-----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, Aih4U6oXBm6wT5EfDbFNR0Rn4xMYKIDfy0EyOZsJ5AvfDkq9c0cpSxiecErPRjAv 8SJ1ptA1nTIK3AfK3AVXpg== 0000920401-96-000005.txt : 19981229 0000920401-96-000005.hdr.sgml : 19981229 ACCESSION NUMBER: 0000920401-96-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960917 DATE AS OF CHANGE: 19981228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVAL CO CENTRAL INDEX KEY: 0000860194 STANDARD INDUSTRIAL CLASSIFICATION: 3634 IRS NUMBER: 133327021 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-20274 FILM NUMBER: 96631295 BUSINESS ADDRESS: STREET 1: 800 E 101ST TERRACE CITY: KANSAS CITY STATE: MO ZIP: 64131 BUSINESS PHONE: 8169434100 MAIL ADDRESS: STREET 1: 800 E 101ST TERRACE CITY: KANSAS CITY STATE: MO ZIP: 64131 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1996. 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: 0-20274 ------- THE RIVAL COMPANY (Exact name of registrant as specified in its charter) Delaware 43-0794462 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 800 E. 101st Terrace, Kansas City, Missouri 64131 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (816) 943-4100 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $ .01 per share 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. (1) Yes X No (2) 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. [ ] The aggregate market value of voting stock held by non-affiliates of the registrant is $128,750,000 as of August 30,1996. The non-inclusion of shares held by directors, officers and beneficial owners of more than 5% of the outstanding stock shall not be deemed an admission that such persons are affiliates of the Registrant. 9,729,667 --------------------------------------------------------------------- (number of shares of common stock outstanding as of August 30, 1996.) Documents Incorporated by Reference Part I and Part II incorporate information by reference from the registrant's Annual Report to Stockholders for the fiscal year ended June 30, 1996. Part III incorporates information by reference from the Registrant's definitive Proxy Statement, to be filed with the Commission for its 1996 Annual Meeting of Stockholders. PART I Item 1. Business. The Rival Company, the registrant, together with its subsidiaries, is referred to herein as "Rival" or as the "Company". The Company's executive offices are located at 800 E. 101st Terrace, Kansas City, Missouri 64131, and its telephone number is (816) 943-4100. The Rival Company was incorporated in Delaware on April 7, 1986 for the purpose of acquiring Rival Manufacturing Company. General The Company is a leading designer, manufacturer and marketer of a variety of products including small kitchen and personal care appliances such as Crock Pot (REGISTERED TRADEMARK) slow cookers, can openers and massagers; products for the home environment including space heaters, air purifiers, humidifiers and fans; and home improvement and industrial products such as sump, well and utility pumps, household ventilation, door chimes, ceiling fans and industrial fans. Since 1992, Rival's sales have grown from $163.5 million to $313.9 million largely as the result of six acquisitions that enabled Rival to expand its product line beyond kitchen appliances, its main products for over sixty years. As a consequence, Rival has begun selling to several new classes of customers, notably national hardware/home centers and industrial supply dealers, and has broadened its international presence. Between April 1995 and April 1996, the Company made three acquisitions: * Patton Electric Company ("Patton") which manufactures fans and space heaters for household and industrial use was acquired in April 1995. Prior to the acquisition, Patton's annual sales were approximately $40.0 million. * Fasco Consumer Products, Inc. ("Fasco") which manufactures an assortment of products including household ventilation, ceiling fans, door chimes and heaters was acquired in January 1996. Fasco generates annual sales of approximately $40.0 million in the home center, building supply and industrial distribution channels. * Bionaire, Inc. ("Bionaire") which assembles and sells air purifiers and humidifiers for household use was acquired in April, 1996. Bionaire has annual sales of approximately $57.0 million with retail distribution in the U.S., Canada and Europe. 2 These three businesses contributed $72.5 million to fiscal 1996 consolidated sales. The Company distributes the Rival (REGISTERED TRADEMARK), Rival Select (TRADEMARK), Simer (REGISTERED TRADEMARK), Pollenex (REGISTERED TRADEMARK), Patton (REGISTERED TRADEMARK), Bionaire (REGISTERED TRADEMARK), Fasco (REGISTERED TRADEMARK) and White Mountain (REGISTERED TRADEMARK) product lines to substantially all major retail outlets in the U.S. and Canada, including such mass merchants as Kmart, Target and Wal-Mart; hardware/home centers such as Ace Hardware, Home Depot and Lowes; department stores, catalog showrooms and warehouse clubs. The Company also sells Patton commercial fans and Fasco building supply and home products to industrial and electrical dealers and distributors. The Company has focused its resources to provide its customers with superior service, product innovation and marketing support. To accomplish this, the Company has developed automated ordering, shipping, invoicing and data storage and retrieval systems that are linked to the retailers "point-of-sale" systems. These automated systems are supported by close coordination between the traffic, warehousing, sales support and finance departments of the retailer and the Company. The Company believes that its highly integrated and cost effective manufacturing represents a competitive strength. The Company manufactures approximately 70% of the products it sells. Its manufacturing facilities, (eight in the U.S. and one in Canada) produce electric motors, molded plastic components, screw machine parts, stampings and stoneware. The Company believes that the ability to manufacture the majority of its products in North America is one of the Company's fundamental strengths. Manufacturing capability gives the Company flexibility, bargaining power with third party vendors, quality control, and quick response time. The ability to manufacture is also helpful in evaluating a prospective acquisition. The Company believes it has significant opportunities for continued growth through the enhancement of existing product lines, new product development, and product line acquisitions. The Company believes that product line acquisitions will continue to be a significant factor in the future growth of the Company. The continuing consolidation within the retail sector, the increasing automation demands and the trend of major retailers to reduce the number of suppliers are expected to provide opportunities to acquire product lines with established positions and shelf space. The Company also believes that its relationships with major retailers and its existing broad product offering can enhance the shelf space of product lines which Rival may acquire. The Company believes that it has adequate access to financing and that its recent experience in making successful acquisitions will facilitate future acquisitions. 3 Products The Company has broad retail distribution in each of the following product categories in which it competes: Kitchen Kitchen Heating Motor-Driven Other Electric Water Appliances Appliances Appliances Products - - ---------- ---------- ---------- -------- Slow cookers Can openers Space heaters Sump, utility Indoor grills Blenders Simmering pot- and well pumps Steamers Hand mixers pourri cookers Showerheads Toasters Stand mixers Ice cream Water Hot pots Food processors freezers filtration and kettles Slicers Massagers Grinders Air purifiers Ice crushers Fans Humidifiers Irons Door chimes Household ventilation The following table indicates the Company's net sales by product category for the periods presented: Years ended June 30 ---------------------- (in millions) Product Category 1996 1995 1994 ---------------- ------ ------ ------ Kitchen heating appliances $116.4 $ 98.3 $ 96.3 Kitchen motor-driven appliances 34.7 39.0 38.5 Other electric appliances 128.7 63.1 49.4 Water products 34.1 31.3 45.0 ------ ------ ------ Total $313.9 $231.7 $229.2 ====== ====== ====== The market for the small electric appliances sold by the Company is mature and highly competitive. As a result, the Company anticipates that growth will continue to be achieved principally through a combination of the enhancement of previously existing product lines, new product introductions, expansion of the customer base for Simer, Fasco and Patton products and additional product line acquisitions. Product Development The Company has an internal product development team dedicated to product line enhancements, and the introduction of new products. As part of this effort, the Company maintains its own engineering and development department to conduct research activities relating to the improvement of existing products and the development of new products. This department presently consists of over 50 people, including engineers, product designers, draftsmen and product managers. The Company also retains the services of outside engineering and design consultants from time to time. The 4 Company's expenditures for product engineering and development were $3.1 million, $2.5 million and $1.8 million for the years ended June 30, 1996, 1995 and 1994, respectively. Costs associated with changes to existing products and the development of new products are charged to operations as incurred. As a result of acquisitions, the Company has been able to significantly strengthen the engineering and development department without increasing the department's expenditures as a percent of the Company's net sales. Internal product development is critical, not only for growth, but also to maintain existing market share. The Company regularly enhances existing products by adding new features and modernizing their design in order to maintain their visual appeal and competitiveness. Acquisitions For a number of years, the Company's growth strategy has included the selective acquisitions of modest sized product lines. The Company acquires a product line when it believes it can use either its manufacturing or distribution strengths to reduce costs or increase sales. The Company has had sufficient resources to more aggressively pursue this strategy since its initial public offering in June 1992. In fiscal 1993, the Company acquired the assets of Simer Pump, a $22 million assembler of sump, well and utility pumps and of Pollenex Corporation, a $28 million marketer of massagers, showerheads and air cleaners. In fiscal 1994, the Company acquired operating assets of White Mountain Freezer, Inc., a $3 million manufacturer of premium quality ice cream freezers. In 1995, the Company acquired Patton Electric Company, a $40 million manufacturer of space heaters and fans for household and industrial use. And in 1996, the Company acquired Fasco Consumer Products, Inc. which generates approximately $40 million in sales of household ventilation products, ceiling fans, door chimes and other household products to retailers and electrical wholesale distributors and it acquired Bionaire, Inc. with $57 million in sales of humidifiers and air purifiers to retailers. The housewares industry includes hundreds of companies with limited product offerings and annual sales below $50 million. The fragmented nature of the industry together with the continuing retail consolidation and increasing automation requirements are expected to result in additional acquisition opportunities. The Company believes that given its strong financial condition, broad customer base, manufacturing expertise and recent acquisition experience, it is poised to capitalize on such opportunities. As such, product line acquisitions remain a key component of the Company's long term growth strategy. 