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, 1997
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: 0-5860
----------------------------
RECOTON CORPORATION
(Exact name of Registrant as Specified in its Charter)
NEW YORK 22-3326054
(State or Other (IRS Employer
Jurisdiction of Identification No.)
Incorporation or Organization)
2950 LAKE EMMA ROAD, LAKE MARY, FLORIDA 32746
(Address of principal executive offices, including zip code)
(407) 333-8900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
reporting requirements for the past 90 days. Yes /x/ No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 11,392,183 shares of Common
Stock, par value $.20 per share, as of May 12, 1997
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(TABULAR AMOUNTS IN THOUSANDS)
MARCH 31, DECEMBER 31,
------------ -------------
ASSETS 1997 1996
------ ------------ -------------
(UNAUDITED)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 11,492 $ 29,130
Accounts receivable (less allowance for doubtful
accounts of $3,723,000 in 1997 and $3,119,000
in 1996) 82,681 101,278
Inventories 111,875 106,987
Prepaid, refundable and deferred income taxes 13,080 12,182
Prepaid expenses and other current assets 9,547 8,687
---------- ----------
TOTAL CURRENT ASSETS 228,675 258,264
PROPERTY AND EQUIPMENT (at cost, less accumulated
depreciation and amortization) 30,960 30,578
TRADEMARKS AND PATENTS (less accumulated amortization) 5,287 5,509
GOODWILL (less accumulated amortization) 30,904 31,251
DEFERRED INCOME TAXES 5,999 5,985
OTHER ASSETS 3,608 3,146
----------- ---------
T O T A L $305,433 $334,733
=========== ==========
LIABILITIES
CURRENT LIABILITIES:
Bank loans and drafts payable $ 18,250 $ 42,945
Current portion of long-term debt 8,671 8,683
Accounts payable 26,990 28,634
Accrued expenses 16,020 17,834
Income taxes payable 1,227 1,361
----------- ----------
TOTAL CURRENT LIABILITIES 71,158 99,457
LONG-TERM DEBT (less current portion above) 100,511 101,753
OTHER NONCURRENT LIABILITIES 7,975 5,049
----------- ----------
TOTAL LIABILITIES 179,644 206,259
--------- --------
STOCKHOLDERS' EQUITY
PREFERRED STOCK - $1.00 par value each - authorized
10,000,000 shares; none issued -- --
COMMON STOCK - $.20 par value each - authorized
25,000,000 shares; issued 12,617,250 shares in
1997 and 12,597,982 shares in 1996 2,523 2,520
ADDITIONAL PAID-IN CAPITAL 75,932 75,913
RETAINED EARNINGS 57,709 57,177
CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT (4,260) (1,021)
------------ ---------
TOTAL 131,904 134,589
TREASURY STOCK - 1,225,067 shares in 1997 and
1996, at cost (6,115) (6,115)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 125,789 128,474
--------- --------
T O T A L $305,433 $334,733
========== ==========
The attached notes are made a part hereof.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
----- ------
<S> <C> <C>
NET SALES $95,761 $54,561
COST OF SALES 59,623 33,619
-------- --------
GROSS PROFIT 36,138 20,942
-------- --------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 34,819 18,302
INTEREST EXPENSE 2,574 647
INVESTMENT INCOME (322) (64)
--------- ----------
T O T A L 37,071 18,885
------- -------
INCOME (LOSS) BEFORE INCOME TAXES (933) 2,057
INCOME TAX (PROVISION) CREDIT 1,465 (451)
-------- ---------
NET INCOME $ 532 $ 1,606
======== =======
INCOME PER SHARE:
PRIMARY $ .05 $.14
======= ====
ASSUMING FULL DILUTION $ .05 $.14
======== =====
AVERAGE NUMBER OF SHARES USED IN COMPUTING
PER SHARE AMOUNTS:
PRIMARY 11,580 11,668
====== ======
ASSUMING FULL DILUTION 11,580 11,682
====== ======
DIVIDENDS NONE NONE
====== ======
The attached notes are made a part hereof.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(TABULAR AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1997 1996
---------- ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 532 $ 1,606
-------- --------
Adjustments to reconcile results of operations to net cash provided by
operating activities:
Depreciation 1,892 967
Amortization of intangibles 859 508
Provision for losses on accounts receivable 271 65
Deferred income taxes (421) (83)
Change in asset and liability accounts
(net of effects of acquisitions):
Accounts receivable 18,210 8,036
Inventory (1,293) 472
Prepaid and refundable income taxes (521)
Prepaid expenses and other current assets (630) (949)
Other assets (1,244) (170)
Accounts payable and accrued expenses (4,831) (4,483)
Income taxes payable (85) (2,308)
Other noncurrent liabilities 1,039 (11)
