<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
---------------------------------------------
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 0-18446
Fairwood Corporation
--------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3472113
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Commerce Center
1201 N. Orange St., Suite 790, Wilmington, DE 19801
- --------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(302) 884-6749
--------------
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
<TABLE>
<CAPTION>
Outstanding at
Class March 30, 1996
----- --------------
<S> <C>
Class A Voting, $.01 Par Value 500
- ------------------------------ -------
Class B Non-Voting, $.01 Par Value 999,800
- ---------------------------------- -------
</TABLE>
<PAGE> 2
FAIRWOOD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
March 30, December 31,
Assets 1996 1995
------ ------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,393 4,264
-------- --------
Accounts and notes receivable:
Trade 26,320 29,545
Due from affiliate 1,537 1,293
Other 691 1,542
-------- --------
28,548 32,380
Less allowance for discounts and doubtful accounts 2,020 1,857
Less advances from factor 10,446 14,443
-------- --------
16,082 16,080
-------- --------
Inventories 15,885 14,394
Prepaid expenses and other current assets 2,428 2,524
-------- --------
Total current assets 35,788 37,262
-------- --------
Property, plant and equipment, at cost 30,915 30,875
Less accumulated depreciation and amortization 17,335 16,841
-------- --------
13,580 14,034
-------- --------
Other assets 2,301 2,125
-------- --------
$ 51,669 53,421
======== ========
</TABLE>
(Continued)
- 2 -
<PAGE> 3
FAIRWOOD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
March 30, December 31,
Liabilities and Deficit 1996 1995
----------------------- --------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Current Liabilites:
Current maturities of long-term debt:
Revolving credit 171,369 -
Senior subordinated debentures 80,000 -
Senior subordinated pay-in-kind debentures 105,853 105,853
Merger debentures 62,928 62,928
Other 170 170
Overdraft 1,890 -
Accounts payable 4,956 6,587
Accrued expenses 63,678 46,820
Federal and state income taxes 5,691 5,719
-------- --------
Total current liabilities 496,535 228,077
-------- --------
Long-term debt:
Revolving credit - 171,369
Senior subordinated debentures - 80,000
Senior subordinated pay-in-kind debentures - -
Merger debentures - -
Other 370 370
-------- --------
370 251,739
-------- --------
Deferred income taxes 1,318 1,318
Other liabilities 3,383 3,222
-------- --------
4,701 4,540
-------- --------
Redeemable preferred stock:
Junior preferred, cumulative, par value $.01 per share 100 100
-------- --------
Common stock and other shareowners' deficit:
Common stock and additional paid-in capital 55,948 55,948
Minimum pension liability ( 956) ( 956)
Retained deficit ( 505,029) ( 486,027)
-------- --------
( 450,037) ( 431,035)
-------- --------
$ 51,669 53,421
======== ========
</TABLE>
See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.
- 3 -
<PAGE> 4
FAIRWOOD CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
March 30, April 1,
1996 1995
-------- -------
<S> <C> <C>
Net sales $ 38,027 55,443
------- -------
Cost of sales 35,261 49,761
Selling, administrative and
general expenses 6,262 7,835
------- -------
41,523 57,596
------- -------
Operating loss ( 3,496) ( 2,153)
------- -------
Interest income 22 90
Interest on indebtedness ( 14,657) ( 14,411)
Other expenses, net ( 857) ( 310)
------- -------
Loss before income taxes ( 18,988) ( 16,784)
Provision for income taxes - -
------- -------
Net loss $( 18,988) ( 16,784)
======= =======
</TABLE>
See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements
- 4 -
<PAGE> 5
FAIRWOOD CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
March 30, April 1,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $( 18,988) ( 16,784)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 535 508
(Gain) loss on disposal of property, plant and equipment 2 ( 6)
Changes in assets and liabilities:
Accounts receivable 3,995 548
Inventories ( 1,491) ( 2,746)
Prepaid expenses and other current assets 96 ( 489)
Overdraft 1,890 -
Accounts payable ( 1,631) 2,163
Accrued expenses 16,858 5,044
Federal and state income taxes ( 28) ( 17)
Other, net ( 15) ( 168)
------- -------
Cash provided (used) - operating activities 1,223 ( 11,947)
------- -------
Cash flows from investing activities:
Proceeds from sale of Super Sagless assets - 15,000
Dispostion of property, plant and equipment 11 6
Capital expenditures ( 94) ( 1,171)
------- -------
Cash provided (used) - investing activities ( 83) 13,835
------- -------
Cash flows from financing activities:
Proceeds from long-term debt - 11,182
Repayment of long-term debt - ( 14,000)
Repayment of proceeds to Factor ( 3,997)
Dividends ( 14) ( 11)
------- -------
Cash used - financing activities ( 4,011) ( 2,829)
------- -------
Decrease in cash and cash equivalents ( 2,871) ( 941)
Cash and cash equivalents:
Beginning of period 4,264 4,615
------- -------
End of period $ 1,393 3,674
======= =======
Supplemental schedule of cash flow information
- ----------------------------------------------
Cash paid during year for:
Interest $ 140 11,182
Income tax refunds (payments), net 712 ( 17)
</TABLE>
Cash and cash equivalents include cash in banks and highly-liquid short-term
investments having a maturity of three months or less on date of purchase.
