<PAGE>   1
===============================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K/A

                                 AMENDMENT NO. 1

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     [Fee Required]

For the fiscal year ended December 31, 1998
--------------------------------------------------------------------------------

[ ]  TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     [No Fee Required]

For the transition period from ____________________ to _______________________

Commission file number 0-25246
--------------------------------------------------------------------------------

                            WINSLOEW FURNITURE, INC.
             (Exact name of registrant as specified in its charter)


          FLORIDA                                          63-1127982
          -------                                          ----------
  (State or other jurisdiction                          (I.R.S. Employer
of incorporation or organization                       Identification No.)


  160 VILLAGE STREET, BIRMINGHAM, ALABAMA                    35242
  ---------------------------------------                   --------
 (Address of principal executive offices)                  (Zip Code)


       (Registrant's telephone number, including area code) (205) 408-7600


          Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                                                         NAME OF EACH EXCHANGE
         TITLE OF EACH CLASS                              ON WHICH REGISTERED
         -------------------                             ---------------------
           COMMON STOCK,
      $.01 PAR VALUE PER SHARE                          NASDAQ NATIONAL MARKET

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---     ---

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         The aggregate market value of shares of Common Stock held by
non-affiliates of the registrant as of June 1, 1999, was approximately
$117,525,165 based on a $31.75 closing sale price for the Common Stock quoted on
the Nasdaq National Market System on such date. For purposes of this
computation, all executive officers, directors, and 5% beneficial owners are, in
fact, affiliates of the registrant.

         The number of shares of Common Stock, $.01 par value per share, of the
registrant outstanding as of June 1, 1999, was 7,181,908.

================================================================================

<PAGE>   2



                                EXPLANATORY NOTE

         This Amendment No. 1 on Form 10-K/A amends and restates Items 7, 8 and
14 in their entirety of the Annual Report on Form 10-K filed by WinsLoew
Furniture, Inc. on March 30, 1999.

                                 INDEX TO ITEMS

<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
PART II

   ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................ 3

   ITEM 8. Financial Statements and Supplementary Data..........................................................10

PART III

   ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................................29

Signatures......................................................................................................33
</TABLE>




                                       2

<PAGE>   3

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

         WinsLoew is comprised of companies engaged in the design, manufacture
and distribution of casual furniture and contract 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 contract 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:

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
                                                             ==============


         The Company planned to sell two of the businesses and liquidating 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
Notes to the Consolidated Financial Statements).

         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 years ended December 31, 1998, 1997
and 1996 for each of the Company's product lines (in thousands, except for
percentages):

<TABLE>
<CAPTION>

                              1998                           1997                         1996
                 -----------------------------     --------------------------    ---------------------------
                     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     $59,733   $28,227    47.3%     $56,363   $24,164    42.9%    $58,066   $23,812    41.0%
Contract seating      69,938    23,439    33.5%      58,386    17,256    29.6%     48,629    14,126    29.0%
RTA                   11,689     2,462    21.1%       7,396     1,294    17.5%     10,710     1,438    13.4%
                  ----------- ---------          ----------- ---------         ----------- ---------

Total               $141,360   $54,128    38.3%    $122,145   $42,714    35.0%   $117,405   $39,376    33.5%
                  =========== =========          =========== =========         =========== =========
</TABLE>



                                       3
<PAGE>   4

         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>

                                                                   FOR THE YEARS ENDED DECEMBER 31,
                                                            -----------------------------------------------
                                                                1998             1997             1996
                                                            --------------    ------------     ------------
<S>                                                               <C>             <C>             <C>
Gross profit                                                      38.3%           35.0%           33.5%
Selling, general and administrative expense                       16.4%           17.5%           18.3%
Amortization                                                       0.8%            0.8%            1.2%
Operating income                                                  21.1%           16.6%           14.0%
Interest expense                                                   0.4%            1.9%            2.6%
Provision for income taxes                                         7.7%            5.6%            4.1%
Income from continuing operations before extraordinary
     item                                                         12.9%            9.1%            7.3%
Loss from discontinued operations, net of taxes                     --            (0.6%)          (0.2%)
Gain (loss) from sale of discontinued operations, net of
     taxes                                                         1.4%           (6.7%)           --
Net income                                                        14.4%            1.8%            7.1%

</TABLE>

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 contract 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 it's
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.




                                       4
<PAGE>   5

         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 contract seating product line experienced a
sales increase of 20.1% due to 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 casual and contract
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 of the
Notes to the Consolidated Financial Statements).




                                       5
<PAGE>   6

         The following table presents the Company's unaudited quarterly data
for 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 following data
has been restated to reflect Southern Wood as a continuing operation.

<TABLE>
<CAPTION>

                                                            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                    FIRST          SECOND            THIRD          FOURTH
                                                ------------    ------------    -------------    ------------
<S>                                               <C>             <C>              <C>             <C>
1998 QUARTERS
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>




                                       6
<PAGE>   7
<TABLE>
<CAPTION>

                                                    FIRST            SECOND          THIRD          FOURTH
                                                  -----------      ------------    -----------    -----------
<S>                                                <C>               <C>             <C>            <C>
1997 QUARTERS
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 receivable and inventory requirements.
The Company has historically financed its short-term liquidity needs with
internally generated funds and revolving line of credit borrowings. 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.

         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 December 31, 1998, from an available maximum line of credit
of $40 million, WinsLoew has elected to set the amount available at $35
million.




                                       7
<PAGE>   8

         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 5
of Notes to the Consolidated Financial Statements). As of December 31, 1998,
there was $6.1 million available for such repurchases.

         CASH FLOWS FROM OPERATING ACTIVITIES. Net cash provided by operations
increased to $31.1 million in 1998 primarily due to improved profitability from
continuing operations.

         CASH FLOWS FROM INVESTING ACTIVITIES. During 1998, the Company spent
$0.9 million on capital expenditures and $9.3 million on the purchase of Tropic
Craft (see Note 3 to the Consolidated Financial Statements).

         At December 31, 1998, 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 the Company's common stock (see Note 5 of Notes to the
Consolidated Financial Statements).

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. At December
31, 1998, the Company did not have any forward contracts outstanding. The
Company did not incur significant gains or losses from these foreign currency
transactions.

         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 December 31, 1998, the Company has completed testing and remediation of
approximately 91% 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



                                       8
<PAGE>   9

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.




                                       9
<PAGE>   10


                                     PART II

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                ----
<S>                                                                                                             <C>
Report of Ernst & Young LLP, Independent Auditors......................................................          11

Consolidated Balance Sheets as of
   December 31, 1998 and 1997..........................................................................          12

Consolidated Statements of Income
   For the Years Ended December 31, 1998, 1997 and 1996................................................          13

Consolidated Statements of Stockholders' Equity
   For the Years Ended December 31, 1998, 1997 and 1996................................................          14

Consolidated Statements of Cash Flows
   For the Years Ended December 31, 1998, 1997 and 1996................................................          15

Notes to Consolidated Financial Statements.............................................................          16
</TABLE>





                                       10

<PAGE>   11


                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.



                                                         /s/ Ernst & Young LLP


Birmingham, Alabama
January 29, 1999




                                       11
<PAGE>   12


                    WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

(In thousands except share and per share amounts)                              DECEMBER 31,
                                                                          ---------------------
                                                                            1998         1997
                                                                          -------      -------
<S>                                                                       <C>          <C>
ASSETS
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 $.0l per share, 5,000,000 shares
   authorized, none issued                                                     --           --
Common stock - par value $.0l 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.


                                       12
<PAGE>   13


                    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.



                                       13
<PAGE>   14


                    WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



<TABLE>
<CAPTION>
(In thousands except share amounts)

                                               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.




                                       14
<PAGE>   15


                    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 front 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.




                                       15
<PAGE>   16


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.



                                       16
<PAGE>   17

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.



                                       17
<PAGE>   18

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>
         <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.



                                       18
<PAGE>   19


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>

The net assets of the discontinued operations at December 31, 1998 and 1997 are
as follows:

<TABLE>
<CAPTION>
(In thousands)                                   1998                 1997
                                              -----------          ----------
<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 $1,750,0000, 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>




                                       19
<PAGE>   20


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>
<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.

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>




                                       20
<PAGE>   21


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 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.



                                       21
<PAGE>   22


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>
                                                    For the Years Ended December 31,
                                         --------------------------------------------------------
(In thousands)                                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
                                             ========            =======               =======

<CAPTION>

                                                 For the Years Ended December 31,
                                             -------------------------------------
(In thousands)                                 1998           1997           1996
                                             --------       --------       -------
<S>                                          <C>            <C>               <C>
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:

(In thousands)
<TABLE>
<CAPTION>
                                               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>



                                       22

<PAGE>   23

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>



                                       23
<PAGE>   24


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 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
                                                --------------     ---------------    --------------
<S>                                             <C>                <C>                <C>
(In thousands)
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>



                                       24
<PAGE>   25


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>

Information with regard to options outstanding and exercise price at December 31
is as follows:

<TABLE>
<CAPTION>
                                                                                       Options Exercisable
                                                                                       at December 31, 1998
                                                                         Weighted     ------------------------
                        Weighted                                          Average
                        Average          Options Outstanding             Remaining                     Weighted
                        Exercise  ----------------------------------       Life                         Average
Exercise Price          Price       1998         1997         1996      at 12/31/98     Shares          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.



                                      25

<PAGE>   26


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
                                                --------      -------       -------
<S>                                             <C>           <C>           <C>
(In thousands)
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
                                                ========      ========      ========
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
                                                ========      ========      ========
</TABLE>



                                       26
<PAGE>   27

<TABLE>
<CAPTION>
                                                  For the Years Ended December 31,
                                                ------------------------------------
                                                   1998          1997         1996
                                                --------      --------      --------
<S>                                             <C>           <C>           <C>
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.

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
                                        ===========     ===========
</TABLE>


                                       27
<PAGE>   28


<TABLE>
<CAPTION>
                                                    December 31,
                                         -----------------------------------
                                             1998                   1997
                                         ----------              -----------
<S>                                      <C>                    <C>
(In thousands)
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, 1 997 and 1996, respectively.

Accumulated amortization at December 3, 1998 and 1 997 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.



                                       28