5 Marketing The vast majority of the Company's sales are to the retail trade. For this business, the Company directs its marketing efforts at the retailer. The Company's products are sold in all major channels of distribution including mass merchants, hardware/home centers, department stores, catalog showrooms, warehouse clubs, drug stores, military exchanges, mail order companies and premium companies. Rival's broad distribution to retailers throughout the U.S. and Canada was a key consideration in each of the six acquisitions consummated by the Company since 1992. Simer's, Patton's and Fasco's strong distribution in hardware/home centers in conjunction with the Rival and Pollenex product lines has provided the Company with the opportunity to combine the strengths of each of the sales organizations. The consolidated group can thus focus its combined efforts on the retail trade which provides the Company and its customers with efficiencies in distribution, warehousing, computer systems and sales and buying personnel. The Patton and Fasco acquisitions also provide the Company with a new class of customers, the industrial and electrical distributors. The approximate breakdown of the Company's sales by class of customer is as follows: Years ended June 30 ------------------- Class of Customer 1996 1995 1994 ----------------- ---- ---- ---- Mass Merchant 47% 48% 49% Hardware/Home Center 17 17 20 Department Store 9 12 12 Catalog Showroom 5 8 7 Electrical and Industrial Distributor 10 2 -- Drug Store, Warehouse Clubs and Other 12 13 12 ---- ---- ---- 100% 100% 100% ==== ==== ==== The Company reaches its customers through its sales organization which consists of a combination of in-house sales managers, field sales associates and independent manufacturers' representative firms. The Company's largest customer, Wal-Mart (including Sam's Wholesale Club), accounted for 26% of net sales in fiscal 1996, 28% of net sales in fiscal 1995 and 27% of net sales in fiscal 1994. The Company's next five largest customers in fiscal 1996 represented 18% of net sales. While the Company does not have long-term contractual relationships with any of its customers, it has been doing business with Wal-Mart and with its next five largest customers continuously for over ten years. The strategy of providing quality products at a promotional price is consistent 6 with the marketing strategy of mass merchants who often use promotions in the small appliance department to create consumer traffic in their stores. The Company works closely with its retail customers in planning their marketing programs and promotions. The Company's advertising strategy is designed to supplement the marketing programs of its customers. Rather than stressing national advertising, the Company devotes approximately 80% of its advertising budget to more cost-effective cooperative advertising with retailers, such as circulars and inserts. The cooperative advertising provides identification of the Company's various brand names together with the name of the retailer. Customer Service The Company's major customers have developed programs of "Quick Response" to reduce inventory and related carrying costs and improve in-stock positions. These programs have continued to grow in importance as retailers have reduced their overall number of vendors in order to minimize freight, warehousing and vendor support costs, such as paperwork and personnel costs. In conjunction with the retailers' systems, the Company has developed automated ordering, shipping and invoicing systems and has been able to combine products sold under more than one of the Company's brand names to certain retailers to help minimize the retailers' support costs. Point of sales information is utilized to generate orders through an Electronic Data Interchange ("EDI") computer system. Additionally, the Company's distribution facilities in Clinton, Missouri, New Haven, Indiana, and Fayetteville, North Carolina incorporate state-of-the-art computer systems that provide information on shipping directly back to the customers' systems. The Company believes that its accommodation of its customers' "Quick-Response" programs has further solidified its position as a key supplier to its most important customers. Manufacturing The Company's nine plants, eight of which are in the U.S and one in Canada, manufacture and assemble approximately 70% of the products it sells. The Company's remaining products are produced, to its specifications, primarily in China. The Company's plants are highly integrated and produce electric motors, injection molded plastic components, screw machine parts, stampings and stoneware. The ability to manufacture the majority of its products in North America is one of the Company's fundamental strengths. Manufacturing capability gives the Company flexibility, bargaining power with third party vendors, quality control, and quick response time when high demand for a product results in customers placing 7 reorders with short delivery dates. The Company operates four manufacturing and assembly facilities in rural Missouri (Clinton, Sedalia, Sweet Springs and Warrensburg), near Kansas City, Missouri. A facility in Flowood, Mississippi produces the stoneware for the Company's Crock-Pot (REGISTERED TRADEMARK) slow cookers, Potpourri Crocks (REGISTERED TRADEMARK) and Crock Grills (REGISTERED TRADEMARK). Additionally, the Company operates two former Patton facilities in Indiana, a former Fasco facility in North Carolina and a Bionaire assembly operation in Lachine, Quebec. In the past five years, the Company has spent approximately $25 million to build a new distribution facility in Clinton, Missouri and to significantly upgrade manufacturing capabilities. Seasonality A significant percentage of the products sold by the Company are given as gifts and, as such, sell at larger volumes during the holiday season. Therefore, sales during the months of August through November are at a higher level than during the other months of the year. Additionally, the Company's working capital requirements, primarily inventories and receivables, peak during the fall. The Company meets these seasonal working capital needs through borrowings under its revolving credit facility. Five of the Company's product lines have sales with specific seasonal trends. These are space heaters and humidifiers which are sold primarily during the fall and winter, and ice cream freezers, pumps and fans which are sold primarily during the spring and summer. Competition The markets for the Company's products are mature and highly competitive. Competition is based upon price, access to retail shelf space, product enhancements, new product introductions, as well as marketing support and distribution systems. There has been a recent trend toward consolidation within the industry, most notably with the mergers of Sunbeam with Oster and Hamilton Beach with Proctor Silex, resulting in these companies, together with Black & Decker, each generating annual sales of small electric household appliances which are significantly higher than sales of the Company. Other significant competitors include Wayne Home Equipment, Masco, Nortek, Teledyne, Honeywell, Holmes, Duracraft, National Presto, Toastmaster, and West Bend. Smaller manufacturers compete with the Company on a limited product offering basis. A few European manufacturers, such as Braun, Group SEB and Moulinex have established niches in the small electric household appliance market, particularly in the high-end department store trade. 8 Trademarks and Patents The Company considers its various trademarks to be a valuable tool in the marketing of its products. Of particular importance to the Company are the Rival (REGISTERED TRADEMARK), Rival Select (TRADEMARK), Simer (REGISTERED TRADEMARK), Pollenex (REGISTERED TRADEMARK), Patton (REGISTERED TRADEMARK), Bionaire (REGISTERED TRADEMARK), White Mountain (REGISTERED TRADEMARK) and the Crock-Pot (REGISTERED TRADEMARK) trademarks. In the course of its operations, the Company files patent applications covering various aspects of the items produced. While the Company's mechanical and design patents in the aggregate are considered to be of importance to the Company, the overall business is not dependent upon any single patent or group of patents. Regulation The Company is subject to federal, state and local regulations concerning the environment, occupational safety and health, and consumer products safety. The Company has not experienced significant difficulty in complying with such regulations and compliance has not had a material adverse effect on the Company's business. All of the Company's electric-powered products are listed by Underwriters Laboratories, Inc. or the Canadian Underwriters Laboratories, Inc., which are independent, not-for-profit corporations engaged in the testing of products for compliance with certain public safety standards. Foreign Operations The Company markets and distributes its products in Canada through its wholly-owned subsidiary, Rival Manufacturing Company of Canada Ltd ("Rival-Canada"). Net sales, operating income and identifiable assets of Rival-Canada are as follows: Years ended June 30 ------------------------ 1996 1995 1994 ------ ------ ------ Net sales $6,944 $6,899 $6,968 Operating income (loss) 34 62 (363) Identifiable assets 3,282 2,612 2,449 As a result of the acquisition of Bionaire in April 1996, the Company now has a much stronger international presence. During calendar 1995, Bionaire had sales in Canada of approximately $15 million and produced an additional $10 million in international sales, primarily in Europe, through its wholly owned subsidiary in the Netherlands. Bionaire's contribution to the Company's business was not significant in fiscal 1996 and is not included in the above table. 9 Employees The Company has approximately 2,500 full-time associates including 240 salaried personnel, except during August through November when employment will likely increase by approximately 10%. Approximately 420 hourly associates at the Flowood, Mississippi plant are represented by a labor organization under a collective bargaining agreement which expires in December 1998. Additionally, approximately 175 hourly associates at the Bionaire assembly facility in Montreal are represented by a labor organization under a collective bargaining agreement which expires in June 1999. The Company considers its labor relations to be excellent and has experienced no work stoppage or labor dispute during the past ten years. Item 2. Properties Square Location Feet Present Use -------- ------- ----------- Kansas City, Missouri 32,000 General Offices Sedalia, Missouri 224,000 Manufacturing & assembly Clinton, Missouri 164,000 Manufacturing & assembly 279,000 Warehousing & distribution Sweet Springs, Missouri 125,000 Manufacturing, assembly & warehousing Warrensburg, Missouri 68,000 Manufacturing & assembly Flowood, Mississippi 142,000 Manufacturing New Haven, Indiana 302,000 Manufacturing & Distribution Peru, Indiana 172,000 Assembly & warehousing Fayetteville, North Carolina 282,500 Manufacturing & assembly 60,000 Warehousing & distribution Lachine, Quebec 128,000 Assembly, warehousing and distribution The Company owns the Clinton, Sweet Springs, Flowood, New Haven, Peru and Fayetteville plants and 157,000 square feet of the Sedalia plant. The Warrensburg plant and 67,000 square feet of the Sedalia plant are occupied under long-term leases which give the Company the option to purchase the relevant property at a nominal cost. The general offices are occupied under a lease through 2005. The Lachine, Quebec facility is leased through June 2000 with renewal options. Item 3. Legal Proceedings. The Company is party to various product liability lawsuits relating to its products and incidental to its business. The Company believes that many of the personal injury and damage claims brought against it arise from the misuse or misapplication of the Company's products and rarely involve manufacturing defects. In 10 such cases, the Company vigorously defends against such actions. Historically, product liability awards have rarely exceeded the Company's individual per occurrence self-insured retention. There can be no assurance, however, that the Company's future product liability experience will be consistent with its past experience. The Company believes that the ultimate conclusion of the various pending claims and lawsuits of the Company will not have a material adverse affect on the consolidated financial statements of the Company. Item 4. Submission of Matters to be a Vote of Security Holders. None. PART II Item 5. Market for the registrant's common equity and related stockholder matters. Incorporated herein by reference from the information provided under the caption "Common Stock Price Range" in the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1996, page 32. Item 6. Selected financial data. Incorporated herein by reference from the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1996, page 14. Item 7. Management's discussion and analysis of financial condition and results of operations. Incorporated herein by reference from the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1996, pages 15-19. Item 8. Financial statements and supplementary data. Incorporated herein by reference from the Company's Annual Report to Stockholders for the fiscal year ended June, 30, 1996, pages 20-31. Item 9. Changes in and disagreements with accountants on accounting and financial disclosure. None. 11 PART III Item 10. Directors and executive officers of the registrant. Item 11. Executive compensation. Item 12. Security ownership of certain beneficial owners and management. Item 13. Certain relationships and related transactions. Information incorporated into Items 10, 11, 12 and 13 above by reference from the information included under the captions entitled "Nominees for Election," "Executive Officers," "Executive Compensation," "Security Ownership of Certain Beneficial Owners and Management" and "Related Party Transaction" in the Company's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A with respect to its 1996 Annual Meeting of Stockholders. PART IV Item 14. Exhibits, financial statement schedules and reports on Form 8-K. a) The financial statements and schedules listed in the accompanying index to consolidated financial statements and financial statement schedules on page 13 are filed as part of this report. b) The exhibits listed in the accompanying index to exhibits are filed as part of this report. 