See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.
- 5 -
<PAGE> 6
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments, consisting
of only normal recurring adjustments, to present fairly the results of
operations and cash flows for the three months ended March 30, 1996
and April 1, 1995, and the financial position at March 30, 1996 and
December 31, 1995. The results of operations for the three-month
period ended March 30, 1996 are not necessarily indicative of the
results to be expected for the full year.
2. The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Company's audited financial
statements included in the 1995 annual report on Form 10-K.
3. As of March 30, 1996 and pursuant to the terms of the accounts
receivable Factoring agreement entered into during 1995 by Stratford
Company ("Stratford"), a division of a wholly-owned subsidiary of
Fairwood, receivables sold which remain to be collected approximated
$14.9 million, of which approximately $1.9 million were sold with
recourse.
4. All inventories (materials, labor and overhead) are valued at the
lower of cost or market using the last-in, first-out (LIFO) method.
The components of inventory, in thousands, are as follows:
<TABLE>
<CAPTION>
March 30, 1996 December 31, 1995
-------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
Raw materials $ 13,497 12,857
In process 4,067 3,532
Finished goods 8,416 8,063
------- ------
Inventories at
first-in, first out 25,980 24,452
LIFO reserve 10,095 10,058
------- ------
Inventories at LIFO $ 15,885 14,394
======= ======
</TABLE>
5. No provision for income taxes have been provided during the three
months ended March 30, 1995 and April 1, 1995 as the Company is in a
net operating loss carryforward position.
6. The Internal Revenue Service ("IRS") has completed the audit
examination of the consolidated Federal income tax returns of Fairwood
and its subsidiaries for the years ended July 11, 1988 through
December 31, 1991 and has delivered to Fairwood a "30-day letter" and
Revenue Agent's Report ("RAR") proposing to adjust Fairwood's taxable
income in the years in issue and in prior years to which net operating
losses of the Consolidated Group were carried back. The cumulative
proposed deficiency in Federal income tax arising from the proposed
adjustments is approximately $70 million, before applicable statutory
interest. Fairwood estimates that the aggregate proposed liability
would, together with statutory interest and state income tax through
March 30, 1996, and net of any applicable deduction for such interest
and state income tax, total approximately $109 million. Fairwood
believes that the
- 6 -
<PAGE> 7
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
proposed adjustments are in error and is vigorously contending this
matter. Under available administrative procedures, Fairwood has
protested the proposed adjustments and has had several conferences
with the IRS Appeals division and expects to have additional
conferences with the IRS Appeals division. Depending upon the outcome
of discussions of issues with the IRS Appeals division, Fairwood may
litigate one or more of the issues. The Company cannot predict the
ultimate outcome nor the impact on its financial statements, if any.
7. On each of April 1, 1995, October 1, 1995 and April 1, 1996, Fairwood
failed to make the required interest payments due on the senior
subordinated pay-in-kind debentures and merger debentures
(collectively, the "Fairwood Debentures") and Fairwood does not expect
to make the cash interest payments required under the Fairwood
Debentures on any future semi-annual interest payment dates. Accrued
interest of $40.5 million on the Fairwood Debentures, which includes
$24.6 million due to CSCL, is included in accrued expenses on the
accompanying consolidated balance sheet as of March 30, 1996. An
involuntary Chapter 7 petition was filed on January 3, 1996 in the
United States Bankruptcy Court for the Southern District of New York
against Fairwood Corporation by certain bondholders. In response to
the bankruptcy filing, on April 22, 1996, Fairwood and certain other
entities filed a cross-motion seeking the dismissal of the petition.
A hearing to consider that motion is currently scheduled for June 7,
1996. If Fairwood is unsuccessful in obtaining dismissal, Fairwood may
convert the Chapter 7 case to a Chapter 11 case or permit a trustee to
be appointed as part of a Chapter 7 proceeding.
8. Consolidated Furniture's revolving line of credit and senior
subordinated debentures mature on January 2, 1997 and, accordingly,
have been classified as current liabilities in the accompanying
unaudited condensed consolidated balance sheet of the Company as of
March 30, 1996. Consolidated Furniture expects to negotiate an
extension of these maturity dates or refinance such indebtedness
prior to January 2, 1997. On April 1, 1996, Consolidated Furniture
entered into the Fourteenth Amendment to the Credit Agreement which
changed various financial covenants through December 31, 1996.
