<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECITON 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 22, 1999
--------------------------------
Interiors, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-24352 13-3590047
- ---------------------------- ------------------------ -------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
320 Washington Street, Mount Vernon, New York 10553
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (914) 665-5400
------------------------------
- --------------------------------------------------------------------------------
(Former Name of Former Address, if Changed Since Last Report)
<PAGE>
The Registrant hereby amends its Current Report on Form 8-K as filed
with the Commission on March 9, 1998 to include the financial statements and pro
forma financial information set forth below which was omitted from the filing
pursuant to Items 7(a)(4) and 7(b)(2).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
(1) Financial Statements of Stylecraft Lamps, Inc. ("Stylecraft") are
appended as an exhibit to this Report.
(a) Pro Forma Financial Information
Pro Forma Financial Information with respect to acquisition of
Stylecraft is appended as an exhibit to this Report.
(b) Exhibits
Financial Statements for Stylecraft for the year[s] ended December 31,
1998 [and December 31, 1997]. Pro Forma Financial Information with
respect to acquisition of Stylecraft Lamps, Inc.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: INTERIORS, INC.
May 10, 1999 By: /s/ Richard Belenski
--------------------------------
Chief Financial Officer
3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Financial Statements for Stylecraft Lamps, Inc. for the year[s]
ended December 31, 1998 [and December 31, 1997]
99.2 Pro Forma Financial Information with respect to acquisition of
Stylecraft Lamps, Inc.
<PAGE>
STYLECRAFT LAMPS, INC.
FINANCIAL STATEMENTS AND
SUPPLEMENTAL MATERIAL
YEARS ENDED DECEMBER 31, 1998 AND 1997
<PAGE>
STYLECRAFT LAMPS, INC.
CONTENTS
- --------------------------------------------------------------------------------
ORGANIZATION AND BUSINESS 3
THE HIGHLIGHTS 4
INDEPENDENT AUDITORS' REPORT 5
FINANCIAL STATEMENTS
Balance sheets 6
Statements of income 7
Statements of stockholders' equity 8
Statements of cash flows 9
Summary of accounting policies 10-11
Notes to financial statements 12-16
SUPPLEMENTAL MATERIAL
Independent auditors' report on
supplemental material 17
Analysis of net sales 18
Analysis of manufacturing overhead 18
Analysis of operating expenses 19
2
<PAGE>
STYLECRAFT LAMPS, INC.
ORGANIZATION AND BUSINESS
- --------------------------------------------------------------------------------
STATE AND DATE Tennessee - October 1977
OF INCORPORATION
OFFICE AND PLANT Hernando, Mississippi
OFFICERS AND Jimmy D. Webster, Jr. - President, Chief Executive
DIRECTORS Officer and Chairman of
the Board
Robert M. Kennedy President and Director
Henry L. Gray - Senior Vice President,
Secretary-Treasurer and
Director
Roland J. Harrison - Vice President of Finance,
Chief Financial Officer
and Director
James P. Tipton - Vice President of
Purchasing and Product
Development and Director
BUSINESS Manufacture and wholesale distribution of lamps and
portable lighting.
3
<PAGE>
<TABLE>
STYLECRAFT LAMPS, INC.
THE HIGHLIGHTS
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year ended December 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES 25,388,927 21,093,158 18,913,208
Percent increase (decrease) 20.4 11.5 (8.7)
NET INCOME 2,165,642 1,490,750 1,231,665
Percent to net sales 8.5 7.1 6.5
Percent to stockholders' average equity 40.3 31.3 30.9
COST OF SALES
Gross profit 7,304,207 5,906,357 5,482,905
Percent to net sales 28.8 28.0 29.0
OPERATING EXPENSES 5,150,414 4,513,299 4,261,145
Percent to net sales 20.3 21.4 22.5
WORKING CAPITAL
At year end 4,303,630 3,900,402 3,468,055
Current asset ratio 2.2 TO 1 2.5 to 1 2.5 to 1
Quick ratio (cash and trade accounts
receivable to current liabilities) 1.3 TO 1 1.5 to 1 1.7 to 1
Inventories 3,219,054 2,345,959 1,720,804
Percent increase (decrease) 37.2 36.3 (8.6)
Percent of working capital 74.8 60.1 49.6
Turnover 6.5 7.5 7.5
Trade receivables 2,612,564 2,145,996 1,981,171
Percent increase 21.7 8.3 7.2
Percent of working capital 60.7 55.0 57.1
Number of days sales 38 37 38
COMMON STOCK
Outstanding shares at year end 1,333 1,333 1,333
Stockholders' equity 5,484,531 5,236,992 4,273,378
Distributions 1,918,103 527,136 644,000
Per share:
Earnings (basic and diluted) 1,624 1,118 924
Stockholders' equity 4,114 3,929 3,206
Distributions 1,439 395 483
- -----------------------------------------------------------------------------------------------
See accompanying independent auditors' report on supplemental material.
