<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FROM TO
Commission File Number 0-5888
WAXMAN INDUSTRIES, INC.
-----------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 34-0899894
-------- ----------
(State of Incorporation) (I.R.S. Employer
Identification Number)
24460 AURORA ROAD
BEDFORD HEIGHTS, OHIO 44146
--------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(216) 439-1830
--------------
(Registrant's Telephone Number Including Area Code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No
---- ----
9,703,728 shares of Common Stock, $.01 par value, and 2,153,046 shares of Class
B Common Stock, $.01 par value, were outstanding as of October 21, 1996.
<PAGE> 2
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
INDEX TO FORM 10-Q
------------------
PAGE
----
PART 1. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations -
Three Months Ended September 30, 1996
and 1995............................................... 3
Condensed Consolidated Balance Sheets -
September 30, 1996 and June 30, 1996.................... 4-5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended September 30, 1996 and
1995................................................... 6
Notes to Condensed Consolidated Financial
Statements............................................. 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II. OTHER INFORMATION
- --------------------------
Item 5. Other Information...................................... 13
Item 6. Exhibits and Reports on Form 8-K....................... 13
SIGNATURES
- ----------
EXHIBIT INDEX
- -------------
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $ 65,879 $ 57,589
Cost of sales 42,985 38,012
------- -------
Gross profit 22,894 19,577
Selling, general and administrative
expenses 16,348 14,760
------- -------
Operating income 6,546 4,817
Interest expense, net 4,049 6,653
------- -------
Income (loss) before income taxes, minority
interest and cumulative effect of change
in accounting 2,497 (1,836)
Provision for income taxes 1,942 142
------- -------
Income (loss) before minority interest and
cumulative effect of change in accounting 555 (1,978)
Minority interest in consolidated
affiliate 1,352 -
------- -------
Loss before cumulative effect of change
in accounting (797) (1,978)
Cumulative effect of change in accounting - (8,213)
------- -------
Net loss $ (797) $(10,191)
======= =======
Earnings (loss) per share (primary and fully diluted):
Income (loss) before minority interest
and cumulative effect of change
in accounting $ .04 $ (.17)
Minority interest in consolidated
affiliate (.10) -
Cumulative effect of change in accounting - (.70)
------- -------
Net loss $ (.06) $ (.87)
======= =======
Weighted average shares and equivalents 13,345 11,729
======= =======
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
3
<PAGE> 4
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
SEPTEMBER 30, 1996 AND JUNE 30, 1996
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,207 $ 2,460
Accounts receivable, net 39,165 37,226
Inventories 64,533 59,883
Prepaid expenses 3,323 4,096
------- -------
Total current assets 108,228 103,665
------- -------
PROPERTY AND EQUIPMENT:
Land 1,470 1,393
Buildings 12,084 11,842
Equipment 25,869 23,090
------- -------
39,423 36,325
Less accumulated depreciation
and amortization (19,656) (18,597)
------- -------
Property and equipment, net 19,767 17,728
COST OF BUSINESSES IN EXCESS
OF NET ASSETS ACQUIRED, NET 13,215 13,318
UNAMORTIZED DEBT ISSUANCE COSTS, NET 4,930 5,008
OTHER ASSETS 3,165 2,918
------- -------
$149,305 $142,637
======= =======
</TABLE>
The accompanying Notes to Condensed Consolidated
Financial Statements are an integral part of these statements.
