<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
AMENDMENT NO. 1
WINSLOEW FURNITURE, INC.
------------------------
(NAME OF THE ISSUER)
TRIVEST FURNITURE CORPORATION
TRIVEST FURNITURE PARTNERS, LTD.
TRIVEST FUND II GROUP, LTD.
EARL W. POWELL
PHILLIP T. GEORGE, M.D.
WILLIAM F. KACZYNSKI, JR.
PETER W. KLEIN
BOBBY TESNEY
VINCENT A. TORTORICI, JR.
R. CRAIG WATTS
RICK J. STEPHENS
WINSLOEW FURNITURE, INC.
------------------------
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
--------------------------------------
(TITLE OF CLASS OF SECURITIES)
975377 10 2
-----------
(CUSIP NUMBER OF CLASS OF SECURITIES)
<TABLE>
<CAPTION>
<S> <C> <C>
Peter W. Klein, Esq. Vincent A. Tortorici, Jr.
Trivest, Inc. WinsLoew Furniture, Inc.
2665 South Bayshore Drive, Suite 800 160 Village Street
Miami, Florida 33133 Birmingham, Alabama 35242
(305) 858-2200 (205-408-7600)
WITH COPIES TO:
James M. Dubin, Esq.
Bruce E. Macdonough, Esq. Paul, Weiss, Rifkind, James F. Hughey, Jr.
Greenberg Traurig, P.A. Wharton & Garrison Balch & Bingham LLP
1221 Brickell Avenue 1285 Avenue of the Americas 1901 Sixth Avenue North
Miami, Florida 33131 New York, New York 10019 Birmingham, Alabama 35203
(305) 579-0500 (212) 373-3000 (205) 251-8100
</TABLE>
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
<PAGE> 2
This statement is filed in connection with (check the appropriate box):
a. |X| The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or Rule
13e-3(c) under the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities
Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or
information statement referred to in checking box (a) are
preliminary copies:
<TABLE>
<CAPTION>
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
TRANSACTION VALUE AMOUNT OF FILING FEE
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
$249,571,303....................................... $49,915
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</TABLE>
* For purposes of calculating the fee only. Assumes purchase of 7,181,908
shares of Common Stock, par value $.01 per share, of WinsLoew
Furniture, Inc. at $34.75 per share.
|X| Check box if any of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the form or schedule and the
date of its filing.
Amount previously paid: $47,401; $2,514
Form or registration no.: Preliminary Proxy Statement on Schedule 14A
Filing party: WinsLoew Furniture, Inc.
Dates filed: April 20, 1999; June 4, 1999
<PAGE> 3
This Rule 13e-3 Transaction Statement (this "Statement") is being filed
in connection with the filing by WinsLoew Furniture, Inc. ("WinsLoew" or the
"Company") with the Securities and Exchange Commission (the "Commission") on
June 4, 1999 of a preliminary Proxy Statement on Schedule 14A (the "Proxy
Statement") in connection with a special meeting of the shareholders of
WinsLoew. At such meeting, the shareholders of WinsLoew will vote upon, among
other things, the adoption of a Second Amended and Restated Agreement and Plan
of Merger dated as of May 4, 1999 (the "Merger Agreement") by and among
WinsLoew and Trivest Furniture Corporation (the "Purchaser"), pursuant to which
the Purchaser will be merged with and into WinsLoew.
The following cross reference sheet is being supplied pursuant to
General Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement of the information required to be included in response to the items of
this Statement. The information in the Schedule 14A which is attached hereto as
Exhibit (d)(3), including all appendices thereto, is hereby expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by the provisions of the Proxy Statement.
CROSS REFERENCE SHEET
ITEM IN SCHEDULE 13E-3 CAPTION OR LOCATION IN THE PROXY STATEMENT
- -------------------------------- --------------------------------------------
Item 1(a)........................ Outside Front Cover Page; "Introduction";
"Summary -- Parties to the Merger"
Item 1(b)........................ Outside Front Cover Page; "Summary--Record
Date and Quorum"; "--Market Prices of Common
Stock and Dividends"; "Market Prices of
Common Stock and Dividends"
Item 1(c)........................ "Summary--Market Prices of Common Stock and
Dividends"; "Market Prices of Common Stock
and Dividends"
Item 1(d)........................ "Dividends"; "Market Prices of Common Stock
and Dividends"
Item 1(e)........................ None
Item 1(f)........................ "Dividends"; "Market Prices of Common Stock
and Dividends"
Item 2(a)........................ "Introduction"; "Summary--Parties to the
Merger"; "Management--Directors and
Executive Officers of WinsLoew"; "Certain
Information Concerning the Purchaser and
Other Affiliates"
Item 2(b)-(d).................... "Management--Directors and Executive
Officers of WinsLoew"; "Certain Information
Concerning the Purchaser and Other
Affiliates"
Item 2(e)........................ None
Item 2(f)........................ None
Item 2(g)........................ "Management--Directors and Executive
Officers of WinsLoew"; "Certain Information
Concerning the Purchaser and Other
Affiliates"
Item 3(a)(1)..................... "Certain Transactions"
3
<PAGE> 4
ITEM IN SCHEDULE 13E-3 CAPTION OR LOCATION IN THE PROXY STATEMENT
- --------------------------------- --------------------------------------------
Item 3(a)(2)..................... "Summary--Conflicts of Interest"; "--Certain
Effects of the Merger"; "Special
Factors--Background of the Merger";
"--Conflicts of Interest";
"--Certain Effects of the Merger"
Item 3(b)......................... "Summary--Conflicts of Interest"; "--Certain
Effects of the Merger"; "Special
Factors--Background of the Merger";
"--Conflicts of Interest";
"--Certain Effects of the Merger"
Item 4(a)......................... "Introduction"; "Summary--The Merger";
"--Effective Time of the Merger and Payment
for Shares"; "--Certain Effects of the
Merger"; "--Conditions to the Merger,
Termination and Expenses"; "--Rights of
Dissenting Shareholders"; "The Merger";
"Rights of Dissenting Shareholders";
Appendix A
Item 4(b)......................... "Introduction"; "Summary--Purpose of the
Special Meeting"; "--Parties to the Merger";
"--Purpose and Reasons of the Affiliates for
the Merger"; "--Conflicts of Interest";
"--Rights of Dissenting Shareholders";
"Special Factors--Purpose and Reasons of the
Affiliates for the Merger"; "--Conflicts of
Interest"; "--Certain Effects of the
Merger"; "The Merger--Termination Fee";
"Rights of Dissenting Shareholders"
Item 5(a), (b).................... "Summary--Purpose and Reasons of the
Affiliates for the Merger"; "--Conflicts of
Interest"; "--Certain Effects of the
Merger"; "--Financing of the Merger";
"Special Factors--Background of the Merger";
"--Purpose and Reasons of the Affiliates for
the Merger"; "--Conflicts of Interest";
"--Certain Effects of the Merger";
"--Conduct of WinsLoew's Business After the
Merger"
Item 5(c)......................... "Special Factors--Conflicts of Interest";
"--Conduct of WinsLoew's Business
After the Merger"
Item 5(d)......................... "Summary--Conflicts of Interest";
"--Financing of the Merger"; "Special
Factors--Conflicts of Interest"; "The
Merger--Financing"
Item 5(e)........................ "Summary--Financing of the Merger";
"--Certain Effects of the Merger"; "Special
Factors--Certain Effects of the Merger";
"--Conduct of WinsLoew's Business After
the Merger"; "The Merger--Financing"
Item 5(f), (g)................... "Summary--Certain Effects of the Merger";
"Special Factors--Certain Effects of the
Merger"
Item 6(a)......................... "Summary--Financing of the Merger"; "The
Merger--Financing"
Item 6(b)......................... "The Merger--Expenses of the Transaction"
Item 6(c)......................... "Summary--Financing of the Merger"; "The
Merger--Financing"
Item 6(d)......................... Not applicable
4
<PAGE> 5
ITEM IN SCHEDULE 13E-3 CAPTION OR LOCATION IN THE PROXY STATEMENT
- --------------------------------- --------------------------------------------
Item 7(a)-(c)..................... "Summary"; "Special Factors--Background of
the Merger"; "--The Special Committee's and
the Board's Recommendation"; "--Opinion of
Financial Advisor"; "--Purpose and Reasons
of the Affiliates for the Merger";
"--Conflicts of Interest"
Item 7(d)......................... "Introduction"; "Summary--The Merger";
"--Purpose and Reasons of the Affiliates for
the Merger"; "--Conflicts of Interest";
"--Certain Effects of the Merger";
"--Federal Income Tax Consequences";
"--Rights of Dissenting Shareholders";
"--Accounting Treatment"; "--Financing of
the Merger"; "Special Factors--Background of
the Merger"; "--Purpose and Reasons of the
Affiliates for the Merger"; "--Conflicts of
Interest"; "--Certain Effects of the
Merger"; "--Conduct of WinsLoew's Business
After the Merger"; "--Certain Risks in the
Event of Bankruptcy"; "The
Merger--Conversion of Securities";
"--Cash-out of WinsLoew Stock Options";
"--Financing"; "--Accounting Treatment";
"Rights of Dissenting Shareholders";
"Federal Income Tax Consequences";
"Principal Shareholders and Stock Ownership
of Management"
Item 8(a), (b)................... "Summary--The Special Committee's and the
Board's Recommendation"; "--Opinion of
Financial Advisor"; "--Position of the
Affiliates as to Fairness of the Merger";
"--Conflicts of Interest"; "--Rights of
Dissenting Shareholders"; "Special
Factors--Background of the Merger"; "--The
Special Committee's and the Board's
Recommendation"; "--Opinion of Financial
Advisor"; "--Position of the Affiliates as
to Fairness of the Merger"; "--Conflicts of
Interest"; "Rights of Dissenting
Shareholders"
Item 8(c)......................... "Introduction"; "Summary--Vote Required";
"Special Factors--The Special Committee's
and the Board's Recommendation"; "The
Special Meeting--Voting Procedures; Required
Vote"; "The Merger--Conditions"
Item 8(d)........................ "Summary--The Special Committee's and the
Board's Recommendation"; "--Opinion of
Financial Advisor"; "Special
Factors--Background of the Merger"; "--The
Special Committee's and the Board's
Recommendation"; "--Opinion of Financial
Advisor"
Item 8(e)......................... "Summary--The Special Committee's and the
Board's Recommendation"; "--Conflicts of
Interest"; "Special Factors--The Special
Committee's and the Board's Recommendation";
"--Conflicts of Interest"
Item 8(f)......................... None
Item 9(a)-(c)..................... "Summary--The Special Committee's and the
Board's Recommendation"; "--Opinion of
Financial Advisor"; "Special
Factors--Background of the Merger"; "--The
Special Committee's and the Board's
Recommendation"; "--Opinion of Financial
Advisor"; Appendix B
Item 10(a)........................ "Summary--Purpose and Reasons of the
Affiliates for the Merger"; "--Conflicts of
Interest"; "Special Factors--Purpose and
Reasons of the Affiliates for the Merger";
"--Conflicts of Interest"; "Principal
Shareholders
5
<PAGE> 6
ITEM IN SCHEDULE 13E-3 CAPTION OR LOCATION IN THE PROXY STATEMENT
- --------------------------------- --------------------------------------------
and Stock Ownership of Management"
Item 10(b)........................ "Market Prices of Common Stock and
Dividends"
Item 11........................... "Introduction"; "Summary--Vote Required";
"--Parties to the Merger"; "--Conflicts of
Interest"; "--Financing of the Merger";
"Special Factors--Background of the Merger";
"--Purpose and Reasons of the Affiliates for
the Merger"; "--Conflicts of Interest";
"--Certain Effects of the Merger"; "The
Merger--Financing"
Item 12(a), (b)................... "Introduction"; "Summary--Vote Required";
"--Purpose and Reasons of the Affiliates for
the Merger"; "--The Special Committee's and
the Board's Recommendation"; "--Conflicts of
Interest"; "Special Factors--The Special
Committee's and the Board's Recommendation";
"--Purpose and Reasons of the Affiliates for
the Merger"; "--Conflicts of Interest"; "The
Special Meeting--Voting Procedures; Required
Vote"
Item 13(a)........................ "Summary--Rights of Dissenting
Shareholders"; "Rights of Dissenting
Shareholders"
Item 13(b)........................ Not applicable
Item 13(c)........................ Not applicable
Item 14(a)........................ "Selected Consolidated Financial Data";
"Management's Discussion and Analysis of
Results of Operations and Financial
Condition"; "Index to Financial Statements"
Item 14(b)........................ Not applicable
Item 15(a)........................ "Summary--Parties to the Merger";
"--Conflicts of Interest"; "--Conditions to
the Merger, Termination and Expenses";
"--Financing of the Merger"; "The Special
Meeting--Proxy Solicitation"; "Special
Factors--Conflicts of Interest"; "The
Merger--Expenses"; "--Termination Fee";
"--Financing"
Item 15(b)........................ "The Special Meeting--Proxy Solicitation"
Item 16........................... Proxy Statement
Item 17(a)-(f).................... Not applicable
6
<PAGE> 7
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth on the cover page to the Proxy
Statement and in the sections entitled "Introduction" and "Summary--Parties to
the Merger" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth on the cover page to the Proxy
Statement and in the sections entitled "Summary--Record Date and Quorum,"
"--Market Prices of Common Stock and Dividends" and "Market Prices of Common
Stock and Dividends" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in the sections entitled
"Summary--Market Prices of Common Stock and Dividends" and "Market Prices of
Common Stock and Dividends" of the Proxy Statement is incorporated herein by
reference.
(d) The information set forth in the section entitled "Market
Prices of Common Stock and Dividends" of the Proxy Statement is incorporated
herein by reference.
(e) None.
(f) The information set forth in the section entitled "Market
Prices of Common Stock and Dividends" of the Proxy Statement is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The information set forth in the sections entitled
"Introduction", "Summary--Parties to the Merger," "Management--Directors and
Executive Officers of WinsLoew" and "Certain Information Concerning the
Purchaser and Other Affiliates" of the Proxy Statement is incorporated herein by
reference.
(b)-(d), (g) The information set forth in the sections entitled
"Summary--Parties to the Merger," "Management--Directors and Executive Officers
of WinsLoew" and "Certain Information Concerning the Purchaser and the Other
Affiliates" of the Proxy Statement is incorporated herein by reference.
(e), (f) Neither the Purchaser nor any executive officer, director or
person controlling the Purchaser or any Affiliate has during the last five years
(i) been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in the section entitled "Certain
Transactions" of the Proxy Statement is incorporated herein by reference.
(a)(2) The information set forth in the sections entitled
"Summary--Conflicts of Interest," "--Certain Effects of the Merger," "Special
Factors--Background of the Merger," "--Conflicts of Interest" and "--Certain
Effects of the Merger" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in the sections entitled
"Summary--Conflicts of Interest," "--Certain Effects of the Merger," "Special
Factors--Background of the Merger," "--Purpose and Reasons of the Affiliates for
the Merger," "--Conflicts of Interest" and "--Certain Effects of the Merger" of
the Proxy Statement is incorporated herein by reference.
7
<PAGE> 8
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the sections entitled
"Introduction," "Summary--The Merger," "--Effective Time of the Merger and
Payment for Shares," "--Certain Effects of the Merger," "--Conditions to the
Merger, Termination and Expenses," "--Rights of Dissenting Shareholders," "The
Merger" and "Rights of Dissenting Shareholders" of the Proxy Statement and
Appendix A to the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled
"Introduction," "Summary--Purpose of the Special Meeting," "--Parties to the
Merger," "--Purpose and Reasons of the Affiliates for the Merger," "--Conflicts
of Interest," "--Rights of Dissenting Shareholders," "Special Factors--Purpose
and Reasons of the Affiliates for the Merger," "--Conflicts of Interest,"
"--Certain Effects of the Merger" "The Merger--Termination Fee" and "Rights of
Dissenting Shareholders" of the Proxy Statement is incorporated herein by
reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a),(b) The information set forth in the sections entitled
"Summary--Purpose and Reasons of the Affiliates for the Merger," "--Conflicts of
Interest," "--Certain Effects of the Merger," "--Financing of the Merger,"
"Special Factors--Background of the Merger," "--Purpose and Reasons of the
Affiliates for the Merger," "--Conflicts of Interest," "--Certain Effects of the
Merger" and "--Conduct of WinsLoew's Business After the Merger" of the Proxy
Statement is incorporated herein by reference.
(c) The information set forth in the sections entitled "Special
Factors--Conflicts of Interest" and "--Conduct of WinsLoew's Business After the
Merger" of the Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled
"Summary--Conflicts of Interest," "--Financing of the Merger," "Special
Factors--Conflicts of Interest" and "The Merger--Financing" of the Proxy
Statement is incorporated herein by reference.
(e) The information set forth in the sections entitled
"Summary--Financing of the Merger," "--Certain Effects of the Merger," "Special
Factors--Certain Effects of the Merger," "--Conduct of WinsLoew's Business After
the Merger" and "The Merger--Financing" of the Proxy Statement is incorporated
herein by reference.
(f),(g) The information set forth in the sections entitled
"Summary--Certain Effects of the Merger" and "Special Factors--Certain Effects
of the Merger" of the Proxy Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the sections entitled
"Summary--Financing of the Merger" and "The Merger--Financing" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in the section entitled "The
Merger--Expenses of the Transaction" of the Proxy Statement is incorporated
herein by reference.
(c) The information set forth in the sections entitled
"Summary--Financing of the Merger" and "The Merger--Financing" of the Proxy
Statement is incorporated herein by reference.
(d) Not applicable.
8
<PAGE> 9
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth in the sections entitled "Summary,"
"Special Factors--Background of the Merger," "--The Special Committee's and the
Board's Recommendation," "--Opinion of Financial Advisor," "--Purpose and
Reasons of the Affiliates for the Merger" and "--Conflicts of Interest" of the
Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled
"Introduction," "Summary--The Merger," "--Purpose and Reasons of the Affiliates
for the Merger," "--Conflicts of Interest," "--Certain Effects of the Merger,"
"--Federal Income Tax Consequences," "--Rights of Dissenting Shareholders,"
"--Accounting Treatment," "--Financing of the Merger," "Special
Factors--Background of the Merger," "--Purpose and Reasons of the Affiliates for
the Merger," "--Conflicts of Interest," "--Certain Effects of the Merger,"
"--Conduct of WinsLoew's Business After the Merger," "--Certain Risks in the
Event of Bankruptcy," "The Merger--Conversion of Securities," "--Cash-out of
WinsLoew Stock Options," "--Financing," "--Accounting Treatment," "Rights of
Dissenting Shareholders," "Federal Income Tax Consequences" and "Principal
Shareholders and Stock Ownership of Management" of the Proxy Statement is
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a), (b) The information set forth in the sections entitled
"Summary--The Special Committee's and the Board's Recommendation," "--Opinion of
Financial Advisor," "--Position of the Affiliates as to Fairness of the Merger,"
"--Conflicts of Interest," "--Rights of Dissenting Shareholders," "Special
Factors--Background of the Merger," "--The Special Committee's and the Board's
Recommendation," "--Opinion of Financial Advisor," "--Position of the Affiliates
as to Fairness of the Merger," "--Conflicts of Interest" and "Rights of
Dissenting Shareholders" of the Proxy Statement are incorporated herein by
reference.
(c) The information set forth in the sections entitled
"Introduction," "Summary--Vote Required," "Special Factors--The Special
Committee's and the Board's Recommendation," "The Special Meeting--Voting
Procedures; Required Vote" and "The Merger--Conditions" of the Proxy Statement
is incorporated herein by reference.
(d) The information set forth in the sections entitled
"Summary--The Special Committee's and the Board's Recommendation," "--Opinion of
Financial Advisor," "Special Factors--Background of the Merger," "--The Special
Committee's and the Board's Recommendation" and "--Opinion of Financial Advisor"
of the Proxy Statement is incorporated herein by reference.
(e) The information set forth in the sections entitled
"Summary--The Special Committee's and the Board's Recommendation," "--Conflicts
of Interest," "Special Factors--The Special Committee's and the Board's
Recommendation" and "--Conflicts of Interest" of the Proxy Statement is
incorporated herein by reference.
(f) None.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in the sections entitled
"Summary--The Special Committee's and the Board's Recommendation," "--Opinion of
Financial Advisor," "Special Factors--Background of the Merger," "--The Special
Committee's and the Board's Recommendation" and "--Opinion of Financial Advisor"
of the Proxy Statement and in Appendix B to the Proxy Statement is incorporated
herein by reference.
9
<PAGE> 10
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the sections entitled
"Summary--Purpose and Reasons of the Affiliates for the Merger," "--Conflicts of
Interest," "Special Factors--Purpose and Reasons of the Affiliates for the
Merger," "--Conflicts of Interest," "Principal Shareholders and Stock Ownership
of Management" of the Proxy Statement is incorporated herein by reference.
(b) "Market Prices of Common Stock and Dividends."
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The information set forth in the sections entitled "Introduction,"
"Summary--Vote Required," "--Parties to the Merger," "--Conflicts of Interest,"
"--Financing of the Merger," "Special Factors--Background of the Merger,"
"--Purpose and Reasons of the Affiliates for the Merger," "--Conflicts of
Interest," "--Certain Effects of the Merger" and "The Merger--Financing" of the
Proxy Statement is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION.
(a),(b) The information set forth in the sections entitled
"Introduction," "Summary--Vote Required," "--Purpose and Reasons of the
Affiliates for the Merger," "--The Special Committee's and the Board's
Recommendation," "--Conflicts of Interest," "Special Factors--The Special
Committee's and the Board's Recommendation," "--Purpose and Reasons of the
Affiliates for the Merger," "--Conflicts of Interest" and "The Special
Meeting--Voting Procedures; Required Vote" of the Proxy Statement is
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Summary--Rights
of Dissenting Shareholders" and "Rights of Dissenting Shareholders" of the Proxy
Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in the section entitled "Selected
Consolidated Financial Data" of the Proxy Statement and in the Consolidated
Financial Statements of the Company for the fiscal years ended December 31, 1997
and December 31, 1998, which are included in the Proxy Statement, is
incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in the sections entitled
"Summary--Parties to the Merger," "--Conflicts of Interest," "--Conditions to
the Merger, Termination and Expenses," "--Financing of the Merger," "The Special
Meeting--Proxy Solicitation," "Special Factors--Conflicts of Interest," "The
Merger--Expenses," "--Termination Fee" and "--Financing" of the Proxy Statement
is incorporated herein by reference.
(b) The information set forth in the section entitled "The Special
Meeting--Proxy Solicitation" of the Proxy Statement is incorporated herein by
reference.
10
<PAGE> 11
ITEM 16. ADDITIONAL INFORMATION.
The entirety of the Proxy Statement is incorporated herein by
reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) BankBoston, N.A. commitment letter to Trivest Furniture Corporation
dated March 29, 1999 (filed as Exhibit (c)(2) to this Schedule
13E-3 as filed on April 19, 1999).
(a)(2) BankBoston, N.A. confirmation letter with respect to $33.00 per share
purchase price to Trivest Furniture Corporation dated March 29, 1999
(filed as Exhibit (c)(3) to this Schedule 13E-3 as filed on April 19,
1999).
(a)(3) Trivest, Inc. commitment letter to Trivest Furniture Corporation dated
March 29, 1999 (filed as Exhibit (c)(4) to this Schedule 13E-3 as filed
on April 19, 1999).
(a)(4) BankBoston, N.A. commitment letter to Trivest Furniture Corporation
dated April 27, 1999.
(a)(5) Trivest, Inc. commitment letter to Trivest Furniture Corporation dated
April 30, 1999.
(a)(6) Trivest, Inc. commitment letter to Trivest Furniture Corporation dated
May 3, 1999.
(b)(1) Opinion of Mann, Armistead & Epperson, Ltd. dated April 7, 1999.
(b)(2) Management's projections for fiscal years 1999 through 2002 provided to
Mann, Armistead & Epperson, Ltd., that are summarized in the
preliminary Proxy Statement (filed as Exhibit (b)(2) to this Schedule
13E-3 as filed on April 19, 1999).
(b)(3) Financial Analysis Presentation materials prepared by Mann, Armistead &
Epperson, Ltd. in connection with providing its opinion dated April 7,
1999 to the Special Committee.
(b)(4) Opinion of Mann, Armistead & Epperson, Ltd. dated May 4, 1999 (included
as Appendix B to the Proxy Statement, which is filed herewith as
Exhibit (d)(3)).
(b)(5) Financial Analysis Presentation materials prepared by Mann, Armistead &
Epperson, Ltd. in connection with providing its opinion dated May 4,
1999 to the Special Committee.
(c)(1) Second Amended and Restated Agreement and Plan of Merger dated as of
May 4, 1999 among WinsLoew Furniture, Inc. and Trivest Furniture
Corporation (included as Appendix A to the Proxy Statement, which is
filed herewith as Exhibit (d)(3)).
(d)(1) Letter to Shareholders (included in the Proxy Statement, which is filed
herewith as Exhibit (d)(3)).
(d)(2) Notice of Special Meeting of Shareholders (included in the Proxy
Statement, which is filed herewith as Exhibit (d)(3)).
(d)(3) Preliminary Proxy Statement.
(d)(4) Form of Proxy.
(d)(5) Press Release issued by WinsLoew Furniture, Inc. dated January 18, 1999
(filed as Exhibit to this Schedule 13E-3 as filed on April 19, 1999).
(d)(6) Press Release issued by WinsLoew Furniture, Inc. dated January 25, 1999
(filed as Exhibit to this Schedule 13E-3 as filed on April 19, 1999).
(d)(7) Press Release issued by WinsLoew Furniture, Inc. dated March 5, 1999
(filed as Exhibit to this Schedule 13E-3 as filed on April 19, 1999).
11
<PAGE> 12
(d)(8) Press Release issued by WinsLoew Furniture, Inc. dated March 31, 1999
(filed as Exhibit to this Schedule 13E-3 as filed on April 19, 1999).
(d)(9) Press Release issued by WinsLoew Furniture, Inc. dated May 5, 1999
(incorporated by reference to the Current Report on Form 8-K filed by
WinsLoew Furniture, Inc. on May 5, 1999).
(e) Not applicable.
(f) Not applicable.
12
<PAGE> 13
SIGNATURES
After due inquiry and to the best of our knowledge and belief, each of
the undersigned certifies that the information set forth in this Statement is
true, complete and correct.
WINSLOEW FURNITURE, INC.
<TABLE>
<S> <C>
Dated: June 4, 1999 By: /s/ Bobby Tesney
----------------------------------------------
Name: Bobby Tesney
Title: President and Chief
Executive Officer
TRIVEST FURNITURE CORPORATION
Dated: June 4, 1999 By: /s/ William F. Kaczynski, Jr.
----------------------------------------------
Name: William F. Kaczynski, Jr.
Title: Vice President
TRIVEST FURNITURE PARTNERS, LTD.
By: TFP, Ltd., its General Partner
By: Trivest II, Inc., Its General Partner
Dated: June 4, 1999 By: /s/ William F. Kaczynski, Jr.
----------------------------------------------
Name: William F. Kaczynski, Jr.
Title: Managing Director
TRIVEST FUND II GROUP, LTD.
By: Trivest Equities, Inc., its General Partner
Dated: June 4, 1999 By: /s/ William F. Kaczynski, Jr.
----------------------------------------------
Name: William F. Kaczynski, Jr.
Title: Managing Director
Dated: June 4, 1999 By: /s/ Earl W. Powell
----------------------------------------------
Earl W. Powell
Dated: June 4, 1999 By: /s/ Phillip T. George, M.D.
----------------------------------------------
Phillip T. George, M.D.
Dated: June 4, 1999 By: /s/ William F. Kaczynski, Jr.
----------------------------------------------
William F. Kaczynski, Jr.
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C>
Dated: June 4, 1999 By: /s/ Peter W. Klein
----------------------------------------------
Peter W. Klein
Dated: June 4, 1999 By: /s/ Bobby Tesney
----------------------------------------------
Bobby Tesney
Dated: June 4, 1999 By: /s/ Vincent A. Tortorici, Jr.
----------------------------------------------
Vincent A. Tortorici, Jr.
Dated: June 4, 1999 By: /s/ R. Craig Watts
----------------------------------------------
R. Craig Watts
Dated: June 4, 1999 By: /s/ Rick J. Stephens
----------------------------------------------
Rick J. Stephens
</TABLE>
14
<PAGE> 15
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
-------- --------------------------------------------------------------
(a)(4) BankBoston, N.A. commitment letter to Trivest Furniture
Corporation dated April 27, 1999.
(a)(5) Trivest, Inc. commitment letter to Trivest Furniture
Corporation dated April 30, 1999.
(a)(6) Trivest, Inc. commitment letter to Trivest Furniture
Corporation dated May 3, 1999.
(b)(1) Opinion of Mann, Armistead & Epperson, Ltd. dated April 7,
1999.
(b)(3) Financial Analysis Presentation materials prepared by Mann,
Armistead & Epperson, Ltd. in connection with providing its
opinion dated April 7, 1999 to the Special Committee.
(b)(5) Financial Analysis Presentation materials prepared by Mann,
Armistead & Epperson, Ltd. in connection with providing its
opinion dated May 4, 1999 to the Special Committee.
(d)(3) Preliminary Proxy Statement.
(d)(4) Form of Proxy.
15
<PAGE> 1
EXHIBIT (a)(4)
[BANKBOSTON, N.A. LETTERHEAD]
April 27, 1999
Trivest Furniture Corporation
c/o Trivest, Inc.
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133-5462
Attention: William F. Kaczynski Jr., Managing Director
Ladies and Gentlemen:
We are pleased to confirm the commitment of BankBoston, N.A. (BKB), subject to
the terms and conditions in this letter and in the Outline referred to below, to
provide $145 million senior, secured credit facilities (the FINANCING) to
Trivest Furniture Corporation (TFC) in connection with its acquisition of
WinsLoew Furniture, Inc. (WINSLOEW and the WINSLOEW ACQUISITION). The borrower
under the definitive credit documents governing the Financing (the BORROWER)
will be WinsLoew Furniture, Inc., the surviving corporation of the merger of TFC
with and into WinsLoew (the MERGER).
The Borrower will secure its obligations in respect of the Financing with a
pledge of substantially all of its tangible and intangible assets and property,
including inventory, accounts receivable, equipment, real estate, capital stock
of subsidiary companies and intellectual property. All of the Borrower's
significant domestic subsidiaries will be co-borrowers or will guaranty the
Financing, at BKB's election, and will secure their obligations in respect of
the Financing (whether direct or pursuant to their guaranties) with a pledge of
substantially all of their tangible and intangible property.
BKB will act as agent (in such capacity, the AGENT) for itself and any other
lending institutions which may become party to the Financing (the LENDERS) and
BancBoston Robertson Stephens Inc. (BRSI) will act as the exclusive syndication
agent and arranger for the Lenders (the ARRANGER) with respect to the Financing.
We understand that the proceeds of the Financing will be used to pay, in part,
the consideration to be paid to existing shareholders of WinsLoew in connection
with the Merger, to refinance existing debt of WinsLoew, to pay the purchase
price of the acquisition by the Borrower of Miami Metal Products, Inc. (POMPEII
and the POMPEII ACQUISITION), to pay expenses of the WinsLoew Acquisition and
the related transactions, to finance "Permitted Acquisitions" as described in
the Outline/as hereinafter defined) and to fund the continuing working capital
needs of the Borrower
- --------------------------------------------------------------------------------
BankBoston, N.A. 1 Confidential
BancBoston Robertson Stephens Inc.
<PAGE> 2
Trivest Furniture Corporation
April 27, 1999
and its subsidiaries, including capital expenditures. The balance of the funding
required to consummate the WinsLoew Acquisition and the Pompeii Acquisition will
be provided by the issuance by the Borrower of up to $140,000,000 (but at least
$125,000,000) original principal amount of unsecured subordinated debt, on terms
and conditions reasonably acceptable to BKB (the UNSECURED DEBT).
BKB will provide the full amount of such Financing, but intends to syndicate the
Financing either before or after closing. Based on our discussions and on the
financial statements, projections and other information and documents previously
furnished to us, we are enclosing herewith an outline of terms and conditions
(the OUTLINE) which sets forth the principal terms on which BKB would be willing
to provide the proposed Financing (this letter and the Outline are collectively
referred to as the COMMITMENT LETTER) and BRSI would be willing to act as the
Arranger.
Our willingness to proceed with the proposed Financing is conditioned on (1)
there being no material misstatements in or omissions from the materials which
have previously been furnished in writing to us for our review, when taken as a
whole and in light of the circumstances in which such materials are presented,
(2) there being in our reasonable judgment no material adverse change in the
assets, business or financial condition of WinsLoew and its subsidiaries taken
as a whole, or in the businesses and assets to be acquired in the WinsLoew
Acquisition or, if applicable the Pompeii Acquisition or the ability of
WinsLoew, the Borrower, any co-borrower or subsidiary guarantor, to perform its
respective obligations described in the Outline, and (3) our receipt of
satisfactory environmental assessments with respect to real property owned or
operated by WinsLoew and its subsidiaries. The availability of the portion of
the proposed Term A loan to be applied to the Pompeii Acquisition will also be
subject to completion to our satisfaction in all respects of our due diligence
investigation as to Pompeii. In addition, the proposed Financing is subject to
the condition that prior to closing of the Financing there are no material
adverse changes in governmental regulation or policy affecting us, WinsLoew or
any of its subsidiaries and no material changes or disruptions in the
syndication, financial or capital markets that could reasonably be expected to
materially impair the syndication of the Financing.
By your signature below, you agree to assist and cooperate with the Arranger in
its syndication efforts, including, but not limited to, promptly preparing and
providing materials and information reasonably deemed necessary by the Arranger
to successfully complete and otherwise facilitate the syndication of the
facilities described herein. In the event that such syndication cannot be
achieved in a manner reasonably satisfactory to BKB and BRSI under the structure
described in the Outline, you agree to cooperate with BKB and BRSI in developing
a mutually acceptable alternative structure that will permit a satisfactory
syndication of such credit facilities. Without limiting the foregoing, you
hereby agree: (a) that the Arranger shall have the exclusive right to syndicate
the Financing and manage all aspects of the syndication (including, without
limitation, in consultation with and subject to the reasonable approval of
Trivest, decisions as to the selection of institutions to be approached and when
they will be approached, when their commitments will be accepted, which
institutions will participate, the allocations of the commitments among the
syndicate lenders and any titles to be given to any lender participating in the
Financing) and that
- --------------------------------------------------------------------------------
BankBoston, N.A. 2 Confidential
BancBoston Robertson Stephens Inc.
<PAGE> 3
Trivest Furniture Corporation
April 27, 1999
you will assist the Arranger and cause WinsLoew and its management to assist the
Arranger in contacting and soliciting potential co-lenders and will provide to
the Arranger, as its reasonable request, financial and organizational
information as well as financial projections needed for syndication purposes;
(b) that the Arranger shall be expressly permitted to distribute any and all
documents and information relating to the transactions contemplated hereby and
received from you or any other source to any potential lender, participant or
assignee, on a confidential basis and subject to reasonable confidentiality
agreements requested by you; (c) to make available TFC and Trivest, Inc.
personnel and WinsLoew management personnel responsible for the Financing or
operations of WinsLoew and its subsidiaries for meetings with potential
syndicate members upon reasonable notification and at reasonable times to be
mutually agreed; (d) to permit the Arranger to publish information in respect of
the Financing (including the Agent's and the Arranger's roles in the structuring
and financing thereof), subject to your prior reasonable approval of the form
and content thereof; and (e) that prior to or after the execution of the
definitive documentation for the facilities, BKB may syndicate all or any
portion of its commitment hereunder to one or more financial institutions after
consultation with and subject to the reasonable approval of TFC and the
Arranger, and further, that upon acceptance by BKB of a written commitment of
any lender to provide a portion of the Financing, BKB shall be released from a
portion of its commitment hereunder in an aggregate amount equal to the
commitment of such lender. In particular, and without limitation of the
foregoing, you , BKB and the Arranger agree to negotiate in good faith regarding
any changes in the definitive loan documents that may be requested in good faith
by prospective Lenders.
Although the Outline sets forth the principal terms of the Financing, you should
understand that BKB, the Agent and the Arranger reserve the right, after
consultation with the Borrower, to change the pricing (limited to 50 basis
points), structure, terms or amount of any portion of the Financing if BKB and
the Arranger reasonably determine that such changes are advisable in order to
ensure a successful syndication or an optimal credit structure for the Financing
so long as the aggregate amount of the Financing shall not be reduced. Moreover,
the Outline does not purport to include all of the customary representations,
warranties, defaults, definitions and other terms which will be contained in the
definitive documents for the Financing, all of which must be reasonably
satisfactory in form and substance to us and our counsel and to you and your
counsel prior to proceeding with the Financing.
By your signature below, you agree to pay all reasonable out-of-pocket costs and
expenses incurred by BKB, the Agent and the Arranger and their respective agents
in connection with this Commitment Letter, the transactions contemplated hereby
and BKB's, the Agent's and the Arranger's ongoing due diligence in connection
therewith (the EXPENSES) (including, without limitation, reasonable attorneys'
fees and expenses (for a single special counsel for the Agent, as well as local
counsel in each relevant jurisdiction to address real estate and collateral
matters and an agreed upon amount for review by any documentation agent
appointed in the Financing)); whether or not such transactions are consummated.
- --------------------------------------------------------------------------------
BankBoston, N.A. 3 Confidential
BancBoston Robertson Stephens Inc.
<PAGE> 4
Trivest Furniture Corporation
April 27, 1999
Further, in consideration of the commitment contained herein, you agree to pay
the Agent the fees described in the letter enclosed herewith (the FEE LETTER) on
the dates and in the amounts provided in the Fee Letter.
By your signature below, you further agree to indemnify and hold harmless BKB,
BRSI, the Agent, the Arranger and each of their respective officers, directors,
employees, affiliates, agents and controlling persons from and against any and
all losses, claims, damages and liabilities to which any such person may become
subject arising out of, or in connection with, the WinsLoew Acquisition, the
Pompeii Acquisition, this Commitment Letter, the transactions contemplated
hereby or any claim, litigation, investigation or proceeding relating to any of
the foregoing, whether or not any of such indemnified persons is a party
thereto, and to reimburse each of such indemnified persons, from time to time
upon their demand, for any reasonable legal or other expenses incurred in
connection with investigating or defending any of the foregoing, whether or not
the transactions contemplated hereby are consummated, PROVIDED that the
foregoing indemnity will not, as to any indemnified person, apply to losses,
claims, damages, liabilities or related expenses to the extent that they arise
from the bad faith, willful misconduct or gross negligence of such indemnified
person.
You agree that this Commitment Letter is for your confidential use only and that
it will not be disclosed by you to any person (including any lender bidding for
the financing contemplated by this Commitment Letter) other than to the Special
Committee of the Board of Directors of WinsLoew and its advisors, to your
securityholders, to your employees, officers, directors, accountants, attorneys,
and other advisors and to any other person consented to by BKB, the Agent or the
Arranger and in each case, only in connection with the transactions contemplated
hereby and on a confidential basis.
Each of BKB, the Agent and the Arranger agrees to keep any information delivered
or made available by you to it confidential and not to disclose such information
other than to their respective employees, officers, attorneys and other advisors
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Financing or rendering advice in connection therewith,
PROVIDED that nothing herein shall prevent BKB, the Agent or the Arranger from
disclosing such information (a) to potential participants in and assignees of
the Financing subject to reasonable confidentiality agreements, (b) upon the
order of any court or administrative agency, (c) upon the request or demand of
any administrative or regulatory agency or authority, (d) to the extent that
such information has been publicly disclosed other than as a result of a
disclosure by BKB, the Agent or the Arranger or (e) otherwise as required by
law.
This Commitment Letter is delivered with the specific understanding that, except
as specifically set forth in the preceding paragraphs, it is not intended to
give rise to any legal liability on the part of either you or BKB or BRSI and
that the commitment set forth herein shall be considered withdrawn if for any
reason you fail to return to BKB's head office in Boston, Massachusetts by 5:00
p.m. (Boston time) on May 7, 1999 (the EXPIRATION DATE) the enclosed copy of
this Commitment Letter, the related Fee Letter signed by you.
- --------------------------------------------------------------------------------
BankBoston, N.A. 4 Confidential
BancBoston Robertson Stephens Inc.
<PAGE> 5
Trivest Furniture Corporation
April 27, 1999
If the foregoing is in accordance with your understanding, please accept this
Commitment Letter by signing the enclosed duplicate in the space indicated and
returning it to us on or prior to Expiration Date. This letter supersedes all of
our prior letters and communications to you regarding the subject matter of this
letter.
Very truly yours,
BANKBOSTON, N.A. BANCBOSTON ROBERTSON STEPHENS INC.
By: /s/ Lauren P. Carrigan By: /s/ Theodore J. Davies
---------------------------------- -------------------------------
Lauren P. Carrigan. Theodore J. Davies
Vice President Director
Corporate Banking Leveraged Finance
Accepted and agreed to this 30th day
of April 1999
TRIVEST FURNITURE CORPORATION
By: /s/ William F. Kaczynski, Jr.
----------------------------------
Title: Managing Director
- --------------------------------------------------------------------------------
BankBoston, N.A. 5 Confidential
BancBoston Robertson Stephens Inc.
<PAGE> 6
----------------------------------------------------------
WINSLOEW FURNITURE, INC.
----------------------------------------------------------
OUTLINE OF TERMS AND CONDITIONS
$145,000,000 SENIOR SECURED CREDIT FACILITIES
March 29, 1999
- --------------------------------------------------------------------------------
THIS OUTLINE OF PROPOSED TERMS AND CONDITIONS IS NOT EXHAUSTIVE. BANKBOSTON,
N.A. ("BKB") AND BANCBOSTON ROBERTSON STEPHENS INC. ("BRSI") RESERVE THE
RIGHT TO PROPOSE OR REQUIRE ADDITIONAL OR MODIFIED TERMS THAT DO NOT RESULT
IN A MATERIAL CHANGE IN THE TRANSACTION OUTLINED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BORROWERS: The survivor of the merger of Trivest Furniture Corporation,
a newly created entity ("TFC") formed to acquire WinsLoew
Furniture, Inc. (such survivor, the "Company" or "WinsLoew")
and WinsLoew Furniture, Inc., together with all of the
Company's material domestic subsidiaries (together with the
Company, the "Borrowers"). At the Agent's option, such
subsidiaries may be guarantors, rather than co-borrowers (in
such case, the "Guarantors"), provided that no guaranty will
be required of any non-US subsidiary if such guaranty would
result in adverse tax consequences to the Company.
FACILITIES: $145,000,000 aggregate senior secured credit facilities
consisting of the following:
(i) $30,000,000 Revolving Credit Facility (the "Revolver"),
including a $10,000,000 sublimit for Standby Letters of
Credit and a $5,000,000 Swingline Facility;
(ii) $25,000,000 Term Loan A (the "Term A").
(iii) $50,000,000 Term Loan B (the "Term B"); and
(iv) $40,000,000 Acquisition Revolver/Term (the "Acquisition
Line").
The Revolver, Term A, Term B and Acquisition Line are
referred to herein as the "Credit Facilities" or
"Facilities."
PURPOSE: Amounts drawn under the Revolver, Term A and Term B on the
Closing Date will be used, in conjunction with the
subordinated debt proceeds and equity contribution, both
described herein, to finance the acquisition of WinsLoew, the
acquisition of Miami Metal Products, Inc. ("Pompeii") by TFC
which is owned by an investor group affiliated with Trivest,
Inc. ("Trivest"), to refinance existing indebtedness, and to
pay transaction expenses. Thereafter, the Revolver will be
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 1 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 7
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
available to fund on-going working capital and general
corporate needs, including capital expenditures, the
Acquisition Line will be available to fund Permitted
Acquisitions, and if the acquisition of Pompeii does not
occur on or prior to the Closing Date, an additional draw
under Term A will be available to pay, in part, the purchase
price of such acquisition all as further outlined below.
GUARANTORS: WinsLoew and all domestic material operating subsidiaries,
which are Borrowers, shall provide unlimited and
unconditional guarantees of all obligations under the
Facilities.
ADMINISTRATIVE
AGENT: BankBoston, N.A. ("BankBoston" or the "Agent").
ARRANGER: BancBoston Robertson Stephens Inc. ("BRSI") will underwrite
the full amount of Facilities as Arranger and will syndicate
the Facilities to a group of lenders acceptable to the
Borrowers and the Agent.
CLOSING DATE: Targeted to occur on or before July 15, 1999 ("Closing").
FINAL MATURITY: Revolver - 12/31/04 (approx. 5.5 years from Closing);
Term A - 12/31/04 (approx. 5.5 years from Closing);
Acquisition Line - 12/31/04 (approx. 5.5 years from Closing);
Term B - 6/30/06 (approx. 7 years from Closing).
SECURITY: First priority security interest in and lien on substantially
all tangible and intangible assets (including all
intellectual property and rights to payment(s) and related
intangibles) of the domestic Borrowers and Guarantors.
WinsLoew will pledge all of the capital stock of its
subsidiaries (other than non-US subsidiaries of which 65% of
the capital stock will be pledged).
AVAILABILITY: REVOLVER - Amounts under the Revolver may be drawn, repaid
and reborrowed, subject to availability under the Borrowing
Base, which shall be equal to the sum of: (i) 85% of combined
eligible accounts receivable; PLUS (ii) 60% of combined
eligible inventory. The Borrowing Base will be reported
monthly, or at more frequent intervals as determined by the
Agent in its reasonable discretion. The Agent, in its
reasonable credit judgment, reserves the right to conduct
periodic commercial finance exams and modify eligibility
standards and establish and modify reserves against Borrowing
Base availability.
TERM A - Term A may be drawn in two stages. If the Pompeii
acquisition has not occurred on or prior to the initial
funding of the Facilities, the initial draw under Term A
shall be $5,000,000 with the balance of $20,000,000 to be
funded upon consummation of the Pompeii acquisition. If the
remaining $20,000,000 commitment to Term A has not been drawn
in conjunction with the funding of the Pompeii acquisition on
or prior to September 30, 1999, such commitment shall
terminate.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 2 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 8
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
Funding of the Pompeii acquisition will be subject to
satisfactory completion of the Agent's due diligence on
Pompeii including, but not limited to, satisfactory review of
all financial information provided to the Agent, and
satisfactory review of all material pending or threatened
litigation or proceeding in court or any administrative
forum.
TERM B - Term B shall be drawn in full at Closing.
Amounts of Term A and Term B that are repaid may not be
reborrowed.
Acquisition Line - THE ACQUISITION LINE WILL BE AVAILABLE THROUGH
DECEMBER 31, 2001, TO FUND PERMITTED ACQUISITIONS (AS DEFINED
HEREIN). ANY UNUTILIZED ACQUISITION LINE COMMITMENT AS OF
DECEMBER 31, 2001 WILL BE TERMINATED.
AMORTIZATION: REVOLVER - No amortization, bullet at maturity.
TERM A & TERM B - Quarterly payments in arrears based on the
following annual amortization schedule. The first payment
date will be September 30, 1999.
<TABLE>
<CAPTION>
($ IN MILLIONS)
---------------------------------------------------------------------------
YEAR Term A TERM B TOTAL
---- ------ ------ -----
<S> <C> <C> <C> <C>
1999 $0.000 $0.500 $0.500
2000 $3.000 $0.500 $3.500
2001 $3.000 $0.500 $3.500
2002 $6.000 $0.500 $6.500
2003 $6.000 $0.500 $6.500
2004 $7.000 $0.500 $7.500
------
2005 $23.500 $23.500
2006 $23.500 $23.500
------- -------
Total $25.000 $50.000 $75.000
---------------------------------------------------------------------------
</TABLE>
If Term A is not fully drawn by September 30, 1999, Term A
amortization amounts will be based upon the pro-rata
percentage of the drawn Term A as of September 30, 1999 to
the $25,000,000 Term A commitment.
ACQUISITION LINE - 12 equal quarterly installments beginning
March 31, 2002.
SWINGLINE FACILITY: Up to $5,000,000 of the Revolver will be available for
swingline advances ("Swingline Loans") to be made available
to the Borrowers by BankBoston. Swingline Loans will
constitute usage under the Revolver (except for used fee
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 3 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 9
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
purposes) and will reduce availability of the Revolver dollar
for dollar. Swingline Loans made by BankBoston will be
settled with the Lenders on a weekly basis.
INTEREST RATE: Outstanding amounts under the Facilities shall accrue
interest at the Borrowers' option at the Alternate Base Rate
or the Eurodollar Rate, plus the Applicable Margin. Alternate
Base Rate shall mean a floating rate equal to the higher of
(i) BankBoston's Base Rate and (ii) the Federal Funds
Effective Rate plus 1/2%. The Applicable Margin for each of
the Facilities will be determined as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Level Leverage REVOLVER, TERM A & ACQ. UNUSED FEE TERM B
LINE
(Funded Debt/EBITDA) Euro+ Base+ Euro+ Base+
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I (greater than) 5.25x 2.75% 0.75% 0.500% 3.25% 1.25%
II 4.50x (less than/equal to) x (less than/equal to) 5.25x 2.50% 0.50% 0.500% 3.00% 1.00%
III 3.75x (less than/equal to) x (less than) 4.50x 2.25% 0.25% 0.375% 3.00% 1.00%
IV 3.00x (less than/equal to) x (less than) 3.75x 2.00% 0.00% 0.375% 3.00% 1.00%
V (less than/equal to) 3.00x 1.75% 0.00% 0.375% 2.75% 0.75%
----------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of calculating the Applicable Margin, the
LEVERAGE RATIO is defined as the ratio of Total Funded Debt
divided by EBITDA, calculated on a rolling four-quarter
basis. Total Funded Debt and EBITDA shall be determined on a
consolidated basis in accordance with GAAP (with pro forma
adjustments permitted to give trailing four-quarter effect to
the acquisition of WinsLoew and Pompeii, as well as future
Permitted Acquisitions and related permitted debt).
Minimum pricing will be set at Level II until the Agent's
receipt of the Borrowers' December 31, 1999 compliance
certificate. Overdue principal, interest and fees will bear
interest at 2% over the rate otherwise applicable thereto.
INTEREST PERIODS: Eurodollar rates may be selected for interest periods of 1,
2, 3 or 6 months, as available.
UNUSED
FEE: An Unused Fee will be payable quarterly in arrears based on
the average daily unused commitment (not excluding borrowings
under the Swingline Facility), under the Revolver and the
Acquisition Line as set forth in the table above, EXCEPT that
the Unused Fee on the Acquisition Line will be equal to 0.75%
per annum until greater than 50% of the Acquisition Line has
been drawn.
LETTER OF
CREDIT FEES: Payable pro rata to the Lenders at the annual rate equal to
the Applicable Margin on Eurodollar Rate Revolving Credit
Loans and based on the maximum amount available to be drawn
under each standby letter of credit; standard fees and
charges on all documentary/commercial letters of credit. In
addition, the
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 4 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 10
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
Borrowers will pay to the Issuing Bank a fronting fee equal
to 0.125% per annum on the maximum amount of each standby
letter of credit.
INTEREST PAYMENTS: Interest on Base Rate loans will be due and payable monthly
in arrears. Interest on Eurodollar Rate loans will be due and
payable at the earliest of the end of each applicable
interest period or quarterly. The effective date of any
change in the Applicable Margin due to a change in the
Borrowers' Leverage will be the third business day following
the receipt by the Agent and the Lenders of the Borrowers'
quarterly financial information.
UP FRONT FEE AND
AGENT'S FEE: As set forth in the Fee Letter.
VOLUNTARY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: Voluntary prepayments of the Term Loans and Acquisition Line
loans and voluntary reductions of the Revolver and
Acquisition Line commitments shall be permitted in whole or
in part with prior notice in a minimum amount of $200,000 and
increments of $50,000, but without premium or penalty, and
subject to standard Eurodollar breakage costs, if any.
MANDATORY
PREPAYMENTS: Subject to certain baskets and other permissible amounts to
be determined, and except to the extent that Total Funded
Debt/EBITDA (computed quarterly on a trailing four-quarter
basis and after giving pro forma effect to the relevant
payment event) is less than 3.0:1, the Borrowers will be
required to make mandatory prepayments of the Credit
Facilities equal to:
* 50% of Excess Cash Flow, computed on the basis of the
Borrowers' annual audited financial statements. Excess
Cash Flow shall mean, for any fiscal year of the
Borrowers, consolidated earnings before interest, taxes,
depreciation and amortization and any other non-cash
charges MINUS increases in working capital (or plus
decreases in working capital), actual cash taxes paid,
capital expenditures and scheduled debt service payments
(including total interest, actual and scheduled repayments
of any money borrowed or capital lease obligation), for
such fiscal year, determined in accordance with GAAP; to
the extent Total Funded Debt/EBITDA is less than 3.0:1
then the percentage of Excess Cash Flow will decrease to
25%.
* 100% of the net proceeds received from the sale of or
disposition of all or any part of the assets of the
Borrowers or any Guarantor (other than in the ordinary
course of business or for consideration pertaining to
sales not in the ordinary course of business not to exceed
in any fiscal year of the Borrowers an aggregate amount to
be determined).
* 100% of the net proceeds received from the issuance of
debt or equity in excess of $5 million by the Borrower or
any Guarantor, except to the extent issued to a seller of
a business acquired by the Company. In the event of an
IPO, the percentage will be 50% of the net proceeds.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 5 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 11
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
Mandatory prepayments shall be applied pro rata to repay
without penalty or premium to the Term A and Term B and, if
the revolving period under the Acquisition Line has expired,
Acquisition Line loans, and within each tranche pro-rata as
to remaining installments as of such date, PROVIDED that
proceeds of the sale of assets acquired with Acquisition Line
loans shall first be applied to repay Acquisition Line loans
without regard to whether the revolving period under the
Acquisition Line has expired. After the Term A, Term B and
all Acquisition Line loans have been repaid in full,
mandatory prepayments will be applied to the Revolver and the
commitment therefor will be permanently reduced in the amount
of any such prepayment.
FINANCIAL
COVENANTS: To be tested quarterly commencing September 30, 1999, on a
consolidated, rolling four-quarter basis (where applicable,
including trailing four-quarter credit for Pompeii and future
Permitted Acquisitions), including, but not limited to, the
following:
* MAXIMUM TOTAL FUNDED DEBT TO EBITDA [Covenant levels to be
mutually determined];
* MINIMUM FIXED CHARGE COVERAGE RATIO [Covenant levels to be
mutually determined];
* MINIMUM EBITDA/INTEREST RATIO [Covenant levels to be
mutually determined];
* MAXIMUM CAPITAL EXPENDITURES [Covenant levels to be
mutually determined].
OTHER COVENANTS: Usual and customary for transactions of this nature, and
subject to limitations and exceptions to be mutually agreed,
including, but not limited to limitations on additional
indebtedness, liens, investments, mergers and consolidations,
asset sales, transactions with affiliates, negative pledges,
restricted payments, distributions and dividends.
PERMITTED
ACQUISITIONS: Prior consent of majority Lenders shall be required for
acquisitions with total consideration of more than $25
million. Prior consent shall not be required for acquisitions
with total consideration of up to $25 million, provided the
conditions to outlined below are met. Each such acquisition
shall be defined as a "Permitted Acquisition":
* Target shall be in a line of business substantially
similar to the Borrowers' existing lines.
* Proposed acquisition shall be "friendly".
* Borrowers shall provide notice of proposed acquisition,
including an information package for Lenders least 14 days
in advance of the proposed drawdown in order to confirm
that the conditions set forth herein are satisfied.
* Target shall have had positive trailing four quarter pro
forma EBITDA (as adjusted for anticipated expense
reductions, etc., referred to below).
* Acquisition structure shall meet minimum requirements to
be detailed in the Credit Agreement or shall be otherwise
reasonably acceptable to the Lenders. Such conditions
shall include, without limitation, requirements that the
Borrowers shall own directly or indirectly a majority of
the equity interests in
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 6 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 12
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
the target and shall control a majority of any voting
securities, and/or shall otherwise control the governance
of the target.
* Security interest shall be granted in all of the target
company's assets; the target company shall be merged into
the Borrowers, or if it is to be a subsidiary of the
Borrowers shall become an obligor under the Facilities.
* The terms of any seller paper or subordinated debt issued
or incurred in connection with the acquisition shall meet
minimum requirements to be detailed in the Credit
Agreement or shall be otherwise reasonably acceptable to
the Lenders. Such conditions shall include, without
limitation, a maximum cash interest rate, a cap on
amortization of principal prior to maturity and repayment
of the Facilities, the absence of financial covenants or
security interests and minimum standards for
subordination.
* No default of event default shall exist at the time of or
after giving effect to the acquisition; Borrowers shall
demonstrate pro forma covenant compliance based on
combined pro forma trailing four-quarter operating
performance, pro forma debt and pro forma debt service
based on pro forma interest on total debt at then
prevailing interest rates (including any Acquisition Line
loan). Any pro forma adjustments to historical EBITDA of
the target company shall be acceptable to the Lenders in
their reasonable discretion (provided that contractual and
adequately documented reductions in former owner's
compensation and/or rental expense, which will be
effective as of the drawdown date, shall be deemed
acceptable).
* Appraisals, if material in the Agent's reasonable
discretion, and phase I environmental surveys satisfactory
to the Agent and Lenders if real estate is involved.
FINANCIAL
REPORTING: Borrowers will agree to provide the following reports:
ANNUAL FINANCIAL STATEMENTS prepared on a consolidated basis
in accordance with GAAP for the current and prior fiscal
year, all certified by a nationally recognized firm of
certified public accountants and accompanied by an
unqualified opinion of such firm on the annual financial
statements, accompanied by covenant compliance calculations
and a representation by the Chief Financial Officer of the
Company that no Event of Default shall have occurred or be
continuing, all submitted to the Agent and Lenders within 105
days of the end of each fiscal year.
MONTHLY FINANCIAL STATEMENTS prepared on a consolidated basis
in accordance with GAAP for the current and prior fiscal
year, all submitted to the Agent and Lenders within 30 days
of the end of each month accompanied at the end of each
fiscal quarter, by covenant compliance calculations and a
representation by the Chief Financial Officer of the Company
that no Event or Default shall have occurred or be
continuing, all submitted to the Agent and Lenders within 45
days of the end of each fiscal quarter.
CONDITIONS
PRECEDENT: In addition to the usual and customary conditions to lending
in transactions of the type contemplated herein, the
obligation of the Agent and the Lenders to provide
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 7 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 13
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
the Credit Facilities shall be subject to (but not limited
to) the following conditions at or prior to the Closing Date
on a basis satisfactory to the Agent:
* Satisfactory completion of the Agent's due diligence on
Pompeii, if applicable, and satisfactory review of all
material pending or threatened litigation or proceeding in
court or any administrative forum.
* Consummation of the acquisition of WinsLoew by TFC on
terms and conditions reasonably satisfactory to the Agent.
* Evidence that affiliates and associates of Trivest, Inc.
have invested not less than $60 million to acquire the
common stock of the Company.
* A review satisfactory to the Agent and its counsel of all
matters related to The Company's environmental liability,
if applicable.
* The Agent and the Arranger must be satisfied that the
financial statements delivered to them fairly present the
business and financial condition of the Borrowers and
their subsidiaries.
* Borrowers shall have issued and received gross proceeds of
not less than $125,000,000 from the issuance of senior
subordinated notes (the "Senior Subordinated Notes") on
terms and conditions reasonably satisfactory to the Agent.
* The Agent and the Arranger shall have received projections
satisfactory to them with respect to the Borrowers and
their subsidiaries for the period from 1999 - 2003.
* No material adverse change, in the reasonable judgment of
the Agent and Arrangers, shall have occurred in the
business, assets or financial condition of the Borrowers
and its subsidiaries taken as a whole since the most
recent financial statements provided to the Agent.
* The absence of any Default or Event of Default under the
loan documentation or under any material contract or
agreement of the Borrowers and their subsidiaries; and
accuracy of representations and warranties in all material
respects.
* At Closing, the ratio of Total Funded Debt divided by pro
forma EBITDA for the latest twelve month period ended
March 31, 1999 on a consolidated basis shall not exceed
5.5:1. For the purposes of this calculation only, Total
Funded Debt shall be adjusted to reflect the Borrowers'
average working capital investment.
* The Agent shall have received a reasonably satisfactory
PRO FORMA closing balance sheet, adjusted to give effect
to the refinancing contemplated hereby.
* The negotiation, execution and delivery of loan and
security documentation reasonably satisfactory in form and
substance to the Borrowers, Agent and the Arranger and
their respective counsel, each of which shall be in full
force and effect on the Closing Date, and the perfection
of all security interests.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 8 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 14
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
* There being no order or injunction or other pending
litigation in which there is a reasonable possibility of a
decision which would materially adversely affect the
ability of the Borrowers or any of its subsidiaries to
perform under the loan documents or the Agent's or
Lenders' rights in respect thereof or their ability to
exercise such rights.
* Other conditions precedent specific to the transaction and
typical of facilities of this type, including the Agent's
receipt of satisfactory corporate approval of the Target
acquisition and the financing as well as opinions of
counsel satisfactory to the Agent as to, among other
matters, valid corporate existence and authority,
legality, validity and binding effect of all loan,
guaranty and security documents, perfection of security
interests, the absence of any violation of law or
regulation or conflict with any existing contracts.
DOCUMENTATION: The Credit Facilities are subject to negotiation, execution
and delivery of a definitive credit agreement and related
security documents, guarantees and any other documents as
shall be reasonably requested by the Agent. The credit
agreement and related security agreements will contain
conditions precedent, covenants, events of default and other
provisions appropriate for transactions of this size, type
and purpose and acceptable to the parties and their
respective counsel.
EVENTS OF DEFAULT: Usual and customary, including (without limitation)
nonpayment, misrepresentation, breach of covenant or
agreement, insolvency, bankruptcy, ERISA, judgments, Change
of Control and cross defaults. No grace periods on principal
payments, certain other notices or grace periods and/or
thresholds to be agreed upon.
ASSIGNMENT AND
PARTICIPATIONS: Usual and customary for transactions of this type and size.
Each lender may assign all or a portion of its loans and
commitments under the Facilities, or sell participations
therein to another person(s), provided that assignments shall
be in a minimum amount of $5 million and shall be subject to
certain conditions, including but not limited to, the
approval of the Borrowers (so long as no Default or Event of
Default exists) and the Agent, such approvals not to be
unreasonably withheld.
SYNDICATION
MATTERS: BankBoston will act as the exclusive administrative agent for
the Facilities and BRSI will act as the exclusive arranger,
adviser and syndication manager for the Facilities and, in
such capacities, each of BankBoston and BRS will perform the
duties and exercise the authority customarily associated with
such roles. No additional agents, co-agents, arrangers or
syndication managers will be appointed, unless the Borrowers
and each of BankBoston and BRSI so agree.
Prior to or after the execution of definitive documentation
for the Facilities, BankBoston reserves the right to
syndicate all or a portion of its commitment to one or more
financial institutions after consultation with the Borrowers
and BRSI. Upon the acceptance by BankBoston of the written
commitment of any Lender to
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 9 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 15
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
provide a portion of the Facilities, BankBoston shall be
released from a portion of its commitment in an aggregate
amount equal to the commitment of such Lender.
BRSI will manage all aspects of the syndication, including
the selection of Lenders, the determination of when BRSI will
approach potential Lenders and the final allocations among
the Lenders. The Borrowers agree to assist BRSI actively in
achieving a timely syndication that is reasonably
satisfactory to BRSI, such assistance to include, among other
things, (a) direct contact during the syndication between the
Borrowers' senior officers, representatives and advisors, on
the one hand, and prospective Lenders, on the other hand at
such times and places as BRSI may reasonably request, (b)
providing to BRSI all financial and other information with
respect to the Borrowers and the transactions contemplated
that BRSI may reasonably request, including but not limited
to financial projections relating to the foregoing, and (c)
assistance in the preparation of a confidential information
memorandum and other marketing materials to be used in
connection with the syndication.
The Borrowers agree that, prior to and during the syndication
of the Facilities, except for the Senior Subordinated Notes,
the Borrowers will not permit any offering, placement or
arrangement of any competing issues of debt securities or
commercial bank facility(ies) of any Borrower and any of its
subsidiaries.
BankBoston and BRSI shall be entitled, after consultation
with the Borrower, to change the pricing (limited to 50 basis
points), structure, terms or amount of any portion of the
Facilities if BankBoston and BRSI determine that such changes
are advisable in order to ensure a successful syndication or
an optimal credit structure for the Facilities so long as the
aggregate amount of the Facilities shall not be reduced.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 10 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 16
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
EXPENSES AND
INDEMNIFICATION: The Borrowers and Guarantors will pay the Agent's and
Arranger's reasonable legal, due diligence, and other
out-of-pocket expenses incurred in connection with the
negotiation, preparation and execution of the documentation
and the establishment of the syndicate, regardless of whether
the Facilities close. The Borrowers and the Guarantors
jointly and severally shall indemnify the Agent, the Arranger
and the Lenders (and all respective affiliates) against all
losses, liabilities, claims, damages or expense relating to
their loans, the loan documents, the Borrowers' use of loan
proceeds or the commitments, including but not limited to
attorneys and other professional fees and settlement costs,
excluding those arising from the indemnified party's own bad
faith, gross negligence or willful misconduct.
GOVERNING LAW: State of Georgia.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 11 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 1
EXHIBIT (a)(5)
TRIVEST FUND II, LTD.
TRIVEST EQUITY PARTNERS II, LTD.
TRIVEST PRINCIPALS FUND II, LTD.
2665 SOUTH BAYSHORE DRIVE, SUITE 800
MIAMI, FLORIDA 33133
April 30, 1999
Trivest Furniture Corporation
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133
Gentlemen:
Reference is made to that certain Amended and Restated Agreement and
Plan of Merger, dated as of March 30, 1999 (the "Merger Agreement"), pursuant to
which Trivest Furniture Corporation (the "Purchaser") has agreed to acquire all
of the outstanding shares of common stock of WinsLoew Furniture, Inc. (the
"Company") (other than certain shares owned by certain officers and directors of
the Company and/or their affiliates (the "Roll-Over Shares")), in a transaction
structured as a cash merger, for $33.00 cash per share (the "Acquisition").
You have advised us that the Purchaser has proposed that the Purchaser
and the Company shall enter into an amendment to the Merger Agreement (the
"Amendment") pursuant to which each holder of common stock of the Company (other
than holders of Roll-OverShares) would receive $34.00 cash per share (and each
holder of outstanding options to purchase common stock of the Company would
receive a cash payment equal to the difference between $34.00 per share and the
per share exercise price of such options.)
We understand that the aggregate purchase price to the Purchaser,
together with fees and expenses, will be approximately $296.2 million, which
amount will be funded by:
(i) approximately $6.1 million of cash available at the Company
(the "Cash on Hand");
(ii) the issuance of $135.0 million of senior subordinated notes
due 2009 (the "Senior Notes");
(iii) borrowings of approximately $80.1 million under a $145.0
million senior secured bank credit facility consisting of (A)
a $30.0 million 51/2year revolving credit facility (the
"Revolver") (not more than $5.1 million of which will be drawn
at closing), (B) a $25.0 million 51/2year term loan A (of
which $5.0 million will be drawn at closing in connection with
the consummation of the Acquisition and $20.0 million may be
used exclusively for the consummation of the proposed
<PAGE> 2
Trivest Furniture Corporation
April 30, 1999
Page 2
acquisition of Miami Metal Products, Inc., dba Pompeii
Furniture Industries and its Mexican affiliate (collectively,
"Pompeii")) and (C) a $50.0 million 7 year term loan B (the
"Credit Facility"), and (D) a $40.0 million 51/2year revolving
acquisition facility; and
(iv) the issuance of not less than $75.0 million of common equity
to Trivest Fund II, Ltd., Trivest Equity Partners II, Ltd.,
Trivest Principals Fund II, Ltd., certain members of senior
management of the Company, certain employees of the Company
and its subsidiaries and certain principals of Trivest II,
Inc. (the "Equity Financing").
We understand that the Cash on Hand, the proceeds of the Senior Notes,
the proceeds of the Credit Facility and the proceeds of the Equity Financing
will be used (i) to pay the consideration payable to the shareholders of the
Company (other than holders of Roll-Over Shares) in connection with the
Acquisition and to make the related payments to holders of outstanding Company
stock options, (ii) to refinance existing indebtedness of the Company and its
subsidiaries, (iii) to pay the purchase price for Pompeii, (iv) to finance
certain future acquisitions by the Company to the extent permitted under the
indenture relating to the Senior Notes and under the Credit Facility, (v) to pay
expenses of the Acquisition and the acquisition of Pompeii and (vi) to fund the
working capital needs of the Company and its subsidiaries and for general
corporate purposes.
