FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[*] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 27, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File Numbers: 333-18475, 33-87930-01, 33-87930
ICON Fitness Corporation
IHF Holdings, Inc.
ICON Health & Fitness, Inc.
(Exact name of registrant as specified in its charter)
Delaware 87-0566936, 87-0531209, 87-0531206
(State or other jurisdiction of (I.R.S. Employer Identification Nos.)
incorporation or organization)
1500 South 1000 West Logan, Utah 84321 (Address and zip code of
principal executive offices)
(435) 750-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if change since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes 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:
ICON Health & Fitness, Inc. 1,000 shares,
IHF Holdings, Inc. 1,000 shares,
ICON Fitness Corporation 100 shares.
<PAGE>
ICON Fitness Corporation and its wholly-owned subsidiary, IHF
Holdings, Inc.
and its wholly-owned subsidiary, ICON Health & Fitness, Inc.
FORM 10-Q INDEX
Page No.
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . 3-7
Consolidated Condensed Balance
Sheets as of February 27, 1999 and
May 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . 3-4
Consolidated Condensed Statements
of Operations for the three months and six months
ended February 27, 1999 and February 28, 1998 . . . . . . . . 5-6
Consolidated Condensed Statements
of Cash Flows for the nine months
ended February 27, 1999 and February 28, 1998 . . . . . . . . . 7
Notes to Consolidated Condensed
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . 8-15
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 15
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . 15
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Securities Holders . . . . 15
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . 15-16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 16
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
ICON Fitness Corporation and its wholly-owned subsidiary,
IHF Holdings, Inc. and its wholly-owned subsidiary,
ICON Health & Fitness, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ICON IHF ICON ICON IHF ICON
Fitness Holdings, Health & Fitness Holdings, Health &
Corporation Inc. Fitness, Inc. Corporation Inc. Fitness,Inc.
February 27, February 27, February 27, May 31, May 31, May 31,
1999 1999 1999 1998 1998 1998
------------ ---------- ------------- ------------ --------- ------------
Assets
Current assets
Cash $7,980 $7,980 $7,980 $3,892 $3,892 $3,892
Accounts receivable-net 184,868 184,868 184,868 124,301 124,301 124,301
Inventories:
Raw materials 49,165 49,165 49,165 42,609 42,609 42,609
Finished goods 71,135 71,135 71,135 78,857 78,857 78,857
Deferred income taxes 12,636 12,636 12,636 11,177 11,177 11,177
Other current assets 8,997 8,997 8,997 6,202 6,202 6,202
Income tax receivable 622 622 622 781 781 781
------- ------- ------- ------- ------- -------
Total current assets 335,403 335,403 335,403 267,819 267,819 267,819
Property and equipment
Land 1,430 1,430 1,430 1,430 1,430 1,430
Building 17,346 17,346 17,346 16,675 16,675 16,675
Machinery & equipment 66,107 66,107 66,107 71,293 71,293 71,293
------ ------ ------ ------ ------ ------
Total 84,883 84,883 84,883 89,398 89,398 89,398
Less: accum deprec (38,231) (38,231) (38,231) (40,579) (40,579) (40,579)
-------- -------- -------- ------- ------- -------
Property & equipment-net 46,652 46,652 46,652 48,819 48,819 48,819
Receivable from parent 2,368 2,368 2,368 2,362 2,362 2,362
Trademarks, net 23,251 23,251 23,251 17,244 17,244 17,244
Deferred income taxes 29,248 19,356 4,549 22,572 16,265 4,927
Other assets 26,251 23,367 20,992 29,057 25,585 21,958
-------- -------- -------- -------- -------- --------
Total assets $463,173 $450,397 $433,215 $387,873 $378,094 $363,129
======== ======== ======== ======== ======== ========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
ICON Fitness Corporation and its wholly-owned subsidiary,
IHF Holdings, Inc. and its wholly-owned subsidiary,
ICON Health & Fitness, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Continued)
(In Thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ICON IHF ICON ICON IHF ICON
Fitness Holdings, Health & Fitness Holdings, Health &
Corporation Inc. Fitness, Inc. Corporation Inc. Fitness,Inc.
February 27, February 27, February 27, May 31, May 31, May 31,
1999 1999 1999 1998 1998 1998
------------ ---------- ------------- ------------ --------- ------------
Liabilities and
Stockholders' Equity
(Deficit)
Current liabilities
Current portion of
long-term debt $205,707 $205,707 $205,707 $6,051 $6,051 $6,051
Accounts payable 109,341 109,341 109,341 83,965 83,965 83,965
Interest payable 2,863 2,863 2,863 6,596 6,596 6,596
Accrued expenses 17,938 17,938 17,938 18,090 18,090 18,090
Income taxes payable 933 933 933 249 249 249
------- ------- ------- ------- ------- -------
Total current liabs 336,782 336,782 336,782 114,951 114,951 114,951
Long term-debt 328,615 217,878 114,989 460,707 360,413 268,495
Stockholders' equity (deficit)
Common stock & additional
paid-in capital 49,702 127,770 166,187 49,701 127,769 166,186
Receivable from officers
for purchase of equity (656) (656) (656) (656) (656) (656)
Cumulative translation
adjustment (975) (975) (975) (547) (547) (547)
Retd earnings(deficit) (250,295) (230,402) (183,112) (236,283) (223,836) (185,300)
-------- -------- -------- -------- -------- --------
Total Stockholders' Equity(202,224) (104,263) (18,556) (187,785) (97,270) (20,317)
-------- -------- -------- -------- -------- --------
Total liabilities and
stockholders' equity $463,173 $450,397 $433,215 $387,873 $378,094 $363,129
======== ======== ======== ======== ======== ========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
ICON Fitness Corporation and its wholly-owned subsidiary,
IHF Holdings, Inc. and its wholly-owned subsidiary,
ICON Health & Fitness, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION> For The Three Months Ended
<S> <C> <C> <C> <C> <C> <C>
ICON IHF ICON ICON IHF ICON
Fitness Holdings, Health & Fitness Holdings, Health &
Corporation Inc. Fitness, Inc. Corporation Inc. Fitness,Inc.
February 27, February 27, February 27, February 28, February 28, February 28,
1999 1999 1999 1998 1998 1998
------------ ---------- ------------- ------------ --------- ------------
Net sales $226,741 $226,741 $226,741 $252,027 $252,027 $252,027
Cost of goods sold 162,821 162,821 162,821 176,519 176,519 176,519
-------- ------- ------- ------- ------- -------
Gross profit 63,920 63,920 63,920 75,508 75,508 75,508
Operating expenses:
Selling expenses 32,306 32,306 32,306 37,064 37,064 37,064
Research and development 2,007 2,007 2,007 1,984 1,984 1,984
General and administrative 13,584 13,584 13,584 14,981 14,981 14,981
-------- ------- ------- ------- ------- -------
Total operating expenses 47,897 47,897 47,897 54,029 54,029 54,029
-------- ------- ------- ------- ------- -------
Operating income 16,023 16,023 16,023 21,479 21,479 21,479
Interest expense 15,779 12,299 8,641 15,666 12,643 9,556
Amortization of deferred
financing fees 2,173 1,976 1,559 1,827 1,657 1,305
-------- ------- ------- ------- ------- ------
Income (loss) before income tax (1,929) 1,748 5,823 3,986 7,179 10,618
Provision (benefit) for
income taxes (299) 811 1,822 1,851 2,925 3,956
--------- -------- -------- -------- -------- -------
Net income (loss) (1,630) 937 4,001 2,135 4,254 6,662
Other comprehensive income:
Foreign currency translation
adjustments 116 116 116 (1,095) (1,095) (1,095)
--------- -------- -------- -------- -------- --------
Comprehensive income (loss) $(1,514) $1,053 $4,117 $1,040 $3,159 $5,567
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
ICON Fitness Corporation and its wholly-owned subsidiary,
IHF Holdings, Inc. and its wholly-owned subsidiary,
ICON Health & Fitness, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION> For The Nine Months Ended
<S> <C> <C> <C> <C> <C> <C>
ICON IHF ICON ICON IHF ICON
Fitness Holdings, Health & Fitness Holdings, Health &
Corporation Inc. Fitness, Inc. Corporation Inc. Fitness,Inc.