12 THE RIVAL COMPANY AND SUBSIDIARIES Index to Consolidated Financial Statements and Financial Statement Schedules INDEX Page Reference ------------------------ Annual Report to Form 10-K Stockholders --------- ------------ Independent Auditors' Report 31 Financial Statements: Consolidated Balance Sheets--June 30, 1996 and 1995 20 Consolidated Statements of Earnings-- Years Ended June 30, 1996, 1995, and 1994 21 Consolidated Statements of Stockholders' Equity--Years Ended June 30, 1996, 1995, and 1994 22 Consolidated Statements of Cash Flows-- Years Ended June 30, 1996, 1995 and 1994 23 Notes to Consolidated Financial Statements 24-31 Financial Statement Schedule: Independent Auditors' Report on Financial Statement Schedule and Consent 14 Schedule VII - Valuation and Qualifying Accounts 15 13 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE AND CONSENT The Board of Directors The Rival Company: The audits referred to in our report dated August 2, 1996 included the related financial statement schedule as of June 30, 1996 and for each of the years in the three-year period ended June 30, 1996, included in the 1996 annual report on Form 10-K. This financial statement schedule is the responsibility of The Rival Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We consent to incorporation by reference in the registration statement (No. 33-69392) on Form S-8 of The Rival Company of the above report and our report dated August 2, 1996 relating to the consolidated balance sheets of The Rival Company and subsidiaries as of June 30, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended June 30, 1996, which report is incorporated by reference in the June 30, 1996 annual report on Form 10-K of The Rival Company. Kansas City, Missouri /s/ KPMG Peat Marwick, LLP -------------------------- September 9, 1996 KPMG Peat Marwick, LLP 14 SCHEDULE VII THE RIVAL COMPANY AND SUBSIDIARIES ______________ VALUATION AND QUALIFYING ACCOUNTS (amounts in thousands) Additions Additions Beginning Charged to from Deductions Ending Balance Expense Acquisitions (A) Balance ------- ------- ------------ ----- ------- Allowance for collection loss and discounts: Year ended 6-30-96 $1,909 $ 463 $ 547 $ 134 $2,785 Year ended 6-30-95 $1,693 $ 356 $ 351 $ 491 $1,909 Year ended 6-30-94 $1,752 $ 685 -- $ 744 $1,693 (A): Write-off of accounts and changes in discount allowances. 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. THE RIVAL COMPANY By: /s/ Thomas K. Manning ------------------------------- Chief Executive Officer September 9, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated below. Signature Title Date - - --------- ----- ---- /s/ Thomas K. Manning - - ------------------------- Thomas K. Manning Chairman of the Board of September 9, 1996 Directors, Chief Executive Officer (Principal Executive Officer) /s/ William L. Yager - - ------------------------- William L. Yager President, Chief Operating September 9, 1996 Officer and Director (Principal Financial Officer) /s/ Stanley D. Biggs - - ------------------------- Stanley D. Biggs Vice President, Chief Financial September 9, 1996 Officer (Principal Accounting Officer) /s/ William S. Endres - - ------------------------- William S. Endres Sr. V.P. Sales and Marketing September 9, 1996 and Director /s/ Darrel M. Sanders - - ------------------------- Darrel M. Sanders Sr. V.P. Operations and September 9, 1996 Director /s/ Jack J. Culberg - - ------------------------- Jack J. Culberg Director September 9, 1996 /s/ Todd Goodwin - - ------------------------- Todd Goodwin Director September 9, 1996 /s/ John E. Grimm, III - - ------------------------- John E. Grimm, III Director September 9, 1996 /s/ Lanny R. Julian - - ------------------------- Lanny R. Julian Director September 9, 1996 /s/ Noel Thomas Patton - - ------------------------- Noel Thomas Patton Director September 9, 1996 /s/ Beatrice B. Smith - - ------------------------- Beatrice B. Smith Director September 9, 1996 16 INDEX TO EXHIBITS Sequentially Exhibit Numbered Number Exhibit Page - - ------ ------- ---- 2 (a) Agreement of Sale, dated September 11, 1992 between the Rival Company and the Marley Company, relative to the acquisition by the Company of specified assets of Simer Pump (incorporated by reference to Exhibit 2 to Registrant's Form 8-K dated as of September 15, 1992). (b) Purchase Agreement by and between The Rival Company and Pollenex Corporation dated April 30, 1993 (incorporated by reference to Exhibit 1 to Registrant's Form 8-K dated as of April 30, 1993). (c) Purchase Agreement by and among Rival Acquisition Company, The Rival Company and Patton Electric Company, Inc., Giant Lion Trading, Ltd. and Noel Thomas Patton and Eve M. Patton dated April 21, 1995 (incorporated by reference to Exhibit 1 to Registrant's Form 8-K dated as of April 21, 1995). (d) Stock Purchase Agreement between H.S. Investments, Inc. as seller, and The Rival Company, as buyer as of December 29, 1995 (incorporated by reference to Exhibit 2 to Form 8-K dated as of January 2, 1996). (e) Offer to purchase all of the Common Shares of Bionaire Inc. (Offering Circular) dated March 5, 1995 (incorporated by reference to Exhibit 1 to Form 8-K dated as of April 2, 1996). 3 (a) Restated Certificate of Incorporation of The Rival Company, a Delaware corporation (the "Company") (incorporated by reference to Exhibit 3(a) to Registrant's Form 10-K for the year ended June 30, 1992). (b) Bylaws of the Company (incorporated by reference to Exhibit 3(b) to Registrant's Form 10-Q for the quarter ended December 31, 1994). 4 (a) Form of Certificate representing shares of Common Stock, par value $.01 per share (incorporated by reference to Exhibit 4(a) to Registrant's Registration Statement on Form S-1, Registration Number 33-46794 dated June 2, 1992 ("Registrant's S-1")). (b) Form of Certificate of Ownership and Merger of The Rival Company into Rival Manufacturing Company (incorporated by reference to Registrant's S-1). 10(a) Note Purchase Agreement for $50,000,000 Senior Unsecured Notes dated as of July 23, 1993 between the Company and the Purchasers listed therein (incorporated by reference to Registrant's Form 10-K for the year ended June 30, 1993). (b) Note Purchase Agreement for $50,000,000 Senior Unsecured Notes dated as of April 15, 1996 between the Company and The Purchasers listed therein (incorporated by reference to Registrant's Form 10-Q for the quarter ended March 31, 1996). (c) Credit Agreement for a $75,000,000 Revolving Credit Facility dated as of April 15, 1996 between the Company, the banks listed therein and, NationsBank of Texas, N.A. as agent (incorporated by reference to Registrant's Form 10-Q for the quarter ending March 31, 1996). 17 (d) ** The Company's 1986 Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10(a) to Registrant's S-1). (e) ** The Company's 1994 Stock Option Plan (incorporated by reference to Exhibit A to Registrant's Proxy Statement, dated September 23, 1994 for its 1994 Annual Meeting of Shareholders). (f) ** Rival Secular Trust Agreement (incorporated by reference to Exhibit 10(e) to Registrant's S-1). (g) ** Employment Agreements, dated as of February 1, 1989 between the Company and Thomas K. Manning, William S. Endres, Darrel Sanders and William L. Yager (incorporated by reference to Registrant's Form 10-K for the year ended June 30, 1993). (h) * Employment Agreement dated as of March 1, 1996 between the Company and Richard M. Bertelli. (i) * Description of The Rival Company, Management Incentive ** Compensation Plan. 11 * Statement regarding computation of earnings per share of the Company. 13 * Annual Report to Stockholders for fiscal year ended June 30, 1996 (except for those pages which are specifically incorporated herein by reference, the Company's Annual Report is not to be deemed filed as part of this report.) 21 * List of subsidiaries of the Company. 23 * Independent auditors' consent - - ------------------- * Filed herewith ** Management contract or compensation plan arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. __________________ The above exhibits may be obtained by Shareholders upon written request to the Office of the Secretary, 800 E. 101st Terrace, Kansas City, Missouri 64131. 18 EX-10.H 2 Exhibit 10(h) ------------- EMPLOYMENT AGREEMENT -------------------- This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of March 1, 1996, by and between THE RIVAL COMPANY, a Delaware corporation (the "Company"), and Richard M. Bertelli (the "Executive"). A. Executive is currently employed as the Vice President of the Company. B. The Company and Executive desire to continue such employment and to provide economic security to the Executive, on the terms hereinafter set forth, in the event such employment is terminated under certain circumstances. Accordingly, in consideration of the foregoing premises, and for other valuable consideration, the adequacy of which is hereby acknowledged, the Company and the Executive, intending to be legally bound, hereby agree as follows: 1. In the event that the Executive's employment is terminated by the Company other than for "just cause" (as defined in numerical paragraph 2 hereof) or Executive terminates his employment for stated "good cause" (as defined in numerical paragraph 3 hereof), the Company shall be obligated to pay Executive (or his estate if Executive shall have died after being discharged) six months severance pay, which shall equal such number of months multiplied by the Executive's Annual Base Salary, divided by 12. For purposes of this Agreement, Executive's Annual Base Salary shall equal the base salary paid to Executive by the Company during the one year period ending on the last day of the most recent pay period preceding the date of termination, provided that if Executive has been employed by the Company for a shorter period, the base salary for such shorter period shall be annualized. Such severance pay shall be paid to Executive (or his estate) in substantially equal monthly installments on the first day of each of the six months commencing with the month immediately following the month in which his employment with the Company is terminated. 2. The term "just cause", for purposes of termination of Executive's employment for "just cause", shall mean (a) the Executive's violation of any reasonable rule or regulation of the Board of Directors or the Executive's superior or the Chief Executive Officer of the Company that results in significant damage to the Company or which, after written notice to do so, Executive fails to make reasonable efforts to correct within a reasonable time, (b) any refusal by Executive to comply with a reasonable, direct order, (c) any wilful misconduct by Executive in the responsibilities reasonably assigned to him, (d) any refusal by Executive to perform his job as required to meet Company objectives or (e) the Executive's performing services for any other corporation or person which competes with the Company while he is employed by the Company and without the written approval of the Chief Executive Officer of the Company; provided, however, that there shall be a rebuttable presumption that any discharge of Executive by the Company within two (2) years after there has been a "change in control" (as defined in numerical paragraph 4 hereof) is a discharge other than for "just cause." 3. The term "good cause", for purposes of termination by Executive of Executive's employment for "good cause" shall mean: (a) any reduction in Executive's salary, benefits or annual bonus not substantially commensurate with reductions for other executive employees of the Company, (b) the involuntary relocation or proposed involuntary relocation of Executive outside the Kansas City and Clinton areas by the Company, (c) the assignment to Executive of services and responsibilities not approved by Executive which are not substantially commensurate with the executive and managerial services and responsibilities which he is then performing for the Company or (d) a good faith belief by Executive that Executive can no longer perform his duties for the Company because of actions taken by the Company. 