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 DECEMBER 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-12046
LEVITZ FURNITURE INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 23-2351830
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6111 BROKEN SOUND PARKWAY, N.W., BOCA RATON, FL 33487-2799
(Address of Principal Executive Offices) (Zip Code)
(561) 994-6006
(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 filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On January 31, 1997, there were 30,320,628 shares of the registrant's Common
Stock outstanding of which 26,746,966 shares were Voting Common Stock and
3,573,662 shares were Non-Voting Common Stock, with no shares held by the
registrant in its treasury.
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PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
LEVITZ FURNITURE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
December 31, March 31,
1996 1996
ASSETS (Unaudited)
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CURRENT ASSETS:
Cash and cash equivalents $ 7,538 $ 12,755
Receivables 34,947 34,025
Inventories 160,244 140,918
Deposits and prepaid expenses 4,846 3,820
Income taxes receivable 943 6,528
Total current assets 208,518 198,046
PROPERTY AND EQUIPMENT, net 215,911 225,509
PROPERTY UNDER CAPITAL LEASES, net 122,460 134,944
OTHER ASSETS:
Intangible leasehold interests 15,957 17,053
Deferred financing fees 12,817 6,935
Goodwill 18,306 18,693
Other 5,619 5,707
Total other assets 52,699 48,388
$599,588 $606,887
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Cash overdrafts $ 19,151 $ 17,912
Current portion of long-term debt 7,179 2,441
Current portion of obligations under
capital leases 3,597 4,845
Accounts payable, trade 60,329 55,933
Accrued expenses and other liabilities 85,176 79,640
Deferred income taxes 3,595 4,628
Revolver borrowings 74,746 52,516
Total current liabilities 253,773 217,915
LONG-TERM DEBT, net of current portion 285,899 293,433
OBLIGATIONS UNDER CAPITAL LEASES, net of
current portion 76,339 82,922
OTHER NONCURRENT LIABILITIES 26,150 24,423
DEFERRED INCOME TAXES 46,167 55,846
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock, at par value 303 303
Capital in excess of par 213,560 212,960
Deferred compensation (1,351) (1,896)
Minimum pension liability (654) (654)
Retained earnings (deficit) (300,598) (278,365)
Total stockholders' deficit (88,740) (67,652)
$599,588 $606,887
</TABLE>
The accompanying notes are an integral part of these condensed
financial
statements.
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<TABLE>
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LEVITZ FURNITURE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands except share data)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $272,007 $270,117 $737,281 $763,242
Costs and expenses:
Cost of sales 151,031 149,987 407,871 412,168
Selling, general and
administrative expenses 102,970 106,974 290,262 306,832
Restructuring expense - 5,000 - 9,000
Charge for store closings - - 8,295 -
Depreciation and amortization 6,698 7,339 20,386 22,084
260,699 269,300 726,814 750,084
Operating income 11,308 817 10,467 13,158
Interest expense, net 14,365 12,150 41,704 37,935
Loss before income taxes (3,057) (11,333) (31,237) (24,777)
Income tax benefit 1,076 4,079 11,006 8,919
Loss before extraordinary items (1,981) (7,254) (20,231) (15,858)
Extraordinary items, net of tax
benefit of $1,090 - - (2,002) -
Net loss $ (1,981) $ (7,254) $(22,233) $(15,858)
Loss per common share:
Loss before extraordinary
items $ (0.07) $ (0.25) $ (0.68) $ (0.54)
Extraordinary items - - (0.07) -
Net loss per common share $ (0.07) $ (0.25) $ (0.75) $ (0.54)
Weighted average number of
common shares outstanding 29,867,217 29,620,628 29,864,847 29,620,628
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
<TABLE>
<CAPTION>
LEVITZ FURNITURE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended December 31,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(22,233) $(15,858)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 11,823 12,502
Amortization 8,563 9,582
Provision for deferred taxes (10,712) (8,321)
Loss on disposal of property and equipment 54 32
Amortization of original issue discount on
deferred debentures 1,054 865
Amortization of deferred financing fees 1,892 1,516
Amortization of deferred compensation 545 -
Pension expense 1,377 3,709
Other 280 -
Extraordinary losses related to early redemption
of debt, before tax benefit 3,092 -
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables (916) (538)
Inventories (19,326) 18,649
Deposits and prepaid expenses (1,026) 2,048
Income taxes receivable 5,585 (35)
Other, net 51 63
Increase (decrease) in:
Accounts payable, trade 4,396 (4,750)
Accrued expenses and other liabilities 9,397 1,975
Other noncurrent liabilities 2,710 (1,973)
Total adjustments 18,839 35,324
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (3,394) 19,466
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,596) (10,490)
Proceeds from sale of property and equipment
and other assets 184 217
Proceeds from sale leaseback of property - 22,209
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (7,412) 11,936
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under Credit Agreement 822,606 221,800
Repayments under Credit Agreement (800,376) (250,223)
Principal payments on long-term debt (3,530) (2,029)
Principal payments under capital
lease obligations (3,484) (3,904)
Increase in cash overdrafts 1,239 10,338
Payment of deferred financing fees (10,866) -
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 5,589 (24,018)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (5,217) 7,384
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,755 6,301
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,538 $ 13,685
</TABLE>
The accompanying notes are an integral part of these condensed
financial
statements.
<PAGE>
LEVITZ FURNITURE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
1. BASIS OF PRESENTATION:
Levitz Furniture Incorporated (LFI), a Delaware corporation, was
incorporated in December 1984 for the purpose of acquiring Levitz
Furniture Corporation (Levitz) in April 1985.
In the opinion of Management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments consisting of
normal recurring accruals necessary to present fairly the financial
position as of December 31, 1996, the results of operations and cash
flows for the periods then ended. The results of operations for the
period ended December 31, 1996, are not necessarily indicative of the
results to be expected for the full year.
