<PAGE> 1
================================================================================
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 April 1, 2000
[ ] 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 1-13474
FLORSHEIM GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3520923
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 North LaSalle Street, Chicago, Illinois 60601-1014
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 458-2500
-------------
Not Applicable
----------------------------------------------------
(Former name, former address and former 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
requirement for the past 90 days. Yes [x] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
8,483,651 Shares as of May 1, 2000
================================================================================
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet:
January 1, 2000 and April 1, 2000
Condensed Consolidated Statement of Operations and Comprehensive
Earnings:
Three Months Ended April 3, 1999 and April 1, 2000
Condensed Consolidated Statement of Cash Flows:
Three Months Ended April 3, 1999 and April 1, 2000
Notes to Condensed Consolidated Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
2
<PAGE> 3
FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
January 1, April 1,
2000 2000
--------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................. $ 5,675 $ 5,444
Accounts receivable, net ................... 30,163 36,126
Inventories ................................ 70,964 66,893
Other current assets ....................... 11,082 11,319
--------- ---------
Total current assets ..................... 117,884 119,782
Property, plant and equipment, net .............. 32,525 30,303
Deferred tax assets, net ........................ 16,623 18,015
Other assets .................................... 30,320 30,826
--------- ---------
Total assets ............................... $ 197,352 $ 198,926
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .......... $ 23,767 $ 16,500
Accounts payable and accrued expenses ...... 24,842 23,895
--------- ---------
Total current liabilities ................ 48,609 40,395
Bank credit facility ............................ 65,000 74,753
Other long-term debt ............................ 18,412 21,265
Other long-term liabilities ..................... 20,683 20,654
--------- ---------
Total liabilities ........................ 152,704 157,067
Shareholders' equity:
Common stock ............................... 8,484 8,484
Paid in capital ............................ 50,644 50,644
Accumulated comprehensive loss-
Translation adjustment ................... (2,760) (3,072)
Accumulated deficit ........................ (11,720) (14,197)
--------- ---------
Total shareholders' equity ............. 44,648 41,859
--------- ---------
Total liabilities and shareholders' equity $ 197,352 $ 198,926
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE EARNINGS
(Unaudited)
(In thousands, except per share data)
Three months Three months
ended ended
April 3, 1999 April 1, 2000
------------- -------------
Net sales $ 63,525 $ 56,221
Cost of sales 33,402 32,210
-------- --------
Gross profit 30,123 24,011
Selling, general and administrative expenses 26,200 24,470
Non-recurring expenses -- (923)
-------- --------
Earnings (loss) from operations 3,923 (1,382)
Interest expense, net 2,397 3,024
Other income, net -- 571
-------- --------
Earnings (loss) before income taxes 1,526 (3,835)
Income tax expense (benefit) 547 (1,358)
-------- --------
Net earnings (loss) 979 (2,477)
Other comprehensive loss -
Foreign currency translation adjustment (138) (312)
-------- --------
Comprehensive earnings (loss) $ 841 $ (2,789)
======== ========
Earnings (loss) per share:
Basic $ 0.12 $ (0.29)
======== ========
Diluted $ 0.11 $ (0.29)
======== ========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
April 3, April 1,
1999 2000
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 979 $(2,477)
Adjustments to reconcile net earnings (loss) to
net cash used in operating activities:
Gain on disposal of assets (10) (619)
Depreciation and amortization 1,518 1,819
Deferred taxes 491 (1,370)
Noncash interest expense 108 274
Increase in receivables (2,596) (5,253)
Decrease (increase) in inventories (725) 4,071
Increase in prepaid expenses and other assets (1,598) (1,439)
Decrease in accounts payable and
other accrued expenses (2,857) (947)
Decrease in other long-term liabilities (28) (29)
------- -------
Net cash used in operating activities (4,662) (5,970)
------- -------
Cash flows from investing activities:
Proceeds from the disposal of assets 10 691
Additions to property, plant and equipment (1,594) (291)
------- -------
Net cash provided by (used in) investing activities (1,584) 400
------- -------
Cash flows from financing activities:
Net borrowing under revolving credit facility 6,000 2,183
Increase in other long-term debt -- 3,156
------- -------
Net cash provided by financing activities 6,000 5,339
------- -------
Net decrease in cash and cash equivalents (246) (231)
Cash and cash equivalent at beginning of period 6,931 5,675
------- -------
Cash and cash equivalents at end of period $ 6,685 $ 5,444
======= =======
Supplemental disclosure:
Cash payments for income taxes, net $ 1,221 $ 381
Cash payments for interest $ 2,756 $ 2,807
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 1, 2000
(Unaudited)
(Dollars in thousands)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Florsheim Group Inc. ("Florsheim" or the "Company) 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 of normal recurring
adjustments, except as otherwise disclosed, considered necessary for a
fair presentation have been included. Operating results for the three
month period ended April 1, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 30, 2000.
