FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission File Numbers: 333-32385-05 and 333-32385
HEDSTROM HOLDINGS, INC.
HEDSTROM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0329830
Delaware 51-0329829
(State or other jurisdiction (IRS Employer
of incorporation Identification
or organization) Number)
585 Slawin Court, Mount
Prospect, Illinois 60056
(Address of principal executive offices, including zip
code)
(847) 803-9200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
At November 13, 1998, there were outstanding: (i) 36,142,883 shares
of the Common Stock, par value $.01 per share, of Hedstrom
Holdings, Inc., (ii) 31,520,000 shares of the Non-Voting Common
Stock, par value $.01 per share, of Hedstrom Holdings, Inc. and
(iii) 10 shares of the Common Stock, par value $.01 per share, of
Hedstrom Corporation.
<PAGE>
HEDSTROM HOLDINGS, INC.
HEDSTROM CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
Page
Number
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
As of September 30, 1998 and December 31, 1997
Consolidated Income Statements
Three months ended September 30, 1998 and 1997
Nine months ended September 30, 1998 and 1997
Consolidated Statements of Cash Flows
Nine months ended September 30, 1998 and 1997
Consolidated Statement of Stockholders' Equity
As of and for the nine months ended September
30, 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Results of Operations
and Financial Condition
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signature
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1 Financial Statements
HEDSTROM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, December 31,
1998 1997 1997
------------- ------------
(unaudited)
<S>
ASSETS
CURRENT ASSETS: <C> <C>
Cash and cash equivalents $ 3,546 $ 10,844
Trade accounts receivable, net of
allowance for doubtful accounts 64,213 82,702
Inventories 61,411 47,464
Deferred income taxes 7,050 7,045
Prepaid expenses and other current assets 4,719 4,801
-------- --------
TOTAL CURRENT ASSETS 140,939 152,856
PROPERTY, PLANT AND EQUIPMENT, at cost,
net of accumulated depreciation 45,619 42,823
-------- --------
OTHER ASSETS:
Deferred charges, net of accumulated
amortization 15,996 18,861
Goodwill, net of accumulated
amortization 176,265 161,176
Deferred income taxes 10,096 10,057
-------- --------
TOTAL OTHER ASSETS 202,357 190,094
-------- --------
TOTAL ASSETS $388,915 $385,773
======== ========
</TABLE>
<PAGE>
<TABLE>
HEDSTROM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, December 31,
1998 1997 1997
------------- ------------
(unaudited)
<S>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES: <C> <C>
Revolving line of credit $ 23,600 $ 35,500
Current portion of long-term debt
and capital leases 11,924 9,222
Accounts payable 22,661 23,381
Accrued expenses 17,502 25,824
-------- --------
TOTAL CURRENT LIABILITIES 75,687 93,927
-------- --------
LONG-TERM DEBT:
Senior Subordinated Notes 110,000 110,000
Senior Discount Notes 25,756 23,288
Term Loans 124,484 104,375
Notes payable to related parties 2,500 2,500
Capital leases 1,796 1,605
Other 2,069 2,914
-------- --------
TOTAL LONG-TERM DEBT 266,605 244,682
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value,
10,000,000 shares authorized, no
shares issued and outstanding - -
Common stock, $0.01 par value,
100,000,000 shares authorized,
36,142,883 and 36,142,883 shares issued
and outstanding, respectively 361 361
Non-voting common stock, $0.01 par value,
40,000,000 shares authorized, 31,520,000
and 31,520,000 issued and outstanding,
respectively 315 315
Additional paid-in capital 51,553 51,553
Foreign currency translation adjustment (871) (778)
Accumulated deficit (4,735) (4,287)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 46,623 47,164
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' $388,915 $385,773
======== ========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
HEDSTROM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
For the three months ended September 30,
---------------------------------------
1998 1997
---- ----
<S> <C> <C>
Net sales $64,353 $61,462
Cost of sales 40,809 41,722
------- -------
Gross profit 23,544 19,740
Selling, general and administrative expense 15,383 14,416
------- -------
Operating income 8,161 5,324
Interest expense 7,896 6,800
------- -------
Income (loss) before income taxes 265 (1,476)
Income tax (benefit) expense 115 (557)
------- -------
Net income (loss) $ 150 $ (919)
------- -------
Basic earnings (loss) per share:
Net income (loss) per share $0.00 ($0.01)
Weighted average number of common shares
outstanding (in thousands) 67,633 68,122
Diluted earnings (loss) per share:
Net income (loss) per share $0.00 ($0.01)
Weighted average number of common shares
outstanding (in thousands) 68,968 68,122
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
HEDSTROM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
For the nine months ended September 30,
--------------------------------------
1998 1997
---- ----
<S> <C> <C>
Net sales $226,014 $165,513
Cost of sales 157,325 115,301
-------- --------
Gross profit 68,689 50,212
Selling, general and administrative expense 46,072 30,658
-------- --------
Operating income 22,617 19,554
Interest expense 23,377 11,509
-------- --------
Income (loss) before income taxes (760) 8,045
Income tax (benefit) expense (312) 2,979
-------- --------
Net income (loss) $ (448) $ 5,066
-------- --------
Basic earnings (loss) per share:
Net income (loss) per share ($0.01) $0.11
Weighted average number of common shares
outstanding (in thousands) 67,663 47,108
Diluted earnings (loss) per share:
Net income (loss) per share ($0.01) $0.11
Weighted average number of common shares
outstanding (in thousands) 67,663 47,108
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
HEDSTROM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the nine months ended September 30
--------------------------------------
1998 1997
---- ----
<S>
Cash flows from operating activities: <C> <C>
Net income (loss) $ (448) $ 5,066
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating activities:
Depreciation of property, plant and equipment and
amortization of goodwill 9,572 7,614
Amortization of deferred financing fees 5,333 -
Deferred income tax benefit (44) 3,301
Changes in current assets and current
liabilities, net of acquisitions:
Accounts receivable 19,591 (21,834)
Inventories (10,892) (3,474)
Prepaid expenses and other current assets 172 (270)
Accounts payable (1,678) (1,497)
Accrued expenses (8,435) (3,096)
-------- -------
Net cash provided by (used for) operating activities 13,171 (14,190)
-------- -------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (7,305) (5,336)
Acquisition of ERO, Inc. (3,037) (122,600)
Acquisition of Backyard Products Ltd. (16,805) -
Other acquisitions (3,579) (2,249)
-------- --------
Net cash used for investing activities (30,726) (130,185)
-------- --------
</TABLE>
<PAGE>
<TABLE>
HEDSTROM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the nine months ended September 30
--------------------------------------
1998 1997
---- ----
<S>
Cash flows from financing activities:
Net proceeds from issuance of Senior <C> <C>
Subordinated Notes - 110,000
Net proceeds from issuance of new term loans - 110,000
Proceeds from term loans 30,000 -
Net proceeds from issuance of Senior
Discount Notes - 21,618
Principal payments on Term Loans (7,249) -
Borrowings on Revolving Credit Facility, net (11,900) 8,300
Repayments of old term loans - (91,393)
Repayments of old revolving lines of
credit, net - (38,925)
Debt financing costs - (17,800)
Net proceeds from issuance of voting
common stock - 3,982
Net proceeds from issuance of non-voting
common stock - 37,462
Other (594) 1,897
-------- --------
Net cash provided by financing activities 10,257 145,141
-------- --------
Net increase (decrease) in cash and cash
equivalents (7,298) 766
Cash and cash equivalents:
Purchased cash - 855
Beginning of period 10,844 533
-------- --------
End of period $ 3,546 $ 2,154
======== ========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
HEDSTROM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands, except shares)
(Unaudited)
Common Stock Foreign
-------------- Additional Currency
Par Paid-In Translation Accumulated
Shares Value Capital Adjustment Deficit Total
--------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 67,662,883 $676 $51,553 $(778) $(4,287) $47,164
Foreign currency translation
adjustment - - - (93) - (93)
Net loss - - - - (448) (448)
--------------------------------------------------------- --------
Balance at September 30, 1998 67,662,883 $676 $51,553 $(871) $(4,735) $46,623
===================================================================
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
<PAGE>
HEDSTROM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - PRINCIPLES OF CONSOLIDATION:
The accompanying interim consolidated financial statements include the
accounts of Hedstrom Holdings, Inc. (Holdings) and its wholly owned
subsidiary, Hedstrom Corporation (Hedstrom, and together with Holdings,
the Company). Effective June 12, 1997, the Company acquired ERO, Inc.
(ERO), which became a wholly owned subsidiary of Hedstrom (see Note 2).
The accompanying consolidated financial statements reflect the operations
of ERO since June 1, 1997. These financial statements are unaudited but,
in the opinion of management, contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
condition, results of operations and cash flows of the Company. Certain
prior period amounts have been reclassified to conform with the current
period presentation. All intercompany balances and transactions have
been eliminated in consolidation.
The interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 as filed with the Securities and Exchange Commission.
The results of operations for the three months and nine months ended
September 30, 1998 are not necessarily indicative of the results to be
expected for the entire fiscal year.
NOTE 2 - ACQUISITION OF ERO, INC.:
On April 10, 1997, Hedstrom and HC Acquisition Corp., a wholly owned
subsidiary of Hedstrom, entered into an Agreement and Plan of Merger (the
"Merger Agreement") with ERO to acquire ERO for a total enterprise value
of approximately $200 million. Pursuant to the Merger Agreement, HC
Acquisition Corp. commenced and, on June 12, 1997, consummated a tender
offer for all of the outstanding shares of the common stock of ERO at a
purchase price of $11.25 per share (the "Tender Offer"). The Company also
assumed a purchase price contingency related to ERO, Inc.'s acquisition
of Amav in October of 1995. The contingency included an additional $3.0
million of purchase price contingent upon achievement of certain
conditions. As those conditions were met as of December 31, 1997, the
Company accrued a liability for the contingency against goodwill. This
was reflected in accrued expenses in the consolidated balance sheet as of
December 31, 1997. The payment was made in March 1998. Upon consummation
of the Tender Offer, (i) HC Acquisition Corp. was merged with and into
ERO (the "Merger") with ERO surviving the Merger as a wholly owned
subsidiary of Hedstrom, (ii) certain of ERO's outstanding indebtedness
was refinanced by Hedstrom (the "ERO Refinancing") and (iii) Hedstrom
refinanced (the "Hedstrom Refinancing") its existing revolving credit
facility and term loan facility. The Merger, the Tender Offer, the ERO
Refinancing and the Hedstrom Refinancing are collectively referred to
herein as the "Acquisition".
<PAGE>
Holdings and Hedstrom required approximately $301.1 million in cash to
consummate the Acquisition, including approximately (i) $122.6 million
paid in connection with the Tender Offer and the Merger, (ii) $82.6
million paid in connection with the ERO Refinancing, (iii) $74.9
million paid in connection with the Hedstrom Refinancing and (iv) $21.0
million incurred in respect of fees and expenses. The funds required to
consummate the Acquisition were provided by (i) $75.0 million of term
loans under a new six-year senior secured term loan facility (the
"Tranche A Term Loan Facility"), (ii) $35.0 million of term loans under a
new eight-year senior secured term loan facility (on July 24, 1998 the
Tranche B Term Loan was increased to $65.0 million to allow for the
acquisition of Backyard Products Limited, see further discussion at Note
8) (the "Tranche B Term Loan Facility" and, together with the Tranche A
Term Loan Facility, the "Term Loan Facilities"), (iii) $16.1 million of
borrowings under a new $70.0 million senior secured revolving credit
facility (the "Revolving Credit Facility" and, together with the Term
Loan Facilities, the "Senior Credit Facilities"), (iv) $110.0 million of
gross proceeds from the offering by Hedstrom of 10% Senior Subordinated
Notes Due 2007 (the "Senior Subordinated Notes"), (v) $25.0 million of gross
proceeds from the offering by Holdings of 44,612 units consisting of 12%
Senior Discount Notes Due 2009 (the "Discount Notes") and 2,705,896 shares
of Common Stock, $.01 par value per share, of Holdings ("Holdings Common
Stock") and (vi) $40.0 million of gross proceeds from the private placement
of 31,520,000 shares of Non-Voting Common Stock, $.01 par value per share,
of Holdings ("Holdings Non-Voting Common Stock") and 480,000 shares of
Holdings Common Stock. The Revolving Credit Facility is also used to
finance certain seasonal working capital requirements.
The acquisition of ERO has been accounted for under the purchase method
of accounting, and accordingly, the purchase price has been allocated to
the assets acquired and the liabilities assumed based upon fair value at
the date of the acquisition of ERO. The excess of the purchase price over
the fair values of the tangible net assets acquired was approximately
$150.0 million, has been recorded as goodwill and is being amortized on a
straight-line basis over 40 years. In the event that facts and
circumstances indicate that the goodwill may be impaired, an evaluation
of recoverability would be performed. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset would
be compared to the assets carrying amount to determine if an adjustment
is required.
The fair value of assets acquired and liabilities assumed, reflecting the
final allocation, was as follows (in thousands):
Current assets $56,200
Net property, plant and
equipment 20,000
Other assets 14,700
Goodwill 150,000
Liabilities assumed (118,300)
--------
Cash paid for ERO $122,600
========
The unaudited pro forma results below assume the Acquisition occurred
at the beginning of the nine month period ended September 30, 1997 (in
thousands, except per share amounts):
<PAGE>
Nine Months Ended
September 30, 1997
------------------
Net sales $ 203,817
Net loss $ (538)
Net loss per share basic $ (0.01)
Net loss per share diluted $ (0.01)
The above pro forma results include adjustments to give effect to
amortization of goodwill, interest expense related to the Senior
Subordinated Notes, the Discount Notes and the Senior Credit Facilities
and cost savings resulting from the rationalization of the sales,
marketing and general and administrative functions, closings of duplicate
facilities and reductions in external administrative expenditures including
legal, insurance, tax, audit and public relations expenditures. These cost
savings reflect personnel terminations that have already occurred or that
have been formally communicated to the employees, closings of duplicate
facilities that have occurred and reductions in external administrative
expenses that have been negotiated, together with the related tax effects.
The pro forma results are not necessarily indicative of the operating
results that would have occurred had the acquisition of ERO been consummated
and had the cost actions giving rise to the cost savings been implemented as
of the beginning of the nine month period ended September 30, 1997 nor are
they necessarily indicative of future operating results.
NOTE 3 - INCOME PER COMMON SHARE:
Holdings adopted SFAS No. 128 "Earnings Per Share", effective December
15, 1997. SFAS No. 128 requires the calculation of basic and diluted
earnings per share. Basic earnings per share is computed by dividing net
income by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share is computed by
dividing the net income by the weighted average number of shares of
common stock and other dilutive securities.
NOTE 4 - INVENTORIES:
Inventories at September 30, 1998 and December 31, 1997 consist of the
following (in thousands):
September 30, December 31,
1998 1997
------------ -----------
Raw materials $20,948 $16,502
Work-in-process 7,325 5,690
Finished goods 33,138 25,272
------- -------
$61,411 $47,464
======= =======
<PAGE>
NOTE 5 - DEBT:
Debt consists of the following (in thousands):
September 30, December 31,
1998 1997
------------- -----------
Senior Subordinated Notes $110,000 $110,000
Term Loans 136,408 112,375
Revolving Credit Facility 23,600 35,500
Senior Discount Notes 25,756 23,288
Other 6,365 8,241
-------- --------
$302,129 $289,404
======== ========
The recent and well-publicized changes in inventory policies and
purchasing practices of Toys R Us - the Company's largest customer in
1997 - and, to a lesser extent, those of the Company's other customers
have adversely affected the 1998 sales levels of the Company and of the
industry generally. Management anticipates that the effects of these
changes will persist at least through the fourth quarter of 1998. As a
consequence, it is projected that the Company will not be in compliance
with certain financial covenants under its Senior Credit Facilities as of
the end of 1998. The Company has notified the agent for the Company's
senior lenders of these developments and will soon commence discussions
with its senior lenders regarding possible amendments to the financial
covenants under the Senior Credit Facilities. Although the Company
anticipates that it will be able to obtain the necessary amendments,
there can be no assurances as to the outcome of the Company's discussions
with its senior lenders.
Senior Subordinated Notes
The $110.0 million Senior Subordinated Notes bear interest at 10% per
annum, payable on June 1 and December 1 of each year, commencing December
1, 1997. The Senior Subordinated Notes mature on June 1, 2007. Except
as set forth below, the Senior Subordinated Notes are not redeemable at
the option of the Company prior to June 1, 2002. On and after such date,
the Senior Subordinated Notes are redeemable, at the Company's option, in
whole or in part, at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest to the
redemption date:
<PAGE>
if redeemed during the 12-month period commencing on June 1 of the years
set forth below:
Redemption
Period Price
------ ----------
2002 105.000
2003 103.333
2004 101.667
2005 and thereafter 100.000%
In addition, at any time and from time to time prior to June 1, 2000, the
Company may redeem in the aggregate up to $44.0 million principal amount
of Senior Subordinated Notes with the proceeds of one or more equity
offerings so long as there is a public market at the time of such
redemption (provided that the equity offering is an offering by Holdings,
a portion of the net cash proceeds thereof equal to the amount required
to redeem any such Senior Subordinated Notes is contributed to the equity
capital of the Company), at a redemption price (expressed as a percentage
of principal amount) of 110%, plus accrued and unpaid interest, if any,
to the redemption date; provided, however, that at least $66.0 million
aggregate principal amount of the Senior Subordinated Notes remains
outstanding after each such redemption.
The Senior Subordinated Notes are unsecured senior subordinated
obligations of the Company and are unconditionally and fully guaranteed
(jointly and severally) on a senior basis by Holdings and on a senior
subordinated basis by each domestic subsidiary of the Company. The
Senior Subordinated Notes are subordinated to all senior indebtedness (as
defined) of the Company and rank pari passu in right of payment with all
senior subordinated indebtedness (as defined) of the Company.
The Senior Subordinated Notes Indenture contains certain covenants that,
among other things, limit (i) the incurrence of additional indebtedness
by the Company and its restricted subsidiaries (as defined), (ii) the
payment of dividends and other restricted payments by the Company and its
restricted subsidiaries, (iii) distributions from restricted
subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi)
sales or issuances of restricted subsidiary capital stock and (vii)
mergers and consolidations.