2. CONSOLIDATED STATEMENTS OF CASH FLOWS:
Supplemental disclosures of cash flow information (dollars in
thousands):
Nine Months Ended
December 31,
1996 1995
Interest paid $39,347 $36,583
Income tax refunds $ 6,968 $ 1,086
3. LONG-TERM DEBT AND REVOLVER BORROWINGS:
On July 1, 1996, Levitz and certain of its wholly owned subsidiaries
entered into senior secured credit facilities providing for up to
$190.0 million of availability (collectively, the "Senior Secured
Facilities"). The Senior Secured Facilities consist of $115.0 million
of revolving notes, $35.0 million of term notes and $40.0 million of
other notes.
Loans made under the revolving notes and other notes bear interest, at
Levitz's option, at a rate equal to either Bankers Trust Company's
("BTC's") prime lending rate plus 1.5% or BTC's LIBOR rate plus 3.25%.
The term notes bear interest at a rate of 15.5%, payable in cash or, at
Levitz's option, at any time prior to July 1, 1999, by the issuance of
up to $10.0 million of additional term notes, having a principal amount
equal to the amount of interest accrued and maturing on July 1, 2001.
To the extent additional term notes are issued for interest, the amount
available under the revolving notes will be permanently decreased. If
LFI achieves a prescribed Fixed Charge Coverage Ratio, as defined, the
interest rate on the term notes will be reset from 15.5% to 11.0%.
The Senior Secured Facilities are secured by substantially all of the
assets of Levitz and its subsidiaries and a perfected pledge of stock
of all Levitz's subsidiaries. LFI and Levitz are subject to certain
covenants and restrictions and cross-default provisions as described in
the Senior Secured Facilities or debt indentures of Levitz, including
among other restrictions the following: provisions which require
certain financial tests be met, restrictions with respect to the sale
of assets, annual capital expenditures, ability to enter into
sale-leaseback transactions or mortgage loans, ability to redeem
certain indebtedness, and limitations on the ability to incur
additional indebtedness, requirements to repurchase certain
indebtedness if a change in control occurs and limitations on the
ability to pay dividends or make certain other restricted payments by
Levitz or LFI.
LFI issued to the original holders of the term notes warrants to
purchase up to 5,000,000 shares of Common Stock of LFI at an initial
exercise price of $4.125 per share, subject to downward adjustments if
certain targeted stock prices of LFI are not achieved in the future and
other anti-dilution provisions.
As a result of the July 1996 refinancing, in the quarter ended June 30,
1996, LFI incurred a before-tax extraordinary loss of $3.1 million on
the write-off of deferred financing fees related to the termination of
Levitz's previous bank credit agreement. The after-tax loss was $2.0
million or $0.07 per share.
In order to comply with a consensus issued in November 1995 set forth
by the Emerging Issues Task Force in EITF 95-22 regarding
classification of certain debt instruments that include both a
requirement for a lock box arrangement and a subjective acceleration
clause, $74.7 million of the borrowings under the revolving notes have
been classified as Revolver Borrowings in current liabilities. Under
the terms of the Senior Secured Facilities, however, Levitz will not be
required to repay this amount in the next year. Payment will only be
required at their expiration on July 1, 2001 or if the Borrowing Base,
as defined in the Senior Secured Facilities, is reduced below the
amount outstanding. Based on anticipated Borrowing Base levels, Levitz
believes the amount outstanding under the Senior Secured Facilities
will be due and payable in July 2001.
As of December 31, 1996, Levitz had approximately $25.2 million of
availability under the Senior Secured Facilities. The Senior Secured
Facilities require LFI to achieve an interest coverage ratio beginning
December 31, 1996 and quarterly thereafter. In December 1996,
Amendment No. 1 to the Senior Secured Facilities changed the interest
coverage ratio through September 30, 1997. LFI and Levitz are
currently in compliance with all such covenants under the Senior
Secured Facilities and all applicable debt indentures.
The retail furniture industry historically has been highly cyclical and
directly affected by, among other things, housing starts, existing home
sales, consumer confidence, the level of personal discretionary
spending, consumer credit availability and general economic conditions.
Furniture purchases are generally discretionary, and in view of the
fact that they represent a significant expenditure to the average
consumer, they are often deferred during times of economic uncertainty.
Decreased comparable store sales and gross profit over the past two
years including the first two quarters of Fiscal 1997, have
significantly reduced operating income and the resulting cash flow
resulting in debt compliance and liquidity concerns.
Management has undertaken a number of steps including the offering for
sale of under-utilized properties to address the liquidity needs of LFI
and Levitz as well as compliance with the Senior Secured Facilities.
Based upon anticipated cash flow from operations and existing borrowing
capacity under the Senior Secured Facilities, Management believes
Levitz will be able to meet the covenants contained in the Senior
Secured Facilities during the foreseeable future, and has sufficient
cash flow to meet current cash needs. However, compliance with such
covenants will be dependent on the successful accomplishment of
Management's strategies and Levitz achieving improved comparable store
sales. Actual results could differ from the estimates used to set
these covenants resulting in Levitz's failure to be in compliance with
the Senior Secured Facilities.
4. SALE OF RECEIVABLES:
Levitz and General Electric Capital Corporation (GECC) are parties to
an Account Purchase Agreement (the Agreement), whereby GECC purchases
Levitz's customer credit obligations without recourse. At December 31,
1996 GECC had $734.4 million of customer credit obligations
outstanding. Pursuant to generally accepted accounting principles,
Levitz's financial statements reflect the above transactions provided
by the Agreement as a sale of the customer credit obligations. Under
the terms of the Agreement, Levitz may pay GECC a fee or may receive
income, based upon the relationship among the interest earned on the
portfolio sold thereunder, the amount of the servicing fee, the prime
rate and to a limited extent, credit losses. The Agreement expires
October 31, 1998, with automatic five-year renewals, unless canceled by
either party with twenty-six month's notice prior to scheduled
termination. On August 21, 1996 Levitz gave GECC notice of Levitz's
intent to renegotiate the Agreement and the parties are renegotiating
the terms of the Agreement. If Levitz or GECC decide to terminate the
Agreement, Levitz will be required to repurchase the outstanding credit
obligations at the termination date, which would not be earlier than
April 1999. If necessary, Levitz believes it could replace the
Agreement with a similar agreement or pursue alternative methods of
financing and servicing its customer credit obligations without
materially affecting its results of operations. No assurances can be
given, however, that Levitz will be able to enter into such
arrangements on acceptable terms. Subject to the ultimate resolution of
negotiations or the terms of a new agreement, generally accepted
accounting principles could require Levitz to change the accounting for
the transactions provided under the Agreement to reflect them as a
financing of the underlying customer credit obligations. For the nine
month periods ended December 31, 1996 and December 31, 1995, Levitz
recorded income under the Agreement of $10.1 million and $8.5 million,
respectively. These amounts are included in selling, general and
administrative expenses as they represent an adjustment to the
estimated sales price of the receivables.
