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 SEPTEMBER 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 33-61534
LEVITZ FURNITURE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 23-1657490
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7887 NORTH FEDERAL HIGHWAY, BOCA RATON, FL 33487-1613
- ------------------------------------------ ----------
(Address of Principal Executive Offices) (Zip Code)
(561) 994-6006
----------------------------------------------------
(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 ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On October 31, 1999, there were 1,000 shares of Common Stock, par value $0.40
outstanding.
<PAGE>
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT
TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY,
INCLUDING STATEMENTS UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS". THESE FORWARD LOOKING STATEMENTS
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF
SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE,
AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) BANKRUPTCY COURT ACTIONS OR
PROCEEDINGS RELATED TO THE BANKRUPTCY OF LEVITZ AND ITS SUBSIDIARIES; (2)
COMPETITIVE PRESSURE IN LEVITZ's INDUSTRY; (3) GENERAL ECONOMIC CONDITIONS; (4)
CHANGES IN THE FINANCIAL MARKETS AFFECTING LEVITZ's FINANCIAL STRUCTURE AND
LEVITZ's COST OF CAPITAL AND BORROWED MONEY; (5) INVENTORY RISKS DUE TO CHANGES
IN MARKET DEMAND OR LEVITZ'S BUSINESS STRATEGIES; (6) CHANGES IN EFFECTIVE TAX
RATES; (7) UNCERTAINTIES INHERENT IN LEVITZ'S OPERATIONS; AND (8) DIFFICULTIES
ENCOUNTERED BY LEVITZ OR OTHERS DEALING WITH YEAR 2000 ISSUE. LEVITZ HAS NO DUTY
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 TO UPDATE THE FORWARD
LOOKING STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q.
LEVITZ FURNITURE CORPORATION AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets............................................................ 3
Consolidated Condensed Statements of Operations.................................................. 4
Consolidated Condensed Statements of Cash Flows.................................................. 5
Notes to Consolidated Condensed Financial Statements............................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Comparison of Operations......................................................................... 12
Liquidity and Capital Resources.................................................................. 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................................... 18
Signatures ......................................................................................... 19
Exhibit Index......................................................................................... 20
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
LEVITZ FURNITURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1999 1999
(UNAUDITED)
------------- ---------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 3,532 $ 3,046
Receivables 20,684 21,861
Inventories 86,484 84,232
Deposits and prepaid expenses 4,161 4,432
Property under agreement of sale 3,051 95,571
--------- ---------
Total current assets 117,912 209,142
--------- ---------
PROPERTY AND EQUIPMENT, net 33,717 38,867
--------- ---------
PROPERTY UNDER CAPITAL LEASES, net 31,971 33,303
--------- ---------
OTHER ASSETS:
Intangible leasehold interests 5,258 5,637
Property held for disposal 13,707 32,469
Deferred income taxes -- 5,385
Other 14,444 9,764
--------- ---------
33,409 53,255
--------- ---------
$ 217,009 $ 334,567
========= =========
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:
Cash overdrafts $ 6,947 $ 8,823
Current portion of long-term debt -- 6,962
Current portion of obligations under capital leases 671 9,846
Accounts payable, trade 30,939 23,060
Accrued expenses and other liabilities 65,668 73,979
Payable to parent 14,036 13,635
Deferred income taxes 2,333 11,696
DIP Facility 65,871 144,618
--------- ---------
Total current liabilities 186,465 292,619
--------- ---------
OBLIGATIONS UNDER CAPITAL LEASES, net of current portion 29,919 29,368
--------- ---------
OTHER NONCURRENT LIABILITIES 9,215 4,290
--------- ---------
DEFERRED INCOME TAXES 3,500 --
--------- ---------
LIABILITIES SUBJECT TO COMPROMISE 292,790 292,609
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIT:
Common stock, at par value 1 1
Capital in excess of par 58,453 58,453
Retained earnings (deficit) (363,334) (342,773)
--------- ---------
Total stockholder's deficit (304,880) (284,319)
--------- ---------
$ 217,009 $ 334,567
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
3
<PAGE>
LEVITZ FURNITURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 126,331 $ 169,285 $ 246,319 $ 340,561
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 72,058 95,982 140,159 193,164
Selling, general and administrative
expenses 55,961 73,632 105,690 150,253
Depreciation and amortization 2,082 4,725 5,003 9,917
Interest expense, net 3,153 7,288 10,376 14,789
--------- --------- --------- ---------
133,254 181,627 261,228 368,123
--------- --------- --------- ---------
Loss before reorganization items and
income taxes (6,923) (12,342) (14,909) (27,562)
--------- --------- --------- ---------
Reorganization items:
Loss on store closings 3,050 -- 3,050 21,135
Professional fees 1,538 1,695 2,602 3,307
--------- --------- --------- ---------
Total 4,588 1,695 5,652 24,442
--------- --------- --------- ---------
Loss before income taxes (11,511) (14,037) (20,561) (52,004)
Income taxes -- -- -- --
--------- --------- --------- ---------
Net loss $ (11,511) $ (14,037) $ (20,561) $ (52,004)
========= ========= ========= =========
Net loss per common share $ (11,511) $ (14,037) $ (20,561) $ (52,004)
========= ========= ========= =========
Weighted average number of common
shares outstanding 1,000 1,000 1,000 1,000
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
4
<PAGE>
LEVITZ FURNITURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (20,561) $ (52,004)
--------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 2,982 5,966
Amortization 2,021 3,951
Gain on disposal of property and equipment (30) (7)
Amortization of deferred financing fees -- 1,105
Pension expense (29) 202
Other -- 213
Reorganization items, non-cash 465 16,133
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables 1,177 (2,929)
Inventories (2,252) 20,655
Deposits and prepaid expenses 271 (1,996)
Other, net (4,719) (9)
Increase (decrease) in:
Accounts payable, trade 7,939 1,366
Accrued expenses and other liabilities (9,493) 3,715
Payable to parent (77) 188
Other noncurrent liabilities (208) 64
--------- ---------
Total adjustments (1,953) 48,617
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (22,514) (3,387)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,639) (2,994)
Proceeds from sale of property and equipment and
other assets 113,636 8,722
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 110,997 5,728
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under DIP Facility 290,405 441,498
Repayments under DIP Facility (369,152) (438,757)
Principal payments on long-term debt (6,962) (52)
Principal payments under capital lease obligations (412) (1,302)
Decrease in cash overdrafts (1,876) (6,076)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (87,997) (4,689)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 486 (2,348)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,046 5,339
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,532 $ 2,991
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
5
<PAGE>
LEVITZ FURNITURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
1. CHAPTER 11 PROCEEDINGS AND BASIS OF PRESENTATION:
Levitz Furniture Corporation (Levitz), a Florida corporation, is a
wholly-owned subsidiary of Levitz Furniture Incorporated (LFI).
On September 5, 1997 (the "Petition Date"), Levitz Furniture
Incorporated, a Delaware corporation ("LFI"), and 11 of its
subsidiaries (collectively, the "Debtors"), including, Levitz Furniture
Corporation, a Florida corporation and wholly-owned subsidiary of LFI
("Levitz" or the "Company") filed voluntary petitions for relief under
Chapter 11, Title 11 of the United States Code (the "Bankruptcy Code")
with the United States Bankruptcy Court for the District of Delaware,
Wilmington, Delaware under Case No. 97-1842(MFW). Pursuant to Sections
1107 and 1108 of the Bankruptcy Code, Levitz, as debtor and
debtor-in-possession, has continued to manage and operate its assets
and businesses pending the confirmation of a reorganization plan or
plans and subject to the supervision and orders of the Court.
On July 7 1999, the Debtors filed a "Disclosure Statement" and a "Joint
Plan of Reorganization" ("Plan of Reorganization" or "Plan"), pursuant
to Section 1125 of the Bankruptcy Code with the Court. The Disclosure
Statement sets forth certain information regarding, among other things,
significant events that have occurred during the Debtors' Chapter 11
cases and the anticipated organization, operation and financing of
"Reorganized Levitz". The Disclosure Statement describes the Plan of
Reorganization, certain effects of Plan confirmation, certain risk
factors associated with securities to be issued under the Plan, and the
manner in which distribution will be made under the Plan. In addition,
the Disclosure Statement discusses the confirmation process and the
voting procedures that holders of claims in impaired classes must
follow for their votes to be counted. The Plan of Reorganization sets
forth certain information, among other things, the classification and
treatment of claims and interests, means for implementation of the
Plan, acceptance or rejection of the Plan and effect of rejection by
one or more classes of claims or interests, provisions for governing
distributions, the treatment of executory contracts and leases,
conditions precedent to confirmation of the Plan and the occurrence of
the effective date of the Plan.
The Plan of Reorganization provides, among other things, that as of the
Plan effective date stockholders and other parties holding equity
interests in the Company will not receive any distributions and
unsecured creditors will receive a distribution of stock in a
"Reorganized Levitz".
Although the Plan of Reorganization provides for the Debtors' emergence
from bankruptcy, there can be no assurances given that the Court will
confirm the Plan, or that such Plan will be consummated.
The exclusivity period to file a plan of reorganization will expire on
November 30, 1999. On November 2, 1999, the Debtors filed a motion with
the Court to extend the exclusivity period to file a plan of
reorganization to January 31, 2000. This extension would accommodate
potential alternative options to the Plan previously submitted July 7,
1999. This motion is scheduled for hearing by the Court on November 16,
1999. There can be no assurances given that the Court will approve the
motion to extend the exclusivity period. After the expiration of the
exclusivity period, creditors will have the right to propose
alternative plans of reorganization.