The failure to make the April 1, 1995 interest payment (See note 6)
constitutes an event of default which permits the acceleration of the
Fairwood Debentures by the demand of the holders of the requisite
aggregate principal amount of the debentures, subject to a 180-day
acceleration blockage provision. Upon acceleration, the Fairwood
Debentures would be currently due and payable. Accordingly, the
Fairwood Debentures have been classified as current liabilities in the
accompanying unaudited condensed consolidated balance sheet as of
March 30, 1996.
- 7 -
<PAGE> 8
Item 2.
FAIRWOOD CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At March 30, 1996, the Company had total indebtedness of approximately $420.7
million of which approximately $420.3 million was current. Total indebtedness
was approximately $420.7 million at December 31, 1995, of which $357.2 million
is owed to Court Square Capital Limited ("CSCL"), an affiliate. The Company's
outstanding indebtedness includes its senior subordinated pay-in-kind
debentures and merger debentures (collectively, the "Fairwood Debentures").
The Company had the option during the first five years to pay interest on the
Fairwood Debentures either through cash payments or through the distribution of
additional securities.
Fairwood is a holding company with no operations. The Company has effectively
no cash flow from its subsidiaries because the cash produced by the operations
of the subsidiaries is not expected for the foreseeable future to be sufficient
to permit the subsidiaries to transfer funds to Fairwood. Fairwood's sole
asset is the stock of Consolidated Furniture Corporation ("Consolidated
Furniture"), its wholly-owned subsidiary. Fairwood's obligations under the
Fairwood Debentures are secured by Fairwood's pledge of its interest in
Consolidated Furniture's stock. CSCL, as holder of Fairwood's senior
subordinated pay-in-kind debentures, has a first priority security interest in
all of the outstanding stock of Consolidated Furniture, and the holders of the
merger debentures have a second priority security interest in such stock. The
Fairwood Debentures are obligations of Fairwood. Consolidated Furniture is not
an obligor under the Fairwood Debentures. However, Consolidated Furniture is
an obligor under the Credit Agreement with CSCL. The Credit Agreement does not
permit Consolidated Furniture to borrow funds and transfer them to Fairwood to
enable Fairwood to make cash interest payments on the Fairwood Debentures. The
borrowings under the Credit Agreement are secured by substantially all of the
assets of Consolidated Furniture. Consolidated Furniture is also a holding
company without operations. Its primary asset is the outstanding stock of
Furniture Comfort Corporation ("Furniture Comfort"), which has operations that
it conducts through its two divisions, Stratford and Barcalounger. Furniture
Comfort is also a direct obligor under the Credit Agreement and has pledged
substantially all of its assets to secure the obligations under the Credit
Agreement. Furniture Comfort is not an obligor on the Fairwood Debentures.
On each of April 1, 1995, October 1 1995 and April 1, 1996, the Company failed
to make the required interest payments due on the Fairwood Debentures and
Fairwood does not expect to be able to make the cash interest payments required
under the Fairwood Debentures on any future semi-annual interest payment dates.
Accrued interest of $40.5 million on the Debentures, which includes $24.6
million due to CSCL, is included in accrued expenses on the accompanying
consolidated balance sheet as of March 30, 1996. An involuntary Chapter 7
petition was filed on January 3, 1996 in the United States Bankruptcy Court for
the Southern District of New York against Fairwood Corporation by certain
bondholders. In response to the bankruptcy filing, on April 22, 1996, Fairwood
and certain other entities filed a cross-motion seeking the dismissal of the
petition. A hearing to consider that
- 8 -
<PAGE> 9
motion is currently scheduled for June 7, 1996. If Fairwood is unsuccessful in
obtaining dismissal, Fairwood may convert the Chapter 7 case to a Chapter 11
case or permit a trustee to be appointed as part of a Chapter 7 proceeding.
The failure to make the April 1, 1995 interest payment (see note 6) constitutes
an event of default which permits the acceleration of the Fairwood Debentures
by the demand of the holders of the requisite aggregate principal amount of the
debentures, subject to a 180-day acceleration blockage provision. Upon
acceleration, the Fairwood Debentures would be due and payable. Accordingly,
the Fairwood Debentures have been classified as current liabilities in the
accompanying unaudited condensed consolidated balance sheet as of
March 30, 1996.
