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 quarterly period ended July 31, 1999
Commission file number 1-5452
ONEIDA LTD.
(Exact name of Registrant as specified in its charter)
NEW YORK 15-0405700
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
ONEIDA, NEW YORK 13421
(Address of principal executive offices) (Zip code)
(315) 361-3636
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), 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 issuer's classes of
common stock as of September 3, 1999: 16,714,055.
<PAGE>
ONEIDA LTD.
FORM 10-Q
FOR THE THREE MONTHS ENDED July 31, 1999
INDEX
PART I FINANCIAL INFORMATION
Consolidated Statement of Operations / 1
Consolidated Balance Sheet / 2
Consolidated Statement of Changes in Stockholders' Equity / 4
Consolidated Statement of Cash Flows / 6
Notes to Consolidated Financial Statements / 7
Management's Discussion and Analysis of Financial Condition and Results
of Operations / 9
PART II OTHER INFORMATION
No other information required to be filed for this quarter.
SIGNATURES
<PAGE>
<TABLE>
ONEIDA LTD.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
(Thousands except per JULY 31, AUG 1, JULY 31, AUG 1,
share amounts) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
NET SALES..................... $112,073 $104,216 $230,112 $211,271
COST OF SALES................. 65,887 64,962 137,009 130,398
INVENTORY WRITEDOWN (NOTE 3).. 3,000
------- ------- ------- -------
GROSS MARGIN.................. 46,186 39,254 90,103 80,873
OPERATING REVENUES............ 99 395 416 416
------- ------- ------- -------
46,285 39,649 90,519 81,289
------- ------- ------- -------
OPERATING EXPENSES:
Selling, advertising and
distribution............... 22,112 21,885 45,338 42,811
General and administrative.. 8,984 8,626 19,342 18,328
Restructuring and unusual
charges (NOTE 3)........... 32,800
------- ------- ------- -------
Total..................... 31,096 30,511 97,480 61,139
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS. 15,189 9,138 (6,961) 20,150
OTHER INCOME (EXPENSE)........ (331) 1,148 (383) 951
INTEREST EXPENSE.............. (2,419) (2,047) (5,069) (3,867)
------- ------- ------- -------
INCOME (LOSS)
BEFORE INCOME TAXES......... 12,439 8,239 (12,413) 17,234
PROVISION (CREDIT) FOR
INCOME TAXES................. 4,733 3,152 (1,688) 6,592
------- ------- ------- -------
NET INCOME (LOSS)............. $7,706 $5,087 ($10,725) $10,642
====== ====== ========= =======
EARNINGS PER SHARE OF COMMON STOCK:
Net income (loss):
Basic..................... $0.46 $0.30 ($0.65) $0.63
Diluted................... 0.46 0.30 (0.65) 0.62
SHARES USED IN PER SHARE DATA:
Basic..................... 16,541 16,734 16,549 16,695
Diluted................... 16,785 17,015 16,702 16,976
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ONEIDA LTD.
CONSOLIDATED BALANCE SHEET
JULY 31, 1999 AND JANUARY 30, 1999
(Thousands)
JULY 31, JAN 30,
1999 1999
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.......................................... $4,001 $1,913
Accounts receivable, net of allowance for doubtful
accounts of $1,728,000 and $1,520,000........ 78,995 72,919
Other accounts and notes receivable........... 1,320 2,777
Inventories:
Finished goods............................... 170,443 160,888
Goods in process............................. 15,225 14,339
Raw materials and supplies................... 14,139 14,885
Other current assets......................... 12,831 8,217
------- -------
Total current assets....................... 296,954 275,938
------- -------
PROPERTY, PLANT AND EQUIPMENT-At cost:
Land and buildings............................ 56,509 56,378
Machinery and equipment....................... 168,509 161,660
------- -------
Total...................................... 225,018 218,038
Less accumulated depreciation................. 128,216 123,010
------- -------
Property, plant & equipment-net............ 96,802 95,028
------- -------
Intangible assets - net....................... 28,411 39,202
Other assets.................................. 33,353 31,900
------- -------
TOTAL..................................... $455,520 $442,068
======= =======
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ONEIDA LTD.
