<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended SEPTEMBER 30, 1997
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from _______________ to ________________
Commission File Number 1-10177
-------
WINDMERE-DURABLE HOLDINGS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-1028301
- ------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5980 MIAMI LAKES DRIVE, MIAMI LAKES, FLORIDA 33014
-------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(305) 362-2611
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirement for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
NUMBER OF SHARES OUTSTANDING
CLASS ON OCTOBER 10, 1997
------ ----------------------------
Common Stock, $.10 Par Value 17,803,629
<PAGE> 2
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Statements of Earnings for the 3
Three Months Ended September 30, 1997 and
1996
Consolidated Statements of Earnings for the 4
Nine Months Ended September 30, 1997 and
1996
Consolidated Balance Sheets as of 5-6
September 30, 1997, December 31, 1996
and September 30, 1996
Consolidated Statements of Cash Flows 7-8
for the Nine Months Ended September 30, 1997
and 1996
Notes to Consolidated Financial Statements 9-11
ITEM 2. Management's Discussion and Analysis of 12-16
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 17
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
----------------------------- -------------------------
<S> <C> <C> <C> <C>
Sales and Other Revenues $ 79,976 100.0% $ 56,181 100.0%
Cost of Goods Sold 62,017 77.5 45,765 81.5
-------- ------------ -------- --------
Gross Profit 17,959 22.5 10,416 18.5
Selling, General and
Administrative Expenses 12,288 15.4 10,295 18.3
-------- ------------ -------- --------
Operating Profit 5,671 7.1 121 .2
Other (Income) Expense
Interest Expense 861 1.1 612 1.1
Interest and Other Income (601) (.8) (943) (1.7)
-------- ------------ -------- --------
260 .3 (331) (.6)
-------- ------------ -------- --------
Earnings Before Equity in Net
Earnings of Joint Ventures
and Income Taxes 5,411 6.8 452 .8
Equity in Net Earnings
of Joint Ventures 3,664 4.6 848 1.5
-------- ------------ -------- --------
Earnings Before Income Taxes 9,075 11.4 1,300 2.3
Income Taxes
Current 397 .5 25 .1
Deferred 161 .2 (426) (.8)
-------- ------------ -------- --------
558 .7 (401) (.7)
-------- ------------ -------- --------
Net Earnings $ 8,517 10.7% $ 1,701 3.0%
======== ============ ======== ========
Earnings Per Common Share and
Common Equivalent Share $ .43 $ .10
======== =======
Average Number of Common
Shares and Common Equivalent
Shares Outstanding 19,917 18,984
======== =======
Dividends Per Common Share $ .00 $ .05
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
------------------------- -------------------------
<S> <C> <C> <C> <C>
Sales and Other Revenues $ 191,451 100.0% $ 136,124 100.0%
Cost of Goods Sold 149,667 78.2 108,757 80.0
--------- ------- --------- -------
Gross Profit 41,784 21.8 27,367 20.0
Selling, General and
Administrative Expenses 33,635 17.5 27,061 19.9
--------- ------- --------- -------
Operating Profit 8,149 4.3 306 .1
Other (Income) Expense
Interest Expense 2,194 1.2 942 .7
Interest and Other Income (1,565) (.8) (2,033) (1.5)
--------- ------- --------- -------
629 .4 (1,091) (.8)
--------- ------- --------- -------
Earnings Before Equity in Net
Earnings of Joint
Ventures and Income Taxes 7,520 3.9 1,397 .9
Equity in Net Earnings
of Joint Ventures 3,784 2.0 97 .1
--------- ------- --------- -------
Earnings Before Income Taxes 11,304 5.9 1,494 1.0
Income Taxes
Current (2,039) (1.0) (168) (.1)
Deferred 2,566 1.3 108 .1
--------- ------- --------- -------
527 .3 (60) 0
--------- ------- --------- -------
Net Earnings $ 10,777 5.6% $ 1,554 1.0%
========= ======= ========= =======
Earnings Per Common
and Common Equivalent Shares $ .55 $ .09
========= =========
Average Number of Common
and Common Equivalent
Shares Outstanding 19,593 17,671
========= =========
Dividends Per Common Share $ .10 $ .15
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
9/30/97 12/31/96 9/30/96
-------- -------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash & Cash Equivalents $ 6,352 $ 8,779 $ 7,592
Accounts and Other Receivables,
less allowances of $1,122,
$1,129 and $1,193, respectively 50,281 37,601 44,242
Receivables from Affiliates (Note 2) 16,749 12,139 7,748
Inventories
Raw Materials 19,317 13,824 14,107
Work-in-process 21,622 20,552 18,063
Finished Goods 57,870 55,138 51,254
-------- -------- --------
Total Inventories 98,809 89,514 83,424
Prepaid Expenses 5,633 3,751 4,149
Future Income Tax Benefits 2,791 3,232 1,643
-------- -------- --------
Total Current Assets 180,615 155,016 148,798
INVESTMENTS IN JOINT VENTURES
(NOTE 2) 39,621 35,291 32,863
PROPERTY, PLANT & EQUIPMENT -
AT COST, less accumulated
depreciation of $48,218,
$45,366 and $45,118, respectively 36,676 32,760 33,396
OTHER ASSETS 12,973 14,212 12,504
-------- -------- --------
TOTAL ASSETS $269,885 $237,279 $227,561
======== ======== ========
</TABLE>
5
<PAGE> 6
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
CONTINUED
<TABLE>
<CAPTION>
9/30/97 12/31/96 9/30/96
--------- --------- ---------
<S> <C> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Notes and Acceptances Payable $ 45,453 $ 21,883 $ 15,564
Current Maturities of Long-Term
Debt 3,815 815 815
Accounts Payable and
Accrued Expenses 25,263 26,335 22,037
Deferred Income, current portion 330 419 598
--------- --------- ---------
Total Current Liabilities 74,861 49,452 39,014
LONG-TERM DEBT 16,274 19,885 20,088
DEFERRED INCOME, less current
portion 15 247 218
STOCKHOLDERS' EQUITY (Note 3)
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; shares issued and out-
standing: 17,800, 17,445 and
17,328, respectively 1,780 1,745 1,733
Paid-in Capital 37,747 35,766 34,348
Retained Earnings 140,029 130,965 132,921
Unrealized Foreign Currency
Translation Adjustment (821) (781) (761)
--------- --------- ---------
Total Stockholders' Equity 178,735 167,695 168,241