Term Loans and Revolving Credit Facility
As discussed in Note 2, the Company obtained the Senior Credit
Facilities in connection with the Acquisition. The Senior Credit
Facilities consist of (a) the six-year $75.0 million Tranche A Senior
Secured Term Loan Facility; (b) the eight-year $65.0 million Tranche B
Senior Secured Term Loan Facility (As discussed in Note 8, on July 24,
1998 the Tranche B Term Loan was increased from $35.0 million to $65.0
million to, among other things, allow for the acquisition of Backyard
Products Limited); and (c) the Senior Secured Revolving Credit Facility
providing for revolving loans to the Company and the issuance of letters
of credit for the account of the Company in an aggregate principal and
stated amount at any time not to exceed $70.0 million. Borrowings under
the Revolving Credit Facility are available based upon a borrowing base
not to exceed 85% of eligible accounts receivable and 50% of eligible
inventory.
<PAGE>
At the Company's option, the interest rates per annum applicable to the
Senior Credit Facilities are either (i) the Eurocurrency Rate (as
defined) plus 2.5% in the case of the Tranche A Term Loan Facility and
the Revolving Credit Facility or 3.0% in the case of the Tranche B Term
Loan Facility or (ii) the Alternate Base Rate (as defined) plus 1.5% in
the case of the Tranche A Term Loan Facility and the Revolving Credit
Facility or 2.0% in the case of the Tranche B Term Loan Facility. The
Alternate Base Rate is the highest of (a) Credit Suisse First Boston's
Prime Rate (as defined) or (b) the federal funds effective rate from time
to time plus 0.5%. The applicable margin in respect of the Tranche A
Term Loan Facility and the Revolving Credit Facility is adjusted from
time to time by amounts to be agreed upon based on the achievement of
certain financial performance targets.
The obligations of the Company under the Senior Credit Facilities are
unconditionally, fully and irrevocably guaranteed (jointly and severally)
by Holdings and each of the Company's direct or indirect domestic
subsidiaries (collectively, the Senior Credit Facilities Guarantors).
In addition, the Senior Credit Facilities are secured by first priority
or equivalent security interests in (i) all the capital stock of, or
other equity interests in, each direct or indirect domestic subsidiary of
the Company and 65% of the capital stock of, or other equity interests
in, each direct foreign subsidiary of the Company, or any of its domestic
subsidiaries and (ii) all tangible and intangible assets (including,
without limitation, intellectual property and owned real property) of the
Company and the Senior Credit Facilities Guarantors.
The Senior Credit Facilities contain a number of significant covenants
that, among other things, restrict the ability of the Company to dispose
of assets, incur additional indebtedness, repay other indebtedness or amend
debt instruments, pay dividends, create liens on assets, make investments
or acquisitions, engage in mergers or consolidations, make capital
expenditures, or engage in certain transactions with affiliates. In
addition, under the Senior Credit Facilities, the Company is required to
comply with specified interest coverage and maximum leverage ratios.
Senior Discount Notes
In connection with the acquisition, Holdings received $25.0 million of
gross proceeds from the issuance by Holdings of 44,612 units, consisting
of the Discount Notes and 2,705,896 shares of Holdings common stock. Of
the $25.0 million in gross proceeds, $3.4 million ($1.25 per share) was
allocated to the shares of Common Stock, based upon management's estimate
of fair market value, and $21.6 million was allocated to Discount Notes.
The Discount Notes are unsecured obligations of Holdings and have an
aggregate principle amount at maturity (June 1, 2009) of $44.6 million,
representing a yield to maturity of 12%. No cash interest will accrue on
the Discount Notes prior to June 1, 2002. Thereafter, cash interest will
be payable on June 1 and December 1 of each year, commencing December 1,
2002.
Except as set forth below, the Discount Notes are not redeemable at the
option of Holdings prior to June 1, 2002. On and after such, the
Discount Notes will be redeemable, at Holdings' option, in whole or in
part, at the following redemption prices (expressed in percentages of
principal amount at maturity), plus accrued and unpaid interest to the
redemption date:
<PAGE>
if redeemed during the 12-month period commencing on June 1 of the years
set forth below:
Redemption
Period Price
------ ----------
2002 106.000
2003 104.000
2004 102.000
2005 and thereafter 100.000%
In addition, at any time and from time to time prior to June 1, 2000,
Holdings may redeem in the aggregate up to 40% of the accreted value of
the Discount Notes with the proceeds of one or more equity offerings by
Holdings so long as there is a public market at the time of such
redemption, at a redemption price (expressed as a percentage of accreted
value on the redemption date) of 112%, plus accrued and unpaid interest,
if any, to the redemption date; provided however, that at least $26.8
million aggregate principal amount at maturity of the Discount Notes
remains outstanding after each such redemption.
At any time on or prior to June 1, 2002, the Discount Notes may also be
redeemed as a whole at the option of Holdings upon the occurrence of a
change of control (as defined) at a redemption price equal to 100% of the
accreted value thereof plus the applicable premium, and accrued and
unpaid interest, if any, to the date of redemption.
The Discount Notes Indenture contains certain covenants that, among other
things, limit (i) the incurrence of additional indebtedness by Holdings
and its restricted subsidiaries (as defined), (ii) the payment of
dividends and other restricted payments by Holdings and its restricted
subsidiaries, (iii) distributions from restricted subsidiaries, (iv) asset
sales, (v) transactions with affiliates, (vi) sales or issuances of
restricted subsidiary capital stock and (vii) mergers and consolidations.
Other Debt
Other debt consists of a $2.5 million note payable by Holdings to the
previous owners of Holdings, as well as various other mortgages, capital
leases and equipment loans. The $2.5 million note payable bears interest
at 10% per annum and is payable at the earlier of April 30, 2002, or when
the Company has met certain cash flow levels. The mortgages and
equipment loans have varying interest rates and maturities.
NOTE 6 - RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS:
Holdings has adopted SFAS No. 130, _Reporting Comprehensive Income_, as
of January 1, 1998. SFAS No. 130 establishes standards for the reporting
and display of comprehensive income and its components in a full set of
general purpose financial statements. Comprehensive income is defined as
the total of net income and all other non-owner changes in equity.
Holdings Comprehensive Income for the quarter ended and nine months
ended September 30, 1998 would be as follows (in thousands):
<PAGE>
3 months 9 months
-------- --------
Net income (loss) $150 $(448)
Foreign currency translation
adjustments (net of tax) 107 (55)
---- -----
Comprehensive income (loss) $257 $(503)
==== =====
Adjustments to other non-owner changes will be reflected in comprehensive
income and cumulative comprehensive income that will be reported in the
consolidated statement of shareholders' equity in Holding's Annual Report
on Form 10-K for the fiscal year ending December 31, 1998.
Holdings has adopted SFAS No. 131, Disclosure about Segments of An
Enterprise and Related Information, as of January 1, 1998. This
pronouncement changes the requirements under which public businesses must
report segment information. The objective of the pronouncement is to
provide information about a company's different types of business
activities and different economic environments. SFAS No. 131 requires
companies to select segments based on their internal reporting system.
Hedstrom is assessing the impact on its disclosures of this
pronouncement. As required by SFAS No 131, compliance with the respective
reporting requirements will be reflected in Holdings 1998 Annual Report
on Form 10-K for the fiscal year ended December 31, 1998.
Holdings has adopted SFAS No. 132, Employees' Disclosures about Pension
and Other Postretirement Benefits, as of January 1, 1998. This
pronouncement revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or
recognition of those plans, however, it does require additional
information on changes in the benefit obligations and fair values of plan
assets in order to facilitate financial analysis. Management does not
believe that SFAS No. 132 will have a significant impact on Holdings'
financial statements.
The Financial Accounting Standards Board has issued SFAS No. 133,
Accounting for Derivative and Similar Financial Instruments For Hedging
Activities. This pronouncement revises the accounting for derivative
financial instruments. It requires entities to recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value. The adoption of this statement is required
for fiscal years beginning after June 15, 1999. The Company has entered
into interest rate swap agreements to hedge exposure to variable interest
rate debt. The Company will recognize these derivatives at fair value in
its financial statements if these agreements are outstanding as of
January 1, 1999. The adoption of this pronouncement is not expected to
have a significant impact on the Company's financial position or results
of operations.
The Financial Accounting Standards Board has issued SFAS No. 134
Accounting For Mortgage-Backed Securities. SFAS No. 134 will have no
effect on the financial condition or results of operations of the
Company.
<PAGE>
NOTE 7 - SUBSIDIARY GUARANTORS / NONGUARANTORS FINANCIAL INFORMATION:
The following is financial information pertaining to Hedstrom and its subsidiary
nonguarantors (with respect to the Senior Subordinated Notes and the Senior
Credit Facilities) for the periods in which they are included in Holding's
accompanying consolidated financial statements.
<TABLE>
HEDSTROM CORPORATION AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
(In thousands)
At September 30, 1998 At December 31, 1997
------------------------------------------ -----------------------------------------------
Hedstrom Hedstrom
Hedstrom Subsidiary Hedstrom Subsidiary
Subsidiary Non- Adjustment Total Subsidiary Non- Adjustments/ Total
Assets Guarantor guarantor Eliminations Hedstrom Guarantors guarantors Eliminations Hedstrom
========================== ========== ========= ============ ======== ========== ========== ============ ========
<S>
Current assets: <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 1,941 $ 1,605 $ - $ 3,546 $ 8,984 $ 1,860 $ - $ 10,844
Accounts receivable, net 53,735 10,478 - 64,213 73,625 9,077 - 82,702
Inventories 44,155 17,416 (160) 61,411 38,429 9,075 (40) 47,464
Deferred income taxes(c) 7,050 - - 7,050 7,045 - - 7,045
Prepaid expenses and other
current assets 4,380 339 - 4,719 4,310 491 - 4,801
-------- ------- -------- -------- -------- -------- -------- --------
Total current assets 111,261 29,838 (160) 140,939 132,393 20,503 (40) 152,856
-------- ------- -------- -------- -------- -------- -------- --------
Property, plant, and
equipment, net 29,249 16,370 - 45,619 27,448 15,375 - 42,823
-------- ------- -------- -------- -------- -------- -------- --------
Other assets:
Investment in and advances
to Nonguarantor
Subsidiaries 45,080 - (45,080) - 44,799 - (44,799) -
Deferred charges, net 15,006 - - 15,006 17,715 - - 17,715
Goodwill, net 157,207 19,058 - 176,265 142,692 18,484 - 161,176
Deferred income taxes 10,574 (478) - 10,096 10,579 (522) - 10,057
-------- ------- -------- -------- -------- -------- -------- --------
Total other assets 227,867 18,580 $45,240 201,367 215,785 17,962 (44,799) 188,948
-------- ------- -------- -------- -------- -------- -------- --------
Total assets $368,377 $64,788 $45,240 $387,925 $375,626 $ 53,840 $(44,839) $384,627
======== ======= ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
HEDSTROM CORPORATION AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
(In thousands)
At September 30, 1998 At December 31, 1997
------------------------------------------ -----------------------------------------------
Hedstrom Hedstrom
Hedstrom Subsidiary Hedstrom Subsidiary
Subsidiary Non- Adjustment Total Subsidiary Non- Adjustments/ Total
Guarantor guarantor Eliminations Hedstrom Guarantors guarantors Eliminations Hedstrom
========== ========= ============ ======== ========== ========== ============ ========
Liabilities and
stockholders' equity
==========================
<S>
Current liabilities: <C> <C> <C> <C> <C> <C> <C> <C>
Revolving line of credit $ 14,551 $ 9,049 $ - $23,600 $ 33,282 $ 2,218 $ - $ 35,500
Current portion of long
term debt and capital
leases 11,184 740 - 11,924 8,492 730 - 9,222
Advances from Guarantor
Subidiaries - 32,270 (32,270) - - 31,956 (31,956) -
Accounts payable (c) 18,574 4,087 - 22,661 20,784 2,597 - 23,381
Accrued expenses 13,821 5,309 (132) 18,998 23,939 2,432 (16) 26,355
-------- ------- -------- --------- -------- ------- -------- --------
Total current
liabilities 58,130 51,455 (32,402) 77,183 86,497 39,933 (31,972) 94,458
-------- ------- -------- --------- -------- ------- -------- --------
Senior Subordinated
Notes 110,000 - - 110,000 110,000 - - 110,000
Term Loans 124,484 - - 124,484 104,375 - - 104,375
Capital leases 1,796 - - 1,796 1,605 - - 1,605
Other 1,675 394 - 2,069 1,857 1,057 - 2,914
-------- ------- -------- --------- -------- ------- -------- --------
Total long-term debt(a) 237,955 394 - 283,349 217,837 1,057 - 218,894
-------- ------- -------- --------- -------- ------- -------- --------
Total liabilities 296,085 51,849 (32,402) 315,532 304,334 40,990 (31,972) 313,352
-------- ------- -------- --------- -------- ------- -------- --------
Total stockholder's
equity 72,292 12,939 (12,838) 72,393 71,292 12,850 (12,867) 71,275
-------- ------- -------- --------- -------- ------- -------- --------
Total liabilities and
stockholders' equity $368,377 $64,788 $(45,240) $387,925 $375,626 $53,840 $(44,839) $384,627
======== ======= ======== ========= ======== ======= ======== ========
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATING INCOME STATEMENTS
(In thousands)
Three Months Ended September 30, 1998 Three Months Ended September 30, 1997
------------------------------------------- -----------------------------------------------
Hedstrom Hedstrom
Hedstrom Subsidiary Hedstrom Subsidiary
Subsidiary Non- Adjustments/ Total Subsidiary Non- Adjustments/ Total
Statement of Operations Guarantor guarantor Eliminations Hedstrom Guarantors guarantors Eliminations Hedstrom
======================= ========= ========= ============ ======== ========== ========== ============ ========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $59,524 $18,112 $(13,283) $64,353 $56,524 $21,039 $(16,101) $61,462
Cost of sales 41,033 13,048 (13,272) 40,809 43,564 15,599 (17,441) 41,722
------- ------- -------- ------- ------- ------- -------- -------
Gross profit (loss) 18,491 5,064 (11) 23,544 12,960 5,440 1,340 19,740
Selling, general and
administrative expense 12,519 2,864 - 15,383 12,743 1,659 14 14,416
------- ------- -------- ------- ------- ------- -------- -------
Operating income (loss) 5,972 2,200 (11) 8,161 217 3,781 1,326 5,324
Interest expense (c) 6,239 684 - 6,923 5,399 690 - 6,089
------- ------- -------- ------- ------- ------- -------- -------
Income (loss) before
income taxes (267) 1,516 (11) 1,238 (5,182) 3,091 1,326 (765)
Income tax provision
(benefit) (c) (114) 633 (4) 515 (2,141) 1,603 273 (265)
------- ------- -------- ------- ------- ------- -------- -------
Net income (loss) $ (153) $ 883 $ (7) $ 723 $(3,041) $1,488 $ 1,053 $(500)
======= ======= ======== ======= ======= ======= ======== =======
</TABLE>
<PAGE>
<TABLE>
HEDSTROM CORPORATION AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENTS
(In thousands)
Nine Months Ended September 30, 1998 Nine Months Ended September 30, 1997
------------------------------------------- ----------------------------------------------
Hedstrom Hedstrom
Hedstrom Subsidiary Hedstrom Subsidiary
Subsidiary Non- Adjustments/ Total Subsidiary Non- Adjustments/ Total
Statement of Operations Guarantor guarantor Eliminations Hedstrom Guarantors guarantors Eliminations Hedstrom
======================= ========= ========= ============ ======== ========== ========== ============ ========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $215,798 $33,717 $(23,501) $226,014 $157,447 $28,063 $(19,997) $165,513
Cost of sales 156,143 24,733 (23,551) 157,325 114,908 20,361 (19,968) 115,301
-------- ------- -------- -------- -------- ------- -------- --------
Gross profit 59,655 8,984 50 68,689 42,539 7,702 (29) 50,212
Selling, general and
administrative expense 39,007 7,065 - 46,072 28,013 2,645 - 30,658
-------- ------- -------- -------- -------- ------- -------- --------
Operating income (loss) 20,648 1,919 50 22,617 14,526 5,057 (29) 19,554
Interest expense (c) 18,699 1,867 - 20,566 9,763 909 - 10,672
-------- ------- -------- -------- -------- ------- -------- --------
Income (loss) before
income taxes 1,949 52 50 2,051 4,763 4,148 (29) 8,882
Income tax provision
(benefit) (c) 692 128 21 841 1,708 1,624 (12) 3,320
-------- ------- -------- -------- -------- ------- -------- --------
Net income (loss) $ 1,257 $ (76) $ 29 $ 1,210 $ 3,055 $2,524 $ (17) $ 5,562
======== ======= ======== ======== ======== ======= ======== ========
</TABLE>
<PAGE>
<TABLE>
HEDSTROM CORPORATION AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended September 30, 1998 Nine Months Ended September 30, 1997
------------------------------------ -------------------------------------------
Hedstrom Hedstrom
Hedstrom Subsidiary Hedstrom Subsidiary
Subsidiary Non- Adustments/ Total Subsidiary Non- Adjustments/ Total
Guarantor guarantor Eliminations Hedstrom guarantor guarantor Eliminations Hedstrom
========= ========= ============ ======== ========= ========== ============ ========
<S>
Cash flows from operating
activities: <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) $ 1,257 $ (76) $ 29 $ 1,210 $ 3,055 $2,524 $(17) $ 5,562
Adjustments to reconcile net
income (loss) to net cash
(used for) provided by
operating activities:
Depreciation of property,
plant and equipment and
amortization of goodwill
and deferreds 10,277 2,004 - 12,281 6,602 363 - 6,965
Deferred income tax
provision (c) (44) - - (44) 3,468 14 - 3,482
Changes in current assets and
current liabilities, net of
acquisitions:
Accounts receivable 20,992 (1,401) - 19,591 (16,718) (5,116) - (21,834)
Inventories (2,351) (8,341) (200) (10,892) 95 (3,598) 29 (3,474)
Prepaid expenses and other 20 152 - 172 (351) 81 - (270)
Accounts payable (3,168) 1,490 - (1,678) (2,554) 1,349 - (1,205)
Accrued expenses (10,517) 2,877 171 (7,469) (6,929) 3,525 (12) (3,416)
Other - - - - (12) 12 - -
-------- ------ ----- --------- -------- ------ ---- --------
Net cash (used for) provided by
operating activities 16,466 (3,295) - 13,171 (13,344) (846) - (14,190)
-------- ------ ----- --------- -------- ------ ---- --------
Cash flows from investing
activities:
Acquisitions of property plant
and equipment (5,409) (1,896) - (7,305) (4,495) (841) - (5,336)
Acquisition of ERO, Inc. (3,037) - (3,037) (122,600) - - (122,600)
Other Acquisition (16,805) (3,500) - (20,305) (2,249) - - (2,249)
-------- ------ ----- -------- -------- ------ ---- ---------
Net cash used for investing
activities (25,251) (5,396) - (30,647) (129,344) (841) - (130,185)
-------- ------ ----- -------- -------- ------ ---- ---------
</TABLE>
<PAGE>
<TABLE>
HEDSTROM CORPORATION AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended September 30, 1998 Nine Months Ended September 30, 1997
------------------------------------ -------------------------------------------
Hedstrom Hedstrom
Hedstrom Subsidiary Hedstrom Subsidiary
Subsidiary Non- Adustments/ Total Subsidiary Non- Adjustments/ Total
Guarantor guarantor Eliminations Hedstrom guarantor guarantor Eliminations Hedstrom
========= ========= ============ ======== ========= ========== ============ ========
<S>
Cash flows from financing
activities:
Net proceeds from issuance of <C> <C> <C> <C> <C> <C> <C> <C>
Senior Subordinated notes - - - - 110,000 - - 110,000
Net proceeds from issuance of
new term loans 30,000 - - 30,000 110,000 - - 110,000
Equity contribution from
Holdings (b) - - - - 63,062 - - 63,062
Principal payments on (7,249) - - (7,249) - - - -
Borrowings on new revolving
line of credit (11,900) - - (11,900) 8,300 - - 8,300
Repayments of old term loans - - - - (85,643) (5,750) - (91,393)
Debt financing cost (b) - - - - (16,550) - - (16,550)
Borrowings (repayments) on
old revolving lines
of credit, net - - - - (38,925) - - (38,925)
Advances to/(from)
Nonguarantor subsidiaries (9,099) 9,099 - - (8,100) 8,100 - -
Other (10) (663) - (673) 647 - - 647
-------- ------ ----- -------- -------- ------ ---- ---------
Net cash (used for) provided
by financing activities 1,742 8,436 - 10,178 142,791 2,350 - 145,141
-------- ------ ----- -------- -------- ------ ---- ---------
Net increase (decrease) in
cash and cash equivalents (7,043) (255) - (7,298) 103 663 - 766
Cash and cash equivalents:
Purchased cash - - - - 530 325 - 855
Beginning of period 8,984 1,860 - 10,844 467 66 - 533
-------- ------ ----- -------- -------- ------ ---- ---------
End of period $ 1,941 $1,605 $ - $ 3,546 $ 1,100 $1,054 $ - $ 2,154
======== ====== ===== ======== ======== ====== ==== =========
</TABLE>
<PAGE>
Each of the Subsidiary Guarantors is a wholly-owned subsidiary of Hedstrom and
has fully and unconditionally guaranteed the Senior Subordinated Notes on a
joint and several basis. The Company has not presented separate financial
statements and other disclosures concerning each subsidiary Guarantor
because management has determined that such information is not material to
investors.
