FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996. Commission File Number 333-11905
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 56-1977928
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 National Highway, Thomasville, North Carolina 27360
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(910) 476-4777
(Telephone Number)
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes No X
--- ---
TABLE OF ADDITIONAL REGISTRANTS
Exact Name of Guarantor
Registrant as Specified Jurisdiction of I.R.S. Employee
in its Charter Incorporation Identification No.
----------------------- --------------- ------------------
Ametex Fabrics, Inc. ...................... Delaware 04-2518916
The Berkline Corporation .................. Delaware 62-1568223
Blue Mountain Trucking Corporation ........ Mississippi 64-0625494
Custom Truck Tires, Inc. .................. Mississippi 64-0712217
D-H Retail Space, Inc. .................... Mississippi 56-1726125
Drexel Heritage Advertising, Inc. ......... Delaware 56-1693295
Drexel Heritage Furnishings, Inc. ......... New York 13-6087066
Drexel Heritage Home Inspirations, Inc. ... North Carolina 38-3176528
Henredon Furniture Industries, Inc. ....... North Carolina 56-0479224
Henredon Transportation Company ........... North Carolina 56-1324378
Interior Fabric Design, Inc. .............. New York 04-2593116
Intro Europe, Inc. ........................ North Carolina 58-1583028
La Barge, Inc. ............................ Michigan 38-1683907
Lifestyle Holdings Ltd. ................... Delaware 56-1977929
Lexington Furniture Industries, Inc. ...... North Carolina 56-0201940
Maitland-Smith, Inc. ...................... North Carolina 31-1252988
Mabro Lamp Company ........................ California 95-4089891
Ramm, Son & Crocker, Inc. ................. New York 38-3036446
Robert Allen Fabrics, Inc. ................ Delaware 04-2928435
Robert Allen Fabrics of N.Y., Inc. ........ Delaware 04-2827352
Sunbury Textile Mills, Inc. ............... Delaware 24-0815238
Universal Furniture Industries, Inc. ...... Delaware 95-3550559
Universal Furniture Limited ............... Delaware 38-2885167
The principal executive offices and telephone number of each co-registrant
is as specified on the cover page.
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -
September 30, 1996 and December 31, 1995 1
Condensed Consolidated Statement of Operations
for the period August 6, 1996 to September 30, 1996, the
period July 1, 1996 to August 5, 1996, and the period July
1, 1995 to September 30, 1995 2
Condensed Consolidated Statement of Operations
for the period August 6, 1996 to September 30, 1996, the
period January 1, 1996 to August 5, 1996, and the period
January 1, 1995 to September 30, 1995 3
Condensed Consolidated Statement of Cash Flows
for the period August 6, 1996 to September 30, 1996, the
period January 1, 1996 to August 5, 1996 and the period
January 1, 1995 to September 30, 1995 4
Notes to Condensed Consolidated Financial Statements 5-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14-19
Part II. Other Information and Signature II-1 - II-4
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
Predecessor
Company Business
September 30, December 31,
ASSETS 1996 1995
-------------- ------------
Current assets:
Cash and cash investments $ 8,850,000 $ 17,310,000
Trade receivables 81,000,000 298,970,000
Other receivables 77,220,000 26,450,000
Investment in Receivables Trust 62,770,000
Prepaid expenses 27,760,000 26,370,000
Deferred income taxes --- 17,000,000
Inventories:
Finished goods 263,960,000 262,930,000
Raw material 214,790,000 206,820,000
Work in process 92,710,000 90,190,000
-------------- --------------
571,460,000 559,940,000
-------------- --------------
Total current assets 829,060,000 946,040,000
Property and equipment, net 335,970,000 484,100,000
Excess of cost over acquired net assets --- 402,280,000
Notes receivable 9,400,000 31,010,000
Other assets 55,670,000 40,480,000
-------------- --------------
Total assets $1,230,100,000 $1,903,910,000
============== ==============
LIABILITIES and SHAREHOLDER'S EQUITY
Current liabilities:
Long term debt, current $ 37,410,000 $ 25,500,000
Accounts payable 96,230,000 92,350,000
Accrued liabilities 148,050,000 87,300,000
-------------- --------------
Total current liabilities 281,690,000 205,150,000
Long-term debt 488,700,000 2,150,000
Other long-term liabilities 35,910,000 75,570,000
-------------- --------------
Total liabilities 806,300,000 282,870,000
-------------- --------------
Common stock, $.01 par value, 3,000
shares authorized, 100 shares issued
and outstanding --- ---
Additional paid in capital 410,000,000 ---
Retained earnings 11,740,000 ---
Foreign currency translation 2,060,000 ---
Masco Corporation Net Investment and
Advances --- 1,621,040,000
-------------- --------------
Total shareholder's equity 423,800,000 1,621,040,000
-------------- --------------
Total liabilities and
Shareholder's equity $1,230,100,000 $1,903,910,000
============== ==============
See notes to condensed consolidated financial statements.
1
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Company Predecessor Business
----------------- ----------------------------------
Period From Period From Period From
Aug. 6, 1996 July 1, 1996 July 1, 1995
to Sept. 30, 1996 to Aug. 5, 1996 to Sept. 30, 1995
----------------- --------------- -----------------
Net sales $ 332,260,000 $ 166,770,000 $ 493,270,000
Cost of sales 245,800,000 128,690,000 374,140,000
-------------- ------------- -------------
Gross profit 86,460,000 38,080,000 119,130,000
Selling, general and
administrative expenses 55,120,000 33,100,000 99,550,000
-------------- ------------- -------------
Operating profit 31,340,000 4,980,000 19,580,000
-------------- ------------- -------------
Other expense, net:
Interest expense 7,960,000 190,000 800,000
Interest expense, Masco
Corporation --- 7,990,000 21,580,000
Other, net 2,790,000 550,000 2,000,000
-------------- ------------- -------------
10,750,000 8,730,000 24,380,000
-------------- ------------- -------------
Income (loss) before
income taxes 20,590,000 (3,750,000) (4,800,000)
Income taxes 8,850,000 1,810,000 2,190,000
-------------- ------------- -------------
Net income (loss) $ 11,740,000 $ (5,560,000) $ (6,990,000)
============== ============= =============
See notes to condensed consolidated financial statements.
2
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Company Predecessor Business
----------------- ----------------------------------
Period From Period From Period From
Aug. 6, 1996 Jan. 1, 1996 Jan. 1, 1995
to Sept. 30, 1996 to Aug. 5, 1996 to Sept. 30, 1995
----------------- --------------- -----------------
Net sales $ 332,260,000 $1,147,890,000 $1,477,700,000
Cost of sales 245,800,000 870,650,000 1,111,850,000
-------------- -------------- --------------
Gross profit 86,460,000 277,240,000 365,850,000
Selling, general and
administrative expenses 55,120,000 222,230,000 300,910,000
-------------- -------------- --------------
Operating profit 31,340,000 55,010,000 64,940,000
-------------- -------------- --------------
Other expense, net:
Interest expense 7,960,000 970,000 1,620,000
Interest expense, Masco
Corporation --- 51,720,000 69,600,000
Other, net 2,790,000 3,480,000 2,800,000
-------------- -------------- --------------
10,750,000 56,170,000 74,020,000
-------------- -------------- --------------
Income (loss) before
income taxes 20,590,000 (1,160,000) (9,080,000)
Income taxes 8,850,000 6,830,000 6,020,000
-------------- -------------- --------------
Net income (loss) $ 11,740,000 $ (7,990,000) $ (15,100,000)
============== ============== ==============
See notes to condensed consolidated financial statements.
