<PAGE> 1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
-----------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998 Commission File Number 333-11905
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 56-1977928
(State of Incorporation) (I.R.S. Employer
Identification No.)
4000 Lifestyle Court
High Point, North Carolina 27265
(Address of Principal Executive Offices) (Zip Code)
(336) 878-7000
(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 /x/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
100 shares of Common Stock, par value $.01 per share, as of September 30, 1998.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30, 1998
(unaudited) and December 31, 1997..................................... 1
Condensed Consolidated Statements of Operations for the nine months
and three months ended September 30, 1998 and 1997 (unaudited)........ 2
Condensed Consolidated Statements of Comprehensive Income for the
nine months and three months ended September 30, 1998 and 1997
(unaudited)........................................................... 3
Condensed Consolidated Statements of Cash Flows for the nine months
and three months ended September 30, 1998 and 1997 (unaudited)........ 4
Notes to Condensed Consolidated Financial Statements.................. 5-11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 12-15
Part II Other Information
Exhibits and Reports on Form 8-K...................................... 16
Signature Page........................................................ 17
Exhibit Index......................................................... 18
</TABLE>
<PAGE> 3
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments ............................... $ 13,370 $ 4,140
Trade receivables ....................................... 63,800 64,480
Investment in receivables trust ......................... 71,770 64,010
Other receivables ....................................... 31,400 40,710
Inventories ............................................. 499,430 510,110
Prepaid expenses ........................................ 43,980 35,440
Deferred income taxes ................................... 38,530 38,530
----------- -----------
Total current assets .................................. 762,280 757,420
Property and equipment, net ................................... 344,770 337,390
Other assets .................................................. 43,420 56,410
----------- -----------
Total assets .......................................... $ 1,150,470 $ 1,151,220
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Long-term debt, current ................................. $ 8,240 $ 2,970
Accounts payable ........................................ 142,020 124,000
Accrued liabilities ..................................... 123,500 149,940
----------- -----------
Total current liabilities ............................. 273,760 276,910
Long-term debt ................................................ 311,610 351,600
Deferred income taxes ......................................... 31,250 31,250
Other long-term liabilities ................................... 51,270 54,070
----------- -----------
Total liabilities ................................... 667,890 713,830
----------- -----------
Stockholder's equity:
Common stock, $.01 par value, 3,000 shares authorized, 100
shares issued and outstanding ....................... -- --
Additional paid-in capital ............................ 421,050 421,050
Retained earnings ..................................... 73,450 25,510
Foreign currency translation .......................... (11,920) (9,170)
----------- -----------
Total stockholder's equity ............................ 482,580 437,390
----------- -----------
Total liabilities and stockholder's equity ............ $ 1,150,470 $ 1,151,220
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE> 4
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
--------------------------------- --------------------------------
SEPT. 30, 1998 SEPT. 30, 1997 SEPT. 30, 1998 SEPT. 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales .......................................... $ 1,468,440 $ 1,450,870 $ 490,980 $ 481,240
Cost of sales ...................................... 1,104,370 1,075,610 368,890 357,890
----------- ----------- ----------- -----------
Gross profit .................................... 364,070 375,260 122,090 123,350
Selling, general and administrative expenses ...... 266,190 259,500 85,430 86,890
----------- ----------- ----------- -----------
Operating profit ................................ 97,880 115,760 36,660 36,460
----------- ----------- ----------- -----------
Other expense, net:
Interest expense ................................ 24,090 32,800 7,770 10,530
Other, net ...................................... 7,880 10,830 1,830 4,600
----------- ----------- ----------- -----------
31,970 43,630 9,600 15,130
----------- ----------- ----------- -----------
Income before income taxes and extraordinary item 65,910 72,130 27,060 21,330
Income taxes ....................................... 17,970 24,160 5,920 6,380
----------- ----------- ----------- -----------
Income before extraordinary item ................ 47,940 47,970 21,140 14,950
Extraordinary item - loss on early extinguishment of
debt (net of income taxes of $7,750) ............ -- (11,620) -- (11,620)
----------- ----------- ----------- -----------
Net income ......................................... $ 47,940 $ 36,350 $ 21,140 $ 3,330
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 5
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
---------------------------------- -----------------------------------
SEPT. 30, 1998 SEPT. 30, 1997 SEPT. 30, 1998 SEPT. 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income ............................ $ 47,940 $ 36,350 $ 21,140 $ 3,330
Other comprehensive income, net of tax:
Foreign currency translation ....... (2,750) (4,350) (870) (2,120)
-------- -------- -------- --------
Comprehensive income .................. $ 45,190 $ 32,000 $ 20,270 $ 1,210
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 6
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
----------------------------------------
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................ $ 47,940 $ 36,350
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ..................... 19,150 18,980
Fabric sample book amortization ................... 10,180 11,680
Bad debt provision ................................ 2,120 5,370
Extraordinary loss on early extinguishment of debt -- 11,620
Changes in operating assets and liabilities:
Receivables ............................................ 7,360 6,430
Inventories ............................................ 10,680 (38,610)
Prepaid expenses and other assets ...................... (1,680) (4,240)
Accounts payable ....................................... 18,020 33,120
Other liabilities ...................................... (5,920) (10,130)
