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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended June 28, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-25246
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WINSLOEW FURNITURE, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 63-1127982
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
201 CAHABA VALLEY PARKWAY, PELHAM, ALABAMA 35124
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including Area Code) (205) 403-0206
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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 .
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Shares Outstanding at August 2, 1996
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$ .01 par value 8,596,387
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WINSLOEW FURNITURE, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets ............................ 3
Consolidated Statements of Income ...................... 4
Consolidated Statements of Cash Flows .................. 5
Notes to Consolidated Financial Statements ............. 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............ 8-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................... 14
Item 4. Submission of Matters to a Vote of Security Holders .... 14
Item 6. Exhibits and Reports on Form 8-K ....................... 14
Signatures ............................................................. 17
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3
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands) June 28, December 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 869 $ 396
Accounts receivable, less allowances
for doubtful accounts 26,130 30,162
Inventories 20,974 19,920
Prepaid expenses and deferred income taxes 3,670 4,163
------------ ------------
Total current assets 51,643 54,641
Property, plant and equipment, net 17,722 18,293
Goodwill, net 30,274 30,720
Other intangible assets, net -- 448
Other assets 1,128 1,268
------------ ------------
$100,767 $105,370
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 1,523 $ 1,815
Accounts payable 4,921 2,690
Other accrued liabilities 9,667 6,459
------------ ------------
Total current liabilities 16,111 10,964
Long-term debt, net of current portion 26,733 40,191
Deferred income taxes 987 987
------------ ------------
Total liabilities 43,831 52,142
------------ ------------
Stockholders' equity:
Preferred stock, par value $.01 per share,
5,000,000 shares authorized, none issued -- --
Common stock, par value $.01 per share,
20,000,000 shares authorized, 8,967,112
issued and outstanding at June 28, 1996
and December 31, 1995 90 90
Additional paid-in capital 37,640 37,640
Retained earnings 19,206 15,498
------------ ------------
56,936 53,228
------------ ------------
$100,767 $105,370
============ ============
See accompanying notes.
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4
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Second Quarter Ended Six Months Ended
------------------------ ------------------------
June 28, June 30, June28, June 30,
1996 1995 1996 1995
------------------------ ------------------------
Net sales $43,914 $44,366 $74,871 $73,829
Cost of sales 28,254 30,851 50,791 53,860
---------- --------- ---------- ---------
Gross profit 15,660 13,515 24,080 19,969
Selling, general and administrative expenses 8,650 7,693 15,189 13,080
Amortization 497 577 1,046 1,080
---------- --------- ---------- ---------
Operating income 6,513 5,245 7,845 5,809
Interest expense 647 1,222 1,834 2,233
---------- --------- ---------- ---------
Income before taxes and
extraordinary item 5,866 4,023 6,011 3,576
Provision for income taxes 2,248 1,627 2,303 1,575
---------- --------- ---------- ---------
Income before extraordinary item 3,618 2,396 3,708 2,001
Extraordinary item -- -- -- (593)
---------- --------- ---------- ---------
Net income $3,618 $2,396 $3,708 $1,408
========== ========= ========== =========
Earnings per share:
Income before extraordinary item $0.40 $0.27 $0.41 $0.22
Extraordinary item -- -- -- (0.07)
---------- --------- ---------- ---------
Net income $0.40 $0.27 $0.41 $0.15
========== ========= ========== =========
Weighted average number of shares 8,967 8,967 8,967 9,092
========== ========= ========== =========
See accompanying notes.
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WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Six Months Ended
----------------------------
June 28, June 30,
1996 1995
----------- -----------
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income $3,708 $1,408
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,060 1,963
Write-off of loan costs related to early
retirement of debt -- 953
Changes in operating assets and liabilities,
net of effects from acquisitions:
Accounts Receivable 4,032 3,980
Inventories (1,054) 1,211
Prepaid expenses and
deferred income taxes 493 335
Other assets (12) 12
Accounts payable 2,231 (1,253)
Other accrued liabilities 3,208 1,884
Deferred income taxes -- (146)
---------- ------------
Total adjustments 10,958 8,939
---------- ------------
Net cash provided by operating activities 14,666 10,347
---------- ------------
INVESTING ACTIVITIES:
Capital expenditures, net of disposals
and reserves (443) (1,722)
Acquisitions, including acquisition costs,
less cash acquired -- (7,345)
----------- -----------
Net cash used in investing activities (443) (9,067)
FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving
credit agreements (12,060) 3,060
Repurchase and cancellation of stock (3,408)
Payments on long-term debt (1,690) (1,096)
Increase in term loan upon refinancing -- 1,560
Loan costs -- (1,193)
----------- -----------
Net cash used in financing activities (13,750) (1,077)
Net increase in cash and cash equivalents 473 203
Cash and cash equivalents at beginning of year 396 1,054
----------- -----------
Cash and cash equivalents at end of period $869 $1,257
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid $1,954 $2,203
Income taxes paid $353 $216
Investing activities included the acquisition of Continental Engineering Group,
Inc. in 1995. Assets acquired, liabilities assumed and consideration paid for
this acquisition were as follows:
Fair Value of assets acquired $ -- $8,533
Cash acquired -- (131)
Liabilities assumed -- (1,057)
------- ---------
$ -- $7,345
======= =========
See accompanying notes.
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WINSLOEW FURNITURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of WinsLoew
Furniture, Inc. and subsidiaries (the "Company" or "WinsLoew"), which are for
interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated financial
statements should be read in conjunction with the annual consolidated
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 as filed with the
Securities and Exchange Commission.
All material intercompany balances and transactions have been eliminated. The
preparation of the consolidated financial statements requires the use of
estimates in the amounts reported.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the results for the interim
periods. The results of operations are presented for the Company's second
quarter which is from March 30 through June 28, 1996, and for the six month
period which is from January 1 through June 28, 1996. The results of
operations for these two periods are not necessarily indicative of the results
to be expected for the full year.
2. INVENTORIES
Inventories consisted of the following:
(In thousands) June 28, December 31,
1996 1995
--------- ------------
Raw materials $10,944 $11,683
Work in process 2,269 1,864
Finished goods 7,761 6,373
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$20,974 $19,920
======= =======
3. LONG-TERM DEBT
In June 1996, WinsLoew amended its senior credit facility to provide the
Company with a variable amount available under the revolving line of credit.
