<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 29, 1997
---------------------------------------------
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 29, 1997
----- -----------------------
<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 29, December 31,
Assets 1997 1996
------ ------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 353 429
-------- --------
Accounts and notes receivable:
Trade 23,963 23,673
Due from affiliate 2,702 2,418
Other 742 648
-------- --------
27,407 26,739
Less allowance for discounts and doubtful accounts 1,614 1,566
Less advances from factor 9,772 9,703
-------- --------
16,021 15,470
-------- --------
Inventories 14,562 13,625
Prepaid expenses and other current assets 2,685 2,468
-------- --------
Total current assets 33,621 31,992
-------- --------
Property, plant and equipment, at cost 31,073 31,034
Less accumulated depreciation and amortization 19,153 18,709
-------- --------
11,920 12,325
-------- --------
Other assets 2,261 2,260
-------- --------
$ 47,802 46,577
======== ========
</TABLE>
(Continued)
- 2 -
<PAGE> 3
FAIRWOOD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
March 29, December 31,
Liabilities and Deficit 1997 1996
----------------------- ------------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Current Liabilites:
Overdraft 4,221 715
Current maturities of long-term debt:
Revolving credit $ 203,992 -
Senior subordinated debentures 80,000 -
Senior subordinated pay-in-kind debentures 105,853 105,853
Merger debentures 62,928 62,928
Other 180 180
Accounts payable 6,840 9,836
Accrued expenses 89,272 71,095
Federal and state income taxes 5,713 5,699
-------- --------
Total current liabilities 558,999 256,306
-------- --------
Long-term debt:
Revolving credit - 203,992
Senior subordinated debentures - 80,000
Other 190 190
-------- --------
190 284,182
-------- --------
Deferred income taxes 1,524 1,524
Other liabilities 2,859 2,513
-------- --------
4,383 4,037
-------- --------
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 ( 539) ( 539)
Retained deficit ( 571,279) ( 553,457)
-------- --------
( 515,870) ( 498,048)
-------- --------
$ 47,802 46,577
======== ========
</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 29, March 30,
1997 1996
-------- --------
<S> <C> <C>
Net sales $ 37,271 38,027
------- -------
Cost of sales 33,819 35,261
Selling, administrative and
general expenses 5,789 6,262
------- -------
39,608 41,523
------- -------
Operating loss ( 2,337) ( 3,496)
------- -------
Interest income 5 22
Interest on indebtedness ( 15,527) ( 14,657)
Other income (expenses), net 53 ( 857)
------- -------
Loss before income taxes ( 17,806) ( 18,988)
Provision for income taxes - -
------- -------
Net loss $( 17,806) ( 18,988)
======= =======
</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 29, March 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $( 17,806) ( 18,988)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 474 535
(Gain) loss on disposal of property, plant and equipment ( 9) 2
Changes in assets and liabilities:
Accounts receivable ( 620) 3,995
Inventories ( 937) ( 1,491)
Prepaid expenses and other current assets ( 217) 96
Accounts payable ( 3,012) ( 1,645)
Accrued expenses 18,177 16,858
Federal and state income taxes 14 ( 28)
Other, net 345 ( 15)
------- -------
Cash used - operating activities ( 3,591) ( 681)
------- -------
Cash flows from investing activities:
Disposition of property, plant and equipment 9 11
Capital expenditures ( 69) ( 94)
------- -------
Cash used - investing activities ( 60) ( 83)
------- -------
Cash flows from financing activities:
Overdraft 3,506 1,890
Proceeds from Factor, net 69 ( 3,997)
------- -------
Cash provided (used) - financing activities 3,575 ( 2,107)
------- -------
Decrease in cash and cash equivalents ( 76) ( 2,871)
Cash and cash equivalents:
Beginning of period 429 4,264
------- -------
End of period $ 353 1,393
======= =======
Supplemental schedule of cash flow information
- ----------------------------------------------
Cash paid during year for:
Interest $ 378 140
Income tax refunds (payments), net 14 712
</TABLE>
Supplemental schedule of noncash operating and financing activities
- -------------------------------------------------------------------
In the three month periods ending March 29,1997 and March 30, 1996 the Company
recognized $16 thousand and $14 thousand, respectively, of accrued dividends
payable to shareholders, which dividends have not been paid.
