<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 5, 1996.
REGISTRATION NO. 333-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
AMRE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 75-2041737
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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8585 N. STEMMONS FREEWAY
SOUTH TOWER
DALLAS, TX 75247
(214) 658-6300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN H. KARNES, JR.
VICE PRESIDENT AND GENERAL COUNSEL
8585 N. STEMMONS FREEWAY
SOUTH TOWER
DALLAS, TX 75247
(214) 658-6300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement, subject to
certain restrictions contained in agreements between certain of the selling
stockholders named herein and AMRE, Inc.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.[x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]_________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]_________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:[ ]
----------------------
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Per Aggregate Amount of
Securities to be Registered be Registered Share Offering Price(1) Registration Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 3,468,641 shares $20 7/8(1) $72,407,881 $24,969
per share
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(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating
the amount of the registration fee, based on the average of the high and
low sale prices of the Common Stock, as reported on the NYSE, on July 1,
1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
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* *
* Information contained herein is subject to completion or amendment. *
* A registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may *
* not be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED JULY 5, 1996
PROSPECTUS
3,468,641 SHARES
AMRE, INC.
COMMON STOCK
THIS PROSPECTUS COVERS 3,468,641 SHARES (THE "SHARES") OF COMMON STOCK, PAR
VALUE $0.01 PER SHARE ("COMMON STOCK"), OF AMRE, INC. ("AMRE" OR THE
"COMPANY").
THE SHARES OFFERED UNDER THIS PROSPECTUS CONSIST OF (I) OUTSTANDING SHARES
OF COMMON STOCK OWNED BY THE PERSONS NAMED IN THIS PROSPECTUS UNDER THE CAPTION
"SELLING STOCKHOLDERS" AND (II) 750,000 AUTHORIZED BUT UNISSUED SHARES TO BE
OFFERED BY AMRE. THE SELLING STOCKHOLDERS ACQUIRED THE SHARES IN VARIOUS
TRANSACTIONS WITH THE COMPANY PURSUANT TO WHICH SUCH SELLING STOCKHOLDERS WERE
GRANTED REGISTRATION RIGHTS. SHARES OFFERED BY AMRE CONSIST OF AUTHORIZED AND
UNISSUED COMMON STOCK. SEE "SELLING STOCKHOLDERS."
Shares may be sold from time to time on or after the expiration of all
contractual restrictions to which the Selling Stockholders may be subject. See
"Selling Stockholders." It is anticipated that the Selling Stockholders may
offer Shares for sale at prevailing prices on the New York Stock Exchange
("NYSE") on the date of sale. See "Plan of Distribution". Other than the
750,000 shares offered for AMRE's account, AMRE will not receive any proceeds
from the sale of the Shares offered hereby. See "Use of Proceeds." Subject to
certain limitations, all expenses of registration incurred in connection with
the offering are being borne by AMRE, except for underwriting fees, discounts
or commissions, if any, attributable to the sale of the Shares offered by the
Selling Stockholders, which are being borne by the Selling Stockholders.
The Shares of Common Stock being offered by this Prospectus have been
listed on the NYSE, except for (i) those shares which are issuable upon the
conversion of AMRE's Senior Convertible Preferred Stock or issuable upon
exercise of stock options, which Shares have been approved for listing subject
to official notice of issuance and (ii) those Shares offered on behalf of AMRE,
with respect to which AMRE has made an application to list on the NYSE. On
July 1, 1996, the closing sales price of the Common Stock on the NYSE was $21
3/8 per share.
FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS"
COMMENCING ON PAGE 4 HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS _______, 1996.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Description of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
AVAILABLE INFORMATION
AMRE is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "Commission"). The
reports, proxy statements, information statements and other information filed
by AMRE with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also may be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at prescribed rates. AMRE Common Stock is
listed on the NYSE. Reports, proxy and information statements and other
information relating to AMRE can be inspected at the offices of the NYSE at 11
Wall Street, New York, New York 10005.
AMRE has filed with the Commission a Registration Statement on Form S-3
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained in this Prospectus or in any document incorporated by reference in
this Prospectus as to the contents of any contract or other document referred
to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference. The Registration
Statement, including exhibits filed as a part thereof, are available for
inspection and copying at the Commission's offices as described above.
No persons have been authorized to give any information or to make any
representation other than those contained in this Prospectus in connection with
the solicitations of proxies or the offering of securities made hereby and, if
given or made, such information or representation must not be relied upon as
having been authorized by AMRE or any other person. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction in which such
offer or solicitation is unlawful or to or from any person to whom it is
unlawful to make any such offer or solicitation in such jurisdiction.
INCORPORATION OF DOCUMENTS BY REFERENCE
This Prospectus incorporates by reference certain documents filed by AMRE
with the Commission which are not presented herein or delivered herewith, as
indicated below. The Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of such person, a copy of any or all of the documents referred to below
which are incorporated in this Prospectus by reference (other than
2
<PAGE> 4
exhibits to such documents unless they are specifically incorporated by
reference into such documents). Requests for such copies should be directed to
John H. Karnes, Jr., Secretary of AMRE, at 8585 North Stemmons Freeway, South
Tower, Dallas, Texas 75247, telephone (214) 658-6334.
The following documents filed by AMRE with the Commission pursuant to the
Exchange Act under File No. 1-9632 are hereby incorporated by reference into
this Prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1995;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31,
1996;
(c) AMRE's Form 8-A, dated July 16, 1987, as amended by Amendment No. 1
Form 8-A dated July 28, 1987; and
(d) Current Reports on Form 8-K dated May 9, 1996 and June 14, 1996.
Also incorporated by reference into this Prospectus are the following
documents filed by AMRE with the Commission pursuant to the Securities Act:
(a) AMRE's registration statement on Form S-4 (No. 333-01755) filed
with the Commission on March 15, 1996 as amended by Amendment No. 1 thereto
filed with the Commission on March 26, 1996, which includes the Joint Proxy
Statement/Prospectus with respect to AMRE's Special Meeting of Stockholders
held on April 25, 1996, but excluding the material set forth under the
following captions:
"Summary -- Opinions of Financial Advisors"
"Special Factors -- Opinions of Financial Advisors"
"Annex E -- Fairness Opinion of Southwest Securities, Inc."
"Annex F -- Fairness Opinion of Bear, Stearns & Co. Inc."
(b) AMRE's registration statement on Form S-4 (No. 333-02627) filed
with the Commission on April 18, 1996 as amended by Amendment No. 1 thereto
filed with the Commission on April 24, 1996, which includes the Information
Statement/Prospectus describing the matters acted upon at a special meeting
of the shareholders of Congressional Construction Corporation held on May
28, 1996, but excluding the material set forth under the following
captions:
"Special Factors -- Fairness Opinion for ESOP"
"Special Factors -- Certain Federal Income Tax Consequences"
"Annex E -- Opinion of Ernst & Young LLP"
"Annex F -- Form of Opinion of Barry Goodmin Limited"
All documents filed by AMRE pursuant to Sections 13(a) or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the termination of
the offering of the shares of Common Stock shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modified or superseded such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
3
<PAGE> 5
THE COMPANY
AMRE provides direct marketing, in-home sales and installation of quality
home improvement products through its wholly owned operating subsidiaries
American Remodeling, Inc. ("ARI"), Facelifters Home Systems, Inc.
("Facelifters") and Congressional Construction Corporation ("Congressional").
AMRE commenced business under the laws of Texas in 1980 and was reincorporated
under the laws of Delaware in February 1987. At December 31, 1995, AMRE had 61
branch offices located in 50 cities in 35 states, and one manufacturing
facility. AMRE's principal executive offices are located at 8585 N. Stemmons
Freeway, South Tower, Dallas, Texas 75247, and its telephone number is (214)
658-6300.
From 1981 until December 1995, AMRE generated virtually all of its revenues
through direct consumer marketing and the in-home sale and installation of
certain home improvement products under an annually renewable license agreement
(the "Sears License Agreement") between ARI and Sears, Roebuck and Co.
("Sears"). ARI, and thereby AMRE, did not renew the Sears License Agreement
when it expired on December 31, 1995. On October 17, 1995, TM Acquisition
Corp. and Century 21 Real Estate Corporation (collectively referred to herein
as "Century 21 Group"), subsidiaries of HFS Incorporated ("HFS"), and ARI,
entered into a license agreement (the "CENTURY 21 License Agreement"),
pursuant to which Century 21 Group has granted to ARI an exclusive 20 year
license to market a variety of home improvement products under the name
"CENTURY 21(R) Home Improvements(SM)". ARI also has the right to grant
sublicenses under the CENTURY 21 License Agreement.
On October 31, 1995, AMRE and Facelifters entered into an agreement whereby
a newly formed subsidiary of AMRE merged with and into Facelifters (the
"Facelifters Merger"). The Facelifters Merger became effective April 25, 1996.
Pursuant to the terms of the agreement, each outstanding share of Facelifters
$0.01 par value common stock was converted into one share of AMRE common stock,
resulting in approximately 3,578,439 shares of AMRE common stock being issued
to holders of Facelifters common stock and Facelifters becoming a wholly owned
subsidiary of AMRE.
On December 30, 1995, AMRE and Congressional entered into an agreement
whereby a newly formed subsidiary of AMRE merged with and into Congressional
(the "Congressional Merger"). The Congressional Merger became effective on May
28, 1996. Pursuant to the terms of the Merger Agreement, each outstanding
share of Congressional $1.00 par value common stock was converted into 601.2
shares of AMRE common stock and each outstanding share of Congressional no par
value convertible preferred stock was converted into 857.14 shares of AMRE
common stock, resulting in approximately 900,000 shares of AMRE common stock
being issued to holders of Congressional common stock and convertible preferred
stock and Congressional becoming a wholly owned subsidiary of AMRE.
On April 29, 1996, AMRE entered into a private placement with Zesiger
Capital Group LLC ("Zesiger"), Reagan Partners L.P. ("Reagan Partners") and
Linder Growth Fund ("Linder") (the "Private Placement") whereby AMRE sold a
total of 800,500 shares of common stock to Zesiger, Reagan Partners and Linder
for $15.75 per share. All of the shares sold by AMRE in the Private Placement
are subject to a lock-up agreement and may not be disposed of until October 30,
1996.
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus. This Prospectus, and the
documents incorporated herein by reference, contain certain forward looking
statements about the business of AMRE. The actual results of AMRE could differ
materially from those forward looking statements. The following information
sets forth certain factors that could cause the actual results of AMRE to
differ materially from those contained in the forward looking statements.
4
<PAGE> 6
BACKGROUND OF THE CONVERSION TO CENTURY 21 HOME IMPROVEMENTS
By switching from the Sears to the CENTURY 21 Home Improvements name, AMRE
implemented a strategic decision to alter significntly the marketing and
distribution focus of its existing home improvements operation as well as to
expand its core product line into new product lines and geographical
territories. The Company realized that the Sears brand name is widely accepted
in the home improvement industry and has significant brand name appeal to a
wide variety of customers. However, the Company believes that, over the long
term, the CENTURTY 21 Home Improvements name provides the Company with a better
opportunity for growth and profitability, including access to additional
geographic markets, a larger array of licensed products, the ability to expand
through sublicensing, a significantly lower royalty obligation and a 20-year
term facilitating long-term planning. Although the benefits derived from the
brand conversion are substantial, they are accompanied by marketing and
operational risks, including those discussed below. While AMRE's successful
conversion to the CENTURY 21 Home Improvements brand is not yet complete and
remains subject to numerous risks and uncertainties, management is encouraged
by the customer receptivity of the new brand and is optimistic about the
Company's ultimate profitability.
HISTORICAL OPERATING LOSSES AND FUTURE PROFITABILITY
AMRE incurred operating losses for the year 1995 while operating under the
Sears name and in the first quarter of 1996 while beginning the conversion
to the CENTURY 21(R) Home Improvements(SM) name. Facelifters and Congressional
also incurred operating losses in 1995 and the first quarter of this year.
Moreover, AMRE previously announced that it expects to experience a significant
decline in contract revenues during the second quarter of 1996 as compared to
the prior year period, and expects to report a loss from operations for the
second quarter.
As discussed below, successfully developing the CENTURY 21 Home
Improvements name entails numerous risks and challenges, including building
consumer awareness of a new brand, developing a cost effective source of sales
leads to replace those previously obtained through the Sears in-store program,
adapting to new advertising media and consumer profiles unrelated to the Sears
customer base, integrating the operations of Facelifters and Congressional and
maintaining liquidity throughout the transition. Although AMRE's ultimate
profitability remains management's uppermost objective, due to the complexity
of the transitional and operational issues facing the Company, management's
strategy in the short term is defined in terms of incremental gains,
quarter-over-quarter, rather than in terms of profitability. Although
management is confident that AMRE's business strategy will be successful over
the long term, it is not possible to estimate when the Company will return to
profitability in light of the transitional challenges and uncertainties which
lie ahead.
DEPENDENCE ON THE CENTURY 21 HOME IMPROVEMENTS NAME
The Sears brand name, previously used by AMRE, is widely recognized and
accepted in the home improvement industry and has significant brand name appeal
to a wide variety of customers. AMRE now conducts its advertising using the
CENTURY 21 Home Improvements name. There is no way to estimate the time
required to build brand awareness of the CENTURY 21 Home Improvements name.
Although the CENTURY 21 Home Improvements name was not used in the home
improvement industry before 1996, at which time AMRE began using the name,
AMRE's management believes such brand name will also be well recognized;
however, there can be no assurance that revenues under the CENTURY 21 Home
Improvements name will be similar to or greater than those under the Sears
brand name. If the CENTURY 21 Home Improvements name does not result in
advertising response rates and sales rates equal to or better than those
experienced under the Sears brand name, it will likely have an adverse effect
on the business, operating results and financial condition of AMRE.
NEW MARKETING STRATEGIES
Leads on potential customers are critically important to AMRE's business.