Trivest Fund II, Ltd., Trivest Equity Partners II, Ltd. and Trivest
Principals Fund II, Ltd. hereby commit, severally in accordance with the pro
rata percentages set forth under Paragraph A of Annex I, hereto, to provide up
to $73.5 million of the Equity Financing for the transaction. Trivest Equity
Partners II, Ltd. and Trivest Principals Fund II, Ltd. hereby commit, severally
in accordance with the pro rata percentages set forth under Paragraph B of Annex
I, hereto, to provide up to $1.5 million of any excess of the Equity Financing
for the transaction over $73.5 million. The foregoing commitments are subject to
the following:
(a) the Amendment shall have been executed and delivered by the
parties thereto;
(b) no material adverse change shall have occurred after the date
hereof in the business, prospects, condition (financial or
otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole;
(c) the Senior Notes financing shall have been consummated on
terms substantially the same as those described above; and
(d) the Credit Facility financing shall have been consummated on
terms substantially the same as those described above.
<PAGE> 3
Trivest Furniture Corporation
April 30, 1999
Page 3
You are hereby authorized to deliver a copy of this letter to the
Special Committee of the Board of Directors of the Company.
Very truly yours,
TRIVEST FUND II, LTD.
By: Trivest Fund II Manager, Ltd., General
Partner
Trivest Equities, Inc., General Partner
By: /s/EARL W. POWELL
-----------------------------------
Earl W. Powell
Chairman and Chief Executive Officer
TRIVEST EQUITY PARTNERS II, LTD.
By: Trivest Fund II Manager, Ltd., General
Partner
Trivest Equities, Inc., General Partner
By: /s/EARL W. POWELL
------------------------------------
Earl W. Powell
Chairman and Chief Executive Officer
TRIVEST PRINCIPALS FUND II, LTD.
By: Trivest Principals Fund II, Inc.,
General Partner
By: /s/EARL W. POWELL
------------------------------------
Earl W. Powell
Chairman and Chief Executive Officer
<PAGE> 4
Trivest Furniture Corporation
April 30, 1999
Page 4
ANNEX I
-------
Pro Rata Percentages of Commitment
----------------------------------
B. First $73.5 million of Equity Financing
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
TRIVEST INVESTOR PRO RATA PERCENTAGE
--------------------------------------------------------------------------------------------------
<S> <C>
Trivest Fund II, Ltd. 72.73%
--------------------------------------------------------------------------------------------------
Trivest Equity Partners II, Ltd. 18.91%
--------------------------------------------------------------------------------------------------
Trivest Principals Fund II, Ltd. 8.36%
--------------------------------------------------------------------------------------------------
</TABLE>
B. Up to $1.5 million Excess of Equity Financing Over $73.5 Million
<TABLE>
<CAPTION>
-------------------------------------------------- -----------------------------------------------
TRIVEST INVESTOR PRO RATA PERCENTAGE
--------------------------------------------------------------------------------------------------
<S> <C>
Trivest Equity Partners II, Ltd. 69.33%
--------------------------------------------------------------------------------------------------
Trivest Principals Fund II, Ltd. 30.67%
--------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT (a)(6)
TRIVEST FUND II, LTD.
TRIVEST EQUITY PARTNERS II, LTD.
TRIVEST PRINCIPALS FUND II, LTD.
2665 SOUTH BAYSHORE DRIVE, SUITE 800
MIAMI, FLORIDA 33133
May 3, 1999
Trivest Furniture Corporation
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133
Gentlemen:
Reference is made to that certain Amended and Restated Agreement and
Plan of Merger, dated as of March 30, 1999 (the "Merger Agreement"), pursuant to
which Trivest Furniture Corporation (the "Purchaser") has agreed to acquire all
of the outstanding shares of common stock of WinsLoew Furniture, Inc. (the
"Company") (other than certain shares owned by certain officers and directors of
the Company and/or their affiliates (the "Roll-Over Shares")), in a transaction
structured as a cash merger, for $33.00 cash per share (the "Acquisition").
You have advised us that the Purchaser has proposed that the Purchaser
and the Company shall enter into an amendment to the Merger Agreement (the
"Amendment") pursuant to which each holder of common stock of the Company (other
than holders of Roll-OverShares) would receive $34.75 cash per share (and each
holder of outstanding options to purchase common stock of the Company would
receive a cash payment equal to the difference between $34.75 per share and the
per share exercise price of such options).
We understand that the aggregate purchase price to the Purchaser,
together with fees and expenses, will be approximately $302.2 million, which
amount will be funded by:
(i) approximately $6.1 million of cash available at the Company
(the "Cash on Hand");
(ii) the issuance of $135.0 million of senior subordinated notes
due 2009 (the "Senior Notes");
(iii) borrowings of approximately $83.1 million under a $145.0
million senior secured bank credit facility consisting of (A)
a $30.0 million 51/2year revolving credit facility (the
"Revolver") (not more than $8.1 million of which will be drawn
at closing), (B) a $25.0 million 51/2year term loan A (of
which $5.0 million will be drawn at closing in connection with
the consummation of the Acquisition and $20.0 million may be
used exclusively for the consummation of the proposed
<PAGE> 2
Trivest Furniture Corporation
May 3, 1999
Page 2
acquisition of Miami Metal Products, Inc., dba Pompeii
Furniture Industries and its Mexican affiliate (collectively,
"Pompeii")) and (C) a $50.0 million 7 year term loan B (the
"Credit Facility"), and (D) a $40.0 million 51/2year revolving
acquisition facility; and
(iv) the issuance of not less than $78.0 million of common equity
to Trivest Fund II, Ltd., Trivest Equity Partners II, Ltd.,
Trivest Principals Fund II, Ltd., certain members of senior
management of the Company, certain employees of the Company
and its subsidiaries and certain principals of Trivest II,
Inc. (the "Equity Financing").
We understand that the Cash on Hand, the proceeds of the Senior Notes,
the proceeds of the Credit Facility and the proceeds of the Equity Financing
will be used (i) to pay the consideration payable to the shareholders of the
Company (other than holders of Roll-Over Shares) in connection with the
Acquisition and to make the related payments to holders of outstanding Company
stock options, (ii) to refinance existing indebtedness of the Company and its
subsidiaries, (iii) to pay the purchase price for Pompeii, (iv) to finance
certain future acquisitions by the Company to the extent permitted under the
indenture relating to the Senior Notes and under the Credit Facility, (v) to pay
expenses of the Acquisition and the acquisition of Pompeii and (vi) to fund the
working capital needs of the Company and its subsidiaries and for general
corporate purposes.
Trivest Fund II, Ltd., Trivest Equity Partners II, Ltd. and Trivest
Principals Fund II, Ltd. hereby commit, severally in accordance with the pro
rata percentages set forth under Paragraph A of Annex I, hereto, to provide up
to $73.5 million of the Equity Financing for the transaction and, by his
signature set forth below, Earl W. Powell (individually or on behalf of an
entity controlled by him) hereby commits to provide up to $3 million of the
Equity Financing for the transaction. Trivest Equity Partners II, Ltd. and
Trivest Principals Fund II, Ltd. hereby commit, severally in accordance with the
pro rata percentages set forth under Paragraph B of Annex I, hereto, to provide
up to $1.5 million of any excess of the Equity Financing for the transaction
over $76.5 million. The foregoing commitments are subject to the following:
(a) the Amendment shall have been executed and delivered by the
parties thereto;
(b) no material adverse change shall have occurred after the date
hereof in the business, prospects, condition (financial or
otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole;
(c) the Senior Notes financing shall have been consummated on
terms substantially the same as those described above; and
<PAGE> 3
Trivest Furniture Corporation
May 3, 1999
Page 3
(d) the Credit Facility financing shall have been consummated on
terms substantially the same as those described above.
You are hereby authorized to deliver a copy of this letter to the
Special Committee of the Board of Directors of the Company.
Very truly yours,
TRIVEST FUND II, LTD.
By: Trivest Fund II Manager, Ltd., General
Partner
Trivest Equities, Inc., General Partner
By: /s/EARL W. POWELL
-----------------------------------
Earl W. Powell
Chairman and Chief Executive Officer
TRIVEST EQUITY PARTNERS II, LTD.
By: Trivest Fund II Manager, Ltd., General
Partner
Trivest Equities, Inc., General Partner
By: /s/EARL W. POWELL
------------------------------------
Earl W. Powell
Chairman and Chief Executive Officer
TRIVEST PRINCIPALS FUND II, LTD.
By: Trivest Principals Fund II, Inc.,
General Partner
By: /s/EARL W. POWELL
------------------------------------
Earl W. Powell
Chairman and Chief Executive Officer
<PAGE> 4
Trivest Furniture Corporation
May 3, 1999
Page 4
ANNEX I
-------
Pro Rata Percentages of Commitment
----------------------------------
B. First $73.5 million of Equity Financing
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
TRIVEST INVESTOR PRO RATA PERCENTAGE
--------------------------------------------------------------------------------------------------
<S> <C>
Trivest Fund II, Ltd. 72.73%
--------------------------------------------------------------------------------------------------
Trivest Equity Partners II, Ltd. 18.91%
--------------------------------------------------------------------------------------------------
Trivest Principals Fund II, Ltd. 8.36%
--------------------------------------------------------------------------------------------------
</TABLE>
B. Up to $1.5 million Excess of Equity Financing Over $76.5 Million
<TABLE>
<CAPTION>
-------------------------------------------------- -----------------------------------------------
TRIVEST INVESTOR PRO RATA PERCENTAGE
--------------------------------------------------------------------------------------------------
<S> <C>
Trivest Equity Partners II, Ltd. 69.33%
--------------------------------------------------------------------------------------------------
Trivest Principals Fund II, Ltd. 30.67%
--------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT (b)(1)
--------------
MANN, ARMISTEAD & EPPERSON, LTD.
INVESTMENT BANKERS AND ADVISORS
April 7, 1999
Special Committee of the Board of Directors
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Gentlemen:
WinsLoew Furniture, Inc. (the "Company") and Trivest Furniture
Corporation (the "Purchaser") have entered into an Amendment and Restated Plan
of Merger dated as of March 30, 1999 (the "Agreement") whereby the Purchaser
would be merged into the Company (the "Merger") pursuant to the terms and
subject to the conditions of the Agreement. The Agreement provides that each
outstanding share of common stock of the Company, other than the shares owned
directly or indirectly by the Purchaser, (the "Public Shareholders") will be
converted into the right to receive $33.00 in cash. You have requested our
opinion to the fairness, from a financial point of view, to the Public
Shareholders of the cash consideration to be received by the Public Shareholders
in the Merger.
In arriving at our opinion, we, among other things: (i) reviewed the
Agreement; (ii) solicited the interest of third parties in submitting a
competing offer for the acquisition of the Company; (iii) met with officers and
certain members of the management of WinsLoew to discuss the respective
business, financial condition, operating results and future prospects; (iv)
reviewed the Company's annual audited financial statements and interim unaudited
financial statements through February 22, 1999; (v) reviewed publicly available
information including recent Securities and Exchange Commission filings and
shareholder communications for WinsLoew; (vi) compared certain financial and
stock market data of WinsLoew with similar data for selected publicly-held
furniture companies; (vii) reviewed projected financial statements through
December 31, 2002 as prepared by management of the Company; (viii) reviewed
historical market price and volume data for the common stock of WinsLoew; (ix)
reviewed various published research reports for WinsLoew; and (x) made such
other financial studies, analyses, and investigations as we deemed appropriate.
In rendering this opinion, we have relied upon the accuracy and
completeness of all financial and other information furnished to us by or on
behalf of the Company and other published information that we considered in our
review. We were not requested to and generally have not undertaken to verify
independently the accuracy and completeness of such information. We have relied
upon the reasonableness of all projections and forecasts provided to us and have
assumed that they were prepared in accordance with accepted practice on bases
reflecting the best currently available estimates and good faith judgments of
the Company's management. Our opinion herein is based on the circumstances
existing and known to us as of the date hereof. We
<PAGE> 2
Special Committee of the Board of Directors
WinsLoew Furniture, Inc.
April 7, 1999
Page 2
have not made or obtained any independent evaluations or appraisals of the
assets or liabilities (contingent or otherwise) of the Company, nor were we
furnished with any such evaluations or appraisals. Consequently, we do not
express any opinion regarding the value of any of the Company's specific
individual assets. We were not requested to, and therefore did not, participate
in the structuring or negotiating of the Merger and have relied as to certain
legal matters on advice from counsel to the Special Committee.
Our opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to us
as of, the date of this letter. Although subsequent developments may affect this
opinion, we do not have any obligation to update or revise this opinion. Our
opinion does not address (i) the relative merits of the Merger and the other
business strategies or transactions with third parties being considered by the
Company's Board of Directors, (ii) the Board's decision to proceed with the
Merger or (iii) the value of the shares of common stock held by the Purchaser or
fairness of any consideration being received by the Purchaser in the Merger. Our
opinion does not constitute a recommendation to any stockholder as to how such
stockholder should vote on the proposed transaction.
Mann, Armistead & Epperson, Ltd., as part of its investment banking
services, is regularly engaged in the valuation of businesses and securities in
connection with mergers, acquisitions, underwritings, private placements and
valuations for corporate, estate and other purposes. Pursuant to our engagement
in connection with this fairness opinion, we will receive a fee for our services
in rendering said opinion, a substantial portion of which is contingent upon the
consummation of the Merger. We are familiar with WinsLoew, having acted as
investment banker in the sale of one of the Company's subsidiaries and having
provided investment research on the Company.
The opinion expressed herein is provided for the benefit of the Special
Committee of the Board of Directors of WinsLoew and the opinion, and any
supporting analysis or other material supplied by us may not be quoted, referred
to, or used in any public filing or in any written document or for any other
purpose without the prior written approval of Mann, Armistead & Epperson, Ltd.
Mann, Armistead & Epperson, Ltd. consents to the use of this opinion in its
entirety in any proxy statement or other communication from WinsLoew to its
shareholders. This letter is not intended to, and shall not, confer any rights
or remedies upon any security holder of WinsLoew or any other person or entity.
Based upon the foregoing considerations, it is our opinion that as of
April 7, 1999, the consideration to be received by the Public Shareholders of
WinsLoew upon consummation of the Merger is fair, from a financial point of
view, to the Public Shareholders of WinsLoew.
Truly yours,
MANN, ARMISTEAD & EPPERSON, LTD.
/S/ MANN ARMISTEAD & EPPERSON, LTD.
<PAGE> 1
EXHIBIT b(3)
WINSLOEW FURNITURE, INC.
OPINION OF THE FINANCIAL ADVISOR
FINANCIAL ANALYSIS
APRIL 7, 1999
MANN, ARMISTEAD & EPPERSON, LTD.
INVESTMENT BANKING
<PAGE> 2
WINSLOEW FURNITURE, INC.
FINANCIAL ANALYSIS - OPINION OF THE FINANCIAL ADVISOR
================================================================================
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. HISTORICAL FINANCIAL ANALYSIS
A. FISCAL YEARS ENDING DECEMBER 31, 1994-1998.................................................................. 1
B. YEAR-TO-DATE INFORMATION, FEBRUARY 22, 1999................................................................. 6
II. PROJECTED FINANCIAL INFORMATION................................................................................... 9
III. OFFER VALUATION
A. COMPARABLE PUBLIC COMPANY INFORMATION....................................................................... 11
B. MULTIPLE ANALYSIS........................................................................................... 13
C. STOCK PRICE ANALYSIS........................................................................................ 14
IV. SOLICITATION PROCESS.............................................................................................. 15
V. DISCOUNTED CASH FLOW ANALYSIS..................................................................................... 17
</TABLE>
- --------------------------------------------------------------------------------
MANN, ARMISTEAD & EPPERSON, LTD.
INVESTMENT BANKING
<PAGE> 3
I. HISTORICAL FINANCIAL ANALYSIS
<PAGE> 4
A. FISCAL YEARS ENDING DECEMBER 31, 1994-1998
<PAGE> 5
WINSLOEW FURNITURE, INC.
Summary Financial Information
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
Income Statement Information Historical - Fiscal Year Ended December 31 (a)(c) Budget(b)
---------------------------------------------------------------- --------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 83,284 $ 95,443 $117,405 $122,145 $141,360 $157,314
Cost of Goods Sold 55,878 64,999 78,029 79,431 87,232 98,135
-------- -------- -------- -------- -------- --------
Gross Profit 27,406 30,444 39,376 42,714 54,128 59,179
Operating Expenses 14,731 17,719 21,472 21,427 23,124 25,859
Non-Recurring Charges 917 0 0 0 0 0
Amortization 2,000 2,077 1,444 992 1,122 1,266
-------- -------- -------- -------- -------- --------
- --------------------------------------------------------------------------------------------------------------------------
Operating Income 9,758 10,648 16,460 20,295 29,882 32,054
- --------------------------------------------------------------------------------------------------------------------------
Interest Expense 2,795 3,841 3,083 2,296 635 810
-------- -------- -------- -------- -------- --------
Earnings Before Income Taxes 6,963 6,807 13,377 17,999 29,247 31,244
Income Tax Expense 3,068 2,739 4,834 6,838 10,947 11,873
-------- -------- -------- -------- -------- --------
Net Income $ 3,895 $ 4,068 $ 8,543 $ 11,161 $ 18,300 $ 19,371
======== ======== ======== ======== ======== ========
Weighted Average Shares - Diluted 9,655 9,029 8,730 7,563 7,624 7,454
Earnings Per Share - Diluted $ 0.40 $ 0.45 $ 0.98 $ 1.48 $ 2.40 $ 2.60
======== ======== ======== ======== ======== ========
</TABLE>
Notes:
- ------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
(c) For the fiscal periods 1995-1998, this information excludes all
extraordinary items, income (losses) from discontinued operations (net of
taxes) and losses form the sale of discontinued operations.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 1
Investment Banking
<PAGE> 6
WINSLOEW FURNITURE, INC.
Summary Financial Information
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
As a Function of Net Sales Historical - Fiscal Year Ended December 31 (a)(c) Budget(b)
------------------------------------------------------- --------
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 67.1% 68.1% 66.5% 65.0% 61.7% 62.4%
------- ------- ------- ------- ------- -------
Gross Profit 32.9% 31.9% 33.5% 35.0% 38.3% 37.6%
Operating Expenses 17.7% 18.6% 18.3% 17.5% 16.4% 16.4%
Non-Recurring Charges 1.1% 0.0% 0.0% 0.0% 0.0% 0.0%
Amortization 2.4% 2.2% 1.2% 0.8% 0.8% 0.8%
------- ------- ------- ------- ------- -------
- ----------------------------------------------------------------------------------------------------------
Operating Income 11.7% 11.2% 14.0% 16.6% 21.1% 20.4%
- ----------------------------------------------------------------------------------------------------------
Interest Expense 3.4% 4.0% 2.6% 1.9% 0.4% 0.5%
------- ------- ------- ------- ------- -------
Earnings Before Income Taxes 8.4% 7.1% 11.4% 14.7% 20.7% 19.9%
Income Tax Expense 3.7% 2.9% 4.1% 5.6% 7.7% 7.5%
------- ------- ------- ------- ------- -------
Net Income 4.7% 4.3% 7.3% 9.1% 12.9% 12.3%
======= ======= ======= ======= ======= =======
Other Information
Net Sales Growth 7.1% 14.6% 23.0% 4.0% 15.7% 11.3%
Effective Income Tax 44.1% 40.2% 36.1% 38.0% 37.4% 38.0%
</TABLE>
Notes:
- ------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
(c) For the fiscal periods 1995-1998, this information excludes all
extraordinary items, income (losses) from discontinued operations (net of
taxes) and losses from the sale of discontinued operations.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 2
Investment Banking
<PAGE> 7
WINSLOEW FURNITURE, INC.
Summary Financial Information - Adjustments to Financial Results
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
Historical(a) Budget (b)
------------ ----------
1998 1999
------- -------
<S> <C> <C>
I. Operating Income (EBIT)
Operating Income (EBIT) $29,882 $32,054
II. Adjustments to Operating Income
Adjustments to Generate EBITDA
Plus - Amortization 1,122 1,566
Plus - Depreciation 1,496 2,145
------- -------
Total Adjustments 2,618 3,711
------------------------------------------------------
EBITDA $32,500 $35,765
------------------------------------------------------
</TABLE>
Notes:
- -----------------------------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Information sourced from internal statements as prepared by WinsLoew
Furniture, Inc.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 3
Investment Banking
<PAGE> 8
WINSLOEW FURNITURE, INC.
Summary Financial Information
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
Balance Sheet Information FYE December 31 (a)
---------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
ASSETS
Cash and Equivalents $ 897 $ 707 $ 1,475
Accounts Receivable 22,851 21,124 23,647
Inventory 10,716 9,096 12,206
Prepaid Insurance and Other Current 3,748 7,391 4,638
Net Assets of Discontinued Operations 12,711 2,057 0
------- ------- -------
Total Current Assets 50,923 40,375 41,966
Net Assets of Discontinued Operations 13,937 6,860 0
Net Property, Plant and Equipment 11,954 10,320 13,948
Goodwill, Net 21,699 21,021 27,176
Other Assets 1,111 763 1,463
------- ------- -------
Total Assets $99,624 $79,339 $84,553
======= ======= =======
LIABILITIES
Current Portion of Long Term Debt 1,955 515 47
Accounts Payable 3,926 3,187 4,377
Other Accrued Liabilities 4,940 7,336 11,702
------- ------- -------
Total Current Liabilities 10,821 11,038 16,126
Long Term Debt, Net of Current Portion 38,726 15,908 1,400
Deferred Income Taxes 1,677 1,367 801
------- ------- -------
Total Liabilities 51,224 28,313 18,327
STOCKHOLDERS' EQUITY
Common Stock 75 75 73
Additional Paid in Capital 24,543 24,926 19,797
Retained Earnings 23,782 26,025 46,356
------- ------- -------
Total Stockholders' Equity 48,400 51,026 66,226
Total Liabilities and Stockholders' Equity $99,624 $79,339 $84,553
======= ======= =======
</TABLE>
Notes:
- ------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 4
Investment Banking
<PAGE> 9
WINSLOEW FURNITURE, INC.
Summary Financial Information
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
Balance Sheet Information FYE December 31 (a)
-------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
ASSETS
Cash and Equivalents 0.9% 0.9% 1.7%
Accounts Receivable 22.9% 26.6% 28.0%
Inventory 10.8% 11.5% 14.4%
Prepaid Insurance and Other Current 3.8% 9.3% 5.5%
Net Assets of Discontinued Operations 12.8% 2.6% 0.0%
------- ------- -------
Total Current Assets 51.1% 50.9% 49.6%
Net Assets of Discontinued Operations 14.0% 8.6% 0.0%
Net Property, Plant and Equipment 12.0% 13.0% 16.5%
Goodwill, Net 21.8% 26.5% 32.1%
Other Assets 1.1% 1.0% 1.7%
------- ------- -------
Total Assets 100.0% 100.0% 100.0%
======= ======= =======
LIABILITIES
Current Portion of Long Term Debt 2.0% 0.6% 0.1%
Accounts Payable 3.9% 4.0% 5.2%
Other Accrued Liabilities 5.0% 9.2% 13.8%
------- ------- -------
Total Current Liabilities 10.9% 13.9% 19.1%
Long Term Debt, Net of Current Portion 38.9% 20.1% 1.7%
Deferred Income Taxes 1.7% 1.7% 0.9%
------- ------- -------
Total Liabilities 51.4% 35.7% 21.7%
STOCKHOLDERS' EQUITY
Common Stock 0.1% 0.1% 0.1%
Additional Paid in Capital 24.6% 31.4% 23.4%
Retained Earnings 23.9% 32.8% 54.8%
------- ------- -------
Total Stockholders' Equity 48.6% 64.3% 78.3%
Total Liabilities and Stockholders' Equity 100.0% 100.0% 100.0%
======= ======= =======
</TABLE>
Notes:
- ------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 5
Investment Banking
<PAGE> 10
B. YEAR-TO-DATE INFORMATION, FEBRUARY 22, 1999
<PAGE> 11
WINSLOEW FURNITURE, INC.
Summary Financial Information
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
Income Statement Information FYE (a) YTD February 22 (b) Trailing-12
-------- ----------------------- --------
1998 1998 1999 2/22/99
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Revenue $141,360 $ 15,398 $ 19,657 $145,619
Cost of Goods Sold 87,232 10,661 12,262 88,833
-------- -------- -------- --------
Gross Profit 54,128 4,737 7,395 56,786
Operating Expenses 23,124 3,477 3,781 23,428
Non-Recurring Charges 0 0 0 0
Amortization 1,122 162 212 1,172
-------- -------- -------- --------
- -------------------------------------------------------------------------------------------------
Operating Income 29,882 1,098 3,402 32,186
- -------------------------------------------------------------------------------------------------
Interest Expense 635 305 149 479
-------- -------- -------- --------
Earnings Before Income Taxes 29,247 793 3,253 31,707
Income Tax Expense 10,947 278 1,217 11,886
-------- -------- -------- --------
Net Income $ 18,300 $ 515 $ 2,036 $ 19,821
======== ======== ======== ========
Weighted Average Shares - Diluted 7,624 7,629 7,420 7,420
Earnings Per Share - Diluted $ 2.40 $ 0.07 $ 0.27 $ 2.67
Net Revenue Growth 15.7% N/A 27.7% 3.0%
As a Function of Net Revenue
Gross Profit 38.3% 30.8% 37.6% 39.0%
Operating Income 21.1% 7.1% 17.3% 22.1%
Pre Tax Income 20.7% 5.2% 16.5% 21.8%
Net Income 12.9% 3.3% 10.4% 13.6%
Operating Income $ 29,882 $ 1,098 $ 3,402 $ 32,186
Plus Depreciation & Amoritization 2,618 441 458 2,635
- -------------------------------------------------------------------------------------------------
EBITDA $ 32,500 $ 1,539 $ 3,860 $ 34,821
- -------------------------------------------------------------------------------------------------
</TABLE>
Notes:
- ------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 6
Investment Banking
<PAGE> 12
WINSLOEW FURNITURE, INC.
Summary Financial Information
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
FYE December 31 (a) As of (b) As of (b)
-------------------- -------- --------
1997 1998 2/22/98 2/22/99
------- ------- ------- -------
<S> <C> <C> <C> <C>
ASSETS
Cash and Equivalents $ 707 $ 1,475 $ 824 $ 1,970
Accounts Receivable 21,124 23,647 27,954 30,955
Inventory 9,096 12,206 12,394 13,419
Prepaid Insurance and Other Current 7,391 4,638 7,534 4,111
Net Assets of Discontinued Operations 2,057 0 0 0
------- ------- ------- -------
Total Current Assets 40,375 41,966 48,706 50,455
Net Assets of Discontinued Operations 6,860 0 0 0
Net Property, Plant and Equipment 10,320 13,948 12,855 13,790
Goodwill, Net 21,021 27,176 24,906 27,376
Other Assets 763 1,463 888 1,152
------- ------- ------- -------
Total Assets $79,339 $84,553 $87,355 $92,773
======= ======= ======= =======
LIABILITIES
Current Portion of Long Term Debt 515 47 515 39
Accounts Payable 3,187 4,377 5,355 5,068
Other Accrued Liabilities 7,336 11,702 11,934 13,928
------- ------- ------- -------
Total Current Liabilities 11,038 16,126 17,804 19,035
Long Term Debt, Net of Current Portion 15,908 1,400 16,625 7,309
Deferred Income Taxes 1,367 801 1,368 801
------- ------- ------- -------
Total Liabilities 28,313 18,327 35,797 27,145
STOCKHOLDERS' EQUITY
Common Stock 75 73 75 72
Additional Paid in Capital 24,926 19,797 25,031 17,164
Retained Earnings 26,025 46,356 26,452 48,392
------- ------- ------- -------
Total Stockholders' Equity 51,026 66,226 51,558 65,628
Total Liabilities and Stockholders' Equity $79,339 $84,553 $87,355 $92,773
======= ======= ======= =======
</TABLE>
Notes:
- ------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 7
Investment Banking
<PAGE> 13
WINSLOEW FURNITURE, INC.
Summary Financial Information
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
FYE December 31 (a) As of (b) As of (b)
------------------- -------- --------
1997 1998 2/22/98 2/22/99
------- ------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash and Equivalents 0.9% 1.7% 0.9% 2.1%
Accounts Receivable 26.6% 28.0% 32.0% 33.4%
Inventory 11.5% 14.4% 14.2% 14.5%
Prepaid Insurance and Other Current 9.3% 5.5% 8.6% 4.4%
Net Assets of Discontinued Operations 2.6% 0.0% 0.0% 0.0%
------- ------- ------- -------
Total Current Assets 50.9% 49.6% 55.8% 54.4%
Net Assets of Discontinued Operations 8.6% 0.0% 0.0% 0.0%
Net Property, Plant and Equipment 13.0% 16.5% 14.7% 14.9%
Goodwill, Net 26.5% 32.1% 28.5% 29.5%
Other Assets 1.0% 1.7% 1.0% 1.2%
------- ------- ------- -------
Total Assets 100.0% 100.0% 100.0% 100.0%
======= ======= ======= =======
LIABILITIES
Current Portion of Long Term Debt 0.6% 0.1% 0.6% 0.0%
Accounts Payable 4.0% 5.2% 6.1% 5.5%
Other Accrued Liabilities 9.2% 13.8% 13.7% 15.0%
------- ------- ------- -------
Total Current Liabilities 13.9% 19.1% 20.4% 20.5%
Long Term Debt, Net of Current Portion 20.1% 1.7% 19.0% 7.9%
Deferred Income Taxes 1.7% 0.9% 1.6% 0.9%
------- ------- ------- -------
Total Liabilities 35.7% 21.7% 41.0% 29.3%
STOCKHOLDERS' EQUITY
Common Stock 0.1% 0.1% 0.1% 0.1%
Additional Paid in Capital 31.4% 23.4% 28.7% 18.5%
Retained Earnings 32.8% 54.8% 30.3% 52.2%
------- ------- ------- -------
Total Stockholders' Equity 64.3% 78.3% 59.0% 70.7%
Total Liabilities and Stockholders' Equity 100.0% 100.0% 100.0% 100.0%
======= ======= ======= =======
</TABLE>
Notes:
- ------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 8
Investment Banking
<PAGE> 14
II. PROJECTED FINANCIAL INFORMATION
<PAGE> 15
WINSLOEW FURNITURE, INC.
Projected Financial Information
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
FYE - DECEMBER 31 FISCAL YEAR ENDED (a) PROJECTED (b)
------------------------- ---------------------------------------------------------
1997 1998 1999 2000 2001 2002
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 122,145 $ 141,360 $ 157,314 $ 169,113 $ 181,796 $ 195,431
Cost of Goods Sold 79,431 87,232 98,135 105,495 113,100 121,350
--------- --------- --------- --------- --------- ---------
Gross Profit 42,714 54,128 59,179 63,618 68,696 74,081
Selling, General & Administrative Exp 22,419 24,246 27,125 28,666 30,766 33,016
--------- --------- --------- --------- --------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income 20,295 29,882 32,054 34,952 37,930 41,065
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Expense 2,296 635 810 (100) (750) (1,250)
--------- --------- --------- --------- --------- ---------
Pre-Tax Income 17,999 29,247 31,244 35,052 38,680 42,315
Income Taxes 6,838 10,947 11,873 13,300 14,700 16,080
--------- --------- --------- --------- --------- ---------
Net Income $ 11,161 $ 18,300 $ 19,371 $ 21,752 $ 23,980 $ 26,235
========= ========= ========= ========= ========= =========
Shares Outstanding 7,563 7,624 7,454 7,500 7,500 7,500
Earnings Per Share $ 1.48 $ 2.40 $ 2.60 $ 2.90 $ 3.20 $ 3.50
ADJUSTMENTS FOR CASH FLOW INFORMATION
Net Income $ 11,161 $ 18,300 $ 19,371 $ 21,752 $ 23,980 $ 26,235
Less: Capital Expenditures (1,001) (942) (5,000) (2,000) (2,000) (2,000)
Plus: Depreciation & Amortization 2,293 2,618 3,178 2,725 2,958 2,933
--------- --------- --------- --------- --------- ---------
Operating Cash Flow $ 12,453 $ 19,976 $ 17,549 $ 22,477 $ 24,938 $ 27,168
========= ========= ========= ========= ========= =========
</TABLE>
Notes:
- -------------------------------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 9
Investment Banking
<PAGE> 16
WINSLOEW FURNITURE, INC.
Projected Financial Information - Assumptions
(As a Percentage of Net Sales)
================================================================================
<TABLE>
<CAPTION>
FYE - DECEMBER 31 FISCAL YEAR ENDED (a) PROJECTED (b)
---------------------- -------------------------------------------
1997 1998 1999 2000 2001 2002
------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Sales Growth 4.0% 15.7% 11.3% 7.5% 7.5% 7.5%
As a Percentage of Net Sales
Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 65.0% 61.7% 61.7% 61.7% 61.7% 61.7%
------- ------- ------- ------- ------- -------
Gross Profit 35.0% 38.3% 38.3% 38.3% 38.3% 38.3%
Selling, General & Administrative Exp 18.4% 17.2% 17.2% 17.2% 17.2% 17.2%
------- ------- ------- ------- ------- -------
- -------------------------------------------------------------------------------------------------------------------------
Operating Income 16.6% 21.1% 21.1% 21.1% 21.1% 21.1%
- -------------------------------------------------------------------------------------------------------------------------
Interest Expense 1.9% 0.4% 0.4% 0.4% 0.4% 0.4%
------- ------- ------- ------- ------- -------
Pre-Tax Income 14.7% 20.7% 19.9% 20.7% 21.3% 21.7%
Income Taxes 5.6% 7.7% 7.5% 7.9% 8.1% 8.2%
======= ======= ======= ======= ======= =======
Effective Tax Rate 38.0% 37.4% 38.0% 37.9% 38.0% 38.0%
</TABLE>
Notes:
- -------------------------------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 10
Investment Banking
<PAGE> 17
III. OFFER VALUATION
<PAGE> 18
WINSLOEW FURNITURE, INC.
Comparable Public Company Analysis
(Dollars in Thousands, Except Per Share Information)
================================================================================
<TABLE>
<CAPTION>
Stock Information Market Value Information
----------------------------------------------------- -------------------------------------------
52 Week Market
Company Name/ Current --------------------- Shares Value of Net Enterprise
Latest Financials Ticker Price(a) High Low Outst. Equity Debt (b) Value
- ---------------------------- ------ --------- --------- --------- -------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Falcon Products, Inc. FCP $ 7.20 $ 13.75 $ 7.20 9,042 $ 65,102 $ 17,440 $ 82,542
QE 1/30/99
Kimball International, Inc. KBALB 14.56 24.94 14.56 41,073 598,023 (130,935) 467,088
QE 12/31/98
LADD Furniture, Inc. LADF 17.08 31.50 13.38 8,017 136,930 111,065 247,995
FYE 1/02/99
Meadowcraft, Inc. MWI 6.00 17.13 4.00 19,709 118,254 55,094 173,348
QE 1/31/99
Pulaski Furniture Corp. PLFC 20.08 27.00 18.63 2,840 57,027 31,330 88,357
QE 1/24/99
Shelby Williams Industries SY 9.20 16.88 8.88 9,108 83,794 (3,335) 80,459
FYE 12/31/98
</TABLE>
<TABLE>
<CAPTION>
Latest Twelve Months
---------------------------------------- Book
Company Name/ Operating Net Value of Estimated
Latest Financials Sales Income (d) Income Equity LTM (e) '99EPS(f)
- ------------------------------ ----------- ---------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Falcon Products, Inc. $ 149,961 $ 11,109 $ 6,350 $ 73,632 $ 0.70 $ 1.09
QE 1/30/99
Kimball International, Inc. 1,066,662 69,568 54,011 452,776 1.32 1.38
QE 12/31/98
LADD Furniture, Inc. 571,063 29,769 12,259 144,521 1.53 1.98
FYE 1/02/99
Meadowcraft, Inc. 156,712 27,361 18,995 50,257 0.96 0.51
QE 1/31/99
Pulaski Furniture Corp. 176,991 12,024 6,688 59,977 2.35 2.64
QE 1/24/99
Shelby Williams Industries 165,937 16,555 10,614 64,695 1.17 1.30
FYE 12/31/98
</TABLE>
Notes:
- ------------------------------
(a) Current price reflects closing price as of April 1, 1999.
(b) Net debt equals short-term debt plus long-term debt, including capitalized
lease obligations, minus cash and marketable securities.
(c) Enterprise Value is equal to market value of equity plus net debt.
(d) Earnings before interest and taxes.
(e) Latest Twelve Months
(f) 1999 Earnings Estimates from Zack's Research.
================================================================================
Mann Armistead & Epperson, Ltd. Page 11
Investment Banking
<PAGE> 19
WINSLOEW FURNITURE, INC.
Comparable Public Company Analysis-Ratios & Multiples
(Dollars in Thousands, Except Per Share Information)
================================================================================
<TABLE>
<CAPTION>
Ratios Multiple of
----------------------------- Enterprise Value to:
Return ---------------------
Company Name/ Operating Net on Operating
Latest Financials Income Income Equity Sales Income
- -------------------------- --------- ------ ------ ----- ---------
<S> <C> <C> <C> <C> <C>
Falcon Products, Inc. 7.4% 4.2% 8.6% 55.0% 7.43 x
QE 1/30/99
Kimball International, Inc. 6.5% 5.1% 11.9% 43.8% 6.71 x
QE 12/31/98
LADD Furniture, Inc. 5.2% 2.1% 8.5% 43.4% 8.33 x
FYE 1/02/99
Meadowcraft, Inc. 17.5% 12.1% 37.8% 110.6% 6.34 x
QE 1/31/99
Pulaski Furniture Corp. 6.8% 3.8% 11.2% 49.9% 7.35 x
QE 1/24/99
Shelby Williams Industries 10.0% 6.4% 16.4% 48.5% 4.86 x
FYE 12/31/98
Low 5.2% 2.1% 8.5% 43.4% 6.69 x
- ---------------------------------------------------------------------------------------
Average 8.9% 5.6% 15.7% 58.5% 6.84 x
- ---------------------------------------------------------------------------------------
High 17.5% 12.1% 37.8% 110.6% 19.66 x
</TABLE>
<TABLE>
<CAPTION>
Multiple of Market Value of Equity to:
--------------------------------------------------------------- Dividends
Company Name/ Shareholders' EPS Estimated --------------------
Latest Financials Equity Sales LTM '99 EPS Rate Yield
- -------------------------- ------------ --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Falcon Products, Inc. 0.88 x 0.43 x 10.25 x 6.61 x $ 0.16 2.2%
QE 1/30/99
Kimball International, Inc. 1.32 x 0.56 x 11.07 x 10.55 x 0.64 4.4%
QE 12/31/98
LADD Furniture, Inc. 0.95 x 0.24 x 11.17 x 8.63 x 0.00 0.0%
FYE 1/02/99
Meadowcraft, Inc. 2.35 x 0.75 x 6.23 x 11.76 x 0.00 0.0%
QE 1/31/99
Pulaski Furniture Corp. 0.95 x 0.32 x 8.53 x 7.61 x 0.68 3.4%
QE 1/24/99
Shelby Williams Industries 1.30 x 0.50 x 7.89 x 7.08 x 0.36 3.9%
FYE 12/31/98
Low 0.88 x 0.24 x 6.23 x 6.61 x 0.00 0.0%
- ------------------------------------------------------------------------------------------------------------------------
Average 1.29 x 0.47 x 9.19 x 8.71 x 0.31 2.3%
- ------------------------------------------------------------------------------------------------------------------------
High 2.35 x 0.75 x 11.17 x 11.76 x 0.68 4.4%
</TABLE>
Notes:
- ----------------------------
EPS = Earnings Per Share
LTM = Latest Twelve Months
================================================================================
Mann Armistead & Epperson, Ltd. Page 12
Investment Banking
<PAGE> 20
B. MULTIPLE ANALYSIS
<PAGE> 21
WINSLOEW FURNITURE, INC.
Summary Multiple Analysis
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
I. Valuation Range
Price Per Share Range
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Price Per Share $ 30.00 $ 31.00 $ 32.00 $ 33.00 $ 34.00 $ 35.00
--------- --------- --------- --------- --------- ---------
Fully Diluted Shares (a) 7,946 7,946 7,946 7,946 7,946 7,946
--------- --------- --------- --------- --------- ---------
Market Value of Equity $ 238,380 $ 246,326 $ 254,272 $ 262,218 $ 270,164 $ 278,110
Adjusted for Net Debt (Projected Cash
Position) (b) (6,734) (6,734) (6,734) (6,734) (6,734) (6,734)
--------- --------- --------- --------- --------- ---------
Enterprise Value (c) $ 231,646 $ 239,592 $ 247,538 $ 255,484 $ 263,430 $ 271,376
</TABLE>
II. Analysis of WinsLoew Earning Multiples vs. Market Multiples
<TABLE>
<CAPTION>
Results Range of Values
--------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FYE 1998
Operating Income (EBIT) (d) $ 29,882 7.8 x 8.0 x 8.3 x 8.5 x 8.8 x 9.1 x
Net Income (e) $ 18,300 13.0 x 13.5 x 13.9 x 14.3 x 14.8 x 15.2 x
Shareholders' Equity (e) $ 66,226 3.6 x 3.7 x 3.8 x 4.0 x 4.1 x 4.2 x
Comparable Public Companies
Multiples, As of April 1, 1999
Operating Income (EBIT) 6.8 x 6.8 x 6.8 x 6.8 x 6.8 x 6.8 x
Net Income 9.2 x 9.2 x 9.2 x 9.2 x 9.2 x 9.2 x
Shareholders' Equity 1.3 x 1.3 x 1.3 x 1.3 x 1.3 x 1.3 x
Premium / (Discount), $33.00 Offer
vs. Comparable Multiples
Operating Income (EBIT) 13.4% 17.3% 21.2% 25.1% 28.9% 32.8%
Net Income 41.7% 46.5% 51.2% 55.9% 60.6% 65.4%
Shareholders' Equity 178.6% 187.9% 197.2% 206.5% 215.8% 225.1%
</TABLE>
Notes:
- --------------------------------------------
(a) Estimated amount of fully diluted shares.
(b) Cash Position includes cash generated from operations as well as the
approximate cash generated through the exercise of stock options at the
closing of a transaction.
(c) Enterprise Value is the Market Value of Equity plus Net Debt.
(d) Multiple a function of Market Value of Enterprise Value
(e) Multiple a function of Market Value of Equity
================================================================================
Mann, Armistead & Epperson, Ltd. Page 13
Investment Banking
<PAGE> 22
C. STOCK PRICE ANALYSIS
<PAGE> 23
WINSLOEW FURNITURE, INC.
Summary Stock Price Analysis
(Dollars in Thousands)
================================================================================
I. Valuation Range
<TABLE>
<CAPTION>
Price Per Share Range
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Price Per Share $ 30.00 $ 31.00 $ 32.00 $ 33.00 $ 34.00 $ 35.00
--------- --------- --------- --------- --------- ---------
Fully Diluted Shares (a) 7,946 7,946 7,946 7,946 7,946 7,946
--------- --------- --------- --------- --------- ---------
Market Value of Equity $ 238,380 $ 246,326 $ 254,272 $ 262,218 $ 270,164 $ 278,110
Adjusted for Net Debt (Projected
Cash Position) (b) (6,734) (6,734) (6,734) (6,734) (6,734) (6,734)
--------- --------- --------- --------- --------- ---------
Enterprise Value (c) $ 231,646 $ 239,592 $ 247,538 $ 255,484 $ 263,430 $ 271,376
</TABLE>
II. Analysis of $33.00 Offer vs.Historical WinsLoew Stock Price at Various
Times
<TABLE>
<CAPTION>
Range of Values
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Percentage Over January 15, 1999 Price @ $27.00 11.1% 14.8% 18.5% 22.2% 25.9% 29.6%
Percentage Over January 8, 1999 Price @ $25.50 17.6% 21.6% 25.5% 29.4% 33.3% 45.8%
Percentage Over October 15, 1998 Price @ $18.50 62.2% 67.6% 73.0% 78.4% 83.8% 89.2%
</TABLE>
Notes:
- --------------------------------------------
(a) Estimated amount of fully diluted shares.
(b) Cash Position includes cash generated from operations as well as the
approximate cash generated through the exercise of stock options at the
closing of a transaction.
(c) Enterprise Value is the Market Value of Equity plus Net Debt.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 14
Investment Banking
<PAGE> 24
IV. SOLICITATION PROCESS
<PAGE> 25
WINSLOEW FURNITURE, INC. CONTACTS 32
ACQUISITION CONTACT LIST EXECUTED CONFIDENTIALITY AGREEMENTS 11
===============================================================================
<TABLE>
<CAPTION>
BOOK BOOK
NUMBER STATUS C/A OWNER/ENTITY NUMBER STATUS C/A OWNER/ENTITY
- ------ ------ --- ------------ ------ ------ --- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12A Closed Yes La-Z-Boy Chair Company 20A Closed Hicks-Muse
1284 North Telegraph Road 200 Cresent Court, Suite 1600
Monroe, Michigan 48162 Dallas, Texas 75201
13A Closed Furniture Brands International 21A Closed Haworth, Inc.
101 South Hanley Road One Haworth Center
St. Louis, Missouri 63105 Holland, Michigan 49423
14A Closed Yes HON Industries, Inc. 22A Closed Yes Weiss, Peck & Greer
414 East Third Street One New York Plaza, 30th Floor
Muscatine, Iowa 52761 New York, NY 10004
15A Closed Citicorp Venture Capital 23A Closed Kholer Company
399 Park Avenue 444 Highland Drive
New York, New York Kholer, Wisconsin 53044
16A Closed Yes MASCO Corporation 24A Closed Ethan Allen Industries, Inc.
21001 Van Born Road Ethan Allen Drive
Taylor, Michigan 48180 Danbury, CT
17A Closed Yes Steelcase Industries 25A Closed Sealy, Inc.
901 44th Street, SE High Point, North Carolina
Grand Rapids, Michigan 49501
18A Closed Windward Capital 26A Closed Yes Klausner Furniture Industries, Inc.
1177 Avenue of the Americas P.O. Box 1255
42nd Floor Ashboro, North Carolina
New York, New York 10036
19A Closed Sprout Group 27A Closed Brunswick Corporation
277 Park Avenue 1 North Field Court
New York, New York 10172 Lake Forest, Illinois 60045
</TABLE>
================================================================================
MANN, ARMISTEAD & EPPERSON, LTD. PAGE 15
INVESTMENT BANKING
<PAGE> 26
WINSLOEW FURNITURE, INC. CONTACTS 32
ACQUISITION CONTACT LIST EXECUTED CONFIDENTIALITY AGREEMENTS 11
===============================================================================
<TABLE>
<CAPTION>
BOOK BOOK
NUMBER STATUS C/A OWNER/ENTITY NUMBER STATUS C/A OWNER/ENTITY
- ------ ------ --- ------------ ------ ------ --- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
28A Closed Clayton, Dubilier & Rice, Inc. 36A Closed Tropitone Industries, Inc.
375 Park Avenue
New York, New York 10152
29A Closed Yes Meadowcraft, Inc. 37A Closed Stevens, Inc.
1401 Meadowcraft Road 111 Center Street
Birmingham, Alabama 35215 Suite 2400
Little Rock, Arkansas 72201
30A Closed KI, Inc. 38A Closed U.S. Industries, Inc.
1330 Bellevue Street
Green Bay, Wisconsin 54308
31A Closed Global Industries, Inc. 39A Closed Newell Co.
1150 Flint Road
Downsview, Ontario
Canada, M3J2J5
32A Closed Yes Falcon Products, Inc. 40A Closed Interface Flooring, Inc.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
33A Closed VIRCO Manufacturing Corporation 41A Closed Leggett & Platt, Inc.
2027 Harpers Way
Torrance, California 90501
34A Closed Ashley Furniture Industries, Inc, 42A Closed Yes Z.S. Fund, LP
One Ashley Way 120 West 45th Street
Arcadia, Wisconsin 54612 New York, New York 10036
35A Closed Yes Saunders, Karp & Megrue, L.P. 43A Open Yes Hancock Park Associates
667 Madison Avenue 1825 Century Park East
New York, New York 10021 Los Angeles, California 90067
</TABLE>
================================================================================
MANN, ARMISTEAD & EPPERSON, LTD.
INVESTMENT BANKING Page 16
<PAGE> 27
V. DISCOUNTED CASH FLOW ANALYSIS
<PAGE> 28
WINSLOEW FURNITURE, INC.
Discounted Cash Flow Analysis
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
Terminal Net Income Multiple
Discount ------------------------------------------------------------------------
Rate 8.2 x 8.7 x 9.2 x 9.7 x 10.2 x
- ------------ --------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
9.0% $73,522 $73,522 $73,522 $73,522 $73,522 Present Value of Cash Flows (a)
152,220 161,512 170,805 180,098 189,391 Present Value of Terminal Value(b)
--------- -------------- -------------- -------------- --------------
225,741 235,034 244,327 253,620 262,912 Total Present Value
(28) (28) (28) (28) (28) Less: Net Debt (c)
--------- -------------- -------------- -------------- --------------
$225,769 $235,062 $244,355 $253,648 $262,940 Net Present Value of Equity
========= ============== ============== ============== ==============
$28.41 $29.58 $30.75 $31.92 $33.09 Value Per Share (d)
========= ============== ============== ============== ==============
10.0% $71,822 $71,822 $71,822 $71,822 $71,822 Present Value of Cash Flows (a)
146,759 155,719 164,678 173,638 182,597 Present Value of Terminal Value(b)
--------- -------------- -------------- -------------- --------------
218,581 227,541 236,500 245,460 254,419 Total Present Value
(28) (28) (28) (28) (28) Less: Net Debt (c)
--------- -------------- -------------- -------------- --------------
$218,609 $227,569 $236,528 $245,488 $254,447 Net Present Value of Equity
========= ============== ============== ============== ==============
$27.51 $28.64 $29.77 $30.89 $32.02 Value Per Share (d)
========= ============== ============== ============== ==============
11.0% $70,184 $70,184 $70,184 $70,184 $70,184 Present Value of Cash Flows (a)
141,542 150,183 158,824 167,465 176,105 Present Value of Terminal Value(b)
--------- -------------- -------------- -------------- --------------
211,725 220,366 229,007 237,648 246,289 Total Present Value
(28) (28) (28) (28) (28) Less: Net Debt (c)
--------- -------------- -------------- -------------- --------------
$211,753 $220,394 $229,035 $237,676 $246,317 Net Present Value of Equity
========= ============== ============== ============== ==============
$26.65 $27.74 $28.82 $29.91 $31.00 Value Per Share (d)
========= ============== ============== ============== ==============
</TABLE>
Notes:
- ----------------
(a) Includes 1999-2002 projected cash flow based on the Company's internal
projections.
(b) Based on a multiple of 2002 projected net income.
(c) Net Debt is defined as total debt outstanding, including capitalized
leases, less cash and equivalents as of December 31, 1999.
Debt and Capitalized Leases $1,447
Cash and Cash Equivalents ($1,475)
-------
($28)
(d) Based on estimate of fully diluted shares outstanding.
================================================================================
Mann, Armistead & Epperson, Ltd. Page 17
Investment Banking
<PAGE> 1
EXHIBIT b(5)
WINSLOEW FURNITURE, INC.
OPINION OF THE FINANCIAL ADVISOR
FINANCIAL ANALYSIS
MAY 4, 1999
MANN, ARMISTEAD & EPPERSON, LTD.
INVESTMENT BANKING
<PAGE> 2
WINSLOEW FURNITURE, INC.
FINANCIAL ANALYSIS OPINION OF THE FINANCIAL ADVISOR
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
I. HISTORICAL FINANCIAL ANALYSIS
A. FISCAL YEARS ENDING DECEMBER 31, 1994-1998................................ 1
B. YEAR-TO-DATE INFORMATION, MARCH 26, 1999.................................. 6
II. PROJECTED FINANCIAL INFORMATION................................................. 9
III. OFFER VALUATION
A. COMPARABLE PUBLIC COMPANY INFORMATION..................................... 11
B. MULTIPLE ANALYSIS......................................................... 13
C. STOCK PRICE ANALYSIS...................................................... 14
IV. SOLICITATION PROCESS............................................................ 15
V. DISCOUNTED CASH FLOW ANALYSIS................................................... 17
</TABLE>
MANN, ARMISTEAD & EPPERSON, LTD.
INVESTMENT BANKING
<PAGE> 3
I. HISTORICAL FINANCIAL ANALYSIS
<PAGE> 4
A. FISCAL YEARS ENDING DECEMBER 31, 1994-1998
<PAGE> 5
WINSLOEW FURNITURE, INC.
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INCOME STATEMENT INFORMATION HISTORICAL - FISCAL YEAR ENDED DECEMBER 31 (a)(c) BUDGET(b)
-------------------------------------------------------- ---------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $83,284 $95,443 $117,405 $122,145 $141,360 $157,314
Cost of Goods Sold 55,878 64,999 78,029 79,431 87,232 98,135
------- ------- -------- -------- -------- ---------
Gross Profit 27,406 30,444 39,376 42,714 54,128 59,179
Operating Expenses 14,731 17,719 21,472 21,427 23,124 25,859
Non-Recurring Charges 917 0 0 0 0 0
Amortization 2,000 2,077 1,444 992 1,122 1,266
------- ------- -------- -------- -------- ---------
Operating Income 9,758 10,648 16,460 20,295 29,882 32,054
Interest Expense 2,795 3,841 3,083 2,296 635 810
------- ------- -------- -------- -------- ---------
Earnings Before Income Taxes 6,963 6,807 13,377 17,999 29,247 31,244
Income Tax Expense 3,068 2,739 4,834 6,838 10,947 11,873
------- ------- -------- -------- -------- ---------
Net Income $3,895 $4,068 $8,543 $11,161 $18,300 $19,371
======= ======= ======== ======== ======== =========
Weighted Average Shares - Diluted 9,655 9,029 8,730 7,563 7,624 7,454
Earnings Per Share - Diluted $0.40 $0.45 $0.98 $1.48 $2.40 $2.60
======= ======= ======== ======== ======== =========
</TABLE>
Notes:
- -------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
(c) For the fiscal periods 1995-1998, this information excludes all
extraordinary items, income (losses) from discontinued operations (net
of taxes) and losses from the sale of discontinued operations.
Mann, Armistead & Epperson, Ltd.
Investment Banking Page 1
<PAGE> 6
WINSLOEW FURNITURE, INC.
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
As a Function of Net Sales Historical - Fiscal Year Ended December 31 (a)(c) Budget (b)
- -------------------------- ----------------------------------------------------- ----------
1994 1995 1996 1997 1998 1999
----- ----- ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 67.1% 68.1% 66.5% 65.0% 61.7% 62.4%
----- ----- ----- ----- ----- -----
Gross Profit 32.9% 31.9% 33.5% 35.0% 38.3% 37.6%
Operating Expenses 17.7% 18.6% 18.3% 17.5% 16.4% 16.4%
Non-Recurring Charges 1.1% 0.0% 0.0% 0.0% 0.0% 0.0%
Amortization 2.4% 2.2% 1.2% 0.8% 0.8% 0.8%
----- ----- ----- ----- ----- -----
Operating Income 11.7% 11.2% 14.0% 16.6% 21.1% 20.4%
Interest Expense 3.4% 4.0% 2.6% 1.9% 0.4% 0.5%
----- ----- ----- ----- ----- -----
Earnings Before Income Taxes 8.4% 7.1% 11.4% 14.7% 20.7% 19.9%
Income Tax Expense 3.7% 2.9% 4.1% 5.6% 7.7% 7.5%
----- ----- ----- ----- ----- -----
Net Income 4.7% 4.3% 7.3% 9.1% 12.9% 12.3%
===== ===== ===== ===== ===== =====
Other Information
- -----------------
Net Sales Growth 7.1% 14.6% 23.0% 4.0% 15.7% 11.3%
Effective Income Tax 44.1% 40.2% 36.1% 38.0% 37.4% 38.0%
</TABLE>
Notes:
- ------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
(c) For the fiscal periods 1995-1998, this information excludes all
extraordinary items, income (losses) from discontinued operations (net of
taxes) and losses from the sale of discontinued operations.
Mann, Armistead & Epperson, Ltd. Page 2
Investment Banking
<PAGE> 7
WINSLOEW FURNITURE, INC.
SUMMARY FINANCIAL INFORMATION - ADJUSTMENTS TO FINANCIAL RESULTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Historical (a) Budget (b)
-------------- ----------
1998 1999
------------- ----------
<S> <C> <C>
I. Operating Income (EBIT)
--------------------------
Operating Income (EBIT) $29,882 $32,054
II. Adjustments to Operating Income
------------------------------------
Adjustments to Generate EBITDA
------------------------------
Plus - Amortization 1,122 1,566
Plus - Depreciation 1,496 2,145
------- -------
Total Adjustments 2,618 3,711
------- -------
EBITDA $32,500 $35,765
</TABLE>
Notes:
- -----------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Information sourced from internal statements as prepared by WinsLoew
Furniture, Inc.
Mann, Armistead & Epperson, Ltd. Page 3
Investment Banking
<PAGE> 8
WINSLOEW FURNITURE, INC.
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Balance Sheet Information
- ------------------------- FYE December 31 (a)
---------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Assets
------
Cash and Equivalents $ 897 $ 707 $ 1,475
Accounts Receivable 22,851 21,124 23,647
Inventory 10,716 9,096 12,206
Prepaid Insurance and Other Current 3,748 7,391 4,638
Net Assets of Discontinued Operations 12,711 2,057 0
------- ------- -------
Total Current Assets 50,923 40,375 41,966
Net Assets of Discontinued Operations 13,937 6,860 0
Net Property, Plant and Equipment 11,954 10,320 13,948
Goodwill, Net 21,699 21,021 27,176
Other Assets 1,111 763 1,463
------- ------- -------
Total Assets $99,624 $79,339 $84,553
======= ======= =======
Liabilities
-----------
Current Portion of Long Term Debt 1,955 515 47
Accounts Payable 3,926 3,187 4,377
Other Accrued Liabilities 4,940 7,336 11,702
------- ------- -------
Total Current Liabilities 10,821 11,038 16,126
Long Term Debt, Net of Current Portion 38,726 15,908 1,400
Deferred Income Taxes 1,677 1,367 801
------- ------- -------
Total Liabilities 51,224 28,313 18,327
Stockholders' Equity
- --------------------
Common Stock 75 75 73
Additional Paid in Capital 24,543 24,926 19,797
Retained Earnings 23,782 26,025 46,356
------- ------- -------
Total Stockholders' Equity 48,400 51,026 66,226
Total Liabilities and Stockholders' Equity $99,624 $79,339 $84,553
======= ======= =======
</TABLE>
Notes:
- -------------
(a) Financial information sourced from 10-K and 10-Q reports.
Mann, Armistead & Epperson, Ltd. Page 4
Investment Banking
<PAGE> 9
WINSLOEW FURNITURE, INC.
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Balance Sheet Information FYE December 31 (a)
- ------------------------- -------------------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Assets
------
Cash and Equivalents 0.9% 0.9% 1.7%
Accounts Receivable 22.9% 26.6% 28.0%
Inventory 10.8% 11.5% 14.4%
Prepaid Insurance and Other Current 3.8% 9.3% 5.5%
Net Assets of Discontinued Operations 12.8% 2.6% 0.0%
----- ----- -----
Total Current Assets 51.1% 50.9% 49.6%
Net Assets of Discontinued Operations 14.0% 8.6% 0.0%
Net Property, Plant and Equipment 12.0% 13.0% 16.5%
Goodwill, Net 21.8% 26.5% 32.1%
Other Assets 1.1% 1.0% 1.7%
----- ----- -----
Total Assets 100.0% 100.0% 100.0%
===== ===== =====
Liabilities
-----------
Current Portion of Long Term Debt 2.0% 0.6% 0.1%
Accounts Payable 3.9% 4.0% 5.2%
Other Accrued Liabilities 5.0% 9.2% 13.8%
----- ----- -----
Total Current Liabilities 10.9% 13.9% 19.1%
Long Term Debt, Net of Current Portion 38.9% 20.1% 1.7%
Deferred Income Taxes 1.7% 1.7% 0.9%
----- ----- -----
Total Liabilities 51.4% 35.7% 21.7%
Stockholders' Equity
- --------------------
Common Stock 0.1% 0.1% 0.1%
Additional Paid in Capital 24.6% 31.4% 23.4%
Retained Earnings 23.9% 32.8% 54.8%
----- ----- -----
Total Stockholders' Equity 48.6% 64.3% 78.3%
Total Liabilities and Stockholders' Equity 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Notes:
- -------------
(a) Financial information sourced from 10-K and 10-Q reports.
Mann, Armistead & Epperson, Ltd. Page 5
Investment Banking
<PAGE> 10
B. YEAR-TO-DATE INFORMATION, MARCH 26, 1999
<PAGE> 11
WINSLOEW FURNITURE, INC.
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Income Statement Information FYE (a) YTD March 26 (b) Trailing-12
------- ---------------- -----------
1998 1998 1999 3/26/99
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Revenue $141,360 $27,576 $32,910 $146,694
Cost of Goods Sold 87,232 17,946 20,031 89,317
-------- ------- ------- --------
Gross Profit 54,128 9,630 12,879 57,377
Operating Expenses 23,124 4,515 5,725 24,334
Non-Recurring Charges 0 0 0 0
Amortization 1,122 244 316 1,194
-------- ------- ------- --------
Operating Income 29,882 4,871 6,838 31,849
Interest Expense 635 333 123 425
-------- ------- ------- --------
Earnings Before Income Taxes 29,247 4,538 6,715 31,424
Income Tax Expense 10,947 1,665 2,531 11,813
-------- ------- ------- --------
Net Income $ 18,300 $ 2,873 $ 4,184 $ 19,611
======== ======= ======= ========
Weighted Average Shares - Diluted 7,624 7,561 7,434 7,434
Earnings Per Share - Diluted $ 2.40 $ 0.38 $ 0.56 $ 2.64
Net Revenue Growth 15.7% N/A 19.3% 3.8%
As a Function of Net Revenue
Gross Profit 38.3% 34.9% 39.1% 39.1%
Operating Income 21.1% 17.7% 20.8% 21.7%
Pre Tax Income 20.7% 16.5% 20.4% 21.4%
Net Income 12.9% 10.4% 12.7% 13.4%
Operating Income $ 29,882 $ 4,871 $ 6,838 $ 31,849
Plus Depreciation & Amoritization 2,618 607 692 2,703
EBITDA $ 32,500 $ 5,478 $ 7,530 $ 34,552
</TABLE>
Notes:
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
Mann, Armistead & Epperson, Ltd.
Investment Banking
Page 6
<PAGE> 12
WINSLOEW FURNITURE, INC.
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FYE December 31 (a) As of (b) As of (b)
------------------- --------- ---------
1997 1998 3/26/98 3/26/99
------------------- --------- ---------
<S> <C> <C> <C> <C>
Assets
------
Cash and Equivalents $ 707 $ 1,475 $ 1,874 $ 1,963
Accounts Receivable 21,124 23,647 29,542 31,278
Inventory 9,096 12,206 12,268 12,926
Prepaid Insurance and Other Current 7,391 4,638 4,984 3,891
Net Assets of Discontinued Operations 2,057 0 0 0
------- ------- ------- -------
Total Current Assets 40,375 41,966 48,668 50,058
Net Assets of Discontinued Operations 6,860 0 0 0
Net Property, Plant and Equipment 10,320 13,948 12,906 13,684
Goodwill, Net 21,021 27,176 24,841 26,955
Other Assets 763 1,463 1,436 1,129
------- ------- ------- -------
Total Assets $79,339 $84,553 $87,851 $91,826
======= ======= ======= =======
Liabilities
-----------
Current Portion of Long Term Debt $ 515 $ 47 $ 514 $ 35
Accounts Payable 3,187 4,377 5,020 4,598
Other Accrued Liabilities 7,336 11,702 10,929 12,388
------- ------- ------- -------
Total Current Liabilities 11,038 16,126 16,463 17,021
Long Term Debt, Net of Current Portion 15,908 1,400 16,704 6,669
Deferred Income Taxes 1,367 801 745 912
------- ------- ------- -------
Total Liabilities 28,313 18,327 33,912 24,602
Stockholders' Equity
- --------------------
Common Stock 75 73 75 72
Additional Paid in Capital 24,926 19,797 25,094 16,612
Retained Earnings 26,025 46,356 28,770 50,540
------- ------- ------- -------
Total Stockholders' Equity 51,026 66,226 53,939 67,224
Total Liabilities and Stockholders' Equity $79,339 $84,553 $87,851 $91,826
======= ======= ======= =======
</TABLE>
Notes:
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
Mann, Armistead & Epperson, Ltd.
Investment Banking
Page 7
<PAGE> 13
WINSLOEW FURNITURE, INC.
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FYE December 31 (a) As of (b) As of (b)
------------------- --------- ---------
1997 1998 3/26/98 3/26/99
----- ----- ------- -------
<S> <C> <C> <C> <C>
Assets
------
Cash and Equivalents 0.9% 1.7% 2.1% 2.1%
Accounts Receivable 26.6% 28.0% 33.6% 34.1%
Inventory 11.5% 14.4% 14.0% 14.1%
Prepaid Insurance and Other Current 9.3% 5.5% 5.7% 4.2%
Net Assets of Discontinued Operations 2.6% 0.0% 0.0% 0.0%
----- ----- ------- -------
Total Current Assets 50.9% 49.6% 55.4% 54.5%
Net Assets of Discontinued Operations 8.6% 0.0% 0.0% 0.0%
Net Property, Plant and Equipment 13.0% 16.5% 14.7% 14.9%
Goodwill, Net 26.5% 32.1% 28.3% 29.4%
Other Assets 1.0% 1.7% 1.6% 1.2%
----- ----- ------- -------
Total Assets 100.0% 100.0% 100.0% 100.0%
===== ===== ======= =======
Liabilities
-----------
Current Portion of Long Term Debt 0.6% 0.1% 0.6% 0.0%
Accounts Payable 4.0% 5.2% 5.7% 5.0%
Other Accrued Liabilities 9.2% 13.8% 12.4% 13.5%
----- ----- ------- -------
Total Current Liabilities 13.9% 19.1% 18.7% 18.5%
Long Term Debt, Net of Current Portion 20.1% 1.7% 19.0% 7.3%
Deferred Income Taxes 1.7% 0.9% 0.8% 1.0%
----- ----- ------- -------
Total Liabilities 35.7% 21.7% 38.6% 26.8%
Stockholders' Equity
- --------------------
Common Stock 0.1% 0.1% 0.1% 0.1%
Additional Paid in Capital 31.4% 23.4% 28.6% 18.1%
Retained Earnings 32.8% 54.8% 32.7% 55.0%
----- ----- ------- -------
Total Stockholders' Equity 64.3% 78.3% 61.4% 73.2%
Total Liabilities and Stockholders' Equity 100.0% 100.0% 100.0% 100.0%
===== ===== ======= =======
</TABLE>
Notes:
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
Mann, Armistead & Epperson, Ltd.
Investment Banking
Page 8
<PAGE> 14
II. PROJECTED FINANCIAL INFORMATION
<PAGE> 15
WINSLOEW FURNITURE, INC.
PROJECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FYE - December 31 Fiscal Year Ended (a) Projected (b)
- ----------------- --------------------- -------------------------------------------------
1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $122,145 $141,360 $157,314 $169,113 $181,796 $195,431
Cost of Goods Sold 79,431 87,232 98,135 105,495 113,100 121,350
-------- -------- -------- -------- -------- --------
Gross Profit 42,714 54,128 59,179 63,618 68,696 74,081
Selling, General & Administrative Exp. 22,419 24,246 27,125 28,666 30,766 33,016
-------- -------- -------- -------- -------- --------
Operating Income 20,295 29,882 32,054 34,952 37,930 41,065
Interest Expense 2,296 635 810 (100) (750) (1,250)
-------- -------- -------- -------- -------- --------
Pre-Tax Income 17,999 29,247 31,244 35,052 38,680 42,315
Income Taxes 6,838 10,947 11,873 13,300 14,700 16,080
-------- -------- -------- -------- -------- --------
Net Income $ 11,161 $ 18,300 $ 19,371 $ 21,752 $ 23,980 $ 26,235
======== ======== ======== ======== ======== ========
Shares Outstanding 7,563 7,624 7,454 7,500 7,500 7,500
Earnings Per Share $ 1.48 $ 2.40 $ 2.60 $ 2.90 $ 3.20 $ 3.50
ADJUSTMENTS FOR CASH FLOW INFORMATION
- -------------------------------------
Net Income $ 11,161 $ 18,300 $ 19,371 $ 21,752 $ 23,980 $ 26,235
Less: Capital Expenditures (1,001) (942) (5,000) (2,000) (2,000) (2,000)
Plus: Depreciation & Amortization 2,293 2,618 3,178 2,725 2,958 2,933
-------- -------- -------- -------- -------- --------
Operating Cash Flow $ 12,453 $ 19,976 $ 17,549 $ 22,477 $ 24,938 $ 27,168
======== ======== ======== ======== ======== ========
</TABLE>
Notes:
- -----------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements
Mann, Armistead & Epperson, Ltd.
