<PAGE> 1
CONFORMED
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 AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 1-542
GROSSMAN'S INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-0524830
- ----------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
in corporation or organization) Identification No.)
45 Dan Road
Canton, Massachusetts 02021
- ----------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
(617) 830-4000
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
200 Union Street, Braintree, Massachusetts 02184
- -----------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods 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
Indicate the number of shares outstanding of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock - $.01 Par Value - 25,856,211 shares as of November 10, 1995,
exclusive of 109,136 shares held as treasury shares.
<PAGE> 2
<TABLE>
GROSSMAN'S INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1995
INDEX
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
- -----------------------------
ITEM 1. FINANCIAL STATEMENTS
GROSSMAN'S INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1995, December 31, 1994 and September 30, 1994.... 3
Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 1995 and 1994.. 5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994................... 6
Notes to Unaudited Interim Consolidated Financial Statements..... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 10
PART II. OTHER INFORMATION
- --------------------------
ITEM 5. OTHER INFORMATION........................................... 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 18
SIGNATURES.......................................................... 19
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
- -----------------------------
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1995 1994 1994
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,944 $ 3,034 $ 949
Receivables, less allowance of
$3,339 at September 30, 1995,
$4,157 at December 31, 1994
and $3,875 at September 30,
1994 for doubtful accounts 26,342 19,449 32,323
Inventories 133,025 116,602 130,491
Other current assets 3,770 9,048 7,986
-------- -------- --------
Total current assets 168,081 148,133 171,749
PROPERTY, PLANT AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION OF $58,770
ON SEPTEMBER 30, 1995, $61,435 ON
DECEMBER 31, 1994 AND $63,648 ON
SEPTEMBER 30, 1994 97,796 114,897 121,439
INVESTMENT IN AND ADVANCES TO
UNCONSOLIDATED AFFILIATE 736 1,896 2,148
NOTE RECEIVABLE, NET 12,528 - -
OTHER ASSETS 1,539 1,694 2,278
-------- -------- --------
$280,680 $266,620 $297,614
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
<PAGE> 4
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1995 1994 1994
------------- ------------ -------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $105,570 $ 89,816 $112,234
Accrued interest 567 1,555 948
Current portion of long-term
debt and capital lease
obligations
14% Debentures, due
January 1, 1996 16,201 - -
Mortgage notes and capital
lease obligations 5,789 13,278 16,681
-------- -------- ---------
Total current liabilities 128,127 104,649 129,863
REVOLVING TERM NOTE PAYABLE 42,757 29,888 31,468
LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATIONS 6,711 30,039 33,265
PENSION LIABILITY 2,984 4,348 14,766
OTHER LIABILITIES 14,050 17,051 16,566
-------- -------- ---------
Total liabilities 194,629 185,975 225,928
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT
Common stock, $.01 par value,
Shares authorized - 50,000
Shares issued - 26,137 in
1995 and 1994 261 261 261
Additional paid-in-capital 155,807 155,840 155,842
Retained earnings (accumulated
deficit) (58,304) (64,008) (62,971)
Minimum pension liability (10,576) (10,576) (20,528)
Cumulative foreign currency
translation adjustment (872) - -
Less shares in treasury, at cost -
109 in 1995,
359 at December 31, 1994 and
378 at September 30, 1994 (265) (872) (918)
--------- --------- ---------
Total Stockholders' Investment 86,051 80,645 71,686
--------- --------- ---------
Total Liabilities and
Stockholders' Investment $280,680 $266,620 $297,614
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
<PAGE> 5
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $194,078 $226,111 $514,838 $581,332
COST OF SALES 146,878 171,124 391,913 437,694
--------- --------- --------- ---------
Gross Profit 47,200 54,987 122,925 143,638
OPERATING EXPENSES
Selling and administrative 38,719 43,130 115,211 123,291
Depreciation and amortization 2,786 3,214 8,650 9,584
Store closing 4,500 6,500 4,500 6,500
Preopening 317 103 462 735
--------- --------- --------- ---------
46,322 52,947 128,823 140,110
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 878 2,040 (5,898) 3,528
OTHER EXPENSES (INCOME)
Interest expense 2,111 1,837 6,438 5,621
Gain on property sales (18,115) (101) (18,313) (353)
Other (299) (413) (844) (1,013)
-------- --------- --------- ---------
(16,303) 1,323 (12,719) 4,255
EQUITY IN NET LOSS OF
UNCONSOLIDATED AFFILIATE 158 156 483 238
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 17,023 561 6,338 (965)
PROVISION (CREDIT) FOR INCOME
TAXES 1,703 56 634 (97)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 15,320 $ 505 $ 5,704 $ (868)
========= ========= ========= =========
NET INCOME (LOSS)
PER COMMON SHARE
(PRIMARY AND FULLY DILUTED) $0.59 $0.02 $0.22 $(0.03)
========= ========= ========= =========
WEIGHTED AVERAGE SHARES AND
EQUIVALENT SHARES OUTSTANDING
Primary 26,031 25,823 25,949 25,748
========= ========= ========= =========
Fully Diluted 26,031 25,899 25,949 25,748
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
<PAGE> 6
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
(Unaudited)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 5,704 $ (868)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 8,650 9,584
Store closing expense 4,500 6,500
Net gain on disposals of property (18,313) (353)
Provision for losses on accounts receivable 1,262 935
Issuance of common stock as payments for
Directors' fees 165 -
Undistributed loss of unconsolidated affiliate 483 238
(Increase) decrease in assets:
Receivables (8,155) (6,285)
Inventories (16,423) (8,671)
Other assets 303 150
Increase in accounts payable and accrued
liabilities and interest 6,726 785
--------- ---------
Total adjustments (20,802) 2,883
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (15,098) 2,015
INVESTING ACTIVITIES
Capital expenditures (6,150) (4,023)
Proceeds from disposals of property 26,828 1,378
Investment in unconsolidated affiliate (194) (1,900)
--------- ---------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 20,484 (4,545)
FINANCING ACTIVITIES
Payments on long-term debt and capital lease
obligations (16,354) (7,522)
Proceeds from mortgage financings - 422
Net borrowings from revolving term note payable 12,869 8,230
Issuance of common stock 9 186
--------- ---------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (3,476) 1,316
Net increase (decrease) in cash and cash equivalents 1,910 (1,214)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,034 2,163
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,944 $ 949
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
<PAGE> 7
GROSSMAN'S INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying Unaudited Interim Consolidated Financial Statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis and, in the opinion of management, include
all adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results for the interim periods. The results of
operations for the interim periods are not necessarily indicative of
results to be expected for the year.
