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UNITED STATES
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 PERIOD ENDED SEPTEMBER 28, 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 1-52
SUNBEAM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 25-1638266
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1615 SOUTH CONGRESS AVENUE 33445
SUITE 200 (ZIP CODE)
DELRAY BEACH, FLORIDA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(561) 243-2100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No| |
On October 15, 1997 there were 85,471,151 shares of the registrant's Common
Stock ($.01 par value) outstanding.
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<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT
ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited) for the three
and nine months ended Septembeer 29, 1996 and September 28, 1997 ........ 2
Condensed Consolidated Balance Sheets as of December 29, 1996 and
September 28, 1997 (Unaudited) ......................................... 3
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine
months ended September 29, 1996 and September 28, 1997 ................. 4
Notes to Condensed Consolidated Financial Statements (Unaudited) ......... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ...................................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .................................... 11
SIGNATURES ........................................................................... 12
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- --------------------------------
SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28,
1996 1997 1996 1997
--------------- --------------- --------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ....................................... $ 231,770 $289,033 $715,375 $ 830,092
Cost of goods sold .............................. 202,998 200,242 591,291 599,021
Selling, general and administrative expense ...... 49,441 33,863 120,080 98,430
--------- --------- -------- ---------
Operating earnings (loss) ........................ (20,669) 54,928 4,004 132,641
Interest expense and other net .................. 4,424 1,503 13,123 6,098
--------- --------- -------- ---------
Earnings (loss) from continuing operations
before income taxes ........................... (25,093) 53,425 (9,119) 126,543
Income taxes (benefit):
Current .......................................... (7,898) 17,136 (4,954) 11,430
Deferred ....................................... (1,425) 1,717 2,223 33,746
--------- --------- -------- ---------
(9,323) 18,853 (2,731) 45,176
--------- --------- -------- ---------
Earnings (loss) from continuing operations ...... (15,770) 34,572 (6,388) 81,367
Earnings (loss) from discontinued operations,
net of taxes .................................... (2,318) -- 12,866 (13,713)
--------- --------- -------- ---------
Net earnings (loss) .............................. $ (18,088) $ 34,572 $ 6,478 $ 67,654
========= ========= ======== =========
Net earnings (loss) per share of common
stock from continuing operations ............... $ (0.19) $ 0.39 $ (0.08) $ 0.93
========= ========= ======== =========
Net earnings (loss) per share of
common stock ................................. $ (0.22) $ 0.39 $ 0.08 $ 0.77
========= ========= ======== =========
Average number of common and common
equivalent shares outstanding .................. 83,578 88,233 83,793 87,884
Dividends declared per share of
common stock .................................... $ .01 $ .01 $ .03 $ .03
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 29, SEPTEMBER 28,
1996 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .......................................... $ 11,526 $ 22,811
Receivables, net ................................................... 213,438 309,095
Inventories ......................................................... 162,252 290,876
Net assets of discontinued operations and other assets held for sale 102,847 2,900
Deferred income taxes ............................................. 93,689 56,854
Prepaid expenses and other current assets ........................... 40,411 10,016
---------- ----------
Total current assets ............................................. 624,163 692,552
Property, plant and equipment, net ................................. 220,088 229,152
Trademarks and trade names, net .................................... 200,262 195,851
Other assets ......................................................... 28,196 27,516
---------- ----------
$1,072,709 $1,145,071
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt ............... $ 921 $ 668
Accounts payable ................................................... 107,319 132,686
Restructuring accrual ............................................. 63,834 20,068
Other current liabilities .......................................... 99,509 92,575
---------- ----------
Total current liabilities ....................................... 271,583 245,997
Long-term debt ...................................................... 201,115 199,855
Non-operating and other long-term liabilities ........................ 152,451 145,509
Deferred income taxes ................................................ 52,308 55,894
Shareholders' equity:
Common stock (issued 88,441,479 and 89,925,359 shares) ............ 884 899
Other shareholders' equity .......................................... 457,756 560,048
Treasury stock, at cost (4,478,814 and 4,460,485) .................. (63,388) (63,131)
---------- ----------
Total shareholders' equity ....................................... 395,252 497,816
---------- ----------
$1,072,709 $1,145,071
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------
SEPTEMBER 29, SEPTEMBER 28,
1996 1997
--------------- --------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings ................................................... $ 6,478 $ 67,654
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization ................................. 34,576 29,770
Loss on sale of discontinued operations, net of taxes ......... -- 13,713
Deferred income taxes .......................................... 2,223 33,746
Changes in working capital and other, including
restructuring spending ....................................... (62,045) (205,655)
--------- ----------
Net cash used in operating activities ........................ (18,768) (60,772)
--------- ----------
INVESTING ACTIVITIES:
Capital expenditures .......................................... (54,985) (40,124)
Proceeds from sale of divested operations and other assets ...... -- 90,922
--------- ----------
Net cash provided by (used in) investing activities ............ (54,985) 50,798
--------- ----------
FINANCING ACTIVITIES:
Net borrowings under revolving credit facility .................. 55,000 10,000
Issuance of long-term debt ....................................... 11,500 --
Payments of debt obligations .................................... (1,383) (11,882)
Proceeds from exercise of stock options ........................ 3,286 25,453
Sale of treasury stock .......................................... 4,437 --
Other ............................................................ (2,722) (2,312)
--------- ----------
Net cash provided by financing activities ..................... 70,118 21,259
--------- ----------
Net increase (decrease) in cash and cash equivalents ............ (3,635) 11,285
Cash and cash equivalents at beginning of period .................. 28,273 11,526
--------- ----------
Cash and cash equivalents at end of period ........................ $ 24,638 $ 22,811
========= ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. OPERATIONS AND BASIS OF PRESENTATION
Sunbeam Corporation (the "Company") is a leading designer, manufacturer,
and marketer of consumer branded products. The Sunbeam/registered trademark/ and
Oster/registered trademark/ brands have been household names for generations,
and the Company is a market share leader in many of its product categories.