4
<PAGE> 5
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
SEPTEMBER 30, 1996 AND JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 14,894 $ 10,972
Accounts payable 30,149 28,607
Accrued liabilities 10,953 11,929
Accrued interest 870 1,441
-------- --------
Total current liabilities 56,866 52,949
-------- --------
LONG-TERM DEBT, NET OF CURRENT PORTION 983 863
SENIOR SECURED DEFERRED COUPON NOTES 64,826 62,723
SENIOR NOTES 43,026 43,026
SENIOR SUBORDINATED NOTES 5,724 5,724
MINORITY INTEREST IN CONSOLIDATED AFFILIATE 21,958 20,606
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value per share:
Authorized and unissued 2,000 shares - -
Common Stock, $.01 par value per share:
Authorized 22,000 shares; Issued 9,693
at September 30, 1996 and June 30, 1996 96 96
Class B common stock, $.01 par value per share:
Authorized 6,000 shares; Issued 2,153
at September 30, 1996 and June 30, 1996 22 22
Paid-in capital 21,419 21,419
Retained deficit (65,301) (64,503)
------- -------
(43,764) (42,966)
Cumulative currency translation adjustment (314) (288)
------- -------
Total stockholders' equity (deficit) (44,078) (43,254)
------- -------
$149,305 $142,637
======= =======
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
5
<PAGE> 6
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net loss $ (797) $(10,191)
Adjustments to reconcile net loss to
net cash provided by (Used in) operating
activities:
Non-cash interest 2,103 1,866
Cumulative effect of change in accounting - 8,213
Minority interest in consolidated affiliate 1,352 -
Depreciation and amortization 1,239 1,342
Changes in assets and liabilities:
Accounts receivable, net (1,939) 766
Inventories (4,650) 4,395
Prepaid expenses 526 (2,137)
Accounts payable 1,542 410
Accrued liabilities (976) 1,352
Accrued interest (571) (2,155)
Other, net (26) (65)
------- -------
Net Cash Provided by (Used in) Operating
Activities (2,197) 3,796
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Capital expenditures, net (3,098) (1,481)
------- -------
Net Cash (Used in) Investing Activities (3,098) (1,481)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Borrowings under credit agreement 32,178 56,816
Payments under credit agreement (28,256) (59,485)
Borrowings (Repayments) of long-term debt 120 (115)
------- -------
Net Cash Provided by
(Used in) Financing Activities 4,042 (2,784)
------- -------
NET DECREASE IN CASH (1,253) (469)
BALANCE, BEGINNING OF PERIOD 2,460 2,106
------- -------
BALANCE, END OF PERIOD $ 1,207 $ 1,637
======= =======
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
6
<PAGE> 7
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
SEPTEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION
---------------------
The condensed consolidated financial statements include the accounts of Waxman
Industries, Inc. ("Waxman"), its wholly owned subsidiaries and its affiliate,
Barnett Inc. (collectively, the "Company"). The Company owns approximately 49.9%
of the voting capital stock of Barnett Inc. and, together with non-voting
preferred stock of Barnett Inc. owned by the Company, approximately 54% of the
capital stock of Barnett. The condensed consolidated statements of operations
for the three months ended September 30, 1996 and 1995, the condensed balance
sheet as of September 30, 1996 and the condensed statements of cash flows for
the three months ended September 30, 1996 and 1995 have been prepared by the
Company without audit, while the condensed balance sheet as of June 30, 1996 was
derived from audited financial statements. In the opinion of management, these
financial statements include all adjustments, all of which are normal and
recurring in nature, necessary to present fairly the financial position, results
of operations and cash flows of the Company as of September 30, 1996 and for all
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes that
the disclosures included herein are adequate and provide a fair presentation of
interim period results. Interim financial statements are not necessarily
indicative of financial position or operating results for an entire year. It is
suggested that these condensed interim financial statements be read in
conjunction with the audited financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K, as amended by an amendment thereto
on Form 10K/A1, for the fiscal year ended June 30, 1996 filed with the
Securities and Exchange Commission.
NOTE 2 - BUSINESS
--------
The Company believes that it is a leading supplier to the home repair and
remodeling market in the United States. Primarily through its indirect wholly
owned subsidiaries, Waxman Consumer Products Group Inc. ("Consumer Products"),
WOC Inc. ("WOC"), and TWI International, Inc. ("TWI") and its affiliate Barnett
Inc. ("Barnett"), the Company markets and distributes a broad range of plumbing,
electrical and hardware products to over 55,000 customers in the United States,
including do-it-yourself warehouse home centers, home improvement centers, mass
merchandisers, hardware stores, lumberyards and to plumbing and electrical
repair and remodeling contractors, independent hardware stores and maintenance
managers.
NOTE 3 - INCOME TAXES
------------
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). The Company is currently unable to recognize any income tax
benefit relating to its net loss. The tax provision for the three months ended
September 30, 1996 represents Barnett's tax provision and a provision for state
and foreign taxes.
At June 30, 1996, the Company had approximately $54.3 million of available
domestic net operating loss carryforwards which will expire between 2008 and
2011. The benefit of these net operating loss carryforwards has been reduced
100% by a valuation allowance. The Company will continue to evaluate the
valuation allowance and to the extent that the Company is able to recognize tax
benefits in the future, such recognition will favorably affect future
<PAGE> 8
results of operations. The Company also has alternative minimum tax
carryforwards of approximately $663,000 at June 30, 1996 which are available to
reduce future regular income taxes over an indefinite period.
As a result of the Barnett Public Offering (as defined below), Barnett is no
longer included in the Company's consolidated tax return. Therefore, the
Company's remaining net operating loss carryforwards are not available to offset
Barnett's taxable income.
