FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended July 1, 1995 Commission File No. 0-11577
LADD FURNITURE, INC.
(Exact name of registrant as specified in charter)
North Carolina 56-1311320
(State or other juris- (I.R.S. Employer
diction of incorpora- Identification No.)
tion or organization)
One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (910) 889-0333
_____________________
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
______________________
As of August 11, 1995 there were 7,725,236 shares of Common Stock ($.30
par value) of the registrant outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the thirteen weeks and twenty-six weeks ended July 1, 1995 and July 2, 1994
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 148,989 153,182 302,377 292,221
Cost of sales 133,492 122,657 260,052 236,112
Gross profit 15,497 30,525 42,325 56,109
Selling, general and
administrative expenses 28,335 23,996 52,151 45,565
Restructuring expense (Note 2) 25,696 - 25,696 -
Operating income (loss) (38,534) 6,529 (35,522) 10,544
Other deductions:
Interest expense 2,846 2,206 5,649 3,840
Other, net 2,687 524 2,861 476
5,533 2,730 8,510 4,316
Earnings (loss) before income taxes (44,067) 3,799 (44,032) 6,228
Income tax expense (benefit) (16,744) 1,094 (16,733) 1,868
Net earnings (loss) $ (27,323) 2,705 (27,299) 4,360
Net earnings (loss) per common share $ (3.54) 0.35 (3.54) 0.57
Weighted average number of
common shares outstanding 7,725 7,697 7,715 7,694
</TABLE>
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
July 1, 1995 and December 31, 1994
(Amounts in thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
July 1,
1995 December 31
(Unaudited) 1994*
<S> <C> <C>
Current assets:
Cash $ 1,406 576
Trade accounts receivable, less allowances
for doubtful receivables, discounts,
returns and allowances of $3,862 and $4,294,
respectively 41,347 52,735
Inventories (Note 3) 91,127 122,083
Prepaid expenses and other current assets 11,670 10,053
Total current assets 145,550 185,447
Property, plant and equipment, net 83,826 109,522
Businesses held for sale, net (Note 2) 31,184 -
Intangible and other assets, net 76,515 83,847
$ 337,075 378,816
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Current installments of long-term debt (Note 5) $ 618 687
Short-term bank borrowings (Note 5) 1,950 5,000
Trade accounts payable 24,059 28,360
Accrued expenses and other current liabilities 29,814 27,715
Total current liabilities 56,441 61,762
Long-term debt, excluding current
installments (Note 5) 145,287 143,584
Deferred compensation and other liabilities 7,000 6,316
Deferred income taxes 4,769 15,248
Total liabilities 213,497 226,910
Shareholders' equity:
Preferred stock of $100 par value. Authorized
500,000 shares; no shares issued - -
Common stock of $.30 par value. Authorized
50,000,000 shares; issued 7,725,236 and
7,700,151 shares, respectively (Note 4) 2,317 2,310
Additional paid-in capital 49,883 49,516
Currency translation adjustment 0 (208)
Retained earnings 72,416 101,105
124,616 152,723
Less unamortized value of restricted stock (1,038) (817)
Total shareholders' equity 123,578 151,906
$ 337,075 378,816
</TABLE>
* Derived from the Company's 1994 Annual Report.
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the twenty-six weeks ended July 1, 1995 and July 2, 1994
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended
July 1, July 2,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (27,299) 4,360
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 7,214 6,621
Amortization 2,199 1,600
Restructuring expense 25,696 -
Provision for losses on trade accounts receivable 2,401 1,473
Gain on sales of property, plant and equipment (136) (155)
Provision for deferred income taxes (14,650) (199)
Increase (decrease) in deferred compensation and
other liabilities 561 (667)
Change in assets and liabilities, net of effects
from purchase of Pilliod Furniture in 1994 and
classification of businesses held for sale in 1995
Increase in trade accounts receivable (4,293) (5,508)
(Increase) decrease in inventories 7,266 (9,803)
Increase in prepaid expenses and other
current assets (460) (3,052)
Decrease in trade accounts payable (123) (1,411)
Increase in accrued expenses and other
current liabilities 6,082 4,531
Total adjustments 31,757 (6,570)
Net cash provided by (used in) operating activities 4,458 (2,210)
Cash flows from investing activities:
Acquisition of Pilliod Furniture, net of cash
acquired - (23,847)
Additions to property, plant and equipment (6,732) (17,817)
Proceeds from sales of property, plant and equipment 75 295
Additions to other assets (1,121) (606)
Net cash used in investing activities (7,778) (41,975)
Cash flows from financing activities:
Proceeds from long-term borrowings 2,131 27,217
Proceeds from (repayments of) short-term bank borrowings (3,050) 22,650
Proceeds from sales of trade accounts receivable 315 31,000
Proceeds from sale leaseback of equipment 6,691 -
Principal payments of long-term debt (497) (35,171)
Proceeds from common stock issued 7 22
Dividends paid (1,390) (1,385)
Net cash provided by financing activities 4,207 44,333
Effect of exchange rate changes on cash (57) (62)
Net increase in cash 830 86
Cash at beginning of period 576 1,350
Cash at end of period $ 1,406 1,436
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 5,585 3,703
Cash paid during the period for income taxes 319 1,367
</TABLE>
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Currency Unamortized
Number Additional trans- value of Total
of shares Common paid-in lation Retained restricted shareholders'
issued stock capital adjustment earnings stock equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994 7,688,719 $ 2,306 49,186 (170) 99,568 (787) 150,103
Shares issued in connection
with incentive stock
option plan 782 - 19 - - - 19
Repurchase of restricted
stock (6,142) (1) (170) - - 170 (1)
Shares issued in connection
with and amortization of
employee restricted
stock awards 16,792 5 481 - - (200) 286
Currency translation
adjustment - - - (38) - - (38)
Net earnings - - - - 4,308 - 4,308
Dividends paid - - - - (2,771) - (2,771)
BALANCE AT DECEMBER 31, 1994 7,700,151 2,310 49,516 (208) 101,105 (817) 151,906
Repurchase of restricted
stock (2,452) (1) (68) - - 68 (1)
Shares issued in connection
with and amortization of
employee restricted
stock awards 27,537 8 435 - - (289) 154
Currency translation
adjustment - - - (57) - - (57)
Reclassification to
businesses held for sale - - - 265 - - 265
Net loss - - - - (27,299) - (27,299)
Dividends paid - - - - (1,390) - (1,390)
BALANCE AT JULY 1, 1995
(UNAUDITED) 7,725,236 $ 2,317 49,883 0 72,416 (1,038) 123,578
</TABLE>
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<PAGE>
Notes:
(1) Quarterly Financial Data
The quarterly consolidated financial data are unaudited but
include, in the opinion of management, all adjustments necessary
for a fair statement of the operating results for the interim
periods indicated. During the quarter, a $10.2 million non-cash
charge was recorded to write-off bank financing fees and increase
reserves for slow moving and discontinued inventories, potential
bad debts and other liabilities recognized during the second
quarter. All other adjustments are of a normal recurring nature
except as disclosed in Note 2 to the financial statements.
(2) Restructuring
In June 1995, the Company recorded a $25.7 million non-cash
restructuring charge. The restructuring charge resulted from the
Company's plan to divest four operating companies (businesses held
for sale), close four Company-owned retail stores and reorganize
the remaining companies to improve operating performance. The
restructuring charge consisted of: (a) $19.5 million to write-down
the businesses held for sale to the lower of carrying value or
estimated fair value, net of disposition expenses; (b) $3.3
million to increase reserves for costs associated with closing
four retail stores (principally lease termination costs); (c) $1.7
million to write-down selected machinery to estimated fair value
as a result of changes in manufacturing processes; and (d) $1.2
million to provide for severance expense and other costs. In
connection with recording the restructuring charge, the Company
adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of (FAS 121).
