SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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: 001-11007
TOASTMASTER INC.
(Exact name of registrant as specified in its charter)
MISSOURI 43-1204566
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
l801 N. Stadium Blvd.
Columbia, Missouri 65202
(Address of principal executive offices)
Telephone number (573)445-8666
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 October 31, 1996, there were 7,538,250 shares of the
Registrant's Common Stock outstanding.
Page 1 of 19 pages
Index to Exhibits on page 12
<PAGE>
TOASTMASTER INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Operations -
Quarters Ended September 30, 1996 and 1995 and 3
Nine Months Ended September 30, 1996 and 1995
Consolidated Balance Sheets -
September 30, 1996 and 1995 and December 31, 1995 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 7-9
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 11
INDEX TO EXHIBITS 12
EXHIBIT 13-19
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED SEPT 30 NINE MONTHS ENDED SEPT 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $ 49,321 $ 56,356 $ 108,694 $ 123,711
Cost of Sales 39,748 46,597 91,479 104,488
Gross Profit 9,573 9,759 17,215 19,223
Selling, General and
Admin. Expenses 6,959 6,959 17,342 16,853
Operating Income(Loss) 2,614 2,800 (127) 2,370
Other Expense - Interest 1,133 1,250 3,039 3,319
Income(Loss) Before Income
Taxes 1,481 1,550 (3,166) (949)
Income Tax Expense
(Benefit) 531 588 (1,150) (211)
Net Income(Loss) $ 950 $ 962 $ (2,016) $ (738)
Net Income(Loss) Per
Common and Common
Equivalent Shares
Outstanding $ 0.13 $ 0.13 $ (0.27) $ (0.10)
Weighted Average Common and Common
Equivalent Shares
Outstanding 7,538 7,553 7,538 7,564
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
<TABLE>
<CAPTION>
TOASTMASTER INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
9/30/96 12/31/95 9/30/95
<S> <C> <C> <C>
ASSETS
Cash $ 93 $ 42 $ 19
Accounts Receivable, less allowances 47,169 64,504 59,084
Inventories
Finished Goods 37,816 30,692 38,761
Raw Matl.,WIP 11,841 10,286 12,586
LIFO/Inventory Valuation Reserve (1,884) (1,973) (1,878)
Total Inventory 47,773 39,005 49,469
Deferred Income Tax 824 824 409
Prepaid Expenses 2,319 588 1,155
Total Current Assets 98,178 104,963 110,136
Property, Plant and Equipment
Land 921 921 896
Buildings 9,074 9,048 9,048
Less:Accumulated Depreciation (4,783) (4,419) (4,298)
Machinery & Equipment 42,689 39,887 39,344
Less:Accumulated Depreciation (28,215) (25,661) (24,834)
Net Property, Plant & Equipment 19,686 19,776 20,156
Goodwill, net of accumulated amortization 3,406 3,491 3,519
Other Assets 1,730 1,765 1,859
$ 123,000 $ 129,995 $ 135,670
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current Installments of
Long-Term Debt $ 2,174 $ 2,176 $ 2,160
Accounts Payable 10,452 5,943 17,089
Accrued Expenses 13,714 15,887 14,606
Income Taxes Payable 0 1,341 0
Total Current Liabilities 26,340 25,347 33,855
Long Term Debt, Excluding Current
Installments 52,679 58,190 57,301
Deferred Income Taxes 1,036 1,036 1,010
Total Liabilities 80,055 84,573 92,166
Stockholders' Equity:
Common Stock, $.10 par value 760 760 760
Additional Paid-in Capital 25,340 25,340 25,340
Minimum Pension Liability Adjustment (267) (267) (281)
Retained Earnings 17,416 19,886 17,965
Equity Adj from Foreign
Currency Translation (16) (9) (54)
43,233 45,710 43,730
Treasury Stock (288) (288) (226)
Total Stockholders' Equity 42,945 45,422 43,504
$ 123,00 $ 129,995 $ 135,670
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED SEPT 30
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,016) $ (738)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 3,337 3,41
Gain on sale of fixed assets 0 (227)
Accounts receivable 17,335 5,362
Inventories (8,768) (12,470)
Prepaid expenses & other current
assets (568) (537)
Other assets (101) (34)
Accounts payable 4,509 8,650
Accrued liabilities (2,173) (562)
Income taxes payable (2,504) (864)
Deferred income taxes 0 0
11,067 2,731
Net cash flows provided by
operating activities 9,051 1,993
Cash flows provided (used) by
investing activities:
Additions to property, plant