Under the Sears brand name, AMRE generated approximately 20% of its sales leads
through AMRE-staffed kiosks located inside of Sears stores and 80% of its leads
through television, radio, direct mail, telemarketing and alternative media
sources. AMRE's transition strategy is to replace its prior Sears in-store
lead source with a multi-faceted field-marketing program consisting of free
standing kiosks located in malls accross the country, increased AMRE presence
in home shows and a cooperative referral program with the CENTURY 21 real
estate broker network. AMRE opened approximately 130 mall kiosks during the
first half of 1996 and plans to open 80 additional kiosks during the second
half. Management believes that the mall kiosk program will eventually be a
cost-effective lead source and the program generated approximately 18% of
AMRE's total leads during the second quarter, although the leads are not yet as
cost-effective as those previously obtained under the Sears program.
AMRE's marketing strategy also includes substantially increasing its
reliance on telemarketing as a lead source and AMRE has opened up two outbound
telemarkeing centers during the brand transition in order to accomplish this
objective. While management is optimistic about the success of AMRE's new
marketing strategy, including replacing its prior Sears in-store lead source
with mall kiosks and increasing its use of telemarketing, there can be no
assurances that AMRE's new lead sources will produce a quantity and quality of
leads comparable to that produced under the Sears name at an equivalent
per-lead cost, and the failure to obtain a sufficient number of quality,
cost-effective leads could have a material adverse impact on AMRE's operations
and financial condition.
5
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ISSUES RELATING TO THE FACELIFTERS MERGER AND THE CONGRESSIONAL MERGER
AMRE incurred a nonrecurring charge to operations of approximately $2.8
million in the fourth quarter of 1995 and recorded nonrecurring charges to
operations of $2.5 million during the first quarter of 1996 to reflect costs
associated with combining operations of Facelifters and Congressional. There
can be no assurance that the combined company will not incur additional charges
in subsequent quarters to reflect additional costs which could have an adverse
effect on AMRE's business, financial condition and results of operations.
AMRE is in the process of integrating certain aspects of the operations of
Facelifters and Congressional, including their sales, marketing, finance and
administration. Management estimates that at least $1.0 million of annual
savings will result from this integration; however, there can be no assurance
that AMRE will successfully integrate the operations of Facelifters or
Congressional. Any delays or unexpected costs incurred in connection with such
integration could have an adverse effect on the combined company's business,
operating results or financial condition. Furthermore, there can be no
assurance that the operations, management and personnel of the merged companies
will be compatible or that AMRE will not experience the loss of key personnel.
While AMRE expects to achieve savings in operating costs as a result of the
Facelifters Merger and the Congressional Merger, there can be no assurance that
such savings will be realized.
LIQUIDITY
The timing of AMRE's return to profitability will materially impact the
Company's liquidity and overall financial condition in the future. See "--
Historical Operating Losses and Future Profitability." Although management
remains confident of AMRE's eventual profitability under the CENTURY 21 Home
Improvements name, the Company would be compelled to seek outside sources for
additional working capital should the Company incur continued material
operating losses in future quarters. No assurances can be given that the
Company could obtain additional working capital in the future, if required, and
the failure to maintain adequate liquidity, either through operational
profitability or outside sources, would have a material adverse effect on
AMRE's overall financial condition.
CUSTOMER FINANCING COST
AMRE has experienced lower customer credit ratings during 1996, resulting
in higher sales credit rejects than in prior years and lower net sales closing
rates. AMRE has an agreement with a financial institution which makes financing
available to its customers. The agreement provides the financial institution
with a right of first refusal on substantially all of AMRE's customer credit
applications and provides AMRE with a minimum acceptance rate of customer
credit applications based on specified criteria. AMRE's risk under the
agreement is limited to its normal warranties and representations regarding
materials and workmanship. On May 8, 1996, the agreement was amended to provide
for (i) an increased minimum acceptance rate regardless of the specified credit
criteria and (ii) a discount to be paid by AMRE on every customer loan provided
by the financial institution. The discount, which was set initially at 5.45
percent of the loan amount, is tied to the specified credit criteria and will
be adjusted every six months.
AMRE estimates that approximately 66 percent of its contract revenues
are financed under this agreement. While the amendment is designed to provide
increased revenue dollars, net of the discount, and therefore increased
profitability, there can be no assurance that revenues will increase.
6
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DEPENDENCE ON CENTURY 21 LICENSE AGREEMENT
AMRE markets and sells its products under the CENTURY 21 License Agreement,
and revenues are dependent upon the continued existence of such license
agreement. AMRE is obligated to make certain minimum royalty payments under
the CENTURY 21 License Agreement. The license has a 20 year term, but may be
terminated earlier by the licensor in the event of default by AMRE, including
the failure to make the minimum royalty payments as provided therein. If the
CENTURY 21 License Agreement is terminated early, such termination would likely
have an adverse effect on AMRE's business.
VOLATILITY OF STOCK PRICE
The market price for AMRE Common Stock is volatile and could be subject to
additional significant fluctuations in response to variations in AMRE's
operating results, AMRE's licensing plan and other factors, including, among
others, investor perceptions of AMRE and the industry in which it operates,
developments in AMRE's relationship with the Century 21 Group and its customers
and general market conditions. Consequently, there can be no assurance that the
market value of shares of Common Stock will be maintained during this offering
or following its consummation. Furthermore, substantial sales of Common Stock
by the Selling Stockholders and AMRE could have an adverse effect on the market
price of the Common Stock.
SEASONALITY
Historically, AMRE's business has been subject to seasonal fluctuations.
Although some products sold by ARI, Facelifters, and Congressional are interior
products, extreme winter weather conditions can have an adverse effect on
scheduling sales appointments and installations. Products such as siding and
windows usually cannot be installed in inclement weather. In addition, the
home improvements industry is affected by economic factors, including, among
others, interest rates, the availability of financing and general economic
conditions. AMRE has historically incurred losses in the first quarter of the
year, and incurred a loss in the first quarter of 1996.
SUSPENSION OF DIVIDENDS
AMRE had paid a quarterly dividend from December 18, 1987 until September
22, 1995, at which time the quarterly dividend was suspended. AMRE's ability
to pay dividends is restricted under the terms of its existing credit
agreements. There can be no assurance that AMRE will pay any dividends in the
future.
SERVICE MARK AND TRADE NAME INFRINGEMENT CLAIM
AMRE has been named as a defendant in a proceeding filed on February 29,
1996 in the Superior Court of California by a party who claims ownership of a
registered service mark and trade name styled "21st Century Home Improvement."
AMRE has been advised by Century 21 that the action is expected to be moved
from state court to federal court in August 1996. The plaintiff alleges, among
other things, that the CENTURY 21 Home Improvements name is an infringement of
the plaintiff's trade name and registered mark and constitutes an unfair
business practice. The plaintiff seeks a preliminary and permanent injunction
enjoining AMRE from operating under the Century 21 Home Improvements name,
general damages according to proof, all profits realized by AMRE from operating
under the Century 21 Home Improvements name in California and costs and
attorneys' fees.
AMRE has been advised by Century 21, the owner of the CENTURY 21 Home
Improvements name, that it gave notice to counsel for the owner of the "21st
Century Home Improvement" mark that the latter mark infringed on Century 21's
federally registered mark. AMRE has further been advised by Century 21 that:
(i) it is its policy and practice to vigorously defend its trade name, (ii)
Century 21 has successfully litigated in the past to protect its trade name and
federally registered mark and (iii) it has obtained a number of judgments
against such entities which had used "21st CENTURY" or marks containing the
word "CENTURY" in connection with remodeling or home construction services. In
addition, Century 21 has advised AMRE that Century 21's federal
7
<PAGE> 9
registration predates the use of the "21st Century Home Improvement" mark. For
the above-listed reasons AMRE believes at this time that it is legally entitled
to use the CENTURY 21 Home Improvements name in California.
COMPETITION
AMRE operates in an industry that is highly fragmented. Although AMRE
believes it is the largest company in the nation in the direct marketing,
in-home sales and installation of home improvement products, AMRE competes with
numerous contractors in each of the territories in which it operates, with
reputation, price, workmanship and services being the principal competitive
factors. These contractors typically conduct operations in a single
metropolitan area. In certain of the territories in which it operates, AMRE
also competes against retail stores that may have greater financial or other
resources than AMRE and that sell similar products in the stores as well as
offer installation services, and will compete with contractors that are Sears
licensees.
8
<PAGE> 10
USE OF PROCEEDS
AMRE will not directly receive any of the proceeds from the sale of the
2,718,641 shares of Common Stock offered under this Prospectus on behalf of the
Selling Stockholders. Any sale of the Common Stock by the Selling Stockholders
will be for their own account. Proceeds from the sale of the 750,000 shares
offered for AMRE's account will be used as follows: (i) approximately $750,000
to fund construction of approximately 100 additional kiosks to facilitate
expansion of the CENTURY 21 Home Improvements mall program; and (ii) any
remaining amounts received for working capital and general corporate purposes.
SELLING STOCKHOLDERS
This Prospectus covers (i) 800,500 shares of Common Stock which AMRE
privately placed with certain institutional investors on April 29, 1996, (ii)
1,918,141 shares of Common Stock (assuming conversion of convertible securities
and exercise of options) which AMRE issued during the last six months in a
variety of transactions relating to AMRE's conversion to the CENTURY 21 Home
Improvements name and the acquisition of Facelifters and (iii) 750,000
previously unissued shares offered by AMRE. All such shares issued to the
Selling Stockholders were issued with attendant registration rights entitling
the holder to require AMRE to register the shares under the Securities Act
either upon the holder's demand or in connection with a registration statement
relating to other AMRE securities. As set forth in the notes to the table
below, the Selling Stockholders have entered into agreements with AMRE which
preclude their sales of any of the Shares of Common Stock offered under this
prospectus until various prescribed dates in the future.
<TABLE>
<CAPTION>
Beneficial Ownership
After this offering
Beneficial Ownership Number of (assuming all shares
Prior to this offering Shares registered are sold)
------------------------- Registered in -----------------------------
Name Shares Percentage this offering Shares Percentage
- ----------------------------- --------- ------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Linder Growth Fund 500,000(1) 2.5% 500,000 - -
Reagan Partners, L.P. 50,000(1) * 50,000 - -
Zesiger Capital Group, L.L.C. 250,500(1) 1.3% 250,500 - -
David Moore 762,000(2) 3.8% 200,000(3) 400,000(3) 2.0%
Mark Honigsfeld 544,420(4)(5) 2.7% 451,787(6) - -
HFS Incorporated 508,475(7) 2.6% 508,475 - -
Green Street Associates,L.P. 162,000(9) * 162,000 - -
Murray Gross 339,625(4) 1.7% 322,500 17,125 *
Deedee Honigsfeld 142,846(4)(8) * 142,846(8) - -
Gregory Kiernan 38,000(9) * 38,000 - -
Mardee Charity Fund 92,533 * 92,533 - -
Foundation
</TABLE>
- --------------------
* Less than 1%
(1) Acquired from AMRE through a private placement on April, 29, 1996. All
shares are subject to a lock-up agreement precluding their resale prior to
October 30, 1996. Zesiger Capital Group LLC ("Zesiger") is an investment
manager with discretion over 250,500 shares of Common Stock acquired
through a private placement. Although Zesiger has voting and dispositive
power over such shares, Zesiger clients retain the economic benefit of such
shares.
(2) Number of shares indicated includes (i) 200,000 Shares of Common Stock
owned directly by Mr. Moore; (ii) currently exercisable options to acquire
400,000 shares of Common Stock at prices
9
<PAGE> 11
ranging from $5.00 to $5.50 per share; and (iii) 162,000 Shares of Common
Stock owned by Green Street Associates, L.P. ("Green Street"), of which Mr.
Moore is a limited partner and the sole shareholder of the corporate
general partner. In addition, Mr. Moore assigned his right to acquire
38,000 additional Shares from AMRE to Gregory Kiernan. All securities were
issued by AMRE under an agreement dated October 17, 1995, pursuant to which
Mr. Moore provided certain services in connection with the establishment of
AMRE's relationship with Century 21 Group and the negotiation of the
CENTURY 21 License Agreement. In connection with the foregoing, Mr. Moore
was elected a director of AMRE and served on AMRE's board from November 15,
1996 until May 29, 1996. All Shares are subject to a lock-up agreement
precluding their resale until AMRE publishes its results for the fiscal
quarter ended June 30, 1996. Mr. Moore disclaims beneficial ownership of
those Shares held by Green Street, except as to the extent of his
beneficial interest in the partnership.
(3) Excludes the 162,000 shares of Common Stock registered by Green Street
hereunder.
(4) Mark Honigsfeld, Murray Gross and Deedee Honigsfeld were formerly
stockholders of Facelifters and received their Common Stock on April 25,
1996, in a one-for-one exchange in connection with AMRE's merger with
Facelifters. Messrs. Honigsfeld and Gross currently serve under employment
contracts with AMRE, and Gross also serves as a director of AMRE. All
shares are subject to a lock-up agreement precluding their resale until
AMRE publishes its results for the fiscal quarter ending June 30, 1996.
Number of shares indicated include 122,500 shares of Common Stock
underlying currently exercisable options for each of Messrs. Honigsfeld and
Gross.
(5) Number includes 100 shares held by Mr. Honigsfeld as a joint tenant with
his spouse and 92,533 shares held by the Mardee Charity Fund Foundation
(the "Foundation"). The Foundation is a charitable organization founded by
Mark Honigsfeld and Deedee Honigsfeld.
(6) Excludes the 92,533 shares of Common Stock held by the Foundation and the
100 shares held by Mr. Honigsfeld as joint tenant with his spouse.