-------- ---------
TOTAL ADJUSTMENTS 13,246 2,044
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,778 3,650
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions (net of cash acquired of
approximately $97,000 in 1997) (267)
Expenditures for trademarks, patents and
intellectual property (17) (44)
Expenditures for property and equipment (1,793) (2,267)
Loan to International Jensen Incorporated (2,000)
----------- -------
NET CASH USED FOR INVESTING ACTIVITIES (2,077) (4,311)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under credit agreements and bridge loans $(99,933) $(4,418)
Net proceeds from sale of senior notes 75,000
Repayments of bank loans assumed upon
acquisition of businesses (2,767)
Repayment of long-term bank borrowings (1,254) (1,509)
Proceeds from exercise of stock options 22 494
Income tax benefit applicable to exercise of stock options 192
---------- --------
NET CASH USED FOR FINANCING ACTIVITIES (28,932) (5,241)
-------- -------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES
ON CASH OF FOREIGN SUBSIDIARIES (407) (8)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17,638) (5,910)
CASH AND CASH EQUIVALENTS - JANUARY 1 29,130 12,393
-------- -------
CASH AND CASH EQUIVALENTS - MARCH 31 $11,492 $ 6,483
======= =======
SUPPLEMENTAL DISCLOSURES:
INTEREST PAID $ 1,836 $ 660
======== ========
INCOME TAXES PAID (REFUNDS RECEIVED) $ (1,059) $ 2,678
======== =======
The attached notes are made a part hereof.
</TABLE>
<PAGE>
RECOTON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE A - The attached summarized financial information does not
include all disclosures required to be included in a
complete set of financial statements prepared in
conformity with generally accepted accounting
principles. Such disclosures were included with the
consolidated financial statements of the Company at
December 31, 1996, included in its annual report on
Form 10-K. Such statements should be read in
conjunction with the data herein.
NOTE B - The financial information reflects all normal
recurring adjustments which, in the opinion of
management, are deemed necessary for a fair presentation
of the results for the interim periods. The results
for the interim periods are not necessarily indicative
of the results to be expected for the year.
Historically, the Company's sales and earnings have
been higher in the second half of each year.
NOTE C - Inventory at March 31, 1997 is comprised of:
Raw materials and work-in-process $ 26,671
Finished goods 76,718
Merchandise in-transit 8,486
-----------
T O T A L $111,875
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of the quarters ended March 31, 1997 and 1996:
RESULTS OF OPERATIONS
Net sales for the first quarter of 1997 increased by 75.5% to $95.8
million from $54.6 million in the same period in 1996. The sales increase is
attributable to sales of the speaker and related product lines which were
procured with the acquisition of International Jensen Incorporated (now known as
Recoton Audio Corporation, or RAC) in late August 1996 and to increased sales of
the InterAct and STD video game and multi-media product lines. RAC's net sales
were $35.9 million for the first quarter of 1997; the balance of the increase
was due predominantly to increased sales at Interact/STD.
Gross profit for the first quarter of 1997 increased by approximately $15.2
million as compared to the first quarter of 1996, and decreased as a percentage
of net sales from 38.4% to 37.7%. The dollar increase is a result of increased
sales volume, while the percentage decrease was primarily attributable to
aggressive pricing in a soft consumer electronics sales environment and lower
gross margins on the Company's speaker products.
Selling, general and administrative expenses for the first quarter of
1997 increased by approximately $16.5 million to $34.8 million as compared to
the first quarter of 1996, and increased as a percentage of net sales from 33.5%
to 36.4%. The major portion of the dollar and percentage increases was
attributable to the acquired RAC operations and the inclusion of Christie Design
Corporation for a full quarter (Christie began shipments in March of 1996). As
the consolidation of the RAC operations into the Company's Florida facilities
occurs, currently planned for the latter half of 1997, certain duplicate
selling, general and administrative expenses which occurred during the first
quarter of 1997 should be eliminated.
