SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-10177
WINDMERE CORPORATION
(Exact name of Registrant as specified in its charter)
Florida 59-1028301
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5980 Miami Lakes Drive, Miami Lakes, Florida 33014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 362-2611
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock $.10 Par Value New York Stock Exchange
Special Preferred Stock Rights New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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_____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 20, 1996, the aggregate market value of the voting
stock (based on the closing price as reported by NYSE of $9.75)
held by non-affiliates of the Registrant was approximately
$138,251,000.
APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of
shares outstanding of each of the Registrant's classes of common
stock, as of the latest practicable date.
16,427,924 Shares of Common Stock
(as of the close of business on March 20, 1996)
DOCUMENTS INCORPORATED BY REFERENCE
1. Windmere Corporation's 1995 Annual Report to Shareholders (for
the fiscal year ended December 31, 1995). Information
contained in this document has been incorporated by reference
in PARTS I and II.
2. Windmere Corporation Proxy Statement for its 1996 Annual
Meeting of Shareholders (dated April 12, 1996). Information
contained in this document has been incorporated by reference
in PART III.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Windmere Corporation (the "Company") is engaged principally in
manufacturing and distributing a wide variety of personal care, kitchen
electric and seasonal products. The Company designs and manufactures its
products for sale to retail stores, distributors and professional beauty
supply customers located primarily in the United States, Canada and
Europe, with additional distribution in Latin America and the Far East.
The Company's products are sold largely under its Windmere trade name,
as well as under other trade names, trademarks and private labels. The
Company also manufactures products on a contract basis for others.
The Company's products are primarily manufactured by Durable Electrical
Metal Factory, Ltd. ("Durable"), its wholly-owned Hong Kong subsidiary,
in Bao An County, Guandong Province of the People's Republic of China
("People's Republic"), which is approximately 60 miles northwest of
central Hong Kong. The Company has a significant amount of its assets
in the People's Republic, primarily consisting of inventory, equipment
and molds. Substantially all of the Company's products are manufactured
by Durable and unrelated factories in the People's Republic.
Approximately 85% to 90% of the Company's products are manufactured by
Durable. The supply and cost of these products can be adversely
affected, among other reasons, by changes in foreign currency exchange
rates, increased import duties, imposition of tariffs, imposition of
import quotas, interruptions in sea or air transportation and political
or economic changes. From time to time, the Company explores
opportunities to diversify its sourcing and/or production of certain
products to other low-cost locations or with other third parties or
joint venture partners in order to reduce its dependence on production
in the People's Republic and/or reduce Durable's dependence on the
Company's existing distribution base. However, at the present time, the
Company intends to continue its production in the People's Republic.
In June 1989, the People's Republic experienced civil disturbances and,
although such disturbances have dissipated since that time, there
continues to be pressure for political reform. No assurance can be
given, however, that civil disturbances will not recur. If it becomes
necessary to relocate the Company's manufacturing facilities from the
People's Republic as a result of civil disturbances in that country or
otherwise, the Company believes the production currently conducted in
the People's Republic could be relocated to other Far East locations,
including Hong Kong, or other low-cost manufacturing locations, with
only temporary disruption and delay in such production and possible
short-term operating and capital losses, provided that the Company is
able to move substantially all of its manufacturing equipment and other
assets currently in the People's Republic to another location. If the
Company is unable to remove such assets, due to confiscation,
expropriation, nationalization, embargoes or governmental restrictions,
it would incur substantial operating and capital losses, including
losses resulting from business disruption and delays in production. In
addition, as a result of a relocation of its manufacturing equipment and
certain other assets, the Company would likely incur relatively higher
manufacturing costs. A relocation could also adversely affect the
Company's revenues if the demand for the Company's products currently
manufactured in the People's Republic decreases due to a disruption in
the production and delivery of such products or due to higher prices
which might result from increased manufacturing costs. Furthermore,
earnings could be adversely affected due to reduced sales and/or the
Company's inability to maintain its current margins on the products
currently manufactured in the People's Republic.
In 1995, President Clinton extended the People's Republic's most-
favored-nation (MFN) trading status for an additional year, beginning
July 3, 1995. The President announced in 1994 that the United States
would, in the future, permanently de-link MFN renewal from human rights
issues, other than freedom of emigration provisions. Under U.S. law,
MFN status means that products are subject to the relatively low duty
rates set forth in Column 1 of the Harmonized Tariff Schedules of the
United States (HTSUS), that have resulted from several rounds of
reciprocal tariff negotiations conducted under the auspices of the
General Agreement on Tariffs and Trade (GATT) since 1945. Products from
countries not eligible for MFN treatment are subject to much higher
rates of duty, averaging 30 percent ad valorem, as set forth in Column
2 of the HTSUS. If MFN status for goods produced in the People's
Republic were removed, there would be a substantial increase in tariffs
imposed on goods of Chinese origin entering the United States, including
those manufactured by the Company, which could have a material adverse
impact on the Company's revenues and earnings.
The Company was incorporated under the laws of the State of Florida in
1963. As used herein, the term "Company" refers to Windmere Corporation
and its subsidiaries, unless the context indicates otherwise. The
Company's executive offices are located at 5980 Miami Lakes Drive, Miami
Lakes, Florida 33014, (see Item 2. Properties), and its telephone number
is (305) 362-2611.
Products
The major portion of the Company's revenues are generated by the sale of
personal care products. The Company's personal care products include
hair dryers, curling irons, curling brushes, hairsetters, combs and
brushes, shears, mirrors and electric shavers.
The Company's appliances include toasters, toaster ovens, can openers,
blenders, hand mixers, waffle irons, steam irons, electronic air
cleaners, fans and air fresheners.
In 1995, 1994 and 1993, net sales of personal care products and
appliances represented approximately 63% and 37%, 70% and 30%, and 74%
and 26%, respectively, of the Company's total net sales.
Marketing and Distribution
Distribution:
The Company's products are sold principally by independent sales
representatives. The Company utilizes media advertising, cooperative
advertising and collateral materials to promote its products.
The Company's products are sold under various federal trademarks and
registrations, some of which include: Windmere, Jumbo Curl, Belson Pro,
Curlmaster, Design Pro, First Class Gourmet, Solid Gold, Hot'n Steamy,
Windmere Salon, Steam Express, Air Moves, ESP, Electric Shock
Protection, VIP Pro, Setting Pretty, Skinni Mini, Clothes Shaver, Easy
Styler, Four Way Curls, Set Up, All Curl Trio, Mirror Go Lightly,
Jerdon, First Class, Plak Trac, Litter Maid, Smoke Catcher, Curly Top,
Prelude, High Fashion, Belson, Pro Touch, Pro Star, Hot Silver, Golden
Touch, Profiles, Comare, Salon Designs, Premiere, Espree, Gold'n Hot and
Gentle Air. The Company believes that its business has not been
materially dependent on any one such trademark.
The Company's distribution businesses include the sale of consumer
products and professional salon products primarily in the United States,
Canada and Europe. Consumer products are primarily sold under the
Windmere brand and professional salon products are sold under the Belson
Products and Comare brands. In addition, private label and controlled
label sales are made by the Company.
In the United States, the Company wholesales its line of consumer
products nationwide to retailers, including department stores, drug
chains, catalog stores and discount and variety stores. The Company
also markets its consumer and professional salon appliances, hair pieces
and a wide variety of brushes and other hair care accessories to
beauticians, barbers and stylists through distributors. In addition,
certain items, including the Company's hair dryers, curling irons and
other personal care appliances, are sold through professional beauty and
barber retail store outlets.
The Company owns a 50% interest in a joint venture, Paragon Industries,
which distributes electric fans and other seasonal products manufactured
by Durable and unaffiliated third parties. At December 31, 1995, this
investment had a negative book value of $.8 million and there were no
significant contingent liabilities arising from such investment.
Manufacturing:
The Company's manufacturing business is conducted by Durable. Durable,
through its twenty-four year relationship with the Company, has produced
an extensive product line, which includes not only the appliances sold
to the Company and its customers and a substantial amount of oscillating
fans for a joint venture, but it has also become a contract manufacturer
for a range of products, such as toasters, steam irons, toaster ovens,
can openers, blenders, hand mixers and waffle irons, which it sells
primarily to customers in the United States, Canada and Europe. Some
of its customers are Rival, Salton-Maxim and Sunbeam.
In February 1996, the Company announced the signing of an agreement
whereby it would acquire a 50% ownership in Salton-Maxim, a designer and
marketer of small kitchen appliances and beauty care products. The
transaction, which is subject to a number of conditions, is expected to
close in June 1996.
Manufacturing and Supplies
The Company's foreign sales and operations are subject to the usual
risks incident to operating abroad, including currency fluctuations,
political conditions and changes in foreign laws. A weakening or
strengthening of the United States dollar may result in higher or lower
cost of goods for the Company from suppliers in countries whose exchange
rate does not parallel the United States dollar, unlike Hong Kong the
currency of which fluctuates substantially parallel to the United States
dollar.
The Company generates approximately 85% to 90% of its revenues from
products manufactured by Durable in the People's Republic. Such
products utilize raw materials available from at least two and as many
as nine or more independent suppliers. The Company has no material
dependence on any single foreign source for such materials.
Seasonality
The Company's business is generally seasonal. The Company has
historically experienced higher revenues in the third and fourth
quarters of each fiscal year primarily due to increased demand by
customers for the Company's products in the late summer for "back to
school" sales and in the fall for Christmas sales. In typical years,
the Company begins to accumulate inventory for its major selling season
in June and July and it continues to purchase products at accelerated
rates until November. The Company's major sales occur during August
through November. Sales are generally made on 60 to 90 day terms.
Heaviest collections on its open accounts receivable are received from
November through March, at which time the Company is in its most liquid
state.
Backlog
The Company's backlog of orders as of December 31, 1995, 1994 and 1993
was approximately $22.2 million, $20.1 million and $17.7 million,
respectively, which orders are generally shipped within the next
succeeding year.
Competition
The Company encounters significant competition with respect to all of
its products. Although the Company's prices for products distributed
under its labels are in general below or competitive with those of many
nationally advertised brands, the Company also competes through quality
of product, attractive packaging, breadth of product lines, speed of
delivery and maintenance of good customer relations. Many of the
Company's major competitors are substantially larger, have greater
financial and other resources and spend more for national advertising.
Some of the Company's competitors include Conair, Helen of Troy and
Remington.
Regulation
In the United States, Canada and Europe, most federal, state, provincial
and local authorities require Underwriters Laboratory, Inc. ("UL") or
other safety regulation certification prior to marketing electrical
appliances in those jurisdictions. All of the non-professional salon
appliances marketed by the Company have such certifications. The
Company endeavors to have most of its products designed to meet those
requirements and to be so certified, although there can be no assurance
that those products, or additional electrical appliances which may be
developed by the Company, will meet such specifications. Certain of the
products sold by the Company in the United States are subject to the
cosmetic purity and labelling provisions of the Fair Packaging and
Labelling Act. The Company believes that in addition to complying with
the Fair Packaging and Labelling Act, it complies with the applicable
rules and regulations of the Federal Trade Commission and other
municipal agencies with respect to, among other things, the content of
advertising and other trade practices.
Patents
Although the Company does not believe that its business is materially
dependent upon patents and patent protection, from time to time, new
products have been introduced with unique features for which the Company
has filed or obtained licenses for patents and design registrations in
the United States and in several foreign countries.