and equipment (3,025) (2,552)
Proceeds from sale of property
and plant 0 919
Net cash flows used by investing
activities (3,025) (1,633)
Cash flows from financing activities:
Proceeds from revolving credit
agreement 118,808 130,168
Repayments of revolving credit
agreement (126,808) (128,297)
Proceeds from term loan 4,119 28
Dividends paid (454) (455)
Repayment of long-term debt (1,633) (1,603)
Purchase of treasury stock 0 (208)
Net cash flows used by
financing activities (5,968) (367)
Foreign currency translation adjustment (7) 1
Net increase(decrease) in cash 51 (6)
Cash at beginning of period 42 25
Cash at end of period $ 93 $ 19
Cash paid during the period for:
Interest $ 3,033 $ 3,317
Income taxes $ 1,401 $ 1,124
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
TOASTMASTER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of
the financial position and operating results for the interim
periods. These financial statements should be read in
conjunction with the consolidated financial statements for the
year ended December 31, 1995 and notes thereto contained in the
Company's Annual Report to Shareholders incorporated by
reference in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995. The results of operations for the
interim periods shown are not necessarily indicative of the
results for the entire fiscal year ending December 31, 1996.
2. The Loan and Security Agreement between the Company and Fleet
Capital Corporation was amended as of July 12, 1996. The
amendment increased the term loan from a balance $5.9 million
to $10 million, with monthly payments continuing through
November 2001. The amendment also extended the expiration date
of the loan agreement to November 2001. The agreement was
further amended in October 1996, increasing all interest rates
by .25% and adding a minimum availability provision of $5
million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE
STATEMENTS MADE IN THIS REPORT ON FORM 10-Q ARE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS, FINANCIAL CONDITION OR BUSINESS COULD DIFFER
MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL CONDITION OR
BUSINESS, OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR
BUSINESS CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS
THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED UNDER THE CAPTION "FACTORS THAT MAY
AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR
BUSINESS," IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE
PERIOD ENDED JUNE 30, 1996, AS WELL AS THOSE DISCUSSED ELSEWHERE IN
THE COMPANY'S REPORTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.
The following discussion should be read in conjunction with the
attached financial statements and notes thereto, and with the
Company's audited consolidated financial statements and notes thereto
for the fiscal year ended December 31, 1995.
The Company believes that sales of many of its products are seasonal,
with significant quantities of its products given as gifts, and
therefore sell in larger volumes during the Christmas shopping
season. Net sales reflect a reduction from revenues of amounts
related to sales discount programs, including absorption of out-bound
freight and certain allowances for advertising, the latter of which
are accounted for by certain competitors as "advertising" expense.
The Company views these amounts as price reductions, thereby reducing
net sales and lowering gross profits as well as selling, general and
administrative expense. As used in this Quarterly Report on Form
10-Q, the term "revenues" are recorded net of product returns and are
before deduction of items referred to above that are used in
computing net sales. During the periods discussed below, net sales
averaged approximately 95% of revenues.
RESULTS OF OPERATIONS
Net sales were $49.3 million for the quarter ended September 30, 1996,
a decrease of $7.1 million or 12.5% from the $56.4 million for the
quarter ended September 30, 1995. Net sales were $108.7 million for
the nine months ended September 30, 1996, a decrease of $15.0 million
or 12.1% from $123.7 million for the nine months ended September 30,
1995.
