SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to __________.
Commission file number 1-13740
Borders Group, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 38-3196915
(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation or No.)
organization)
500 East Washington Street, Ann Arbor, Michigan 48104
(Address of principal executive offices)
(zip code)
(313) 913-1100
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes___X___ No_______
Title of Class Shares Outstanding As Of
Common Stock December 6, 1996
($.001 par value) 37,848,548
<PAGE>
BORDERS GROUP, INC.
INDEX
Part I - Financial Information
Page
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
Part II - Other Information
Item 1. Legal Proceedings N/A
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a vote of
Securityholders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 16
Signatures
<PAGE>
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions except per common share data)
(Unaudited)
13 Weeks Ended
October 27, October 22,
1996 1995
------- -------
Sales $ 413.5 $ 362.1
Cost of merchandise sold, including
occupancy costs 314.3 279.4
------ -------
Gross profit 99.2 82.7
Expenses, selling, general and administrative 100.0 89.1
Pre-opening expense 1.8 1.4
Goodwill amortization and write-down 0.3 0.6
Operating losses of stores identified
for closure (--) (0.4)
------- -------
Operating loss (2.9) (8.0)
Interest expense 1.8 1.8
------- -------
Loss before income tax (4.7) (9.8)
Income tax benefit (2.0) (3.8)
------- -------
Net loss $ (2.7) $ (6.0)
======== ========
Loss per common share data (Pro forma for 13 weeks ended October 22, 1995 - Note
2):
Loss per common share $ (0.06) $ (0.15)
======= ========
Weighted average common shares
outstanding (in thousands) 41,855 40,401
======= =======
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
<PAGE>
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions except per common share data)
(Unaudited)
39 Weeks Ended
October 27, October 22,
1996 1995
------- -------
Sales $ 1,231.8 $ 1,079.5
Cost of merchandise sold, including
occupancy costs 941.6 836.6
------ ------
Gross profit 290.2 242.9
Selling, general and administrative expenses 294.3 263.7
Pre-opening expense 3.8 3.3
Goodwill amortization and writedown 0.8 185.1
Operating losses of stores identified
for closure (--) (2.7)
----- -------
Operating loss (8.7) (206.5)
Interest expense 5.3 2.1
----- -------
Loss before income tax (14.0) (208.6)
Income tax benefit (5.6) (10.1)
----- -------
Net loss $ (8.4) $ (198.5)
====== =======
Loss per common share data (Pro forma for 39 weeks ended October 22, 1995 - Note
2):
Loss per common share $(0.20) $(4.66)
======= =======
Weighted average common shares
outstanding (in thousands) 41,515 42,556
======= =======
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
<PAGE>
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per common share data)
(Unaudited)
10/27/96 10/22/95 1/28/96
Assets
Current Assets
Cash $ 43.2 $ 41.5 $ 36.5
Merchandise inventories 869.8 736.8 637.5
Accounts receivable and other current assets 50.6 104.6 66.2
------- ------- -------
Total current assets 963.6 882.9 740.2
Property and equipment, net of accumulated
depreciation of $229.7,
$188.9 and $218.5, respectively 279.3 288.7 243.5
Other assets and deferred charges 38.7 16.2 29.0
Goodwill, net of accumulated amortization of
$41.2, $39.8, and
$40.4, respectively (Note 3) 38.8 74.4 39.6
------- ------- -------
$1,320.4 $1,262.2 $1,052.3
======= ======= =======
<PAGE>
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per common share data)
(Unaudited)
Liabilities and Stockholders' Equity 10/27/96 10/22/95 1/28/96
Current liabilities:
Short-term debt and capital lease
obligations due within one year $ 180.5 $ 195.2 $ 60.5
Trade accounts payable 498.8 381.7 304.8
Accrued payroll and other liabilities 133.4 124.8 157.0
Restructuring reserve 3.8 21.0 7.0
Taxes, including income taxes -- 7.7 13.6
------- ------- -------
Total Current Liabilities 816.5 730.4 542.9
Long-term debt and capital lease
obligations 6.5 8.7 8.1
Other long-term liabilities 25.6 46.6 29.3
Commitments and contingencies (Note 5) -- -- --
------- ------- -------
Total Liabilities 848.6 785.7 580.3
------- ------- -------
Stockholders' equity:
Preferred Stock, par value $.001 per
share; 10,000,000 shares authorized;
no shares issued and outstanding -- -- --
Common stock, par value $.001 per share;
200,000,000 shares authorized;
37,832,899, 37,510,314 and 37,658,992
issued and outstanding at
October 27, 1996, October 22, 1995, and
January 28, 1996, respectively -- -- --
Additional paid-in capital 674.8 659.8 669.2
Officers receivables and deferred
compensation (0.8) (2.1) (3.4)
Retained earnings (deficit) (202.2) (181.2) (193.8)
------- ------- -------
Total stockholders' equity 471.8 476.5 472.0
------- ------- -------
$1,320.4 $1,262.2 $1,052.3
======= ======= =======
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
<PAGE>
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE 39 WEEKS ENDED October 27, 1996
(Dollars in millions)
(Unaudited)
Officers
Rec. Add'l Retained
Common Stock Deferred Paid-in Earnings
Shares Amount Comp Capital (Deficit) Total
Balance at 1/28/96 37,658,992 $-- $ (3.4) $ 669.2 $ (193.8) $ 472.0
Net loss -- -- -- -- (8.4) (8.4)
Issuance of common
stock 173,907 -- -- 3.9 -- 3.9
Tax benefit of equity
compensation -- -- -- 1.7 -- 1.7
Payment of receivable
and deferred
compensation -- -- 2.6 -- -- 2.6
---------- --- ------- ------- -------- ------
Balance at 10/27/96 37,832,899 $-- $ (0.8) $ 674.8 $ 202.2 $471.8
========== === ======= ======= ======== ======
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
<PAGE>
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
39 Weeks Ended
October 27, October 22,
1996 1995
Cash provided by (used for):
Operations
Net loss $(8.4) $(198.5)
Adjustments to reconcile net loss
to operating cash flows:
Depreciation and goodwill amortization and
writedown 30.0 213.1
Other non-cash charges -- 9.5
Increase (decrease) in other long-term assets
and liabilities (12.8) 1.8
Cash provided by (used for) current assets
and current liabilities:
Increase in inventories (232.3) (209.3)
Decrease in restructuring reserve (2.1) (25.3)
(Increase)decrease in property held for
resale 15.4 (31.1)
Increase in accounts payable 194.0 110.5
Other, net (29.1) 10.6
------ ------
Net cash used for operations (45.3) (118.7)
------ ------
Investing
Capital expenditures (71.9) (89.9)
Proceeds from asset sale 2.0 ---
------ ------
Net cash used for investing (69.9) (89.9)
------ ------
Financing
Net funding from credit facility 120.0 195.0
Issuance of common stock 3.9 9.7
Repayment of long-term debt (2.0) (6.9)
Purchase of shares held by Kmart -- (72.7)
Repayment of Kmart intercompany borrowings -- (112.0)
------ ------
Net cash provided by financing 121.9 13.1
------ ------
Net increase (decrease) in cash 6.7 (195.5)
and equivalents
Cash and equivalents at beginning
of year 36.5 237.0
------ ------
Cash and equivalents at end of period $ 43.2 $ 41.5
====== ======
See accompanying Notes to Unaudited Condensed Consolidated
Financial Statements.
<PAGE>
BORDERS GROUP, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per common share data)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Borders Group, Inc. (the Company) have been prepared in accordance with Rule
10-01 of Regulation S-X and do not include all the information and notes
required by generally accepted accounting principles for complete financial
statements. All adjustments, consisting only of normal recurring adjustments,
have been made which, in the opinion of management, are necessary for a fair
presentation of the results of the interim periods. The results of operations
for such interim periods are not necessarily indicative of results of operations
for a full year. The unaudited condensed consolidated financial statements
should be read in conjunction with the Company's consolidated financial
statements and notes thereto for the fiscal year ended January 28, 1996 (the
1995 consolidated financial statements).
The Company's fiscal year ends on the Sunday immediately preceding the
last Wednesday in January. At October 27, 1996, the Company operated a chain of
966 mall-based bookstores, 142 book superstores, and 5 music stores throughout
the United States.
Certain reclassifications of previously reported October 22, 1995 balances
have been made to conform with the 1995 change in reporting presentation.
Note 2 - Public Offering of Common Stock
An initial public offering of the Company's common stock (the IPO) was
completed June 1, 1995. Prior to the IPO, the Company was a majority-owned
subsidiary of Kmart. As a result of the IPO and a subsequent transaction
completed in August 1995, Kmart no longer holds an interest in the Company's
common stock. See the 1995 consolidated financial statements for further
discussion.
