<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 1996
[ ] 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: 33-96794
----------
DECORATIVE HOME ACCENTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0998387
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
Industrial Park Drive, Abbeville, South Carolina 29620
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 446-2123
Indicate by check mark whether the registrant 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).
Yes [ ] No [X]
Indicate by check mark whether the registrant has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 10, 1996, there were 1,074,838 shares outstanding of the
Registrant's Class A Common Stock ($0.01 par value), 1,756,126 shares
outstanding of the Registrant's Class B Non-Voting Common Stock ($0.01 par
value), 386,040 shares outstanding of the Registrant's Class C Common Stock
($0.01 par value), 808,333 shares outstanding of the Registrant's Class D Common
Stock ($0.01 par value), 125,000 shares outstanding of the Registrant's Class F
Common Stock and 51,875 outstanding shares of the Registrant's 14% Cumulative
Redeemable Preferred Stock ($0.01 par value).
<PAGE> 2
DECORATIVE HOME ACCENTS, INC.
QUARTER ENDED MARCH 31, 1996
INDEX
<TABLE>
<CAPTION>
Page
No.
---
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 1996 (As Restated)
and December 31, 1995 ................................................. 4
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1996 (As Restated) and 1995..................... 5
Condensed Consolidated Statement of Stockholders' Equity for the
three months ended March 31, 1996 (As Restated)........................ 6
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 (As Restated) and 1995 .................... 7
Notes to Condensed Consolidated Financial Statements (Unaudited).............. 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................. 10
PART II OTHER INFORMATION
Signature Page ............................................................... 15
</TABLE>
2
<PAGE> 3
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 MODIFIES THE QUARTERLY REPORT FILED ON FORM 10-Q BY
THE REGISTRANT FOR THE PERIOD ENDED MARCH 31, 1996 AS FOLLOWS: PART I, ITEM 1,
FINANCIAL STATEMENTS (UNAUDITED), AND ITEM 2, MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAVE BEEN REPLACED IN
THEIR ENTIRETY.
3
<PAGE> 4
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DECORATIVE HOME ACCENTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
1996 December 31,
(Unaudited) 1995 (1)
----------- --------
<S> <C> <C>
(Restated - Note 4)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 169
Investment securities 1,000 1,000
Accounts receivable - net of allowance for doubtful accounts of
$2,661 at March 31, 1996 and $2,506 at December 31, 1995 31,255 28,982
Income taxes receivable 3,488 2,714
Inventories 47,705 43,713
Deferred income taxes 4,231 4,282
Other current assets 1,077 598
--------- ---------
Total current assets 88,756 81,458
PROPERTY, PLANT AND EQUIPMENT, NET 30,626 30,667
OTHER ASSETS 9,314 8,790
INTANGIBLE ASSETS, NET 93,508 94,938
--------- ---------
TOTAL ASSETS $ 222,204 $ 215,853
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 13,686 14,452
Accrued liabilities 7,017 9,775
Accrued interest 4,067 7,583
--------- ---------
Total current liabilities 24,770 31,810
--------- ---------
LONG-TERM DEBT 151,326 131,452
DEFERRED INCOME TAXES 1,154 3,348
REDEEMABLE PREFERRED STOCK 43,123 41,059
REDEEMABLE COMMON STOCK 1,817 1,639
STOCKHOLDERS' EQUITY:
Common stocks 9 9
Additional paid-in capital 13,864 16,107
Reduction of certain equity interest to predecessor basis (6,209) (6,209)
Accumulated deficit (7,650) (3,362)
--------- ---------
Total stockholders' equity 14 6,545
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 222,204 $ 215,853
========= =========
</TABLE>
(1) Derived from December 31, 1995 audited consolidated financial statements.
See notes to condensed consolidated financial statements (unaudited).