Investment Banking Page 9
<PAGE> 16
WINSLOEW FURNITURE, INC.
PROJECTED FINANCIAL INFORMATION - ASSUMPTIONS
(AS A PERCENTAGE OF NET SALES)
<TABLE>
<CAPTION>
FYE - DECEMBER 31 Fiscal Year Ended (a) Projected (b)
- ----------------- --------------------- -------------------------------
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SALES GROWTH 4.0% 15.7% 11.3% 7.5% 7.5% 7.5%
- ------------
AS A PERCENTAGE OF NET SALES
- ----------------------------
Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 65.0% 61.7% 61.7% 61.7% 61.7% 61.7%
----- ----- ----- ----- ----- -----
Gross Profit 35.0% 38.3% 38.3% 38.3% 38.3% 38.3%
Selling, General & Administrative Exp. 18.4% 17.2% 17.2% 17.2% 17.2% 17.2%
----- ----- ----- ----- ----- -----
Operating Income 16.6% 21.1% 21.1% 21.1% 21.1% 21.1%
----- ----- ----- ----- ----- -----
Interest Expense 1.9% 0.4% 0.4% 0.4% 0.4% 0.4%
----- ----- ----- ----- ----- -----
Pre-Tax Income 14.7% 20.7% 19.9% 20.7% 21.3% 21.7%
Income Taxes 5.6% 7.7% 7.5% 7.9% 8.1% 8.2%
===== ===== ===== ===== ===== =====
Effective Tax Rate 38.0% 37.4% 38.0% 37.9% 38.0% 38.0%
</TABLE>
Notes:
- ----------------------------------------------------
(a) Financial information sourced from 10-K and 10-Q reports.
(b) Financial information sourced from internal financial statements.
Mann, Armistead & Epperson, Ltd. Page 10
Investment Banking
<PAGE> 17
III. OFFER VALUATION
<PAGE> 18
A. Comparable Public Company Information
<PAGE> 19
WINSLOEW FURNITURE, INC.
COMPARABLE PUBLIC COMPANY ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION> Stock Information Market Value Information
--------------------------------------------------------- --------------------------------------
52 Week Market
Company Name/ Current ------------------ Shares Value Of Net Enterprise
Latest Financials Ticker Price(a) High Low Outst. Equity Debt(b) Value
- ----------------- -------- --------- ------ ----- ------ ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Falcon Products, Inc. FCP $ 7.81 $13.75 $ 7.20 9,042 $ 70,618 $ 17,440 $ 88,058
QE 1/30/99
Kimball International, Inc. KBALB 16.00 24.94 14.56 40,952 655,232 (130,935) 524,297
QE 3/31/98
LADD Furniture, Inc. LADF 19.13 31.50 13.38 7,951 152,063 108,863 260,926
FYE 4/03/99
Meadowcraft, Inc. MWI 7.06 17.13 4.00 19,709 139,195 55,094 194,289
QE 1/31/99
Pulaski Furniture Corp. PLFC 21.50 27.00 18.63 2,840 61,060 31,330 92,390
QE 1/24/99
Shelby Williams Industries SY 12.88 16.88 8.88 8,786 113,120 (6,282) 106,838
FYE 3/31/98
Latest Twelve Months
------------------------------- Book
Operating Net Value Of Estimated
Sales Income(d) Income Equity LTM(e) '99EPS(f)
-------- --------- ------ ----- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Falcon Products, Inc. $ 149,961 $11,109 $ 6,350 $ 73,632 $0.70 $1.09
QE 1/30/99
Kimball International, Inc. 1,089,715 74,438 55,498 455,188 1.36 1.38
QE 3/31/98
LADD Furniture, Inc. 580,798 31,198 13,496 148,171 1.70 1.98
FYE 4/03/99
Meadowcraft, Inc. 156,712 27,361 18,995 50,257 0.96 0.51
QE 1/31/99
Pulaski Furniture Corp. 176,991 12,024 6,688 59,977 2.35 2.64
QE 1/24/99
Shelby Williams Industries 170,581 16,801 10,764 65,024 1.23 1.30
FYE 3/31/98
</TABLE>
Notes
- --------------------------
(a)Current price reflects closing price as of April 28, 1999.
(b)Net debt equals short-term debt plus long-term debt, including capitalized
lease obligations, minus cash and marketable securities.
(c)Enterprise Value is equal to market value of equity plus net debt.
(d)Earnings before interest and taxes.
(e)Latest Twelve Months
(f)1999 Earnings Estimates from Zack's Research.
Mann Armistead & Epperson, Ltd.
Investment Banking
Page 11
<PAGE> 20
WINSLOEW FURNITURE, INC.
COMPARABLE PUBLIC COMPANY ANALYSIS-RATIOS & MULTIPLES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Ratios Multiple of Multiple of Market
------------------------- Enterprise Value to: Value of Equity to:
Return -------------------- ------------------------------------------ Dividends
Company Name/ Operating Net on Operating Shareholders' EPS Estimated ------------
Latest Financials Income Income Equity Sale Income Equity Sales LTM '99 EPS Rate Yield
- ----------------- --------- ------ ------ ---- --------- ------------- ----- --- --------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Falcon Products, Inc. 7.4% 4.2% 8.6% 58.7% 7.93 x 0.96 x 0.47 x 11.12 x 7.17 x $0.16 2.0%
QE 1/30/99
Kimball
International, Inc. 6.8% 5.1% 12.2% 48.1% 7.04 x 1.44 x 0.60 x 11.81 x 11.59 x 0.64 4.0%
QE 3/31/98
LADD Furniture, Inc. 5.4% 2.3% 9.1% 44.9% 8.36 x 1.03 x 0.26 x 11.27 x 9.66 x 0.00 0.0%
FYE 4/03/99
Meadowcraft, Inc. 17.5% 12.1% 37.8% 124.0% 7.10 x 2.77 x 0.89 x 7.33 x 13.85 x 0.00 0.0%
QE 1/31/99
Pulaski Furniture Corp. 6.8% 3.8% 11.2% 52.2% 7.68 x 1.02 x 0.34 x 9.13 x 8.14 x 0.68 3.2%
QE 1/24/99
Shelby Williams
Industries 9.8% 6.3% 16.6% 62.6% 6.36 x 1.74 x 0.66 x 10.51 x 9.90 x 0.36 2.8%
FYE 3/31/98
Low 5.4% 2.3% 8.6% 44.9% 6.69 x 0.96 x 0.26 x 7.33 x 7.17 x 0.00 0.0%
Average 9.0% 5.6% 15.9% 65.1% 7.41 x 1.49 x 0.54 x 10.19 x 10.05 x 0.31 2.0%
High 17.5% 12.1% 37.8% 124.0% 19.66 x 2.77 x 0.89 x 11.81 x 13.85 x 0.68 4.0%
</TABLE>
Notes:
- -------------
EPS = Earnings Per Share
LTM = Latest Twelve Months
Mann Armistead & Epperson, Ltd.
Investment Banking Page 12
<PAGE> 21
B. MULTIPLE ANALYSIS
<PAGE> 22
WINSLOEW FURNITURE, INC.
SUMMARY MULTIPLE ANALYSIS
(DOLLARS IN THOUSANDS)
I. VALUATION RANGE
<TABLE>
<CAPTION>
Price Per Share Range Offer
-------------------------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price Per Share $ 30.00 $ 31.00 $ 32.00 $ 33.00 $ 34.00 $ 35.00 $ 36.00 $ 34.75
-------- -------- -------- -------- -------- -------- -------- --------
Fully Diluted Shares(a) 7,946 7,946 7,946 7,946 7,946 7,946 7,946 7,946
-------- -------- -------- -------- -------- -------- -------- --------
Market Value of Equity $238,380 $246,326 $254,272 $262,218 $270,164 $278,110 $286,056 $276,124
Adjusted for Net Debt
(Projected Cash
Position)(b) (1,806) (1,806) (1,806) (1,806) (1,806) (1,806) (1,806) (1,806)
-------- -------- -------- -------- -------- -------- -------- --------
Enterprise Value(c) $236,574 $244,520 $252,466 $260,412 $268,358 $276,304 $284,250 $274,318
</TABLE>
II. ANALYSIS OF WINSLOEW EARNING MULTIPLES VS. MARKET MULTIPLES
<TABLE>
<CAPTION>
Results Range of Values
------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TRAILING -- 12 MONTHS, 3/26/99
Operating Income (EBIT)(d) $31,849 7.4x 7.7x 7.9x 8.2x 8.4x 8.7x 8.9x 8.6x
Net Income(e) $19,611 12.2x 12.6x 13.0x 13.4x 13.8x 14.2x 14.6x 14.1x
Shareholders' Equity(e) $67,224 3.5x 3.7x 3.8x 3.9x 4.0x 4.1x 4.3x 4.1x
COMPARABLE PUBLIC COMPANIES MULTIPLES, AS OF APRIL 28, 1999
Operating Income (EBIT) 7.4x 7.4x 7.4x 7.4x 7.4x 7.4x 7.4x 7.4x
Net Income 10.2x 10.2x 10.2x 10.2x 10.2x 10.2x 10.2x 10.2x
Shareholders' Equity 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x
PREMIUM/(DISCOUNT), OFFER VS. COMPARABLE MULTIPLES
Operating Income (EBIT) 0.2% 3.6% 6.9% 10.3% 13.7% 17.0% 20.4% 16.2%
Net Income 19.2% 23.2% 27.2% 31.2% 35.1% 39.1% 43.1% 38.1%
Shareholders' Equity 137.7% 145.6% 153.5% 161.4% 169.4% 177.3% 185.2% 175.3%
</TABLE>
Notes:
- ---------------
(a) Estimated amount of fully diluted shares.
(b) Cash Position includes cash generated from operations as well as the
approximate cash generated through the exercise of stock options (of approx.
$7.0 million) at the closing of a transaction.
(c) Enterpise Value is the Market Value of Equity plus Net Debt.
(d) Multiple a function of Market Value of Enterprise Value
(e) Multiple a function of Market Value of Equity
Mann, Armistead & Epperson, Ltd.
Investment Banking Page 13
<PAGE> 23
C. STOCK PRICE ANALYSIS
<PAGE> 24
WINSLOEW FURNITURE, INC.
SUMMARY STOCK PRICE ANALYSIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
I. Valuation Range
- ------------------
Price Per Share Range Offer
-------------------------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price Per Share....................... $ 30.00 $ 31.00 $ 32.00 $ 33.00 $ 34.00 $ 35.00 $ 36.00 $ 34.75
-------- -------- -------- -------- -------- -------- -------- --------
Fully Diluted Shares(a)............... 7,946 7,946 7,946 7,946 7,946 7,946 7,946 7,946
-------- -------- -------- -------- -------- -------- -------- --------
Market Value of Equity................ $238,380 $246,326 $254,272 $262,218 $270,164 $278,110 $286,056 $276,124
Adjusted for Net Debt (Projected
Cash Position)(b)................. (6,734) (6,734) (6,734) (6,734) (6,734) (6,734) (6,734) (6,734)
-------- -------- -------- -------- -------- -------- -------- --------
Enterprise Value(c)................... $231,646 $239,592 $247,538 $255,484 $263,430 $271,376 $279,322 $269,390
II. ANALYSIS OF OFFER VS. HISTORICAL WINSLOEW STOCK PRICE AT VARIOUS TIMES
- --------------------------------------------------------------------------
Range of Values
-------------------------------------------------------------------------------------
Percentage Over January 15, 1999 Price
@ $27.00............................ 11.1% 14.8% 18.5% 22.2% 25.9% 29.6% 33.3% 28.7%
Percentage Over January 8, 1999 Price
@ $25.50............................ 17.6% 21.6% 25.5% 29.4% 33.3% 37.3% 41.2% 36.3%
Percentage Over October 15, 1998 Price
@ $18.50............................ 62.2% 67.6% 73.0% 78.4% 83.8% 89.2% 94.6% 87.8%
</TABLE>
Notes:
- ------
(a) Estimated amount of fully diluted shares.
(b) Cash Position includes cash generated from operations as well as the
approximate cash generated through the exercise of stock options at the
closing of a transition.
(c) Enterprise Value is the Market Value of Equity plus Net Debt.
Mann, Armistead & Epperson, Ltd.
Investment Banking Page 14
<PAGE> 25
IV. SOLICITATION PROCESS
<PAGE> 26
WinsLoew Furniture, Inc. Contacts 32
Acquisition Contact List Executed Confidentiality Agreements 11
<TABLE>
<CAPTION>
Book Book
Number Status C/A Owner/Entity Number Status C/A Owner/Entity
- ------ ------ --- ------------ ------ ------ --- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
12A Closed Yes La-Z-Boy Chair Company 20A Closed Hicks-Muse
1284 North Telegraph Road 200 Cresent Court, Suite 1600
Monroe, Michigan 48162 Dallas, Texas 75201
13A Closed Furniture Brands International 21A Closed Haworth, Inc.
101 South Hanley Road One Haworth Center
St. Louis, Missouri 63105 Holland, Michigan 49423
14A Closed Yes HON Industries, Inc. 22A Closed Yes Weiss, Peck & Greer
414 East Third Street One New York Plaza, 30th Floor
Muscatine, Iowa 52761 New York, NY 10004
15A Closed CitiCorp Venture Capital 23A Closed Kholer Company
399 Park Avenue 444 Highland Drive
New York, New York Kholer, Wisconsin 53044
16A Closed Yes MASCO Corporation 24A Closed Ethan Allen Industries, Inc.
21001 Van Born Road Ethan Allen Drive
Taylor, Michigan 48180 Danbury, CT
17A Closed Yes Steelcase Industries 25A Closed Sealy, Inc.
901 44th Street, SE High Point, North Carolina
Grand Rapids, Michigan 49501
18A Closed Windward Capital 26A Closed Yes Klausner Furniture Industries, Inc.
1177 Avenue of the Americas P.O. Box 1255
42nd Floor Ashboro, North Carolina
New York, New York 10036
19A Closed Sprout Group 27A Closed Brunswick Corporation
277 Park Avenue 1 North Field Court
New York, New York 10172 Lake Forest, Illinois 60045
</TABLE>
Mann, Armistead & Epperson, Ltd. Page 15
Investment Banking
<PAGE> 27
WinsLoew Furniture, Inc. Contacts 32
Acquisition Contact List Executed Confidentiality Agreements 11
<TABLE>
<CAPTION>
Book Book
Number Status C/A Owner/Entity Number Status C/A Owner/Entity
- ------ ------ --- ------------ ------ ------ --- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
28A Closed Clayton, Dubilier & Rice, Inc. 36A Closed Tropitone Industries, Inc.
375 Park Avenue
New York, New York 10152
29A Closed Yes Meadowcraft, Inc. 37A Closed Stevens, Inc.
1401 Meadowcraft Road 111 Center Street
Birmingham, Alabama 35215 Suite 2400
Little Rock, Arkansas 72201
30A Closed KI, Inc.
1330 Bellevue Street 38A Closed U.S Industries, Inc.
Green Bay, Wisconsin 54308
31A Closed Global Industries, Inc.
1150 Flint Road 39A Closed Newell Co.
Downsview, Ontario
Canada, M3J2J5
32A Closed Yes Falcon Products, Inc. 40A Closed Interface Flooring, Inc.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
33A Closed VIRCO Manufacturing Corporation 41A Closed Leggett & Platt, Inc.
2027 Harpers Way
Torrance, California 90501
34A Closed Ashley Furniture Industries, Inc. 42A Closed Yes Z.S. Fund, LP
One Ashley Way 120 West 45th Street
Arcadia, Wisconsin 54612 New York, New York 10036
35A Closed Yes Saunders, Karp & Megrue, L.P. 43A Open Yes Hancock Park Associates
667 Madison Avenue 1825 Century Park East
New York, New York 10021 Los Angeles, California 90067
</TABLE>
Mann, Armistead & Epperson, Ltd. Page 16
Investment Banking
<PAGE> 28
V. DISCOUNTED CASH FLOW ANALYSIS
<PAGE> 29
WINSLOEW FURNITURE, INC.
DISCOUNTED CASH FLOW ANALYSIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Terminal Net Income Multiple
Discount --------------------------------------------------------------------
Rate 9.2x 9.7x 10.2x 10.7x 11.2x
- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
9.0% $ 73,522 $ 73,522 $ 73,522 $ 73,522 $ 73,522 Present Value of Cash Flows(a)
170,868 180,160 189,453 198,746 208,039 Present Value of Terminal Value(b)
-------- -------- -------- -------- --------
244,389 253,682 262,975 272,267 281,560 Total Present Value
(28) (28) (28) (28) (28) Less: Net Debt(c)
-------- -------- -------- -------- --------
$244,417 $253,710 $263,000 $272,295 $281,588 Net Present Value of Equity
======== ======== ======== ======== ========
$ 30.76 $ 31.93 $ 33.10 $ 34.27 $ 35.44 Value Per Share(d)
======== ======== ======== ======== ========
10.0% $ 71,822 $ 71,822 $ 71,822 $ 71,822 $ 71,822 Present Value of Cash Flows(a)
164,738 173,698 182,657 191,617 200,576 Present Value of Terminal Value(b)
-------- -------- -------- -------- --------
236,560 245,520 254,479 263,439 272,398 Total Present Value
(28) (28) (28) (28) (28) Less: Net Debt(c)
-------- -------- -------- -------- --------
$236,588 $245,548 $254,507 $263,467 $272,426 Net Present Value of Equity
======== ======== ======== ======== ========
$ 29.77 $ 30.90 $ 32.03 $ 33.16 $ 34.28 Value Per Share(d)
======== ======== ======== ======== ========
11.0% $ 70,184 $ 70,184 $ 70,184 $ 70,184 $ 70,184 Present Value of Cash Flows(a)
158,882 167,522 176,163 184,804 193,445 Present Value of Terminal Value(b)
-------- -------- -------- -------- --------
229,065 237,706 246,347 254,988 263,629 Total Present Value
(28) (28) (28) (28) (28) Less: Net Debt(c)
-------- -------- -------- -------- --------
$229,093 $237,734 $246,375 $255,016 $263,657 Net Present Value of Equity
======== ======== ======== ======== ========
$ 28.83 $ 29.92 $ 31.01 $ 32.09 $ 33.18 Value Per Share(d)
======== ======== ======== ======== ========
</TABLE>
- ------------------------
Notes:
(a) Includes 1999-2002 projected cash flow based on the Company's internal
projections.
(b) Based on a multiple of 2002 projected net income.
(c) Net Debt is defined as total debt outstanding, including capitalized
leases, less cash and equivalents as of December 31, 1999.
<TABLE>
<S> <C>
Debt and Capitalized Leases $ 1,447
Cash and Cash Equivalents $(1,475)
-------
$ (28)
</TABLE>
(d) Based on estimate of fully diluted shares outstanding.
Mann, Armistead & Epperson, Ltd.
Investment Banking Page 17
<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, For Use of the Commission Only
[ ] Definitive proxy statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
WINSLOEW FURNITURE, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, $.01 par value per Share
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
7,181,908
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$34.75
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$249,571,303
- -------------------------------------------------------------------------------
(5) Total fee paid:
$49,915
- -------------------------------------------------------------------------------
[X] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount previously paid:
$47,401
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
Schedule 14A
- -------------------------------------------------------------------------------
(3) Filing Party:
WinsLoew Furniture, Inc.
- -------------------------------------------------------------------------------
(4) Date Filed:
- -------------------------------------------------------------------------------
April 19, 1999
- -------------------------------------------------------------------------------
<PAGE> 2
WINSLOEW FURNITURE, INC.
160 Village Street
Birmingham, Alabama 35242
June __, 1999
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders
(the "Special Meeting") of WinsLoew Furniture, Inc. (the "Company" or
"WinsLoew") to be held on Tuesday, July 27, 1999, at 9:00 a.m., local time, at
the offices of Trivest, Inc., located at 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133. The purpose of the Special Meeting is to consider and vote
upon a merger (the "Merger") that, if approved and subsequently consummated,
will result in the public shareholders of WinsLoew receiving $34.75 in cash per
share for their stock and WinsLoew becoming a privately-owned company.
If approved by WinsLoew's shareholders, the Merger would be
accomplished pursuant to a Second Amended and Restated Agreement and Plan of
Merger (the "Merger Agreement") as follows: Trivest Furniture Corporation, a
newly-formed Florida corporation (the "Purchaser"), would merge with and into
WinsLoew, which would be the surviving corporation in the Merger. If the Merger
is consummated, each outstanding share of common stock, $.01 par value, of
WinsLoew (the "Common Stock"), other than shares held by the Purchaser, will be
canceled and converted automatically into the right to receive $34.75 in cash,
payable to the holder thereof, without interest.
The Purchaser has been organized at the direction of two private
investment partnerships affiliated with certain WinsLoew directors, Trivest
Furniture Partners, Ltd. and Trivest Fund II Group, Ltd. (together, the "Trivest
Partnerships") for the purpose of acquiring all of WinsLoew's Common Stock. As a
result of the Merger, WinsLoew will become a privately held company that is
owned by the Trivest Partnerships, certain WinsLoew directors, certain members
of WinsLoew's management and certain WinsLoew employees.
A special committee of the Board of Directors of WinsLoew (the "Special
Committee"), consisting of five independent directors, was formed to
investigate, consider and evaluate the proposed Merger and possible strategic
alternatives to maximize shareholder value. The Special Committee has
recommended to WinsLoew's Board of Directors that the Merger and related
agreements be approved. In connection with its evaluation of the proposed Merger
and certain possible strategic alternatives, the Special Committee engaged Mann
Armistead & Epperson, Ltd. ("Mann Armistead") to act as its financial advisor.
Mann Armistead has rendered its opinion that, as of May 4, 1999, based upon and
subject to the assumptions, limitations and qualifications set forth in such
opinion, the cash merger consideration of $34.75 per share to be received in the
Merger is fair from a financial point of view to the public shareholders of the
Company. The written opinion of Mann Armistead, dated as of May 4, 1999, is
attached as Appendix B to the enclosed Proxy Statement and should be read
carefully and in its entirety by the shareholders.
THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS BELIEVE THAT THE TERMS
OF THE MERGER ARE SUBSTANTIVELY AND PROCEDURALLY FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY'S SHAREHOLDERS AND RECOMMEND THAT THE SHAREHOLDERS
APPROVE THE MERGER.
Approval of the Merger at the Special Meeting will require the
affirmative vote of holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Special Meeting. Shareholders (including members
of WinsLoew's senior management, the members of the Special Committee and
certain shareholders affiliated or associated with the Trivest Partnerships)
who, as of the record date, hold of record approximately 35.8% of the
outstanding shares of Common Stock, have expressed their intention to vote their
shares for approval of the Merger. If the Merger is approved by the
shareholders, the closing of the Merger will occur as soon after the Special
Meeting as all of the other conditions to closing the Merger are satisfied.
<PAGE> 3
The accompanying Proxy Statement provides you with a summary of the
proposed Merger and additional information about the parties involved and their
interests. Please give all this information your careful attention. Whether or
not you plan to attend, it is important that your shares are represented at the
Special Meeting. A failure to vote or a vote to abstain will count as a vote
against the Merger. Accordingly, you are requested to promptly complete, sign
and date the enclosed proxy and return it in the envelope provided.
EARL W. POWELL
Chairman of the Board
BOBBY TESNEY
President and Chief Executive Officer
2
<PAGE> 4
WINSLOEW FURNITURE, INC.
160 Village Street
Birmingham, Alabama 35242
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on July 27, 1999
To the Shareholders of
WinsLoew Furniture, Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
WinsLoew Furniture, Inc., a Florida corporation (the "Company"), will be held at
9:00 a.m., local time, on Tuesday, July 27, 1999, at the offices of Trivest,
Inc., located at 2665 South Bayshore Drive, Suite 800, Miami, Florida 33133, for
the following purposes:
1. To consider and vote upon a proposal to approve and adopt a
Second Amended and Restated Agreement and Plan of Merger (the
"Merger Agreement"), providing for the merger (the "Merger")
of Trivest Furniture Corporation, a Florida corporation (the
"Purchaser"), with and into the Company, with the Company
being the surviving corporation. In the Merger, each
outstanding share of the Company's Common Stock, $.01 par
value (other than shares held by the Purchaser), will be
converted into the right to receive $34.75 in cash, without
interest. The Merger Agreement is more fully described in the
accompanying Proxy Statement and is attached as Appendix A to
the Proxy Statement.
2. To transact such other business as may properly come before
the meeting and any adjournments or postponements thereof.
The Board of Directors has determined that only shareholders of record
at the close of business on June 14, 1999 are entitled to notice of, and to vote
at, the meeting and any adjournments or postponements thereof. The stock
transfer books of the Company will not be closed prior to the meeting.
YOUR VOTE IS IMPORTANT
In order to ensure that your vote will be counted, please complete,
date, sign and return the enclosed proxy card promptly in the enclosed
pre-addressed envelope whether or not you plan to attend the meeting. No postage
is required if mailed in the United States. Your proxy may be revoked at any
time before it is voted, by filing with the Secretary of the Company a written
revocation, by submitting a proxy bearing a later date, or by attending and
voting in person at the meeting. Please do not send any certificates for your
shares at this time.
By Order of the Board of Directors
Bobby Tesney
President and Chief Executive Officer
Birmingham, Alabama
June __, 1999
<PAGE> 5
WINSLOEW FURNITURE, INC.
160 Village Street
Birmingham, Alabama 35242
-----------------------------
PROXY STATEMENT
-----------------------------
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on July 27, 1999
Introduction
This Proxy Statement is being furnished to the shareholders of WinsLoew
Furniture, Inc., a Florida corporation (the "Company" or "WinsLoew"), in
connection with the solicitation by its Board of Directors (the "Board") of
proxies to be used at a Special Meeting of Shareholders (as it may be adjourned
or postponed, the "Special Meeting") to be held on Tuesday, July 27, 1999 at
9:00 a.m., local time, at the offices of Trivest, Inc., located at 2665 South
Bayshore Drive, Suite 800, Miami, Florida 33133, and at any adjournments or
postponements thereof. The date of this Proxy Statement is June __, 1999, and
this Proxy Statement, the foregoing Notice of Special Meeting of Shareholders
and the enclosed proxy card are first being mailed to shareholders of WinsLoew
on or about June __, 1999.
The Special Meeting has been called to consider and vote upon a
proposal to approve and adopt a Second Amended and Restated Agreement and Plan
of Merger (the "Merger Agreement" or the "Second Amended Merger Agreement"),
which is attached to this Proxy Statement as Appendix A. Pursuant to the Merger
Agreement, Trivest Furniture Corporation (the "Purchaser"), a newly-formed
Florida corporation, will be merged with and into WinsLoew (the "Merger"). In
the Merger, each outstanding share of common stock, $.01 par value (the "Common
Stock"), of WinsLoew (other than shares held by the Purchaser) will be canceled
and converted automatically into the right to receive $34.75 in cash, payable to
the holder thereof, without interest. The Purchaser has been organized at the
direction of two private investment partnerships, Trivest Furniture Partners,
Ltd. and Trivest Fund II Group, Ltd. (together, the "Trivest Partnerships")
controlled by Earl W. Powell, WinsLoew's Chairman of the Board. After the
Merger, WinsLoew will become a privately held company wholly-owned by the
Purchaser's shareholders, and the public shareholders will no longer own an
equity interest in WinsLoew.
Immediately prior to the Merger, all of the outstanding common stock of
the Purchaser will be acquired by the following parties, which will purchase
such shares for cash or contribute to the Purchaser shares of WinsLoew Common
Stock in exchange for shares of Purchaser common stock: (i) the Trivest
Partnerships, Mr. Powell and Phillip T. George, M.D., who is also a director of
WinsLoew (collectively, the "Trivest Investors"); (ii) Bobby Tesney, the
President, Chief Executive Officer, and a director of the Company (the
"Management Director"), Vincent A. Tortorici, Jr., the Company's Vice President
and Chief Financial Officer, R. Craig Watts, the Company's Executive Vice
President, Contract Seating, and Rick J. Stephens, the Company's Vice President,
Operations (together with the Management Director, the "Management Group"); and
(iii) approximately 35 other
-------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE> 6
Company employees or sales representatives who will be offered the opportunity
to acquire shares of Purchaser common stock (the "Eligible Persons").
Trivest Fund I, Ltd., Trivest Equity Partners I, Ltd., Trivest
Principals' Fund 1988, Trivest Special Situations Fund 1985, L.P. and Trivest
Annuity Fund, Ltd. (collectively, the "Existing Trivest Shareholders"), which
are private investment partnerships controlled by Messrs. Powell and George,
currently hold of record approximately 23.7% of the outstanding WinsLoew Common
Stock. The Existing Trivest Shareholders will receive $34.75 per share in cash
for all of their shares on the same basis as other WinsLoew shareholders and
will not be shareholders of WinsLoew after the Merger.
The current executive officers of WinsLoew will retain their positions
with WinsLoew. Mr. Tesney will remain a director of the Company following the
Merger. Earl W. Powell, Phillip T. George, M.D., William F. Kaczynski, Jr. and
Peter W. Klein, the current WinsLoew directors affiliated with the Trivest
Partnerships (the "Trivest Directors"), will remain directors of WinsLoew. All
of the Trivest Directors are indirect investors in the Trivest Partnerships.
The aggregate consideration payable in the Merger, excluding fees and
expenses, is approximately $268.3 million. The amount to be paid in cash will be
reduced by the aggregate value of the Common Stock that the Management Group,
the Trivest Investors, and the Eligible Persons contribute to the Purchaser.
Because certain directors of WinsLoew will have a financial interest in
the Merger, the Board of Directors appointed a special committee of
disinterested directors to consider and make recommendations with respect to the
Merger and possible strategic alternatives to maximize shareholder value (the
"Special Committee"). The Special Committee and the Board believe that the terms
of the Merger are substantively and procedurally fair to, and in the best
interests of, the Company's shareholders and recommend that the shareholders
approve the Merger. See "SPECIAL FACTORS--Conflicts of Interest -- The Special
Committee's and the Board's Recommendation."
Approval of the Merger at the Special Meeting will require the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Special Meeting. Shareholders (including
the members of the Management Group, certain other members of management, the
individual Trivest Investors, the Existing Trivest Shareholders, the other
members of the Board and certain shareholders affiliated or associated with the
Trivest Partnerships) who, as of the record date, held of record approximately
2,570,218, or 35.8%, of the outstanding shares of Common Stock have expressed
their intention to vote their shares for approval of the Merger. Holders of
4,611,690, or approximately 64.2%, of the outstanding shares of Common Stock
remain uncommitted with respect to how they will vote on the Merger.
Accordingly, the affirmative vote by holders of Common Stock representing
approximately 1,020,737 (or 22.1%) of such uncommitted shares, or approximately
14.2% of the outstanding shares, will be required to approve the Merger. The
consummation of the Merger is subject to a number of conditions, and,
accordingly, even if shareholders approve the Merger, there can be no assurance
that the Merger will be consummated.
WHAT YOU NEED TO DO NOW
Please promptly complete, sign and date the enclosed proxy card and
return it in the envelope provided. A failure to vote or a vote to abstain will
have the same legal effect as a vote against the Merger. If your shares are held
in "street name" by your broker, then you should instruct your broker how to
vote your shares. If you do not provide instructions to your broker, your shares
will not be voted and they will be counted as votes against the proposal to
approve and adopt the Merger Agreement. Please do not send in stock certificates
now. After the Merger is completed, we will send you written instructions for
exchanging your Common Stock certificates for the cash to which you are
entitled.
Shareholders are urged to read and consider carefully the information
contained in this Proxy Statement and to consult with their personal financial
and tax advisors.
ii
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction......................................................................................................i
Summary...........................................................................................................1
Date, Time and Place of the Special Meeting................................................................1
Purpose of the Special Meeting.............................................................................1
Record Date and Quorum.....................................................................................1
Vote Required..............................................................................................1
Parties to the Merger......................................................................................2
The Merger.................................................................................................3
Effective Time of the Merger and Payment for Shares........................................................3
The Special Committee's and Board's Recommendation.........................................................3
Opinion of Financial Advisor...............................................................................3
Purpose and Reasons of the Affiliates for the Merger.......................................................4
Position of the Affiliates as to Fairness of the Merger....................................................4
Conflicts of Interest......................................................................................5
Certain Effects of the Merger..............................................................................6
Conditions to the Merger, Termination and Expenses.........................................................6
Federal Income Tax Consequences............................................................................8
Rights of Dissenting Shareholders..........................................................................8
Accounting Treatment.......................................................................................8
Financing of the Merger....................................................................................8
Market Prices of Common Stock and Dividends................................................................9
The Special Meeting..............................................................................................10
Proxy Solicitation........................................................................................10
Record Date and Quorum Requirement........................................................................10
Voting Procedures; Required Vote..........................................................................10
Voting and Revocation of Proxies..........................................................................11
Effective Time............................................................................................11
Special Factors..................................................................................................12
Background of the Merger..................................................................................12
The Special Committee's and the Board's Recommendation....................................................31
Opinion of the Financial Advisor..........................................................................37
Purpose and Reasons of the Affiliates for the Merger......................................................43
Position of the Affiliates as to Fairness of the Merger...................................................45
Conflicts of Interest.....................................................................................45
Certain Effects of the Merger.............................................................................49
Conduct of WinsLoew's Business After the Merger...........................................................50
Certain Forward Looking Information.......................................................................50
The Merger.......................................................................................................51
Conversion of Securities..................................................................................51
Cash-out of WinsLoew Stock Options........................................................................51
Transfer of Shares........................................................................................51
Conditions................................................................................................52
Representations and Warranties............................................................................53
Covenants.................................................................................................54
Nonsolicitation Covenant..................................................................................56
Indemnification and Insurance.............................................................................56
Expenses..................................................................................................57
Termination, Amendment and Waiver.........................................................................57
Termination Fee...........................................................................................58
Escrow Deposit............................................................................................58
</TABLE>
iii
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
Financing.................................................................................................58
Expenses of the Transaction...............................................................................63
Regulatory Approvals......................................................................................63
Accounting Treatment......................................................................................63
Rights of Dissenting Shareholders................................................................................63
Federal Income Tax Consequences..................................................................................64
Business of the Company..........................................................................................65
Background................................................................................................65
Competitive Strengths.....................................................................................67
Growth Strategies.........................................................................................68
Products and Markets......................................................................................69
Product Design and Development............................................................................71
Marketing and Sales.......................................................................................72
Backlog...................................................................................................72
Manufacturing.............................................................................................73
Raw Materials and Foreign Sourcing........................................................................74
Competition...............................................................................................74
Trademarks and Patents....................................................................................75
Environmental Matters.....................................................................................75
Properties................................................................................................75
Employees.................................................................................................76
Legal Proceedings.........................................................................................77
Selected Consolidated Financial Data.............................................................................78
Management's Discussion and Analysis of Results of Operations and Financial Condition............................79
General...................................................................................................79
Results of Operations.....................................................................................79
Comparison of Quarter Ended March 26, 1999 and Quarter Ended March 27, 1998...............................80
Comparison of Years Ended December 31, 1998 and 1997......................................................81
Comparison of Years Ended December 31, 1997 and 1996......................................................81
Seasonality and Quarterly Information.....................................................................82
Liquidity and Capital Resources...........................................................................84
Foreign Exchange Fluctuations and Effects of Inflation....................................................85
Year 2000.................................................................................................86
Certain Forward Looking Information..............................................................................87
Management.......................................................................................................88
Directors and Executive Officers of WinsLoew..............................................................88
Executive and Director Compensation.......................................................................90
Principal Shareholders and Stock Ownership.......................................................................94
Certain Information Concerning the Purchaser and Other Affiliates................................................97
Certain Transactions.............................................................................................99
Market Prices of Common Stock and Dividends.....................................................................100
Disclosure Regarding Forward-Looking Statements.................................................................101
Independent Public Accountants..................................................................................101
Information Concerning Shareholder Proposals....................................................................101
Other Business..................................................................................................101
Documents Incorporated by Reference.............................................................................102
Available Information...........................................................................................102
Index to Consolidated Financial Statements......................................................................F-1
</TABLE>
APPENDICES
APPENDIX A - Amended and Restated Agreement and Plan of Merger
APPENDIX B - Opinion of Mann Armistead & Epperson, Ltd.
iv
<PAGE> 9
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement. Reference is made to, and this Summary is qualified in
its entirety by, the more detailed information contained elsewhere or
incorporated by reference in this Proxy Statement. Shareholders are urged to
read this Proxy Statement and its appendices in their entirety before voting.
Date, Time and Place of the Special Meeting
The Special Meeting of WinsLoew will be held on Tuesday, July 27, 1999,
at 9:00 a.m., local time, at the offices of Trivest, Inc., located at 2665 South
Bayshore Drive, Suite 800, Miami, Florida 33133.
Purpose of the Special Meeting
At the Special Meeting, the shareholders of the Company will consider
and vote on a proposal to approve the Merger Agreement, which is attached to
this Proxy Statement as Appendix A, pursuant to which the Purchaser, a
newly-formed Florida corporation, would merge with and into WinsLoew, with
WinsLoew as the surviving corporation in the Merger, and each outstanding share
of Common Stock of WinsLoew, other than shares held by the Purchaser will be
converted automatically into the right to receive $34.75 in cash payable to the
holders thereof, without interest (the "Cash Merger Consideration"). See "THE
MERGER."
Record Date and Quorum
The Board of Directors of the Company has fixed the close of business
on June 14, 1999 as the Record Date for the determination of shareholders
entitled to notice of, and to vote at, the Special Meeting and any adjournments
or postponements thereof. Each holder of record of Common Stock at the close of
business on the Record Date is entitled to one vote for each share then held on
each matter submitted to a vote of shareholders. At the close of business on the
Record Date, there were 7,181,908 shares of Common Stock outstanding. The
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the Special Meeting must be present in person or represented by proxy to
constitute a quorum for the transaction of business. See "THE SPECIAL MEETING."
Vote Required
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Special Meeting is required to
approve the Merger Agreement. Thus, a failure to vote or a vote to abstain will
have the same legal effect as a vote cast against approval. In addition, brokers
who hold shares of Common Stock as nominees will not have discretionary
authority to vote such shares in the absence of instructions from the beneficial
owners. A broker non-vote will have the same effect as a vote against the
Merger. See "THE SPECIAL MEETING--Voting Procedures; Required Vote."
Shareholders (including the Management Group, certain other members of
management, the individual Trivest Investors, the Existing Trivest Shareholders,
the other members of the Board and certain shareholders affiliated or associated
with the Trivest Partnerships) who as of the record date held of record
2,570,218, or approximately 35.8%, of the outstanding shares of Common Stock
have expressed their intention to vote their shares for approval of the Merger.
Holders of 4,611,690 shares of Common Stock, or approximately 64.2%, of the
outstanding shares of Common Stock, remain uncommitted with respect to how they
will vote on the Merger. Accordingly, the affirmative vote by holders of Common
Stock representing approximately 1,020,737 (or 22.1%) of such uncommitted
shares, or approximately 14.2% of the outstanding shares, will be required to
approve the Merger.
1
<PAGE> 10
Parties to the Merger
The Company.
WinsLoew is a leading designer, manufacturer and distributor of a broad
offering of casual outdoor furniture and seating products sold either into the
retail channel (commonly referred to as the residential market) or non-retail
channels (commonly referred to as the contract markets). WinsLoew's casual
furniture, which is marketed to both residential and contract markets, includes
chairs, chaise lounges, tables, umbrellas and related accessories, generally
constructed from aluminum, wrought iron, wood or fiberglass. WinsLoew's seating
products, which are marketed exclusively to the contract market, include wood,
metal and upholstered chairs, sofas and love seats that are offered in a variety
of finish and fabric options. All of WinsLoew's casual and seating furniture
products are manufactured pursuant to customer orders. Management believe that
the Company's success is attributable to its proven ability to consistently
deliver high quality, innovatively-styled products on a timely basis with
superior customer service. WinsLoew also manufactures certain ready-to-assemble
furniture products that are designed for household use and distributed through
various retail channels.
The principal executive offices of the Company are located at 160
Village Street, Birmingham, Alabama 35242. The Company's telephone number is
(205) 408-7600. See "BUSINESS OF THE COMPANY."
The Purchaser.
The Purchaser is a newly-formed Florida corporation organized at the
direction of the Trivest Partnerships, each of which is a private investment
partnership. See "CERTAIN INFORMATION CONCERNING THE PURCHASER AND OTHER
AFFILIATES." Immediately prior to the consummation of the Merger, the Trivest
Investors, the members of the Management Group and the Eligible Persons will
purchase shares of Purchaser common stock for cash or contribute to the
Purchaser shares of WinsLoew Common Stock in exchange for shares of Purchaser
common stock as follows:
o The Trivest Investors. The Trivest Investors together will
acquire an aggregate of approximately 95.6% of the outstanding
Purchaser common stock. The Trivest Investors include the
Trivest Partnerships and Messrs. Powell and George. See
"SPECIAL FACTORS--Purpose and Reasons of the Affiliates for
the Merger" and "--Conflicts of Interest."
o The Management Group. The members of the Management Group
together will acquire an aggregate of approximately 4.4% of
the outstanding Purchaser common stock. The members of the
Management Group are the following executive officers of
WinsLoew: Bobby Tesney, President and Chief Executive Officer,
Vincent A. Tortorici, Jr., Vice President and Chief Financial
Officer, R. Craig Watts, Executive Vice President, Contract
Seating, and Rick J. Stephens, Vice President, Operations. See
"SPECIAL FACTORS--Purpose and Reasons of the Affiliates for
the Merger" and "--Conflicts of Interest."
o The Eligible Persons. Approximately 35 Eligible Persons (not
including members of the Management Group) will individually
be offered the opportunity to purchase shares of common stock
of the Purchaser and/or contribute any or all of their shares
of Common Stock to the Purchaser in exchange for common stock
of the Purchaser.
After the Merger, the Trivest Directors and the Management Director
will continue to serve as directors of WinsLoew, and the four members of the
Management Group will continue to serve as executive officers of WinsLoew. See
"SPECIAL FACTORS--Conflicts of Interest."
The executive offices of the Purchaser are located at 2665 South
Bayshore Drive, Suite 800, Miami, Florida 33133. The Purchaser's telephone
number is (305) 858-2200.
2
<PAGE> 11
The Merger
The Merger Agreement provides that subject to satisfaction of certain
conditions, the Purchaser will be merged with and into WinsLoew, and that
following the Merger, the separate existence of the Purchaser will cease and
WinsLoew will continue as the surviving corporation owned by the shareholders of
the Purchaser. At the effective time of the Merger, which shall be the date and
time of filing of Articles of Merger with the Secretary of State of the State of
Florida (the "Effective Time"), and subject to the terms and conditions set
forth in the Merger Agreement, each share of issued and outstanding Common Stock
(other than shares held by the Purchaser) will, by virtue of the Merger, be
canceled and converted into the right to receive $34.75 in cash, without
interest. As a result of the Merger, WinsLoew's Common Stock will no longer be
publicly traded and will be 100% owned by the shareholders of the Purchaser. See
"THE MERGER."
Effective Time of the Merger and Payment for Shares
The Effective Time is currently expected to occur as soon as
practicable after the Special Meeting, subject to approval of the Merger
Agreement at the Special Meeting and satisfaction or waiver of the terms and
conditions of the Merger Agreement. See "--Conditions to the Merger, Termination
and Expenses" and "THE MERGER--Conditions." Detailed instructions with regard to
the surrender of share certificates, together with a letter of transmittal, will
be forwarded to shareholders by the Company's transfer agent, American Stock
Transfer & Trust Company (the "Disbursing Agent"), promptly following the
Effective Time. Shareholders should not submit their certificates to the
Disbursing Agent until they have received such materials. The Disbursing Agent
will send payment of the Cash Merger Consideration to shareholders as promptly
as practicable following receipt by the Disbursing Agent of their certificates
and other required documents. No interest will be paid or accrued on the cash
payable upon the surrender of certificates. See "THE MERGER--Conversion of
Securities." Shareholders should not send any share certificates at this time.
The Special Committee's and Board's Recommendation
The Trivest Directors and the Management Director will have financial
interests in the Purchaser and are therefore subject to conflicts of interest in
evaluating the Merger. Accordingly, in January 1999, the Board appointed the
Special Committee, comprised of all five disinterested directors, to evaluate
and make recommendations with respect to the Merger and other strategic options.
Based on the factors set forth in this Proxy Statement (see "SPECIAL
FACTORS--The Special Committee's and the Board's Recommendation" and
"--Conflicts of Interest."), the Special Committee recommended to the Board that
the Merger Agreement be approved and that it be recommended to the shareholders
of the Company. Following the recommendation of the Special Committee, the Board
approved the Merger Agreement and recommended that the shareholders of the
Company approve the Merger Agreement. In connection with the foregoing, the
Special Committee and the Board determined that the Merger is substantively and
procedurally fair to, and in the best interests of, the shareholders of the
Company other than the Purchaser (the "Public Shareholders"). In connection with
their recommendations, the Special Committee and the Board each adopted the
analyses and findings of the Special Committee's financial advisor, Mann
Armistead & Epperson, Ltd. See "SPECIAL FACTORS--Opinion of Financial Advisor."
The Special Committee and the Board recommend that the shareholders
vote "FOR" the approval of the Merger Agreement.
Opinion of Financial Advisor
Mann Armistead & Epperson, Ltd. ("Mann Armistead") provided its opinion
to the Special Committee that, as of the date of such opinion, the Cash Merger
Consideration was fair from a financial point of view to the Public Shareholders
of the Company.
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<PAGE> 12
The full text of the written opinion of Mann Armistead, dated as of May
4, 1999, which sets forth assumptions made, matters considered and limitations
on the review undertaken in connection with such opinion, is attached hereto as
Appendix B and is incorporated herein by reference. The opinion of Mann
Armistead referred to herein does not constitute a recommendation as to how any
holder of such shares should vote with respect to the Merger. Holders of shares
of Common Stock are urged to, and should, read such opinion in its entirety. See
"SPECIAL FACTORS--Opinion of Financial Advisor." In connection with the delivery
of its opinion, Mann Armistead made a presentation to the Special Committee
including, among other things, a selected public companies comparative analysis
and discounted cash flow analysis. Pursuant to Mann Armistead's selected
companies comparative analysis, the selected companies rendered, on average,
current equity and adjusted market value multiples of 10.2 times net income, 7.4
times earnings before interest and taxes ("EBIT") and 1.5 times shareholder
equity, while the $34.75 Cash Merger Consideration equates to 14.1 times net
income, 8.6 times EBIT and 4.1 times shareholders equity. Pursuant to its
discounted cash flow analysis, Mann Armistead estimated the Company's total net
present value based on the Company's future streams of after-tax cash flow on a
stand alone basis for the fiscal year periods 1999 to 2002 utilizing a range of
terminal values and discount rates, which produced a range of per share values
from $28.83 to $35.44. This discounted cash flow analysis was based on
projections provided by the Company, including projected earnings per share in
fiscal years 1999 to 2002 of $2.60, $2.90, $3.20 and $3.50, respectively. See
"CERTAIN FORWARD LOOKING INFORMATION." The Company's projected fiscal 1999
earnings per share of $2.60 compares to the following street analyst consensus
projections: First Call - $2.55 at May 19, 1999; and Zacks - $2.67 at May 16,
1999. In addition, the Company's 1999 fiscal first quarter earnings per share of
$.56 compared to the following street analyst consensus projections: First Call
- - $.41; and Zacks - $.47. See "SPECIAL FACTORS--Opinion of Financial Advisor."
The Company has agreed to pay Mann Armistead aggregate fees of
$1,877,783 in connection with its services as financial advisor to the Special
Committee and the Company and its rendering of such opinion. See "SPECIAL
FACTORS--Opinion of Financial Advisor." The Company has agreed to reimburse Mann
Armistead for its reasonable out-of-pocket expenses, including attorneys' fees,
and to indemnify Mann Armistead against certain liabilities, including certain
liabilities under the federal securities laws.
Purpose and Reasons of the Affiliates for the Merger
The purpose of the Purchaser, the members of the Management Group, the
Trivest Partnerships and the Trivest Directors (collectively, the "Affiliates")
for engaging in the transactions contemplated by the Merger Agreement is to
acquire, together with any participating Eligible Persons, 100% of the ownership
of the Company. As a result of the Merger, the Trivest Investors together will
increase their beneficial interest in WinsLoew's Common Stock from approximately
29.8% to approximately 95.6% (less the interest acquired by the Eligible
Persons), and the members of the Management Group together will decrease their
beneficial interest in WinsLoew from approximately 5.6% to approximately 4.4%.
The Affiliates believe that as a private company WinsLoew will have greater
flexibility to focus on enhancing value by emphasizing growth and operating cash
flow without the constraint of the public market's emphasis on quarterly
earnings. See "SPECIAL FACTORS--Purpose and Reasons of the Affiliates for the
Merger."
Position of the Affiliates as to Fairness of the Merger
Each of the Affiliates has considered the analyses and findings of the
Special Committee and the Board (described in detail in "SPECIAL FACTORS -- The
Special Committee's and the Board's Recommendation") with respect to the
fairness of the Merger to the Public Shareholders of the Company. As of the date
of this Proxy Statement, each of the Affiliates adopts the analyses and findings
of the Special Committee and the Board with respect to the fairness of the
Merger and believes that the Merger is both procedurally and substantively fair
to, and in the best interests of, the Company's Public Shareholders; provided
that no opinion is expressed as to the fairness to any shareholder making an
investment in the Purchaser. See "SPECIAL FACTORS--Position of the Affiliates as
to Fairness of the Merger." The Trivest Directors have financial interests in
the Merger and the
4
<PAGE> 13
members of the Management Group have financial and employment interests in the
Merger. See "SPECIAL FACTORS--Conflicts of Interest."
Conflicts of Interest
In considering the recommendation of the Board with respect to the
Merger, shareholders should be aware that certain officers and directors of
WinsLoew and affiliates and associates of these officers and directors have
interests in connection with the Merger which may present them with actual or
potential conflicts of interest, which are described in more detail under
"SPECIAL FACTORS -- Conflicts of Interest."
The Trivest Directors. Upon consummation of the Merger, the Trivest
Directors will receive an aggregate of approximately $76.4 million in respect of
(i) Cash Merger Consideration on the same terms as other shareholders for shares
of Common Stock not contributed to the Purchaser and (ii) outstanding options to
purchase shares of Common Stock (including approximately $59.2 million of Cash
Merger Consideration for the shares of Common Stock held by the Existing Trivest
Shareholders). See "SPECIAL FACTORS--Conflicts of Interest--Cash Payments to the
Trivest Directors and Members of the Management Group." In addition, after the
Merger, the Trivest Directors together will beneficially own an approximately
95.6% interest in WinsLoew (including the 91.8% interest acquired by the Trivest
Partnerships). In addition, each Trivest Director is an indirect investor in the
Trivest Partnerships. See "SPECIAL FACTORS--Conflicts of Interest--Post-Merger
Ownership and Control of WinsLoew." After the Merger, WinsLoew's Board will be
comprised of Messrs. Powell, George, Kaczynski, Klein and Tesney.
Payments to Trivest . Upon consummation of the Merger, the Company will
pay a financial advisory fee to Trivest II, Inc., an investment adviser
affiliated with the Trivest Partnerships and related funds ("Trivest"), of
$________ for services rendered in connection with the financing of the Merger
and related transactions. In addition, after consummation of the Merger,
WinsLoew will pay Trivest an annual management fee of $________ for ongoing
financial advisory services.
The Management Group. Upon consummation of the Merger, the members of
the Management Group will receive an aggregate of approximately $11.7 million in
respect of (i) Cash Merger Consideration on the same terms as other shareholders
for shares of Common Stock not contributed to the Purchaser and (ii) outstanding
options to purchase shares of Common Stock. See "SPECIAL FACTORS--Conflicts of
Interest--Cash Payments to the Trivest Directors and Members of the Management
Group." In addition, after the Merger, the members of the Management Group
together will beneficially own an approximately 4.4% interest in WinsLoew. See
"SPECIAL FACTORS--Conflicts of Interest--Post-Merger Ownership and Control of
WinsLoew." Each member of the Management Group will remain an executive officer
of the Company and Bobby Tesney, the President and Chief Executive Officer, will
continue to serve on the Board of the Company immediately following the Merger.
Certain members of the Management Group will, prior to the Merger, enter into
new employment agreements with WinsLoew replacing their existing employment
agreements. The new employment agreements will provide for substantially the
same base salaries and annual cash bonuses as their existing employment
agreements.
The Special Committee. Upon consummation of the Merger, the members of
the Special Committee will receive an aggregate of approximately $9.4 million in
respect of (i) the Cash Merger Consideration for their shares of Common Stock
and (ii) outstanding options to purchase Common Stock. As compensation for
serving on the Special Committee, which met approximately 27 times from January
1999 through the date of this Proxy Statement, the Chairman of the Special
Committee will receive a fee in the amount of $30,000, and the other members of
the Special Committee will each receive $22,500. Members of the Special
Committee will be entitled to certain indemnification rights granted under the
Merger Agreement to the current and former directors and officers of the
Company. See "SPECIAL FACTORS--Conflicts of Interest."
Indemnification and Insurance. The Merger Agreement provides that all
rights to indemnification for acts or omissions occurring prior to the Effective
Time now existing in favor of the current or former directors or
5
<PAGE> 14
officers of the Company and its subsidiaries (including the members of the
Special Committee) shall survive the Merger and shall continue in accordance
with their terms. In addition, the directors and executive officers of the
Company will be provided with continuing directors' and officers' liability
insurance coverage following the Merger, subject to certain limitations. See
"SPECIAL FACTORS--Conflicts of Interest."
Certain Effects of the Merger
As a result of the Merger, the entire equity interest in the Company
will be owned by the Trivest Investors, the Management Group and by the Eligible
Persons who elect to invest in the Purchaser. The Public Shareholders will no
longer have any interest in, and will not be shareholders of, WinsLoew, and
therefore will not participate in WinsLoew's future earnings and potential
growth. Instead, the Public Shareholders will have the right to receive $34.75
in cash, without interest, for each share held. An equity investment in the
Company following the Merger involves substantial risk resulting from the
limited liquidity of any such investment and the leverage resulting from the
borrowings that will be required to fund the payment of the Cash Merger
Consideration as well as any future borrowings necessary to support the
Company's business strategy. Nonetheless, if the Company successfully executes
its business strategy, the value of such an equity investment is expected to be
considerably greater than the original cost thereof. See "SPECIAL
FACTORS--Conflicts of Interest" and "CERTAIN FORWARD LOOKING INFORMATION."
In addition, the Common Stock will no longer be traded on the Nasdaq
National Market and price quotations with respect to sales of shares in the
public market will no longer be available. The registration of the Common Stock
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), will
terminate, and this termination will eliminate the Company's obligation to file
periodic financial and other information with the Securities and Exchange
Commission (the "Commission") and will make most other provisions of the
Exchange Act inapplicable. See "SPECIAL FACTORS--Certain Effects of the Merger."
Conditions to the Merger, Termination and Expenses
Each party's obligation to effect the Merger is subject to satisfaction
of a number of conditions, including with respect to one or both parties: (i)
the Merger Agreement shall have been approved by holders of a majority of the
outstanding shares of Common Stock, (ii) all required consents and approvals
shall have been obtained, and (iii) the representations and warranties of the
parties shall be true and correct in all material respects as of the Effective
Time except as contemplated by the Merger Agreement. Any or all of the
conditions that have not been satisfied may be waived (other than the condition
that the Merger Agreement shall have been approved by holders of a majority of
the outstanding shares of Common Stock). After approval of the Merger Agreement
by the shareholders of WinsLoew, however, no condition may be waived which
reduces the amount or changes the form of the Cash Merger Consideration to be
received by the shareholders or that by law would require further approval of
the shareholders of WinsLoew unless a waiver of such condition is approved by
the shareholders. See "THE MERGER--Conditions." Even if the shareholders approve
the Merger Agreement, there can be no assurance that the Merger will be
consummated.
At any time prior to the Effective Time, the Merger Agreement may be
terminated by the mutual written consent of WinsLoew and the Purchaser. In
addition, either WinsLoew or the Purchaser may terminate the Merger Agreement
prior to the Effective Time if (i) a court or other governmental entity
permanently enjoins, restrains or prohibits the Merger and such action is final
and non-appealable or (ii) the Effective Time shall not have occurred on or
before August 31, 1999, unless extended by agreement of the Purchaser and the
Company. See "THE MERGER--Termination, Amendment and Waiver."
The Merger Agreement may be terminated by the Purchaser prior to the
Effective Time if: (i)(A) the representations and warranties of the Company as
to its capitalization shall not have been true and correct in all material
respects when made, or (B) any other representation or warranty of the Company
shall not have been true and correct in all material respects when made, except
in any case where such failure to be true and correct would not, in the
aggregate, (x) have a material adverse effect on the Company, or (y) prevent or
delay the consummation
6
<PAGE> 15
of the Merger; (ii) the Company shall have failed to comply in any material
respect with any of its material obligations or covenants contained in the
Merger Agreement, except in any case where such failure would not, in the
aggregate, (x) have a material adverse effect on the Company, or (y) prevent or
materially delay consummation of the Merger; (iii) there shall have been a
material adverse change with respect to the Company, provided that the Company
shall, if curable, have a reasonable period in which to cure any failure
described in clause (i), (ii) or (iii) of this paragraph; or (iv)(A) the Board
or the Special Committee fails to approve and recommend or withdraws or modifies
in a manner adverse to the Purchaser its approval or recommendation of the
Merger or the Merger Agreement, or approves or recommends any Acquisition
Proposal, (B) the Company enters into any agreement with respect to any Superior
Proposal following written notice to the Purchaser and payment of the
Termination Fee discussed below, or (C) the Board or the Special Committee
resolves to take any such action in clauses (iv)(A) or (B).
An "Acquisition Proposal" is defined under the Merger Agreement to
include any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of 20% or more of the assets of the Company and
its subsidiaries or 20% or more of any class of equity securities of the Company
or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its subsidiaries, any
merger, consolidation, business combination, sale of all or substantially all
the assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries (other than the transactions
between the parties to the Merger Agreement contemplated by the Merger
Agreement), or any other transaction the consummation of which could reasonably
be expected to impede, interfere with, prevent or materially delay the Merger or
which could reasonably be expected to dilute materially the benefits to the
Purchaser of the transactions contemplated by the Merger Agreement.
A "Superior Proposal" is defined under the Merger Agreement to include
any bona fide proposal made by a third party to acquire, directly or indirectly,
for consideration consisting of cash and/or securities, more than 50% of the
shares of Common Stock then outstanding or all or substantially all the assets
of the Company and otherwise on terms which the Board reasonably determines in
its good faith judgment (based on the advice of Mann Armistead) to be more
favorable to the Company's shareholders than the Merger.
WinsLoew may terminate the Merger Agreement (i) in connection with
entering into a definitive agreement with respect to a Superior Proposal
following written notice to the Purchaser and the payment of the Termination Fee
discussed below, and provided that the Company complies with its covenant
against soliciting, discussing or negotiating any Acquisition Proposal (except
as required by the Board's fiduciary duties), (ii) if any representation or
warranty of the Purchaser was not true and correct in all material respects when
made or has ceased to be true and correct in all material respects as if made on
such later date, (iii) if the Purchaser fails to comply in any material respect
with any of its material obligations or covenants in the Merger Agreement, or
(iv) if the Purchaser fails to pay the Cash Merger Consideration to the
Disbursing Agent not later than the tenth business day following the
satisfaction or waiver of the conditions to the obligations of the Purchaser to
consummate the Merger, provided that the Purchaser shall, if curable, have a
reasonable period in which to cure any failure described in clause (ii) or (iii)
of this paragraph. See "THE MERGER--Nonsolicitation Covenant" and
"--Termination, Amendment and Waiver."
WinsLoew has agreed to pay to the Purchaser a termination fee (the
"Termination Fee") in the amount of $10.0 million, plus up to $1.5 million of
expenses of the Purchaser in the event the Merger Agreement is terminated (i) by
the Purchaser due to (A) the breach by the Company of any of its
representations, warranties or covenants, or a material adverse change with
respect to WinsLoew, each as described above, or (B)(1) the Board or the Special
Committee failing to approve and recommend or withdrawing or modifying in a
manner adverse to the Purchaser its approval or recommendation of the Merger or
the Merger Agreement, or approving or recommending any Acquisition Proposal, (2)
the Company entering into any agreement with respect to any Superior Proposal or
(3) the Board or the Special Committee resolving to take any such action in
clauses (1) or (2), or (ii) by the Company due to entering into a definitive
agreement in connection with a Superior Proposal. See "THE MERGER--Termination
Fee."
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<PAGE> 16
The Purchaser has delivered a cash escrow deposit in the amount of $3.0
million to an escrow agent pending the consummation of the Merger or the
termination of the Merger Agreement. In the event that WinsLoew terminates the
Merger Agreement due to (i) any uncured material breach by the Purchaser of any
of its representations or material obligations in the Merger Agreement or (ii)
the Purchaser's failure to pay the Cash Merger Consideration to the Disbursing
Agent not later than the tenth business day following the satisfaction or waiver
of the conditions to the obligations of the Purchaser to consummate the Merger,
then, in addition, to any other remedies WinsLoew may have in respect of such
termination, the escrow deposit shall be paid to WinsLoew. Upon the consummation
of the Merger or the termination of the Merger Agreement for any other reason,
the escrow deposit shall be paid to the Purchaser. See "THE MERGER--Escrow
Deposit."
Except as provided above, each of the parties has agreed to pay its own
costs and expenses in connection with the Merger, provided that the Purchaser
will pay any filing fees required under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended (the "HSR Act"). See "THE
MERGER--Termination Fee" and "--Expenses of the Transaction."
Federal Income Tax Consequences
The receipt of the Cash Merger Consideration by holders of Common Stock
pursuant to the Merger will be a taxable transaction for federal income tax
purposes. All holders of Common Stock are urged to consult their tax advisors to
determine the effect of the Merger on such holders under federal, state, local
and foreign tax laws. See "FEDERAL INCOME TAX CONSEQUENCES."
Rights of Dissenting Shareholders
Under Florida law, WinsLoew shareholders have no right to an appraisal
of the value of their shares in connection with the Merger.
Accounting Treatment
The Merger will be treated as a purchase business combination for
accounting purposes.
Financing of the Merger
It is estimated that approximately $282.2 million will be required to
consummate the Merger and pay related fees and expenses. This sum is expected to
be provided by the following: (i) approximately $78.0 million in equity
contributions to the Purchaser by the Trivest Investors (reduced by the cash and
the aggregate value (at $34.75 per share) of the shares of Common Stock
contributed to the Purchaser by the Eligible Persons) and the Management Group;
(ii) borrowings of approximately $63.1 million under a $145.0 million senior
secured credit facility to be obtained by the Purchaser, WinsLoew and its
subsidiaries pursuant to a commitment letter, dated as of April 27, 1999, from
BankBoston, N.A. ("BankBoston"); (iii) the issuance by WinsLoew of approximately
$135.0 million aggregate principal amount of senior subordinated notes that the
Purchaser expects to issue based upon a letter from Bear, Stearns & Co. Inc.
("Bear Stearns") to the effect that, as of May 12, 1999 and subject to certain
conditions, it was highly confident that it could arrange for the sale of such
notes in connection with the Merger; and (iv) approximately $6.1 million of
WinsLoew's expected cash on hand. The bank financing commitment includes $75.0
million in term loans, a $30.0 million revolver and a $40.0 million acquisition
line for subsequent acquisitions by WinsLoew, all to be secured by first-fee
mortgages on owned real estate and first priority security interests in
substantially all of WinsLoew's assets. The BankBoston commitment letter is
subject to customary conditions, and the Bear Stearns highly confident letter
does not constitute a commitment or undertaking by Bear Stearns to place or
purchase the senior subordinated notes and does not ensure the successful
placement or completion of the offering of such notes; moreover, the Bear
Stearns letter sets forth only its expectation as of May 12, 1999 with respect
to its ability to arrange a sale of the notes in connection with the Merger.
Except for the BankBoston and Trivest commitment letters, there are no firm
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<PAGE> 17
commitments from any person to provide equity, provide senior financing,
purchase the Company's senior subordinated notes or provide any other financing
for the Merger, and there can be no assurance that any such financing will be
obtained. See "THE MERGER--Financing."
Market Prices of Common Stock and Dividends
The Company's Common Stock has been traded on the Nasdaq National
Market under the symbol "WLFI" since December 19, 1994. The following table sets
forth, for the periods indicated, the high and low sales price per share of
Common Stock as reported by the Nasdaq National Market:
<TABLE>
<CAPTION>
High Low
--------- --------
1997
<S> <C> <C>
First Quarter............................................. $11 7/8 $8 1/8
Second Quarter............................................ $11 $8 3/8
Third Quarter............................................. $15 $10 15/16
Fourth Quarter............................................ $16 13/16 $13 5/16
1998
First Quarter............................................. $20 5/8 $13 3/4
Second Quarter............................................ $29 $20 11/16
Third Quarter............................................. $28 3/4 $15 1/2
-
Fourth Quarter............................................ $26 1/2 $17 7/8
-
1999
First Quarter............................................. $28 3/4 $23
-
Second Quarter............................................
(through June __, 1999) $____ $____
</TABLE>
On January 6, the last trading day prior to the Board meeting at which
Mr. Powell stated that he, together with the other Trivest Investors and the
Management Group, would be willing to submit a proposal to purchase the Company,
the closing price per share of the Common Stock as reported by Nasdaq was $24
3/8. On January 15, 1999, the last trading day prior to the announcement of the
delivery of Mr. Powell's initial proposal to the Special Committee, the closing
price per share of the Common Stock as reported by Nasdaq was $27. On January
25, the last trading day prior to the announcement of the execution of the
letter of intent relating to the Merger, the closing price per share of the
Common Stock as reported by Nasdaq was $28 1/2. On March 4, 1999, the last
trading day prior to announcement of the execution of the Merger Agreement, the
closing price per share of Common Stock as reported by Nasdaq was $26 3/4. On
March 30, 1999, the last trading day prior to the announcement of the First
Amended Merger Agreement (as hereinafter defined) increasing the per share
purchase price from $30.00 to $33.00, the closing price per share of the Common
Stock as reported by Nasdaq was $27 1/2. On May 4, 1999, the last trading day
prior to the announcement of the Second Amended Merger Agreement increasing the
per share purchase price from $33.00 to $34.75, the closing price per share of
the Common Stock as reported by Nasdaq was $32 1/4. On June ___, 1999, the last
trading day prior to the printing of this Proxy Statement, the closing price per
share of Common Stock as reported by Nasdaq was $_____.
At April 30, 1999, there were approximately 104 holders of record of
Common Stock and approximately 1,997 persons or entities holding Common Stock in
nominee name.
The Company has not declared nor paid any cash dividends on its Common
Stock, does not anticipate that any dividends will be declared nor paid in the
foreseeable future, and intends to retain earnings to finance the development
and expansion of the Company's operations. Under the Merger Agreement, the
Company has agreed not to pay any dividends on the Common Stock prior to the
Effective Date. In addition, the Company's payment of dividends is also
restricted under the terms of its credit facilities (see Note 4 to the Company's
Consolidated Financial Statements).
9
<PAGE> 18
THE SPECIAL MEETING
Proxy Solicitation
This Proxy Statement is being delivered to WinsLoew's shareholders in
connection with the solicitation by the Board of proxies to be voted at the
Special Meeting to be held on Tuesday, July 27, 1999 at 9:00 a.m., local time,
at the offices of Trivest, Inc. located at 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133. All expenses incurred in connection with solicitation of
the enclosed proxy will be paid by the Company. Officers, directors and regular
employees of the Company, who will receive no additional compensation for their
services, may solicit proxies by telephone or personal call. In addition, the
Company has retained D.F. King & Co., Inc. to solicit proxies for a fee of
$6,500 plus expenses. The Company may request banks, brokers and other
custodians, nominees and fiduciaries to forward copies of the proxy material to
their principals and to request authority for the execution of proxies. The
Company may reimburse such persons for their expenses in doing so. This Proxy
Statement and the accompanying proxy card are being mailed to shareholders on or
about June __, 1999.
