SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1997

[_] 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 0-21226
------------------------------

SEAMAN FURNITURE COMPANY, INC.
------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 11-2751205
----------------- ----------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

300 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK 11797
- ---------------------------------------- --------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (516) 496-9560
---------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $.01 PAR VALUE NASDAQ NATIONAL MARKET

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.[_]

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTION 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
--- ---

AS OF JULY 15, 1997, THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT WAS $20,578,012 BASED ON THE LAST REPORTED SALE
PRICE OF THE REGISTRANT'S COMMON STOCK ON THE NASDAQ NATIONAL MARKET SYSTEM.

4,536,839 SHARES OF COMMON STOCK WERE OUTSTANDING ON JULY 15, 1997.

Item 1. BUSINESS
--------

GENERAL

Seaman Furniture Company, Inc. (the "Company" or "Seaman's") believes that
it is the largest regional specialty furniture retailer in the northeastern
United States in terms of sales and that it has the leading market position in
the greater New York metropolitan area. The Company currently operates a chain
of 41 stores. Of these, 27 are in the New York, New Jersey and Connecticut Tri-
State Area, 8 are in the Philadelphia metropolitan area and 6 are in the
Cleveland/Akron, Ohio metropolitan area. The move into the Cleveland/Akron
area, was the Company's first expansion beyond the Northeast. Seaman's stores
sell a variety of living room, bedroom, dining room and other home furniture and
accessories in contemporary, traditional, country and casual styles. The
Company was incorporated in Delaware in June 1985 as a successor to the business
founded by Julius Seaman, who opened the first "Seaman's" store in Brooklyn, New
York in 1933.

Seaman's retailing philosophy targets the broad sector of middle-income,
value-oriented consumers by providing value pricing, quality products, enhanced
customer service, quick delivery and in-store credit. This philosophy is
conveyed to consumers through Seaman's high-impact television, radio and
newspaper advertising.

MARKETING AND MERCHANDISING

Seaman's retailing philosophy is driven by its "narrow and deep"
merchandising strategy. The basis of this strategy is to carry and display in
each store a similar variety of furniture styles and models in a carefully
limited selection of fabrics, colors and finishes pre-selected by Seaman's
buyers. The "narrow and deep" merchandising strategy allows the Company to
purchase merchandise in large quantities at substantial savings to the Company
and, ultimately, the customer. The ability to purchase items in large
quantities also enables the Company to work with its suppliers to customize
merchandise so that the Company can offer items that are often exclusive to its
trading area. Seaman's also is able to offer quick delivery of merchandise to
its customers since less than 2% of Seaman's sales are special order items, with
the balance being items that are usually stocked in Seaman's warehouses.
Pricing decisions, including the timing and amount of promotions and markdowns,
are made centrally by Seaman's management and its buyers.

"The Package/(R)/" is an important element of Seaman's merchandising
strategy. In the 1970s, Seaman's stores implemented "The Package/(R)/" concept,
which encourages the purchase of a collection of complementary furniture items
at a significant savings compared to the already competitive prices of the
individual items in the collection. In the stores, furniture is displayed in
model room settings that present the furniture as coordinated collections in a
home environment, which enables customers to more easily envision the furniture
in their own homes, in addition to encouraging the purchase of multiple pieces
of furniture in one transaction. Seaman's mass media advertising campaigns
emphasize the value in this merchandising concept. The majority of the dollar
value of all merchandise sold over each of the last three fiscal years was sold
as part of a package of merchandise.

The Company carries contemporary, high-fashion, European-style furniture,
traditional, country and casual styles of furniture in its stores in order to
attract a base of customers with different style preferences. The Company's
store design strategy emphasizes this product mix by tailoring the environment
of each model room setting to the style of the furniture and by creating
distinct sales areas for each style of furniture. The Company currently
displays substantially the same merchandise mix in all of its stores. However,
it makes changes in a particular region's stores' merchandise mix based on local
nuances and preferences reported to the Company by regional and store
management.

The Company believes that it maintains relatively low inventories of
merchandise in relation to its sales by use of its inventory control system in
particular through use of the radio frequency, bar-code system in its 2 largest
warehouses. Seaman's buyers monitor inventory regularly to maintain levels
required by its most recent sales trends. Daily computer reports are available
that show, among other things, sales by category and style of furniture, which
help the Company understand local preferences and market conditions. The
Company takes advantage of rapid merchandise turnover to continually update and
refresh the styles, fabrics, colors and finishes available. Seaman's average
inventory turnover, including store display samples, is approximately five times
per year, which the Company believes is among the highest in its industry.

All of Seaman's stores are generally open seven days a week. Each location
is staffed with trained management and sales personnel who are familiar with the
Company's merchandise, promotions and credit programs. Management personnel are
compensated on a salary and potential bonus basis, and sales personnel are
compensated on a salary and commission basis.

The Company provides a one-year limited warranty on all of the furniture it
sells. Pursuant to this limited warranty, the Company generally replaces or
repairs any defective merchandise or offers a merchandise certificate or refund
at the customer's option. The Company generally requires that its suppliers
stand behind its warranty. The Company could bear the cost, however, if a
supplier did not honor the warranty obligation.

STORE REDESIGN AND RENOVATION

The Company has been redesigning and renovating its existing stores and
designing its new stores to provide a more attractive in-store atmosphere. This
has been achieved by professionally redesigning and redecorating selling space
in existing stores and designing new stores in order to improve the consumer's
shopping experience and to enhance the appearance of displayed merchandise.
Seaman's design strategy focuses on partitioning store selling space to create
multiple room settings that include furniture, lamps and other accessories
suggesting how merchandise might look in the customer's home. Since May 1993,
the Company has invested approximately $4.9 million to renovate its existing
stores, and expects to invest approximately $1 million on store renovations
through fiscal 1998. Currently, 35 of Seaman's 41 stores have been renovated or
were initially designed under these new guidelines, and the Company expects to
complete the redesign and renovation of 3 more stores in fiscal 1998.

COMPETITION

All aspects of the retail furniture business are highly competitive.
Business practices such as credit availability, its terms and selection of
merchandise vary widely among the Company's competitors. The Company believes
that the principal areas of competition with respect to its business are price,
delivery time and selection, and that it competes effectively in these areas.
The Company's competitors include individual furniture stores, department and
discount stores and chain stores, some of which have been established in the
same geographic areas as the Company's stores for long periods of time. Some of
the Company's competitors derive revenue from sales of products other than
furniture.

SUPPLIERS

The Company purchases all of its merchandise directly from approximately
170 domestic and foreign suppliers. The Company does not manufacture any of the
furniture it sells. Over the last three fiscal years, no supplier has provided
the Company with merchandise representing more than 6.5% of the Company's
purchases, and the Company is not dependent upon any single supplier for
merchandise. In fiscal 1997, the Company purchased approximately 80% of its
merchandise from 40 of its suppliers. The Company is diversified in all of its
product categories, with a minimum of at least three suppliers in all primary
categories. Although the Company has no long-term contracts or commitments with
any supplier, the Company has had long-term relationships with many of its
suppliers and believes that it is viewed as a valued customer due to its prompt
payment history, its low rate of merchandise returns because of its use of
clearance centers to liquidate slow-selling merchandise and its practice of
purchasing merchandise in large quantities. This ability to purchase items in
large quantities also enables the Company to work with its suppliers to
customize its merchandise in order to offer items that are often exclusive to
its trading area. While management believes that alternative sources of supply
are available for all merchandise purchased, purchases from these alternative
sources may be more costly both with respect to price and payment terms.

Foreign suppliers provide the Company with approximately 30% of its
merchandise. The Company imports merchandise principally from suppliers in
Canada, Italy and the Far East. All of the Company's purchases from foreign
suppliers are based on U.S. dollar values and are paid in U.S. dollars without
adjustments for currency rate fluctuations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Overview."

WAREHOUSING, DISTRIBUTION AND DELIVERY

Seaman's purchasing strategy of pre-selecting and stocking specific
merchandise in its warehouses together with the size of its warehouses enables
the Company to take advantage of purchasing efficiencies and to store large
amounts of certain merchandise in order to ensure quick delivery. The majority
of items sold in Seaman's stores are delivered to the customer within two weeks
of the date of the written sale, or in some instances within a few days. The
Company believes that such quick delivery provides it with a distinct advantage
in its competitive markets.

The Company operates three warehouses to store its inventories of
merchandise which are located in Woodbridge, New Jersey (the "Woodbridge
warehouse"), Central Islip, New York (the "Islip warehouse") and Cleveland, Ohio
(the "Cleveland warehouse"). The Woodbridge warehouse, which is approximately
450,000 square feet, is a leased facility. It services Seaman's seven New
Jersey stores, its eight Philadelphia area stores and five of its New York
stores. Approximately 39% of Seaman's sales in fiscal 1997 were delivered from
this facility. The Islip warehouse is owned and operated by the Company and has
approximately 248,000 square feet that services Seaman's stores in Connecticut
and its remaining New York stores. Approximately 30% of the Company's sales in
fiscal 1997 were delivered from this facility. The Cleveland warehouse, which is
a leased facility, is approximately 100,000 square feet and services the Ohio
stores. Approximately 5% of Seaman's sales were delivered from this facility.
The term on this lease expires on May 30, 1998. See "Properties". The balance
of the inventory is stored with and delivered from either a public warehouse or
certain suppliers who store and deliver goods for the Company. The Company
believes that these warehouses will be sufficient to support Seaman's deliveries
in its existing market areas over the next two fiscal years.

In April 1996 the Company converted its Islip warehouse to a full radio
frequency inventory control system ("RF System"). The Company converted its
Woodbridge warehouse to a similar RF System in August 1996. The Company has no
plans to convert its Cleveland warehouse to an RF System in the near future.

Merchandise is delivered from the Woodbridge, Islip and Cleveland
warehouses to customers by two delivery companies, which acting as agents for
the Company, also collect cash balances due from customers. The Company has
written contracts with the delivery companies whereby the amounts paid by the
Company to these companies vary depending on the volume of merchandise delivered
and the distance traveled. The contracts with these delivery companies are
material to the Company. If one of the delivery companies were to cease doing
business with the Company, the second delivery company could replace it or
another delivery company could be found without a material impact on the
delivery process. It would be difficult, however, to replace both delivery
companies at the same time due to the start-up time necessary to familiarize a
new delivery company with the Company's operations.

The Company also permits customers to pick up some merchandise directly
from its stores, clearance centers and warehouses. Certain merchandise,
particularly store display items, discontinued styles and clearance items, is
delivered directly from Seaman's stores and clearance centers by small
independent truckers.

ADVERTISING AND PROMOTIONS

The Company believes it enjoys widespread name recognition in the greater
New York and Philadelphia metropolitan market areas, primarily due to intensive,
ongoing mass media advertising campaigns utilizing the Company's trademarks
"Seaman's/(R)/," "See Seaman's First/(R)/," "Seaman's Plus/(R)/" and "The
Package/(R)/." Advertising and sales promotions are important parts of Seaman's
overall merchandising strategy, emphasizing the reputation of the Company as a
quality retailer and the value of "The Package/(R)/" concept of merchandising.
See "Business - Marketing and

Merchandising." Approximately 59% of Seaman's advertising budget for fiscal 1997
was for advertising in major New York, Philadelphia and Cleveland metropolitan
area newspapers and for the distribution of color circulars in newspapers, while
the majority of the remaining 41% was for local television and radio
advertising. Historically, the Company has not used direct mail as a significant
part of its advertising programs.

The Company continues to offer and advertise credit and product promotions
on a regular basis. Seaman's product promotions usually offer discounted prices
on specific individual items and on items that are merchandised together in "The
Package/(R)/" approach.

One of Seaman's most successful promotions has been its "No/No/No"
campaign, which offers qualifying customers the use of the Company's proprietary
credit card with no down payment (exclusive of sales tax and delivery charges),
deferred payments and interest free terms for a specified period, generally
three to four months, on certain purchases. These promotions not only serve to
bolster sales but have the added effects of providing additional customers for
its proprietary credit card program and an increased possibility that customers
will become repeat customers through continued use of their Seaman's credit
card. See "Business - Credit Operations."

INFORMATION SYSTEMS

The Company operates a computer system which was installed in July 1994.
The system integrates Seaman's financial, purchasing and inventory functions and
enables management to access credit, sales and inventory information quickly,
while providing many operating efficiencies for the Company. The Company
installed an RF System in its Islip warehouse in April 1996 and completed
installation of a similar system in its Woodbridge warehouse in August 1996.

CREDIT OPERATIONS

The Company offers its customers the option to make purchases using cash,
the Company's proprietary credit card or other major credit and charge cards
(MasterCard, Visa, Optima and Discover credit cards and the American Express
card). Generally, the Company requires a deposit covering sales tax and
delivery charges when a sale is made, with the balance payable upon or prior to
delivery of the merchandise.

The Company had provided in-house credit for its customers since the early
1980s. On August 5, 1997, the Company consummated the sale of substantially all
of its customer accounts receivable to Household Bank (Nevada), N.A.
("Household") for net proceeds of approximately $70 million. In connection
therewith, the Company also entered into a Merchant Agreement with Household,
dated August 1, 1997 with an effective date of August 5, 1997, pursuant to which
Household will provide revolving credit financing to individual qualified
customers of the Company through the issuance of a Seamans proprietary credit
card. The Company's proprietary credit card is offered to qualified customers
for the purchase of merchandise at any of Seaman's stores. The Company currently
offers special credit terms to its cardholders on a promotional

basis, such as no down payment on the furniture, deferred payments and interest
free promotions under the "No/No/No" program. See "Business - Advertising and
Promotions." Those customers who are approved for credit and utilize the
Company's own proprietary credit card, may spend up to their approved credit
limit on furniture purchases with a nominal down-payment. Convenient, in-store
credit approvals for Seaman's customers are processed in a matter of minutes.

