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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE) 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 NOVEMBER 2, 2003
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: 0-50158
FRANK'S NURSERY & CRAFTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 47-0863558
(State of Incorporation) (IRS Employer Identification No.)
580 KIRTS BLVD., SUITE 300
TROY, MICHIGAN 48084
(Address of Principal Executive Offices) (Zip Code)
(248) 712-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 17, 2003
COMMON STOCK $.001 PAR VALUE 17,217,241
FRANK'S NURSERY & CRAFTS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements:
Balance Sheets as of November 2, 2003 (Unaudited), November 3, 3
2002 (Unaudited), and January 26, 2003
Statements of Operations for the twelve weeks ended November 2, 4
2003 (Unaudited) and the twelve weeks ended November 3, 2002
(Unaudited)
Statements of Operations for the forty weeks ended November 2, 5
2003 (Unaudited), the twenty-four weeks ended November 3, 2002
(Unaudited), and the sixteen weeks ended May 19, 2002
Statements of Shareholders' Equity (Deficit) for the sixteen 6
weeks ended May 19, 2002, the thirty-six weeks ended January 26,
2003, and the forty weeks ended November 2, 2003 (Unaudited)
Statements of Cash Flows for the forty weeks ended November 2, 7
2003 (Unaudited), the twenty-four weeks ended November 3, 2002
(Unaudited), and the sixteen weeks ended May 19, 2002
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3 Quantitative and Qualitative Disclosures about Market Risk 15
Item 4 Controls and Procedures 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
CERTIFICATIONS
2
FRANK'S NURSERY & CRAFTS, INC.
BALANCE SHEETS
(in thousands, except for par value)
November 2, November 3, January 26,
2003 2002 2003
--------------- ---------------- ---------------
(Unaudited) (Unaudited)
Restated Restated
ASSETS
Current assets:
Cash and cash equivalents $ 2,099 $ 2,570 $ 3,068
Accounts receivable, net 1,235 2,199 1,218
Merchandise inventory 70,452 62,096 39,050
Assets to be disposed of - 2,131 200
Prepaid expenses and other current assets 4,556 5,917 4,173
--------------- ---------------- ---------------
Total current assets 78,342 74,913 47,709
Property, plant and equipment, net 56,754 54,561 56,102
Other assets and deferred charges 3,738 4,225 3,616
--------------- ---------------- ---------------
Total assets $ 138,834 $ 133,699 $ 107,427
=============== ================ ===============
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable $ 30,661 $ 33,289 $ 18,009
Accrued expenses 19,138 19,671 16,402
Accrued expense payables pre-petition 1,100 2,520 1,902
Revolving credit facility 21,559 16,298 -
Revolving credit facility - related party 20,000 - 15,250
Current portion of long term debt 1,569 1,806 1,685
--------------- ---------------- ---------------
Total current liabilities 94,027 73,584 53,248
Long-term debt:
Senior debt, less current portion 24,066 26,389 24,730
Term Loan - related party, net of unamortized discount 17,543 17,360 16,323
--------------- ---------------- ---------------
Total long-term debt 41,609 43,749 41,053
Other liabilities 3,914 3,452 3,334
Shareholders' (deficit) equity:
Preferred stock $.001 par value, - - -
10,000,000 shares authorized, none issued
Common stock $.001 par value, 20 20 20
50,000,000 shares authorized, 16,926,957 shares
issued and outstanding and 3,073,043 shares
to be issued
Additional paid-in-capital 27,457 26,100 27,457
Accumulated deficit (28,193) (13,206) (17,685)
--------------- ---------------- ---------------
Total shareholders' (deficit) equity (716) 12,914 9,792
--------------- ---------------- ---------------
Total liabilities and shareholders' (deficit) equity $ 138,834 $ 133,699 $ 107,427
=============== ================ ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
FRANK'S NURSERY & CRAFTS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Twelve Weeks Twelve Weeks
Ended Ended
November 2, November 3,
2003 2002
------------ ------------
Restated
NET SALES $ 40,284 $ 39,612
OPERATING COSTS AND EXPENSES:
Cost of goods sold, including buying and occupancy 34,532 34,575
Selling, general, and administrative 17,850 17,278
Restructuring charges -- 2,000
-------- --------
Total operating costs and expenses 52,382 53,853
-------- --------
LOSS FROM OPERATIONS (12,098) (14,241)
OTHER INCOME (EXPENSE):
Interest expense and amortization of debt costs (2,258) (1,811)
Sundry (expense) income (98) 93
-------- --------
Total other expense (2,356) (1,718)
-------- --------
LOSS BEFORE INCOME TAXES (14,454) (15,959)
-------- --------
NET LOSS $(14,454) $(15,959)
======== ========
LOSS PER SHARE - BASIC $ (0.72) $ (0.80)
======== ========
LOSS PER SHARE - DILUTED $ (0.72) $ (0.80)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 20,000 20,000
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 20,000 20,000
======== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
FRANK'S NURSERY & CRAFTS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Forty Weeks Twenty-four Sixteen Weeks
Ended Weeks Ended Ended
November 2, November 3, May 19,
2003 2002 2002
------------ ---------------- -----------------
(Successor) (Successor) (Predecessor)
Restated Restated (1)
NET SALES $ 248,324 $ 128,682 $ 110,992
OPERATING COSTS AND EXPENSES:
Cost of goods sold, including buying and occupancy 181,486 99,221 80,756
Selling, general, and administrative 69,704 38,031 31,490
Restructuring charges 893 1,397 21,839
--------- --------- ---------
Total operating costs and expenses 252,083 138,649 134,085