Adoption of FAS 121 was not material and had no effect on earlier
interim periods.
The following unaudited pro forma information shows consolidated
operating results for the periods presented as though the Company
had divested the four businesses held for sale as of January 1,
1994, and excluding the restructuring expense recorded during the
second quarter of 1995 (in thousands):
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 120,888 121,964 248,402 235,161
Earnings (loss) before
interest and income taxes (12,441) 4,301 (8,476) 8,067
</TABLE>
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<PAGE>
The Company expects that the businesses being divested will be
sold by the end of 1995. The Company intends to use the net cash
proceeds from the sale of the businesses to reduce long-term debt.
The following unaudited information shows the components included
in businesses held for sale at July 1, 1995 (in thousands):
Current assets $ 38,590
Property, plan and equipment, net 17,179
Other noncurrent assets 5,363
Current liabilities (10,713)
Currency translation adjustment 265
Total assets, net 50,684
Reserve for loss (19,500)
Businesses held for sale $ 31,184
(3) Inventories
A summary of inventories follows (in thousands):
<TABLE>
<CAPTION>
July 1, December 31,
1995 1994
<S> <C> <C>
Inventories on the FIFO
cost method:
Finished goods $ 55,704 65,046
Work in process 15,498 23,084
Raw materials and supplies 31,342 47,997
Total inventories on
the FIFO cost method 102,544 136,127
Less adjustments of certain inven-
tories to the LIFO cost method (11,417) (14,044)
$ 91,127 122,083
</TABLE>
At July 1, 1995, businesses held for sale in the consolidated
balance sheet included inventories totaling $23.7 million.
(4) Reverse Stock Split
On May 12, 1995, shareholders approved a one-for-three reverse
split of the Company's common stock which became effective May 16,
1995. This reverse split increased the par value of the common
stock to $0.30 per share from $0.10 per share and decreased the
issued shares to 7,725,236 from 23,171,799 prior to the reverse
split. All per share data presented in the accompanying financial
statements have been restated for the one-for-three stock split.
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<PAGE>
(5) Amendment of Long-Term Credit Facility
Effective August 14, 1995, the Company's $190.0 million long-term
credit facility was amended (the Amended Facility). Borrowings
under the Amended Facility bear interest at rates selected
periodically by the Company of LIBOR (6.0% at July 1, 1995) plus
1 1/4% to 2 3/4 %, prime (9.0% at July 1, 1995) plus 1/4% to
1 3/4 %, or at a lesser rate based on the availability of bank
funds. Under the Amended Facility, the Company pays a commitment
fee of 3/8 % to 1/2% per annum on the unused portion of the
revolving credit loan.
The pricing of the Amended Facility is determined by a ratio of
debt levels to cash flows, as specified. For the period August
14, 1995 through April 1996, the Amended Facility will bear
interest at LIBOR plus 2 1/4% or prime plus 1 1/4%, and the Company
will pay a commitment fee of 1/2%. When the Company reduces its
debt levels by $20.0 million or $40.0 million from the cash proceeds
of the sale of companies as discussed in Note 2, the interest rate on
the Amended Facility will be reduced by 1/8% or 1/4%, respectively.
Borrowings under the facility prior to the amendment included
interest at rates selected periodically by the Company of LIBOR
plus 7/8%, prime or at a lesser rate based on the availability of
bank funds. Commitment fees under this prior facility were 1/4% per
annum on the unused portion of the revolving credit loan.
At current borrowing levels and interest rates, the effect of the
Amended Facility would be to lower profit before income taxes by
approximately $2.1 million annually. In connection with amending
the long-term credit facility, during the quarter ended July 1,
1995 the Company charged approximately $525,000 in unamortized
financing fees to operations.
Borrowings under the Amended Facility are unsecured but will
become subject to a lien on substantially all the assets of the
Company effective March 30, 1996 if the term loan component of the
facility has not been reduced by $40.0 million by that date. The
Amended Facility requires the maintenance of certain ratios
pertaining to shareholders' equity, operating earnings, and
operating cash flows and contains covenants which relate to future
borrowings, liens on assets, specified amounts of consolidated net
worth and capital spending, and the operations of the Company. At
July 1, 1995, the Company was in compliance with covenants under
the prior credit facility or had obtained waivers where violations
existed thereto.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table sets forth the percentage relationship of net
sales to certain items included in the Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 89.6 80.1 86.0 80.8
Gross profit 10.4 19.9 14.0 19.2
Selling, general and
administrative expenses 19.1 15.6 17.2 15.6
Restructuring expense 17.2 - 8.5 -
Operating income (loss) (25.9) 4.3 (11.7) 3.6
Other deductions
Interest expense 1.9 1.4 1.9 1.3
Other, net 1.8 .4 .9 .2
3.7 1.8 2.8 1.5
Earnings (loss) before
income taxes (29.6) 2.5 (14.5) 2.1
Income tax expense (benefit) (11.2) .7 (5.5) .6
Net earnings (loss) (18.4)% 1.8% (9.0)% 1.5%
</TABLE>
Net sales for the second quarter and first six months of 1995 were
$149.0 million and $302.4 million, respectively, compared with $153.2
million and $292.2 million during the comparable 1994 periods. Net
sales in 1995 decreased from prior year levels by 2.7% for the second
quarter and increased by 3.5% for the year-to-date. The decrease in
the second quarter 1995 net sales was primarily due to decreased
consumer demand for furniture. On a pro forma basis assuming the
acquisition of Pilliod had occurred at the beginning of fiscal year
1994, 1995 year-to-date net sales would have increased from prior year
levels by 1.0%.
Cost of sales as a percentage of net sales increased to 89.6% for
the second quarter of 1995 and 86.0% for the year-to-date, compared to
80.1% and 80.8%, respectively, in 1994. This increase resulted in a
decrease in the gross profit margins to 10.4% for the second quarter
and 14.0% for the year-to-date, from 19.9% and 19.2%, respectively, in
1994. The increase in the cost of sales was primarily attributable to
a $5.3 million non-cash charge to increase reserves for slow-moving and
discontinued inventories. The charge was recorded as a result of a
change in industry conditions requiring further discounting for sale of
such goods. High raw material costs continued to negatively impact
gross margins in the second quarter and first six months of 1995.
Also, due to
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<PAGE>
the recent sluggish sales pace in the furniture industry, several of
the Company's plants took increased downtime in the second quarter to
reduce inventories. These temporary plant shutdowns resulted in
unabsorbed fixed costs, which further reduced the quarter's gross
margins.
Selling, general and administrative (SG&A) expenses increased to
19.1% of net sales for the second quarter of 1995 from 15.6% for the
same period in 1994, while first half SG&A expenses increased to 17.2%
from 15.6% in 1994. During the second quarter, the Company recorded a
$2.3 million non-cash charge to increase bad debt reserves due to
current industry conditions, and to provide for other miscellaneous
expenses. Additionally, higher marketing expenses were incurred during
the second quarter in conjunction with the large number of new products
introduced at the Spring furniture market.
