-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D147T64/nUbokgxlf5rxFHR4p8/TjEnJ4FD5/QhAGtuRFSSbvv8Ll7tEJHH0KG0L 2GBqN3Ky6oQ/7vMXbjl/pw== 0001011570-99-000008.txt : 19991117 0001011570-99-000008.hdr.sgml : 19991117 ACCESSION NUMBER: 0001011570-99-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KNOLL INC CENTRAL INDEX KEY: 0001011570 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FURNITURE & FIXTURES [2590] IRS NUMBER: 133873847 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12907 FILM NUMBER: 99753726 BUSINESS ADDRESS: STREET 1: 1235 WATER ST CITY: EAST GREENVILLE STATE: PA ZIP: 18041 BUSINESS PHONE: 2156797991 MAIL ADDRESS: STREET 1: 1235 WATER STREET CITY: EAST GREENVILLE STATE: PA ZIP: 18041 10-Q 1 FORM 10-Q 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 quarterly period ended September 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 001-12907 KNOLL, INC. A Delaware Corporation I.R.S. Employer No. 13-3873847 1235 Water Street East Greenville, PA 18041 Telephone Number (215)679-7991 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 --- --- As of November 12, 1999, there were 23,287,598 shares of the Registrant's common stock, par value $0.01 per share, outstanding. KNOLL, INC. TABLE OF CONTENTS FOR FORM 10-Q Item Page - ---- ---- PART I -- FINANCIAL INFORMATION 1. Condensed Consolidated Financial Statements (Unaudited): Condensed Consolidated Balance Sheets at September 30, 1999 and December 31, 1998..................................... 3 Condensed Consolidated Statements of Operations for the three months ended September 30, 1999 and 1998 and the nine months ended September 30, 1999 and 1998............. 4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998............. 5 Notes to the Condensed Consolidated Financial Statements.... 6 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 9 3. Quantitative and Qualitative Disclosures about Market Risk...... 12 PART II -- OTHER INFORMATION 1. Legal Proceedings............................................... 13 2. Changes in Securities and Use of Proceeds....................... 13 6. Exhibits and Reports on Form 8-K................................ 14 Signatures.......................................................... 15 Exhibit Index....................................................... 16 2 PART I -- FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) - ---------------------------------------------------------------- KNOLL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars In Thousands, Except Per Share Data)
September 30, 1999 December 31, 1998 ------------------ ----------------- ASSETS Current assets: Cash and cash equivalents.......... $ 11,538 $ 17,465 Customer receivables, net.......... 143,831 137,956 Inventories........................ 80,771 77,113 Deferred income taxes.............. 21,005 21,067 Prepaid and other current assets... 15,435 9,842 -------- -------- Total current assets........... 272,580 263,443 Property, plant and equipment.......... 272,269 257,970 Accumulated depreciation............... (92,462) (71,803) -------- -------- Property, plant and equipment, net............... 179,807 186,167 Intangible assets...................... 282,489 282,197 Accumulated amortization............... (28,061) (22,154) -------- -------- Intangible assets, net......... 254,428 260,043 Other noncurrent assets................ 4,286 4,374 -------- -------- Total Assets................... $711,101 $714,027 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt............................. $ - $ 10,000 Accounts payable................... 57,435 59,551 Income taxes payable............... 846 7,096 Other current liabilities.......... 80,145 91,756 -------- -------- Total current liabilities...... 138,426 168,403 Long-term debt......................... 139,169 159,255 Postretirement benefits other than pension.............................. 19,149 18,450 Other noncurrent liabilities........... 27,974 24,069 -------- -------- Total liabilities.............. 324,718 370,177 -------- -------- Stockholders' equity: Common stock, $0.01 par value; 100,000,000 shares authorized; 40,832,712 shares issued and outstanding (net of 2,894,700 treasury shares) in 1999 and 41,799,499 shares issued and outstanding (net of 1,707,700 treasury shares) in 1998......... 408 418 Additional paid-in-capital......... 157,419 181,792 Unearned stock grant compensation.. (503) (712) Retained earnings.................. 236,197 170,986 Accumulated other comprehensive income........................... (7,138) (8,634) -------- -------- Total stockholders' equity..... 386,383 343,850 -------- -------- Total Liabilities and Stockholders' Equity......... $711,101 $714,027 ======== ========
See accompanying notes. 3 KNOLL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Sales...................... $247,543 $235,028 $710,479 $702,760 Cost of sales.............. 150,958 142,006 430,149 424,577 -------- -------- -------- -------- Gross profit............... 96,585 93,022 280,330 278,183 Selling, general and administrative expenses................. 50,154 49,065 151,469 150,894 -------- -------- -------- -------- Operating income........... 46,431 43,957 128,861 127,289 Interest expense........... 3,796 3,910 12,175 12,882 Recapitalization expense.................. 541 -- 3,541 -- Other income (expense), net...................... 168 1,837 (769) 2,931 -------- -------- -------- -------- Income before income tax expense.............. 42,262 41,884 112,376 117,338 Income tax expense......... 17,249 16,947 47,165 47,528 -------- -------- -------- -------- Net income................. $ 25,013 $ 24,937 $ 65,211 $ 69,810 ======== ======== ======== ======== Earnings per share of common stock: Basic................ $ 0.63 $ 0.60 $ 1.65 $ 1.68 Diluted.............. $ 0.61 $ 0.57 $ 1.59 $ 1.59 Weighted average shares of common stock outstanding: Basic................ 39,694 41,762 39,607 41,555 Diluted.............. 41,082 43,864 41,081 43,887
See accompanying notes. 4 KNOLL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands)
