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 quarterly period ended MARCH 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________________ to ____________________
Commission file number 1-9917
CATALINA LIGHTING, INC
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(Exact name of registrant as specified in its chapter)
FLORIDA
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(State or other jurisdiction of incorporation or organization)
59-1548266
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(I.R.S. Employer Identification Number)
18191 NW 68TH AVENUE, MIAMI, FLORIDA 33015
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(Address of principal executive offices) (Zip Code)
(305) 558-4777
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Registrant's telephone number, including area code
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Former name, former address and former fiscal year, if changed
since last report.
Indicate by check / 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: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date. OUTSTANDING ON MAY 6, 1998: 7,109,069 SHARES.
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
--------
Condensed consolidated balance sheets -
March 31, 1998 and September 30, 1997........................... 3-4
Condensed consolidated statements of operations -
Three and six months ended March 31, 1998 and 1997.............. 5
Condensed consolidated statements of cash flows -
Six months ended March 31, 1998 and 1997........................ 6-7
Notes to condensed consolidated financial statements............. 8-11
Management's discussion and analysis of financial
condition and results ofoperations.............................. 12-18
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings......................................... 19
ITEM 4 Submission of Matters to a Vote of Security Holders....... 19
ITEM 6 Exhibits and Reports on Form 8-K.......................... 19
2
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS MARCH 31, SEPTEMBER 30,
1998 1997
------------------ -----------------
(Unaudited) *
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,629 $ 1,847
Account receivable, net of allowances
of $8,288 and $8,314 respectively 24,888 24,169
Inventories 29,149 34,612
Income taxes receivable 2,073 2,380
Other current assets 6,903 5,406
------------------ -----------------
Total current assets 64,642 68,414
Property and equipment, net 28,926 29,969
Restricted cash equivalents and short-term investments 2,238 1,883
Goodwill, net 11,245 11,473
Other assets 4,525 4,842
------------------ -----------------
$ 111,576 $ 116,581
================== =================
</TABLE>
(continued on page 4)
3
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
----------- ---------
(Unaudited) *
<S> <C> <C>
Current liabilities
Notes payable - credit lines $ 5,599 $ 5,574
Accounts and letters of credit payable 15,698 18,099
Current maturities of bonds payable 980 970
Current maturities of other long-term debt 484 476
Other current liabilities 5,004 5,586
-------- --------
Total current liabilities 27,765 30,705
Notes payable - credit lines 18,800 21,000
Convertible subordinated notes 7,600 7,600
Bonds payable - real estate related 9,110 9,195
Other long-term debt 1,796 1,942
Other liabilities 5,182 5,082
-------- --------
Total liabilities 70,253 75,524
-------- --------
Commitments and contingencies
Stockholders' equity
Common stock, issued and outstanding 7,109
shares and 7,095 shares, respectively 71 71
Additional paid-in capital 26,422 26,311
Retained earnings 14,830 14,675
-------- --------
Total stockholders' equity 41,323 41,057
-------- --------
$111,576 $116,581
======== ========
</TABLE>
*Condensed from audited financial statements
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------ ------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 40,246 $ 44,874 $ 77,229 $ 89,969
Cost of sales 31,959 38,426 62,367 75,564
-------------- -------------- -------------- --------------
Gross profit 8,287 6,448 14,862 14,405
Selling, general and administrative
expenses 6,636 6,287 13,120 12,442
Plant closing costs - 930 - 930
Litigation charges and
related professional fees 29 6,304 (122) 7,232
-------------- -------------- -------------- --------------
Operating income (loss) 1,622 (7,073) 1,864 (6,199)
-------------- -------------- -------------- --------------
Other income (expenses):
Interest expense (1,023) (978) (2,047) (1,821)
Other income (expenses) 104 (15) 398 (17)
-------------- -------------- -------------- --------------
Total other income (expenses) (919) (993) (1,649) (1,838)
-------------- -------------- -------------- --------------
Income (loss) before income taxes 703 (8,066) 215 (8,037)
Income tax benefit (provision) (167) 3,078 (60) 3,071
-------------- -------------- -------------- --------------
Net income (loss) $ 536 $ (4,988) $ 155 $ (4,966)
============== ============== ============== ==============
Weighted average number of
shares outstanding
Basic 7,109 7,065 7,107 7,065
Diluted 7,421 7,065 7,600 7,065
Earnings (loss) per share
Basic $ 0.08 $ (0.71) $ 0.02 $ (0.70)
Diluted $ 0.07 $ (0.71) $ 0.02 $ (0.70)
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
----------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 155 $ (4,966)
Adjustments for non-cash items:
Plant closing costs - 930
Litigation settlements - 4,274
Other 2,385 3,223
Change in assets and liabilities 1,190 (5,254)
---------------- ---------------
Net cash provided by (used in) operating activities 3,730 (1,793)
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net (1,037) (4,772)
Payments for acquisitions - (44)
Decrease (increase) in restricted cash equivalents and
short-term investments 96 (11)
---------------- ---------------
Net cash provided by (used in) investing activities (941) (4,827)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 57 5
Payments on other liabilities (364) (357)
Payments on bonds (75) (70)
Proceeds from notes payable - credit lines 12,600 18,700
Payments on notes payable - credit lines (14,800) (11,821)
Net proceeds from (payments on) notes payable - credit lines
due on demand 25 (1,153)
Sinking fund redemption payments on bonds (450) (450)
---------------- ---------------
Net cash provided by (used in) financing activities (3,007) 4,854
---------------- ---------------
Net increase (decrease) in cash and cash equivalents (218) (1,766)
Cash and cash equivalents at beginning of period 1,847 1,766
---------------- ---------------
Cash and cash equivalents at end of period $ 1,629 $ -
================ ===============
</TABLE>
(continued on page 7)
6
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
SUPPLEMENTAL CASH FLOW INFORMATION
SIX MONTHS ENDED
MARCH 31,
----------------------------------
1998 1997
---------------- ----------------
(IN THOUSANDS)
Cash paid for:
Interest $ 2,057 $ 1,833
Income taxes $ 141 $ 888
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During the six months ended March 31, 1998 and 1997, total capital lease
obligations incurred for new office, machinery and warehouse equipment
aggregated $124,000 and $617,000, respectively.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the accounting policies described in the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1997 and
should be read in conjunction with the consolidated financial statements and
notes which appear in that report. These statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (which consist mostly of normal,
recurring accruals) considered necessary for a fair presentation have been
included. The results of operations for the three and six months ended March 31,
1998 may not necessarily be indicative of operating results to be expected for
the full fiscal year due to seasonal fluctuations in the Company's business,
changes in economic conditions and other factors.
Certain amounts previously presented in the financial statements of prior
periods have been reclassified to conform to the current period's presentation.
Earnings (loss) per Share
The Company adopted Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("SFAS 128") for the quarter ended December 31, 1997 which
changes the method of calculating earnings per share. SFAS 128 requires the
presentation of "basic" earnings per share and "diluted" earnings per share on
the face of the statement of operations. Basic earnings per share is computed by
dividing the net income or loss attributable to common shareholders by the
weighted average common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. Upon adoption, earnings per share data for prior periods are required to
be restated. Earnings per share information presented in the accompanying
financial statements for the three and six months ended March 31, 1997 have been
restated to comply with SFAS No. 128.
2. INVENTORIES
Inventories consisted of the following:
MARCH 31, SEPTEMBER 30,
1998 1997
------------------ ------------------
(In thousands)
Raw materials $ 3,710 $ 3,569
Work-in-progress 910 1,006
Finished goods 24,529 30,037
------------------ ------------------
Total Inventories $ 29,149 $ 34,612
================== ==================
3. PROPERTY AND EQUIPMENT, NET
Shenzhen Jiadianbao Electrical Products Co., Ltd. ("SJE"), a cooperative joint
venture subsidiary of the Company's wholly-owned subsidiary Go-Gro Industries
Ltd. ("Go-Gro"), and the Bureau of National Land Planning Bao-An Branch of
Shenzhen City entered into a Land Use Agreement covering approximately 467,300
square feet in Bao-An County, Shenzhen City, People's Republic of China on April
11, 1995. The agreement provides SJE with the right to use this land until
January 18, 2042. The land use rights are non-transferable. Under the terms of
the SJE joint venture agreement, ownership of the land and buildings of SJE is
divided 70% to Go-Gro and 30% to the other joint venture partner. Land costs,
including the land use rights, approximated $2.6 million of which Go-Gro has
paid its 70% proportionate share of $1.8 million. Under the terms of this
agreement, as amended, SJE is obligated to construct approximately 500,000
square feet of factory buildings and 211,000 square feet of dormitories and
offices, with 40 percent of the construction required to be completed (which was
completed) by April 1, 1997 and the remainder by December 31, 1999. The Company
plans to file an application to extend the completion
8
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. PROPERTY AND EQUIPMENT, NET (CONTINUED)
deadline of December 1999. The total cost for this project is estimated at $15.5
million (of which $10.4 million had been expended as of March 31, 1998), and
includes approximately $1.0 million for a Municipal Coordination Facilities Fee
(MCFF). The MCFF is based upon the square footage to be constructed. The
agreement calls for the MCFF to be paid in installments beginning in January
1997. A 162,000 square foot factory, a 77,000 square foot warehouse and a 60,000
square foot dormitory, became operational in June 1997.
4. CONTINGENCIES
LEGAL
On June 4, 1991, the Company was served with a copy of the Complaint in the
matter of Browder vs. Catalina Lighting, Inc., Robert Hersh, Dean S. Rappaport
and Henry Gayer, Case No. 91-23683, in the Circuit Court of the 11th Judicial
Circuit in and for Dade County, Florida. The plaintiff in the action, the former
President and Chief Executive Officer of the Company, contended that his
employment was wrongfully terminated and as such brought action for breach of
contract, defamation, slander, libel and intentional interference with business
and contractual relationships, including claims for damages in excess of $5
million against the Company and $3 million against the named directors. During
the course of the litigation the Company prevailed on its Motions for Summary
Judgment and the Court dismissed the plaintiff's claims of libel and
indemnification. On February 3, 1997, the plaintiff voluntarily dismissed the
remaining defamation claims against the Company and Directors. The breach of
contract claim was tried in February, 1997 and the jury returned a verdict
against the Company for total damages of $2.4 million (including prejudgment
interest). On July 14, 1997, the Court also granted plaintiff's motion for
attorney fees and costs of $1.9 million. A provision of $4.3 million was
recorded by the Company during the quarter ended March 31, 1997 and a $470,000
provision for post-judgment interest has been recorded through March 31, 1998.
The Company is appealing the verdict and attorney fee award.