The amendment reduces the amount available under its revolving credit line to
$20 million effective July 1, 1996. The Company may, at its option, elect to
increase the revolving credit line at January 1, 1997, to a maximum of
$40 million. Thereafter, on each July 1, the amount available will
automatically decrease to $20 million and on each January 1, the Company may
elect to increase the revolving credit line to a maximum of $40 million. In
July 1996, the Company amended its senior credit facility to allow the
Company to borrow up to $6.6 million under its acquisition line of credit to
purchase shares of the Company's common stock (see Note 4 below).
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4. CAPITAL STOCK
In 1995, the WinsLoew's Board of Directors approved a plan to acquire up to
1,000,000 shares of the Company's stock, and repurchased 574,000 shares of
common stock on the open market for $3,408,000. In June 1996, WinsLoew's
Board of Directors approved a plan to acquire up to an additional 1,000,000
shares of the Company's stock. In July 1996, the Company repurchased 370,725
shares for $2,229,000. The purchases are being funded with proceeds from the
Company's credit facility (see Note 3 above).
5. ACQUISTION OF CONTINENTAL ENGINEERING GROUP, INC.
On March 24, 1995, WinsLoew acquired all of the stock of Continental
Engineering Group, Inc. for approximately $7.3 million. The following
unaudited pro forma information has been prepared assuming that the acquisition
of Continental had occurred on January 1, 1995. The pro forma results are not
necessarily indicative of what actually would have occurred if the acquisition
had been in effect for the entire period presented.
(In thousands) Second Quarter Ended Six Months Ended
June 30, 1995 June 30, 1995
-------------------- --------------------
Net sales $44,366 $75,604
Net income 2,396 1,409
Net income per share $ .27 $ .15
Average shares outstanding 8,967 9,092
6. EXTRAORDINARY ITEM
In the first quarter of 1995, the Company incurred an extraordinary charge of
$593,000, net of an income tax benefit of $360,000, related to prepayment
penalties and the write-off of unamortized deferred loan costs associated
with the retirement of separate credit facilities.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
WinsLoew is engaged in the design, manufacture and distribution of casual
furniture, contract seating, ready-to-assemble ("RTA") furniture and futons.
WinsLoew's casual furniture products are distributed through independent
manufacturer's representatives, and are constructed of extruded and tubular
aluminum, wrought iron and cast aluminum. These products are distributed
through fine patio stores, department stores and full line furniture stores
nationwide. WinsLoew's contract seating products are distributed to a broad
customer base which includes architectural design firms, and restaurant and
lodging chains. WinsLoew's RTA products include ergonomically-designed
computer workstations, which the Company denotes as "space savers",
promotionally-priced coffee and end tables, wall units and rolling carts.
WinsLoew also manufactures and distributes an extensive line of futons,
frames and related accessories. Distribution of RTA and futon furniture
products is primarily through mass merchandisers, catalogue wholesalers and
specialty retailers.
RESULTS OF OPERATIONS
The following table sets forth net sales, gross profit and gross margin as a
percent of net sales for the second quarter of 1996 (March 30 through June 28)
compared to the second quarter of 1995 (April 1 through June 30) and for the
first six months of 1996 (January 1 through June 28) compared to the first six
months of 1995 (January 1 through June 30) for each of the Company's product
lines (in thousands, except for percentages):
Three Months Ended
---------------------------------------------------------
June 28, 1996 June 30, 1995
---------------------------- -------------------------
Net Gross Gross Net Gross Gross
Sales Profit Margin Sales Profit Margin
--------- -------- ------- --------- ------- ------
Casual furniture $22,246 $ 9,742 43.8% $20,968 $ 8,212 39.2%
Contract seating 12,293 3,852 31.3% 10,205 2,871 28.1%
RTA furniture 4,908 1,415 28.8% 7,343 1,925 26.2%
Futons 4,467 651 14.6% 5,850 507 8.7%
--------- -------- -------- --------
Total $43,914 $15,660 35.7% $44,366 $13,515 30.5%
========= ======== ======== ========
Six Months Ended
---------------------------------------------------------
June 28, 1996 June 30, 1995
--------------------------- --------------------------
Net Gross Gross Net Gross Gross
Sales Profit Margin Sales Profit Margin
--------- -------- ------ --------- ------- ------
Casual furniture $31,572 $12,864 40.7% $29,368 $10,785 36.7%
Contract seating 23,988 6,986 29.1% 19,423 5,222 26.9%
RTA furniture 10,664 3,057 28.7% 12,494 3,094 24.8%
Futons 8,647 1,173 13.6% 12,544 868 6.9%
--------- -------- --------- -------
Total $74,871 $24,080 32.2% $73,829 $19,969 27.0%
========= ======== ========= =======
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The following table sets forth certain information relating to the Company's
operations expressed as a percentage of the Company's net sales:
Three Months Ended Six Months Ended
----------------------- ----------------------
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ---------
Gross margin 35.7% 30.5% 32.2% 27.0%
Selling, general and
administrative expense 19.7% 17.3% 20.3% 17.7%
Amortization 1.2% 1.3% 1.4% 1.5%
Operating income 14.8% 11.8% 10.5% 7.9%
Interest expense, net 1.5% 2.8% 2.5% 3.0%
Income before income taxes
and extraordinary item 13.3% 9.1% 8.0% 4.8%
Net income 8.2% 5.4% 5.0% 1.9%
COMPARISON OF SECOND QUARTERS ENDED JUNE 28, 1996 AND JUNE 30, 1995
Net Sales: WinsLoew's consolidated net sales for the second quarter of 1996
decreased $452,000 or 1.0%, to $43.9 million from $44.4 million in the second
quarter of 1995. Two of the Company's four product lines experienced sales
increases. The Contract Seating product line experienced a sales increase of
20.5% as construction in the lodging industry drove up demand. The Casual
product line increased sales by 6.1%. The Company believes that due to its
high quality and innovative designs, existing retail customers have allocated
more floor space, and are therefore requiring larger inventories of the
Company's casual aluminum furniture. RTA product line sales decreased by 33.2%
in the second quarter of 1996 when compared to the second quarter of 1995. The
decrease in RTA product line sales is a direct result of the Company's
restructuring of this product line in September, 1995. This restructuring
resulted in the Company exiting the promotionally-priced seating market,
beginning a transition from traditional lower margin RTA products to higher
margin products. Also in the second quarter of 1996, some mass merchants
have purchased fewer products as a result of price increases in the RTA
product line. Futon product line sales decreased by $1.4 million. In
September, 1995, the Company announced a restructuring of this product line,
which reduced product offerings and discontinued sales to some mass merchant
customers. With the decision to reduce sales to the mass merchant market,
the Company has begun to focus efforts on rebuilding the specialty store
business. However, Futon product sales to the specialty store market have
declined from the levels of the second quarter of 1995.
