RSI HOLDINGS INC, 10QSB, 1995-07-13

RSI HOLDINGS INC
10QSB, 1995-07-13
MACHINERY, EQUIPMENT & SUPPLIES

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<PAGE> 1

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10 - QSB

(MARK ONE)

X Quarterly Report pursuant to Section 13 or 15 (d) of the
- --- Securities Exchange Act of 1934

For the Quarterly Period Ended May 31, 1995 or

Transition Report pursuant to Section 13 or 15 (d) of the
- --- Securities Exchange Act of 1934

For the Transition Period From to
----------------- ------------------

COMMISSION FILE NUMBER 0-18091

RSI HOLDINGS, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)

NORTH CAROLINA 56-1200363
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

245 E. Broad Street, Suite A, P. O. Box 6847
Greenville, South Carolina 29606
----------------------------------------------------
(Address of principal executive offices)

(803) 271-7171
---------------------------------------------------
Issuer's telephone number

Not Applicable
---------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

Common Stock - $.01 Par Value -- 7,994,292 shares outstanding as of July 12,
1995

<PAGE> 2

INDEX

RSI HOLDINGS, INC.

<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
<S> <C> <C>
Item 1. Financial Statements (Unaudited)

Condensed consolidated statement of net assets in liquidation --
May 31, 1995 4

Condensed consolidated statement of changes in net assets in liquidation --
Nine months ended May 31, 1995 5

Condensed consolidated statements of operations -- Three and Nine
months ended May 31, 1994 (Going concern basis) 6

Condensed consolidated statement of cash flows --
Nine months ended May 31, 1994 (Going concern basis) 7

Notes to condensed consolidated financial statements --
May 31, 1995 8

Item 2. Management's Discussion and Analysis of Financial Condition 15

PART II. OTHER INFORMATION 21
- -------- -----------------
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 26
Item 3. Defaults upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 27

SIGNATURES 28
</TABLE>
<PAGE> 3

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RSI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS IN
LIQUIDATION (Unaudited)

May 31, 1995

<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents $1,387,000
Accounts receivable 73,000
Property and equipment 1,559,000
Other assets 5,000
----------

3,024,000

LIABILITIES
Trade accounts payable 9,000
Accrued expenses 376,000
Note payable 11,000
Estimated costs during the remaining period of liquidation 579,000
----------

975,000
Contingencies -- Note C
----------

Net assets in liquidation $2,049,000
==========
</TABLE>

See notes to condensed consolidated financial statements.

Page 4
<PAGE> 4

RSI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN NET ASSETS IN LIQUIDATION (Unaudited)

<TABLE>
<S> <C>
Nine Months Ended May 31, 1995

Net assets in liquidation at August 31, 1994 $ 1,930,000

Changes in nets assets in liquidation attributed to:
Increase in cash and cash equivalents 1,059,000
Decrease in trade accounts payable 570,000
Decrease in accrued expenses 331,000
Decrease in estimated costs during remaining period of liquidation 969,000
Decrease in notes payable and capital lease obligation 2,202,000
Decrease of inventory floor plan debt resulting from sale of inventory to supplier 4,123,000
Decrease in deferred compensation 54,000
Decrease in accounts receivable as a result of collection (1,667,000)
Decrease in inventory resulting principally from sale of inventory
to suppliers and other dealers (5,873,000)
Sales of property and equipment (1,648,000)
Decrease in other assets (1,000)
-----------

Net assets in liquidation at May 31, 1995 $ 2,049,000
===========
</TABLE>

See notes to condensed consolidated financial statements.

Page 5
<PAGE> 5

RSI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
(Going Concern Basis)

Three and Nine Months ended May 31, 1994

Three Months Nine Months
Ended Ended
May 31 May 31
1994 1994
-----------------------------
<S> <C> <C>
Net sales $4,928,000 $12,326,000
Cost of goods sold 3,767,000 9,585,000
-----------------------------
Gross profit on sales 1,161,000 2,741,000
Expenses:
Selling, general and administrative expenses 1,227,000 3,779,000
Reduction in carrying value of property, plant and equipment 300,000 300,000
-----------------------------
1,527,000 4,079,000
-----------------------------
Operating (loss) (366,000) (1,338,000)
Other (expense) income:
Interest expense (86,000) (311,000)
Other revenues and sundry income 109,000 154,000
-----------------------------
23,000 (157,000)
-----------------------------
Net (loss) ($343,000) ($1,495,000)
=============================

Net (loss) per share ($0.04) ($0.19)
=============================

Dividends per share $0.00 $0.00
=============================

Weighted average shares outstanding 7,994,292 7,994,292
=============================
</TABLE>

See notes to condensed consolidated financial statements.

Page 6
<PAGE> 6

RSI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Going Concern Basis)

Nine Months ended May 31, 1994

<TABLE>
<S> <C>
OPERATING ACTIVITIES
From continuing operations ($1,029,000)
Changes in components of working capital
affecting continuing operations 737,000
-----------
Net cash used in operations (292,000)

INVESTING ACTIVITIES
Property, plant and equipment
Purchases (44,000)
Proceeds from disposition 34,000
Other 4,000
-----------

Net cash used in investing activities (6,000)

FINANCING ACTIVITIES
Proceeds from revolving line of credit
and long-term borrowings 1,832,000
Principal payments on notes payable (1,556,000)
Scheduled principal payments on long-term debt (342,000)
-----------

Net cash used in financing activities (66,000)
-----------

Net decrease in cash and cash equivalents (364,000)

Cash and cash equivalents at beginning of period 466,000
-----------

Cash and cash equivalents at end of period $102,000
===========
</TABLE>

See notes to condensed consolidated financial statements.

Page 7
<PAGE> 7

RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A - BASIS OF PRESENTATION

As of August 31, 1994, RSI Holdings, Inc. (the "Company") adopted the
liquidation basis of accounting. The Company had experienced significant
recurring losses and the Company and its primary supplier of turf care products
reached an agreement that after October 31, 1994, the Company would no longer
be authorized to sell its products. Because substantially all of the Company's
assets were related to the turf care business and the Company would no longer
be authorized to sell the products of its major supplier, it was concluded by
the Board of Directors of the Company that the Company should cease its
existing business operations and sell its existing business operations as of
August 31, 1994. A proposal recommended by the Board of Directors to sell
substantially all of the assets of the Company (other than cash or cash
equivalents) was approved by the shareholders at a meeting held on January 17,
1995.

