<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
Commission File Number 0-24884
CANNONDALE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-0871823
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 BROOKSIDE PLACE, GEORGETOWN, CT 06829-0122
(Address of principal executive offices, including zip code)
(203) 544-9800
(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), Yes X No and (2) has been subject to such
--- ---
filing requirements for the past 90 days Yes X No .
--- ---
The number of shares outstanding of the issuer's Common Stock, $.01 par value,
as of May 5, 1997 was 8,678,649.
<PAGE> 2
CANNONDALE CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 29,
1997, June 29, 1996 and March 30, 1996 3
Condensed Consolidated Statements of Earnings for the
three and nine months ended March 29, 1997 and
March 30, 1996 4
Condensed Consolidated Statement of Stockholders'
Equity for the nine months ended March 29, 1997
and the year ended June 29, 1996 5
Condensed Consolidated Statements of Cash Flows for
the nine months ended March 29, 1997 and March 30,
1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II Other Information 10
</TABLE>
2
<PAGE> 3
CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 29, 1997 JUNE 29,1996 MARCH 30,1996
-------------- ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ........................................ $ 3,088 $ 4,305 $ 2,105
Trade accounts receivable, less allowances of
$7,805, $5,238, and $5,396 ................ 76,183 52,027 62,847
Inventory ................................... 33,077 30,526 32,354
Deferred income taxes ....................... 2,985 2,041 2,413
Prepaid expenses and other current assets ... 1,637 1,154 1,791
--------- --------- --------
Total current assets ........................... 116,970 90,053 101,510
Property, plant and equipment, net ............. 20,402 18,527 18,528
Other assets ................................... 1,611 1,365 1,341
--------- --------- --------
Total assets ................................... $ 138,983 $ 109,945 $121,379
========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................ $ 12,813 $ 12,431 $ 12,272
Revolving credit advances ................... 3,419 4,756 9,116
Income taxes payable ........................ 3,289 1,845 2,768
Warranty and other accrued expenses ......... 6,555 7,309 7,824
Current installments of long-term debt ...... 1,307 1,680 1,567
--------- --------- --------
Total current liabilities ...................... 27,383 28,021 33,547
Long-term debt, less current installments ...... 33,608 13,114 22,101
Deferred income taxes .......................... 165 235 386
Other noncurrent liabilities ................... 294 281 469
--------- --------- --------
Total liabilities .............................. 61,450 41,651 56,503
--------- --------- --------
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 18,000,000
Issued and outstanding shares -
8,673,634, 8,611,715 and 8,573,554 ........ 87 86 86
Additional paid-in capital .................. 56,710 55,965 55,673
Retained earnings ........................... 21,741 12,547 9,043
Cumulative translation adjustment ........... (1,005) (304) 74
--------- --------- --------
Total stockholders' equity ..................... 77,533 68,294 64,876
--------- --------- --------
Total liabilities and stockholders' equity ..... $ 138,983 $ 109,945 $121,379
========= ========= ========
</TABLE>
See accompanying notes
3
<PAGE> 4
CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT FOR PER-SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
MARCH 29, MARCH 30, MARCH 29, MARCH 30,
--------- --------- --------- ---------
1997 1996 1997 1996
---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ............................ $ 48,229 $ 45,050 $ 120,403 $ 106,968
Cost of sales ........................ 28,698 27,511 74,747 68,159
-------- -------- --------- ---------
Gross profit ......................... 19,531 17,539 45,656 38,809
-------- -------- --------- ---------
Expenses:
Selling, general and administrative 9,436 9,233 27,225 23,884
Research and development .......... 946 667 2,608 2,151
-------- -------- --------- ---------
10,382 9,900 29,833 26,035
-------- -------- --------- ---------
Operating income ..................... 9,149 7,639 15,823 12,774
-------- -------- --------- ---------
Other income (expense):
Interest expense .................. (543) (644) (1,231) (1,775)
Other income (expense) ............ 290 (7) 281 (12)
-------- -------- --------- ---------
(253) (651) (950) (1,787)
-------- -------- --------- ---------
Income before income taxes ........... 8,896 6,988 14,873 10,987
Income tax expense ................... (3,344) (2,764) (5,679) (4,345)
-------- -------- --------- ---------
Net income ........................... $ 5,552 $ 4,224 $ 9,194 $ 6,642
======== ======== ========= =========
Primary income per share:
Net income ........................ $ .62 $ .48 $ 1.03 $ .79
======== ======== ========= =========
Fully-diluted income per share:
Net income ........................ $ .62 $ .47 $ 1.03 $ .78
======== ======== ========= =========
</TABLE>
See accompanying notes
4
<PAGE> 5
CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
------------------ PAID-IN RETAINED TRANSLATION
SHARES VALUE CAPITAL EARNINGS ADJUSTMENT TOTAL
------ ----- ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1995 ....... 7,127,181 $71 $33,294 $ 2,401 $ 322 $ 36,088
Net income .................. -- -- -- 10,146 -- 10,146
Issuance of common stock (Net
of $1,490 offering costs) .. 1,366,666 14 22,071 -- -- 22,085
Exercise of options ......... 117,868 1 600 -- -- 601
Foreign currency adjustment . -- -- -- -- (626) (626)
--------- --- ------- -------- ------- --------
Balance at June 29, 1996 ...... 8,611,715 86 55,965 12,547 (304) 68,294
(Unaudited)
Net income .................. -- -- -- 9,194 -- 9,194
Exercise of options ......... 61,919 1 745 -- -- 746
Foreign currency adjustment . -- -- -- -- (701) (701)
--------- --- ------- -------- ------- --------
Balance at March 29, 1997 ..... 8,673,634 $87 $56,710 $ 21,741 $(1,005) $ 77,533
========= === ======= ======== ======= ========
</TABLE>
See accompanying notes
5
<PAGE> 6
CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 29, 1997 MARCH 30, 1996
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES ............ $(18,216) $(22,792)
-------- --------
INVESTING ACTIVITIES:
Capital expenditures ............................. (6,215) (2,183)
Proceeds from sale of headquarters facility ...... 1,676 --
-------- --------
Net cash used in investing activities ............ (4,539) (2,183)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock ....... 746 22,394
Net proceeds from (repayments of) borrowings under
short-term revolving credit agreements ....... (987) 4,603
Net proceeds from (repayments of) borrowings under
long-term debt and capital lease agreements .. 20,987 (2,014)
-------- --------
Net cash provided by financing activities ........ 20,746 24,983
-------- --------
Effect of exchange rate changes on cash .......... 792 (158)
-------- --------
Net decrease in cash ............................. (1,217) (150)
Cash at beginning of period ...................... 4,305 2,255
-------- --------
Cash at end of period ............................ $ 3,088 $ 2,105
======== ========
</TABLE>
See accompanying notes
6
<PAGE> 7
CANNONDALE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Cannondale Corporation (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 the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three- and nine-month periods ended March 29, 1997 are
not necessarily indicative of the results that may be expected for the year
ending June 28, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended June 29, 1996
included in the Company's Annual Report on Form 10-K/A.
Certain prior-period amounts have been reclassified to conform to the
current year's presentation.
2. INVENTORY
The components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 29, MARCH 30,
1997 JUNE 29,1996 1996
---- ------------ ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Raw materials ..................... $ 14,888 $ 14,664 $ 15,564
Work-in-process ................... 1,834 1,772 2,026
Finished goods .................... 17,162 15,505 16,137
Less reserve for obsolete inventory (807) (1,415) (1,373)
-------- -------- --------
$ 33,077 $ 30,526 $ 32,354
======== ======== ========
</TABLE>
3. EARNINGS PER SHARE AMOUNTS
Earnings per share of common stock are computed using the weighted average
number of shares of common stock and common stock equivalents outstanding for
each period. The weighted average number of shares of common stock and common
stock equivalents used in the computation of earnings per share was 8,957,521
and 8,891,986 for the three-month periods ended March 29, 1997 and March 30,
1996, respectively, and 8,922,396 and 8,446,056 for the nine-month periods ended
March 29, 1997 and March 30, 1996, respectively. Common stock equivalents
include options to purchase common stock.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which is required to be adopted by the
Company for the period ended December 27, 1997. At that time, the Company will
be required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact is expected to result in an increase in primary earnings
per share of $.02 and $.01 per share for the three-month periods ended March 29,
1997 and March 30, 1996, respectively, and an increase in primary earnings per
share of $.04 and $.03 per share for the nine-month periods ended March 29, 1997
and March 30, 1996, respectively. The impact of Statement 128 on the calculation
of fully diluted earnings per share for these quarters is not expected to be
material.