Consolidated Furniture, Fairwood's wholly-owned subsidiary, is expected to
service its interest payment obligations under the Credit Agreement and senior
subordinated debentures from its cash flow from operations and available credit
facilities. Throughout 1995 Consolidated Furniture funded interest obligations
related to long-term indebtedness on the revolving line of credit and the
senior subordinated debentures through increased borrowings from CSCL under the
Credit Agreement. There were no borrowings from or repayments to CSCL during
the first three months of 1996. Consolidated Furniture is dependent upon CSCL
for funding of its debt service costs. CSCL has in the past increased its
revolving credit line to Consolidated Furniture in order for Consolidated
Furniture to meet its debt service obligations on the revolving line of credit
and the senior subordinated debentures. Under the Credit Agreement,
Consolidated Furniture and its subsidiaries are generally restricted from
transferring moneys to Fairwood with the exception of amounts for (a) specified
administrative expenses of Fairwood and (b) payment of income taxes. The senior
subordinated debentures, senior subordinated pay-in-kind debentures and merger
debentures also have certain restrictions as to the payment and transfer of
moneys. Management believes that cash flow from operations and funding from
CSCL will be adequate to meet Consolidated Furniture's obligations on the
revolving line of credit and the senior subordinated debentures through
December 31, 1996.
Consolidated furniture's revolving line of credit and senior subordinated
debentures mature on January 2, 1997 and, accordingly, have been classified as
current liabilities in the accompanying consolidated balance sheet as of March
30, 1996. Consolidated Furniture expects to negotiate an extension of these
maturity dates with CSCL or refinance such indebtedness prior to January 2,
1997. However, there can be no assurance that the Company will be able to
negotiate such an extension, or that the terms of such extension or refinancing
will not be on terms less favorable than those currently in place.
There can be no assurance that Fairwood will be able to continue as a going
concern. A bankruptcy Petition was filed against Fairwood on January 3, 1996
by certain holders of merger debentures. Fairwood has recently filed a motion
to dismiss the Petition and a hearing to consider that motion has been
currently scheduled for June 7, 1996. There is no way to know what the outcome
of this hearing will be. At this time no decision has been made by Fairwood
concerning its alternatives should the Court not dismiss the Petition.
For a discussion of the status of the IRS examination, refer to Fairwood's
audited consolidated financial statements as of December 31, 1995 included in
Fairwood's Form 10-K, and footnote 6 to Fairwood's unaudited condensed
consolidated financial statements included herein.
- 9 -
<PAGE> 10
Results of Operations
Three Months Ended March 30, 1996 Versus Three Months Ended April 1, 1995
The following discussion presents the material changes in results of operations
which have occurred in the first quarter of 1996 in comparison to the same
period in 1995.
Consolidated net sales were approximately $38.0 million in the first quarter of
1996, a decrease of 31.4% from last year's first quarter consolidated net sales
of approximately $55.4 million, the strongest quarter in 1995, due primarily
due to a reduction of sales at Stratford.
First quarter 1996 net sales (including intercompany sales) by the Stratford
Company decreased 36.9% to approximately $28.6 million as compared to $45.3
million for the comparable period in 1995. First quarter sales in 1996 to
Stratford's larger national retail chain customers decreased 50.2%, while sales
to smaller retail furniture store customers decreased by 36.4%. Total
Stratford Company volume (excluding sales to Simmons) decreased 43.5% during
the first quarter of 1996 as compared to 1995. Volume to Stratford's larger
national retail chain customers decreased 50.7%, while volume to Stratford's
smaller retail furniture store customers decreased 36.0%. These decreases in
sales and volume were due to a carryover from 1995 of internal and external
factors compounded further by industry-wide slow furniture sales and extreme
winter weather. In 1995 Stratford changed its market strategy by discontinuing
low margin and slow moving styles and by tightening credit and sales terms.
This caused an expected decrease in sales to mainly smaller retail customers
into 1996. Sales to the larger national retail customers continued to decline
into 1996 primarily due to (1) customers' organizational realignment lowering
customers' overall inventory levels, (2) the consolidation of customers' stores
and the subsequent delayed opening of the new consolidated stores, (3)
discontinuance of furniture sales by certain customers, and (4) Stratford's
price increases conflicting with the retailers' pricing policies.
Average selling prices changed between (6.4%) to 10.9% (excluding discontinued
and new products), depending on the type of product and customer. Excluding
sales to Simmons Upholstered Furniture Corporation ("Simmons"), who became an
affiliate during November 1995, net sales for the first quarter of 1996 were
approximately $25.5 million compared to approximately $45.3 million for the
first quarter of 1995, a decrease of 43.7%. First quarter sales in 1996 to
Simmons amounted to $2.8 million.
First quarter 1996 net sales by Barcalounger decreased 6.5% to approximately
$10.1 million as compared to $10.8 million in 1995. This decrease in sales
reflects a decrease of 9.2% in the number of pieces sold in the first quarter
of 1996 versus 1995, and a 3.2% increase in average selling prices.