.
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 29, 1997 and
March 30, 1996, and the financial position at March 29, 1997 and December
31, 1996. The results of operations for the three-month period ended
March 29, 1997 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 Fairwood Corporation's ("Fairwood or
Company") audited consolidated financial statements included in the 1996
annual report on Form 10-K. Fairwood is a holding company as is its
subsidiary, Consolidated Furniture Corporation ("Consolidated Furniture")
which is the parent of Furniture Comfort Corporation ("Furniture
Comfort") whose two operating divisions, Stratford Company ("Stratford")
and Barcalounger Company ("Barcalounger") manufacture motion upholstered
residential furniture.
3. As of March 29, 1997 and pursuant to the terms of the accounts receivable
Factoring Agreement entered into during 1995 by Stratford, receivables
sold which remain to be collected approximated $11.2 million, of which
approximately $2.6 million were sold with recourse. As of March 29, 1997
and pursuant to the terms of the accounts receivable Factoring Agreement
entered into during 1996 by Barcalounger, receivables sold with recourse
which remain to be collected approximated $1.0 million.
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 29, 1997 December 31, 1996
-------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
Raw materials $ 12,882 13,047
In process 3,235 3,028
Finished goods 5,907 5,163
------ ------
Inventories at
first-in, first out 22,024 21,238
LIFO reserve 7,462 7,613
------ ------
Inventories at LIFO $ 14,562 13,625
====== ======
</TABLE>
5. No provision for income taxes have been provided during the three months
ended March 29, 1997 and March 30, 1996 as the Company is in a net
operating loss carryforward position.
6. Fairwood is contesting an Internal Revenue Service ("IRS") Agent's report
resulting from an IRS audit examination of the consolidated Federal
income tax returns of Fairwood and its subsidiaries for the years ended
July 11, 1988 through December 1991. The report proposed to adjust
Fairwood's taxable income in the years in issue
- 6 -
<PAGE> 7
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
and in prior years to which net operating losses of the Consolidated tax
group were carried back. Fairwood estimates that the aggregate proposed
liability, if all issues were resolved unfavorably would, together with
statutory interest and state income tax, total approximately $124 million
and eliminate substantially all of the net operating loss carryforwards.
Fairwood believes that the proposed adjustments are in error and is
vigorously contesting this matter. Under available administrative
procedures, Fairwood had protested the proposed adjustments and, through
negotiations with the IRS Appeals Division, has reached an agreement in
principle for a potential settlement of the issues in the case. A final
settlement based on the foregoing is estimated to be approximately $4.4
million and is included in Federal and state income taxes on the
accompanying audited consolidated balance sheets. The agreement in
principle will also eliminate substantially all of the Company's
available net operating loss carryforwards and may preclude the deduction
of certain future interest expense. The terms of the proposed settlement
are subject to final approval by the IRS and will also require the
approval of the Joint Committee on Taxation, and no assurance can be
given that such approvals will be given. However, should the outcome of
the reviews in question be unfavorable to Fairwood on one or more issues
in the case then Fairwood and its Subsidiaries may exercise their rights
to litigate these issues. Fairwood and its Subsidiaries cannot predict
the ultimate outcome of these issues, nor the impact on its financial
statements.
7. On each of April 1, 1995 and October 1, 1995, and each semi-annual
interest payment date thereafter, 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 $67.6 million on the Fairwood Debentures,
which includes $41.0 million due to CSCL, is included in accrued expenses
in the accompanying consolidated balance sheet as of March 29, 1997. 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 merger debenture holders. In response to
the bankruptcy filing, on April 22, 1996, Fairwood and certain other
entities filed a cross-motion seeking dismissal of the petition. On
November 26, 1996, the motion to dismiss was denied. On December 26,
1996, Fairwood exercised its right to convert the pending involuntary
bankruptcy case to a voluntary Chapter 11 proceeding as
debtor-in-possession. Fairwood has indicated in Bankruptcy Court papers
that it intends to propose a plan of reorganization with the Bankruptcy
Court at some time in the future. The Chapter 11 case pertains only to
Fairwood Corporation. Its direct and indirect subsidiaries, including
Consolidated Furniture Corporation, Furniture Comfort Corporation, as
well as their operating divisions, Stratford and Barcalounger, are not
parties to the bankruptcy, nor are such operations under the supervision
of the Bankruptcy Court. It is currently expected that these companies
will continue to operate in the normal course of business.
