|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended September 2, 2000
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____ to ____
Commission file number 0-4173
| DMI FURNITURE, INC. |
| (Exact name of registrant as specified in its charter) |
| DELAWARE | 41-0678467 | |
| (State of incorporation) | (IRS employer ID number) | |
| One Oxmoor Place, 101 Bullitt Lane, Louisville, Kentucky 40222 |
| (Address of principal executive offices) |
Registrant’s telephone number with area code: (502) 426-4351
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
| COMMON STOCK, $.10 PAR VALUE |
| (Title of Class) |
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [ ]
Total pages — 58
Page 1
The aggregate market value of the voting stock held by non-affiliates of the Registrant was $9,019,325 as of September 2, 2000.
Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock as of the last practicable date.
| Class | Outstanding at September 2, 2000 | |||
| Common Stock, Par Value $.10 per Share | 4,132,255 | |||
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders on December 15, 2000 are incorporated by reference into Part III. Part I.
Page 2
Part I.
Item 1. BUSINESS.
Preliminary Note Regarding Forward-Looking Statements
The information set forth in “Item 1. Business,” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the other portions of this report includes forward-looking statements about the Corporation and its business. For this purpose, the use of words such as “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. Factors that realistically could cause results to differ materially from those projected in the forward-looking statements include the cyclical and seasonal nature of the furniture market; the availability and cost of raw materials and labor; availability, terms and deployment of capital; events that disrupt the flow of goods from off-shore manufacturing sources; merchandising decisions by one or more of the Company’s major customers that adversely affect their purchases of the Company’s furniture products; changes in fashion or tastes; general conditions in the economy or capital markets; demographic changes; competition; and other factors identified in “Item 1. Business,” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in other portions of this report.
(a) General Development of Business.
The operations of the Company during the past three years consisted of the manufacture, import, and sale of low and medium-priced residential, home office, and commercial office furniture.
(b) Financial Information About Industry Segments.
The Company’s continuing operations as shown in its Selected Financial Data (See Item 6) for the five years ended September 2, 2000, consist of one industry segment — the manufacture, import, and sale of furniture.
(c) Narrative Description of the Business.
The Company manufactures, imports, and sells low and medium-priced bedroom furniture, dining furniture, occasional and accent furniture, home office and commercial office furniture, conference tables, and chairs.
The Company’s furniture products are marketed throughout the United States, Puerto Rico, Canada, Mexico, Caribbean, and Saudi Arabia, principally to furniture retailers. Export sales totaled approximately 2% of the Company’s sales in fiscal 2000. Approximately 6% of the Company’s sales are to wholesale distributors. The Company’s sales are made through independent, commissioned sales representatives, as well as sales and marketing personnel employed by the Company. The Company maintains showrooms for furniture markets in High Point, North Carolina. The Company also participates in the annual NeoCon commercial office furniture tradeshow in Chicago, Illinois.
I-1
Page 3
The raw materials essential to the domestic manufacture of furniture are wood, board products, fabric, finishing materials, hardware and glass. There are a number of sources of supply for wood, board products and fabric. Approximately 42% of these materials are purchased from independent suppliers, and the balance of these materials are obtained by the Company by processing purchased logs and lumber through the Company’s saw mill and dimension plant, by cutting various types of board and drawer body parts, and manufacturing high pressure laminated tops for its office furniture. If, for any reason, the Company’s existing sources of supply for any of its raw materials became unable to service the Company, the Company believes its furniture manufacturing operations would not be adversely affected because there are adequate alternate sources of supply. Loss of any one or several sources of supply would not have a material adverse effect on the Company as ample alternative sources exist.
Approximately 62% of the Company’s total sales are of imported product. The Company sources these products from various factories in Asia and Mexico, both through agents and direct, based primarily on Company developed designs. The Company maintains showrooms, production offices, and quality control organizations in China and Thailand. An unanticipated interruption in the flow of products from one or more of these factories could have a short-term material adverse effect on the Company’s results of operations.
The Company owns or uses the following trademarks in connection with its furniture products, which trademarks are due to expire on the dates indicated below:
| Trademark | Product | Date | ||||
| TOP GUARD | All DMI products | 2002 | ||||
| Wood Classics Furniture Company | All DMI products | 2006 | ||||
| Carolina Desk Company | All DMI products | 2008 | ||||
| DMI | All DMI products | 2009 | ||||
| DMI Furniture, Inc. | All DMI products | 2009 | ||||
| Wood Manor | All DMI products | 2007 | ||||
| Cyber City Furniture Warehouse | All DMI products | 2007 | ||||
| Carolina Classics Office Furniture Company |
All DMI products | 2010 | ||||
| Wynwood | All DMI products | 2009 | ||||
| Homestyles | All DMI products | Pending | ||||
| Dolly Madison | All DMI products | 2010 | ||||
| Barrister Oak | All DMI products | 2008 | ||||
| Freelance | All DMI products | Pending | ||||
| Euroflex | All DMI products | Pending | ||||
| Flexcom | All DMI products | Pending | ||||
| Shenandoah Valley Furniture Company |
All DMI products | Pending | ||||
| Locust Grove Furniture Company | All DMI products | Pending | ||||
| Sonoma Collection by Virginia County Furniture Classics |
All DMI products | Pending | ||||
It is not common in the furniture industry to obtain a patent for a furniture design. If a particular design of a furniture manufacturer is well accepted in the marketplace, it is common for
I-2
Page 4
other manufacturers to imitate the same design without recourse by the furniture manufacturer who initially introduced the design. The Company often engages independent designers to work in conjunction with its own personnel in designing furniture products.
The Company’s sales have historically not been subject to material seasonal fluctuations. However, as the Company’s seasonal promotions of imported furniture increase, the sales may be more subject to quarterly fluctuations. See Note 10 to the consolidated financial statements.
It is the furniture industry’s and the Company’s practice to grant extended payment terms from time to time to promote sales of products. From time to time, the Company extends payment terms by 30 to 60 days in an attempt to stimulate sales of its products. The frequency of the special payment terms depends upon general business conditions, but generally extended terms are offered only once or twice per year and then only on certain products. These special payment terms have not had, nor are they expected to have in the future, any material impact on the Company’s liquidity.
The Company’s six largest customers accounted for approximately 49% of the Company’s total sales in fiscal 2000. One customer accounted for 30.7% of the Company’s total net sales for fiscal 2000. The loss of one or more of these customers at the same time could have a materially adverse effect on the business of the Company. As of September 2, 2000, one customer accounted for approximately 34% of total accounts receivable. The Company’s customers include large furniture chain store retailers, wholesale clubs, catalog retailers, and independent distributors, as well as numerous smaller retailers.
The furniture industry is extremely competitive. The Company competes in the national market for low to upper medium-priced furniture. Due to the fragmented nature of the furniture manufacturing industry and the unavailability of complete financial reports for all its competitors, the Company is unable to accurately state its rank in the industry. There are, however, a large number of furniture manufacturers with substantially greater sales and greater economic resources than the Company, a number of which are subsidiaries or divisions of large national companies. The principal methods of competition in the furniture industry are design, pricing, sales force, customer service, and manufacturing location.
The Company believes it is a leading producer and marketer of popular priced “promotional” bedroom furniture, home office furniture, and wood office furniture.
The Company employs approximately 382 employees, of whom approximately 108 are covered by collective bargaining contracts. The collective bargaining agreement with the United Steel Workers of America, Local 331U, covering 86 employees, expires on March 31, 2001. The Company presently does not anticipate a strike or work stoppage at any of its facilities. However, it cannot be assumed that labor difficulties will not be encountered in the future.
Item 2. PROPERTIES.
The Company’s principal offices are located in 10,336 square feet of leased office space in Louisville, Kentucky.
I-3
Page 5
The Company owns two operating furniture-manufacturing plants located in Huntingburg, Indiana (78,910 square feet, and 100,000 square feet); a sawmill and a dimension parts plant located in Ferdinand, Indiana; and a fabrication plant in Huntingburg, Indiana (98,000 square feet). In addition, the Company owns two warehousing facilities totaling 335,000 square feet in Huntingburg, Indiana.
During fiscal 2000 the Company closed and sold its furniture manufacturing plant located in Ferdinand, Indiana (117,823 square feet). See Note 12 to the financial statements for additional information.
All of the Company’s properties are encumbered by mortgages held by its bank. See Note 2 to the consolidated financial statements.
The productive capacity and extent of utilization of each of the Company’s manufacturing facilities for the fiscal year ended September 2, 2000 are set forth in the table below. “Productive capacity” is defined for this purpose as gross sales dollars produced both for outside sales and internal integration, working fifty hours per week on a single shift with the existing number of employees and no material investments in machinery and equipment or change in product mix. The Company has on occasion operated more than one shift at one of its plants and may add shifts to other plants in the future to increase capacity.
| Fiscal 2000 | |||||||||||||
| Facility | Capacity | Production | %Utilized | ||||||||||
| (dollars in thousands) | |||||||||||||
| Huntingburg, Ind. 5th St. Plant | $ | 22,695 | $ | 20,089 | 89 | % | |||||||
| Huntingburg, Ind. Chestnut Street Plant | 20,383 | 17,627 | 86 | % | |||||||||
| Huntingburg, Ind. Fabricator | 9,455 | 7,576 | 80 | % | |||||||||
| Ferdinand, Ind. Sawmill/ | |||||||||||||
| Dimension Plant | 8,313 | 7,212 | 87 | % | |||||||||
| $ | 60,846 | $ | 52,504 | 86 | % | ||||||||
Item 3. LEGAL PROCEEDINGS.