4. DEBT
On March 27, 1997, the Company amended it's domestic financing agreement.
The interest rate on the outstanding combined credit facility is the prime rate
with an option to borrow at LIBOR plus a LIBOR margin (ranging from .50% to
1.0%). The LIBOR margin is adjusted quarterly based on the Company's most
current quarterly financial statements. LIBOR for U.S. dollar, Dutch guilder and
Japanese yen borrowings was 5.68%, 3.12% and .68% at March 29, 1997,
respectively.
7
<PAGE> 8
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales. Net sales increased from $45.1 million in the third quarter of fiscal
1996 to $48.2 million in the third quarter of fiscal 1997, an increase of $3.1
million or 7.1%. For the first nine months, net sales increased 12.6% from
$107.0 million in fiscal 1996 to $120.4 million in fiscal 1997, an increase of
$13.4 million. Compared to the same periods last year, net sales on a pro-forma
basis, adjusted for the effect of a stronger U.S. dollar for the three- and
nine-month periods ended March 29, 1997, increased 15% and 18%, respectively.
The increase in sales was a result of the continued worldwide demand for
Cannondale products, a sales mix that favored international markets and growth
in the Company's non-bike categories.
Gross Profit. Gross profit as a percentage of net sales increased to 40.5% for
the third quarter of fiscal 1997 compared to 38.9% for the third quarter of
fiscal 1996. The gross profit for the third quarter of 1997 was $19.5 million,
an increase of $2.0 million, or 11.4%, over the gross profit of $17.5 million
for the third quarter of fiscal 1996. For the first nine months of fiscal 1997,
gross profit as a percentage of net sales increased to 37.9% ($45.7 million)
compared to 36.3% ($38.8 million) in fiscal 1996. The improvement in gross
profit reflects increased sales, a mix that favored international markets, an
increase in non-bike sales, cost-reduction programs, the effect of a stronger
U.S. dollar against the Japanese yen and the Company's continued integration of
proprietary technology through the use of its Cannondale bicycle frames, CODA
components and HeadShok suspension systems.
Operating Expenses. Operating expenses were $10.4 million for the third quarter
of fiscal 1997, an increase of approximately $500,000, or 4.9%, over the third
quarter of fiscal 1996 of $9.9 million. For the first nine months of fiscal
1997, operating expenses were $29.8 million, an increase of approximately $3.8
million, or 14.6%, over the first nine months of fiscal 1996 of $26.0 million.
In both periods, increases in selling, general and administrative expenses were
directly associated with increased sales, and additional personnel, advertising,
and marketing costs required to support the Company's growth. The Company also
increased its investment in international advertising and marketing. For the
third quarter, the increased selling, general and administrative expenses were
primarily offset by the effect of a stronger U.S. dollar and decreased warranty
expense attributable to improved manufacturing processes and investments in
product testing. As a percentage of sales, selling, general and administrative
expenses remained at approximately 22% for the first nine months of fiscal 1997
compared to the first nine months of fiscal 1996. The increase in research and
development expenses in both periods reflects the Company's commitment to
further investments in innovation in such areas as frame, suspension and brake
technology, as well as high-performance sport wheelchairs. For the first nine
months of fiscal 1997, as a
8
<PAGE> 9
percentage of net sales, total operating expenses remained at approximately 24%
compared to the first nine months of fiscal 1996.