The column "Total Hedstrom" represents the consolidated financial statements of
Hedstrom Corporation and its subsidiaries. Hedstrom Corporation is Holdings'
only direct subsidiary. The primary differences between the consolidated
amounts of Hedstrom Corporation and the consolidated amounts included in the
accompanying consolidated financial statements of Holdings are as follows:
(a) Hedstrom Corporation's Long-Term Debt does not include a $2.5 million note
payable issued by Holdings in connection with its 1995 recapitalization, and
the issuance of Senior Discount Notes valued at $25.8 million at
September 30, 1998.
(b) Hedstrom Corporation's stockholder's equity includes Holdings' stockholders
equity plus $21.6 million in proceeds from the issuance of Senior Discount
Notes, which proceeds were contributed as equity by Holdings to
Hedstrom Corporation less the interest, net of taxes, accrued thereon and,
as of both September 30, 1998 and December 31, 1997, the $2.5 million note
payable described in (a) above less the interest, net of taxes, accrued thereon.
(c) Accounts payable, Interest expense and deferred income taxes do not
reflect the accrued interest, interest expense and the deferred tax benefit
of accrued interest on the obligations discussed in (a) above.
<PAGE>
NOTE 8 - ACQUISITIONS:
On July 24, 1998 the Company acquired 100% of the outstanding shares of
Backyard Products Limited, which has annual sales of approximately $13.9
million, a leading Canadian manufacturer and supplier of wood gym sets
and accessories. The purchase price of approximately $16.8 million was
financed through an amendment to the Company's existing Senior Credit
Facilities, which increased the Tranche B Term Loan by $30 million. The
$30 million proceeds from the amendment were used to fund the acquisition
as well as to pay down borrowings under the Revolving Credit Facility.
The acquisition was accounted for as a purchase; accordingly, the
purchase price was allocated to the underlying assets and liabilities
based on their respective estimated fair values at the date of the
acquisition. The estimated value of assets acquired was $4.9 million and
the liabilities assumed was $2.7 million. The excess of the purchase
price over the value of the net assets acquired was recorded as goodwill
and will be amortized over 40 years.
NOTE 9 - SUBSEQUENT EVENTS:
Members of the Rubber Workers Union in Ashland, Ohio ceased production at
the Ashland Division Plant on October 3, 1998. The work stoppage at the
Ashland facility was resolved on October 10, 1998 when a tentative agreement
was reached. The new collective bargaining agreement was ratified by the rank
and file on October 12, 1998 and will expire on October 2, 2001. The work
stoppage did not have a material effect on the Company's operations or its
ability to service its customers on a timely basis.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion of the Company's results of operations and
financial condition should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto contained
herein, as well as those included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997 as filed with the Securities
and Exchange Commission. This Quarterly Report on Form 10-Q contains
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, which are subject to risks
and uncertainties that could cause actual results to differ materially
from those expressed or implied in such statements. These risks, which
are further detailed in the Registration Statement on Form S-1 of the
Company as filed with the Securities and Exchange Commission (File Nos.
333-32385-05 and 333-32385), include, but are not limited to, the
Company's recent net losses, substantial leverage and debt service,
financing restrictions and covenants, reliance on key customers,
dependence on key licenses and obtaining new licenses, raw materials prices
and product liability risks. In addition, such forward-looking statements
are necessarily dependent upon assumptions, estimates and dates that may be
incorrect or imprecise and involve known and unknown risks, uncertainties
and other factors. Accordingly, any forward-looking statements included
herein do not purport to be predictions of future events or circumstances
and may not be realized. Forward-looking statements can be identified by,
<PAGE>
among other things, the use of forward -looking terminology such as believes,
expects, may, will, should, seeks, pro-forma, anticipates or intends' or
the negative of any thereof, or other variations or comparable terminology,
or by discussions of strategy or intentions. Given these uncertainties,
undue reliance should not be placed on any forward-looking statements.
The Company disclaims any obligation to update any such factors or to
publicly announce the results of any revisions to any of the forward-
looking statements contained herein to reflect future events or
developments.
Results of Operations
The following table sets forth net sales and gross profit for each of
Hedstrom's operating divisions for the periods indicated:
<PAGE>
Three months Nine months
Ended September 30, Ended September 30,
------------------- -------------------
(In Millions)
-------------
1997 1998 1997 1998
---- ---- ---- ----
Net sales
Bedford Division $11.4 $7.4 $ 93.4 $ 66.1
Ashland Division 6.3 5.5 30.6 30.2
International Division 3.2 1.4 17.1 8.0
ERO Divisioin 20.2 21.9 45.6 27.5
Amav Division 23.3 25.3 39.3 33.7
----- ----- ----- ------
Total net income $64.4 $61.5 $226.0 $165.5
===== ===== ====== ======
Gross profit:
Bedford Division $1.7 $0.8 $19.4 17.0
Ashland Division 1.2 0.5 7.3 8.2
International Division 0.6 0.3 3.2 1.9
ERO Division 10.9 9.7 10.1 11.5
Amav Division 9.1 8.4 5.1 11.6
----- ----- ----- -----
Total gross profit $23.5 $19.7 $68.7 $50.2
===== ===== ===== =====
A comparison of the Company's results of operations for the nine months
ended September 30, 1998 with the same period in 1997 is necessarily
affected by the impact of the consummation of the acquisition of ERO on
June 12, 1997. Due to the inclusion of ERO's results from and after June
12, 1997, management does not believe the comparison of operating results
with the same period in 1997 is meaningful.
Net Sales. Consolidated net sales for the third quarter ended
September 30, 1998 increased to $64.4 million from $61.5 million for the
comparable prior year quarter, an increase of $2.9 million. The increase
was a result of higher sales at the Bedford, International and Ashland
Divisions which were partially offset by lower sales at the ERO and AMAV
divisions. Net sales of the Bedford Division increased by $4.0 million
for the third quarter versus the prior year comparable quarter. The
increase was primarily a result of increased sales of trampolines as a
result of the acquisition of Bollinger Industries, Inc.'s trampoline
business, increased sales of sports related items such as Turbo Hoops,
and increased wood kit sales as a result of the acquisition of Backyard
Products Limited (see Note 8 of the Notes to Consolidated Financial
Statements). These increases were partially offset by lower sales of
Spring Horses during the quarter due to inventory reduction efforts by
Toys R Us. The net sales of the International Division for the third
quarter increased by $1.8 million as compared to the prior years third
quarter. The increase can be attributed to the acquisition of certain
assets of Bestoy, a U.K. manufacturer, made during the first quarter of
1998. Net sales of the Ashland Division increased by $0.8 million
versus the prior year comparable quarter mainly as a result of greater
<PAGE>
demand for children's ball pits, the effects of which were partially
offset by lower sales of OEM products. The aforementioned increases in
third quarter sales, as compared to the prior years third quarter, were
partially offset by lower net sales at the ERO and AMAV Divisions. The
ERO Division's net sales decreased by $1.7 million to $20.2 million for
the quarter ended September 30, 1998 as compared to the prior years third
quarter. The decrease was primarily attributable to fewernew product
introductions of Priss Prints products, inventory reduction efforts by
Toys R Us (which impacted all ERO product lines), reduced offerings of the
Coral product lines and timing of licenses relating to the Slumber Shoppe
line of products. Net sales of the AMAV division decreased by $2.0 million
to $23.3 million for the third quarter of 1998 versus the third quarter of
1997. The decrease was primarily due to close-out sales of Impact product
which increased sales made during the third quarter of 1997.
Consolidated net sales for the nine months ended September 30, 1998
versus the nine months ended September 30, 1997 increased to $226.0
million from $165.5 million, an increase of $60.5 million. The increase
was attributable to increased sales at the Bedford Division, the
inclusion of the ERO and AMAV Divisions for the full year to date period
versus their inclusion for only four months during the same period of
1997, and increased sales at the International and Ashland Divisions.
Net sales of the Bedford Division increased by $27.3 million for the
year to date period ended September 30, 1998 versus the same period of
1997. The increase was primarily due to increased sales of trampolines
as a result of the acquisition of Bollinger Industries, Inc.'s trampoline
business, increased gym set sales as a result of increased market share,
and higher sales of OEM, Preschool and Sports products. The higher OEM,
Preschool and Sports products net sales were partially offset by lower
sales of Spring Horses due to inventory reduction efforts by Toys R Us.
The inclusion of the ERO and AMAV Divisions for the full nine months of
the year to date period ended September 30, 1998 versus their inclusion
for only four months for the same period of 1997 resulted in increased
sales of $23.7 million. The International Division's increase can be
attributed to the acquisition of certain assets of Bestoy, a U.K.
Manufacturer, during the first quarter of 1998 and sales associated with
the acquisition of M.A. Henry Limited, a Canadian manufacturer, in August
of 1997. Net sales for the Ashland Division for the first nine months of
1998 versus the same period of 1997 increased slightly as a result of
greater demand for children's ball pits.
Gross Profit. Consolidated gross profit for the third quarter ended
September 30, 1998 increased by $3.8 million to $23.5 million as compared
to $19.7 million for the third quarter ended September 30, 1997,
primarily as a result of higher consolidated net sales and favorable
manufacturing variances. As a percentage of consolidated net sales,
consolidated gross profit percentage increased to 36.6% in the third
quarter of 1998 from 32.1% in the third quarter of 1997. The increase
was due to higher gross margins at the ERO, AMAV, Bedford and Ashland
divisions during the third quarter of 1998 versus the third quarter of
1997, though primarily at the ERO and AMAV Divisions which represented
68% of consolidated net sales for the quarter. The ERO Division's gross
profit percentage increased to 53.9% in the third quarter of 1998 versus
44.4% during the third quarter of 1997. The increase was due primarily
to favorable manufacturing variances related to increased production
volume as the ERO Division was building inventory in anticipation of fourth
<PAGE>
quarter sales, as well as a more favorable product sales mix and more
favorable material costs. The AMAV Division's gross profit percentage
increased to 39.2% for the third quarter of 1998 from 33.4% for the third
quarter of 1997. The increase was primarily a result of higher average
selling prices of Impact products, as sales during the third quarter of 1997
included a relatively high level of low margin close-out sales. The gross
profit percentage of the AMAV Division was also impacted by a more favorable
product sales mix.
The gross profit percentage at the Bedford Division increased to 15.0 during
the third quarter of 1998 from 10.8% during the third quarter of 1997. The
increase was a result of favorable manufacturing cost absorption caused by
increased volume of trampoline production and sales, the effects of which
more than offset the negative impact of an unfavorable product sales mix.
The gross profit percentage at the Ashland Division increased to 19.8% for
the quarter ended September 30, 1998 versus 8.3% for the quarter ended
September 30, 1997. The increase was due to increased sales of ball pits,
which have relatively high gross profit margins. The International
Division's gross profit percentage decreased from 20.9% to 17.6% as a result
of unfavorable product mix.
Consolidated gross profit for the nine months ended September 30, 1998
increased by $18.5 million to $68.7 million as compared to $50.2 million
for the nine months ended September 30, 1997, primarily as a result of
higher consolidated net sales. As a percentage of consolidated net
sales, the consolidated gross profit percentage increased slightly to
30.4% for the nine months ended September 30, 1998 from 30.3% for the
comparable period in 1997. Increases from the inclusion of the ERO and
AMAV Divisions, for the nine month period ended September 30, 1998
(versus only four months during the same period in 1997), which have a
higher overall gross profit percentage than the other divisions of
Hedstrom, were partially offset by a decrease in the Bedford Division's
gross profit percentage. The Ashland and International Divisions gross
profit percentages remained relatively flat during the nine month period
ended September 30, 1998 when compared to the same period of 1997. The
Bedford Division's gross profit percentage for the nine months ended
September 30, 1998 decreased from 25.6% to 22.6% compared to the prior
year. The decline in the Bedford Division's gross profit percentage for
the nine months ended September 30, 1998 was due to increased sales of
trampolines, which carry a lower gross profit percentage, and decreased
sales, as a percentage of total Bedford Division sales, of gym sets and
wood kits, which generally carry a higher overall gross margin.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.0 million to $15.4 million in the
third quarter of 1998 from $14.4 million in the third quarter of 1997
mainly as a result of higher sales. As a percentage of net sales,
selling, general and administrative expenses for the quarter ended
September 30, 1998 were 23.9% versus 23.4% for the quarter ended
September 30, 1997.
For the nine month period ended September 30, 1998, selling, general and
administrative expenses increased $15.4 million to $46.1 million from
$30.7 for the nine month period ended September 30, 1997. As a
percentage of net sales, selling, general and administrative expenses for
<PAGE>
the nine month period ended September 30, 1998 were 20.4% versus 18.5%
for the comparable period of 1998. The increase was primarily due to the
inclusion of the ERO and AMAV Divisions, which experience relatively high
selling, general and administrative expenses, and the inclusion of
amortization of acquisition-related intangible assets and royalty
expenses.
Interest Expense. For the three month period ended September 30, 1998,
interest expense increased by $1.1 million to $7.9 million. The
increase in interest expense was a result of higher average debt levels
associated with higher working capital requirements and the additional
debt associated with the acquisition of Backyard Products Limited (see
Note 8 of the Notes to Consolidated Financial Statements).
Interest expense for the nine month period ended September 30, 1998
versus the comparable period in 1997 increased $11.9 million to $23.4
million. The increase in interest expense was a result of higher average
debt levels associated with the acquisition related debt and<PAGE>
higher working
capital requirements.
Income Tax Expense. Holdings effective tax rate for the quarter ended
September 30, 1998 was 43.3% versus 37.8% for the quarter ended September
30, 1997. The effective rate for the nine months ended September 30,
1998 was 41.0% versus 37.0% for the prior year comparable period. The
increase was attributable to the acquisition of ERO, which generated a
large amount of non-deductible goodwill.
Liquidity and Capital Resources of the Company
Working Capital and Cash Flows
Net cash provided by operating activities was $13.2 million for the
nine months ended September 30, 1998. The cash provided by operations
reflects the seasonal nature of the Company's sales. The ERO and Amav
Division's sales and accounts receivable build during the second half of
the year and are liquidated in the first half of the following year. The
Bedford, Ashland and International Divisions build sales and accounts
receivable during the first half of the year and liquidate during the
second half of the year.
Net cash used for investing activities was $30.7 million during the nine
months ended September 30, 1998, including $16.8 million used for the
acquisition of Backyard Products Limited (as discussed in Note 8 of the
Notes to Consolidated Financial Statements), $7.3 million used for the
acquisition of property, plant and equipment, $3.0 million of contingency
payments relating to the ERO Acquisition (as discussed in Note 2 of the
Notes to Consolidated Financial Statements) and $3.5 million used to
purchase certain assets from Bestoy, a U.K. manufacturer.
Net cash provided by financing activities was $10.3 million, representing
net proceeds from an additional $30.0 million of Tranche B Term Loans
used to fund the acquisition of Backyard Products Limited and paydown a
portion of the Company's outstanding Revolver Balance. The Company also
made $7.2 million of principal payments on the Company's other term
loans.
