UNITED STATES
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 MAY 4, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21690
-------
SUNGLASS HUT INTERNATIONAL, INC.
- - --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 22-2802551
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
255 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 461-6100
-----------------------------
- - --------------------------------------------------------------------------------
(Former name, former address and fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of the registrant's common stock is 54,176,516
(as of June 14, 1996).
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX
PAGE
PART I - FINANCIAL INFORMATION
<S> <C>
ITEM 1. Financial Statements
Consolidated Balance Sheets as of May 4, 1996 (UNAUDITED) and February 3, 1996 ...........3
Consolidated Statements of Income for the thirteen weeks ended May 4, 1996
and April 29, 1995 (UNAUDITED)............................................................4
Consolidated Statements of Cash Flows for the thirteen weeks ended May 4, 1996 and
April 29, 1995 (UNAUDITED) ...............................................................5
Note to Consolidated Financial Statements (UNAUDITED).....................................7
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................................8
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.........................................................11
Signatures...............................................................................12
</TABLE>
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
May 4, February 3,
ASSETS 1996 1996
------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................................... $ 5,377 $ 4,506
Accounts receivable ......................................................... 4,114 2,379
Inventory ................................................................... 129,407 110,268
Prepaid rent ................................................................ 6,527 5,912
Other current assets ........................................................ 13,115 9,680
-------- ---------
Total current assets ...................................... 158,540 132,745
PROPERTY AND EQUIPMENT, net of accumulated depreciation ........................ 86,083 83,980
and amortization of $48,272 and $46,084
UNAMORTIZED COST IN EXCESS OF NET ASSETS OF ACQUIRED ........................... 39,683 39,095
BUSINESSES, net of accumulated amortization of $25,825 and $25,273
OTHER ASSETS ................................................................... 11,134 11,256
-------- ---------
Total assets .............................................. $295,440 $ 267,076
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................................ $ 26,627 $ 28,791
Accrued payroll and related taxes ........................................... 4,132 5,662
Accrued rent ................................................................ 4,557 3,568
Accrued expenses ............................................................ 8,007 6,670
Current portion of long-term debt ........................................... 121 129
-------- ---------
Total current liabilities ................................. 43,444 44,820
LONG-TERM DEBT, net of current portion ......................................... 85,906 69,432
-------- ---------
Total liabilities ......................................... 129,350 114,252
-------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock ............................................................. -- --
Common stock ................................................................ 541 538
Additional paid-in capital .................................................. 164,016 159,088
Foreign currency translation adjustment ..................................... 677 (500)
Retained earnings (accumulated deficit) ..................................... 856 (6,302)
-------- ---------
Total stockholders' equity ................................ 166,090 152,824
-------- ---------
Total liabilities and stockholders' equity ................ $295,440 $ 267,076
======== =========
</TABLE>
See Note to Consolidated Financial Statements ................
-3-
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Thirteen Weeks Ended
--------------------
May 4, April 29,
1996 1995
-------- -------
<S> <C> <C>
Net sales ............................................................ $122,822 $87,579
Cost of goods sold, occupancy and buying expenses .................... 70,111 50,006
-------- -------
Gross profit .................................... 52,711 37,573
Selling, general and administrative expenses:
Operating expenses ................................................. 33,521 24,470
Depreciation and leasehold amortization ........................... 5,177 3,541
Amortization of cost in excess of net assets of acquired businesses 521 347
-------- -------
39,219 28,358
-------- -------
Earnings before interest and income taxes ....... 13,492 9,215
Interest expense ..................................................... 1,462 642
-------- -------
Earnings before income taxes .................... 12,030 8,573
Provision for income taxes ........................................... 4,872 3,498
-------- -------
Net income ...................................... 7,158 5,075
Proforma adjustment for income taxes ................................. -- 57
-------- -------
Pro forma net income ............................ $ 7,158 $ 5,018
======== =======
Pro forma net income per share .................. $ .13 $ .09
======== =======
Weighted average shares outstanding .................................. 55,763 53,818
======== =======
</TABLE>
See Note to Consolidated Financial Statements.
