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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
Commission File Number 0-23222
FINISHMASTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-2252096
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
4259 40th Street, SE
Kentwood, Michigan 49512
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's Telephone Number, including area code:(616) 949-7604
Indicate by check mark whether the registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding twelve months and (2) has
been subject to the filing requirements for at least the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 1, 1996
----- -----------------------------
Common Stock 6,000,140 shares
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1
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FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEETS
FINISHMASTER, INC. AND SUBSIDIARY
June 30, March 31,
1996 1996
---- ----
(Unaudited)
(In thousands)
ASSETS
CURRENT ASSETS:
Cash $ 1,380 $ 1,109
Accounts receivable, less allowance
of $505,000 and $350,000 respectively 14,701 15,119
Inventories 23,640 23,502
Prepaid expenses and current assets 1,016 808
------- -------
TOTAL CURRENT ASSETS 40,737 40,538
PROPERTY, PLANT AND EQUIPMENT, net of depreciation 6,721 6,249
OTHER ASSETS:
Intangibles and other 22,098 19,985
------- -------
$ 69,556 $ 66,772
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 5,044 $
Accounts payable 5,838 10,093
Accrued expenses and other current liabilities 1,989 1,766
Current maturities of long-term obligations 4,195 3,643
------- -------
TOTAL CURRENT LIABILITIES 17,066 15,502
LONG-TERM OBLIGATIONS, less current maturities 20,125 19,605
(Note 3)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value,
1,000,000 shares authorized:
Common stock, $1 stated value, 10,000,000
shares authorized, 6,000,140 and 6,000,000 shares issued
and outstanding 6,000 6,000
Additional paid-in capital 14,509 14,508
Retained earnings 11,856 11,157
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32,365 31,665
------- -------
$ 69,556 $ 66,772
------- -------
------- -------
See notes to consolidated financial statements
2
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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FINISHMASTER, INC. AND SUBSIDIARY
Three Months Ended June 30,
1996 1995
---- ----
(Unaudited) (Unaudited)
----------- -----------
(In thousands, except per share data)
NET SALES $33,149 $23,485
COST OF SALES
(EXCLUSIVE OF ITEMS SHOWN SEPARATELY BELOW) 21,222 15,019
------ ------
GROSS MARGIN 11,927 8,466
EXPENSES
Operating expenses 5,273 3,401
Selling, general and administrative 4,425 3,154
Depreciation and amortization 705 425
------ ------
10,403 6,980
------ ------
INCOME FROM OPERATIONS 1,524 1,486
OTHER EXPENSE 449 47
------ ------
INCOME BEFORE INCOME TAXES 1,075 1,439
Income tax expense 376 507
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NET INCOME $ 699 $ 932
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NET INCOME PER SHARE $. 12 $. 16
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------ ------
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 6,000 6,000
------ ------
------ ------
See notes to consolidated financial statements
3
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CONSOLIDATED CONDENSED STATEMENT OF CASH FLOW
FINISHMASTER, INC AND SUBSIDIARY
Three Months Ended June 30,
1996 1995
---- ----
(unaudited) (unaudited)
(in thousands)
OPERATING ACTIVITIES
Net Income $ 699 $ 932
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 705 425
Changes in operating assets and liabilities:
Accounts receivable 1,280 252
Inventories 636 (306)
Prepaid expenses and other (207) 6
Accounts payable and other current
liabilities (4,735) (1,576)
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NET CASH USED IN OPERATING ACTIVITIES (1,622) (267)
INVESTING ACTIVITIES
Net cash used in business
acquisitions - note 2 (1,651) (4,723)
Proceeds from sale of property and equipment 148
Purchases of property and equipment(net of
disposals) (379) (346)
Sale of (investment in) marketable securities 4,684
Other (163) (29)
------- ------
NET CASH USED IN INVESTING ACTIVITIES (2,193) (266)
FINANCING ACTIVITIES
Repayment of long term obligations, net of
new debt issuance (958) (374)
Net borrowings under lines of credit 5,044
------- ------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 4,086 (374)
INCREASE (DECREASE) IN CASH 271 (907)
CASH AT BEGINNING OF PERIOD 1,109 2,138
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CASH AT END OF PERIOD $ 1,380 $ 1,231
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See notes to consolidated financial statements
4
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FINISHMASTER, INC. AND SUBSIDIARY
JUNE 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited, condensed, consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation of the results of the interim periods
covered have been included. For further information, refer to the
consolidated financial statements and notes thereto included in
FinishMaster's annual report on Form 10-K for the year ended March 31, 1996.
