- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-9457
SHELBY WILLIAMS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-0974443
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11-111 Merchandise Mart 60654
Chicago, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(312) 527-3593
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------------------------------ ------------------------------------
Common Stock, $.05 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _X_
At February 13, 1997, there were 8,743,863 shares of the registrant's common
stock outstanding. As of said date the aggregate market value of the voting
stock held by non-affiliates of the registrant (computed by reference to the
closing sale price on such date) was approximately $83,280,000.
Documents incorporated by reference:
PART OF FORM 10-K INTO WHICH
DOCUMENT DOCUMENT IS INCORPORATED
- -------------------------------------------------- ----------------------------
Registrant's annual report to stockholders for
1996............................................. Part II, Items 5-8
Registrant's definitive proxy statement to be
filed for 1997 annual meeting.................... Part III, Items 10-13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART I
ITEM 1. BUSINESS.
The registrant, Shelby Williams Industries, Inc. ("Shelby Williams" or the
"Company"), a Delaware corporation incorporated in February, 1976, is the
successor to a business formed in Chicago, Illinois in 1954. Its principal
executive offices are located at 11-111 Merchandise Mart, Chicago, Illinois
60654, telephone (312) 527-3593. The Company has additional executive,
operational and administrative offices at 150 Shelby Williams Drive, Morristown,
Tennessee 37813, telephone (423) 586-7000.
In the third quarter of 1996, the Company sold the business and related
manufacturing facility of its "Preview" line of contemporary upholstered seating
products at its approximate carrying value. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note to
Consolidated Financial Statements captioned "Restructuring Charge."
INDUSTRY
The contract furniture industry in which Shelby Williams primarily operates
serves the hospitality (including lodging, gaming, interval vacation and country
club), food service, university, healthcare and other institutional markets.
Approximately 80% of the Company's 1996 net sales were to the hospitality and
food service markets.
Shelby Williams estimates, based upon its experience and knowledge of its
markets, that demand for seating products in the hospitality and food service
industries is primarily for the refurbishment of existing facilities rather than
seating in new facilities. Shelby Williams estimates that food service seating
(including seating for food service facilities in hotels) is replaced
approximately every eight to 12 years and seating for hotel guest rooms every
ten to 15 years. In light of the significant level of acquisitions in the
lodging industry over the last two years and the trend of new owners to
refurbish and reposition following an acquisition, industry analysts expect
strong levels of refurbishing. In addition, increased profits in the lodging
industry resulting from high occupancy levels, coupled with increasing average
daily rates, have made additional funds available for refurbishing. According to
industry research, profitability levels in the United States lodging industry
are expected to remain strong over the next few years.
New construction activity also provides opportunities for additional
contract seating sales. According to independent industry analysts, over 100,000
rooms were constructed in 1996, a 20.8% increase over the previous year. New
construction activity reflects high profits in the lodging industry due to
strong occupancy levels and increasing average daily rates.
Based on net sales, management estimates that Shelby Williams is
approximately three times larger than the next largest manufacturer of contract
seating products for the hospitality and food service industries. The markets
for the seating products in which Shelby Williams competes are served by a small
number of relatively large, privately-held companies and divisions of
publicly-held companies and a large number of relatively small, privately-held
regional manufacturers. Shelby Williams believes that its size provides it with
certain advantages relative to its competitors.
GENERAL
Shelby Williams is the leading designer, manufacturer and distributor of
seating products used in the hospitality (including lodging, gaming, interval
vacation and country club) and food service industries. The Company produces and
markets under the SHELBY WILLIAMS brand name an extensive line of seating
products including wood, metal and rattan chairs, barstools, sofas and sleep
sofas and stacking chairs, as well as banquet-related products under the KING
ARTHUR brand name including folding tables, food service carts and portable
dance floors. In addition, Shelby Williams designs and manufactures seating
products under the THONET brand name for the university, healthcare and other
institutional markets. The Company also manufactures vinyl wallcovering products
for residential, hotel and office use and markets other textile products and
floor coverings to the architectural and design community and end users. The
Company markets these products
2
under the brand names SELLERS & JOSEPHSON and PHF, respectively. Shelby Williams
manufactures approximately 350 standard furniture products for the hospitality
and food service industries, and approximately 200 standard products for the
university, healthcare and other institutional markets. The majority of these
products are supplied under special order and finished and upholstered to
customer specifications.