Interest expense (net of interest income) increased by approximately
$1.7 million to $2.3 million in the first quarter of 1997 as compared to the
first quarter of 1996. The increase is primarily attributable to the increased
debt associated with the acquisition and operations of RAC, acquired in August
1996. Interest is expected to remain higher in 1997 than in 1996 as a result of
the additional debt incurred.
The Company incurred a quarterly loss before income taxes of $.9
million for 1997 as compared to an income before income taxes of $2.1 million in
the first quarter of 1996. The major portion of the loss is attributable to
losses incurred from the operations of RAC and related expenses; namely, $2.1
million in interest expense and $.2 million in amortization of intangible
assets.
The Company's income taxes and effective consolidated income tax rate
have been affected by changes in the proportion of domestic and foreign earnings
which have occurred primarily after the acquisition of STD in September 1995.
While earnings from North America and Western Europe are primarily taxed at or
close to United States income tax rates, earnings from the Company's Asian
operations are taxed at a maximum rate of 16.50%. The Company's pretax loss of
$.9 million for the three months ended March 31, 1997 is comprised of the excess
of domestic losses over foreign (primarily Asian) earnings. This resulted in an
income tax credit which exceeded the consolidated pretax loss for the period
since the tax credits attributable to the domestic losses were
disproportionately higher than the income tax expense attributable to the
foreign earnings. Management is unable to estimate whether the Company's
effective income tax rate for the first quarter of 1997 will be indicative of
its effective income tax rate for the year ending December 31, 1997, or
thereafter because of changes in the proportion of domestic and foreign taxable
earnings which might occur.
Earnings per share were $.05 on both a primary and fully-diluted basis
for the three months ended March 31, 1997 based on 11,580,000 average common and
common equivalent shares outstanding (on both a primary and fully-diluted
basis). For the comparable three months of 1996, earnings per share were $.14 on
both a primary and fully-diluted basis. The 1996 per share calculations were
based on 11,668,000 (11,682,000 on a fully-diluted basis) average common and
common equivalent shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
In August 1996, the Company entered into a multibank $120 million
bridge facility, which was subsequently increased to $135 million, to
accommodate the acquisition of RAC and to finance the Company's on-going
operations. In January 1997, the Company completed a $75 million private
placement of 10-year senior notes, the proceeds of which were utilized to reduce
the bridge facility, which facility was then converted and increased to a
four-year $15 million term loan and a three-year $50 million committed revolving
line of credit. The four-year term loan refinanced at more favorable interest
rates $15 million of RAC indebtedness assumed on its acquisition. At March 31,
1997, outstanding borrowings and letters of credit under the revolving facility
were approximately $30.9 million.
At March 31, 1997, the Company had working capital of approximately
$157.5 million as compared to approximately $158.8 million at December 31, 1996.
However, the Company's ratio of current assets to current liabilities increased
to 3.2 to 1 at March 31, 1997 as compared with 2.6 to 1 at December 31, 1996.
The increase in the working capital ratio is primarily the result of decreases
in both current assets and current liabilities due to normal seasonal
fluctuations.
In August 1994, the Board of Directors authorized the repurchase by the
Company of up to 500,000 outstanding Common Shares. In 1995, 42,366 shares were
purchased for $.7 million; no shares were repurchased pursuant to such
authorization in 1996 or in the three months ended March 31, 1997. In June 1996,
the Board of Directors authorized, under certain circumstances, the purchase
from time to time of additional shares of the Company's stock from certain
officers. In July 1996, the Company purchased 65,000 shares of stock from an
officer, for approximately $1.2 million. Any future repurchases may be limited
by the terms of the Company's new loan agreements.
In April 1995, Recoton formed Christie Design Corporation, then located
in Chatsworth, California. This wholly-owned subsidiary, which develops and
markets speaker products, commenced manufacturing and shipments in March 1996.
Through March 31, 1997, the Company has expended approximately $3.9 million of
start-up and capital costs for this subsidiary.
In September 1995, Recoton acquired STD, a Hong Kong-based
international manufacturer and marketer of multimedia and computer accessories,
including video game joysticks, controllers and accessories and computer
speakers sold under the InterAct and STD brand names. STD's operations are in
Hong Kong, the People's Republic of China and Maryland (U.S.A.). The total cost
of the purchase of $22.7 million was paid through a combination of cash and
406,092 Recoton Common Shares (valued at $8.3 million). In connection with the
acquisition, the Company assumed notes and loans payable of approximately $6.1
million. The cash portion of the purchase price was initially borrowed under
existing bank lines of credit. In December 1995, the Company obtained a
five-year bank term loan to replace these borrowings.
