SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
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 0-20450
-------
PlayCore, Inc.
--------------
(Exact name of registrant as specified in its charter.)
Delaware 36-3808989
- ------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
15 West Milwaukee Street, Janesville, Wisconsin 53545
-----------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code (608)741-7183.
-------------
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 twelve 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 ninety 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: as of May 5, 2000 there were
7,982,104 shares of Common Stock, par value $.01 per share, outstanding.
<PAGE>
PLAYCORE, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2000
INDEX
Part I. Financial Information: Page
----
Unaudited Consolidated Balance Sheets -
December 31, 1999 and March 31, 2000 3
Unaudited Consolidated Interim Statements of Operations
and Retained Earnings -
Three Months Ended March 31, 1999 and 2000 4
Unaudited Consolidated Interim Statements of Cash Flows-
Three Months Ended March 31, 1999 and 2000 5
Notes to Unaudited Interim Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Quantitative and Qualitative Disclosure about Market Risk 10
Part II. Other Information
Item 1 - Legal Proceedings
Item 6 - Exhibits and Reports on Form 8-K 12
Signature 13
2
<PAGE>
<TABLE>
PlayCore, Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands, except share data)
<CAPTION>
December 31, March 31,
ASSETS 1999 2000
----------- -----------
Current assets:
<S> <C> <C>
Cash $ 800 $ 811
Accounts receivable, less allowance for doubtful accounts of $666 and $704 28,302 28,457
Other receivables 1,219 1,367
Inventories 19,124 23,910
Refundable income taxes 1,169 723
Prepaid expenses 3,099 4,770
Deferred income taxes 1,855 1,730
----------- -----------
Total current assets 55,568 61,768
Property, plant and equipment, net 26,688 27,255
Deferred financing and other costs, net of accumulated amortization of $2,537 and $2,796 3,557 3,373
Identifiable intangible assets, net of accumulated amortization of $1,169 and $1,250 6,358 6,277
Goodwill, net of accumulated amortization of $6,621 and $7,000 47,768 47,389
Other long-term assets 372 363
----------- -----------
$ 140,311 $ 146,425
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan $ 25,105 $ 32,881
Accounts payable 9,319 11,566
Accrued expenses 15,410 12,493
Current portion of long-term debt 9,087 9,268
----------- -----------
Total current liabilities 58,921 66,208
Long-term debt, net of current portion 46,232 45,381
Convertible subordinated debentures payable to stockholders 7,258 7,258
Deferred income taxes 4,269 4,575
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
no shares issued or outstanding - -
Common stock, $.01 par value, 25,000,000 shares authorized,
11,575,599 and 11,593,989 shares issued 116 116
Class B common stock, $.01 par value, 1,750,000 shares authorized,
no shares issued or outstanding - -
Additional paid-in capital 37,692 37,780
Retained earnings 26,334 25,618
Less 3,634,385 common shares held in treasury, at cost (40,511) (40,511)
----------- -----------
Total stockholders' equity 23,631 23,003
----------- -----------
$ 140,311 $ 146,425
=========== ===========
Note: The consolidated balance sheet at December 31, 1999 has been derived from the
audited consolidated balance sheet at that date.
See notes to interim consolidated financial statements
</TABLE>
3
<PAGE>
PlayCore, Inc.
Consolidated Interim Statements of Operations and Retained Earnings
(unaudited)
(in thousands, except per share amounts)
Three months Three months
ended ended
March 31, March 31,
1999 2000
------------ ------------
Net sales $ 31,473 $ 38,511
Cost of goods sold 18,283 23,514
------------ ------------
Gross profit 13,190 14,997
Operating expenses:
Selling 6,392 6,970
General and administrative 3,666 5,818
Amortization of intangible assets 590 719
------------ ------------
10,648 13,507
------------ ------------
Operating income 2,542 1,490
Other expense:
Interest expense 1,938 2,403
Other, net 112 241
------------ ------------
Total other expense 2,050 2,644
------------ ------------
Income(loss) before income taxes 492 (1,154)
Income tax expense(benefit) 200 (438)
------------ ------------
Net income(loss) 292 (716)
Retained earnings at beginning of period 19,248 26,334
------------ ------------
Retained earnings at end of period $ 19,540 $ 25,618
============ ============
Earnings(loss) per share:
Basic $ 0.04 $ (0.09)
Diluted 0.03 (0.09)
See notes to interim consolidated financial statements
4
<PAGE>
<TABLE>
PlayCore, Inc.
