<PAGE> 1
UNITED STATES
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 quarter period ended MARCH 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT
OF 1934
For the transition period from to
----- ------
Commission file number 0-16482
ROADMASTER INDUSTRIES, INC.
---------------------------
(Exact name of Registrant as specified in its charter)
Delaware 84-1065239
---------------------------------- -----------------------------------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
250 Spring Street NW, Atlanta, Georgia 30303
--------------------------------------------
(Address of principal executive offices, including zip code)
(404)586-9000
--------------------------------------------
(Registrants telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, net of treasury stock, as of the latest practicable date.
Class Outstanding at April 30, 1996
--------------------------- -----------------------------
Common Stock $.01 par value 49,801,929 shares
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROADMASTER INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 3,567 $ 8,417
Accounts and notes receivable, net 105,750 188,573
Inventories 151,693 166,743
Prepaid expenses and other assets 10,227 6,441
Prepaid and refundable income taxes 25,703 30,180
Cash in escrow 13,686 --
Deferred income taxes 7,581 6,232
-------------- ---------------
Total current assets 318,207 406,586
Property, plant and equipment: 101,859 101,773
Less-Accumulated depreciation and amortization 27,396 25,300
Net property, plant and equipment 74,463 76,473
Investments in equity securities, at market 691 1,809
Deferred financing and acquisition charges 23,850 23,847
Goodwill and other intangible assets, net 22,946 63,933
Long-term trade receivables 754 1,639
Other assets 2,136 2,820
-------------- ---------------
Total assets $ 443,047 $ 577,107
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving lines of credit $ 39,018 $ 85,402
Current portion of long-term debt 2,656 1,519
Accounts payable 96,170 97,369
Accrued expenses 35,174 48,212
Total current liabilities 173,018 232,502
Deferred income taxes 2,961 3,145
Revolving lines of credit 54,260 132,200
Long-term debt 147,068 147,388
Other long-term liabilities 5,903 6,348
-------------- ---------------
Total long-term liabilities 210,192 289,081
Stockholders' equity:
Preferred stock -- --
Common stock 540 540
Additional paid-in capital 103,574 103,574
Retained (loss) earnings (30,970) (35,412)
Deferred compensation (2,682) (2,896)
Net unrealized (loss) gain on equity securities (62) 281
-------------- ---------------
70,400 66,087
Treasury stock, at cost (10,563) (10,563)
-------------- ---------------
Total stockholders' equity 59,837 55,524
-------------- ---------------
Total liabilities and stockholders' equity $ 443,047 $ 577,107
============== ===============
</TABLE>
See accompanying notes.
2
<PAGE> 3
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 30, 1996 APRIL 1, 1995
-------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
Net sales $ 129,414 $ 175,546
Cost of sales 113,192 151,589
----------- ----------
Gross profit 16,222 23,957
Selling, general and
administrative expenses 16,417 17,318
Other income/expense, net:
Interest expense 7,963 7,918
Gain on sale of subsidiary (20,151) --
Other, net 700 1,113
---------- ----------
(11,488) 9,031
----------- ----------
Earnings (loss) before income tax expense 11,293 (2,392)
Income tax expense (benefit) 6,663 (915)
----------- ----------
Net earnings (loss) $ 4,630 $ (1,477)
=========== ==========
Earnings (loss) per common share:
Primary $ .09 $ (0.03)
=========== ==========
Fully diluted $ .09 $ (0.03)
=========== ==========
Weighted average common shares
outstanding and common stock
equivalents:
Primary 50,139 48,649
=========== ==========
Fully diluted 63,075 48,649
=========== ==========
</TABLE>
See accompanying notes.
3
<PAGE> 4
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 30, APRIL 1,
1996 1995
------------ -----------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 4,630 $ (1,477)
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 4,196 3,106
Amortization of deferred compensation 215 190
Gain on sale of marketable securities (403) --
Loss on sale of property, plant and equipment 182 --
Gain on sale of subsidiary (20,151) --
Change in assets and liabilities:
Accounts receivable 60,737 16,529
Inventories (16,272) (18,485)
Prepaid expenses and other assets (3,743) (7,705)
Cash in escrow (13,686) --
Other assets (430) (2,509)
Accounts payable (12,869) (5,067)
Accrued expenses (6,134) (424)
Long-term liabilities (159) --
Income taxes 6,435 (966)
Deferred income taxes (158) (14)
---------- ----------
Net cash provided for (used in) operating activities 2,390 (16,822)
---------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment (2,072) (3,203)
Acquisitions (364) --
Proceeds from sale of marketable securities 1,146 --
Proceeds from sale of property, plant and equipment 79 --
Proceeds from sale of subsidiary 120,000 --
---------- -----------
Net cash provided for (used in) investing activities 118,789 (3,203)
---------- -----------
Cash flows from financing activities:
Net change in revolving lines of credit (125,324) 17,097
Principal payments of long term debt (352) (738)
Debt refinancing cost incurred (93) (59)
Cumulative translation adjustments (260) (77)
Proceeds from exercise of stock warrants -- 13
---------- -----------
Net cash (used in ) provided by financing activities (126,029) 16,236
---------- -----------
Net decrease in cash and cash equivalents (4,850) (3,789)
Cash and cash equivalents, beginning of period 8,417 6,378
---------- -----------
Cash and cash equivalents, end of period $ 3,567 $ 2,589
========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission regarding interim financial reporting. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements and should be
read in conjunction with the most recent annual audited financial statements of
the Company. In the opinion of management, these unaudited consolidated
financial statements include all adjustments necessary for a fair presentation
of its financial position as of March 30, 1996, and the results of operations
and its cash flows for the three months then ended. Such adjustments were of a
normal recurring nature.
