-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NTvv9kP33DftuPiOWJiEQRZEheUBjF4abBzeFuqQ3o6W2tVDP8VohgZ/49sfw4Kx 75dlTEitTF0yRPH0HLbLyA== 0000950137-97-002674.txt : 19970812 0000950137-97-002674.hdr.sgml : 19970812 ACCESSION NUMBER: 0000950137-97-002674 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19970811 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DECORATIVE HOME ACCENTS INC CENTRAL INDEX KEY: 0001000453 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED TEXTILE PRODUCTS [2390] IRS NUMBER: 570998387 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 033-96794 FILM NUMBER: 97655734 BUSINESS ADDRESS: STREET 1: INDUSTRIAL PARK DR STREET 2: P.O. BOX 11877 CITY: ABBEVILLE STATE: SC ZIP: 29620 BUSINESS PHONE: 8644462123 MAIL ADDRESS: STREET 1: P.O. BOX 1187 CITY: ABBEVILLE STATE: SC ZIP: 29620 10-Q/A 1 AMENDMENT TO FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: March 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number: 33-96794 ---------- DECORATIVE HOME ACCENTS, INC. (Exact name of registrant as specified in its charter) Delaware 57-0998387 - ------------------------------- ------------------------------------ (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) Industrial Park Drive, Abbeville, South Carolina 29620 ------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (864) 446-2123 Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports). Yes [ ] No [X] Indicate by check mark whether the registrant has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of May 10, 1996, there were 1,074,838 shares outstanding of the Registrant's Class A Common Stock ($0.01 par value), 1,756,126 shares outstanding of the Registrant's Class B Non-Voting Common Stock ($0.01 par value), 386,040 shares outstanding of the Registrant's Class C Common Stock ($0.01 par value), 808,333 shares outstanding of the Registrant's Class D Common Stock ($0.01 par value), 125,000 shares outstanding of the Registrant's Class F Common Stock and 51,875 outstanding shares of the Registrant's 14% Cumulative Redeemable Preferred Stock ($0.01 par value). 2 DECORATIVE HOME ACCENTS, INC. QUARTER ENDED MARCH 31, 1996 INDEX
Page No. --- PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of March 31, 1996 (As Restated) and December 31, 1995 ................................................. 4 Condensed Consolidated Statements of Operations for the three months ended March 31, 1996 (As Restated) and 1995..................... 5 Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 1996 (As Restated)........................ 6 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1996 (As Restated) and 1995 .................... 7 Notes to Condensed Consolidated Financial Statements (Unaudited).............. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................. 10 PART II OTHER INFORMATION Signature Page ............................................................... 15
2 3 AMENDMENT NO. 1 THIS AMENDMENT NO. 1 MODIFIES THE QUARTERLY REPORT FILED ON FORM 10-Q BY THE REGISTRANT FOR THE PERIOD ENDED MARCH 31, 1996 AS FOLLOWS: PART I, ITEM 1, FINANCIAL STATEMENTS (UNAUDITED), AND ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAVE BEEN REPLACED IN THEIR ENTIRETY. 3 4 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DECORATIVE HOME ACCENTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) - --------------------------------------------------------------------------------
March 31, 1996 December 31, (Unaudited) 1995 (1) ----------- -------- (Restated - Note 4) ASSETS CURRENT ASSETS: Cash and cash equivalents $ - $ 169 Investment securities 1,000 1,000 Accounts receivable - net of allowance for doubtful accounts of $2,661 at March 31, 1996 and $2,506 at December 31, 1995 31,255 28,982 Income taxes receivable 3,488 2,714 Inventories 47,705 43,713 Deferred income taxes 4,231 4,282 Other current assets 1,077 598 --------- --------- Total current assets 88,756 81,458 PROPERTY, PLANT AND EQUIPMENT, NET 30,626 30,667 OTHER ASSETS 9,314 8,790 INTANGIBLE ASSETS, NET 93,508 94,938 --------- --------- TOTAL ASSETS $ 222,204 $ 215,853 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable 13,686 14,452 Accrued liabilities 7,017 9,775 Accrued interest 4,067 7,583 --------- --------- Total current liabilities 24,770 31,810 --------- --------- LONG-TERM DEBT 151,326 131,452 DEFERRED INCOME TAXES 1,154 3,348 REDEEMABLE PREFERRED STOCK 43,123 41,059 REDEEMABLE COMMON STOCK 1,817 1,639 STOCKHOLDERS' EQUITY: Common stocks 9 9 Additional paid-in capital 13,864 16,107 Reduction of certain equity interest to predecessor basis (6,209) (6,209) Accumulated deficit (7,650) (3,362) --------- --------- Total stockholders' equity 14 6,545 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 222,204 $ 215,853 ========= =========