Nine Months Ended September 30, ------------------------ 1999 1998 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income..................................... $ 65,211 $ 69,810 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization............ 26,705 28,648 Other noncash items...................... 1,419 (2,211) Recapitalization expense................. 3,541 -- Changes in assets and liabilities: Customer receivables................. (6,647) (4,478) Inventories.......................... (4,106) (6,993) Accounts payable..................... (3,584) (8,245) Current and deferred income taxes.... (1,084) 1,002 Other current assets and liabilities........................ (13,771) 347 Other noncurrent assets and liabilities........................ (1,157) 1,413 -------- -------- Cash provided by operating activities.......... 66,527 79,293 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment..... (14,376) (20,206) Proceeds from sale of assets................... 106 22 -------- -------- Cash used in investing activities.............. (14,270) (20,184) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of revolving credit facility, net.... (30,000) (61,000) Net proceeds from issuance of stock............ 3,674 4,399 Purchase of common stock....................... (28,675) (3,127) Payment of recapitalization costs.............. (2,738) -- -------- -------- Cash used in financing activities.............. (57,739) (59,728) -------- -------- Effect of exchange rate changes on cash and cash equivalents......................... (445) (84) -------- -------- Decrease in cash and cash equivalents.......... (5,927) (703) Cash and cash equivalents at beginning of period....................................... 17,465 10,790 -------- -------- Cash and cash equivalents at end of period..... $ 11,538 $ 10,087 ======== ========
See accompanying notes. 5 KNOLL, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (Unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Knoll, Inc. (the "Company" or "Knoll") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation are reflected in the condensed consolidated financial statements. The condensed consolidated balance sheet as of December 31, 1998 is derived from the Company's 1998 audited balance sheet. The unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 1998. The results of operations for the three and nine months ended September 30, 1999 are not necessarily indicative of the results to be expected for the full year ending December 31, 1999. 2. Acquisition of Shares Owned by Public Stockholders and New Credit Agreement On March 23, 1999, the Company received a proposal from Warburg, Pincus Ventures, L.P. ("Warburg") and certain members of Knoll management (collectively, the "Continuing Stockholders") regarding a recapitalization (merger) transaction whereby the Company would acquire all of the outstanding shares of its common stock not owned by the Continuing Stockholders for $25.00 per share. The Board of Directors appointed a special committee, consisting of independent members of the Board of Directors, to consider the proposed merger. The special committee retained legal counsel and an investment banker to assist in evaluating the proposed merger. The Continuing Stockholders subsequently increased the proposed merger consideration to $28.00 per share. On June 21, 1999, the Board of Directors, at the recommendation of the special committee, approved the proposed merger at a price of $28.00 per share. On that same day, Warburg and the Company entered into an agreement and plan of merger, which was subsequently amended on July 29, 1999. On October 20, 1999, the merger was approved by the holders of a majority of the outstanding shares of Knoll common stock at the Company's 1999 annual meeting of stockholders. On August 13, 1999, the Company entered into an agreement with the holder of a majority of its 10.875% Senior Subordinated Notes due 2006 (the "Senior Subordinated Notes"). Under the agreement, the majority holder consented to the merger and the related transactions, and the Company agreed to pay such holder (and other holders of the Senior Subordinated Notes who also consent), promptly after completion of the merger, $120 per $1,000 principal amount of the Senior Subordinated Notes owned by the holder. All other holders have provided their consent. As a result, the Company will recognize the total consent payment of $12.9 million as a component of the extraordinary loss to be recognized by the Company in the fourth quarter of 1999. Eight class action complaints relating to the initial announcement of the proposed merger were filed in March 1999. One complaint was voluntarily dismissed and the seven remaining complaints were consolidated into a single action. On June 21, 1999, the Company entered into a Memorandum of Understanding with counsel to the plaintiffs in the lawsuits. The Memorandum of Understanding provided for the settlement of such lawsuits based on the payment of a per share merger consideration of $28.00. On November 3, 1999, the proposed settlement of the litigation, as provided for in the Memorandum of Understanding, was approved by the Delaware Court of Chancery. The merger of a newly formed entity, which was organized by Warburg, with and into Knoll, with Knoll continuing as the surviving corporation, was consummated on November 4, 1999. As a result of the merger, the approximately 17.7 million shares of common stock held by the public stockholders of Knoll immediately prior to the merger have 6 been converted into the right to receive $28.00 per share in cash and have been canceled. Furthermore, the Company's common stock ceased to be listed on the New York Stock Exchange, and the registration of the Company's common stock under the Securities Exchange Act was terminated. During the three months and nine months ended September 30, 1999, the Company incurred $0.5 million and $3.5 million of expense relating to the planned recapitalization of the Company that occurred upon consummation of the merger. This expense is not expected to be deductible for income tax purposes. On October 20, 1999, the Company entered into a credit agreement that provides up to $650.0 million to (a) fund the merger and related fees and expenses (including consent fees related to the Company's Senior Subordinated Notes), (b) refinance all amounts owing under the Company's senior credit agreement that existed immediately prior to the merger and (c) provide for working capital and ongoing general corporate purposes. The agreement consists of a $325.0 million six-year term loan facility and a $325.0 million six-year revolving credit facility. Borrowings under the agreement bear interest at a floating rate based, at the Company's option, upon (a) the Eurodollar rate (as defined therein) plus an applicable percentage that is subject to change based upon the Company's ratio of funded debt to EBITDA or (b) the greater of the federal funds rate plus 0.5% or the prime rate, plus an applicable percentage that is subject to change based upon the Company's ratio of funded debt to EBITDA. The Company is required to make quarterly principal payments under the term loan facility commencing on December 31, 1999 and continuing through September 2005. The agreement is secured by substantially all of the Company's present and future domestic assets, 100% of the capital stock of the Company's present and future domestic subsidiaries and 65% of the capital stock of the Company's present and future foreign subsidiaries. Additionally, all borrowings are jointly and severally, unconditionally guaranteed by the Company's existing and future domestic subsidiaries. However, if the Company is unable to satisfy all or any portion of its obligation with respect to the credit agreement, it is unlikely that the guarantors will be able to pay all or any portion of such unsatisfied obligations. In connection with the consummation of the merger on November 4, 1999, the Company repaid all of its then-outstanding senior indebtedness, which amounted to $14.0 million, and incurred debt totaling $533.0 million under the new credit agreement. 3. Inventories