The results of operations for the interim periods presented are not
necessarily indicative of the results for the full year.
A change in control of the Company occurred on July 9, 1996. On such date,
LDI AutoPaints, Inc. an Indiana corporation, and Maxco, Inc. a Michigan
corporation consummated the purchase and sale of all 4,045,000 shares of Common
Stock of the Company which were owned by Maxco. The shares purchased and sold
represent 67.4% of the total issued and outstanding shares of Common Stock of
the Company.
NOTE 2 - ACQUISITION
The Company's acquisition strategy is to continue to acquire automotive
paint distributors in existing and new markets. The following table summarizes
the assets purchased in acquisitions made by FinishMaster during the three
months ended June 30, 1996. These acquisitions have been accounted for as
purchases and accordingly, the acquired assets and liabilities have been
recorded at their estimated fair values at the dates of acquisition. Intangible
assets related to goodwill and covenants not to compete were recorded with each
acquisition.
Three Months ended
June 30, 1996
-------------
(in thousands)
Accounts receivable $ 862
Inventories 775
Equipment and other 347
-------
ASSETS ACQUIRED 1,984
Intangibles 2,401
-------
4,385
Less accounts payable 1,256
-------
PURCHASE PRICE 3,129
Acquisition debt 1,478
-------
PURCHASE OF ASSETS OF BUSINESSES
NET OF ACQUISITION DEBT $ 1,651
-------
-------
Number of acquisitions 1
The acquisition was financed with cash, a bank line of credit and seller
financing. Operating results of the acquired organization are included in
FinishMaster's financial statements from the respective date of purchase.
5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FINISHMASTER, INC. AND SUBSIDIARY
JUNE 30, 1996
NOTE 3 - LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following:
June 30, March 31,
1996 1996
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(in thousands)
Notes payable to former owners of acquired
businesses with interest at various rates
up to 9% $ 14,812 $13,535
Note payable to bank under lines of credit
with interest rate not exceeding the prime
interest rate(7.71% at 3/31/96) due in 2001 7,679 7,809
Mortgage note payable to an insurance
corporation with interest at
8.05% due July, 2000 1,613 1,625
Other long-term financing at various rates 216 279
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TOTAL OBLIGATIONS 24,320 23,248
Less current maturities 4,195 3,643
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TOTAL LONG-TERM OBLIGATIONS $20,125 $19,605
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On June 19,1996, the Company obtained a commitment for a $5.0 million unsecured
line of credit to fund periodic working capital requirements and a separate
unsecured $15.0 million credit facility to fund acquisitions. At June 30, 1996
there was $7.3 million of these credit facilities available to fund future
working capital requirements and acquisitions. The borrowings bear interest at
various rates not exceeding the prime rate of interest. These lines contain
covenants which require maintenance of certain financial ratios.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINISHMASTER, INC. AND SUBSIDIARY
JUNE 30, 1996
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital resources are significantly affected by
its acquisition activity. Acquisitions typically are financed by a
combination of internally generated cash flow, seller financing, and
borrowings under the company's loan facilities. The Company had working
capital of $23.6 million at June 30, 1996. In addition, the Company has a
credit agreement which provides for borrowings in the aggregate of $20.0
million of which $7.3 million is available. The Company believes its cash and
other liquid resources, cash flow generated from operating activities, and
the available lines of credit will be sufficient to support operations and
general capital requirements for the next twelve months.