(1) Derived from December 31, 1995 audited consolidated financial statements. See notes to condensed consolidated financial statements (unaudited). 4 5 DECORATIVE HOME ACCENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED) - -------------------------------------------------------------------------------
Three Months Ended March 31, 1996 March 31, 1995 -------------- -------------- (Restated - Note 4) SALES $ 38,783 $ 11,276 COST OF GOODS SOLD 28,836 5,819 -------- -------- GROSS PROFIT 9,947 5,457 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 11,736 4,261 -------- -------- INCOME (LOSS) FROM OPERATIONS (1,789) 1,196 -------- -------- INTEREST INCOME (EXPENSE) Interest expense (4,614) (1,812) Interest income 9 131 -------- -------- Interest income (expense), net (4,605) (1,681) -------- -------- LOSS BEFORE PROVISION FOR INCOME TAXES (6,394) (485) INCOME TAX BENEFIT 2,106 184 -------- -------- NET LOSS $ (4,288) $ (301) ======== ========
See notes to condensed consolidated financial statements (unaudited). 5 6 DECORATIVE HOME ACCENTS, INC. CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 1996 (IN THOUSANDS) (UNAUDITED) - --------------------------------------------------------------------------------
Reduction of Certain Equity Interest to Total Common Additional Predecessor Retained Stockholders' Stocks Paid-in Capital Basis Earnings Equity ------ --------------- -------------- -------- ------------- Balances at December 31, 1995 $ 9 $ 16,107 $ (6,209) $ (3,362) $ 6,545 Accretion of redeemable common stock for the three months ended March 31, 1996 (179) (179) Accretion of redeemable preferred stock for the three months ended March 31, 1996 (189) (189) Preferred stock dividend paid-in-kind (1,875) (1,875) Net loss (Restated - Note 4) (4,288) (4,288) -------- -------- -------- -------- -------- Balances at March 31, 1996 (Restated - Note 4) $ 9 $ 13,864 $ (6,209) $ (7,650) $ 14 ======== ======== ======== ======== ========
See notes to condensed consolidated financial statements (unaudited). 6 7 DECORATIVE HOME ACCENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) - --------------------------------------------------------------------------------
Three months ended March 31 1996 1995 ------------------------- (Restated - Note 4) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (4,288) $ (301) Adjustment to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 2,328 1,027 Deferred tax (benefit) provision (2,143) 131 Changes in operating assets and liabilities: Accounts receivable (2,273) 1,548 Inventories (3,992) (639) Income tax receivable (774) - Other current assets (479) (1,158) Accounts payable (766) 1,286 Accrued liabilities (1,009) (1,419) Accrued interest (3,516) 1,757 Income taxes payable - (567) -------- -------- Net cash provided by (used in) operating activities (16,912) 1,665 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (857) (440) Other long term assets (524) - -------- -------- Net cash used in investing activities (1,381) (440) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings under revolving line of credit 19,874 - Redeemable preferred stock dividends paid (1,750) - -------- -------- Net cash provided by financing activities 18,124 - -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (169) 1,225 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 169 8,355 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ 9,580 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 9,875 $ - ======== ========
See notes to condensed consolidated financial statements (unaudited). 7 8 DECORATIVE HOME ACCENTS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 (AS RESTATED) AND 1995 1. BASIS OF INTERIM PRESENTATION The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included in the interim financial information. For interim reporting, the Company's subsidiary, Home innovations. Inc. ("HII") records an estimated gross profit based on information provided by its accounting and financial systems. At year-end, inventories of the Company are stated at the lower of cost, determined using the first-in, first-out (FIFO) method, or market. The Company's business is seasonal in nature, with its highest sales levels historically occurring in the third and fourth fiscal quarters, which include the holiday selling season. Therefore, the results of operations for the interim periods are not necessarily indicative of the operating results of the full year. 2. ORGANIZATION The accompanying interim consolidated financial statements as of March 31, 1996, include the accounts of Decorative Home Accents, Inc. ("DHA" or the "Company") and its wholly-owned subsidiaries, The Rug Barn, Inc. and Home Innovations, Inc. (purchased on July 13, 1995). All significant intercompany transactions and accounts have been eliminated. 3. BALANCE SHEET COMPONENTS Inventories are summarized as follows (in $000's):
