SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
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 No. 1-7117
General Housewares Corp.
(Exact name of Registrant as specified in its Charter)
Delaware 41-0919772
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1536 Beech Street 47804
Terre Haute, Indiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (812) 232-1000
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
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
Indicate the number of shares outstanding of each of the
Registrant's classes of Common Stock as of the latest practicable
date.
Class of Common Stock Outstanding at May 14, 1996
$.33-1/3 Par Value 4,037,440
PART I FINANCIAL INFORMATION
GENERAL HOUSEWARES CORP. & SUBSIDIARIES
(Dollars in thousands except per share amounts)
Consolidated Condensed Statement of Income and Retained Earnings
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
For the three months
ended March 31,
1996 1995
Net Sales $24,602 $27,361
Cost of goods sold 16,963 17,668
------- -------
Gross profit 7,639 9,693
Selling, general and administrative
expenses 10,747 8,677
------- -------
Operating income (loss) (3,108) 1,016
Interest Expense, net 672 656
------- -------
Income (loss) from operations before
income taxes (3,780) 360
Income taxes (1,551) 148
------- -------
Net income (loss) for the period (2,229) 212
Retained earnings, beginning of period 31,119 30,029
Less: Dividends ($.08 per common share in
1996 and 1995) 300 299
------- -------
Retained earnings, end of period $28,590 $29,942
======= =======
Earnings per common share:
Net income (loss) ($0.59) $0.06
======= =======
</TABLE>
See notes to consolidated condensed financial statement.
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<S> <C> <C>
As of
March 31, December 31,
1996 1995
(Unaudited)
----------- -----------
ASSETS
Current assets:
Cash $ 25 $ 3,414
Accounts receivable, less allowances of
$3,301 ($4,029 in 1995) 14,807 16,152
Inventories 20,643 26,867
Deferred tax asset 2,705 2,743
Other current assets 311 661
Income taxes refundable 1,358 -
----------- ----------
Total current assets 39,849 49,837
Property, plant and equipment, net 13,066 14,613
Other assets 6,074 7,565
Assets held for sale 4,358 -
Patents and other intangible
assets 3,724 3,830
Cost in excess of net assets
acquired 28,412 28,765
----------- ----------
$95,483 $104,610
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term debt and notes payable $ 4,000 $ 12,000
Current maturities of
long term debt 2,170 2,163
Accounts payable 4,186 3,579
Salaries, wages and related
benefits 3,335 2,487
Accrued liabilities 3,311 1,957
Income taxes payable - 1,312
----------- ----------
Total current liabilities 17,002 23,498
Long term debt 24,815 25,038
Deferred liabilities 4,253 4,226
Stockholders' equity:
Preferred stock - $1.00 par value:
Authorized - 1,000,000 shares
Common stock - $.33-1/3 par value:
Authorized - 10,000,000 shares
Outstanding - 1996 - 4,045,188
and 1995 - 3,988,486 shares. 1,351 1,347
Capital in excess of par value 23,633 23,528
Treasury stock at cost - 1996 and
1995 - 277,760 shares (3,649) (3,649)
Retained earnings 28,590 31,119
Cumulative translation adjustment (54) (39)
Minimum pension liability (458) (458)
----------- ----------
Total stockholders' equity 49,413 51,848
----------- ----------
$95,483 $104,610
=========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<S> <C> <C>
For the three months
ended March 31,
1996 1995
-------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($2,229) $ 212
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities -
Depreciation and amortization 1,352 1,190
Foreign exchange loss - 7
Compensation related to stock awards 27 15
Decrease (increase) in operating assets:
Accounts receivable 1,344 652
Inventory 3,605 (3,895)
Other assets 594 343
Increase (decrease) in operating liabilities:
Accounts payable 609 603
Salaries, wages and related benefits,
accrued and deferred liabilities 2,293 1,049
Income taxes payable (refundable) (2,668) (913)
-------- -------
Net cash provided by (used for)
operating activities: 4,928 (737)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant
and equipment (1,084) (823)
Proceeds from sale of assets 1,205 -
-------- -------
Net cash provided by (used for)
investing activities 121 (823)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of deferred obligation - (2,382)
Debt (repayment) borrowing (8,216) 1,210
Proceeds from stock options and
employee purchases 82 221
Dividends paid (300) (299)
-------- -------
Net cash used for financing
activities (8,434) (1,250)
-------- -------
Net decrease in cash and
cash equivalents (3,386) (2,810)
Cash and cash equivalents at
beginning of period 3,414 2,993
Effect of exchange rate on cash (3) 6
-------- -------
Cash and cash equivalents at end
of period $25 $189
======== =======
</TABLE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands)
NOTE 1 - GENERAL
The accompanying interim Consolidated Condensed Financial
Statements have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations.
However, in the opinion of management, the financial statements
included herein reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the
financial information for the periods presented. The
Consolidated Condensed Financial Statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's 1994 Annual Report on Form
10-K.