These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
contained in the Annual Report on Form 10-K of Grossman's Inc. for the
year ended December 31, 1994. The balance sheet as of December 31, 1994
has been derived from the audited financial statements as of that date.
The Unaudited Interim Consolidated Financial Statements include the
accounts of Grossman's Inc. and its wholly-owned subsidiaries
(the "Company") after elimination of significant intercompany balances
and transactions.
The Company's fiscal year end is December 31. The Company records
activity in quarterly accounting periods of equal length, ending on the
last Saturday of each quarter. The differences in amounts presented and
those which would have been presented using actual quarter end dates are
not material.
Certain amounts in the consolidated financial statements for prior periods
have been reclassified to conform to the current period classification.
Such reclassifications had no effect on previously reported results of
operations.
<TABLE>
NOTE 2 - LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT
- ------------------------------------------------------
Long-term debt consists of the following (in thousands):
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1995 1994 1994
------------- ------------ -------------
<S> <C> <C> <C>
14% Debentures, due
January 1, 1996 $16,201 $16,201 $16,201
Mortgage notes 4,278 15,759 20,612
Capital lease obligations 8,222 11,357 13,133
------- ------- -------
28,701 43,317 49,946
Less current portion 21,990 13,278 16,681
------- ------- -------
$ 6,711 $30,039 $33,265
======= ======= =======
</TABLE>
<PAGE> 8
NOTE 2 - LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT (CONTINUED)
- ------------------------------------------------------------------
In March 1995, available borrowings, including letters of credit up to $15
million, under the Company's loan and security agreement with BankAmerica
Business Credit, Inc., were increased from $60 million to $75 million.
The agreement contains various covenants which, among other things,
require minimum levels of net worth, establish minimum interest and fixed
charge coverage ratios, and establish maximum levels of capital
expenditures and investments in subsidiary. Subsequent to the second
quarter of 1995, it was necessary to obtain amendments to the agreement,
including modifications to covenants for the third quarter of 1995. At
September 30, 1995, the Company was in compliance with all covenants, as
amended. Further modifications will be required to covenants covering the
fourth quarter of 1995 and year ended December 31, 1995. The Company
expects to either receive such modifications or to have a new credit
facility in effect prior to December 31, 1995.
At September 30, 1995, cash borrowings under this revolving credit
agreement totalled $42.8 million and outstanding letters of credit
totalled $8.7 million. The maximum total borrowings under this agreement
during the nine months ended September 30, 1995 were $70.8 million,
including letters of credit of $12.0 million. The weighted average annual
interest rate on borrowings during the nine months ended September 30,
1995 and 1994 was 9.5% and 7.1%, respectively.
Mortgage payments related to sales of closed store and other properties
totalled $11.3 million in the nine months ended September 30, 1995.
<TABLE>
NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
- -------------------------------------------------
Accounts payable and accrued liabilities consist of the following (in
thousands):
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1995 1994 1994
------------- ------------ -------------
<S> <C> <C> <C>
Accounts payable $ 71,001 $59,383 $ 76,071
Accrued salaries, wages,
commissions and related taxes 4,655 6,007 5,892
Accrued income and franchise taxes 1,109 844 1,040
Accrued taxes other than income
and franchise 3,746 3,107 4,024
Accrued store closing costs 9,855 2,240 6,711
Accrued insurance 7,459 10,618 8,728
Other accrued liabilities 7,745 7,617 9,768
-------- ------- --------
$105,570 $89,816 $112,234
======== ======= ========
</TABLE>
<PAGE> 9
<TABLE>
NOTE 4 - OTHER LIABILITIES
- --------------------------
Other long-term liabilities consist of the following (in thousands):
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1995 1994 1994
------------- ------------ -------------
<S> <C> <C> <C>
Accrued insurance $ 9,340 $ 8,014 $ 9,425
Accrued store closing costs 4,154 8,307 6,381
Other accrued liabilities 556 730 760
------- ------- -------
$14,050 $17,051 $16,566
======= ======= =======
</TABLE>
<TABLE>
NOTE 5 - INVESTMENT IN UNCONSOLIDATED AFFILIATE
- -----------------------------------------------
The Company has a 50% interest in a Mexican retailer of building materials
and related products. Summarized operational information for this joint
venture, which began operations in the second quarter of 1994, is as
follows (in thousands):
<CAPTION>
Three months ended Nine months ended
September 30, 1995 September 30, 1995
------------------ ------------------
<S> <C> <C>
Gross revenue $2,028 $6,439
Cost of sales and expenses 2,343 7,405
------- -------
Net loss $ (315) $ (966)
======= =======
Company's interest in net loss $ (158) $ (483)
======= =======
</TABLE>
During 1995, the Company reduced its investment in this joint venture by
$872 thousand, and recorded a corresponding adjustment to stockholders'
investment, to reflect a devaluation of the Mexican peso in relation to
the U.S. dollar.
NOTE 6 - SALE OF PROPERTY
- --------------------------
In September 1995, the Company completed the sale of its 35 acre
headquarters site in Braintree, Massachusetts to Kmart Corporation for
$32 million. Cash of $16.2 million was received, along with a note
receivable for the remaining balance of $15.8 million. The note is due in
two installments; $8.0 million is due January 1997 and the remainder is
due September 1997. The note bears interest at 1% over Prime Rate during
the note's final eight month period. The note has been discounted for
financial reporting purposes.
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FINANCIAL CONDITION
- -------------------
SEPTEMBER 30, 1995 COMPARED WITH DECEMBER 31, 1994
- --------------------------------------------------
Financial condition at September 30, 1995 reflects the seasonality of the
Company's business, ongoing disposals of properties and related paydowns
on long-term debt, and the sale of the Company's former headquarters site.
In the third quarter, the Company continued its policy of reviewing stores
past and projected future performance to identify underperforming capital
utilization and to redeploy this capital to initiatives expected to
generate more attractive long-term returns. Using these guidelines, 11
underperforming Grossman's stores in the East were closed, three of which
will be reopened as Mr. 2nd's Bargain Outlet stores. The closing of the
stores will be completed during the fourth quarter of 1995 and proceeds
from the inventory liquidation will be used to reduce accounts payable and
borrowings under the revolving credit agreement. Additional liquidity
will result over time, as property sales proceeds are expected to exceed
related mortgages due. In conjunction with these closings, the Company
recorded a $4.5 million pre-tax charge, related to closing costs, lease
expenses, inventory writedowns, other expenses, and property, plant and
equipment costs.
