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 quarter 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 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 9, 1997
$.33-1/3 Par Value 3,814,110
GENERAL HOUSEWARES CORP.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Condensed Statements of Income and Retained Earnings
Three months ended March 31, 1997 and1996
Consolidated Condensed Balance Sheets
March 31, 1997 and December 31, 1996
Consolidated Condensed Statements of Cash Flows
Three months ended March 31, 1997 and 1996
Notes to Consolidated Condensed Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
SIGNATURES
PART I FINANCIAL INFORMATION
GENERAL HOUSEWARES CORP. & SUBSIDIARIES
(Dollars in thousands except per share amounts)
Consolidated Condensed Statement of Income and Retained Earnings (UNAUDITED)
For the three months
ended March 31
1997 1996
Net Sales $20,875 $24,602
Cost of goods sold 12,270 16,963
Gross profit 8,605 7,639
Selling, general and
administrative expenses 9,095 10,747
Operating loss (490) (3,108)
Interest expense, net 595 672
Loss from operations before
income taxes (1,085) (3,780)
Income taxes ( 391) (1,551)
Net loss for the period ( 694) (2,229)
Retained earnings, beginning of period 27,279 31,119
Less: Dividends ($.08 per common share
in 1997 and 1996) 304 300
Retained earnings, end of period $26,281 $28,590
Earnings per common share:
Net loss ($0.18) ($0.59)
See notes to consolidated condensed financial statement.
CONSOLIDATED CONDENSED BALANCE SHEET
As of
March 31, December 31,
1997 1996
(UNAUDITED)
ASSETS
Current Assets:
Cash $ 2,926 $ 1,981
Accounts receivable, less
allowances of $2,132
($3,575 in 1996) 11,992 15,823
Inventories 20,640 18,513
Deferred tax asset 3,831 3,831
Other current assets 1,011 932
Income taxes refundable 385 ---
Total current assets 40,785 41,080
Note receivable 2,645 2,707
Property, plant and
equipment, net 13,096 13,420
Other assets 6,242 6,479
Patents and other intangible
assets 4,089 4,195
Cost in excess of net assets
acquired 27,041 27,398
$93,898 $95,279
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of
long term debt $ 2,190 $ 2,190
Notes payable 500 ---
Accounts payable 3,064 3,932
Salaries, wages and related
benefits 1,562 1,671
Accrued liabilities 3,801 3,288
Income taxes payable --- 379
Total current liabilities 11,117 11,460
Long term debt 30,453 30,575
Deferred liabilities 4,809 4,754
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 - 1997 - 4,101,848
and 1996 - 4,080,736 shares. 1,363 1,361
Capital in excess of par value 24,054 23,976
Treasury stock at cost - 1997 and
1996 - 277,760 shares (3,649) (3,649)
Retained earnings 26,287 27,279
Cumulative translation
adjustment (154) (95)
Minimum pension liability (382) (382)
Total stockholders' equity 47,519 48,490
$93,898 $95,279
See notes to consolidated condensed financial statements.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the three months
ended March 31,
1997 1996
OPERATING ACTIVITIES:
Net loss ($694) ($2,229)
Adjustments to reconcile net loss
to net cash provided by
operating activities -
Depreciation and amortization 1,630 1,352
Foreign exchange loss (6) ---
Compensation related to stock awards --- 27
Decrease (increase) in operating assets:
Accounts receivable 3,822 1,344
Inventory (2,140) 3,605
Other assets (233) 594
Increase (decrease) in operating liabilities:
Accounts payable (863) 609
Salaries, wages and related benefits,
accrued and deferred liabilities 427 2,293
Income taxes payable (refundable) (724) (2,668)
Net cash provided by
operating activity 1,219 4,927
INVESTING ACTIVITIES:
Additions to property, plant
and equipment (606) (1,084)
Proceeds from sale of assets --- 1,205
Net cash (used for) provided by
investing activities (606) 121
FINANCING ACTIVITIES:
Debt borrowing (repayment) 385 (8,216)
Note receivable activity 187 ----
Proceeds from stock options and
employee purchases 80 82
Dividends paid (304) (300)
Net cash provided by (used for)
financing activities 348 (8,434)
Net increase (decrease) in cash
and cash equivalents 961 (3,386)
Cash and cash equivalents at
beginning of period 1,981 3,414
Effect of exchange rate on cash (16) (3)
Cash and cash equivalents at end
of period $ 2,926 $ 25
See notes to consolidated condensed financial statements.
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 1996
Annual Report on Form 10K.