6
<PAGE>
The consolidated financial statements have been presented in accordance
with the American Institute of Certified Public Accountants Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization
under the Bankruptcy Code"(SOP 90-7) and have been prepared in
accordance with generally accepted accounting principles applicable to
a going concern, which principles, except as otherwise disclosed,
assume that assets will be realized and liabilities will be discharged
in the ordinary course of business. As a result of the Chapter 11 cases
and circumstances relating to this event, including Levitz's debt
structure, its recurring losses, and current economic conditions, such
realization of assets and liquidation of liabilities are subject to
significant uncertainty. While under the protection of Chapter 11, the
Company may sell or otherwise dispose of assets, and liquidate or
settle liabilities, for amounts other than those reflected in the
financial statements. Additionally, the amounts reported on the
consolidated balance sheet could materially change because of changes
in business strategies and the effects of an approved plan of
reorganization.
The appropriateness of using the going concern basis is dependent upon,
among other things, confirmation of a plan of reorganization, future
profitable operations, the ability to comply with the terms of the DIP
Facility and the ability to generate sufficient cash from operations
and financing arrangements to meet obligations.
In the Chapter 11 cases, substantially all unsecured liabilities as of
the Petition Date are subject to compromise or other treatment under a
plan of reorganization which must be confirmed by the Bankruptcy Court
after submission to any required vote by affected parties. For
financial reporting purposes, those liabilities and obligations whose
treatment and satisfaction is dependent on the outcome of the Chapter
11 cases have been segregated and classified as liabilities subject to
compromise under reorganization proceedings in the consolidated balance
sheets. Generally, all actions to enforce or otherwise effect repayment
of pre-Chapter 11 liabilities as well as all pending litigation against
the Debtors are stayed while the Debtors continue their business
operations as debtors-in-possession. Unaudited schedules have been
filed by the Debtors with the Court setting forth the assets and
liabilities of the Debtors as of the Petition Date as reflected in the
Debtor's accounting records. Levitz notified all known claimants
subject to the August 10, 1998 bar date of their need to file a proof
of claim with the Court. A bar date is the date by which claims against
Levitz must be filed if the claimants wish to receive any distribution
in the Chapter 11 cases. Differences between amounts shown by the
Debtors and claims filed by creditors are being investigated and will
be either amicably resolved or adjudicated before the Court. The
ultimate amount of and settlement terms for such liabilities are
subject to an approved plan of reorganization and accordingly are not
presently determinable.
Under the Bankruptcy Code, the Debtors may elect to assume or reject
real estate leases, employment contracts, personal property leases,
service contracts and other pre-petition executory contracts, subject
to Court approval. Claims for damages resulting from the rejection of
real estate leases and other executory contracts will be subject to
separate bar dates. The Debtors have not reviewed all real estate
leases for assumption or rejection. Since the Petition Date, the
Debtors had rejected leases for twenty-five store locations. The Court
has extended the time for which the Debtors may assume or reject
unexpired leases of nonresidential real property to December 28, 1999.
The liabilities subject to compromise include a reserve for an
estimated amount that may be claimed by lessors for leases that have
been rejected and for any executory contracts that are expected to be
rejected through September 30, 1999. The Debtors will continue to
analyze their real estate leases and executory contracts and may assume
or reject additional leases and contracts. Such rejections could result
in additional liabilities subject to compromise.
In the opinion of Management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments consisting of
normal recurring accruals necessary to present fairly the financial
position as of September 30, 1999; the results of operations and cash
flows for the periods then ended. The results of operations for the
period ended September 30, 1999, are not necessarily indicative of the
results to be expected for the full year.
7
<PAGE>
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in Levitz's audited
financial statements for the year ended March 31, 1999, which is
included in its Form 10-K.
2. DEBT:
LFI, Levitz and substantially all of its subsidiaries, as
debtors-in-possession, are parties to a Postpetition Credit Agreement,
as amended, dated as of September 5, 1997 (the "DIP Facility") with BT
Commercial Corporation (BTCC) as agent. The DIP Facility has been
approved by the Court and includes a total commitment comprised of
revolving notes of $95.0 million and an overadvance term note of $10.0
million. Letter of Credit obligations under the revolver portion of the
DIP Facility are limited to $25.0 million. The DIP Facility is intended
to provide Levitz with the cash and liquidity to conduct its operations
and pay for merchandise shipments at normal levels during the course of
the Chapter 11 proceedings.
Loans made under the DIP Facility revolving notes bear interest, at
Levitz's option, at a rate equal to either Bankers Trust Company's
prime rate plus 1.5% or BTCC's LIBOR rate plus 3.75%. The overadvanced
term notes bear interest at 16.0%. Levitz is required to pay an unused
line fee of 0.5%, and a letter of credit fee of 2.0%.
The maximum borrowings, excluding the term commitments, under the DIP
Facility are limited to 85% of eligible accounts receivable, 75% of
eligible inventory (as defined in the DIP Facility) and a fixed asset
sublimit which is permanently reduced as the proceeds from the sale of
fixed assets and leasehold interests are received. Qualification of
accounts receivable and inventory items as "eligible" is subject to
unilateral change at the discretion of the lenders. Excess availability
under the DIP Facility at October 31, 1999 was $16.8 million.
The DIP Facility is secured by substantially all of the assets of
Levitz and its subsidiaries and a perfected pledge of stock of all
Levitz's subsidiaries. The DIP Facility contains restrictive covenants
including, among other things, the maintenance of minimum earnings
before interest, taxes, depreciation and amortization as defined
(EBITDA), limitations on the incurrence of additional indebtedness,
liens, contingent obligations, sales of assets, capital expenditures
and a prohibition on paying dividends.
On September 16, 1999, the DIP Facility was amended to include, among
other things, an extension of the DIP Facility expiration date until
June 30, 2000, a reduction in the EBITDA requirements for September and
December 1999 and an extension of the fixed asset sublimit expiration
date to December 31, 1999.
Since March 31, 1999 Levitz has sold twenty-one owned properties and
leasehold interests in twenty-three properties. Since the Petition
Date, leases have been rejected on twenty-five properties. As of
October 31, 1999, there are ten properties held for disposal. Six of
the ten properties held for disposal are under agreement of sale,
letters of intent or other types of offers estimated to be $6.6 million
of gross proceeds. No assurances can be given that a sufficient number
of these transactions will close prior to the expiration of the fixed
asset sublimit on December 31, 1999. Based on facts and circumstances
at that time, Levitz may request an extension of the fixed asset
sublimit expiration date. No assurances can be given that an extension
of the expiration date would be granted or that additional financing
could be obtained.
8
<PAGE>
The lenders under the DIP Facility have a super-priority administrative
expense claim against the estate of the Debtors. The DIP Facility
expires on June 30, 2000. Although LFI and Levitz are currently in
compliance with the DIP Facility covenants as amended, due to the
outcome of the Private-Label Credit Card Program dispute as described
in Note 4 to the consolidated condensed financial statements and other
factors, the Company may have to seek an additional amendment or waiver
under the DIP Facility to remain in compliance in future periods. There
can be no assurances given that such an amendment or waiver would be
granted.
3. LIABILITIES SUBJECT TO COMPROMISE:
The principal categories of obligations classified as liabilities
subject to compromise under reorganization proceedings are identified
below. The amounts below in total vary significantly from the stated
amount of proofs of claim that were filed with the Court and may be
subject to future adjustment depending on Court action, further
developments with respect to potential disputed claims, and
determination as to the value of any collateral securing claims, or
other events. Additional claims may arise from the rejection of
additional real estate leases and executory contracts by the Debtors.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
(DOLLARS IN
LIABILITIES SUBJECT TO COMPROMISE THOUSANDS)
--------------------------------- -------------
<S> <C>
Accounts payable, trade $ 38,580
Accrued expenses 15,274
13.375% Senior Notes due 10/15/98 96,031 (1)
9.625% Senior Subordinated Notes due 7/15/03 101,337 (1)
Reserve for lease rejection claims 19,787
Executive retirement and employment agreements 17,278
General liability claims 736
Reserve for previous store closings 1,353
Common area maintenance 233
Real estate taxes 1,635
Personal property taxes 546
----------
$ 292,790
==========
</TABLE>
(1) Includes accrued interest at September 4, 1997.
As a result of the Chapter 11 filing, no principal or interest payments
will be made on most pre-petition debt without Court approval or until
a plan of reorganization providing for the repayment terms has been
confirmed by the Court and becomes effective. Interest on pre-petition
unsecured obligations has not been accrued after the Petition Date
except that interest expense and principal payments will continue to be
recorded on capital lease obligations unless the Debtors reject the
leases. If a capital lease is rejected the obligation will be limited
to the lease rejection claim. Contractual interest expense of $10.9
million was not recorded on certain pre-petition debt for the periods
ended September 30, 1999 and 1998.
4. PRIVATE-LABEL CREDIT CARD PROGRAM:
On September 4, 1998 Levitz and its operating subsidiaries entered into
an agreement ("Merchant Agreement") with Household Bank (SB), N.A.
("Household") whereby Household would provide financing to individual
consumers purchasing merchandise from Levitz ("Private-Label Credit
Card Program"). The Court approved the Merchant Agreement and granted a
first priority and security interest and lien to Household on certain
reserves ("Merchant Risk Reserve") retained or accumulated by
Household, totaling $10.9 million at September 30, 1999, and gave
administrative expense status to substantially all obligations of
Levitz arising under the Merchant Agreement. Both the reserves and
obligations are limited to a certain maximum amount under the Merchant
Agreement. Levitz funds the Merchant Risk Reserve through a reduction
of 3.5% on all customer accounts financed.
At September 30, 1999, Household's portfolio balance was $478.3
million. Levitz recorded income
9
<PAGE>
of $18.6 million and $3.0 million for the six month periods ended
September 30, 1999 and 1998, respectively. The income recorded for the
six month period ended September 30, 1999 was derived from the Merchant
Agreement with Household, The income recorded for the same period of
the prior year was primarily derived from the former agreement with
General Electric Capital Corporation.