<PAGE>
Liquidity
Interest payments on the Senior Subordinated Notes and interest and
principal payments under the Senior Credit Facilities, represent
significant cash requirements for the Company. The Senior Subordinated
Notes require semiannual interest payments of $5.5 million. Borrowings
under the Senior Credit Facilities bear interest at floating rates and
require interest payments on varying dates depending on the interest rate
option selected by the Company. Borrowings under the Senior Credit
Facilities consisted of $140 million under the Term Loan Facilities,
comprised of a $75 million Tranche A Term Loan maturing in 2003 and a $65
million Tranche B term loan maturing in 2005 (on July 24, 1998, the
Tranche B Term Loan was increased $30 million to $65 million to, among
other things, fund the acquisition of Backyard Products Limited, (see
further discussion at Note 8 of the Notes to Consolidated Financial
Statements)). The Senior Credit Facilities also include a $70 million
Revolving Credit Facility. As of September 30, 1998, a balance of
$23.6 million was outstanding under the Revolving Credit Facility.
At present, the Discount Notes do not require cash interest payments.
Rather, principal will accrete to an aggregate principal amount of $44.6
million on June 1, 2002. Commencing on such date, Holdings will be
required to make semiannual interest payments of $2.7 million.
The Company's remaining liquidity demands will be for capital
expenditures and for working capital needs. For the foreseeable future,
the Company expects that its capital expenditures will be limited
primarily to maintaining existing facilities and equipment and completing
its insourcing of manufacturing certain components. The Company's credit
agreement imposes an annual limit of $10.0 million on its capital
expenditures and investments (subject in any given year to a roll-over of
up to $4.0 million of unused capital expenditure capacity from the
previous year).
The Company's primary sources of liquidity are cash flows from operations
and borrowings under the Revolving Credit Facility. As of September 30,
1998, the Company had $3.5 million of cash on hand and approximately
$31.6 million was available to the Company under the Revolving Credit
Facility (subject to borrowing base limitations). Management believes
that cash generated from operations, together with borrowings under the
Revolving Credit Facility, will be sufficient to meet the Company's
working capital and capital expenditures needs for the foreseeable
future.
The recent and well-publicized changes in inventory policies and
purchasing practices of Toys R Us - the Company's largest customer in
1997 - and, to a lesser extent, those of the Company's other customers
have adversely affected the 1998 sales levels of the Company and of the
industry generally. Management anticipates that the effects of these
changes will persist at least through the fourth quarter of 1998. As a
consequence, it is projected that the Company will not be in compliance
with certain financial covenants under its Senior Credit Facilities as of
the end of 1998. The Company has notified the agent for the Company's
senior lenders of these developments and will soon commence discussions
with its senior lenders regarding possible amendments to the financial
<PAGE>
covenants under the Senior Credit Facilities. Although the Company
anticipates that it will be able to obtain the necessary amendments,
there can be no assurances as to the outcome of the Company's discussions
with its senior lenders.
Year 2000 Date Conversion
The Company relies on a significant number of computer programs and
computer technologies (collectively, IT) and non-IT Systems for its key
operations, including product design, finance and various administrative
functions. In July of 1997 the Company began an impact assessment of the
Year 2000 on our business systems and our ability to provide product,
information, and services to our business partners before, during and
after the Year 2000. The result of this assessment was a two phase plan
to ensure Year 2000 compliance. Phase I of our Year 2000 compliance plan
addresses our mainframe business systems which need to be converted to
handle Year 2000 dates. Phase II addresses computer hardware, stand-alone
systems, and embedded systems which may need to be upgraded by year end 1999.
Conversion of Phase I data bases and programs was completed in July,
1998. The systems testing phase is now in progress and is anticipated to
be completed in the first quarter of 1999. The Company plans to install
the converted business systems in April 1999.
Assessment of all computer hardware, stand-alone systems, communications
hardware and software (phase II) which may require replacement or upgrade
by January 2000 is now in progress and these systems will be replaced or
upgraded throughout 1999.
In addition, the Company is evaluating the status of key vendors as it
relates to their Year 2000 readiness to ensure that our ability to
produce and deliver product is not impacted by Year 2000 issues. As this
evaluation is completed the Company will decide what further actions, if
any, are appropriate.
The Company anticipates that costs related to ensuring Year 2000
compliance will approximate $1.0 million. The Company believes that it
has funds available through its existing credit facilities to address the
Year 2000 costs. These costs will include software, hardware and
consulting expenses which are being expensed as incurred. While the
Company is confident that the Year 2000 issues are manageable and will be
dealt with in a timely fashion, this conclusion is forward looking and
involves uncertainty and risks. The ultimate result may be impacted by a
variety of factors such as, but not limited to, remediation of existing
IT systems, the failure to identify problems associated with non-IT
systems which could materially impact the Company's ability to transact
its business and problems associated with supplier or customer
information systems which could have a similar impact.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is currently involved in several lawsuits arising
in the ordinary course of business. The Company maintains
insurance covering such liability, and does not believe that
the outcome of any such lawsuits will have a material adverse
effect on the Company's financial condition.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(1) 2.1 - Agreement and Plan of Merger, dated as of April 10,
1997, among Hedstrom Corporation, HC Acquisition Corp.
and ERO, Inc.
(1) 3.1 - Restated Certificate of Incorporation of Hedstrom
Holdings, Inc., as filed with the Secretary of State
of the State of Delaware on October 27, 1995.
(1) 3.2 Certificate of Amendment of Restated Certificate of
Incorporation of Hedstrom Holdings, Inc., as filed with
the Secretary of State of the State of Delaware on
June 6,1997
(1) 3.3 - Restated Bylaws of Hedstrom Holdings, Inc.
(1) 3.4 - Certificate of Incorporation of New Hedstrom Corp.,
as filed with the Secretary of State of the State of
Delaware on November 20, 1990.
(1) 3.5 - Certificate of Amendment of the Certificate of
Incorporation of New Hedstrom Corp., as filed with the
Secretary of State of the State of Delaware on January
14, 1991.
(1) 3.6 - By-Laws of Hedstrom Corporation.
(1) 4.1 - Indenture, dated as of June 1, 1997, among Hedstrom
Corporation, Hedstrom Holdings, Inc., the Subsidiary
Guarantors identified on the signature pages thereto
and IBJ Schroder Bank & Trust Company, as Trustee.
(1) 4.2 - Form of Senior Subordinated Note.
(1) 4.3 - Indenture, dated as of June 1, 1997, among Hedstrom
Holdings, Inc. and United States Trust Company of New
York, as Trustee.
(1) 4.4 - Form of Discount Note.
<PAGE>
(2) 10.1 - Stock Purchase Agreement, dated July 24, 1998 by
and between Hedstrom Corporation and Richard Boyer.
(2) 10.2 - Amendment Number Three dated July 24, 1998 to the
Credit Agreement, dated as of June 12, 1997, among
Hedstrom Corporation, Hedstrom Holdings, Inc., the
financial institution party thereto and Credit Suisse.
(3) 10.3 - Collective Bargaining Agreement, dated October 3,
1998 by and between Hedstrom Corporation and The United
Steel Workers of America, AFL-CIO-CLC, on behalf of
its affiliated Local Union No. 524L
(3) 11.1 - Computation of Earnings Per Share.
(3) 27.1 - Financial Data Schedule.
(1) Incorporated by reference to the respective exhibit in
Holdings' and Hedstrom's Registration Statement on Form S-1
(File Nos. 333-32385-05 and 333-32385).
(2) Incorporated by reference to the respective exhibit in
Holdings' and Hedstrom's Quarterly Report on Form10-Q for the
quarterly period ended June 30, 1998 filed with the Commission
on or about August 14, 1998
(3) Filed herewith
b) Reports on Form 8-K
The registrant has not filed any reports on Form 8-K during
the quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf
by the undersigned thereunto duly authorized.
Date: November 16, 1998
HEDSTROM HOLDINGS, INC.
HEDSTROM CORPORATION
/s/ David F. Crowley
David F.Crowley
Chief Financial Officer
AGREEMENT
between
THE PLASTICS DIVISION OF
HEDSTROM CORPORATION
and
THE UNITED STEELWORKERS
OF AMERICA, AFL-CIO-CLC,
ON BEHALF OF ITS AFFILIATED
LOCAL UNION NO. 524L
Effective October 3, 1998
AGREEMENT
This Agreement is made and entered into by an between the PLASTICS
DIVISION OF HEDSTROM CORPORATION, hereinafter called the Company and
the United Steelworkers of America, AFL-CIO-CLC, On Behalf Of Its
Affiliated Local Union No. 524L, hereinafter called the Union.
October 3, 1998
Page Article
Absence
Address 12
Agreement
Arbitration 5
Attendance
Base Rate 8
Bidding 9
Data Collection Terminal (time recording) 13
Departments 9
Discharge 4
Disciplinary Action 4
Discipline Side Letter Agreement
Employee-Decided & Employee Paid Additional
Insurance Options Side Letter
Experimental Work 6
Federal Mediation 5
Funeral Pay
Grievances 3
Grievance Procedure 4
Group Leader Side Letter
Holidays 7
Hours of Work 6
Incentive Rates 4
Incentive Side Letter Agreement
Injuries 8
Injury Reporting
Insurance 10
Irrevocability 2
Job Disqualification Reconsideration Side Letter
Job Posting 9
Jury Duty Pay 7
Layoffs 9
Leaves of Absence
Management Clause 3
Military Pay 7
MSDS
Night Bonus 8
Non-Discrimination 16
Overtime 6
Overtime Relief Program Side Letter
Pay Day 12
Past Avg. Hourly Earnings 8
Penalties
Pensions 401K 14
Phone Numbers 12
Piece Work Standards 8
Probation 9
Rates of Pay (new hire) 8
Recalls 9
Reporting Pay 8
Rest Periods 13
Safety 11
Safety Rules
Schedule A
Seniority 9
Seniority Lists 9
Seniority Termination 9
Shift Preference 9
Shop Rules
Shutdown 7
Smoking Areas 8
Sole and Complete Agreement
Superseniority 9
Suspension 4
Temporary Transfers 8
Temporary Warehouse Shipping Crew Side Letter
Term of Agreement 15
Termination 9
Union Dues 2
Union Representative 4
Union Safety Committee 11
Vacations 7
Wages 8
Wage Progression 8
Weekend (Fourth & Fifth) Shift Side Letter
ARTICLE 1
Recognition
1.01 - The Company recognizes the Union as the exclusive bargaining
agency for all production, maintenance, including shipping and receiving,
truck drivers, and laboratory employees of the Company at its Ashland,
Ohio facilities, exclusive of executive, administrative, office, clerical
employees, guards and all supervisory employees with the authority to
hire, discharge, discipline or effectively recommend changes in the
status of employees as to factory wage rates, hours, and working
conditions.
ARTICLE 2
Security
2.01 - All employees who are members of the Union as of the signing
of this Agreement shall remain members of the Union as a condition of
continued employment with the Company.
2.02 - All present employees who are not now members of the Union
shall make application for membership not later than thirty-one (31) days
after the signing of this agreement and, if accepted, must remain members
of the Union as a condition of continued employment with the Company.
2.03 - All employees hired or transferred into the bargaining unit
subsequent to the signing of this Agreement shall, upon completing his or
her probationary period, make application for membership and, if
accepted, must remain members of the Union as a condition of continued
employment with the Company.
2.04 - The provisions of the Paragraph 2.01, 2.02 and 2.03 of this
Section shall not apply to any employees covered by this Agreement to
whom membership in the Union is denied or whose membership therein has
been terminated for reasons other than the failure of such employee to
tender his initiation fee or periodic dues.
2.05 - Any employee who fails to meet the requirements of this
Section shall not be retained in the employ of the Company provided that
the Union shall have notified the Company and the employee in writing of
such default and said employee shall have failed to remedy the same
within ten (10) days after receipt of such notice.
2.06 - The Company, upon written authorization of the employee on a
form approved and furnished by the Union, shall deduct from the pay
received each week by such employee the Union dues for the current week
and promptly remit same to the appropriate officer of the Union.
ARTICLE 3
Management Clause
3.01 - The Management of the plant and the general operation thereof
and the direction of the Company's working force, and the affairs of the
Company with reference to the operation of its business, including the
right to hire, to make reasonable shop rules consistent with the terms of
this Agreement, which rules shall be conspicuously posted, to suspend or
discharge, to transfer from one department to another within the unit and
to demote for cause, and the right to relieve employees within the
bargaining unit from duty for lack of work or other legitimate reasons,
are vested exclusively with the Company so long as none of the provisions
of this Agreement are violated, and subject to the right of the employees
to present grievances.
ARTICLE 4
Grievances
4.01 - A grievance is a complaint, dispute or controversy permitted
by this Agreement in which it is claimed that the Company or the Union or
an employee or group of employees has failed to comply with an obligation
assumed by it under the terms of this Agreement, and which involves (1)
a dispute as to the facts involved, (2) a question concerning the
interpretation or application of any provision or provisions of this
Agreement or (3) both.
4.02 - Changes in general business practice, the manner of operating
units of the business, the control and direction of working forces, the
selection of personnel (subject, however, to the specific provisions as to
seniority) and other business and operating procedure, shall not give rise
to grievance of employees or of the Union, except under circumstances which
bring them within the scope of this Agreement.
4.03 - Any employee will, upon request, be accompanied by a Union
representative when called by the Company for disciplinary action. The
employee will be notified that he is being called for disciplinary action
before going to the meeting.
4.04 - The Union shall designate a Shop Committee, not to exceed
three (3) members, whose authority shall be to take up grievances and
other matters authorized by the Agreement. Nothing in this Agreement
shall be construed to prevent any individual employee or group of
employees from presenting a grievance directly to the Company but the
bargaining shall be done only through the accredited representatives of
the Union.
4.05 - The Union shall notify the Company in writing of the personnel
of the Union Shop Committee and the Stewards, and in like manner the
Company shall be advised from time to time as changes in membership of
such Committee shall be affected. The Company shall notify the Union of
any changes in the supervisory personnel of the Company.
4.06 - Time lost from the regular shift at processing grievances
shall be paid for at the rate of the employee's average for that date; if
no average for that day is established, then the average of that employee
for his or her last preceding work day shall be paid. The starting time
for grievance meetings shall be 2:30 p.m., unless otherwise mutually
agreed by the Company and the Union.
4.07 - The parties to this Agreement recognize that grievances should
be settled promptly and as close to the source as possible. Further,
both parties will endeavor to present all facts relating to the grievance
at the first step in the grievance procedure. All disputes, complaints
and grievances permitted in this contract shall be presented according to
the following procedures, except for time limits as provided in Paragraph
8.12.
Grievance Procedure
4.08 - STEP ONE - The Complaint shall be taken up in the first
instance between the employee and/or his Union Representative and the
employee's Department Foreman.
4.09 - STEP TWO - If the grievance cannot be settled with the
Department Foreman, the grievance shall be reduced to writing in
duplicate within five (5) working days and signed by the aggrieved
employee and/or a member of the Union Shop Committee and presented to the
Department Foreman, who shall give his written answer to the grievance to
a member of the Union Shop Committee or other designated Union Officer
within three (3) scheduled working days. If the grievance involves an
incentive standard where the standard must be restudied by the Industrial
Engineering Department, the Company answer, which will include the actual
time study, must be given to the Union in ten (10) scheduled working days
instead of three (3) scheduled working days, unless otherwise mutually
agreed.
4.10 - STEP THREE - If the written answer to the grievance is
unsatisfactory to the Union, it may be appealed within five (5) working
days from the date the answer is received to Step Three, by presenting
the appeal in writing to the Industrial Relations Manager or other person
or persons designated by the Company. Within five (5) working days after
the Company receives the appeal, the Union Shop Committee and the
Industrial Relations Manager or his designated representative, shall meet
and attempt to settle the grievance. The Company Representative shall
give the Company's final answer in writing to the Union President within
three (3) scheduled working days after the meeting.
4.11 - (STEP THREE-Incentive) - Where the grievance involves
incentive rates, a reasonable time shall be allowed for further study by
a Union Time Study Engineer, and a meeting between the Company
Representative and the Union Shop Committee shall be held thereafter, and
the Company shall give its final written answer within three (3)
scheduled working days after such meeting.
4.12 - If a satisfactory settlement cannot be reached after such
meeting as provided for in Step Three (3), the grievance may be appealed
to arbitration as provided in Article Five (5) of this Agreement,
provided written demand for arbitration is presented by the Union to the
Company within thirty (30) calendar days after the final meeting between
the Company and the Union.
4.13 - Grievances relating to the discharge or suspension of an
employee must be initiated within two (2) working days from the time the
Union receives notice of such discharge or suspension under Article 4.19,
and grievances relating to layoff of an employee must be initiated within
five (5) working days from the time of such layoff, or such actions of the
Company shall be final, so long as the Company sends notices of individual
layoffs to the Union by the end of the day following the layoff and weekly
summary of all layoffs during the week in question by the beginning of the
next week. If the Company fails to supply such notice, the five (5) day
layoff filing period will begin only after sending the notice.
4.14 - The time limits in each of the steps of the grievance
procedure and arbitration shall be strictly observed unless mutually
extended in writing by the Company and the Union. If any grievance is
not appealed to the next step or to arbitration within the time limits
set forth in this Article IV as to each step, the grievance shall be
considered dropped on a non-precedence-setting basis.
4.15 - If the Company fails to give a written answer at any step
where required within the applicable time limit, unless there is a
mutually agreed waiver or extension of time limit, the grievance shall be
automatically considered appealed to the next step or to arbitration, as
the case may be.
4.16 - Except where the contract provides specifically otherwise,
whenever it be determined that an employee is entitled to be reimbursed
for lost wages, such reimbursement shall be on the basis of the
employee's past average hourly earnings.
4.17 - Any employee who loses time or wages through an unjust
suspension, unjust discharge, or through mis-application of seniority
shall be compensated by the Company for such lost wages, at past average
hourly earnings, for such amount of lost time as shall be determined by
the grievance procedure.
4.18 - The general wage scale, which is Schedule A of this
contract, shall not be subject to arbitration.
4.19 - The Company will notify the Union President or his designated
representative in writing of the suspension or discharge of an employee
within the bargaining unit within one (1) scheduled working day of the
normal week.
4.20 - There shall be no retroactivity beyond the date of the
violation.