4. For purposes of this Agreement, a "change in control" shall mean (a) the acquisition, directly or indirectly, by any "person" or "group" of "persons" (as the terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 and the rules thereunder) of beneficial ownership of securities of the Company or of securities of the Company's ultimate parent corporation representing 30% or more of the combined voting power of the then outstanding securities of such corporation, (b) any merger, consolidation or sale of all or a substantial part of the assets of the Company or (c) a change in the Board of Directors such that a majority of a Board of Directors of the Company or the Company's ultimate parent corporation ceases to consist of Continuing Directors ("Continuing Director " means any person who was a member of the Board of Directors of the Company or the ultimate parent corporation, as the case may be, as of the date hereof, and any person who subsequently becomes a member of such Board of Directors if such person's appointment, election or nomination for election to such Board of Directors is recommended or approved by a majority of the then Continuing Directors of such Board of Directors). 5. The Company acknowledges and agrees that Executive shall be entitled to receive all of the payments provided for herein regardless of any income which Executive may receive from other sources after the termination of his employment with the Company. 6. Nothing in this Agreement shall confer upon Executive the right to continue in the employ of the Company or any of its subsidiaries or, subject to the terms hereof, shall affect any right which the Company or any of its subsidiaries may have to terminate the employment of the Executive. No benefit provided herein is intended or shall be deemed to be granted to Executive in lieu of any benefits, rights or privileges to which may be entitled while he is an employee of the Company under any retirement, pension, insurance, hospitalization, stock option, stock purchase, incentive compensation or other plan of the Company which may now be in effect or which may hereafter be adopted, it being understood that Executive shall have the same rights and privileges to participate in such plans while employed by the Company as any other executive employee of the Company. 7. As consideration for the execution of this Agreement by the Company, Executive covenants and agrees as follows: (a) During the term of and at all times after the termination (whether by the Company or the Executive) of Executive's employment with the Company, Executive shall keep confidential and not disclose to any person, firm or corporation (other than the Company, a person designated in writing by the Company, or as may otherwise be required by law or reasonable business practice), the trade secrets or confidential information or knowledge relating to the business of the Company or its affiliates or subsidiaries, including, without limiting the generality of the foregoing: (i) the names of the Company's agents, suppliers and customers; (ii) the contractual arrangements between the Company and its agents, suppliers or customers; (iii) the financial details (including credit and discount terms) of the Company's relationship with its agents, suppliers or customers; (iv) the names of prospective customers and their requirements; (v) information concerning the Company's financial structure or operating results; (vi) information concerning all inventions, products, discoveries, improvements, processes, manufacturing, marketing and service methods or techniques, developments, ideas, concepts, designs, styles, specifications, knowhow, strategies and data, whether or not patentable or registerable under copyright or similar statues, owned by the Company; (vii) information concerning the remuneration paid by the Company to its employees; or (viii) any other matter which is not readily available to the public relating to the business of the Company. (b) All correspondence, notes, recordings, files, keys, computer programs (whether source code or object code) and other materials and reproductions thereof pertaining in any respect to the Company, its subsidiaries or affiliates or any of their respective businesses, shall be the property of and shall be delivered to and retained by the Company upon Executive's termination of employment with the Company. 8. Executive acknowledges that the provisions of numerical paragraph 7 hereof are reasonable and necessary to protect the legitimate interests of the Company and its subsidiaries and affiliates (such subsidiaries and affiliates, whether now in existence or coming into existence later during the term of this Employment Agreement, being third-party intended beneficiaries of numerical paragraph 7 of this Agreement) and that any violation by Executive of any provision of numerical paragraph 7 will cause irreparable injury to the Company, its subsidiaries and affiliates. Executive acknowledges that the Company, its subsidiaries and affiliates are entitled to appropriate injunctive relief in any court of competent jurisdiction to enforce their rights hereunder, in addition to any other rights available to them at law or in equity. 9. In the event Executive commences litigation to enforce his rights under this Agreement and prevails in such litigation, Executive shall be entitled to recover his costs and expenses, including reasonable attorneys' fees. 10. No delay or omission to exercise any right, power or remedy accruing under this Agreement shall impair any such right, power or remedy nor shall it be construed to be a waiver of any such right, power or remedy or of any similar right, power or remedy to which a party thereafter becomes entitled. Any waiver, permit, consent or approval of any kind or character under this Agreement, or any waiver of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. 11. If any part of this Agreement is held by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part by reason of any rule of law or public policy, such part shall be deemed to be severed from the remainder of this Agreement for the purpose only of the particular legal proceedings in question and all other covenants and provisions of this Agreement shall in every other respect continue in full force and effect and no covenant or provision shall be deemed dependent upon any other covenant or provision. 12. This Agreement shall inure to and be binding upon the parties hereto and their respective heirs, successors and assigns, including, without limitation, any person, partnership or corporation which may acquire all or substantially all of the Company's assets and business or with or into which the Company may be consolidated or merged, and this provision shall apply in the event of any subsequent merger, consolidation or transfer. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. COMPANY: THE RIVAL COMPANY By: ------------------------------- Thomas K. Manning President EXECUTIVE: ------------------------------------ Richard M. Bertelli Vice President of Sales EX-10.I 3 Exhibit 10(i) The Rival Company Management Incentive Compensation Plan Each year, under the Management Incentive Bonus Plan, the Committee establishes a goal relating to the Company's operating income that sets the minimum and maximum bonus pools that may be earned. No bonus is paid to the Chief Executive Officer, the President, the Chief Financial Officer or the Senior Vice Presidents if a minimum level of budgeted operating income is not achieved. The incentive pool is established as a percentage of operating income earned by the Company over the threshold. A majority of the incentive pool generated by reaching the target is distributed in cash ratably to designated executive officers and managers at year-end based on a weighing of positions and base salaries. The remaining portion of the incentive pool is distributed to outstanding performers within the eligible group based on the recommendation of the CEO to the Committee. The targeted and maximum bonuses payable to executive officers represent a significant portion of an executive's total compensation (25-30% of the total compensation derived from a combination of base salary, bonus and stock options). EX-11 4 Exhibit 11 THE RIVAL COMPANY AND SUBSIDIARIES Earnings Per Share (in thousands except per share data) Years Ended June 30 ------------------- Primary Earnings Per Share* 1996 1995 1994 - - -------------------------- -------- -------- -------- Net earnings $ 14,239 $ 13,985 $ 14,317 ======== ======== ======== Weighted average common and common equivalent shares outstanding 9,950 9,505 9,475 -------- -------- -------- Earnings per common and common equivalent shares $ 1.43 $ 1.47 $ 1.51 -------- -------- -------- Computation of weighted average common and common equivalent shares outstanding: Average common shares outstanding 9,725 9,312 9,248 Average number of options outstanding 557 433 367 Less treasury shares acquired with proceeds from exercise of options (332) (240) (140) -------- -------- -------- Weighted average common and common equivalent shares outstanding 9,950 9,505 9,475 ======== ======== ======== * Fully diluted earnings per share is equal to primary earnings per share for all periods presented. EX-13 5 Consolidated Statements of Earnings Data (In thousands, except per share amounts) Years ended June 30, 1996 1995 1994 1993 1992 - - ----------------------------------------------------------------------------- Net sales $313,864 $231,711 $229,233 $184,451 $163,516 Cost of sales 230,207 168,406 162,703 130,979 118,711 ------------------------------------------------ Gross profit 83,657 63,305 66,530 53,472 44,805 Selling, general and administrative expenses 51,258 34,908 37,885 30,243 25,716 Amortization of goodwill 1,735 1,327 1,233 1,109 1,098 ------------------------------------------------ Operating income 30,664 27,070 27,412 22,120 17,991 Interest expense 7,117 4,216 4,113 3,560 7,763 Other expenses 295 120 205 301 599 ------------------------------------------------ Earnings before income taxes and extraordinary item 23,252 22,734 23,094 18,259 9,629 Income tax expense 9,013 8,749 8,777 7,023 3,953 ------------------------------------------------ Earnings before extraordinary item 14,239 13,985 14,317 11,236 5,676 Extraordinary loss, extinguishment of debt, net - - - 510 1,750 ------------------------------------------------ Net earnings $ 14,239 $ 13,985 $ 14,317 $ 10,726 $ 3,926 ================================================ Net earnings attributable to common stock $ 14,239 $ 13,985 $ 14,317 $ 10,726 $ 2,989 ================================================ Net earnings per common share $ 1.43 $ 1.47 $ 1.51 $ 1.14 $ 0.51 ================================================ Dividends per common share $ 0.20 $ 0.16 $ 0.12 $ - $ - ================================================ Weighted average common and common equivalent shares outstanding (1) 9,950 9,505 9,475 9,417 5,905 ================================================ (1) Stock options are included as common stock equivalents. Consolidated Balance Sheet Data (In thousands, except per share amounts) At June 30, 1996 1995 1994 1993 1992 ------------------------------------------------ Working capital $ 91,396 $ 60,293 $ 60,063 $ 52,225 $ 22,912 Total assets 288,251 204,368 151,467 139,666 106,443 Long-term debt (less current portion) 88,000 42,000 46,000 50,000 25,000 Stockholders' equity 106,148 93,805 76,104 62,085 51,415 * The tables above should be read in conjunction with the Company's consolidated financial statements and notes, which appear herein on pages 20-30, inclusive. Page 14 Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated Statements of Earnings Data (Expressed as a percentage of sales) Years ended June 30, 1996 1995 1994 ------------------------ Net sales 100.0% 100.0% 100.0% Cost of sales 73.3 72.7 71.0 ----------------------- Gross profit 26.7 27.3 29.0 Selling, general and administrative expenses 16.3 15.0 16.5 Amortization of goodwill 0.6 0.6 0.5 ----------------------- Operating income 9.8 11.7 12.0 Interest expense 2.3 1.8 1.8 Other expenses 0.1 0.1 0.1 ----------------------- Earnings before income taxes 7.4 9.8 10.1 Income tax expense 2.9 3.8 3.9 ----------------------- Net earnings 4.5% 6.0% 6.2% ======================= Net Sales by Product Category ($ in millions) The Company's sales generally fall into four product categories: * Kitchen heating appliances such as Crock Pot (REGISTERED TRADEMARK) slow cookers, steamers, indoor grills and toasters; * Kitchen motor driven appliances such as can openers, slicers, mixers, food processors and blenders; * Other electric appliances such as space heaters, fans, simmering potpourri cookers, household ventilation, ice cream freezers, air cleaners, humidifiers, door chimes and massagers; and * Water products such as sump, utility and well pumps, shower heads and water filtration devices. (Pie chart) 1994 Net Sales ($ in millions) - - ------------------------------------------- Kitchen Heating Appliances $ 96.3 Other Electric Appliances $ 49.4 Water Products $ 45.0 Kitchen Motor-Driven Appliances $ 38.5 ------ $229.2 ====== (Pie chart) 1995 Net Sales ($ in millions) - - ------------------------------------------- Kitchen Heating Appliances $ 98.3 Other Electric Appliances $ 63.1 Water Products $ 31.3 Kitchen Motor-Driven Appliances $ 39.0 ------ $231.7 ====== (Pie chart) 1996 Net Sales ($ in