<PAGE> 1
================================================================================
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 MAY 2, 1998,
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 1-12814
COLE NATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 34-1453189
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5915 LANDERBROOK DRIVE
MAYFIELD HEIGHTS, OHIO 44124
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(440) 449-4100
(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. X YES NO
--- ---
AS OF MAY 29, 1998, 14,899,415 SHARES OF THE REGISTRANT'S COMMON STOCK WERE
OUTSTANDING.
================================================================================
<PAGE> 2
- --------------------------------------------------------------------------------
COLE NATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MAY 2, 1998
INDEX
<TABLE>
<CAPTION>
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
CONSOLIDATED BALANCE SHEETS AS OF MAY 2, 1998 AND JANUARY 31,
1998...................................................................... 1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE 13 WEEKS ENDED MAY 2,
1998 AND MAY 3, 1997...................................................... 2
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE 13 WEEKS ENDED MAY 2,
1998 AND MAY 3, 1997...................................................... 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................ 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................................................... 6 - 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................................... 9
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
May 2, January 31,
1998 1998
----------- -----------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and temporary cash investments $ 37,707 $ 68,053
Accounts receivable, less allowance for doubtful accounts of
$7,039 in 1998 and $4,334 in 1997 56,060 52,030
Current portion of notes receivable 4,293 4,177
Refundable income taxes 9,520 9,520
Inventories 121,570 119,970
Prepaid expenses and other 6,875 9,195
Deferred income tax benefits 21,534 21,534
----------- -----------
Total current assets 257,559 284,479
Property and equipment, at cost 248,440 242,966
Less-accumulated depreciation and amortization (121,296) (115,162)
----------- -----------
Total property and equipment, net 127,144 127,804
Other assets:
Notes receivable, excluding current portion 36,963 25,783
Deferred income taxes and other 59,652 54,241
Intangible assets, net 158,239 159,077
----------- -----------
Total assets $ 639,557 $ 651,384
=========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 16,051 $ 16,027
Accounts payable 49,186 71,867
Accrued interest 7,435 6,615
Net liabilities of discontinued operations 4,544 3,475
Accrued liabilities 110,739 112,363
Accrued income taxes 4,421 957
----------- -----------
Total current liabilities 192,376 211,304
Long-term debt, net of discount and current portion 277,060 277,401
Other long-term liabilities 30,654 30,664
Stockholders' equity:
Preferred stock - -
Common stock 15 15
Paid-in capital 252,480 251,405
Foreign currency translation adjustment (1,484) (1,749)
Notes receivable - stock option exercise (926) (926)
Accumulated deficit (110,007) (116,119)
Treasury stock at cost (611) (611)
----------- -----------
Total stockholders' equity 139,467 132,015
----------- -----------
Total liabilities and stockholders' equity
$ 639,557 $ 651,384
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
-1-
<PAGE> 4
COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
13 Weeks Ended
------------------------
May 2, May 3,
1998 1997
---------- ----------
<S> <C> <C>
Net revenue $ 271,828 $ 239,686
Costs and expenses:
Cost of goods sold 90,289 82,412
Operating expenses 156,318 136,041
Depreciation and amortization 8,398 7,460
---------- ----------
Total costs and expenses 255,005 225,913
---------- ----------
Income from continuing operations 16,823 13,773
Interest expense, net 6,287 7,783
---------- ----------
Income from continuing operations before income taxes 10,536 5,990
Income tax provision 4,424 2,636
---------- ----------
Income from continuing operations 6,112 3,354
Operating loss from discontinued operations,
net of income taxes - (906)
---------- ----------
Net income $ 6,112 $ 2,448
========== ==========
Earnings (loss) per common share:
Basic-
Income from continuing operations $ .41 $ .28
Loss from discontinued operations - (.08)
---------- ----------
Net income $ .41 $ .20
========== ==========
Diluted-
Income from continuing operations $ .40 $ .27
Loss from discontinued operations - (.07)
---------- ----------
Net income $ .40 $ .20
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
-2-
<PAGE> 5
COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
13 Weeks Ended
---------------------
May 2, May 3,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,112 $ 2,448
Adjustments to reconcile net income to net cash used by
operating activities:
Depreciation and amortization 8,398 7,460
Non-cash interest (226) 96
Change in assets and liabilities:
Decrease (increase) in accounts and notes
receivable, prepaid expenses and other assets (1,957) 630
Decrease (increase) in net assets of discontinued
operations 1,069 (1,864)
Increase in inventories (1,502) (7,864)
Decrease in accounts payable, accrued liabilities
and other liabilities (23,755) (23,791)
Increase (decrease) in accrued interest 820 (924)
Increase (decrease) in accrued income taxes 3,464 (15,877)
-------- --------
Net cash used by operating activities (7,577) (39,686)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment, net (5,973) (11,187)
Systems development costs (6,332) (2,078)
Investment in Pearle Europe (10,296) -
Other, net (678) (378)
-------- --------
Net cash used by investing activities (23,279) (13,643)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt (335) (296)
Net proceeds from exercise of stock options and warrants 818 841
Other, net 27 (152)
-------- --------
Net cash provided by financing activities 510 393
-------- --------
Cash and temporary cash investments:
Net decrease during the period (30,346) (52,936)
Balance, beginning of the period 68,053 73,141
-------- --------
Balance, end of the period $ 37,707 $ 20,205
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
-3-
<PAGE> 6
COLE NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Cole
National Corporation (CNC), its wholly owned subsidiaries, including Cole
National Group, Inc. (CNG), and CNG's wholly owned subsidiaries
(collectively, the "Company"). All significant intercompany transactions
have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared
without audit and certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted, although the
Company believes that the disclosures herein are adequate to make the
information not misleading. Results for interim periods are not necessarily
indicative of the results to be expected for the full year. These
statements should be read in conjunction with the Company's consolidated
financial statements for the fiscal year ended January 31, 1998.