Shelby Williams estimates that, of its 1996 net sales of $172.4 million,
approximately 80% were to the hospitality and food service industries and
approximately 13% were to university, healthcare and other institutional
markets. Representative users of the Company's products include Doubletree,
Embassy Suites, Four Seasons, Hampton Inns, Hilton, Holiday Inns, Hyatt, La
Quinta, Marriott, Ritz Carton and Sheraton, in the lodging industry; Caesars
Palace, Circus Circus, Grand Casino, MGM Grand, Mirage and Sun International, in
the gaming industry; Fairfield Communities, Marriott Vacation, Signature Resorts
and Vacation Break USA, in the interval vacation industry; and Brinker
International (Corner Bakery, Macaroni Grill, Maggiano's), Darden Restaurants
(Olive Garden and Red Lobster), Hard Rock Cafe, Lettuce Entertain You, Luby's
Cafeteria, Morton's of Chicago, Pizza Hut, Planet Hollywood, Starbucks and
Wendy's in the food service industry. The Company's ten largest customers
accounted for approximately 17% of 1996 net sales, and no single customer
accounted for more than 3% of 1996 net sales.
The Company's sales and marketing staff consists of approximately 105
full-time employees, of which 65 are field sales personnel. The Company's
products are marketed to hospitality and food service chains or their buying
agencies and to other customers through interior designers, architects, contract
furniture, food service and office furniture dealers. Shelby Williams markets
its products through 14 showrooms and sales offices in the United States and
approximately 40 distributors internationally. In addition, Shelby Williams
publishes four extensive catalog systems displaying the Company's products.
Customers may order standard products directly from these catalogs or request
changes to meet their design specifications.
Shelby Williams believes that the following factors distinguish it from its
competitors and have contributed to its leading position:
BREADTH OF PRODUCTS. Management believes that Shelby Williams offers the
widest range of seating products in the contract furniture industry for the
hospitality and food service markets. Shelby Williams believes that its ability
to provide a customer with all of its seating requirements (i.e., banquet, guest
room, casino, restaurant and public spaces) from a single source provides it
with a competitive advantage. In addition, Shelby Williams believes that it is
uniquely positioned to take advantage of the trend among large national
hospitality and food service companies to consolidate supplier relationships.
CUSTOMER SERVICE. Management believes that Shelby Williams offers a
superior level of customer service resulting in a high level of customer
satisfaction and enhanced opportunities for repeat business. As part of its
customer service program, Shelby Williams employs a dedicated sales force of 65
field sales personnel knowledgeable about Shelby Williams' products and attuned
to customers' requirements. Shelby Williams believes that its sales force and
the high quality of ongoing service and support it provides have enabled it to
establish strong relationships with its customers.
QUALITY AND RELIABILITY. Shelby Williams' strong reputation for product
quality, reliability and timely delivery has been an important factor in its
success and positions the Company favorably in competing for business. Moreover,
Shelby Williams' reputation for quality has enabled the Company to lead the
industry in setting standards for safety, quality and durability. Management
believes that its SHELBY WILLIAMS, THONET and KING ARTHUR brands are leading
tradenames in their respective markets.
DESIGN AND MANUFACTURING CAPABILITIES. Shelby Williams distinguishes itself
from other industry participants based on its manufacturing flexibility and its
ability to customize orders to customer specifications. Approximately 90% of the
Company's products are catalog items, finished and upholstered to customer
specifications. In addition, Shelby Williams often works with designers and
architects to design new products and customize standard products on behalf of
end users.
3
PRODUCTS
Shelby Williams' product lines consist primarily of: (i) seating for dining,
gaming, guest room, conference and banquet facilities, (ii) healthcare and
university seating, and (iii) desks, credenzas and seating for general office
and institutional use. To complement its major product lines, Shelby Williams
also manufactures and distributes banquet folding tables, portable dance floors
and platforms, food service carts and other function furniture, as well as a
full range of vinyl wallcoverings and floor coverings. Shelby Williams' products
are primarily sold: (i) directly to hospitality and food service providers,
gaming establishments, universities and other institutions, (ii) to interior
designers, architects and other buying agencies that in turn sell the products
to the end users, and (iii) to rental companies that store Company products and
rent them to their customers.