--------- --------- ---------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 269,885 $ 237,279 $ 227,561
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 10,777 $ 1,554
Adjustments to reconcile net earnings
to net cash used in operating
activities:
Depreciation of property, plant and
equipment 4,956 4,886
Amortization of intangible assets 824 483
Amortization of deferred income (321) (449)
Equity in net earnings of joint ventures (4,332) (97)
Changes in assets and liabilities
Increase in accounts and other
receivables (12,687) (7,680)
Increase in inventories (9,295) (3,681)
Increase in prepaid expenses (1,882) (1,146)
Decrease (increase) in other assets 615 (776)
(Decrease) increase in accounts payable
and accrued expenses (1,072) 3,929
Decrease in current and
deferred income taxes 441
(Decrease) increase in other accounts (34) 45
-------- --------
Net cash used in operating activities (12,010) (2,932)
Cash flows from investing activities:
Additions to property, plant and
equipment - net (8,872) (7,798)
Purchase of assets - LitterMaid(TM) -- (2,246)
Purchase of assets - Bay Books & Tapes -- (1,180)
Investments in joint ventures (198) (7,934)
Increase (decrease) in receivable accounts
and notes from affiliates (4,610) 1,307
-------- --------
Net cash used in investing activities $(13,680) $(17,851)
</TABLE>
7
<PAGE> 8
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
CONTINUED
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Net borrowings under lines of credit $ 23,570 $ 15,522
Payments of long-term debt (611) $ (611)
Exercise of stock options and warrants 2,017 1,949
Cash dividends paid (1,713) (2,485)
Purchases of common stock -- (3,768)
-------- --------
Net cash provided by financing activities 23,263 10,607
-------- --------
Decrease in cash and cash equivalents (2,427) (10,176)
Cash and cash equivalents at beginning of year 8,779 17,768
-------- --------
Cash and cash equivalents at end of quarter $ 6,352 $ 7,592
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 963 $ 337
Income taxes $ 11 $ 336
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE> 9
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
INTERIM REPORTING
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all normal recurring adjustments necessary
to present fairly the Company's financial position as of September 30,
1997 and 1996, and the results of its operations and changes in
financial position for the interim periods. Results for interim periods
should not be considered indicative of results for a full year.
Reference should be made to the financial statements contained in the
Company's Annual Report on Form 10-K for the year ended December 31,
1996.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified for comparability.
2. INVESTMENTS IN JOINT VENTURES
Investments in joint ventures consist of the Company's interests in
joint ventures, accounted for under the equity method. Included are the
Company's 50-percent interests in Salton/Maxim Housewares,
Inc.("Salton"), New M-Tech Corporation ("New M-Tech"), PX Distributors,
Inc. ("PX"), Breakroom of Tennessee, Inc. and Anasazi Partners, L.P.
("Anasazi").
In December 1996, the Company purchased the remainder of its seasonal
products joint venture. Financial data for this entity is consolidated
for the 1997 period and has, therefore, been excluded in the table
below for 1997.
Summarized financial information of the unconsolidated companies is as
follows: (In Thousands)
Nine Nine
Months Ended Year Ended Months Ended
9/30/97 12/31/96 9/30/96
------------ ---------- ------------
EARNINGS
Sales $276,125 $162,368 $ 77,085
Gross Profit $ 61,901 $ 34,312 $ 13,433
Net Earnings $ 8,651 $ 5,552 $ 453
BALANCE SHEET
Current Assets $175,572
Noncurrent Assets $ 37,772
Current Liabilities $145,056
Shareholders' Equity $ 66,661
9
<PAGE> 10
At September 30, 1997, the Company's loans to certain of its joint
venture partners ("affiliates") totaled $9.1 million. The Company has
also provided a $9.0 million corporate guarantee as support for a
credit facility obtained by one of its joint ventures.
Sales made by joint ventures were to entities other than members of the
consolidated group. Sales totaling $12.6 million and $30.0 million,
respectively, were made by the Company to the joint ventures in the
three and nine month periods ended September 30, 1997. Sales to joint
ventures for the three and nine month periods ended September 30, 1996
totaled $3.3 million and $4.5 million, respectively. Included in
Receivables from Affiliates at September 30, 1997 is $8.0 million due
the Company from the joint ventures for trade receivables.
Note: Profits earned by the Company's manufacturing subsidiary on sales
to joint ventures are included in the consolidated earnings results and
are not part of the above table.
3. STOCKHOLDERS' EQUITY
DIVIDENDS
In August 1997, the Board of Directors reevaluated the dividend policy
in light of the Company's strategic repositioning for growth and the
resultant cash requirements and eliminated the Company's quarterly cash
dividend.
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share", which
changes the method for reporting Earnings Per Share. The statement is
effective for financial statement periods ending after December 15,
1997. The Company has not yet determined the impact, if any, of
adopting the new standard.
4. SUPPLIER CONTRACT
In January 1997, the Company, through its 50-percent interests in
Salton and New M-Tech, entered into supply contracts with the Kmart
Corporation for Kmart to purchase, distribute, market and sell certain
products under the White-Westinghouse brand name licensed to Salton and
New M-Tech. Under the terms of the contract, Salton and New M-Tech will
supply Kmart, either through the Company or other manufacturers, with a
broad range of small electrical appliances, consumer electronics and
telephone products under the White-Westinghouse brand name. Kmart will
be the exclusive discount department store to market these
White-Westinghouse products.