<PAGE>
Weighted average shares outstanding are calculated as follows:
Pro Forma
13 Weeks 13 Weeks
Ended Ended
10/27/96 10/22/95
-------- --------
Shares outstanding at beginning of period 37,776 42,867
Purchase of Kmart's remaining interest (3,981)
Shares issued during the period 38 15
Common stock equivalents 4,040 1,500
------ ------
Weighted average common shares outstanding 41,854 40,401
====== ======
The pro forma earnings per common share data are based on actual common shares
outstanding after the IPO and assume the IPO took place at the beginning of
fiscal 1995.
Note 3 - Accounting for Goodwill
In the second and fourth quarters of 1995 the Company recorded pre-tax
charges to operations of $182.0 and $19.8, respectively, to reflect the change
in the method of evaluating the recoverability of goodwill and its continued
application. These noncash write-downs in goodwill were the result of a change
in policy by the Company after the IPO to evaluate the recoverability of
goodwill based on a fair value method. There was no write-down required under
this policy in the quarter or year-to-date period ended October 27, 1996.
Note 4 - Restructuring Program
In 1993, the Company implemented a restructuring plan pursuant to which it
planned to close 187 underperforming Walden stores and to combine certain
distribution and headquarters functions of Borders and Walden. The Company
recorded a restructuring charge of $142.8 to provide for the estimated costs of
implementing the plan. The Company recorded an additional charge of $6.4 in the
fourth quarter of 1994 to reflect revised estimates of the cost of completing
the restructuring plan. As of January 28, 1996, the program was substantially
complete. For the 13 weeks and 39 weeks ended October 27, 1996, $0.5 and $2.1 of
cash expenditures were charged to the restructuring reserve.
<PAGE>
Note 5 - Commitments and Contingencies
There are various claims, lawsuits, and actions pending against the
Company and its subsidiaries which are incident to their operations. It is the
opinion of management that the ultimate resolution of these matters will not
have a material effect on the Company's liquidity, financial position or results
of operations.
During 1994, the Company entered into an agreement in which leases with
respect to four Borders' locations serve as collateral for certain mortgage
pass-through certificates. These mortgage pass-through certificates include a
provision requiring the Company to repurchase the underlying mortgage notes in
certain events, including the failure by the Company to make payments of rent
under the related leases, the failure by Kmart to maintain required investment
grade ratings or the termination of the guarantee by Kmart of the Company's
obligations under the related leases (which would require mutual consent of
Kmart and Borders). In the event the Company is required to repurchase all of
the underlying mortgage notes, the Company would be obligated to pay
approximately $36.6. Kmart has failed to maintain investment grade ratings and
therefore these notes are now subject to put by the holder. To date, the holder
has not exercised its rights to put the notes.
The Company does not believe that the note purchase would have had a
material effect on the Company's financial position or earnings.
Note 6 - Financing
Credit Facility: The Company has a credit agreement which provides a $300,
five-year working capital facility. Borrowings under the credit facility bear
interest at a base rate or an increment over LIBOR at the Company's option. The
credit agreement contains operating covenants which limit the Company's ability
to incur indebtedness, make acquisitions, dispose of assets and issue,
repurchase in excess of $50 million of its common stock, pay dividends on its
common stock, and require the Company to meet certain financial measures
regarding fixed charge coverage, leverage and tangible net worth. The Company
had borrowings outstanding under the credit facility of $180.0 at October 27,
1996 and $215.0 at December 9, 1996.
Lease Financing Facility: On November 26, 1995 the Company entered into a five
year, $150 lease financing facility ("the Facility") to finance new stores and
other property through operating leases. The Facility will provide financing to
Lessors through loans from a third party lender for up to 95% of a project cost.
It is expected that Lessors will make equity contributions approximating 5% of
each project. Independent of its obligations as lessee, the Company will
guarantee payment when due of all amounts required to be paid to the third party
lender. The principal amount guaranteed will be limited to approximately 89% of
the original cost of a project so long as the Company is not in default under
the lease relating to such project. There was $84.1 outstanding under the lease
facility at October 27, 1996 and $95.5 at December 9, 1996.
In February 1996, the Company entered into interest rate swaps with a
total notional amount of $140, which effectively converted variable rate
borrowings to a fixed rate based on 3 month LIBOR. These swap agreements all
expire within 12 months of the date the Company entered into the agreements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company, through its subsidiaries, is the second largest operator of
book superstores and the largest operator of mall-based bookstores in the United
States based upon both sales and number of stores. At October 27, 1996, the
Company operated 142 book superstores under the Borders name, 966 mall-based and
other bookstores primarily under the Waldenbooks name, and 5 stores under the
names Planet Music and CD Superstore.
The Company's third quarter of 1996 and 1995 consisted of the 13 weeks
ended October 27, 1996 and October 22, 1995, respectively.
Reporting Format. During 1995, the Company changed its reporting format from
prior years to reclassify certain occupancy costs and exclude buying costs from
cost of sales. Previously reported October 22, 1995 balances have been
reclassified to conform to the revised presentation.
Results of Operations
The following table presents the Company's statement of operations data,
as a percentage of sales, for the periods indicated:
13 Weeks Ended 39 Weeks Ended
--------------- ---------------
10/27/96 10/22/95 10/27/96 10/22/95
----- ----- ----- -----
Sales 100.0% 100.0% 100.0% 100.0%
Cost of merchandise sold, including
occupancy costs 76.0 77.2 76.4 77.5
----- ----- ----- -----
Gross margin 24.0 22.8 23.6 22.5
Selling, general and administrative
expenses 24.2 24.6 23.9 24.4
Pre-opening expense 0.4 0.4 0.3 0.3
Goodwill amortization and writedown 0.1 0.2 0.1 17.1
Operating losses of stores identified
for closure (1) -- (0.1) -- (0.3)
----- ----- ----- -----
Operating loss (0.7) (2.2) (0.7) (19.1)
Interest expense 0.4 0.5 0.4 0.2
----- ----- ----- -----
Loss before income tax (1.1) (2.7) (1.1) (19.3)
Income tax benefit (0.5) (1.0) (0.5) (0.9)
----- ----- ----- -----
Net Loss (0.7)% (1.7)% (1.6)% (18.4)%
===== ===== ===== =====
Net Loss excluding writedown (0.7)% (1.7)% (1.6)% (1.5)%
===== ===== ===== =====
(1) Operating losses from stores included in the Waldenbooks restructuring
program are charged against the reserve for such losses in 1995.
<PAGE>
Store Activity
The Company's store activity is summarized below:
Quarter Ended Year Ended
October 27, October 22, January 28,
1996 1995 1996
-------- ------- -------
Borders Superstores
Beginning number of stores 127 88 75
Openings 15 9 41
----- ----- -----
Ending number of stores 142 97 116
===== ===== =====
Walden Mall Bookstores
Beginning number of stores 966 1,037 1,102
Openings 5 3 5
Closings (5) (17) (115)
----- ----- -----
Ending number of stores 966 1,023 992
===== ===== =====
CD Superstores/ Planet Music
Superstores:
Beginning number of stores 7 10 10
Closings (2) --- (1)
----- ----- -----
Endings 5 10 9
===== ===== =====
13 Weeks Ended October 27, 1996 and October 22, 1995
Sales in the third quarter of 1996 were $413.5 million, a $51.4 million,
or 14.2%, increase over third quarter 1995 sales of $362.1 million. This
increase reflects a $63.0 million, or 42.3%, increase in Borders' sales
resulting from new store openings and a comparable store sales increase of 8.6%.
This increase was offset in part by a decline in Waldenbooks sales of $7.8
million due to store closings and a 0.2% decrease in comparable store sales.
Cost of merchandise sold, including occupancy costs, was $314.3 million in
the third quarter of 1996, as compared with $279.4 million in the third quarter
of 1995. Gross margin as a percentage of sales was 24.0% in 1996 versus 22.8% in
1995. This 1.2% improvement reflects the impact of consolidated distribution
operations and improved buying resulting in higher initial product margin,
reduced depreciation as a result of the fourth quarter 1995 SFAS 121 write-off
and tighter control of inventory shrinkage.
Selling, general and administrative ("SG&A") expenses in the third quarter
of 1996 were up $10.9 million, or 12.2%, over SG&A expenses in the third quarter
of 1995 ($100.0 million versus $89.1 million). As a percentage of sales, SG&A
expenses fell from 24.6% to 24.2% in 1996. This 0.4% decrease is primarily due
to the leveraging of corporate overhead over the Company's expanding sales base,
as well as headcount and wage savings resulting from the move of the Waldenbooks
headquarters from Stamford, Connecticut to Ann Arbor, Michigan in the third
quarter of 1995 and higher marketing allowances.
Pre-opening expense in the third quarter of 1996 was $1.8 million as
compared to $1.4 million in 1995. Pre-opening expense consists principally of
grand-opening advertising expense and store payroll related to the opening, and
is expensed in the first full fiscal month of a store's operations. Pre-opening
expense per store varies primarily as a result of differing levels of grand
opening advertising, depending on the presence of the Company and its
competitors in the market and differing levels of labor costs associated with
merchandising the store. The Company opened 15 Borders superstores and 5
Waldenbooks mall-based store in the third quarter of 1996 as compared to 9
Borders superstores and 3 Waldenbooks store in the third quarter of 1995. The
increase in pre-opening expense is a result of the timing of the 1996 store
openings.