On February 23, 1993, Dana Lighting (now Catalina Industries, Inc.), a
subsidiary of the Company, and Nathan Katz, President of Dana, were served with
a copy of the Complaint in a matter captioned Holmes Products Corp. vs. Dana
Lighting, Inc. and Nathan Katz, Case No. 93-0249 in the Superior Court of the
Commonwealth of Massachusetts, City of Worcester, Massachusetts. The plaintiff
in the action alleges that Dana Lighting engaged in acts constituting tortious
interference with contractual actions, interference with prospective economic
relationship with plaintiff's supplier and unfair competition. Plaintiff seeks
injunctive relief and damages in excess of $10 million. Dana filed its Answer to
the Complaint on March 15, 1993 denying all allegations, and Plaintiff's request
for a temporary restraining order was denied by the Court. The supplier and
Dana's President have filed affidavits with the Court denying that Dana engaged
in such acts. In July 1994, Holmes Products Corp. amended the Complaint to
include allegations of a violation of civil RICO and a violation of the Federal
Antitrust laws. On July 22, 1994, Dana Lighting removed the case from State
Court to the United States District Court for the District Court of
Massachusetts. On March 19, 1997, the Court granted Dana's motion for summary
judgment and dismissed the claims against the Company regarding violation of
civil RICO, Federal Antitrust and State unfair competition. Subsequently, the
Federal Court remanded the counts alleging interference with contractual
relations and prospective business relations to the Massachusetts Superior
Court, City of Worcester. Plaintiff has filed an appeal of the Federal Court's
dismissal of the state unfair competition and unjust enrichment claims with the
federal appeals court. Management believes that the Complaint is totally without
merit and disputes that any of the alleged acts or damages occurred or that Dana
is liable in any matter. The Company intends to defend this case vigorously and
the outcome of this case cannot presently be determined. No provision for any
liability that may result from this litigation has been recorded in the
accompanying condensed consolidated financial statements.
On December 17, 1996 White Consolidated Industries, Inc. ("White"), which has
acquired certain limited trademark rights from Westinghouse Electric Corp.
("Westinghouse") to market certain household products under the
White-Westinghouse trademark, notified the Company of a lawsuit against
Westinghouse and the Company filed in the United States District Court, for the
Northern District of Ohio. The lawsuit challenged the Company's right to use the
Westinghouse trademarks on its lighting products and alleges trademark
infringement. On December 24, 1996, Westinghouse and the Company served a
Complaint and Motion for Preliminary Injunction against White, AB Electrolux,
Steel City Vacuum Co., Inc., Salton/Maxim Housewares, Inc., Newtech Electronics
Corp., and Windmere Durable Holdings, Inc. in the United States District Court,
Eastern District of Pennsylvania, Case No. 96-2294 alleging that the defendants
had violated Westinghouse's trademark rights,
9
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. CONTINGENCIES (CONTINUED)
breached the Agreement between Westinghouse and White and sought an injunction
to enjoin White against interference with their contractual arrangements. In
October 1997, the cases were consolidated in the Pennsylvania case and on
November 7, 1997 White filed a Counterclaim and Third Party Claims against
Westinghouse, Catalina and Minami International Corporation alleging trademark
infringement, trademark dilution, false designation of origin, false advertising
and unfair competition and seeking injunctive relief and damages. Both the
Company and Westinghouse vigorously dispute White's allegations. Pursuant to the
License Agreement between Westinghouse and the Company, Westinghouse is
defending and indemnifying the Company for all costs and expenses for claims,
damages and losses, including the costs of litigation, accordingly no provision
for this matter has been recorded in the accompanying condensed consolidated
financial statements. Discovery is proceeding and the case could be tried in
late 1998.
The Company has recently received a number of claims relating to halogen
torchieres sold by the Company to various retailers. While the Company is still
in the process of evaluating these claims, management does not currently believe
they will result in a material uninsured liability to the Company.
The Company is also a defendant in other legal proceedings arising in the course
of business. In the opinion of management the ultimate resolution of these other
legal proceedings will not have a material adverse effect on the financial
position or annual results of operations of the Company.
OTHER
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
programs that have time sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failure or
miscalculations. The Company is in the process of identifying and assessing the
systems that could be affected by the Year 2000 Issue and is developing an
implementation plan to resolve the issue. The Company expects to complete the
assessment, formalize its plan for corrective action and estimate the potential
incremental costs required to address this issue by December 1998. The Company
is presently unable to determine what impact, if any, the Year 2000 issue will
have on its operations.
Substantially all of the products either purchased or manufactured by the
Company are imported from China. The continued importation into the U.S. of
products manufactured in China could be affected by any one of several
significant trade issues that presently impact U.S. - China relations. On May
29, 1997, the President of the United States extended to the People's Republic
of China "Most Favored Nation" ("MFN") treatment for the entry of goods into the
United States for an additional year, beginning July 3, 1997. In the context of
United States tariff legislation, MFN treatment means that products are subject
to favorable duty rates upon entry into the United States. On June 24, 1997 the
House of Representatives supported the President's decision and rejected a bill
to impose trade sanctions against China due to alleged human rights abuses.
Members of Congress and the "human rights community" will continue to monitor
the human rights issues in China and adverse developments in human rights and
other trade issues in China could affect U.S. - China relations. As a result of
various political and trade disagreements between the U.S. Government and China,
it is possible restrictions could be placed on trade with China in the future
which could adversely impact the Company's operations and financial position.
5. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued. SFAS
No. 130 establishes standards for the reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. SFAS No. 130 requires that a
company (a) classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of the balance sheet. SFAS No. 130 is effective
for fiscal years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required. The Company has not determined the effects, if any, that SFAS No. 130
will have on its consolidated financial statements.
10
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued. SFAS No. 131 establishes standards for the way
that public companies report selected information about operating segments in
annual financial statements and requires that those companies report selected
information about segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 131, which supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise", but
retains the requirement to report information about major customers, requires
that a public company report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally, financial
information is required to be reported on the basis that it is used internally
for evaluating segment performance and deciding how to allocate resources to
segments. SFAS No. 131 requires that a public company report a measure of
segment profit or loss, certain specific revenue and expense items, and segment
assets. However, SFAS No. 131 does not require the reporting of information that
is not prepared for internal use if reporting it would be impracticable. SFAS
No. 131 also requires that a public company report descriptive information about
the way that the operating segments were determined, the products and services
provided by the operating segments, differences between the measurements used in
reporting segment information and those used in the enterprise's general-purpose
financial statements, and changes in the measurement of segment amounts from
period to period. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997, with disclosures in interim financial
statements not required in the year of adoption. The Company has not determined
the effects, if any, that SFAS No. 131 will have on the disclosures in its
consolidated financial statements.
11
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Certain statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, including without limitation
expectations as to future sales and profitability, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company and its subsidiaries to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
but are not limited to, the following: the highly competitive nature of the
lighting industry; reliance on certain key customers; consumer demand for
lighting products; dependence on imports from China; general economic and
business conditions; operating costs; advertising and promotional efforts; brand
awareness; the existence or absence of adverse publicity; acceptance of new
product offerings; changing trends in customer tastes; changes in business
strategy; availability, terms and deployment of capital; availability and cost
of raw materials and supplies; the costs and other effects of legal and
administrative proceedings; and other factors referenced in this Form 10-Q and
in the Company's annual report on Form 10-K for the year ended September 30,
1997. The Company will not undertake and specifically declines any obligation to
update or correct any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
In the following comparison of the results of operations, the three and
six months ended March 31, 1998 and 1997 are referred to as 1998 and 1997,
respectively.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Net sales and gross profit for 1998 were $40.2 million and $8.3 million,
respectively, as compared to $44.9 million and $6.4 million, respectively, for
1997. The Company generated net income of $536,000 ($.07 per share) in 1998
compared to a net loss of $5 million ($.71 per share) in 1997.
The $4.6 million decrease in net sales from the prior year is attributable
to a $4.7 million decline in unit sales of one product class, halogen
torchieres. The sales decline for the halogen torchieres is due in part to media
attention focused on incidents of fire associated with this product. Current
versions of the halogen torchiere sold by the Company incorporate new safety
devices exceeding the new safety requirements for this product recently
promulgated by Underwriters Laboratory. During the latter half of fiscal 1998
the Company expects to introduce new versions of the torchiere incorporating new
technologies to address the declining sales of this product category. However,
there can be no assurance these versions will be as successful as the previous
models and torchiere sales for the balance of fiscal 1998 are not expected to
equal fiscal 1997 sales levels. Another $883,000 of the decline related to sales
of Meridian lamps. Lamp sales decreased by $1.4 million and net sales for the
Company's other principal line of products, lighting fixtures, decreased by $3.2
million. Lamps and lighting fixtures accounted for 67% and 33%, respectively, of
net sales in 1998 compared to 63% and 37% in 1997, respectively. In 1998 and
1997, Home Depot accounted for 24% and 19.3%, respectively, of the Company's net
sales.
Gross profit increased by $1.8 million in 1998. The gross profit
percentage of 20.6% for 1998 represented an increase from 1997, which was 17.8%
after eliminating the impact on the gross profit percentage of the Company's
discontinued Meridian Lamps manufacturing subsidiary. The improvement in the
gross profit percentage from 1997 to 1998 was attributable to improved margins
earned on direct sales due to new product placement and a more profitable
product mix.
Many of the Company's major customers (most notably Home Depot and Kmart)
purchase from the Company primarily on a direct basis, whereby the merchandise
is shipped directly from the factory to the customer, rather than from the
Company's warehouses. Approximately 56% of the Company's sales in 1998 were made
on a direct basis as compared to 55% in 1997. Sales made by the Company on a
direct basis typically generate lower margins than sales from the Company's
warehouses. The amount of the Company's sales made on a direct basis is
dependent upon customer buying preferences, which are influenced by a number of
factors that vary from customer to customer.
12
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Selling, general and administrative expenses ("SG&A") increased by
$349,000 primarily due to increased costs in the Orient to support the Company's
growth and restructuring of operations ($380,000) and an increase in royalties
($125,000). These increases were partially offset by a decrease of $126,000 in
SG&A incurred by Meridian which ceased operations in June 1997. SG&A expenses
were 16.5% of sales in 1998 compared to 14% in 1997. The increase in SG&A as a
percentage of sales is attributable to the factors mentioned above and the
decline in sales.
In 1997, in conjunction with the decision to cease Meridian's operations,
the Company recorded a $930,000 charge to write down the plant and related
equipment to fair market value (less disposition costs) and to provide for
severance payments to Meridian's employees.
Litigation charges and related professional fees in 1997 represented the
amount provided for an adverse jury verdict of $4.3 million on litigation with
the Company's former Chief Executive Officer, a payment of $1,000,000 to settle
patent litigation with Black & Decker, and the related professional fees
incurred for these two matters (see Note 4 of Notes to Condensed Consolidated
Financial Statements).
Interest expense increased to $1 million in 1998 from $978,000 in 1997
reflecting a $106,000 provision for interest related to the $4.3 million adverse
jury verdict presently under appeal (see Note 4 of Notes to Condensed
Consolidated Financial Statements).
Other income for 1998 consists primarily of a refund of excess pension
fund contributions and rental income on the Meridian facility.
The effective income tax rates for 1998 and 1997 were 24% and 38%,
respectively. The lower effective tax rate for 1998 reflects the projected
impact for the fiscal year ended September 30, 1998 of higher proportionate
foreign income, which is taxed at a significantly lower rate than U.S. income.