--------- ---------
Net cash provided by operating activities ........ 107,850 70,570
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures ...................................... (29,270) (23,920)
Fabric sample book expenditures ........................... (11,090) (10,160)
Net investments in receivables trust ...................... (7,760) (8,780)
Issuance of notes receivable .............................. (580) (2,950)
Collection of notes receivable ............................ 6,460 11,370
Other, net ................................................ 1,680 (2,280)
--------- ---------
Net cash used for investing activities .............. (40,560) (36,720)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from long-term debt .............................. 47,500 234,000
Repayments of long-term debt .............................. (85,000) (261,000)
Net proceeds of other debt ................................ 2,780 410
Net repayments from accounts receivable transactions ...... -- (17,000)
Deferred financing costs .................................. -- (790)
Dividends paid ............................................ (23,340) --
--------- ---------
Net cash used for financing activities .............. (58,060) (44,380)
--------- ---------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the period ........................ 9,230 (10,530)
Balance, beginning of period .............................. 4,140 22,400
--------- ---------
Balance, end of period .................................... $ 13,370 $ 11,870
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 7
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The Condensed Consolidated Financial Statements include the accounts of
LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the "Company") and its subsidiary
companies as of September 30, 1998 (unaudited) and December 31, 1997, and for
the nine and three month periods ended September 30, 1998 and 1997 (unaudited).
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
accompanying unaudited Condensed Consolidated Financial Statements should be
read in conjunction with the Consolidated Financial Statements and notes thereto
in the Company's report on Form 10-K for the fiscal year ended December 31,
1997. In the Notes to Condensed Consolidated Financial Statements, all dollar
amounts are shown in thousands unless otherwise stated.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 129 ("SFAS No. 129"),
"Disclosure of Information about Capital Structure," will become effective in
1998 and will not have a material effect on the information currently reported
by the Company. The Company will adopt the provisions of SFAS No. 129
effective December 31, 1998.
SFAS No. 130, "Reporting Comprehensive Income," became effective in 1998.
This Statement establishes standards for reporting and display of comprehensive
income and its components in the financial statements. Under the provision of
SFAS No. 130, the Company elected to report comprehensive income in a separate
statement of comprehensive income that begins with net income. Comparative
disclosures which include prior period information have been made to conform
with the provisions of this Statement.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," will become effective in 1998. This Statement establishes
standards for reporting information about operating segments in annual financial
statements and requires that enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. This Statement requires that the Company report financial and
descriptive information about its reportable operating segments on the basis
that is used internally for evaluation segment performance and deciding how to
allocate resources to segments. Comparative disclosures which include prior
period information will be restated to conform with the provisions of this
Statement. The Company will adopt the provisions of SFAS No. 131 effective
December 31, 1998.
SFAS No. 132, "Employers' Disclosure about Pensions and Other
Postretirement Benefits," will become effective in 1998. This statement
standardizes the disclosure requirements for pension and postretirement benefits
and will require changes in disclosures of benefit obligations and fair values
of plan assets. Comparative disclosures which include prior period information
will be restated to conform with the provisions of this Statement. The Company
will adopt the provisions of SFAS No. 132 effective December 31, 1998.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," will become effective for fiscal years beginning after June 15,
1999. This Statement standardizes the disclosure requirements for derivative
instruments and requires that all derivatives be recognized as assets or
liabilities and measured at fair value. The Company does not believe its
adoption will have a material impact on the Company's financial statements.
3. INVENTORY
As of September 30, 1998 and December 31, 1997, inventory balances were as
follows:
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 1998 31, 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
Finished goods ............... $226,300 $216,360
Raw materials ................ 200,480 216,010
Work in process .............. 72,650 77,740
-------- --------
$499,430 $510,110
======== ========
</TABLE>
5
<PAGE> 8
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT
As of September 30, 1998 and December 31, 1997, the outstanding balances
of long-term debt were as follows:
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 1998 31, 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
Revolving credit facility .......... $114,500 $152,000
Senior subordinated notes ......... 200,000 200,000
Other borrowings ................... 5,350 2,570
-------- --------
319,850 354,570
Less current portion ............... 8,240 2,970
-------- --------
$311,610 $351,600
======== ========
</TABLE>
5. RESTRUCTURING INITIATIVES
At the end of 1997, the Company completed an in-depth evaluation of its
global manufacturing and distribution base, and recorded a $58.5 million charge
to rationalize and restructure its worldwide operations, focusing principally on
the Company's Universal Furniture business unit. The majority of Universal
Furniture's restructuring activity is taking place in Asia, where facilities
with 1.3 million square feet of manufacturing and distribution space have been
eliminated as production has been consolidated into existing, lower-cost Asian
facilities. Implementation of this restructuring effort began in the first
quarter of 1998. As a result of the restructuring, significant non-recurring
costs are being incurred to sever lease obligations, provide for employee
severance, and provide for the impairment of inventory and property and
equipment. The restructuring initiatives include a reduction in workforce,
eliminating approximately 3,000 positions. The positions eliminated consist
primarily of production and supervisory personnel.