The $25.7 million restructuring expense incurred in the second
quarter of 1995 resulted from the Company's plans to divest four
operating companies and restructure its remaining operating companies
to improve operating performance. As set forth in Note 2, the reserves
included a non-cash charge to write-down the businesses held for sale
to the lower of carrying value or estimated fair values, to provide for
expected losses from the closing of four Company-owned retail stores,
to write-down selected machinery due to changes in manufacturing
processes, and to provide for severance expense and other costs.
Other deductions were 3.7% of net sales for the second quarter and
2.8% for the first six months of 1995, compared to 1.8% and 1.5%,
respectively, in 1994. The increase in other deductions was primarily
due to an increase in interest expense resulting from an increase in
a v e r a ge outstanding borrowings, coupled with an increase of
approximately 2% in the average quarterly and first six months interest
rate compared to the same periods of 1994. Included in other
deductions in the second quarter of 1995 were non-cash charges totaling
$2.2 million attributable to the write-off of bank financing fees and
other noncurrent assets, and the recognition of other liabilities.
The significant pre-tax operating loss recorded for the first half
of 1995, as well as the anticipated realization by year-end of the
restructuring charges included therein, caused the current year
effective income tax rate to rise to 38%, as compared with 30% for the
year earlier period. The financial reporting effect of the anticipated
1995 net operating loss (which will be carried back three years and
then forward 15 years or until used in full) on the tax rate is to
defer recognition of the rate-reducing benefits of previously initiated
tax planning efforts until realization is reasonably assured.
The Company's net loss was $27.3 million, or $3.54 per share, for
the second quarter of 1995, compared with net earnings of $2.7 million,
or $.35 per share for the same quarter of 1994. The first half net
loss was $27.3 million, or $3.54 per share for 1995, compared with net
earnings of $4.4 million, or $.57 per share, for 1994.
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<PAGE>
Liquidity and Capital Resources
The Company's current ratio at July 1, 1995 was 2.6 to 1 compared
to 3.0 to 1 at December 31, 1994. Net working capital totaled $89.1
million at July 1, 1995 compared to $123.7 million at December 31,
1994. The decline in the current ratio and the decrease in net working
capital were primarily attributable to the current assets and
liabilities of the companies to be divested being reclassified to a
noncurrent asset, businesses held for sale. Exclusive of the
reclassification and the $5.3 million increase in reserves recorded in
the second quarter for slow moving and discontinued inventories,
inventories declined year-to-date by $2.0 million as a result of
shipments and plant downtown taken during the year.
During the first six months of 1995, the Company generated cash
from net earnings plus depreciation, amortization and restructuring
expense of $7.8 million compared to $12.6 million in 1994. The cash
generated in 1995 and 1994's first half of the year was utilized to
fund working capital needs and capital expenditures.
During the first six months of 1995, capital spending totaled $6.7
million compared to $17.8 million during the same period in 1994.
Capital expenditures in the first half of 1994 were funded largely from
borrowings under the Company's long-term and short-term revolving
credit lines. A majority of the capital spent during the first six
months of 1995 was to complete capital projects initiated in 1994 and
early 1995.
During the second quarter of 1995, the Company's short-term bank
borrowings declined $3.1 million and long-term borrowings declined $7.8
million resulting in a $10.9 million reduction in total debt. The
quarterly decrease in debt resulted from working capital reductions and
a $6.7 million sale/leaseback of selected machinery and equipment. The
Company had outstanding long-term borrowings of $145.3 million at July
1, 1995, representing 51.8% of total capitalization at that date,
compared to $143.6 million or 45.3% at December 31, 1994. At July 1,
1995, the Company had $50.1 million in unused and available long-term
revolving bank credit lines to meet future cash requirements.
As a result of the Company's 1995 second quarter operating
performance and restructuring, the Company would have violated certain
covenants in its long-term credit facility if waivers had not been
obtained from the Company's bank group. On August 14, 1995, the
Company's long-term credit facility was amended as discussed in Note 5.
The amended long-term credit facility will result in higher interest
expense for the Company in the foreseeable future. At current
borrowing levels and interest rates, the effect of the Amended Facility
would be to lower profit before income taxes by approximately $2.1
million annually.
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<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held in
High Point, North Carolina on May 12, 1995. Of the 23,171,799
shares of common stock outstanding on the record date,
19,495,679 shares were present in person or by proxy. The
share information is stated at the amount prior to the one-
for-three reverse stock split as the split did not become
effective until May 16, 1995. Those shares were voted on the
following matters as set forth below:
A. Election of Directors:
Richard R. Allen Fred L. Schuermann, Jr.
For: 19,110,452 For: 19,114,415
Abstentions: 385,227 Abstentions: 381,264
Broker Non-Votes: 0 Broker Non-Votes: 0
William B. Cash Don A. Hunziker
For: 18,785,427 For: 19,110,882
Abstentions: 710,252 Abstentions: 384,797
Broker Non-Votes: 0 Broker Non-Votes: 0
James H. Corrigan, Jr. Thomas F. Keller
For: 18,809,325 For: 18,808,725
Abstentions: 686,354 Abstentions: 686,954
Broker Non-Votes: 0 Broker Non-Votes: 0
O. William Fenn, Jr
For: 19,115,652
Abstentions: 380,027
Broker Non-Votes: 0
B. Proposal to ratify the election of KPMG Peat Marwick LLP
as independent auditors of the Company for 1995:
For: 19,395,369
Against: 74,907
Abstentions: 25,403
Broker Non-votes: 0
C. Proposal to approve the amendment to the Company's
Articles of Incorporation and the concurrent one-for-
three reverse stock split:
For: 17,026,510
Against: 2,469,169
Abstentions: 0
Broker Non-votes: 0
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<PAGE>
Item 5. Other Information
On August 14, 1995 the Company entered into the Third
Amendment to Amended and Restated Credit Agreement with
Nationsbank, N.A. (Carolinas), as agent, amending various
financial covenants, increasing the interest rates applicable
to borrowings, providing for prepayment of term loan
borrowings upon divesture of certain operating units of the
Company, and providing for the possible pledging of
essentially all of the assets of the Company and its
subsidiaries as security for the borrowings, if the term loan
is not reduced by $40.0 million prior to March 30, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Articles of Amendment of LADD Furniture, Inc.
10.2 Amendment Agreement No. 1 dated as of June 7, 1995
amending Exhibit A-1 to the Equipment Leasing
Agreement dated as of December 15, 1994 between
Unionbanc Leasing Corporation and LADD Furniture,
Inc.
10.3 Amendment Agreement No. 1 dated as of June 7, 1995
amending Exhibit A-1 to the Equipment Leasing
Agreement dated as of December 15, 1994 between
BOT Financial Corporation and LADD Furniture, Inc.
10.4 Amendment Agreement No. 1 dated as of June 15,
1995 amending Lease Supplement No. One to the
Equipment Leasing Agreement dated as of December
15, 1994 between BOT Financial Corporation and
LADD Furniture, Inc.
10.5 Third Amendment to Amended and Restated Credit
Agreement dated as of August 14, 1995, between the
Company, Nationsbank, N.A., as agent and each of
the banks signatory thereto.
(b) Reports on Form 8-K
During the quarter, the Company filed a Form 8-K/A-2
dated April 24, 1995 amending the Form 8-K report dated
February 14, 1994 which reported under Item 2 the
Company's acquisition of all of the outstanding stock of
Pilliod Holding Company (Pilliod). The Form 8-K/A-2
also amended the Form 8-K/A-1 dated April 8, 1994 which
included the audited financial statements for Pilliod
for the nine months ended January 31, 1994 and pro forma
financial data reflecting the combination of the Company
and Pilliod as if the acquisition had occurred January
3, 1993.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LADD Furniture, Inc.