Levitz is exposed to market risk under the terms of the Household
Agreement. Levitz may pay a fee or may receive income, based upon the
relationship among the interest earned on the portfolio, the amount of
the servicing fee, the cost of capital, promotional discount fees and
credit losses. A one percent increase or decrease in the finance charge
to customers or the cost of capital or the credit loss rate would
increase or decrease the annual income from the portfolio by $3.5
million to $5.5 million.
Levitz is obligated for all credit losses under the portfolio,
including the GECC portfolio transferred to Household, up to a maximum
of 15% of average outstanding receivables and for 50% of all credit
losses above 15%. In October 1999 Household gave notice of its intent
to require Levitz to significantly increase the amount of its monthly
payment to Household for Levitz's obligations under the Merchant
Agreement for credit losses. Levitz has disputed the propriety of such
charges and is awaiting both a response from Household and the results
of a review of the first year performance under the Merchant Agreement
as reported by Household. The outcome of the review and the response
from Household could have a material adverse effect on Levitz's
financial position and reported results of operations in future
periods. In such case, Levitz may be required to seek additional
financing to meet its obligations under the Merchant Agreement. While
Levitz believes alternatives exist to obtain such financing, there
can be no assurances given that such financing would be obtained.
Levitz is also required under the Merchant Agreement to fund a merchant
risk reserve of 3.5% of all customer accounts financed up to a
stipulated dollar amount.
5. REORGANIZATION ITEMS:
Store Closings
In September 1999 Levitz provided an additional $3.1 million store
closing reserve based on revised estimates of when closed stores would
be sold. Cash charges included $1.5 million for the revised estimate of
expenses on idle space for continuing stores, $0.2 million for rental
of equipment for closed stores and $0.9 million for additional
continuing expenses for closed stores. Non-cash charges included an
additional write-down of property held for disposal in the amount of
$0.5 million.
Professional fees
Professional fees include accounting, legal and consulting services
provided to LFI and the Creditors' Committee which, subject to Court
approval, are required to be paid by Levitz while it is in Chapter 11.
6. PROPERTY UNDER AGREEMENT OF SALE:
On July 7, 1999, Levitz sold five owned properties and leasehold
interests/rights in five properties, concerning previously closed store
locations. The gross proceeds from the transaction were $19.8 million
(the "Bulk Sale Transaction"). Net proceeds of approximately $19.4
million, excluding closing costs, were used to pay-off existing
mortgages and accrued interest of $0.6 million, cure costs relating to
pre-petition liabilities of $0.3 million, proration of real estate
taxes and other costs of $0.4 million and to pay down the revolver
portion of the DIP Facility of approximately $18.1 million. The Bulk
Sale Transaction relieved Levitz of all lease obligations for the
leased properties.
7. LOSS PER SHARE:
Loss per common share is based on the weighted average number of common
shares outstanding during each period of 1,000 shares.
10
<PAGE>
8. CONSOLIDATED STATEMENTS OF CASH FLOWS:
Supplemental disclosures of cash flow information (dollars in
thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
-------------------------------------------
1999 1998
--------------- ----------------
<S> <C> <C>
Interest paid $ 12,005 $ 13,407
=============== ================
Income tax paid (refunded), net $ 64 $ 47
=============== ================
</TABLE>
9. RECLASSIFICATIONS:
Effective March 31, 1999, Levitz elected to reclassify certain revenues
in its consolidated condensed statements of operations. As a result,
net sales and selling, general and administrative ("SG&A") expenses
have been restated for the six month periods ended September 30, 1999
and 1998. Levitz now reflects delivery income and miscellaneous revenue
in SG&A expenses. Previously, these revenues were included in net
sales. The effect of this reclassification was to reduce net sales and
SG&A expenses by $8.0 million and $10.4 million for the six month
periods ended September 30, 1999 and 1998, respectively.
Certain other amounts in prior year's consolidated condensed financial
statements have been reclassified to conform to the current year's
presentation.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
On September 5, 1997 (the "Petition Date"), Levitz Furniture Incorporated, a
Delaware corporation ("LFI"), and 11 of its subsidiaries (collectively, the
"Debtors"), including, Levitz Furniture Corporation, a Florida corporation and
wholly-owned subsidiary of LFI ("Levitz"), filed voluntary petitions for relief
under Chapter 11, Title 11 of the United States Code (the "Bankruptcy Code")
with the United States Bankruptcy Court for the District of Delaware,
Wilmington, Delaware ("the Court"). The bankruptcy cases of LFI and Levitz and
their affiliates are being jointly administered, for procedural purposes only,
under Case No. 97-1842(MFW). Pursuant to Sections 1107 and 1108 of the
Bankruptcy Code, Levitz, as debtor and debtor-in-possession, has continued to
manage and operate its assets and businesses pending the confirmation of a
reorganization plan or plans and subject to the supervision and orders of the
Court.
COMPARISON OF OPERATIONS
The following table sets forth Levitz's results of operations expressed as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
--------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 57.0 56.7 56.9 56.7
----- ----- ----- -----
Gross profit 43.0 43.3 43.1 43.3
Selling, general and administrative
expenses 44.3 43.5 42.9 44.2
Depreciation and amortization 1.6 2.8 2.0 2.9
Interest expense 2.5 4.3 4.2 4.3
----- ----- ----- -----
Loss before reorganization items
and income taxes (5.4) (7.3) (6.0) (8.1)
Reorganization items (3.6) (1.0) (2.3) (7.2)
----- ----- ----- -----
Net loss (9.0)% (8.3)% (8.3)% (15.3)%
===== ===== ===== =====
Comparable store sales increase/
(decrease) (2.9)% 8.7 % (1.3)% 2.8 %
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
Net sales of $126.3 million for the three month period ended September 30, 1999
decreased $43.0 million or 25.4% from net sales of $169.3 million in the same
period for the prior year. Approximately $40.3 million of the net sales decrease
was due to the closing of forty-two stores during the last six months of Fiscal
1999. Sales on a comparable store basis decreased 2.9%. The comparable store
sales decline was offset by the increase in
12
<PAGE>
net sales from the addition of one new store in Valencia, California in May
1999. Comparable store sales for July and August 1999 decreased 3.9% and 6.1%,
respectively from the same months of the prior year. September 1999 comparable
store sales increased 1.3% from the comparable period of the prior year.
Gross profit as a percentage of net sales decreased to 43.0% for the three month
period ended September 30, 1999 compared to 43.3% in the same period of the
prior year. The gross margin decrease was due to increases in clearance
promotions and special bedding promotions.
Selling, general and administrative (SG&A) expenses of $56.0 million for the
period ended September 30, 1999 decreased $17.6 million or 23.9% from SG&A
expenses of $73.6 million in the same period for the prior year. The reduction
in SG&A expenses included $16.7 million due to the closing of forty-two stores
during the last six months of Fiscal 1999 and $1.4 million in comparable store
expense reductions. These reductions were offset by an increase in SG&A Expenses
of $0.5 million with the opening of one new store in May 1999. The reduction in
SG&A Expenses for comparable stores was due to the increase in service fee
income under the Company's Private-Label Credit Card Program of $6.9 million.
The increase in service fee income was offset by increases in advertising
expense of $1.9 million; an increase in salaries and benefits of $0.6 million
and delivery and other expenses of $0.9 million primarily due to inefficiencies
in the implementation of the warehouse rationalization program; and an increase
in occupancy costs of $2.1 million due to the sale and leaseback of owned
properties and the sale of leasehold interests which increased rent on leased
properties.
Depreciation and amortization for the three month period ended September 30,
1999 decreased to $2.1 million from $4.7 million or 55.3% from the same period
of the prior year. The decrease was primarily due to the closing of forty-two
stores and the disposal of owned and leased properties.
Interest expense for the three month period ended September 30, 1999 decreased
to $3.2 million from $7.3 million for the same period of the prior year. The
decrease was primarily due to reduced borrowings under the DIP Facility as a
result of sales of real estate properties and leasehold interests, the net
proceeds from which were used to pay down the DIP Facility as required. Interest
on pre-petition unsecured obligations has not been accrued after the Petition
Date except that interest expense continues to be recorded on capital lease
obligations. Contractual interest expense of $5.5 million was not recorded on
certain pre-petition unsecured debt for the three month periods ended September
30, 1999 and 1998.
Reorganization items for the three month period ended September 30, 1999
included a charge of $3.1 million for revised estimates of continuing expenses
on closed stores and idle space in continuing stores as well as an additional
write-down on property held for disposal. Professional fees and other expenses
related to bankruptcy services rendered during the three month periods ended
September 30, 1999 and 1998 were $1.5 million and $1.7 million, respectively.
Levitz has not recorded any tax benefits for the losses incurred during the
periods ended September 30, 1999 and 1998. Levitz does not anticipate recording
any tax provision for the remainder of Fiscal 2000, subject to changes in
operating performance.
As a result of the aforementioned factors, net loss for the period ended
September 30, 1999 amounted to $11.5 million or 9.0% of net sales as compared to
net loss of $14.0 million or 8.3% of net sales for the same period of the prior
year.
SIX MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1998
Net sales of $246.3 million for the six month period ended September 30, 1999
decreased $94.3 million or 27.7% over net sales of $340.6 million in the same
period for the prior year. Approximately $91.5 million of the net sales decrease
was due to the closing of forty-two stores during the last six months of Fiscal
1999. Sales on a comparable store basis decreased 1.3%, the comparable store
sale decline was offset by the increase in net sales from the addition of one
new store in Valencia, California in May 1999.
13
<PAGE>
Gross profit as a percentage of net sales decreased to 43.1% for the six month
period ended September 30, 1999 compared to 43.3% in the same period of the
prior year. The gross margin decrease was due to increases in clearance
promotions and special bedding promotions.