As a result of the decision to sell the operating assets of the Company, the
Company changed its basis of accounting for its financial statements at August
31, 1994 from the going concern basis of accounting to the liquidation basis of
accounting in accordance with generally accepted accounting principles.
Consequently, assets have been valued at estimated net realizable value and
liabilities are presented at their estimated settlement amounts, including
estimated costs associated with carrying out the liquidation. The actual
realization of assets and settlement of liabilities could be higher or lower
than amounts indicated and is based upon management estimates as of May 31,
1995. In addition, as described in Note C, significant uncertainties exist
with respect to the outcome of litigation in which the Company is a defendant.
No provision has been made as of May 31, 1995 for any liability that may result
upon ultimate resolution of these litigation matters.

The accompanying unaudited condensed consolidated financial statements at May
31, 1995 have been prepared in accordance with generally accepted accounting
principles for interim financial information under the liquidation basis of
accounting and with the instructions to Form 10 - QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation on the liquidation basis have been included.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10 - K for
the year ended August 31, 1994.

NOTE B - NOTES PAYABLE AND CREDIT ARRANGEMENTS

During November 1994, the Company executed an unsecured working capital line of
credit with a bank in the amount of $500,000 that expired March 31, 1995.
During March 1995 the Company and the bank extended the expiration date of this
facility through December 31, 1995. Amounts outstanding under the line of
credit bear interest at the bank's prime rate. This bank facility was not used
during the nine months ended May 31, 1995. This line of credit replaced the
working capital line of credit that was established during December 1993 and
may only be used to meet the Company's short-term obligations during its
liquidation process. This working capital line of credit does not contain any
financial covenants. The line of credit is guaranteed by Mr. Buck Mickel,
Chairman of the Board of Directors, Chief Executive Officer and a shareholder.

8
<PAGE> 8

RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED

NOTE C - CONTINGENCIES

TRIPLE A LITIGATION

In 1987, Triple A Machine Shop, Inc. ("Triple A") purchased property
at 2801 Giant Road in Richmond, California from Wiegmann & Rose. As part of
this transaction, Wiegmann & Rose agreed to prepare a proposed plan of
abatement for environmental contamination at the property, submit it to the
Regional Water Quality Control Board, and, upon approval, implement the
abatement plan. Wiegmann & Rose did not cause any of the pollution found at
the site. Soon afterwards, consultants for Wiegmann & Rose prepared a proposed
plan of abatement and submitted it to the Regional Board. However, the
California Department of Health Services asserted jurisdiction over the matter,
demanded that Wiegmann & Rose investigate the possibility of buried drums at
the property, and initiated a planning process that produced a Remedial
Investigation and Feasibility Study, Remedial Action Plan, and Community
Relations Plan. Buried drums, which contained various substances including
solvents and other volatile organic compounds ("VOCs") were found and removed
in 1988. Planning and remediation continued for solvents that had leaked from
the drums and for heavy metals that had also been disposed of at the property.

In 1988, Wiegmann & Rose filed suit against NL Industries, Inc. ("NL")
and Esselte Pendaflex Corporation ("Esselte"), and alleged that these two
defendants were responsible for the contamination on the property. NL and
Esselte filed third-party complaints against Triple A. This litigation was
resolved December 31, 1991 through the entry of a consent decree (the "1991
Decree") that required NL to abate the contamination at Site R on the property
diligently and to the satisfaction of the regulatory agencies. In effect, NL
took over Wiegmann & Rose's obligations under the contract with Triple A with
respect to Site R.

During July of 1993, Triple A sued Wiegmann & Rose and RSI
Corporation, the former parent corporation of the Company which is now Delta
Woodside Industries, Inc., alleging that Wiegmann & Rose breached the sales
contract, breached the covenant of good faith and fair dealing implied in the
contract, and maintained a continuing nuisance on the property as a result of a
failure to abate the contamination within a reasonable time. The Company has
indemnified Delta Woodside Industries, Inc. against certain liabilities and
expenses, including those in connection with the lawsuit by Triple A. This
indemnification was made in connection with the distribution of the Company's
Common Stock to the shareholders of RSI Corporation in November 1989.

Wiegmann & Rose did not cause any of the contamination on the site.
In addition, the Company had diligently proceeded to abate the contamination
through the date of the 1991 Decree and the terms of the 1991 Decree required
NL, not the Company, to abate the contamination on Site R diligently and to the
satisfaction of regulatory agencies. Based upon these facts, management
believes that the allegations of Triple A are without merit, and is contesting
the case vigorously.

9
<PAGE> 9

RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED

complied with its obligations to Triple A under the contract), or, failing
that, that NL has failed to comply with the consent decree (and therefore is
responsible for any damages for events following the entry of the consent
decree).

In April 1994, the court granted Wiegmann & Rose's motion for partial
summary judgment, which effectively relieved Wiegmann & Rose from liability for
events occurring before the entry of the 1991 Decree with respect to Site R.
Wiegmann & Rose had argued, and the court apparently agreed, that in the 1991
Decree Triple A had released Wiegmann & Rose "for any and all liability for
costs paid and services performed . . . through the date of this Decree that
are related to remediation of hazardous substances at Site R or to this
action". For events occurring after the date of its entry, the 1991 Decree
provides that NL is principally responsible for the remediation of the portion
of the property known as Site R, although Wiegmann & Rose retains liability in
the event that NL does not perform. The 1991 Decree did not address the
liability of any party with respect to portions of the property outside Site R.

Although counsel for Triple A had earlier expressed a willingness to
dismiss this matter, settlement discussions with Triple A as to this matter
were interrupted by the discovery of a new area of contamination, as discussed
below, and a reliable evaluation of the ultimate outcome cannot be made at this
time. Triple A's complaint seeks special damages in excess of $2,700,000,
general damages according to proof, and punitive damages of $1,000,000.

