-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LrmSR6yUYrJbsiWlX7VcB7GAQ/ACZRGkDvF/2fgmD7q1n0b1SetqIYW7FbOzSAiZ 09K+tLf0Gj0CGBtD95glGQ== 0000950144-97-012319.txt : 19971117 0000950144-97-012319.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950144-97-012319 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WINDMERE DURABLE HOLDINGS INC CENTRAL INDEX KEY: 0000217084 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] IRS NUMBER: 591028301 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10177 FILM NUMBER: 97719459 BUSINESS ADDRESS: STREET 1: 5980 MIAMI LAKES DR CITY: MIAMI LAKES STATE: FL ZIP: 33014 BUSINESS PHONE: 3053622611 MAIL ADDRESS: STREET 1: 5980 MIAMI LAKES DRIVE CITY: MIAMI LAKES STATE: FL ZIP: 33014 FORMER COMPANY: FORMER CONFORMED NAME: WINDMERE CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SAVE WAY INDUSTRIES INC DATE OF NAME CHANGE: 19830815 FORMER COMPANY: FORMER CONFORMED NAME: SAVE WAY BARBER & BEAUTY SUPPLIES INC DATE OF NAME CHANGE: 19770626 10-Q 1 WINDMERE-DURABLE HOLDINGS, INC. 10-Q 9/30/97 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended SEPTEMBER 30, 1997 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _______________ to ________________ Commission File Number 1-10177 ------- WINDMERE-DURABLE HOLDINGS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) FLORIDA 59-1028301 - ------------------------------ ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5980 MIAMI LAKES DRIVE, MIAMI LAKES, FLORIDA 33014 -------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (305) 362-2611 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 report(s), and (2) has been subject to such filing requirement for the past 90 days. Yes X No ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: NUMBER OF SHARES OUTSTANDING CLASS ON OCTOBER 10, 1997 ------ ---------------------------- Common Stock, $.10 Par Value 17,803,629 2 WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES INDEX
PART I. FINANCIAL INFORMATION ITEM 1. Consolidated Statements of Earnings for the 3 Three Months Ended September 30, 1997 and 1996 Consolidated Statements of Earnings for the 4 Nine Months Ended September 30, 1997 and 1996 Consolidated Balance Sheets as of 5-6 September 30, 1997, December 31, 1996 and September 30, 1996 Consolidated Statements of Cash Flows 7-8 for the Nine Months Ended September 30, 1997 and 1996 Notes to Consolidated Financial Statements 9-11 ITEM 2. Management's Discussion and Analysis of 12-16 Financial Condition and Results of Operations PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 17 ITEM 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE INFORMATION)
Three Months Ended September 30, 1997 1996 ----------------------------- ------------------------- Sales and Other Revenues $ 79,976 100.0% $ 56,181 100.0% Cost of Goods Sold 62,017 77.5 45,765 81.5 -------- ------------ -------- -------- Gross Profit 17,959 22.5 10,416 18.5 Selling, General and Administrative Expenses 12,288 15.4 10,295 18.3 -------- ------------ -------- -------- Operating Profit 5,671 7.1 121 .2 Other (Income) Expense Interest Expense 861 1.1 612 1.1 Interest and Other Income (601) (.8) (943) (1.7) -------- ------------ -------- -------- 260 .3 (331) (.6) -------- ------------ -------- -------- Earnings Before Equity in Net Earnings of Joint Ventures and Income Taxes 5,411 6.8 452 .8 Equity in Net Earnings of Joint Ventures 3,664 4.6 848 1.5 -------- ------------ -------- -------- Earnings Before Income Taxes 9,075 11.4 1,300 2.3 Income Taxes Current 397 .5 25 .1 Deferred 161 .2 (426) (.8) -------- ------------ -------- -------- 558 .7 (401) (.7) -------- ------------ -------- -------- Net Earnings $ 8,517 10.7% $ 1,701 3.0% ======== ============ ======== ======== Earnings Per Common Share and Common Equivalent Share $ .43 $ .10 ======== ======= Average Number of Common Shares and Common Equivalent Shares Outstanding 19,917 18,984 ======== ======= Dividends Per Common Share $ .00 $ .05 ======== =======
The accompanying notes are an integral part of these statements. 3 4 WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE INFORMATION)
Nine Months Ended September 30, 1997 1996 ------------------------- ------------------------- Sales and Other Revenues $ 191,451 100.0% $ 136,124 100.0% Cost of Goods Sold 149,667 78.2 108,757 80.0 --------- ------- --------- ------- Gross Profit 41,784 21.8 27,367 20.0 Selling, General and Administrative Expenses 33,635 17.5 27,061 19.9 --------- ------- --------- ------- Operating Profit 8,149 4.3 306 .1 Other (Income) Expense Interest Expense 2,194 1.2 942 .7 Interest and Other Income (1,565) (.8) (2,033) (1.5) --------- ------- --------- ------- 629 .4 (1,091) (.8) --------- ------- --------- ------- Earnings Before Equity in Net Earnings of Joint Ventures and Income Taxes 7,520 3.9 1,397 .9 Equity in Net Earnings of Joint Ventures 3,784 2.0 97 .1 --------- ------- --------- ------- Earnings Before Income Taxes 11,304 5.9 1,494 1.0 Income Taxes Current (2,039) (1.0) (168) (.1) Deferred 2,566 1.3 108 .1 --------- ------- --------- ------- 527 .3 (60) 0 --------- ------- --------- ------- Net Earnings $ 10,777 5.6% $ 1,554 1.0% ========= ======= ========= ======= Earnings Per Common and Common Equivalent Shares $ .55 $ .09 ========= ========= Average Number of Common and Common Equivalent Shares Outstanding 19,593 17,671 ========= ========= Dividends Per Common Share $ .10 $ .15 ========= =========
The accompanying notes are an integral part of these statements. 4 5 WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
9/30/97 12/31/96 9/30/96 -------- -------- -------- ASSETS CURRENT ASSETS Cash & Cash Equivalents $ 6,352 $ 8,779 $ 7,592 Accounts and Other Receivables, less allowances of $1,122, $1,129 and $1,193, respectively 50,281 37,601 44,242 Receivables from Affiliates (Note 2) 16,749 12,139 7,748 Inventories Raw Materials 19,317 13,824 14,107 Work-in-process 21,622 20,552 18,063 Finished Goods 57,870 55,138 51,254 -------- -------- -------- Total Inventories 98,809 89,514 83,424 Prepaid Expenses 5,633 3,751 4,149 Future Income Tax Benefits 2,791 3,232 1,643 -------- -------- -------- Total Current Assets 180,615 155,016 148,798 INVESTMENTS IN JOINT VENTURES (NOTE 2) 39,621 35,291 32,863 PROPERTY, PLANT & EQUIPMENT - AT COST, less accumulated depreciation of $48,218, $45,366 and $45,118, respectively 36,676 32,760 33,396 OTHER ASSETS 12,973 14,212 12,504 -------- -------- -------- TOTAL ASSETS $269,885 $237,279 $227,561 ======== ======== ========
5 6 WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS) CONTINUED
9/30/97 12/31/96 9/30/96 --------- --------- --------- LIABILITIES CURRENT LIABILITIES Notes and Acceptances Payable $ 45,453 $ 21,883 $ 15,564 Current Maturities of Long-Term Debt 3,815 815 815 Accounts Payable and Accrued Expenses 25,263 26,335 22,037 Deferred Income, current portion 330 419 598 --------- --------- --------- Total Current Liabilities 74,861 49,452 39,014 LONG-TERM DEBT 16,274 19,885 20,088 DEFERRED INCOME, less current portion 15 247 218 STOCKHOLDERS' EQUITY (Note 3) Special Preferred Stock - authorized 40,000,000 shares of $.01 par value; none issued Common Stock - authorized 40,000,000 shares of $.10 par value; shares issued and out- standing: 17,800, 17,445 and 17,328, respectively 1,780 1,745 1,733 Paid-in Capital 37,747 35,766 34,348 Retained Earnings 140,029 130,965 132,921 Unrealized Foreign Currency Translation Adjustment (821) (781) (761) --------- --------- --------- Total Stockholders' Equity 178,735 167,695 168,241 --------- --------- --------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 269,885 $ 237,279 $ 227,561 ========= ========= =========
The accompanying notes are an integral part of these statements. 6 7 WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Nine Months Ended September 30, 1997 1996 -------- -------- Cash flows from operating activities: Net earnings $ 10,777 $ 1,554 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation of property, plant and equipment 4,956 4,886 Amortization of intangible assets 824 483 Amortization of deferred income (321) (449) Equity in net earnings of joint ventures (4,332) (97) Changes in assets and liabilities Increase in accounts and other receivables (12,687) (7,680) Increase in inventories (9,295) (3,681) Increase in prepaid expenses (1,882) (1,146) Decrease (increase) in other assets 615 (776) (Decrease) increase in accounts payable and accrued expenses (1,072) 3,929 Decrease in current and deferred income taxes 441 (Decrease) increase in other accounts (34) 45 -------- -------- Net cash used in operating activities (12,010) (2,932) Cash flows from investing activities: Additions to property, plant and equipment - net (8,872) (7,798) Purchase of assets - LitterMaid(TM) -- (2,246) Purchase of assets - Bay Books & Tapes -- (1,180) Investments in joint ventures (198) (7,934) Increase (decrease) in receivable accounts and notes from affiliates (4,610) 1,307 -------- -------- Net cash used in investing activities $(13,680) $(17,851)
7 8 WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) CONTINUED
Nine Months Ended September 30, 1997 1996 -------- -------- Cash flows from financing activities: Net borrowings under lines of credit $ 23,570 $ 15,522 Payments of long-term debt (611) $ (611) Exercise of stock options and warrants 2,017 1,949 Cash dividends paid (1,713) (2,485) Purchases of common stock -- (3,768) -------- -------- Net cash provided by financing activities 23,263 10,607 -------- -------- Decrease in cash and cash equivalents (2,427) (10,176) Cash and cash equivalents at beginning of year 8,779 17,768 -------- -------- Cash and cash equivalents at end of quarter $ 6,352 $ 7,592 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for: Interest $ 963 $ 337 Income taxes $ 11 $ 336
The accompanying notes are an integral part of these statements. 8 9 WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF ACCOUNTING POLICIES INTERIM REPORTING In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all normal recurring adjustments necessary to present fairly the Company's financial position as of September 30, 1997 and 1996, and the results of its operations and changes in financial position for the interim periods. Results for interim periods should not be considered indicative of results for a full year. Reference should be made to the financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. RECLASSIFICATIONS Certain prior period amounts have been reclassified for comparability. 2. INVESTMENTS IN JOINT VENTURES Investments in joint ventures consist of the Company's interests in joint ventures, accounted for under the equity method. Included are the Company's 50-percent interests in Salton/Maxim Housewares, Inc.("Salton"), New M-Tech Corporation ("New M-Tech"), PX Distributors, Inc. ("PX"), Breakroom of Tennessee, Inc. and Anasazi Partners, L.P. ("Anasazi"). In December 1996, the Company purchased the remainder of its seasonal products joint venture. Financial data for this entity is consolidated for the 1997 period and has, therefore, been excluded in the table below for 1997. Summarized financial information of the unconsolidated companies is as follows: (In Thousands) Nine Nine Months Ended Year Ended Months Ended 9/30/97 12/31/96 9/30/96 ------------ ---------- ------------ EARNINGS Sales $276,125 $162,368 $ 77,085 Gross Profit $ 61,901 $ 34,312 $ 13,433 Net Earnings $ 8,651 $ 5,552 $ 453 BALANCE SHEET Current Assets $175,572 Noncurrent Assets $ 37,772 Current Liabilities $145,056 Shareholders' Equity $ 66,661 9 10 At September 30, 1997, the Company's loans to certain of its joint venture partners ("affiliates") totaled $9.1 million. The Company has also provided a $9.0 million corporate guarantee as support for a credit facility obtained by one of its joint ventures. Sales made by joint ventures were to entities other than members of the consolidated group. Sales totaling $12.6 million and $30.0 million, respectively, were made by the Company to the joint ventures in the three and nine month periods ended September 30, 1997. Sales to joint ventures for the three and nine month periods ended September 30, 1996 totaled $3.3 million and $4.5 million, respectively. Included in Receivables from Affiliates at September 30, 1997 is $8.0 million due the Company from the joint ventures for trade receivables. Note: Profits earned by the Company's manufacturing subsidiary on sales to joint ventures are included in the consolidated earnings results and are not part of the above table. 3. STOCKHOLDERS' EQUITY DIVIDENDS In August 1997, the Board of Directors reevaluated the dividend policy in light of the Company's strategic repositioning for growth and the resultant cash requirements and eliminated the Company's quarterly cash dividend. EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share", which changes the method for reporting Earnings Per Share. The statement is effective for financial statement periods ending after December 15, 1997. The Company has not yet determined the impact, if any, of adopting the new standard. 4. SUPPLIER CONTRACT In January 1997, the Company, through its 50-percent interests in Salton and New M-Tech, entered into supply contracts with the Kmart Corporation for Kmart to purchase, distribute, market and sell certain products under the White-Westinghouse brand name licensed to Salton and New M-Tech. Under the terms of the contract, Salton and New M-Tech will supply Kmart, either through the Company or other manufacturers, with a broad range of small electrical appliances, consumer electronics and telephone products under the White-Westinghouse brand name. Kmart will be the exclusive discount department store to market these White-Westinghouse products. 5. MARKETING COOPERATION AGREEMENT Pursuant to the Marketing Cooperation Agreement executed as part of the 1996 acquisition of Salton, the parties, on April 30, 1997, entered into an agreement pursuant to which fees are paid to the Company. Fees earned by the Company under various marketing arrangements with its joint ventures totaled $.9 million and $1.8 10 11 million for the three month and nine month periods ended September 30, 1997, respectively, and are classified as Sales and Other Revenues. 6. COMMITMENTS AND CONTINGENCIES The Company, its 50-percent owned joint venture partners Salton/Maxim Housewares, Inc. and New M-Tech Corporation, White Consolidated Industries, Inc. ("White Consolidated"), and certain other parties have been named as defendants in litigation filed by Westinghouse Electric Corporation ("Westinghouse") in the United States District Court for the Western District in Pennsylvania on December 18, 1996. The action arises from a dispute between Westinghouse and White Consolidated over rights to use the "Westinghouse" trademark for consumer products, based on transactions between Westinghouse and White Consolidated in the 1970's and the parties' subsequent conduct. Prior to the filing of Westinghouse's complaint against the Company, White Consolidated, on November 14, 1996, filed a complaint in the United States District Court for the Northern District of Ohio against Westinghouse and another corporation for trademark infringement, dilution, false designation or origin and false advertisement, seeking both injunctive relief and damages. Procedural motions concerning the jurisdiction in which the dispute should be heard have been filed by the parties. The action by Westinghouse seeks, among other things, a preliminary injunction enjoining the defendants from using the trademark, unspecified damages and attorneys' fees. Pursuant to the Indemnification Agreement dated January 23, 1997 by and among White Consolidated, Kmart Corporation, and the Company, White Consolidated is defending and indemnifying the Company for all costs and expenses for claims, damages, and losses, including the costs of litigation. Pursuant to the license agreements with White Consolidated, White Consolidated is defending and indemnifying Salton/Maxim and New M- Tech for all costs and expenses for claims, damages, and losses, including the costs of litigation. On April 9, 1997, on joint motion of the parties, the court issued an order staying future proceedings until the earlier of July 1, 1997 or five days after hearing before the court in order to give the parties an opportunity to pursue settlement discussions. Subsequently, after a status hearing before the Court on July 15, 1997, and in accordance with the Court's memorandum order of July 17, 1997, counsel for the parties in the litigation pending in the United States District Court for the Western District of Pennsylvania reported to the Court in a letter that the parties had agreed to pursue an expedited mini-trial/mediation proceeding in an effort to resolve their disputes. A mediation proceeding occurred and the parties were unable to reach a mediated settlement. Discovery is proceeding and the matter is likely to be tried in late 1998. 11 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996 Sales and Other Revenues ("Revenues") for the third quarter of 1997 increased by $23.8 million or 42.4% over Revenues for the same period in 1996. The increase is primarily the result of a $17.7 million increase in distribution sales, including $6.0 million in seasonal product sales resulting from the Company's December 1996 acquisition of the remainder of its seasonal products joint venture and $7.8 million in kitchen product sales. A $5.8 million increase in manufacturing sales also contributed to the growth in sales. Sales to a national retail beauty supply chain and to Salton accounted for 16.3% and 11.4%, respectively, of total sales for the 1997 period. Fees earned by the Company under marketing arrangements with its joint ventures totaled $.9 million and are classified as Sales and Other Revenues. COMPARATIVE REVENUE RESULTS (In Thousands) THREE MONTHS ENDED SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 ---------------------- ---------------------- DISTRIBUTION $59,799 74.8% $42,097 74.9% MANUFACTURING 20,177 25.2 14,084 25.1 ------- ------- ------- ------- Total Revenues $79,976 100.0% $56,181 100.0% ======= ======= ======= ======= Gross profit, as a percentage of sales, increased by 4.0% in the 1997 period primarily due to better absorption of fixed manufacturing overhead costs over increased sales volume. Selling, general and administrative costs increased by $2.0 million in the third quarter of 1997 compared to the same period of 1996, yet decreased as a percentage of sales to 15.4% from 18.3% for the same periods, as fixed expenses were spread over the Company's increased sales. The increase in costs is primarily the result of expenses related to LitterMaid, Inc., Bay Books & Tapes, Inc. and the now wholly-owned seasonal products company, whose operations, due to their respective acquisition dates, were not fully reflected in the 1996 third quarter financial statements. The Company's equity in net earnings of joint ventures was $3.7 million for the third quarter of 1997 as compared to $.8 million for the same period in 1996. Included in 1997 are the results of operations of the Company's interests in Salton, New M-Tech, and various other ventures, some of which were not acquired until the third quarter of 1996. Salton and New M-Tech were primarily responsible for the current period's increased earnings. In December 1996, the Company acquired the remainder of its seasonal products joint venture. The Company's tax expense is based on the earnings of each of its foreign and domestic operations, and it includes such additional U.S. taxes as are applicable to the repatriation of foreign earnings. Foreign earnings, other than in Canada, are generally taxed at rates lower than in the United States. The average number of common shares and common equivalent shares used in computing per share results was 19,917,000 in 1997, as compared to 18,984,000 in 1996, a 4.9% increase. The change was primarily due to the additional 12 13 dilutive effect of stock options and warrants arising from the Company's higher average stock price in 1997 and the additional shares issued upon the acquisition of Salton. In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share", which changes the method for reporting Earnings Per Share. The statement is effective for financial statements for periods ending after December 15, 1997. The Company has not yet determined the impact, if any, of adopting the new standard. RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996 Sales and Other Revenues for the 1997 nine month period increased by $55.3 million or 40.6% over Revenues for the same period in 1996. The increase is primarily the result of a $34.0 million increase in distribution sales which includes $18.7 million in seasonal product sales resulting from the Company's December 1996 acquisition of the remainder of its seasonal products joint venture and $11.5 million in kitchen product sales. Additional manufacturing sales of $18.2 million also contributed to the growth in sales. Fees earned by the Company under marketing arrangements with its joint ventures totaled $1.8 million and are classified as Sales and Other Revenues. COMPARATIVE REVENUE RESULTS NINE MONTHS ENDED SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 ----------------------- ----------------------- DISTRIBUTION $138,988 72.6% $105,069 77.2% MANUFACTURING 52,463 27.4 31,055 22.8 -------- ------- -------- ------- Total Revenues $191,451 100.0% $136,124 100.0% ======== ======= ======== ======= Gross profit, as a percentage of sales, increased by 1.8% in the 1997 period primarily due to better absorption of fixed manufacturing overhead costs over increased sales volume. Selling, general and administrative costs increased by $6.6 million in the nine months ended September 30, 1997 compared to the same period of 1996, yet decreased as a percentage of sales to 17.6% from 19.0% for the same periods, as fixed expenses were spread over the Company's increased sales. The increase in costs is primarily the result of expenses related to LitterMaid, Inc., Bay Books & Tapes, Inc. and the Company's now wholly-owned seasonal products company, whose operations, due to their respective acquisition dates, were not fully reflected in the 1996 third quarter financial statements. Interest expense increased by $1.3 million in the 1997 period as a result of the amounts paid on notes issued in conjunction with the Salton and New M- Tech acquisitions, as well as the increased level of borrowing under the Company's line of credit facilities. The Company's equity in net earnings of joint ventures was $3.8 million for the nine months ended September 30, 1997 as compared to $.1 million for the same period in 1996. Included in 1997 are the results of operations of the Company's interests in Salton, New M-Tech and various other ventures, some of which were not acquired until the third quarter of 1996. In December 1996, the Company acquired the remainder of its seasonal products joint venture. 13 14 The Company's tax expense is based on the earnings of each of its foreign and domestic operations, and it includes such additional U.S. taxes as are applicable to the repatriation of foreign earnings. Foreign earnings, other than in Canada, are generally taxed at rates lower than in the United States. The average number of common shares and common equivalent shares used in computing per share results was 19,593,000 in 1997, as compared to 17,671,000 in 1996, a 10.9% increase. The change was primarily due to the additional dilutive effect of stock options and warrants arising from the Company's higher average stock price in 1997 and the additional shares issued upon the acquisition of Salton. LIQUIDITY & CAPITAL RESOURCES At September 30, 1997, the Company's current ratio and quick ratio were 2.4 to 1 and 1.1 to 1 as compared to 3.8 to 1 and 1.6 to 1 at September 30, 1996. Working capital at those dates was $105.8 million and $109.8 million, respectively. The Company has presented its current and quick ratios solely as supplemental disclosures because the Company believes that they enhance the understanding of its financial performance. The Company and its joint ventures are experiencing accelerated growth. The net use of cash in operating activities of $12.0 million is a result of the growth. Cash flow was strongly impacted by the increase in inventory levels needed to meet future sales demands and the increase in accounts receivable balances resulting from strong third quarter activity. Investing expenditures of $8.9 million in additions to property, plant and equipment and a $4.6 million increase in receivables from affiliates are also a result of the accelerated growth. The $45.5 million borrowed under the Company's lines of credit at September 30, 1997, an increase of $23.6 million since the beginning of the year, is the primary funding source used by the Company to support its increased working capital requirements as well as to support its seasonal borrowing needs. Certain of the Company's foreign subsidiaries (the "subsidiaries") have $13.8 million in trade finance lines of credit, payable on demand, which are secured by the subsidiaries' tangible and intangible property located in Hong Kong and in the People's Republic of China, as well as a Company guarantee. At September 30, 1997, the subsidiaries were utilizing, including letters of credit, approximately $3.6 million of these credit lines. These subsidiaries also have available a $5.0 million revolving line of credit which is supported by a domestic standby letter of credit, guaranteed by the Company, of which $3.3 was outstanding as of September 30, 1997. Outstanding borrowings by the Company's Hong Kong subsidiaries are primarily in U.S. dollars. The Company has a $50.0 million line of credit from a domestic bank, secured by domestic accounts receivable and inventory. At September 30, 1997, outstanding borrowings under this credit line totaled $38.5 million and bear interest at LIBOR plus 1.50%. In August 1997, the Board of Directors reevaluated the dividend policy in light of the Company's strategic repositioning for growth and the resultant cash requirements and eliminated the Company's quarterly cash dividend. No provision for U.S. taxes has been made on undistributed earnings of the Company's foreign subsidiaries and joint ventures because management plans to reinvest such earnings in their respective operations or in other foreign operations. Repatriating those earnings or using them in some other manner which would give rise to a U.S. tax liability would reduce after tax earnings 14 15 and available working capital. The Company believes that its cash on hand and internally generated funds, together with its credit lines, will provide sufficient funding to meet the Company's capital requirements and its operating needs for the foreseeable future. LEGAL PROCEEDINGS The Company, its 50-percent owned joint venture partners Salton/Maxim Housewares, Inc. and New M-Tech Corporation, White Consolidated Industries, Inc. ("White Consolidated"), and certain other parties have been named as defendants in litigation filed by Westinghouse Electric Corporation ("Westinghouse") in the United Stated District Court for the Western District in Pennsylvania on December 18, 1996. The action arises from a dispute between Westinghouse and White Consolidated over rights to use the "Westinghouse" trademark for consumer products, based on transactions between Westinghouse and White Consolidated in the 1970's and the parties' subsequent conduct. Prior to the filing of Westinghouse's complaint against the Company, White Consolidated, on November 14, 1996, filed a complaint in the United States District Court for the Northern District of Ohio against Westinghouse and another corporation for trademark infringement, dilution, false designation or origin and false advertisement, seeking both injunctive relief and damages. Procedural motions concerning the jurisdiction in which the dispute should be heard have been filed by the parties. The action by Westinghouse seeks, among other things, a preliminary injunction enjoining the defendants from using the trademark, unspecified damages and attorneys' fees. Pursuant to the Indemnification Agreement dated January 23, 1997 by and among White Consolidated, Kmart Corporation, and the Company, White Consolidated is defending and indemnifying the Company for all costs and expenses for claims, damages, and losses, including the costs of litigation. Pursuant to the license agreements with White Consolidated, White Consolidated is defending and indemnifying Salton/Maxim and New M-Tech for all costs and expenses for claims, damages, and losses, including the costs of litigation. On April 9, 1997, on joint motion of the parties, the court issued an order staying future proceedings until the earlier of July 1, 1997 or five days after hearing before the court in order to give the parties an opportunity to pursue settlement discussions. Subsequently, after a status hearing before the Court on July 15, 1997, and in accordance with the Court's memorandum order of July 17, 1997, counsel for the parties in the litigation pending in the United States District Court for the Western District of Pennsylvania reported to the Court in a letter that the parties had agreed to pursue an expedited mini-trial/mediation proceeding in an effort to resolve their disputes. A mediation proceeding occurred and the parties were unable to reach a mediated settlement. Discovery is proceeding and the matter is likely to be tried in late 1998. The Company is subject to other legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability, if any, in excess of applicable insurance coverage, is not likely to have a material effect on the financial position of the Company. MANUFACTURING OPERATIONS Substantially all of the Company's products (85% - 90%) are manufactured by Durable, its wholly-owned Hong Kong subsidiary, in Bao An County, Guangdong Province of the People's Republic of China (PRC), which is approximately 60 miles northwest of central Hong Kong. The Company has a significant amount of its assets in the PRC, primarily consisting of inventory, equipment and molds. The supply and cost of products manufactured in the PRC can be 15 16 adversely affected, among other reasons, by changes in foreign currency exchange rates, increased import duties, imposition of tariffs, imposition of import quotas, interruptions in sea or air transportation and political or economic changes. Presently, products imported into the U.S. from the PRC are subject to favorable duty rates based on the "Most Favored Nation" status of the PRC ("MFN Status"). MFN Status is reviewed on an annual basis by the President and Congress and was renewed in June 1997. If MFN status for goods produced in the PRC were removed, there would be a substantial increase in tariffs imposed on goods of PRC origin entering the United States, including those manufactured by the Company, which could have a material adverse impact on the Company's revenues and earnings. From time to time, the Company explores opportunities to diversify its sourcing and/or production of certain products to other low-cost locations or with other third parties or joint venture partners in order to reduce its dependence on production in the PRC and/or reduce Durable's dependence on the Company's existing distribution base. However, at the present time, the Company intends to continue its production in the PRC. 16 17 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings See "Legal Proceedings" in Part I, Item 2 of this report. ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits EX-2.1 Amendment No. 3 to the Credit Agreement (October 11, 1996) dated July 27, 1997 EX-2.2 Amendment No. 4 to the Credit Agreement (October 11, 1996) dated August 21, 1997 EX-27 Financial Data Schedule (for SEC use only) (b) There were no reports on Form 8-K filed for the three months ended September 30, 1997. 17 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WINDMERE-DURABLE HOLDINGS, INC. ------------------------------- (Registrant) November 13, 1997 By: /s/ Harry D. Schulman -------------------------------------- Harry D. Schulman Senior Vice President - Finance and Administration and Chief Financial Officer (Duly authorized to sign on behalf of the Registrant) November 13, 1997 By: /s/ Burton A. Honig -------------------------------------- Burton A. Honig Vice President - Finance (Duly authorized to sign on behalf of the Registrant) 18 EX-2.1 2 AM.#3 TO CREDIT AGREEMENT 1 Exhibit 2.1 AMENDMENT AGREEMENT NO. 3 TO THE CREDIT AGREEMENT This AMENDMENT AGREEMENT NO. 3 TO THE CREDIT AGREEMENT (the "Amendment Agreement"), dated as of July 27, 1997 is made by and among WINDMERE CORPORATION, a Florida corporation having its principal place of business in Miami Lakes, Florida (the "Borrower"), NATIONSBANK, NATIONAL ASSOCIATION (as successor by merger to NationsBank, National Association (South)), a national banking association organized and existing under the laws of the United States, and NATIONAL BANK OF CANADA, as Lenders (such financial institutions are hereinafter referred to individually as a "Lender" or collectively as the "Lenders"), and NATIONSBANK, NATIONAL ASSOCIATION (as successor by merger to NationsBank, National Association (South)), in its capacity as agent for the Lenders (in such capacity, the "Agent"); W I T N E S S E T H: -------------------- WHEREAS, the Borrower, the Agent and the Lenders have entered into that certain Credit Agreement dated as of October 11, 1996, as amended by Amendment Agreement No. 1 to the Credit Agreement dated as of January 31, 1997, and by Amendment Agreement No. 2 to the Credit Agreement dated as of May 15, 1997 (as so amended, the "Credit Agreement"); and WHEREAS, the Agent, the Lenders and each of the Affiliates and Subsidiaries of the Borrower party thereto have entered into a Guaranty and Suretyship Agreement dated as of October 11, 1996, pursuant to which such Affiliates and Subsidiaries of the Borrower have guaranteed the Borrower's Obligations under the Credit Agreement; and WHEREAS, the Borrower has requested that the Agent and the Lenders amend the Credit Agreement; and WHEREAS, upon the terms and conditions contained herein, the Agent and the Lenders are willing to amend the Credit Agreement; NOW, THEREFORE, in consideration of the premises and conditions herein set forth, it is hereby agreed as follows: 1. CREDIT AGREEMENT AMENDMENT. Subject to the conditions hereof, the Credit Agreement is hereby amended, effective as of the date hereof by deleting the definition of "Stated Termination Date" appearing in SECTION 1.1 and inserting in lieu thereof the following: "'Stated Termination Date' means August 26, 1997 or such later date as the parties may agree pursuant to SECTION 2.13." 2 2. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent and the Lenders to enter into this Amendment Agreement, the Borrower hereby represents and warrants that the Credit Agreement has been re-examined by the Borrower and that except as disclosed by the Borrower in writing to the Lenders as of the date hereof except: (a) The representations and warranties made by the Borrower in ARTICLE VII thereof are true on and as of the date hereof except that the financial statements referred to in SECTION 7.6 shall be those most recently furnished to the Agent pursuant to SECTION 8.1; (b) There has been no material adverse change in the condition, financial or otherwise, of the Borrower and its Subsidiaries since the date of the most recent financial reports of the Borrower delivered to the Agent under SECTION 8.1 thereof, other than changes in the ordinary course of business, none of which has been a material adverse change; (c) The business and properties of the Borrower and its Subsidiaries are not, and since the date of the most recent financial reports of the Borrower delivered to the Agent under SECTION 8.1 thereof, have not been, adversely affected in any substantial way as the result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo, riot, activities of armed forces, war or acts of God or the public enemy, or cancellation or loss of any major contracts; and (d) After giving effect to this Amendment Agreement, no condition exists which, upon the effectiveness of the amendment contemplated hereby, would constitute a Default or an Event of Default on the part of the Borrower under the Credit Agreement or the Notes, either immediately or with the lapse of time or the giving of notice, or both. 3. CONDITIONS PRECEDENT. The effectiveness of this Amendment Agreement is subject to the receipt by the Agent of the following: (a) six counterparts of this Amendment Agreement duly executed by all signatories hereto; and (b) copies of all additional agreements, instruments and documents which the Agent may reasonably request, such documents, when appropriate, to be certified by appropriate governmental authorities. All proceedings of the Borrower relating to the matters provided for herein shall be satisfactory to the Lenders, the Agent and their counsel. 4. ENTIRE AGREEMENT. This Amendment Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. 2 3 No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and no one of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as in this Amendment Agreement otherwise expressly stated, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Amendment Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any proceeding or succeeding breach thereof. 5. CONSENT OF GUARANTORS. The Guarantors have joined in the execution of this Amendment Agreement for the purposes of consenting hereto and for the further purpose of confirming their guaranty of Obligations of Borrower as provided in the Guaranty. 6. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 7. COUNTERPARTS. This Amendment Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 8. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY (I) SUBMITS TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY OR FOR PURPOSES OF COLLECTION AND (II) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION. 9. ENFORCEABILITY. Should any one or more of the provisions of this Amendment Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 10. CREDIT AGREEMENT. All references in any of the Loan Documents to the Credit Agreement shall mean and include the Credit Agreement as amended hereby. 11. SUCCESSORS AND ASSIGNS. This Amendment Agreement shall be binding upon and inure to the benefit of each of the Borrower, the Lenders, the Agent and their respective successors, assigns and legal representatives; PROVIDED, HOWEVER, that the Borrower, without the prior consent of the Lenders, may not assign any rights, powers, duties or obligations hereunder. 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. WINDMERE CORPORATION By: -------------------------------- Name: ---------------------------- Title: ---------------------------- GUARANTORS: WINDMERE-DURABLE HOLDINGS, INC. By: -------------------------------- Name: ---------------------------- Title: ---------------------------- WINDMERE HOLDINGS CORPORATION By: -------------------------------- Name: ---------------------------- Title: ---------------------------- WINDMERE HOLDINGS CORPORATION II By: -------------------------------- Name: ---------------------------- Title: ---------------------------- WINDMERE FAN PRODUCTS, INC. By: -------------------------------- Name: ---------------------------- Title: ---------------------------- 4 5 LITTER MAID, INC. By: -------------------------------- Name: ---------------------------- Title: ---------------------------- BAY BOOKS & TAPES, INC. By: -------------------------------- Name: ---------------------------- Title: ---------------------------- JERDON PRODUCTS, INC. By: -------------------------------- Name: ---------------------------- Title: ---------------------------- CONSUMER PRODUCTS AMERICAS, INC. By: -------------------------------- Name: ---------------------------- Title: ---------------------------- FORTUNE PRODUCTS, INC. By: -------------------------------- Name: ---------------------------- Title: ---------------------------- 5 6 EDI MASTERS, INC. By: -------------------------------- Name: ---------------------------- Title: ---------------------------- 6 7 NATIONSBANK, NATIONAL ASSOCIATION, as Agent and Lender By: -------------------------------- Name: Richard G. Parkhurst Title: Vice President 7 8 NATIONAL BANK OF CANADA, as Lender By: -------------------------------- Name: ---------------------------- Title: 8 EX-2.2 3 AM.#4 TO CREDIT AGREEMENT 1 Exhibit 2.2 AMENDMENT AGREEMENT NO. 4 TO THE CREDIT AGREEMENT This AMENDMENT AGREEMENT NO. 4 TO THE CREDIT AGREEMENT (the "Amendment Agreement"), dated as of August 21, 1997 is made by and among WINDMERE CORPORATION, a Florida corporation having its principal place of business in Miami Lakes, Florida (the "Borrower"), NATIONSBANK, NATIONAL ASSOCIATION (as successor by merger to NationsBank, National Association (South)), a national banking association organized and existing under the laws of the United States, and NATIONAL BANK OF CANADA, as Lenders (such financial institutions are hereinafter referred to individually as a "Lender" or collectively as the "Lenders"), and NATIONSBANK, NATIONAL ASSOCIATION (as successor by merger to NationsBank, National Association (South)), in its capacity as agent for the Lenders (in such capacity, the "Agent"); W I T N E S S E T H: WHEREAS, the Borrower, the Agent and the Lenders have entered into that certain Credit Agreement dated as of October 11, 1996, as amended by Amendment Agreement No. 1 to the Credit Agreement dated as of January 31, 1997, by Amendment Agreement No. 2 to the Credit Agreement dated as of May 15, 1997 and by Amendment Agreement No. 3 to the Credit Agreement dated as of July 27, 1997 (as so amended, the "Credit Agreement"); and WHEREAS, the Agent, the Lenders and each of the domestic Affiliates and domestic Subsidiaries of the Borrower party thereto have entered into a Guaranty and Suretyship Agreement dated as of October 11, 1996, pursuant to which such Affiliates and Subsidiaries of the Borrower have guaranteed the Borrower's Obligations under the Credit Agreement; and WHEREAS, Windmere Consumer Products, Inc., an Affiliate of the Borrower, the Agent and the Lenders has entered into a Guarantee and Suretyship Agreement dated as of the date hereof pursuant to which Windmere Consumer Products, Inc. has guaranteed the Borrower's Obligations under the Credit Agreement; and WHEREAS, the Borrower has requested that the Agent and the Lenders amend the Credit Agreement; and WHEREAS, upon the terms and conditions contained herein, the Agent and the Lenders are willing to amend the Credit Agreement; NOW, THEREFORE, in consideration of the premises and conditions herein set forth, it is hereby agreed as follows: 2 1. CREDIT AGREEMENT AMENDMENT. Subject to the conditions hereof, the Credit Agreement is hereby amended, effective as of the date hereof, as follows: (a) Section 1.1 to the Credit Agreement is hereby amended by amending and restating the following definitions, each in its entirety as follows: "'Borrowing Base' means, as of the date of determination thereof, (i) Eligible Receivables multiplied by 85% plus (ii) Eligible Inventory multiplied by 40% (the "Eligible Inventory Amount") provided that if the date of determination is between July 15 and December 15 of any year, the Eligible Inventory amount determined in subsection (ii) above shall be Eligible Inventory multiplied by 50%; provided further, that the Eligible Inventory amount determined at any time shall not exceed $20,000,000;" "'Consolidated Tangible Net Worth' means the total of Parent's and its Subsidiaries' shareholder equity as determined in accordance with GAAP, minus the sum of the following, (i) the book value of all assets which would be treated as intangible assets under GAAP other than and (ii) any prepaid advertising credits; provided, however, that in determining the amount of goodwill, where capital stock of the Borrower is a part of the consideration paid in connection with one or more Acquisitions, there may be included in Consolidated Tangible Net Worth up to $5,000,000 of goodwill, so long as the fair market value of capital stock of the Borrower given as consideration equals the amount of goodwill so included." "'Default Rate' means (i) with respect to each Eurodollar Rate Loan, until the end of the Interest Period applicable thereto, a rate of two percent (2%) above the Eurodollar Rate applicable to such Loan, and thereafter at a rate of interest per annum which shall be two percent (2%) above the Base Rate, (ii) with respect to Base Rate Loans, at a rate of interest per annum which shall be two percent (2%) above the Base Rate, (iii) with respect to Money Market Loans, at a rate of interest per annum which shall be two percent (2%) above the Money Market Rate and (iv) in any case, the maximum rate permitted by applicable law, if lower;" "'Eligible Inventory' means that domestic inventory of the Borrower and the Guarantors which is determined by the Agent in the reasonable exercise of its discretion to be Eligible Inventory; provided, however, that any of the following shall not be Eligible Inventory: (i) inventory that is kept in any location other than the (a) warehouses owned by the Borrower or the Guarantors and located in Miami, Florida, (b) the warehouse located at 3313 Northwest 37th Street, Miami, Florida and (c) public warehouses located in (v) Sparkes, Nevada, (w) Kent, Washington, (x) Pennsauken, New Jersey, (y) Largo, Florida and (z) Memphis, Tennessee; and 2 3 (ii) inventory that is unfinished;" "'Eligible Receivables' means those trade accounts receivable of the (a) Borrower, (b) the Parent, (c) the Domestic Subsidiaries of each of the Borrower and the Parent and (d) Windmere Consumer Products, Inc., which are determined by the Agent in the reasonable exercise of its discretion to be an Eligible Receivable; provided, however, that any of the following shall not be Eligible Receivables: (i) intercompany receivables; (ii) receivables owed by the United States government or any of its states, departments, agencies or instrumentalities of any thereof; (iii) receivables owed by a person not a United States or Canadian citizen or corporation, partnership or other entity organized under the laws of the United States or province of Canada or the Commonwealth of Canada whose principal office is not located either within the United States or Canada. (iv) receivables of any customer more than 50% of which receivables due Borrower, the Parent, any Domestic Subsidiaries of the Borrower or the Parent or Windmere Consumer Products, Inc. are more than 90 days past due; (v) receivables that are due or unpaid for more than ninety (90) days from the original due date thereof; and (vi) any receivable which is subject to any offset, deduction, defense, dispute or counterclaim;" "'Stated Termination Date' means August 25, 1998 or such later date as the parties may agree pursuant to Section 2.13;" "'Total Revolving Credit Commitment' means a principal amount equal to $45,000,000, such amount as reduced from time to time in accordance with Section 2.7;" (b) Section 1.1 is hereby amended by adding the following definitions thereto in their appropriate alphabetical order: "'Floating Rate' means (i) in the case of a Base Rate Loan the Base Rate, and (ii) in the case of a Money Market Loan the Money Market Rate;" "'Floating Rate Loan' means a Loan which is either a Base Rate Loan or a Money Market Loan;" 3 4 "'Money Market Loan' means a Loan which bears interest at the Money Market Rate;" "'Money Market Rate' means the sum of (i) the greater of (x) the one month Eurodollar Rate as determined by the Agent and (y) the rate of interest announced daily by the Agent to be its money market rate, plus (ii) the Applicable Margin;" (c) Article II of the Agreement is hereby amended by deleting the phrase "Base Rate Loan" and "Base Rate Loans" wherever it appears therein and inserting in lieu thereof the phrase "Floating Rate Loan" and "Floating Rate Loans," respectively. (d) The second sentence of Section 2.1(c)(i) to the Credit Agreement is hereby amended by inserting after the phrase "Base Rate" a comma and the phrase "Money Market Rate". (e) Section 8.12(a) to the Credit Agreement is hereby amended by amending and restating such section in its entirety as follows: "(a) Consolidated Tangible Net Worth. Maintain at all times Consolidated Tangible Net Worth equal to the sum of (i) $146,855,500 plus (ii) 50% of Consolidated Net Income for each quarterly period subsequent to September 30, 1997 plus (iii) the aggregate net proceeds of any equity offering (including net proceeds under any stock option or executive compensation plan) received by Parent after June 30, 1997; and" (f) Exhibit A to the Credit Agreement is hereby amended by amending and restating such Exhibit in its entirety as set forth in Exhibit A hereto. (g) Exhibit I to the Credit Agreement is hereby amended by amending and restating such Exhibit in its entirety as set forth in Exhibit I hereto. 2. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent and the Lenders to enter into this Amendment Agreement, the Borrower hereby represents and warrants that the Credit Agreement has been re-examined by the Borrower and that except as disclosed by the Borrower in writing to the Lenders as of the date hereof except: (a) The representations and warranties made by the Borrower in Article VII thereof are true on and as of the date hereof except that the financial statements referred to in Section 7.6 shall be those most recently furnished to the Agent pursuant to Section 8.1; (b) There has been no material adverse change in the condition, financial or otherwise, of the Borrower and its Subsidiaries since the date of the most recent financial 4 5 reports of the Borrower delivered to the Agent under Section 8.1 thereof, other than changes in the ordinary course of business, none of which has been a material adverse change; (c) The business and properties of the Borrower and its Subsidiaries are not, and since the date of the most recent financial reports of the Borrower delivered to the Agent under Section 8.1 thereof, have not been, adversely affected in any substantial way as the result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo, riot, activities of armed forces, war or acts of God or the public enemy, or cancellation or loss of any major contracts; and (d) After giving effect to this Amendment Agreement, no condition exists which, upon the effectiveness of the amendment contemplated hereby, would constitute a Default or an Event of Default on the part of the Borrower under the Credit Agreement or the Notes, either immediately or with the lapse of time or the giving of notice, or both. 3. CONDITIONS PRECEDENT. The effectiveness of this Amendment Agree- ment is subject to the receipt by the Agent of the following: (i) six counterparts of this Amendment Agreement duly executed by all signatories hereto; (ii) four counterparts of each of (a) the Security Agreement executed by Windmere Consumer Products, Inc. in favor of the Agent, (b) the Guaranty Agreement executed by Windmere Consumer Products, Inc. in favor of the Agent, each in form and substance satisfactory to the Agent and (c) the documents required pursuant to Section 8.11 of the Credit Agreement; (iii) promissory notes executed by the Borrower in favor of each of the Lenders in amounts equal to each Lender's Revolving Credit Commitment; (iv) resolutions of Board of Directors or other governing body of the Borrower approving this Amendment Agreement certified by the Secretary of the Borrower; (v) opinion of counsel of the Borrower in form and substance satisfactory to the Agent; and (vi) copies of all additional agreements, instruments and documents which the Agent may reasonably request, such documents, when appropriate, to be certified by appropriate governmental authorities. All proceedings of the Borrower relating to the matters provided for herein shall be satisfactory to the Lenders, the Agent and their counsel. 5 6 4. ENTIRE AGREEMENT. This Amendment Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and no one of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as in this Amendment Agreement otherwise expressly stated, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Amendment Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any proceeding or succeeding breach thereof. 5. CONSENT OF GUARANTORS. The Guarantors have joined in the execution of this Amendment Agreement for the purposes of consenting hereto and for the further purpose of confirming their guaranty of Obligations of Borrower as provided in the Guaranty. 6. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 7. COUNTERPARTS. This Amendment Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 8. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY (I) SUBMITS TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY OR FOR PURPOSES OF COLLECTION AND (II) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION. 9. ENFORCEABILITY. Should any one or more of the provisions of this Amendment Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 10. CREDIT AGREEMENT. All references in any of the Loan Documents to the Credit Agreement shall mean and include the Credit Agreement as amended hereby. 11. SUCCESSORS AND ASSIGNS. This Amendment Agreement shall be binding upon and inure to the benefit of each of the Borrower, the Lenders, the Agent and their respective 6 7 successors, assigns and legal representatives; provided, however, that the Borrower, without the prior consent of the Lenders, may not assign any rights, powers, duties or obligations hereunder. IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. WINDMERE CORPORATION By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- GUARANTORS: WINDMERE-DURABLE HOLDINGS, INC. By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- WINDMERE HOLDINGS CORPORATION By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- WINDMERE HOLDINGS CORPORATION II By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- 7 8 WINDMERE FAN PRODUCTS, INC. By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- LITTER MAID, INC. By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- BAY BOOKS & TAPES, INC. By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- JERDON PRODUCTS, INC. By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- CONSUMER PRODUCTS AMERICAS, INC. By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- 8 9 FORTUNE PRODUCTS, INC. By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- EDI MASTERS, INC. By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- WINDMERE CONSUMER PRODUCTS, INC. By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- 9 10 NATIONSBANK, NATIONAL ASSOCIATION, as Agent and Lender By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- 10 11 NATIONAL BANK OF CANADA, as Lender By: -------------------------------------- Name: ----------------------------------- Title: ----------------------------------- 11 12 EXHIBIT A Applicable Commitment Percentages
Revolving Applicable Credit Commitment Lender Commitment Percentage - ------ ---------- ---------- NationsBank, National Association $25,000,000 55.555555556% National Bank of Canada 20,000,000 44.444444444% ----------- ------------ $45,000,000 100%
A-1 13 EXHIBIT I Form of Borrowing Base Certificate The undersigned Authorized Representative of Windmere Corporation hereby certifies as follows: (a) Eligible Receivables as of this date: Total $__________________ x 85% = $_______________ (b) Eligible Inventory as of this date: Total $__________________ x ___%* = $_______________(not to exceed $20,000,000) (a) + (b) = $______________
*40% during period December 16 through following July 14 and 50% at all other times. EXECUTED THIS ____ DAY OF __________________, 199__. WINDMERE CORPORATION By: ------------------------- Authorized Representative I-1 EX-27 4 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 6,352 0 65,908 1,122 98,809 180,615 84,894 48,218 269,885 74,861 0 0 0 1,780 37,747 269,885 191,451 191,451 149,667 149,667 33,635 0 2,194 11,304 527 10,777 0 0 0 10,777 .55 .55
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