In September 1995, the Company sold its former corporate headquarters to
Kmart Corporation for $32.0 million and recognized a pre-tax gain of $18.1
million. The purchase price was paid as follows: $16.2 million was
received in cash and the remaining $15.8 million will be paid in the form
of a note. The note is due in two installments; $8.0 million is due in
January 1997 and the remainder is due September 1997. The note bears
interest at 1% over Prime Rate during the note's final eight month period.
The note has been discounted for financial reporting purposes. The
proceeds received were used to repay revolving credit borrowings.
During the first nine months of 1995, the Company sold its Eastern
Division Distribution Center and certain closed store properties, and
repaid outstanding mortgage debt totalling $11.3 million. The Company
continues to actively market properties vacated as a result of previously
closing a total of 41 stores in prior years. Of the 24 owned stores
within this group, nine were sold prior to 1995, five were sold in 1995
and one was reopened as a Mr. 2nd's Bargain Outlet. Of the 17 leased
properties within this group, nine leases have been terminated, two leases
are due to expire in 1996, and one store was reopened as Mr. 2nd's Bargain
Outlet. Proceeds received in the nine months ended September 30, 1995
from the sale of the distribution center, the cash portion of the
headquarters property sales and the sale of the closed store properties
totalled $26.8 million. It is anticipated that the remaining owned
properties will be sold over a period of years, resulting in a liquidity
improvement at the time of each respective sale.
<PAGE> 11
SEPTEMBER 30, 1995 COMPARED WITH DECEMBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------
In March 1995, available borrowings, including letters of credit up to $15
million, under the Company's loan and security agreement with BankAmerica
Business Credit, Inc., were increased from $60 million to $75 million.
The agreement contains various covenants which, among other things,
require minimum levels of net worth, establish minimum interest and fixed
charge coverage ratios, and establish maximum levels of capital
expenditures and investments in subsidiary. Subsequent to the second
quarter of 1995, it was necessary to obtain amendments to the agreement,
including modifications to covenants for the third quarter of 1995. At
September 30, 1995, the Company was in compliance with all covenants, as
amended. Further modifications will be required to covenants covering the
fourth quarter of 1995 and year ended December 31, 1995. The Company
expects to either receive such modifications or to have a new credit
facility in effect prior to December 31, 1995.
At September 30, 1995, cash borrowings under the revolving credit
agreement totalled $42.8 million, and outstanding letters of credit
totalled $8.7 million. The maximum total borrowings under this agreement
during the nine months ended September 30, 1995 were $70.8 million,
including letters of credit of $12.0 million.
Total long-term debt, including the 14% Debentures and capital lease
obligations, decreased a total of $14.6 million. This is the result of
$11.3 million of payments associated with sold properties, and continuing
scheduled payments, offset by an increase in capital lease obligations,
principally for equipment in new stores.
Working capital at September 30, 1995 was $40.0 million, a decrease of
$3.5 million from the prior year end and a decrease of $1.9 million from
one year ago. Increased inventory levels as a result of new stores have
been principally offset by an increase in related accounts payable.
Accounts receivable increased by $6.9 million since year end, reflecting
the seasonality of the Company's business, but decreased by $6.0 million
since one year ago, reflecting store closings. The current portion of
long-term debt and capital lease obligations increased by $8.7 million,
reflecting a $16.2 million reclassification to current maturity of 14%
Debentures, due January 1, 1996, offset by net reductions of $7.5 million
for mortgages and lease obligations.
Property, plant and equipment declined by $17.1 million since year end,
reflecting property sales, offset by $6.2 million in capital expenditures.
Capital expenditures were made principally to support Contractors'
Warehouse stores, which opened in Indianapolis and Fort Wayne, Indiana,
and Columbus, Ohio.
During 1995, an adjustment of $872 thousand was recorded, reducing the
investment in its 50% owned Mexican joint venture, to reflect a
devaluation of the Mexican peso in relation to the U.S. dollar. A
corresponding adjustment was made to stockholders' equity.
<PAGE> 12
RESULTS OF OPERATIONS
Nine months ended September 30, 1995 compared with nine months ended
- --------------------------------------------------------------------
September 30, 1994
- ------------------
Net income of $5.7 million for the first nine months of 1995 compared with
a net loss of $900 thousand in 1994 with non-recurring items occurring in
each year. The 1995 results include a pre-tax gain of $18.1 million on
the sale of the Company's former headquarters site and a $4.5 million
provision for the closing of Eastern Division stores. The 1994 results
include a $6.5 million provision for the closing of 18 Eastern Division
stores. Before non-recurring items, an operating loss of $1.4 million
resulted in 1995, as compared to operating income of $10.0 million in
1994. Operating expense savings were insufficient to offset a gross
profit decline of $20.7 million, which resulted from both sales declines
and margin rate decreases. Declining housing starts and turnover rates,
low selling prices and margins on commodity lumber prices, and sluggish
economic conditions, particularly in the Northeast, contributed to the
1995 results.
In the fourth quarter of 1995, the Company is undertaking initiatives to
improve future sales, particularly with respect to comparable store sales
in the Eastern Division, which have had monthly declines since April 1995.
Additional sales personnel, both on the road and within stores, are being
added to all markets to expand service to professional customers. In
addition, a door and window assembly facility will be opened in the East
in early 1996 to improve the ability to meet customer special order needs.