February 27, February 27, February 27, February 28, February 28, February 28,
1999 1999 1999 1998 1998 1998
------------- --------- ------------- ------------ ----------- -------------
Net sales $558,236 $558,236 $558,236 $615,821 $615,821 $615,821
Cost of goods sold 401,790 401,790 401,790 437,611 437,611 437,611
-------- ------- ------- ------- ------- -------
Gross profit 156,446 156,446 156,446 178,210 178,210 178,210
Operating expenses:
Selling expenses 78,510 78,510 78,510 97,293 97,293 97,293
Research and development 5,576 5,576 5,576 5,978 5,978 5,978
General and administrative 39,950 39,950 39,950 45,303 45,301 45,301
-------- ------- ------- ------- ------- -------
Total operating expenses 124,036 124,036 124,036 148,574 148,572 148,572
-------- ------- ------- ------- ------- -------
Operating income 32,410 32,410 32,410 29,636 29,638 29,638
Interest expense 46,036 35,593 24,622 45,015 35,948 26,687
Amortization of deferred
financing fees 6,371 5,783 4,531 5,065 4,555 3,498
-------- ------- ------- ------- ------- ------
Income (Loss) before income tax (19,997) (8,966) 3,257 (20,444) (10,865) (547)
Provision (Benefit) for
income taxes (5,985) (2,400) 1,069 (6,450) (3,227) (124)
--------- -------- -------- -------- -------- --------
Net Income(loss) (14,012) (6,566) 2,188 (13,994) (7,638) (423)
========= ======== ======== ========= ========= =========
Other comprehensive income:
Foreign currency translation
adjustments (428) (428) (428) (597) (597) (597)
--------- -------- -------- --------- --------- ---------
Comprehensive income(loss) $(14,440) $(6,994) $1,760 $(14,591) $(8,235) $(1,020)
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
ICON Fitness Corporation and its wholly-owned subsidiary,
IHF Holdings, Inc. and its wholly-owned subsidiary,
ICON Health & Fitness, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION> For The Nine Months Ended
<S> <C> <C> <C> <C> <C> <C>
ICON IHF ICON ICON IHF ICON
Fitness Holdings, Health & Fitness Holdings, Health &
Corporation Inc. Fitness, Inc. Corporation Inc. Fitness,Inc.
February 27, February 27, February 27, February 28, February 28, February 28,
1999 1999 1999 1998 1998 1998
------------ ---------- ------------- ------------ ---------- ------------
OPERATING ACTIVITIES:
Net loss $(14,012) $(6,566) $2,188 $(13,994) $(7,638) $(423)
Adjustments to reconcile net
income to net cash provided
by operating activity:
Benefit for deferred taxes (8,135) (4,550) (1,081) (8,544) (5,321) (2,218)
Amortization of debt
discount and deferred
financing fees 27,996 16,965 4,742 23,572 13,996 3,678
Depreciation & amortization 13,214 13,214 13,214 12,037 12,037 12,037
Inventory revaluation -- -- -- 330 330 330
Loss on sale of assets -- -- -- 333 333 333
Changes in operating assets and liabilities:
Accounts receivable (60,567) (60,567) (60,567) (32,014) (32,014) (32,014)
Inventory 1,166 1,166 1,166 3,543 3,543 3,543
Other assets (14,206) (14,206) (14,206) (1,611) (1,614) (1,614)
Account payable and
accrued expenses 22,175 22,175 22,175 3,856 3,856 3,856
------- ------- ------- -------- -------- --------
Net cash used in
operating activities (32,369) (32,369) (32,369) (12,492) (12,492) (12,492)
INVESTING ACTIVITIES:
Proceeds from sale of assets -- -- -- 18,250 18,250 18,250
Purchases of property
and equipment (9,054) (9,054) (9,054) (9,724) (9,724) (9,724)
------- ------- ------- -------- -------- --------
Net cash used in
investing activities (9,054) (9,054) (9,054) 8,526 8,526 8,526
FINANCING ACTIVITIES:
Proceeds from long-term debt,
net of payments 45,939 45,939 45,939 6,796 6,796 6,796
------ ------ ------ ------ ------ ------
Net cash received from
financing activities 45,939 45,939 45,939 6,796 6,796 6,796
Effect of exchange rate
change on cash (428) (428) (428) (597) (597) (597)
------- ------- ------- -------- -------- -------
Net increase in cash 4,088 4,088 4,088 2,233 2,233 2,233
Cash at beginning of period 3,892 3,892 3,892 5,560 5,560 5,560
------- ------- ------- -------- -------- --------
Cash at end of period $7,980 $7,980 $7,980 $7,793 $7,793 $7,793
SUPPLEMENTAL DISCLOSURES:
Cash paid (received)
during the year for:
Interest $27,608 $27,608 $27,608 $26,792 $26,792 $26,792
Income taxes $21 $21 $21 $144 $144 $144
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
ICON Fitness Corp. and its wholly owned subsidiary,
IHF Holdings, Inc. and its wholly owned subsidiary,
ICON Health & Fitness, Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Basis of Presentation
The consolidated condensed financial statements include the accounts of ICON
Fitness Corporation ("ICON Fitness"), its wholly-owned subsidiary, IHF Holdings,
Inc. ("IHF Holdings"), and its wholly-owned subsidiary, ICON Health & Fitness,
Inc. ("ICON Health"), and its wholly-owned subsidiaries (collectively, the
Company). ICON Fitness' parent company, IHF Capital, Inc. ("IHF Capital"), is
not a registrant.
The accompanying consolidated condensed financial statements and notes should be
read in conjunction with the financial statements contained in the Company's
Annual Report on Form 10-K. In management's opinion, the accompanying
consolidated condensed financial statements include all adjustments necessary
for a fair presentation of the results of the interim periods presented, and all
such adjustments are of a normal recurring nature. The home fitness industry is
seasonal in nature and the results of operations for the interim periods
presented may not be indicative of the results for the full year.
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies at the date of the consolidated financial
statements, and the reported amount of revenues and expenses during the period.
Actual results could differ from those estimates.
In June 1997, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (SFAS 130) and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131). The Company adopted SFAS 130 and 131 on June 1, 1998. SFAS 130 establishes
standards for reporting comprehensive income and its components in the
consolidated condensed financial statements. SFAS 131 establishes standards for
reporting information on operating segments and will first be applicable to the
May 31, 1999 year end consolidated financial statements.
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This quarterly Report on Form 10Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. For this purpose, any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes", "anticipates", "plans", "expects", "intends" and similar expressions
are intended to identify forward-looking statements. The Company's actual
results could differ materially from those set forth in the forward-looking
statements and are subject to a number of risks, including risks identified in
this quarterly report and the Company's annual report on Form 10-K. See "Recent
Developments" and "Liquidity and Capital Resources."
<PAGE>
Recent Developments
Debt Restructuring
The Company has engaged an investment banker and special legal counsel and is
currently pursuing a restructuring of its debt with holders of its notes and is
also actively pursuing additional equity and debt financing arrangements in
support of such a restructuring. These discussions are continuing. While the
Company believes that agreements with respect to the restructuring and
additional equity and debt financing can be reached by the end of the current
fiscal year, there can be no assurance that any such restructuring will be
achieved or such financing secured. The Company's ability to meet its
obligations as they become due will be dependent on a restructuring.
Notwithstanding these circumstances and the ultimate uncertainty surrounding the
nature of any restructuring, these financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. These financial
statements do not include any adjustments relating to the recoverability and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
NordicTrack Transaction
On December 23, 1998, the Company bought inventory, trademarks and certain other
assets of NordicTrack, Inc., a debtor under Chapter 11 of the Bankruptcy Code.
The terms of the purchase provided for payment of (i) $6,050,000 in cash at and
after closing, subject to adjustment based on the quantity and quality of
inventory delivered, (ii) $3,500,000 payable 60 days after closing, and (iii) up
to $3,000,000 payable over time as royalties based upon the sale of goods
bearing trademarks of NordicTrack, Inc., and other trademark related revenues as
follows: 2.0% of the first $50,000,000 of revenues, 1.0% of the next
$100,000,000 of revenues, and 0.5% of the next $200,000,000 of revenues. The
Company has paid $9.7 million to date as required by the terms of the purchase
contract. In a related transaction, the Company obtained leases of 18
NordicTrack retail store locations for no additional consideration other than
the assumption of liabilities related to the leases for those locations.
In connection with the NordicTrack transaction, the Company and Sears Roebuck &
Co. executed a license agreement that allows Sears to be the exclusive retailer
of NordicTrack branded fitness equipment outside of the Company's own retail and
direct marketing channels of distribution. In addition, under the agreement, the
Company granted Sears a royalty-bearing exclusive license to market fitness
apparel and certain categories of sporting goods under the NordicTrack brand.
The agreement will run for a term of twelve (12) years subject to certain early
termination provisions in 2005. The Company received a non-refundable, one-time
fee of $1.2 million for the rights granted to Sears under the agreement.
Subsequent Event
On April 2, 1999, a lawsuit, in which the Company was a party, was settled. The
terms of the settlement require the Company to pay $1.0 million to a third party
for breach of contract. The Company had $0.5 million accrued at February 27,
1999 associated with this claim and accrued the remaining $0.5 million in the
month ended March 27, 1999.
<PAGE>
Year 2000 Compliance
The Company utilizes and is dependent upon data processing systems and software
to conduct its business. The data processing systems and software include those
developed and maintained by the Company's third-party data processing vendors
and software which is run on in-house computer systems. The Company has reviewed
and assessed all hardware and software to confirm that it will function properly
in the Year 2000. With respect to internal systems, the results of the
evaluation to date have not revealed any Year 2000 issues that, in the Company's
opinion, create a material risk or disruption of operations. The total cost
associated with required modifications to become Year 2000 compliant is not
expected to be material to the Company's financial position. The estimated total
cost of the Year 2000 Project is $2.5 million. The total amount expended on the
Project through February 27, 1999, was $1.8 million, which leaves the estimated
future cost of completing the Year 2000 Project at approximately $0.7 million.
The entire project is expected to be complete by the Company's fiscal fourth
quarter of 1999.