--------- --------- ---------
LOSS FROM OPERATIONS (3,759) (9,967) (23,093)
OTHER INCOME (EXPENSES):
Interest expense (contractual interest of $6,210 for the (6,881) (3,397) (2,583)
sixteen weeks ended May 19, 2002) and amortization of
debt costs
Sundry income 132 158 109
--------- --------- ---------
Total other expenses (6,749) (3,239) (2,474)
--------- --------- ---------
LOSS BEFORE REORGANIZATION ITEMS AND INCOME TAXES (10,508) (13,206) (25,567)
REORGANIZATION ITEMS:
Gain on cancellation of pre-petition liabilities -- -- 184,954
Fresh start adjustments -- -- 324
Extinguishment of debt -- -- (1,439)
--------- --------- ---------
Total reorganization items -- -- 183,839
--------- --------- ---------
NET (LOSS) EARNINGS $ (10,508) $ (13,206) $ 158,272
========= ========= =========
LOSS PER SHARE - BASIC $ (0.53) $ (0.66)
========= =========
LOSS PER SHARE - DILUTED $ (0.53) $ (0.66)
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 20,000 20,000
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 20,000 20,000
========= =========
(1) The sixteen weeks ended May 19, 2002 have been restated to reflect a
reorganization item for extinguishment of debt of $1,439 belonging to the
Predecessor.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
FRANK'S NURSERY & CRAFTS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
SIXTEEN WEEKS ENDED MAY 19, 2002, THIRTY-SIX WEEKS ENDED JANUARY 26, 2003, AND
FORTY WEEKS ENDED NOVEMBER 2, 2003
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
Common Stock Additional Accumulated Net Total
Number Par Paid-in Deficit Parent Shareholders'
of Shares Value Capital Investment Equity
(Deficit)
------------- ------- ------------ ------------- ------------ -------------
Predecessor:
Balance at January 27, 2002 1,000 $ 1 $ 165,999 $ (280,112) $ 16,117 $ (97,995)
Net loss excluding plan of
reorganization and fresh start
adjustments (25,567) (25,567)
Effect of plan of reorganization and fresh
start adjustments:
Cancellation of old common stock (1,000) (1) (165,999) (166,000)
New common stock 20,000,000 20 22,980 23,000
Cancellation of net parent investment (16,117) (16,117)
Extinguishment of debt (1,439) (1,439)
Other fresh start adjustments 307,118 307,118
------------- ------- ------------ ------------- ------------ -----------
Successor:
Balance at May 20, 2002 20,000,000 20 22,980 - - 23,000
Issuance of 10,869,565 warrants in
connection with Term Loan debt
4,436 4,436
Expense for stock options issued 41 41
Net loss (Restated) (17,685) (17,685)
------------- ------- ------------ ------------- ------------ -----------
Balance at January 26, 2003 (Restated) 20,000,000 20 27,457 (17,685) - 9,792
Net loss (10,508) (10,508)
------------- ------- ------------ ------------- ------------ -----------
Balance at November 2, 2003 20,000,000 (1) $ 20 $ 27,457 $ (28,193) $ - $ (716)
============= ======= ============ ============= ============ ===========
(1) 16,926,957 shares issued and 3,073,043 to be issued.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
FRANK'S NURSERY & CRAFTS, INC
STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
Forty Weeks Twenty-four Sixteen Weeks
Ended Weeks Ended Ended
November 2, November 3, May 19,
2003 2002 2002
----------------- ---------------- ---------------
(Successor) (Successor) (Predecessor)
Restated Restated (1)
OPERATING ACTIVITIES:
Net (loss) earnings $ (10,508) $ (13,206) $ 158,272
Adjustments to reconcile net (loss) earnings to net cash
provided by (used in) operating activities:
Depreciation 2,465 3,223 4,900
Amortization of debt costs and warrants 1,682 683 632
Non cash portion of restructuring and other related charges 893 1,397 17,572
Debt issue costs - - 1,079
Gain on cancellation of pre-petition liabilities - - (184,991)
Fresh start adjustments - - (324)
Other (95) (78) (939)
----------------- ---------------- ---------------
(5,563) (7,981) (3,799)
Changes in assets and liabilities, net of effects of fresh
start adjustments and gain on cancellation of pre-petition
liabilities:
Notes receivable - - 1,631
Accounts receivable (17) (279) 885
Inventory (31,402) (471) (23,996)
Prepaid expenses (383) (264) 1,405
Other non current assets (584) (2,046) (349)
Accounts payable 12,652 (11,398) 36,121
Accrued expenses 1,041 (10,242) 7,603
----------------- ---------------- ---------------
Net cash (used in) provided by operating activities (24,256) (32,681) 19,501
----------------- ---------------- ---------------
INVESTING ACTIVITIES:
Additions to property, plant, and equipment (1,732) (2,118) (605)
Net proceeds from asset sales 240 4,969 2,566
----------------- ---------------- ---------------
Net cash (used in) provided by investing activities (1,492) 2,851 1,961
----------------- ---------------- ---------------
FINANCING ACTIVITIES:
Increase (decrease) in revolving credit facilities (net) 26,309 2,651 (10,650)
Payment of long-term debt and capital leases (1,530) (750) (2,183)
Borrowings under term loan - 20,000 -
----------------- ---------------- ---------------
Net cash provided by (used in) financing activities 24,779 21,901 (12,833)
----------------- ---------------- ---------------
Net change in cash and cash equivalents (969) (7,929) 8,629
Cash and cash equivalents at beginning of period 3,068 10,499 1,870
----------------- ---------------- ---------------
Cash and cash equivalents at end of period $ 2,099 $ 2,570 $ 10,499
================= ================ ===============
(1) The sixteen weeks ended May 19, 2002 have been restated to reflect a reorganization item for extinguishment of debt of
$1,439 belonging to the Predecessor.