<PAGE> 13
<TABLE>
Nine months ended September 30, 1995 compared with nine months ended
- --------------------------------------------------------------------
September 30, 1994 (CONTINUED)
- ------------------------------
The following table shows comparative sales results by store type during
the first six months, the third quarter and for the nine month period:
<CAPTION>
Six Months Three Months Nine Months
Ended June Ended September Ended September
-------------- --------------- ---------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SALES (in thousands)
Grossman's Stores
Retail Sales $ 95.6 $137.4 $ 59.9 $ 92.6 $155.5 $230.0
Professional Sales 83.8 93.6 51.5 63.0 135.3 156.6
------ ------ ------ ------ ------ ------
Total Grossman's Stores 179.4 231.0 111.4 155.6 290.8 386.6
Mr. 2nd's Bargain Outlet
Stores 24.9 21.2 12.0 11.7 36.9 32.9
------ ------ ------ ------ ------ ------
Total Eastern Division 204.3 252.2 123.4 167.3 327.7 419.5
Contractors' Warehouse
Division 116.4 103.0 70.7 58.8 187.1 161.8
------ ------ ------ ------ ------ ------
Total Grossman's Inc. $320.7 $355.2 $194.1 $226.1 $514.8 $581.3
====== ====== ====== ====== ====== ======
% OF TOTAL SALES
Grossman's Stores
Retail Sales 29.8 % 38.6 % 30.8 % 40.9 % 30.2 % 39.6 %
Professional Sales 26.1 26.4 26.5 27.9 26.3 26.9
------ ------ ------ ------ ------ ------
Total Grossman's Stores 55.9 65.0 57.3 68.8 56.5 66.5
Mr. 2nd's Bargain Outlet
Stores 7.8 6.0 6.2 5.2 7.2 5.7
------ ------ ------ ------ ------ ------
Total Eastern Division 63.7 71.0 63.5 74.0 63.7 72.2
Contractors' Warehouse
Division 36.3 29.0 36.5 26.0 36.3 27.8
------ ------ ------ ------ ------ ------
Total Grossman's Inc. 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
====== ====== ====== ====== ====== ======
</TABLE>
<PAGE> 14
RESULTS OF OPERATIONS
- ---------------------
<TABLE>
Nine months ended September 30, 1995 compared with nine months ended
- --------------------------------------------------------------------
September 30, 1994 (CONTINUED)
- ------------------------------
(TABLE CONTINUED)
<CAPTION>
Six Months Three Months Nine Months
Ended June Ended September Ended September
-------------- --------------- ---------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SALES % INCREASE (DECREASE)
VERSUS PRIOR YEAR
Grossman's Stores
Retail Sales (30.4)% (21.2)% (35.3)% (16.4)% (32.4)% (19.4)%
Professional Sales (10.5) (14.5) (18.3) (8.4) (13.6) (12.2)
------ ------ ------ ------ ------ ------
Total Grossman's Stores (22.3) (18.6) (28.4) (13.4) (24.8) (16.6)
Mr. 2nd's Bargain Outlet
Stores 17.5 (9.5) 2.6 (4.9) 12.2 (7.9)
------ ------ ------ ------ ------ ------
Total Eastern Division (19.0) (17.9) (26.2) (12.8) (21.9) (16.0)
Contractors' Warehouse
Division 13.0 17.9 20.2 5.4 15.6 13.0
------ ------ ------ ------ ------ ------
Total Grossman's Inc. (9.7)% (10.0)% (14.2)% (8.7)% (11.4)% (9.5)%
====== ====== ====== ====== ====== ======
COMPARABLE STORE SALES %
INCREASE (DECREASE)
VERSUS PRIOR YEAR
Grossman's Stores
Retail Sales (12.3)% (6.6)% (21.0)% (4.0)% (15.9)% (5.6)%
Professional Sales 7.3 15.1 (3.4) 19.3 3.0 16.8
------ ------ ------ ------ ------ ------
Total Grossman's Stores (4.1) 1.1 (13.7) 4.3 (8.0) 2.4
Mr. 2nd's Bargain Outlet
Stores 6.6 (1.0) - 10.4 4.0 2.9
------ ------ ------ ------ ------ ------
Total Eastern Division (3.0) 1.0 (12.6) 53.1 (7.0) 2.4
Contractors' Warehouse
Division (1.2) (5.0) 9.4 (2.7) 2.6 (5.1)
------ ------ ------ ------ ------ ------
Total Grossman's Inc. (2.4)% (0.6)% (6.1)% 2.8 % (3.9)% 0.5 %
====== ====== ====== ====== ====== ======
TOTAL NUMBER OF STORES
Grossman's Stores 72 89 71 89
Mr. 2nd's Bargain Outlet
Stores 20 18 19 18
Contractors' Warehouse
Division 13 12 14 12
------ ------ ------ ------
Total Number of Stores 105 119 104 119
====== ====== ====== ======
</TABLE>
<PAGE> 15
Nine months ended September 30, 1995 compared with nine months ended
- --------------------------------------------------------------------
September 30, 1994 (CONTINUED)
- ------------------------------
Total sales results reflect 18 Eastern Division stores closed in late 1994
and three Contractors' Warehouse openings; one in the second quarter of
1994, one early in 1995 and the other during the third quarter of 1995.
Two Mr. 2nd's Bargain Outlet openings, one in late 1994 and one in early
1995, and one closing in the third quarter of 1995, are also reflected.
Within Grossman's stores, increases in comparable store sales results to
professionals is indicative of the strategy to target these customers.
Increases in comparable store sales to professionals resulted in the first
two quarters, but a decline occurred in the third quarter. For the nine
month period, the increase, however, was not enough to offset the
continuing erosion of the retail customer comparable sales. Sales to both
professional and retail customers reflect declining selling prices for
commodity lumber products, which account for over 25% of the total sales
mix. Contractors' Warehouse comparable store sales increased for the
first nine months of 1995 by 2.6%. Within Contractors' Warehouse, a
comparable store sales decline of 1.3% for the first six months of 1995,
impacted by heavy rains in the first quarter, was offset by the third
quarter increase of 9.4%.
The gross profit decline of $20.7 million was the result of the sales
decline and a decline in gross margin from 24.7% in 1994 to 23.9% in 1995,
reflecting the decline in commodity lumber margins. Margin declines also
continue to occur as a result of sales increases to professional
customers, who receive discounts from retail pricing and as Contractors'
Warehouse stores continue to open. Total professional sales, including
Contractors' Warehouse, increased from 54.7% in the nine month period
ended September 30, 1994 to 62.6% in the comparable period in 1995.
Operating expenses, excluding the non-recurring store closing expense,
decreased by $9.3 million for the nine month period in 1995 compared with
the same period in 1994. This is the result of continued expense control
and downsizing in selling and administrative expense areas, which account
for $8.1 million of the decrease, reduction in depreciation and
amortization of $934 thousand, principally due to the closing of 18
Eastern Division stores in the fall of 1994 and the sale of the Eastern
Division Distribution Center in 1995, and a reduction in store preopening
expense of $273 thousand. The reduction in selling and administrative
expenses was tempered by additional costs, principally payroll, incurred
during the first quarter related to Eastern Division store modifications.
Operating expenses related to Project Pro's, Inc., the Company's 80% owned
subsidiary, totalled $2.5 million for the first nine months of 1995,
compared to $3.9 million in 1994.
In the fourth quarter of 1995, the Company undertook initiatives to
further reduce administrative costs, consistent with efficiencies gained
during the relocation of the home office facility, store closings and
changes in operating procedures. Cost saving measures, including
adjusting store hours and overhead levels and reassessing all home office
functions, will result in lower infrastructure costs.