Employees
At March 1, 1996, the Company's distribution businesses in the United
States, Canada, Europe and Hong Kong employed approximately 250
persons. Durable's operations in Hong Kong and the People's Republic of
China employed approximately 10,000 persons. The Company enjoys
satisfactory working relations with these employees. The Company is not
a party to any collective bargaining agreement.
Geographic Area Financial Information
Incorporated by reference to the Company's 1995 Annual Report to
Shareholders, under the caption, "Note M to Consolidated Financial
Statements, Geographic Area Information". Included as part of Exhibit
13.
Item 2. PROPERTIES
The executive offices of the Company, from which a significant amount of
its business activities are conducted, are currently located at 5980
Miami Lakes Drive, Miami Lakes, Florida. All of the space in this two-
story office and warehouse facility is owned and occupied by the
Company. The Company also utilizes the services of public warehouses
located in Reno, Nevada and Memphis, Tennessee pursuant to short-term
contracts.
Durable owns approximately 50,000 sq. ft. of office space in Hong Kong,
of which 30,000 sq. ft. is used for its and the Company's trading
companies' headquarters. Durable also utilizes facilities of 1,600,000
sq. ft. in the People's Republic which it operates under contracts with
the local government. The contracts require such periodic adjustments
that terms of between one and five years exist at all times. Certain
facilities have contract terms extending beyond five years.
ITEM 3. LEGAL PROCEEDINGS
In April 1994, Kabushiki Kaisha Izumi Seiki Seisakusho, a Japanese
corporation ("Izumi"), filed an action against the Company, David M.
Friedson, the President and Chief Executive Officer of the Company, U.S.
Philips Corporation, North American Philips Corporation and N.V. Philips
Gloellampenfabrieken (together, "Philips"). This action concerns the
1992 settlement (the "Philips Settlement") of certain claims, primarily
a Federal antitrust claim, made by the Company against Philips, which
resulted in an $89,644,257 judgment in favor of the Company. Pursuant
to the Philips Settlement, Philips paid the Company $57,000,000 in May
1992. As part of the Philips Settlement, the Company and Philips agreed
that the Company's money judgment against Philips in connection with
such antitrust litigation would be vacated. Izumi is claiming, among
other things, that the Philips Settlement, including the agreement with
Philips to cooperate to vacate the related judgment in favor of the
Company, constitutes a breach by the Company of a customary
indemnification agreement between Izumi (as seller of goods) and the
Company (as buyer of goods) dated February 20, 1984. This
indemnification agreement covered certain claims against the Company and
was entered into more than eight months prior to the commencement of the
Philips litigation in connection with the routine purchase by the
Company of goods from Izumi. Izumi advanced certain legal fees and
costs to the Company in connection with the Philips litigation. Izumi
is further claiming that it is entitled to recover from the Company an
unspecified portion of the Philips Settlement, punitive damages and
reimbursement of litigation and other related costs and expenses. The
Company disagrees with Izumi's position and believes that it has
meritorious defenses to these claims by Izumi. A pre-answer motion by
the Company has resulted in the dismissal of some of Izumi's claims, and
the Company has answered the remaining claims. The Company intends to
defend this action fully and vigorously.
In addition, in June 1995, Izumi filed another lawsuit against the
Company and Philips. In this second lawsuit, Izumi sought equitable
relief in the form of reinstatement of the 1990 judgments in the
Company's favor against Philips, which were vacated. This complaint was
amended to include Sears, Roebuck and Co. ("Sears") as a co-plaintiff
and to seek reinstatement of an unfair competition judgment only. In
December 1995, this second lawsuit was dismissed by the Court. Izumi and
Sears filed notices of appeal, but subsequently withdrew the appeal.
The Company is also subject to other legal proceedings, product
liability and other claims which arise in the ordinary course of its
business. In the opinion of management, the amount of ultimate
liability, if any, in excess of applicable insurance coverage, is not
likely to have a material effect on the financial position of the
Company. However, as the outcome of litigation or other legal claims is
difficult to predict, significant changes in the estimated exposures
could occur.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the New York Stock Exchange under the
symbol WND. High and low market prices and dividends paid per share in 1995
and 1994, by quarters, are as follows:
Market Price Cash
High Low Dividends
1995
Fourth quarter 7 3/8 6 $.05
Third quarter 8 1/4 7 1/4 .05
Second quarter 9 7 5/8 .05
First quarter 9 3/4 7 5/8 .05
$.20
1994
Fourth quarter 11 1/8 7 5/8 $.05
Third quarter 12 9 3/8 .05
Second quarter 11 7/8 7 3/4 .05
First quarter 8 1/2 6 3/4 .00
$.15
The approximate number of holders of common stock of the Company, as of
December 31, 1995, was 1,400. This number does not include any adjustment
for shareholders owning common stock in the Depository Trust name or
otherwise in "Street" name, which the Company believes represents an
additional 6,300 shareholders.
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
1995 1994 1993
Net sales $187,777 $181,112 $170,661
Equity in net earnings (loss)
of joint ventures $ (393) $ 91 $ (504)
Earnings (loss) before taxes
and minority interest $ (3,165) $ 23,131 $ 12,305
Provision for taxes
(benefits) $ (1,281) $ 2,595 $ 1,365
Effective tax rate (40.5)% 11.2% 11.0%
Net earnings (loss) $ (1,884)* $ 20,537** $ 11,469***
Working capital $127,626 $129,281 $117,961
Current ratio 7.5 to 1 7.0 to 1 5.8 to 1
Property, plant and
equipment, net $ 30,485 $ 28,449 $ 25,022
Total assets $188,012 $197,124 $180,479
Long-term debt, deferred
liabilities and minority
interest $ 3,519 $ 4,932 $ 9,492
Common stock in treasury -
at cost $ - $ - $ -
Stockholders' equity $164,931 $170,625 $146,587
Per share data:
Net earnings (loss) $ (.11)* $ 1.17** $ .71***
Cash dividends paid $ .20 $ .15 $ -
Book value at year end $ 9.87 $ 10.20 $ 9.29
Return on average equity - 12.9% 8.2%
*Includes a non-recurring loss on the sale of an other asset of $5,280,000,
or $.31 per share.
**Includes a non-recurring gain on the sale of Hong Kong office space of
$7,810,500, or $.45 per share.
***Includes cumulative effect of accounting change benefit of $1,731,100,
or $.11 per share.
****Includes extraordinary credit from litigation settlement of
$29,648,800, or $1.82 per share.
1992 1991
Net sales $175,450 $141,608
Equity in net earnings (loss)
of joint ventures $ (848) $ (1,020)
Earnings (loss) before taxes
and minority interest $ 6,531 $(11,947)
Provision for taxes
(benefits) $ 805 $ (813)
Effective tax rate 10.9% (7.4)%
Net earnings (loss) $ 34,335**** $ (9,488)
Working capital $104,139 $ 96,705
Current ratio 4.8 to 1 4.8 to 1
Property, plant and
equipment, net $ 24,546 $ 25,751
Total assets $172,974 $175,836
Long-term debt, deferred
liabilities and minority
interest $ 12,291 $ 49,999
Common stock in treasury -
at cost $ - $ 7,344
Stockholders' equity $132,922 $100,216
Per share data:
Net earnings (loss) $ 2.09**** $ (.59)
Cash dividends paid $ - $ -
Book value at year end $ 8.65 $ 6.19
Return on average equity 29.4% -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Year Ended December 31, 1995 compared with Year Ended December 31, 1994
Net Sales
Net sales were $187.8 million and $181.1 million for the years ended
December 31, 1995 and 1994, respectively. Manufacturing sales increased by
$14.4 million due to increased shipments of kitchen electric appliances.
Distribution sales declined by $7.7 million primarily due to the weak U.S.
retailing environment in 1995. Wal-Mart Stores, Inc. and a kitchen electric
appliance distributor accounted for 13.1% and 11.4%, respectively, of the
Company's 1995 sales.
Set forth below is a table indicating the revenues that the Company derived
from its distribution and manufacturing operations for the periods
indicated:
Year Ended December 31,
1995 1994
Distribution $147,576,000 79% $155,320,600 86%
Manufacturing 40,200,900 21 25,791,600 14
Total Sales $187,776,900 100% $181,112,200 100%
Gross Profit Margin
The Company's gross margin percentage decreased in 1995 to 21.8% of sales
from the 27.0% level in the prior year due to higher raw materials costs
which could not be passed on to customers and the greater concentration of
lower-margin manufacturing sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales were
20.0% and 19.6% in 1995 and 1994, respectively. The Company's higher
aggregate operating expenses were primarily a result of increased bad debt
expense and inventory storage costs.
Unusual or Non-Recurring Items
In 1995, the Company incurred a non-recurring pre-tax loss of $8.0 million
on the sale of an other asset. This transaction reduced 1995 net earnings
by $5.3 million, or $.31 per share, on an after-tax basis.
Equity in Net Earnings (Loss) of Joint Ventures
The Company's equity in net earnings (loss) of joint ventures was $(.4)
million and $.1 million in 1995 and 1994, respectively. Lower gross
margins in 1995, due to higher raw materials costs, produced the decline in
the joint venture's earnings.
Taxes
The Company's tax expense is based on the earnings of each of its foreign
and domestic operations and it includes such additional U.S. taxes as are
applicable to the repatriation of foreign earnings. Offshore earnings
generally are taxed at rates lower than in the United States. The Company
made a provision in its 1995 second quarter of $.4 million, or $.02 per
share, as a result of its settlement of a Hong Kong tax audit.
Earnings Per Share
The average number of common shares and common equivalent shares used in
computing per share results was 2.1% lower in 1995 primarily as a result of
a lower dilutive effect from unexercised stock options and warrants, due
both to a decline in the quoted market price of the Company's common stock
during the year and the Company's fourth quarter loss.
Year Ended December 31, 1994 compared with Year Ended December 31, 1993
Net Sales
Net sales were $181.1 million and $170.7 million for the years ended
December 31, 1994 and 1993, respectively. The higher sales volume was
produced by the Company's distribution businesses on increased unit
shipments of core products. The sales increase was almost evenly divided
between shipments to retailers and professional beauty supply customers.
Manufacturing sales by Durable were relatively unchanged, as 1994's growth
in sales of kitchen electric appliances offset a $6.5 million decline in
sales of electric fragrance units. Wal-Mart Stores, Inc. accounted for
17.8% of the Company's 1994 sales.
Set forth below is a table indicating the revenues that the Company derived
from its distribution and manufacturing operations for the periods
indicated:
Year Ended December 31,
1994 1993
Distribution $155,320,600 86% $144,609,600 85%
Manufacturing 25,791,600 14 26,051,800 15
Total Sales $181,112,200 100% $170,661,400 100%
Gross Profit Margin
The Company's gross profit margin declined in 1994 to 27.0% of sales from
the 28.1% level in the prior year. The lower gross margin resulted
primarily from three factors. The Company experienced the effects of
higher raw materials prices in the second half of 1994. In addition,
growth in kitchen electric appliance sales was achieved at lower than
normal margins in order to establish a market presence. Finally, while
manufacturing sales were level for both years, electric fragrance unit
sales, which had higher margins, were significantly lower in 1994.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales were
19.6% and 21.4% in 1994 and 1993, respectively. The Company's lower
aggregate operating expenses were primarily a result of reduced advertising
costs and legal expenses.
Unusual or Non-Recurring Items
In 1994, the Company recorded an unusual and non-recurring gain of $7.8
million on the sale of 60,000 square feet of office space in Hong Kong. No
taxes were provided as the gain is not taxable.
