<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 4, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER:
THE WILLIAM CARTER COMPANY
(Exact name of registrant as specified in charter)
MASSACHUSETTS 04-1156680
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1590 ADAMSON PARKWAY, SUITE 400
MORROW, GEORGIA 30260
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(770) 961-8722
--------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Applicable only to corporate issuers:
As of August 18, 1998, there were 1,000 shares of Common Stock outstanding.
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<PAGE>
FORM 10-Q
THE WILLIAM CARTER COMPANY
INDEX
PART I. Financial Information Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of July 4, 1998
(unaudited) and January 3, 1998 3
Unaudited Condensed Consolidated Statements of Operations
for the three-month periods ended July 4, 1998 and
June 28, 1997 4
Unaudited Condensed Consolidated Statements of Operations
for the six-month periods ended July 4, 1998 and June 28,
1997 5
Unaudited Condensed Consolidated Statements of Cash Flows
for the six-month periods ended July 4, 1998 and June 28,
1997 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. Other Information 14
2
<PAGE>
THE WILLIAM CARTER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
July 4, January 3,
1998 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,306 $ 4,259
Accounts receivable, net 32,125 30,134
Inventories 115,763 87,639
Prepaid expenses and other current assets 2,343 3,390
Deferred income taxes 12,777 12,910
-------- --------
Total current assets 166,314 138,332
Property, plant and equipment, net 53,254 53,011
Tradename, net 95,833 97,083
Cost in excess of fair value of net assets acquired, net 30,964 31,445
Deferred debt issuance costs, net 7,339 7,980
Other assets 3,423 4,048
-------- --------
Total assets $357,127 $331,899
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 900 $ 900
Accounts payable 18,932 14,582
Other current liabilities 30,637 35,267
-------- --------
Total current liabilities 50,469 50,749
Long-term debt 186,350 156,200
Deferred income taxes 39,294 39,777
Other long-term liabilities 9,990 9,990
-------- --------
Total liabilities 286,103 256,716
-------- --------
Redeemable preferred stock, par value $.01 per share, $4,000
per share liquidation and redemption value, 5,000 shares
authorized, issued and outstanding 18,582 18,462
-------- --------
Common stockholder's equity:
Common stock, par value $.01 per share, 1,000
shares authorized, issued and outstanding -- --
Additional paid-in capital 55,270 56,721
Accumulated deficit (2,828) --
-------- --------
Total common stockholder's equity 52,442 56,721
-------- --------
Total liabilities and stockholder's equity $357,127 $331,899
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
THE WILLIAM CARTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three-month period ended
------------------------
July 4, June 28,
1998 1997
---- ----
<S> <C> <C>
Net sales $87,784 $72,517
Costs of goods sold 56,352 44,513
------- -------
Gross profit 31,432 28,004
Selling, general and administrative expenses 28,364 25,843
------- -------
Operating income 3,068 2,161
Interest expense 4,653 4,324
------- -------
Loss before benefit from income taxes (1,585) (2,163)
Benefit from income taxes 522 1,061
------- -------
Net loss (1,063) (1,102)
Dividend requirements and accretion on
redeemable preferred stock (664) (675)
------- -------
Net loss applicable to common stockholder $(1,727) $(1,777)
======= =======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
THE WILLIAM CARTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six-month period ended
----------------------
July 4, June 28,
1998 1997
---- ----
<S> <C> <C>
Net sales $172,928 $147,718
Costs of goods sold 110,861 92,322
-------- --------
Gross profit 62,067 55,396
Selling, general and administrative expenses 57,739 52,225
-------- --------
Operating income 4,328 3,171
Interest expense 9,122 8,347
-------- --------
Loss before benefit from income taxes (4,794) (5,176)
Benefit from income taxes 1,966 2,535
-------- --------
Net loss (2,828) (2,641)
Dividend requirements and accretion on redeemable
preferred stock (1,327) (1,333)
-------- --------
Net loss applicable to common stockholder $ (4,155) $ (3,974)
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE>
THE WILLIAM CARTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six-month period ended
----------------------
July 4, June 28,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,828) $ (2,641)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 8,239 7,412
Deferred tax benefit (350) (1,527)
Effect of changes in operating assets
and liabilities:
(Increase) decrease in current assets:
Accounts receivable (1,991) (5,897)
Inventories (28,124) (18,927)
Prepaid expenses and other current assets 999 3,599
Increase (decrease) in liabilities:
Accounts payable 4,350 7,619
Other liabilities (2,804) (2,516)
-------- --------
Net cash used in operating activities (22,509) (12,878)
-------- --------
Cash flows from investing activities:
Capital expenditures (5,457) (5,449)
Proceeds from sale of fixed assets 20 13
-------- --------
Net cash used in investing activities (5,437) (5,436)
-------- --------
Cash flows from financing activities:
Proceeds from revolving line of credit 71,250 52,500
Payments of revolving line of credit (40,650) (31,500)
Payment of term loan (450) -
Capital contribution from Holdings 60 -
Dividend to Holdings (184) -
Preferred stock dividend (1,207) (1,220)
Payment of debt issuance costs - (650)
Other (1,826) -
-------- --------
Net cash provided by financing activities 26,993 19,130
-------- --------
Net (decrease) increase in cash and cash equivalents (953) 816
Cash and cash equivalents, beginning of period 4,259 1,961
-------- --------
Cash and cash equivalents, end of period $ 3,306 $ 2,777
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
6
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PREPARATION:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of The William Carter Company (the "Company"
or "Carter's") contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the Company
as of July 4, 1998, the results of its operations for the three-month and
six-month periods ended July 4, 1998 and June 28, 1997, and cash flows for the
six-month periods ended July 4, 1998 and June 28, 1997. Operating results for
the three-month and six-month periods ended July 4, 1998 are not necessarily
indicative of the results that may be expected for the fiscal year ending
January 2, 1999. The accompanying condensed consolidated balance sheet of the
Company as of January 3, 1998 has been derived from the audited consolidated
financial statements included in the Company's fiscal 1997 Annual Report on Form
10-K.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission and the instructions to Form 10-Q. The
accounting policies followed by the Company are set forth in its Annual Report
on Form 10-K in the Notes to the Company's consolidated financial statements for
the fiscal year ended January 3, 1998.