The Company markets its products through virtually every category of
retailer including mass merchandisers, catalog showrooms, warehouse clubs,
department stores, catalogs, Company-owned outlet stores, television shopping
channels, hardware stores, home centers, drug and grocery stores, pet supply
retailers, as well as independent distributors and the military. The Company
also sells its products to commercial consumers such as hotels and other
institutions.
In the opinion of management, the unaudited condensed consolidated
financial statements furnished herein include all adjustments (consisting only
of normal recurring adjustments with the exception of the loss from discontinued
operations in the first quarter of 1997) necessary for a fair presentation of
the results of operations for the interim periods presented. These interim
results of operations are not necessarily indicative of results for the entire
year. Certain prior year amounts have been reclassified to reflect discontinued
operations as described in Note 4. The condensed consolidated financial
statements contained herein should be read in conjunction with the consolidated
financial statements and related notes contained in the Company's 1996 Annual
Report on Form 10-K ("Form 10-K").
2. SUPPLEMENTAL FINANCIAL STATEMENT DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 29, SEPTEMBER 28,
1996 1997
-------------- --------------
<S> <C> <C>
Inventories:
Finished goods ................................. $ 84,813 $ 179,573
Work in process ................................. 25,167 37,530
Raw materials and supplies ..................... 52,272 73,773
---------- ---------
$ 162,252 $ 290,876
========== =========
Property, plant and equipment:
Land .......................................... $ 2,524 $ 1,793
Buildings and improvements ..................... 95,619 86,602
Machinery and equipment ........................ 258,199 238,653
---------- ---------
356,342 327,048
Accumulated depreciation and amortization ...... (136,254) (97,896)
---------- ---------
$ 220,088 $ 229,152
========== =========
Trademarks and trade names:
Gross .......................................... $ 237,054 $ 237,054
Accumulated amortization ........................ (36,792) (41,203)
---------- ---------
$ 200,262 $ 195,851
========== =========
</TABLE>
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<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
2. SUPPLEMENTAL FINANCIAL STATEMENT DATA--(CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------
SEPTEMBER 29, SEPTEMBER 28,
1996 1997
--------------- --------------
<S> <C> <C>
Cash paid during the period for:
Interest, net of $350 and $559 interest capitalized in
1996 and 1997, respectively ........................ $8,249 $ 8,385
====== =========
Income tax refunds ................................. $ (540) $ (44,595)
====== =========
</TABLE>
Non-Cash Transaction:
In connection with a warehouse expansion, the Company entered into a $5.0
million capital lease obligation in 1996.
3. RESTRUCTURING
During the fourth quarter of 1996, the Company initiated a restructuring
and growth plan. As a result, the Company recorded a pre-tax special charge to
earnings of approximately $337.6 million in the fourth quarter of 1996 of which
approximately 20% was for cash items.
