UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended March 30, 2001
-------------
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 0-25246
--------
WINSLOEW FURNITURE, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 63-1127982
- - ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
160 VILLAGE STREET, BIRMINGHAM, ALABAMA 35242
- - -----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(205) 408-7600
--------------
(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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Shares Outstanding at April 23, 2001
- - --------------- -----------------------------------
$ .01 par value 850,497
WINSLOEW FURNITURE, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheets ................. 3
Consolidated Statements of Income ........... 4
Consolidated Statements of Cash Flows ....... 5-6
Notes to Consolidated Financial Statements .. 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................... 16
Item 4. Submission of Matters to a Vote of
Security Holders .................................. 16
Item 6. Exhibits and Reports on Form 8-K ..................... 17
Signatures ............................................................. 18
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
WinsLoew Furniture, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(In thousands) March 30, December 31,
2001 2000
--------- -----------
Assets
Cash and cash equivalents $ 328 $ 602
Accounts receivable, less
allowances for doubtful accounts 42,020 36,992
Inventories 22,853 20,198
Prepaid expenses and other
current assets 5,713 5,742
------- --------
Total current assets 70,914 63,534
Property, plant and equipment, net 27,402 27,827
Goodwill, net 270,979 269,258
Other assets 6,885 7,004
------- -------
Total Assets $376,181 $367,622
======== ========
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 4,775 $4,025
Accounts payable 6,652 5,739
Accrued interest 3,264 6,765
Other accrued liabilities 16,522 13,221
------- -------
Total current liabilities 31,213 29,750
Long-term debt, net of current portion 245,840 238,147
Deferred income taxes 1,849 1,849
------- -------
Total liabilities 278,902 269,746
------- -------
Commitments and contingencies
Stockholders' equity: Common stock; par value $.01 per share, 1,000,000 shares
authorized at March 30,2001 and December 31, 2000 with 850,497 and 850,350
shares issued and outstanding at March 30, 2001
and December 31, 2000 respectively 9 9
Additional paid-in capital 88,839 88,819
Retained earnings 8,474 9,048
Accumulated Other Comprehensive
Loss (43) --
------- -------
Total stockholders' equity 97,279 97,876
------- -------
$376,181 $367,622
======== =========
See accompanying notes.
WinsLoew Furniture, Inc and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(In thousands)
For The Quarters Ended
----------------------
March 30, March 31,
2001 2000
--------- ---------
Net sales .......... $ 39,718 $ 39,353
Cost of sales ...... 24,717 23,551
-------- --------
Gross profit .... 15,001 15,802
Selling, general
and administrative
expenses ......... 7,142 6,873
Amortization ....... 1,877 1,518
-------- --------
Operating income 5,982 7,411
Interest expense
7,267 6,537
-------- --------
Income before
income taxes ..... (1,285) 874
Provision for
income taxes ..... (711) 484
-------- --------
Net income/(loss) .. $ (574) $ 390
======== ========
See accompanying notes.
WinsLoew Furniture, Inc. and Subsidiaries
Consolidated Statements of Cash Flows(Unaudited)
(In thousands)
For the Three Months Ended
-------------------------
March 30, March 31,
2001 2000
--------- ----------
Cash flows from operating activities:
Net income/(loss) ...................... $ (574) $ 390
Adjustments to reconcile net
income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization .......... 2,744 2,137
Provision for losses on accounts
receivable ........................... (661) 98
Changes in operating assets and
liabilities, net of effects
from acquisitions and dispositions:
Accounts receivable .................. (3,953) (9,952)
Inventories .......................... (2,273) (2,063)
Prepaid expenses and other
current assets ..................... 69 (306)
Refundable income taxes .............. -- 6,150
Other assets and goodwill, net ....... (78) (12)
Accounts payable ..................... 638 1,167
Accrued interest ..................... (3,501) (2,658)
Other accrued liabilities ............ (714) (1,097)
-------- --------
Total adjustments ................... (7,729) (6,536)
Net cash used in
operating activities .............. (8,303) (6,146)
-------- --------
Cash flows from investing activities:
Capital expenditures, net of disposals (120) (358)
Investment in subsidiaries ........... (229) (35,499)
-------- --------
Net cash used in investing activities (349) (35,857)
-------- --------
Cash flows from financing activities:
Net borrowings under
revolving credit agreements ......... 8,156 15,669
Net borrowings for acquisitions ...... 288 20,000
Proceeds from issuance of
common stock, net ................... 20 7,100
Repurchase and cancellation of stock . -- (900)
Deferred financing costs .............. (86) --
-------- --------