NOTE 2 - THE COMPANY:
The Company is a manufacturer and marketer of premier branded childrenswear
under the CARTER'S, CARTER'S CLASSICS and BABY DIOR labels. The Company
manufactures its products in plants located in the southern United States, Costa
Rica, the Dominican Republic and Mexico. Products are manufactured for wholesale
distribution to major domestic retailers, and for the Company's 142 retail
outlet stores that market its brand name merchandise and certain products
manufactured by other companies. The retail operations represented approximately
40% and 41% of consolidated net sales in the second quarter and first half of
fiscal 1998, respectively (41% and 38% in the second quarter and first half of
fiscal 1997, respectively).
7
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3 - INVENTORIES:
Inventories consisted of the following ($000):
<TABLE>
<CAPTION>
July 4, January 3,
1998 1998
---- ----
<S> <C> <C>
Finished goods $ 76,577 $50,026
Work in process 26,671 24,069
Raw materials 12,515 13,544
-------- -------
Total $115,763 $87,639
======== =======
</TABLE>
NOTE 4 - LONG TERM DEBT:
In June 1998, Carter's amended its Senior Credit Facility to benefit from
favorable changes in the interest rate environment and to support higher levels
of demand for the Company's products. The applicable interest margins for loans
which accrue interest at the Eurodollar Rate were adjusted from 2.50% to 2.25%
for the revolving credit facility and from 3.00% to 2.50% for the term loan.
The amendment provides for additional reductions in the interest margin based on
the achievement of certain leverage ratios. To support peak working capital
requirements in the second quarter, the revolving credit facility was increased
from $50.0 million to $65.0 million and the letter of credit sublimit increased
from $10.0 million to $15.0 million.
NOTE 5 - PARENT COMPANY TRANSACTIONS:
The Company paid dividends to its parent company Carter Holdings, Inc.
("Holdings") in the amounts of approximately $47,000 and $184,000 in the
three-month and the six-month periods ended July 4, 1998, respectively. These
proceeds were used by Holdings to repurchase shares of Holdings' stock owned by
certain former employees of the Company. In addition, during the first quarter
of 1998, Holdings made a $60,000 capital contribution to the Company in
connection with proceeds received by Holdings from the issuance of shares of
Holdings' stock to an employee of the Company.
On February 25, 1998, the Company's Board of Directors declared a
semiannual dividend of 12% on $20.0 million of redeemable preferred stock which
was paid to Holdings on May 1, 1998. The Company plans to pay a similar dividend
on November 1, 1998.
8
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 6 - ENVIRONMENTAL MATTERS:
Carter's has been named as a third-party defendant in an action involving
environmental claims relating to property located near its previously owned
facility in Needham, Massachusetts. This case is in the early stages of
discovery and management intends to aggressively defend its position that it has
no liability in this matter. In 1998, the Company commenced a review in Lamar
County, Georgia of a potential claim under Georgia's environmental laws. Based
on the information available at this time, the ultimate outcome of these matters
is uncertain and, therefore, the Company is unable to determine the amount of
its liability or assess whether the resolution of these matters will have a
material adverse effect on its results of operations or financial condition.
Accordingly, no provision for any liability has been made in the accompanying
financial statements.
9
<PAGE>
FORM 10-Q
THE WILLIAM CARTER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. THE COMPANY
UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS.
RESULTS OF OPERATIONS
SIX-MONTH PERIOD ENDED JULY 4, 1998 COMPARED WITH SIX-MONTH PERIOD ENDED
JUNE 28, 1997
Consolidated net sales for the second quarter of 1998 were $87.8 million,
an increase of $15.3 million (21.1%) compared with the second quarter of 1997.
Consolidated net sales for the first half of 1998 were $172.9 million, an
increase of $25.2 million (17.1%) compared with the first half of 1997.
The Company's wholesale sales increased $8.4 million (20.2%) to
approximately $50.1 million in the second quarter of 1998 from $41.7 million in
the second quarter of 1997. This increase in wholesale sales can be attributed
to an earlier demand for the Company's seasonal goods and the achievement of a
better inventory position relative to the same period in the prior
year.
Wholesale sales in the first half of 1998 increased $13.9 million (15.7%)
to approximately $101.7 million from $87.8 million in the first half of 1997.
The increase in wholesale sales was due primarily to the new product line
introductions, which include Special Delivery, Baby Basics, Dreamakers and
Another Bundle of JOY (acronym for "Just One Year"), a total nursery concept
focused on apparel and related accessories for a child's first year of life.
The Company's retail outlet store sales in the second quarter of 1998 were
$37.7 million, an increase of $8.2 million (27.6%) compared with the second
quarter of 1997. Comparable store sales increased 21.2% in the second quarter of
1998 compared with the second quarter of 1997. The Company opened four stores
and closed one store in the second quarter of 1998. In the first half of 1998,
the Company opened five stores and closed one store. There were 142 stores in
operation at July 4, 1998 compared with 139 stores at June 28, 1997.
Retail sales in the first half of 1998 were $71.3 million, an increase of
$14.7 million (25.9%) compared with the first half of 1997. Comparable store
sales increased 18.0% in the first half of 1998. These increases are attributed
to the successful implementation of a new marketing strategy. This strategy was
designed to clearly communicate the value of Carter's products sold through the
outlet stores relative to comparable values offered elsewhere. Improvements in
the merchandise planning and allocation process, a more impactful and
coordinated visual display of merchandise, and a commitment to improve the
quality of customer service, contributed to the increase in retail sales in the
first half of 1998.