Revenues in the quarter ended September 30, 1996 for kitchen countertop
appliances were $39.7 million, a decrease of 15.3% from the quarter
ended September 30, 1995. Kitchen countertop <PAGE> appliance revenues for
the nine months ended September 30, 1996 were $85.8 million, a decrease
of 16% from the comparable period in 1995. Due to increasing
competition for shelf placement, as well as a maturing product
category, shipments of the Bread BoxTM automatic breadmaker decreased
$7.3 million and $13.0 million for the quarter and nine months ended
September 30, 1996 from the comparable periods in 1995. Revenues from
breadmakers are expected to decline during the fourth quarter of 1996
when compared to the fourth quarter of 1995.
Environmental products revenues for the quarter ended September 30,
1996 were $1.9 million, a 21% decrease from $2.4 million for the third
quarter of 1995. Revenues for environmental products for the nine
months ended September 30, 1996 were $3.6 million, a decrease of 31%
from $5.2 million for the nine months ended September 30, 1995, due
primarily to a reduction in fan sales. The Company is continuing to
deemphasize the environmental products segment because of low margins
and a lack of shelf space at retail. The Company believes this segment
will continue to become less important to its business.
Time products revenues were relatively unchanged at $10.1 million for
the quarter ended September 30, 1996, compared to $10.3 million for the
quarter ended September 30, 1995. Revenues for the nine months ended
September 30, 1996 were $25.2 million, up 7% from $23.5 million for the
comparable period in 1995. The increase is due to gains in shelf
placement with two major customers.
Sales to the five largest customers for the third quarter of 1996
represented approximately 42.8% of revenues. Sales to the five largest
customers in the third quarter of 1995 were 47.4% of revenues. For the
nine months ended September 30, 1996, sales to the five largest
customers were approximately 42.7% of revenues compared to
approximately 44.8% for the same period in 1995.
Gross profit was $9.6 million (19.4% of net sales) for the quarter
ended September 30, 1996 and $9.8 million (17.3% of net sales) for the
quarter ended September 30, 1995. For the nine months ended September
30, 1996 gross profit was $17.2 million (15.8% of net sales) compared
to $19.2 million (15.5% of net sales) for the same period in 1995. The
increase in gross profit in the third quarter, as a percentage of net
sales, was primarily attributable to lower raw material costs.
Selling, general and administrative expenses for the quarter ended
September 30, 1996 were unchanged at $7.0 million compared to the same
period of 1995. The Company experienced a $600 thousand bad debt
expense during the third quarter of 1996 due to the bankruptcy filing
of Best Products. For the nine months ended September 30, expenses
were $17.3 million in 1996 and $16.9 million in 1995. The increase in
expenses for the nine months is due in part to a gain realized in 1995
from the sale of unused land, which was netted against administrative
expenses, that was not duplicated in 1996. In addition, the Company
increased spending in the engineering department, including leased
computers with modeling software, as well as additional personnel.
The Company has begun a study, to be completed during the fourth
quarter of 1996, of actions needed to restructure certain operations of
the Company with a view to improving future financial <PAGE> performance. This
broad ranging review is focusing on a variety of factors driving the
Company's business, includung those affecting gross profit margins,
product innovation, growth potential and financing costs. The Company
believes that a fundamental reassessment of this sort is warranted by
continuing evolution in the retail environment and buying patterns, the
maturation of certain products and a desire to improve its competitive
posture as well as its profitability. These strategic initiatives may
include the disposition of certain products or segments of the
Company's business as well as the acquisition of complementary products
or businesses.
Certain members of the Company's management include the Company's
largest shareholders and they share the interests of the other
shareholders in moving this process forward as expeditiously as is
prudent. It is currently anticipated that this restructuring analysis
and accompanying recommendations will be presented to the Company's
Board of Directors by the end of the year. Accordingly, no further
details will be announced until the Board has had an opportunity to
consider this information and determine a future course of action.
Interest expense decreased to $1.1 million for the quarter ended
September 30, 1996 from $1.3 million for the same period last year.