The Company's business is seasonal in nature and subject to general
economic conditions and other factors. Accordingly, the results of operations
for the three months ended March 30, 1996 and April 1, 1995 are not necessarily
indicative of the results which may be expected for the full year.
2. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three months ended
March 30, April 1,
1996 1995
---------- ----------
<S> <C> <C>
Supplemental disclosures of cash flow information:
(in thousands)
Cash paid for:
Interest $ 10,630 $ 11,788
========== ===========
Income taxes $ 209 $ 21
========== ===========
Supplemental schedule of non-cash investing
and financing activities:
Exchange of common stock for interest of MZH $ -- $ 1,500
</TABLE>
3. INVENTORIES
At March 30, 1996 and December 31, 1995, inventories consisted of:
<TABLE>
<CAPTION>
(in thousands) March 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Raw materials $ 56,884 $ 58,960
Work in process 9,823 9,570
Finished goods 84,986 98,213
------------ ------------
Total inventory $ 151,693 $ 166,743
============ ============
</TABLE>
5
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ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. FINANCIAL REPORTING PERIOD
For comparative purposes the quarter ending March 30, 1996 is consistent
with the same period ending April 1, 1995. The Company prepares its financial
statements on thirteen (13) week quarters comprised of two four-week periods
and one five-week period.
5. DISPOSITIONS
On March 8, 1996, the Company completed the sale of the assets of its
Nelson/Weather-Rite, Inc. camping subsidiary including MZH, Inc., to Brunswick
Corporation for cash consideration of $120 million. The sale included the
purchase of all the assets and the assumption of accounts payable and accrued
liabilities. The final purchase price is subject to ordinary post closing
adjustments based on closing working capital levels. The Company used the net
proceeds to reduce its outstanding revolving credit facility by approximately
$106 million. The net pretax gain realized from the sale was $20.2 million.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales ("sales") decreased $46.1 million or 26%, in the first quarter
of 1996 compared to the first quarter of 1995. This decrease was primarily
attributable to a soft fitness retail environment and to a lessor extent, the
sale of the Company's Nelson/Weather-Rite, Inc. ("Nelson/Weather-Rite")
subsidiary on March 8, 1996. However, the Company's bicycle and toy
divisions' sales remained strong. Bicycle sales were up 8% from the first
quarter of 1995 representing continued market share gains in this segment.
Gross profit decreased $7.7 million or 32%, in the first quarter 1996
compared to the same period of 1995 primarily resulting from lower sales
volume. Gross profit, expressed as a percent of sales, was 12.5% in the first
quarter of 1996 versus 13.6% in the first quarter of 1995. Gross profit
margins for the Company's bicycle and toy divisions in the first quarter of
1996 were up significantly from the same prior year period. Such increases
were attributable to reductions in material costs, placement and sell through
of higher price point products and a turnaround in operating efficiency in the
Company's primary toy manufacturing facility. With respect to the fitness
business, gross profits in the first quarter of 1996 were lower than the same
period of 1995. Such decrease was primarily due to reduced sales volume and
underutilization of the Company's manufacturing facilities. The Company is
currently in the process of closing its Tyler, Texas facility and streamlining
and consolidating all fitness operations into its Opelika, Alabama facility.
While no assurances can be given, management believes the combination of the
actions underway will assist in reducing costs, optimize the utilization of the
Company's fitness manufacturing facility and return gross profit margins for
fitness products to historical levels.
Selling, general and administrative expenses decreased $0.9 million in the
first quarter of 1996 versus the same period in 1995. This decrease was due to
a reduction in volume related expenses, such as commission expenses, the sale
of its Nelson/Weather-Rite subsidiary and cost reductions implemented in the
second half of 1995 relating to administrative expenses and reductions in
personnel. Product warranty costs increased to 3.3% of sales in the first
quarter of 1996 versus 1.9% in 1995. Although no assurances can be given, the
Company anticipates warranty expenses, as a percentage of sales, will decline
throughout 1996 due to the successful sourcing of treadmill motors from
new suppliers and stringent quality assurance measures recently implemented.
Interest expense for the three months ended March 30, 1996 was $8.0
million versus 7.9 million in the comparable period of 1995. Expressed as a
percentage of sales, interest was 6.1% in the first three months of 1996 versus
4.5% in the first three months of 1995.
The Company recorded a pretax gain of $20.2 million in the first quarter
of 1996 resulting from the sale of its Nelson/Weather-Rite camping subsidiary
to Brunswick Corporation on March 8, 1996.