Approximately 350 standard furniture products are marketed to the
hospitality and food service industries; approximately 200 standard furniture
products are marketed for healthcare, university and other institutional use;
and approximately 25 standard furniture products are marketed for office use. In
addition to offering a standard line of products, Shelby Williams focuses on the
specific requirements of its customers and end users and has considerable
customization capabilities. Substantially all products are supplied under
special order and are finished and upholstered to customers' specifications.
Shelby Williams' products are marketed through an extensive catalog system,
through which customers may order standard Company products or devise custom
designs to suit their specific needs.
Shelby Williams' products are manufactured in hardwoods, such as maple, elm
and beech, as well as in rattan and metal, and are available in a wide variety
of finishes. Products are made of solid wood or a combination of woods, and many
are constructed with bentwood components, which provides extended durability.
All wooden products are finished on a conveyorized line which incorporates
forced drying cycles. The sealer coat and final conversion varnish coats are
applied by means of a state-of-the-art electrostatic finishing system which
insures uniform application resulting in a durable chip-resistant finish. Chairs
may be covered with fabric upholstery or vinyl, pursuant to customer design and
specification. Metal products are also produced in a wide variety of styles and
finishes.
In addition to its seating products, Shelby Williams produces and
distributes certain function-room furniture items, such as banquet and
conference tables, stages and food service equipment. Shelby Williams also
designs, produces and distributes furniture utilized by private healthcare
practitioners, such as reclining chairs, as well as standard dormitory furniture
utilized by universities. In addition, Shelby Williams designs and markets
approximately 50 standard patterns of textile products. These textile products
are manufactured by outside suppliers and are both used on the Company's own
seating products and distributed through dealers and interior designers for use
by other manufacturers. Shelby Williams also distributes a wide line of floor
coverings in the Pacific Basin which are manufactured by outside sources.
Management believes that it provides one of the widest ranges of seating
products in the contract furniture industry, as well as superior custom-design
capabilities. Due to its component-manufacturing facility in Zacatecas, Mexico,
its 200,000 square foot storage warehouse in Morristown, Tennessee, and its
considerable in-house production capabilities, the Company believes it is able
to provide a shorter lead time on orders than many of its competitors, most of
whom import components from European sources. Shelby Williams believes that all
of these qualities are instrumental in attracting the large orders of hotels,
restaurants and casinos that seek the convenience and pricing of a single-source
provider.
MARKETING
The Company's marketing strategy is based upon a higher degree of direct
sales relative to its competitors which tend to conduct sales through factory
representatives and with minimal sales forces. The Company's sales and marketing
staff consists of approximately 105 full-time employees, approximately 65 of
which are exclusively involved in field sales. This dedicated sales force is an
integral component of the Company's customer service and support strategy.
Management believes the high quality of ongoing service and support provided by
the sales force results in strong customer relationships and enhanced
opportunities for repeat business.
4
Each of the Company's sales persons sells products and services customers
within an assigned territory. The Company's sales persons promote customer
satisfaction with periodic service calls in addition to scheduled follow-up
visits. Sales persons receive a base salary, plus commissions based on net
sales. All orders are subject to acceptance by the Company's management.
Shelby Williams markets its products to a wide variety of customers
including: (i) hospitality and food service chains or their buying agencies and
(ii) other users through interior designers, architects, contract furniture,
food service and furniture dealers.
Shelby Williams markets its products through advertising in major trade
publications and illustrating the Company's products in its catalogs. Shelby
Williams publishes four extensive catalogs displaying its products and
distributes catalogs to architects, designers and dealers. Catalogs are
periodically supplemented as new products are introduced. Customers may order
standard products directly from these catalogs or request changes to meet their
design specifications.
DISTRIBUTION
Shelby Williams distributes its products both domestically and
internationally. Shelby Williams has showrooms and sales offices in 14 cities in
the United States, as well as distributors in 32 foreign countries. Many of
these distributors are concentrated in Europe and Asia, and Shelby Williams is
expanding its presence in Latin America and the Middle East. The Company's
design resource center in Honolulu, Hawaii, serves customers in the Pacific
Basin and Far East. In addition, Shelby Williams utilizes its local facilities
and existing distribution channels to assemble and distribute products in the
United States imported from European sources. Shelby Williams also exhibits at
major national and international trade shows.
CUSTOMERS AND END USERS
Some of the Company's major hospitality and food service customers and end
users:
HOTELS
Boykin Lodging Co.
