-----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, Du+yIUptZsy3xa/f+ifObb7hvkNjxK5krNvGM6Qfj+obnOpB5/zNii2LVCUCHLw/ PffLbf/jipMkmtGbTEiTWw== 0000950152-98-005172.txt : 19980610 0000950152-98-005172.hdr.sgml : 19980610 ACCESSION NUMBER: 0000950152-98-005172 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980502 FILED AS OF DATE: 19980609 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLE NATIONAL CORP /DE/ CENTRAL INDEX KEY: 0000769644 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 341453189 STATE OF INCORPORATION: DE FISCAL YEAR END: 0203 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12814 FILM NUMBER: 98644755 BUSINESS ADDRESS: STREET 1: 5915 LANDERBROOK DR CITY: MAYFIELD HEIGHTS STATE: OH ZIP: 44124 BUSINESS PHONE: 2164494100 MAIL ADDRESS: STREET 1: 5915 LANDERBROOK DRIVE STREET 2: SUITE 300 CITY: CLEVELAND STATE: OH ZIP: 44124 FORMER COMPANY: FORMER CONFORMED NAME: CNC HOLDING CORP/DE DATE OF NAME CHANGE: 19920703 10-Q 1 COLE NATIONAL CORPORATION 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ---- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 2, 1998, OR ---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO __________________. COMMISSION FILE NUMBER 1-12814 COLE NATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 34-1453189 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 5915 LANDERBROOK DRIVE MAYFIELD HEIGHTS, OHIO 44124 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (440) 449-4100 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. X YES NO --- --- AS OF MAY 29, 1998, 14,899,415 SHARES OF THE REGISTRANT'S COMMON STOCK WERE OUTSTANDING. ================================================================================ 2 - -------------------------------------------------------------------------------- COLE NATIONAL CORPORATION AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MAY 2, 1998 INDEX
PAGE NO. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS AS OF MAY 2, 1998 AND JANUARY 31, 1998...................................................................... 1 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE 13 WEEKS ENDED MAY 2, 1998 AND MAY 3, 1997...................................................... 2 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE 13 WEEKS ENDED MAY 2, 1998 AND MAY 3, 1997...................................................... 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................ 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................................... 6 - 8 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................................... 9
- -------------------------------------------------------------------------------- 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS COLE NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS)
May 2, January 31, 1998 1998 ----------- ----------- Assets - ------ Current assets: Cash and temporary cash investments $ 37,707 $ 68,053 Accounts receivable, less allowance for doubtful accounts of $7,039 in 1998 and $4,334 in 1997 56,060 52,030 Current portion of notes receivable 4,293 4,177 Refundable income taxes 9,520 9,520 Inventories 121,570 119,970 Prepaid expenses and other 6,875 9,195 Deferred income tax benefits 21,534 21,534 ----------- ----------- Total current assets 257,559 284,479 Property and equipment, at cost 248,440 242,966 Less-accumulated depreciation and amortization (121,296) (115,162) ----------- ----------- Total property and equipment, net 127,144 127,804 Other assets: Notes receivable, excluding current portion 36,963 25,783 Deferred income taxes and other 59,652 54,241 Intangible assets, net 158,239 159,077 ----------- ----------- Total assets $ 639,557 $ 651,384 =========== =========== Liabilities and Stockholders' Equity - ------------------------------------ Current liabilities: Current portion of long-term debt $ 16,051 $ 16,027 Accounts payable 49,186 71,867 Accrued interest 7,435 6,615 Net liabilities of discontinued operations 4,544 3,475 Accrued liabilities 110,739 112,363 Accrued income taxes 4,421 957 ----------- ----------- Total current liabilities 192,376 211,304 Long-term debt, net of discount and current portion 277,060 277,401 Other long-term liabilities 30,654 30,664 Stockholders' equity: Preferred stock - - Common stock 15 15 Paid-in capital 252,480 251,405 Foreign currency translation adjustment (1,484) (1,749) Notes receivable - stock option exercise (926) (926) Accumulated deficit (110,007) (116,119) Treasury stock at cost (611) (611) ----------- ----------- Total stockholders' equity 139,467 132,015 ----------- ----------- Total liabilities and stockholders' equity $ 639,557 $ 651,384 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. -1- 4 COLE NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13 Weeks Ended ------------------------ May 2, May 3, 1998 1997 ---------- ---------- Net revenue $ 271,828 $ 239,686 Costs and expenses: Cost of goods sold 90,289 82,412 Operating expenses 156,318 136,041 Depreciation and amortization 8,398 7,460 ---------- ---------- Total costs and expenses 255,005 225,913 ---------- ---------- Income from continuing operations 16,823 13,773 Interest expense, net 6,287 7,783 ---------- ---------- Income from continuing operations before income taxes 10,536 5,990 Income tax provision 4,424 2,636 ---------- ---------- Income from continuing operations 6,112 3,354 Operating loss from discontinued operations, net of income taxes - (906) ---------- ---------- Net income $ 6,112 $ 2,448 ========== ========== Earnings (loss) per common share: Basic- Income from continuing operations $ .41 $ .28 Loss from discontinued operations - (.08) ---------- ---------- Net income $ .41 $ .20 ========== ========== Diluted- Income from continuing operations $ .40 $ .27 Loss from discontinued operations - (.07) ---------- ---------- Net income $ .40 $ .20 ========== ==========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. -2- 5 COLE NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