During the nine months ended September 28, 1997, the restructuring accrual
was reduced by $43.7 million as a result of cash and non-cash charges. The
following table sets forth the details and the cumulative activity in the
restructuring accrual as of September 28, 1997 (in millions):
<TABLE>
<CAPTION>
ACCRUAL BALANCE CASH NON-CASH ACCRUAL BALANCE
AT DECEMBER 29, 1996 REDUCTIONS REDUCTIONS AT SEPTEMBER 28, 1997
---------------------- ------------ ------------ ----------------------
<S> <C> <C> <C> <C>
Severance and other
employee costs ............ $ 36.9 $ (15.9) $ (5.5) $ 15.5
Closure and consolidation of
facilities and related exit
costs ..................... 26.9 (20.6) (1.7) 4.6
------- -------- ------ -------
Total ..................... $ 63.8 $ (36.5) $ (7.2) $ 20.1
======= ======== ====== =======
</TABLE>
4. DISCONTINUED OPERATIONS AND OTHER ASSETS HELD FOR SALE
In March 1997, the Company completed the sale of its furniture business (by
a sale of assets) to a subsidiary of U.S. Industries, Inc. The Company initially
recorded a provision for estimated losses to be incurred on the sale of the
furniture business of $32.4 million, net of applicable income tax benefits, for
the fiscal year ended December 29, 1996. During the first quarter of 1997, upon
the completion of the sale, the Company provided for additional losses on
disposal of the furniture business in the amount of $13.7 million, net of
applicable income tax benefits as a result of lower than anticipated sales
proceeds.
In March 1997, the Company completed the sale of its time and temperature
product line and in May 1997, the Company completed the sale of its Biddeford,
Maine textile facility to an employee led investment group.
-6-
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
5. CREDIT FACILITIES AND LONG-TERM DEBT
In July 1997, the Company reduced the amount of available borrowings under
its September 1996 unsecured five year revolving credit facility from $500
million to $250 million. At September 28, 1997, the Company had $115 million of
borrowings outstanding under the revolving credit facility. During 1997, the
Company also repaid $11.9 million of other long-term borrowings related to the
divested furniture operations and other assets sold.
6. EARNINGS PER SHARE
During the first quarter of 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings
Per Share", which supersedes Accounting Principles Board Opinion No. 15,
"Earnings Per Share". SFAS No. 128 is effective for financial statements for
both interim and annual periods after December 15, 1997. Early application is
prohibited; although, footnote disclosure of proforma earnings per share ("EPS")
amounts computed under SFAS No. 128 is permitted, as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- --------------------------------
SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28,
1996 1997 1996 1997
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Primary EPS as reported ............ (.22) .39 .08 .78
Effect of SFAS No. 128 ............ -- .02 -- .02
----- ---- ---- ---
Basic EPS as restated ............... (.22) .41 .08 .80
===== ==== ==== ===
Fully diluted EPS as reported ...... (.22) .39 .08 .77
Effect of SFAS No. 128 ............ -- -- -- .01
----- ---- ---- ---
Diluted EPS as restated ............ (.22) .39 .08 .78
===== ==== ==== ===
</TABLE>
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
accompanying condensed consolidated financial statements for the three and nine
months ended September 29, 1996 and September 28, 1997 and the 1996 Form 10-K.
RESULTS OF OPERATIONS
The table below sets forth selected operating data of the Company for the
three and nine months ended September 29, 1996 and September 28, 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- --------------------------------
SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28,
1996 1997 1996 1997
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Net sales ........................ 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ............... 87.6 69.3 82.7 72.2
---------- ------- ------- -------
Gross margin ..................... 12.4 30.7 17.3 27.8
Selling, general and administrative
expense .......................... 21.3 11.7 16.8 11.8
---------- ------- ------- -------
Operating earnings (loss).......... (8.9)% 19.0% 0.5% 16.0%
========== ======= ======= =======
</TABLE>
Net sales from continuing operations for the three and nine months ended
September 28, 1997, were $289.0 million and $830.1 million, respectively, an
increase of $57.3 million (24.7%) and an increase of $114.7 million (16.0%) over
the comparable periods in the prior year. Net sales on a normalized basis, after
excluding divested product lines which are not classified as discontinued
operations (time and temperature products, decorative bedding and
Counselor/registered trademark/ & Borg/registered trademark/ branded scales),
increased 28.3% and 19.4% for the three and nine months ended September 28,
1997, respectively.
Global sales, on a normalized basis, increased during the third quarter and
nine months ended September 28, 1997 in all five of the Company's product
categories (Appliances, Health Care, Personal Care and Comfort, Outdoor Cooking,
and Away From Home) primarily from new product introductions, improved
distribution (particularly with the Company's top ten customers), international
geographic expansion and improved price realization for certain products. Global
sales growth on a normalized basis exceeded 30% during the third quarter of 1997
in the Appliance and Personal Care and Comfort categories and sales grew over
26% in the Outdoor Cooking category. Sales for the third quarter of 1997 in the
Health at Home and Away From Home categories increased 13% and 2%, respectively.
For the nine months ended September 28, 1997, sales growth in excess of 20% on a
normalized basis was experienced in the Appliances (24%), Personal Care and
Comfort (31%) and Away From Home (22%) product categories while sales for
Outdoor Cooking and Health at Home products increased 10% and 6%, respectively.