Equity in Net Earnings (Loss) of Joint Ventures
The Company's equity in net earnings (loss) of joint ventures, excluding
the results of a joint venture sold in August 1993, was $.1 million and
$(.3) million in 1994 and 1993, respectively. Higher sales and gross
margins in 1994 produced the improved earnings.
Taxes
The Company's tax expense is based on the earnings of each of its foreign
and domestic operations and it includes such additional U.S. taxes as are
applicable to the repatriation of foreign earnings. Offshore earnings
generally are taxed at rates lower than in the United States. Non-
recurring transactions in 1994 and 1993 lowered the Company's effective tax
rate by 5.9 percentage points in each of those years.
Earnings Per Share
The average number of common shares and common equivalent shares used in
computing per share results was 8.5% higher in 1994 primarily as a result
of the 1,000,000 shares issued to acquire the additional 20% interest in
Durable, the exercise of stock options and warrants, as well as a higher
dilutive effect from unexercised stock options and warrants due to
increases in the quoted market price of the Company's common stock during
most of 1994. The purchase and retirement of 397,400 common shares
produced only a small reduction in the annual weighted average shares total
because these purchases occurred late in 1994.
Liquidity & Capital Resources
At December 31, 1995, the Company's working capital was $127.6 million, a
decrease of $1.7 million since the end of 1994. At the end of 1995, 1994
and 1993, the Company's current ratio was 7.5 to 1, 7.0 to 1 and 5.8 to 1,
respectively, and its quick ratio was 3.5 to 1, 3.6 to 1 and 3.1 to 1,
respectively.
Cash and cash equivalents increased by $4.8 million during 1995. Cash of
$13.4 million was provided from operating activities, which included the
refund of $3.0 million that had been deposited as security in connection
with a Hong Kong tax audit. The Company utilized approximately $13.1
million of cash this year to finance higher inventory levels and for the
acquisition of fixed assets. In 1995, the Company purchased and retired
139,600 shares of its common stock at a cost of $1.0 million. Cash
dividends of $3.4 million were paid to shareholders in 1995. In January
1996, the Company used $2.6 million to purchase and retire 356,500 shares
of its common stock, bringing the total number of shares purchased under a
1,000,000 share authorization to 893,500, at an aggregate cost of $7.5
million.
The Company's foreign subsidiaries (the "subsidiaries") have $6.4 million
in trade finance lines of credit, payable on demand, which are secured by
the subsidiaries' tangible and intangible property located in Hong Kong and
in the People's Republic of China, as well as a Company guarantee. At
December 31, 1995, the subsidiaries were utilizing, including letters of
credit, approximately $.6 million of these credit lines, leaving a
remaining funding capacity of $5.8 million. These subsidiaries also have
available an additional $5.0 million line of credit which is supported by a
domestic standby letter of credit, which credit line was not being used at
December 31, 1995.
The Company has a $20.0 million demand line of credit from a domestic bank,
which is secured by domestic accounts receivable. At December 31, 1995,
there were no outstanding borrowings under this credit line.
No provision for U.S. taxes has been made on undistributed earnings of the
Company's foreign subsidiaries and joint ventures because management plans
to reinvest such earnings in their respective operations or in other
foreign operations. Repatriating those earnings or using them in some
other manner which would give rise to a U.S. tax liability would reduce
after tax earnings and available working capital.
The Company believes that its cash on hand and internally generated funds,
together with its credit lines, will provide sufficient funding to meet the
Company's capital requirements and its operating needs for the foreseeable
future.
Legal Proceedings
In April 1994, Kabushiki Kaisha Izumi Seiki Seisakusho, a Japanese
corporation ("Izumi"), filed an action against the Company, David M.
Friedson, the President and Chief Executive Officer of the Company, U.S.
Philips Corporation, North American Philips Corporation and N.V. Philips
Gloellampenfabrieken (together, "Philips"). This action concerns the 1992
settlement (the "Philips Settlement") of certain claims, primarily a
Federal antitrust claim, made by the Company against Philips, which
resulted in an $89,644,257 judgment in favor of the Company. Pursuant to
the Philips Settlement, Philips paid the Company $57,000,000 in May 1992.
As part of the Philips Settlement, the Company and Philips agreed that the
Company's money judgment against Philips in connection with such antitrust
litigation would be vacated. Izumi is claiming, among other things, that
the Philips Settlement, including the agreement with Philips to cooperate
to vacate the related judgment in favor of the Company, constitutes a
breach by the Company of a customary indemnification agreement between
Izumi (as seller of goods) and the Company (as buyer of goods) dated
February 20, 1984. This indemnification agreement covered certain claims
against the Company and was entered into more than eight months prior to
the commencement of the Philips litigation in connection with the routine
purchase by the Company of goods from Izumi. Izumi advanced certain legal
fees and costs to the Company in connection with the Philips litigation.
Izumi is further claiming that it is entitled to recover from the Company
an unspecified portion of the Philips Settlement, punitive damages and
reimbursement of litigation and other related costs and expenses. The
Company disagrees with Izumi's position and believes that it has
meritorious defenses to these claims by Izumi. A pre-answer motion by the
Company has resulted in the dismissal of some of Izumi's claims, and the
Company has answered the remaining claims. The Company intends to defend
this action fully and vigorously.
In addition, in June 1995, Izumi filed another lawsuit against the Company
and Philips. In this second lawsuit, Izumi sought equitable relief in the
form of reinstatement of the 1990 judgments in the Company's favor against
Philips, which were vacated. This complaint was amended to include Sears,
Roebuck and Co. ("Sears") as a co-plaintiff and to seek reinstatement of an
unfair competition judgment only. In December 1995, this second lawsuit
was dismissed by the Court. Izumi and Sears filed notices of appeal, but
subsequently withdrew the appeal.
The Company is also subject to other legal proceedings, product liability
and other claims which arise in the ordinary course of its business. In
the opinion of management, the amount of ultimate liability, if any, in
excess of applicable insurance coverage, is not likely to have a material
effect on the financial position of the Company. However, as the outcome of
litigation or other legal claims is difficult to predict, significant
changes in the estimated exposures could occur.
Manufacturing Operations
The Company's products are primarily manufactured by Durable, its wholly-
owned Hong Kong subsidiary, in Bao An County, Guandong Province of the
People's Republic of China, which is approximately 60 miles northwest of
central Hong Kong. The Company has a significant amount of its assets in
the People's Republic, primarily consisting of inventory, equipment and
molds. Substantially all of the Company's products are manufactured by
Durable and unrelated factories in the People's Republic. Approximately
85% to 90% of the Company's revenues are currently derived from products
manufactured by Durable. The supply and cost of these products, as well as
finished products, can be adversely affected, among other reasons, by
changes in foreign currency exchange rates, increased import duties,
imposition of tariffs, imposition of import quotas, interruptions in sea or
air transportation and political or economic changes. From time to time,
the Company explores opportunities to diversify its sourcing and/or
production of certain products to other low-cost locations or with other
third parties or joint venture partners in order to reduce its dependence
on production in the People's Republic and/or reduce Durable's dependence
on the Company's existing distribution base. However, at the present time,
the Company intends to continue its production in the People's Republic.
In June 1989, the People's Republic experienced civil disturbances and,
although such disturbances have dissipated since that time, there continues
to be pressure for political reform. No assurance can be given, however,
that civil disturbances will not recur. If it becomes necessary to
relocate the Company's manufacturing facilities from the People's Republic
as a result of civil disturbances in that country or otherwise, the Company
believes the production currently conducted in the People's Republic could
be relocated to other Far East locations, including Hong Kong, or other
low-cost manufacturing locations, with only temporary disruption and delay
in such production and possible short-term operating and capital losses,
provided that the Company is able to move substantially all of its
manufacturing equipment and other assets currently in the People's Republic
to another location. If the Company is unable to remove such assets, due
to confiscation, expropriation, nationalization, embargoes or governmental
restrictions, it would incur substantial operating and capital losses,
including losses resulting from business disruption and delays in pro-
duction. In addition, as a result of a relocation of its manufacturing
equipment and certain other assets, the Company would likely incur
relatively higher manufacturing costs. A relocation could also adversely
affect the Company's revenues if the demand for the Company's products
currently manufactured in the People's Republic decreases due to a dis-
ruption in the production and delivery of such products or due to higher
prices which might result from increased manufacturing costs. Furthermore,
earnings could be adversely affected due to reduced sales and/or the
Company's inability to maintain its current margins on the products
currently manufactured in the People's Republic.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to the Company's 1995 Annual Report to
Shareholders (Exhibit 13). See also PART IV, ITEM 14(a)2 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the Company's Proxy Statement for its 1996
Annual Meeting of Shareholders under the captions "Election of Directors"
and "Executive Officers".
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's Proxy Statement for its 1996
Annual Meeting of Shareholders under the captions "Executive Compensation"
and "Certain Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's Proxy Statement for its 1996
Annual Meeting of Shareholders under the caption "Security Ownership".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by Reference to the Company's Proxy Statement for its 1996
Annual Meeting of Shareholders under the captions "Executive Compensation"
and "Certain Transactions".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. FINANCIAL STATEMENTS
The following consolidated financial statements of Windmere
Corporation and subsidiaries are incorporated by reference in
PART II, ITEM 8:
AUDITOR'S REPORT Exhibit 13
CONSOLIDATED BALANCE SHEETS AS OF
DECEMBER 31, 1995 AND 1994 Exhibit 13
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994
AND 1993 Exhibit 13
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY - THREE YEARS ENDED
DECEMBER 31, 1995 Exhibit 13
CONSOLIDATED STATEMENTS OF
CASH FLOWS - YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 Exhibit 13
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS Exhibit 13
2. FINANCIAL STATEMENT SCHEDULES
AUDITOR'S REPORT Filed herewith
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES -
YEARS ENDED DECEMBER 31,
1995, 1994 AND 1993 Filed herewith
Individual financial statements of the Company have been omitted since
consolidated financial statements have been presented, the parent is
primarily an operating company and all subsidiaries included in the
consolidated financial statements are wholly-owned. All other schedules
have been omitted since the required information is not present or not
present in amounts sufficient to require submission of the schedule or
because the information required is included in the consolidated financial
statements or the notes thereto.
EXHIBITS
(3) Articles of Incorporation and By-Laws.
3.1 Amended and Restated Articles of Incorporation of the Company filed
with the Florida Secretary of State on May 17, 1984. Incorporated
by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1984.
3.2 Articles of Amendment to the Articles of Incorporation of the
Company filed with the Florida Secretary of State on May 16, 1986.
Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1986.
3.3 Articles of Amendment to the Articles of Incorporation of the
Company filed with the Florida Secretary of State on June 23, 1986.
Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1987.
3.4 By-Laws as amended through October 11, 1991. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991.
3.5 Amendment to October 11, 1991 By-Laws. Incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
(10) Material Contracts
Executive Compensation Plans and Arrangements
10.1 Employment Agreement dated as of January 27, 1983, between Belvin
Friedson and the Company. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1982.
10.2 Employment Agreement, First Amendment, dated as of February 27,
1987, between Belvin Friedson and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1986.
10.3 Employment Agreement, Second Amendment, dated as of December 16,
1992, between Belvin Friedson and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10.4 Employment Agreements dated as of July 18, 1983, between David M.
Friedson, Barbara Friedson Garrett and Arnold Thaler, respectively,
and the Company. Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1983.
10.5 Employment Agreement, First Amendment, dated as of January 17,
1985, between David M. Friedson and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1984.