Goodwill amortization was $0.3 million in the third quarter 1996 as
compared to $0.6 million in 1995. The decrease in goodwill amortization is a
result of the goodwill write-down taken in 1995.
Interest expense was $1.8 million in both the third quarter of 1996 and
1995.
Income tax benefit in the third quarter of 1996 was $2.0 million as
compared to a benefit of $3.8 million in 1995.
39 Weeks Ended October 27, 1996 and October 22, 1995
Sales for the 39 weeks ended October 27, 1996, were $1,231.8 million, a
$152.3 million, or 14.1%, increase over sales for the 39 weeks ended October 22,
1995, of $1,079.5 million. This increase reflects a $194.0 million, or 46.0%,
increase in Borders' sales resulting from new store openings and a comparable
store sales increase of 9.2%. This increase was offset in part by a decline in
Waldenbooks sales of $34.5 million due to store closings and a 1.2% decrease in
comparable store sales.
Cost of merchandise sold, including occupancy costs, was $941.6 million in
the first 39 weeks of 1996, as compared with $836.6 million in the same period
of 1995. Gross margin as a percentage of sales was 23.6% in 1996 versus 22.5% in
1995. This 1.1% improvement reflects the impact of higher initial margin due to
improved buying, tighter control of inventory shrinkage and savings from
consolidated distribution operations.
Selling, general and administrative ("SG&A") expenses in the 39 weeks
ended October 27, 1996 were $294.3 million versus $263.7 million for the same
period of 1995. As a percentage of sales, SG&A expenses fell from 24.4% in 1995
to 23.9% 1996. This 0.5% decrease is primarily due to the leveraging of
corporate overhead over the Company's expanding sales base, as well as headcount
and wage savings resulting from the move of the Waldenbooks headquarters from
Stamford, Connecticut to Ann Arbor, Michigan in the third quarter of 1995 and
higher co-op advertising rebates.
Pre-opening expense in the first 39 weeks of 1996 was $3.8 million
compared to $3.3 million in the same 1995 period. The Company opened 26 Borders
superstores and 8 Waldenbooks mall-based store by the end of the third quarter
of 1996 as compared to 22 Borders superstores and 4 Waldenbooks store in the
first 39 weeks of 1995.
Goodwill amortization was $0.8 million in the first 39 weeks of 1996 as
compared to $185.1 million of goodwill amortization and writedown in the first
39 weeks of 1995, which included the $182.0 writedown taken in the second
quarter of 1995. The decrease in goodwill amortization is a result of the
goodwill write-down taken in 1995.
Interest expense was $5.3 million in 1996 as compared to $2.1 in 1995. The
increase is due primarily to borrowings outstanding during the period ended
October 27, 1996 used to fund the Kmart share purchase in the third quarter of
1995.
Income tax benefit for the first 39 weeks of 1996 was $5.6 million as
compared to a benefit of $10.1 million in the same 1995 period.
Liquidity and Capital Resources
The Company's principal capital requirements are to fund working capital
needs, the opening of new stores and the refurbishment and expansion of existing
stores.
Net cash used for operations for the 39 weeks ended October 27, 1996 was
$46.3 million as compared to $118.7 million in the corresponding period in the
prior year. The current year activity primarily reflects a net loss of $8.4
million combined with an increase in payables of $194.0 million and a decrease
in property held for resale of $15.4 million offset by a decrease in other
current liabilities of $27.1 million and an increase in inventories of $232.8
million. The decrease in cash used for operations as compared to the prior year
is primarily attributable to the decrease in inventory, net of accounts payable,
over the prior year representing the Company's focus on reducing its investment
in inventory at mall stores and improving inventory management resulting in an
increase in vendor funded inventory. Other operating cash flow primarily
represents decreases in accrued liabilities and other non-trade accounts
payable. The Company expects to complete the sale of properties included in
property held for resale during 1996 and 1997.
Net cash used for investing for the first 39 weeks of 1996 was $69.9
million as compared to $89.9 million in the first 39 weeks of 1995. The Company
opened 26 new superstores and 8 new Waldenbooks stores in the first 39 weeks of
1996 versus 22 new superstores in the first 39 weeks of 1995. The decrease is
due primarily to the use of the company's lease facility to construct developer
financed store locations.
Net cash provided by financing in the first 39 weeks of 1996 was $121.9
million versus cash used for financing of $13.1 million in the first 39 weeks of
1995. Net cash provided by financing in 1996 resulted primarily from net
borrowings under the credit facility.
The Company anticipates that planned closings of Waldenbooks stores will
decrease Waldenbooks' annual working capital requirements. On a consolidated
basis, the Company expects its working capital requirements to increase as a
result of its expansion program for its Borders books and music superstores.
In 1995 the Company entered into a $300 million, five-year working capital
line of credit, with a syndicate of banks. The Company had $180.0 million in
outstanding borrowings under the Credit Facility as of October 27, 1996
On November 26, 1995 the Company entered into a five year $150 million
lease financing facility to finance new stores and other property through
operating leases. The lease facility will provide financing to Lessors through
loans from a third party lender for up to 95% of a project cost. It is expected
that Lessors will make equity contributions approximating 5% of each project.
Independent of its obligations as lessee, the Company will guarantee payment
when due of all amounts required to be paid to the third party lender. The
principal amount guaranteed will be limited to approximately 89% of the original
cost of a project so long as the Company is not in default under the lease
relating to such project. There were 24 properties financed through the lease
facility, with a financed value of $84.1 million, at October 27, 1996.
Management believes that the rental payments for properties financed through the
lease facility may be lower than those which the Company could obtain elsewhere
due to, among other factors, (i) the lower borrowing rates available to the
Company's landlords under the facility, and (ii) the fact the rental payments
for properties financed through the facility do not include amortization of the
principal amounts of the landlords' indebtedness related to the properties.
Rental payments relating to such properties will be adjusted when permanent
financing is obtained to reflect the interest rates available at the time of the
refinancing and the amortization of principal.
During 1994, the Company entered into agreements in which leases with
respect to four Borders' locations serve as collateral for certain mortgage
pass-through certificates. These mortgage pass-through certificates include a
provision requiring the Company to repurchase the underlying mortgage notes in
certain events, including the failure by the Company to make payments of rent
under the related leases, the failure by Kmart to maintain required investment
grade ratings or the termination of the guarantee by Kmart of the Company's
obligations under the related leases (which would require mutual consent of
Kmart and Borders). In the event the Company is required to repurchase all of
the underlying mortgage notes, the Company would be obligated to pay
approximately $36.6 million. The Company would expect to fund this obligation
through its line of credit. Kmart has failed to maintain investment grade
ratings, and therefore, these notes are now subject to put by the holder. To
date, the holder has not exercised its right to put the notes.
In addition to the contingent repurchase obligations described above,
leases relating to two other Borders locations served as collateral for certain
mortgage pass-thru certificates. On March 11, 1996 Kmart was required to
repurchase the underlying notes. The Company purchased the notes from Kmart for
approximately $12.1 on June 18, 1996, which fully satisfied the Company's
contingent obligation.
The Company does not believe that the note purchase has had a material
effect on the Company's financial position or earnings.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on form 8-K
Exhibits:
(a) Exhibits: 11.1 Statement of Computation of per share earnings
27.0 Financial Data Schedule
10.35 Amendment No. 7 and Consent to Credit Agreement among
Borders Group, Inc., its Subsidiaries and Parties Thereto
(b) Reports on Form 8-K: None
<PAGE>
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 thereto duly authorized.
BORDERS GROUP, INC.
(Registrant)
Date: December 10, 1996 By: /s/
-------------------------
George R. Mrkonic
Vice Chairman and President
(Principal Financial and
Accounting Officer)
<PAGE>
AMENDMENT NO. 7 TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 7 TO CREDIT AGREEMENT (the "Amendment") is
entered into as of the 2nd day of December, 1996 by and between PNC BANK,
NATIONAL ASSOCIATION, as Administrative Agent under the Credit Agreement
described below, on behalf of the Lenders, and BORDERS GROUP, INC., a Delaware
corporation (the "Company"), on behalf of the Borrowers.