millions) - - ------------------------------------------- Kitchen Heating Appliances $116.4 Other Electric Appliances $128.7 Water Products $ 34.1 Kitchen Motor-Driven Appliances $ 34.7 ------ $313.9 ====== Page 15 Management's Discussion and Analysis of Financial Condition and Results of Operations General The Company's sales grew from $231.7 million in fiscal 1995 to $313.9 million in fiscal 1996. Much of this growth was the result of three acquisitions: * Patton Electric Company ("Patton") which manufactures fans and space heaters for household and industrial use was acquired in April 1995. Prior to the acquisition, Patton's annual sales were approximately $40.0 million. * Fasco Consumer Products, Inc. ("Fasco") which manufactures an assortment of products including household ventilation, ceiling fans, door chimes and heaters was acquired in January 1996. Fasco generates annual sales of approximately $40.0 million in the home center, building supply and industrial distribution channels. * Bionaire, Inc. ("Bionaire") which assembles and sells air purifiers and humidifiers for household use was acquired in April, 1996. Bionaire has annual sales of approximately $57.0 million with retail distribution in the U.S., Canada and Europe. Together, Patton, Fasco and Bionaire contributed $72.5 million to fiscal 1996 consolidated sales. Patton contributed $10.9 million to fiscal 1995 consolidated sales. In addition to sales growth through these acquisitions, the Company's other products grew by $20.6 million (9%) during fiscal 1996. The majority of this increase was in kitchen heating appliances which increased by $18.7 million. The vast majority of the Company's sales are in product lines which are relatively mature and provide a stable base of revenues. Future growth is expected to be generated primarily from 1) the introduction of new products and product lines under each of the Company's brand names, 2) expansion and enhancement of the customer base and distribution for Patton, Simer and Fasco products, 3) future acquisitions and 4) increased sales through international markets. Fiscal 1996 compared to Fiscal 1995 Net Sales Net sales increased $82.2 million to $313.9 million for the year ended June 30, 1996 ("fiscal 1996") compared to $231.7 million for the year ended June 30, 1995 ("fiscal 1995"). The majority ($61.6 million) of the $82.2 million increase reflected the sales contributions of Patton, Fasco and Bionaire, companies acquired between April 1995 and April 1996. Excluding these acquired businesses, sales increased by $20.6 million (9%), primarily from an $18.7 million increase in kitchen heating appliance sales. A modest price increase combined with higher unit sales, especially of toasters and Crock Pot (REGISTERED TRADEMARK) slow cookers, contributed to the sales growth. Gross Profit Gross profit was $83.7 million (26.7% of net sales) in fiscal 1996 compared to $63.3 million (27.3% of net sales) in fiscal 1995. The decline in the gross margin as a percentage of sales was the result of low margins on sales of Patton products caused by the high cost of component inventories purchased in the April 1995 acquisition, and unfavorable variances resulting from failure of overseas suppliers to deliver components. (Bar chart) Net Sales (Millions of Dollars) - - -------------------------------------- 1992 $163.5 1993 $184.5 1994 $229.2 1995 $231.7 1996 $313.9 (Bar chart) Operating Income (Millions of Dollars) - - -------------------------------------- 1992 $ 18.0 1993 $ 22.1 1994 $ 27.4 1995 $ 27.1 1996 $ 30.7 Page 16 Selling, General and Administrative Expenses Selling, general and administrative expenses totaled $51.3 million (16.3% of net sales) in fiscal 1996 compared to $34.9 million (15.0% of net sales) in fiscal 1995. Selling expenses increased as a percentage of net sales from 11.2% to 12.7%. The higher selling expense percentage was primarily the result of the operations of Fasco and Bionaire. Excluding these businesses, selling expenses were 11.6% as compared to 11.2% in the prior year with the increase being the result of incremental spending on print and television advertising to promote the Crock Pot (REGISTERED TRADEMARK) slow cooker. Selling expenses for Fasco and Bionaire totaled $5.8 million (24.3% of net sales). These expenses were especially high due to the seasonality of Bionaire sales (Bionaire was acquired in the fourth fiscal quarter and less than 10% of annual volume is shipped during such quarter) and the incomplete integration of Bionaire and Fasco businesses into the consolidated entity. General and administrative expenses were $11.4 million in fiscal 1996 compared to $8.9 million in 1995. The increase was generally required to support the company's growth. General and administrative expenses as a percentage of net sales declined from 3.8% to 3.6%. Interest Expense Interest expense was $7.1 million in fiscal 1996 compared to $4.2 million in fiscal 1995. Total average borrowings increased from $66 million to $106 million due to the aforementioned acquisitions. The average interest rate increased from 6.1% to 6.7% as a result of higher interest rates on the revolving credit facility and the issuance of 10 year notes in April 1996 at an interest rate of 7.21%. Income Taxes Effective income tax rates were 38.8% in fiscal 1996 compared to 38.5% in fiscal 1995. The statutory rate was 35% in each year. The difference between the statutory rate and the effective rate is primarily due to nondeductible amortization of goodwill recorded as a result of the 1986 acquisition of the Company, provisions for state income taxes and differences between the rate of taxation between the Company's U.S. and international operations. Net Earnings Net earnings were $14.2 million ($1.43 per share) in fiscal 1996 compared to $14.0 million ($1.47 per share) in fiscal 1995. The decrease in net earnings per share reflects additional shares issued by the Company in conjunction with the acquisition of Patton. Fiscal 1995 compared to Fiscal 1994 Net Sales Net sales were $231.7 million for the year ended June 30, 1995 ("fiscal 1995") compared to $229.2 million for the year ended June 30, 1994 ("fiscal 1994"). Sales of kitchen heating appliances and kitchen motor-driven appliances increased slightly despite a combination of slow retail sales and efforts by retailers to reduce their inventories during the third and fourth fiscal quarters. Sales of other electric appliances increased $13.7 million due to the Patton acquisition which contributed $10.9 million to the fourth quarter sales together with higher sales of Pollenex air cleaners. Sales of water products declined $13.7 million due primarily to lower sales of Simer pumps which resulted from dry weather in key midwestern markets, especially when compared to unusually heavy rainfall during fiscal 1994. (Bar chart) Interest Expense (Millions of Dollars) - - -------------------------------------- 1992 $ 7.8 1993 $ 3.6 1994 $ 4.1 1995 $ 4.2 1996 $ 7.1 (Bar chart) Stockholders' Equity (Millions of Dollars) - - -------------------------------------- 1992 $ 51.4 1993 $ 62.1 1994 $ 76.1 1995 $ 93.8 1996 $106.1 Page 17 Gross Profit Gross profit was $63.3 million (27.3% of net sales) in fiscal 1995 compared to $66.5 million (29.0% of net sales) in fiscal 1994. The decline in gross margins was primarily the result of increasing raw material costs. Substantially all significant raw materials: plastics, aluminum, steel and cardboard increased dramatically throughout fiscal 1995. A price increase implemented in January 1995 partially offset these cost increases. Retailers and consumers remain extremely price conscious which has made it difficult for the Company as well as others in the industry to increase prices sufficiently to maintain margins. Selling, General and Administrative Expense Selling, general and administrative expenses totaled $34.9 million (15.0% of net sales) in fiscal 1995 compared to $37.9 million (16.5% of net sales) in fiscal 1994. Selling expenses decreased as a percentage of sales from 12.1% to 11.2%. Advertising expenses were lower by $1.1 million (.5% of sales) due to utilizing less regional television advertising as well as improved control over cooperative advertising with the Company's retail customers. Selling expenses in fiscal 1994 also included non-recurring costs related to the post- acquisition Pollenex transition as well as significant expenditures for Rival Select (TRADEMARK) packaging design. General and administrative expenses were $8.9 million in fiscal 1995 compared to $10.2 million in fiscal 1994. Legal and professional expenses declined as fiscal 1994 included costs related to a secondary stock offering and the completion of an EPA clean-up in Mississippi. The management incentive bonus accrual was also lower in fiscal 1995. Interest Expense Interest expense was $4.2 million in fiscal 1995 compared to $4.1 million in fiscal 1994. Total average borrowings decreased slightly from $65.5 million to $63.8 million. This decrease in borrowings was more than offset by an increase in the average interest rate from 6.1% to 6.5%. Income Taxes Effective income tax rates were 38.5% in fiscal 1995 compared to 38.0% in fiscal 1994. The statutory rate was 35% in each year. The difference between the statutory rate and the effective rate is primarily due to nondeductible amortization of goodwill recorded as a result of the 1986 acquisition of the Company and provisions for state income taxes. The increase in the effective income tax rate from 1994 to 1995 is the result of legislation increasing Missouri corporate income taxes. Net Earnings Net earnings were $14.0 million ($1.47 per share) in fiscal 1995 compared to $14.3 million ($1.51 per share) in fiscal 1994. The decrease in net earnings resulted from lower gross margins as a percentage of sales. The Company was, however, able to offset much of the gross margin decline by reducing selling, general and administrative costs by $3.0 million (from 16.5% of sales to 15.0% of sales). Liquidity & Capital Resources The Company generated earnings plus depreciation and amortization of $22.5 million in fiscal 1996, $20.6 million in fiscal 1995 and $21.1 million in fiscal 1994. In recent years, the Company has used its operating cash flows to make significant investments in its business as evidenced by the $75.2 million spent on four acquisitions and the investment of $16.6 million in plant and equipment during the three years ended June 30, 1996. Cash provided by operating activities was $3.4 million in fiscal 1996, $9.2 million in fiscal 1995 (Bar chart) Net Earnings (Millions of Dollars) - - -------------------------------------- 1992 $ 3.9 1993 $ 10.7 1994 $ 14.3 1995 $ 14.0 1996 $ 14.2 (Bar chart) Dividends Per Share - - -------------------------------------- 1992 $ 0.0 1993 $ 0.0 1994 $ 0.12 1995 $ 0.16 1996 $ 0.20 Page 18 and $14.9 million in fiscal 1994. The amount of net cash provided by operating activities can fluctuate significantly as a result of changes in accounts receivable and inventory balances. During fiscal 1996, strong fourth quarter sales resulted in a significant increase in accounts receivable. Investing activities have resulted in a net use of cash during each of the past three fiscal years due to expenditures for property, plant and equipment together with acquisitions. Capital expenditures were $5.9 million in fiscal 1996, $4.9 million in fiscal 1995 and $5.9 million in fiscal 1994. Cash flows from financing activities in fiscal 1996 consisted primarily of $50 million borrowed in a private placement under a ten year, 7.21% unsecured note purchase agreement. Additionally, the Company had a net increase in borrowings under its working capital loans of $7.8 million during fiscal 1996. During fiscal 1994, $50 million was received from the sale of unsecured notes with a 6.42% fixed rate in a private placement. The majority of the proceeds from the 1994 transaction was used to retire term loans under a previous bank credit agreement. The Company's operations require significant amounts of working capital, particularly during the fall of each year. Sales are on terms which generally range from 30 days to 75 days, resulting in substantial accounts receivable balances. Due to the seasonal nature of the business, the Company builds inventory levels during the spring and summer in anticipation of a heavy August through November selling season for Rival, Pollenex and Bionaire products. Historically, inventory levels peak in August. The Company relies on revolving credit loans to finance these work-ing capital require- ments. As of June 30, 1996, the Company had $92 million in long term debt (including $4 million current portion) and $85 million in revolving loan commitments. Revolving credit loans outstanding were $51.9 million as of such date. The long term debt requires periodic principal payments including $4.0 million for each of the next two years and has a final maturity in 2008. The revolving credit facilities include a $75 million U.S. bank