- 7 -
<PAGE> 8
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
8. Consolidated Furniture's revolving line of credit and senior subordinated
debentures mature on January 2, 1998 and, accordingly, have been
classified as current liabilities in the accompanying unaudited condensed
consolidated balance sheet of the Company as of March 29, 1997.
Consolidated Furniture expects to negotiate an extension of these
maturity dates or refinance such indebtedness prior to January 2, 1998.
Fairwood's failure to make the April 1, 1995 and subsequent period
interest payments 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. 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 29, 1997.
- 8 -
<PAGE> 9
Item 2.
FAIRWOOD CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain information set forth or incorporated by reference herein contains
forward-looking statements as such term is defined in Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended.
Liquidity and Capital Resources
At March 29, 1997 and December 31, 1996, the Company had total indebtedness of
approximately $453.1 million of which approximately $452.9 million was current
and approximately $389.8 million was owed to Court Square Capital Limited
("CSCL"), an affiliate. Accrued interest on total indebtedness was
approximately $79.6 million and $64.4 million at March 29, 1997 and December
31, 1996, respectively. Approximately $53.0 million and $40.5 million of the
accrued interest was owed to CSCL at March 29, 1997 and December 31, 1996,
respectively. 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, 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, 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.
- 9 -
<PAGE> 10
On each of April 1, 1995 and October 1, 1995, and each semi-annual interest
payment date thereafter, 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 $67.6 million on the
Fairwood Debentures, which includes $41.0 million due to CSCL, is included in
accrued expenses in the accompanying consolidated balance sheet as of March 29,
1997.
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 merger debenture holders. In response to the bankruptcy
filing, on April 22, 1996, Fairwood and certain other entities filed a
cross-motion seeking dismissal of the petition. On November 26, 1996, the
motion to dismiss was denied. On December 26, 1996, Fairwood exercised its
right to convert the pending involuntary bankruptcy case to a voluntary Chapter
11 proceeding as debtor-in-possession. Fairwood has indicated in Bankruptcy
Court papers that it intends to propose a plan of reorganization with the
Bankruptcy Court at some time in the future. The Chapter 11 case pertains only
to Fairwood Corporation. Its direct and indirect subsidiaries, including
Consolidated Furniture Corporation, Furniture Comfort Corporation, as well as
their operating divisions, Stratford and Barcalounger, are not parties to the
bankruptcy, nor are such operations under the supervision of the Bankruptcy
Court. It is currently expected that these companies will continue to operate
in the normal course of business.
Fairwood's failure to make the April 1, 1995 and subsequent period interest
payments 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 29, 1997.
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 1996 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 1997. 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, 1997.
- 10 -
<PAGE> 11
Consolidated furniture's revolving line of credit and senior subordinated
debentures mature on January 2, 1998 and, accordingly, have been classified as
current liabilities in the accompanying consolidated balance sheet as of March
29, 1997. Consolidated Furniture expects to negotiate an extension of these
maturity dates with CSCL or refinance such indebtedness prior to January 2,
1998. 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 converted the
involuntary bankruptcy case to a voluntary Chapter 11 proceeding as
debtor-in-possession. Fairwood has indicated in Bankruptcy Court papers that
it intends to propose a plan of reorganization with the Bankruptcy Court at
some time in the future. There is no way to know what the outcome of the
proceeding will be. At this time no decision has been made by Fairwood
concerning its alternatives should the plan of reorganization not be approved.
For a discussion of the status of the IRS examination, refer to Fairwood's
audited consolidated financial statements as of December 31, 1996 included in
Fairwood's Form 10-K, and footnote 6 to Fairwood's unaudited condensed
consolidated financial statements included herein.
Results of Operations
Three Months Ended March 29, 1997 Versus Three Months Ended March 30, 1996
The following discussion presents the material changes in results of operations
which have occurred in the first quarter of 1997 in comparison to the same
period in 1996.
Consolidated net sales were approximately $37.3 million in the first quarter of
1997, a decrease of 1.8% from last year's first quarter consolidated net sales
of approximately $38.0 million, due primarily due to a reduction of sales at
Stratford.
