<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1999
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ________________________ to ____________________
Commission file number 0-18446
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Fairwood Corporation
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(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 Street, Suite 790
Wilmington, DE 19801
- ------------------------------------------ ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 302-884-6749
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Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
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None Not Applicable
Securities registered pursuant to Section 12 (g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was zero as of February 29, 2000.
On February 29, 2000, the registrant had outstanding 500 shares of Class A
Voting common stock, $.01 par value and 999,800 shares of Class B Non-Voting
common stock, $.01 par value.
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PART I
ITEM 1. BUSINESS
Fairwood Corporation ("Fairwood"), is a privately held Delaware
corporation organized in 1988 by investors including Citicorp Venture Capital
Ltd. ("CVCL") for the purpose of acquiring all of the common stock of
Consolidated Furniture Corporation, formerly named Mohasco Corporation
("Consolidated Furniture"). At the date of acquisition, Consolidated Furniture's
operations were diversified and included the manufacture of residential
furniture and carpet, and the rental of residential and office furniture.
Consolidated Furniture sold its carpet and rental operations in 1988.
The principal executive offices of Fairwood are located at One Commerce
Center, 1201 Orange St., Suite 790, Wilmington, Delaware 19801. Fairwood is a
holding company with no independent operations: its primary asset is all of the
common stock of Consolidated Furniture.
On June 3, 1999, Furniture Comfort Corporation ("Furniture Comfort"
formerly Futorian Furnishings, Inc.), Consolidated Furniture's operating
subsidiary, sold substantially all of the assets of the Stratford Division for
approximately $14 million in cash plus the assumption of certain liabilities.
The proceeds from the sale were used to pay-down the revolving credit and term
loan. The sale included substantially all of the business and assets of the
Stratford Division, including the sale of its office and showroom in
Bannockburn, Illinois and the assignment of leases for certain other
manufacturing and showroom facilities. The final sales price for the net assets
of Stratford Division was subject to certain post-closing adjustments. As a
result of this sale, Furniture Comfort recognized a loss of approximately $2
million, which includes $1 million for claims previously submitted by the
purchaser of Stratford regarding post-closing adjustments.
Fairwood's subsidiary, Consolidated Furniture, is the parent of Furniture
Comfort Corporation whose sole operating division, Bacalounger Division
("Barcalounger") manufactures upholstered stationary and motion furniture, such
as modular living room groups, recliners, rockers and glider chairs. In
September 1999, Barcalounger Division incurred substantial damage due to floods
caused by the heavy rains of Hurricane Floyd. The damage to inventory was
approximately $5.8 million. This amount includes the destruction of all
finished inventory, approximately 95% of work in process and approximately 50%
of raw materials. Lost sales of approximately $6 million resulted from the
plant being closed for approximately three weeks. Losses experienced by the
Company were largely offset by insurance proceeds. The net effect was a $0.5
million loss.
On January 3, 1996, certain holders of the Fairwood public debentures (the
"Bondholders") filed an involuntary Chapter 7 case against Fairwood in the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court." Fairwood, Consolidated Furniture and certain affiliates
filed a motion in response to the involuntary filing seeking to dismiss the
petition. By order dated December 4, 1996, the Bankruptcy Court denied the
motion to dismiss the petition.
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Thereafter, on December 26, 1996, Fairwood exercised its right to convert
the Chapter 7 case to a case under Chapter 11. As of the date hereof, Fairwood
continues to operate as a debtor in possession under Section 1108 of the
Bankruptcy Code. The Chapter 11 case pertains only to Fairwood Corporation.
Fairwood Corporation's direct and indirect subsidiaries, including Consolidated
Furniture Corporation, Furniture Comfort Corporation, as well as its operating
division, Barcalounger, are not parties to the bankruptcy. In April 1997 the
Bondholders' filed a Motion with the Bankruptcy Court seeking to convert
Fairwood's Chapter 11 case to a case under Chapter 7 or, alternatively, for the
appointment of a Chapter 11 trustee. By order dated March 2, 1999, the
Bondholders' motion to convert the case or, alternatively, for the appointment
of a Chapter 11 trustee, was denied in its entirety. On March 10, 2000, the
District Court entered an Order affirming the Bankruptcy Court's decision in all
respects. It is possible that the Bondholders will take a further appeal of the
District Court's ruling. Consolidated Furniture and subsidiaries are expecting
to continue to operate in the normal course of business. In the event that the
Bondholders do not take a further appeal of the District Court's order, Fairwood
expects to file a plan of reorganization in the near term.
In October 1998, the Bankruptcy Court approved the settlement of issues
arising out of an Internal Revenue Service ("IRS") audit examination of the
consolidated Federal income tax returns of Fairwood and its subsidiaries for the
periods ended July 11, 1988 through December 31, 1991. In the second quarter of
1999, payment of the Fairwood Group's estimated Federal tax liability was made
to the IRS. The tax payment, including estimated interest, was approximately
$4.5 million and was provided for in the financial statements in previous years.
See Item 3. LEGAL PROCEEDINGS.
Operations
Furniture Comfort, through its Barcalounger division, serves selected
segments of the highly diversified $22+ billion residential furniture market.
Consolidated Furniture entered the furniture industry through a series of
acquisitions commencing in 1964. Currently a diversified line of upholstered
motion furniture is manufactured and sold under the Barcalounger brand name,
whose products have been successfully targeted to a more selective, higher
priced market. Barcalounger manufactures and sells higher-priced motion
furniture and is well known for its high-quality recliners. The products are
sold nationally to furniture retailers and department stores mainly through
commissioned sales forces.
The furniture industry is affected to a substantial degree by style, value
and fashion. Barcalounger participates in important furnishings market showings
held during the year in High Point, North Carolina and San Francisco, California
to acquaint retailers with the significant number of new products introduced
each year. Barcalounger frequently reviews its product lines to evaluate whether
minor or major restyling of such lines is warranted. To generate new product and
style ideas based upon consumer and retailer response, Barcalounger maintains
in-house design staffs and contracts with outside designers. The designers
consult with manufacturing management to analyze the economic feasibility of
producing new products based on their designs.
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Barcalounger operates in a highly competitive segment of the motion
furniture business. Many new competitors and existing stationary manufacturers
have entered this particular market, as well as existing competitors, which have
expanded their lines. Barcalounger has been able to maintain its market share by
focusing on its core high-end high-quality product lines. See Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES. For the years ended December 31,
1999, 1998 and 1997, net sales by Barcalounger were $50.1 million, $54.7 million
and $49.7 million, respectively.
The furniture market is highly competitive and includes a large number of
manufacturers, none of which dominates the market. Certain of these
manufacturers produce a broader range of furniture than Barcalounger, and many
of them have greater financial and other resources. In addition, there are
relatively few barriers to entry into the industry. Competition could require
Barcalounger to reduce prices, offer better credit terms, or increase spending
on product development, marketing or sales, any of which could adversely affect
the Company.
Barcalounger targets a selected market for its high-end recliner chair and
motion upholstered furniture. Barcalounger sells mainly to furniture stores and
department stores that carry more expensive products and provide interior design
services directly or indirectly. Barcalounger gives limited warranties for its
products. The value and fine quality of its furniture is apparent as hardwood
frames are emphasized and only the finest leather and fabric coverings are
offered. Barcalounger has significant brand recognition and has a reputation of
having one of the best product lines in terms of value, quality, design and
service in the higher priced segment of the motion furniture industry.
Barcalounger is well known in the furniture industry which is
characterized by a large number of relatively small manufacturers. The following
are among the Company's larger competitors: Life Style Furnishings
International, Furniture Brands International, La-Z-Boy, Klausner, Natuzzi, and
Bassett, many of which have greater financial resources than the Company.
Competition is intense at all levels, stressing price, style, fabric and product
finish.
Factors Affecting the Home Furnishings Industry
The furniture industry as a whole is affected by demographics, household
formations, the level of personal discretionary income, household mobility and
the rate of new home construction. There exists a substantial replacement market
that is relatively less affected by these factors.
Research and Development
Since the furniture industry is characterized by active competition among
a large number of companies, many of which also have substantial facilities and
resources, Barcalounger believes that the maintenance of high product quality
and the development of new products are essential to maintaining its competitive
position. In support of these goals, Barcalounger conducts research and
development activities.
The Furniture Comfort Corporation expended a total of $9,086,000 in the
past five years for research and development programs of which $1,187,000,
$2,026,000, and $1,945,000 was expended in 1999, 1998 and 1997, respectively.
Barcalounger's share included $2,193,000 for the past five years and $470,000,
$455,000 and $441,000 for 1999, 1998 and 1997, respectively.
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Employees
Fairwood has no employees but its subsidiaries and their operating
division employed 384 persons at December 31, 1999. The Barcalounger division
has a long record of generally harmonious relations with employees. None of the
employees are subject to a collective bargaining agreement.
Backlog
The backlog of orders for the Barcalounger division was approximately
$9,002,000 at December 31, 1999 and approximately $3,638,000 at December 31,
1998. The increase in backlog is attributable to an increase in sales demand and
the loss of inventory and production time due to the flood. It is expected that
the backlog at December 31, 1999 will be filled in the current year. Furniture
Comfort does not consider backlog to be a significant indicator of the sales
outlook for its products beyond the period of a few months.
Seasonality, Major Customers and Export Sales
There are seasonal factors which affect Barcalounger's business. Spring
and fall are generally considered periods of increased interest by consumers in
interior furnishings since these are periods of increased real estate activity
involving relocation of families. The Christmas holiday season and other special
occasions usually generate increased sales of some of Barcalounger's furniture
lines. On the other hand, inclement weather in mid-winter generally discourages
the purchase of interior furnishings. Similarly, the closedown of a portion of
Barcalounger's activities for vacation periods in July has a limiting effect on
production as well as sales. Barcalounger maintains adequate levels of inventory
to meet seasonal demands.
Export sales for 1999, 1998 and 1997 were approximately 2 percent of sales
for each year, of which approximately 1% was made to Canada for each year.
Environmental and Raw Materials
In 1999, there were no significant effects upon the capital expenditures,
earnings and competitive position of Barcalounger occasioned by compliance with
provisions of federal, state and local laws regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment.
Raw materials purchased by Barcalounger are all procured in the open
market from a number of suppliers. In general, no major difficulties have been
experienced in obtaining raw materials.
Patents
Patents are not a significant consideration in the manufacture of most of
Barcalounger's products. Barcalounger does not believe that their operating
income is materially dependent on any one patent or license or group of related
patents or licenses.
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ITEM 2. PROPERTIES
The furniture manufacturing activities of Barcalounger are conducted in a
modern facility of suitable construction. This facility is in good operating
condition, reasonably maintained and contains reasonably modern equipment. All
of the principal items of machinery and equipment located in this facility are
owned by Furniture Comfort or its operating division.
Barcalounger also leases showrooms in High Point, North Carolina and San
Francisco, California for display and storage of products. Fairwood and
Consolidated Furniture lease office space in Wilmington, Delaware.
Barcalounger believes that its plant and facilities, in the aggregate, are
adequate, suitable and of sufficient capacity for purposes of conducting its
current business for the foreseeable future without making capital expenditures
materially higher than historical levels.
As of December 31, 1999, Furniture Comfort Corporation has leased
furniture facilities as follows:
<TABLE>
<CAPTION>
Location Use Square Footage
-------- --- --------------
<S> <C> <C>
Barcalounger
Leased
Rocky Mount, NC Manufacturing plant 364,000
High Point, NC Showroom 9,808
San Francisco, CA Showroom 2,945
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376,753
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Stratford
Leased
Guntown, MS Warehouse
Subleased to third party 216,000
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592,753
=========
</TABLE>
Substantially all of the assets of Consolidated Furniture and its
subsidiaries are subject to a lien in favor of Court Square Capital Limited
("CSCL") granted in connection with the Credit Agreement (See Note 4 to the
Company's Consolidated Financial Statements set forth in item 8).
ITEM 3. LEGAL PROCEEDINGS
In October 1998, the Bankruptcy Court approved the settlement of issues
arising out of an Internal Revenue Service ("IRS") audit examination of the
consolidated Federal income tax returns of Fairwood and its subsidiaries for the
periods ended July 11, 1988 through December 31, 1991. In the second quarter of
1999, payment of the Fairwood Group's estimated Federal tax liability was made
to the IRS. The tax payment, including estimated interest, was approximately
$4.8 million and was provided for in the financial statements in previous years.
As approved by the Bankruptcy Court, the settlement was funded by
additional borrowings under Consolidated Furniture's existing revolving credit
agreement, with any refund obtained returned to the lender under that facility.
The settlement significantly reduced Fairwood's available net operating loss
carry forwards.
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Fairwood is obligated to the extent of any adjustment by the IRS to the
interest component of the settlement and the state effect of this settlement. A
provision for additional interest of $1.9 million and taxes of $0.1 million, as
of December 31 1999 remains. The provision for interest and provision for taxes
are included in accrued interest and Federal and state income taxes,
respectively on the accompanying consolidated balance sheet. The Company has not
reached final settlement with all taxing authorities, therefore the amount of
the provisions are subject to change.
On October 4, 1994, Consolidated Furniture was served with a complaint
filed in U.S. District Court in Philadelphia by third party plaintiffs against
Consolidated Furniture and its former subsidiary, Sloane Blabon Corporation,
which engaged in the linoleum business, U.S. vs. Berks Associates, et al., Civ.
No. 91-4868, E.D. PA. The original complaint in the case was filed by the
Environmental Protection Agency against Berks Associates and others to recover
over $200 million from twelve defendants (not including Consolidated Furniture)
for costs incurred or to be incurred in connection with the investigation and
remediation of a Super Fund site in Douglasville, Pennsylvania. The original
defendants then sued over 600 third party defendants to share in the liability,
if any. Sloane Blabon is alleged to have disposed of benzine at the site from
1949 through May 1953, when Sloane Blabon sold its relevant assets to Congoleum
Corporation. During the period in question, Sloane Blabon disposed of
substantial quantities of benzine to Berks Associates at the Douglasville site.
However, Consolidated Furniture does not believe its disposals were toxic as
alleged. The damages sought from Sloane Blabon and Consolidated Furniture are
unspecified. On August 28, 1995 Consolidated Furniture joined with five other
Potentially Responsible Parties and made an offer of settlement to the EPA.
Consolidated Furniture's share of the offer is approximately $190,000. The EPA
has not rejected or accepted the offer.
On January 3, 1996, certain holders of the Fairwood public debentures (the
"Bondholders") filed an involuntary Chapter 7 case against Fairwood in the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court." Fairwood, Consolidated Furniture and certain affiliates
filed a motion in response to the involuntary filing seeking to dismiss the
petition. By order dated December 4, 1996, the Bankruptcy Court denied the
motion to dismiss the petition.
Thereafter, on December 26, 1996, Fairwood exercised its right to convert
the Chapter 7 case to a case under Chapter 11. As of the date hereof, Fairwood
continues to operate as a debtor in possession under Section 1108 of the
Bankruptcy Code. The Chapter 11 case pertains only to Fairwood Corporation.
Fairwood Corporation's direct and indirect subsidiaries, including Consolidated
Furniture Corporation, Furniture Comfort Corporation, as well as its operating
division, Barcalounger, are not parties to the bankruptcy. In April 1997 the
Bondholders' filed a Motion with the Bankruptcy Court seeking to convert
Fairwood's Chapter 11 case to a case under Chapter 7 or, alternatively, for the
appointment of a Chapter 11 trustee. By order dated March 2, 1999, the
Bondholders' motion to convert the case or, alternatively, for the appointment
of a Chapter 11 trustee, was denied in its entirety. On March 10, 2000, the
District Court entered an Order affirming the Bankruptcy Court's decision in all
respects. It is possible that the Bondholders will take a further appeal of the
District Court's ruling. Consolidated Furniture and subsidiaries are expecting
to continue to operate in the normal course of business. In the event that the
Bondholders do not take a further appeal of the District Court's order, Fairwood
expects to file a plan of reorganization in the near term.