WITNESSETH:
WHEREAS, the Borrowers, the Lenders, the Administrative Agent and
the Syndication Agent have entered into that certain Credit Agreement dated as
of March 28, 1995 (as heretofore amended, the "Agreement"; terms defined in the
Agreement, as amended hereby, which are used herein shall have the same meanings
as are set forth in the Agreement for such terms unless otherwise defined
herein);
WHEREAS, the Borrowers have requested that the Lenders amend certain
provisions of the Agreement, and the Lenders are willing to do so on the terms
and subject to the conditions hereinafter set forth; and
WHEREAS, pursuant to Section 12.01 of the Agreement, the
Administrative Agent, with the written consent of the Required Lenders, may
enter into certain prescribed amendments to the Agreement on behalf of the
Lenders, and the Company may enter into amendments of the Agreement on behalf of
the Borrowers;
NOW, THEREFORE, in consideration of the premises set forth above,
the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Lenders and the Borrowers hereby agree as follows:
1. Amendment to Agreement. Upon the Effective Date (as
defined in Section 2 below), the Agreement is amended as follows:
a. Clause (xiii) of the definition of "Permitted Lien"
in Section 1.01 is amended by deleting the words "Section 8.02(a)(xv)" and
inserting in lieu thereof the following: "Section 8.02(a)(xi)".
b. The definition of "Consolidated Funded Indebtedness"
in Section 1.01 is amended by inserting the following after "Lease Financing
Guarantee": "or permitted by Section 8.02(c)(viii)".
c. The definition of "Fee Letters" is amended by
inserting the following immediately after "Syndication Agent":
and all other letter agreements between the Company and any
party hereto under which the parties thereto designate that such letter
agreement is a fee letter for purposes of this Agreement, including, without
limitation, the letter agreements dated as of November 14, 1996 between the
Company and the Administrative Agent or the Syndication Agent.
d. The definition of "Fees" in Section 1.01 is amended
by inserting the following immediately after "Usage Fee": "the Repurchase
Fee".
e. Section 1.01 is amended by amending and restating
the definitions set forth below as follows:
Financed Lease shall mean a lease of real property,
improvements on real property or real property and improvements thereon by the
Company or any of its Subsidiaries entered into (i) pursuant to the
Participation Agreement or (ii) in connection with the Supplemental Facility
(including without limitation any lease with respect to Indebtedness under the
Project Loan Agreements (as defined in the Lease Credit Agreement) purchased or
assigned as part of the Supplemental Facility).
Foreign Joint Venture shall mean individually and
Foreign Joint Ventures shall mean collectively any corporation, partnership,
limited liability company, joint venture or other entity (i) incorporated in any
jurisdiction other than a state of the United States of America or formed
primarily for the purpose of doing business outside of the United States of
America and (ii) in which the Company and its Subsidiaries own less than 50% of
the capital stock, partnership interests, membership interests or other
ownership interests.
Lease Financing Payment shall mean any payment by
the Company or any of its Subsidiaries (i) under the Lease Financing Guarantee
or any Supplemental Lease Financing Agreement in respect of Contingent
Obligations described in Section 8.02(c)(viii) (other than in respect of Basic
Rent (as defined in the Lease Credit Agreement and the Supplemental Lease
Financing Agreements (or if the term Basic Rent is not defined in the
Supplemental Lease Financing Agreements, as the amount represented by Basic Rent
as defined in the Lease Credit Agreement is otherwise defined in the
Supplemental Lease Financing Agreements)), (ii) to purchase or otherwise acquire
all or any portion of any Property subject to any Financed Lease, including,
without limitation, all payments pursuant to the exercise by the Company or any
of its Subsidiaries of any Purchase Option (as defined in a Financed Lease) or
similar option as provided in any Supplemental Lease Financing Agreement or
(iii) that constitutes a payment of the Termination Value or the Maximum
Residual Guarantee Amount (as each such term is defined in the Lease Credit
Agreement or the Supplemental Lease Financing Agreements (or a comparable
payment under the Supplemental Lease Financing Agreements if such terms are not
defined therein)).
Lease Financing Rent Expense shall mean all Basic
Rent (as defined in the Lease Credit Agreement and the Supplemental Lease
Financing Agreements (or if the term Basic Rent is not defined in the
Supplemental Lease Financing Agreements, as the amount represented by Basic Rent
as defined in the Lease Credit Agreement is otherwise defined in the
Supplemental Lease Financing Agreements)) payable by the Company and its
Subsidiaries, as lessee or sublessee under a Financed Lease.
Restricted Subsidiary shall mean individually and
Restricted Subsidiaries shall mean collectively any Subsidiary of the Company
(other than Unrestricted Subsidiaries) of which 50% or more of the outstanding
shares of capital stock, partnership interests or membership interests are owned
by the Company (whether directly or through one or more Subsidiaries of the
Company).
f. Section 1.01 is amended by inserting the following
definitions in their proper alphabetical sequence:
Capitalized Rent Expense shall mean an amount equal
to four times the sum of Rent Expense and Lease Financing Rent Expense.
Distributions shall have the meaning assigned to
such term in Section 8.02(e).
Domestic Joint Venture shall mean individually and
Domestic Joint Ventures shall mean collectively any corporation, partnership,
limited liability company, joint venture or other entity (i) incorporated in any
state of the United States of America for the purpose of doing business in the
United States of America and (ii) in which the Company and its Subsidiaries own
less than 50% of the capital stock, partnership interests, membership interests
or other ownership interests.
Investments shall have the meaning assigned to such
term in Section 8.02(d).
Joint Venture shall mean any Foreign Joint Venture
or Domestic Joint Venture, and Joint Ventures shall mean all Foreign Joint
Ventures and Domestic Joint Ventures.
Leverage Ratio shall mean the ratio (expressed as a
percentage) of Consolidated Funded Indebtedness plus four times Annual Rent
Expense plus eight times Annual Lease Financing Rent Expense to Consolidated
Total Capital plus four times Annual Rent Expense plus eight times Annual Lease
Financing Rent Expense.
Permitted Joint Venture Activity shall mean (i) any
Investment by any Borrower in any Joint Venture or any Contingent Obligations of
any Borrower in respect of any Indebtedness of any Joint Venture, provided that
(a) the aggregate amount of all such Investments and Contingent Obligations does
not at any time exceed 15% of Consolidated Tangible Net Worth, determined as of
the last day of the Fiscal Quarter most recently ended, (b) the aggregate amount
of all such Investments and Contingent Obligations in all Foreign Joint Ventures
does not at any time exceed 10% of Consolidated Tangible Net Worth, determined
as of the last day of the Fiscal Quarter most recently ended, and (c) the
aggregate amount of all such Investments and Contingent Obligations in all
Domestic Joint Ventures does not at any time exceed 10% of Consolidated Tangible
Net Worth, determined as of the last day of the Fiscal Quarter most recently
ended and (ii) any Contingent Obligations of Borrowers, or Indebtedness of
Borrowers constituting reimbursement obligations under letters of credit,
relating to leases executed, as lessee, by a Joint Venture, provided, that the
aggregate amount of such Contingent Obligations and Indebtedness is limited to
lease payments (whether such amounts are fixed or percentage rent, fees, costs
or otherwise) not in excess of an aggregate of (x) $15,000,000 in any Fiscal
Year with respect to all Joint Ventures, (y) $10,000,000 in any Fiscal Year with
respect to all Foreign Joint Ventures and (z) $10,000,000 in any Fiscal Year
with respect to all Domestic Joint Ventures.
Permitted Restricted Subsidiary Activity shall mean
(i) any Investment by any Borrower in any Restricted Subsidiary or any
Contingent Obligations of any Borrower in respect of any Indebtedness of any
Restricted Subsidiary, provided that (a) the aggregate amount of all such
Investments and Contingent Obligations does not at any time exceed 20% of
Consolidated Tangible Net Worth, determined as of the last day of the Fiscal
Quarter most recently ended, (b) the aggregate amount of all equity investments
and capital contributions made by the Borrowers in any Restricted Subsidiary
does not exceed 15% of Consolidated Tangible Net Worth, determined as of the
last day of the Fiscal Quarter most recently ended, (c) the aggregate amount of
all loans or advances by the Borrowers to Restricted Subsidiaries does not
exceed 15% of Consolidated Tangible Net Worth, determined as of the last day of
the Fiscal Quarter most recently ended and (d) the aggregate amount of all
Contingent Obligations of the Borrowers in respect of Indebtedness of Restricted
Subsidiaries does not exceed 15% of Consolidated Tangible Net Worth, determined
as of the last day of the Fiscal Quarter most recently ended and (ii) any
Contingent Obligations of Borrowers, or Indebtedness of Borrowers constituting
reimbursement obligations under letters of credit, relating to leases executed,
as lessee, by a Restricted Subsidiary, provided, that, the aggregate amount of
such Contingent Obligations and Indebtedness is limited to lease payments
(whether such amounts are fixed or percentage rent, fees, costs or otherwise)
not in excess of an aggregate of $15,000,000 in any Fiscal Year with respect to
all Restricted Subsidiaries.
Repurchase Amount shall mean $50,000,000, as such
amount may be reduced by the Company pursuant to Section 2.03(d).
Repurchase Fee shall have the meaning assigned to
such term in Section 2.03(d).
Supplemental Facility shall have the meaning
assigned to such term in Section 8.02(c)(viii).