4
<PAGE> 5
DECORATIVE HOME ACCENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
(UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
(Restated - Note 4)
SALES $ 38,783 $ 11,276
COST OF GOODS SOLD 28,836 5,819
-------- --------
GROSS PROFIT 9,947 5,457
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 11,736 4,261
-------- --------
INCOME (LOSS) FROM OPERATIONS (1,789) 1,196
-------- --------
INTEREST INCOME (EXPENSE)
Interest expense (4,614) (1,812)
Interest income 9 131
-------- --------
Interest income (expense), net (4,605) (1,681)
-------- --------
LOSS BEFORE PROVISION FOR INCOME TAXES (6,394) (485)
INCOME TAX BENEFIT 2,106 184
-------- --------
NET LOSS $ (4,288) $ (301)
======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
5
<PAGE> 6
DECORATIVE HOME ACCENTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Reduction of
Certain Equity
Interest to Total
Common Additional Predecessor Retained Stockholders'
Stocks Paid-in Capital Basis Earnings Equity
------ --------------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $ 9 $ 16,107 $ (6,209) $ (3,362) $ 6,545
Accretion of redeemable common stock for the
three months ended March 31, 1996 (179) (179)
Accretion of redeemable preferred stock for the
three months ended March 31, 1996 (189) (189)
Preferred stock dividend paid-in-kind (1,875) (1,875)
Net loss (Restated - Note 4) (4,288) (4,288)
-------- -------- -------- -------- --------
Balances at March 31, 1996 (Restated - Note 4) $ 9 $ 13,864 $ (6,209) $ (7,650) $ 14
======== ======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
6
<PAGE> 7
DECORATIVE HOME ACCENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31
1996 1995
-------------------------
<S> <C> <C>
(Restated - Note 4)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,288) $ (301)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,328 1,027
Deferred tax (benefit) provision (2,143) 131
Changes in operating assets and liabilities:
Accounts receivable (2,273) 1,548
Inventories (3,992) (639)
Income tax receivable (774) -
Other current assets (479) (1,158)
Accounts payable (766) 1,286
Accrued liabilities (1,009) (1,419)
Accrued interest (3,516) 1,757
Income taxes payable - (567)
-------- --------
Net cash provided by (used in) operating
activities (16,912) 1,665
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (857) (440)
Other long term assets (524) -
-------- --------
Net cash used in investing activities (1,381) (440)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving line of credit 19,874 -
Redeemable preferred stock dividends paid (1,750) -
-------- --------
Net cash provided by financing activities 18,124 -
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (169) 1,225
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 169 8,355
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ - $ 9,580
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 9,875 $ -
======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
7
<PAGE> 8
DECORATIVE HOME ACCENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 (AS RESTATED) AND 1995
1. BASIS OF INTERIM PRESENTATION
The accompanying interim unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the
instructions of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included in the
interim financial information.
For interim reporting, the Company's subsidiary, Home innovations. Inc.
("HII") records an estimated gross profit based on information provided
by its accounting and financial systems. At year-end, inventories of the
Company are stated at the lower of cost, determined using the first-in,
first-out (FIFO) method, or market.
The Company's business is seasonal in nature, with its highest sales
levels historically occurring in the third and fourth fiscal quarters,
which include the holiday selling season. Therefore, the results of
operations for the interim periods are not necessarily indicative of the
operating results of the full year.
2. ORGANIZATION
The accompanying interim consolidated financial statements as of March
31, 1996, include the accounts of Decorative Home Accents, Inc. ("DHA"
or the "Company") and its wholly-owned subsidiaries, The Rug Barn, Inc.
and Home Innovations, Inc. (purchased on July 13, 1995).
All significant intercompany transactions and accounts have been
eliminated.
3. BALANCE SHEET COMPONENTS
Inventories are summarized as follows (in $000's):
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Raw materials $23,552 $24,464
Work-in-process 2,130 973
Finished goods 22,023 18,276
------- -------
$47,705 $43,713
======= =======
</TABLE>
8
<PAGE> 9
Property, plant and equipment is summarized as follows (in $000's):
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C>
Land $ 863 $ 863
Buildings and improvements 15,398 15,384
Furniture and fixtures 3,193 3,184
Machinery and equipment 14,171 14,101
-------- --------
33,625 33,532
Accumulated depreciation (3,895) (3,375)
-------- --------
29,730 30,157
Construction in progress 896 510
-------- --------
$ 30,626 $ 30,667
======== ========
</TABLE>
4. RESTATEMENT
Subsequent to the original issuance of the Company's financial
statements for the three months ended March 1996, the six months ended
June 30, 1996 and the nine months ended September 30, 1996, management
determined that certain customer chargebacks and credits had either not
been properly recorded in the financial statements or had been recorded
in improper accounting periods. As a result, the accompanying financial
statements have been restated. The following is a summary of the effects
of the restatements:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
---------------------------------
AS AS ORIGINALLY
RESTATED RECORDED
-------- --------
<S> <C> <C>
Net sales $38,783 $39,786
Loss from operations $(1,789) $ (867)
Net loss $(4,288) $(3,670)
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
---------------------------------
AS AS ORIGINALLY
RESTATED RECORDED
-------- --------
<S> <C> <C>
Current assets $ 88,756 $ 89,455
Total assets $222,204 $222,935
Current liabilities $ 24,770 $ 24,910
Total liabilities $177,250 $177,363
Total shareholders' equity $ 14 $ 632
</TABLE>
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Note: Subsequent to the original issuance of the Company's financial statements
for the three months ended March 1996, the six months ended June 30, 1996
and the nine months ended September 30, 1996, management determined that
certain customer chargebacks and credits had either not been properly
recorded in the financial statements or had been recorded in improper
accounting periods. As a result, the accompanying financial statements
have been restated. The Company has implemented additional procedures
including timely reconciliation of the Company's accounts receivable to
avoid such future errors.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations reflects the restatement of the Company's unaudited
condensed consolidated statements of operations for the three months ended
March 31, 1996. See Note 4 to the Company's unaudited condensed
consolidated financial statements.