SEASONALITY AND CYCLICALITY

The Company's business generally is not subject to significant seasonal
variations. However, the Company's business is significantly influenced by the
general economy, consumer confidence and disposable income, and the housing
markets in the areas where its stores are located.

TRADEMARKS

The Company's name is well established in the greater New York and
Philadelphia metropolitan markets served by the Company's stores, and management
believes that the reputation of that trade name is important. The Company and
its subsidiaries do not have any material patents or trademarks, except for the
Company's trademarks "The Package/(R)/," "See Seaman's First,/(R)" "/Seaman's
Plus/(R)/" and "Fabric Bond." The Company is in the process of registering an
additional trademark, "The Sensible Way to a Beautiful Home."

EMPLOYEES

As of April 30, 1997, the Company had 1,104 full-time employees. Four
collective bargaining agreements with Local 875 of the International Brotherhood
of Teamsters ("Local 875") are currently in force. Contracts covering the
employment of the New York, New Jersey, Connecticut and Philadelphia sales
staff, the New York, New Jersey, Connecticut, Philadelphia store porters and
certain Islip and Woodbridge warehouse staff are due to expire on January 2,
2000, March 1, 2000, December 29, 1998 and August 15, 2000, respectively.
Except for the Islip union members, who receive health coverage from a Company
sponsored plan under the collective bargaining agreements with Local 875 the
Company contributes to the union's welfare and pension funds. For its nonunion
employees, the Company provides health, dental, life and disability insurance
coverage. The Company also has a defined contribution 401(k) savings plan
covering nonunion employees. The Company has never had a strike or work
stoppage.

1988 LEVERAGED BUYOUT AND SUBSEQUENT REORGANIZATION

Following an initial public offering of Seaman's common stock in 1985 and a
secondary offering in 1986, the Company was taken private in a leveraged buyout
(the "LBO") by affiliates of Kohlberg Kravis Roberts & Co., L.P. in 1988,
incurring debt of approximately $360 million. The Company experienced a
considerable, unanticipated decline in sales volume, operating income and
liquidity in the years 1989 through 1991 due, among other things, to changes in
business philosophy (including cutting merchandise margins, de-emphasizing "The
Package/(R)/" concept and

expanding Seaman's emphasis on sales events in its advertising) and the debt
burden that resulted from the LBO, and was exacerbated further by a significant
economic recession in the United States that was especially severe in the
northeastern United States. Thereafter, the Company filed for bankruptcy
protection under Chapter 11 ("Chapter 11") of the United States Bankruptcy Code
in January 1992. The Company emerged from Chapter 11 proceedings in October
1992, with its outstanding indebtedness having been reduced from approximately
$360 million to approximately $13 million. As part of its Chapter 11
proceedings, the Company adopted "fresh start reporting." Current senior
management of the Company was appointed by the Board of Directors immediately
following Seaman's emergence from Chapter 11 proceedings.

PROPOSAL TO TAKE THE COMPANY PRIVATE

SFC Merger Company, a Delaware corporation controlled by a group consisting
of the Company's senior management and majority stockholders, M.D. Sass
Associates, Inc., T. Rowe Price Recovery Fund, L.P., and Carl Marks Management
Co. L.P., executed a merger agreement (the "Merger Agreement") with the Company
on August 13, 1997. The Merger Agreement provides for, among other things, cash
consideration of $25.05 per share for each share of the Company's outstanding
common stock. Under the terms of the Merger Agreement, the Company will survive
the merger and be owned by the majority stockholders and the current senior
management of the Company. The Merger Agreement was approved by a special
committee of the Board of Directors of the Company consisting of two independent
directors. The special committee received a fairness opinion from Wasserstein
Perella & Co, Inc. The Merger Agreement is subject to certain conditions,
including financing and stockholder approval.

ITEM 2. PROPERTIES
----------

The Company currently operates 41 stores: 27 stores in the New York, New
Jersey and Connecticut Tri-State Area, 8 stores in the Philadelphia metropolitan
area and 6 stores in the Cleveland/Akron metropolitan area. Most of Seaman's
stores are located near heavily populated areas, shopping malls or other retail
operations and are near major highways or other major thoroughfares. Seaman's
stores range in size from approximately 10,000 to 47,000 square feet, and most
of each store is devoted to selling space. The average selling space per store
is approximately 23,000 square feet. No store accounted for more than 10% of
the Company's net sales for fiscal 1997.

The opening of the stores in the Cleveland/Akron area was the Company's
initial expansion beyond the Northeast. The Cleveland stores range in size from
approximately 23,000 square feet to 37,000 square feet.

All of Seaman's stores are leased. See Note 7 of the Notes to Consolidated
Financial Statements for information with respect to specific leases. The terms
for the 41 leases expire at various times in the years from 1998 through 2023
with many having options to renew for additional periods. There can be no
assurances that the leases that expire will be renewed or renegotiated on the
same terms.

As discussed above, the Company operates three warehouse facilities: the
Woodbridge, New Jersey warehouse, the Central Islip, New York warehouse and the
Cleveland, Ohio warehouse. The Woodbridge warehouse, which is approximately
450,000 square feet, is leased. This lease expires in 2002 with an option to
renew for eight additional years. The Islip warehouse, which is approximately
248,000 square feet, is owned by the Company and was financed, in part, by a
$6.0 million industrial revenue bond which was issued by the Town of Islip, New
York. On November 8, 1996, the Company prepaid the industrial revenue bond,
which had an outstanding principal balance of approximately $3.7 million, with
proceeds received from Fleet Bank N.A. in the amount of approximately $6.2
million pursuant to a Mortgage Note ("Note") issued by the Company to Fleet.
The Note, payable monthly and maturing on November 8, 2003, is secured by a
Mortgage, Security Agreement and Assignment of Lease Rights covering the
Company's Central Islip Warehouse. The balance of the proceeds was used to
reduce the outstanding borrowing under the Loan Agreement (as hereinafter
defined). The Cleveland warehouse, which is approximately 100,000 square feet,
is leased on a year to year basis. The Company believes that the Islip,
Woodbridge and Cleveland warehouses have sufficient capacity to support Seaman's
near term planned expansion in the current market areas they serve. See
"Business - Warehousing, Distribution and Delivery."

The Company's executive offices are located in a 40,000 square foot leased
facility located in Woodbury, New York. This lease expires in 2002 with an
option to renew for five additional years. The Company believes that its
executive offices are sufficient to accommodate current anticipated growth.

The Company also owns approximately 16 acres of undeveloped land located in
Bridgeport, New Jersey, which property is being marketed for sale.

ITEM 3. LEGAL PROCEEDINGS
-----------------

The Company from time to time is involved in legal proceedings and
litigation incidental to the normal course of the Company's business. The
Company believes that the ultimate disposition of these proceedings and
ligitation will not materially adversely affect the Company's financial
position.

ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
------------------------

None.

PART II.
--------

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MARKETS
-------------------------------

The Company's common stock, par value $0.01 per share (the "Common Stock")
became listed on the Nasdaq National Market on June 8, 1993. Prior to that it
was quoted on the National Quotation System's "pink sheets." The common stock
closed at $22 3/4 on July 15, 1997.

The following table sets forth (as reported by Nasdaq National Market) for
the periods indicated the prices of the common stock.

FISCAL 1997 HIGH LOW CLOSE
----------- ---- --- -----

4th Quarter 20 1/4 19 19 1/2
3rd Quarter 21 1/4 18 1/4 20
2nd Quarter 21 1/4 16 7/8 18 1/2
1st Quarter 19 3/8 16 1/4 16 3/4

FISCAL 1996 HIGH LOW CLOSE
----------- ---- --- -----

4th Quarter 19 3/4 15 18 1/2
3rd Quarter 19 1/2 17 1/2 18 3/8
2nd Quarter 19 3/4 16 3/4 19 3/4
1st Quarter 21 18 3/4 18 3/4

These quotations reflect inter-dealer prices, without retail markups,
markdowns or commissions.

The number of record holders of the Company's Common Stock as of July 15,
1997 was 259. Pursuant to the Company's Amended and Restated Stock Option Plan,
1,015,595 shares of the Common Stock are subject to outstanding options at April
30, 1997. See "The Company's Proxy Statement for 1997 Annual Stockholders
Meeting."

The Company has never paid any cash dividends on its stock.

ITEM 6. FINANCIAL INFORMATION

SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Amounts in Thousands)

PROFORMA
YEAR YEAR YEAR YEAR TWELVE-MONTH
ENDED ENDED ENDED ENDED PERIOD ENDED
APRIL 30, 1997 APRIL 30, 1996 APRIL 30, 1995 APRIL 30, 1994 APRIL 30, 1993 (1)
-------------- -------------- -------------- -------------- ------------------

Revenues:
Net Sales $251,175 $229,505 $215,857 $170,348 $162,576
Net Finance Charge Income 12,809 14,036 12,364 7,865 8,490
-------- -------- -------- -------- --------
Total 263,984 243,541 228,221 178,213 171,066
-------- -------- -------- -------- --------
Operating Costs & Expenses:
Cost of sales, including
Buying and Occupancy costs 167,430 152,982 138,038 112,648 109,904
Selling, General and
Administrative 87,206 83,094 74,691 60,159 63,171
-------- -------- -------- -------- --------
Total 254,636 236,076 212,729 172,807 173,075
-------- -------- -------- -------- --------
Income (Loss) from Operations 9,348 7,465 15,492 5,406 (2,009)
Interest Expense (2,247) (1,748) (1,707) (1,854) (1,347)
Interest Income 65 878 561 694 507
Reorganization Charges -- -- -- -- (8,033)
-------- -------- -------- -------- --------
Income (Loss) before Income Tax
and Extraordinary Credits 7,166 6,595 14,346 4,246 (10,882)
Income Tax (Expense)/Benefit (3,081) (2,700) (5,738) 2,694 --
-------- -------- -------- -------- --------
Income (Loss) before
Extraordinary Credits 4,085 3,895 8,608 6,940 (10,882)
Extraordinary Credits -- -- -- -- 353,569
-------- -------- -------- -------- --------
Net Income $ 4,085 $ 3,895 $ 8,608 $ 6,940 $342,687
-------- -------- -------- -------- --------

(1) Combines arithmetically the five month period ended September 30, 1992 and
the seven month period ended April 30, 1993. The 1993 twelve-month period
includes five months of activities while the Company operated as a Debtor-
in-Possession and seven months of activities after emergence from Chapter
11 and debt discharge.

The following table sets forth for the periods indicated certain items in
selected financial data as a percentage of sales, and the percentage change of
such items from the indicated prior period.

PERCENTAGE OF NET SALES PERCENTAGE INCREASE (DECREASE)
----------------------- ------------------------------
PROFORMA YEAR ENDED APRIL 30,
YEAR YEAR YEAR YEAR TWELVE-MONTH 1997 1996 1995
ENDED ENDED ENDED ENDED PERIOD ENDED VS VS VS
4/30/97 4/30/96 4/30/95 4/30/94 4/30/93 (1) 1996 1995 1994
------- ------- ------- ------- ----------- ---- ---- ----

Revenues:
Net Sales 100.0 100.0 100.0 100.0 100.0 9.4 6.3 26.7
Net Finance Charge Income 5.1 6.1 5.7 4.6 5.2 -8.7 13.5 57.2
Cost of sales, including
Buying and Occupancy costs 66.7 66.7 63.9 66.1 67.6 9.4 10.8 22.5
Selling, General and Administrative 34.7 36.2 34.6 35.3 38.9 4.9 11.3 24.2
Income (Loss) from Operations 3.7 3.3 7.2 3.2 -1.3 25.2 -51.8 186.6
Interest Expense -0.9 -0.8 -0.8 -1.1 -0.8 28.5 2.4 -7.9
Interest Income 0.0 0.4 0.3 0.4 0.3 -92.6 56.5 -19.2
Reorganization Charges -- -- -- -- -4.9 -- -- --
Income (Loss) before Income Tax
and Extraordinary Credits 2.8 3.0 6.7 2.5 -6.7 8.7 -54.0 237.9
Income Tax (Expense)/Benefit -1.2 -1.2 -2.7 1.6 -- 14.1 -52.9 313.0
Income (Loss) before
Extraordinary Credits 1.6 1.7 4.0 4.1 -6.7 4.9 -54.8 24.0
Extraordinary Credits -- -- -- -- 217.5 -- -- --
Net Income 1.6 1.7 4.0 4.1 210.8 4.9 -54.8 24.0

(1) Combines arithmetically the five month period ended September 30, 1992 and
the seven month period ended April 30, 1993. The 1993 twelve-month period
includes five months of activities while the Company operated as a Debtor-in-
Possession and seven months of activities after emergence from Chapter 11 and
debt discharge.

(AMOUNTS IN THOUSANDS)
-----------------------------------------------
AT AT AT AT AT
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----

Balance Sheet Data:
Cash & Cash Equivalents $ 6,423 $ 3,436 $ 20,431 $ 23,512 $ 26,353
Other Current Assets 103,808 101,142 80,585 68,207 54,455
Current Liabilities 42,724 37,631 43,350 35,841 25,635
Working Capital 67,507 66,947 57,666 55,878 55,173
Total Assets 161,222 159,251 153,334 136,586 113,436
Long-term Debt 12,878 20,085 12,328 12,915 13,278
Stockholders' Equity $105,620 $101,535 $ 97,656 $ 87,830 $ 74,523

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
----------------------------------------------

The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with "Selected
Consolidated Financial Information," the

Consolidated Financial Statements and Notes thereto and the other information
included elsewhere in this Form 10-K/A.