Supplemental Lease Financing Agreements shall mean
all agreements executed in connection with the Supplemental Facility, including,
without limitation, any guarantee or reimbursement obligation in respect of a
letter of credit or other agreement under which Contingent Obligations of the
Borrowers are created in respect of the Supplemental Facility.
Unrestricted Subsidiary shall mean individually and
Unrestricted Subsidiaries shall mean collectively any Subsidiary of the Company
(i) of which 80% or more of the outstanding shares of capital stock, partnership
interests or membership interests are owned by the Company (whether directly or
through one or more Subsidiaries of the Company) and (ii) that has executed and
delivered a letter agreement in form and substance satisfactory to the
Administrative Agent under which such Subsidiary agrees to be bound by the
provisions of Article IX hereof, together with such legal opinions and other
documents and instruments as the Administrative Agent may request.
Wholly-owned Subsidiary shall mean individually and
Wholly-owned Subsidiaries shall mean collectively any Subsidiary of the Company
of which all of the outstanding shares of capital stock or other equity
interests are owned by the Company (whether directly or through one or more
Wholly-owned Subsidiaries of the Company).
g. Section 2.03 is amended by adding the following as a
new clause (d) and renumbering the existing clause (d) as clause (e):
(d) Repurchase Fee. The Borrowers hereby agree
that, upon the purchase by the Company of any common stock of the Company, the
Borrowers shall have an irrevocable obligation to pay to the Administrative
Agent for the benefit of the Lenders, a nonrefundable fee (the "Repurchase Fee")
calculated on a daily basis by multiplying .2667% per annum by the gross amount
paid by the Company for such stock. With respect to each such repurchase of
stock, the Repurchase Fee shall accrue from the date of any such purchase until
the later of (a) the date that is 2 years from the date of such purchase and (b)
the date on which the Leverage Ratio, calculated as of the end of any Fiscal
Quarter, is less than 60%, provided, that in calculating the Leverage Ratio for
purposes of this Section, the Company shall be deemed to have repurchased common
stock of the Company and paid the full Repurchase Amount therefor. The
Repurchase Fee shall be allocated among the Lenders in proportion to the amount
of the Commitment provided by each Lender. Such Repurchase Fee shall be payable
in arrears on the last Business Day of each March, June, September and December
after the date hereof, provided, that on the Expiration Date or upon
acceleration of the Obligations, the Repurchase Fee accrued to such date
together with the Repurchase Fee that would be payable thereafter but for the
occurrence of the Expiration Date or acceleration of the Obligations, shall be
immediately due and payable. Notwithstanding the foregoing, the amount payable
under this clause (d) by the Company on the Expiration Date or upon acceleration
of the Obligations shall not exceed the Repurchase Fee that otherwise would be
payable for a full Fiscal Quarter during the two years referred to above. The
Company may upon five (5) Business Days written irrevocable notice to the
Administrative Agent permanently reduce the Repurchase Amount in whole multiples
of $5,000,000 to an amount not less than the aggregate amount theretofore paid
by the Company with respect to repurchases of its common stock as permitted by
Section 8.02(e).
h. Section 6.01(j) is amended by inserting immediately after
the term "margin stock" the first time such term appears in the second sentence
thereof the following: "(other than common stock of the Company repurchased in
accordance with Section 8.02(e))".
i. Section 6.02 is amended by inserting immediately
after the reference to "12.11" the following: "and the amendment of Schedule
6.01(c) in connection with any new Subsidiary of the Company as permitted
herein".
j. Section 8.01(j) is amended and restated in its
entirety as follows:
(j) Use of Proceeds. The Borrowers will use the
proceeds of the Loans only for working capital purposes, repurchases of the
Company's common stock in accordance with Section 8.02(e) and Purchases and
Investments as permitted by this Agreement, and such uses shall not contravene
any applicable Law or any other provision thereof.
k. Section 8.01(m) is amended and restated in its
entirety as follows:
(m) Subsidiary Guarantees. If (i) any Restricted
Subsidiary's total assets determined in accordance with GAAP at the end of any
Fiscal Quarter constitute more than 10% of Consolidated Tangible Net Worth
determined at the end of such Fiscal Quarter or (ii) any Restricted Subsidiary's
net income determined in accordance with GAAP for any rolling four Fiscal
Quarter period exceeds 10% of Consolidated Net Income for such four Fiscal
Quarters, the Company shall cause such Restricted Subsidiary to agree to be
bound by the provisions of Article IX hereof and to execute a letter agreement
to such effect in form and substance satisfactory to the Administrative Agent
and to deliver such legal opinions and other documents and instruments as the
Administrative Agent may request.
l. Section 8.01(n) is deleted in its entirety.
m. Section 8.02 is amended and restated in its entirety
as set forth in Schedule 1 hereto.
n. Exhibit 8.03(c) is hereby deleted and replaced by Exhibit
8.03(c) attached hereto, or such other form of compliance certificate as the
Agents and the Company may otherwise agree from time to time.
o. Section 8.03(c) is amended by inserting the
following as a new clause (iii):
and (iii) describing any Permitted Joint Venture Activity or
Permitted Restricted Subsidiary Activity engaged in, or any Purchase made,
during the period covered by such financial statements.
p. Section 8.03(j) is amended and restated as follows:
(j) Notices Regarding Lease Financing Agreements and
Supplemental Lease Financing AgreementsNotices Regarding Lease Financing
Agreements and Supplemental Lease Financing Agreements.
(i) promptly upon the occurrence of any event
requiring the Company or any Subsidiary of the Company, or any election by the
Company or any Subsidiary of the Company, to make any Lease Financing Payment,
and in any event not less than ten (10) days prior to the date of any such Lease
Financing Payment, written notice thereof setting forth the details thereof; and
(ii) promptly, and in any event within five (5) days
after the occurrence thereof, written notice of any matured or unmatured default
under the Lease Credit Agreement, the Lease Financing Guarantee or any
Supplemental Lease Financing Agreement or any matured or unmatured default under
any Financed Lease.
q. Section 8.03 of the Agreement is amended by adding a
new clause (k) as follows:
(k) Notices Regarding Repurchases of Stock. Promptly, and in
any event within five (5) Business Days, after the repurchase by the Company of
any its common stock, written notice thereof (including the number of shares
repurchased, the amount paid by the Company with respect to such repurchase and
the date of such repurchase).
r. Section 10.01(p) is amended and restated as follows:
(p) Any matured default shall have occurred under the Lease
Credit Agreement, any Supplemental Lease Financing Agreement or any Financed
Lease, whether or not any obligations thereunder have been accelerated.
2. Conditions of Effectiveness. The amendments to the
Agreement contained in Section 1 shall become effective (the "Effective
Date") when and only when each of the conditions specified below has been
satisfied:
a. no Event of Default or Potential Default shall have
occurred and be continuing on the date hereof or on the Effective Date and the
representations and warranties made in the Agreement and in Section 3 hereof
shall be true and correct on the date hereof and on the Effective Date and the
Borrowers shall have delivered to the Administrative Agent for the benefit of
each Lender an officer's certificate to both such effects;
b. the Administrative Agent shall have received for the
benefit of each Lender all of the following documents, each document being in
form and substance satisfactory to the Administrative Agent:
(1) written Approval Memos from the Required Banks;
(2) this Amendment, duly executed by the Company;
(3) the officer's certificate referenced in clause
a. above;
(4) a consent to this Amendment executed by each of
Borders Properties, Inc. and Waldenbooks Properties, Inc. in the form of
Exhibit A hereto; and
(5) such instruments, agreements, opinions of
Thomas D. Carney, General Counsel of the Borrowers, and other items as the
Administrative Agent may request; and
c. the Administrative Agent shall have received (i) for the
benefit of the Lenders $300,000, which amount shall be distributed to the
Lenders that have executed and delivered Approval Memos to the Administrative
Agent (and to Bankers Trust Company as Agent under the Lease Credit Agreement if
such Lender is participating in such lease financing facility) prior to 5:00
p.m. Chicago time on November 25, 1996 (such distribution shall be made based on
each such Lender's pro rata share of the total commitments of all lenders under
the Agreement and such lease financing facility) and (ii) the fees set forth in
the Fee Letters executed in connection with this Amendment.
3. Representation and Warranties. Each of the Borrowers represents
and warrants as follows: (i) it has all necessary power and authority to execute
and deliver this Amendment and to perform its obligations hereunder; (ii) the
execution, delivery and performance of this Amendment have been duly authorized
by it; (iii) this Amendment and the Agreement, as amended hereby, constitute the
legal, valid and binding obligations of such Borrower and are enforceable
against such Borrower in accordance with their terms; and (iv) the approval,
execution, delivery and performance of the terms hereof and of the Agreement, as
amended hereby, do not violate any contractual provision to which it is a party
or by which it is or its properties are bound or any Law applicable to it.