Other income (expense). Interest expense for the third quarter of fiscal 1997
was $543,000, a decrease of approximately $101,000 from the third quarter of
fiscal 1996. For the first nine months of fiscal 1997, interest expense was
$1,231,000, a decrease of approximately $544,000 from the first nine months of
fiscal 1996. In both periods, higher average borrowings were offset by the lower
interest rates available under the Company's multi-currency revolving credit
facility. The increase in other income in both periods represents the receipt of
interest from dealers.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $18.2 million for the first nine
months of fiscal 1997, a decrease of $4.6 million compared to the $22.8 million
used for the first nine months of fiscal 1996. The net use of cash is typical
for the first nine months of the fiscal year due to seasonal activity, which
includes higher inventory levels during the busiest shipping period of the year
and seasonal terms offered to dealers through the Company's Authorized Retailer
Program. The reduction in the use of cash from operating activities compared to
the prior year was primarily attributable to the leveling of inventory growth
during the first nine months of fiscal 1997 compared to fiscal 1996. During the
prior year period, the Company initiated a strategy to maintain higher inventory
levels to capitalize on its flexible manufacturing capabilities.
Capital expenditures were $6.2 million for the first nine months of fiscal 1997,
compared to $2.2 million in the first nine months of fiscal 1996. The increase
in spending primarily reflects the Company's investment in its facilities'
expansion, which is required to support future growth. The proceeds from the
sale of the Company's headquarters facility, $1.7 million, are being
reinvested in this expansion.
Net cash provided by financing activities for the first nine months of fiscal
1997 was $20.7 million, a decrease of $4.3 million compared to the $25.0 million
for the first nine months of fiscal 1996. The net cash provided by financing
activities in fiscal 1997 primarily reflects the net proceeds from borrowings
under the Company's long-term revolving credit facility to meet its operating
and capital requirements during the period. The net cash provided by financing
activities in fiscal 1996 reflects the net proceeds from the public offering of
common stock in September 1995, which were used to reduce borrowings under the
Company's credit facilities.
The Company expects that cash flow generated by its operations and borrowings
under the revolving credit facilities will be sufficient to meet its planned
operating and capital requirements for the foreseeable future.
9
<PAGE> 10
PART II OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Page
----
<S> <C>
(a) Index to Exhibits 12
(b) Reports on Form 8-K
None
</TABLE>
10
<PAGE> 11
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.
CANNONDALE CORPORATION
Date: May 13, 1997 /s/ William A. Luca
--------------------
William A. Luca
Vice President of Finance, Treasurer
and Chief Financial Officer
(Principal Financial Officer
and authorized signatory)
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.1.6 Assignment of Agreements and Instruments,
dated March 26, 1997, between Fleet Capital
Corporation ("Assignor") and Fleet National
Bank ("Assignee")
10.1.7 Amendment No. 1, dated March 27, 1997
between the Company and Fleet National Bank
(successor by assignment to Fleet Capital
Corporation)
11 Statement re: Computation of Earnings per
Common Share
27 Financial Data Schedule
</TABLE>
12
<PAGE> 1
ASSIGNMENT OF AGREEMENTS AND INSTRUMENTS
FOR VALUE RECEIVED, Fleet Capital Corporation (formerly known as Shawmut
Capital Corporation, successor to Barclays Business Credit, Inc.) ("Assignor")
hereby assigns, transfers and sets over absolutely to Fleet National Bank
("Assignee") all of its right, title and interest in and to the following:
1. Amended and Restated Loan and Security Agreement (the "Loan
Agreement"), dated as of March 29, 1996, by and between Assignor and Cannondale
Corporation ("Cannondale").
2. Revolving Credit Note, dated as of March 29, 1996, in the original
principal amount of $35,000,000 made by Cannondale in favor of Assignor.
3. Term Note, dated as of March 31, 1995, in the original principal amount
of $3,500,000, made by Cannondale in favor of Shawmut Capital Corporation.
4. Patents Collateral Assignment, dated as of July 2, 1993, between
Cannondale and Barclays Business Credit, Inc.
5. Trademark Security Agreement, dated as of March 29, 1996, made by
Cannondale in favor of Assignor.
6. The Letters of Credit set forth on Exhibit A hereto.
7. The Security Documents and the Other Documents not otherwise set forth
above.
From and after June 30, 1997, the Assignee agrees that it shall be without
recourse to Assignor with respect to the risks of collection and Cannondale's
ability to satisfy the Obligations or perform its covenants or agreements under
the Loan Agreement, the Security Documents and the Other Documents. The Assignee
acknowledges that it has reviewed and inspected the Loan Agreement, the Notes,
the Security Documents and the Other Documents.