5. MARKETING COOPERATION AGREEMENT
Pursuant to the Marketing Cooperation Agreement executed as part of the
1996 acquisition of Salton, the parties, on April 30, 1997, entered
into an agreement pursuant to which fees are paid to the Company. Fees
earned by the Company under various marketing arrangements with its
joint ventures totaled $.9 million and $1.8
10
<PAGE> 11
million for the three month and nine month periods ended September 30,
1997, respectively, and are classified as Sales and Other Revenues.
6. COMMITMENTS AND CONTINGENCIES
The Company, its 50-percent owned joint venture partners Salton/Maxim
Housewares, Inc. and New M-Tech Corporation, White Consolidated
Industries, Inc. ("White Consolidated"), and certain other parties have
been named as defendants in litigation filed by Westinghouse Electric
Corporation ("Westinghouse") in the United States District Court for
the Western District in Pennsylvania on December 18, 1996. The action
arises from a dispute between Westinghouse and White Consolidated over
rights to use the "Westinghouse" trademark for consumer products, based
on transactions between Westinghouse and White Consolidated in the
1970's and the parties' subsequent conduct. Prior to the filing of
Westinghouse's complaint against the Company, White Consolidated, on
November 14, 1996, filed a complaint in the United States District
Court for the Northern District of Ohio against Westinghouse and
another corporation for trademark infringement, dilution, false
designation or origin and false advertisement, seeking both injunctive
relief and damages. Procedural motions concerning the jurisdiction in
which the dispute should be heard have been filed by the parties. The
action by Westinghouse seeks, among other things, a preliminary
injunction enjoining the defendants from using the trademark,
unspecified damages and attorneys' fees. Pursuant to the
Indemnification Agreement dated January 23, 1997 by and among White
Consolidated, Kmart Corporation, and the Company, White Consolidated is
defending and indemnifying the Company for all costs and expenses for
claims, damages, and losses, including the costs of litigation.
Pursuant to the license agreements with White Consolidated, White
Consolidated is defending and indemnifying Salton/Maxim and New M- Tech
for all costs and expenses for claims, damages, and losses, including
the costs of litigation. On April 9, 1997, on joint motion of the
parties, the court issued an order staying future proceedings until the
earlier of July 1, 1997 or five days after hearing before the court in
order to give the parties an opportunity to pursue settlement
discussions. Subsequently, after a status hearing before the Court on
July 15, 1997, and in accordance with the Court's memorandum order of
July 17, 1997, counsel for the parties in the litigation pending in the
United States District Court for the Western District of Pennsylvania
reported to the Court in a letter that the parties had agreed to pursue
an expedited mini-trial/mediation proceeding in an effort to resolve
their disputes. A mediation proceeding occurred and the parties were
unable to reach a mediated settlement. Discovery is proceeding and the
matter is likely to be tried in late 1998.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1996
Sales and Other Revenues ("Revenues") for the third quarter of 1997 increased by
$23.8 million or 42.4% over Revenues for the same period in 1996. The increase
is primarily the result of a $17.7 million increase in distribution sales,
including $6.0 million in seasonal product sales resulting from the Company's
December 1996 acquisition of the remainder of its seasonal products joint
venture and $7.8 million in kitchen product sales. A $5.8 million increase in
manufacturing sales also contributed to the growth in sales. Sales to a national
retail beauty supply chain and to Salton accounted for 16.3% and 11.4%,
respectively, of total sales for the 1997 period. Fees earned by the Company
under marketing arrangements with its joint ventures totaled $.9 million and are
classified as Sales and Other Revenues.
COMPARATIVE REVENUE RESULTS
(In Thousands) THREE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
---------------------- ----------------------
DISTRIBUTION $59,799 74.8% $42,097 74.9%
MANUFACTURING 20,177 25.2 14,084 25.1
------- ------- ------- -------
Total Revenues $79,976 100.0% $56,181 100.0%
======= ======= ======= =======
Gross profit, as a percentage of sales, increased by 4.0% in the 1997 period
primarily due to better absorption of fixed manufacturing overhead costs over
increased sales volume.
Selling, general and administrative costs increased by $2.0 million in the third
quarter of 1997 compared to the same period of 1996, yet decreased as a
percentage of sales to 15.4% from 18.3% for the same periods, as fixed expenses
were spread over the Company's increased sales. The increase in costs is
primarily the result of expenses related to LitterMaid, Inc., Bay Books & Tapes,
Inc. and the now wholly-owned seasonal products company, whose operations, due
to their respective acquisition dates, were not fully reflected in the 1996
third quarter financial statements.
The Company's equity in net earnings of joint ventures was $3.7 million for the
third quarter of 1997 as compared to $.8 million for the same period in 1996.
Included in 1997 are the results of operations of the Company's interests in
Salton, New M-Tech, and various other ventures, some of which were not acquired
until the third quarter of 1996. Salton and New M-Tech were primarily
responsible for the current period's increased earnings. In December 1996, the
Company acquired the remainder of its seasonal products joint venture.
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. Foreign earnings, other than
in Canada, are generally taxed at rates lower than in the United States.
The average number of common shares and common equivalent shares used in
computing per share results was 19,917,000 in 1997, as compared to 18,984,000 in
1996, a 4.9% increase. The change was primarily due to the additional
12
<PAGE> 13
dilutive effect of stock options and warrants arising from the Company's higher
average stock price in 1997 and the additional shares issued upon the
acquisition of Salton.
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share", which changes the method for
reporting Earnings Per Share. The statement is effective for financial
statements for periods ending after December 15, 1997. The Company has not yet
determined the impact, if any, of adopting the new standard.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1996
Sales and Other Revenues for the 1997 nine month period increased by $55.3
million or 40.6% over Revenues for the same period in 1996. The increase is
primarily the result of a $34.0 million increase in distribution sales which
includes $18.7 million in seasonal product sales resulting from the Company's
December 1996 acquisition of the remainder of its seasonal products joint
venture and $11.5 million in kitchen product sales. Additional manufacturing
sales of $18.2 million also contributed to the growth in sales. Fees earned by
the Company under marketing arrangements with its joint ventures totaled $1.8
million and are classified as Sales and Other Revenues.