Supplemental disclosure of non cash financing information:
Capital lease additions of $749 for the forty weeks ended November 2, 2003. Fair value adjustments of assets
due to fresh start accounting of $35,170 for the sixteen weeks ended May 19, 2002.
Cash paid for interest $ 4,230 $ 1,906 933
================= ================ ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
FRANK'S NURSERY & CRAFTS, INC.
(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
(TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) GENERAL
Frank's Nursery & Crafts, Inc., a Delaware corporation ("Frank's" or the
"Company"), operates the largest chain (as measured by sales) in the United
States of specialty retail stores devoted to the sale of lawn and garden
products. Frank's also is a leading retailer of indoor garden products and
accessories, including silk floral arrangements, as well as Christmas decor
merchandise.
CHAPTER 11 PROCEEDINGS AND REORGANIZATION
On February 19, 2001 (the "Petition Date"), Frank's Nursery & Crafts, Inc., a
Michigan corporation ("Old Frank's"), and FNC Holdings Inc. ("Holdings"), the
sole shareholder of Old Frank's, (collectively with Old Frank's, the "Debtors"),
filed voluntary petitions for reorganization under chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
Court for the District of Maryland (the "Bankruptcy Court"). The chapter 11
cases for the Debtors (the "Chapter 11 Cases") were jointly administered for
procedural purposes. From the Petition Date until May 19, 2002, the Debtors
operated their businesses as debtors-in-possession pursuant to the Bankruptcy
Code. On May 7, 2002, the Bankruptcy Court confirmed the Debtors' Second Amended
Joint Plan of Reorganization, with certain modifications (as so modified, the
"Plan"). On May 20, 2002 (the "Effective Date"), the Plan became effective and
the Debtors successfully emerged from their chapter 11 bankruptcy proceedings.
Pursuant to the Plan, the following transactions were completed on or about the
Effective Date:
- - all of Old Frank's and Holdings issued and outstanding common stock was
cancelled;
- - Old Frank's merged with and into Holdings, and then changed its name to
Frank's which was reincorporated in Delaware (the "Merger");
- - certain indebtedness of the Debtors was cancelled in exchange for cash
and/or common stock, par value $.001 per share, of Frank's ("Common
Stock"), the first installment of which was issued on September 12, 2002;
- - executory contracts or unexpired leases to which any Debtor was a party
were assumed, or rejected;
- - members of the board of directors and officers of Frank's were elected or
appointed and began serving their respective terms; and
- - the overall corporate structure was simplified through the dissolution or
merger with all of Old Frank's and Holdings subsidiaries.
In addition, the Debtors' mortgage lenders determined, and the bankruptcy court
found, that there was sufficient security to support the Company's refinanced
mortgages.
On the Effective Date, 50,000,000 shares of Common Stock were authorized and (a)
20,000,000 shares of Common Stock were reserved for distribution in respect of
claims against the Debtors, (b) 913,044 shares of Common Stock were reserved for
issuance of warrants to purchase shares of common Stock ("Warrants") at an
exercise price of $1.38 for the old equity holders of Holdings, (c) 3,652,174
shares of Common Stock were reserved for a new stock option plan, which was
implemented in accordance with the Plan and (d) 5,869,565 shares of Common Stock
were reserved for the conversion rights of Kimco Capital Corporation and its
affiliates ("Kimco") as part of the exit financing. In addition, on the
Effective Date, Frank's entered into a three-year $50 million secured revolving
credit facility, that includes $25 million for letters of credit, with Congress
Financial Corporation as agent for a syndicate of lenders and a $30 million term
and revolving loan with Kimco.
BASIS OF PRESENTATION
The Company emerged from Chapter 11 bankruptcy proceedings on May 20, 2002,
which for financial reporting purposes, the Company deemed the effective date of
the Plan. Fresh start reporting was implemented as of May 20, 2002, and
accordingly, at such date all assets and liabilities were restated to reflect
their respective fair values. For financial reporting purposes, references to
"Predecessor" refer to the Company's predecessors on and prior to May 20, 2002,
and references to "Successor" refer to the Company on and after May 20, 2002,
after giving effect to the implementation of fresh start reporting. Successor
financial statements are not comparable to Predecessor financial statements.
The accompanying financial statements that contain the sixteen weeks ended May
19, 2002 (Predecessor) have been presented in accordance with SOP 90-7,
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code"
and assumed that the Debtors would continue as a going concern.
8
Pursuant to SOP 90-7, professional fees and other costs associated with the
Chapter 11 Cases were expensed as incurred and reported as restructuring items.
Interest expense was reported only to the extent that it was expected to be paid
following the Chapter 11 Cases.
The accompanying unaudited financial statements include all adjustments,
consisting only of normal, recurring adjustments and accruals, which are, in the
opinion of management, necessary for fair presentation of the results of
operations and financial position. Results of operations for interim periods may
not be indicative of future results. The unaudited financial statements should
be read in conjunction with the audited financial statements included in Frank's
Annual Report on Form 10-K, as filed with the Securities and Exchange Commission
for the fiscal year ended January 26, 2003.
(2) RECLASSIFICATIONS
Certain amounts reported in previous periods have been reclassified to conform
to the 2003 presentation.
(3) RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In October, 2003, the Company became aware of certain potential accounting
issues related to marketable securities from a 1999 defined benefit plan
reversion that the Company has determined were not properly recorded in the
Company's accounting records. Under the direction and oversight of the Audit
Committee and with the assistance of outside legal advisors and accounting
consultants, the Company conducted an inquiry into these and related accounting
issues. As a result of this process, the Company is, by means of this filing,
restating its previously issued financial statements for the twenty-four weeks
ended November 3, 2002 and the sixteen weeks ended May 19, 2002.