Selling, general and administrative ("SG&A") expenses decreased $44.6 million
for the six month period ended September 30, 1999 as compared to the same period
for the prior year. The reduction in SG&A expenses included $38.0 million due to
the closing of forty-two stores during the last six months of Fiscal 1999, $1.9
million in the reduction of corporate expenses and $5.6 million reduction in
SG&A expenses for comparable stores. SG&A expenses increased $0.9 million for
the addition of one new store. SG&A expenses decreased in comparable stores
primarily due to the increase in service fee income of $15.9 million from the
Private-Label Credit Card Program. This was offset by an increase in advertising
expense of $4.1 million, salaries and benefits of $1.2 million, occupancy of
$2.8 million and other costs of $2.2 million. Advertising expense increased due
to the increase in media promotions of $2.9 million and the increase in
"interest free" promotions offered under the Company's private-label credit card
program of $1.2 million. Salaries and benefits and other expenses increased due
to the inefficiencies in the implementation of the warehouse rationalization
program and a realignment of store positions. Occupancy costs increased due to
the sale and leaseback of owned properties and the sale of leasehold interests
which increased rents on leased properties.
Interest expense for the six month period ended September 30, 1999 decreased to
$10.4 million from $14.8 million for the same period of the prior year. The
decrease was primarily due to reduced borrowings under the DIP Facility as a
result of sales of real estate properties and leasehold interests, the net
proceeds from which were used to pay down the DIP Facility as required. Interest
on pre-petition unsecured obligations has not been accrued after the Petition
Date except that interest expense continues to be recorded on capital lease
obligations. Contractual interest expense of $10.9 million was not recorded on
certain pre-petition unsecured debt for the six month periods ended September
30, 1999 and 1998.
Reorganization items for the six month period ended September 30, 1999 included
a charge of $3.1 million for revised estimates of continuing expenses on closed
stores and idle space in continuing stores as well as an additional write-down
on property held for disposal. Reorganization items for the six month period
ended September 30, 1998 included a charge of $21.1 million for the closing of
fifteen stores in under-performing markets and the elimination of certain
support functions and the closing of warehouses in certain locations. Also
included as reorganizational items are professional fees of $2.6 million and
$3.3 million for accounting, legal and consulting services provided to Levitz
and the Creditors' Committee while Levitz is in Chapter 11 for the six month
periods ended September 30, 1999 and 1998, respectively.
Levitz has not recorded any tax benefits for the loss incurred during the six
month periods ended September 30, 1999 and 1998. Levitz does not anticipate
recording any tax provision for the remainder of Fiscal 2000, subject to changes
in operating performance.
Net loss for the six month period ended September 30, 1999 was $20.6 million or
8.3% of net sales as compared to a net loss of $52.0 million or 15.3% of net
sales for the same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Levitz's primary sources of liquidity are cash flow from operations (including
the proceeds from customer credit obligations under the Private-Label Credit
Card Program by Household), trade credit and borrowings under the DIP Facility.
During the six month period ended September 30, 1999, Levitz used approximately
$15.2 million of net cash flow in operations before changes in operating assets
and liabilities. Changes in operating assets and liabilities further reduced net
cash flow from operations by $7.4 million. Increases in inventory of $2.3
million, other assets (largely the Household Merchant Risk Reserve under the
Private-Label Credit Card Program) of $4.7 million and the reduction of accrued
expenses and other liabilities of $9.5 million had an unfavorable impact on cash
14
<PAGE>
flow. Cash flow was favorably impacted by an increase in trade payables of $7.9
million due to negotiations of better payment terms with trade vendors and a
decrease in customer receivables of $1.2 million. The decrease in accrued
expenses was primarily due to the reduction in accrued interest of $1.9 million
on the DIP Facility due to reduced borrowings, reduction in accrued real estate
taxes and other taxes of $3.3 million due to the closing of stores and required
pre-payment of real estate taxes under the sale- leaseback agreement, reduction
of closed store reserves of $2.8 million and the reduction of other accrued
operating costs of $1.5 million due to store closings.
Cash provided by investing activities for the six month period ended September
30, 1999 includes $39.7 million of proceeds from leasehold interests or asset
sales of closed facilities and $73.9 million in proceeds from sale-leaseback
transactions on continuing stores. The net proceeds from which were applied as
repayments to the DIP Facility as required by the agreement.
Levitz's total capital expenditures were approximately $2.6 million during the
six month period ended September 30, 1999. Levitz spent $0.3 million on
renovations and equipment for one new store in Valencia, CA and $2.3 million for
existing store improvements and equipment. Management plans to spend
approximately $6.0 million for capital expenditures in the current fiscal year
of which approximately $2.9 million is for maintenance of existing facilities.
Net cash used in financing activities amounted to $88.0 million during the six
month period ended September 30, 1999. Repayments under the DIP Facility were
$78.7 million. Principal payments under long-term obligations, to include the
pay off of mortgages on the sale of owned property, were $7.4 million and
outstanding checks and cash overdrafts decreased $1.9 million.
Debt
LFI, Levitz and substantially all of its subsidiaries, as debtors-in-possession,
are parties to a Postpetition Credit Agreement, as amended, dated as of
September 5, 1997 (the "DIP Facility") with BT Commercial Corporation (BTCC) as
agent. The DIP Facility has been approved by the Court and includes a total
commitment comprised of revolving notes of $95.0 million and an overadvance term
note of $10.0 million. Letter of Credit obligations under the revolver portion
of the DIP Facility are limited to $25.0 million. The DIP Facility is intended
to provide Levitz with the cash and liquidity to conduct its operations and pay
for merchandise shipments at normal levels during the course of the Chapter 11
proceedings.
Loans made under the DIP Facility revolving notes bear interest, at Levitz's
option, at a rate equal to either Bankers Trust Company's prime rate plus 1.5%
or BTCC's LIBOR rate plus 3.75%. The overadvanced term notes bear interest at
16.0%. Levitz is required to pay an unused line fee of 0.5%, and a letter of
credit fee of 2.0%.
The maximum borrowings, excluding the term commitments, under the DIP Facility
are limited to 85% of eligible accounts receivable, 75% of eligible inventory
(as defined in the DIP Facility) and a fixed asset sublimit which is permanently
reduced as the proceeds from the sale of fixed assets and leasehold interests
are received. Qualification of accounts receivable and inventory items as
"eligible" is subject to unilateral change at the discretion of the lenders.
Excess availability under the DIP Facility at October 31, 1999 was $16.8
million.
The DIP Facility is secured by substantially all of the assets of Levitz and its
subsidiaries and a perfected pledge of stock of all Levitz's subsidiaries. The
DIP Facility contains restrictive covenants including, among other things, the
maintenance of minimum earnings before interest, taxes, depreciation and
amortization as defined (EBITDA), limitations on the incurrence of additional
indebtedness, liens, contingent obligations, sales of assets, capital
expenditures and a prohibition on paying dividends.
15
<PAGE>
On September 16, 1999, the DIP Facility was amended to include, among other
things, an extension of the DIP Facility expiration date until June 30, 2000, a
reduction in the EBITDA requirements for September and December 1999 and an
extension of the fixed asset sublimit expiration date to December 31, 1999.
Since March 31, 1999 Levitz has sold twenty-one owned properties and leasehold
interests in twenty-three properties. Since the Petition Date, leases have been
rejected on twenty-five properties. As of October 31, 1999, there are ten
properties held for disposal. Six of the ten properties held for disposal are
under agreement of sale, letters of intent or other types of offers estimated to
be $6.6 million of gross proceeds. No assurances can be given that a sufficient
number of these transactions will close prior to the expiration of the fixed
asset sublimit on December 31, 1999. Based on facts and circumstances at that
time, Levitz may request an extension of the fixed asset sublimit expiration
date. No assurances can be given that an extension of the expiration date would
be granted or that additional financing could be obtained.
The lenders under the DIP Facility have a super-priority administrative expense
claim against the estate of the Debtors. The DIP Facility expires on June 30,
2000. Although LFI and Levitz are currently in compliance with the DIP Facility
covenants as amended, due to the outcome of the Private-Label Credit Card
Program dispute as described in Note 4 to the consolidated condensed financial
statements and other factors, the Company may have to seek an additional
amendment or waiver under the DIP Facility to remain in compliance in future
periods. There can be no assurances given that such an amendment or waiver would
be granted.
Private-Label Credit Card Program
On September 4, 1998 Levitz and its operating subsidiaries entered into an
agreement ("Merchant Agreement") with Household Bank (SB), N.A. ("Household")
whereby Household would provide financing to individual consumers purchasing
merchandise from Levitz ("Private-Label Credit Card Program"). The Court
approved the Merchant Agreement and granted a first priority and security
interest and lien to Household on certain reserves ("Merchant Risk Reserve")
retained or accumulated by Household, totaling $10.9 million at September 30,
1999, and gave administrative expense status to substantially all obligations of
Levitz arising under the Merchant Agreement. Both the reserves and obligations
are limited to a certain maximum amount under the Merchant Agreement. Levitz
funds the Merchant Risk Reserve through a reduction of 3.5% on all customer
accounts financed.
At September 30, 1999, Household's portfolio balance was $478.3 million. Levitz
recorded income of $18.6 million and $3.0 million for the six month periods
ended September 30, 1999 and 1998, respectively. The income recorded for the six
month period ended September 30, 1999 was derived from the Merchant Agreement
with Household. The income recorded for the same period of the prior year was
primarily derived from the former agreement with GeneraL Electric Capital
Corporation.
Levitz is exposed to market risk under the terms of the Household Agreement.
Levitz may pay a fee or may receive income, based upon the relationship among
the interest earned on the portfolio, the amount of the servicing fee, the cost
of capital, promotional discount fees and credit losses. A one percent increase
or decrease in the finance charge to customers or the cost of capital or the
credit loss rate would increase or decrease the annual income from the portfolio
by $3.5 million to $5.5 million.