5. CLOSED STORES:
During the quarter ended June 30, 1996, Management developed a plan to
close five satellite stores. The stores were closed on October 31,
1996. The plan resulted in a pre-tax charge for store closings of $8.3
million. The charge includes the reduction of the carrying value of
the store assets to their estimated fair value net of selling expenses
as well as reserves for future rental payments under operating lease
agreements. Included in the store closing charge is a $2.4 million
charge from the adoption of SFAS No. 121 effective April 1, 1996 for
one of the closed stores. The charge increased net loss by $5.4
million or $0.18 per share for the nine month period ended December 31,
1996.
6. EARNINGS PER COMMON SHARE:
Earnings per Common Share are based on the weighted average number of
common shares outstanding during each period.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table sets forth LFI's results of operations expressed as a
percentage of net sales for the periods indicated:
Percentage of Net Sales
Three Months Ended Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
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Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 55.5 55.5 55.3 54.0
Gross profit 44.5 44.5 44.7 46.0
Selling, general and
administrative expenses 37.8 39.6 39.4 40.2
Restructuring expense - 1.9 - 1.2
Charge for store closings - - 1.1 -
Depreciation and amortization 2.5 2.7 2.8 2.9
Operating income 4.2 0.3 1.4 1.7
Interest expense 5.3 4.5 5.6 5.0
Loss before income taxes (1.1) (4.2) (4.2) (3.3)
Income tax benefit (0.4) (1.5) (1.5) (1.2)
Loss before extraordinary items (0.7) (2.7) (2.7) (2.1)
Extraordinary items, net of tax
benefit - - (0.3) -
Net loss (0.7)% (2.7)% (3.0)% (2.1)%
Comparable store sales 2.0 % (9.7)% (3.0)% (9.6)%
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1995
Net sales of $272.0 million for the three month period ended December 31,
1996 increased $1.9 million or 0.7% over net sales of $270.1 million in the
same period for the prior year. Sales on a comparable store basis increased
2.0%. Management believes the improvement reflects consumer acceptance of
the new changes in merchandise assortment and marketing. The marketing
effort has shifted from a low-end to a mid-priced focus with changes in the
merchandise assortment to compliment this effort.
Gross profit as a percentage of net sales remained at 44.5% for the three
month period ended December 31, 1996 as compared to the same period for the
prior year.
Selling, general and administrative (SG&A) expenses decreased $4.0 million
for the three month period ended December 31, 1996 as compared to the same
period for the prior year. As a percentage of net sales, SG&A expenses
decreased to 37.8% from 39.6%, respectively. The decrease in SG&A expenses
was primarily due to the reduction in the number of employees from the
comparable period last year. Salaries and related employee benefits and
payroll tax expenses decreased $4.2 million.
The restructuring expense for the three month period ended December 31, 1995
was a result of the elimination of regional offices and certain support
positions. The restructuring charge included $4.7 million of severance pay
and related employee benefits and $0.3 million of lease commitments on
closed regional office facilities.
As a percentage of net sales, depreciation and amortization expenses for
such periods decreased to 2.5% from 2.7% for the three month period ended
December 31, 1996 as compared to the same period of the prior year.
Operating income for the three month period ended December 31, 1996
increased $10.5 million to $11.3 million from the same period for the prior
year. As a percentage of net sales, operating income increased to 4.2% from
0.3%, respectively. The percentage and dollar increases are primarily
attributable to the increase in net sales, the reduction in SG&A expenses
and the restructuring charge in the prior year.
Interest expense for the three month period ended December 31, 1996
increased $2.2 million or 18.2% from the same period for the prior year. As
a percentage of net sales, interest expense increased to 5.3% from 4.5%,
respectively. The increase is due to increased borrowings and higher
effective interest rates.
As a result of the aforementioned factors, loss before income taxes for the
three month period ended December 31, 1996 amounted to $3.1 million or 1.1%
of net sales as compared to a loss of $11.3 million or 4.2% of net sales for
the same period of the prior year.
Income tax benefit for the three month period ended December 31, 1996 was
$1.1 million or 0.4% of net sales as compared to $4.1 million or 1.5% of net
sales for the same period of the prior year. The effective tax rate was
35.2% for the three month period ended December 31, 1996 as compared to
36.0% for the same period of the prior year.
Net loss for the three month period ended December 31, 1996 was $2.0 million
or 0.7% of net sales as compared to net loss of $7.3 million or 2.7% of net
sales for the same period of the prior year.
NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO NINE MONTHS ENDED
DECEMBER 31, 1995
Net sales of $737.3 million for the nine months ended December 31, 1996
decreased $26.0 million or 3.3% from net sales of $763.2 million in the same
period of the prior year. Sales on a comparable store basis decreased 3.0%.
Gross profit as a percentage of net sales decreased to 44.7% for the nine
month period ended December 31, 1996 compared to 46.0% in the same period
for the prior year. The decrease is attributable to a change in pricing
policy toward more competitive pricing and increased value for the customer.
SG&A expenses decreased $16.6 million or 5.4% for the nine month period
ended December 31, 1996 as compared to the same period of the prior year. As
a percentage of net sales, SG&A expenses decreased to 39.4% from 40.2%,
respectively. The decrease in SG&A expenses is primarily due to the
reduction in the number of employees from the comparable period last year.
The restructuring expense for the nine month period ended December 31, 1995,
was a result of the consolidation of regional offices and the elimination of
certain support positions. The restructuring charge included $7.8 million
of severance pay and related employee benefits and $1.2 million of lease
commitments on closed regional office facilities. During the quarter ended
June 30, 1996, Management developed a plan to close five satellite stores.