10
<PAGE>
FORM 10-Q
THE WILLIAM CARTER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company's gross profit increased $3.4 million (12.2%) to $31.4 million
in the second quarter of 1998 compared with the second quarter of 1997. In the
first half of 1998, gross profit increased $6.7 million (12.0%) to $62.1 million
compared with the first half of 1997. The improvement in gross profit reflects
the benefit derived from the growth in wholesale sales in the "baby" product
category, including the new product introductions, and growth in retail store
sales. In the second quarter of 1998, gross profit as a percentage of net sales
decreased to 35.8% of net sales compared with 38.6% in the second quarter of
1997. Gross profit as a percentage of net sales in the first half of 1998
decreased to 35.9% compared to 37.5% in the first half of 1997. The decrease
in gross margin as a percentage of net sales reflects the impact of start-up
costs incurred in the development of the Company's sewing operations in Mexico.
Such start-up costs are comprised of manufacturing direct labor and facility
costs not yet absorbed in inventory due to the low level of production during
the development stage. Gross profit as a percentage of net sales is expected
to improve in the second half of 1998.
Selling, general and administrative expenses for the second
quarter of 1998 increased $2.5 million (9.8%) to $28.4 million compared with the
second quarter of 1997. As a percentage of net sales, such expenses decreased to
32.3% in the second quarter of 1998 compared to 35.6% in the second quarter of
1997. Similarly, while these expenses for the first half of 1998 increased $5.5
million (10.6%) to $57.7 million compared with the first half of 1997, expenses
as a percentage of net sales decreased to 33.4% in the first half of 1998
compared to 35.4% in the first half of 1997. The increase in total selling,
general and administrative expenses reflects the costs associated with the new
retail management team engaged in 1997 and freight and distribution costs
incurred to support the increase in sales. The improvement in selling, general
and administrative expenses as a percentage of net sales reflects the benefit
from comparable store sales increases achieved by the Company's retail outlet
stores and lower retail store expenses relative to sales resulting from cost
controls implemented in store operations.
Operating income for the second quarter of 1998 increased $0.9 million
(41.9%) to $3.1 million compared with the second quarter of 1997. Operating
income in the first half of 1998 increased
$1.2 million (36.5%) to $4.3 million compared with the first half of 1997. This
increase reflects the changes in gross profit and selling, general and
administration expenses described above.
Interest expense for the second quarter of 1998 increased to $4.7 million
compared with $4.3 million in the second quarter of 1997. In the first half of
1998, interest expense was $9.1 million compared with $8.3 million in the first
half of 1997. This increase reflects the cost of higher average revolver
borrowings for working capital requirements in the first half of 1998 needed to
support an increased level of demand for Carter's products. Average revolver
borrowings during the first half of 1998 were $19.2 million compared to $6.1
million in the first half of 1997. At July 4, 1998, outstanding debt aggregated
$187.3 million compared to $166.0 million at June 28, 1997.
The Company recorded an income tax benefit of $0.5 million in the second
quarter of 1998 compared with an income tax benefit of $1.1 million in the
second quarter of 1997. The first half 1998 tax benefit was $2.0 million
compared with $2.5 million in the first half of 1997. The Company's effective
tax rate was approximately 41.0% during the first half of 1998, an estimated tax
rate lower than the first half of 1997, due primarily to higher projected
pretax income for 1998.
11
<PAGE>
FORM 10-Q
THE WILLIAM CARTER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
As a result of the factors described above, the Company reported a net loss
of approximately $1.1 million in each of the second quarters of 1998 and 1997.
The net loss for the first half of 1998 was $2.8 million compared to a loss of
$2.6 million in the first half of 1997.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
The Company has financed its working capital, capital expenditures and debt
service requirements primarily through internally generated cash flow, in
addition to funds borrowed under the Company's revolving credit facility.
Net accounts receivable at July 4, 1998 were $32.1 million compared with
$25.2 million at June 28, 1997. This increase reflects the higher levels of
wholesale revenues in the second quarter of 1998 as compared to the second
quarter of 1997. Due to the seasonal nature of the Company's operations, the
net accounts receivable balance at July 4, 1998 is not comparable with the net
accounts receivable balance at January 3, 1998.
Inventories at July 4, 1998 were $115.8 million compared with $95.5 million
at June 28, 1997. This increase reflects the growth in inventory required to
support higher levels of sales demands. Inventory turnover in 1998 has improved
relative to 1997. Due to the seasonal nature of the Company's operations, the
net inventory balance at July 4, 1998 is not comparable with the net inventory
balance at January 3, 1998.
Net cash flows used in operating activities increased $9.6 million to
$22.5 million for the six-month period ended July 4, 1998 from $12.9 million in
the six-month period ended June 28, 1997. This increase can be attributed to
the increase in inventory levels in fiscal 1998, financed primarily through
revolver borrowings under the Senior Credit Facility.
At July 4, 1998, the Company had $187.3 million of debt outstanding,
consisting of $100.0 million of 10 3/8% Series A Senior Subordinated Notes,
$43.7 million in term loan borrowings and $43.6 million in revolver borrowings
under the Senior Credit Facility, exclusive of approximately $4.9 million of
outstanding letters of credit. At July 4, 1998, the Company had approximately
$16.5 million of financing available under the revolving credit portion of the
Senior Credit Facility.
The Company invested $5.4 million in capital expenditures during the first
half of 1998 and 1997. The Company plans to invest a total of approximately
$20.0 million in capital expenditures in 1998.
The Company believes that cash generated from operations, together with
availability under the revolving portion of the Senior Credit Facility, will be
adequate to meet its debt service requirements, capital expenditures and working
capital needs for the foreseeable future, although no assurance can be given in
this regard.
On February 25, 1998, the Company's Board of Directors declared a
semiannual dividend of 12% on $20.0 million of redeemable preferred stock which
was paid on May 1, 1998. The Company plans to pay a similar dividend on
November 1, 1998.