Since the 1991 Decree, NL has been working towards completion of the
remediation of Site R, and during 1994 requested that the California
Environmental Protection Agency, Department of Toxic Substances Control
("California DTSC") declare that the remediation of Site R is complete. The
California DTSC has requested additional commitments from NL and Triple A on
future operation, maintenance, and sampling of Site R. The Company believes
that NL has the financial ability to remediate Site R. This belief is based
upon the Company's knowledge of the remediation of Site R that NL has performed
to date and upon the Company's review of the quarterly report of NL on Form
10-Q for the fiscal quarter ended September 30, 1994 (the "September 10-Q").
The September 10-Q indicated that, at September 30, 1994, the working capital
of NL was $305,000,000 and NL's working capital ratio was 2.2 to 1.0.

During 1994 NL reported to the California DTSC that it has discovered
additional contamination in the form of elevated levels of petroleum
hydrocarbons or volatile organic compounds on the property at issue but
adjacent to Site R. ("Site R" is the phrase used to describe the portion of
the property formerly owned by Wiegmann & Rose that by 1987 had been targeted
by the regulatory agencies for investigation and remediation.) The property is
now owned by Triple A. Because the contamination is not within the boundaries
of Site R, NL has taken the position to the California DTSC that it is not
responsible for the remediation of this contamination. The extent of the
contamination, the estimated cost of its remediation, and Wiegmann & Rose's
responsibility for it have not yet been determined but the cleanup costs and
legal expenses related to this additional contamination could be significant
and could materially and adversely affect the Company's consummation of its
plan of liquidation and its financial position. The California DTSC has not
yet requested remediation of this area of additional contamination. In the
event that a claim is asserted against Wiegmann & Rose in connection with this
additional contamination, Wiegmann & Rose expects to take the position that NL
is primarily responsible for the additional contamination. No assurance can be
given that Wiegmann & Rose will be successful in this matter and, if the matter
were litigated, the litigation could take years. During fiscal 1994, the

10
<PAGE> 10

RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED

Company paid approximately $72,000 in legal expenses related to the Triple A
lawsuit arising from the California property including Site R. During the nine
months ended May 31, 1995, the Company incurred approximately $24,000 in legal
and other expenses related to the Triple A lawsuit arising from the
contamination found on the California property including Site R. The Company
has been in contact with its two primary insurers. One of these insurers has
denied coverage and the other has undertaken, subject to reservation of rights,
to reimburse Wiegmann & Rose for its defense costs in relation to this claim.
The Company received $54,173 from one of these insurers during June 1995 in
payment for certain of its defense cost incurred prior to September 30, 1994.

HOLIDAY INNS, INC. LITIGATION

In addition, RSI Corporation (now Delta Woodside Industries, Inc.),
the former parent corporation of the Company, is one of several defendants
(including Sparjax Corporation, RSI Corporation's now dissolved subsidiary) in
a lawsuit filed on July 29, 1993 by Holiday Inns, Inc. in the Circuit Court of
the Fourth Judicial Circuit for Duval County, Florida. This suit seeks
indemnification for payments made or to be made by Holiday Inns, Inc., as the
guarantor, to the lessor for obligations under a ninety-nine year land lease
agreement allegedly in default. The lease agreement was commenced in 1967 and
has a term of ninety-nine years. The lessor under the lease agreement was
originally Fernandina Contractors, Inc. and by assignment is currently Sam
Spevak. Holiday Inns, Inc. was the original lessee under the lease agreement.
Payments under the lease agreement are the greater of $24,000 annually or the
highest average annual payments during any five-year period during the first
twenty (20) years of the lease, using a percentage of income formula.

The lessee's interest in the lease agreement has been assigned to a
series of parties including RSI Corporation and Sparjax Corporation. RSI
Corporation was the lessee under the lease agreement from June, 1979 to August,
1979, and Sparjax Corporation was the lessee thereunder from August, 1979 to
January, 1981. The current lessee is American Hotel Investors, Inc. ("AHI").
AHI allegedly has failed to make lease payments due under the lease agreement
and to otherwise comply with its obligation under the lease agreement.

Holiday Inns, Inc. has alleged that Sparjax Corporation, which is the
assignee of the lease agreement from RSI Corporation, is in breach of a written
Indemnification Agreement executed by Sparjax Corporation in favor of Holiday
Inns, Inc. upon its assumption of the lease agreement. All of the outstanding
common stock of Sparjax Corporation was acquired by RSI Corporation during
fiscal 1983 and this corporation was dissolved by forfeiture in fiscal 1990.
In connection with such dissolution, no material assets were distributed to
Sparjax Corporation's parent. Other than as described herein, there is no
contractual relationship whatsoever between RSI Corporation and Holiday Inns,
Inc.

11
<PAGE> 11

RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED

assert similar claims against all subsequent lessees (including RSI Corporation
and Sparjax Corporation) under the lease agreement, seeking indemnification
against sums paid or to be paid to Sam Spevak pursuant to his lawsuit.
(Currently Holiday Inns, Inc. claims to have paid the lessor in excess of
$260,000 to date as a result of the alleged lawsuit. RSI Corporation and
Sparjax Corporation have no independent information with respect to the
particulars of the payment of this sum.) Upon a motion of counsel for RSI
Corporation, Holiday Inns, Inc.'s claims against RSI Corporation were dismissed
without prejudice, but Holiday Inns, Inc. has filed an amended complaint to
reinstate certain of its claims against RSI Corporation and Sparjax
Corporation. Counsel for RSI Corporation and Sparjax Corporation will file an
Answer to one of the claims and will move for dismissal with prejudice with
respect to the claims that have previously been dismissed.

RSI Corporation denies its alleged liability to Holiday Inns, Inc. and
intends to defend this matter vigorously.

The potential maximum amount of Holiday Inns, Inc.'s exposure for rent
under the lease, reduced to present value, has been preliminarily estimated by
counsel to be approximately $3,500,000. Although Holiday Inns, Inc. has
advanced a claim for indemnification with respect to repairs and maintenance
costs, in the event the court determines the lessees have an obligation to make
such payments throughout the balance of the lease term, these amounts cannot be
quantified with any reasonable degree of accuracy. Nonetheless, RSI
Corporation denies its alleged liability to Holiday Inns, Inc. and, further,
if found liable for any sum as a result of Holiday Inns, Inc.'s claims, RSI
Corporation and Sparjax Corporation would have a claim in equity against AHI,
the current and allegedly defaulting lessee under the lease agreement and its
principal shareholders, who guaranteed AHI's obligations under the lease. AHI
is a private corporation and the Company has no information regarding the
financial ability of AHI or its principal shareholders to perform AHI's
obligations under the lease or to reimburse any third party for any payments
made under the lease as a result of the lawsuit described above. The motel
property is now being demolished.