The stores were closed on October 31, 1996. The plan resulted in a pre-tax
charge for store closings of $8.3 million. The charge includes the
reduction of the carrying value of the store assets to their estimated fair
value net of selling expenses as well as reserves for future rental payments
under operating lease agreements. Included in the store closing charge is a
$2.4 million charge from the adoption of SFAS No. 121 effective April 1,
1996 for one of the closed stores.
Depreciation and amortization expenses decreased $1.7 million or 7.7% for
the nine month period ended December 31, 1996 as compared to the same period
of the prior year. As a percentage of net sales, depreciation and
amortization expenses for such periods decreased to 2.8% from 2.9%,
respectively. Amortization decreased to $8.6 million from $9.6 million in
the period ended December 31, 1996 as compared to the same period of the
prior year. Depreciation decreased to $11.8 million from $12.5 million in
the period ended December 31, 1996 as compared to the same period of the
prior year due to store closings during the current year period.
<PAGE>
Operating income for the nine months ended December 31, 1996 decreased $2.7
million or 20.5% from the same period for the prior year. As a percentage of
net sales, operating income for such periods decreased to 1.4% from 1.7%.
The percentage and dollar decreases are attributable to the decline in net
sales and the reduction in gross profit as offset by the reduction in SG&A
expenses.
Interest expense increased $3.8 million or 9.9% for the nine month period
ended December 31, 1996 as compared to the same period of the prior year. As
a percentage of net sales interest expense increased to 5.6% from 5.0%,
respectively. The increase in dollars in interest expense was primarily due
to increased average borrowing levels and to higher effective interest
rates. The increase in percentage of net sales is due to the dollar
increase as noted above and the decline in net sales.
As a result of the aforementioned factors, loss before income taxes for the
nine month period ended December 31, 1996 amounted to $31.2 million or 4.2%
of net sales as compared to losses of $24.8 million or 3.3% of net sales for
the same period of the prior year.
Income tax benefit was $11.0 million or 1.5% of net sales for the nine month
period ended December 31, 1996 as compared to $8.9 million or 1.2% of net
sales for the same period of the prior year. The effective tax rate
decreased to 35.2% from 36.0%.
Net loss before extraordinary items for the nine month period ended December
31, 1996 amounted to $20.2 million or 2.7% of net sales as compared to net
loss of $15.9 million or 2.1% of net sales for the same period of the prior
year.
Extraordinary losses net of tax benefit were $2.0 million or 0.3% of net
sales for the period ended December 31, 1996. The extraordinary losses
included the write- off of deferred financing fees relating to the previous
credit agreement.
Net loss for the nine month period ended December 31, 1996 was $22.2 million
or 3.0% of net sales as compared to net loss of $15.9 million or 2.1% of net
sales for the same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
LFI's only material asset is the common stock of Levitz and, therefore, its
ability to pay cash dividends, interest and principal is dependent upon
dividends and other payments from Levitz. LFI's ability to obtain cash from
Levitz is restricted by the Senior Secured Facilities, the indentures
relating to Levitz's outstanding indebtedness and Florida law. LFI's only
outstanding obligations are $8.4 million principal amount ($7.7 million
accreted value as of December 31, 1996) of Deferred Debentures which do not
require cash interest payments until April 1997.
Net cash used in operating activities for the nine month period ended
December 31, 1996 includes the add-back of depreciation and amortization
expense of $20.4 million, plus other non-cash items of $5.5 million,
extraordinary loss on the early redemption of debt of $3.1 million and a
decrease in working capital of $1.8 million. The decrease in working
capital excluding income taxes primarily includes an increase in inventory
of $19.3 million and an increase in accrued expenses of $9.4 million. The
increase in inventory is due to the decrease in net sales and the change in
merchandise assortment. The increase in accrued expenses is due to
increased promotional fees on zero percent financing offered to customers.
Capital expenditures of $7.6 million during the nine month period ended
December 31, 1996 were for maintenance and alterations of existing stores.
Management estimates that approximately $6.0 million to $10.0 million is
required annually to adequately maintain and/or improve its existing
warehouse-showrooms and satellite stores. Levitz does not expect to open
any new stores in the current fiscal year.
The cash provided by investing activities for the nine month period ended
December 31, 1995 was primarily due to the sale-leaseback of three
warehouse-showrooms and one satellite store for approximately $22.2 million.
The net cash provided by financing activities for the period ended December
31, 1996 included increased borrowings under the Senior Secured Facilities
of $22.2 million reduced by payment of financing fees of $10.9 million and
principal payments under other long-term debt and capital leases of $7.0
million.
<PAGE>
On July 1, 1996, Levitz and certain of its wholly owned subsidiaries entered
into senior secured credit facilities providing for up to $190.0 million of
availability (collectively, the "Senior Secured Facilities"). The proceeds
of the Senior Secured Facilities were used to refinance indebtedness
incurred under Levitz's previous bank credit agreement, to provide liquidity
for working capital needs and for other general corporate purposes. The
Senior Secured Facilities expire on July 1, 2001. Levitz paid financing
fees of $10.9 million for the Senior Secured Facilities.
LFI issued to the original holders of the term notes warrants to purchase up
to 5,000,000 shares of Common Stock of LFI at an initial exercise price of
$4.125, subject to downward adjustments if certain targeted stock prices of
LFI are not achieved in the future and other anti-dilution provisions.
In order to comply with a consensus issued in November 1995 set forth by the
Emerging Issues Task Force in EITF 95-22 regarding classification of certain
debt instruments that include both a requirement for a lock box arrangement
and a subjective acceleration clause, $74.7 million of the borrowings under
the revolving notes have been classified as a current liability. Under the
terms of the Senior Secured Facilities, however, Levitz will not be required
to repay this amount in the next year. Payment will only be required at
their expiration on July 1, 2001 or if the Borrowing Base, as defined in the
Senior Secured Facilities, is reduced below the amount outstanding. Based
on anticipated Borrowing Base levels, Levitz believes the amount outstanding
will be due and payable in July 2001. See Note 3 of the consolidated
condensed financial statements.