Consolidated cost of sales decreased 29.1% in the first quarter of 1996 to
$35.3 million, or 92.7% of net sales, as compared to $49.8 million, or 89.8% of
net sales in 1995. Stratford Company cost of sales increased to 96.8% of net
sales in the first quarter of 1996, as compared to 92.0% in the first quarter
of 1995. Stratford's increased percentage of cost of sales is attributable to
several factors: (1) continued underabsorption of overhead due to declining
sales during January and February, (2) non-recurring costs associated with
overhead head count reductions to balance staffing due to lower sales volumes,
(3) delays in the implementation of the Simmons contract which was expected to
add manufacturing activity and lower overhead, and (4) lost production time as
a result of bad weather and power outages. Barcalounger cost of sales remained
essentially flat at 81.8% and 81.1% of net sales for the first quarters of 1996
and 1995, respectively.
- 10 -
<PAGE> 11
Consolidated selling, administrative and general expenses for the first
quarters of 1996 and 1995 were approximately $6.3 million and $7.8 million,
respectively, representing a decrease of 20.1%. This decline was due primarily
to lower sales commissions as a result of the drop in volume with smaller
retail customers which generally have a higher commission rate and the
continuing downsizing, where appropriate, and benefits from the ongoing
reductions of corporate expenses through improved controls resulting from the
decentralization, elimination of duplication of effort and transfer of
corporate functions that started in 1993.
Other expense, net, was approximately $.9 million and $.3 million for the first
quarters of 1996 and 1995, respectively. The increase was primarily due to
startup costs incurred relative to the Simmons contract.
No income taxes have been provided in the first quarters of 1996 and 1995,
respectively, as the Company is in a net operating loss carryforward position.
For a discussion of the status of the IRS examination, refer to the Company's
audited consolidated financial statements as of December 31, 1995 included in
the Company's Form 10-K, and footnote 4 to the Company's unaudited condensed
consolidated financial statements included herein.
- 11 -
<PAGE> 12
Part II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3, Legal Proceedings, previously reported in
the Registrant's Form 10-K for the year ended December 31, 1995 for a
description of pending legal action.
There are certain legal proceedings arising out of the normal course
of business, the financial risk of which are not considered material
in relation to the consolidated financial position of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.41 Fifth Amendment, dated January 2, 1996, to the Increasing Rate
Senior Debentures.
4.42 Thirteenth Amendment, dated January 13, 1996, to Credit
Agreement.
4.43 Fourteenth Amendment, dated April 1, 1996, to Credit Agreement.
(b) Reports on Form 8-K
Notification of involuntary bankruptcy petition filing on January 3,
1996.
- 12 -
<PAGE> 13
FAIRWOOD CORPORATION AND SUBSIDIARIES
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.
FAIRWOOD CORPORATION
--------------------
(Registrant)
/s/ John B. Sganga
-------------------------
John B. Sganga
Chief Financial Officer,
Executive Vice President,
Secretary and Treasurer
Date: May 11, 1996
- 13 -
<PAGE> 1
EXHIBIT 4.41
FIFTH AMENDMENT
FIFTH AMENDMENT, dated as of January 2, 1996, to the Increasing Rate Senior
Subordinated Debentures due January 3, 1996 of Consolidated Furniture
Corporation (formerly known as Mohasco Corporation) (the "Borrower") issued in
the original principal amount of $80,000,000 to Court Square Capital Limited
(formerly known as Citicorp Capital Investors Ltd.) (the "Lender") dated as of
September 22, 1989, as amended (the "Security") and the indenture attached as
Exhibit A thereto (the "Indenture"). Capitalized terms used herein without
definition shall have the same meaning as ascribed to such terms in the Security
and the Indenture.
Background
Pursuant to the terms of the Security and Section 9.2 of the Indenture, the
Borrower and the trustee under the Indenture may effect amendments to the
Security and the Indenture with the consent of all Securityholders. Pursuant to
the terms of the Security and Section 11.16 of the Indenture, if a trustee has
not been appointed under the Indenture, the Borrower, with the consent of all
Securityholders, may effect such amendments without the consent of a trustee.
The Lender is the sole Securityholder and no trustee has been appointed under
the Indenture. The parties have agreed to amend the Security and the Indenture
to extend the maturity date of the Security from January 2, 1996 to January 2,
1997.
Terms
In consideration of the foregoing premises and the agreements and
convenants contained herein, and intending to be legally bound, the parties
hereto agree as follows:
Section 1. Amendments.
1.1 The Security shall be amended as set forth in Endorsement No. 4
thereto, which Endorsement shall be in the form of Annex A hereto. The
Lender is hereby authorized to attach to its Security such Endorsement
No. 4 executed by a duly authorized officer of the Borrower, and to insert on
the face of its Security the following legend:
"THIS SECURITY SHALL BE DEEMED TO INCLUDE ENDORSEMENT NO. 4
DATED AS OF JANUARY 2, 1996 WHICH IS ATTACHED HERETO."