CONSOLIDATED BALANCE SHEET
JULY 31, 1999 AND JANUARY 30, 1999
(Thousands)
JULY 31, JAN 30,
1999 1999
------- -------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt............................... $51,803 $56,060
Accounts payable.............................. 27,573 26,638
Accrued liabilities........................... 45,678 40,295
Accrued income taxes.......................... 6,421 6,388
Dividends payable............................. 1,702 1,701
Current installments of long-term debt........ 6,704 4,790
------- -------
Total current liabilities.................. 139,881 135,872
LONG-TERM DEBT................................. 111,754 89,605
OTHER LIABILITIES:
Accrued postretirement liability.............. 55,017 54,264
Accrued pension liability..................... 13,789 9,584
Other liabilities............................. 11,056 12,495
------- -------
Total...................................... 79,862 76,343
------ -------
STOCKHOLDERS' EQUITY:
Cumulative 6% preferred stock; $25 par
value; authorized 95,660 shares, issued
87,013 and 87,411 shares, respectively,
callable at $30 per share.................... 2,175 2,185
Common stock $1 par value; authorized
48,000,000 shares, issued 17,576,621
and 17,423,478 shares, respectively.......... 17,577 17,423
Additional paid-in capital.................... 81,445 79,737
Retained earnings............................. 51,823 65,870
Equity adjustment from translation............ (11,917) (11,079)
Less cost of common stock held in
treasury; 883,747 and 816,284 shares,
respectively................................ (14,978) (13,888)
Less unallocated ESOP shares of common
stock of 78,793.............................. (2,102)
------- -------
Stockholders' Equity....................... 124,023 140,248
------- -------
TOTAL..................................... $455,520 $422,068
======= =======
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Changes
in Stockholders' Equity
For the quarters ended July 31, 1999 and August 1, 1998
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at May 2, 1998... 17,242 $17,242 $2,199 $77,867 $58,459
Stock plan activity, net. 127 127 1,298
Cancelled stock.......... (7) (7) (1)
Purchase/retirement of
Treasury stock, net...... (7) (7)
Cash dividends declared
($.20 per share)...... (3,387)
Net income............... $5,087 5,087
Other comprehensive
income (loss)......... (1,344)
-------
Comprehensive income..... $3,743
ESOP activity, net....... ======
---------------------------------------------
Balance August 1, 1998 17,355 $17,355 $2,198 $79,165 $60,159
=============================================
</TABLE>
<TABLE>
Accumulated
Other Comp Treasury Unallocated
Income Stock ESOP
-------------------------------------------------------
<S> <C> <C> <C>
Balance at May 2, 1998... ($9,475) ($5,632) ($1,782)
Stock plan activity, net.
Cancelled stock..........
Purchase/retirement of
Treasury stock, net...... (5,528)
Cash dividends declared
($.20 per share)......
Net income...............
Other comprehensive
income (loss)......... (1,344)
Comprehensive income.....
ESOP activity, net....... 1,474
-------------------------------------------------------
Balance August 1, 1998 ($10,819) ($11,160) ($308)
=======================================================
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Changes
in Stockholders' Equity
For the quarters ended July 31, 1999 and August 1, 1998
(Continued)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at May 1, 1999... 17,500 $17,500 $2,175 $80,530 $45,760
Stock plan activity, net. 77 77 915
Cancelled stock..........
Purchase/retirement of
Treasury stock, net......
Cash dividends declared
($.10 per share)...... (1,643)
Net income............... $7,706 7,706
Other comprehensive
income (loss)......... (802)
-------
Comprehensive income..... $6,904
ESOP activity, net....... ======
---------------------------------------------
Balance July 31, 1999 17,577 $17,577 $2,175 $81,445 $51,823
=============================================
</TABLE>
<TABLE>
Accumulated
Other Comp Treasury Unallocated
Income Stock ESOP
-------------------------------------------------------
<S> <C> <C> <C>
Balance at May 1, 1999... ($11,115) ($14,593) ($1,434)
Stock plan activity, net.
Cancelled stock..........
Purchase/retirement of
Treasury stock, net...... (648)
Cash dividends declared
($.10 per share)......
Net income...............
Other comprehensive
income (loss)......... (804)
Comprehensive income.....