Consolidated Interim Statements of Cash Flows
(unaudited)
(in thousands)
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
1999 2000
------------ ------------
Operating activities
<S> <C> <C>
Net income(loss) $ 292 $ (716)
Adjustments to reconcile net income(loss) to
net cash used by operating activities:
Amortization of debt discount 91 91
Deferred income taxes 300 431
Depreciation 666 926
Amortization of intangible assets 590 719
Changes in operating assets and liabilities (8,459) (6,985)
------------ ------------
Net cash used by operating activities (6,520) (5,534)
Investing activities
Purchase of property, plant and equipment (2,241) (1,483)
Acquisitions, including transaction costs and net of cash acquired (14,148) -
------------ ------------
Net cash used by investing activities (16,389) (1,483)
Financing activities
Increase in revolving loan 14,000 7,776
Issuances of long-term debt 10,323 -
Debt issuance costs incurred (843) (75)
Proceeds from issuance of common stock 14 88
Payments of long-term debt (445) (761)
------------ ------------
Net cash provided by financing activities 23,049 7,028
------------ ------------
Increase in cash 140 11
Cash at beginning of period 487 800
------------ ------------
Cash at end of period $ 627 $ 811
============ ============
Supplemental disclosure of cash flows information-
Cash paid (received) during period for:
Interest $ 1,899 $ 1,816
Income taxes refunded - (1,385)
See notes to interim consolidated financial statements
</TABLE>
5
<PAGE>
PlayCore, Inc.
Notes to Interim Consolidated Financial Statements
Unaudited
(in thousands)
March 31, 2000
1. Basis of presentation of unaudited consolidated financial statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for interim financial information. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for year end financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three months ended March 31, 2000 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000. For further
information refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
2. Earnings per share
The following table sets forth the computation of basic and diluted
earnings per share:
Three months Three months
ended ended
March 31, March 31,
1999 2000
------------ ------------
Numerator:
Numerator for basic and diluted earnings
per share -
Net income (loss) $ 292 $ (716)
============ ============
Denominator:
Denominator for basic earnings per share -
weighted average shares 7,910 7,956
Effect of diluted securities:
Employee stock options(treasury stock
method) 114 -
Warrants 627 -
------------ ------------
Denominator for diluted earnings per share 8,651 7,956
============ ============
3. Inventories
Inventories consisted of the following:
December 31, March 31,
1999 2000
------------ ------------
Finished goods and work in process $ 10,699 $ 12,235
Raw materials 8,425 11,675
------------ ------------
$ 19,124 $ 23,910
============ ============
4. Segment Reporting
Three months ended March 31, 1999
-------------------------------------
Commercial Consumer Total
---------- -------- --------
Revenues from external customers $ 14,011 $ 17,462 $ 31,473
Segment profit (loss) 331 (39) 292
Three months ended March 31, 2000
-------------------------------------
Commercial Consumer Total
---------- -------- --------
Revenues from external customers $ 14,781 $ 23,730 $ 38,511
Segment profit (loss) 271 (987) (716)
6
<PAGE>
PlayCore, Inc.
Notes to Interim Consolidated Financial Statements
Unaudited
(in thousands)
March 31, 2000
5. Acquistion by Chartwell Investments II LLC
On April 13, 2000, the Company entered into a definitive agreement and plan
of merger with a newly-formed affiliate of Chartwell Investments II LLC
("Chartwell") providing for the acquisition of all of the outstanding
shares of PlayCore for $10.10 per share in cash. As part of the
transaction, GreenGrass Holdings, PlayCore's majority shareholder, has
agreed to sell all of its shares of PlayCore common stock to the Chartwell
affiliate. GreenGrass Holdings owns approximately 72 percent of the
outstanding shares of PlayCore. The board of directors of PlayCore
unanimously approved the transaction. PlayCore and the Chartwell affiliate
have initiated a joint tender offer. The completion of the tender offer is
subject to certain conditions, including the tender of 1,367,947 shares,
representing 50.1 percent of the publicly-held shares not owned by
GreenGrass Holdings and and current directors and officers of PlayCore; the
receipt of funds from the lenders; and expiration of a waiting period under
the U.S. Hart-Scott-Rodino Act. Any shares of PlayCore common stock not
purchased in the tender offer will be acquired in a subsequent merger
transaction at the same $10.10 per share cash price.
