-----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, Hyw7qeAKYW9emij9zF1hHHr8STZSzXlarDdMObHzLzzZirxHZKoTyk+v0EX/9vsU OEsi7YzWN6bzECkyX+wpXg== 0000950131-98-005748.txt : 19981103 0000950131-98-005748.hdr.sgml : 19981103 ACCESSION NUMBER: 0000950131-98-005748 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVAL CO CENTRAL INDEX KEY: 0000860194 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] IRS NUMBER: 133327021 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20274 FILM NUMBER: 98735998 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-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998. OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to _________________ Commission file number 0-20274 ------- THE RIVAL COMPANY - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 43-0794462 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 800 E. 101st Terrace, Kansas City, MO 64131 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (816) 943-4100 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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. (l) Yes X No ----- ----- (2) Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. As of September 30, 1998, the registrant had 9,293,477 shares of common stock, par value $.01 per share, outstanding. 1 THE RIVAL COMPANY FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1998 INDEX PART I. - FINANCIAL INFORMATION Page ITEM 1. Financial Statements (1) Condensed Consolidated Financial Statements (unaudited): Condensed Consolidated Balance Sheets as of September 30, 1998, September 30, 1997, and June 30, 1998. 3 Condensed Consolidated Statements of Operations for the three months ended September 30, 1998 and September 30, 1997. 4 Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 1998 and September 30, 1997. 5 (2) Notes to Condensed Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 PART II. - OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K 10
2 PART I - FINANCIAL INFORMATION THE RIVAL COMPANY AND SUBSIDIARIES ----------------------- CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 1998 and 1997 and June 30, 1998 (amounts in thousands) (unaudited)
09/30/98 09/30/97 06/30/98 -------- -------- -------- ASSETS Current assets: Cash $ 1,209 $ 476 $ 309 Accounts receivable 73,837 85,696 75,106 Inventories 113,008 118,106 101,714 Deferred income taxes 2,361 2,584 2,379 Prepaid expenses 2,044 2,097 1,376 -------- -------- -------- Total current assets 192,459 208,959 180,884 Property, plant and equipment, net 37,606 47,008 46,045 Goodwill 59,859 61,688 60,418 Other assets 10,004 5,301 4,767 -------- -------- -------- $299,928 $322,956 $292,114 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to banks $ 66,335 $ 78,175 $ 58,200 Current portion of long-term debt 6,000 4,000 6,000 Trade accounts payable 19,823 20,758 15,056 Income taxes payable -- 3,497 403 Other payables and accrued expenses 13,894 13,992 11,618 -------- -------- -------- Total current liabilities 106,052 120,422 91,277 Long-term debt, less current portion 78,000 84,000 78,000 Deferred income taxes and other liabilities 5,085 5,009 6,222 Stockholders' equity: Common stock 98 98 98 Paid-in capital 45,972 45,656 45,971 Retained earnings 71,978 72,865 76,463 Treasury stock, at cost (6,952) (4,438) (5,608) Foreign currency translation adjustments (305) (656) (309) -------- -------- -------- Total stockholders' equity 110,791 113,525 116,615 -------- -------- -------- $299,928 $322,956 $292,114 ======== ======== ========
See accompanying notes to condensed consolidated financial statements. 3 THE RIVAL COMPANY AND SUBSIDIARIES -------------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended September 30, 1998 and September 30, 1997 (amounts in thousands, except per share amounts) (unaudited)
Three months ended --------------------- 09/30/98 09/30/97 --------- --------- Net sales $ 80,052 $ 96,697 Cost of sales 59,577 71,119 Cost of Sales, plant restructuring 2,833 -- --------- --------- Total Cost of sales 62,410 71,119 --------- --------- Gross profit 17,642 25,578 Selling expenses 12,166 12,999 General and administrative expenses 2,942 3,255 Plant restructuring expenses 4,887 -- Amortization of goodwill and other intangibles 685 779 --------- --------- Operating income (loss) (3,038) 8,545 Interest expense 2,484 2,587 Miscellaneous, net 345 3 --------- --------- Earnings (loss) before income taxes (5,867) 5,955 Income tax expense (benefit) (2,033) 2,229 --------- --------- Net earnings (loss) $ (3,834) $ 3,726 ========= ========= Weighted average common shares outstanding 9,348 9,449 ========= ========= Net earnings (loss) per share (Basic EPS) $ (0.41) $ 0.39 ========= ========= Weighted average common and common equivalent shares outstanding 9,348 9,663 ========= ========= Net earnings (loss) per share (Diluted EPS) $ (0.41) $ 0.39 ========= =========
See accompanying notes to condensed consolidated financial statements. 4 THE RIVAL COMPANY AND SUBSIDIARIES ------------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended September 30, 1998 and September 30, 1997 (amounts in thousands) (unaudited)