The balance sheet at January 1, 2000 has been derived from the audited
consolidated financial statements at that date, but does not include
all of the information and notes required by generally accepted
accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements
and notes thereto included in the Company's annual report on Form 10-K
for the fiscal year ended January 1, 2000.
(2) INVENTORIES
Inventories are summarized as follows:
January 1, April 1,
2000 2000
--------- --------
Retail merchandise $34,329 $36,155
Finished products 32,682 28,256
Raw materials 3,953 2,482
------- -------
$70,964 $66,893
======= =======
(3) LONG TERM DEBT
In May 2000, the Company amended its bank credit facility, resulting in
a waiver of the financial covenant related to the EBITDA to interest
expense ratio for the quarter ended April 1, 2000. In addition, the
amendment reset this covenant and established new financial covenants
commencing with the quarter ending July 1, 2000. The new covenants
6
<PAGE> 7
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 1, 2000
(Unaudited)
(Dollars in thousands)
include additional requirements related to levels of senior debt to
EBITDA and total debt to EBITDA.
(4) NON-RECURRING EXPENSES
The Company recorded a $923 pretax charge in the quarter ended April 1,
2000. The charge consisted of $627 for costs associated with the
downsizing of the Company's corporate headquarters space, including the
write-off of certain leasehold improvements, lease termination costs
and move expenses. Of these costs, $310 were non-cash. The charge also
included severance costs for approximately 20 people located primarily
at the Company's corporate headquarters.
The following table summarizes the costs reflected in the Condensed
Consolidated Financial States as of and for the quarter ended April 1,
2000:
<TABLE>
<CAPTION>
Accrued Amounts Accrued
Balance at Additional Charged Balance at
January 1, 2000 Provision to Accrued April 1, 2000
--------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Resignation/Strategic Study
Legal and professional fees $ 254 $ -- $ 0 $ 254
Employee related expenses 365 -- (160) 205
--------- -------- --------- -----------
619 -- (160) 459
--------- -------- --------- -----------
Cape Girardeau Closing
Inventory write-offs 610 -- (85) 525
Plant and equipment costs 437 -- (77) 360
Employee related expenses 566 -- (441) 125
--------- -------- --------- -----------
1,613 -- (603) 1,010
--------- -------- --------- -----------
Facility Downsizing/Golf Sale
Inventory write-offs 300 -- -- 300
Receivables allowance 365 -- -- 365
Facilities charges 276 627 (356) 547
Employee related expenses 195 296 (161) 330
--------- -------- --------- ----------
1,136 923 (517) 1,542
--------- -------- --------- ----------
Total $ 3,368 $ 923 $ (1,280) $ 3,011
========= ======== ========= ==========
</TABLE>
7
<PAGE> 8
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 1, 2000
(Unaudited)
(Dollars in thousands)
(5) OTHER INCOME
During the first quarter of 2000 the Company recorded a $587 pretax
gain related to the sale of the Cape Girardeau, Missouri facility. The
gain is included in other income.
(6) EARNINGS PER SHARE
The Company presents basic and diluted earnings per share. Basic
earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share
reflect the potential dilution that could occur if securities or other
contracts to issue common stock were exercised. Basic and diluted
earnings per share do not include securities in instances where they
would be antidilutive.