With respect to outside vendors, shippers and customers that have responded to
our request for information, 24.8% have indicated that their hardware or
software is Year 2000. Evaluation of these issues is continuing and there can be
no assurance that additional issues, not presently known to the Company, will
not be discovered which could present a material risk of disruption to the
Company's operations.
The Company's assessment of the risks associated with Year 2000 issues is
forward-looking. Actual results may vary for a variety of reasons including
those described above.
Seasonality
Financial results for the fitness industry are generally seasonal. Based on the
Company's historical experience, the Company would expect greater sales in the
second and third quarters than in the fourth and first quarters. The actual
results could differ materially depending upon consumer preferences,
availability of product, competition, and the Company's customers continuing to
carry and promote its various product lines, among other risks and
uncertainties. The following table reflects the Company's consolidated net sales
for the first, second and third quarters of fiscal 1999 and for each quarter in
fiscal 1998 and 1997:
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Fiscal 1999 $117.2 $214.3 $226.7 ---
Fiscal 1998 $127.5 $236.3 $252.0 $133.5
Fiscal 1997 $125.8 $249.5 $248.7 $212.2
The Company believes that the relatively moderate rates of inflation in recent
years have not had a significant impact on its net sales or profitability.
Three Months Ended February 27, 1999 Compared to Three months ended February 28,
1998
Net sales decreased $25.3 million, or 10.0%, between the three months ended
February 27, 1999 and February 28, 1998. Domestic sales of treadmills decreased
to $143.8 million for the three months ended February 27, 1999 from $174.7
million for the three months ended February 28, 1998, a 17.7% decrease. Sales of
domestic treadmills represented 63.4% and 69.3% in the three months ended
February 27, 1999 and February 28, 1998, respectively. Other decreases include
<PAGE>
a decline in elliptical product sales of $6.2 million. The sale of stationary
bikes increased $4.5 million, benches increased $3.2 million, softgoods
increased $3.1 million and home spas and other relaxation product sales
increased $1.0 million during the third quarter of fiscal 1999 when compared to
the third quarter of fiscal 1998. The decline in domestic treadmill sales is
attributable to a softening demand in the market as well as a major customer
that filed for bankruptcy during the quarter.
Gross profit decreased by $11.6 million, or 15.4%, to $63.9 million for the
three months ended February 27, 1999 from $75.5 million for the three months
ended February 28, 1998 and decreased as a percentage of net sales to 28.2% from
30.0%. This decrease of 1.8% was largely due to the decline in net sales and
changes in product mix.
Selling expenses totaled $32.3 million, or 14.3% of net sales in the third
quarter of fiscal 1999, compared to $37.1 million, or 14.7% of net sales for the
third quarter of fiscal 1998. This decrease is attributable primarily to a
reduction in advertising expenses that have decreased by approximately $4.6
million for the third quarter of fiscal 1999, versus the third quarter of fiscal
1998. Other selling expense decreases included a reduction in salaries and wages
of approximately $0.8 million, commission expense of approximately $0.8 million,
freight expense of $0.5 million, and approximately a $0.3 million reduction in
trade show and other related expenses when compared with the third quarter of
fiscal 1998. The above decreased expenses were offset by an increase in bad debt
expense of $2.2 million due mainly to the Service Merchandise bankruptcy filing.
Research and development expenses totaled $2.0 million, or 0.9% of net sales for
the third quarter of fiscal 1999, compared to $2.0 million, or 0.8% of net sales
for the third quarter of fiscal 1998.
General and administrative expenses totaled $13.6 million, or 6.0% of net sales
for the third quarter of fiscal 1999, compared to $15.0 million, or 5.9% of net
sales for the third quarter of fiscal 1998. This decrease of approximately $1.4
million in general and administrative expenses for the third quarter of fiscal
1999, is attributable to a decrease in legal expense and insurance claims of
$0.7 million, salaries, wages and bonuses of $0.6 million, and aggregate other
expenses of approximately $0.6 million. These decreased expenses were offset by
an increase in depreciation expense of $0.5 million.
As a result of the foregoing factors, operating income was $16.0 million in the
third quarter of fiscal 1999, compared to operating income of $21.5 million in
the third quarter of fiscal 1998.
Interest expense was $8.6 million for ICON Health, $12.3 million for IHF
Holdings and $15.8 million for ICON Fitness for the three months ended February
27, 1999, compared with interest expense of $9.6 million for ICON Health, $12.6
million for IHF Holdings and $15.7 million for ICON Fitness for the three months
ended February 28, 1998. The decrease in interest expense for ICON Health and
IHF Holdings was a result of decreased borrowings under the amended Credit
Agreement at the ICON Health operating level, offset by an increased level of
interest expense at the IHF Holdings level relative to accretion of the
outstanding principal balance of IHF Holdings indebtedness. The increased level
of interest expense for ICON Fitness is also due to the accretion of the
principal balances from their respective outstanding indebtedness.
Income tax expense was $1.8 million for ICON Health, $0.8 million for IHF
Holdings and a benefit of $0.3 million for ICON Fitness for the third quarter of
fiscal 1999, compared with a tax expense of $4.0 million for ICON
<PAGE>
Health, $2.9 million for IHF Holdings and $1.9 for ICON Fitness during the third
quarter of fiscal 1998. The decrease in tax expense for the third quarter of
fiscal 1999, compared to the third quarter of fiscal 1998, was a result of
decreased earnings for the Company.
As a result of the foregoing factors, net income was $4.0 million for ICON
Health, $0.9 million for IHF Holdings and a net loss of $1.6 million for ICON
Fitness for the third quarter of fiscal 1999, compared to net income in the
third quarter of fiscal 1998 of $6.7 million for ICON Health, $4.3 million for
IHF Holdings and $2.1 million for ICON Fitness.
Operating Results for the Nine Months Ended February 27, 1999 and February
28, 1998
During the first nine months of fiscal 1999, net sales decreased $57.6 million,
or 9.4%, to $558.2 million from $615.8 million in the first nine months of
fiscal 1998. Domestic treadmill sales for the first nine months of fiscal 1999
accounted for approximately 60.1% of total net sales, versus 62.5% in the first
nine months of fiscal 1998. For the first nine months of fiscal 1999, domestic
treadmill sales were $335.6 million compared to $385.0 million for the same
period a year ago, which represents a $49.4 million decrease. Other decreases
include a decline in the sale of airwalkers of $10.5 million, elliptical
products of $7.5 million, upright rowers of $3.7 million, miscellaneous and
other products of $4.6 million and international sales declines of $4.1 million.
The sale of stationary bikes increased $10.9 million, softgood sales increased
$4.3 million, home spas and other relaxation product sales increased $4.3
million, and trampoline sales increased $2.7 million during the first nine
months of fiscal 1999 compared to the first nine months of fiscal 1998.
Gross profit for the first nine months of fiscal 1999 was $156.4 million, or
28.0% of net sales, compared to $178.2 million, or 28.9% of net sales for the
first nine months of fiscal 1998. The decrease of 0.9% in profit margin was
attributable to the changes in product mix.
Selling expenses totaled $78.5 million, or 14.1% of net sales, in the first nine
months of fiscal 1999, compared to $97.3 million, or 15.8% of net sales for the
first nine months of fiscal 1998. This decrease, both in dollars and as a
percentage of sales, is attributable primarily to a reduction in advertising
expenses that have decreased by approximately $12.3 million for the first nine
months of fiscal 1999, versus the first nine months of fiscal 1998. Other
selling expense decreases include reductions in salaries and wages of
approximately $2.7 million, freight expense of approximately $1.8 million,
commission expense of $0.8 million, and trade show and other related expenses of
approximately a $4.2 million. Bad debt expense increased for the first nine
months of fiscal 1999 over fiscal 1998 by approximately $2.2 million or 56% due
mainly to the Service Merchandise bankruptcy filing.
Research and development expenses totaled $5.6 million, or 1.0% of net sales,
for the first nine months of fiscal 1999, compared to $6.0 million, or 1.0% of
net sales for the first nine months of fiscal 1998. This $0.4 million decrease
is attributable to management's efforts to reduce costs in the current year,
consisting mainly of contract labor and supplies associated with research and
development.
General and administrative expenses totaled $40.0 million, or 7.2% of net sales,
for the first nine months of fiscal 1999, compared to $45.3 million, or 7.4% of
net sales for the first nine months of fiscal 1998. This decrease of
approximately $5.3 million in general and administrative expenses for the first
nine months of fiscal 1999, was attributable to a decrease in insurance claims
and legal expenses of $3.4 million, salaries
<PAGE>
and wages of $0.6 million, management fees of approximately $0.4 million, and
aggregate other expenses of approximately $2.6 million. These decreased expenses
were offset by an increase in bonus expense of $0.5 million and depreciation and
amortization expense of $1.2 million.
As a result of the foregoing factors, operating income was $32.4 million in the
first nine months of fiscal 1999, compared to operating income of $29.6 million
in the first nine months of fiscal 1998. The higher operating income was a
result of reduced costs and expenses, primarily advertising, freight and
insurance claims and legal costs.