Three months ended --------------------- 09/30/98 09/30/97 --------- --------- Cash flows from operating activities: Net earnings (loss) $ (3,834) $ 3,726 Adjustments to reconcile net earnings to net cash used by operating activities: Depreciation and amortization 2,934 2,679 Non-cash restructuring changes 6,717 -- Deferred taxes (1,182) -- Other 303 78 Changes in assets and liabilities: Accounts receivable 1,052 (11,033) Inventories (13,232) (12,819) Prepaid expenses (668) (722) Accounts payable and accruals 5,264 5,772 Income taxes payable (403) 2,266 --------- --------- Net cash used by operating activities (3,049) (10,053) --------- --------- Cash flows from investing activities: Capital expenditures (1,813) (2,189) Other (351) (9) --------- --------- Net cash used by investing activities (2,164) (2,198) --------- --------- Cash flows from financing activities: Net borrowings under working capital loans 8,135 13,100 Dividends paid (651) (567) Treasury stock repurchases (1,344) -- Other (27) -- --------- --------- Net cash provided by financing activities 6,113 12,533 --------- --------- Net increase in cash 900 282 --------- --------- Cash at beginning of period 309 194 --------- --------- Cash at end of period $ 1,209 $ 476 ========= =========
See accompanying notes to condensed consolidated financial statements. 5 THE RIVAL COMPANY AND SUBSIDIARIES ----------------------- Notes to Condensed Consolidated Financial Statements Three Months Ended September 30, 1998 and September 30, 1997 Note 1 - ------ In the opinion of Management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position of the Company as of September 30, 1998 and 1997 and the results of its operations and its cash flows for the three months ended September 30, 1998 and 1997. The June 30, 1998, condensed consolidated balance sheet has been derived from the audited consolidated financial statements as of that date. These financial statements have been prepared in accordance with the instructions to Form 10-Q. To the extent that information and footnotes required by generally accepted accounting principles for complete financial statements are contained in or consistent with the audited consolidated financial statements incorporated by reference in the Company's Form 10-K for the year ended June 30, 1998, such information and footnotes have not been duplicated herein. Note 2 Seasonality - ------------------ The results of operations for the three months ended September 30, are not indicative of the results to be expected for the full year due to the seasonal nature of the Company's operations. Note 3 Inventories - ------------------ The following is a summary of inventories at September 30, 1998 and 1997 and June 30, 1998 (in thousands):
Sept. 30, 1998 Sept. 30, 1997 June 30, 1998 -------------- -------------- ------------- Raw materials and work in progress $ 38,804 $ 51,402 $ 40,518 Finished goods 80,294 72,369 67,061 -------- -------- -------- 119,098 123,771 107,579 Less LIFO allowance (6,090) (5,665) (5,865) -------- -------- -------- $113,008 $118,106 $101,714 ======== ======== ========
Note 4 Business Segments - ------------------------ The Rival Company manages its operations through four business units: kitchen electrics and personal care (kitchen electrics), home environment, industrial and building supply (industrial) and international. The kitchen electrics business unit sells products including Crock-Pot(R) slow cookers, toasters, ice cream freezers, can openers and massagers to retailers throughout the U.S. The home environment business unit sells products including fans, air purifiers, humidifiers, showerheads, electric space heaters, and utility pumps to retailers throughout the U.S. The industrial group sells products including industrial fans and drum blowers, household ventilation, ceiling fans, door chimes and electric heaters to electrical and industrial wholesale distributors throughout the U.S. The international business unit sells the Company's products outside the U.S. 6 The Company is reporting business segment information in accordance with the provisions of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" which was issued in June 1997. The Rival Company evaluates performance based upon contribution margin, which it defines as gross margin less selling expenses. Administrative functions such as finance and management information systems are centralized and are not allocated to the business units. The various business units share manufacturing and distribution facilities. Costs of operating the manufacturing plants are allocated to the business units through full-absorption standard costing and distribution costs are allocated based upon volume shipped from each distribution center. Summary financial information for each reportable segment, together with non-business unit results consisting of sales directly to consumers, for the three month periods ended September 30, 1998 and 1997 is as follows (in thousands):
September Kitchen Home 1998 Electrics Environment Industrial International Other Total - ----------------------------------------------------------------------------------------- Net sales $41,754 $20,016 $8,822 $ 8,082 $1,378 $80,052 Gross profit 11,475 4,112 2,148 1,976 764 20,475 Selling expenses 5,162 2,972 1,982 1,417 633 12,166 Contribution margin 6,313 1,140 166 559 131 8,309 September Kitchen Home 1997 Electrics Environment Industrial International Other Total - ----------------------------------------------------------------------------------------- Net sales $49,601 $26,366 $9,076 $10,320 $1,334 $96,697 Gross profit 13,955 5,598 2,426 2,840 759 25,578 Selling expenses 5,714 3,076 2,143 1,683 383 12,999 Contribution margin 8,241 2,522 283 1,157 376 12,579
Gross profit differs from that reported in the accompanying condensed consolidated statement of operations as the cost of sales related to plant restructuring has not been allocated to any reportable segment. Note 5 Comprehensive Income - ---------------------------- In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income" which establishes rules for the reporting of comprehensive income and its components. Comprehensive income consists of net income and foreign currency translation adjustments as presented in the following table. The adoption of Statement No. 130 had no impact on total stockholders' equity.