Also contributing to the Company's sales growth in 1997 were its new retail
outlet stores, of which 18 were open by September 1997. International sales on a
normalized basis grew over 51% during the third quarter and 31% for the nine
months ended September 28, 1997, driven primarily by 50 new 220 volt product
introductions and the execution of 20 new international distribution and license
agreements during the past nine months. Domestic sales on a normalized basis
increased 24% during the third quarter and 17% for the nine months ended
September 28, 1997, primarily from new product introductions and the improved
distribution with the Company's top customers discussed above.
The gross margin percentage for the third quarter of 1997 increased 18.3
percentage points, to 30.7%, while the gross margin percentage for the first
nine months of 1997 increased 10.5 percentage points to 27.8%. These increases
reflect the results of many cost savings and margin enhancement initiatives
undertaken as part of the Company's restructuring plan announced in November
1996 coupled with the incremental margin attributable to new products and higher
revenues associated with the Company's growth plan. The Company's cost reduction
initiatives included reducing the number of manufacturing facilities from 26 to
9 currently (with one additional manufacturing facility scheduled to be closed
later in 1997).
-8-
<PAGE>
In addition, the Company has taken other actions to enhance margins, including
the elimination of low margin and/or unprofitable products/stock keeping units
(SKU'S) and the consolidation of the Company's purchasing activities and
re-negotiation of supply contracts resulting in procurement savings for raw
materials and products. The third quarter 1997 gross margin was also positively
impacted by improved product mix, including fewer sales of lower margin Outdoor
Cooking Products compared to the first half of 1997.
The Company has essentially completed its restructuring plan and initiated
a refinement program in the second quarter of 1997 targeted at aggressively
improving factory productivity at all of its remaining operations, including the
Neosho, Missouri Outdoor Cooking Products facility which suffered from poor
productivity and operating inefficiencies during the 1997 grill season. The
benefits of the refinement program began to favorably impact productivity in
several factories during the third quarter of 1997. The refinement of the Neosho
facility, which will be completed prior to the initiation of production for the
1998 grill season, includes a re-layout to improve material flow, increased
usage of common parts in the manufacturing process and modifications to the
paint system to increase capacity and throughput. These initiatives coupled with
the re-negotiation of customer contracts for the 1998 grill season are expected
to improve Outdoor Cooking gross margins in 1998.
Operating earnings for the quarter ended September 28, 1997 increased $75.6
million over the prior year to $54.9 million. For the nine months ended
September 28, 1997, operating earnings were $132.6 million, an increase of
$128.6 million over the comparable prior year period. As a percentage of sales,
the operating margin of 19.0% increased 27.9 percentage points above last year's
third quarter. For the nine month period of 1997, the operating margin was
16.0%, an increase of 15.5 percentage points over the comparable prior year
period. The operating margin improvements for 1997 were the result of the
improved gross margin discussed above and lower selling, general and
administrative ("SG&A") costs in 1997 associated with the consolidation of six
divisional and regional headquarters into one, reduced staffing levels, the
outsourcing of certain back-office functions and a reduction in the number of
warehouses. In addition, SG&A during the third quarter of 1996 included
compensation costs of $7.4 million associated with restricted stock awards and
other costs related to the employment of a new senior management team and bad
debt expense of $3.2 million associated with the bankruptcy filings of certain
of the Company's retail customers and the third quarter and nine months of 1997
included higher media advertising spending. The cost reduction initiatives and
one time items in 1996 coupled with increased sales in 1997 resulted in SG&A
decreasing as a percentage of sales from 21.3% and 16.8% for the three month and
nine month periods ended September 29, 1996 to 11.7% and 11.9% for the
comparable periods of 1997, respectively.
Interest expense and other, net decreased for the three and nine months
ended September 28, 1997 by $2.9 million and $7.0 million, respectively,
primarily as a result of lower borrowing levels in 1997 and higher foreign
exchange losses in 1996 associated with a Venezuelan currency devaluation.
The overall effective income tax rate (related to both earnings from
continuing and discontinued operations) for the nine months ended September 28,
1997 was 35.7%, a 1.3 percentage point decrease from the overall prior year
effective tax rate. This decrease reflects lower foreign taxes from the
utilization of foreign tax credits and loss carryforwards and lower state income
taxes.
For the three months ended September 28, 1997, the Company's earnings from
continuing operations were $34.6 million, an increase of $50.4 million over a
loss from continuing operations of $15.8 million in 1996. For the nine months
ended September 28, 1997 earnings from continuing operations increased $87.8
million to $81.4 million. Earnings per share from continuing operations for the
third quarter of 1997 of $.39 per share was $.58 per share better than the loss
of $.19 per share reported during the third quarter of 1996. On a year to date
basis, earnings per share from continuing operations of $.93 per share was $1.01
greater than the $.08 loss per share reported in the first nine months of 1996.