1.2 The Indenture is hereby amended as follows:
<PAGE> 2
(a) The date "January 2, 1996" is deleted from the fourth
line of the cover page of the Indenture and the date "January 2,1997" is
inserted in lieu thereof.
(b) The date "January 2, 1996" is deleted from the second
paragraph on page 1 of the Indenture and the date "January 2, 1997" is
inserted in lieu thereof.
(c) The date "January 2, 1996" is deleted from the
definition of "Securities" in Section 1.1 of the Indenture and the date
"January 2, 1997" is inserted in lieu thereof.
Section 2. Conditions to Effectiveness. This Fifth Amendment shall
become effective when the Endorsement No. 4 in the form of Annex A hereto is
executed on behalf of the parties hereto and delivered to the Lender.
Section 3. Effect of Amendment on Security and Indenture.
3.1 Except as specifically amended above, the Security and the
Indenture shall remain in full force and effect and hereby are ratified and
confirmed. As used in the Security and the Indenture, the terms "Security" or
"Indenture", "this Security" or "this Indenture", "herein", "hereinafter",
"hereunder", "hereto", and words of similar import shall, unless the context
requires otherwise, mean the Security and the Indenture as amended by this
Fifth Amendment.
3.2 The execution, delivery and effectiveness of this Fifth
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of the Lender under the Security or the
Indenture.
Section 4. Execution and Counterparts. This Fifth Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which together shall constitute one and the
same instrument.
Section 5. Governing Law. This Fifth Amendment shall be governed by
the laws of the State of New York applicable to contracts to be performed
wholly in the State of New York, without regard to the conflicts of laws
rules thereof.
Section 6. Headings. Section headings in this Fifth Amendment are
included herein for convenience of reference
- 2 -
<PAGE> 3
only and shall not constitute a part of this Fifth Amendment for any other
purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment
to be duly executed by their respective officers as of the date first above
written.
CONSOLIDATED FURNITURE CORPORATION
By: /s/ JOHN B. SGANGA
--------------------------------
John B. Sganga
Executive Vice President
By: /s/ JOHN B. SGANGA
--------------------------------
John B. Sganga
Chief Financial Officer,
Treasurer and Controller
COURT SQUARE CAPITAL LIMITED
By:
--------------------------------
M. Saleem Muqaddam
Vice President
-3-
<PAGE> 4
ANNEX A
FORM OF ENDORSEMENT NO. 4
CONSOLIDATED FURNITURE CORPORATION and COURT SQUARE CAPITAL LIMITED
hereby agree that the promissory note to which this Endorsement No. 4 is
attached (the "Debentures") shall be and hereby is amended as follows:
A. Delete the words "January 2, 1996" appearing on the front of the
Debentures and substitute therefor the words "January 2, 1997."
B. Delete the words "due January 2, 1996" appearing on the first page
of the back of the Debentures and substitute therefor the words "due January 2,
1997."
CONSOLIDATED FURNITURE CORPORATION
Dated: January 2, 1996 By: /s/ JOHN B. SGANGA
----------------------------
John B. Sganga
Executive Vice President
Dated: January 2, 1996 By: /s/ JOHN B. SGANGA
----------------------------
John B. Sganga
Chief Financial Officer,
Treasurer and Controller
COURT SQUARE CAPITAL LIMITED
Dated: January 2, 1996 By:
----------------------------
M. Saleem Muqaddam
Vice President
A-1
<PAGE> 1
EXHIBIT 4.42
[Executive Version]
THIRTEENTH AMENDMENT
TO CREDIT AGREEMENT
THIS THIRTEENTH AMENDMENT TO CREDIT AGREEMENT, dated as of January 31,
1996 (the "Thirteenth Amendment"), is among Court Square Capital Limited
(formerly known as Citicorp Capital Investors Ltd.) (the "Lender") and
Consolidated Furniture Corporation (formerly known as Mohasco Corporation),
Furniture Comfort Corporation (formerly known as Mohasco Upholstered Furniture
Corporation) (on its behalf and on behalf of each of its Stratford and
Barcalounger operating units), SSC Corporation (formerly known as Super Sagless
Corporation) and Choice Seats Corporation (collectively, the "Borrowers").
BACKGROUND
A. The Lender and the Borrowers are parties to a Credit Agreement
dated as of September 22, 1989, as amended (the "Credit Agreement"). All
capitalized terms used in this Thirteenth Amendment and not otherwise defined
herein shall have the respective meanings specified in the Credit Agreement.