The Company's operating activities used $1.6 million of cash through the first
quarter of 1996 and $0.3 million in the prior year. Cash flow generated by the
company's earnings was primarily offset by payments to vendors to maximize
discounts allowed.
The accounts receivable decrease of $0.4 million since the prior year ended
March 31, 1996 was primarily the result of more intensive collection activity
with certain slower paying customers. The accounts receivable days
outstanding also decreased to approximately 40 days from 42 days in the prior
year.
The investment in inventory remained fairly constant since the prior year
ended March 31, 1996, increasing $0.1 million. Inventory days on hand
decreased to approximately 100 days from 104 days in the prior year. The
reduction in days is primarily attributable to increased efficiencies in
acquired outlets. Inventory is expected to stay at this level throughout the
year subject to increases for acquisitions and large purchases in advance
of price increases by the suppliers.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS(CONTINUED)
RESULTS OF OPERATIONS
The following table sets forth for the three months ended June 30, 1996 and June
30, 1995 certain items from the Company's Statement of Operations as a
percentage of net sales.
Three months ended
June 30,
1996 1995
---- ----
Net sales 100.0% 100.0%
Cost of sales 64.0 64.0
------ ------
Gross margin 36.0 36.0
Operating expenses 15.8 14.5
Selling, general and administrative 13.3 13.4
Depreciation and amortization 2.1 1.8
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31.4 29.7
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Income from operations 4.6 6.3
Investment income (expense), net (1.4) (0.2)
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Income tax expense 1.1 2.1
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Net income 2.1% 4.0%
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THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
NET SALES. Net sales increased $9.7 million or 41.1% from $23.4 million for the
three months ended June 30, 1995 to $33.1 million for the three months ended
June 30, 1996. Of the net sales increase, $8.7 million resulted from sales
generated by acquisitions with the remainder coming from same outlet sales
growth. Same outlet sales growth represents the increase in sales for a given
outlet open for the period compared to the same period of the prior year.
GROSS MARGIN. Gross margin increased from $8.5 million to $11.9 million and
remained constant as a percentage of net sales at 36.0%. Gross margin
percentage remained constant due to the Company's continued participation in
vendor discounts and volume buying to maximize profit opportunities.
OPERATING EXPENSES. Operating expenses increased from $3.4 million to $5.3
million and as a percentage of net sales from 14.5% to 15.8%. Operating
expenses consist of wages, building and vehicle costs for the outlets and the
distribution center. The increase as a percentage of net sales resulted from
rapid expansion in two new regions where additional fixed costs were added to
support growth. The Company expects a reduction in operating expenses as a
percentage of sales as store consolidations and additional acquisitions take
place. While consolidations may occur within existing markets where
appropriate, the Company has no plans to withdraw from any of its existing
markets.
SELLING, GENERAL AND ADMINISTRATIVE. S, G, & A expenses increased from $3.2
million to $4.4 million; however, S, G, & A expenses decreased as a
percentage of net sales from 13.4% to 13.3%. General and administrative
expenses consist of corporate support staff and expenses for marketing, data
processing, accounting, credit, purchasing and human resources. Selling
expenses include sales commissions, wages, and expenses supporting customer
sales activity.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization increased
from $0.4 million to $0.7 million and as a percentage of net sales from 1.8% to
2.1%. The increase resulted from acqusitions made since the prior period.
OPERATING INCOME. As a result of the foregoing, income from operations
remained constant at approximately $1.5 million; however, income from
operations decreased as a percent of net sales from 6.3% to 4.6%.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
INTEREST EXPENSE. Interest expense increased from $151,000 to $453,000 as a
result of acquisition financing and borrowings used to take advantage of
favorable supplier payment discounts.