INTRODUCTION
The following discussion provides management's assessment of the results of
operations and liquidity and capital resources of DHA and should be read in
conjunction with the respective financial statements of DHA and the notes
thereto included elsewhere in this Form 10-Q. The following table includes
unaudited proforma financial information as if the July 1995 purchase of Home
Innovations, Inc. ("HII") occurred as of January 1, 1995. Such adjustments to
the proforma financial information consist principally of the following: net
adjustments to cost of goods sold and SG & A expenses related to adjusting
depreciation expense for the new basis of accounting resulting from the HII
acquisition; increases in SG& A expenses to account for the amortization of
goodwill and the identifiable intangible assets resulting from the HII
acquisition; increases in SG & A expenses to account for compensation expense
resulting from granting stock options at less than fair market value; net
adjustments to interest expense resulting from issuance of 13% Senior Notes due
2002 and extinguishment of prior debt, amortization of debt issuance costs and
accretion of discount on the Senior Notes.
Management's discussion and analysis of the results of operations should be read
using the proforma financial information presented below:
<TABLE>
<CAPTION>
ACTUAL PROFORMA
Three Months Ended
-----------------------
March 31, March 31,
1996 1995
---- -----
<S> <C> <C>
Sales $ 38,783 $ 52,712
Cost of Goods Sold 28,836 37,531
-------- --------
Gross Profit 9,947 15,181
Selling, General and Administrative
Expenses 11,736 11,460
-------- --------
Income (Loss) From Operations (1,789) 3,721
Interest Expense, Net (4,605) (4,222)
-------- --------
Loss Before Income Taxes $ (6,394) $ (501)
======== ========
</TABLE>
IMPACT OF THE PURCHASE OF HOME INNOVATIONS, INC.
On July 13, 1995, DHA acquired HII, a leading manufacturer of niche oriented
home accessories with the following product categories: bath furnishings, window
and specialty products, bedding products and the new Calvin Klein Home
Collection, a new line of designer home products launched in September 1995
under the Calvin Klein trademark. The cash purchase price of HII was
approximately $95.1 million, after a $6.7 million reduction to the purchase
price, including acquisition related costs of approximately $1.8 million and the
assumption of approximately $31.0 million in liabilities consisting of trade
payables and accruals and $2.3 million of junior subordinated notes.
10
<PAGE> 11
The $6.7 million adjustment to the purchase price was determined as a result of
the level of net assets acquired as of the closing date and certain
indemnifications from the sellers. The $6.7 million was received from the
sellers in December, 1995.
RESULTS OF OPERATIONS
As described above, the results of operations for the three months ended March
31, 1995 reflect proforma adjustments related to the merger agreement discussed
above.
Comparison of Results of Operations for the Three Months Ended March 31,
1996 (Actual) (As Restated) with the Proforma Results of Operations for
the Three Months Ended March 31, 1995 (with proforma adjustments as
discussed above).
NET SALES
Net sales for three months ended March 31, 1996 decreased by $13.9 million, or
26.4% from $52.7 million of proforma net sales for the three months ended March
31, 1995 to $38.8 million for the three months ended March 31, 1996. Sales
across most of the Company's major product lines decreased principally as a
result of soft retail conditions in the major markets served by the Company. All
distribution channels served were affected by the soft retail environment
including the giftware trade. The reduction of consumer spending and the
associated tightening of retailer's inventory positions which began in the third
quarter of 1995 continued to have negative effects on the Company's sales
performance as expected. Also, the Company's 1996 sales were negatively impacted
by increased accounts receivable chargebacks related to customer returns and
sales allowances. If current market conditions prevail, the Company expects full
year sales to continue to be adversely affected.