7
<PAGE>
Management's Discussion and Analysis
of
Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
Certain matters discussed herein are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "anticipates,"
"expects" or words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are forward-looking statements. Such
forward-looking statements are subject to certain risks and uncertainties which
are described in close proximity to such statements and which could cause actual
results to differ materially from those currently anticipated. Readers are urged
to consider these factors carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements made herein are only made as of the
date of this report and the Company undertakes no obligation to publicly update
such forward-looking statements to reflect subsequent events or circumstances.
Acquisition by Chartwell Investments II LLC
On April 13, 2000, the Company entered into a definitive agreement and plan of
merger with a newly-formed affiliate of Chartwell Investments II LLC
("Chartwell") providing for the acquisition of all of the outstanding shares of
PlayCore for $10.10 per share in cash. As part of the transaction, GreenGrass
Holdings, PlayCore's majority shareholder, has agreed to sell all of its shares
of PlayCore common stock to the Chartwell affiliate. GreenGrass Holdings owns
approximately 72 percent of the outstanding shares of PlayCore. The board of
directors of PlayCore unanimously approved the transaction. PlayCore and the
Chartwell affiliate have initiated a joint tender offer. The completion of the
tender offer is subject to certain conditions, including the tender of 1,367,947
shares, representing 50.1 percent of the publicly-held shares not owned by
GreenGrass Holdings and current directors and officers of PlayCore; the receipt
of funds from the lenders; and expiration of a waiting period under the U.S.
Hart-Scott-Rodino Act. Any shares of PlayCore common stock not purchased in the
tender offer will be acquired in a subsequent merger transaction at the same
$10.10 per share cash price.
Results of Operations:
On February 16, 1999, the Company acquired all of the capital stock of Heartland
Industries, Inc. (Heartland), a maker of backyard wooden storage buildings. The
acquisition of Heartland was accounted for using the purchase method. Therefore,
the results of Heartland are included with those of the Company beginning with
the date of acquisition.
Three months ended March 31, 2000, compared to the three months ended March 31,
1999.
Net Sales. Net sales increased $7.0 million, or 22.4 percent, to $38.5 million
for the three months ended March 31, 2000 as compared to $31.5 million for the
same period a year ago. Sales of the Company's consumer products increased $6.2
million, or 35.9 percent, to $23.7 million for the
8
<PAGE>
three months ended March 31, 2000 as compared to $17.5 million for the same
period a year ago. This increase in sales is mainly attributable to the
inclusion of Heartland sales for the entire first quarter of 2000 versus the
inclusion of Heartland sales for only February 16 through March 31 in 1999.
Sales of the Company's commercial products increased $0.8 million, or 5.5
percent, to $14.8 million for the three months ended March 31, 2000 as compared
to $14.0 million for the same period in 1999.
Gross Profit. Gross profit increased $1.8 million, or 13.7 percent, to $15.0
million but decreased as a percentage of net sales to 38.9 percent for the three
months ended March 31, 2000 as compared to $13.2 million and 41.9 percent for
the same period a year ago. The main reason for the decline in the gross profit
margin is a greater percentage of sales attributable to Heartland's wooden
storage buildings, which have a lower profit margin than playground equipment.
Selling Expense. Selling expense increased $0.6 million, or 9.0 percent, to $7.0
million but declined as a percentage of net sales to 18.1 percent for the first
three months of 2000 as compared to $6.4 million and 20.3 percent for the three
months ended March 31, 1999. The decrease as a percentage of net sales was due
to the impact of higher sales volume on fixed selling expenses and the lower
selling costs as a percentage of net sales associated with wooden storage
building sales.
General and Administrative Expenses. General and administrative expenses
increased $2.1 million, or 58.7 percent, to $5.8 million and increased as a
percentage of net sales to 15.1 percent for the three months ended March 31,
2000 as compared to $3.7 million and 11.6 percent for the same period a year
ago. The dollar increase was primarily due to the inclusion of Heartland's
general and administrative expenses for the entire first quarter of 2000 versus
the inclusion of Heartland's general and administrative expenses for only
February 16 through March 31 in 1999. The increase as a percentage of net sales
was mainly due to higher general and administrative expenses as a percentage of
net sales associated with wooden storage building sales.
Amortization of Intangible Assets. Amortization of financing fees, goodwill and
other intangible assets was $0.7 million for the three months ended March 31,
2000 as compared to $0.6 million for the same period a year ago. Additional
amortization resulted from goodwill and financing fees associated with the
Heartland acquisition.