Three months ended -------------------- 09/20/98 09/30/97 -------- -------- Net earnings (loss) $(3,834) $3,726 Foreign currency translation adjustments 4 (24) ------- ------ Total comprehensive income (loss) $(3,830) $3,702 ======= ======
Note 6 Treasury Stock Purchases - -------------------------------- During the quarter ended September 1998, the Company repurchased 105,400 shares of its common stock at an average price of $12.75 per share. The purchases were financed through borrowings under the Company's revolving credit agreement. 7 Note 7 Net Earnings Per Share - ------------------------------ In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share" which revises the calculation and presentation provisions of Accounting Principles Board Opinion 15 ("APB 15") and related interpretations. Statement No. 128 has been adopted in the accompanying financial statements with retroactive application. Basic earnings per share excludes dilution and is computed by dividing net earnings by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per 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 earnings per share in the September 1997 quarter and are therefore included in the computation of diluted earnings per share for such period. Diluted earnings per share in the accompanying statement of operations is identical to the primary earnings per share previously presented in accordance with APB 15. For the September 1998 quarter, common stock options are anti-dilutive and are excluded from the calculation of diluted earnings per share. Note 8 Restructuring Charges - ----------------------------- The Company recorded restructuring charges during the September 1998 quarter totaling $7.7 million pretax ($4.7 million after tax) related to the previously announced closing of two manufacturing plants and three distribution centers. The charges include $2.8 million in cost of sales to recognize the cost of components in excess of their salvage value on products being transferred to overseas manufacturers together with inefficiencies resulting from the announcement at plants scheduled for closure. The balance of the $7.7 million charge represents the estimated loss on disposal of properties together with severance and other costs. The Company expects to incur approximately $1.3 million in additional restructuring charges during the balance of fiscal 1999 related to ongoing plant inefficiencies and costs of moving equipment and inventories to its other facilities. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales were $80.1 million in the quarter ended September 30, 1998 compared to $96.7 million in the prior year. The sales decline affected most of the Company's major lines of business. Kitchen electrics posted a 16% decline from $49.6 million to $41.8 million. Sales to retailers are not consistent with retail point of sale information received from our major retail customers indicating that at least a substantial portion of the sales decline relates to shrinking retail inventories. Home environment sales declined $6.4 million (24%). Much of this decline was in the Bionaire air cleaners and humidifiers. Major customers are shifting their assortments to newly introduced products that will be available for shipment during October and November. The international business unit had significant sales gains during fiscal 1998, however, sales declined during the September 1998 quarter by $2.2 million (22%) largely as a result of currency devaluations in key Latin American markets. 8 Gross profit before restructuring costs was $20.5 million (25.6% of sales) compared to $25.6 million (26.5% of sales) in the prior year. This 0.9% decline in gross profit as a percent of sales was the result of various factors including competition in space heaters, lower profitability in Canada due to the weak currency and increased shipping costs from Asia. These factors offset improvements that have been achieved in other categories including can openers and air cleaners. After the restructuring costs, gross profit was $17.6 million (22.0% of sales). Selling expenses were $12.2 million (15.2% of sales) for the current quarter compared to $13.0 million (13.4% of sales) in the prior year. The higher selling expenses as a percentage of sales was primarily due to spreading fixed costs over the smaller sales base. Commission expense increased as a percentage of sales due to a higher percentage of total sales made through independent sale representatives. General and administrative expenses decreased nearly 10% to $2.9 million due to a decline in legal expenses. Interest expense declined from $2.6 million to $2.5 million due to a $4 million payment on long term debt and lower borrowings on the revolving credit agreement. Other non-operating expense of $0.3 million primarily represents losses from foreign currency exchange relative to the Canadian dollar and the Mexican peso. Net loss for the quarter was $3.8 million ($0.41 per share) compared to net earnings of $3.7 million ($0.39 per share) in the prior year. Excluding the $4.7 million after tax cost of the restructuring, earnings for the September 1998 quarter were $0.9 million ($0.10 per share). Liquidity and Capital Resources As of September 30, 1998 the Company had $84 million in long term