This Assignment contains the entire agreement between the parties hereto
concerning the subject matter hereof and may not be modified or changes in any
way except in a writing signed by both parties.
This Assignment shall be binding upon and shall inure to the benefit of
Assignor and Assignee and their respective successors and assigns.
<PAGE> 2
2
Two or more duplicate originals of this Assignment may be signed by the
parties hereto, each of which shall be an original, but all of which shall
constitute one in the same instrument.
All capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Loan Agreement.
Dated: March 26, 1997
FLEET CAPITAL CORPORATION
(formerly known as Shawmut Capital
Corporation, successor to Barclays Credit, Inc.)
By: /s/ HOWARD HANDMAN
----------------------------------
Name: Howard Handman
Title: Vice President
FLEET NATIONAL BANK
By: /s/ MARGARET D. HARWOOD
----------------------------------
Name: Margaret D. Harwood
Title: Vice President
<PAGE> 3
3
STATE OF CONNECTICUT )
) ss:Glastonbury March 27 , 1997
COUNTY OF HARTFORD )
Personally appeared Howard Handman, Vice President of Fleet Capital
Corporation, a Rhode Island corporation, signer and sealer of the foregoing
instrument, and acknowledged the same to be his free act and deed as such
officer and the free act and deed of said Corporation, before me.
/s/ LISA A. GIAMPAOLO
----------------------------------
Notary Public
My Commission Expires: February 28, 2000
STATE OF CONNECTICUT )
) ss: Bridgeport March 27, 1997
COUNTY OF FAIRFIELD )
Personally appeared Margaret Harwood, Vice President of Fleet
National Bank, signer and sealer of the foregoing instrument, and acknowledged
the same to be his free act and deed as such officer and the free act and deed
of said Bank, before me.
/s/ PATRICIA WAIKSMIS
----------------------------------
Notary Public
My Commission Expires: January 31, 2002
<PAGE> 1
AMENDMENT NO. 1
Dated as of March 27, 1997
AMENDMENT by and among CANNONDALE CORPORATION, a corporation
organized under the laws of the State of Delaware (the "Borrower") and FLEET
NATIONAL BANK (successor by assignment to FLEET CAPITAL CORPORATION) (the
"Lender").
PRELIMINARY STATEMENTS:
A. The Borrower and Fleet Capital Corporation have entered into an
Amended and Restated Loan Agreement dated as of March 29, 1996 (as amended, the
"Loan Agreement"; the capitalized terms defined therein being used herein as
therein defined unless otherwise defined herein).
B. Fleet Capital Corporation assigned its interest in the Loan
Agreement and the other Loan Documents to the Lender on March 27, 1997.
C. Pursuant to the Loan Agreement, the Borrower is indebted to the
Lender under the Loan Documents in the aggregate principal amount of
$12,975,124.22, as of the date hereof (the "Indebtedness"), which Indebtedness
is owed by the Borrower to the Lender without offset, defense or counterclaim of
any kind, nature or description. As security for such Indebtedness, the Borrower
has heretofore granted to the Lender a first priority security interest, subject
only to Permitted Liens, in all the Borrower's assets, whether now owed or
hereafter acquired, wherever located of any kind, nature or description,
tangible or intangible, including without limitation, the Borrower's accounts
receivable, inventory, equipment, and general intangibles, and such security
interests and liens granted by the Borrower to the Lender are hereby
reacknowledged and confirmed by the Borrower.
D. The Borrower and the Lender have agreed to amend the Loan
Agreement and the other Loan Documents as hereinafter set forth.
SECTION 1. Amendments. The Loan Documents are, effective as of
the date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 2 hereof, hereby amended as follows:
(a) The following new definitions are added to Appendix A of
the Loan Agreement in appropriate alphabetical order:
<PAGE> 2
2
Current Maturities - as of the date designated, payments
scheduled to be paid under Indebtedness within one year after such date as
determined in accordance with GAAP.
EBITDA - with respect to any fiscal period, EBIT, plus the sum
of the following amounts for such period determined on a Consolidated
basis to the extent included in the determination of EBIT: (i) interest
expense (net of interest income), (ii) income tax expense, (ii)
depreciation and (iv) amortization.