Record Date and Quorum Requirement
The Common Stock is the only outstanding voting security of the
Company. The Board has fixed the close of business on June 14, 1999 as the
Record Date for the determination of shareholders entitled to notice of, and to
vote at, the Special Meeting. Each holder of record of Common Stock at the close
of business on the Record Date is entitled to one vote for each share then held
on each matter submitted to a vote of shareholders. At the close of business on
the Record Date, there were 7,181,908 shares of Common Stock issued and
outstanding held by _____ holders of record and by approximately ________
persons or entities holding in nominee name.
Prior to the Special Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspectors shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof.
The holders of a majority of the outstanding shares entitled to vote at
the Special Meeting must be present in person or represented by proxy to
constitute a quorum for the transaction of business. Abstentions and shares
referred to as "broker or nominee non-votes" that are represented at the Special
Meeting (shares held by brokers or nominees as to which instructions have not
been received from the beneficial owners or other persons entitled to vote and
the broker or nominee does not have discretionary voting power on a particular
matter) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. If less than a majority of outstanding
shares of Common Stock are represented at the Special Meeting, holders of a
majority of the shares so represented may adjourn the Special Meeting to another
date, time or place, and notice need not be given of the new date, time or place
if the new date, time or place is announced at the Special Meeting before an
adjournment is taken.
Voting Procedures; Required Vote
Approval of the Merger Agreement, which is attached as Appendix A
hereto, will require the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Special Meeting. A
failure to vote or a vote to abstain will have the same legal effect as a vote
cast against approval. Brokers and, in many cases, nominees will not have
discretionary power to vote on the proposal to be presented at the Special
Meeting. Accordingly, beneficial owners of shares should instruct their brokers
or nominees how to vote. A broker or nominee non-vote will have the same effect
as a vote against the Merger.
Shareholders (including the Management Group, certain other members of
management, the Trivest Directors, the Existing Trivest Shareholders, the other
members of the Board and certain shareholders affiliated or
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associated with the Trivest Partnerships) who as of the record date held of
record 2,570,218, or approximately 35.8%, of the outstanding shares of Common
Stock have expressed their intention to vote their shares for approval of the
Merger. Holders of 4,611,690, or approximately 64.2%, of the outstanding shares
of Common Stock remain uncommitted with respect to how they will vote on the
Merger. Accordingly, the affirmative vote by holders of Common Stock
representing approximately 1,020,737 (or 22.1%) of such uncommitted shares, or
approximately 14.2% of the outstanding shares, will be required to approve the
Merger.
Under Florida law, WinsLoew shareholders have no right to an appraisal
of the value of their shares in connection with the Merger.
Voting and Revocation of Proxies
The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Special Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Special Meeting. Subject to such revocation, all shares represented by each
properly executed proxy received by the Secretary of WinsLoew will be voted in
accordance with the instructions indicated thereon, and if no instructions are
indicated, will be voted to approve the Merger and in such manner as the persons
named on the enclosed proxy card in their discretion determine upon such other
business as may properly come before the Special Meeting.
The shares represented by the accompanying proxy card and entitled to
vote will be voted if the proxy card is properly signed and received by the
Secretary of the Company prior to the Special Meeting.
Effective Time
The Merger will be effective as soon as practicable following
shareholder approval of the Merger Agreement and upon the filing of Articles of
Merger with the Secretary of State of the State of Florida. The Effective Time
is currently expected to occur as soon as practicable after the Special Meeting,
subject to approval of the Merger Agreement at the Special Meeting and
satisfaction or waiver of the terms and conditions set forth in the Merger
Agreement. See "THE MERGER--Conditions."
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SPECIAL FACTORS
Background of the Merger
Past Contacts, Transactions and Negotiations.
WinsLoew's growth strategies have, since inception, included the
acquisition of complementary product lines, and, as part of its efforts to
pursue appropriate acquisition opportunities, WinsLoew regularly engages in
discussions with industry participants regarding possible transactions. During
the period from February 1998 through February 1999, representatives of the
Company, including Messrs. Powell, Kaczynski and Tesney, contacted, or responded
to inquiries from, 26 direct competitors and 30 other furniture manufacturers
with respect to WinsLoew's interest in exploring potential acquisitions,
combinations or other transactions with such companies. During that period and
in response to such contacts, the Company entered into confidentiality
agreements or fee reimbursement agreements with nine direct competitors and
eight other manufacturers. The remaining companies contacted declined to pursue
discussions with the Company. Ultimately, WinsLoew entered into letters of
intent with three of the competitors with whom it had entered into
confidentiality agreements. Of these, WinsLoew acquired one, Villella, Inc.
d/b/a Tropic Craft Aluminum Furniture Manufacturers, and has entered into a
stock purchase agreement to acquire another, Miami Metal Products, Inc. d/b/a
Pompeii Furniture Industries and its affiliate, Industrial Mueblera Pompeii de
Mexico, S.A. de C.V. (together, "Pompeii"). See "BUSINESS OF THE
COMPANY--Background." Following initial due diligence, WinsLoew determined not
to pursue an acquisition of the third competitor. In addition, in May and June
of 1998 and February and March of 1999, WinsLoew and Trivest contacted and
engaged in a number of discussions with a publicly held manufacturer engaged
primarily in the contract seating markets of the furniture industry (the
"Potential Transaction Party"), with whom the Company had entered into a
confidentiality agreement. These discussions led to a general understanding of
terms regarding a possible business combination. Management and Trivest proposed
the transaction to the Special Committee at a March 18 Board meeting; however,
the Special Committee elected not to pursue such transaction at that time.
Subsequently, at a March 30 Board meeting, the Chairman of the Board confirmed
that the Board would not be asked to make a final decision with respect to the
proposed business combination with the Potential Transaction Party until the
completion of management's due diligence investigation. The Potential
Transaction Party terminated discussions with the Company in April 1999, and,
consequently, the Special Committee was not requested to make such a final
decision. WinsLoew is currently continuing to evaluate acquisitions of three of
the other companies that signed confidentiality agreements. However, other than
Pompeii, WinsLoew has not reached any agreements in principle with, or made any
formal proposals to, any of the foregoing 56 companies, and WinsLoew is not
currently in discussions with any such company relating to a possible
acquisition by WinsLoew.
In addition to pursuing WinsLoew's acquisition strategy, at various
times during 1997 and 1998, the Board considered certain limitations on the
Company's operating flexibility related to the public market's emphasis on
quarterly earnings. As a result, in April 1998, representatives of the Company,
including certain members of senior management and certain of the Trivest
Directors, met with representatives of Mann Armistead to discuss various
strategic alternatives that might enable the Company's shareholders to realize
the inherent value of their shares of Common Stock. As part of such discussions,
Mann Armistead and the WinsLoew representatives considered a number of publicly
and privately owned furniture manufacturers with whom a strategic combination
might be feasible. In May 1998, Mann Armistead contacted two publicly owned
furniture manufacturers regarding a potential sale of, or combination with, the
Company. See "--Opinion of the Financial Advisor" for a description of the terms
of Mann Armistead's current and previous engagements with WinsLoew. Management
of the Company and Trivest selected these two furniture manufacturers from among
those identified by Mann Armistead based primarily on their belief that it would
not be in the best interests of the Company's shareholders to receive the stock
of any of the other proposed companies as consideration. Of the two competitors
contacted by Mann Armistead, one declined to pursue discussions with the
Company, and the other (the "Potential Acquiror") expressed an interest in
discussing a possible transaction. During the summer of 1998, representatives of
the Potential Acquiror and representatives of WinsLoew, including Messrs.
Kaczynski, Powell and Tesney, as well as representatives of Mann Armistead, met
several times to discuss a possible strategic transaction. These discussions
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<PAGE> 21
resulted in a July 1998 proposal by the Potential Acquiror to acquire the
Company in a transaction that would value WinsLoew's Common Stock at $25.00 per
share. WinsLoew declined such proposal and has had no further discussions with
the Potential Acquiror, except that Mann Armistead contacted the Potential
Acquiror as part of its solicitation process described below.
The Initial Merger Agreement.
On January 7, 1999, at a regular meeting of the Board, the foregoing
exploratory efforts were reviewed by the Board. Certain members of the Board
also noted their belief that the low trading price of the Common Stock did not,
in their view, reflect the Company's financial and operating performance. Among
other items, directors noted that although the Company had announced its
expectation that 1998 earnings would be in excess of analysts' projections,
there had been no appreciable increase in the trading price of the Common Stock.
Members of the Board went on to discuss how the foregoing was exacerbated by the
Company's relatively small market capitalization and the relatively low level of
trading in the Common Stock on the Nasdaq National Market. Finally, members of
the Board expressed concern about how long it would take for the trading price
of the Common Stock to reflect its inherent value.
At the conclusion of that meeting, Mr. Powell suggested that he, on
behalf of certain partnerships affiliated with Mr. Powell or Trivest (not
presently holders of WinsLoew Common Stock), together with certain members of
senior management, would be willing to submit a proposal to purchase the Company
in an all-cash transaction. At that time, because of the potential conflicts of
interest, the Board appointed a Special Committee of outside directors to
consider whether a sale of the Company would be in the best interests of the
shareholders and to consider and make recommendations with respect to any formal
proposal that might be submitted, as well as other possible strategic
alternatives. The Special Committee consists of James S. Smith (the Chairman of
the Special Committee), William H. Allen, Jr., Henry C. Cheek, M. Miller Gorrie,
and Sherwood M. Weiser. At the January 7 meeting, the Board authorized the
Special Committee to establish such procedures, review such information and
engage such financial advisors and legal counsel as it deemed reasonable and
necessary to carry out its duties, and to conduct negotiations with respect to
any proposed transaction. For their services on the Special Committee, the
Company has agreed to pay the Chairman a fee of $30,000 and each other member a
fee of $22,500. See "SPECIAL FACTORS--Conflicts of Interest."
The Special Committee members are the only members of the Board who are
not either employees of WinsLoew or participating as purchasers in the Merger,
except that Mr. Weiser and members of his family are indirect investors in
Trivest Fund II Group, Ltd., one of the Trivest Partnerships, which investment
is not a significant part of the assets of Mr. Weiser or his family or of
Trivest Fund II Group, Ltd. The Special Committee members discussed these
financial interests and determined that they would not impact Mr. Weiser's
independence or judgment and that his value to the Special Committee outweighed
any possible conflict of interest. All members of the Special Committee hold
shares of Common Stock and options to purchase shares of Common Stock. See
"SPECIAL FACTORS -- Conflicts of Interest." In addition, Mr. Smith and members
of his family are limited partners of two of the Existing Trivest Shareholders,
which investment is not a significant part of the assets of Mr. Smith or his
family or of such Existing Trivest Shareholders. All of the shares of Common
Stock held by the Existing Trivest Shareholders and the members of the Special
Committee will be converted into the right to receive the Cash Merger
Consideration, and all options held by the members of the Special Committee will
be canceled in exchange for cash, on the same terms as the Public Shareholders.
The Common Stock beneficially owned by the members of the Special Committee is
significant, which was viewed as a positive factor in their ability to determine
the best interests of the WinsLoew shareholders. See "PRINCIPAL SHAREHOLDERS AND
STOCK OWNERSHIP."
On January 11, the Special Committee contacted Mann Armistead regarding
its possible engagement by the Special Committee in connection with its
appointment to consider the possible proposal by Mr. Powell and other strategic
alternatives.
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On January 15, 1999, Mr. Powell made a formal proposal to the Special
Committee on behalf of a corporation to be formed by the Trivest Partnerships
and certain members of senior management to acquire all of the outstanding
shares of Common Stock not owned at the time of the Merger by such persons,
subject to certain terms and conditions. The Trivest Partnerships are affiliated
with Mr. Powell but are not presently holders of Common Stock. Mr. Powell's
proposal was set forth in a letter of intent (the "Letter of Intent") that
provided that the proposed transaction would be structured as a cash merger in
which shareholders not investing in the Purchaser would receive $30.00 per share
(and each holder of outstanding options to purchase Common Stock would receive a
cash payment equal to the difference between $30.00 per share and the per share
exercise price of such options). The draft Letter of Intent also provided for a
termination fee of $6.0 million to be paid by the Company to the Purchaser in
certain circumstances. Mr. Powell also provided the Special Committee with a
draft merger agreement (the "Initial Merger Agreement") for review by the
Special Committee and its legal and financial advisors. Prior to the opening of
the market on Monday, January 18, the first trading day after the delivery of
the Merger proposal, the Company issued a press release announcing its receipt
of the Merger proposal and the establishment of the Special Committee.
On January 19, the Special Committee engaged Balch & Bingham LLP
("Balch & Bingham") as its legal counsel. Also on January 19, the Special
Committee engaged Mann Armistead regarding the possible sale of all or part of
the assets or stock of the Company, evaluating the Merger, soliciting and
evaluating other potential buyers for the Company, participating in negotiations
with the Purchaser or another potential acquiror, and providing a fairness
opinion related to a definitive agreement and closing of a sale transaction.
The Special Committee engaged Mann Armistead based on its nationally
recognized experience in the furniture manufacturing industry and its expertise
in the evaluation of businesses in connection with transactions similar to the
Merger. The Special Committee considered Mann Armistead's specific knowledge of,
and familiarity with, WinsLoew's business, financial condition and results of
operations in connection with the Company's 1998 retainer of Mann Armistead to
evaluate a number of furniture manufacturers in connection with a possible
strategic transaction, as described above. The Special Committee also considered
that management's prior contacts with Mann Armistead had focused primarily on
the feasibility of a sale of the Company to an unaffiliated strategic buyer and,
therefore, did not create a conflict of interest with respect to the Special
Committee's engagement of Mann Armistead.
Neither the Board nor the Special Committee determined that it was
necessary to elect additional outside directors to act on behalf of the
Company's public shareholders for the purpose of negotiating the terms of the
Initial Merger Agreement based upon, among other factors, the engagement of
independent legal counsel to the Special Committee, the engagement of Mann
Armistead as its financial advisor and the absence of any affiliation on the
part of the members of the Special Committee with the Purchaser that was deemed
to be problematic.
In its January 19 meeting, the Special Committee discussed with
representatives of Mann Armistead and Balch & Bingham various issues raised by
the Merger proposal and Letter of Intent, including whether the sale of the
Company at this time was in the best interests of the shareholders, the
desirability of soliciting other offers, and whether entering into the Letter of
Intent would facilitate or inhibit the possible sale of the Company at a higher
price. The Special Committee also considered the size and effect of any
termination fee to the Purchaser, the process for obtaining a fairness opinion
and the procedure to identify other strategic alternatives, including the sale
of the Company in whole or in part. The Special Committee was concerned, and
discussed with Mann Armistead, that while the $30.00 price may be in the range
of fair, a higher price might be obtainable. The Special Committee instructed
Mann Armistead to commence solicitation of offers from other potential acquirors
and investigation and analysis of the value of the Company and the Merger
proposal.
On January 20, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss other potential
acquirors of the Company. The Special Committee approved a list of the ten most
likely possible acquirors identified by Mann Armistead, which included the
Potential Acquiror with which the Company held discussions in 1998. In addition,
Mr. Smith reported on his
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discussions with Mr. Powell in which Mr. Smith had attempted to negotiate a
reduction in the termination fee in the Letter of Intent, which Mr. Powell
declined to do.
On January 22, after consultation with Mr. Smith and representatives of
Mann Armistead, Balch & Bingham submitted comments on the Letter of Intent to
the Purchaser and its counsel, Greenberg Traurig, P.A. ("Greenberg Traurig"),
which the Purchaser accepted. Later the same day, the Special Committee held a
telephonic meeting with representatives of Mann Armistead and Balch & Bingham
during which they discussed the Special Committee's possible recommendation to
the Board of the revised Letter of Intent. The revised Letter of Intent
permitted the Company (i) for 90 days from execution, to solicit or participate
in discussions or negotiations regarding any acquisition proposal that could
reasonably be expected to result in a more favorable proposal, and (ii) to (A)
approve or recommend a more favorable proposal, (B) cause the Company to enter
into an agreement with respect to a more favorable proposal or (C) terminate the
Letter of Intent, but in each case only upon three days' written notice and the
payment of a termination payment of $6.0 million and reimbursement of the
Purchaser's expenses up to $1.2 million. The Letter of Intent also provided that
the parties would each pay their own costs and expenses, except as provided
above. The Special Committee believed that the provisions of the Letter of
Intent regarding the termination fee and expense reimbursement obligations were
not unreasonable and would not have the effect of discouraging competing bids
and that the Purchaser would not enter into the Letter of Intent and incur
various costs and expenses to secure financing for the Merger without such
provisions. During the same meeting, representatives of Mann Armistead reported
on its contacts with the possible acquirors that it had identified and its
preliminary views regarding the value of the Common Stock, including that the
$30.00 price per share price fell within the range of fair. The Special
Committee directed Mann Armistead to solicit interest from parties in addition
to the ten on the initial list. The Special Committee also directed Mr. Smith to
attempt to negotiate a higher price with the Purchaser. The Special Committee
agreed, however, that entering into the Letter of Intent would be advisable in
order to negotiate the terms of the Merger with the Purchaser while continuing
the solicitation process.
On January 22, Mr. Smith and Mr. Powell discussed by telephone an
increase in the $30.00 price per share, which Mr. Powell declined to do.
On January 25, at a special telephonic meeting of the Board of
Directors at which all of the directors participated except Messrs. Cheek and
Gorrie, Mr. Smith made a presentation to the Board to the effect that the
Special Committee had determined that the execution of the Letter of Intent in
its revised form dated January 22, 1999 containing the $30.00 per share Merger
proposal was in the best interest of the Company and its shareholders and that
the Special Committee had recommended that the execution of the Letter of Intent
be approved by the Board. The Board unanimously (except for Messrs. Cheek and
Gorrie, who did not participate) approved the execution of the Letter of Intent.
Later that same day, the Letter of Intent was executed, and the Company issued a
press release announcing the same.
Later the same day, the Special Committee held a telephonic meeting
with representatives of Mann Armistead and Balch & Bingham to discuss the Letter
of Intent and Mann Armistead's solicitation efforts. Mann Armistead reported
that its contacts included the Potential Acquiror, which had declined further
interest. Mann Armistead proposed, and the Special Committee authorized
communication with, an expanded list of potential acquirors with the anticipated
ability to finance a purchase of the Company. The Special Committee also
authorized Balch & Bingham to commence negotiation of the Initial Merger
Agreement.
On February 2, the Special Committee held a telephonic meeting with
representatives of Mann Armistead and Balch & Bingham. The Special Committee
discussed the descriptive memorandum prepared by Mann Armistead to be sent to
potential acquirors. The Special Committee also discussed the status of the
contemplated Pompeii acquisition and any effect it might have on the Merger
proposal or any other strategic transaction. Representatives of Mann Armistead
also reported on its ongoing solicitation process. They reported that 13
possible strategic and financial acquirors had been contacted to date and that
confidentiality agreements in substantially the same form had been executed by 5
of them. Upon execution of a confidentiality agreement, the Special Committee
provided each potential acquiror with summary financial information.
Representatives of Mann Armistead also discussed with the Special Committee
specific potential acquirors and Mann Armistead's communications with them. In
addition, the Special Committee discussed a tentative timetable for negotiating
the Initial Merger Agreement and the expected time required for the Purchaser to
arrange the necessary financing. In this regard, representatives of
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<PAGE> 24
Mann Armistead also discussed with the Special Committee specific potential
acquirors and Mann Armistead's communications with them. In addition, the
Special Committee discussed a tentative timetable for negotiating the Initial
Merger Agreement and the expected time required for the Purchaser to arrange the
necessary financing. In this regard, representatives of Mann Armistead explained
that the delivery of Mann Armistead's fairness opinion was contingent upon the
Purchaser's demonstration of its ability to obtain financing for the Merger. The
Special Committee determined to provide Mann Armistead an adequate opportunity
to carry out its solicitation process prior to the execution of the Initial
Merger Agreement with the Purchaser. The Special Committee also approved the
compensation for its Chairman and other members, which was subsequently approved
by the Board of Directors.
During the remainder of February, 19 additional potential acquirors
were contacted, of which six executed confidentiality agreements and engaged in
due diligence reviews of the Company.
On February 13, Balch & Bingham sent to Greenberg Traurig the Special
Committee's comments to the Initial Merger Agreement. On February 16 and 17,
Balch & Bingham and Greenberg Traurig negotiated various terms of the Initial
Merger Agreement. The principal points of negotiation included (i) the scope of
certain representations and warranties of the Purchaser as to its financing for
the Merger, (ii) the restrictions on the Company's solicitation of alternative
proposals or offers to acquire the Company and the requirement of a "fiduciary"
determination, and (iii) a "drop dead" date after which the Initial Merger
Agreement would terminate if the Merger had not been consummated. The Special
Committee insisted on the right to solicit Superior Proposals following the
execution of the Initial Merger Agreement. In addition, the Special Committee
insisted that the Special Committee have the right to terminate the Initial
Merger Agreement if the Merger was not consummated by a specified date. On
February 18, Greenberg Traurig distributed a revised draft of the Initial Merger
Agreement to the Special Committee and Balch & Bingham which was revised to
provide, among other things, that (i) the Special Committee could solicit
Superior Proposals for 30 days following the execution of the Initial Merger
Agreement and, in addition, thereafter participate in discussions or
negotiations regarding unsolicited Superior Proposals and/or Superior Proposals
solicited prior to the expiration of such 30 days and (ii) either party could
terminate the Initial Merger Agreement if the Merger had not been consummated
within 90 days of execution. The Special Committee found such terms acceptable
because they believed that any potential acquirors would be informed of the
opportunity to submit a bid by virtue of Mann Armistead's solicitation process
and the public announcement of the Merger proposal.
On February 17, the Special Committee held a telephonic meeting with
representatives of Mann Armistead and Balch & Bingham regarding the status of,
and issues raised in, the negotiation of the Initial Merger Agreement, as well
as Mann Armistead's fairness opinion and solicitation process. At this meeting,
representatives of Mann Armistead described the two most serious potential
acquirors that had been contacted to date. One was a strategic acquiror that
stated that it had been considering WinsLoew as an acquisition target prior to
the announcement of the Merger proposal on January 15. The Special Committee
believed that a strategic transaction with such acquiror would have provided
substantial synergies. This strategic acquiror had initially declined interest
due to its perception that management would not be receptive to another
purchaser. Although representatives of the Special Committee corrected this
impression, this strategic acquiror stated it would not participate in an
auction process and that it was not prepared to act quickly.
The other potential acquiror was Hancock Park Associates ("Hancock
Park"), a financial buyer that representatives of Mann Armistead believed would
likely structure a transaction similar to the Merger proposal. In 1995, Hancock
Park had acquired Brown Jordan Company, a competitor of WinsLoew that sells
casual outdoor furniture at a higher price point, and its subsidiary, Casual
Living Worldwide, which produces lower-priced casual furniture. Hancock Park
also owns Leslie's Poolmart, Inc. and Busy Body, Inc., which together with Brown
Jordan Company and Casual Living Worldwide, have annual net revenues in excess
of $400 million.
Representatives of Mann Armistead also informed the Special Committee
regarding other potential purchasers that had declined further interest and
summarized their due diligence and other work related to issuing a fairness
opinion.
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The Special Committee discussed with Mann Armistead the likely timing
of any formal expression of interest from any other potential acquiror in order
to determine the schedule for finalizing the Initial Merger Agreement. In
particular, the Special Committee considered the Purchaser's request to execute
the Initial Merger Agreement prior to the Purchaser's receipt of committed
financing, as well as its request to execute the Initial Merger Agreement prior
to the Special Committee's receipt of Mann Armistead's fairness opinion. In
response to inquiries from the Special Committee, representatives of Mann
Armistead stated that they could not render a fairness opinion without
additional assurances, which were subsequently obtained, regarding the
Purchaser's ability to obtain financing. The Special Committee determined that
it would be consistent with its fiduciary duties to execute the Initial Merger
Agreement so long as the Purchaser's financing was sufficiently definite and
Mann Armistead rendered its oral fairness opinion prior to execution.
The Special Committee also discussed the Investment Services Agreement
between the Company and Trivest dated as of December 16, 1994 (the "Investment
Services Agreement"), which provided for (i) an annual fee of $500,000 to
Trivest for ten years, subject to increases for acquisitions, (ii) an investment
banking fee for certain transactions, and (iii) payment of Trivest's expenses.
At the time it negotiated the termination fee under the Initial Merger
Agreement, the Special Committee expected that Trivest would not receive
additional compensation pursuant to the Investment Services Agreement in
addition to the termination fee and expense reimbursement, because such a fee
would effectively increase the cost of the transaction to another purchaser.
Consequently, Balch & Bingham's comments to the Initial Merger Agreement
included a requested provision requiring the termination of the Investment
Services Agreement in the event the Company were sold to a third party. The
Purchaser did not initially agree to any aspect of such requested change.
The Special Committee also considered requiring as a condition in the
Initial Merger Agreement that a majority of the shares held by persons or
entities not affiliated with management or the Purchaser be voted in favor of
the Merger. The Purchaser did not agree to such a condition, and the Special
Committee determined not to require it, provided that (i) the Initial Merger
Agreement was not executed until the Special Committee had received Mann
Armistead's oral fairness opinion, (ii) the Purchaser had provided adequate
assurances of its ability to obtain the required financing, and (iii) the
Special Committee members voted unanimously to approve the Merger.
During the period from January 25 through February 19, representatives
of the Purchaser, including the Trivest Directors and members of the Management
Group, pursued a variety of potential arrangements for financing the Merger. The
Purchaser received nine proposals for senior secured financing and six proposals
with respect to a possible unsecured debt financing. In addition,
representatives of the Purchaser also engaged in preliminary discussions with a
number of institutional investors regarding possible equity co-investments with
the Trivest Partnerships and the Management Group. On February 18, the Purchaser
selected BankBoston to provide its senior secured financing and Bear Stearns to
purchase and resell under Rule 144A $125.0 million aggregate principal amount of
senior subordinated notes. On February 22, the Purchaser received a draft
proposal letter from BankBoston for a $145.0 million senior secured credit
facility to provide a portion of the Cash Merger Consideration and provide
WinsLoew with working capital and an acquisition revolver after the Merger.
Following discussions concerning the terms and conditions set forth in the draft
proposal letter, representatives of BankBoston and the Purchaser executed a
revised proposal letter on February 26. The parties continued to negotiate the
terms of the proposed financing during the week of March 1. Representatives of
the Purchaser and Bear Stearns met on February 23 at the offices of WinsLoew for
an organizational meeting for the proposed Rule 144A offering of senior
subordinated notes. At that meeting, representatives of Bear Stearns provided
the Company and the Purchaser with a term sheet outlining the terms of the
proposed offering and commenced their due diligence review of the Company. See
"THE MERGER--Financing."
During the weeks of February 8, 15 and 22, representatives of Mann
Armistead and Balch & Bingham and members of the Special Committee performed
various due diligence and analyses with respect to WinsLoew. In this connection,
Mann Armistead reviewed certain financial and other information concerning the
Company and met with certain members of the Company's management to discuss the
Company's historical and projected financial results, as well as opportunities
available to WinsLoew to achieve higher levels of internal growth and
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improved profitability, including the pending acquisition of Pompeii. The
Company's management annually prepares financial forecasts for internal use in
capital budgeting and other management decisions. Management provided to the
Special Committee and Mann Armistead such forecasts prepared during 1998 for the
fiscal years 1999 through 2002, which forecasts do not give effect to the Merger
or the related financing or to any possible acquisitions or other transactions
that might occur after the Merger. See "CERTAIN FORWARD LOOKING INFORMATION."
On February 24, representatives of the Purchaser and Greenberg Traurig
met with representatives of Balch & Bingham at the offices of Balch & Bingham in
Birmingham, Alabama. At such meeting, representatives of Balch & Bingham related
the Special Committee's insistence that the Purchaser demonstrate its ability to
obtain financing for the Merger. In response, the Purchaser provided the Special
Committee with a draft proposal letter from BankBoston (followed by a copy of
the signed proposal letter dated February 26) for the $145.0 million credit
facility, as well as an indicative term sheet prepared by Bear Stearns with
respect to a senior subordinated note offering.
On February 26, Balch & Bingham provided to Greenberg Traurig a mark-up
of the February 18 draft of the Initial Merger Agreement reflecting negotiations
during the February 24 meeting. On March 1, Greenberg Traurig distributed a
revised draft of the Initial Merger Agreement which, among other changes,
included various representations and covenants as to the Purchaser's financing
arrangements.
During the weeks of February 22 and March 1, representatives of Mann
Armistead discussed the terms, conditions and status of the Purchaser's proposed
financing with representatives of each of BankBoston and Bear Stearns.
On March 1, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss the then
current draft of the Merger Agreement. Balch & Bingham reported that the
unresolved issues were the status of the Investment Services Agreement, the
timing of the fairness opinion and the status of the Purchaser's financing
commitments. Representatives of Mann Armistead described its discussions with
and review of the Purchaser's financing sources and stated that they were
becoming increasingly confident that the requisite financing could be obtained.
They also reviewed Mann Armistead's valuation methods of the purchase price and
stated that Mann Armistead believed that $30.00 was within the range of fair.
They stated that Mann Armistead was prepared to provide its oral fairness
opinion to this effect, with the delivery of the written fairness opinion
subject to the Purchaser's receipt of a commitment letter from BankBoston for
the senior secured financing facility and absent the Company's receipt of a
proposal to acquire the Company for a higher per share purchase price. In that
regard, the Mann Armistead representatives explained that such opinion as to the
fairness of the $30.00 price per share could be affected by the Special
Committee's receipt of a proposal for a competing merger transaction at a higher
per share price than the Merger proposal's $30.00 per share price. The Mann
Armistead representatives also reported that there were three potential
acquirors that had signed confidentiality agreements and had not yet declined
further interest, one strategic buyer and two financial buyers, one of which was
not as far along in its review process as the others.
A meeting of the Board was scheduled for March 4, and a meeting of the
Special Committee was scheduled for the same day prior to the Board meeting in
order to consider the Initial Merger Agreement.
On March 3 and March 4, Balch & Bingham and Greenberg Traurig
substantially completed negotiation of the Merger Agreement providing for a
$30.00 per share purchase price.
On the evening of March 3, Mann Armistead received a written,
non-binding proposal from Hancock Park to acquire the Company for $32.50 per
share in cash (the "March 3 Hancock Park Proposal").
On March 4, the Special Committee met to consider the Initial Merger
Agreement and the Hancock Park proposal, which included a due diligence
condition, as well as customary conditions similar to Mr. Powell's initial
Merger proposal in January 1999, including the execution of a mutually
acceptable agreement, receipt of regulatory
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and shareholder approvals, and securing satisfactory financing. In addition, the
proposal stated that Hancock Park's representatives were prepared to complete
their due diligence investigation as soon as possible. Hancock Park's proposal
included a financing structure similar to the Merger proposal. The Special
Committee considered that the Purchaser might withdraw its offer if the Initial
Merger Agreement were not executed and that the Hancock Park proposal had not
been analyzed. Following discussions with representatives of Balch & Bingham and
Mann Armistead regarding its fiduciary duties and related issues, the Special
Committee determined that it was in the best interests of the Company's
shareholders to execute the Initial Merger Agreement and pursue the Hancock Park
proposal, noting in particular that (i) the termination fee in the Letter of
Intent would apply if the Company entered into an agreement with Hancock Park,
whether or not the Initial Merger Agreement was executed, and (ii) the Merger
Agreement permitted the Special Committee adequate opportunity to pursue the
Hancock Park proposal and consider other offers. The Special Committee also
considered competitive concerns regarding a due diligence investigation by
Hancock Park of certain of the Company's manufacturing operations, particularly
the Winston facility, since Hancock Park owns Brown Jordan Company, a competitor
of WinsLoew, as well as the fact that Hancock Park would be required to take
into account other acquisition costs, including the payment of the termination
fee and expenses to the Purchaser.
At the March 4 meeting of the Special Committee, Mann Armistead made a
presentation regarding its solicitation process, which included contacting and
providing a descriptive memorandum to 32 companies, 11 of which executed
confidentiality agreements and obtained additional information. Representatives
of Mann Armistead reported that they had made numerous follow-up calls, that
eight companies had declined further interest and that three companies still
showed apparent interest in acquiring the Company. Of those three, only Hancock
Park had made a formal proposal. After the execution of the Initial Merger
Agreement, the remaining two companies that had executed confidentiality
agreements and received additional information declined further interest in
acquiring the Company. Representatives of Mann Armistead also reviewed the
analyses that they had performed to produce a range of implied values for the
Company's Common Stock. The Special Committee discussed with Mann Armistead its
investigation of WinsLoew and the assumptions made in connection with its
analyses and the facts upon which these analyses were based. Mann Armistead
explained the assumptions, methodologies and relative limits of its analyses.
Mann Armistead concluded its presentation by rendering its oral opinion, subject
to certain assumptions made, matters considered and limits on the review
undertaken in connection with such opinion and absent the Company's receipt of a
proposal to acquire the Company for a higher per share purchase price, that the
$30.00 per share was fair from a financial point of view to the Public
Shareholders, with the delivery of its written opinion and accompanying
materials being subject to the Purchaser's receipt of a commitment letter with
respect to the Purchaser's senior secured credit facility. The Special Committee
then discussed the terms and conditions of the transactions contemplated by
Initial Merger Agreement, which respect to which Balch & Bingham made a detailed
presentation. The Special Committee also discussed its strong desire that the
Investment Services Agreement be amended to provide that it be terminated in
connection with the Merger or the consummation of a Superior Proposal. The
Special Committee unanimously concluded that the Merger (including the $30.00
per share to be paid to the Public Shareholders) was substantively and
procedurally fair to, and in the best interests of, the Public Shareholders and
determined to recommend the Initial Merger Agreement to the full Board and that
the Board recommend it to the Company's shareholders.
Following the Special Committee's March 4 vote to recommend the Initial
Merger Agreement to the Board, the Board met to accept the Special Committee's
recommendation, approve and adopt the Initial Merger Agreement and recommend it
to the shareholders of the Company. Mr. Smith reported on the Special
Committee's consideration of the Merger proposal and possible strategic
alternatives, including Mann Armistead's valuation and solicitation process.
Mann Armistead repeated its Special Committee presentation to the full Board,
including a description of the Hancock Park proposal and its oral fairness
opinion. The members of the Board discussed the conditions set forth in the
Hancock Park proposal, the probability of Hancock Park obtaining financing on a
timely basis, its expected timetable for conducting due diligence and related
competitive issues, as well as WinsLoew management's likely reaction to Hancock
Park. The members of the Special Committee further emphasized the terms of the
Initial Merger Agreement that would permit WinsLoew to continue to solicit
Superior Proposals and engage in negotiations subsequent to execution. The
members of the Board then discussed the terms and conditions of the Initial
Merger Agreement, as well as the relationship of the Investment Services
Agreement
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to the Initial Merger Agreement. Following such discussion, the Trivest
Directors agreed that the Investment Services Agreement would be amended to
provide that Trivest would not be entitled to a transaction fee or reimbursement
of expenses by reason of either the Merger or any Superior Proposal. The Board
also ratified the fees approved by the Special Committee for their service on
such committee ($20,000 for the Chairman and $15,000 for each other member,
which amounts were subsequently increased to $30,000 and $22,500, respectively).
All ten members of the Board unanimously approved and adopted the Initial Merger
Agreement, recommended it to the shareholders and determined that the Merger
provided for therein (including the $30.00 per share to be paid to the Public
Shareholders) was substantively and procedurally fair to, and in the best
interests of, the Public Shareholders. Prior to the opening of the market on
March 5, the parties executed the definitive Initial Merger Agreement and issued
a press release announcing its execution.
The March 3 Hancock Park Proposal
On March 9, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss the status of
the March 3 Hancock Park Proposal. The Special Committee discussed the timing
and scope of Hancock Park's due diligence investigation of WinsLoew, including
Hancock Park's requested site visits and management meetings. The Special
Committee also instructed its Chairman to confirm with representatives of
Hancock Park that the $32.50 offer was net to the shareholders and that Hancock
Park was aware of the termination fee and expense reimbursement provisions of
the Initial Merger Agreement and the terms of the Investment Services Agreement
as required to be amended by the Initial Merger Agreement. The Special Committee
also instructed Mann Armistead to obtain additional information regarding
Hancock Park's financing structure and whether the response of the Company's
management would have any impact on such offer. Representatives of Hancock Park
later confirmed that they were interested in purchasing the Company with or
without the continued employment of management. The Special Committee also
discussed the importance of providing Hancock Park with access to Company
information and personnel to enable it to negotiate a definitive agreement and
obtain financing commitments. The Chairman of the Special Committee communicated
the importance of such access to management and directed them to respond on a
priority basis and to consult with the Special Committee regarding any concerns
about providing potentially sensitive information.
On March 10, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham. Representatives of the Purchaser, including
Mr. Powell, also participated for part of the meeting to update the Special
Committee on the progress of the Purchaser's financing arrangements. Mr. Powell
also shared with the Special Committee his concerns regarding the ability of
Hancock Park to obtain financing (including for the Pompeii transaction) and
that Mann Armistead may have been influenced by its compensation arrangement to
pursue the higher March 3 Hancock Park Proposal prior to a demonstration by
Hancock Park of its ability to obtain financing. Mr. Powell was then excused
from the meeting, and representatives of Mann Armistead joined the meeting. The
Special Committee determined that Messrs. Smith and Gorrie, along with
representatives of Balch & Bingham, would meet the Hancock Park representatives
in Birmingham for its due diligence and management meetings, and that Mr. Smith
would check Hancock Park's financing references directly to enable the Special
Committee to better evaluate the March 3 Hancock Park Proposal. The Special
Committee also authorized the engagement of PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") as independent financial consultants to investigate
the relative experience and financing capabilities of the Purchaser and Hancock
Park. The Special Committee agreed to pay PricewaterhouseCoopers customary fees,
which are not expected to exceed $200,000.
On March 12, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead. Mr. Smith reported his
conversations with representatives of three financial references which had
participated in previous debt or equity financings with Hancock Park as well as
other parties familiar with Hancock Park and its principal, Mr. Forticq. All of
these representatives were uniformly favorable in their opinion of Hancock Park
and Mr. Forticq. The Special Committee arranged for representatives of Hancock
Park and its financing sources to visit the Winston facility following a
preliminary meeting at the Company's offices in Birmingham scheduled for March
16. The Special Committee also consulted with PricewaterhouseCoopers about
providing additional independent financial advice.
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<PAGE> 29
On March 16, Messrs. Smith and Gorrie met with members of management
and representatives of Hancock Park and its financing sources at the Company's
offices in Birmingham. After discussions between the Special Committee and
members of management regarding competitive concerns related to touring the
Company's manufacturing facilities, members of management accompanied
representatives of Hancock Park on the planned plant tours.
On March 18, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss the status of
the March 3 Hancock Park Proposal and to consider Hancock Park's request for
reimbursement of certain expenses.
On March 18, the Company's Board held a meeting to consider the
Company's possible acquisition of the Potential Transaction Party. Mr. Powell
summarized the various discussions with the Potential Transaction Party that had
commenced in May 1998 when representatives of the Company, including Messrs.
Powell, Kaczynski and Tesney, had contacted a number of direct competitors and
other furniture manufacturers regarding WinsLoew's interest in exploring
potential acquisitions, combinations or other transactions. Mr. Powell stated
that these initial discussions had not resulted in a desire to pursue a possible
transaction, but that discussions had resumed subsequent to Mr. Powell's initial
Merger proposal in January 1999. From early February through mid-March 1999,
representatives of WinsLoew and Trivest met with representatives of the
Potential Transaction Party regarding a possible business combination, which
culminated in a general understanding of terms regarding a business combination.
The members of the Board reviewed background materials pertaining to the
Potential Transaction Party, including a draft 1998 annual report and draft 1999
proxy statement, as well as valuation analyses prepared for the Company by
Trivest . Mr. Powell pointed out that management believed that the combination
with the Potential Transaction Party would be an attractive investment for
WinsLoew and that affiliates of Trivest might seek a transaction should WinsLoew
determine not to pursue the opportunity. In response to questions from the
Special Committee, Mr. Powell also stated that management and Trivest believed
that financing would be readily available to WinsLoew to effect a transaction.
The members of the Board also discussed that the practical effect of a decision
to proceed with a combination with the Potential Transaction Party would be for
the Company to remain publicly held for a long enough period of time to achieve
the expected financial and operating synergies. Mr. Powell then asked the
Special Committee to consider the proposed combination of the Company with the
Potential Transaction Party and make a recommendation as to whether or not
WinsLoew should further pursue a combination with the Potential Transaction
Party. After deliberation, the Special Committee determined to proceed with the
Merger or a comparable sale transaction and not to pursue a business combination
with the Potential Transaction Party at that time.
Mr. Smith then reported to the Board on the status of Hancock Park's
financing and due diligence investigation. Mr. Smith also reported on
PricewaterhouseCoopers' work related to the relative experience and financing
capabilities of the Purchaser and Hancock Park. The members of the Board
unanimously determined to adjourn the meeting until after the Special
Committee's receipt of PricewaterhouseCoopers' conclusions.
On March 19, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and PricewaterhouseCoopers to discuss the
advice to be provided by PricewaterhouseCoopers to the Special Committee. The
Special Committee also discussed facilitating management's providing due
diligence information to Hancock Park and the Special Committee's advisors,
including PricewaterhouseCoopers.
On March 16, at Hancock Park's request, the Special Committee had
directed Balch & Bingham and Mann Armistead to commence discussions with
representatives of Hancock Park regarding an agreement to reimburse Hancock
Park's expenses. From March 16 through March 23, Balch & Bingham negotiated such
an agreement with representatives of Hancock Park, including Hancock Park's
request that it be reimbursed for up to $300,000 of its expenses. These
negotiations resulted in a proposed agreement to reimburse up to $100,000 of
Hancock Park's expenses in the event that (i) the Company received a written or
oral fairness opinion that Hancock Park had made an offer that constituted a
Superior Proposal under the Initial Merger Agreement, (ii) the Company entered
into an agreement with another party for the acquisition of the Company at a per
share price higher than $30.00 or (iii) the Company determined not to pursue a
sale of the Company.
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On March 24, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss the
negotiations with Hancock Park. The Special Committee authorized its Chairman to
enter into the foregoing agreement for reimbursement up to $100,000. Hancock
Park declined to execute such a reimbursement agreement. At the same meeting,
the Special Committee directed Balch & Bingham to continue discussions and
negotiations with Hancock Park for a possible merger transaction since the
members of the Special Committee expected that within a few days Hancock Park's
financing would be sufficiently developed to enable the Special Committee to
reach a decision regarding whether its $32.50 per share offer constituted a
Superior Proposal (as defined in "SUMMARY--Conditions to the Merger, Termination
and Expenses") under the Initial Merger Agreement.
During the period from March 5 through March 29, representatives of the
Purchaser, including the Trivest Directors and members of the Management Group,
continued to negotiate their financing arrangements with BankBoston and Bear
Stearns. These efforts resulted in the execution and delivery on March 29 of (i)
a letter from Bear Stearns to the Purchaser stating that Bear Stearns was highly
confident that, as of March 29 and subject to certain conditions, it could
arrange for the sale of up to $130.0 million aggregate principal amount of
senior subordinated notes of WinsLoew in connection with the Merger, (ii) a
commitment letter from BankBoston for a $145.0 million senior secured credit
facility to provide a portion of the Cash Merger Consideration and provide
WinsLoew with working capital and an acquisition revolver after the Merger, and
(iii) a commitment letter from affiliates of the Trivest Partnerships for up to
$75.0 million of equity financing. The Bear Stearns highly confident letter does
not constitute a commitment or undertaking by Bear Stearns to place or purchase
the senior subordinated notes and did not ensure the successful placement or
completion of the offering of such notes; moreover, the Bear Stearns letter set
forth only its expectation as of March 29, 1999 with respect to its ability to
arrange a sale of the notes in connection with the Merger. See "THE
MERGER--Financing."
The Alabama Litigation
On March 25, 1999, the Company and the members of the Board were named
as defendants in a lawsuit filed in the Circuit Court of Jefferson County,
Alabama, styled Craig Smith v. WinsLoew Furniture, Inc., et al (the "Alabama
Litigation"). As of the date of this Proxy Statement, the plaintiff has not yet
effected service of process on certain of the Company's directors in this
action. The lawsuit purports to be brought as a class action on behalf of all of
the Company's shareholders except the defendants and was filed in connection
with the Initial Merger Agreement. As of the date of this Proxy Statement, the
complaint filed in the lawsuit has not been amended to reflect the increase in
the per share merger consideration from $30.00 to $34.75 subsequent to the
filing of the complaint, as discussed below under "--The Second Amended Merger
Agreement."
The principal substantive allegations set forth in the complaint are
that (i) the individual defendants breached fiduciary duties of care and loyalty
owed by them as directors to the shareholder plaintiffs, (ii) Mr. Powell and
other members of the Company's "management group" breached fiduciary duties owed
by them as allegedly controlling shareholders to the Company's other
shareholders by, among other things, attempting to acquire 100% equity ownership
of the Company for an allegedly "grossly inadequate price" at the alleged
expense of the Company's other shareholders, (iii) the Company's announcement of
the initial $30.00 per share bid by the Purchaser failed to disclose improving
growth prospects, (iv) by virtue of the equity holdings of the "management
group" and their alleged "overwhelming control" of the Board, third parties were
practically precluded from making competing bids, and (v) the initial per share
merger consideration of $30.00 per share is unconscionable, unfair and grossly
inadequate and the terms of the Initial Merger Agreement constituted an unfair
and illegal business practice upon the Company's minority shareholders. No other
per share amount is specified in the complaint.
The relief sought by the plaintiff is that (i) the court declare the
lawsuit to be a class action and certify the plaintiff as class representative
and his counsel as class counsel, (ii) the Merger be enjoined or, if not
enjoined, that the plaintiffs be granted rescission and rescissionary damages,
(iii) the plaintiff and the alleged class be awarded damages, (iv) the plaintiff
be awarded costs and disbursements of bringing the
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lawsuit, together with fees and expenses of the plaintiff's counsel and experts,
and (v) the plaintiff and the alleged class be granted such other relief as the
court shall deem just and proper. The complaint does not specify the amount of
any damages sought.
The Company has forwarded a claim with respect to this matter to its
directors' and officers' insurance carrier and, with the approval of such
carrier, has retained legal counsel to represent it and the members of the
Board. The Company believes that the claims set forth in the lawsuit are without
merit and intends to vigorously defend this lawsuit.
The March 30 Trivest Proposal
On the morning of March 30, the Purchaser delivered to the Special
Committee a letter stating that it was prepared to increase the purchase price
by 10% from $30.00 per share to $33.00 per share (the "March 30 Trivest
Proposal"). Such proposal was accompanied by copies of the Trivest equity
commitment letter, the BankBoston senior secured financing commitment letter and
the Bear Stearns highly confident letter with respect to the senior subordinated
notes, as well as a proposed amendment to the Initial Merger Agreement. The
proposed amendment provided for the following: (i) an increase in the per share
purchase price from $30.00 to $33.00; (ii) the deletion of the Purchaser's
financing condition; (iii) a revised non-solicitation provision prohibiting the
Special Committee's ongoing solicitations and negotiations with potential
acquirors unless the Board determined that it had a fiduciary obligation to do
so and that a Superior Proposal had been received; (iv) an increase in the
termination fee from $6.0 million to $10.0 million and an increase in the
maximum expense reimbursement from $1.2 million to $1.5 million; (v) the
Purchaser's right to terminate the Initial Merger Agreement and receive expense
reimbursement up to $1.5 million and liquidated damages of $1.0 million if the
Proxy Statement were not filed by April 12 (unless the delay resulted from the
Purchaser's non-cooperation or the unavailability of required financial
statements); (vi) the delivery of Mann Armistead's written fairness opinion by
April 7; and (vii) the extension to July 15 of the date after which either the
Company or the Purchaser could terminate the Initial Merger Agreement without
payment of the termination fee and expense reimbursement provided for therein.
The March 30 Trivest Proposal stated that it expired at 6:00 p.m. that evening.
On the morning of March 30, in connection with the March 3 Hancock Park
Proposal of $32.50 per share, Hancock Park delivered to the Special Committee
(i) a letter from Desai Capital Management Incorporated ("Desai") to Mann
Armistead dated March 30, 1999 stating their preparedness to provide the
required equity capital for Hancock Park's acquisition of the Company and (ii) a
letter from BT Alex. Brown Incorporated dated March 29, 1999 stating that BT
Alex. Brown Incorporated was very interested in pursuing a transaction in which
BT Commercial Corporation would underwrite, participate in and act as agent for
a senior secured credit facility and in which BT Alex. Brown Incorporated would
place senior subordinated debt and a preferred equity investment. Both letters
were subject to the completion of due diligence. Representatives of Hancock Park
discussed with representatives of Mann Armistead that Hancock Park would be
willing to increase its price to $33.50 per share but only if the Company agreed
to pay an inducement fee in the event that a merger agreement with Hancock Park
was not entered into.
In the early afternoon of March 30, the Special Committee held a
telephonic meeting with representatives of Balch & Bingham, Mann Armistead and
PricewaterhouseCoopers. Representatives of Mann Armistead reported on the status
of discussions with representatives of Hancock Park and the letters received
from the proposed financing sources of each of the Purchaser and Hancock Park.
Representatives of Balch & Bingham described the status of negotiations with
representatives of Hancock Park with respect to a merger agreement.
Representatives of Balch & Bingham reported that they had completed negotiating
such an agreement, except for the termination fee and expense reimbursement
related to the shareholder vote. With the assistance of PricewaterhouseCoopers,
the Special Committee discussed the March 30 Trivest Proposal of $33.00 per
share and the March 3 Hancock Park Proposal of $32.50 per share and compared
them on the basis of price and the ability to finance and consummate the
proposed transactions. PricewaterhouseCoopers advised the Special Committee that
based upon its investigation of the Purchaser and Hancock Park and its review of
their revised offers and financing commitments, the Purchaser had more committed
financing than Hancock Park. The Special Committee
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concluded that the March 30 Trivest Proposal of $33.00 per share was more
favorable than Hancock Park's proposal on the basis of its higher per share
purchase price and more committed financing than Hancock Park. The Special
Committee determined to negotiate with the Purchaser regarding the termination
fee and expense reimbursement provisions of the proposed amendment to the
Initial Merger Agreement. Members of the Special Committee also recommended to
the Board that it authorize the Company to enter into an agreement to pay
Hancock Park a fee if it submitted an offer higher than $33.00 per share in the
event such offer did not result in a transaction with Hancock Park.
The First Amended Merger Agreement
On the afternoon of March 30, the Board reconvened its March 18 meeting
with all directors participating. As the first order of business, Mr. Smith
provided an update with respect to the Special Committee's activities. Mr. Smith
acknowledged receipt of Mr. Powell's letter dated March 29 setting forth the
March 30 Trivest Proposal increasing the purchase price from $30.00 per share to
$33.00 per share. He went on to express the Special Committee's desire that with
the exception of the increase in the per share purchase price and the removal of
the Purchaser's financing condition, the terms and conditions of the Initial
Merger Agreement remain unchanged. As the next order of business, Mr. Tesney
made a presentation to the Board with respect to management's ongoing due
diligence investigation of the Potential Transaction Party. The Chairman of the
Board also confirmed that the Board would not be asked to make a final decision
with respect to the proposed business combination with the Potential Transaction
Party until the completion of such due diligence investigation.
Next, the members of the Board asked the Special Committee for its
recommendation regarding the Purchaser's proposed amendment to the Initial
Merger Agreement. The Board meeting adjourned while the members of the Special
Committee further considered the proposed amendment. The members of the Special
Committee considered the reasonableness of providing for a higher termination
fee in exchange for a 10% increase in the per share purchase price. In addition,
the members of the Special Committee considered the Purchaser's expressed
concern that it not be used simply to elicit higher offers from other bidders
and its desire for increased certainty that the Company would consummate the
Merger. In addition, in the earlier meetings, Mann Armistead had rendered its
oral advice, later confirmed in its written opinion, subject to certain
assumptions made, matters considered and limits on the review undertaken in
connection with such opinion, that the $33.00 per share purchase price was fair
from a financial point of view to the Public Shareholders. Mann Armistead
expressly advised the Special Committee that its favorable opinion on the
fairness of the Purchaser's $33.00 per share offer did not imply a belief that
such price was the highest price available. Following its deliberations, the
Special Committee determined to recommend that the full Board approve the
proposed amendment, subject to the deletion of the provision permitting the
Purchaser to terminate the Initial Merger Agreement and receive expense
reimbursement up to $1.5 million and liquidated damages of $1.0 million if the
Proxy Statement were not filed by April 12. The Special Committee unanimously
concluded that the Initial Merger Agreement, as so amended (the "First Amended
Merger Agreement") (including the $33.00 per share purchase price to be paid to
the Public Shareholders), was substantively and procedurally fair to, and in the
best interests of, the Public Shareholders and determined to recommend approval
of the First Amended Merger Agreement to the full Board.
Immediately thereafter, the Board meeting reconvened. After the Special
Committee delivered its recommendation regarding the First Amended Merger
Agreement, all ten members of the Board unanimously approved and adopted the
First Amended Merger Agreement, recommended it to the shareholders and
determined that the Merger provided for therein was substantively and
procedurally fair to, and in the best interests of, the Public Shareholders. The
Board determined not to consider a fee arrangement with Hancock Park at that
time. Prior to the opening of the market on March 31, the parties executed the
First Amended Merger Agreement and issued a press release announcing its
execution.
On March 31, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead. Balch & Bingham
summarized the non-solicitation provisions of the First Amended
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Merger Agreement, and the Special Committee directed Balch & Bingham and Mann
Armistead to cease all discussions and negotiations with Hancock Park.
The April 8 Hancock Park Proposal
On April 9, the Special Committee received from Hancock Park a written,
non-binding offer, dated April 8, to acquire the Company for a per share
purchase price of $33.50 (or $34.00 if the termination fee payable to the
Purchaser under the First Amended Merger Agreement was reduced from $10.0
million to $6.0 million) (the "April 8 Hancock Park Proposal"). The proposal
stated that it would expire on April 19, which date was subsequently extended as
discussed below. In addition, the proposal was accompanied by (i) a letter from
BT Alex. Brown Incorporated that, as of April 7, 1999 and subject to certain
conditions, BT Alex. Brown Incorporated was highly confident that it could
arrange for the sale of up to $150.0 million aggregate principal amount of
senior subordinated notes in connection with the proposed transaction, (ii) a
commitment letter dated April 7, 1999 from BT Commercial Corporation for a
senior secured credit facility of up to $100.0 million, subject to the
completion of due diligence, (iii) a letter from BT Alex. Brown Incorporated
that, as of April 7, 1999 and subject to certain conditions, it was willing to
use its best efforts to act as underwriter or placement agent for the sale or
placement of up to $20.0 million of pay-in-kind preferred stock, and (iv) a
commitment letter dated April 8, 1999 from Private Equity Investors III, L.P., a
private investment partnership managed by Desai, for up to $70.7 million of
common equity financing. The BT Alex. Brown Incorporated highly confident letter
did not constitute a commitment to place or purchase senior subordinated notes
or ensure the successful placement or completion of the offering of such notes;
moreover, such letter set forth only the expectation of BT Alex. Brown
Incorporated as of April 7, 1999 with respect to its ability to arrange a sale
of such notes. The proposed financing for the April 8 Hancock Park Proposal
contemplated, and was contingent upon, the simultaneous refinancing of
indebtedness of Brown Jordan International, Inc., ("Brown Jordan"), an affiliate
of Hancock Park. The proposal also included a revised draft of the form of
merger agreement previously negotiated with Hancock Park providing for, among
other things, an increase in the purchase price as described above, the deletion
of Hancock Park's financing condition and the addition of a provision that the
$6.0 million termination fee would be payable to Hancock Park in the event the
proposed transaction was not approved by WinsLoew's shareholders. Accompanying
the April 8 Hancock Park Proposal was a letter addressed to the Special
Committee from Paul Hastings, Janofsky & Walker LLP ("Paul Hastings"), counsel
to Hancock Park, alleging that the events leading up to the execution of the
First Amended Merger Agreement had unfairly favored the Purchaser and asserting
that Hancock Park had advised Mann Armistead on March 30 prior to the execution
of the First Amended Merger Agreement that it was willing to offer a higher
price than $33.00 per share (the price contained in the First Amended Merger
Agreement) if it received a $2 million fee in the event such higher offer was
not ultimately accepted. The letter also asserted that Hancock Park was entitled
to reimbursement for its expenses.
On April 12, the Board held a meeting with all directors participating
to consider the April 8 Hancock Park Proposal. The Board authorized Mann
Armistead to advise the Board whether or not the April 8 Hancock Park Proposal
constituted a Superior Proposal under the First Amended Merger Agreement.
Pursuant to the First Amended Merger Agreement, the Company was not permitted to
discuss or negotiate with any third party regarding an Acquisition Proposal (as
defined under "SUMMARY--Conditions to the Merger, Termination and Expenses")
unless the Board determined that (a) such Acquisition Proposal was a Superior
Proposal to the transaction contemplated by the First Amended Merger Agreement
Proposal and (b) such discussions or negotiations were necessary in order to
comply with its fiduciary duties under applicable law. Moreover, also pursuant
to the terms of the First Amended Merger Agreement, the Company could not enter
into an agreement with respect to a Superior Proposal for five business days
after a "Superior Proposal" determination had been made. At the same meeting,
the Board authorized the engagement of the law firm of Paul, Weiss, Rifkind,
Wharton & Garrison, New York, New York ("Paul Weiss"), to assist the Board in
evaluating its fiduciary duties in connection with the April 8 Hancock Park
Proposal. Also during the April 12 meeting, Mr. Tesney provided an update of
management's ongoing due diligence investigation of the Potential Transaction
Party.
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On April 16, Mann Armistead concluded that it required additional
information relating to the April 8 Hancock Park Proposal in order to evaluate
whether it constituted a Superior Proposal, including matters relating to the
financial condition of Brown Jordan and the structure of, and marketing plans
for, the proposed financing. On April 16, Paul Weiss orally advised Paul
Hastings of such information request, which Paul Weiss confirmed in writing on
April 17. On April 16, representatives of Hancock Park advised representatives
of the Special Committee that Hancock Park had agreed to extend the expiration
date of the April 8 Hancock Park Proposal from April 19 to April 23 in order to
provide the Board sufficient time to consider such proposal and that, if the
April 8 Hancock Park Proposal were determined to be a Superior Proposal under
the First Amended Merger Agreement, Hancock Park would further extend the
expiration date to April 30 in order to accommodate the five business day period
required by the First Amended Merger Agreement before the Company could enter
into a transaction agreement with Hancock Park.
On April 19, the Board held a telephonic meeting with representatives
of Paul Weiss and Balch & Bingham at which the directors discussed matters
relating to the April 8 Hancock Park Proposal. In view of the conflicts of
certain of the directors, the Board unanimously authorized the Special
Committee, together with its financial and legal advisors, to consider whether
the April 8 Hancock Park Proposal constituted a Superior Proposal under the
First Amended Merger Agreement and to make recommendations to the full Board as
to such determination, as well as to other matters relating to the April 8
Hancock Park Proposal. Immediately thereafter, the Special Committee met with
its financial and legal advisors to discuss its evaluation of the proposal.
The April 21 Hancock Park Proposal
On April 21, Hancock Park delivered to the Special Committee a written,
non-binding offer to acquire the Company for a per share purchase price $.50
higher than the price contemplated by the April 8 Hancock Park Proposal, or
$34.00 ($34.50 if the termination fee payable to the Purchaser under the Initial
Merger Agreement was reduced from $10.0 million to $6.0 million) (the "April 21
Hancock Park Proposal"). Such proposal stated that it would expire April 23 but
would be extended to April 30 in order to permit the lapse of the notice period
required by the First Amended Merger Agreement if the Board determined that it
constituted a Superior Proposal under the First Amended Merger Agreement. The
proposal was accompanied by copies of revised versions of the letters previously
provided by BT Alex. Brown Incorporated, BT Commercial Corporation and Private
Equity Investors III, L.P. relating to the financing of the proposed transaction
on a stand-alone basis. In addition, the revised commitment letter from Private
Equity Investors III, L.P. included a stand-by commitment for up to $10.0
million of the $20.0 million pay-in-kind preferred stock to be sold as part of
the proposed financing. The April 21 Hancock Park Proposal included the
additional information that had been requested by Mann Armistead, other than
information relating to Brown Jordan, since the revised proposal contemplated
that the transaction would be financed on a stand-alone basis, rather than in
conjunction with the refinancing of Brown Jordan.
On April 22, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham, Paul Weiss, Mann Armistead and
PricewaterhouseCoopers present. After reviewing the terms of the April 21
Hancock Park Proposal and the proposed financing thereof, representatives of
Mann Armistead advised the Special Committee of their opinions that the April 21
Hancock Park Proposal constituted a Superior Proposal under the First Amended
Merger Agreement. Paul Weiss then advised the Special Committee as to its
fiduciary duties under applicable law in light of the financial advisors'
conclusion. The Special Committee then unanimously determined that the April 21
Hancock Park Proposal was a Superior Proposal and voted to recommend to the full
Board that its representatives commence discussions and negotiations with
Hancock Park. The Special Committee then reviewed the non-financial terms of the
April 21 Hancock Park Proposal with its advisors. At the meeting, several
directors expressed concern about the fact that the entity that would purchase
the Company under the proposal appeared to be a newly-formed corporation that
would have no assets to satisfy liabilities it may have to the Company
(including the termination fee and expense reimbursement payable to the
Purchaser under the First Amended Merger Agreement upon the execution of an
acquisition agreement with a third party) in the event that such newly-formed
corporation was unable to obtain financing and (because of the absence of a
financing condition)
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thereby breached its agreement to consummate the merger. The Special Committee
noted that the Purchaser was also a newly-formed corporation with no assets to
satisfy liabilities it may have to the Company in the event of such a breach,
although in the case of the Purchaser, such liabilities would not include
payment of the termination fee since there was no existing agreement with
Hancock Park to pay any such fee in the event of a transaction with another
party. The Special Committee instructed its representatives to seek to address
this issue in any future negotiations with both Hancock Park and the Purchaser.
Immediately following the April 22 Special Committee Meeting, a meeting
of the full Board was convened. At the meeting, the Board unanimously voted to
accept the Special Committee's recommendation.
Promptly following the April 22 Board Meeting, Paul Weiss advised Paul
Hastings of the Board's "Superior Proposal" determination and discussed matters
relating to the terms of the transaction contemplated by the April 21 Hancock
Park Proposal. Paul Weiss reviewed a number of issues raised by the proposed
merger agreement that had accompanied the earlier April 8 Hancock Park Proposal.
In particular, Paul Weiss suggested that Hancock Park provide security in the
form of a letter of credit or escrow deposit in favor of the Company to secure
Hancock Park's obligations to consummate the proposed merger and to compensate
the Company for its expenses in the event Hancock Park breached its obligation
to consummate that merger. Paul Weiss said that the Special Committee would be
open to alternative suggestions to address its concerns on this issue.
On April 22, the Company sent to the Purchaser by overnight mail the
notice that it had received a Superior Proposal as required by the First Amended
Merger Agreement.
On April 23, representatives of the Special Committee and
representatives of Hancock Park negotiated the terms of a proposed merger
agreement, but did not reach agreement on several issues, including Hancock
Park's request for a termination fee of $6.0 million in the event Hancock Park's
proposed merger was not approved by the Company's shareholders and the Special
Committee's request that Hancock Park post security to compensate the Company in
the event it breached its contractual obligation to consummate the merger.
On April 26, the Special Committee held a telephonic meeting with
representatives of Paul Weiss, Balch & Bingham, Mann Armistead and
PricewaterhouseCoopers present. Representatives of Mann Armistead and
PricewaterhouseCoopers reported to the Special Committee on their recent
discussions with Hancock Park and its sources of debt and equity financing
regarding the certainty of the financing for the April 21 Hancock Park Proposal.
Paul Weiss and Balch & Bingham then updated the Special Committee on
negotiations with Paul Hastings regarding the terms of the proposed Hancock Park
merger agreement. The Special Committee authorized its financial and legal
advisors to engage in further negotiations and discussions with both the
Purchaser and Hancock Park to seek more favorable offers from each party, and to
continue to investigate the certainty of their respective financing proposals.
Between April 26 and April 28, representatives of the Special Committee
continued to negotiate with representatives of both the Purchaser and Hancock
Park with a view towards improving the price and terms of their respective
proposed transactions. On April 28, the Purchaser informed representatives of
the Special Committee that it intended to submit a revised acquisition proposal
on April 30, the last day of the five business day period under the First
Amended Merger Agreement before the Company could enter into a transaction
agreement with Hancock Park.
On April 28, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham, Paul Weiss, Mann Armistead and
PricewaterhouseCoopers present. Mann Armistead and PricewaterhouseCoopers
reported to the Special Committee on their additional discussions with the
financing sources of both Hancock Park and the Purchaser. Mann Armistead and
PricewaterhouseCoopers each stated that, in their view, the Purchaser's
financing and Hancock Park's financing were substantially similar in terms of
certainty and that both financing proposals were equally likely to be
consummated. The
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<PAGE> 36
Special Committee then discussed matters relating to the conduct of the sale
process following the Special Committee's receipt of an improved offer from the
Purchaser, which was anticipated on April 30.
In accordance with the Special Committee's instructions, on the evening
of April 28, representatives of the Special Committee informed representatives
of Hancock Park that the Special Committee expected to receive a revised offer
from the Purchaser on April 30. The Special Committee's representatives asked
that representatives of Hancock Park be available on Friday, April 30 and at all
times over the ensuing weekend to respond to the Purchaser's revised offer
promptly and to participate in any resulting negotiations or further improved
offer so that WinsLoew could conclude the sale process and enter into a new
merger agreement with the party making the most favorable offer by the end of
the day on Monday, May 3. Representatives of Hancock Park did not object to the
procedure for the continuation and conclusion of negotiations as outlined by the
Special Committee representatives and agreed that they would be available over
the weekend and would act as quickly as practicable. The Special Committee's
representatives reiterated the Special Committee's request that Hancock Park
post security to secure Hancock Park's obligation to consummate the transaction.
The requested security, in the aggregate amount of $14.5 million, consisted of
$3.0 million for transaction expenses expected to be incurred by the Company,
the $10.0 million termination fee, and $1.5 million expense reimbursement
payable to the Purchaser under the First Amended Merger Agreement upon execution
of a definitive agreement with Hancock Park. On the evening of April 28, Paul
Hastings confirmed that Hancock Park had agreed to extend the April 21 Hancock
Park Proposal until May 3.
Also on April 28, representatives of the Special Committee reviewed the
timing of the conclusion of the sale process with representatives of the
Purchaser, who agreed that they would be available over the weekend to respond
promptly to any additional offers submitted by Hancock Park.
On April 29, Paul Weiss sent to Paul Hastings proposed changes to
Hancock Park's draft merger agreement providing for, among other things, (a) the
posting of a $14.5 million letter of credit by Hancock Park to secure its
obligation to consummate the transaction and (b) the deletion of a condition to
Hancock Park's obligation to close in the event of certain pending litigation.
The April 30 Trivest Proposal
On April 30, the Purchaser delivered to the Special Committee a
written, non-binding offer to increase the purchase price under the First
Amended Merger Agreement from $33.00 to $34.00 per share (the "April 30 Trivest
Proposal"). The proposal was accompanied by revised versions of the Trivest
equity commitment letter, the BankBoston senior secured financing commitment
letter and the Bear Stearns "highly confident letter," as well as a proposed
amendment to the First Amended Merger Agreement. The proposed amendment provided
for an increase in the per share purchase price from $33.00 to $34.00 and a $3.0
million escrow deposit by the Purchaser, to be paid to the Company in the event
that the Company terminated the Merger Agreement on the basis of certain
breaches by the Purchaser. The April 30 Trivest Proposal stated that it would
expire on May 3.