Other Expense. Interest expense was $2.4 million for the three months ended
March 31, 2000 as compared to $1.9 million for the same period in 1999. This
increase in interest expense was due to the additional debt that was incurred in
connection with the February 1999 acquisition of Heartland.
Seasonality
The Company's sales pattern is seasonal and is concentrated in the period from
April 1 through September 30 (approximately 60 percent). The timing of initial
stocking orders and fluctuations in customer demand through the spring and
summer months contribute to this pattern.
9
<PAGE>
Liquidity and Capital Resources
During the three months ended March 31, 2000, total indebtedness increased $7.1
million to $94.8 million primarily as a result of increased levels of working
capital to meet the seasonal increase in production levels.
The Company's primary sources of working capital are cash flows from operations
and borrowings under PlayCore Wisconsin's senior credit facility, which was
entered into in March 1997, amended in February 1999, March 2000 and April 2000,
and runs through June 2003. PlayCore Wisconsin, Inc. is a wholly owned
subsidiary of the Company. The PlayCore Wisconsin facility consists of (a) a
$33.0 million revolving credit facility; (b) a $38.0 million Term A facility and
(c) a $9.0 million Term B facility. The revolving loan facility will reduce to
$28.0 million after July 31, 2000. The entire facility is guaranteed by
PlayCore, Inc. and secured by a first priority mortgage or security interest in
all of PlayCore Wisconsin's tangible and intangible assets, as well as the
Company's pledge of all of the outstanding shares of PlayCore Wisconsin common
stock. In addition, the Company and PlayCore Wisconsin are subject to certain
restrictive covenants, which include, among other things, a general restriction
on the payment of dividends and a limitation on additional indebtedness.
Borrowing availability under the PlayCore Wisconsin revolving credit facility is
limited to specified percentages of qualified inventories and accounts
receivable, not to exceed $33.0 million. At March 31, 2000, the outstanding
amount of the revolving loan facility was $32.9 million. In April 2000, the
revolving credit facility was amended to, among other things, increase the
percentage of qualified inventories and accounts receivables used to determine
the borrowing availability.
The Company made capital expenditures totaling approximately $1.5 million in the
three months ended March 31, 2000. The Company continues to evaluate
opportunities for both internal and external growth and believes that funds
generated from operations and its current and anticipated future capacity for
borrowing will be sufficient to fund current business operations as well as
anticipated future capital expenditures and growth opportunities.
Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
The Company is exposed to market risk related to changes in interest rates. The
Company's earnings are affected by changes in the interest rate as a result of
its borrowings under the senior credit facility. If market interest rates for
the borrowings under the senior credit facility average 1% more during the year
ended December 31, 2000 than they did during 1999, the Company's interest
expense would increase, and income before taxes would decrease by approximately
$0.7 million. This analysis does not consider the effects of the reduced level
of overall economic activity that could exist in such an environment. Further,
in the event of a change of such magnitude, management could take actions to
further mitigate its exposure to the change. However, due to the uncertainty of
the specific actions that would be taken and their possible effects, the
sensitivity analysis assumes no changes in the Company's financial structure.
10
<PAGE>
In February 2000, the Company entered into an interest rate cap agreement
covering $20.0 million of outstanding debt obligations and that expires in
February 2002. The cap agreement places a LIBOR rate ceiling of 8% on the
obligations covered.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A complaint was filed in Rock County, Wisconsin state court against the Company
and its board of directors. The Company was informed on May 4, 2000 that the
complaint was filed on April 17, 2000, three days after the public announcement
that the Company had entered into the definitive agreement and plan of merger
with the newly-formed affiliate of Chartwell Investments II, LLC. The complaint
was filed as a purported class action on behalf of holders of Company common
stock. The complaint alleges that the Company's board of directors, by entering
into the agreement and plan of merger with the Chartwell entity, violated its
fiduciary duties to Company stockholders. Neither the Company nor, to the
Company's knowledge, any of its directors have been served with the complaint.
The Company believes that the plaintiff's claims are without merit, and intends
to defend the action vigorously.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10 - Amendment No. 2, dated as of April 13, 2000, to Amended
and Restated Credit Agreement, dated as of February 16,
1999, among PlayCore, Inc., PlayCore Wisconsin, Inc.,
the Lenders party to thereof and Fleet National Bank,
as lender and agent.