line and a Canadian facility for the Canadian dollar equivalent of U.S. $10.0 million. The U.S. revolving credit facility expires in June 1999 and currently bears interest at a floating rate of LIBOR plus .75%. In addition, the Company is required to pay a fee of .25% on the unused portion of the commitment. The term notes and the revolving credit loans include financial covenants regarding minimum net worth, minimum fixed charge coverage ratios and maximum leverage ratios. The borrowings under the U.S. revolving credit facility are required to be $45 million or less for a period of 45 consecutive days each year. No assets of the Company are pledged to secure any indebtedness. Management believes that cash generated from operations, together with the revolving loan commitments will be sufficient to meet its cash requirements for the foreseeable future. Inflation The Company believes that its business is not affected by inflation, except to the extent the economy in general is affected thereby. (Bar chart) Total Assets (Millions of Dollars) - - -------------------------------------- 1992 $106.4 1993 $139.7 1994 $151.5 1995 $204.4 1996 $288.3 (Bar chart) Working Capital (Millions of Dollars) - - -------------------------------------- 1992 $ 22.9 1993 $ 52.2 1994 $ 60.1 1995 $ 60.3 1996 $ 91.4 (Bar chart) Long-Term Debt (Millions of Dollars) - - -------------------------------------- 1992 $ 25.0 1993 $ 50.0 1994 $ 46.0 1995 $ 42.0 1996 $ 88.0 Page 19 Consolidated Balance Sheets (In thousands) June 30, 1996 1995 - - ----------------------------------------------------------------------------- Assets Current assets: Cash $ 1,503 $ 193 Accounts receivable 74,103 43,492 Inventories 102,030 81,104 Deferred income tax charges 1,602 860 Prepaid expenses 2,142 835 ------------------ Total current assets 181,380 126,484 Property, plant and equipment, net 40,345 27,072 Goodwill 60,086 48,186 Other assets 6,440 2,626 ------------------ $288,251 $204,368 ================== Liabilities and Stockholders' Equity Current liabilities: Notes payable to bank $ 51,896 $ 37,627 Current portion of long-term debt 4,000 4,000 Trade accounts payable 20,354 14,972 Accrued interest 2,232 1,488 Income taxes payable 197 577 Other payables and accrued expenses 11,305 7,527 ------------------ Total current liabilities 89,984 66,191 Long-term debt, less current portion 88,000 42,000 Deferred income taxes and other liabilities 4,119 2,372 Stockholders' equity: Common stock, $0.01 par value. Authorized 15,000,000 shares; issued, 9,755,064 in 1996 and 9,740,330 in 1995; outstanding, 9,729,667 in 1996 and 9,714,933 in 1995 97 97 Paid-in capital 45,488 45,366 Foreign currency translation (468) (395) Treasury stock, at cost (310) (310) Retained earnings 61,341 49,047 ------------------ Total stockholders' equity 106,148 93,805 Commitments and contingencies ------------------ $288,251 $204,368 ================== See accompanying notes to consolidated financial statements. Page 20 Consolidated Statements of Earnings (In thousands, except per share amounts) Years ended June 30, 1996 1995 1994 - - ----------------------------------------------------------------------------- Net sales $313,864 $231,711 $229,233 Cost of sales 230,207 168,406 162,703 ---------------------------- Gross profit 83,657 63,305 66,530 Selling expenses 39,884 26,019 27,722 General and administrative expenses 11,374 8,889 10,163 Amortization of goodwill 1,735 1,327 1,233 ---------------------------- Operating income 30,664 27,070 27,412 ---------------------------- Other expenses: Interest expense 7,117 4,216 4,113 Miscellaneous, net 295 120 205 ---------------------------- Total other expenses 7,412 4,336 4,318 ---------------------------- Earnings before income taxes 23,252 22,734 23,094 Income tax expense 9,013 8,749 8,777 ---------------------------- Net earnings $ 14,239 $ 13,985 $ 14,317 ============================ Weighted average common and common equivalent shares outstanding 9,950 9,505 9,475 ============================ Net earnings per common share $ 1.43 $ 1.47 $ 1.51 ============================ See accompanying notes to consolidated financial statements. Page 21 Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts) Foreign Total Common Paid-In Currency Treasury Retained Stockholders' Stock Capital Translation Stock Earnings Equity - - -------------------------------------------------------------------------------------------------- Balance June 30, 1993 $91 $39,188 $(235) $(310) $23,351 $ 62,085 Common stock issued - 160,980 shares 2 28 - - - 30 Foreign currency translation adjustments - - (174) - - (174) Compensation expense from issuance of non-qualified stock options, net of income tax benefit of $55 - 95 - - - 95 Income tax benefit recognized upon exercise of non-qualified stock options - 865 - - - 865 Dividends paid - - - - (1,114) (1,114) Net earnings - - - - 14,317 14,317 ------------------------------------------------------------ Balance June 30, 1994 93 40,176 (409) (310) 36,554 76,104 Common stock issued - 9,370 shares - 43 - - - 43 Foreign currency translation adjustments - - 14 - - 14 Compensation expense from issuance of non-qualified stock options, net of income tax benefit of $18 - 32 - - - 32 Income tax benefit recognized upon exercise of non-qualified stock options - 43 - - - 43 Purchase of common stock for treasury - 427,100 shares - - - (6,824) - (6,824) Common stock issued relative to the acquisition of a business - 850,000 shares 4 5,072 - 6,824 - 11,900 Dividends paid - - - - (1,492) (1,492) Net earnings - - - - 13,985 13,985 ------------------------------------------------------------ Balance June 30, 1995 97 45,366 (395) (310) 49,047 93,805 Common stock issued - 14,734 shares - 30 - - - 30 Foreign currency translation adjustments - - (73) - - (73) Income tax benefit recognized upon exercise of non-qualified stock options - 92 - - - 92 Dividends paid - - - - (1,945) (1,945) Net earnings - - - - 14,239 14,239 ------------------------------------------------------------ Balance June 30, 1996 $97 $45,488 $(468) $(310) $61,341 $106,148 ============================================================ See accompanying notes to consolidated financial statements.
Page 22 Consolidated Statements of Cash Flows (In thousands) Years ended June 30, 1996 1995 1994 - - ----------------------------------------------------------------------------- Cash Flows from Operating Activities: Net earnings $14,239 $13,985 $14,317 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 8,293 6,638 6,828 Provision for losses on accounts receivable 463 356 685 Deferred income taxes (402) 260 (284) Issuance and exercise of non-qualified stock options 92 75 960 Other - - (287) Changes in assets and liabilities, net of acquisitions: Accounts receivable (15,101) (2,610) (4,857) Inventories (3,727) (5,435) (5,307) Prepaid expenses 455 248 432 Income taxes (380) 171 (717) Accounts payable and accruals (567) (4,537) 3,092 ------------------------- Total adjustments (10,874) (4,834) 545 ------------------------- Net cash provided by operating activities 3,365 9,151 14,862 ------------------------- Cash Flows from Investing Activities: Capital expenditures (5,873) (4,905) (5,867) Acquisition of businesses (47,670) (25,269) (2,265) Other (278) 329 (200) ------------------------- Net cash used in investing activities (53,821) (29,845) (8,332) ------------------------- Cash Flows from Financing Activities: Borrowings under working capital loans 122,854 85,627 64,900 Repayment of working capital loans (115,100) (52,600) (78,300) Borrowings under term loan agreements 50,000 - 50,000 Repayment of long-term debt (4,000) (4,000) (42,000) Net proceeds from issuance of common stock 30 43 30 Dividends paid (1,945) (1,492) (1,114) Purchase of common stock for treasury - (6,824) - ------------------------- Net cash provided (used) by financing activities 51,839 20,754 (6,484) ------------------------- Effect of Exchange Rate Changes on Cash (73) 14 (174) ------------------------- Net Increase (Decrease) in Cash 1,310 74 (128) Cash at Beginning of Period 193 119 247 ------------------------- Cash at End of Period $ 1,503 $ 193 $ 119 ========================= See accompanying notes to consolidated financial statements. Page 23 Notes to Consolidated Financial Statements (in thousands, except per share data) 1. Summary of Significant Accounting Policies Operations of The Rival Company and its Subsidiaries The Rival Company and its subsidiaries ("the Company") design, manufacture and market small household appliances, personal care appliances, commercial and industrial fans, ventilation equipment as well as sump, well and utility pumps. The Company sells its products to retail and industrial customers, primarily in the U.S. and Canada. The Company's raw materials are readily available, and the Company is not dependent on any small group of suppliers. Principles of Consolidation The Consolidated Financial Statements include the accounts of The Rival Company and its direct and indirect wholly-owned subsidiaries: Bionaire Inc. ("Bionaire - Canada"), Bionaire Corporation ("Bionaire - U.S."), Bionaire International B.V. ("Bionaire - Europe"), Fasco Consumer Products, Inc. ("Fasco"), Pollenex Corporation ("Pollenex"), Patton Electric Company, Inc. ("Patton"), Patton Electric (Hong Kong) Limited ("PEHK"), Rival Manufacturing Company of Canada, Ltd. ("Rival-Canada") and Waverly Products Company, Ltd. All significant intercompany account balances and transactions have been eliminated in consolidation. Inventories Approximately 45% of the Company's inventories are stated at the lower of LIFO (last-in, first-out method) cost or market at June 30, 1996 (55% at June 30, 1995). The balance of the inventories is stated at the lower of FIFO (first- in, first-out) cost or market. Depreciation Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful lives of the assets which range from 3 to 10 years on furniture and fixtures as well as machinery and equipment and 10 to 40 years on buildings and improvements. Goodwill The excess of the purchase price paid in the 1986 acquisition of the Company over the estimated fair value of the net assets acquired (goodwill) is being amortized on a straight-line basis over a period of forty years. The goodwill resulting from subsequent acquisitions is being amortized on a straight-line basis over periods ranging from 15 to 30 years. The Company assesses the recoverability of goodwill by determining whether the amortization of the goodwill balance over its remaining life can be recovered through undiscounted future operating cash flows. Goodwill is reflected in the accompanying Consolidated Balance Sheets net of accumulated amortization of $12,220,249 and $10,485,000 at June 30, 1996 and 1995, respectively. Other Assets Other assets include non-compete agreements with an aggregate unamortized balance of $4.2 million. Such agreements are being amortized over their contractual terms which range from three to eight years. Income Taxes The Company and its domestic subsidiaries file a consolidated federal income tax return. The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. Research and Development Research and development costs are expensed when incurred. Such costs were $3,136,000 in 1996, $2,502,000 in 1995 and $1,847,000 in 1994. Self-insurance Rival maintains a self-insurance program against general and product liability claims, as well as medical claims and workers' compensation claims, with excess coverage above the Company's self-insured retention. Provisions for such claims are accrued based upon the Company's estimate of its aggregate liability. The Company does not provide any postretirement benefits other than pensions. Net Sales The Company recognizes revenue at the time products are shipped to its customers. Sales to one of the Company's customers were 26%, 28% and 27% of consolidated net sales for the years ended June 30, 1996, 1995 and 1994, respectively. Page 24 The Company's customer base consists primarily of retailers and distributors who sell to retailers throughout the United States and Canada. As such, a significant concentration of the Company's business activity is with entities whose ability to meet their obligations with the Company is dependent upon prevailing economic conditions within the retail industry. Foreign Currency Translation Assets and liabilities in foreign currencies are translated into dollars at the rates prevailing at the balance sheet date. Revenues and expenses are translated at average rates for the year. The net exchange differences resulting from these translations are reported in stockholders' equity, net of tax effects. Fair Value of Financial Instruments The carrying amount of cash, accounts receivable, notes payable to bank and trade accounts payable approximates fair value because of the short maturity of these instruments. The fair value of the Company's long-term debt ($89.8 million at June 30, 1996) was estimated using current interest rates for similar debt. The carrying amount of long-term debt at June 30, 1996 was $92.0 million. The fair value of the Company's interest rate swap agreement ($.5 million at June 30, 1996) represents the estimated amount the Company would pay to settle the swap agreement. Net Earnings per Common Share Net earnings per common share is computed based upon the weighted average number of common shares and dilutive common equivalent shares outstanding. Common stock options, which are common stock equivalents, have a dilutive effect on net earnings per common share in all periods and are therefore included in the computation of net earnings per common share. Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those amounts. 2. Acquisitions On January 2, 1996, the Company acquired 100% of the Common Stock of Fasco Consumer Products, Inc. ("Fasco"), a Fayetteville, North Carolina manufacturer of heating, ventilating and other convenience products that are distributed through wholesale and retail markets with annual sales of approximately $40 million. On April 3, 1996, the Company, through a wholly-owned Canadian subsidiary, completed the acquisition of Bionaire, Inc. ("Bionaire"). Bionaire, which had annual sales of approximately $57 million and is headquartered in Lachine, Quebec, assembles and markets air purifiers, humidifiers and related accessories such as replacement filters. The Company paid $23.5 million in cash for the stock of Fasco together with a non-compete agreement from the seller and its affiliates. The stock of Bionaire was acquired for $25 million cash. The acquisitions were accounted for as purchases and, accordingly, the purchase prices were allocated to the assets acquired and the liabilities assumed based upon their respective fair values. The purchase prices and the allocation of such amounts to assets acquired and liabilities assumed are summarized as follows (in thousands): -------------------------------------------------------------------------- Cash paid for Fasco $23,532 Cash paid for Bionaire 24,993 Acquisition expenses incurred 675 ------- $49,200 ======= Cash $ 1,530 Inventory 17,199 Accounts receivable 15,973 Property, plant and equipment 13,153 Prepaid expenses 1,762 Non-compete agreement 4,000 Goodwill 13,635 Liabilities assumed (18,052) ------- $49,200 ======= Page 25 2. Acquisitions, continued In April 1995, the Company acquired substantially all of the assets of Patton Electric Company, Inc. ("Patton") together with certain assets of its affiliated companies. Patton is a manufacturer of fans and space heaters for consumer and industrial use which had annual sales of approximately $40 million at the time of acquisition. The Company paid approximately $25 million in cash, issued 850,000 shares of its common stock, which were valued at $11.9 million, and assumed certain liabilities of Patton. The consolidated operating results of the Company for the fiscal years ended June 30, 1996 and 1995 on a proforma basis as though the Patton, Fasco and Bionaire acquisitions had occurred on July 1, 1994 would be as follows (in thousands, except per share amounts) (unaudited): 1996 1995 -------------------------------------------------------------------------- Revenues $383,646 $363,045 Operating income 35,310 37,185 Net earnings 14,995 17,770 Earnings per share $ 1.51 $ 1.74 Weighted average common and common equivalent shares outstanding 9,950 10,190 The proforma results of operations are not necessarily indicative of the actual operating results that would have occurred had the acquisitions been consummated on July 1, 1994 or of future operating results on a combined basis. The operating results of Patton, Fasco and Bionaire have been included in the consolidated results of the Company since the date of their respective acquisitions. During fiscal 1995, Patton operations contributed $10.9 million in net sales. Patton, Fasco and Bionaire contributed a combined $72.5 million in net sales to the fiscal 1996 consolidated results. 3. Accounts Receivable Accounts receivable consist of (in thousands): at June 30, 1996 1995 -------------------------------------------------------------------------- Trade $76,258 $45,154 Other 630 247 ----------------- 76,888 45,401 Less allowance for collection losses and discounts (2,785) (1,909) ----------------- $74,103 $43,492 ================= 4. Inventories Inventories consist of (in thousands): at June 30, 1996 1995 -------------------------------------------------------------------------- Raw materials $ 37,442 $ 33,221 Work in process 5,028 1,741 Finished goods 64,103 49,924 ------------------- 106,573 84,886 Valuation to lifo (4,543) (3,782) ------------------- $102,030 $ 81,104 =================== If LIFO inventories had been stated at the lower of FIFO cost or market, earnings before income taxes would have been $761,000, $544,000 and $223,000 higher for the years ended June 30, 1996, 1995 and 1994, respectively. Page 26 5. Property, Plant and Equipment Property, plant and equipment is summarized as follows (in thousands): at June 30, 1996 1995 -------------------------------------------------------------------------- Land $ 958 $ 633 Buildings and improvements 19,601 14,432 Machinery and equipment 44,247 30,184 Furniture and fixtures 5,248 3,411 ----------------- 70,054 48,660 Less accumulated depreciation (29,709) (21,588) ----------------- $40,345 $27,072 ================= 6. Notes Payable and Long-Term Debt On April 15, 1996, the Company entered into a $75 million unsecured revolving line of credit with a group of banks (the "Revolving Credit Facility"). Borrowings under the Revolving Credit Facility bear interest at floating rates determined at the Company's option to be LIBOR plus .75% or prime. In addition, the Company is required to pay a fee of .25% per annum on the unused portion of the commitment. At June 30, 1996, $43.5 million was outstanding under the Revolving Credit Facility. Bionaire also has a revolving credit facility through a Canadian bank for the Canadian Dollar equivalent of U.S. $10 million. As of June 30, 1996, U.S. $8.4 million was outstanding under the credit line. On April 19, 1996, the Company sold $50 million in unsecured notes in a private placement. The notes bear interest at a rate of 7.21%, and have a final maturity in 2008. In conjunction with the sale of these notes, the Company entered into a twelve year interest rate swap transaction with Bank of America, N.A. in the notional amount of $25 million. The effect of the swap transaction was to convert the interest payment stream on $25 million of the notes to a variable rate which is approximately 0.45% above the prevailing six month LIBOR rate. Income or expense associated with the interest rate swap agreement is recognized on the accrual basis as an adjustment to interest expense. On July 23, 1993, the Company sold $50 million in unsecured notes in a private placement. These notes bear interest at a per annum rate of 6.42% which is paid semiannually and have a final maturity in 2003. The balance outstanding on June 30, 1996 was $42 million. Installment payments on the long-term debt for the next five fiscal years are as follows: 1997, $4,000,000; 1998, $4,000,000; 1999, $6,000,000; 2000, $7,000,000; 2001, $7,000,000. The unsecured notes and the Revolving Credit Facility include financial covenants regarding minimum net worth, minimum fixed charge coverage ratio and maximum leverage ratios. At June 30, 1996, the Company had $18.0 million in unrestricted retained earnings available for future dividends. Average borrowings, maximum borrowings and the year-end interest rate (exclusive of commitment fees) on working capital loans under the Revolving Credit Facility were as follows (in thousands): Years ended June 30, 1996 1995 1994 -------------------------------------------------------------------------- Average borrowings $53,047 $15,700 $16,104 Maximum borrowings $84,650 $38,800 $32,600 Year-end rate 6.31% 6.70% 5.40% Total interest paid on all indebtedness during the years ended June 30, 1996, 1995 and 1994 was $6,373,000, $4,189,000 and $2,959,000, respectively. 7. Income Taxes Income tax expense (benefit) is comprised of the following (in thousands): Years ended June 30, 1996 1995 1994 -------------------------------------------------------------------------- Current: Federal $ 9,356 $ 7,629 $ 8,592 State and local 549 811 705 Foreign (490) 49 (181) --------------------------- Total current tax expense 9,415 8,489 9,116 Deferred tax expense (402) 260 (339) --------------------------- Total income tax expense $ 9,013 $ 8,749 $ 8,777 =========================== Page 27 7. Income Taxes, continued The tax effects of temporary differences that result in deferred assets and (liabilities) are presented below (in thousands). There were no valuation allowances provided for deferred tax assets. at June 30, 1996 1995 -------------------------------------------------------------------------- Depreciation $(3,516) $(1,904) Inventory (1,436) (1,550) Pension plan costs (469) (626) ----------------- Total deferred tax liabilities (5,421) (4,080) ----------------- Bad debts 461 406 Reserves not currently deductible 1,876 1,804 Carryforward of Canadian income tax benefit 500 - Other 408 358 ----------------- Total deferred tax assets 3,245 2,568 ----------------- Net deferred tax liabilities $(2,176) $(1,512) ================= A reconciliation of the U.S. statutory rates to the Company's effective tax rates is as follows: Years ended June 30, 1996 1995 1994 -------------------------------------------------------------------------- Income tax expense at statutory rate 35.0% 35.0% 35.0% State income tax expense net of federal income tax benefit 1.5 2.4 2.1 Amortization of goodwill 1.8 1.7 1.7 Other .5 (.6) (.8) ------------------------- Effective tax rate 38.8% 38.5% 38.0% ======================== Total income taxes paid, net of refunds, during the years ended June 30, 1996, 1995 and 1994 was $9,703,000, $8,275,000 and $8,968,000, respectively. The Company has foreign investment tax credits approximating $1,200,000 and domestic and foreign net operating loss carryforwards approximating $650,000 and $1,900,000, respectively, with respect to its acquisition of Bionaire. Utilization of these carryforwards is subject to limitation and such carryforwards expire through 2010. 8. Pension and Retirement Plans The Company has noncontributory defined benefit pension and retirement plans covering salaried and certain hourly employees. The components of the net periodic pension cost (benefit) of the plans are as follows (in thousands): Years ended June 30, 1996 1995 1994 -------------------------------------------------------------------------- Service cost-benefits earned during the period $ 566 $ 535 $ 454 Interest cost on projected benefit obligation 826 765 690 Actual return on plan assets (2,528) (936) (529) Net amortization and deferral 1,631 128 (334) --------------------------- Net periodic pension expense (benefit) $ 495 $ 492 $ 281 =========================== Page 28 The following table sets forth the plans' funded status and the amounts included in the Company's Consolidated Balance Sheets (in thousands): at June 30, 1996 1995 -------------------------------------------------------------------------- Actuarial present value of accumulated benefit obligations: Vested $ 9,536 $ 9,124 Non-vested 771 347 ----------------- Accumulated benefit obligation 10,307 9,471 Excess of projected benefit obligation over accumulated benefit obligation 1,655 1,709 ----------------- Projected benefit obligation 11,962 11,180 ================= Fair value of plan assets 13,959 10,906 ================= Plan assets in excess of (less than) projected benefit obligation 1,997 (274) Unrecognized net (gain) loss (635) 2,040 Unrecognized prior service cost 231 32 Unrecognized net transition asset (amortized over 22 years) (1,025) (1,119) ----------------- Prepaid pension cost $ 568 $ 679 ================= As of June 30, 1996, approximately 4% of pension plan assets were invested in cash equivalents, 36% were invested in an intermediate term bond fund which consisted primarily of U.S. Government obligations and 60% were invested in common stocks. Significant pension plan assumptions are as follows: Years ended June 30, 1996 1995 1994 -------------------------------------------------------------------------- Discount rate 7.50% 7.50% 7.50% Expected long-term rate of return on plan assets 8.00% 8.25% 8.25% Salary increase rate 4.50% 4.50% 5.00% The Company has a Savings Plan (401K) which allows employees to make voluntary contributions of up to 15% of annual compensation, as defined. The Company makes partial matching contributions which were $95,000, $71,000 and $64,000 for the years ended June 30, 1996, 1995 and 1994, respectively. 