Date: August 15, 1995 By: s/William S. Creekmuir
William S. Creekmuir
Senior Vice President
and Chief Financial Officer
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<PAGE>
ARTICLE OF AMENDMENT
OF
LADD FURNITURE, INC.
The undersigned corporation hereby submits
these Article of Amendment for the purpose of amending
its articles of incorporation:
1. The name of the corporation is LADD
Furniture, Inc.
2. The following amendment to the
articles of incorporation of the corporation was
adopted by its shareholders on the 12th day of May,
1995, in the manner prescribed by law:
Article 4 is hereby amended and restated in
its entirety as follows:
The aggregate number of shares which
the Corporation shall have the
authority to issue is Fifty Million
Five Hundred Thousand (50,500,000),
divided into Five Hundred Thousand
(500,000) shares of series preferred
stock of par value of $100 per share
(hereafter called series preferred
stock), and Fifty Million (50,000,000)
shares of common stock of the par
value of $.30 per share (hereafter
called common stock).
The Board of Directors of the
Corporation shall have the authority
to fix by resolution or resolutions
the preferences, limitations and
relative rights of the series
preferred stock or to establish series
within the class of series preferred
stock and determine the preferences,
limitations and relative rights
between such series, as in their
discretion they shall determine from
time to time.
Upon filing of this amendment with the
office of the Secretary of State of
the State of North Carolina, each
share of common stock, $.10 par value,
of the Corporation, issued and
outstanding at such time shall, by
virtue of this amendment to the
Corporation's articles of
incorporation, be changed into
one-third (1/3) of one share of fully
paid and nonassessable common stock,
$.30 par value, of the Corporation.
In lieu of the issuance of fractional
shares that would otherwise result
from the reverse stock split effected
by the preceding paragraph of this
Article 4, the Corporation shall issue
to any stockholder that would
otherwise receive fractional shares
one additional share.
Following the effectiveness of this
amendment, certificates for the shares
of common stock to be outstanding
after the reverse stock split shall be
issued pursuant to procedures adopted
by the Corporation's board of
directors and communicated to those
who are to receive new certificates.
3. These articles will become effective at 5:00
p.m. on May 16, 1995.
This the 12th day of May, 1995.
LADD FURNITURE, INC.
By:_____________________________
Richard R. Allen, Chairman
and Chief Executive Officer
AMENDMENT AGREEMENT NO. 1
AMENDMENT AGREEMENT NO. 1 dated as of June 7, 1995
amending Exhibit A-1 to the Equipment Leasing Agreement
dated as of December 15, 1994 between Unionbanc Leasing
Corporation ("Lessor") and LADD Furniture, Inc.
("Lessee") (said Equipment Leasing Agreement as amended
and supplemented from time to time herein called the
"Agreement"). All capitalized terms which are not
otherwise defined herein shall have the meaning given
to such terms in the Agreement.
WHEREAS, Lessee and Lessor desire to fix the
Basic Rent percentage and Interim Rent Percentage
pertaining to Equipment being accepted on or after June
7, 1995 and through and including June 30, 1995.
NOW THEREFORE, in consideration of the
foregoing, and of the mutual covenants herein
contained, Lessee and Lessor do hereby agree as
follows:
1. The section titled Basic Rent
Percentage is hereby amended by adding after the words
"January 1, 1995" appearing on the second line thereof,
the words "and prior to June 30, 1995, a factor equal
to 1.477829%, and on or after July 1, 1995".
2. The section titled Interim Rent
Percentage is hereby amended by adding after the words
"January 1, 1995" appearing in the second line thereof,
the words "and prior to June 30, 1995, a factor equal
to .049261%, and on or after July 1, 1995".
3. The first full paragraph on the second
page is inapplicable to Equipment accepted between June
7, 1995 through and including June 30, 1995.
4. The section titled Certain Values is
hereby replaced with the following Certain
Values:
<TABLE>
<CAPTION>
Estimated Maximum Maximum
Residual Lessee Lessor
Value Risk Risk
Expiration of: Percentage:* Percentage:* Percentage:*
<S> <C> <C> <C>
Basic Term 55.197300 41.004026 14.193274
Renewal Term 1 30.000000 23.670111 6.329889
(if any)
</TABLE>
<PAGE>
The words "this Agreement", "hereby" and other
like words in the Agreement from and after the
effective date of this Amendment Agreement No. 1 shall
mean and include the Agreement as amended and each
amendment and supplement thereto. The Agreement as
amended shall continue in full force and effect,
strictly in accordance with its terms, and is in all
respects ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have
caused this Amendment Agreement No. 1 to be duly
executed by their duly authorized representatives as of
the date first written above.
LADD FURNITURE, INC.
(LESSEE)
BY:
TITLE:
UNIONBANC LEASING
CORPORATION (LESSOR)
BY:
TITLE:
AMENDMENT AGREEMENT NO. 1
AMENDMENT AGREEMENT NO. 1 dated as of June 7, 1995
amending Exhibit A-1 to the Equipment Leasing Agreement
dated as of December 15, 1994 between BOT Financial
Corporation ("Lessor") and LADD Furniture, Inc.
("Lessee") (said Equipment Leasing Agreement as amended
and supplemented from time to time herein called the
"Agreement"). All capitalized terms which are not
otherwise defined herein shall have the meaning given
to such terms in the Agreement.
WHEREAS, Lessee and Lessor desire to fix the
Basic Rent percentage and Interim Rent Percentage
pertaining to Equipment being accepted on or after June
7, 1995 and through and including June 30, 1995.
NOW THEREFORE, in consideration of the
foregoing, and of the mutual covenants herein
contained, Lessee and Lessor do hereby agree as
follows:
1. The section titled Basic Rent
Percentage is hereby amended by adding after the words
"January 1, 1995" appearing on the second line thereof,
the words "and prior to June 30, 1995, a factor equal
to 1.477829%, and on or after July 1, 1995".
2. The section titled Interim Rent
Percentage is hereby amended by adding after the words
"January 1, 1995" appearing in the second line thereof,
the words "and prior to June 30, 1995, a factor equal
to .049261%, and on or after July 1, 1995".
3. The first full paragraph on the second
page is inapplicable to Equipment accepted between June
7, 1995 through and including June 30, 1995.
4. The section titled Certain Values is
hereby replaced with the following Certain
Values:
Estimated Maximum Maximum
Residual Lessee Lessor
Value Risk Risk
Expiration of: Percentage:* Percentage:* Percentage:*
Basic Term 55.197300 41.004026 14.193274
Renewal Term 1 30.000000 23.670111 6.329889
(if any)
<PAGE>
The words "this Agreement", "hereby" and other
like words in the Agreement from and after the
effective date of this Amendment Agreement No. 1 shall
mean and include the Agreement as amended and each
amendment and supplement thereto. The Agreement as
amended shall continue in full force and effect,
strictly in accordance with its terms, and is in all
respects ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have
caused this Amendment Agreement No. 1 to be duly
executed by their duly authorized representatives as of
the date first written above.
LADD FURNITURE, INC.
(LESSEE)
BY:
TITLE:
BOT FINANCIAL CORPORATION
(LESSOR)
BY:
TITLE:
AMENDMENT AGREEMENT NO. 1
AMENDMENT AGREEMENT NO. 1 dated as of June 15,
1995 amending Lease Supplement No. One to the Equipment
Leasing Agreement dated as of December 15, 1994 between
BOT Financial Corporation ("Lessor") and LADD
Furniture, Inc. ("Lessee") (said Equipment Leasing
Agreement as amended and supplemented from time to time
herein called the "Agreement"). All capitalized terms
which are not otherwise defined herein shall have the
meaning given to such terms in the Agreement.