The Company's fiscal year ends on April 30. Fiscal years are identified
according to the calendar year in which they end. For example, the fiscal year
ended April 30, 1997 is referred to as "fiscal 1997."

OVERVIEW

The Company is engaged in a single line of business, the retail sale of
residential furniture, and the Company's revenues are principally derived from
such sales. The Company also has a proprietary credit card program which is
operated to promote its furniture business. For fiscal 1997, net finance charge
income from the Company's credit card operations represented 5.1% of net sales,
however, as of August 5, 1997 when the Company sold its customer accounts
receivables, the Company will not generate finance income from sales using the
proprietary credit card. See "- Subsequent Events."

The Company's most significant category of operating expenses is the cost
of sales, which includes the cost of goods sold, warehousing, distribution and
delivery (net of delivery charges to customers) expenses, rent and depreciation
for the stores and buying staff expenses, including payroll. The category of
selling, general and administrative expenses is the other significant element in
the Company's cost structure. This includes store (excluding rent and
depreciation) expenses, advertising, corporate administration (excluding buying
staff) expenses and the costs of the credit card program.

The Company imports a substantial amount of merchandise directly from
foreign suppliers. Imported merchandise represented approximately 30% to 35% of
the Company's purchases during the periods discussed herein. The Company pays
for all of such imported merchandise in U.S. dollars based on U.S. dollar prices
fixed at the time of the Company's order. The Company does not issue open
purchase orders as to price and therefore does not bear foreign currency
exchange rate fluctuation risk in connection with such import purchases; that
risk is borne by the Company's suppliers. While foreign currency exchange rates
affect the U.S. dollar prices that suppliers quote to the Company, the Company
is not obligated to purchase merchandise if a supplier seeks to increase the
price established at the time of the Company's order. The Company is able to
purchase replacement merchandise from both domestic and foreign suppliers.

In connection with the LBO in February 1988, the Company incurred debt of
approximately $360 million, which influenced both strategic and day-to-day
management decisions. The Company then experienced a considerable,
unanticipated decline in sales volume, operating income and liquidity in the
years 1989 through 1991 due, inter alia, to changes in business philosophy
(including, for example, reducing retail gross margin, de-emphasizing "The
Package/(R)/" concept and expanding Seaman's emphasis on sales events in its
advertising) and the debt burden that resulted from the LBO. The Company's
situation was exacerbated by a significant economic recession that was
especially severe in the northeastern United States. Although the LBO debt was
restructured in November 1989, in December 1991 the Company was

facing possible cross-defaults under its senior and subordinated debt
obligations and, in January 1992, filed for Chapter 11 bankruptcy protection.
See "Business - 1988 LBO and Subsequent Reorganization." Shortly after filing
for bankruptcy protection, the Company closed 15 of its then 37 stores. The
Company emerged from Chapter 11 proceedings in October 1992 with its outstanding
indebtedness having been reduced from approximately $360 million to
approximately $13 million. As part of its Chapter 11 proceedings, the Company
also adopted "fresh start reporting." Current senior management of the Company
was appointed by the Board of Directors immediately following the Company's
emergence from Chapter 11.

For the five months ended September 30, 1992 (during which the Company
operated under Chapter 11 bankruptcy protection), the Company incurred an
operating loss of $3.6 million; for the seven months ended April 30, 1993 (after
the Company had emerged from its Chapter 11 proceedings), the Company had an
operating profit of $1.6 million. For fiscal 1994, the Company's operating
profit was $5.4 million, for fiscal 1995 it was $15.5 million, for fiscal 1996
it was $7.5 million, and for fiscal 1997 it was $9.3 million.

RESULTS OF OPERATIONS

Fiscal Year Ended April 30, 1997 Compared to Fiscal Year Ended April 30, 1996
- -----------------------------------------------------------------------------

Net sales for fiscal 1997 of $251.2 million increased by $21.7 million (or
9.4%) compared to net sales for fiscal year 1996. The increase resulted
primarily from the full fiscal year sales of nine new stores opened at various
times during fiscal 1996. Comparable store sales for fiscal 1997 were $233.7
million, an increase of $4.2 million (or 1.8%) compared to comparable store
sales of $229.5 million for fiscal 1996.

Net finance charge income of $12.8 million for fiscal 1997 decreased by
$1.2 million (or 8.7%) from fiscal 1996, primarily due to an increased amount of
deferred interest credit promotions in fiscal 1997. Proprietary credit card
sales have grown from 30% of total sales in fiscal 1994 to 39% in fiscal 1997,
having peaked at 46% of total sales in fiscal 1995.

As a result of the foregoing increases, total revenues for fiscal 1997 were
$264 million, an increase of $20.4 million (or 8.4%) over the comparable prior
year period.

Cost of sales increased by $14.4 million (or 9.4%) between the two periods,
principally due to the increase in net sales.

Selling, general and administrative expenses increased by $4.1 million (or
4.9%) between the two periods, principally due to the increase in the number of
stores that were operating throughout fiscal 1997.

As a result of the foregoing, income from operations was $9.3 million for
fiscal 1997 compared to $7.5 million for fiscal 1996.

Net interest expense of $2.2 million for fiscal 1997 increased $1.3 million
(150.8%) from $870,000 for fiscal 1996. This is primarily attributed to
decreased interest income due to the Company's lower cash balances during the
fiscal year despite having a higher cash balance at year end and to increased
interest expense associated with the revolving credit line entered into in April
1996 and increased capital lease interest expense.

The provision for income taxes for fiscal 1997 is based upon an effective
income tax rate of 43% as compared to 41% for fiscal 1996. As of April 30,
1997, the Company had a long-term deferred tax asset of $10.8 million and a
current deferred tax asset of $5.0 million. The long-term deferred tax asset is
primarily related to operating losses that occurred following the LBO. There
are limitations on the time periods during which these deferred tax assets can
be used and on the amounts that the Company can use each year. See Note 4 of
Notes to Consolidated Financial Statements.

As a result of the foregoing, the Company's net income for fiscal 1997 was
$4.1 million compared to net income of $3.9 million for fiscal 1996.

Fiscal Year Ended April 30, 1996 Compared to Fiscal Year Ended April 30, 1995
- -----------------------------------------------------------------------------

Net sales for fiscal 1996 of $229.5 million increased by $13.6 million (or
6.3%) compared to net sales for fiscal year 1995. The increase resulted from
the opening of nine new stores commencing in September 1995. Comparable store
sales for fiscal 1996 were $204.8 million, a decrease of $11.1 million (or -
5.1%) compared to comparable store sales of $215.9 million for fiscal 1995.
Management believes that this decrease is primarily attributable to the weak
sales environment in the furniture industry and severe winter weather conditions
in the Company's markets.

Net finance charge income of $14.0 million for fiscal 1996 increased by
$1.7 million (or 13.5%) from fiscal 1995, primarily due to an increase in the
average accounts receivable balance in fiscal 1996 compared to fiscal 1995.
Since the Company instituted the "Seaman's Plus/(R)/" credit card in April 1994,
proprietary credit sales grew from 30% of total sales in fiscal 1994 to 46% in
fiscal 1995 and have more recently leveled off at 40% in fiscal 1996.

As a result of the foregoing increases, total revenues for fiscal 1996 were
$243.5 million, an increase of $15.3 million (or 6.7%) over the comparable prior
year period.

Cost of sales increased by $14.9 million (or 10.8%) between the two
periods, principally due to the increase in net sales, the opening of nine new
stores and a warehouse, and decreased gross margins due to the competitive
retail environment.

Selling, general and administrative expenses increased by $8.4 million (or
11.3%) between the two periods, principally due to the opening of nine stores
and an increase in the allowance for bad debts due to the higher customer
accounts receivable balance. The Company also incurred increased advertising
expenses due to its entrance into a new market.

As a result of the foregoing, income from operations was $7.5 million for
fiscal 1996 compared to $15.5 million for fiscal 1995.

Net interest expense of $870,000 for fiscal 1996 decreased as compared to
fiscal 1995 due to increased interest income attributed to higher cash balances.
The Company's interest expense primarily consists of interest on its capital
leases and on the mortgage it holds for its Islip warehouse.

The provision for income taxes for fiscal 1996 is based upon an effective
income tax rate of 41%. As of April 30, 1996, the Company had a long-term
deferred tax asset of $11.9 million and a current deferred tax asset of $5.7
million. The long-term deferred tax asset is primarily related to operating
losses that occurred following the LBO. There are limitations on the time
periods during which these deferred tax assets can be used and on the amounts
that the Company can use each year. See Note 4 of Notes to Consolidated
Financial Statements.

As a result of the foregoing, the Company's net income for fiscal 1996 was
$3.9 million compared to net income of $8.6 million for fiscal 1995.

Fiscal Year Ended April 30, 1995 Compared to Fiscal Year Ended April 30, 1994
- -----------------------------------------------------------------------------

Net sales for fiscal 1995 of $215.9 million increased by $45.5 million (or
26.7%) compared to net sales for fiscal year 1994. Of such increase, $16.1
million resulted from the opening of five new stores commencing in September
1994 and the balance was primarily attributable to the implementation of new
management strategies, including a redirected advertising focus and an increased
emphasis on the Company's credit card operations, including the implementation
of the "Seaman's Plus/(R)/" credit card. Comparable store sales for fiscal 1995
were $198.2 million, an increase of $28.3 million (or 16.7%) compared to
comparable store sales of $169.9 million for fiscal 1994. Management believes
that this increase is primarily attributable to the redirected advertising
focus, customer acceptance of the "Seaman's Plus/(R)/" credit card, the ongoing
store redesign and renovation program and the use of a broadened merchandise mix
in the Company's stores.

Finance charge income of $12.4 million for fiscal 1995 increased by $4.5
million (or 57.2%) from fiscal 1994, primarily due to an increase in sales made
on the "Seaman's Plus/(R)/" credit card of $16.0 million in fiscal 1995 compared
to fiscal 1994. Sales made on the "Seaman's Plus/(R)/" credit card increased to
approximately 46% of net sales in fiscal 1995 from approximately 30% of net
sales in fiscal 1994.

As a result of the foregoing increases, total revenues for fiscal 1995 were
$228.2 million, an increase of $50.0 million (or 28.1%) over the comparable
prior year period.

Cost of sales increased by $25.4 million (or 22.5%) between the two
periods, principally due to the increase in net sales, but decreased as a
percentage of net sales from 66.1% for fiscal 1994 to 63.9% for fiscal 1995.
The decrease as a percentage of net sales was primarily due to the Company's
operating leverage, which supported the increase in net sales without

corresponding increases in fixed operating costs (in particular, warehousing
expenses), and an improvement in retail gross margin.

Selling, general and administrative expenses increased by $14.5 million (or
24.2%) between the two periods, principally due to the opening of five stores
and an increase in the allowance for bad debts due to the higher customer
accounts receivable balance. As a percentage of net sales, however, selling,
general and administrative expenses decreased from 35.3% for fiscal 1994 to
34.6% for fiscal 1995. The decrease as a percentage of net sales was
principally due to operating leverage, in particular with respect to advertising
and corporate administration expenses. Additionally, the Company maintained
cost controls while continuing to increase its net sales volume.

As a result of the foregoing, income from operations improved to $15.5
million for fiscal 1995 compared to $5.4 million for fiscal 1994.

Net interest expense of $1.2 million for fiscal 1995 remained constant as
compared to fiscal 1994. The Company's interest expense primarily consists of
interest on its capital leases and on the mortgage it holds for its Islip
warehouse.

The provision for income taxes for fiscal 1995, is based upon an effective
income tax rate of 40%. As of April 30, 1995, the Company had a long-term
deferred tax asset of $13.4 million and a current deferred tax asset of $5.6
million. The long-term deferred tax asset is primarily related to operating
losses that occurred following the LBO. There are limitations on the time
periods during which these deferred tax assets can be used and on the amounts
that the Company can use each year. In fiscal 1994, the Company recorded a non-
recurring income tax benefit of $4.2 million, which was principally a result of
the utilization of tax operating loss carryforwards. See Note 7 of Notes to
Consolidated Financial Statements.

As a result of the foregoing, the Company's net income for fiscal 1995 was
$8.6 million compared to net income of $6.9 million for fiscal 1994.

LIQUIDITY AND CAPITAL RESOURCES

At April 30, 1997, the Company had working capital of $67.5 million. The
Company's principal sources of liquidity are earnings before income taxes,
depreciation and amortization, and prior to its termination on July 30, 1997,
borrowings, if any, under the $40 million Revolving Credit and Security
Agreement (the "Loan Agreement") with the Bank of New York Commercial
Corporation and Fleet Bank, N.A. (as Successor-by-Merger to NatWest Bank N.A.)
as lenders (the "Lenders"). The Company's principal uses of cash are working
capital needs, capital expenditures and debt service obligations, including
capitalized lease costs.

The Company's cash and cash equivalents increased in fiscal 1997 but had
decreased in fiscal 1996, 1995 and 1994. The Company's working capital
increased from $66.9 million at April 30, 1996 to $67.5 million at April 30,
1997. Cash and cash equivalents increased from $3.4 million at April 30, 1996
to $6.4 million at April 30, 1997. As of April 30, 1997, the Company

had stockholders' equity of $105.6 million. The Company's largest asset at such
date was accounts receivable of $68.9 million (net of bad debt reserves). At
April 30, 1997, $2 million was outstanding under the Loan Agreement consisting
primarily of letters of credit. At April 30, 1997, the Company had $12.9 million
in long term debt, consisting of capitalized lease obligations and a mortgage in
connection with its Central Islip, New York warehouse facility. See
"Properties."