The Company is a defendant in various lawsuits arising in the normal course of business. In management’s opinion, these lawsuits are not material to the results of operations or financial position of the Company, or are adequately covered by insurance.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of the fiscal year, which required a vote of security holders.
I-4
Page 6
Part II.
Item 5. MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS.
(a) Price Range of Common Stock
The Company’s Common Stock is traded in the over-the-counter market and is quoted on NASDAQ under the trading symbol DMIF. The following table sets forth the high and low bid quotations, as reported by NASDAQ for the Company’s Common Stock, for each fiscal quarter indicated. The quotations represent prices between dealers, do not include commissions, mark-ups or markdowns and may not represent actual transactions.
| High Bid | Low Bid | |||||||
| Price | Price | Price | ||||||
| 1st Quarter of 1999 | $ | 3.75 | $ | 2.06 | ||||
| 2nd Quarter of 1999 | $ | 4.88 | $ | 3.31 | ||||
| 3rd Quarter of 1999 | $ | 4.13 | $ | 2.94 | ||||
| 4th Quarter of 1999 | $ | 3.19 | $ | 2.00 | ||||
| 1st Quarter of 2000 | $ | 2.50 | $ | 1.25 | ||||
| 2nd Quarter of 2000 | $ | 2.38 | $ | 1.00 | ||||
| 3rd Quarter of 2000 | $ | 2.88 | $ | 2.00 | ||||
| 4th Quarter of 2000 | $ | 2.81 | $ | 1.97 | ||||
(b) Approximate Number of Equity Security Holders
Title of Class- Common Stock, $.10 Par Value
Approximate Number of Stockholders as of September 2, 2000 — 1,303
(c) Dividend History
No dividends have been paid on the Registrant’s Common Stock since its issuance on November 11, 1977.
(d) Dividend Policy
Payment of dividends is within the discretion of the Company’s Board of Directors and will depend, among other factors, on earnings, capital requirements and the operating and financial condition of the Company. At the present time, the Company’s anticipated capital requirements are such that it intends to follow a policy of retaining earnings in order to finance the development of its business and the retirement of its debt. In addition, the Company’s present financing agreement with Bank One, Indiana, N.A. prohibits the payment of dividends on common stock without the written consent of the bank. See Notes 2 and 5 to the consolidated financial statements.
II-1
Page 7
ITEM 6.
DMI FURNITURE, INC.
SELECTED FINANCIAL DATA (1)
| Fiscal Year Ended | ||||||||||||||||||||
| September 2, | August 28, | August 29, | August 30, | August 31, | ||||||||||||||||
| 2000 | 1999 | 1998 | 1997 | 1996 | ||||||||||||||||
| (Amounts in thousands except per share amounts) | ||||||||||||||||||||
| Net sales | $ | 104,837 | $ | 80,373 | $ | 64,727 | $ | 56,434 | $ | 55,563 | ||||||||||
| Net income from continuing operations | 2,565 | (5)1,088 | 1,975 | 2,416 | (3)376 | |||||||||||||||
| Diluted earnings per common share (2) | $ | 0.60 | (5)$0.25 | (4)$0.07 | $ | 0.40 | (3)$0.07 | |||||||||||||
| Total assets | $ | 50,949 | $ | 45,279 | $ | 41,329 | $ | 35,551 | $ | 31,178 | ||||||||||
| Long-term debt and capital lease obligations | 27,353 | 26,838 | 22,917 | 14,857 | 13,661 | |||||||||||||||
Notes to selected financial data:
| Note 1 | - | This summary should be read in conjunction with the related financial statements and notes. | ||
| Note 2 | - | Diluted earnings per common share are based on the weighted average number of common and common equivalent shares outstanding during the period. | ||
| Note 3 | - | Includes plant closing reserve which reduced net income and earnings per common share by approximately $538,000 and $.09 per share respectively. | ||
| Note 4 | - | Includes charge from preferred stock redemption of $1,666,000 which impacted diluted earnings per common share by approximately $.40. | ||
| Note 5 | - | Includes plant closing reserve which reduced net income and earnings per common share by approximately $372,000 and $.08 per share respectively. | ||
II-2
Page 8
Item 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company has a $34,800,000 credit agreement with Bank One, Indiana, N.A. comprised of a $5,300,000 term loan, a $1,500,000 term loan, and a maximum revolving master note loan commitment of $28,000,000 (outstanding balance $19,950,338 as of September 2, 2000). Effective December 1, 2000, the maximum revolving master note payable is $26,500,000, including a $2,500,000 seasonal commitment to finance accounts receivable and inventory. On September 2, 2000, the Company had approximately $2,800,000 available under the formula for calculating its available borrowings. See Note 2 to the consolidated financial statements.
Demands for funds relate to payments for raw materials and other operating costs, resale merchandise, debt obligations, and capital expenditures. The Company’s ability to generate cash adequate to meet short and long-term needs results from the collection of accounts receivable and from its ability to borrow funds. The Company’s days of sales outstanding of accounts receivable averaged 60 days for fiscal 2000 and 57 days for fiscal 1999. Inventory turnover was 4.2 in fiscal 2000 and 3.7 in fiscal 1999. The Company believes it will be able to generate enough cash in fiscal 2001 from operations together with available borrowings under its revolving master note to make scheduled payments on its long-term debt.
On August 28, 1998 the Company retired its Series C Preferred Stock. Of the 1,995,050 Series C shares outstanding, 1,557,593 shares were redeemed for $3.00 per share by the Company as stated in its Certificate of Incorporation, and 437,457 Series C shares were converted into 722,762 common shares at the option of the holders. The redeeming shareholders were paid a final dividend of $75,319 on the date of redemption. The redemption of the 1,557,593 Series C shares resulted in a $1,666,000 charge to income applicable to common stock because the $3.00 redemption price exceeded the par value of the Series C stock of $2.00, and the Company recognized approximately $109,000 in transaction costs. The redemption was funded through term bank debt and cash. This transaction has, and will continue to, result in a substantial anti-dilutive effect on earnings per common share.
Key elements of the Consolidated Statement of Cash Flows (in thousands):
| 2000 | 1999 | 1998 | ||||||||||
| Net cash used by operating activities | $ | (1,476 | ) | $ | (4,093 | ) | $ | (1,211 | ) | |||
| Cash provided/(used) in investing activities | 298 | (385 | ) | (2,233 | ) | |||||||
| Net cash flows from operating and investing activities | (1,178 | ) | (4,478 | ) | (3,444 | ) | ||||||
| Cash provided by financing activities | 1,070 | 4,171 | 4,025 | |||||||||
| Net change in cash and cash equivalents | $ | (108 | ) | $ | (307 | ) | $ | 581 | ||||
During fiscal 2000, fiscal 1999 and fiscal 1998 the Company used cash flows for operations of $1,476,000, $4,093,000 and $1,211,000 respectively, primarily to finance finished goods inventories for its new divisions and new commercial office groups as well as to finance increased accounts receivables from substantially increased sales.
II-3
Page 9
Cash flows provided from investing activities were $298,000 for fiscal 2000. The cash provided in fiscal 2000 was primarily a result of asset sales related to the closure of Plant 4 (see note 12) partially offset by new equipment purchases. Cash flows of $385,000 were used for investing activities during fiscal 1999 primarily for plant and equipment modernization expenditures. Cash flows of $2,233,000 were used for investing activities during fiscal 1998 primarily to build a new warehousing and distribution facility, as well as to finish a capital project at the Company’s sawmill and dimension plant.
During fiscal 2000 net cash flows from financing activities of $1,070,000 were used primarily to finance working capital requirements. Net cash flows from financing activities of $4,171,000 for fiscal 1999 were used primarily to finance the previously mentioned fixed assets. Net cash flows from financing activities of $4,025,000 for fiscal 1998 were used to finance the previously mentioned capital expenditures.
The Company does not believe any events are probable which would materially change its present liquidity position, which is adequate to satisfy known demands for funds for operations and to pay bank and other debt. See Note 2 to the consolidated financial statements.
The Company’s fiscal 2001 budget for capital expenditures is approximately $484,000. The Company anticipates that its 2001 internal cash flow and additional borrowings available under its credit agreement will be sufficient to pay for these expenditures.