Promptly after receiving the April 30 Trivest Proposal, representatives
of the Special Committee advised representatives of Hancock Park of such
proposal and, in subsequent telephone conversations, the material terms thereof,
including the $34.00 per share purchase price and Purchaser's agreement to post
security in the amount of $3.0 million. In response to questions from the
Hancock Park representatives, representatives of the Special Committee explained
that they had requested the Purchaser to post security for a breach of its
obligation to consummate the Merger in the amount of $3.0 million rather than
the $14.5 million that had been requested from Hancock Park because, by entering
into an amended agreement with the Purchaser, the Company would not incur the
obligation to pay any termination fees or expenses (whereas, by entering into an
agreement with Hancock Park, the Company would incur an immediate obligation to
the Purchaser of $11.5 million, as a result of the termination fee and expense
reimbursement provision contained in the First Amended Merger Agreement). Later
on April 30, Paul Hastings informed Paul Weiss that Hancock Park was considering
its response to the April 30 Trivest Proposal, but with regard
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to open points on the proposed Hancock Park merger agreement, Hancock Park (i)
would only require reimbursement of its expenses, rather than a termination fee
of $6.0 million that it had previously requested, in the event shareholder
approval was not obtained and the Existing Trivest Shareholders and the Trivest
Directors abstained or voted against the proposed merger, (ii) was not inclined
to accept the Special Committee's proposed deletion of the pending litigation
closing condition, but that it might be willing to accept a provision that
excepted the pending Alabama Litigation (which they said had only recently been
disclosed to them) after conducting further due diligence about such litigation
(See "--Alabama Litigation" above), and (iii) was not inclined to agree to post
any security for Hancock Park's obligations to consummate the proposed
transaction.
On April 30, Paul Weiss provided representatives of the Purchaser with
a draft escrow agreement (the "Escrow Agreement") and proposed changes to the
First Amended Merger Agreement relating to the escrow agreement and a deletion
of the closing condition relating to pending litigation.
On April 30, the Special Committee held a telephonic meeting. At that
meeting, the Special Committee's legal advisors advised it of the terms of the
April 30 Trivest Proposal. The Special Committee then discussed matters relating
to the Purchaser's and Hancock Park's proposals and scheduled a meeting for the
evening of May 2.
On May 1, representatives of the Special Committee contacted
representatives of Hancock Park several times regarding the status of Hancock
Park's consideration of an improved offer. Hancock Park's representatives stated
that they were actively considering making a new proposal but would not be in a
position to do so until May 2.
On May 1 and May 2, representatives of the Special Committee and
representatives of the Purchaser continued their negotiations of amendments to
the First Amended Merger Agreement. The Purchaser agreed to the Special
Committee's proposed changes relating to the Escrow Agreement and to the
deletion of the "pending litigation" closing condition.
The May 2 Hancock Park Proposal and the May 2 Trivest Proposal
On the afternoon of May 2, representatives of Hancock Park informed
representatives of the Special Committee that Hancock Park had increased its
offer to $34.75 per share (or $35.25 per share in the event that the $10.0
million termination fee payable to the Purchaser under the First Amended Merger
Agreement was reduced to $6.0 million) (the "May 2 Hancock Park Proposal"). The
May 2 Hancock Park Proposal included the following principal additional terms:
(a) if such proposal was not approved by the Company's shareholders, and the
Existing Trivest Shareholders and the Trivest Directors voted against or
abstained from voting thereon, Hancock Park would receive up to $1.2 million of
expense reimbursement from the Company and (b) Hancock Park's obligation to
close would continue to be subject to the absence of certain pending litigation,
but Hancock Park would consider excluding from such condition the Alabama
Litigation following satisfactory completion of due diligence regarding the
lawsuit. Representatives of Hancock Park stated that Hancock Park had declined
the Special Committee's request to post security for its obligation to close in
the amount requested, or in any lesser amount. The May 2 Hancock Park Proposal
was to expire on May 3 and was extended as discussed below.
After their discussions with representatives of Hancock Park,
representatives of the Special Committee promptly advised the Purchaser of the
May 2 Hancock Park Proposal, and the Purchaser increased its offer to $34.75 per
share (the "May 2 Trivest Proposal"). Representatives of the Special Committee
promptly informed representatives of Hancock Park of the May 2 Trivest Proposal.
Early on the evening of May 2, Paul Hastings orally informed Paul Weiss that the
May 2 Hancock Park Proposal was Hancock Park's best offer based on its current
state of knowledge about the Company, its management and prospects. Paul
Hastings advised that if Hancock Park had the opportunity to conduct additional
due
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diligence, including access to management and further review of financial
information, it might possibly raise its bid, but that there could be no
assurances it would do so.
On the evening of May 2, the Special Committee held a telephonic
meeting with representatives of Balch & Bingham, Paul Weiss, Mann Armistead and
PricewaterhouseCoopers present. The Special Committee's advisors advised it of
the terms of the May 2 Hancock Park Proposal and the May 2 Trivest Proposal. The
Special Committee discussed Hancock Park's comments regarding additional due
diligence, and confirmed that Hancock Park had not been denied access to
management or information regarding the Company after the April 22 "Superior
Proposal" determination. The Special Committee unanimously determined to defer
consideration of the two offers until the following day, May 3, which the
parties previously had been advised would be the date on which final offers
would be considered, in order to enable both parties additional time to consider
improving their offers. The Special Committee discussed the fact that the May 2
Hancock Park Proposal contained an alternative price of $35.25 per share in the
event the termination fee payable to the Purchaser pursuant to the First Amended
Merger Agreement were reduced from $10 million to $6 million, and instructed its
representatives to seek a reduction of such fee from the Purchaser.
Representatives of the Special Committee contacted representatives of Hancock
Park to advise them of the Special Committee's determinations. The Special
Committee's representatives stated that the Purchaser's agreement to post
security and to the deletion of the pending litigation condition were
significant to the Committee, and urged that Hancock Park reconsider its
positions on these issues.
On May 3, the Purchaser confirmed the May 2 Trivest Proposal in
writing, stating that it would expire on May 4. The proposal was accompanied by
a revised version of the Trivest equity commitment letter increasing Trivest's
common equity commitment from $75.0 million to $78.0 million to reflect the
increased purchase price.
In addition, on May 3, representatives of the Special Committee
requested the Purchaser to agree to reduce the termination fee from $10.0
million to $6.0 million, or, in the alternative, to increase its offer to pay
$35.25 per share. The Purchaser declined to do so.
In a letter dated May 3, Paul Hastings confirmed Hancock Park's
interest in meeting with management and reviewing additional financial data, and
stated that Hancock Park was prepared to keep its current proposal open until
May 14 if such additional due diligence investigations proceeded. The letter
stated that Hancock Park had received oral commitments from its financing
sources to finance up to an additional $.50 per share upon satisfactory
completion of additional due diligence. The letter also asserted that Hancock
Park had not "received an adequate explanation" of the Special Committee's
decision to agree to the termination fees payable to the Purchaser under the
Initial Merger Agreement and the First Amended Merger Agreement. The letter
reasserted Hancock Park's earlier claim for reimbursement of expenses.
In addition, on May 3, the Special Committee held a telephonic meeting
with representatives of Balch & Bingham, Paul Weiss, Mann Armistead and
PricewaterhouseCoopers present. The Special Committee and its advisors discussed
and compared the terms and conditions of the May 2 Trivest Proposal and the May
2 Hancock Park Proposal. The Special Committee determined that because the May 2
Trivest Proposal did not expire until May 4, it would again defer taking action
on the two proposals in order to enable Hancock Park to conduct additional due
diligence prior to the expiration of the May 2 Trivest Proposal. The Special
Committee also instructed its representatives to seek a further extension of the
May 2 Trivest Proposal to accommodate additional due diligence by Hancock Park.
Later that evening, at the request of Hancock Park, representatives of the
Special Committee arranged for four senior members of the Company's management
to meet with representatives of Hancock Park at Hancock Park's offices in New
York City the following day and for the Company to provide certain financial
information that had been requested by Hancock Park. Paul Weiss also contacted
the Purchaser and asked the Purchaser to extend the May 2 Trivest Proposal. The
Purchaser declined to extend such proposal beyond May 4.
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On the morning of May 4, the Purchaser, the Company and the escrow
agent executed and delivered the Escrow Agreement, and the Purchaser funded the
$3.0 million escrow, contingent upon the execution of an amended First Amended
Merger Agreement.
On May 4, representatives of Hancock Park met with members of
WinsLoew's senior management in New York City and reviewed additional financial
information. Following such meetings, representatives of Hancock Park advised
representatives of the Special Committee that while the meetings had been
productive, Hancock Park was not in a position to submit an improved proposal,
and that it required an additional week of due diligence in order to determine
if a higher offer would be feasible. Hancock Park also confirmed that it
continued to be unwilling to provide a letter of credit or an escrow deposit in
any amount as security for the Company's expenses.
The Second Amended Merger Agreement
Early on the evening of May 4, the Special Committee held a meeting
with representatives of Balch & Bingham, Paul Weiss, Mann Armistead and
PricewaterhouseCoopers present to consider the May 2 Hancock Park Proposal and
the May 2 Trivest Proposal. Representatives of Mann Armistead made a
presentation reviewing the analyses they had performed to produce a range of
implied values for the Company's Common Stock, including the assumptions made,
the facts upon which these analyses were based, the methodologies utilized and
the relative limits of their analyses. See "--Opinion of the Financial Advisor."
Mann Armistead concluded its presentation by rendering its oral opinion,
subsequently confirmed in writing, that based on its analyses, the $34.75 per
share Cash Merger Consideration was fair from a financial point of view to the
Public Shareholders. In addition, representatives of Mann Armistead and
PricewaterhouseCoopers confirmed to the Special Committee that the financing
arrangements for the two proposals were substantially equivalent. The Special
Committee then discussed the terms of the two proposals. During the meeting,
representatives of Hancock Park contacted representatives of the Special
Committee to request that, in the event the Company accepted the May 2 Trivest
Proposal, the amended First Amended Merger Agreement permit Hancock Park to
conduct additional due diligence without the need for a "Superior Proposal"
determination. The Special Committee's representatives made such a request to
the Purchaser, who did not agree to such change. After extensive discussion, and
for the reasons described below under "THE SPECIAL COMMITTEE'S AND THE BOARD'S
RECOMMENDATION," the Special Committee determined that the May 2 Trivest
Proposal was more favorable to the Company's Public Shareholders than the May 2
Hancock Park Proposal. The Special Committee concluded that the Merger
(including the May 2 Trivest Proposal's $34.75 per share Cash Merger
Consideration to be paid to the Public Shareholders) was substantively and
procedurally fair to, and in the best interests of, the Public Shareholders and
determined to recommend the amended First Amended Merger Agreement incorporating
the changes previously agreed to (the "Second Amended Merger Agreement" or the
"Merger Agreement") to the full Board. All members of the Special Committee
voted in favor of such recommendation, except Mr. Smith, who was absent from the
meeting.
The Second Amended Merger Agreement incorporated the following changes
from the First Amended Merger Agreement: (i) an increase in the per share
purchase price from $33.00 to $34.75; (ii) a $3.0 million escrow deposit to be
paid to the Company if the Merger Agreement were terminated on the basis of the
Purchaser's material breach of representations or material covenants; (iii) a
deletion of the closing condition relating to pending litigation; (iv) the
extension to August 31 of the date after which either the Company or the
Purchaser could terminate the Merger Agreement; and (v) permitting the Company
to terminate the Merger Agreement in the event the Purchaser breaches its
covenant to pay the Cash Merger Consideration to the Disbursing Agent not later
than the tenth business day following the satisfaction or waiver of the
conditions to the Purchaser's obligation to consummate the Merger.
On May 4, subsequent to the meeting of the Special Committee, the full
Board met to consider the Special Committee's recommendation, the approval and
adoption of the Second Amended Merger Agreement and the recommendation to the
shareholders of the Company. The Special Committee reported
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on its consideration of the May 2 Hancock Park Proposal and the May 2 Trivest
Proposal, including Mann Armistead's solicitation process, its presentation to
the Special Committee and the views of Mann Armistead and PricewaterhouseCoopers
as to the financing arrangements underlying the two proposals. Mann Armistead
confirmed to the full Board its oral fairness opinion. The Board approved and
adopted the Second Amended Merger Agreement, recommended it to the shareholders
and determined that the Merger (including the $34.75 per share Cash Merger
Consideration to be paid to the Public Shareholders) was substantively and
procedurally fair to, and in the best interests of, the Public Shareholders. The
parties executed the Second Amended Merger Agreement on the evening of May 4,
and issued a press release on May 5 prior to the opening of the market
announcing its execution. All members of the Board voted in favor of such
recommendation, except Messrs. Tesney and Smith, who were absent from the
meeting.
A copy of Mann Armistead's written fairness opinion to the Special
Committee, dated May 4, 1999, together with the accompanying valuation analyses
and other materials has been filed as an exhibit to the Schedule 13E-3 filed
with the Commission in connection with the Merger and is available for
inspection and copying at the principal executive offices of the Company during
its regular business hours by any shareholder or any representative of a
shareholder who has been so designated in writing. A copy of such materials will
be provided by the Company to any shareholder or any representative of a
shareholder who has been so designated in writing upon written request and at
the expense of the requesting shareholder or such representative. See "Available
Information."
The Special Committee's and the Board's Recommendation
General
The Special Committee and the Board have each determined that the
Merger is substantively and procedurally fair to, and in the best interests of,
the Public Shareholders. Upon the Special Committee's recommendation, the Board
has approved and adopted the Merger Agreement and recommended it to the
shareholders. Certain members of the Board will have a financial interest in the
Merger that may present them with actual or potential conflicts of interest as
discussed under "--Conflicts of Interest."
The Special Committee met in person or by telephone conference on
approximately 27 occasions between January 7, 1999 and the date of this Proxy
Statement to consider and make recommendations with respect to the Merger and
other possible strategic alternatives for the Company. The Special Committee was
assisted in its deliberations by (i) Mann Armistead, the financial advisor to
the Special Committee, (ii) Balch & Bingham, legal counsel to the Special
Committee, (iii) Paul Weiss, special counsel to the Board, and (iv)
PricewaterhouseCoopers, which was retained to assist the Special Committee in
its evaluation of the financings proposed by the Purchaser and Hancock Park in
connection with their respective merger proposals. At a meeting held on May 4,
1999, the Special Committee determined that the Merger, including the Cash
Merger Consideration to be paid to the Public Shareholders, is substantively and
procedurally fair to, and in the best interests of, the Public Shareholders and
recommended that the full Board approve the Second Amended Merger Agreement.
Principal Factors
The material factors the Special Committee evaluated in determining
that the Merger is substantively and procedurally fair to, and in the best
interests of, the Public Shareholders are described below. Except as noted
below, the Special Committee considered the following factors to be positive
factors supporting its determination that the Merger is substantively and
procedurally fair to, and in the best interests of, the Public Shareholders:
(i) Mann Armistead's opinion delivered to the Special
Committee on May 4, 1999, which Mann Armistead confirmed in writing,
that the $34.75 per share to be received by the Public Shareholders was
fair to such holders from a financial point of view. The full text of
the written opinion of Mann Armistead , which sets forth assumptions
made, matters considered and
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limitations on the review undertaken in connection with its opinion, is
attached hereto as Appendix B and is incorporated herein by reference.
The Company's shareholders are urged to and should read such opinion in
its entirety. The Special Committee also considered the fact that Mann
Armistead had previously rendered opinions stating its view that prices
of $30.00 and $33.00 per share in connection with the Initial Merger
Agreement and the First Amended Merger Agreement, respectively, were
fair to the Public Shareholders from a financial point of view, as of
the date of such opinions. The Special Committee considered Mann
Armistead's presentations to the Special Committee, including Mann
Armistead's selected public companies and discounted cash flow analyses
and its solicitation of more favorable proposals. See "--Opinion of the
Financial Advisor." The Special Committee and the Board expressly
adopted the conclusions and analyses of Mann Armistead in its
determination that the Merger is fair to the Public Shareholders. In
its review of the analyses performed by Mann Armistead, the Special
Committee did not place greater weight on any one of the separate
analyses prepared by Mann Armistead, but rather relied upon the summary
and conclusions of Mann Armistead that the analyses, taken as a whole,
supported the conclusion that the Merger is fair to the Public
Shareholders from a financial point of view. Based on Mann Armistead's
nationally recognized expertise in the furniture manufacturing
industry, its expertise and experience in the evaluation of businesses
in connection with transactions similar to the Merger, its familiarity
with WinsLoew's business, financial condition, results of operations
and prospects, its solicitation process and negotiations with other
potential acquirors, and its analyses and presentations related to the
fairness opinion, the Special Committee and the Board believe that Mann
Armistead's opinion as to the fairness of the Cash Merger Consideration
to be received by the Public Shareholders was well supported and sound.
The Board and the Special Committee believe that the Mann Armistead
oral presentations and its oral and written opinion supported the
Special Committee's and Board's fairness determination.
(ii) The premium (35.4%) by which the Cash Merger
Consideration of $34.75 per share exceeds the closing price ($24 3/8
per share) of the Common Stock on the day prior to the Board meeting at
which Mr. Powell stated that he, together with the other Trivest
Investors and the Management Group, would be willing to submit a
proposal to purchase the Company, the premium (28.7%) by which the Cash
Merger Consideration exceeds the closing price ($27 per share) of the
Common Stock on the last trading day prior to the January 15
announcement of the Merger proposal, the premium (87.8%) by which the
Cash Merger Consideration exceeds the closing price ($18 1/2 per share)
of the Common Stock on the date three months prior to such
announcement. The Special Committee also considered the fact that the
Cash Merger Consideration is substantially in excess of the Company's
fully diluted book value per share of $9.45 at March 26, 1999, or
approximately 3.7 times such book value per share. See "--Opinion of
Financial Advisor." The Special Committee did not consider as
significant the premium (12.1%) by which the Cash Merger Consideration
exceeded the closing price of the Common Stock on the last trading day
prior to the announcement of the execution of the Second Amended Merger
Agreement in light of the prior announcements relating to the proposed
transactions.
(iii) The terms and conditions of the Merger Agreement,
including those that were designed to ensure that the Board could
fulfill its fiduciary duties to obtain the best value reasonably
available for the Public Shareholders. In particular, the Special
Committee considered that: (a) from the execution of the Initial Merger
Agreement on March 5 until the execution of the First Amended Merger
Agreement on March 30, the Initial Merger Agreement permitted the
Special Committee to continue to solicit Superior Proposals and to
engage in negotiations regarding Superior Proposals; (b) after such
date, the First Amended Merger Agreement permitted (and the Second
Amended Merger Agreement continues to permit) the Board to consider
unsolicited Superior Proposals from other parties and, subject to
certain conditions, to engage in negotiations relating thereto; (c) the
Purchaser's obligation to consummate the Merger is not subject to any
due diligence or financing contingency; (d) the termination fee and
expense reimbursement obligations, which were intended not to have
(and, in fact, did not have) the effect of discouraging competing bids,
in particular the Hancock Park proposals; and (e) the provision in the
Second Amended
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Merger Agreement that, subject to the satisfaction of certain
conditions, the Board may withdraw or modify its recommendation to the
shareholders regarding the Merger and enter into an agreement with
respect to a Superior Proposal, if such a transaction becomes available
prior to the consummation of the Merger and the Board determines that
it is necessary to do so in order to comply with its fiduciary duties.
See "--The Merger."
(iv) The improved terms and conditions of the Second Amended
Merger Agreement that were not contained in the Initial Merger
Agreement or the First Amended Merger Agreement, including (a) the
increase in the Cash Merger Consideration from $30.00 to $34.75 per
share, (b) the provision by the Purchaser of the escrow deposit
pursuant to the Escrow Agreement to secure its obligations to
consummate the Merger and to compensate the Company in the event the
Purchaser breaches such obligation and (c) the elimination of a
provision contained in the Initial Merger Agreement and the First
Amended Merger Agreement that would have enabled the Purchaser not to
consummate the Merger in the event of certain pending litigation. See
"--The Merger."
(v) The financial ability of the Purchaser to consummate the
Merger. As noted above, the Purchaser's obligation to consummate the
Merger Agreement is not conditioned upon the Purchaser's having
obtained financing for the Merger, and such obligation is secured by
the Escrow Agreement. In addition, the Special Committee, through its
advisors, conducted inquiries into the certainty of consummation of the
proposed equity and debt financing with representatives of the
Purchaser, BankBoston and Bear Stearns.
(vi) The relatively low level of trading of the Common Stock
on the Nasdaq National Market and the small number of shareholders of
record and persons or entities holding in nominee name (approximately
104 and 1,997, respectively, as of April 30), which the Special
Committee believed would limit the ability of the Public Shareholders
to sell their Common Stock at the current market price. The Merger
would provide each shareholder other than the Purchaser with cash for
his or her shares.
(vii) The fact that subsequent to the announcement on January
15 of the initial Merger proposal (a) Mann Armistead conducted an
extensive solicitation of third parties who might be interested in
pursuing a transaction involving the Company, (b) since such date, the
Special Committee and its representatives received formal proposals for
the acquisition of the Company from a single other potential purchaser
-- Hancock Park and (c) extensive discussions and negotiations between
representatives of the Special Committee and representatives of Hancock
Park occurred over more than two months regarding an alternative
transaction resulting in the May 2 Hancock Park Proposal, which the
Special Committee determined was not as favorable to the Public
Shareholders as the Merger.
(viii) The fact that the furniture industry is cyclical and
sensitive to changes in general economic conditions, consumer
confidence and discretionary income, interest rate levels and credit
availability and the effect of such factors on the market price of the
Common Stock and management's ability to execute the Company's business
strategy. In this connection, the Special Committee considered that the
Company is subject to pressures from public shareholders and market
professionals to maintain and increase earnings per share. The Special
Committee believes that as a public company WinsLoew may not have
adequate flexibility to consider business strategies that have
long-term benefits but that may adversely impact earnings per share and
the market price of the Common Stock in the short term.
(ix) Actual or potential conflicts of interest to which
certain officers and directors of the Company and their affiliates are
subject in connection with the Merger, including the fact that, after
the Merger (a) the Trivest Directors will beneficially own
approximately 95.6% of the Company and the members of the Management
Group will beneficially own approximately 4.4% of the Company
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and (b) certain members of the Management Group will enter into new
employment agreements with WinsLoew replacing their existing employment
agreements with the Company, and that such new employment agreements
will provide for the payment of substantially the same base salaries
and annual cash bonuses as their existing employment agreements. The
Special Committee considered these conflicts of interest to be negative
factors in its determination that the Merger is fair to the Public
Shareholders. The Special Committee believed, however, that such
conflicts were mitigated in part by the following:
- The establishment of the Special Committee to seek
other offers and make an independent determination as
to the fairness of the Merger and to negotiate the
terms of the Initial Merger Agreement, the First
Amended Merger Agreement and the Second Amended
Merger Agreement with representatives of the
Purchaser, as well as the terms of alternative
transactions proposed by third parties.
- The Special Committee considered that the Trivest
Directors, who together with the Existing Trivest
Shareholders, hold approximately 29.3% of the
outstanding shares of Common Stock, have expressed
their intention to vote all such shares in favor of
the Merger and further noted that only approximately
4.0% of the total value of the Common Stock and
options they hold (including all of the shares held
by the Existing Trivest Shareholders) would be
invested in the Purchaser. Moreover, none of the
Existing Trivest Shareholders will have a direct or
indirect interest in WinsLoew after the Merger. The
Special Committee viewed this high degree of
"sell-side" participation by affiliates of Trivest,
with respect to whom Mr. Powell and other Trivest
affiliates also had fiduciary obligations, as a
positive factor in its determination that the Merger
is fair to the Public Shareholders.
- Similarly, the Special Committee considered that the
members of the Management Group, who together hold
approximately 2.7% of the outstanding shares of
Common Stock, have expressed their intention to vote
all of such shares in favor of the Merger and further
noted that only 23.6% of the total value of the
Common Stock and options they hold would be invested
in the Purchaser. The Special Committee considered
that a larger investment in the Purchaser by the
Management Group would indicate a level of confidence
in the Company's prospects that might be inconsistent
with the Special Committee's assessment of the
Company's prospects.
(x) The adequacy of the information regarding the Company
which the Special Committee and its financial and legal advisors had
been provided.
(xi) The fact that under Florida law, WinsLoew shareholders
have no right to an appraisal of the value of their shares in
connection with the Merger. The Special Committee considered this to be
a negative factor in its determination that the Merger is fair to the
Public Shareholders.
(xii) The likelihood that the Purchaser, as an affiliate of
the Company, would continue to operate the business in a similar manner
following the transaction, and that consequently the Merger was not
likely to result in disruption to employees, suppliers, customers and
the communities in which the Company operates.
Additional Factors
In addition to the factors set forth in paragraphs (i) to (xii) above,
the Special Committee also considered a number of factors relating to its
determination that the Merger was more favorable than the May 2 Hancock Park
Proposal. As noted above, representatives of Hancock Park indicated on May 4
that, with an additional week of due diligence investigation, it was possible
that Hancock Park might be able to
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submit a proposal providing for a price greater than that contained in the May 2
Hancock Park Proposal. Hancock Park did not indicate the amount of such a
possible price increase, but stated that its lenders had orally stated that they
would be prepared to lend additional amounts necessary to finance a $.50 per
share increase. The Special Committee instructed its representatives to request
the Purchaser to agree that the Second Amended Merger Agreement permit Hancock
Park to conduct additional due diligence without the need for an additional
"Superior Proposal" determination. The Purchaser declined to agree to such a
change in the Second Amended Merger Agreement.
The Special Committee determined to recommend on May 4 that the Board
of Directors approve the May 2 Trivest Proposal despite the possibility that a
higher Hancock Park offer might be forthcoming after taking into account the
following factors: (i) the fact that the May 2 Trivest Proposal was to expire
later that evening, that the Purchaser had declined a request for an additional
extension, and the uncertainty as to whether the May 2 Trivest Proposal would
continue to be available after such date, (ii) the uncertain likelihood of a
price increase, particularly in light of the absence of any statement by Hancock
Park representatives that such a price increase was probable, (iii) its view
that the procedures for, and timing of, the bidding process that had been
established following the Board's "Superior Proposal" determination on April 22
(which had been reviewed with Hancock Park representatives without objection)
had been fair and had provided each of the Purchaser and Hancock Park with the
opportunity to put forth its best proposal within a reasonable period of time
and (iv) the fact that the Company and Hancock Park had been unable to reach an
agreement regarding certain terms of the proposed merger, including the security
for expenses and the closing condition regarding litigation. The Special
Committee also considered the fact that (a) Hancock Park had conducted extensive
due diligence in February and March and (b) from April 22, when the Board made
its "Superior Proposal" determination (and thus due diligence inquiries were
permitted) until May 2, Hancock Park had not suggested that it required
additional due diligence in order to submit a revised offer and, in fact, had
submitted three revised proposals without any such due diligence.
The Special Committee also considered the fact that the May 2 Hancock
Park Proposal provided for a price of $34.75 per share (or $35.25 per share if
the Purchaser's $10.0 million termination fee contained in the First Amended
Merger Agreement was reduced to $6.0 million). Consequently, under the latter
price formulation, the May 2 Hancock Park Proposal would have provided a higher
price than the $34.75 per share price contained in the Second Amended Merger
Agreement. However, the First Amended Merger Agreement obligated the Company to
pay the $10 million termination fee to the Purchaser in the event the Company
entered into an agreement with Hancock Park and, having unsuccessfully requested
the Purchaser to agree to reduce such fee to $6.0 million, the Special Committee
did not believe that it could unilaterally effect such reduction without
breaching the First Amended Merger Agreement. As a result of these contractual
obligations of the Company, the Special Committee did not believe the
alternative price of $35.25 per share contained in the May 2 Hancock Park
Proposal to be available. Moreover, although no determination on the $35.25
pricing proposal was made, some members of the Special Committee stated that,
even at such a higher price, the May 2 Hancock Park Proposal might be less
favorable to the Public Stockholders because, unlike the May 2 Trivest Proposal,
(a) it did not provide any security for the Company and its stockholders in the
event of a breach of the obligation to consummate the transaction and (b) it
contained a broad "no pending litigation" closing condition, from which Hancock
Park would not except the Alabama Litigation without further due diligence.
Discussion
In view of the wide variety of factors considered in connection with
their evaluation of the Merger Agreement, neither the Special Committee nor the
Board found it practicable to, and did not, quantify or otherwise assign
relative weights to the individual factors considered in reaching their
respective determinations. In considering each such factor, the Special
Committee and the Board specifically took note of the following points:
With respect to factor (i) above, the Special Committee and the Board
considered the fact that Mann Armistead reviewed the projections prepared by
management with respect to net sales, operating income, net income, earnings per
share and other items. See "CERTAIN FORWARD LOOKING INFORMATION." In
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addition, at the February 17, March 4 and May 4 meetings of the Special
Committee, members of the Special Committee asked representatives of Mann
Armistead to elaborate generally upon the methodologies on which their analyses
were based.
With respect to factors (ii) and (vi) above, although the Special
Committee, the Board and Mann Armistead took note of the market price of the
Common Stock, none of such persons relied exclusively upon the current or
historical market prices of the Common Stock in making its determination with
respect to the fairness of the Cash Merger Consideration, given the fact that
the Common Stock has been and continues to be relatively thinly traded. The
Special Committee concluded that the Merger would give the Public Shareholders,
particularly those holding a large number of shares of Common Stock, an
opportunity to realize immediate value for their Common Stock at a substantial
premium. The Special Committee recognized that while consummation of the Merger
would result in the shareholders being entitled to receive $34.75 in cash per
share, it also would eliminate the opportunity for the Public Shareholders
(other than the Eligible Persons) to participate in the future growth, if any,
of the business of WinsLoew and potential market appreciation in the Common
Stock. The Special Committee concluded that, based on the discount historically
applied by the market to the Common Stock, it was unlikely that future trading
value would compare favorably with the $34.75 per share payable in the Merger.
Thus, on balance and considering WinsLoew's future prospects, as well as its
historical results of operations, the Special Committee concluded that the
uncertain prospect for future appreciation did not justify depriving WinsLoew's
shareholders of the opportunity to obtain an immediate cash premium for their
Common Stock. In light of these conclusions and the other matters discussed
below, the Special Committee determined that the $34.75 Cash Merger
Consideration was fair and presented the shareholders with an attractive
opportunity and potentially greater benefit than maintaining their ownership
interest in WinsLoew.
The Special Committee considered the fact that the obligation of the
Company to consummate the Merger is not conditioned upon the favorable vote of a
majority of the Public Shareholders, even though the Merger may not be
considered to be at "arm's length" because the Trivest Directors and the members
of the Management Group are both affiliates of the Company and parties to the
Merger Agreement with different interests than the Company. Notwithstanding the
absence of such a voting requirement, the Special Committee believes that the
procedure that was followed in determining the purchase price to be paid to the
shareholders of the Company was fair to the Public Shareholders. As described
above, the ten-person Board of Directors of the Company (one of whom is the
Management Director and four of whom are the Trivest Directors) appointed as the
only members of the Special Committee the five non-employee directors who were
independent of the Management Group and the Trivest Partnerships. The terms of
the Merger Agreement were determined through arm's-length negotiations between
the Special Committee and its legal and financial advisors, on the one hand, and
representatives of the Purchaser, on the other. Moreover, from its initial
execution on March 5 until its amendment on March 30, the Initial Merger
Agreement permitted WinsLoew to (x) solicit Superior Proposals and (y) negotiate
on behalf of the Company with third parties with respect to Superior Proposals.
The First Amended Merger Agreement permitted, and the Merger Agreement permits,
WinsLoew to (i) withdraw or modify its recommendation to the shareholders
regarding the Merger, (ii) enter into an agreement with respect to, or approve,
a Superior Proposal or (iii) terminate the Merger Agreement, so long as the
Board determines in each case (i), (ii) or (iii) that it is necessary to do so
in order to comply with its fiduciary duties and notifies the Purchaser that it
has received a Superior Proposal. In addition, the Merger Agreement contains
provisions (without which the Special Committee believes the Purchaser would not
have entered into the Merger Agreement) imposing upon the Company the
Termination Fee and expense reimbursement obligations that, in the view of the
Special Committee, are reasonable and would not have the effect of discouraging
competing bids. (See "THE MERGER--Nonsolicitation Covenant"). Thus, although the
Merger is not structured to require approval of a majority of the unaffiliated
shareholders (which the Special Committee considered to be a negative factor),
the Special Committee nevertheless believes, as of the date of this Proxy
Statement and for the reasons set forth above, that the Merger is procedurally
fair to the Public Shareholders.
The Special Committee also noted that approximately 36.0% of the
outstanding shares of Common Stock are held of record by persons who have
expressed their intention to vote their shares of Common Stock in favor of the
Merger, including members of the Management Group, certain other members of
management,
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members of the Board, the Existing Trivest Shareholders and other individuals
associated or affiliated with the Trivest Partnerships. The Special Committee
further noted that approximately 93.5% of such shares would not be rolled over
into shares of Purchaser common stock, but rather would be converted into the
Cash Merger Consideration pursuant to the Merger on the same terms as the Public
Shareholders. The Special Committee viewed this as a significant positive factor
in its determination that the Merger is fair to the Public Shareholders.
The Special Committee and the Board both expressly adopted the
conclusion of Mann Armistead that the Cash Merger Consideration to be received
by the Public Shareholders in the Merger is fair to such shareholders from a
financial point of view.
Based on the foregoing, on May 4, 1999, the Special Committee
determined that the Merger is substantively and procedurally fair to, and in the
best interest of, the Public Shareholders and recommended to the Board approval
of the Merger Agreement and that it be recommended to the shareholders of the
Company.
The Board approved the Merger on May 4, 1999 and determined that the
Merger is substantively and procedurally fair to, and in the best interest of,
the Public Shareholders and resolved to recommend it to the Company's
shareholders.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE MERGER.
Certain members of the Board will have a financial interest in the
Merger that may present them with actual or potential conflicts of interest as
discussed under "--Conflicts of Interest."
Opinion of the Financial Advisor
Mann Armistead delivered its written opinion to the Special Committee
to the effect that the Cash Merger Consideration to be received by the Public
Shareholders in the Merger is fair to such shareholders from a financial point
of view.
Mann Armistead is a recognized investment banking firm regularly
engaged in the valuation of private and public businesses and their securities
in connection with mergers and acquisitions, competitive biddings and valuations
for estate, corporate and other purposes and acting as financial advisor in
connection with other forms of strategic corporate transactions. Mann Armistead
is actively involved in securities research on the furniture industry. The
Special Committee selected Mann Armistead as its financial advisor because it is
a nationally known investment banking firm with expertise in the furniture
industry, because it has experience in transactions similar to the Merger and
because it is familiar with WinsLoew and its business.
March 4 Opinion
As part of its role as financial advisor to the Special Committee, Mann
Armistead was asked by the Special Committee to render an opinion to the Special
Committee as to whether the consideration to be received by the Public
Shareholders is fair to the Public Shareholders from a financial point of view.
In addition, Mann Armistead was instructed by the Special Committee to solicit
superior proposals from both strategic and financial buyers. On March 4, 1999,
Mann Armistead rendered to the Special Committee an oral opinion, which was to
be subsequently confirmed by a written opinion that the $30.00 per share
consideration described in the Initial Merger Agreement was fair, from a
financial point of view, to the Public Shareholders of WinsLoew.
April 7 Opinion
On March 30, the Special Committee received the March 30 Trivest
Proposal and a proposed amendment to the Initial Merger Agreement from the
Purchaser. Among other things, the amendment increased the consideration to
WinsLoew shareholders to $33.00 per share, removed the financing contingency and
required the immediate termination of any discussions and negotiations with
other potential buyers, subject to the Board's
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fiduciary duties. On March 30, the Special Committee and the Board each approved
the First Amended Merger Agreement. Mann Armistead issued its written opinion,
dated April 7, 1999, stating that as of such date, and based upon and subject to
certain matters stated therein, the $33.00 per share merger consideration was
fair, from a financial point of view, to the Public Shareholders of WinsLoew.
Pursuant to the requirements of the First Amended Merger Agreement, on March 31,
the Special Committee instructed Mann Armistead to discontinue its process to
solicit superior offers from third parties.
May 4 Opinion
On April 9, the Special Committee received the April 8 Hancock Park
Proposal to acquire the Company for a per share purchase price of $33.50 (or
$34.00 if the termination fee under the First Amended Merger Agreement was
reduced from $10.0 million to $6.0 million). On April 21, Hancock Park increased
the per share purchase price of this offer to $34.00 ($34.50 if the termination
fee under the Merger Agreement with the Purchaser was reduced from $10.0 million
to $6.0 million). On April 22, the Board determined that the April 21 Hancock
Park Proposal constituted a Superior Proposal under the First Amended Merger
Agreement, and the Company provided the Purchaser with the requisite notice
thereunder. On April 30, the Special Committee received the April 30 Trivest
Proposal from the Purchaser to increase the purchase price under the First
Amended Merger Agreement to $34.00 per share. On May 2, the Special Committee
received the May 2 Hancock Park Proposal increasing the per share purchase price
to $34.75 (or $35.25 if the termination fee under the First Amended Merger
Agreement was reduced from $10.0 million to $6.0 million). The same day, the
Special Committee received a proposed amendment to the First Amended Merger
Agreement and the May 2 Trivest Proposal from the Purchaser to increase the
purchase price to $34.75 per share. On May 4, the Special Committee and the
Board each approved the Second Amended Merger Agreement providing for, among
other things, an increase in the purchase price to $34.75 per share. The Special
Committee's and the Board's approvals were based, in part, upon the oral opinion
of Mann Armistead, later confirmed in writing, that as of May 4, 1999 and based
upon and subject to certain matters stated therein, the $34.75 per share Cash
Merger Consideration described in this Proxy Statement was fair, from a
financial point of view, to the Public Shareholders of WinsLoew. On May 4, the
Special Committee directed Mann Armistead to cease all discussions and
negotiations with Hancock Park.
The full text of Mann Armistead's written opinion dated May 4, 1999,
which sets forth certain assumptions made, matters considered and limitations on
review undertaken is attached as Appendix B to this Proxy Statement and is
incorporated herein by reference, and the Company's shareholders are urged to
carefully read such opinion in its entirety. The summary of the opinion of Mann
Armistead set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of the opinion attached. Mann Armistead's opinion is
directed only to the fairness, from a financial point of view, of the $34.75
Cash Merger Consideration as described herein, to the Public Shareholders of
WinsLoew.
Mann Armistead's opinion is addressed to the Special Committee of the
Board of Directors of WinsLoew and does not constitute a recommendation as to
how any shareholder of WinsLoew should vote with respect to the Merger. The
opinion of Mann Armistead does not address (i) the relative merits of the Merger
or any other business strategies or transactions with third parties considered
by the Board of Directors or the effect of any such other transaction, (ii) the
Board's decision to proceed with the Merger to the exclusion of other
transactions, or (iii) the value of the shares of WinsLoew's common stock held
by the Purchaser or fairness of any consideration being received by the
Purchaser in the Merger.
Mann Armistead was not requested by the Special Committee to make, nor
did Mann Armistead make, any recommendation as to the amount of the
consideration to be received by the Public Shareholders. With the exception of
the instructions on March 31 and May 4 to cease discussions with other
interested third parties, no limitations were imposed by the Special Committee
with respect to procedures followed or the investigations made by Mann Armistead
in rendering its opinions.
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Mann Armistead reviewed certain financial, businesses and other
information that was publicly available or furnished to Mann Armistead by
WinsLoew, including: (i) WinsLoew's Annual Reports to Shareholders, Annual
Reports on Form 10-K and related financial information for the years ended
December 31, 1994 through December 31, 1998; (ii) certain publicly available
information with respect to historical market prices and trading activities for
WinsLoew's Common Stock and for certain publicly traded furniture industry
companies which Mann Armistead deemed relevant; (iii) certain mergers and
acquisitions in the furniture industry; (iv) other financial information
concerning the business and operations of WinsLoew including certain financial
analyses and forecasts for WinsLoew prepared by senior management; and (v) such
other financial studies, analyses, securities research, inquiries and other
matters as Mann Armistead deemed necessary. In addition, Mann Armistead
discussed the business and prospects of WinsLoew with members of senior
management and visited several of the Company's operating facilities.
In connection with its review, Mann Armistead relied upon and assumed
the accuracy and completeness of all of the foregoing information provided to it
or publicly available, including the representations and warranties of WinsLoew
included in the Merger Agreement, and Mann Armistead has not assumed any
responsibility for independent verification of such information. Mann Armistead
relied upon the senior management of WinsLoew as to the reasonableness and
achievability of its financial and operational forecasts and projections, and
the assumptions and bases therefore, provided to Mann Armistead, and assumed
that such forecasts and projections reflect the best currently available
estimates and judgments of WinsLoew's senior management and that such forecasts
and projections will be realized in the amounts and in the time periods
currently estimated by such senior management. Mann Armistead did not undertake
any independent valuation or appraisal of the real estate owned by WinsLoew.
In rendering its opinion, Mann Armistead conducted a solicitation
process and performed a variety of financial analyses. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. Moreover, the evaluation
of the fairness of the Cash Merger Consideration, from a financial point of
view, to holders of the WinsLoew common stock was to some extent a subjective
one based on the experience and judgment of Mann Armistead and not merely or
only the result of mathematical analysis of financial data. Accordingly, not
withstanding the separate factors summarized below, Mann Armistead believes that
its analyses must be considered as a whole and that selecting certain portions
of its analyses and of the factors contained therein, without considering all
analyses and factors, could create an incomplete view of the evaluation process
underlying its opinion. The Mann Armistead opinion is based on market, economic
and other conditions as they existed and should be evaluated as of the date of
the Mann Armistead opinion.
Analyses Performed
The following is a summary of the material analyses performed by Mann
Armistead in connection with its opinion expressed herein:
(A) Offer Valuation: Using publicly available information, Mann
Armistead analyzed, among other things, the market value and
trading multiples of the Company and the following selected
publicly traded companies in the furniture industry: Falcon
Products, Inc.; Kimball International, Inc.; LADD Furniture,
Inc.; Meadowcraft, Inc.; Pulaski Furniture Corp.; and Shelby
Williams Industries, Inc. (collectively the "Selected
Companies"). Mann Armistead compared market values of, among
other things, current equity value and adjusted market value
(equity value, plus total debt, less cash and cash
equivalents) as multiples of the latest 12 months net income,
earnings before interest and taxes (EBIT) and shareholders'
equity. Based on the above described analysis, Mann Armistead
determined the Selected Companies (based on a closing stock
price date of April 28, 1999) rendered on average a multiple
range of 10.2 times net income, 7.4 times EBIT and 1.5 times
shareholders' equity.
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When compared to the merger consideration value of
$34.75 per share, Mann Armistead determined, based on
WinsLoew's financial results for the trailing 12 months ended
March 26, 1999, the offer to equate to 14.1 times net income,
8.6 times EBIT and 4.1 times shareholders' equity. Based on
this information, Mann Armistead determined the Cash Merger
Consideration to represent a premium value when compared to
the Selected Companies.
Mann Armistead reviewed the terms of the Merger
Agreement, based on a Cash Merger Consideration value of
$34.75 per share for WinsLoew's Common Stock, and determined
such offer to represent a premium, based on market closing
stock prices for WinsLoew for the following dates noted: of
28.7% as of January 15, 1999 (based on $27 per share), the
last trading date immediately preceding the announcement of
the original offer from the Purchaser; of 36.3% as of January
8, 1999 (based on $25 1/2 per share), the date one week prior
to such announcement; and of 87.8% as of October 15, 1998
(based on $18 1/2 per share), the date three months prior to
the announcement.
(B) Solicitation Process: After being retained by the Special
Committee, Mann Armistead prepared a descriptive memorandum on
WinsLoew, suggested a list of potential acquirors which was
approved by the Special Committee and began the solicitation
process to determine if there were other potential buyers who
might pay more than the Purchaser's original offer of $30.00
per share.
March 3 Hancock Park Proposal. Mann Armistead
contacted 32 potential acquirors of whom 11 indicated an
interest in receiving additional information. From that group,
only one, Hancock Park, submitted to the Special Committee
formal proposals. The other ten declined interest. The initial
March 3 Hancock Park Proposal provided for an all cash offer
of $32.50 per share, subject to, among other things, the
successful completion of its financing efforts. The Special
Committee instructed Mann Armistead to investigate Hancock
Park's financing sources in order to determine the probability
of closing a transaction with Hancock Park. Mann Armistead
accompanied Hancock Park on its due diligence visits to
WinsLoew's headquarters in Birmingham, Alabama and to the
Loewenstein operation in Pompano Beach, Florida. During these
visits, Mann Armistead had the opportunity to discuss
financing with Hancock Park and its advisor, BT Alex. Brown
Incorporated, as well as its equity partner, Desai . On March
30, Mann Armistead received letters from BT Alex. Brown and
Desai indicating their level of support for financing the
March 30 Hancock Park Proposal.
March 30 Trivest Proposal. Also on March 30, the
Special Committee received the March 30 Trivest Proposal and a
proposed amendment to the Initial Merger Agreement from the
Purchaser which, among other things, increased its offer from
$30.00 to $33.00 per share, removed the financing contingency
and required the Company and its advisors to immediately cease
discussions and negotiations with other potential acquirors,
including Hancock Park, subject to the Board's fiduciary
duties. On that same day, the Special Committee recommended
the amendment to the Board, which the Board approved, and the
First Amended Merger Agreement was executed. Mann Armistead,
in accordance with the Special Committee's instructions and
the First Amended Merger Agreement, ceased discussions with
Hancock Park and other potential acquirors as of that date.
April 8 Hancock Park Proposal. On April 9, the
Special Committee received the April 8 Hancock Park Proposal
for an all cash offer to acquire the Company for a per share
purchase price of $33.50 (or $34.00 if the termination fee
under the First Amended Merger Agreement with the Purchaser
was reduced from $10.0 million to $6.0 million). Such offer
expressly stated that it would expire April 19, which date was
subsequently extended . In addition, the proposal was
accompanied by copies of letters from BT Alex. Brown
41
<PAGE> 50
Incorporated and an affiliate of Desai indicating their level
of support for financing the proposal. On April 12, the Board
authorized its representatives to direct Mann Armistead to
advise the Board whether or not the April 8 Hancock Park
Proposal constituted a Superior Proposal under the First
Amended Merger Agreement.
April 21 Hancock Park Proposal. On April 21, Hancock
Park increased the per share purchase price of this offer to
$34.00 (or $34.50 if the termination fee under the First
Amended Merger Agreement was reduced from $10.0 million to
$6.0 million). The increase was accompanied by copies of
revised versions of the letters previously provided by BT
Alex. Brown Incorporated and Private Equity Investors III,
L.P. relating to financing the proposed transaction. On April
22, the Board determined that the April 21 Hancock Park
Proposal constituted a Superior Proposal under the First
Amended Merger Agreement, and the Company provided the
Purchaser with the requisite notice thereunder.
April 30 Trivest Proposal. On April 30, the Special
Committee received the April 30 Trivest Proposal from the
Purchaser to increase the purchase price under the First
Amended Merger Agreement to $34.00 per share, accompanied by
revised versions of the Trivest equity commitment letter, the
BankBoston senior secured financing commitment letter and the
Bear Stearns "highly confident letter."
May 2 Proposals. On May 2, the Special Committee
received the May 2 Hancock Park Proposal increasing the per
share purchase price to $34.75 (or $35.25 if the termination
fee under the First Amended Merger Agreement was reduced from
$10.0 million to $6.0 million), contingent upon an agreement
by the Company to reimburse Hancock Park for expenses up to a
maximum of $1.2 million under certain circumstances. The same
day, the Special Committee received a proposed amendment to
the First Amended Merger Agreement from the Purchaser and the
May 2 Trivest Proposal to increase the purchase price to
$34.75 per share. In addition, on May 4, representatives of
Hancock Park conducted additional due diligence, including
reviews of updated financial information and interviews with
members of WinsLoew's senior management. The same day, Paul
Weiss advised Hancock Park of the $34.75 May 2 Trivest
Proposal. Representatives of Hancock Park confirmed that
Hancock Park was not prepared to increase its offer at that
time and that Hancock Park was unwilling to provide an escrow
deposit.
Merger Agreement. On May 4, the Purchaser provided
the Company with a $3.0 million escrow deposit to secure its
obligations under the Merger Agreement, and the Special
Committee and the Board each approved the Merger Agreement
providing for, among other things, an increase in the purchase
price to $34.75 per share. The Special Committee's and the
Board's approvals were based, in part, upon the oral opinion
of Mann Armistead, later confirmed in writing, that as of May
4, 1999 and based upon and subject to certain matters stated
therein, the $34.75 per share Cash Merger Consideration
described in this Proxy Statement was fair, from a financial
point of view, to the Public Shareholders of WinsLoew. On May
4, the Special Committee directed Mann Armistead to cease all
discussions and negotiations with Hancock Park.
(C) Discounted Cash Flow Analysis: Using a discounted cash flow
analysis, Mann Armistead estimated the net present value of
the future streams of after-tax cash flow that WinsLoew could
produce on a stand alone basis for the fiscal year end periods
1999-2002 and a terminal multiple value was utilized to
determine value. For this analysis, Mann Armistead considered
various scenarios for the performance of the WinsLoew Common
Stock using (i) the sales revenue, net income and cash flow
projections as supplied by WinsLoew's senior management (see
"CERTAIN FORWARD LOOKING INFORMATION"), (ii) a range of 9.2
times to 11.2
42
<PAGE> 51
times earnings as the terminal value of WinsLoew's Common
Stock (a range determined by using the midpoint of the
Selected Companies net income multiple analysis), and (iii) a
range of discount rates from 9.0% to 11.0%. The Company's
projections included projected earnings per share in fiscal
years 1999 to 2002 of $2.60, $2.90, $3.20 and $3.50,
respectively. These compare to the following street analyst
consensus projections for 1999 earnings per share: First Call
- $2.55 at May 19, 1999; and Zacks - $2.67 at May 16, 1999. In
addition, the Company's first quarter earnings per share of
$.56 compared to the following street analyst consensus
projections: First Call - $.41; and Zacks - $.47. The ranges
used in this analysis were chosen based upon what Mann
Armistead, in its judgment, considered to be appropriate
taking into account, among other things, WinsLoew's past and
current financial performance, the general level of inflation,
and rates of return generally required in the marketplace for
companies with similar risk profiles. Mann Armistead's
discounted cash flow analysis produced a range of per share
values from $28.83 to $35.44. In considering the average of
the foregoing range, the present value of a share of
WinsLoew's Common Stock was calculated to be less than that of
the Cash Merger Consideration.
(D) Analysis of Selected Furniture Industry Acquisition
Transactions: Mann Armistead undertook a review of publicly
available information regarding selected acquisitions in the
furniture industry but did not find any transactions which
were in its opinion comparable to the Merger. Most of the
acquisitions occurring within the industry are those involving
private companies and complete financial information was not
generally available.
The summary set forth does not purport to be a complete description of
the analysis or data utilized by Mann Armistead in the preparation of its
opinion. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to summary description. Mann Armistead based its
analyses on assumptions that it deemed reasonable, including assumptions
concerning WinsLoew, general overall business and economic conditions and
industry related factors.
Engagement of Mann Armistead
Mann Armistead was retained by the Special Committee of the Board of
Directors of WinsLoew pursuant to an Engagement Letter executed on January 19,
1999 (the "Engagement Letter"). Pursuant to the Engagement Letter, the Company
retained Mann Armistead to assist the Special Committee by (i) evaluating the
Merger proposal, (ii) soliciting and evaluating other potential buyers for the
Company as instructed by the Special Committee, (iii) participating in
negotiations related to the possible sale of the Company and (iv) providing its
fairness opinion. Pursuant to the terms of the Engagement Letter, the Company
agreed to pay Mann Armistead a fee as follows: (i) if the Trivest Investors and
the Management Group purchased the Company for $30.00 per share, then the
Company would have paid Mann Armistead a fee of $350,000; and (ii) if (A) the
Trivest Investors and the Management Group purchased the Company for a per share
price in excess of $30.00 or (B) the Company was purchased by any buyer
contacted by Mann Armistead, then the Company would pay Mann Armistead a fee
equal to 0.7% of the purchase price for the Company (including cash payments in
respect of outstanding stock options). As of the date of this Proxy Statement,
the Company has paid Mann Armistead $105,000, plus expenses, and, upon
consummation of the Merger, has agreed to pay Mann Armistead an additional
$1,772,783 pursuant to the Engagement Letter. The Company has agreed to
reimburse Mann Armistead for its reasonable out-of-pocket expenses, including
attorneys' fees, and to indemnify Mann Armistead against certain liabilities,
including certain liabilities under the federal securities laws.
Prior to the Company's engagement of Mann Armistead under the
Engagement Letter, the Company had retained Mann Armistead in June 1997 in
connection with the possible sale of its Continental Engineering Group, Inc.
subsidiary and in May 1998 in connection with the possible sale of the Company
to the Potential Acquiror or another specified publicly held furniture
manufacturer. Pursuant to a letter dated June 30, 1997, as amended by a letter
dated November 17, 1997, the Company engaged Mann Armistead to act as the
Company's investment banker in connection with the possible sale of the stock of
Continental Engineering Group, Inc. The Company
43
<PAGE> 52
sold its Continental Engineering Group, Inc. subsidiary in June 1998 and paid
Mann Armistead a fee of $193,000 in connection therewith. Pursuant to a letter
dated May 7, 1998, the Company engaged Mann Armistead to act as the Company's
investment banker in connection with the possible sale of the Company to the
Potential Acquiror or another specified publicly held furniture manufacturer for
a fee of 0.6% of the aggregate consideration, subject to a minimum fee of $1.0
million. No agreement with respect to such a sale was ever reached, and the
Company has had no contact with either entity since July 1998, except that Mann
Armistead contacted the Potential Acquiror as part of its solicitation process
in connection with the Merger. As a result of such engagement, the Company
reimbursed Mann Armistead for expenses, but did not pay Mann Armistead any fees.
See "--Background of the Merger--Past Contracts, Transactions and Negotiations."
In the ordinary course of business, Mann Armistead has provided
securities research coverage on WinsLoew. Mann Armistead has ceased such
coverage since its engagement by the Company in connection with the Merger.
Except as described herein, neither Mann Armistead nor any of its
affiliates has performed any investment banking or other financial services for,
or had any material financial relationship with, the Company during the two
years preceding the date hereof.
Purpose and Reasons of the Affiliates for the Merger
The purpose of the Affiliates for engaging in the transactions
contemplated by the Merger Agreement is to acquire, together with any Eligible
Persons, 100% of the ownership of the Company. The Affiliates believe that as a
private company WinsLoew will have greater flexibility to focus on enhancing
value by emphasizing growth and operating cash flow without the constraint of
the public market's emphasis on quarterly earnings. In addition, the Affiliates
regard the acquisition of the Common Stock in the Merger as an attractive
investment opportunity because they believe that WinsLoew's future business
prospects are favorable and that the substantial increase in the debt to equity
ratio of WinsLoew after the Merger, although importing greater investment risks,
will create the potential for the shareholders' equity value of WinsLoew to
increase more rapidly on a percentage basis than the shareholders' equity value
of an identical corporation with a larger equity base and less debt. After the
Merger, the Trivest Investors and the Management Group could earn a substantial
return on their equity investment in WinsLoew. While the Trivest Investors and
the Management Group are looking to achieve substantial returns on their
investment in WinsLoew, they believe that such returns are available only to
those investors who are willing to bear the substantial risks associated with a
highly leveraged investment. Each believes that the discount on the potential
future value of WinsLoew that may be applied to reflect such risk from a point
of view of the Public Shareholders is necessarily different from the discount
applied by the members of the Trivest Investors and the Management Group who
will own a significant interest in a privately held company and who,
accordingly, will be able to closely and directly monitor and influence the
performance of their investment.
Immediately prior to the Merger, the Trivest Investors, the Management
Group and the Eligible Persons will acquire equity interests in the Purchaser by
purchasing shares of Purchaser common stock for cash or contributing to the
Purchaser shares of WinsLoew Common Stock in exchange for shares of Purchaser
common stock as follows:
The Trivest Investors. The Trivest Investors together beneficially own,
in the aggregate, approximately 29.8% of the outstanding Common Stock, including
23.7% that is held of record by the Existing Trivest Shareholders. The Trivest
Partnerships do not currently hold any Common Stock. See "PRINCIPAL SHAREHOLDERS
AND STOCK OWNERSHIP OF MANAGEMENT." The individual Trivest Investors will
contribute an aggregate of 86,331 shares of Common Stock (valued at $34.75 per
share with an aggregate value of approximately $3.0 million) in exchange for
shares of Purchaser common stock, the Trivest Partnerships will purchase
additional shares of Purchaser common stock for approximately $70.6 million in
cash, and the Trivest Partnerships will contribute approximately 28,777 shares
of Common Stock (valued at $34.75 per share with an aggregate value of
approximately $1.0 million) in exchange for shares of Purchaser common stock,
such that the total amount of the Trivest Investors' contribution to the
Purchaser will be
44
<PAGE> 53
approximately $74.6 million, representing approximately 95.6% of the outstanding
Purchaser common stock and, after the Merger, outstanding WinsLoew Common Stock,
provided that the cash portion of such contribution from the Trivest
Partnerships is subject to reduction by an amount equal to the cash and the
aggregate value (at $34.75 per share) of the shares of Common Stock contributed
to the Purchaser by the Eligible Persons. Since the Trivest Partnerships do not
currently hold any shares of Common Stock, the shares of Common Stock
contributed to the Purchaser by the Trivest Partnerships will be from certain
WinsLoew shareholders who will be limited partners of Trivest Furniture
Partners, Ltd. and who will make a capital contribution of a portion of their
shares of WinsLoew Common Stock to Trivest Furniture Partners, Ltd., which will
then contribute such shares to the Purchaser in exchange for shares of Purchaser
common stock as described above. See "--Conflicts of Interest--Post-Merger
Ownership and Control of the Purchaser" and "THE MERGER -- Financing."
The Management Group. The members of the Management Group beneficially
own, in the aggregate, approximately 5.6% of the outstanding Common Stock. See
"PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT." The members of the
Management Group will contribute to the Purchaser an aggregate of 79,914 shares
of Common Stock (valued at $34.75 per share with an aggregate value of
approximately $2.8 million) in exchange for shares of Purchaser common stock and
will purchase additional shares of Purchaser common stock for approximately
$650,000 in cash, such that the total amount of the Management Group's
contribution to the Purchaser will be approximately $3.5 million, representing
approximately 4.4% of the outstanding Purchaser common stock, and, after the
Merger, outstanding WinsLoew Common Stock. See "--Conflicts of
Interest--Post-Merger Ownership and Control of the Purchaser" and "THE MERGER --
Financing."
The Eligible Persons. Approximately 35 Eligible Persons (not including
members of the Management Group) will individually be offered the opportunity to
purchase shares of common stock of the Purchaser and/or contribute any or all of
their shares of Common Stock to the Purchaser in exchange for Purchaser common
stock.
As a result of the Merger, the following Affiliates are expected to
change their percentage beneficial ownership of the common equity of WinsLoew,
on a fully diluted basis, as follows: Messrs. Powell and George, from an
aggregate of approximately 29.8% to 95.6%.; and the Management Group, from an
aggregate of approximately 5.6% to 4.4%. Such post-Merger percentages for
Messrs. Powell and George include approximately 91.8% to be acquired by the
Trivest Partnerships in the Merger. Such Affiliates' interests in WinsLoew's net
book value and net earnings will increase correspondingly. See "SELECTED
CONSOLIDATED FINANCIAL DATA." Payments in connection with the Merger and related
financing will reduce substantially WinsLoew's net book value and net earnings.
See "THE MERGER--Financing."
In order to provide a prompt and orderly transfer of ownership of
WinsLoew from the current shareholders to the Trivest Investors and the members
of the Management Group, in light of relevant financial, legal, tax and other
considerations, and to facilitate the required financing for the transaction,
the acquisition has been structured as a merger pursuant to which, if the Merger
Agreement is adopted by the requisite vote of the shareholders, the Purchaser
will be merged with and into WinsLoew, and all of the outstanding shares of
Common Stock (other than shares held by the Purchaser) will be converted into
the right to receive the Cash Merger Consideration, without interest.
While the Trivest Investors and the members of the Management Group did
not consider any alternatives to the Merger with respect to the Company,
representatives of the Company, including members of the Management Group and
the Trivest Directors, have had discussions with third parties regarding
possible business combinations, sales or acquisitions of assets and other
transactions. See "SPECIAL FACTORS--Background of the Merger--Past Contracts,
Transactions and Negotiations" and "BUSINESS OF THE COMPANY--Background--Recent
Developments."
45
<PAGE> 54
While the Trivest Investors and the members of the Management Group
believe that there will be significant opportunities associated with their
investment in WinsLoew, there are also substantial risks that such opportunities
may not be fully realized.
Position of the Affiliates as to Fairness of the Merger
Each of the Affiliates has considered the analyses and findings of the
Special Committee and the Board (described in detail in "SPECIAL FACTORS -- The
Special Committee's and the Board's Recommendation") with respect to the
fairness of the Merger to the Public Shareholders of the Company. As of the date
of this Proxy Statement, each of the Affiliates adopts the analyses and findings
of the Special Committee and the Board with respect to the fairness of the
Merger and believes that the Merger is both procedurally and substantively fair
to, and in the best interest of, the Company's Public Shareholders; provided
that no opinion is expressed as to the fairness to any shareholder making an
investment in the Purchaser. The Trivest Directors have financial interests in
the Merger and the members of the Management Group have financial and employment
interests in the Merger. See "SPECIAL FACTORS--Conflicts of Interest."
Conflicts of Interest
In considering the recommendations of the Board with respect to the
Merger, shareholders should be aware that certain officers and directors of
WinsLoew and affiliates and associates of these officers and directors are
Trivest Investors or members of the Management Group or otherwise have interests
in connection with the Merger which may present them with actual or potential
conflicts of interest as summarized below. The Special Committee and the Board
were aware of these interests and considered them among the other matters
described under "--The Special Committee's and the Board's Recommendation." The
Special Committee considered the Management Group's conflicts of interest to be
a negative factor in its determination that the Merger is fair to the Public
Shareholders.
Post-Merger Ownership and Control of WinsLoew. It is anticipated that
immediately after the Merger the following individuals and entities will
beneficially own the number of shares of common stock of the Purchaser shown in
the following table, which are to be issued in exchange for cash or shares of
WinsLoew Common Stock contributed prior to the Merger. See "--Purpose and
Reasons of the Affiliates for the Merger." The table does not reflect the
beneficial ownership of any shares of common stock of the Purchaser by Eligible
Persons. To the extent any of the Eligible Persons accept the Purchaser's offer
to issue to them shares of common stock of the Purchaser in exchange for shares
of Common Stock or for cash, the share numbers and percentages shown in the
following table for the Trivest Partnerships will decrease.
<TABLE>
<CAPTION>
Number of Shares of Percentage of Purchaser
Purchaser Common Stock Common Stock
Name of Beneficial Owner Beneficially Owned(1) Beneficially Owned
- -------------------------------- ---------------------- -----------------------
<S> <C> <C>
Trivest Partnerships(2) ....... 71,573,000 91.8%
Trivest Directors (3)
Earl W. Powell (4) ......... 73,573,000 94.3%
Phillip T. George, M.D. (5) 72,573,000 93.0%
Trivest Investors Subtotal 74,573,000 95.6%
Management Group (3)
Bobby Tesney ............... 1,158,000 1.5%
R. Craig Watts ............. 869,000 1.1%
Vincent A. Tortorici, Jr ... 700,000 0.9%
Rick J. Stephens ........... 700,000 0.9%
Management Group Subtotal 3,427,000 4.4%
Total ................. 78,000,000 100.0%
</TABLE>
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<PAGE> 55
(1) Except as otherwise indicated below, all shares are owned directly and
each person has sole voting and investment power with respect to all
shares.
(2) Includes 34,124,000 shares to be held of record by Trivest Furniture
Partners, Ltd. and 37,449,000 shares to be held of record by Trivest Fund
II Group, Ltd. Such entities do not currently own any shares of Common
Stock. Trivest Equities, Inc. serves as the sole general partner of
Trivest Fund II Group, Ltd., a privately-held investment partnership.
Trivest serves as the sole general partner of TFP, Ltd., which in turn is
the sole general partner of Trivest Furniture Partners, Ltd., a
privately-held investment partnership. Messrs. Powell and George are
executive officers of each of Trivest Equities, Inc. and Trivest. Messrs.
Powell and George are the sole directors of Trivest Equities, Inc., and
Mr. Powell is the sole director of Trivest. Mr. Powell is the controlling
shareholder of both Trivest Equities, Inc. and Trivest. Each Trivest
Director is also an indirect investor in the Trivest Partnerships. See
"CERTAIN INFORMATION CONCERNING THE PURCHASER AND OTHER AFFILIATES."
(3) See "PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT" for number
of shares of Common Stock and percentage of Common Stock beneficially
owned before the Merger by these persons.
(4) Includes 2,000,000 shares to be held of record directly, 37,449,000
shares to be held of record by Trivest Furniture Partners, Ltd. and
34,124,000 shares held of record by Trivest Fund II Group, Ltd. See note
(2) above.
(5) Includes 1,000,000 shares to be held of record directly, 37,449,000
shares to be held of record by Trivest Furniture Partners, Ltd. and
34,124,000 shares held of record by Trivest Fund II Group, Ltd. See note
(2) above.
Following the consummation of the Merger, the members of the Management
Group will continue as executive officers of the Company, and Mr. Tesney will
continue to serve on the Board of Directors of the Company.
The Board of Directors of the Company after the Merger will be
comprised of Messrs. Powell, George, Kaczynski, Klein and Tesney. The Trivest
Investors are expected to beneficially own approximately 95.6% of the shares of
WinsLoew Common Stock after the Merger and by virtue of such ownership will be
able to designate all members of its Board of Directors.
Cash Payments to the Trivest Directors and Members of the Management
Group. Shares of Common Stock held by the Trivest Directors and the members of
the Management Group that are not contributed to the Purchaser will be converted
into the right to receive the same Cash Merger Consideration as shares of Common
Stock held by other shareholders of the Company. See "--Purpose and Reasons of
the Affiliates for the Merger." The Trivest Directors and the members of the
Management Group will also receive cash on the same basis as all other optionees
for the Aggregate Unrealized Gain on any stock options they hold. Prior to the
Effective Time, WinsLoew has agreed, pursuant to the terms of the Merger
Agreement, to take all necessary action to cancel all outstanding options to
purchase Common Stock, whether or not exercisable. See "THE MERGER--Cash-out of
WinsLoew Stock Options" and "PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF
MANAGEMENT." Under the terms of the Merger Agreement, all outstanding options
will be terminated (whether or not exercisable) and each holder thereof will
receive an amount in cash equal to the Aggregate Unrealized Gain on such options
on the same basis as other holders of WinsLoew stock options. As of June 1,
1999, there were options outstanding to purchase an aggregate of 765,400 shares
of Common Stock at a weighted average exercise price of $10.34 per share, all of
which have an exercise price per share of less than $34.75.
47
<PAGE> 56
The following table sets forth information as of June 1, 1999 as to the
shares of Common Stock and the options to purchase shares of Common Stock
(whether or not exercisable) held by members of the Management Group and the
Trivest Directors for which cash payments will be received upon consummation of
the Merger.
<TABLE>
<CAPTION>
Amount of Cash Total Amount of
to be Received Amount of Cash Cash to be
Trivest Director or Shares Not for Shares Not Shares to be Received Received upon
Management Group Contributed to Contributed to Underlying for Stock Consummation of
Member Purchaser Purchaser Stock Options(1) Options the Merger
- ------------------------ -------------- -------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Bobby Tesney ........... 18,369 $ 638,322.75 125,000 $ 3,216,875.00 $ 3,855,197.75
R. Craig Watts ......... 88,055 $ 3,059,911.25 85,175 $ 2,248,028.75 $ 5,307,940.00
Vincent A. Tortorici, Jr 8,317 $ 289,015.75 60,000 $ 1,556,250.00 $ 1,845,265.75
Rick J. Stephens ....... 2,028 $ 70,473.00 25,000 $ 642,812.50 $ 713,285.50
Earl W. Powell ......... 1,905,008(2) $ 66,199,028.00 51,125 $ 1,188,728.75 $ 67,387,756.75
Phillip T. George, M.D . 1,813,256(2) $ 63,010,646.00 35,750 $ 816,340.00 $ 63,826,986.00
William F. Kaczynski, Jr -- -- 7,500 $ 98,593.75 $ 98,593.75
Peter W. Klein ......... -- -- 22,550 $ 437,175.00 $ 437,175.00
</TABLE>
(1) Includes all options held, including both vested and unvested options.
(2) Includes 1,703,427 shares held of record by the Existing Trivest
Shareholders that will be converted into the right to receive the same
Cash Merger Consideration as shares of Common Stock held by other
shareholders of the Company.
Investment of Trivest Directors and Members of the Management Group in
the Purchaser. The following table sets forth the investment of the Trivest
Directors and each member of the Management Group in the Purchaser as a
percentage of the total value of the shares of Common Stock and the Aggregate
Unrealized Gain on any stock options held by such member.