In connection with the distribution of the Common Stock to the
shareholders of RSI Corporation, the Company indemnified RSI Corporation
against certain liabilities and expenses including those in connection with the
lawsuit by Holiday Inns, Inc. The ultimate outcome of this matter is not
known. No provision has been made in the accompanying financial statements for
any liability which may result from this matter.

OTHER LITIGATION

On January 12, 1995, a Mr. Cesar A. Cuenca served a complaint against
the Company in the 11th Judicial Circuit Court, Dade County, Florida seeking
damages in excess of the minimal jurisdictional amount of the Court, exclusive
of costs and interest and demands costs of this action together with such
further relief as the Court shall deem fit. The Plaintiff alleges that he was
injured while operating a vehicle that was sold by the Company. The Complaint
also named the manufacturer of the vehicle. The manufacturer has accepted
defense of the Company regarding this matter under reservation of rights. This
matter is in the early stages. The Company believes, however, based on the
arrangements with the manufacturer and the Company's own insurance, that this
action should not have a material adverse effect on the Company's consummation
of its plan of liquidation and its financial position.

12
<PAGE> 12

RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED

On February 4, 1994, a Mr. Everette Moncur and Edwina Moncur, his
wife, served a complaint against the Company in the 17th Judicial Circuit
Court, Broward County, Florida seeking damages in excess of $15,000 for
injuries sustained while operating a turf care product sold by the Company.
The complaint also named the manufacturer of the product. The manufacturer and
its insurance carrier have accepted defense of the Company regarding this
matter. This matter is in the early stages. The Company believes, however,
based on the arrangements with the manufacturer, the manufacturer's insurance
company, and the Company's own insurance, that this action should not have a
material adverse effect on the Company's consummation of its plan of
liquidation and its financial position.

The Company and its subsidiaries are also defendants in other legal
actions, including several claims for exposure to asbestos, involving claims
arising in the normal course of business. The claims for exposure to asbestos
consist of the following seven lawsuits against Wiegmann & Rose, in each case
seeking unspecified damages for injury allegedly due to asbestos exposure: (i)
Brophy v. Abex et al. (filed April 9, 1992), pending in the San Francisco,
California Superior Court, seeks damages for wrongful death allegedly due to
asbestos exposure. Wiegmann & Rose has been dismissed without prejudice in
this action and the applicable statute of limitations has now passed, barring
any subsequent action by the plaintiff against Wiegmann & Rose. (ii) Canga v.
Abex et al. (filed March 18, 1993), pending in the San Francisco Superior
Court, seeks damages for personal injuries allegedly due to asbestos exposure.
Wiegmann & Rose has been dismissed without prejudice in this action. (iii)
Jordison v. Abex et al. (filed January 21, 1994), pending in the San Francisco
Superior Court, seeks damages for personal injuries allegedly due to asbestos
exposure. The case against Wiegmann & Rose has been dismissed without
prejudice. (iv) Hall v. Abex et al. (filed February 25, 1994), pending in the
San Francisco Superior Court, seeks damages for personal injuries allegedly due
to asbestos exposure. The plaintiffs, husband and wife, allege that the
husband was exposed to asbestos in Wiegmann & Rose's products and/or that he
was exposed to asbestos on Wiegmann & Rose's premises. Demand has been made
upon the plaintiffs to dismiss Wiegmann & Rose from the action. Discovery is
incomplete, and the plaintiff husband was deposed in January 1995. Plaintiff
husband testified that he was present on Wiegmann & Rose premises on several
occasions, to oversee repairs/manufacturing being conducted by Wiegmann & Rose
for his employer, Standard Oil, and to conduct certain tests on the
machines/equipment being repaired by Wiegmann & Rose. Plaintiff husband,
however, provided no testimony establishing a nexus between Wiegmann & Rose and
any alleged asbestos exposure, other than his unsubstantiated belief.
Discovery is incomplete, and the Company intends to defend this case
vigorously. Plaintiffs in this action have made a settlement offer for a total
of $2,998 to settle their claims but Wiegmann & Rose has not yet responded to
this offer. (v) Barnes v. Abex et al. (filed December 3, 1993), pending in the
San Francisco Superior Court, seeks damages for wrongful death allegedly due to
asbestos exposure. The case against Wiegmann & Rose has been dismissed without
prejudice, and the applicable statute of limitation has passed, barring any
subsequent action by plaintiff against Wiegmann & Rose. (vi) Richardson v.
Abex et al. (filed August 5, 1993), pending in the San Francisco Superior
Court, seeks damages for personal injuries allegedly due to asbestos exposure.
The case against Wiegmann & Rose has been dismissed without prejudice. (vii)
Sorensen v. Abex et al. (filed July 20, 1993), pending in the San Francisco
Superior Court, seeks damages for personal injuries allegedly due to asbestos
exposure. The case against Wiegmann & Rose has been dismissed without
prejudice.

In the remaining case (Hall), Wiegmann & Rose is one of approximately
one hundred defendants. Based upon financial information known to the Company,
the Company believes that, in each of the above cases, several of the other
defendants have greater financial resources than the Company.

13
<PAGE> 13

RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED

The Company believes that, as a result of its legal defenses and
insurance arrangements, none of these other actions, if decided adversely,
should have a material adverse effect on its consolidated financial position,
or consummation of the plan of liquidation. As to the asbestos claims, the
Company's belief as to the availability of legal defenses is based upon the
advice of the Company's counsel as to the existence of defenses stemming from
the failure of the plaintiffs to establish asbestos exposure related to
Wiegmann & Rose. The Company has contacted its two primary insurance companies
relating to these asbestos claims. These companies have undertaken, under
reservation of rights, to reimburse Wiegmann & Rose for defense costs related
to these claims. The Company believes that the likelihood of continued
recoveries relating to these asbestos claims pursuant to the current
arrangement with these insurance companies is probable.