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As of the date hereof, there are certain other legal proceedings pending,
which arise out of the normal course of the Companies' business, the financial
risk of which is not considered material in relation to the consolidated
financial position of Fairwood.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREOWNER
MATTERS
Fairwood's common stock is privately held, and therefore, no established
public trading market exists. At December 31, 1999 and 1998, there were three
shareowners of Fairwood's common stock. No dividends were declared on Fairwood's
common stock in 1999 and 1998. The ability of Fairwood to pay dividends and make
distributions in respect of its common stock is restricted by instruments
relating to Fairwood's debt. Furthermore, the ability of Consolidated Furniture
and its subsidiaries to transfer moneys to Fairwood (including without
limitation by dividend or distribution) is restricted by instruments relating to
Consolidated Furniture's and its subsidiaries' debt, including the Credit
Agreement. See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources" and Note 4
to Fairwood's Consolidated Financial Statements set forth in Item 8.
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ITEM 6. SELECTED FINANCIAL DATA
FAIRWOOD CORPORATION AND SUBSIDIARIES
Five-Year Summary of Consolidated Financial Data
(Dollar Amounts in Millions)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 100.1 154.2 148.1 151.3 176.8
Operating loss ( 9.6) ( 13.8) ( 20.6) ( 6.4) ( 11.8)
Interest expense, net ( 76.3) ( 71.7) ( 65.4) ( 61.2) ( 58.6)
Loss on sale of division ( 2.0) - - - -
Loss due to flood damage ( 0.5) - - - -
Net loss ( 88.3) ( 85.5) ( 86.1) ( 67.4) ( 70.7)
Total assets 23.3 56.2 56.8 46.6 54.1
Long-term debt, including
current maturities * 625.5 556.7 505.8 453.1 420.7
Redeemable preferred stock .1 .1 .1 .1 .1
</TABLE>
* - Does not include accrued interest for 1999, 1998, 1997, 1996 and 1995 of
$147.5, $118.5 million, $91.4 million, $64.4 million and $37.3 million,
respectively.
In 1999, operations data includes the activities of the Stratford Division
for the period from January 1 through June 3, 1999 (date of sale). Accordingly,
the data presented for 1999 is not comparable with 1998, 1997, 1996 and 1995.
For additional information, see the Company's Consolidated Financial
Statements included with this report, including Notes 3 and 11 thereto regarding
certain tax and liquidity matters.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES
Certain information in this annual report on Form 10-K, including but not
limited to the Management's Discussion and Analysis of Financial Condition and
Results of Operations, may constitute forward-looking statements as such term is
defined in Section 27A of the Securities Act of 1933 (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934. Certain forward-looking
statements can be identified by the use of forward-looking terminology such as,
"believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "estimated," or "anticipates" or the negative thereof or
other comparable terminology, or by discussions of strategy, plans or
intentions. Forward-looking statements involve risks and uncertainties, which
could cause actual results to be materially different than those in the
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company assumes no obligation to update such information.
1999 vs. 1998 Results of Operations
Consolidated net sales of approximately $100.1 million for 1999 decreased
35.1% from 1998 net sales of approximately $154.2 million, due primarily to the
sale of Stratford operations in 1999. Consolidated cost of sales decreased 36.5%
in 1999 to approximately $91.4 million, or 91.4% of net sales as compared to
$143.9 million, or 93.3% of net sales, in 1998. These sales and cost of sales
decreases were caused largely by the sale of Stratford.
On June 3, 1999, Furniture Comfort Corporation ("Furniture Comfort"
formerly Futorian Furnishings, Inc.), Consolidated Furniture's operating
subsidiary, sold substantially all of the assets of the Stratford Division for
approximately $14 million in cash plus the assumption of certain liabilities.
The proceeds from the sale were used to pay-down the revolving credit and term
loan. The sale included substantially all of the business and assets of the
Stratford Division, including its office and showroom in Bannockburn, Illinois
and the assignment of leases for certain other manufacturing and showroom
facilities. The final sales price for the net assets of Stratford Division was
subject to certain post-closing adjustments. As a result of this sale, Furniture
Comfort recognized a loss of approximately $2 million, which includes $1 million
for claims previously submitted by the purchaser of Stratford regarding
post-closing adjustments.
Net sales for 1999 by Barcalounger decreased 8.4% to approximately $50.1
million as compared to $54.7 million in 1998, principally due to lost sales from
the flood related closure at Barcalounger's Rocky Mount, North Carolina facility
partially offset by a 3.7% increase in average selling prices. The average
selling price increase is the result of the sale of products with more expensive
upper grade leather. Barcalounger continues to add to its product offerings of
higher-priced recliner and motion upholstered furniture through an emphasis on
more expensive leather and fabric coverings. Concurrent with these new
offerings, Barcalounger discontinued certain lower-priced products. This change
led to a sales mix which resulted in increases in average sales prices.
Barcalounger cost of sales decreased to 79.3% of net sales in 1999, as compared
to 80.4% in 1998. The decrease in cost of sales as a percentage of sales is
primarily the result of lower costs associated with certain raw materials.
Consolidated selling, administrative and general expenses decreased 24.5%
to approximately $18.2 million in 1999 from approximately $24.1 million in 1998.
The decrease was largely a result of the sale of Stratford. Selling,
administrative and general expenses of Barcalounger remained constant at $6.3
million for 1999 and 1998.
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On September 16, 1999, Barcalounger incurred substantial damage due to
floods caused by the heavy rains of Hurricane Floyd. The damage to inventory was
approximately $5.8 million. This amount includes the destruction of all finished
inventory, approximately 95% of work in process and approximately 50% of raw
materials. Lost sales of approximately $4 million resulted from the plant being
closed for approximately three weeks. Losses experienced by the Company were
largely offset by insurance proceeds. The net effect was a $0.5 million loss.
Consolidated interest expense increased 6.5% to $76.6 million from $71.9
million due primarily to additional borrowings under the Credit Agreement, as
discussed in Liquidity and Capital Resources.
Barcalounger pretax earnings decreased 15.9% to approximately $3.7 million
in 1999 from approximately $4.4 million in 1998. The decrease in pretax earnings
was due primarily to the lost sales from the flood related closure.
1998 vs. 1997 Results of Operations
Consolidated net sales of approximately $154.2 million for 1998 increased
4.1% from 1997 net sales of approximately $148.1 million, primarily due to
increased sales at Barcalounger.
Net sales (including intercompany sales) for 1998 by Stratford increased
.8% to approximately $101.6 million as compared to $100.6 million for 1997.
During 1998 and 1997 net sales by Stratford include $6.7 million and $11.2
million, respectively, of sales to Simmons Upholstered Furniture Corporation
("Simmons"), an affiliate of the Company. Excluding these sales, net sales by
Stratford increased 5.9% in 1998. Total volume, excluding frame and coil sales
which accounted for 7.8% of sales in 1998 and 10.6% in 1997, increased 3.6%,
while average selling prices remained approximately the same. Sales in 1998 to
Stratford's larger, national retail customers increased 32.6%, while sales to
smaller retail customers decreased 15.8%. These changes in sales were in large
part achieved through increased sales to value merchants and improved track
account business.
Net sales for 1998 by Barcalounger increased 10.1% to approximately $54.7
million as compared to $49.7 million for 1997. This increase in sales reflects
an increase of 5.4% in the number of pieces sold in 1998 versus 1997, and a 3.7%
increase in average selling prices. Barcalounger continues to add to its product
offerings of higher-priced recliner and motion upholstered furniture through an
emphasis on more expensive leather and fabric coverings. Concurrent with these
new offerings, Barcalounger discontinued certain lower-priced products. By
offering a finer, more exclusive product, Barcalounger was able to increase
sales in 1998 and 1997 with those retail furniture store customers who
specialize in higher-priced, better quality furniture. This change led to a
sales mix which resulted in increases in average prices.
Consolidated cost of sales increased 1.3% in 1998 to approximately $143.9
million, or 93.3% of net sales as compared to $142.0 million, or 95.9% of net
sales, in 1997. Stratford cost of sales, including intercompany sales, decreased
to 100.5% of net sales in 1998, as compared to 103.5% in 1997. Barcalounger cost
of sales decreased to 80.4% of net sales in 1998, as compared to 80.6% in 1997.
Stratford cost of sales as a percentage of sales decreased in 1998 because of
costs savings achieved from the movement of product lines from the Okolona
facility to the New Albany facility and improved sales mix.
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Consolidated selling, administrative and general expenses decreased 9.7%
to approximately $24.1 million in 1998 from approximately $26.7 million in 1997.
Stratford selling, administrative and general expenses decreased 12.5% to
approximately $16.1 million in 1998 from approximately $18.4 million in 1997.
The decrease in selling, administrative and general expenses was attributable to
cost reductions. Barcalounger selling, administrative and general expenses
increased 6.6% to approximately $6.3 million in 1998 from approximately $5.9
million in 1997.
Consolidated interest expense increased 9.8% to $71.9 million from $65.5
million due primarily to additional borrowings under the Credit Agreement, as
discussed in Liquidity and Capital Resources. Stratford interest expense
increased 66.7% to $3.0 million from $1.8 million due primarily to additional
borrowings under Furniture Comfort's Revolving credit and term loan agreement,
as discussed in Liquidity and Capital Resources.
Stratford pretax loss decreased 19.9% to approximately ($19.3) million in
1998 from approximately ($24.1) million in 1997. Barcalounger pretax earnings
increased 22.2% to approximately $4.4 million in 1998 from approximately $3.6
million in 1997.
Liquidity and Capital Resources
Capital requirements for operations during 1999 and 1998 were provided
primarily by borrowings under the revolving credit facility and operating cash
flows at Barcalounger.
Fairwood had a working capital deficit of approximately $(302.8) million
and $(294.1) million at December 31, 1999 and 1998, respectively. At December
31, 1999, Fairwood had long-term debt of approximately $625.5 million of which
$168.8 million was current. Long-term debt at December 31, 1998 was
approximately $556.7 million of which $168.8 million was current. Accrued
interest on long-term debt was $147.5 million at December 31, 1999 and $118.5
million at December 31, 1998. Accrued interest is classified as a current
liability.
In conjunction with Fairwood's acquisition by merger of Consolidated
Furniture on September 22, 1989, certain bridge loans were refinanced with loans
under a credit agreement with CSCL (the "Credit Agreement") and senior
subordinated pay-in-kind debentures due to CSCL. In exchange for the
approximately 6.85% of Consolidated Furniture common stock then outstanding,
Fairwood issued $33.5 million of subordinated pay-in-kind merger debentures and
918,170 warrants to purchase, in the aggregate, 142,900 shares of Fairwood's
Class A common stock. The exercise period for the warrants issued with the
merger debentures expired on September 22, 1995. The assets of Consolidated
Furniture and its subsidiaries are pledged as security for the amounts due under
the Credit Agreement. Certain instruments related to the Credit Agreement have
been amended and certain covenants therein have been waived at various times
through December 1999.
Throughout 1999, 1998 and 1997, Consolidated Furniture funded interest
obligations related to long-term indebtedness through increased borrowings from
CSCL. Increases in outstanding borrowings from CSCL under the Credit Agreement
during the years ended December 31, 1999, 1998 and 1997 were approximately $70.9
million, $51.1 million and $50.7 million, respectively. All outstanding debt and
accrued interest at December 31, 1999, excluding the $62.9 million of
outstanding merger debentures plus $55.8 million accrued interest thereon is
payable to CSCL, which is an indirect subsidiary of Citigroup and an affiliate
of CVCL. Consolidated Furniture has obtained an extension of the debt payable to
CSCL to January 2001. Interest on the revolving credit loan of Consolidated
- 12 -
<PAGE> 13
Furniture and its subsidiaries is payable quarterly at 1-1/2% above the
applicable prime rate, which prime rate was 8.50% at December 31, 1999. Interest
on the senior subordinated debentures of Consolidated Furniture is payable
semi-annually at 18%. Interest on the senior subordinated pay-in-kind debentures
and merger debentures of Fairwood is payable semi-annually at 15-1/2% and
16-7/8%, respectively.
Interest payments during the years ended December 31, 1999, 1998 and 1997
of approximately $48.1 million, $44.8 million and $38.5 million, respectively
were primarily made through increased borrowings under the revolving credit
agreement. Principal payments of approximately $.0 million, $.2 million and $.2
million were made during the years ended December 31, 1999, 1998 and 1997,
respectively.
Annual maturities on debt for the years ended December 31, 2000 and 2001
are approximately $168.8 million and $456.7 million, respectively. Interest
payments expected to be made through increased borrowings and cash from
operations for the years ended December 31, 2000, 2001 and 2002 are estimated to
be approximately $57.0 million, $63.3 million and $70.3 million.
On April 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 $141.9 million on the Fairwood
Debentures, which includes $86.1 million due to CSCL, is included in accrued
interest on the consolidated balance sheet as of December 31, 1999. See Note 4
to the accompanying Consolidated Financial Statements.
Based on the terms of the Fairwood Debentures, the failure to make the
interest payment 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 and all accrued interest would be due and payable. Accordingly, the
Fairwood Debentures totaling $168.8 million have been classified as current
liabilities in the accompanying Consolidated Financial Statements as of December
31, 1999.
Capital additions were approximately $0.5 million, $1.4 million and $3.0
million for the years 1999, 1998 and 1997, respectively. Barcalounger
anticipates making capital expenditures of approximately $0.3 million during
2000, primarily for the purpose of maintaining and upgrading their manufacturing
equipment, machinery and facilities. Barcalounger has no firm commitments for
the purchase of capital equipment or facilities. It is anticipated that
necessary capital expenditures will be funded through cash flow generated from
operations of Barcalounger or available credit facilities under the Consolidated
Furniture's Credit Agreement with CSCL. Consolidated Furniture and Furniture
Comfort intend to pursue other sources of financing to the extent available and
cost effective.
Consolidated Furniture, Furniture Comfort and the operating divisions are
dependent upon CSCL for funding of their debt service costs. Instruments
relating to the Credit Agreement and senior subordinated debentures have been
amended and certain provisions thereof waived at various times through December
1999 to provide more favorable terms to Consolidated Furniture and, in certain
instances, to avoid defaults thereunder. Under the Credit Agreement,
Consolidated Furniture and its subsidiaries are generally restricted from
transferring moneys to Fairwood (including without limitation by dividend or
distribution) with the exception of amounts for (a) specified administrative
expenses of the Company and (b) payment of income taxes. Furthermore,
- 13 -
<PAGE> 14
Consolidated Furniture is subject to additional restrictions on transferring
moneys to Fairwood (including without limitation by dividend or distribution)
under the indenture for its senior subordinated debentures, which generally
requires the satisfaction of certain financial conditions for such transfers.
Fairwood is subject to additional restrictions on payment or transfer of moneys
(including without limitation by dividend or distribution) under the indentures
for its senior subordinated pay-in-kind debentures and merger debentures, which
generally require the satisfaction of certain financial conditions for such
transfers.
Consolidated Furniture anticipates that funds provided by Barcalounger and
available credit facilities under the Credit Agreement will be available in 2000
to support the operations of Barcalounger. However, as discussed above, funds
provided by available credit facilities cannot be expected to be adequate to
make transfers to Fairwood for cash interest payments due in 2000 or thereafter
on the Fairwood senior subordinated pay-in-kind debentures and merger
debentures. Consolidated Furniture's obligations under the Credit Agreement are
collateralized by substantially all of the assets of Consolidated Furniture and
its subsidiaries.
On February 11, 1998, Furniture Comfort entered into a revolving credit
and term loan agreement with a domestic corporation which replaced its two
factoring agreements for Barcalounger and Stratford. The agreement provided for
an aggregate maximum commitment of $30,750,000 and expired in 2001. Pursuant to
the a revolving credit and term loan agreement, Furniture Comfort's accounts
receivable, inventory, property and equipment and other assets were pledged as
collateral. Furniture Comfort had an outstanding balance under the revolving
credit and term loan in the amount of $27.5 million at December 31, 1998. These
borrowings were repaid during June 1999 in conjunction with the sale of
substantially all of the assets of Stratford, a division of Furniture Comfort.
January 3, 1996, certain holders of the Fairwood public debentures (the
"Bondholders") filed an involuntary Chapter 7 petition against Fairwood in the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court.") Fairwood, Consolidated Furniture and certain Citicorp
affiliates filed a motion in response to the involuntary filing seeking to
dismiss the petition. By order dated December 4, 1996, the Bankruptcy Court
denied the motion to dismiss the petition.
Thereafter, on December 26, 1996, Fairwood exercised its right to convert
the Chapter 7 case to a case under Chapter 11. As of the date hereof, Fairwood
continues to operate as a debtor in possession under Section 1108 of the
Bankruptcy Code. The Chapter 11 case pertains only to Fairwood Corporation.