For the nine months ended September 30, interest expense was $3.0
million in 1996 compared to $3.3 million in 1995. The decrease in
interest expense was due to lower rates and lower borrowing levels
caused by lower average accounts receivable.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require substantial working capital. The
Company has used available cash flow from operations and borrowings
under its revolving credit agreement to finance additional working
capital, to retire long-term debt and to fund capital expenditures.
Net cash flows provided by operating activities for the nine months
ended September 30, 1996 were $9.1 million. Since December 31, 1995,
accounts receivable decreased $17.3 million and inventories increased
$8.8 million. The decrease in accounts receivable, as well as a
portion of the increase in inventory, was attributable to normal
seasonal patterns, as well as the reduction in sales, primarily on
extended sales terms.
Net cash flows used for additions to property, plant and equipment
were $3.0 million and were primarily used for tooling to produce new
products, as well as to purchase new equipment. In addition, the
Company is constructing a 48,000 square foot warehouse addition to
its North Carolina facility. This addition is expected to be
completed late in the fourth quarter of 1996. Net cash flows used by
financing activities were $6.0 million for the nine months ended
September 30, 1996, and resulted primarily from repayments under the
revolving credit agreement.
Amounts outstanding under the revolving credit agreement at September
30, 1996 were $45.2 million and other long-term debt was $9.6
million, including the current portion of $2.2 million. The terms of
and collateral for the revolving credit agreement and long-term debt
are described in Note 3 of the Notes to the Annual Financial
Statements contained in the Company's 1995 Annual <PAGE> Report to
shareholders, which note is incorporated herein by reference. The
loan agreement described in Note 3, referred to above, was amended in
July 1996, increasing the balance of the term loan from $5.9 million
to $10 million and extending the expiration of the term loan from
September 1997 to November 2001. The expiration of the revolving
agreement was extended from November 1999 to November 2001. An
additional amendment to the loan agreement was made in October 1996,
increasing all interest rates under the agreement by .25% and adding
a minimum availability provision of $5 million.
At September 30, 1996, the Company could borrow an additional $11.7
million under the terms of the amended revolving credit agreement.
Principal payments on the long-term debt are expected to be funded
from internally generated cash flow and future borrowings.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORMS 8K
(a) Exhibits
Exhibit No.
Description
4.3.11 Eleventh Amendment to Loan and Security Agreement, dated as
of October 22, 1996, between the Registrant and Fleet
Capital Corporation (filed as Exhibit 10.1.11)
10.1.11 Eleventh Amendment to Loan and Security Agreement, dated as
of October 22, 1996, between the Registrant and Fleet
Capital Corporation.
No reports on Form 8-K were filed during the quarter ended September
30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: TOASTMASTER INC.
November 12, 1996 BY: /s/John E. Thompson
John E. Thompson
Executive Vice President
Chief Financial Officer
Signing on behalf of the registrant and
as principal financial officer
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description Page
4.3.11 Eleventh Amendment to Loan and Security 13-19
Agreement,dated as of October 22, 1996,
between the Registrant and Fleet Capital
Corporation (filed as Exhibit 10.1.11)
10.1.11 Eleventh Amendment to Loan and Security 13-19
Agreement, dated as of October 22, 1996,
between the Registrant and Fleet Capital
Corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 93
<SECURITIES> 0
<RECEIVABLES> 49,892
<ALLOWANCES> 2,723
<INVENTORY> 47,773
<CURRENT-ASSETS> 98,178
<PP&E> 19,686
<DEPRECIATION> 32,998
<TOTAL-ASSETS> 123,000
<CURRENT-LIABILITIES> 26,340
<BONDS> 0
0
0
<COMMON> 760
<OTHER-SE> 42,185
<TOTAL-LIABILITY-AND-EQUITY> 123,000
<SALES> 108,694
<TOTAL-REVENUES> 108,694
<CGS> 91,479
<TOTAL-COSTS> 91,479
<OTHER-EXPENSES> 17,342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,039
<INCOME-PRETAX> (3,166)
<INCOME-TAX> (1,150)
<INCOME-CONTINUING> (2,016)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,166)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
WAIVER AND
ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS WAIVER AND ELEVENTH AMENDMENT TO LOAN AND SECURITY
AGREEMENT (this "Amendment") is made as of October 22, 1996, by
and between TOASTMASTER INC., a Missouri corporation ("Borrower")
and FLEET CAPITAL CORPORATION, a Rhode Island corporation, as
successor by merger to Fleet Capital Corporation, a Connecticut
corporation ("Lender").