Net cash provided by financing
activities ........................... 8,378 41,869
-------- --------
Net decrease in cash and
cash equivalents .................. (274) (134)
WinsLoew Furniture, Inc. and Subsidiaries
Consolidated Statements of Cash Flows(Unaudited)
(In Thousands)
For the Three Months Ended
-------------------------
March 30, March 31,
2001 2000
--------- ----------
Cash and cash equivalents at
beginning of year 602 710
--------- ----------
Cash and cash equivalents at
end of period $ 328 $ 576
======= =======
For the Three Months Ended
-------------------------
March 30, March 31,
2000 2000
--------- ----------
Supplemental disclosures:
Interest paid $10,397 $8,829
Income taxes paid 261 ---
======== ========
Investing activities included the acquisition of The Woodsmiths Company:
Initial Investment $ 287
Cash acquired (58)
========
Initial Investment 229
See accompanying notes
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of WinsLoew
Furniture, Inc. and subsidiaries (the "Company" or "WinsLoew") that are for
interim periods do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated financial
statements should be read in conjunction with the annual consolidated financial
statements and notes thereto contained in the Company's Annual Report on Form
10-K for the year ended December 31, 2000, as filed with the Securities and
Exchange Commission.
All material intercompany balances and transactions have been eliminated. The
preparation of the consolidated financial statements requires the use of
estimates in the amounts reported.
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (which are of a normal recurring nature)
necessary for a fair presentation of the results for the interim periods. The
results of operations are presented for the Company's first quarter, which is
from January 1, 2001 through March 30, 2001. The results of operations for this
period are not necessarily indicative of the results to be expected for the full
year.
2. Inventories
Inventories consisted of the following:
(In thousands)
March 30, December 31,
2001 2000
---------- ------------
Raw materials $13,885 $13,398
Work in process 3,252 3,262
Finished Goods 5,716 3,538
------- -------
$22,853 $20,198
======= =======
3. Capital Stock
At December 31, 2000, there were 850,350 shares outstanding. Since December 31,
2000 and as of March 30, 2001, the Company has issued 147 shares for $0.02
million. These shares were not related to the Woodsmiths acquisition. As of
March 30, 2001 there were 850,497 shares outstanding.
4. Acquisitions
On March 9, 2001 the Company purchased all of the assets of The Woodsmiths
Company. Woodsmiths, a manufacturer of custom table tops for the contract and
hospitality industry, is located in Pompano Beach Florida. The purchase price of
approximately $2.8 million was paid in cash of approximately $0.3 million and a
$2.5 note payable to the sole shareholder of Woodsmiths.
In addition, the stock purchase agreement provides for an additional contingent
deferred payment of up to $1,000,000 based upon Woodsmiths' earnings before
interest, taxes, depreciation, amortization and management fees. The maximum
contingent payment amount of $1,000,000 was recorded at the time of purchase as
an addition to goodwill and an accrued liability of the Company. The amount of
any such contingent payment will be made directly to the former sole
shareholder.
The acquisition resulted in goodwill of approximately $3.4 million and was
accounted for under the purchase method of accounting. The operating results of
Woodsmiths have been included in the consolidated operating results beginning
with the month of March.
On August 11, 2000 the Company purchased all of the stock of Charter Furniture.
The purchase price of approximately $18.5 million was paid in cash and financed
with $3.3 million of equity investment and $15.2 million under the revolving
credit facility. The acquisition resulted in goodwill of $18.7 million and was
accounted for under the purchase method of accounting.
On June 16, 2000 the Company purchased certain assets of Stuart Clark, Inc. and
its affiliates. The purchase price of approximately $3.1 million was paid in
cash and financed with $0.3 million of equity investment and borrowings of $2.8
million under the Company's revolving credit facility. The acquisition resulted
in goodwill of approximately $2.8 million and was accounted for under the
purchase method of accounting.
On March 31, 2000 the Company purchased all of the stock of Wabash. The purchase
price of approximately $35.5 million was paid in cash and financed with $7.1
million of equity investment, borrowings of $20.0 million under the acquisition
loan and $8.4 million under the revolving credit facility. The acquisition
resulted in goodwill of $21.9 million and was accounted for under the purchase
method of accounting. During the second quarter of 2000 an additional $0.6
million payment was made as part of the final working capital purchase
adjustment. The payment was financed under the Company's revolving credit
facility. The operating results of Wabash have been included in the consolidated
operating results for the second quarter.