(7) Number of shares indicated include the Common Stock underlying 300,000
shares of AMRE's Senior Convertible Preferred Stock issued to HFS in
connection with AMRE's entering into the CENTURY 21 License Agreement. In
connection with the sale of the stock, AMRE also gave HFS the right to
designate two members to AMRE's board of directors. All shares are subject
to a lock-up agreement precluding their resale until AMRE publishes its
results for the fiscal quarter ending June 30, 1996.
(8) Number includes 100 shares held by Mrs. Honigsfeld as a joint tenant with
her spouse and excludes the 92,533 shares held by the Foundation.
(9) Represents shares acquired as designees of David Moore. Mr. Moore is a
limited partner and the sole equity holder of the general partner of Green
Street Associates, L.P. See Note (2). All shares are subject to a lock-up
agreement precluding their resale until AMRE publishes its results for the
fiscal quarter ending June 30, 1996.
10
<PAGE> 12
PLAN OF DISTRIBUTION
The Selling Stockholders have entered into agreements with AMRE which
preclude their sales of any of the shares of Common Stock offered under this
Prospectus until various prescribed dates in the future. See "Selling
Stockholders" for a discussion of these restrictive provisions and the dates
upon which the Selling Stockholders will be entitled to sell their shares.
Shares offered under this Prospectus may be sold, from time to time
and at any time, either inside or outside of the United States: (i) directly
to purchasers; (ii) to dealers; (iii) to investors and/or dealers through a
specific bidding or auction process or otherwise; (iv) through underwriters or
dealers; (v) through agents; or (vi) through a combination of any such methods
of sale.
Offers to purchase shares of Common Stock may be solicited directly by
the Selling Stockholders (or AMRE with respect to the 750,000 previously
unissued shares offered hereunder) or by agents designated by the Selling
Stockholders (or AMRE) from time to time. Any such agent which may be deemed
to be an underwriter as that term is defined in the Securities Act, involved in
the offer or sale of the shares of Common Stock in respect of which this
Prospectus is delivered will be named, and any commissions payable to such
agent will be set forth, in a Prospectus Supplement. Unless otherwise
indicated in such Prospectus Supplement, any such agent will be acting on a
best efforts basis. In effecting sales, underwriters, brokers or dealers may
arrange for other underwriters, brokers or dealers to participate. Brokers or
dealers will receive commissions, concessions or discounts in amounts to be
negotiated immediately prior to the sale.
If a dealer is utilized in the sale of the shares of Common Stock in
respect of which this Prospectus is delivered, such shares of Common Stock will
be sold to such dealer, as principal. The dealer may then resell such shares
of Common Stock to the public at varying prices to be determined by such dealer
at the time of resale. In the case of a sale to a dealer, the Prospectus
Supplement will state the name of such dealer, the number of shares purchased
and the price paid.
Depending upon market conditions and other factors, AMRE, on behalf of
the Selling Stockholders, may consider offering some of the shares being
registered under this Prospecuts in an underwritten public offering. Such an
offering would allow the Selling Stockholders the opportunity to sell
approximately fifty percent of their AMRE Shares. In the event that the
Company proceeds with a public offering, it may elect to sell any or all of the
primary Shares being offered under this Prospectus. The Company will made a
decision in either the third or fourth quarter of 1996 if it will proceed with
an underwritten offering. Any stockholders who would be participating in such
an offering will be required to enter into additional restrictive agreements
relating to the sale of shares covered by the shelf registration but not
included in the public offering.
11
<PAGE> 13
DESCRIPTION OF CAPITAL STOCK
The following description sets forth certain general terms and
provisions of the AMRE capital stock . All information is qualified in its
entirety by reference to the applicable provisions of AMRE's Certificate of
Incorporation, as amended, and By-laws.
AMRE's authorized capital stock consists of (i) 40,000,000 shares of
Common Stock, $.01 par value, of which 19,502,256 shares were issued and
outstanding as of June 24, 1996, and (ii) 1,000,000 shares of preferred stock,
par value $0.10 of which (a) 300,000 shares have been designated as Senior
Convertible Preferred Stock, par value $0.10, all of which are issued and
outstanding, and (b) 400,000 shares have been designated as Junior
Participating Preferred Stock, none of which has been issued. All of the
outstanding shares of Common Stock of the Company are validly issued, fully
paid and nonassessable and are free of preemptive rights and are listed on the
NYSE.
There are 1,989,295 shares of Common Stock which are reserved and
available for issuance pursuant to outstanding options granted by the Board of
Directors of the Company. Other than the foregoing (including the Company's
Senior Convertible Preferred Stock, par value $0.10) and except as provided in
the Rights Agreement dated as of November 13, 1992, between the Company and The
Bank of New York, the Company has no outstanding capital stock or securities
convertible into or exchangeable for any shares of its stock, or any rights
(either preemptive or other) to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent
or otherwise) of, or any calls, commitments or claims of any character relating
to, any stock or any stock or securities convertible into or exchangeable for
any stock. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire, redeem or retire any shares of
its stock or any securities convertible into or exchangeable for any stock
other than the Senior Convertible Preferred Stock, which is subject to
mandatory redemption on January 1, 2001.
There are no material voting trusts or other agreements or
understandings with respect to the voting of the capital stock of the Company
to which the Company is a party or of which the Company has knowledge.
12
<PAGE> 14
LEGAL MATTERS
The validity of the securities registered pursuant to this Prospectus
will be passed upon for AMRE by Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1700
Pacific Avenue, Suite 4100, Dallas, Texas 75201.
EXPERTS
The audited supplemental consolidated annual financial statements of
AMRE, Inc., included in this Prospectus and the consolidated annual financial
statements of AMRE incorporated by reference in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated by reference or
included herein in reliance upon the authority of said firm as experts in giving
said reports.
The consolidated annual financial statements of Facelifters Home
Systems, Inc. incorporated by reference in this Prospectus have been audited by
Grant Thornton LLP, independent certified public accountants, as indicated in
their report with respect thereto, and are incorporated herein in reliance upon
the authority of said firm as experts in giving said report.
The consolidated financial statements of Congressional Construction
Corporation incorporated by reference in this Prospectus have been audited by
Deloitte & Touche LLP, independent certified public accountants, as indicated
in their report with respect thereto, and are incorporated herein in reliance
upon the authority of said firm as experts in giving said report.
13
<PAGE> 15
INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
SUPPLEMENTAL CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS (unaudited)
Supplemental Consolidated Balance Sheet - March 31, 1996 and December 31, 1995 . . F-2
Supplemental Consolidated Statement of Operations - Quarterly periods ended
March 31, 1996 and April 2, 1995 . . . . . . . . . . . . . . . . . . . . . . . F-3
Supplemental Consolidated Statement of Cash Flows - Quarterly periods ended March
31, 1996 and April 2, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Supplemental Consolidated Statement of Changes in Stockholders' Equity - Quarterly
period ended March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Supplemental Consolidated Financial Statements . . . . . . . . . . . . . . F-6
SUPPLEMENTAL CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . F-10
Supplemental Consolidated Balance Sheet - December 31, 1994 and December 31, 1995 . F-11
Supplemental Consolidated Statement of Operations - Years ended December 31, 1993,
1994 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
Supplemental Consolidated Statement of Cash Flows - Years ended December 31, 1993,
1994 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Supplemental Consolidated Statement of Changes in Stockholders' Equity - Years
ended December 31, 1993, 1994 and 1995 . . . . . . . . . . . . . . . . . . . . F-14
Notes to Supplemental Consolidated Financial Statements . . . . . . . . . . . . . . F-15
</TABLE>
F-1
<PAGE> 16
AMRE, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 8,208 $ 13,177
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . 4,370 9,523
Accounts receivable -
Trade, net of allowance for doubtful accounts of $931 and $891 . 8,370 8,806
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430 913
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 3,237 3,987
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,323 7,370
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 2,630 3,983
--------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . 33,568 47,759
Property, plant and equipment, net . . . . . . . . . . . . . . . . . 9,255 9,291
Goodwill, less accumulated amortization of $2,189 and $2,164 . . . . 9,206 9,768
Notes receivable - related parties . . . . . . . . . . . . . . . . . -- 469
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,638 1,499
--------- --------
$ 53,667 $ 68,786
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,814 $ 16,516
Wages, commissions and bonuses . . . . . . . . . . . . . . . . . . 5,757 5,698
Accrued workers' compensation . . . . . . . . . . . . . . . . . . . 2,051 2,076
Current portion - long-term debt and capital lease obligations . . 1,503 2,283
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . 18,502 20,678
--------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . 47,627 47,251
--------- --------
Long-term debt and capital lease obligations . . . . . . . . . . . . 5,997 6,120
--------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 53,624 53,371
--------- --------
Commitments and contingencies
Senior convertible redeemable preferred stock - $.10 par value;
300,000 shares issued and outstanding, liquidation
value of $10 per share . . . . . . . . . . . . . . . . . . . 3,060 3,000
Stockholders' equity:
Preferred stock - $.10 par value, 1,000,000 shares
authorized; 300,000 Senior convertible shares outstanding . . . . -- --
Common stock - $.01 par value, 40,000,000 shares
authorized, 19,218,440 and 18,872,039 shares issued; 18,606,242
and 17,649,841 shares outstanding . . . . . . . . . . . . . . . . 192 189
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 32,557 34,293
Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . (25,405) (6,446)
--------- --------
7,344 28,036
Less: Treasury stock, at cost (612,198 and 1,222,198 shares) . . . (5,160) (10,301)
Unearned ESOP compensation . . . . . . . . . . . . . . . . . (5,201) (5,320)
--------- --------
Total stockholders' equity (3,017) 12,415
--------- --------
$ 53,667 $ 68,786
========= ========
</TABLE>
See accompanying Notes to Supplemental Consolidated Financial Statements.
F-2
<PAGE> 17
AMRE, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------
MARCH 31, 1996 APRIL 2, 1995
-------------- ---------------
<S> <C> <C>
Contract revenues . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,601 $ 74,831
Contract costs . . . . . . . . . . . . . . . . . . . . . . . . . . 21,385 26,067
-------------- ---------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,216 48,764
-------------- ---------------
Branch operating expenses . . . . . . . . . . . . . . . . . . . . . 5,937 5,589
Marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . 23,879 20,964
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . 12,891 14,295
License fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,530 8,868
General and administrative expenses . . . . . . . . . . . . . . . . 6,494 6,115
Non-recurring charges . . . . . . . . . . . . . . . . . . . . . . . 2,500 --
-------------- ---------------
56,231 55,831
-------------- ---------------
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . (19,015) (7,067)
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . 287 292
Other income (expense), net . . . . . . . . . . . . . . . . . . . . (214) (177)
-------------- ---------------
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . (18,942) (6,952)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (2,437)
-------------- ---------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,942) $ (4,515)
============== ===============
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . $ (1.05) $ (.26)
============== ===============
Cash dividends declared per share . . . . . . . . . . . . . . . . . $ -- $ .02
============== ===============
Weighted average shares outstanding . . . . . . . . . . . . . . . . 18,112 17,108
============== ===============
</TABLE>
See accompanying Notes to Supplemental Consolidated Financial Statements.
F-3
<PAGE> 18
AMRE, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------
MARCH 31, 1996 APRIL 2, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,942) $ (4,515)
------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . -- (2,437)
Depreciation and amortization . . . . . . . . . . . . . . . . . 950 1,040
Provision for doubtful accounts . . . . . . . . . . . . . . . . 314 (61)
Other non-cash items . . . . . . . . . . . . . . . . . . . . . 1,209 175
Cash receipts of (payments for) income taxes . . . . . . . . . 747 (55)
Changes in assets and liabilities:
Accounts receivable and other . . . . . . . . . . . . . . . . 605 (2,610)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 1,047 (463)
Prepaid expenses and other assets . . . . . . . . . . . . . . 869 (995)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 3,298 154
Other liabilities . . . . . . . . . . . . . . . . . . . . . . (2,138) 3,500
------------ ------------
Total adjustments . . . . . . . . . . . . . . . . . . . . 6,901 (1,752)
------------ ------------
Net cash used in operating activities . . . . . . . . . . . . . . (12,041) (6,267)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities . . . . . . . . . . . . . . . . . 10,792 17,165
Purchase of marketable securities . . . . . . . . . . . . . . . (5,668) (9,804)
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . 469 14
Capital expenditures . . . . . . . . . . . . . . . . . . . . . (1,096) (983)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 --
------------ ------------
Net cash provided by investing activities . . . . . . . . . . . . 4,604 6,392
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable . . . . . . . . . . . . . . . . . . -- 521
Payments on long-term debt . . . . . . . . . . . . . . . . . . (983) (222)
Issuance of common stock . . . . . . . . . . . . . . . . . . . 3,468 34
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (17) (403)
------------ ------------
Net cash provided by (used in) financing activities . . . . . . . 2,468 (70)
------------ ------------
Net change in cash and cash equivalents . . . . . . . . . . . . . (4,969) 55
Cash and cash equivalents at beginning of period . . . . . . . . 13,177 9,344
------------ ------------
Cash and cash equivalents at end of period . . . . . . . . . . . $ 8,208 $ 9,399
============ ============
</TABLE>
See accompanying Notes to Supplemental Consolidated Financial Statements.
F-4
<PAGE> 19
AMRE, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNEARNED TREASURY STOCK
--------------------- PAID-IN RETAINED ESOP -------------------
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION SHARES AMOUNT
------ ------ ------- ------- ------------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 . 18,872 $ 189 $ 34,293 $ (6,446) $ (5,320) (1,222) $ (10,301)
Net loss . . . . . . . . . -- -- -- (18,942) -- -- --
Preferred Stock Dividends . -- -- (60) -- -- -- --
Issuance of Stock . . . . . 38 -- 189 -- -- -- --
Compensation Expense for
ESOP Shares Released . . -- -- -- (17) 119 -- --
Exercise of Options . . . . 308 3 (1,865) -- -- 610 5,141
------ -------- -------- ---------- ---------- -------- ---------
Balance, March 31, 1996 . . . 19,218 $ 192 $ 32,557 $ (25,405) $ (5,201) (612) $ (5,160)
====== ======== ======== ========= ========= ======== =========
</TABLE>
See accompanying Notes to Supplemental Consolidated Financial Statements.