<PAGE> 16
Nine months ended September 30, 1995 compared with nine months ended
- --------------------------------------------------------------------
September 30, 1994 (CONTINUED)
- ------------------------------
At the end of the third quarter in both 1994 and 1995, non-recurring
charges for store closings were recorded to cover costs related to leases,
severance and outplacement expenses, inventory writedowns, other expenses
and property, plant and equipment costs. In 1995, the Company closed 11
underperforming stores and a $4.5 million provision was recorded, and in
1994 18 stores were closed and a $6.5 million provision was recorded. In
the nine months ended September 30, 1994 and 1995, sales from stores now
closed represented 20.1% and 7.3%, respectively, of total sales.
Interest expense increased to $6.4 million during the first nine months of
1995 from $5.6 million during the first nine months of 1994, reflecting
both an increase in average revolving credit borrowings and the rate on
such borrowings. The weighted average rate on revolver borrowings
increased from 7.1% in 1994 to 9.5% in 1995.
Included in the 1995 results is a third quarter $18.1 million pre-tax gain
on the sale of the Company's headquarters site. This gain results from
the selling price, offset by the net book value of the property, the
discount on the note received from Kmart, certain site shutdown costs
which were incremental to the normal operations of the facility and
closing costs associated with the transaction.
The 1995 first nine months include a $483 thousand net loss related to the
Company's 50% owned Mexican joint venture, compared with a $238 thousand
loss in 1994, when the venture began operations midway through the second
quarter.
Three months ended September 30, 1995 compared with three months ended
- ----------------------------------------------------------------------
September 30, 1994
- ------------------
Net income of $15.3 million for the third quarter of 1995 compared with
net income of $500 thousand in 1994. The 1995 results include a pre-tax
gain of $18.1 million on the sale of the Company's former headquarter site
and a $4.5 million provision for the closing of 11 Eastern Division
stores. The 1994 results include a $6.5 million provision for the closing
of 18 Eastern Division stores. Before non-recurring items, operating
income of $5.4 million resulted in 1995, as compared to operating income
of $8.5 million in 1994. Operating expense savings were insufficient to
offset a gross profit decline of $7.8 million. Declining housing starts
and turnover rates, low selling prices and margins on commodity lumber
prices, and sluggish economic conditions, particularly in the Northeast,
contributed to the 1995 results.
Third quarter sales results reflect 18 Eastern Division stores closed in
late 1994 and two Contractors' Warehouse openings, one in early 1995 and
the other during the third quarter. Two Mr. 2nd's Bargain Outlet
openings, one in late 1994 and one in early 1995, and one closing in the
third quarter of 1995, are also reflected.
<PAGE> 17
Three months ended September 30, 1995 compared with three months ended
- ----------------------------------------------------------------------
September 30, 1994 (CONTINUED)
- ------------------------------
Within Grossman's stores, comparable store sales results declined to both
the retail and professional customers. Sales in both categories reflect
declining selling prices for commodity lumber products, which account for
over 25% of the total sales mix. As previously mentioned, in reaction to
sales results, the Company is undertaking initiatives to improve future
sales. Comparable store sales within Mr. 2nd's Bargain Outlet stores were
unchanged in the third quarter of 1995. Contractors' Warehouse comparable
store sales increased by 9.4% in the third quarter of 1995.
The gross profit decline of $7.8 million was directly the result of the
sales decline. The gross margin rate for the quarter remained constant
from 1994 to 1995 as margin rate declines resulting from lower commodity
margins and a shift toward professional sales were offset by certain price
increases and a change in product sales mix.
Operating expenses, excluding non-recurring store closing expenses
decreased by $4.6 million for the quarter ended September 1995, compared
with the same period in 1994. This is the result of continued expense
control and downsizing in selling and administrative expense areas, which
account for $4.4 million of the decrease, reduction in depreciation and
amortization of $428 thousand, principally due to the closing of 18
Eastern Division stores, the sale of the Eastern Division Distribution
Center in 1995, and an increase in store preopening expense of $214
thousand due to the opening of a Contractors' Warehouse and a Mr. 2nd's
Bargain Outlet. Operating expenses related to Project Pro's, the
Company's 80% owned subsidiary, totalled $846 thousand for the third
quarter of 1995, as compared to $1.6 million for the third quarter of
1994.
At the end of the third quarter in both 1994 and 1995, non-recurring
charges for store closings were recorded to cover costs related to leases,
severance and outplacement expenses, inventory writedowns, other expenses
and the net unrecoverable amount of property, plant and equipment. In
1995, the Company closed 11 underperforming stores and a $4.5 million
provision was recorded, and in 1994 18 stores were closed and a $6.5
million provision was recorded. In the three months ended September 30,
1994 and 1995, sales from stores now closed represented 19.7% and 7.1%,
respectively, of total sales.
Interest expense increased from $1.8 million during the third quarter of
1994 to $2.1 million during the third quarter of 1995, reflecting both an
increase in average revolving credit and the rate on such borrowings. The
weighted average rate on revolver borrowings increased from 7.8% in 1994
to 9.4% in 1995.
<PAGE> 18
PART II - OTHER INFORMATION
- ---------------------------
ITEM 5. OTHER INFORMATION
On September 26, 1995, the Company sold its former headquarters
site in Braintree, Massachusetts for $32.0 million, represented
by $16.2 million in cash and a promissory note for $15.8 million
payable over two years, in accordance with the agreement filed
on June 23, 1995 with the Securities and Exchange Commission as
an exhibit to Form 8-K. The note is due in two installments;
$8.0 million is due in January 1997 and the remainder is due
September 1997. The note bears interest at 1% over Prime Rate
after January 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
4(o)-2 Third Amendment, dated March 15, 1995, to the Loan
and Security Agreement between Grossman's Inc. and
BankAmerica Business Credit, Inc., dated
December 15, 1993, filed herewith.
4(o)-3 Fourth Amendment, dated July 27, 1995, to the Loan
and Security Agreement between Grossman's Inc. and
BankAmerica Business Credit, Inc., dated
December 15, 1993, filed herewith.
4(o)-4 Fifth Amendment, dated October 26, 1995, to the Loan
and Security Agreement between Grossman's Inc. and
BankAmerica Business Credit, Inc., dated
December 15, 1993, filed herewith.
11(a) Statement re computation of earnings per share,
filed herewith.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the
three months ended September 30, 1995.
<PAGE> 19
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GROSSMAN'S INC.