The following unaudited pro forma information has been prepared assuming that
the Woodsmiths, Charter, Stuart Clark and Wabash Valley acquisitions occurred on
January 1, 2000. Permitted pro forma adjustments include only the effects of
events directly attributable to the transactions that are factually supportable
and expected to have a continuing impact. The pro forma results are not
necessarily indicative of what actually would have occurred if the transactions
had been in effect for the entire period presented.
Three months ended
(In thousands) March 30, March 31,
2001 2000
---- ----
Net sales $ 40,390 $ 51,756
Income (loss) before taxes (1,279) 847
Net income (loss) (570) 380
======== ========
5. Segment Information
The Company has three segments organized and managed based on the products sold.
The Company evaluates performance and allocates resources based on gross profit.
There are no intersegment sales/transfers. Export revenues are not material.
(In thousands)
Three Months Ended
----------------------
March 30, March 31,
2001 2000
--------- --------
NET SALES:
Casual products ................. $ 19,974 $ 19,652
Contract and Hospitality products 17,503 15,725
Ready to assemble products ...... 2,241 3,976
-------- --------
Total net sales .............. $ 39,718 $ 39,353
======== ========
SEGMENT GROSS PROFIT:
Casual products ................. $ 8,737 $ 9,344
Contract and Hospitality products 5,918 5,608
Ready to assemble products ...... 346 850
-------- --------
Total segment gross profit ... 15,001 15,802
Reconciling items:
Selling, general and
administrative expenses ...... 7,142 6,873
Amortization .................... 1,877 1,518
-------- --------
Operating income ............. 5,982 7,411
Interest expense ,net ........... 7,267 6,537
-------- --------
Income/(loss) before income taxes $ (1,285) $ 874
======== ========
(In thousands) March 30, March 31,
2001 2000
-------- --------
SEGMENT ASSETS:
Casual products $126,432 $122,766
Contract and Hospitality products 51,581 23,487
Ready to assemble products 5,901 8,175
------- -------
Total 183,914 154,428
Reconciling items:
Corporate 192,267 196,749
-------- --------
Total consolidated assets $376,181 $351,177
======== ========
6. Subsequent Events
On May 8, 2001 the Company acquired Brown Jordan International, Inc. Brown
Jordan International, Inc. is the parent company of Brown Jordan Company and
Casual Living Worldwide. Brown Jordan, El Monte, CA, is a leading designer,
manufacturer, and marketer of casual furniture targeting the premium segment of
the casual furniture market, while Casual Living Worldwide, Oxnard, CA, is a
leading producer in the value-priced segment of the casual furniture market.
The $125 million purchase price consists of $80.4 million of equity with the
$44.6 million balance resulting from the payment of outstanding indebtedness.
The acquisition was funded with $54 million of equity and $22 million of notes
issued to the sellers, with the balance obtained through a replacement of the
Company's existing Senior Credit Facility. The new Senior Credit Facility
consists of a $165 million Term Loan and a $60 million revolving credit
facility. The acquisition will be accounted for under the purchase method of
accounting.
7. Accounting Pronouncements
On January 1, 2001 the Company adopted SFAS No. 133, "Accounting For Derivative
Instruments and Hedging Activities," as amended by SFAS No. 137 and No. 138.
The Company enters into short term currency forward contracts to hedge currency
exposures associated with the purchase of certain raw materials. The fair value
of theses contracts was not material upon adoption of the standard or at the end
of fiscal 2000.
Adoption of SFAS No. 133 on January 1, 2001 resulted in recording the fair value
of the contracts as a derivative liability on the balance sheet with the
corresponding debit to Accumulated Other Comprehensive Income.
Management's Discussion and Analysis of Financial Condition
And Results of Operations
General
We are a leading designer, manufacturer and distributor of a broad offering of
casual indoor and outdoor furniture and contract and hospitality products. We
also manufacture certain ready-to-assemble furniture products. Our casual
furniture includes chairs, chaise lounges, tables, umbrellas and related
accessories, which are generally constructed from aluminum, wrought iron, wood
or fiberglass. In addition, our casual line includes a variety of tables,
chairs, benches and swings for the site amenity market. Our seating products
include wood, metal and upholstered chairs, sofas and loveseats, which are
offered in a wide variety of finish and fabric options. All of our casual
furniture, excluding Wabash, and contract and hospitality products are
manufactured pursuant to customer orders. We sell our furniture products to the
residential market and to the contract and hospitality market, consisting of
commercial and institutional users.