F-5
<PAGE> 20
AMRE, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - UNAUDITED INTERIM SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
Basis of presentation - The accompanying interim supplemental consolidated
financial statements of AMRE, Inc. and its subsidiaries, American Remodeling,
Inc., Facelifters Home Systems, Inc., and Congressional Construction
Corporation (the "Company" or "AMRE") as of March 31, 1996 and for the
quarterly periods ended March 31, 1996 and April 2, 1995 are unaudited;
however, in the opinion of management, these interim statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position, results of operations and cash
flows. These supplemental financial statements should be read in conjunction
with the supplemental consolidated annual financial statements and related notes
included elsewhere in this filing.
On April 25, 1996, the Company consummated a merger with Facelifters Home
Systems, Inc. ("Facelifters"). The merger is accounted for as a pooling of
interests. The accompanying unaudited supplemental consolidated financial
statements give retroactive effect to this transaction.
On May 28, 1996, the Company consummated a merger with Congressional
Construction Corporation ("Congressional"). The merger is accounted for as a
pooling of interests. The accompanying unaudited supplemental consolidated
financial statements give retroactive effect to this transaction.
Fiscal period - The Company's quarterly periods end on the Sunday nearest
to the last day in the calendar quarter except at year end which is December
31.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
AMRE has been named as a defendant in a proceeding filed on February 29,
1996 in the Superior Court of California by a party who claims ownership of a
registered service mark and trade name styled "21st Century Home Improvement."
AMRE has been advised by Century 21 that the action has been moved from state
court to federal court. The plaintiff alleges, among other things, that the
CENTURY 21 Home Improvements(SM) name is an infringement of the plaintiff's
trade name and registered mark and constitutes an unfair business practice. The
plaintiff seeks a preliminary and permanent injunction enjoining AMRE from
operating under the Century 21 Home Improvements name, general damages according
to proof, all profits realized by AMRE from operating under the Century 21 Home
Improvements name in California and costs and attorneys' fees.
AMRE has been advised by Century 21, the owner of the CENTURY 21 Home
Improvements name, that it gave notice to counsel for the owner of the "21st
Century Home Improvement" mark that the latter mark infringed on Century 21's
federally registered mark. AMRE has further been advised by Century 21 that :
(i) it is its policy and practice to vigorously defend its trade name, (ii)
Century 21 has successfully litigated in the past to protect its trade name and
federally registered mark, and (iii) it has obtained a number of judgments
against such entities which had used "21st CENTURY" or marks containing the
word "CENTURY" in connection with remodeling or home construction services. In
addition, Century 21 has advised AMRE that Century 21's federal registration
predates the use of the "21st Century Home Improvement" mark, and for the
above-listed reasons, AMRE believes at this time that it is legally entitled to
use the CENTURY 21 Home Improvements name in California.
The Company is a party to certain other legal proceedings arising in the
ordinary course of business, none of which is believed to be material to the
financial position of the Company.
The Company has an agreement with a financial institution which makes
financing available to the Company's customers. The customer executes a
Revolving Credit Agreement with the lender and the lender pays the Company
F-6
<PAGE> 21
on completion of the installation.The agreement provides the financial
institution with right of first refusal on substantially all of the Company's
customer credit applications, and provides for the Company, a minimum
acceptance rate of customer credit applications based on specified criteria.
The Company's credit risk is limited to its normal warranties and
representations regarding materials and workmanship. Prior to 1995, the
Company assumed some recourse liability or credit risk in certain customer
financing agreements, if customer defaults exceed specified levels. The
Company has provided a reserve for estimated losses under the recourse
liability. However, customer defaults may differ from the estimated amount and
therefore the reserve may be adjusted in future periods.
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
In the three month periods ended March 31, 1996 and April 2, 1995, the
Company recorded non-cash operating items as follows:
<TABLE>
<CAPTION>
March 31, April 2,
1996 1995
-------------- --------------
<S> <C> <C>
Amortization of investment premium
and discounts 29 31
Compensation expense for ESOP
shares released 119 114
Leaseholds and other assets
written off 990 -
Other 71 -
---------------- --------------
1,209 175
---------------- --------------
</TABLE>
NOTE 4 - NONRECURRING CHARGES
The Company incurred nonrecurring charges to operations currently estimated
at approximately $2.5 million for certain costs associated with the merger and
the integration of the operations of Facelifters and Congressional. This
estimate is subject to change based upon additional information.
NOTE 5 - INCOME TAXES
The Company has recorded a valuation allowance to reflect the uncertainties
associated with the ultimate realization of its deferred tax asset. Management
periodically reviews the expected realization of the deferred tax asset and
makes adjustments to the valuation allowance, as appropriate, when existing
conditions change the probability of ultimate realization. The Company
established a valuation allowance of $6.4 million at December 31, 1995 which
equaled 100% of its deferred tax asset.
Management's evaluation as to the realizability of the deferred tax asset
took into consideration available evidence, both positive and negative,
regarding ultimate realization. Negative evidence considered by management
included (1) a significant loss in 1995, (2) operating losses in two of the
last three years, (3) the expected decline in revenues and expected first
quarter 1996 operating loss, (4) the uncertainties associated with the time and
cost to build awareness of the CENTURY 21 Home Improvements name and generate
significant amounts of cost-effective leads and the process of integrating the
companies if the mergers were consummated make it difficult to estimate when
the Company will return to profitability and (5) costs relating to the brand
transition and the mergers.
F-7
<PAGE> 22
Positive evidence considered by management included (1) a 3.0% license fee
(subject to an $11.0 million minimum in 1996) to be paid for use of the CENTURY
21 Home Improvements name as compared to a 12.0% license fee paid to Sears in
1995 and (2) expanded geographic and product opportunities under the Century 21
License Agreement.
Until the Century 21 License Agreement is in operation for a period of
time, there is no historical or objective evidence to determine its impact on
future taxable income. Therefore, based on the existing objective evidence,
management believes it is more likely than not that the Company will be unable
to generate sufficient taxable income to utilize the deferred tax asset and
that a reserve should be provided for the entire deferred tax asset. No tax
benefit has been provided for the pre-tax loss of the current period ended
March 31, 1996 and the valuation allowance has been maintained at 100% of the
deferred tax asset. Management will review the valuation allowance in the
future as the results and impact of the CENTURY 21 Home Improvements license
arrangement are known.
NOTE 6 - CAPITALIZATION
Revolving credit facility - At March 31, 1996, no loans had been made under
the credit facility.
Senior Convertible Redeemable Preferred Stock - At March 31, 1996, $60,000
of dividends have been accrued on the Senior Convertible Redeemable Preferred
Stock.
Amendment to Certificate of Incorporation - In connection with the
Facelifters merger, on April 25, 1996, the stockholders of the Company approved
an amendment to the Certificate of Incorporation to increase the number of
authorized shares of common stock of the Company from 20 million to 40 million
shares.
Common Stock Issued in Private Placement - On April 30, 1996, the Company
completed a private placement with institutional investors pursuant to which
the Company issued 800,500 shares of its common stock. The purchasers had not
previously owned any common stock of the Company. The common stock was sold at
a discount to the then current market price in exchange for an agreement with
the investors not to sell the shares for a minimum of 180 days. The Company
received approximately $12 million of net proceeds after transaction expenses.
The accompanying unaudited supplemental consolidated financial statements do
not give retroactive effect to this transaction since it was not completed
until after the current reporting period ended March 31, 1996.
NOTE 7 - MERGERS WITH FACELIFTERS AND CONGRESSIONAL
On October 31, 1995, the Company and Facelifters entered into an agreement
whereby a newly formed subsidiary of the Company would be merged with and into
Facelifters. Facelifters designs, manufactures, markets, sells and installs
kitchen cabinet refacing products utilized in kitchen remodeling, directly to
consumers in 23 markets, primarily markets in which the Company did not
operate.
On April 25, 1996, the stockholders of the Company and Facelifters approved
the merger ("Facelifters Merger") and Facelifters became a direct, wholly-owned
subsidiary of AMRE. Each outstanding share of common stock of Facelifters,
$.01 par value per share (the "Facelifters Common Stock"), was converted into
one share of AMRE Common Stock. Based on the number of shares of Facelifters
Common Stock outstanding upon consummation of the Facelifters Merger,
approximately 3,578,439 shares of AMRE Common Stock were issued to holders of
Facelifters Common Stock. In addition, AMRE will reserve approximately 368,255
shares of AMRE Common Stock for issuance upon the exercise of outstanding
options to acquire Facelifters Common Stock.
The merger is accounted for as a pooling of interests. The accompanying
unaudited supplemental consolidated financial statements give retroactive
effect to this transaction.
F-8
<PAGE> 23
On December 30, 1995, the Company and Congressional entered into an
agreement whereby a newly formed subsidiary of the Company was merged with and
into Congressional. Congressional markets, sells, furnishes and installs home
improvement products, including siding, fencing, wooden decks, replacement
vinyl windows, roofing and patio enclosures directly to consumers in certain
markets, primarily markets in which the Company does not currently operate. In
connection with the merger, 899,998 shares were issued to the existing
stockholders of Congressional.
On May 22, 1996, the Company consummated the merger with Congressional.
The merger is accounted for as a pooling of interests. The accompanying
unaudited supplemental consolidated financial statements give retroactive
effect to this transaction.
Combined and separate results of the Company, Congressional and Facelifters
for the periods presented are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------
MARCH 31, 1996 APRIL 2, 1995
-------------- -------------
<S> <C> <C>
Contract revenues:
AMRE . . . . . . . . . . . . . . . . . $ 45,602 $ 60,885
Congressional . . . . . . . . . . . . . 2,639 3,279
Facelifters . . . . . . . . . . . . . . 10,360 10,667
----------- ----------
Combined . . . . . . . . . . . . . . . $ 58,601 $ 74,831
----------- ----------
Net loss:
AMRE . . . . . . . . . . . . . . . . . $ (15,655) $ (3,895)
Congressional . . . . . . . . . . . . . (536) (456)
Facelifters . . . . . . . . . . . . . . (2,751) (164)
----------- ----------
Combined . . . . . . . . . . . . . . . $ (18,942) $ (4,515)
----------- ----------
Loss per share:
AMRE . . . . . . . . . . . . . . . . . $ (.87) $ (.22)
Congressional . . . . . . . . . . . . . (.03) (.03)
Facelifters . . . . . . . . . . . . . . (.15) (.01)
Combined . . . . . . . . . . . . . . . $ (1.05) $ (.26)
=========== ==========
</TABLE>
F-9
<PAGE> 24
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of AMRE, Inc.:
We have audited the accompanying supplemental consolidated balance sheets of
AMRE, Inc. (a Delaware Corporation) and subsidiaries as of December 31, 1994
and 1995, and the related supplemental consolidated statements of operations,
cash flows and changes in stockholders' equity for the three years ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in
all material respects, the financial position of AMRE, Inc. and subsidiaries as
of December 31, 1994 and 1995, and the results of their operations and their
cash flows for the three years ended December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Dallas, Texas
June 27, 1996
F-10
<PAGE> 25
AMRE, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
ASSETS 1994 1995
----------- ------------
<S> <C>
Current assets:
Cash and cash equivalents $ 9,344 $ 13,177
Marketable securities, including restricted securities of $1,250 and $0 20,894 9,523
Accounts receivable-
Trade, net of allowance for doubtful accounts of $1,157 and $891 9,951 8,806
Other 710 913
Income taxes 575 3,987
Inventories 7,231 7,370
Deferred income taxes 1,802 -
Prepaid expenses 5,865 3,983
--------- --------
Total current assets 56,372 47,759
--------- --------
Property, plant, and equipment, net 9,259 9,291
Goodwill, less accumulated amortization of $1,793 and $2,164 10,294 9,768
Notes receivable:
Related parties 4,217 469
Other 137 -
Other assets 1,879 1,499
---------- --------
$ 82,158 $ 68,786
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,771 $ 16,516
Wages, commissions and bonuses 5,680 5,698
Accrued workers' compensation 2,051 2,076
Current portion - long term debt and capital lease obligations 1,223 2,283
Other accrued liabilities 12,458 20,678
--------- --------
Total current liabilities 42,183 47,251
Long-term debt and capital lease obligations 6,448 6,120
--------- --------
Total liabilities 48,631 53,371
--------- --------
Commitments and contingencies
Senior convertible redeemable preferred stock - $.10 par value;
300,000 shares issued and outstanding; liquidation value of $10 per share - 3,000
Stockholders' equity:
Preferred stock - $.10 par value, 1,000,000 shares authorized;
300,000 Senior convertible shares outstanding - -
Common stock - $.01 par value, 40,000,000 shares authorized,
18,305,476 and 18,872,039 shares issued; 17,083,278 and 17,649,841
shares outstanding 183 189
Additional paid-in capital 31,118 34,293
Retained earnings (deficit) 18,374 (6,446)
--------- --------
49,675 28,036
Less-
Treasury stock, at cost (1,222,198 and 1,222,198 shares) (10,301) (10,301)
Unearned ESOP compensation (5,847) (5,320)
--------- --------
Total stockholders' equity 33,527 12,415
--------- --------
$ 82,158 $ 68,786
========= ========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-11
<PAGE> 26
AMRE, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
--------- ---------- ----------
<S> <C> <C> <C>
Contract revenues $ 299,375 $ 337,608 $ 339,907
Contract costs 92,490 112,676 115,311
--------- ---------- ----------
Gross profit 206,885 224,932 224,596
--------- ---------- ----------
Branch operating expenses 20,867 21,528 24,001
Marketing expenses 72,883 77,136 85,242