March 31, 1996 December 31, 1995 -------------- ----------------- Raw materials $23,552 $24,464 Work-in-process 2,130 973 Finished goods 22,023 18,276 ------- ------- $47,705 $43,713 ======= =======
8 9 Property, plant and equipment is summarized as follows (in $000's):
MARCH 31, 1996 DECEMBER 31, 1995 -------------- ----------------- Land $ 863 $ 863 Buildings and improvements 15,398 15,384 Furniture and fixtures 3,193 3,184 Machinery and equipment 14,171 14,101 -------- -------- 33,625 33,532 Accumulated depreciation (3,895) (3,375) -------- -------- 29,730 30,157 Construction in progress 896 510 -------- -------- $ 30,626 $ 30,667 ======== ========
4. RESTATEMENT Subsequent to the original issuance of the Company's financial statements for the three months ended March 1996, the six months ended June 30, 1996 and the nine months ended September 30, 1996, management determined that certain customer chargebacks and credits had either not been properly recorded in the financial statements or had been recorded in improper accounting periods. As a result, the accompanying financial statements have been restated. The following is a summary of the effects of the restatements:
THREE MONTHS ENDED MARCH 31, 1996 --------------------------------- AS AS ORIGINALLY RESTATED RECORDED -------- -------- Net sales $38,783 $39,786 Loss from operations $(1,789) $ (867) Net loss $(4,288) $(3,670)
AS OF MARCH 31, 1996 --------------------------------- AS AS ORIGINALLY RESTATED RECORDED -------- -------- Current assets $ 88,756 $ 89,455 Total assets $222,204 $222,935 Current liabilities $ 24,770 $ 24,910 Total liabilities $177,250 $177,363 Total shareholders' equity $ 14 $ 632
9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Note: Subsequent to the original issuance of the Company's financial statements for the three months ended March 1996, the six months ended June 30, 1996 and the nine months ended September 30, 1996, management determined that certain customer chargebacks and credits had either not been properly recorded in the financial statements or had been recorded in improper accounting periods. As a result, the accompanying financial statements have been restated. The Company has implemented additional procedures including timely reconciliation of the Company's accounts receivable to avoid such future errors. This Management's Discussion and Analysis of Financial Condition and Results of Operations reflects the restatement of the Company's unaudited condensed consolidated statements of operations for the three months ended March 31, 1996. See Note 4 to the Company's unaudited condensed consolidated financial statements. INTRODUCTION The following discussion provides management's assessment of the results of operations and liquidity and capital resources of DHA and should be read in conjunction with the respective financial statements of DHA and the notes thereto included elsewhere in this Form 10-Q. The following table includes unaudited proforma financial information as if the July 1995 purchase of Home Innovations, Inc. ("HII") occurred as of January 1, 1995. Such adjustments to the proforma financial information consist principally of the following: net adjustments to cost of goods sold and SG & A expenses related to adjusting depreciation expense for the new basis of accounting resulting from the HII acquisition; increases in SG& A expenses to account for the amortization of goodwill and the identifiable intangible assets resulting from the HII acquisition; increases in SG & A expenses to account for compensation expense resulting from granting stock options at less than fair market value; net adjustments to interest expense resulting from issuance of 13% Senior Notes due 2002 and extinguishment of prior debt, amortization of debt issuance costs and accretion of discount on the Senior Notes. Management's discussion and analysis of the results of operations should be read using the proforma financial information presented below:
ACTUAL PROFORMA Three Months Ended ----------------------- March 31, March 31, 1996 1995 ---- ----- Sales $ 38,783 $ 52,712 Cost of Goods Sold 28,836 37,531 -------- -------- Gross Profit 9,947 15,181 Selling, General and Administrative Expenses 11,736 11,460 -------- -------- Income (Loss) From Operations (1,789) 3,721 Interest Expense, Net (4,605) (4,222) -------- -------- Loss Before Income Taxes $ (6,394) $ (501) ======== ========
IMPACT OF THE PURCHASE OF HOME INNOVATIONS, INC. On July 13, 1995, DHA acquired HII, a leading manufacturer of niche oriented home accessories with the following product categories: bath furnishings, window and specialty products, bedding products and the new Calvin Klein Home Collection, a new line of designer home products launched in September 1995 under the Calvin Klein trademark. The cash purchase price of HII was approximately $95.1 million, after a $6.7 million reduction to the purchase price, including acquisition related costs of approximately $1.8 million and the assumption of approximately $31.0 million in liabilities consisting of trade payables and accruals and $2.3 million of junior subordinated notes. 10 11 The $6.7 million adjustment to the purchase price was determined as a result of the level of net assets acquired as of the closing date and certain indemnifications from the sellers. The $6.7 million was received from the sellers in December, 1995. RESULTS OF OPERATIONS As described above, the results of operations for the three months ended March 31, 1995 reflect proforma adjustments related to the merger agreement discussed above. Comparison of Results of Operations for the Three Months Ended March 31, 1996 (Actual) (As Restated) with the Proforma Results of Operations for the Three Months Ended March 31, 1995 (with proforma adjustments as discussed above). NET SALES Net sales for three months ended March 31, 1996 decreased by $13.9 million, or 26.4% from $52.7 million of proforma net sales for the three months ended March 31, 1995 to $38.8 million for the three months ended March 31, 1996. Sales across most of the Company's major product lines decreased principally as a result of soft retail conditions in the major markets served by the Company. All distribution channels served were affected by the soft retail environment including the giftware trade. The reduction of consumer spending and the associated tightening of retailer's inventory positions which began in the third quarter of 1995 continued to have negative effects on the Company's sales performance as expected. Also, the Company's 1996 sales were negatively impacted by increased accounts receivable chargebacks related to customer returns and sales allowances. If current market conditions prevail, the Company expects full year sales to continue to be adversely affected. GROSS PROFIT The gross profit margin decreased from a proforma of 28.8% for the three months ended March 31, 1995 to 25.6% for the three months ended March 31, 1996. The decrease of approximately 3.2 percentage points in the Company's gross profit margin partially resulted from plant efficiency losses in the printing and cut-and-sew operations. As part of the Company's program to improve long-term operating performance and control inventory investment, the Company temporarily reduced manufacturing operations at certain plants during the quarter. This resulted in fixed overhead being unabsorbed by inventory production. The Company believes that its manufacturing operations are now properly sized relative to current market demand for the Company's products. There were no significant changes in the prices paid for raw materials between the 1995 and 1996 periods as the Company was able to secure raw material purchase contracts at levels equal to or more favorable than that of the prior year. SELLING, GENERAL & ADMINISTRATIVE EXPENSES SG&A expenses increased $276,000 or 2.4% from a proforma of $11.5 million for the three months ended March 31, 1995 to $11.7 million for the three months ended March 31, 1996. As a percentage of sales, SG&A expenses increased from a proforma of 21.7% for the three months ended March 31, 1995 to 30.2% for the same period of 1996. The increase in SG&A expenses as a percentage of sales was principally attributable to the fixed nature of the Company's selling and administrative salary base. Specifically, marketing and design functions, while not increasing substantially from year to