COMPARATIVE REVENUE RESULTS
NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
----------------------- -----------------------
DISTRIBUTION $138,988 72.6% $105,069 77.2%
MANUFACTURING 52,463 27.4 31,055 22.8
-------- ------- -------- -------
Total Revenues $191,451 100.0% $136,124 100.0%
======== ======= ======== =======
Gross profit, as a percentage of sales, increased by 1.8% in the 1997 period
primarily due to better absorption of fixed manufacturing overhead costs over
increased sales volume.
Selling, general and administrative costs increased by $6.6 million in the nine
months ended September 30, 1997 compared to the same period of 1996, yet
decreased as a percentage of sales to 17.6% from 19.0% for the same periods, as
fixed expenses were spread over the Company's increased sales. The increase in
costs is primarily the result of expenses related to LitterMaid, Inc., Bay Books
& Tapes, Inc. and the Company's now wholly-owned seasonal products company,
whose operations, due to their respective acquisition dates, were not fully
reflected in the 1996 third quarter financial statements.
Interest expense increased by $1.3 million in the 1997 period as a result of the
amounts paid on notes issued in conjunction with the Salton and New M- Tech
acquisitions, as well as the increased level of borrowing under the Company's
line of credit facilities.
The Company's equity in net earnings of joint ventures was $3.8 million for the
nine months ended September 30, 1997 as compared to $.1 million for the same
period in 1996. Included in 1997 are the results of operations of the Company's
interests in Salton, New M-Tech and various other ventures, some of which were
not acquired until the third quarter of 1996. In December 1996, the Company
acquired the remainder of its seasonal products joint venture.
13
<PAGE> 14
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. Foreign earnings, other than
in Canada, are generally taxed at rates lower than in the United States.
The average number of common shares and common equivalent shares used in
computing per share results was 19,593,000 in 1997, as compared to 17,671,000 in
1996, a 10.9% increase. The change was primarily due to the additional dilutive
effect of stock options and warrants arising from the Company's higher average
stock price in 1997 and the additional shares issued upon the acquisition of
Salton.
LIQUIDITY & CAPITAL RESOURCES
At September 30, 1997, the Company's current ratio and quick ratio were 2.4 to 1
and 1.1 to 1 as compared to 3.8 to 1 and 1.6 to 1 at September 30, 1996. Working
capital at those dates was $105.8 million and $109.8 million, respectively. The
Company has presented its current and quick ratios solely as supplemental
disclosures because the Company believes that they enhance the understanding of
its financial performance.
The Company and its joint ventures are experiencing accelerated growth. The net
use of cash in operating activities of $12.0 million is a result of the growth.
Cash flow was strongly impacted by the increase in inventory levels needed to
meet future sales demands and the increase in accounts receivable balances
resulting from strong third quarter activity. Investing expenditures of $8.9
million in additions to property, plant and equipment and a $4.6 million
increase in receivables from affiliates are also a result of the accelerated
growth. The $45.5 million borrowed under the Company's lines of credit at
September 30, 1997, an increase of $23.6 million since the beginning of the
year, is the primary funding source used by the Company to support its increased
working capital requirements as well as to support its seasonal borrowing needs.
Certain of the Company's foreign subsidiaries (the "subsidiaries") have $13.8
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 September
30, 1997, the subsidiaries were utilizing, including letters of credit,
approximately $3.6 million of these credit lines. These subsidiaries also have
available a $5.0 million revolving line of credit which is supported by a
domestic standby letter of credit, guaranteed by the Company, of which $3.3 was
outstanding as of September 30, 1997. Outstanding borrowings by the Company's
Hong Kong subsidiaries are primarily in U.S. dollars.
The Company has a $50.0 million line of credit from a domestic bank, secured by
domestic accounts receivable and inventory. At September 30, 1997, outstanding
borrowings under this credit line totaled $38.5 million and bear interest at
LIBOR plus 1.50%.
In August 1997, the Board of Directors reevaluated the dividend policy in light
of the Company's strategic repositioning for growth and the resultant cash
requirements and eliminated the Company's quarterly cash dividend.
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
14
<PAGE> 15
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
The Company, its 50-percent owned joint venture partners Salton/Maxim
Housewares, Inc. and New M-Tech Corporation, White Consolidated Industries, Inc.
("White Consolidated"), and certain other parties have been named as defendants
in litigation filed by Westinghouse Electric Corporation ("Westinghouse") in the
United Stated District Court for the Western District in Pennsylvania on
December 18, 1996. The action arises from a dispute between Westinghouse and
White Consolidated over rights to use the "Westinghouse" trademark for consumer
products, based on transactions between Westinghouse and White Consolidated in
the 1970's and the parties' subsequent conduct. Prior to the filing of
Westinghouse's complaint against the Company, White Consolidated, on November
14, 1996, filed a complaint in the United States District Court for the Northern
District of Ohio against Westinghouse and another corporation for trademark
infringement, dilution, false designation or origin and false advertisement,
seeking both injunctive relief and damages. Procedural motions concerning the
jurisdiction in which the dispute should be heard have been filed by the
parties. The action by Westinghouse seeks, among other things, a preliminary
injunction enjoining the defendants from using the trademark, unspecified
damages and attorneys' fees. Pursuant to the Indemnification Agreement dated
January 23, 1997 by and among White Consolidated, Kmart Corporation, and the
Company, White Consolidated is defending and indemnifying the Company for all
costs and expenses for claims, damages, and losses, including the costs of
litigation. Pursuant to the license agreements with White Consolidated, White
Consolidated is defending and indemnifying Salton/Maxim and New M-Tech for all
costs and expenses for claims, damages, and losses, including the costs of
litigation. On April 9, 1997, on joint motion of the parties, the court issued
an order staying future proceedings until the earlier of July 1, 1997 or five
days after hearing before the court in order to give the parties an opportunity
to pursue settlement discussions. Subsequently, after a status hearing before
the Court on July 15, 1997, and in accordance with the Court's memorandum order
of July 17, 1997, counsel for the parties in the litigation pending in the
United States District Court for the Western District of Pennsylvania reported
to the Court in a letter that the parties had agreed to pursue an expedited
mini-trial/mediation proceeding in an effort to resolve their disputes. A
mediation proceeding occurred and the parties were unable to reach a mediated
settlement. Discovery is proceeding and the matter is likely to be tried in late
1998.