Selling expenses 52,595 59,550 62,353
Sears license fees 34,654 40,053 40,213
General and administrative expenses 29,448 24,699 26,885
Provision for plant closing - - 1,065
Nonrecurring charges - - 11,800
--------- ---------- ----------
210,447 222,966 251,559
--------- ---------- ----------
Operating income (loss) (3,562) 1,966 (26,963)
Investment income 1,292 1,173 1,024
Other income (expense), net 1,313 83 578
--------- ---------- ----------
Income (loss) before income taxes (957) 3,222 (25,361)
Income taxes (2,661) 1,197 (1,499)
--------- ---------- ----------
Net income (loss) $ 1,704 $ 2,025 $ (23,862)
========= ========== ==========
Net income (loss) per share $0.09 $0.12 $(1.39)
===== ===== ======
Weighted average shares outstanding 18,181 17,108 17,194
====== ====== ======
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-12
<PAGE> 27
AMRE, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
--------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,704 $ 2,025 $ (23,862)
-------- --------- ----------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operations:
Income taxes (2,661) 1,197 (1,499)
Depreciation and amortization 3,903 3,600 4,111
Provision for doubtful accounts 1,612 1,106 814
Other non-cash items 333 1,050 6,987
Cash receipts of (payments for) income taxes 2,480 3,092 (300)
Changes in assets and liabilities:
Accounts receivable and other 1,331 562 (280)
Inventories (464) (706) (139)
Prepaid expenses and other assets (57) (1,631) 3,167
Accounts payable 1,325 2,026 (4,255)
Other liabilities (1,807) (2,501) 7,875
-------- --------- ----------
Total adjustments 5,995 7,795 16,481
-------- --------- ----------
Net cash provided by (used in) operations 7,699 9,820 (7,381)
-------- --------- ---------
Cash flows from investing activities:
Sale of marketable securities 16,542 16,425 28,416
Purchase of marketable securities (25,405) (16,807) (17,255)
Capital and acquisition expenditures (1,158) (2,943) (3,583)
Notes receivable (262) (22) 42
Other 89 60 13
-------- --------- ----------
Net cash provided by (used in) investing activities (10,194) (3,287) 7,633
------- --------- ----------
Cash flows from financing activities:
Payments on long-term debt (866) (1,346) (1,124)
Borrowings on long-term debt - 1,093 1,062
Purchase of treasury shares (961) - -
Issuance of common and preferred stock 651 2,350 4,482
Dividends paid (1,556) (1,559) (839)
-------- --------- ----------
Net cash provided by (used in) financing activities (2,732) 538 3,581
------- --------- ----------
Net increase (decrease) in cash and cash equivalents (5,227) 7,071 3,833
Cash and cash equivalents at beginning of year 7,500 2,273 9,344
-------- --------- ----------
Cash and cash equivalents at end of year $ 2,273 $ 9,344 $ 13,177
======== ========= ==========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-13
<PAGE> 28
AMRE, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED UNEARNED TREASURY STOCK
----------------- PAID-IN EARNINGS ESOP -------------------
SHARES AMOUNT CAPITAL (DEFICIT) COMPENSATION SHARES AMOUNT
-------- ------- ------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 17,503 $ 175 $ 28,931 $ 17,845 $ - (1,331) $(10,273)
Net income - - - 1,704 - - -
Exercise of options - - (381) - - 132 911
Warrants exercised 30 - 121 - - - -
Treasury shares issued
for compensation - - 22 - - 12 -
Cash dividends - - - (1,556) - - -
Purchase of treasury stock - - - - - (95) (961)
ESOP borrowings recorded
as unearned compensation - - - - (7,000) - -
Compensation expense for
ESOP shares released - - - - 337 - -
------ ------- -------- --------- -------- ------- --------
BALANCE, December 31, 1993 17,533 175 28,693 17,993 (6,663) (1,282) (10,323)
Net income - - - 2,025 - - -
Exercise of options 229 3 227 - - 60 22
Warrants exercised 543 5 2,207 - - - -
Cash dividends - - - (1,559) - - -
Compensation expense for
ESOP shares released - - (9) (85) 816 - -
------ ------- -------- --------- -------- ------ --------
BALANCE, December 31, 1994 18,305 183 31,118 18,374 (5,847) (1,222) (10,301)
Net loss - - - (23,862) - - -
Exercise of options 205 2 669 - - - -
Issuance of stock 362 4 1,806 - - - -
Cash dividends - - - (839) - - -
Stock options granted to
non-employee - - 700 - - - -
Compensation expense for
ESOP shares released - - - (119) 527 - -
------ ------- -------- --------- -------- ------ --------
BALANCE, December 31, 1995 18,872 $ 189 $ 34,293 $ (6,446) $ (5,320) (1,222) $(10,301)
====== ======= ======== ========= ======== ====== ========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-14
<PAGE> 29
AMRE, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN TABLES IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION:
The Company is engaged, through direct consumer marketing, in the in-home sale
and installation of siding and related exterior home improvement products,
kitchen cabinet refacing and custom countertops, replacement windows, and in
certain of its territories, exterior coating, wooden decks, fencing, roofing,
and patio enclosures. The Company currently conducts its business in the
United States.
On April 25, 1996, AMRE consummated a merger with Facelifters Home Systems,
Inc. and Subsidiaries ("Facelifters"). The merger of Facelifters has been
accounted for as a pooling of interests for accounting purposes. The
supplemental consolidated financial statements give retroactive effect to this
transaction and reflect the issuance of one share of AMRE common stock in
exchange for each share of Facelifters common stock. In addition, Facelifters'
methods of accounting for advertising and income taxes have been conformed to
AMRE's methods for all periods presented.
On May 28, 1996, AMRE consummated a merger with Congressional Construction
Corporation ("Congressional"). The merger of Congressional has been accounted
for as a pooling of interests for accounting purposes. The supplemental
consolidated financial statements give retroactive effect to this transaction
and reflect the issuance of 899,998 shares of AMRE common stock to holders of
Congressional common stock and Congressional preferred stock. See Note 15 for
additional disclosures related to the mergers.
The supplemental consolidated financial statements include the accounts of
AMRE, Inc. and its subsidiaries, American Remodeling, Inc., Facelifters, and
Congressional (herein referred to as the "Company" or "AMRE"). All significant
intercompany accounts and transactions are eliminated in consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of estimates in financial statements - The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of certain assets and liabilities and disclosure of contingent liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from these estimates.
Cash equivalents - Cash equivalents are short-term, highly liquid investments
with original maturities of three months or less that are readily convertible
to known amounts of cash and present an insignificant risk of change in value
because of changes in interest rates.
Marketable securities - The Company classifies its investments as available
for sale because it does not acquire the securities for the purpose of selling
them in the near term to generate profits on short-term differences in price,
or, with the intent of holding them to maturity. The Company uses the specific
identification method of determining cost in computing realized gains and
losses.
Accounts receivable - The Company's accounts receivable consist of amounts due
from individuals, credit card sponsors and financial institutions. Certain of
the amounts due from individuals are secured by second mortgages.
Inventories - Inventories (consisting principally of materials) are carried at
the lower of cost (first-in, first-out) or market.
Property, plant, and equipment - Property, plant and equipment is carried at
cost, less accumulated depreciation. Depreciation is computed over the
estimated useful lives of the related assets by using the straight-line method
of
F-15
<PAGE> 30
depreciation for financial reporting purposes. Maintenance and repair
expenditures are charged to operations; renewals and betterments are
capitalized.
Goodwill - Goodwill represents the excess of cost over the fair value of net
tangible assets acquired and is amortized on a straight-line basis over periods
of 10 to 40 years.
Long-lived assets - The Company periodically evaluates whether the remaining
useful life of long-lived assets, including goodwill, may require revision or
the remaining unamortized balance may not be recoverable. When factors
indicate the asset should be evaluated for possible impairment, the Company
uses an estimate of the specific asset's cash flow in evaluating such asset's
fair value.
Accrued workers' compensation - The Company accrues workers' compensation costs
based on the amount of estimated total losses to be incurred for the period.
These estimates are based on the total payroll, using assumptions relating to
the Company's loss experience as well as future expected losses.
Revenue recognition - The Company recognizes its revenue upon completion of
each home improvement contract.
Contract costs - Contract costs represent the costs of direct material and
direct labor associated with installations and manufacturing overhead
associated with the production of cabinet fronts and countertops.
Advertising expense - The Company expenses advertising costs as incurred.
Income taxes - Deferred income taxes are provided for temporary differences
between the tax basis of assets and liabilities and their financial reporting
amounts. Deferred taxes are recorded based upon enacted tax rates anticipated
to be in effect when the temporary differences are expected to reverse. A
valuation allowance is provided when required.
Earnings per share - Net income (loss) per common share is based on net income
(loss) after preferred stock dividend requirements and the weighted average
number of common shares outstanding after giving effect to stock options
considered to be dilutive common stock equivalents. Fully diluted net income
(loss) per common share is based on the weighted average number of common
shares outstanding after giving effect to dilutive common stock equivalents,
and adjusted for the incremental dilutive shares attributed to convertible
preferred stock. For all periods presented, weighted average shares
outstanding reflects the issuance of (1) one share of AMRE common stock for
each share of Facelifters common stock, and (2) 899,998 shares of AMRE common
stock for all the outstanding common and preferred stock of Congressional to
effect these mergers.
3. MARKETABLE SECURITIES:
Marketable securities, reported at fair value, which approximates cost, consist
primarily of state and city municipal bonds, with contractual maturity dates
ranging from January 1, 1996 to January 1, 1997. For the years ended December
31, 1994 and 1995, the Company had no material gains or losses from the sale of
securities.
F-16
<PAGE> 31
4. PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
Depreciation December 31,
----------------------
Lives 1994 1995
------------- ---------- ---------
<S> <C> <C> <C>
Buildings 39 years $ 1,018 $ 1,346
Machinery and equipment 5 years 12,833 14,563
Software development cost 5 years 3,496 3,814
Furniture and fixtures 3-5 years 4,100 4,666
Leasehold improvements 3-15 years 1,896 1,174
Land 221 221
--------- --------
23,564 25,784
Less- Accumulated depreciation and amortization (14,305) (16,493)
--------- --------
$ 9,259 $ 9,291
========= ========
</TABLE>
In September 1995, the Company decided to phase out its Brooklyn plant and move
additional manufacturing activities to its Virginia facility. Accordingly, it
recorded a $1,065,000 provision for plant closing in September 1995 to cover
expected costs associated with the plant closing. These costs include buy-out
of the lease ($525,000), abandonment of leasehold improvements ($437,000),
impairment in the values of redundant machinery and fixtures and other costs
directly related to the plant closing ($103,000).
5. LICENSE AGREEMENTS:
Since 1981 substantially all of the Company's contracts have been sold under
license agreements with Sears, Roebuck and Co. The license agreements were
one-year renewable agreements, cancelable by either party with 60 days written
notice. The fee was generally paid after the Company had completed the
contract and collected the contract amount. The average license fee paid to
Sears over the last three years was 11.8%.
On October 17, 1995, American Remodeling, Inc., ("ARI"), a wholly owned
subsidiary of AMRE and TM Acquisition Corporation and Century 21 Real Estate
Corporation (collectively referred to as "Century 21"), subsidiaries of HFS
Incorporated ("HFS"), entered into an agreement pursuant to which Century 21
granted to ARI an exclusive 20 year license to operate under the name CENTURY
21 Home Improvements for the marketing, sale, and installation of certain home
improvement products in the United States, Canada, and Mexico ("Century 21
License Agreement"), and the right to grant sublicenses under the agreement.
The Company did not renew its license agreements with Sears which expired on
December 31, 1995.
Under the Century 21 License Agreement, the Company will pay fees equal to the
greater of 3% of the aggregate contract revenues of the Company and its
sublicensees, or certain guaranteed annual minimums starting at $11 million in
1996 and increasing during the term of the 20 year agreement. The agreement
provides for a fee of an additional 10% of the contract revenue for each sale
made pursuant to a customer referral from Century 21, payable to the respective
Century 21 broker who originated the customer referral. The Century 21 License
Agreement provides for immediate termination by either the Company or Century
21 if either party is negligent in the performance of its services, becomes
insolvent or bankrupt, or fails to comply with any material provision of the
Century 21 License Agreement, including the payment of license fees as
stipulated.
The Company began entering into certain sublicense agreements (including
sublicense agreements with its newly acquired subsidiaries, Facelifters and
Congressional), commencing January 1, 1996.
6. NONRECURRING CHARGES:
In connection with the Century 21 License Agreement (see Note 5), the Company
recorded a nonrecurring charge of $5,115,000 consisting primarily of
transaction fees and expenses and costs associated with the termination of the
F-17
<PAGE> 32
Sears License Agreement, including the write-off of certain assets and a
provision for incremental warranty costs related to installations sold under
the Sears brand name.
In connection with the Facelifters and Congressional mergers, the Company
recorded a nonrecurring charge of $2,770,000 for transaction fees and expenses
associated with combining operations. However, costs could increase if the
Company encounters unexpected difficulties in the integration of these
businesses. The Company consummated the mergers in the Company's second
quarter of 1996.
The Company recorded a nonrecurring, non-cash charge of $3,915,000 in
connection with the settlement of, and pursuant to, employment and separation
agreements between the Company and Mr. Ronald I. Wagner (see Note 9). On
December 1, 1995, Mr. Wagner announced that he was resigning as Chairman of the
Board of the Company. Under the terms of the agreements, the Company agreed to
pay Mr. Wagner $500,000 and released him from his promissory note payable to
the Company in exchange for his waiving termination amounts owed to him under
his employment agreement and his agreement not to compete with the Company for
a period of five years.