10.6 Employment Agreement, Second Amendment and Nonqualified Stock
Option, dated as of September 30, 1985, between David M. Friedson
and the Company. Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1985.
10.7 Employment Agreement (Third Amendment) and Nonqualified Stock
Option (First Amendment) dated as of October 28, 1987, between
David M. Friedson and the Company. Incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1987.
10.8 Employment Agreement (Fourth Amendment) and Nonqualified Stock
Option (Second Amendment) dated as of October 26, 1987, between
David M. Friedson and the Company. Incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1987.
10.9 Employment Agreement (Fifth Amendment) dated as of December 16,
1992, between David M. Friedson and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10.10 Nonqualified Stock Option dated as of January 5, 1987, granted by
the Company to Barbara Friedson Garrett. Incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1986.
10.11 Employment Agreement (First Amendment) and Nonqualified Stock
Option (First Amendment) dated as of October 26, 1987, between
Barbara Friedson Garrett and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1987.
10.12 Employment Agreement (Second Amendment) and Nonqualified Stock
Option (Second Amendment) dated as of October 26, 1987 between
Barbara Friedson Garrett and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1987.
10.13 Employment Agreement (Third Amendment) dated as of December 16,
1992, between Barbara Friedson Garrett and the Company.
Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
10.14 Nonqualified Stock Option dated as of January 5, 1987, granted by
the Company to Arnold Thaler. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1986.
10.15 Employment Agreement (First Amendment) and Nonqualified Stock
Option (First Amendment) dated as of October 26, 1987 between
Arnold Thaler and the Company. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1987.
10.16 Employment Agreement (Second Amendment) and Nonqualified Stock
Option (Second Amendment) dated as of October 26, 1987 between
Arnold Thaler and the Company. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1987.
10.17 Employment Agreement (Third Amendment) dated as of December 16,
1992, between Arnold Thaler and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10.18 Employment Agreement dated May 31, 1987, between Robert Gorman and
the Company. Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1987.
10.19 Employment Agreement (First Amendment) dated as of December 16,
1992, between Robert Gorman and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10.20 1982 Employees Incentive Stock Option Plan. Incorporated by
reference to Exhibit 4 to Post-Effective Amendment No. 1 to the
Company's Form S-8 Registration Statement No. 2-92540.
10.21 Amendment to 1982 Employees Incentive Stock Option Plan.
Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1987.
10.22 1992 Employees Incentive Stock Option Plan. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10.23 Employment Agreement dated as of October 26, 1987 between Burton A.
Honig and the Company. Incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1987.
10.24 Employment Agreement (First Amendment) dated as of December 16,
1992, between Burton A. Honig and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10.25 Consulting Agreement dated January 1, 1989 between Mr. Lai Kin,
Chairman of Durable, and the Company. Incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1988.
10.26 Employment Agreement dated January 3, 1989, between Harry Schulman
and the Company. Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1988.
10.27 Employment Agreement (First Amendment) dated as of June 4, 1990,
between Harry Schulman and the Company. Incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10.28 Employment Agreement (Second Amendment) dated as of December 16,
1992, between Harry Schulman and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10.29 1988 Director Stock Option Plan. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1988.
10.30 1989 Employees 401(k) Profit Sharing Plan and Trust. Incorporated
by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1989.
10.31 Consulting Agreement, dated March 30, 1987, between Paragon
Industries, Paragon Sales, Inc., William Weber, Jacqueline K. Weber
and the Company. Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1990.
10.32 Amendment to Consulting Agreement, dated May 29, 1990, between
Paragon Industries, Paragon Sales, Inc., William Weber, Jacqueline
K. Weber and the Company. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1990.
10.33 Second Amended and Restated Employment Agreement dated January 1,
1991, between David O'Neill and the Company. Incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991.
10.34 Second Amended and Restated Employment Agreement (First Amendment)
dated December 16, 1992, between David O'Neill and the Company.
Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
Other Material Contracts
10.35 Installment Purchase Contract dated as of May 1, 1985, between the
Dade County Industrial Development Authority and the Company.
Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1985.
10.36 Asset Purchase Agreement dated September 30, 1988 between Sally
Beauty Company, Alberto-Culver Company, the Company and certain of
the Company's affiliates. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1988.
10.37 Joint Venture Agreement, dated March 30, 1987, between Paragon
Sales, Inc., William Weber, Jacqueline K. Weber and the Company.
Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1990.
10.38 Amendment to Joint Venture Agreement, dated May 29, 1990, between
Paragon Sales, Inc., William Weber, Jacqueline K. Weber and the
Company. Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1990.
10.39 Exclusive Sales Agreement dated May 29, 1992 among the Company,
American International Industries and Zvi and Betty Ryzman.
Incorporated by reference to the Company's Form S-2 Registration
Statement No. 33-51776.
10.40 Settlement Agreement dated May 6, 1992 between North American
Philips Corporation and the Company. Incorporated by reference to
the Company's Form S-2 Registration Statement No. 33-51776.
10.41 Letter of Credit Agreement dated July 31, 1992 between NationsBank
and the Company. Incorporated by reference to the Company's Form
S-2 Registration Statement No. 33-51776.
10.42 Agreement dated May 28, 1991, between Xingiao Economic Development
Corporation and Durable. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1991.
10.43 Agreement dated May 28, 1991, between Bogang Economic Development
Company and Durable. Incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.44 Agreement dated May 28, 1991, between Wanfeng Economic Development
Corporation and Durable. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1991.
10.45 Warrant Agreement dated October 1, 1992, between American Stock
Transfer and Trust Company and the Company. Incorporated by
reference to the Company's Form S-2 Registration Statement No. 33-
51776.
10.46 Stock Purchase Agreement dated May 29, 1992 between Glamour
Industries, Inc. and the Company. Incorporated by reference to the
Company's Form S-2 Registration Statement No. 33-51776.
10.47 Trademark Licensing Agreement dated January 11, 1994, between
Helene Curtis, Inc. and the Company. Incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
10.48 Stock Acquisition Agreement dated April 1, 1994, between Durable,
PPC Industries 1980 Limited, Ourimbah Investment, Limited and the
Company. Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.
10.49 1995 Common Stock Purchase Rights Agreement dated March 6, 1995
between American Stock Transfer and Trust Company and the Company.
Incorporated by reference to the Company's Form 8-A Registration
Statement filed March 7, 1995.
10.50 Facility Letter dated June 3, 1995, from the Bank of East Asia,
Limited to Durable, Durable Electric Limited and PPC Industries
1980 Limited. Incorporated by reference to the Company's Form 10-Q
dated June 30, 1995.
10.51 Amended and Restated Letter Agreement dated July 28, 1995, between
NationsBank and the Company. Incorporated by reference to the
Company's Form 10-Q dated June 30, 1995.
10.52 Amendment No. 1 to Amended and Restated Letter Agreement, dated
March 1, 1996, between NationsBank and the Company. Exhibit 1.
(13) Annual Report to Security Holders for the year ended December 31,
1995. Exhibit 13.
(22) Subsidiaries of the Registrant. Filed herewith.
(24) Consents of experts and counsel. Filed herewith.
(b) REPORTS ON FORM 8-K
None.
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Windmere Corporation
We have audited the accompanying consolidated balance sheets of Windmere
Corporation and Subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Windmere
Corporation and Subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
We have also audited Schedule II of Windmere Corporation and Subsidiaries
for each of the three years in the period ended December 31, 1995. In our
opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
GRANT THORNTON LLP
Miami, Florida
February 7, 1996
WINDMERE CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Changes in allowance for possible
losses on accounts receivable:
Years Ended December 31,
1995 1994 1993
Balance at beginning
of period $1,338,100 $1,424,600 $1,635,600
Addition - Charged to
costs and expenses 894,700 231,400 212,100
Addition - Charged to
other accounts (a) 31,600 31,300 157,300
Deductions (b) (1,106,400) (349,200) (580,400)
Balance at end
of period $1,158,000 $1,338,100 $1,424,600
(a) Recoveries of amounts previously written off against the reserve.
(b) Write-off of accounts receivable against the reserve.
Part IV. Item 3. (22).
SUBSIDIARIES OF THE REGISTRANT
Name Incorporated In
Consumer Products Americas, Inc. Florida
EDI Masters, Inc. Florida
Fortune Products, Inc. Florida
Jerdon Products, Inc. Florida
Windmere Fan Products, Inc. Florida
Windmere Holdings Corporation Delaware
Goal Making Company Limited British Virgin Islands
Remdale Investments Limited British Virgin Islands
Windmere Consumer Products, Inc. Canada
Windmere France, S.A.R.L. France
Durable Electric, Ltd. Hong Kong
Durable Electrical Metal Factory, Ltd. Hong Kong
Durable Europe, Ltd. Hong Kong
PPC Industries (1980) Ltd. Hong Kong
Sandgate Services, Ltd. Hong Kong
Windmere Europe, B.V. Netherlands
Each of the above subsidiaries is wholly-owned and is included in the
consolidated financial statements as of December 31, 1995.
AUDITOR'S CONSENT
We have issued our report dated February 7, 1996, accompanying the
consolidated financial statements and schedules incorporated by reference
in the Annual Report of Windmere Corporation on Form 10-K for the year
ended December 31, 1995. We hereby consent to the incorporation by
reference of the aforementioned report in the Registration Statements of
Windmere Corporation on Form S-8 (File No. 33-7681, effective September 30,
1986), Form S-8 (File No. 33-36424, effective August 17, 1990), Form S-2
(File No. 33-51776, effective January 19, 1993), and on Form S-8 (File No.
33-58574, effective February 22, 1993).
GRANT THORNTON LLP
Miami, Florida
March 27, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WINDMERE CORPORATION
(Registrant)
BY: /s/ DATE: 3-26-96
David M. Friedson, President
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
BY: /s/ DATE: 3-26-96
David M. Friedson, Director and
President (Principal Executive
Officer)
BY: /s/ DATE: 3-27-96
Harry D. Schulman, Executive Vice
President - Finance and Administration
(Principal Financial Officer)
BY: /s/ DATE: 3-26-96
Burton A. Honig, Vice President -
Finance (Principal Accounting Officer)
BY: /s/ DATE: 3-25-96
Bertley Sager, Director
BY: /s/ DATE: 3-25-96
Jerald I. Rosen, Director
BY: /s/ DATE: 3-25-96
Harold Strauss, Director
BY: /s/ DATE: 3-26-96
Lai Kin, Director
BY: /s/ DATE: 3-26-96
Raymond So, Director
BY: /s/ DATE: 3-26-96
Leonard Glazer, Director
BY: /s/ DATE: 3-27-96
Barbara Friedson Garrett, Director
BY: /s/ DATE: 3-27-96
Felix S. Sabates, Director
AMENDMENT NO. 1 TO
AMENDED AND RESTATED LETTER AGREEMENT
AND AMENDED AND RESTATED NOTE
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED LETTER AGREEMENT
AND AMENDED AND RESTATED NOTE (the "Amendment") dated March 1,
1996, is made by and between WINDMERE CORPORATION, a Florida
corporation (the "Borrower"), and NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH) (successor by merger of NationsBank of Florida, National
Association), a national banking association, (the "Bank").