WHEREAS, due to an invoicing error certain
amounts of the Acquisition Cost of various Items of
Equipment were not indicated on Lease Supplement No.
One on the execution date thereof.
WHEREAS, Lessee has paid such mounts to the
vendors entitled thereto, respectively, and Lessor and
Lessee agree that Lessor shall refund such amounts to
Lessee.
WHEREAS, Lessor and Lessee desire to amend the
amount of Acquisition Cost and Rent payable indicated
on Lease Supplement No. One to reflect such amounts
paid by Lessor to Lessee.
NOW, THEREFORE, in consideration of the
foregoing, and of the mutual covenants contained
herein, Lessee and Lessor do hereby agree s follows:
1. Paragraph 3 of Lease Supplement No.
One is amended by deleting the dollar amount
"$4,359,371.41" therefrom and replacing it with the
dollar amount "$4,437,753.13".
2. Paragraph 9 of Lease Supplement No. 1
deleted in its entirety and replaced with the
following:
"9. Basic Rent Payable during Basic Term:
$67,011.71 on each Rent Payment Date commencing
February 1, 1995 and ending July 1, 1995, and
$68,291.03 on each Rent Payment Date during the
remaining Basic Term, commencing August 1, 1995, in
each case, in arrears, plus all applicable sale and/or
use taxes."
The words "this Supplement", "hereby", and
other like words in Lease Supplement No. One from and
after the date hereof shall mean and include Lease
Supplement No. One as amended, and each amendment
thereto. Lease Supplement No. One as amended shall
continue in full force and effect strictly in
accordance with its terms and is in all respects
ratified and confirmed.
1
<PAGE>
IN WITNESS WHEREOF, Lessee and Lessor have
caused this Amending Agreement No. 1 to be executed
their duly authorized representatives as of the date
first above written.
LADD FURNITURE, INC., Lessee
By: ___________________________
Title:
BOT FINANCIAL CORPORATION, Lessor
By: ___________________________
Title:
2
THIRD AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
This Third Amendment to Amended and Restated Credit
Agreement (this "Third Amendment"), dated as of August 14, 1995,
is entered into by and among LADD FURNITURE, INC. (the
"Company"), the guarantors identified as such on the signature
pages attached hereto (the "Guarantors"), the banks identified as
such on the signature pages attached hereto (the "Banks") and
NATIONSBANK, N.A. (Carolinas) f/k/a NATIONSBANK OF NORTH
CAROLINA, N.A., as agent for the Banks (in such capacity, the
"Agent"). All capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the
Credit Agreement (as defined below).
RECITALS
A. The Company, the Guarantors, the Banks and the Agent
entered into that certain Amended and Restated Credit Agreement
dated as of October 19, 1994, that certain First Amendment to
Amended and Restated Credit Agreement dated as of February 16,
1995 and that certain Second Amendment to Amended and Restated
Credit Agreement dated as of March 30, 1995 (collectively, the
"Credit Agreement").
B. The Company and the Banks have agreed to modify the
terms of the Credit Agreement as set forth below.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. New Definitions. The following definitions shall be added
to Section 1.01 of the Credit Agreement as follows:
(a) "Applicable Margin Ratio" shall mean, for any
period, the ratio of (i) Funded Debt at such time to (ii)
EBITDA as calculated on a rolling four Quarterly Period
basis; provided that (a) for the Quarterly Date ending
nearest March 31, 1996, EBITDA shall be calculated on a
rolling three Quarterly Period basis multiplied times 1.33
and (b) it is understood that Funded Debt does not contain
amounts outstanding under the Securitization Program.
(b) "Capital Expenditures" shall mean, for any period,
for the Company and its Consolidated Subsidiaries on a
consolidated basis all capital expenditures as computed in
accordance with GAAP.
(c) "EBITDA" shall mean, for any period, the sum of
(a) EBIT plus (b) all depreciation and amortization expense
(to the extent deducted in the calculation of EBIT) of the
Company
<PAGE>
and its Consolidated Subsidiaries on a consolidated basis for
such period, all as determined in accordance with GAAP.
(c) "Securitization Program" shall mean the sale of
trade receivables by LADD Funding Corp.
2. Amendments to Existing Definitions. The following
definitions set forth in Section 1.01 of the Credit
Agreement shall be modified as follows:
(a) The definition of Applicable Margin shall be amended in
its entirety to read as follows:
"Applicable Margin" shall mean (i) from August 14, 1995
until the first Applicable Margin Change Date subsequent to
March 31, 1996, (A) with respect to Base Rate Loans, 1.25%
and (B) with respect to Eurodollar Loans, 2.25% (as modified
for reductions in the Term Loan, as set forth below) and
(ii) thereafter, the appropriate Applicable Margin
corresponding to the ratio described below in effect as of
the most recent Applicable Margin Change Date (as modified
for reductions in the Term Loan, as set forth below):
<TABLE>
<CAPTION>
Applicable Margin
Base Rate Eurodollar
Tier Applicable Margin Ratio Loans Loans
<S> <C> <C>
1 > 3.75 to 1.0 1.75% 2.75%
-
2 > 3.0 to 1.0
-
but < 3.75 to 1.0 1.25% 2.25%
3 > 2.5 to 1.0
-
but < 3.0 to 1.0 0.875% 1.875%
4 > 2.0 to 1.0
-
but < 2.5 to 1.0 0.50% 1.50%
5 > 2.0 to 1.0 0.25% 1.25%
-
</TABLE>
Each of the Applicable Margins in effect until the
Quarterly Date nearest March 31, 1996 or as set forth under
Tier 1 and Tier 2 above shall be reduced by 0.125%, upon
the outstanding principal balance of the Term Loan reaching
each of the following levels: (a) $55,000,000 and (b)
$35,000,000; it being understood that the reduction shall
occur at each level for a maximum reduction of .25%.
(b) The definition of Applicable Margin Change Date shall
be amended in its entirety to read as follows:
"Applicable Margin Change Date" shall mean, for each
Quarterly Period, the date of delivery by the Borrower of
the quarterly compliance certificate required by Section
8.01 hereof. The Applicable Margin shall also change on
the
- 2 -
<PAGE>
date(s) of the appropriate reduction of the Term Loan
as set forth in the definition of Applicable Margin.
(c) The definition of Base Rate shall be amended in its
entirety to read as follows:
"Base Rate" shall mean, with respect to any Base Rate
Loan, for any day, the sum of (a) the Applicable Margin
plus (b) the higher of (i) the Federal Funds Rate for such
day, plus .5% per annum or (ii) the Prime Rate for such
day; provided that if in the reasonable judgment of the
Agent the Federal Funds Rate cannot be determined then the
Base Rate shall mean the Prime Rate. Each change in any
interest rate provided for herein based upon the Base Rate
resulting from a change in the Base Rate shall take effect
at the time of such change in the Base Rate.
(d) The definition of Basic Documents shall be amended in
its entirety to read as follows:
"Basic Documents" shall mean, collectively, this
Agreement, the Notes, the Pledge Agreements and any
security agreements, mortgage documents or other collateral
documents executed by the Company or any of its
Subsidiaries in favor of the Agent or the Banks.