3
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Company Predecessor Business
----------------- ----------------------------------
Period From Period From Period From
Aug. 6, 1996 Jan. 1, 1996 Jan. 1, 1995
to Sept. 30, 1996 to Aug. 5, 1996 to Sept. 30, 1995
----------------- --------------- -----------------
CASH FLOWS FROM (FOR):
OPERATING ACTIVITIES:
Net income (loss) $ 11,740,000 $ (7,990,000) $ (15,100,000)
Depreciation and amortization 6,110,000 39,260,000 50,660,000
Bad debt provision, net 680,000 2,250,000 3,820,000
Deferred income taxes --- (2,610,000) ---
(Increase) decrease in receivables (9,780,000) 39,550,000 (33,590,000)
(Increase) decrease in inventories 5,890,000 (17,480,000) (20,190,000)
(Increase) decrease in prepaid
expenses (6,180,000) (6,720,000) (13,010,000)
Increase (Decrease) in current
liabilities 49,690,000 (6,610,000) 12,560,000
------------- ------------- -------------
Net cash from (for)
operating activities 58,150,000 39,650,000 (14,850,000)
------------- ------------- -------------
INVESTING ACTIVITIES:
Acquisition of businesses,
net of cash acquired (686,690,000) --- ---
Investments in Receivables Trust (62,770,000) --- ---
Capital expenditures (2,770,000) (16,520,000) (49,610,000)
Collection of notes receivable, net --- 2,790,000 3,120,000
Other, net 7,380,000 (2,640,000) 4,860,000
------------- ------------- -------------
Net cash (for)
investing activities (744,850,000) (16,370,000) (41,630,000)
------------- ------------- -------------
FINANCING ACTIVITIES:
Proceeds from long term debt 525,000,000 87,760,000 34,050,000
Proceeds from sale of accounts
receivable 167,000,000 --- ---
Capital contribution 65,350,000 --- ---
Deferred financing costs (34,590,000) --- ---
Net repayments of short term debt (27,210,000) (87,090,000) (3,480,000)
Increase (decrease) in
Masco Corporation net
investment and advances --- (22,600,000) 1,200,000
------------- ------------- -------------
Net cash from (for)
financing activities 695,550,000 (21,930,000) 31,770,000
------------- ------------- -------------
CASH:
Increase (decrease) for the period 8,850,000 1,350,000 (24,710,000)
Balance, beginning of period --- 17,310,000 24,710,000
------------- ------------- -------------
Balance, end of period $ 8,850,000 $ 18,660,000 $ ---
============= ============= =============
Noncash transactions:
In addition to the acquisition consideration reflected above, Furnishings
International Inc., the parent of Lifestyle Furnishings International Ltd.,
issued $285 million in notes and $60 million in equity securities to the seller.
Deferred financing costs of $5.0 million are included in accrued liabilities.
See notes to condensed consolidated financial statements.
4
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. THE ACQUISITION
---------------
LifeStyle Furnishings International Ltd. (the "Company") was formed in May
1996 for the purpose of acquiring (the "acquisition") the Masco Home
Furnishings Group (the "Group" or "Predecessor Business"). In the formation
of the Company, 100 shares of common stock were issued to Furnishings
International Inc. ("FII"), the Company's sole stockholder. On August 5,
1996, FII acquired the Predecessor Business from Masco Corporation
("Masco") for approximately $1.1 billion and contributed substantially all
of the businesses acquired to the Company. The purchase price of $1.1
billion was financed by: (i) senior bank facilities ($325.0 million); (ii)
senior subordinated notes ($200.0 million); (iii) equity contribution
($410.0 million); and (iv) proceeds from sale of accounts receivable
($155.0 million). (See Note 3 Receivables Facility and Note 4 Long-Term
Debt).
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the purchase price was allocated to the acquired assets
and assumed liabilities based upon estimated fair values as of the closing
of the acquisition. The excess of the fair value of the assets and
liabilities acquired over the purchase price was allocated to reduce
non-current assets, principally property and equipment.
As a result of the acquisition and new basis of accounting, the Company's
financial statements for the periods subsequent to the acquisition are not
comparable to the Predecessor Business' financial statements for the
periods prior to the acquisition.
2. BASIS OF PRESENTATION
---------------------
Basis of Presentation. The unaudited Condensed Consolidated Financial
Statements include the accounts of the Company and its subsidiary companies
for the periods presented. Intercompany accounts and transactions are
eliminated. These Condensed Consolidated Financial Statements reflect, in
the opinion of management, all adjustments necessary for a fair
presentation of the interim financial statements. All such adjustments are
of a normal and recurring nature.
The financial information for the periods ended on or prior to August 5,
1996 refer to the Predecessor Business as it existed prior to the
acquisition. The Group was not a legal entity and included certain Masco
subsidiaries whose operations consisted of the manufacture and sale of home
furnishings products including quality furniture, fabrics and other home
furnishings. With respect to the unaudited financial information for the
interim periods of the Predecessor Business, it is the opinion of
management that all adjustments, which consist of normal and recurring
adjustments necessary for a fair presentation of interim combined financial
statements, have been included. The unaudited combined financial statements
should be read in conjunction with the Predecessor Business' combined
financial statements for the year ended December 31, 1995 included in the
Company's registration statement on Form S-4 (No. 333-11905).
Operating results of the interim period are not necessarily indicative of
results that may be expected for the period from August 6, 1996 to December
31, 1996.
Recently Issued Accounting Standards. Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities," becomes effective in 1997. The
Company does not believe its adoption will have a material impact on the
Company's financial statements.
5
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. RECEIVABLES FACILITY
--------------------
In connection with the acquisition, the Company established a Receivables
Facility and formed LFI Receivables Corporation (the "Receivables
Subsidiary"), a wholly owned, bankruptcy remote subsidiary of the Company.
The Receivables Subsidiary purchases, on a revolving basis, substantially
all trade receivables generated by the Company and FII at a 2.04% discount.
The Receivables Subsidiary established a master trust (the "Master Trust")
to which it transfers and assigns all its rights in those trade
receivables. A syndicate of banks and other financial institutions (the
"Participants") may purchase up to $175 million in investor certificates
representing fractional undivided senior interests in the trade receivables
held by the Master Trust.
As of September 30, 1996, the outstanding balance of trade receivables sold
to the Master Trust amounted to $230 million. Of this amount, $167 million
had been sold to the Participants at face value through the issuance of
Senior Investor Certificates. The Receivables Subsidiary retained an
investment in the Master Trust of $63 million, comprised of $14 million of
Senior Exchangeable Company Certificates and $49 million of Subordinated
Investor Certificates.
The Senior Investor Certificates bear interest at LIBOR plus 1% and there
is a commitment fee of .5% per annum of the unused commitment under the
facility. The cost of this facility is included in "Other, net" in the
Statement of Operations, and amounted to $1.9 million for the period ended
September 30, 1996.