NOTE 2 - INVENTORIES
<TABLE>
<S> <C> <C>
March 31, December 31,
1996 1995
Raw materials $ 3,213 $ 4,635
Work in process 1,223 2,884
Finished goods 17,400 21,417
------- -------
21,836 28,936
LIFO Reserve (1,193) (2,069)
------- -------
Total, net $20,643 $26,867
======= =======
</TABLE>
NOTE 3 - PROPERTIES
<TABLE>
<S> <C> <C>
March 31, December 31,
1996 1995
--------- ------------
Land $ 641 $ 684
Buildings 3,639 4,378
Equipment 24,932 30,795
--------- ------------
Total 29,212 35,857
Depreciation (16,146) (21,244)
--------- ------------
Total, net $13,066 $14,613
========= ============
</TABLE>
NOTE 4 - RESTRUCTURING AND OTHER SPECIAL CHARGES
During the first quarter of 1996, management decided to
divest the Company's cast iron and cast aluminum cookware
businesses (Sidney Division) as well as proceed with other
restructuring efforts. On May 2, 1996, the Company reached an
agreement in principal to sell the assets of its Sidney Division.
The agreement, which is subject to financing and certain
approvals, calls for the sale to be completed on or before June
30, 1996. Costs related to exiting the businesses were recorded
in the first quarter of 1996. In addition, costs related to
closing three under-performing manufacturer's retail outlet
stores and several charges related to a realignment of sales,
marketing and administrative staff were recorded in the first
quarter of 1996. The components of those items qualifying as
restructuring costs under EITF 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit and
Activity (including Certain Costs Incurred in a Restructuring)",
as well as quantification of other special charges are as
follows:
<TABLE>
<S> <C> <C>
Income Statement
Item Classification Amount
- - ----- ---------------- --------
Facility Write-down S,G & A $ 205
Pension Curtailment S,G & A 400
Product Returns S,G & A 200
Retail Store Closings S,G & A 491
LIFO Reversal Cost of Sales (1,328)
Inventory Write-down Cost of Sales 400
Other Special Charges
(Primarily Severance and
Relocation) S,G & A 820
</TABLE>
Revenues generated by the cast iron and cast aluminum businesses
were $2,557 for the three months ended March 31, 1996 as compared
to $4,290 for the same three month period in 1995. Net operating
losses (including advertising, warehousing and direct marketing
expenses but prior to the allocation of corporate overhead) were
$651 for the three month period ended March 31, 1996. Net
operating income calculated on a comparative basis for the same
period in 1995 was $296. Revenues and operating losses related
to the retail stores to be closed are not significant to the
overall operations of the Company.
NOTE 5 - LOAN COVENANTS
Terms of the Company's Bank Credit Agreement and Senior Notes
Agreement require that the Company maintain certain minimum
financial ratios. As a result of reported financial results in
the first quarter of 1996, the Company was not in compliance with
a fixed charge coverage ratio relative to both the Bank Credit
Agreement and Senior Notes Agreement as of March 31, 1996. The
non-compliance related to the Bank Credit Agreement was waived as
of the balance sheet date. Amounts outstanding under the bank
credit agreement have been classified as a current liability as
of March 31, 1996 as the Company intends to repay such
outstanding amounts from current working capital and the proceeds
from the sale of assets disclosed in Note 4. The holders of the
Senior Notes also waived the non-compliance as of March 31, 1996
and have agreed to ammend the terms of the Senior Notes related
to the fixed charge coverage ratio going forward. Accordingly,
the Senior Notes have been classified as non-current at March 31,
1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(In thousands)
Referring to the Company's financial condition as of March 31,
1996 as contrasted with December 31, 1995, inventories, accounts
receivable, other assets and current liabilities all decreased.
Despite first quarter sales below prior year and planned levels,
inventories decreased due to successful inventory reduction
initiatives resulting from the Company's continued emphasis on
supply chain management. These initiatives include the
development of timely and accurate sales forecasts which enable
more sophisticated management of production and purchasing
schedules as well as the proactive identification and liquidation
of excess and obsolete inventory. The decrease in accounts
receivable is reflective of the Company's seasonality. Other
assets were reduced by the sale of a non-operating facility that
the Company retained as part of the sale of its giftware division
in 1989. The sale of this facility and the announcement during
the first quarter of the Company's intention to divest the cast
iron and cast aluminum businesses are primary examples of the
Company's strategic goal of concentrating on solid growth, high
potential, operating activities. During the first three months
of 1996, the Company was able to reduce short-term debt by
$8,000. The repayments were funded primarily by a reduction in
inventories, accounts receivable and other assets.
Net sales for the three month period ended March 31, 1996 were
$24,602, a decrease of 10% as compared to net sales for the same
period in 1995. Lower than anticipated sell-through in the
housewares retail sector in the fourth quarter of 1995 led to a
reduction, as compared to the prior year, in customer purchasing
activity during the first quarter of 1996. Also contributing to
the sales slowdown was weakness in the Company's cast aluminum
product line related to the line's reduction in emphasis by a
major customer. First quarter 1996 gross profit decreased $2,054
or 4.3% from the first quarter of 1995. Of this decrease, $930
is attributed to the decreased sales volume and $415 is due to
the liquidation of excess and obsolete inventory at reduced
margins. Unfavorable manufacturing variances resulting from the
reduced sales activity and the inventory reduction program in the
first quarter of 1996 were partially offset by a favorable
reversal of LIFO reserves resulting from the Company's decision
to exit the cast iron and cast aluminum businesses.