Business
We market our casual furniture products to the residential market under the
Winston and Pompeii brand names through approximately 25 independent sales
representatives to over 800 active customers, which are primarily specialty
patio furniture stores located throughout the United States. We also market a
broad line of casual furniture products in the contract markets under the
Texacraft, Tropic Craft and Pompeii brand names, primarily through our in-house
sales force, to lodging and restaurant chains, country clubs, apartment
developers and property management firms, architectural design firms,
municipalities and other commercial and institutional users. In addition, we
market a variety of products under Wabash brand name. These products are
targeted at educational facilities, municipality and recreation centers, hotels
and motels and other institutional and corporate users.
We market our seating products to a broad customer base in the contract and
hospitality market under the Loewenstein, Lodging By Loewenstein, Stuart Clark
and Charter brand names through approximately 24 regional independent sales
organizations. Our customers include lodging and restaurant chains,
architectural design firms, professional sports complexes, schools, healthcare
facilities, office furniture dealers, retail store planners and other commercial
and institutional users in the contract and hospitality market. We manufacture
over 300 distinct models of seating products ranging from traditional to
contemporary styles of chairs, as well as reception area love seats, sofas and
stools. We design, assemble and finish our seating products with component parts
from a variety of suppliers, including a number of Italian manufacturers.
Over the past several years, we have undertaken a number of initiatives to
strengthen and grow our core casual furniture and seating businesses. We have
focused resources on our core business and disposed of non-core or unprofitable
operations. In 1997, we sold our wrought iron furniture business, and in 1998 we
discontinued and sold or liquidated certain of our ready-to-assemble furniture
operations. We also embarked on a focused acquisition program to broaden our
core product offering in the casual segment that, to date, has resulted in the
acquisitions of Tropic Craft, a manufacturer of casual furniture sold into the
contract markets; Pompeii, a manufacturer of upper-end casual furniture sold
into both the residential and contract markets and Wabash Valley, a manufacturer
of site amenities products in the institutional and corporate markets. Our
balanced approach to growth has also resulted in acquisitions to complement our
seating segment. These acquisitions included Stuart Clark and Charter during
2000, both of which manufacture upholstered furniture for the hospitality
industry.
In addition, The Company purchased The Woodsmiths Company in March 2001.
Woodsmiths is a manufacturer of custom tabletops for the contract and
hospitality markets. The acquisition was accounted for under the purchase method
of accounting and accordingly, the operating results of Woodsmiths have been
included in the consolidated operating results beginning in March 2001.
Results of Operations
The following table sets forth net sales, gross profit, and gross margin as a
percent of net sales for the respective periods for each of the Company's
product lines (in thousands, except for percentages):
Three Months Ended
------------------------------------------------
March 30, 2001 March 31, 2000
------------------------ -----------------------
Net Gross Gross Net Gross Gross
Sales Profit Margin Sales Profit Margin
------- ------- ------ ------- ------ ------
Casual furniture $19,974 $ 8,737 43.7% $19,652 $ 9,344 47.5%
Contract/Hosp. 17,503 5,918 33.8% 15,725 5,608 35.7%
RTA 2,241 346 15.4% 3,976 850 21.4%
------- ------- ------- ------
Total $39,718 $15,001 37.8% $39,353 $15,802 40.2%
======= ======= ======= =======
The following table sets forth certain information relating to the Company's
operations expressed as a percentage of the Company's net sales:
Three Months Ended
------------------
March 30, March 31,
2001 2000
-------- --------
Gross margin 37.8% 40.2%
Selling, general and
administrative expense 18.0% 17.5%
Amortization 4.7% 3.9%
Operating income 15.1% 18.8%
Interest expense, net 18.3% 16.6%
Income before income taxes (3.2)% 2.2%
Net income (1.4)% 1.0%
Comparison of Three Months Ended March 30, 2001 and March 31, 2000
Net Sales
WinsLoew's consolidated net sales for the first quarter of 2001, $39.7 million,
increased $0.3 million or 0.9 % from $39.4 million in the first quarter 2000.