The Company anticipates that the Receivables Facility will be replaced by a
similar facility under which the Master Trust will issue asset-backed
investor certificates of up to $200 million. If the Receivables Facility
has not been replaced by February, 1997, the interest rate may increase by
up to 1.5%. This arrangement places certain restrictions on the Company and
the Receivables Subsidiary, including placing liens on the trade
receivables, and changes to credit and collection policies. At September
30, 1996, the Company was in compliance with these covenants.
4. LONG-TERM DEBT
--------------
As of September 30, 1996, the outstanding balances of long-term debt were
as follows, in millions:
Revolving credit facility ........................ -
Tranche A term loan .............................. $125.0
Tranche B term loan .............................. 175.0
Senior subordinated notes ........................ 200.0
Other borrowings ................................. 26.1
------
526.1
Less current portion ............................. (37.4)
------
$488.7
======
In connection with the acquisition, the Company entered into loans under
senior bank facilities and issued senior subordinated notes, the net
proceeds of which were used to repay certain existing intercompany
indebtedness of the Predecessor Business to Masco Corporation.
6
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. LONG-TERM DEBT, continued
--------------
Senior Bank Facilities. The Company entered into a credit agreement
providing for term loans of $300 million and a revolving credit facility of
$150 million. The term loans consist of: (i) $125 million Tranche A bearing
interest at LIBOR plus 2.5% (or an alternative rate at the Company's
option) payable in quarterly installments through 2002; and (ii) $175
million Tranche B bearing interest at LIBOR plus 3.0% (or an alternative
rate at the Company's option) payable in quarterly installments through
2004. The revolving credit facility is a 6 year facility and bears interest
at LIBOR plus 2.5% (or an alternative rate at the Company's option). The
revolving credit facility requires a commitment fee of .5% per annum on the
unused portion of the facility. The Company, at its option, may prepay the
term loans or permanently reduce the revolving credit facility.
At closing of the acquisition, borrowings under the senior bank facilities
totalled $300 million in term loans and $25 million under the revolving
credit facility. During the period ended September 30, 1996, all borrowings
under the revolving credit facility were repaid, and during October 1996
the term loans have been prepaid in the amount of $15 million.
The obligations under the senior bank facilities are unconditionally
guaranteed, jointly and severally by FII and substantially all domestic
subsidiaries of the Company, and are secured by substantially all the
assets of the Company and the guarantors. The senior bank facilities
contain significant restrictive covenants including minimum interest
coverage ratios, maximum leverage ratios, annual capital expenditures
limitations and net worth requirements. At September 30, 1996, the Company
was in compliance with these covenants.
Senior Subordinated Notes. In connection with the acquisition, the Company
issued, in a private placement, $200 million unsecured senior subordinated
notes (the "Notes") maturing August 1, 2006. Interest on the Notes is
payable semi-annually at 10 7/8% per annum commencing on February 1, 1997.
The Notes may be redeemed by the Company subsequent to August 1, 2001 at
premiums which begin at 5.438% and decline each year to face for
redemptions taking place after August 1, 2004. In addition, at any time
prior to August 1, 1999, the Company may redeem up to 33 1/3% of the
original aggregate principal amount of the Notes with the proceeds of one
or more public equity offerings at a redemption price of 110.875%. Also,
upon a qualifying change of control, the Notes may be redeemed at the
option of the Company or in certain instances at the option of the Note
holders, at a premium of 1%. The Notes contain certain restrictive
covenants which, among others, limit the incurrence of additional
indebtedness and restrict capital transactions, distributions, and asset
dispositions of certain subsidiaries. At September 30, 1996, the Company
was in compliance with these covenants.
In connection with the Note offering, each of the Company's domestic
operating subsidiaries (the "Guarantor Subsidiaries") fully and
unconditionally guarantee the Company's performance under the Notes on a
joint and several basis (See Note 6 Guarantor Financial Statements).
On November 8, 1996, the Company's and the Guarantor Subsidiaries'
registration statement on Form S-4 (No. 333-11905) became effective under
the Securities Act of 1933, providing for the exchange of the Notes for new
notes (the "New Notes"). The New Notes are identical in all material
respects to the Notes except that they are registered under the Securities
Act, thus allowing, subject to certain limitations, transfer pursuant to
the Securities Act.
7
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. INCOME TAXES
------------
The Company provides for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). On an interim basis, the Company provides for income taxes
using the estimated annual effective rate. The difference between the
effective tax rate of 43% and the federal statutory tax rate of 35% is due
to state, local and foreign income taxes.
The Company is included in the consolidated federal tax return of FII.
Pursuant to the Company's tax sharing agreement with FII, the Company will
be required to make tax sharing payments to FII with respect to the
Company's pro rata share of consolidated federal and combined state and
local income tax liabilities.
Under SFAS 109, deferred income taxes are provided to recognize the effect
of temporary differences between financial reporting and income tax
reporting. As a result of the acquisition, deferred taxes were established
to reflect the tax effect of the difference between assigned fair values
and the tax basis of certain assets acquired and liabilities assumed. A
full valuation allowance has been provided for the resulting deferred tax
assets.
The Predecessor Business was included in the consolidated federal and state
tax returns of Masco. Accordingly, substantially all income tax-related
assets and liabilities were due to or from Masco. Income taxes and credits
were computed on a separate return basis.
8
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. GUARANTOR FINANCIAL STATEMENTS
------------------------------
In connection with the Note offering, the Guarantor Subsidiaries fully and
unconditionally guarantees the Company's performance under the Notes on a
joint and several basis. The Guarantor Subsidiaries are direct or indirect
wholly-owned subsidiaries of the Company. The remaining subsidiaries are
direct or indirect subsidiaries of the Guarantor Subsidiaries. The
following condensed consolidated financial data provides information
regarding the financial position, results of operations and cash flows of
the Guarantor Subsidiaries ("condensed consolidated financial data").
Separate financial statements of the Guarantor Subsidiaries are not
presented because management has determined those would not be material to
the holders of Notes.
For purposes of the condensed consolidated financial data, the Guarantor
Subsidiaries include substantially all domestic subsidiaries of the Company
(other than the Receivables Subsidiary and certain subsidiaries with
substantially no assets or operations). The Guarantor Subsidiaries account
for their investments in the non-guarantor subsidiaries on the equity
method. The principal elimination entries are to eliminate the investments
in subsidiaries and intercompany balances and transactions.