Gross Margin: Consolidated gross margin increased to 35.7% in the second
quarter of 1996, compared to 30.5% in the second quarter of 1995. Each of the
Company's product lines experienced increases in gross margin. The RTA product
line gross margin improved by 2.6 percentage points, primarily due to the
Company's sale in 1995 of its promotionally-priced seating business which
eliminated sales of these lower margin products. The Futon product line
improved its gross margin by 5.9 percentage points. As noted above, the
Company has reduced lower margin product offerings and some mass merchant
market sales in the Futon product line. The Company has also reduced
manufacturing overhead, labor and material costs in the Futon product line.
These factors have allowed the Company to improve margins at a lower level of
sales. The Casual and Contract Seating product lines also had improved gross
margins in the second quarter of 1996, due to greater operating efficiencies
from increased sales volumes. The Casual product line has also experienced
favorable raw material costs during the second quarter of 1996.
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Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased from the second quarter of 1995 due to
increased commissions as a result of increased sales volume in the Casual and
Contract Seating product lines, increased sales promotional expenses and
increased provisions for uncollectable accounts receivable.
Operating Income: As a result of the above, operating income increased by
$1.3 million to $6.5 million (14.8% of net sales) in the second quarter of 1996
as compared to $5.2 million (11.8% of net sales) in the second quarter of 1995.
Interest Expense: The Company's interest expense decreased $575,000 in the
second quarter of 1996. As of June 28, 1996, the Company had reduced its
debt by $13.8 million since December 31, 1995, and by $16.2 million since
June 30, 1995. These reductions in debt levels have led to improved financial
ratios for the Company and, in turn, allowed the Company to pay lower spreads
between the base rate and LIBOR and the rates which the Company is obligated
to pay to its lenders. These lower spreads decreased the Company's effective
interest rate below those incurred in the second quarter of 1995.
Provision for Income Taxes: The Company's 1996 effective tax rate of 38.3% is
greater than the federal statutory rate due to the effect of state income taxes
and non-deductible goodwill amortization. For the second quarter of 1995,
the effective tax rate was 40.4% which is greater than the federal statutory
rate due to the effect of state income taxes and non-deductible goodwill
amortization.
COMPARISON OF SIX MONTHS ENDED JUNE 28, 1996 AND JUNE 30, 1995
Net Sales: WinsLoew's consolidated net sales for the first six months of
1996 increased $1.1 million or 1.4%, to $74.9 million from $73.8 million in the
first quarter of 1995. Two of the Company's four product lines experienced
sales increases. The Contract Seating product line experienced a sales
increase of 23.5% as construction in the lodging industry drove up demand. The
Casual product line increased sales by 7.5%. The Company believes that due to
its high quality and innovative designs, existing retail customers have
allocated more floor space, and are therefore requiring larger inventories of
the Company's casual aluminum furniture. RTA product line sales decreased by
14.7% due to the Company's restructuring of this product line in September,
1995. This restructuring resulted in the Company exiting the promotionally-
priced seating market, beginning a transition from traditional lower margin RTA
products to higher margin products. Also in the first six months of 1996, some
mass merchants have purchased fewer products as a result of price increases in
the RTA product line. The decrease in RTA sales was offset by Continental
Engineering Group, Inc. being included for the entire first six months of 1996.
Futon product line sales decreased by $3.9 million. In September, 1995, the
Company announced a restructuring of this product line, which reduced product
offerings and discontinued sales to some mass merchant customers. With the
decision to reduce sales to the mass merchant market, the Company has begun
to focus efforts on rebuilding the specialty store business. However, Futon
product sales to the specialty store market have declined from the levels of
the first six months of 1995.
Gross Margin: Consolidated gross margin increased to 32.2% in the first six
months of 1996, compared to 27.0% in the first six months of 1995. Each of the
Company's product lines experienced increases in gross margin. The Casual and
Contract Seating product lines had improved gross margins in the first six
months of 1996, due to greater operating efficiencies from increased sales
volumes. The Casual product line has also experienced favorable raw material
costs during the first six months of 1996. The RTA product line gross margin
improved by 3.9 percentage points, primarily due to the acquisition of
Continental Engineering Group, Inc., whose products have higher gross margins
than the Company's traditional RTA products. The Company's sale of its
promotionally-priced seating business also eliminated sales of these lower
margin products. The Futon product line improved its gross margin by
7.1 percentage points.
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As noted above, the Company has reduced lower margin product offerings and some
mass merchant market sales in the Futon product line. The Company has also
reduced manufacturing overhead, labor and material costs in the Futon product
line. These factors have allowed the Company to improve margins at a lower
level of sales.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased from the six months of 1995 due to the
addition of Continental for the full first quarter of 1996, increased
commissions as a result of increased sales volume in the Casual and Contract
Seating product lines, increased sales promotional expenses and increased
provisions for uncollectable accounts receivable.
Operating Income: As a result of the above, operating income increased by
$2.0 million to $7.9 million (10.5% of net sales) in the first six months of
1996 as compared to $5.9 million (7.9% of net sales) in the first six months
of 1995.
Interest Expense: The Company's interest expense decreased $399,000 in the
first six months of 1996 compared to the same period in 1995. As of
June 28, 1996, the Company had reduced its debt by $13.8 million since
December 31, 1995, and by $16.2 million since June 30, 1995. These reductions
in debt levels have led to improved financial ratios for the Company and, in
turn, allowed the Company to pay lower spreads between the base rate and LIBOR
and the rates which the Company is obligated to pay to its lenders. These
lower spreads decreased the Company's effective interest rate below those
incurred in the first six months of 1995 and the first quarter of 1996.
Provision for Income Taxes: The Company's 1996 effective tax rate of 38.3% is
greater than the federal statutory rate due to the effect of state income taxes
and non-deductible goodwill amortization. For the first six months of 1995,
the effective tax rate was 44.0% which is greater than the federal statutory
rate due to the effect of state income taxes and non-deductible goodwill
amortization.