Bristol Hotel Co.
Cap Star Hotels
Ciga Hotels
Doubletree Hotel Corp.
Four Seasons Hotel, Inc.
John Q. Hammons Hotel, Inc.
Hilton Hotel Corp.
Hyatt Hotel Co.
Holiday Inns, Inc.
Intercontinental Hotels
Interstate Hotel Corp.
La Quinta Inns, Inc.
Loews Hotel Corp.
Marcus Corp. (Budgetel Inns)
Marriott Hotel Corp.
Prime Hospitality Corp.
Promus Companies Inc.
(Embassy Suites, Hampton Inns
Homewood Suites)
Renaissance Hotel Corp.
The Ritz Carlton Hotel Co.
The Sheraton Corp.
Starwood Lodging Trust
Westin Hotels
Wyndham Hotels
RESTAURANTS
Applebees Restaurants
Au Bon Pain Restaurants
Brinker International Inc.
(The Corner Bakery,
Macaroni Grill, Maggiano's)
Champs Restaurants
Club Corporation of America
Darden Restaurants Inc.
(The Olive Garden and
Red Lobster Restaurants)
The Hard Rock Cafe
Luby's Cafeteria Inc.
Morton's of Chicago Restaurant
Nick's Fishmarkets
Pizza Hut Inc.
Planet Hollywood Int'l Inc.
Sirloin Stockade
Starbucks Coffee Company
Sullivan Steak Houses
T.G.I. Friday's
Veladi Ranch Steakhouses
Wendy's International Inc.
GAMING
Boyd Gaming Corp.
(Stardust Resort & Casino)
Bally's Casino Resort
Carnival Hotel & Casino
Caesars Palace
Circus Circus Enterprises, Inc.
Cow Creek Indian Gaming Center
Churchill Downs Race Track
Delaware Park Race Track & Casino
Grand Casino, Inc.
Harrah's Entertainment Inc.
Menominee Tribal Gaming
MGM Grand Hotel & Casino
The Mirage Resorts
Sheraton Casino
Showboat Marina Casino
Soaring Eagle Indian Casino
Sun International Hotels
INTERVAL VACATION
(TIME SHARE)
Embassy Vacation Resort
Properties, Inc.
Fairfield Communities, Inc.
Hilton Grand Vacations
Hyatt Vacation Club
Marriott Vacation Club Int'l.
Nevada Resort Properties
The Shell Group
Signature Resorts Inc.
Trendwest Resorts, Inc.
Vacation Break USA, Inc.
Vistana Resorts
Some of the Company's major healthcare and university, wallcovering and
floorcovering and other customers and end users:
5
HEALTHCARE AND
UNIVERSITIES
Albert Einstein Medical Center
Assisted Living Concepts
(Columbia/HCA Hospitals)
Georgia Institute of Technology
Georgia State University
Kaiser Foundation Hospitals
Manor Care Inc.
Michigan State University
Roosevelt University
Rutgers University
Sterling House
The University of Chicago
Hospitals
University of California at Davis
University of Tennessee
Wake Forest University
WALLCOVERING AND
FLOORCOVERING
Duron Paints
Island Flooring
Patton Wallcoverings, Inc.
Seabrook Wallcoverings Co. Inc.
Thybony Wallcoverings Co. Inc.
The Warner Company
OTHER
Allstate Insurance Co.
AFNAF (Air Force Non-
Appropriated Funds)
Clinique Cosmetics Departments
The Eckerd Corporation
The General Services Administration
May Department Stores
J.C. Penney Company
Sears, Roebuck & Co.
The Walgreen Co.
The Company's past business relationship with the above customers and end
users is not intended to imply that such relationship will continue in the
future.
In 1996, the Company also sold products to over 220 country clubs.
The Company's ten largest customers accounted for approximately 17% of net
sales in 1996, and no single customer accounted for more than 3% of 1996 net
sales. Approximately 90% of the Company's products are manufactured to fill
specific orders.
TRADEMARKS AND TRADENAMES
The Company sells its hospitality and food service products under the
trademarks SHELBY WILLIAMS-Registered Trademark-, KING
ARTHUR-Registered Trademark- and STERNO-Registered Trademark- and its
healthcare, dormitory and other institutional furniture under the trademark
THONET-Registered Trademark-. The Company markets cutting room tables and
accessories under the PHILLOCRAFT-Registered Trademark- name, fabric products
under the SW TEXTILES-Registered Trademark- name and wallcoverings under the
SELLERS & JOSEPHSON-REGISTERED TRADEMARK- name. The Company distributes wall and
floor coverings, fabrics, textiles and furniture in Hawaii and the entire
Pacific Basin under the name PHF-Registered Trademark-.