Fairwood Corporation's direct and indirect subsidiaries, including Consolidated
Furniture Corporation, Furniture Comfort Corporation, as well as its operating
division, Barcalounger, are not parties to the bankruptcy. In April 1997 the
Bondholders' filed a Motion with the Bankruptcy Court seeking to convert
Fairwood's Chapter 11 case to a case under Chapter 7 or, alternatively, for the
appointment of a Chapter 11 trustee. By order dated March 2, 1999, the
Bondholders' motion to convert the case or, alternatively, for the appointment
of a Chapter 11 trustee, was denied in its entirety. On March 10, 2000, the
District Court entered an Order affirming the Bankruptcy Court's decision in all
respects. It is possible that the Bondholders will take a further appeal of the
District Court's ruling. Consolidated Furniture and subsidiaries are expecting
to continue to operate in the normal course of business. In the event that the
Bondholders do not take a further appeal of the District Court's order, Fairwood
expects to file a plan of reorganization in the near term.
- 14 -
<PAGE> 15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Fairwood is exposed to risks related to fluctuations in interest rates on
the revolving credit facility and term loan agreement and the Credit Agreement.
Fairwood does not utilize interest rate swaps, forwards or option contracts on
foreign currencies or commodities, or other types of derivative instruments.
Fairwood has other borrowing facilities, however these have fixed interest
rates.
For fixed rate debt, changes in interest rates generally affect the fair
value of the underlying indebtedness, but not earnings or cash flows.
Conversely, for variable rate debt, changes in interest rates generally do not
impact fair value, but do affect future earnings and cash flows.
Assuming the amount outstanding under the Credit Agreement remains at
$376.8 million, the balance at December 31, 1999, each one percentage point
increase in the prime interest rate would result in an increase in interest
expense for the coming year of approximately $3.8 million. The fixed rate debt
includes the following (in thousands):
<TABLE>
<CAPTION>
Interest rate
Amount At December 31, 1999
<S> <C> <C>
Senior subordinated debentures, due 2001 $ 80,000 18%
Senior subordinated pay-in-kind
debentures, due 2001 105,853 15-1/2%
Merger debentures, due 2004 62,928 16-7/8%
-------
$248,781
</TABLE>
The fair value of the fixed rate debt, and changes in fair value due to
fluctuations in market rates cannot be reasonably estimated considering
Fairwood's ongoing financial difficulties. $185,853 of the fixed rate debt is
due to CSCL, and Fairwood plans to attempt to refinance, or negotiate an
extension of the debt payable to CSCL when due.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplementary data are filed as a
part of this report:
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1999 and 1998
Consolidated Statements of Operations for the Years ended December 31, 1999,
1998 and 1997
Consolidated Statements of Shareowner's Equity (Deficit) for the
Years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the Years ended December 31, 1999,
1998 and 1997
Notes to Consolidated Financial Statements
- 15 -
<PAGE> 16
Independent Auditors' Report
The Shareowners and Board of Directors
Fairwood Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Fairwood
Corporation and subsidiaries ("Fairwood") as of December 31, 1999 and 1998, and
the related consolidated statements of operations, shareowners' equity (deficit)
and cash flows for each of the years in the three-year period ended December 31,
1999. We also have audited the related financial statement schedule as listed in
the accompanying index for Item 14(a)2 on page 43. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Fairwood Corporation
and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
The accompanying consolidated financial statements have been prepared assuming
that Fairwood will continue as a going concern. As discussed in Notes 4 and 11
to the consolidated financial statements, Fairwood failed to make the required
interest payments on its senior subordinated pay-in-kind and merger debentures
when due in 1995, and all semi-annual interest payments due thereafter and does
not expect to be able to make such payments in the future. Also, as described in
notes 1 and 11, Fairwood continues to operate as a debtor in possession under
Section 1108 of the U.S. Bankruptcy Code. These matters raise substantial doubt
about the ability of Fairwood Corporation to continue as a going concern.
Management's plans in regard to these matters are described in Notes 1 and 11.
The consolidated financial statements and financial statement schedule do not
include any adjustments that might result from the outcome of this uncertainty.
KPMG LLP
Washington, DC
March 15, 2000,
except as to note 2 which is as of March 28, 2000
- 16 -
<PAGE> 17
<TABLE>
<CAPTION>
FAIRWOOD CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(In thousands except share and per share data)
Assets (note 4) 1999 1998
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,135 2,165
------- -------
Accounts and notes receivable
Trade 8,455 22,662
Notes receivable, affiliate (note 8) - 500
Due from affiliate (note 8) - 4,089
----- ------
8,455 27,251
Less allowance for discounts and doubtful accounts 325 1,317
------- -------
8,130 25,934
------- -------
Inventories (note 1) 6,841 14,666
Prepaid expenses and other current assets 166 610
------- -------
Total current assets 20,272 43,375
------- -------
Property, plant and equipment, at cost:
Land 31 84
Buildings and improvements 4,925 13,456
Machinery and equipment 2,132 16,633
Leasehold improvements 972 2,696
Construction in progress 67 5
------- -------
8,127 32,874
Less accumulated depreciation and amortization 5,185 20,380
------- -------
2,942 12,494
Other assets 125 337
------- -------
$ 23,339 56,206
======= =======
<CAPTION>
Liabilities and Shareowners' equity (deficit) 1999 1998
--------------------------------------------- ---- ----
<C> <C> <C>
Current liabilities:
Revolving credit and term loan $ - 27,480
Overdraft - 2,212
Current maturities of long-term debt (notes 4 and 11):
Senior subordinated pay-in-kind debentures 105,853 105,853
Merger debentures 62,928 62,928
Other - 45
Accrued interest (notes 3 and 4) 147,490 118,462
Accounts payable:
Trade 1,884 5,760
Other 1,131 1,332
Accrued expenses 3,611 8,389
Federal and state income taxes 133 5,027
------- -------
Total current liabilities 323,030 337,488
------- -------
Long-term debt, less current maturities (notes 4 and 11):
Revolving credit 376,768 305,855
Senior subordinated debentures 80,000 80,000
Mortgage payable - 2,006
------- -------
456,768 387,861
------- -------
Other liabilities (note 7) 2,771 72
------- -------
Redeemable preferred stock (note 5):
Par value $.01 per share, authorized 100,000 shares:
Junior preferred, cumulative, issued and outsta
1,000 shares. Liquidation value $100 per share,
before accrued dividends. 100 100
------- -------
Shareowners' equity (deficit):
Common stock, par value $.01 per share (notes 4 and 6):
Class A voting, authorized 3,000,000 shares; issued
and outstanding 500 shares. - -
Class B non-voting, authorized 3,000,000 shares;
issued and outstanding 999,800 shares. 10 10
Additional paid-in capital 55,938 55,938
Minimum pension liability (note 7) ( 1,644) ( 27)
Accumulated deficit (813,634) (725,236)
------- -------
(759,330) (669,315)
------- -------
Commitments and contingencies (notes 1, 3, 4, 7,
8, 9, 10 and 11)
$ 23,339 56,206
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
- 17 -
<PAGE> 18
FAIRWOOD CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Net sales (notes 2 and 8) $ 100,072 154,174 148,113
------- ------- -------
Cost of sales (notes 2 and 8) 91,420 143,885 142,024
Selling, administrative and
general expenses (notes 2 and 8) 18,224 24,110 26,705
------- ------- -------
109,644 167,995 168,729
------- ------- -------
Operating loss ( 9,572) ( 13,821) ( 20,616)
Interest income 295 150 111
Interest on indebtedness (note 4) ( 76,591) ( 71,863) ( 65,547)
Loss on sale of Stratford Division (note 2) ( 2,013) - -
Loss due to flood damage (note 12) ( 461) - -
Other income (expenses), net 42 29 ( 72)
------- ------- -------
Loss before income taxes ( 88,300) ( 85,505) ( 86,124)
Provision for income
taxes (note 3) - - -
------- ------- -------
Net loss $( 88,300) ( 85,505) ( 86,124)
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
- 18 -
<PAGE> 19
FAIRWOOD CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareowners' Equity (Deficit)
Years Ended December 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Common stock Additional
------------ Paid-in Comprehensive Accumulated
Class A Class B Capital Income deficit
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ - 10 55,938 (553,457)
Comprehensive loss
Net loss ( 86,124) ( 86,124)
Other comprehensive income, net of tax
Adjustment to minimum
pension liability 186
-------
Comprehensive loss ( 85,938)
=======
Preferred stock dividends ( 69)
------- ------- ------- -------
Balance, December 31, 1997 $ - 10 55,938 (639,650)
Comprehensive loss
Net loss ( 85,505) ( 85,505)
Other comprehensive income, net of tax
Adjustment to minimum
pension liability (note 7) 326
-------
Comprehensive loss ( 85,179)
=======
Preferred stock dividends ( 81)
------- ------- ------- -------
Balance, December 31, 1998 $ - 10 55,938 (725,236)
Comprehensive loss
Net loss ( 88,300) ( 88,300)
Other comprehensive income, net of tax
Adjustment to minimum
pension liability (note 7) ( 1,617)
-------
Comprehensive loss ( 89,917)
=======
Preferred stock dividends ( 98)
------- ------- ------- -------
Balance, December 31, 1999 $ - 10 55,938 (813,634)
======= ======= ======= =======
<CAPTION>
Accumulated
Other
Comprehensive Shareowners'
Income Equity
(Loss) (Deficit)
------ ---------
<S> <C> <C>
Balance, January 1, 1997 ( 539) (498,048)
Comprehensive loss
Net loss ( 86,124)
Other comprehensive income, net of tax
Adjustment to minimum
pension liability 186 186
Comprehensive loss
Preferred stock dividends ( 69)
------- -------
Balance, December 31, 1997 ( 353) (584,055)
Comprehensive loss
Net loss ( 85,505)
Other comprehensive income, net of tax
Adjustment to minimum
pension liability (note 7) 326 326
Comprehensive loss
Preferred stock dividends ( 81)
------- -------
Balance, December 31, 1998 ( 27) (669,315)
Comprehensive loss
Net loss ( 88,300)
Other comprehensive income, net of tax
Adjustment to minimum
pension liability (note 7) ( 1,617) ( 1,617)
Comprehensive loss
Preferred stock dividends ( 98)
------- -------
Balance, December 31, 1999 ( 1,644) (759,330)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
- 19 -
<PAGE> 20
FAIRWOOD CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss (88,300) (85,505) (86,124)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,171 1,870 1,886
Loss (gain) on sale of property and equipment - ( 13) 361
Loss on sale of Stratford Division 2,013 - -
Changes in assets and liabilities:
Accounts receivable 4,907 ( 63) ( 846)
Inventories ( 1,043) ( 716) ( 325)
Prepaid expenses and other current assets 398 115 564
Accounts payable 4,234 ( 4,045) 1,151
Accrued interest and expenses 28,356 26,380 29,376
Federal and state income taxes ( 4,894) - ( 24)
Other, net 1,215 ( 158) ( 193)
------ ------- ------
Cash used in operating activities (51,943) (62,135) (54,174)
------ ------ ------
Cash flows from investing activities:
Proceeds from sale of Stratford Division 13,690 - -
Repayment by (advance to) affiliate 500 - ( 500)
Proceeds from disposition of property,
plant and equipment - 21 87
Purchases of property and equipment ( 480) ( 1,371) ( 3,010)
------- ------ -----
Cash provided by (used in) investing activities 13,710 ( 1,350) ( 3,423)
------- ------ ------
Cash flows from financing activities:
Proceeds from long-term debt 70,913 51,141 52,817
Proceeds (repayments) - note payable, net ( 27,480) 27,480 -
Overdraft ( 2,212) 2,212 ( 715)
Proceeds (repayments) from sale of receivables
to (from) Factor, net - (15,554) 5,851
Repayment of long-term debt ( 18) ( 234) ( 180)
-------- ------ ------
Cash provided by financing activities 41,203 65,045 57,773
------- ------- -------
Increase in cash and cash equivalents 2,970 1,560 176
Cash and cash equivalents:
Beginning of period 2,165 605 429
------- ------- -------
End of period $ 5,135 2,165 605
======= ======= =======
Supplemental schedule of cash flow information
- ----------------------------------------------
Cash paid during year for:
Interest $ 52,495 44,837 38,516
Income taxes 350 - -
Adjustment to minimum pension liability 1,617 ( 326) ( 186)
</TABLE>
See accompanying notes to consolidated financial statements.
- 20 -
<PAGE> 21
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies and Description of
Business
Principles of Consolidation and Description of Business
The consolidated financial statements represent a consolidation of
the financial statements of Fairwood Corporation ("Fairwood" or the "Company"),
and Consolidated Furniture Corporation ("Consolidated Furniture") and all of its
subsidiaries. All significant intercompany balances, transactions and profits
have been eliminated in consolidation.
Through its wholly-owned subsidiary, Consolidated Furniture and
Consolidated Furniture's wholly-owned subsidiary Furniture Comfort Corporation
("Furniture Comfort" formerly Futorian Furnishings, Inc.), the Company
manufactures and sells higher-priced upholstered motion furniture mainly to
furniture and department stores that carry more expensive products. The products
are sold nationally under the brand name Barcalounger, mainly through a
commissioned sales force.
As further described in note 11, Fairwood is currently operating as
debtor in possession under Section 1108 of the United States Bankruptcy Code.
The Chapter 11 case pertains only to Fairwood Corporation.
Inventories
All inventories (comprised of materials, labor and overhead costs)
are valued at the lower of cost or market using the last-in, first-out (LIFO)
method. In 1998 the Company had a LIFO liquidation of $121,000.
The components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Raw materials $ 4,486 10,740
In process 2,144 3,054
Finished goods 1,612 8,579
------ ------
Inventories at first-in, first-out 8,242 22,373
LIFO reserve 1,401 7,707
------ ------
Inventories at LIFO $ 6,841 14,666
====== ======
</TABLE>
Property, Plant and Equipment
Depreciation and amortization of property, plant and equipment is
provided on a straight-line basis over the estimated useful lives as follows:
buildings 45 years; machinery and equipment 7 to 10 years; and leasehold
improvements over the shorter of the term of related leases or 10 years.
Revenue Recognition
Revenue is recognized when title to furniture passes to the customer.
The Company provides an allowance for estimated future customer returns under
the warranty terms of sale.
- 21 -
<PAGE> 22
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies and Description of
Business (continued)
Statements of Cash Flows
Cash and cash equivalents include cash in banks and highly liquid
short-term investments having a maturity of three months or less on the date of
purchase.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting amounts
of existing assets and liabilities and their respective tax bases at each
year-end. Deferred tax assets and liabilities are measured using enacted tax
rates and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established when
necessary to reduce the deferred tax asset to the amount expected to be
realized. Income tax expense is the amount payable for the year and the change
during the period in deferred tax assets and liabilities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Impairment of Long-Lived Assets
The Company reviews all long-lived assets to be held and used in the
business for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset or a group of assets may not be
recoverable. The Company considers a history of operating losses to be its
primary indicator of potential impairment. Assets are grouped and evaluated for
impairment at the lowest level for which there are identifiable cash flows that
are largely independent of the cash flows of other groups of assets.
- 22 -
<PAGE> 23
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies and Description of
Business (continued)
Impairment of Long-Lived Assets (continued)
The Company deems an asset to be impaired if a forecast of
undiscounted future operating cash flows directly related to the asset,
including disposal value, if any, is less than its carrying amount. If an asset
is determined to be impaired, the loss is measured as the amount by which the
carrying amount of the asset exceeds its fair value. Fair value is based on
quoted market prices in active markets, if available. If quoted market prices
are not available, an estimate of fair value is based on the best information
available, including prices for similar assets or the results of valuation
techniques such as discounting estimated future cash flows as if the decision to
continue to use the impaired asset was a new investment decision. The Company
generally measures fair value using industry knowledge, price quotes, when
attainable, and other factors relevant to determine recoverability. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
cost to sell. Considerable management judgment is necessary to estimate the fair
value. Accordingly, actual results could vary significantly from such estimates.
Comprehensive Income
Comprehensive income of Fairwood consists of an additional pension
liability and net loss. The Statement requires only additional disclosures in
the consolidated financial statements; it does not affect the Company's
financial position or results of operations.