W I T N E S S E T H:
WHEREAS, the Bank by an Amended and Restated Letter Agreement
dated as of July 28, 1995 (the "Agreement"), has agreed to make
available and has made available to Borrower a working capital loan
of up to $20,000,000, reducing at December 31, 1995 to $10,000,000,
and a letter of credit facility of up to $5,000,000; and
WHEREAS, the Borrower has requested that the Bank reinstate
the additional $10,000,000 of the working capital facility which
reduced at December 31, 1995 upon the same terms and conditions
existing prior to December 31, 1995 and the Bank is willing to
reinstate such amount;
NOW, THEREFORE, in consideration of the mutual covenants,
promises and conditions herein set forth, it is hereby agreed as
follows:
1. The terms "Agreement" and "Note" as used herein and in
the Agreement, the Note and the other Loan Documents (as defined in
the "Agreement") shall mean the Agreement and the Note as hereby
amended and modified. Unless the context otherwise requires, all
capitalized terms used herein and in the other Loan Documents
without definition shall have the respective meanings provided
therefor in the Agreement, as hereby amended.
2. Subject to the conditions set forth in paragraph 5
hereof, the Agreement shall be and hereby is amended, effective as
of March 1, 1996, as follows:
(a) The second sentence of the first paragraph of the
Agreement is amended to read as follows:
"The Borrower has requested that the Bank increase the
amount of the revolving loan to the principal amount of
$20,000,000 and that the Bank increase the letter of
credit facility to $10,000,000 to the Borrower."
(b) Paragraph 5 of the Agreement is hereby amended in
its entirety so that as amended it shall read as follows:
"5. Reinstatement. The Committed Amount shall
automatically be increased, effective March 1, 1996, from
$10,000,000 to $20,000,000 and the Note shall be deemed
amended to reflect a Maximum Amount of $20,000,000 from
and after March 1, 1996."
(c) Paragraph 6 of the Agreement is hereby amended in
its entirety so that as amended it shall read as follows:
"6. Unused Fee. For the period beginning on the
date hereof and ending on the Termination Date (excluding
however the period from January 1, 1996 through February
29, 1996), the Borrower will pay to the Bank an unused
fee equal to one quarter of a percent (1/4%) per annum
multiplied by the amount by which the Committed Amount
exceeds the greater of (i) $10,000,000 or (ii) the daily
amount of (A) the aggregate undrawn amount of Standby
Letters of Credit and (B) Loans outstanding. The unused
fee shall be calculated on a basis of a year of 360 days
for actual days elapsed and shall be payable quarterly in
arrears on the last day of each September, December,
March and June."
(d) Exhibit E to the Agreement is amended in its
entirety so that as amended it reads as attached hereto.
3. The Note shall be and hereby is amended, effective as of
March, 1996 in order to define on page one the term "Maximum
Amount" to read as follows:
"Maximum Amount: $20,000,000"
4. Each of the Domestic Subsidiaries of the Borrower who has
previously delivered a Guaranty to the Bank has joined in the
execution of this Amendment Agreement for the purpose of consenting
to this Amendment Agreement and affirming its respective guaranty
of the obligations of Borrower arising under the Agreement as
amended by this Amendment Agreement.
5. The Borrower hereby represents and warrants to the Agent
and the Bank that as of the date hereof the Agreement has been re-
examined by the Borrower and:
(i) The representations and warranties made by the
Borrower therein and in the other Loan Documents are true,
complete and correct in all material respects on and as of the
date hereof, are hereby reaffirmed, and shall survive the
execution and delivery of the Amendment Agreement;
(ii) The execution, delivery and performance of this
Amendment Agreement will not conflict with or result in the
breach of any of the provisions of, or cause a default under,
the Articles of Incorporation or Bylaws of the Borrower, or
any applicable law, rule or regulation, or any judgment,
order, writ, injunction or decree of any court, administrative
agency or other government instrumentality to which the
Borrower or any Subsidiary is subject or any agreement or
instrument to which the Borrower or any Subsidiary is a party,
the effect of which would have any material adverse effect on
the ability of the Borrower or any Guarantor to observe the
covenants and agreements contained in the Agreement, as
amended hereby, or in any other Loan Document or to pay the
obligations arising under the Agreement and the Guaranty, and
will not result in the creation or imposition of any security
interest, lien, charge or encumbrance on any of the assets of
the Borrower or any Subsidiary.
6. As conditions to the effectiveness of this Amendment
Agreement there shall not have occurred either (i) any Default or
Event of Default which shall not have been waived or (ii) any
material adverse change in the business, financial condition or
operations of the Borrower or any Subsidiary since September 30,
1995.
7. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to
the subject matter hereof and supersedes any prior negotiations and
agreements among the parties relative to such subject matter. No
promise, condition, representation or warranty, express or implied,
not herein set forth shall bind any party hereto, and none of them
has relied on any such promise, condition, representation or
warranty. Each of the parties hereto acknowledges that, except as
in this Amendment Agreement otherwise expressly stated, no
representations, warranties or commitments, express or implied,
have been made by any party to the other.
8. Except as specifically amended, modified or supplemented
by this Amendment Agreement, all of the other documents delivered
in connection with the Loans, as heretofore amended, are hereby
confirmed and ratified in all respects and shall remain in full
force and effect according to their respective terms.
9. Should any stamp or excise tax become payable under the
laws of the United States or of any state or any subdivision
thereof or municipality therein in respect of the Amendment
Agreement, the Borrower shall pay the same (including interest
penalties, if any) and shall hold the Bank and the Agent harmless
with respect thereto.
10. This Amendment Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment Agreement to be duly executed by their duly authorized
officers, all as of the day and year first above written.
WINDMERE CORPORATION
WITNESS:
__________________________ By :________________________________
Name: John Heinlein
__________________________ Title: Treasurer
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH)
By:________________________________
Name: Bennie H. Duck, Jr.
Title: Vice President
The undersigned hereby acknowledge, agree to and consent to
the terms and provisions hereof, as of this 1st day of March, 1996.
WITNESS: WINDMERE HOLDINGS CORPORATION
_________________________ By: ________________________________
Name: John Heinlein
_________________________ Title: Secretary
WITNESS: WINDMERE FAN PRODUCTS, INC.
_________________________ By: ________________________________
Name: John Heinlein
_________________________ Title: Treasurer
WITNESS: JERDON PRODUCTS, INC.
_________________________ By: ________________________________
Name: John Heinlein
_________________________ Title: Secretary
WITNESS: CONSUMER PRODUCTS AMERICAS, INC.
_________________________ By: ________________________________
Name: John Heinlein
_________________________ Title: Secretary
WITNESS: FORTUNE PRODUCTS, INC.
_________________________ By: ________________________________
Name: John Heinlein
_________________________ Title: Treasurer
WITNESS: EDI MASTERS, INC.
_________________________ By: ________________________________
Name: John Heinlein
_________________________ Title: Vice President
EXHIBIT E
Indebtedness
(a) Dade County Industrial Development Authority Variable Rate
Demand Industrial Development Revenue Bonds (Windmere
Corporation Project) Series 1985 ($7,500,000), and related
documents thereto, including, but not limited to, (i) Guaranty
Agreement, dated as of May 1, 1985, between Windmere
Corporation and Bankers Trust Company, and (ii) Letter of
Credit Agreement, dated as of July 31, 1992, between Windmere
Corporation and NationsBank of Florida, N.A.
(b) Banking Facility or Facilities in an aggregate principal
amount not to exceed $8,000,000 granted by the Bank of East
Asia, Limited or other financial institution to Durable
Electrical Metal Factory, Ltd. and/or other Subsidiaries.
(c) Guarantee by Windmere Corporation of the Indebtedness
described in (b) above.
(d) Equipment leases existing at July 28, 1995.
(e) $5,000,000 Standby Letter of Credit from Bank of Tokyo
Limited-Hong Kong (through Miami office) to provide working
capital.
(f) Subordinated Note in the amount of $10,847,620 payable to
Salton/Maxim Housewares, Inc.
<PAGE>
FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
WINDMERE CORPORATION
AND SUBSIDIARIES
December 31, 1995 and 1994
Board of Directors and Stockholders
Windmere Corporation
We have audited the accompanying consolidated balance sheets of Windmere
Corporation and Subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above resent
fairly, in all material respects, the consolidated financial position of
Windmere Corporation and Subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their consolidated cash
flows for each of the three years in the period ended December 31, 1995,
in conformity with generally accepted accounting principles.
Miami, Florida
February 7, 1996
Windmere Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
1995 1994
CURRENT ASSETS
Cash and cash equivalents (Note A) $17,768,100 $12,988,300
Short-term investments (Note A) - 2,500,000
Accounts and other receivables, less
allowances of $1,158,000 in 1995 and
$1,338,100 in 1994 (Note E) 36,597,300 38,733,300
Receivables from affiliates (Notes A and C) 9,982,800 12,444,300
Inventories (Note A) 79,013,600 74,278,400
Prepaid expenses (Note I) 2,183,600 8,020,500
Future income tax benefits (Notes A and I) 1,642,900 1,883,400
Total current assets 147,188,300 150,848,200
INVESTMENTS (Notes A and C) - -
PROPERTY, PLANT AND EQUIPMENT - AT COST,
less accumulated depreciation
(Notes A and D) 30,484,700 28,449,100
OTHER ASSETS (Notes A and B) 10,338,900 17,826,700
$188,011,900 $197,124,000
LIABILITIES
CURRENT LIABILITIES
Notes and acceptances payable (Note E) $ 42,300 $ 740,100
Current maturities of long-term
debt (Note G) 814,800 814,800
Accounts payable 9,979,700 8,120,000
Accrued expenses (Note F) 8,127,800 8,981,700
Income taxes (Notes A and I) - 2,312,600
Deferred income, current portion (Note A) 598,100 598,100
Total current liabilities 19,562,700 21,567,300
LONG-TERM DEBT, less current
maturities (Note G) 2,851,800 3,666,700
DEFERRED INCOME, less current
portion (Note A) 666,900 1,265,000
COMMITMENTS AND CONTINGENCIES (Note J) - -
STOCKHOLDERS' EQUITY (Notes A, K, L and P)
Special preferred stock - authorized
40,000,000 shares of $.01 par value;
none issued - -
Common stock - authorized 40,000,000 shares
of $.10 par value; issued 16,713,053
in 1995 and 16,734,172 in 1994 1,671,300 1,673,400
Paid-in capital 30,173,000 30,648,700
Retained earnings 133,851,400 139,088,800
Unrealized foreign currency
translation adjustment (765,200) (785,900)
Total stockholders' equity 164,930,500 170,625,000
$188,011,900 $197,124,000
The accompanying notes are an integral part of these statements.