BACKLOG
The Company's backlog of orders at December 31, 1996, was $32.0 million, a
record level, as compared to $28.0 million at December 31, 1995, excluding
Preview. The Company expects to ship substantially all of its backlog by the end
of 1997.
RAW MATERIALS AND SUPPLIES
The Company manufactures most of its products to customer order from basic
raw materials. The Company utilizes a wide variety of raw materials in the
manufacture of its products including lumber, plywood, rattan, metal tubing, and
other frame components, foam cushioning, vinyl and textiles, all of which the
Company believes to be in abundant supply and available from a variety of
different sources. The Company has no long-term supply contracts with any of its
suppliers and it has experienced no significant problems in obtaining raw
materials in adequate amounts for its operations.
6
MANUFACTURING AND ASSEMBLY
The following table summarizes the products manufactured and assembled at
each of the Company's manufacturing facilities (as of January 1, 1997):
LOCATION PRODUCTS
- ----------------------------------------------------- ---------------------------------------
Morristown, TN....................................... Hospitality, food service and gaming
seating; banquet seating (1)
Statesville, NC...................................... Healthcare and university seating;
banquet seating and products
Canton, MS........................................... Upholstered products
Zacatecas, MX........................................ Furniture components
Englewood, NJ........................................ Wallcoverings
Carlstadt, NJ........................................ Wallcoverings
- ------------------------
(1) Product information is summarized for two manufacturing facilities located
in Morristown, Tennessee.
Shelby Williams operations primarily consist of wood bending, wood working
and finishing, assembly, metal forming and fabrication, electrostatic wood and
metal finishing. Shelby Williams also prints and laminates vinyl wallcoverings.
For certain chair styles, Shelby Williams purchases components manufactured by
other companies. These components, which are manufactured to the Company's
specifications, are assembled, finished and upholstered by Shelby Williams. All
outsourced components are available domestically except for rattan, which is
indigenous to the Phillipines and Indonesia. For many of its standard product
offerings, Shelby Williams optimizes its production costs by sourcing the
components produced at its Zacatecas, Mexico, facility.
All manufacturing operations emphasize quality control during the various
production processes. To provide consistency and speed to the finishing process,
the Company utilizes conveyorized paint lines with spray booths and drying ovens
positioned to allow proper drying times between finishing steps. In addition,
Shelby Williams has recently invested in electrostatic wood-finishing systems
which provide superior finishing qualities and are more advantageous from an
environmental standpoint. The Company intends to invest in powder-coating lines
which provide similar advantages for the metal product lines. Management expects
to continue to invest in automated machinery and equipment.
COMPETITION
All aspects of the Company's business are highly competitive. The Company
competes at some level with Falcon Products, Inc., Gasser Chair Co., L & B
Contract Industries, Inc., WinsLoew Furniture Inc., Virco Manufacturing
Corporation and MTS Seating. The Company competes primarily on the basis of
design, quality, service, product pricing and speed of delivery.
The Company believes that none of its principal competitors offers the
complete range of seating products that the Company offers. There can be no
assurance that the Company's principal competitors will not offer a greater
range of seating products or that new entrants will not enter the market.
EMPLOYEES
As of December 31, 1996, the Company had 1,667 full-time employees. Of
these, 1,449 were engaged in manufacturing, 113 in administrative and clerical
positions, and 105 in sales and marketing. Those engaged in manufacturing
included 241 employees in Mexico.
Hourly manufacturing employees at both Morristown, Tennessee, and Canton,
Mississippi, are represented by separate bargaining agreements with contracts
expiring in November 1999 (covering approximately 600 employees) and November
1997 (covering approximately 200 employees), respectively. The Company believes
that its relations with its employees are good.
7
ITEM 2. PROPERTIES.