GROSS PROFIT
The gross profit margin decreased from a proforma of 28.8% for the three months
ended March 31, 1995 to 25.6% for the three months ended March 31, 1996. The
decrease of approximately 3.2 percentage points in the Company's gross profit
margin partially resulted from plant efficiency losses in the printing and
cut-and-sew operations. As part of the Company's program to improve long-term
operating performance and control inventory investment, the Company temporarily
reduced manufacturing operations at certain plants during the quarter. This
resulted in fixed overhead being unabsorbed by inventory production. The Company
believes that its manufacturing operations are now properly sized relative to
current market demand for the Company's products. There were no significant
changes in the prices paid for raw materials between the 1995 and 1996 periods
as the Company was able to secure raw material purchase contracts at levels
equal to or more favorable than that of the prior year.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
SG&A expenses increased $276,000 or 2.4% from a proforma of $11.5 million for
the three months ended March 31, 1995 to $11.7 million for the three months
ended March 31, 1996. As a percentage of sales, SG&A expenses increased from a
proforma of 21.7% for the three months ended March 31, 1995 to 30.2% for the
same period of 1996. The increase in SG&A expenses as a percentage of sales was
principally attributable to the fixed nature of the Company's selling and
administrative salary base. Specifically, marketing and design functions, while
not increasing substantially from year to year on an absolute dollar basis,
reflect a higher percentage because of the decreased sales in the 1996 quarter.
SG&A expenses associated with the launch of the Calvin Klein Home line, which
since its inception in September 1995 have as a percentage of sales exceeded the
level of the Company's mature businesses, also contributed to the increased SG&A
for the 1996 quarter. Historically, the Company's SG&A costs as a percentage of
sales have exceeded many of the Company's competitors due to the commission
structure associated with the giftware trade and a relatively high fixed cost
structure within Home Innovations. During the 1996 quarter, the Company
implemented a consolidation of many of its marketing and administrative
functions in an attempt to improve the SG&A expense ratio and expects to see
improvement in its absolute dollar of SG&A costs going forward beginning in the
second half of 1996.
11
<PAGE> 12
INTEREST EXPENSE, NET
Interest expense, net increased from a proforma of $4.2 million for the three
months ended March 31, 1995 to $4.6 million for the three months ended March 31,
1996. This increase was principally due to increased borrowings under the
Company's revolving line of credit during the first quarter of 1996.
SEASONALITY
The Company's business is seasonal in nature with its highest sales levels
historically occurring during the third and fourth fiscal quarters, which
includes the holiday selling season.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity for operations and expansion have
historically been funds generated internally and borrowings under the Company's
$50.0 million revolving credit facility. Available borrowings under the credit
facility are based on specified levels of underlying collateral. As of March 31,
1996, the Company had approximately $9.1 million available under the revolving
credit facility described above (net of $24.7 million of outstanding borrowings
and $1.4 million in outstanding letters of credit). The Company intends to
utilize borrowings under the revolving credit facility to meet seasonal
fluctuations in the Company's working capital requirements, typically peaking in
early October, and to fund the anticipated build up of inventory relating to the
continued introduction of the Calvin Klein Home line of products. Management
expects the Calvin Klein Home line of products to increase the Company's working
capital needs in 1996 by approximately $8 to $12 million from 1995 levels.
Management believes that the working capital requirements related to Calvin
Klein in 1996 peaked in April 1996. Management believes that the Company's cash
flow from operations and borrowing under the revolving credit facility will be
sufficient to fund the Calvin Klein Home requirements. The obligations under the
revolving credit facility are secured by a first lien on the inventory and
receivables of The Rug Barn, Inc. and Home Innovations, Inc. and its
subsidiaries. The revolving credit facility contains certain financial and other
covenants with which the Company must comply, including, but not limited to a
requirement to maintain certain financial ratios and limitations on the ability
of Rug Barn and Home Innovations to incur additional indebtedness and pay
dividends. The Company was in compliance with the loan covenants, as amended, at
March 31, 1996.
Cash flows used in operating activities were approximately $16.9 million for the
three month period ended March 31, 1996. Driving the cash used in operating
activities for the first quarter, in addition to the Company's net loss, were an
increase in receivables of $2.3 million and inventory of $4.0 million and a
reduction of $3.5 million in accrued interest. The additional inventory
investment related principally to the introduction of the new Calvin Klein Home
line. The increase in receivables resulted from a slight increase in the
Company's sales velocity in the latter weeks of the quarter. The reduction of
$3.5 million in accrued interest resulted from the semi-annual interest payment
on the Company's $125 million, 13% Senior Notes.