year on an absolute dollar basis, reflect a higher percentage because of the decreased sales in the 1996 quarter. SG&A expenses associated with the launch of the Calvin Klein Home line, which since its inception in September 1995 have as a percentage of sales exceeded the level of the Company's mature businesses, also contributed to the increased SG&A for the 1996 quarter. Historically, the Company's SG&A costs as a percentage of sales have exceeded many of the Company's competitors due to the commission structure associated with the giftware trade and a relatively high fixed cost structure within Home Innovations. During the 1996 quarter, the Company implemented a consolidation of many of its marketing and administrative functions in an attempt to improve the SG&A expense ratio and expects to see improvement in its absolute dollar of SG&A costs going forward beginning in the second half of 1996. 11 12 INTEREST EXPENSE, NET Interest expense, net increased from a proforma of $4.2 million for the three months ended March 31, 1995 to $4.6 million for the three months ended March 31, 1996. This increase was principally due to increased borrowings under the Company's revolving line of credit during the first quarter of 1996. SEASONALITY The Company's business is seasonal in nature with its highest sales levels historically occurring during the third and fourth fiscal quarters, which includes the holiday selling season. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity for operations and expansion have historically been funds generated internally and borrowings under the Company's $50.0 million revolving credit facility. Available borrowings under the credit facility are based on specified levels of underlying collateral. As of March 31, 1996, the Company had approximately $9.1 million available under the revolving credit facility described above (net of $24.7 million of outstanding borrowings and $1.4 million in outstanding letters of credit). The Company intends to utilize borrowings under the revolving credit facility to meet seasonal fluctuations in the Company's working capital requirements, typically peaking in early October, and to fund the anticipated build up of inventory relating to the continued introduction of the Calvin Klein Home line of products. Management expects the Calvin Klein Home line of products to increase the Company's working capital needs in 1996 by approximately $8 to $12 million from 1995 levels. Management believes that the working capital requirements related to Calvin Klein in 1996 peaked in April 1996. Management believes that the Company's cash flow from operations and borrowing under the revolving credit facility will be sufficient to fund the Calvin Klein Home requirements. The obligations under the revolving credit facility are secured by a first lien on the inventory and receivables of The Rug Barn, Inc. and Home Innovations, Inc. and its subsidiaries. The revolving credit facility contains certain financial and other covenants with which the Company must comply, including, but not limited to a requirement to maintain certain financial ratios and limitations on the ability of Rug Barn and Home Innovations to incur additional indebtedness and pay dividends. The Company was in compliance with the loan covenants, as amended, at March 31, 1996. Cash flows used in operating activities were approximately $16.9 million for the three month period ended March 31, 1996. Driving the cash used in operating activities for the first quarter, in addition to the Company's net loss, were an increase in receivables of $2.3 million and inventory of $4.0 million and a reduction of $3.5 million in accrued interest. The additional inventory investment related principally to the introduction of the new Calvin Klein Home line. The increase in receivables resulted from a slight increase in the Company's sales velocity in the latter weeks of the quarter. The reduction of $3.5 million in accrued interest resulted from the semi-annual interest payment on the Company's $125 million, 13% Senior Notes. Capital expenditures for the three month period in 1996 approximated $857,000. The Company currently has no material commitments for capital expenditures. Borrowings under the Company's line of credit increased by approximately $19.9 million during the three month period ended March 31, 1996. The additional borrowings resulted primarily from the cash used in operating activities including the interest payment on the Company's Senior Notes and the continued inventory investment in Calvin Klein Home. Additionally, the Company paid dividends totaling $1.75 million on its redeemable preferred stock in January 1996. During 1996 the Company expects that dividends will be paid in kind rather than in cash. Management expects that the Company's cash flow from operations and borrowings under the revolving credit facility, as required, will be adequate to finance anticipated operation needs, planned capital expenditures and to meet its debt service obligations in 1996. 12 13 INFLATION Although the operations of the Company are generally influenced by economic conditions, the Company does not believe that inflation had a material effect on the results of operations during the three months ended March 31, 1996 and 1995. The Company has been historically able to mitigate the impact of the increases in the spot market prices of cotton through fixed price purchase contracts. EFFECT OF COMPLIANCE WITH ENVIRONMENTAL PROTECTION PROVISIONS Compliance with Federal, State and local provisions that have been enacted or adopted regulating the discharge of materials in the environment, or otherwise relating to protection of the environment, has not had, and is not expected to have, a material adverse effect on the capital expenditures, net income or competitive position of the Company. PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements contained in this Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations) that are not historical facts are forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The Company cautions readers of this Quarterly Report on Form 10-Q that a number of important factors could cause the Company's actual results in 1996 and beyond to differ materially from those expressed in any such forward-looking statements. These factors include, without limitation, the general economic and business conditions affecting the retail industry, the Company's ability to meet its debt service obligations, contractual restrictions on HII's and the Rug Barn's ability to pay dividends to the Company, competition from a variety of firms ranging from small manufacturers to large textile mills, the seasonality of the Company's sales, the volatility of the Company's raw material cost, the Company's dependence on key personnel and the risk of loss of a material customer or a significant license. These and other factors are more fully described in the Company's previous filings with the Securities and Exchange Commission including, without limitation, the Company's Prospectus dated November 10, 1995. 13 14 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is involved in various routine legal proceedings incidental to the conduct of its business. Management believes that none of these legal proceedings will have a material adverse impact on the financial condition or results of operations of the Company. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS SEE EXHIBIT INDEX. (B) REPORTS ON FORM 8-K NONE 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-Q/A (Amendment No. 1 to its quarterly report on Form 10-Q for the quarter ended March 31, 1996) to be signed on its behalf by the undersigned thereunto duly authorized. Decorative Home Accents, Inc. --------------------------------- (Registrant) Date: August 1, 1997 /s/ Jay N. Baker ---------------------------- ---------------------------------- Jay N. Baker* Chief Financial Officer *Duly authorized to sign on behalf of the Registrant. 15 16 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 3.3 Certificate of Correction to Certificate of Designation for Decorative Home Accents, Inc. 27 Financial data schedule 4.6 Form of Third Amendment to the Amended and Restated Credit Agreement, dated as of July 13, 1995, by among LaSalle National Bank, as co-agent and lender, General Electric Capital Corporation, as co-agent and lender, the Rug Barn, Inc., Home Innovations, Inc., Home Curtain Corp., Calvin Klein Home, Inc., Draymore Mfg. Corp. and R.A. Briggs and Company, as amended by the First Amendment, dated as of November 17, 1995, and by the Second Amendment, dated as of December 31, 1995.
16 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF DECORATIVE HOME ACCENTS, INC. FOR THE THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1995 JAN-01-1996 MAR-31-1996 0 1,000 33,916 2,661 47,705 88,756 34,521 3,895 222,204 24,770 0 43,123 0 9 13,864 222,204 38,783 38,783 28,836 0 11,736 0 4,605 (6,394) (2,106) 0 0 0 0 (4,288) 0 0
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