B. The Borrowers have requested that the Credit Agreement be amended
as set forth herein, and the Lender has agreed, subject to the terms and
conditions of this Thirteenth Amendment, to such amendment.
TERMS
In consideration of the mutual covenants and agreements contained
herein, and intending to be legally bound, the Lender and the Borrowers hereby
agree as follows:
Section 1 - Overadvance Amount.
The definition of "Overadvance Amount" in Section 6.1 of the Credit
Agreement is hereby amended and restated to read in its entirety as follows:
"Overadvance Amount" means $200,000,000 during the first fiscal
quarter of 1996 and thereafter.
Section 2 - Conditions to Effectiveness.
This Thirteenth Amendment shall be effective when, and only when, the
Lender shall have received counterparts of this Thirteenth Amendment executed
by each of the Borrowers and copies of such approvals, opinions or documents as
the Lender may reasonably request.
<PAGE> 2
Section 3 - Representations and Warranties.
The Borrowers hereby jointly and severally represent and warrant to the
Lender that the execution, delivery and performance by each of the Borrowers of
this Thirteenth Amendment:
(a) are within each of the Borrower's respective corporate
powers;
(b) have been duly authorized by all necessary corporate
actions of each of the Borrowers;
(c) do not and will not:
(i) violate any requirement of law;
(ii) conflict with or result in the breach of, or
constitute a default under, any indenture, mortgage,
deed of trust, lease, agreement or other instrument binding on
or affecting any of the Borrowers; or
(iii) require the consent or approval of, authorization by
or notice to or filing or registration with any governmental
authority or other person other than those which have been
obtained and copies of which have been delivered to the Lender,
each of which is in full force and effect.
Section 4 - Miscellaneous.
(a) The Credit Agreement, as amended hereby, shall be binding
upon and shall inure to the benefit of the Lender and the Borrowers and their
respective successors and assigns.
(b) This Thirteenth Amendment may be executed in any number of
counterparts, each counterpart constituting an original but altogether one and
the same instrument and contract.
(c) This Thirteenth Amendment shall be construed in connection
with and as part of the Credit Agreement, and all terms, conditions and
covenants contained in the Credit Agreement except as herein modified shall
remain in full force and effect.
<PAGE> 3
(d) Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Thirteenth Amendment may refer to the "Credit Agreement dated as of September
22, 1989" without making specific reference to the Thirteenth Amendment, but
nevertheless all such references shall be deemed to include this Thirteenth
Amendment unless the context shall otherwise require.
[SIGNATURE PAGES FOLLOW]
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the Lender and the Borrowers have caused this
instrument to be executed and delivered by their duly authorized officers as of
the date and year first above written.
COURT SQUARE CAPITAL LIMITED
By:
-----------------------------------------
M. Saleem Magaddam
Vice President
CONSOLIDATED FURNITURE CORPORATION
By: /s/ JOHN B. SGANGA
-----------------------------------------
John B. Sganga
Executive Vice President,
Chief Financial Officer,
Treasurer and Controller
FURNITURE COMFORT CORPORATION
By: /s/ JOHN B. SGANGA
-----------------------------------------
John B. Sganga
Executive Vice President,
Treasurer and Secretary
SSC CORPORATION
By: /s/ JOHN B. SGANGA
----------------------------------------
John B. Sganga
Executive Vice President,
Treasurer and Secretary
CHOICE SEATS CORPORATION
By: /s/ JOHN B. SGANGA
----------------------------------------
John B. Sganga
Executive Vice President,
Treasurer and Secretary
- 4 -
<PAGE> 1
EXHIBIT 4.43
[Execution Version]
FOURTEENTH AMENDMENT
TO CREDIT AGREEMENT
THIS FOURTEENTH AMENDMENT TO CREDIT AGREEMENT, dated as of April 1, 1996
(the "Fourteenth Amendment"), is among Court Square Capital Limited (formerly
known as Citicorp Capital Investors Ltd.) (the "Lender") and Consolidated
Furniture Corporation (formerly known as Mohasco Corporation), Furniture Comfort
Corporation (formerly known as Mohasco Upholstered Furniture Corporation) (on
its behalf and on behalf of each of its Stratford and Barcalounger operating
units), SSC Corporation (formerly known as Super Sagless Corporation) and Choice
Seats Corporation (collectively, the "Borrowers").
BACKGROUND
A. The Lender and the Borrowers are parties to a Credit Agreement dated as
of September 22, 1989, as amended (the "Credit Agreement"). All capitalized
terms used in this Fourteenth Amendment and not otherwise defined herein shall
have the respective meanings specified in the Credit Agreement.
B. The Borrowers have requested that the Credit Agreement be amended as set
forth herein, and the Lender has agreed, subject to the terms and conditions of
this Fourteenth Amendment, to such amendment.