13 Weeks Ended --------------------- May 2, May 3, 1998 1997 -------- -------- Cash flows from operating activities: Net income $ 6,112 $ 2,448 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 8,398 7,460 Non-cash interest (226) 96 Change in assets and liabilities: Decrease (increase) in accounts and notes receivable, prepaid expenses and other assets (1,957) 630 Decrease (increase) in net assets of discontinued operations 1,069 (1,864) Increase in inventories (1,502) (7,864) Decrease in accounts payable, accrued liabilities and other liabilities (23,755) (23,791) Increase (decrease) in accrued interest 820 (924) Increase (decrease) in accrued income taxes 3,464 (15,877) -------- -------- Net cash used by operating activities (7,577) (39,686) -------- -------- Cash flows from investing activities: Purchases of property and equipment, net (5,973) (11,187) Systems development costs (6,332) (2,078) Investment in Pearle Europe (10,296) - Other, net (678) (378) -------- -------- Net cash used by investing activities (23,279) (13,643) -------- -------- Cash flows from financing activities: Repayment of long-term debt (335) (296) Net proceeds from exercise of stock options and warrants 818 841 Other, net 27 (152) -------- -------- Net cash provided by financing activities 510 393 -------- -------- Cash and temporary cash investments: Net decrease during the period (30,346) (52,936) Balance, beginning of the period 68,053 73,141 -------- -------- Balance, end of the period $ 37,707 $ 20,205 ======== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. -3- 6 COLE NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION AND ACCOUNTING POLICIES The consolidated financial statements include the accounts of Cole National Corporation (CNC), its wholly owned subsidiaries, including Cole National Group, Inc. (CNG), and CNG's wholly owned subsidiaries (collectively, the "Company"). All significant intercompany transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared without audit and certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although the Company believes that the disclosures herein are adequate to make the information not misleading. Results for interim periods are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the Company's consolidated financial statements for the fiscal year ended January 31, 1998. In the opinion of management, the accompanying financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company's financial position as of May 2, 1998 and the results of operations and cash flows for the 13 weeks ended May 2, 1998 and May 3, 1997. Inventories The accompanying interim consolidated financial statements have been prepared without physical inventories. Cash Flows Net cash flows from operating activities reflect cash payments for income taxes and interest of $443,000 and $5,838,000, respectively, for the 13 weeks ended May 2, 1998, and $17,967,000 and $9,553,000, respectively, for the 13 weeks ended May 3, 1997. Earnings Per Share Earnings per share for the 13 weeks ended May 2, 1998 and May 3, 1997 have been calculated based on the following weighted average number of common shares and equivalents, if applicable, outstanding:
1998 1997 ------------- ----------- Basic 14,754,887 12,019,488 Diluted 15,277,070 12,481,113
-4- 7 (2) INVESTMENT IN PEARLE EUROPE B.V. In February 1998, the Company repaid a $3.2 million note payable to a subsidiary of Pearle Europe and invested an additional $7.2 million in the form of 8% shareholder loans to Pearle Europe in connection with Pearle Europe's acquisition of optical operations in Germany and Austria. (3) NEW ACCOUNTING PRONOUNCEMENT Effective February 1, 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income". This statement requires that the Company report the change in its equity during a period from non-owner sources. For the 13 weeks ended May 2, 1998 and May 3, 1997, components of other comprehensive income (loss) relate to foreign currency translation adjustments related to the Company's Canadian operations and investment in Pearle Europe B.V. Total comprehensive income is as follows (000's omitted):
13 Weeks Ended ------------------------------ May 2, 1998 May 3, 1997 ------------ ------------ Net income $ 6,112 $ 2,448 Other comprehensive income (loss) 265 (46) ------------ ------------ Total comprehensive income $ 6,377 $ 1,988 ============ ============