In the first quarter of 1996, the Company recorded tax expense of $6.7
million representing an effective rate of 59%. This compares to the 38%
effective rate recognized in the first quarter of 1995. The increase in the
effective tax rate is attributable to the Federal and State tax expense
recorded as part of the sale of Nelson/Weather-Rite at a total rate of 50%.
Tax benefits for losses from normal operations were recorded at 39%, generating
the overall 59% effective rate.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's working capital has been obtained primarily
from internally generated funds and revolving lines of credit from banks. On a
consolidated basis, during the first three months of 1996, without giving
affect to the sale of Nelson/Weather-Rite, the Company's operations provided
cash flow of approximately $2.4 million, primarily due to the reduction in
trade receivables which was partially offset by increased inventory and reduced
accounts payable. The Company's investing activities provided cash flow of
approximately $118.8 million, primarily due to proceeds received from the sale
of Nelson/Weather-Rite of $120 million. Cash of $2.1 million was used for
capital expenditures. The Company's financing activites used cash of
approximately $126 million, related primarily to the reduction of its
outstanding revolving credit facility paid down from the net proceeds from the
Nelson/Weather-Rite sale.
In September 1995, the Company amended and restated its existing bank
credit agreement (as amended, the "Bank Credit Agreement"). The Bank Credit
Agreement provides for a term loan facility and a revolving credit facility of
up to $300 million, subject to restrictions on borrowings pursuant to certain
covenants in the indenture, as amended, for the Company's $100 million 11.75%
Senior Subordinated Notes due 2002 (the "Notes"). The revolving credit
facility provides for borrowings of up to $275 million, reduced to $230 million
subsequent to the sale of Nelson/Weather-Rite, based on eligible trade
receivables and inventory. At December 31, 1995, the interest rate on the
revolving credit facility was 9.25%. The term of the Bank Credit Agreement is
through September 29, 1998, and is automatically renewed for successive one
year terms unless terminated by either the lenders or the Company.
The Bank Credit Agreement requires the maintenance of various financial
covenants including minimum net worth, fixed maturity coverages and minimum
working levels. In the first quarter of 1996, the Company was not in
compliance with several of its loan covenants calculated as of December 31,
1995. These events of non-compliance were waived as of December 31, 1995 by
the lenders under the Bank Credit Agreement pursuant to the further amendment
and restatement of the former credit facility in the first quarter of 1996.
At no time has the Company been in default with respect to the payment of
indebtedness under the Bank Credit Agreement before or subsequent to its
amendment and restatement. The Company expects to remain in compliance with
the covenants in its Bank Credit Agreement in 1996.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company has two long-term debt issues, the $51,745,000 Convertible
Subordinated Debentures due 2003 (the "Debentures") and the Notes. The
Debentures are redeemable at the option of the Company beginning September 15,
1996 at a price of 105.875% of the principal face amount. The redemption price
declines to par on or after December 15, 2000. The Notes may be converted at
any time prior to redemption to Common Stock at a conversion price of $4.00.
Before the Company's Debentures can be called for redemption, the Company's
Common Stock also must meet or exceed a minimum closing price of $5.0625 per
share for the thirty day period prior to such notice of redemption.
The Notes and Debentures are obligations of the Company and are, to a
large extent, dependent on the Company's operating subsidiaries for the payment
of interest. Such interest payments are permitted under the Bank Credit
Agreement with certain restrictions. The Company does not anticipate any
restrictions on its ability to make such interest payments pursuant to the
provisions of the Bank Credit Agreement.
At March 30, 1996, the Company, on a consolidated basis, had stockholders'
equity of $59.8 million versus $55.5 million at December 31, 1995. Management
believes that the Company's financing arrangements and anticipated cash flow
during 1996 are adequate to provide the funds necessary to support operations
and to permit the Company to meet its obligations.
9
<PAGE> 10
Part II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K.
a) Exhibits:
11 - Computation of Per Share Earnings
10.73 - Fifth Amendment to the Amended and Restated
Revolver dated as of March 28, 1996.
27 - Financial Data Schedule (for SEC use only)
b) Reports on Form 8-K.
On January 19, 1996, the Company filed a Current report on Form
8-K announcing that the Company had entered into a binding letter
of intent to sell its Nelson/Weather-Rite, Inc. subsidiary for
$120 million in cash.
10
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
ROADMASTER INDUSTRIES, INC.
Dated: May 14, 1996 By: /s/ Charles E. Sanders
-------------- -----------------------------
Charles E. Sanders
Vice President
Dated: May 14, 1996 By: /s/ Charles E. Sanders
-------------- -----------------------------
Charles E. Sanders
Principal Financial Officer
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------- ----------- ------
<S> <C> <C>
10.73 - Fifth Amendment to the Amended and
Restated Revolver dated as of March
28, 1996.