4
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stylecraft Lamps, Inc.
Hernando, Mississippi
We have audited the accompanying balance sheets of Stylecraft Lamps, Inc. as of
December 31, 1998 and 1997, and the related statements of income, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stylecraft Lamps, Inc. at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
January 15, 1999
Memphis, Tennessee
5
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 1,934,036 $ 1,887,304
Receivables:
Trade, less $30,000 and $20,000 allowance for possible
losses (Notes 1 and 4) 2,612,564 2,145,996
Other 10,274 29,185
Inventories (Note 2) 3,219,054 2,345,959
Note receivable from stockholder 100,000 100,000
- -----------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 7,875,928 6,508,444
PROPERTY AND EQUIPMENT, less accumulated
depreciation (Notes 3 and 5) 1,370,901 1,478,668
OTHER - 77,922
- ----------------------------------------------------------------------------------------------
$ 9,246,829 $ 8,065,034
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
STYLECRAFT LAMPS, INC.
BALANCE SHEETS
- -----------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (Note 4) $ - $ 5,000
Stockholders' distributions payable 567,215 -
Accounts payable 2,730,008 2,095,904
Accrued expenses 245,075 354,946
Current maturities of long-term debt (Note 5) 30,000 152,192
- -----------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,572,298 2,608,042
LONG-TERM DEBT, less current maturities (Note 5) 190,000 220,000
- -----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 3,762,298 2,828,042
- -----------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)
STOCKHOLDERS' EQUITY
Common stock, $4 par - shares authorized 2,000;
shares outstanding 1,333 5,332 5,332
Additional paid-in capital 33,700 33,700
Retained earnings (Note 7) 5,445,499 5,197,960
- -----------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 5,484,531 5,236,992
- -----------------------------------------------------------------------------------------------
$ 9,246,829 $ 8,065,034
- -----------------------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to financcial statements.
6
</TABLE>
<PAGE>
<TABLE>
STYLECRAFT LAMPS, INC.
STATEMENTS OF INCOME
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year ended December 31, 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 25,388,927 $ 21,093,158
- -----------------------------------------------------------------------------------------------
COST OF SALES
Materials consumed 14,060,328 11,549,727
Direct labor 1,648,482 1,420,972
Manufacturing overhead 2,375,910 2,216,102
- -----------------------------------------------------------------------------------------------
Total cost of sales 18,084,720 15,186,801
- -----------------------------------------------------------------------------------------------
GROSS PROFIT 7,304,207 5,906,357
OPERATING EXPENSES 5,150,414 4,513,299
- -----------------------------------------------------------------------------------------------
OPERATING INCOME 2,153,793 1,393,058
- -----------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 63,891 91,551
Interest expense (21,199) (31,060)
Gain (loss) on sale of assets (48,037) 10,295
Miscellaneous - net 17,194 26,906
- -----------------------------------------------------------------------------------------------
Total other income 11,849 97,692
- -----------------------------------------------------------------------------------------------
NET INCOME (Note 7) $ 2,165,642 $ 1,490,750
- -----------------------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to financcial statements.