(2) Divestiture
On June 3, 1999, Furniture Comfort Corporation ("Furniture Comfort"
formerly Futorian Furnishings, Inc.), Consolidated Furniture's operating
subsidiary, sold substantially all of the assets of the Stratford Division for
approximately $14 million in cash plus the assumption of certain liabilities.
The proceeds from the sale were used to pay-down the revolving credit and term
loan. The sale included substantially all of the business and assets of the
Stratford Division, including its office and showroom in Bannockburn, Illinois
and the assignment of leases for certain other manufacturing and showroom
facilities. The final sales price for the net assets of Stratford Division was
subject to certain post-closing adjustments. As a result of this sale, Furniture
Comfort recognized a loss of approximately $2 million, which includes $1 million
for claims previously submitted by the purchaser of Stratford regarding
post-closing adjustments.
- 23 -
<PAGE> 24
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Income Taxes
No income taxes have been provided in the accompanying statements of
operations because the Company is in a net operating loss carryforward position.
In October 1998, the United States Bankruptcy Court (the "Bankruptcy
Court") approved the settlement of issues arising out of an Internal Revenue
Service ("IRS") audit examination of the consolidated Federal income tax returns
of Fairwood and its subsidiaries for the periods ended July 11, 1988 through
December 31, 1991. In the second quarter of 1999, payment of the Fairwood
Group's estimated Federal tax liability was made to the IRS. The tax payment,
including estimated interest, was approximately $4.5 million and was provided
for in the financial statements in previous years.
As approved by the Bankruptcy Court, the settlement was funded by
additional borrowings under Consolidated Furniture's existing revolving credit
agreement, with any refund obtained returned to the lender under that facility.
The settlement significantly reduced Fairwood's available net operating loss
carryforwards.
Fairwood is obligated to the extent of any adjustment by the IRS to
the interest component of the settlement and the state tax effect of this
settlement. An accrual for additional interest of $1.9 million and taxes of $0.1
million remains at December 31, 1999. These accruals for interest and taxes are
included in accrued interest and Federal and state income taxes, respectively on
the accompanying consolidated balance sheet. The Company has not reached final
settlement with all taxing authorities, therefore the amount of the accruals are
subject to change.
A reconciliation of the provision for income taxes included in the
statements of operations and the amount computed by applying the U.S. Federal
income tax rate, in thousands, is summarized below:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Expected tax benefit computed
at U.S. rate $ (30,022) (29,072) (29,282)
Increase in valuation
allowance 28,882 27,847 32,902
State taxes, net of
Federal benefit ( 3,005) ( 3,370) ( 3,411)
Nondeductible interest 4,213 4,213 -
Other ( 68) 382 ( 209)
------ ------ ------
Total provision for income taxes $ - - -
====== ====== ======
</TABLE>
- 24 -
<PAGE> 25
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Income Taxes (continued)
The tax effects of temporary differences as of December 31, in
thousands, are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $139,355 109,496
AMT credit carryforward 1,480 1,480
Accounts receivable 123 522
Vacation and holiday pay 87 333
Accrued expenses 910 2,133
Interest on merger debentures 2,688 3,444
Valuation allowance (144,333) (115,451)
------- -------
$ 310 1,957
======= =======
Deferred tax liabilities:
Property, plant and equipment $ 310 1,957
======= =======
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1999
and 1998 was $115,451,000 and $126,403,000, respectively. The net changes in the
total valuation allowance for the years ended December 31, 1999 and 1998 was an
increase of $28,882,000 and a decrease of $10,952,000, respectively.
At December 31, 1999, the Company's net operating loss carryforwards
of approximately $367,111,000 expire in various years through 2019.
Due to certain changes in the ownership structure of Fairwood's
shareholders', Fairwood's net operating losses and other tax attributes may be
further limited by the Internal Revenue Code (Code) Sections 382 and 383.
(4) Long-term Debt
In conjunction with Fairwood's acquisition by merger of Consolidated
Furniture on September 22, 1989, certain bridge loans were refinanced with loans
under a revolving credit agreement with Court Square Capital Limited ("CSCL"),
an affiliated company, (the "Credit Agreement") and senior subordinated
pay-in-kind debentures due to CSCL. The assets of Consolidated Furniture and its
subsidiaries are pledged as security for the amounts due under the Credit
Agreement. Certain instruments related to the Credit Agreement have been amended
and certain covenants therein have been waived at various times through December
1999.
- 25 -
<PAGE> 26
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Long-term Debt (continued)
The outstanding debt at December 31, was as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1999
Interest
Debt 1999 1998 Rates
---- -------- -------- -------
<S> <C> <C> <C>
Revolving credit, due 2001 $376,768 305,855 10%
Senior subordinated debentures, due 2001 80,000 80,000 18%
Senior subordinated pay-
in-kind debentures, due 2001 105,853 105,853 15-1/2%
Merger debentures, due 2004 62,928 62,928 16-7/8%
Mortgage payable, due 2017 - 2,051 8-1/2%
------- -------
625,549 556,687
Less current maturities 168,781 168,826
------- -------
$456,768 387,861
======= =======
</TABLE>
All outstanding debt and accrued interest at December 31, 1999,
excluding the $62.9 million of outstanding merger debentures plus $55.8 million
accrued interest thereon, is payable to CSCL.
On April 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 $141.9 million on the
Fairwood Debentures, which includes $86.1 million due to CSCL, is included in
accrued interest in the accompanying consolidated balance sheet as of December
31, 1999.
Based on the terms of the Fairwood Debentures, the failure to make
the April 1, 1995 and subsequent period interest payments constitute 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 and all accrued interest would be due
and payable. Accordingly, the Fairwood Debentures have been classified as
current liabilities in the accompanying consolidated balance sheets.
The fair market value of the debentures and revolving credit debt
cannot be reasonably estimated considering Fairwood's ongoing financial
difficulties (Note 11).
- 26 -
<PAGE> 27
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Long-term Debt (continued)
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Years ending December 31, Amount
------------------------- ------
<S> <C> <C>
2000 $168,781
2001 456,768
--------
625,549
Less current portion 168,781
--------
$456,768
========
</TABLE>
In January 1999, Consolidated Furniture entered into the Eighth
Amendment to the Senior Subordinated Debentures due January 4, 1999, which
extended the due date to January 3, 2000. In December 1999, Consolidated
Furniture entered into the Ninth Amendment to the Senior Subordinated Debentures
due January 3, 2000, which extended the due date to January 2, 2001.
In April 1999, Consolidated Furniture entered into the Twenty-fourth
Amendment to the Credit Agreement, which changed various covenants and increased
the amount of the Revolving Credit Commitment to $366,000,000. In September
1999, Consolidated Furniture entered into the Twenty-fifth Amendment to the
Credit Agreement, which changed various covenants and increased the amount of
the Revolving Credit Commitment to $380,000,000. In December 1999, Consolidated
Furniture entered into the Twenty-sixth Amendment to the Credit Agreement, which
changed various covenants and increased the amount of the Revolving Credit
Commitment to $435,000,000. The interest rate under the Credit Agreement is
prime plus 1.5 percent, which averaged approximately 9.50 percent for 1999.
Substantially all of Fairwood's debt instruments restrict the payment
of dividends, and the Credit Agreement with CSCL relating to Consolidated
Furniture's revolving credit facility, contains certain financial covenant
tests. Fairwood plans to attempt to refinance, or negotiate an extension of, the
debt payable to CSCL when due.
(5) Redeemable Preferred Stock
The Company issued 1,000 shares of junior preferred stock, par value
$.01 per share, for $100,000, which shares are held by CSCL. Dividends accrue at
$18 per share annually. As of December 31, 1999 and 1998, dividends payable were
approximately $505,000 and $407,000, respectively, and were included in accounts
payable in the accompanying consolidated balance sheets.
- 27 -
<PAGE> 28
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Common Stock
Holders of Class A common stock are entitled to convert their shares
to an equal number of shares of Class B common stock and holders of Class B
common stock are entitled to convert their shares to an equal number of shares
of Class A common stock.
(7) Employee Benefit Plans
All salaried employees, excluding certain key executives, and hourly
paid employees of Fairwood with one year of service were covered by
non-contributory defined benefit retirement plans through May 31, 1993, at which
time further benefit accruals ceased and the plans were "frozen." Benefits for
the plans are determined based on length of service and certain average annual
employee earnings. The cost of the retirement plans is accrued annually; funding
is in accordance with actuarial requirements of the plans, subject to the
Employee Retirement Income Security Act of 1974, as amended.
Information with respect to the retirement plans for 1999 and 1998
has been determined by consulting actuaries. The following table sets forth the
plans' funded status at December 31, and reconciles amounts recognized in the
consolidated balance sheets at December 31, (in thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Change in benefit obligations:
Benefit obligation at beginning of year $ 4,846 16,901
Interest cost 379 1,131
Actuarial gain ( 196) ( 921)
Monthly benefits paid ( 102) ( 521)
Lump sum distributions ( 3,504) ( 4,416)
Annuity purchase - ( 7,892)
Loss recognized due to plan settlement 1,736 564
------ ------
Benefit obligation at end of year 3,159 4,846
------ ------
Change in plan assets:
Fair value of plan assets at beginning of year 5,004 14,280
Actual return on plan assets ( 276) 3,350
Employer contributions 92 813
Benefits paid, distributions and annuity purchase ( 3,606) (12,829)
Expenses ( 804) ( 610)
------ ------
Fair value of plan assets at end of year 410 5,004
------ ------
Funded status ( 2,749) 158
Unrecognized actuarial (gain) loss 1,644 ( 176)
------ ------
Net amount recognized $( 1,105) ( 18)
====== ======
Amounts recognized in the consolidated balance
sheet consist of:
Accrued benefit liability ( 2,749) ( 45)
Accumulated other comprehensive income 1,644 27
------- ------
Net amount recognized $ ( 1,105) ( 18)
====== ======
</TABLE>
- 28 -
<PAGE> 29
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Employee Benefit Plans (continued)
Pension expense is summarized, in thousands, as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Components of net periodic benefit cost
Current service cost $ - - -
Interest cost 379 1,131 1,111
Expected return on assets ( 450) (2,739) (2,546)
Amorization of deferred gain (loss) 14 1,455 1,442
----- ----- -----
Net periodic benefit cost (gain) ( 57) ( 153) 7
Income (loss) recognized due
to plan settlement (1,236) 294 -
----- ----- -----
Net pension (income) expense $ 1,179 ( 447) 7
====== ===== =====
Assumptions:
Discount rate 8.00% 6.85% 7.00%
Expected long-term rate of return on assets 9.00% 9.00% 9.00%
Pay increase N/A N/A N/A
Cost of living 3.00% 3.00% 3.00%
</TABLE>
During 1999 and 1998 Fairwood directed the plan to pay lump sum
distributions to settle a portion of Fairwood's obligation under the plans. As a
result of the settlements, Fairwood recognized a loss of $1,736,000 and
$564,000, respectively. Furthermore, on December 29, 1998 Fairwood purchased an
annuity contract settling an additional $7,892,000 of the accumulated pension
benefit obligation. The discount rate for 1998 was reduced to reflect the actual
price of this purchased annuity contract.
Effective June 1, 1993, the following defined contribution plans were
adopted by the Company's operating companies:
Barcalounger Retirement Plan
This non-contributory plan is designed to provide income at
retirement and covers all Barcalounger employees with at least one year of
service. Annual company contributions are based on individual participant's
earnings and length of service. For the years ended December 31, 1999, 1998 and
1997, Barcalounger contributions were $154,000, $144,000 and $140,000,
respectively.
- 29 -
<PAGE> 30
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Employee Benefit Plans (continued)
Barcalounger Savings Plan
This plan is designed to provide a savings vehicle for Barcalounger
employees with at least one year of service who may elect to participate by
saving on a before-tax and/or after-tax basis in one or more of four investment
funds. Annual company contributions match 25% of participants' contributions of
up to four percent of earnings. For the years ended December 31, 1999, 1998 and
1997, Barcalounger matching contributions were $56,000, $54,000 and $47,000,
respectively.
Barcalounger Executive Deferred Compensation Plan
An Executive Deferred Compensation Plan effective August 1, 1999, was
established by Barcalounger, to provide certain of its designated executives
with an additional method of planning for their retirement. In addition, the
Plan serves as an incentive for them to promote the success of the Company and
to encourage them to maintain their employment relationships with the Company.
The Plan is intended to be unfunded and amounts of contributions shall be
determined at the sole discretion of the Board of Directors of Furniture
Comfort. For the year ended December 31, 1999, Barcalounger designated
contributions of $80,000 to the plan.
Stratford Retirement Plan
This non-contributory plan is designed to provide income at
retirement and covers all Stratford employees with at least one year of service.
Annual company contributions are based on individual participant's earnings and
length of service. For the years ended December 31, 1999, 1998 and 1997
Stratford contributions were $0, $600,000 and $585,000, respectively.
Consolidated Furniture also sponsors an investment plan. This
investment plan is a defined contribution plan covering all employees of
Consolidated Furniture and its subsidiaries, who have a minimum of one year of
service. For the years ended December 31, 1999, 1998 and 1997, Consolidated
Furniture contributions were $2,000, $2,000 and $2,000, respectively.
- 30 -
<PAGE> 31
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Related party transactions
Through June 3, 1999, (see note 2) Stratford provided new product
development and selling activities to Simmons, an affiliate. As a result of this
Agreement, Stratford recognized approximately $14 million and $7 million of
revenue in 1999 and 1998, respectively, from the manufacture and supply of
product and was reimbursed by Simmons approximately $250,000 and $600,000 for
new product development and approximately $1.2 million and $2.7 million,
respectively, for selling expenses. The new product development and selling
expense reimbursements are recognized as a reduction to selling, administrative
and general expenses in the accompanying consolidated statements of operations.
Also, in 1999 and 1998, Stratford recognized as a reduction in general and
administrative expenses, approximately $1.4 million and $2.2 million of
reimbursements for general and administrative expenses. The revenues and related
cost for the manufacture and supply of product are included in net sales and
cost of sales, respectively, in the accompanying consolidated statements of
operations. At December 31, 1998, approximately $4,089,000 was due from Simmons
under this Agreement. Under a separate agreement, Simmons owed Stratford
$500,000 at December 31, 1998, which was repaid in 1999.
(9) Rental Commitments
The Company and its subsidiaries lease certain manufacturing,
showroom and warehousing facilities under various operating leases.
Future minimum lease payments at December 31, 1999 under all
non-cancelable operating leases are as follows (In thousands):
<TABLE>
<CAPTION>
Years ending December 31, Amount
------------------------- ------
<S> <C>
2000 $290
2001 142
2002 142
2003 142
2004 142
----
$858
====
</TABLE>
It is expected that, in the normal course of business, non-cancelable
leases that expire will be renewed or replaced.
- 31 -
<PAGE> 32
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Rental Commitments (continued)
Rental expense is summarized, in thousands, as follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1999 1998 1997
-------- -------- ------
<S> <C> <C> <C>
Minimum Rentals
(including cancel-
able leases) $ 991 1,998 2,227
Sublease rentals ( 109) ( 262) ( 254)
------ ------ ------
$ 882 1,736 1,973
====== ====== ======
</TABLE>
(10) Contingencies
Consolidated Furniture was served a complaint by third party
plaintiffs against Consolidated Furniture and a former subsidiary. The original
complaint in the case was filed by the Environmental Protection Agency to
recover over $200 million from 12 defendants (not including Consolidated
Furniture), for costs incurred in connection with the investigation and
remediation of a Super Fund site. On August 28, 1995, Consolidated Furniture
joined with 5 other Potentially Responsible Parties and made an offer of
settlement to the EPA. Consolidated Furniture's share of the offer is
approximately $190,000. The EPA has not rejected or accepted the offer.
There are other contingent liabilities at December 31, 1999
consisting of purchase commitments and legal proceedings arising in the ordinary
course of business including environmental litigation. Fairwood believes that
the financial risk involved in connection with all other contingent liabilities,
except as otherwise disclosed in these consolidated financial statements, is not
material in relation to the consolidated financial position of the Company.
(11) Liquidity
As discussed in Note 4, interest on Fairwood's senior subordinated
pay-in-kind debentures and merger debentures was not paid on April 1, 1995 and
each semi-annual interest payment date thereafter and Fairwood does not expect
to make the cash interest payments required under the Fairwood Debentures on any
future semi-annual interest payment date. Fairwood has substantially no assets
other than the common stock of Consolidated Furniture, and Consolidated
Furniture and its primary operating subsidiary have pledged substantially all of
their assets to collateralize their obligations under the Credit Agreement.