11 - Computation of Per Share Earnings,
Three Months Ended March 30, 1996
and April 1, 1995
27 - Financial Data Schedule
(for SEC use only) N/A
</TABLE>
12
<PAGE> 1
EXHIBIT 10.73
AMENDMENT NO. 5
TO
LOAN AND SECURITY AGREEMENT
Dated as of December 6, 1994
AMENDED AND RESTATED
as of September 29, 1995
THIS AMENDMENT NO. 5 dated as of March 28, 1996 (this
"Amendment") is entered into among ROADMASTER CORPORATION, a Delaware
corporation ("RMC"), ROADMASTER LEISURE INC., a corporation incorporated under
the laws of the province of Ontario, Canada ("RML"), WILLOW HOSIERY COMPANY,
INC., a New York corporation ("Willow"), HUTCH SPORTS USA INC., a Delaware
corporation ("Hutch"), and ROADMASTER RECEIVABLES CORPORATION, an Illinois
corporation ("RRC") (RMC, RML, Willow, Hutch and RRC being sometimes
hereinafter referred to collectively as the "Borrowers" and individually as a
"Borrower"), the financial institutions named on the signature pages of this
Amendment as "Lenders," and BANKAMERICA BUSINESS CREDIT, INC., a Delaware
corporation, as agent for the Lenders (in such capacity as agent, the "Agent").
Capitalized terms used herein but not defined herein shall have the meanings
provided in the Loan Agreement.
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of December 6, 1994, as
amended and restated as of September 29, 1995, as further amended as of October
31, 1995 pursuant to Amendment No. 1 thereto, as of January 15, 1996 pursuant
to Amendment No. 2 thereto, as of February 14, 1996 pursuant to Amendment No. 3
thereto, and as of March 8, 1996 pursuant to Amendment No. 4 thereto (the "Loan
Agreement"); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed
to amend the Loan Agreement on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and
the Agent hereby agree as follows:
Section 1. Amendment of the Loan Agreement. Subject to the
fulfillment of the conditions precedent set forth in Section 3 below, effective
as of December 31, 1995, the Loan Agreement is hereby amended as follows:
(a) The definition of "Adjusted Tangible Net Worth" contained
in Section 1.1 is amended and restated as follows:
-1-
<PAGE> 2
"Adjusted Tangible Net Worth" means, with respect to
a Borrower, at any date: (a) the book value (after deducting
related depreciation, obsolescence, amortization, valuation,
and other proper reserves as determined in accordance with
GAAP) at which the Adjusted Tangible Assets of such Borrower
would be shown on a balance sheet of such Borrower at such
date prepared in accordance with GAAP less (b) the amount of
Debt of such Borrower (excluding (1) in the case of RMC, the
then outstanding principal amounts of the Subordinated Debt
and the outstanding principal amount of Debt incurred under
the Subordinated Revolver, and (2) Debt incurred and
subordinated to the Obligations on a basis satisfactory in
form and substance to the Agent and the Lenders); provided
that Adjusted Tangible Net Worth shall be calculated, (A) with
respect to RMC and Hutch, without giving effect to the
Distributions, if any, by Hutch, and simultaneous capital
contributions by the Parent to RMC, permitted pursuant to
clause (2)(B) of the second sentence of Section 8.10, (B) with
respect to RMC, without giving effect to (i) the payments of
principal of the Debt outstanding under the Subordinated
Revolver to enable the Parent to redeem Senior Subordinated
Notes in accordance with subclause (D) of clause 2 of Section
8.15, or (ii) the Distributions to the Parent by RMC in the
respective amounts of $1,500,000 and $250,000, which
Distributions were permitted pursuant to Section 2 of
Amendment No. 5 to this Agreement, and (C) with respect to
each Borrower, without giving effect to the payment of closing
fees, legal expenses and associated costs incurred by such
Borrower in connection with the initial closing of the
transactions described in this Agreement or payments made to
employees pursuant to severance packages in effect on the date
of this Agreement.
(b) Paragraph (a) of the definition of "Individual Borrowing
Base" contained in Section 1.1 is amended and restated as follows:
(a) at any time with respect to RMC, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible
Accounts of RMC at such time plus (2) an amount equal to the
lesser of (A) $90,000,000, and (B) (i) sixty percent (60%) of
the value of Eligible Inventory of RMC at such time.
(c) The definition of "Triggering Date" contained in Section
1.1 of the Loan Agreement is amended and restated as follows:
-2-
<PAGE> 3
"Triggering Date" means a date designated by the
Agent following the occurrence of either (a) Availability
being less than $17,500,000, or (b) any Default or Event of
Default, and in either such case the Agent's election in its
discretion to designate a Triggering Date; provided, that the
Triggering Date may not occur prior to two (2) Business Days
following the Agent's notice thereof to RMC.