debt (including $6 million current portion) and $100 million in revolving loan commitments. Revolving credit loans outstanding were $66.3 million as of such date. The long-term debt requires periodic principal payments including $6.0 million in January 1999 and $7.0 million in January 2000 and has a final maturity in 2008. The revolving credit facilities include a $75 million U.S. bank line, which expires in March 2000, and a Canadian facility for the Canadian dollar equivalent of U.S. $10.0 million. The Company also has a $15 million seasonal bank line, which expires on December 31, 1998. The U.S. revolving credit facility currently bears interest at a floating rate of LIBOR plus .75%. During the three months ended September 30, 1998, the Company used $3.0 million of cash for operating activities. The Company historically requires a significant amount of cash each fall to fund its build-up in inventories and accounts receivable during its peak-selling season. The Company also repurchased 105,400 shares of its common stock for $1.3 million during the September 1998 quarter. These cash requirements are funded through borrowings on the working capital line. The Company plans to make capital expenditures of approximately $12.0 million to $14.0 million during fiscal 1999 including expansion of its Missouri facilities as part of the plant restructuring. Management believes that cash generated from operations and its bank credit facilities will be sufficient to meet its cash requirements for the foreseeable future. 9 Computer Systems and the Year 2000 During the past several years, the Company has replaced all of its significant computer software applications as part of normal system upgrades. All of the new systems are, according to the software vendors, year 2000 compliant (i.e. support proper processing of transactions relating to the year 2000 and beyond). The Company has created a task force to test all of its significant software and to determine whether embedded technology, such as microcontrollers, contained in its machinery and equipment is Year 2000 compliant. In addition, the task force will review the Year 2000 compliance of its key suppliers and service providers in an effort to reduce the potential adverse effect on its operations from non- compliance by such parties. The task force is currently expected to complete its review by June 30, 1999. As systems are tested, the Company intends to develop contingency plans for systems that exhibit possible Year 2000 problems. The cost of the task force's activities is not expected to be significant. Forward Looking Information This form 10-Q contains "forward-looking statements" about business operations, financial performance and market conditions. Such statements are subject to certain risks, uncertainties and other factors that can affect the Company's businesses and cause actual results to differ materially from those contained in any forward-looking statement. The additional restructuring charges expected during the balance of fiscal 1999 are estimates of management based upon information currently available. Due to a number of risks and uncertainties involved in completing the restructuring, actual restructuring charges may be materially different from those currently anticipated. PART II - OTHER INFORMATION --------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits. 11 Schedule regarding computation of per share earnings. (b) Reports on Form 8-K. None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE RIVAL COMPANY Dated: October 30, 1998 By: /s/ William L. Yager ------------------------ William L. Yager President and Chief Operating Officer (Duly Authorized Officer) 10 EX-11 2 EARNINGS PER SHARE Exhibit 11 THE RIVAL COMPANY AND SUBSIDIARIES Earnings Per Share (in thousands except per share data)
Three Months ended September 30 ------------ 1998 1997 ---- ---- Net earnings (loss) $(3,834) $3,726 ======= ====== Weighted average common and common equivalent shares outstanding 9,348 9,663 ======= ====== Earnings per common and common equivalent shares $ (0.41) $ 0.39 ======= ====== Computation of weighted average common and common equivalent shares outstanding: Average common shares outstanding 9,348 9,449 Average number of options outstanding 879 828 Less treasury shares acquired with proceeds from exercise of options (781) (614) ------- ------ Weighted average common and common equivalent shares outstanding 9,446 9,663 ======= ======
a) The common stock equivalents are anti-dilutive and, therefore, are excluded from the presentation in the Condensed Consolidated Statements of Operations for the quarter ended September 30, 1998. EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from September 1998 Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS 3-MOS JUN-30-1999 JUN-30-1998 JUL-01-1998 JUL-01-1997 SEP-30-1998 SEP-30-1997 1,209 476 0 0 75,932 88,203 2,095 2,507 113,008 118,106 192,459 208,959 78,217 80,195 40,611 33,187 299,928 322,956 106,052 120,422 78,000 84,000 0 0 0 0 98 98 110,693 113,427 299,928 322,956 80,052 96,697 80,052 96,697 62,410 71,119 62,410 71,119 20,680 17,033 217 232 2,484 2,587 (5,867) 5,955 (2,033) 2,229 (3,834) 3,726 0 0 0 0 0 0 (3,834) 3,726 (0.41) .39 (0.41) .39
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