9. Leases The Company maintains operating leases on equipment, warehouse and office properties. Rental expense under such leases amounted to $790,000, $406,000 and $385,000 for the years ended June 30, 1996, 1995 and 1994, respectively. Future rental commitments under noncancellable operating leases with a remaining term in excess of one year at June 30, 1996 are as follows (in thousands): Year ending June 30 -------------------------------------------------------------------------- 1997 $1,910 1998 $1,851 1999 $1,689 2000 $1,359 2001 $ 707 Thereafter $2,306 Future rental commitments include approximately $400,000 per year through December 2000 related to a Bionaire facility in New York which is not being used. A $500,000 reserve for loss under this lease was recorded in connection with the acquisition of Bionaire. The Company is attempting to sublease this facility. Page 29 10. Compensation Arrangements At the 1994 shareholders' meeting, the 1994 Stock Option Plan was approved. The Plan provides for the granting of options to purchase 700,000 shares of common stock. Additionally, the 1986 Stock Option Plan provided for the granting of options to purchase 742,000 shares of common stock. Options granted under the plans may be either incentive stock options or nonqualified stock options. The option price for incentive stock options under the plans is to be the greater of par value or fair market value on the date of grant. The option price for nonqualified stock option under the plans is to be determined by the Company's Board of Directors, but may not be less than par value. At the end of each year following the date of grant, 25% of the options become exercisable, with accumulation privileges. During the year ended June 30, 1996, the Company granted incentive stock options to purchase 177,000 shares of common stock for prices ranging from $16.00 to $24.13 per share which were the market values of the Company's common stock on the dates of grant. Options to purchase 319,161 shares were exercisable at June 30, 1996. As of June 30, 1996 there were 106,531 outstanding options at an exercise price of $.19 per share, 166,490 options at exercise prices between $11.00 and $13.00, 133,200 options at exercise prices between $15.00 and $20.00 and 281,600 options at exercise prices in excess of $20.00. Option activity for the three years ended June 30, 1996 was as follows: Outstanding Shares -------------------------------------------------------------------------- June 30, 1993 470,130 ========================================================================== Granted 119,000 Exercised at $.19 per share (160,980) Cancelled (6,325) -------------------------------------------------------------------------- June 30, 1994 421,825 ========================================================================== Granted 137,800 Exercised at $.19 per share to $12.75 per share (9,370) Cancelled (12,700) -------------------------------------------------------------------------- June 30, 1995 537,555 ========================================================================== Granted 177,000 Exercised at $.19 per share to $11.13 per share (14,734) Cancelled (12,000) -------------------------------------------------------------------------- June 30, 1996 687,821 ========================================================================== The Company provides an incentive compensation plan for certain members of management. Bonuses under the plan are computed based upon actual earnings from operations compared to budgeted earnings from operations. Bonuses under the plan were $750,000 for 1996, $450,000 for 1995 and $1,025,000 for 1994. Prior to January 1, 1995, a related party of a director of the Company rendered financial advisory and other services to the Company for an annual fee, plus expenses. Such fees and expenses amounted to $100,000 and $207,000 for the years ended June 30, 1995 and 1994, respectively. 11. Contingencies The Company is party to various product liability lawsuits relating to its products and incidental to its business. The Company believes that many of the personal injury and damage claims brought against it arise from the misuse or misapplication of the Company's products and rarely involve manufacturing defects. In such cases, the Company vigorously defends against such actions. Historically, product liability awards have rarely exceeded the Company's individual per occurrence self-insured retention. There can be no assurance, however, that the Company's future product liability experience will be consistent with its past experience. The Company believes that the ultimate conclusion of the various pending claims and lawsuits of the Company will not have a material adverse effect on the consolidated financial statements of the Company. Page 30 12. Unaudited Quarterly Financial Data Unaudited quarterly financial data is as follows (amounts in thousands except per share amounts): Sept. Dec. March June Fiscal 1996 1995 1995 1996 1996 -------------------------------------------------------------------------- Net sales $73,897 $97,450 $61,916 $80,601 Gross profit 21,416 27,310 16,658 18,273 Operating income 9,826 13,982 4,432 2,424 Net earnings $ 5,093 $ 7,456 $ 1,572 $ 118 ========================================================================== Net earnings per common share $ 0.51 $ 0.75 $ 0.16 $ 0.01 ========================================================================== Sept. Dec. March June Fiscal 1995 1994 1994 1995 1995 -------------------------------------------------------------------------- Net sales $61,398 $78,087 $39,624 $52,602 Gross profit 17,699 22,074 11,032 12,500 Operating income 8,277 11,287 3,831 3,675 Net earnings $ 4,403 $ 6,297 $ 1,750 $ 1,535 ========================================================================== Net earnings per common share $ 0.46 $ 0.66 $ 0.19 $ 0.16 ========================================================================== Independent Auditors' Report The Board of Directors and Stockholders The Rival Company: We have audited the accompanying consolidated balance sheets of The Rival Company and subsidiaries as of June 30, 1996 and 1995 and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended June 30, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Rival Company and subsidiaries as of June 30, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 1996, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Kansas City, Missouri August 2, 1996 Page 31 Investor Information Corporate Headquarters 800 East 101st Terrace Kansas City, Missouri 64131 [816] 943-4100 SEC Form 10-K Stockholders may receive a copy of the Corporation's 1996 Annual Report to the Securities and Exchange Commission on Form 10-K free of charge by writing to the Office of the Secretary. Annual Meeting The 1996 annual meeting of shareholders will be held at 9:00 a.m., local time, on Wednesday, November 13, 1996, at the Overland Park Marriott, 10800 Metcalf Avenue, Overland Park, Kansas. Formal notice of the meeting, a proxy statement and proxy form will be mailed separately to all shareholders of record at the close of business on September 15, 1996. Management urges all shareholders to vote their proxies and thus participate in the decisions that will be made at this meeting. Registrar & Transfer Agent UMB Bank, N.A., P.O. Box 410064 Kansas City, MO 64141 For change of name, address, or to replace lost stock certificates, write the UMB Bank, N.A. at the above address, or phone: [816] 860-7445. Independent Auditors KPMG Peat Marwick LLP 1600 Commerce Bank Building Kansas City, MO 64106 Security Analyst Contact Security analyst inquiries are welcome. Please direct them to Mr. William L. Yager, President and Chief Operating Officer at 816-943-4100. Common Stock Price Range The Common Stock of The Rival Company is traded on The Nasdaq stock market under the symbol RIVL. Stock price quotations can be found in major daily newspapers and in The Wall Street Journal. The Rival Company made its initial public offering of common stock at a price of $10.50 per share on June 2, 1992. The following table shows the range of high and low sales prices of the Company's common stock for fiscal 1996 and 1995. Fiscal 1996 High Low -------------------------------------------------------------------------- First Quarter ended September 30 $20.25 $14.25 Second Quarter ended December 31 23.00 19.25 Third Quarter ended March 31 24.25 20.50 Fourth Quarter ended June 30 25.75 22.25 Fiscal 1995 High Low -------------------------------------------------------------------------- First Quarter ended September 30 $22.00 $19.38 Second Quarter ended December 31 26.25 14.50 Third Quarter ended March 31 18.00 15.00 Fourth Quarter ended June 30 16.50 14.00 At June 30, 1996, there were 9,729,667 shares outstanding and 237 stockholders of record. A substantial number of shares of common stock are held in "street name." The number of individual stockholders is believed to be approximately 3,000. Dividends The Board of Directors approved an increase in the quarterly dividend to $0.06 per share effective in September 1996. Future dividend payments are subject to approval of the Board of Directors. The Company paid dividends of $0.20 per share in fiscal 1996 and $0.16 per share in fiscal 1995. Page 32 Directors and Executive Officers Board of Directors Thomas K. Manning (1), Chairman of the Board and Chief Executive Officer William L. Yager, President and Chief Operating Officer William S. Endres, Senior Vice President-Sales and Marketing Darrel M. Sanders, Senior Vice President-Operations Jack J. Culberg (1), investor and former Chairman of the Board of The Rival Company Todd Goodwin (1, 2), Partner, Gibbons Goodwin van Amerongen, Investment bankers John E. Grimm III (2), Chairman and Chief Executive Officer Midbrook, Inc., Consultants Lanny R. Julian (2, 3), President, Donlan Marketing Group, L.L.C., a marketing consulting company Noel Thomas Patton (3), investor and former owner, Chairman and Chief Executive Officer of Patton Electric Company, Inc. Beatrice Smith, Ph.D. (1, 3), Dean, College of Human Environmental Sciences University of Missouri - Columbia 1 Member, Executive Committee 2 Member, Compensation and Stock Option Committee 3 Member, Audit Committee Officers Thomas K. Manning, Chairman of the Board and Chief Executive Officer William L. Yager, President and Chief Operating Officer William S. Endres, Senior Vice President-Sales and Marketing Darrel M. Sanders, Senior Vice President-Operations Stanley D. Biggs, Vice President, Chief Financial Officer and Corporate Secretary Gerald E. Byle, Vice President-International Sales Michael T. Fuller, Vice President-Industrial Sales Philip J. Gyori, Vice President-Marketing Sidney W. Hose, Vice President-Home Environment James Houchen, Vice President-Materials Management A. Aykut Ozgunay, Vice President-Engineering Jon K. Patterson, Vice President-Management Information Systems Trademarks Trademarks of The Rival Company mentioned in this Annual Report include Rival, Rival Select, Simer, Pollenex, Patton, Bionaire, Crock Pot, Crock Grill, Potpourri Crock and White Mountain. (COPYRIGHT) The Rival Company 1996 Page 33 EX-21 6 Exhibit 21 THE RIVAL COMPANY List of Subsidiaries Bionaire Corporation Bionaire France Bionaire, Inc. Bionaire International B.V. Fasco Consumer Products, Inc. Patton Electric Company, Inc. Patton Electric (Hong Kong) Limited RC Acquisition, Inc. Rival Consumer Sales Corporation Rival Manufacturing Company of Canada Ltd. Waverly Products Company, Ltd. EX-23 7 Exhibit 23 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE AND CONSENT The Board of Directors The Rival Company: The audits referred to in our report dated August 2, 1996 included the related financial statement schedule as of June 30, 1996 and for each of the years in the three-year period ended June 30, 1996, included in the 1996 annual report on Form 10-K. This financial statement schedule is the responsibility of The Rival Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We consent to incorporation by reference in the registration statement (No. 33-69392) on Form S-8 of The Rival Company of the above report and our report dated August 2, 1996 relating to the consolidated balance sheets of The Rival Company and subsidiaries as of June 30, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended June 30, 1996, which report is incorporated by reference in the June 30, 1996 annual report on Form 10-K of The Rival Company. Kansas City, Missouri /s/ KPMG Peat Marwick, LLP -------------------------- September 9, 1996 KPMG Peat Marwick, LLP EX-27 8
5 This schedule contains summary financial information extracted from the 10-K for the period ended June 30, 1996, and is qualified in its entirety by reference to such financial statements. 1,000 YEAR YEAR JUN-30-1996 JUN-30-1995 JUL-01-1995 JUL-01-1994 JUN-30-1996 JUN-30-1995 1,503 193 0 0 76,888 45,401 2,785 1,909 102,030 81,104 181,380 126,484 70,054 48,660 29,709 21,588 288,251 204,368 89,984 66,191 88,000 42,000 97 97 0 0 0 0 106,051 93,708 288,251 204,368 313,864 231,711 313,864 231,711 230,207 168,406 230,207 168,406 52,993 36,235 463 356 7,117 4,216 23,252 22,734 9,013 8,749 14,239 13,985 0 0 0 0 0 0 14,239 13,985 1.43 1.47 1.43 1.47
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