PRELIMINARY STATEMENTS:
A. Borrower and Lender are parties to that certain Loan
and Security Agreement dated as of November 19, 1993, (as amended
from time to time, the "Loan Agreement"). Capitalized terms used
but not defined herein shall have the meanings given them in the
Loan Agreement.
B. Borrower and Lender now desire to amend certain
provisions of the Loan Agreement on and subject to the terms
hereof.
TERMS OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
mutual promises and agreements hereinafter set forth, the parties
hereto agree as follows:
1. Waiver. The Lender hereby waives the provisions of
Section 9.3(C) of the Loan Agreement [RELATING TO QUARTERLY
PRE-TAX EARNINGS] for the period from January 1, 1996 through
September 30, 1996, but only to the extent the Borrower achieved
Adjusted Net Earnings from Operations plus Federal, State and
local income taxes deducted in the computation thereof of not
less than ($3,166,000) (loss) for such period, and the Loan
Agreement requires such figure to be not less than ($2,575,000)
(loss) for such period.
2. Amendments to Loan Agreement. The Loan Agreement is
hereby amended as follows:
(a) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby amended by replacing the definitions of Base
Rate-Term Loan, Fixed Rate, LIBO Rate, and LIBO Rate-Term Loan
with the following:
Base Rate-Term Loan - A fluctuating interest rate per
annum equal on each day to the sum of (i) the Base Rate, plus
(ii) one percent (1.0%) per annum.
<PAGE>
"Fixed Rate"- With respect to a Specified Amount of a
Revolving Credit Loan during any Interest Period, a fixed
interest rate per annum equal to the sum of:
(i) the yield to maturity of U.S. Treasury notes maturing
on, or as nearly as possible prior to, the last day of such
Interest Period, such yield to be determined by the Lender as of
the Business Day immediately preceding the first day of such
Interest Period, based on the yields derived from the asked quote
published in the "Treasury Bonds, Notes & Bills" column in the
Wall Street Journal as of such date; plus
(ii) Lender's cost (expressed as a percentage per annum) to
acquire such U.S. Treasury notes (whether or not Lender actually
acquires any such notes in connection with making a Fixed Rate
Loan in the Specified Amount) in an amount not to exceed fifteen
one-hundredths of one percent (0.15%); plus
(iii) two and thirty-five one hundredths of one percent
(2.35%).
If The Wall Street Journal shall cease to publish yields on
U.S. Treasury notes, then Lender may determine such yields from
another financial newspaper or electronic market information
service (such as Telerate) of recognized standing. The
determination of the Fixed Rate by Lender shall, in the absence
of manifest error, be conclusive.
"LIBO Rate"- With respect to the Revolving Credit Loans and
Equipment Loans (other than Fixed Rate Loans), means a
fluctuating interest rate per annum equal on each day to the sum
of:
(i) the rate of interest per annum (adjusted to reflect
reserve, deposit insurance or other similar requirements to which
the Bank may be subject) at which deposits in United States
dollars are offered by the principal office of the Bank, in
London, England, to prime banks in the London interbank market at
or about 11:00 a.m. (London time) on such day (or if such day is
not a Business Day, on the next preceding Business day) for a
thirty (30) day period in an amount approximately equal to the
principal amount of such Revolving Credit Loans or Equipment
Loans, or both, plus
(ii) two and one-quarter percent (2.25%) per annum.