Levitz and General Electric Capital Corporation (GECC) are parties to an
Account Purchase Agreement (the Agreement), whereby GECC purchases Levitz's
customer credit obligations without recourse. At December 31, 1996 GECC had
$734.4 million of customer credit obligations outstanding. Pursuant to
generally accepted accounting principles, Levitz's financial statements
reflect the above transactions provided by the Agreement as a sale of the
customer credit obligations. Under the terms of the Agreement, Levitz may
pay GECC a fee or may receive income, based upon the relationship among the
interest earned on the portfolio sold thereunder, the amount of the
servicing fee, the prime rate and to a limited extent, credit losses. The
Agreement expires October 31, 1998, with automatic five-year renewals,
unless canceled by either party with twenty-six month's notice prior to
scheduled termination. On August 21, 1996 Levitz gave GECC notice of
Levitz's intent to renegotiate the Agreement and the parties are
renegotiating the terms of the Agreement. If Levitz or GECC decide to
terminate the Agreement, Levitz will be required to repurchase the
outstanding credit obligations at the termination date, which would not be
earlier than April 1999. If necessary, Levitz believes it could replace the
Agreement with a similar agreement or pursue alternative methods of
financing and servicing its customer credit obligations without materially
affecting its results of operations. No assurances can be given, however,
that Levitz will be able to enter into such arrangements on acceptable
terms. Subject to the ultimate resolution of negotiations or the terms of a
new agreement, generally accepted accounting principles could require Levitz
to change the accounting for the transactions provided under the Agreement
to reflect them as a financing of the underlying customer credit
obligations.
Management has undertaken a number of steps to address the liquidity needs
of LFI and Levitz as well as compliance with the Senior Secured Facilities.
Except as set forth above, based upon anticipated cash flow from operations
and existing borrowing capacity under the Senior Secured Facilities,
Management believes LFI and Levitz will be able to meet the covenants
contained in the Senior Secured Facilities during the foreseeable future and
has sufficient cash flow to meet current cash needs. However, compliance
with such covenants will be dependent on the successful accomplishment of
management's strategies and Levitz achieving improved comparable store
sales. Actual results could differ from the estimates used to set these
covenants resulting in Levitz's failure to be in compliance with the Senior
Secured Facilities. In December 1996, Amendment No. 1 to the Senior Secured
Facilities changed the interest coverage ratio through September 30, 1997.
As of December 31, 1996, Levitz had approximately $25.2 million of
availability under the Senior Secured Facilities.
<PAGE>
PART II OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10: Amendment No. 2 dated as of December 16, 1996 to
the Credit Agreements dated as of July 1, 1996 among Levitz
Furniture Corporation, et al. and BT Commercial Corporation, as
Agent.
Exhibit 27: Financial Data Schedule
(b) Report on Form 8-K: On December 6, 1996 the registrant filed a
report on Form 8-K under Item 5. "Other Events" reporting the
execution of Amendment No. 1 to the Credit Agreements as
defined in item 6 (a) above, incorporated by reference to
Exhibit 99 to the registrant's Report on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEVITZ FURNITURE INCORPORATED
(Registrant)
Date: February 13, 1997 /s/ PATRICK J. NOLAN
Patrick J. Nolan
Vice President and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibits to Form 10-Q
Number
Exhibit Table Exhibit
10 Amendment No. 2 dated as of December 16, 1996
among Levitz Furniture Corporation, et al.
and BT Commercial Corporation, as agent.
27 Financial Data Schedule.
AMENDMENT NO. 2
TO
CREDIT AGREEMENTS
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENTS ("AMENDMENT") is dated as of
December 16, 1996, by and among LEVITZ FURNITURE CORPORATION, a Florida
corporation ("LFC"), LEVITZ FURNITURE COMPANY OF THE MIDWEST, INC., a
Colorado corporation ("LFC MIDWEST"), LEVITZ FURNITURE COMPANY OF THE
PACIFIC, INC., a California corporation ("LFC PACIFIC"), LEVITZ FURNITURE
COMPANY OF WASHINGTON, INC., a Washington corporation ("LFC WASHINGTON") and
JOHN M. SMYTH COMPANY, an Illinois corporation ("SMYTH") (LFC, LFC Midwest,
LFC Pacific, LFC Washington and Smyth sometimes hereinafter referred to
individually as a "BORROWER" and collectively as the "BORROWERS"); LFC,
acting in its capacity as borrowing agent for the Borrowers (LFC, in such
capacity, the "LFC FUNDS ADMINISTRATOR"); BT COMMERCIAL CORPORATION, a
Delaware corporation (in its individual capacity, hereinafter referred to as
"BTCC"), acting in its capacity as agent (in such capacity, hereinafter
referred to as the "TRANCHE A AGENT") under the "TRANCHE A CREDIT AGREEMENT"
(as hereinafter defined); BTCC, acting in its capacity as agent (in such
capacity, hereinafter referred to as the "TRANCHE B AGENT") under the
"TRANCHE B CREDIT AGREEMENT" (as hereinafter defined); and each of the
Lenders under and as defined in the Tranche A Credit Agreement (hereinafter
referred to as the "TRANCHE A LENDERS") and the "TRANCHE B LENDERS" (as
defined in the Tranche A Credit Agreement). Capitalized terms used herein
but not otherwise defined herein shall have the respective meanings assigned
to such terms in the Tranche A Credit Agreement.