1995 CHARGES FOR RESTRUCTURING
In September, 1995, WinsLoew recorded a charge of $7.1 million related to a
plan to redirect the marketing and operations of the Company's RTA and Futon
product lines. The restructuring plan was substantially completed during 1995.
However, as part of the restructuring, the Company had excess capacity at its
Futon manufacturing facilities. The Company disclosed plans to consolidate its
futon production facilities into fewer locations and sell any excess
facilities. As a result, the Company recorded a charge of $655,000 to reduce
excess facilities to their estimated realizable value. In the first quarter of
1996, management completed its review of the Futon facilities, culminating in a
decision to consolidate its Tennessee operations into two facilities from four
facilities. This consolidation should result in no material change to the
charge recorded in 1995. WinsLoew's management is exploring ways to minimize
the cost of this consolidation effort so as to have an insignificant effect on
cash flows. As a result, while originally scheduled to be completed during the
third quarter of 1996, the consolidation of facilities may extend into
the fourth quarter of 1996.
SEASONALITY AND QUARTERLY INFORMATION
The furniture industry is cyclical and sensitive to changes in general economic
conditions, consumer confidence, discretionary income, interest rate levels and
credit availability.
Sales of Casual products are typically higher in the second and fourth quarters
of each year, primarily as a result of: (1) high retail demand for casual
furniture in the second quarter, preceding the summer months, and (2) the impact
of special sales programs on fourth quarter sales. The Company's Casual
product sales will also be affected by weather conditions during the peak
retail selling season and the resulting impact on consumer purchases of
outdoor furniture products.
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The results of operations for any interim quarter are not necessarily
indicative of results for a full year.
LIQUIDITY AND CAPITAL RESOURCES
The WinsLoew's short-term cash needs are primarily for working capital to
support its debt service, accounts receivable and inventory requirements. The
Company has historically financed its short-term liquidity needs with
internally generated funds and revolving credit facility borrowings. The
Company actively monitors its cash balances and applies available funds to
reduce borrowings under its long-term revolving line of credit. At
June 28, 1996, the Company had $35.5 million of working capital and
$19.4 million of unused and available funds under its credit facilities
($9.4 million of unused and available funds after giving effect to the
June 1996 amendment described below). The Company has reduced its debt by
$16.2 million since June 30, 1995, increasing its unused and available funds by
$4.4 million.
In June 1996, WinsLoew amended its senior credit facility to provide the
Company with a variable amount available under the revolving line of credit
(see Note 3 to the Consolidated Financial Statements). Due to the seasonal
nature of the Casual furniture product line, the Company's cash requirements
are usually greater in the first quarter of each year. The June 1996 amendment
allows the amount available to fluctuate with the seasonal nature of the
Company's business. After the first quarter of each year, the Company's cash
requirements from its credit line are less. By the use of a variable amount of
credit availability, the Company can avoid the significant cost of paying for
an available but unused line of credit.
In July 1996, WinsLoew amended its senior credit to allow the Company to borrow
up to $6.6 million under its acquisition line of credit to purchase shares of
the Company's common stock (see Note 3 to the Consolidated Financial
Statements).
Cash Flows From Operating Activities: For the first six months of 1996, cash
provided by operating activities was $14.7 million compared to cash provided of
$10.3 million in the first six months of 1995. During the first four months of
each year, accounts receivable in the Casual Furniture division normally
increase due to extended payment terms offered to customers. During the second
quarter, the Company receives payment on these accounts receivable. The
improvement in cash provided by operations in the first six months of 1996
compared to 1995 also benefited from a cash management program which management
began in 1995. This program has conserved cash by reducing accounts receivable
and inventory in all divisions below those levels which the Company had
historically maintained. Finally, the improved cash flows provided by
operations benefited from the overall improvement in profits, primarily in the
Casual and Contract Seating product lines.
Cash Flows From Investing Activities: WinsLoew's net cash used in investing
activities was $443,000 during the first quarter of 1996 compared to
$9.1 million in 1995. The Company paid $7.3 million in cash, including
capitalized acquisition costs, to purchase Continental Engineering in
March, 1995. During 1996, the Company reduced its net capital equipment
expenditures by $1.3 million from its levels in the first six months of 1995.
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Cash Flows From Financing Activities: Net cash used in financing activities was
$13.8 million in the first six months of 1996 compared to $1.1 million in the
first six months of 1995. In the first six months of 1996, increased cash
flows from the overall improvement in profits, primarily in the Casual and
Contract Seating product lines, were used to reduce the Company's debt. In
1995, the Company borrowed $10.7 million to finance the acquisition of
Continental Engineering and the repurchase of the Company's common stock.
At June 28, 1996, the Company has no material commitments for capital
expenditures.
FOREIGN EXCHANGE FORWARD CONTRACTS
WinsLoew purchases some raw materials from several Italian suppliers. These
purchases expose the Company to the effects of fluctuations in the value of the
U.S. dollar versus the Italian lira. If the U.S. dollar declines in value
versus the Italian lira, the Company will pay more in U.S. dollars for these
purchases. To reduce its exposure to loss from such potential foreign exchange
fluctuations, the Company will occasionally enter into foreign exchange forward
contracts. These contracts allow the Company to buy Italian lira at a
predetermined exchange rate and thereby transfer the risk of subsequent
exchange rate fluctuations to a third party. However, if the Company is unable
to continue such forward contract activities and the Company's inventories
increase in connection with expanding sales activities, a weakening of the U.S.
dollar against the Italian lira could result in reduced gross margins. During
the first six months of 1996, the Company purchased $3.4 million of these
materials. The Company elected to hedge a portion of its exposure to purchases
made in the second quarter of 1996 by entering into foreign currency forward
contracts with a value of $515,000, of which $391,000 remains outstanding and
unsettled. The Company did not incur significant gains or losses from these
foreign currency transactions.