Such rate will be reduced by one-quarter of one percent
(0.25%) per annum for each fiscal year of Borrower in which it
achieves EBIT of $14,000,000 or more, provided, however, that
such rate shall never be less than the rate computed in clause
(i) above plus one and one-quarter percent (1.25%) per annum.
Such reduction will be determined on the basis of the Borrower's
<PAGE> audited financial statements for the relevant fiscal year
delivered to Lender in accordance with Section 9.1(J)(i), and
shall take effect from and after the date of delivery of such
financial statements showing achievement of such EBIT target.
As used in this Agreement, the LIBO Rate is a fluctuating
interest rate determined daily by Lender and is not fixed for any
period. The LIBO Rate shall be increased or decreased, as the
case may be, by an amount equal to any increase or decrease in
the rate computed in accordance with clause (i) above, with such
adjustments to be effective as of the opening of business on the
day that any such change in such rate becomes effective. The
LIBO Rate in effect on the date hereof shall be the LIBO Rate
effective as of the opening of business on the date hereof, but
if this Agreement is executed on a day that is not a Business
Day, the LIBO Rate in effect on the date hereof shall be the LIBO
Rate effective as of the opening of business on the last Business
Day immediately preceding the date hereof. If the Bank ceases to
offer deposits in U.S. Dollars in the London interbank market,
then the Lender will determine the LIBO Rate based on the 30-day
LIBO rates quoted by Reuters or in The Wall Street Journal or
other financial newspaper or electronic market information
service of recognized standing.
LIBO Rate-Term Loan - A fluctuating interest rate per annul
equal to the sum of:
(i) the rate of interest per annum (adjusted to reflect
reserve, deposit insurance or other similar requirements to which
the Bank may be subject) at which deposits in United States
dollars are offered to Lender by prime banks in the London
interbank market at or about 11:00 a.m. (London time) on such day
(or if such day is not a Business Day, on the next preceding
Business Day) for a thirty (30), sixty (60), ninety (90) or one
hundred-eighty (180) day period, as applicable, in an amount
approximately equal to the principal amount of the LIBO Rate Term
Loan Portion, plus
(ii) two and one-half of one percent (2.50%) per annum.
(b) Section 3.1(A) of the Loan Agreement [RELATING TO
INTEREST AND CHARGES ON THE TERM LOAN] is hereby deleted in its
entirety and replaced with the following new Section 3.1(A):
(A) Term Loan. Borrower shall pay interest on
the outstanding principal amount of the Term Loan Note as
follows:
(i) To and including September 13, 1997,
Borrower shall pay interest on $5,880,948 of the outstanding
principal amount of the Term Loan Note, less principal payments
received under the Term Loan Note during such period, at a fixed
<PAGE> interest rate per annum equal to nine and forty-seven
one-hundredths of one percent (9.47%);
(ii) To and including September 13, 1997,
Borrower shall pay interest on the outstanding principal amount
of the Term Loan Note which is not subject to the fixed rate
described in subpart (i) above at either the Base Rate-Term Loan
or the LIBO Rate-Term Loan, as provided in Section 3.1(I) hereof;
and
(iii) From and after September 14, 1997,
Borrower shall pay interest on the entire outstanding principal
amount of the Term Loan Note at either the Base Rate-Term Loan or
the LIBO Rate-Term Loan, as provided in Section 3.1(I) hereof.
(c) Section 3.1(B) of the Loan Agreement [RELATING TO BASE
RATE LOANS] is hereby amended by deleting the first two
paragraphs thereof and replacing them with the following:
(B) Base Rate Loans. Except to the extent that
Borrower shall elect to pay interest on the Revolving Credit
Loans or the Equipment Loans, or both, pursuant to subsection (C)
or (E) of this Section 3.1, Borrower shall pay interest on the
principal amount of the Revolving Credit Note and the Equipment
Notes outstanding at the end of each day at a fluctuating rate
per annum equal to three-fourths of one percent (.75%) above the
Base Rate in effect on such day.