7
</TABLE>
<PAGE>
<TABLE>
STYLECRAFT LAMPS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------
<CAPTION>
Total
Common Stock Additional Stock-
------------------ Paid-in Retained Treasury holders'
Shares Amount Capital Earnings Stock Equity
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 1,500 6,000 37,921 4,640,361 (410,90) 4,273,378
Net income for the year - - - 1,490,750 - 1,490,750
Distributions to stockholders - - - (527,136) - (527,136)
Retirement of treasury stock (167) (668) (4,221) (406,015) 410,904 -
- ------------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 1,333 5,332 33,700 5,197,960 $ - 5,236,992
Net income for the year - - - 2,165,642 - 2,165,642
Distributions to stockholders - - - (1,918,10) - (1,918,10)
- ------------------------------------------------------------------------------------------------
BALANCE, December 31, 1998 1,333 $5,332 $33,700 $5,445,499 $ - $5,484,531
- ------------------------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to financcial statements.
8
</TABLE>
<PAGE>
<TABLE>
STYLECRAFT LAMPS, INC.
STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year ended December 31, 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,165,642 $ 1,490,750
Depreciation and amortization 241,947 191,230
Provision for bad debts 53,518 24,476
Loss (gain) on sale of assets 48,037 (10,295)
Non-cash officer compensation (Note 8) 262,901 -
Increase in operating assets:
Receivables (501,175) (186,596)
Inventories (873,095) (625,155)
Increase (decrease) in operating liabilities:
Accounts payable 634,104 246,644
Accrued expenses (109,871) 112,668
- -----------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,922,008 1,243,722
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (332,568) (615,889)
Proceeds from sale of assets 27,450 75,613
Increase in other assets (62,078) (20,478)
- -----------------------------------------------------------------------------------------------
Net cash used by investing activities (367,196) (560,754)
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to stockholders (1,350,888) (527,136)
Principal payments on long-term debt (152,192) (140,967)
Line of credit repayments - net (5,000) -
- -----------------------------------------------------------------------------------------------
Net cash used by financing activities (1,508,080) (668,103)
- -----------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS (Note 8) 46,732 14,865
CASH AND CASH EQUIVALENTS, beginning of year 1,887,304 1,872,439
- -----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 1,934,036 $ 1,887,304
- -----------------------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to financcial statements.
9
</TABLE>
<PAGE>
STYLECRAFT LAMPS, INC.
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
BUSINESS The Company is a manufacturer of lamps and portable
lighting sold primarily for wholesale distribution
throughout the United States. The Company operates
in five buildings in northwest Mississippi.
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.
INVENTORIES Inventories are valued at the lower of cost
(first-in, first-out) or market. Maintenance and
office supplies are not inventoried.
PROPERTY, Property and equipment are stated at cost.
EQUIPMENT AND Maintenance and repairs are charged to operations
DEPRECIATION when incurred. For financial reporting and income
tax purposes, depreciation is computed using the
straight-line and accelerated methods over the
following estimated useful lives:
--------------------------------------------------
Land improvements 15-19
Buildings and improvements 7-40
Office furniture and equipment 5-7
Machinery and equipment 5-7
Autos and trucks 3-5
--------------------------------------------------
RECLASSIFICATIONS Certain amounts in the 1997 financial statements
have been reclassified to conform to the 1998
presentation.
10
<PAGE>
STYLECRAFT LAMPS, INC.
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
FAIR VALUE OF The carrying amounts reported in the balance sheets
FINANCIAL for cash, accounts receivable and accounts payable,
INSTRUMENTS and accrued liabilities approximate fair value
because of the immediate or short-term maturity of
these financial instruments. The carrying amounts
of the Company's financial instruments consisting
of cash and cash equivalents, accounts and notes
receivable and long-term debt are estimated by
management to approximate their respective fair
values.
LONG-LIVED ASSETS The Company assesses potential impairments to its
long-lived assets when there is evidence that
events or changes in circumstances have made
recovery of the asset's carrying value unlikely. An
impairment loss would be recognized when the sum of
the expected future undiscounted net cash flows is
less than the carrying amount of the asset. No such
impairment losses have been identified by the
Company.
REVENUE Sales and related cost of sales are recognized upon
RECOGNITION passage of title which generally coincides with
shipment of the products to the customer.
11
<PAGE>
STYLECRAFT LAMPS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ACCOUNTS The Company is a manufacturer of lamps and portable
RECEIVABLE AND lighting, and grants credit to its customers,
CONCENTRATION OF substantially all of whom are domestic retailers.
RISK Collections are dependent upon the retail economy.
The Company evaluates the need for reserves for
potential losses from credit sales to these
customers and such losses have been within
management's expectations.