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Part II. Other Information
Item 1. Legal Proceedings
The Company is, from time to time, involved in routine litigation. None of
such routine litigation in which the Company is presently involved is material
to its financial position, results of operations or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant held its Annual Meeting of Shareholders on June 18, 1996
(b) Not applicable
(c) The only matter voted on at the Annual Meeting of Shareholders was the
election of Class II directors. The tabulation of votes is as follows:
Broker
Name For Withheld Non-Votes
------------------------ --------- -------- ---------
Phillip T. George, M.D. 8,015,266 35,745 -0-
Peter W. Klein 8,015,266 35,745 -0-
Bobby Tesney 8,015,266 35,745 -0-
Sherwood M. Weiser 8,015,266 35,745 -0-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: (An asterisk to the left of an exhibit number denotes a
management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Quarterly Report on Form 10-Q.)
Exhibit Description
2.1 Agreement and Plan of Merger, dated as of September 30, 1994, by and
among Registrant, Old Winston and Old Loewenstein (1)
*10.1 Registrant's 1994 Stock Option Plan (1)
10.2 Form of Indemnification agreement between the Registrant and certain
of its directors and executive officers, and schedule of parties
thereto (10.2)(2)
*10.3 Employment Agreements between the Registrant and each of Bobby Tesney,
R. Craig Watts, Stephen C. Hess, and Vincent A. Tortorici, Jr.
(10.3)(2)
*10.4 Investment Services Agreement, dated December 16, 1994, between the
Registrant and Trivest, Inc. (10.6)(2)
10.5 Agreement, dated August 1, 1990, between Winston and the Retail,
Wholesale, and Department Store Union, AFL-CIO, as amended
August 1, 1993 (10.8)(1)
14
15
10.6 Lease, dated October 15, 1969, between 601 Industrial Development
Corporation and Winston, as amended (10.15)(1)
10.7 Lease, dated July 13, 1987, between LaSalle National Bank and Winston,
as amended (10.18)(1)
10.8 Business Lease, dated November, 18, 1993, between Loewenstein and
Emanuel Vanzo (10.21)(2)
10.9 Asset Purchase Agreement, dated October 29, 1993, among Loewenstein,
Shaffield Industries, Inc., Tennessee Woods, Inc., Figoshen Mills,
Inc., Gary S. Shaffield, John W. Shaffield, and G.S.S., a Partnership
(10.22)(1)
10.10 Agreement and Plan of Merger, dated December 30, 1993, among
Loewenstein, New West Industries, and Michael W. Haworth, as agent and
attorney-in-fact (10.23)(1)
10.11 Company Shareholders Agreement, dated December 30, 1993, among
Loewenstein, New West Industries, and Michael Haworth, both as
shareholder of New West and as agent and attorney-in-fact, and the
shareholders of New West (10.24)(1)
10.12 Lease Agreement, dated as of November 27, 1985, between The Equitable
Life Assurance Society of the United States and Jerry Rega and
Associates, Inc., d/b/a Texacraft, as amended (10.26)(2)
10.13 Lease Agreement, dated as of January 11,1989, between W. Leslie Pelio
and Michael Haworth d/b/a Simworth, as amended (10.13)(2)
10.14 Multi-Tenant Triple Net Industrial Lease, dated as of December 12,1991,
between Birtcher Campbell Reliance - MIP Ltd., and Continental
Engineering Group, Inc., d/b/a Microcenter, as amended (10.30)(2)
10.15 Stock Purchase Agreement among WinsLoew Furniture, Inc., Continental
Engineering Group, Inc., and certain Shareholders, dated
February 15, 1995 (10.31)(3)
10.16 Credit Agreement, dated February 2, 1995, among the Registrant, its
subsidiaries, and Heller Financial, Inc. (10.32)(3)
10.17 First Amendment to Credit Agreement, dated February 22, 1995, among the
Registrant, its subsidiaries, and Heller Financial, Inc. (4)
10.18 Second Amendment to Credit Agreement, dated May 8, 1995, among the
Registrant, its subsidiaries, and Heller Financial, Inc. (4)
10.19 Third Amendment to Credit Agreement, dated November 15, 1995, among the
Registrant, its subsidiaries, and Heller Financial, Inc. (4)
10.20 Fourth Amendment to Credit Agreement, dated November 20, 1995, among
the Registrant, its subsidiaries, and Heller Financial, Inc. (4)
10.21 Fifth Amendment to Credit Agreement, dated June 30, 1996 among the
Registrant, its subsidiaries, and Heller Financial, Inc. (5)
15
16
10.22 Sixth Amendment to Credit Agreement, dated July 1, 1996, among the
Registrant, its subsidiaries, and Heller Financial, Inc. (5)
10.23 Commercial Lease by and between Triangle Investments and Winston
Furniture Company of Alabama, Inc., dated November 6, 1995 (10.21)(4)
10.24 Lease Agreement by and between Sorrell Partnership and Southern Wood
Products dated March 8, 1994 (10.22)(4)
10.25 Lease Agreement by and between Teacher Insurance and Annuity
Association and Winston Furniture Company of Alabama, Inc., commencing
December 15, 1995 (4)
27 Financial Data Schedule (6)
_______________________
(1) Incorporated by reference to the exhibits, shown in parentheses and filed
with the Registrant's Registration Statement on Form S-4 (No. 33-85476)
(2) Filed with 1994 10-K. Incorporated by reference to the exhibits, shown in
parentheses and filed with the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994.
(3) Incorporated by reference to the exhibits, shown in parentheses and filed
with theRegistrant's Report on Form 8-K filed April 7, 1995
(4) Filed with 1995 10-K. Incorporated by reference to the exhibits, shown in
parentheses and filed with the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995.
(5) Filed herewith.
(6) Filed in electronic format.
Exhibits required by Item 601 of Regulation S-K
The index to exhibits that are listed in Item 6(a) of this report and not
incorporated by reference follows the "Signatures" section hereof and is
incorporated herein by reference.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter for which this
Quarterly Report on Form 10-Q is being filed.
16
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINSLOEW FURNITURE, INC.
/s/ Bobby Tesney
-----------------
August 2, 1996 BOBBY TESNEY
President and Chief Executive Officer
/s/ Vincent A. Tortorici, Jr.
-----------------------------
August 2, 1996 VINCENT A. TORTORICI, Jr.
Chief Financial Officer
17
INDEX TO EXHIBITS
Page Number
in Sequential
Number System
EXHIBIT
10.21 Fifth Amendment to Credit Agreement, dated June 30, 1996 among
the Registrant, its subsidiaries, and Heller Financial, Inc.
10.22 Sixth Amendment to Credit Agreement, dated July 1, 1996, among
the Registrant, its subsidiaries, and Heller Financial, Inc.