The Company entered into the $40 million Loan Agreement on April 29, 1996.
The term of the Loan Agreement was three years. The Company granted to the
Lenders a security interest in the Company's customer receivables and all
General Intangibles as defined in the Loan Agreement. The Loan Agreement
contained covenants and provisions which are customary for a secured revolving
credit facility. The funds available under the Loan Agreement were primarily
for capital expenditures and general corporate purposes. The Company terminated
the Loan Agreement on July 30, 1997 in connection with the sale of its customer
accounts receivables.

At the same time that the Company entered into the Loan Agreement, it
redeemed certain receivables- backed securities designated "8.10% Class A Credit
Card Participation Certificates, Series 1995-1" in the amount of $20 million,
from a third party investor not affiliated with the Company. These Certificates
were issued in April 1995 by the Seaman Furniture Credit Card Master Trust which
was originated by Seaman Receivables Corporation, a wholly owned special purpose
finance subsidiary of the Company.

Capital expenditures during fiscal 1994, fiscal 1995, fiscal 1996 and
fiscal 1997 were $4.5 million, $6.5 million, $8 million and $2.9 million,
respectively. Capital expenditures during fiscal 1995, 1996 and 1997 were
principally for new store openings, store renovations and a radio frequency
system for the Islip and Woodbridge warehouses. See "Business - Store Redesign
and Renovation."

Unless a customer is making a purchase using the Company's proprietary
credit card, the Company generally requires customers to make a down payment
(generally 30% of the sales price) at the time an order is placed, with the
balance payable upon or prior to delivery of the merchandise. The percentage of
sales paid with cash, check or major credit cards (for which customers are
generally required to provide a down payment absent a special promotion) has
changed from approximately 54% in fiscal 1995 to approximately 60% in fiscal
1996 and 1997. The balance of the Company's sales for each of such periods was
financed internally from working capital on the Company's proprietary credit
card.

Customer deposits at April 30, 1995, April 30, 1996 and April 30, 1997 were
$7.5 million, $9.3 million and $8.5 million, respectively. The relatively low
level of customer deposits on a given date compared to net sales for a period
reflects both the Company's quick delivery policy and customer use of the
Company's proprietary credit card. If the Company generates more sales with
the Company's proprietary credit card, the level of customer deposits is not
expected to change in tandem with changes in net sales.

When the Company opens a new store in an existing market, it is able to
leverage its fixed costs for advertising and corporate administration to cover
the new store. While its fixed costs

for distribution may not increase (if there is existing warehouse capacity),
increased expansion even in existing markets will ultimately lead to increased
distribution costs. As the Company opens stores in new markets, however, the
Company's fixed costs for distribution, advertising and corporate administration
are likely to increase as existing warehousing facilities are not likely to be
able to service new, geographically distant markets; existing advertising
programs will not promote the Company and its merchandise in such new markets;
and new personnel will likely be needed to manage the new market areas. However,
additional expansion in a new market area should not result in greater fixed
costs as the new warehouse facilities, advertising programs and administrative
framework should be sufficient to support reasonable, planned expansion in such
markets. In addition, as the Company expands into urban areas that are less
populated than the greater New York metropolitan area, and as the Company opens
stores in suburban areas in new and existing markets, the Company expects
average sales per store and sales per square foot of selling space to be less
than that of existing stores due to differences in population density and size
of local market.

SUBSEQUENT EVENTS

On August 5, 1997, the Company consummated the sale of substantially all of
its customer accounts receivable to Household for net proceeds of approximately
$70 million. In connection therewith, the Company also entered into a Merchant
Agreement with Household, dated August 1, 1997 with an effective date of August
5, 1997, pursuant to which Household will provide revolving credit financing to
individual qualified customers of the Company through issuance of the Company's
proprietary credit card and will provide services to existing credit customers.
The Company has terminated its Service Agreement with SPS Payment Systems, Inc.
which had provided services since April 1994 with regard to the Company's
proprietary credit card program.

The Company entered into a commitment letter dated July 31, 1997 with
Heller Business Credit, a division of Heller Financial, Inc., to provide a five-
year term loan for $10 million and a five-year revolving credit facility for $25
million collateralized by eligible inventory of the Company (the "Heller Loan
Facility"). It is expected that final documentation for the loan will be
consummated at the effective time of the merger.

The Company currently expects that the borrowings under the Heller Loan
Facility will be sufficient to meet the Company's planned capital expenditures,
long-term debt (composed of capital lease obligations and principal on the
Company's mortgage and repayments on the term loan) and currently anticipated
working capital requirements through the end of fiscal 1999 without
consideration of uncertainties surrounding the Merger Agreement. See
"Business -Proposal to take the Company Private."

ADOPTION OF "ACCOUNTING FOR STOCK-BASED COMPENSATION" ("SFAS 123")

Compensation" ("SFAS 123"), which uses a fair value method of accounting. The
adoption did not have a material effect on the Company's financial statements.

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

With the exception of the historical information contained in this report,
the matters described herein contain forward-looking statements that involve
risk and uncertainties including but not limited to economic and competitive
factors outside of the control of the Company. These factors more specifically
include: competition from other retail stores, continuing strong economic
conditions, especially in the northeastern United States and the Company's
ability to identify consumer preferences with regard to its merchandise mix.
Forward-looking statements are typically identified by the words "believe,"
"expect," "anticipate," "intend," "estimate," and similar expressions. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates.

INFLATION

Inflation has not had a material impact on the Company's operating and
occupancy costs.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------

See Index to Financial Statements and Exhibits, which appears on Page F-1
hereof.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------

None.

PART III.
---------

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CONTROL PERSONS OF THE REGISTRANT
---------------------------------

DIRECTORS

Barry J. Alperin, 57, a Director of the Company since November 23,
1992, is a private consultant. He was Vice Chairman of Hasbro, Inc. from 1990
until his retirement on July 31, 1995, and a member of its Board of Directors
from 1988 until May 1996. Mr. Alperin was Chief Operating Officer and Executive
Vice President of Hasbro, Inc. from 1989 to 1990, and from 1985 to 1988 he was a
Senior Vice President - Corporate. Prior to that, he was a Partner with the law
firm of Fenwick, Davis & West in New York. Mr. Alperin has an L.L.B. from
Harvard Law School, an M.B.A. from the Amos Tuck School of Business, and a B.A.
from Dartmouth College. He is also a director of Henry Schein, Inc.

Leo Peraldo, 62, has been a Director of the Company since October 14,
1992. He is currently President of Family & Business Insurance Center, Inc. He
was the Vice President of Finance for Klaussner Furniture Industries, Inc., one
of the major furniture manufacturers in the United States until December 31,
1992 when he retired. He has over twenty years experience in the furniture
industry. Mr. Peraldo has a B.S. degree from Texas Christian University.

Alan Rosenberg, 47, has been the President and Chief Executive Officer
of the Company and a Director of the Company since October 14, 1992. From June
1992 until his current appointment with the Company, Mr. Rosenberg worked for
Ametex Fabrics, a division of Masco Industries. Prior to that, he had been
employed by the Company since 1971. He was a buyer from 1971 to 1980, Soft
Lines Merchandise Manager from 1980 to 1985, Vice President -Soft Lines from
1985 to 1990, and Senior Vice President - General Merchandise Manager from 1990
to June 1992. Mr. Rosenberg holds a B.S. Degree from the State University of
New York at Albany.

James B. Rubin, 43, has been a Director of the Company since June 28,
1994, and is Co-Chairman and Chief Investment Officer of Resurgence Asset
Management, L.L.C. ("Resurgence"), a successor company to M.D. Sass Associates,
Inc.'s restructured securities division, Sass Lamle Rubin & Co., of which he was
co-founder in 1989. Previously, he was principal of J.B. Rubin & Company, an
investment management and financial advisory firm. From 1985 to 1986, Mr. Rubin
was Senior Financial Analyst with Smith Vasilou Management Company, an
investment firm specializing in troubled companies. Mr. Rubin graduated from
Cornell University in 1975 with an undergraduate degree in Industrial
Engineering. He is also a director of Computervision Corporation and Corporate
Renaissance Group, Inc.

Kim Z. Golden, 42, a Director of the Company since October 14, 1992,
is an Executive Vice President of T. Rowe Price Recovery Fund Associates, Inc.
("Associates"). Prior to joining Associates in 1991, Mr. Golden was a Vice
President in the Corporate Finance Department at Chemical Bank ("Chemical").
From 1986 to 1991, he served in various capacities at Chemical, emphasizing
valuation, leveraged buyouts, and mergers and acquisitions. Prior to joining the
Corporate Finance Department in 1986, he was a Managing Consultant in Chemical's
Foreign Exchange Advisory Service, advising Fortune 100 companies on
international financial risk management. From 1979 to 1981, Mr. Golden worked
in the Office of International Monetary Affairs at the United States Treasury
Department. Mr. Golden has a B.A. and a B.Mus. from Oberlin College and an
M.P.A. from the Woodrow Wilson School of Public and International Affairs,
Princeton University.

Robert C. Ruocco, 38, a Director of the Company since October 14,
1992, has been, since 1993, a general partner of Carl Marks Management Co., L.P.
("Carl Marks"), an investment advisory firm, which acts as general partner to
various investment partnerships, and an executive officer of an investment
advisory affiliate of Carl Marks. From July 1989 through 1992, Mr. Ruocco was
employed by M.J. Whitman, L.P., a registered broker dealer, prior to which he
was a Vice President in the Corporate Finance Division of Chemical Bank,
specializing in restructurings and reorganizations. Mr. Ruocco served in
various capacities at Chemical Bank

beginning in November 1984 and began his professional career in August 1980,
when he joined the management training program at Manufacturers Hanover Trust
Company. He graduated from Dartmouth College in 1980 with an A.B. Degree in
Economics.

EXECUTIVE OFFICERS

The following table sets forth information relating to each of the
executive officers and other significant employees of the Company:

Name Age Position(s) with the Company
- ---- --- ----------------------------

Alan Rosenberg 47 President, Chief Executive Officer and Director

Steven H. Halper 52 Executive Vice President - Chief Operating Officer and Secretary

Peter McGeough 43 Executive Vice President - Chief Administrative and Financial
Officer

Donald S. Leibowitz 47 Vice President - Operations

Thomas A. Martinez 50 Vice President - Merchandising

Coleen A. Colreavy 32 Vice President - Corporate Controller and Chief Accounting
Officer

Robert N. Webber 42 Vice President - General Counsel and Assistant Secretary

Alan Rosenberg has been the President and Chief Executive Officer of the
Company and a Director of the Company since October 14, 1992. From June 1992
until his current appointment with the Company, Mr. Rosenberg worked for Ametex
Fabrics, a division of Masco Industries. Prior to that, he had been employed by
the Company since 1971. He was a buyer from 1971 to 1980, Soft Lines
Merchandise Manager from 1980 to 1985, Vice President - Soft Lines from 1985 to
1990, and Senior Vice President - General Merchandise Manager from 1990 to June
1992. Mr. Rosenberg holds a B.S. degree from the State University of New York
at Albany.

Steven H. Halper, Executive Vice President - Chief Operating Officer and
Secretary of the Company. He has been Executive Vice President - Chief
Operating Officer since October 14, 1992, and has been Secretary since September
1, 1993. From March 1992 until October 1992, Mr. Halper was a consultant to the
furniture industry. Prior to that, he had been employed by the Company since
1968. He was General Merchandise Manager of the Company from 1976 until 1984
and was elected Senior Vice President - Operations and Secretary in June 1985.
He holds a B.S. degree from the Wharton School of Business, University of
Pennsylvania.

Peter McGeough, Executive Vice President - Chief Administrative and
Financial Officer of the Company, has been employed in that capacity since
October 14, 1992. From June 1992 until October 1992, Mr. McGeough was Vice
President - Controller at Brooks Fashion Stores, a specialty retailer. Mr.
McGeough was Vice President - Finance of the Company from April 1990 to June
1992. Prior to that, he was Vice President - Controller at Brooks Fashion
Stores and Vice President - Finance at Fortunoff's, a home furnishings retailer.
He has a B.A. (honors) and M.A. (honors) from University College, Dublin,
Ireland.

Donald S. Leibowitz has been Vice President - Operations since November 2,
1992. From June 1992 until his appointment on November 2, 1992, he was Vice
President of Operations for Pergament Home Centers. Prior to that, Mr.
Leibowitz had been employed by the Company since September 1988. Mr. Leibowitz
was Vice President of Operations at Folz Vending and spent fourteen years with
Abraham & Strauss, a division of Federated Department Stores. Mr. Leibowitz
holds a B.S. degree from Long Island University.

Thomas A. Martinez, Vice President - Merchandising, has been employed by
the Company since April 13, 1991. From February 1989 to April 1991, he worked
in the furniture industry as an import specialist; from March 1987 to February
1989, he was Vice President of Purchasing for Norman Harvey Associates. Mr.
Martinez was a buyer for the Company from March 1981 to March 1987. Prior to
that, he was a buyer for Sachs New York, a furniture retailer, and spent seven
years as an over-the-counter trader and an arbitrage trader for First Manhattan
Securities. He attended Mercy College in Dobbs Ferry, where he majored in
Marketing.

Coleen A. Colreavy, Vice President - Corporate Controller and Chief
Accounting Officer, has been employed by the Company since March 1989. She
became Corporate Controller in January 1993. Ms. Colreavy previously held the
positions of Assistant Controller, Budget Manager and Financial Reporting
Manager. Prior to joining the Company, she was employed by the accounting firm
of Touche Ross. Ms. Colreavy is a certified public accountant and holds a B.S.
(honors) from St. John's University.