(e) The definition of Debt Service Coverage Ratio shall be
amended in its entirety to read as follows:
"Debt Service Coverage Ratio" shall mean (i) for the
Quarterly Dates nearest September 30, 1995, December 31,
1995 and March 31, 1996, the ratio of (a) EBIT for such
period to (b) Interest Expense for such period and (ii) for
any Quarterly Date thereafter, the ratio of (a) the
difference of (1) EBITDA for such period less (2) Capital
Expenditures for such period to (b) the sum of (1) Interest
Expense for such period plus (2) scheduled maturities of
long term debt for such period plus (3) all Dividend
Payments for such period.
(f) The definition of Equity Issuance is amended such that
the term "Effective Date" wherever located therein
shall be deleted and the words "January 2, 1994"
substituted in replacement therefor.
3. Section 2.01(a). Subsection (a) of Section 2.01 of the
Credit Agreement is amended in its entirety to read as
follows:
(a) Revolving Credit Loans. Each Bank severally
agrees, on the terms of this Agreement, to make revolving
loans to the Company in Dollars, at any time and from time
to time during the period from and including the Effective
Date to but not including the Revolving Credit Commitment
Termination Date (each a "Revolving Credit Loan and
collectively the "Revolving Credit Loans"); provided,
however, that (i) the
- 3 -
<PAGE>
sum of the aggregate amount of Revolving Credit Loans
outstanding plus the aggregate amount of Competitive
Bid Loans outstanding plus the aggregate amount of Swing
Line Loans outstanding plus then outstanding balance of the
Securitization Program shall not exceed the Revolving
Credit Commitment and (ii) with respect to each individual
Bank, the Bank's pro rata share of outstanding Revolving
Loans shall not exceed such Bank's Revolving Credit
Commitment Percentage of the Revolving Credit Commitment.
Subject to the terms of this Agreement, the Company may
borrow, repay and reborrow the amount of the Revolving
Credit Commitment.
4. Section 2.01(b)(i). Subsection (b)(i) of Section 2.01
of the Credit Agreement is amended in its entirety to read
as follows:
(b) Competitive Bid Loans Subfacility.
(i) Competitive Bid Loans. Subject to the terms and
conditions hereof, the Company may, from time to time
during the period from and including the Effective Date to
but not including the Revolving Credit Commitment
Termination Date, request and each Bank may, in its sole
discretion, agree to make Competitive Bid Loans to the
Company; provided, however, that (x) the sum of the
aggregate amount of Revolving Credit Loans outstanding plus
the aggregate amount of Competitive Bid Loans outstanding
plus the aggregate amount of Swing Line Loans outstanding
plus the then outstanding balance of the Securitization
Program shall not exceed the Revolving Credit Commitment
and (y) if a Bank does make a Competitive Bid Loan it shall
not reduce such Bank's obligation to make its pro rata
share of any Revolving Credit Loan.
5. Section 2.01(e)(i). Subsection (e)(i) of Section 2.01 of
the Credit Agreement is amended in its entirety to read as
follows:
(i) Swing Line Loans. NationsBank hereby agrees,
on the terms of this Agreement and only if the Company is
in compliance with all the conditions set forth in Section
6, to make revolving loans to the Company in Dollars, at
any time and from time to time during the period from and
including the Effective Date to but not including the
Revolving Credit Commitment Termination Date (each a "Swing
Line Loan" and collectively, the "Swing Line Loans");
provided , however that (i) the sum of the aggregate amount
of Swing Line Loans outstanding at any one time shall not
exceed the Swing Line Loan Commitment and (ii) the sum of
the aggregate amount of Swing Line Loans outstanding plus
the aggregate principal amount of Revolving Loans
outstanding plus the aggregate amount of Competitive Bid
Loans outstanding plus the then outstanding balance of the
Securitization Program shall not exceed the Revolving
Credit Commitment. Subject to the terms of this Agreement,
the Company may borrow, repay and reborrow the amount of
the Revolving Credit Commitment.
- 4 -
<PAGE>
6. Section 2.04. Section 2.04 of the Credit Agreement is
amended in its entirety to read as follows:
2.04 Commitment Fees. The Company shall pay to the Agent
for the account of each Bank a commitment fee (the "Commitment
Fee") on the daily average unused amount of the Revolving Credit
Commitment, for (I) the period from and including the Effective
Date to and including August 13, 1995, at a rate per annum equal
to (A) .25% or (B) if on any Quarterly Date the Company has (1) a
Leverage Ratio less than 35% or (2) attained a long term credit
rating of Baa3 or better from Moody's Investors Services, Inc. or
BBB- or better from Standard and Poor's Corporation, then .20% or
(C) notwithstanding whether the Company has met the requirements
of (B)(1) or (B)(2) above, if on any Quarterly Date subsequent to
the Quarterly Date nearest March, 1997, the ratio of Senior Debt
at such time to Capital at such time is greater than 45%, then
.375% and (II) for the period from and including August 14, 1995
to but not including the Revolving Credit Commitment Termination
Date, at a rate per annum equal to (A) if on any Quarterly Date
the ratio of (i) Funded Debt to (ii) EBITDA is greater than or
equal to 3.0 to 1.0, then .50% or (B) if on any Quarterly Date
the ratio of (i) Funded Debt to (ii) EBITDA is less than 3.0 to
1.0, then .375%. For the purpose of calculating the Commitment
Fee, the amount outstanding as Competitive Bid Loans, Swing Line
Loans and under the Securitization Program shall not be included
in the amount used under the Revolving Credit Commitment
(notwithstanding the fact that the amount of Competitive Bid
Loans, Swing Line Loans and under the Securitization Program
outstanding reduces availability under the Revolving Credit
Commitment). The applicable Commitment Fee percentage shall be
determined on each Quarterly Date for the preceding Quarterly
Period. The Commitment Fee shall be payable in arrears on each
Quarterly Date, on the date of any reduction in the Revolving
Credit Commitment and on the Revolving Credit Commitment
Termination Date.
7. Section 2.08(b)(ii). Section 2.08(b)(ii) of the Credit
Agreement is amended in its entirety to read as follows:
(ii) Overadvance. If, at any time, the sum of
Revolving Credit Loans outstanding plus Competitive Bid
Loans outstanding plus Swing Line Loans outstanding plus
the then outstanding balance of the Securitization Program
exceeds the Revolving Credit Commitment, then the Company
shall immediately make a payment in the amount of the
deficiency.
8. Section 2.08(b)(iv). A new subsection (iv) shall be added
to Section 2.08(b) of the Credit Agreement to read as
follows:
(iv) Sale of Certain Subsidiaries or Divisions.
Promptly upon receipt thereof, the Company shall prepay the
principal amount of the Loans in an amount equal to all
cash Net Proceeds received by the Company from the
liquidation or sale of any assets (other than inventory or
equipment in the ordinary course of business), or the
business as a whole of, Brown Jordan Company, Fournier
Furniture, Inc. or the
-5-
<PAGE>
Daystrom division or the Lea Lumber and Plywood Co.
division of the Company; provided that if the Company
receives any non-cash Net Proceeds from the above
liquidations or sales, the Company must (A) pledge or assign
such non-cash Net Proceeds as requested by the Agent and
(B) all cash received by the Company from such non-cash
Net Proceeds shall be used to prepay the principal amount
of the Loans.