September 30, 1999 December 31, 1998 ------------------ ----------------- (In Thousands) Raw materials.............. $43,903 $42,625 Work in process............ 12,678 11,827 Finished goods............. 24,190 22,661 ------- ------- Inventories................ $80,771 $77,113 ======= =======
7 4. Earnings Per Share The following table sets forth a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (in thousands, except per share amounts):
Weighted Net Income Average Shares Per Share (Numerator) (Denominator) Amount ----------- --------------- --------- Three Months Ended September 30, 1999: Basic earnings per share.............. $25,013 39,694 $0.63 ===== Effect of dilutive potential common shares: Stock options.................. -- 360 Nonvested restricted stock grants................. -- 1,028 ------- ------ Diluted earnings per share............ $25,013 41,082 $0.61 ======= ====== ===== Three Months Ended September 30, 1998: Basic earnings per share.............. $24,937 41,762 $0.60 ===== Effect of dilutive potential common shares: Stock options................... -- 439 Nonvested restricted stock grants.................. -- 1,663 ------- ------ Diluted earnings per share............ $24,937 43,864 $0.57 ======= ====== ===== Nine Months Ended September 30, 1999: Basic earnings per share.............. $65,211 39,607 $1.65 ===== Effect of dilutive potential common shares: Stock options................... -- 306 Nonvested restricted stock grants.................. -- 1,168 ------- ------ Diluted earnings per share............ $65,211 41,081 $1.59 ======= ====== ===== Nine Months Ended September 30, 1998: Basic earnings per share.............. $69,810 41,555 $1.68 ===== Effect of dilutive potential common shares: Stock options................... -- 525 Nonvested restricted stock grants.................. -- 1,807 ------- ------ Diluted earnings per share............ $69,810 43,887 $1.59 ======= ====== =====
Options to purchase 793,000; 823,000; and 1,093,000 shares of common stock that were outstanding as of September 30, 1999, June 30, 1999 and March 31, 1999, respectively, were not included in the calculations of diluted earnings per share for 1999. Such options were excluded from the calculations because their exercise prices exceeded the average market price of the common stock for the appropriate period and, therefore, their effect on earnings per share would have been antidilutive. 5. Share Repurchase Program During the nine months ended September 30, 1999, the Company purchased 1,187,000 shares of its common stock for $28.7 million, or an average price of $24.16 per share. Since the inception of the share repurchase program in September 1998, the Company has purchased 2,894,700 shares of its common stock for $67.5 million, or an average price of $23.33 per share. 6. Comprehensive Income For the three months ended September 30, 1999 and 1998, total comprehensive income amounted to $25.5 million and $21.9 million, respectively. Total comprehensive income for the nine months ended September 30, 1999 and 1998 was $66.7 million and $64.5 million, respectively. 8 Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations --------------------- The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto and in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1998. Results of Operations Comparison of Third Quarter and Nine Months Ended September 30, 1999 to Third Quarter and Nine Months Ended September 30, 1998 Sales. Sales for the third quarter of 1999 were $247.5 million, an increase of 5.3%, or $12.5 million, from third quarter 1998 sales of $235.0 million. Sales for the nine months ended September 30, 1999 were $710.5 million, an increase of 1.1%, or $7.7 million, from sales of $702.8 million for the same period of 1998. Growth for the third quarter and nine months resulted from increased volume in North America, which was attributable primarily to increased sales of office systems and storage products, offset in part by a reduction of volume in Europe. Gross Profit and Operating Income. As a percentage of sales, gross profit was 39.0% for the third quarter of 1999 compared to 39.6% for the third quarter of 1998 and was 39.5% for the nine months ended September 30, 1999 compared to 39.6% for the same period of 1998. The decrease in gross margin for the third quarter was due primarily to manufacturing inefficiencies that resulted from implementation issues associated with the transition to a new manufacturing system. Operating income as a percentage of sales was 18.7% for the third quarter of 1999 and 18.1% for the nine months ended September 30, 1999, both unchanged from the same periods of the prior year. Selling, general and administrative expenses were $50.2 million for the third quarter of 1999 compared to $49.1 million for the third quarter of 1998. This increase was due primarily to increased expenses related to sales and technology initiatives in the third quarter of 1999. Selling, general and administrative expenses for the nine months ended September 30, 1999 were $151.5 million compared to $150.9 million for the same period of 1998. As a percentage of sales, the Company's selling, general and administrative expenses decreased to 20.3% for the third quarter of 1999 from 20.9% for the third quarter of 1998 and decreased to 21.3% for the nine months ended September 30, 1999 from 21.5% for the same period of 1998. Interest Expense. The Company's interest expense was $3.8 million for the third quarter of 1999 and $12.2 million for the nine months ended September 30, 1999 compared to $3.9 million for the third quarter of 1998 and $12.9 million for the nine months ended September 30, 1998. The decreases in interest expense were due principally to lower outstanding debt balances during the third quarter and nine months of 1999 compared to the third quarter and nine months of 1998. Recapitalization Expense. Pursuant to an Agreement and Plan of Merger dated as of June 21, 1999 (as amended on July 29, 1999), between Warburg and Knoll, a newly formed entity was organized by Warburg and merged with and into Knoll on November 4, 1999, with Knoll continuing as the surviving corporation. As a result