Furthermore, the ability of Consolidated Furniture and its subsidiaries to
transfer moneys to Fairwood (including without limitation by dividend or
distribution) is restricted by instruments relating to Consolidated Furniture's
and its subsidiaries' debt, including the Credit Agreement. Certain instruments
related to the Credit Agreement have been amended at various times through
December 1999.
- 32 -
<PAGE> 33
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Liquidity (continued)
Throughout portions of 1999, 1998, and 1997, Consolidated Furniture
did not generate sufficient funds from operations to fully meet its interest
obligations related to its long-term indebtedness. During this period,
Consolidated Furniture funded its interest obligations under the Credit
Agreement through increased borrowings from CSCL under such Agreement.
Consolidated Furniture is dependent upon Court Square Capital Limited
("CSCL") for funding of its debt service costs. Instruments relating to the
revolving credit facility and senior subordinated debentures have been amended
and certain provisions thereof waived at various times through December 1999 to
provide more favorable terms to Consolidated Furniture and, in certain
instances, to avoid defaults thereunder. Under the Credit Agreement,
Consolidated Furniture and its subsidiaries are generally restricted from
transferring moneys to Fairwood (including without limitation by dividend or
distribution) with the exception of amounts for (a) specified administrative
expenses of the Company and (b) payment of income taxes. Furthermore,
Consolidated Furniture is subject to additional restrictions on transferring
moneys to Fairwood (including without limitation by dividend or distribution)
under the indenture for its senior subordinated debentures, which generally
requires the satisfaction of certain financial conditions for such transfers.
Fairwood is subject to additional restrictions on payment or transfer of moneys
(including without limitation by dividend or distribution) under the indentures
for its senior subordinated pay-in-kind debentures and merger debentures, which
generally require the satisfaction of certain financial conditions for such
transfers.
However, cash flows from Barcalounger and its parent companies,
Furniture Comfort and Consolidated Furniture, will not be sufficient to permit
the Company to make cash interest payments on Fairwood's senior subordinated
pay-in-kind debentures and merger debentures. Consolidated Furniture's credit
facilities do not permit it to borrow funds to enable Fairwood to make cash
interest payments on the senior subordinated pay-in-kind debentures and merger
debentures. Accordingly, since Fairwood has failed to make the interest payments
required since 1995, see note 4, and is expected to fail to make any future cash
interest payments, the Fairwood Debentures have been classified as current.
Based on the terms of the Fairwood Debentures, the failure to make the April 1,
1995 and subsequent period interest payment 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 and all accrued interest would be due and
payable.
- 33 -
<PAGE> 34
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Liquidity (continued)
On January 3, 1996, certain holders of the Fairwood public debentures
(the "Bondholders") filed an involuntary Chapter 7 petition against Fairwood in
the United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court.") Fairwood, Consolidated Furniture and certain Citicorp
affiliates filed a motion in response to the involuntary filing seeking to
dismiss the petition. By order dated December 4, 1996, the Bankruptcy Court
denied the motion to dismiss the petition.
Thereafter, on December 26, 1996, Fairwood exercised its right to
convert the Chapter 7 case to a case under Chapter 11. As of the date hereof,
Fairwood continues to operate as a debtor in possession under Section 1108 of
the Bankruptcy Code. The Chapter 11 case pertains only to Fairwood Corporation.
Fairwood Corporation's direct and indirect subsidiaries, including Consolidated
Furniture Corporation, Furniture Comfort Corporation, as well as its operating
division, Barcalounger, are not parties to the bankruptcy. In April 1997, the
Bondholders' filed a Motion with the Bankruptcy Court seeking to convert
Fairwood's Chapter 11 case to a case under Chapter 7 or, alternatively, for the
appointment of a Chapter 11 trustee. By order dated March 2, 1999, the
Bondholders' motion to convert the case or, alternatively, for the appointment
of a Chapter 11 trustee, was denied in its entirety. On March 10, 2000, the
District Court entered an Order affirming the Bankruptcy Court's decision in all
respects. It is possible that the Bondholders will take a further appeal of the
District Court's ruling. Consolidated Furniture and subsidiaries are expecting
to continue to operate in the normal course of business. In the event that the
Bondholders do not take a further appeal of the District Court's order, Fairwood
expects to file a plan of reorganization in the near term.
(12) Flood damage
In September 1999, Barcalounger Division, the only remaining
operating division of Furniture Comfort, incurred substantial damage due to
floods caused by the heavy rains of Hurricane Floyd. The damage to inventory was
approximately $5.8 million. This amount includes the destruction of all finished
inventory, approximately 95% of work in process and approximately 50% of raw
materials. Barcalounger lost sales as a result of its Rocky Mount, North
Carolina plant being closed for approximately three weeks. Losses experienced by
the Company were largely offset by insurance proceeds. The net effect was a $0.5
million loss.
- 34 -
<PAGE> 35
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Segment Reporting
In June 1997, the Financial Accounting Standard Board issued
Statement of Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosure
about Segments of an Enterprise and Related Information." SFAS No. 131 requires
Fairwood to present certain information about each identified segment that
exceeds certain quantitative thresholds for revenue, profit or loss, and assets.
Prior to the sale of Stratford, Fairwood's reportable segments were
strategic business units that offer different products. They were managed
separately because each business had distinctly different markets and they had
separate marketing and manufacturing facilities.
Stratford Division:
On June 3, 1999, Furniture Comfort sold substantially all of the
assets of the Stratford Division for approximately $14 million in cash plus the
assumption of certain liabilities (see note 2). Stratford had targeted a broad
market for it mid-priced recliner, motion and stationary upholstered furniture.
Stratford sold mainly to large national retail furniture and department stores
and has strong brand recognition.
Barcalounger Division:
Barcalounger targets a selected market for its high-end recliner
chair and motion upholstered furniture. Barcalounger sells mainly to furniture
stores and department stores that carry more expensive products and provide
interior design services directly or indirectly. Barcalounger gives extensive
warranties for its products.
The required segment financial information, in thousands, for the
years ending December 31, are as follows:
<TABLE>
<CAPTION>
1999 Stratford Barcalounger Corporate Eliminations Totals
---- --------- ------------ --------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 49,971 $ 50,101 $ - $ - $ 100,072
Intersegment income 650 - - ( 650) -
Interest income 75 169 51 - 295
Interest expense 1,530 26 75,035 - 76,591
Depreciation and
amortization 847 324 - - 1,171
Segment profit (loss) ( 14,198) 3,721* ( 77,823) - ( 88,300)
Segment assets 1,066 20,633 1,640 - 23,339
Expenditures for
segment assets 218 262 - - 480
</TABLE>
* - includes loss from flood of $461.
- 35 -
<PAGE> 36
FAIRWOOD CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Segment Reporting (continued)
<TABLE>
<CAPTION>
1998 Stratford Barcalounger Corporate Eliminations Totals
---- --------- ------------ --------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 99,436 $ 54,738 $ - $ - $ 154,174
Intersegment income 2,184 - - ( 2,184) -
Interest income 98 - 52 - 150
Interest expense 2,968 22 68,873 - 71,863
Depreciation and
amortization 1,570 300 - - 1,870
Segment profit (loss) ( 19,346) 4,353 ( 70,512) - (85,505)
Segment assets 35,816 19,281 3,066 - 58,163
Expenditures for
segment assets 1,124 247 - - 1,371
</TABLE>
<TABLE>
<CAPTION>
1997 Stratford Barcalounger Corporate Eliminations Totals
---- --------- ------------ --------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 98,432 $ 49,681 $ - $ - $ 148,113
Intersegment income 2,181 - - ( 2,181) -
Interest income - 23 88 - 111
Interest expense 1,764 169 63,614 - 65,547
Depreciation and
amortization 1,616 270 - - 1,886
Segment profit (loss) ( 24,114) 3,559 ( 65,569) - ( 86,124)
Segment assets 36,998 16,927 2,840 - 56,765
Expenditures for
segment assets 2,671 339 - - 3,010
</TABLE>
Geographical information
Revenues
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- ------
<S> <C> <C> <C>
United States $ 98,319 151,017 144,864
Canada 972 1,301 1,470
Other 781 1,856 1,779
------- ------- -------
$ 100,072 154,174 148,113
======= ======= =======
Long-lived
Assets - United States $ 2,942 12,494 13,001
------------------------ ======= ======= =======
</TABLE>
- 36 -
<PAGE> 37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Executive Officers
The name, age and position or principal occupation during the past five
years of each member of the Board of Directors and executive officer of the
Company are set forth below. Directors serve for a term of one year and until
their successors are elected and qualified. Officers are elected annually by the
Board of Directors to serve for the ensuing year and until their respective
successors are elected.
<TABLE>
<CAPTION>
Director Position and Principal Occupation or
Name Age Since Employment Held During Last 5 Years
---- --- -------- ------------------------------------
<S> <C> <C>
John B. Sganga 68 1990 Chief Financial Officer, Executive
Vice President and Treasurer since
September 1989. Mr. Sganga has also
been, inter alia, Chief Financial Officer,
Executive Vice President, Controller
and Treasurer of Consolidated Furniture
and Vice President and Treasurer of each
of Consolidated Furniture's subsidiaries
since September 1989. Mr. Sganga has been
a director of Consolidated Furniture and
Furniture Comfort Corporation since
February 1990.
M. Saleem Muqaddam 52 1992 Vice President, CVCL, an affiliate
of the Company, since 1989. Mr. Mugaddam
is also vice president of CSCL, an affiliate
of CVCL. Previously, Mr. Muqaddam spent 16 years
with Citibank, N.A., an affiliate of the Company,
in senior managerial positions. Mr. Muqaddam
is also a director of Consolidated Furniture,
Futorian, Chromcraft Revington, Inc., Pamida
Holdings, Inc., and Plantronics, Inc.
</TABLE>
- 37 -
<PAGE> 38
Fairwood's senior executive officer holds the title of Chief Financial
Officer, Executive Vice President, Secretary and Treasurer. No executive officer
holds the title of President or Chief Executive Officer, but the functions
customarily performed by the person holding such titles are performed by
Fairwood's Chief Financial Officer, Executive Vice President, Secretary and
Treasurer. There are no arrangements or understandings between any director and
any other person naming such person pursuant to which such director was selected
as a director.
The following is the president of Furniture Comfort Corporation and may
be deemed to be an executive officer of the Company as of December 31, 1999:
Date Assumed
Name Age Position Position
---- --- -------- --------
Wayne T. Stephens 49 President and Chief February 1999
Executive Officer
Furniture Comfort Corporation
There are no family relationships among any of the Company's directors or
officers.
The following is a brief account of the business experience during the
past five years of Mr. Stephens:
In connection with services provided by The Finley Group, a management
consulting firm, Mr. Stephens, a principal of that firm, has acted as president
of a number of companies. In April 1993, Mr. Stephens became a direct consultant
to the Company and in January 1994 an employee of Barcalounger. In February
1999, Mr. Stephens was named President and Chief Executive Officer of Furniture
Comfort Corporation.
- 38 -
<PAGE> 39
ITEM 11. EXECUTIVE COMPENSATION
Executive Officers' Compensation
Information concerning the compensation earned by the above named
executive officers is set forth in the Summary Compensation Table.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Annual Compensation
Principal ------------------- All Other
Position Year Salary Bonus Compensation
- --------- ---- ------ ----- ------------
<S> <C> <C> <C> <C> <C>
John B. Sganga 1999 $150,000 $ - $ 7,500 (1)
Executive VP 1998 150,000 - 7,500 (1)
and CFO 1997 150,000 - 7,500 (1)
Wayne T. Stephens 1999 194,418 169,519 24,703 (2)
President & CEO 1998 185,000 232,712 4,211 (2)
Furniture Comfort 1997 185,000 217,375 1,910 (2)
Corporation
Lawrence Adelman (3) 1999 45,833 - -
Stratford 1998 275,000 - -
1997 170,994 - -
Gary L. Parks (4) 1997 154,641 - 39,409 (5)
Stratford
</TABLE>
(1) 1999, 1998 and 1997 amounts represent Consolidated Furniture
contributions to the investment plan of $1,500 and an automobile
allowance of $6,000.
(2) 1999 amount represents company contributions to the investment plan of
$3,203, $20,000 set aside in an unfunded deferred compensation plan and
$1,500 for the value of the use of a company vehicle. 1998 amount
represents company contributions to the investment plan of $3,018 and
$1,193 for the value of the use of a company vehicle. 1997 amount
represents company contributions to the investment plan of $705 and
$1,205 for the value of the use of a company vehicle.
(3) Effective February 25, 1999, Mr. Adelman resigned as President and Chief
Executive Officer at Furniture Comfort Corporation.
(4) Effective October 17, 1997, Mr. Parks resigned as Chief Operating Officer
of Stratford, a division of Furniture Comfort Corporation.
(5) 1997 amount represents $37,119 for severance pay and $2,290 for the use
of a company vehicle.
- 39 -
<PAGE> 40
Employment Agreements
Consolidated Furniture entered into an employment agreement with Mr.
Sganga, who is named in the summary compensation table, effective December 15,
1993, which provided for an annual salary, plus such bonuses as may be awarded
in the discretion of the Board of Directors. This agreement ended on December
31, 1995, and Mr. Sganga continues to be employed under similar terms.
Salaried Investment Plan
Officers of Consolidated Furniture are eligible to participate in its
Tax-qualified Investment Plan for Salaried and Hourly Employees. Directors who
are not officers are not eligible. Consolidated Furniture may, but is not
obligated to, contribute up to 100% of any savings of a participant not
exceeding 4% of salary.
The full value of a participant's investment in the plan becomes payable
upon retirement, disability or death. Upon termination of employment for other
reasons, a participant is entitled to the accumulated value of his or her
savings, and to varying amounts of Consolidated Furniture's contributions
depending on years of membership in the plan, with 100% thereof payable if years
of membership are 5 or more.
During 1999, 1998 and 1997, such contributions for Mr. Sganga were
$1,500, $1,500 and $1,500, respectively. The Company contribution for Mr.
Stephens was $3,203, $3,018 and $705 in 1999, 1998 and 1997, respectively.
Incentive Plan
Consolidated Furniture maintains an executive incentive (bonus) plan
implemented to provide individual awards for attainment of specified business
objectives. Under the executive incentive plan, each of Consolidated Furniture's
profit centers is assigned certain business goals annually, which are based on
earnings and cash flow. Awards are made to profit center participants based upon
the extent to which their respective profit centers attain their goals. Total
awards made for the 1999 Plan Year were $388,079, including awards of $169,519
for Mr. Stephens. Total awards made for the 1998 Plan Year were $588,563
including awards of $232,712 for Mr. Stephens. Total awards made for the 1997
Plan Year were $483,528, including awards of $217,375 for Mr. Stephens.
Executive Deferred Compensation Plan
An Executive Deferred Compensation Plan effective August 1, 1999, was
established by The Barcalounger Company, a division of Furniture Comfort
Corporation, to provide certain of its designated executives with an additional
method of planning for their retirement. In addition, the Plan serves as an
incentive for them to promote the success of the Company and to encourage them
to maintain their employment relationships with the Company. Total amounts
designated for the 1999 was $80,000, including $20,000 for Mr. Stephens.
Directors' Compensation
As of the date of this Annual Report on Form 10-K, the Company has not
determined what compensation directors who are not officers of the Company will
receive for their service as director. No compensation was paid to directors for
their services as directors in 1997, 1998 or 1999.
- 40 -
<PAGE> 41
Compensation Committee Interlocks and Insider Participation
The Company's board of directors does not have a separate compensation
committee. Accordingly, the entire board of directors considers executive
compensation matters, except that any executive officer who is a director does
not take part in executive compensation matters regarding that executive
officer.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Stockholders
Fairwood's common stock consists of both voting stock and non-voting
stock. The table below sets forth, as of February 29, 2000, certain information
regarding the directors and executive officers and each person who owns of
record or beneficially 5% or more of the outstanding shares of common stock.
Such beneficial owners own their shares directly and have sole voting and
investment power with respect to their shares.