9. Section 2.08. The last paragraph of Section 2.08 of the
Credit Agreement is amended in its entirety as follows:
Mandatory prepayments shall be applied: first, (A) if
pursuant to subsection (i) above, pro rata to the remaining
installments of the Term Loan on the basis provided in
Section 2.08(a) hereof, (B) if pursuant to subsection (iii)
above, to the remaining installments of the Term Loan in
the inverse order of maturity or (C) if pursuant to
subsection (iv) above, (1) with respect to the first
$25,000,000 prepaid under subsection (iv), to the remaining
installments of the Term Loan in inverse order of maturity
and (2) with respect to any additional amounts prepaid
under subsection (iv), pro rata to the remaining
installments of the Term Loan on the basis provided in
Section 2.08(a) hereof; second, to the Revolving Credit
Loans; provided that, upon any such prepayment of the
Revolving Credit Loans under Subsection (i), (iii) or (iv)
above, the Revolving Credit Commitment shall automatically
be reduced on such date by the amount of such prepayment
and, if the amount available for prepayment as aforesaid
exceeds the amount of Revolving Credit Loans outstanding on
such date, the Revolving Credit Commitment shall be further
reduced on such date by such excess amount; and third, if
the Term Loan is paid in full and the Revolving Credit
Loans have been paid in full then to the Swing Line Loans
and then to the Competitive Bid Loans on a pro rata basis
to each Bank holding Competitive Loans.
10. Section 6.02. Subsection (c) of Section 6.02 of the Credit
Agreement is amended in its entirety to read as follows:
(c) the representations and warranties made by the
Company and each Obligor in (i) Sections 7.01 through 7.11,
inclusive in the Credit Agreement and (ii) the Pledge
Agreements and such security agreements, mortgage documents
and other collateral documents as entered into by an
Obligor in favor of the Agent or the Banks shall be true
and correct on and as of the making of such Loan with the
same force and effect as if made on and as of such date.
11. Section 8.10. Section 8.10 of the Credit Agreement is
amended in its entirety to read as follows:
8.10 Leverage Ratio. The Company will not permit the
Leverage Ratio to exceed (a) 56% on the Quarterly Dates ending
nearest September 30, 1995 and December 31, 1995, (b) 55% on the
-6-
<PAGE>
Quarterly Dates ending nearest March 31, 1996, June 30, 1996 and
September 30, 1996 and (c) 50% on each Quarterly Date thereafter.
12. Section 8.11. Section 8.11 of the Credit Agreement is
amended in its entirety to read as follows:
8.11 Consolidated Net Worth. The Company will not
permit Consolidated Net Worth on any Quarterly Date to be less
than the sum of (x) $120,000,000 plus (y) 50% of the aggregate
amount of NPAT for each Quarterly Period occurring after June 30,
1995 and ending on such Quarterly Date (on a cumulative basis)
plus (z) 50% of the aggregate net proceeds of all Equity
Issuances from and after the date hereof.
13. Section 8.12. Section 8.12 of the Credit Agreement is
amended in its entirety to read as follows:
8.12 Debt Service Coverage Ratio. The Company will not
permit the Debt Service Coverage Ratio to be less than (a) for
the Quarterly Period ending on the Quarterly Date nearest
September 30, 1995, 1.10 to 1.0, (b) for the rolling two
Quarterly Periods ending on the Quarterly Date nearest December
31, 1995, 1.15 to 1.0, (c) for the rolling three Quarterly
Periods ending on the Quarterly Date nearest March 31, 1996, 1.25
to 1.0, (d) for the rolling two Quarterly Periods ending on the
Quarterly Date nearest June 30, 1996, 1.0 to 1.0, as calculated
by multiplying each component comprising the Debt Service
Coverage Ratio for such rolling two Quarter Periods times 2 (e)
for the rolling three Quarterly Periods ending on the Quarterly
Date nearest September 30, 1996, 1.10 to 1.0, as calculated by
multiplying each component comprising the Debt Service Coverage
Ratio for such rolling three Quarterly Periods times 1.33 and (f)
for each rolling four Quarterly Periods ending on any Quarterly
Date thereafter, 1.10 to 1.
14. Section 8.17. A new Section 8.17 is added to the Credit
Agreement to read as follows:
8.17 Capital Expenditures. The Company will not permit
the aggregate amount of Capital Expenditures incurred on or after
July 1, 1995 to exceed (a) $5,000,000 as of the Quarterly Date
ending nearest September 30, 1995, (b) $10,500,000 as of the
Quarterly Date ending nearest December 31, 1995 and (c)
$13,500,000 as of the Quarterly Date ending nearest March 31,
1996.
15. Exhibit C. Exhibit C to the Credit Agreement is amended by
changing the reference to "Section 8.06(j)" in Section 4
thereof to "Section 8.06(n)".
16. Expenses. It is understood and agreed that Section 12.03
of the Credit Agreement provides that the Company shall
only be responsible for legal counsel fees of the Agent
(and not of any Bank) except in connection with enforcement
and collection proceedings as a result of a Default or
Event of Default.
-7-
<PAGE>
17. Covenants of Obligors.
(a) Within 30 days after the date of this Third
Amendment, each Obligor shall (i) execute and deliver to an
escrow agent (such escrow agent to be agreed upon between
the Company and the Agent, the "Escrow Agent") security
agreements, pledge agreements, UCC financing statements and
such other documents as the Agent shall reasonably request
in order to grant a potential perfected lien to the Banks
in all of the personal property assets (to the extent not
prohibited by agreements of the Obligors in connection with
the Securitization Program and including all stock of any
Subsidiaries of any Obligor) of each Obligor (all in form
and substance acceptable to the Agent in its reasonable
sole discretion) and (ii) enter into an escrow agreement
(the "Escrow Agreement") among the Company, the Agent and
the escrow agent that will provide, among other things, (1)
that upon the failure of the Company to reduce the Term
Loan, on or before March 31, 1996, to $35,000,000 or less
that all documents held by the escrow agent under the
Escrow Agreement shall be delivered to the Agent for the
benefit of the Banks and (2) that any fees and expenses
incurred in connection with the Escrow Agreement shall be
for the account of the Company. In connection with the
delivery of the above documents, the Agent shall receive an
opinion from Petree Stockton, L.L.P., counsel to the
Obligors, satisfactory to the Agent.
(b) If prior to December 31, 1995, (i) the Term Loan
has not been reduced to $35,000,000 or less or (ii) the
Company or its Subsidiaries have not entered into executed
sales contracts that would ensure to the satisfaction of
Agent that the Term Loan will be reduced to $35,000,000 or
less prior to March 31, 1996 then each Obligor shall within
45 days after requested (A) execute and deliver to the
Escrow Agent mortgages, deeds of trusts, deeds to secure
debt or such other documents as are necessary to provide
the Banks with a perfected lien on each parcel of real
estate owned by such Obligor (other than the real property
owned or leased by Brown Jordan Company, Fournier
Furniture, Inc. or the Lea Lumber and Plywood Co. division
or the Daystrom division of the Company), (B) execute and
deliver to the Escrow Agent (to the extent permitted)
leasehold mortgages on all real property leased by such
Obligor and (C) assist in obtaining legal opinions from
local counsel in each state where the real property of the
Obligors is located as to the enforceability of such
mortgage documents. It is understood that failure of the
Agent and the Banks to timely obtain (A), (B) and (C) above
shall constitute an Event of Default.
(c) If prior to March 31, 1996, the Term Loan has not
been reduced to $35,000,000 or less then the Obligors shall
(i) execute and deliver to the Agent all documentation set
forth in (b) above as to real property owned or leased by
Brown Jordan Company, Fournier Furniture, Inc. or the Lea
-8-
<PAGE>
Lumber and Plywood Co. division or the Daystrom division of
the Company and (ii) provide such appraisals, environmental
reports, title insurance and other documents or information
regarding their real property as reasonably requested by
the Agent.