MERIDIAN
The Company ceased manufacturing operations and closed its Meridian Lamps
facility in June 1997. Net sales for 1997 were $883,000, cost of sales was $2.3
million and the pretax loss was $2.5 million.
COMPARISON OF SIX MONTHS ENDED MARCH 31, 1998 AND 1997
Net sales and gross profit for 1998 were $77.2 million and $14.9 million,
respectively, as compared to $90 million and $14.4 million, respectively, for
1997. The Company generated net income of $155,000 ($.02 per share) in 1998
compared to a net loss of $5 million ($.70 per share) in 1997.
The $12.7 million decrease in net sales from the prior year is
attributable to an $8.1 million decline in unit sales of one product class,
halogen torchieres and $2.9 million in sales of now discontinued products, the
Meridian lamps and "Hugger" flashlights. The sales decline for the halogen
torchieres is attributed in part to media attention focused on incidents of fire
associated with this product. Current versions of the halogen torchiere sold by
the Company incorporate new safety devices exceeding the new safety requirements
for this product recently promulgated by Underwriters Laboratory. During the
latter half of fiscal 1998 the Company expects to introduce new versions of the
torchiere incorporating new technologies to address the declining sales of this
product category. However, there can be no assurance these versions will be as
successful as the previous models and torchiere sales for the balance of fiscal
1998 are not expected to equal fiscal 1997 sales levels. Management believes the
remainder of the sales decrease is due to a variety of factors including the
consolidation of the customer base, delayed new product placement in Europe and
the purchasing patterns of the Company's customers in general, which can vary
from quarter to quarter. Sales during the third quarter of fiscal 1998 could
continue to be adversely affected by these factors. Lamp sales decreased by $7.7
million and net sales for the Company's other principal line of products,
lighting fixtures, decreased by $5 million. Lamps and lighting fixtures
accounted for 63% and 37%, respectively, of net sales in 1998 and 1997. In 1998
and 1997, Home Depot accounted for 25% and 16.5%, respectively, of the Company's
net sales.
Gross profit increased by $457,000 in 1998. The gross profit percentage of
19.2% for 1998 represented an increase from 1997, which was 17.5% after
eliminating the impact of sales of discontinued products and discontinued
operations. The improvement in the gross profit percentage from 1997 to 1998 was
attributable to improved margins earned on direct sales due to new product
placement and a more profitable product mix.
13
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Many of the Company's major customers (most notably Home Depot and Kmart)
purchase from the Company primarily on a direct basis, whereby the merchandise
is shipped directly from the factory to the customer, rather than from the
Company's warehouses. Approximately 59% of the Company's sales in 1998 were made
on a direct basis as compared to 55% in 1997. Sales made by the Company on a
direct basis typically generate lower margins than sales from the Company's
warehouses. The amount of the Company's sales made on a direct basis is
dependent upon customer buying preferences, which are influenced by a number of
factors that vary from customer to customer.
Selling, general and administrative expenses ("SG&A") increased by
$678,000 due to increased costs in the Orient to support the Company's growth
and restructuring of operations ($652,000) and higher U.S. personnel costs
($279,000). These increases were partially offset by a decrease of $261,000 in
SG&A incurred by Meridian which ceased operations in June 1997. SG&A expenses
were 17% of sales in 1998 compared to 13.8% in 1997. The increase in SG&A as a
percentage of sales is attributable to the factors mentioned above and the
decline in sales.
In 1997, in conjunction with the decision to cease Meridian's operations,
the Company recorded a $930,000 charge to write down the plant and related
equipment to fair market value (less disposition costs) and to provide for
severance payments to Meridian's employees.
Litigation charges and related professional fees in 1997 represented the
amount provided for an adverse jury verdict of $4.3 million on litigation with
the Company's former Chief Executive Officer, a payment of $1,000,000 to settle
patent litigation with Black & Decker, and the related professional fees
incurred for these two matters (see Note 4 of Notes to Condensed Consolidated
Financial Statements).
Interest expense increased to $2 million in 1998 from $1.8 million in 1997
reflecting a $212,000 provision for interest related to the $4.3 million adverse
jury verdict presently under appeal (see Note 4 of Notes to Condensed
Consolidated Financial Statements).
Other income for 1998 includes a gain of $164,000 on the sale of
marketable equity securities, with the remainder consisting primarily of rental
income on the Meridian facility.
The effective income tax rates for 1998 and 1997 were 28% and 38%,
respectively. The lower effective tax rate for 1998 reflects the projected
impact for the fiscal year ended September 30, 1998 of higher proportionate
foreign income, which is taxed at a significantly lower rate than U.S. income.
MERIDIAN
The Company ceased manufacturing operations and closed its Meridian Lamps
facility in June 1997. Net sales for 1997 were $1.6 million, cost of sales was
$3.3 million and the pretax loss was $3.1 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company meets its short-term liquidity needs through cash provided by
operations, accounts payable, borrowings under various credit facilities with
banks, and the use of letters of credit from customers to fund certain of its
direct import sales activities. Lease obligations, mortgage notes, convertible
subordinated notes, bonds and capital stock are additional sources for the
longer-term liquidity and financing needs of the Company. Management believes
the Company's available sources of cash will enable it to fulfill its liquidity
requirements for the next year.
CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 1998
The Company's operating, investing and financing activities resulted in a
net decrease in cash and cash equivalents of $218,000 from September 30, 1997 to
March 31, 1998.
The net cash of $3.7 million provided by operating activities was used
primarily to pay for capital expenditures aggregating $1 million, to pay down
credit lines and to make sinking fund redemption payments on outstanding bonds.
Such capital expenditures included $760,000 in costs incurred by Go-Gro for the
purchase of machinery, molds and equipment and building improvements.
14
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CREDIT AND LEASING FACILITIES, CONVERTIBLE SUBORDINATED NOTES, MORTGAGE AND
BONDS
The Company has a $65 million credit facility with a group of commercial
banks. This facility provides credit in the form of a $7.6 million non-revolving
loan and $57.4 million in revolving loans, acceptances, and trade and stand-by
letters of credit, matures September 30, 1999 and provides for quarterly
principal payments of $950,000 on the non-revolving loan which commenced on June
1, 1997. The non-revolving loan bears interest at prime plus 1% and other
borrowings under the facility bear interest, payable monthly, at the Company's
preference of either the prime rate or the LIBOR rate plus a variable spread
based upon earnings, debt and interest expense levels defined under the credit
agreement (LIBOR + 2.5% at March 31, 1998). Obligations under this facility are
secured by substantially all of the Company's U.S. assets. The Company is
required to comply with various convenants in connection with this facility and
borrowings are subject to a borrowing base calculated from U.S. receivables and
inventory. In addition, the agreement prohibits the payment of any cash
dividends or other distribution on any shares of the Company's common stock,
other than dividends payable solely in shares of common stock, unless approval
is obtained from the lenders. At March 31, 1998, the Company had used $24
million under its credit facility and $4.9 million was available for additional
borrowings under the borrowing base calculation.
The Company's Canadian and Hong Kong subsidiaries have credit facilities
with foreign banks of $2.9 million and $4.5 million, respectively. Borrowings
under the Canadian facility are secured by substantially all of the assets of
the Canadian subsidiary and are limited under a borrowing base defined as the
aggregate of certain percentages of accounts receivable and inventory. Advances
bear interest at the Canadian prime rate plus .5% (7% at March 31, 1998). At
March 31, 1998, borrowings amounted to U.S. $1.8 million and U.S. $423,000 was
available for additional borrowings under the borrowing base calculation.
Borrowings under the Hong Kong facility are secured by substantially all the
assets of Go-Gro. The facility provides credit in the form of acceptances, trade
and stand-by letters of credit, overdraft protection and negotiation of
discrepant documents presented under export letters of credit issued by banks.
Advances bear interest at the Hong Kong prime rate plus .25% (9% at March 31,
1998). At March 31, 1998, there were no borrowings under this facility and $1.1
million was available for borrowings. Each of these credit facilities are
payable upon demand and are subject to annual reviews by the banks. With respect
to the Canadian facility, the agreement prohibits the payment of dividends and
the Company is required to comply with various covenants, which effectively
restrict the amount of funds which may be transferred from the Canadian
subsidiary to the Company. The Hong Kong facility limits the payment of
dividends that may be paid to the Company but does not limit advances or loans
from Go-Gro to the Company.
The Company has outstanding $7.6 million of 8% convertible subordinated
notes due on March 15, 2002. The notes are convertible into common shares of the
Company's stock at a conversion price of $7.31 per share, subject to certain
anti-dilution adjustments (as defined in the Note Agreement), at any time prior
to maturity. The notes are subordinated in right of payment to all existing and
future senior indebtedness of the Company and the notes are callable at the
option of the Company with certain required premium payments. Principal payments
of approximately $2.5 million are required on March 15 in each of the years 2000
and 2001. The remaining outstanding principal and interest is due in full on
March 15, 2002. Interest is payable semiannually. The terms of the Note
Agreement require the Company to maintain specific interest coverage ratio
levels in order to increase its credit facilities or otherwise incur new debt
and to maintain a minimum consolidated net worth. In addition, the note
agreement prohibits the declaration or payment of dividends on any shares of the
Company's capital stock, except dividends or other distributions payable solely
in shares of the Company's common stock, and the purchase or retirement of any
shares of capital stock or other capital distributions.
The Company arranged for the issuance in 1995 of $10.5 million in State of
Mississippi Variable Rate Industrial Revenue Development Bonds to finance (along
with internally generated cash flow and the Company's $1 million leasing
facility) a warehouse located near Tupelo, Mississippi. The bonds have a stated
maturity of May 1, 2010 and require mandatory sinking fund redemption payments,
payable monthly, of $900,000 per year from 1996 to 2002, $600,000 per year in
2003 and 2004, and $500,000 per year from 2005 to 2010. The bonds bear interest
at a variable rate (5.65% at March 31, 1998) that is adjustable weekly to the
rate the remarketing agent for the bonds deems to be the market rate for such
bonds. The bonds are secured by a lien on the land, building, and all other
property financed by the bonds. Additional security is provided by an $8.9
million direct pay letter of credit which is not part of the Company's credit
line.
15
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CREDIT AND LEASING FACILITIES, CONVERTIBLE SUBORDINATED NOTES, MORTGAGE AND
BONDS (CONTINUED)
The Company financed the purchase and improvements of its Meridian
manufacturing facility through the issuance of a series of State of Mississippi
General Obligation Bonds (Mississippi Small Enterprise Development Finance Act
Issue, 1994 Series GG) with an aggregate available principal balance of
$1,605,000, a weighted average coupon rate of 6.36% and a contractual maturity
of 15 years. The bonds are secured by a first mortgage on land, building and
improvements and a $1.4 million standby letter of credit which is not part of
the Company's credit line. Interest on the bonds is payable semiannually and
principal payments are due annually. In June 1997, the Company ceased
manufacturing operations at Meridian and leased the facility to a
non-manufacturing entity and in August 1997 made a $1.5 million payment in
escrow with respect to the bonds. The Company plans to redeem the bonds at their
earliest redemption date, approximately November 1, 1999.