Interest Expense - with respect to any fiscal period, the
amount which would, on a Consolidated basis, be set forth opposite the
caption "interest expense" or any like caption on an income statement of
the Borrower.
Rate Ratio -- with respect to any fiscal period, the ratio of
(a) EBITDA for such period less the sum of all unfinanced Capital
Expenditures for such period to (b) Interest Expense for such period plus
the Current Maturities for such period.
(b) The definition of the term "Adjusted LIBOR Rate" contained
in Appendix A to the Loan Agreement is amended and restated in full to read as
follows:
Adjusted LIBOR Rate - For any LIBOR Interest Period, as
applied to any LIBOR Rate Loan, the rate per annum (rounded upward, if
necessary, to the nearest 1/32 of one percent) as determined on the basis
of the offered rates for deposits in U.S. dollars, for a period of time
comparable to such LIBOR Interest Period which appears on the Telerate
page 3750 as of 11:00 a.m. London time on the date that is two London
business days preceding the first day of such LIBOR Interest Period;
provided, however, if the rate described above does not appear on the
Telerate System on any applicable interest determination date, the
Adjusted LIBOR Rate shall be the rate (rounded upwards as described above,
if necessary) for deposits in dollars for a period substantially equal to
the interest period on the Reuters Page "LIBOR" (or such other page as may
replace the LIBOR Page on that service for the purpose of displaying such
rates), as of 11:00 a.m. (London time), on the day that is two (2) London
business days prior to the beginning of such interest period.
If both the Telerate and Reuters system are unavailable, then
the rate for that date will be determined on the basis of the offered
rates for deposits in U.S. dollars for a period of time comparable to such
LIBOR Interest Period which are offered by four major banks in the London
interbank market at approximately 11:00 a.m. London time, on the day that
is two London business days preceding the first day of such LIBOR Interest
Period as selected by Lender.
<PAGE> 3
3
The principal London office of each of the four major London banks will be
requested to provide a quotation of its U.S. dollar deposit offered rate.
If at least two such quotations are provided, the rate for that date will
be the arithmetic means of the quotations. If fewer than two quotations
are provided as requested, the rate for that date will be determined on
the basis of the rates quoted for loans in U.S. dollars to leading
European banks for a period of time comparable to such LIBOR Interest
Period offered by major banks in New York City at approximately 11:00 a.m.
New York City time, on the day that is two Business Days preceding the
first day of such LIBOR Interest Period. In the event that the Lender is
unable to obtain any such quotation as provided above, it will be deemed
that the Adjusted LIBOR Rate cannot be determined.
IN THE EVENT THAT THE BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM SHALL IMPOSE A RESERVE PERCENTAGE WITH RESPECT TO LIBOR
RATE LOAN DEPOSITS OF THE LENDER; THEN FOR ANY PERIOD DURING WHICH SUCH
RESERVE PERCENTAGE SHALL APPLY, THE ADJUSTED LIBOR RATE SHALL BE EQUAL TO
THE AMOUNT DETERMINED ABOVE DIVIDED BY AN AMOUNT EQUAL TO 1 MINUS THE
RESERVE PERCENTAGE.
(c) The definition of the term "LIBOR Rate" contained in
Appendix A to the Loan Agreement is amended and restated in full to read as
follows:
LIBOR Rate - a per annum rate equal to the sum of the Adjusted
LIBOR Rate plus the corresponding per annum percentage ("LIBOR Margin")
based on Borrower's Rate Ratio calculated on a rolling four quarter basis
as of the most recent four fiscal quarterly financial statements:
Rate Ratio LIBOR Margin
---------- ------------
Less than or equal to 3.0 1.000%
Greater than 3.0, but less
than or equal to 5.0 0.875%
Greater than 5.0, but less
than or equal to 7.50 0.750%
Greater than 7.50, but less
than or equal to 10.0 0.625%
Greater than 10.00 0.500%
For purposes of calculating the LIBOR Margin in connection
with this definition, the applicable LIBOR Margin shall increase by 0.125%
for each
<PAGE> 4
4
day when the Revolving Credit Loans outstanding exceed $26,250,000. The
applicable LIBOR Margin shall change quarterly based on the results of
Borrower's most current quarterly financial statements, on the next fiscal
quarter following delivery to Lender of such financial statements.