The following table provides a reconciliation of the weighted average
shares outstanding used in calculating basic and diluted earnings per
share (in 000's):
Fiscal Quarter Ended
------------------------
April 3, April 1,
1999 2000
------- --------
Weighted average shares
outstanding - basic 8,454 8,484
Assumed exercise of stock options 72 --
----- -----
Weighted average shares
outstanding - diluted 8,526 8,484
===== =====
8
<PAGE> 9
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 1, 2000
(Unaudited)
(Dollars in thousands)
(7) BUSINESS SEGMENT INFORMATION
Operating segment information is as follows:
Fiscal Quarter Ended
----------------------
April 3, April 1,
1999 2000
--------- ---------
Net Sales
U.S. Wholesale $ 26,607 $ 24,674
U.S. Retail 25,012 21,405
International 11,906 10,142
--------- ---------
$ 63,525 $ 56,221
========= =========
Earnings (Loss) from Operations
U.S. Wholesale $ 3,328 $ 1,273
U.S. Retail (655) (3,412)
International 1,250 757
--------- ---------
$ 3,923 $ (1,382)
========= =========
January 1, April 1,
2000 2000
--------- ---------
Total Assets
U.S. Wholesale $ 105,956 $ 104,564
U.S. Retail 69,112 71,944
International 22,284 22,418
--------- ---------
$ 197,352 $ 198,926
========= =========
U.S. Wholesale includes certain corporate expenses and assets which are not
charged to other reportable segments. The April 1, 2000 period included $923 of
non-recurring expenses, which are included in U.S. Wholesale, related to
downsizing of the Company's corporate headquarters space and severance.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months ended April 1, 2000 Compared to the Three Months ended April 3,
1999
Net sales for the three months ended April 1, 2000 were $56.2 million, down $7.3
million, or 11.5%, as compared to the three months ended April 3, 1999. Net
sales were negatively impacted by inventory problems related to the
implementation of the Company's new wholesale computer software system in 1999.
The system problems resulted in reduced shipments to wholesale customers as well
as to the Company's U.S. Retail business as the Company was unable satisfy
customer orders. U.S. Wholesale sales were $24.7 million in 2000 compared to
$26.6 million in 1999 as result of the inventory problems. U.S. Retail net sales
decreased $3.6 million, or 14.4% to $21.4 million, primarily as a result of
planned store closings in 1999 and inventory shortages during the first two
months of the quarter. The inventory position improved in March, resulting in
improved sales, but the improvement was not sufficient to offset the shortfall
in the first two months of the quarter. U.S. Specialty Stores same store sales
decreased 1.4% over the comparable 1999 period. International sales decreased
$1.8 million to $10.1 million, due largely to the lack of inventory.
Gross profit margin for the first quarter 2000 was $24.0 million or 42.7% of net
sales, as compared to 47.4% of net sales for the first quarter 1999. Gross
profit margin was negatively impacted by the lower sales volume in each of the
businesses and the sale of close out products.
Selling, general and administrative expenses for the first quarter 2000 were
$24.5 million, a decrease of $1.7 million from the first quarter 1999. Selling,
general and administrative expenses for the first quarter 2000 were 43.5% of net
sales, an increase from 41.2% of net sales for the first quarter of 1999. The
decrease in expense was the result of cost reduction programs initiated in the
fourth quarter of 1999, and to a lesser extent, the reduced sales volume.
Non-recurring expenses of $0.9 million were recorded in the first quarter of
2000. The charge included $0.6 million related to the downsizing of the
Company's corporate headquarters space. Approximately $0.3 million of these
costs were non-cash. The remaining portion of the non-recurring expense of $0.3
million related to severance and associated benefit costs.
Interest expense for the first quarter 2000 was $3.0 million as compared to the
first quarter 1999 amount of $2.4 million. This increase is due to increased
borrowings during the first quarter 2000 as compared to the first quarter 1999
and an increase in the weighted average interest rate under the Company's new
credit facility.
Other income for the first quarter includes a $587 gain on the sale of the
Company's Cape Girardeau, Missouri, manufacturing facility which was closed in
December 1999. The sale of the facility was completed in January 2000.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONT'D)
Income tax benefit for the first quarter of 2000 was $1.4 million, compared to
income tax expense of $0.5 million in the 1999 period. The effective tax rate
for 2000 was 35.4% compared to 35.8% in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital at April 1, 2000 was $79.4 million, as compared to $69.3 million
at January 1, 2000. The increase in working capital reflects an increase in
accounts receivable and the reclassification of certain debt to long term,
partially offset by reduced inventory levels.