INVESTMENT INCOME. Income from investments decreased $100,000 for the
current quarter from $104,000 to $4,000 as a result of the sale of
investments to finance acquisition downpayments and operations.
PROVISION FOR INCOME TAX. The Company's effective tax rate for both three month
periods was approximately 35%. This rate varied from the Company's statutory
tax rate of 34% primarily due to nondeductible expenses for tax purposes.
NET INCOME. Net Income was $703,000 or $0.12 per share compared to $932,000
or $0.16 per share in the prior year. The average number of shares of common
stock outstanding was at 6,000,140 at June 30, 1996 due to the exercising of
stock options and 6,000,000 at June 30, 1995.
9
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information and Events
By a letter dated July 22, 1996, Mr. Ronald P. White resigned as a
director and as President and Chief Officer of the Registrant. By a
letter dated July 29, 1996, Mr. James F. White resigned as a
director of the Registrant. The Board of Directors has elected
Thomas U. Young, the existing Vice Chairman of the Board of the
Company, to replace Mr. Ronald P. White as President and Chief
Operating Officer, and has nominated Mr. Peter L. Frechette, the
Chairman, President and Chief Executive Officer of Paterson Dental
Company, for election as a director at the next annual meeting of
shareholders of the Registrant.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits, unless otherwise indicated, have been filed as exhibits
to Form S-1 Registration Statement, No. 33-73804, effective date of February 22,
1994 and are hereby incorporated by reference.
Exhibit
No. Description of Document
------- ------------------------------------------------------------------
3.1 Articles of Incorporation of the Registrant
3.2 Bylaws of FinishMaster, Inc.
10.1 Deferred Compensation Agreement dated April 1, 1977 by and between
the Company and James F. White
10.11 Amendment to Deferred Compensation Agreement dated December 15, 1995
by and between the Company and James F. White (incorporated by
reference to Form 10-Q dated December 31, 1995)
10.12 Loan Agreement dated June 7, 1990 between the Company and FB Annuity
Company relating to the purchase of the Company's Kentwood, Michigan
central distribution facility.
10.13 FinishMaster Inc. Stock Option Plan
10.14 Credit agreement dated August 24, 1995 between the Company and
National Bank of Detroit to fund acquisitions and working capital
requirements (incorporated by reference to Form 10-Q dated
September 30, 1995)
10.15* Amendment to Credit Agreement dated July 1, 1996.
11.1* Statement regarding computation of per share earnings
27.1* Financial Data Schedule
* Filed herewith
Form 8-K was originally filed on July 16, 1996 regarding a change in control
of Registrant and a change in Registrant's certifying accountant, as amended by
Form 8-K/A filed on July 29, 1996 regarding a clarification with respect in
Registrant's certifying accountant.
10
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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.
FINISHMASTER, INC.
Date August 13, 1996 \S\ THOMAS U. YOUNG
------------------------ --------------------------
Thomas U. Young, President
(Chief Operating Officer)
\S\ROGER A. SOROKIN
--------------------------
Roger A. Sorokin,
Vice-President Finance
(Principal Financial and
Accounting Officer)
11
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AMENDMENT TO CREDIT AGREEMENT
(1996)
This Amendment to Credit Agreement (this "Amendment")
is made on the 1st day of July, 1996 between FINISHMASTER, INC., a Michigan
corporation, of 4259 40th Street, S.E., Kentwood, Michigan 49512 (the
"Borrower"), and NBD Bank, a Michigan banking corporation, of 200 Ottawa Avenue,
N.W., Brand Rapids, Michigan 49503 (the "Lender").