The activities discontinued consist of furniture and component parts
manufacturing plants that supply other manufacturing operations. The activities
previously performed at these facilities have been shifted to other facilities
where existing production capacity can be more efficiently utilized. As such,
the operations discontinued do not have separately identifiable revenues or
operating income.
The following represents the Company's restructuring activities for the
periods indicated (in millions):
<TABLE>
<CAPTION>
ASSET CONTRACTUAL EMPLOYEE
WRITE-DOWNS OBLIGATIONS SEVERANCE OTHER TOTAL
------------ ------------ ----------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 .. $38.1 $ 9.8 $ 8.8 $ 1.8 $58.5
Non-cash items ............. (38.1) -- -- -- (38.1)
Cash items ................. -- (6.1) (8.2) (1.8) (16.1)
----- ----- ----- ----- -----
Balance at September 30, 1998 . $ -- $ 3.7 $ 0.6 $ -- $ 4.3
===== ===== ===== ===== =====
</TABLE>
6
<PAGE> 9
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. GUARANTOR FINANCIAL STATEMENTS
In connection with the issuance of its 10 7/8% Senior Subordinated Notes
due 2006 (the "Notes"), the Company's domestic operating subsidiaries
("Guarantor Subsidiaries") fully and unconditionally guaranteed 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. There are no restrictions under the Company's financing
arrangements on the ability of the Guarantor Subsidiaries to distribute funds to
the Company in the form of cash dividends, loans or advances. The following
financial data provides information regarding the financial position, results of
operations and cash flows of the Guarantor Subsidiaries (condensed consolidating
financial data). Separate financial statements and other disclosures concerning
the Guarantor Subsidiaries are not presented because management has determined
that such information would not be material to the holders of the Notes.
For purposes of the condensed consolidating financial data, the Guarantor
Subsidiaries include substantially all domestic subsidiaries of the Company
(other than special purpose subsidiaries formed in connection with the Company's
receivables financing facility (the "Receivables Subsidiaries") 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 Company also accounts for its investments in the
Guarantor Subsidiaries and the Receivables Subsidiaries on the equity method.
The principal elimination entries are to eliminate the investments in
subsidiaries and intercompany balances and transactions.
7
<PAGE> 10
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash investments .............. $ -- $ 2,120 $ 11,250 $ -- $ 13,370
Trade receivables ...................... -- 18,280 45,520 -- 63,800
Investment in receivables trust ........ -- -- 71,770 -- 71,770
Other receivables ...................... -- 17,520 13,880 -- 31,400
Inventories ............................ -- 438,400 61,030 -- 499,430
Prepaid expenses ....................... -- 37,150 6,830 -- 43,980
Deferred income taxes .................. -- 28,700 9,830 -- 38,530
Intercompany account ................... -- 232,610 -- (232,610) --
----------- ----------- ----------- ----------- -----------
Total current assets .............. -- 774,780 220,110 (232,610) 762,280
Property and equipment, net .................. -- 270,910 73,860 -- 344,770
Other assets ................................. -- 41,790 1,630 -- 43,420
Investments in affiliates .................... 482,580 (56,500) -- (426,080) --
----------- ----------- ----------- ----------- -----------
Total assets ...................... $ 482,580 $ 1,030,980 $ 295,600 $ (658,690) $ 1,150,470
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Long-term debt, current ................ $ -- $ 4,680 $ 3,560 $ -- $ 8,240
Accounts payable ....................... -- 114,560 27,460 -- 142,020
Accrued liabilities .................... -- 86,350 37,150 -- 123,500
Intercompany account ................... -- -- 232,610 (232,610) --
----------- ----------- ----------- ----------- -----------
Total current liabilities ......... -- 205,590 300,780 (232,610) 273,760
Long-term debt ............................... -- 311,610 -- -- 311,610
Deferred income taxes ........................ -- 31,250 -- -- 31,250
Other long-term liabilities .................. -- 49,300 1,970 -- 51,270
----------- ----------- ----------- ----------- -----------
Total liabilities ................. -- 597,750 302,750 (238,820) 667,890
Stockholder's equity ......................... 482,580 433,230 (7,150) (426,080) 482,580
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholder's
equity ......................... $ 482,580 $ 1,030,980 $ 295,600 $ (658,690) $ 1,150,470
=========== =========== =========== =========== ===========
</TABLE>
8
<PAGE> 11
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash investments .............. $ -- $ (7,050) $ 11,190 $ -- $ 4,140