Interest expense was $24.6 million for ICON Health, $35.6 million for IHF
Holdings and $46.0 million for ICON Fitness in the first nine months of fiscal
1999, compared to $26.7 million for ICON Health, $35.9 million for IHF Holdings
and $45.0 million for ICON Fitness for the first nine months of fiscal 1998. The
decrease in interest expense for the operating company and IHF Holdings was due
to a lower level of outstanding indebtedness in fiscal 1999 as a result of
decreased borrowings under the amended Credit Agreement, partially offset in the
case of IHF Holdings by the accretion of the principal balance of its
outstanding indebtedness. However, in ICON Fitness, there is an additional level
of borrowings with respect to accretion of the principal balances of the
Company's outstanding indebtedness.
Income tax expense was $1.1 million for ICON Health, a benefit of $2.4 million
for IHF Holdings and a benefit of $6.0 million for ICON Fitness for the first
nine months of fiscal 1999, compared with a tax benefit of $0.1 million for ICON
Health, $3.2 million for IHF Holdings and $6.5 for ICON Fitness during the first
nine months of fiscal 1998. The decrease in tax benefit for the first nine
months of fiscal 1999, compared to the first nine months of fiscal 1998, was a
result of decreased losses before taxes incurred by the Company.
As a result of the foregoing factors, net profits were $2.2 million for ICON
Health, net losses were $6.6 million for IHF Holdings and $14.0 million for ICON
Fitness for the first nine months of fiscal 1999, compared to net losses in the
first nine months of fiscal 1998 of $0.4 million for ICON Health, $7.6 million
for IHF Holdings and $14.0 million for ICON Fitness.
Liquidity and Capital Resources
The Company's liquidity consists of cash, trade accounts receivable,
inventories, and a revolving credit facility. At February 27, 1999, working
capital was a negative $2.7 million, with a balance of $8.0 million in cash.
Cash used in operating activities aggregated $32.4 million for the nine months
ended February 27, 1999. Trade accounts receivable increased 48.7% from May 31,
1998 to February 27, 1999, while inventory levels decreased 1.0% from May 31,
1998 to February 27, 1999, largely due to the normal seasonality of the
business. There can be no assurance that the Company will have the liquidity to
meet its obligations as they become due.
ICON Health had $198.6 million of revolving credit borrowings under the amended
Credit Agreement at February 27, 1999 compared to $206.6 million at February 28,
1998. The revolving credit borrowings have increased by $50.1 million from
$148.5 million reported at the end of fiscal 1998. Line of Credit borrowings
have been used to fund inventory levels, finance normal trade credit for
customers, make interest payments on debt obligations and to fund capital
expenditures. The long-term portion of the term loans have decreased from $19.5
million reported at the end of fiscal 1998 to $14.6 million at February 27,
1999. This decrease is a result of scheduled debt payments.
<PAGE>
As of April 17, 1999, the Company had outstanding, revolving credit borrowings
of $150.7 million and unused availability under its amended Credit Agreement of
$6.3 million. The Company's ability to meet short-term cash requirements is
based on continued collections of trade receivables and extension of credit from
both its banks and vendors. The amount of availability under the Company's
amended Credit Agreement is determined under the borrowing base formula,
which was amended as of July 31, 1998 and subsequently amended April 16,
1999, to increase temporarily the amount that could be borrowed by the
Company. After June 30, 1999, the Company will be able to borrow under the
Credit Agreement only the amounts that could be borrowed under the borrowing
base formula that was in effect prior to the July 31, 1998 amendment plus $5.0
million. The April 16, 1999 Amendment adjusted certain covenant compliance
issues for the third quarter ended February 27, 1999 and increased the amount of
unused availability for the Company based on an increased level of borrowings
associated with eligible inventories.
The Company is highly leveraged. The Company's need for advances under the
amended Credit Agreement is affected by a number of factors, including the
Company's operating performance, the Company's level of capital expenditures,
scheduled debt payments, and the willingness of the Company's suppliers to
extend credit to the Company. Many of these factors are beyond the Company's
control.
The revolving credit portion of the Company's amended Credit Agreement will be
due and payable on August 2, 1999. As a result, the revolving credit portion of
the amended Credit Agreement is now classified as a current liability, which has
resulted in a significant decrease in working capital when compared to the May
31, 1998 balance sheet. There can be no assurance that the Company will be able
to enter into arrangements to replace that borrowing facility.
The Company is required to pay $6.5 million of interest on ICON Health's 13%
Senior Subordinated Notes semiannually each January 15 and July 15, and will be
required to repay $101.25 million of principal on those notes on July 15, 2002.
In fiscal 1999, the Company will be required to pay $1.65 million of principal
under the term loan portion of its amended Credit Agreement each quarter on the
last day of March, June, September and December. The amount of such quarterly
principal payments will decrease to $1.56 million in fiscal 2000 and will
continue at that rate until the final payment of $5.6 million in December 2002.
Once repaid, borrowings under the Company's term loan cannot be borrowed again.
The first payment of cash interest on IHF Holdings' 15% Senior Secured Discount
Notes will be due May 15, 2000. Commencing on that date, the Company will be
required to pay $9.3 million of interest on those notes semiannually each May 15
and November 15. The Company will be required to pay $132.2 million of accreted
principal on those notes on November 15, 2004.
The first payment of cash interest on ICON Fitness' 14% Senior Discount Notes
will be due May 15, 2002. Commencing on that date, the Company will be required
to pay $11.3 million of interest on those notes semiannually each May 15 and
November 15. The Company will be required to pay $162.0 million of accreted
principal on those notes on November 15, 2007.
The Company will require substantial additional cash flow to meet these
obligations, and is, therefore, seeking to effect a restructuring of its
debt. See "Recent Developments-Possible Debt Restructuring."
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is party to a variety of non-product liability commercial suits
involving contract and intellectual property claims. The Company believes that
potential adverse resolution of these suits will not have a material adverse
effect on the Company. The Company is also involved in several patent
infringement claims, arising in the ordinary course of business. The Company
believes that the ultimate outcome of these matters will not have a material
adverse affect on the financial position or results of operations of the
Company.
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.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1C Amendment No. 13 to Amended and Restated Credit Agreement dated as of
April 16, 1999 among ICON Health & Fitness, Inc., the lenders named
therein, and General Electric Capital Corporation
10.1D Amendment No. 14 to Amended and Restated Credit Agreement dated as of
April 16, 1999 among ICON Health & Fitness, Inc., the lenders named
therein, and General Electric Capital Corporation
27.1 Financial Data Schedule for ICON Fitness Corporation.
27.2 Financial Data Schedule for IHF Holdings, Inc.
27.3 Financial Data Schedule for ICON Health & Fitness, Inc.
(b) Reports on Form 8-K
None.
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 of the
undersigned thereunto duly authorized.
ICON Fitness Corporation
IHF Holdings, Inc.
ICON Health & Fitness, Inc.
(Registrants)
<PAGE>
By: /s/ Gary Stevenson Date: April 19, 1999
- - ------------------------- --------------------
Gary Stevenson, President
By: /s/ S. Fred Beck Date: April 19, 1999
- - ------------------------------------- --------------------
S. Fred Beck, Chief Financial Officer
<PAGE>
WAIVER, CONSENT AND AMENDMENT NO. 13
TO
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
This WAIVER, CONSENT AND AMENDMENT NO. 13 TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment No. 13" or this "Amendment") is entered into as of
this 15th day of April, 1999, by and among ICON HEALTH & FITNESS, INC., a
Delaware corporation ("Borrower"), GENERAL ELECTRIC CAPITAL CORPORATION, a New
York corporation ("Agent"), for itself as a Lender and as Agent for Lenders, and
the other Lenders signatory hereto. Unless otherwise specified herein,
capitalized terms used in this Amendment shall have the meanings ascribed to
them in Schedule A to the Agreement (as hereinafter defined).
RECITALS
--------
WHEREAS, Borrower, Agent and Lenders have entered into that certain
Amended and Restated Credit Agreement, dated as of November 14, 1994, as amended
by that certain Amendment No. 1 to the Amended and Restated Credit Agreement,
dated as of September 8, 1995, that certain Amendment No. 2 to Amended and
Restated Credit Agreement, dated as of May 31, 1996, that certain Amendment No.
3 to Amended and Restated Credit Agreement, dated as of June 24, 1996, that
certain Amendment No. 4 to the Amended and Restated Credit Agreement, dated as
of July 12, 1996, that certain Amendment No. 5 to the Amended and Restated
Credit Agreement, dated as of August 14, 1996 ("Amendment 5"), that certain
Amendment No. 6 to the Amended and Restated Credit Agreement, dated as of August
23, 1996, that certain Consent and Amendment No. 7 to the Amended and Restated
Credit Agreement, dated as of November 12, 1996, that certain Waiver, Consent
and Amendment No. 8 to the Amended and Restated Credit Agreement, dated as of
March 17, 1997, that certain Waiver, Consent and Amendment No. 9 to Amended and
Restated Credit Agreement dated as of July 31, 1997, that certain Amendment No.