The Company has a $1 million leasing facility with a financial institution
to finance the purchase of equipment in the United States, of which $645,000 was
available at March 31, 1998. In addition, the Company has a leasing facility for
$9 million Hong Kong dollars (U.S. $1.2 million) with a Hong Kong financial
institution to finance the purchase of machinery and equipment for its China
facilities of which U.S. $370,000 was available at March 31, 1998.
The Company financed its corporate headquarters in Miami, Florida with a
loan payable monthly through 1999, based on a 15 year amortization schedule,
with a balloon payment in 1999, bearing interest at 8% and secured by a mortgage
on the land and building.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued.
SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general-purpose financial statements. SFAS No. 130 requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS No. 130
requires that a company (a) classify items of other comprehensive income by
their nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the balance sheet. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods provided for comparative purposes is
required. The Company has not determined the effects, if any, that SFAS No. 130
will have on its consolidated financial statements.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued. SFAS No. 131 establishes standards for the way
that public companies report selected information about operating segments in
annual financial statements and requires that those companies report selected
information about segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 131, which supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise", but
retains the requirement to report information about major customers, requires
that a public company report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally, financial
information is required to be reported on the basis that it is used internally
for evaluating segment performance and deciding how to allocate resources to
segments. SFAS No. 131 requires that a public company report a measure of
segment profit or loss, certain specific revenue and expense items, and segment
assets. However, SFAS No. 131 does not require the reporting of information that
is not prepared for internal use if reporting it would be impracticable. SFAS
No. 131 also requires that a public company report descriptive information about
the way that the operating segments were determined, the products and services
provided by the operating segments, differences between the measurements used in
reporting segment information and those used in the enterprise's general-purpose
financial statements, and changes in the measurement, of segment amounts from
period to period. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997, with disclosures in interim financial
statements not required in the year of adoption. The Company has not determined
the effects, if any, that SFAS No. 131 will have on the disclosures in its
consolidated financial statements.
16
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
OTHER
Shenzhen Jiadianbao Electrical Products Co., Ltd. ("SJE"), a cooperative
joint venture subsidiary of the Company's wholly-owned subsidiary Go-Gro
Industries Ltd. ("Go-Gro"), and the Bureau of National Land Planning Bao-An
Branch of Shenzhen City entered into a Land Use Agreement covering approximately
467,300 square feet in Bao-An County, Shenzhen City, People's Republic of China
on April 11, 1995. The agreement provides SJE with the right to use this land
until January 18, 2042. The land use rights are non-transferable. Under the
terms of the SJE joint venture agreement, ownership of the land and buildings of
SJE is divided 70% to Go-Gro and 30% to the other joint venture partner. Land
costs, including the land use rights, approximated $2.6 million of which Go-Gro
has paid its 70% proportionate share of $1.8 million. Under the terms of this
agreement, as amended, SJE is obligated to construct approximately 500,000
square feet of factory buildings and 211,000 square feet of dormitories and
offices, with 40 percent of the construction required to be completed (which was
completed) by April 1, 1997 and the remainder by December 31, 1999. The Company
plans to file an application to extend the completion deadline of December 1999.
The total cost for this project is estimated at $15.5 million (of which $10.4
million had been expended as of March 31, 1998), and includes approximately $1.0
million for a Municipal Coordination Facilities Fee (MCFF). The MCFF is based
upon the square footage to be constructed. The agreement calls for the MCFF to
be paid in installments beginning in January 1997. A 162,000 square foot
factory, a 77,000 square foot warehouse and a 60,000 square foot dormitory
became fully operational in June 1997.
On April 26, 1996, the Company entered into a license agreement with
Westinghouse Electric Corporation ("Westinghouse") to market and distribute a
full range of lighting fixtures, lamps and other lighting products under the
Westinghouse brand name in exchange for royalty payments. The agreement
terminates on September 30, 2001. Catalina has an option to extend the agreement
for an additional ten years. The royalty payments are due quarterly and are
based on a percent of the value of the Company's net shipments of Westinghouse
branded products, subject to annual minimum payments due. Either party has the
right to terminate the agreement during years three through five of the
agreement if the Company does not meet the minimum net shipments required under
the agreement. Net sales of Westinghouse branded products amounted to $3.5
million and $4.0 million for the six months ended March 31, 1998 and 1997,
respectively.
On December 17, 1996 White Consolidated Industries, Inc. ("White"), which
has acquired certain limited trademark rights from Westinghouse Electric Corp.
("Westinghouse") to market certain household products under the
White-Westinghouse trademark, notified the Company of a lawsuit against
Westinghouse and the Company filed in the United States District Court, for the
Northern District of Ohio. The lawsuit challenged the Company's right to use the
Westinghouse trademarks on its lighting products and alleges trademark
infringement. On December 24, 1996, Westinghouse and the Company served a
Complaint and Motion for Preliminary Injunction against White, AB Electrolux,
Steel City Vacuum Co., Inc., Salton/Maxim Housewares, Inc., Newtech Electronics
Corp., and Windmere Durable Holdings, Inc. in the United States District Court,
Eastern District of Pennsylvania, Case No. 96-2294 alleging that the defendants
had violated Westinghouse's trademark rights, breached the Agreement between
Westinghouse and White and sought an injunction to enjoin White against
interference with their contractual arrangements. In October 1997, the cases
were consolidated in the Pennsylvania case and on November 7, 1997 White filed a
Counterclaim and Third Party Claims against Westinghouse, Catalina and Minami
International Corporation alleging trademark infringement, trademark dilution,
false designation of origin, false advertising and unfair competition and
seeking injunctive relief and damages. Both the Company and Westinghouse
vigorously dispute White's allegations. Pursuant to the License Agreement
between Westinghouse and the Company, Westinghouse is defending and indemnifying
the Company for all costs and expenses for claims, damages and losses, including
the costs of litigation, accordingly no provision for this matter has been
recorded in the financial statements. Discovery is proceeding and the case could
be tried in late 1998.
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
programs that have time sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failure or
miscalculations. The Company is in the process of identifying and assessing the
systems that could be affected by the Year 2000 Issue and is developing an
implementation plan to resolve the issue. The Company expects to complete the
assessment, formalize its plan for corrective action, and estimate the potential
incremental costs required to address this issue by December 1998. The Company
is presently unable to determine what impact, if any, the Year 2000 issue will
have on its operations.
17
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RENEWAL OF CHINA'S MOST FAVORED NATION STATUS
Substantially all of the products either purchased or manufactured by the
Company are imported from China. The continued importation into the U.S. of
products manufactured in China could be affected by any one of several
significant trade issues that presently impact U.S. - China relations. On May
29, 1997, the President of the United States extended to the People's Republic
of China "Most Favored Nation" ("MFN") treatment for the entry of goods into the
United States for an additional year, beginning July 3, 1997. In the context of
United States tariff legislation, MFN treatment means that products are subject
to favorable duty rates upon entry into the United States. On June 24, 1997 the
House of Representatives supported the President's decision and rejected a bill
to impose trade sanctions against China due to alleged human rights abuses.
Members of Congress and the "human rights community" will continue to monitor
the human rights issues in China and adverse developments in human rights and
other trade issues in China could affect U.S. - China relations. As a result of
various political and trade disagreements between the U.S. Government and China,
it is possible restrictions could be placed on trade with China in the future
which could adversely impact the Company's operations and financial position.
ECONOMIC CONDITIONS
During late 1997 various countries in Southeast Asia (including Thailand,
South Korea, Malaysia, the Philippines and Indonesia) were involved in an
emerging crisis impacting their economies and characterized by currency
devaluations, rising interest rates, deteriorating economic growth and declining
capital markets. The Company does not conduct business with, or have a
significant investment in, any of these countries. However, this crisis could
have serious adverse repercussions on the financial stability of all countries
in the region, including Hong Kong and China, and has implications for the
global financial system as well, including the United States. The Company is
presently unable to determine what impact, if any, this Asian economic crisis
will have on its business.
18
<PAGE>
CATALINA LIGHTING, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.154 Seventh Amendment to Letter of Credit Agreement between
Catalina Industries, Inc. and SunTrust Bank, Central Florida,
N.A. dated December 31, 1997.
10.155 Twelfth Amendment to Third Amended and Restated Credit
Agreement between Catalina Lighting, Inc. and SunTrust Bank,
Central Florida, N.A. dated December 31, 1997.
10.156 Second Amendment to Financing Agreement between Catalina
Lighting Canada (1992), Inc. and National Bank of Canada dated
December 19, 1997.
10.157 Eighth Amendment to Letter of Credit Agreement between
Catalina Industries, Inc. and SunTrust Bank, Central Florida,
N.A. dated March 31, 1998.
10.158 Thirteenth Amendment to Third Amended and Restated Credit
Agreement between Catalina Lighting, Inc. and SunTrust Bank,
Central Florida, N.A. dated March 31, 1998.
11 Schedule of Computation of Diluted Earnings (Loss) per Share.
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
19
<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.
/s/ DAVID W. SASNETT
----------------------------
DAVID W. SASNETT
SENIOR VICE PRESIDENT
/s/ DAVID W. SASNETT
----------------------------
DAVID W. SASNETT
CHIEF FINANCIAL OFFICER AND
CHIEF ACCOUNTING OFFICER
Date: May 15, 1998
20
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION
-------- -----------
10.154 Seventh Amendment to Letter of Credit Agreement between Catalina
Industries, Inc. and SunTrust Bank, Central Florida, N.A. dated
December 31, 1997.
10.155 Twelfth Amendment to Third Amended and Restated Credit Agreement
between Catalina Lighting, Inc. and SunTrust Bank, Central
Florida, N.A. dated December 31, 1997.
10.156 Second Amendment to Financing Agreement between Catalina Lighting
Canada (1992), Inc. and National Bank of Canada dated December
19, 1997.
10.157 Eighth Amendment to Letter of Credit Agreement between
Catalina Industries, Inc. and SunTrust Bank, Central Florida,
N.A. dated March 31, 1998.
10.158 Thirteenth Amendment to Third Amended and Restated Credit
Agreement between Catalina Lighting, Inc. and SunTrust Bank,
Central Florida, N.A. dated March 31, 1998.
11 Schedule of Computation of Diluted Earnings (Loss) per Share.
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
EXHIBIT 10.154
SEVENTH AMENDMENT TO
LETTER OF CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO LETTER OF CREDIT AGREEMENT (the "Seventh
Amendment") dated as of December 31, 1997, by and among CATALINA INDUSTRIES,
INC. D/B/A DANA LIGHTING, a Florida corporation (the "Company"), the
corporations designated as guarantors (collectively, the "Guarantors") and
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION F/K/A SUN BANK, NATIONAL
ASSOCIATION, a national banking association (the "Bank").