-------------------
Company
by /s/ Steven L. Shapiro
--------------------------------------
Steven L. Shapiro
Vice President - Controller
(Principal Accounting Officer)
DATE: November 14, 1995
EXECUTION COPY
THIRD AMENDMENT, dated as of March 15, 1995 (this
"Amendment"), to the Loan and Security Agreement, dated as of
December 15, 1993 (as heretofore amended, supplemented or otherwise
modified, the "Loan Agreement"), between BankAmerica Business
Credit, Inc. (the "Lender") and Grossman's Inc. (the "Borrower").
W I T N E S S E T H :
WHEREAS, the Lender and the Borrower are parties to the Loan
Agreement;
WHEREAS, the Borrower has requested that the Lender amend
the Loan Agreement to increase the amount of the Total Facility
to $75,000,000 and to increase the advance rate with respect to
Eligible Inventory; and
WHEREAS, the Lender is willing to make such amendments but
only on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein,
capitalized terms used herein have the respective meanings
ascribed thereto in the Loan Agreement.
2. Amendment of Section 1.1 (Defined Terms). Section 1.1
of the Loan Agreement is hereby amended by:
(a) deleting from the definition of "Availability" the
amount "$60,000,000" appearing in clause (i) of paragraph
(a) of such definition and substituting therefor the amount
"$75,000,000";
(b) deleting from the definition of "Availability"
the phrase "fifty percent (50%)"" appearing in clause
(ii)(B) of paragraph (a) of such definition and substituting
therefor the phrase "the Applicable Percent";
(b) adding the following new defined term in its
appropriate alphabetical order:
"'Applicable Percent' means
(a) for each calendar month from March, 1995
through October, 1995, the lesser of (i) sixty percent
(60%) and (ii) a percent notified by the Borrower to
the Lender on or prior to the first day of such month
as the Applicable Percent to be effective for such
month; provided that the Applicable Percent for the
month of March, 1995 shall be a percent notified by the
Borrower to the Lender (not to exceed 60%) on or before
March 17, 1995; provided, further, that any reduction
of the Applicable Percent shall be a permanent
reduction; and provided, still further, that if the
Borrower fails to give any such notice in respect of
any calendar month, the Applicable Percent in effect
for the preceding month shall remain in effect for such
calendar month; and
(b) for each calendar month thereafter,
commencing with November, 1995, fifty percent (50%).
3. Amendment of Section 2.1 (Total Facility). Section 2.1
of the Loan Agreement is hereby amended by deleting the amount
"$60,000,000" appearing therein and substituting therefor the
amount "$75,000,000".
4. Amendment of Section 3.4 (Commitment Fee). Section 3.4
of the Loan Agreement is hereby amended by deleting the amount
"$50,000,000" appearing therein and substituting therefor the
amount "$75,000,000".
5. Addition of New Section 3.5. Article 3 of the Loan
Agreement is hereby amended by adding after Section 3.4 a new
Section 3.5 reading in it entirety as follows:
"3.5 Additional Fee. The Borrower further agrees to
pay an additional monthly fee to the Lender on the first
Business Day of each calendar month, commencing April 3,
1995, through November 1, 1995, computed as set forth in the
following sentence. Such fee shall be equal to the product
of (a) $10,000 times (b) the Applicable Percent (expressed
as a whole number and not as a percent) for the month just
ended minus 50. (For purposes of clarification and by way
of example only, if the Applicable Percent for the month of
April, 1995 were 58%, the fee payable pursuant to this
Section 3.5 on May 1, 1995 would be computed as follows:
$10,000 x (58-50) = $80,000.)"
6. Representations and Warranties. To induce the Lender
to enter into this Amendment, the Borrower hereby represents and
warrants to the Lender as follows, with the same effect as if
such representations and warranties were set forth in the Loan
Agreement:
(a) The Borrower has the corporate power and authority
to enter into this Amendment and has taken all corporate
action required to authorize its execution and delivery of
this Amendment and its performance of the Loan Agreement, as
amended hereby (as so amended, the "Amended Agreement").
This Amendment has been duly executed and delivered by the
Borrower and the Amended Agreement constitutes the valid and
binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms. The execution,
delivery, and performance of this Amendment and the Amended
Agreement by the Borrower will not violate its certificate
of incorporation or by-laws or any agreement or legal
requirement binding on the Borrower.
(b) On the date hereof and after giving effect to the
terms of this Amendment, (i) the Loan Agreement and the
other Loan Documents are in full force and effect and
constitute the Borrower's binding obligations, enforceable
against the Borrower in accordance with their respective
terms; (ii) no Event or Event of Default has occurred and is
continuing; and (iii) the Borrower does not have any defense
to or setoff, counterclaim or claim against payment of the
Obligations and enforcement of the Loan Documents based upon
a fact or circumstance existing or occurring on or prior to
the date hereof.
7. Effectiveness. This Amendment shall be effective as of
the date first written above upon receipt by the Lender of a
counterpart hereof duly executed by the Borrower.
8. Limited Effect. This Amendment shall be limited solely
to the matters expressly set forth herein and shall not (a)
constitute an amendment of any other term or condition of the
Loan Agreement or of any instrument or agreement referred to
therein or (b) prejudice any right or rights which the Lender may
now have or may have in the future under or in connection with
the Loan Agreement or any instrument or agreement referred to
therein. Except as expressly amended hereby, all of the covenants
and provisions of the Loan Agreement are and shall continue to be
in full force and effect.
9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
10. Counterparts. This Amendment may be executed by the
parties hereto in any number of separate counterparts, each of
which shall be an original, and all of which taken together shall
be deemed to constitute one and the same instrument.
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.
BANKAMERICA BUSINESS CREDIT, INC.
By:
Name:
Title:
GROSSMAN'S INC.
By:
Name:
Title:
EXECUTION COPY
FOURTH AMENDMENT, dated as of July 27, 1995 (this
"Amendment"), to the Loan and Security Agreement, dated as of
December 15, 1993 (as heretofore amended, supplemented or otherwise
modified, the "Loan Agreement"), between BankAmerica Business
Credit, Inc. (the "Lender") and Grossman's Inc. (the "Borrower").
W I T N E S S E T H :
WHEREAS, the Lender and the Borrower are parties to the Loan
Agreement;
WHEREAS, Sections 9.20 and 9.21 of the Loan Agreement
contemplate, among other things, that the respective covenants
contained therein may be amended so that they are tested at the
end of each fiscal quarter of the Borrower during the Borrower's
1995 Fiscal Year; and
WHEREAS, the Lender is willing to make such amendments but
only on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein,
capitalized terms used herein have the respective meanings
ascribed thereto in the Loan Agreement.
