<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 MARCH 31, 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 Identification Number)
incorporation or organization)
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
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
he preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to 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 April 30, 1997
------- ----------------------------
Common Stock, $.10 Par Value 17,491,962
<PAGE> 2
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Statements of Earnings for the 3
------ Three Months Ended March 31, 1997 and 1996
Consolidated Balance Sheets as of 4-5
March 31, 1997, December 31, 1996
and March 31, 1996
Consolidated Statements of Cash Flows 6-7
for the Three Months Ended March 31, 1997
and 1996
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of 11-13
------ Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
------
Item 6. Exhibits and Reports on Form 8-K 14
------
15
SIGNATURES
</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 March 31,
1997 1996
---- ----
<S> <C> <C> <C> <C>
Sales and Other Revenues $ 51,412 100.0% $ 40,440 100.0%
Cost of Goods Sold 40,593 79.0 31,837 78.7
-------- ----- -------- -----
Gross Profit 10,819 21.0 8,603 21.3
Selling, General and
Administrative Expenses 9,697 18.9 8,050 20.0
-------- ----- -------- -----
Operating Profit 1,122 2.1 553 1.3
Other (Income) Expense
Interest Expense 624 1.2 133 .3
Interest and Other Income (477) (.9) (475) (1.2)
-------- ----- -------- -----
147 .3 (342) (.9)
-------- ----- -------- -----
Earnings Before Equity in Net
Loss of Joint Ventures
and Income Taxes 975 1.8 895 2.2
Equity in Net Loss
of Joint Ventures (490) (.9) (225) (.5)
-------- ----- -------- ------
Earnings Before Income Taxes 485 .9 670 1.7
Income Taxes
Current (1,996) (3.9) (98) (.2)
Deferred 2,160 4.2 472 1.2
-------- ----- -------- -----
164 .3 374 1
-------- ----- -------- -----
Net Earnings $ 321 .6% $ 296 .7%
======== ===== ======== =====
Earnings Per Common Share $ .02 $ .02
and Common Equivalent Share ======== ========
Average Number of Common
Shares and Common Equivalent 19,286 17,622
Shares Outstanding ======== ========
Dividends Per Common Share $ .05 $ .05
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 3/31/97 12/31/96 3/31/96
------- -------- -------
<S> <C> <C> <C>
CURRENT ASSETS
Cash & Cash Equivalents $ 9,188 $ 8,779 $ 11,693
Accounts and Other Receivables,
less allowances of $1,072,
$1,129 and $1,084, respectively 32,492 37,601 33,626
Receivables from Affiliates (Note 2) 17,108 12,139 10,968
Inventories
Raw Materials 13,856 13,824 16,295
Work-in-process 21,077 20,552 21,081
Finished Goods 50,112 55,138 41,182
--------- --------- ---------
Total Inventories 85,045 89,514 78,558
Prepaid Expenses 4,903 3,751 2,990
Future Income Tax Benefits 3,274 3,232 1,250
--------- --------- ---------
Total Current Assets 152,010 155,016 139,085
INVESTMENTS IN JOINT VENTURES
(NOTE 2) 34,880 35,291 -
PROPERTY, PLANT & EQUIPMENT -
AT COST, less accumulated
depreciation of $46,959,
$46,907 and $41,846, respectively 33,139 32,760 30,489
OTHER ASSETS 13,867 14,212 11,992
--------- --------- ---------
TOTAL ASSETS $ 233,896 $ 237,279 $ 181,566
========= ========= =========
</TABLE>
4
<PAGE> 5
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
CONTINUED
<TABLE>
<CAPTION>
LIABILITIES 3/31/97 2/31/96 3/31/96
------- -------- -------
<S> <C> <C> <C>
CURRENT LIABILITIES
Notes and Acceptances Payable $ 26,846 $21,883 $ -
Current Maturities of Long-Term
Debt 815 815 815
Accounts Payable 12,191 12,106 8,849
Accrued Expenses 6,502 14,229 5,806
Income Taxes 64 93
Deferred Income, current portion 352 419 598
-------- -------- --------
Total Current Liabilities 46,770 49,452 16,161
LONG-TERM DEBT 19,681 19,885 2,648
DEFERRED INCOME, less current
portion 165 247 517
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: 17,478, 17,445 and
16,429, respectively 1,748 1,745 1,643
Paid-in Capital 35,986 35,766 28,028
Retained Earnings 130,431 130,965 133,326
Unrealized Foreign Currency
Translation Adjustment (885) (781) (757)
-------- -------- --------