of the merger, all shares of common stock held by the public stockholders of Knoll immediately prior to the merger have been converted into the right to receive $28.00 per share in cash and have been canceled. During the three months and nine months ended September 30, 1999, the Company incurred $0.5 million and $3.5 million of expense relating to the planned recapitalization of the Company that occurred upon consummation of the merger. See Note 2 to the unaudited condensed consolidated financial statements for further discussion of the merger. Income Tax Expense. The Company's effective tax rate for the third quarter and nine months ended September 30, 1999 was 40.8% and 42.0%, respectively, compared to 40.5% for the third quarter and nine months ended September 30, 1998, respectively. The increases in the Company's effective tax rate for the third quarter and nine months were due primarily to the recapitalization expense, which is not expected to be deductible for income tax purposes. The changes in the effective tax rate for the third quarter and nine months were also impacted by the mix of the Company's pretax income and the varying tax rates attributable to the countries in which it operates. 9 Earnings Per Share. The Company's diluted earnings per share for the third quarter of 1999 were $0.61, an increase of 7.0% from diluted earnings per share of $0.57 for the third quarter of 1998. Diluted earnings per share of $1.59 for the nine months ended September 30, 1999 was unchanged from the same period of 1998. The recapitalization expense discussed above negatively impacted 1999 diluted earnings per share by $0.01 for the third quarter of 1999 and $0.08 for the nine months ended September 30, 1999. Excluding the impact of the recapitalization expense, earnings per share were $0.62 for the third quarter of 1999, an increase of 8.8% over the third quarter of 1998, and $1.67 for the nine months ended September 30, 1999, an increase of 5.0% over the same period of 1998. Earnings per share for the third quarter and nine months ended September 30, 1999 benefited from the reduced number of common shares outstanding that resulted from the repurchase of shares of common stock by the Company under its share repurchase program that was implemented in September 1998. Liquidity and Capital Resources During the nine months ended September 30, 1999, the Company generated cash flow from operations of $66.5 million. Cash provided by operations resulted primarily from earnings before depreciation, amortization and recapitalization expense offset by cash used for working capital purposes. This cash flow, in addition to proceeds of $3.7 million received from the issuance of stock under the company's employee stock plans, was applied to the funding of $14.4 million in capital expenditures, the repayment of $30.0 million under the Company's revolving credit facility and the repurchase, during the first two months of 1999, of 1,187,000 shares of the Company's common stock for $28.7 million. As of September 30, 1999, the Company's ratio of debt to total capitalization was 26.5%, and the Company had an aggregate of $250.9 million available for borrowing under its U.S. and European revolving credit facilities. In connection with the consummation of the merger on November 4, 1999, which is discussed above, the Company repaid all of its then-outstanding senior indebtedness, which amounted to $14.0 million, and incurred debt totaling $533.0 million under a new senior credit agreement. The new credit agreement provides up to $650.0 million to (a) fund the merger and related fees and expenses, (b) refinance all amounts owing under the Company's senior credit agreement that existed immediately prior to the merger and (c) provide for working capital and ongoing general corporate purposes. The agreement consists of a $325.0 million six-year term loan facility and a $325.0 million six-year revolving credit facility. Borrowings bear interest at a floating rate based, at the Company's option, upon (a) the Eurodollar rate (as defined therein) plus an applicable percentage that is subject to change based upon the Company's ratio of funded debt to EBITDA or (b) the greater of the federal funds rate plus 0.5% or the prime rate, plus an applicable percentage that is subject to change based upon the Company's ratio of funded debt to EBITDA. The Company is required to make quarterly principal payments under the term loan facility commencing on December 31, 1999, in an aggregate annual amount of $3.75 million in 1999, $17.5 million in 2000, $31.25 million in 2001, $52.5 million in 2002, $63.75 million in 2003, $81.25 million in 2004 and $75.0 million in 2005. Loans made pursuant to the revolving credit facility may be borrowed, repaid and reborrowed from time to time until November 4, 2005. The agreement is secured by substantially all of the Company's present and future domestic assets, 100% of the capital stock of the Company's present and future domestic subsidiaries and 65% of the capital stock of the Company's present and future foreign subsidiaries. Additionally, all borrowings are jointly and severally, unconditionally guaranteed by the Company's existing and future domestic subsidiaries. However, if the Company is unable to satisfy all or any portion of its obligation with respect to the credit agreement, it is unlikely that the guarantors will be able to pay all or any portion of such unsatisfied obligations. The Company believes that existing cash balances and internally generated cash flows, together with borrowings available under the revolving credit facility of the new credit agreement entered into in connection with the merger, will be sufficient to fund normal working capital needs, capital spending requirements and debt service requirements for at least the next twelve months. The Company's debt instruments contain certain covenants that, among other things, limit the Company's ability to incur additional indebtedness, pay dividends and purchase Company stock as well as require the Company to maintain certain financial ratios. Backlog The Company's backlog of unfilled orders was $204.4 million at September 30, 1999 and $141.5 million at September 30, 1998. The Company manufactures substantially all of its products to order and expects to fill substantially all outstanding unfilled orders within the next twelve months. As such, backlog is not a significant factor used to predict the Company's long-term business prospects. 