Robert N. Webber, Vice President - General Counsel and Assistant Secretary,
has been employed in that capacity since March 1, 1995. From September 1993
until February 1995, Mr. Webber was on retainer with the Company while attending
an L.L.M. program at Pace University Law School. Prior to that, he had been
employed by the Company since 1983. He was the Assistant General Counsel of the
Company from 1983 until March 1989, when he was elected Vice President - General
Counsel and was elected Secretary in 1992. He holds J.D. and L.L.M. degrees
from Pace University Law School and a B.A. from New York University.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

To the Company's knowledge, based solely on a review of the copies of the
reports furnished to the Company and written representations of all directors
and executive officers that no other reports were required with respect to their
beneficial ownership of Common Stock during the fiscal year ended April 30,
1997, the Company's directors and executive officers and all beneficial owners
of more than 10% of the Common Stock outstanding complied with all

applicable filing requirements under Section 16(a) of the Securities and
Exchange Act of 1934 with respect to their beneficial ownership of Common Stock
during the fiscal year ended April 30, 1997, except with respect to the
following filings: Mr. Rosenberg, Mr. Halper and Mr. McGeough each failed to
file a report on Form 5 relating to four transactions on a timely basis,
Mr.Webber and Ms. Colreavy each failed to file a report on Form 5 relating to
two transactions on a timely basis, and Mr. Alperin and Mr. Peraldo failed to
file a report on Form 5 relating to one transaction on a timely basis.

ITEM 11. EXECUTIVE COMPENSATION
----------------------

The following table summarizes the compensation awarded to, earned by or
paid to the Chief Executive Officer and the four other most highly compensated
executive officers during the fiscal year ended April 30, 1997 for services
rendered in all capacities to the Company.

Annual Compensation Long Term
------------------------- ------------
Compensation
------------

Shares Underlying
Options

Bonus($) Other Annual (Number of
Name Year Salary($) (1) Comp.($)(2) Shares)

Alan Rosenberg 1997 309,514 0 31,598 0
President & CEO 1996 300,216 0 21,124 60,000
1995 283,669 325,000 17,065 20,000

Steven Halper 1997 242,592 0 7,401 0
COO & Executive Vice President 1996 235,216 0 8,449 52,500
1995 216,574 275,000 7,866 17,500

Peter McGeough 1997 242,592 0 9,583 0
CFO & Executive Vice President 1996 235,216 0 8,180 52,500
1995 216,574 275,000 10,267 17,500

Thomas Martinez 1997 138,908 8,000 3,224 0
Vice President - Merchandising 1996 133,971 0 3,316 6,000
1995 127,755 35,000 4,892 9,000
Donald Leibowitz 1997 128,682 7,500 4,372 0
Vice President - Operations 1996 123,890 0 3,138 6,000
1995 117,107 33,000 4,981 8,000

(1) Bonuses earned for each of fiscal 1997 and 1995 were paid in fiscal
1998 and 1996 respectively. Stock options earned for each of fiscal
1996 and 1995 were granted in fiscal 1997 and 1996, respectively.

(2) For Messrs. Rosenberg, Halper, McGeough, Martinez, and Leibowitz,
"Other Annual Compensation" includes monies paid to each for
automobile expenses, life insurance, and medical insurance.

COMPENSATION OF DIRECTORS

Each director of the Company, who is not an executive officer or principal
stockholder or is not a representative of a principal stockholder of the Company
or any of its subsidiaries nor affiliated with a stockholder, is paid an annual
base retainer fee of $25,000 and a fee of $1,500 for each sub-committee meeting
attended. Each director, who represents a principal of the Company or any of
its subsidiaries or affiliated with such a stockholder, is paid an annual base
retainer fee of $10,000. Members of the Board of Directors, who are also
employees of the Company or any of its subsidiaries, receive no additional
compensation for service on the Board.

The Amended and Restated 1992 Stock Option Plan provides that options to
purchase Common Stock may be issued to directors who are not employees of the
Company. See "Executive Compensation - The Company's Amended and Restated 1992
Stock Option Plan."

OPTION GRANTS IN LAST FISCAL YEAR

None.

FISCAL YEAR END OPTION VALUES

The following table sets forth certain information regarding the total
number of stock options held by each of the named executive officers, and the
aggregate value of such stock options, on April 30, 1997. No options were
exercised by any of the named executives during the fiscal year ended April 30,
1997.

AGGREGATED OPTION EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
---------------------------------

Value of
Number of Shares Underlying Unexercised In-the Money
Unexercised Options Options at
at Fiscal Year End Fiscal Year End (1)

Name Shares acquired Value Exercisable (#) Unexercisable Exercisable ($) Unexercisable
on exercise (#) Realized ($) (#) ($)
- ---- --------------- ------------ --------------- ------------- --------------- ------------

Alan Rosenberg -- -- 228,520 83,703 2,753,345 536,666

Steven Halper -- -- 178,056 68,610 2,082,502 402,489

Peter McGeough -- -- 178,056 68,610 2,082,502 402,489

Thomas Martinez -- -- 22,500 7,000 123,550 0
Donald Liebowitz -- -- 18,434 6,666 94,150 0

(1) The closing price of the Company's Common Stock on the Nasdaq National
Market on April 30, 1997 was $19.50 and is used in calculating the
value of unexercised options.

EMPLOYMENT AGREEMENTS

The Company renewed the Employment Agreements (collectively, the
"Employment Agreements") with each of Messrs. Rosenberg, Halper and McGeough
(each individually an "Executive" and, collectively, the "Executives"), each
having a three (3) year term which commenced as of May 1, 1995 (the
"Commencement Date") and ends as of April 30, 1998, with automatic renewals for
consecutive terms of one year each, unless terminated by either party at least
90 days prior to the end of the existing term. Mr. Rosenberg's annual salary
during the first year of the Employment Agreement was $300,000; Mr. Halper's
annual salary during the first year was $235,000; and Mr. McGeough's annual
salary during the first year was $235,000. The Employment Agreements provide
that, on each anniversary of the Commencement Date, each Executive's annual
salary shall be increased by an amount determined by multiplying the Executive's
annual salary for the preceding year by the percentage increase of the consumer
price index for that year. The Executives shall be eligible for a minimum bonus
(the "Minimum Bonus") for each completed fiscal year of his employment. This
Minimum Bonus is calculated pursuant to a matrix established by the Board. The
matrix sets forth various potential bonus amounts based on the Company's
financial results. The Employment Agreements provide that the Board establish a
new matrix prior to each April 30 for the next succeeding fiscal year.
Additionally, prior to the first anniversary of the Commencement Date, and prior
to each such anniversary thereafter, the Board of Directors is obligated to
review the salary and benefits of each Executive payable under the Employment
Agreements and, in its discretion, after consideration of an Executive's
performance, the profitability and financial position of the Company, and any
other factors they deem appropriate, the Board of Directors may, by a majority
vote, agree in its absolute sole discretion to increase the salary of an
Executive by more than the consumer price index increase and/or to pay a bonus
greater than the Minimum Bonus. Mr. Rosenberg's current annual salary is
$317,030; Mr. Halper's current annual salary is $248,422; and Mr. McGeough's
current annual salary is $248,422.

The Company, at its expense, provides each of the Executives, so long as
they remain employed by the Company, with an automobile. It also provides the
Executives with coverage under all employee benefit plans (excluding any bonus,
profit sharing or similar programs) in accordance with the terms thereof, which
the Company makes available to its senior executives, and provides the
Executives with supplemental medical insurance to cover the cost of any co-
payment obligations. For as long as an Executive is insurable, the Company will
provide and pay for term life insurance, payable to the Executive's designated
beneficiary, which is in addition to any other life insurance available to
employees of the Company. In the case of Mr. Rosenberg, the life insurance is
in the amount of $1,000,000. For each of Messrs. Halper and McGeough, it is in
the amount of $750,000.

The Employment Agreements provide that the Company grant options to
purchase up to 60,000 shares of Common Stock of the Company to Mr. Rosenberg and
options to purchase up to 52,500 shares of Common Stock of the Company to each
of Messrs. Halper and McGeough. Originally, these options were to vest in equal
amounts on each of May 1, 1996, May 1, 1997 and May 1, 1998 at exercise prices
of $24.00, $29.00 and $35.00 per share respectively. Upon the recommendation of
the Compensation Committee, the Board of Directors approved the

cancellation of these options on July 25, 1996. The Board of Directors had
approved the issuance of an identical number of new options to the Executives at
strike prices of $21.00, $24.50 and $28.00 per share, vesting in equal amounts
over three (3) years commencing May 1, 1997, a year later than the original
grants were to begin vesting.

The Company may terminate an Executive's employment at any time for any
reason. If an Executive's employment is terminated other than (i) for Cause (as
defined in the Employment Agreements; however, see "Change in Control" also in
the Employment Agreements), (ii) as a result of the Executive's death or (iii)
as a result of the Executive's permanent disability, or if the Executive
terminates his employment for Good Reason (as hereinafter defined), prior to the
termination date of the Employment Agreements, he shall be entitled to continue
to receive his then current salary for a period of two years following
termination, in addition to continued coverage under the various benefit
programs.

Good Reason is defined in the Employment Agreements as any one of the
following events occurring and the Company failing to cure within ten days: (i)
any material breach by the Company of any provision of the Agreements; (ii) any
material diminution by the Company of the Employee's duties or responsibilities;
or (iii) any Change in Control.

Change of Control is defined in the Employment Agreements as any time
certain affiliates of M.D. Sass Associates, Inc., T. Rowe Price Recovery Fund,
L.P. and Carl Marks Management Co., L.P. and any of their affiliates, or any one
or more of them, do not constitute or do not have the right to constitute at
least two members of the Board of Directors or any person or "group" becomes a
beneficial owner of more than 50% of the voting stock of the Company.

CHANGE IN CONTROL ARRANGEMENTS

The Company entered into severance agreements dated February 24, 1997 with
Messrs. Martinez and Liebowitz (the "Severance Agreements") by which the named
executive officer party to the agreement would receive one year's, nine months
or six months of his annual salary if there were a Termination within 180, 181-
270 or 271-365 days, respectively, after the effective date of a Change of
Control.

In addition, the Severance Agreements provide that the Company will pay the
named executive officer, in accordance with the Company's severance policy, a
severance payment of one week's salary for each year of service with the
Company, provided that in no event will the total amount of such service based
payment and the severance payment discussed above exceed one year's salary for
such executive officer. Also, the Company will continue the employee benefits
for that officer for three months, including health, medical and hospital
insurance and automobile expense allowance, upon such Termination. All stock
options granted to the named executive officer will immediately vest, to the
extent they are unvested, upon such termination.

The Severance Agreements become operative upon a Change of Control and
terminate one year from each Change of Control.

Change of Control is defined in the Severance Agreements to mean (i) the
Company is merged, consolidated or reorganized into or with another corporation
or person, and as a result none of M.D. Sass Associates, Inc., T. Rowe Price
Recovery Fund, L.P. or Carl Marks Management Co., L.P., nor any of their
respective affiliates, individually or in the aggregate, has the power to elect
a majority of the board of directors of the surviving corporation and another
person has such right; or (ii) the Company sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal person,
and as a result of such sale or transfer none of M.D. Sass Associates, Inc., T.
Rowe Price Recovery Fund, L.P. or Carl Marks Management Co., L.P., nor any of
their respective affiliates, individually or in the aggregate, has the power to
elect a majority of the board of directors of the purchasing entity immediately
after such sale or transfer.

Termination is defined by the Severance Agreements as, if after a Change of
Control (i) employment is terminated other than for "Cause" (as defined in the
Severance Agreement), or (ii) salary is reduced or there is a material reduction
in the duties attached to the executive officer's position with the Company and
the executive officer terminates his employment with the Company.

THE COMPANY'S AMENDED AND RESTATED 1992 STOCK OPTION PLAN

The purpose of the Amended and Restated 1992 Stock Option Plan is to
attract and retain officers and key employees for the Company by providing to
such persons incentives and rewards for superior performance. The total number
of shares of the Company's Common Stock that may be issued under options granted
pursuant to the Stock Option Plan is 1,500,000.

Options granted under the Stock Option Plan are nonqualified stock options.
No option shall be exercisable more than 10 years from the date of grant, nor
are they transferable. The option price may be equal to, greater than or less
than the fair market value of the Common Stock, as determined by the
Compensation Committee, which administers the Amended and Restated 1992 Stock
Option Plan. The Board may adjust the option price and the number or kind of
shares covered by outstanding options if it determines it is necessary to
prevent dilution or enlargement of the rights of optionees that could otherwise
result from any (a) stock dividend, stock split, combination of shares or other
change in the capital structure of the Company or (b) merger, consolidation,
spin-off, reorganization, or other corporate transaction or event having an
effect similar to any of the foregoing.

At the discretion of the Compensation Committee, any stock option agreement
may provide that if an optionee desires to sell any shares of Common Stock owned
pursuant to an exercise of any option, he or she must give written notice to the
Company, which shall constitute an offer to sell to the Company, the shares set
forth in the notice on the same terms as the proposed sale. Also, the
Compensation Committee may require any stock option agreement to provide that,
upon an optionee's ceasing to be an employee of the Company for any reason,
including death or retirement, it shall have the right to repurchase from the
optionee any Common Stock of the Company then owned and to surrender for
cancellation any unexercised options upon payment of

the purchase price. The Amended and Restated 1992 Stock Option Plan also
provides that, in the event of termination of employment by reason of death,
disability, retirement, or any leave of absence approved by the Company, the
Compensation Committee may waive or modify any limitation or requirement with
respect to any award under the Amended and Restated 1992 Stock Option Plan.