Total Stockholders' Equity 167,280 167,695 162,240
-------- -------- --------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $233,896 $237,279 $181,566
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 321 $ 296
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation of property, plant and
equipment 1,622 1,614
Amortization of intangible assets 264 136
Amortization of deferred income (149) (150)
Net change in allowance for losses
on accounts receivable (57) (127)
Equity in loss of joint ventures 310 225
Changes in assets and liabilities
Decrease in accounts and other
receivables 5,166 3,052
Decrease in inventories 4,469 516
Increase in prepaid expenses (1,152) (493)
Decrease in other assets 148 83
Decrease in accounts payable
and accrued expenses (7,578) (3,453)
Increase (decrease) in current and
deferred income taxes (42) 486
(Increase) decrease in other accounts (104) 11
--------- --------
Net cash provided by
operating activities 3,218 2,196
Cash flows from investing activities:
Additions to property, plant and
equipment - net (2,001) (1,621)
Purchase of assets - Litter Maid(TM) - (2,200)
Decrease (increase) in receivable accounts
and notes from affiliates (4,935) (1,210)
--------- --------
Net cash used in
investing activities $ (6,936) $ (5,031)
</TABLE>
6
<PAGE> 7
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONTINUED
Three Months Ended March 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net borrowings under lines of credit $ 4,963 $ (42)
Payments of long-term debt (204) $ (204)
Exercise of stock options
and warrants 223 440
Cash dividends paid (855) (821)
Purchases of common stock - (2,613)
-------- --------
Net cash provided by (used in)
financing activities 4,127 (3,240)
-------- --------
Increase (decrease) in cash
and cash equivalents 409 (6,075)
Cash and cash equivalents at
beginning of year 8,779 17,768
-------- --------
Cash and cash equivalents at end
of quarter $ 9,188 $ 11,693
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 117 $ 97
Income taxes $ 68 $ 266
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
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 March 31, 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 registrant'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"). Investments in these ventures, except for PX, were made
subsequent to March 31, 1996. First quarter 1996 financial data for
these ventures has, therefore, been excluded from the table below. 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)
<TABLE>
<CAPTION>
Three Three
Months Ended Year Ended Months Ended
3/31/97 12/31/96 3/31/96
------- -------- -------
<S> <C> <C> <C>
Earnings
--------
Sales $50,177 $162,368 $ 11,728
Gross Profit $14,055 $ 34,312 $ 741
Net Earnings (Loss) $ (619) $ 5,552 (450)
Balance Sheet
-------------
Current Assets $78,215
Noncurrent Assets $34,011
Current Liabilities $60,241
Shareholders' Equity $51,098
</TABLE>
8
<PAGE> 9
Certain of the Company's joint venture investments had
deficits of $.3 million, $.4 million and $1.0 million, at
March 31, 1997, December 31, 1996 and March 31, 1996,
respectively. Such deficits have been classified as
reductions in Receivables from Affiliates.
At March 31, 1997, the Company's loans to certain of its joint
venture partners ("affiliates") totaled $7.8 million.
Sales made by joint ventures were to entities other than
members of the consolidated group. Sales totaling $7.7
million and $.1 million were made by the Company to Salton in
the three month periods ended March 31, 1997 and 1996,
respectively. Included in Receivables from Affiliates is $8.7
million in trade receivables due the Company from Salton.
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
The Board of Directors of the Company declared a regular
quarterly cash dividend of $.05 per share to shareholders of
record at the close of business on March 4, 1997, which was
paid on March 18, 1997. The payment of dividends is at the
discretion of the Board of Directors of the Company and will
depend upon, among other things, future earnings, capital
requirements, the Company's financial condition and such other
factors as the Board of Directors may consider.