Levitz is obligated for all credit losses under the portfolio, including the
GECC portfolio transferred to Household, up to a maximum of 15% of average
outstanding receivables and for 50% of all credit losses above 15%. In October
1999 Household gave notice of its intent to require Levitz to significantly
increase the amount of its monthly payment to Household for Levitz's obligations
under the Merchant Agreement for credit losses. Levitz has disputed the
propriety of such charges and is awaiting both a response from Household and the
results of a review of the first year performance under the Merchant Agreement
as reported by Household. The outcome of the review and the response from
Household could have a material adverse effect on Levitz's financial position
and reported results of operations in future periods. In such case, Levitz may
be required to seek additional financing to meet its obligations under the
Merchant Agreement. While Levitz believes alternatives exist to obtain such
financing, there can be no assurances given that such financing would be
obtained.
Going Concern
The Company believes that cash on hand, amounts available under the DIP
Facility, as amended, and funds from operations will enable the Company to meet
its current liquidity and capital expenditures requirements.
16
<PAGE>
On July 7 1999, the Debtors filed a "Disclosure Statement" and a "Joint Plan of
Reorganization" ("Plan of Reorganization" or "Plan"), pursuant to Section 1125
of the Bankruptcy Code with the Court. The Disclosure Statement sets forth
certain information regarding, among other things, significant events that have
occurred during the Debtors' Chapter 11 cases and the anticipated organization,
operation and financings of "Reorganized Levitz". The Disclosure Statement
describes the Plan of Reorganization, certain effects of Plan confirmation,
certain risk factors associated with securities to be issued under the Plan, and
the manner in which distribution will be made under the Plan. In addition, the
Disclosure Statement discusses the confirmation process and the voting
procedures that holders of claims in impaired classes must follow for their
votes to be counted. The Plan of Reorganization sets forth certain information,
among other things, the classification and treatment of claims and interests,
means for implementation of the Plan, acceptance or rejection of the Plan and
effect of rejection by one or more classes of claims or interests, provisions
for governing distributions, the treatment of executory contracts and leases,
conditions precedent to confirmation of the Plan and the occurrence of the
effective date of the Plan.
The Plan of Reorganization provides, among other things, that as of the Plan
effective date stockholders and other parties holding equity interests in the
Company will not receive any distributions and unsecured creditors will receive
a distribution of stock in a "Reorganized Levitz".
Although the Plan of Reorganization provides for the Debtors' emergence from
bankruptcy, there can be no assurances given that the Plan will be confirmed by
the Court, or that such Plan will be consummated.
The exclusivity period to file a plan of reorganization will expire on November
30, 1999. On November 2, 1999, the Debtors filed a motion with the Court to
extend the exclusivity period to file a plan of reorganization to January 31,
2000. This extension would accommodate potential alternative options to the Plan
previously submitted July 7, 1999. This motion is scheduled for hearing by the
Court on November 16, 1999. There can be no assurances given that the Court will
approve the motion to extend the exclusivity period. After the expiration of the
exclusivity period, creditors will have the right to propose alternative plans
of reorganization.
Year 2000
Management believes that the Company's Year 2000 project has essentially been
completed. All remediation has taken place and the Company will continue to do
compliance testing through December 1999 as well as perform a continuing review
of systems and hardware performance into the year 2000. The estimated cost,
excluding in-house salaries, wages and benefits, for the continued testing and
review is expected to be approximately $0.2 million for testing and continued
review of software, warehouse and other operational systems.
Management's current beliefs and estimates are derived from numerous assumptions
including, but not limited to, the continued availability of certain resources
and the readiness of third-parties through their own remediation plans. Although
the Company is communicating with vendors and others with which it does business
to coordinate Year 2000 conversions, there can be no assurance, however, that
the systems of these other companies will be converted in a timely manner, or
that any such failure to convert by another company would not have an adverse
effect on the Company's systems and operations.
17
<PAGE>
PART II OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.66: Amendment No. 12 dated as of August 4, 1998 to
the Postpetition Credit Agreement among Levitz Furniture
Incorporated, et al. and BT Commercial Corporation, as agent.
Exhibit 10.67: Amendment No. 13 dated as of September 16,
1999 to the Postpetition Credit Agreement among Levitz
Furniture Incorporated, et al. and BT Commercial
Corporation, as agent.
Exhibit 27: Financial Data Schedule
(b) Report on Form 8-K: None.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEVITZ FURNITURE CORPORATION
(Registrant)
Date: November 15, 1999 /s/ MICHAEL MCCREERY
---------------------------------
Michael McCreery
Senior Vice President and
Chief Financial Officer
19
<PAGE>
EXHIBIT INDEX
Exhibits to Form 10-Q
NUMBER
EXHIBIT TABLE EXHIBIT
- ------------- -------
10.66 Amendment No. 12 dated as of August 4, 1998 to the
Postpetition Credit Agreement among Levitz Furniture
Incorporated, et al. and BT Commercial Corporation, as
agent.
10.67 Amendment No. 13 dated as of September 16, 1999 to the
Postpetition Credit Agreement among Levitz Furniture
Incorporated, et al. and BT Commercial Corporation, as
agent.
27 Financial Data Schedule.
20
EXHIBIT NO. 10.66
TWELFTH AMENDMENT TO POSTPETITION CREDIT AGREEMENT
THIS TWELFTH AMENDMENT TO POSTPETITION CREDIT AGREEMENT, dated as of
August [__], 1999 (this "Amendment"), is among LEVITZ FURNITURE INCORPORATED, a
Delaware corporation and a debtor and debtor in possession, LEVITZ FURNITURE
CORPORATION, a Florida corporation and a debtor and debtor in possession
("LFC"), LEVITZ FURNITURE REALTY CORPORATION, a Florida corporation and a debtor
and debtor in possession, LEVITZ SHOPPING SERVICE, INC., a Florida corporation
and a debtor and debtor in possession, LEVITZ FURNITURE COMPANY OF THE MIDWEST,
INC., a Colorado corporation and a debtor and debtor in possession, LEVITZ
FURNITURE COMPANY OF THE PACIFIC, INC., a California corporation and a debtor
and debtor in possession, LEVITZ FURNITURE COMPANY OF WASHINGTON, INC., a
Washington corporation and a debtor and debtor in possession, LEVITZ FURNITURE
COMPANY OF THE MIDWEST REALTY, INC., a Colorado corporation and a debtor and
debtor in possession, LEVITZ FURNITURE COMPANY OF THE PACIFIC REALTY, INC., a
California corporation and a debtor and a debtor in possession, LEVITZ FURNITURE
COMPANY OF WASHINGTON REALTY, INC., a Washington corporation and debtor and a
debtor in possession, LEVITZ REINSURANCE CORPORATION, JOHN M. SMYTH COMPANY, an
Illinois corporation and a debtor and debtor in possession, and JOHN M. SMYTH
REALTY COMPANY, an Illinois corporation and a debtor and debtor in possession
(collectively, the "BORROWERS"), each Revolving Lender and Overadvance Term
Lender signatories hereto (collectively, the "LENDERS"), and BT COMMERCIAL
CORPORATION, a Delaware corporation, acting in its capacity as collateral agent
and agent for the Lenders (in such capacity, together with its successors in
such capacity, the "AGENT"). Capitalized terms used in this Amendment and not
otherwise defined have the meanings assigned to such terms in the Postpetition
Credit Agreement dated as of September 5, 1997 (as amended, restated,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Borrowers, the Lenders and the Agent.
PRELIMINARY STATEMENTS:
A. The Borrowers, the Lenders and the Agent are parties to the Credit
Agreement.
B. The Borrowers have requested that the Lenders and the Agent amend
the Credit Agreement in certain respects.
C. The Borrowers, the Lenders and the Agent have agreed to amend the
Credit Agreement on the terms and subject to the conditions of this Amendment.
AGREEMENT:
In consideration of the premises and the mutual agreements contained in
this Amendment, the Borrowers, the Lenders and the Agent agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
On the date each of the conditions set forth in SECTION 2 is satisfied
by the Borrowers (the "CLOSING DATE"), the Credit Agreement is amended as
follows:
1.1 Article 2C to the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
1
<PAGE>
ARTICLE 2C. OVERADVANCE TERM LOAN
Subject to the terms and conditions set forth in this Credit
Agreement, and in reliance on the representations and warranties of the
Borrowers set forth herein, from time to time prior to the Overadvance
Maturity Date and upon receipt of notice from the Agent that Excess
Availability is less than $12,000,000 (which amount shall include the
amount set forth in subsection (d) in the definition of Borrowing
Base), the Overadvance Term Lender will make term loans (each an
"Overadvance Term Loan") to the Borrowers, as soon as reasonably
practicable and in no event more than 10 Business Days after receiving
notice from the Agent, each in the original principal amount of
$10,000,000. In no event may more than one Overadvance Term Loan be
outstanding at any time. Notwithstanding anything to the contrary
contained in Section 4.7B and Section 4.11 and provided that no Default
or Event of Default then exists, Borrowers shall repay the principal
amount of any Overadvance Term Loan in the event that Excess
Availability is equal to or greater than $18,000,000 for the five (5)
consecutive Business Days prior to the date of such prepayment. The
proceeds of each Overadvance Term Loan will be immediately deposited
with the Agent and, notwithstanding the provisions of Section 4.11,
will be applied by the Agent to pay down the outstanding principal of
the Revolving Loans on such date. Each Overadvance Term Loan shall be
evidenced by an Overadvance Term Note and shall be governed in all
respects by the terms of this Credit Agreement and the other Credit
Documents.