W I T N E S S E T H:
WHEREAS, the Company, Guarantors and the Bank have entered into that
certain Letter of Credit Agreement dated as of May 1, 1995, as amended by that
certain First Amendment to Letter of Credit Agreement dated as of June 30, 1995,
as further amended by that certain Second Amendment to Letter of Credit
Agreement and First Amendment to Security Agreement dated as of December 28,
1995, as further amended by that certain Third Amendment to Letter of Credit
Agreement dated as of March 27, 1996, as further amended by that certain Fourth
Amendment to Letter of Credit Agreement dated as of December 30, 1996, as
further amended by that certain Fifth Amendment to Letter of Credit Agreement
dated as of March 31, 1997, and as further amended by that certain Sixth
Amendment to Letter of Credit Agreement dated as of September 30, 1997 (as
amended, the "Letter of Credit Agreement"); and
WHEREAS, the Company and the Guarantors have requested that the Letter of
Credit Agreement be amended to revise a certain financial covenant contained in
Annex VI attached to said Letter of Credit Agreement and incorporated therein by
reference; and
WHEREAS, the Bank has agreed to amend the Letter of Credit Agreement to
provide for the foregoing, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO LETTER OF CREDIT AGREEMENT. Section 5.14, contained in Annex VI
attached to the Letter of Credit Agreement, is hereby deleted and, in lieu
thereof, there is substituted therefor the following new Section 5.14:
<PAGE>
"Section 5.14. INTEREST COVERAGE RATIO.
Permit the ratio of (a) the sum of
(i) Consolidated Pre-tax Income PLUS
(ii) Consolidated Interest Charges to
(b) Consolidated Interest Charges, to be less
than 1.0:1 for the one (1) calendar quarterly
period ending December 31, 1995; less than
0.60:1 for the immediately preceding two (2)
calendar quarterly periods ending March 31,
1996; less than 1.25:1 for the immediately
preceding three (3) calendar quarterly
periods ending June 30, 1996; less than
1.75:1 for the immediately preceding four (4)
calendar quarterly period ending
September 30, 1996; less than 1.25:1 for the
immediately preceding four (4) calendar
quarterly periods ending December 31, 1996;
excluding the effect of the actual pretax
charge to earnings previously disclosed to
the Agent and the Banks not to exceed
$9,859,826.00 incurred during the quarterly
period ending March 31, 1997, less than
1.00:1 for the immediately preceding four (4)
calendar quarterly periods ending March 31,
1997; excluding the effect of the actual
pretax charge to earnings not to exceed
$432,000.00 incurred during the quarterly
period ending June 30, 1997 for all
calculations for which said quarterly period
is included, less than 1.50:1 for the one (1)
calendar quarterly period ending June 30,
1997; less than 1.75:1 for the immediately
preceding two (2) calendar quarterly periods
ending September 30, 1997; less than 1.40:1
for the immediately preceding three (3)
calendar quarterly periods ending
December 31, 1997; less than 1.75:1 for the
immediately preceding four (4) calendar
quarterly periods ending March 31, 1998; and
less than 2.00:1 for the immediately
preceding four (4) calendar quarterly periods
ending on the last day of each calendar
quarter thereafter."
2. COUNTERPARTS. The Seventh Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and permitted assigns.
3. CAPITALIZED TERMS. All capitalized terms contained herein shall have the
meanings assigned to them in the Letter of Credit
2
<PAGE>
Agreement unless the context herein otherwise dictates or unless different
meanings are specifically assigned to such terms herein.
4. RATIFICATION OF LOAN DOCUMENTS; MISCELLANEOUS. The Letter of Credit
Agreement as amended hereby shall remain in full force and effect and this
Seventh Amendment to Letter of Credit Agreement shall not be deemed a novation.
Each and every reference to the Letter of Credit Agreement and any other
Operative Documents shall be deemed to refer to the Letter of Credit Agreement
as amended by the Seventh Amendment. The Company and the Guarantors hereby
acknowledge and represent that the Operative Documents, as amended, are, as of
the date hereof, valid and enforceable in accordance with their respective terms
and are not subject to any defenses, counterclaims or right of set-offs
whatsoever.
5. GOVERNING LAW. THIS SEVENTH AMENDMENT SHALL BE EFFECTIVE UPON ACCEPTANCE BY
THE BANK IN FLORIDA AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
(BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK)
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Seventh Amendment as of
the day and year first above written.
COMPANY:
CATALINA INDUSTRIES, INC.
d/b/a DANA LIGHTING
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY/TREASURER
GUARANTORS:
CATALINA LIGHTING, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
VICE PRESIDENT,
SECRETARY/TREASURER
CATALINA REAL ESTATE TRUST, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY/TREASURER
ANGEL STATION, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY/TREASURER
MERIDIAN LAMPS, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY/TREASURER
4
<PAGE>
MERIDIAN LAMPS DEVELOPMENT, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY/TREASURER
CATALINA ADMINISTRATIVE CORPORATION
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
ASSISTANT SECRETARY
BANK:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION F/K/A SUN BANK,
NATIONAL ASSOCIATION
By: /s/ DAVID E. CROW
------------------------------------
DAVID E. CROW,
SENIOR VICE PRESIDENT
MERIDIAN LAMPS DEVELOPMENT, INC.
By:
--------------------------------------
THOMAS M. BLUTH
SECRETARY/TREASURER
CATALINK ADMINISTRATIVE CORPORATION
By:
--------------------------------------
THOMAS M. BLUTH
ASSISTANT SECRETARY
BANK:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION F/K/A SUN BANK,
NATIONAL ASSOCIATION
By:
--------------------------------------
DAVLD E. CROW,
SENIOR VICE PRESIDENT
5
EXHIBIT 10.155
TWELFTH AMENDMENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS TWELFTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(the "Twelfth Amendment") dated as of December 31, 1997, by and among CATALINA
LIGHTING, INC., a Florida corporation (the "Borrower"), the corporations listed
on ANNEX I thereto (the "Guarantors"), the Banks signatories to the Credit
Agreement (as hereinafter defined) (the "Banks") and SUNTRUST BANK, CENTRAL
FLORIDA, NATIONAL ASSOCIATION, a national banking association, as Agent (the
"Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Banks and the Agent have
entered into that certain Third Amended and Restated Credit Agreement dated as
of May 12, 1994, as amended by that certain First Amendment to Third Amended and
Restated Credit Agreement, Second Amended and Restated Security Agreement, Third
Amended and Restated Stock and Notes Pledge, Third Amended and Restated
Agreement Regarding Factoring Proceeds, Consent and Waiver dated as of August
12, 1994, as further amended by that Second Amendment to Third Amended and
Restated Credit Agreement and Third Amended and Restated Stock and Notes Pledge,
dated as of February 23, 1995, as further amended by that Third Amendment to
Third Amended and Restated Credit Agreement and Consent, dated as of May 1,
1995, as further amended by that Fourth Amendment to the Third Amended and
Restated Credit Agreement, dated as of June 30, 1995, as further amended by that
Fifth Amendment to Third Amended and Restated Credit Agreement, dated as of
December 4, 1995, as further amended by that Sixth Amendment to Third Amended
and Restated Credit Agreement, Second Amendment to Second Amended and Restated
Security Agreement and Second Amendment to Third Amended and Restated Stock and
Notes Pledge, dated as of December 28, 1995, as further amended by that Seventh
Amendment to Third Amended and Restated Credit Agreement, dated as of March 18,
1996, as further amended by that Eighth Amendment to Third Amended and Restated
Credit Agreement, Third Amendment to Second Amended and Restated Security
Agreement, and Fourth Amendment to Third Amended and Restated Stock and Notes
Pledge, dated as of October 4, 1996, as further amended by that Ninth Amendment
to Third Amended and Restated Credit Agreement, dated as of December 30, 1996,
as further amended by that Tenth Amendment to Third Amended and Restated Credit
Agreement, dated as of March 31, 1997, and as further amended by that Eleventh
Amendment to Third Amended and Restated Credit Agreement, dated as of September
30, 1997 (as so amended, the "Credit Agreement"); and
<PAGE>
WHEREAS, the Borrower and the Guarantors have requested that the Credit
Agreement be amended to revise a certain financial covenant.
WHEREAS, the Banks and the Agent have agreed to amend the Credit
Agreement to provide for the foregoing, subject to the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO CREDIT AGREEMENT. Section 5.14 of the Credit Agreement is hereby
deleted, and in lieu thereof, there is substituted the following:
"Section 5.14. INTEREST COVERAGE RATIO.
Permit the ratio of (a) the sum of
(i) Consolidated Pre-tax Income PLUS
(ii) Consolidated Interest Charges to
(b) Consolidated Interest Charges, to be less
than 1.0:1 for the one (1) calendar quarterly
period ending December 31, l995; less than
0.60:1 for the immediately preceding two (2)
calendar quarterly periods ending March 31,
1996; less than 1.25:1 for the immediately
preceding three (3) calendar quarterly
periods ending June 30, 1996; less than
1.75:1 for the immediately preceding four (4)
calendar quarterly period ending
September 30, 1996; less than 1.25:1 for the
immediately preceding four (4) calendar
quarterly periods ending December 31, 1996;
excluding the effect of the actual pretax
charge to earnings previously disclosed to
the Agent and the Banks not to exceed
$9,859,826.00 incurred during the quarterly
period ending March 31, 1997, less than
1.00:1 for the immediately preceding four (4)
calendar quarterly periods ending March 31,
1997; excluding the effect of the actual
pretax charge to earnings not to exceed
$432,000.00 incurred during the quarterly
period ending June 30, 1997 for all
calculations for which said quarterly period
is included, less than 1.50: 1 for the one (1)
calendar quarterly period ending June 30,
1997; less than 1.75:1 for the immediately
preceding two (2) calendar quarterly periods
2
<PAGE>
ending September 30, 1997; less than 1.40:1
for the immediately preceding three (3)
calendar quarterly periods ending
December 31, 1997; less than 1.75:1 for the
immediately preceding four (4) calendar
quarterly periods ending March 31, 1998; and
less than 2.00:1 for the immediately
preceding four (4) calendar quarterly periods
ending on the last day of each calendar
quarter thereafter."
2. COUNTERPARTS. The Twelfth Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and permitted assigns.
3. CAPITALIZED TERMS. All capitalized terms contained herein shall have
the meanings assigned to them in the Credit Agreement unless the context herein
otherwise dictates or unless different meanings are specifically assigned to
such terms herein.
4. RATIFICATION OF LOAN DOCUMENTS; MISCELLAUSOUS. The Credit Agreement
as amended hereby, and all other Loan Documents shall remain in full force and
effect in this Twelfth Amendment to Credit Agreement shall not be deemed a
novation. Each and every reference to the Credit Agreement and any other Loan
Documents shall be deemed to refer to the Credit Agreement as amended by the
Twelfth Amendment. The Borrower and the Guarantors hereby acknowledge and
represent that the Loan Documents, as amended, are, as of the date hereof, valid
and enforceable in accordance with their respective terms and are not subject to
any defenses, counterclaims or right of set-offs whatsoever.
5. GOVERNING LAW. THIS TWELFTH AMENDMENT SHALL BE EFFECTIVE UPON
ACCEPTANCE BY THE BANKS IN FLORIDA AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICT OF LAW
PRINCIPLES.
IN WITNESS WHEREOF, the parties have executed this Twelfth Amendment as
of the day and year first above written.
(BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK)
3
<PAGE>
BORROWER:
CATALINA LIGHTING, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
VICE PRESIDENT, SECRETARY,
TREASURER
GUARANTORS:
EACH OF THE CORPORATIONS LISTED
ON ANNEX I HERETO
CATALINA INDUSTRIES, INC.,
d/b/a DANA LIGHTING
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY, TREASURER
CATALINA REAL ESTATE TRUST, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY, TREASURER
ANGEL STATION, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY, TREASURER
MERIDIAN LAMPS, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY, TREASURER
4
<PAGE>
MERIDIAN LAMPS DEVELOPMENT, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY, TREASURER
CATALINA ADMINISTRATIVE CORPORATION
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
ASSISTANT SECRETARY
CATALINA MBRCHANDISING, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
. SECRETARY, TREASURER
AGENT:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By:
-------------------------------------
DAVID E. CROW,
SENIOR VICE PRESIDENT
5
<PAGE>
MERIDIAN LAMPS DEVELOPMENT, INC.
By:
-------------------------------------
THOMAS M. BLUTH
SECRETARY, TREASURER
CATALINA ADMINISTRATIVE CORPORATION
By:
-------------------------------------
THOMAS M. BLUTH
ASSISTANT SECRETARY
CATALINA MERCHANDISING, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
THOMAS M. BLUTH
SECRETARY, TREASURER
AGENT:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By: /s/ DAVID E. CROW
-------------------------------------
DAVID E. CROW,
SENIOR VICE PRESIDENT
5
<PAGE>
"Banks"
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION F/K/A SUN
BANK, NATIONAL ASSOCIATION
By: /s/ DAVID E. CROW
-------------------------------------
DAVID E. CROW
SENIOR VICE PRESIDENT
NATIONAL BANK OF CANADA,
a Canadien chartered bank
By:
-------------------------------------
MICHAEL S. BLOOMENFELD
VICE PRESIDENT AND MANAGER
FIRST UNION NATIONAL BANR F/K/A
FIRST UNION NATIONAL BANK OF FLORIDA
By: _____________________________________
Name: _______________________________
Title: ______________________________
6
<PAGE>
"Banks"
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION F/K/A SUN
BANK, NATIONAL ASSOCIATION
By: /s/ DAVID E. CROW
-------------------------------------
DAVID E. CROW
SENIOR VICE PRESIDENT
NATIONAL BANK OF CANADA,
a Canadien chartered bank
By: /s/ MICHAEL S. BLOOMENFELD
-------------------------------------
MICHAE1 S. BLOOMENFELD
VICE PRESIDENT AND MANAGER
FIRST UNION NATIONAL BANK F/K/A
FIRST UNION NATIONAL BANK OF FLORIDA
By:
-------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
6
<PAGE>
"Banks"
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION F/K/A SUN
BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
DAVID E. CROW
SENIOR VICE PRESIDENT
NATIONAL BANK OF CANADA,
a Canadien chartered bank
By:
-------------------------------------
MICHAE1 S. BLOOMENFELD
VICE PRESIDENT AND MANAGER
FIRST UNION NATIONAL BANR F/K/A
FIRST UNION NATIONAL BANK OF FLORIDA
By: [ILLEGIBLE]
-------------------------------------
Name: ROBERT L. GRIFF
-----------------------------------
Title: SENIOR VICE PRESIDENT
-----------------------------------
6
EXHIBIT 10.156
[LETTERHEAD]
NATIONAL BANK OF CANADA
December 19, 1997
CATALINA LIGHTING CANADA, (1992) INC.
LUMIERES CATALINA CANADA, (1992) INC.
c/o Catalina Lighting, Inc.
18191 N.W. 68th Avenue
Miami, Florida 33015
United States of America
ATTENTION OF MR. THOMAS M. BLUTH, TAX DIRECTOR
Dear Sir:
RE: SECOND AMENDMENT TO OFFER OF FINANCING AND BANKING SERVICES
Reference is hereby made to the Offer of financing and banking services dated
April 17, 1996 and amended October 17, 1997, between Catalina Lighting Canada,
(1992) Inc. (the "Borrower") and National Bank of Canada (the "Bank").
Capitalized terms used herein and not otherwise defined shall have the meanings
specified in the Offer of financing and banking services.
In consideration of the mutual covenants and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Bank and the Borrower have agreed as follows;
1) The Offer of financing and banking services and Amendment to Offer of
financing and banking services shall be further amended as follows;
A) The credit referenced in section 1.1 shall be replaced by the
following;
1.1 THE CREDIT
The Bank, subject to the terms and conditions hereof, agrees to
make available to the Borrower an operating credit of $4,000,000,
in Canadian Dollars or U.S. equivalent, to finance the Borrower's
operating requirements.
B) The interest rate referenced in section 1.4 shall be replaced by the
following;
1.4 INTEREST RATE
All Canadian dollars advances shall bear interest at the
Canadian Prime Rate of the Bank plus 0.50%, and all U.S. dollars
advances shall bear interest at the U.S. Base Rate of the Bank.
Interest shall be payable monthly on the 26th day of each month.
<PAGE>
AMENDMENT TO OFFER OF FINANCING PAGE 2
2. The amendments and waivers set forth herein are strictly limited to the
terms, covenants, matters, occasions and times specifically described
above and shall not be deemed to constitute an amendment, consent or waiver
with respect to any other term, covenant, matter, time or occasion.
3. This letter agreement supersedes and replaces any prior agreements of
understandings with respect to any of the matters provided for herein.
4. This letter agreement shall be deemed to have been made in the Province of
Quebec and governed by the interpreted in accordance with the laws of such
Province and the laws of Canada applicable therein, except that no doctrine
or choice of law shall be used to apply the laws of any other jurisdiction.
Except to the extent waived or modified herein, the Offer of financing and
banking services remains in full force and effect and is hereby ratified and
confirmed. Please evidence your agreement with the terms of this letter
agreement by signing in the space below. This letter agreement shall become
effective in accordance with its terms upon execution by the Bank and the
Borrower whereupon all references to the Agreement in the Offer of financing
and banking services and in the other credit Documents shall, except where the
context otherwise requires, be deemed to be a reference to the Offer of
financing and banking services as amended by the letter agreement dated
October 17, 1997, and further amended by this letter agreement.
Sincerely,
NATIONAL BANK OF CANADA
Per: /s/ TIMOTHY LOHN Per: /s/ ELLIS GASTON
---------------------------- ------------------------------
TIMOTHY LOHN ELLIS GASTON
DIVISIONAL MANAGER SENIOR MANAGER
<PAGE>
AMENDMENT TO OFFER OF FINANCING PAGE 3
ACCEPTANCE
The undersigned hereby accepts the terms and conditions of this Offer dated
December 19, 1997, at the City of __________________, Province of Quebec,
this ____ day of _________, 199_.
CATALINA LIGHTING CANADA, (1992) INC.
LUMIERES CATALINA CANADA, (1992) INC.
Per: /s/ [ILLEGIBLE] Per:
----------------------------- ----------------------
Name: Name:
Title: Title:
EXHIBIT 10.157
EIGHTH AMENDMENT TO
LETTER OF CREDIT AGREEMENT
THIS EIGHTH AMENDMENT TO LETTER OF CREDIT AGREEMENT (the "Eighth
Amendment") dated as of March 31, 1998 by and among CATALINA INDUSTRIES, INC.
D/B/A/ DANA LIGHTING, a Florida corporation (the "Company"), the corporations
designated as guarantors (collectively, the "Guarantors") and SUNTRUST BANK,
CENTRAL FLORIDA, NATIONAL ASSOCIATION F/K/A SUN BANK, NATIONAL ASSOCIATION, a
national banking association (the "Bank").
W I T N E S S E T H:
WHEREAS, the Company, Guarantors and the Bank have entered into that
certain Letter of Credit Agreement dated as of May 1, 1995, as amended by that
certain First Amendment to Letter of Credit Agreement dated as of June 30, 1995,
as further amended by that certain Second Amendment to Letter of Credit
Agreement and First Amendment to Security Agreement dated as of December 28,
1995, as further amended by that certain Third Amendment to Letter of Credit
Agreement dated as of March 27, 1996, as further amended by that certain Fourth
Amendment to Letter of Credit Agreement dated as of December 30, 1996, as
further amended by that certain Fifth Amendment to Letter of Credit Agreement
dated as of March 31, 1997, as further amended by that certain Sixth Amendment
to Letter of Credit Agreement dated as of September 30, 1997, and as further
amended by that certain Seventh Amendment to Letter of Credit Agreement dated as
of December 31, 1997 (as amended, the "Letter of Credit Agreement"); and
WHEREAS, the Company and the Guarantors have requested that the Letter of
Credit Agreement be amended to revise certain financial covenants contained in
Annex VI attached to said Letter of Credit Agreement and incorporated therein by
reference; and
WHEREAS, the Bank has agreed to amend the Letter of Credit Agreement to
provide for the foregoing, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENTS TO LETTER OF CREDIT AGREEMENT. The Letter of Credit Agreement
is amended as follows:
<PAGE>
a. Section 5.12, contained in Annex VI attached to the Letter of Credit
Agreement, is hereby deleted and, in lieu thereof, there is substituted the
following:
"Section 5.12. MINIMUM CONSOLIDATED TANGIBLE NET WORTH PLUS
SUBORDINATED DEBT. Permit its Minimum Consolidated Tangible Net Worth
Plus Subordinated Debt to be less than $36,000,000.00 from the date
hereof until September 29, 1996; $39,000,000.00 from September 30,
1996 until March 30, 1997; $34,500,000.00 from March 31, 1997 until
June 29, 1997; $35,000,000.00 from June 30, 1997 until September 29,
1997; $35,500,000.00 from September 30, 1997 until December 30, 1997;
$35,750,000.00 from December 31, 1997 until March 30, 1997;
$36,250,000.00 from March 31, 1998 until June 29, 1998; $37,250,000.00
from June 30, 1998 until September 29, 1998; $38,250,000.00 from
September 30, 1998 until December 30, 1998; $38,750,00.00 from
December 31, 1998 until March 30, 1999; $39,250,000.00 from March
31, 1999 until June 29, 1999; $40,250,000.00 from June 30, 1999 until
September 29, 1999; $41,250,000.00 from September 30, 1999 until
December 30, 1999; $41,750,000.00 from December 31, 1999 until March
30, 2000; and $42,250,000.00 as at March 31, 2000 and at all times
thereafter.
b. Section 5.14, contained in Annex VI attached to the Letter of Credit
Agreement, is hereby deleted and, in lieu thereof, there is substituted the
following:
"Section 5.14. INTEREST COVERAGE RATIO. Permit the ratio of (a) the
sum of (i) Consolidated Pre-tax Income PLUS (ii) Consolidated Interest
Charges to (b) Consolidated Interest Charges, to be less than 1.0:1
for the one (1) calendar quarterly period ending December 31, 1995;
less than 0.61:1 for the immediately preceding two (2) calendar
quarterly periods ending March 31, 1996; less than 1.25:1 for the
immediately preceding three (3) calendar quarterly periods ending
June 30, 1996; less than 1.75:1 for the immediately preceding four
(4) calendar quarterly period
2
<PAGE>
ending September 30, 1996; less than 1.25:1 for the immediately
preceding four (4) calendar quarterly periods ending December 31,
1996; excluding the effect of the actual pretax charge to earnings
previously disclosed to the Agent and the Banks not to exceed
$9,859,826.00 incurred during the quarterly period ending March 31,
1997, less than 1.00:1 for the immediately preceding four (4) calendar
quarterly periods ending March 31, 1997; excluding the effect of the
actual pretax charge to earnings not to exceed $432,000.00 incurred
during the quarterly period ending June 30, 1997 for all calculations
for which said quarterly period is included, less than 1.50:1 for the
one (1) calendar quarterly period ending June 30, 1997; less than
1.75:1 for the immediately preceding two (2) calendar quarterly
periods ending September 30, 1997; less than 1.40:1 for the
immediately preceding three (3) calendar quarterly periods ending
December 31, 1997; less than 1.30:1 for the immediately preceding four
(4) calendar quarterly periods ending March 31, 1998; less than 1.35:1
for the immediately preceding four (4) calendar quarterly periods
ending June 30, 1998; less than 1.50.:1 for the immediately preceding
four (4) calendar quarterly periods ending September 30, 1998; less
than 1.75:1 for the immediately preceding four (4) calendar quarterly
periods ending December 31, 1998; and less than 2.00:1 for the
immediately preceeding four (4) calender quarterly periods ending on
the last day of each calendar quarter thereafter."