10 Year 2000 Readiness Disclosure The Company has completed the implementation of its strategic project to replace and enhance its existing manufacturing and business information systems (software and hardware) in North America with a new fully integrated system, which the Company believes to be year 2000 compliant. Additionally, the Company has completed an evaluation of the information systems currently being used by its European operations and other potential European year 2000 issues and is taking actions to address the year 2000 issues that have been identified. Based upon information presently known, the Company does not expect its European year 2000 issues to have a material adverse effect upon its results of operations. In North America, the Company has installed and is utilizing the new system at all of its sites. In addition, the Company has completed an inventory of its manufacturing equipment to identify equipment that contains embedded chips and is taking actions to address issues related to embedded chips that the Company has determined may not be year 2000 compliant. The Company anticipates that problems related to embedded chips that are not year 2000 compliant will be remedied, through replacement or other satisfactory measures, during the remainder of 1999. The Company has experienced adverse operational issues related to the project implementation. The Company has been developing and will continue to develop and implement plans to address these issues as they arise, and the Company expects to resolve any significant issues before year-end. If the Company successfully addresses and resolves issues associated with the system implementation and noncompliant embedded chips in a timely manner, the year 2000 issues associated with its information systems and manufacturing equipment would not be expected to have a material adverse effect on the Company's operations. In the event the Company is unable to resolve issues, which have arisen or may develop from the implementation, on a timely basis, the Company's ability to take customer orders, manufacture and deliver product on a timely basis, invoice customers and collect payments may be impaired. The Company can not reasonably estimate at this time the amount of lost revenue or additional expenses that might be expected in this scenario. Failure to implement the project on a timely basis could have a material adverse effect on the Company. The Company currently does not have a contingency plan in place. However, the Company continually evaluates the status of completion and whether or not a contingency plan is or may be necessary. The Company would tailor any contingency plan to address the issue in question and attempt to minimize the impact upon the Company's operations and customers. The Company estimates that the total project cost will be approximately $35.0 million, of which approximately 70% will be expensed and 30% will be capitalized. Through September 30, 1999, the Company incurred expenditures of approximately $31.8 million ($22.5 million expense and $9.3 million capital) related to the project. The project is being funded with cash flows from operations. The estimated cost of the project has not constrained the Company's information systems budget or materially affected other necessary information systems activities. The costs and completion date of the project are based on the best estimates of management, which were derived utilizing numerous assumptions of future events, including the continued availability of certain technical and consulting resources. There can be no guarantee that these estimates are accurate. Actual results could differ materially from those anticipated and, therefore, could have a material adverse effect on the Company's operations. As the year 2000 issue is a global concern, the Company's operations could be materially adversely affected by circumstances beyond its control. Disruptions in the economy generally resulting from year 2000 issues could materially adversely affect the Company. Additionally, the year 2000 readiness of the Company's vendors, dealers and other third parties (such as utility companies, the U.S. government and customers) on which it relies could impact the Company's operations. Although the Company's systems do not interface directly with those of third parties, the inability of these other parties to complete their year 2000 initiatives in a timely manner could have a material adverse effect on the Company. The Company has no means of ensuring that its vendors, dealers and other third parties will be year 2000 compliant in a timely manner. However, the Company has been actively working to determine the year 2000 readiness of these parties and to determine the actions, if any, that would be necessary to help minimize any potential adverse impact on the Company. The Company has been formally communicating with vendors, dealers and certain other 11 third parties through questionnaires and on-site visits. For any vendors that the Company deems to be at risk of not being adequately prepared for the year 2000, the Company has or will attempt to seek alternate sources for procuring product or supplies, build inventories or develop an appropriate contingency plan. To date, the Company is not aware of any third-party year 2000 issue that is expected to materially adversely impact the Company's operations. Statement Regarding Forward-Looking Disclosure Certain portions of this Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. Forward-looking statements relate to future operations, strategies, financial results or other developments and are not based on historical information. In particular, statements using verbs such as "anticipates," "believes," "estimates," "expects" or words of similar meaning generally involve forward-looking statements. The Company cautions that its forward-looking statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, without limitation, the highly competitive nature of the market in which the Company competes, including the introduction of new products, pricing changes by the Company's competitors and growth rates of the office systems category; risks associated with the Company's growth strategy, including the risk that the Company's introduction of new products will not achieve the same degree of success achieved historically by the Company's products; the Company's indebtedness, which requires a substantial portion of the Company's cash flow from operations to be dedicated to debt service, making such cash flow unavailable for other purposes, and which could limit the Company's flexibility in reacting to changes in its industry or economic conditions generally; the ability to resolve issues arising from the implementation of the Company's information systems project, which could impair the Company's operations if not resolved successfully or on time; possible risks relating to year 2000 issues; the Company's dependence on key personnel; the ability of the Company to maintain its relationships with its dealers; the Company's reliance on its patents and other intellectual property; environmental