12
<PAGE>
FORM 10-Q
THE WILLIAM CARTER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
EFFECTS OF INFLATION
The Company is affected by inflation primarily through the purchase of raw
material, increased operating costs and expenses, and higher interest rates. The
effects of inflation on the Company's operations have not been material in
recent years.
SEASONALITY
The Company experiences seasonal fluctuations in its sales and
profitability, with generally lower sales and gross profit in the first and
second quarters of its fiscal year. The Company believes that seasonality of
sales and profitability is a factor that affects the baby and children's apparel
industry generally and is primarily due to retailers' emphasis on Fall and
Holiday sales, including back to school promotions, which results in higher
sales and profitability in the third and fourth quarters. Accordingly, the
results of operations for the three-month and six-month periods ended July 4,
1998 are not indicative of the results to be expected for the full year.
YEAR 2000
The potential for software processing errors arising from calculations
using the Year 2000 date are a known risk. The Company is currently evaluating
its financial and operating systems capabilities to ensure such systems and
related processes are not adversely affected by conversion of system dates to
Year 2000. The Company is also communicating with its strategic suppliers and
financial institutions to determine whether their information systems will
comply with Year 2000 requirements and not disrupt transactions with the
Company. The Company has established a task force to address Year 2000
requirements and to determine cost of compliance. The assessment of Year 2000
requirements is an ongoing process. Accordingly, while the ultimate costs to
comply with such requirements have not been fully determined, the expenditures
are not expected to be material to the Company's business operations or
financial condition. The Company expects to be Year 2000 ready in the first
half of 1999.
13
<PAGE>
FORM 10-Q
THE WILLIAM CARTER COMPANY
PART II - OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising out of the
ordinary course of its business. Management believes that none of these actions,
individually or in the aggregate, will have a material adverse effect on the
results of operations or financial condition of the Company.
ITEM 2. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
*10.9 Amendment to the Senior Credit Facility dated June 22, 1998 among the
Company, certain lenders and The Chase Manhattan Bank, as
administrative agent.
*27 Financial Data Schedule
* Filed herewith
(b) Reports on Form 8K
No report was filed by the Registrant during the quarter ended
July 4, 1998
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WILLIAM CARTER COMPANY
Date: August 18, 1998 /s/ FREDERICK J. ROWAN, II
----------------------------
Frederick J. Rowan, II
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: August 18, 1998 /s/ MICHAEL D. CASEY
----------------------------
Michael D. Casey
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
15
<PAGE>
Exhibit 10.9
Execution Copy
AMENDMENT, dated as of June 22, 1998 (this "AMENDMENT"), to
the Credit Agreement, dated as of October 30,1996 (as the same may be amended,
supplemented, waived or otherwise modified from time to time, the "CREDIT
AGREEMENT"; capitalized terms used herein but not otherwise defined herein shall
be as defined in the Credit Agreement), among THE WILLIAM CARTER COMPANY, a
Massachusetts corporation ("CARTER'S" or the "COMPANY"), as successor by merger
to TWCC ACQUISITION CORP., a Massachusetts corporation, the several lenders from
time to time parties thereto (the "LENDERS"), CHASE SECURITIES INC. ("CSI") and
BT SECURITIES CORPORATION ("BTSC"), as arrangers (the "ARRANGERS"), CSI, as
advisor to the Company in connection with the Merger (as defined in the Credit
Agreement) and the other transactions contemplated by the Credit Agreement,
BANKERS TRUST COMPANY, as syndication agent (in such capacity, the "SYNDICATION
AGENT"), GOLDMAN SACHS CREDIT PARTNERS L.P. ("GOLDMAN SACHS"), as documentation
agent (in such capacity, the "DOCUMENTATION AGENT") and THE CHASE MANHATTAN
BANK, a New York banking corporation, as administrative agent for the Lenders
(in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H
WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make certain loans and other extensions of credit to the Company;
WHEREAS, the Company has requested that the Lenders amend the
Credit Agreement to, among other things, (i) increase aggregate Revolving Credit
Commitments to $65,000,000, (ii) provide that the Applicable Margin and
commitment fees be based upon the financial leverage of the Company, (iii)
increase the Letter of Credit sublimit to $15,000,000, (iv) permit the Company
to retain Net Proceeds from the possible sale of its Textile Operations (as
defined herein) subject to certain terms and conditions and (v) increase the
Base Amount in respect of Capital Expenditures to $20,000,000 for each fiscal
year of the Company;
WHEREAS, the Lenders are willing to agree to the requested
amendments, but only upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises contained
herein, the parties hereto agree as follows:
I. AMENDMENTS TO THE CREDIT AGREEMENT.
1. DEFINED TERMS. Unless otherwise defined herein,
capitalized terms which are defined in the Credit Agreement are used herein
as defined therein.