4. Reference to the Effect on the Agreement.
a. On the Effective Date: (i) each reference in the
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
like import shall mean and be a reference to the Agreement as amended hereby
and (ii) each reference to the Agreement in all other Loan Documents shall
mean and be a reference to the Agreement, as amended hereby.
b. Except as specifically amended above, the Agreement
and all other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
c. The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as an amendment to any
provision of the Agreement nor a waiver of any right, power or remedy of any
Lender or Agent, nor constitute a waiver of, or consent to any departure from,
any provision of the Agreement or any other Loan Document.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the internal laws (as opposed to conflicts of
law provisions) of the State of Illinois.
6. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or
more of the parties to this Amendment on any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. Delivery of a duly executed counterpart copy of
this Amendment may be made by telecopy.
8. Expenses. The Borrowers will upon demand pay to each of the
Agents the amount of any and all expenses, including the reasonable fees and
expenses of each Agent's attorneys (which attorneys may be an Agent's employees
to the extent agreed to in advance by Borrowers) which any such Agent may incur
in connection with the preparation, negotiation and enforcement of this
Amendment and each of the agreements, instruments and other documents to be
delivered to the Agents or the Lenders in connection herewith.
[Signature pages to follow]
<PAGE>
AMENDMENT NO. 7
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION, as
Administrative Agent acting on behalf of the Lenders pursuant to Section
12.01 of the Agreement
By: _______\s\__________
Title:_____________________________
BORDERS GROUP, INC., acting on
behalf of the Borrowers pursuant to Section 12.01 of the Agreement
By: _______\s\_________________
Title:_____________________________
<PAGE>
EXHIBIT A
CONSENT
Each of the undersigned, as a Guarantor under that certain Credit
Agreement dated as of March 28, 1995, among PNC Bank, National Association, as
Administrative Agent, Borders Group, Inc. (the "Company"), and each of the other
Borrowers and Lenders a party thereto (as heretofore amended, the "Agreement";
terms defined in the Agreement, as amended by Amendment No. 7 referred to below,
which are used herein shall have the meanings as are set forth in the Agreement
for such terms unless otherwise defined herein), hereby (i) consents to
Amendment No. 7 to Credit Agreement, dated as of December 2, 1996, between the
Administrative Agent, on behalf of the Lenders, and the Company, on behalf of
the Borrowers (the "Amendment"), and the amendments contained therein and (ii)
confirms and agrees that, notwithstanding the Amendment and the effectiveness of
the amendments contained therein, the Agreement is, and shall continue to be, in
full force and effect and is hereby confirmed and ratified in all respects,
including, without limitation, each of the undersigned's obligations under
Article IX thereof. Nothing herein is intended or shall be deemed to limit any
Agent's or Lender's rights under the Agreement to take actions without the
consent of the undersigned.
Dated as of December 2, 1996
Borders Properties, Inc.
By: _______\s\______________
Title: _____________________
Waldenbooks Properties, Inc.
By: ________\s\_____________
Title: _____________________
<PAGE>
SCHEDULE 1
8.02 Negative CovenantsNegative Covenants. The Borrowers, jointly
and severally, covenant and agree that until payment in full of the Loans and
interest thereon, expiration or termination of all Letters of Credit,
satisfaction of all of the Borrowers' Obligations under the Loan Documents and
termination of the Commitments, the Borrowers shall comply at all times with the
following negative covenants:
(a) IndebtednessIndebtedness. Each of the Borrowers shall
not, and shall not permit any of its Subsidiaries to, at any time create, incur,
assume or suffer to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Indebtedness existing on the Closing Date
as set forth on Schedule 8.02(a) (including any extensions or renewals thereof
provided there is no increase in the amount thereof or other significant change
in the terms thereof unless otherwise specified on Schedule 8.02(a));
(iii) Capitalized Lease Obligations as
and to the extent permitted under Section 8.02(o);
(iv) interest rate swap, cap, collar or floor
agreements or other interest rate management devices with any Lender,
referencing an aggregate notional amount not to exceed, based on the reasonable
business judgment of the Company, the maximum principal amount outstanding at
any time of all Indebtedness of the Company and its Subsidiaries on a
consolidated basis plus an amount equal to 30% of Capitalized Rent Expense, with
such interest rate management devices to be entered into for hedging purposes
only and not for speculation;
(v) Indebtedness secured by Purchase Money
Security Interests so long as the amount of such Indebtedness does not exceed
the purchase price of the Property which is subject to such Purchase Money
Security Interests;
(vi) Indebtedness of an Unrestricted
Subsidiary to another Unrestricted Subsidiary or to the Company or Indebtedness
of the Company to an Unrestricted Subsidiary so long as such Indebtedness is
unsecured;
(vii) Contingent Obligations as and to
the extent permitted under Section 8.02(c);
(viii) obligations of the Company to Kmart
as contemplated by the Stockholder Agreement;
(ix) additional Indebtedness with an aggregate
principal amount outstanding not to exceed $6,000,000, which is secured by real
property of the Company and its Subsidiaries; provided that the principal amount
of any such Indebtedness shall not exceed the fair market value of the real
property securing such Indebtedness;
(x) additional unsecured Indebtedness of the
Borrowers with an aggregate principal amount outstanding not to exceed
$15,000,000;
(xi) Indebtedness of Subsidiaries (other than
the Borrowers) to third parties, so long as the holders of such Indebtedness
have no contractual or legal recourse to the Company or any of its other
Subsidiaries, except as otherwise permitted by this Agreement, provided, that
notwithstanding any other provision in this Agreement, the aggregate principal
amount of all Indebtedness for all such Subsidiaries (other than Indebtedness of
WPI and BPI outstanding as of November 30, 1996 to third parties) shall not at
any time exceed $20,000,000;
(xii) Permitted Sutro Refinancing
Indebtedness, so long as (A) the aggregate principal amount of any such
Indebtedness outstanding does not exceed $36,000,000, (B) the aggregate
principal amount of any such Indebtedness incurred, at the date of incurrence,
is at least 85% of the face value of the amount of "Notes" (as defined in the
Note Put Agreements) purchased by Borders as required by Section 2.2 of the Note
Purchase Agreements, (C) any such Indebtedness is incurred no sooner than the
relevant "Tenant Purchase Date" (as defined in the Note Put Agreements), (D) the
representations, warranties and covenants contained in the documentation with
respect to any such Indebtedness are no more restrictive, as determined in the
reasonable discretion of the Administrative Agent, than the representations,
warranties or covenants hereof, (E) the maturity of any such Indebtedness is not
less than two years from the date of incurrence, and (F) on or before the date
of incurrence, the Borrowers shall have delivered to the Lenders proforma
financial statements, in form and substance satisfactory to the Lenders, showing
that, during the term of such Indebtedness, based on reasonable projections of
the financial performance of the Borrowers, the Borrowers will not be in
violation of any of the financial covenants contained in Section 8.02;
(xiii) other Indebtedness for borrowed
money of the Borrowers, provided that (A) the terms and conditions of such
Indebtedness are no more restrictive than those of this Agreement, (B) no Event
of Default or Potential Default would occur as a result of the incurrence of
such Indebtedness, (C) the interest rate on such Indebtedness (after taking into
account all other fees payable in connection with such Indebtedness) is less
than the interest rate payable on the Loans, (D) such Indebtedness is
subordinated to the Obligations upon terms and conditions satisfactory to the
Agents and (E) such Indebtedness is unsecured;
(xiv) Indebtedness of the Borrowers under
the Lease Financing Guarantee, so long as the conditions specified in Section
8.02(c)(vii) have been satisfied; and
(xv) Indebtedness of the Borrowers in
connection with the Supplemental Facility, so long as the conditions specified
in clauses (A) through (E) of Section 8.02(c)(viii) have been satisfied.
(b) Liens. Each of the Borrowers shall not, and shall not
permit any of its Subsidiaries to, at any time create, incur, assume or suffer
to exist any Lien on any of its Property now owned or hereafter acquired, or
agree or become liable to do so, except Permitted Liens.