laws and regulations, including those that may be enacted in the future, that affect the ownership and operation of the Company's manufacturing plants; risks relating to potential labor disruptions; fluctuations in foreign currency exchange rates; and fluctuations in industry revenues driven by a variety of macroeconomic factors, including white-collar employment levels and corporate cash flows, as well as by a variety of industry factors such as corporate reengineering and restructuring, technology demands, ergonomic, health and safety concerns and corporate relocations. Item 3. Quantitative and Qualitative Disclosures about Market Risk - ------------------------------------------------------------------- During the normal course of business, the Company is routinely subjected to market risk associated with interest rate movements and foreign currency exchange rate movements. Interest rate risk arises from the Company's debt obligations and, prior to April 1999, from interest rate collar agreements. Foreign currency exchange rate risk arises from the Company's foreign operations and purchases of inventory from foreign suppliers. At December 31, 1998, the Company had outstanding interest rate collar agreements with an aggregate notional principal amount of $115.0 million. Such agreements expired in April 1999. As such, as of September 30, 1999, the Company is no longer subjected to interest rate risk from interest rate collar agreements. There have been no other changes in the types of market risk to which the Company is exposed as disclosed in the Company's annual report on Form 10-K for the year ended December 31, 1998. With the exception of the Company's variable rate debt obligation, there has been no material change in the carrying amounts or fair values of the Company's financial instruments that were disclosed in the Company's annual report on Form 10-K for the year ended December 31, 1998. Regarding the variable rate debt, the Company had $31.0 million of such debt outstanding at September 30, 1999, which is a decrease of $30.0 million from December 31, 1998. The fair value of this debt continues to approximate its carrying amount. 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- In March 1999, eight class action complaints (Stark v. Knoll, Inc., et al., No. 17049NC; Guido v. Warburg, Pincus & Co., et al., No. 17052NC; Marotta v. Knoll, Inc., et al., No. 17053NC; Finkelstein v. Knoll, Inc., et al., No. 17055NC; Rausch v. Knoll, Inc., et al., No 17059NC; Hatfield v. Knoll, Inc., et al., No. 17068NC; Shervy v. Knoll, Inc., et al., No. 17073NC; Simms v. Knoll, Inc., et al., No. 17076NC) were filed in the Court of Chancery for the State of Delaware, New Castle County, relating to the initial merger proposal of the Continuing Stockholders contemplating the acquisition of all of the outstanding shares of common stock not owned by them at a price of $25.00 per share, which was previously discussed in Note 2 to the unaudited condensed consolidated financial statements. The Stark complaint was voluntarily dismissed, and the remaining seven complaints were consolidated into a single class action. The defendants named in the complaints were the Company, Burton B. Staniar, John W. Amerman, Robert J. Dolan, Jeffrey A. Harris, Sidney Lapidus, Kewsong Lee, John L. Vogelstein, John H. Lynch, Warburg, Pincus & Co., Warburg and E.M. Warburg, Pincus & Co., LLC. The complaints alleged breach of fiduciary duty on the part of the individual defendants in connection with the proposed purchase of such shares of common stock and sought a preliminary injunction, damages and rescission. Generally, the lawsuits purported to be brought on behalf of the holders of common stock and alleged substantially similar claims of breach of fiduciary duty. In general, the plaintiffs alleged that the merger consideration was unjust and inadequate in that the intrinsic value of the shares of common stock was allegedly greater than the proposed merger consideration, in view of the Company's prospects; the proposed merger consideration included an inadequate premium; and the proposed merger consideration was designed to cap the market price of the shares of common stock before the trading price for the shares of common stock could recover from an alleged temporary downturn in the market. The lawsuits also generally sought injunctive relief, an injunction of the proposed merger (or, if consummated, rescission thereof), compensatory and other damages and an award of attorney's fees and expenses. On June 21, 1999, the Company entered into a Memorandum of Understanding with counsel to the plaintiffs in such stockholder lawsuits. The Memorandum of Understanding provided for the settlement of such lawsuits based on the payment of a per share merger consideration of $28.00 and provided that the plaintiffs petition the court for certification of a class on a "non-opt-out" basis. On November 3, 1999, the proposed settlement of the litigation, as provided for in the Memorandum of Understanding, was approved by the Delaware Court of Chancery. Item 2. Changes in Securities and Use of Proceeds - -------------------------------------------------- Restrictions on Dividends The indenture relating to the Company's Senior Subordinated Notes and the credit agreement governing the Company's term and revolving credit facilities entered into in connection with the merger limit the Company's ability to pay dividends to its stockholders. The Company has not paid any dividends on its common stock, and any future determination to pay dividends will depend on the Company's results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by the Board of Directors. 13 Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- a. Exhibits: 2* Amended and Restated Agreement and Plan of Merger by and between Warburg, Pincus Ventures, L.P. and Knoll, Inc., dated as of July 29, 1999. 10.1** Letter Agreement between Oak Hill Securities Fund, L.P. and the Company, dated August 13, 1999. 10.2*** Credit Agreement, dated as of October 20, 1999, by and among the Company, the Guarantors (as defined therein), the Lenders (as defined therein), Bank of America, N.A., as Administrative Agent, the Chase Manhattan Bank, as Syndication Agent, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Documentation Agent. 10.3 Supplemental Indenture No. 3, dated as of November 4, 1999, by and among the Company, the Guarantors (as defined therein), and The Bank of New York, as trustee, relating to the Company's 10.875% Senior Subordinated Notes due 2006. 