Casual product line sales decreased by 26.8% from the first quarter of 2000
excluding the effect of the Wabash acquisition. This decline results from
softness in the residential casual market, as a result of unfavorable weather
conditions in the Company's primary Northeast and Midwest markets. When
including the acquisition of Wabash, casual sales increased 1.6% during the
first quarter of 2001 when compared to the first quarter of 2000. Sales in the
contract and hospitality product line, excluding the effect of the Stuart Clark,
Charter and Woodsmiths acquisitions, for the first quarter decreased by 18.8%
when compared to the same period in 2000. This reflects the slowdown in new
construction and refurbishing projects in the contract market. When including
all acquisitions, contract and hospitality sales increased 11.3% during the
first quarter of 2001 when compared to the first quarter of 2000. The RTA
product line experienced a sales decline of 43.6% over 2000 as major customers
reduced inventories, scaled back catalog distribution and tightened credit for
their catalog customers.
Gross Margin
Consolidated gross margin was 37.8% in the first quarter of 2001, compared to
40.2% in the first quarter of 2000. The margin decline is due to a combination
of acquisitions, underabsorbed overhead related to volume, and product mix
particularly within the contract and hospitality segment. Specifically, gross
margins in the casual product line decreased from 47.5 % in the first quarter of
2000 to 43.7% during the first quarter of 2001. 1.8% of the decline is due to
the product mix associated with the Wabash acquisition, while the balance is
volume related. The gross margin for contract and hospitality declined to 33.8%
in the first quarter of 2001, compared to 35.7% in the first quarter of 2000.
Approximately 1.4% of the margin decline results from the effect of acquisitions
while the balance of 0.5% is due to unfavorable product mix within the existing
contract and hospitality businesses. Gross margins in the RTA product line
decreased from 21.4% in the first quarter of 2000 to 15.4% during the first
quarter of 2001 reflecting the decrease in sales volume.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $0.3 million in the
first quarter of 2001, compared to the first quarter of 2000. Increases of $2.5
million were directly attributable to recent acquisitions were offset by a $0.8
million adjustment of allowances for doubtful accounts. When adjusting for the
effect of acquisitions and the allowance for doubtful accounts, expenses
declined over $1.0 million in the first quarter of 2001, compared to the same
period of 2000.
Amortization
Amortization expense increased $0.4 million in the first quarter of 2001,
compared to the first quarter of 2000, due to amortization associated with the
Wabash, Stuart Clark, Charter and Woodsmiths acquisitions.
Operating Income
As a result of the above, operating income decreased by $1.4 million, to $6.0
million (15.1% of net sales) in the first quarter of 2001, compared to $7.4
million (18.8% of net sales) in the first quarter of 2000.
Interest Expense
Interest expense increased by $0.7 million in the first quarter of 2001,
compared to the first quarter of 2000. The increase is the result of increases
in The Company's base borrowing rate as well as additional debt assumed in
support of acquisitions.
Provision for Income Taxes
The Company's effective tax rate from continuing operations for the first
quarter of 2001 was 55.3% compared to 55.4% for the first quarter of 2000. The
effective tax rate is greater than the federal statutory rate due primarily to
the effect of state income taxes and non-deductible goodwill amortization.
Seasonality and Quarterly Information
The furniture industry is cyclical and sensitive to changes in general economic
conditions, consumer confidence, discretionary income, and interest rate levels
and credit availability.
Sales of casual products are typically higher in the second and fourth quarters
of each year, primarily as a result of: (1) high retail demand for casual
furniture in the second quarter, preceding the summer months, and (2) the impact
of special sales programs on fourth quarter sales. The Company's casual product
sales will also be affected by weather conditions during the peak retail selling
season with a resulting impact on consumer purchases of outdoor furniture
products.
The results of operations for any interim quarter are not necessarily indicative
of results for a full year.
Liquidity and Capital Resources
The Company's short-term cash needs are primarily for debt service and working
capital, including accounts receivable and inventory requirements. The Company
has historically financed its short-term liquidity needs with internally
generated funds and revolving line of credit borrowings. The Company actively
monitors its cash balances and applies available funds to reduce borrowings
under its long-term revolving line of credit. At March 30, 2001, the Company had
$39.7 million of working capital and $5.1 million of unused and available funds
under its revolving credit facility.