2. Amendment of Section 9.20 (Minimum Interest Coverage).
Section 9.20 of the Loan Agreement is hereby amended by deleting
such Section in its entirety and substituting therefor the
following:
"9.20 Minimum Interest Coverage. The Borrower
shall not permit the ratio (the "Interest Coverage Ratio")
of (a) Adjusted Net Earnings from Operations for any period
specified below plus interest expense of the Borrower and
its Subsidiaries for such period and provision for income
taxes of the Borrower and its Subsidiaries for such period
plus depreciation and amortization expense of the Borrower
and its Subsidiaries for such period to (b) interest expense
of the Borrower and its Subsidiaries for such period to be
less than the ratio set forth opposite any such period:
<TABLE>
<CAPTION>
Period Ratio
<S> <C>
Second fiscal quarter of 1995 Fiscal Year 2.75/1
Third fiscal quarter of 1995 Fiscal Year 4.00/1
Fourth fiscal quarter of 1995 Fiscal Year 3.25/1
1995 Fiscal Year 3.4/1
1996 Fiscal Year and each Fiscal Year
thereafter 7.2/1
</TABLE>
Promptly upon the receipt by the Lender of the
forecasts required to be delivered to the Lender under
Section 7.2(f) for the Borrower's 1996 Fiscal Year, the
Borrower and the Lender agree to enter into and diligently
pursue in good faith negotiations to amend this financial
covenant so as to additionally test this covenant at the end
of each fiscal quarter of the Borrower during the 1996
Fiscal Year."
3. Amendment of Section 9.21 (Adjusted Tangible Net Worth.
Section 9.21 of the Loan Agreement is hereby amended by deleting
such Section in its entirety and substituting therefor the
following:
"9.21 Adjusted Tangible Net Worth. The Borrower
shall not permit Adjusted Tangible Net Worth to be less than
the following amounts on any of the following respective
dates:
<TABLE>
<CAPTION>
Date Amount
<S> <C>
Last day of second fiscal quarter of
1995 Fiscal Year $79,000,000
Last day of third fiscal quarter of
1995 Fiscal Year $83,000,000
Last day of 1995 Fiscal Year $89,000,000
Last day of 1996 Fiscal Year and of
each Fiscal Year thereafter $92,000,000
</TABLE>
Promptly upon the receipt by the Lender of the
forecasts required to be delivered to the Lender under
Section 7.2(f) for the Borrower's 1996 Fiscal Year, the
Borrower and the Lender agree to enter into and diligently
pursue in good faith negotiations to amend this financial
covenant so as to additionally test this covenant at the end
of each fiscal quarter of the Borrower during the 1996
Fiscal."
4. Representations and Warranties. To induce the Lender
to enter into this Amendment, the Borrower hereby represents and
warrants to the Lender as follows, with the same effect as if
such representations and warranties were set forth in the Loan
Agreement:
(a) The Borrower has the corporate power and authority
to enter into this Amendment and has taken all corporate
action required to authorize its execution and delivery of
this Amendment and its performance of the Loan Agreement, as
amended hereby (as so amended, the "Amended Agreement").
This Amendment has been duly executed and delivered by the
Borrower and the Amended Agreement constitutes the valid and
binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms. The execution,
delivery, and performance of this Amendment and the Amended
Agreement by the Borrower will not violate its certificate
of incorporation or by-laws or any agreement or legal
requirement binding on the Borrower.
(b) On the date hereof and after giving effect to the
terms of this Amendment, (i) the Loan Agreement and the
other Loan Documents are in full force and effect and
constitute the Borrower's binding obligations, enforceable
against the Borrower in accordance with their respective
terms; (ii) no Event or Event of Default has occurred and is
continuing; and (iii) the Borrower does not have any defense
to or setoff, counterclaim or claim against payment of the
Obligations and enforcement of the Loan Documents based upon
a fact or circumstance existing or occurring on or prior to
the date hereof.
5. Effectiveness. This Amendment shall be effective as of
the date first written above upon receipt by the Lender of a
counterpart hereof duly executed by the Borrower.
6. Limited Effect. This Amendment shall be limited solely
to the matters expressly set forth herein and shall not (a)
constitute an amendment of any other term or condition of the
Loan Agreement or of any instrument or agreement referred to
therein or (b) prejudice any right or rights which the Lender may
now have or may have in the future under or in connection with
the Loan Agreement or any instrument or agreement referred to
therein. Except as expressly amended hereby, all of the covenants
and provisions of the Loan Agreement are and shall continue to be
in full force and effect.
7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
8. Counterparts. This Amendment may be executed by the
parties hereto in any number of separate counterparts, each of
which shall be an original, and all of which taken together shall
be deemed to constitute one and the same instrument.
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.
BANKAMERICA BUSINESS CREDIT, INC.
By:
Name:
Title:
GROSSMAN'S INC.
By:
Name:
Title:
EXECUTION COPY
FIFTH AMENDMENT, dated as of October 26, 1995 (this
"Amendment"), to the Loan and Security Agreement, dated as of
December 15, 1993 (as heretofore amended, supplemented or otherwise
modified, the "Loan Agreement"), between BankAmerica Business
Credit, Inc. (the "Lender") and Grossman's Inc. (the "Borrower").
W I T N E S S E T H :
WHEREAS, the Lender and the Borrower are parties to the Loan
Agreement;
WHEREAS, the Borrower has requested that the Lender amend
the Loan Agreement in certain respects to permit (i) increased
investments in Project-Pro's, Inc., a Subsidiary of the Borrower,
(ii) the dissolution and liquidation of Project-Pro's, Inc., and
(iii) additional time for the Borrower to demonstrate to the
Lender that the Borrower has the ability to repay upon scheduled
maturity the Borrower's 14% debentures maturing January 1, 1996;
and
WHEREAS, the Lender is willing to make such amendments but
only on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein,
capitalized terms used herein have the respective meanings
ascribed thereto in the Loan Agreement.