1.2 The definition of "Borrowing Base" contained in Section 1.1 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
Borrowing Base means, at any time, the sum at such time of:
(a) the Fixed Asset Sublimit (which may be a negative
number), plus
(b) eighty-five percent (85%) of Eligible Accounts
Receivable, plus
(c) seventy-five percent (75%) of Eligible Inventory; provided
that the foregoing percentage may be adjusted by the Agent in the
exercise of its Permitted Discretion based upon appraisals of the
Borrowers' inventory prepared from time to time at the Agent's or the
Majority Lenders' direction, plus
(d) solely for the purposes of accepting the borrowing of the
Overadvance Term Loans, $10,000,000 (the "Overadvance Term Loan
Amount"); provided, that, effective as of the earlier to occur of (i)
ten (10) Business Days after the date on which the Overadvance Term
Lender receives notice from the Agent that Excess Availability is less
than $12,000,000 or (ii) the date on which the proceeds of an
Overadvance Term Loan are received by the Agent for the account of the
Debtors, the Overadvance Term Loan Amount will be automatically reduced
to zero (-0-); and provided further, that (I) in the event that the
principal amount of any Overadvance Term Loan is repaid as contemplated
under Article 2C, the Overadvance Term Loan Amount will automatically
be reestablished at $10,000,000 and (ii) notwithstanding anything to
the contrary contained in this Agreement or any of the other Credit
Documents, (x) only the Overadvance Term Lender shall have any
obligation to fund an Overadvance Term Loan and (y) prior to any date
on which the Overadvance Term Loan Amount is reduced to zero pursuant
to the initial proviso to this paragraph (d), the Revolving Lenders
shall have no obligation whatsoever to make any Revolving Loan or other
extension of credit under this Agreement to the extent that,
immediately
2
<PAGE>
before or after giving effect to such Revolving Loan or extension of
credit, Excess Availability is less than $10,000,000, less
(e) the aggregate amount of the Borrowers' allowed
professional fees and disbursements to which the Postpetition
Obligations and the Prepetition Obligations may be subordinated
pursuant to the Interim Financing Order and the Permanent Financing
Order following a Default or an Event of Default;
provided, that so long as the LFC Funds Administrator has delivered a
current Borrowing Base Certificate to the Agent in accordance with the
requirements of Section 7.2, the Agent may rely on such Borrowing Base
Certificate for purposes of computing the amounts referred to in
clauses (b) and (c) above.
In addition, the Agent, in the exercise of its Permitted Discretion,
may (i) establish and increase or decrease reserves against Eligible
Accounts Receivable and Eligible Inventory, (ii) reduce the advance
rates provided for in this definition, or restore such advance rates to
any level equal to or below the advance rates in effect as of the date
of this Credit Agreement, and (iii) impose additional restrictions (or
eliminate the same) to the standards of eligibility set forth in the
definitions of "Eligible Accounts Receivable" and "Eligible Inventory."
Notwithstanding anything herein to the contrary, on and subsequent to
the close of the Sale/Leaseback Transaction, the Agent will not
increase the advance rates without receiving prior consent of the
Majority Term Lenders and the Overadvance Term Lender.
1.3 Section 4.7B of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
4.7B No Permitted Prepayment of Overadvance Term Loan.
Until payment in full of all Postpetition Obligations in
respect of Revolving Loans, Term Loans and Letter of Credit Obligations
and termination of the Revolving Commitments pursuant to the provisions
hereof, and except as provided in Article 2C with respect to the
repayment of any Overadvance Term Loans in the event that Excess
Availability is equal to or greater than $18,000,000 for five (5)
consecutive Business Days, the Borrowers may not prepay or make any
other payment or distribution of any kind (in cash, securities or
otherwise but excluding payments of accrued and unpaid interest, fees
and expenses) in respect of or in connection with the Overadvance Term
Loan at any time in whole or in part and all such principal amounts
otherwise distributable in respect of or in connection with the
Overadvance Term Loan shall be paid to the Agent for allocation to the
Postpetition Obligations in respect of Revolving Loans, Letters of
Credit Obligations and Term Loans as provided herein until all such
obligations are indefeasibly paid in full in cash and the Revolving
Commitments are fully terminated.
1.4 Section 7.2(a) of the Credit Agreement is hereby amended by
adding the following sentence at the end thereof:
The Borrowers shall also deliver a copy of each Borrowing Base
Certificate to the Overadvance Term Lender on or prior to the times
required for such delivery to the Agent hereunder.
1.5 Section 9.2B of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
9.2B Acceleration of Postpetition Obligations in Respect of Overadvance
Term Loan
3
<PAGE>
Upon the earlier of (i) the Overadvance Maturity Date or (ii)
the occurrence and during the continuance of any Event of Default under
Section 9.1(a), by reason of the Borrowers' failure to make any payment
of interest on the Overadvance Term Loan when the same shall become
payable, then, without prejudice to the rights of the Agent or
Overadvance Term Lender to enforce its claims against the Borrowers,
upon notice from the Overadvance Term Lender to the LFC Funds
Administrator and the Agent, all Postpetition Obligations in respect of
the Overadvance Term Loan shall be immediately due and payable without
presentment, demand, protest or any other action or obligation of the
Agent or Overadvance Term Lender; provided, that, notwithstanding the
foregoing, the Overadvance Term Lender may not accelerate the maturity
of the Overadvance Term Loan pursuant to this Section 9.2B nor exercise
any rights or remedies with respect hereto nor cause the Agent to
exercise any rights or remedies on behalf of the Overadvance Term
Lender with respect hereto (other than to enforce its rights under
Article 2C or Section 4.11(a) in accordance with the terms hereof)
until all Postpetition Obligations owing to the Revolving Lenders and
the Term Lenders have been indefeasibly paid in full and the Revolving
Commitments and Term Commitments have been terminated. In addition, the
Overadvance Term Lender, acting in its capacity as Overadvance Term
Lender agrees that it shall be bound by all, and shall not object to
any, modifications, extensions of maturity and amendments to the Credit
Agreement executed by the Agent, Lenders, Majority Lenders and/or
Majority Term Lenders (as applicable) and that none of the same shall
require advance notice to, or the consent of, any Overadvance Term
Lender; provided, however, that no such modification, extension, waiver
or amendment shall (a) extend the maturity date of any portion of the
principal amount of or interest or fees payable to the Overadvance Term
Lender, (b) reduce the principal amount of or the rate of interest or
fees payable on the Overadvance Term Loan, (c) release all or
substantially all of the Collateral, (d) alter, amend or otherwise
impair the lien granted hereunder to the Overadvance Term Lender or the
priority thereof or any priority granted to the Overadvance Term Lender
under section 364 of the Bankruptcy Code or the Amendment Approval
Order, (e) alter, amend or otherwise impair the Overadvance Term
Lender's rights under the Amendment Approval Order, or (f) amend
Article 2C of this Section 9.2(B).
2. CONDITIONS PRECEDENT.
This Amendment becomes effective upon satisfaction of the
following conditions:
2.1 AMENDMENT APPROVAL ORDER. This Amendment has been approved by
the Bankruptcy Court pursuant to an order (the "Amendment Approval Order"),
which order is in full force and effect and has not been reversed, modified,
amended, appealed or stayed. The Agent shall have been satisfied with the form
and substance (and the timing of the notice) of the motion for the entry of the
Amendment Approval Order. In addition, each signatory hereto shall have been
satisfied with the form and substance of the Amendment Approval Order.
2.2 DOCUMENTS. The Agent has received all of the following, each
duly executed and dated as of the Closing Date (or such other date as is
satisfactory to the Agent) in form and substance satisfactory to the Agent.
(A) TWELFTH AMENDMENT. Ten copies of this Amendment executed
by the LFC Funds Administrator, the Borrowers, the Agent and all Lenders; and
(B) OTHER. Such other documents as the Agent may reasonably
request.
4
<PAGE>
3. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers represents and warrants to the Agent and each
Lender that, after giving effect to this Amendment or any part of this
Amendment:
3.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in the Credit Agreement and the other Credit Documents are
true and correct in all material respects on and as of the date of this
Amendment, in each case as if then made, other than representations and
warranties that expressly relate solely to an earlier date (in which case such
representations and warranties were true and accurate on and as of such earlier
date).
3.2 EVENTS OF DEFAULT. No Default or Event of Default has occurred
which has not been waived (or, in the case of an Event of Default, cured) under
the terms of the Credit Agreement.
3.3 ENFORCEABILITY. Upon approval by the Bankruptcy Court (as
contemplated by SECTION 2.1), this Amendment and the Credit Agreement, as
amended by this Amendment, will constitute legal, valid and binding obligations
of the LFC Funds Administrator and each of the Borrowers and will be enforceable
against such Persons in accordance with their respective terms.
3.4 CONSENTS. The execution and delivery by the LFC Funds
Administrator and each of the Borrowers of this Amendment does not require the
consent or approval of any Person other than the Bankruptcy Court (as
contemplated by SECTION 2.1), except such consents and approvals as have been
obtained.
4. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
CREDIT DOCUMENTS.
4.1 REFERENCES. Upon the effectiveness of this Amendment, or any
part of this Amendment, each reference in the Credit Agreement to "this
Agreement", "hereunder" "hereof", "herein" or words of like import, and each
reference in each of the other Credit Documents to the "Credit Agreement" shall
mean and be a reference to the Credit Agreement as amended by this Amendment or
any part of this Amendment.
4.2 RATIFICATION. Except as expressly set forth in this Amendment,
all of the terms and conditions of the Credit Agreement and the other Credit
Documents remain in full force and effect and are ratified and confirmed in all
respects. The execution and delivery of this Amendment by the Agent and each of
the Lenders in no way obligates the Agent or any of the Lenders at any time
hereafter to consent to any other amendment or modification of any term or
provision of the Credit Agreement or any of the other Credit Documents, whether
of a similar or different nature.