The Company's share base utilized in the earnings per share calculation
increased approximately 5% for both the three and nine month periods ended
September 28, 1997 as a result of an increase in the number of shares of common
stock and common stock equivalents outstanding due to exercises and grants of
stock options and a higher market value of the Company's common stock in 1997.
-9-
<PAGE>
The Company's discontinued furniture operations, which were sold in March
1997, reflect a net loss of $13.7 million in 1997 on revenues of $51.6 million.
In 1996, the discontinued furniture operations experienced a net loss of $2.3
million for the third quarter and net income of $12.8 million for the nine
months ended September 29, 1996, on revenues of $13.1 million and $215.3 million
for the three and nine months periods, respectively. During the first quarter of
1997, upon completion of the sale of the furniture business, the Company
provided for additional losses on the disposal in the amount of $13.7 million,
net of applicable tax benefits, as a result of lower than anticipated sales
proceeds. Including the operating results of the discontinued furniture business
and the additional loss provision on the disposal recorded in the first quarter
of 1997, the Company's net earnings for the nine months ended September 28, 1997
were $67.7 million, an increase of $61.2 million from the net earnings of $6.5
million in the first nine months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 28, 1997, the Company had cash and cash equivalents of $22.8
million and total debt of $200.5 million. Cash used in operating activities for
the nine months ended September 28, 1997 was $60.8 million compared to $18.8
million for the comparable period of 1996. This decrease is primarily
attributable to an increase in earnings before non-cash charges in 1997, offset
by higher accounts receivable due to increased sales in 1997, increased 1997
inventory levels necessary to support anticipated fourth quarter sales growth
and cash expenditures in 1997 under the Company's restructuring plan. In
addition, cash used in operating activities in 1997 was favorably impacted
by.higher income tax refunds due to the carryback of 1996 operating losses to
obtain refunds of prior year tax payments.
Capital spending totaled $40.1 million for the first nine months of 1997
and was primarily for new products, cost reduction and capacity expansion
initiatives. Cash provided by investing activities reflects $90.9 million in
proceeds from sales of businesses, assets, and product categories determined to
be non-core to the Company's ongoing operations in conjunction with the 1996
restructuring plan. Cash provided by financing activities totaled $21.3 million
in 1997 and reflects $10.0 million of borrowings under the Company's revolving
credit facility, $11.9 million of debt repayments related to the divested
furniture operations and other assets sold, and $25.5 million in cash proceeds
from the exercise of stock options in 1997, substantially all by former
employees of the Company. In 1996, cash provided by financing activities of
$70.1 million was primarily from increased borrowings to support working capital
and capital spending requirements. In July 1997, the Company reduced the amount
of available borrowings under its September 1996 unsecured five year revolving
credit facility from $500 million to $250 million.
The Company believes that its cash flow from operations, existing cash and
cash equivalent balances as well as its revolving credit facility will be
sufficient to finance its requirements to support working capital needs, capital
expenditures, restructuring expenditures and debt service in the foreseeable
future.
CAUTIONARY STATEMENTS
Certain of the information contained herein may contain "forward-looking"
information, as such term is defined by the Private Securities Litigation Reform
Act of 1995 and in releases made by the Securities and Exchange Commission
("SEC" ). Actual results could differ materially from those projected in the
forward-looking statements as a result of various factors, including those set
forth in Part 1, Item 1 under the heading "Cautionary Statements" in the 1996
Form 10-K, which cautionary statements are incorporated herein by reference.
-10-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
11 Calculation of Earnings Per Share of Common Stock.
27 Financial Data Schedule, submitted electronically to the Securities and
Exchange Commission for information only and not filed.
99.1 Press Release dated October 13, 1997, regarding 1997 new product
introductions.
99.2 Press Release dated October 22, 1997, regarding third quarter 1997
earnings.
99.3 Press Release dated October 23, 1997, announcing retention of Morgan
Stanley.
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K during the third quarter of
1997.
-11-
<PAGE>
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.
SUNBEAM CORPORATION
Date: October 24, 1997 By: /s/ RUSSELL A. KERSH
-----------------------------------
Russell A. Kersh
Executive Vice President, Finance
and Administration (Principal
Financial Officer and duly
authorized to sign on behalf of the
Registrant)
-12-
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- - ------- -----------
11 Calculation of Earnings Per Share of Common Stock.
27 Financial Data Schedule
99.1 Press Release dated October 13. 1997, regarding 1997 new product
introductions.
99.2 Press Release dated October 22, 1997, regarding third quarter 1997
third quater earnings.
99.3 Press Release dated October 23, 1997, announcing retention of Morgan
Stanley.