(4) RECLASSIFICATIONS Certain 1997 amounts have been reclassified to conform with the 1998 presentation. -5- 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion of certain factors affecting the Company's results of operations for the 13 week periods ended May 2, 1998 and May 3, 1997 (the Company's first quarter) and its liquidity and capital resources. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this filing and the Company's audited financial statements for the fiscal year ended January 31, 1998 included in its annual report on Form 10-K. The Company's fiscal year ends on the Saturday closest to January 31. Fiscal years are identified according to the calendar year in which they begin. For example, the fiscal year ended January 31, 1998 is referred to as "fiscal 1997." RESULTS OF OPERATIONS Net revenue for the first quarter of fiscal 1998 increased 13.4% to $271.8 million from $239.7 million for the same period in fiscal 1997. The increase was primarily attributable to the opening of additional Cole Optical units including the American Vision Centers, Inc. ("AVC") stores acquired in August 1997, a consolidated comparable store sales increase of 3.7% and the growth of managed vision care fees. At Cole Optical, comparable store sales increased 4.6% and 1.7% at Cole Vision and Pearle, respectively. The Pearle increase was impacted by a weaker than expected reception to a new promotional offer in February and March. At Things Remembered, the comparable store sales increase of 4.6% reflected increased sales of additional personalization, new products and clearance merchandise. At May 2, 1998, the Company had 2,832 specialty service retail locations, including 401 franchised locations, compared to 2,664 at May 3, 1997. Gross profit increased 15.4% to $181.5 million in the first quarter of fiscal 1998 from $157.3 million in the same period last year. The gross profit increase was primarily attributable to the increased revenue at Cole Optical and Things Remembered. Gross margins for the first quarter of fiscal 1998 and fiscal 1997 were 66.8% and 65.6%, respectively. Gross margin was favorably impacted by the growth in managed vision care fees and the sales mix of higher margin products at Cole Optical. Operating expenses increased 14.9% to $156.3 million in the first quarter of fiscal 1998 from $136.0 million in fiscal 1997, and as a percentage of revenue, operating expenses increased to 57.5% in fiscal 1998 from 56.8% in fiscal 1997. The leverage loss was primarily a result of increased advertising expenditures at Pearle and increased expenses related to managed vision care fee growth partially offset by leverage gains on payroll and store occupancy costs. Fiscal 1998 depreciation and amortization expense of $8.4 million was $0.9 million more than fiscal 1997 reflecting the acquisition of AVC and an increase in capital expenditures. Income from operations increased 22.1% to $16.8 million for the first quarter of fiscal 1998 from $13.8 million for the same period a year ago, primarily the result of the increase in net revenue, partially offset by leverage loss from additional advertising expenditures. -6- 9 Net interest expense decreased $1.5 million from the first quarter of fiscal 1997 to $6.3 million in the first quarter of fiscal 1998. The decrease was primarily attributable to the purchase and retirement of $150.9 million of 11-1/4% Senior Notes in conjunction with a tender offer in September 1997 partially offset by additional interest on $125.0 million of 8-5/8% Senior Subordinated Notes issued in August 1997. An income tax provision was recorded in the first quarter of fiscal 1998 and fiscal 1997 using the Company's estimated annual effective tax rate of 42% and 44%, respectively. The reduction in the rate primarily reflects the estimated impact of non-deductible amortization of goodwill in both years. Net income increased to $6.1 million for the first quarter of fiscal 1998 from $2.4 million for the first quarter of fiscal 1997. The increase was due to improvement in income from continuing operations, the reduction of net interest expense and a $0.9 million loss from discontinued operations in the first quarter of fiscal 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's primary source of liquidity is funds provided from operations of its operating subsidiaries. In addition, the Company's operating subsidiaries have available to them working capital commitments of $75.0 million under their Credit Facility, reduced by commitments under letters of credit. There were no working capital borrowings outstanding during the first quarter of fiscal 1998 and fiscal 1997. Operations for the first quarter used $7.6 million of cash in fiscal 1998 compared to $39.7 million in fiscal 1997. The decrease in cash used by operations was primarily attributable to the payment in 1997 of $15.0 million of taxes due on the sale of Pearle's European operation, a smaller increase in first quarter inventories in 1998 and the increase in net income. Cash used by investing activities included capital additions of $6.0 million and $11.2 million for the first quarter of fiscal 1998 and fiscal 1997, respectively. The majority of capital expenditures were for store fixtures, equipment and leasehold improvements for new stores and the remodeling of existing stores. In fiscal 1997, capital expenditures of $4.4 million were incurred in connection