14
<PAGE> 14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

DECISION TO DISCONTINUE EXISTING OPERATIONS

The Company and the Jacobsen Division of Textron, Inc. ("Jacobsen"),
its principal supplier of turf care products, reached an agreement on July 28,
1994 that the Company would no longer be authorized to sell Jacobsen products
after October 31, 1994. The Company decided to cease its existing business
operations and commenced winding up its turf care operations following this
agreement. Because the Company decided that it should cease its existing
business operations and sell substantially all of its operating assets, the
Company has reported its financial position on the liquidation basis of
accounting as of May 31, 1995. During fiscal 1994 the Company recorded a
reduction in net assets of $1,408,000 to reflect the change to the liquidation
basis of accounting from the going concern basis of accounting. In the
liquidation basis of accounting, assets are valued at their net realizable
value (rather than at their net historical cost), and liabilities include
estimated costs associated with carrying out the sale of substantially all of
the assets of the Company.

For several years, the Company has experienced significant recurring
operating losses and after October 31, 1994, the Company was no longer
authorized to sell Jacobsen products. Because substantially all of the
Company's assets were related to the turf care business and the Company is no
longer authorized to sell the products of its primary supplier, the Board of
Directors of the Company determined in July of 1994 that the Company should
cease its existing business operations and sell the operating assets of the
Company. Accordingly, the Company ceased substantially all of its existing
business operations by August 31, 1994. The Company received shareholder
approval for the sale of substantially all of the Company's assets (the "Sale
of Assets Plan") at its annual meeting of shareholders held on January 17,
1995.

LIQUIDITY AND CAPITAL RESOURCES

During September of 1994, the Company negotiated with Jacobsen to
repurchase the Company's inventory manufactured by Jacobsen, and to purchase
certain non-Jacobsen inventory at the Company's Carolinas locations. The
Company also negotiated with certain successor dealers of Jacobsen products to
purchase a substantial portion of the Company's non-Jacobsen inventory at the
Florida locations. The manufacturer of a significant portion of the Company's
non-Jacobsen inventory had refused to repurchase from the Company unsold
inventory manufactured by it. The Company believes that it was able to reduce
its continuing losses and to receive more favorable prices by selling both the
Jacobsen and a large portion of the non-Jacobsen inventory to Jacobsen and the
successor dealers prior to the expiration of the Company's status as a Jacobsen
dealer. Jacobsen was willing to expedite the purchase of the Jacobsen
inventory and to purchase certain non-Jacobsen inventory because expediting the
transfer allowed Jacobsen and its successor dealers to minimize the
interruption of service to the Company's customers. The Company believes that
the prices received under these arrangements with Jacobsen and its successor
dealers exceed the amounts that it would have received if it had attempted to
sell the inventory to inventory liquidators in the open market.

The Company also negotiated during September, 1994 to sell
substantially all its furniture and fixtures, machinery and equipment and
certain delivery equipment to Jacobsen and its successor dealers. The Company
also negotiated short-term leases with Jacobsen and its successor dealers to
lease the Company's facilities in Fort Lauderdale, Florida; Tampa, Florida; and
Little River, South Carolina. The

15
<PAGE> 15

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
(CONTINUED)

Company believes that it was able to sell this property and lease these
facilities to Jacobsen and its successor dealers because these arrangements
allowed the new dealers to continue the turf care business as a continuing
business and it also allowed the new dealers to employ a substantial number of
the operating personnel of the Company. The successor dealers continue to
lease the two Florida locations. Jacobsen terminated its sublease of the
Little River, South Carolina location effective June 30, 1995. The Company's
lease obligation for the Little River, South Carolina location expires
September 30, 1995.

The holders of an aggregate of 167,591 shares of Common Stock
dissented from the Sale of Assets Plan. These holders are entitled under North
Carolina law to receive the "fair value" of their shares of Common Stock as
determined in accordance with North Carolina law. The Company has not yet
determined the "fair value" of these shares. It intends to make this
determination promptly following the sale of the two substantial remaining real
estate holdings of the Company as part of the consummation of the Sale of
Assets Plan. Although these parcels are being offered for sale, the Company has
not yet received an acceptable offer for either parcel and is unable to predict
when and if these parcels might be sold.

The Company currently intends to use the assets, if any, remaining
after the consummation of the Sale of Assets Plan and the payment or provision
for payment of liabilities and contingencies and payment to shareholders
dissenting from the Sale of Assets Plan to acquire, invest in, or commence
another business enterprise.

The Company's financial statements for the third quarter of fiscal
1994 are stated on the going concern basis of accounting. The Company had
discontinued its business operations effective August 31, 1994 and the financial
statements for fiscal 1995 are stated on the liquidation basis of accounting.
For these reasons, no comparison is made in this discussion to the Company's
financial statements for the third quarter of fiscal 1994 because such a
comparison would not be meaningful.

DEBT ARRANGEMENTS

During November 1994, the Company executed an unsecured working
capital line of credit with a bank in the amount of $500,000 that expired March
31, 1995. During March 1995 the Company and the bank extended the expiration
date of this facility through December 31, 1995. Amounts outstanding under the
line of credit bear interest at the bank's prime rate. This bank facility was
not used during the nine months ended May 31, 1995. This line of credit
replaced the $500,000 working capital line of credit that was executed during
December 1993, but can only be used to meet the Company's short-term
obligations during the period of consummation of its Sale of Assets Plan. This
working capital line of credit does not contain the financial covenants
relating to tangible net worth, minimum working capital levels, and minimum
ratios for working capital and total liabilities to tangible net worth
contained in the December 1993 facility. The line of credit is guaranteed by
Mr. Buck Mickel, Chairman of the Board, Chief Executive Officer of the Company
and a shareholder.

LITIGATION MATTERS

Reference is hereby made to the material under the heading "Item I.
Legal Proceedings" in Part II, Other Information, which is incorporated herein
by reference.