2. COUNTERPARTS. The Eighth Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and permitted assigns.
3. CAPITALIZED TERMS. All capitalized terms contained herein shall have the
meanings assigned to them in the Letter of Credit Agreement unless the context
herein otherwise dictates or unless different meanings are specifically assigned
to such terms herein.
3
<PAGE>
4. RATIFICATION OF LOAN DOCUMENTS; MISCELLANEOUS. The Letter of Credit
Agreement as amended hereby shall remain in full force and effect and this
Eighth Amendment to Letter of Credit Agreement shall not be deemed a novation.
Each and every reference to the Letter of Credit Agreement and any other
Operative Documents shall be deemed to refer to the Letter of Credit Agreement
as amended by the Eighth Amendment. The Company and the Guarantors hereby
acknowledge and represent that the Operative Documents, as amended, are, as of
the date hereof, valid and enforceable in accordance with their respective
terms and are not subject to any defenses, counterclaims or right of set-offs
whatsoever.
5. GOVERNING LAW. THIS EIGHTH AMENDMENT SHALL BE EFFECTIVE UPON ACCEPTANCE
BY THE BANK IN FLORIDA AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES.
(BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK)
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Eighth Amendment as of
the day and year first above written.
COMPANY:
CATALINA INDUSTRIES, INC.
d/b/a Dana Lighting
By: /s/ THOMAS M. BLUTH
----------------------------
Thomas M. Bluth
Secretary/Treasurer
GUARANTORS:
CATALINA LIGHTING, INC.
By: /s/ THOMAS M. BLUTH
---------------------------
Thomas M. Bluth
Vice President,
Secretary/Treasurer
CATALINA REAL ESTATE TRUST, INC.
By: /s/ THOMAS M. BLUTH
----------------------------
Thomas M. Bluth
Secretary/Treasurer
ANGEL STATION, INC.
By: /s/ THOMAS M. BLUTH
---------------------------
Thomas M. Bluth
Secretary/Treasurer
MERIDIAN LAMPS, INC.
By: /s/ THOMAS M. BLUTH
---------------------------
Thomas M. Bluth
Secretary/Treasurer
5
<PAGE>
MERIDIAN LAMPS, INC.
By: /s/ THOMAS M. BLUTH
---------------------------
Thomas M. Bluth
Secretary/Treasurer
CATALINA ADMINISTRATIVE CORPORATION
By: /s/ THOMAS M. BLUTH
---------------------------
Thomas M. Bluth
Assistant Secretary
BANK:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION f/k/a Sun Bank,
National Association
By: /s/ VIPUL H. PATEL
----------------------------
Vipul H. Patel,
First Vice President
6
EXHIBIT 10.158
THIRTEENTH AMENDMENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRTEENTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(the "Thirteenth Amendment") dated as of March 31, 1998, by and among CATALINA
LIGHTING, INC., a Florida corporation (the "Borrower"), the corporations listed
on ANNEX I thereto (the "Guarantors"), the Banks signatories to the Credit
Agreement (as hereinafter defined) (the "Banks") and SUNTRUST BANK, CENTRAL
FLORIDA, NATIONAL ASSOCIATION, a national banking association, as Agent (the
"Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Banks and the Agent have
entered into that certain Third Amended and Restated Credit Agreement dated as
of May 12, 1994, as amended by that certain First Amendment to Third Amended and
Restated Credit Agreement, Second Amended and Restated Security Agreement, Third
Amended and Restated Stock and Notes Pledge, Third Amended and Restated
Agreement Regarding Factoring Proceeds, Consent and Waiver dated as of August
12, 1994, as further amended by that Second Amendment to Third Amended and
Restated Credit Agreement and Third Amended and Restated Stock and Notes Pledge,
dated as of February 23, 1995, as further amended by that Third Amendment to
Third Amended and Restated Credit Agreement and Consent, dated as of May 1,
1995, as further amended by that Fourth Amendment to the Third Amended and
Restated Credit Agreement, dated as of June 30, 1995, as further amended by that
Fifth Amendment to Third Amended and Restated Credit Agreement, dated as of
December 4, 1995, as further amended by that Sixth Amendment to Third Amended
and Restated Credit Agreement, Second Amendment to Second Amended and Restated
Security Agreement and Second Amendment to Third Amended and Restated Stock and
Notes Pledge, dated as of December 28, 1995, as further amended by that Seventh
Amendment to Third Amended and Restated Credit Agreement, dated as of March 18,
1996, as further amended by that Eighth Amendment to Third Amended and Restated
Credit Agreement, Third Amendment to Second Amended and Restated Security
Agreement, and Fourth Amendment to Third Amended and Restated Stock and Notes
Pledge, dated as of October 4, 1996, as further amended by that Ninth Amendment
to Third Amended and Restated Credit Agreement, dated as of December 30, 1996,
as further amended by that Tenth Amendment to Third Amended and Restated Credit
Agreement, dated as of March 31, 1997, as further amended by that Eleventh
Amendment to Third Amended and Restated Credit Agreement, dated as of September
30, 1997, and as further amended by that Twelfth
<PAGE>
Amendment to Third Amended and Restated Credit Agreement, dated as of December
31, 1997 (as so amended, the "Credit Agreement"); and
WHEREAS, the Borrower and the Guarantors have requested that the Credit
Agreement be amended to extend the availability of advances under the Credit
Agreement and to revise certain financial covenants.
WHEREAS, the Banks and the Agent have agreed to amend the Credit Agreement
to provide for the foregoing, subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended as
follows:
a. Section 5.12 of the Credit Agreement is hereby deleted, and in lieu
thereof, there is substituted the following:
"Section 5.12. MINIMUM CONSOLIDATED TANGIBLE NET WORTH
PLUS SUBORDINATED DEBT. Permit its Minimum Consolidated
Tangible Net Worth Plus Subordinated Debt to be less than
$36,000,000.00 from the date hereof until September 29,
1996; $39,000,000.00 from September 30, 1996 until March
30, 1997; $34,500,000.00 from March 31, 1997 until June
29, 1997; $35,000,000.00 from June 30, 1997 until
September 29, 1997; $35,500,000.00 from September 30,
1997 until December 30, 1997; $35,750,000.00 from
December 31, 1997 until March 30, 1997; 36,250,000.00
from March 31, 1998 until June 29, 1998; $37,250,000.00
from June 30, 1998 until September 29, 1998; $38,250,000
from September 30, 1998 until December 30, 1998;
$38,750,000.00 from December 31, 1998 until March 30, 1999;
$39,250,000.00 from March 31, 1999 until June 29, 1999;
$40,250,000.00 from June 30, 1999 until September 29, 1999;
$41,250,000.00 from September 30, 1999 until December 30,
1999; $41,750,000.00 from December 31, 1999 until March 30,
2000; and
2
<PAGE>
$2,250,000.00 as of March 31, 2000 and at all times
thereafter.
b. Section 5.14 of the Credit Agreement is hereby deleted, and in lieu
thereof, there is substituted the following:
"Section 5.14. INTEREST COVERAGE RATIO. Permit the ratio
of (a) the sum of (i) Consolidated Pre-tax Income PLUS
(ii) Consolidated Interest Charges to (b) Consolidated
Interest Charges, to be less than 1.0:1 for the one (1)
calendar quarterly period ending December 31, 1995; less
than 0.60:1 for the immediately preceding two (2)
calendar quarterly periods ending March 31, 1996; less
than 1.25:1 for the immediately preceding three (3)
calendar quarterly periods ending June 30, 1996; less
than 1.75:1 for the immediately preceding four (4)
calendar quarterly period ending September 30, 1996; less
than 1.25:1 for the immediately preceding four (4)
calendar quarterly periods ending December 31, 1996;
excluding the effect of the actual pretax charge to
earnings previously disclosed to the Agent and the Banks
not to exceed $9,859,826.00 incurred during the quarterly
period ending March 31, 1997, less than 1.00:1 for the
immediately preceding four (4) calendar quarterly periods
ending March 31, 1997; excluding the effect of the actual
pretax charge to earnings not to exceed $432,000.00
incurred during the quarterly period ending June 30,
1997 for all calculations for which said quarterly period
is included, less than 1.50:1 for the one (1) calendar
quarterly period ending June 30, 1997; less than 1.75:1
for the immediately preceding two (2) calendar quarterly
periods ending September 30, 1997; less than 1.40:1 for
the immediately preceding three (3) calendar quarterly
periods ending December 31, 1997; less than 1.30:1 for the
immediately preceding four (4) calendar quarterly periods
ending March 31, 1998; less than 1.35:1 for the
immediately preceding four (4) calendar quarterly periods
ending June 30, 1998; less than 1.50:1 for the
immediately preceding four (4) calendar quarterly periods
ending September 30, 1998; less than 1.75:1 for the
immediately preceding four (4) calendar quarterly periods
3
<PAGE>
ending December 31, 1998; and less than 2.00:1 for the
immediately preceding four (4) calendar quarterly
periods ending on the last day of each calendar quarter
thereafter."
c. The definition of "Termination Date" as defined in Section 11.1(a) of
the Credit Agreement is hereby deleted and, in lieu thereof, there is
substituted the following:
"'TERMINATION DATE' means the earlier of (i) September
30, 1999, as extended from time to time pursuant to
Section 1.4, and (ii) the date of termination in whole
of the Bank's Commitments pursuant to Section 1.2 or 7.2."
2. COUNTERPARTS. The Thirteenth Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and permitted assigns.
3. CAPITALIZED TERMS. All capitalized terms contained herein shall have the
meanings assigned to them in the Credit Agreement unless the context herein
otherwise dictates or unless different meanings are specifically assigned to
such terms herein.