In the opinion of management, the accompanying financial statements
contain all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the Company's financial position as of May 2,
1998 and the results of operations and cash flows for the 13 weeks ended
May 2, 1998 and May 3, 1997.
Inventories
The accompanying interim consolidated financial statements have been
prepared without physical inventories.
Cash Flows
Net cash flows from operating activities reflect cash payments for
income taxes and interest of $443,000 and $5,838,000, respectively, for the
13 weeks ended May 2, 1998, and $17,967,000 and $9,553,000, respectively,
for the 13 weeks ended May 3, 1997.
Earnings Per Share
Earnings per share for the 13 weeks ended May 2, 1998 and May 3, 1997
have been calculated based on the following weighted average number of
common shares and equivalents, if applicable, outstanding:
<TABLE>
<CAPTION>
1998 1997
------------- -----------
<S> <C> <C>
Basic 14,754,887 12,019,488
Diluted 15,277,070 12,481,113
</TABLE>
-4-
<PAGE> 7
(2) INVESTMENT IN PEARLE EUROPE B.V.
In February 1998, the Company repaid a $3.2 million note payable to a
subsidiary of Pearle Europe and invested an additional $7.2 million in the
form of 8% shareholder loans to Pearle Europe in connection with Pearle
Europe's acquisition of optical operations in Germany and Austria.
(3) NEW ACCOUNTING PRONOUNCEMENT
Effective February 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income". This
statement requires that the Company report the change in its equity during
a period from non-owner sources. For the 13 weeks ended May 2, 1998 and May
3, 1997, components of other comprehensive income (loss) relate to foreign
currency translation adjustments related to the Company's Canadian
operations and investment in Pearle Europe B.V. Total comprehensive income
is as follows (000's omitted):
<TABLE>
<CAPTION>
13 Weeks Ended
------------------------------
May 2, 1998 May 3, 1997
------------ ------------
<S> <C> <C>
Net income $ 6,112 $ 2,448
Other comprehensive income (loss) 265 (46)
------------ ------------
Total comprehensive income $ 6,377 $ 1,988
============ ============
</TABLE>
(4) RECLASSIFICATIONS
Certain 1997 amounts have been reclassified to conform with the 1998
presentation.
-5-
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of certain factors affecting the
Company's results of operations for the 13 week periods ended May 2, 1998
and May 3, 1997 (the Company's first quarter) and its liquidity and capital
resources. This discussion should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in
this filing and the Company's audited financial statements for the fiscal
year ended January 31, 1998 included in its annual report on Form 10-K.
The Company's fiscal year ends on the Saturday closest to January 31.
Fiscal years are identified according to the calendar year in which they
begin. For example, the fiscal year ended January 31, 1998 is referred to
as "fiscal 1997."
RESULTS OF OPERATIONS
Net revenue for the first quarter of fiscal 1998 increased 13.4% to
$271.8 million from $239.7 million for the same period in fiscal 1997. The
increase was primarily attributable to the opening of additional Cole
Optical units including the American Vision Centers, Inc. ("AVC") stores
acquired in August 1997, a consolidated comparable store sales increase of
3.7% and the growth of managed vision care fees. At Cole Optical,
comparable store sales increased 4.6% and 1.7% at Cole Vision and Pearle,
respectively. The Pearle increase was impacted by a weaker than expected
reception to a new promotional offer in February and March. At Things
Remembered, the comparable store sales increase of 4.6% reflected increased
sales of additional personalization, new products and clearance
merchandise. At May 2, 1998, the Company had 2,832 specialty service retail
locations, including 401 franchised locations, compared to 2,664 at May 3,
1997.