2. AMENDMENT TO SUBSECTION 1.1 (DEFINED TERMS). Subsection 1.1
of the Credit Agreement is hereby amended by (a) deleting clause (b) from the
definition of "Net Proceeds" therein in its entirety and substituting in lieu
thereof the following clause (b):
<PAGE>
"(b) any Asset Sale, excluding (i) any net proceeds received upon any
condemnation or exercise of rights of eminent domain to the extent the
same shall be deemed not to constitute Net Proceeds pursuant to the
proviso to subsection 8.5(d), (ii) any proceeds of insurance received upon
any casualty or loss, (iii) any net proceeds consisting of repayments or
prepayments, in whole or in part, of loans permitted under subsection
8.6(g) or any interest or other amounts paid in respect of such loans and
(iv) any net proceeds received from the sale or other disposition of the
Textile Operations not to exceed $30,000,000 in the aggregate (including
any net proceeds consisting of principal repayments or prepayments under
clause (iii)) PROVIDED that, in the case of clause (iv), (x) such net
proceeds (excluding any net proceeds under clause (iii)) are reinvested in
new or existing properties within eighteen months and (y) the Senior
Leverage Ratio based upon the date of the most recent financial statements
delivered to the Administrative Agent pursuant to subsection 7.1(c) prior
to the date of receipt of such net proceeds (excluding any net proceeds
under clause (iii)) shall be less than 2.50 to 1.00;";
(b) deleting the definitions of "Applicable Margin" and
"Revolving Credit Commitment" therein in their entirety and substituting in lieu
thereof in proper alphabetical order the following:
"APPLICABLE MARGIN": for any day, with respect to any Term
Loan, Revolving Credit Loan or Swing Line Loan of the Types set forth
below, or with respect to the commitment fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under each
caption for Term Loans, Revolving Credit Loans or Swing Line Loans, as the
case may be, of "Alternate Base Rate Loan" or "Eurodollar Loan" or under
the caption "Commitment Fee Rate", as the case may be, based upon the
Total Leverage Ratio as set forth under the relevant column heading below:
<TABLE>
<CAPTION>
- ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
REVOLVING REVOLVING SWING COMMITMENT
TOTAL LEVERAGE RATIO: CREDIT LOANS CREDIT LOANS TERM LOANS TERM LOANS LINE LOANS FEE RATE
Alternate Eurodollar Alternate Eurodollar Alternate
Base Rate Loan Loan Base Loan Base Loan
Rate Loan
- ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
4.75 and above 1.50% 2.50% 1.75% 2.75% 1.50% 0.50%
- ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
4.25 and above but less 1.25% 2.25% 1.50% 2.50% 1.25% 0.50%
than 4.75
- ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
4.00 and above but less 1.00% 2.00% 1.25% 2.25% 1.00% 0.50%
than 4.25
- ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
3.50 and above but less 0.75% 1.75% 1.00% 2.00% 0.75% 0.375%
than 4.00
- ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
less than 3.50 0.50% 1.50% 1.00% 2.00% 0.50% 0.375%
- ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
</TABLE>
2
<PAGE>
The Applicable Margin for any date shall be determined by reference to the
Total Leverage Ratio as of the last day of the fiscal quarter most
recently ended, and any change in the Applicable Margin shall become
effective upon the delivery to the Administrative Agent of a certificate
of the chief financial officer of the Company pursuant to subsection
7.2(b) (which certificate may be delivered prior to delivery of the
relevant financial statements) with respect to the financial statements to
be delivered pursuant to subsection 7.1(a) and (b) for the most recently
ended fiscal quarter or fiscal year, as the case may be, (x) setting forth
in reasonable detail the calculation of the Total Leverage Ratio at the
end of such fiscal quarter and (y) stating that the signer has reviewed
the terms of this Agreement and other Credit Documents and has made, or
caused to be made under his supervision, a review in reasonable detail of
the transactions and condition of the Company and its Subsidiaries during
the applicable fiscal quarter, and that the signer does not have knowledge
of the existence as of the date of such officers' certificate of any Event
of Default or Default and any such change in the Applicable Margin shall
apply (i) in the case of Alternate Base Rate Loans, to Alternate Base Rate
Loans outstanding on such delivery date or made on and after such delivery
date, (ii) in the case of Eurodollar Loans, to Eurodollar Loans
outstanding on such delivery date or made on and after such delivery date
and (iii) in the case of commitment fees, to the Available Revolving
Credit Commitments on and after such delivery date in accordance with
subsection 3.2. It is understood that the foregoing certificate of the
chief financial officer shall be permitted to be delivered prior to, but
in no event later than, the time of the actual delivery of the financial
statements required to be delivered pursuant to subsection 7.1.
Notwithstanding the foregoing, (i) at all times from the date of
effectiveness of the Amendment, dated as of June 22, 1998, to this
Agreement to the date on which the chief financial officer delivers the
certificate set forth in the first sentence of this paragraph in respect
of the financial statements delivered pursuant to subsection 7.1 for the
fiscal year of the Company ended January 2, 1999, the Applicable Margin
shall be (v) for Revolving Credit Loans which are Eurodollar Loans, 2.25%,
(w) for Revolving Credit Loans and Swing Line Loans which are Alternate
Base Rate Loans, 1.25%, (x) for Term Loans which are Eurodollar Loans,
2.50%, (y) for Term Loans which are Alternate Base Rate Loans, 1.50% and
(z) with respect to commitment fees payable hereunder, 0.50% or (ii) if
the Company fails to deliver the certificate required under subsection
7.2(b) with respect to a fiscal quarter or fiscal year, as the case may
be, then the Applicable Margin shall be (x) during the period from the
date upon which such certificate was required to be delivered until the
date upon which it actually is delivered, the Applicable Margin in effect
immediately prior to the date such certificate was due, and (y) if such
certificate, when actually delivered, would have required an increase in
the Applicable Margin over the Applicable Margin in effect immediately
prior to the date such certificate was due, the Company shall promptly
following the delivery of such certificate pay to the Lenders and the
Administrative Agent any additional amounts of interest or fees which
would have been payable on any previous Interest Payment Date had such
higher Applicable Margin been in effect from the date such certificate was
required to be delivered."
"REVOLVING CREDIT COMMITMENT": as to any Lender, its obligations to
make Revolving Credit Loans to the Company pursuant to subsection 3.1, and
to purchase its L/C Participating Interest in any Letter of Credit, in an
aggregate amount not to exceed the amount set forth under such Lender's
name in Schedule I opposite the caption "Revolving Credit Commitment" or
in Schedule 1 to the Assignment and Acceptance by which such Lender
acquired its Revolving Credit Commitment, as the same may be reduced from
time to time pursuant to subsection 4.3 or 4.4(b) or adjusted pursuant to
subsection 11.6(c); collectively, as to all the Lenders, the "REVOLVING
CREDIT COMMITMENTS". In no event shall the aggregate Revolving Credit
Commitments of all Lenders exceed $65,000,000 at any time."; and
3
<PAGE>
(c) adding the following definitions of "Consolidated Senior
Funded Indebtedness", "Senior Leverage Ratio", "Textile Operations" and "Total
Leverage Ratio" thereto in proper alphabetical order:
"CONSOLIDATED SENIOR FUNDED INDEBTEDNESS": at a particular date,
Consolidated Funded Indebtedness MINUS subordinated indebtedness, if any,
of the Company and its Subsidiaries."