Condensed Consolidated Balance Sheet
(in thousands)
Company
--------------------------------------------------------
September 30, 1996
--------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
--------------------------------------------------------
ASSETS
Current Assets:
Cash and cash investments $ (3,020) $ 11,870 --- $ 8,850
Trade receivables 37,030 43,970 --- 81,000
Other receivables 67,090 10,130 --- 77,220
Investment in Receivables Trust 62,770 --- --- 62,770
Prepaid expenses 13,640 14,120 --- 27,760
Inventories 459,200 112,260 --- 571,460
Intercompany account 151,170 13,820 $(164,990) ---
---------- -------- --------- ----------
Total current assets 787,880 206,170 (164,990) 829,060
Property and equipment, net 258,020 77,950 --- 335,970
Long term debt, current 9,400 --- --- 9,400
Other assets 47,190 8,480 --- 55,670
Investments in affiliates 53,700 --- (53,700) ---
---------- -------- --------- ----------
Total assets $1,156,190 $292,600 $(218,690) $1,230,100
========== ======== ========= ==========
LIABILITIES and SHAREHOLDER'S EQUITY
Current Liabilities:
Notes payable $ 16,220 $ 21,190 --- $ 37,410
Accounts payable 68,950 27,280 --- 96,230
Accrued liabilities 113,010 35,040 --- 148,050
Intercompany account 13,820 151,170 $(164,990) ---
---------- -------- --------- ----------
Total current liabilities 212,000 234,680 (164,990) 281,690
Long-term debt 485,920 2,780 --- 488,700
Other long-term liabilities 34,470 1,440 --- 35,910
---------- -------- --------- ----------
Total liabilities 732,390 238,900 (164,990) 806,300
Shareholder's equity 423,800 53,700 (53,700) 423,800
---------- -------- --------- ----------
Total liabilities and
shareholder's equity $1,156,190 $292,600 $(218,690) $1,230,100
========== ======== ========= ==========
9
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. GUARANTOR FINANCIAL STATEMENTS, continued
------------------------------
Condensed Consolidated Statement of Operations
(in thousands)
Company
--------------------------------------------------------
for the period August 6 to September 30, 1996
--------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
--------------------------------------------------------
Net sales $ 291,780 $ 86,820 $ (46,340) $ 332,260
Cost of sales 220,300 71,840 (46,340) 245,800
---------- -------- --------- ----------
Gross profit 71,480 14,980 --- 86,460
Selling, general and
administrative expenses 45,640 9,480 --- 55,120
---------- -------- --------- ----------
Operating profit 25,840 5,500 --- 31,340
Other expense, net: 7,110 910 2,730 10,750
---------- -------- --------- ----------
Income (loss) before income taxes 18,730 4,590 (2,730) 20,590
Income taxes 6,990 1,860 --- 8,850
---------- -------- --------- ----------
Net income $ 11,740 $ 2,730 $ (2,730) $ 11,740
========== ======== ========= ==========
Predecessor Business
--------------------------------------------------------
for the period January 1, 1996 to August 5, 1996
--------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Combined
--------------------------------------------------------
Net sales $1,014,270 $294,360 $(160,740) $1,147,890
Cost of sales 780,000 251,390 (160,740) 870,650
---------- -------- --------- ----------
Gross profit 234,270 42,970 --- 277,240
Selling, general and
administrative expenses 182,510 39,720 --- 222,230
---------- -------- --------- ----------
Operating profit 51,760 3,250 --- 55,010
Other expense, net: 44,570 9,280 2,320 56,170
---------- -------- --------- ----------
Income (loss) before income taxes 7,190 (6,030) (2,320) (1,160)
Income taxes (credit) 8,910 (2,080) --- 6,830
---------- -------- --------- ----------
Net loss $ (1,720) $ (3,950) $ (2,320) $ (7,990)
========== ======== ========= ==========
10
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. GUARANTOR FINANCIAL STATEMENTS, continued
------------------------------
Condensed Consolidated Statement of Cash Flows
(in thousands)
Company
--------------------------------------------------------
for the period August 6, 1996 to September 30, 1996
--------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
--------------------------------------------------------
CASH FLOWS FROM (FOR):
OPERATING ACTIVITIES:
Net income (loss) $ 11,740 $ 2,730 $ (2,730) $ 11,740
Depreciation and amortization 4,800 1,310 --- 6,110
Bad debt provision, net 680 --- --- 680
(Increase) decrease in receivables (3,840) (3,630) (2,310) (9,780)
(Increase) decrease in inventories (8,960) 14,850 --- 5,890
(Increase) decrease in prepaid
expenses (5,320) (860) --- (6,180)
Increase (decrease) in current
liabilities 31,940 15,440 2,310 49,690
(Increase) decrease in
intercompany accounts, net 7,210 (7,210) --- ---
---------- -------- --------- ----------
Net cash from (for) operating
activities 38,250 22,630 (2,730) 58,150
---------- -------- --------- ----------
INVESTING ACTIVITIES:
Acquisition of businesses, net
of cash acquired (686,690) --- --- (686,690)
Investments in Receivables Trust (62,770) --- --- (62,770)
Capital expenditures (2,120) (650) --- (2,770)
Other, net 12,560 (7,910) 2,730 7,380
---------- -------- --------- ----------
Net cash from (for) investing
activities (739,020) (8,560) 2,730 (744,850)
---------- -------- --------- ----------
FINANCING ACTIVITIES:
Proceeds from long term debt 525,000 --- --- 525,000
Proceeds from sale of accounts
receivable 167,000 --- --- 167,000
Capital contribution 65,350 --- --- 65,350
Deferred financing costs (34,590) --- --- (34,590)
Net repayments of short-term debt (25,010) (2,200) --- (27,210)
---------- -------- --------- ----------
Net cash from (for) financing
activities 697,750 (2,200) --- 695,550
---------- -------- ----------
CASH:
Increase (decrease) for the period (3,020) 11,870 --- 8,850
At August 6 --- --- --- ---
---------- -------- --------- ----------
At September 30 $ (3,020) $ 11,870 $ --- $ 8,850
========== ======== ========= ==========
11
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. GUARANTOR FINANCIAL STATEMENTS, continued
------------------------------
Condensed Consolidated Statement of Cash Flows
(in thousands)
Predecessor Business
--------------------------------------------------------
for the period January 1, 1996 to August 5, 1996
--------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Combined
--------------------------------------------------------
CASH FLOWS FROM (FOR):
OPERATING ACTIVITIES:
Net loss $ (1,720) $ (3,950) $ (2,320) $ (7,990)
Depreciation and amortization 32,320 6,940 --- 39,260
Bad debt provision, net 1,980 270 --- 2,250
Deferred income taxes (2,610) --- --- (2,610)
(Increase) decrease in receivables 24,540 14,610 400 39,550
(Increase) decrease in inventories (20,430) 2,950 --- (17,480)
(Increase) decrease in prepaid
expenses (7,100) 380 --- (6,720)
Increase (decrease) in current
liabilities 30 (6,210) (430) (6,610)
(Increase) decrease in
intercompany accounts, net (5,120) 5,120 --- ---
---------- -------- --------- ----------
Net cash from (for) operating
activities 21,890 20,110 (2,350) 39,650
---------- -------- --------- ----------
INVESTING ACTIVITIES:
Capital expenditures (14,130) (2,390) --- (16,520)
Collection of notes receivable,
net 1,450 1,340 --- 2,790
Other, net (4,530) 7,290 (5,400) (2,640)
---------- -------- --------- ----------
Net cash from (for) investing
activities (17,210) 6,240 (5,400) (16,370)
---------- -------- --------- ----------
FINANCING ACTIVITIES:
Increase (decrease) in Masco
Corporation net investment
and advances (4,900) (25,450) 7,750 (22,600)
Proceeds from long term debt 800 86,960 --- 87,760
Net repayments of short term debt (800) (86,290) --- (87,090)
---------- -------- --------- ----------
Net cash from (for) financing
activities (4,900) (24,780) 7,750 (21,930)
---------- -------- --------- ----------
CASH:
Increase (decrease) for the period (220) 1,570 --- 1,350
At January 1 4,540 12,770 --- 17,310
---------- -------- --------- ----------
At August 5 $ 4,320 $ 14,340 $ --- $ 18,660
========== ======== ========= ==========
12
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. PRO FORMA SUPPLEMENTARY DATA
----------------------------
The following supplementary pro forma consolidated statements of operations
for the quarters ended September 30, 1996 and 1995 and for the nine month
periods ended September 30, 1996 and 1995 give effect to the acquisition