With respect to the Common Stock repurchased by the Company, the purchase
price shall be determined by (a) multiplying the number of shares of Common
Stock being repurchased by the Company by (b) the Current Market Price (as
defined below) per share of Common Stock as of the date of the notice. With
respect to the surrender of options, the purchase price shall be determined by
(a) multiplying the number of shares of Common Stock subject to such options or
portion thereof being surrendered to the Company by (b) the difference between
the Current Market Price per share of Common Stock as of the date of the notice
and the option exercise price per share of Common Stock as of the date of the
notice. "Current Market Price" shall mean, in respect of any share of Common
Stock on any particular date, the average of the daily market prices for the
previous 10 consecutive business days for a listing on the National Market
System or the previous 30 days for a listing on the Nasdaq National Market. In
the event there is no market for the shares or the Compensation Committee, in
its sole discretion, determines that, on account of the lack of trading volume,
the Current Market Price cannot be determined from the daily market prices, the
Current Market Price shall mean the amount determined by an investment banker
selected by the optionee from a list of at least three disinterested qualified
investment bankers provided by the Compensation Committee.

The Board may amend the Amended and Restated 1992 Stock Option Plan from
time to time except that any increase in the number of shares of Common Stock
issued under the Amended and Restated 1992 Stock Option Plan (except for the
adjustments allowed regarding dilution or enlargement of an optionee's rights)
or a change in who is eligible to receive options or otherwise cause Rule 16b-3
of the Securities Exchange Act of 1934 to cease to be applicable to the Amended
and Restated 1992 Stock Option Plan requires stockholder approval.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

There were no Compensation Committee interlocks or insider participation in
compensation during the last fiscal year.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------

The following tables furnish information as of August 15, 1997 as to: (i)
shares of Company Common Stock beneficially owned by any person owning
beneficially more than five percent (5%) of the outstanding shares; and (ii)
shares of Company Common Stock beneficially owned by each director of the
Company and shares of Company Common Stock

beneficially owned by all directors and officers of the Company, as a group.
(Except as indicated hereinafter, all such shares are beneficially owned
directly by the person indicated in the table.)

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class
- ------------------- ----------------------- --------

M.D. Sass Associates, Inc. 1,726,361(2) 38.1%(2)
c/o Resurgence Asset
Management, L.L.C.
1185 Ave. of the Americas
New York, NY 10036

T. Rowe Price Recovery 967,900(3) 21.3%(3)
Fund, L.P.
100 E. Pratt Street
Baltimore, MD 21202

Carl Marks 938,050(4) 20.7%(4)
Management Co., L.P.
135 E. 57th St.
New York, NY 10022

(1) Each beneficial owner has sole voting and investment power, with
respect to the shares listed, unless otherwise indicated.

(2) M.D. Sass Associates, Inc. exercises voting power and investment power
over these shares on behalf of certain client accounts and accounts
managed by its affiliates with which such powers are shared.
Additionally, M.D. Sass employees and affiliates have an indirect
beneficial interest in certain of the client entities which own these
shares. M.D. Sass disclaims beneficial ownership of shares owned by
its clients. James B. Rubin shares voting and investment power in the
above shares as a principal in M.D. Sass's restructured securities
activities and with respect to shares included in the above total held
by him as trustee for a defined contribution plan. Mr. Rubin
disclaims beneficial ownership of these shares.

(3) Represents shares owned of record and beneficially by T. Rowe Price
Recovery Fund, L.P. ("Recovery Fund") directly. Associates, as the
general partner of Recovery Fund, has the power to vote and dispose of
such shares, and Kim Golden, as Executive Vice President of
Associates, has the authority to act on behalf of Associates as to the
voting and disposition of such shares. Accordingly, Associates and Mr.
Golden share investment power with Recovery

Fund as to the shares and may be deemed to be beneficial owners of the
shares owned directly by Recovery Fund. Each of Associates and Mr.
Golden disclaims beneficial ownership of the shares.

(4) Represents 891,250 shares beneficially owned directly by two
investment partnerships, of which Carl Marks is sole General Partner.
The two general partners of Carl Marks, Messrs. Andrew M. Boas and
Robert C. Ruocco, share the power to direct the voting and disposition
of such shares. Accordingly, such shares may be deemed to be
beneficially owned by both Carl Marks and by Messrs. Boas and Ruocco.
In addition, an account managed by an affiliate of Carl Marks owns
beneficially 46,800 shares of Common Stock, which shares may also be
deemed to be beneficially owned by Messrs. Boas and Ruocco.

SECURITY OWNERSHIP OF MANAGEMENT

Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class
- ------------------- ----------------------- --------

Barry J. Alperin 8,000(2) .2%(2)
Kim Z. Golden 967,900(3) 21.3%(3)
Steven H. Halper 178,056(4) 3.4%(4)
Peter McGeough 184,056(5) 3.5%(5)
Leo Peraldo 8,000(6) .2%(6)
Alan Rosenberg 228,520(7) 4.4%(7)
James B. Rubin 1,726,361(8) 38.1%(8)
Robert C. Ruocco 938,050(9) 20.7%(9)

Total Shares Owned by
Directors and Executive
Officers as a Group
(13 individuals): 4,323,145(10) 93.4(10)

(1) Each beneficial owner has sole voting and investment power with
respect to the shares listed, unless otherwise indicated.

(2) All of the 8,000 shares beneficially owned by Mr. Alperin are shares
to which Mr. Alperin has the right to acquire beneficial ownership
through the exercise of stock options.

(3) These shares are owned by the Recovery Fund; voting and dispositive
power is exercised through its sole general partner, Associates,
which is a wholly owned subsidiary of T. Rowe Price Associates, Inc.
Mr. Golden is Executive Vice

President of Associates. Mr. Golden expressly disclaims beneficial
ownership of such shares.

(4) All of the 178,056 shares beneficially owned by Mr. Halper are shares
to which Mr. Halper has the right to acquire beneficial ownership
through the exercise of stock options.

(5) Of the 184,056 shares beneficially owned by Mr. McGeough, 178,056
shares are shares as to which Mr. McGeough has the right to acquire
beneficial ownership through the exercise of stock options, and 2,000
are owned by Mr. McGeough's spouse, of which Mr. McGeough expressly
disclaims beneficial ownership.

(6) All of the 8,000 shares beneficially owned by Mr. Peraldo are shares
to which Mr. Peraldo has the right to acquire beneficial ownership
through the exercise of stock options.

(7) All of the 228,520 shares beneficially owned by Mr. Rosenberg are
shares as to which Mr. Rosenberg has the right to acquire beneficial
ownership through the exercise of stock options.

(8) Shares voting power and investment power with affiliated persons and
entities under common control for the benefit of clients owning these
shares. Mr. Rubin expressly disclaims beneficial ownership of such
shares. M.D. Sass employees and affiliates have an indirect beneficial
interest in the certain client entities which own the shares.

(9) Consists of shares beneficially owned by Carl Marks and an affiliated
advisory firm of which Mr. Ruocco is a general partner and an
executive officer, respectively. See Note 4 to table of Security
Ownership of Certain Beneficial Owners and Management.

(10) See the information in the footnotes set forth above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

PART IV.
--------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 10-K
------------------------

(a) Financial Statements
--------------------

See Index to Financial Statements and Schedules which appears on page F-1
hereof.

(b) Reports on Form 8-K
-------------------

The Company filed a report on Form 8-K on July 10, 1997 regarding the
proposal by the Company's senior management and majority stockholders to take
the Company private for $24 a share pursuant to Item 5 of Form 8-K.

The Company filed a report on Form 8-K on August 15, 1997 regarding the
sale of the customer accounts receivables pursuant to Item 2 of Form 8-K and the
execution of the Merger Agreement pursuant to Item 5 of Form 8-K.

The exhibits listed on the Exhibit Index following the signature page
hereof are filed herewith in response to this Item.

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.

SEAMAN FURNITURE COMPANY, INC.

By: /s/ Alan Rosenberg
-------------------------------------
Alan Rosenberg, President and
Chief Executive Officer

Date: October 23, 1997

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.

/s/ Alan Rosenberg
- --------------------------------------------------
Alan Rosenberg, President, Chief Executive Officer Date: October 23, 1997
and Director

/s/ Peter McGeough
- --------------------------------------------------
Peter McGeough, Executive Vice President, Date: October 23, 1997
Chief Financial
and Administrative Officer

/s/ Steven H. Halper
- --------------------------------------------------
Steven H. Halper, Executive Vice President, Date: October 23, 1997
Chief Operating Officer and Secretary

/s/ Coleen A. Colreavy Date: October 23, 1997
- --------------------------------------------------
Coleen A. Colreavy, Vice President,
Corporate Controller
and Chief Accounting Officer

SIGNATURES
----------

/s/ Barry J. Alperin
- --------------------------------------------------
Barry J. Alperin, Director Date: October 23, 1997

/s/ Kim Z. Golden
- --------------------------------------------------
Kim Z. Golden, Director Date: October 23, 1997

/s/ Leo Peraldo
- --------------------------------------------------
Leo Peraldo, Director Date: October 23, 1997

- --------------------------------------------------
James B. Rubin, Director

- --------------------------------------------------
Robert C. Ruocco, Director

SEAMAN FURNITURE COMPANY, INC. AND
SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS
ENDED APRIL 30, 1997, 1996 AND 1995
AND INDEPENDENT AUDITORS' REPORT

SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
-----------------------------------------------

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

PAGE NO.
--------
Financial Statements:

Independent Auditors' Report F-2

Consolidated Balance Sheets, for the Years Ended
April 30, 1997 and 1996 F-3

Statements of Consolidated Operations, for the
Years Ended April 30, 1997, 1996 and 1995 F-4

Statements of Stockholders' Equity, for the
Years Ended April 30, 1997, 1996 and 1995 F-5

Statements of Consolidated Cash Flows, for the
Years Ended April 30, 1997, 1996 and 1995 F-6

Notes to Consolidated Financial Statements F-7

Schedules:

SCHEDULES OMITTED
-----------------

Schedules not filed herewith are omitted because of the absence of
conditions under which they are required or because the information called for
is shown in the financial statements or notes thereto.

F-1

INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

The Board of Directors and Shareholders
Seaman Furniture Company, Inc.:

We have audited the accompanying consolidated balance sheets of Seaman Furniture
Company, Inc. and Subsidiaries (collectively, the "Company") as of April 30,
1997 and 1996 and the related statements of consolidated operations,
stockholders' equity and consolidated cash flows for each of the three fiscal
years in the period ended April 30, 1997. These consolidated financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company at April 30, 1997 and 1996 and the results of their operations and their
cash flows for the three fiscal years in the period ended April 30, 1997 in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP

New York, New York
June 27, 1997, except for Note 9,
for which the date of our report
is August 13, 1997

F-2

SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEETS
APRIL 30, 1997 AND 1996 (IN THOUSANDS)
- --------------------------------------

ASSETS NOTES 1997 1996
- ------ ----- ---- ----

CURRENT ASSETS:
Cash and cash equivalents 2 $ 6,423 $ 3,436
Accounts receivable (less allowance for
doubtful accounts of $8,104 and
$8,983, respectively) 2,6,9 68,916 65,716
Merchandise inventories 2 28,782 27,796
Prepaid expenses and other current assets 1,133 1,921
Deferred income tax benefit 4 4,977 5,709
-------- --------
Total current assets 110,231 104,578

PROPERTY AND EQUIPMENT - at cost: 2
Land 2,324 2,724
Buildings and improvements 15,145 15,145
Furniture, fixtures and office equipment 13,519 13,199
Leaseholds and leasehold improvements 17,084 15,992
-------- --------
Total 48,072 47,060
Less - Accumulated depreciation and
amortization (16,681) (13,909)
-------- --------
Property and equipment - net 31,391 33,151

PROPERTY FINANCED BY
CAPITAL LEASES (less accumulated
amortization of $3,777 and $3,366,
respectively) 2,3 4,727 5,138
Deferred Income Tax Benefit 4 10,834 11,935
OTHER ASSETS (principally deposits) 4,039 4,449
-------- --------
TOTAL $161,222 $159,251
======== ========

LIABILITIES AND
STOCKHOLDERS' EQUITY NOTES 1997 1996
- -------------------- ----- ---- ----
- -
CURRENT LIABILITIES:
Accounts payable - trade $ 13,167 $ 11,022
Accrued expenses and other 19,947 16,670
Current portion of long-term debt 3 1,123 673
Customer deposits 2 8,487 9,266
-------- --------
Total current liabilities 42,724 37,631
-------- --------

LONG-TERM DEBT 3 12,878 20,085
-------- --------
COMMITMENTS AND
CONTINGENCIES 7
STOCKHOLDERS' EQUITY:
Common stock-$.01 par value;
authorized 15,000,000 shares;
issued 5,004,575 shares
at April 30, 1997 50 50
Additional paid-in capital 5 86,817 86,817
Retained earnings 24,310 20,225
-------- --------
111,177 107,092

Less: Treasury Stock, at cost
(467,534 shares at April 30, 1997 and 1996) (5,557) (5,557)
-------- --------
Stockholders' equity - net 105,620 101,535
-------- --------
TOTAL $161,222 $159,251
======== ========

See Notes to Consolidated Financial Statements.