EXHIBIT
10.21
1
FIFTH AMENDMENT TO CREDIT AGREEMENT
This Fifth Amendment to Credit Agreement dated as of June 30, 1996 (this
"Agreement") is among WINSLOEW FURNITURE, INC., a Florida corporation
("WinsLoew"), LOEWENSTEIN, INC., a Florida corporation ("Loewenstein"), WINSTON
FURNITURE COMPANY OF ALABAMA, INC., an Alabama corporation ("Winston"), XL
LIQUIDATION CORP., a North Carolina corporation ("XL"), TEXACRAFT, INC., a
Texas corporation ("Texacraft"), and CONTINENTAL ENGINEERING GROUP, INC., a
California corporation ("Continental") (WinsLoew, Loewenstein, Winston, XL,
Texacraft and Continental being hereinafter referred to collectively as
"Borrowers" and individually as a "Borrower"), the financial institutions party
hereto as "Lenders" and HELLER FINANCIAL, INC., a Delaware corporation in its
capacity as agent for the Lenders ("Agent").
W I T N E S S E T H:
--------------------
WHEREAS, Agent, Borrowers and Lenders are parties to that certain Credit
Agreement dated February 2, 1995 (as heretofore amended, the "Credit Agreement";
capitalized terms not otherwise defined herein shall have the definitions
provided therefor in the Credit Agreement) and to certain other documents
executed in connection with the Credit Agreement; and
WHEREAS, the parties hereto wish to amend the Credit Agreement to permit
Borrowers to periodically adjust the amount of the Revolving Loan Commitment.
NOW, THEREFORE, the parties agree as follows:
1. Amendments to the Credit Agreement.
(a) Subsection 1.1 of the Credit Agreement is hereby amended by adding
the following new definition in appropriate alphabetical order:
"Seasonal Adjustment" shall have the meaning ascribed to such term in
subsection 2.1(B).
(b) Subsection 1.1 of the Credit Agreement is hereby further amended by
amending and restating the definition of "Revolving Loan Commitment" to read in
its entirety as follows:
"Revolving Loan Commitment" means (a) as to any Lender, the
commitment of such Lender to make Revolving Loans as set forth on the
signature page of this Agreement opposite such Lender's signature or in the
most recent Lender Addition Agreement, if any, executed by such Lender, as
such commitment amount may be increased by Borrower and subsequently
decreased pursuant to any Seasonal Adjustment effected in accordance with
subsection 2.1(B), and (b) as to all Lenders, the aggregate commitment of all
Lenders to make Revolving Loans and to purchase participations in Lender
Letters of Credit and Risk Participation Agreements pursuant to subsection
2.1(D)(2), as such aggregate commitment amount may be increased by
Borrower and subsequently decreased pursuant to any Seasonal Adjustment
effected in accordance with subsection 2.1(B).
(c) Subsection 2.1(B) of the Credit Agreement is hereby amended by
amending and restating such subsection to read in its entirety as follows:
(B) Revolving Loan. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of each Loan
Party in the Loan Documents, each Lender agrees, severally and not jointly, to
1
2
lend to the Borrowers from time to time during the period from the Closing Date
to and excluding the Expiry Date, its Pro Rata Share of the Revolving Loan.
The aggregate amount of the Revolving Loan Commitments shall be
$20,000,000; provided, however, that at the election of the Borrowers the
aggregate amount of the Revolving Loan Commitments may be increased on
December 31st of each year to an amount up to $40,000,000 provided that
Agent receives a written notice of such election from the Borrowers prior to
December 1st of such year specifying the amount of the increase and certifying
that, on a pro-forma basis after giving effect to such increase (i) no Event of
Default will exist and (ii) the Maximum Revolving Loan Amount will exceed the
aggregate outstanding principal balance of the Revolving Loan by at least
$4,000,000; provided, further, however, that the aggregate amount of the
Revolving Loan Commitments shall, if so increased, automatically reduce to
$20,000,000 on June 30th of each year, without requirement of notice from the
Borrowers, the Agent or the Lenders (each such increase or decrease, a
"Seasonal Adjustment"). Any Borrower may request a Revolving Loan pursuant
to the terms of this Agreement. Each of the Borrowers agrees to be jointly and
severally liable with respect to the Revolving Loan. The Revolving Loan may be
repaid and reborrowed at any time prior to the Expiry Date. No Lender shall
have any obligation to make advances under this subsection 2.1(B) to any
Borrower to the extent any requested advance would cause the principal balance
of the Revolving Loan then outstanding to exceed the Maximum Revolving Loan
Amount; provided that the Substantial Majority Lenders may, in their sole
discretion, elect from time to time for a period not to exceed ninety (90)
consecutive days, to make Revolving Loans to Borrowers that exceed the
Maximum Revolving Loan Amount by up to $2,000,000 but in no event in an
amount greater than the aggregate amount of Lenders' Revolving Loan
Commitments. If Revolving Loans in excess of the Maximum Revolving Loan
Amount are made pursuant to the approval of the Substantial Majority Lenders
as set forth in the proviso to the preceding sentence, then for purposes of
subsection 2.1(B)(1), the Maximum Revolving Loan Amount shall be deemed
increased by such amount but only for so long as the Substantial Majority
Lenders allow such Revolving Loans to be outstanding.
(1) "Maximum Revolving Loan Amount" means, as of any
date of determination, the lesser of (a) the Revolving Loan
Commitments minus the aggregate Risk Participation Reserve or (b) the
Borrowing Base minus the Risk Participation Reserve, each such
amount calculated as of such date of determination.
(2) "Borrowing Base" means, as of any date of
determination, the sum of (a) eighty-five percent (85%) of the Eligible
Accounts of the Borrowers and their Subsidiaries plus (b) sixty percent
(60%) of Eligible Inventory of the Borrowers and their Subsidiaries. The
Borrowing Base shall be determined based on the most recent
Borrowing Base Certificate timely delivered by WinsLoew pursuant to
subsection 5.1(F).
(d) Subsection 2.1(F) of the Credit Agreement is hereby amended by
deleting the first sentence thereof in its entirety, and substituting the
following therefor:
Each Borrower shall execute and deliver to each Lender a Revolving Note to
evidence the Revolving Loan, such Revolving Note to be in the principal amount
of the maximum Revolving Loan Commitment of such Lender available to such
Borrower at any time hereunder, and with other appropriate insertions.