The Company is subject to other legal proceedings and 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.
MANUFACTURING OPERATIONS
Substantially all of the Company's products (85% - 90%) are manufactured by
Durable, its wholly-owned Hong Kong subsidiary, in Bao An County, Guangdong
Province of the People's Republic of China (PRC), which is approximately 60
miles northwest of central Hong Kong. The Company has a significant amount of
its assets in the PRC, primarily consisting of inventory, equipment and molds.
The supply and cost of products manufactured in the PRC can be
15
<PAGE> 16
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. 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 reviewed on an annual basis by the President and
Congress and was renewed in June 1997.
If MFN status for goods produced in the PRC were removed, there would be a
substantial increase in tariffs imposed on goods of PRC 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. 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 PRC 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 PRC.
16
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See "Legal Proceedings" in Part I, Item 2 of this report.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
EX-2.1 Amendment No. 3 to the Credit Agreement (October 11, 1996)
dated July 27, 1997
EX-2.2 Amendment No. 4 to the Credit Agreement (October 11, 1996)
dated August 21, 1997
EX-27 Financial Data Schedule (for SEC use only)
(b) There were no reports on Form 8-K filed for the three months
ended September 30, 1997.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINDMERE-DURABLE HOLDINGS, INC.
-------------------------------
(Registrant)
November 13, 1997 By: /s/ Harry D. Schulman
--------------------------------------
Harry D. Schulman
Senior Vice President -
Finance and Administration and
Chief Financial Officer
(Duly authorized to sign on
behalf of the Registrant)
November 13, 1997 By: /s/ Burton A. Honig
--------------------------------------
Burton A. Honig
Vice President - Finance
(Duly authorized to sign on
behalf of the Registrant)
18
<PAGE> 1
Exhibit 2.1
AMENDMENT AGREEMENT NO. 3
TO THE CREDIT AGREEMENT
This AMENDMENT AGREEMENT NO. 3 TO THE CREDIT AGREEMENT (the "Amendment
Agreement"), dated as of July 27, 1997 is made by and among WINDMERE
CORPORATION, a Florida corporation having its principal place of business in
Miami Lakes, Florida (the "Borrower"), NATIONSBANK, NATIONAL ASSOCIATION (as
successor by merger to NationsBank, National Association (South)), a national
banking association organized and existing under the laws of the United States,
and NATIONAL BANK OF CANADA, as Lenders (such financial institutions are
hereinafter referred to individually as a "Lender" or collectively as the
"Lenders"), and NATIONSBANK, NATIONAL ASSOCIATION (as successor by merger to
NationsBank, National Association (South)), in its capacity as agent for the
Lenders (in such capacity, the "Agent");
W I T N E S S E T H:
--------------------
WHEREAS, the Borrower, the Agent and the Lenders have entered into that
certain Credit Agreement dated as of October 11, 1996, as amended by Amendment
Agreement No. 1 to the Credit Agreement dated as of January 31, 1997, and by
Amendment Agreement No. 2 to the Credit Agreement dated as of May 15, 1997 (as
so amended, the "Credit Agreement"); and
WHEREAS, the Agent, the Lenders and each of the Affiliates and
Subsidiaries of the Borrower party thereto have entered into a Guaranty and
Suretyship Agreement dated as of October 11, 1996, pursuant to which such
Affiliates and Subsidiaries of the Borrower have guaranteed the Borrower's
Obligations under the Credit Agreement; and
WHEREAS, the Borrower has requested that the Agent and the Lenders
amend the Credit Agreement; and
WHEREAS, upon the terms and conditions contained herein, the Agent and
the Lenders are willing to amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and conditions herein
set forth, it is hereby agreed as follows:
1. CREDIT AGREEMENT AMENDMENT. Subject to the conditions hereof, the
Credit Agreement is hereby amended, effective as of the date hereof by deleting
the definition of "Stated Termination Date" appearing in SECTION 1.1 and
inserting in lieu thereof the following:
"'Stated Termination Date' means August 26, 1997 or such later
date as the parties may agree pursuant to SECTION 2.13."
<PAGE> 2
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent and the
Lenders to enter into this Amendment Agreement, the Borrower hereby represents
and warrants that the Credit Agreement has been re-examined by the Borrower and
that except as disclosed by the Borrower in writing to the Lenders as of the
date hereof except:
(a) The representations and warranties made by the Borrower in
ARTICLE VII thereof are true on and as of the date hereof except that
the financial statements referred to in SECTION 7.6 shall be those most
recently furnished to the Agent pursuant to SECTION 8.1;
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower and its Subsidiaries
since the date of the most recent financial reports of the Borrower
delivered to the Agent under SECTION 8.1 thereof, other than changes in
the ordinary course of business, none of which has been a material
adverse change;
(c) The business and properties of the Borrower and its
Subsidiaries are not, and since the date of the most recent financial
reports of the Borrower delivered to the Agent under SECTION 8.1
thereof, have not been, adversely affected in any substantial way as
the result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workers, flood, embargo, riot, activities of
armed forces, war or acts of God or the public enemy, or cancellation
or loss of any major contracts; and
(d) After giving effect to this Amendment Agreement, no
condition exists which, upon the effectiveness of the amendment
contemplated hereby, would constitute a Default or an Event of Default
on the part of the Borrower under the Credit Agreement or the Notes,
either immediately or with the lapse of time or the giving of notice,
or both.