18. Waiver. The Banks agree to permanently waive the June 30
Financial Covenant Defaults (as defined in that certain
letter agreement dated June 29, 1995 among the Company, the
Guarantors, the Agent and the Banks). This is a one time
waiver and does not constitute a waiver of any Default or
Event of Default other than the June 30 Financial
Covenants.
19. Conditions Precedent. The effectiveness of this Third
Amendment is subject to the satisfaction of each of the
following conditions (including, without limitation, that
each document to be delivered under this Section 19 shall
be in form and substance satisfactory to the Banks):
(a) Corporate Action. The Agent shall have received
certified copies of all corporate action taken by each
Obligor approving this Third Amendment and each of the
documents delivered in connection therewith (including,
without limitation, a certificate setting forth the
resolutions of the Board of Directors of each Obligor
adopted in respect of the transactions contemplated by this
Third Amendment).
(b) Good Standing. The Agent shall have received
copies of certificates of good standing, existence or its
equivalent with respect to each Obligor as of a recent date
by the appropriate government authorities of the state of
incorporation of each Obligor.
(c) Opinion of Counsel to the Obligers. The Agent
shall have received an opinion of Petree Stockton, L.L.P.,
counsel to the Obligors, satisfactory to the Agent.
(d) Third Amendment. The Agent shall have received
copies of this Third Amendment duly executed by each of the
parties hereto and dated as of the date hereof.
(e) Fee. The Agent shall have received the full
amount of the fee described in Section 20 below.
(f) Other Documents. The Agent shall have received
such other documents relating to the transactions
contemplated hereby as the Agent or any Bank or counsel to
the Agent may reasonably request.
20. Fee. In consideration of the Banks entering into this
Third Amendment, the Company agrees to pay to the Banks on
the date hereof, for the pro rata benefit of each Bank, a
fee in the aggregate amount of $617,500.
-9-
<PAGE>
21. Liens. The Company and the Guarantors, as applicable,
affirm the liens and security interests created and granted
in the Credit Agreement and the Basic Documents and agree
that this Third Amendment shall in no manner adversely
affect or impair such liens and security interests.
22. Representations and Warranties. The Company hereby
represents and warrants to the Banks and the Agent that (a)
no Event of Default exists and is continuing under the
Credit Agreement; (b) the Company has no claims,
counterclaims, offsets, credits or defenses to the Basic
Documents and the performance of its obligations
thereunder, or if the Company has any such claims,
counterclaims, offsets, credits or defenses to the Basic
Documents or any transaction related to the Basic
Documents, same are hereby waived, relinquished and
released in consideration of the Banks' execution and
delivery of this Third Amendment; and (c) since the date of
the last financial statements of the Company delivered to
Banks, no material adverse change has occurred in the
business, financial condition or prospects of the Company
other than as previously disclosed to the Banks.
23. Acknowledgment of Guarantors. The Guarantors acknowledge
and consent to all of the terms and conditions of this
Third Amendment and agree that this First Amendment and all
documents executed in connection herewith do not operate to
reduce or discharge the Guarantors' obligations under the
Credit Agreement or the other Basic Documents. The
Guarantors acknowledge and agree that the Guarantors have
no claims, counterclaims, offsets, credits or defenses to
the Basic Documents and the performance of the Guarantors'
obligations thereunder, or if Guarantors did have any such
claims, counterclaims, offsets, credits or defenses to the
Basic Documents or any transaction related to the Basic
Documents, the same are hereby waived, relinquished and
released in consideration of the Banks' execution and
delivery of this Third Amendment.
24. No Other Changes. Except as expressly modified and amended
in this Third Amendment, all of the terms, provisions and
conditions of the Basic Documents shall remain unchanged.
25. Counterparts. This Third Amendment may be executed in any
number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of
which taken together shall constitute one and the same
instrument.
26. ENTIRETY. THIS THIRD AMENDMENT AND THE OTHER BASIC
DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES
AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF
ANY, RELATING TO THE SUBJECT MATTER HEREOF. THESE BASIC
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
-10-
<PAGE>
This Third Amendment is executed as of the day and year
first written above.
BORROWER
ATTEST: LADD FURNITURE, INC.
By:____________________ By:_____________________________
Assistant Secretary William S. Creekmuir
Senior Vice President and
Chief Financial Officer
(corporate seal)
GUARANTORS
ATTEST: PENNSYLVANIA HOUSE, INC.
By:_____________________ By:________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: BROWN JORDAN COMPANY
By:_____________________ By:________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: CLAYTON-MARCUS COMPANY, INC.
By:____________________ By:________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: LADD CONTRACT SALES CORPORATION
By:_____________________ By:_______________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
[signatures continued]
<PAGE>
ATTEST: FOURNIER FURNITURE, INC.
By:_____________________ By:_________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: BARCLAY FURNITURE CO.
By:______________________ By:________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: AMERICAN FURNITURE COMPANY,
INCORPORATED
By:_____________________ By:_________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: PILLIOD FURNITURE, INC.
By:_____________________ By:_________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
ATTEST: LEA INDUSTRIES, INC.
(a North Carolina corporation)
By:_____________________ By:_________________________________
Assistant Secretary William S. Creekmuir
Vice President
(corporate seal)
[signatures continued]
<PAGE>
BANKS
NATIONSBANK, N.A. (CAROLINAS) f/k/a
NATIONSBANK BANK OF NORTH CAROLINA,
N.A. as Agent and as a Bank
By:_____________________________
Gregory W. Powell
Senior Vice President
CIBC INC.
By:_____________________________
Name:___________________________
Title:__________________________
CREDITANSTALT CORPORATE FINANCE,
INC.
By:_____________________________
Name:___________________________
Title:__________________________
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
By:_____________________________
Name:___________________________
Title:__________________________
ABN AMRO BANK N.A.
By:_____________________________
Name:___________________________
Title:__________________________
BRANCH BANK AND TRUST COMPANY
By:_____________________________
Name:___________________________
Title:__________________________
COMMONWEALTH BANK, a division of
MERIDIAN BANK
By:_____________________________
Name:___________________________
Title:__________________________
[signatures continued]
<PAGE>
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:_____________________________
Name:___________________________
Title:__________________________
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Name:___________________________
Title:__________________________
NBD BANK f/k/a NBD BANK, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 1,406
<SECURITIES> 0
<RECEIVABLES> 41,347
<ALLOWANCES> 3,862
<INVENTORY> 91,127
<CURRENT-ASSETS> 145,550
<PP&E> 83,826
<DEPRECIATION> 0
<TOTAL-ASSETS> 337,075
<CURRENT-LIABILITIES> 56,441
<BONDS> 145,287
<COMMON> 2,317
0
0
<OTHER-SE> 121,261
<TOTAL-LIABILITY-AND-EQUITY> 337,075
<SALES> 302,377
<TOTAL-REVENUES> 302,377
<CGS> 260,052
<TOTAL-COSTS> 260,052
<OTHER-EXPENSES> 86,357
<LOSS-PROVISION> 2,401
<INTEREST-EXPENSE> 5,649
<INCOME-PRETAX> (44,032)
<INCOME-TAX> (16,733)
<INCOME-CONTINUING> (27,299)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,299)
<EPS-PRIMARY> (3.54)
<EPS-DILUTED> (3.54)
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