EXHIBIT 11
SUNBEAM CORPORATION AND SUBSIDIARIES
CALCULATIONS OF EARNINGS
PER SHARE OF COMMON STOCK
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- --------------------------------
SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28,
1996 1997 1996 1997
--------------- --------------- --------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net earnings (loss) applicable to
common shareholders ..................... $ (18,088) $34,572 $ 6,478 $67,654
========= ======== ======== ========
Weighted average number of
common shares outstanding ............... 83,578 85,283 82,543 84,762
Add:
Common shares issuable for exercise
of options, net of shares assumed to have
been acquired with proceeds
therefrom ........................... -- 2,950 1,250 3,122
--------- -------- -------- --------
Number of shares applicable to earnings
per share calculation .................. 83,578 88,233 83,793 87,884
========= ======== ======== ========
Earnings (loss) per share of common stock.. $ (.22) $ .39 $ .08 $ .77
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SUNBEAM CORPORATION FINANCIAL STATEMENTS FOR THE PERIOD
ENDED SEPTEMBER 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> DEC-30-1996
<CASH> 22,811
<SECURITIES> 0
<RECEIVABLES> 309,095
<ALLOWANCES> 0
<INVENTORY> 290,876
<CURRENT-ASSETS> 692,552
<PP&E> 327,048
<DEPRECIATION> 97,896
<TOTAL-ASSETS> 1,145,071
<CURRENT-LIABILITIES> 245,997
<BONDS> 199,855
0
0
<COMMON> 899
<OTHER-SE> 496,917
<TOTAL-LIABILITY-AND-EQUITY> 1,145,071
<SALES> 830,092
<TOTAL-REVENUES> 830,092
<CGS> 599,021
<TOTAL-COSTS> 599,021
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,098
<INCOME-PRETAX> 126,543
<INCOME-TAX> 45,176
<INCOME-CONTINUING> 81,367
<DISCONTINUED> (13,713)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,654
<EPS-PRIMARY> .78
<EPS-DILUTED> .77
</TABLE>
EXHBIT 99.1
[SUNBEAM LOGO]
FOR IMMEDIATE RELASE:
SUNBEAM WILL EXCEED NEW PRODUCTS
GOAL FOR 1997
DELRAY BEACH, FLORIDA OCTOBER 13, 1997 - Sunbeam Corporation (NYSE: SOC)
announced today that it will exceed its original goal for new product
introductions in 1997. "We originally set out to introduce 42 new international
products and 30 new U.S. products as a means to rapidly expand our international
breadth of product lines and to provide product differentiation within the U.S.
product lines", said Al Dunlap, Sunbeam's Chairman and Chief Executive Officer.
Mr. Dunlap continued, "As a result of our accelerated product development cycle
and our ability to rapidly commercialize U.S. products for international use, we
now expect to introduce 54 new international products and 35 new U.S. products
in 1997."
Mr. Dunlap said, "Our new product development process focuses on fixing chronic
consumer complaints and incorporates a tremendous amount of design concurrency
to aid in accelerating products to market. Additionally, all of our U.S. new
products are now designed for the global market and for ease of manufacturing."
The Company expects new products will contribute over $100 million in additional
revenue in 1997.
Last week in New York City, the Company unveiled two new highly differentiated
products, the Allergysmart/tm/ air purification and the Freshsource/tm/ water
purification products. Mr. Dunlap said, "These two new products represent the
very best of the "new" Sunbeam. We were able to bring these products to market
in eight months, from ideation to production, and they both solve the most
significant consumer complaints associated with current products in the
marketplace." Additionally, Mr. Dunlap discussed an arepa maker which was
introduced in Venezuela during the third quarter, "Arepa's are a food staple in
many parts of South and Central America, and we redesigned and modified our
current sandwich maker to dramaticallly reduce the amount of time needed to
prepare an arepa. Due to its success, we plan on introducing the arepa maker in
North America in 1998 to take advantage of ethnic food trends throughout the
United States."
Sunbeam Corporation is a leading consumer products company that designs,
manufactures and markets, nationally and internationally, a diverse portfolio of
brand name products. The Company's Sunbeam/r/ and Oster/r/ brands have been
household names for generations, both domestically and abroad, and the Company
is a market leader in many of its product categories.
*****************************
Contact: Media: Investors:
Nicole Reilly Rich Goudis
(212)885-0353 (561)243-2100
EXHIBIT 99.2
[SUMBEAM LOGO]
FOR IMMEDIATE RELEASE:
SUNBEAM ANNOUNCES SALES UP NEARLY 30%,
EPS OF $0.39 EXCEEDS CONSENSUS EXPECTATIONS
DELRAY BEACH, FLORIDA OCTOBER 22, 1997 - Sunbeam Corporation (NYSE:SOC)
announced today its third quarter 1997 results. Sales for the quarter were
$289.0 million, reflecting a 28.3% increase over the prior year period on a
comparable basis (excluding discontinued businesses and divested product lines).