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding Shares Percentage
Name and Address Shares of Company's of Company's of
of Beneficial Owner Common Stock Common Stock Voting Power
- ------------------- ------------------- ------------------ ------------
<S> <C> <C> <C>
Citicorp Venture Capital 1,000,100 99.98% 60%
Ltd. *
399 Park Avenue
New York, NY 10043
Thomas F. Creamer 100 0.01% 20%
C/O Fairwood Corporation
1201 Orange Street
Wilmington, Delaware 19801
Anthony C. Howkins 100 0.01% 20%
C/O Fairwood Corporation
1201 Orange Street
Wilmington, Delaware 19801
John B. Sganga - 0.00% 0%
C/O Fairwood Corporation
1201 Orange Street
Wilmington, Delaware 19801
M. Saleem Muqaddam** 1,000,100 99.98% 60%
C/O Citicorp Venture
Capital Ltd.
399 Park Avenue
New York, NY 10043
</TABLE>
- ----------
* Owns 999,800 shares of the Company's Class B Non-Voting Common Stock and
300 shares of the Company's Class A Voting Common Stock. Under the Company's
Certificate of Incorporation, the Class B Non-Voting Common Stock is convertible
into Class A Voting Common Stock, so long as the holder of the Class B Stock
would be permitted to hold the resulting Class A Stock under applicable law. On
December 31, 1990, CVCL and Fairwood entered into an Agreement and Plan to
Relinquish Control pursuant to which CVCL converted 200 shares of Class B Stock
into 200 shares of Class A Stock and increased its ownership of the outstanding
Class A Stock from 33-1/3% to 60%. Under this Agreement, CVCL is required to
convert a sufficient number of shares of Class A Stock into Class B Stock to
reduce CVCL's ownership of Class A Stock such that
- 41 -
<PAGE> 42
CVCL will no longer be presumed to have control of Fairwood under the
regulations of the Small Business Administration upon the earlier of (i) the
date on which the Company's ratio of earnings before interest, taxes and
depreciation to interest expense on a consolidated basis has been 1.5 to 1 for
three consecutive fiscal quarters or (ii) December 31, 1997 (or such later date
as may be consented to by the Small Business Administration). The Small Business
Administration has extended the December 31, 1997 conversion date to December
31, 2000. The Agreement has been accepted by the Small Business Administration.
CVCL is a subsidiary of Citibank, N.A., a national bank which is owned by
Citigroup and is an affiliate of CSCL.
** Mr. Muqaddam disclaims beneficial ownership of these shares owned of record
by CVCL which are attributed to him by reason of his status as an officer of
CVCL.
Ownership by Directors and Officers
As of February 29, 2000, no shares of the Company's common stock were
beneficially held by any director or officer.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As further described in the Company's financial statements in Item 8, a
large majority of the Company's long-term debt at December 31, 1999 is payable
to CSCL, an affiliate of CVCL, the Company's majority shareowner. M. Saleem
Muqaddam, a director of the Company, is a vice president of CVCL and CSCL.
During 1999 and at December 31, 1999, the largest aggregate amount of
indebtedness outstanding that was payable to CSCL was approximately $562.6
million. See Note 4, Long-term Debt, in the Notes to Consolidated Financial
Statements set forth in Item 8. During 1999 the Company borrowed approximately
$70.9 million from CSCL and made no payments to CSCL. During 2000 it is
anticipated that approximately $57.0 million will be borrowed from CSCL and that
no repayments to CSCL will be made. It is also anticipated that interest due to
CSCL on the senior subordinated pay-in-kind debentures, which interest
approximates $16.4 million, will not be paid.
399 Venture Partners, Inc. ("VPI"), an affiliate of CVCL owns a majority
of Furnishings International Inc. (formerly Simmons Holding
Corporation)("Furnishings"), the parent of Simmons Upholstered Furniture
Corporation ("Simmons"). M. Saleem Muqaddam is a vice president of CVCL and a
director of Furnishings, Simmons and the Company. Stratford and Simmons were
parties to a Manufacturing Agreement dated as of November 29, 1995 (the
"Agreement"). Under this Agreement, Stratford had agreed to manufacture product
for and supply product on behalf of Simmons for a term of one year, subject to
automatic annual renewals, unless terminated by either party. (See Note 8 to the
Company's Consolidated Financial Statements set forth in Item 8).
- 42 -
<PAGE> 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
(a) 1. Financial Statements Page
-------------------- ----
The following financial statements and supplementary data are
included in Part II, Item 8:
<S> <C>
Independent Auditors' Report................................... 16
Consolidated Balance Sheets at December 31, 1999 and 1998...... 17
Consolidated Statements of Operations for the Years ended
December 31, 1999, 1998 and 1997............................. 18
Consolidated Statements of Shareowners' Equity (Deficit)
for the Years ended December 31, 1999, 1998 and 1997......... 19
Consolidated Statements of Cash Flows for the Years ended
December 31, 1999, 1998 and 1997............................. 20
Notes to Consolidated Financial Statements ................... 21-36
2. Financial Statement Schedule
For the three years ended December 31, 1999:
Schedule II--Valuation and Qualifying Accounts
and Reserves................................... 49
</TABLE>
Other schedules are omitted because of the absence of conditions under
which they are required.
- 43 -
<PAGE> 44
3. Exhibits
Exhibits are listed by numbers corresponding to the Exhibit Table of Item
601 in Regulation S-K
(3.1) Certificate of Incorporation of the Registrant, as amended
incorporated by reference to Exhibit 3.3 of the Registrant's
Registration Statement on Form S-4 (the "Form S-4")).
(3.2) By-Laws of the Registrant (incorporated by reference to exhibit
3.4 of the Form S-4).
(3.3) Certificate of Amendment of Certificate of Incorporation, dated
March 22, 1993 (incorporated by reference to Exhibit 3.3 of the
Registrant's annual report on Form 10-K for the year ended
December 31, 1992 (the "1992 Form 10-K")).
(4.1) Indenture, dated as of August 15, 1989, between Fairwood
Corporation, formerly MHS Holdings Corporation the "Company") and
Bankers Trust Company, as Trustee, relating to the 16-7/8%
Subordinated Pay-In-Kind Debentures due 2004 (the "Merger
Debentures"), (incorporated reference to Exhibit 4.1 of the
Registrant's third quarter report on Form 10-Q for the quarter
ended September 30, 1989 (the "1989 Third Quarter 10-Q")).
(4.2) Form of Merger Debentures, included as Exhibit A to Exhibit 4.1,
(incorporated by reference to Exhibit 4.2 of the 1989 Third
Quarter 10-Q).
(4.3) Pledge and Security Agreement, dated as of August 15, 1989, made
by the Company to Bankers Trust Company, as Trustee, (incorporated
by reference to Exhibit 4.3 of the 1989 Third Quarter 10-Q).
(4.4) 15-1/2% Senior Subordinated Pay-In-Kind Debentures of the Company,
dated as of September 22, 1989, issued to Citicorp Capital
Investors Ltd. (incorporated by reference to Exhibit 4.6 of the
1989 Third Quarter 10-Q).
(4.5) Pledge and Security Agreement, dated September 22, 1989, made by
the Company to Citicorp Capital Investors Ltd., as Agent,
(incorporated by reference to Exhibit 4.7 of the 1989 Third
Quarter 10-Q).
(4.6) Credit Agreement dated as of September 22, 1989 among Mohasco
Corporation ("Mohasco"), Mohasco Upholstered Furniture
Corporation, Chromcraft Corporation, Super Sagless Corporation,
Choice Seats Corporation and Peters Revington Corporation and
Citicorp Capital Investors Ltd. (the "Credit Agreement"),
(incorporated by reference to Exhibit 4.8 of the Registrant's
annual report on Form 10-K for the year ended December 31, 1989
(the "1989 Form 10-K")).
(4.7) Amendment, dated December 15, 1989, to the Credit Agreement,
(incorporated by reference to Exhibit 4.9 of the 1989 Form 10-K).
(4.8) Amendment, dated March 13, 1990, to the Credit Agreement,
(incorporated by reference to Exhibit 4.10 of the 1989 Form 10-K).
(4.9) Notice of Election and Waiver, dated March 13, 1990, to the Credit
Agreement, (incorporated by reference to Exhibit 4.11 of the
Registrant's annual report on Form 10-K for the year ended
December 31, 1990 (the "1990 Form 10-K")).
- 44 -
<PAGE> 45
(4.10) Term Note B, dated March 13, 1990, issued to Court Square Capital
Limited, (incorporated by reference to Exhibit 4.12 of the 1989
Form 10-K).
(4.11) Agreement and Waiver, dated August 15, 1990, to the Credit
Agreement, (incorporated by reference to Exhibit 4.13 of the 1990
Form 10-K).
(4.12) Agreement and Waiver, dated September 5, 1990, to the Credit
Agreement, (incorporated by reference to Exhibit 4.14 of the 1990
Form 10-K).
(4.13) Agreement and Waiver, dated September 15, 1990, to the Credit
Agreement, (incorporated by reference to Exhibit 4.16 of the 1990
Form 10-K).
(4.14) Waiver and Amendment, dated September 15, 1990, to the Credit
Agreement and letter, dated September 15, 1990, related thereto,
(incorporated by reference to Exhibit 4.16 of the 1990 Form 10-K).
(4.15) Waiver and Fourth Amendment, dated as of December 31, 1990, to the
Credit Agreement, (incorporated by reference to Exhibit 4.17 of
the 1990 Form 10-K).
(4.16) Revolving Credit Note, dated September 22, 1989, amended and
restated as of September 15, 1990, issued to Court Square Capital
Limited, and Endorsement No. 1 thereto, dated as of December 31,
1990, (incorporated by reference to Exhibit 4.18 of the 1990 Form
10-K).
(4.17) Increasing Rate Senior Subordinated Debentures of Mohasco
Corporation dated as of September 22, 1989 issued to Citicorp
Capital Investors Ltd. (the "Senior Subordinated Debentures"),
(incorporated by reference to Exhibit 4.13 of the 1989 Form 10-K).
(4.18) Amendment, dated March 30, 1990, to the Senior Subordinated
Debentures, (incorporated by reference to Exhibit 4.14 of the 1989
Form 10-K).
(4.19) Second Amendment, dated as of December 31, 1990, to the Senior
Subordinated Debentures, (incorporated by reference to Exhibit
4.21 of the 1990 Form 10-K).
(4.20) Endorsement No. 1, dated as of December 31, 1990, to the Senior
Subordinated Debentures, (incorporated by reference to Exhibit
4.22 of the 1990 Form 10-K).
(4.21) Waiver, dated as of June 29, 1991, to the Credit Agreement,
(incorporated by reference to Exhibit 4.23 of the Registrant's
annual report on Form 10-K for the year ended December 31,1991 the
"1991 Form 10-K")).
(4.22) Waiver, dated as of October 31, 1991, to the Credit Agreement,
(incorporated by reference to Exhibit 4.24 of the 1991 Form 10-K).
(4.23) Waiver and Fifth Amendment, dated as of March 27, 1992, to Credit
Agreement, (incorporated by reference to Exhibit 4.26 of the 1991
Form 10-K).
(4.24) Third Amendment, dated as of March 27, 1992, to the Senior
Subordinated Debentures, (incorporated by reference to Exhibit
4.27 of the 1991 Form 10-K).
(4.25) Endorsement No. 2, dated as of March 27, 1992, to the Senior
Subordinated Debentures, (incorporated by reference to Exhibit
4.28 of the 1991 Form 10-K).
- 45 -
<PAGE> 46
(4.26) Sixth Amendment, dated as of April 23, 1992, to Credit Agreement,
(incorporated by reference to Exhibit 4.1 of the Registrant's
second quarter report on Form 10-Q for the quarter ended June 27,
1992 (the "1992 Second Quarter 10-Q")).
(4.27) Seventh Amendment, dated as of April 23, 1992, to Credit
Agreement, (incorporated by reference to Exhibit 4.2 of the 1992
Second Quarter 10-Q).
(4.28) Eighth Amendment, dated as of September 26, 1992, to Credit
Agreement, (incorporated by reference to Exhibit 4.1 of the
Registrant's third quarter report on Form 10-Q for the quarter
ended September 26,1992 (the "1992 Third Quarter 10-Q")).
(4.29) Waiver and Ninth Amendment, dated as of February 4, 1993, to
Credit Agreement, (incorporated by reference to Exhibit 4.32 of
the 1992 Form 10-K).
(4.30) Tenth Amendment, dated as of March 22, 1993, to Credit Agreement,
(incorporated by reference to Exhibit 4.33 of the 1992 Form 10-K).
(4.31) Recision of Waiver, dated as of April 30, 1993, to Credit
Agreement, (incorporated by reference to Exhibit 4.1 of the
Registrant's first quarter report on Form 10-Q for the quarter
ended April 3, 1993 (the "1993 First Quarter 10- Q")).
(4.32) Eleventh Amendment, dated as of March 25, 1994, to Credit
Agreement, (incorporated by reference to Exhibit 4.35 of the 1993
Form 10-K).
(4.33) Fourth Amendment, dated as of January 3, 1994, to the Senior
Subordinated Debentures, (incorporated by reference to Exhibit
4.36 of the 1993 Form 10-K).
(4.34) Factoring Agreement, dated as of July 25, 1995, between Capital
Factors, Inc. and Stratford Company, a division of Furniture
Comfort Corporation, (incorporated by reference to Exhibit 4.37 of
the 1995 Form 10-K).
(4.35) Debt Subordination Agreement, dated as of July, 1995, between
Capital Factors, Inc. and Consolidated Furniture Corporation,
formerly Mohasco Corporation, (incorporated by reference to
Exhibit 4.38 of the 1995 Form 10-K).
(4.36) Lien Subordination Agreement, dated as of July 25, 1995, between
Capital Factors, Inc. and Court Square Capital Limited,
(incorporated by reference to Exhibit 4.39 of the 1995 Form 10-K).
(4.37) Twelfth Amendment, dated as of November 30, 1995, to Credit
Agreement, (incorporated by reference to Exhibit 4.40 of the 1995
Form 10-K).
(4.38) Fifth Amendment, dated as of January 2, 1996, to the Senior
Subordinated Debentures, (incorporated by reference to Exhibit
4.41 of the Registrant's first quarter report on Form 10-Q for the
quarter ended March 30, 1996 (the "1996 First Quarter 10-Q")).
(4.39) Thirteenth Amendment, dated as of January 13, 1996, to Credit
Agreement, (incorporated by reference to Exhibit 4.42 of the
Registrant's first quarter report on Form 10-Q for the quarter
ended March 30, 1996 (the "1996 First Quarter 10- Q")).
- 46 -
<PAGE> 47
(4.40) Fourteenth Amendment, dated as of March 25, 1996, to Credit
Agreement, (incorporated by reference to Exhibit 4.43 of the
Registrant's first quarter report on Form 10-Q for the quarter
ended March 30, 1996 (the "1996 First Quarter 10- Q")).
(4.41) Fifteenth Amendment, dated as of September 30, 1996, to Credit
Agreement, (incorporated by reference to Exhibit 4.36 of the 1993
Form 10-K).
(4.42) Sixteenth Amendment, dated as of December 31, 1996, to Credit
Agreement, (incorporated by reference to Exhibit 4.36 of the 1993
Form 10-K).
(4.43) Sixth Amendment, dated as of January 2, 1997, to the Senior
Subordinated Debentures, (incorporated by reference to Exhibit
4.43 of the 1996 Form 10-K).
(4.44) Factoring Agreement, dated as of December 10, 1996, between
Capital Factors, Inc. and Barcalounger Company, a division of
Furniture Comfort Corporation, (incorporated by reference to
Exhibit 4.44 of the 1996 Form 10-K).
(4.45) Debt Subordination Agreement, dated as of December 10, 1996,
between Capital Factors, Inc. and Consolidated Furniture
Corporation, formerly Mohasco Corporation, (incorporated by
reference to Exhibit 4.45 of the 1996 Form 10-K).
(4.46) Lien Subordination Agreement, dated as of December 10, 1996,
between Capital Factors, Inc. and Court Square Capital Limited,
(incorporated by reference to Exhibit 4.46 of the 1996 Form 10-K).
(4.47) Seventeenth Amendment, dated as of May 23, 1997, to Credit
Agreement, (incorporated by reference to Exhibit 4.47 of the 1997
Form 10-K).
(4.48) Eighteenth Amendment, dated as of July 1, 1997, to Credit
Agreement, (incorporated by reference to Exhibit 4.48 of the 1997
Form 10-K).