Selling, general and administrative expenses for the three month
period ended March 31, 1996 were $10,747 as compared to $8,677
for the same period in 1995. Of this increase, $1,075 is
directly related to the pending sale of the cast iron and cast
aluminum businesses and includes a write-down of the operating
facility based on the expected sale price, expenses associated
with an anticipated pension curtailment and future warranty costs
to be covered by the Company among other costs related to the
exit. Strategic initiatives in conjunction with the divestiture
of the cast iron and cast aluminum businesses were also made in
the first quarter of 1996. These initiatives included a
realignment of sales, marketing and administrative staff to focus
efforts on the Company's high growth and high potential
businesses resulting in $660 of additional first quarter 1996
charges and $491 of expenses recorded in the first three months
of 1996 to cover the cost of closing three under-performing
manufacturer's retail outlet stores operated by the Company. On
a comparable basis, without the aforementioned unusual items,
first quarter 1996 selling, general and administrative expenses
decreased by approximately $165 to $8,512. As a percentage of
sales, the resulting increase over the prior year is primarily
due to the substantial amount of fixed selling, general and
administrative expenses and their relation to a lower sales base.
The operating loss for the first three months of 1996 was $3,108
as compared to operating income of $1,016 for the same period in
1995. Interest expense for the first quarter of 1996 was $656 as
compared to $672 for the same period in 1995. The net loss of
$2,229 in the first quarter of 1996 represents a $2,588 decrease
from net income of $212 in 1995. Related quarterly earnings
(loss) per share dropped from $.06 for the three months ended
March 31, 1995 to ($.59) in the same period of 1996.
Restructuring
Included in the first quarter charges that qualify as
restructuring costs under EITF 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)",
are certain charges related to the sale of the cast iron and cast
aluminum businesses along with the planned closing of three
manufacturer's retail outlet stores. The makeup of the costs are
detailed above. While future cash outlays will be required for
the retail store closings, the Company is not able to estimate
the period in which the cash disbursements will be made. The
disbursements, when made, will be funded by the Company's
operations and/or the Company's operating line of credit.
By exiting the cast aluminum and cast iron businesses, the
Company anticipates an improvement in operating income. The
operating income improvement will be partially realized in 1996
during the second half of the year as the sale of the iron and
aluminum businesses will be finalized by June 30, 1996. The
impact of closing the manufacturer's retail outlet stores will
not be significant to the Company's overall financial
performance. The Company will realize positive cash flow from
the sale of the iron and aluminum businesses and the closure of
the manufacturer's retail outlet stores during 1996 due to the
sale of related assets and cessation of capital expenditures.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
11a. Primary Earnings Per Share
Reports on Form 8-K - There were no reports on Form 8-K
filed for the three months ended March 31, 1996.
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.
GENERAL HOUSEWARES CORP.
Dated: May 15, 1996 By /s/ Robert L. Gray
Robert L. Gray
Vice President Finance
and Treasurer
By /s/ Mark S. Scales
Mark S. Scales
Corporate Controller
Chief Accounting Officer
EXHIBIT 11
COMPUTATION OF PRIMARY EARNINGS PER SHARE
<TABLE>
<S> <C> <C>
For the three months
ended March 31,
1996 1995
--------- ---------
Net income ($ 2,229) $ 212
Shares:
Weighted average number of shares of
common stock outstanding 3,761,315 3,735,362
Shares assumed issued (less shares
assumed purchased for treasury) on
stock option agreements 3,615 36,599
Rounding 39 (416)
--------- ---------
3,765,000 3,772,000
========= =========
Net Income per Common Share ($0.59) $0.06
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> 0
</LEGEND>
<CIK> 0000040643
<NAME> 0
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 18,108
<ALLOWANCES> 3,301
<INVENTORY> 20,643
<CURRENT-ASSETS> 39,849
<PP&E> 29,212
<DEPRECIATION> 16,146
<TOTAL-ASSETS> 95,483
<CURRENT-LIABILITIES> 17,002
<BONDS> 0
<COMMON> 1,351
0
0
<OTHER-SE> 48,062
<TOTAL-LIABILITY-AND-EQUITY> 95,483
<SALES> 24,602
<TOTAL-REVENUES> 24,602
<CGS> 16,963
<TOTAL-COSTS> 16,963
<OTHER-EXPENSES> 10,747
<LOSS-PROVISION> 76
<INTEREST-EXPENSE> 672
<INCOME-PRETAX> (3,780)
<INCOME-TAX> (1,551)
<INCOME-CONTINUING> (2,229)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,229)
<EPS-PRIMARY> (.59)
<EPS-DILUTED> (.59)
</TABLE>