3. CONDITIONS PRECEDENT. The effectiveness of this Amendment Agreement
is subject to the receipt by the Agent of the following:
(a) six counterparts of this Amendment Agreement duly executed
by all signatories hereto; and
(b) copies of all additional agreements, instruments and
documents which the Agent may reasonably request, such documents, when
appropriate, to be certified by appropriate governmental authorities.
All proceedings of the Borrower relating to the matters provided for herein
shall be satisfactory to the Lenders, the Agent and their counsel.
4. ENTIRE AGREEMENT. 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.
2
<PAGE> 3
No promise, condition, representation or warranty, express or implied, not
herein set forth shall bind any party hereto, and no one 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. None of the terms or
conditions of this Amendment Agreement may be changed, modified, waived or
canceled orally or otherwise, except by writing, signed by all the parties
hereto, specifying such change, modification, waiver or cancellation of such
terms or conditions, or of any proceeding or succeeding breach thereof.
5. CONSENT OF GUARANTORS. The Guarantors have joined in the execution
of this Amendment Agreement for the purposes of consenting hereto and for the
further purpose of confirming their guaranty of Obligations of Borrower as
provided in the Guaranty.
6. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
7. COUNTERPARTS. This Amendment Agreement may be executed in any number
of counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
8. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY (I) SUBMITS TO
THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE
PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY OR FOR PURPOSES OF COLLECTION AND (II) WAIVES
TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
9. ENFORCEABILITY. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one or
more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
10. CREDIT AGREEMENT. All references in any of the Loan Documents to
the Credit Agreement shall mean and include the Credit Agreement as amended
hereby.
11. SUCCESSORS AND ASSIGNS. This Amendment Agreement shall be binding
upon and inure to the benefit of each of the Borrower, the Lenders, the Agent
and their respective successors, assigns and legal representatives; PROVIDED,
HOWEVER, that the Borrower, without the prior consent of the Lenders, may not
assign any rights, powers, duties or obligations hereunder.
3
<PAGE> 4
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
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
GUARANTORS:
WINDMERE-DURABLE HOLDINGS, INC.
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
WINDMERE HOLDINGS CORPORATION
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
WINDMERE HOLDINGS CORPORATION II
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
WINDMERE FAN PRODUCTS, INC.
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
4
<PAGE> 5
LITTER MAID, INC.
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
BAY BOOKS & TAPES, INC.
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
JERDON PRODUCTS, INC.
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
CONSUMER PRODUCTS AMERICAS, INC.
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
FORTUNE PRODUCTS, INC.
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
5
<PAGE> 6
EDI MASTERS, INC.
By:
--------------------------------
Name:
----------------------------
Title:
----------------------------
6
<PAGE> 7
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent and Lender
By:
--------------------------------
Name: Richard G. Parkhurst
Title: Vice President
7
<PAGE> 8
NATIONAL BANK OF CANADA, as Lender
By:
--------------------------------
Name:
----------------------------
Title:
8
<PAGE> 1
Exhibit 2.2
AMENDMENT AGREEMENT NO. 4
TO THE CREDIT AGREEMENT
This AMENDMENT AGREEMENT NO. 4 TO THE CREDIT AGREEMENT (the "Amendment
Agreement"), dated as of August 21, 1997 is made by and among WINDMERE
CORPORATION, a Florida corporation having its principal place of business in
Miami Lakes, Florida (the "Borrower"), NATIONSBANK, NATIONAL ASSOCIATION (as
successor by merger to NationsBank, National Association (South)), a national
banking association organized and existing under the laws of the United States,
and NATIONAL BANK OF CANADA, as Lenders (such financial institutions are
hereinafter referred to individually as a "Lender" or collectively as the
"Lenders"), and NATIONSBANK, NATIONAL ASSOCIATION (as successor by merger to
NationsBank, National Association (South)), in its capacity as agent for the
Lenders (in such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders have entered into that
certain Credit Agreement dated as of October 11, 1996, as amended by Amendment
Agreement No. 1 to the Credit Agreement dated as of January 31, 1997, by
Amendment Agreement No. 2 to the Credit Agreement dated as of May 15, 1997 and
by Amendment Agreement No. 3 to the Credit Agreement dated as of July 27, 1997
(as so amended, the "Credit Agreement"); and
WHEREAS, the Agent, the Lenders and each of the domestic Affiliates and
domestic Subsidiaries of the Borrower party thereto have entered into a Guaranty
and Suretyship Agreement dated as of October 11, 1996, pursuant to which such
Affiliates and Subsidiaries of the Borrower have guaranteed the Borrower's
Obligations under the Credit Agreement; and
WHEREAS, Windmere Consumer Products, Inc., an Affiliate of the
Borrower, the Agent and the Lenders has entered into a Guarantee and Suretyship
Agreement dated as of the date hereof pursuant to which Windmere Consumer
Products, Inc. has guaranteed the Borrower's Obligations under the Credit
Agreement; and
WHEREAS, the Borrower has requested that the Agent and the Lenders
amend the Credit Agreement; and
WHEREAS, upon the terms and conditions contained herein, the Agent and
the Lenders are willing to amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and conditions herein
set forth, it is hereby agreed as follows:
<PAGE> 2
1. CREDIT AGREEMENT AMENDMENT. Subject to the conditions hereof, the
Credit Agreement is hereby amended, effective as of the date hereof, as follows:
(a) Section 1.1 to the Credit Agreement is hereby amended by
amending and restating the following definitions, each in its entirety as
follows:
"'Borrowing Base' means, as of the date of determination
thereof, (i) Eligible Receivables multiplied by 85% plus (ii)
Eligible Inventory multiplied by 40% (the "Eligible Inventory
Amount") provided that if the date of determination is between July
15 and December 15 of any year, the Eligible Inventory amount
determined in subsection (ii) above shall be Eligible Inventory
multiplied by 50%; provided further, that the Eligible Inventory
amount determined at any time shall not exceed $20,000,000;"
"'Consolidated Tangible Net Worth' means the total of Parent's
and its Subsidiaries' shareholder equity as determined in accordance
with GAAP, minus the sum of the following, (i) the book value of all
assets which would be treated as intangible assets under GAAP other
than and (ii) any prepaid advertising credits; provided, however,
that in determining the amount of goodwill, where capital stock of
the Borrower is a part of the consideration paid in connection with
one or more Acquisitions, there may be included in Consolidated
Tangible Net Worth up to $5,000,000 of goodwill, so long as the fair
market value of capital stock of the Borrower given as consideration
equals the amount of goodwill so included."