(d) Clauses 2 and 3 of Section 8.15 of the Loan Agreement are
amended and restated as follows:
(2) (A) pay interest on the Subordinated Debt in the
original principal amount of $33,000,000 evidenced by that
certain Third Subordinated Term Note dated September 30, 1993
executed by RMC in favor of the Parent in amounts not to
exceed $1,035,000 per calendar quarter to enable the Parent to
pay interest which is then due and payable on the Subordinated
Debentures; (B) pay interest at a rate not in excess of eight
percent (8%) per annum, on that certain Debt in the original
principal amount of $6,000,000 evidenced by that certain
Fourth Subordinated Term Note dated November 30, 1993 executed
by RMC in favor of the Parent, to enable the Parent to pay
interest which is then due and payable on the Subordinated
Debentures; (C) pay interest on the Debt outstanding under the
Subordinated Revolver in amounts not to exceed $5,875,000
semiannually to enable the Parent to pay interest which is
then due and payable on the Senior Subordinated Notes
(provided, that the amount of such interest permitted to be
paid pursuant to this clause (C) shall be reduced by the
product of (a) the excess, if any, of $50,000,000 over the
principal of the Debt outstanding from time to time under the
Subordinated Revolver times (b) the interest rate of 11 3/4%
per annum applicable thereto); and (D) make payments of
principal of the Debt outstanding under the Subordinated
Revolver to enable the Parent to redeem Senior Subordinated
Notes, such payments not to exceed (i) $20,000,000 in the
aggregate during the period commencing on March 28, 1996 and
ending on December 31, 1996, or (ii) $5,000,000 during any
period of fourteen (14) consecutive days; provided, however,
that the payments described in subclauses (A), (B) and (C) of
this clause (2) may not be made in the event that after giving
effect thereto, there would have occurred any Default or Event
of Default; and provided, further, that the payments described
in subclause (D) of this clause (2) may not be made in the
event that after giving effect thereto (i) Availability would
be less
-3-
<PAGE> 4
than $30,000,000, or (ii) there would have occurred any
Default or Event of Default (provided, that no payment
described in subclause (D) of this clause (2) may be made
unless the Agent shall have received at least one (1) Business
Day's prior notice of such payment, which notice shall set
forth the face amount of the Senior Subordinated Notes
proposed to be redeemed and the price therefor, and contain a
certificate of the chief financial officer or treasurer of the
Parent setting forth in reasonable detail the calculations
required to establish that after giving effect to such
payment, Availability would not be less than $30,000,000, and
stating that after giving effect to such payment, there would
not have occurred any Default or Event of Default); and
(3) pay principal on the DP Note to the extent
required to enable DP to pay its obligations and liabilities,
as and when DP shall be required to do so; provided, however,
that the payments described in this clause (3) may not be made
in the event that after giving effect thereto, (i) there would
have occurred any Default or Event of Default, or (ii) the sum
of such payments made upon or after the Restatement Closing
Date would exceed $5,000,000.
(e) Sections 8.23, 8.25, 8.26 and 8.27 of the Loan Agreement
are amended and restated as set forth on Exhibit A hereto.
Section 2. RMC Distributions; Purchase of T.Q., Inc. Capital
Stock. (a) Reference is hereby made to Section 8.10 of the Loan Agreement,
which, among other things, prohibits each Borrower from making Distributions,
other than certain Distributions described therein. Notwithstanding such
prohibition, subject to the fulfillment of the conditions precedent set forth
in Section 3 below, the Lenders hereby consent to (a) a one-time Distribution
to the Parent by RMC in the amount of $1,500,000, to enable the Parent to
replenish funds in its money market deposit account with LaSalle National Bank,
such Distribution to be made on or prior to April 15, 1996, and (b) a one-time
Distribution to the Parent by RMC in the amount of $250,000, to enable the
Parent to make a contemporaneous contribution to the capital of Hutch in such
amount, such Distribution to be made on or prior to June 30, 1996; provided,
that at the time of such Distributions and after giving effect thereto no
Default or Event of Default shall exist and be continuing and that such
Distributions shall be made in accordance with all applicable laws.
(b) Reference is hereby made to Section 8.21 of the Loan
Agreement, which, among other things, prohibits each Borrower from acquiring
any Subsidiary. Notwithstanding such prohibition, subject to the fulfillment
of the conditions precedent set forth in Section 3 below, the Lenders hereby
consent to the acquisition by Hutch, on or prior to June 30, 1996, of that
portion of the capital stock of T.Q., Inc., a Kentucky corporation, that is not
currently owned by Hutch, for a purchase price not to exceed $1,040,000 (of
which not more than $250,000 shall
-4-
<PAGE> 5
be cash, with the balance of the purchase price consisting of the assumption of
certain liabilities). Hutch acknowledges that such capital stock shall,
immediately following such acquisition, be delivered to the Agent, and shall be
held by the Agent subject to the terms of the Hutch Pledge.