7. SUPPLEMENTAL CASH FLOW INFORMATION:
For the years ended December 31, 1993, 1994, and 1995, the Company recorded
non-cash operating items as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1993 1994 1995
-------- --------- -------
<S> <C> <C> <C>
Amortization of investment premium and discounts $ 194 $ 216 $ 207
Separation agreement - - 3,915
Common stock and common stock options
granted for services rendered - - 1,700
Compensation expense for ESOP shares released 337 722 409
Leaseholds abandoned - - 437
Other (198) 112 319
------- --------- -------
$ 333 $ 1,050 $ 6,987
======== ========= =======
</TABLE>
During the years ended December 31, 1994 and 1995, the Company acquired
$1,757,000 and $2,254,000, respectively, of capital equipment financed with
long term debt.
Interest paid during the years ended December 31, 1993, 1994, and 1995 was
$232,000, $530,000, and $670,000, respectively.
F-18
<PAGE> 33
8. INCOME TAXES:
Income taxes consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1993 1994 1995
--------- --------- ----------
<S> <C> <C> <C>
Current:
Federal $ (4,191) $ (492) $ (3,456)
State 166 207 155
Deferred:
Federal 1,181 1,298 1,965
State 183 184 (163)
--------- --------- ---------
Total $ (2,661) $ 1,197 $ (1,499)
======== ========= =========
</TABLE>
The effective income tax rate differs from the statutory federal income tax
rate for the following reasons:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1993 1994 1995
--------- --------- ----------
<S> <C> <C> <C>
Statutory rate (34.0%) 34.0% (34.0%)
State taxes, net of federal benefit 28.5 12.0 (0.6)
Municipal bond income (30.8) (8.7) (1.1)
Valuation allowance - - 23.7
Write-off of foreign subsidiary (118.9) - -
Goodwill amortization 9.7 2.9 0.4
Federal income tax refund (104.5) - -
Other (28.1) (3.0) 5.7
------- ------- --------
Effective rate (278.1%) 37.2% (5.9%)
======= ======= ========
</TABLE>
The components of, and changes in, the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
December 31, Deferred December 31,
1994 Income Taxes 1995
------------- ------------ -----------
<S> <C> <C> <C>
Workers' compensation $ 791 $ 14 $ 805
Nonrecurring charges - 1,066 1,066
Health insurance 403 (3) 400
Allowance for doubtful accounts 473 27 500
Net operating loss carryforward 921 2,003 2,924
Other 220 1,513 1,733
--------- --------- --------
Total 2,808 4,620 7,428
Valuation allowance (1,006) (6,422) (7,428)
--------- --------- --------
Net deferred taxes $ 1,802 $ (1,802) $ -
========= ========= ========
</TABLE>
F-19
<PAGE> 34
The Company incurred a tax loss in 1995 and has recorded a tax benefit in the
amount refundable from taxes paid in prior years. The Company has a net
operating loss carryforward of approximately $8.6 million that will expire in
2010 if not utilized earlier. AMRE has recorded a valuation allowance to
reflect the uncertainties associated with the ultimate realization of its
deferred tax asset. Management periodically reviews the expected realization
of AMRE's deferred tax asset and makes adjustments to the valuation allowance,
as appropriate, when existing conditions change the probability of ultimate
realization. At December 31, 1995, AMRE's valuation allowance of approximately
$7.5 million equals 100% of its deferred tax asset.
Management's evaluation as to the deferred tax asset takes into consideration
available evidence, both positive and negative, regarding ultimate realization.
Negative evidence considered by management included (1) a significant operating
loss in 1995, (2) operating losses in two of the last three years, (3) the
expected decline in revenues and the first quarter 1996 operating loss, (4) the
uncertainties associated with the time and cost to build awareness of the
CENTURY 21 Home Improvements name, AMRE's ability to generate significant
amounts of cost-effective leads and the process of integrating the companies
make it difficult to estimate when AMRE will return to profitability, and (5)
costs relating to the brand transition and the mergers.
Positive evidence considered by management included (1) a 3.0% license fee
(subject to an $11.0 million minimum in 1996) to be paid for use of the CENTURY
21 Home Improvements mark as compared to a 12.0% license fee paid to Sears in
1995, and (2) expanded geographic and product opportunities under the Century
21 License Agreement.
Until the Century 21 License Agreement is in operation for a period of time,
there is no historical or objective evidence to determine its impact on taxable
income. Therefore, based on the existing objective evidence, management
believes it is more likely than not that AMRE will be unable to generate
sufficient taxable income to utilize the deferred tax asset and that the entire
deferred tax asset should be reserved for as of December 31, 1995. Management
will review the valuation allowance in the future as the results and impact of
the Century 21 License Agreement are known.
9. COMMITMENTS AND CONTINGENCIES:
The Company is a party to certain legal proceedings arising in the ordinary
course of business, none of which is believed to be material to the financial
position or results of operations of the Company.
Leases
The Company operates in leased facilities and also leases certain equipment.
In most cases, management expects that leases currently in effect will be
renewed or replaced by other leases of a similar nature and term. Escalation
charges and restrictions imposed by lease agreements are not significant.
Rental expense under operating leases was $4,571,000, $4,477,000, and
$5,251,000 for the years ended December 31, 1993, 1994, and 1995, respectively.
Commitments for future minimum facility rental payments required under
operating leases with terms in excess of one year for the years ending December
31, are as follows:
<TABLE>
<S> <C>
1996 $ 5,811
1997 5,397
1998 4,413
1999 3,484
2000 2,667
Later years 3,994
--------
Total $ 25,766
========
</TABLE>
In 1993, the Company began to consolidate certain branches where more than one
leased facility existed in the same local geographic market. In December 1993,
the Company expensed approximately $600,000 for estimated costs of moving as
well as the remaining lease obligations on certain of these leased branch
facilities.
F-20
<PAGE> 35
Other Agreements
On December 1, 1995, AMRE and Ronald I. Wagner, its former Chairman, entered
into a Separation Agreement (the "Wagner Separation Agreement"), pursuant to
which Mr. Wagner resigned from all positions that he held as a director,
officer or employee of AMRE. In connection with the Wagner Separation
Agreement, AMRE and Mr. Wagner agreed, among other things, as follows:
1. Mr. Wagner will not compete with AMRE in any of its products and
services under the Century 21 License Agreement anywhere in North
America for a period of five years;
2. Mr. Wagner waived and released AMRE from amounts owed him of
approximately $3,375,000 pursuant to the termination provisions of his
employment agreement with AMRE;
3. In exchange for 1 and 2 above, (a) AMRE shall pay Mr. Wagner the sum
of $500,000, payable in two equal installments in 1997 and 1999; (b)
AMRE released Mr. Wagner from his payment obligation under an
outstanding promissory note payable (due April 1997), plus interest,
in the amount of $4,101,824; and (c) AMRE granted demand and
piggy-back registration rights to Mr. Wagner with respect to 550,000
shares of AMRE Common Stock covered by currently exercisable options
held by Mr. Wagner; and
4. Mr. Wagner and AMRE agreed to terminate the current lease under which
AMRE leases from Mr. Wagner certain of its facilities and enter into a
new lease commencing January 1, 1996 for a term of ten years at an
annual rent beginning at $180,000 for the first two years.
In connection with the Wagner Separation Agreement, the Company recorded a
nonrecurring charge of $3,915,000.
The Company has Indemnification Agreements with the members of its Board of
Directors. The Indemnification Agreements are for an unspecified period of
time and are intended to indemnify and hold harmless each director to the
fullest extent permitted or authorized by applicable law and the By-Laws of the
Company.
The Company has an agreement with a financial institution which makes financing
available to the Company's customers. The customer executes a Revolving Credit
Agreement with the lender and the lender pays the Company on completion of the
installation. The agreement provides the financial institution with right of
first refusal on substantially all of the Company's customer credit
applications, and provides for the Company a minimum acceptance rate of
customer credit applications based on specified criteria. The Company's credit
risk is limited to its normal warranties and representations regarding
materials and workmanship. Prior to 1995, the Company assumed some recourse
liability or credit risk in certain customer financing agreements. On
approximately $13 million of contracts financed under such agreements the
Company has agreed to indemnify the financial institution for losses if
customer defaults exceed specified levels. The Company has provided a reserve
for estimated losses under the recourse liability. However, customer defaults
may differ from the estimated amount and therefore the reserve may be adjusted
in future periods.
F-21
<PAGE> 36
10. LONG-TERM DEBT:
Long-term debt consisted of the following at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
ESOP loan (see Note 12) $ 5,926,000 $ 5,399,000
Term notes payable 326,000 858,000
Borrowings under revolving line of credit 450,000 870,000
Obligations under capital leases 942,000 1,263,000
Other 27,000 13,000
----------- ----------
Total debt 7,671,000 8,403,000
Less- Current maturities (1,223,000) (2,283,000)
----------- -----------
Total long-term debt $ 6,448,000 $ 6,120,000
=========== ===========
</TABLE>
Future maturities of long-term debt, excluding capital lease obligations, are
as follows:
<TABLE>
<CAPTION>
Year Amount
--------- -----------
<S> <C>
1996 $ 2,111,000
1997 717,000
1998 757,000
1999 796,000
2000 804,000
Thereafter 1,955,000
-----------
$ 7,140,000
===========
</TABLE>
Term notes payable include: (i) a five-year note to a bank with an interest
rate of 8.2% payable in monthly installments of $10,411, secured by certain
equipment and machinery at the Virginia manufacturing facility, with an
outstanding balance of $326,000 and $289,000 at December 31, 1994 and 1995;
(ii) a five-year note to a bank with an interest rate of 8.75% payable in
monthly installments of $6,552, with $291,000 outstanding at December 31, 1995;
and (iii) a seven-year note payable to the Industrial Development Authority
payable in monthly installments of $3,798 with an interest rate of 6%, secured
by equipment and machinery at the Virginia manufacturing facility, with
$278,000 outstanding at December 31, 1995.
At December 31, 1995, the Company was not in compliance with debt covenants
related to a certain note payable. The Company had obtained a waiver releasing
it from the requirements of the related covenants until March 31, 1996. As a
result, the entire obligation has been included in current maturities in the
above table, although the lender has not expressed an intention to demand
repayment of the entire balance.
Borrowings under a revolving line of credit of $450,000 and $870,000 at
December 31, 1994 and 1995, were with European American Bank bearing interest
at prime rate plus 1%. The revolving line of credit had a maximum borrowing
capacity of $2 million and $1 million as of December 31, 1994 and 1995. In
February 1996, the Company paid off all of its outstanding obligations under
this credit agreement which subsequently terminated on March 31, 1996.
Concurrent with entering into the Century 21 License Agreement, the Company and
HFS entered into a revolving credit facility in an amount up to $4 million.
The agreement provides for a commitment fee of 1/2% of the unused portion of
the facility and provides that loans made thereunder carry an interest rate of
LIBOR plus 1 1/2%. Under the agreement, the Company is subject to certain
covenants, including limitations on indebtedness and liens,
F-22
<PAGE> 37
limitations on asset dispositions, and restrictions on the payment of
dividends. This revolving credit facility matures on December 29, 1998. At
December 31, 1995, no loans had been made under this credit facility.
Obligations under capital leases include (i) an agreement with Charles City
County, Virginia to lease land and a building, and (ii) various capital leases
for machinery and equipment. The Charles City lease has a 15-year term bearing
interest at 7% and contains a bargain purchase option at the end of the lease.
The lease is payable in monthly installments of $7,156 and is secured by the
related land and building. The remaining obligation under this lease,
excluding interest, was $787,000 at December 31, 1995. Remaining obligations
under the machinery and equipment leases, excluding interest, were $476,000 at
December 31, 1995.
Future minimum lease payments under capital leases are as follows:
<TABLE>
<CAPTION>
Year Amount
--------- -----------
<S> <C>
1996 $ 271,000
1997 243,000
1998 190,000
1999 188,000
Thereafter 900,000
-----------
Total minimum lease payments 1,792,000
Less- Amount representing interest (529,000)
Present value of minimum lease payments 1,263,000
Less- Current portion (172,000)
-----------
Noncurrent portion $ 1,091,000
===========
</TABLE>
11. SAVINGS INVESTMENT AND STOCK OPTION PLANS:
The Company has a Savings Investment Plan that is a defined contribution plan
under which qualified employees may elect to defer up to 10% of their salary
and provides for a matching Company contribution of 25% of the amount withheld
up to 6% of salary. Withheld amounts and Company contributions are invested in
certain investment options at the employee's direction. For the years ended
December 31, 1993, 1994, and 1995, Company contributions were $338,000,
$365,000, and $363,000, respectively.
The Company has no defined benefit pension plan nor any other post-retirement
or post-employment benefit plan.
The Company has a Stock Option Plan (the "Plan") for the benefit of its key
employees. The Plan authorizes grants, at the then current market price, of
non-qualified options to purchase up to 2,600,000 shares of Common Stock, and,
in certain instances, authorizes the award of limited stock appreciation
rights. The options and stock appreciation rights vest within three years of
the date of the grant and expire 10 years from the date of grant.
Prior to the merger, Facelifters had certain qualified incentive stock option
plans which authorized grants of options to purchase shares of common stock. In
connection with the merger, the Facelifters option holders are entitled to
shares of AMRE common stock, on a one-for-one basis, under their existing option
grants which became fully vested on the date of the merger.
At December 31, 1995, options for approximately 543,000 shares were exercisable
under the foregoing stock option plans and an additional 176,000 options became
exercisable upon consummation of the Facelifters merger. Shares available for
grant were 1,163,063 and no stock appreciation rights were outstanding at
December 31, 1995.