At January 1, 1997, the Company maintained facilities with an aggregate of
approximately 1,700,000 square feet of space for its operations. The Company
considers all of its facilities to be in good operating condition. Currently,
the Company's manufacturing facilities are operating at approximately 85% of
capacity, with wood products facilities operating at over 90% of capacity. The
following table summarizes the principal physical properties, both owned and
leased, used by the Company in its operations:
APPROXIMATE
SQUARE
LOCATION USE FOOTAGE OWNED/LEASED EXPIRATION DATE
- ----------------------------------- -------------------- ------------ -------------------- -----------------
Chicago, IL........................ Showroom/Offices 6,750 Leased July, 2000
Morristown, TN..................... Mfg./Offices 515,960 Owned --
Morristown, TN..................... Mfg./Warehousing 228,000 Owned --
Canton, MS......................... Mfg./Warehousing 406,000 Owned/Leased(1) May, 2001(1)
Statesville, NC.................... Mfg./Warehousing 326,670 Owned --
Zacatecas, MX...................... Mfg./Warehousing 90,000 Owned --
Englewood, NJ...................... Mfg./Warehousing 68,000 Leased Dec., 2003(2)
Honolulu, HI....................... Warehousing 45,000 Leased Aug., 2003(2)
Carlstadt, NJ...................... Mfg./Warehousing 35,000 Leased April, 2004
- ------------------------
(1) Approximately 238,100 square feet are owned and 167,900 are leased.
(2) The Company has an option to renew the lease for 10 additional years at a
nominal rental increase.
The Company has showrooms and sales offices in 14 United States cities,
including Atlanta, Chicago, Dallas, Honolulu, Los Angeles, New York and
Plantation, Florida.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in various product liability lawsuits arising in
the normal course of business. Management believes that the Company's insurance
is adequate to cover its potential liability under all pending and threatened
litigation. The Company believes, after consultation with counsel, that
allegations of punitive damages, which are alleged in certain cases, are without
merit.
On July 15, 1992, a case was filed in the Chancery Court for Greene County,
Tennessee, entitled Linda Foshie, Joseph Allen Foshie, David Ray Foshie, and
Michael Scott Foshie, suing individually on their own behalf and as
representative parties of a class action, plaintiffs, v. Steve Cansler, Fred
Cansler, Jimmy Cansler, C & C Millwright Maintenance Co., Inc., Foamex Products,
Inc., Recticel Foam Corporation, Foamex L.P., Morristown Foam Corporation, and
Shelby Williams Industries, Inc., defendants. The complaint alleged, among other
things, that defendants conspired to transport and store hazardous waste on
premises which abutted the home of the named plaintiffs, that such activity
violated both state and federal law, and that plaintiffs were damaged thereby.
The complaint sought, among other things, compensatory damages of $2.5 million
for each of the four named plaintiffs and punitive damages of $5 million for
each of the four named plaintiffs, and similar damages for other alleged class
members. On August 11, 1992, a case was filed in the Circuit Court for Greene
County, Tennessee entitled Richard Lee Cobble and wife, Patricia Day Cobble;
Richard Lee Cobble, Jr.; Kenneth Dwayne Cobble; Claude Cobble and wife, Lenora
Cobble; Gary A. Douthat and wife Julia A. Douthat; Donald Joseph Hewitt and wife
Jacqueline Kay Hewitt; Robert Hensley, Jr. and wife Brenda Hensley; Penny
Hensley b/n/f and parents, Robert Hensley, Jr., and Brenda Hensley, Stephen
Hensley b/n/f and parents, Robert Hensley, Jr., and Brenda Hensley, plaintiffs,
v. Steve Cansler; Fred Cansler; Jimmy Cansler; C & C Milwright Maintenance Co.,
Inc.; Foamex Products, Inc.; Recticel Foam Corporation; Foamex L.P.; Morristown
Foam Corporation; and Shelby Williams Industries, Inc., defendants, containing
similar allegations and seeking $5 million in compensatory damages and $10
million in punitive damages for each of nine named plaintiff groups.
8
The Company was dismissed by the plaintiffs as a defendant in the lawsuits
filed July 15, 1992 and August 11, 1992 by plaintiffs Linda Foshie, and others,
and Richard Lee Cobble, and others, respectively. The Company's only costs for
these claims were insignificant legal expenses. Another defendant in the Foshie
case filed a cross-complaint against the Company regarding claims against it by
the same plaintiffs. The Company believes that the cross-complaint against it
was without merit and that the Company had meritorious defenses. Among other
things, the Company believes that no acts complained of by the plaintiffs in
these cases occurred prior to July 1979, at which time the Company sold the
stock in its subsidiary, Morristown Foam Corporation, which owned certain
facilities involved in these cases, and that other than its past ownership of
this subsidiary, the Company had no involvement with the facilities in question.