"SENIOR LEVERAGE RATIO": at any date, the ratio of average
Consolidated Senior Funded Indebtedness of the Company and its
Subsidiaries for the period of twelve consecutive fiscal months most
recently ended prior to such date to Consolidated EBITDA for the four
consecutive fiscal quarters ended as of such date; PROVIDED that with
respect to any acquisition permitted by subsection 8.7, the last four
fiscal quarters of Consolidated EBITDA (as may be adjusted for post
acquisition cost savings reasonably agreed to by the Company and the
Administrative Agent) of the acquired company shall be added for the
purposes of calculating this ratio; PROVIDED, FURTHER, that, average
Consolidated Senior Funded Indebtedness for a period of twelve consecutive
fiscal months shall be determined by dividing (a) the aggregate of
Consolidated Senior Funded Indebtedness as of the last day of each of the
twelve consecutive fiscal months by (b) 12 for the purpose of calculating
this ratio."
"TEXTILE OPERATIONS": all or a substantial portion of the real and
personal property used in connection with the textile operations conducted
by the Company at its facility located at Railroad Street, Barnesville,
Georgia."
"TOTAL LEVERAGE RATIO": at any date, the ratio of average Consolidated
Funded Indebtedness of the Company and its Subsidiaries for the period of
twelve consecutive fiscal months most recently ended prior to such date to
Consolidated EBITDA for the four consecutive fiscal quarters ended as of
such date; PROVIDED that with respect to any acquisition permitted by
subsection 8.7, the last four fiscal quarters of Consolidated EBITDA (as
may be adjusted for post acquisition cost savings reasonably agreed to by
the Company and the Administrative Agent) of the acquired company shall be
added for the purposes of calculating this ratio; PROVIDED, FURTHER, that
average Consolidated Funded Indebtedness for a period of twelve
consecutive fiscal months shall be determined by dividing (a) the
aggregate of Consolidated Funded Indebtedness as of the last day of each
of the twelve consecutive fiscal months by (b) 12 for the purposes of
calculating this ratio.".
3. AMENDMENT TO SUBSECTION 3.1 (REVOLVING CREDIT
COMMITMENTS). Subsection 3.1 of the Credit Agreement is hereby amended by
deleting the second sentence in paragraph (a) thereof in its entirety and
substituting in lieu thereof the following sentence:
"Notwithstanding the above, in no event shall any Revolving Credit
Loans be made, or Letter of Credit be issued, if the aggregate amount of
the Revolving Credit Loans to be made or Letter of Credit to be issued
would, after giving effect to the use of proceeds, if any, thereof, exceed
the aggregate Available Revolving Credit Commitments nor shall any Letter
of Credit be issued if after giving effect thereto the sum of the undrawn
amount of all outstanding Letters of Credit and the amount of all L/C
Obligations would exceed $15,000,000.".
4. AMENDMENT TO SUBSECTION 4.4 (OPTIONAL AND MANDATORY
PREPAYMENTS; REPAYMENTS OF TERM LOANS). Subsection 4.4 of the Credit
Agreement is hereby amended by adding the following sentence to the end of
clause (iv) of paragraph (b) thereof:
4
<PAGE>
"For purposes of this clause (iv), any gain from the sale or other
disposition of the Textile Operations shall be excluded from the
calculation of Excess Cash Flow.".
5. AMENDMENT TO SUBSECTION 7.2 (CERTIFICATES; OTHER
INFORMATION). Subsection 7.2 of the Credit Agreement is hereby amended by
deleting paragraph (b) thereof in its entirety and substituting in lieu
thereof the following paragraph (b):
"(b) within 15 days of the delivery of the financial statements
referred to in subsection 7.1(a) and (b) (except that the certificate
referred to in clause (iii) below shall be delivered concurrently with
such financial statements and the certificate in clause (vi) may be
delivered prior to delivery of such financial statements), a certificate
of the chief financial officer of the Company stating that, to the best of
such officer's knowledge, during such period (i) no Subsidiary has been
formed or acquired (or, if any such Subsidiary has been formed or
acquired, the Company has complied with the requirements of subsection 7.9
with respect thereto), (ii) neither the Company nor any of its
Subsidiaries has changed its name, its principal place of business, its
chief executive office or the location of any material item of tangible
Collateral without complying with the requirements of this Agreement and
the Security Documents with respect thereto, (iii) each of the Company and
its Subsidiaries has observed or performed all of its respective covenants
and other agreements, and satisfied every material condition, contained in
this Agreement, the Notes and the other Credit Documents to be observed,
performed or satisfied by it, and that such officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate, (iv) showing in detail as of the end of the related fiscal
period the figures and calculations supporting such statement in respect
of clause (e) of subsection 8.1, clauses (b) and (e) of subsection 8.3,
subsections 8.7 through 8.11 and clause (vi) of this subsection 7.2(b) and
any other calculations reasonably requested by the Administrative Agent
with respect to the quantitative aspects of the other covenants contained
herein, (v) if not specified in the financial statements delivered
pursuant to subsection 7.1, specifying the aggregate amount of interest
paid or accrued by the Company and its Subsidiaries, and the aggregate
amount of depreciation, depletion and amortization charged on the books of
the Company and its Subsidiaries, during such accounting period and (vi)
setting forth the Total Leverage Ratio as of the last day of such fiscal
quarter or fiscal year, as the case may be, for purposes of determining
the `Applicable Margin' as defined in this Agreement;".