27 Financial Data Schedule. b. Current Reports on Form 8-K: The Company did not file any reports on Form 8-K during the three months ended September 30, 1999. - ------------------------------------------------------------------------------ * Incorporated by reference to the Company's Definitive Proxy Statement on Schedule 14A, which was filed with the Securities and Exchange Commission on September 30, 1999. ** Incorporated by reference to the Company's Amendment No. 1 to Schedule 13E-3, which was filed with the Securities and Exchange Commission on September 10, 1999. *** Incorporated by reference to the Company's Form 8-K dated November 4, 1999, which was filed with the Securities and Exchange Commission on November 5, 1999. 14 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. KNOLL, INC. Date: November 15, 1999 By: /s/ Burton B. Staniar -------------------------- Burton B. Staniar Chairman of the Board Date: November 15, 1999 By: /s/ Douglas J. Purdom -------------------------- Douglas J. Purdom Senior Vice President and Chief Financial Officer 15 EXHIBIT INDEX ------------- Exhibit Number Description - ------- ----------- 2* Amended and Restated Agreement and Plan of Merger by and between Warburg, Pincus Ventures, L.P. and Knoll, Inc., dated as of July 29, 1999. 10.1** Letter Agreement between Oak Hill Securities Fund, L.P. and the Company, dated August 13, 1999. 10.2*** Credit Agreement, dated as of October 20, 1999, by and among the Company, the Guarantors (as defined therein), the Lenders (as defined therein), Bank of America, N.A., as Administrative Agent, the Chase Manhattan Bank, as Syndication Agent, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Documentation Agent. 10.3 Supplemental Indenture No. 3, dated as of November 4, 1999, by and among the Company, the Guarantors (as defined therein), and The Bank of New York, as trustee, relating to the Company's 10.875% Senior Subordinated Notes due 2006. 27 Financial Data Schedule. - ------------------------------------------------------------------------------ * Incorporated by reference to the Company's Definitive Proxy Statement on Schedule 14A, which was filed with the Securities and Exchange Commission on September 30, 1999. ** Incorporated by reference to the Company's Amendment No. 1 to Schedule 13E-3, which was filed with the Securities and Exchange Commission on September 10, 1999. *** Incorporated by reference to the Company's Form 8-K dated November 4, 1999, which was filed with the Securities and Exchange Commission on November 5, 1999. 16 EX-10.3 2 SUPPLEMENTAL INDENTURE NO. 3 EXHIBIT 10.3 THIS SUPPLEMENTAL INDENTURE No. 3 (the "Supplemental Indenture") dated as of November 4, 1999 among Knoll, Inc., a Delaware corporation ("Knoll"), as the Company, Knoll Overseas, Inc., a Delaware corporation, and Spinneybeck Enterprises, Inc., a New York corporation, as Guarantors (the "Guarantors"), and The Bank of New York (as successor to IBJ Whitehall Bank & Trust Company (successor to IBJ Schroder Bank & Trust Company)), as Trustee. W I T N E S S E T H: WHEREAS, there has previously been executed and delivered to the Trustee an Indenture (the "Indenture") dated as of February 29, 1996 among T.K.G. Acquisition Sub, Inc., a Delaware corporation ("Sub"), as the Company, T.K.G. Acquisition Corp., a Delaware corporation ("TKG"), the Guarantors, The Knoll Group, Inc., a Delaware corporation, and Knoll North America, Inc., a Delaware corporation, as guarantors, and the Trustee, providing for the issuance of 10 7/8% Senior Subordinated Notes due 2006 (the "Notes"); WHEREAS, there has previously been executed and delivered to the Trustee Supplemental Indenture No. 1 dated as of February 29, 1996 among TKG, Knoll, Inc., a Delaware corporation ("Old Knoll"), the Guarantors and the Trustee pursuant to which Old Knoll succeeded Sub as the Company; WHEREAS, there has previously been executed and delivered to the Trustee Supplemental Indenture No. 2 dated as of March 14, 1997 among Knoll (formerly TKG), Old Knoll, the Guarantors and the Trustee pursuant to which Knoll succeeded Old Knoll as the Company; WHEREAS, Knoll has entered into an Amended and Restated Agreement and Plan of Merger, dated as of July 29, 1999, pursuant to which Knoll's controlling stockholders and certain members of management will take Knoll private in a transaction (the "Merger") in which Knoll will be the surviving corporation; WHEREAS, in order to effect the Merger and related transactions, Knoll has commenced a solicitation of consents from the registered holders (the "Holders") of the Notes to certain amendments to the Indenture, the particulars of which are more fully set forth herein (the "Amendments"); WHEREAS, the Holders of a majority in aggregate principal amount of the outstanding Notes have consented to the Amendments in accordance with the provisions of Section 902 of the Indenture; and WHEREAS, The Bank of New York has succeeded IBJ Whitehall Bank & Trust Company (successor to IBJ Schroder Bank & Trust Company)), as Trustee. NOW, THEREFORE, in consideration of the foregoing and of the mutual premises and covenants contained herein and for other good and valuable consideration, the parties hereto agree, for the equal and proportionate benefit of the respective Holders from time to time of the Notes, as follows: ARTICLE ONE AMENDMENT OF THE INDENTURE -------------------------- SECTION 1.01. Amendment of Section 1.01. Section 1.01 of the Indenture is hereby amended as follows: (a) The following definition is hereby amended and restated: "Credit Facilities" means (a) prior to consummation of the ----------------- 1999 Merger, the Revolving Credit Facility and the Term Credit Facility, and (b) from and after consummation of the 1999 Merger, the credit facilities of the Company pursuant to that certain Credit Agreement dated as of October 20, 1999 (the "Credit ------ Agreement") among the Company, the other Credit Parties party --------- thereto, the Lenders party thereto, Bank of America, N.A., as Administrative Agent, The Chase Manhattan Bank, as Syndication Agent, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Documentation Agent, in each case of clauses (a) and (b) above, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced, restated or refinanced from time to time. A copy of the Credit Agreement as in effect on the 1999 Merger Date is attached to this Supplemental Indenture as Exhibit A hereto. --------- (b) The following definitions are hereby added in appropriate alphabetical order: "Funded Indebtedness" shall have the meaning ascribed to ------------------- "Funded Debt" thereto in the Credit Agreement, except that the ----------- proviso at the end of such definition shall be ignored for the purposes of the Indenture. "1999 Merger" means the merger, effective as of the date of ----------- this Supplemental Indenture, of the Company and Knoll Acquisition Corp., a Delaware corporation, in which the Company is the surviving corporation. "1999 Merger Date" means the date the 1999 Merger is ---------------- consummated. "Leverage