10 to Amended and Restated Credit Agreement dated as of August 28, 1997, that
certain Amendment No. 11 to Amended and Restated Credit Agreement dated as of
November 25, 1997 ("Amendment 11"), and that certain Waiver, Consent and
Amendment No. 12 to Amended and Restated Credit Agreement dated as of July 31,
1998 ("Amendment 12") (as further amended, supplemented, restated or otherwise
modified from time to time, the "Agreement"); and
WHEREAS, Borrower has requested that Agent and Lenders enter into
<PAGE>
certain amendments to the Agreement; and
WHEREAS, Agent and Requisite Lenders have agreed to enter into certain
amendments to the Agreement upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual execution hereof and other
good and valuable consideration, the parties hereto agree as follows:
Section
1. Amendment to Commitment Termination Date.
Clause (i) of the definition of Revolving Commitment Termination Date
contained in Schedule A to the Credit Agreement is amended to read in its
entirety as follows:
"(i) August 2, 1999"
The following clause (c) is added to Section 1.2 of the Agreement:
(c) Notwithstanding any provision herein contained to the contrary,
all of the Term Loan Obligations shall be due and payable in full on the
Revolving Commitment Termination Date.
Section 1. 0. 1. Amendments to Borrowing Base.
A. For the period of February 1, 1999 through June 30, 1999, Sections 1.7
and 1.8, of the Agreement shall be amended and restated to read in their
entirety as follows; provided that if the EBITDA criterion in clause B below is
met, the formulation set forth in this clause A shall remain in effect until the
Obligations are paid in full:
1.7 Eligible Accounts. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Agent and on other information available to
Agent, Agent shall in its reasonable credit judgment exercised in good faith
determine which Accounts of Borrower and its domestic Subsidiaries shall be
"Eligible Accounts" for purposes of this Agreement. In determining whether a
particular Account constitutes an Eligible Account, Agent shall not include any
such Account to which any of the exclusionary criteria set forth below applies.
Agent reserves the right, at any time and from time to time to adjust any such
criteria, to establish new criteria and to establish reserves with respect to
Eligible Accounts in its reasonable credit judgment exercised in good faith. In
no event shall the criteria set forth below be changed to make more credit
available. Eligible Accounts shall not include any Account of Borrower or its
domestic Subsidiaries:
(a) which does not arise from the sale of goods or the performance
of services by Borrower or a domestic Subsidiary of Borrower in the ordinary
course of its business;
(b) upon which (i) Borrower's or its applicable domestic
Subsidiary's right to receive payment is not absolute or is contingent upon the
fulfillment of any condition whatsoever or (ii) Borrower or the applicable
domestic Subsidiary of Borrower is not able to bring suit or otherwise enforce
its remedies against the Account Debtor through judicial process, or (iii) if
the Account represents a progress billing consisting of an invoice for goods
sold or used or services rendered pursuant to a contract under which the Account
Debtor's obligation to pay that invoice is subject to Borrower's or its domestic
Subsidiaries' completion of further performance under such contract or is
subject to the equitable lien of a surety bond issuer;
(c) to the extent that any defense, counterclaim, charge- back,
setoff or dispute is asserted as to, or applicable to, such Account;
<PAGE>
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor and payable in
Dollars;
(e) with respect to which an invoice, acceptable to Agent in form
and substance, has not been sent to the applicable Account Debtor;
(f) that (i) is not owned by Borrower or one of its domestic
Subsidiaries or (ii) is subject to any right, claim, security interest or other
interest of any other Person, other than Liens in favor of Agent, on behalf of
itself and Lenders which shall be first priority Liens;
(g) that arises from a sale to any director, officer, other employee
or Affiliate of Borrower or any of its domestic Subsidiaries;
(h) that is more than ninety (90) days past due; or (i) that is not
paid within one hundred twenty (120) days
following its original invoice date (or one hundred fifty (150) days following
its original invoice date in the case of Service Merchandise Company).
Without duplicating the criteria set forth in clauses (h) and
(i)above, there shall be deducted from the total amount of Eligible Accounts the
allowance for doubtful accounts attributable to current Accounts as determined
in accordance with GAAP.
1.8 Eligible Inventory. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Agent and on other information available to
Agent, Agent shall in its reasonable credit judgment exercised in good faith
determine which Inventory of Borrower and its domestic Subsidiaries shall be
"Eligible Inventory" for purposes of this Agreement. In determining whether any
particular Inventory constitutes Eligible Inventory, Agent shall not include any
such Inventory to which any of the exclusionary criteria set forth below
applies. Agent reserves the right, at any time and from time to time to adjust
any such criteria, to establish new criteria and to establish reserves with
respect to Eligible Inventory in its reasonable credit judgment exercised in
good faith, including without limitation reserves equal to the amount of any
Permitted Encumbrances that are senior to Agent's security interests in the
Eligible Inventory. In no event shall the criteria set forth below be changed to
make more credit available. Eligible Inventory shall not include any Inventory
of Borrower or its domestic Subsidiaries that:
(a) is not owned by Borrower or one of its domestic Subsidiaries
free and clear of all Liens and rights of any other Person (including the rights
of a purchaser that has made progress payments and the rights of a surety that
has issued a bond to assure Borrower's or one of its domestic Subsidiaries'
performance with respect to that Inventory), except the Liens in favor of Agent,
on behalf of itself and Lenders, and Permitted Encumbrances of the type
identified in clauses (v) or (vi) of the definition of Permitted Encumbrances;
(b) is (i) not located on premises owned by Borrower or one of its
domestic Subsidiaries or (ii) is stored at leased premises or with a bailee,
warehouseman or similar Person, unless Agent has given its prior consent thereto
and unless (x) in each case, a satisfactory bailee letter or landlord waiver has
been delivered to Agent, or (y)reserves satisfactory to Agent have been
established with respect thereto;
(c) is covered by a negotiable document of title, unless such
document has been delivered to Agent with all necessary endorsements, free and
clear of all Liens except those in favor of Agent, on behalf of itself
<PAGE>
and Lenders;
(d) is Healthrider Inventory that is unsalable, shopworn, seconds,
damaged or unfit for sale as determined in accordance with GAAP; or
(e) as to which Agent's Lien, on behalf of itself and Lenders,
therein is not a first priority perfected Lien, subject only to
Permitted Encumbrances of the type referred to in Section 1.8(a).
B. Unless Borrower's consolidated EBITDA for the twelve months ending May
31, 1999 exceeds $65,000,000 and Borrower has delivered financial statements to
Agent and Lenders demonstrating the foregoing on or before June 30, 1999, then
from July 1, 1999 through the date on which the Obligations are paid in full,
Sections 1.7 and 1.8 of the Agreement shall be automatically amended and
restated to read in their entirety as follows:
1.7 Eligible Accounts. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Agent and on other information available to
Agent, Agent shall in its reasonable credit judgment exercised in good faith
determine which Accounts of Borrower and its domestic Subsidiaries shall be
"Eligible Accounts" for purposes of this Agreement. In determining whether a
particular Account constitutes an Eligible Account, Agent shall not include any
such Account to which any of the exclusionary criteria set forth below applies.
Agent reserves the right, at any time and from time to time to adjust any such
criteria, to establish new criteria and to establish reserves with respect to
Eligible Accounts in its reasonable credit judgment \exercised in good faith. In
no event shall the criteria set forth below be changed to make more credit
available. Eligible Accounts shall not include any Account of Borrower or its
domestic Subsidiaries:
C. which does not arise from the sale of goods or the
performance of services by Borrower or any of its domestic Subsidiaries
in the ordinary course of its business;
D. upon which (i) Borrower's or its domestic Subsidiary's right to
receive payment is not absolute or is contingent upon the fulfillment of any
condition whatsoever or (ii) Borrower or its domestic Subsidiaries are not able
to bring suit or otherwise enforce its remedies against the Account Debtor
through judicial process, or (iii) if the Account represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant to
a contract under which the Account Debtor's obligation to pay that invoice is
subject to Borrower's or its domestic Subsidiaries' completion of further
performance under such contract or is subject to the equitable lien of a surety
bond issuer;
E. to the extent that any defense, counterclaim, charge-
back, setoff or dispute is asserted as to, or applicable to, such Account;
F. that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor and payable in
Dollars;
G. with respect to which an invoice, acceptable to Agent in
form and substance, has not been sent to the applicable Account Debtor;
H. that (i) is not owned by Borrower or a domestic Subsidiary of
Borrower or (ii) is subject to any right, claim, security interest or other
interest of any other Person, other than Liens in favor of Agent, on behalf of
itself and Lenders;
<PAGE>
I. that arises from a sale to any director, officer, other
employee or Affiliate of Borrower or any of its domestic Subsidiaries;
J. that is the obligation of an Account Debtor that is the United
States government or a political subdivision thereof and is subject to the
Federal Assignment of Claims Act of 1940, unless Agent, in its sole discretion,
has agreed to the contrary in writing or the Borrower or the applicable domestic
Subsidiary of Borrower, if necessary or desirable, has complied with the Federal
Assignment of Claims Act of 1940, and any amendments thereto, with respect to
such obligation;
K. that is the obligation of an Account Debtor located in a foreign
country other than Canada (excluding the Maritime Provinces of Canada) unless
(I) supported by a letter of credit in form and substance and issued by a
financial institution reasonably acceptable to Agent that is pledged, endorsed
and delivered to Agent or (II) such Account Debtor and the jurisdiction where
such Account Debtor resides are each acceptable to Agent in its sole and
absolute discretion;
L. that is the obligation of an Account Debtor to whom Borrower or
the applicable domestic Subsidiary is liable for goods sold or services rendered
by the Account Debtor to Borrower; provided, however, that only the portion of
the Account equal to the amount owed to such Account Debtor shall be ineligible;
M. that arises with respect to goods which are delivered on a
cash-on-delivery basis or placed on consignment, guaranteed sale or other terms
by reason of which the payment by the Account Debtor is or may be conditional;
N. other than a consumer Account covered by clause (s), that is in
default; provided, further, that, without limiting the generality of the
foregoing, an Account shall be deemed in default upon the occurrence of any of
the following:
(i) the Account is not paid within sixty (60)days
past its due date;
(ii) if any Account Debtor obligated upon such
Account suspends business, makes a general assignment for the benefit of
creditors or fails to pay its debts generally as they come due; or
(iii) if any petition is filed by or against any
Account Debtor obligated upon such Account under any bankruptcy law or any other
federal, state or foreign (including any provincial) receivership, insolvency
relief or other law or laws for the relief of debtors; provided, however, that
Accounts of Account Debtors with annual revenues in excess of $500,000,000 that
arise while such Account Debtors are operating under Chapter 11 of Title 11 of
the United States Code (but not Accounts arising prior thereto) shall not be
deemed to be in default unless such Accounts are not paid within forty-five (45)
days past the original invoice date.