ARTICLE 5
Arbitration - Arbitration Procedures
5.01 - All disputes, differences and grievances arising under this
Agreement between the parties hereto that shall not have been
satisfactorily settled after the grievance procedure has been followed as
set forth in Article IV may be submitted to Arbitration.
5.02 - Within three (3) normal working days from the date the written
demand provided in Paragraph 4.12 is served upon the Company by the
Union, the Company's designated representative shall meet with the Union
Shop Committee and send a joint letter to the Federal Mediation and
Conciliation Service requesting submission of a list of eleven (11)
persons recommended as arbitrators, all of whom shall be members of the
National Academy of Arbitrators to ensure the highest quality of
arbitrators, from which list the arbitrator shall be chosen. Upon receipt
of such list, the Company's designated representative and the Union Shop
Committee shall meet within two (2) normal working days at the request of
either party, and select the arbitrator according to the procedure
hereinafter provided.
5.03 - The Company and the Union Shop Committee, taking alternate
turns after the one to first strike has been determined by lot, each
shall strike out of said list a total of five (5) names and the one (1)
remaining shall be the arbitrator. The Company and Union shall thereupon
jointly prepare a communication requesting such selected arbitrator to
act and to submit dates available for the hearing.
5.04 - Upon receipt of such available dates from the arbitrator, the
Company and the Union shall meet within two (2) normal working days and
select the date for such hearing and will promptly notify the arbitrator
as to the date selected. On the hearing date so selected the parties
shall, at the time and place set by the arbitrator, appear and present
evidence in support of their respective positions.
5.05 - Evidence admissible before such arbitrator shall be the
evidence normally admitted in arbitration proceedings and shall be under
oath. Hearings shall be held within the Ashland, Ohio, area.
5.06 - The Arbitrator shall, within thirty (30) days from the final
date of the hearing, submit in writing to both parties a decision on the
grievance arbitrated, (unless additional time is requested by the
arbitrator) and mutually agreed to by the Company and the Union. This
written decision shall be final and binding upon both parties and shall
be complied with as soon as possible. If such decision directs a retroactive
wage payment, the Company will notify the Union of the date such payment will
be made.
5.07 - The compensation and reasonable expense of the arbitrator
selected from the list of the Federal Mediation and Conciliation Service
shall be paid by the Company and the Union in equal shares.
5.08 - Nothing in this contract shall be construed as obligating the
parties, or either of them, to arbitrate the terms of any contract or
agreement to be entered into upon a termination or expiration of this
contract.
ARTICLE 6
Hours
6.01 - Seven and one-half (7-1/2) or eight (8) consecutive hours,
with the exception of lunch time, as the case may be, in any twenty-four
(24) hour period shall constitute a normal work day. The twenty-four
(24) hour period shall start when the employee reports for work at the
beginning of his/her shift. Five (5) consecutive normal work days of
thirty-seven and one-half (37-1/2) or forty (40) hours, as the case may
be, in any one (1) week, beginning with the start of the first shift on
Monday (currently 7 A.M. to 3 P.M.) or the third shift on Sunday night
(currently 11 P.M. Sunday to 7 A.M. Monday), as the Company elects, shall
constitute a normal work week. The Company will not change the starting
day the normal work week except to maintain efficiency and will give the
Union a notice of at least thirty (30) calendar days prior to any such
change.
6.02 - Time and one-half shall not be paid for work performed in
excess of eight (8) hours in twenty-four (24) hour period where such work
is caused by a shift change at the employee's request.
6.03 - Time and one-half (1-1/2) shall be paid for all work performed
over eight (8) hours in any one (1) day, or over forty (40) hours in any
one (1) week, and for all work performed on Saturday except for work
performed by employees regularly scheduled for weekend shift work and
except as otherwise noted. To be eligible for time and one-half (1 /)
pay on Saturday, the employee must have performed all scheduled work
within his/her normal work week, except for absence on authorized Union
business, or absence on account of sickness (a physician's certificate
may be required), death in the immediate family (as defined in Section
8.22), or jury duty.
6.04 - Double time shall be paid for all work performed on Sunday,
provided the employee has performed all scheduled work within his/her
normal work week, except for absence on authorized Union business,
absence on account of sickness (a physician's certificate may be
required), death in the immediate family, or jury duty.
6.05 - There shall be no duplicating or pyramiding of overtime pay,
and where it is proven there is duplicating or pyramiding, no claim for
either will be paid by the Company to any employee.
6.06 - When an employee is requested and works more than the hours of
his regular shift without twenty-four (24) hours' notice, he shall be
allowed one - half (1/2) hour lunch time with pay, where work beyond the
hours of his regular shift is in excess of three (3) hours, except in the
case of emergency, unavoidable breakdown or conditions beyond the control
of the Company. This half hour lunch period does not necessarily have to
be spent on Company property. A lunch period will be provided within a
reasonable amount of time when working overtime without notice.
6.07 - (A) - When there is overtime or premium work on a job, the
Company will, whenever possible, endeavor to equalize overtime and
premium work on an instance by instance basis among qualified employees
in their respective classifications in the department performing the same
or similar work. Sunday start-up, before the regular shift, and weekend
boiler checks will not count as instances. If employees within the
classification refuse the overtime or premium work, said overtime or
premium work must be offered to qualified employees of that department
before it becomes available to another department.
Overtime or premium work offered and refused within the respective
classifications will be considered worked for the purpose of charging and
equalizing overtime or premium work. An employee who is absent from work
because of illness, injury, leave of absence, vacation, suspension or for
any other reason, except absence upon instruction of Supervisor because
no work is available, will be charged each day in such manner that his
status relative to other employees in his classification will be the same
as it would have been if he had not been absent. Employees from other
departments will be expected to meet performance standards of the
department in which they are working overtime or premium work.
Inadvertent inequitable distribution or equalization of overtime or
premium work among qualified employees in their respective job
classifications in a department will be cured only by offering future
overtime assignments to the affected individual(s).
(B) - When the Company schedules a full department or shift for
overtime work or no other employee with experience is available for a
necessary job, employees in the department or shift shall perform the work,
but when less than a full department or shift is scheduled for overtime
work, such work shall be offered to the employees affected in each job
classification on the basis of seniority. If the jobs cannot be filled on a
voluntary basis, the jobs shall be filled by those employees who have the
least seniority in the job classification affected. Except for employees
regularly scheduled for weekend shift work, when any holiday referred to in
7.10 is observed on Friday or Monday, or on Easter weekend, work on that
weekend shall be optional except in cases of emergency. But even employees
regularly scheduled for weekend work will have the option of working if
Christmas Eve, Christmas Day, New Year's Eve, New Year's Day, or Independence
Day falls on a Saturday or Sunday. General notification of Saturday overtime
will be posted on Department bulletin boards by the end of first shift on
Wednesday of the work week. Specific assignments will be made by Thursday
noon. In an emergency, a shorter notice may be given.
6.08 - Work normally performed by employees in the bargaining unit
will not be performed by those excluded therefrom to the extent that
hours of employment will be appreciably decreased. Foremen will continue
to perform experimental work and instruct employees in their work, but
under no circumstances will a foreman be permitted to displace a regular
production or maintenance employee.
6.09 - No time records shall be altered or substituted by the foreman
without knowledge of the change being brought to the employee's
attention, in writing, by the end of the next shift that the employee
works. Employees are required to swipe the data entry terminal daily
when entering and leaving work.
6.10 - The term "emergency" as used in this contract shall mean any
unexpected or unforeseen condition, happening or occurrence requiring
immediate action to prevent loss, protect property, or to preserve the
customer services reputation of the Company.
ARTICLE 7
Vacations, Holidays, and Leaves
7.01 _ Effective 1-1-99, eligible employees shall receive vacations
within each calendar year according to the following schedule:
Year(s) of Continuous Service Amount of
Vacation
One but less than four One (1) Week
Four but less than twelve Two (2) Weeks
Twelve but less than fifteen Three (3)
Weeks
Fifteen or more Four (4)
Weeks
7.02 - An employee who attains his or her first, fourth, twelfth, or
fifteenth anniversary in a calendar year shall become eligible for an
additional week of vacation as set forth in Paragraph 7.01 upon such
anniversary date.
7.03 - Each week of vacation pay to which an employee is entitled
shall be equivalent to two percent (2%) of the employee's gross annual
earnings with the Company for the preceding calendar year, as reflected
by his or her individual Internal Revenue Service W-2 Form.
7.04 - (A) - Vacations will be scheduled so far as practical in
accordance with the employee's desires and by seniority within the
employee's job classification, except that the Company reserves the final
right to schedule and reschedule vacations to ensure efficient and
orderly operations, including the right to schedule vacations during a
temporary plant shutdown for vacation purposes during the week in which
July 4 is observed for employees except maintenance, laboratory,
experimental, or other employees required to work during such shutdown.
If the Company intends to change the times of current vacation shutdowns,
it will give the Union and employees at least thirty (30) days' notice of
a change in the summer vacation shutdown (currently the week in which
July 4 is observed) and/or at least thirty (30) days' notice of a change
in the Christmas week vacation shutdown (currently the week in which the
Christmas holiday is observed), except for conditions beyond the
Company's control such as unforeseen customer-demanded orders.
(B) _ Full week vacations in a calendar year will be selected on or
before February 15 of such year, in writing, with seniority in job
classification to control in case of conflict, except that when an
employee bids or elects to return to a job outside of his or her job
classification, the employee will be required to schedule his or her
vacation so that it does not conflict with already scheduled vacations in
that department, and, further, an employee who is displaced from his or
her regular job and bumps elsewhere in the plant shall reschedule vacation,
if necessary, consistent with his or her seniority. The Company will notify
employees of approved vacations on or before March 15.
Vacations selected after February 15 will be on a "first-come, first
served"basis, regardless of whether such vacation requests are for a full
week or less than a full week..
7.05 - Except in an employee emergency agreed upon as such by the
Company, each week of vacation pay will be paid to each employee no
earlier than the Friday prior to commencement of his/her scheduled
vacation (including vacation shutdown) period or after the employee and
Company agree to waive all or part of the employee's vacation, provided
the Company receives notice of at least ten (10) working days. Any
vacation pay unpaid by mid-December will be paid prior to Christmas Day.
7.06 - An employee whose service with the Company is terminated
after he/she has qualified for his/her vacation, shall be paid for
untaken vacation due him/her. In case of death, such payment will be
made to the employee's dependent or to his/her estate.
7.07 - Vacations may not be accumulated from year to year, and
vacations may be taken only in one (1) week increments, except that an
employee eligible for more than one (1) week of vacation may take such
excess vacation in less than full week increments. But this is on the
condition that the employee makes a request for such vacation at least
ten (10) days in advance of the time requested and the time off will not
adversely affect operations. Any such approved vacation will be paid
within the week in which the vacation is taken.
7.08 - (A) - When a holiday falls in an employee's vacation during a
plant shutdown for vacations, the vacation will be extended by one (1)
additional day at the beginning or end of the shutdown, as determined by
the Company.
(B) - When a holiday falls during an employee's vacation other
than during a plant shutdown, the vacation will either be extended by one
(1) additional day for each holiday or holiday pay paid to the employee
without additional time off, as the employee elects.
7.09 - To qualify for vacation and vacation pay in a calendar year,
an employee must be actively employed at some point during such calendar
year.
7.10 - Employees who qualify under the Conditions outlined below
will be entitled to eight (8) hours pay for:
Thanksgiving Day
Day After Thanksgiving
Christmas Eve Day
Christmas Day
New Year's Eve Day
New Year's Day
Good Friday
Memorial Day
Independence Day
Labor Day
Holiday pay will be at straight time pay, which is the hourly rate
for hourly rated employees and, for incentive employees, the employee
will be paid an average of his/her last two (2) weeks' straight time
earnings prior to the holiday week. When any of the above holidays falls
on Sunday, the Monday following shall be observed as the holiday. When any
of the above holidays falls on Saturday, the Friday immediately preceding
such holiday shall be observed as the holiday. In the event the first of
two (2) consecutive holidays falls on Sunday, the Friday immediately
preceding such holiday shall be observed as the holiday.
If work is performed on the above-designated holidays, the employee
will receive in addition to holiday pay, double time pay for the hours
worked.
To qualify for holiday pay, all of the following conditions must be
met:
1. The employee shall have completed his/her probationary
period.
2. The employees must work the last preceding and first
succeeding scheduled work period, except -
(a) In the event of an absence which was excused or approved;
(b) In the event death occurs in the immediate family, (as
defined in Paragraph 8.22);
(c)In case of personal injury or illness certified by a
physician; if absence is due to such injury or illness,
holiday pay will be paid for holidays which occur within
thirty (30) calendar days following the date absence begins;
(d) In case of layoff or recall which occurs during the week of
the holiday, or the week prior to a holiday;
(e) An employee who does not work the scheduled workday before
and/or the scheduled workday after the holiday will have his
or her holiday pay reduced by the number of hours not
worked.
3. The employee must perform work on the holiday in case of
breakdown or emergency only.
7.11 - Leaves of absence, without pay, will be granted to employees
for good cause, up to thirty (30) days. Such leaves will be granted,
in writing, in triplicate form; the Company to retain one copy, the
employee to receive one copy, and the Union Committee to receive the
third copy. These leaves may be extended providing the Company and the
Union Committee agree, jointly, to such extension.
7.12 - Good cause for granting a leave of absence shall include
death or serious illness in the immediate family, and attending to Union
business, as a delegate or an alternate to a Union Convention or as an
officer or representative of the International Union. Leaves of absence
shall be granted only where the requirements of the plant permit, except in
actual emergencies, or in case of aforesaid Union business.
7.13 - All employees at completion of their probationary period
shall receive from the Company the difference between their regular pay
for Monday through Friday, excluding overtime, and compensation received
for Jury Duty, or for regular reserve military training of not more than
two (2) weeks. The latter shall not be paid in the event of universal
military training or of a national emergency.
7.14 - An employee, who has completed the probationary period, who
becomes ill (including pregnancy) or is injured and whose claim is
supported by medical evidence shall be granted a leave of absence to
cover the period of such illness or injury. Seniority shall accumulate
during such leave of absence subject to the limitations of Paragraph
9.17.
The Company will reserve the right to have any injured, or sick
(including pregnancy) employee examined by a doctor selected by the
Company, and/or require an employee to submit a statement from a
physician regarding ability or inability to perform work. If the
Company-selected doctor disagrees with the doctor of the employee about
the medical condition of the employee, the two (2) doctors shall select a
third doctor, whose decision will be binding. The fee of the third
doctor will be paid by the Company. If the employee fails to return to
work at the end of the leave of absence, or extension thereof, after release
from his physician, or obtains employment without the consent of the Company
while on leave of absence will automatically forfeit reinstatement rights.
The Company may request medical certification of continued disability every
thirty (30) days. Weekly indemnity will cease when the employee is declared
no longer disabled by the attending physician.
ARTICLE 8
Wages
8.01 - The hourly and incentive base (designated by asterisks) rate
of pay for each day worked (hourly rated) and incentive job classification
shall be set forth in Schedule A annexed and made a part of this Agreement.
8.02 - The starting rate for former experienced employees with more
than ninety (90) days service with the
Company shall be the same rate paid employees with like experience. This
shall apply only to former employees who voluntarily terminated their
employment and not more than ninety (90) days have elapsed since their
employment
termination.
8.03 - A night bonus of five cents ($.05) per hour shall be paid for
all work performed on the second shift and a night bonus of ten cents
($.10) per hour shall be paid for all work performed on the third shift.
8.04 - Piecework standards shall be set by the Company, using
recognized industrial engineering techniques, subject to the right of the
employees to present grievances should said standards seem inequitable.
Any disputed standards will be restudied using the stop watch method.
Where practicable, the Company will furnish the employee and the Union a
copy of the elements and process instructions of the job one (1) working
day before any study to establish a standard is taken. Procedures and
elements may be changed as the job is studied, but the standard and
procedures issued will incorporate any changes made. When piecework
standards are established which do not utilize the employee's full time,
this fact shall be noted in the posted standards.
8.05 - At least one (1) working day prior to the effective date of a
piecework rate set by the Company, the Company shall give written notice
to the Union of such piecework rate and the effective date thereof. Such
written notice shall be a copy of the standard which shall contain the
elements of the job and the rate. If a standard is changed, the Union
will be advised of the elements changed in writing.
8.06 - Until piecework standards are set on new jobs, employees will
be paid the base rate of the job. A new employee on an incentive job or
an employee who requests a transfer to any incentive job will be paid the
applicable rate for the job shown in Schedule A from the time the employee
begins new job. Unless otherwise stated in this contract, the piecework base
rates as shown in Schedule A will be the rates paid for each applicable
classification.
When the procedures or content of an incentive job are changed so
that the old rate no longer applies, the employee shall be paid the base
rate of the job. When the revised rate is made effective, it shall be
retroactive to the date of the change in the job.
8.07 - Piecework standards must be set within thirty (30) scheduled
working days after the start of a new or changed job, provided the
operation is scheduled for production ten (10) working days. Should it
be impossible to set piecework standards within thirty (30) working days,
then the piecework rates shall be retroactive to thirty (30) calendar days
after the beginning of a job.
8.08 - In all wage incentive applications, the following principles
will be adhered to:
a. Measurement standards will be expressed in terms of time as
related to units of production.
b. Operator performance will be expressed in terms of percent of
standard or normal performance with one hundred percent (100%) representing
the standard normal performance.
c. The incentive payments over and above the base rate will be
the performance over and above the standard requirements of one hundred
percent (100%) and will be in equal proportion to the percent of performance
above standard, (e.g., extra pay equal to ten percent (10%) of the base rate
for one hundred ten percent (110%) performance).
d. The Company will endeavor to figure piecework standards so
that the average incentive worker can earn one hundred percent (100%) pace
after a reasonable learning period and by putting forth honest effort.