-4-
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Thirteen Weeks Ended
--------------------
May 4, April 29,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................. $ 7,158 $ 5,075
-------- --------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities-
Depreciation and amortization ............................................... 5,698 3,888
Changes in assets and liabilities, net of effect of acquisitions-
Changes in assets:
Accounts receivable ............................................... (1,735) (1,017)
Inventory ......................................................... (19,139) (8,600)
Prepaid rent ...................................................... (615) (184)
Other current assets .............................................. (3,435) (3,721)
Other assets ...................................................... (132) (620)
Changes in liabilities:
Accounts payable .................................................. (2,164) 2,980
Accrued expenses .................................................. 1,716 3,560
-------- --------
(19,806) (3,714)
-------- --------
Net cash (used in) provided by operating activities ................ (12,648) 1,361
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................................ (7,401) (8,654)
Acquisition of businesses ................................................... -- (1,303)
Investment in and advances to affiliate ..................................... -- (5,500)
-------- --------
Net cash used in investing activities .............................. (7,401) (15,457)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt .................................... -- 4,136
Principal payments on long-term debt ........................................ -- (356)
Proceeds from borrowings under revolving credit facilities .................. 48,166 9,600
Principal payments on revolving credit facilities ........................... (31,700) (48,200)
Proceeds from sale of common stock .......................................... -- 53,800
Distributions to stockholders by pooled company ............................. -- (545)
Proceeds from exercise of stock options ..................................... 4,008 395
-------- --------
Net cash provided by financing activities .......................... 20,474 18,830
-------- --------
Effect of exchange rate changes on cash and cash equivalents ................ 446 --
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS ...................................... 871 4,734
CASH AND CASH EQUIVALENTS, beginning of period ................................. 4,506 2,773
-------- --------
CASH AND CASH EQUIVALENTS, end of period ....................................... $ 5,377 $ 7,507
======== ========
</TABLE>
Continued on Next Page
-5-
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
May 4, April 29,
1996 1995
-------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,009 $ 566
========== ==========
Income taxes $ 3,576 $ 1,099
========== ==========
</TABLE>
See Note to Consolidated Financial Statements
-6-
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying consolidated financial statements of the Company have been
prepared in accordance with the instructions to Form 10-Q and, therefore, omit
or condense certain footnotes and other information normally included in
financial statements prepared in accordance with generally accepted accounting
principles. The accounting policies followed for interim financial reporting are
the same as those disclosed in Note 1 of the Notes to Consolidated Financial
Statements included in the Company's audited financial statements for the fiscal
year ended February 3, 1996 which are included in Form 10-K. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the financial information for the interim
periods reported have been made. Results of operations for the thirteen weeks
ended May 4, 1996 are not necessarily indicative of the results to be expected
for the entire fiscal year ending February 1, 1997. Certain prior year amounts
have been reclassified to conform with current year financial statement
classifications.
On June 29, 1995, the Company acquired Sunsations Sunglazss Company
("Sunsations"), an Indiana corporation, through the exchange of all of the
outstanding common stock of Sunsations for 7,411,764 shares of the Company's
common stock. At the time of the acquisition, Sunsations operated 350 stores in
44 states and Canada. The acquisition was accounted for as a
pooling-of-interests, and accordingly, the accompanying financial statements
have been restated to include the accounts and operations of Sunsations for all
periods prior to the merger. In addition, all fiscal 1995 share data relating to
the Company's common stock including pro forma earnings per share and weighted
average shares have been retroactively restated to reflect the 7,411,764 shares
of the company's common stock issued as part of the acquisition.
The statement of operations and the statement of cash flows for the thirteen
weeks ended April 29, 1995 as originally reported, have been restated to combine
the results of operations of Sunsations and the statement of cash flows of
Sunsations for the thirteen weeks ended April 29, 1995. Certain Sunsations
balances and amounts have been reclassified to conform to the Company's
presentation. The pro forma adjustment to reflect income taxes in the
consolidated statements of operations reflects the additional tax provision that
would have been recorded at the corporation level had Sunsations not been an S
Corporation during the respective periods.
As a result of the merger, effective January 29, 1995 (the first day of the
Company's fiscal 1995 year), Sunsations' fiscal year end was changed to conform
with the Company's fiscal year end. Sunsations' results of operations for the
28 days ended January 28, 1995 have been recorded in the accompanying unaudited
interim fiscal 1995 financial statements as an adjustment to accumulated
deficit. Net sales and pro forma net loss for Sunsations for the 28 days ended
January 29, 1995, not included in the accompanying unaudited interim statement
of operations, were approximately $2,190,000 and $789,000, respectively.