with the construction of Things Remembered's new warehouse and distribution facility. In May 1998, the Company purchased an office building in Twinsburg, Ohio for $9.5 million. It is anticipated that a portion of Cole Optical's business will move there during 1998. The Company is currently evaluating financing alternatives for both facilities. In February 1998, the Company repaid a $3.2 million note payable to a subsidiary of Pearle Europe B.V. (Pearle Europe) and invested an additional $7.2 million in the form of 8% shareholder loans to Pearle Europe in connection with Pearle Europe's acquisition of two optical operations in Germany and Austria. Investments in systems development costs totaled $6.3 and $2.1 million in the first quarter of fiscal 1998 and fiscal 1997, respectively. The Company believes that funds provided from operations along with funds available under the Credit Facility will provide adequate sources of liquidity to allow the Company's operating subsidiaries to continue to expand the number of stores and to fund capital expenditures and systems development costs. -7- 10 FORWARD-LOOKING INFORMATION Certain sections of this Form 10-Q contain forward-looking statements. Forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the Company. All forward-looking statements involve risk and uncertainty. The Company operates in a highly competitive environment, and its future liquidity, financial condition and operating results may be materially affected by a variety of factors, some of which may be beyond the control of the Company, including risks associated with the integration of acquired operations, the Company's ability to select and stock merchandise attractive to customers, the implementation of its store acquisition program, the ability to attract Managed Vision Care accounts, economic and weather factors affecting consumer spending, operating factors, including manufacturing quality of optical and engraved goods, affecting customer satisfaction, the Company's relationships with host stores, franchisees and Managed Vision Care customers, the mix of goods sold, pricing and other competitive factors and the seasonality of the Company's business. -8- 11 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following Exhibits are filed herewith and made a part hereof: 27 Financial Data Schedule 10.1 Third Amendment to the Credit Agreement, dated as of May 15, 1998, among Cole Vision Corporation, Things Remembered, Inc., Pearle, Inc., and Pearle Service Corporation and Canadian Imperial Bank of Commerce. (b) Reports on Form 8-K The Company has not filed any reports on Form 8-K for the quarterly period ended May 2, 1998. -9- 12 SIGNATURE --------- 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. COLE NATIONAL CORPORATION By: /s/ Wayne L. Mosley -------------------------------------- Wayne L. Mosley Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer) Date: June 9, 1998 -10- 13 COLE NATIONAL CORPORATION FORM 10-Q QUARTER ENDED MAY 2, 1998 EXHIBIT INDEX Exhibit Number Description -------- ----------- 27 Financial Data Schedule 10.1 Third Amendment to the Credit Agreement, dated as of May 15, 1998, among Cole Vision Corporation, Things Remembered, Inc., Pearle, Inc., and Pearle Service Corporation and Canadian Imperial Bank of Commerce. -11- EX-10.1 2 EXHIBIT 10.1 1 EXHIBIT 10.1 EXECUTION COPY THIRD AMENDMENT THIRD AMENDMENT, dated as of May 15, 1998 (this "AMENDMENT"), to the Credit Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among COLE VISION CORPORATION, a Delaware corporation ("COLE VISION"), THINGS REMEMBERED, INC., a Delaware corporation ("THINGS REMEMBERED"), PEARLE, INC., a Delaware corporation ("PEARLE") and PEARLE SERVICE CORPORATION, a Delaware corporation ("PSC"; Cole Vision, Things Remembered, Pearle and PSC each being referred to as a "BORROWER" and collectively as the "BORROWERS"), the several banks and other financial institutions from time to time parties thereto (collectively, the "LENDERS") and CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian-chartered bank acting through its New York Agency, as administrative agent for the Lenders thereunder (in such capacity, the "ADMINISTRATIVE AGENT"). W I T N E S S E T H: WHEREAS, the Borrowers, the Lenders and the Administrative Agent are parties to the Credit Agreement; WHEREAS, the Borrowers have requested that the Administrative Agent and the Lenders amend the Credit Agreement as set forth herein; and WHEREAS, the Administrative Agent and the Lenders are willing to effect such amendment, but only upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the Borrowers, the Lenders and the Administrative Agent hereby agree as follows: 1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the Credit Agreement shall have such meanings when used herein. 