In August 1996, Recoton acquired the branded product lines of RAC (then
known as International Jensen Incorporated), a leading marketer of home and
automotive loudspeakers and automotive electronics, for a total cost of
approximately $60.2 million, which includes closing costs and estimated
consolidation costs. In connection with the acquisition, Recoton assumed
approximately $34 million in notes and loans payable. The transaction occurred
by merger with a Recoton subsidiary, after the sale of Jensen's original
equipment manufacturing business to a third party.
In December 1996, the Company, through a German subsidiary, acquired
selected assets of Heco GmbH and Heco Electronics GmbH (both in Germany) for a
cost of approximately $1.3 million. Heco is a leading brand of home speakers in
Germany.
In February 1997, Recoton acquired the outstanding stock of Tambalan
Limited (Tambalan) at a cost of approximately $285,000 and assumed certain
outstanding debt of approximately $2.9 million. Tambalan markets headphones and
other consumer electronics products in the United Kingdom and other European
countries under the trade name Ross Consumer Products. Tambalan is located in
England and also has a branch operation in Hong Kong.
The Company began construction of a 318,000 square foot expansion of
its warehouse on its Lake Mary, Florida property. The estimated cost of the
building construction is approximately $5 million.
To date foreign currency fluctuations have not materially affected the
company's results of operations. The Company believes there is currently a
limited exposure to loss due to foreign currency risks in its Asian
subsidiaries. The Hong Kong dollar has been pegged to the U.S. dollar at an
official exchange rate of HK $7.73 to US $1.00. Historically, there have been no
material fluctuations in the Hong Kong/United States and the Hong Kong/Chinese
exchange rates. However, as a result of the RAC, Heco and Tambalan acquisitions,
the Company's newly acquired operations in Western Europe are exposed to
variations in foreign exchange rates. Due to the strengthening of the U.S.
dollar against foreign currencies in the first quarter of 1997, the Company's
stockholders' equity was reduced by a foreign currency translation adjustment of
approximately $3 million. If there are any further material adverse changes in
the relationships between the European and Canadian currencies with the United
States dollar, such changes could adversely affect the results of the Company's
European and Canadian operations.
The Company has no other material commitments for capital expenditures,
although it will continue to evaluate possible acquisitions which may be
attractive to the growth of the Company.
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
When used in this Form 10-Q and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases and in
oral statements made with the approval of an authorized executive officer, the
words or phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," "expect," "believe," "hope" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
such forward-looking statements, which speak only as of the date made.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
(10.32) Amendment Agreement to Note Purchase
Agreement dated January 6, 1997 between Recoton Corporation
and the several purchasers, dated as of May 13, 1997
(27) Financial Data Schedule
(b) Reports on Form 8-K: none
<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.
RECOTON CORPORATION
/S/ STUART MONT
Stuart Mont
COO, CFO, Exec. V. P.-Operations,
Secretary
/S/ JOSEPH H. MASSOT
Joseph H. Massot
Vice President,
Treasurer, Asst. Sec. and
Principal Accounting Officer
Dated: May 13, 1997
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION
10.32 Amendment Agreement to Note
Purchase Agreement dated
January 6, 1997 between Recoton
Corporation and the several
purchasers, dated as of May 13, 1997
27 Financial Data Schedule
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (this "AGREEMENT"), dated as of May 13, 1997, by and
among RECOTON CORPORATION, a New York corporation (together with its successors
and assigns, the "COMPANY"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, JOHN
HANCOCK MUTUAL LIFE INSURANCE COMPANY, JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY, MELLON BANK, N.A. (SOLELY IN ITS CAPACITY AS TRUSTEE FOR THE LONG TERM
INVESTMENT TRUST, AS DIRECTED BY JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, AND
NOT IN ITS INDIVIDUAL CAPACITY), JOHN HANCOCK LIFE INSURANCE COMPANY OF AMERICA
and MELLON BANK, N.A. (SOLELY IN ITS CAPACITY AS TRUSTEE FOR THE NYNEX MASTER
PENSION TRUST, AS DIRECTED BY JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, AND
NOT IN ITS INDIVIDUAL CAPACITY) (collectively, the "NOTEHOLDERS").