RECITALS
A. The Borrower and the Lender are parties to a Credit Agreement dated
August 24, 1995, (the "Existing Credit Agreement"), pursuant and subject to
which Lender agreed to extend the following loans to the Borrower (the
"Committed Loans"):
(i) Acquistion Loans in an aggregate amount (subject to the
adjustments set forth in the Existing Credit Agreement) of up to
$12,000,000; and
(ii) Working Capital Loans in an aggregate amount (subject to the
adjustments set forth in the Existing Credit Agreement) of up to
$5,000,000;
B. Subject to the terms and conditions of the Existing Credit Agreement,
the Borrower has the right to convert Acquistion Loans to Term Loans, the
aggregate outstanding principal balance of which reduces the Total Acquistion
Loan Commitment.
C. The aggregate outstanding principal balance of Term Loans on the date
of this Amendment is $7,613,775.
D. The Borrower has requested the Lender to increase the maximum amount
available under the Total Acquistion Loan Commitment from $12,000,000 to
$15,000,000.
E. The Borrower and the Lender also wish to set forth herein certain
other amendments to the Existing Credit Agreement and Loan Documents.
NOW, THEREFORE, the Lender and the Borrower agree as follows:
1. DEFINTIONS (a) Any capitalized term used but not defined in this
Amendment will have the meaning assigned to
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such term in the Existing Credit Agreement. From and after the date of this
Amendment, each reference in the Existing Credit Agreement or this Amendment to
the term "Agreement: means the Existing Credit Agreement, as modified by this
Amendment, and each reference in the Agreement to "Loan Documents" includes,
without limitation, this Amendment and the documents that evidence, secure or
otherwise relate to the Committed Loans, as modified hereby.
(b) From and after the date of this Amendment, each reference in the
Agreement and the other Loan Documents to the term:
(i) "Acquistion Note" means the promissory note of the Borrower
issued pursuant to paragraph 3 of this Amendment, as the same may be modified,
endorsed or amended from time to time.
(ii) "Applicable Borrowing Margin" means 145 basis points (1.45%)
PER ANNUM; PROVIDED that if any consolidated financial statements of the
Borrower indicate that during the period covered thereby, (i) the Intermediate
Rate Increase Criterion was or is satisfied, then until the longer of (A) 90
days from the Bank's receipt of such financial statements, or (B) until the
Borrower submits financial statements establishing that such criterion is no
longer satisfied, the Applicable Borrowing Margin shall be increased to 170
basis points (1.70%) PER ANNUM, and (ii) a Prime Rate Increase Criterion is
satisfied, then notwithstanding anything to the contrary contained in this
Agreement, until the longer of (A) 90 days from the Bank's receipt of such
financial statements, or (B) until the Borrower submits financial statements
establishing that such criterion is no longer satisfied, each Term Loan and
Fixed Period Loan shall bear interest at the Prime Rate.
(iii) "Final Maturity Date" means July 31, 1997.
(iv) "Intermediate Rate Increase Criterion" means a ratio of the
Borrower and Refinishers, on a consolidated basis, of Funded Debt to EBITDA
equal to or greater than 2.5 to 1, but less than 3.0 to 1.
(v) "Parent" means LDI, Ltd.
(vi) "Prime Rate Increase Criterion" means (i) a ratio of the
Borrower and Refinishers, on a consolidated basis, of Funded Debt to EBITDA
equal to or greater than 3.0 to 1, or (ii) failure by the Borrower to deliver
any of the financial statements described in Section 5.1 of the Existing Credit
Agreement at the time and in the form required thereby.
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2. BORROWER'S AGREEMENTS AND ACKNOWLEDGEMENTS. (a) the Borrower
restates, affirms and makes, effective as of the date of this Amendment, each of
the covenants, agreements, acknowledgments, representations, warranties, waivers
and releases contained in the Existing Credit Agreement and the other Loan
Documents. Further, except as specifically modified hereby, the Borrower
ratifies and affirms the continuing validity and binding effect of the Loan
Documents and represents and warrants to the Lender that all representations and
warranties contained in each of the Loan Documents are true as of the date
hereof.