At May 19, 2002, the balance of $1 million was reclassified to fixed assets as
an adjustment to fresh-start accounting. The restatement of the Company's
Balance Sheets as of November 3, 2002 resulted in a decrease in assets of $38
thousand and an increase in accumulated deficit of $38 thousand and as of
January 26, 2003 resulted in a decrease in assets of $54 thousand and an
increase in accumulated deficit of $54 thousand. The restatement of the
Company's Statements of Operations for the twelve weeks ended November 3, 2002
resulted in an increase in selling, general, and administrative expenses
("SG&A") of $9 thousand and a decrease in interest income of $11 thousand and
for the twenty-four weeks ended November 3, 2002 resulted in an increase in SG&A
of $16 thousand and a decrease in interest income of $22 thousand. For the
sixteen weeks ended May 19, 2002, the restatement of the Company's Statement of
Operations resulted in a decrease in interest income of $9 thousand.
Unless otherwise expressly stated, all financial information in this Quarterly
Report on Form 10-Q is presented inclusive of these revisions.
(4) LOSS PER SHARE
Basic loss per share is computed by dividing net loss on common shares by the
weighted average number of common shares outstanding during each period. For
purposes of the per share calculation, 20,000,000 shares were used which
represent 16,926,957 shares outstanding and 3,073,043 shares to be issued.
Diluted earnings per share reflect per share amounts that would have resulted if
dilutive potential common stock had been converted to common stock.
(5) STOCK OPTIONS
The Company accounts for stock-based compensation issued to its employees and
non-employee directors in accordance with APB Opinion No. 25, "Accounting for
Stock Issued to Employees", and related Interpretations. Accordingly, the
Company has adopted the "disclosure only" provisions of SFAS No. 148,
"Accounting for Stock-Based Compensation -- Transition and Disclosure". SFAS No.
148 provides alternative methods of transition for a voluntary change to the
fair value method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 requires new prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
For SFAS No. 148 purposes, the fair value of each option granted under the
Company's stock option plan is estimated as of the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: expected dividend yield of 0%; stock price volatility of 50%; risk
free interest rates ranging from 2.86% to 3.16%; and an expected option term of
5 years.
If the Company had elected to recognize the compensation cost of its stock
option plan based on the fair value method of accounting, net loss and net loss
per share for the twelve and forty weeks ended November 2, 2003 would have been
decreased to the pro forma amounts below (dollars in thousands, except per share
amounts):
9
Twelve Weeks Forty Weeks
Ended Ended
November 2, 2003 November 2, 2003
-------------------- ------------------------
Net loss, as reported $ (14,454) $ (10,508)
Total stock-based compensation expense determined (128) (425)
under the fair value method
-------------------- ------------------------
Pro forma net loss $ (14,582) $ (10,933)
==================== ========================
Weighted average number of shares 20,000 20,000
outstanding - basic
Weighted average number of shares 20,000 20,000
outstanding - diluted
Basic and diluted loss per share:
As reported - basic $ (0.72) $ (0.53)
==================== ========================
As reported - diluted $ (0.72) $ (0.53)
==================== ========================
Pro forma - basic $ (0.73) $ (0.55)
==================== ========================
Pro forma - diluted $ (0.73) $ (0.55)
==================== ========================
(6) RESTRUCTURING
During the fourth fiscal quarter of 2002 and the second fiscal quarter of 2003,
the Company implemented two corporate overhead restructuring initiatives to
reduce costs at its corporate headquarters. Additionally, during the fiscal
second quarter of 2003, the Company announced the closure of its Harrisburg, PA
warehouse. As a result of the two restructuring initiatives, the Company
recorded non-recurring charges for workforce reductions of $0.7 million during
the fourth fiscal quarter of 2002 and $0.9 million during the fiscal second
quarter of 2003. For the fiscal year ended January 26, 2003, the Company
recorded restructuring charges based on Emerging Issues Task Force ("EITF")
94-3, "LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER
COSTS TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN A
RESTRUCTURING)." For the fiscal quarter ended August 10, 2003, the Company
records restructuring charges based on Financial Accounting Standards Board
("FASB") No. 146, "ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL
ACTIVITIES."
Reconciliation of the restructuring liability, as of November 2, 2003, is as
follows:
Balance at January 2003 2003 2003 Ending Balance at
26, 2003 Charges Payments Adjustments November 2, 2003
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Employee separation costs (a) $ 747 893 (787) - $ 853
====================================================================================
(a) Of the planned downsizing of 58 positions, 29 reductions had been
implemented as of November 2, 2003.
The Company expects that substantially all remaining payments will be made
within the next twelve months.
(7) RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). This statement is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company determined that there was no impact on the
Company's financial condition or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included elsewhere in this Quarterly
Report, and with the audited financial statements and notes thereto included in
the Company's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission for the fiscal year ended January 26, 2003, as amended.
10
FRESH START REPORTING AND FACTORS AFFECTING COMPARABILITY OF FINANCIAL
INFORMATION
The Company emerged from Chapter 11 bankruptcy proceedings on May 20,
2002, which for financial reporting purposes, the Company deemed the effective
date of the plan of reorganization. Fresh start reporting was implemented as of
May 20, 2002, and accordingly, at such date all assets and liabilities were
restated to reflect their respective fair values. For financial reporting
purposes, references to "Predecessor" refer to the Company's predecessors on and
prior to May 20, 2002, and references to "Successor" refer to the Company on and
after May 20, 2002, after giving effect to the implementation of fresh start
reporting. Successor financial statements are not comparable to Predecessor
financial statements.
RESULTS OF OPERATIONS
The following table shows the 2003 periods in comparison to the corresponding
2002 periods (dollars in thousands).