16
<PAGE> 16

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION-
(CONTINUED)

TRANSITION ACTIVITIES

During September and October, 1994 the Company collected a substantial
portion of its trade accounts receivable and paid substantially all its
outstanding accounts payable. The Company's floor plan debt was paid with
proceeds from the sale of inventory to Jacobsen. During October 1994 the
Company received approximately $814,000 from Jacobsen which represented a
substantial portion of the net proceeds from the sale of Jacobsen inventory due
to the Company after Jacobsen paid the associated floor plan debt. The
remaining amount owed by Jacobsen was received by the Company during January
1995. The Company paid off its $656,000 Fort Lauderdale, Florida mortgage note
and the then outstanding balance of $100,000 on the bank line of credit during
October 1994 with the $814,000 proceeds from the sale of Jacobsen inventory.
During December 1994 the Company settled its capital lease obligation for
$83,000. During January 1995 the Company paid the outstanding principal
deferred compensation of $54,000.

Cash and cash equivalents in the amount of $1,387,000 as of May 31,
1995 included United States treasury bills with a maturity of three months when
purchased and having a cost basis of $1,009,000. Cash and cash equivalents in
excess of the amounts invested in United States treasury bills is invested as
available in a bank master note and may be liquidated by the Company to meet
its cash needs on a daily basis. The Company has earned $14,000 and $20,000 on
these investments during the three and nine months ended May 31, 1995,
respectively.

As of May 31, 1995, the net realizable value of total accounts
receivable was $73,000 as compared to $1,732,000 at August 31, 1994. These
accounts receivable have a face value of $198,000 and have been reduced by an
aggregate of $125,000 to reflect the Company's estimate of the net realizable
value of the accounts receivable. At May 31, 1995 accounts receivable with a
face value of $123,000 were due from customers. The remaining $75,000 in face
value of accounts receivable consists of miscellaneous receivables arising in
the ordinary course of business. During the three months ended May 31, 1995
accounts receivable due from customers were reduced by collections of
approximatedly $65,000 and adjustments (principally prior service charges) of
approximately $7,000. The Company is making its best efforts to collect all
those amounts owed to it. There is no assurance, however, that the Company
will be successful in its collection efforts.

Accounts receivable due from customers arose from sales prior to
September 1994 of turf care products to golf courses and other institutional
customers. The Company has had increased difficulty collecting these accounts
receivable because it can no longer provide repair and other service to such
customers. The Company has engaged either attorneys or collection agencies to
collect approximately $100,000 in face value of customers accounts receivable
and $6,000 in face value of other receivables that it has been unable to
collect. The fees of the attorneys and collection agencies for collection are
up to approximately 40% of the amount recovered. The Company will attempt to
recover its collection costs from the customers but there is no assurance that
it will be successful in these efforts. The Company will continue with its
collection efforts and intends to use a third party collector to assist with
the collection of those other customer accounts receivable as it determines
that it will be unable to collect such amounts on its own.

17
<PAGE> 17

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION-
(CONTINUED)

The change in net assets attributable to the liquidation of inventory
of $5,873,000 during the nine months ended May 31, 1995 resulted primarily from
the sale of inventory of turf care equipment and supplies to Jacobsen and two
of its dealers during September and October of 1994. A substantial portion of
the remaining inventory consisted of boat trailers held for resale. The
Company used its best efforts to sell the remaining inventory of boat trailers
including a reduction of its prices offered to dealers in January, 1995 to
prices that would cover the Company's cost of inventory and delivery costs.
After the dealers purchased all that they wished at these reduced prices
(approximately $62,000), the Company then negotiated to return to its supplier
substantially all the remaining inventory at current cost prices for current
inventory and reduced prices for non-current inventory. The Company received
the settlement of $28,000 for its remaining inventory of boat trailers during
April 1995. Net sales of boat trailers during the nine months ended May 31,
1995 were approximately $179,000.

At May 31, 1995, the Company had accrued $376,000 to record all known
expenses incurred through May 31, 1995, but not yet paid. As of May 31, 1995
the Company's estimated costs to be incurred during the remaining period of
liquidation through December 31, 1995 were $579,000 as compared to $1,557,000
at August 31, 1994. This reduction of $978,000 resulted primarily from
payments made by the Company and adjustment to expense categories based on
costs incurred to date during the nine months ended May 31, 1995. These costs
include costs expected to be incurred in connection with the consummation of
the sale by the Company of substantially all of its remaining assets during the
liquidation period through December 31, 1995. These costs include anticipated
legal fees ($142,000), accounting and auditing fees ($27,000), salaries and
severance pay ($104,000), lease commitments ($55,000), property taxes
($37,000), insurance and other overhead items ($29,000), shareholder relation
expenses ($32,000), administrative office expenses ($53,000), and the Company's
estimate of unforeseen costs ($100,000) that the Company expects to incur
during the remaining liquidation period through December 31, 1995.

The Company listed its property in Fort Myers, Florida for sale during
May, 1994 and sold the property during October, 1994 for the aggregate sum
(before selling expenses) of $800,000. The Company applied the proceeds of the
sale of the property to pay the associated bank mortgage having a balance as of
August 31, 1994 of $372,000 and to pay $315,000 against the term debt having a
balance as of August 31, 1994 of $425,000 with the bank. The Company incurred
selling expenses of approximately $66,000 in connection with such sale.

During January 1995 the Company sold its property at Hilton Head,
South Carolina for the aggregate sum (before selling expenses) of $630,000.
The Company applied the proceeds of the sale of the property to pay the
associated bank mortgage having a principal balance $191,000. The Company
incurred selling expenses of approximately $58,000 in connection with such
sale.

The Company's subordinated and unsubordinated debt which aggregated
$314,000 were released from the subordination agreement during October 1994
when the bank debt to which it was subordinated was paid. The $314,000 debt
bore interest at 7% and was due during January of 1996. The Company paid these
notes during January 1995 so as to reduce the interest expense that it would
incur during 1995. Principal payments were as follows: Central Wesleyan
College, $10,000; Furman University, $20,000; Clemson University, $10,000;
William R. Kimball, a former director of the Company, $100,000; and the
following adult children of the Chairman of the Board of Directors and Chief
Executive Officer: Buck

18
<PAGE> 18

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
(CONTINUED)

A. Mickel, a former vice-president, $54,000; Charles C. Mickel, $60,000; and
Minor M. Shaw, $60,000.

Mr. C. C. Guy, President of the Company and Mr. Charles M. Bolt,
President of Distribution of the Company retired from their positions as
officers of the Company effective January 17, 1995, and Mr. Buck A. Mickel,
resigned as vice president of the Company effective January 17, 1995. The
Company agreed to continue to pay Mr. Bolt at the annual rate of $100,000 for
one year after his retirement. The Company agreed to continue to pay Mr. Guy
his salary for six months after his retirement (a total of $24,000 over six
months). The Company agreed to continue to pay Mr. Buck A. Mickel his salary
for six months after his leaving the Company (a total of approximately $15,000
over six months). During the period through May 31, 1995, Mr. Guy has been
available for consultation, Mr. Bolt has assisted in liquidating the assets of
the Company and Mr. Buck A. Mickel has assisted in efforts to resolve the legal
contingencies of Wiegmann & Rose. The Company determined that the salary
continuation arrangements were appropriate notwithstanding the Company's
financial condition because of each officer's long years of service to the
Company and anticipated value as a consultant to the Company.