<TABLE>
<CAPTION>
Value of WinsLoew
Trivest Director or Common Stock and Value of Investment Percentage
Management Group Member Options(1) in the Purchaser Investment
- ----------------------- ----------------- ------------------- ----------
<S> <C> <C> <C>
Trivest Directors
Earl W. Powell(2) ........... $ 69,387,758.25 $ 2,000,000.00 2.9%
Phillip T. George, M.D.(2) .. $ 64,826,986.75 $ 1,000,000.00 1.5%
Trivest Directors Total(2) $ 75,020,656.75 $ 3,000,000.00 4.0%
Trivest Management Group Members
Bobby Tesney ................ $ 5,013,206.75 $ 1,158,000.00 23.1%
R. Craig Watts .............. $ 6,176,933.25 $ 869,000.00 14.1%
Vincent A. Tortorici, Jr .... $ 2,145,262.50 $ 700,000.00 32.6%
Rick J. Stephens ............ $ 1,163,298.00 $ 700,000.00 60.2%
Management Group Total .. $ 14,498,700.50 $ 3,427,000.00 23.6%
</TABLE>
(1) Includes (i) the aggregate value of WinsLoew Common Stock (valued at
$34.75 per share) and (ii) the Aggregate Unrealized Gain on all stock
options.
(2) Includes 1,703,427 shares held of record by the Existing Trivest
Shareholders that will be converted into the right to receive the same
Cash Merger Consideration as shares of Common Stock held by other
shareholders of the Company.
Payments to Trivest. Upon consummation of the Merger, the Purchaser
will pay a financial advisory fee to Trivest of $______ for services rendered in
connection with the financing of the Merger and related
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<PAGE> 57
transactions. In addition, WinsLoew will pay Trivest an annual fee of $________
for ongoing financial advisory services.
New Employment Agreements with the Management Group. Upon consummation
of the Merger, the employment agreements that Messrs. Tesney, Watts and
Tortorici currently have with the Company will terminate. At such time, such
members of the Management Group will enter into new employment agreements with
WinsLoew providing for the payment of substantially the same base salaries and
annual cash bonuses as their existing employment agreements.
The Special Committee. As compensation for serving on the Special
Committee, which met in person or by telephone conference on approximately 27
occasions between January 7, 1999 and the date of this Proxy Statement, the
Chairman of the Special Committee will receive a fee of approximately $30,000,
and the other members of the Special Committee will each receive $22,500.
Each member of the Special Committee, as an outside director, typically
receives on the date of each meeting of the Board options to purchase 2,500
shares of Common Stock at the market price of the Common Stock on such date.
Each director received options to purchase 2,500 shares of Common Stock on
January 7, 1999, the date of the first Board meeting in 1999, none of which have
been exercised. Directors have not been granted any options since that date.
The following table sets forth information as of June 1, 1999 as to the
shares of Common stock and options to purchase shares of Common Stock (whether
or not exercisable) held by members of the Special Committee and the cash
payments that they will receive upon consummation of the Merger.
<TABLE>
<CAPTION>
Total Amount of
Amount of Cash Cash to be
to be Received Shares Amount of Cash Received upon
Shares of for Shares of Underlying to be received for Consummation of
Special Committee Member Common Stock Common Stock Options(1) Stock Options the Merger
- ------------------------ ------------ -------------- ---------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
William H. Allen, Jr 1,050 $ 36,487.50 25,000 [$561,093.75 $ 597,581.25
Henry C. Cheek ..... 6,000 [$208,500.00 32,500 [$722,812.50 $ 931,312.50
M. Miller Gorrie ... 141,450 $ 4,915,387.50 30,000 [$678,437.50 $ 5,593,825.00
James S. Smith ..... 20,000 [$695,000.00 32,500 [$723,437.50 $ 1,418,437.50
Sherwood M. Weiser . 7,675 [$266,706.25 25,000 [$561,093.95 $ 827,800.00
</TABLE>
(1) Includes all options held, including both vested and unvested options.
Members of the Special Committee will also be entitled to certain
indemnification rights granted under the Merger Agreement to the current and
former directors and officers of the Company. See "--Conflicts of
Interest--Indemnification and Insurance."
Indemnification and Insurance. The Merger Agreement provides that all
rights to indemnification for acts or omissions occurring prior to the Effective
Time now existing in favor of the current or former directors or officers of the
Company and its subsidiaries (including the members of the Special Committee)
shall survive the Merger and shall continue in accordance with their terms. In
addition, WinsLoew is obligated for a period of two years from the Effective
Time to continue in effect directors' and officers' liability insurance with
respect to matters occurring prior to the Effective Time, which insurance must
contain terms and conditions no less advantageous than are contained in
WinsLoew's current directors' and officers' liability insurance policy; provided
that WinsLoew is not obligated to expend annually more than 200% of the current
cost of such coverage.
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<PAGE> 58
Certain Effects of the Merger
As a result of the Merger, other than the Eligible Persons, the Public
Shareholders will not have an opportunity to continue their equity interest in
WinsLoew as an ongoing corporation and therefore will not share in the future
earnings and potential growth of WinsLoew. Upon consummation of the Merger, the
Common Stock will no longer be traded on the Nasdaq National Market, price
quotations will no longer be available and the registration of the Common Stock
under the Exchange Act will be terminated. The termination of registration of
the Common Stock under the Exchange Act will eliminate the requirement to
provide information to the Commission and will make most of the provisions of
the Exchange Act, such as the short-swing profit recovery provisions of Section
16(b) and the requirement of furnishing a proxy or information statement in
connection with shareholders' meetings, no longer applicable.
The members of the Management Group, the Eligible Persons and two of
the Trivest Directors (Messrs. Powell and George) will own direct equity
interests in WinsLoew after the Merger that will allow them directly to share in
its future earnings and potential growth. In addition, all of the Trivest
Directors are indirect investors in the Trivest Partnerships. An investment in
WinsLoew following the Merger involves substantial risk resulting from the
limited liquidity of any such investment and the increased leverage associated
with future borrowings that will be necessary to fund the substantial capital
expenditures required to execute the Company's business strategy. Nonetheless,
if the Company is able to successfully implement its business strategy, the
value of such an equity investment would be considerably greater than the
original cost thereof. See "CERTAIN FORWARD LOOKING INFORMATION."
The receipt of cash pursuant to the Merger will be a taxable
transaction. See "FEDERAL INCOME TAX CONSEQUENCES."
Conduct of WinsLoew's Business After the Merger
The Purchaser is continuing to evaluate WinsLoew's business, assets,
practices, operations, properties, corporate structure, capitalization,
management and personnel and discuss what changes, if any, will be desirable.
Subject to the foregoing, the Purchaser expects that the day-to-day business and
operations of WinsLoew will be conducted substantially as they are currently
being conducted by WinsLoew. The Purchaser does not currently intend to dispose
of any assets of WinsLoew, other than in the ordinary course of business.
Additionally, the Purchaser does not currently contemplate any material change
in the composition of WinsLoew's current management, although after the Merger,
the Board will be comprised of Messrs. Powell, George, Kaczynski, Klein and
Tesney.
Certain Forward Looking Information
Certain projections prepared by management of WinsLoew are included
elsewhere in this Proxy Statement under the heading "CERTAIN FORWARD LOOKING
INFORMATION."
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<PAGE> 59
THE MERGER
The Merger Agreement provides that the Purchaser, a newly-formed
Florida corporation, will be merged with and into WinsLoew, and that following
the Merger, the separate existence of the Purchaser will cease and WinsLoew will
continue as the surviving corporation.
The terms of and conditions to the Merger are contained in the Merger
Agreement which is included in full as Appendix A to this Proxy Statement and is
incorporated herein by reference. The discussion in this Proxy Statement of the
Merger and the summary description of the principal terms of the Merger
Agreement are subject to and qualified in their entirety by reference to the
more complete information set forth in the Merger Agreement.
Conversion of Securities
At the Effective Time, subject to the terms, conditions and procedures
set forth in the Merger Agreement, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares held by
the Purchaser) will, by virtue of the Merger, be converted into the right to
receive the Cash Merger Consideration. Except for the right to receive the Cash
Merger Consideration, from and after the Effective Time, all shares (other than
shares held by the Purchaser), by virtue of the Merger and without any action on
the part of the holders, will no longer be outstanding and will be canceled and
retired and will cease to exist. Each holder of a certificate formerly
representing any shares (other than shares held by the Purchaser) will after the
Effective Time cease to have any rights with respect to such shares other than
the right to receive the Cash Merger Consideration for such shares upon
surrender of the certificate.
No interest will be paid or accrued on the amount payable upon the
surrender of any certificate. Payment to be made to a person other than the
registered holder of the certificate surrendered is conditioned upon the
certificate so surrendered being properly endorsed and otherwise in proper form
for transfer, as determined by the Disbursing Agent. Further, the person
requesting such payment will be required to pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the certificate surrendered or establish to the satisfaction of the
Disbursing Agent that such tax has been paid or is not payable. Six months
following the Effective Time, WinsLoew will be entitled to cause the Disbursing
Agent to deliver to it any funds (including any interest received with respect
thereto) made available to the Disbursing Agent which have not been disbursed to
holders of certificates formerly representing shares outstanding prior to the
Effective Time, and thereafter such holders will be entitled to look to WinsLoew
only as general creditors with respect to cash payable upon due surrender of
their certificates. Notwithstanding the foregoing, neither the Disbursing Agent
nor any party to the Merger Agreement will be liable to any holder of
certificates formerly representing shares for any cash paid to a public official
pursuant to any applicable abandoned property, escheat or similar law. Except as
described in this paragraph, WinsLoew will pay all charges and expenses,
including those of the Disbursing Agent, in connection with the exchange of
shares for the Cash Merger Consideration.
Each share of the Purchaser's common stock that is issued and
outstanding immediately prior to the Merger will be converted at the Effective
Time into one share of Common Stock of WinsLoew.
Cash-out of WinsLoew Stock Options
In general, outstanding stock options to purchase shares of WinsLoew
Common Stock shall be canceled or terminated as of the Effective Time. Holders
of such options shall receive a cash payment equal to the difference between
$34.75 per share and the exercise prices of their WinsLoew stock options times
the number of shares issuable upon exercise of such options (the "Aggregate
Unrealized Gain").
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<PAGE> 60
Transfer of Shares
No transfers of shares of Common Stock will be made on the stock
transfer books at or after the Effective Time. If, after the Effective Time,
certificates representing such shares are presented to WinsLoew, such shares
will be canceled and exchanged for the Cash Merger Consideration.
Conditions
Each party's respective obligation to effect the Merger is subject to
the satisfaction, at or prior to the Effective Time, of each of the following
conditions, any or all of which may be waived at the appropriate party's
discretion, to the extent permitted by applicable law:
(a) the Merger Agreement and the Merger shall have been approved
and adopted by the affirmative vote or consent of the holders of at least a
majority of the outstanding shares of Common Stock;
(b) all consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental authority or other regulatory
body required in connection with the execution, delivery and performance of the
Merger Agreement, the failure to obtain which would prevent the consummation of
the Merger or have a material adverse effect on the Company, shall have been
obtained without the imposition of any condition having a material adverse
effect on the Company;
(c) early termination shall have been granted or applicable
waiting periods shall have expired under the HSR Act, if applicable;
(d) no governmental authority or other regulatory body (including
any court of competent jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
then in effect and has the effect of making illegal, materially restricting or
in any way preventing or prohibiting the Merger or the transactions contemplated
by the Merger Agreement; and
(e) all authorizations, consents, waivers and approvals from
parties to contracts or other agreements to which any of the Company or its
subsidiaries is a party, or by which any of them is bound, as may be required to
be obtained by them in connection with the performance of the Merger Agreement,
the failure to obtain which would prevent the consummation of the Merger or
have, individually or in the aggregate, a material adverse effect on Company,
shall have been obtained.
The obligations of the Purchaser to effect the Merger are further
subject to satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) there shall not have occurred any change, condition, event or
development that has resulted in, or could reasonably be expected to result in,
a material adverse effect on the Company;
(b) the representations and warranties of the Company in the
Merger Agreement that are qualified by materiality shall be true and correct in
all respects as of the date of the Merger Agreement and as of the Effective
Time;
(c) the representations and warranties of the Company in the
Merger Agreement that are not qualified by materiality shall be true and correct
in all material respects as of the date of the Merger Agreement and as of the
Effective Time;
(d) the Company shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement;
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<PAGE> 61
(e) an officer of the Company shall have delivered to the
Purchaser a certificate to the effect that each of the conditions specified in
the preceding clauses (b), (c) and (d) is satisfied in all respects; and
(f) the Purchaser shall have received an opinion, dated the
Effective Time, of Balch & Bingham in form and substance reasonably satisfactory
to the Purchaser, with respect to the matters set forth in Sections 3.01, 3.02,
3.03, 3.04 and 3.05 of the Merger Agreement (relating to organization,
subsidiaries, capitalization, authority and consents, approvals and the absence
of violations, respectively).
The obligations of the Company to effect the Merger are further
subject to satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) the representations and warranties of the Purchaser in the
Merger Agreement that are qualified by materiality shall be true and correct in
all respects as of the date of the Merger Agreement and as of the Effective
Time;
(b) the representations and warranties of the Purchaser in the
Merger Agreement that are not qualified by materiality shall be true and correct
in all material respects as of the date of the Merger Agreement and as of the
Effective Time;
(c) the Purchaser shall have performed in all material respects
all obligations required to be performed by them under the Merger Agreement;
(d) the Purchaser shall have delivered to the Company a
certificate to the effect that each of the conditions specified in the preceding
clauses (a), (b) and (c) is satisfied in all respects;
(e) the Company shall have received an opinion, dated the
Effective Time, of Greenberg Traurig in form reasonably satisfactory to the
Company, with respect to the matters set forth in Sections 4.01, 4.02 and 4.03
of the Merger Agreement; and
(f) the Purchaser shall have executed definitive documentation in
connection with their financing of the aggregate Cash Merger Consideration and
shall have sufficient funds available to consummate the Merger, to pay all
related expenses and to refinance the Company's existing indebtedness under its
credit facility.
After approval of the Merger Agreement by the shareholders of WinsLoew,
no condition may be waived that reduces the amount or changes the form of the
Cash Merger Consideration to be received by the shareholders or that by law
requires further shareholder approval unless a waiver of such condition is
approved by the shareholders.
Representations and Warranties
WinsLoew has made representations and warranties in the Merger
Agreement regarding, among other things, organization and good standing,
subsidiaries, capitalization, authority to enter into the Merger Agreement,
requisite governmental and other consents and approvals, content and submission
of forms and reports required to be filed by WinsLoew with the Commission,
financial statements, absence of certain changes in the business of WinsLoew
since December 31, 1998, absence of undisclosed liabilities, employee benefits,
absence of litigation to which WinsLoew is a party, possession of necessary
permits and compliance with applicable law, requisite tax filings, brokers and
finders, labor matters, title to property, environmental matters, accounts
receivable, customers, interested party transactions, insurance, product
liability and inventory.
The Purchaser has made representations and warranties in the Merger
Agreement regarding, among other things, its organization and good standing,
authority to enter into the transaction, requisite governmental and other
consents and approvals, accuracy of information supplied by the Purchaser for
submission in forms and reports
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<PAGE> 62
required to be filed with the Commission, the Purchaser's financing capability,
WinsLoew's solvency after the Merger, brokers and finders and absence of prior
activities.
The representations and warranties of the parties in the Merger
Agreement will expire upon consummation of the Merger, and upon such expiration
none of such parties or their respective officers, directors or principals will
have any liability whatsoever with respect to any such representations or
warranties.
Covenants
In the Merger Agreement, WinsLoew has agreed as to itself and its
subsidiaries that prior to the Effective Time, unless otherwise agreed to in
advance by the Purchaser or as otherwise contemplated by the Merger Agreement:
(a) The Company shall, and shall cause its subsidiaries to, carry
on their respective businesses in the usual, regular and ordinary course and the
Company shall, and shall cause its subsidiaries to, use all reasonable efforts
to preserve intact their present business organizations, keep available the
services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
the Company and its subsidiaries.
(b) The Company shall not, and shall not permit any of its
subsidiaries to, (i) declare or pay any dividends on or make other distributions
in respect of any of its capital stock, except for dividends by a direct or
indirect wholly-owned subsidiary of the Company to its Purchaser, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or its subsidiaries
or any other securities thereof.
(c) The Company shall not, and shall not permit any of its
subsidiaries to, issue, deliver, sell, pledge or encumber, or authorize or
propose the issuance, delivery, sale, pledge or encumbrance of, any shares of
its capital stock of any class or any securities convertible into, or any
rights, warrants, calls, subscriptions or options to acquire, any such shares or
convertible securities, or any other ownership interest (including stock
appreciation rights or phantom stock) other than (i) the issuance of shares of
Common Stock upon the exercise of Company stock options outstanding on the date
of the Merger Agreement and in accordance with the terms of such Company stock
options, or (ii) issuances by a wholly-owned subsidiary of the Company of its
capital stock to its Purchaser.
(d) The Company shall not, and shall not permit any of its
subsidiaries to, amend or propose to amend its articles or certificate of
incorporation or bylaws (or similar organizational documents) in any way which
would be adverse to the Purchaser's rights under the Merger Agreement.
(e) The Company shall not, and shall not permit any of its
subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or any substantial assets of (other than
inventory and equipment in the ordinary course consistent with past practice, to
the extent not otherwise prohibited by the Merger Agreement), or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof.
(f) Other than dispositions in the ordinary course of business
consistent with past practice, the Company shall not, and shall not permit any
of its subsidiaries to, sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of, any of its
assets.
(g) The Company shall not, and shall not permit any of its
subsidiaries to, (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its subsidiaries, guarantee
any debt securities of others, enter into any "keep-well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
working capital borrowings incurred in the ordinary course of business
consistent with past practice under the Company's credit facility
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<PAGE> 63
existing and in effect on the date of the Merger Agreement, or (ii) make any
loans, advances or capital contributions to, or investments in, any other
person, other than, with respect to both clause (i) and (ii) above, (A) to the
Company or any direct or indirect wholly owned subsidiary of the Company, or (B)
any advances to employees in accordance with past practice.
(h) The Company shall confer with the Purchaser on a regular and
frequent basis as reasonably requested by the Purchaser, report on operational
matters and promptly advise Purchaser orally and, if requested by the Purchaser,
in writing of any change or event to the best knowledge of the Company having,
or which, insofar as can reasonably be foreseen, is likely to have, a material
adverse effect on the Company. The Company shall promptly provide to the
Purchaser (or its counsel) copies of all filings made by the Company with any
governmental entity in connection with the Merger Agreement and the transactions
contemplated hereby.
(i) The Company shall not make any material change, other than in
the ordinary course of business, consistent with past practice, or as required
by the Commission or law, with respect to any accounting methods, principles or
practices used by the Company (except insofar as may be required by a change in
generally accepted accounting principles).
(j) Except for fees and expenses related to the transactions
contemplated herein, the Company shall not, and shall not permit any of its
subsidiaries to, pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of (i) liabilities recognized or disclosed in the most recent
financial statements contained in documents filed by the Company with the
Commission, or (ii) liabilities incurred since the date of such financial
statements in the ordinary course of business consistent with past practice. The
Company shall not, and shall not permit any of its subsidiaries to, waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company or any of its subsidiaries is a party.
(k) Except as provided in the Merger Agreement, the Company and
its subsidiaries will not, without the prior written consent of the Purchaser,
which shall not be unreasonably withheld, except as may be required by law, (i)
enter into, adopt, amend or terminate any Company benefit plan or other employee
benefit plan or any agreement, arrangement, plan or policy for the benefit of
any director, executive officer or current or former key employee, (ii) increase
in any manner the compensation or fringe benefits of, or pay any bonus to, any
director, executive officer or key employee, except as required by any Company
benefit plan or agreement with such employees existing on the date of this
Agreement, (iii) enter into, adopt, amend or terminate any Company benefit plan
or other benefit plan or agreement, arrangement, plan or policy for the benefit
of any employees who are not directors, executive offices or current or former
key employees of the Company, other than increases in the compensation of
employees made in the ordinary course of business consistent with past practice,
or (iv) pay any benefit not required by any plan or arrangement as in effect as
of the date hereof (including the granting of, acceleration of exercisability of
or vesting of stock options, stock appreciation rights or restricted stock).
(l) Except in the ordinary course of business consistent with past
practices, neither the Company nor any of its subsidiaries shall (i) modify,
amend or terminate any material contract or agreement to which the Company or
such subsidiary is a party, or (ii) waive, release or assign any material rights
or claims.
(m) The Company shall not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation of the
Company or any of its subsidiaries.
(n) Except as set forth in the Merger Agreement, the Company shall
not make any tax election or settle or compromise any material income tax
liability.
(o) The Company shall not nor will it permit any of its
subsidiaries to take or agree or commit to take any action that is reasonably
likely to result in any of the Company's representations or warranties hereunder
being untrue in any material respect at, or as of any time prior to, the
Effective Time.
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<PAGE> 64
(p) The Company shall not, and shall not permit any of its
subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions described in clauses (a) through (o).
In addition, except as contemplated by the Merger Agreement, the
Company shall not, and shall not permit any of its subsidiaries to, take any
action that could reasonably be expected to result in (i) any of the
representations and warranties of the Company set forth in the Merger Agreement
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect, or (iii) any of the conditions to the Merger set forth above
not being satisfied in all material respects.
In addition, the Purchaser has agreed to pay the Cash Merger
Consideration to the Disbursing Agent not later than the tenth business day
following the satisfaction or waiver of the conditions to the Purchaser's
obligation to consummate the Merger.
Nonsolicitation Covenant
The Company has agreed that it and its officers, directors, employees,
representatives and agents shall immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to an Acquisition
Proposal that could not reasonably be considered a Superior Proposal. The
Company has agreed that it shall not, nor shall it permit any of its
subsidiaries to, authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing non-public information or assistance), or knowingly take any other
action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
or (ii) participate in any discussions or negotiations regarding any Acquisition
Proposal; provided, however, that if, at any time the Board of Directors of the
Company determines in good faith, based upon the opinion of independent legal
counsel (who may be the Company's regularly engaged independent counsel), that
it is necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, the Company may, in response to an
unsolicited Superior Proposal, (x) furnish information with respect to the
Company to the person making such unsolicited Superior Proposal pursuant to a
confidentiality agreement in a form approved by the Company and Purchaser (such
approval not to be unreasonably withheld or delayed), and (y) participate in
discussions or negotiations regarding such Superior Proposal. WinsLoew is
obligated to inform the Purchaser promptly of any request for information or any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and, unless the Company is contractually prohibited from
making such disclosure, the identity of the person making such request or
Acquisition Proposal.
Except as set forth above, neither the Board of Directors of the
Company nor any committee thereof may (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Purchaser, the approval or
recommendation by such Board of Directors or committee of the Merger Agreement
or the Merger, (ii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal, or (iii) cause the Company to enter into any agreement
with respect to any Acquisition Proposal. Notwithstanding the foregoing, in the
event that the Board of Directors of the Company determines in good faith, based
upon the opinion of independent legal counsel (who may be the Company's
regularly engaged independent counsel), that it is necessary to do so in order
to comply with its fiduciary duties to the Company's shareholders under
applicable law, the Board of Directors of the Company may withdraw or modify its
approval or recommendation of the Merger Agreement and the Merger, approve or
recommend a Superior Proposal, cause the Company to enter into an agreement with
respect to a Superior Proposal or terminate the Merger Agreement, but in each
case only at a time that is after the fifth business day following Purchaser's
receipt of written notice (a "Notice of Superior Proposal") advising the
Purchaser that the Board of Directors of the Company has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal. In addition, if the
Company proposes to enter into an agreement with respect to any Acquisition
Proposal, it must concurrently with entering into such agreement pay, or cause
to be paid, to the Purchaser the Termination Fee.
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Indemnification and Insurance
The Merger Agreement provides that all rights to indemnification for
acts or omissions occurring prior to the Effective Time existing in favor of the
current or former directors or officers of the Company and its subsidiaries as
provided in their respective certificates or articles of incorporation or bylaws
(or similar organizational documents) or existing indemnification contracts
shall survive the Merger and shall continue in full force and effect in
accordance with their terms. In addition, the Purchaser will provide for a
period of not less than two years after the Effective Time, the Company's
current directors and officers an insurance and indemnification policy that
provides coverage for events occurring at or prior to the Effective Time that is
no less favorable than the Company's existing insurance and indemnification
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, that the Company shall not be
required to pay an annual premium for the such insurance and indemnification
policy in excess of 200% of the annual premium currently paid by the Company for
such insurance, but in such case shall purchase as much such coverage as
possible for such amount.
Expenses
The parties have agreed to pay their own costs and expenses in
connection with the Merger Agreement and the transactions contemplated thereby,
provided that the Purchaser will pay any filing fees required under the HSR Act.
WinsLoew has agreed, however, to pay or reimburse the Purchaser for all expenses
up to $1.5 million incurred by the Purchaser in connection with the Merger
Transaction upon certain events. See "THE MERGER--Termination Fee."
Termination, Amendment and Waiver
At any time prior to the Effective Time, the Merger Agreement may be
terminated by the mutual written consent of WinsLoew and the Purchaser. In
addition, either WinsLoew or the Purchaser may terminate the Merger Agreement
prior to the Effective Time if (i) any governmental entity shall have issued an
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for payment of, or payment
for, shares of Common Stock pursuant to the Merger and such order, decree or
ruling or other action shall have become final and nonappealable, provided,
however, that such right to terminate the Merger Agreement is not available to
any party that has failed to use its reasonable efforts to comply promptly with
legal requirements, cooperate with and furnish information to the other party
and obtain any required governmental or other consents, authorizations, orders,
approvals or exemptions or (ii) the Effective Time shall not have occurred on or
before August 31, 1999, unless extended by agreement of the Purchaser and the
Company.
The Merger Agreement may be terminated by the Purchaser prior to the
Effective Time if: (i)(A) the representations and warranties of the Company as
to its capitalization shall not have been true and correct in all material
respects when made, or (B) any other representation or warranty of the Company
shall not have been true and correct in all material respects when made, except
in any case where such failure to be true and correct would not, in the
aggregate, (x) have a material adverse effect on the Company, or (y) prevent or
delay the consummation of the Merger; (ii) the Company shall have failed to
comply in any material respect with any of its material obligations or covenants
contained in the Merger Agreement, except in any case where such failure would
not, in the aggregate, (x) have a material adverse effect on the Company, or (y)
prevent or materially delay consummation of the Merger; (iii) there shall have
been a material adverse change with respect to the Company, provided that the
Company shall, if curable, have a reasonable period in which to cure any failure
described in clause (i), (ii) or (iii) of this paragraph; or (iv)(A) the Board
or the Special Committee fails to approve and recommend or withdraws or modifies
in a manner adverse to the Purchaser its approval or recommendation of the
Merger or the Merger Agreement, or approves or recommends any Acquisition
Proposal, (B) the Company enters into any agreement with respect to any Superior
Proposal following written notice to the Purchaser and payment of the
Termination Fee discussed below, or (C) the Board or the Special Committee
resolves to take any such action in clauses (iv)(A) or (B).
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<PAGE> 66
WinsLoew may terminate the Merger Agreement (i) in connection with
entering into a definitive agreement with respect to a Superior Proposal
following written notice to the Board, a determination that the Company's
failure to do so would violate the Board's fiduciary duties and the payment of
the termination Fee described below and provided that the Company complies with
its covenant against soliciting, discussing or negotiating any Acquisition
Proposal (except as required by the Board's fiduciary duties), (ii) if any
representation or warranty of the Purchaser was not true and correct in all
material respects when made or has ceased to be true and correct in all material
respects as if made on such later date, (iii) if the Purchaser fails to comply
in any material respect with any of its material obligations or covenants in the
Merger Agreement, or (iv) if the Purchaser fails to pay the Cash Merger
Consideration to the Disbursing Agent not later than the tenth business day
following the satisfaction or waiver of the conditions to the obligations of the
Purchaser to consummate the Merger, provided that the Purchaser shall, if
curable, have a reasonable period in which to cure any failure described in
clause (ii) or (iii) of this paragraph.
Subject to the provisions of applicable law, the Merger Agreement may
be modified or amended, and provisions thereof waived, by written agreement of
the parties. However, after approval of the terms of the Merger Agreement by the
shareholders of WinsLoew, no amendment or waiver of a provision may be made
which reduces the amount or changes the form of the Cash Merger Consideration to
be received by the shareholders or that by law requires further shareholder
approval unless such amendment or waiver of a provision is approved by the
shareholders. With respect to any material modification, amendment or waiver of
the Merger Agreement, the Board, in the exercise of its fiduciary duty and in
accordance with any applicable law or regulation, will make a resolicitation of
shareholders.
Termination Fee
WinsLoew has agreed to pay to the Purchaser a Termination Fee in the
amount of $10.0 million plus up to $1.5 million of expenses of the Purchaser in
the event the Merger Agreement is terminated (i) by the Purchaser due to (A) the
breach by the Company of any of its representations, warranties or covenants, or
a material adverse change with respect to WinsLoew, each as described above (see
"THE MERGER--Termination; Amendment and Waiver"), or (B) (1) the Board or the
Special Committee failing to approve and recommend or withdrawing or modifying
in a manner adverse to the Purchaser its approval or recommendation of the
Merger or the Merger Agreement, or approving or recommending any Acquisition
Proposal, (2) the Company entering into any agreement with respect to any
Superior Proposal or (3) the Board or the Special Committee resolving to take
any such action in clauses (1) or (2), or (ii) by the Company due to entering
into a definitive agreement in connection with a Superior Proposal.
Escrow Deposit
Pursuant to the Escrow Agreement, the Purchaser has delivered a cash
escrow deposit in the amount of $3.0 million to an escrow agent pending the
consummation of the Merger or the termination of the Merger Agreement. In the
event that WinsLoew terminates the Merger Agreement due to (i) any uncured
material breach by the Purchaser of any of its representations or material
obligations in the Merger Agreement or (ii) the Purchaser's failure to pay the
Cash Merger Consideration to the Disbursing Agent not later than the tenth
business day following the satisfaction or waiver of the conditions to the
obligations of the Purchaser to consummate the Merger, then, in addition to any
other remedies WinsLoew may have in respect of such termination, the escrow
deposit shall be paid to WinsLoew. Upon the consummation of the Merger or the
termination of the Merger Agreement for any other reason, the escrow deposit
shall be paid to the Purchaser.
Financing
It is estimated that approximately $282.2 million will be required to
consummate the Merger and pay related fees and expenses. This sum is expected to
be provided by the following: (i) approximately $78.0 million in equity
contributions to the Purchaser by the Trivest Investors (reduced by the cash and
the aggregate
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<PAGE> 67
value (at $34.75 per share) of the shares of Common Stock contributed to the
Purchaser by the Eligible Persons) and the Management Group; (ii) borrowings of
approximately $63.1 million under a $145.0 million senior secured credit
facility to be obtained by the Purchaser, WinsLoew and its subsidiaries pursuant
to a commitment letter, dated as of April 27, 1999, from BankBoston; (iii) the
issuance by WinsLoew of approximately $135.0 million aggregate principal amount
of senior subordinated notes that the Purchaser expects to issue based upon a
letter from Bear Stearns to the effect that, as of May 12, 1999 and subject to
certain conditions, it was highly confident that it could arrange for the sale
of such notes in connection with the Merger; and (iv) approximately $6.1 million
of WinsLoew's expected cash on hand. The bank financing commitment includes
$75.0 million in term loans, a $30.0 million revolver and a $40.0 million
acquisition line for subsequent acquisitions by WinsLoew, all to be secured by
first-fee mortgages on owned real estate and first priority security interests
in substantially all of WinsLoew's assets. The BankBoston commitment letter is
subject to customary conditions, and the Bear Stearns highly confident letter
does not constitute a commitment or undertaking by Bear Stearns to place or
purchase the senior subordinated notes and does not ensure the successful
placement or completion of the offering of such notes; moreover, the Bear
Stearns letter sets forth only its expectation as of May 12, 1999 with respect
to its ability to arrange a sale of the notes in connection with the Merger.
Except for the BankBoston and Trivest commitment letters, there are no firm
commitments from any person to provide equity, provide senior financing,
purchase the Company's senior subordinated notes or provide any other financing
for the Merger, and there can be no assurance that any such financing will be
obtained. See "SPECIAL FACTORS--Purpose and Reasons of the Affiliates for the
Merger."
Cash Financing for the Merger. The cash financing for the Merger is
expected to be provided by as follows:
<TABLE>
<CAPTION>
Source of Funds Amount
--------------- ------
<S> <C>
Cash contribution to the Purchaser by the Trivest Partnerships(1) ....... $ 70,573,000
Cash contribution to the Purchaser by the individual Trivest Investors .. --
Cash contribution to the Purchaser by the members of the Management Group 650,000
Expected Cash on hand of WinsLoew ....................................... 6,100,000
Senior Secured Credit Facility .......................................... 63,100,000
Senior Subordinated notes ............................................... 135,000,000
Total ............................................................... $276,423,000
</TABLE>
(1) The amount of the cash contribution of the Trivest Partnerships will be
reduced by an amount equal to the aggregate value (at $34.75 per share)
of any shares of Common Stock contributed to the Purchaser by the
Eligible Persons.
Credit Facility. The BankBoston commitment letter provides, subject to
various conditions mentioned below, for a total of $145.0 million financing in
the form of (i) two groups of term loans, the Term A loans for $25.0 million and
the Term B loans for $50.0 million, (ii) revolving loans for up to $30.0
million, including letters of credit, and (iii) revolving loans for permitted
acquisitions for up to $40.0 million. Subject to certain restrictions, WinsLoew
will be able to use the senior credit facility for its working capital and
general corporate purposes.
Repayment. The different loans under the senior credit facility will be
due as follows:
- The revolving loans -- five and a half years after the
consummation of the merger;
- The acquisition loans -- 33.3% in each of 2002, 2003 and 2004;
- The Term A loans -- 12.0% in 2000, 12.0% in 2001, 24.0% in
2002, 24.0% in 2003 and 28.0% in 2004; and
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<PAGE> 68
- The Term B loans --1.0% in each of 1999, 2000, 2001, 2002,
2003 and 2004 and 47.0% in each of 2005 and 2006.
The Term A loans may be drawn in two stages. If the Pompeii acquisition
has not occurred on or prior to the Transaction, the initial draw under Term A
loans will be $5.0 million with the balance of $20.0 million to be funded upon
consummation of the Pompeii acquisition. The remaining $20.0 million commitment
to Term A loans will terminate if it has not been drawn in conjunction with the
funding of the Pompeii acquisition on or prior to September 30, 1999. See
"BUSINESS OF THE COMPANY--Background--Recent Developments."
Availability under the revolving loans will be limited to the sum of
(i) 85% of combined eligible accounts receivable, plus (ii) 60% of combined
eligible inventory.
The revolving loans for acquisitions will be used to fund permitted
acquisitions after the Merger, excluding the pending Pompeii acquisition. These
loans will be available on a revolving basis through December 31, 2001. Amounts
not drawn by that date will be canceled.
WinsLoew will be permitted to repay any of its borrowings, or
reborrowings in the case of the revolving loans, under the senior credit
facility without paying a premium or penalty, other than payment of breakage
costs and reimbursement of the lenders' actual re-employment costs under certain
circumstances.
Also, it is mandatory that WinsLoew repay any outstanding borrowings
out of certain net cash proceeds WinsLoew receives from the following events:
- 100% of sales of assets so long as WinsLoew's leverage ratio
is greater than or equal to 3.0:1, except for sales in the
ordinary course of business and subject to certain exceptions,
including the right to reinvest the proceeds in its business
under certain circumstances;
- 100% of permitted debt issuances, subject to certain
exceptions;
- 100% of permitted equity issuances (50% for an initial public
offering), subject to certain exceptions; and
- 50% of annual excess cash flow (25% when the leverage ratio is
less than 3.0:1).
Security; Guaranty. Each of WinsLoew's direct and indirect domestic
subsidiaries will guarantee WinsLoew's obligations under the senior credit
facility. The following will secure its obligations under the senior credit
facility and each of the guarantors under its guarantee:
- a security interest in substantially all of WinsLoew's assets
and the assets of the subsidiary guarantors; and
- a pledge of all of the capital stock of each of WinsLoew's
direct and indirect domestic subsidiaries.
Interest. At WinsLoew's option, the interest rates under the senior
credit facility will be either: (1) the base rate, which is the higher of the
prime lending rate or 0.5% in excess of the federal funds effective rate, plus a
margin, or (2) adjusted LIBOR plus a margin. The margins of the different loans
under the senior credit facility will vary according to a pricing grid based
upon WinsLoew's consolidated leverage ratio as follows:
- on each of the Term A loans and revolving loans (including
acquisition loans), the margins will range from 0.75% to zero
for the base rate or from 2.75% to 1.75% for adjusted LIBOR;
and
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<PAGE> 69
- on the Term B loans, the margins will range from 1.25% to
0.75% for base rate or from 3.25% to 2.75% for adjusted LIBOR.
Fees. WinsLoew has agreed to pay certain fees in connection with the
senior credit facility, including: (1) letter of credit fees; (2) agency fees;
and (3) commitment fees. Commitment fees are payable at a rate per annum of 0.5%
on the undrawn amounts of the revolving loans but (i) may reduce to 0.375%
depending upon our consolidated leverage ratio and (ii) will be 0.75% until
WinsLoew borrows more than $20.0 million for acquisitions.
Covenants. The senior credit facility will require that WinsLoew meet
certain financial tests which include a maximum leverage ratio, a minimum
interest coverage ratio and minimum EBITDA levels. The senior credit facility
will also contain covenants which, among other things, will restrict WinsLoew's
ability, subject to certain exceptions, to do the following:
- incur liens;
- engage in transactions with affiliates;
- incur indebtedness;
- declare dividends or redeem or repurchase capital stock;
- make loans and investments;
- engage in mergers, acquisitions, consolidations and asset
sales;
- acquire assets, stock or debt securities of any person;
- amend our articles of incorporation; and
- make capital expenditures.
The senior credit facility will also require that WinsLoew satisfy
certain customary affirmative covenants and make certain customary
indemnifications to its lenders and the administrative agent under the senior
credit facility.
Events of Default. The senior credit facility will contain customary
events of default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, certain events of bankruptcy
and insolvency, ERISA violations, judgment defaults, cross-defaults to certain
other indebtedness and a change in control.
The definitive agreements for the senior credit facility to be provided
under the BankBoston commitment letter have not been reached. Accordingly, the
provisions described herein may change as a result of the negotiation of
definitive agreements. It is a condition to the BankBoston financing that
definitive agreements be entered into. In addition, it is anticipated that the
obligation of BankBoston to provide financing will be subject to the
satisfaction of certain other conditions, including among others: (i) the
satisfaction of all conditions precedent to the Merger and BankBoston's
satisfaction with the terms and documentation for the Merger; (ii) evidence that
the Trivest Partnerships have invested not less than $78.0 million to acquire
WinsLoew (including Pompeii); and (iii) WinsLoew shall have received the net
proceeds from not less than $130.0 million aggregate principal amount of senior
subordinated notes on terms and conditions satisfactory to BankBoston.
Senior Subordinated Notes. The Company expects to issue the senior
subordinated notes at the Effective Time in a private placement for resale
pursuant to Rule 144A under the Securities Act of 1993, as amended. The
Purchaser has received a "highly confident letter," dated May 12, 1999, from
Bear Stearns which states that, as of such date and based upon and subject to
current market conditions and the information
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<PAGE> 70
concerning WinsLoew and Pompeii supplied to Bear Stearns by or on behalf of the
Purchaser, Bear Stearns was highly confident of its ability, as lead manager, to
place the senior subordinated notes. The Bear Stearns letter does not constitute
a commitment or undertaking by Bear Stearns to place or purchase the senior
subordinated notes and does not ensure the successful placement or completion of
the offering of such notes; moreover, the letter sets forth only Bear Stearns'
expectation as of May 12, 1999 with respect to its ability to arrange a sale of
the notes in connection with the Merger.
It is currently contemplated that the senior subordinated notes will
(i) be unsecured, general obligations of the Company, (ii) mature on the eighth
anniversary of issuance, (iii) bear interest at a fixed rate to be determined,
(iv) have no mandatory redemption requirements prior to maturity, (v) not be
redeemable prior to the fourth anniversary after issuance and thereafter at
premiums to par (except that up to 35% of the original aggregate principal
amount may redeemed at the Company's option, in whole or in part, during the
first three years after issuance with proceeds from one or more public equity
offerings, at a price to be determined) and (vi) contain standard high yield
covenants typical for a transaction of this nature.
The highly confident letter is subject to each of the following: (i)
all terms and conditions of the notes and the offering of the notes, including,
but not limited to, coupon, price, maturity and covenants; (ii) the terms and
conditions of all of the other components of financing for the Merger; (iii) the
terms of, and the execution of documentation related to the Merger and the
financing, including, but not limited to loan agreements for the senior credit
facility, a definitive note purchase agreement and a definitive registration
rights agreement with respect to the notes, (iv) no material adverse change in
the business, prospects, condition (financial or otherwise) or material adverse
change in the business, prospects, condition (financial or otherwise) or results
of operations of WinsLoew or Pompeii; (v) completion of due diligence regarding
WinsLoew relating to the examination of accounting, legal, regulatory, tax,
labor, insurance, pension and environmental liabilities (actual or contingent),
material contracts, leases and debt agreements; (vi) nothing coming to Bear
Stearns' attention regarding WinsLoew that contradicts or calls into question
(A) the information previously provided to Bear Stearns by or on behalf of the
Purchaser or (B) the results of Bear Stearns' financial due diligence
investigation; (vii) satisfactory completion of due diligence on Pompeii; (viii)
no material adverse change in market conditions for new issues of high yield
debt; (ix) no material adverse change in conditions of the financial and capital
markets generally, and (x) the Purchaser's and WinsLoew's full and complete
cooperation with respect to the marketing of the notes. The acceptability of
each of the foregoing will be made in the sole discretion of Bear Stearns'
Commitment Committee. The termination of the agreement governing the acquisition
of Pompeii pursuant to its terms would not, in and of itself, cause Bear Stearns
to change its opinion, as of May 12, 1999, of its ability to place the notes.
Contributed Equity Financing. Members of the Management Group and the
Trivest Investors will contribute shares of Common Stock to the Purchaser in
exchange for shares of Purchaser common stock in the respective amounts shown
below and thereby relieve the Purchaser of the need to finance the payment of
Cash Merger Consideration for Common Stock in WinsLoew totaling approximately
$6.8 million. The Trivest Partnerships do not currently hold any shares of
Common Stock. Accordingly, all shares of Common Stock contributed to the
Purchaser will be from the individual Trivest Investors and members of the
Management Group; provided, however, that certain WinsLoew shareholders who will
be limited partners of Trivest Furniture Partners, Ltd. will make a capital
contribution of a portion of their shares of WinsLoew Common Stock to Trivest
Furniture Partners, Ltd., which will then contribute such shares to the
Purchaser in exchange for shares of Purchaser common stock.
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<PAGE> 71
<TABLE>
<CAPTION>
Shares of Value of WinsLoew
WinsLoew Common Stock Common Stock
Person or Entity Contributed to Contributed to Purchaser
- ---------------------------- Purchaser ------------------------
---------------------
<S> <C> <C>
Management Group:
Bobby Tesney ............ 33,324 $1,158,000
R. Craig Watts .......... 25,007 869,000
Vincent A. Tortorici, Jr. 8,633 300,000
Rick J. Stephens ........ 12,950 450,000
Trivest Partnerships ....... 28,777 1,000,000
Trivest Directors:
Earl W. Powell .......... 57,554 2,000,000
Phillip T. George, M.D .. 28,777 1,000,000
Total ................. 195,022 $6,777,000
</TABLE>
Expenses of the Transaction
Assuming the Merger is consummated, the estimated costs and fees in
connection with the Merger, financing and the related transactions that will be
paid by WinsLoew are as follows:
<TABLE>
<CAPTION>
Cost or Fee Estimated Amount
----------- ----------------
<S> <C>
Financial advisory fees.............................. $
Senior note underwriting commissions.................
Bank commitment fees.................................
Legal fees...........................................
Accounting fees......................................
Printing and mailing fees............................
Solicitation expenses................................ 6,500
Commission filing fees............................... 49,915
Other regulatory filing fees.........................
Miscellaneous........................................
----------
$
==========
</TABLE>
See "SPECIAL FACTORS--Opinion of Financial Advisor" for a description
of the fees to be paid to Mann Armistead in connection with its engagement. For
a description of certain fees payable to the members of the Special Committee,
see "SPECIAL FACTORS--Conflicts of Interest."
For a description of WinsLoew's obligation, even if the Merger is not
consummated, to pay or reimburse the Purchaser for expenses incurred by the
Purchaser in connection with the Merger, see "THE MERGER--Expenses" and
"--Termination Fee."
Regulatory Approvals
WinsLoew is not aware of any license or regulatory permit which is
material to the business of WinsLoew and which is likely to be adversely
affected by the Merger or of any approval or other action by any state, federal
or foreign government or governmental agency that would be required prior to
effecting the Merger.
Accounting Treatment
The Merger will be treated as a purchase business combination for
accounting purposes.
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RIGHTS OF DISSENTING SHAREHOLDERS
Under Florida law, WinsLoew shareholders have no right to an appraisal
of the value of their shares in connection with the Merger.
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<PAGE> 73
FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger to the holders of Common Stock. This discussion is
based on the current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any change, which may or may not be retroactive, could alter the tax
consequences to the holders of Common Stock as described herein. The following
discussion is addressed to a shareholder that holds Common Stock as a capital
asset and that, for federal income tax purposes, is a U.S. citizen or resident
or a domestic corporation, partnership, trust or estate. This discussion does
not purport to deal with all aspects of taxation that may be relevant to a
particular shareholder in light of his, her or its particular circumstances or
to certain types of taxpayers subject to special treatment under the federal
income tax law, including financial institutions, broker-dealers, foreign
persons, persons holding Common Stock as part of a straddle, "synthetic
security" or other integrated investment (including a "conversion transaction")
or persons who acquired their Common Stock through the exercise of an employee
stock option or otherwise as compensation.
A holder of Common Stock will recognize capital gain or loss for
federal income tax purposes on each share of Common Stock exchanged for the Cash
Merger Consideration pursuant to the Merger. The amount of gain or loss
recognized on a share will be equal to the difference between $34.75 and the
holder's basis in the share. The gain or loss will be long-term capital gain or
loss in the case of shares held for more than one year as of the date of the
Merger. In the case of individuals, trusts and estates, net capital gain for a
taxable year (that is, the excess of net long-term capital gain for the taxable
year over any net short-term capital loss for the year) is subject to a maximum
federal income tax rate of 20 percent. Receipt of the Cash Merger Consideration
in exchange for Common Stock pursuant to the Merger also may be a taxable
transaction under applicable state, local and foreign tax laws.
A holder of Common Stock may be subject to backup withholding at the
rate of 31 percent with respect to Cash Merger Consideration received pursuant
to the Merger, unless the holder (a) is a corporation or comes within certain
other exempt categories and, when required, demonstrates that fact or (b)
provides a correct taxpayer identification number ("TIN"), certifies as to no
loss of exemption from backup withholding and otherwise complies with the
applicable requirements of the backup withholdings rules. To prevent the
possibility of backup withholding on payments made to certain holders with
respect to shares of Common Stock pursuant to the Merger, each holder must
provide the Disbursing Agent with his, her or its correct TIN by completing a
Form W-9 or Substitute Form W-9 (or, in the case of a foreign person, must
provide to the Disbursing Agent a properly completed Form W-8 or Substitute Form
W-8). A holder of Common Stock that does not provide his, her or its correct
TIN, when required to do so, may be subject to penalties imposed by the Internal
Revenue Service (the "IRS"), as well as to backup withholding. Any amount
withheld under these rules will be refundable or creditable against the holder's
federal income tax liability, provided the required information is furnished to
the IRS. WinsLoew (or its agent) will report to the holders of Common Stock and
to the IRS the amount of any "reportable payments," as defined in Section 3406
of the Code, and the amount of tax, if any, withheld with respect thereto.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH IN THIS PROXY STATEMENT
ARE FOR GENERAL INFORMATION ONLY. THE TAX CONSEQUENCES FOR A PARTICULAR
SHAREHOLDER WILL DEPEND UPON THE FACTS AND CIRCUMSTANCES APPLICABLE TO THAT
SHAREHOLDER. ACCORDINGLY, EACH SHAREHOLDER IS URGED TO CONSULT HIS, HER OR ITS
OWN TAX ADVISER TO DETERMINE THE TAX CONSEQUENCES OF THE MERGER TO THE
SHAREHOLDER IN LIGHT OF HIS, HER OR ITS PARTICULAR CIRCUMSTANCES, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND ANY
POSSIBLE CHANGES IN THOSE LAWS. THE FOREGOING DISCUSSION MAY NOT APPLY TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION.
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<PAGE> 74
BUSINESS OF THE COMPANY
Background
WinsLoew is a leading designer, manufacturer and distributor of a broad
offering of casual outdoor furniture and seating products sold either into the
retail channel (commonly referred to as the residential market) or non-retail
channels (commonly referred to as the contract markets). WinsLoew's casual
furniture, which is marketed to both residential and contract markets, includes
chairs, chaise lounges, tables, umbrellas and related accessories, generally
constructed from aluminum, wrought iron, wood or fiberglass. WinsLoew's seating
products, which are marketed exclusively to the contract market, include wood,
metal and upholstered chairs, sofas and love seats that are offered in a variety
of finish and fabric options. All of WinsLoew's casual and seating furniture
products are manufactured pursuant to customer orders. Management believe that
the Company's success is attributable to its proven ability to consistently
deliver high quality, innovatively-styled products on a timely basis with
superior customer service. WinsLoew also manufactures certain ready-to-assemble
("RTA") furniture products that are designed for household use and distributed
through various retail channels.
WinsLoew markets its casual furniture products under the Winston(R)
brand name through approximately 25 independent sales representatives to over
800 active customers, primarily to specialty patio furniture stores located
throughout the United States. WinsLoew also markets its casual furniture
products under the Texacraft(R) and Tropic Craft(R) brand names, primarily
through its in-house sales force, to lodging and restaurant chains, country
clubs, apartment developers and managers, architectural design firms,
municipalities and other commercial users in the contract markets. WinsLoew
offers over 20 separate style collections of casual furniture products for the
residential market, each of which is comprised of numerous pieces available in
various combinations of finishes and fabrics, and offers numerous casual
furniture products for the contract market. WinsLoew's target market is the
medium to upper-end category of the casual furniture market, with suggested
retail prices for a table and four chairs typically ranging from $700 to $1,800.
WinsLoew markets its seating lines under the Loewenstein(R) and
Gregson(R) brand names through approximately 40 independent sales organizations
that employ an aggregate of approximately 120 sales representatives to a broad
customer base including lodging and restaurant chains, architectural design
firms, sports facilities, schools, healthcare facilities, office furniture
dealers, retail store planners and other commercial and institutional users in
the contract markets. WinsLoew's seating products include over 300 distinct
models of chairs ranging from traditional to contemporary styles, as well as
reception area love seats, sofas and stools. As such, WinsLoew's seating
products have a broad range of commercial and institutional uses, including,
among others, in-room lodging seating, stadium luxury box seating, restaurant
and lounge seating and classroom seating. WinsLoew designs, assembles and
finishes its seating products with component parts from a variety of suppliers,
including a number of European manufacturers. Management believes that the
Company's success in distinguishing its seating products from those of its
competitors is due in part to its long-standing and frequently exclusive
relationships with a number of leading Italian designers and manufacturers.
These relationships enable WinsLoew to offer products incorporating unique
designs and sophisticated manufacturing techniques that are generally
unavailable in the United States. WinsLoew recently entered into a three year
contract with an international lodging company under which WinsLoew is a
preferred supplier of upholstered seating products for its lodging chains. In
1998 and 1999, WinsLoew also provided all of the skybox seating for three new
stadiums in the United States.
WinsLoew has undertaken a number of initiatives in recent years to
strengthen and grow its core casual furniture and seating businesses. WinsLoew
has focused its resources on its core business and disposed of non-core or
unprofitable operations. In 1997, WinsLoew sold its wrought iron furniture
business, and in 1998 WinsLoew discontinued and sold or liquidated certain of
its RTA operations. WinsLoew embarked on an acquisition program to broaden its
core product offering that, to date, has resulted in the
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acquisition of Tropic Craft (a manufacturer of casual furniture sold into the
contract markets) and the pending acquisition of Pompeii (a manufacturer of
upper-end casual furniture sold into both the residential and contract markets).
Over the course of this period WinsLoew also implemented a strategic operating
plan to enhance its operating efficiencies and controls and improve its market
position. For example, WinsLoew reconfigured the manufacturing processes within
its facilities and realigned production between certain facilities.
History
Merger of Winston and Loewenstein. WinsLoew was formed in December 1994
through the merger of Winston Furniture Company, Inc. ("Winston") and
Loewenstein Furniture Group, Inc. ("Loewenstein") with and into WinsLoew, a
newly-formed corporation that was formed for the purpose of the merger. As a
result of the merger, (i) each outstanding share of Winston common stock was
converted into 1.00 shares of WinsLoew Common Stock, and each outstanding share
of Loewenstein common stock was converted into 1.05 shares of WinsLoew Common
Stock.
Winston History. Winston, a designer, manufacturer and distributor of
casual furniture for both the residential and contract markets, began business
in October 1975 as a division of Marathon Corporation. In March 1986, Winston
management and certain other investors acquired the aluminum furniture business
of that division in a leveraged buyout. Winston acquired the wrought iron and
tubular steel furniture business of the Lyon-Shaw, Inc., a division of B.B.
Walker Company ("Lyon Shaw"), in November 1986. In August 1987, Winston
completed an initial public offering of its shares. In December 1988, Winston
management, other employees and affiliates of the Trivest Partnerships purchased
Winston in a leveraged buyout. Following the December 1988 buyout, Winston
expanded its manufacturing facilities, focused on its core business and reduced
its outstanding indebtedness. In February 1993, Winston completed its initial
public offering and used the net proceeds received therefrom to further reduce
outstanding indebtedness. In September 1994, Winston acquired substantially all
of the assets of Texacraft, Inc., a Texas corporation ("Texacraft"), which was a
privately held manufacturer of aluminum furniture for the contract market.
Loewenstein History. Loewenstein, Inc. was founded in 1967 and acquired
in February 1985 by Atlantis Plastics, Inc., a publicly-traded plastics company
and an affiliate of the Trivest Partnerships. In 1987 and 1988, Atlantis
acquired (i) Southern Wood Products, Inc. ("Southern Wood"), a manufacturer of
promotionally priced RTA furniture; (ii) Gregson Furniture Industries, Inc.
("Gregson"), a manufacturer of traditional and transitional styled seating for
the office and institutional markets; and (iii) Excel Office and Contract, Inc.
("Excel"), a manufacturer of contemporary and traditional styled seating for the
office furniture market. Loewenstein, Inc., Southern Wood, Gregson and Excel
represented the furniture group of Atlantis (the "Atlantis Furniture Group"). In
April 1991, former management and employees of the Atlantis Furniture Group and
certain affiliates of the Trivest Partnerships formed Loewenstein, which
concurrently therewith purchased the Atlantis Furniture Group. In September
1993, Loewenstein completed its initial public offering of Loewenstein common
stock and used the net proceeds to retire substantially all of its outstanding
indebtedness and for working capital. In November 1993, Loewenstein acquired
substantially all of the assets of Shaffield Industries, Inc., a Tennessee
corporation, and certain of its affiliates (collectively, "Shaffield"). The
assets acquired consisted of substantially all of the assets used by Shaffield
in its business as a vertically-integrated manufacturer of RTA furniture,
including futons, chairs, tables and related accessories marketed under the
trademark From the Source(R). In February 1994, Loewenstein acquired New West
Industries, a California corporation ("New West"). New West was a manufacturer
of RTA furniture, including futons, chairs and related accessories.
Recent Developments
Sale of Excel. During the fourth quarter of 1995, WinsLoew disposed of
the assets of its Excel business.
Sale of Lyon Shaw. During the third quarter of 1997, WinsLoew disposed
of certain assets of its Lyon Shaw wrought iron furniture manufacturing business
in the casual furniture product line.
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Tropic Craft Acquisition. During the third quarter of 1998, WinsLoew
acquired the stock of Villella, Inc. d.b.a. Tropic Craft Aluminum Furniture
Manufacturers ("Tropic Craft"), a manufacturer of aluminum casual furniture sold
into contract markets.
Pompeii Acquisition. During the fourth quarter of 1998, WinsLoew
entered into a Stock Purchase Agreement with the shareholders of Pompeii, a
manufacturer of aluminum casual furniture sold into contract and residential
markets. For the year ended December 31, 1998 and the quarter ended March 31,
1999, Pompeii had net revenues of $14.5 million and $3.4 million, respectively,
and EBITDA of $3.3 million and $700,000, respectively. The Stock Purchase
Agreement provides for a cash purchase price of $17.4 million. The closing of
the Pompeii acquisition is expected to occur contemporaneously with the Merger
or later in the third quarter of 1999, once certain conditions related to the
Pompeii facility in Miami, Florida are met by the selling shareholders.
RTA Operations. During 1997, WinsLoew adopted a plan to dispose of its
RTA operations and recorded a pretax non-cash charge totaling $12.4 million in
the fourth quarter of 1997 relating to the disposal of the RTA operations.
During 1998, WinsLoew sold its equity interest in the Continental Engineering
Group, Inc. subsidiary, which WinsLoew had acquired in February 1995. In
addition, WinsLoew liquidated the assets related to its New West futon business.
WinsLoew subsequently decided to retain its third RTA entity (Southern Wood) due
to improved profitability and, accordingly, has reclassified its Southern Woods
results to continuing operations.
Reference is made to Note 2 of the Company's Consolidated Financial
Statements for additional information with respect to the Company's discontinued
operations, acquisitions and dispositions, including the completed Tropic Craft
acquisition.
Competitive Strengths
Management believes that WinsLoew has achieved its leading market
position by capitalizing on the following key competitive strengths.
Reputation for Producing High Quality Products. WinsLoew's reputation
for providing customers with high quality products is built upon its use of
superior structural designs, aesthetic styling, sophisticated manufacturing
techniques and strict quality control standards. WinsLoew begin its design
process by identifying trends in style and other design elements through
independent research and independent designers. Reflecting its focus on both
sales and manufacturing, WinsLoew also solicits opinions from its sales
representatives, dealers and other customers, its engineering department and, in
the case of its seating lines, the Company's European suppliers. WinsLoew also
employs a number of manufacturing processes that differentiate its products from
those of its competitors. For example, at its Loewenstein plan, WinsLoew uses an
electrostatically applied ultraviolet cured wood finishing system for its
seating products that produces one of the most consistent, durable and vibrant
finishes in the industry. Finally, to ensure that only the highest quality
products are shipped to our customers, WinsLoew examines all seating products
during the manufacturing process. WinsLoew's focus on quality is evidenced by
its actual warranty claims, which, over the past five years, have approximated
only 0.8% of total sales. WinsLoew's reputation for producing high quality
products is further evidenced by its receipt of the Casual Furniture Retailer
Association's prestigious "Manufacturer's Leadership Award" three times and its
recognition as a finalist every year since the award's inception in 1990. The
criteria for this award include quality, design, merchandising, customer service
and ethics.
Unique Delivery Capabilities. WinsLoew is committed to shipping its
furniture products on a timely and reliable basis because it is critical to both
its casual furniture and seating customers. It is particularly important to the
Company's casual furniture retailers because of their short selling season,
general desire to minimize inventory levels and need to offer their customers
products that will be available at the time of or soon after purchase.
WinsLoew's commitment to timely delivery to these retailers is
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exemplified by its policy of paying freight charges under its "Quick Ship"
program if shipment is not made within 15 working days from credit approval of a
customer's order. Since WinsLoew introduced this programs, it has never had to
pay freight charges. In addition, WinsLoew's ability to deliver its products on
an "in time on time" basis is critical to its contract market customers, since
they need to receive the Company's casual furniture or seating products
according to particular schedules in order to meet their own construction or
operating deadlines. To the knowledge of management, the Company has never
failed to deliver under its contractual arrangements in the contract markets
(except for events beyond the Company's control). WinsLoew's "Quick Ship"
program and its commitment to "in time and on time" delivery are unique in the
furniture manufacturing industry and distinguish WinsLoew from its competitors.
Continual Focus on Customer Service. Many of WinsLoew's customers
require unique product features that vary from the broad range of products that
the Company offers at any given time. Consequently, WinsLoew works closely with
its customers in the contract markets to provide customized seating products
that meet their particular needs by modifying the Company's product designs,
manufacturing processes, finishes and fabrics. WinsLoew has the ability to offer
such customized products quickly and cost effectively due to its flexible
processes and trained sales staff knowledgeable in the design, manufacture,
variety and decor applications of its products. In addition, WinsLoew assists
retailers by offering special sales programs, short lead-times and extensive
point-of-sale and other marketing materials. All of these services are geared
toward assisting the Company's customers improve the profitability of their
businesses.
Strong Distribution Relationships. WinsLoew believes that its ability
to satisfy the end customer through high quality products, timely delivery and a
focus on total customer service has resulted in strong relationships with its
sales representatives and distributors. As a result, these constituencies assist
the Company by providing valuable market insight, new product feedback and a
unique dedication to the success of the Company's products. For example,
WinsLoew's independent sales representatives consistently provide it with market
information and feedback that enable it to adapt products to better meet
customer demands. Many of these representatives also help WinsLoew in
identifying key trends that assist WinsLoew in managing its business. They are
also involved in WinsLoew's new product design process. In addition, a portion
of WinsLoew's seating sales are generated each year through customer referrals
from its design consultants and independent sales representatives.
Experienced Management Team with Significant Ownership. WinsLoew's
experienced and dedicated management team has been instrumental in its success
and represents one of its key competitive advantages. Each member of WinsLoew's
senior management team has worked with the Company for over 10 years and has
extensive experience in the furniture manufacturing industry. Bobby Tesney, the
President and Chief Executive Officer, leads the management team and has over 20
years of industry experience. WinsLoew also benefits from the experience and
expertise of Trivest, whose affiliated investment partnerships currently hold
approximately 23.7% of the Common Stock. Trivest has provided strategic
consulting, acquisition and other advice since 1988. Earl Powell, the President
and Chief Executive Officer of Trivest, has served as the Chairman of the Board
of WinsLoew and its predecessors for over 10 years.
Growth Strategies
WinsLoew's strategic objective is to further enhance its leading market
position in the casual and contract furniture markets. WinsLoew plans on
achieving this objective through the continued implementation of the following
strategies:
Increase Penetration of Existing Customers. WinsLoew is constantly
working towards increasing its sales to its existing customer base. WinsLoew
will continue to emphasize high quality products, timely delivery and customer
service together with innovatively styled new product designs, to increase
penetration of existing customers. Over the past several years, WinsLoew's
network of specialty retailers has continually increased the share of retail
floor space dedicated to the Company's products, which has resulted in increased
sales.
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Attract New Customers. WinsLoew has undertaken a number of programs to
expand its customer base in existing markets and enter new markets. These
efforts include, for example, the use of market focused sales personnel and
private labeling as well as the targeting of national specialty stores. In the
seating business, WinsLoew is in the midst of establishing selected sales groups
to focus on certain specialty end markets. The first such group was recently
established to focus exclusively on selling seating products in the lodging
industry. As a result of this effort, WinsLoew is currently negotiating with a
national lodging chain to become a preferred supplier for various seating
products. Through its private labeling program, WinsLoew is seeking to take
advantage of the trend towards outsourcing. In the residential market, WinsLoew
is targeting national specialty stores that offer home design products,
including outdoor casual furniture. Management believes that by targeting such
rapidly growing specialty retailers, WinsLoew will be able to leverage its
growth and national presence without significantly increased selling and
marketing expenses.
Selectively Introduce New Products. WinsLoew annually refreshes its
product line with new designs and styles and periodically introduces new
complementary products. Each year WinsLoew undergoes a design process that
results in the introduction of newly designed casual furniture and seating
products. WinsLoew's design process involves all aspects of the Company,
including senior management, manufacturing, in-house sales force, distributors
and independent sales representatives in order to design new furniture styles
which are easy to manufacture, attractive and innovative. WinsLoew also
periodically adds new products that complement its existing product offering.
For example, WinsLoew recently expanded its product line to include tables for
lobbies and other common areas in the hospitality industry. In order to minimize
its capital investment however, WinsLoew is currently purchasing these tables
from third party suppliers.
Pursue Complementary Acquisitions. WinsLoew continually reviews
acquisition opportunities that augment or complement its existing operations or
provide entry into new geographic markets. WinsLoew also seeks to improve the
efficiency of its acquired companies by reducing overhead, leveraging sales and
distribution, achieving raw material purchasing savings and improving
manufacturing operations. Tropic Craft, for example, which WinsLoew acquired in
1998, provides an increased presence in the contract markets for casual
furniture. Similarly, management expects Pompeii to provide WinsLoew with a
leading brand in the upper end of the casual furniture market, as well as a
significant opportunity to achieve operating efficiencies.
Products and Markets
The Company designs, manufactures and distributes three principal
product lines:
- casual furniture for both the residential and contract
markets;
- seating designed for the contract markets; and
- RTA furniture designed for household use.
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Casual Furniture
The Company markets its casual furniture products, consisting
principally of medium to upper-end indoor and outdoor furniture, under the
Winston(R), Texacraft(R) and Tropic Craft(R) brand names. The following is a
summary of the Company's principal products and customers.
<TABLE>
<CAPTION>
Brand Principal Products Principal Customers
----- ------------------ -------------------
<S> <C> <C>
Winston............................. Residential casual furniture Over 800 active customers,
constructed of extruded and tubular consisting of specialty patio
aluminum. stores, full-line furniture
retailers and department stores.
Texacraft........................... Contract casual furniture Lodging and restaurant chains,
constructed of aluminum, wrought country clubs, apartment developers
iron, wood and fiberglass. and managers, architectural design
firms, municipalities and other
commercial users.
Tropic Craft........................ Contract casual furniture Lodging and restaurant chains,
constructed of aluminum, wrought country clubs, apartment developers
iron, wood and fiberglass. and managers, architectural design
firms, municipalities and other
commercial users.
</TABLE>
The Company currently manufactures and sells over 20 separate style
collections of casual furniture products that include traditional, European, and
contemporary design patterns. Within each style collection there are multiple
products including chairs, tables, chaise lounges and accessory pieces such as
ottomans, cocktail tables, end tables, tea carts and umbrellas constructed of
extruded, tubular and cast aluminum, steel, wrought iron, wood and fiberglass.
We offer chairs with glider action, adjustable positions and rocking and swivel
motions, as well as a selection of restaurant and outdoor seating and site
furnishings. Our casual seating products feature cushions and vinyl strapping in
a variety of colors and patterns. All of our casual furniture products feature a
durable painted finish, which is also offered in a wide selection of colors. The
suggested retail prices for a residential table and four chairs currently range
from approximately $700 to $1,800.
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Seating
The Company markets its seating products under the Loewenstein(R) and
Gregson(R) brand names. The following is a summary of the Company's principal
products and customers:
<TABLE>
<CAPTION>
Brand Principal Products Principal Customers
----- ------------------ -------------------
<S> <C> <C>
Loewenstein.......................... Contemporary, transitional and Lodging and restaurant chains,
traditional seating for commercial architectural design firms, sports
and institutional uses. facilities, schools, healthcare
facilities, office furniture
dealers, retail store planners and
other commercial and institutional
users in the contract markets.
Gregson.............................. Traditional office and other Office furniture dealers and lodging
institutional seating. chains.
</TABLE>
The Company's seating products (other than the casual products
described above) include over 300 distinct models of wood, metal and upholstered
chairs in contemporary, traditional and transitional styles, as well as
reception area love seats, sofas and stools. The Company assembles wood frames
and finishes them with one of its numerous standard colors or, if requested, to
the customer's specification. Metal chairs are available in chrome or in a
selection of standard powder coat finishes. For upholstered products, the
customer may select from a number of catalog fabrics, vinyls and leathers or may
specify or supply its choice of materials. The Company maintains an inventory of
unassembled chair components that enables it to respond quickly to large
quantity orders in a variety of finish and fabric combinations. See
"--Manufacturing." As such, WinsLoew's seating products have a number of
commercial and institutional uses, including in-room lodging seating, stadium
luxury box seating, restaurant and lounge seating and classroom seating. Sales
to Marriott International, Inc., the Company's largest customer in the contract
markets, accounted for 10%, 16% and 17% of consolidated net sales in 1996, 1997
and 1998.