In May 2000, the Company amended its bank credit facility, resulting in a waiver
of the financial covenant related to the EBITDA to interest expense ratio for
the quarter ended April 1, 2000. In addition, the amendment reset this covenant
and established new financial covenants commencing with the quarter ending July
1, 2000. The new covenants include additional requirements related to levels of
senior debt to EBITDA and total debt to EBITDA.
FORWARD LOOKING STATEMENTS
When used in this discussion, the words "believes" and "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, over which the Company has no
control, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligations to republish revised forward-looking statements to reflect events or
circumstances after the date thereof or to reflect the occurrence of
unanticipated events. Readers are also urged to carefully review and consider
the various disclosures made by the Company in this report, as well as the
Company's periodic reports with the Securities Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
There have been no material changes in the Company's market risk during the
three month period ended April 1, 2000. For additional information, refer to
Item 7A in the Company's Annual Report on form 10-K for the year ended January
1, 2000.
11
<PAGE> 12
PART II OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
Exhibit
Number Description
------- -----------
4.1 Second Amendment, dated as of May 15, 2000 to the
Credit Agreement dated August 23, 1999 among the
Company and BT Commercial Corporation, as Agent, and
Lenders party thereto.
27 Financial Data Schedule
(b) Form 8-K was not required to be filed during the quarter ended April 1,
2000.
12
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FLORSHEIM GROUP INC.
(Registrant)
By /s/ Richard Anglin
Richard J. Anglin
Executive Vice-President,
Chief Financial Officer
Date: May 16, 2000
13
<PAGE> 14
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
4.1 Second Amendment, dated as of May 15, 2000 to the
Credit Agreement dated August 23, 1999 among the
Company and BT Commercial Corporation, as Agent, and
Lenders party thereto.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 4.1
SECOND AMENDMENT TO CREDIT AGREEMENT
This Second Amendment to Credit Agreement (the "Amendment") is made on
this 15th day of May, 2000 by and among Florsheim Group Inc., The Florsheim Shoe
Store Company-Northeast, The Florsheim Shoe Store Company-West, Florsheim
Occupational Footwear, Inc., and L.J. O'Neill Shoe Co. (collectively, the
"Borrowers"), each of the financial institutions from time to time a party
thereto (individually, a "Lender" and collectively the "Lenders") and BT
Commercial Corporation, (individually ("BTCC") and in its capacity as agent (the
"Agent")).
W I T N E S S E T H:
WHEREAS, the Agent, the Lenders and the Borrowers are parties to that
certain Credit Agreement dated as of August 23, 1999, as amended through the
date hereof (the "Credit Agreement"); and
WHEREAS, the parties desire to amend the Credit Agreement, as more
fully set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and the other good and valuable consideration, the adequacy of which
is hereby acknowledged, and subject to the terms and conditions hereof, the
parties hereto agree as follows:
SECTION 1 DEFINITIONS. Unless otherwise defined herein, all capitalized
terms shall have the meaning given to them in the Credit Agreement.
SECTION 2 AMENDMENTS TO CREDIT AGREEMENT.
2.1 Section 1.1 of the Credit Agreement is hereby further
amended by inserting the following new defined term in proper alphabetical
sequence:
"SENIOR INDEBTEDNESS means Indebtedness of the
Consolidated Entity, other than Indebtedness which
has subordination terms, covenants, pricing and other
terms which have been approved in writing by the
Majority Lenders."
2.2 Section 1.1 of the Credit Agreement is hereby further
amended by deleting the defined term "LIBOR Rate Margin in its entirety, and
inserting the following in its stead:
"LIBOR RATE MARGIN means three and one-half percent
(3.50%) per annum for each Interest Period for a
LIBOR Rate Loan, provided however, that if
<PAGE> 2
the ratio of (1) Indebtedness to (2) EBITDA as of the
end of any fiscal quarter shall be less than 5.0 to
1.0, based on such financial reports delivered by
Florsheim to Agent sufficient to Agent's reasonable
satisfaction concerning such fact, and so long as no
Default or Event of Default then exists, the LIBOR
Rate Margin shall, effective on the first day of the
calendar month following the month in which the Agent
has confirmed such fact, be three percent (3.00%) per
annum for any Interest Period occurring during the
three (3) calendar months commencing with the month
in which the reduction in the LIBOR Rate Margin is
effective (except that notwithstanding the foregoing,
if a Default or Event of Default shall occur during
any period during the term hereof in which the
Borrowers are otherwise entitled to the benefit of a
reduced LIBOR Rate Margin, no such reduction shall be
effective during the pendency of any such Default or
Event of Default). At such time as the financial
reports delivered by Florsheim to Agent demonstrate
that the ratio of total Indebtedness to EBITDA as at
the end of any fiscal quarter shall be equal to or
greater than 5.0:1.0, then, in such event, the LIBOR
Rate Margin shall revert to three and one-half
percent (3.50%)."