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
On April 30, 1997, the Company entered into a Letter Agreement
with Salton pursuant to the Marketing Cooperation Agreement
included as part of the original Stock Purchase Agreement.
Under the terms of the Letter Agreement, Salton will pay the
Company a fee equal to 50-percent of the excess of net sales
over direct expenses of all White-Westinghouse products sold
by
9
<PAGE> 10
Salton to Kmart. Such fees are recorded 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.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended March 31, 1997 Compared to
Three Months Ended March 31, 1996
Net sales for the first quarter of 1997 increased by $11.0 million or 27.2%
over sales for the same period in 1996. The increase is primarily the result
of the inclusion of $7.6 million in seasonal product sales as a result of the
Company's December 1996 acquisition of the remainder of its seasonal products
joint venture and an increase of $3.5 million in manufacturing sales. Salton
and a discount retailer accounted for 15.1% and 10.7%, respectively, of total
sales for the 1997 period.
On April 30, 1997, the Company entered into a Letter Agreement with Salton
pursuant to the Marketing Cooperation Agreement included as part of the
original Stock Purchase Agreement. Under the terms of the Letter Agreement,
Salton will pay the Company a fee equal to 50-percent of the excess of net
sales over direct expenses of all White-Westinghouse products sold by Salton to
Kmart. Such fees are recorded as Sales and Other Revenues.
<TABLE>
<CAPTION>
COMPARATIVE SALES RESULTS
-------------------------
(In Thousands) Three Months Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C> <C> <C>
DISTRIBUTION $ 39,615 79.4% $ 32,092 79.4%
MANUFACTURING 11,797 20.6 8,348 20.6
------- ----- ------- ----
Total Sales $ 51,412 100.0% $ 40,440 100.0%
======= ===== ======= =====
</TABLE>
Selling, general and administrative costs increased to $9.7 million in the
first quarter of 1997 from $8.1 million in the first quarter of 1996, yet
decreased as a percentage of sales to 18.9% from 20.0% for the same periods.
The increase of $1.6 million is primarily the result of costs related to
LitterMaid, Inc., Bay Books & Tapes, Inc. and the now wholly owned seasonal
products company, whose operations were not reflected in the 1996 first quarter
financial statements.
Interest expense increased by $.5 million in the first quarter of 1997 as a
result of the amounts paid on notes payable 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 loss of joint ventures was $.5 million and $.2
million in the first quarter of 1997 and 1996, respectively. Included in 1997
are the results of operations of the Company's interests in Salton, New M-Tech
and various other ventures acquired subsequent to the first quarter of 1996.
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 19,286,000 in 1997, as compared to
11
<PAGE> 12
17,622,000 in 1996. 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.
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.
Liquidity & Capital Resources
At March 31, 1997, the Company's current ratio and quick ratio were 3.3 to 1
and 1.1 to 1 as compared to 8.6 to 1 and 2.8 to 1 for the first quarter of
1996. Working capital at those dates was $105.2 million and $122.9 million,
respectively.
Cash balances increased by $.4 million during the three months ended March 31,
1997. This increase is the net result of the excess of the $3.2 million
generated from operations over net expenditures for investing and financing
activities. Investing expenditures of $6.9 million consisted of additions to
property, plant and equipment and increases in receivables from affiliates.
The $4.1 million increase in financing activities is primarily the result of
additional borrowings used to settle the Izumi lawsuit.
Certain of 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 March
31, 1997, the subsidiaries were utilizing, including letters of credit,
approximately $3.2 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, of which $3.9 was outstanding as of March
31, 1997.
The Company has a $30.0 million line of credit from a domestic bank, secured
by domestic accounts receivable and inventory, which is scheduled for renewal
in July, 1997. At March 31, 1997, outstanding borrowings under this credit
line totaled $21.5 million.
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
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
12
<PAGE> 13
("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.
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 People's Republic, primarily consisting of inventory,
equipment and molds. The supply and cost of products manufactured in the PRC
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. 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 is up for renewal in July 1997.
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.
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.
13
<PAGE> 14
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
10 - Letter Agreement dated April 30, 1997 between the Company and
Salton/Maxim Housewares, Inc.