The Company is currently subject to claims under federal and state environmental laws based on allegations that the Company had hazardous substances disposed of at three waste disposal sites. Due to the limited nature of the Company’s involvement in these environmental proceedings, the availability of certain defenses, and the involvement of many other parties with substantial financial resources in the proceedings, the Company does not anticipate, based on currently available information, that potential environmental liabilities arising from these proceedings are likely to exceed the amount of the Company’s reserve by an amount that would have a material effect on the Company’s financial condition, results of operations or cash flows. Expenses for the year to date were not material. See “Item 3. Legal Proceedings” and Note 4 of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
Net sales for fiscal 2000 increased by $24,464,000 or approximately 30% over fiscal 1999. This increase was primarily volume driven and was the result of increased home office sales and sales by the Company’s Wynwood and Homestyles divisions. The sales changes were as follows: Home office sales accounted for approximately 48% of the sales increase; Wynwood and Homestyles together accounted for approximately 49% of the sales increase; commercial office sales accounted for 8% of the increase; while promotional bedroom sales decreased by approximately 9%. Net sales for fiscal 1999 increased by $15,646,000 or approximately 24% over fiscal 1998. The sales changes were as follows: Home office increased approximately 36%; Wynwood and Homestyles together accounted for approximately 18% of the sales increase; promotional bedroom sales decreased by approximately 8%; and commercial office sales decreased by approximately 5%.
As a percentage of sales, cost of sales was 80.5% of sales for fiscal 2000, 80.2% of sales
II-4
Page 10
for fiscal 1999, and 77.7% of sales for fiscal 1998. The increases in cost of sales as a percentage of sales in fiscal 2000 and fiscal 1999 were primarily a result of lower utilization of the Company’s production facilities and a lower margin product sales mix.
As a percentage of sales, selling, general and administrative expenses were 13.7% of sales for fiscal 2000, 14.6% of sales for fiscal 1999, and 15.9% of sales for fiscal 1998. The decrease in fiscal 2000 and fiscal 1999 as a percent of sales is primarily the result of the fixed nature of a majority of these expenses relative to the substantial sales increase
During the fourth quarter of fiscal 1999 management committed to permanently close its Ferdinand, Indiana furniture manufacturing plant during fiscal 2000. During the fourth quarter of fiscal 1999 the company recorded a pre-tax charge of $600,000 for the expected costs of closing the above-mentioned plant. As of May 27, 2000 the company had completed the shut down of the Ferdinand, Indiana plant. During the third quarter the company recognized a $166,000 gain on the sales of assets. The company also recorded a $125,000 plant closing reserve credit in the second fiscal quarter, as plant-closing costs became known. The balance in the plant closing reserve as of September 2, 2000 is zero.
Net interest expense increased to $2,239,000 in fiscal 2000 from $1,766,000 in fiscal 1999 primarily due to increases in the prime & LIBOR interest rates and higher loan balances to support the increased accounts receivable and inventory balances. Net interest expense increased to $1,766,000 in fiscal 1999 from $1,060,000 in fiscal 1998 primarily due to higher loan balances to support the increased accounts receivable and inventory balances.
Gain On Disposal Of Property, Plant and Equipment — during fiscal 2000 the Company sold or retired certain assets relating to the closure of the Ferdinand, IN manufacturing plant. The overall effect of the disposal is a $166,000 gain. In addition, other assets were disposed of in the ordinary course of business; the gain on the sale of these assets was approximately $7,000.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”. The Company expects to adopt the new Statement effective September 3, 2000. The Statement will require the Company to recognize all derivatives on the balance sheet at fair value. The Company does not anticipate that the adoption of this Statement will have a significant effect on its results of operations or financial position.
EFFECTS OF INFLATION
Inflation affects the Company’s business principally in the form of cost increases for material and wages. Management has attempted to cover increased costs by increasing sales prices to the extent permitted by competition. Historically, the Company has not been able to raise sales prices enough so as to offset all increased costs during all past years. The Company believes that its competitors also have not been able to raise their prices so as to offset all increased costs and therefore does not feel that the Company has incurred any material adverse effect on its competitive position. The Company believes that it has been able to minimize the effects of general inflation in the past by improving its manufacturing and purchasing efficiency and
II-5
Page 11
increasing its employee productivity. There can be no assurance that inflation will not have a material effect on the Company’s business in the future.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company’s primary market risk exposure with regard to financial instruments is changes in interest rates. At September 2, 2000, a hypothetical 100 basis points increase in short term interest rates would result in a reduction of approximately $200,000 in annual pretax earnings. This estimate assumes no change in the volume or composition of debt at September 2, 2000. The Company has effectively fixed the interest rates on approximately $8 million of its long-term debt through the use of interest rate swaps, and the above estimated earnings reduction takes these swaps into account. As of September 2, 2000 the fair market value of these swaps is approximately $193,500. (See Note 13)
II-6
Page 12
DMI FURNITURE, INC.
FORM 10-K
ITEMS 8, 14(a) 1 AND 2 AND 14(d)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial statements of the registrant required to be included in Item 8 are listed below:
| Page | ||
| Consolidated Financial Statements: | ||
| Report of Independent Public Accountants | F-1 | |
| Consolidated Balance Sheets as of September 2, 2000 and August 28, 1999 | F-2, F-3 | |
| Consolidated Statements of Income for the years ended September 2, 2000, August 28, 1999 and August 29, 1998 | F-4 | |
| Consolidated Statements of Stockholders’ Equity for the years ended September 2, 2000, August 28, 1999, and August 29, 1998 | F-5 | |
| Consolidated Statements of Cash Flows for the years ended September 2, 2000, August 28, 1999, and August 29, 1998 | F-6, F-7 | |
| Notes to Consolidated Financial Statements | F-8 – F-19 |
The following financial statement schedule of the registrant is included in Item 14(d):
| Page | ||
| II—Valuation and Qualifying Accounts | S-1 |
Schedules other than those mentioned above are omitted because the conditions requiring their filing do not exist or because the required information is presented in the consolidated financial statements, including the notes thereto.
II-7
Page 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders of DMI Furniture, Inc.:
We have audited the accompanying consolidated balance sheets of DMI Furniture, Inc. (a Delaware corporation) and subsidiary as of September 2, 2000 and August 28, 1999 and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended September 2, 2000. These consolidated financial statements and the schedule referred to below are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of DMI Furniture, Inc. and subsidiary as of September 2, 2000 and August 28, 1999, and the results of their operations and their cash flows for each of the three years in the period ended September 2, 2000 in conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the Index To Consolidated Financial Statements and Schedules is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
| ARTHUR ANDERSEN LLP |
October 11, 2000
Louisville, Kentucky
F-1
Page 14
DMI FURNITURE, INC.
CONSOLIDATED BALANCE SHEETS
September 2, 1000 and August 28, 1999
(Amounts in thousands)
| ASSETS | 2000 | 1999 | ||||||||||||
| Current assets: | ||||||||||||||
| Cash | $ | 677 | $ | 785 | ||||||||||
| Accounts receivable, less allowance for doubtful accounts of $201,000 in 2000 and $175,000 in 1999 (Note 11) | 17,891 | 12,686 | ||||||||||||
| Inventories (Note 9) | 20,811 | 18,905 | ||||||||||||
| Other current assets | 413 | 471 | ||||||||||||
| Current portion of deferred income taxes (Note 8) | 1,241 | 1,103 | ||||||||||||
| Total current assets | 41,033 | 33,950 | ||||||||||||
| Property, plant and equipment, at cost: | ||||||||||||||
| Land | 655 | 753 | ||||||||||||
| Buildings and improvements | 8,418 | 9,771 | ||||||||||||
| Machinery and equipment | 9,891 | 11,247 | ||||||||||||
| Leasehold improvements | 985 | 979 | ||||||||||||
| Construction in Progress | 399 | 0 | ||||||||||||
| 20,348 | 22,750 | |||||||||||||
| Less accumulated depreciation | 10,613 | 11,871 | ||||||||||||
| Net property, plant and equipment | 9,735 | 10,879 | ||||||||||||
| Other assets: | ||||||||||||||
| Intangible pension asset | 0 | 334 | ||||||||||||
| Other | 181 | 116 | ||||||||||||
| Total other assets | 181 | 450 | ||||||||||||
| Total Assets | $ | 50,949 | $ | 45,279 | ||||||||||
See accompanying notes.
F-2
Page 15
DMI FURNITURE, INC.
CONSOLIDATED BALANCE SHEETS
September 2, 2000 and August 28, 1999
(Amounts in thousands)
(Continued)
| LIABILITIES AND STOCKHOLDERS' EQUITY | 2000 | 1999 | |||||||||
| Current liabilities: | |||||||||||
| Trade accounts payable | $ | 3,576 | $ | 2,527 | |||||||
| Accrued liabilities (Note 9) | 3,754 | 2,665 | |||||||||
| Long-term debt due within one year (Note 2) | 1,500 | 1,509 | |||||||||
| Total current liabilities | $ | 8,830 | $ | 6,701 | |||||||
| Long-term liabilities: | |||||||||||
| Long-term debt (Note 2) | $ | 26,501 | $ | 25,425 | |||||||
| Accrued pension costs (Note 7) | 0 | 636 | |||||||||
| Deferred compensation (Note 7) | 176 | 228 | |||||||||
| Deferred income taxes (Note 8) | 676 | 549 | |||||||||
| $ | 27,353 | $ | 26,838 | ||||||||
| Commitments and contingencies (Notes 3 & 4) | |||||||||||
| Stockholders’ equity: (Notes 5 & 6)
Common stock, $.10 par value, 9,600,000 shares authorized, 4,132,255 shares outstanding (4,042,636 in 1999) |
$ | 413 | $ | 405 | |||||||
| Additional paid-in capital | 16,753 | 16,551 | |||||||||
| Retained deficit | (2,400 | ) | (4,965 | ) | |||||||
| Accumulated other comprehensive income | 0 | (251 | ) | ||||||||
| Total stockholders’ equity | $ | 14,766 | $ | 11,740 | |||||||
| Total liabilities and stockholders’ equity and stockholders’ | $ | 50,949 | $ | 45,279 | |||||||
See accompanying notes.