-7-
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
The company's separate results for the thirteen weeks ended April 29, 1995 and
Sunsations' separate results for the thirteen weeks ended April 29, 1995 are
as follows:
THIRTEEN WEEKS
ENDED APRIL 29,
1995
---------------
Net Sales:
Sunglass Hut International, Inc. $73,106
Sunsations Sunglass Company 14,473
---------------
$87,579
===============
Pro forma net income:
Sunglass Hut International, Inc. $ 4,959
Sunsations Sunglass Company 59
---------------
$ 5,018
===============
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Sunglass Hut International, Inc. (the "Company") is the world's largest
specialty retailer of sunglasses with 1,847 worldwide locations as of May
4, 1996. The Company's business strategy is to combine the operating
efficiencies, extensive product assortment and everyday low prices of category
dominant retailers with the level of customer service and ambiance
characteristic of specialty retailers. A typical store carries approximately
1,000 stock keeping units.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term cash needs are primarily for working capital to support
its inventory requirements and new store additions. The Company's long-term
liquidity requirements relate principally to the maturity of existing long-term
debt in December 1998, operating lease commitments and continued store
expansion. During May 1996, the Company renegotiated its existing revolving
credit facility with NationsBank of Florida, National Association
("NationsBank"), acting as the agent for a conglomerate of banks, to increase
the credit facility from $100.0 million to $125.0 million on substantially
similar terms. The credit facility includes up to $10.0 million in letters of
credit. Borrowings under the credit facility generally bear interest at a
floating rate equal to (i) the prime lending rate or the federal funds effective
rate plus 0.50% or (ii) LIBOR plus 1.00%. Due to the seasonal nature of the
Company's business, outstanding borrowings under the credit facility typically
peak during the first and third fiscal quarters as the Company finances
inventory purchases in advance of the Company's highest sales periods. See
"Seasonality and Quarterly Results." As of May 4, 1996, the Company had $4.8
million in letters of credit outstanding which were maintained as security for
performance under the Company's executive office lease and to service other
debt.
On June 10, 1996, the Company commenced a 144A private offering to certain
qualified institutional buyers of $100 million principal amount of Convertible
Subordinated Notes due 2003. The purpose of the offering is to refinance
outstanding senior indebtedness and to finance the company's expansion plans.
Offers will be made only by means of an offering memorandum.
Net cash used in operating activities was $12.6 million for the first three
months of fiscal 1996 compared to $1.4 million provided by operating activities
for the same period in fiscal 1995. The difference between the Company's net
income and operating cash flow in fiscal 1996 was primarily attributable to the
Company's $25.1 million investment in inventory and current assets partially
offset by $5.7 million of non-cash charges for depreciation and amortization.
-8-
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
Net cash used in investing activities was $7.4 million for the first three
months of fiscal 1996 compared to $15.5 million for the same period last year.
The fiscal 1996 cash flow reflects an increase in capital expenditures related
to new store expansion and the renovation of existing stores. There were no
business acquisitions during the first three months of fiscal year 1996 and no
advances were made to the Australian Joint Venture which became wholly owned in
October 16, 1995.
Net cash provided by financing activities was $20.5 million for the first three
months of fiscal 1996 compared to $18.8 million for the same period last year.
The fiscal 1995 cash flow reflects the proceeds of $53.8 million from a
secondary offering of 4.2 million shares of the Company's common stock completed
in February 1995. The net proceeds from that offering were used to repay
approximately $41.3 million of indebtedness under the NationsBank revolving
credit facility, and for other working capital requirements.
Management believes that net cash provided by operations together with borrowing
availability under the Company's revolving credit facility and, if consummated,
the proceds from the 144A Private Offering of Convertible Subordinated Notes
will be sufficient to fund estimated capital expenditures associated with the
Company's planned opening of approximately 350 stores in fiscal 1996 and other
working capital requirements through at least fiscal 1996. In the event that the
Private Offering of Convertible Subordinated Notes does not materialize, the
Company intends to pursue additional financing alternatives to continue to
finance its expansion plans. The Company estimates that its typical capital
expenditures to open new in-line stores range from $70,000 to $125,000 for
fixtures and leasehold improvements, while the costs for kiosk locations range
from $25,000 to $40,000. In addition, initial inventory for a new store ranges
from $30,000 for a small kiosk to over $50,000 for a large in-line store.
RESULTS OF OPERATIONS
QUARTERS ENDED MAY 4, 1996 AND APRIL 29, 1995
Net sales increased $35.2 million, or 40.2%, to $122.8 million during the
quarter ended May 4, 1996 compared to $87.6 million for the same period of
fiscal 1995. Approximately 73.0% of this increase was attributable to sales from
new stores opened and acquired during the first quarter of fiscal 1996 (and
fiscal 1995 to the extent not reflected in comparable store sales increases),
while an increase in comparable store sales of 7.6% accounted for approximately
27.0% of this increase. Management believes that the comparable store sales
increase was primarily due to increased unit sales of the Company's branded
sunglass offerings and, to a lesser extent, to its expanded private label
sunglass offerings.
Gross profit increased $15.1 million, or 40.2%, to $52.7 million during the
quarter ended May 4, 1996 compared to $37.6 million for the same period of
fiscal 1995 primarily due to the increase in net sales. As a percentage of net
sales, gross profit was 42.9% in both 1996 and 1995.