ESOP activity, net....... (668)
-------------------------------------------------------
Balance July 31, 1999 ($11,917) ($14,978) ($2,102)
=======================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Changes
in Stockholders' Equity
For the six months ended July 31, 1999 and August 1, 1998
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1998 17,091 $17,242 $2,200 $76,007 $54,620
Stock plan activity, net... 292 292 3,158
Cancelled stock............ (21) (21) (2)
Purchase/retirement of
Treasury stock, net...... (7) (7)
Cash dividends declared
($.30 per share)...... (5,103)
Net income............... $10,642 10,642
Other comprehensive
income (loss)......... (2,150)
-------
Comprehensive income..... $8,492
ESOP activity, net....... ======
----------------------------------------------
Balance August 1, 1998 17,355 $17,355 $2,198 $79,165 $60,159
==============================================
</TABLE>
<TABLE>
Accumulated
Other Comp Treasury Unallocated
Income Stock ESOP
-------------------------------------------------------
<S> <C> <C> <C>
Balance at January 31, 1999 ($8,669) ($5,632) (1,782)
Stock plan activity, net...
Cancelled stock............
Purchase/retirement of
Treasury stock, net........ (5,528)
Cash dividends declared
(.30 per share)...........
Net income.................
Other comprehensive
income (loss)........... (2,150)
Comprehensive income.......
ESOP activity, net......... 1,474
----------------------------------------------
Balance August 1, 1998 ($10,819) ($11,160) ($308)
===============================================
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Changes
in Stockholders' Equity
For the six months ended July 31, 1999 and August 1, 1998
(Continued)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 30, 1999. 17,423 $17,423 $2,185 $79,737 $65,870
Stock plan activity, net.. 159 159 1,703
Cancelled stock........... (5) (5) 1
Purchase/retirement of
Treasury stock, net....... (10) 4
Cash dividends declared
($.20 per share)....... (3,322)
Net income................($10,725) (10,725)
Other comprehensive
income (loss).......... (838)
-------
Comprehensive income...... $6,904
ESOP activity, net........ ======
---------------------------------------------
Balance July 31, 1999 17,577 $17,577 $2,175 $81,445 $51,823
=============================================
</TABLE>
<TABLE>
Accumulated
Other Comp Treasury Unallocated
Income Stock ESOP
-------------------------------------------------
<S> <C> <C> <C>
Balance at January 30, 1999 ($11,079) ($13,888) $ -
Stock plan activity, net...
Cancelled stock............
Purchase/retirement of
Treasury stock, net........ (1,352)
Cash dividends declared
($.20 per share)........
Net income.................
Other comprehensive
income (loss)........... (838)
Comprehensive income.......
ESOP activity, net......... 262 (2,102)
--------------------------------------------------
Balance July 31, 1999 ($11,917) ($14,978) ($2,102)
==================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 31, 1999 and AUGUST 1, 1998
(In Thousands)
FOR THE
SIX MONTHS ENDED
JULY 31, AUG 1,
1999 1998
------- -------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)............................... ($10,725) $10,642
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation................................... 5,731 6,688
Impairment of long-term assets
and inventory writedowns.................... 15,000
Amortization of intangibles.................... 1,365 1,517
Deferred taxes and other non-cash
charges and credits......................... 5,927 452
Decrease (increase) in operating assets:
Receivables.................................... (4,619) (3,221)
Inventories.................................... (12,695) (43,948)
Other current assets........................... (4,614) (2,573)
Other assets................................ (111) 40
Increase in accounts payable................... 935 5,057
Increase (decrease) in accrued liabilities..... 5,418 (5,323)
Net cash provided by (used in) ------- -------
operating activities....................... 1,612 (30,669)
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures...... (11,208) (11,856)
Minority interest............................... (1,332) (182)
Retirement of property, plant and equipment..... 153 214
Other, net...................................... (1,441) (58)
------- -------
Net cash used in investing activities....... (13,828) (11,882)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.......... 1,821 3,243
Issuance of restricted stock plan shares........ 36 178
Purchase of treasury stock...................... (1,096) (4,947)
Purchase (allocation) of ESOP shares - net...... (2,102) (529)
Issuance (payments) of short-term debt - net... (4,258) 54,824
Payment of long-term debt....................... (275) (222)
Proceeds from issuance of long-term debt........ 24,338 449
Dividends paid.................................. (3,322) (5,103)
------- -------
Net cash provided by financing activities... 15,142 47,893
------- -------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH.......... (838) (2,150)
------- -------
NET INCREASE IN CASH.............................. 2,088 3,192
CASH AT BEGINNING OF YEAR......................... 1,913 3,095
------- -------
CASH AT END OF PERIOD............................. $4,001 $6,287
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid ................................... $4,764 $3,989
Income taxes paid................................ 2,133 4,887
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands)
1. The statements for the six months ended July 31, 1999 and August 1, 1998
are unaudited; in the opinion of the Company such unaudited statements include
all adjustments (which comprise only normal recurring accruals) necessary for a
fair presentation of the results of such periods. The results of operations for
the six months ended July 31, 1999 are not necessarily indicative of the results
of operations to be expected for the year ending January 29, 2000. The
consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes for the years ended in
January 1999 and 1998 included in the Company's January 30, 1999 Annual Report
to the Securities and Exchange Commission on Form 10-K.