The primary emphasis of the Company's efforts during the remainder of
1995 will be directed toward determining the Company's contingent liabilities
and resolving potential claims against the Company. See "Litigation Matters".
The Company currently anticipates that it will be able to meet its known
obligations with its existing cash balances, collections of its customer
accounts receivable, and proceeds from the sales of its remaining assets. The
Company has satisfied its obligations on its floor plan liabilities and certain
other accounts payable through the sale of inventory to Jacobsen and Jacobsen
dealers and through collections of its customer accounts receivable.

The Company's remaining unsold real properties primarily consists of
properties located at Tampa and Fort Lauderdale, Florida. These properties
have an estimated liquidation value of $1,559,000 (net of estimated selling
expenses) and are not subject to any material debt. The estimated liquidation
values are based in part upon appraisals dated March 21, 1994 and March 11,
1994, respectively, which have not been independently verified by the Company
(collectively, the "Appraisals"). The Appraisals each assume a "reasonable"
marketing time for each property (assumed to be six months to one year by the
Fort Lauderdale appraisal and not specified with respect to the Tampa
property), as well as various other material assumptions set forth in the
Appraisals, as bases for the estimated value of each property. The Company has
received no reasonable offers for the sale of these properties and there is no
assurance that the Company will realize sales prices for the properties
comparable to the values estimated for each property by the Appraisals, or that
the Company will find it advisable or feasible to market any of the properties
for a period of time as long as the "reasonable" marketing time assumed by the
Appraisals or that the other assumptions set forth in the Appraisals will prove
to be accurate to any extent.

Proceeds of the consummation of the Sale of Assets Plan have been or
will be applied first to satisfy debt associated with the particular assets
sold, next to the general debts of the Company, next to pay for or make
provisions for the payment of contingent liabilities of the Company and next to
pay "fair value" to the holders of the 167,591 shares of Common Stock
dissenting from the Sale of Assets Plan. There is no assurance that the
Company's proceeds from the sale of its remaining assets will be sufficient to
cover these debts and expenses.

As discussed above, the Company currently anticipates that it will be
able to sell substantially all

19
<PAGE> 19

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
(CONTINUED)

of its assets (other than cash and cash equivalents) by December 31, 1995.
During this same period, the Company intends to search for other business
opportunities in which to invest or engage. There can be no assurance,
however, that the Company will be able to sell substantially all of its assets
or to find favorable business opportunities during this period. If this
transition period is extended, the Company may not have sufficient proceeds to
cover its anticipated expenses and may have problems under the Investment
Company Act of 1940, as amended. The Company is unable to predict with
certainty when the Fort Lauderdale property and Tampa property will be sold but
has estimated costs during the remaining period of liquidation based on such
sales occurring by December 31, 1995. Although no assurance can be given, the
Company currently believes that the expenses expected to be incurred by the
Company during this period of asset sales will be spread over the period in a
manner that will allow the Company to meet its obligations as they become due.
In addition, the Company will continue to incur legal expenses relating to its
contingent liabilities. The Company plans to continue to attempt to settle its
contingent liabilities during 1995, but it cannot estimate when these will be
settled or the ultimate outcome of the lawsuits or environmental matters
described above under Item I of Part II, "Legal Proceedings" or of any unknown
contingencies. There can be no assurance that the Company's cash balances will
be sufficient to allow it to meet its recorded liabilities and any known or
unknown contingent liabilities. The ultimate outcome of these contingencies is
not known. No provision has been made in the accompanying financial statements
for any liability which may result from these matters, except for an estimate
of the legal costs that the Company expects to incur in the defense of these
matters.

20
<PAGE> 20

RSI HOLDINGS, INC.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

TRIPLE A LITIGATION

21
<PAGE> 21

The action, which was filed in the Contra Costa County, California
Superior Court on July 19, 1993, was removed to the federal district court for
the Northern District of California on August 25, 1993, and Wiegmann & Rose
answered the complaint. The court granted Wiegmann & Rose's motion to reopen
the previous litigation, which was made with the intention of obtaining from
the court a determination that NL has complied with the consent decree (and
therefore that Wiegmann & Rose has complied with its obligations to Triple A
under the contract), or, failing that, that NL has failed to comply with the
consent decree (and therefore is responsible for any damages for events
following the entry of the consent decree).

22
<PAGE> 22

cleanup costs and legal expenses related to this additional contamination could
be significant and could materially and adversely affect the Company's
consummation of its plan of liquidation and its financial position. The
California DTSC has not yet requested remediation of this area of additional
contamination. In the event that a claim is asserted against Wiegmann & Rose
in connection with this additional contamination, Wiegmann & Rose expects to
take the position that NL is primarily responsible for the additional
contamination. No assurance can be given that Wiegmann & Rose will be
successful in this matter and, if the matter were litigated, the litigation
could take years. During fiscal 1994, the Company paid approximately $72,000
in legal expenses related to the Triple A lawsuit arising from the California
property including Site R. During the nine months ended May 31, 1995, the
Company incurred approximately $24,000 in legal and other expenses related to
the Triple A lawsuit arising from the contamination found on the California
property including Site R. The Company has been in contact with its two
primary insurers. One of these insurers has denied coverage and the other has
undertaken, subject to reservation of rights, to reimburse Wiegmann & Rose for
its defense costs in relation to this claim. The Company received $54,173 from
one of these insurers during June 1995 in payment for certain of its defense
cost incurred prior to September 30, 1994.