2.3 Section 8.1 of the Credit Agreement is hereby deleted in
its entirety, and the following is inserted in its stead:
"8.1 INTEREST COVERAGE RATIO. The Consolidated Entity
shall have as of the end of each fiscal period set
forth below a ratio of EBITDA to Interest Expense of
not less than the ratio set forth below:
<PAGE> 3
- -------------------------------------------------------------------
PERIOD RATIO
- -------------------------------------------------------------------
twelve fiscal months ending with the 1.0:1.0
third quarter of fiscal 2000
- -------------------------------------------------------------------
twelve fiscal months ending with the 1.3:1.0
fourth quarter of fiscal 2000
- -------------------------------------------------------------------
twelve fiscal months ending with the 1.4:1.0
first quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the 1.4:1.0
second quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the 1.6:1.0
third quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the 1.7:1.0
fourth quarter of fiscal 2001, and each
fiscal quarter thereafter for the then
ending twelve fiscal month period
- -------------------------------------------------------------------
2.4 Article 8 of the Credit Agreement is hereby amended by
inserting the following new Section 8.1.1:
"8.1.1 SENIOR LEVERAGE RATIO. The Consolidated Entity
shall have as of the end of each fiscal period set
forth below a ratio of Senior Indebtedness to EBITDA
of not more than the ratio set forth below:
<PAGE> 4
- -------------------------------------------------------------------
PERIOD RATIO
- -------------------------------------------------------------------
twelve fiscal months ending with the 11.00:1.0
second quarter of fiscal 2000
- -------------------------------------------------------------------
twelve fiscal months ending with the third 7.15:1.0
quarter of fiscal 2000
- -------------------------------------------------------------------
twelve fiscal months ending with the 5.00:1.0
fourth quarter of fiscal 2000
- -------------------------------------------------------------------
twelve fiscal months ending with the first 4.50:1.0
quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the 4.25:1.0
second quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the third 4.00:1.0
quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the 4.00:1.00
fourth quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the first 3.50:1.0
quarter of fiscal 2002, and each fiscal
quarter thereafter for the then ending
twelve fiscal month period
- -------------------------------------------------------------------
<PAGE> 5
2.5 Article 8 of the Credit Agreement is hereby further
amended by inserting the following new Section 8.1.2:
"TOTAL LEVERAGE RATIO. The Consolidated Entity shall
have as of the end of each fiscal period set forth
below a ratio of Indebtedness to EBITDA of not less
than the ratio set forth below:
- -------------------------------------------------------------------
PERIOD RATIO
- -------------------------------------------------------------------
twelve fiscal months ending with the 13.00:1.0
second quarter of fiscal 2000
- -------------------------------------------------------------------
twelve fiscal months ending with the third 8.50:1.0
quarter of fiscal 2000
- -------------------------------------------------------------------
twelve fiscal months ending with the 6.15:1.0
fourth quarter of fiscal 2000
- -------------------------------------------------------------------
twelve fiscal months ending with the first 5.50:1.0
quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the 5.50:1.0
second quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the third 5.25:1.0
quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the 5.25:1.00
fourth quarter of fiscal 2001
- -------------------------------------------------------------------
twelve fiscal months ending with the first 5.00:1.0
quarter of fiscal 2002, and each fiscal
quarter thereafter for the then ending
twelve fiscal month period
- -------------------------------------------------------------------
<PAGE> 6
2.6 Section 8.2 of the Credit Agreement is hereby amended by
deleting the first sentence thereof, and inserting the following its stead:
"The Consolidated Entity shall not make payments for
Capital Expenditures in excess of $8,500,000 during
fiscal 2000 and any fiscal year thereafter."