RTA Furniture
The Company sells its RTA products under the Southern Wood Products(R)
brand name to mass merchandisers and catalog wholesalers.
The Company's RTA products include promotionally priced RTA "spindle"
and "flatline" furniture and fully assembled case goods furniture products
designed for household use. Our "spindle" products include ready to assemble
items such as coffee tables, end tables, wall units and rolling carts.
"Flatline" products include ready to assemble items such as book shelves,
entertainment centers and tape storage units. Case goods products include fully
assembled four drawer chests and three drawer chest and changing towers, with an
optional hutch.
The Company's "spindle" and "flatline" products are sold in a box that
contains all components and hardware necessary for home-assembly. Case goods are
sold fully assembled and packaged, offering consumers a promotionally priced
alternative for household furniture.
Product Design and Development
The Company continually reviews and evaluates its casual furniture and
contract seating furniture designs, and annually adds and discontinues designs
that management deems appropriate in order to capitalize on marketing
opportunities and trends. The Company generally begins the design process by
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identifying marketing needs and conceptualizing product ideas through regular
meetings of senior management. The Company identifies trends in shapes, colors
and patterns through independent research, contacts with its dealers and the
occasional use of independent designers. The Company also solicits opinions with
respect to trends in styles, colors and other design elements from its sales
representatives, dealers and other customers, and its engineering department and
other employees prior to final design selection. The Company provides
preliminary sketches to its manufacturing personnel and, in the case of its
seating lines, its European suppliers, who in turn engineer the product's
construction and produce one or more prototypes in preparation for actual
full-scale production. The Company generally introduces new products at national
or regional furniture markets. The Company's custom design capabilities also
allows it to modify styles, materials and production in order to provide
customers with products that meet their particular needs. In particular,
management believes that an important element of its success in the seating
business is its long-standing and frequently exclusive relationships with
leading Italian design firms, as well as its proven ability to offer innovative
products that are sturdy, aesthetically appealing and scaled for the United
States market. Management bases this belief upon its extensive industry
experience and discussions with key customers, sales representatives and
competitors.
The Company has generally redesigned or updated approximately one-third
to one-half of its casual furniture product lines and 20% of its contract
seating product lines annually. The costs of implementing these annual changes
have historically included certain: (i) research and development costs; (ii)
capital expenditures for tooling; and (iii) advertising and catalog expenses.
Shipments of new designs generally begin in September of each year.
Marketing and Sales
The Company sells substantially all of its products through both its
internal sales staff and independent manufacturer's representatives. The Company
sells its casual products in the residential market through approximately 30
independent manufacturer's representatives. The Company sells its casual
products in the contract market through both company employees and independent
sales representatives. The Company sells its seating products through
approximately 40 independent sales representative organizations that employ
approximately 120 sales associates. The Company sells its RTA products through
internal sales staff.
Each independent representative: (i) promotes, solicits and sells
products in an assigned territory, (ii) agrees to assist in the collection of
receivables and adjustment of any complaints with regard to his or her sales and
(iii) receives commissions based on the net sales made in his or her territory.
The Company determines the prices at which its products will be sold and may
refuse to accept any orders submitted by a sales representative for
credit-worthiness or other reasons. Independent representatives may carry other
products which do not directly compete with our product lines. The Company has
long-standing relationships with most of its representatives.
The Company's marketing program assists its representatives in various
ways, including: (i) holding exhibitions at national and regional furniture
shows and leasing a year-round showroom at the Merchandise Mart in Chicago,
Illinois, (ii) providing retailers with annual four-color catalogs of our
products, sample materials illustrating available colors and fabrics, point of
sale materials and special sales brochures, (iii) providing information directly
to representatives at annual sales meetings attended by senior management and
manufacturing personnel, (iv) maintaining a customer service department which
ensures that the Company promptly responds to the needs and orders of customers,
(v) maintaining regular contact with key retailers and (vi) conducting ongoing
surveys to determine dealer satisfaction.
Backlog
As of March 26, 1999, backlog of orders was approximately $19.3
million, compared to $18.9 million at March 27, 1998. In accordance with
industry practice, the Company generally permit orders to be canceled prior to
shipment without penalty. The Company does not consider backlog to be predictive
of
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future sales activity because of the Company's short manufacturing cycle and
delivery time, and, especially in the case of casual furniture, the seasonality
of sales.
Manufacturing
The Company produces products at eight manufacturing facilities located
throughout the United States. See "--Properties." The Company believe that its
facilities are some of the most modern in the furniture industry, and that the
efficiencies attributable to these plants are a significant factor in the
Company's relatively low manufacturing costs.
Casual Furniture
In the manufacturing process, the Company cuts extruded aluminum tubes
to size and shapes or bends them in specially designed machinery. The aluminum
is then welded to form a solid frame, and the frame is subjected to a grinding
and buffing process to eliminate any rough spots that may have been caused
during welding. After this process is completed, the frame is cleaned, painted
in a state-of-the-art powder coating system and heat cured. The Company then
adds vinyl strapping, cushions, fabric slings, or other accessories to the
finished frame, as appropriate, packages the product with umbrellas, tempered
glass and other accessories, as applicable, and ships it to the customer.
Management believes that the Company manufactures the highest quality
aluminum casual furniture in its price range. The Company welds, not rivets or
bolts, the major frame components of its aluminum furniture, thereby increasing
the durability and enhancing the appearance of the aluminum product line. The
powder coated painting process results in an attractive and durable finish. To
ensure that only the highest quality products are shipped to customers, the
Company's quality control department has established numerous control check
points where the quality of all of our aluminum products is examined during the
manufacturing process. These processes allow the Company to offer a two-year
frame and finish guarantee on all aluminum products for residential use.
Warranty expense to date has been negligible.
Seating
The Company assembles most of its contract seating products to order,
but does not generally have the same level of vertical integration as is present
in the manufacture of its casual product lines. Instead, the Company purchases
component parts from a variety of suppliers, including a number of European
manufacturers. The principal elements of wood chair assembly include: (i) frame
glue-up, (ii) sanding, (iii) seat assembly (in which upholstered seats are
constructed from component bottoms, foam padding and cloth coverings) and (iv)
painting/lacquering. To provide consistency and speed in this finishing process,
the Company utilizes a state-of-the-art conveyorized paint line with
electrostatic spray guns and a three-dimensional ultraviolet drying system. For
upholstered products, the specified fabric cloth is stretched to the chair frame
over foam padding. The Company generally assembles its metal chairs from
imported components. After rework and leveling, the Company cartons its chairs
to prevent damage in transportation. The manufacturing process also includes a
number of product inspections and other quality control procedures.
RTA Furniture
For the manufacture of "spindle" products, the Company uses high
density particle board and dowels. The Company turns, stains and lacquers all of
the spindles. The Company laminates the particle board with a variety of wood
grains and solid colors. The Company individually boxes the product with
spindles and board, along with any necessary hardware and assembly instructions.
For "flatline" products the Company individually boxes the cut laminated
particle board, along with necessary hardware and assembly instructions. For
case goods, the edges of the cut laminated particle board may be "soft formed"
for aesthetic value. The Company then assembles the unit using glue and screws
and quality components and hardware, such as
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self-closing drawer runners, on all units. Finally, the Company packages these
fully assembled units for shipment.
Raw Materials and Foreign Sourcing
The Company's principal raw materials consist of extruded aluminum
tubes, woven vinyl fabrics, paint/finishing materials, vinyl strapping, cushion
filler materials, cartons, glass table tops, component parts for contract
seating, particle board and other lumber products and hardware. Although the
Company has no long-term supply contracts, it generally has a number of sources
for raw materials and has not experienced any significant problems in obtaining
adequate supplies for our operations. Nevertheless, the purchase of aluminum is,
from time to time, highly competitive, and its price, as a commodity, is subject
to market conditions beyond our control. In addition, fluctuations in lumber
prices and the costs of other raw materials have not historically had a material
adverse effect on the Company's results of operations.
However, future price increases could have a material adverse effect on
the Company's financial condition and results of operations. The Company
believes that its policy of maintaining several sources for most supplies
contributes to its ability to obtain competitive pricing.
A significant portion of the Loewenstein raw materials consist of
component chair parts purchased from several Italian manufacturers. The Company
views our suppliers as "partners" and work with such suppliers on an ongoing
basis to design and develop new products. The Company believes that these
cooperative efforts, its long-standing relationships with these suppliers and
its experience in conducting on-site, quality control inspections provide it
with a competitive advantage over many other furniture manufacturers, including
a competitive purchasing advantage in times of product shortages. In addition,
in the case of Italian and European suppliers, the Company generally contracts
for purchases of such component parts in such manner as to minimize its exposure
to foreign currency fluctuations. Although the Company has close working
relationships with our foreign suppliers, its future success may depend, in
part, on maintaining such or similar relationships. Given the special nature of
the manufacturing capabilities of these suppliers, in particular certain
wood-bending capabilities, and sources of specialized wood types, the
Loewenstein division could experience a disruption in operations in the event of
any required replacement of such suppliers. Situations beyond the Company's
control, including political instability, significant and prolonged foreign
currency fluctuations, economic disruptions, the imposition of tariffs and
import and export controls, changes in government policies and other factors
could have a material adverse effect on the Company's financial condition and
results of operations.
Competition
The furniture industry is highly competitive and includes a large
number of manufacturers, none of which dominate the market. Certain of the
companies which compete directly with the Company may have greater financial and
other resources than the Company does. Based on its extensive industry
experience, management believes that competition in casual furniture and seating
is generally a function of product design, construction quality, prompt
delivery, product availability, customer service and price. Similarly,
management believes that competition in our promotional price niche of the RTA
furniture industry is limited, and is based primarily on prompt delivery,
product availability, customer service and price.
Management believes that the Company successfully competes in the
furniture industry primarily on the basis of its innovatively-styled product
offerings and merchandising programs, the quality of its products, and its
emphasis on providing high levels of customer service. Management believes that
its residential casual product line has a leading share of the casual furniture
market in the geographic region east of the Mississippi River.
While sales of imported, foreign-produced casual furniture have
increased significantly in recent years, the Company's sales have not been
adversely affected because such foreign products are generally: (i) limited
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in design, styles and colors, (ii) of lesser quality than the Company's
products, (iii) marketed in the lower-end price range and (iv) not supported
with competitive customer service and responsiveness to customers' needs for
quick delivery.
In the contract seating segment, the Company competes with many
manufacturers, ranging from large, national, publicly traded entities to small,
one-product firms selling to small, geographic markets.
Trademarks and Patents
The Company has registered the Winston(R), Loewenstein(R), Gregson(R)
and Southern Wood Products(R) trademarks with the United States Patent and
Trademark Office. Management believes that the Company's trademark position is
adequately protected in all markets in which the Company does business.
Management also believes that the Company's various trade names are generally
well recognized by dealers and distributors, and are associated with a high
level of quality and value.
The Company holds several design and utility patents, and has
applications pending for issuance of other design and utility patents. Since
management believes that the Company is an innovator of styles and designs, it
is the Company's policy to apply for design and utility patents for those
designs that management believes may be of significance to its business.
Environmental Matters
Management believes that the Company complies in all material respects
with all applicable federal, state and local provisions relating to the
protection of the environment. The principal environmental regulations that
apply to the Company govern air emissions, water quality and the storage and
disposition of solvents. Compliance with environmental protection laws and
regulations has not had a material adverse impact on the Company's financial
condition or results of operations in the past and management does not expect
compliance to have a material adverse impact in the future.
Properties
The following table provides information with respect to each of the
Company's facilities:
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<TABLE>
<CAPTION>
Appr. Building Owned
Location Primary Use Area (feet) Or Leased
-------- ----------- ----------- ---------
<S> <C> <C> <C>
Birmingham, AL................. Corporate headquarters 9,800 Owned
Haleyville, AL.................. Casual furniture manufacturing and offices 155,000 Owned
Haleyville, AL.................. Casual furniture warehouse 20,000 Owned
Haleyville, AL.................. Casual furniture sewing plant 30,000 Owned
Chicago, IL..................... Casual furniture merchandise mart showroom 12,000 Leased (1)
Houston, TX..................... Casual furniture manufacturing and offices 89,500 Leased (2)
Ocala, FL....................... Casual furniture manufacturing and offices 49,000 Owned
Pompano Beach, FL............... Seating manufacturing and offices 100,000 Owned
Pompano Beach, FL............... Seating warehouse 6,500 Leased (3)
Liberty, NC..................... Seating manufacturing and offices 126,000 Owned
Sparta, TN...................... Seating manufacturing and offices 94,300 Owned
Sparta, TN...................... Seating manufacturing and offices 63,260 Owned
</TABLE>
(1) Lease expires August 31, 2002.
(2) Lease expires April 15, 2005.
(3) Lease is month-to-month.
Management believes that the Company's manufacturing facilities in the
casual furniture and seating product lines are currently operating, in the
aggregate, at approximately 75% of capacity, assuming a one-shift basis.
Management considers the Company's present manufacturing capacity to be
sufficient for the foreseeable future and believes that, by adding multiple
shift operations, the Company can significantly increase the total capacity of
its facilities to meet growing product demand with minimal additional capital
expenditures. In addition, the Company engages in an ongoing maintenance and
upgrading program, and management considers the Company's machinery and
equipment to be in good condition and adequate for the purposes for which they
are currently used.
Employees
At March 26, 1999, the Company had approximately 1,044 full-time
employees, of whom 33 were employed in management, 127 in sales, general, and
administrative positions, and 884 in manufacturing, shipping, and warehouse
positions. Full-time employees at March 26, 1999 included approximately 866
hourly and 178 salaried employees.
The only employees subject to collective bargaining agreements are
approximately 123 of the Company's hourly employees in Haleyville, Alabama, who
are represented by the Retail, Wholesale, and Department Store Union. The labor
agreement between WinsLoew and the union, which expires on July 31, 2001,
provides that there shall be no strikes, slowdowns or lockouts. Management
considers the Company's employee relations to be good.
77
<PAGE> 86
Legal Proceedings
From time to time, the Company is subject to legal proceedings and
other claims arising in the ordinary course of business. The Company maintains
insurance coverage against potential claims in an amount which management
believes to be adequate. Based primarily on discussions with counsel and
management familiar with the underlying disputes, management believes that the
Company is not presently a party to any litigation, the outcome of which would
have a material adverse effect on the Company's business or operations.
The Company and the members of the Board have been named as defendants
in a lawsuit filed on March 25, 1999 in the Circuit Court of Jefferson County,
Alabama, styled Craig Smith v. WinsLoew Furniture, Inc., et al. As of the date
of this Proxy Statement, the plaintiff has not yet effected service of process
on certain of our directors in this action. The lawsuit purports to be brought
as a class action on behalf of all of the Company's shareholders except the
defendants and was filed in connection with the Transaction. As of the date of
this Proxy Statement, the complaint filed in the lawsuit has not been amended to
reflect the increase in the per share merger consideration from $30.00 to $34.75
pursuant to the Second Amended Merger Agreement subsequent to the filing of the
complaint.
The principal substantive allegations set forth in the complaint are
that (i) the individual defendants breached fiduciary duties of care and loyalty
owed by them as directors to the shareholder plaintiffs, (ii) Mr. Powell and
other members of the "management group" breached fiduciary duties owed by them
as allegedly controlling shareholders to our other shareholders by, among other
things, attempting to acquire 100% equity ownership of the Company for an
allegedly "grossly inadequate price" at the alleged expense of the Company's
other shareholders, (iii) the Company's announcement of the initial $30.00 per
share bid by Trivest Furniture Corporation failed to disclose improving growth
prospects, (iv) by virtue of the equity holdings of the "management group" and
their alleged "overwhelming control" of the Board, third parties were
practically precluded from making competing bids, and (v) the initial per share
merger consideration of $30.00 per share is unconscionable, unfair and grossly
inadequate and the terms of the merger constituted an unfair and illegal
business practice upon our minority shareholders. No other per share amount is
specified in the complaint.
The relief sought by the plaintiff is that (i) the court declare the
lawsuit to be a class action and certify the plaintiff as class representative
and his counsel as class counsel, (ii) the merger be enjoined or, if not
enjoined, that the plaintiffs be granted rescission and rescissionary damages,
(iii) the plaintiff and the alleged class be awarded damages, (iv) the plaintiff
be awarded costs and disbursements of bringing the lawsuit, together with fees
and expenses of the plaintiff's counsel and experts, and (v) the plaintiff and
the alleged class be granted such other relief as the court shall deem just and
proper. The complaint does not specify the amount of any damages sought.
The Company forwarded a claim with respect to this matter to its
directors' and officers' insurance carrier and, with the approval of such
carrier, has retained legal counsel to represent the Company and the members of
the Board. The Company believes that the claims set forth in the lawsuit are
without merit and intends to vigorously defend this lawsuit.
78
<PAGE> 87
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of December 31,
1997 and 1998 and for each of the three years in the period ended December 31,
1998 are derived from the Consolidated Financial Statements of WinsLoew. The
following data has been restated to reflect Southern Wood as a continuing
operation (see Note 2 to Consolidated Financial Statements). The selected
consolidated financial data as of December 31, 1994, 1995 and 1996 and for each
of the two years in the period ended December 31, 1995 are derived from the
unaudited consolidated financial statements of the Company and include in the
opinion of management, all adjustments necessary to present fairly the data for
such periods. Due to the seasonality of the Company's operation and other
factors, the results of operations for the three months ended March 26, 1999 may
not be indicative of the results that may be expected for the full year. The
following selected consolidated financial data should be read in conjunction
with WinsLoew's Consolidated Financial Statements and related Notes,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the other financial information included herein.
<TABLE>
<CAPTION>
Year Ended December 31, For the Quarters Ended
------------------------------------------------------------- ----------------------
March 27, March 26,
--------- ---------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:(1)
Net sales .............................. $95,561 $ 110,887 $ 117,405 $ 122,145 $141,360 $27,576 $32,910
Cost of sales .......................... 65,060 78,710 78,029 79,431 87,232 17,946 20,031
------- --------- --------- --------- -------- ------- -------
Gross profit ........................ 30,501 32,177 39,376 42,714 54,128 9,630 12,879
Selling, general and administrative .... 16,303 19,303 21,472 21,427 23,124 4,515 5,725
expenses
Amortization ........................... 2,000 2,087 1,444 992 1,122 244 316
Non-recurring charges .................. 917 -- -- -- -- -- --
------- --------- --------- --------- -------- ------- -------
Operating income .................... 11,281 10,787 16,460 20,295 29,882 2,667 4,667
Interest expense ....................... 2,795 3,841 3,083 2,296 635 333 123
------- --------- --------- --------- -------- ------- -------
Income from continuing operations before
income taxes and extraordinary item . 8,486 6,946 13,377 17,999 29,247 4,538 6,715
Provision for income taxes ............. 3,068 3,489 4,834 6,838 10,947 1,665 2,531
------- --------- --------- --------- -------- ------- -------
Income from continuing operations before
extraordinary item .................. 5,418 3,457 8,543 11,161 18,300 4,184 2,873
Income (loss) from discontinued
operations, net of taxes ............ 934 (9,199) (259) (718) -- -- --
Gain (loss) from sale of discontinued
operations, net of taxes ............ -- -- -- (8,200) 2,031 -- --
Extraordinary item ..................... -- 1,698 -- -- -- -- --
------- --------- --------- --------- -------- ------- -------
Net income (loss) ...................... $ 6,352 ($ 4,044) $ 8,284 $ 2,243 $ 20,331 $ 2,873 $ 4,184
======= ========= ========= ========= ======== ======= =======
Basic earnings (loss) per share:
Income from continuing operations before
extraordinary item .................. $ 0.56 $ 0.38 $ 0.98 $ 1.49 $ 2.46 $ 0.38 $ 0.58
Income (loss) from discontinued
operations, net of taxes ............ 0.10 (1.02) (0.03) (0.09) -- -- --
Gain (loss) from sale of discontinued
operations, net of taxes ............ -- -- -- (1.10) 0.27 -- --
Extraordinary item ..................... -- 0.19 -- -- -- -- --
------- --------- --------- --------- -------- ------- -------
Net income (loss) ...................... $ 0.66 ($ 0.45) $ 0.95 $ 0.30 $ 2.73 $ 0.56 $ 0.37
======= ========= ========= ========= ======== ======= =======
Weighted average shares ................ 9,655 9,029 8,724 7,484 7,450 7,535 7,220
======= ========= ========= ========= ======== ======= =======
Diluted earnings (loss) per share:
Income from continuing operations before
extraordinary item .................. $ 0.56 $ 0.38 $ 0.98 $ 1.48 $ 2.40 $ 0.37 $ 0.56
Income (loss) from discontinued
operations, net of taxes ............ 0.10 (1.02) (0.03) (0.10) -- -- --
Gain (loss) from sale of discontinued
operations, net of taxes ............ -- -- -- (1.08) 0.27 -- --
Extraordinary item ..................... 0.19 -- -- -- -- --
------- --------- --------- --------- -------- ------- -------
Net income (loss) ...................... $ 0.66 ($ 0.45) $ 0.95 $ 0.30 $ 2.67 $ 0.37 $ 0.56
======= ========= ========= ========= ======== ======= =======
Weighted average shares and common share
equivalents outstanding ............. 9,655 9,029 8,730 7,563 7,624 7,683 7,434
======= ========= ========= ========= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31, For the Quarters Ended
------------------------------------------------------------- ------------------------
March 27, March 26,
--------- ---------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
Balance Sheet Data:(1)
Working capital ....................... $ 37,711 $ 58,785 $40,102 $29,937 $25,840 $32,205 $33,037
------- -------
Total assets .......................... 111,054 104,004 99,950 80,414 84,553 83,948 91,826
------- -------
Long-term debt (less current portion) . 39,094 40,130 38,726 15,908 1,400 16,704 6,669
------- -------
Total debt ............................ 40,893 41,941 40,681 16,423 1,447 17,218 6,704
------- -------
Stockholders' equity .................. 60,680 53,228 48,400 51,026 66,226 53,939 67,224
------- -------
</TABLE>
- ----------------------------
(1) The ratio of earnings to fixed charges for the fiscal years ended
December 31, 1997 and 1998 and the fiscal quarters ended March 27, 1998
and March 26, 1999 was 9-to-1, 4.7-to-1, 15-to-1 and 56-to-1,
respectively. The book value per share as of December 31, 1998 and
March 26, 1999 was $9.08 and $9.36 per share, respectively.
79
<PAGE> 88
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
General
WinsLoew designs, manufactures and distributes casual furniture and
seating furniture. WinsLoew's casual furniture products are distributed through
independent manufacturer's representatives and are constructed of extruded and
tubular aluminum and cast aluminum. These products are distributed through fine
patio stores, department stores and full line furniture stores nationwide.
WinsLoew's seating products are distributed to a broad customer base, which
includes architectural design firms and restaurant and lodging chains.
During 1997 the Company adopted a plan to dispose of its RTA
operations. WinsLoew's RTA products included ergonomically-designed computer
workstations, which the Company denoted as "space savers", promotionally-priced
coffee and end tables, wall units and rolling carts and an extensive line of
futons, futon frames and related accessories. Distribution of RTA furniture
products was primarily through mass merchandisers, catalogue wholesalers and
specialty retailers. As a result of this decision, the Company recorded a
pre-tax non-cash charge totaling $12.4 million in the fourth quarter of 1997
relating to the disposal of the RTA operations. The charge can be summarized as
follows:
<TABLE>
<S> <C>
Write-off of goodwill in connection with sale of assets $ 3,902,000
Reduction of inventory value 2,791,000
Reduction of property to net realizable value 2,067,000
Reduction of accounts receivable value 1,390,000
Other liabilities / reserves 1,050,000
Accrual for losses through disposition 1,200,000
-----------
Total $12,400,000
===========
</TABLE>
The Company planned to sell two of the businesses and liquidate the
assets related to the futon business. During 1998 the Company sold one of the
businesses, completed the liquidation of the futon business and decided to
retain its Southern Wood business due to improved profitability (see Note 2 to
the Consolidated Financial Statements). Accordingly, the amounts reflected
hereafter include Southern Wood as a continuing operation.
Results of Operations
The following table sets forth net sales, gross profit and gross margin
as a percent of net sales for the fiscal periods indicated for each of the
Company's product lines (in thousands, except for percentages):
<TABLE>
<CAPTION>
1996 1997 1998
-------------------------------- --------------------------------- -----------------------------
Net Gross Gross Net Gross Gross Net Gross Gross
Sales Profit Margin Sales Profit Margin Sales Profit Margin
----- ------ ------ ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Casual furniture $ 58,066 $23,812 41.0% $ 56,363 $24,164 42.9% $ 59,733 $28,227 47.3%
Seating 48,629 14,126 29.0% 58,386 17,256 29.6% 69,938 23,439 33.5%
RTA 10,710 1,438 13.4% 7,396 1,294 17.5% 11,689 2,462 21.1%
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total $117,405 $39,376 33.5% $122,145 $42,714 35.0% $141,360 $54,128 38.3%
======== ======= ==== ======== ======= ==== ======== ======= ====
</TABLE>
80
<PAGE> 89
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------
March 27, 1998 March 26, 1999
------------------------------- --------------------------------
Net Gross Gross Net Gross Gross
----- ------ ------ ----- ------ ------
Sales Profit Margin Sales Profit Margin
----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Casual furniture $ 9,630 $4,354 45.2% $13,634 $ 6,467 47.4%
Seating 15,498 4,769 30.8% 15,885 5,619 35.4%
RTA 2,448 507 20.7% 3,391 793 23.4%
------- ------ ------- -------
Total $27,576 $9,630 34.9% $32,910 $12,879 39.1%
======= ====== ======= =======
</TABLE>
The following table sets forth certain information relating to the
Company's operations expressed as a percentage of the Company's net sales:
<TABLE>
<CAPTION>
Years Ended December 31, Three Months Ended
------------------------ ------------------
March 27, March 26,
--------- ---------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross profit 33.5% 35.0% 38.3% 34.9% 39.1%
Selling, general and administrative expense 18.3% 17.5% 16.4% 16.4% 17.4%
Amortization 1.2% 0.8% 0.8% 0.9% 1.0%
Operating income 14.0% 16.6% 21.1% 17.7% 20.7%
Interest expense 2.6% 1.9% 0.4% 1.2% 0.4%
Provision for income taxes 4.1% 5.6% 7.7% 6.0% 7.7%
Income from continuing operations before
extraordinary item 7.3% 9.1% 12.9% 10.4% 12.7%
Loss from discontinued operations, net of taxes (0.2%) (0.6%) -- -- --
Gain (loss) from sale of discontinued operations,
net of taxes -- (6.7%) 1.4% -- --
Net income 7.1% 1.8% 14.4% 10.4% 12.7%
</TABLE>
Comparison of Quarter Ended March 26, 1999 and Quarter Ended March 27, 1998
Net Sales. WinsLoew's consolidated net sales for the first quarter of
1999, $32.9 million, increased $5.3 million or 19.3% from $27.6 million in the
first quarter of 1998. WinsLoew's casual and RTA product lines experienced
strong sales increases, while the seating product line was relatively flat
during the first quarter of 1999, increasing 2.5%. Sales of casual products
increased 41.6% in the first quarter of 1999, compared to the first quarter of
1998. If Tropic Craft, which was purchased in the third quarter of 1998, is
excluded, sales of casual products increased 29.2%. Management believes that
this increase in demand is primarily due to the Company's emphasis on quality,
leading the industry through innovative designs and providing customer
flexibility with our delivery program. WinsLoew's PDQ shipping program provides
exceptional customer value by allowing quick response during the casual market's
short retail selling season. RTA product sales increased 38.5% in the first
quarter of 1999, compared to the first quarter of 1998, primarily due to
increased demand across the board on all RTA furniture.
Gross Profit. Consolidated gross margin was 39.1% in the first quarter
of 1999, compared to 34.9% in the first quarter of 1998. All three lines
contributed to the increase in gross margin. The casual product line gross
margin improved to 47.4% in the first quarter of 1999 compared to 45.2% in the
first quarter of 1998, due to increased demand and improved operating
efficiencies. The gross margin for seating products improved to 35.4% in the
first quarter of 1999 compared to 30.8% in the first quarter of 1998 due to a
favorable product mix and improved profit margins on its core products. The RTA
product line gross margin improved to 23.4% in the first quarter of 1999
compared to 20.7% in the first quarter of 1998, due to increased demand and
improved operating efficiencies.
81
<PAGE> 90
Selling, General and Administrative Expenses. Selling, general and
administrative (SG&A) expenses increased $1.2 million in the first quarter of
1999, compared to the first quarter of 1998 SG&A expense of $4.5 million. The
increase was primarily the result of sales related expenditures.
Operating Income. As a result of the above, operating income increased
by $1.9 million, to $6.8 million (20.7% of net sales) in the first quarter of
1999 compared to $4.9 million (17.7% of net sales) in the first quarter of 1998.
Interest Expense. Our interest expense decreased $210,000 in the first
quarter of 1999, compared to the first quarter of 1998, due to lower outstanding
debt balance.
Provision for Income Taxes. WinsLoew's effective tax rate for the first
quarter of 1999 was 37.7% compared to 36.7% for the first quarter of 1998. The
effective tax rate is greater than the federal statutory rate primarily due to
the effect of state income taxes and non-deductible goodwill amortization.
Comparison of Years Ended December 31, 1998 and 1997
Net Sales. WinsLoew's consolidated net sales for 1998 increased $19.2
million or 15.7% to $141.4 million, compared to $122.1 million in 1997. The
casual product line sales increased by 17.9%, after excluding sales for the
Company's wrought iron business sold during 1997. The Company believes that due
to its high quality and innovative designs, existing retail customers have
continued to allocate more floor space, requiring larger inventories of the
Company's casual aluminum furniture. The seating product line experienced a
sales increase of 19.8% due to growth in the core business and increased demand
from the lodging industry. The RTA product line experienced a sales increase of
58.0% due to increased demand as the Company broadened its product offering to
include additional flat-line products and case goods which allowed the Company
to enter new markets.
Gross Profit. Consolidated gross profit increased $11.4 million in 1998
to $54.1 million compared to $42.7 million in 1997. The casual, contract seating
and RTA product lines improved gross profits in 1998 due to greater operating
efficiencies, increased sales volumes and improved raw material costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.7 million in 1998, compared to 1997, due to
commissions expense and other variable costs related to the increased sales
volume in 1998.
Amortization. Amortization expense increased $130,000 in 1998, compared
to 1997, due to amortization of goodwill related to the Tropic Craft
acquisition.
Operating Income. As a result of the above, WinsLoew recorded operating
income of $29.9 million (21.1% of net sales) in 1998, compared to operating
income of $20.3 million (16.6% of net sales) in 1997.
Interest Expense. WinsLoew's interest expense decreased $1.7 million in
1998, compared to 1997. The Company has reduced its debt by $15.0 million from
December 31, 1997.
Provision for Income Taxes. WinsLoew's effective tax rate from
continuing operations of 37.4% in 1998 and 38.0% in 1997 is greater than the
federal statutory rate due to the effect of state income taxes and
non-deductible goodwill amortization.
Comparison of Years Ended December 31, 1997 and 1996
Net Sales. WinsLoew's consolidated net sales for 1997 increased $4.7
million or 4.0% to $122.1 million, compared to $117.4 million in 1996. The
casual product line sales increased by 7.6% after excluding sales for the
Company's wrought iron business sold during 1997. The Company believes that due
to its high quality and innovative designs, existing retail customers have
allocated more floor space, requiring larger inventories of the Company's casual
aluminum furniture. The seating product line experienced a sales increase of
20.1% due to
82
<PAGE> 91
growth in the core business and increased demand from the lodging industry. The
RTA product line experienced a sales decrease of 30.9% due to the loss of a
major customer.
Gross Profit. Consolidated gross profit increased $3.3 million in 1997
to $42.7 million compared to $39.4 million in 1996. The seating product lines
improved gross profits in 1997 due to greater operating efficiencies, increased
sales volumes (after excluding sales for the Company's Lyon Shaw wrought iron
business sold in 1997) and improved raw material costs. The RTA product line
experienced a 10.0% decrease in gross profit in 1997 due to lower sales volume.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $45,000 in 1997, compared to 1996, due to
various cost reduction programs which more than offset commission expense and
other variable costs related to the increased sales volume in 1997.
Amortization. Amortization expense decreased $452,000 due to the
intangible assets that became fully amortized in 1996.
Operating Income. As a result of the above, WinsLoew recorded operating
income of $20.3 million (16.6% of net sales) in 1997, compared to operating
income of $16.5 million (14.0% of net sales) in 1996.
Interest Expense. WinsLoew's interest expense decreased $787,000 in
1997, compared to 1996. The Company reduced its debt by $24.3 million from
December 31, 1996 to December 31, 1997.
Provision for Income Taxes. WinsLoew's effective tax rate from
continuing operations of 38.0% in 1997 and 36.1% in 1996 is greater than the
federal statutory rate due to the effect of state income taxes and
non-deductible goodwill amortization.
Seasonality and Quarterly Information
The furniture industry is cyclical and sensitive to changes in general
economic conditions, consumer confidence, and discretionary income, interest
rate levels and credit availability.
Sales of casual products are typically higher in the second quarter and
fourth quarters of each year, primarily as a result of the following: (i) high
retail demand for casual furniture in the second quarter, preceding the summer
months and (ii) the impact of special sales programs on fourth quarter sales.
The Company's casual product sales can also be affected by weather conditions
during the peak retail selling season and the resulting impact on consumer
purchases of outdoor furniture products. During the third quarter of 1997, the
Company sold its Lyon Shaw wrought iron division (See Note 3 to the Consolidated
Financial Statements).
The following table presents the Company's unaudited quarterly data for
1999, 1998 and 1997. Such operating results are not necessarily indicative of
results for future periods. WinsLoew believes that all necessary and normal
recurring adjustments have been included in the amounts in order to present
fairly and in accordance with generally accepted accounting principles the
selected quarterly information when read in conjunction with WinsLoew's
Consolidated Financial Statements included elsewhere herein. The results of
operations for any interim quarter are not necessarily indicative of results for
a full year. The following data has been restated to reflect Southern Wood as a
continuing operation.
83
<PAGE> 92
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 Quarters First
- ------------- -------
<S> <C>
Net sales $32,910
Gross profit 12,879
Operating income 4,667
Interest expense (income) 123
Income from continuing operations 4,184
Gain on sale of discontinued operations --
Net income 4,184
=======
Basic earnings per share:
Income from continuing operations (1) $ 0.58
Gain on sale of discontinued
operations --
-------
Net income (1) $ 0.58
=======
Weighted average shares 7,220
=======
Diluted earnings per share:
Income from continuing operations $ 0.56
Gain on sale of discontinued
operations --
Net income $ 0.56
=======
Weighted average shares and common share
equivalents outstanding 7,434
=======
</TABLE>
<TABLE>
<CAPTION>
1998 Quarters First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 27,576 $ 42,892 $ 36,258 $ 34,634
Gross profit 9,630 16,740 13,527 14,231
Operating income 4,871 10,282 6,265 8,464
Interest expense (income) 333 354 137 (189)
Income from continuing operations 2,873 6,199 3,791 5,437
Gain on sale of discontinued operations -- -- -- 2,031
Net income $ 2,873 $ 6,199 $ 3,791 $ 7,468
======== ======== ======== ========
Basic earnings per share:
Income from continuing operations (1) $ 0.38 $ 0.83 $ 0.51 $ 0.75
Gain on sale of discontinued
operations -- -- -- 0.27
-------- -------- -------- --------
Net income (1) $ 0.38 $ 0.83 $ 0.51 $ 1.02
======== ======== ======== ========
Weighted average shares 7,535 7,513 7,468 7,296
======== ======== ======== ========
Diluted earnings per share:
Income from continuing operations $ 0.37 $ 0.80 $ 0.50 $ 0.73
Gain on sale of discontinued
operations -- -- -- 0.27
Net income $ 0.37 $ 0.80 $ 0.50 $ 1.00
======== ======== ======== ========
Weighted average shares and common share
equivalents outstanding 7,683 7,722 7,647 7,453
======== ======== ======== ========
</TABLE>
84
<PAGE> 93
<TABLE>
<CAPTION>
1997 Quarters First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 24,682 $ 39,854 $ 29,523 $ 28,086
Gross profit 7,519 15,020 10,073 10,102
Operating income 2,592 8,313 4,440 4,950
Interest expense 857 645 590 204
Income from continuing operations 1,047 4,729 2,355 3,030
Loss from discontinued operations (229) (225) (73) (191)
Loss on sale of discontinued operations -- -- -- (8,200)
Net income (loss) $ 818 $ 4,504 $ 2,282 ($ 5,361)
======== ======== ======== ========
Basic earnings (loss) per share:
Income from continuing operations (1) $ 0.14 $ 0.63 $ 0.31 $ 0.40
Loss from discontinued operations (1) (0.03) (0.03) (0.01) (0.03)
Loss on sale of discontinued
operations (1) -- -- -- (1.09)
-------- -------- -------- --------
Net income (loss) $ 0.11 $ 0.60 $ 0.30 ($ 0.72)
======== ======== ======== ========
Weighted average shares 7,443 7,456 7,508 7,524
======== ======== ======== ========
Diluted earnings (loss) per share:
Income from continuing operations $ 0.14 $ 0.63 $ 0.31 $ 0.40
Loss from discontinued
operations (0.03) (0.03) (0.01) (0.03)
Loss on sale of discontinued
operations (1) -- -- -- (1.07)
-------- -------- -------- --------
Net income (loss) (1) $ 0.11 $ 0.60 $ 0.30 ($ 0.70)
======== ======== ======== ========
Weighted average shares and common share
equivalents outstanding 7,495 7,502 7,602 7,630
======== ======== ======== ========
</TABLE>
- --------------------
(1) Quarter amounts do not add to annual figures due to rounding.
Liquidity and Capital Resources
The Company's short-term cash needs are primarily for working capital
to support its debt service, accounts payable and inventory requirements. The
Company has historically financed its short-term liquidity needs with internally
generated funds and revolving line of credit borrowings. The Company actively
monitors its cash balances and applies available funds to reduce borrowings
under its senior credit facility. At December 31, 1998, the Company had $25.8
million of working capital and $18.4 million of unused and available funds under
its credit facilities, and at March 26, 1999, the Company had $33.0 million of
working capital and $24.6 million of unused and available funds under its senior
credit facility.
The Company has a senior credit facility with a consortium of banks and
other institutional lenders. The facility, which matures in February 2001 and is
collateralized by substantially all of the assets of the Company, consists of a
revolving line of credit, term loan and an acquisition line of credit. The
working capital revolving line of credit allows the Company to borrow funds up
to a certain percentage of eligible inventories and accounts receivable. The
$12.5 million acquisition line of credit can be used for capital expenditures
and purchases of the Company's Common Stock.
In June 1996, WinsLoew amended its senior credit facility to provide
the Company with a variable amount available under the revolving line of credit
(see Note 4 to the Consolidated Financial Statements). Due to the seasonal
nature of the casual furniture product line, WinsLoew's cash requirements are
usually greater in the first quarter of each year. The June 1996 amendment
allows the amount available to fluctuate with the seasonal nature of the
Company's business. After the first quarter of each year, the Company's cash
requirements from its credit line decline. By use of a variable amount of credit
availability, the Company can avoid the cost of an available but unused line of
credit. At March 26, 1999, from an available maximum line of credit of $40.0
million, WinsLoew has elected to set the amount available at $35.0 million.
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<PAGE> 94
WinsLoew's senior credit facility allows the Company to borrow under
its line of credit to purchase shares of the Company's Common Stock (see Note 4
to the Consolidated Financial Statements). As of March 26, 1999, there was $2.9
million available for such repurchases.
Cash Flows from Operating Activities. Net cash provided by operations
increased to $31.1 million in 1998, compared to $22.6 million in 1997, primarily
due to improved profitability from continuing operations. Net cash used in
operating activities in the first quarter of 1999 was $1.5 million, compared to
$500,000 of net cash provided by operating activities in the first quarter of
1998. Negative cash flow in the first quarter of 1999 reflects financing of $8.0
million of accounts receivable pursuant to the Company's long-standing sales
strategy of providing extended payment terms to customers. During the first four
months of each year, accounts receivable in the casual furniture division
normally increase due to extended payment terms offered to customers. During the
second quarter, the Company receives payment on these accounts receivable.
Management believes that this special sales program provides a matching
advantage, reduces the effects of seasonality on operations and reduces finished
goods inventory levels.
Cash Flows from Investing Activities. During 1998, the Company spent
$900,000 on capital expenditures and $9.3 million on the purchase of Tropic
Craft (see Note 3 to the Consolidated Financial Statements), compared to $1.0
million spent on capital expenditures and $2.1 million received in proceeds
related to the disposition of certain assets of the Company's wrought iron
business in 1997. Net cash used in investing activities in the first quarter of
1999 was $112,000, compared to $337,000 used in the first quarter of 1998. Cash
used in investing activities in the first quarter of 1999 and 1998 was primarily
for the purchase of machinery and equipment. At March 26, 1999, the Company had
no material commitments for capital expenditures.
Cash Flows From Financing Activities. During 1998, the Company used the
cash generated by operations to repay $15.0 million of debt and purchase $6.1
million of its Common Stock (see Note 5 to the Consolidated Financial
Statements), compared to $24.3 million of cash generated by operations and from
investing activities used to repay debt during 1997. Net cash provided by
financing activities in the first quarter of 1999 was $2.1 million, compared to
$1.0 million provided in the first quarter of 1998. In the first quarter of
1999, cash was provided by the Company's revolving credit facility (see Note 3
to the Consolidated Financial Statements) to purchase shares of the Company's
Common Stock (see Note 4 to the Consolidated Financial Statements) and to
provide for seasonal working capital needs.
In connection with the Merger, the Purchaser has received a commitment
from BankBoston relating to a $145.0 million senior credit facility. See "THE
MERGER--Financing."
Foreign Exchange Fluctuations and Effects of Inflation
WinsLoew purchases some raw materials from several Italian suppliers.
These purchases expose the Company to the effects of fluctuations in the value
of the U.S. dollar versus the Italian lira. If the U.S. dollar declines in value
versus the Italian lira, the Company will pay more in U.S. dollars for these
purchases. To reduce its exposure to loss from such potential foreign exchange
fluctuations, the Company will occasionally enter into foreign exchange forward
contracts. These contracts allow the Company to buy Italian lira at a
predetermined exchange rate, thereby transferring the risk of subsequent
exchange rate fluctuations to a third party. However, if the Company is unable
to continue such forward contract activities, and the Company's inventories
increase in connection with expanding sales activities, a weakening of the U.S.
dollar against the Italian lira could result in reduced gross margins. The
Company elected to hedge a portion of its exposure to purchases made in 1998 by
entering into foreign currency forward contracts with a value of $1.7 million,
all of which were outstanding and unsettled at March 27, 1998, maturing at
approximately $330,000 per month. The Company did not incur significant gains or
losses from these foreign currency transactions. At December 31, 1998, the
Company did not have any foreign currency foward contracts outstanding. In
addition, the Company did not enter into and did not have outstanding any
foreign currency forward contracts during the first quarter of 1999.
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<PAGE> 95
Inflation has not had a significant impact on the Company in the past
three years, nor is it expected to have a significant impact in the foreseeable
future.
Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year. Computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This error could potentially result in
a system failure or miscalculation causing disruptions to operations.
In mid-1995, the Company began an assessment of the Year 2000 issue on
its internal information technology systems and other non-information technology
systems such as facility automation control systems, third-party network systems
and other embedded technology and microcontrollers, as well as for the
replacement or correction of all such systems required in the new millennium.
Based on the assessment, the Company determined that it was necessary to replace
portions of its software and hardware so that those systems will properly
utilize dates beyond December 31, 1999, including third-party network equipment,
software products and services.
As of June 1, 1999, the Company has completed testing and remediation
of 100% of its continuing operations business critical systems at an aggregated
cost of approximately $500,000, representing approximately 20% of the Company's
IT budget for the last four years, which has been obtained from internally
generated funds. Substantially all of these costs were for planning, analysis,
repair or replacement of existing software, upgrades of existing software or
evaluation of information received from material suppliers and customers.
Non-information technology systems do not represent a significant component of
the Company's operations. The Company deducts these costs from income. Other
non-Year 2000 efforts have not been materially delayed.
The Company has contacted and received responses from all of its
material suppliers and customers concerning Year 2000 compliance. Based on these
discussions the Company is not aware of any supplier or customer with a Year
2000 issue that would materially impact its financial position, results of
operations or liquidity. The Company did not use any independent verification or
validation process to assure the reliability of their risk and cost estimates.
Consequently, the Company has no means of ensuring that suppliers or customers
will be Year 2000 ready. The effect of non-compliance by third parties is not
determinable.
Management believes that it has substantially completed an effective
program to resolve the Year 2000 issue in a timely manner. In the event that the
Company's program is not successful, management believes that it has established
adequate contingency plans whereby the Company would rely on its own manual
systems, independent of external providers' Year 2000 compliance, maintain
increased inventory levels and adjust staffing levels for its business critical
systems. Management believes that such an event would not materially affect the
Company's financial position or results of operations. However, disruptions in
the general economy resulting from Year 2000 issues could adversely affect the
Company's financial condition or results of operations.
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CERTAIN FORWARD LOOKING INFORMATION
The Company does not, as a matter of course, make public projections as
to future financial results. However, WinsLoew management annually prepares
financial forecasts for internal use in capital budgeting and other management
decisions. Management provided to the Special Committee and Mann Armistead such
forecasts prepared during 1998 for the fiscal years 1999 through 2002, which
forecasts do not give effect to the Merger or the related financing. None of
these projections were prepared with a view to public disclosure or compliance
with published guidelines of the Commission or the guidelines established by the
American Institute of Certified Public Accountants regarding projections. Ernst
& Young LLP, the Company's independent auditors, have not performed any
procedures with respect to the projections and assume no responsibility for
them.
A summary of these projections is set forth below:
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 2000 Fiscal 2001 Fiscal 2002
----------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Net sales $157,314 $169,113 $181,796 $195,431
Operating Income 32,054 34,951 37,930 41,065
Net income 19,371 21,751 23,980 26,235
Earnings per share 2.60 2.90 3.20 3.50
</TABLE>
The foregoing projections should be read together with the information
contained in WinsLoew's Consolidated Financial Statements and related Notes
included elsewhere herein and with the following assumptions made in preparing
such projections:
(a) The foregoing projections do not give effect to the Merger or
related financing.
(b) The foregoing projections do not give effect to the acquisition of
Pompeii or any other possible acquisitions or other transactions that may occur
after the Merger.
(c) Revenue would increase at a rate consistent with historical
financial performance.
None of the foregoing projections should be regarded as an accurate
prediction of future events. Such projections are subjective in many respects
and thus susceptible to various interpretations and periodic revision based
actual experience and business developments. In addition, such projections are
based on a number of assumptions that are subject to risks and uncertainties
which could cause actual results to differ materially from those projected. Such
risks and uncertainties include the cyclical nature of the furniture
manufacturing industry, significant competition in the furniture manufacturing
industry, WinsLoew's dependence on key management and extensive environmental
regulation. The projections have not been and will not be revised or updated
from the date of their preparation to reflect subsequent events, facts or other
information of which any person or entity has become aware.
Inclusion of the foregoing forecasts should not be regarded as a
representation by WinsLoew, the Purchaser, any of their respective affiliates or
financial advisors or any other entity or person that the projected results
would be achieved or as to any future event, occurrence or non-occurrence and
none of the foregoing parties assumes any responsibility for the accuracy of
such information. There can be no assurance that the projections will be
realized, and actual results may be higher or lower than those shown, possibly
by material amounts.
A complete copy of the projections provided by management to the
Special Committee and Mann Armistead for the fiscal years 1999 through 2002 has
been filed as an exhibit to the Schedule 13E-3 filed with the Commission in
connection with the Merger and is available for inspection and copying at the
principal executive offices of the Company during its regular business hours by
any shareholder or any representative of a shareholder who has been so
designated in writing. A copy of such projections will be provided by the
Company to any shareholder or any representative of a shareholder who has been
so designated in writing upon written request and at the expense of the
requesting shareholder or such representative. See "Available Information."
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MANAGEMENT
Directors and Executive Officers of WinsLoew
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Earl W. Powell................................ 60 Chairman of the Board
Bobby Tesney.................................. 54 President, Chief Executive Officer and Director
R. Craig Watts................................ 45 Executive Vice President -- Contract Seating
Stephen C. Hess............................... 50 Executive Vice President -- Casual Furniture
Vincent A. Tortorici, Jr...................... 45 Vice President and Chief Financial Officer
Rick J. Stephens.............................. 45 Vice President -- Operations
William F. Kaczynski, Jr...................... 39 Director
Phillip T. George, M.D........................ 59 Director
Peter W. Klein................................ 43 Director
William H. Allen, Jr.......................... 63 Director
Sherwood M. Weiser............................ 68 Director
M. Miller Gorrie.............................. 63 Director
James S. Smith................................ 70 Director
Henry C. Cheek................................ 73 Director
</TABLE>
The Company was formed in September 1994, and in December 1994 the
Company merged with each of Winston and Loewenstein. Each of the Company's
directors and executive officers were also directors or officers of Winston
and/or Loewenstein, as described below. Prior to the merger, each of Winston and
Loewenstein were publicly held corporations whose common stock traded on the
Nasdaq National Market.
Mr. Powell, Chairman of the Board of the Company since October 1994,
serves as President and Chief Executive Officer of Trivest, which is a private
investment firm specializing in management services and acquisitions,
dispositions and leveraged buyouts, which was formed by Messrs. Powell and
George in 1981. Trivest is an affiliate of the Trivest Partnerships. Mr. Powell
has also served as Chairman of the Board of Atlantis Plastics, Inc., an American
Stock Exchange company whose subsidiaries are engaged in the plastics industry
("Atlantis"), since founding that company in February 1984, as Chief Executive
of Atlantis from its organization until February 1995 and as President of
Atlantis from November 1993 to February 1995. Mr. Powell has served as Chairman
of the Board of Biscayne Apparel, Inc., a company whose principal subsidiaries
are engaged in the apparel industry ("Biscayne"), since October 1985 and
presently serves as Chief Executive Officer of Biscayne. The common stock of
Biscayne is quoted on the NASD OTC Bulletin Board. Biscayne filed a voluntary
Chapter 11 bankruptcy petition in February 1999. Mr. Powell also served as
Chairman of the Board of Winston from December 1988 to December 1994, Chairman
of the Board of Loewenstein from February 1985 to December 1994 and as
Loewenstein's President and Chief Executive Officer from May 1994 to December
1994. From 1971 until 1985, Mr. Powell was a partner with KPMG Peat Marwick,
Certified Public Accountants ("Peat Marwick"), where his positions included
serving as managing partner of Peat Marwick's Miami office.
Mr. Tesney, President, Chief Executive Officer and a director of the
Company since October 1994, served as President, Chief Executive Officer and a
director of Winston from December 1993 to December 1994, General Manager of
Winston from 1985 to December 1993 and as Senior Vice President-Operations of
Winston from January to December 1993. Mr. Tesney also served as Vice President
of Winston from 1979 until January 1992.
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Mr. Watts, Executive Vice President-Contract Seating of the Company
since October 1994, served as a director of Loewenstein from December 1990 to
December 1994, and was appointed Loewenstein's Executive Vice President-Contract
Seating in May 1993, after serving as Vice President since May 1991. Mr. Watts
also serves as the President and Chief Operating Officer of the Company's
Loewenstein and Gregson divisions, and has served in a number of management
positions since joining Loewenstein in April 1981.
Mr. Hess, the Company's Executive Vice President-Casual Furniture since
October 1994, served as Winston's Executive Vice President from December 1993 to
December 1994, Winston's Senior Vice President-Marketing and Sales from January
1992 to September 1993, and as Winston's Vice President-Marketing and Sales from
January 1983 until January 1992.
Mr. Tortorici, the Company's Vice President and Chief Financial Officer
since October 1994, served as Winston's Vice President-Finance and
Administration and Chief Financial Officer from March 1988 to December 1994. Mr.
Tortorici is a certified public accountant and was employed by Arthur Andersen &
Co. from 1976 until March 1988.
Mr. Stephens, the Company's Vice President-Operations since May 1999,
served as Vice President-Operations at Winston from January 1995 to May 1999 and
served as Vice President and General Manager at Winston from December 1993 to
January 1995.
Mr. Kaczynski was elected director of the Company in January 1998. Mr.
Kaczynski has served as an executive officer of Trivest since January 1998 and
is presently a Managing Director. From July 1996 until December 1997, he was
Chief Financial Officer of WebSite Management Corp. d/b/a FlashNet
Communications, an Internet service provider. From June 1994 until June 1996, he
was Chief Financial Officer of Colorado Mountain Express, Inc., an airport
transportation company. Prior to that he was with Heller Financial, Inc. from
1986 until 1994, most recently as Senior Vice President-Corporate Finance Group,
Dallas, Texas.
Dr. George, a director of the Company since October 1994, served as a
director of Winston from October 1989 to December 1994 and as a director of
Loewenstein from February 1985 to December 1994. Dr. George also serves as the
Vice Chairman of the Board of Trivest, the Vice Chairman of the Board and
Chairman of the Executive Committee of the Board of Directors of Atlantis, and
as a Director of Biscayne. Biscayne filed a voluntary Chapter 11 bankruptcy
petition in February 1999. Dr. George's executive position with Trivest has been
his principal occupation since retiring from the private practice of plastic and
reconstructive surgery in February 1986.
Mr. Klein, a director of the Company since October 1994, served as a
director of Winston from December 1988 to December 1994 and as a director of
Loewenstein from May 1993 to December 1994. Mr. Klein has served as an executive
officer of Trivest since May 1986 and is presently a Managing Director and the
General Counsel of Trivest. Prior to joining Trivest, Mr. Klein practiced law in
Chicago, Illinois and Cleveland, Ohio.
Mr. Allen, a director of the Company since October 1994, served as a
director of Loewenstein from September 1993 to December 1994. Mr. Allen serves
as Vice Chairman of NationsBank Florida, and served as Chairman of the Board and
Chief Executive Officer of Intercontinental Bank, a Nasdaq National Market
company headquartered in Miami, Florida, from April 1987 until its merger with
NationsBank South in December 1994. Mr. Allen also serves as a director of
American Bankers Insurance Group, a New York Stock Exchange company
headquartered in Miami, Florida, and Decorator Industries, Inc., traded on the
American Stock Exchange, headquartered in Hollywood, Florida.
Mr. Weiser, a director of the Company since October 1994, has been,
since 1972, the Chairman of the Board, President and Chief Executive Officer of
CHC International, Inc., a leading hotel and casino development and management
company that does business as "Carnival Hotels and Casinos," and its
predecessors. Mr. Weiser also serves as a director of Carnival Corporation, a
cruise line traded on the New York Stock Exchange, Wyndam International, Inc.,
traded as a paired share real estate investment trust on the New York Stock
Exchange, and Mellon United National Bank, a New York Stock Exchange company.
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Mr. Gorrie, a director of the Company since October 1994, served as a
director of Winston from February 1993 to December 1994 and from May 1986 to
December 1988. Mr. Gorrie has been Chairman of Brasfield & Gorrie General
Contractor, Inc., a diversified general contractor based in Birmingham, Alabama,
since 1964. Mr. Gorrie is a director of Colonial Properties Trust, a real estate
investment trust traded on the New York Stock Exchange.
Mr. Smith, a director of the Company since October 1994, served as a
director of Winston from February 1993 to December 1994, and as a director of
Biscayne from June 1986 to February 1992. Mr. Smith has been engaged in private
investment activities as his principal occupation for more than the prior five
years. Mr. Smith served as Executive Vice President of Stephens, Inc., an
investment banking firm based in Little Rock, Arkansas, from January 1985 until
May 1987. Mr. Smith has also served as President of the Arnold D. Frese
Foundation since March 1979.
Mr. Cheek, a director of the Company since October 1994, served as a
director of Winston from February 1993 to December 1994. Mr. Cheek has been
engaged in private investment activities as his principal occupation for more
than the prior five years. From 1951 until his retirement in 1984, Mr. Cheek was
Vice President of U.S. Industries, Inc., a diversified holding company and
served as Chief Executive Officer of its Furniture Group.
Mr. Cheek served as a director of Winston from May 1987 through December 1988.
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Executive and Director Compensation
Summary Compensation Table
The following table sets forth compensation awarded to, earned by or
paid to (a) the Company's Chief Executive Officer, (b) each of the Company's
other executive officers, and (c) a former executive officer who was serving as
an executive officer at December 31, 1998 and whose total 1998 salary and bonus
from the Company was $100,000 or more (the Chief Executive Officer and such
other executive officers are referred to herein as the "Named Executive
Officers").
<TABLE>
<CAPTION>
Long Term
Compensation
---------------
Annual Compensation Awards
---------------------------------------------------------- ---------------
Other Annual Number of
Name and Principal Position Fiscal Year Salary Bonus Compensation(1) Options Granted
--------------------------- ----------- ------ ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Bobby Tesney........................ 1998 $250,150 $250,150 $104,236 --
President and Chief Executive . 1997 245,000 183,750 49,221 40,000
Officer ....................... 1996 216,400 162,300 28,240 --
Stephen C. Hess .................... 1998 204,200 173,570 42,256 --
Executive Vice President-Casual 1997 200,000 150,000 20,935 30,000
Furniture ..................... 1996 178,218 133,663 18,606 --
Vincent A. Tortorici, Jr ........... 1998 148,050 96,233 15,784 --
Vice President and Chief ...... 1997 145,000 72,500 12,669 25,000
Financial Officer ............. 1996 129,900 64,950 8,718 --
R. Craig Watts ..................... 1998 185,824 157,803 21,067 --
Executive Vice ................ 1997 181,830 136,373 19,343 25,000
President-Contract Seating .... 1996 166,138 121,103 20,357 --
Rick J. Stephens ................... 1998 123,552 61,776 9,121 --
Vice President-Operations ..... 1997 120,240 48,096 7,567 7,500
1996 106,124 42,565 7,277 --
Jerry C. Camp ...................... 1998 94,096 28,800 7,820 --
Vice President-Operations(2) .. 1997 85,770 8,900 5,908 5,000
1996 71,850 7,185 5,195 --
</TABLE>
- --------------------
(1) "Other Annual Compensation" represents amount paid by the Company on
behalf of the Named Executive Officer under the Company's Non-Qualified
Supplemental Executive Retirement Plan established in October 1996. Under
the terms of this Plan, selected employees make after-tax contributions
of their salary to one or more investment alternatives available under
such Plan. The Company then matches the employee contribution (up to 10%
of compensation on an after-tax basis) depending on the employee's length
of service (up to 100% for 20 years of continuous service). The employee
is vested at all times in the deferred compensation and is vested
immediately in the matching contribution.
(2) Former Vice-President--Operations.
Option Grants
No stock options were granted to any Named Executive Officers in 1998.
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<PAGE> 101
Aggregated 1998 Fiscal Year-End Option Value Table
The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers as of December
31, 1998. No stock options were exercised by such persons during 1998. All
"unexercisable" options will become fully exercisable and canceled in exchange
for cash payments pursuant to the Merger. See "THE MERGER -- Cash-out of
WinsLoew Stock Options."
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The Money Options
at December 31, 1998 at December 31, 1998
-------------------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bobby Tesney...................... 73,000 52,000 $1,263,625 $922,000
Stephen C. Hess................... 51,000 34,000 849,750 589,000
Vincent A. Tortorici, Jr.......... 30,000 30,000 536,250 525,000
R. Craig Watts.................... 55,175 30,000 1,020,335 525,000
Rick J. Stephens.................. 7,500 17,500 258,563 178,000
Jerry C. Camp(1).................. 4,500 4,000 68,063 64,000
</TABLE>
- --------------------
(1) Former Vice-President--Operations.
401(k) Plan
Effective January 1, 1997, the WinsLoew Furniture, Inc. 401(k) Plan
(the "Plan") was established. Employees of the Company and its subsidiaries are
eligible to participate in the Plan following the later to occur of (i) the
employee's completion of one year of service or (ii) the employee's 21st
birthday. Eligible employees may make a salary reduction contributions to the
Plan on a pretax basis. For each calendar year, the Company and the other
participating employees may make matching contributions to the Plan based on a
discretionary matching percentage to be determined each year by the Company. In
addition, the Company and the other participating employers may make a
discretionary profit sharing contribution to the plan on behalf of each
participant who completes more than 500 hours of service during the year or who
is employed on the last day of the year. This latter contribution is allocated
proportionately based on each participant's compensation. An employee's vested
benefits are payable upon his retirement, death, disability, or other
termination of employment or upon the attainment of age 59-1/2. An employee is
always fully vested in his account balance attributable to his own contributions
to the Plan. The employee's interest in the account attributable to his
employers contributions and earnings thereon becomes fully vested upon the
earlier of the attainment of his normal retirement date (age 65), his death, his
permanent and total disability, or his completion of six years of service. If an
employee terminates employment for reasons other than retirement, death, or
disability, his vested interest is based on a graduated vesting schedule which
provides for 20% vesting after two years of service and 20% for each year
thereafter. Nonvested amounts are forfeited.
Long Term Incentive and Pension Plans
The Company has no Long Term Incentive or Pension Plans.
Director Compensation
During 1996 and the first quarter of 1997, the Company paid each
director who was neither an employee of the Company nor Trivest an annual
retainer of $10,000, an additional retainer of $2,500 for serving on the
Compensation Committee, a $500 fee for each meeting of the Board of Directors
attended and, unless held on the same day as a Board meeting, $500 for each
committee meeting attended. The Company also reimburses all directors for
expenses incurred in connection with their activities as directors.
Additionally, prior to 1997, on March 31 of each year, each director
who was neither an employee of the Company nor Trivest received automatic grants
of options to purchase 5,000 shares of Common Stock pursuant to
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<PAGE> 102
the Company's 1994 Stock Option Plan. Such options become exercisable at the
rate of 20% per year on each anniversary of the date of grant, and have an
exercise price equal to the fair market value of Common Stock on the date of
grant. The unexercised portion of any such option will terminate upon the
earliest to occur of the following: (i) the expiration of 10 years from the date
of grant of the option, (ii) twelve months after the date on which the optionee
ceases to be a director by reason of the death or disability of the optionee, or
(iii) three months after the optionee ceases to be a director for any other
reason. In addition, each other director of the Company is eligible to receive
discretionary grants of options pursuant to such plan. These automatic grants
were terminated in connection with the adoption of the Amended and Restated 1994
Stock Option Plan by the Board of Directors in January 1997.
The Board of Directors approved new compensation policies effective
April 1, 1997. Directors who are neither employees of the Company nor Trivest
are paid a $2,500 cash fee for each meeting attended in person and a $500 cash
fee for each meeting attended by telephone. In addition, each member of the
Compensation and Audit Committee receives a $2,500 annual retainer, payable
quarterly in advance.
In addition, during 1998 each of the Company's directors was granted
options to purchase 2,500 shares of Common Stock pursuant to the Company's
Amended and Restated 1994 Stock Option Plan for each meeting of the Board of
Directors attended by him. There were two meetings of the Board of Directors in
1998. Such options become exercisable at the rate of 20% per year on each
anniversary of the date of grant and have an exercise price equal to the fair
market value of the Common Stock on the date of grant. The unexercised portion
of such options will terminate on the earliest to occur of the following (i) the
expiration of 10 years from the date of grant of the option, (ii) twelve months
after the date on which the optionee ceases to be a director by reason of the
death or disability of the optionee, or (iii) except as otherwise may be
determined by the Board, three months after the date on which the optionee
ceases to be a director for any other reason. The unvested portion of the
foregoing options will become fully vested in the event of a change in control
of the Company.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
Effective January 1, 1995, the Company entered into five-year
employment agreements with each of Messrs. Tesney, Watts, Hess and Tortorici (as
amended, the "Employment Agreements"). The Employment Agreements provide for the
Company to pay Messrs. Tesney, Watts, Hess and Tortorici base salaries of
$200,000, $150,000, $165,000 and $120,000, respectively, in each case subject to
annual cost of living adjustments. The Employment Agreements also provide for
annual incentive compensation payments of a portion of the executive's then base
salary (100% in the case of Mr. Tesney, 85% in the case of each of Messrs. Hess
and Watts, and 65% in the case of Mr. Tortorici) based on the operating earnings
(adjusted to exclude the effect of goodwill amortization) of (i) the Company, in
the case of Messrs. Tesney and Tortorici, (ii) the Company's Contract Seating
divisions, in the case of Mr. Watts,) and (iii) the Company's Casual Furniture
divisions, in the case of Mr. Hess. None of such officers will receive any
incentive compensation payment under his Employment Agreement for any particular
year unless the relevant operating earnings for such year are at least 75% of
the "target earnings" for such year. Target earnings for 1998 were set by the
Compensation Committee of the Board. Each Employment Agreement also provides
that the executive will receive six months base salary if his employment is
terminated without "cause" (as defined), and prohibits the executive from
directly or indirectly competing with the Company for one year after termination
of his employment (six months if he is terminated by the Company without
"cause"). The Employment Agreements were approved by the Compensation Committee
of the Company's Board of Directors.
Each of Messrs. Tesney, Watts, Hess and Tortorici will, prior to the
Merger, enter into a new employment agreement with WinsLoew replacing his
existing employment agreement. The new employment agreements will provide for
substantially the same base salaries and annual cash bonuses as their existing
employment agreements.
Each of the Named Executive Officers holds options to purchase Common
Stock under the Company's Amended and restated 1994 Stock Option Plan. To the
extent not already exercisable, such options generally become exercisable upon
(i) a reorganization, merger, consolidation or other form of corporate
transaction with respect to which ownership of a majority of the voting power of
the Common Stock is transferred, (ii) liquidation or dissolution of the Company
or (iii) the sale of all or substantially all of the Company's assets.
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<PAGE> 103
Compensation Committee Interlocks and Insider Participation
Mr. Powell, the Company's Chairman, also serves on the Board of
Directors of CHC International, Inc., a hotel and casino development and
management company. Mr. Weiser, a director and member of the Compensation
Committee of the Company, serves as Chairman of the Board, President and Chief
Executive Officer of CHC International, Inc. See "--Directors and Executive
Officers of WinsLoew."
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<PAGE> 104
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of June 1, 1999 by (i) each person
known by the Company to beneficially own more than five percent of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each "Named Executive Officer" of the Company (as defined below in "Executive
Compensation-Summary Compensation Table"), and (iv) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
Beneficial Ownership
of Common Stock(2)
-------------------------------------
Number of Shares Percentage
---------------- ----------
<S> <C> <C>
Earl W. Powell(3)(4).............................................. 2,000,187 27.7%
Phillip T. George, M.D.(3)(5)..................................... 1,866,283 25.9%
Trivest Group, Inc.(3)(6)......................................... 908,455 12.6%
FMR Corp.(7)...................................................... 596,200 8.3%
Trivest Special Situations Fund 1985, L.P.(3)(8).................. 542,816 7.6%
Cadence Capital Management(9)..................................... 378,500 5.3%
Heartland Advisors, Inc.(10)...................................... 229,300 3.2%
R. Craig Watts(11)................................................ 178,237 2.5%
M. Miller Gorrie(12).............................................. 156,950 2.2%
Bobby Tesney(13).................................................. 142,693 2.0%
Stephen C. Hess(14)............................................... 93,602 1.3%
Vincent A. Tortorici, Jr.(15)..................................... 56,950 *
James S. Smith(16)................................................ 36,000 *
Rick J. Stephens(17).............................................. 33,478 *
Henry C. Cheek(18)................................................ 22,000 *
Sherwood M. Weiser(19)............................................ 18,175 *
William H. Allen, Jr.(20)......................................... 11,550 *
Peter W. Klein(3)(21)............................................. 9,050 *
Jerry C. Camp(22)................................................. 7,262 *
William F. Kaczynski, Jr.(3)(23).................................. 1,000 *
All directors and executive officers as a group (14 persons)(24).. 2,915,012 38.4%
</TABLE>
- --------------------
(*) Less than 1%
(1) Except as otherwise indicated below, the address of each beneficial
owner is 160 Village Street, Birmingham, Alabama 35242.
(2) Except as otherwise indicated below, all shares are owned directly and
each person has sole voting and investment power with respect to all
shares. For purposes of this table, a person is deemed to have
"beneficial ownership" of any shares as of a given date which the
person has the right to acquire within 60 days after such date. For
purposes of computing the outstanding shares held by each person named
above on a given date, any shares which such person has the right to
acquire within 60 days after such date are deemed to be outstanding,
but are not deemed to be outstanding for the purpose of computing the
percentage
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<PAGE> 105
ownership of any other person. However, the table does not reflect the
acceleration of stock options vesting that will result from the Merger.