Earnings per share from continuing operations of $0.39 were $0.58 ahead of the
loss of $0.19 reported in the third quarter of 1996. On a year to date basis,
revenue of $830.1 million was 19.4% above 1996, on a comparable basis, and
earnings per share from continuing operations of $0.93 was $1.01 above the loss
of $0.08 reported in 1996.
In making the announcement, Al Dunlap, Sunbeam's Chairman and Chief Executive
Officer, said, "I am very pleased that the rate of revenue growth has continued
to accelerate, concurrent with a dramatic expansion of operating margins. Our
commitment to reposition the Sunbeam(R) and Oster(R) brands, introduce new
innovative products, expand our international presence, improve customer service
levels and dramatically refine all operations has enabled the Company to
significantly expand operating margins to 19% during the third quarter." Mr.
Dunlap added, "In the past 15 months we have been able to turn around a great
old company that had lost its way, reposition it for tremendous profitable
growth and build a great management team that is focused on increasing
shareholder value."
Mr. Dunlap attributed the impressive third quarter sales results to strong
increases in all five of the Company's global business categories. International
sales were up 50.8% for the quarter, driven primarily by 50 new product
introductions and the signing of 20 new international distribution and license
agreements during the past twelve months. Domestic sales growth of 23.7% was
attributable to improved distribution and new product introductions. "Sales to
our top ten domestic customers were up over 30% in the third quarter, reflecting
our strategic initiative to significantly improve shipping performance and fill
out of stocks at retail," Mr. Dunlap said.
"The Company successfully began shipping 10 new U.S. products in the third
quarter led by our highly differentiated softserve ice-cream maker, the
redesigned Oster(R) blender and our entry into the deep fryer product line. We
now believe we will introduce 35 new U.S. products and 54 new international
products in 1997, well surpassing our original goal," said Mr. Dunlap. Included
in the 35 new U.S. products are the Freshsource(TM) water filter and
Allergysmart(TM) air cleaner products which the Company unveiled on October 8,
1997 and which will begin shipping during
<PAGE>
the fourth quarter.
On a reported basis, Sunbeam's sales for the third quarter and first nine months
of 1997 were up 24.7% and 16.0%, respectively because of accounting rules which
require that certain divested businesses (time & temperature products,
decorative bedding and Counselor(R) & Borg(R) branded scales) not be classified
as discontinued operations.
Mr. Dunlap added, "This is the first time in the Company's history that it has
consistently achieved double digit sales growth, each quarter, without an
acquisition."
Sunbeam Corporation is a leading consumer products company that designs,
manufactures and markets, nationally and internationally, a diverse portfolio of
brand name products. The Company's Sunbeam(R) and Oster(R) brands have been
household names for generations, both domestically and abroad, and the Company
is a market leader in many of its product categories.
CAUTIONARY STATEMENT: Statements contained in this press release, including
statements relating to the Company's expectations regarding anticipated
performance in the future, are all "forward looking statements" as such term is
defined in the Private Securities Litigation Reform Act of 1995. Actual results
could differ materially from the Company's statements regarding its
expectations, goals or projected results, due to various factors, including
those set forth in the Company's Cautionary Statements contained in its Form
10-K, filed with the Securities and Exchange Commission on March 31, 1997.
****************************************
Contact: Media: Investors:
Nicole Reilly Rich Goudis
(212)885-0353 Vice President Investor Relations
(561)243-2142
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except EPS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales $830.10 $715.40 $289.00 $231.80
Cost of goods sold 599.00 591.30 200.20 203.00
------- ------- -------- --------
Gross profit 231.10 124.10 88.80 28.80
% of sales 0.28% 0.17% 0.31% 0.12%
Selling, general & administrative expense 98.40 120.10 33.90 49.50
------- ------- -------- --------
Operating earnings 132.70 4.00 54.90 (20.70)
% of sales 0.16% 0.01% 0.19% (0.09)%
Interest expense and other, net 6.10 13.10 1.50 4.40
Earnings (loss) from continuing operations before
income taxes 126.60 (9.10) 53.40 (25.10)
Income taxes (benefit) 45.20 (2.70) 18.90 (9.30)
------- ------- -------- --------
Earnings (loss) from continuing operations 81.40 (6.40) 34.50 (15.80)
Earnings (loss) from discontinued operations, net of tax (13.70) 12.90 - (2.30)
------- ------- -------- --------
Net earnings (loss) $ 67.70 $ 6.50 $ 34.50 $ (18.10)
======= ======= ======== ========
Earnings (loss) per share from continuing operations $ 0.93 $ (0.08) $ 0.39 $ (0.19)
======= ======= ======== ========