2
3
(e) The Commitments of each Lender set forth on the signature page of the
Credit Agreement or, where applicable, the Lender Addition Agreements pursuant
to which such Lender became a party to the Credit Agreement, shall, after the
date on which this Agreement becomes effective, be as set forth on the
signature page to this Agreement.
2. Conditions. The effectiveness of the foregoing amendments is subject to
the satisfaction of the following conditions:
(a) No Default. No Default or Event of Default under the Credit Agreement,
as amended hereby, shall have occurred and be continuing.
(b) Warranties and Representations. The warranties and representations
of Borrowers contained in this Agreement, the Credit Agreement, as amended
hereby, and the Loan Documents shall be true and correct as of the effective
date hereof, with the same effect as though made on such date, except to the
extent that any of such warranties and representations expressly relate to an
earlier date, in which case such representations and warranties shall have
been true and correct as of such earlier date.
(c) Execution and Delivery. This Agreement shall have been executed
and delivered by Borrowers, Agent and Lenders.
3. Miscellaneous.
(a) Captions. Section captions used in this Agreement are
for convenience only, and shall not affect the construction of this Agreement.
(b) Governing Law. This Agreement shall be a contract made under and
governed by the laws of the State of Illinois, without regard to conflict of
laws principles. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Agreement.
(d) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the sole benefit of Borrowers, Agent, Lenders and their
respective successors and assigns.
(e) References. Any reference to the Credit Agreement contained in any
notice, request, certificate, or other document executed concurrently with or
after the execution and delivery of this Agreement shall be deemed to be a
reference to the Credit Agreement as amended by this Agreement unless the
context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything contained herein,
the terms of this Agreement are not intended to and do not serve to effect a
novation of any of the Obligations created pursuant to the Credit Agreement.
The parties hereto expressly do not intend to extinguish the Credit Agreement.
Instead, it is the express intention of the parties hereto to reaffirm the
existing Obligations under the Credit Agreement which are evidenced by the
Notes and secured by the Collateral. The Credit Agreement as amended hereby
and each of the Loan Documents remain in full force and effect.
3
4
Delivered at Chicago, Illinois, as of the day and year first above written.
WINSLOEW FURNITURE, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
LOEWENSTEIN, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
WINSTON FURNITURE COMPANY
OF ALABAMA, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
XL LIQUIDATION CORP.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
TEXACRAFT, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
CONTINENTAL ENGINEERING
GROUP, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
4
5
ACQUISITION LOAN COMMITMENT: HELLER FINANCIAL, INC.,
$3,333,334 Individually and as Agent
TERM LOAN COMMITMENT: By: /s/ K. Craig Gallehugh
$1,732,632 --------------------------
REVOLVING LOAN COMMITMENT: Name Printed: K. Craig Gallehugh
$10,666,668 Title: Vice President
(maximum amount, subject to adjustment
pursuant to subsection 2.1(B) of the
Credit Agreement)
ACQUISITION LOAN COMMITMENT: THE FIRST NATIONAL BANK
$3,333,333 OF BOSTON
TERM LOAN COMMITMENT: By: /s/ William C. Purniton
$1,732,631 ---------------------------
REVOLVING LOAN COMMITMENT: Name Printed: William C. Purniton
$10,666,666 Title: Vice President
(maximum amount, subject to adjustment
pursuant to subsection 2.1(B) of the
Credit Agreement)
ACQUISITION LOAN COMMITMENT: BANK OF AMERICA ILLINOIS
$3,333,333
TERM LOAN COMMITMENT: By:_____________________________
$1,732,631 Name Printed:__________________
REVOLVING LOAN COMMITMENT: Title:___________________________
$10,666,666
(maximum amount, subject to adjustment
pursuant to subsection 2.1(B) of the
Credit Agreement)
ACQUISITION LOAN COMMITMENT: ABN AMRO BANK N.V.
$2,500,000
TERM LOAN COMMITMENT: By:_____________________________
$1,299,473 Name Printed:__________________
REVOLVING LOAN COMMITMENT: Title:___________________________
$8,000,000
(maximum amount, subject to adjustment
pursuant to subsection 2.1(B) of the
Credit Agreement)
5
EXHIBIT
10.22
SIXTH AMENDMENT TO CREDIT AGREEMENT
This Sixth Amendment to Credit Agreement dated as of July 1, 1996 (this
"Agreement") is among WINSLOEW FURNITURE, INC., a Florida corporation
("WinsLoew"), LOEWENSTEIN, INC., a Florida corporation ("Loewenstein"), WINSTON
FURNITURE COMPANY OF ALABAMA, INC., an Alabama corporation ("Winston"), XL
LIQUIDATION CORP., a North Carolina corporation ("XL"), TEXACRAFT, INC.,
a Texas corporation ("Texacraft"), and CONTINENTAL ENGINEERING GROUP, INC., a
California corporation ("Continental") (WinsLoew, Loewenstein, Winston, XL,
Texacraft and Continental being hereinafter referred to collectively as
"Borrowers" and individually as a "Borrower"), the financial institutions party
hereto as "Lenders" and HELLER FINANCIAL, INC., a Delaware corporation in its
capacity as agent for the Lenders ("Agent").
W I T N E S S E T H:
--------------------
WHEREAS, Agent, Borrowers and Lenders are parties to that certain Credit
Agreement dated February 2, 1995 (as heretofore amended from time to time, the
"Credit Agreement"; capitalized terms not otherwise defined herein shall have
the definitions provided therefor in the Credit Agreement) and to certain other
documents executed in connection with the Credit Agreement; and
WHEREAS, the parties hereto wish to amend the Credit Agreement to permit
WinsLoew or any Subsidiary of WinsLoew to acquire a portion of its capital
stock.
NOW, THEREFORE, the parties agree as follows:
1.Amendments to the Credit Agreement.