Exhibit 27 - Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURE
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.
PlayCore, Inc.
Date: May 15, 2000 /s/ Richard E. Ruegger
--------------------------------------
Richard E. Ruegger,
Vice President-Finance
and Chief Financial Officer
(Duly authorized officer and Principal
Financial and Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
10 Amendment No. 2, dated as of April 13, 2000, to Amended and Restated
Credit Agreement, dated as of February 16, 1999, among PlayCore, Inc.,
PlayCore Wisconsin, Inc., the Lenders party to thereof and Fleet
National Bank, as lender and agent.
27 Financial Data Schedule
14
PLAYCORE, INC.
PLAYCORE WISCONSIN, INC.
RESTATED CREDIT AGREEMENT
Amendment No. 2
---------------
This Agreement, dated as of April 13, 2000 (this "Agreement"), is among
PlayCore Wisconsin, Inc., a Wisconsin corporation, the Subsidiaries of PlayCore
Wisconsin, Inc. party hereto, PlayCore Wisconsin, Inc.'s corporate parent
PlayCore, Inc., a Delaware corporation, the Lenders party hereto and Fleet
National Bank, both in its capacity as a Lender and in its capacity as agent for
itself and the other Lenders. The parties agree as follows:
1. Credit Agreement; Definitions. This Agreement amends the Credit
Agreement dated as of March 13, 1997, as amended and restated as of February 16,
1999, among the parties hereto (as in effect prior to giving effect to this
Agreement, the "Credit Agreement"). Terms defined in the Credit Agreement as
amended hereby (the "Amended Credit Agreement") and not otherwise defined herein
are used with the meaning so defined.
2. Amendment of Credit Agreement. Effective upon the date hereof, the
definition of the term "Borrowing Base" in Section 1.18 of the Credit Agreement
is amended by adding the following clause (c) immediately following clause (b)
thereof and prior to the proviso thereto:
"plus (c) (i) prior to May 11, 2000, $5,000,000 and
(ii) from May 11, 2000 through May 26, 2000, $2,000,000;"
3. Representations and Warranties. Each of the Borrower and the
Guarantors jointly and severally represents and warrants as follows:
3.1. Legal Existence, Organization. Each of the Borrower and
the Guarantors is duly organized and validly existing and in good
standing under the laws of the jurisdiction of its organization, with
all power and authority, corporate or otherwise, necessary (a) to enter
into and perform this Agreement and the Amended Credit Agreement and
(b) to own its properties and carry on the business now conducted or
proposed to be conducted by it. Each of the Borrower and the Guarantors
has taken all corporate or other action required to make the provisions
of this Agreement and the Amended Credit Agreement the valid and
enforceable obligations they purport to be.
3.2. Enforceability. Each of the Borrower and the Guarantors
has duly authorized, executed and delivered this Agreement. Each of
this Agreement and the Amended Credit Agreement is the legal, valid and
binding obligation of each of the Borrower and the Guarantors and is
enforceable against the Borrower and the Guarantors in accordance with
its terms.
<PAGE>
3.3. No Legal Obstacle to Agreements. Neither the execution,
delivery or performance of this Agreement, nor the performance of the
Amended Credit Agreement, nor the consummation of any other transaction
referred to or contemplated by this Agreement, nor the fulfillment of
the terms hereof or thereof, has constituted or resulted in or will
constitute or result in:
(a) any breach or termination of any agreement, instrument,
deed or lease to which the Holding Company or any of its Subsidiaries
is a party or by which it is bound, or of the Charter or By-laws of the
Holding Company or any of its Subsidiaries;
(b) the violation of any law, judgment, decree or governmental
order, rule or regulation applicable to the Holding Company or any of
its Subsidiaries;
(c) the creation under any agreement, instrument, deed or
lease of any Lien (other than Liens on the Credit Security which secure
the Credit Obligations) upon any of the assets of the Holding Company
or any of its Subsidiaries; or
(d) any redemption, retirement or other repurchase obligation
of the Holding Company or any of its Subsidiaries under any Charter,
By-law, agreement, instrument, deed or lease.
No approval, authorization or other action by, or declaration to or
filing with, any governmental or administrative authority or any other
Person is required to be obtained or made by the Holding Company or any
of its Subsidiaries in connection with the execution, delivery and
performance of this Agreement or the performance of the Amended Credit
Agreement, or the consummation of the transactions contemplated hereby
or thereby.