NOTE 2 - INVENTORIES
March 31, December 31,
1997 1996
Raw materials $ 3,417 $ 2,873
Work in process 1,027 953
Finished goods 16,845 15,629
21,289 19,455
LIFO Reserve (649) (942)
Total, net $20,640 $18,513
NOTE 3 - PROPERTIES
March 31, December 31,
1997 1996
Land $ 648 $ 648
Buildings 6,899 6,890
Equipment 24,088 23,519
Total 31,635 31,057
Depreciation (18,539) (17,637)
Total, net $13,096 $13,420
NOTE 4 - LOAN COVENANTS
Terms of the Company's Bank Credit Agreement and Senior Notes
Agreement require that the Company maintain certain minimum
financial ratios. The Company was not in compliance with a
fixed charges coverage ratio relative to the Bank Credit
Agreement as of March 31, 1997 and the Company believes it is
likely that it will not be in compliance with the fixed charges
coverage ratios and dividend tests related to both the Bank
Credit Agreement and Senior Notes as of the next measurement
date. A waiver of the non-compliance and conditional waiver of
the expected noncompliance extending through the next
measurement date have been obtained for both the Bank Credit
Agreement and the Senior Notes. The Company expects that no
such further waivers will be required in subsequent quarters.
NOTE 5 - EARNINGS PER SHARE
The Company will adopt Statement of Financial Accounting Standards No. 128
"Earnings per Share" (SFAS No. 128) effective December 31, 1997. SFAS No.
128 requires presentation of "Basic" and "Diluted" earnings per share rather
than "Primary" and "Fully Diluted" earnings per share for companies with
complex capital structures. The Company does not anticipate a material
change in earnings per share as a result of adopting SFAS No. 128.
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,
1997, as contrasted with December 31, 1996, inventories
increased while accounts receivable decreased. The increase in
inventories over year-end 1996 is a result of seasonal
inventory build and first quarter sales below planned levels.
The decrease in accounts receivable is also a result of sales
below planned levels as well as the Company's seasonality in
operations.
Net sales for the three month period ended March 31, 1997 were
$20,875, a decrease of 15% as compared to net sales for the
same period in 1996. Contributing to the sales decline was the
third quarter 1996 divestiture of the Company's cast iron
cookware division (Sidney Division) and the Company's stamped
and spun aluminum division which accounted for approximately
$3.0 million of the first quarter 1996 net sales (accounts for
12% of the overall 15% sales decline). In addition, reduced
sell-through at the retail level and more restrictive inventory
management programs at certain retailers combined to reduce
sales of the Company's cutlery and cookware products.
Partially offsetting these declines was the continued growth of
the Company's kitchen and household tool product line. First
quarter 1997 gross profit increased $966 or 12.6% from the
first quarter of 1996. Gross profit as a percent of sales
increased from 31.1% in the first quarter of 1996 to 41.2% in
the first quarter of 1997. The increase is primarily a result
of the favorable change in sales mix from the divested Sidney
Division lines to the kitchen/household tool lines. In
addition, the divested Sidney Division and an inventory
reduction program spurred substantial unfavorable manufacturing
variances in the first quarter of 1996.
Selling, general and administrative expenses for the three
month period ended March 31, 1997, were $9,095 as compared to
$10,747 for the same period in 1996. Of this decline, $1,075
is directly related to accruals established in the first
quarter of 1996 related to the pending sale of the Sidney
Division including write-down of the net book value of the
operating facility based on the expected sale price, expenses
associated with a 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 Sidney Division 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
1997 selling, general and administrative expenses increased by
approximately $575 over the comparable period in 1996. The
increase is due primarily to investments in customer service
initiatives (including warehouse improvements and information
systems upgrades) and the building of brand equity in certain
product lines.
The operating loss for the first three months of 1997 was $490
as compared to a loss of $3,108 for the same period in 1996.
Interest expense for the first quarter of 1997 was $595 as
compared to $672 for the same period in 1996. The reduction in
interest expense is due primarily to working capital reductions
from the first quarter of 1996. The net loss of $694 in the
first quarter of 1997 represents a $1,535 improvement over the
net loss of $2,229 in 1996. Related quarterly loss per share
improved from $.59 for the three months ended March 31, 1996 to
$.18 in the same period of 1997.
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, 1997.
EXHIBIT 11
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(Dollars in thousands except per share amounts)
For the three months
ended March 31,
1997 1996
Net income ($694) ($2,229)
Shares:
Weighted average number of shares of
common stock outstanding 3,804,085 3,761,315
Shares assumed issued (less shares
assumed purchased for treasury) on
stock option agreements 2,559 3,615
Rounding 356 70
3,807,000 3,765,000
Net Income per Common Share ($0.18) ($0.59)
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 9, 1997 /s/ Robert L. Gray
Vice President Corporate
Development, Chief Financial
Officer and Treasurer
/s/ Mark S. Scales
Vice President Corporate Controller
Chief Accounting Officer
EXHIBIT 11
COMPUTATION OF PRIMARY EARNINGS PER SHARE
<TABLE>
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For the three months
ended March 31, 1997
1997 1996
Net (loss) income ($694) ($2,229)
Shares:
Weighted average number of shares
of common stock outstanding 3,804,085 3,761,315
Shares assumed issued (less
shares purchased for
treasury) on stock option
agreements 2,559 2,559
Rounding 356 70
3,807,000 3,765,000
Net (loss) income per Common Share $(0.18) $(0.59)
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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