Operating expenses increased $9.1 million, or 37.0%, during the quarter ended
May 4, 1996 compared to the same period of fiscal 1995. This increase is
primarily due to operating expenses associated with the operations and
management of new stores opened and acquired in fiscal 1996 and 1995. Operating
expenses as a percentage of net sales decreased to 27.3% in 1996 compared to
27.9% in 1995, primarily as a result of operating efficiencies and economies of
scale resulting from higher sales volume.
Depreciation and leasehold amortization expense increased $1.6 million, or
46.2%, to $5.2 million during the quarter ended May 4, 1996 compared to $3.5
million for the same period of fiscal 1995, primarily due to new store growth.
As a result of the foregoing, the Company reported net income of $7.2
million during the quarter ended May 4, 1996 compared to $5.0 million for the
same period of fiscal 1995.
-9-
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SEASONALITY AND QUARTERLY RESULTS
Historically, the Company's operations have been seasonal, with highest net
sales and net income occurring in the second fiscal quarter (reflecting
increased demand for sunglasses during the spring and summer months) and, to a
lesser extent, the fourth fiscal quarter (reflecting increased demand during the
year-end holiday selling season).
The Company's results of operations may also fluctuate from quarter-to-quarter
as a result of the amount and timing of sales contributed by new stores and the
integration of new stores into the operations of the Company, as well as other
factors. The addition of a large number of new stores can therefore
significantly affect results of operations on a quarter-to-quarter basis.
-10-
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
-------------------------------------------------
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment No. 1 to Revolving Credit and Reimbursement
Agreement, dated as of May 22, 1996, among the Registrant,
NationsBank, N.A. and the other Lenders named therein1
- - ----------------------
1 Filed Herewith
(b) The Company did not file any reports on Form 8-K during the quarter
ended May 4, 1996.
-11-
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC. AND SUBSIDIARIES
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.
SUNGLASS HUT INTERNATIONAL, INC.
Date: June 17, 1996 By: /s/JACK B. CHADSEY
---------------------
Jack B. Chadsey
President and Chief Executive Officer and
Director (principal executive officer)
Date: June 17, 1996 By: /s/LARRY G. PETERSEN
-----------------------
Larry G. Petersen
Senior Vice President-Finance
and Chief Financial Officer
(principal financial officer)
Date: June 17, 1996 By: /s/GEORGE L. PITA
-----------------------
George L. Pita
Vice President-Finance and International
Development(principal accounting officer)
-12-
Exhibit 10.1
AMENDMENT AGREEMENT NO. 1 TO
AMENDED AND RESTATED REVOLVING CREDIT
AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT AGREEMENT is made and entered into this 22nd day of May,
1996, by and among SUNGLASS HUT INTERNATIONAL, INC., a Delaware corporation
(herein called the "Borrower"), NATIONSBANK NATIONAL ASSOCIATION (the "Agent"),
as Agent for the lenders (the "Lenders") party to the Amended and Restated
Revolving Credit and Reimbursement Agreement dated December 14, 1995 among such
Lenders, Borrower and the Agent (the "Agreement") and each of the Lenders party
to the Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders have entered into the
Agreement pursuant to which the Lenders have agreed to make revolving loans to
the Borrower in the principal amount of up to $100,000,000 as evidenced by the
Notes (as defined in the Agreement); and
WHEREAS, as a condition to the making of the revolving loans pursuant
to the Agreement the Lenders have required that all Material Subsidiaries of the
Borrower guaranty payment of all Obligations of the Borrower arising under the
Agreement; and
WHEREAS, the Borrower has requested that the Total Revolving Credit
Commitment of the Lenders be increased for 364 days to $125,000,000 and that the
Lenders consent to the reincorporation of the Borrower in the State of Florida
by the merger of the Borrower with and into Sunglass Hut International
Acquisition, Inc., a Florida corporation ("Sunglass Florida"), with Sunglass
Florida being the survivor in such transaction, changing its name to Sunglass
Hut International, Inc., and succeeding to all of the rights and obligations
(including without limitation the Obligations) of the Borrower, as such merger
transaction (the "Reincorporation Transaction") is further described in the
Borrower's Schedule 14A Information (Proxy Statement) filed on May 3, 1996 with
the Securities and Exchange Commission; and
WHEREAS, the increase in the Total Revolving Credit Commitment and the
respective Revolving Credit Commitments of the Lenders, and the Reincorporation
Transaction, require the approval of the Required Lenders pursuant to the
Agreement and the Borrower has requested that the Lenders consent to the
amendment of the Agreement in the manner set forth herein;
WHEREAS, the Agent and Lenders have agreed, subject to the terms of
this Amendment Agreement, to amend the Agreement in the manner set forth herein;
<PAGE>
NOW, THEREFORE, the Borrower, the Agent and the Lenders do hereby agree
as follows:
1. DEFINITIONS. The term "Agreement" as used herein and in the
Loan Documents (as defined in the Agreement) shall mean the Agreement as hereby
amended and modified. Unless the context otherwise requires, all terms used
herein without definition shall have the definition provided therefor in the
Agreement.