NOTE 4 - IMPACT OF NEW ACCOUNTING STANDARDS
----------------------------------
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which establishes new accounting
standards for the measurement and recognition of stock-based awards. SFAS No.
123 permits entities to continue to use the traditional accounting for
stock-based awards prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees," however, under this option, the Company will be required
to disclose the pro forma effect of stock-based awards on net income and
earnings per share as if SFAS No. 123 had been adopted. SFAS No. 123 is
effective in fiscal 1997. The Company intends to continue using the provisions
of APB Opinion No. 25 to account for stock-based awards.
NOTE 5 - BARNETT
-------
In April 1996, Barnett completed an initial public offering (the "Barnett Public
Offering") of its common stock (the "Barnett Common Stock"). In the offering,
7,207,200 shares, representing approximately 55.1% of the Barnett Common Stock,
were sold in the aggregate by Barnett and Waxman USA Inc., a direct wholly owned
subsidiary of Waxman, at an initial public offering price per share of $14.00.
Since the consummation of the Barnett Public Offering, the cash flow generated
by Barnett is no longer available to the Company other than the amounts paid to
the Company for services, or the pro rata amounts, if any, distributed by
Barnett in the form of a common stock dividend. The Company consolidates
Barnett's financial results and records a charge on its statement of operations
for the net income related to the outside stockholders' interest.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
Cash payments during the three months ended September 30, 1996 and 1995 included
income taxes of $1.4 million and $0.2 million and interest of $2.3 million and
$3.8 million, respectively.
NOTE 7 - EARNINGS PER SHARE
------------------
Primary earnings per share are calculated by dividing net income by the weighted
average number of shares of common stock and common stock equivalents, which
include outstanding stock options.
The number of shares of common stock used to calculate primary and fully diluted
earnings per share are as follows:
September 30, 1996 - 13,345,000
September 30, 1995 - 11,729,000
For the period ended September 30, 1995, stock options were not considered in
calculating earnings per share since the exercise price of the stock options was
greater than the market price of the Company's common stock.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
A. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
AND 1995
This Quarterly Report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 including,
without limitation, statements regarding the sufficiency of the Company's
liquidity and sources of capital. These forward-looking statements are subject
to certain risks, uncertainties and other factors which could cause actual
results to differ materially. Additional information regarding factors that
could potentially affect the Company or its financial results may be included in
the Company's filings with the Securities and Exchange Commission.
Net Sales
- ---------
Net sales for the fiscal 1997 first quarter ended September 30, 1996 totaled
$65.9 million, an increase of 14.4% as compared to the $57.6 million in the
comparable quarter in fiscal 1996. Most of the net sales increase is
attributable to Barnett's introduction of 1,031 new products and the expansion
of its telesales operations by 19 telesalespersons over the prior year. Sales
from products introduced over the past twelve months accounted for $3.2 million
of the increase. In addition, an expanded promotional flyer campaign resulted in
an increase in the number of Barnett's active customers from 39,000 to 43,000,
contributing $1.3 million to the increase in net sales for the fiscal 1997 first
quarter as compared to the same period in fiscal 1996.
The Company's wholly owned operations recorded a net sales increase of 2.3%,
accounting for the remaining improvement in the Company's net sales. The
increase is attributable to additional market opportunities that became
available as a result of the Company's strengthened financial position, an
increase in direct selling activities from the Company's foreign operations and
an improved economic environment for most of the Company's products. The
increase was partially offset by decreased demand from some of the Company's
larger customers, as a result of the highly competitive retail industry and
Consumer Products discontinuance of certain lower margin product lines.
Gross Profit
- ------------
Gross profit increased by 16.9% to $22.9 million in the three months ended
September 30, 1996, as compared to $19.6 million in the corresponding prior year
period. The gross profit margin improved to 34.8% in the quarter ended September
30, 1996 from 34.0% for the comparable period last year. Barnett's gross profit
for the quarter ended September 30, 1996 increased by 28.8% to $12.4 million as
gross profit margins improved over the comparable quarter last year. The
improvements were the result of favorable vendor program changes, including
additional volume incentive programs in the current three month period.