(a) Subsection 2.1(C) of the Credit Agreement is hereby amended to delete
said subsection and substitute the following in its place and stead:
(C) Acquisition Loan. Subject to the limitations placed upon
(a) Borrowers to make Capital Expenditures set forth in Section 6.1 and (b)
WinsLoew and its Subsidiaries to repurchase WinsLoew's capital stock pursuant
to the terms of Subsection 7.5(d) of the Credit Agreement and the other terms
and conditions of this Agreement and in reliance upon the representations and
warranties of each Loan Party in the Loan Documents, each Lender agrees,
severally and not jointly, to lend to Borrowers on or before February 2, 1998
its Pro Rata Share of the portion of the Acquisition Loan requested by WinsLoew
upon receipt of a certificate executed by WinsLoew certifying that the terms
and conditions of this subsection 2.1(C) and/or Subsection 7.5(d) have been
satisfied. The proceeds of the Acquisition Loan shall be used solely to fund
Capital Expenditures and the acquisition of WinsLoew capital stock pursuant to
the terms of Subsection 7.5(d). The aggregate amount of advances made under
the Acquisition Loan shall not exceed $12,500,000. WinsLoew may request an
Acquisition Loan for itself or any Borrower pursuant to the terms of this
Agreement. No advances will be made under the Acquisition Loan after
February 2, 1998. Thereafter, any outstanding Acquisition Loan shall be repaid
in quarterly installments on the last day of each calendar quarter as follows:
(i) fifteen percent (15%) of such outstanding balance shall be payable in four
(4) equal installments during calendar year 1998; (ii) thirty-five percent
(35%) ofsuch outstanding balance shall be payable in four (4) equal
installments during calendar 1999; and (iii) fifty percent (50%) of such
outstanding balance shall be payable in four (4) equal installments during
calendar year 2000. Each of the Borrowers shall be jointly and severally
liable with respect to the Acquisition Loans.
1
2
(b) Subsection 6.7 of the Credit Agreement is hereby amended to decrease
each amount of Tangible Net Worth provided in said subsection for each quarter
during the periods set forth in Subsection 6.7 commencing September 30, 1996 by
an amount equal to the aggregate cost of the WinsLoew capital stock repurchased
pursuant to Section 7.5(d) of the Credit Agreement commencing with any WinsLoew
capital stock repurchased on or after June 27, 1996.
(c) Subsection 7.5(d)(B) of the Credit Agreement is hereby amended to
delete the number $10,000,000 and substitute the number $6,592,000 in its place
and stead.
(d) Subsection 7.5(d) of the Credit Agreement is hereby amended to delete
the period at the end of said subsection and add the following:
and (D) the repurchase of WinsLoew capital stock may only be
funded from the proceeds of the Acquisition Loan.
2. Conditions. The effectiveness of the foregoing amendments is subject to
the satisfaction of the following conditions:
(a) Amendment Fee. Borrowers shall pay to Lenders an amendment fee
equal to $61,250.
(b) No Default. No Default or Event of Default under the Credit Agreement,
as amended hereby, shall have occurred and be continuing.
(c) Warranties and Representations. The warranties and representations
of Borrowers contained in this Agreement, the Credit Agreement, as amended
hereby, and the Loan Documents shall be true and correct as of the effective
date hereof, with the same effect as though made on such date, except to the
extent that any of such warranties and representations expressly relate to an
earlier date, in which case such representations and warranties shall have
been true and correct as of such earlier date.
(d) Execution and Delivery. This Agreement shall have been executed
and delivered by Borrowers, Agent and Lenders.
3.Miscellaneous.
(a) Captions. Section captions used in this Agreement are for convenience
only, and shall not affect the construction of this Agreement.
(b) Governing Law. This Agreement shall be a contract made under and
governed by the laws of the State of Illinois, without regard to conflict of
laws principles. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Agreement.
2
3
(d) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the sole benefit of Borrowers, Agent, Lenders and their
respective successors and assigns.
(e) References. Any reference to the Credit Agreement contained in any
notice, request, certificate, or other document executed concurrently with or
after the execution and delivery of this Agreement shall be deemed to be a
reference to the Credit Agreement as amended by this Agreement unless the
context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything contained herein,
the terms of this Agreement are not intended to and do not serve to effect a
novation of any of the Obligations created pursuant to the Credit Agreement.
The parties hereto expressly do not intend to extinguish the Credit Agreement.
Instead, it is the express intention of the parties hereto to reaffirm the
existing Obligations under the Credit Agreement which are evidenced by the Notes
and secured by the Collateral. The Credit Agreement as amended hereby and each
of the Loan Documents remain in full force and effect.
Delivered at Chicago, Illinois, as of the day and year first above written.
WINSLOEW FURNITURE, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
LOEWENSTEIN, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
WINSTON FURNITURE COMPANY
OF ALABAMA, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
XL LIQUIDATION CORP.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
TEXACRAFT, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
CONTINENTAL ENGINEERING
GROUP, INC.
By:/s/ Vincent A. Tortorici, Jr.
--------------------------------
Name Printed: Vincent A. Tortorici, Jr.
Title: Vice President
3
4
ACQUISITION LOAN COMMITMENT: HELLER FINANCIAL, INC.,
$3,333,334 Individually and as Agent
TERM LOAN COMMITMENT: By: /s/ K. Craig Gallehugh
$1,641,440 --------------------------
REVOLVING LOAN COMMITMENT: Name Printed: K. Craig Gallehugh
$10,666,668 Title: Vice President
(maximum amount, subject to adjustment
pursuant to subsection 2.1(B) of the
Credit Agreement)
ACQUISITION LOAN COMMITMENT: THE FIRST NATIONAL BANK
$3,333,333 OF BOSTON
TERM LOAN COMMITMENT: By:_____________________________
$1,641,440 Name Printed:__________________
REVOLVING LOAN COMMITMENT: Title:___________________________
$10,666,666
(maximum amount, subject to adjustment
pursuant to subsection 2.1(B) of the
Credit Agreement)
ACQUISITION LOAN COMMITMENT: BANK OF AMERICA ILLINOIS
$3,333,333
TERM LOAN COMMITMENT: By: /s/ Joseph T. Koch
$1,641,440 ----------------------
REVOLVING LOAN COMMITMENT: Name Printed: Joseph T. Koch
$10,666,666 Title: Senior Vice President
(maximum amount, subject to adjustment
pursuant to subsection 2.1(B) of the
Credit Agreement)
ACQUISITION LOAN COMMITMENT: ABN AMRO BANK N.V.
$2,500,000
TERM LOAN COMMITMENT: By:_____________________________
$1,231,080 Name Printed:__________________
REVOLVING LOAN COMMITMENT: Title:___________________________
$8,000,000
(maximum amount, subject to adjustment
pursuant to subsection 2.1(B) of the
Credit Agreement)
4