Due to the nature of its business and the volume of
sales activity, the Company accumulates, from time
to time, bank balances in excess of the insurance
provided by Federal insurance authorities. At
December 31, 1998, such excess balances totaled
approximately $2,222,000.
Sales to one customer accounted for approximately
10% of total sales for 1998. Outstanding accounts
receivable from this customer were approximately
$342,000 at December 31, 1998. There were no sales
exceeding 10% to one customer for 1997.
Activity in the allowance for possible losses is
summarized as follows:
December 31, 1998 1997
---------------------------------------------------
BALANCE, beginning of year $ 20,000 $ 20,000
Charged to expense 53,518 24,476
Uncollected balances written
off, net of recoveries (43,518) (24,476)
---------------------------------------------------
BALANCE, at end of year $ 30,000 $ 20,000
---------------------------------------------------
12
<PAGE>
STYLECRAFT LAMPS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. INVENTORIES Inventories are summarized as follows:
December 31, 1998 1997
---------------------------------------------------
Finished products and
work-in-process $ 1,419,293 $ 1,194,649
Raw materials and
purchased parts 1,804,761 1,151,310
---------------------------------------------------
Totals $ 3,219,054 $ 2,345,959
---------------------------------------------------
3. PROPERTY AND Major classes of property and equipment consist of
EQUIPMENT the following:
December 31, 1998 1997
---------------------------------------------------
Land and improvements $ 97,079 $ 97,079
Buildings and
improvements 1,412,686 1,235,213
Machinery and equipment 560,536 542,981
Office furniture and
equipment 578,436 520,846
Autos and trucks 200,190 390,572
---------------------------------------------------
2,848,927 2,786,691
Less accumulated
depreciation (1,478,026) (1,308,023)
---------------------------------------------------
Net property and
equipment $ 1,370,901 $ 1,478,668
---------------------------------------------------
4. NOTES PAYABLE The Company has a $1,000,000 bank line of credit
agreement available through May 1, 1999. There were
no borrowings outstanding under this agreement at
December 31, 1998 and there were $5,000 of
borrowings outstanding at December 31, 1997.
Borrowings bear interest at the bank's prime rate
(7.75% at December 31, 1998) and are collateralized
by trade accounts receivable.
13
<PAGE>
STYLECRAFT LAMPS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. LONG-TERM DEBT Long-term debt consists of the following:
December 31, 1998 1997
---------------------------------------------------
State of Mississippi Rural
Economic Development General
Obligation bond issue $220,000 $250,000
Note to stockholder repaid in
December 1998 - 122,192
---------------------------------------------------
Totals 220,000 372,192
Less current maturities (30,000) (152,192)
---------------------------------------------------
Long-term debt $190,000 $220,000
---------------------------------------------------
The State of Mississippi Rural Economic Development
General Obligation bonds are scheduled to mature
serially over the next six years and bear interest
at an average coupon rate of 5.402%. The bonds are
secured by property and equipment with a net book
value of approximately $268,000.
The principal payments required on the bonds in
future years are as follows:
---------------------------------------------------
1999 $ 30,000
2000 35,000
2001 35,000
2002 40,000
2003 40,000
2004 40,000
---------------------------------------------------
$ 220,000
---------------------------------------------------
14
<PAGE>
STYLECRAFT LAMPS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. COMMITMENTS AND The Company is involved in various legal matters in
CONTINGENCIES the ordinary course of its business. None of these
matters are expected to have a material adverse
effect on the Company's financial statements.
The Company leases certain market showrooms under
noncancellable operating leases which expire
through the year 2002. Management expects that in
the normal course of business, the leases will be
renewed or replaced by other leases. Rent expense
under all market showroom leases was approximately
$135,000 and $132,000 for 1998 and 1997,
respectively.
At December 31, 1998, the future minimum payments
for showroom leases are as follows:
---------------------------------------------------
1999 $ 60,640
2000 44,557
2001 42,473
2002 3,548
---------------------------------------------------
Total $ 151,218
---------------------------------------------------
7. TAXES ON INCOME The absence of a provision for income taxes is due
to the election by the Company, and consent by its
stockholders, to include their respective shares of
taxable income of the corporation in their
individual tax returns. As a result, no federal or
state income taxes are imposed on the Company.