F-23
<PAGE> 38
Options granted to certain employees to purchase common stock pursuant to the
foregoing stock option plans were as follows:
<TABLE>
<CAPTION>
Options Exercise Price
----------- -------------------
<S> <C> <C> <C>
Balance, December 31, 1992 1,632,978 $0.64 - $8.88
Granted 191,000 5.00 - 5.02
Canceled (172,998) 4.25 - 8.88
Exercised (131,763) 0.64 - 6.75
Redemptions (255,007) 3.00 - 6.75
----------- --------------------
Balance, December 31, 1993 1,264,210 0.64 - 8.88
Granted 635,697 3.50 - 7.50
Canceled (50,354) 3.50 - 8.00
Exercised (289,000) 0.64 - 2.16
Surrendered (324,697) 4.25 - 8.88
----------- --------------------
Balance, December 31, 1994 1,235,856 0.64 - 8.50
Granted 285,299 3.50 - 8.10
Canceled (148,806) 3.50 - 7.50
Exercised (204,563) 0.64 - 8.40
----------- --------------------
Balance, December 31, 1995 1,167,786 $1.75 - $8.50
=========== ====================
</TABLE>
In addition to the options granted under the Plan, the Board has granted
options outside the Plan to certain employees and Board members. Options
granted outside the Plan vest in various periods, ranging from immediately to
four years from the date of the grant.
Non-Plan options at December 31, 1995, of which 1,142,500 were vested, are as
follows:
<TABLE>
<CAPTION>
Number of Shares Exercise Price
-------------------- -----------------
<S> <C> <C> <C>
Ronald I. Wagner 550,000 $3.50
Robert M. Swartz 500,000 4.13
Directors 212,500 3.50 - 4.50
Others 480,000 4.25 - 7.88
-------------- -------------------
Total 1,742,500 $3.50 - $7.88
============== ===================
</TABLE>
On November 15, 1993, the Board of Directors authorized the holders of all AMRE
options to surrender their options for a redemption price of $0.50 per share.
The offer remained open until December 20, 1993. Options for 255,007 shares
under the Plan, and 41,250 shares outside the Plan were redeemed for a total of
approximately $148,000. On May 11, 1994, the Board of Directors authorized the
holders of all options with an exercise price in excess of $3.50 per share
under the Plan, and certain holders of options outside of the Plan, to
surrender their options for new options with an exercise price of $3.50 per
share which would vest based upon the new grant date of May 11, 1994. Options
for 324,697 shares, at prices ranging from $4.25 to $8.88 per share, granted
under the Plan, and for 1,012,500 shares, at prices ranging from $3.63 to $7.63
per share, granted outside of the Plan, were canceled and reissued in
connection with this offer.
On October 17, 1995, in exchange for services rendered in connection with the
Century 21 License Agreement, the Company granted nonplan stock options of
200,000 shares at $5.00 per share and 200,000 shares at $5.50 per share, to a
private investor. These options were exercisable upon issuance, and are
included in the above table. Included
F-24
<PAGE> 39
in nonrecurring charges in the results of operations for the year ended
December 31, 1995 is $700,000 related to these options.
12. EMPLOYEE STOCK OWNERSHIP PLAN:
Effective June 30, 1993, the Company's Congressional subsidiary established an
Employee Stock Ownership Plan (ESOP) covering its employees. Congressional
borrowed $7 million from a bank ("ESOP Bank Loan") and then lent that sum to
the ESOP ("ESOP Loan"). The ESOP used the proceeds of the ESOP Loan to
purchase 599,998 shares of the Company's common stock from one of
Congressional's stockholders. The balance of the ESOP Loan is included in the
Company's balance sheet as a reduction of stockholders' equity.
The ESOP Bank Loan bears interest at 85% of the bank's Prime Rate (effective
rate of 7.225% at December 31, 1995 and 1994), and is guaranteed by the
Company. The loan and security agreement, among other provisions, contains
certain restrictive covenants, the most restrictive of which requires that the
Company meet a financial ratio test. Principal payments on the ESOP Bank Loan
are due in 40 quarterly installments commencing on September 30, 1993, and
ending on June 30, 2003. During 1995 and 1994, the Company made contributions
to the ESOP of $527,239 and $815,765, respectively, that were used to pay
principal on the ESOP Bank Loan.
The stock held by the ESOP is released for allocation to participants' accounts
as principal is paid on the ESOP Loan. Gross compensation expense (i.e., the
fair value of shares allocated to participant accounts) was approximately
$409,000 and $722,000 for the years ended December 31, 1995 and 1994,
respectively. As of December 31, 1995, the ESOP owned 599,998 shares, 165,483
of which had been allocated to participants' accounts.
The Company expects to terminate the ESOP during 1996.
13. RELATED PARTIES:
The Company leases a kitchen cabinet manufacturing facility in Chicago,
Illinois from Ronald I. Wagner, former Chairman of the Board. The Company paid
Mr. Wagner $165,000 for each of the three years ended December 31, 1993, 1994,
and 1995. In December 1995, the Company and Mr. Wagner entered into a new
lease agreement which provides for a term of 10 years commencing January 1,
1996, and for lease payments of $180,000 for each of the first two years, after
which payments are adjusted in subsequent years for changes in the consumer
price index. The Company has the option to terminate the lease at any time for
a lump sum cash payment equal to the following 36 monthly installments under
the terms of the agreement.
The Company had leased its Brooklyn, New York facility from the former Chairman
of the Board of its Facelifters subsidiary, Mark Honigsfeld, under a 15-year
lease executed April 1, 1987. The lease provided for a current base monthly
rental of $20,000 plus annual escalations based on increases in the Consumer
Price Index. This facility housed a manufacturing plant and the New York City
area sales, warehouse, and installation offices. During the quarter ended
September 30, 1995, the Company initiated a plan to phase-out its manufacturing
operations at the Brooklyn facility since its new Virginia plant was equipped
and staffed to accommodate the expanded capacity. In connection therewith, Mr.
Honigsfeld has accepted $525,000 as a full buy-out of the Brooklyn facility
lease, the remaining rental payments on which totaled approximately $1,580,000.
See Note 4 for additional information relative to the closing of the Brooklyn
plant. To provide for an orderly transition of its phase-out plan, the Company
executed a new one-year lease with Mr. Honigsfeld effective April 1, 1996,
with rents of $18,000 per month for six months and $7,500 per month for the
final six months.
The Company has made loans pursuant to promissory notes to certain executive
officers. At December 31, 1995, one note for $469,000 was outstanding. This
note was paid in full in February, 1996.
One of the Company's directors is chief executive officer and a director of a
direct advertising agency. The Company has retained this agency for direct
response television advertising since 1985. Payments made by the Company to
this agency, including payments for purchased television time and development
of television commercials for the years ended December 31, 1993, 1994, and 1995
were $6,480,000, $5,294,000 and $5,933,000, respectively. The Company believes
that charges for the services provided under the advertising arrangement are
comparable to those that would be charged by an unrelated third party.
F-25
<PAGE> 40
In connection with the Century 21 License Agreement and issuance of the Senior
Convertible Redeemable Preferred Stock, the Company added three members to its
Board of Directors from Century 21 and HFS.
14. CAPITALIZATION:
At the time of the Facelifters merger , the Company amended its Certificate of
Incorporation to increase the number of authorized shares of the Company from
20 million to 40 million in order to permit issuance of additional shares of
AMRE common stock to the former holders of Facelifters common stock and
Congressional common and preferred stock, and for other general corporate
purposes.
The Company has a Stockholder Rights Plan under which preferred stock purchase
rights ("Rights") were distributed as a dividend at the rate of one Right for
each share of common stock held. The Rights will expire on November 23, 2002.
Under the plan, each Right entitles holders of the Company's common stock to
buy one one-hundredth of a share of Series A Junior Participating Preferred
Stock at an exercise price of $25.00. The Rights are exercisable only if a
person or group commences a tender or exchange offer upon consummation of which
that person or group would beneficially own 25% or more of the common stock.
Generally, based on the occurrence of certain events, the holder of a Right may
either purchase shares of the Company's common stock (or other consideration in
certain circumstances) having a calculated value of twice the Right's exercise
price or purchase such person's or group's shares of common stock having a
calculated value of twice the Right's exercise price. Additionally, based on
the occurrence of certain events, the Company's Board of Directors may exchange
all or part, as defined, of the Rights for shares of the Company's common stock
on a one-for-one basis. Notwithstanding the foregoing, the Company will
generally be entitled to redeem the Rights at $.01 each within ten days
following a public announcement that such person or group acquires beneficial
ownership or 25% of more of the Company's common stock.
Concurrent with the execution of the Century 21 License Agreement, the Company
and HFS entered into a preferred stock purchase agreement pursuant to which HFS
purchased 300,000 shares of AMRE Senior Convertible Preferred Stock, par value
$.10, at $10 per share. Under the terms of the agreement, dividends are
payable quarterly at a rate of 8% per annum, are fully cumulative and accrue
whether or not earned or declared. The agreement provides that no dividends
shall be declared or paid on common, or any other class of preferred stock of
the Company, unless full cumulative dividends have been paid on the Senior
Convertible Preferred Stock. The Senior Convertible Preferred Stock is
convertible into common stock of the Company at $5.90 per share subject to
adjustment as specified in the agreement. It is also subject to optional
redemption beginning January 1, 1999, and mandatory redemption on January 1,
2001, both preceded by payment in full of any accrued dividends.
Also concurrent with the execution of the Century 21 License Agreement, the
Company and a private investor entered into an agreement pursuant to which the
investor would purchase up to 200,000 shares of common stock, $.01 par value,
of the Company at $5 per share. At December 31, 1995, the Company had issued
162,000 shares of common stock under the terms of the agreement. The remaining
38,000 shares were purchased in February, 1996.
The Company issued 200,000 shares of the Company's common stock to the investor
for services provided in connection with the negotiation of the Century 21
License Agreement and related transactions. Included in nonrecurring charges
in the results of operations for the year ended December 31, 1995 is $1,000,000
relating to the issuance of the common shares.
In 1993, the Company purchased 94,905 shares from a former officer.
In 1993 and 1994, the Company received proceeds of approximately $100,000 and
$2,200,000, respectively, from the exercise of warrants issued in 1991 and
1992.
F-26
<PAGE> 41
15. FACELIFTERS AND CONGRESSIONAL MERGERS:
The Facelifters and Congressional mergers qualify as tax-free reorganizations
and were accounted for as poolings of interests. Accordingly, the Company's
financial statements have been restated to include the results of Facelifters
and Congressional for all periods presented.
Combined and separate results of the Company, Facelifters, and Congressional
for the periods presented are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
AMRE $ 260,692 $ 285,930 $ 271,337
Facelifters 25,774 34,158 49,752
Congressional 12,909 17,520 18,818
----------- ----------- -----------
Combined $ 299,375 $ 337,608 $ 339,907
=========== =========== ===========
Net income (loss):
AMRE $ 856 $ 1,459 $ (22,385)
Facelifters 1,683 (495) (1,268)
Congressional (777) 235 (209)
Adjustment(a) (58) 826 -
----------- ----------- -----------
Combined $ 1,704 $ 2,025 $ (23,862)
=========== =========== ===========
Loss per share:
AMRE $ 0.04 $ 0.09 $ (1.30)
Facelifters 0.09 (0.03) (0.08)
Congressional (0.04) 0.01 (0.01)
Adjustment(2) - 0.05 -
----------- ----------- -----------
Combined $ 0.09 $ 0.12 $ (1.39)
=========== =========== ===========
</TABLE>
(a) Effect of conforming the method of accounting for advertising costs.
Facelifters' previously reported results have been restated for all periods
presented to conform its method of accounting for advertising costs to the
Company's method of expensing such costs as incurred. The consolidated
financial statements of Facelifters and the 1993 financial statements of
Congressional were recast to a calendar year to conform with the Company's
fiscal year.
16. SUBSEQUENT EVENT:
On April 30, 1996, the Company completed a private placement with institutional
investors pursuant to which the Company issued 800,500 shares of AMRE common
stock. The Company received approximately $12 million of net proceeds after
transaction expenses.
F-27
<PAGE> 42
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following sets forth the estimated expenses and costs in connection
with the issuance and distribution of the shares of Common Stock being
registered hereby. Expenses will be borne by AMRE.
<TABLE>
<S> <C>
SEC registration fees . . . . . . . . . . . . . . . $ 24,969
NYSE listing fees . . . . . . . . . . . . . . . . . $ 2,625
Printing and engraving fees . . . . . . . . . . . . $ 5,000
Legal fees and expenses . . . . . . . . . . . . . . $ 40,000
Accounting fees and expenses . . . . . . . . . . . . $ 30,000
Miscellaneous . . . . . . . . . . . . . . . . . . . $ 7,406
--------
Total . . . . . . . . . . . . . . . . . . . $ 110,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that he is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise.
Section 145 also allows a corporation to purchase and maintain insurance on
behalf of any such person.
Article 9 of AMRE's Certificate of Incorporation and Article 11 of AMRE's
Bylaws, which provide for indemnification of directors and officers and for the
authority to purchase insurance with respect to indemnification of directors
and officers, are incorporated herein by reference.
Article 11 of AMRE's Bylaws provides that AMRE shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (whether or not by or in the right of AMRE) by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of AMRE, or is or was serving or has agreed to serve
at the request of AMRE as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of any action alleged to have been taken or omitted in such capacity,
against costs, charges, expenses (including attorneys' fees), judgments, fines,
and amounts paid in settlement actually and reasonably incurred by him or on
his behalf in connection with such action, suit or proceeding to the fullest
extent permitted by Delaware law.
The right to indemnification under Article 11 of AMRE's Bylaws is a
contract right which includes, with respect to directors, officers, employees
and agents, the right to be paid by AMRE of the costs, charges and expenses
incurred in defending a civil or criminal action, suit or proceeding in advance
of its disposition; provided, however, that the payment of such costs, charges
and expenses incurred by a director or officer in his capacity as a director
and officer (and not in any other capacity in which service was or is rendered
by such person while a director or officer) in advance of the final disposition
of such action, suit or proceeding shall be made only upon delivery to AMRE of
an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under Article 11 of AMRE's Bylaws or
otherwise.