F-3
Page 16
DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share amounts)
| Years Ended | |||||||||||||
| September 2, | August 28, | August 29, | |||||||||||
| 2000 | 1999 | 1998 | |||||||||||
| Net sales (Note 11) | $ | 104,837 | $ | 80,373 | $ | 64,727 | |||||||
| Cost of sales | 84,399 | 64,476 | 50,291 | ||||||||||
| Gross profit | 20,438 | 15,897 | 14,436 | ||||||||||
| Selling, general and administrative expenses | 14,382 | 11,727 | 10,279 | ||||||||||
| Plant closing reserve (Note 12) | (125 | ) | 600 | 0 | |||||||||
| Other income (expense): | |||||||||||||
| Interest expense (net) | (2,239 | ) | (1,766 | ) | (1,060 | ) | |||||||
| Gain on disposal of property, plant and equipment | 173 | 17 | 10 | ||||||||||
| Other | 0 | (6 | ) | 24 | |||||||||
| (2,066 | ) | (1,755 | ) | (1,026 | ) | ||||||||
| Income before provision for income taxes | 4,115 | 1,815 | 3,131 | ||||||||||
| Provision for income taxes (Note 8) | (1,550 | ) | (727 | ) | (1,156 | ) | |||||||
| Net income | $ | 2,565 | $ | 1,088 | $ | 1,975 | |||||||
| Net income applicable to common stock (Note 5) | $ | 2,565 | $ | 1,088 | $ | 309 | |||||||
| Earnings per common share (Notes 1, 5, and 15) | |||||||||||||
| Basic | $ | 0.63 | $ | 0.27 | $ | 0.09 | |||||||
| Diluted | $ | 0.60 | $ | 0.25 | $ | 0.07 | |||||||
See accompanying notes.
F-4
Page 17
DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands)
Three years ended September 2, 2000
| Series C | Number of | Number of | (1) | |||||||||||||||||||||||||||||
| Convertible | Series C | Common | Additional | Retained | Minimum | |||||||||||||||||||||||||||
| Preferred | Shares | Common | Shares | Paid-In | Earnings | Pension | ||||||||||||||||||||||||||
| Stock | Outstanding | Stock | Outstanding | Capital | (Deficit) | Liability | Total | |||||||||||||||||||||||||
| BALANCES AT AUGUST 30, 1997 | 3,990 | 1,995 | 315 | 3,152 | 15,341 | (6,385 | ) | — | 13,261 | |||||||||||||||||||||||
| Net income | — | — | — | — | — | 1,975 | — | 1,975 | ||||||||||||||||||||||||
| Redemption of preferred stock | (3,115 | ) | (1,558 | ) | — | — | — | (1,667 | ) | — | (4,782 | ) | ||||||||||||||||||||
| Conversion of preferred stock | (875 | ) | (437 | ) | 73 | 723 | 802 | — | — | — | ||||||||||||||||||||||
| Dividends on preferred stock | — | — | — | — | — | 24 | — | 24 | ||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | (263 | ) | (263 | ) | ||||||||||||||||||||||
| Issuance of common stock | — | — | 2 | 17 | 40 | — | — | 42 | ||||||||||||||||||||||||
| BALANCES AT AUGUST 29, 1998 | — | — | 390 | 3,892 | 16,183 | (6,053 | ) | (263 | ) | 10,257 | ||||||||||||||||||||||
| Net income | — | — | — | — | — | 1,088 | — | 1,088 | ||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | 12 | 12 | ||||||||||||||||||||||||
| Issuance of common stock | — | — | 15 | 151 | 368 | — | — | 383 | ||||||||||||||||||||||||
| BALANCES AT AUGUST 28, 1999 | — | — | $ | 405 | 4,043 | $ | 16,551 | $ | (4,965 | ) | $ | (251 | ) | $ | 11,740 | |||||||||||||||||
| Net income | — | — | — | — | — | 2,565 | — | 2,565 | ||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | 251 | 251 | ||||||||||||||||||||||||
| Issuance of common stock | — | — | 8 | 89 | 202 | — | — | 210 | ||||||||||||||||||||||||
| BALANCES AT SEPTEMBER 2, 2000 | — | — | $ | 413 | 4,132 | $ | 16,753 | $ | (2,400 | ) | $ | — | $ | 14,766 | ||||||||||||||||||
| (1) | This column provides information with respect to accumulated other comprehensive income. | |
| (2) | Comprehensive income consists of the following (in thousands) 2000 - $2,816;1999 - $1,100; 1998 - $1,712 |
See accompanying notes.
F-5
Page 18
DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
| Years Ended | ||||||||||||||
| Sep. 2, | Aug. 28, | Aug. 29, | ||||||||||||
| 2000 | 1999 | 1998 | ||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income | $ | 2,565 | $ | 1,088 | $ | 1,975 | ||||||||
| Adjustments to reconcile net income to
net cash provided (used) by operating activities |
||||||||||||||
| Depreciation and amortization | 1,072 | 1,220 | 1,244 | |||||||||||
| Amortization of loan closing costs | 24 | 24 | 22 | |||||||||||
| (Gain) loss on disposal of property, plant and equipment | (173 | ) | (17 | ) | 9 | |||||||||
| Deferred income taxes | (11 | ) | (45 | ) | (219 | ) | ||||||||
| Changes in assets and liabilities: | ||||||||||||||
| Accounts receivable | (5,205 | ) | (2,434 | ) | (1,103 | ) | ||||||||
| Inventories | (1,906 | ) | (2,609 | ) | (4,035 | ) | ||||||||
| Other assets | (5 | ) | (126 | ) | (4 | ) | ||||||||
| Trade accounts payable | 1,049 | (994 | ) | 631 | ||||||||||
| Accrued liabilities | 1,296 | 6 | 409 | |||||||||||
| Accrued pension costs | (130 | ) | (161 | ) | (92 | ) | ||||||||
| Deferred compensation | (52 | ) | (45 | ) | (48 | ) | ||||||||
| Total adjustments | (4,041 | ) | (5,181 | ) | (3,186 | ) | ||||||||
| Net cash used by operating activities | (1,476 | ) | (4,093 | ) | (1,211 | ) | ||||||||
| Cash flows provided/(used) by investing activities: | ||||||||||||||
| Capital expenditures | (479 | ) | (404 | ) | (2,292 | ) | ||||||||
| Proceeds from the disposal of property, plant and equipment | 777 | 19 | 59 | |||||||||||
| Net cash provided/(used) by investing activities | 298 | (385 | ) | (2,233 | ) | |||||||||
See accompanying notes.
F-6
Page 19
DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(Amounts in thousands)
| Years Ended | ||||||||||||||
| Sep. 2, | Aug. 28, | Aug. 29, | ||||||||||||
| 2000 | 1999 | 1998 | ||||||||||||
| Cash flows provided/(used) by financing activities | ||||||||||||||
| Borrowings from line-of-credit | 32,950 | 32,567 | 24,672 | |||||||||||
| Payments on line-of-credit | (30,250 | ) | (27,150 | ) | (21,158 | ) | ||||||||
| Additions to long-term debt | — | — | 5,727 | |||||||||||
| Payments on long-term debt | (1,633 | ) | (1,400 | ) | (1,181 | ) | ||||||||
| Restricted cash | — | — | 1,080 | |||||||||||
| Cash dividends on preferred stock | — | — | (374 | ) | ||||||||||
| Proceeds from stock options exercised | 3 | 154 | 41 | |||||||||||
| Retirement of preferred stock | — | — | (4,782 | ) | ||||||||||
| Net cash provided by financing activities | 1,070 | 4,171 | 4,025 | |||||||||||
| Increase/(Decrease) in cash | (108 | ) | (307 | ) | 581 | |||||||||
| Cash — beginning of period | 785 | 1,092 | 511 | |||||||||||
| Cash — end of period | $ | 677 | $ | 785 | $ | 1,092 | ||||||||
| Cash paid for: | ||||||||||||||
| Interest (net of amounts capitalized) | $ | 2,205 | $ | 1,739 | $ | 1,014 | ||||||||
| Income taxes | $ | 1,274 | $ | 1,044 | $ | 1,164 | ||||||||
| Non cash Items: | ||||||||||||||
| Stock grants | $ | 207 | $ | 229 | $ | 1 | ||||||||
See accompanying notes.