"'Default Rate' means (i) with respect to each Eurodollar Rate
Loan, until the end of the Interest Period applicable thereto, a
rate of two percent (2%) above the Eurodollar Rate applicable to
such Loan, and thereafter at a rate of interest per annum which
shall be two percent (2%) above the Base Rate, (ii) with respect to
Base Rate Loans, at a rate of interest per annum which shall be two
percent (2%) above the Base Rate, (iii) with respect to Money Market
Loans, at a rate of interest per annum which shall be two percent
(2%) above the Money Market Rate and (iv) in any case, the maximum
rate permitted by applicable law, if lower;"
"'Eligible Inventory' means that domestic inventory of the
Borrower and the Guarantors which is determined by the Agent in the
reasonable exercise of its discretion to be Eligible Inventory;
provided, however, that any of the following shall not be Eligible
Inventory:
(i) inventory that is kept in any location other than the (a)
warehouses owned by the Borrower or the Guarantors and located in
Miami, Florida, (b) the warehouse located at 3313 Northwest 37th
Street, Miami, Florida and (c) public warehouses located in (v)
Sparkes, Nevada, (w) Kent, Washington, (x) Pennsauken, New Jersey,
(y) Largo, Florida and (z) Memphis, Tennessee; and
2
<PAGE> 3
(ii) inventory that is unfinished;"
"'Eligible Receivables' means those trade accounts receivable
of the (a) Borrower, (b) the Parent, (c) the Domestic Subsidiaries
of each of the Borrower and the Parent and (d) Windmere Consumer
Products, Inc., which are determined by the Agent in the reasonable
exercise of its discretion to be an Eligible Receivable; provided,
however, that any of the following shall not be Eligible
Receivables:
(i) intercompany receivables;
(ii) receivables owed by the United States government or any
of its states, departments, agencies or instrumentalities of any
thereof;
(iii) receivables owed by a person not a United States or
Canadian citizen or corporation, partnership or other entity
organized under the laws of the United States or province of Canada
or the Commonwealth of Canada whose principal office is not located
either within the United States or Canada.
(iv) receivables of any customer more than 50% of which
receivables due Borrower, the Parent, any Domestic Subsidiaries of
the Borrower or the Parent or Windmere Consumer Products, Inc. are
more than 90 days past due;
(v) receivables that are due or unpaid for more than ninety
(90) days from the original due date thereof; and
(vi) any receivable which is subject to any offset,
deduction, defense, dispute or counterclaim;"
"'Stated Termination Date' means August 25, 1998 or such later
date as the parties may agree pursuant to Section 2.13;"
"'Total Revolving Credit Commitment' means a principal amount
equal to $45,000,000, such amount as reduced from time to time in
accordance with Section 2.7;"
(b) Section 1.1 is hereby amended by adding the following
definitions thereto in their appropriate alphabetical order:
"'Floating Rate' means (i) in the case of a Base Rate Loan the
Base Rate, and (ii) in the case of a Money Market Loan the Money
Market Rate;"
"'Floating Rate Loan' means a Loan which is either a Base Rate
Loan or a Money Market Loan;"
3
<PAGE> 4
"'Money Market Loan' means a Loan which bears interest at the
Money Market Rate;"
"'Money Market Rate' means the sum of (i) the greater of (x)
the one month Eurodollar Rate as determined by the Agent and (y) the
rate of interest announced daily by the Agent to be its money market
rate, plus (ii) the Applicable Margin;"
(c) Article II of the Agreement is hereby amended by deleting the
phrase "Base Rate Loan" and "Base Rate Loans" wherever it appears therein
and inserting in lieu thereof the phrase "Floating Rate Loan" and
"Floating Rate Loans," respectively.
(d) The second sentence of Section 2.1(c)(i) to the Credit
Agreement is hereby amended by inserting after the phrase "Base Rate" a
comma and the phrase "Money Market Rate".
(e) Section 8.12(a) to the Credit Agreement is hereby amended by
amending and restating such section in its entirety as follows:
"(a) Consolidated Tangible Net Worth. Maintain at all times
Consolidated Tangible Net Worth equal to the sum of (i) $146,855,500
plus (ii) 50% of Consolidated Net Income for each quarterly period
subsequent to September 30, 1997 plus (iii) the aggregate net
proceeds of any equity offering (including net proceeds under any
stock option or executive compensation plan) received by Parent
after June 30, 1997; and"
(f) Exhibit A to the Credit Agreement is hereby amended by
amending and restating such Exhibit in its entirety as set forth in
Exhibit A hereto.
(g) Exhibit I to the Credit Agreement is hereby amended by
amending and restating such Exhibit in its entirety as set forth in
Exhibit I hereto.
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent and the
Lenders to enter into this Amendment Agreement, the Borrower hereby represents
and warrants that the Credit Agreement has been re-examined by the Borrower and
that except as disclosed by the Borrower in writing to the Lenders as of the
date hereof except:
(a) The representations and warranties made by the Borrower in
Article VII thereof are true on and as of the date hereof except that the
financial statements referred to in Section 7.6 shall be those most
recently furnished to the Agent pursuant to Section 8.1;
(b) There has been no material adverse change in the condition,
financial or otherwise, of the Borrower and its Subsidiaries since the
date of the most recent financial
4
<PAGE> 5
reports of the Borrower delivered to the Agent under Section 8.1 thereof,
other than changes in the ordinary course of business, none of which has
been a material adverse change;
(c) The business and properties of the Borrower and its Subsidiaries
are not, and since the date of the most recent financial reports of the
Borrower delivered to the Agent under Section 8.1 thereof, have not been,
adversely affected in any substantial way as the result of any fire,
explosion, earthquake, accident, strike, lockout, combination of workers,
flood, embargo, riot, activities of armed forces, war or acts of God or
the public enemy, or cancellation or loss of any major contracts; and
(d) After giving effect to this Amendment Agreement, no condition
exists which, upon the effectiveness of the amendment contemplated hereby,
would constitute a Default or an Event of Default on the part of the
Borrower under the Credit Agreement or the Notes, either immediately or
with the lapse of time or the giving of notice, or both.