Trade receivables ...................... -- 23,860 40,620 -- 64,480
Investment in receivables trust ........ -- -- 64,010 -- 64,010
Other receivables ...................... -- 30,540 10,170 -- 40,710
Inventories ............................ -- 444,140 65,970 -- 510,110
Prepaid expenses ....................... -- 23,170 12,270 -- 35,440
Deferred income taxes .................. -- 28,700 9,830 -- 38,530
Intercompany account ................... -- 257,070 -- (257,070) --
-------- ----------- --------- --------- ----------
Total current assets .............. -- 800,430 214,060 (257,070) 757,420
Property and equipment, net .................. -- 265,440 71,950 -- 337,390
Other assets ................................. -- 54,510 1,900 -- 56,410
Investments in affiliates .................... 437,390 (79,830) -- (357,560) --
-------- ----------- --------- --------- ----------
Total assets ...................... $437,390 $ 1,040,550 $ 287,910 $(614,630) $1,151,220
======== =========== ========= ========= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Long-term debt, current ................ $ -- $ 2,200 $ 770 $ -- $ 2,970
Accounts payable ....................... -- 103,180 20,820 -- 124,000
Accrued liabilities .................... -- 102,920 47,020 -- 149,940
Intercompany account ................... -- -- 257,070 (257,070) --
-------- ----------- --------- --------- ----------
Total current liabilities ......... -- 208,300 325,680 (257,070) 276,910
Long-term debt ............................... -- 351,600 -- -- 351,600
Deferred income taxes ........................ -- 31,250 -- -- 31,250
Other long-term liabilities .................. -- 51,890 2,180 -- 54,070
-------- ----------- --------- --------- ----------
Total liabilities ................. -- 643,040 327,860 (257,070) 713,830
Stockholder's equity ......................... 437,390 397,510 (39,950) (357,560) 437,390
-------- ----------- --------- --------- ----------
Total liabilities and stockholder's
equity ......................... $437,390 $ 1,040,550 $ 287,910 $(614,630) $1,151,220
======== =========== ========= ========= ==========
</TABLE>
9
<PAGE> 12
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales ............................. $ -- $1,364,460 $ 404,310 $(300,330) $ 1,468,440
Cost of sales ......................... -- 1,048,460 350,660 (294,750) 1,104,370
-------- ---------- --------- --------- -----------
Gross profit ....................... -- 316,000 53,650 (5,580) 364,070
Selling, general and administrative
expenses ........................... -- 231,990 34,200 -- 266,190
-------- ---------- --------- --------- -----------
Operating profit ................... -- 84,010 19,450 (5,580) 97,880
Other (income) expense, net ........... (53,520) 28,890 (11,430) 68,030 31,970
-------- ---------- --------- --------- -----------
Income before income taxes ......... 53,520 55,120 30,880 (73,610) 65,910
Income taxes .......................... -- 11,100 6,870 -- 17,970
-------- ---------- --------- --------- -----------
Net income ........................ 53,520 44,020 24,010 (73,610) 47,940
-------- ---------- --------- --------- -----------
Other comprehensive income, net of tax:
Foreign currency translation ...... -- -- (2,750) -- (2,750)
-------- ---------- --------- --------- -----------
Comprehensive income .............. $ 53,520 $ 44,020 $ 21,260 $ (73,610) $ 45,190
======== ========== ========= ========= ===========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales .............................. $ -- $ 1,311,380 $ 327,140 $(187,650) $ 1,450,870
Cost of sales .......................... -- 989,600 273,660 (187,650) 1,075,610
-------- ----------- --------- --------- -----------
Gross profit ........................ -- 321,780 53,480 -- 375,260
Selling, general and
administrative expenses ............. -- 222,730 36,770 -- 259,500
-------- ----------- --------- --------- -----------
Operating profit .................... -- 99,050 16,710 -- 115,760
Other (income) expense, net ............ (47,970) 45,800 (2,470) 48,270 43,630
-------- ----------- --------- --------- -----------
Income (loss) before income
taxes and extraordinary item ..... 47,970 53,250 19,180 (48,270) 72,130
Income taxes ........................... -- 20,230 3,930 -- 24,160
-------- ----------- --------- --------- -----------
Income (loss) before
extraordinary item ............... 47,970 33,020 15,250 (48,270) 47,970
Extraordinary item-loss on early
Extinguishment of debt (net of income
taxes of $7,750) .................... -- (11,620) -- -- (11,620)
-------- ----------- --------- --------- -----------
Net income (loss) ...................... 47,970 21,400 15,250 (48,270) 36,350
-------- ----------- --------- --------- -----------
Other comprehensive income, net of tax:
Foreign currency translation ....... -- -- (4,350) -- (4,350)
-------- ----------- --------- --------- -----------
Comprehensive income ............... $ 47,970 $ 21,400 $ 10,900 $ (48,270) $ 32,000
======== =========== ========= ========= ===========
</TABLE>
10
<PAGE> 13
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING
ACTIVITIES: ........................ $ -- $ 75,110 $ 32,740 $ -- $ 107,850
-------- -------- -------- -------- ---------
INVESTING ACTIVITIES:
Capital expenditures .................. -- (22,560) (6,710) -- (29,270)
Fabric sample book expenditures ....... -- (11,090) -- -- (11,090)
Net investments in receivables trust .. -- -- (7,760) -- (7,760)
Issuance of notes receivable .......... -- (580) -- -- (580)
Collection of notes receivable ........ -- 6,460 -- -- 6,460
Other, net ............................ -- 4,430 (2,750) -- 1,680
-------- -------- -------- -------- ---------
Net cash used for
investing activities .......... -- (23,340) (17,220) -- (40,560)
-------- -------- -------- -------- ---------
FINANCING ACTIVITIES:
Proceeds from long-term debt .......... -- 47,500 -- -- 47,500
Repayments of long-term debt .......... -- (85,000) -- -- (85,000)
Net proceeds (repayments) of
other debt.......................... -- (10) 2,790 -- 2,780
Dividends paid ........................ -- (23,340) -- -- (23,340)
Intercompany accounts, net ............ -- 18,250 (18,250) -- --
-------- -------- -------- -------- ---------
Net cash used for
financing activities .......... -- (42,600) (15,460) -- (58,060)
-------- -------- -------- -------- ---------
CASH AND CASH INVESTMENTS:
Increase for the period ............... -- 9,170 60 -- 9,230
Balance, beginning of period .......... -- (7,050) 11,190 -- 4,140
-------- -------- -------- -------- ---------
Balance, end of period ................ $ - $ 2,120 $ 11,250 $ - $ 13,370
======== ======== ======== ======== =========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING
ACTIVITIES: ........................ $ -- $ 40,470 $ 30,100 $ -- $ 70,570
------- --------- -------- -------- ---------
INVESTING ACTIVITIES:
Capital expenditures ............... -- (20,950) (2,970) -- (23,920)
Fabric sample book expenditures .... -- (10,160) -- -- (10,160)
Net investments in receivables
trust .......................... -- -- (8,780) -- (8,780)
Issuance of notes receivable ....... -- (2,950) -- -- (2,950)
Collection of notes receivable -- 11,370 -- -- 11,370
Other, net ......................... -- 1,570 (3,850) -- (2,280)
------- --------- -------- -------- ---------
Net cash used for investing
activities ....................... -- (21,120) (15,600) -- (36,720)
------- --------- -------- -------- ---------
FINANCING ACTIVITIES:
Proceeds from long-term debt ....... -- 234,000 -- -- 234,000
Repayments of long-term debt ....... -- (261,000) -- -- (261,000)
Net proceeds (repayments) of
other debt ....................... -- 930 (520) -- 410
Net repayments from accounts
receivable transactions ......... -- -- (17,000) -- (17,000)
Deferred financing costs ........... -- (790) -- -- (790)
Intercompany accounts, net ......... -- 1,440 (1,440) -- --
------- --------- -------- -------- ---------
Net cash used for financing
activities ...................... -- (25,420) (18,960) -- (44,380)
------- --------- -------- -------- ---------
CASH AND CASH INVESTMENTS:
Decrease for the period ............... -- (6,070) (4,460) -- (10,530)
Balance, beginning of period .......... -- 4,510 17,890 -- 22,400
------- --------- -------- -------- ---------
Balance, end of period ................ $ -- $ (1,560) $ 13,430 $ -- $ 11,870
======= ========= ======== ======== =========
</TABLE>
11
<PAGE> 14
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998 TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1997
Net sales were $1,468.4 million for the nine months ended September 30,
1998, an increase of $17.5 million, or 1.2%, from $1,450.9 million for the
comparable period of 1997. Net sales of fine furniture increased 2.1% to
$1,276.6 million for the nine months ended September 30, 1998 from $1,250.7
million for the comparable period of 1997. The Company's net sales of fine
furniture, while increasing over the comparable period of 1997, were negatively
impacted as the implementation of planned restructuring, reengineering and
logistics initiatives combined to temporarily limit product availability. Net
sales of decorative home furnishing fabrics decreased 4.2% to $191.8 million for
the nine months ended September 30, 1998 from $200.2 million for the comparable
period of 1997. Decorative home furnishing fabric sales were lost due to
shipping delays incurred during the implementation of a more sophisticated
computer system at The Robert Allen Group. This computer system is now on-line
and 24-hour order-to-ship performance with additional functionality is being
achieved.