F-7
Page 20
DMI FURNITURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
The Company — The consolidated financial statements include DMI Furniture, Inc. and its wholly owned subsidiary, DMI Management, Inc. (DMI or Company). All significant inter-company accounts and transactions have been eliminated. DMI Furniture, Inc. operates in one industry — the Company manufactures, imports, and sells residential, home office, and commercial office furniture. The Company has more than one operating segment which are aggregated into one reportable segment, in accordance with Financial Accounting Standards Board Statement No. 131, “Disclosures About Segments of an Enterprise and Related Information”. Its principal distribution channels are multi-market furniture retailers, distributors, independent retailers, catalogers, and warehouse clubs located primarily throughout the United States. The Company’s fiscal year consists of a fifty-two week period ending on the last Saturday in August. Approximately every seven years the Company’s fiscal year consists of fifty-three weeks. Fiscal year 2000 consists of a fifty-three week period ending the first Saturday in September. Fiscal years 1999 and 1998 presented in this report consist of fifty-two weeks.
Inventories — Inventories are valued at the lower of cost (first-in, first-out method) or market.
Depreciation — Depreciation is provided on the basis of estimated useful lives of the property, plant and equipment, using the straight-line method. The useful lives of property, plant and equipment are as follows: Building and leasehold improvements, 8-35 years; and machinery and equipment, 3-13 years.
Income taxes — The Company recognizes deferred tax assets and liabilities based upon the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. (See Note 8 for additional information)
Earnings per common share — Earnings per common share are based on the weighted average number of common and common equivalent shares outstanding during the period (2000-4,274,000; 1999 — 4,383,000; 1998 — 4,214,781), and assumes the conversion of the Series C Preferred Stock into common stock. (See Note 15 for additional information)
Consolidated Statements of Cash Flows — For purposes of the Consolidated Statements of Cash Flows the Company considers all highly liquid debt instruments with an initial maturity of three months or less at the date of purchase to be cash equivalents.
Advertising — The Company expenses advertising-type costs as incurred. Advertising expense was approximately $1,672,000, $1,906,000 and $1,211,000 in fiscal 2000, 1999 and 1998 respectively.
Accounting Estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
F-8
Page 21
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Long-lived assets — In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (SFAS No. 121). This standard establishes accounting standards for evaluating the potential impairment of long-lived assets, certain identifiable intangibles and goodwill. The Company adopted the provisions of SFAS No. 121 in the first quarter of fiscal 1997 and the application of the standard has not resulted in an impairment loss.
Revenue recognition – The Company recognizes sales of its products when the products are shipped to customers.
Impact of Recently Issued Accounting Standards – In June 1998, the Financial Accounting Standards Board issued Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”. The Company expects to adopt the new Statement effective September 3, 2000. The Statement will require the Company to recognize all derivatives on the balance sheet at fair value. The Company does not anticipate that the adoption of this Statement will have a significant effect on its results of operations or financial position.
2. Long-term debt
Long-term debt consists of the following:
| 2000 | 1999 | ||||||||
| Economic Development Revenue Bonds; payable in twelve equal monthly payments beginning in fiscal 2002; weekly adjustable coupon interest rate (4.62% on 9/2/00) and payable monthly. | $ | 2,230,000 | $ | 2,230,000 | |||||
| Economic Development Revenue Bonds; payable in twelve equal monthly payments beginning in fiscal 2003; weekly adjustable coupon interest rate (4.62% on 9/2/00) and payable monthly. | 2,020,000 | 2,020,000 | |||||||
| Term note payable to bank; due in 45 monthly principal installments of $116,666.67 through 5/31/02; interest at prime + .25% (9.75%) or LIBOR + 2.5% (9.37%). | 2,501,000 | 4,017,000 | |||||||
| Term note payable to bank; due in 60 monthly principal installments of $8,333.33 and final payment of $1 million on 8/31/03; interest at prime + .25% (9.75%) or LIBOR + 2.5% (9.37%). | 1,300,000 | 1,408,000 | |||||||
F-9
Page 22
| 2000 | 1999 | ||||||||||||
| $28,000,000 revolving master note payable to bank; interest at prime + .25 (9.75%) or LIBOR + 2.5% (9.37%); expires December, 2000. | 19,950,000 | 17,250,000 | |||||||||||
| Capital leases on equipment; payable quarterly through March, 2000; interest at various rates. | 0 | 9,000 | |||||||||||
| 28,001,000 | 26,934,000 | ||||||||||||
| Less portion due within one year | 1,500,000 | 1,509,000 | |||||||||||
| $ | 26,501,000 | $ | 25,425,000 | ||||||||||
With respect to the term notes and revolving loan above, the Company has the option of borrowing based on prime rate + .25% or London Interbank Offered Rate (LIBOR) + 2.50%. As of September 2, 2000, $18 million of the revolver note balance and $3.6 million of the term loans were LIBOR priced.
Substantially all assets are pledged to collateralize long-term debt. On September 2, 2000, the Company had no additional borrowings available under the formula for calculating its available borrowings.
With respect to the Economic Development Revenue Bonds (Bonds), the Company has the option to establish the Bonds’ interest rate form (variable or fixed interest rate). When the Bonds are in the variable rate form, or at the end of a fixed interest rate period, the Bondholders reserve the right to demand payment on the Bonds. If any of the Bondholders exercise their rights, a remarketing agent is responsible for remarketing the Bonds on a best efforts basis for not less than the outstanding principal and accrued interest. If the Bonds cannot be remarketed the lender is committed to providing financing for up to 372 days. The letters of credit expire in 2001 unless earlier extended by the bank. As a result of these bank commitments, the Bonds are classified as long-term debt in the accompanying balance sheet.
The aggregate maturities of long-term debt and capital leases for the next five fiscal years and thereafter are as follows:
| 2001 | $ | 1,500,000 | |||
| 2002 | 25,393,000 | ||||
| 2003 | 1,108,000 | ||||
| 2004 | — | ||||
| 2005 | — | ||||
| Thereafter | — | ||||
| $ | 28,001,000 | ||||
The Company’s bank financing agreement contains restrictive covenants that require the Company, among other things, to maintain a fixed charge ratio, tangible net worth, and ratio of total funded debt to EBITDA, all as defined in the bank financing agreement. The financing agreement further restricts the Company from, among other things, without prior written consent, redeeming or purchasing any of its outstanding capital stock; acquiring, merging or consolidating with any other business; paying dividends; and, acquiring capital assets in excess of the annual depreciation. As of September 2, 2000 the Company is in compliance with the aforementioned
F-10
Page 23
covenants.
On October 9, 2000 Bank One, Indiana, NA committed, effective December 1, 2000, to a maximum revolving master note payable of $26,500,000 including a $2,500,000 seasonal commitment, to finance accounts receivable and inventory. In addition, the revolving master note payable expiration date was extended to December 31, 2001.
3. Lease commitments
The Company leases certain of its facilities and equipment under operating leases. The leases generally require the Company to pay taxes, insurance, maintenance and utilities. Some of the leases contain renewal options.
Future minimum lease payments at September 2, 2000 under these leases are as follows:
| 2000 | $ | 1,220,000 | ||
| 2001 | 655,000 | |||
| 2002 | 134,000 | |||
| 2003 | 15,000 | |||
| 2004 | 9,000 | |||
| Total minimum payments | $ | 2,033,000 | ||
Rent expense under operating leases charged to operations during fiscal years 2000, 1999 and 1998 was $1,114,000, $844,000 and $785,000 respectively.
4. Commitments and contingencies
The Company is currently subject to claims under federal and state environmental laws based on allegations that the Company had hazardous substances disposed of at three waste disposal sites. After depositing $57,000 in a trust fund under the terms of a tentative settlement of claims arising from one site and paying its portion of preliminary investigation and remediation costs at the other two sites, the Company retains a reserve of approximately $41,000 against potential environmental liabilities. Due to the limited nature of the Company’s involvement in these environmental proceedings, the availability of certain defenses, and the involvement of many other parties with substantial financial resources in the proceedings, the Company does not anticipate, based on currently available information, that potential environmental liabilities arising from these proceedings are likely to exceed the amount of the Company’s reserve by an amount that would have a material effect on the Company’s financial condition, results of operations or cash flows. Expenses for the year to date were not material.
The Company has entered into individual employment agreements with certain of its officers, which expire at various times through August 31, 2001. Certain of these agreements provide for lump sum payments in the event employment is terminated as a result of a change in ownership of the Company as defined in the agreements.
5. Convertible preferred stock
On August 28, 1998 the Company retired its Series C Preferred Stock. Of the 1,995,050 Series C shares outstanding, 1,557,593 shares were redeemed for $3.00 per share by the Company
F-11
Page 24
as stated in its Certificate of Incorporation, and 437,457 Series C shares were converted into 722,762 common shares at the option of the holders. The redeeming shareholders were paid a final dividend of $75,319 on the date of redemption. The redemption of the 1,557,593 Series C shares caused a $1,666,000 charge to income applicable to common stock because the $3.00 redemption price exceeded the par value of the Series C stock of $2.00, and the Company recognized approximately $109,000 in transaction costs. The redemption was funded through term bank debt and cash. There were $399,010 of preferred dividends accrued in fiscal 1997 of which approximately $374,000 were paid in fiscal 1998.
6. Stock options
The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued To Employees” (APB 25) and related Interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under FASB Statement No. 123, “Accounting for Stock-Based Compensation,” requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.