2. AMENDMENT TO SUBSECTION 1.1. Subsection 1.1 of the Credit Agreement is hereby amended by changing the definition of "EBITDA" to read in its entirety as follows: "EBITDA": for any period, with respect to CNG and its Subsidiaries on a consolidated basis, determined in accordance with GAAP, an amount equal to the sum of (a) Net Income for such period, plus (b) income taxes, excluding income taxes (either positive or negative) attributable to extraordinary and non-recurring gains or losses or sales or other dispositions of assets permitted under subsection 8.6, plus (c) Interest Expense for such period, plus (d) depreciation for such period, plus (e) amortization for such period, plus (f) any other non-cash items (including 2 2 minority interests) reducing Net Income for such period, plus (g) amortization of deferred financing costs and expenses for such period, minus (h) all non-cash items increasing Net Income for such period, minus (i) all cash payments made in such period in respect of restructuring charges deducted in calculating Net Income for such period or any prior period (excluding any such cash payments made in respect of (i) the $8,000,000 pre-tax business integration charge associated with the AVC acquisition taken by CNG during fiscal 1997 and (ii) the $61,100,000 pre-tax charge for certain unusual and non-recurring items related to the Pearle acquisition taken by CNG in the fourth quarter of fiscal 1996). 3. AMENDMENT TO SUBSECTION 8.9(E). Subsection 8.9(e) of the Credit Agreement is hereby amended to read in its entirety as follows: "(e) so long as no Default or Event of Default has occurred and is continuing or would occur after giving effect to such Investment, Investments in franchises in a business related to the optical business of Pearle and Cole Vision as conducted on the Closing Date in an aggregate amount not to exceed $15,000,000 during any fiscal year; and" 4. AMENDMENT TO SUBSECTION 8.9(F). Subsection 8.9(f) of the Credit Agreement is hereby amended to read in its entirety as follows: "(f) Investments, other than the purchase of CNG Notes or the Senior Subordinated Notes, in an aggregate amount not to exceed $10,000,000." 5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby confirms, reaffirms and restates the representations and warranties made by it in Section 5 of the Credit Agreement, PROVIDED that each reference to the Credit Agreement therein shall be deemed to be a reference to the Credit Agreement after giving effect to this Amendment. Each Borrower represents and warrants that, after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing. 6. EFFECTIVENESS. This Amendment shall be effective upon execution and delivery by each of the Borrowers, the Administrative Agent and the Majority Lenders. 7. CONTINUING EFFECT OF CREDIT AGREEMENT. This Amendment shall not constitute a waiver, amendment or modification of any other provision of the Credit Agreement not expressly referred to herein and shall not be construed as a waiver or consent to any further or future action on the part of the Borrowers that would require a waiver or consent of the Lenders or the Administrative Agent. Except as expressly amended or modified herein, the provisions of the Credit Agreement are and shall remain in full force and effect. 3 3 8. COUNTERPARTS. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Amendment signed by all the parties shall be lodged with the Borrowers and the Administrative Agent. 9. PAYMENT OF EXPENSES. The Borrowers agree, jointly and severally, to pay or reimburse the Administrative Agent for all of its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of this Amendment and any other documents prepared in connection herewith, and the consummation and administration of the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent. 4 4 10. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. COLE VISION CORPORATION By: /s/ Josegh Gaglioti ---------------------------------------- Title: Vice President and Treasurer THINGS REMEMBERED, INC. By: /s/ Josegh Gaglioti ---------------------------------------- Title: Vice President and Treasurer PEARLE, INC. By: /s/ Josegh Gaglioti ---------------------------------------- Title: Vice President and Treasurer PEARLE SERVICE CORPORATION By: /s/ Josegh Gaglioti ---------------------------------------- Title: Vice President and Treasurer 5 5 CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent By: /s/ Elizabeth Fischer ---------------------------------------- Title: Authorized Signatory CIBC INC. By: /s/ Elizabeth Fischer ---------------------------------------- Title: Executive Director CIBC Oppenheimer Corp. As Agent CREDIT SUISSE FIRST BOSTON By: Authorized Signatory ---------------------------------------- Title: By: Authorized Signatory ---------------------------------------- Title: NATIONSBANK, N.A. By: Authorized Signatory ---------------------------------------- Title: CORESTATES BANK, N.A. By: Authorized Signatory ---------------------------------------- Title: 6 6 THE FUJI BANK, LIMITED By: /s/ Peter L. Chinnici ------------------------------------ Title: Joint General Manager NATIONAL CITY BANK By: Authorized Signatory ------------------------------------ Title: THE SANWA BANK, LIMITED, CHICAGO BRANCH By: Authorized Signatory ------------------------------------ Title: YASUDA TRUST & BANK CO. By: ____________________________________ Title: EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q. 1,000 3-MOS JAN-30-1999 FEB-01-1998 MAY-02-1998 37,707 0 60,353 7,039 121,570 257,559 248,440 121,296 639,557 192,376 277,060 0 0 15 139,452 639,557 271,828 271,828 90,289 255,005 0 0 6,287 10,536 4,424 6,112 0 0 0 6,112 .41 .40
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