(b) The Borrower represents and warrants that each balance sheet,
statement of income, statement of retained earnings and statement of changes in
financial position submitted to the Lender was prepared in accordance with GAAP
and present fairly the financial position of the Borrower as of the date of such
statement. No changes having a material adverse effect upon the Borrower have
occured since the date of the most recent of such financial statements.
3. TOTAL ACQUISTION LOAN COMMITMENT. Paragraph 2.1.A of the Existing
Credit Agreement is amended to provide that the "Total Acquistion Loan
Commitment" shall be equal, before accounting for the reductions and adjustments
set forth in the Agreement (including, without limitation, reductions for the
aggregate outstanding balance of Term Loans), to $15,000,000. The Borrower
shall execute and deliver to the Lender a single Acquistion Note to evidence the
Acquistion Lender a single Acquistion Note to evidence the Acquistion Loans, in
the stated principal amount of $15,000,000 and otherwise in form and substance
acceptable to the Lender.
4. INTEREST RATE OPTIONS. (a) The proviso at the end of paragraph 2.6.A
of the Existing Credit Agreement is amended and restated as follows:
PROVIDED, HOWEVER, that if (i) any consolidated financial statements of the
Borrower indicate that during the period covered thereby, the ratio of the
Borrower's and Refinisher's Funded Debt to EBITDA was or is equal to or
greater than 3.0 to 1, or (ii) the Borrower fails to deliver any of the
financial statements described in Section 5.1 of the Existing Credit
Agreement at the time and in the form required thereby, then until the
longer of (A) 90 days from the Bank's receipt of such financial statements,
or (B) until the Borrower submits financial statements
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establishing that the ratio of the Borrower's and Refinisher's Funded Debt
to EBITDA is less than 3.0 to 1, each Term Loan and Fixed Period Loan shall
bear interest at the Prime Rate.
(b) The proviso at the end of the first paragraph of 2.7.B of the
Existing Credit Agreement is amended and restated as follow:
PROVIDED, HOWEVER, that if (i) any consolidated financial statements of the
Borrower indicate that during the period covered thereby, the ratio of the
Borrower's and Refinisher's Funded Debt to EBITDA was or is equal to or
greater than 3.0 to 1, or (ii) the Borrower fails to deliver any of the
financial statements described in Section 5.1 of the Existing Credit
Agreement at the time and in the form required thereby, then until the
longer of (A) 90 days from the Bank's receipt of such financial statements,
or (B) until the Borrower submits financial statements establishing that
the ratio of the Borrower's and Refinisher's Funded Debt to EBITDA is less
than 3.0 to 1, each Term Loan shall bear interest at the Prime Rate.
5. FINANCIAL COVENANT AMENDMENTS. (a) Paragraph 6.6B of the Existing
Credit Agreement is amended and restated in its entirety as follows:
FUNDED DEBT/EBITDA. The Borrower and Refinishers will not, on a
consolidated basis, permit or suffer their ratio of (i) Funded Debt to (ii)
EBITDA, as measured on the last day of each calendar quarter, in each case
for the four calendar quarters preceding the date of measurement, to exceed
3.75 to 1 with respect to each four quarter period ending before September
30, 1996, and 3.5 to 1 with respect to each four quarter period ending on
or after September 30, 1996.
(b) Paragraph 6.6D of the Existing Credit Agreement is amended and
restated in its entirety as follows:
DEBT COVERAGE RATIO. At any time that there remains outstanding any
indebtedness under a Term Loan, the Borrower and Refinishers will not, on a
consolidated basis, permit or
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suffer their ratio of (i) EBITDA (less provision for cash taxes based on
income) to (ii) Debt Service, as measured on the last day of each calendar
quarter, in each case for the four calendar quarters preceding the date of
measurement, to be:
(A) less than 1.50 to 1 with respect to each four quarter period
ending before September 30, 1996;
(B) less than 1.35 to 1 with respect to each four quarter period
ending before September 30, 1996, but before March 31, 1997; and
(C) less than 1.50 to 1 with respect to each four quarter period
ending on or after March 31, 1997.