F-3

SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

STATEMENTS OF CONSOLIDATED OPERATIONS
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995
(IN THOUSANDS EXCEPT PER COMMON SHARE AMOUNTS)
- --------------------------------------------------------------------------------

YEAR ENDED YEAR ENDED YEAR ENDED
NOTES APRIL 30, 1997 APRIL 30, 1996 APRIL 30, 1995
---------- --------------- --------------- ---------------

REVENUES:
Net sales 2 $ 251,175 $ 229,505 $ 215,857
Net finance charge income 12,809 14,036 12,364
------ ------ ------

Total 263,984 243,541 228,221
------- ------- -------

OPERATING COSTS AND EXPENSES:
Cost of sales, including buying and occupancy cost 167,430 152,982 138,038
Selling, general and administrative 2 87,206 83,094 74,691
------ ------ ------

Total 254,636 236,076 212,729
------- ------- -------

INCOME FROM OPERATIONS 9,348 7,465 15,492

INTEREST EXPENSE (2,247) (1,748) (1,707)
INTEREST INCOME 65 878 561
-- --- ---

INCOME BEFORE PROVISION
FOR INCOME TAXES 7,166 6,595 14,346

PROVISION FOR INCOME TAXES 4 (3,081) (2,700) (5,738)
------ ------ ------

NET INCOME $4,085 $3,895 $8,608
====== ====== ======

NET INCOME PER COMMON SHARE 2 $0.82 $0.78 $1.68
===== ===== =====

Weighted average common and common
equivalent shares outstanding 4,991,875 4,979,152 5,129,441
========= ========= =========

See Notes to Consolidated Financial Statements.

F-4

SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995
(IN THOUSANDS)
- --------------------------------------------------------------------------------

COMMON STOCK ADDITIONAL
------------
PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK
------ ------ ------- -------- -----

Balances at May 1, 1994 5,002,500 $50 $82,594 $ 7,722 $(2,536)
Issued common stock 2,075 19

Repurchase of treasury stock (3,005)

Reversal of Valuation Allowance for deferred
tax assets originating prior to emergence
from Chapter 11 4,204
Net income for the year ended April 30, 1995 8,608
-----

Balances at April 30, 1995 5,004,575 50 86,817 16,330 (5,541)
Repurchase of treasury stock (16)
Net income for the year ended April 30, 1996 3,895
-----

Balances at April 30, 1996 5,004,575 50 86,817 20,225 (5,557)
Net income for the year ended April 30, 1997 4,085
-----

Balances at April 30, 1997 5,004,575 $50 $86,817 $24,310 $(5,557)
========= === ======= ======= =======

See Notes to Consolidated Financial Statements.

F-5

SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEAR ENDED APRIL 30, 1997, 1996 AND 1995
(IN THOUSANDS)
- --------------------------------------------------------------------------------

YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996 APRIL 30, 1995
-------------- -------------- --------------

OPERATING ACTIVITIES:
Net income $ 4,085 $ 3,895 $ 8,608
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:

Depreciation, amortization and writedown of land 5,118 4,156 3,143
Deferred income taxes 1,833 1,369 613
Provision for bad debts 9,797 12,716 8,739
Changes in certain assets and liabilities:
Accounts receivable (12,997) (7,367) (35,954)
Merchandise inventories (986) (4,373) (4,021)
Prepaid expenses and other assets 1,198 (1,415) (1,820)
Accounts payable 2,145 422 1,367
Accrued expenses and other 3,277 (7,991) 5,336
Customer deposits (779) 1,764 890
---- ----- ---

Net cash provided by (used in) operating activities 12,691 3,176 (13,099)
------ ----- -------

INVESTING ACTIVITIES:
Purchase of equipment (2,947) (7,998) (6,472)
------ ------ ------

FINANCING ACTIVITIES:
Securitization of accounts receivable -- (20,000) 20,000
Borrowings (Repayments) under Debt obligations 1,659 (587) (505)

Purchase of Treasury Stock -- (16) (3,005)

(Repayments) Borrowings on lines of credit (8,416) 8,430 --
------ ----- --

Net cash (used in) provided by financing activities (6,757) (12,173) 16,490
------ ------- ------

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,987 (16,995) (3,081)

CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 3,436 20,431 23,512
----- ------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $6,423 $3,436 $20,431
====== ====== =======

SUPPLEMENTAL DISCLOSURES:
- -------------------------

Interest paid $870 $448 $401
==== ==== ====
Income taxes paid $983 $2,220 $3,596
==== ====== ======

See Notes to Consolidated Financial Statements.

F-6

SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. DESCRIPTION OF BUSINESS

Seaman Furniture Company, Inc. (the "Company"), a Delaware corporation, is
one of the largest regional specialty furniture retailers in the
Northeastern United States. As of April 30, 1997, the Company operated a
chain of 38 stores in the greater New York, Philadelphia and Cleveland
metropolitan areas. The Company was incorporated in 1985 as a successor to
the business founded by Julius Seaman, who started the business in Brooklyn
in 1933.

2. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of Seaman Furniture Company, Inc. and its
wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.

SALES AND CUSTOMER DEPOSITS - Sales are recorded upon the delivery of
merchandise to customers. Customer deposits are recorded as a liability
until delivery of the merchandise to customers or until the deposit is
forfeited. Income from forfeited deposits is recorded using estimates
determined from the Company's experience with prior forfeitures.

CASH EQUIVALENTS - Cash equivalents consist of highly liquid investments
primarily in commercial paper and certificates of deposit, all of which
have a maturity of three months or less. All securities, which are held to
maturity, are stated at cost, adjusted for previous amortized or discount
accreted, if any. The Company has the intent and ability to hold such
securities to maturity. As of April 30, 1997 and 1996, the Company did not
hold any available-for-sale securities. Interest earned on investment
securities is included in interest income.

ACCOUNTS RECEIVABLE - Accounts receivable consist principally of interest-
bearing amounts due from retail customers under financing agreements which
provide for monthly payments over various terms, substantially all of which
are between 24 and 33 months. Accounts receivable installments due in more
than one year are included in current assets in accordance with standard
industry practices. It is not practicable to determine the amount of such
installments.

F-7

The activity in the allowance for doubtful accounts for each of the
periods presented follows (in thousands):

YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996 APRIL 30, 1995
-------------- -------------- --------------

Balance, beginning of period $ 8,983 $ 8,786 $ 5,494
Provision 9,797 12,716 8,739
Write-offs (13,039) (14,558) (6,987)
Recoveries 2,363 2,039 1,540
----- ----- -----

Balance, end of period $8,104 $8,983 $8,786
====== ====== ======

FINANCE CHARGE INCOME

Gross finance charge revenue and the related expense are as follows:

APRIL 30,
1997 1996 1995
--------- -------- --------

Finance charge revenues $12,980 $16,078 $12,495
Finance expenditures 171 2,042 131
--- ----- ---

Net finance charge income $12,809 $14,036 $12,364
======= ======= =======

MERCHANDISE INVENTORIES - The Company values its inventories under the
first-in, first-out cost flow assumption.

PROPERTY AND EQUIPMENT - Property and equipment is stated at cost less
accumulated depreciation and amortization. Depreciation of buildings and
improvements and furniture, fixtures and office equipment is computed using
the straight-line method over their estimated useful lives which are:
buildings and improvements, 30 to 31.5 years and furniture, fixtures and
office equipment, 5 to 10 years. Leaseholds and leasehold improvements are
amortized over the terms of the related leases or their estimated useful
lives, whichever are shorter. In 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121 ("SFAS
121"), "Accounting For the Impairment of Long-Lived Assets and For Long-
Lived Assets To Be Disposed Of". SFAS 121 prescribes the accounting
treatment for long-lived assets, identifiable intangibles and goodwill
related to those assets when there are indications that the carrying values
of those assets may not be recoverable. The adoption of SFAS 121 did not
have a material effect on the Company's results of operations or its
financial position at April 30, 1997.

PROPERTY FINANCED BY CAPITAL LEASES - Property financed by capital leases
is amortized on the straight-line basis over the shorter of their estimated
useful lives or the remaining terms of the leases.

F-8

INCOME TAXES - The Company follows the provisions of Statement of Financial
Accounting Standards No. 109. "Accounting for Income Taxes" ("SFAS No.
109"), which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included
in the company's financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the differences
between the financial accounting and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse.

OPERATING LEASES - Rent expense relating to stores which are classified as
operating leases due to the terms of the respective leases is recognized on
the straight-line method.

STORE OPENING EXPENSES - Expenses (other than those relating to capital
improvements) associated with new store openings are charged to operations
in the period in which such expenses are incurred.

NET INCOME PER SHARE- Net income per share is based on the weighted average
number of common and common equivalent shares outstanding during the
period. Employee stock options are considered to be common stock
equivalents and, accordingly, the calculation includes approximately
454,834, 442,111 and 455,981 common stock equivalent shares using the
treasury stock method for the years ended April 30, 1997, 1996 and 1995,
respectively. Also, the weighted average common and common equivalent
shares outstanding used to calculate net income per share were 4,991,875,
4,979,152, and 5,129,441 for fiscal 1997, 1996 and 1995, respectively.

PERVASIVENESS OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

RECLASSIFICATIONS - Certain reclassifications have been made to prior
consolidated financial statements to conform with the April 30, 1997
presentation.

DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS - Management of the
Company believes that the fair value of the Company's financial instruments
approximates their recorded value due to the short maturities of these
instruments as of April 30, 1997 and 1996.

F-9

3. LONG-TERM DEBT

LONG-TERM DEBT - At April 30, 1997 and 1996, long-term debt, consisted of
the following in thousands of dollars:

APRIL 30,
---------
1997 1996
---- ----

Industrial Revenue Bonds (A) $ - $ 3,962
Fleet Mortgage (A) 5,819 -
Revolving Credit Agreement (B) 14 8,430
Capital Leases (C) 8,168 8,366
----- -----
Total 14,001 20,758
------ ------
Less:
Current portion 1,123 673
----- ---

Long-term debt $12,878 $20,085
======= =======

(A) FLEET MORTGAGE/INDUSTRIAL REVENUE BOND - On November 8, 1996, the
Company entered into a $6,187,500 mortgage loan with a bank to
refinance a $6,000,000 Town of Islip Development Bond ("IDA") held by
the bank. Approximately $3,738,000 was outstanding on the IDA as of
the transaction date. The Company is obligated to pay equal monthly
installments of approximately $73,660 through November 1, 2003. The
interest rate on such agreement was 8.49 percent at April 30, 1997.
The loan is collateralized by land and a building in Central Islip, NY
with a carrying value of approximately $11 million at April 30, 1997.

(B) REVOLVING TERM LOAN AGREEMENT - On April 26, 1996, the Company entered
into a revolving term loan agreement with two banks, under which the
banks were committed to lend up to $40 million to the Company. The
Company is obligated to pay a commitment fee of .25 percent per annum
of the unused balance under these agreements. Borrowings under these
agreements bear interest at variable rates based upon the net income
of the Company, as defined in the agreement. Interest on these
borrowings was 9.0 percent at April 30, 1997. The Company granted to
the Lenders a security interest in the Company's customer receivables
and all general intangibles as defined in the Loan Agreement.

The loan agreements contain certain covenants which include (i)
maintenance of certain financial ratios; (ii) maintenance of certain
amounts of net income, working capital and net worth; (iii)
limitations on capital expenditures; (iv) limitations on the payment
of dividends; (v) limitations on other indebtedness; (vi) restrictions
on the disposal of assets; and (vii) limitations on corporate
reorganizations. At April 30, 1997, the Company was in compliance with
each of the covenants mentioned above.

F-10

(C) CAPITAL LEASES - The obligations relative to capital leases at April
30, 1997 relate to two store leases and are payable in varying monthly
installments.

LONG-TERM MATURITIES - Long-term obligations are scheduled to mature as
follows (in thousands of dollars):

YEAR ENDED APRIL 30, AMOUNT
-------------------- -------
1998 $ 2,376
1999 2,513
2000 2,593
2001 2,656
2002 2,723
Thereafter 16,586
-------
Total 29,447
Less interest on capital leases 15,447
-------

Total $14,000
=======

4. INCOME TAXES

The Company records deferred tax assets or liabilities at the end of each
period which is determined using the currently enacted tax rate expected to
apply to taxable income in the periods in which the deferred tax asset or
liability is expected to be settled or realized.

The income tax provision is as follows (in thousands of dollars):

YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996 APRIL 30, 1995
-------------- -------------- --------------
Current:
Federal $1,067 $911 $3,821
State & Local 553 420 1,304
Deferred 1,461 1,369 613
----- ----- ---
Total $3,081 $2,700 $5,738
====== ====== ======

F-11

The Company's effective income tax rate differs from the Federal statutory
rate. The reasons for this difference are as follows (dollar amounts in
thousands):

YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996 APRIL 30, 1995
-------------- -------------- --------------
AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ -

Federal statutory rate $2,436 34.0 $2,243 34.0 $4,878 34.0
Increases (reductions) due to:
State & local taxes - net of
Federal income tax benefit 645 9.0 457 7.0 860 6.0
--- --- --- --- --- ---
Effective rate $3,081 43.0 $2,700 41.0 $5,738 40.0
====== ==== ====== ==== ====== ====

The significant elements of gross deferred tax assets and liabilities at
April 30, 1997 and 1996 are as follows (dollar amounts in thousands):

APRIL 30, 1997 APRIL 30, 1996
-------------- --------------
DEFERRED TAX DEFERRED TAX
ASSETS/(LIABILITIES) ASSETS/(LIABILITIES)
-------------------- --------------------

Allowance for doubtful accounts $ 3,734 $ 4,193
Allowances for obsolete and
slow-moving inventories 1,300 1,489
Customer deposit forfeitures 5 72
Other (62) (45)
--- ---
Total current portion 4,977 5,709
----- -----

Capital leases 1,421 1,367
Accelerated depreciation (570) (1,132)
Other 815 487
Net operating loss carryforwards 9,168 11,213
----- ------
Noncurrent portion 10,834 11,935
------ ------

Total $15,811 $17,644
======= =======

At April 30, 1997, the Company had Federal tax loss carryforwards
aggregating approximately $21 million, which expire in 2007. Net operating
loss carryforwards of approximately $3 million were utilized during the
fiscal year ended April 30, 1997.