Windmere Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
1995 1994 1993
Net sales $187,776,900 $181,112,200 $170,661,400
Cost of goods sold 146,907,300 132,185,700 122,772,300
Gross profit 40,869,600 48,926,500 47,889,100
Selling, general and
administrative expenses 37,625,100 35,531,600 36,447,900
Unusual or non-recurring
items (Note B) 8,000,000 (7,810,500) -
Operating profit (loss) (4,755,500) 21,205,400 11,441,200
Other (income) expense
Interest expense 578,300 551,900 819,800
Interest and other income (2,561,800) (2,385,800) (2,187,700)
(1,983,500) (1,833,900) (1,367,900)
Earnings (loss) before
equity in net earnings
(loss) of joint venture,
income taxes, minority
interest and cumulative
effect of accounting
change (2,772,000) 23,039,300 12,809,100
Equity in net earnings (loss) of
joint venture (Notes A and C) (392,600) 91,400 (503,900)
Earnings (loss) before
income taxes, minority
interest and cumulative
effect of accounting
change (3,164,600) 23,130,700 12,305,200
Income taxes (benefit) (Notes A and I)
Current (1,242,700) 2,375,700 1,468,000
Deferred (38,100) 218,800 (103,500)
(1,280,800) 2,594,500 1,364,500
Earnings (loss) before
minority interest and
cumulative effect of
accounting change (1,883,800) 20,536,200 10,940,700
Minority interest in net (profit)
loss of subsidiary - 1,200 (1,202,600)
Earnings (loss) before
cumulative effect of
accounting change (1,883,800) 20,537,400 9,738,100
Cumulative effect of accounting
change (Note I) - - 1,731,100
Net earnings (loss) $(1,883,800) $20,537,400 $11,469,200
Per share data (Note A)
Earnings (loss) per common share
and common equivalent shares
Earnings (loss) before cumulative
effect of accounting change $(.11) $1.17 $ .60
Cumulative effect of accounting
change - - .11
Net earnings (loss) $(.11) $1.17 $ .71
Dividends per common share $.20 $ .15 $ -
The accompanying notes are an integral part of these statements.
Windmere Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three years ended December 31, 1995
Unrealized
foreign
currency
Common Paid-in Retained translation
stock capital earnings adjustment
Balance at
January 1, 1993 $ 1,535,700 $22,546,400 $109,617,300 $(777,000)
Net earnings - - 11,469,200 -
Exercise of stock options
and warrants 42,400 1,829,800 - -
Tax benefit resulting from
exercise of stock options - 257,100 - -
Unrealized foreign currency
translation adjustment - - - 66,300
Balance at December
31, 1993 1,578,100 24,633,300 121,086,500 (710,700)
Net earnings - - 20,537,400 -
Cash dividends - $.15 per
share - - (2,535,100) -
Acquisition of additional
20% interest in Durable
Electrical Metal Factory,
Ltd. ("Durable") 100,000 7,900,000 - -
Purchase and retirement of
397,400 shares of common
stock (39,700) (3,858,900) - -
Exercise of stock options
and warrants 35,000 1,645,800 - -
Tax benefit resulting from
exercise of stock options - 328,500 - -
Unrealized foreign currency
translation adjustment - - - (75,200)
Balance at December
31, 1994 1,673,400 30,648,700 139,088,800 (785,900)
Net (loss) - - (1,883,800) -
Cash dividends - $.20 per
share - - (3,353,600) -
Purchase and retirement of
139,600 shares of common
stock (14,000) (997,400) - -
Exercise of stock options
and warrants 11,900 414,400 - -
Tax benefit resulting from
exercise of stock options - 242,800 - -
Cost of intercompany
recapitalization - (135,500) - -
Unrealized foreign currency
translation adjustment - - - 20,700
Balance at December
31, 1995 $1,671,300 $30,173,000 $133,851,400 $(765,200)
The accompanying notes are an integral part of these statements.
Windmere Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
1995 1994 1993
Cash flows from operating activities
Net earnings (loss) $(1,883,800) $20,537,400 $11,469,200
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities
Depreciation of property, plant
and equipment 6,218,300 5,378,500 5,151,800
Amortization of intangible
assets 561,100 440,100 553,600
Loss on sale of other asset 8,000,000 - -
Net change in allowance for losses
on accounts receivable (180,100) (86,500) (211,000)
Gain on sale of fixed asset - (7,810,500) -
Amortization of deferred income (598,100) (598,100) (598,200)
Equity in (earnings) losses of
joint venture 392,600 (91,400) 503,900
Increase (decrease) in minority
interest - (1,200) 1,493,600
Changes in assets and liabilities
Decrease (increase) in accounts
and other receivables 2,316,100 (7,378,200) 4,834,800
Decrease (increase) in
inventories (4,735,200) (7,120,900) 1,383,600
Decrease (increase) in prepaid
expenses 5,836,900 (1,029,600) (4,328,200)
Increase (decrease) in accounts
payable and accrued
expenses 1,005,800 (1,845,600) (1,340,500)
Increase (decrease) in current
and deferred income
taxes (1,829,300) 2,695,900 (1,738,600)
Decrease in notes and acceptances
payable (697,800) (2,255,700) (2,816,000)
Decrease (increase) in other
assets (1,073,300) (294,800) 569,000
Increase in current maturities
of long-term debt - - 814,800
Decrease (increase) in other
accounts 20,700 (75,200) 66,300
Net cash provided by
operating activities 13,353,900 464,200 15,808,100
Cash flows from investing activities
Proceeds from fixed asset sales 129,600 9,442,000 262,900
Additions to property, plant
and equipment (8,383,500) (10,436,900) (5,891,000)
(Decrease) increase in short-term
investments 2,500,000 (2,500,000) -
Other changes in investments in
affiliates - - (437,200)
Sale of investments - - 242,600
Decrease (increase) in receivables
from affiliates 2,068,900 (3,186,300) 2,449,900
Decrease in restricted cash - - 6,212,000
Net cash provided by (used in)
investing activities (3,685,000) (6,681,200) 2,839,200
Cash flows from financing activities
Payments of long-term debt (814,900) (836,500) (3,019,300)
Exercises of stock options and
warrants 426,300 1,680,800 1,872,200
Cash dividends paid (3,353,600) (2,535,100) -
Purchases of common stock (1,011,400) (3,898,600) -
Cost of intercompany
recapitalization (135,500) - -
Net cash used in
financing activities (4,889,100) (5,589,400) (1,147,100)
Increase (decrease) in cash and
cash equivalents 4,779,800 (11,806,400) 17,500,200
Cash and cash equivalents
at beginning of year 12,988,300 24,794,700 7,294,500
Cash and cash equivalents
at end of year $17,768,100 $ 12,988,300 $24,794,700
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 488,500 $ 502,200 $ 593,900
Income taxes $2,181,800 $1,927,300 $2,353,500
Non-cash investing and financing
activities:
Common stock issued for additional
investment in Durable (Note A) $ - $8,000,000 $ -
Tax benefit resulting from exercise
of stock options $ 242,800 $ 328,500 $ 257,100
The accompanying notes are an integral part of these statements.
Windmere Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF ACCOUNTING POLICIES
Windmere Corporation and Subsidiaries (the "Company") is principally
engaged in the manufacture and sale of personal care, kitchen electric
and seasonal products. In preparing financial statements in conformity
with generally accepted accounting principles, management is required to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during
the reporting period. Actual results could differ from those estimates.
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying consolidated financial
statements follows.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Intercompany balances and
transactions are eliminated in consolidation. The Company reflects its
investment in its 50%-owned joint venture at cost plus its equity in
undistributed net earnings.
Foreign Currency Translation
Balance sheet accounts of the Company's foreign operations are translated
at the exchange rate in effect at each year end and income statement
accounts are translated at the average exchange rates prevailing during
the year. Adjustments resulting from this translation process are
accumulated in a separate component of stockholders' equity and are not
included in the determination of net earnings. The Company's foreign
manufacturing subsidiary utilizes the local currency as its functional
currency, and the other foreign subsidiaries primarily utilize the U.S.
dollar as their functional currency.
Cash and Cash Equivalents
Short-Term Investments
The Company considers all highly liquid investments with maturities of
three months or less at the time of purchase to be cash equivalents.
Similar investments with maturities between three months and one year at
the time of purchase are classified as short-term investments.
Inventories
Inventories are stated at the lower of cost or market; cost is determined
by the first-in, first-out method. Inventories are comprised of the
following:
1995 1994
Raw materials $16,327,900 $18,993,200
Work in process 21,085,300 15,155,900
Finished goods 41,600,400 40,129,300
$79,013,600 $74,278,400
Receivables from Affiliates
Receivables from affiliates arise primarily in the ordinary course of
business, are interest bearing and are settled as trade obligations.
Property, Plant and Equipment
Depreciation and amortization are provided for in amounts sufficient to
relate the cost of depreciable assets to their estimated operating
service lives using accelerated and straight-line methods.
Intangible Assets
Intangible assets, consisting primarily of goodwill, are being amortized
on a straight-line basis over twenty years. Intangible assets were
$10,113,700 and $10,169,300 at December 31, 1995 and 1994, respectively,
and the related accumulated amortization was $2,126,800 and $1,660,900,
respectively.
In 1994, the Company acquired the 20% interest in Durable that it did not
already own. The purchase price consisted of the delivery of one million
shares of the Company's common stock, valued at $8,000,000, and a cash
payment of $10,000. This acquisition was accounted for as a purchase.
Goodwill of $5,211,000 was recognized on the transaction.
On an ongoing basis, management reviews the valuation and amortization of
goodwill. As part of this review, the Company estimates the value and
future benefits of the net income generated by the related subsidiaries
to determine that no impairment has occurred.
In March 1995, the Financial Accounting Standards Board issued Statement
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." This Statement had no impact on the
Company's results of operations or financial position upon adoption in
January 1996.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, trade receivables and
accounts payable approximate fair value due to the short-term maturities
of these instruments.
Income Taxes
No provision has been made for U.S. taxes on undistributed earnings of
foreign subsidiaries and joint ventures of approximately $104,000,000 at
December 31, 1995, as it is anticipated that such earnings will be
reinvested in their respective operations or in other foreign operations.
Deferred taxes have been provided on temporary differences in reporting
certain transactions for financial accounting and tax purposes.
Deferred Income
In 1992, the Company granted an exclusive license for the distribution of
a product. Deferred income of $1,340,600 resulted from this transaction,
which will be reported as other income on a straight-line basis over the
five year license term.
In 1988, the Company sold its Save-Way Beauty Supply stores for a gain of
approximately $6,980,000, $3,300,000 of which was allocated to a ten-year
covenant not to compete that is being amortized to other income on a
straight-line basis.
Earnings Per Share
Earnings per share are based upon the weighted average number of common
shares and common equivalent shares outstanding during each year. The
total number of such weighted average shares was 17,227,000 in 1995,
17,589,000 in 1994, and 16,212,000 in 1993. Stock options and warrants
are considered common stock equivalents unless their inclusion would be
antidilutive.
Stock Options
Options granted under the Company's Stock Option Plans are accounted for
under APB 25, "Accounting for Stock Issued to Employees," and related
interpretations. In November 1995, the Financial Accounting Standards
Board issued Statement 123, "Accounting for Stock-Based Compensation,"
which will require additional proforma disclosures for companies that
will continue to account for employee stock options under the intrinsic
value method specified in APB 25. The Company plans to continue to apply
APB 25 and the only effect of adopting Statement 123 in 1996 will be the
new disclosure requirement.
Reclassifications
Certain prior year amounts within the accompanying financial statements
have been reclassified for comparability.
NOTE B - UNUSUAL OR NON-RECURRING ITEMS
In 1995, the Company incurred a non-recurring pre-tax loss of $8,000,000
on the sale of an other asset. This transaction reduced 1995 net
earnings by $5,280,000, or $.31 per share, on an after-tax basis.
In 1994, Durable sold 60,000 square feet of office space in Hong Kong,
for $9,500,000. This transaction generated a non-recurring profit of
$7,810,500, or approximately $.45 per share. No taxes were provided as
the gain was not taxable.
NOTE C - INVESTMENTS
Investments are comprised of the following:
1995 1994
Joint venture - at cost plus
equity in undistributed earnings $ - $ -
The Company's joint venture investment at December 31, 1995 and 1994 had
negative values of approximately $800,000 and $400,000, respectively,
which deficits have been classified as a reduction in receivables from
affiliates.