The Delaware Act was amended in 1986 to provide that Delaware corporations
may amend their certificates of incorporation to relieve directors of monetary
liability for breach of their fiduciary duty, except under certain
circumstances, including breach of the director's duty of loyalty, acts or
omissions not in good faith or involving intentional misconduct and a knowing
violation of law or any transaction from which the director derived improper
personal benefit. Article 9 of AMRE's Certificate of Incorporation provides
that, to the fullest extent permitted by
II-1
<PAGE> 43
the Delaware Act, AMRE's directors shall not be liable to AMRE or its
stockholders for monetary damages for breach of their fiduciary duties as a
director.
Finally, individual agreements containing indemnification provisions have
been entered into between AMRE and each director of AMRE which contractually
obligate AMRE to provide to the directors (i) indemnification, (ii) insurance
and (iii) additional indemnification. These agreements are for an unspecified
period of time and are intended to indemnify and hold harmless each director to
the fullest extent permitted or authorized by applicable law and AMRE's Bylaws.
ITEM 16. EXHIBITS.
2.1 - Agreement and Plan of Merger dated as of October 31, 1995 among AMRE,
Facelifters Home Systems, Inc., a New York corporation, Facelifters
and Merger Sub (incorporated by reference to Exhibit 7.1 to AMRE's
Current Report on Form 8-K dated October 31, 1995).
2.2 - Amendment No. 1 dated December 12, 1995 to Agreement and Plan of
Merger dated as of October 31, 1995 among AMRE, Facelifters Home
Systems, Inc., a New York corporation, Facelifters and Merger Sub
(incorporated by reference to Exhibit 2.3 to AMRE's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995).
2.3 - Amendment No. 2 dated February 12, 1996 to Agreement and Plan of
Merger dated as of October 31, 1995 among AMRE, Facelifters Home
Systems, Inc., a New York Corporation, Facelifters and Merger Sub, as
amended (incorporated by reference to Exhibit 2.3 of AMRE's
Registration Statement on Form S-4, Registration No. 333- 01755).
2.4* - Amendment No. 3 dated February 12, 1996 to Agreement and Plan of
Merger dated as of October 31, 1995 among AMRE, Facelifters Home
Systems, Inc., a New York corporation, Facelifters and Merger Sub, as
amended.
2.5 - Agreement and Plan of Merger, dated as of December 30, 1995, among
AMRE, Congressional Merger Sub and Congressional (incorporated by
reference to Exhibit 2.1 to AMRE's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
2.6 - Amendment No. 1 dated April 17, 1996 to Agreement and Plan of Merger
dated as of December 30, 1995, among AMRE, Congressional Merger Sub
and Congressional (incorporated by reference to Exhibit 2.2 to AMRE's
Registration Statement on Form S-4, Registration No. 333-02627).
4.1 - Rights Agreement, dated as of November 13, 1992, by and between AMRE
and The Bank of New York, as successor Rights Agent to The Frost
National Bank of San Antonio (incorporated by reference to Exhibit 1
to AMRE's Registration Statement on Form 8-A, dated November 19,
1992).
5* - Opinion regarding legality.
23.1 - Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.(included in the
Exhibit 5 opinion filed herewith).
23.2* - Consent of Arthur Andersen LLP.
23.3* - Consent of Grant Thornton LLP.
23.4* - Consent of Deloitte & Touche LLP.
24 - Power of Attorney (see the signature pages to this Form S-3
Registration Statement).
27** - Financial Data Schedule
_________________
* Filed herewith.
** To be filed by Amendment
II-2
<PAGE> 44
Item 17. Undertakings
The undersigned registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;"
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) For the purpose of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(5) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(6) For purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement on Form S-3 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Dallas, State of
Texas, on July 5, 1996.
AMRE, INC.
By: /s/ ROBERT M. SWARTZ
---------------------------------------
Robert M. Swartz
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each of the undersigned hereby constitutes
and appoints each of Robert M. Swartz and John H. Karnes, Jr., and each or any
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and on his behalf and in his name,
place and stead, in any and all capacities, to sign, execute, and file with the
Securities and Exchange Commission and any state securities regulatory board or
commission any documents relating to the proposed issuance and registration of
the securities offered pursuant to this Registration Statement on Form S-3
under the Securities Act of 1933, as amended, including any and all amendments
relating thereto, with all exhibits and any and all documents required to be
filed with respect thereto and any regulatory authority, granting unto said
attorney, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could
do if personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN D. SNODGRASS Chairman of the Board July 1, 1996
- ---------------------------- and Director
John D. Snodgrass
/s/ ROBERT M. SWARTZ Chief Executive Officer July 1, 1996
- ---------------------------- and Director
Robert M. Swartz
/s/ RONALD L. BLIWAS Director July 1, 1996
- ----------------------------
Ronald L. Bliwas
Director
- ----------------------------
Dennis S. Bookshester
</TABLE>
II-4
<PAGE> 46
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ARTHUR P. FRIGO Director
- ----------------------------
Arthur P. Frigo
/s/ MURRAY GROSS Director July 1, 1996
- ----------------------------
Murray Gross
/s/ STEPHEN P. HOLMES Director July 1, 1996
- ----------------------------
Stephen P. Holmes
/s/ JACK L. MCDONALD Director July 1, 1996
- ----------------------------
Jack L. McDonald
Director
- ----------------------------
Robert W. Pittman
Director
- ----------------------------
Sheldon I. Stein
/s/ JOHN S. VANECKO Principal Financial and July 1, 1996
- ---------------------------- Accounting Officer
John S. Vanecko
</TABLE>
II-5
<PAGE> 47
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
2.1 - Agreement and Plan of Merger dated as of October 31, 1995 among AMRE,
Facelifters Home Systems, Inc., a New York corporation, Facelifters
and Merger Sub (incorporated by reference to Exhibit 7.1 to AMRE's
Current Report on Form 8-K dated October 31, 1995).
2.2 - Amendment No. 1 dated December 12, 1995 to Agreement and Plan of
Merger dated as of October 31, 1995 among AMRE, Facelifters Home
Systems, Inc., a New York corporation, Facelifters and Merger Sub
(incorporated by reference to Exhibit 2.3 to AMRE's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995).
2.3 - Amendment No. 2 dated February 12, 1996 to Agreement and Plan of
Merger dated as of October 31, 1995 among AMRE, Facelifters Home
Systems, Inc., a New York Corporation, Facelifters and Merger Sub, as
amended (incorporated by reference to Exhibit 2.3 of AMRE's
Registration Statement on Form S-4, Registration No. 333- 01755).
2.4* - Amendment No. 3 dated February 12, 1996 to Agreement and Plan of
Merger dated as of October 31, 1995 among AMRE, Facelifters Home
Systems, Inc., a New York corporation, Facelifters and Merger Sub, as
amended.
2.5 - Agreement and Plan of Merger, dated as of December 30, 1995, among
AMRE, Congressional Merger Sub and Congressional (incorporated by
reference to Exhibit 2.1 to AMRE's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
2.6 - Amendment No. 1 dated April 17, 1996 to Agreement and Plan of Merger
dated as of December 30, 1995, among AMRE, Congressional Merger Sub
and Congressional (incorporated by reference to Exhibit 2.2 to AMRE's
Registration Statement on Form S-4, Registration No. 333-02627).
4.1 - Rights Agreement, dated as of November 13, 1992, by and between AMRE
and The Bank of New York, as successor Rights Agent to The Frost
National Bank of San Antonio (incorporated by reference to Exhibit 1
to AMRE's Registration Statement on Form 8-A, dated November 19,
1992).
5* - Opinion regarding legality.
23.1 - Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.(included in the
Exhibit 5 opinion filed herewith).
23.2* - Consent of Arthur Andersen LLP.
23.3* - Consent of Grant Thornton LLP.
23.4* - Consent of Deloitte & Touche LLP.
24 - Power of Attorney (see the signature pages to this Form S-3
Registration Statement).
27** - Financial Data Schedule
</TABLE>
_________________
* Filed herewith.
** To be filed by Amendment
<PAGE> 1
EXHIBIT 2.4
AMENDMENT NO. 3 TO MERGER AGREEMENT
This Amendment No. 3 (the "AMENDMENT"), made and entered into this
13th day of February 1996, is by and among AMRE, Inc., a Delaware corporation
("AMRE"), AMRE Acquisition, Inc., a Delaware corporation and a newly formed,
wholly owned subsidiary of AMRE ("MERGER SUB"), and Facelifters Home Systems,
Inc., a Delaware corporation (the "COMPANY"), which is the successor in
interest, by way of merger, to Facelifters Home Systems, Inc., a New York
corporation and amends that certain Agreement and Plan of Merger, made and
entered into the 31st day of October 1995, by and among AMRE, Merger Sub and
the Company, as amended on the 12th day of December, 1995 and the 12th day of
February, 1996 (the "MERGER AGREEMENT"). Capitalized terms used and not
defined herein shall have the meanings assigned to them in the Merger
Agreement.
PRELIMINARY STATEMENTS
AMRE, Merger Sub and the Company desire to amend the Merger Agreement
as set forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
STATEMENT OF AMENDMENT
1. Amendatory Provision. Section 7.1(b) to the Merger Agreement
is amended and restated in its entirety to read as follows:
(b) by either of the Boards of Directors of
Merger Sub or the Company if the Effective Time shall not have
occurred on or before August 30, 1996; provided, however, that
the right to terminate under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such
date;
2. Existing Agreement. Except as expressly amended hereby, all
of the terms, covenants and conditions of the Merger Agreement (i) are ratified
and confirmed, (ii) shall remain unamended and not waived and (iii) shall
continue in full force and effect.
3. Governing Law. This Amendment shall be governed in all
respects, including validity, interpretation and effect, by the internal laws
of the State of Delaware without giving effect to the principles of conflict of
laws thereof.
4. Counterparts. This Amendment may be executed in one or more
counterparts.
5. Enforceability. If any provision of this Amendment shall be
held to be illegal, invalid or unenforceable under any applicable law, then
such contravention or invalidity shall not invalidate the entire Amendment or
the Merger Agreement. Such provision shall be deemed
<PAGE> 2
to be modified to the extent necessary to render it legal, valid and
enforceable, and if no such modification shall render it legal, valid and
enforceable, then this Amendment and the Merger Agreement shall be construed as
if not containing the provision held to be invalid, and the rights and
obligations of the parties shall be construed and enforced accordingly.
IN WITNESS WHEREOF, AMRE, Merger Sub and the Company have caused this
Amendment to be executed as of the date first written above.
AMRE, INC.
By: /s/ Robert M.Swartz
------------------------------------------
Name: Robert M.Swartz
-------------------------------
Title:
-----------------------------
AMRE ACQUISITION, INC.
By: /s/ Robert M.Swartz
------------------------------------------
Name: Robert M.Swartz
-------------------------------
Title:
-----------------------------
FACELIFTERS HOME SYSTEMS, INC.,
a Delaware corporation
By: /s/ Murray Gross
------------------------------------------
Name: Murray Gross
-------------------------------
Title:
-----------------------------
2
<PAGE> 1
EXHIBIT 5
[AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. LETTERHEAD]
July __, 1996
AMRE, Inc.
8585 N. Stemmons Freeway
South Tower
Dallas, TX 75247-3805
Gentlemen:
We have acted as counsel to AMRE, Inc., a Delaware corporation (the
"Company"), in connection with the offering of up to 3,472,641 shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), as
described in registration statement No. 333-______ on form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission.
We have, as counsel to the Company, examined originals or photostatic,
certified or conformed copies of all such agreements, documents, instruments,
corporate records, certificates of public officials, public records and
certificates of officers of the Company as we have deemed necessary, relevant
or appropriate to enable us to render the opinions stated below. In rendering
such opinions, we have assumed the genuineness of all signatures and the
authenticity of all documents examined by us. As to various questions of fact
material to such opinions, we have relied upon representations of the Company.
Based upon such examination and representations, we advise you that in
our opinion:
1. The shares of Common Stock which are to be sold by the Company
and the Selling Stockholders (as that term is defined in the
Registration Statement), have been duly and validly authorized
by the Company.
2. The shares of Common Stock which are to be sold by the Company
as contemplated by the Registration Statement, when sold for a
consideration at least equal to the par value thereof, will be
validly issued, fully paid as non-assessable.
3. The shares of Common Stock which are to be sold by the Company
and the Selling Stockholders, are fully paid and
non-assessable.
<PAGE> 2
AMRE, Inc.
July __, 1996
Page 2
We consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus contained therein.
Sincerely,
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
<PAGE> 1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 27, 1996,
included in the AMRE, Inc. Annual Report on Form 10-K for the year ended
December 31, 1995, and to all references to our firm included in this
registration statement. We also consent to the use of our report dated June
27, 1996 on the Company's audited supplemental consolidated financial
statements included herein.
/s/ ARTHUR ANDERSEN LLP
Dallas, Texas
July 2, 1996
<PAGE> 1
EXHIBIT 23.3
We have issued our report dated June 16, 1995, accompanying the consolidated
financial statements of Facelifters Home Systems, Inc. and Subsidiaries
appearing in the 1995 Annual Report of the Company to its shareholders and
accompanying the schedules included in the Annual Report on Form 10-K for the
year ended March 31, 1995 which are incorporated by reference in this
Registration Statement. We consent to the incorporation by reference in the
Registration Statement of the aforementioned report and to the use of our name
as it appears under the caption "Experts."
GRANT THORNTON LLP
Fort Lauderdale, Florida
July 1, 1996
<PAGE> 1
[DELOITTE & TOUCHE LLP COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
AMRE, Inc. on Form S-3 of our report dated March 4, 1996 (relating to the
financial statements of Congressional Construction Corporation not presented
separately herein) appearing in Form S-4 Registration Statement No. 335-02627
filed by AMRE, Inc. on April 18, 1996.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
June 28, 1996