At December 31, 1998, retained earnings which can
be distributed tax free to shareholders were
approximately $2,722,000.
15
<PAGE>
STYLECRAFT LAMPS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. SUPPLEMENTAL Interest paid was $21,181 in 1998 and $31,253 in
DISCLOSURE OF 1997. In 1998 an officer received non-cash
CASH FLOW compensation of $262,901 at estimated fair value
INFORMATION and consisted of $140,000 in life insurance premium
receivables and $122,901 in automotive equipment.
The book value of the assets included in the
non-cash compensation was more than fair market
value and, as a result, the Company recognized a
$56,376 loss on the transfer. The transaction did
not have a significant impact on the Company's
results of operations.
9. PENDING SALE On August 22, 1998, the Company's stockholders
entered into an agreement to sell all of the
Company's outstanding stock to a third party in
exchange for cash. The sale is expected to close in
February 1999.
10. YEAR 2000 ISSUES Like other companies, Stylecraft Lamps, Inc. could
(UNAUDITED) be adversely affected if the computer systems we,
our suppliers or customers use do not properly
process and calculate date-related information and
data from the period surrounding and including
January 1, 2000. This is commonly known as the
"Year 2000" issue. Additionally, this issue could
impact non-computer systems and devices such as
production equipment, elevators, etc. At this time,
because of the complexities involved in the issue,
management cannot provide assurances that the Year
2000 issue will not have an impact on the Company's
operations.
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON SUPPLEMENTAL MATERIAL
Our audits of the basic financial statements included in the preceding section
of this report were made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental material presented in the
following section of this report is presented for purposes of additional
analysis, and the information appearing on page 4 is presented to highlight
certain information in the basic financial statements; they are not a required
part of those financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
We have also previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1996 and the related statements
of income, stockholders' equity and cash flows for the year then ended (which
are not presented herein): and we expressed an unqualified opinion on those
financial statements.
Certified Public Accountants
Memphis, Tennessee
January 15, 1999
17
<PAGE>
<TABLE>
STYLECRAFT LAMPS, INC.
ANALYSIS OF NET SALES
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year ended December 31,
--------------------------------------------------------------
1998 1997
------------------------------- ------------------------------
PERCENT TO Percent to
AMOUNT NET SALES Amount Net Sales
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross sales $ 26,514,298 104.4% $ 21,776,433 103.2%
Less returns and allowances (1,125,371) (4.4) (683,275) (3.2)
- -----------------------------------------------------------------------------------------------
Net sales $ 25,388,927 100.0% $ 21,093,158 100.0%
- -----------------------------------------------------------------------------------------------
ANALYSIS OF MANUFACTURING OVERHEAD
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year ended December 31, 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Indirect labor $ 1,840,407 $ 1,690,012
Payroll taxes 180,491 202,465
Supplies 156,042 116,586
Depreciation 70,652 54,187
Utilities 67,436 64,755
Repairs and maintenance 48,850 42,632
Rent 4,221 5,128
Workers' compensation insurance 3,867 30,298
General insurance 3,944 10,039
- -----------------------------------------------------------------------------------------------
Total manufacturing overhead $ 2,375,910 $ 2,216,102
- -----------------------------------------------------------------------------------------------
See accompanying independent auditors' report on supplemental material.
18
</TABLE>
<PAGE>
<TABLE>
STYLECRAFT LAMPS, INC.
ANALYSIS OF OPERATING EXPENSES
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year ended December 31, 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
SELLING EXPENSES
Sales commissions $ 1,946,425 $ 1,615,211
Freight-out 436,323 479,172
Advertising and promotion 229,099 219,579
Travel and entertainment 73,758 84,389
Depreciation 94,775 52,605
- -----------------------------------------------------------------------------------------------
TOTAL SELLING EXPENSES 2,780,380 2,450,956
- -----------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries 1,661,618 1,468,648
Professional fees 127,854 42,986
Repairs and maintenance 86,845 75,790
Depreciation 76,520 84,438
Payroll taxes 75,054 63,885
Office supplies 56,384 31,956
Other taxes 54,613 55,927
Bad debt expense 53,518 24,476
Telephone 37,167 32,124
Employee benefits 34,644 84,295
Postage 21,458 18,108
General insurance 16,814 42,797
Dues and subscriptions 14,708 8,254
Contract labor 13,623 -
Contributions 10,654 10,621
Bank charges 3,670 3,116
Miscellaneous 24,890 14,922
- -----------------------------------------------------------------------------------------------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 2,370,034 2,062,343
- -----------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 5,150,414 $ 4,513,299
- -----------------------------------------------------------------------------------------------
See accompanying independent auditors' report on supplemental material.