O. which is the obligation of an Account Debtor that is in default
(as defined in subparagraph (l)(i) above) on fifty percent(50%) or more of the
dollar amount of Accounts upon which such Account Debtor is obligated;
P. other than a consumer Account covered by clause (s), which
Account is by its original terms due more than one hundred twenty (120) days
from its original invoice date (or one hundred fifty (150) days following its
original invoice date in the case of Service Merchandise Company);
<PAGE>
Q. which arises from any bill-and-hold or other sale of goods which
remain in Borrower's or any of its domestic Subsidiaries' possession or under
Borrower's or any of its domestic Subsidiaries' control;
R. as to which Agent's interest, on behalf of itself and
other Lenders, is not a first priority perfected security interest;
S. as to which any of the representations or warranties
pertaining to Accounts set forth in this Agreement or any of the other Loan
Documents is untrue in any material respect;
T. to the extent such Account exceeds any credit limit for
such Account Debtor established by Agent, in its reasonable discretion
upon reasonable prior notice to Borrower;
U. which are consumer Accounts in excess of $50,000,000 in
the aggregate, or to the extent two or more payments on any such Account
remain unpaid for longer than thirty (30) days; or
V. to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper.
1.8 Eligible Inventory. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Agent and on other information available to
Agent, Agent shall in its reasonable credit judgment exercised in good faith
determine which Inventory of Borrower and its domestic Subsidiaries shall be
"Eligible Inventory" for purposes of this Agreement. In determining whether any
particular Inventory constitutes Eligible Inventory, Agent shall not include any
such Inventory to which any of the exclusionary criteria set forth below
applies. Agent reserves the right, at any time and from time to time to adjust
any such criteria, to establish new criteria and to establish reserves with
respect to Eligible Inventory in its reasonable credit judgment exercised in
good faith, including without limitation reserves equal to the amount of any
Permitted Encumbrances that are senior to Agent's security interests in the
Eligible Inventory. In no event shall the criteria set forth below be changed to
make more credit available. Eligible Inventory shall not include any Inventory
of Borrower or any domestic Subsidiary of Borrower that:
(a) is not owned by Borrower or a domestic Subsidiary of Borrower
free and clear of all Liens and rights of any other person, except the Liens in
favor of Agent, on behalf of itself and Lenders, and encumbrances set forth in
clause (v) or (vi) of the definition of Permitted Encumbrances;
(b) (i) is not located on premises owned by Borrower or one of its
domestic Subsidiaries or (ii) is stored at leased premises or with a bailee,
warehouseman or similar Person, unless (x) in each case, a satisfactory bailee
letter or landlord waiver has been delivered to Agent, or (y) reserves
satisfactory to Agent have been established with
respect thereto;
(c) is covered by a negotiable document of title, unless such
document has been delivered to Agent;
(d) in Agent's reasonable opinion, is obsolete, unsalable, shopworn,
seconds, damaged or unfit for sale;
(e) consists of display items or packing or shipping materials,
work-in-progress Inventory or replacement parts for production equipment;
<PAGE>
(f) consists of discontinued or slow-moving items or finished
goods of substandard quality;
(g) is placed by Borrower or one of its domestic Subsidiaries
on consignment;
(h) is not of a type held for sale in the ordinary course of
Borrower's or one of its domestic Subsidiaries' business;
(i) as to which Agent's interest, on behalf of itself and Lenders,
therein is not a first priority perfected security interest;
(j) as to which any of the representations or warranties pertaining
to Inventory set forth in the Agreement or any of the other Loan Documents is
untrue in any material respect; or
(k) is Inventory in transit;
provided, however, the amount of Eligible Inventory shall be reduced
by the amount of, without limitation, any freight-in charges which Agent
reasonably determines are otherwise included in Eligible Inventory, and provided
further, that inventory that is not owned by Borrower or one of its domestic
Subsidiaries or in which the Agent does not have a first and prior perfected
security interest (subject only to Permitted Encumbrances of the type referred
to in Section 1.8(a)) shall not be deemed to be Inventory or Eligible Inventory
for any purpose.
W. For purposes of determining the Borrowing Base pursuant to each of
clauses A and B above, to the extent that payment of an Account has been
received in Borrower's or its domestic Subsidiary's Lock Box, such Account shall
cease to be an Eligible Account, regardless of whether or when the proceeds of
that Account are transferred to Agent.
Section
1. Amendments to Financial Covenants (Schedule I). Clauses (c) and (d) of
Schedule I are hereby amended to read in their entirety effective as of February
28, 1999 as set forth in Schedule I attached hereto.
Section 1. 0. 1. Delivery of May Financial Statements.
Notwithstanding any provision of the Agreement to the contrary, Borrower
shall deliver to Agent and Lenders the financial statements required by
clause (b) of Schedule G to the Credit Agreement for the Fiscal Quarter
ending May 31, 1999, on or prior to June 30, 1999, and the failure to do so
shall constitute an immediate Event of Default not subject to any cure
period.
Section 1. 0. 2. Waiver and Release. Borrower hereby waives and
releases any and all claims it may have against Agent and each Lender
arising under, or in connection with, the Agreement, any of the other Loan
Documents or any transactions in connection therewith.
Section 1. 2. 3. Representations And Warranties Of Borrower.
Borrower represents and warrants that:
A. the execution, delivery and performance by Borrower of this Amendment
has been duly authorized by all necessary corporate action and this Amendment is
a legal, valid and binding obligation of Borrower enforceable against Borrower
in accordance with its terms, except as the enforcement thereof may be subject
to (i) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally and (ii) general
principles of equity
<PAGE>
(regardless of whether such enforcement is sought in a proceeding in equity
or at law);
B. each of the representations and warranties contained in the Agreement
is true and correct in all material respects on and as of the date hereof as if
made on the date hereof, except to the extent that such representations and
warranties expressly relate to an earlier date;
C. neither the execution, delivery and performance of this Amendment nor
the consummation of the transactions contemplated hereby does or shall
contravene, result in a breach of, or violate (i) any provision of Borrower's
certificate or articles of incorporation or bylaws, (ii) any law or regulation,
or any order or decree of any court or government instrumentality, or (iii) any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Ultimate Holdings, Intermediate Holdings, Holdings, Borrower or any of its
Subsidiaries is a party or by which any of their property is bound; and
D. after giving effect to this Amendment, no Default or Event of Default
shall have occurred and be continuing under the Agreement.
Section
1. Conditions To Effectiveness. This Amendment shall be effective upon
satisfaction of the following conditions precedent:
A. Execution and delivery of this Amendment by Requisite Lenders
and Borrower.
B. The representations and warranties contained herein shall be true and
correct in all respects.
C. Delivery to Agent of a duly executed opinion of in-house counsel to
Borrower, in form and substance satisfactory to Agent and its counsel, opining
as to the due authorization, execution and delivery of this Amendment and the
absence of any conflict between this Amendment and any other agreements or
obligations of Ultimate Holdings, Intermediate Holdings, Holdings or Borrower.
D. Delivery to Agent of a duly executed opinion of outside counsel to
Borrower, in form and substance satisfactory to Agent and its counsel, opining
as to the absence of any conflict between this Amendment and any other
agreements of Ultimate Holdings, Intermediate Holdings, Holdings or Borrower
relating to the Zero Coupon Notes, the Senior Notes, or other Indebtedness.
E. Execution and delivery to Agent of a Reaffirmation of Guaranty by ICON
International Holdings, Inc., JumpKing, Inc., and Universal
Technical Services, Inc.