transactions as if they had occurred on January 1, 1995. The pro forma
consolidated statements of operations are provided for informational
purposes only and should not be construed to be indicative of the Company's
results of operations had the transactions been consummated on the dates
assumed and do not project the Company's results of operations for any
future date. (See Notes 1 and 2)
Quarter Ended Nine Months Ended
------------------------------ ------------------------------
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
Pro Forma Pro Forma Pro Forma Pro Forma
--------- --------- --------- ---------
Net sales $ 494,960 $ 477,970 $1,446,480 $1,425,830
Cost of sales 369,440 357,080 1,076,990 1,056,440
---------- ---------- ---------- ----------
Gross profit 125,520 120,890 369,490 369,390
Selling, general and
administrative expenses 85,640 89,610 259,930 270,300
---------- ---------- ---------- ----------
Operating profit 39,880 31,280 109,560 99,090
Other expense, net:
Interest expense 16,400 16,400 49,200 49,200
Other, net 3,010 6,340 11,670 15,360
---------- ---------- ---------- ----------
19,410 22,740 60,870 64,560
---------- ---------- ---------- ----------
Income before taxes 20,470 8,540 48,690 34,530
Income taxes 8,800 3,670 20,940 14,850
---------- ---------- ---------- ----------
Net income $ 11,670 $ 4,870 $ 27,750 $ 19,680
========== ========== ========== ==========
Quarter Ended Nine Months Ended
------------------------------ ------------------------------
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
Pro Forma Pro Forma Pro Forma Pro Forma
--------- --------- --------- ---------
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of sales 74.64% 74.71% 74.46% 74.09%
Gross profit 25.36% 25.29% 25.54% 25.91%
Selling, general and
administrative expenses 17.30% 18.75% 17.97% 18.96%
Operating profit 8.06% 6.54% 7.57% 6.95%
Other expense, net:
Interest expense 3.31% 3.43% 3.40% 3.45%
Other, net 0.61% 1.33% 0.81% 1.08%
3.92% 4.76% 4.21% 4.53%
Income before taxes 4.14% 1.78% 3.36% 2.42%
Income taxes 1.78% 0.77% 1.44% 1.04%
Net income 2.36% 1.01% 1.92% 1.38%
The primary adjustments applied to the historical predecessor business financial
statements to arrive at the pro forma presentation include the following:
a) Adjustment to reflect elimination of goodwill amortization of approximately
$14.2 million on an annualized basis.
b) Adjustment of approximately $15.9 million on an annual basis to reflect
decreased depreciation for writedown of property and equipment from the
allocation of the estimated fair value of the net assets over purchase
price.
c) Adjustment to reflect the reduction of interest expense due to the
elimination of interest expense on Masco Corporation net advances offset by
the impact of interest expense on the financing arrangements incurred at
the acquisition.
d) Adjustment to eliminate the operating results of businesses acquired by FII
from Masco but not contributed to the Company.
13
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
LifeStyle Furnishings International Ltd. (The "Company") is the largest U.S.
based manufacturer and marketer of residential furniture and the nation's
largest designer, marketer and distributor of decorative home furnishing
fabrics. Approximately 86% of net sales are derived from residential furniture,
which includes decorative accessories ("fine furniture"). Decorative home
furnishing fabrics accounted for the remaining 14% of net sales.
The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto. Results of an interim
period are not necessarily indicative of results for the full year or of future
periods.
THE ACQUISITION TRANSACTIONS
The Company was formed in May 1996 for the purpose of acquiring the Masco Home
Furnishings Group (the "Group" or "Predecessor Business"). In the formation of
the Company, 100 shares of common stock were issued to Furnishings International
Inc. ("FII"), the Company's sole stockholder. On August 5, 1996, FII acquired
the Predecessor Business from Masco Corporation for approximately $1.1 billion
and contributed substantially all of the businesses acquired to the Company. The
purchase price of $1.1 billion was financed by: (i) senior bank facilities
($325.0 million); (ii) senior subordinated notes ($200.0 million); (iii) equity
contribution ($410.0 million); and (iv) proceeds from sale of accounts
receivable ($155.0 million).
The acquisition was accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated to the acquired assets and assumed
liabilities based upon estimated fair values as of the closing date of the
acquisition. The excess of the fair value of the assets and liabilities acquired
over the purchase price was allocated to reduce non-current assets, principally
property and equipment.
As a result of the acquisition and new basis of accounting, the Company's
financial statements for the periods subsequent to the acquisition are not
comparable to the Predecessor Business' financial statements for the periods
prior to the acquisition.
RESTRUCTURING INITIATIVES AND INVENTORY REDUCTION
In connection with the acquisition, management began developing a restructuring
plan. The plan is expected to be finalized by the end of 1996 upon approval by
the Company's Board of Directors and implementation completed in 1997. As
permitted by Emerging Issues Task Force ("EITF") issue 95-3 "Recognition of
Liabilities in Connection with a Purchase Business Combination" the total cost
of the plan, which management estimates to be approximately $28.3 million, was
included as part of the purchase price allocation. The Company does not expect
any significant impact on its liquidity as a result of this plan.
The Company is evaluating the future benefit of its continuing investment in
certain joint ventures in Asia. The carrying value of these investments
approximates $19.7 million at September 30, 1996. Management expects to complete
its evaluation in early 1997.
Management has also initiated a plan to reduce inventory levels to generate cash
flow and reduce carrying costs. At this time, management does not believe this
inventory reduction program will have a material adverse effect on future
results of operations or the financial condition of the Company.
14
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
RESULTS OF OPERATIONS
The following table sets forth certain data from the Company's Condensed
Consolidated Financial Statements expressed as a percentage of net sales. For
purposes of this presentation, the results of operations for the period August
6, 1996 through September 30, 1996 have been combined with the results of the
Predecessor Business.
Quarter Ended Nine Months Ended
------------------------------ ------------------------------
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of sales 75.05% 75.85% 75.43% 75.24%
------------- ------------- ------------- -------------
Gross profit 24.95% 24.15% 24.57% 24.76%
Selling, general and
administrative expenses 17.69% 20.18% 18.74% 20.36%
------------- ------------- ------------- -------------
Operating profit 7.26% 3.97% 5.83% 4.40%
Other expense, net:
Interest expense 3.23% 4.54% 4.10% 4.82%
Other, net 0.66% 0.40% 0.42% 0.19%
------------- ------------- ------------- -------------
3.89% 4.94% 4.52% 5.01%
Income before taxes 3.37% (0.97%) 1.31% (0.61%)
Income taxes 2.14% 0.44% 1.06% 0.41%
------------- ------------- ------------- -------------
Net income 1.23% (1.41%) 0.25% (1.02%)
============= ============= ============= =============
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996 TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Net sales. Net sales were $499.0 million for the three months ended September
30, 1996, an increase of $5.7 million or 1.2% from $493.3 million for the three
months ended September 30, 1995. Net sales of fine furniture increased 0.3% to
$431.6 million for the three months ended September 30, 1996 from $430.2 million
for the three months ended September 30, 1995. Net sales of fine furniture grew
primarily due to recent product introductions and modest increased industry
demand. Net sales of decorative home furnishings fabrics increased 6.8% to $67.4
million for the three months ended September 30, 1996 from $63.1 million for the
three months ended September 30, 1995, primarily due to strength in the woven
segment of the market and improved business conditions.