2. AMENDMENTS. Subject to the conditions hereof, the
Agreement is hereby amended, effective as of the date hereof, as follows:
(a) EXHIBIT A to the Agreement is hereby amended by deleting
the EXHIBIT A as heretofore in effect and substituting in lieu thereof
the EXHIBIT A-1996 attached to this Amendment Agreement;
(b) EXHIBIT F to the Agreement is hereby amended by deleting
the EXHIBIT F as heretofore in effect and substituting in lieu thereof
the EXHIBIT F-1996 attached to this Amendment Agreement, and the term
"Notes" as defined in Section 1.01 and as used in Section 2.07 and
elsewhere in the Agreement shall be deemed to refer to the Notes in the
form of EXHIBIT F-1996 issued to the Lenders pursuant to the terms of
this Amendment Agreement and otherwise pursuant to an Assignment and
Acceptance;
(c) The definition of "Total Revolving Credit Commitment" in
Section 1.01 of the Agreement is amended by (i) deleting the amount
"$100,000,000" and substituting in lieu thereof the phrase "(a)
$125,000,000 from the date hereof to and including May 20, 1997, and
(b) thereafter $100,000,000", and (ii) deleting the phrase "or the sum
of Revolving Credit Commitments set forth on EXHIBIT A hereto";
(d) Each of Section 8.09, 8.11, 8.12 and 8.15 is amended by
adding at the end thereof the following: "Notwithstanding the
limitations contained in this Section, the Borrower and Sunglass
Florida may consummate the Reincorporation Transaction; provided that
immediately after giving effect thereto, (i) no Default or Event of
Default shall exist, occur or be continuing (after giving effect to
this sentence) and (ii) the survivor of the Reincorporation Transaction
shall succeed without further action to all of the obligations and
liabilities (including without limitation the "Obligations") of the
Borrower (as constituted immediately before consummation of the
Reincorporation Transaction).";
(e) Immediately after giving effect to the Reincorporation
Transaction, the term "Borrower" as used in the Agreement and the other
Loan Documents shall mean Sunglass Florida, as successor to the
Borrower as constituted
2
<PAGE>
immediately prior to consummation of the Reincorporation Transaction;
and
(f) The definitions of "Sunglass Florida" and "Reincorporation
Transaction" set forth above are hereby incorporated into Section 1.01
of the Agreement.
3. Sunglass Florida, by its execution hereof, hereby acknowledges and
agrees that immediately upon consummation of the Reincorporation Transaction, it
shall absolutely and unconditionally assume and be and become liable for all of
the Obligations of the Borrower under the Agreement and the other Loan
Documents, and hereby represents, warrants and certifies that there exists (and
upon consummation of the Reincorporation Transaction there will not exist) any
defense, setoff, counterclaim, recoupment or other claim or defense which would
in any way excuse, discharge or diminish its liability as Borrower of the
Obligations as provided in the Loan Documents.
4. Each Lender hereby consents, upon the terms and conditions herein
provided, to the Reincorporation Transaction and the amendments hereby effected.
5. Each Material Subsidiary of the Borrower has joined in the execution
of this Amendment Agreement for the purpose of (i) consenting to the
Reincorporation Transaction, (ii) agreeing to the other amendments to the
Agreement and the other Loan Documents effected hereby and (ii) confirming its
guarantee of payment of all the Obligations, including without limitation those
arising pursuant to the increase in the Total Revolving Credit Commitment herein
provided for.
6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
certifies that:
(a) The representations and warranties made by Borrower in
Article VI of the Agreement are true on and as of the date hereof
except that the financial statements referred to in Section 6.01(f)
shall be those most recently furnished to each Lender pursuant to
Section 7.01(a) and (b);
(b) There has been no material change in the condition,
financial or otherwise, of the Borrower and its Subsidiaries since the
date of the most recent financial reports of the Borrower received by
each Lender under Section 7.01 thereof, other than changes in the
ordinary course of business, none of which has been a material adverse
change;
(c) The business and properties of the Borrower and its
Subsidiaries are not, and since the date of the most recent financial
report of the Borrower and its Subsidiaries received by each Lender
under Section 7.01 thereof have not been, adversely affected in any
substantial way as the result of any
3
<PAGE>
fire, explosion, earthquake, accident, strike, lockout, combination of
workers, flood, embargo, riot, activities of armed forces, war or acts
of God or the public enemy, or cancellation or loss of any major
contracts; and
(f) No event has occurred and no condition exists which, upon
the consummation of the transaction contemplated hereby, constitutes a
Default or an Event of Default on the part of the Borrower under the
Agreement, the Notes or any other Loan Document either immediately or
with the lapse of time or the giving of notice, or both.