(4.49) Mortgage, Security Agreement, Assignment of Rents and Financing
Statement, dated November 12, 1997, by Futorian Furnishings, Inc.
in favor of Banco Popular, (incorporated by reference to Exhibit
4.49 of the 1997 Form 10-K).
(4.50) Mortgage Note, dated November 12, 1997, by Futorian Furnishings,
Inc. and Banco Popular, (incorporated by reference to Exhibit 4.50
of the 1997 Form 10-K).
(4.51) Nineteenth Amendment, dated as of January 30, 1998, to Credit
Agreement, (incorporated by reference to Exhibit 4.51 of the 1997
Form 10-K).
(4.52) Twentieth Amendment, dated as of January 31, 1998, to Credit
Agreement, (incorporated by reference to Exhibit 4.52 of the 1997
Form 10-K).
(4.54) Seventh Amendment, dated as of January 2, 1998, to the Senior
Subordinated Debentures, (incorporated by reference to Exhibit
4.54 of the 1997 Form 10-K).
(4.55) Twenty-first Amendment, dated as of February 1, 1998, to Credit
Agreement, (incorporated by reference to Exhibit 4.55 of the 1998
Form 10-K).
(4.56) Twenty-second Amendment, dated as of September 30, 1998, to Credit
Agreement, (incorporated by reference to Exhibit 4.56 of the 1998
Form 10-K).
- 47 -
<PAGE> 48
(4.57) Twenty-third Amendment, dated as of December 15, 1998, to Credit
Agreement, (incorporated by reference to Exhibit 4.57 of the 1998
Form 10-K).
(4.58) Eighth Amendment, dated as of January 4, 1999, to the Senior
Subordinated Debentures, (incorporated by reference to Exhibit
4.58 of the 1998 Form 10-K).
(4.59) Twenty-fourth Amendment, dated as of April 2, 1999, to Credit
Agreement.
(4.60) Twenty-fifth Amendment, dated as of September 30, 1999, to Credit
Agreement.
(4.61) Twenty-sixth Amendment, dated as of December 29, 1999, to Credit
Agreement.
(4.62) Ninth Amendment, dated as of December 29, 1999, to the Senior
Subordinated Debentures.
(10.1) Mohasco Executive Retirement Plan, (incorporated by reference to
Exhibit 10.5 of the 1990 Form 10-K).
(10.2) Mohasco Corporation Executive Incentive Plan, (incorporated by
reference to Exhibit 10.6 of the 1990 Form 10-K).
(10.3) Amendment, dated December 31, 1991, to the Mohasco Executive
Retirement Plan, (incorporated by reference to Exhibit 10.6 of the
1991 Form 10-K).
(10.5) Real Estate Purchase Agreement, dated September 15, 1997, between
Furniture Comfort Corporation and American National Bank and Trust
Company, not personally, but solely as Trustee under Trust
Agreement dated July 17, 1978, and known as Trust No. 43449
(incorporated by reference to Exhibit 10.5 of the 1998 Form 10-K).
(10.6) Agreement for Purchase and Sale of Assets among Furniture Comfort
Corporation, Consolidated Furniture Corporation, Vanguard, L.L.C.,
Heath Furnishings, L.L.C., Stratford Upholstery, L.L.C., Simmons
Upholstery, L.L.C., Western Upholstery Company, L.L.C., and
Vanguard Properties II, L.L.C. dated June 3, 1999, (incorporated
by reference to Exhibit 1.1 of the June 3, 1999 Form 8-K).
(21.1) List of Subsidiaries of the Registrant.
The Company agrees to furnish the Securities and Exchange Commission, upon
request, a copy of any instrument defining the rights of holders of long term
debt of the Company and its consolidated subsidiaries.
(b) Reports on Form 8-K
A report of Form 8-K was filed on October 6 regarding the Barcalounger
Division, an indirect division of Fairwood, incurring substantial damage
due to the floods caused by the heavy rains as a result of hurricane
Floyd.
- 48 -
<PAGE> 49
Schedule II
FAIRWOOD CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Years ended December 31, 1999, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance
beginning charged to from at close
Description of period earnings reserves of period
----------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Valuation and qualifying
accounts and reserves
deducted from accounts
and notes receivable:
1999
Allowance for discounts $ 71 123 169 25
Allowance for doubtful
accounts 1,246 197 1,143 300
Allowance for estimated
loss on claims - - - -
------ ------ ------ -----
$ 1,317 320 1,312 (1) 325
====== ====== ====== ======
1998
Allowance for discounts $ 51 398 378 71
Allowance for doubtful
accounts 4,165 ( 544) 2,373 1,246
Allowance for estimated
loss on claims - - - -
------ ------ ------ ------
$ 4,216 ( 146) 2,751 1,317
====== ====== ====== ======
1997
Allowance for discounts $ 79 408 436 51
Allowance for doubtful
accounts 1,487 3,244 566 4,165
Allowance for estimated
loss on claims - - - -
------ ------ ------ -----
$ 1,566 3,652 1,002 4,216
====== ====== ====== ======
</TABLE>
(1) - Primarily the result of the sale of the Stratford Division's net assets.
- 49 -
<PAGE> 50
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FAIRWOOD CORPORATION
By: /s/ John B. Sganga
------------------------
John B. Sganga
Chief Financial Officer,
Executive Vice President,
Secretary and Treasurer
Date: April 14, 2000
------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on April 14, 2000 by the following persons on
behalf of the Registrant and in the capacities indicated.
Title
/s/ John B. Sganga Director and Chief
- --------------------------- Financial Officer,
John B. Sganga Executive Vice President,
Secretary and Treasurer
(principal executive,
financial and accounting
officer)
- 50 -
<PAGE> 51
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on April 14, 2000 by the following person on behalf
of the Registrant and in the capacity indicated.
Title
/s/ M. Saleem Muqaddam Director
- --------------------------------
M. Saleem Muqaddam
- 51 -
<PAGE> 1
EXHIBIT 4.59
TWENTY-FOURTH AMENDMENT
TO CREDIT AGREEMENT
THIS TWENTY-FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of
April 2, 1998 (the "Twenty-fourth 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)("Consolidated"), Futorian Furnishings, Inc. (formerly known as
Mohasco Upholstered Furniture Corporation, and as Furniture Comfort Corporation)
(on its behalf and on behalf of each of its Stratford and Barcalounger operating
units) ("Futorian"), 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 Twenty-fourth 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 Twenty-fourth 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 - Revolving Credit Note.
Exhibit 1.1.3 of the Credit Agreement is hereby amended as set
forth in Endorsement No. 8 thereto, which endorsement shall be in the form of
Annex A hereto. The Lender is hereby authorized to attach to the Revolving
Credit Note such Endorsement No. 8 as duly executed and delivered by such
authorized officers of each of the Borrowers on the date hereof and to insert on
the face of the Revolving Credit Note the following legend:
THIS SECURITY SHALL BE DEEMED TO INCLUDE ENDORSEMENT NO. 8 DATED
AS OF APRIL 2, 1999 WHICH IS ATTACHED HERETO.
Section 2 - Revolving Credit Commitment.
<PAGE> 2
The definition of "Revolving Credit Commitment" in Section 6.1 of
the Credit Agreement is hereby amended and restated to read in its
entirety as follows:
"Revolving Credit Commitment" means (i) $355,000,000 during
any fiscal quarter on or prior to September 30, 1999, and (ii)
$366,000,000 during the fourth quarter of 1999 and thereafter.
Section 3 - 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
0.25 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.]
4.1.5 Consolidated Net Worth. Permit Consolidated Net Worth
to be (i) less than $(435,000,000) on the last day of any fiscal
quarter ended on or prior to September 30, 1999 and (ii) less than
$(450,000,000) on the last day of the fiscal quarter ended on
December 31, 1999, and each fiscal quarter thereafter.
4.1.6 Working Capital. Permit Working Capital to be less
than: $(280,000,000) on the last day of any fiscal quarter on or
prior to September 30, 1999, and each fiscal quarter thereafter.
4.1.7 Total Debt. Permit Consolidated Indebtedness to (i)
exceed $465,000,000 at any time on or before September 30, 1999 or
(ii) exceed $475,000,000 at any time after December 31, 1999.
- 2 -
<PAGE> 3
Section 4 - 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 (i) $327,500,000 during the first
fiscal quarter of 1999, (ii) $337,500,000 during the second fiscal
quarter of 1999, (iii) $355,000,000 during the third fiscal
quarter of 1999, and (iv) $366,000,000 during the fourth fiscal
quarter of 1999 and thereafter.
Section 5 - Conditions to Effectiveness. This Twenty-fourth Amendment shall
be effective when, and only when, the Lender shall have received counterparts of
this Twenty-fourth Amendment executed by each of the Borrowers and copies of
such approvals, opinions or documents as the Lender may reasonably request.
Section 6 - Representations and Warranties. The Borrowers hereby jointly and
severally represent and warrant to the lender that:
(a) the execution, delivery and performance by each of the
Borrowers of this Twenty-fourth Amendment (i) are within each of the Borrower's
respective corporate powers, (ii) have been duly authorized by all necessary
corporate actions of each of the Borrowers and (iii) do not and will not (X)
violate any requirement of law, (Y) 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
(Z) 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; and
(b) that, after giving effect to this Twenty-fourth Amendment,
all the representations and warranties of the Borrowers contained in the Credit
Agreement shall be true and correct in all material respects.
Section 7 - 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 Twenty-fourth Amendment may be executed in any number
of counterparts, each counterpart constituting an original but altogether one
and the same instrument and contract.
- 3 -
<PAGE> 4
(c) This Twenty-fourth 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
Twenty-fourth Amendment may refer to the "Credit Agreement dated as of September
22, 1989" without making specific reference to the Twenty-fourth Amendment, but
nevertheless all such references shall be deemed to include this Twenty-fourth
Amendment unless the context shall otherwise require.
(e) This Twenty-fourth Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.
[SIGNATURE PAGES FOLLOW]
- 4 -
<PAGE> 5
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 fourth above written.
COURT SQUARE CAPITAL LIMITED
By:
-----------------------------------
M. Saleem Muqaddam
Vice President
CONSOLIDATED FURNITURE CORPORATION
By:
-----------------------------------
John B. Sganga
Executive Vice President,
Chief Financial Officer,
Secretary, Treasurer and
Controller
FUTORIAN FURNISHINGS, INC.
By:
-----------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
SSC CORPORATION
By:
-----------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
CHOICE SEATS CORPORATION
By:
-----------------------------------
John B. Sganga
Treasurer, Vice President and
Secretary
- 5 -
<PAGE> 6
FORM OF ENDORSEMENT NO. 8
COURT SQUARE CAPITAL LIMITED (formerly known as Citicorp Capital
Investors Ltd.) and CONSOLIDATED FURNITURE CORPORATION (formerly known as
Mohasco Corporation), FUTORIAN FURNISHINGS, INC. (formerly known as Mohasco
Upholstered Furniture Corporation, and as Furniture Comfort 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 hereby agree that the promissory note, as amended, to which this
Endorsement No. 8 is attached (the "Revolving Credit Note") shall be and hereby
is amended as follows:
A. Each occurance of the amount "$327,500,000" on page 1 of
the Revolving Credit Note is deleted and the amount "366,000,000" is inserted in
lieu thereof.
B. The words "Three Hundred Twenty-Seven Million Five Hundred
Thousand," are deleted from the fourth paragraph of the Revolving Credit Note
and the words "Three Hundred Sixty-six Million" are inserted in lieu thereof.
Date: April 2, 1999
[Signatures]
- 6 -
<PAGE> 7
ENDORSEMENT NO. 8
COURT SQUARE CAPITAL LIMITED (formerly known as Citicorp Capital
Investors Ltd.) and CONSOLIDATED FURNITURE CORPORATION (formerly known as
Mohasco Corporation), FUTORIAN FURNISHINGS, INC. (formerly known as Mohasco
Upholstered Furniture Corporation, and as Furniture Comfort 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 hereby agree that the promissory note, as amended, to which this
Endorsement No. 8 is attached (the "Revolving Credit Note") shall be and hereby
is amended as follows:
A. Each occurance of the amount "$327,500,000" on page 1 of
the Revolving Credit Note is deleted and the amount "366,000,000" is inserted in
lieu thereof.
B. The words "Three Hundred Twenty-Seven Million Five Hundred
Thousand," are deleted from the fourth paragraph of the Revolving Credit Note
and the words "Three Hundred Sixty-six Million" are inserted in lieu thereof.
Date: April 2, 1999
COURT SQUARE CAPITAL LIMITED
By:
--------------------------------------
M. Saleem Muqaddam
Vice President
CONSOLIDATED FURNITURE CORPORATION
By:
--------------------------------------
John B. Sganga
Executive Vice President,
Chief Financial Officer,
Secretary, Treasurer and
Controller
FUTORIAN FURNISHINGS, INC.
By:
--------------------------------------
John B. Sganga
- 7 -
<PAGE> 8
Vice President, Treasurer and
Secretary
SSC CORPORATION
By:
--------------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
CHOICE SEATS CORPORATION
By:
--------------------------------------
John B. Sganga
Treasurer, Vice President and
Secretary
- 8 -
<PAGE> 1
EXHIBIT 4.60
TWENTY-FIFTH AMENDMENT
TO CREDIT AGREEMENT
THIS TWENTY-FIFTH AMENDMENT TO CREDIT AGREEMENT, dated as of
September 30, 1999 (the "Twenty-fifth 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)("Consolidated"), Futorian Furnishings, Inc. (formerly known as
Mohasco Upholstered Furniture Corporation, and as Furniture Comfort Corporation)
(on its behalf and on behalf of each of its Stratford and Barcalounger operating
units) ("Futorian"), 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 Twenty-fifth 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 Twenty-fifth 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 - Revolving Credit Note.
Exhibit 1.1.3 of the Credit Agreement is hereby amended as set
forth in Endorsement No. 9 thereto, which endorsement shall be in the form of
Annex A hereto. The Lender is hereby authorized to attach to the Revolving
Credit Note such Endorsement No. 9 as duly executed and delivered by such
authorized officers of each of the Borrowers on the date hereof and to insert on
the face of the Revolving Credit Note the following legend:
THIS SECURITY SHALL BE DEEMED TO INCLUDE ENDORSEMENT NO. 9 DATED
AS OF SEPTEMBER 30, 1999 WHICH IS ATTACHED HERETO.
<PAGE> 2
Section 2 - Revolving Credit Commitment.
The definition of "Revolving Credit Commitment" in Section 6.1 of
the Credit Agreement is hereby amended and restated to read in its
entirety as follows:
"Revolving Credit Commitment" means (i) $370,000,000 during
any fiscal quarter on or prior to September 30, 1999, and (ii)
$380,000,000 during the fourth quarter ended on December 31, 1999
and thereafter.
Section 3 - 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
0.20 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.]
4.1.5 Consolidated Net Worth. Permit Consolidated Net Worth
to be (i) less than $(440,000,000) on the last day of any fiscal
quarter ended on or prior to September 30, 1999 and (ii) less than
$(460,000,000) on the last day of the fiscal quarter ended on
December 31, 1999, and each fiscal quarter thereafter.
4.1.6 Working Capital. Permit Working Capital to be less
than: $(280,000,000) on the last day of any fiscal quarter on or
prior to September 30, 1999, and each fiscal quarter thereafter.
4.1.7 Total Debt. Permit Consolidated Indebtedness to (i)
exceed $465,000,000 at any time on or before September 30, 1999 or
(ii) exceed $475,000,000 at any time after December 31, 1999.
- 2 -
<PAGE> 3
Section 4 - 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 (i) $360,000,000 during any fiscal
quarter on or prior to September 30, 1999, and (ii) $370,000,000
during the fourth fiscal quarter ending on December 31,1999 and
thereafter.
Section 5 - Conditions to Effectiveness. This Twenty-fifth Amendment shall be
effective when, and only when, the Lender shall have received counterparts of
this Twenty-fifth Amendment executed by each of the Borrowers and copies of such
approvals, opinions or documents as the Lender may reasonably request.
Section 6 - Representations and Warranties. The Borrowers hereby jointly and
severally represent and warrant to the lender that:
(a) the execution, delivery and performance by each of the
Borrowers of this Twenty-fifth Amendment (i) are within each of the Borrower's
respective corporate powers, (ii) have been duly authorized by all necessary
corporate actions of each of the Borrowers and (iii) do not and will not (X)
violate any requirement of law, (Y) 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
(Z) 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; and
(b) that, after giving effect to this Twenty-fifth Amendment,
all the representations and warranties of the Borrowers contained in the Credit
Agreement shall be true and correct in all material respects.