4. RATIFICATION OF LOAN DOCUMENTS; MISCELLANEOUS. The Credit Agreement as
amended hereby, and all other Loan Documents shall remain in full force and
effect in this Thirteenth Amendment to Credit Agreement shall not be deemed a
novation. Each and every reference to the Credit Agreement and any other
Loan Documents shall be deemed to refer to the Credit Agreement as amended by
the Thirteenth Amendment. The Borrower and the Guarantors hereby acknowledge
and represent that the Loan Documents, as amended, are, as of the date hereof,
valid and enforceable in accordance with their respective terms and are not
subject to any defenses, counterclaims or right of set-offs whatsoever.
5. GOVERNING LAW. THIS THIRTEENTH AMENDMENT SHALL BE EFFECTIVE UPON
ACCEPTANCE BY THE BANKS IN FLORIDA AND SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES.
IN WITNESS WHEREOF, the parties have executed this Thirteenth Amendment as
of the day and year first above written.
(BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK)
4
<PAGE>
BORROWER:
CATALINA LIGHTING, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
Thomas M. Bluth
Vice President, Secretary,
Treasurer
GUARANTORS:
EACH OF THE CORPORATIONS LISTED
ON ANNEX I HERETO
CATALINA INDUSTRIES, INC.
d/b/a Dana Lighting
By: /s/ THOMAS M. BLUTH
-------------------------------------
Thomas M. Bluth
Secretary, Treasurer
CATALINA REAL ESTATE TRUST, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
Thomas M. Bluth
Secretary, Treasurer
ANGEL STATION, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
Thomas M. Bluth
Secretary, Treasurer
MERIDIAN LAMPS, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
Thomas M. Bluth
Secretary, Treasurer
MERIDIAN LAMPS DEVELOPMENT, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
Thomas M. Bluth
Secretary, Treasurer
5
<PAGE>
SIGNATURE PAGE TO THIRTEENTH AMENDMENT
TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT BY AND BETWEEN SUNTRUST,
AS AGENT, THE CATALINA ENTITIES
AND THE BANKS
CATALINA ADMINISTRATIVE CORPORATION
By: /s/ THOMAS M. BLUTH
-------------------------------------
Thomas M. Bluth
Assistant Secretary
CATALINA MERCHANDISING, INC.
By: /s/ THOMAS M. BLUTH
-------------------------------------
Thomas M. Bluth
Secretary, Treasurer
6
<PAGE>
ACKNOWLEDGEMENT
STATE OF GEORGIA
COUNTY OF SUTTON
On this the 30th day of March, 1998, personally appeared Thomas M. Bluth, a
Vice President of Catalina Lighting, Inc., and the Secretary-Treasurer of
Catalina Industries, Inc., Catalina Real Estate Trust, Inc., Angel Station,
Inc., Meridian Lamps, Inc., Meridian Lamps Development, Inc., Catalina
Administrative Corporation and Catalina Merchandising, Inc., and before me,
executed this Thirteenth Amendment to Third Amended and Restated Credit
Agreement dated as of March 31, 1998.
In witness whereof, I have hereunto set my hand and official seal.
/s/ CATHERINE R. SMITH
-------------------------------------
NOTARY PUBLIC - STATE OF GEORGIA
Catherine R. Smith
-------------------------------------
(Type name of notary public)
Personally known: [X]
or produced identification:
Type of identification produced:
My commission expires: Notary Public,
Cobb County,
Georgia
My Commission
Expires Jan. 5,
1999
(NOTARIAL SEAL)
7
<PAGE>
SIGNATURE PAGE TO THIRTEENTH AMENDMENT
TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT BY AND BETWEEN SUNTRUST,
AS AGENT, THE CATALINA ENTITIES
AND THE BANKS
AGENT:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By: /s/ RONALD K. RUEVE
-------------------------------------
Name: Ronald K. Rueve
Title: Vice President
BANK:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By: /s/ RONALD K. RUEVE
-------------------------------------
Name: Ronald K. Rueve
Title: Vice President
ACKNOWLEDGEMENT
STATE OF GEORGIA
COUNTY OF SUTTON
On this the 30th day of March, 1998, personally appeared Ronald K. Rueve,
a Vice President of SunTrust Bank, Central Florida, National Association, a
national banking association, and before me, executed this Thirteenth Amendment
to Third Amended and Restated Credit Agreement as Agent and as a Bank.
In witness whereof, I have hereunto set my hand and official seal.
/s/ CHRISTINE B. ALFORD
-------------------------------------
NOTARY PUBLIC - STATE OF GEORGIA
Christine B. Alford
-------------------------------------
(Type name of notary public)
Personally known: [X]
or produced identification:
Type of identification produced:
My commission expires: Notary Public,
DeKolb County,
Georgia
My Commission
Expires June
29, 2001
(NOTARIAL SEAL)
8
<PAGE>
SIGNATURE PAGE TO THIRTEENTH AMENDMENT
TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT BY AND BETWEEN SUNTRUST,
AS AGENT, THE CATALINA ENTITIES
AND THE BANKS
BANK:
NATIONAL BANK OF CANADA,
a Canadian chartered bank
By: /s/ J. MICHAEL SMITH
-------------------------------------
Name: J. Michael Smith
Title: Vice President
ACKNOWLEDGEMENT
STATE OF NEW YORK
COUNTY OF NEW YORK
On this the 30th day of March, 1998, personally appeared J. Michael Smith,
a Vice President of National Bank of Canada, a Canadian Charter Bank, and before
me, executed this Thirteenth Amendment to Third Amended and Restated Credit
Agreement as a Bank.
In witness whereof, I have hereunto set my hand and official seal.
/s/ UNA TERESA FINN
-------------------------------------
NOTARY PUBLIC - STATE OF NEW YORK
Una Teresa Finn
-------------------------------------
(Type name of notary public)
UNA TERESA FINN Personally known: [ ]
Notary Public, State of New York or produced identification:
No. 01-F16058871 Type of identification produced:
Qualified in Queens County My commission expires:
Commission Expires March 11, 1999 (NOTARIAL SEAL)
9
<PAGE>
SIGNATURE PAGE TO THIRTEENTH AMENDMENT
TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT BY AND BETWEEN SUNTRUST,
AS AGENT, THE CATALINA ENTITIES
AND THE BANKS
BANK:
FIRST UNION NATIONAL BANK, f/k/a
First Union National Bank of Florida
By: /s/ CHARLES T. KLENK
-------------------------------------
Name: Charles T. Klenk
Title: Vice President
ACKNOWLEDGEMENT
NASSAU
BAHAMAS
On this the 31st day of March, 1998, personally appeared Charles T. Klenk,
a Vice President of First Union National Bank, a national banking association,
and before me, executed this Thirteenth Amendment to Third Amended and Restated
Credit Agreement as a Bank.
In witness whereof, I have hereunto set my hand and official seal.
/s/ ARTHUR SELIGMAN
-------------------------------------
NOTARY PUBLIC
Arthur Seligman
-------------------------------------
(Type name of notary public)
Personally known: [ ]
or produced identification: [X]
Type of identification produced:
Driver's License
My commission expires: 31st December
1998
(NOTARIAL SEAL)
10
<PAGE>
AFFIDAVIT OF OUT-OF-STATE DELIVERY
STATE OF GEORGIA
COUNTY OF FULTON
I, Christine B. Alford, being first duly sworn, upon my oath, depose and
say:
1. That I am an Admin. Assistant of SunTrust Banks, Inc. ("SunTrust").
2. That on the 30th day of March, 1997, I received via Federal Express
that certain Thirteenth Amendment to Third Amended and Restated Credit
Agreement (the "Thirteenth Amendment") dated as of March 31, 1998 by and
among Catalina Lighting, Inc. as the Borrower (the " Borrower"), the Guarantors
listed thereon, and SunTrust, individually and as Agent, National Bank of
Canada, and First Union National Bank, f/k/a First Union National Bank of
Florida (collectively, the "Lenders"), as the Lenders.
3. That I accepted delivery of the Thirteenth Amendment on behalf of the
Lenders in Atlanta, Georgia.
/s/ CHRISTINE B. ALFORD
-------------------------------------
Name: Christine B. Alford
Title: Administrative Assistant
Sworn to and subscribed before me this 1 day of April, 1998
/s/ MARY W. HARRELL
-------------------------------------
Signature of Notary Public, State of
Georgia
Mary W. Harrell
-------------------------------------
Stamp, Type or Print Commissioned
Name of Notary Public Personally
Known: [X]; or Produced Identification:
Type of Identification:
(NOTARIAL SEAL)
Notary Public [ILLEGIBLE] County, Georgia
My Commission Expires May 12, 2001
EXHIBIT 11
CATALINA LIGHTING, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF DILUTED EARNINGS (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------------- --------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Net income (loss) for diluted earnings per share $ 536 $ (4,988) $ 155 $ (4,966)
=============== =============== =============== ==============
Weighted average number of common shares
outstanding during the period 7,109 7,065 7,107 7,065
Add: common equivalent shares determined
using the Treasury Stock method
representing shares issuable upon exercise
of stock options and warrants and shares
issuable under contractual agreements 312 - 493 -
--------------- --------------- --------------- --------------
Weighted average number of shares
used in calculation of diluted earnings per share 7,421 7,065 7,600 7,065
=============== =============== =============== ==============
Diluted earnings (loss) per share $ 0.07 $ (0.71) $ 0.02 $ (0.70)
=============== =============== =============== ==============
</TABLE>
NOTE
Subordinated notes convertible into 1,040,000 common shares were not
included for 1998 and 1997 because their effect is anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 1,629
<SECURITIES> 0
<RECEIVABLES> 24,888
<ALLOWANCES> 8,288
<INVENTORY> 29,149
<CURRENT-ASSETS> 64,642
<PP&E> 28,926
<DEPRECIATION> 0
<TOTAL-ASSETS> 111,576
<CURRENT-LIABILITIES> 27,765
<BONDS> 9,110
0
0
<COMMON> 71
<OTHER-SE> 41,252
<TOTAL-LIABILITY-AND-EQUITY> 111,576
<SALES> 77,229
<TOTAL-REVENUES> 77,229
<CGS> 62,367
<TOTAL-COSTS> 62,367
<OTHER-EXPENSES> 12,998
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,047
<INCOME-PRETAX> 215
<INCOME-TAX> 60
<INCOME-CONTINUING> 155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,065
<SECURITIES> 0
<RECEIVABLES> 26,726
<ALLOWANCES> 8,089
<INVENTORY> 39,994
<CURRENT-ASSETS> 73,337
<PP&E> 27,890
<DEPRECIATION> 0
<TOTAL-ASSETS> 116,087
<CURRENT-LIABILITIES> 33,783
<BONDS> 10,095
0
0
<COMMON> 71
<OTHER-SE> 43,928
<TOTAL-LIABILITY-AND-EQUITY> 116,087
<SALES> 45,095
<TOTAL-REVENUES> 45,095
<CGS> 37,138
<TOTAL-COSTS> 37,138
<OTHER-EXPENSES> 7,083
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 843
<INCOME-PRETAX> 29
<INCOME-TAX> 7
<INCOME-CONTINUING> 22
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