3.4. Defaults. Immediately after giving effect to the
amendments set forth in Section 2 hereof and the waivers set forth in
Section 4 hereof, no Default will exist.
3.5. Incorporation of Representations and Warranties. The
representations and warranties set forth in Section 7 of the Amended
Credit Agreement are true and correct on the date hereof as if
originally made on and as of the date hereof.
4. Waivers With Respect to Certain Events of Default. The Lenders waive
the Events of Default caused by (a) the Borrower paying on or prior to the date
hereof the interest payment due under the Credit Agreement on March 31, 2000 and
(b) the sum of the Revolving Loan plus Letter of Credit Exposure exceeding the
Borrowing Base (as defined in the Credit Agreement prior to giving effect to
this Agreement) by no more than $6,600,000 for the period from January 1, 2000
through the date hereof.
-2-
<PAGE>
5. Amendment Fee. On May 26, 2000, the Borrower shall pay to the Agent
for the accounts of the respective Lenders in accordance with their respective
Commitments in the Revolving Loan an amendment fee (the "Amendment Fee") equal
to $400,000; provided, however, that (a) in the event the Borrowing Base exceeds
the sum of the Revolving Loan plus the Letter of Credit Exposure by at least
$2,000,000 at all times after May 10, 2000, the Amendment Fee shall be reduced
to $200,000 and (b) in the event clause (a) does not apply, but the Borrowing
Base exceeds the sum of the Revolving Loan plus the Letter of Credit Exposure by
at least $2,000,000 on and after May 25, 2000, the Amendment Fee shall be
reduced to $300,000. In addition, the Borrower shall pay to the Agent the
reasonable fees and expenses of its special counsel in connection with this
Agreement.
6. General. The Amended Credit Agreement and all of the Credit
Documents are each confirmed as being in full force and effect. This Agreement,
the Amended Credit Agreement and the other Credit Documents referred to herein
or therein constitute the entire understanding of the parties with respect to
the subject matter hereof and thereof and supersede all prior and current
understandings and agreements, whether written or oral. Each of this Agreement
and the Amended Credit Agreement is a Credit Document and may be executed in any
number of counterparts, which together shall constitute one instrument, and
shall bind and inure to the benefit of the parties and their respective
successors and assigns, including as such successors and assigns all holders of
any Credit Obligation. This Agreement shall be governed by and construed in
accordance with the laws (other than the conflict of law rules) of The
Commonwealth of Massachusetts.
[the remainder of this page is intentionally blank]
-3-
<PAGE>
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first above written.
PLAYCORE, INC.
By /s/
------------------------------------
Title:
PLAYCORE WISCONSIN, INC.
By /s/
------------------------------------
Title:
HEARTLAND INDUSTRIES, INC. (DE)
By /s/
------------------------------------
Title:
FLEET NATIONAL BANK
By /s/
------------------------------------
Title:
LASALLE BANK NATIONAL ASSOCIATION
By /s/
------------------------------------
Title:
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By /s/
------------------------------------
Title:
-4-
<PAGE>
MASSMUTUAL HIGH YIELD PARTNERS II, LLC
By HYP MANAGEMENT, INC., as
Managing Member
By /s/
------------------------------------
Title:
FIRSTAR BANK MILWAUKEE, N.A.
By /s/
------------------------------------
Title:
M & I MARSHALL & ILSLEY BANK
By /s/
------------------------------------
Title:
By /s/
------------------------------------
Title:
KEY CORPORATE CAPITAL INC.
By /s/
------------------------------------
Title:
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PLAYCORE, INC. AS OF AND FOR
THE THREE-MONTH PERIOD ENDED MARCH 31, 2000 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 811
<SECURITIES> 0
<RECEIVABLES> 29,161
<ALLOWANCES> 704
<INVENTORY> 23,910
<CURRENT-ASSETS> 61,768
<PP&E> 40,045
<DEPRECIATION> 12,790
<TOTAL-ASSETS> 146,425
<CURRENT-LIABILITIES> 66,208
<BONDS> 45,381
0
0
<COMMON> 116
<OTHER-SE> 22,887
<TOTAL-LIABILITY-AND-EQUITY> 146,425
<SALES> 38,511
<TOTAL-REVENUES> 38,511
<CGS> 23,514
<TOTAL-COSTS> 23,514
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,403
<INCOME-PRETAX> (1,154)
<INCOME-TAX> (438)
<INCOME-CONTINUING> (716)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (716)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