Earnings (loss) per share $ 0.77 $ 0.08 $ 0.39 $ (0.22)
======= ======= ======== ========
Average number of common shares outstanding 87.88 83.79 88.23 83.58
</TABLE>
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
SEPTEMBER 28, DECEMBER 29,
1997 1996
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $22.8 $11.5
Receivables, net 309.1 213.4
Inventories 290.9 162.3
Net assets of discontinued operations
and other assets held for sale 2.9 102.8
Deferred income taxes 56.8 93.7
Prepaid expenses and other current assets 10.0 40.4
------------- ------------
Total current assets 692.5 624.1
Property, plant and equipment, net 229.2 220.1
Trademarks and trade names, net 195.9 200.3
Other assets 27.5 28.2
------------- ------------
$1,145.1 $1,072.7
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of
long-term debt $0.7 $0.9
Accounts payable 132.7 107.3
Restructuring accrual 20.1 63.8
Other current liabilities 92.5 99.5
------------- ------------
Total current liabilities 246.0 271.5
Long-term debt 199.9 201.1
Deferred income taxes 55.9 52.3
Non-operating and other long-term liabilities 145.5 152.5
Shareholders' equity 497.8 395.3
------------- ------------
$1,145.1 $1,072.7
============= ============
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in millions)
NINE MONTHS ENDED
-----------------------------------
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
OPERATING ACTIVITIES
Net earnings $67.7 $6.5
Depreciation and amortization 29.8 34.6
Deferred income taxes 33.7 2.2
Loss on sale of discontinued operations,
net of taxes 13.7 -
Changes in working capital and other,
including restructuring spending (205.7) (62.1)
------------- -------------
(60.8) (18.8)
INVESTING ACTIVITIES
Capital expenditures (40.1) (55.0)
Proceeds from sale of divested
operations and other assets 90.9 -
------------- -------------
50.8 (55.0)
------------- -------------
FINANCING ACTIVITIES
Net borrowings under revolving
credit facility 10.0 55.0
Issuance of long-term debt - 11.5
Payment of debt obligations (11.5) (1.4)
Proceeds from exercise of stock option 25.5 3.3
Sale of treasury stock - 4.4
Other (2.7) (2.7)
------------- -------------
21.3 70.1
------------- -------------
Net increase (decrease) in cash and
cash equivalents 11.3 (3.7)
Cash and cash equivalents, beginning
of period 11.5 28.3
------------- -------------
Cash and cash equivalents, end
of period $22.8 $24.6
============= =============
EXHIBIT 99.3
FOR IMMEDIATE RELEASE
SUNBEAM CORPORATION RETAINS MORGAN STANLEY
TO EXPLORE ALTERNATIVES
Delray Beach, FL, (October 23, 1997) -- Sunbeam Corporation (NYSE:SOC)
announced today that it has retained the firm of Morgan Stanley & Co.
Incorporated to serve as its financial advisor in exploring strategic
alternatives for the Company.
Albert J. Dunlap, Sunbeam's Chairman, stated: "I have always been a
strong proponent of maximizing shareholder value at Sunbeam, as well as at the
other companies which I have headed. Yesterday we released third quarter
earnings which reflect solid achievement in the fifteen months since our new
management team began the task of turning around the Company. Having
successfully completed the turnaround of Sunbeam and being well on our way to
dramatically growing the business, we feel that the timing now is right to look
towards achieving the next level of value for our shareholders. As I have said
on numerous occasions, we will pursue whatever course serves best to enhance
shareholder value, including acquisitions, mergers or possibly a sale of the
Company. We have been approached by a number of investment bankers with
suggestions as to various courses of action which we should consider pursuing.
Our Board felt that it was time to really focus our efforts by formally engaging
a single investment banking advisor. We have worked over the years with all the
major investment bankers, and we felt that for this particular assignment,
Morgan Stanley would do the best job for Sunbeam and its shareholders. We are
also pleased to be working with the Llama Company and its President, Alice
Walton, as an advisor to Morgan Stanley, in exploring all opportunities
available to Sunbeam."
Mr. Dunlap added: "We are doing what any similarly situated company
should do, which is to explore all alternatives for the benefit of our
shareholders. I wish to stress that we are actively pursuing all alternatives
and are open to any and all types of transactions. There is, of course, no
assurance as to the particular type of transaction that could occur or that any
<PAGE>
transaction will occur at all."
Sunbeam Corporation is a leading consumer products company that
designs, manufactures and markets, nationally and internationally, a diverse
portfolio of brand name consumer products. The Company's Sunbeam/registered
trademark/ and Oster/registered trademark/ brands have been household names for
generations, both domestically and abroad, and the Company is a market leader in
many of its product categories.
# # #
Contact: Media: Investor Relations:
Nicole Reilly Rich Goudis
(212) 885 0353 Vice President, Investor Relations
Pager 1-888-899-9629 SUNBEAM CORPORATION
(561) 243-2100