RECITALS:
A. The Company has entered into that certain Note Purchase Agreement, dated
as of January 6, 1997 (the "EXISTING NOTE PURCHASE AGREEMENT" and, as amended
hereby, the "AMENDED NOTE PURCHASE AGREEMENT" ), with the Noteholders, pursuant
to which the Company originally issued and sold to the Noteholders an aggregate
principal amount of $75,000,000 of the Company's Adjustable Rate Senior Notes
due January 6, 2007.
B. The Noteholders are the current holders of 100% of the Notes outstanding
as of the date hereof (the "AMENDMENT DATE").
C. The Company has requested that certain of the provisions in the Existing
Note Purchase Agreement be amended, as more particularly provided herein.
D. The Noteholders are agreeable, subject to the terms and conditions set
forth below, to amending the Existing Note Purchase Agreement, and in connection
therewith, the Company and the Noteholders have agreed to amend the Existing
Note Purchase Agreement as set forth herein.
E. Unless otherwise expressly provided for herein, capitalized terms used
herein and defined in the Existing Note Purchase Agreement are used herein with
the meanings ascribed to them in the Existing Note Purchase Agreement.
AGREEMENT:
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. AMENDMENTS.
The Company and, subject to the satisfaction of the conditions set forth in
Section 4, the Noteholders hereby consent and agree to the following amendments
to the Existing Note Purchase Agreement, such amendments to be deemed to have
been in effect on and after the Closing Date:
(I) PARAGRAPH 6C -- subclause (a) of clause (iii) of paragraph 6C
shall be amended and restated in its entirety as follows:
(a) the sum of (x) Consolidated Funded Debt plus (y) Excess
Current Debt shall be less than or equal to
(1) $110,000,000, if the incurrence of such Funded Debt
occurs on or after the Closing Date and before June 30, 1997,
(2) 55% of Consolidated Tangible Gross Worth, determined as
at the end of the then most recently ended fiscal quarter of the
Company, if the incurrence of such Funded Debt occurs on or after
June 30, 1997 and prior to December 31, 1997, and
(3) 50% of Consolidated Tangible Gross Worth, determined as
at the end of the then most recently ended fiscal quarter of the
Company, if the incurrence of such Funded Debt occurs after
December 31, 1997, and
(II) PARAGRAPH 6E -- paragraph 6E shall be amended and restated in its
entirety as follows:
6E. NET WORTH. The Company will not at any time permit
Consolidated Tangible Net Worth to be less than
(i) if such time is on or after the Closing Date and before
June 30, 1997, $87,000,000, and
(ii) if such time is on or after June 30, 1997, the sum of
(a) $90,000,000, plus
(b) the sum of the Annual Net Worth Increase
Amounts for all fiscal years ended after the Closing Date.
"Annual Net Worth Increase Amount" means, for any fiscal
year of the Company ended after December 31, 1996, the greater of
(a) 50% of Consolidated Net Income for such fiscal year and (b)
$0.
SECTION 2. AFFIRMATION.
The Company hereby acknowledges and affirms all of its obligations under
the terms of the Note Purchase Agreement.
SECTION 3. WARRANTIES AND REPRESENTATIONS.
To induce the Noteholders to enter into this Agreement, the Company
warrants and represents to the Noteholders that as of the Amendment Date:
3.1 ACTIONS PENDING. Except as set forth in Part 8C of Annex 3 to the Note
Purchase Agreement, there is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of the Subsidiaries, or any Properties of the Company or any of the
Subsidiaries, by or before any court, arbitrator or administrative or
governmental body which might result in any material adverse change in the
business, condition (financial or otherwise) or operations of the Company and
the Subsidiaries taken as a whole.
3.2 NO DEFAULTS. No Defaults or Events of Default exist under the terms of
the Amended Note Purchase Agreement.
SECTION 4. CONDITIONS.
The consent of the Noteholders to the amendments set forth in Section 1
shall be effective as of the Closing Date upon the execution hereof by the
Company and the Required Holders and receipt of an executed copy of an
acceptable waiver of any violations of covenants contained in the Bank Credit
Agreement.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK.
5.2 DUPLICATE ORIGINALS.
Two or more duplicate originals of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Agreement may be executed in one or
more counterparts and shall be effective when at least one counterpart shall
have been executed by the Company and the Required Holders, and each set of
counterparts which, collectively, show execution by each party hereto shall
constitute one duplicate original.