19
</TABLE>
<PAGE>
EXHIBIT 99.2 PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Combined financial Information as of June 30, 1998 and
the year then ended and as of December 31, 1998 and the for six months then
ended for Interiors, Inc. and comparable periods for the Combined Companies has
been prepared to reflect the combined financial position and the results of
operations of Interiors, Inc. and subsidiaries as if the combination described
had been effective as of July 1, 1997 for one year operations ending June 30,
1998 and for six months operations ending December 31, 1998. The acquisitions of
Stylecraft, Petals, Model Homes, CSL and the probable acquisition of Decor have
been accounted for as purchases as if the acquisitions had all occurred as of
July 1, 1997 for the fiscal year ending June 30, 1998 and as purchases as if the
acquisitions had all occurred as of July 1, 1998 for the interim period ending
December 31, 1998. The excess of purchase price over fair value of assets
acquired if the acquisitions had all occurred as of July 1, 1997 or July 1, 1998
is reflected as an intangible asset and is being amortized over forty years.
The Pro Forma Combined Financial Information is unaudited and not necessarily
indicative of the consolidated results which actually would have occurred if the
combination had been consummated at the beginning of the periods presented, nor
does it purport to represent the future financial position and results of
operations for future periods.
In management's opinion, all material adjustments necessary to reflect the
affects of the combination have been made.
<PAGE>
PRO FORMA INTERIM FINANCIAL INFORMATION FOR INTERIORS AND COMBINED COMPANIES
($'S 000)
<TABLE>
<CAPTION>
Model
Interiors Stylecraft Petals Homes CSL Decor Adjustments Total
12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES 23,263 15,500 22,400 5,700 6,200 2,350 75,413
COST OF GOODS SOLD 14,960 10,800 10,640 2,850 3,900 1,300 44,450
------------------------------------------------------------------------------------
Gross profit 8,302 4,700 11,760 2,850 2,300 1,050 30,962
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 6,962 2,450 10,024 2,650 2,000 1,000 (38) 25,048
------------------------------------------------------------------------------------
Income from operations 1,341 2,250 1,736 200 300 50 38 5,915
OTHER EXPENSE (INCOME)
Amortization of goodwill 193 200 393
Interest expense 984 10 300 150 50 335 1,829
Financing charges - noncash 437 437
Consulting and management fees (120) 38 (82)
Minority interest expense 88 88
Gain on legal settlement (82) (82)
------------------------------------------------------------------------------------
Total other expense (income) 1,412 10 300 0 150 50 661 2,583
------------------------------------------------------------------------------------
Income (loss) from operations
before (benefit) provision for
income taxes and extraordinary item (71) 2,240 1,436 200 150 0 (623) 3,332
(BENEFIT) PROVISION FOR INCOME TAXES 10 157 115 14 20 0
------------------------------------------------------------------------------------
Income (loss) from operations before
extraordinary item (81) 2,083 1,321 186 130 0 (623) 3,332
EXTRAORDINARY GAIN FROM EARLY
EXTINGUISHMENT OF DEBT 1,371
------------------------------------------------------------------------------------
NET INCOME 1,289 2,083 1,321 186 130 0 (623) 3,332
------------------------------------------------------------------------------------
Basic EPS 0.08 0.16
Diluted EPS 0.08 0.15
Shares (000) 14,038 3,529 17,567
Shares (000) 14,928 3,529 18,457
</TABLE>
PRO FORMA INTERIM FINANCIAL INFORMATION FOR INTERIORS AND COMBINED COMPANIES
($'S 000)
<TABLE>
<CAPTION>
Model
Interiors Stylecraft Petals Homes CSL Decor Adjustments Total
6/30/98 6/30/98 6/30/98 6/30/98 6/30/98 6/30/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES 54,600 25,400 37,200 9,900 12,400 5,200 144,700