Gross profit increased 15.4% to $181.5 million in the first quarter of
fiscal 1998 from $157.3 million in the same period last year. The gross
profit increase was primarily attributable to the increased revenue at Cole
Optical and Things Remembered. Gross margins for the first quarter of
fiscal 1998 and fiscal 1997 were 66.8% and 65.6%, respectively. Gross
margin was favorably impacted by the growth in managed vision care fees and
the sales mix of higher margin products at Cole Optical.
Operating expenses increased 14.9% to $156.3 million in the first
quarter of fiscal 1998 from $136.0 million in fiscal 1997, and as a
percentage of revenue, operating expenses increased to 57.5% in fiscal 1998
from 56.8% in fiscal 1997. The leverage loss was primarily a result of
increased advertising expenditures at Pearle and increased expenses related
to managed vision care fee growth partially offset by leverage gains on
payroll and store occupancy costs. Fiscal 1998 depreciation and
amortization expense of $8.4 million was $0.9 million more than fiscal 1997
reflecting the acquisition of AVC and an increase in capital expenditures.
Income from operations increased 22.1% to $16.8 million for the first
quarter of fiscal 1998 from $13.8 million for the same period a year ago,
primarily the result of the increase in net revenue, partially offset by
leverage loss from additional advertising expenditures.
-6-
<PAGE> 9
Net interest expense decreased $1.5 million from the first quarter of
fiscal 1997 to $6.3 million in the first quarter of fiscal 1998. The
decrease was primarily attributable to the purchase and retirement of
$150.9 million of 11-1/4% Senior Notes in conjunction with a tender offer
in September 1997 partially offset by additional interest on $125.0 million
of 8-5/8% Senior Subordinated Notes issued in August 1997.
An income tax provision was recorded in the first quarter of fiscal
1998 and fiscal 1997 using the Company's estimated annual effective tax
rate of 42% and 44%, respectively. The reduction in the rate primarily
reflects the estimated impact of non-deductible amortization of goodwill in
both years.
Net income increased to $6.1 million for the first quarter of fiscal
1998 from $2.4 million for the first quarter of fiscal 1997. The increase
was due to improvement in income from continuing operations, the reduction
of net interest expense and a $0.9 million loss from discontinued
operations in the first quarter of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is funds provided from
operations of its operating subsidiaries. In addition, the Company's
operating subsidiaries have available to them working capital commitments
of $75.0 million under their Credit Facility, reduced by commitments under
letters of credit. There were no working capital borrowings outstanding
during the first quarter of fiscal 1998 and fiscal 1997.
Operations for the first quarter used $7.6 million of cash in fiscal
1998 compared to $39.7 million in fiscal 1997. The decrease in cash used by
operations was primarily attributable to the payment in 1997 of $15.0
million of taxes due on the sale of Pearle's European operation, a smaller
increase in first quarter inventories in 1998 and the increase in net
income.
Cash used by investing activities included capital additions of $6.0
million and $11.2 million for the first quarter of fiscal 1998 and fiscal
1997, respectively. The majority of capital expenditures were for store
fixtures, equipment and leasehold improvements for new stores and the
remodeling of existing stores. In fiscal 1997, capital expenditures of $4.4
million were incurred in connection with the construction of Things
Remembered's new warehouse and distribution facility. In May 1998, the
Company purchased an office building in Twinsburg, Ohio for $9.5 million.
It is anticipated that a portion of Cole Optical's business will move there
during 1998. The Company is currently evaluating financing alternatives for
both facilities. In February 1998, the Company repaid a $3.2 million note
payable to a subsidiary of Pearle Europe B.V. (Pearle Europe) and invested
an additional $7.2 million in the form of 8% shareholder loans to Pearle
Europe in connection with Pearle Europe's acquisition of two optical
operations in Germany and Austria. Investments in systems development costs
totaled $6.3 and $2.1 million in the first quarter of fiscal 1998 and
fiscal 1997, respectively.
The Company believes that funds provided from operations along with
funds available under the Credit Facility will provide adequate sources of
liquidity to allow the Company's operating subsidiaries to continue to
expand the number of stores and to fund capital expenditures and systems
development costs.
-7-
<PAGE> 10
FORWARD-LOOKING INFORMATION
Certain sections of this Form 10-Q contain forward-looking statements.