First quarter 1997 net sales (including intercompany sales) by the Stratford
Company decreased 10.5% to approximately $25.6 million as compared to $28.6
million for the comparable period in 1996. First quarter sales in 1997 to
Stratford's larger national retail chain customers decreased 15.0%, while sales
to smaller retail furniture store customers decreased by 8.3%. Total Stratford
volume, excluding sales to Simmons Upholstered Furniture Corporation
("Simmons"), an affiliate, decreased 17.2% during the first quarter of 1997 as
compared to 1996. Volume to Stratford's larger national retail chain customers
decreased 12.5%, while volume to Stratford's smaller retail furniture store
customers decreased 20.9%. Sales of woodworking items to other furniture
manufacturers increased 96.4% during the first quarter of 1997 as compared to
1996. These decreases in sales and volume were due to a continuance of adverse
factors carried over from 1995 and 1996 that includes a weakness in sales in
mid priced furniture that Stratford targets. This was combined with decreased
sales to value merchants and the larger chain store customers who now make up
the bulk of Stratford's customer base. Stratford's strategy to improve margins
and lower selling costs continues to be in conflict with certain customers and
has slowed Stratford's attempt to recapture smaller stores' sales. The attempt
to recapture lost sales with smaller customers is proceeding slowly.
- 11 -
<PAGE> 12
Average selling prices decreased 4.4% during the first quarter of 1997 as
compared to 1996. Excluding sales to Simmons, net sales for the first quarter
of 1997 were approximately $22.6 million compared to approximately $25.5
million for the first quarter of 1996, a decrease of 11.4%. First quarter
sales in 1997 to Simmons were approximately $3.0 million compared to
approximately $2.8 million for the first quarter of 1996, an increase of 7.1%.
First quarter 1997 net sales by Barcalounger increased 21.8% to approximately
$12.3 million as compared to $10.1 million in 1996. This increase in sales
reflects an increase of 14.7% in the number of pieces sold in the first quarter
of 1997 versus 1996, and a 6.2% increase in average selling prices.
Consolidated cost of sales decreased 4.2% in the first quarter of 1997 to $33.8
million, or 90.7% of net sales, as compared to $35.3 million, or 92.7% of net
sales in 1996. Stratford Company cost of sales decreased to 95.8% of net sales
in the first quarter of 1997, as compared to 96.8% in the first quarter of
1996. Stratford's decreased percentage of cost of sales is attributable to
better overhead absorption and improved manufacturing variances. Barcalounger
cost of sales decreased to 80.7% from 81.8% of net sales for the first quarters
of 1997 and 1996, respectively.
Consolidated selling, administrative and general expenses for the first
quarters of 1997 and 1996 were approximately $5.8 million and $6.3 million,
respectively, representing a decrease of 7.9%. This decline is due to reduced
sales commissions and selling expenses because of lower volume at Stratford and
continued cost controls on a company wide basis.
Interest expense, was approximately $15.5 million and $14.7 million for the
first quarters of 1997 and 1996, respectively, an increase of approximately
5.4%. The increase was primarily due to increased borrowings on the line of
credit.
No income taxes have been provided in the first quarters of 1997 and 1996,
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, 1996 included in
the Company's Form 10-K, and footnote 6 to the Company's unaudited condensed
consolidated financial statements included herein.
- 12 -
<PAGE> 13
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, 1996 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
None
(b) Reports on Form 8-K
None
- 13 -
<PAGE> 14
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 12, 1997
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-29-1997
<CASH> 353
<SECURITIES> 0
<RECEIVABLES> 17,635
<ALLOWANCES> 1,614
<INVENTORY> 14,562
<CURRENT-ASSETS> 33,621
<PP&E> 31,073
<DEPRECIATION> 19,153
<TOTAL-ASSETS> 47,802
<CURRENT-LIABILITIES> 558,999
<BONDS> 190
0
100
<COMMON> 55,948
<OTHER-SE> (571,818)
<TOTAL-LIABILITY-AND-EQUITY> 47,802
<SALES> 37,271
<TOTAL-REVENUES> 37,271
<CGS> 33,819
<TOTAL-COSTS> 39,608
<OTHER-EXPENSES> (58)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,527
<INCOME-PRETAX> (17,806)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,806)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,806)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