Capital expenditures for the three month period in 1996 approximated $857,000.
The Company currently has no material commitments for capital expenditures.
Borrowings under the Company's line of credit increased by approximately $19.9
million during the three month period ended March 31, 1996. The additional
borrowings resulted primarily from the cash used in operating activities
including the interest payment on the Company's Senior Notes and the continued
inventory investment in Calvin Klein Home. Additionally, the Company paid
dividends totaling $1.75 million on its redeemable preferred stock in January
1996. During 1996 the Company expects that dividends will be paid in kind rather
than in cash.
Management expects that the Company's cash flow from operations and borrowings
under the revolving credit facility, as required, will be adequate to finance
anticipated operation needs, planned capital expenditures and to meet its debt
service obligations in 1996.
12
<PAGE> 13
INFLATION
Although the operations of the Company are generally influenced by economic
conditions, the Company does not believe that inflation had a material effect on
the results of operations during the three months ended March 31, 1996 and 1995.
The Company has been historically able to mitigate the impact of the increases
in the spot market prices of cotton through fixed price purchase contracts.
EFFECT OF COMPLIANCE WITH ENVIRONMENTAL PROTECTION PROVISIONS
Compliance with Federal, State and local provisions that have been enacted or
adopted regulating the discharge of materials in the environment, or otherwise
relating to protection of the environment, has not had, and is not expected to
have, a material adverse effect on the capital expenditures, net income or
competitive position of the Company.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) that are not historical facts are
forward-looking statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. The Company cautions readers of this
Quarterly Report on Form 10-Q that a number of important factors could cause the
Company's actual results in 1996 and beyond to differ materially from those
expressed in any such forward-looking statements. These factors include, without
limitation, the general economic and business conditions affecting the retail
industry, the Company's ability to meet its debt service obligations,
contractual restrictions on HII's and the Rug Barn's ability to pay dividends to
the Company, competition from a variety of firms ranging from small
manufacturers to large textile mills, the seasonality of the Company's sales,
the volatility of the Company's raw material cost, the Company's dependence on
key personnel and the risk of loss of a material customer or a significant
license. These and other factors are more fully described in the Company's
previous filings with the Securities and Exchange Commission including, without
limitation, the Company's Prospectus dated November 10, 1995.
13
<PAGE> 14
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various routine legal proceedings incidental to the
conduct of its business. Management believes that none of these legal
proceedings will have a material adverse impact on the financial condition or
results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
SEE EXHIBIT INDEX.
(B) REPORTS ON FORM 8-K
NONE
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-Q/A (Amendment No. 1 to its quarterly
report on Form 10-Q for the quarter ended March 31, 1996) to be signed on its
behalf by the undersigned thereunto duly authorized.
Decorative Home Accents, Inc.
---------------------------------
(Registrant)
Date: August 1, 1997 /s/ Jay N. Baker
---------------------------- ----------------------------------
Jay N. Baker*
Chief Financial Officer
*Duly authorized to sign on behalf of the Registrant.
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.3 Certificate of Correction to Certificate of Designation for Decorative
Home Accents, Inc.
27 Financial data schedule
4.6 Form of Third Amendment to the Amended and Restated Credit Agreement,
dated as of July 13, 1995, by among LaSalle National Bank, as co-agent
and lender, General Electric Capital Corporation, as co-agent and
lender, the Rug Barn, Inc., Home Innovations, Inc., Home Curtain Corp.,
Calvin Klein Home, Inc., Draymore Mfg. Corp. and R.A. Briggs and
Company, as amended by the First Amendment, dated as of November 17,
1995, and by the Second Amendment, dated as of December 31, 1995.
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DECORATIVE HOME ACCENTS, INC. FOR THE THREE MONTHS ENDED
MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 1,000
<RECEIVABLES> 33,916
<ALLOWANCES> 2,661
<INVENTORY> 47,705
<CURRENT-ASSETS> 88,756
<PP&E> 34,521
<DEPRECIATION> 3,895
<TOTAL-ASSETS> 222,204
<CURRENT-LIABILITIES> 24,770
<BONDS> 0
43,123
0
<COMMON> 9
<OTHER-SE> 13,864
<TOTAL-LIABILITY-AND-EQUITY> 222,204
<SALES> 38,783
<TOTAL-REVENUES> 38,783
<CGS> 28,836
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,736
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,605
<INCOME-PRETAX> (6,394)
<INCOME-TAX> (2,106)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,288)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