Gross profit for the Company's wholly owned operations for the first quarter of
fiscal 1997 amounted to $10.5 million, an improvement of 5.6% over the $10.0
million in the corresponding period last year. The gross profit margin improved
by 3.2%, and was 35.8% in the current year quarter as compared to 34.7% for the
quarter ended September 30, 1995, primarily due to the discontinuance of lower
margin product lines.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses ("SG&A expenses") increased from
$14.8 million for the quarter ended September 30, 1996 to $16.3 million for the
current quarter. As a percentage of sales, SG&A expenses decreased from
9
<PAGE> 10
25.6% for the first quarter of fiscal 1996 to 24.8% for the first fiscal quarter
of 1997. Barnett's SG&A expenses for the first quarter of fiscal 1997 increased
to $8.0 million from the $6.3 million of the comparable period last year. The
increase was the result of the addition of 19 telesalespersons, an expansion of
its marketing staff, an enhanced commitment to a "same day" shipping policy and
a reduction in prepaid freight minimums to customers, as well as public costs
for Barnett as an independent public company. As a percentage of sales,
Barnett's SG&A expenses were relatively unchanged for the comparable quarters.
SG&A expenses for the Company's wholly owned operations decreased slightly, and
as a percentage of sales, improved to 28.4% in the first quarter of fiscal 1997
as compared to 29.3% in the same quarter of fiscal 1996. The improvement is
primarily due to higher sales, and the write down of goodwill and other assets
resulting from the adoption of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in the fourth
quarter of fiscal 1996.
Interest Expense
- ----------------
For the quarter ended September 30, 1996, interest expense totaled $4.0 million,
a decrease of $2.6 million from the $6.6 million in the comparable quarter last
year. The decrease is primarily due to the repayment of debt with proceeds from
the Barnett Public Offering. Average borrowings for the current year's quarter
amounted to $127.8 million, with a weighted average interest rate of 11.8%, as
compared to $206.1 million in the same quarter last year with an weighted
average interest rate of 12.3%.
Provision for Income Taxes
- --------------------------
The provision for income taxes amounted to $1.9 million and $0.1 million for the
first quarter of fiscal 1997 and 1996, respectively. The provision for the
current quarter primarily represents Barnett's tax provision and state and
foreign taxes of the Company's wholly owned operations. The difference between
the effective and statutory tax rates is primarily due to domestic losses not
benefited and goodwill amortization.
With the completion of the Barnett Public Offering, Barnett is no longer
included in the consolidated tax return of the Company and is unable to benefit
from the Company's net operating loss carryforwards. In accordance with the
provisions of SFAS No. 109, the Company is unable to benefit its losses in the
current year.
Minority Interest in Consolidated Affiliate
- -------------------------------------------
The Company recorded a charge of $1.4 million for the quarter ended September
30, 1996 for the 50.1% of Barnett's net income associated with the outside
stockholders' common stock interest.
Cumulative Effect of Change in Accounting
- -----------------------------------------
Effective July 1, 1995, the Company changed its method of accounting for
procurement costs. Procurement costs represent the amount paid in connection
with a customer's commitment to purchase products from the Company for a
specified period. The amount capitalized is the consideration paid by the
Company to the new or existing customer (i) for the right to supply such
customer for a specified period and (ii) to purchase competitor's merchandise
that the customer has on hand when it changes suppliers, less the salvage value
received by the Company. The Company adopted a policy to amortize these costs in
the fiscal year incurred due to the uncertainty of today's competitive retail
environment. Previously, these costs were amortized over the period deemed to be
benefited. The cumulative effect of this change on prior years of $8.2 million,
without tax benefit, is reported as a separate charge in the first quarter of
fiscal 1996.
10
<PAGE> 11
Net Loss
- --------
The Company's net loss for the quarter ended September 30, 1996 amounted to $0.8
million, or $.06 per share, an improvement over the loss of $2.0 million or $.17
per share before the cumulative effect of the change in accounting in the first
quarter of fiscal 1996. In the first quarter of fiscal 1996 the Company also
recorded a charge for the cumulative effect of the change in accounting of $8.2
million, or $.70 per share resulting in a net loss of $10.2 million or $.87 per
share.
B. Liquidity and Capital Resources
-------------------------------
At September 30, 1996, the Company had $14.2 million available under the credit
agreement with BankAmerica Business Credit, Inc. (the "New Credit Agreement").
The New Credit Agreement contains certain covenants and restrictions, including
a material adverse effect clause and the requirement to maintain cash collateral
accounts. Accordingly, borrowings under the New Credit Agreement and New Term
Loans have been classified as a current liability. The Company was in compliance
with all loan covenants at September 30, 1996.
At September 30, 1996, the Company had working capital of $51.4 million and a
current ratio of 1.9 to 1.