27 - Financial Data Schedule.
(b) There were no reports on Form 8-K filed for the three months
ended March 31, 1997.
14
<PAGE> 15
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)
May 13, 1997 By: /s/
------------------------------
Harry D. Schulman
Senior Vice President -
Finance and Administration and
Chief Financial Officer
(Duly authorized to sign on
behalf of the Registrant)
May 13, 1997 By: /s/
-----------------------------
Burton A. Honig
Vice President - Finance
(Duly authorized to sign on
behalf of the Registrant)
15
<PAGE> 1
EXHIBIT 10
LETTER AGREEMENT DATED APRIL 30, 1997 ("AGREEMENT")
BETWEEN
WINDMERE CORPORATION ("WINDMERE")
AND
SALTON/MAXIM HOUSEWARES, INC. ("SALTON")
WHEREAS, Windmere, with its main office in Miami Lakes, Florida, and Salton,
with its main office in Mt. Prospect, Illinois, have worked together to obtain
the benefits of significant sales of products under the White-Westinghouse
brand to Kmart Corporation ("Kmart"), and have signed a multi-year contract
between Salton and Kmart documenting said relationship.
WHEREAS, the distribution profits on the sales to Kmart of the
White-Westinghouse brand of appliances will all be received and recorded on the
books of Salton (the "White-Westinghouse Profits").
NOW, THEREFORE, following Kmart's execution of the aforesaid contract and in
consideration of Windmere's marketing cooperation efforts in connection with
the Company's supply contract with Kmart and Windmere's guarantee of the
Company's obligations under such contract, this Letter Agreement documents the
obligation of Salton to pay a fee as described herein to Windmere as
compensation for its efforts on Salton's behalf in obtaining said
White-Westinghouse Profits.
FEE: Salton shall pay Windmere a fee equal to 50% of the White-Westinghouse
profits (the "50% Fee"). The 50% Fee shall be paid within 60 days of the close
of each calendar quarter based on the transactions in said quarter, accompanied
by a sales report transmitted by facsimile, which will provide such sales
information and other data as Windmere may reasonably require to describe the
calculation of the 50% Fee.
For purposes of this Agreement, the "White-Westinghouse Profits" shall be
computed based on all White-Westinghouse sales (net of actual returns) to Kmart
less direct costs of sales and direct expenses, such as the Detroit office
selling expenses, inspection fees, warehousing costs, freight out, royalties
and cooperative advertising. Direct Expenses shall not include taxes whether
based on income or property, data processing and/or other selling, general and
administrative costs except those identified in the preceding sentence or
mutually agreed upon.
PAYMENT: Payment shall be by wire transfer to Windmere's bank account.
TERM: This Agreement shall not be cancelable during the term of that definitive
contract between Salton and Kmart, including any extensions or modifications
thereof. The term of this agreement shall coincide with the contract term as
specified in that said contract between Salton and Kmart.
JURISDICTION: This Agreement shall be interpreted under the laws of the State
of Florida.
Windmere Corporation Salton/Maxim Housewares, Inc.
/s/ /s/
------------------------- -----------------------------
By: Harry D. Schulman By: Leonhard Dreimann
Senior Vice President President
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATI0N EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WINDMERE-DURABLE HOLDINGS, INC. FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,188
<SECURITIES> 0
<RECEIVABLES> 33,564
<ALLOWANCES> 1,072
<INVENTORY> 85,045
<CURRENT-ASSETS> 152,010
<PP&E> 80,098
<DEPRECIATION> 46,959
<TOTAL-ASSETS> 233,896
<CURRENT-LIABILITIES> 46,770
<BONDS> 1,833
0
0
<COMMON> 1,748
<OTHER-SE> 165,532
<TOTAL-LIABILITY-AND-EQUITY> 233,896
<SALES> 51,412
<TOTAL-REVENUES> 51,412
<CGS> 40,593
<TOTAL-COSTS> 40,593
<OTHER-EXPENSES> 9,697
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 624
<INCOME-PRETAX> 485
<INCOME-TAX> 164
<INCOME-CONTINUING> 321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 321
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