Section 7 - 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 Twenty-fifth 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 Twenty-fifth 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.
- 3 -
<PAGE> 4
(d) Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Twenty-fifth Amendment may refer to the "Credit Agreement dated as of September
22, 1989" without making specific reference to the Twenty-fifth Amendment, but
nevertheless all such references shall be deemed to include this Twenty-fifth
Amendment unless the context shall otherwise require.
(e) This Twenty-fifth Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.
[SIGNATURE PAGES FOLLOW]
- 4 -
<PAGE> 5
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 fourth above written.
COURT SQUARE CAPITAL LIMITED
By:
---------------------------------
M. Saleem Muqaddam
Vice President
CONSOLIDATED FURNITURE CORPORATION
By:
---------------------------------
John B. Sganga
Executive Vice President,
Chief Financial Officer,
Secretary, Treasurer and
Controller
FUTORIAN FURNISHINGS, INC.
By:
---------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
SSC CORPORATION
By:
---------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
CHOICE SEATS CORPORATION
By:
---------------------------------
John B. Sganga
Treasurer, Vice President and
Secretary
- 5 -
<PAGE> 6
Annex A
FORM OF ENDORSEMENT NO. 9
COURT SQUARE CAPITAL LIMITED (formerly known as Citicorp Capital
Investors Ltd.) and CONSOLIDATED FURNITURE CORPORATION (formerly known as
Mohasco Corporation), FUTORIAN FURNISHINGS, INC. (formerly known as Mohasco
Upholstered Furniture Corporation, and as Furniture Comfort 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 hereby agree that the promissory note, as amended, to which this
Endorsement No. 9 is attached (the "Revolving Credit Note") shall be and hereby
is amended as follows:
A. Each occurance of the amount "$366,000,000" on page 1 of
the Revolving Credit Note is deleted and the amount "$380,000,000" is inserted
in lieu thereof.
B. The words "Three Hundred Sixty-six Million" are deleted
from the fourth paragraph of the Revolving Credit Note and the words "Three
Hundred Eighty Million" are inserted in lieu thereof.
Date: September 30, 1999
[Signatures]
<PAGE> 7
ENDORSEMENT NO. 9
COURT SQUARE CAPITAL LIMITED (formerly known as Citicorp Capital
Investors Ltd.) and CONSOLIDATED FURNITURE CORPORATION (formerly known as
Mohasco Corporation), FUTORIAN FURNISHINGS, INC. (formerly known as Mohasco
Upholstered Furniture Corporation, and as Furniture Comfort 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 hereby agree that the promissory note, as amended, to which this
Endorsement No. 9 is attached (the "Revolving Credit Note") shall be and hereby
is amended as follows:
A. Each occurance of the amount "366,000,000" on page 1 of the
Revolving Credit Note is deleted and the amount "380,000,000" is inserted in
lieu thereof.
B. The words "Three Hundred Sixty-six Million", are deleted
from the fourth paragraph of the Revolving Credit Note and the words "Three
Hundred Eighty Million" are inserted in lieu thereof.
Date: September 30, 1999
COURT SQUARE CAPITAL LIMITED
By:
-------------------------------------
M. Saleem Muqaddam
Vice President
CONSOLIDATED FURNITURE CORPORATION
By:
-------------------------------------
John B. Sganga
Executive Vice President,
Chief Financial Officer,
Secretary, Treasurer and
Controller
FUTORIAN FURNISHINGS, INC.
By:
-------------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
<PAGE> 8
SSC CORPORATION
By:
-------------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
CHOICE SEATS CORPORATION
By:
-------------------------------------
John B. Sganga
Treasurer, Vice President and
Secretary
- 2 -
<PAGE> 1
EXHIBIT 4.61
TWENTY-SIXTH AMENDMENT
TO CREDIT AGREEMENT
THIS TWENTY-SIXTH AMENDMENT TO CREDIT AGREEMENT, dated as of
December 29, 1999 (the "Twenty-sixth 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)("Consolidated"), Furniture Comfort Corporation (formerly known as
Mohasco Upholstered Furniture Corporation, and as Futorian Furnishings, Inc. )
(on its behalf and on behalf of each of its Stratford and Barcalounger operating
units) ("Comfort"), 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 Twenty-sixth 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 Twenty-sixth 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 - Revolving Credit Note.
Exhibit 1.1.3 of the Credit Agreement is hereby amended as set
forth in Endorsement No. 10 thereto, which endorsement shall be in the form of
Annex A hereto. The Lender is hereby authorized to attach to the Revolving
Credit Note such Endorsement No. 10 as duly executed and delivered by such
authorized officers of each of the Borrowers on the date hereof and to insert on
the face of the Revolving Credit Note the following legend:
THIS SECURITY SHALL BE DEEMED TO INCLUDE ENDORSEMENT NO. 10 DATED
AS OF DECEMBER 29, 1999 WHICH IS ATTACHED HERETO.
<PAGE> 2
Section 2 - Revolving Credit Commitment.
The definition of "Revolving Credit Commitment" in Section 6.1 of
the Credit Agreement is hereby amended and restated to read in its
entirety as follows:
"Revolving Credit Commitment" means $435,000,000 during any
fiscal quarter on or prior to December 31, 2000 and thereafter.
Section 3 - Revolving Credit Maturity Date.
The definition of "Revolving Credit Maturity Date" in Section 6.1
of the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
"Revolving Credit Maturity Date" means January 2, 2001, when
the Revolving Credit Note shall due and payable in full.
Section 4 - 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 (i) less
than .175 to 1 on the last day of any of the fiscal quarters ended
on December 31, 1999, March 31, 2000 and June 30, 2000 or (ii)
less than .150 to 1 on the last day of any fiscal quarter, ended
on September 30, 2000 and each fiscal quarter thereafter.
4.1.2 [Intentionally Omitted.]
4.1.3 [Intentionally Omitted.]
4.1.4 [Intentionally Omitted.]
4.1.5 Consolidated Net Worth. Permit Consolidated Net Worth
to be (i) less than $(470,000,000) during the first fiscal quarter
ended on March 31, 2000, (ii) less than $(480,000,000) during the
second fiscal quarter ended on June 30, 2000, (iii) less than
$(495,000,000) during the third fiscal quarter ended on September
30, 2000 or (iv) less than $(505,000,000) during the fourth fiscal
quarter ended on December 31, 2000 and thereafter.
- 2 -
<PAGE> 3
4.1.6 Working Capital. Permit Working Capital to be less
than: $(280,000,000) on the last day of any fiscal quarter on or
prior to September 30, 1999, and each fiscal quarter thereafter.
4.1.7 Total Debt. Permit Consolidated Indebtedness to (i)
exceed $475,000,000 during the first fiscal quarter ended on March
31, 2000, (ii) exceed $485,000,000 during the second fiscal
quarter ended on June 30, 2000, (iii) exceed $505,000,000 during
the third fiscal quarter ended on September 30, 2000 or (iv)
exceed $515,000,000 during the fourth fiscal quarter ended on
December 31, 2000 or thereafter.
Section 5 - 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 (i) $390,000,000 during the first
fiscal quarter ended on March 31, 2000, (ii) $400,000,000 during
the second fiscal quarter ended on June 30, 2000, (iii)
$415,000,000 during the third fiscal quarter ended on September
30, 2000 and (iv) $425,000,000 during the fourth fiscal quarter
ended on December 31, 2000 and thereafter.
Section 6 - Conditions to Effectiveness. This Twenty-sixth Amendment shall be
effective when, and only when, the Lender shall have received counterparts of
this Twenty-sixth Amendment executed by each of the Borrowers and copies of such
approvals, opinions or documents as the Lender may reasonably request.
Section 7 - Representations and Warranties. The Borrowers hereby jointly and
severally represent and warrant to the lender that:
(a) the execution, delivery and performance by each of the
Borrowers of this Twenty-sixth Amendment (i) are within each of the Borrower's
respective corporate powers, (ii) have been duly authorized by all necessary
corporate actions of each of the Borrowers and (iii) do not and will not (X)
violate any requirement of law, (Y) 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
(Z) 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; and
(b) that, after giving effect to this Twenty-sixth Amendment, all
the representations and warranties of the Borrowers contained in the Credit
Agreement shall be true and correct in all material respects.
- 3 -
<PAGE> 4
Section 8 - 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 Twenty-sixth 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 Twenty-sixth 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
Twenty-sixth Amendment may refer to the "Credit Agreement dated as of September
22, 1989" without making specific reference to the Twenty-sixth Amendment, but
nevertheless all such references shall be deemed to include this Twenty-sixth
Amendment unless the context shall otherwise require.
(e) This Twenty-sixth Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.
[SIGNATURE PAGES FOLLOW]
- 4 -
<PAGE> 5
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 set forth above written.
COURT SQUARE CAPITAL LIMITED
By:
---------------------------------
M. Saleem Muqaddam
Vice President
CONSOLIDATED FURNITURE CORPORATION
By:
---------------------------------
John B. Sganga
Executive Vice President,
Chief Financial Officer,
Secretary, Treasurer and
Controller
FURNITURE COMFORT CORPORATION
By:
---------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
SSC CORPORATION
By:
---------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
CHOICE SEATS CORPORATION
By:
---------------------------------
John B. Sganga
Treasurer, Vice President and
Secretary
- 5 -
<PAGE> 6
Annex A
FORM OF ENDORSEMENT NO. 10
COURT SQUARE CAPITAL LIMITED (formerly known as Citicorp Capital
Investors Ltd.) and CONSOLIDATED FURNITURE CORPORATION (formerly known as
Mohasco Corporation), FURNITURE COMFORT CORPORATION (formerly known as Mohasco
Upholstered Furniture Corporation, and as Futorian Furnishings, Inc.) (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 hereby agree that the promissory note, as amended, to which this
Endorsement No. 10 is attached (the "Revolving Credit Note") shall be and hereby
is amended as follows:
A. Each occurance of the amount "$380,000,000" on page 1 of
the Revolving Credit Note is deleted and the amount "$435,000,000" is inserted
in lieu thereof.
B. The words "Three Hundred Eighty Million" are deleted from
the fourth paragraph of the Revolving Credit Note and the words "Four Hundred
Thirty Five Million" are inserted in lieu thereof.
Date: December 29, 1999
[Signatures]
<PAGE> 7
ENDORSEMENT NO. 10
COURT SQUARE CAPITAL LIMITED (formerly known as Citicorp Capital
Investors Ltd.) and CONSOLIDATED FURNITURE CORPORATION (formerly known as
Mohasco Corporation), FURNITURE COMFORT CORPORATION (formerly known as Mohasco
Upholstered Furniture Corporation, and as Futorian Furnishing, Inc.) (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 hereby agree that the promissory note, as amended, to which this
Endorsement No. 10 is attached (the "Revolving Credit Note") shall be and hereby
is amended as follows:
A. Each occurance of the amount "380,000,000" on page 1 of the
Revolving Credit Note is deleted and the amount "435,000,000" is inserted in
lieu thereof.
B. The words "Three Hundred Eighty Million", are deleted from
the fourth paragraph of the Revolving Credit Note and the words "Four Hundred
Thirty Five Million" are inserted in lieu thereof.
Date: December 29, 1999
COURT SQUARE CAPITAL LIMITED
By:
------------------------------------
M. Saleem Muqaddam
Vice President
CONSOLIDATED FURNITURE CORPORATION
By:
------------------------------------
John B. Sganga
Executive Vice President,
Chief Financial Officer,
Secretary, Treasurer and
Controller
FURNITURE COMFORT CORPORATION
By:
------------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
<PAGE> 8
SSC CORPORATION
By:
------------------------------------
John B. Sganga
Vice President, Treasurer and
Secretary
CHOICE SEATS CORPORATION
By:
------------------------------------
John B. Sganga
Treasurer, Vice President and
Secretary
- 2 -
<PAGE> 1
EXHIBIT 4.62
NINTH AMENDMENT
NINTH AMENDMENT, dated as of December 29, 1999, 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 3, 2000 to January 2, 2001.
Terms
In consideration of the foregoing premises and the agreements and
covenants 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. 8 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. 8 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. 8 DATED
AS OF DECEMBER 29, 1999 WHICH IS ATTACHED HERETO."
1.2 The Indenture is hereby amended as follows:
<PAGE> 2
(a) The date "January 3, 2000" is deleted from
the fourth line of the cover page of the Indenture and the date "January 2,
2001" is inserted in lieu thereof.
(b) The date "January 3, 2000" is deleted from
the second paragraph on page 1 of the Indenture and the date "January 2, 2001"
is inserted in lieu thereof.
(c) The date "January 3, 2000" is deleted from
the definition of "Securities" in Section 1.1 of the Indenture and the date
"January 2, 2001" is inserted in lieu thereof.
Section 2. Conditions to Effectiveness. This Ninth Amendment
shall become effective when the Endorsement No. 8 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 Ninth
Amendment.
3.2 The execution, delivery and effectiveness of this
Ninth 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 Ninth 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 Ninth 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 Ninth Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Ninth Amendment for any other purpose.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Ninth
Amendment to be duly executed by their respective officers as of the date first
above written.
[SIGNATURE PAGES FOLLOW]
- 3 -
<PAGE> 4
CONSOLIDATED FURNITURE CORPORATION
By:
-------------------------------
John B. Sganga
Executive Vice President
By:
-------------------------------
John B. Sganga
Chief Financial Officer,
Treasurer and Controller
COURT SQUARE CAPITAL LIMITED
By:
-------------------------------
M. Saleem Muqaddam
Vice President
- 4 -
<PAGE> 5
ANNEX A
FORM OF ENDORSEMENT NO. 8
CONSOLIDATED FURNITURE CORPORATION and COURT SQUARE CAPITAL
LIMITED hereby agree that the promissory note to which this Endorsement No. 8 is
attached (the "Debentures") shall be and hereby is amended as follows:
A. Delete the words "January 3, 2000" appearing on the front
of the Debentures and substitute therefor the words "January 2, 2001."
B. Delete the words "due January 3, 2000" appearing on the
first page of the back of the Debentures and substitute therefor the words "due
January 2, 2001."
Date: December 29,1999
[Signatures]
<PAGE> 6
ENDORSEMENT NO. 8
CONSOLIDATED FURNITURE CORPORATION and COURT SQUARE CAPITAL
LIMITED hereby agree that the promissory note to which this Endorsement No. 8 is
attached (the "Debentures") shall be and hereby is amended as follows:
A. Delete the words "January 3, 2000" appearing on the front
of the Debentures and substitute therefor the words "January 2, 2001."
B. Delete the words "due January 3, 2000" appearing on the
first page of the back of the Debentures and substitute therefor the words "due
January 2, 2001."
CONSOLIDATED FURNITURE CORPORATION
Dated: December 29, 1999 By:
-------------------------------
John B. Sganga
Executive Vice President
Dated: December 29, 1999 By:
-------------------------------
John B. Sganga
Chief Financial Officer,
Treasurer and Controller
COURT SQUARE CAPITAL LIMITED
Dated: December 29, 1999 By:
-------------------------------
M. Saleem Muqaddam
Vice President
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
State of
Incorporation
or other
jurisdiction
in which
Name organized
---- -------------
<S> <C>
Consolidated Furniture Corporation New York
Furniture Comfort Corporation Delaware
SSC Corporation Delaware
</TABLE>
Each of the above subsidiaries is 100% owned by the Registrant or a
subsidiary (as indicated by indentation) and are included in the consolidated
financial statements of the Registrant.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,135
<SECURITIES> 0
<RECEIVABLES> 8,455
<ALLOWANCES> 325
<INVENTORY> 6,841
<CURRENT-ASSETS> 20,272
<PP&E> 8,127
<DEPRECIATION> 5,185
<TOTAL-ASSETS> 23,339
<CURRENT-LIABILITIES> 323,030
<BONDS> 248,781
0
100
<COMMON> 55,948
<OTHER-SE> (815,278)
<TOTAL-LIABILITY-AND-EQUITY> 23,339
<SALES> 100,072
<TOTAL-REVENUES> 100,072
<CGS> 91,420
<TOTAL-COSTS> 109,644
<OTHER-EXPENSES> 2,137
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,591
<INCOME-PRETAX> (88,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (88,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88,300)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