(d) Section 2.5 of the Loan Agreement is amended and restated
in full to read as follows:
2.5 Annual Facility Fee. Borrower shall pay to Lender a fee
equal to the corresponding following percentage per annum (based upon a
year of 360 days for the actual number of days elapsed) of the average
monthly unused amount of the Revolving Credit Loans available to Borrower
pursuant to Section 1.1 hereof, based on Borrower's Rate Ratio calculated
on a rolling four quarter basis as of the most recent four fiscal
quarterly financial statements:
Rate Ratio Percentage
---------- ----------
Less than or equal to 3.0 0.375%
Greater than 3.0, but less
than or equal to 5.0 0.300%
Greater than 5.0, but less
than or equal to 7.50 0.250%
Greater than 7.50, but less
than or equal to 10.0 0.200%
Greater than 10.00 0.1875%
The applicable Percentage shall change quarterly based on the
results of Borrower's most current quarterly financial statements, on the
next fiscal quarter following delivery to Lender of such financial
statements. The facility fee shall be payable monthly in arrears on the
first day of each calendar month hereafter.
SECTION 2. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Lender shall have received
counterparts of this Amendment executed by the Borrower and the Lender, and
Section 1 hereof shall become effective when, and only when, the Lender shall
have additionally received all of the following documents, each document (unless
otherwise indicated) being dated the date of receipt thereof by the Lender
(which date shall be the same for all such documents), in form and substance
satisfactory to the Lender:
<PAGE> 5
5
(a) Certified copies of (i) the resolutions of the Board of
Directors of the Borrower approving this Amendment and the matters contemplated
hereby and (ii) all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Amendment and the matters
contemplated hereby.
(b) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign this Amendment and the other documents to be
delivered hereunder.
(c) A certificate signed by a duly authorized officer of the
Borrower stating that:
(i) The representations and warranties contained in Section 3
hereof are correct on and as of the date of such certificate as
though made on and as of such date, and
(ii) No event has occurred and is continuing which constitutes
a Default or an Event of Default.
SECTION 3. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction indicated at
the beginning of this Amendment.
(b) The execution, delivery and performance by the Borrower of
this Amendment and the Loan Documents, as amended hereby, to which it is or is
to be a party are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not contravene (i) the
Borrower's charter or by-laws, (ii) law or any contractual restriction binding
on or affecting the Borrower, or result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge, encumbrance or preferential arrangement of any nature upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
(c) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Borrower of this
Amendment or any of the Loan Documents, as amended hereby, to which it is or is
to be a party.
<PAGE> 6
6
(d) This Amendment and each of the other Loan Documents as
amended hereby, constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms.
(e) The Loan Agreement creates valid and perfected first
priority security interests and liens in and to the Collateral covered thereby
enforceable against all third parties in all jurisdictions, securing the payment
of all Obligations, and the execution, delivery and performance of this
Amendment do not adversely affect the aforesaid security interests and liens of
the Loan Agreement.
(f) Except as set forth in the Loan Agreement, there is no
pending or threatened action or proceeding affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or operations of the
Borrower or any Subsidiary. There is no pending or threatened action or
proceeding affecting the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator which purports to affect the legality,
validity or enforceability of this Amendment or any of the other Loan Documents,
as amended hereby.
(g) The Loan Documents existing on the date hereof constitute
legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms.
SECTION 4. Reference to and Effect on the Loan Documents.
(a) Upon the effectiveness of Section 1 hereof, on and after
the date hereof each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference in
any Loan Documents to the Loan Agreement or any other Loan Document, shall mean
and be a reference to the Loan Agreement or such other Loan Document as amended
hereby.