In December 1995, the Company was served with a third party complaint filed by
Steve Cansler in an action in the federal district court for the eastern
district of Tennessee brought by Recticel Foam Corporation against Steve and
Fred Cansler for cost recovery of funds spent by Recticel Foam Corporation in
cleaning up the contamination that is the subject of the actions described
above. In January 1996, the Company was served with an essentially identical
third party complaint in the same action, filed by Fred Cansler. The Company
believes that these third party complaints were meritless, for the same reasons
which led to the Company's dismissal from the tort actions described above.
None of the claims against the Company described in the preceding two
paragraphs is currently pending. In May, 1996 the Recticel case and the claims
against the Company in that case were dismissed without prejudice. In November,
1996 the claim against the Company in the Foshie case was dismissed without
prejudice. In neither case did the Company make any payment as damages or
settlement.
In February, 1997, the Company's King Arthur division received a complaint,
addressed to King Arthur, Inc., in a case pending in the Superior Court of New
Jersey, Camden County, Law Division, entitled Pennsauken Solid Waste Management
Authority, et al., vs. Ward Sand & Material Co., Inc. and a large number of
other defendants. The complaint, which identifies King Arthur, Inc. as one of
the defendants, alleges, among other things, that during the operation of a
landfill from the 1960's to 1984, the defendants improperly generated,
transported and/or disposed of certain hazardous waste materials, and that
defendants are jointly and severally liable to plaintiffs for all costs and
damages incurred by plaintiffs for remediation of the landfill and any
surrounding areas which are found to be contaminated. The complaint does not
specify any dollar amount of damages. The Company acquired certain assets of
King Arthur, Inc. in 1986. The Company has not had an opportunity to make an
independent investigation of the allegations in the complaint, but the Company
believes, based on its present knowledge, that it has valid defenses to the
allegations in the complaint, and that the Company's liability, if any, is not
material. The Company is in the process of putting its insurers on notice of the
complaint.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
9
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
AGE AT PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
NAME 2-1-97 AND POSITION AND OFFICE WITH REGISTRANT
- ----------------------------------------------- --------- ----------------------------------------------
Paul N. Steinfeld.............................. 42 Chairman of the Board of Directors and Chief
Executive Officer since January, 1996; Vice
Chairman of the Board and Chief Executive
Officer from May, 1991 to January, 1996;
Vice Chairman of the Board and Chief
Administrative Officer prior to May, 1991.
Director during past five years.
Robert P. Coulter.............................. 54 President and Chief Operating Officer since
May, 1990; prior thereto President and
Treasurer. Director during past five years.
Manfred Steinfeld.............................. 72 Chairman of Executive Committee and chairman
of executive compensation committee since
January, 1996; Chairman of the Board and
chairman of executive compensation committee
from May, 1991 to January, 1996; prior
thereto Chairman of the Board and Chief
Executive Officer. Director during past five
years.
Peter W. Barile................................ 54 Executive Vice President since May, 1990.
Sam Ferrell.................................... 55 Vice President, Finance, Treasurer and Chief
Financial Officer and Assistant Secretary
since May, 1990.
The executive officers of the registrant are elected annually by the Board
of Directors, hold office until their successors are chosen and qualify, and may
be removed at any time by the affirmative vote of a majority of the Board. There
are no written employment agreements with any executive officers. Manfred
Steinfeld is the father of Paul N. Steinfeld; there is no other family
relationship between any director or executive officer of the Company.
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information under the heading "Common Stock Information (Unaudited)" on
page 18 of the Company's 1996 Annual Report to Stockholders is hereby
incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information under the heading "Five Year Summary of Selected Financial
Data" on page 3 of the Company's 1996 Annual Report to Stockholders is hereby
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 21 of the Company's 1996
Annual Report to Stockholders is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information contained on pages 13 (Consolidated Statements of Income),
14-15 (Consolidated Balance Sheets), 16 (Consolidated Statements of Cash Flows),
17 (Consolidated Statements of Stockholders' Equity), 18-20 (Notes to
Consolidated Financial Statements) and 20 (Report of Independent Auditors) of
the Company's 1996 Annual Report to Stockholders is hereby incorporated by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
The information called for by Part III (Item 10 (Directors and Executive
Officers of the Registrant), Item 11 (Executive Compensation), Item 12 (Security
Ownership of Certain Beneficial Owners and Management), and Item 13 (Certain
Relationships and Related Transactions)) is incorporated by reference, to the
extent required, from the Company's definitive proxy statement to be filed
pursuant to Regulation 14A not later than 120 days after December 31, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) List of financial statements and schedules.