Had compensation cost for all option grants to employees and directors been determined consistent with FASB Statement No. 123, the Company’s net income and earnings per share would have been affected as follows. Because the method of accounting required by SFAS No. 123 has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years.
| 2000 | 1999 | 1998 | ||||||||||||
| Net income: As reported |
2,565,000 | $ | 1,088,000 | $ | 1,975,000 | |||||||||
| Proforma | 2,504,000 | 993,000 | 1,907,000 | |||||||||||
| Diluted earnings per common share: | ||||||||||||||
| As reported | $ | .60 | $ | .25 | $ | .07 | (1) | |||||||
| Proforma | .59 | .23 | .06 | (1) | ||||||||||
(1) Net income applicable to common stock was used to compute fiscal 1998 diluted earnings per common share. See Note 5 for additional information.
Stock options granted prior to February 22, 1994 were granted pursuant to the Amended Employee Incentive Stock Option Plan approved by stockholders February, 1989. In February, 1994 the stockholders approved the 1993 Long Term Incentive Stock Plan For Employees under which the Company is authorized to issue options to selected key employees to acquire a maximum of 600,000 shares of its common stock in addition to option shares outstanding at the time of its adoption. On February 15, 2000 the maximum shares of common stock allowed to be issued was increased to 800,000 shares for the 1993 Long Term Incentive Stock Plan for Employees. The option price cannot be less than 100% of the fair market value of the stock at date of grant for Incentive Stock Options (or 110% for a 10% beneficial owner), and not less than 50% of the fair market value at date of grant for Non-Qualified Stock Options. Options vest at the cumulative rate of 33%, 67%, and 100% on the first three anniversaries of the date of grant and expire ten years from date of grant.
F-12
Page 25
A summary of the option transactions during the three years ended September 2, 2000 follows:
| 2000 | 1999 | 1998 | ||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||
| Average | Average | Average | ||||||||||||||||||||||
| Options | Exercise | Options | Exercise | Options | Exercise | |||||||||||||||||||
| (000) | Price | (000) | Price | (000) | Price | |||||||||||||||||||
| Outstanding-beginning of year | 783 | $ | 1.98 | 805 | $ | 1.92 | 707 | $ | 1.80 | |||||||||||||||
| Granted | 5 | 1.75 | 20 | 3.63 | 100 | 2.88 | ||||||||||||||||||
| Exercised | — | — | (42 | ) | 1.70 | ( 2 | ) | 1.38 | ||||||||||||||||
| Expired | (22 | ) | 2.65 | — | — | — | — | |||||||||||||||||
| Outstanding-end of year | 766 | $ | 1.96 | 783 | $ | 1.98 | 805 | $ | 1.92 | |||||||||||||||
| Exercisable at end of year | 718 | $ | 1.89 | 668 | $ | 1.80 | 616 | $ | 1.71 | |||||||||||||||
| Weighted-average fair value of options granted during the year | $ | 1.75 | $ | 2.18 | $ | 1.64 | ||||||||||||||||||
Exercise prices for options outstanding as of September 2, 2000 ranged from $1.38 to $3.63. The weighted-average remaining contractual life of those options is 4 years.
Included in the above are non-qualified options for 366,724 shares of common stock for $1.38 to $2.50 per share to certain employees/directors, which have a total option price of approximately $652,000. The options are immediately exercisable for up to ten years after the date of grant.
The Company has a stock option plan under which the Company is authorized to issue options to non-employee directors to acquire a maximum of 160,000 shares of its common stock for options granted prior to March 15, 1998. A new plan was adopted effective March 15, 1998 authorizing the Company to issue options to non-employee directors to acquire a maximum of 100,000 shares of its common stock. The option price is the closing bid price for shares on NASDAQ on the date of grant. Options vest at the cumulative rate of 50% and 100% on the first two anniversaries of the date of grant and expire ten years from date of grant. A summary of the option transactions during the three years ended September 2, 2000 follows:
| 2000 | 1999 | 1998 | ||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||
| Average | Average | Average | ||||||||||||||||||||||
| Options | Exercise | Options | Exercise | Options | Exercise | |||||||||||||||||||
| (000) | Price | (000) | Price | (000) | Price | |||||||||||||||||||
| Outstanding-beginning of year | 45 | $ | 2.77 | 55 | $ | 2.49 | 52 | $ | 2.15 | |||||||||||||||
| Granted | 3 | 2.69 | 9 | 4.00 | 6 | 2.81 | ||||||||||||||||||
| Exercised | (2 | ) | 1.47 | (18 | ) | 2.53 | (3 | ) | 1.98 | |||||||||||||||
| Expired | (2 | ) | 1.75 | (1 | ) | 2.62 | — | 2.25 | ||||||||||||||||
| Outstanding-end of year | 44 | $ | 2.87 | 45 | $ | 2.77 | 55 | $ | 2.49 | |||||||||||||||
| Exercisable at end of year | 37 | $ | 2.74 | 33 | $ | 2.42 | 39 | $ | 2.12 | |||||||||||||||
| Weighted-average fair value of options granted during the year | $ | 2.69 | $ | 2.41 | $ | 1.73 | ||||||||||||||||||
F-13
Page 26
Exercise prices for options outstanding as of September 2, 2000 ranged from $1.19 to $4.00. The weighted-average remaining contractual life of those options is 5.5 years.
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in fiscal 2000, 1999, and 1998: expected volatility of 36.1 percent; risk-free interest rate of 5.75 percent; expected lives for options of 10 years; and expected dividend yield of 0 percent based on the Company’s history of no dividend payments on common stock.
7. Pension plans
The Company has a defined benefit pension plan which covers substantially all hourly employees. Pension costs charged to operations were approximately $113,000 in fiscal 2000, $142,000 in fiscal 1999, and $116,000 in fiscal 1998. Retirement benefits are based on years of credited service multiplied by a dollar amount negotiated under collective bargaining agreements. The Company’s policy is to fund normal costs and amortization of prior service costs at a level which is equal to or greater than the minimum required under ERISA.
Net pension costs for the defined benefit plan in fiscal 2000, fiscal 1999 and fiscal 1998 was computed as follows:
| 2000 | 1999 | 1998 | |||||||||||
| Service cost-benefits earned | $ | 77,623 | $ | 77,211 | $ | 59,554 | |||||||
| Interest cost on projected benefit obligation | 230,881 | 220,314 | 205,198 | ||||||||||
| Actual return on plan assets | (224,024 | ) | (191,850 | ) | (172,984 | ) | |||||||
| Amortization of transition obligation | 9,907 | 9,907 | 9,907 | ||||||||||
| Amortization of unrecognized prior service cost | 15,326 | 15,326 | 13,990 | ||||||||||
| Recognized actuarial (gain)/loss | 3,535 | 10,649 | — | ||||||||||
| Net pension expense | $ | 113,248 | $ | 141,557 | $ | 115,665 | |||||||
The funded status of the defined benefit plan at September 2, 2000 and August 28, 1999 is shown below:
| 2000 | 1999 | ||||||||||
| Change in benefit obligation: | |||||||||||
| Benefit obligation at beginning of year | $ | 3,365,596 | $ | 3,073,659 | |||||||
| Service cost | 77,623 | 77,211 | |||||||||
| Interest cost | 230,881 | 220,314 | |||||||||
| Plan amendments | — | 27,125 | |||||||||
| Benefits paid | (249,910 | ) | (204,313 | ) | |||||||
| Actuarial (gain) or loss | (417,841 | ) | 171,600 | ||||||||
| Benefit obligation at end of year | $ | 3,006,349 | $ | 3,365,596 | |||||||
F-14
Page 27
| Change in plan assets: | ||||||||||
| Fair value of plan assets at beginning of year | $ | 2,729,220 | $ | 2,266,559 | ||||||
| Actual return on plan assets | 519,996 | 371,974 | ||||||||
| Employer contributions | 200,000 | 295,000 | ||||||||
| Benefits paid | (249,910 | ) | (204,313 | ) | ||||||
| Fair Value of plan assets at end of year | $ | 3,199,306 | $ | 2,729,220 | ||||||
| Reconciliation of funded status: | ||||||||||
| Funded status | $ | 192,957 | $ | (636,376 | ) | |||||
| Unrecognized actuarial (gain) or loss | (423,367 | ) | 378,981 | |||||||
| Unrecognized transition (asset) or obligation | 99,064 | 108,971 | ||||||||
| Unrecognized prior service cost | 209,907 | 225,233 | ||||||||
| Net amount recognized at year-end | $ | 78,561 | $ | 76,809 | ||||||
| Amounts recognized in the statement of financial position consists of: | ||||||||||
| Prepaid benefit cost | $ | 78,561 | $ | — | ||||||
| Accrued benefit liability | — | $ | (636,376 | ) | ||||||
| Intangible asset | — | 334,204 | ||||||||
| Accumulated other comprehensive income | — | 378,981 | ||||||||
| Net amount recognized at year-end | $ | 78,561 | $ | 76,809 | ||||||
| Other comprehensive income attributable to change in additional minimum liability recognition (pre tax) | $ | (378,981 | ) | $ | (19,173 | ) | ||||
| Weighted-average assumptions as of: | 9/2/00 | 8/28/99 | ||||||||
| Discount rate | 8.00 | % | 7.00 | % | ||||||
| Expected long-term rate of return on plan assets | 8.25 | % | 8.25 | % | ||||||
The change in actuarial assumptions relating to the discount rate increasing from 7% to 8% accounted for $444,343 of the total $519,996 actual return on plan assets mentioned above.