7. CONDITIONS. As a condition to the effectiveness of
this Amendment Agreement, the Borrower shall deliver, or cause
to be delivered to the Agent, the following:
(a) ten (10) counterparts of this Amendment Agreement
duly executed by the Borrower, Sunglass Florida and the
Material Subsidiaries;
(b) substitute Notes payable to the order of each Lender in
the form of EXHIBIT F-1996 in the stated amount of the Revolving Credit
Commitment of each Lender, duly executed by the Borrower;
(c) an opinion or opinions of counsel for the
Borrower, Sunglass Florida and the Material Subsidiaries in
form and content acceptable to the Agent; and
(d) such other instruments and documents as the Agent
may reasonably request.
8. OTHER DOCUMENTS. All instruments and documents incident to the
consummation of the transactions contemplated hereby shall be satisfactory in
form and substance to the Agent and its counsel; the Agent shall have received
copies of all additional agreements, instruments and documents which it may
reasonably request in connection therewith, including evidence of the authority
of Borrower, Sunglass Florida and the Material Subsidiaries to enter into the
transactions contemplated by this Amendment Agreement, such documents, when
appropriate, to be certified by appropriate corporate or governmental
authorities; and all proceedings of the Borrower, Sunglass Florida and the
Material Subsidiaries relating to the matters provided for herein shall be
satisfactory to the Agent and its counsel.
9. ENTIRE AGREEMENT. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, conditions, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and no one of them has relied on any such promise,
4
<PAGE>
condition, representation or warranty. Each of the parties hereto acknowledges
that, except as in this Amendment Agreement otherwise expressly stated, no
representations, warranties or commitments, express or implied, have been made
by any other party to the other. None of the terms or conditions of this
Amendment Agreement may be changed, modified, waived or canceled orally or
otherwise, except by writing, signed by all the parties hereto, specifying such
change, modification, waiver or cancellation of such terms or conditions, or of
any proceeding or succeeding breach thereof.
10. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically
amended, modified or supplemented, the Agreement and all of the other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
BORROWER:
SUNGLASS HUT INTERNATIONAL, INC.
WITNESS:
By: /s/ Larty G. Petersen
- - ----------------------------- -------------------------------
Name: Larry G. Petersen
/s/ Elizabeth A. Jeffares Title: Senior Vice President-Finance
- - ----------------------------- Chief Financial Officer and
Treasurer
SUNGLASS FLORIDA:
SUNGLASS HUT INTERNATIONAL
ACQUISITION, INC.
WITNESS:
By: /s/ Larry G. Petersen
- - ---------------------------- -----------------------------
Name: Larry G. Petersen
/s/ Elizabeth A. Jeffares Title: ____________________________
6
<PAGE>
GUARANTORS:
SUNGLASS HUT CORPORATION
SUNGLASS HUT TRADING CORPORATION
SUNSATIONS SUNGLASS COMPANY
SUNGLASS HUT REALTY CORPORATION
SUNGLASS HUT OF FLORIDA, INC.
SUNGLASS HUT ACQUISITION CORP.
IHS DISTRIBUTION CORP.
IHS PROCUREMENT CORP.
SUNGLASS HUT EYE X COMPANY
SHI SALES CORP.
SUNGLASS HUT HOLDINGS OF FRANCE, INC.
SUNGLASS HUT OF NORTHERN FRANCE, INC.
SUNGLASS HUT OF SOUTHERN FRANCE, INC.
By: /s/ Larry G. Petersen
--------------------------------
Name: Larry G. Petersen
Title: Vice President
SUNGLASS HUT (U.K.) LIMITED
SUNGLASS WORLD HOLDING PTY LIMITED
SUNGLASS HUT OF FRANCE, S.A.