Section 3. Conditions to Amendment. This Amendment shall
become effective upon satisfaction of the following conditions:
(a) the receipt by the Agent, by facsimile transmission, of
signed counterparts of this Amendment, executed by each Lender, each
Borrower and each other party thereto, and the execution of this
Amendment by the Agent; provided that each Lender, each Borrower and
each other party thereto shall promptly thereafter execute and deliver
to the Agent eight original counterparts of this Amendment;
(b) the receipt by the Agent, by facsimile transmission, of
signed counterparts of an Amendment No. 1 to the Parent Guaranty,
executed by the Parent; provided that the Parent shall promptly
thereafter execute and deliver to the Agent eight original
counterparts of such Amendment No. 1 to the Parent Guaranty;
(c) the receipt by the Agent, by facsimile transmission, of
signed counterparts of an Amendment No. 1 to the Parent Subordination
Agreement, executed by the Parent; provided that the Parent shall
promptly thereafter execute and deliver to the Agent eight original
counterparts of such Amendment No. 1 to the Parent Subordination
Agreement;
(d) the receipt by the Agent, by facsimile transmission, of
signed counterparts of an Amendment No. 1 to the DP Subordination
Agreement, executed by DP; provided that DP shall promptly thereafter
execute and deliver to the Agent eight original counterparts of such
Amendment No. 1 to the DP Subordination Agreement;
(e) the receipt by the Agent, by facsimile transmission, of
signed counterparts of an Acknowledgment and Reaffirmation Agreement,
executed by each Borrower and each other party thereto; provided that
each Borrower and each other party thereto shall promptly thereafter
execute and deliver to the Agent eight original counterparts of such
Acknowledgment and Reaffirmation; and
(f) the receipt by the Agent, for the benefit of the Lenders,
of an amendment fee in the amount of $250,000.
Section 4. Representations and Warranties. Each Borrower
hereby represents and warrants that (i) this Amendment constitutes a legal,
valid and binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms, (ii) the representations and warranties
contained in the Loan Agreement are correct in all material respects as though
made on and as of the date of this Amendment, and (iii) no Event of Default has
occurred and is continuing.
-5-
<PAGE> 6
Section 5. Reference to and Effect on the Loan Agreement.
(a) Upon the effectiveness of this Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", "hereof",
"herein", or words of like import shall mean and be a reference to the Loan
Agreement, as amended hereby, and each reference to the Loan Agreement in any
other document, instrument or agreement executed and/or delivered in connection
with the Loan Agreement shall mean and be a reference to the Loan Agreement, as
amended hereby.
(b) Except as specifically amended above, the Loan
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Loan Agreement, nor constitute a waiver of any
provision of the Loan Agreement or of any Default or Event of Default in
existence on the date of this Amendment.
Section 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 7. Governing Law. This Amendment shall be governed
by and construed in accordance with the internal laws (as opposed to the
conflicts of laws provisions) of the State of Illinois.
Section 8. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of March 28, 1996.
ROADMASTER CORPORATION
By:
-------------------------------
Title:
-6-
<PAGE> 7
ROADMASTER LEISURE INC.
By:
----------------------------
Title:
WILLOW HOSIERY COMPANY, INC.
By:
----------------------------
Title:
HUTCH SPORTS USA INC.
By:
----------------------------
Title:
ROADMASTER RECEIVABLES CORPORATION
By:
----------------------------
Title:
BANKAMERICA BUSINESS CREDIT, INC., as the
Agent
By:
----------------------------
Vice President
BANKAMERICA BUSINESS CREDIT, INC., as a Lender
By:
----------------------------
Vice President
DEUTSCHE FINANCIAL SERVICES CORPORATION,
as a Lender
By:
----------------------------
Vice President
-7-
<PAGE> 8
MELLON BANK, N.A., as a Lender
By:
-------------------------------
Vice President
NATIONSBANK OF GEORGIA, N.A., as a Lender
By:
-------------------------------
Vice President
GREEN TREE FINANCIAL SERVICING CORPORATION,
as a Lender
By:
-------------------------------
Vice President
NATIONAL BANK OF CANADA, a Canadian chartered
bank, as a Lender
By:
-------------------------------
Vice President
By:
-------------------------------
FIRST BANK NATIONAL ASSOCIATION, as a Lender
By:
-------------------------------
Vice President
-8-
<PAGE> 9
EXHIBIT A
to
Amendment No. 5
8.23 Capital Expenditures. (a) RMC shall not make or incur
any Capital Expenditure if, after giving effect thereto, the aggregate amount
of all Capital Expenditures by RMC would exceed (1) $16,500,000 during Fiscal
Year 1996, (2) $17,500,000 during Fiscal Year 1997, or (3) $5,000,000 during
each fiscal quarter thereafter.
(b) RML shall not make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures
by RML would exceed (1) $75,000 during Fiscal Year 1996, (2) $85,000 during
Fiscal Year 1997, or (3) $25,000 during each fiscal quarter thereafter.
(c) Willow shall not make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by Willow would exceed (1) $175,000 during Fiscal Year 1996, (2)
$200,000 during Fiscal Year 1997, or (3) $60,000 during each fiscal quarter
thereafter.
(d) Hutch shall not make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures
by Hutch would exceed (1) $1,000,000 during Fiscal Year 1996, (2) $1,000,000
during Fiscal Year 1997, or (3) $250,000 during each fiscal quarter thereafter.
(e) RRC shall not make or incur any Capital Expenditures.
(f) No Borrower shall make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by all Borrowers would exceed (1) $17,750,000 during Fiscal Year
1996, (2) $18,785,000 during Fiscal Year 1997, or (3) $5,335,000 during each
fiscal quarter thereafter.