(c) Contingent Obligations. Each of the
Borrowers shall not, and shall not permit any of its Subsidiaries to, at any
time, directly or indirectly, become or be liable in respect of any Contingent
Obligations, except for:
(i) Contingent Obligations of any Borrower or
Unrestricted Subsidiary in respect of obligations of the Borrowers or
Unrestricted Subsidiaries;
(ii) Permitted Lease Contingent Obligations,
provided that the portion of all such Permitted Lease Contingent Obligations
which constitute current liabilities determined and consolidated in accordance
with GAAP, shall not exceed Fifteen Million Dollars ($15,000,000) at any one
time;
(iii) Contingent Obligations arising by
operation of any applicable law which individually or in the aggregate could
not reasonably be expected to have Material Adverse Effect;
(iv) any Contingent Obligations arising under
the Note Put Agreements;
(v) any Contingent Obligations arising under
any computer leases with respect to which Kmart is the lessee and any of the
Borrowers is the user of such computer equipment;
(vi) any Contingent Obligations arising under
any of the Kmart Agreements;
(vii) Contingent Obligations arising under
the Lease Financing Guarantee, provided, however, that the aggregate amount of
Indebtedness permitted by Section 8.02(a)(xiv) the aggregate amount of
Contingent Obligations permitted hereunder shall not exceed $200,000,000;
(viii) Contingent Obligations of the Company
and its Subsidiaries pursuant to a facility established for the purpose of
purchasing Indebtedness outstanding under the Project Loan Agreements (as
defined in the Participation Agreement) or constructing new retail stores for
the Borrowers (the "Supplemental Facility"), provided that (A) the aggregate
amount of Indebtedness permitted by Section 8.02(a)(xv) plus the aggregate
amount of Contingent Obligations permitted hereunder, together with the
aggregate amount of Indebtedness permitted by Section 8.02(a)(xiv) plus the
aggregate amount of Contingent Obligations permitted by Section 8.02(c)(vii),
does not exceed $250,000,000, (B) the terms and conditions of the Supplemental
Facility are satisfactory to any two of PNC Bank, First Chicago and Bankers
Trust Company, (C) no Event of Default or Potential Default would occur as a
result of the closing of the Supplemental Facility, (D) the maturity date of the
Indebtedness outstanding under the Supplemental Facility is not prior to the
Expiration Date and (E) the structure of such financing is substantially similar
to the structure of the financing under the Participation Agreement, Lease
Credit Agreement and the Lease Financing Guarantee;
(ix) Contingent Obligations constituting a
Permitted Joint Venture Activity, provided no Event of Default or Potential
Default has occurred and is continuing or would result therefrom; and
(x) Contingent Obligations constituting a
Permitted Restricted Subsidiary Activity, provided no Event of Default or
Potential Default has occurred and is continuing or would result therefrom.
(d) Loans and InvestmentsLoans and Investments. Each of the
Borrowers shall not, and shall not permit any of its Subsidiaries to, at any
time make or suffer to remain outstanding any loan or advance to, or purchase,
acquire or own any stock, bonds, notes or securities of, or any partnership
interest (whether general or limited) in, or any other investment or interest
in, or make any capital contribution to, any other Person, or agree, become or
remain liable to do any of the foregoing (collectively, "Investments"), except:
(i)trade credit extended on usual and
customary terms in the ordinary course of business;
(ii) advances to employees to meet
expenses incurred by such employees in the ordinary course of business;
(iii) Permitted Investments;
(iv) Investments by the Company or any
other Borrower in any Unrestricted Subsidiary or by any Unrestricted
Subsidiary in a Borrower or an Unrestricted Subsidiary, so long as any loans
or advances are unsecured;
(v)Purchases (a) so long as no Potential
Default or Event of Default has occurred and is continuing or would result
therefrom, (b) to the extent that the aggregate of all Purchases made in any
rolling four Fiscal Quarter period as permitted under this Section 8.02(d)(v) do
not exceed 20% of Consolidated Tangible Net Worth (determined as of the last day
of the Fiscal Quarter most recently ended), (c) so long as the amount equal to
(1) the aggregate amount of all Purchases made in any rolling four Fiscal
Quarter period, as permitted under this Section 8.02(d)(v), in excess of 10% of
Consolidated Tangible Net Worth (determined as of the last day of the Fiscal
Quarter most recently ended) plus (2) all Capital Expenditures in such rolling
four Fiscal Quarter period permitted under Section 8.02(o) does not exceed
$150,000,000 period, (d) so long as the assets or business subject to such
Purchase is in substantially the same or a similar type of business as the
Company and its Subsidiaries and (e) so long as the Board of Directors of any
Person to be acquired has approved the terms of the Purchase;
(vi) loans and advances, in addition to those
permitted under Section 8.02(d)(ii), to employees in an aggregate principal
amount not to exceed $10,000,000;
(vii) Investments constituting Permitted Joint
Venture Activities, provided no Event of Default or Potential Default has
occurred and is continuing or would result therefrom;
(viii) Investments constituting Permitted
Restricted Subsidiary Activities, provided no Event of Default or Potential
Default has occurred and is continuing or would result therefrom; and
(ix) repurchases of the Company's common stock
in accordance with Section 8.02(e).
Dividends and Related Distributions. The Company shall not, and shall not permit
any of its Subsidiaries to, make or pay, or agree to become or remain liable to
make or pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock or partnership interests or on account of the purchase,
redemption, retirement or acquisition of its shares of capital stock (or
warrants, options or rights therefor) (collectively, "Distributions"), except:
(i)the Company may make open market
repurchases of shares of its common stock so long as the aggregate amount paid
by the Company with respect to all such repurchases does not at any time exceed
the Repurchase Amount in effect from time to time and no Event of Default or
Potential Default has occurred and is continuing or would result therefrom;
(ii) the Company may engage in stock
splits (including reverse stock splits) or pay dividends in stock;
(iii) Wholly-owned Subsidiaries may make
Distributions to the Company or another Wholly-owned Subsidiary;
(iv) Subsidiaries other than
Wholly-owned Subsidiaries may make Distributions so long as (a) the aggregate
amount of Distributions made by any such Subsidiary to any Person other than the
Company or a Subsidiary of the Company in any Fiscal Year does not exceed 50% of
such Person's pro rata share (based on the percentage of stock or other equity
interests owned by such Person) of such Subsidiary's net income for such Fiscal
Year as determined in accordance with GAAP and (b) no later than ten (10) days
prior to any such Distribution, the Company shall have given written notice to
the Lenders and the Agents thereof, together with calculations demonstrating
that such Distribution complies with this clause (iv); and
(v) the Company may pay dividends on
its preferred stock so long as the dividend rate on such preferred stock (after
taking into account all other fees and amounts payable on such preferred stock)
is less than the interest rate payable on the Loans.
Liquidations, Mergers, Consolidations. Each of the Borrowers shall not, and
shall not permit any of its Subsidiaries to, dissolve, liquidate or wind-up its
affairs, or become a party to any merger or consolidation, provided that any
Borrower (other than the Company) may consolidate or merge into another Borrower
and any Subsidiary of a Borrower may consolidate or merge into any Borrower or
any Wholly-owned Subsidiary of a Borrower so long as the Borrower or a
Wholly-owned Subsidiary is the surviving corporation of such consolidation or
merger.
Dispositions of Assets or Subsidiaries. Each of the Borrowers shall not, and
shall not permit any of its Subsidiaries to, sell, convey, assign, lease,
abandon or otherwise transfer or dispose of, voluntarily or involuntarily, any
of its Property (including sale, assignment, discount or other disposition of
accounts, contract rights, chattel paper, equipment or general intangibles with
or without recourse or any shares of capital stock, shares of beneficial
interest or partnership interests of a Subsidiary of such Borrower), except:
(i)transactions involving the sale of
inventory in the ordinary course of business;
(ii) any sale, transfer or lease of
Property, including without limitation any store closures, in the ordinary
course of business which are no longer necessary or required in the conduct of
the Borrower's or Subsidiary's business;
(iii) any sale or transfer of Property in
order to concurrently or subsequently lease as lessee such Property, so long as
such sale and leaseback occurs in the ordinary course of business;
(iv) any sale, transfer or lease of
Property, by any Subsidiary of an Unrestricted Subsidiary to such
Unrestricted Subsidiary or another Unrestricted Subsidiary;
(v)any sale, transfer or lease of Property
in the ordinary course of business which are replaced by substitute Property
acquired or leased within the parameters of Section 8.02(o);
(vi) any sale or transfer of the real
property located in Stamford, Connecticut; and
(vii) any transfers to Kmart of
"Premises" pursuant to the Kmart Indemnity (as such term is defined therein) if
and to the extent that any such transfer does not cause an Event of Default
under Section 10.01(f) hereof.
Affiliate Transactions. Each of the Borrowers shall not, and shall not permit
any of its Subsidiaries to, enter into or carry out any transaction (including
purchasing property or services from or selling property or services to any
Affiliate of any Borrower (other than another Borrower) or other Person) unless
such transaction (i) is not otherwise prohibited by this Agreement, (ii) is
entered into in the ordinary course of business upon fair and reasonable
arm's-length terms and conditions which are fully disclosed to the
Administrative Agent and (iii) is in accordance with all applicable Law.
Subsidiaries, Partnerships and Joint Ventures. Each of the Borrowers shall s
not, and shall not permit any of its Subsidiaries to, become or agree to become
a general or limited partner, joint venturer or member in any partnership, joint
venture or limited liability company, as the case may be, provided that the
Company or any of its Wholly-owned Subsidiaries may own or create (A) any
Wholly-owned Subsidiary, (B) any Unrestricted Subsidiary, (C) any Restricted
Subsidiary so long as (1) the aggregate of all Purchases by the Company and its
Subsidiaries of or Investments in or to such Restricted Subsidiary is otherwise
permitted by this Agreement, and (2) no such Restricted Subsidiary shall have
Indebtedness which is recourse to or guaranteed by the Company or any of its
Subsidiaries except as otherwise permitted by this Agreement and (D) any Joint
Venture so long as (1) the aggregate of all Purchases by the Company and its
Subsidiaries of or Investments by the Company and its Subsidiaries in or to any
such Joint Ventures is otherwise permitted by this Agreement, and (2) no such
Joint Venture shall have Indebtedness which is recourse to or guaranteed by the
Company or any of its Subsidiaries except as otherwise permitted by this
Agreement.