COST OF GOODS SOLD 35,700 17,900 17,900 5,000 7,800 3,200 87,500
-----------------------------------------------------------------------------------
Gross profit 18,900 7,500 19,300 4,900 4,600 2,000 57,200
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 15,587 5,400 16,800 5,000 6,300 3,600 (200) 52,487
-----------------------------------------------------------------------------------
Income from operations 3,313 2,100 2,500 (100) (1,700) (1,600) 200 4,713
OTHER EXPENSE (INCOME)
Amortization of goodwill 42 747 789
Interest expense 1,400 600 (100) 400 100 670 3,070
Financing charges - noncash 306 270 576
Consulting and management fees (335) 200 (135)
Minority interest income (1,029) (1,029)
-----------------------------------------------------------------------------------
Total other expense (income) 1,413 0 600 (100) 400 100 858 3,271
-----------------------------------------------------------------------------------
Income (loss) from operations
before (benefit) provision for
income taxes and extraordinary item 1,900 2,100 1,900 0 (2,100) (1,700) (658) 1,442
(BENEFIT) PROVISION FOR INCOME TAXES (93) (102) (93) 0 0 0 0 (288)
-----------------------------------------------------------------------------------
NET INCOME 1,993 2,202 1,993 0 (2,100) (1,700) (658) 1,730
-----------------------------------------------------------------------------------
Basic EPS 0.12 0.04
Diluted EPS 0.11 0.04
Shares (000) 14,038 3,529 17,567
Shares (000) 14,928 3,529 18,457
</TABLE>
<PAGE>
PRO FORMA INTERIM FINANCIAL INFORMATION FOR INTERIORS AND COMBINED COMPANIES
($'S 000)
<TABLE>
<CAPTION>
Model
Interiors Stylecraft Petals Homes CSL Decor Adjustments Total
BALANCE SHEET 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash 673 1,934 1,949 65 (4,612) 9
Accounts receivable, net 6,946 2,613 482 1,243 1,310 510 13,104
Inventories 8,400 3,219 7,111 860 3,492 622 23,704
Other current assets 6,214 110 1,432 130 218 656 8,760
-------------------------------------------------------------------------------------
Total current assets 22,233 7,876 10,974 2,233 5,085 1,788 (4,612) 45,577
-------------------------------------------------------------------------------------
INVESTMENT IN AFFILIATES 4,467 4,467
PROPERTY AND EQUIPMENT, net 1,513 1,371 929 4,852 1,004 81 9,750
OTHER ASSETS 21,093 460 34 332 1,623 13,799 37,341
-------------------------------------------------------------------------------------
Total assets 49,306 9,247 12,363 7,119 6,421 3,492 9,187 97,135
=====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Notes payable and current
maturities of long-term debt 12,665 30 2,826 741 2,197 1,301 (3,097) 16,663
Accounts payable and accrued
liabilities 8,191 3,542 6,959 2,109 2,093 2,026 (891) 24,029
-------------------------------------------------------------------------------------
Total current liabilities 20,856 3,572 9,785 2,850 4,290 3,327 (3,988) 40,692
LONG TERM DEBT 5,287 190 282 1,723 513 11,349 19,344
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
5,300,000 shares authorized, 596,711
shares issued and outstanding 6 2 (2) 6
Preferred stock, $.01 par value,
65 65
Class A common stock, $.001 par value,
60,000,000 shares authorized,
23,285,425 shares issued, 20 5 53 200 12 (267) 23
21,785,425 shares outstanding
Class B common stock, $.001 par value,
2,500,000 shares authorized,
1,105,000 shares issued and
outstanding 1 1
Treasury stock (1,317) (1,700) (1,218) 2,918 (1,317)
Additional paid-in-capital 32,946 34 4,231 16,279 6,611 (13,287) 46,814
Accumulated deficit (7,545) 5,446 (288) 4,069 (14,665) (6,961) 12,399 (7,545)
Notes receivable (948) (948)
-------------------------------------------------------------------------------------
Total stockholders' equity 23,163 5,485 2,296 4,269 408 (348) 1,826 37,099
-------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 49,306 9,247 12,363 7,119 6,421 3,492 9,187 97,135
=====================================================================================
</TABLE>