HOLIDAY INNS, INC. LITIGATION

23
<PAGE> 23

On or about September 23, 1992, Sam Spevak filed a lawsuit against
Holiday Inns, Inc. for allegedly failing to pay monthly rent under the lease
agreement. This lawsuit is pending in the Circuit Court of the Fourth Judicial
Circuit, in and for Duval County, Florida. On May 4, 1993, Sam Spevak filed a
Second Amended Complaint seeking from Holiday Inns, Inc. unpaid rent, unpaid
taxes, interest, attorney fees and costs. On November 19, 1993, Sam Spevak
filed a Third Amended Complaint in the Court seeking from Holiday Inns, Inc.
unpaid rent, unpaid taxes, attorneys fees and costs and seeking a declaratory
judgment against Holiday Inns, Inc. to establish whether or not Holiday Inns,
Inc. is liable for costs of repair and maintenance to the leased premises.
Holiday Inns, Inc. amended its complaint to assert similar claims against all
subsequent lessees (including RSI Corporation and Sparjax Corporation) under
the lease agreement, seeking indemnification against sums paid or to be paid to
Sam Spevak pursuant to his lawsuit. (Currently Holiday Inns, Inc. claims to
have paid the lessor in excess of $260,000 to date as a result of the alleged
lawsuit. RSI Corporation and Sparjax Corporation have no independent
information with respect to the particulars of the payment of this sum.) Upon
a motion of counsel for RSI Corporation, Holiday Inns, Inc.'s claims against
RSI Corporation were dismissed without prejudice, but Holiday Inns, Inc. has
filed an Amended Complaint to reinstate certain of its claims against RSI
Corporation and Sparjax Corporation. Counsel for RSI Corporation and Sparjax
Corporation will file an Answer to one of the claims and will move for
dismissal with prejudice with respect to the claims that have previously been
dismissed.

RSI Corporation denies its alleged liability to Holiday Inns, Inc. and
intends to defend this matter vigorously.

24
<PAGE> 24

OTHER LITIGATION

25
<PAGE> 25

to this offer. (v) Barnes v. Abex et al. (filed December 3, 1993), pending in
the San Francisco Superior Court, seeks damages for wrongful death allegedly
due to asbestos exposure. The case against Wiegmann & Rose has been dismissed
without prejudice, and the applicable statute of limitation has passed, barring
any subsequent action by plaintiff against Wiegmann & Rose. (vi) Richardson v.
Abex et al. (filed August 5, 1993), pending in the San Francisco Superior
Court, seeks damages for personal injuries allegedly due to asbestos exposure.
The case against Wiegmann & Rose has been dismissed without prejudice. (vii)
Sorensen v. Abex et al. (filed July 20, 1993), pending in the San Francisco
Superior Court, seeks damages for personal injuries allegedly due to asbestos
exposure. The case against Wiegmann & Rose has been dismissed without
prejudice.

ITEM 2. CHANGES IN SECURITIES*

ITEM 3. DEFAULTS UPON SENIOR SECURITIES*

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*

ITEM 5. OTHER INFORMATION*

*Items 2, 3, 4 and 5 are not presented as they are not applicable or the
information required thereunder is substantially the same as information
previously reported.

26
<PAGE> 26

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Listing of Exhibits

3.1 Articles of Incorporation of RSI Holdings, Inc., as amended:
Incorporated by reference to Exhibits 3.2 and 3.2.2 to the
Registration Statement on Form S-4 of RSI Corporation and
Porter Brothers, Inc., File No. 33-30247 (the "Form S-4").

3.1.1 Articles of Amendment and Certificate of Reduction of Capital
of Porter Brothers, Inc.: Incorporated by reference to Exhibit
4.1 to the Form 8-K of the Registrant filed with the
Securities and Exchange Commission on November 28, 1989, File
No. 0-7067.

3.2.1 By-laws of RSI Holdings, Inc., as amended: Incorporated by
reference to Exhibit 3.2.1 to the Form S-4.

3.2.2 Amendment to By-laws of RSI Holdings, Inc. Incorporated by
reference to Exhibit 4.2.2 to the Form 10-QSB of the
Registrant file with the Securities and Exchange Commission on
January 13, 1995

4.1 Specimen of Certificate for RSI Holdings, Inc., common stock:
Incorporated by reference to Exhibit 4.1.2 to the Form S-4.

4.2 See Exhibits 3.1, 3.1.1, 3.2.1 and 3.2.2.

27 Financial Data Schedule (for SEC use only)

99.1 Promissory Note by and between the Registrant and Branch
Banking and Trust Company, dated November 3, 1994:
Incorporated by reference to Exhibit 10.9 to the Form 10-K
filed with the Securities and Exchange Commission for the
fiscal year ended August 31, 1994, File No. 0-18091 (the "1994
10-K").

99.1.1 Guarantee Agreement by and between Buck Mickel and Branch
Banking and Trust Company dated October 19, 1994:
Incorporated by reference to Exhibit 10.9.1 to the 1994 10-K.

99.1.2 Letter Agreement by and between the Registrant and Branch
Banking and Trust Company dated November 4, 1994:
Incorporated by reference to Exhibit 10.10 to the 1994 10-K.

99.1.3 Note Modification Agreement dated as of March 17, 1995 by and
between RSI Holdings, Inc., and Branch Banking and Trust
Company: Incorporated by reference to Exhibit 99.1.3 to the
Form 10-QSB of the Registrant filed with the Securities and
Exchange Commission on April 14, 1995.

(b) Reports on Form 8-K

The Company did not file any reports on Form 8-K during the
three months ended May 31, 1995.

27
<PAGE> 27

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

RSI HOLDINGS, INC.
---------------------------

July 13, 1995 /s/ Joe F. Ogburn
- ---------------------- ---------------------------------
(Date) Joe F. Ogburn, Treasurer
(Principal Accounting Officer)

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THE AFOREMENTIONED
STATEMENT IS UNCLASSIFIED AND STATES THE ASSETS IN LIQUIDATION BUT DOES NOT
CONTAIN EQUITY ACCOUNTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> MAY-31-1995
<CASH> 1,387,000
<SECURITIES> 0
<RECEIVABLES> 73,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,559,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,024,000
<CURRENT-LIABILITIES> 975,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,049,000
<TOTAL-LIABILITY-AND-EQUITY> 3,024,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>