15
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Gross profit. Gross profit was $124.5 million for the three months ended
September 30, 1996, an increase of $5.4 million or 4.5% from $119.1 million for
the comparable period of 1995. This increase was primarily attributable to the
impact of a modest increase in sales and in the gross profit margin increasing
to 25.0% for the three months ended September 30, 1996 from 24.2% for the
comparable period of 1995. The improvement in the gross profit margin is
primarily attributable to the reduced depreciation expense which resulted from
the reduction in carrying value of depreciable fixed assets due to the
allocation of purchase price.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $88.2 million for the three months ended September
30, 1996, a decrease of $11.4 million or 11.4%, from $99.6 million for the
comparable period of 1995. As a percentage of net sales, selling, general and
administrative expenses declined to 17.7% for the three months ended September
30, 1996 from 20.2% for the three months ended September 30, 1995. The decrease
in general and administrative expenses reflects the benefits of the Company's
cost reduction initiatives implemented in the last half of 1995, combined with
the net decrease in general and administrative expenses incurred since August 6,
1996 as a stand alone company when compared to the management fees previously
charged to the Company by Masco.
Operating profit. Operating profit increased to $36.3 million for the three
months ended September 30, 1996, an increase of $16.7 million or 85.2% from
$19.6 million for the comparable period of 1995. As a percentage of net sales,
operating profit increased to 7.3% for the three months ended September 30, 1996
from 4.0% for the comparable period of 1995. This improvement was achieved
primarily for the reasons discussed above.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 TO NINE MONTHS ENDED
SEPTEMBER 30, 1995.
Net sales. Net sales were $1,480.1 million for the nine months ended September
30, 1996, an increase of $2.4 million or 0.2% from $1,477.7 million for the nine
months ended September 30, 1995. Net sales of fine furniture increased 0.5% to
$1,279.7 million for the nine months ended September 30, 1996 from $1,273.9
million for the nine months ended September 30, 1995. Net sales of fine
furniture grew modestly primarily due to severe weather conditions in early 1996
which resulted in several weather-related plant shutdowns and due to slower
industry sales. Net sales of decorative home furnishings fabrics decreased 1.6%
to $200.5 million for the nine months ended September 30, 1996 from $203.8
million for the nine months ended September 30, 1995, primarily due to severe
weather conditions in early 1996 which caused slow retail sales, and due to
decreased industry demand for certain product lines.
Gross profit. Gross profit was $363.7 million for the nine months ended
September 30, 1996, a decrease of $2.2 million or 0.6% from $365.9 million for
the comparable period of 1995. Gross profit margins declined to 24.6% for the
nine months ended September 30, 1996 from 24.8% for the comparable period of
1995. The decrease was primarily the result of temporary plant closings due to
severe weather and start-up costs related to substantial new product
introductions in early 1996.
16
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Selling, general and administrative expenses. Selling, general and
administrative expenses were $277.4 million for the nine months ended September
30, 1996, a decrease of $23.5 million or 7.8% from $300.9 million for the
comparable period of 1995. As a percentage of net sales, selling, general and
administrative expenses declined to 18.7% for the nine months ended September
30, 1996 from 20.4% for the nine months ended September 30, 1995. The decrease
in general and administrative expenses reflects the benefits of the Company's
cost reduction initiatives implemented in the last half of 1995, combined with a
net decrease in general and administrative expenses incurred since August 6,
1996 as a stand alone company when compared to the management fees previously
charged to the Company by Masco.
Operating profit. Operating profit increased to $86.4 million for the nine
months ended September 30, 1996, an increase of $21.5 million or 33.1% from
$64.9 million for the comparable period of 1995. As a percentage of net sales,
operating profit increased to 5.8% for the nine months ended September 30, 1996
from 4.4% for the comparable period of 1995. This improvement was achieved
primarily for the reasons discussed above.
PRO FORMA RESULTS OF OPERATIONS
On a pro forma basis for the nine months ended September 30, 1996 (after giving
effect to the acquisition transactions as if they had occurred on January 1,
1995), the Company's net income was $27.8 million, an increase of $8.1 million
from pro forma net income of $19.7 million for the comparable period of 1995.
This increase is primarily attributable to increased sales and reductions, since
August 5, 1996, in actual selling, general and administrative expenses resulting
from reductions in corporate overhead expenses associated with the acquisition
and the elimination of certain marketing and consulting arrangements during
1996. See the Pro Forma Supplementary Data included in the Notes to the
Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from debt service on the
indebtedness incurred in connection with the transactions, working capital needs
and the funding of capital expenditures.
Principal and interest payments under the Senior Bank Facilities, and the Notes
represent significant liquidity requirements for the Company. Under the terms of
the Senior Bank Facilities, the Company will be required to make principal
payments totaling approximately $21.3 million in 1997, $21.0 million in 1998,
$21.0 million in 1999, $21.3 million in 2000 and $34.5 million in 2001. Loans
under the Senior Bank Facilities bear interest at floating rates based upon the
interest rate option selected by the Company. During October 1996, the Company
purchased an interest rate collar resulting in $250 million of the Company's
long term debt being subject to an interest rate ceiling of 8.0% and floor of
5.45%.
The Company made capital expenditures of $19.3 million for the nine months ended
September 30, 1996. The Company believes that as a result of the availability of
excess capacity in its manufacturing facilities, no significant additional
capital expenditures will be required to expand capacity. The Company's ability
to make capital expenditures is subject to certain restrictions under the Senior
Bank Facilities.
The Company's principal source of cash to fund its liquidity needs is its net
cash from operating activities and availability of borrowings under the
Revolving Credit Facility. Net cash from operating activities for the nine
months ended September 30, 1996 was $97.8 million, an increase of $112.7 million
from ($14.9) million in the comparable period of 1995, primarily as a result of
an increase in earnings and decreases in working capital.
17
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
As of September 30, 1996, the amount available under the Revolving Credit
Facility was $150 million (less the face amount of existing letters of credit of
$32.5 million) and no amounts were outstanding. Amounts available under the
Revolving Credit Facility may be used for working capital and general corporate
purposes (including up to $50.0 million for letters of credit), subject to
certain limitations under the Senior Bank Facilities. The Company believes that
cash generated from operations, together with the amounts available under the
Revolving Credit Facility, will be adequate to meet its debt service
requirements, capital expenditures and working capital needs for the foreseeable
future, although no assurance can be given in this regard.
18
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(concluded)
19
PART II. OTHER INFORMATION
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Items 1, 2, 3 and 5 are not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
On July 31, 1996, FURNISHINGS INTERNATIONAL INC., the corporate parent of
the Company ("FII") approved by written consent of sole stockholder, an
amendment to the Company's certificate of incorporation to restate its name in
block capital letters. On August 7, 1996, FII approved by written consent of
sole stockholder, an increase in the size of the board of the Company by 7 and
the election of the following individuals to the Board of Directors of the
Company:
C. Sean Day
Donald M. Roberts
In addition to the foregoing, Wayne B. Lyon, Richard M. Cashin, Jr., Robert L.