Gross profit was $364.1 million for the nine months ended September 30,
1998, a decrease of $11.2 million, or 3.0%, from $375.3 million for the
comparable period of 1997. Gross profit margins decreased to 24.8% for the nine
months ended September 30, 1998 from 25.9% for the comparable period of 1997.
Gross profit margins were negatively impacted by transition costs related to the
Company's restructuring and reengineering initiatives associated with
implementation of "Pull" manufacturing processes, as well as temporary
production inefficiencies, increased overhead expenses associated with the
successful introduction of an unusually large number of new products, inventory
reduction programs and the costs related to the computer system implementation
at The Robert Allen Group. The Company is reengineering its manufacturing
processes in order to reduce order-to-ship cycles, improve product quality and
value, reduce inventories and broadly improve the Company's responsiveness to
customers and consumers. Gross profit is expected to be unfavorably impacted,
although at a reduced rate, through the next several quarters as additional
costs continue in support of these restructuring and reengineering initiatives.
Selling, general and administrative expenses were $266.2 million for the
nine months ended September 30, 1998, an increase of $6.7 million, or 2.6%, from
$259.5 million for the comparable period of 1997. As a percentage of net sales,
selling, general and administrative expenses increased to 18.1% for the nine
months ended September 30, 1998 from 17.9% for the comparable period of 1997.
Selling expense was 11.0% of net sales as compared to 11.1% for 1997, and
general and administrative expenses were 7.1% of net sales compared to 6.8% in
1997. General and administrative expenses increased due to higher consulting
fees and other administrative costs.
Operating profit was $97.9 million for the nine months ended September 30,
1998, a decrease of $17.9 million, or 15.5%, from $115.8 million for the
comparable period of 1997. As a percentage of net sales, operating profit
decreased to 6.7% for the nine months ended September 30, 1998 from 8.0% for the
comparable period of 1997. The decline in operating profit is directly
attributable to the aforementioned planned restructuring and reengineering
initiatives, which necessarily caused disruption at certain plants and resulted
in additional costs. In addition, the Company incurred costs related to the
computer system implementation at The Robert Allen Group. Operating profit is
expected to be unfavorably impacted, although at a reduced rate, through the
next several quarters as additional costs continue in support of these
restructuring and reengineering initiatives.
Exclusive of transition costs related to the Company's restructuring and
reengineering initiatives and costs related to the computer system
implementation at the Robert Allen Group, adjusted or "core" operating profit
was $124.4 million, an increase of $8.6 million, or 7.4%, as compared to the
nine months ended September 30, 1997. As a percentage of net sales, "core"
operating profit increased to 8.5% for the nine months ended September 30, 1998
from 8.0% for the comparable period of 1997.
12
<PAGE> 15
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Interest expense was $24.1 million for the nine months ended September 30,
1998, a decrease of $8.7 million, or 26.5%, from the comparable period of 1997.
This decrease was a result of lower average debt outstanding during the nine
months ended September 30, 1998 and reduced interest rates obtained when the
Company refinanced its credit facility in August 1997.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1998 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997
Net sales were $491.0 million for the three months ended September 30,
1998, an increase of $9.8 million, or 2.0%, from $481.2 million for the
comparable period of 1997. Net sales of fine furniture increased 3.2% to $429.8
million for the three months ended September 30, 1998 from $416.3 million for
the comparable period of 1997. The Company's net sales of fine furniture, while
increasing over the comparable period of 1997, were negatively impacted as the
implementation of planned restructuring, reengineering and logistics initiatives
combined to temporarily limit product availability. Net sales of decorative home
furnishing fabrics decreased 5.7% to $61.2 million for the three months ended
September 30, 1998 from $64.9 million for the comparable period of 1997.
Gross profit was $122.1 million for the three months ended September 30,
1998, a decrease of $1.3 million, or 1.1%, from $123.4 million for the
comparable period of 1997. Gross profit margins decreased to 24.9% for the three
months ended September 30, 1998 from 25.6% for the comparable period of 1997.
Gross profit margins were negatively impacted by transition costs related to the
Company's restructuring and reengineering initiatives associated with
implementation of "Pull" manufacturing processes. The Company is reengineering
its manufacturing processes in order to reduce order-to-ship cycles, improve
product quality and value, reduce inventories and broadly improve the Company's
responsiveness to customers and consumers.
Selling, general and administrative expenses were $85.4 million for the
three months ended September 30, 1998, a decrease of $1.5 million, or 1.7%, from
$86.9 million for the comparable period of 1997. As a percentage of net sales,
selling, general and administrative expenses decreased to 17.4% for the three
months ended September 30, 1998 from 18.1% for the comparable period of 1997.