(1) Financial statements. The following financial statements are
incorporated by reference in Part II, Item 8 of this report:
Consolidated Statements of Income for the years ended December 31,
1996, 1995, and 1994
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended December
31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Report of Independent Auditors
(2) Financial statement schedules:
None since the required information is not present or is not present in
amounts sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial statements or
notes thereto.
(b) No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
(c) List of exhibits: See Exhibit Index immediately preceding exhibits.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 3, 1997
SHELBY WILLIAMS INDUSTRIES, INC.
--------------------------------------
(Registrant)
By PAUL N. STEINFELD
------------------------------------
Paul N. Steinfeld
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
- -------------------------------------------------- ------------------------------ ------------------
PAUL N. STEINFELD Chairman of the Board and
--------------------------------------- Director (Principal
(Paul N. Steinfeld) Executive Officer)
ROBERT P. COULTER* President and Director
---------------------------------------
(Robert P. Coulter)
MANFRED STEINFELD* Chairman of the Executive
--------------------------------------- Committee and Director
(Manfred Steinfeld)
SAM FERRELL* Vice President of Finance,
--------------------------------------- Treasurer and Assistant
(Sam Ferrell) Secretary (Principal
Financial and Accounting
Officer)
ROBERT L. HAAG* Director
---------------------------------------
(Robert L. Haag) March 3, 1997
WILLIAM B. KAPLAN* Director
---------------------------------------
(William B. Kaplan)
DOUGLAS A. PARKER* Director
---------------------------------------
(Douglas A. Parker)
HERBERT L. ROTH* Director
---------------------------------------
(Herbert L. Roth)
TRISHA WILSON* Director
---------------------------------------
(Trisha Wilson)
*By PAUL N. STEINFELD
-----------------------------------
Paul N. Steinfeld, Attorney-in-fact
9
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
2.1 Asset Purchase Agreement dated September 16, 1996 between Preview Furniture Corporation, the Registrant
and Ferguson Copeland, LLC.
3(i) Registrant's Certificate of Incorporation and all amendments thereto, filed as Exhibit 3.1 to
Registrant's annual report on Form 10-K for 1987 and hereby incorporated by reference.
3(ii) Registrant's By-Laws, as amended, filed as Exhibit 3(ii) to Registrant's annual report on Form 10-K for
1995 and hereby incorporated by reference.
4.0 The Registrant agrees to furnish a copy of the capital lease referred to in the Registrant's Consolidated
Financial Statements to the Commission upon request.
4.1 The Registrant agrees to furnish a copy of the 7.8% note agreement dated July 31, 1992 and payable in
quarterly installments of $1,000,000 beginning in October 1997, for $8,000,000, to the Commission upon
request.
*10.1 1995 Senior Management Incentive Plan, filed as Exhibit 10.3 to Registrant's annual report on Form 10-K
for 1994 and hereby incorporated by reference.
*10.2 1996 Senior Management Incentive Plan, filed as Exhibit 10.3 to Registrant's annual report on Form 10-K
for 1995 and hereby incorporated by reference.
*10.3 1997 Senior Management Incentive Plan.
*10.4 Registrant's 1992 Key Employees' Incentive Stock Option Plan, filed as Exhibit 10.6 to Registrant's
annual report on Form 10-K for 1991 and hereby incorporated by reference.
*10.5 Registrant's 1995 Directors' Stock Option Plan, filed as Exhibit 10.1 to Registrant's Form 10-Q for
quarter ended March 31, 1995 and hereby incorporated by reference.
13.1 Portions of Registrant's annual report to stockholders for 1996.
21.1 Subsidiaries of the Registrant.
23.1 Consent of independent auditors to incorporation by reference in Form 10-K.
23.2 Consent of independent auditors to incorporation by reference in Form S-8.
24.1 Power of Attorney.
27.1 Financial Data Schedule (EDGAR only).
- ------------------------
* Compensation plan.
10