The following table provides financial data for the joint venture, which
is accounted for on the equity method:
1995 1994
Current assets $9,657,400 $12,967,600
Non-current assets 35,100 17,900
Total assets $9,692,500 $12,985,500
Current liabilities $11,317,100 $13,773,200
Non-current liabilities - -
Total liabilities $11,317,100 $13,773,200
Sales $30,171,600 $30,184,500
Gross profit $ 2,346,000 $ 3,572,500
Net earnings (loss) $ (785,200) $ 182,800
All sales made by the joint venture were to entities other than members
of the consolidated group. Included in the Company's sales are sales
made to the joint venture of approximately $7,485,300 and $8,621,000 in
1995 and 1994, respectively.
NOTE D - PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant and equipment:
1995 1994
Building $4,493,100 $4,493,100
Building improvements 589,700 389,000
Computer equipment 4,697,600 4,959,000
Furniture and equipment 55,197,000 49,470,700
Leasehold improvements 3,283,300 1,890,800
Land and land improvements 2,650,600 2,650,600
70,911,300 63,853,200
Less accumulated depreciation
and amortization 40,426,600 35,404,100
$30,484,700 $28,449,100
NOTE E - NOTES AND ACCEPTANCES PAYABLE
The Company's foreign subsidiaries (the "subsidiaries") have $6,400,000
in trade finance lines of credit, payable on demand, which are secured by
the subsidiaries' tangible and intangible property located in Hong Kong
and in the People's Republic of China, as well as a Company guarantee.
At December 31, 1995, the subsidiaries were utilizing, including letters
of credit, approximately $600,000 of these credit lines. These
subsidiaries also have available an additional $5,000,000 line of credit
which is supported by a domestic standby letter of credit, which credit
line was not being used at December 31, 1995.
The Company has a $20,000,000 line of credit from a domestic bank, which
is secured by domestic accounts receivable. At December 31, 1995, there
were no outstanding borrowings under this credit line.
NOTE F - ACCRUED EXPENSES
Accrued expenses are summarized as follows:
1995 1994
Advertising allowances $ 971,400 $1,896,800
Salaries and bonuses 1,611,100 1,958,800
Volume rebates 1,022,700 1,081,200
Other 4,522,600 4,044,900
$8,127,800 $8,981,700
NOTE G - LONG-TERM DEBT
Long-term debt is summarized as follows:
1995 1994
Industrial development revenue bonds $3,666,600 $4,481,500
Less current maturities 814,800 814,800
Total long-term debt $2,851,800 $3,666,700
In 1985, the Company received proceeds of $7,500,000 from the issuance of
tax-exempt industrial development revenue bonds. The bonds are being
paid off in equal quarterly principal payments of $203,700 through May
2000. At December 31, 1995, the interest rate on the bonds was 6.70%.
The bonds include certain covenants which provide, among other things,
restrictions relating to the maintenance of minimum levels of working
capital, net worth and other financial ratios.
NOTE H - EMPLOYEE BENEFIT PLANS
The Company has a 401(k) plan for its employees to which the Company
makes discretionary contributions at rates dependent on the level of each
employee's contributions. Contributions made by the Company are limited
to the maximum allowable for federal income tax purposes. The amounts
charged to earnings for this plan during the three years ended
December 31, 1995 were not significant.
The Company does not provide any health or other benefits to retirees.
NOTE I - INCOME TAXES
Income tax expense (benefit) consists of the following:
1995 1994 1993
Current
Federal $(1,392,300) $2,156,000 $1,286,400
Foreign 183,800 72,900 125,500
State (34,200) 146,800 56,100
(1,242,700) 2,375,700 1,468,000
Deferred (38,100) 218,800 (103,500)
$(1,280,800) $2,594,500 $1,364,500
The analysis of the deferred income tax provision (benefit) representing
the tax effects of temporary differences between tax and financial
reporting is as follows:
1995 1994 1993
Intercompany profit in
inventory $(72,500) $ - $ -
Differences in timing between
financial and
tax reporting 49,300 15,000 (302,600)
Utilization of net operating loss
carryforward 220,100 413,500 477,700
Deferred income 224,300 55,300 68,300
Depreciation and
amortization (303,800) (248,900) (204,400)
Other (155,500) (16,100) (142,500)
$(38,100) $218,800 $(103,500)
The United States and foreign components of earnings (loss) before income
taxes are as follows:
1995 1994 1993
United States $(8,056,300) $7,449,500 $3,979,400
Foreign 4,891,700 15,681,200 8,325,800
$(3,164,600) $23,130,700 $12,305,200
The differences between the statutory rates and the tax rates computed on
pre-tax profits are as follows:
1995 1994 1993
% % %
Tax expense (benefit) at
statutory rates (34.0)% 34.0% 34.0%
State taxes, net of federal
tax benefit (.7) .4 .5
Foreign (income) loss not
subject to tax 2.6 (15.9) (11.0)
Provision for prior years'
Hong Kong income taxes 12.3 (5.9) -
Net tax rate differential on
undistributed foreign earnings(25.6) (2.0) (14.5)
Equity in joint venture earnings
not subject to U.S. tax or
already taxed (4.2) .1 1.4
Effect of gross up of foreign
taxes, net of foreign
tax credit (4.1) - -
Federal withholding taxes 7.8 - -
Other 5.4 .5 .6
(40.5)% 11.2% 11.0%
In the third quarter of 1995, the Company reached an agreement with the
Hong Kong Inland Revenue Department concerning the taxes assessed against
the Company's consolidated Hong Kong subsidiaries through 1991. The
assessment, including interest charges and net of U.S. foreign tax
credits, approximates $1,400,000. The Company made a provision in its
1995 second quarter of $400,000 or $.02 per share, to increase its
contingency reserve to the settlement amount. Security deposits of
approximately $3,000,000 were refunded to the Company during the fourth
quarter of 1995. Hong Kong tax returns for the fiscal years 1992 through
1994 have also been audited and accepted as filed. The Internal Revenue
Service is currently examining the Company's 1992 tax return. To date,
no material adjustments have been proposed. Management believes that
adequate provision for taxes has been made for the years under examination
and those not yet examined.
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," on January 1, 1993, which changed the
Company's method of accounting for income taxes to an asset and liability
approach. The cumulative effect of this change in the method of
accounting for income taxes, after minority interest in the portion
relating to Durable, was a benefit of $1,731,100 or $.11 per share. The
cumulative effect adjustment primarily consists of the tax benefit
associated with Durable's net operating loss carryforward. A valuation
allowance has not been recorded limiting such benefits based on
management's current estimate that future profits will be sufficient to
realize these benefits. A valuation allowance for the entire tax benefit
of the net operating losses primarily accumulated by the Company's
European subsidiary has been provided as the realizability of the
benefits of such net operating losses is not assured.
The primary components of future income tax benefits at December 31, 1995
are as follows:
Net operating loss carryforwards
(net of valuation allowances of $171,000) $ 244,100
Depreciation and amortization 76,300
Deferred income 513,300
Differences in timing between financial
and tax reporting 1,708,500
Other 170,900
2,713,100
Less amount included in other assets 1,070,200
$1,642,900
The tax benefits resulting from the exercise of stock options have been
recorded as additions to paid-in capital in the amounts of $242,800 and
$328,500 in 1995 and 1994, respectively.
NOTE J - COMMITMENTS AND CONTINGENCIES
Litigation
In April 1994, Kabushiki Kaisha Izumi Seiki Seisakusho, a Japanese
corporation ("Izumi"), filed an action against the Company, David M.
Friedson, the President and Chief Executive Officer of the Company, U.S.
Philips Corporation, North American Philips Corporation and N.V. Philips
Gloellampenfabrieken (together, "Philips"). This action concerns the
1992 settlement (the "Philips Settlement") of certain claims, primarily a
Federal antitrust claim, made by the Company against Philips, which
resulted in an $89,644,257 judgment in favor of the Company. Pursuant to
the Philips Settlement, Philips paid the Company $57,000,000 in May 1992.
As part of the Philips Settlement, the Company and Philips agreed that
the Company's money judgment against Philips in connection with such
antitrust litigation would be vacated. Izumi is claiming, among other
things, that the Philips Settlement, including the agreement with Philips
to cooperate to vacate the related judgment in favor of the Company,
constitutes a breach by the Company of a customary indemnification
agreement between Izumi (as seller of goods) and the Company (as buyer of
goods) dated February 20, 1984. This indemnification agreement covered
certain claims against the Company and was entered into more than eight
months prior to the commencement of the Philips litigation in connection
with the routine purchase by the Company of goods from Izumi. Izumi
advanced certain legal fees and costs to the Company in connection with
the Philips litigation. Izumi is further claiming that it is entitled to
recover from the Company an unspecified portion of the Philips
Settlement, punitive damages and reimbursement of litigation and other
related costs and expenses. The Company disagrees with Izumi's position
and believes that it has meritorious defenses to these claims by Izumi.
A pre-answer motion by the Company has resulted in the dismissal of some
of Izumi's claims, and the Company has answered the remaining claims.
The Company intends to defend this action fully and vigorously.
In addition, in June 1995, Izumi filed another lawsuit against the
Company and Philips. In this second lawsuit, Izumi sought equitable
relief in the form of reinstatement of the 1990 judgments in the
Company's favor against Philips, which were vacated. This complaint was
amended to include Sears, Roebuck and Company ("Sears") as a co-plaintiff
and to seek reinstatement of an unfair competition judgment only. In
December 1995, this second lawsuit was dismissed by the Court. Izumi and
Sears filed notices of appeal, but subsequently withdrew the appeal.
The Company is also subject to other legal proceedings, product liability
and other claims which arise in the ordinary course of its business. In
the opinion of management, the amount of ultimate liability, if any, in
excess of applicable insurance coverage, is not likely to have a material
effect on the financial position of the Company. However, as the outcome
of litigation or other legal claims is difficult to predict, significant
changes in the estimated exposures could occur.
Employment Agreements
The Company has entered into employment agreements with several of its
executive officers for periods ranging from two to five years. The
agreements provide the employees with an option to terminate their
agreements and receive lump sum payments of up to five years compensation
if there is a change in control of the Company.
Other
In April 1994, the Company purchased from Ourimbah Investment, Limited
("Ourimbah") the remaining 20% of the issued and outstanding capital
stock of Durable (the "Purchased Shares") which had not, prior to such
purchase, been owned, directly or indirectly, by the Company. In
connection with such purchase, the Company agreed to make an additional
payment to Ourimbah for the Purchased Shares upon the occurrence of a
change of control of the Company on or before July 1, 1999. Any such
additional payment will be in an amount with respect to each Purchased
Share equal to the greater of (i) the same multiple of earnings per share
of Durable as the highest multiple of earnings per share paid for the
shares of common stock of the Company received in connection with such
change of control or (ii) the same multiple of net asset value per share
of Durable as the highest multiple of price per net asset value per share
paid for the shares of common stock of the Company received in connection
with such change of control. For purposes of determining whether any
such additional payment is required, a change of control will be deemed
to have occurred upon (i) the acquisition by any person of 50% or more of
the then outstanding shares of common stock of the Company, (ii) a change
in the majority of the members of the Company's board of directors who
are serving as of the date of the purchase agreement or (iii) the
approval by the Company's shareholders of (A) a reorganization, merger or
consolidation in which the shareholders of the Company prior to such
transaction do not, immediately thereafter, own more than 50% of the
combined voting power of the Company following such transaction, (B) a
liquidation of dissolution of the Company or (C) a sale of all or
substantially all of the Company's assets. No change of control will be
deemed to have occurred in connection with any transaction approved by a
majority of the members of the board of directors.