Twelve weeks ended Forty weeks Twenty-four Sixteen weeks
ended weeks ended ended
------------------------- ------------ ----------- -------------
November 2, November 3, November 2, November 3, May 19, 2002
2003 2002 2003 2002
------------------------- ------------ ----------- -------------
("Successor") ("Predecessor")
(Restated) (Restated) (Restated)
Net sales $40,284 $ 39,612 $248,324 $128,682 $ 110,992
Operating costs and expenses:
Cost of sales, including buying 34,532 34,575 181,486 99,221 80,756
and occupancy
Selling, general, and administrative 17,850 17,278 69,704 38,031 31,490
Restructuring and other related charges -- 2,000 893 1,397 21,839
-------- -------- ------- -------- --------
Total operating costs and expenses 52,382 53,853 252,083 138,649 134,085
Loss from operations (12,098) (14,241) (3,759) (9,967) (23,093)
Other income (expenses):
Interest expense and amortization of (2,258) (1,811) (6,881) (3,397) (2,583)
debt costs
Other income (expenses) (98) 93 132 158 109
-------- -------- ------- -------- --------
Total other expenses (2,356) (1,718) (6,749) (3,239) (2,474)
Loss before reorganization income (14,454) (15,959) (10,508) (13,206) (25,567)
Reorganization income -- -- -- -- 183,839
-------- -------- ------- -------- --------
Net loss (earnings) $(14,454) $ (15,959) $(10,508) $ (13,206) $ 158,272
======== ======== ======= ======== ========
NET SALES. Net sales were $40.3 million for the twelve weeks ended
November 2, 2003 ("2003 quarter"), an increase of $0.7 million, or 1.7%,
compared with net sales of $39.6 million for the twelve weeks ended November 3,
2002 ("2002 quarter"). The fiscal quarter-to-date sales increase was driven by a
more comprehensive marketing program and merchandising initiatives designed to
maximize the fall lawn and garden business.
Net sales were $248.3 million for the forty weeks ended November 2,
2003 ("2003 YTD"), an increase of $8.7 million, or 3.6%, compared with net sales
of $239.7 million for the forty weeks ended November 3, 2002 ("2002 YTD"). The
fiscal year-to-date sales increase was driven by a more comprehensive marketing
program, merchandising initiatives designed to extend the lawn and garden
season, and solid consumer demand for high quality nursery products.
There were 170 stores open for all periods presented.
COST OF SALES, INCLUDING BUYING AND OCCUPANCY. Cost of sales was $34.5
million for the 2003 quarter, a decrease of $0.1 million, or 0.1% compared with
$34.6 million for the 2002 quarter. Cost of sales, as a percentage of net sales,
was 85.7% for the 2003 quarter compared with 87.3% for the 2002 quarter. This
percentage decline of 1.6% is due primarily to lower occupancy and depreciation
costs.
Cost of sales were $181.5 million for 2003 YTD, an increase of $1.5
million, or 0.8%, compared with $180.0 million for 2002 YTD. Cost of sales, as a
percentage of net sales, was 73.1% for 2003 YTD compared with 75.1% for 2002
YTD. This percentage decline of 2.0% is due primarily to lower occupancy and
depreciation costs resulting from fresh start accounting, as well as lower
utility costs.
SELLING, GENERAL, AND ADMINISTRATIVE ("SG&A") EXPENSES. SG&A expenses
were $17.9 million for the 2003 quarter, an increase of $0.6 million, or 3.3%,
compared with $17.3 million for the 2002 quarter. As a percentage of net sales,
SG&A expenses were 44.3% for the 2003 quarter compared with 43.6% for the 2002
quarter. This percentage increase is largely due to increased advertising costs.
SG&A expenses were $69.7 million for 2003 YTD, an increase of $0.2
million, or 0.3%, compared with $69.5 million for 2002 YTD. As a percentage of
sales, SG&A expenses were 28.1% for YTD 2003 compared with 29.0% for 2002 YTD.
This
11
percentage decline of 0.9% is primarily due to headcount reductions and
headquarters cost savings initiatives, which were partially offset by increased
advertising costs.
RESTRUCTURING AND OTHER RELATED CHARGES. No restructuring or related
charges were taken in the 2003 quarter. In the 2002 quarter, the charge of $2.0
million represented a change in estimate for the pre-petition claim payments.
For YTD 2003, a charge of $0.9 million in the second fiscal quarter of 2003
included the following: $0.2 million for a severance and employee retention plan
related to the closure of the Harrisburg, PA warehouse and $0.7 million for
severance costs pertaining to corporate overhead restructuring. In 2002 YTD, the
charge of $23.2 million consisted of $2.0 million representing a change in
estimate for the pre-petition claim payments; $15.5 million for costs of lease
rejections; $2.6 million for professional fees; $1.8 million for severance and
employee retention plans approved by the bankruptcy court while under Chapter 11
bankruptcy; $1.1 million for costs of mortgage debt; and miscellaneous expenses
of $0.2 million. The $15.5 million liability for the costs of rejected store
leases represented an estimate of the maximum claim allowed under bankruptcy
law. In accordance with the plan of reorganization, these claims were treated as
general unsecured claims and resulted in a cancellation of debt and recognized
as a reorganization item. The $1.1 million liability for costs of mortgage debt
represented an estimate to properly state the pre-petition long-term debt in
accordance with the plan of reorganization.
OTHER INCOME (EXPENSES). Other income primarily relates to gains from
the sale of property, interest income, and miscellaneous income. Other expense
was $0.1 million for the 2003 quarter compared to other income of $0.1 million
for the 2002 quarter. Other income was $0.1 million for 2003 YTD compared to
$0.3 million for 2002 YTD. Included in other expense for the 2003 quarter are
approximately $0.4 million associated with a partial roof collapse at the
Company's leased Harrisburg warehouse facility.