(j) Continuation of or Change in Business. Each
of the Borrowers shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than (a) with respect to the Borrowers, BPI and
WPI, substantially as conducted and operated by such Person during the Fiscal
Year prior to the Company's 1996 Fiscal Year and (b) with respect to any
Subsidiary of a Borrower (other than WPI or BPI), substantially as conducted and
operated by a Borrower, in a business reasonably incidental and complementary
thereto or in an educational related retail business.
Plans and Benefit Arrangements. Each of the Borrowers shall not, and shall
not permit any of its Subsidiaries to:
(i)adopt, sponsor, maintain or make
contributions to any Plan, any Multiemployer Plan, any Multiple Employer Plan or
except as set forth on Schedule 6.01(t), any Benefit Arrangement that provides
benefits to retirees; or
(ii) engage in a Prohibited Transaction
with any Benefit Arrangement which, alone or in conjunction with any other
circumstances or set of circumstances resulting in liability under ERISA, would
have a Material Adverse Effect.
Fiscal Year. Each of the Borrowers shall not, and shall not permit any of its
Subsidiaries to, change its Fiscal Quarter or change its Fiscal Year.
Issuance of Stock. Each of the Borrowers (other than the Company and any
Unrestricted Subsidiary) shall not, and shall not permit any of its Subsidiaries
(other than Unrestricted Subsidiaries) to, issue any additional shares of its
capital stock or any options, warrants or other rights in respect thereof,
except to the Company or any Wholly-owned Subsidiary, provided, however, that
the Company shall not issue any preferred stock unless the dividend rate thereon
is permitted by Section 8.02(e)(v).
Changes in Organizational Documents. Each of the Borrowers shall not, and shall
not permit any of its Subsidiaries to, amend in any respect its certificate of
incorporation (including any provisions or resolutions relating to capital
stock), by-laws or other organizational documents in the event such change would
be adverse to the Lenders.
Capital Expenditures. Each of the Borrowers shall not, and shall not permit any
of its Subsidiaries to, make any payments on account of any Capital
Expenditures, except to the extent that the aggregate of all such Capital
Expenditures do not exceed $140,000,000 in any rolling four Fiscal Quarter
period, and except to the extent that such Capital Expenditures, when aggregated
with all Purchases permitted under Section 8.02(d)(v) during the preceding four
Fiscal Quarters (but only to the extent the aggregate amount of such Purchases
exceeds 10% of Consolidated Tangible Net Worth, determined as of the last day of
the Fiscal Quarter most recently ended), do not exceed $150,000,000. All such
Capital Expenditures shall be made under usual and customary terms and in the
ordinary course of business. For purposes of this covenant, Capital Expenditures
shall not include assets purchased or acquired, or expenditures made in respect
of assets, which are held for resale in accordance with GAAP, except to the
extent that such a Capital Expenditure is made at a time when, or to the extent
that as a result of such Capital Expenditure, the aggregate value of assets held
for resale exceeds or would exceed $30,000,000.
Minimum Fixed Charge Coverage Ratio. The Borrowers shall not permit the Fixed
Charge Coverage Ratio, calculated as of the end of each Fiscal Quarter for the
previous four Fiscal Quarters then ended, to be less than 1.45 to 1.0.
Maximum Leverage Ratio. The Borrowers shall not permit the Leverage Ratio (i)
calculated as of the end of any first or second Fiscal Quarter of any Fiscal
Year to exceed 75%, (ii) calculated as of the end of any third Fiscal Quarter of
any Fiscal Year to exceed 77.5%, or (iii) calculated as of the end of any fourth
Fiscal Quarter of any Fiscal Year to exceed 72.5%, provided, that beginning with
the fourth Fiscal Quarter of the Company's 1998 Fiscal Year, the percentages set
forth in clauses (i), (ii) and (iii) above shall be 70%, 72.5% and 67.5%,
respectively.
Minimum Tangible Net Worth. The Borrowers shall not at any time permit
Consolidated Tangible Net Worth to be less than the sum of (i) $470,000,000 plus
(ii) 50% of the Consolidated Net Income for each Fiscal Quarter in which net
income was earned (with no deduction for a net loss) during the period from July
29, 1996 through the last day of the Fiscal Quarter immediately preceding the
date of determination, plus (iii) 100% of the net cash proceeds to the Company
of any public or private issuance of equity securities, minus (iv) the aggregate
amount paid by the Company with respect to any repurchase of its common stock.
Modifications of Other Documents. The Borrowers shall not permit or otherwise
consent to any amendment to or modification of any of the Kmart Agreements
(after their respective execution), the Stockholder Agreement, the Lease Credit
Agreement, the Lease Financing Guarantee, the Participation Agreement, any
Financed Lease or any other Operative Agreement (as defined in the Lease Credit
Agreement), any Supplemental Lease Financing Agreement or any of the Note Put
Agreements which could reasonably be expected to have a Material Adverse Effect,
which would have the effect of materially increasing the obligations of or
burdens on the Borrowers or any of their Subsidiaries thereunder or which would
have the effect of shortening or deleting any notice or cure period provided for
therein.
Prepayment of Note Put Agreement Obligations. Each of the Borrowers shall s not,
and shall not permit any of its Subsidiaries to, make any payment or prepayment
in respect of Borders' obligations under any of the Note Put Agreements at any
time before a "Tenant Purchase Date" as defined in the Note Put Agreements.
Lease Financing Payments. Each of the Borrowers shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, make any Lease Financing
Payment, provided, however, that a Borrower may make a Lease Financing Payment
if (i) both before and after giving effect to such Lease Financing Payment, no
Event of Default or Potential Default exists or would exist and the
representations and warranties contained in Article VI are and will be true and
correct, and the Company shall have delivered to the Administrative Agent an
officer's certificate to both such effects, (ii) the notice required by Section
8.03(j)(i) of this Agreement has been given to the Administrative Agent and each
of the Lenders, (iii) the Company shall have delivered to the Administrative
Agent no later than ten (10) days prior to the date of any such Lease Financing
Payment cash flow projections for the twelve months following such Lease
Financing Payment, in form and substance reasonably satisfactory to the
Administrative Agent, (a) showing that the Borrowers' working capital
requirements and borrowing needs are not and will not be adversely affected by
such Lease Financing Payment and (b) containing calculations in sufficient
detail to demonstrate on a pro forma basis compliance as of the end of each
Fiscal Quarter within such twelve month period with all financial covenants
contained in Section 8.02, (iv) after giving effect to such Lease Financing
Payment, the aggregate amount of all Lease Financing Payments made by the
Borrowers as permitted by this Section 8.02(u) is less than $20,000,000 and (v)
the Lease Financing Payment is otherwise permitted by this Agreement. For
purposes of clause (iv) of this Section 8.02(u), the amount of any Lease
Financing Payment made by the Borrowers to purchase Property subject to any
Financed Lease shall not be included in determining the aggregate amount of
Lease Financing Payments made by the Borrowers once all of such Property is sold
by such Borrower to any Person that is not an Affiliate of the Company.
Exhibit 11.1
Statement of Computation of Per Share Earnings
(dollars in millions except per share data)
For the 13-weeks Ended For the 39-weeks Ended
October 27, 1996 October 27, 1996
Primary Earnings per
Common Share:
Net loss $ (2.7) $ (8.4)
Pro forma weighted
average shares
outstanding (000's) 41,855 41,515
--------- --------
Primary E.P.S. $ (0.06) $ (0.20)
========== ==========
Fully Diluted Earnings per
Common Share:
Net Loss $ (2.7) $ (8.4)
Pro forma weighted
average shares
outstanding (000's) 41,564 41,418
--------- --------
Fully Diluted E.P.S. $ (0.06) $ (0.20)
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-26-1997
<PERIOD-START> JUL-29-1996
<PERIOD-END> OCT-27-1996
<CASH> 43
<SECURITIES> 0
<RECEIVABLES> 51
<ALLOWANCES> 0
<INVENTORY> 870
<CURRENT-ASSETS> 964
<PP&E> 509
<DEPRECIATION> 230
<TOTAL-ASSETS> 1320
<CURRENT-LIABILITIES> 817
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 472
<TOTAL-LIABILITY-AND-EQUITY> 1320
<SALES> 414
<TOTAL-REVENUES> 414
<CGS> 314
<TOTAL-COSTS> 314
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> (5)
<INCOME-TAX> (2)
<INCOME-CONTINUING> (3)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