5. SHAREHOLDERS' EQUITY

The Company's amended and restated Certificate of Incorporation provides
that the authorized capital stock of the Company consists of 15 million
shares of Common Stock, par value $.01 per share.

F-12

The holders of the common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Holders
of common stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor.

STOCK OPTIONS
-------------

The Company has a compensatory stock option plan (the "Plan") which
provides for the issuance of incentive or non-qualified stock options to
certain senior executives and other executives. The aggregate options which
may be granted under the Plan is 1,500,000. The Plan is administered by the
Compensation Committee of the Company's Board of Directors.

Under the Plan, the Company grants options at the approximate fair market
value. The Company's stock options become exercisable over varying terms,
as specified by the Compensation Committee. The options granted to certain
senior executives (see Note 7) are exercisable in full any time after the
granting date. The options granted to other executives vest over a two- or
three-year period. Stock options are subject to forfeiture in certain
circumstances.

The Company continues to account for the Option Plan using the intrinsic
value method in accordance with Accounting Principles Board No. 25,
"Accounting For Stock Issued To Employees" and its related interpretations.
Effective with fiscal 1997, the Company is subject to the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting For Stock-
Based Compensation" ("SFAS 123"). SFAS 123 established a fair value method
of calculating compensation expense related to stock-based compensation
plans, and requires the disclosure of the pro forma effects of recording
such expense. Under SFAS 123, the fair value of stock-based awards to
employees is calculated through the use of option pricing models, even
though such models were developed to estimate the fair value of freely
tradable, fully transferable options without vesting restrictions, which
significantly differ from the Company's stock option awards. These models
also require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affect the
calculated values. The Company's calculations were made using the Black-
Scholes option pricing model with the following assumptions:

Volatility Rate 5%
Risk-Free Interest Rate 9%
Dividend Rate 0%
Expected Term of Option In Years 5 years

On a pro forma basis, net income and earnings per common share for fiscal
1997 and 1996 would have been $3,941 and $.79 and $3,895 and $.78,
respectively.

F-13

A summary of activity under the Company's stock option plans for the year
ended April 30, 1997 is as follows:

WEIGHTED
NUMBER EXERCISE AVERAGE
OF SHARES PRICE RANGE PRICE
--------- ----------- -----

Balance - May 1, 1993 555,555 $5.01 $5.01
Granted 37,000 $9.00 9.00
------ ----- ----
Balance - April 30, 1994 592,555 $5.01 - $9.00 5.26
======= ============= ====
Granted 93,000 $12.50 - $18.75 13.41
Exercised (2,075) $9.00 9.00
------ ----- ----
Balance - April 30, 1995 683,480 $ 5.01 - $18.75 6.36
======= =============== ====
Granted 322,500 $20.50 - $35.00 25.02
Exercised (10,041) $9.00 - $12.50 10.14
Canceled (19,734) $20.50 20.50
------- ------ -----
Balance - April 30, 1996 976,205 $5.01 - $35.00 12.20
======= ============== =====
Granted 213,000 $18.125-$28.00 23.13
Exercised (2,400) $9.00 9.00
Cancelled (169,710) $20.50 - $35.00 29.09
-------- --------------- -----
Balance - April 30, 1997 1,017,095 $5.01 - $28.00 11.68
========= ============== =====
Options exercisable- April 30, 1997 603,044 $5.01 - $20.50 $7.42
======= ============== =====

Options Outstanding Options Exercisable
------------------- -------------------

Weighted Weighted
Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life (yrs.) Price Exercisable Price
- --------------- ----------- ----------- ----- ----------- -----

$5.01-9.00 581,305 5.5 $ 5.19 488,714 $5.22
$12.50-18.75 83,200 7.2 $13.52 59,796 $13.74
$18.125-24.50 352,590 8.7 $22.09 54,534 $20.15
------- ------
1,017,095 603,044
========= =======

F-14

6. SALE OF ACCOUNTS RECEIVABLE

In April 1995, the Company entered into an agreement with a third party to
sell, with limited recourse, $20 million of its eligible, as defined, trade
accounts receivable. The rate associated with that agreement was 8.1
percent per annum. In April 1996, the Company redeemed and terminated the
1995 series of Class A Securitization Certificates in the amount of $20
million.

7. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company is obligated under various noncancelable operating leases
covering stores and two warehouses which provide for minimum rentals plus,
in certain instances, real estate taxes, other expenses and additional
rentals based on sales levels. Future minimum lease payments under these
operating leases are as follows (in thousands of dollars):

YEAR ENDING APRIL 30, AMOUNT
--------------------- ------
1998 $14,134
1999 14,321
2000 13,999
2001 13,576
2002 13,001
2003 - 2007 37,485
2008 - 2012 14,389
2013 - 2017 4,875
2018 - 2022 2,232
2023 155
--------
Total $128,167
========

RENT EXPENSE

Rent expense for operating leases aggregated approximately $13,697,000,
$13,197,000, $10,883,000 (net of sub-lease income of approximately
$507,000, $541,000 and $495,000) for the years ended April 30, 1997, 1996
and 1995, respectively. These amounts include additional rental payments of
approximately zero, $12,000 and $51,000, respectively, which are based on
store sales.

RETIREMENT PLANS

The Company has a defined contribution pension plan which is qualified
under Section 401(k) of the Internal Revenue Code. Such plan is available
to substantially all employees not covered by collective bargaining
agreements. The Company may make contributions to match a portion of
participant contributions.

The Company also participates in a multi-employer union-sponsored pension
plan.

F-15

Information concerning benefits and assets available to pay benefits
for this plan is not available. Under the Employee Retirement Income
Security Act of 1974, as amended, an employer, upon withdrawal from a
multi-employer plan, is required to continue funding its proportionate
share of the plan's unfunded vested benefits, if any. The Company has no
current intention of withdrawing from the plan.

Total expenses related to these plans aggregated approximately $1,751,000,
$1,658,000 and $1,497,000, respectively, for the years ended April 30,
1997, 1996 and 1995.

LITIGATION

The Company is involved in various proceedings incidental to the normal
course of their business. Management does not expect that any of such
proceedings will have a material adverse effect on the Company's
consolidated financial position or results of operations.

EMPLOYMENT AGREEMENTS

The Company, in May 1995, renewed its three-year employment agreements with
certain senior executives of the Company. Such employment agreements, all
of which terminate in April 1998, required first year annual compensation
in the aggregate of $770,000 with annual increases subject to a Consumer
Price Index formula, as defined in the agreements, or the discretion of the
Board of Directors.

Also, such executives were granted 165,000, 55,000 and 30,000 options
during fiscal 1997, 1996 and 1995, respectively to purchase shares of
common stock issuable pursuant to the 1992 Stock Option Plan, which was
adopted by the Company. Such options vest over a three-year period.

In addition, during a prior year, such executives were granted 555,555
options (at the then fair values) to purchase shares of common stock
issuable pursuant to the 1992 Stock Option Plan, which was adopted by the
Company. Such options vest at the sole discretion of the Board of
Directors, but in any event, no later than ten years from the date of
grant. Approximately one-half of such options were issued and fully vested
at the date of grant. Subsequent thereto, an additional 23,150 and 162,035
options became vested in June 1994 and May 1995, respectively. At April 30,
1997, 92,591 options remained unvested.

8. QUARTERLY FINANCIAL DATA (UNAUDITED)

YEAR ENDED FIRST SECOND THIRD FOURTH
APRIL 30, 1997 QUARTER QUARTER QUARTER QUARTER TOTAL
-------------- ------- ------- ------- ------- -------

Sales $62,659 $63,722 $63,294 $61,500 $251,175
Gross Margin $20,361 $21,138 $21,249 $20,997 $83,745
Net Income $445 $1,059 $968 $1,613 $4,085
Net Income Per Share $0.09 $0.21 $0.19 $0.33 $0.82

F-16

YEAR ENDED FIRST SECOND THIRD FOURTH
APRIL 30, 1996 QUARTER QUARTER QUARTER QUARTER TOTAL
-------------- ------- ------- ------- ------- -------

Sales $57,468 $57,966 $56,292 57,779 $229,505
Gross Margin $19,927 $19,885 $18,048 $18,663 $ 76,523
Net Income $1,534 $1,504 $335 $522 $3,895
Net Income Per Share $0.31 $0.30 $0.07 $0.10 $0.78

Quarterly and total year earnings per share are calculated independently
based on the weighted average number of shares and share equivalents outstanding
during each period.

9. SUBSEQUENT EVENTS

On July 30, 1997, the Company terminated its Revolving Credit and Security
Agreement with BNY Financial Corporation and Fleet Bank, N.A. The Company
wrote off costs of approximately $358,000 which were previously capitalized
in connection with such agreement.

On August 5, 1997, the Company consummated the sale of substantially all of
its customer accounts receivable for net proceeds of approximate $70
million.

On August 13, 1997, the Company executed a merger agreement with SFC Merger
Company. ("Newco"), an entity owned by the majority shareholders of the
Company. Under the terms of the merger agreement, Newco will purchase the
outstanding shares of common stock of the Company for cash consideration of
$25.05 per share. The merger is subject to certain conditions, including
financing and stockholder approval.

10. SUPPLEMENTAL INFORMATION

Advertising expense for the years ended April 30, 1997, 1996 and 1995 was
approximately $23,581,000, $23,273,000, and $20,097,000, respectively.

* * * * * *

F-17

EXHIBIT INDEX
-------------

EXHIBIT
NO. DESCRIPTION
------- -----------

*2.1 First Amended Joint Plan of Reorganization dated July 21, 1992.

2.2 Agreement and Plan of Merger dated as of August 13, 1997 by and
between the Company and SFC Merger Company (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed by
the Company on August 13, 1997).

*3.1 Amended and Restated Certificate of Incorporation effective as of
February 12, 1993.

*3.2 Amended and Restated By-Laws effective as of February 12, 1993.

4.1(a) Article IV and VI of the Amended and Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.1 filed as
part of the Registration Statement on Form 10 filed by the Company
on February 13, 1993) and Articles II and VI of the Amended and
Restated By-Laws (incorporated by reference to Exhibit 3.2 filed as
part of the Registration Statement on Form 10 filed by the Company
on February 13, 1993).

4.3 Amended and Restated 1992 Stock Option Plan (incorporated by
reference to Exhibit 4.3 filed as part of the Registration
Statement on Form S-8 filed by the Company on February 4, 1994).

**10.1 (a) Delivery Service Agreement dated as of September 12, 1994
between the Company and Merchants Home Delivery Service, Inc.

(b) Delivery Service Agreement dated as of May 12, 1993 between
the Company and Joseph Eletto Transfer, Inc.

**10.2 Lease Agreement dated June 14, 1991 between the Company and
Mack Woodbridge Industrial.

***10.3 (a) Employment Agreement dated as of May 1, 1995 between the
Company and Alan Rosenberg.

(b) Employment Agreement dated as of May 1, 1995 between the
Company and Steven H. Halper.

*10.4 1992 Stock Option Plan.

10.5 Form of Nonqualified Stock Option Agreement.

10.6 **(a) Agreement dated as of August 16, 1994 between the Company
and Local 875 affiliated with the International Brotherhood
of Teamster, Warehousemen and Helpers of America.

**(b) Agreement dated as of January 1995 between the Company and
Local 875 affiliated with the International Brotherhood of
Teamsters, Chauffeurs, Warehousemen and Helpers of America
(unsigned).

(c) Agreement dated as of January 3, 1997 between the Company
and Local 875 affiliated with the International Brotherhood
of Teamsters, Warehousemen and Helpers of America.

(d) Agreement dated as of March 1, 1997 between the Company and
Local 875 affiliated with the International Brotherhood of
Teamsters, Warehousemen and Helpers of America (unsigned).

*10.7 Form of Indemnification Agreement.

10.8 Pooling and Servicing Agreement dated as of March 15, 1995, among
Seaman Receivables Corporation, as transferor, Seaman Furniture
Company, Inc. as servicer, and The Bank of New York, as trustee.
(Incorporated by reference to Exhibit 10.1 filed as part of the
Current Report on Form 8-K filed by the Company on April 22, 1995.)

10.9 Revolving credit and Security Agreement dated as of April 29, 1995
with the Bank of New York Credit Corp. and NatWest Bank N.A. as Co-
Lenders. (Incorporated by reference to Exhibit 7 filed as part of
the current report on form 8-11 filed by the Company 5/14/96.

10.10 Form of Severance Agreement dated as of February 24, 1997 entered
into between the Company and Lawrence A. Winslow, Donald S.
Liebowitz, Robert N. Webber, Coleen A. Colreavy, Thomas A.
Martinez, William J. Kelly, Mario Tomiatti and Maria Infante.

****10.11 Purchase and Sale Agreement dated as of August 1, 1997 by and
between the Company and Household Bank (Nevada), N.A., a national
banking association.

21 Subsidiaries

* Incorporated by reference to the exhibit with the corresponding
exhibit number filed as part of the Registration Statement on Form
10 filed by the Company on February 13, 1993.

** Incorporated by reference to the exhibit with the corresponding
exhibit number filed as part of the 10-K filed by the Company on
July 28, 1995.

*** Incorporated by reference to the exhibit with the corresponding
exhibit number filed as part of the 10-K filed by the Company on
July 30, 1996.

**** Incorporated by reference to the exhibit with the corresponding
exhibit number filed as part of the 10-KA filed by the Company on
September 29, 1997. Confidential treatment requested pursuant to
Rule 24b-2.