6. AMENDMENT TO SUBSECTION 8.4 (PROHIBITION OF FUNDAMENTAL
CHANGES). Subsection 8.4 of the Credit Agreement is hereby amended by
inserting in the fifth line thereof the phrase "or (h)" immediately after the
phrase "except (a) for the transactions otherwise permitted pursuant to
clause (b)" therein.
7. AMENDMENT TO SUBSECTION 8.5 (PROHIBITION ON SALE OF
ASSETS). Subsection 8.5 of the Credit Agreement is hereby amended by (a)
deleting the second occurrence of the word "and" from paragraph (f) thereof, (b)
deleting the period at the end of paragraph (g) thereof and substituting in lieu
thereof the phrase "; and", and (c) by adding the following paragraph (h) to the
end thereof:
"(h) for the sale or other disposition of the Textile Operations at
least 66 2/3% of the aggregate consideration for which shall consist of
cash.".
8. AMENDMENT TO SUBSECTION 8.6 (LIMITATION ON INVESTMENTS,
LOANS AND ADVANCES). Subsection 8.6 of the Credit Agreement is hereby amended by
(a) deleting the final occurrence of the word "and" from paragraph (e) thereof,
(b) deleting the period at the end of paragraph (f) thereof and
5
<PAGE>
substituting in lieu thereof the phrase "; and", and (c) by adding the
following paragraph (g) to the end thereof:
"(g) the Company may make loans to purchasers of the Textile Operations
not to exceed $10,000,000 in aggregate principal amount at any time on
terms reasonably satisfactory to the Administrative Agent and solely for
the purpose of financing the acquisition of the Textile Operations.".
9. AMENDMENT TO SUBSECTION 8.7 (CAPITAL EXPENDITURES).
Subsection 8.7 of the Credit Agreement is hereby amended by (a) deleting the
table set forth therein in its entirety and substituting in lieu thereof the
following table:
"Fiscal Year
or Period Base Amount
--------- -----------
1998 $20,000,000
1999 $20,000,000
2000 $20,000,000
2001 $20,000,000
2002 $20,000,000
January 1, 2003 to $20,000,000"; and
October 31, 2003
(b) adding the phrase "and (h)" to the end of the second
proviso thereto.
10. AMENDMENT TO SCHEDULE I OF THE CREDIT AGREEMENT (LIST OF
ADDRESSES FOR NOTICES; LENDING OFFICES; COMMITMENT AMOUNTS). Schedule I of the
Credit Agreement is hereby amended by deleting such Schedule in its entirety and
substituting in lieu thereof Schedule I set forth on Annex A attached hereto.
II. GENERAL PROVISIONS.
6
<PAGE>
1. REPRESENTATIONS AND WARRANTIES. On and as of the date
hereof and after giving effect to this Amendment, the Company hereby confirms
and reaffirms that the representations and warranties set forth in Section 5 of
the Credit Agreement are true and correct in all material respects, except to
the extent that such representations and warranties expressly relate to a
specific earlier date in which case the Company hereby confirms and reaffirms
that such representations and warranties are true and correct in all material
respects as of such earlier date.
2. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. This
Amendment shall become effective upon satisfaction of the following
conditions:
(a) The Administrative Agent shall have received counterparts of this
Amendment duly executed and delivered by the Company, the Administrative
Agent and the Lenders;
(b)(i) The Administrative Agent shall have received, for the
account of the Lenders, all fees due and payable to the Lenders; and
(ii) The Administrative Agent shall have received all other fees,
expenses and other consideration required to be paid or delivered to the
Administrative Agent on or before the date of effectiveness of this
Amendment.
3. CONTINUING EFFECT; NO OTHER AMENDMENTS. Except as expressly
amended hereby, all of the terms and provisions of the Credit Agreement are and
shall remain in full force and effect. The amendments provided for herein are
limited to the specific subsections of the Credit Agreement specified herein and
shall not constitute a consent, amendment or waiver of, or an indication of the
Lenders' willingness to consent to, amend or waive, any other provisions of the
Credit Agreement or the same subsections for any other date or time period
(whether or not such other provisions or compliance with such subsections for
another date or time period are affected by the circumstances addressed in this
Amendment).
4. EXPENSES. The Company agrees to pay and reimburse the
Administrative Agent for all its reasonable costs and expenses incurred in
connection with the preparation and delivery of this Amendment, including,
without limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.
5. COUNTERPARTS. This Amendment may be executed by one or more
of the parties to this Amendment on any number of separate counterparts
(including by telecopy), 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 the parties hereto shall be delivered to the Company and the
Administrative Agent.
6. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
THE WILLIAM CARTER COMPANY
By: /s/ MICHAEL D. CASEY
------------------------------
Michael D. Casey
Senior Vice President & CFO
THE CHASE MANHATTAN BANK, as
Administrative Agent, Issuing Lender and a Lender
By: /s/ DAVID MICHAELS
------------------------------
David Michaels
Vice President
BANKERS TRUST COMPANY, as Syndication Agent and
as a Lender
By: /s/ GREGORY SHEFIN
------------------------------
Gregory Shefin
Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P., as Documentation
Agent and as a Lender
By: /s/ STEPHEN B. KING
------------------------------
Stephen B. King
Authorized Signatory
8
<PAGE>
ANNEX A
Schedule 1 to the
Credit Agreement
----------------
LENDERS, ADDRESSES AND COMMITMENTS
<TABLE>
<CAPTION>
Revolving Credit Term Loan
Commitment Commitment (a) Total
<S> <C> <C> <C>
THE CHASE MANHATTAN BANK $12,350,000.00 ------------ $ 12,350,000.00
1375 Broadway, Suite 800
New York, NY 10018
Attn. David Michaels
Telecopy: 212-827-4497
BANKERS TRUST COMPANY $11,050,000.00 ------------ $ 11,050,000.00
130 Liberty Street
New York, NY 10016
Attn. Larry Benison
Telecopy: 212-250-7351
GOLDMAN SACHS CREDIT PARTNERS L.P. $10,400,000.00 ------------ $ 10,400,000.00
85 Broad Street, 16th Floor
New York, NY 10004
Attn. Steven King
Telecopy: 212-902-2417
FIRST UNION NATIONAL BANK $10,400,000.00 ------------ $ 10,400,000.00
One First Union Center
301 S. College Street, DC-5
Charlotte, NC 28288-0737
Attn. George L. Woolsey
Telecopy: 704-374-3300
THE FIRST NATIONAL BANK OF BOSTON $10,400,000.00 ------------ $ 10,400,000.00
100 Federal Street
Boston, MA 02110
Attn. Kimberly F. Harris
Telecopy: 617-434-4929
FLEET BANK NATIONAL ASSOCIATION $10,400,000.00 ------------ $ 10,400,000.00
One Federal Street
Boston, MA 02110
Attn. Kerry McElhiney
Telecopy: 617-346-0815
</TABLE>
- ------------------
(a) The amounts stated under this heading are the actual principal amounts of
Term Loans outstanding on June 22, 1998.