2. Amendment of Section 1.1 (Defined Terms). Section 1.1
of the Loan Agreement is hereby amended by deleting from the
definition of "Restricted Investment" contained therein clause
(g) of such definition and substituting therefor the following:
"(g) investments as of the date hereof by the Borrower
in any of its Subsidiaries existing on the date hereof and
additional investments in Project Pro's, Inc., a Delaware
corporation, not to exceed $8,000,000 in the aggregate;
provided that after giving effect to any additional
investment under this paragraph (g), Availability (less the
aggregate amount of all payables owing by the Borrower which
are more than thirty (30) days overdue at the time of
calculation) is not less than $5,000,000;"
3. Amendment of Section 9.5 (Mergers, Consolidations,
Acquisitions, or Sales). Section 9.5 of the Loan Agreement is
hereby amended by:
(a) deleting the word "and" appearing immediately
before clause (v) thereof and substituting therefor a semi-
colon; and
(b) adding the following new text immediately before
the period at the end thereof:
"and (vi) the winding up, liquidation and/or
dissolution of Project-Pro's, Inc., a Delaware
corporation"
4. Amendment of Section 9.21 (Adjusted Tangible Net
Worth). Section 9.21 of the Loan Agreement is hereby amended by
deleting such Section in its entirety and substituting therefor
the following:
"9.21 Adjusted Tangible Net Worth. The Borrower
shall not permit Adjusted Tangible Net Worth to be less than
the following amounts on any of the following respective
dates:
<TABLE>
<CAPTION>
Date Amount
<S> <C>
Last day of second fiscal quarter of
1995 Fiscal Year $79,000,000
Last day of third fiscal quarter of
1995 Fiscal Year $79,900,000
Last day of 1995 Fiscal Year $89,000,000
Last day of 1996 Fiscal Year and of
each Fiscal Year thereafter $92,000,000
</TABLE>
Promptly upon the receipt by the Lender of the
forecasts required to be delivered to the Lender under
Section 7.2(f) for the Borrower's 1996 Fiscal Year, the
Borrower and the Lender agree to enter into and diligently
pursue in good faith negotiations to amend this financial
covenant so as to additionally test this covenant at the end
of each fiscal quarter of the Borrower during the 1996
Fiscal."
5. Amendment of Section 11.1 (Events of Default). Section
11.1 of the Loan Agreement is hereby amended by deleting
paragraph (q) thereof in its entirety and substituting therefor
the following:
"(q) (i) the Borrower shall have failed to demonstrate
to the Lender's satisfaction on or prior to December 1, 1995
that the Borrower shall have the ability (other than through
the Borrower's operations after December 1, 1995) to repay
upon scheduled maturity the Borrower's 14% debentures
maturing January 1, 1996, or (ii) the Borrower shall have
failed to provide the Lender on or prior to December 1, 1995
with projections of monthly financial and business
performance (including balance sheets, statements of
operations, Availability projections and cash flows) for the
period from December 1, 1995 through April 30, 1996 in form
satisfactory to the Lender which confirm to the Lender's
satisfaction that the Borrower will (A) maintain projected
Availability satisfactory to the Lender and (B) pay all Debt
as it matures."
6. Representations and Warranties. To induce the Lender
to enter into this Amendment, the Borrower hereby represents and
warrants to the Lender as follows, with the same effect as if
such representations and warranties were set forth in the Loan
Agreement:
(a) The Borrower has the corporate power and authority
to enter into this Amendment and has taken all corporate
action required to authorize its execution and delivery of
this Amendment and its performance of the Loan Agreement, as
amended hereby (as so amended, the "Amended Agreement").
This Amendment has been duly executed and delivered by the
Borrower and the Amended Agreement constitutes the valid and
binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms. The execution,
delivery, and performance of this Amendment and the Amended
Agreement by the Borrower will not violate its certificate
of incorporation or by-laws or any agreement or legal
requirement binding on the Borrower.
(b) On the date hereof and after giving effect to the
terms of this Amendment, (i) the Loan Agreement and the
other Loan Documents are in full force and effect and
constitute the Borrower's binding obligations, enforceable
against the Borrower in accordance with their respective
terms; (ii) no Event or Event of Default has occurred and is
continuing; and (iii) the Borrower does not have any defense
to or setoff, counterclaim or claim against payment of the
Obligations and enforcement of the Loan Documents based upon
a fact or circumstance existing or occurring on or prior to
the date hereof.
7. Effectiveness. This Amendment shall be effective as of
the date first written above upon receipt by the Lender of a
counterpart hereof duly executed by the Borrower.
8. Limited Effect. This Amendment shall be limited solely
to the matters expressly set forth herein and shall not (a)
constitute an amendment of any other term or condition of the
Loan Agreement or of any instrument or agreement referred to
therein or (b) prejudice any right or rights which the Lender may
now have or may have in the future under or in connection with
the Loan Agreement or any instrument or agreement referred to
therein. Except as expressly amended hereby, all of the covenants
and provisions of the Loan Agreement are and shall continue to be
in full force and effect.
9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
10. Counterparts. This Amendment may be executed by the
parties hereto in any number of separate counterparts, each of
which shall be an original, and all of which taken together shall
be deemed to constitute one and the same instrument.
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.
BANKAMERICA BUSINESS CREDIT, INC.
By:
Name:
Title:
GROSSMAN'S INC.
By:
Name:
Title:
<TABLE>
EXHIBIT 11(a)
-------------
GROSSMAN'S INC.
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) for
primary and fully diluted
earnings per share $15,320 $ 505 $ 5,704 $ (868)
======== ========= ========= =========
Weighted average number
of shares outstanding 26,031 25,823 25,949 25,748
Net effect of dilutive
stock options - - - -
--------- --------- --------- ---------
Total weighted average
shares outstanding and
common stock equivalents
used in primary
calculation of earnings
per share 26,031 25,823 25,949 25,748
Additional dilution from
stock options - 76 - -
-------- --------- --------- ---------
Total weighted average
shares outstanding and
common stock equivalents
used in fully diluted
calculation of earnings
per share 26,031 25,899 25,949 25,748
======== ========= ========= =========
Primary earnings (loss)
per share $ 0.59 $ 0.02 $ 0.22 $(0.03)
======== ========= ========= =========
Fully diluted earnings
(loss) per share $ 0.59 $ 0.02 $ 0.22 $(0.03)
======== ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 4,944
<SECURITIES> 0
<RECEIVABLES> 29,681
<ALLOWANCES> 3,339
<INVENTORY> 133,025
<CURRENT-ASSETS> 168,081
<PP&E> 156,566
<DEPRECIATION> 58,770
<TOTAL-ASSETS> 280,680
<CURRENT-LIABILITIES> 128,127
<BONDS> 49,468
<COMMON> 261
0
0
<OTHER-SE> 85,790
<TOTAL-LIABILITY-AND-EQUITY> 280,680
<SALES> 194,078
<TOTAL-REVENUES> 194,078
<CGS> 146,878
<TOTAL-COSTS> 193,200
<OTHER-EXPENSES> (16,303)
<LOSS-PROVISION> 1,262
<INTEREST-EXPENSE> 2,111
<INCOME-PRETAX> 17,023
<INCOME-TAX> 1,703
<INCOME-CONTINUING> 15,320
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,320
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
</TABLE>