Normal, or one hundred percent (100%), work pace shall be equal to that of
walking at a speed of three (3) miles per hour with no load on a level
surface, dealing fifty-two (52) cards in four (4) equal parts in .50 minutes,
or typing fifty (50) words per minute on a manual typewriter.
e. There shall be no maximum piecework percentage. A present or
existing rate shall not be construed as being guaranteed. Piecework
standards shall not be changed unless there is a change in the job content
or procedure, or unless there is agreement to the change by the Shop
Committee and the Company. Standards may also be changed when errors in
computation are found.
f. The Company shall, in establishing and adjusting rates, give
due consideration to skill, fatigue and rest periods.
g. Time standards shall be set so that a qualified operator
exerting an increased maintainable effort with proper allowance for personal
rest shall have the expectancy of exceeding the standard by an average
of twenty percent (20%) to thirty percent (30%).
h. Performance records and all information necessary to enable
employees to calculate their earnings will be made available.
i. On those operations that have machine or cycle controlled
portions of an operation, the incentive standard will provide earnings
opportunity for those elements or portions of the elements equivalent to
twenty-four percent (24%) of the base rate. During such machine time any
time that is not fully utilized by the employee may be used by the Company
to assign other job elements.
8.09 - It is agreed that no change will be made in the production
standards unless changes are made in the job content of the operation in
question which either increases or decreases the time necessary to produce
a unit of production. Any change in production standards shall be confined
to the element or elements of work that changed or to the change in machine
limitation time, referred to Paragraph 8.08, and made commensurate with the
degree of change in job content so that operators working with the same
speed, skill and effort as before the change was made will have the same
earning opportunity.
8.10 - So far as practical, all jobs will be placed on piecework.
If the Company fails to do so, the Union shall have the right to file
grievances.
8.11 - The rates and explanations of an incentive procedure will be
available to all employees. Time study data will be made available to the
Steward in that department. Any dissatisfaction will be handled in accordance
with the regular grievance procedure. A time study engineer selected by the
employees shall be permitted to check the job in question prior to
arbitration. All pertinent data shall be made available for the inspection
of said engineer.
8.12 - No grievance as to new base or changed base and/or hourly
rates and piecework rates shall be filed until after the fifth (5th)
working day on which a job is run. Any back pay resulting from the
filing of a grievance concerning a rate of pay shall be effective
retroactively to the date the rate was established, but in no event for
more than thirty (30) days prior to the date grievance was filed in
writing with the Company.
8.13 - When an employee's job has not run out, and he/she is taken
off his/her regular job to perform work at the request of the Company,
he/she shall normally be paid the base rate of the new job performed or
the base rate of his/her old job, whichever is higher (plus any incentive
earnings as normally computed). However, if an incentive worker is taken
off his/her regular job by the Company to:
1. Prepare samples;
2. Act as an instructor to another employee;
3. Make a major set-up of a production machine, such as
a spray decorating machine, then he/she
will be paid past average hourly earnings, unless the
preparation, set-up or instruction involved is included in the
incentive piece rate, or is a separate piecework standard or
separate hourly rate;
So long as the employee performs a fair day's work at a fair
day's pace.
8.14 - Past average hourly earnings are the employee's average hourly
earnings in the most recent week in which the employee has performed at
least twenty-four (24) hours' work in his/her regular incentive job,
excluding overtime and "off standard" time.
8.15 - Employees will be paid their past average hourly earnings for
the following reasons, so long as the employee performs a fair day's work
at a fair day's pace:
A. Time lost due to mechanical or power delays.
B. Time lost due to stock abnormalities.
C. Time lost waiting for materials.
During these "Lost Times", the employee may be assigned to do other
work available; during this reassigned time,
he/she will be paid the rate of the new job or his/her past average
hourly earnings, whichever is higher. These allowances must have the
prior written approval of his/her foreman. The employee is required to
report abnormal stocks to his/her foreman immediately.
8.16 - The Company is not required to pay for production spoiled by
the negligence of the operator.
8.17 - Temporary transfers may be made by the Company for a period
not to exceed two (2) weeks. In the event the temporary vacancy
necessitating the transfer extends beyond two (2) weeks, the Company will
solicit a qualified volunteer to fill the remainder of the vacancy. If
more than one (1) qualified employee volunteers, the most senior
qualified volunteer will be transferred. If there is no qualified
volunteer, the least senior qualified employee will be transferred.
During the period of the transfer, so long as the employee's regular job
continues to run, the employee shall be paid the rate of his/her old job
or the rate of the new job, whichever is higher. However, if an
incentive employee is transferred temporarily to another job, regardless
of whether such job is on incentive, then he/she will receive the higher
of either his/her past average hourly earnings or whatever he/she earns
at the new job.
8.18 - Employees scheduled and reporting to work will be provided
with a minimum of four (4) hours' work or pay in lieu of work, such pay
to start from the hour the employee reports for work, unless the Company
has notified such employees not to report at least two (2) hours prior to
their scheduled starting time. When an employee mutually agrees to come
to the plant and perform work for the Company with full knowledge that
there may be less than four (4) hours' work, the Company shall not be
obligated to pay the employee for four (4) hours as provided above.
This subsection 8.18 shall not apply should work be interfered with
due to conditions beyond the Company's control, such as power failure,
major breakdown, floods, fires, work stoppages or acts of God. The
Company is not obligated to pay an employee report-in pay if the employee
does not have a phone number where he can be contacted by the Company.
8.19 - An employee called to work outside his regular shift will be
provided with a minimum of two (2) hours' work or pay in lieu of work,
such pay to start from the hour the employee reports for work.
Provisions in Article 6.06 do not apply in this case until after three
(3) hours have been worked.
8.20 - The following general, across-the-board wage increases shall
be made to the hourly and incentive base rates referred to in Paragraph
8.01 which were in effect at the termination of the previous contract:
Effective Date Amount of Hourly Increase
October 4, 1998 Thirty cents ($ .30)
October 3, 1999 Thirty cents ($ .30)
October 8, 2000 Thirty cents ($ .30)
8.21 - When an employee is injured or suffers from occupational
illness during his/her work shift, and is treated in the plant first-aid
room or in a doctor's office or hospital, and is able to return to work,
he/she shall be paid for the time spent receiving treatment or first aid
at his/her regular hourly rate or his/her incentive base rate. If the
employee is unable to return to work, he/she shall be paid for the
balance of his/her shift at his/her regular hourly rate or his/her
incentive base rate.
8.22 - (A.) An employee with seniority who suffers a loss of
earnings because of absence from work to attend the funeral of:
(a.) his/her parent, stepparents, parent-in-law, brother, sister,
child, spouse, grandparent, grandchild, stepchild, legally adopted
child, half brother or half sister, or a dependent who lives in
his/her household shall be paid for the amount of such time lost
from his/her regular shift up to but not exceeding three (3) days'
pay, including the day of the funeral; or
(b.) his/her brother in-law or sister-in-law shall be paid for the
amount of such time lost from his/her regular shift up to but not
exceeding one (1) day's pay, which will be the day of the funeral.
(B.) Each day of pay shall be at the employee's regular
hourly rate, if not on incentive, or his/her past average hourly earnings
for employees on incentive but, in no case in excess of eight (8) hours for
any one (1)day.
(C.) The Company may require satisfactory proof of the
relationship, death, and attendance at the funeral.
ARTICLE 9
Seniority
9.01 - Seniority shall be defined as the length of service in the
bargaining unit since the last date of hiring but in no event earlier
than the organization date of the present Company, August 14, 1939.
9.02 - An employee's seniority date shall be the date on which he was
last hired.
9.03 - When two (2) or more people are hired on the same day, their
seniority in relation to each other shall be established by the far right
digits of their Social Security numbers, with the employee having the
lower digit (for example, zero) being assigned the greater seniority
rank. To the extent that two (2) or more employees have the identical
far right digit in their Social Security numbers, the Company will use
the first dissimilar digits closest to the far right digits to determine
the seniority rank of those employees.
9.04 - Members of the Union Shop Committee shall have top seniority
in case of layoff from the plant.
9.05 - Newly hired employees shall be on probation for their first
seventy (70) calendar days, with no extension of such period except as
agreed in writing by the Company and the Union. (Discharge of said
employee during said
probationary period shall not be considered a grievance.)
9.06 - Time off the payroll by reason of vacation, leaves of absence
or excused absence under Article VII shall be counted as continuous
service for the purpose of seniority, subject to the limitations of
Paragraph 9.17.
9.07 - Seniority and ability to perform the available work shall
govern layoffs and recall of employees.
9.08 - (A) - Each employee with seniority will carry seniority within
the department where the employee works regularly. Current departments
are as follows:
Dept. 5 Blow Mold & Injection Mold
Dept. 7 Ball Pit Pack
Dept. 8 Vinyl (incl. Vinyl Mold Cleaning)
Dept. 16 Plant II
Dept. 51 Maintenance (including Stores)
Dept. 52 Receiving
Dept. 53 Quality Control
Dept. 54 Laboratory
Dept. 55 Mold Repair
Dept. 58 Samples
Dept. 59 General Factory and Janitorial
Dept. 73 Shipping
(B) - The Company may add, combine, eliminate or otherwise change
departments.
(C) - Job classifications will be grouped together in separate
job grades as set forth in Schedule "A".
9.09 - (A) - In a reduction of force situation, layoffs not to exceed
one (1) week may be made without regard to seniority except every member
of the Union Shop Committee as designated in Section 4.04. This one (1)
week will not be used with any frequency or as a control of Production.
In the event that a reduction of force becomes necessary, the Company
will first approach the most senior employee or employees in the job
classifications which are to be affected by the reduction of force in
order to determine their interest in taking a voluntary layoff, with the
understanding that an employee who elects a voluntary layoff may request
a recall to work after three (3) months if the layoff continues for more
than three (3) months. At the end of the three (3) month period, to the
extent the employee elects to return but there is no less senior employee
to displace in the employee's classification, he or she may exercise
his/her choice of options as specified in this Section.
If, after the Company has solicited the interest of senior employees
in a voluntary layoff and there is still a need for a reduction in force,
which reduction in force exceeds the above mentioned one (1) week period,
any displaced employee or employees (that is, the least senior employee
or employees in the affected job classifications) will have his/her
choice of the following options:
a. move into an available job vacancy for which the employee can
qualify;
b. move into either of the last two (2) but still functional
job classifications held by the employee on a
permanent and satisfactory basis, provided the employee can
perform the job in a satisfactory manner within a reasonable
time;
c. bump the least senior employee in the plant, so long as the
displaced employee has at least one (1) year of accumulated
seniority; or
d. elect an optional layoff, in order of seniority in each affected job
classification, provided there are no available vacancies.
(B) - Employees bumping the least senior employee in the plant will
be provided training equivalent to that afforded a new hire to the extent
there is reasonable improvement.
(C) - In the exercise of seniority, top maintenance employees and
laboratory employees shall be considered as separate from production
employees and neither shall be permitted to replace the other.
Laboratory and top maintenance employees on layoff may be provided
employment, by seniority and ability, when production vacancies exist
following recall of all production employees. Laboratory and top maintenance
employees will return to their regular jobs when work becomes available.
(D)(1) - Return of displaced employees to their regular jobs and
recall of employees from layoff will be based on seniority, provided a
recalled employee has the ability to qualify for the job to which he or
she is recalled. When employees other than Rotocast Machine Operators
are on voluntary layoff and recalled to the Rotocast job classification,
the employee may choose to stay on voluntary layoff, and the company may
elect to hire and train Rotocast Machine Operators.
(D)(2) - Despite Subsection (D)(1), when there are ten (10) or fewer
employees still on layoff and a recall is necessary, the Company will
have the right to assign such employees irrespective of seniority to open
positions, as the Company sees fit. This arrangement will last no more
than three (3) weeks unless extended by agreement between the Company and
the Union Shop Committee.
(E) - Employees displaced must return to their regular jobs when
they become available.
(F) - Employees who exercise bumping privileges or are recalled will
receive the rate of pay for the job into which they bump or to which they
are recalled.
9.10 - If twenty-five percent (25%) of the employees are scheduled
for four (4) days or less a week for a period of two (2) consecutive
weeks, the Company shall layoff according to Paragraph 9.09, or as
mutually agreed between the Company and the Union Shop Committee. The
Company will notify the Union at the time layoffs are made.
9.11 - To preserve seniority during layoffs, each employee must
report to the Personnel Office of the Company within ninety (90) days after
layoff and within each ninety (90) days thereafter. Said report shall be
made in person (no phone calls) or on the return post card mailed by the
Personnel Office at least three (3) weeks before the end of the ninety (90)
day period. If no report is received at the end of the ninety (90) day
period, the Company will notify the Union and the termination will be
effective unless within one (1) calendar week thereafter a grievance is filed
and subsequently sustained.
9.12 - Employees laid off on account of slack work shall retain their
seniority. However, if an employee is called back to work after a
layoff, and does not report for work within five (5) days after notice is
sent by the Company by registered or certified mail to his/her last address
on file with the Company, he shall lose his/her seniority.
9.13 - The Company shall give to the employee at least forty-eight
(48) hours' notice of any layoff or in lieu of notice two (2) normal
days' work or two (2) normal days' pay. Sending an employee home because
of conditions beyond the Company's control such as power failure,
breakdown, floods, fires, emergencies, work stoppage and acts of God
shall not be considered a layoff.
9.14 - Whenever a new job is created or a vacancy occurs on an
established job, which vacancy is expected to or lasts more than thirty
(30) working days, the Company shall post a notice on the bulletin boards
in the plant advising the employees of the existence of such new job or
vacancy.
Any notice identifying one or more possible job vacancies shall
contain the rate(s) of the job(s) and be posted on the bulletin board and
remain in effect during each calendar year. A newly created job shall
remain posted for forty-eight (48) hours. Bids will be registered in
triplicate on forms to be provided by the Company, with one copy to be
given to the Personnel Department, one to be given to the President of
the Union and the third to be retained by the employee. The opening shall
be awarded to the most senior nonprobationary bidder with ability to
qualify for the work, except for the openings related to Group Leader
(Maintenance), Group Leader (Non-Maintenance), Group Leader (Mold
Repair). Top Maintenance, Product Development Technician, Product
Technician, Semi-Truck Driver, Hazardous Material Communicator and
Coordinator, Stores Attendant and Quality Control A or B and Process
Equipment Set-up and Repair. For such openings, the most qualified
nonprobationary bidder will be awarded the opening, unless two or more
bidders are most qualified with relatively the same skill and/or
experience, and then seniority will control. If there are no bids, if
no one who bids on the job accepts the job, or no bidder has ability to
qualify for the work, the most senior employee on layoff with ability to
qualify for the work will be recalled, provided it is a nonlisted job.
If, instead, it is a job listed in this Section 9.14, the Company will
recall the most qualified employee on layoff, unless two or more laid off
employees are most qualified, and then seniority will control. If there
is no such employee, a new employee may be hired. The Union reserves the
right to question and, as necessary, grieve the Company's determination
of who is most qualified.
A successful bidder will not be allowed to bid again for four (4)
months or until the opening ceases to exist, whichever occurs first. The
successful bidder on an established job will begin work on the job within
thirty (30) calendar days unless otherwise mutually agreed, which agreement
will not be unreasonably withheld.
A successful bidder who fails to qualify for an opening within a
reasonable training period of not less than one (1) week, so long as the
employee shows reasonable progress from day to day or unless the
employee's inability is absolutely obvious, will (a) return to his or her
former job, if vacant, (b) be placed in an opening in a job within his
or her job grade, or (c) replace the least senior employee in the plant,
seniority and ability permitting.
Group leaders will continue to be subject to Company removal.
9.15 - (A) - Shift preference within a job classification shall
prevail for all employees working in a department that is operating on a
multiple shift basis with the following exceptions: (1) An employee
with greater seniority may not invoke such seniority for the purpose of
changing shift if such shift change would disrupt production; (2) After
choosing a shift, an employee may not apply for a second change for a
period of six (6) months, except with the consent of the Company and the
Union. Any such employee preference will be in writing, with a copy to
be furnished to the Union.
9.15 - (B) - In the event that, at the request of the Company in
other than an emergency situation, an employee switches shifts and loses
pay as a result, the Company will reimburse the employee for pay lost as
a result of the switch.
9.16 - The employee seniority list, including job classifications, shall
be provided to the Union, and the Company shall keep the list up-to-date by
monthly revision. The Company shall post the list in each plant by
the 15th of each and every month.
9.17 - Nothing in this Agreement shall be interpreted as preventing
the discharge of an employee for just cause.
An employee's seniority shall be terminated for the following reasons
only:
(1) Quits or retires.
(2) Absence from work for more than two (2)
consecutive working days without prior
notification, without being excused, or without a
legitimate excuse.
(3) Discharge for a justifiable reason.
(4) Overstaying a leave of absence.
(5) Failure to report within five (5) days after recall
notice is mailed to the employee's last address on
record with the Company Personnel Office, unless such
failure is caused by proven sickness, accident, death
in immediate family, or other unavoidable
circumstance.
(6) Failure to comply with Paragraph 9.11.
(7) Layoff or absence due to illness, injury
or otherwise in excess of twenty-four (24)
consecutive months for employees with fewer than five
(5) years of seniority or in excess of sixty (60)
consecutive months for employees with five (5) or
more years seniority.
9.18 - To adequately provide for the development of new products and
for the continuous operation of the plant during a period of layoffs, it
is recognized that superseniority is necessary in some instances.
Superseniority means that an employee in a classification may be
furnished work in his or her classification and department during layoffs
irrespective of his/her seniority status. Superseniority shall be granted
the senior employee in each classification.
9.19 - A member of the bargaining unit who accepts Company employment
at the Ashland, Ohio, location outside the unit and who leaves the unit
on or after October 4, 1989, but who, at any time, returns to the unit at
the discretion of the Company shall regain his or her former unit
seniority but not obtain additional seniority accrued while the employee
was outside the unit. Upon return to the unit, the employee, consistent
with his or her former unit seniority, may return to his or her former
job, if vacant, any other existing vacancy, bid on a job, or displace the
least senior employee in the plant, except that a former maintenance
employee may displace the least senior maintenance employee.
ARTICLE 10
Insurance
10.01 - During the term of this Agreement, the following types of
insurance coverage will be provided to employees or former employee who
have completed three (3) months of continuous employment with the
Company:
Type of Insurance Effective Date Coverage Amount Coverage Extent
Term Life and November 1, 1998 $14,000 Employee Only
Accidental Death NOvember 1, 2000 $15,000
& Dismemberment
Weekly Indemity October 4, 1998 $200.00 Employee Only
(Nonoccupational October 8, 2000 $225.00
Sickness and
Accident) per week up to 26 weeks
Retiree Term Life November 1, 1998 $5,000
Insurance Retiree Only,
November 1, 1999 $5,500 and only to a
retiree who
November 1, 2000 $6,000 terminates
Increased Life insurance Company
coverage will be fo employment
those who retire on permanently
or after the above after having
effective dates shown, reached age
with past retirees 62 with
to maintain current at least 15
coverage levels year of
coverage levels. continuos
service as a
full time
Company
employee
(Coverage prior to May 5.