6. COSTS AND EXPENSES. Borrower agrees to pay all costs and expenses
in connection with the negotiation, preparation, reproduction, execution,
delivery, enforcement, attempted enforcement and defense of the terms of this
Amendment and the other Loan Documents and of Lender's actions in connection
therewith, and all amendments or modifications of or supplements to any of
the foregoing, and any and all other documents furnished pursuant hereto or
thereto, or in connection herewith or therewith.
7. PROHIBITION ON ASSIGNMENT. Borrower may not assign any of its rights
under this Amendment or any of the other Loan Documents without the prior
written consent of the Lender, which consent may be withheld at Lender's sole
discretion. Any attempt to assign a right in contravention of the foregoing
shall be void and without force or effect.
8. EXECUTION AND COUNTERPARTS. This Amendment may be executed in any
number of counterparts, each of which, when so executed and delivered, shall be
deemed to be an original, but when taken together shall constitute one and the
same Amendment.
9. SEVERABILITY. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction, which provisions shall remain in full force
and effect.
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10. HEADINGS. Section headings used in this Amendment are for convenience
of reference only and shall not affect the construction of the Agreement.
11. ENFORCEABILITY OF LOAN DOCUMENTS. Except as expressly and
specifically set forth herein, the Loan Documents remain unmodified and in full
force and effect. In the event of any discrepancy between any other Loan
Document and this Amendment, the terms and condition of this Amendment will
control and such other Loan Document is deemed amednded to conform hereto.
Executed by the parties on the date first set forth above.
NBD Bank, a Michigan banking
corporation
By: Raymond E. Reitsma
-----------------------------
Its: Vice President
-------------------------
Finishmaster, Inc., a
Michigan corporation
By: Roger A. Sorokin
-----------------------------
Its: Vice President Finance
--------------------------
-18-
<PAGE>
FINISHMASTER INC. AND SUBSIDIARY
EXHIBIT 11.1-STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended June 30,
NET INCOME FOR COMPUTATION
OF PER SHARE AMOUNTS 1996 1995
- - -------------------------------------- -------------- -----------
Net Income attributable to common
stock-- primary and fully diluted $ 699,000 $ 932,000
---------- ----------
---------- ----------
PRIMARY
- - --------------------------------------
Average shares outstanding 6,000,140 6,000,000
Net effect of dilutive stock
options--based on the
Treasury Stock Method using average
market price 11,000 35,900
---------- ----------
TOTAL 6,011,140 6,035,900
PER SHARE AMOUNT(1) $ 0.12 $ 0.15
---------- ----------
FULLY DILUTED
- - --------------------------------------
Average shares outstanding 6,000,140 6,000,000
Net effect of dilutive stock options--based
on the Treasury Stock Method using the
quarter-end market price if higher than
average market price 11,000 48,333
---------- ----------
TOTAL 6,011,140 6,048,333
PER SHARE AMOUNT(1) $ 0.12 $ 0.15
---------- ----------
---------- ----------
(1)Aggregate dilution from stock options is less than three percent of earnings
per common share outstanding and therefore need not be reported for either
primary or fully diluted earnings per share.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1380
<SECURITIES> 0
<RECEIVABLES> 15206
<ALLOWANCES> 505
<INVENTORY> 23640
<CURRENT-ASSETS> 40737
<PP&E> 9805
<DEPRECIATION> 3084
<TOTAL-ASSETS> 69556
<CURRENT-LIABILITIES> 17066
<BONDS> 0
0
0
<COMMON> 6000
<OTHER-SE> 23365
<TOTAL-LIABILITY-AND-EQUITY> 69556
<SALES> 33149
<TOTAL-REVENUES> 33149
<CGS> 21222
<TOTAL-COSTS> 10403
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 449
<INCOME-PRETAX> 1075
<INCOME-TAX> 376
<INCOME-CONTINUING> 699
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 699
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