SECTION 3. AMENDMENT FEE. In consideration of the agreement of the
Agent and Lenders to enter into this Amendment, the Borrowers shall pay to the
Agent, for the benefit of the Lenders, an amendment fee in the amount of Five
Hundred Thousand Dollars ($500,000) on the date hereof. The Agent is hereby
authorized by the Borrower to charge such fee to Borrowers' Loan Account.
SECTION 4. CONDITIONS PRECEDENT. The effectiveness of this Amendment is
expressly conditioned upon satisfaction of the following conditions precedent:
4.1 The Borrowers shall have paid the amendment fee in the
amount of $500,000 to the Agent for the benefit of the Lenders;
4.2 Agent shall have received copies of this Amendment duly
executed by the Borrowers and the Majority Lenders; and
4.3 Agent shall have received such other documents,
certificates and assurances as it shall reasonably request.
SECTION 5. REAFFIRMATION OF BORROWERS. The Borrowers hereby represent
and warrant to Agent and Lender that (i) the representations and warranties set
forth in Section 5 of the Credit Agreement are true and correct on and as of the
date hereof, except to the extent (a) that any such representations or
warranties relate to a specific date, or (b) of changes thereto as a result of
transactions for which Agent and Lenders have granted their consent; (ii) the
Borrowers are on the date hereof in compliance with all of the terms and
provisions set forth in the Credit Agreement as hereby amended; and (iii) upon
execution hereof no Default or Even of Default has occurred and is continuing or
has not previously been waived.
SECTION 6. FULL FORCE AND EFFECT. Except as herein amended, the Credit
Agreement and all other Credit Documents shall remain in full force and effect.
SECTION 7. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed and delivered in Chicago, Illinois by their proper and
duly authorized officers as of the date first set forth above.
BORROWER:
FLORSHEIM GROUP INC.
By: /s/ Richard J. Anglin
Name: Richard J. Anglin
Title: Executive Vice President,
Chief Financial Officer
THE FLORSHEIM SHOE STORE
COMPANY - NORTHEAST
By: /s/ Richard J. Anglin
Name: Richard J. Anglin
Title: Executive Vice President,
Chief Financial Officer
THE FLORSHEIM SHOE STORE
COMPANY - WEST
By: /s/ Richard J. Anglin
Name: Richard J. Anglin
Title: Executive Vice President,
Chief Financial Officer
FLORSHEIM OCCUPATIONAL
FOOTWEAR, INC.
By: /s/ Richard J. Anglin
Name: Richard J. Anglin
Title: Executive Vice President,
Chief Financial Officer
<PAGE> 8
L.J. O'NEILL SHOE CO.
By: /s/ Richard J. Anglin
Name: Richard J. Anglin
Title: Executive Vice President,
Chief Financial Officer
AGENT:
BT COMMERCIAL CORPORATION, as Agent
By: /s/ Frank Fazio
Name: Frank Fazio
Title: Director
LENDERS:
BT COMMERCIAL CORPORATION
By: /s/ Frank Fazio
Name: Frank Fazio
Title: Director
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ Steven M. Marks
Name: Steven M. Marks
Title: First Vice-President
DIME COMMERCIAL CORP.
By: /s/ Dan Bueno
Name: Dan Bueno
Title: Assistant Treasurer
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<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> JAN-02-2000
<PERIOD-END> APR-01-2000
<EXCHANGE-RATE> 1
<CASH> 4,723
<SECURITIES> 721
<RECEIVABLES> 36,126
<ALLOWANCES> 2,179
<INVENTORY> 66,893
<CURRENT-ASSETS> 119,782
<PP&E> 58,911
<DEPRECIATION> 28,608
<TOTAL-ASSETS> 198,926
<CURRENT-LIABILITIES> 40,395
<BONDS> 96,018
0
0
<COMMON> 8,484
<OTHER-SE> 33,375
<TOTAL-LIABILITY-AND-EQUITY> 198,926
<SALES> 56,221
<TOTAL-REVENUES> 56,221
<CGS> 32,210
<TOTAL-COSTS> 25,393
<OTHER-EXPENSES> 571
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,024
<INCOME-PRETAX> (3,835)
<INCOME-TAX> 1,358
<INCOME-CONTINUING> (2,477)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,477)
<EPS-BASIC> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