5.3 EFFECT OF THIS AGREEMENT.
Except as specifically provided in this Agreement, no terms or provisions
of the Existing Note Purchase Agreement have been modified or changed by this
Agreement and the terms and provisions of the Existing Note Purchase Agreement,
as amended hereby, shall continue in full force and effect.
5.4 WAIVERS AND AMENDMENTS OF THIS AGREEMENT.
Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated orally, or by any action or inaction, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
5.5 SECTION HEADINGS.
The titles of the sections hereof appear as a matter of convenience only,
do not constitute a part of this Agreement and shall not affect the construction
hereof.
5.6 COSTS AND EXPENSES.
The Company shall pay promptly (and in any event within 30 days of
receiving a statement therefor) all costs and expenses of the Noteholders
related hereto, including, but not limited to, the statement for fees and
disbursements of the Noteholders' special counsel for matters in connection with
this Agreement. The obligations of the Company under this Section 5.6 shall
survive the payment or prepayment of the Notes and the termination of the
Amended Note Purchase Agreement.
5.7 SURVIVAL.
All warranties, representations, certifications and covenants made by the
Company hereunder, or in any certificate or other instrument delivered pursuant
hereto or thereto, shall be considered to have been relied upon by the
Noteholders and shall survive the execution of this Agreement regardless of any
investigation made by or on behalf of the Noteholders.
5.8 SUBSIDIARY CONSENTS.
The Company covenants to obtain an executed consent to this Agreement from
each of its Subsidiaries that is a party to a Subsidiary Guaranty within ten
days after the date hereof. This covenant shall be deemed to be an agreement of
the type referred to in paragraph 7A(iv) of the Amended Note Purchase Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by a duly authorized officer or agent thereof, as the
case may be, as of the date first above written.
RECOTON CORPORATION
By
----------------------------------------
Name:
Title:
The foregoing Agreement is hereby accepted as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By
Name: Kevin J. Kraska
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By
Name:
Title:
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By
Name:
Title:
[Signature page to the Amendment Agreement among Recoton
Corporation and the Noteholders listed therein.]
<PAGE>
MELLON BANK, N.A., SOLELY IN ITS CAPACITY AS TRUSTEE FOR THE LONG TERM
INVESTMENT TRUST, (AS DIRECTED BY JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY),
AND NOT IN ITS INDIVIDUAL CAPACITY
The decision to participate in this investment, any representations made herein
by the participant, and any actions taken hereunder by the participant has/have
been made solely at the discretion of the investment fiduciary who has sole
investment discretion with respect to this investment.
By [SEAL]
Name:
Title:
JOHN HANCOCK LIFE INSURANCE COMPANY OF AMERICA
By
Name:
Title:
MELLON BANK, N.A., SOLELY IN ITS CAPACITY AS TRUSTEE FOR THE NYNEX MASTER
PENSION TRUST, (AS DIRECTED BY JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY), AND
NOT IN ITS INDIVIDUAL CAPACITY
The decision to participate in this investment, any representations made herein
by the participant, and any actions taken hereunder by the participant has/have
been made solely at the direction of the investment fiduciary who has sole
investment discretion with respect to this investment By [SEAL] Name: Title:
By [SEAL]
Name:
Title:
<PAGE>
[Signature page to the Amendment Agreement among Recoton Corporation and the
Noteholders listed therein.]
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at March 31, 1997 (Unaudited) and
the Condensed Consolidated Statement of Operations for the Three Months Ended
March 31, 1997 (Unaudited) 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> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,492
<SECURITIES> 0
<RECEIVABLES> 86,404
<ALLOWANCES> 3,723
<INVENTORY> 111,875
<CURRENT-ASSETS> 228,675
<PP&E> 43,580
<DEPRECIATION> 12,620
<TOTAL-ASSETS> 305,433
<CURRENT-LIABILITIES> 71,158
<BONDS> 100,511
0
0
<COMMON> 2,523
<OTHER-SE> 123,266
<TOTAL-LIABILITY-AND-EQUITY> 305,433
<SALES> 95,761
<TOTAL-REVENUES> 96,083
<CGS> 59,623
<TOTAL-COSTS> 59,623
<OTHER-EXPENSES> 34,548
<LOSS-PROVISION> 271
<INTEREST-EXPENSE> 2,574
<INCOME-PRETAX> (933)
<INCOME-TAX> (1,465)
<INCOME-CONTINUING> 532
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 532
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