Ratio" shall have the meaning ascribed thereto in -------------- the Credit Agreement. -2- (c) The following clause (h) is hereby added to the end of the definition of Exempt Affiliate Transactions: "and (h) transactions pursuant to or in connection with the 1999 Merger, including any stockholders or registration rights agreements, and including amendments thereto entered into after the 1999 Merger Date, provided that the terms of any such amendment are -------- not, in the aggregate, less favorable to the Company than the terms of such agreement prior to such amendment." (d) Clause (i) of the definition of Permitted Indebtedness is hereby amended and restated to read as follows: "(i) Indebtedness of the Company under the Credit Facilities (and of the Domestic Subsidiaries under the Guarantees thereof), or any refinancing thereof, in an aggregate principal amount at any time outstanding (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) not to exceed $675 million, less the aggregate amount of all Net Proceeds of Asset Sales applied, after the 1999 Merger Date, to permanently reduce the outstanding amount or the commitments with respect to such Indebtedness pursuant to Section 4.08 hereof;" SECTION 1.02. Amendment of Section 4.10. (a) The following is hereby added to the end of clause (i) of the first paragraph of Section 4.10 of the Indenture: "and other than payments to stockholders of the Company in connection with the 1999 Merger;" (b) Clause (c) following the first paragraph of Section 4.10 of the Indenture is hereby amended and restated to read as follows: "(c) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment were made at the end of the applicable four-quarter period, have a Leverage Ratio, at the end of the Company's most recently ended fiscal quarter for which internal financial statements are available, of less than 2.5 to 1;" (c) Clause (vi) of the penultimate paragraph of Section 4.10 of the Indenture is hereby amended and restated to read as follows: "(vi) any payment by the Company or any of its Subsidiaries directly or through any direct or indirect parent company (a) in connection with the repurchase of outstanding shares of Capital Stock of the Company or TKG following the death, disability, termination of employment or retirement (even if such employee is retained in a consulting capacity) of Management Shareholders and (b) of amounts required to be paid to participants or former -3- participants in employee benefit plans upon any termination of employment by such participants as provided in the documents related thereto, in an aggregate amount (for both clauses (a) and (b)) not to exceed $15 million in any fiscal year (up to a maximum of $30 million) from and after the 1999 Merger Date;" (d) The following clauses (xi) and (xii) are hereby added following clause (x) of the penultimate paragraph of Section 4.10 of the Indenture: "and (xi) Restricted Payments made prior to the 1999 Merger Date in compliance with the Indenture as in effect at the time of any such Restricted Payment; and (xii) the making of Restricted Payments after the 1999 Merger Date in an aggregate amount not to exceed $20 million;" (e) The following new paragraph is hereby added at the end of Section 4.10 of the Indenture, as follows: "The computation of the amount of Restricted Payments that may be made by the Company after the 1999 Merger Date shall be conducted in accordance with, and shall be subject to, the terms and conditions of this Indenture as amended on the 1999 Merger Date, and it is understood and agreed that any accrued availability to make Restricted Payments under this Indenture prior to the date hereof is not available to the Company or its Subsidiaries after the 1999 Merger Date unless and except to the extent that such Restricted Payments are allowed and availability exists under this Indenture as amended on the 1999 Merger Date." SECTION 1.03. Amendment of Section 5.01. Section 5.01 of the Indenture is hereby amended by adding the following sentence at the end of Section 5.01 of the Indenture: "The 1999 Merger need not comply with the provisions of this Section 5.01." SECTION 1.04. Attachment of Exhibit. The Indenture is hereby amended by attaching, as Exhibit L --------- thereto, the text of Exhibit A of this Supplemental Indenture. --------- ARTICLE TWO MISCELLANEOUS ------------- SECTION 2.01. Effect. The provisions set forth in this Supplemental Indenture shall be deemed to be, and shall be construed as part of, the Indenture to the same extent as if set forth fully therein. All references to the Indenture in the Indenture or in any other agreement, document or instrument delivered in connection therewith or pursuant thereto shall be deemed -4- to refer to the Indenture as amended by this Supplemental Indenture. Except as amended hereby, the Indenture shall remain in full force and effect. SECTION 2.02. Trust Indenture Act Controls. If any provision of this Supplemental Indenture limits, qualifies or conflicts with another provision that is required by or deemed to be included in this Supplemental Indenture by the Trust Indenture Act (as such term is defined in the Indenture), the required or incorporated provision shall control. SECTION 2.03. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). SECTION 2.04. Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be original, but such counterparts shall together constitute but one and the same instrument. SECTION 2.05. Severability. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 2.06. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. -5- IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written. KNOLL, INC. By /s/ Douglas J. Purdom --------------------------------- Name: Douglas J. Purdom Title: Senior Vice President and Chief Financial Officer KNOLL OVERSEAS, INC. By /s/ Douglas J. Purdom --------------------------------- Name: Douglas J. Purdom Title: Senior Vice President and Chief Financial Officer SPINNEYBECK ENTERPRISES, INC. By /s/ Douglas J. Purdom --------------------------------- Name: Douglas J. Purdom Title: Senior Vice President and Chief Financial Officer THE BANK OF NEW YORK (successor to IBJ WHITEHALL BANK & TRUST COMPANY (successor to IBJ SCHRODER BANK & TRUST COMPANY)), as Trustee By /s/ Remo J. Reale --------------------------------- Name: Remo J. Reale Title: Vice President EXHIBIT A --------- CREDIT AGREEMENT (See Exhibit 10.2 of this Form 10-Q for the period ended September 30,1999.) EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1999 SEP-30-1999 11,538 0 143,831 0 80,771 272,580 272,269 92,462 711,101 138,426 139,169 0 0 408 385,975 711,101 710,479 710,479 430,149 430,149 151,469 0 12,175 112,376 47,165 65,211 0 0 0 65,211 1.65 1.59
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