INTEREST EXPENSE AND AMORTIZATION OF DEBT COSTS AND WARRANTS. Interest
expense and amortization of debt costs and warrants ("interest expense") was
$2.3 million for the 2003 quarter, an increase of $0.4 million, or 24.7%,
compared with interest expense of $1.8 million for the 2002 quarter. The fiscal
quarter-to-date increase in interest expense was due to increased borrowings.
Interest expense was $6.9 million for 2003 YTD, an increase of $0.9 million, or
15.1%, compared with interest expense of $6.0 million for 2002 YTD. Higher
interest expense for 2003 was due primarily to an increase in borrowings.
REORGANIZATION ITEMS. A gain of $183.8 million was recognized for 2002.
The gain was due to the cancellation of pre-petition liabilities upon emergence
($184.9 million), the fresh start accounting adjustments ($0.3 million), offset
by a loss from the extinguishment of debt ($1.4 million).
INCOME TAXES. No income tax benefit was recognized for the loss for 2003 and
2002. Instead, the increase in net deferred tax assets as a result of the loss
was offset by an equal increase in the valuation allowance. In addition, no
income tax expense was recognized on the reorganization items. The items of
income and expense included in the reorganization income are non-taxable and
non-deductible, respectively.
LIQUIDITY AND CAPITAL RESOURCES
REVOLVING CREDIT FACILITY WITH CONGRESS FINANCIAL CORPORATION
The Company entered into a revolving credit facility with Congress
Financial Corporation on May 20, 2002 ("the Congress facility"). The Congress
facility is a $50 million, secured revolving loan facility, which includes $25
million of availability for letters of credit. On November 25, 2003, Congress
and the Company executed an amendment to the credit facility which, among other
things, limited borrowings under the facility to $42 million until certain
conditions are satisfied. The November 25, 2003 amendment is discussed further
below. The availability of borrowings under this facility generally is based on
a percentage of eligible inventory and certain other assets, subject to certain
reserves. The amounts reserved are based on a number of variables, including
inventory levels, merchandise purchases and sales levels, and the types of
reserves include inventory shrinkage, letters of credit outstanding, sales taxes
and other liabilities of the Company. The total amount of these reserves varies
by season but typically ranges from 15% to 35% of the cost of eligible
inventory. As of November 2, 2003, there were $21.6 million in borrowings
outstanding under the Congress facility and outstanding letters of credit
aggregated $1.9 million. Excess availability as of November 2, 2003 was $5.6
million.
The Congress facility allows the Company the option of prime rate loans
or Eurodollar loans. Depending upon the Company's excess availability, loans
under the facility bear interest either at the prime rate plus 0.25% or 0.75% or
a Eurodollar rate plus 2.75%, 3.25% or 3.5%. These rates were increased by an
amendment to the Congress facility on February 10, 2003, and prior to such
amendment, the interest rates under the Congress facility either were the prime
rate plus 0.25% or 0.50% or a Eurodollar rate plus 2.75%, 3.00%, or 3.25%. The
Congress facility has an initial term of three years and renews for successive
one-year terms thereafter unless the lender or the Company elects to terminate
the Congress facility as of the end of the initial term or any renewal term. The
Congress facility includes an unused line fee of 0.25% per year, a servicing fee
of $10,000 per calendar quarter, and an early
12
termination fee in an amount equal to 1.00% of the amount of the maximum credit
if the Congress facility is terminated in whole during the second year and 0.50%
if terminated during the third year.
The Congress facility contains a number of covenants, which restrict,
among other things, Frank's ability to incur additional debt or make other
restricted payments, grant liens, make loans, advances, and investments, engage
in transactions with affiliates, dispose of assets, prepay and refinance debt,
and make certain changes in its business. The Congress facility also prohibits
the declaration or payment by the Company of dividends on shares of its capital
stock.
The Congress facility also originally contained two financial
covenants; a minimum quarterly level of adjusted EBITDA (as described below) and
a minimum ratio of inventory to accounts payable. On February 10, 2003, the
Company and Congress Financial entered into an amendment to the facility which
revised the measurement of minimum level of inventory from a daily to a weekly
basis, lowered the minimum quarterly adjusted EBITDA levels, revised the minimum
ratio of inventory to accounts payable to be a ratio of accounts payable to
inventory, and increased the interest rates for the Congress facility as
described above. The amended financial covenants are measured only if (1) the
Company's excess availability, plus the amount of cash equivalents maintained by
the Company in an account under the control of Congress Financial, falls below
$4.0 million at any time or (2) the Company's average excess availability, plus
the average amount of cash equivalents maintained in such account, for any
four-week period falls below $9.0 million. In such event, the minimum adjusted
EBITDA covenant is measured quarterly and the minimum accounts payable to
inventory ratio covenant is measured for each accounting period, and the minimum
levels required by each covenant varies from period to period. Management
believes that the amended covenants are less restrictive and provide the Company
with more flexibility than the original covenants. The required minimum accounts
payable to inventory ratio for November 2, 2003 was 36.1%, and the company's
actual ratio at such date was 43.5%. On November 25, 2003, the parties entered
into an amendment to the credit facility which eliminated the minimum accounts
payable to inventory ratio covenant with respect to accounting periods in the
fiscal year ending January 25, 2004. The required minimum level of adjusted
EBITDA for the period from November 4, 2002 through November 2, 2003 was $(7.6)
million, and the actual level for such period was $(2.9) million, as shown
below.