George, John A. Morgan and David F. Thomas continued as directors of the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibits
- ------- -----------------------
3.1* Certificate of Incorporation of LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
(the "Company")
3.2* Certificate of Incorporation of Ametex Fabrics, Inc.
3.3* Certificate of Incorporation of The Berkline Corporation
3.4* Articles of Incorporation of Blue Mountain Trucking Corporation
3.5* Articles of Incorporation of Custom Truck Tires, Inc.
3.6* Certificate of Incorporation of D-H Retail Space, Inc.
3.7* Certificate of Incorporation of Drexel Heritage Advertising, Inc.
3.8* Certificate of Incorporation of Drexel Heritage Furnishings, Inc.
3.9* Articles of Incorporation of Drexel Heritage Home Inspirations, Inc.
3.10* Certificate of Incorporation of Henredon Furniture Industries, Inc.
3.11* Articles of Incorporation of Henredon Transportation Company
3.12* Certificate of Incorporation of Interior Fabric Design, Inc.
3.13* Articles of Incorporation of Intro Europe, Inc.
3.14* Articles of Incorporation of La Barge, Inc.
3.15* Certificate of Incorporation of Lexington Furniture Industries, Inc.
3.16* Certificate of Incorporation of Lifestyle Holdings Ltd.
3.17* Articles of Incorporation of Maitland-Smith, Inc.
- ----------
* Incorporated by reference from the registrants' Registration Statement on
Form S-4 (No. 333-11905)
II-1
Exhibit
Number Description of Exhibits
- ------ -----------------------
3.18* Articles of Incorporation of Marbro Lamp Company
3.19* Certificate of Incorporation of Ramm, Son & Crocker, Inc.
3.20* Certificate of Incorporation of Robert Allen Fabrics, Inc.
3.21* Certificate of Incorporation of Robert Allen Fabrics of N.Y., Inc.
3.22* Certificate of Incorporation of Sunbury Textile Mills, Inc.
3.23* Certificate of Incorporation of Universal Furniture Industries
3.24* Certificate of Incorporation of Universal Furniture Limited
3.25* By-Laws of the Company
3.26* By-Laws of Ametex Fabrics, Inc.
3.27* By-Laws of The Berkline Corporation
3.28* By-Laws of Blue Mountain Trucking Corporation
3.29* By-Laws of Custom Truck Tires, Inc.
3.30* By-Laws of D-H Retail Space, Inc.
3.31* By-Laws of Drexel Heritage Advertising, Inc.
3.32* By-Laws of Drexel Heritage Furnishings Inc.
3.33* By-Laws of Drexel Heritage Home Inspirations, Inc.
3.34* By-Laws of Henredon Furniture Industries, Inc.
3.35* By-Laws of Henredon Transportation Company
3.36* By-Laws of Interior Fabric Design, Inc.
3.37* By-Laws of Intro Europe, Inc.
3.38* By-Laws of La Barge, Inc.
3.39* By-Laws of Lexington Funiture Industries, Inc.
3.40* By-Laws of Lifestyle holdings Ltd.
3.41* By-Laws of Maitland-Smith, Inc.
3.42* By-Laws of Marbro Lamp Company
3.43* By-Laws of Ramm, Son & Crocker, Inc.
3.44* By-Laws of Robert Allen Fabrics, Inc.
3.45* By-Laws of Robert Allen Fabrics of N.Y., Inc.
3.46* By-Laws of Sunbury Textile Mills, Inc.
3.47* By-Laws of Universal Furniture Industries
3.48* By-Laws of Universal Furniture Limited
4* Indenture between the Company, the Guarantors named therein and IBJ
Schroder Bank & Trust Company, as Trustee, dated as of August 5, 1996.
- ----------
* Incorporated by reference from the registrants' Registration Statement on
Form S-4 (No. 333-11905)
II-2
Exhibit
Number Description of Exhibits
- ------ -----------------------
10.1* Acquisition Agreement between FURNISHINGS INTERNATIONAL INC. and Masco
Corporation dated as of March 29, 1996
10.2* Amendment No. 1 to Acquisition Agreement dated as of June 21, 1996
10.3* Amendment No. 2 to Acquisition Agreement dated as of August 5, 1996
10.4* Credit Agreement dated as of August 5, 1996 among FURNISHINGS
INTERNATIONAL INC., the Company, the subsidiary borrowers named therein,
the lenders named therein and The Chase Manhattan Bank, as Swingline
Lender, Administrative Agent and Collateral Agent, Chase Manhattan Bank
Delaware as Issuing Bank
10.5* Exchange and Registration Rights Agreement between the Company, the
Guarantors named therein, Chase Securities Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, dated as of August 5, 1996.
10.6* Pooling Agreement, dated as of August 5, 1996, among LFI Receivables
Corporation, LFI Servicing Corporation and The Chase Manhattan Bank, as
Trustee.
10.7* Series 1996-A Supplement, dated as of August 5, 1996, among LFI
Receivables Corporation, LFI Servicing Corporation, Chemical Bank, as
Agent and as Initial Purchaser, and The Chase Manhattan Bank, as
Trustee.
10.8* Servicing Agreement, dated as of August 5, 1996, among LFI Receivables
Corporation, LFI Servicing Corporation, as Master Servicer, each of the
Servicers party thereto and The Chase Manhattan Bank, as Trustee.
10.9* Receivables Sale Agreement, dated as of August 5, 1996, among LFI
Receivables Corporation, the Sellers named therein and the Servicers
named therein.
10.10* Stockholders' Agreement, dated as of August 5, 1996, among Masco
Corporation, FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc.,
Associate Madison Companies, Inc., and the other stockholders named
therein.
10.11* Registration Rights Agreement, dated as of August 5, 1996, among Masco
Corporation, FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc.,
Associate Madison Companies, Inc., and the other stockholders named
therein.
10.12* Management Agreement, dated as of August 5, 1996, by and between
FURNISHINGS INTERNATIONAL INC. and the Company.
10.13* Tax Sharing Agreement, dated as of the 5th day of August, 1996, by and
between FURNISHINGS INTERNATIONAL INC., Simmons Upholstered Furniture
Corporation, the Company and LFI Receivables Corporation.
10.14* Transition Services Agreement, dated as of August 5, 1996, among
FURNISHINGS INTERNATIONAL INC. and Masco Corporation.
10.15* 12.0% Senior Pay-in-Kind Note of FURNISHINGS INTERNATIONAL INC. dated
August 5, 1996.
10.16* Purchase Agreement dated July 31, 1996 between the Company, Chase
Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and
the Guarantors named therein.
27+ Financial Data Schedule
(b) No reports on Form 8-K were filed by the registrants during the three
months ended September 30, 1996.
- ----------
* Incorporated by reference from the registrants' Registration Statement on
Form S-4 (No. 333-11905)
+ Filed herewith
II-3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
AMETEX FABRICS, INC.
THE BERKLINE CORPORATION
BLUE MOUNTAIN TRUCKING CORPORATION
CUSTOM TRUCK TIRES, INC.
D-H RETAIL SPACE, INC.
DREXEL HERITAGE ADVERTISING, INC.
DREXEL HERITAGE FURNISHINGS, INC.
DREXEL HERITAGE HOME INSPIRATIONS, INC.
HENREDON FURNITURE INDUSTRIES, INC.
HENREDON TRANSPORTATION COMPANY
INTERIOR FABRIC DESIGN, INC.