(b) Except as specifically amended above, the Loan Agreement,
the Notes and the other Loan Documents, shall remain in full force and effect
and are hereby ratified and confirmed. Without limiting the generality of the
foregoing, the Loan Agreement and all of the Collateral described therein do and
shall continue to secure the payment of all Obligations, indebtedness and
liabilities of the Borrower to the Lender under the Loan Agreement and the other
Loan Documents, as amended hereby.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Lender under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
<PAGE> 7
7
SECTION 5. Costs, Expenses and Taxes. The Borrower agrees to
pay on demand all costs and expenses of the Lender in connection with the
preparation, execution and delivery of this Amendment and the other instruments
and documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Lender with
respect thereto and with respect to advising the Lender as to its rights and
responsibilities hereunder and thereunder. The Borrower further agrees to pay on
demand all costs and expenses, if any (including, without limitation, reasonable
counsel fees and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Amendment and the other
instruments and documents to be delivered hereunder, including, without
limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 5. In addition, the Borrower shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, and agrees to save the
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes.
SECTION 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 7. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of Connecticut.
SECTION 8. Commercial Waiver. THE BORROWER ACKNOWLEDGES THAT
THE LOANS EVIDENCED BY THE NOTES ARE FOR COMMERCIAL PURPOSES AND WAIVES ANY
RIGHT TO NOTICE AND HEARING UNDER SECTIONS 52-278a THROUGH 52-278n OF THE
CONNECTICUT GENERAL STATUTES AS NOW OR HEREAFTER AMENDED AND AUTHORIZES THE
ATTORNEY OF THE LENDER, OR ANY SUCCESSOR THERETO, TO ISSUE A WRIT OF PREJUDGMENT
REMEDY WITHOUT COURT ORDER. THE BORROWER ACKNOWLEDGES THAT IT MAKES THESE
WAIVERS AND THE WAIVERS CONTAINED IN SECTIONS 11.14 and 11.15 KNOWINGLY,
VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THESE
WAIVERS WITH ITS ATTORNEYS.
<PAGE> 8
8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
Borrower:
CANNONDALE CORPORATION
By: /s/ WILLIAM F. SCHMALKUCHE
------------------------------
Name: William F. Schmalkuche
Title: Assistant Treasurer
Lender:
FLEET NATIONAL BANK
By: /s/ MARGARET D. HARWOOD
------------------------------
Margaret D. Harwood
Vice President
<PAGE> 1
EXHIBIT 11
CANNONDALE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT FOR PER-SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
MARCH 29, MARCH 30, MARCH 29, MARCH 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE COMPUTATION:
Weighted average shares outstanding .......... 8,648 8,564 8,625 8,089
Net effect of options-
based on the treasury stock method ........... 310 328 297 357
------ ------ ------ ------
Weighted average number of common shares
and equivalents outstanding during the period 8,958 8,892 8,922 8,446
====== ====== ====== ======
Income applicable to common shares and
equivalents ............................... $5,552 $4,224 $9,194 $6,642
====== ====== ====== ======
Net income per share ......................... $ .62 $ .48 $ 1.03 $ .79
====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE COMPUTATION:
Weighted average shares outstanding .......... 8,648 8,564 8,625 8,089
Net effect of options-
based on the treasury stock method ........... 310 400 297 409
------ ------ ------ ------
Weighted average number of common shares
and equivalents outstanding during the period 8,958 8,964 8,922 8,498
====== ====== ====== ======
Income applicable to common shares and
equivalents ............................... $5,552 $4,224 $9,194 $6,642
====== ====== ====== ======
Net income per share ......................... $ .62 $ .47 $ 1.03 $ .78
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> MAR-29-1997
<CASH> 3,088
<SECURITIES> 0
<RECEIVABLES> 83,988
<ALLOWANCES> 7,805
<INVENTORY> 33,077
<CURRENT-ASSETS> 116,970
<PP&E> 37,693
<DEPRECIATION> 17,291
<TOTAL-ASSETS> 138,983
<CURRENT-LIABILITIES> 27,383
<BONDS> 33,608
0
0
<COMMON> 87
<OTHER-SE> 77,446
<TOTAL-LIABILITY-AND-EQUITY> 138,983
<SALES> 120,403
<TOTAL-REVENUES> 120,403
<CGS> 74,747
<TOTAL-COSTS> 74,747
<OTHER-EXPENSES> 29,833
<LOSS-PROVISION> 9,281
<INTEREST-EXPENSE> 1,231
<INCOME-PRETAX> 14,873
<INCOME-TAX> 5,679
<INCOME-CONTINUING> 9,194
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,194
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