Each amount set forth in clauses (a) through (d) of this Section 8.23 for any
fiscal period shall hereinafter be referred to as a "Base Amount." In the
event that a Borrower shall, during any applicable fiscal period, make or incur
Capital Expenditures in an aggregate amount less than the Base Amount for such
fiscal period, an amount (a "Carry-Over Amount") equal to the lesser of (1)
one-half of such Base Amount, and (2) such Base Amount minus the aggregate
amount of such Capital Expenditures actually made or incurred, shall be added
to the Base Amount for the then next succeeding fiscal period. No Carry-Over
Amount shall be added to any Base Amount other than the Base Amount for the
then next succeeding fiscal period. For purposes of making the calculations
contemplated by this paragraph, any Capital
-9-
<PAGE> 10
Expenditures made or incurred during any fiscal period shall be deemed to
reduce, first, the Base Amount for such fiscal period, and second, the
Carry-Over Amount, if any, added to the Base Amount for such fiscal period.
8.25 Interest Coverage. (a) RMC will not permit the ratio
of RMC's and its consolidated Subsidiaries' (other than Diversified Trucking's)
(1) Adjusted Net Earnings from Operations plus, to the extent deducted in
computing such Adjusted Net Earnings from Operations, (A) cash interest
expense, (B) any provision for income taxes, (C) depreciation, and (D)
amortization, to (2) cash interest expense, to be less than (i) 0.5 to 1.0 as
of the last day of the third fiscal quarter of Fiscal Year 1996, calculated for
the period commencing on January 1, 1996 and ending on such date, and (ii) 1.1
to 1.0 as of the last day of each fiscal quarter thereafter, calculated for the
four (4) consecutive fiscal quarters ending on such date. For purposes of this
Section 8.25(a), Adjusted Net Earnings of RMC and its consolidated
Subsidiaries, other than Diversified Trucking, for any fiscal quarter shall be
deemed to include the principal amount of any Debt of RMC incurred during such
fiscal quarter and subordinated to the Obligations on a basis satisfactory in
form and substance to the Majority Lenders; provided, no such amounts in excess
of $5,000,000 in the aggregate during the term of this Agreement shall be so
included in Adjusted Net Earnings of RMC and its consolidated Subsidiaries
other than Diversified Trucking.
(b) RML will not permit the ratio of RML's (1) Adjusted Net
Earnings from Operations plus, to the extent deducted in computing such
Adjusted Net Earnings from Operations, (A) cash interest expense, (B) any
provision for income taxes, (C) depreciation, and (D) amortization, to (2) cash
interest expense, to be less than (i) 1.3 to 1.0 as of the last day of the
first and second fiscal quarters of Fiscal Year 1996, calculated in each case
for the period commencing on January 1, 1996 and ending on such date, (ii) 1.7
to 1.0 as of the last day of the third fiscal quarter of Fiscal Year 1996,
calculated for the period commencing on January 1, 1996 and ending on such
date, and (iii) 2.0 to 1.0 as of the last day of each fiscal quarter
thereafter, calculated for the four (4) consecutive fiscal quarters ending on
such date.
(c) Willow will not permit the ratio of Willow's (1) Adjusted
Net Earnings from Operations plus, to the extent deducted in computing such
Adjusted Net Earnings from Operations, (A) cash interest expense, (B) any
provision for income taxes, (C) depreciation, and (D) amortization, to (2) cash
interest expense, to be less than (i) 1.2 to 1.0 as of the last day of the
second fiscal quarter of Fiscal Year 1996, calculated for the period commencing
on January 1, 1996 and ending on such date, (ii) 1.3 to 1.0 as of the last day
of the third fiscal quarter of
-10-
<PAGE> 11
Fiscal Year 1996, calculated for the period commencing on January 1, 1996 and
ending on such date, (iii) 1.6 to 1.0 as of the last day of the fourth fiscal
quarter of Fiscal Year 1996, calculated for the four (4) consecutive fiscal
quarters ending on such date, (iv) 1.7 to 1.0 as of the last day of the first,
second, third and fourth fiscal quarters of Fiscal Year 1997, calculated in
each case for the four (4) consecutive fiscal quarters ending on such date, and
(v) 1.8 to 1.0 as of the last day of each fiscal quarter thereafter, calculated
for the four (4) consecutive fiscal quarters ending on such date.
(d) Hutch will not permit the ratio of Hutch's (1) Adjusted
Net Earnings from Operations plus, to the extent deducted in computing such
Adjusted Net Earnings from Operations, (A) cash interest expense, (B) any
provision for income taxes, (C) depreciation, and (D) amortization, to (2) cash
interest expense, to be less than (i) 0.6 to 1.0 as of the last day of the
third fiscal quarter of Fiscal Year 1996, calculated for the period commencing
on January 1, 1996 and ending on such date, (ii) 0.8 to 1.0 as of the last day
of the fourth fiscal quarter of Fiscal Year 1996, calculated for the four (4)
consecutive fiscal quarters ending on such date, (iii) 0.8 to 1.0 as of the
last day of the first fiscal quarter of Fiscal Year 1997, calculated for the
four (4) consecutive fiscal quarters ending on such date, and (iv) 1.0 to 1.0
as of the last day of each fiscal quarter thereafter, calculated for the four
(4) consecutive fiscal quarters ending on such date.