Adjusted EBITDA, as measured under the Congress facility, equals the
net income of the Company for the applicable fiscal period, minus extraordinary
gains included in such net income for such fiscal period, plus interest expense,
income taxes, depreciation and amortization, other non-cash charges (other than
to the extent requiring an accrual or reserve for future cash expenses) and
non-cash extraordinary losses deducted from such net income for such fiscal
period, plus, for the fifth, sixth and seventh accounting periods of the
Company's 2002 fiscal year, restructuring charges of up to $500,000 in the
aggregate for such accounting periods deducted from such net income for such
fiscal period, all as determined in accordance with generally accepted
accounting principles ("GAAP"). A summary of the calculation of the Company's
adjusted EBITDA for the period from November 4, 2002 through November 2, 2003 is
set forth below.
(000's)
----------
Net loss using GAAP $(14,988)
Plus:
Depreciation 1,526
Interest 8,519
Non cash losses 1,994
----------
Adjusted EBITDA $(2,949)
==========
The adjusted EBITDA set forth above should not be considered an
alternative to GAAP net income as an indication of the Company's performance.
The computation of adjusted EBITDA required by the Congress facility may differ
from the methodology for calculating adjusted EBITDA utilized by other
companies, and therefore, may not provide an appropriate comparison to the
results of other companies.
On November 25, 2003, the Company and Congress Financial Corporation
entered into an amendment to the Congress facility which eliminated the
requirement to comply with the accounts payable to inventory ratio covenant for
any accounting period during the fiscal year ending January 25, 2004, and
limited total borrowings under the facility to $42 million until additional
lenders become parties to the credit facility and provide aggregate commitments
of at least $8 million. The amendment also provides that the accounts payable to
inventory ratio covenant will be reset for the accounting periods in the fiscal
year ended January 30, 2005 based upon the good faith and reasonable projections
by the Company, to be determined by the agreement of Congress and the Company.
13
TERM LOAN AND REVOLVING CREDIT FACILITY - RELATED PARTY
The Company has a credit facility arranged by Kimco Capital Corp. ("the
Kimco facility") that originally provided for a $20 million term loan and $10
million of revolving loans. Frank's and Kimco Capital Corp. amended the Kimco
facility on January 23, 2003, providing for an increase in the amount of
revolving loans available under the Kimco facility to $20 million. The Company
and Kimco Capital Corp. entered into an amendment to the Kimco facility as of
October 30, 2003 to allow for overline revolving loan advances of up to $7
million during the period from January 1, 2004 to April 1, 2004. The Kimco
facility is secured by a first priority lien on certain of the Company's owned
and leased real property and a second lien on the Company's inventory. These
loans bear interest at 10.25% per year for an initial term of three years, with
the option for the Company to renew the loans for up to an additional two years,
provided that the Company is not then in default. A portion of the Kimco
facility has been participated by Kimco Capital Corp. to Third Avenue Trust
and/or its designees. As of November 2, 2003 total debt outstanding under the
Kimco facility was $40.0 million.
The Kimco facility contains a number of covenants, which restrict,
among other things, Frank's ability to incur additional debt, pay dividends or
make other restricted payments, grant liens, make loans, advances and
investments, engage in transactions with affiliates, dispose of assets, enter
into sale-leaseback arrangements, effect mergers, consolidations, and
dissolutions or issue preferred stock. In addition, Frank's is required to
prepay borrowings under this facility with the net cash proceeds from the sale
of certain assets. The Kimco facility does not contain any financial covenants,
but a default by the Company under its credit facility with Congress Financial
would trigger a default under the Kimco facility.
Kimco Capital Corp. is an affiliate of (i) Kimco Realty Services, Inc.
and Kimco Realty Corporation, which, as of December 17, 2003, are the beneficial
owners of 51.7% of the Company's common stock, (ii) Kimco Select Investments, of
which David M. Samber, one of the Company's directors, was the Chief Executive
Officer, and (iii) Kimco Realty Corporation, of which Aaron J. Fleishaker, one
of the Company's directors, is an Executive Vice President. A portion of the
credit facility has been participated by Kimco Capital Corp. to Third Avenue
Trust and/or its designees, which, collectively with its affiliates, is the
beneficial owner of 18.0% of the Company's common stock as of December 17, 2003.
ADEQUACY OF CAPITAL RESOURCES
The Company's most significant cash requirements are for merchandise
inventory, and these requirements fluctuate throughout the year due to the
seasonality of the business. Cash requirements increase substantially in August
and September in anticipation of the Christmas season and in March and April for
the lawn and garden business. Additionally, the Company's business depends, in
part, on normal weather patterns across its markets. Any unusual weather
patterns can have a material and adverse impact on the Company's revenues,
particularly on the lawn and garden industry.
In the months leading up to the Company's peak selling seasons, the
Company orders product for delivery prior to and during the selling seasons.
Frank's negotiates payment terms with suppliers on a case-by-case basis.
Historically, the majority of payments are made during or shortly after the
selling season, and a small percentage is paid prior to the influx of sales
receipts. Working capital for pre-seasonal inventory buildup comes from the
Company's two revolving credit facilities and/or cash generated by operations.
The Congress facility is asset-based and allows for borrowing at a percentage of
inventories on hand, net of amounts reserved under the credit agreement. The
amounts reserved are based on a number of variables, including inventory levels,
merchandise purchases and sales levels, and the types of reserves include
inventory shrinkage, letters of credit outstanding, sales taxes and other
liabilities of the Company. The total amount of these reserves varies by season
but typically ranges from 15% to 35% of the cost of eligible inventory. The
Kimco facility is secured by real estate and a second lien on the Company's
inventory. Availability under the facility does not fluctuate from month to
month as it is not tied to a borrowing base. Hence, the Company uses the Kimco
revolver to fund most of the pre-seasonal inventory buildup, and the Congress
facility when inventory levels and advance rates rise.