WITNESSETH:
WHEREAS, Borrowers, the Tranche A Agent and the Tranche A Lenders have
entered into that certain Credit Agreement dated as of July 1, 1996, as
amended (the "TRANCHE A CREDIT AGREEMENT"), pursuant to which the Tranche A
Lenders have agreed to make certain loans and other financial accommodations
to or for the account of Borrowers;
WHEREAS, Borrowers, the Tranche B Agent and the Tranche B Lenders have
entered into that certain Credit Agreement dated as of July 1, 1996, as
amended (the "TRANCHE B CREDIT AGREEMENT"), pursuant to which the Tranche B
Lenders have agreed to make certain loans and other financial accommodations
to or for the account of Borrowers;
WHEREAS, the Term Lenders have advised the Tranche A Agent and the
Tranche B Agent (sometimes hereinafter referred to collectively as the
"AGENTS") and the Tranche A Lenders and the Tranche B Lenders (sometimes
hereinafter referred to collectively as the "LENDERS") that pursuant to that
certain Agreement for Sale of Claim dated as of December 16, 1996 (the "TERM
NOTE PURCHASE AGREEMENT"), among each of the Term Lenders and Silver Oak
Capital, L.L.C., as Agent (the "SUBSTITUTE TERM LENDER"), the Term Lenders
wish to assign their respective rights and delegate their respective
obligations under the Term Notes and the other Credit Documents, including
the Tranche A Credit Agreement (the "TERM ASSIGNMENT"), in each case to the
Substitute Term Lender;
WHEREAS, the Term Lenders have requested that the Tranche A Agent
consent to the Term Assignment, and the Tranche A Agent has agreed to
consent to the Term Assignment, subject to the prior amendment of the
Tranche A Credit Agreement and the Tranche B Credit Agreement (sometimes
hereinafter referred to collectively as the "CREDIT AGREEMENTS"), in each
case as set forth herein; and
WHEREAS, Borrowers, the LFC Funds Administrator, the Agents and the
Lenders have agreed to amend the Credit Agreements, on the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the respective parties hereto hereby agree as follows:
1. CONSENT TO TERM ASSIGNMENT. Effective as of the date hereof, upon
satisfaction of the conditions precedent set forth in SECTION 3 below, the
Tranche A Agent hereby consents to the Term Assignment.
2. AMENDMENT TO TRANCHE A CREDIT AGREEMENT. Effective as of the date
hereof, upon satisfaction of the conditions precedent set forth in SECTION 3
below, the Tranche A Credit Agreement is hereby amended as follows:
2.1 The defined term "CHANGE OF CONTROL" set forth in SECTION 1.1
of the Tranche A Credit Agreement is hereby amended by deleting the
words "any Term Lender" and substituting therefor the words "Apollo
Management L.P., a Delaware limited partnership," in each case in: (I)
the parenthetical beginning in the first line of CLAUSE (A) thereof);
(II) the parenthetical beginning in the first line of CLAUSE (B)
thereof); and (III) the parenthetical beginning in the third line of
CLAUSE (C) thereof).
2.2 The defined term "EXPENSES" set forth in SECTION 1.1 of the
Tranche A Credit Agreement is hereby amended by deleting therefrom: (I)
the words "the Term Lenders" appearing in the second line thereof and
substituting therefor the words "Apollo Management L.P., a Delaware
limited partnership, and/or its Affiliates"; (II) the words "or any Term
Lender" appearing in the twelfth line thereof; and (III) the words "Term
Lender" appearing in the twenty-seventh line thereof and substituting
therefor the words "Apollo Management L.P., a Delaware limited
partnership, and/or its Affiliates".
2.3 The following defined term is hereby added to SECTION 1.1 of
the Tranche A Credit Agreement in the appropriate alphabetical order:
MAJORITY TERM LENDERS means, at any time, those Term Lenders
holding in the aggregate more than fifty-percent (50%) of the Term
Exposure at such time.
2.4 SECTION 7.2 of the Tranche A Credit Agreement is hereby
amended by deleting therefrom (I) the words "each Term Lender" appearing
in the first and second lines thereof and (II) the words "or any Term
Lender" appearing in the second line of CLAUSE (C) thereof.
2.5 SECTION 7.5 of the Tranche A Credit Agreement is hereby
amended by deleting therefrom the words "Term Lenders, or their
respective" appearing in the fifth line thereof and substituting the
word "its" therefor.
2.6 CLAUSE (B) of SECTION 7.13 of the Tranche A Credit Agreement
is hereby amended by deleting therefrom: (I) the words "or any Term
Lender" appearing in the first line thereof; and (II) the words ", any
Term Lender" appearing in the seventh line thereof.
2.7 CLAUSE (C) of SECTION 7.14 of the Tranche A Credit Agreement
is hereby amended by deleting therefrom the words "or the Term Lenders"
appearing in the twenty-first line thereof.
2.8 SECTION 8.6 of the Tranche A Credit Agreement is hereby
amended by deleting therefrom the proviso set forth therein and
substituting therefor the following language:
PROVIDED, THAT, (A) each such disposition is for fair value and (B)
the Majority Term Lenders have consented thereto in their sole
discretion; PROVIDED, FURTHER, that, the consent of the Majority
Term Lenders to any such disposition shall not be required so long
as:
(1) after giving effect to such disposition, the aggregate
liquidation value of the Borrowers' real property owned in fee
simple absolute, net of any Indebtedness secured by a Lien on such
real property senior to the Lien thereon in favor of the Collateral
Agent, is greater than $59,500,000, such liquidation value to be
determined by reference to the schedule of liquidation values
acknowledged by the Collateral Agent, the Borrowers and the
Majority Term Lenders on or before December 16, 1996, as the
schedule to be used for purposes of determining compliance with
this SUBSECTION (1); PROVIDED, THAT the Borrowers may update such
schedule once (and only once) by retaining, at their own expense, a
nationally recognized real estate appraisal firm that is reasonably
acceptable to the Collateral Agent and the Majority Term Lenders,
which firm shall render an opinion as to the respective fair market
values and liquidation values as of the date of such opinion of all
of Borrower's real property that is (X) owned in fee simple
absolute, and (Y) subject to a Lien in favor of the Collateral
Agent for the benefit of the Secured Parties;
and, PROVIDED, FURTHER, THAT all drafts of such opinion, and the
final such opinion, shall be simultaneously delivered to the
Collateral Agent, the Borrowers and to each Term Lender. The final
opinion shall be reasonably satisfactory to the Collateral Agent
and the Majority Term Lenders, shall be addressed to the Collateral
Agent, the Borrowers and the Lenders and shall state that each of
such Persons may rely thereon. Upon delivery of an opinion meeting
the conditions set forth above, the schedule of liquidation values
set forth in such opinion shall become the schedule used for
purposes of determining compliance with this SUBSECTION (1);
(2) after giving effect to such disposition, the aggregate
consideration received with respect to all such dispositions for
all Borrowers does not exceed the following amounts (the "PERMITTED
AMOUNTS"):
(X) $4,890,000, for dispositions made between December
11, 1996 and March 31, 1997, and
(Y) $17,500,000, for dispositions made in any single
fiscal year being with the fiscal year ending March 31, 1998;
PLUS, in any fiscal year, the cumulative unused portion of any
Permitted Amount for a prior fiscal year or the period between
December 11, 1996 and March 31, 1997;
(3) the total consideration received with respect to such
disposition is paid in full in cash upon consummation thereof and
the Net Cash Disposition Proceeds thereof are thereupon (I)
immediately reinvested in the business of the Borrowers or their
respective Subsidiaries or (II) delivered to the Collateral Agent,
in which case such consideration will be applied pursuant to the
terms of the Collateral Agency Agreement; and
(4) the fair value of the property comprising such disposition
(I) is the fair value thereof as reasonably determined by the Board
of Directors of such Borrower, if the total consideration for any
individual piece of real property, or any single item of personal
property, as the case may be, comprising all or any part of such
disposition, does not exceed $7,500,000, or (II) is the fair value
thereof as determined by a reputable
<PAGE>
independent appraiser, if the total consideration for any
individual piece of real property, or any single item of personal
property, as the case may be, comprising all or any part of such
disposition, exceeds $7,500,000.