Forward-looking statements are made based upon management's expectations
and beliefs concerning future events impacting the Company. All
forward-looking statements involve risk and uncertainty.
The Company operates in a highly competitive environment, and its
future liquidity, financial condition and operating results may be
materially affected by a variety of factors, some of which may be beyond
the control of the Company, including risks associated with the integration
of acquired operations, the Company's ability to select and stock
merchandise attractive to customers, the implementation of its store
acquisition program, the ability to attract Managed Vision Care accounts,
economic and weather factors affecting consumer spending, operating
factors, including manufacturing quality of optical and engraved goods,
affecting customer satisfaction, the Company's relationships with host
stores, franchisees and Managed Vision Care customers, the mix of goods
sold, pricing and other competitive factors and the seasonality of the
Company's business.
-8-
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following Exhibits are filed herewith and made a part
hereof:
27 Financial Data Schedule
10.1 Third Amendment to the Credit Agreement, dated as of May 15,
1998, among Cole Vision Corporation, Things Remembered,
Inc., Pearle, Inc., and Pearle Service Corporation and
Canadian Imperial Bank of Commerce.
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K for the quarterly
period ended May 2, 1998.
-9-
<PAGE> 12
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLE NATIONAL CORPORATION
By: /s/ Wayne L. Mosley
--------------------------------------
Wayne L. Mosley
Vice President and Controller
(Duly Authorized Officer and Principal
Accounting Officer)
Date: June 9, 1998
-10-
<PAGE> 13
COLE NATIONAL CORPORATION
FORM 10-Q
QUARTER ENDED MAY 2, 1998
EXHIBIT INDEX
Exhibit
Number Description
-------- -----------
27 Financial Data Schedule
10.1 Third Amendment to the Credit Agreement, dated as of May 15,
1998, among Cole Vision Corporation, Things Remembered,
Inc., Pearle, Inc., and Pearle Service Corporation and
Canadian Imperial Bank of Commerce.
-11-
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
THIRD AMENDMENT
THIRD AMENDMENT, dated as of May 15, 1998 (this "AMENDMENT"), to the
Credit Agreement, dated as of November 15, 1996 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among COLE VISION
CORPORATION, a Delaware corporation ("COLE VISION"), THINGS REMEMBERED, INC., a
Delaware corporation ("THINGS REMEMBERED"), PEARLE, INC., a Delaware corporation
("PEARLE") and PEARLE SERVICE CORPORATION, a Delaware corporation ("PSC"; Cole
Vision, Things Remembered, Pearle and PSC each being referred to as a "BORROWER"
and collectively as the "BORROWERS"), the several banks and other financial
institutions from time to time parties thereto (collectively, the "LENDERS") and
CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian-chartered bank acting through its
New York Agency, as administrative agent for the Lenders thereunder (in such
capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Administrative Agent are
parties to the Credit Agreement;
WHEREAS, the Borrowers have requested that the Administrative Agent and
the Lenders amend the Credit Agreement as set forth herein; and
WHEREAS, the Administrative Agent and the Lenders are willing to effect
such amendment, but only upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, the Borrowers, the Lenders and the
Administrative Agent hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the
Credit Agreement shall have such meanings when used herein.
2. AMENDMENT TO SUBSECTION 1.1. Subsection 1.1 of the Credit Agreement
is hereby amended by changing the definition of "EBITDA" to read in its entirety
as follows:
"EBITDA": for any period, with respect to CNG and its Subsidiaries on a
consolidated basis, determined in accordance with GAAP, an amount equal
to the sum of (a) Net Income for such period, plus (b) income taxes,
excluding income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales or other
dispositions of assets permitted under subsection 8.6, plus (c)
Interest Expense for such period, plus (d) depreciation for such
period, plus (e) amortization for such period, plus (f) any other
non-cash items (including
<PAGE> 2
2
minority interests) reducing Net Income for such period, plus (g)
amortization of deferred financing costs and expenses for such period,
minus (h) all non-cash items increasing Net Income for such period,
minus (i) all cash payments made in such period in respect of
restructuring charges deducted in calculating Net Income for such
period or any prior period (excluding any such cash payments made in
respect of (i) the $8,000,000 pre-tax business integration charge
associated with the AVC acquisition taken by CNG during fiscal 1997 and
(ii) the $61,100,000 pre-tax charge for certain unusual and
non-recurring items related to the Pearle acquisition taken by CNG in
the fourth quarter of fiscal 1996).