See "THE MERGER -- Cash-out of WinsLoew Stock Options."
(3) The beneficial owner's address is 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133.
(4) Includes 259,135 shares owned directly, 37,625 shares subject to
exercisable options granted under the Company's stock option plan,
662,484 shares held of record by Trivest Fund I, Ltd., 245,971 shares
held of record by Trivest Equity Partners I, Ltd., 116,459 shares held
of record by Trivest Principals' Fund 1988, of which Mr. Powell is a
general partner, 542,816 shares owned of record by Trivest Special
Situations Fund 1985, L.P. ("TSSF") (see note (8)) and 135,697 shares
owned of record by Trivest Annuity Fund, Ltd.("Annuity Fund"). Excludes
13,500 shares subject to unvested options that will become fully vested
and exercisable upon consummation of the Merger. The General Partner of
Annuity Fund is Trivest Plan Sponsor, Inc. ("Trivest Plan Sponsor").
Messrs. Powell and George are executive officers and directors of
Trivest Plan Sponsor and beneficially own 100% of its outstanding
stock.
(5) Includes 136,641 shares owned directly, 1,965 shares held of record by
Dr. George as custodian for his minor children under the Florida
Uniform Gifts to Minors Act as to which Dr. George disclaims beneficial
ownership, 24,250 shares subject to exercisable options under the
Company's stock option plan, 662,484 shares held of record by Trivest
Fund I, Ltd., 245,971 shares held of record by Trivest Equity Partners
I, Ltd., 116,459 shares held of record by Trivest Principals' Fund
1988, of which Dr. George is a general partner, 542,816 shares of
record owned by TSSF (See note (8)), and 135,697 shares owned of record
by Annuity Fund. Excludes 11,500 shares subject to unvested options
that will become fully vested and exercisable upon consummation of the
Merger. The General Partner of Annuity Fund is Trivest Plan Sponsor.
Messrs. Powell and George are executive officers and directors of
Trivest Plan Sponsor and beneficially own 100% of its outstanding
stock.
(6) Trivest Group, Inc. serves as the sole general partner of Trivest 1988
Fund Managers, Ltd., which in turn is the sole general partner of (i)
Trivest Fund I, Ltd., a privately held investment partnership that
holds of record 662,484 shares of Common Stock, and (ii) Trivest Equity
Partners I, Ltd., a privately held investment partnership that holds of
record 245,971 shares of Common Stock. Messrs. Powell and George are
executive officers and directors of Trivest Group, Inc. and
beneficially own 100% of its outstanding capital stock.
(7) The address for FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
(8) The general partner of TSSF is Trivest Associates, L.P. ("Associates"),
a Florida limited partnership whose general partner is Trivest, Inc.
Messrs. Powell and George are executive officers and directors of
Trivest Inc. and beneficially own 100% of its outstanding capital
stock. Messrs. Powell and George are also limited partners of
Associates.
(9) The address for Cadence Capital Management is One Exchange Place, 29th
Floor, Boston, Massachusetts 02109.
(10) The address for Heartland Advisors, Inc. is 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202.
(11) Includes 113,062 shares owned directly and 65,175 shares subject to
exercisable options granted under the Company's Stock Option Plan.
Excludes 20,000 shares subject to unvested options that will become
fully vested and exercisable upon consummation of the Merger. Mr.
Watts' address is 1801 N. Andrews Avenue, Pompano Beach, Florida 33062.
(12) Includes 62,750 shares owned directly and 15,500 shares subject to
exercisable options granted under the Company's stock option plan and
78,700 shares owned by Brasfield & Gorrie, General Contractors,
Incorporated. Excludes 14,500 shares subject to unvested options that
will become fully vested and exercisable upon consummation of the
Merger. Mr. Gorrie's address is c/o Brasfield and Gorrie, 729 South
30th Street, Birmingham, Alabama 35233.
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<PAGE> 106
(13) Includes 51,693 shares owned directly and 91,000 shares subject to
exercisable options granted under the Company's stock option plan.
Excludes 34,000 shares subject to unvested options that will become
fully vested and exercisable upon consummation of the Merger.
(14) Includes 31,602 shares owned directly and 62,000 shares subject to
exercisable options granted under the Company's stock option plan.
Excludes 23,000 shares subject to unvested options that will become
fully vested and exercisable upon consummation of the Merger.
(15) Includes 16,950 shares owned directly and 40,000 shares subject to
exercisable options granted under the Company's stock option plan.
Excludes 20,000 shares subject to unvested options that will become
fully vested and exercisable upon consummation of the Merger.
(16) Includes 20,000 shares owned directly and 16,000 shares subject to
exercisable options granted under the Company's stock option plan.
Excludes 16,500 shares subject to unvested options that will become
fully vested and exercisable upon consummation of the Merger. Mr.
Smith's address is Suite 916, 10 Rockefeller Plaza, New York, New York
10020.
(17) Includes 14,978 shares owned directly and 18,500 shares subject to
exercisable options granted under the Company's stock option plan.
Excludes 6,500 options subject to unvested options that will become
fully vested and exercisable upon consummation of the Merger.
(18) Includes 6,000 shares owned directly and 16,000 shares subject to
exercisable options granted under the Company's stock option plan.
Excludes 16,500 shares subject to unvested options that will become
fully vested and exercisable upon consummation of the Merger. Mr.
Cheek's address is 3713 Fairway Drive, DCBE, Granbury, Texas 76049.
(19) Includes 5,675 shares held by Mr. Weiser's wife, 2,000 shares owned
directly and 10,500 shares subject to exercisable options granted under
the Company's stock option plan. Excludes 14,500 shares subject to
unvested options that will become fully vested and exercisable upon
consummation of the Merger. Mr. Weiser's address is 3250 Mary Street,
5th Floor, Miami, Florida 33133.
(20) Includes 1,050 shares owned directly and 10,500 shares subject to
exercisable options granted under the Company's stock option plan.
Excludes 14,500 shares subject to unvested options that will become
fully vested and exercisable upon consummation of the Merger. Mr.
Allen's address is c/o Nations Bank South, 200 S.E. 1st Street, Suite
800, Miami, Florida 33131.
(21) Represents 9,050 shares subject to exercisable options granted under
the Company's stock option plan. Excludes 13,500 shares subject to
unvested options that will become fully vested and exercisable upon
consummation of the Merger.
(22) Includes 1,762 shares owned directly and 5,500 shares subject to
exercisable options granted under the Company's stock option plan.
Excludes 3,000 shares subject to unvested options that will become
fully vested and exercisable upon consummation of the Merger.
(23) Includes 1,000 shares subject to exercisable options. Excludes 6,500
shares subject to unvested options that will become fully vested and
exercisable upon consummation of the Merger.
(24) Includes an aggregate of 413,100 shares subject to exercisable options
granted under the Company's stock option plan, 1,024,914 shares owned
of record by Trivest Fund I, Ltd., Trivest Equity Fund I, Ltd., and
Trivest Principals' Fund 1988 and 678,513 shares owned of record by
TSSF and Annuity Fund. See notes (4), (5), (6) and (7).
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<PAGE> 107
CERTAIN INFORMATION CONCERNING
THE PURCHASER AND OTHER AFFILIATES
Purchaser. The Purchaser is a newly-formed Florida corporation
organized at the direction of the Trivest Partnerships. The principal executive
offices of the Purchaser are located at 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133. The telephone number is (305) 858-2200.
Trivest Directors. The Trivest Directors are Earl W. Powell, Phillip T.
George, M.D., William F. Kaczynski, Jr. and Peter W. Klein. See
"MANAGEMENT--Directors and Executive Officers of WinsLoew." The principal
business address of each of them is c/o Trivest, Inc., 2665 South Bayshore
Drive, Suite 800, Miami, Florida 33133. Each of the Trivest Directors is a
citizen of the United States. Each of their principal occupations is as a
director and/or executive officer of Trivest and associated entities.
Management Group. The members of the Management Group are the following
executive officers of WinsLoew: Bobby Tesney, President and Chief Executive
Officer, Vincent A. Tortorici, Jr., Vice President and Chief Financial Officer,
R. Craig Watts, Executive Vice President, Contract Seating, and Rick J.
Stephens, Vice President, Operations. See "MANAGEMENT--Directors and Executive
Officers of WinsLoew." The business address for each member of the Management
Group is the principal executive offices of WinsLoew, located at 160 Village
Street, Birmingham, Alabama 35242. Each member of the Management Group is a
citizen of the United States.
Trivest Furniture Partners, Ltd.
Trivest Furniture Partners, Ltd. Trivest Furniture Partners, Ltd., a
Florida limited partnership, is a privately held investment partnership
established for the purpose of providing equity financing for the Merger. Its
principal executive offices are located at 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133. Its sole general partner is TFP, Ltd.
TFP, Ltd. Trivest Furniture, Ltd. is a Florida limited partnership
established for the purpose of managing Trivest Furniture Partners, Ltd., of
which it is the sole general partner. Its principal executive offices are
located at 2665 South Bayshore Drive, Suite 800, Miami, Florida 33133. Its sole
general partner is Trivest.
Trivest. Trivest II, Inc., a Florida corporation, is a private
investment firm specializing in management services and acquisitions,
dispositions and leveraged layouts. It is the sole general partner of TFP, Ltd.
Mr. Powell is the controlling shareholder and sole director of Trivest. The
following persons are the executive officers of Trivest: Mr. Powell, Dr. George,
Mr. Kaczynski, Mr. Klein, Troy D. Templeton, Derek A. McDowell, B. Jay Anderson
and Peter Vandenberg, Jr. Each such person is a citizen of the United States.
Each of their principal occupations is as a director or executive officer of
Trivest and associated entities. See "MANAGEMENT--Directors and Executive
Officers of WinsLoew." Set forth below is a brief description of the business
experience during at least the last five years of each of Messrs. Templeton,
McDowell, Anderson and Vandenberg. The principal executive offices of Trivest
are located at 2665 South Bayshore Drive, Suite 800, Miami, Florida 33133.
Troy D. Templeton. Mr. Templeton has served as an executive officer of
Trivest since 1989 and is presently Senior Managing Director. Prior to joining
Trivest, Mr. Templeton served in various capacities with Southeast Bank, N.A. in
Miami, Florida.
Derek A. McDowell. Mr. McDowell has served as an executive officer of
Trivest since January 1998 and is presently a Managing Director. Prior to
joining Trivest, Mr. McDowell served in various capacities for eight years with
private equity and management consulting firms, including: H.I.G. Capital
Management, Continental Illinois Venture Corporation, and Corporate Value
Associates.
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<PAGE> 108
B. Jay Anderson. Mr. Anderson has served as an executive officer of
Trivest since 1987 and is presently Treasurer and Chief Financial Officer. Prior
to joining Trivest, Mr. Anderson served as Audit Manager with KPMG-Peat Marwick
in Miami from 1981 to 1987.
Peter Vandenberg, Jr. Mr. Vandenberg, a Certified Public Accountant,
has served as an executive officer of Trivest since January 1999 and is
presently a Managing Director. Mr. Vandenberg has served as President of
Biscayne, one of Trivest's associated entities, since November 1997 and as Chief
Operating Officer of Biscayne since March 1998. The common stock of Biscayne is
quoted on the NASD OTC Bulletin Board. Biscayne filed a Voluntary Chapter 11
bankruptcy petition in February 1999. Mr. Vandenberg joined Biscayne in January
1987 and has served as Vice President (Executive Vice President from December
1996 until becoming President), Treasurer and Chief Financial Officer since such
time (except for the period from April 1991 to September 1991, when he served as
a Vice President of Biscayne and as an executive officer of Trivest). He was
appointed a director of Biscayne in November 1994. Prior to joining Trivest, Mr.
Vandenberg served in various capacities with Peat Marwick from December 1977
until January 1987, and was a senior manager of that firm from July 1984 until
joining the Company.
Trivest Fund II Group, Ltd.
Trivest Fund II Group, Ltd. Trivest Fund II Group, Ltd., a Florida
limited partnership, is a privately held investment partnership established for
the purpose of providing equity financing for the Merger. Its principal
executive offices are located at 2665 South Bayshore Drive, Suite 800, Miami,
Florida 33133. Its sole general partner is Trivest Equities, Inc.
Trivest Equities, Inc. Trivest Equities, Inc., a Florida corporation,
is principally engaged in the business of investing through partnerships in
other companies. It is the sole general partner of Trivest Fund II Group, Ltd.
Mr. Powell is the controlling shareholder of Trivest Equities, Inc., and Messrs.
Powell and George are its sole directors. The following persons are the
executive officers of Trivest Equities, Inc.: Messrs. Powell, George, Kaczynski,
Klein, Templeton, McDowell, Anderson and Vandenberg. Each such person is a
citizen of the United States. Each of their principal occupations is as a
director or executive officer of Trivest and associated entities, including
Trivest Equities, Inc. See "MANAGEMENT--Directors and Executive Officers of
WinsLoew." Set forth above is a brief description of the business experience
during at least the last five years of each of Messrs. Templeton, McDowell,
Anderson and Vandenberg. The principal executive offices of Trivest Equities,
Inc. are located at 2665 South Bayshore Drive, Suite 800, Miami, Florida 33133.
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CERTAIN TRANSACTIONS
Investment Services Agreement. In December 1994, the Company entered
into a ten-year Investment Services Agreement with Trivest, pursuant to which
Trivest provides corporate finance, strategic and capital planning and other
management advice to the Company, including (i) conducting relations on behalf
of the Company with accountants, attorneys, financial advisors and other
professionals, (ii) providing reports to the Company with respect to the value
of its assets, and (iii) rendering advice with respect to acquisitions,
dispositions, financings and refinancings. Pursuant to the Investment Services
Agreement, Trivest receives a base annual fee of $500,000 (in 1994), subject to
cost-of-living increases. In addition, for each additional business acquired by
the Company, Trivest's base compensation will generally be increased by the
greater of (i) $100,000, and (ii) the sum of 5% of the additional business's
projected annual earnings before income taxes, interest expense and amortization
of goodwill ("EBITA") for the fiscal year in which it is acquired up to $2.0
million of EBITA, plus 3.5% of EBITA in excess of $2.0 million. Moreover,
subject to the approval of the Company's board (including a majority of
disinterested directors), for each acquisition or disposition of any business
operation by the Company introduced or negotiated by Trivest, Trivest will
generally receive a fee of up to 3% of the purchase price. The Company paid
Trivest $640,980 for services rendered under the Investment Services Agreement
during 1998.
Pursuant to an amendment entered into between Trivest and the Company
as of March 5, 1999, the parties agreed that (i) no such fee would be payable to
Trivest with respect to the Merger, (ii) if the Termination Fee is paid in
connection with a Superior Proposal pursuant to the Merger Agreement, no such
fee shall be payable with respect to such Superior Proposal under the Investment
Services Agreement, and (iii) Trivest shall not be reimbursed under the
Investment Services Agreement for any expenses related to the Merger or a
Superior Proposal. See "SPECIAL FACTORS--Background" and "THE
MERGER--Termination."
Trivest Legal Department. Trivest maintains an internal legal
department, which accounts for its time on an hourly basis and bills Trivest and
its affiliates, including the Company, for services rendered at prevailing
rates. In 1998, the Company paid Trivest $40,516.25 for services rendered by the
legal department. The Company believes that the fees charged by the Trivest
legal department in 1998 were no less favorable to the Company than fees charged
by unaffiliated third parties for similar services.
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<PAGE> 110
MARKET PRICES OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock has been traded on the Nasdaq National
Market under the symbol "WLFI" since January 1, 1995. The following table sets
forth, for the period indicated, the high and low sales price per share of
Common Stock as reported by the Nasdaq National Market System:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1997
First Quarter................................... $ 11 7/8 $ 8 1/8
Second Quarter.................................. $ 11 $ 8 3/8
Third Quarter................................... $ 15 $ 10 15/16
Fourth Quarter.................................. $ 16 13/16 $ 13 5/16
1998
First Quarter................................... $ 20 5/8 $ 13 3/4
Second Quarter.................................. $ 29 $ 20 11/16
Third Quarter................................... $ 28 3/4 $ 15 1/2
Fourth Quarter.................................. $ 26 1/2 $ 17 7/8
1999
First Quarter................................... $ 28 3/4 $ 23
Second Quarter.................................. $ _____ $ _____
(through June __, 1999)
</TABLE>
On January 6, the last trading day prior to the Board meeting at which
Mr. Powell stated that he, together with the other Trivest Investors and the
Management Group, would be willing to submit a proposal to purchase the Company,
the closing price per share of the Common Stock as reported by Nasdaq was $24
3/8. On January 15, 1999, the last trading day prior to the announcement of the
delivery of Mr. Powell's initial proposal to the Special Committee, the closing
price per share of the Common Stock as reported by Nasdaq was $27. On January
25, the last trading day prior to the announcement of the execution of the
Letter of Intent relating to the Merger, the closing price per share of the
Common Stock as reported by Nasdaq was $28 1/2. On March 4, 1999, the last
trading day prior to announcement of the First Amended Merger Agreement, the
closing price per share of Common Stock as reported by Nasdaq was $26 3/4. On
March 30, 1999, the last trading day prior to the announcement of the First
Amended Merger Agreement increasing the per share purchase price from $30.00 to
$33.00, the closing price per share of the Common Stock as reported by Nasdaq
was $27 1/2. On May 4, 1999, the last trading day prior to the announcement of
the Merger Agreement increasing the per share purchase price from $33.00 to
$34.75, the closing price per share of the Common Stock as reported by Nasdaq
was $32 1/4. On June ___, 1999, the last trading day prior to the printing of
this Proxy Statement, the closing price per share of Common Stock as reported by
Nasdaq was $_____.
As of April 30, 1999, there were approximately 104 holders of record of
Common Stock and approximately 1,997 persons or entities holding Common Stock in
nominee name.
The Company has not declared nor paid any cash dividends on its Common
Stock, does not anticipate that any dividends will be declared nor paid in the
foreseeable future, and intends to retain earnings to finance the development
and expansion of the Company's operations. Under the Merger Agreement, the
company has agreed not to pay any dividends on the Common Stock prior to the
Effective Date. In addition, the Company's payment of dividends is also
restricted under the terms of its credit facilities (see Note 4 of Notes to the
Company's Consolidated Financial Statements).
In January 1998, the Board approved a plan to acquire up to 1,000,000
shares of Common Stock. The purchases commenced in May 1998 and were funded by
the Company's senior credit facility. As of the date of this Proxy Statement,
the Company had acquired 112,500 shares for approximately $3.2 million under the
plan at prices ranging from $27 5/8 to $28 1/2 per share, and the last purchase
of Common Stock by the Company under such plan was on February 25, 1999 of
20,000 shares at a per share price of $27 5/8. All such purchases were
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<PAGE> 111
effected through brokers on the Nasdaq National Market System. The average price
per share for such purchases during each fiscal quarter since January 1998 were
as follows:
<TABLE>
<S> <C>
1998
First Quarter............................. N/A
Second Quarter............................ $27 1/2
Third Quarter............................. $17 3/4
Fourth Quarter............................ $19
1999
First Quarter............................. $28 1/3
</TABLE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains certain forward-looking statements
regarding the intent, belief and current expectations of the Company's
management. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to be correct. Generally, these statements relate
to business plans or strategies, projected or anticipated benefits or other
consequences of such plans or strategies, or projections involving anticipated
revenues, expenses, earnings, levels of capital expenditures or other aspects of
operating results. The operations of the Company are subject to a number of
uncertainties, risks and other influences, many of which are outside the control
of the Company and any one of which, or a combination of which, could materially
affect the results of the Company's operations and whether the forward-looking
statements made by the Company ultimately prove to be accurate. The Company
assumes no obligation to update any forward-looking statements.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP, certified public accountants, served as the
Company's independent auditors for the fiscal year ended December 31, 1998. The
Consolidated Balance Sheets as of December 31, 1998 and December 31, 1997, and
the related Consolidated Statements of Income, Shareholders' Equity and Cash
Flows for each of the three fiscal years in the period ended December 31, 1998
included in this Proxy Statement have been audited by Ernst & Young LLP,
independent auditors, as stated in their report. A representative of Ernst &
Young LLP will be present at the Special Meeting to answer appropriate questions
from shareholders and will have the opportunity to make a statement if so
desired.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
WinsLoew's annual meeting of shareholders is normally held in June of
each year. Management has postponed the date of the 1999 annual meeting of
shareholders pending the Special Meeting. If the proposal to approve the Merger
is not approved at the Special Meeting, then the 1999 annual meeting of
shareholders will be held in November 1999. In order to be considered for
inclusion in the Company's proxy statement and form of proxy for the 1999 annual
meeting of shareholders, proposals of shareholders intended to be presented at
the meeting must be submitted to the Company in accordance with the procedures
prescribed in Rule 14a-8 under the Exchange Act and must be received by the
Company at its principal executive offices by August 31, 1999. Pursuant to the
Company's Articles of Incorporation, in order to be considered at such meeting,
proposals of shareholders must be received by the Company at its principal
executive offices by the tenth day following the date on which notice of the
date of the meeting is given to shareholders or made public, whichever occurs
first. The Company's proxy statement for the 1999 annual meeting of
shareholders, if held, will confer discretionary authority to vote on any
shareholder proposal presented at the meeting unless the Company receives notice
of such proposal by such date.
OTHER BUSINESS
The Board knows of no other business to be brought before the Special
Meeting. If, however, any other business should properly come before the Special
Meeting, it is the intention of the persons named in the
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<PAGE> 112
accompanying proxy to vote proxies as in their discretion they may deem
appropriate, unless they are directed by a proxy to do otherwise.
DOCUMENTS INCORPORATED BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Proxy Statement and
prior to the Special Meeting and any adjournment or postponement thereof, shall
be deemed to be incorporated by reference in this Proxy Statement and to be a
part hereof for purposes of the Exchange Act from the date of the filing of such
documents. Any statement contained in this Proxy Statement, in a supplement to
this Proxy Statement or in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein or in any
subsequently filed supplement to this Proxy Statement or in any document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith files reports, proxy statements, and
other information with the Commission. The reports, proxy statements, and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the following Regional Offices of
the Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. The same information is also available on the
Internet at http://www.FreeEDGAR.com.
The Affiliates (consisting of the Purchaser, the members of the
Management Group, the Trivest Partnerships and the Trivest Directors), have
filed a Schedule 13E-3 with the Commission with respect to the transactions
contemplated by the Merger Agreement. As permitted by the rules and regulations
of the Commission, this Proxy Statement omits certain information and exhibits
contained in the Schedule 13E-3. The Schedule 13E-3 (including exhibits) and any
amendments thereto may be inspected and copied at, or obtained from, the
Commission's offices as set forth above. For further information, reference is
hereby made to the Schedule 13E-3 and the exhibits thereto. Statements contained
in this Proxy Statement concerning documents filed with the Commission as
exhibits to the Schedule 13E-3 or attached as Appendices to this Proxy Statement
are not necessarily complete and, in each instance, reference is made to the
copy of the document filed as an exhibit to the Schedule 13E-3 or attached as an
Appendix to this Proxy Statement. Each statement in this Proxy Statement
concerning such a document is qualified in its entirety by reference to such
document.
Certain documents discussed in this Proxy Statement, including, without
limitation, the Schedule 13E-3 and all exhibits thereto, are also available for
inspection and copying at the principal executive offices of the Company at 160
Village Street, Birmingham, Alabama 35242, telephone (205) 408-7600, during its
regular business hours, by any shareholder or his or her representative so
designated in writing. Upon the written request of a shareholder directed to the
Secretary of the Company at the above address, the Company will mail to such
shareholder a copy of any such document at the expense of such shareholder.
If the Merger is consummated, the Company will deregister the Common
Stock and will no longer be subject to the requirements of the Exchange Act. See
"SPECIAL FACTORS--Certain Effects of the Merger."
104
<PAGE> 113
No person has been authorized to give any information or make any
representation in connection with the solicitation of proxies made hereby other
than those contained or incorporated by reference in this Proxy Statement, and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or the Purchaser. This Proxy Statement
does not constitute a solicitation of a proxy in any jurisdiction where, or to
or from any person to whom, it is unlawful to make such proxy solicitation in
such jurisdiction. The delivery of this Proxy Statement shall not, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
or incorporated by reference herein is correct as of any time subsequent to its
date. Information in this Proxy Statement about the Company has been provided
by the Company, and information about the Purchaser has been provided by the
Purchaser.
By Order of the Board of Directors
Bobby Tesney
President and Chief Executive Officer
Birmingham, Alabama
June __, 1999
105
<PAGE> 114
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors ......................... F-2
Consolidated Balance Sheets as of
December 31, 1998 and 1997 ............................................. F-3
Consolidated Statements of Income
For the Years Ended December 31, 1998, 1997 and 1996 ................... F-4
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1998, 1997 and 1996 ................... F-5
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998, 1997 and 1996 ................... F-6
Notes to Consolidated Financial Statements ................................ F-7
Consolidated Balance Sheet
as of March 26, 1999 (Unaudited) ....................................... F-18
Consolidated Statements of Income
For the Quarters Ended March 26, 1999 and March 27, 1998 (Unaudited).... F-19
Consolidated Statements of Cash Flows
For the Quarters Ended March 26, 1999 and March 27, 1998 (Unaudited).... F-20
Notes to Consolidated Financial Statements (Unaudited) .................... F-21
</TABLE>
F-1
<PAGE> 115
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders of WinsLoew Furniture, Inc.
We have audited the accompanying consolidated balance sheets of WinsLoew
Furniture, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1998. 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 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of WinsLoew
Furniture, Inc. and Subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
Birmingham, Alabama /s/ Ernst & Young LLP
January 29, 1999
F-2
<PAGE> 116
WinsLoew Furniture, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands except share and per share amounts) December 31,
--------------------
1998 1997
------- -------
Assets
<S> <C> <C>
Cash and cash equivalents $ 475 $ 707
Cash in escrow 1,000 --
Accounts receivable, less allowances for doubtful accounts of
$1,694 and $788 at December 31, 1998 and 1997, respectively 23,647 22,031
Inventories 12,206 10,433
Prepaid expenses and other current assets 4,638 7,409
Net assets of discontinued operations -- 1,470
------- -------
Total current assets 41,966 42,050
Net assets of discontinued operations -- 4,548
Property, plant and equipment, net 13,948 12,023
Goodwill, net 27,176 21,021
Other assets, net 1,463 772
------- -------
$84,553 $80,414
======= =======
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 47 $ 515
Accounts payable 4,377 3,395
Other accrued liabilities 9,952 8,203
Net liabilities of discontinued operations 1,750 --
------- -------
Total current liabilities 16,126 12,113
Long-term debt, net of current portion 1,400 15,908
Deferred income taxes 801 1,367
------- -------
Total liabilities 18,327 29,388
------- -------
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, par value $.01 per share, 5,000,000 shares
authorized, none issued -- --
Common stock- par value $.01 per share, 20,000,000 shares
authorized, 7,294,408 and 7,526,508 shares issued and
outstanding at December 31, 1998 and 1997, respectively 73 75
Additional paid-in capital 19,797 24,926
Retained earnings 46,356 26,025
------- -------
Total stockholders' equity 66,226 51,026
------- -------
$84,553 $80,414
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 117
WinsLoew Furniture, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
(In thousands except per share amounts) Year Ended December 31,
---------------------------------------
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Net sales $141,360 $ 122,145 $ 117,405
Cost of sales 87,232 79,431 78,029
-------- --------- ---------
Gross profit 54,128 42,714 39,376
Selling, general and administrative expenses 23,124 21,427 21,472
Amortization 1,122 992 1,444
-------- --------- ---------
Operating income 29,882 20,295 16,460
Interest expense 635 2,296 3,083
-------- --------- ---------
Income from continuing operations before
income taxes 29,247 17,999 13,377
Provision for income taxes 10,947 6,838 4,834
-------- --------- ---------
Income from continuing operations 18,300 11,161 8,543
Loss from discontinued operations,
net of taxes -- (718) (259)
Gain (loss) from sale of discontinued operations,
net of taxes 2,031 (8,200) --
-------- --------- ---------
Net income $ 20,331 $ 2,243 $ 8,284
======== ========= =========
Basic earnings (loss) per share:
Income from continuing operations $ 2.46 $ 1.49 $ 0.98
Loss from discontinued operations,
net of taxes -- (0.09) (0.03)
Gain (loss) from sale of discontinued
operations, net of taxes 0.27 (1.10) --
-------- --------- ---------
Net income $ 2.73 $ 0.30 $ 0.95
======== ========= =========
Weighted average number of shares 7,450 7,484 8,724
======== ========= =========
Diluted earnings (loss) per share:
Income from continuing operations $ 2.40 $ 1.48 $ 0.98
Loss from discontinued operations,
net of taxes -- (0.10) (0.03)
Gain (loss) from sale of discontinued
operations, net of taxes 0.27 (1.08) --
-------- --------- ---------
Net income $ 2.67 $ 0.30 $ 0.95
======== ========= =========
Weighted average number of shares and
common stock equivalents 7,624 7,563 8,730
======== ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE> 118
WinsLoew Furniture, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(In thousands except share amounts)
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- Paid-in Retained
Shares Amount Capital Earnings Total
--------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 8,967,112 $ 90 $ 37,640 $15,498 $ 53,228
Exercise of stock options 25,100 -- 187 -- 187
Repurchase and cancellation of stock (576,925) (6) (3,958) -- (3,964)
Repurchase and cancellation of stock
from affiliated company (933,504) (9) (9,326) -- (9,335)
Net income -- -- -- 8,284 8,284
--------- ---- -------- ------- --------
Balance, December 31, 1996 7,481,783 75 24,543 23,782 48,400
Exercise of stock options 94,725 1 872 -- 873
Repurchase and cancellation of stock (50,000) (1) (489) -- (490)
Net income -- -- -- 2,243 2,243
---------- ---- -------- ------- --------
Balance, December 31, 1997 7,526,508 75 24,926 26,025 51,026
Exercise of stock options 63,900 1 924 -- 925
Repurchase and cancellation of stock (296,000) (3) (6,053) -- (6,056)
Net income -- -- -- 20,331 20,331
--------- ---- -------- ------- --------
Balance, December 31, 1998 7,294,408 $ 73 $ 19,797 $46,356 $ 66,226
========= ==== ======== ======= ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 119
WinsLoew Furniture, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands) Year Ended December 31,
--------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 20,331 $ 2,243 $ 8,284
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,618 2,634 2,979
Provision for losses on accounts receivable 1,331 42 1,759
Change in net assets held for sale 6,743 14,710 1,591
Changes in operating assets and liabilities,
net of effects from acquisitions and dispositions:
Accounts receivable (2,210) 1,875 (617)
Inventories (1,164) 1,182 288
Prepaid expenses and other current assets 2,779 (3,871) 50
Other assets 843 691 (144)
Accounts payable 792 (591) 1,841
Other accrued liabilities (357) 3,386 (497)
Deferred income taxes (566) (310) 690
-------- -------- --------
Total adjustments 10,809 19,748 7,940
-------- -------- --------
Net cash provided by operating activities 31,140 21,991 16,224
-------- -------- --------
Cash flows from investing activities:
Capital expenditures, net of disposals (942) (425) (1,351)
Proceeds from disposition of business -- 2,119 --
Proceeds from disposition of business held in escrow (1,000) -- --
Investment in subsidiary (9,323) -- --
-------- -------- --------
Net cash provided by (used in) investing activities (11,265) 1,694 (1,351)
-------- -------- --------
Cash flows from financing activities:
Net payments under revolving credit agreements (10,837) (19,872) (65)
Payments on long-term debt (4,139) (4,386) (4,225)
Proceeds from issuance of common stock, net 925 873 187
Repurchase and cancellation of stock (6,056) (490) (3,964)
Repurchase and cancellation of stock from affiliated company -- -- (9,335)
Proceeds from issuance of long-term debt -- -- 3,030
-------- -------- --------
Net cash used in financing activities (20,107) (23,875) (14,372)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (232) (190) 501
Cash and cash equivalents at beginning of year 707 897 396
-------- -------- --------
Cash and cash equivalents at end of year $ 475 $ 707 $ 897
======== ======== ========
Supplemental disclosures:
Interest paid $ 695 $ 2,318 $ 3,296
Income taxes paid $ 9,579 $ 6,048 $ 3,937
======== ======== ========
Investing activities included the acquisition of Tropic Craft in 1998
Assets acquired, liabilities assumed and consideration paid was as follows:
Fair value of assets acquired $ 10,078
Cash acquired (43)
Liabilities assumed (712)
--------
$ 9,323
========
</TABLE>
See accompanying notes.
F-6
<PAGE> 120
WinsLoew Furniture, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of WinsLoew
Furniture, Inc. ("WinsLoew") and its subsidiaries (the "Company"). All material
intercompany balances and transactions have been eliminated.
Business
WinsLoew is comprised of companies engaged in the design, manufacture and
distribution of casual, contract seating and ready-to-assemble ("RTA")
furniture. WinsLoew's casual furniture products are distributed through
independent manufacturer's representatives, and are constructed of extruded and
tubular aluminum, wrought iron and cast aluminum. These products are distributed
through fine patio stores, department stores and full line furniture stores
nationwide. WinsLoew's contract seating products are distributed to a customer
base which includes architectural design firms, restaurant and lodging chains.
WinsLoew's RTA products include promotionally priced coffee and end tables, wall
units and rolling carts. Distribution of RTA furniture products is primarily
through mass merchandisers, catalogue wholesalers and specialty retailers. The
Company performs periodic credit evaluations of its customers' financial
condition and determines if collateral is needed on a customer by customer
basis.
Cash and Cash Equivalents
The Company classifies as cash and cash equivalents all highly liquid
investments which have maturities at the date of purchase of three months or
less. The Company maintains its cash in bank deposit accounts which, at times,
may exceed the federally insured limits. The Company has not experienced any
losses in such accounts.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
utilizing the first-in, first-out ("FIFO") and weighted average methods.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. The Company provides for
depreciation on a straight-line basis over the following estimated useful lives:
building and improvements, 8 to 40 years; manufacturing equipment, 2 to 10
years; office furniture and equipment, 3 to 7 years; and vehicles, 3 to 5 years.
Goodwill
Goodwill is amortized on a straight-line basis over forty years from the date of
the respective acquisition. The carrying value of goodwill is reviewed if the
facts and circumstances suggest it may be impaired. If the review, using
undiscounted cash flows over the remaining amortization period, indicates that
the cost of goodwill will not be recoverable, the Company's carrying value are
reduced.
F-7
<PAGE> 121
Deferred Costs (Other Assets)
Loan acquisition costs and related legal fees, included in other assets, are
deferred and amortized over the respective terms of the related debt.
Income Taxes
Deferred income taxes are provided for temporary differences between the basis
of assets and liabilities for financial reporting purposes and the related basis
for income tax purposes in accordance with the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings
per Share. Statement 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to SFAS No. 128 requirements.
The numerators for the earnings per share calculation are set forth on the face
of the accompanying income statements. The only difference between the
denominator for the basic and dilutive calculations are the number of shares
added to basic for the dilutive effect of employee stock options.
Revenue Recognition
Sales are recorded at time of shipment from the Company's facilities to
customers.
Use of Estimates
The preparation of the consolidated financial statements requires the use of
estimates in the amounts reported. Actual results could differ from those
estimates.
Accounting for Stock-Based Compensation Plans
The Company follows the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees and related Interpretations to
account for its stock option plan. Under provisions of APB No. 25, no
compensation expense has been recognized for stock option grants.
Foreign Currency Forward Contracts
The Company has exposure to losses which may result from settlement of certain
raw materials purchases denominated in a foreign currency. To reduce this
exposure, the Company has entered into forward contracts to buy foreign
currency. These forward contracts are accounted for as hedges, therefore, gains
and losses from settlement of the forward contracts are used to offset gains and
losses from settlement of the liability for the purchased raw materials. Gains
and losses are recognized in the same period in which gains or losses from the
raw material purchases are recognized. The Company is exposed to losses on the
forward contracts in the event it does not purchase the raw materials; however,
the Company does not anticipate this event.
At December 31, 1998 the Company did not have any forward contracts outstanding.
There were no significant deferred gains or (losses) and actual gains (losses)
included in cost of sales were ($12,000), $30,000 and $15,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.
F-8
<PAGE> 122
Impact of Recently Issued Accounting Standard
In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. The standard establishes principles for the
disclosure of information about operating segments in financial statements. The
adoption did not have any effect on the Company's primary financial statements,
but did effect the disclosure of segment information contained in Note 9.
2. Discontinued Operations
During 1997, the Company adopted a plan to dispose of its RTA operations.
WinsLoew's RTA products included ergonomically-designed computer workstations,
which the Company denoted as "space savers", promotionally-priced coffee and end
tables, wall units and rolling carts and an extensive line of futons, futon
frames and related accessories. Distribution of RTA furniture products was
primarily through mass merchandisers, catalogue wholesalers and specialty
retailers. As a result of this decision, the Company recorded a pre-tax non-cash
charge totaling $12.4 million ($8.2 million net of taxes) in the fourth quarter
of 1997 relating to the disposal of the RTA operations. The charge can be
summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Write-off of goodwill in connection with sale of assets $ 3,902,000
Reduction of inventory value 2,791,000
Reduction of property to net realizable value 2,067,000
Reduction of accounts receivable value 1,390,000
Other liabilities/reserves 1,050,000
Accrual for losses through disposition 1,200,000
-----------
Total $12,400,000
===========
</TABLE>
The Company planned to sell two of the businesses and liquidate the assets
related to the futon business. During 1998 the Company sold one of the
businesses and completed the liquidation of the futon business. At the end of
1997 and during 1998, the Company attempted to sell its remaining RTA facility
but was unable to obtain a satisfactory offer. The Company devoted significant
management time to the operation resulting in improved profitability by the end
of 1998. Due to the recovery, the Company decided, during the fourth quarter of
1998, to retain Southern Wood.
As a condition of the sale mentioned above, WinsLoew is required to hold in
escrow $1.0 million of the sales proceeds to provide indemnification to the
purchaser for claims arising from the date of purchase to December 31, 1999.
The operating results of the discontinued operations are summarized as follows
(dollars in thousands, except for per share amounts):
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Net sales $ 4,432 $ 15,921 $ 26,574
Income before taxes -- (1,178) (385)
Net loss -- (718) (259)
Net loss per share-diluted $ -- $ (0.10) $ (0.03)
</TABLE>
F-9
<PAGE> 123
The net assets of the discontinued operations at December 31, 1998 and 1997 are
as follows:
<TABLE>
<CAPTION>
1998 1997
----- -------
(In thousands)
<S> <C> <C>
Current assets $ -- $ 3,449
Current liabilities, including reserve for estimated losses through
disposal date (1,750) (1,979)
Net assets/liabilities of discontinued operations, current $(1,750) $ 1,470
======= =======
Property, net $ -- $ 478
Goodwill, net -- 4,018
Other assets -- 52
------- -------
Net assets of discontinued operations, non-current $ -- $ 4,548
======= =======
</TABLE>
Under the provisions of SFAS No. 5, Accounting for Contingencies, the Company
has evaluated the contingencies related to the sale of its discontinued RTA
operation and the liquidation of its discontinued futon operations. This
evaluation resulted in a net liability of $1,750,000, which is comprised of
$1,160,000 for the settlement of warranty claims and product returns in
accordance with the Company's warranty policy and contractual indemnity related
to the sale of the RTA operations, $200,000 in contingent liabilities related to
the closing of the sale of the RTA operations, $250,000 of litigation involving
a disputed trade name and $140,000 of miscellaneous items. The contingent
amounts are expected to be finalized by December 31, 1999 and settled during
2000.
The total assets and liabilities of the subsequently retained Southern Wood
operation for the period classified as a discontinued operation were $4.0
million and $1.1 million, respectively, at December 31, 1997.
The operating results of the subsequently retained Southern Wood operation for
each of the years the operation was reported as a discontinued operation are
summarized as follows (dollars in thousands, except for per share amounts):
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------
1998 1997 1996
------- ------ -------
<S> <C> <C> <C>
Net sales $11,689 $7,396 $10,710
Income before taxes 1,004 399 30
Net income 611 247 18
Net income per share - diluted $ 0.08 $ 0.03 $ --
</TABLE>
During 1998, the Company recorded pre-tax income from the disposition of
discontinued operations totaling $3.2 million ($2.0 million net of taxes). The
components are as follows:
<TABLE>
<CAPTION>
<S> <C>
Gain on liquidation of Futon operations $ 2,425,000
Reversal of reserves related to Southern Wood 1,857,000
Loss on sale of remaining RTA operation (1,093,000)
-----------
Total $ 3,189,000
===========
</TABLE>
The reversal of reserves is comprised of $1,157 related to the write-down of
assets to net realizable values, $400,000 estimated loss from operations, and
$300,000 for estimated costs of disposal. The amounts were a reversal of the
amounts accrued in 1997 for discontinued operations related to Southern Wood.
F-10
<PAGE> 124
The loss on the sale of the remaining RTA operation is the actual loss incurred
on the sale of the business in 1998.
As a result of the Board's decision to retain Southern Wood, the consolidated
financial statements for 1997 and 1996 have been reclassified to reflect the
results of operations and assets and liabilities, net of reserves for
discontinued operations, of Southern Wood as a continuing operation.
3. Acquisition and Disposition
During the third quarter of 1997, the Company disposed of certain assets of its
wrought iron business in the casual furniture product line. The sale generated
proceeds of $2.1 million. This business accounted for net sales of $5.7 million
and $11.0 million in the years ended December 31, 1997 and 1996, respectively.
The operating income of this business was not material to consolidated operating
income. During the third quarter of 1997, the Company recorded approximately
$230,000 of costs associated with the sale in selling, general and
administrative expenses.
In June 1998, the Company purchased all of the stock of Villella, Inc. d/b/a
Tropic Craft Aluminum Furniture Manufacturers ("Tropic Craft") for $9.3 million.
In addition, the seller will be entitled to receive a contingent purchase price
payment of up to $1.0 million upon achievement of targeted earning performance
with respect to the years ending June 30, 1999 and June 30, 2000. Tropic Craft
is engaged in the design and manufacture of contract casual furniture. The
acquisition resulted in goodwill of $6.9 million. Funds for the acquisition were
provided under WinsLoew's credit facility. The acquisition was accounted for
under the purchase method and, accordingly, the operating results of Tropic
Craft have been included in the consolidated operating results since the date of
acquisition.
The following unaudited pro forma information has been prepared assuming that
the acquisition of Tropic Craft occurred on January 1, 1997. Permitted pro forma
adjustments include only the effects of events directly attributable to the
transaction that are factually supportable and expected to have a continuing
impact. The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been in effect for the entire period
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
<TABLE>
<CAPTION>
(In thousands, except per share amounts) For the Years Ended December 31,
--------------------------------
1998 1997
-------------- ----------------
<S> <C> <C>
Net sales $144,752 $127,108
Income from continuing operations $ 18,946 $ 11,298
Net income $ 20,977 $ 2,380
Income from continuing operations per share - diluted $ 2.49 $ 1.49
Net income per share - diluted $ 2.76 $ 0.32
</TABLE>
F-11
<PAGE> 125
4. Long-Term Debt
Long-term debt consisted of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
------- -------
<S> <C> <C>
Revolving line of credit $ 1,400 $ 1,546
Term loan -- 2,287
Acquisition line of credit -- 12,500
Other 47 90
------- -------
1,447 16,423
Less: current portion 47 515
------- -------
$ 1,400 $15,908
======= =======
</TABLE>
Senior Credit Facilities
The Company's senior credit facility, as amended, provides for $62.5 million
which matures in February 2001, and is collateralized by substantially all of
the assets of the Company. The facility consists of a working capital revolving
line of credit (maximum of $40 million), a term loan (originally $10 million)
and an acquisition line of credit (maximum of $12.5 million). The working
capital revolving line of credit allows the Company to borrow funds up to a
certain percentage of eligible inventories and accounts receivable. The term
loan requires quarterly repayments. The acquisition line of credit converts to a
term loan with principal payments due in quarterly installments. Additionally, a
payment equal to 50% of cash flow, as defined, is required for each year within
90 days of year-end. WinsLoew's amended senior credit facility provides the
Company with a variable amount available under the revolving line of credit.
Effective each June 30, the maximum amount available under its revolving line of
credit is $20 million. The Company may, at its option, elect to increase the
revolving line of credit at each December 31 through the following June 30 to a
maximum of $40 million. As of December 31, 1998, WinsLoew elected to increase
the revolving line of credit to $35 million.
The WinsLoew's senior credit facility allows the Company to borrow up to $10
million under its line of credit to purchase shares of the Company's common
stock (see Note 5 below). At December 31, 1998 there was $6.1 million available
for this purpose.
The interest rates on the components of the senior credit facility are either
the base rate plus a spread, or the LIBOR rate plus a spread, as elected by the
Company. The spread is determined by the leverage ratio, as defined, for the
twelve month period ending each quarter. At December 31, 1998, the loans are
priced at the base rate plus 0.25% (8.25% at December 31, 1998). If any LIBOR
loans had been outstanding at December 31, 1998 they would have been priced at
the LIBOR rate plus 1.25%. In addition, WinsLoew pays an unused facility fee of
.375% per annum on a quarterly basis in arrears.
The agreement requires the Company to meet certain financial ratios for
leverage, interest coverage, tangible net worth and includes other provisions
generally common in such agreements including restrictions on dividends,
additional indebtedness and capital expenditures. At December 31, 1998, the
Company was in compliance with its debt covenants. The carrying value of the
revolving line of credit approximated its fair value at December 31, 1998.
F-12
<PAGE> 126
5. Capital Stock
On January 23, 1998, the Board approved a plan authorizing the repurchase of
1,000,000 shares of the Company's stock in the open market at times and prices
deemed advantageous. During 1998, the Company retired 296,000 shares of common
stock purchased for $6.1 million. Subsequent to December 31, 1998 the Company
has purchased 92,500 shares at a cost of $2.6 million. Currently, under the
Board approved repurchase plan, there are 611,500 shares available for
repurchase.
6. Income Taxes
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
(In thousands) For the Years Ended December 31,
----------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Provision for taxes related to continuing operations $10,947 $ 6,838 $ 4,834
Benefit for taxes related to discontinued operations -- (375) (126)
Provision (benefit) for taxes related to loss on sale of
discontinued operations 1,158 (4,200) --
------- ------- -------
Total provision for taxes $12,105 $ 2,263 $ 4,708
======= ======= =======
Federal:
Current $10,128 $ 3,985 $ 4,478
Deferred 856 (1,936) (251)
State:
Current 989 496 542
Deferred 132 (282) (61)
------- ------- -------
$12,105 $ 2,263 $ 4,708
======= ======= =======
</TABLE>
At December 31, 1998 and 1997, deferred tax assets and liabilities consisted of
the following:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Capitalized inventory costs $ 173 $ 415
Reserves and accruals 2,894 3,660
State net operating loss carryforwards 304 344
------- -------
Deferred tax assets 3,371 4,419
------- -------
Deferred tax liabilities:
Intangible asset basis difference (191) (98)
Excess of tax over book depreciation (611) (1,194)
Prepaid expenses (94) (93)
Other (504) (75)
------- -------
Deferred tax liabilities (1,400) (1,460)
------- -------
Deferred income taxes, net $ 1,971 $ 2,959
======= =======
Included in:
Other current assets/liabilities $ 2,772 $ 4,326
Deferred income taxes (801) (1,367)
------- -------
$ 1,971 $ 2,959
======= =======
</TABLE>
F-13
<PAGE> 127
The following table summarizes the differences between the federal income tax
rate and the Company's effective income tax rate for financial statement
purposes:
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Federal income tax rate 35.0% 34.0% 34.0%
State income taxes 3.4% 4.7% 2.2%
Goodwill amortization 2.1% 9.3% 2.0%
Other (3.4)% 2.2% (2.0)%
------ ------ ------
Effective tax rate 37.1% 50.2% 36.2%
====== ====== ======
</TABLE>
7. Related Party Transactions
In October 1994, WinsLoew entered into a ten-year agreement (the "Investment
Services Agreement") with Trivest, Inc. ("Trivest"). Trivest and the Company
have certain common shareholders, officers and directors. Pursuant to the
Investment Services Agreement, Trivest provides corporate finance, financial
relations, strategic and capital planning and other management advice to the
Company. The base compensation is $500,000, subject to cost of living increases
and increases for additional businesses acquired. For 1998, 1997 and 1996, the
amount expensed was $641,000, $628,000 and $604,000, respectively. In 1996, the
Company retired 933,504 shares of its common stock purchased from an affiliated
company at $10 per share.
8. Commitments and Contingencies
Leases
The Company leases certain office space, manufacturing facilities and various
items of equipment under operating leases. Some leases for office and
manufacturing space contain renewal options and provisions for increases in
minimum payments based on various measures of inflation. Rental expense amounted
to approximately $830,000, $769,000, and $792,000 for the years ended December
31, 1998, 1997 and 1996, respectively. Operating lease agreements in effect at
December 31, 1998, have the following remaining minimum payment obligations:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1999 $765
2000 740
2001 744
2002 714
2003 306
2004 - 2007 757
</TABLE>
Employment Agreements
The Company has employment agreements with certain employees. The agreements
provide for minimum salary levels and bonuses based on a percentage of pre-tax
operating income, as defined in the agreements.
Employee Benefit Plans
The Company has an employee benefit plan established under the provisions of
Section 401(k) of the Internal Revenue Code. Full-time employees who meet
various eligibility requirements may voluntarily participate in the
F-14
<PAGE> 128
plan. The plan provides for voluntary employee contributions through salary
reduction, as well as discretionary employer contributions. Company
contributions were $161,000 and $143,000 in 1998 and 1997, respectively.
Stock Option Plan
In 1994, the Company established a Stock Option Plan (the "Plan") as a means to
retain and motivate key employees and directors. The Compensation Committee of
the Board of Directors administers and interprets the Plan and is authorized to
grant options to all eligible employees of the Company and non-employee
directors. The Plan provides for both incentive stock options and non-qualified
stock options. Options are granted under the Plan on such terms and at such
prices as determined by the Compensation Committee, except that the per share
exercise price of incentive stock options cannot be less than the fair market
value of the Company's common stock on the date of grant. The Company has
reserved 1,500,000 shares of common stock for issuance upon exercise of stock
options. All options which have been granted have a term of ten years and vest
ratably over five years.
Pro forma net income and earnings per share have been determined as if the
Company had accounted for its employee stock options as compensation expense
based on their fair value. Fair value was estimated at the date of grant using a
Black-Scholes option pricing model for 1998, 1997 and 1996 assuming a risk-free
interest rate of 4.83%, 6.45% and 6.2% for 1998, 1997 and 1996, respectively, a
volatility factor for the Company's common stock of .608, .411 and .532 in 1998,
1997 and 1996, respectively and a weighted-average expected life of the options
of six years. The pro forma information is not likely to be representative of
the effects of options on pro forma net income in future years because the
Company is required to include only options granted since 1994 in the pro forma
information.
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1998 1997 1996
---------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Pro forma net income $ 20,035 $ 2,068 $ 8,198
========== ========= =========
Pro forma income (loss) per share, diluted:
Income from continuing operations $ 2.36 $ 1.45 $ 0.97
Loss from discontinued operations, net of taxes -- (0.09) (0.03)
Gain (loss) from sale of discontinued operations, net of
taxes 0.27 (1.08) --
---------- --------- ---------
Net income $ 2.63 $ 0.28 $ 0.94
========== ========= =========
</TABLE>
Information with respect to WinsLoew's Plan is as follows:
<TABLE>
<CAPTION>
1998
--------------------------------
Weighted Average
Options Exercise Price 1997 1996
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Options outstanding at January 1 784,850 $ 9.19 671,550 738,450
Granted 40,000 $ 20.62 250,000 25,000
Exercised (63,900) $ 8.25 (94,725) (25,100)
Canceled (18,050) $ 9.29 (41,975) (66,800)
-------- -------- --------
Options outstanding at December 31 742,900 $ 9.89 784,850 671,550
------------ ----------- ------------
Exercise prices per share $5.88-$23.44 $5.88-$16.06 $5.88-$11.63
============ ============ ============
Options exercisable at December 31 422,060 $ 9.20 407,100 480,400
============ ============ ============
Options available for grant at December 31 573,375 595,325 803,350
============ ============ ============
</TABLE>
F-15
<PAGE> 129
Information with regard to options outstanding and exercise price at December 31
is as follows:
<TABLE>
<CAPTION>
Weighted Options Exercisable at
Weighted Options Outstanding Average December 31, 1998
Average ----------------------------------- Remaining ---------------------------
Exercise Life at Weighted
Exercise Price Price 1998 1997 1996 12/31/98 Shares Average Price
- -------------- ----- ---- ---- ---- -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$5.88 - $6.67 $ 6.16 255,800 291,850 356,250 6.1 160,240 $ 6.20
8.66 8.66 8,200 10,250 10,250 6.2 4,920 8.66
10.00 - 10.50 10.35 240,900 284,750 158,550 7.3 104,900 10.16
11.13 - 11.63 11.56 163,000 163,000 146,500 5.4 145,000 11.61
12.63 12.63 20,000 20,000 -- 8.6 4,000 12.63
16.06 16.06 15,000 15,000 -- 8.9 3,000 16.06
17.00 17.00 17,500 -- -- 9.0 -- --
23.44 23.44 22,500 -- -- 9.4 -- --
------- ------- ------- -------
Total 9.89 742,900 784,850 671,550 7.0 422,060 9.20
======= ======= ======= =======
</TABLE>
The estimated weighted average fair value of options granted in 1998 is $12.51
per option. The weighted average remaining contractual life for options granted
in 1998 is 9.3 years.
Litigation and Liability Claims
The Company is, from time to time, involved in routine litigation including
general liability and worker's compensation claims. It is the opinion of
management that sufficient insurance has been purchased to cover current and
potential general liability and worker's compensation claims. None of such
litigation in which the Company is presently involved is believed to be material
to its liquidity, financial position or results of operations.
9. Operating Segments
The Company has three segments organized and managed based on the products sold.
These reportable segments are described in Note 1.
The Company evaluates performance and allocates resources based on gross profit.
The accounting policies are the same as those described in the summary of
significant accounting policies. There are no intersegment sales/transfers.
Export revenues are not material.
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
REVENUES:
Casual products $ 59,733 $ 56,363 $ 58,066
Contract seating products 69,938 58,386 48,629
Ready to assemble products 11,689 7,396 10,710
-------- -------- --------
Total revenues $141,360 $122,145 $117,405
======== ======== ========
</TABLE>
F-16
<PAGE> 130
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------
1998 1997 1996
------- -------- --------
(In thousands)
<S> <C> <C> <C>
SEGMENT GROSS PROFIT:
Casual products $28,227 $24,164 $23,812
Contract seating products 23,439 17,256 14,126
Ready to assemble products 2,462 1,294 1,438
------- ------- -------
Total segment gross profit 54,128 42,714 39,376
Reconciling items:
Selling and general and administrative expenses 23,124 21,427 21,472
Amortization 1,122 992 1,444
------- ------- -------
Operating income 29,882 20,295 16,460
Interest expense, net 635 2,296 3,083
------- ------- -------
Income from continuing operations before income taxes $29,247 $17,999 $13,377
======= ======= =======
DEPRECIATION AND AMORTIZATION:
Casual products $ 1,550 $ 1,532 $ 1,956
Contract seating products 425 411 360
Ready to assemble products 309 341 349
Total 2,284 2,284 2,665
Reconciling items:
Corporate 334 350 314
------- ------- -------
Total depreciation and amortization $ 2,618 $ 2,634 $ 2,979
======= ======= =======
EXPENDITURES FOR (DISPOSAL OF) LONG LIVED ASSETS, NET:
Casual products $ (24) $ 790 $ 629
Contract seating products 129 236 162
Ready to assemble products 103 (576) 61
------- ------- -------
Total 208 450 852
Reconciling items:
Corporate 734 (25) 499
------- ------- -------
Total expenditures for long lived assets, net $ 942 $ 425 $ 1,351
======= ======= =======
SEGMENT ASSETS:
Casual products $51,880 $41,964 $48,086
Contract seating products 23,486 21,836 22,372
Ready to assemble products 6,496 3,974 6,246
------- ------- -------
Total 81,862 67,774 76,704
Reconciling items:
Corporate 2,691 6,622 2,518
Assets held for sale -- 6,018 20,728
------- ------- -------
Total consolidated assets $84,553 $80,414 $99,950
======= ======= =======
</TABLE>
The Company has one contract seating customer that accounted for 17%, 16% and
10% of consolidated revenues in the years ended December 31, 1998, 1997 and
1996, respectively.
F-17
<PAGE> 131
10. Supplemental Information
The following balance sheet captions are comprised of the items specified
below:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Inventories:
Raw materials $ 9,288 $ 8,146
Work in process 1,521 1,089
Finished goods 1,397 1,198
-------- --------
$ 12,206 $ 10,433
======== ========
Property, plant and equipment:
Land $ 2,628 $ 1,834
Building and improvements 10,838 9,273
Manufacturing equipment 9,464 9,146
Office equipment 1,953 1,776
Construction in progress 81 74
Vehicles 176 141
-------- --------
25,140 22,244
Accumulated depreciation (11,192) (10,221)
-------- --------
$ 13,948 $ 12,023
======== ========
Other accrued liabilities:
Compensation, commissions and employee benefits $ 3,063 $ 2,324
Customer deposits 1,749 1,559
Income taxes 1,546 971
Interest 24 88
Other 3,570 3,261
-------- --------
$ 9,952 $ 8,203
======== ========
</TABLE>
Depreciation expense for continuing operations was $1,496,000, $1,642,000, and
$1,535,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Accumulated amortization at December 31, 1998 and 1997 related to goodwill was
$6,348,000 and $5,564,000, respectively. Accumulated amortization at December
31, 1998 and 1997 related to other intangible assets was $1,110,000 and
$773,000, respectively.
11. Subsequent Events
In January 1999, the Company entered into a non-binding letter of intent (the
"letter") to pursue a potential merger in which the Company's public
shareholders would receive $30.00 per share in cash. The purchasing entity would
be formed by the Chairman of the Board of Directors and other members of
management. A Special Committee of the Company's Board of Directors was
established to review the proposal and it has recommended the letter.
The letter permits the Company to solicit and consider superior proposals
subject to the payment of a termination fee to the management group upon the
acceptance of another offer. The proposed merger is subject to, among other
things, approval by the Company's shareholders and the Special Committee.
Accordingly, there can be no assurance that the merger will be consummated.
F-18
<PAGE> 132
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 26, December 31,
(In thousands except share and per share amounts) 1999 1998
------- -------
<S> <C> <C>
Assets
Cash and cash equivalents $ 963 $ 475
------- -------
Cash in escrow 1,000 1,000
Accounts receivable, less allowances for doubtful accounts 31,278 23,647
Inventories 12,926 12,206
Prepaid expenses and other current assets 3,891 4,638
------- -------
Total current assets 50,058 41,966
Property, plant and equipment, net 13,684 13,948
Goodwill, net 26,955 27,176
Other assets 1,129 1,463
------- -------
$91,826 $84,553
======= =======
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 35 $ 47
------- -------
Accounts payable 4,598 4,377
Other accrued liabilities 10,673 9,952
Net liabilities of discontinued operations 1,715 1,750
------- -------
Total current liabilities 17,021 16,126
Long-term debt, net of current portion 6,669 1,400
Deferred income taxes 912 801
------- -------
Total liabilities 24,602 18,327
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share, 5,000,000 shares
authorized, none issued -- --
Common stock; par value $.01 per share, 20,000,000 shares
authorized, 7,181,908 and 7,294,408 shares issued and outstanding
at March 26, 1999 and December 31, 1998 72 73
Additional paid-in capital 16,612 19,797
Retained earnings 50,540 46,356
------- -------
Total stockholders' equity 67,224 66,226
------- -------
$91,826 $84,553
======= =======
</TABLE>
F-19
<PAGE> 133
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Quarters Ended
-----------------------
March 26, March 27,
(In thousands except share and per share amounts) 1999 1998
---------- ---------
<S> <C> <C>
Net sales $32,910 $27,576
Cost of sales 20,031 17,946
------- -------
Gross profit 12,879 9,630
Selling, general and administrative expenses 5,725 4,515
Amortization 316 244
------- -------
Operating income 4,667 2,667
Interest expense 123 333
------- -------
Income before income taxes 6,715 4,538
Provision for income taxes 2,531 1,665
------- -------
Net income $ 4,184 $ 2,873
======= =======
Basic earnings per share $ 0.58 $ 0.38
======= =======
Weighted average number of shares 7,220 7,535
======= =======
Diluted earnings per share $ 0.56 $ 0.37
======= =======
Weighted average number of shares and common stock equivalents 7,434 7,683
======= =======
</TABLE>
See accompanying notes.
F-20
<PAGE> 134
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) For the Quarters Ended
----------------------
March 26, March 27,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,184 $ 2,873
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 692 607
Provision for losses on accounts receivable 377 79
Change in net assets held for sale -- 805
Changes in operating assets and liabilities, net of effects from
acquisitions and dispositions:
Accounts receivable (8,008) (6,540)
Inventories (720) (272)
Prepaid expenses and other current assets 747 2,635
Other assets 239 (715)
Accounts payable 221 1,203
Other accrued liabilities 686 485
Deferred income taxes 111 (622)
------- -------
Total adjustments (5,655) (2,335)
------- -------
Net cash provided by (used in) operating activities (1,471) 538
------- -------
Cash flows from investing activities:
Capital expenditures, net of disposals (112) (334)
------- -------
Net cash used in investing activities (112) (334)
------- -------
Cash flows from financing activities:
Net borrowings under revolving credit agreements 5,257 795
Proceeds from issuance of common stock, net -- 168
Repurchase and cancellation of stock (3,186) --
------- -------
Net cash provided by financing activities 2,071 963
------- -------
Net increase in cash and cash equivalents 488 1,167
------- -------
Cash and cash equivalents at beginning of year 475 707
------- -------
Cash and cash equivalents at end of period $ 963 $ 1,874
======= =======
Supplemental disclosures:
Interest paid $ 28 $ 259
Income taxes paid $ 155 $ 28
======= =======
</TABLE>
See accompanying notes.
F-21
<PAGE> 135
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of
WinsLoew Furniture, Inc. and subsidiaries (the "Company" or "WinsLoew")
that are for interim periods do not include all disclosures provided in
the annual consolidated financial statements. These unaudited
consolidated financial statements should be read in conjunction with
the annual consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, as filed with the Securities and Exchange
Commission.
All material intercompany balances and transactions have been
eliminated. The preparation of the consolidated financial statements
requires the use of estimates in the amounts reported.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the results for
the interim periods. The results of operations are presented for the
Company's first quarter, which is from January 1 through March 26,
1999. The results of operations for this period are not necessarily
indicative of the results to be expected for the full year.
2. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 26, December 31,
(In thousands) 1999 1998
--------- ---------
<S> <C> <C>
Raw materials..................................... $ 9,739 $ 9,288
--------- ---------
Work in process................................... 1,619 1,521
--------- ---------
Finished goods.................................... 1,568 1,397
--------- ---------
$ 12,926 $ 12,206
--------- ---------
</TABLE>
3. Long-term Debt
WinsLoew's amended senior credit facility provides the Company with a
variable amount available under the revolving line of credit. The
amount available under its revolving credit line is $20 million between
July 1 each year through December 31. The Company may, at its option,
elect to increase the revolving credit line at January 1 through the
following June 30 to a maximum of $40 million. At January 1, 1999, the
Company elected to set the maximum amount available under the revolving
credit line at $35 million.
4. Capital Stock
In January 1998, WinsLoew's Board of Directors approved a plan to
acquire up to 1,000,000 shares of the Company's common stock. The
purchases are being funded by the Company's senior credit facility (see
Note 3 above). At December 31, 1998, there were 704,000 shares
available under the plan. Since December 31, 1998 and as of March 26,
1999, the Company has acquired 112,500 shares for $3.2 million.
F-22
<PAGE> 136
5. Discontinued Operations
At March 26, 1999, there have not been any material changes in the net
liabilities of discontinued operations as compared to December 31,
1998.
6. Segment Information
The Company has three segments organized and managed based on the
products sold. The Company evaluates performance and allocates
resources based on gross profit. There are no intersegment
sales/transfers.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
(In thousands) March 26, 1999 March 27, 1998
-------------- --------------
REVENUES:
<S> <C> <C>
Casual products............................................... $ 13,634 $ 9,630
Contract seating products..................................... 15,885 15,498
Ready to assemble products.................................... 3,391 2,448
Total revenues............................................. $ 32,910 $ 27,576
SEGMENT GROSS PROFIT:
Casual products............................................... $ 6,467 $ 4,354
Contract seating products..................................... 5,619 4,769
Ready to assemble products.................................... 793 507
Total segment gross profit................................. 12,879 9,630
RECONCILING ITEMS:
Selling, general and administrative expenses.................. 5,725 4,515
Amortization.................................................. 316 244
Operating income........................................... 6,838 4,871
Interest expense-net.......................................... 123 333
Income from continuing operations before income taxes......... $ 6,715 $ 4,538
SEGMENT ASSETS:
Casual products............................................... $ 60,104 $ 51,880
Contract seating products..................................... 22,808 23,486
Ready to assemble products.................................... 7,241 6,496
Total...................................................... 90,153 81,862
RECONCILING ITEMS:
Corporate..................................................... 1,673 2,691
Total consolidated assets.................................. $ 91,826 $ 84,553
</TABLE>
7. Subsequent Event
On March 30, 1999, WinsLoew and Trivest Furniture Corporation (the
"Purchaser"), a Florida corporation formed by Earl W. Powell of
Trivest, Inc., who is also the Chairman of the Company's Board of
Directors, amended their Agreement and Plan of Merger to, among other
things, (1) increase the per share cash purchase price from $30.00 per
share to $33.00 per share, (2) increase the "break-up" fee, and (3)
eliminate the Purchaser's financing condition. The amendment to the
Agreement and Plan of Merger was approved by WinsLoew's Board of
Directors, as well as the Special Committee of the Board appointed to
evaluate the initial Trivest proposal and possible strategic
alternatives.
F-23
<PAGE> 137
Pursuant to the amended agreement, the proposed merger is subject,
among other things, to (1) shareholder approval and (2) compliance with
all applicable regulatory and governmental requirements. Accordingly,
there can be no assurance that the merger will be consummated.
F-24
<PAGE> 1
EXHIBIT (d)(4)
WINSLOEW FURNITURE, INC.
160 VILLAGE STREET
BIRMINGHAM, ALABAMA 35242
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
ON TUESDAY, JULY 27, 1999 AT 9:00 A.M.
The undersigned hereby appoints Bobby Tesney and Vincent A. Tortorici, Jr., and
each of them, proxies, with full power of substitution and resubstitution, for
and in the name of the undersigned, to vote all shares of common stock, par
value $.01 per share, of WinsLoew Furniture, Inc., held by the undersigned at
the close of business on June 14, 1999, which the undersigned would be entitled
to vote if personally present at the Special Meeting of Shareholders to be held
on Tuesday, July 27, 1999 at 9:00 a.m., local time, at the offices of Trivest,
Inc., 2665 South Bayshore Drive, Miami, Florida 33133, and at any adjournment or
postponement thereof, upon the matters described in the accompanying Notice of
Special Meeting of Shareholders and Proxy Statement, receipt of which is hereby
acknowledged, and upon any other business that may properly come before the
meeting or any adjournment or postponement thereof. Said proxies are directed to
vote on the matters described in the Notice of Special Meeting of Shareholders
and Proxy Statement as follows, and otherwise in their discretion upon such
other business as may properly come before the meeting or any adjournment
thereof.
PROPOSAL OF THE BOARD OF DIRECTORS TO APPROVE THE SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 4, 1999 BETWEEN WINSLOEW
FURNITURE, INC. AND TRIVEST FURNITURE CORPORATION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE UNDERSIGNED HEREBY REVOKES ANY PROXY OR PROXIES HERETOFORE GIVEN TO VOTE
UPON OR ACT WITH RESPECT TO SUCH STOCK AND HEREBY RATIFIES AND CONFIRMS ALL THAT
SAID PROXIES, THEIR SUBSTITUTES, OR ANY OF THEM, MAY LAWFULLY DO BY VIRTUE
HEREOF.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WINSLOEW
FURNITURE, INC.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE
PROXY WILL BE VOTED FOR THE PROPOSAL LISTED ABOVE.
Dated: ______________________, 1999
-------------------------------------------
Signature
Please sign exactly as your name(s)
appear(s) hereon. Where more than one owner
is shown above, each should sign. When
signing in a fiduciary or representative
capacity, please add your full title as
such. If this proxy is submitted by a
corporation, it should be executed in the
full corporate name by a duly authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF YOU ATTEND
THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY.