2.9 SECTION 9.1(J) of the Tranche A Credit Agreement is hereby
amended by deleting therefrom the parenthetical beginning in the fourth
line thereof.
2.10 SECTION 9.2A of the Tranche A Credit Agreement is hereby
amended by inserting the word "Majority" immediately prior to the words
"Term Lenders" appearing in the sixth line thereof.
2.11 SECTION 9.4 of the Tranche A Credit Agreement is hereby
amended by inserting the word "Majority" immediately prior to the words
"Term Lenders" appearing in the fifth line thereof.
2.12 CLAUSE (C) of SECTION 11.8 of the Tranche A Credit Agreement
is hereby deleted in its entirety and the following language is hereby
substituted therefor:
(C) TERM LENDER ASSIGNMENT. Each Term Lender may assign to
one or more Persons all or a portion of its rights and obligations
under this Credit Agreement, the Term Notes and the other Credit
Documents, with the consent of the Agent, which consent shall not
be unreasonably withheld or delayed; and upon execution and
delivery to the Agent, for its acceptance and recording in the
Register, of an agreement in substantially the form of EXHIBIT G
(an "ASSIGNMENT AND ASSUMPTION AGREEMENT"), together with surrender
of any Term Note or Term Notes subject to such assignment and a
processing and recordation fee of $2,500, such assignment shall be
effective and ANNEX II hereto shall be deemed to be modified
accordingly. No such assignment shall be for less than $10,000,000
of the Term Commitments unless it is to another Lender or is an
assignment of all of such Term Lender's rights and obligations
under this Credit Agreement.
2.13 CLAUSE (B) of SECTION 11.11 of the Tranche A Credit Agreement
is hereby amended by (I) inserting the word "Majority" immediately prior
to the words "Term Lenders" appearing in the first line thereof; and
(II) deleting from the seventh line thereof the references to Sections
6.11 and 9.1(j).
2A. AMENDMENT TO TRANCHE B CREDIT AGREEMENT. Effective as of the date
hereof, upon satisfaction of the conditions precedent set forth in SECTION 3
below, the Tranche B Credit Agreement is hereby amended as follows:
2A.1 SECTION 7.1(J) of the Tranche B Credit Agreement is hereby
amended by deleting therefrom the parenthetical beginning in the fourth
line thereof.
2B. Amendment to Collateral Agency Agreement. Effective as of the date
hereof, upon satisfaction of the conditions precedent set forth in SECTION 3
below, the Collateral Agency Agreement is hereby amended as follows:
2B.1 CLAUSE (A) of SECTION 1 of the Collateral Agency Agreement is
hereby amended by adding the following defined term thereto in the
appropriate alphabetical order:
"MAJORITY TERM LENDERS" means the "Majority Term Lenders" as
defined in the Tranche A Credit Agreement.
2B.2 SECTION 2.3 of the Collateral Agency Agreement is hereby
amended by inserting the word "Majority" immediately prior to the words
"Term Lenders" appearing in the twentieth and twenty-first lines
thereof.
2B.3 SECTION 2.5 of the Collateral Agency Agreement is hereby
amended by inserting the word "Majority" immediately prior to the words
"Term Lenders" appearing in the ninth line thereof.
2B.4 SECTION 2.7 of the Collateral Agency Agreement is hereby
amended by inserting the word "Majority" immediately prior to the words
"Term Lenders" appearing in the fourth line thereof.
3. CONDITIONS PRECEDENT. This Amendment shall become effective as of
the date hereof, upon satisfaction of each of the following conditions:
(A) Agents shall have received twelve (12) copies of this
Amendment, duly executed by the LFC Funds Administrator, each of the
Borrowers and the Majority Lenders.
(B) The Term Assignment shall have been consummated pursuant to
the respective terms and provisions of the Term Note Purchase Agreement.
(C) The Tranche A Agent shall have received (I) an Assignment and
Assumption Agreement with respect to the Term Notes, duly executed by
the Term Lenders and the Substitute Term Lender and (II) each of the
Term Notes.
(D) Borrowers shall have reimbursed the Term Lenders for Expenses
in an aggregate amount equal to $27,500.00.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS.
4.1 Each of the Borrowers hereby represents and warrants to each
of the Agents and Lenders that, after giving effect to this Amendment:
(A) All representations and warranties contained in each of the
Credit Agreements and the other Transaction Documents are true and
correct in all material respects on and as of the date of this
Amendment, in each case as if then made, other than representations and
warranties that expressly relate solely to an earlier date (in which
case such representations and warranties were true and accurate on and
as of such earlier date);
(B) No Default or Event of Default has occurred which has not been
waived (or, in the case of an Event of Default, cured) pursuant to the
respective terms of the Credit Agreements;
(C) this Amendment, and each of the Credit Agreements as amended
hereby, constitute legal, valid and binding obligations of the LFC Funds
Administrator and each of the Borrowers and are enforceable against such
Persons in accordance with their respective terms; and
(D) the execution and delivery by the LFC Funds Administrator and
each of the Borrowers of this Amendment does not require the consent or
approval of any Person, except such consents and approvals as shall have
been obtained.
5. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENTS AND THE OTHER
CREDIT DOCUMENTS.
5.1 Upon the effectiveness of this Amendment, each reference in
each of the Credit Agreements to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in each of the other
Transaction Documents to the "Credit Agreement," the "Tranche A Credit
Agreement" and/or the "Tranche B Credit Agreement" shall in each case mean
and be a reference to the respective Credit Agreements as amended hereby.
5.2 Except as expressly set forth herein, (I) the execution and
delivery of this Amendment shall in no way affect any of the respective
rights, powers or remedies of either of the Agents or any of the Lenders
with respect to any Event of Default nor constitute a waiver of any
provision of either of the Credit Agreements or any of the other Transaction
Documents and (II) all of the respective terms and conditions of the Credits
Agreement, the other Transaction Documents and all other documents,
instruments, amendments and agreements executed and/or delivered by the
Borrowers and/or the LFC Funds Administrator pursuant thereto or in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed in all respects. The execution and delivery of this
Amendment by the Agents and each of the Lenders shall in no way obligate the
Agents or any of the Lenders, at any time hereafter, to consent to any other
amendment or modification of any term or provision of the Credit Agreements
or any of the other Transaction Documents, whether of a similar or different
nature.
6. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
AND DECISIONS OF THE STATE OF NEW YORK.
7. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as
of the date first set forth above.
LFC FUNDS ADMINISTRATOR:
LEVITZ FURNITURE CORPORATION, a Florida
corporation, in its capacity as LFC
Funds Administrator
By: /s/ PATRICK J. NOLAN
Name: Patrick J. Nolan
Title: Senior Vice President
<PAGE>
BORROWERS:
LEVITZ FURNITURE CORPORATION, a Florida
corporation
By: /s/ PATRICK J. NOLAN
Name: Patrick J. Nolan
Title: Senior Vice President
LEVITZ FURNITURE COMPANY OF THE MIDWEST,
INC., a Colorado corporation
By: /s/ PATRICK J. NOLAN
Name: Patrick J. Nolan
Title: Senior Vice President
LEVITZ FURNITURE COMPANY OF THE PACIFIC,
INC., a California corporation
By: /s/ PATRICK J. NOLAN
Name: Patrick J. Nolan
Title: Senior Vice President
LEVITZ FURNITURE COMPANY OF WASHINGTON,
INC., a Washington corporation
By: /s/ PATRICK J. NOLAN
Name: Patrick J. Nolan
Title: Senior Vice President
JOHN M. SMYTH COMPANY, an Illinois
corporation
By: /s/ PATRICK J. NOLAN
Name: Patrick J. Nolan
Title: Senior Vice President
<PAGE>
AGENTS:
BT COMMERCIAL CORPORATION, in its
respective capacities as Tranche A Agent
and Tranche B Agent
By: /s/ FRANK FAZIO
Frank Fazio
Vice President
<PAGE>
LENDERS:
BT COMMERCIAL CORPORATION
By: /s/ FRANK FAZIO
Frank Fazio
Vice President
SANWA BUSINESS CREDIT CORPORATION
By: /s/ LAWRENCE J. PLACEK
Name: Lawrence J. Placek
Title: Vice President
LASALLE NATIONAL BANK
By: /s/ CHRISTOPHER G. CLIFFORD
Name: Christopher G. Clifford
Title: Senior Vice President
CONGRESS FINANCIAL CORPORATION (CENTRAL)
By: /s/ STEVEN LINDERMAN
Name: Steven Linderman
Title: Vice President
HELLER FINANCIAL, INC.
By: /s/ DWAYNE L. COKER
Name: Dwayne L. Coker
Title: Vice President
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ MATTHEW N. MCALPINE
Name: Matthew N. McAlpine
Title: Vice President
<PAGE>
FINOVA CAPITAL CORPORATION
By: /s/ PETE MARTINEZ
Name: Pete Martinez
Title: Asst. Vice President
APOLLO INVESTMENT FUND III, L.P.
By: APOLLO ADVISORS II, L.P., ITS GENERAL PARTNER
By: APOLLO CAPITAL MANAGEMENT II, INC.
ITS GENERAL PARTNER
By: /s/ ROBERT KATZ
Name: Robert Katz
Title: Vice President
APOLLO OVERSEAS PARTNERS III, L.P.
By: APOLLO ADVISORS II, L.P.,
ITS MANAGING GENERAL PARTNER
By: APOLLO CAPITAL MANAGEMENT II, INC., ITS
GENERAL PARTNER
By: /s/ ROBERT KATZ
Name: Robert Katz
Title: Vice President
APOLLO (U.K.) PARTNERS III, L.P.,
By: APOLLO ADVISORS II, L.P., ITS MANAGING GENERAL
PARTNER
By: APOLLO CAPITAL MANAGEMENT II, INC.
ITS GENERAL PARTNER
By: /s/ ROBERT KATZ
Name: Robert Katz
Title: Vice President
<TABLE> <S> <C>
<S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,538
<SECURITIES> 0
<RECEIVABLES> 34,947
<ALLOWANCES> 0
<INVENTORY> 160,244
<CURRENT-ASSETS> 208,518
<PP&E> 215,911
<DEPRECIATION> 0
<TOTAL-ASSETS> 599,588
<CURRENT-LIABILITIES> 273,773
<BONDS> 285,889
0
0
<COMMON> 303
<OTHER-SE> (88,437)
<TOTAL-LIABILITY-AND-EQUITY> 599,588
<SALES> 737,281
<TOTAL-REVENUES> 737,281
<CGS> 407,871
<TOTAL-COSTS> 407,871
<OTHER-EXPENSES> 318,943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,704
<INCOME-PRETAX> (31,237)
<INCOME-TAX> 11,006
<INCOME-CONTINUING> (20,231)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,002)
<CHANGES> 0
<NET-INCOME> (22,233)
<EPS-PRIMARY> (.75)
<EPS-DILUTED> 0
</TABLE>