Group Inc.)
Retiree Prescription January 1, 1999 $1,000 annual Eligible benefit
Card (eligible if you maximum for Retiree Only
retire on or after benefit and only to a
1-1-99) retiree wh
Subject to co-pay terminates
Employee Prescription Company
Card coverage effective employment
from age 62 until age 70. permanently after
having reached
62 with at least
15 years
of continuous
service as a
full time
Company employee.
Group Surgical/ Effective 4/1/96, $200.00 per Individual or
Hospitalization person deductible ($400.00 per Family as
Major Medical family maximum) and thereafter elected and
90% of covered medical paid
expenses up to a $1,200.00 per
person out of pocket deductible
($2,400.00 per family excludes
deductible) and thereafter fully
paid coverage for covered
expenses up to $2,500,000
lifetime maximum per covered
individual. consistent with the
available in-network option,
with higher deductibles and other
expenses to apply under the
out-of-network option.
10.02 - The group insurance coverage outlined in Paragraph 10.01 will
be available to each eligible employee and/or his or her dependents, if
dependent coverage is available and the employee elects dependent
coverage, upon contribution by the employee of five percent (5 %) and,
effective January 1, 1990, six percent (6 %) of the total cost of the
elected coverage each month. If available, an employee may elect and pay
only for particular types of insurance coverage, such as life insurance
only.
10.03 - (A) - (1) - Company paid group coverage for life insurance,
accidental death and dismemberment insurance, prescription card,
hospitalization insurance, and surgical expense insurance described in
Paragraph 10.01 will continue on behalf of a laid-off employee until the
end of the third month following the month in which layoff occurs.
(A) - (2) - Company-paid group coverage for life insurance,
accidental death and dismemberment insurance, hospitalization insurance,
and surgical expense insurance described in Paragraph 10.01 will continue
on behalf of an employee on a Company-approved medical leave of absence
for up to twelve (12) months following the month in which such leave
begins.
(B) - Company-paid group coverage for weekly indemnity insurance
described in Paragraph 10.01 will continue to be made available to an
employee on layoff or on medical leave of absence for a period not to
exceed thirty-one (31) days following the date of layoff or the beginning
of the medical leave of absence.
(C) - In the event that Company-paid insurance coverage is due to
terminate, a laid off employee will have a one time option, to be
exercised prior to the date Company payments are to cease, to elect
to continue such coverage at group rates for up to one (1) year,
provided the employee retains seniority, by making the required
contributions individually on or before the monthly payment date
established by the Company and as otherwise required by applicable law.
This one (1) year option, if chosen by an employee,
will be credited against the length of insurance continuation options
required by such laws as the Consolidated Omnibus Budget Reconciliation
Act ("COBRA").
10.04 - Complete details of the above insurance program are contained in
insurance contracts, which are incorporated by reference into this Agreement.
10.05 - Any employee or eligible dependent whose Company-paid
insurance coverage ceases may continue such coverage consistent with
applicable law at the employee's expense.
ARTICLE 11
Safety
11.01 - The Company agrees to make all reasonable provisions for the
safety and health of the employees during the hours of their employment.
The Union agrees to promote in every way possible the realization of the
responsibility of the individual employee with regard to preventing
accidents to himself or his fellow employees during the hours of their
employment. The Union shall designate a Union Safety Committee of three
(3). Recommendations of the Safety Committee of Union and Management
shall be followed insofar as practicable. The Company shall notify the
Union Safety Committee when a State Safety Inspector is present on the
Company premises. The Union Safety Committee shall submit
recommendations on plant safety to the State Safety Inspector at the time
of his plant inspection. All parties to this Agreement shall comply with
Federal, State and City safety regulations where they apply.
ll.02 - In conformance with Federal, State and Local safety and
sanitary laws, employees are expected to follow established safety
practices, and to wear approved safety clothing and/or safety devices
provided by the Company. An employee who violates a safety rule or
otherwise fails to maintain expected safety standards will be reminded of
his/her personal and contractual obligation to aid in the prevention of
accidents. An employee who continues to ignore safety obligations is
subject to any of the following penalties: Step 1 -
Written Warning; Step 2 - One to three day suspension; and Step 3 - Up
to and including discharge. It is understood that the severity of the
discipline will depend on the seriousness of the infraction.
ARTICLE 12
Miscellaneous
12.01 - Shop rules may be published by the Company with this
contract and such publication shall be considered personal notice of such
rules to each member of the bargaining unit.
12.02 - All employees covered by this Agreement shall be paid once
every week on Friday, except that during a normal work week, second and
third shift employees will be paid Thursday night. In a work week
wherein a holiday occurs, second and third shift employees may receive
their paychecks on the same day as the first shift employees. But no
checks will be provided prior to Thursday.
12.03 - Wherever in this Agreement a masculine noun or pronoun is
used, it shall refer to both genders.
12.04 - Employees must inform the Company of their current address
and telephone number.
ARTICLE 13
Rest Periods
13.01 - There will be two (2) rest periods permitted in any one (1)
shift; one (1) rest period of ten (10) minutes in the first half of the
shift and one (1) rest period of ten (10) minutes in the second half of
the shift. An employee must swipe in and out by using the data
collection terminal for each rest period.
PENALTIES
1. After the first violation the employee will be warned by
management or may be subject to more drastic discipline if
considered necessary, even to discharge. The normal disciplinary
process will be:
1st offense - Written verbal warning
2nd offense - Written warning
3rd offense - Suspension up to three (3) days without pay
4th offense - Up to and including discharge
It is recognized by the Company and the Union that some violations
may warrant more substantial and more
immediate action than others but in all cases the action should be
appropriate for the violation.
The following shall be considered as violations:
1. Time periods exceeding ten (10) minutes, as reflected by the
data collection terminal entries.
2. Leaving one's job so as to hamper production or work
hardship on fellow employees.
NOTE: At a later date, a system of signal bells may be installed,
indicating when individuals or departments will make use of lunch-
smoking periods.
ARTICLE 14
Pensions
14.01 - Effective January 1, 1990, the Company will cease making
contributions to the IRA Program. Instead, effective as of such date,
the Company will establish a tax qualified, individual account defined
contribution profit sharing plan, containing a "cash or deferred" option,
consistent with Internal Revenue Code Section 401(k) (the "401(k) Plan")
and begin making, in accordance with the terms of the Plan, contributions
on behalf of all current and future employees who are both eligible to
participate in the 401(k) Plan and enroll in the Plan. To be eligible,
an employee must be subject to this Agreement, be at least 18 years of
age, and have continuous Company service of at least one (1) year. Any
such employee may enroll in the Plan as of the next calendar quarter on
or after satisfying these conditions and timely submitting an enrollment
form.
14.02 - Effective as of each calendar quarter after the creation of
the 401(k) Plan, the Company will contribute one percent (1%) of the
Company earnings of each eligible, enrolled employee into his or her
individual account under the 401(k) Plan, irrespective of whether the
employee contributes to the account. In addition to this Company
contribution, to the extent an employee contributes earnings on a pre-tax
or after-tax basis to his or her individual account during any calendar
quarter, the Company will also contribute to each such employee's
individual account, on a "matching" basis, fifty cents ($.50) for every
dollar contributed by the employee up to six percent (6 %) of the employee's
Company earnings. Finally, the employee may also contribute an additional
one percent (1%) to nine percent (9%) of his or her Company earnings on
either a pre-tax or after-tax basis.
But these supplemental contributions by an employee will not be subject
to a Company-matching contribution.
14.03 - Each eligible employee enrolled in the 401(k) Plan will
always be one hundred percent (100%) vested as to all contributions made
to the Plan by the Company or the employee. In no event, however, will
either pre-tax or total contributions to an individual account in any
calendar year exceed Internal Revenue Service ceilings.
14.04 - This is merely an outline of the 401(k) Plan. The full
terms and requirements of the plan will be contained in the 401(k) Plan
document itself, and the terms of the Plan will control over this outline
to the extent that an inconsistency or conflict develops.
ARTICLE 15
Term
15.01 - This Agreement shall be effective from and after 12:01
A.M., October 3, 1998, and shall remain in full force and effect until<PAGE>
12:01 A.M. October 3, 1998, and shall automatically renew itself from
year-to-year thereafter unless either party notifies the other in writing
at least sixty (60) days prior to, but not more than seventy-five (75)
days prior to the expiration date of a desire to amend or terminate the
same. Negotiations will begin no less than sixty days before the end of
said Agreement.
15.02 - In consideration of this Agreement referred to herein, it is
specifically agreed that there shall be no strike, stoppage of work or
lockout during the life of this Agreement or while negotiations for a new
contract continue until all peaceful methods of adjustment have been
exhausted.
ARTICLE 16
Non-Discrimination
16.01 - The Company and the Union agree that there shall be no
discrimination against any employee or applicant because of race, color,
creed, national origin, sex, religion, disability, or age, as defined by
and to the extent required by applicable law. In particular, the Union
recognizes that the Company must make reasonable accommodations for qualified
individuals with disabilities, unless this causes undue hardship to the
Company, under both the Americans with Disabilities Act of 1990 and
applicable state or local law. In the event that these laws require the
Company to take actions or make decisions which conceivably could be
inconsistent with the provisions of this Agreement, the Union pledges to
work with the Company to do whatever is required by law.
ARTICLE 17
Sole and Complete Agreement
17.01 - The Company and Union specifically agree that this Agreement
is the sole and complete Agreement between them and that any previous
agreement or agreements, oral or written, expressed or implied, are of
no effect during the term of this Agreement.
There shall be no additional agreements reached between the
Company and Union without the express written, signed agreement of the
parties.
Dated at Ashland, Ohio this 3rd day of October, 1998.
This contract is signed subject to approval by the The United
Steelworkers of America, AFL-CIO-CLC, with which Local Union
No. 524L is affiliated.
HEDSTROM PLASTICS DIVISION
James Braeunig
David Braeunig
Paul Slack
Rick Braden
Helen Long
UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC, ON BEHALF OF LOCAL 524L
Roscoe Porter
Brenda Hinkson
Harry Burke
Zena Brown
USW-STAFF REPRESENTATIVE
Randy McComas
The Company and Union agree to these Four Side Letter Agreements:
INCENTIVE SIDE LETTER AGREEMENT
Effective after the Agreement becomes effective, all incentive jobs
on which, in their previous twelve months of operation, employees earned
less than seventy percent (70%) or more than one hundred forty percent
(140%) will be considered new jobs, studied in accordance with the
Agreement, and new incentive rates established if necessary. Such new
rates will be subject to the grievance procedure as specified in the
Agreement for new rates. Any subsequent changes in a production standard
that has been changed will be made in accordance with Paragraph 8.09 of
the Agreement.
OVERTIME RELIEF PROGRAM SIDE LETTER
AGREEMENT
1. Each month full-time employees interested in
overtime/weekend work for that month must submit an overtime
preference sheet except as otherwise agreed. The Company will
offer available overtime and premium work to these employees,
consistent with the Agreement, provided they are qualified.
2. If there are insufficient qualified full-time volunteers,
the Company may schedule qualified part-time employees to perform
the work on straight time so long as qualified employees are not
on layoff, unless otherwise agreed. Under no circumstances will
part-time employees be used to replace full-time employees so
long as qualified full-timers are willing to perform the extra
work, and under no circumstances, unless otherwise agreed, will
more than five (5) part-time employees work any shift.
3. Only if there are insufficient qualified full-time
volunteers and insufficient qualified part-timers will the work
be assigned on a nonvoluntary basis to full-time employees.
4. Part-time employees will serve a probation of four hundred
(400) hours worked, not counting training. During probation,
part-time employees will be subject to discharge, with or without
justifiable cause, but after probation only for justifiable
cause, which will include, among other reasons, failure to be
available for work to the Company's satisfaction. Except for the
right to use of the contractual grievance and arbitration
procedures to contest a discharge, a proper pay rate under
Schedule A, or proper shift differential, part-time employees who
have completed their probation will have no right or benefit
under the Agreement, including,
5. without limit, insurance, vacation, holidays, Saturday,
Sunday, and holiday premium pay, and other benefits extended to
full-timers.
6. Part-time employees will become and remain members of the
Union under the Agreement after thirty (30) calendar days of
their first day worked.
7. The Company will maintain a pool of what it considers
qualified part-time employees and offer work to those who, in its
estmation are most reliable and best able to perform the work
needed. Unless otherwise agreed, this pool will not exceed
fifteen (15).
8. The Company and Union will work out, as soon as possible,
additional needed details to make the program more workable and
flexible to provide overtime preference to available, qualified
full-timers, while maximizing the chances of attracting,
training, keeping and using available, qualified part-time
employees to hopefully diminish the need to assign mandatory
overtime and premium work.
9. This program will start with the effective date of the new
Agreement and continue in effect from month to month, subject to
cancellation on one (1) month's written notice by either party.
Upon cancellation of this program, the program will cease in its
entirety, including automatic employment termination of all part-
time employees without notice.
DISCIPLINE SIDE LETTER
AGREEMENT
During the term of the 1995-1998 Agreement, for purposes of imposing
progressive discipline, the Company will examine an employee's individual
employment file to determine if the employee has engaged in the same or
similar misconduct. If the employee has not engaged in the same or
similar misconduct within the twelve (12) months prior to the incident in
question, the Company will impose the first step of its progressive
disciplinary policy. If, in contrast, the employee has engaged in the
same or similar misconduct within the prior twelve (12) months, the
Company will consider this misconduct and progress to the next step of
the progressive disciplinary procedure. Discipline older than twelve<PAGE>
(12), months will not be considered further for progressive discipline.
Except for serious misconduct, where more severe discipline, up to
and including discharge, will be imposed, progressive discipline will
consist of a verbal warning for a first offense, a written warning for a
second offense, a three (3) day suspension, without pay, for a third
offense, and discharge for a fourth offense, unless the infraction, in
the Company's judgement, merits additional warnings prior to or rather
than suspension or discharge.
This clean-up procedure will not apply to suspension cases, last
chance warnings, or absenteeism situations, unless these forms of
discipline, by their terms, expire automatically and, after expiration,
are no longer to be used to impose automatic discharge.
In addition, except to comply with equal employment/affirmative
action and other legal requirements and except for suspension, last
chance, and absenteeism situations, the Company will make no use of or
reference to discipline imposed more than thirty-six (36) months prior to
discipline that results in arbitration.
TEMPORARY WAREHOUSE SHIPPING
CREW SIDE LETTER AGREEMENT
Without relinquishing their respective positions on the Company's
right to add shifts and/or change shift times on a temporary or regular
basis, the Company and the Union hereby agree to the Company's right to
institute, on a year by year basis, an additional temporary warehouse
shipping crew shift for the hours necessary to meet business demands.
JOB DISQUALIFICATION RECONSIDERATION SIDE LETTER
AGREEMENT
The Company will review a job disqualification for compelling reasons.<PAGE>
GROUP LEADER SIDE LETTER AGREEMENT
1. The term Group Leader shall mean an employee on a job with the
combined responsibility of directing the work of a group of employees on
other hourly rated jobs and performing the same work as that of the group
directed. The direction generally consists of activities such as are
required to: (a) plan work to be performed by the group; (b) determine
on the job working procedure; (c) arrange for necessary tools, supplies
and facilities; (d) instruct members of the group; and/or (e) inspect
coordinate, and record the work performed by the group. Such direction
does not include obligations to: (a) hire, promote, demote, suspend, or
discharge members of the group; (b) represent the Company in handling
employee grievances; or (c) perform other general supervisory or
management functions.
1. Group Leader will become a so-called listed job subject to
bidding but also Company discretionary removal under Section
9.14.
2. Unlike other job classifications, however, the Group Leader
job will be an add-on job title, in addition to the employee's
regular classification, and that job will pay the entry level
hourly rate as shown in _Schedule A_. This Group Leader job and
job rate will be subject to removal (not to be confused with a
job disqualification, which applies to full jobs only) by the
Company for substandard performance or other job-related reasons,
including reductions in the number of Group Leaders leading one or
more particular job(s). The Company, when reducing Group Leaders
leading one (1) or more job(s), will retain the most qualified as
Group Leaders, with seniority to control between two (2)
individuals with the same overall Group Leader evaluation score.
3. (A) The most qualified will be determined by the Company
from comparing individuals':
(a) demonstrated leadership skills;
(b) breadth and depth of knowledge over the machines
and duties of the job classification(s) involved;
(c) performance in such classification(s);
(d) necessary proficiency in mathematics, reading, and
other skills related to the particular Group Leader
position;
(e) teamwork; and
(f) attendance.
(B) To the extent possible, analysis of such factors will be reduced
to an overall score by job-related test scoring and, for subjective factors,
by rating the factor on a 1 to 5 scale, to be multiplied by a
number agreed by the Company and the Union to reflect the relative
importance of the factor.
EXAMPLE:
The Company and Union agree that the leadership factor is to have a
multiplier of 3. An individual rated 3 on leadership would have a
composite leadership score of 9 (3 x 3), to be added to the individual's
overall Group Leader evaluation score.
5 (A) A Group Leader removed as a Group Leader will have no bumping
option. Instead he/she will return to his/her regular job and have
bumping options under Section 9.09 (A) only to the extent displaced from
that regular job. A Group Leader who ceases to be a Group Leader will lose
the Group Leader job rate.
(B) To provide leadership as a Group Leader, employees who are not
Group Leaders will have no right to bump or otherwise displace a Group
Leader from his/her job or to displace a Group Leader from his/her
shift.
(C) If, as the result of a reduction in force or other reason, a
Group Leader no longer is leading at least one (1) employee, the Group
Leader will cease to be a Group Leader and lose the job rate until
leadership resumes.
(D) Group Leaders will have superseniority protection from layoff
only to the extent that, following the layoff, Group Leader duties
remain. To the extent a Group Leader ceases to be a Group Leader, the
employee's superseniority and job rate will cease.
(E) Group Leader will not be considered a previous job vacancy or
job classification to which an employee may bump or otherwise move under
Section 9.09 (A).