Cash Flows from Operating Activities. Cash used in operating activities was $8.2
million and $6.1 million for the first three months of 2001 and 2000
respectively. The increase in cash used results primarily from increased debt
service.
Cash Flows from Investing Activities. Cash used in investing activities was $0.4
million and $35.9 million for the first three months of 2001 and 2000
respectively. Cash invested during the first three months of 2001 included $0.2
million in support of acquisitions compared to $35.5 million for acquisitions in
the first quarter of 2000.
Cash Flows From Financing Activities. Net cash provided by financing activities
during the first three months of 2000 was $8.4 million compared to net cash
provided in financing activities of $41.9 million in the three months of 2000.
During the first quarter of 2001 a total of $0.2 million was provided for
acquisitions compared to $35.5 million provided in 2000 for the Wabash
acquisition. In addition, the first quarter of 2000 included stock repurchases
totaling $0.9 million.
Foreign Exchange Forward Contracts
WinsLoew purchases some raw materials from several Italian suppliers. These
purchases expose the Company to the effects of fluctuations in the value of the
U.S. dollar versus the Italian lira. If the U.S. dollar declines in value versus
the Italian lira, the Company will pay more in U.S. dollars for these purchases.
To reduce its exposure to loss from such potential foreign exchange
fluctuations, the Company will occasionally enter into foreign exchange forward
contracts. These contracts allow the Company to buy Italian lira at a
predetermined exchange rate and thereby transfer the risk of subsequent exchange
rate fluctuations to a third party. However, if the Company is unable to
continue such forward contract activities and the Company's inventories increase
in connection with expanding sales activities, a weakening of the U.S. dollar
against the Italian lira could result in reduced gross margins. The Company
elected to hedge a portion of its exposure to purchases made in 2001 by entering
into foreign currency forward contracts with a value of $2.8 million, of which
$2.1 million were outstanding and unsettled at March 30, 2001. The Company did
not incur significant gains or losses during the first quarter as a result of
these foreign currency transactions. The Company's hedging activities relate
solely to its component purchases in Italy; the Company does not speculate in
foreign currency.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
From time to time, we are subject to legal proceedings and other claims arising
in the ordinary course of our business. We maintain insurance coverage against
potential claims in an amount that we believe to be adequate. Based primarily on
discussions with counsel and management familiar with the underlying disputes
and except as described below, we believe that we are not presently a party to
any litigation, the outcome of which would have a material adverse effect on our
business, financial condition, results of operations or future prospects.
As reported in Part I item III of the Company's Annual Report on form 10-K for
the fiscal year ended December 31, 1999 and 2000, and incorporated herein by
reference, the Company and former members of its board of directors have been
named as defendants in a lawsuit filed on March 25, 1999 in the Circuit Court of
Jefferson County, Alabama, styled Craig Smith v. WinsLoew Furniture, Inc. et al.
On June 14, 1999, we and the members of the board of directors filed a motion to
dismiss the lawsuit or, in the alternative, to grant summary judgment in our
favor. After a hearing held on November 11, 1999, the court granted our motion
to dismiss but gave the plaintiff 30 days' leave to file an amended complaint.
The plaintiff filed an amended complaint on December 15, 1999 and another motion
to dismiss was filed on behalf of all defendants on February 28, 2000. A hearing
on the motion to dismiss was set for April 11, 2000. The court subsequently
denied the Company's motion to dismiss and a status conference was scheduled for
November 28, 2000.
On January 11, 2001 the Honorable Thomas Woodall entered an order giving
preliminary approval to a proposed settlement of this action. The proposed
settlement provides for no additional benefit to be bestowed upon the class and
possible payment by the Company of attorney fees in an amount not to exceed
$575,000.00. A final hearing was held on April 24, 2001. At the hearing the
settlement was approved and the case was dismissed with prejudice.
Item 4. Submission of Matters to a Vote of Security Holders
(a) None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Stock Purchase Agreement by and among Loewenstein, Inc., The Woodsmiths
Company, Inc. and Raynor E. Baldwin dated as of March 9, 2001 (1)
27 Financial Data Schedule
(1) Filed herewith
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINSLOEW FURNITURE,INC
By:/s/ Bobby Tesney
May 11, 2001 Bobby Tesney
President and Chief Executive Officer
May 11, 2001 By:/s/ Vincent A.Tortorici, Jr.
----------------------------
Vincent A. Tortorici, Jr.
Chief Financial Officer