5
<PAGE>
5. GOVERNING LAW.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT IS
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS AND DECISIONS OF THE
STATE OF NEW YORK.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
6
<PAGE>
6. HEADINGS; COUNTERPARTS.
Section headings in this Amendment are included for convenience of
reference only and do not constitute a part of this Amendment for any other
purpose. This Amendment may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their duly authorized officers as of the date first
set forth above.
LFC FUNDS ADMINISTRATOR:
LEVITZ FURNITURE CORPORATION, a Florida
corporation, in its capacity as LFC Funds
Administrator
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
BORROWERS:
LEVITZ FURNITURE CORPORATION, a Florida
corporation, in its individual capacity and
it its capacity as the LFC Funds
Administrator
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
LEVITZ FURNITURE INCORPORATED, a Delaware
corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
7
<PAGE>
LEVITZ FURNITURE REALTY CORPORATION, a
Florida corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
LEVITZ SHOPPING SERVICE, a Florida
corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
LEVITZ FURNITURE COMPANY OF THE MIDWEST,
INC., a Colorado corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
LEVITZ FURNITURE COMPANY OF THE PACIFIC,
INC., a California corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
LEVITZ FURNITURE COMPANY OF WASHINGTON,
INC., a Washington corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
8
<PAGE>
LEVITZ FURNITURE COMPANY OF THE MIDWEST
REALTY, INC., a Colorado corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
LEVITZ FURNITURE COMPANY OF THE PACIFIC
REALTY, INC., a California corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
LEVITZ FURNITURE COMPANY OF WASHINGTON
REALTY, INC., a Washington corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
JOHN M. SMYTH COMPANY, an Illinois
corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
JOHN M. SMYTH REALTY COMPANY, an Illinois
corporation
By: /s/
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
9
<PAGE>
AGENT:
BT COMMERCIAL CORPORATION, in its capacity
as Agent
By: /s/ WAYNE D. HILLOCK
---------------------------------------
Name: Wayne D. Hillock
---------------------------------------
Title: Principal
---------------------------------------
REVOLVING LENDERS:
BT COMMERCIAL CORPORATION, a Delaware
corporation in its respective capacities as
Revolving Lender and Collateral Agent
By: /s/ WAYNE D. HILLOCK
---------------------------------------
Name: Wayne D. Hillock
---------------------------------------
Title: Principal
---------------------------------------
FINOVA CAPITAL CORPORATION, in its capacity
as Revolving Lender
By: /s/ BRIAN RUJAWITZ
---------------------------------------
Name: Brian Rujawitz
---------------------------------------
Title: AVP
---------------------------------------
HELLER FINANCIAL, INC., in its capacity as
Revolving Lender
By: /s/ JOHN BUFF
--------------------------------------
Name: John Buff
--------------------------------------
Title: SVP
--------------------------------------
LASALLE NATIONAL BANK, in its capacity as
Revolving Lender
By: /s/ CHRISTOPHER G. CLIFFORD
--------------------------------------
Name: Christopher G. Clifford
--------------------------------------
Title: Sr. VP
--------------------------------------
10
<PAGE>
TRANSAMERICA BUSINESS CREDIT CORPORATIONN,
in its capacity as Revolving Lender
By: /s/
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
GMAC BUSINESS CREDIT L.L.C.
By: /s/
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
OVERADVANCE TERM LENDER:
M.D. SASS CORPORATE RESURGENCE PARTNERS,
L.P., as Overadvance Term Lender
By: /s/ Robert T. Simington
--------------------------------------
Name: Robert T. Simington
--------------------------------------
Title: Senior Vice President
--------------------------------------
11
EXHIBIT NO. 10.67
THIRTEENTH AMENDMENT TO POSTPETITION CREDIT AGREEMENT
THIS THIRTEENTH AMENDMENT TO POSTPETITION CREDIT AGREEMENT, dated as of
September 16, 1999 (this "AMENDMENT"), is among LEVITZ FURNITURE INCORPORATED, a
Delaware corporation and a debtor and debtor in possession, LEVITZ FURNITURE
CORPORATION, a Florida corporation and a debtor and debtor in possession
("LFC"), LEVITZ FURNITURE REALTY CORPORATION, a Florida corporation and a debtor
and debtor in possession, LEVITZ SHOPPING SERVICE, INC., a Florida corporation
and a debtor and debtor in possession, LEVITZ FURNITURE COMPANY OF THE MIDWEST,
INC., a Colorado corporation and a debtor and debtor in possession, LEVITZ
FURNITURE COMPANY OF THE PACIFIC, INC., a California corporation and a debtor
and debtor in possession, LEVITZ FURNITURE COMPANY OF WASHINGTON, INC., a
Washington corporation and a debtor and debtor in possession, LEVITZ FURNITURE
COMPANY OF THE MIDWEST REALTY, INC., a Colorado corporation and a debtor and
debtor in possession, LEVITZ FURNITURE COMPANY OF THE PACIFIC REALTY, INC., a
California corporation and a debtor and a debtor in possession, LEVITZ FURNITURE
COMPANY OF WASHINGTON REALTY, INC., a Washington corporation and debtor and a
debtor in possession, LEVITZ REINSURANCE CORPORATION, JOHN M. SMYTH COMPANY, an
Illinois corporation and a debtor and debtor in possession, and JOHN M. SMYTH
REALTY COMPANY, an Illinois corporation and a debtor and debtor in possession
(collectively, the "BORROWERS"), each Revolving Lender and Overadvance Term
Lender signatories hereto (collectively, the "LENDERS"), and BT COMMERCIAL
CORPORATION, a Delaware corporation, acting in its capacity as collateral agent
and agent for the Lenders (in such capacity, together with its successors in
such capacity, the "AGENT"). Capitalized terms used in this Amendment and not
otherwise defined have the meanings assigned to such terms in the Postpetition
Credit Agreement dated as of September 5, 1997 (as amended, restated,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Borrowers, the Lenders and the Agent.
PRELIMINARY STATEMENTS:
A. The Borrowers, the Lenders and the Agent are parties to the Credit
Agreement.
B. The Borrowers have requested that the Lenders and the Agent amend
the Credit Agreement in certain respects.
C. The Borrowers, the Lenders and the Agent have agreed to amend the
Credit Agreement on the terms and subject to the conditions of this Amendment.
AGREEMENT:
In consideration of the premises and the mutual agreements contained in
this Amendment, the Borrowers, the Lenders and the Agent agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
On the date each of the conditions set forth in SECTION 2 is satisfied
by the Borrowers (the "CLOSING DATE"), the Credit Agreement is amended as
follows:
1.1 Section 1.1 of the Credit Agreement is amended by deleting the
definition of "EXPIRATION DATE" in its entirety and replacing it as follows:
1
<PAGE>
EXPIRATION DATE means the earlier of (i) June 30, 2000 and
(ii) the date on which this Credit Agreement is terminated pursuant to
SECTION 9.2(B).
1.2 Section 1.1 of the Credit Agreement is further amended by deleting
the reference to September 30, 1999 contained in the second proviso of the
definition of "FIXED ASSET SUBLIMIT" and by replacing it with a reference to
"DECEMBER 31, 1999".
1.3 Section 1.1 of the Credit Agreement is further amended by deleting
the definition of "OVERADVANCE MATURITY DATE" in its entirety and replacing it
as follows:
OVERADVANCE MATURITY DATE means the earlier of (i) June 30, 2000 or
(ii) the Expiration Date.
1.4 Section 1.1 of the Credit Agreement is further amended, effective
December 31, 1999, by deleting the definition of "REVOLVING LINE OF CREDIT" in
its entirety and replacing it as follows:
REVOLVING LINE OF CREDIT means the aggregate revolving line of
credit extended pursuant to this Credit Agreement by the Revolving
Lenders to the Borrowers for Revolving Loans and Letters of Credit, in
an aggregate principal amount at any time of up to $95,000,000, as such
amount may be reduced from time to time pursuant to the terms and
provisions hereof.
1.5 The Credit Agreement is further amended by adding a new Section
7.17 thereto which shall read in its entirety as follows:
7.17 AMENDMENT FEE
The Borrowers shall pay to the Agent on December 31, 1999, for
the ratable benefit of the Lenders in consideration for the Lenders'
entering into the Thirteenth Amendment to the Credit Agreement (the
"THIRTEENTH AMENDMENT"), a non-refundable fee equal to $150,000 (the
"AMENDMENT FEE"). The Amendment Fee shall be earned in full by the
Lenders upon the effectiveness of the Thirteenth Amendment.
1.6 Section 8.1 of the Credit Agreement is amended by deleting such
section in its entirety and replacing it as follows:
8.1 MINIMUM EBITDA
At the end of the period beginning on April 1, 1999 and ending
on each of the days set forth below, EBITDA for such period shall be an
amount not less than the following:
PERIOD END AMOUNT
September 30, 1999 $ -0-
December 31, 1999 $4,000,000
March 31, 2000 $9,000,000
1.7 Annex I of the Credit Agreement is amended by replacing such annex
with the Annex I attached to this Amendment as EXHIBIT A.
2. CONDITIONS PRECEDENT.
2
<PAGE>
This Amendment becomes effective upon satisfaction of the following
conditions:
2.1 AMENDMENT APPROVAL ORDER. This Amendment has been approved by the
Bankruptcy Court pursuant to an order (the "AMENDMENT APPROVAL ORDER"), which
order is in full force and effect and has not been reversed, modified, amended,
appealed or stayed. The Agent shall have been satisfied with the form and
substance (and the timing of the notice) of the motion for the entry of the
Amendment Approval Order. In addition, the Agent shall have been satisfied with
the form and substance of the Amendment Approval Order.
2.2 EXPENSES. The Agent shall have been reimbursed for all fees and
expenses incurred by the Agent in connection with this Amendment.