6. Group Leaders will receive annual performance evaluations.
7. A Group Leader will have overtime and premium pay rights only
among Group Leaders performing similar duties and will be
eligible for overtime and premium time in his/her regular job
only if all other qualified employees in that regular job
classification have declined the overtime or premium time work.
8. Except for removals or layoffs, this Side Letter Agreement
will not cause a wage reduction of any Group Leader, in the
position of Group Leader as of September 1, 1998, because he/she
no longer leads one (1) or more employees.
9. Group Leader (Maintenance), Group Leader (Non-Maintenance),
and Group Leader (Mold Repair) will be added to Grade 22 of
Schedule A of the Agreement.
10. The number of Group Leaders will be determined by the Company
consistent with sound business sense, subject to grievance by the
Union if it disagrees.
11. As a new program which needs monitoring and possible
modification to fully achieve its intent, the Company and Union
pledge to address concerns promptly and modify the program as
necessary and appropriate.
WEEKEND (FOURTH & FIFTH) SHIFT SIDE LETTER
AGREEMENT
To the extent the Company initiates, continues, or resumes so called
fourth (4th) and/or fifth (5th) shift weekend work schedules during the
term of the Agreement, the following procedures will apply and supercede
only those portions of the Agreement to avoid conflict with such
provisions here:
1. Shift Hours. Except as modified by the Company, regularly
scheduled weekend work schedules will be as follows:
Shift Saturday Sunday Total Regular
Hours Worked
Fourth (4th) Shift 11:00pm Friday- 11:00pm Saturday- Twenty-four(24)
11:00am Saturday 11:00am Sunday
Fifth (5th) Shift 11:00am Saturday- 11:00am Sunday- Twenty-four (24)
11:00pm Sunday 11:00pm Sunday
2. Full-Time Employees & Benefit Eligibility. Employees who
regularly work fourth (4th) and/or fifth (5th) shift weekend work
will be considered full-time employees eligible for benefits under
the Agreement except as modified here.
3. Pay For Time Worked. Regular weekend shift employees will
receive:
(a) straight time pay for their first eight (8) hours worked
on Saturday, which includes time worked from 11:00pm Friday:
(b) time and one-half (1-1/2) their regular rates of pay for
hours worked in excess of eight (8) on Saturday:
(c) double (2X) their regular rates of pay for hours worked
on Sunday; and
(d) time and one-half (1-1/2) their regular rates of pay for
all hours worked on weekends, provided they work all
scheduled hours in that week.
1. Shift Differential. Regular weekend shift employees who work
the majority of their hours during fourth (4th) shift will receive
third (3rd) shift shift differential pay in addition to their
straight time hourly pay, and regular weekend shift employees who
work fifth (5th) shift will receive second (2nd) shift shift
differential pay in addition to their straight time hourly pay.
2. Vacations. Regular weekend shift employees will earn vacation
time off and vacation pay consistent with Article VII/Vacations,
Holidays and Leaves, except that a week of vacation will consist
of a Saturday (counting as two (2) days) and a Sunday (counting
as three (3) days).
3. Holidays. Regular weekend shift employees will earn holiday
time off and holiday pay consistent with Article VII/Vacations,
Holidays and Leaves, except that:
(a) Either a Saturday or a Sunday taken as a personal day
will count as two (2) personal days taken; and
(b) No work on a Saturday or a Sunday will be considered
premium time worked.
1. Paid Breaks. Regular weekend employees working on fourth
(4th) or fifth (5th) shift will receive three (3) ten (10)
minute paid breaks for each twelve (12) hours worked on a
Saturday or Sunday, which includes time from 11:00pm Friday.
2. Funeral Leave & Pay. Regular weekend shift employees will be
eligible for funeral pay consistent with Section 8.22, except
that such employees will be eligible for up to two (2) days' pay
funeral leave, with each such paid day being twelve hours at the
employees' straight time hourly rate of pay, including shift
differential.
3. Absenteeism. Regular weekend shift employees will adhere to
the Company's attendance/absenteeism program and standards and be
charged with time missed from scheduled work identical in
treatment to regular weekday shift employees.
4. Weekday Employees. Neither this Side Letter Agreement nor
references in the Agreement to _employees regularly scheduled for
weekend shift work_ will apply to employees who regularly work
weekday shifts but, as necessary, also perform work on weekends.
EMPLOYEE-DECIDED & EMPLOYEE-PAID ADDITIONAL
INSURANCE OPTIONS SIDE LETTER AGREEMENT
During the term of the Agreement, the Company may offer employees,
at the employee's option, the employee's complete expense except as
stated here and through insurance carriers of the Company's
choosing, the option of purchasing additional insurance coverage
above and beyond that reflected in the Agreement. To the extent
such additional insurance options are offered, they will not be
reflected in the Agreement, covered by the terms of the Agreement,
and therefore will not be subject to either the grievance or
arbitration procedures of the Agreement. The decision whether to
elect and pay for such coverage will be solely that of the employee,
without the solicitation or assistance of either the Company or Union.
Such additional insurance options may include, for example, dental,
short term disability, personal accident, additional life, cancer
protection, long term health care, indemnity, and/other insurance.
Any eligibility, coverage, payment or other dispute or concern over
such additional insurance elected and paid by an employee will be solely
between the employee and the insurer and in no way involve the Company or
the Union. Such dispute or other concern is to be resolved by the
employee and insurer by resort to the contract between the employee and
the insurer.
During the term of the Agreement, the Company will pay one dollar
and twenty-five cents ($1.25) per week of the cost of only group dental
insurance coverage elected and otherwise paid by the employee to help
defray such cost.
FACTORY SHOP RULES
The following factory shop rules are published with this contract
pursuant to Paragraph 12.01 of the contract between the Company and the
Union.
It is noted that this publication is considered personal notice to
each employee.
PLEASE READ CAREFULLY
1. All employees shall be at their work station at the
start of their shift and at the end of their lunch period.
Incentive workers shall not start production prior to the
starting time of their shift.
2. Regular attendance is expected from every employee.
An employee unable to work shall notify the Personnel Office
or his/her foreman prior to his/her regular starting time, if
possible, or will be charged with a no report.
3. All employees are permitted a five (5) minute wash-up
period at the end of their shift. There shall be no lining up
at the data collection terminals ahead of swipe out time. If
washing-up is completed before time to swipe-out, then the
employee shall return to his or her department.
4. All employees shall maintain their working area,
machine, or table in a neat and clean condition at all times.
Special clean-up periods shall be at the direction of the
foreman or supervisor.
5. Trash, wastepaper, etc. shall be placed in trash
cans. Walls, machinery and equipment shall not be marked or
defaced in any manner.
6. Smoking, including the use of smokeless tobacco,
is prohibited in all parts of the factory except for posted
areas in the factory yard.
7. Matches other than safety matches shall not be
carried in the factory.
8. Violation of the following listed rules shall be
considered sufficient cause for discharge or other
disciplinary action (written verbal, written, or suspension
up to three (3) days):
a. Habitual tardiness or absenteeism.
b. Absence for more than two (2) consecutive days without
just cause or without notifying the foreman or the
plant superintendent or the Personnel Department.
c. Stopping work before quitting time. Washing or
preparing to leave before the proper time.
d. Willfully attempting to alter the time or other work
records of another worker.
e. Tampering with or falsifying his/her own or another
employee's time records, piecework slips, or other
work records.
f. Falsifying personnel records, reports, claims for
injuries or illnesses or claims for benefits provided
by the Company.
g. Intimidation or interference with the rights of any
other employee. Sexual harassment will also not be
tolerated.
h. Leaving department or building during working hours
without notifying foreman with reasonable excuse.
i. Inefficiency - (based on employee progress report).
j. Spoiling work willfully, sabotage, defacing,
damaging or destroying Company property or the
property of other employees.
k. Making of unnecessary scrap through carelessness.
l. Insubordination - refusing to satisfactorily
perform a reasonable task or duty assigned by the
foreman or other supervisor.
m. Stealing property of an employee or the Company.
n. Failure to submit to reasonable parcel inspection.
o. Gambling on Company property.
p. Possession of illegal weapons, firearms, or
drug paraphernalia on Company property.
q. The use of drugs, possession of drugs, or being
under the influence of drugs on Company property.
(The rule does not apply to drugs administered or
prescribed by a doctor.)
r. Failure to submit to testing for illegal or abused
substances, including drugs and alcohol, upon
probable suspicion about employees conduct or fitness
for duty.
s. Positive test results showing presence of controlled
substances following testing.
t. Conviction on or off Company property for a firearm
violation, drug violation or sale of drugs.
u. The use of profane, obscene, abusive or
threatening language to supervisors or fellow
employees.
v. Conviction of a crime, the nature of which would be
calculated to render the employee undesirable as
an associate or co-worker.
w. Soliciting on Company property without permission.
x. No employee is permitted to bring in or distribute,
at any time on Company property, literature that is
libelous, defamatory, scurrilous, abusive or
insulting, or any literature which would tend to
disrupt order, discipline, or production within the
plants. This is not intended to prohibit the posting
of normal Union publications and
notices.
y. Smoking, including the use of smokeless
tobacco in prohibited areas.
z. Intoxication or bringing in or drinking
intoxicating liquors on plant premises or reporting
for work under the influence of liquor.
aa. Injuring other people or equipment, tools,
materials, or supplies through carelessness or
negligence.
bb. Failure to shutdown machinery or power driven
equipment per procedure when leaving job or when it
is being repaired or adjusted.
cc. Removal of safety devices or guards on
machines or equipment.
dd. Failure to report accident, injury or visible
damage to equipment.
ee. Habitual failure to maintain good housekeeping.
ff. Fighting, running, playing practical jokes,
throwing things, pushing people or other obvious
menaces to safety of other workers.
gg. Failure to wear or use Company-provided
personal protective equipment and safety glasses.
hh. Defacing, destroying or removing pages from
the Hazardous Material Data Sheet notebooks.
ii. Disposing of compounds and chemicals in
unapproved refuse containers or dumpster. Employee
must obtain written approval prior to taking
hazardous waste to the storage or pick up area.
9. The management of this Company, as well as the officers of your
Union, are interested in your safety, and will work together to
provide you with a safe place to work. Our safety record is good,
but is takes eternal vigilance on the part of everyone to maintain
this record, and hopefully to show improvement.
We expect you to work safely, and to follow the safety
instructions of your supervisors. Each safety rule is necessary
because an accident has proved its need. Please read them.
a. Do smoke only in designated areas.
b. Do bring safety matches only into the plant; other
types are dangerous.
c. Do report even minor injuries to your supervisor.
d. Do use eye protection (goggles, shield or helmets)
for grinding, buffing, sanding, chipping, cutting,
welding, or other operations where flying material
might enter the eyes.
e. Do use ladders (no chairs, boxes, etc.) equipped with
safety feet.
f. Do use welding permits when welding.
g. Do walk, not run (stairways included).
h. Do use safety cans for flammable materials such as
solvents, rags, thinner, etc. Store and dispose of
in proper containers.
i. Do use ground clamps when pouring solvents from one
container to another.
j. Do keep sharp objects sheathed or covered.
k. Do report all unsafe practices or hazards to your
supervisor.
1. Do not remove safety devices from machines.
m. Do not clean or repair machines when in motion.
n. Do not play practical jokes, fight, throw things,
push or trip people.
o. Do not play with the air hoses. They are dangerous.
p. Do keep your area neat and clean.
SCHEDULE A
JOB CLASSIFICATIONS HOURLY RATE
10-4-98 10-3-99 10-8-2000
GRADE 1 $8.17 $8.47 $8.77
*Ball Deflator
*Buffer
*Shrink Wrap
*Trimmer
GRADE 2 $8.22 $8.52 $8.82
*Inflator
*OEM Finisher
*Packer/Finisher
*Seamer
GRADE 3 $8.38 $8.68 $8.98
*Blow Mold Operator
*Decorator
*Extrusion Operator/Utility
*Flame Treater
Mask Cleaner
*Tampo Printer
GRADE 4 $8.65 $8.95 $9.25
Salvage
GRADE 5 $8.74 $9.04 $9.34
GRADE 6 $8.83 $9.13 $9.43
General Labor
Sample Preparer
GRADE 7 $8.88 $9.18 $9.48
Janitor (Minimum)
Quality Control B
GRADE 8 $8.96 $9.26 $9.56
Inventory
Lab Assistant (Minimum)
Quality Control A (Minimum)
GRADE 9 $9.03 $9.33 $9.63
Experimental Work
GRADE 10 $9.08 $9.38 $9.68
* Incentive Job
GRADE 11 $9.14 $9.44 $9.74
Servicer
Shippers Helper/UPS Shippers Helper
GRADE 12 $9.18 $9.48 $9.78
GRADE 13 $9.23 $9.53 $9.83
Hazardous Material Comm/Coord. (Minimum)
Product Dev. Tech. (Minimum)
Product Technician B
Process Equipment Set-up & Repair (Minimum)
GRADE 14 $9.30 $9.60 $9.90
Grinder
Mold Cleaner (Minimum)
GRADE 15 $9.32 $9.62 $9.92
Receiving Clerk
Shipper
GRADE 16 $9.35 $9.65 $9.95
Semi-Truck Driver (Minimum)
GRADE 17 $9.38 $9.68 $9.98
Extrusion Operator/Utility
Product Tech. A (Minimum)
UPS Shipper
Utility Person
Foamer
GRADE 18 $9.41 $9.71 $10.01
GRADE 19 $9.56 $9.86 $10.16
Paint Mixer B
GRADE 20 $9.65 $9.95 $10.25
Paint Mixer A
GRADE 21
Blow Mold Operator $9.71 $10.01 $10.31
Compounder $9.71 $10.01 $10.31
* Incentive Job
GRADE 21
Machine Operator (Non-POD) $9.94 $10.24 $10.54
Machine Operator (POD) $10.10 $10.40 $10.70
Machine Operator (Rigid) $10.00 $10.30 $10.60
Machine Operator (1500) $10.10 $10.40 $10.70
Stores Attendant $9.75 $10.05 $10.35
Production Support $9.95 $10.25 $10.55
GRADE 22
Maintenance:
Boiler/Maintenance (Minimum) $10.35 $10.65 $10.95
Machinist/Maintenance (Minimum) $10.35 $10.65 $10.95
Maintenance B $9.83/10.3 $10.13/10.64 $10.43/10.94
Maintenance A $10.34/10.80 $10.64/11.10 $10.94/11.40
Top (Minimum) $10.8 $11.1 $11.40
Oiler (Minimum) $10.34 $10.64 $10.94
Group Leader (Maintenance) $14.55/16.55 $14.85/16.85 $15.15/17.15
Group Leader (Non-Maintenance)
Level 1 $10.20/10.80 $10.50/11.10 $10.80/11.40
Level 2 $10.95/11.55 $11.25/11.85 $11.55/12.15
Level 3 $12.05/14.80 $12.35/15.10 $12.65/15.40
Mold Repair (Minimum) $9.83 $10.13 $10.43
Group Leader (Mold Repair) $14.55/16.55 $14.85/16.85 $15.15/17.15
* Incentive Job
Employees hired on or after October 4, 1989 will receive 85% of
the Schedule A applicable wage rate of the job held, including any
applicable wage increases and as rounded off to the nearest whole cent,
during their first six (6) months of Company employment, 90% during their
second six (6) months, 95% during their third six (6) months, and 100%
beginning with their fourth six (6) months.
This wage progression will not apply to employees hired on or
after October 4, 1989, as maintenance, quality control, or laboratory
employees. The Company also reserves the right to discontinue the
progression in whole or part to attract qualified employees. In the event
the progression is discontinued, the new hire rate will revert to the 90%
arrangement to apply until completion of the 70 day probationary period as
set forth in the Subsection 8.01 of the 1986-1989 Agreement.
During the life of the October 3, 1998 to October 3, 2001
Agreement, the Company, on an experimental basis only and for the life of
the new Labor Agreement only, will shorten the length of time between the
progression steps of Schedule A by two (2) months each, so that the 85%
tier will last four (4), instead of six (6) months; the 90% tier also four
(4) instead of six (6) months; and the 95% tier also four (4) instead of
six (6) months, with the right to revert or otherwise exercise its rights
with regard to such progressions at the end of this labor agreement. This
will not affect Company's right to generally discontinue the progression
in whole or part to attract qualified employees with regard to specific
needs to attract qualified employees in certain needed job
classifications.
Classifications with minimum wage rate: Top Maintenance,
Quality Control A, Product Development Technician, Janitor, and Lab
Assistant A, the Union reserves the right to question, and, as
necessary, grieve pay differences among employees in the same job to
justify the Company's assessment of their relative job performances.
The Union will receive notice of anyone being paid above the minimum
rate.
EXHIBIT 11.1
<TABLE>
HEDSTROM HOLDINGS, INC. AND SUBSIDIARY
EARNINGS PER SHARE DISCLOSURE
For the nine month period ended September 30, 1998
(Dollars in thousands)
Income Shares Share
(Numerator) (Denominator) Amount
<S>
Basic Earnings Per Share: <C> <C> <C>
Net loss .............. $ (448) $67,663 $(0.01)
Effect of Dilutive Securities:
Stock options in the money - - -
Buyback of shares at average price
of $1.64 - - -
------ ------- ------
Net effect of stock options - - -
Diluted Earnings Per Share: ------ ------- ------
Net income $(448) $67,663 $(0.01)
===== ======= ======
Options to purchase 4,052,216 shares of common stock at
prices ranging from $1.00 - $1.64 per share were outstanding
at September 30, 1998 but were not included in the
computation of diluted EPS as they were anti-dilutive at the
end of the period.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,546
<SECURITIES> 0
<RECEIVABLES> 64,213
<ALLOWANCES> 0
<INVENTORY> 61,411
<CURRENT-ASSETS> 140,939
<PP&E> 45,619
<DEPRECIATION> 0
<TOTAL-ASSETS> 388,915
<CURRENT-LIABILITIES> 75,687
<BONDS> 0
0
0
<COMMON> 676
<OTHER-SE> 45,947
<TOTAL-LIABILITY-AND-EQUITY> 388,915
<SALES> 226,014
<TOTAL-REVENUES> 226,014
<CGS> 157,325
<TOTAL-COSTS> 46,072
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,377
<INCOME-PRETAX> (760)
<INCOME-TAX> (312)
<INCOME-CONTINUING> (448)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (448)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