Selling expense was 10.5% of net sales as compared to 11.0% for 1997, and
general and administrative expenses were 6.9% of net sales compared to 7.1% in
1997. The decrease in selling expenses reflects essentially flat selling
expenses on higher sales volume. The decrease in general and administrative
expenses reflects higher bad debt expenses in the prior year related to
bankruptcy filings of two large customers.
Operating profit was $36.7 million for the three months ended September
30, 1998, essentially flat from $36.5 million for the comparable period of
1997. As a percentage of net sales, operating profit decreased to 7.5% for the
three months ended September 30, 1998 from 7.6% for the comparable period of
1997. The decline in operating profit is directly attributable to the
aforementioned planned restructuring and reengineering initiatives, which
necessarily caused disruption at certain plants and resulted in additional
costs.
Exclusive of transition costs related to the Company's restructuring and
reengineering initiatives, adjusted or "core" operating profit was $42.7
million, an increase of $6.2 million, or 17.0%, as compared to the three months
ended September 30, 1997. As a percentage of net sales, "core" operating profit
increased to 8.7% for the three months ended September 30, 1998 from 7.6% for
the comparable period of 1997.
Interest expense was $7.8 million for the three months ended September 30,
1998, a decrease of $2.7 million, or 25.7%, from the comparable period of 1997.
This decrease was a result of lower average debt outstanding during the three
months ended September 30, 1998 and reduced interest rates obtained when the
Company refinanced its credit facility in August 1997.
13
<PAGE> 16
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESTRUCTURING INITIATIVES
At the end of 1997, the Company completed an in-depth evaluation of its
global manufacturing and distribution base, and recorded a $58.5 million charge
to rationalize and restructure its worldwide operations, focusing principally on
the Company's Universal Furniture business unit. The majority of Universal
Furniture's restructuring activity is taking place in Asia, where facilities
with 1.3 million square feet of manufacturing and distribution space have been
eliminated as production has been consolidated into existing, lower-cost Asian
facilities. Implementation of this restructuring effort began in the first
quarter of 1998. As a result of the restructuring, significant non-recurring
costs are being incurred to sever lease obligations, provide for employee
severance, and provide for the impairment of inventory and property and
equipment. The restructuring initiatives include a reduction in workforce,
eliminating approximately 3,000 positions. The positions eliminated consist
primarily of production and supervisory personnel.
The activities discontinued consist of furniture and component parts
manufacturing plants that supply other manufacturing operations. The activities
previously performed at these facilities have been shifted to other facilities
where existing production capacity can be more efficiently utilized. As such,
the operations discontinued do not have separately identifiable revenues or
operating income.
The following represents the Company's restructuring activities for the
periods indicated (in millions):
<TABLE>
<CAPTION>
ASSET CONTRACTUAL EMPLOYEE
WRITE-DOWNS OBLIGATIONS SEVERANCE OTHER TOTAL
----------- ----------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 .. $38.1 $ 9.8 $ 8.8 $ 1.8 $58.5
Non-cash items ............. (38.1) -- -- -- (38.1)
Cash items ................. -- (6.1) (8.2) (1.8) (16.1)
----- ----- ----- ----- -----
Balance at September 30, 1998 . $ -- $ 3.7 $ 0.6 $ - $ 4.3
===== ===== ===== ===== =====
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from debt service, working
capital needs and the funding of capital expenditures. The Company's principal
source of cash to fund its liquidity needs is its net cash from operating
activities and availability of borrowings under its current $400.0 million
senior secured revolving credit facility.
During the nine months ended September 30, 1998, net cash from operating
activities totaled $107.9 million, net cash used for investing activities
totaled $40.6 million, and net cash used for financing activities totaled $58.1
million. A $23.3 million cash dividend to Furnishings International Inc. ("FII",
the Company's parent) was paid during January 1998.
Capital expenditures totaled $29.3 million for the nine months ended
September 30, 1998, an increase of $5.4 million from the comparable period of
1997. Fabric sample book expenditures totaled $11.1 million for the nine months
ended September 30, 1998, an increase of $0.9 million over the comparable period
of 1997.
LifeStyle made net principal payments on its long-term debt of $34.7
million during the nine months ended September 30, 1998. Total long-term debt
decreased to $319.9 million as of September 30, 1998 as compared to $354.6
million at December 31, 1997. As of November 3, 1998, the Company had borrowed
an additional $1.0 million under its revolving credit facility.
14
<PAGE> 17
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
On July 7, 1998, FII filed with the Securities and Exchange Commission a
registration statement on Form S-1 relating to a proposed initial public
offering of up to $460 million in common stock. Since the time of the filing,
however, FII and its advisors have determined that, in light of current market
conditions, it is in the best interest of FII and the Company to delay the
proposed public offering until a later date.