Section
1. Success Fee. Borrower shall pay to Agent for the benefit of all Lenders a
success fee in the amount of $411,830.22. Such fee shall be due and payable on
the earlier to occur of the date on which the Obligations are paid in full or
the Revolving Loan Commitment Termination Date and shall be paid to the Persons
that are Lenders as of the date hereof (or their successors and assigns) in
accordance with their Pro Rata Shares as of the date hereof. Such fee is in
addition to the success fee set forth in Section 21 of Amendment 12.
<PAGE>
Section 1. 0. 1. Additional Reporting. On the first Tuesday
following the date hereof and on the corresponding Tuesday of each month
thereafter during normal business hours, Borrower's senior management will
schedule and participate in conference calls with Agent and Lenders to
discuss with Agent and Lenders (i) Borrower's progress toward completing the
recapitalization contemplated by the lock-up letter attached hereto as
Exhibit A and (ii) Borrower's current operating performance.
Section 1. 0. 2. Reference To And Effect Upon The Agreement.
A. Except as specifically amended above, the Agreement and the other Loan
Documents shall remain in full force and effect and are hereby ratified and
confirmed.
B. The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Agent or any Lender under
the Agreement or any Loan Document, nor constitute a waiver of any provision of
the Agreement or any Loan Document, except as specifically set forth herein.
Upon the effectiveness of this Amendment, each reference in the Agreement to
"this Agreement", "hereunder", "hereof", "herein" or words of similar import
shall mean and be a reference to the Agreement as amended hereby.
Section
1. Costs And Expenses. As provided in Section 11.3 of the Agreement, Borrower
agrees to reimburse Agent for all fees, costs and expenses, including the
reasonable fees, costs and expenses of counsel or other advisors for advice,
assistance, or other representation in connection with this Amendment.
Section 1. 0. 1. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS
OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.
Section 1. 0. 2. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purposes.
Section 1. 0. 3. Counterparts. This Amendment may be executed in
any number of counterparts, each of which when so executed shall be deemed
an original, but all such counterparts shall constitute one and the same
instrument.
(signature page follows)
<PAGE>
IN WITNESS WHEREOF, the parties hereto hereupon set their hands as of the
date first written above.
ICON HEALTH & FITNESS, INC.
By:
Title:
Revolving Credit Loan GENERAL ELECTRIC CAPITAL CORPORATION,
Commitment: $177,500,000, as Agent and Original Lender
(including a Supplemental
Credit Loan Commitment By:
of $2,500,000)
Term Loan A: $1,117,340.88 Title:
Revolving Credit Loan PILGRIM AMERICA PRIME RATE TRUST
Commitment: $0,
Term Loan B: $15,551,874.33 By:
Title:
Revolving Credit Loan THE FIRST NATIONAL BANK OF CHICAGO
Commitment: $23,500,000, (assignee of NBD Bank)
Term Loan A: $335,285.55
By:
Title:
Revolving Credit Loan BANKBOSTON, N.A.
Commitment: $18,000,000,
Term Loan A: $223,393.29
By:
Title:
Revolving Credit Loan NATIONSBANK OF TEXAS, N.A.
Commitment: $17,500,000,
By:
Title:
Revolving Credit Loan ZIONS FIRST NATIONAL BANK
Commitment: $9,000,000,
Term Loan A: $223,393.29
By:
Title:
Revolving Credit Loan THE CIT GROUP/BUSINESS CREDIT, INC.
Commitment: $15,500,000,
Term Loan A: $223,393.29
By:
<PAGE>
Title:
Revolving Credit Loan UNION BANK
Commitment: $13,000,000,
Term Loan A: $335,285.55
By:
Title:
Revolving Credit Loan CITICORP USA, INC.
Commitment: $29,250,000,
(including a Supplemental
Credit Loan Commitment By:
of $2,500,000)
Term Loan A: $1,286,369.76 Title:
Revolving Credit Loan THE PROVIDENT BANK
Commitment: $6,750,000,
Term Loan A: $167,838.39
By:
Title:
Revolving Credit Commitment (including
$5,000,000 Supplemental Credit Loan
Commitment): $310,000,000.00
Term Loans: $ 19,464,174.33
---------------
Total $329,464,174.33
<PAGE>
SCHEDULE I
(c) Minimum Interest Coverage Ratio. Borrower and its Subsidiaries on a
consolidated basis shall have at the end of each Fiscal Quarter set forth below,
a ratio of (i) EBITDA (excluding deferred management fees payable to Bain
Capital, Inc.) to (ii) Interest Charges for the 12-month period then ended of
not less than the following:
1.35 for the Fiscal Quarter ending February 28, 1999; and 1.70 for
the Fiscal Quarter ending May 31, 1999 and each
Fiscal Quarter ending thereafter.
(d) Minimum Debt Service Coverage Ratio. Borrower and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter, a ratio of
(i) EBITDA (excluding deferred management fees payable to Bain Capital, Inc.) to
(ii) Debt Service, in each case, for the 12-month period then ended of not less
than the following:
1.15 for the Fiscal Quarter ending February 28, 1999; and 1.30 for
the Fiscal Quarter ending May 31, 1999 and each
Fiscal Quarter ending thereafter.
<PAGE>
EXHIBIT A
Form of Lock-Up Letter
AMENDMENT NO. 14
TO
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDMENT NO. 14 TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment No. 14" or this "Amendment") is entered into as of this 16th day of
April, 1999, by and among ICON HEALTH & FITNESS, INC., a Delaware corporation
("Borrower"), GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
("Agent"), for itself as a Lender and as Agent for Lenders, and the other
Lenders signatory hereto. Unless otherwise specified herein, capitalized terms
used in this Amendment shall have the meanings ascribed to them in Schedule A to
the Agreement (as hereinafter defined).
RECITALS
WHEREAS, Borrower, Agent and Lenders have entered into that certain
Amended and Restated Credit Agreement, dated as of November 14, 1994, as amended
by that certain Amendment No. 1 to the Amended and Restated Credit Agreement,
dated as of September 8, 1995, that certain Amendment No. 2 to Amended and
Restated Credit Agreement, dated as of May 31, 1996, that certain Amendment No.
3 to Amended and Restated Credit Agreement, dated as of June 24, 1996, that
certain Amendment No. 4 to the Amended and Restated Credit Agreement, dated as
of July 12, 1996, that certain Amendment No. 5 to the Amended and Restated
Credit Agreement, dated as of August 14, 1996 ("Amendment 5"), that certain
Amendment No. 6 to the Amended and Restated Credit Agreement, dated as of August
23, 1996, that certain Consent and Amendment No. 7 to the Amended and Restated
Credit Agreement, dated as of November 12, 1996, that certain Waiver, Consent
and Amendment No. 8 to the Amended and Restated Credit Agreement, dated as of
March 17, 1997, that certain Waiver, Consent and Amendment No. 9 to Amended and
Restated Credit Agreement dated as of July 31, 1997, that certain Amendment No.
10 to Amended and Restated Credit Agreement dated as of August 28, 1997, that
certain Amendment No. 11 to Amended and Restated Credit Agreement dated as of
November 25, 1997 ("Amendment 11"), that certain Waiver, Consent and Amendment
No. 12 to Amended and Restated Credit Agreement dated as of July 31, 1998
("Amendment 12"), and that certain Waiver , Consent and Amendment No. 13 to
Amended and Restated Credit Agreement dated as of April 15, 1999 ("Amendment
13") (as further amended, supplemented, restated or otherwise modified from time
to time, the "Agreement"); and
<PAGE>
WHEREAS, Borrower has requested that Agent and Lenders enter into
certain amendments to the Agreement; and
WHEREAS, Agent and Requisite Lenders have agreed to enter into certain
amendments to the Agreement upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual execution hereof and other
good and valuable consideration, the parties hereto agree as follows:
Section
1. 0 .
Amendment to Inventory Advance Rate. The commencement of the seasonal
over-advance provided for in clause (b)(i) of the definition of Borrowing Base
in Schedule A to the Credit Agreement shall be moved forward in time, in
increments, as follows: the basic advance rate of 60% shall be increased to 65%
upon delivery to the Agent of evidence that holders of at least 90% in principal
amount of the Senior Notes outstanding have executed and delivered to Borrower
"lock-up letters" conforming in all material respects to the form of lock-up
letter attached as Exhibit A to Amendment 13 on or prior to April 30, 1999, such
increase to continue so long as such lock-up letters remain in effect. The basic
advance rate shall be further increased from 65% to 70% upon delivery to Agent
on or prior to June 1, 1999 of a proposal letter from one or more recognized
financial institutions in form and substance reasonably satisfactory to Agent,
providing for financing sufficient to pay in full all of the Obligations prior
to August 2, 1999, such increase to continue so long as such lock-up letters and
such proposal letter remain in effect (as determined by Agent). Notwithstanding
the foregoing, the aggregate, incremental Borrowing Availability resulting from
such increases in the inventory advance rate shall not exceed $8,000,000 at any
time and (ii) the aggregate Revolving Credit Advances and Letter of Credit
Obligations outstanding at any time shall not exceed that amount permitted under
the indentures governing the Senior Notes, Intermediate Holdings Zero Coupon
Notes and Zero Coupon Notes.
Section 1. 0. 1. Waiver and Release. Borrower hereby waives and
releases any and all claims it may have against Agent and each Lender
arising under, or in connection with, the Agreement, any of the other Loan
Documents or any transactions in connection therewith.