By: /s/ Larry G. Petersen
--------------------------------
Name: Larry G. Petersen
Title: Director
SUNGLASS HUT AUSTRALIA PTY LIMITED
By: /s/ Larry G. Petersen
---------------------------------
Name: Larry G. Petersen
Title: Authorized Signatory
7
<PAGE>
NATIONSBANK, NATIONAL ASSOCIATION,
AS AGENT FOR THE LENDERS
By: /s/ Steven Hanas
------------------------------
Name: Stephen Hanas
Title: Vice President
NATIONSBANK, NATIONAL ASSOCIATION,
as Lender
By: /s/ Steven Hanas
------------------------------
Name: Stephen Hanas
Title: Vice President
8
<PAGE>
COMMONWEALTH BANK OF AUSTRALIA,
GRAND CAYMAN BRANCH
By: /s/ Illegible
-----------------------------
Name:/s/ Illegible
-----------------------------
Title:/s/ Illegible
-----------------------------
9
<PAGE>
ABN AMRO BANK North America, Inc.
As Agent For
ABN AMRO Bank N.V.
By: /s/ Illegible
----------------------------
Name: /s/ Illegible
----------------------------
Title:/s/ Illegible
----------------------------
By: /s/ Illegible
----------------------------
Name: /s/ Illegible
----------------------------
Title:/s/ Illegible
----------------------------
10
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ Frank K. Sandler
-----------------------------
Name: Frank K. Sandler
-----------------------------
Title: Relationship Manager
-----------------------------
11
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Alain Papiasse
-----------------------------
Name: Alain Papiasse
-----------------------------
Title: Executive Vice President
-----------------------------
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ Alain Papiasse
-----------------------------
Name: Alain Papiasse
-----------------------------
Title: Authorized Signature
-----------------------------
12
<PAGE>
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ Stephen Mitchell
-----------------------------
Name: Stephen Mitchell
-----------------------------
Title: Vice President
-----------------------------
13
<PAGE>
LTCB TRUST COMPANY
By: /s/ Satoru Otsubo
-----------------------------
Name: Saturo Otsubo
-----------------------------
Title: Executive Vice President
-----------------------------
14
<PAGE>
EXHIBIT A-1996
Applicable Commitment Percentages
AFTER AND
INCLUDING AFTER
MAY 22, 1996 MAY 20, 1997
------------ ------------
NationsBank, N.A ................. $31,250,000 $ 25,000,000 25.0%
United States National Bank
of Oregon ........................ $25,000,000 20,000,000 20.0%
ABN AMRO Bank N.V ................ $15,625,000 12,500,000 12.5%
Credit Lyonnais New York Branch
and Credit Lyonnais Cayman
Island Branch ................... $15,625,000 12,500,000 12.5%
Commonwealth Bank of Australia ... $12,500,000 10,000,000 10.0%
Grand Cayman Branch
The Bank of Nova Scotia .......... $12,500,000 10,000,000 10.0%
LTCB Trust Company ............... $12,500,000 10,000,000 10.0%
----------- ------------ ----
$125,000,000 $100,000,000 100.0%
15
<PAGE>
EXHIBIT F-1996
Form of Notes
_______________ 1
[____________, ___________]2
_______________, 1996
FOR VALUE RECEIVED, SUNGLASS HUT INTERNATIONAL, INC., a Florida
corporation having its principal place of business located in Coral Gables,
Florida (the "Borrower"), hereby promises to pay to the order of
___________________________________3 (the "Lender"), in its individual
capacity, at the office of NationsBank, N.A., as agent for the Lender (the
"Agent"), located at Independence Center, 15th Floor, Charlotte, North Carolina
28255 (or at such other place or places as the Agent may designate) at the times
set forth in the Amended and Restated Revolving Credit and Reimbursement
Agreement dated as of December 14, 1995 among the Borrower, the financial
institutions party thereto (collectively, the "Lenders") and the Agent (as
amended, supplemented or modified from time to time, the "Agreement" -- all
capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement), in lawful money of the United States of
America, in immediately available funds, the principal amount of
[______________________________________________]4 DOLLARS
($__________)1 or, if less than such principal amount, the aggregate unpaid
principal amount of all Revolving Credit Loans made by the Lender to the
Borrower pursuant to the Agreement on the Revolving Credit Termination Date or
such earlier date as may be required pursuant to the terms of the Agreement, and
to pay interest from the date hereof on the unpaid principal amount hereof, in
like money, at said office, on the dates and at the rates provided in Article II
of the Agreement. All or any portion of the principal amount of Loans may be
prepaid as provided in the Agreement.
- - -------------------------------
1 Insert Lender's Revolving Credit Commitment in arabic
numerals.