3. AMENDMENT TO SUBSECTION 8.9(E). Subsection 8.9(e) of the Credit
Agreement is hereby amended to read in its entirety as follows:
"(e) so long as no Default or Event of Default has occurred
and is continuing or would occur after giving effect to such
Investment, Investments in franchises in a business related to the
optical business of Pearle and Cole Vision as conducted on the Closing
Date in an aggregate amount not to exceed $15,000,000 during any fiscal
year; and"
4. AMENDMENT TO SUBSECTION 8.9(F). Subsection 8.9(f) of the Credit
Agreement is hereby amended to read in its entirety as follows:
"(f) Investments, other than the purchase of CNG Notes or the
Senior Subordinated Notes, in an aggregate amount not to exceed
$10,000,000."
5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby confirms,
reaffirms and restates the representations and warranties made by it in Section
5 of the Credit Agreement, PROVIDED that each reference to the Credit Agreement
therein shall be deemed to be a reference to the Credit Agreement after giving
effect to this Amendment. Each Borrower represents and warrants that, after
giving effect to this Amendment, no Default or Event of Default has occurred and
is continuing.
6. EFFECTIVENESS. This Amendment shall be effective upon execution and
delivery by each of the Borrowers, the Administrative Agent and the Majority
Lenders.
7. CONTINUING EFFECT OF CREDIT AGREEMENT. This Amendment shall not
constitute a waiver, amendment or modification of any other provision of the
Credit Agreement not expressly referred to herein and shall not be construed as
a waiver or consent to any further or future action on the part of the Borrowers
that would require a waiver or consent of the Lenders or the Administrative
Agent. Except as expressly amended or modified herein, the provisions of the
Credit Agreement are and shall remain in full force and effect.
<PAGE> 3
3
8. COUNTERPARTS. This Amendment may be executed by one or more of the
parties to this Amendment on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Amendment signed by all the parties shall be lodged with the Borrowers and the
Administrative Agent.
9. PAYMENT OF EXPENSES. The Borrowers agree, jointly and severally, to
pay or reimburse the Administrative Agent for all of its out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of this Amendment and any other documents prepared in connection herewith, and
the consummation and administration of the transactions contemplated hereby,
including, without limitation, the reasonable fees and disbursements of counsel
to the Administrative Agent.
<PAGE> 4
4
10. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
COLE VISION CORPORATION
By: /s/ Josegh Gaglioti
----------------------------------------
Title: Vice President and Treasurer
THINGS REMEMBERED, INC.
By: /s/ Josegh Gaglioti
----------------------------------------
Title: Vice President and Treasurer
PEARLE, INC.
By: /s/ Josegh Gaglioti
----------------------------------------
Title: Vice President and Treasurer
PEARLE SERVICE CORPORATION
By: /s/ Josegh Gaglioti
----------------------------------------
Title: Vice President and Treasurer
<PAGE> 5
5
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY,
as Administrative Agent
By: /s/ Elizabeth Fischer
----------------------------------------
Title: Authorized Signatory
CIBC INC.
By: /s/ Elizabeth Fischer
----------------------------------------
Title: Executive Director
CIBC Oppenheimer Corp. As Agent
CREDIT SUISSE FIRST BOSTON
By: Authorized Signatory
----------------------------------------
Title:
By: Authorized Signatory
----------------------------------------
Title:
NATIONSBANK, N.A.
By: Authorized Signatory
----------------------------------------
Title:
CORESTATES BANK, N.A.
By: Authorized Signatory
----------------------------------------
Title:
<PAGE> 6
6
THE FUJI BANK, LIMITED
By: /s/ Peter L. Chinnici
------------------------------------
Title: Joint General Manager
NATIONAL CITY BANK
By: Authorized Signatory
------------------------------------
Title:
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: Authorized Signatory
------------------------------------
Title:
YASUDA TRUST & BANK CO.
By: ____________________________________
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> MAY-02-1998
<CASH> 37,707
<SECURITIES> 0
<RECEIVABLES> 60,353
<ALLOWANCES> 7,039
<INVENTORY> 121,570
<CURRENT-ASSETS> 257,559
<PP&E> 248,440
<DEPRECIATION> 121,296
<TOTAL-ASSETS> 639,557
<CURRENT-LIABILITIES> 192,376
<BONDS> 277,060
0
0
<COMMON> 15
<OTHER-SE> 139,452
<TOTAL-LIABILITY-AND-EQUITY> 639,557
<SALES> 271,828
<TOTAL-REVENUES> 271,828
<CGS> 90,289
<TOTAL-COSTS> 255,005
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,287
<INCOME-PRETAX> 10,536
<INCOME-TAX> 4,424
<INCOME-CONTINUING> 6,112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,112
<EPS-PRIMARY> .41
<EPS-DILUTED> .40
</TABLE>