The rate described in the preceding paragraph will be
reduced by one-eighth of one percent (0.125%) per annum for each
fiscal year of Borrower in which it achieves EBIT of $14,000,000
or more, provided, however, that such rate shall never be less
than one-fourth of one percent (.25%) above the Base Rate. Such
reduction will be determined on the basis of the Borrower's
audited financial statements for the relevant fiscal year
delivered to Lender in accordance with Section 9.1(J)(i), and
shall take effect from and after the date of delivery of such
financial statements showing achievement of such EBIT target.
(d) Section 9.3(D) of the Loan Agreement [RELATING TO
ANNUAL PROFITABILITY] is hereby amended to provide that Borrower
shall achieve Adjusted Net Earnings from Operations of not less
than $175,000 for the fiscal year ending December 31, 1996. The
current provisions contained in Section 9.3(D), which require
Borrower to achieve Adjusted Net Earnings from Operations of not
less than $2,900,000 during each fiscal year, shall continue to
apply to all other periods.
(e) Section 9.3(E) of the Loan Agreement [RELATING TO DEBT
SERVICE COVERAGE] is hereby amended to provide that Borrower
shall maintain, as of December 31, 1996, for the immediately
preceding twelve months, a ratio of Net Cash Flow to Debt Service
<PAGE> of not less than 0.10 to 1.0. The current provisions contained
in Section 9.3(E), which require Borrower to maintain, as of
December 31st of each year for the immediately preceding twelve
months, a ratio of Net Cash Flow to Debt Service of not less than
1.3 to 1.0, shall continue to apply to all other periods.
(f) A new section 9.2(BB) is added to the Loan Agreement
[relating to Minimum Availability] as follows:
(BB) Minimum Availability. At any time permit the
excess of the Borrowing Base over the total amount of Revolving
Credit Loans outstanding hereunder to be less than Five Million
Dollars ($5,000,000).
2. No Claims; Liens Unimpaired. Borrower acknowledges
that, as of the date hereof, it has no actual knowledge of any
existing claims, defenses (personal or otherwise) or rights of
setoff or recoupment whatsoever with respect to the Loan
Agreement or any of the other Loan Documents. Borrower agrees
that this Amendment in no way acts as a release or relinquishment
of any Liens in favor of the Lender securing payment of any of
the Obligations.
3. No Other Amendments or Waivers. Except as expressly
set forth herein, there are no other agreements or
understandings, written or oral, between Borrower and Lender
relating to the Loan Agreement and/or the other Loan Documents
that are not fully and completely set forth or described herein.
Except to the extent specifically amended hereby, all terms and
provisions of the Loan Agreement and the other Loan Documents
shall remain in full force and effect in accordance with their
respective terms, and no provisions thereof have been waived,
except as specifically set forth herein.
4. Further Assurances. Borrower agrees to execute such
other and further documents and instruments as Lender may request
to implement the provisions of this Amendment.
5. Amendments. No provision of this Amendment may be
amended, modified or waived, except by an instrument in writing
signed by the Lender.
6. Counterparts; Faxed Signatures. This Amendment may be
executed in one or more counterparts and by different parties on
different counterparts, each of which shall be deemed an original
instrument and all of which taken together shall constitute one
and the same agreement. A signature of a party delivered by
telecopy or other electronic communication shall constitute an
original signature of such party.
<PAGE>
7. Incorporation by Reference; Statement Required by
Section 432.045, Mo. Rev. Stat.
(a) Each of the Notes and the other Loan Documents is
incorporated herein in full by this reference, provided, however,
that if there is any inconsistency between this Amendment and
such other Loan Documents (as amended by this Amendment), this
Amendment shall govern.
(b) ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND
CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO
PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING
OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS
ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY
LATER AGREE IN WRITING TO MODIFY IT.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed on the date specified at the
beginning hereof.
TOASTMASTER INC.
By:_____________________________
Name:
Title:
FLEET CAPITAL CORPORATION
By:_____________________________
Name:
Title:
