-----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, AH0xsrY69l9NucWV3KmReUzYjh74woaICPmyWfB/1CzBfFn9v1JTIxEsRMFrsoAz ORXc8CF6OJM/jlEmnKNibQ== 0000927025-98-000163.txt : 19981113 0000927025-98-000163.hdr.sgml : 19981113 ACCESSION NUMBER: 0000927025-98-000163 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOASTMASTER INC CENTRAL INDEX KEY: 0000818268 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] IRS NUMBER: 431204566 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11007 FILM NUMBER: 98744513 BUSINESS ADDRESS: STREET 1: 1801 N STADIUM BLVD CITY: COLUMBIA STATE: MO ZIP: 65202 BUSINESS PHONE: 3144458666 10-Q 1 _________________________________________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1998 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: 1-11007 TOASTMASTER INC. (Exact name of registrant as specified in its charter) MISSOURI 43-1204566 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1801 NORTH STADIUM BOULEVARD, COLUMBIA, MISSOURI 65202 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (573)445-8666 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 [ ] AT OCTOBER 31, 1998, THERE WERE 7,551,950 SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING. _________________________________________________________________________ TOASTMASTER INC. INDEX PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF OPERATIONS - QUARTERS ENDED SEPTEMBER 30, 1998 AND 1997 3 AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1998 AND 1997 AND DECEMBER 31, 1997 4 CONSOLIDATED STATEMENTS OF CASH FLOWS - NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7-10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 10 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10 SIGNATURE 11 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TOASTMASTER INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED SEPT 30 NINE MONTHS ENDED SEPT 30 1998 1997 1998 1997 Net Sales $ 37,855 $ 44,209 $ 92,923 $ 98,281 Cost of Sales 33,604 35,570 80,094 80,539 Gross Profit 4,251 8,639 12,829 17,742 Selling, General and Admin. Expenses 5,567 5,472 15,430 16,101 Operating Income (Loss) (1,316) 3,167 (2,601) 1,641 Other Income - Interest 0 0 0 343 Other Expense - Interest 1,059 1,044 2,821 2,775 Income (Loss) Before Income Taxes (2,375) 2,123 (5,422) (791) Income Tax Expense (Benefit) (752) 713 (1,905) (348) Net Income (Loss) $ (1,623) $ 1,410 $ (3,517) $ (443) Basic Earnings(Loss) per Common Share $ (0.21) $ 0.19 $ (0.47) $ (0.06) Diluted Earnings(Loss) per Common Share $ (0.21) $ 0.19 $ (0.46) $ (0.06) Weighted Average Shares Used in Computation: Basic Earnings per Common Share 7,552 7,538 7,547 7,538 Diluted Earnings per Common Share 7,592 7,550 7,588 7,542
SEE ACCOMPANYING NOTES TOASTMASTER INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
9/30/98 12/31/97 9/30/97 ASSETS Cash $ 356 $ 178 $ 112 Accounts Receivable,less allowances 34,903 42,396 40,150 Inventories Finished Goods 38,677 26,029 34,838 Raw Matl.,WIP 8,225 7,157 10,462 LIFO/Inventory Valuation Reserve (792) (1,360) (3,065) Total Inventory 46,110 31,826 42,235 Deferred Income Tax 0 0 2,280 Prepaid Expenses 2,077 2,145 3,221 Income Taxes Receivable 5,645 4,070 1,116 Total Current Assets 89,091 80,615 89,114 Property, Plant and Equipment Land 928 928 928 Buildings 10,602 9,885 9,833 Less:Accumulated Depreciation (5,781) (5,393) (5,267) Machinery & Equipment 39,759 45,661 45,002 Less:Accumulated Depreciation (28,433) (31,818) (31,266) Net Property, Plant & Equipment 17,075 19,263 19,230 Goodwill, net of accumulated amortization 3,181 3,265 3,294 Other Assets 3,129 3,148 1,861 $ 112,476 $ 106,291 $ 113,499 LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities Current Installments of Long-Term Debt $ 2,054 $ 2,104 $ 2,117 Accounts Payable 7,812 4,383 8,724 Accrued Expenses 12,138 12,936 13,392 Deferred Income Taxes 1,456 1,456 0 Total Current Liabilities 23,460 20,879 24,233 Long Term Debt, Excl. Current Installments 50,135 42,597 49,090 Deferred Income Taxes 801 801 579 Other Liabilities 805 695 325 Total Liabilities 75,201 64,972 74,227 Stockholders' Equity: Common Stock, $.10 par value 760 760 760 Additional Paid-in Capital 25,340 25,344 25,340 Retained Earnings 11,905 15,878 13,696 Accumulated Other Comprehensive Income (492) (375) (236) 37,513 41,607 39,560 Treasury Stock (238) (288) (288) Total Stockholders' Equity 37,275 41,319 39,272 $ 112,476 $ 106,291 $ 113,499
SEE ACCOMPANYING NOTES TOASTMASTER INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
NINE MONTHS ENDED SEPT 30 1998 1997 Cash flows from operating activities: Net loss $ (3,517) $ (443) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,911 2,814 Loss on sale of prop., plant and equip. 26 0 Restructuring charge 0 123 Accounts receivable 7,493 2,554 Inventories (14,284) (7,758) Prepaid expenses & other current assets 68 (1,311) Other assets 15 (166) Accounts payable 3,429 4,972 Accrued liabilities (688) (1,000) Income taxes (1,575) (348) ------- ------- (2,605) (120) Net cash flows used in ------- ------- operating activities (6,122) (563) Cash flows from investing activities: Additions to property,plant and equipment (1,349) (3,423) Proceeds from sale of prop.,plant and equip. 688 0 Net cash flows used in investing activities (661) (3,423) Cash flows from financing activities: Proceeds from revolving credit agreement 111,128 106,005 Repayments of revolving credit agreement (102,044) (99,946) Stock options exercised 43 0 Dividends paid (453) (453) Repayment of long-term debt (1,596) (1,608) Net cash flows provided by financing activities 7,078 3,998 Foreign currency translation adjustment (117) 3 Net increase in cash 178 15 Cash at beginning of period 178 97 Cash at end of period $ 356 $ 112 Cash paid during the period for: Interest $ 2,736 $ 2,699 Income taxes $ 0 $ 0
SEE ACCOMPANYING NOTES TOASTMASTER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying financial statements as of September 30, 1998 and September 30, 1997 and for the quarter and the nine months then ended are unaudited. The balance sheet as of December 31, 1997 has been derived from the audited balance sheet as of that date. The consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. These financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 1997 and notes thereto contained in the Company's Annual Report to Shareholders incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 1997. The results of operations for the interim periods shown are not necessarily indicative of the results for the entire fiscal year ending December 31, 1998. 2. The loan and security agreement between the Company and Fleet Capital Corporation, as described in note 3 in the Notes to Consolidated Financial Statements contained in the Company's Annual Report to Shareholders, was amended as of March 11, 1998. The amendment reduced by .5% the interest rate under the London Interbank Offering Rate(LIBOR) option for borrowings under the revolving credit and term loan provisions of the agreement. The Company was not in compliance with Sec. 9.3(C), Quarterly Pre-Tax Earnings, for the nine months ended September 30, 1998. A waiver has been obtained for this non-compliance as of September 30, 1998. 3. Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The adjustments that were previously made through stockholders' equity for the minimum pension liability and foreign currency adjustments will now be disclosed as other comprehensive income. For the quarter ended September 30, 1998, other comprehensive loss was $63 thousand and the total comprehensive loss was $1.686 million. For the quarter ended September 30, 1997, other comprehensive income was $4 thousand and the total comprehensive income was $1.414 million. For the nine months ended September 30, 1998, other comprehensive loss was $117 thousand and the total comprehensive loss was $3.634 million. For the nine months ended September 30, 1997, other comprehensive income was $3 thousand and the total comprehensive loss was $440 thousand. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS MADE IN THIS REPORT ON FORM 10-Q ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE WORDS "SHOULD," "WILL BE," "INTENDED," "CONTINUE," "BELIEVE," "MAY," "EXPECT," "HOPE," "ANTICIPATE," "GOAL," "FORECAST" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS, FINANCIAL CONDITION OR BUSINESS COULD DIFFER MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL CONDITION OR BUSINESS, OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THE COMPANY'S REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. The following discussion should be read in conjunction with the attached financial statements and notes thereto, and with the Company's audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 1997. The Company believes that sales of many of its products are seasonal, with significant quantities of its products given as gifts, and therefore sell in larger volumes during the Christmas shopping season. Net sales reflect a reduction from revenues of amounts related to sales discount programs, including absorption of out-bound freight and certain allowances for advertising, the latter of which are accounted for by certain competitors as "advertising" expense. The Company views these amounts as price reductions, thereby reducing net sales and lowering gross profits, as well as selling, general and administrative expense. As used in this Quarterly Report on Form 10-Q, the term "revenues" are recorded net of product returns and are before deduction of items referred to above that are used in computing net sales. During the periods discussed below, net sales averaged approximately 95% of revenues. RESULTS OF OPERATIONS Net sales decreased 14.4% to $37.9 million for the quarter ended September 30, 1998 from $44.2 million for the quarter ended September 30, 1997. For the nine months ended September 30, 1998, net sales decreased 5.5% to $92.9 million from $98.3 million for the comparable period in 1997. The decline in sales in the third quarter and the nine months reflects several different factors, including: delays in shipping to meet orders received late in the quarter and the resulting difficulty of scheduling carriers; delays in orders from some of the Company's largest customers; temporary postponement of the introduction of the Company's Global DesignTM, Porsche and OperaTM product lines being imported from Europe to ensure UL compliance; delays in production on certain products from Asian suppliers; and difficulty in obtaining an adequate number of shipping containers at Asian ports to get product to the U.S. in a timely manner. Kitchen appliance revenues were $31.6 million for the third quarter of 1998, a decrease of 11% from $35.5 million for the same period in 1997. Revenues from kitchen appliances for the nine months ended September 30, 1998 decreased 4% to $74.8 million from $77.9 million for the nine months ended September 30, 1997. A decline in breadmaker, toaster and countertop oven revenues in both the third quarter and the nine months was primarily responsible for this decrease. Time products revenues were $8.5 million for the quarter ended September 30, 1998, a decrease of 17.5% from $10.3 million for the quarter ended September 30, 1997. For the nine months ended September 30, 1998, revenues from time products were $23 million, a decrease of 3% from $23.7 million for the same period in 1997. The decrease in both periods was due to a decline in timer shipments. Revenues from the discontinued environmental products were $58 thousand and $349 thousand for the quarter ended September 30, 1998 and 1997, respectively. Revenues for the nine months ended September 30, 1998 were $51 thousand compared to $1.3 million for the same period in 1997. Revenues from the five largest customers for the third quarter of 1998 represented approximately 41.9% of revenues. The five largest customers accounted for 46.2% of revenues for the third quarter of 1997. For the nine months ended September 30, 1998, revenues from the five largest customers were 43.9%. The five largest customers accounted for 46.5% of revenues for the nine months ended September 30, 1997. Gross profit was $4.3 million, 11.2% of net sales, for the quarter ended September 30, 1998, a decrease from $8.6 million, or 19.5% of net sales, for the comparable period in 1997. Gross profit also decreased for the nine months ended September 30, 1998 to $12.8 million, or 13.8% of net sales, from $17.7 million, or 18.1% of net sales, for the same period in 1997. The decrease as a percentage of net sales was primarily due to lower product margins, increased health care and workers' compensation costs and less absorption of overhead costs due to lower production. Selling, general and administrative expenses for the quarter ended September 30, 1998 increased slightly to $5.6 million compared to $5.5 million for the third quarter of 1997. A decrease in selling and advertising expenses due to the lower sales levels was more than offset by the exchange rate loss from Mexico and Canada of $441 thousand for the quarter ended September 30, 1998, as compared to $19 thousand for the same period in 1997. For the nine months ended September 30, 1998, selling, general and administrative expenses were $15.4 million, a decrease from $16.1 million for the same period in 1997. Cost controls initiated earlier in the year contributed to the reduction in expense. The decline in the value of the peso and the Canadian dollar negatively affected the nine months ended September 30, 1998 by $822 thousand compared to $73 thousand for the same period of 1997. Interest expense was up slightly at $1.059 million for the quarter ended September 30, 1998 from $1.044 million for the same period in 1997. Interest expense for the nine months ended September 30, 1998 increased slightly to $2.821 million as compared to $2.775 million for the same period in 1997. The Company's Board of Directors decided not to authorize the declaration or payment of a cash dividend in the fourth quarter of 1998. No determination was made by the Board as to when or whether dividends would be declared in the future. The payment and amount of any future dividends will be determined by the Board of Directors, from time to time, after taking into account various factors such as the Company's financial condition, results of operations, and current and anticipated cash needs. LIQUIDITY AND CAPITAL RESOURCES The Company's operations require substantial working capital. The Company has used available cash flow from operations and borrowings under its revolving credit agreement to finance additional working capital, to retire long-term debt and to fund capital expenditures. Net cash flows used by operating activities for the nine months ended September 30, 1998 were $6.1 million. Since December 31, 1997, there was a reduction in accounts receivable of $7.5 million, an increase in inventory of $14.3 million and an increase in accounts payable of $3.4 million as a result of seasonal patterns. The increase in inventory and the decrease in accounts receivable were impacted by the lower sales levels. Cash flows used for additions to property, plant and equipment of $1.3 million include the cost of new equipment and tooling for new and existing products. Proceeds from the sale of property, plant and equipment were from the closure of the Boonville manufacturing facility. All equipment not relocated to other facilities was sold for approximately net book value. Net cash flows provided by financing activities were $7.1 million for the nine months ended September 30, 1998, and were primarily from additional borrowings under the revolving credit agreement. At September 30, 1998, amounts outstanding under the revolving credit agreement were $44.4 million. The Company could borrow an additional $5.6 million under the terms of the revolving credit agreement at September 30, 1998. Other long-term debt was $7.8 million, including the current portion of $2.1 million. The terms of and collateral for the revolving credit agreement and long-term debt are described in Note 3 of the Notes to the Consolidated Financial Statements contained in the Company's 1997 Annual Report to shareholders, which note is incorporated herein by reference. Principal payments on the long-term debt are expected to be funded from internally generated cash flows and future borrowings. The revolving credit agreement expires in November 2001. YEAR 2000 ISSUES The Company has completed testing of all operation and financial information systems for Year 2000 compliance during the first nine months of 1998, with the exception of the human resources/payroll(HR/PR) system. The HR/PR software testing will be completed in the fourth quarter of 1998. The systems which were tested proved to be Year 2000 ready. The Company's EDI system has passed the National Retail Federation's "Year2000 Translator Test," a plan developed in conjunction with retailers and manufacturers to test EDI once rather than testing with each retailer. All existing workstations and network servers are scheduled to be replaced by the end of the first quarter of 1999 with Year 2000 compliant technology. Non-information technology systems, such as communication systems and manufacturing equipment are being updated or have no date implications. The Company expects all systems to be Year 2000 compliant by mid-1999. The Company realizes that problems could exist with third party suppliers who may not be Year 2000 compliant. Therefore, the Company has sent questionnaires to suppliers with whom there is a material relationship. To date, 70% of those polled have responded, with 33% claiming to be Year 2000 ready. The Company will follow-up with additional questionnaires in the first quarter of 1999. The Company has received and responded to 51 requests from its customers. The Company has not polled its customers. To date the funds which have been spent on specific Year 2000 issues have not been material to the Company and based upon issues which have been identified to date, future costs associated with the matter are not expected to have a material impact on the business. While the Company is confident that the Year 2000 issues are manageable and will be dealt with in a timely fashion, this conclusion is forward looking and involves uncertainty and risks. The ultimate result may be impacted by a variety of factors such as, but not limited to, the failure to identify problems associated with non-IT systems which could materially impact the Company's ability to transact its business and problems associated with supplier or customer information systems which could have a similar impact. To date, the Company has not established a contingency plan for possible Year 2000 issues. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has transactions denominated in foreign currencies as discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1997 Annual Report. At September 30, 1998, accounts receivable included $1.3 million denominated in Canadian dollars and $1.3 million denominated in Mexican pesos. The Company does not purchase or sell foreign currency futures or forwards. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1998. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: TOASTMASTER INC. November 11, 1998 BY:/s/ John E. Thompson John E. Thompson Executive Vice President Chief Financial Officer Signing on behalf of the registrant And as principal financial officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 SEP-30-1998 356 0 37,587 2,684 46,110 89,091 17,075 34,214 112,476 75,201 0 0 0 760 36,515 112,476 92,923 92,923 80,094 80,094 15,430 0 2,821 (5,422) (1,905) (3,517) 0 0 0 (3,517) (.47) (.46)
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