2.3 DOCUMENTS. The Agent has received all of the following, each duly
executed and dated as of the Closing Date (or such other date as is satisfactory
to the Agent) in form and substance satisfactory to the Agent:
(A) THIRTEENTH AMENDMENT. Ten copies of this Amendment
executed by the LFC Funds Administrator, the Borrowers, the Agent and all
Lenders; and
(B) OTHER. Such other documents as the Agent may reasonably
request.
3. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers represents and warrants to the Agent and each
Lender that, after giving effect to this Amendment or any part of this
Amendment:
3.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties
contained in the Credit Agreement and the other Credit Documents are true and
correct in all material respects on and as of the date of this Amendment, in
each case as if then made, other than representations and warranties that
expressly relate solely to an earlier date (in which case such representations
and warranties were true and accurate on and as of such earlier date).
3.2 EVENTS OF DEFAULT. No Default or Event of Default has occurred
which has not been waived (or, in the case of an Event of Default, cured) under
the terms of the Credit Agreement.
3.3 ENFORCEABILITY. Upon approval by the Bankruptcy Court (as
contemplated by SECTION 2.1), this Amendment and the Credit Agreement, as
amended by this Amendment, will constitute legal, valid and binding obligations
of the LFC Funds Administrator and each of the Borrowers and will be enforceable
against such Persons in accordance with their respective terms.
3.4 CONSENTS. The execution and delivery by the LFC Funds Administrator
and each of the Borrowers of this Amendment does not require the consent or
approval of any Person other than the Bankruptcy Court (as contemplated by
SECTION 2.1), except such consents and approvals as have been obtained.
4. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER CREDIT
DOCUMENTS.
4.1 REFERENCES. Upon the effectiveness of this Amendment, or any part
of this Amendment, each reference in the Credit Agreement to "this Agreement",
"hereunder" "hereof", "herein" or words of like import, and each reference in
each of the other Credit Documents to the "Credit Agreement" shall mean and be a
reference to the Credit Agreement as amended by this Amendment or any part of
this Amendment.
3
<PAGE>
4.2 RATIFICATION. Except as expressly set forth in this Amendment, all
of the terms and conditions of the Credit Agreement and the other Credit
Documents remain in full force and effect and are ratified and confirmed in all
respects. The execution and delivery of this Amendment by the Agent and each of
the Lenders in no way obligates the Agent or any of the Lenders at any time
hereafter to consent to any other amendment or modification of any term or
provision of the Credit Agreement or any of the other Credit Documents, whether
of a similar or different nature.
4
<PAGE>
5. GOVERNING LAW.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT IS
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS AND DECISIONS OF THE
STATE OF NEW YORK.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
5
<PAGE>
6. HEADINGS; COUNTERPARTS.
Section headings in this Amendment are included for convenience of
reference only and do not constitute a part of this Amendment for any other
purpose. This Amendment may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their duly authorized officers as of the date first
set forth above.
LFC FUNDS ADMINISTRATOR:
LEVITZ FURNITURE CORPORATION, a Florida
corporation, in its capacity as LFC
Funds Administrator
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
BORROWERS:
LEVITZ FURNITURE CORPORATION, a Florida
corporation, in its individual capacity and
it its capacity as the LFC Funds
Administrator
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
LEVITZ FURNITURE INCORPORATED, a Delaware
corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
6
<PAGE>
LEVITZ FURNITURE REALTY CORPORATION, a
Florida corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
LEVITZ SHOPPING SERVICE, a Florida
corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
LEVITZ FURNITURE COMPANY OF THE MIDWEST,
INC., a Colorado corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
LEVITZ FURNITURE COMPANY OF THE PACIFIC,
INC., a California corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
LEVITZ FURNITURE COMPANY OF WASHINGTON,
INC., a Washington corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
7
<PAGE>
LEVITZ FURNITURE COMPANY OF THE MIDWEST
REALTY, INC., a Colorado corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
LEVITZ FURNITURE COMPANY OF THE PACIFIC
REALTY, INC., a California corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
LEVITZ FURNITURE COMPANY OF WASHINGTON
REALTY, INC., a Washington corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
JOHN M. SMYTH COMPANY, an Illinois
corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
JOHN M. SMYTH REALTY COMPANY, an Illinois
corporation
By: /s/ MICHAEL E. MCCREERY
-------------------------------------
Name: Michael E. McCreery
-------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------
8
<PAGE>
AGENT:
BT COMMERCIAL CORPORATION, in its capacity
as Agent
By: /s/ DEAN J. WHALEN
-------------------------------------
Name: Dean J. Whalen
-------------------------------------
Title: Associate
-------------------------------------
REVOLVING LENDERS:
BT COMMERCIAL CORPORATION, a Delaware
corporation in its respective capacities as
Revolving Lender and Collateral Agent
By: /s/ DEAN J. WHALEN
-------------------------------------
Name: Dean J. Whalen
-------------------------------------
Title: Associate
-------------------------------------
FINOVA CAPITAL CORPORATION, in its capacity a
Revolving Lender
By: /s/
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
HELLER FINANCIAL, INC., in its capacity as
Revolving Lender
By: /s/ DENNIS GRAHAM
-------------------------------------
Name: Dennis Graham
-------------------------------------
Title: Assistant Vice President
-------------------------------------
LASALLE NATIONAL BANK, in its capacity as
Revolving Lender
By: /s/ CHRISTOPHER G. CLIFFORD
-------------------------------------
Name: Christopher G. Clifford
-------------------------------------
Title: Sr. VP
-------------------------------------
9
<PAGE>
TRANSAMERICA BUSINESS CREDIT CORPORATIONN,
in its capacity as Revolving Lender
By: /s/ R. L. HEINZ
-------------------------------------
Name: R. L. Heinz
-------------------------------------
Title: SVP
-------------------------------------
GMAC BUSINESS CREDIT L.L.C., in its
capacity as Revolving Lender
By: /s/ THOMAS BRENT
-------------------------------------
Name: Thomas Brent
-------------------------------------
Title: Vice President
-------------------------------------
OVERADVANCE TERM LENDER:
M.D. SASS CORPORATE RESURGENCE PARTNERS,
L.P., as Overadvance Term Lender
By: /s/ Robert T. Simington
-------------------------------------
Name: Robert T. Simington
-------------------------------------
Title: Senior Vice President
-------------------------------------
10
<PAGE>
EXHIBIT A TO THIRTEENTH AMENDMENT
ANNEX I
TO
POSTPETITION CREDIT AGREEMENT
DATED AS OF SEPTEMBER 5, 1997
LIST OF REVOLVING LENDERS/REVOLVING COMMITMENT
AMOUNTS; AND APPLICABLE LENDING OFFICES
1. BT COMMERCIAL CORPORATION
233 South Wacker Drive
Chicago, Illinois 60606
REVOLVING COMMITMENT AMOUNT: $16,869,159.00
DOMESTIC LENDING OFFICE: 233 South Wacker Drive
Chicago, Illinois 60606
LIBOR LENDING OFFICE: 233 South Wacker Drive
Chicago, Illinois 60606
2. LA SALLE NATIONAL BANK
135 South LaSalle Street
Suite 425
Chicago, Illinois 60603
REVOLVING COMMITMENT AMOUNT: $16,869,159.00
DOMESTIC LENDING OFFICE: 135 South LaSalle Street
Suite 425
Chicago, Illinois 60603
LIBOR LENDING OFFICE: 135 South LaSalle Street
Suite 425
Chicago, Illinois 60603
3. HELLER FINANCIAL, INC.
500 West Monroe Street
18th Floor
Chicago, Illinois 60661
REVOLVING COMMITMENT AMOUNT: $15,981,308.00
DOMESTIC LENDING OFFICE: 500 West Monroe Street
18th Floor
Chicago, Illinois 60661
LIBOR LENDING OFFICE: 500 West Monroe Street
18th Floor
Chicago, Illinois 60661
11
<PAGE>
4. TRANSAMERICA BUSINESS CREDIT CORPORATION
8750 W. Bryn Mawr Avenue
Suite 720
Chicago, Illinois 60631
REVOLVING COMMITMENT AMOUNT: $11,542,056.00
DOMESTIC LENDING OFFICE: 8750 W. Bryn Mawr Avenue
Suite 720
Chicago, Illinois 60631
LIBOR LENDING OFFICE: 8750 W. Bryn Mawr Avenue
Suite 720
Chicago, Illinois 60631
5. FINOVA CAPITAL CORPORATION
355 South Grand Avenue
Suite 2400
Los Angeles, California 90071
REVOLVING COMMITMENT AMOUNT: $16,869,159.00
DOMESTIC LENDING OFFICE: 355 South Grand Avenue
Suite 2400
Los Angeles, California 90071
LIBOR LENDING OFFICE: 355 South Grand Avenue
Suite 2400
Los Angeles, California 90071
6. GMAC BUSINESS CREDIT L.L.C.
200 South Wacker Drive
Suite 3129
Chicago, Illinois 60606
REVOLVING COMMITMENT AMOUNT: $16,869,159.00
DOMESTIC LENDING OFFICE: 200 South Wacker Drive
Suite 3129
Chicago, Illinois 60606
LIBOR LENDING OFFICE: 200 South Wacker Drive
Suite 3129
Chicago, Illinois 60606
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,532
<SECURITIES> 0
<RECEIVABLES> 20,648
<ALLOWANCES> 0
<INVENTORY> 86,484
<CURRENT-ASSETS> 117,912
<PP&E> 33,717
<DEPRECIATION> 0
<TOTAL-ASSETS> 217,009
<CURRENT-LIABILITIES> 186,465
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (304,881)
<TOTAL-LIABILITY-AND-EQUITY> 217,009
<SALES> 246,319
<TOTAL-REVENUES> 246,319
<CGS> 140,159
<TOTAL-COSTS> 140,159
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,376
<INCOME-PRETAX> (20,561)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,561)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,561)
<EPS-BASIC> (20,561)
<EPS-DILUTED> 0
</TABLE>