NOTE K - STOCKHOLDERS' EQUITY
Stock Options
The 1982 and 1992 Employees' Incentive Stock Option Plans provide for
granting of options of not more than 1,200,000 shares and 500,000 shares,
respectively, of common stock at a price based upon the fair market value
at the date the options are granted. Options granted under the plans are
exercisable in equal annual installments during a five or six year period
beginning one year after the date the option is granted.
Qualified incentive stock option activity is summarized as follows:
Option price
Shares per share
Options outstanding
January 1, 1994 487,400 $3.25 - $6.38
Granted 147,500 $7.13 - $9.75
Exercised (161,695) $3.25 - $6.38
Expired or cancelled (8,000) $5.13
Options outstanding
December 31, 1994 465,205 $3.25 - $9.75
Granted 89,500 $6.13 - $7.88
Exercised (88,000) $3.25 - $7.13
Expired or cancelled (75,200) $3.25 - $9.75
Options outstanding
December 31, 1995 391,505
Options exercisable
December 31, 1995 182,505
As of December 31, 1995, the options outstanding pursuant to the 1982 and
1992 plans were 156,005 and 235,500, respectively, of which 145,505
shares were exercisable under the 1982 plan and 37,000 shares were
exercisable under the 1992 plan.
Non-qualified stock options have also been granted by the Company. Their
activity is summarized as follows:
Option price
Shares per share
Options outstanding
January 1, 1994 741,967 $ 2.88 - $17.38
Granted 901,200 $ 7.00 - $10.88
Exercised (80,500) $ 2.88 - $ 8.00
Expired or cancelled (61,190) $ 3.25 - $16.63
Options outstanding
December 31, 1994 1,501,477 $ 2.88 - $17.38
Granted 16,500 $ 8.56
Exercised (23,000) $ 3.25 - $ 6.00
Expired or cancelled (20,000) $ 17.38
Options outstanding
December 31, 1995 1,474,977
Options exercisable
December 31, 1995 1,045,977
No amount has been charged to income under the above plans.
Warrants
As part of a lawsuit settlement, warrants to purchase 750,423 shares of
the Company's common stock have been issued. The warrants have an
exercise price of $7.50 per share and are exercisable through January 19,
1998. At December 31, 1995, 199,189 warrants have been exercised.
Common Stock Purchase Rights Plan
In March 1995, the Company implemented a Common Stock Purchase Rights
Plan and distributed one Right for each share of the Company's common
stock outstanding. The Rights are not exercisable or transferable, apart
from the Company's common stock, until after a person or group acquires,
or has the right to acquire, beneficial ownership of 15 percent or more
of the Company's common stock (which threshold may, under certain
circumstances, be reduced to 10 percent) or announces a tender or
exchange offer to acquire such percentage of the Company's common stock.
Each Right entitles the holder to purchase one quarter of one share of
common stock at an exercise price of $25.00 per full share and contains
provisions that entitle the holder in the event of specific transactions,
to purchase common stock of the Company or any acquiring or surviving
entity at one-half of market price as determined under the terms of the
Rights Agreement. The Rights will expire in March 2005, unless
previously exercised or redeemed at the option of the Company for $.00001
per Right.
NOTE L - SPECIAL PREFERRED STOCK
During 1986, the Company was authorized to issue 40,000,000 shares of
$.01 par value special preferred stock purchase rights for each share of
common stock, par value $.10 per share. These rights entitled the holder
to purchase one share of special preferred stock at a price of $.01 under
certain conditions in connection with preserving for the Company and its
stockholders the benefits of any recovery in the Company's lawsuit with
North American Philips Corporation, et al. In 1992, these conditions
ceased to apply, therefore, the special preferred stock rights remain
outstanding but have no continuing application.
NOTE M - GEOGRAPHIC AREA INFORMATION
1995 1994 1993
Revenues
United States operations $126,959,000 $136,500,000 $126,114,200
International operations
Sales to unaffiliated
customers 60,817,900 44,612,200 44,547,200
Transfers between
geographical
areas 83,517,400 85,070,700 72,783,100
Eliminations (83,517,400) (85,070,700) (72,783,100)
$187,776,900 $181,112,200 $170,661,400
Operating profit
United States operations $(7,774,000) $ 5,799,000 $ 3,133,900
International operations 1,854,500 15,853,400 9,141,100
Eliminations 1,164,000 (447,000) (833,800)
Operating profit (loss) (4,755,500) 21,205,400 11,441,200
Equity in net earnings (loss)
of joint ventures (392,600) 91,400 (503,900)
Interest expense (578,300) (551,900) (819,800)
Interest and other income 2,561,800 2,385,800 2,187,700
Consolidated earnings
(loss) before income
taxes, minority interest
and cumulative effect
of accounting change $(3,164,600) $23,130,700 $12,305,200
Identifiable assets
United States operations $101,555,700 $112,339,500 $92,237,200
International operations 145,714,800 123,670,900 110,311,200
Eliminations (59,258,600) (38,886,400) (22,069,100)
Consolidated assets $188,011,900 $197,124,000 $180,479,300
Transfers between geographic areas are billed at negotiated prices. In
1995, the United States operations' operating profit includes an
$8,000,000 loss on the sale of an other asset. In 1994, the
international operations' operating profit includes a $7,810,500 gain on
the sale of Hong Kong office space. All United States revenues are
derived from sales to unaffiliated customers. Included in domestic
revenues and operating profit are certain sales derived from direct
product shipments from Hong Kong to customers located in the United
States.
International operations are conducted in Canada, Hong Kong, Europe and
the People's Republic of China.
NOTE N - CONCENTRATION OF CREDIT AND OTHER RISKS
The Company sells on credit terms to a majority of its customers, most of
which are U.S. and Canadian retailers and distributors located throughout
those countries.
Wal-Mart Stores, Inc. accounted for 13.1%, 17.8% and 19.3% of the
Company's sales in 1995, 1994 and 1993, respectively. In 1995, a kitchen
electric appliance distributor accounted for 11.4% of the Company's
sales.
The Company's allowance for doubtful accounts is based on management's
estimates of the creditworthiness of its customers, and, in the opinion
of management is believed to be set in an amount sufficient to respond to
normal business conditions. Should such conditions deteriorate or any
major credit customer default on its obligations to the Company, this
allowance may need to be increased which may have an adverse impact upon
the Company's earnings.
The Company produces the vast majority of its products in its facilities
in the People's Republic of China ("PRC"). The Company is subject to the
risk that political or economic upheaval in the PRC could cause
production disruptions and/or increases to its costs, although no such
events have occurred in over five years. Presently, products imported
into the U.S. from the PRC are subject to favorable duty rates based on
the "Most Favored Nation" status of the PRC ("MFN Status"). MFN Status
is renewed on an annual basis by the President and Congress. If
political or economic instability in the PRC develops or if higher duties
were applied to imports into the U.S., the Company could experience a
material adverse impact on its revenues and earnings.
NOTE O - RELATED PARTY TRANSACTIONS
The Company has used the services of Top Sales Company, Inc. ("Top
Sales"), an independent sales representative, since 1978. A member of
the Company's Board of Directors is the sole shareholder and Chief
Executive Officer of Top Sales. The Company made commission payments to
Top Sales of $556,400, $719,600 and $575,500 in 1995, 1994 and 1993,
respectively.
In 1986, the Company made a non-interest bearing loan of $78,000 to a
director of the Company. The entire amount of such loan was outstanding
during the current year.
During 1995, the Company made a series of personal loans bearing interest
at prevailing market rates to the Company's President and Chief Executive
Officer. At December 31, 1995, the loan balance was $680,200.
NOTE P - SUBSEQUENT EVENT
In February 1996, the Company signed an agreement with Salton/Maxim
Housewares, Inc. ("Salton"), whereby it will acquire a 50% ownership
interest in Salton. The Company will issue to Salton 748,112 shares of
its common stock, a $10,847,620 note, and a cash payment of $3,254,286.
The closing of the transaction, currently anticipated in June 1996, is
subject to a number of conditions including the Company and Salton
entering into mutually satisfactory commercial agreements, the Board of
Directors of Salton receiving a fairness opinion, and approval of the
transaction by the shareholders of Salton.
SUPPLEMENTAL FINANCIAL DATA
Quarterly Financial Data (Unaudited)
The quarterly results for the years 1995 and 1994 are set forth in the
following tabulation.
Net Earnings
Gross Earnings (Loss)
Sales Profit (Loss) Per Share
1995
First quarter $37,930,100 $9,135,600 $ 305,200 $ .02
Second quarter 42,102,100 9,073,600 936,000 .05
Third quarter 52,681,300 11,220,800 871,600 .05
Fourth quarter 55,063,400 11,439,600 (3,996,600)* (.23)
Total $187,776,900 $40,869,600 $(1,883,800) $ (.11)
1994
First quarter $31,191,600 $8,008,700 $ 447,400 $ .03
Second quarter 41,962,000 11,278,900 9,940,800 ** .57
Third quarter 55,885,000 16,318,000 5,837,900 .33
Fourth quarter 52,073,600 13,320,900 4,311,300 .24
Total $181,112,200 $48,926,500 $20,537,400 $1.17
* Includes an after-tax non-recurring loss on the sale of an other asset of
$5,280,000, or $.31 per share.
** Includes a non-recurring gain on the sale of Hong Kong office space of
$7,810,500, or $.45 per share.
Quarterly Stock Quotations and Dividends Per Share
The Company's common stock is traded on the New York Stock Exchange under the
symbol WND. High and low market prices and dividends paid per share in 1995
and 1994, by quarters, are as follows:
Market Price Cash
High Low Dividends
1995
Fourth quarter 7-3/8 6 $ .05
Third quarter 8-1/4 7-1/4 .05
Second quarter 9 7-5/8 .05
First quarter 9-3/4 7-5/8 .05
$ .20
1994
Fourth quarter 11-1/8 7-5/8 $ .05
Third quarter 12 9-3/8 .05
Second quarter 11-7/8 7-3/4 .05
First quarter 8-1/2 6-3/4 .00
$ .15
The approximate number of holders of common stock of the Company, as of
December 31, 1995, was 1,400. This number does not include any adjustment
for shareholders owning common stock in the Depository Trust name or
otherwise in "Street" name, which the Company believes represents an
additional 6,300 shareholders.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 17,768,100
<SECURITIES> 0
<RECEIVABLES> 37,755,300
<ALLOWANCES> 1,158,000
<INVENTORY> 79,013,600
<CURRENT-ASSETS> 147,188,300
<PP&E> 70,911,300
<DEPRECIATION> 40,426,600
<TOTAL-ASSETS> 188,011,900
<CURRENT-LIABILITIES> 19,562,700
<BONDS> 2,851,800
0
0
<COMMON> 1,671,300
<OTHER-SE> 163,259,200
<TOTAL-LIABILITY-AND-EQUITY> 188,011,900
<SALES> 187,776,900
<TOTAL-REVENUES> 187,776,900
<CGS> 146,907,300
<TOTAL-COSTS> 146,907,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 894,700
<INTEREST-EXPENSE> 578,300
<INCOME-PRETAX> (2,772,000)
<INCOME-TAX> (1,280,800)
<INCOME-CONTINUING> (1,883,800)<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,883,800)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES A $5,280,000 LOSS ON THE SALE OF AN OTHER ASSET.
</FN>
</TABLE>