9
<PAGE>
<TABLE>
<CAPTION>
Revolving Credit Term Loan
Commitment Commitment Total
<S> <C> <C> <C>
VAN KAMPEN AMERICAN CAPITAL PRIME ------------ $ 7,056,000.00 $ 7,056,000.00
RATE INCOME TRUST
c/o Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, IL 60181
Att. Jeff Maillet
Telecopy: 630-684-6740
MERRILL LYNCH SENIOR FLOATING RATE ------------ $ 6,174,000.00 $ 6,174,000.00
FUND, INC.
500 College Road
Area E4
Plainsboro, NJ 08536
Attn. John Geijer
Telecopy: 609-282-7616
ML CLO XII PILGRIM AMERICA (CAYMAN) ------------ $ 6,174,000.00 $ 6,174,000.00
LTD.
Pilgrim America Investments Inc.
40 North Central Avenue, Suite 100
Phoenix, AZ 85004
Attn. Michael Bacevich
Telecopy: 602-417-8327
ML CBO IV (CAYMAN) LTD. ------------ $ 6,174,000.00 $ 6,174,000.00
Protective Asset Management
Two Galleria Tower
13455 Noel Road-LB #45
Dallas, TX 75240
Attn. Mark Okada
Telecopy: 972-233-4343
PAMCO CAYMAN LTD. ------------ $ 6,174,000.00 $ 6,174,000.00
Two Galleria Tower
13455 Noel Road-LB #45
Dallas, TX 75240
Attn. Mark Okada
Telecopy: 972-233-4343
PRIME INCOME TRUST ------------ $ 6,174,000.00 $ 6,174,000.00
Two World Trade Center
72nd Floor
New York, NY 10048
Attn. Rafael Scolari
Telecopy: 212-392-5345
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Revolving Credit Term Loan
Commitment Commitment Total
<S> <C> <C> <C>
SENIOR DEBT PORTFOLIO ------------ $ 6,174,000.00 $ 6,174,000.00
Boston Management and Research
24 Federal Street
Boston, MA 02110
Attn. Gretchen Bergstresser
Telecopy: 617-695-9594
Total Allocation $65,000,000.00 $44,100,000.00 $109,100,000.00
</TABLE>
11
<PAGE>
FIRST UNION NATIONAL BANKERS
By: /s/ GEORGE L. WOOLSEY
------------------------------
George L. Woolsey
Vice President
THE FIRST UNION NATIONAL BANKER OF BOSTON
By: /s/ MARIE C. DUPREY
------------------------------
Marie C. Duprey
Vice President
FLEET NATIONAL BANK
By: /s/ TY ANDERSON
------------------------------
Ty Anderson
Director
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By: /s/ JEFFREY W. MAILLET
------------------------------
Jeffrey W. Maillet
Senior Vice President & Director
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/ GIL MARCHAND
------------------------------
Gil Marchand
Vice President
12
<PAGE>
ML CLO XII PILGRIM AMERICA (CAYMAN) LTD.
By: /s/ HOWARD TIFFEN
------------------------------
Howard Tiffen
Senior Vice President
ML CBO IV (CAYMAN) LTD.
By: /s/ MARK K. OKADA
------------------------------
Mark K. Okada CFA
Executive Vice President
PAMCO CAYMAN LTD.
By: /s/ MARK K. OKADA
------------------------------
Mark K. Okada CFA
Executive Vice President
PRIME INCOME TRUST
By: /s/ PETER GEWIRTZ
------------------------------
Peter Gewirtz
Authorized Signatory
SENIOR DEBT PORTFOLIO
By: /s/ PAYSON F. SWAFFIELD
------------------------------
Payson F. Swaffield
Vice President
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> JAN-02-1999 JAN-02-1999
<PERIOD-START> JAN-04-1998 APR-05-1998
<PERIOD-END> JUL-04-1998 JUL-04-1998
<CASH> 3,306 0
<SECURITIES> 0 0
<RECEIVABLES> 34,471 0
<ALLOWANCES> 2,346 0
<INVENTORY> 115,763 0
<CURRENT-ASSETS> 166,314 0
<PP&E> 69,034 0
<DEPRECIATION> 15,780 0
<TOTAL-ASSETS> 357,127 0
<CURRENT-LIABILITIES> 50,469 0
<BONDS> 186,350 0
18,582 0
0 0
<COMMON> 0 0
<OTHER-SE> 52,442 0
<TOTAL-LIABILITY-AND-EQUITY> 357,127 0
<SALES> 172,928 87,784
<TOTAL-REVENUES> 172,928 87,784
<CGS> 110,861 56,352
<TOTAL-COSTS> 110,861 56,352
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,122 4,653
<INCOME-PRETAX> (4,794) (1,585)
<INCOME-TAX> (1,966) (522)
<INCOME-CONTINUING> (2,828) (1,063)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,828) (1,063)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