INTRO EUROPE, INC.
LA BARGE, INC.
LEXINGTON FURNITURE INDUSTRIES, INC.
LIFESTYLE HOLDINGS LTD.
MAITLAND-SMITH, INC.
MABRO LAMP COMPANY
RAMM, SON & CROCKER, INC.
ROBERT ALLEN FABRICS, INC.
ROBERT ALLEN FABRICS OF N.Y., INC.
SUNBURY TEXTILE MILLS, INC.
UNIVERSAL FURNITURE INDUSTRIES, INC.
UNIVERSAL FURNITURE LIMITED
(Registrants)
Date: November 14, 1996 By: /s/ Ronald J. Hoffman
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Ronald J. Hoffman
Vice President and Treasurer
II-4
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
EXHIBIT INDEX
Exhibit
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3.1* Certificate of Incorporation of LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
(the "Company")
3.2* Certificate of Incorporation of Ametex Fabrics, Inc.
3.3* Certificate of Incorporation of The Berkline Corporation
3.4* Articles of Incorporation of Blue Mountain Trucking Corporation
3.5* Articles of Incorporation of Custom Truck Tires, Inc.
3.6* Certificate of Incorporation of D-H Retail Space, Inc.
3.7* Certificate of Incorporation of Drexel Heritage Advertising, Inc.
3.8* Certificate of Incorporation of Drexel Heritage Furnishings, Inc.
3.9* Articles of Incorporation of Drexel Heritage Home Inspirations, Inc.
3.10* Certificate of Incorporation of Henredon Furniture Industries, Inc.
3.11* Articles of Incorporation of Henredon Transportation Company
3.12* Certificate of Incorporation of Interior Fabric Design, Inc.
3.13* Articles of Incorporation of Intro Europe, Inc.
3.14* Articles of Incorporation of La Barge, Inc.
3.15* Certificate of Incorporation of Lexington Furniture Industries, Inc.
3.16* Certificate of Incorporation of Lifestyle Holdings Ltd.
3.17* Articles of Incorporation of Maitland-Smith, Inc.
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* Incorporated by reference from the registrants' Registration Statement on
Form S-4 (No. 333-11905)
Exhibit
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3.18* Articles of Incorporation of Marbro Lamp Company
3.19* Certificate of Incorporation of Ramm, Son & Crocker, Inc.
3.20* Certificate of Incorporation of Robert Allen Fabrics, Inc.
3.21* Certificate of Incorporation of Robert Allen Fabrics of N.Y., Inc.
3.22* Certificate of Incorporation of Sunbury Textile Mills, Inc.
3.23* Certificate of Incorporation of Universal Furniture Industries
3.24* Certificate of Incorporation of Universal Furniture Limited
3.25* By-Laws of the Company
3.26* By-Laws of Ametex Fabrics, Inc.
3.27* By-Laws of The Berkline Corporation
3.28* By-Laws of Blue Mountain Trucking Corporation
3.29* By-Laws of Custom Truck Tires, Inc.
3.30* By-Laws of D-H Retail Space, Inc.
3.31* By-Laws of Drexel Heritage Advertising, Inc.
3.32* By-Laws of Drexel Heritage Furnishings Inc.
3.33* By-Laws of Drexel Heritage Home Inspirations, Inc.
3.34* By-Laws of Henredon Furniture Industries, Inc.
3.35* By-Laws of Henredon Transportation Company
3.36* By-Laws of Interior Fabric Design, Inc.
3.37* By-Laws of Intro Europe, Inc.
3.38* By-Laws of La Barge, Inc.
3.39* By-Laws of Lexington Funiture Industries, Inc.
3.40* By-Laws of Lifestyle holdings Ltd.
3.41* By-Laws of Maitland-Smith, Inc.
3.42* By-Laws of Marbro Lamp Company
3.43* By-Laws of Ramm, Son & Crocker, Inc.
3.44* By-Laws of Robert Allen Fabrics, Inc.
3.45* By-Laws of Robert Allen Fabrics of N.Y., Inc.
3.46* By-Laws of Sunbury Textile Mills, Inc.
3.47* By-Laws of Universal Furniture Industries
3.48* By-Laws of Universal Furniture Limited
4* Indenture between the Company, the Guarantors named therein and IBJ
Schroder Bank & Trust Company, as Trustee, dated as of August 5, 1996.
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* Incorporated by reference from the registrants' Registration Statement on
Form S-4 (No. 333-11905)
Exhibit
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10.1* Acquisition Agreement between FURNISHINGS INTERNATIONAL INC. and Masco
Corporation dated as of March 29, 1996
10.2* Amendment No. 1 to Acquisition Agreement dated as of June 21, 1996
10.3* Amendment No. 2 to Acquisition Agreement dated as of August 5, 1996
10.4* Credit Agreement dated as of August 5, 1996 among FURNISHINGS
INTERNATIONAL INC., the Company, the subsidiary borrowers named therein,
the lenders named therein and The Chase Manhattan Bank, as Swingline
Lender, Administrative Agent and Collateral Agent, Chase Manhattan Bank
Delaware as Issuing Bank
10.5* Exchange and Registration Rights Agreement between the Company, the
Guarantors named therein, Chase Securities Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, dated as of August 5, 1996.
10.6* Pooling Agreement, dated as of August 5, 1996, among LFI Receivables
Corporation, LFI Servicing Corporation and The Chase Manhattan Bank, as
Trustee.
10.7* Series 1996-A Supplement, dated as of August 5, 1996, among LFI
Receivables Corporation, LFI Servicing Corporation, Chemical Bank, as
Agent and as Initial Purchaser, and The Chase Manhattan Bank, as
Trustee.
10.8* Servicing Agreement, dated as of August 5, 1996, among LFI Receivables
Corporation, LFI Servicing Corporation, as Master Servicer, each of the
Servicers party thereto and The Chase Manhattan Bank, as Trustee.
10.9* Receivables Sale Agreement, dated as of August 5, 1996, among LFI
Receivables Corporation, the Sellers named therein and the Servicers
named therein.
10.10* Stockholders' Agreement, dated as of August 5, 1996, among Masco
Corporation, FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc.,
Associate Madison Companies, Inc., and the other stockholders named
therein.
10.11* Registration Rights Agreement, dated as of August 5, 1996, among Masco
Corporation, FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc.,
Associate Madison Companies, Inc., and the other stockholders named
therein.
10.12* Management Agreement, dated as of August 5, 1996, by and between
FURNISHINGS INTERNATIONAL INC. and the Company.
10.13* Tax Sharing Agreement, dated as of the 5th day of August, 1996, by and
between FURNISHINGS INTERNATIONAL INC., Simmons Upholstered Furniture
Corporation, the Company and LFI Receivables Corporation.
10.14* Transition Services Agreement, dated as of August 5, 1996, among
FURNISHINGS INTERNATIONAL INC. and Masco Corporation.
10.15* 12.0% Senior Pay-in-Kind Note of FURNISHINGS INTERNATIONAL INC. dated
August 5, 1996.
10.16* Purchase Agreement dated July 31, 1996 between the Company, Chase
Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and
the Guarantors named therein.
27+ Financial Data Schedule
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* Incorporated by reference from the registrants' Registration Statement on
Form S-4 (No. 333-11905)
+ Filed herewith