The Company has defined contribution 401(k) type retirement plans for salaried and hourly personnel. Costs charged to operations in fiscal 2000, fiscal 1999 and fiscal 1998 for these plans were approximately $173,000, $160,000 and $152,000, respectively.
The Company had a non-qualified deferred compensation plan that was terminated for all non-retired executive participants during fiscal 1989. The present value of future payments under the plan accrued at September 2, 2000 and August 28, 1999 is approximately $176,000 and $228,000, respectively. Plan costs charged to operations were approximately $24,000 in fiscal 2000, $25,000 in fiscal 1999, and approximately $29,000 in fiscal 1998.
8. Income taxes
The tax effect of each temporary timing difference and carry forward that gives rise to significant deferred tax assets and deferred tax liabilities as of September 2, 2000 and August 28, 1999 is as follows (in thousands):
F-15
Page 28
| 2000 | 1999 | |||||||
| Accumulated tax depreciation of property and equipment in excess of accumulated book depreciation and other related items | $ | (582 | ) | $ | (630 | ) | ||
| Various accruals and reserves | 888 | 946 | ||||||
| Inventory | 228 | 204 | ||||||
| Other | 31 | 34 | ||||||
| Net deferred tax asset | $ | 565 | $ | 554 | ||||
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Management believes the existing net deductible temporary differences will reverse during the periods in which the Company generates net taxable income. Based on this belief and the Company’s historical and current pre-tax earnings as well as its expectations for the future, management believes it is more likely than not that the Company will realize its deferred tax assets. As a result, no valuation allowance was required as of September 2, 2000 and August 28, 1999. Further, except for the effects of the reversal of net deductible temporary differences, the Company is not currently aware of any factors that would cause significant differences between taxable income and pre-tax book income in future years.
Income tax expense consisted of the following (in thousands):
| Twelve Months Ended | ||||||||||||
| Sep. 2, | Aug. 28, | Aug. 29, | ||||||||||
| 2000 | 1999 | 1998 | ||||||||||
| Currently payable | $ | 1,561 | $ | 772 | $ | 1,375 | ||||||
| Deferred | (11 | ) | (45 | ) | (219 | ) | ||||||
| Total | $ | 1,550 | $ | 727 | $ | 1,156 | ||||||
The deferred tax provision for the twelve months ended September 2, 2000, August 28, 1999, and August 29, 1998 consisted of the following (in thousands):
| 2000 | 1999 | 1998 | |||||||||||
| Excess tax over book depreciation | $ | (52 | ) | $ | 38 | $ | (22 | ) | |||||
| Other | 41 | (83 | ) | (197 | ) | ||||||||
| $ | (11 | ) | $ | (45 | ) | $ | (219 | ) | |||||
The provision for income taxes differs from that computed at the federal statutory corporate tax rate as follows (in thousands):
| Twelve Months Ended | ||||||||||||
| Sep. 2, | Aug. 28, | Aug. 29, | ||||||||||
| 2000 | 1999 | 1998 | ||||||||||
| Tax at 34% statutory rate | $ | 1,409 | $ | 617 | $ | 1,073 | ||||||
| State income taxes, net of federal benefit | 141 | 110 | 83 | |||||||||
| Income Taxes | $ | 1,550 | $ | 727 | $ | 1,156 | ||||||
F-16
Page 29
9. Other information
Inventories — Inventories are summarized below:
| 2000 | 1999 | |||||||
| Finished goods | $ | 16,273,000 | $ | 13,415,000 | ||||
| Work in process | 488,000 | 525,000 | ||||||
| Raw material | 4,050,000 | 4,965,000 | ||||||
| $ | 20,811,000 | $ | 18,905,000 | |||||
Accrued liabilities — Accrued liabilities are summarized below:
| 2000 | 1999 | |||||||||
| Property, payroll and other taxes | $ | 1,171,000 | $ | 560,000 | ||||||
| Payroll, bonuses and commissions | 2,071,000 | 1,457,000 | ||||||||
| Plant closing reserve | — | 260,000 | ||||||||
| Interest | 190,000 | 150,000 | ||||||||
| Other | 322,000 | 238,000 | ||||||||
| $ | 3,754,000 | $ | 2,665,000 | |||||||
10. Quarterly financial data
Quarterly financial data (unaudited — in thousands of dollars except per share amounts)
| Fiscal 2000 | ||||||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
| Net sales | $ | 28,378 | $ | 24,020 | $ | 26,849 | $ | 25,590 | $ | 104,837 | ||||||||||
| Gross profit | 5,644 | 4,361 | 5,523 | 4,910 | 20,438 | |||||||||||||||
| Net income | 879 | 444 | 687 | 555 | 2,565 | |||||||||||||||
| Diluted earnings per
common share (1) |
$ | .21 | $ | .10 | $ | .16 | $ | .13 | $ | .60 | ||||||||||
| Fiscal 1999 | ||||||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
| Net sales | $ | 23,003 | $ | 20,287 | $ | 18,950 | $ | 18,133 | $ | 80,373 | ||||||||||
| Gross profit | 4,728 | 3,945 | 3,915 | 3,309 | 15,897 | |||||||||||||||
| Net income | 805 | 320 | 309 | (2)(346 | ) | 1,088 | ||||||||||||||
| Diluted earnings per
common share (1) |
$ | .19 | $ | .07 | $ | .07 | ($.09 | ) | $ | .25 | ||||||||||
F-17
Page 30
(1) Diluted earnings per common share was calculated by dividing net income by the weighted average number of common and common equivalent shares outstanding during the period. Diluted earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the annual diluted earnings per common share.
(2) See Note 12.
11. Major customers and sources of supply
The Company’s six largest customers accounted for approximately 49% of the Company’s total sales in fiscal 2000. One customer accounted for 30.7% of the Company’s total net sales for fiscal 2000. Six customers accounted for 49% of sales in fiscal 1999 and six customers accounted for 51% of sales in fiscal 1998. The loss of one or more of these customers at the same time could have a materially adverse effect on the business of the Company. As of September 2, 2000, one customer accounted for approximately 34% of total accounts receivable. The Company’s customers include large furniture chain store retailers, wholesale clubs, catalog retailers, and independent distributors, as well as numerous smaller retailers.
Approximately 62% of the Company’s total sales are of imported product. The Company sources these products from various factories in Asia and Mexico, both through agents and direct, based primarily on Company developed designs. The Company maintains a showroom, production office, and quality control organization in China. An unanticipated interruption in the flow of products from one or more of these factories could have a short-term material adverse effect on the Company’s results of operations.
12. Plant closing
During the fourth quarter of fiscal 1999 management committed to permanently close its Ferdinand, Indiana furniture manufacturing plant during fiscal 2000. During the fourth quarter of fiscal 1999 the Company recorded a pre-tax charge of $600,000 for the expected costs of closing the above-mentioned plant. As of May 27, 2000 the company had completed the shut down of the Ferdinand, Indiana plant. During the third quarter the company recognized a $166,000 gain on the sales of assets. The Company also recorded a $125,000 plant closing reserve credit in the second fiscal quarter, as plant-closing costs became known. The balance in the plant closing reserve as of September 2, 2000 is zero.
13. Fair Value of Financial Instruments
The book values of cash and cash equivalents, trade receivable and trade payables are considered to be representative of their respective fair values because of the immediate or short-term maturities of these financial instruments. The fair value of the Company’s debt instruments approximated the book value because substantial portions of the underlying instruments are variable rate notes which re-price frequently.
The Company as of September 2, 2000 has approximately $8 million in interest rate swaps, which are used to reduce the risk of interest rate movements for a portion of its long-term debt. The market value of the swaps is approximately $193,500.
14. Source and Supply of Labor
The Company employs approximately 382 employees, of whom approximately 108 are covered by collective bargaining contracts. The collective bargaining agreement with the United
F-18
Page 31
Steel Workers of America, Local 331U, covering 86 employees, expires on March 31, 2001.
15. Earnings Per Common Share
In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS No. 128”). This standard modifies disclosure requirements for companies required to report earnings per share (“EPS”) to include presentations of Basic EPS (which includes no dilution of common stock equivalents) and, if applicable, Diluted EPS (which reflects the potential dilution of common stock equivalents).