The Company's current projections indicate that it is likely to be out
of compliance with the existing accounts payable to inventory ratio covenant of
the Congress facility during most of the fiscal year ending January 30, 2005. On
November 25, 2003, the Company and Congress Financial Corporation entered into
an amendment in which Congress agreed to reset the accounts payable to inventory
ratio covenant with respect to the accounting periods during the fiscal year
ending January 30, 2005 based on the good faith and reasonable projections of
the Company, to be determined by the agreement of Congress and the Company.
However, the Company cannot provide any assurance that Congress and the Company
will reach agreement on the revisions to the accounts payable to inventory ratio
covenant, and if they are not able to reach such agreement, the Company is not
likely to be able to comply with the existing covenant requirements.
In the event that cash flows from operations, together with available
borrowings under the Company's credit facilities, are not sufficient to meet the
Company's cash requirements, the Company would be required to obtain alternative
financing, reduce planned capital expenditures or inventory levels, or make
other changes to its operating plan. The Company can provide no assurance that
additional or alternative financing would be available on acceptable terms,
especially in light of the fact that, except for miscellaneous
14
real property and equipment, substantially all of the Company's existing assets
are pledged as collateral for the existing credit facilities, or that reductions
in planned capital expenditures or inventory levels would be sufficient to cover
any cash shortfalls.
The Company plans to either renew its existing credit facilities or
seek alternative outside financing prior to the expiration of the facilities in
May 2005. The Company can provide no assurances that it will be successful in
renewing the facilities.
The Company anticipates spending approximately $0.6 million for capital
expenditures for the remainder of fiscal 2003, primarily for store remodeling
and refurbishments. No store openings are planned for fiscal 2003.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This filing contains certain forward-looking statements, which reflect
management's current views of future events and financial performance. These
forward-looking statements are based on many assumptions and factors detailed in
the Company's filings with the Securities and Exchange Commission, including the
effect of currency translations, customer demand, fashion trends, competitive
market forces, uncertainties related to the effect of competitive products and
pricing, customer acceptance of the Company's merchandise mix and retail
locations, unseasonable weather, risks associated with foreign global sourcing,
including political instability and changes in import regulations, economic
conditions worldwide, and the ability of the Company to execute its business
plans effectively. Any changes in such assumptions or factors could produce
significantly different results. The Company undertakes no obligation to update
forward-looking statements, whether as a result of new information, future
events, or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company perceives its market risk is related to interest rate risk
and foreign currency exchange rate risk for its borrowings under the credit
facility with Congress Financial, which is a variable rate financing agreement.
Borrowings under the Congress facility may be based upon the U.S. prime interest
rate or the Eurodollar rate. The Company does not use swaps or other interest
rate protection agreements to hedge this risk. During the period beginning
January 27, 2003 through November 2, 2003, the Company's average outstanding
balance under the Congress facility was $13.6 million. At such level, a 200
basis point change in the interest rate on the credit facility would result in
an increase in interest expense of $272,000 per year. The Company had $21.6
million outstanding under the Congress facility at November 2, 2003. Interest
under the $40.0 million credit facility with Kimco Capital is fixed at 10 1/4%
per annum and $40.0 million was outstanding at November 2, 2003. The Company
does not enter into derivative or interest rate transactions for speculative
purposes.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. As of the end of
the period covered by this Form 10-Q, an evaluation was performed
under the supervision and with the participation of Frank's
management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation
of Frank's disclosure controls and procedures pursuant to Exchange
Act Rule 13a-15. Based on their evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the design and
operation of these disclosure controls and procedures were
effective to ensure that all material information required to be
filed in this Form 10-Q has been made known to them on a timely
basis.
(b) Changes in internal controls. There were no significant changes in
Frank's internal controls, or in other factors that could
significantly affect Frank's internal controls, subsequent to the
most recent evaluation of internal controls performed by the
Company.
15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
10.1 Third Amendment to Credit and Security Agreement,
dated as of October 30, 2003, among the Registrant
and Kimco Capital Corp.
10.2 Amendment No. 3 to Loan and Security Agreement, dated
as of October 30, 2003, among the Registrant, Congress
Financial Corporation, as Administrative Agent, and
the Lenders party thereto
31.1 Chief Executive Officer Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Chief Financial Officer Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Chief Executive Officer Certification Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Chief Financial Officer Certification Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
During the quarter ended November 2, 2003, Frank's filed the
following Reports on Form 8-K:
Report on Form 8-K dated September 19, 2003, reporting
under Item 5 the issuance of a press release announcing
the Company's net sales for the four and thirty-two weeks
ended September 7, 2003.
Report on Form 8-K dated October 9, 2003, reporting under
Item 5 the issuance of a press release announcing the
Company's net sales for the four and thirty-six weeks
ended October 5, 2003.
16
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.
DATE: December 17, 2003 FRANK'S NURSERY & CRAFTS, INC.
(Registrant)
By: /s/ Bruce Dale
-----------------------
Bruce Dale
Chief Executive Officer
/s/ Alan J. Minker
-----------------------
Alan J. Minker
Senior Vice President and
Chief Financial Officer
17
10-Q EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-10.1 Third Amendment to Credit and Security Agreement,
dated as of October 30, 2003, among the Registrant
and Kimco Capital Corp.
EX-10.2 Amendment No. 3 to Loan and Security Agreement, dated as
of October 30, 2003, among the Registrant, Congress
Financial Corporation, as Administrative Agent, and the
Lenders party thereto
EX-31.1 Chief Executive Officer Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
EX-31.2 Chief Financial Officer Certifications Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
EX-32.1 Chief Executive Officer Certifications Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EX-32.2 Chief Financial Officer Certification Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
18