2 Insert name of city of Agent's Principal Office.
3 Insert name of Lender in capital letters.
4 Insert Lender's Revolving Credit Commitment in words.
16
<PAGE>
If payment of all sums due hereunder is accelerated under the terms of
the Agreement or under the terms of the other Loan Documents executed in
connection with the Agreement, the then remaining principal amount and accrued
but unpaid interest shall bear interest which shall be payable on demand (i) in
the case of a Fixed Rate Loan, at a rate of two percent (2%) above the Fixed
Rate for such Fixed Rate Loan, and (ii) in the case of a Base Rate Loan, at a
rate two percent (2%) per annum in excess of the Base Rate, or the maximum rate
permitted under applicable law, if lower, until such principal and interest have
been paid in full. Further, in the event of such acceleration, this Note, and
all other indebtedness of the Borrower to the Lender shall become immediately
due and payable, without presentation, demand, protest or notice of any kind,
all of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees, and
interest thereon at the rates set forth above.
Interest hereunder shall be computed on the basis of a 360 day year for
the actual number of days in the interest period.
This Note is one of the Revolving Credit Notes in the aggregate
principal amount of up to $125,000,000 referred to in the Agreement and is
issued pursuant to and entitled to the benefits and security of the Agreement to
which reference is hereby made for a more complete statement of the terms and
conditions upon which the Loans evidenced hereby were or are made and are to be
repaid. This Note is subject to certain restrictions on transfer or assignment
as provided in the Agreement.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law the benefits of all provisions of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability hereon until judgment be obtained
and execution issues against any other of them and returned satisfied or until
it can be shown that the maker or any other party hereto had no property
available for the satisfaction of the debt evidenced by this instrument, or
until any other proceedings can be had against any of them, also their right, if
any, to require the holder hereof to hold as security for this Note any
collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, diligence or any other formality are hereby waived
by all parties bound hereon.
17
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be made,
executed and delivered by its duly authorized representative as of the date and
year first above written, all pursuant to authority duly granted.
SUNGLASS HUT INTERNATIONAL, INC.
WITNESS:
______________________ By: _________________________________
______________________ Title: ______________________________
18
<PAGE>
ACKNOWLEDGEMENT OF EXECUTION ON BEHALF OF
SUNGLASS HUT INTERNATIONAL, INC.
STATE OF _____________
COUNTY OF _____________
Before me, the undersigned, a Notary Public in and for said County and
State on this _____ day of __________, 1996 A.D., personally appeared Larry G.
Petersen, known to be the Senior Vice President-Finance, Chief Financial Officer
and Treasurer of Sunglass Hut International, Inc. (the "Borrower"), who, being
by me duly sworn, says he works at 255 Alhambra Circle, Coral Gables, Florida
33134, and that by authority duly given by, and as the act of, the Borrower, the
foregoing and annexed Note dated ____________, 1996, was signed by him as said
Senior Vice President-Finance, Chief Financial Officer and Treasurer on behalf
of the Borrower.
Witness my hand and official seal this ____ day of __________, 1996.
-----------------------------------
Notary Public
(SEAL)
My commission expires: _______________
19
<PAGE>
AFFIDAVIT OF _______________________
(Name of Affiant)
The undersigned, being first duly sworn, deposes and says that:
1. He is the ________________ of ______________________
and works at _____________________________, __________, ______________.
2. The Note of Sunglass Hut International, Inc. to
________________________ (the "Bank") dated ______________, 1996
was executed before him and delivered to him on behalf of the
Bank in __________, __________ on ____________, 1996.
This the ____ day of __________, 1996.
-----------------------------------
(Signature of Affiant)
Acknowledgement of Execution
STATE OF _____________
COUNTY OF _____________
Before me, the undersigned, a Notary Public in and for said County and
State on this ____ day of __________, 1996 A.D., personally appeared
_______________________ who before me affixed his signature to the above
Affidavit.
Witness my hand and official seal this ____ day of ___________, 1996.
-----------------------------------
Notary Public
(SEAL)
My Commission Expires: ________________
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 5,377
<SECURITIES> 0
<RECEIVABLES> 4,114
<ALLOWANCES> 0
<INVENTORY> 129,407
<CURRENT-ASSETS> 158,540
<PP&E> 86,083
<DEPRECIATION> 5,177
<TOTAL-ASSETS> 295,440
<CURRENT-LIABILITIES> 43,444
<BONDS> 0
0
0
<COMMON> 541
<OTHER-SE> 165,549
<TOTAL-LIABILITY-AND-EQUITY> 295,440
<SALES> 122,822
<TOTAL-REVENUES> 122,822
<CGS> 70,111
<TOTAL-COSTS> 39,219
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,462
<INCOME-PRETAX> 12,030
<INCOME-TAX> 4,872
<INCOME-CONTINUING> 7,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,158
<EPS-PRIMARY> $0.13
<EPS-DILUTED> $0.13
</TABLE>