8.26 Adjusted Tangible Net Worth. (a) RMC and its
consolidated Subsidiaries other than Diversified Trucking will have Adjusted
Tangible Net Worth of not less than the applicable amount set forth below as of
the last day of the fiscal quarter of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$133,339,000 First 1996
$128,446,000 Second 1996
$127,524,000 Third 1996
$133,870,000 Fourth 1996
and
$134,000,000 Each fiscal quarter
thereafter
</TABLE>
(b) RML will have Adjusted Tangible Net Worth of not less
than the applicable amount set forth below as of the last day of the fiscal
quarter of the Fiscal Year indicated:
-11-
<PAGE> 12
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 3,000,000 First 1996
$ 3,000,000 Second 1996
$ 3,000,000 Third 1996
$ 3,750,000 Fourth 1996
$ 3,800,000 First 1997
$ 3,950,000 Second 1997
$ 4,250,000 Third 1997
$ 4,600,000 Fourth 1997
and
$ 4,650,000 Each fiscal quarter
thereafter
</TABLE>
(c) Willow will have Adjusted Tangible Net Worth of not less
than the applicable amount set forth below as of the last day of the fiscal
quarter of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 1,750,000 First 1996
$ 1,900,000 Second 1996
$ 2,000,000 Third 1996
$ 2,000,000 Fourth 1996
$ 2,000,000 First 1997
$ 2,050,000 Second 1997
$ 2,100,000 Third 1997
$ 2,250,000 Fourth 1997
and
$ 2,400,000 Each fiscal quarter
thereafter
</TABLE>
(d) Hutch will have Adjusted Tangible Net Worth of not less
than the applicable amount set forth below as of the last day of the fiscal
quarter of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 3,550,000 First 1996
$ 2,750,000 Second 1996
$ 3,150,000 Third 1996
$ 3,200,000 Fourth 1996
$ 3,300,000 First 1997
$ 3,650,000 Second 1997
$ 3,850,000 Third 1997
$ 4,600,000 Fourth 1997
</TABLE>
-12-
<PAGE> 13
<TABLE>
<S> <C>
and
$ 4,750,000 Each fiscal quarter
thereafter
</TABLE>
8.27 Availability. The Borrowers shall maintain Availability
of not less than $17,500,000 at all times, and RMC shall maintain Individual
Availability of not less than $12,500,000 at all times.
-13-
<PAGE> 1
EXHIBIT 11
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE MONTHS ENDED MARCH 30, 1996 AND APRIL 1, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 30, APRIL 1,
1996 1995
--------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
Primary:
Weighted average common shares outstanding during period 49,177 48,649
Common shares issuable if all warrants had been converted
at the date of issuance 962 -
---------- -----------
Average common shares outstanding for primary calculation 50,139 48,649
========== ===========
Fully Diluted:
Weighted average common shares outstanding during period 49,177 48,649
Net common shares issuable on exercise of warrants 962 --
Assumed conversion of 8% subordinated debentures to common stock
as of date of issuance, August 5, 1993 12,936 --
---------- -----------
Average common shares outstanding for fully diluted calculation 63,075 48,649
========== ===========
Earnings:
From net earnings (loss) $ 4,630 $ (1,477)
Assumed conversion of 8% subordinated debentures as of date of
issuance, August 5, 1993:
Plus interest savings, net of tax 820 --
---------- -----------
Net earnings (loss) $ 5,450 $ (1,477)
========== ===========
Primary earnings per share:
Net earnings (loss) $ 0.09 $ (0.03)
========== ===========
Fully diluted earnings per share:
From net earnings (loss) $ 0.07 $ (0.03)
From debt conversion 0.02 --
---------- -----------
Net earnings (loss) $ 0.09 $ (0.03)
========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ROADMASTER INDUSTRIES, INC. FOR THE THREE MONTHS ENDED
MARCH 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,567
<SECURITIES> 0
<RECEIVABLES> 105,750
<ALLOWANCES> 0
<INVENTORY> 151,693
<CURRENT-ASSETS> 318,207
<PP&E> 101,859
<DEPRECIATION> (27,396)
<TOTAL-ASSETS> 443,047
<CURRENT-LIABILITIES> 173,013
<BONDS> 0
0
0
<COMMON> 540
<OTHER-SE> 59,297
<TOTAL-LIABILITY-AND-EQUITY> 443,047
<SALES> 129,414
<TOTAL-REVENUES> 129,414
<CGS> 113,192
<TOTAL-COSTS> 16,417
<OTHER-EXPENSES> (11,488)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,963
<INCOME-PRETAX> 11,293
<INCOME-TAX> 6,663
<INCOME-CONTINUING> 4,630
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,630
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
<FN>
INCLUDED IN OTHER EXPENSES IS A GAIN OF $20,151,000 ON THE SALE OF THE
COMPANY'S NELSON/WEATHER-RITE, INC. SUBSIDIARY.
</FN>
</TABLE>