Section 1. 0. 2. Representations And Warranties Of Borrower.
Borrower represents and warrants that:
A. the execution, delivery and performance by Borrower of this Amendment
has been duly authorized by all necessary corporate action and this Amendment is
a legal, valid and binding obligation of Borrower enforceable against Borrower
in accordance with its terms, except as the enforcement thereof may be subject
to (i) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law);
B. each of the representations and warranties contained in the Agreement
is true and correct in all material respects on and as of the date hereof as if
made on the date hereof, except to the extent that such representations and
warranties expressly relate to an earlier date;
C. neither the execution, delivery and performance of this Amendment nor
the consummation of the transactions contemplated hereby does or shall
contravene, result in a breach of, or violate (i) any provision of Borrower's
certificate or articles of incorporation or bylaws, (ii) any law or regulation,
or any order or decree of any court or government instrumentality, or (iii) any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Ultimate Holdings, Intermediate Holdings, Holdings, Borrower or any of its
Subsidiaries is a party or by which any of their property is bound; and
<PAGE>
D. after giving effect to this Amendment, no Default or Event of Default
shall have occurred and be continuing under the Agreement.
Section
1. Conditions To Effectiveness. This Amendment shall be effective upon
satisfaction of the following conditions precedent:
A. Execution and delivery of this Amendment by Requisite Lenders
and Borrower.
B. The representations and warranties contained herein shall be true and
correct in all respects.
C. Delivery to Agent of a duly executed opinion of in-house counsel to
Borrower, in form and substance satisfactory to Agent and its counsel, opining
as to the due authorization, execution and delivery of this Amendment and the
absence of any conflict between this Amendment and any other agreements or
obligations of Ultimate Holdings, Intermediate Holdings, Holdings or Borrower.
D. Delivery to Agent of a duly executed opinion of outside counsel to
Borrower, in form and substance satisfactory to Agent and its counsel, opining
as to the absence of any conflict between this Amendment and any other
agreements of Ultimate Holdings, Intermediate Holdings, Holdings or Borrower
relating to the Zero Coupon Notes, the Senior Notes, or other Indebtedness.
E. Execution and delivery to Agent of a Reaffirmation of Guaranty by ICON
International Holdings, Inc., JumpKing, Inc., and Universal
Technical Services, Inc.
Section
1. Success Fee. Borrower shall pay to Agent for the benefit of all Lenders a
success fee in the amount of $411,830.22. Such fee shall be due and payable on
the earlier to occur of the date on which the Obligations are paid in full or
the Revolving Loan Commitment Termination Date and shall be paid to the Persons
that are Lenders as of the date hereof (or their successors and assigns) in
accordance with their Pro Rata Shares as of the date hereof. Such fee is in
addition to the success fee set forth in Section 21 of Amendment 12 and the
success fee set forth in Section 8 of Amendment 13.
Section 1. 0. 1. Reference To And Effect Upon The Agreement.
A. Except as specifically amended above, the Agreement and the other Loan
Documents shall remain in full force and effect and are hereby ratified and
confirmed.
B. The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Agent or any Lender under
the Agreement or any Loan Document, nor constitute a waiver of any provision of
the Agreement or any Loan Document, except as specifically set forth herein.
Upon the effectiveness of this Amendment, each reference in the Agreement to
"this Agreement", "hereunder", "hereof", "herein" or words of similar import
shall mean and be a reference to the Agreement as amended hereby.
<PAGE>
Section
1. Costs And Expenses. As provided in Section 11.3 of the Agreement, Borrower
agrees to reimburse Agent for all fees, costs and expenses, including the
reasonable fees, costs and expenses of counsel or other advisors for advice,
assistance, or other representation in connection with this Amendment.
Section 1. 0. 1. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS
OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.
Section 1. 0. 2. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purposes.
Section 1. 0. 3. Counterparts. This Amendment may be executed in
any number of counterparts, each of which when so executed shall be deemed
an original, but all such counterparts shall constitute one and the same
instrument.
(signature page follows)
<PAGE>
IN WITNESS WHEREOF, the parties hereto hereupon set their hands as of the
date first written above.
ICON HEALTH & FITNESS, INC.
By:
Title:
Revolving Credit Loan GENERAL ELECTRIC CAPITAL CORPORATION,
Commitment: $177,500,000, as Agent and Original Lender
(including a Supplemental
Credit Loan Commitment By:
of $2,500,000)
Term Loan A: $1,117,340.88 Title:
Revolving Credit Loan PILGRIM AMERICA PRIME RATE TRUST
Commitment: $0,
Term Loan B: $15,551,874.33 By:
Title:
Revolving Credit Loan THE FIRST NATIONAL BANK OF CHICAGO
Commitment: $23,500,000, (assignee of NBD Bank)
Term Loan A: $335,285.55
By:
Title:
Revolving Credit Loan BANKBOSTON, N.A.
Commitment: $18,000,000,
Term Loan A: $223,393.29
By:
Title:
Revolving Credit Loan NATIONSBANK OF TEXAS, N.A.
Commitment: $17,500,000,
By:
Title:
Revolving Credit Loan ZIONS FIRST NATIONAL BANK
Commitment: $9,000,000,
Term Loan A: $223,393.29
By:
Title:
Revolving Credit Loan THE CIT GROUP/BUSINESS CREDIT, INC.
Commitment: $15,500,000,
Term Loan A: $223,393.29
By:
<PAGE>
Title:
Revolving Credit Loan UNION BANK
Commitment: $13,000,000,
Term Loan A: $335,285.55
By:
Title:
Revolving Credit Loan CITICORP USA, INC.
Commitment: $29,250,000,
(including a Supplemental
Credit Loan Commitment By:
of $2,500,000)
Term Loan A: $1,286,369.76 Title:
Revolving Credit Loan THE PROVIDENT BANK
Commitment: $6,750,000,
Term Loan A: $167,838.39
By:
Title:
Revolving Credit Commitment (including
$5,000,000 Supplemental Credit Loan
Commitment): $310,000,000.00
Term Loans: $ 19,464,174.33
---------------
Total $329,464,174.33
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
SCHEDULE 27.1
This schedule contains summary financial information extracted from the February
27, 1999 Financial Statements included in the Company's Form 10-Q and is
qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<CIK> 0001029294
<NAME> ICON Fitness Corporation
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> FEB-27-1999
<CASH> 7980
<SECURITIES> 0
<RECEIVABLES> 184868
<ALLOWANCES> (13083)
<INVENTORY> 120300
<CURRENT-ASSETS> 335403
<PP&E> 84883
<DEPRECIATION> 38231
<TOTAL-ASSETS> 463173
<CURRENT-LIABILITIES> 336782
<BONDS> 328615
0
0
<COMMON> 49702
<OTHER-SE> (251926)
<TOTAL-LIABILITY-AND-EQUITY> 463173
<SALES> 558236
<TOTAL-REVENUES> 558236
<CGS> 401790
<TOTAL-COSTS> 124036
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46036
<INCOME-PRETAX> (19997)
<INCOME-TAX> (5985)
<INCOME-CONTINUING> (140291)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14012)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
SCHEDULE 27.2
This schedule contains summary financial information extracted from the February
27, 1999 Financial Statements included in the Company's Form 10-Q and is
qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<CIK> 0000934799
<NAME> IHF Holdings Inc
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> FEB-27-1999
<CASH> 7980
<SECURITIES> 0
<RECEIVABLES> 184868
<ALLOWANCES> (13083)
<INVENTORY> 120300
<CURRENT-ASSETS> 335403
<PP&E> 84883
<DEPRECIATION> 38231
<TOTAL-ASSETS> 450397
<CURRENT-LIABILITIES> 336782
<BONDS> 217878
0
0
<COMMON> 127770
<OTHER-SE> (232033)
<TOTAL-LIABILITY-AND-EQUITY> 450397
<SALES> 558236
<TOTAL-REVENUES> 558236
<CGS> 401790
<TOTAL-COSTS> 124036
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35593
<INCOME-PRETAX> (8966)
<INCOME-TAX> (2400)
<INCOME-CONTINUING> (6566)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6566)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
SCHEDULE 27.3
This schedule contains summary financial information extracted from the February
27, 1999 Financial Statements included in the Company's Form 10-Q and is
qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<CIK> 0000934798
<NAME> ICON Health & Fitness Inc
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1998
<PERIOD-END> FEB-27-1999
<CASH> 7980
<SECURITIES> 0
<RECEIVABLES> 184868
<ALLOWANCES> (13083)
<INVENTORY> 120300
<CURRENT-ASSETS> 335403
<PP&E> 84883
<DEPRECIATION> 38231
<TOTAL-ASSETS> 433215
<CURRENT-LIABILITIES> 336782
<BONDS> 114989
0
0
<COMMON> 166187
<OTHER-SE> (184743)
<TOTAL-LIABILITY-AND-EQUITY> 433215
<SALES> 558236
<TOTAL-REVENUES> 558236
<CGS> 401790
<TOTAL-COSTS> 124036
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24622
<INCOME-PRETAX> 3257
<INCOME-TAX> 1069
<INCOME-CONTINUING> 2188
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2188
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>