The Company relies primarily on Consumer Products for cash flow since Barnett's
cash flow is no longer available to the Company with the completion of the
Barnett Public Offering. Consumer Products' customers include do-it-yourself
warehouse centers, home improvement centers, mass merchandisers, hardware stores
and lumberyards. Consumer Products may be adversely affected by prolonged
economic downturns or significant declines in consumer spending. There can be no
assurances that any such prolonged economic downturns or significant declines in
consumer spending will not have a material adverse impact on the Consumer
Products' business and its ability to generate cash flow. Furthermore, Consumer
Products' largest customer, Kmart and its subsidiary, Builders Square,
historically have accounted for approximately 42% to 44% of Consumer Products'
total net sales. The Company has been advised by Kmart that it is in the process
of conducting a review of its supply arrangements with its suppliers of plumbing
and hardware products, including Consumer Products, and will make a decision
regarding which vendors it will utilize by the end of December 1996. Based on
discussions to date with Kmart's management, the Company believes it will retain
the Kmart business. However, all large merchandisers review supply arrangements
from time to time and there can be no assurance that this relationship will
continue or as to the terms of any relationship that does continue. In the event
Consumer Products were to either lose Kmart as a customer or Kmart were to
significantly curtail its purchases from Consumer Products, there would be
material short-term adverse effects until the Company could modify Consumer
Products' cost structure to be more in line with its reduced revenue base.
The Company does not have any commitments to make substantial capital
expenditures.
The Company believes that the funds generated from operations, along with the
funds available under the New Credit Agreement will be sufficient to satisfy the
Company's liquidity requirements until June 1, 1999 (the date that the $5.7
million principal payment is due on the Senior Subordinated Notes) or, if the
Company is able to refinance the Senior Subordinated Notes, December 1, 1999
(the date that the cash interest becomes payable by the Company under the
Deferred Coupon Notes). There can be no assurance that the Company will be able
to pay cash interest on the Deferred Coupon Notes commencing in December 1999 or
that the Company will be able to refinance the Senior Subordinated Notes or the
Deferred Coupon Notes.
11
<PAGE> 12
Discussion of Cash Flows
- ------------------------
Net cash used by the Company's operations was $2.2 million for the quarter ended
September 30, 1996, due mainly to an increase in inventories, accounts
receivable and a decrease in accruals (principally accrued income tax and
accrued interest payments) which were partially offset by an increase in
accounts payable. Cash flow used for investments totaled $3.1 million, primarily
relating to Barnett's operations, including capital expenditures for improved
management information systems, including the buy-out of an operating lease
incurred in prior years and expansion and/or relocation of several of Barnett's
distribution centers to accommodate new product offerings. Cash flow from
financing totaled $4.0 million. Net debt borrowings during the quarter ended
September 30, 1996 under the New Credit Agreement totaled $3.9 million.
12
<PAGE> 13
PART II. OTHER INFORMATION
-----------------
ITEM 5. OTHER INFORMATION
-----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) See Exhibit 27.
b) Form 8-K
None
All other items in Part II are either inapplicable to the Company during the
quarter ended September 30, 1996 or the answer is negative or a response has
been previously reported and an additional report of the information need not be
made, pursuant to the instructions to Part II.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WAXMAN INDUSTRIES, INC.
-----------------------
REGISTRANT
DATE: NOVEMBER 7, 1996 BY: /S/ MICHAEL J. VANTUSKO
MICHAEL J. VANTUSKO
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
13
<PAGE> 14
EXHIBIT INDEX
-------------
EXHIBIT PAPER (P) OR
- ------- ------------
NUMBER DESCRIPTION ELECTRONIC (E)
- ------ ----------- --------------
(27) Financial Data Schedule
(submitted to the Securities
and Exchange Commission in
Electronic Format) E
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,207
<SECURITIES> 0
<RECEIVABLES> 41,440
<ALLOWANCES> (2,275)
<INVENTORY> 64,533
<CURRENT-ASSETS> 108,228
<PP&E> 39,423
<DEPRECIATION> 19,656
<TOTAL-ASSETS> 149,305
<CURRENT-LIABILITIES> 56,866
<BONDS> 114,559
0
0
<COMMON> 118
<OTHER-SE> (44,196)
<TOTAL-LIABILITY-AND-EQUITY> 149,305
<SALES> 65,879
<TOTAL-REVENUES> 65,879
<CGS> 42,985
<TOTAL-COSTS> 16,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,049
<INCOME-PRETAX> 2,497
<INCOME-TAX> 1,942
<INCOME-CONTINUING> 555
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (797)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