3. CONDITIONS PRECEDENT. The effectiveness of this Amendment Agree-
ment is subject to the receipt by the Agent of the following:
(i) six counterparts of this Amendment Agreement duly
executed by all signatories hereto;
(ii) four counterparts of each of (a) the Security Agreement
executed by Windmere Consumer Products, Inc. in favor of the Agent,
(b) the Guaranty Agreement executed by Windmere Consumer Products,
Inc. in favor of the Agent, each in form and substance satisfactory
to the Agent and (c) the documents required pursuant to Section 8.11
of the Credit Agreement;
(iii) promissory notes executed by the Borrower in favor of
each of the Lenders in amounts equal to each Lender's Revolving
Credit Commitment;
(iv) resolutions of Board of Directors or other governing body
of the Borrower approving this Amendment Agreement certified by the
Secretary of the Borrower;
(v) opinion of counsel of the Borrower in form and substance
satisfactory to the Agent; and
(vi) copies of all additional agreements, instruments and
documents which the Agent may reasonably request, such documents,
when appropriate, to be certified by appropriate governmental
authorities.
All proceedings of the Borrower relating to the matters provided for herein
shall be satisfactory to the Lenders, the Agent and their counsel.
5
<PAGE> 6
4. ENTIRE AGREEMENT. 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 no one 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. None of the terms or conditions of this Amendment Agreement may be
changed, modified, waived or canceled orally or otherwise, except by writing,
signed by all the parties hereto, specifying such change, modification, waiver
or cancellation of such terms or conditions, or of any proceeding or succeeding
breach thereof.
5. CONSENT OF GUARANTORS. The Guarantors have joined in the execution of
this Amendment Agreement for the purposes of consenting hereto and for the
further purpose of confirming their guaranty of Obligations of Borrower as
provided in the Guaranty.
6. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
7. COUNTERPARTS. This Amendment Agreement may be executed in any number
of counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
8. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY (I) SUBMITS TO
THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE
PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY OR FOR PURPOSES OF COLLECTION AND (II) WAIVES
TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
9. ENFORCEABILITY. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one or
more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
10. CREDIT AGREEMENT. All references in any of the Loan Documents to the
Credit Agreement shall mean and include the Credit Agreement as amended hereby.
11. SUCCESSORS AND ASSIGNS. This Amendment Agreement shall be binding upon
and inure to the benefit of each of the Borrower, the Lenders, the Agent and
their respective
6
<PAGE> 7
successors, assigns and legal representatives; provided, however, that the
Borrower, without the prior consent of the Lenders, may not assign any rights,
powers, duties or obligations hereunder.
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
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
GUARANTORS:
WINDMERE-DURABLE HOLDINGS, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
WINDMERE HOLDINGS CORPORATION
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
WINDMERE HOLDINGS CORPORATION II
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
7
<PAGE> 8
WINDMERE FAN PRODUCTS, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
LITTER MAID, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
BAY BOOKS & TAPES, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
JERDON PRODUCTS, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
CONSUMER PRODUCTS AMERICAS, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
8
<PAGE> 9
FORTUNE PRODUCTS, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
EDI MASTERS, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
WINDMERE CONSUMER PRODUCTS, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
9
<PAGE> 10
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent and Lender
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
10
<PAGE> 11
NATIONAL BANK OF CANADA, as Lender
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
11
<PAGE> 12
EXHIBIT A
Applicable Commitment Percentages
<TABLE>
<CAPTION>
Revolving Applicable
Credit Commitment
Lender Commitment Percentage
- ------ ---------- ----------
<S> <C> <C>
NationsBank, National
Association $25,000,000 55.555555556%
National Bank of
Canada 20,000,000 44.444444444%
----------- ------------
$45,000,000 100%
</TABLE>
A-1
<PAGE> 13
EXHIBIT I
Form of Borrowing Base Certificate
The undersigned Authorized Representative of Windmere Corporation
hereby certifies as follows:
<TABLE>
<S> <C> <C>
(a) Eligible Receivables as of this date:
Total $__________________ x 85% = $_______________
(b) Eligible Inventory as of this date:
Total $__________________ x ___%* = $_______________(not
to exceed $20,000,000)
(a) + (b) = $______________
</TABLE>
*40% during period December 16 through following July 14 and 50% at all
other times.
EXECUTED THIS ____ DAY OF __________________, 199__.
WINDMERE CORPORATION
By:
-------------------------
Authorized Representative
I-1
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,352
<SECURITIES> 0
<RECEIVABLES> 65,908
<ALLOWANCES> 1,122
<INVENTORY> 98,809
<CURRENT-ASSETS> 180,615
<PP&E> 84,894
<DEPRECIATION> 48,218
<TOTAL-ASSETS> 269,885
<CURRENT-LIABILITIES> 74,861
<BONDS> 0
0
0
<COMMON> 1,780
<OTHER-SE> 37,747
<TOTAL-LIABILITY-AND-EQUITY> 269,885
<SALES> 191,451
<TOTAL-REVENUES> 191,451
<CGS> 149,667
<TOTAL-COSTS> 149,667
<OTHER-EXPENSES> 33,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,194
<INCOME-PRETAX> 11,304
<INCOME-TAX> 527
<INCOME-CONTINUING> 10,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,777
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