TERMS
In consideration of the mutual covenants and agreements contained herein,
and intending to be legally bound, the Lender and the Borrowers hereby agree as
follows:
Section 1 -- Financial Covenants.
Section 4.1 of the Credit Agreement is hereby amended and restated to read
in its entirety as follows:
"SECTION 4.1 Financial Covenants of Borrowers. Borrowers shall not
at any time:
4.1.1 Current Ratio. Permit the ratio of Consolidated Current
Assets to Consolidated Current Liabilities to be less than 0.075 to 1 on
the last day of any fiscal quarter.
4.1.2 [Intentionally Omitted].
4.1.3 [Intentionally Omitted].
4.1.4 [Intentionally Omitted].
<PAGE> 2
4.1.5 Consolidated Net Worth. Permit Consolidated Net Worth to be
less than $(275,000,000) at any time.
4.1.6 Working Capital. Permit Working Capital to be less than
$(280,000,000) on the last day of any fiscal quarter.
4.1.7 Total Debt. Permit Consolidated Indebtedness to exceed
$290,000,000 at any time.
Section 2 -- Conditions to Effectiveness.
This Fourteenth Amendment shall be effective when, and only when, the
Lender shall have received counterparts of this Fourteenth Amendment executed by
each of the Borrowers and copies of such approvals, opinions or documents as
the Lender may reasonably request.
Section 3 -- Representations and Warranties.
The Borrowers hereby jointly and severally represent and warrant to the
Lender that the execution, delivery and performance by each of the Borrowers of
this Fourteenth Amendment:
(a) are within each of the Borrower's respective corporate powers;
(b) have been duly authorized by all necessary corporate actions of
each of the Borrowers;
(c) do not and will not:
(i) violate any requirement of law;
(ii) conflict with or result in the breach of, or constitute a
default under, any indenture, mortgage, deed of trust, lease, agreement
or other instrument binding on or affecting any of the Borrowers; or
(iii) require the consent or approval of, authorization by or
notice to or filing or registration with any governmental authority or
other person other than those which have been obtained and copies of
which have been delivered to the Lender, each of which is in full
force and effect.
<PAGE> 3
Section 4 - Miscellaneous.
(a) The Credit Agreement, as amended hereby, shall be binding
upon and shall inure to the benefit of the Lender and the Borrowers and their
respective succesors and assigns.
(b) This Fourteenth Amendment may be executed in any number of
counterparts, each counterpart constituting an original but altogether one and
the same instrument and contract.
(c) This Fourteenth Amendment shall be construed in connection
with and as part of the Credit Agreement, and all terms, conditions and
covenants contained in the Credit Agreement except as herein modified shall
remain in full force and effect.
(d) Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Fourteenth Amendment may refer to the "Credit Agreement dated as of September
22, 1989" without making specific reference to the Fourteenth Amendment, but
nevertheless all such references shall be deemed to include this Fourteenth
Amendment unless the context shall otherwise require.
[SIGNATURE PAGES FOLLOW]
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Lender and the Borrowers have caused this
instrument to be executed and delivered by their duly authorized officers as of
the date and year first above written.
COURT SQUARE CAPITAL LIMITED
By: /s/ M. SALEEM MUQADDAM
--------------------------------
M. Saleem Muqaddam
Vice President
CONSOLIDATED FURNITURE CORPORATION
By: /s/ JOHN B. SGANGA
--------------------------------
John B. Sganga
Executive Vice President,
Chief Financial Officer,
Treasurer and Controller
FURNITURE COMFORT CORPORATION
By: /s/ JOHN B. SGANGA
--------------------------------
John B. Sganga
Executive Vice President,
Treasurer and Secretary
SSC CORPORATION
By: /s/ JOHN B. SGANGA
--------------------------------
John B. Sganga
Executive Vice President,
Treasurer and Secretary
CHOICE SEATS CORPORATION
By: /s/ JOHN B. SGANGA
--------------------------------
John B. Sganga
Executive Vice President,
Treasurer and Secretary
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<CASH> 1,393
<SECURITIES> 0
<RECEIVABLES> 28,548
<ALLOWANCES> 12,466
<INVENTORY> 15,885
<CURRENT-ASSETS> 35,788
<PP&E> 30,915
<DEPRECIATION> 17,335
<TOTAL-ASSETS> 51,669
<CURRENT-LIABILITIES> 496,535
<BONDS> 248,781
0
100
<COMMON> 55,948
<OTHER-SE> (505,985)
<TOTAL-LIABILITY-AND-EQUITY> 51,669
<SALES> 38,027
<TOTAL-REVENUES> 38,027
<CGS> 35,261
<TOTAL-COSTS> 41,523
<OTHER-EXPENSES> (835)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,657
<INCOME-PRETAX> (18,988)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,988)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,988)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