On August 12, 1998, the Company commenced a cash tender offer and consent
solicitation to acquire all of its outstanding $200 million 10-7/8% Senior
Subordinated Notes due 2006 (the "Subordinated Notes"), contingent upon the
completion of the initial public offering. On August 25, 1998, the Company
announced that it had received consents from the holders of 100% of the
Subordinated Notes accepting the offer to purchase their notes and consenting to
the adoption of amendments eliminating substantially all of the covenants and
restrictive provisions under the indenture governing the Subordinated Notes. The
tender offer was subsequently amended on September 11, 1998 to reduce the total
consideration payable pursuant to the offer and to delete completion of the
initial public offering as a condition to acceptance and purchase of the
Subordinated Notes. Following receipt of the amended offer, a majority of the
holders of the Subordinated Notes elected to withdraw their notes and, on
September 28, 1998, the Company announced that its tender offer and consent
solicitation had been terminated.
YEAR 2000 ISSUES
Year 2000 issues are the result of computer programs that were written
using two digits rather than four to define the applicable year. For example,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among other material adverse
consequences, a temporary inability to process transactions or engage in similar
normal business activities.
Each of the Company's subsidiaries is evaluating its computerized systems
on an internal basis, and is making corrective plans where required. Such
evaluations are designed to cover all financial and operational systems and the
Company has begun to make the necessary changes. The Company has hired a Year
2000 Project Director who is charged with Year 2000 planning and remediation and
has established a committee comprised of senior managers to review our Year 2000
implementation strategy and to oversee Year 2000 compliance measures. The
Company has also contracted with a computer systems consulting firm to conduct a
review of all of the Company's computer systems and to issue a report on the
necessary compliance measures. In order to determine the effect on the Company
if a supplier or customer failed to resolve its own Year 2000 issues, the
Company is communicating with its suppliers and customers about the compliance
of their own systems. The Company cannot be sure that the failure of a customer
or supplier to be Year 2000 will not have a material adverse effect on the
Company's own business. The Company intends to complete the final assessment and
implementation of the corrective action plans during 1998 and 1999. The Company
currently anticipates that the development and implementation of Year 2000
compliance measures will cost approximately $12 million all of which will be
expensed. In addition, during 1997, the Company began implementing a
company-wide, Oracle-based software platform that is designed to be Year 2000
compliant.
15
<PAGE> 18
PART II. OTHER INFORMATION
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Items 1, 2, 3, 4, and 5 are not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
<S> <C>
27+ Financial Data Schedule
(b) Reports on Form 8-K
Report on Form 8-K dated August 12, 1998 reporting under Item 5
the issuance of a press release relating to the announcement of a
cash tender offer and solicitation of consents with respect to
the Company's outstanding public debt.
Report on Form 8-K dated August 14, 1998 reporting under Item 5
the issuance of a press release relating to the announcement of
the Company's results of operations for the second quarter 1998.
Report on Form 8-K dated August 25, 1998 reporting under Item 5
the issuance of a press release relating to the announcement of
the receipt of requisite consents to a cash tender offer and
solicitation of consents with respect to the Company's
outstanding public debt.
Report on Form 8-K dated September 11, 1998 reporting under Item
5 the issuance of a press release relating to the announcement of
an amendment to the terms of the Company's cash tender offer and
solicitation of consents with respect to its outstanding public
debt.
</TABLE>
- -----------
+ Filed herewith
16
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Date: November 9, 1998 BY: /s/ RONALD J. HOFFMAN
--------------------------------------------
Ronald J. Hoffman
Vice President, Chief Financial Officer and Treasurer
(Chief Financial Officer and Authorized Signatory)
17
<PAGE> 20
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------------- ---------------------------------------------------------
<S> <C>
27+ Financial Data Schedule
</TABLE>
- -----------
+ Filed herewith
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 13370
<SECURITIES> 71770
<RECEIVABLES> 95200<F1>
<ALLOWANCES> 0
<INVENTORY> 499430
<CURRENT-ASSETS> 762280
<PP&E> 344770<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 1150470
<CURRENT-LIABILITIES> 273760
<BONDS> 200000
0
0
<COMMON> 0
<OTHER-SE> 482580
<TOTAL-LIABILITY-AND-EQUITY> 1150470
<SALES> 490980
<TOTAL-REVENUES> 490980
<CGS> 368890
<TOTAL-COSTS> 368890
<OTHER-EXPENSES> 1830
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7770
<INCOME-PRETAX> 27060
<INCOME-TAX> 5920
<INCOME-CONTINUING> 21140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21140
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables and property and equipment are presented net of allowances for
doubtful accounts and accumulated depreciation and amortization, respectively.
</FN>
</TABLE>