The standard was effective for the Company with the completion of its fiscal 1998 second quarter.
| (Thousands except per share amounts) | ||||||||||||
| 2000 | 1999 | 1998 | ||||||||||
| Net income | $ | 2,565 | $ | 1,088 | $ | 1,975 | ||||||
| Less: loss on preferred stock redemption (1) | — | — | (1,666 | ) | ||||||||
| Net income applicable to common stock | $ | 2,565 | $ | 1,088 | $ | 309 | ||||||
| Average common shares outstanding | 4,103 | 3,991 | 3,261 | |||||||||
| Common stock equivalents-dilutive options and convertible preferred stock | 171 | 392 | 954 | |||||||||
| Average shares of common stock and equivalents outstanding | 4,274 | 4,383 | 4,215 | |||||||||
| Basic earnings per share | $ | .63 | $ | .27 | $ | .09 | ||||||
| (Net income applicable to common stock divided by average common shares outstanding) | ||||||||||||
| Diluted earnings per share (2) | $ | .60 | $ | .25 | $ | .07 | ||||||
| (Net income divided by average shares of common stock and equivalents outstanding) | ||||||||||||
(1) On August 28, 1998 the Company redeemed its Series C Preferred Stock, which caused a $1,666,000 charge to net income applicable to common stock. See Note 5 for more information.
(2) For fiscal 1998, the loss on redemption of preferred stock is deducted from net income in computing diluted earnings per share because not deducting it would be anti-dilutive.
F-19
Page 32
Item 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES.
None.
II-8
Page 33
Part III.
Items 10, 11, 12 and 13.
The information called for by this part (Items 10, 11, 12 and 13) is incorporated by reference from the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission not later than November 1, 2000.
III-1
Page 34
Part IV.
Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K.
| The financial statements required by Sections 14(a) 1 and 2 and 14(d) are included under Item 8. |
| The exhibits required by Item 14(a) 3 are listed on the index to Exhibits. |
| Schedules required by Item 14(d) follow the signature pages. |
Item 14(b). REPORTS ON FORM 8-K
| On September 6, 2000 the Company filed a current report on Form 8-K to report the Company had adopted new by-laws provisions establishing procedures for the introduction of business at stockholder meetings and the nomination of directors. |
IV-1
Page 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| DATED: | October 23, 2000 | DMI FURNITURE, INC. | ||
| By:/S/Donald D. Dreher | ||||
| President, Chairman of the Board
and Chief Executive Officer and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| /S/Joseph G. Hill Joseph G. Hill |
Executive Vice President, Operations and Director | October 23, 2000 | ||
| Vice President, Finance, Chief Financial Officer, Treasurer, and Principal | ||||
| /S/Phillip J. Keller Phillip J. Keller |
Accounting Officer | October 23, 2000 | ||
| /S/Joseph L. Ponce Joseph L. Ponce |
Director | October 23, 2000 | ||
| /S/Thomas M. Levine. Thomas M. Levine |
Director | October 23, 2000 | ||
| /S/David Martin David Martin |
Director | October 23, 2000 | ||
| /S/W. Howard Armistead W. Howard Amristead |
Director | October 23, 2000 | ||
| /S/Donald D. Dreher Donald D. Dreher |
President, Chief Executive Officer, Chairman of the Board and Director |
October 23, 2000 |
IV-2
Page 36
DMI FURNITURE, INC.
SCHEDULE II
| Additions | ||||||||||||||||
| Balance at | Charged | Charge-offs | Balance | |||||||||||||
| Beginning | to Costs and | Net of | at End | |||||||||||||
| Description | of Period | Expenses | Recoveries | of Period | ||||||||||||
| Allowance for doubtful accounts: | ||||||||||||||||
| Year ended August 29, 1998 | $ | 141,000 | $ | 97,000 | $ | 88,000 | $ | 150,000 | ||||||||
| Year ended August 28, 1999 | $ | 150,000 | $ | 132,000 | $ | 107,000 | $ | 175,000 | ||||||||
| Year ended September 2, 2000 | $ | 175,000 | $ | 207,000 | $ | 181,000 | $ | 201,000 | ||||||||
| Plant closing reserve | ||||||||||||||||
| Year ended August 29, 1998 | $ | — | $ | — | $ | — | $ | — | ||||||||
| Year ended August 28, 1999 | $ | — | $ | 600,000 | $ | — | $ | 600,000 | ||||||||
| Year ended September 2, 2000 | $ | 600,000 | $ | — | $ | 600,000 | $ | — | ||||||||
Page 37
Item 14(a)3. EXHIBITS
| 10-K | ||||||
| Page No. | ||||||
| * | (3)(a) | Restated Certificate of Incorporation | ||||
| ******* | (b) | Bylaws | ||||
| * | (4)(a) | Restated Certificate of Incorporation | ||||
| ******* | (b) | Bylaws | ||||
| ******** | (10)(a) | 1988 Stock Option Plan for Employees | ||||
| ***** | (b) | Non-employee Director Stock Option | ||||
| Program | ||||||
| ***** | (c) | Form of Indemnification Agreement | ||||
| ***** | (d) | Amendment of Employment Agreement and | ||||
| Officer Severance Agreement dated as of | ||||||
| May 19, 1988 between Joseph G. Hill and | ||||||
| DMI Furniture, Inc. | ||||||
| **** | (e) | First Amendment to Amended and Restated Credit | ||||
| Agreement between DMI Furniture, Inc. and Bank One, | ||||||
| Indiana, National Association dated July 2, 1998. | ||||||
| **** | (f) | Second Amendment to Amended and Restated Credit | ||||
| Agreement between DMI Furniture, Inc. and Bank One, | ||||||
| Indiana, National Association dated August 27, 1998. | ||||||
| ***** | (g) | Amendment of Employment Agreement and Officer | ||||
| Severance Agreement dated as of May 19, 1988 between | ||||||
| Donald D. Dreher and DMI Furniture, Inc. | ||||||
| ** | (h) | Amended and Restated Credit Agreement between | ||||
| Bank One, Indianapolis, National Association, and | ||||||
| DMI Furniture, Inc. dated October 3, 1997. | ||||||
| ***** | (i) | Loan Agreement between City of Huntingburg, Indiana | ||||
| and DMI Furniture, Inc. dated June 1, 1994. | ||||||
| ***** | (j) | 1993 Long Term Incentive Stock Plan for Employees | ||||
| ***** | (k) | Stock Compensation and Deferral Plan for Outside | ||||
| Directors. | ||||||
| ***** | (l) | Loan Agreement between City of Huntingburg, Indiana | ||||
| and DMI Furniture, Inc. dated as of October 1, 1993. | ||||||
| (m) | Extension and Renewal of Employment Agreement | |||||
| as of September 3, 2000 between DMI Furniture, Inc. | ||||||
| and Joseph G. Hill. | E1-E6 | |||||
| (n) | Extension and Renewal of Employment Agreement | |||||
| as of April,26, 2000 between DMI Furniture, Inc. | ||||||
| and Donald D. Dreher | E7-E12 | |||||
| ***** | (o) | 1998 Stock Option Plan For Independent Directors | ||||
| **** | (p) | Third Amendment To Amended And Restated Credit | ||||
| Agreement dated as of July, 1999 between Bank One, | ||||||
| Indiana N.A. and DMI Furniture, Inc. | ||||||
| **** | (q) | Promissory Note Modification Agreement dated as of | ||||
| July, 1999 between Bank One, Indiana N.A. and | ||||||
| DMI Furniture, Inc. |
Page 38
| **** | (r) | Fourth Amendment To Amended And Restated Credit | ||||
| Agreement dated as of October, 1999 between Bank | ||||||
| One, Indiana N.A. and DMI Furniture, Inc. | ||||||
| ****** | (s) | Fifth Amendment To Amended And Restated Credit | ||||
| Agreement dated as of February 17, 2000 between | ||||||
| Bank One, Indiana N.A. and DMI Furniture, Inc. | ||||||
| ****** | (t) | Sixth Amendment To Amended And Restated Credit | ||||
| Agreement dated as of March 12, 2000 between | ||||||
| Bank One, Indiana N.A. and DMI Furniture, Inc. | ||||||
| (u) | Seventh Amendment To Amended And Restated Credit | |||||
| Agreement dated as of July 12, 2000 between | ||||||
| Bank One, Indiana N.A. and DMI Furniture, Inc. | E13-E15 | |||||
| (21) | List of subsidiaries | E-16 | ||||
| (23) | Consent of Arthur Andersen LLP to incorporation | |||||
| of audit report into S-8 registration statements. | E-17 | |||||
| (27) | Financial Data Schedule | E-18 | ||||
| (99) | Undertakings | E-19 | ||||
| * | Incorporated by reference to Form 10-K for the fiscal | |||||
| year ended August 31,1996 | ||||||
| ** | Incorporated by reference to report on Form 10-Q | |||||
| for the fiscal quarter ended November 29, 1997 | ||||||
| *** | Incorporated by reference to Proxy Statement dated | |||||
| February 20, 1998. | ||||||
| **** | Incorporated by reference to Form 10-K for the fiscal | |||||
| year ended August 28, 1999 | ||||||
| ***** | Incorporated by reference to Form 10-Q for the fiscal | |||||
| quarter ended November 30, 1999. | ||||||
| ****** | Incorporated by reference to Form 10-Q for the fiscal | |||||
| quarter ended May 27, 2000. | ||||||
| ******* | Incorporated by reference to Form 8-K dated | |||||
| September 6, 2000. | ||||||
| ******** | Incorporated by reference to Registration Number 33-64188 | |||||
Page 39
|
|