2. The provision for income taxes is based on pre-tax income for financial
statement purposes with an appropriate deferred tax provision to give effect to
changes in temporary differences between the financial statements and tax bases
of assets and liabilities. The temporary differences arise principally from
restructuring charges, postretirement benefits, depreciation and other employee
benefits.
3. In the quarter ended May 1, 1999, the Company recorded a $35,800 charge
for restructuring and other unusual items, as it broadened the restructuring
program initiated in 1998. This total includes $3,000 of inventory writedowns
due to discontinuing certain product lines, $11,000 of charges related to
operations restructuring, $12,000 of long-term asset impairments and $9,800 of
other unusual charges. Key components of the restructuring are the closure of
the Company's flatware manufacturing facility in Niagara Falls, Canada;
consolidation of the Company's international operations; and further elimination
of positions and underperforming product lines.
The majority of the $11,000 restructuring charge related to operations
made in the first quarter related to early retirement benefits, severance and
associated employee benefit costs. The closure of the Canadian manufacturing
facility, which was substantially completed in the first quarter, resulted in
the reduction of approximately 150 jobs. The intent of the total strategic
restructuring plan is to reduce the Company's worldwide employment of 4,800 jobs
by approximately 12%. This is being accomplished by means of the above
mentioned plant closure and further international and domestic job
consolidations, as well as through normal attrition and the extension of early
retirement and termination packages. In the second quarter and the first six
months , the Company actually paid $7,300 and $7,700 of these restructuring
costs, respectively.
The asset writedowns are related to goodwill associated with the
purchase of an Italian subsidiary and the writedown of manufacturing fixed
assets that will no longer be utilized due to the closing of the Oneida Canada
plant and the exiting o f certain product lines. The full $12,000 of non-cash
charges were recorded against the respective assets to reduce them to net
realizable value in the first quarter. The Company recorded a $3,000 non-cash
inventory reserve charge as a component of cost of sales during the first
quarter to reduce discontinued product lines to net realizable value. $1,310 and
$1,470 was written off against the reserve during the second quarter and first
half of the year, respectively.
During the first quarter, the Company expensed $9,800 of unusual items.
These were costs related to an unsolicited takeover attempt as well as costs
incurred to overcome unique market barriers in the foodservice glassware market.
Approximately $1,900 and $5,000 of these unusual expense payments were made in
the second quarter and first half of 1999, respectively.
<PAGE>
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands)
In the year ended January 1999, the Company initiated restructuring
efforts by means of a workforce reduction that was accomplished through job
consolidations and early retirements. The Company previously accrued $5,000 to
account for the severance and related employee benefits for this phase. As of
the end of the second quarter, approximately $400 of benefits remain unpaid.
The majority of the restructuring and unusual expense payments will be
completed by year-end. There are no anticipated adjustments needed for any of
the restructuring or unusual expense accruals.
4. Basic and diluted earnings per share are presented for each period in
which a statement of operations is presented. Basic earnings per share is
computed by dividing income less preferred stock dividends by the weighted
average shares actually outstanding for the period. Diluted earnings per share
includes the potentially dilutive effect of shares issuable under the employee
stock purchase and incentive stock option plans.
The following is a reconciliation of basic earnings per share to diluted
earnings per share for the six months ended July 31, 1999 and August 1, 1998:
Net Preferred Adjusted Earnings
Income Stock Net Income Average Per
(Loss) Dividends (Loss) Shares Share
- --------------------------------------------------------------------------------
[S] [C] [C] [C] [C] [C]
1999:
Basic earnings
per share $(10,725) $(65) $(10,790) 16,549 $(.65)
Effect of stock options 153
Diluted earnings
per share (10,725) (65) (10,790) 16,702 (.65)
- --------------------------------------------------------------------------------
1998:
Basic earnings
per share 10,642 (66) 10,576 16,695 .63
Effect of stock options 281
Diluted earnings
per share 10,642 (66) 10,576 16,976 .62
- --------------------------------------------------------------------------------
5. Included in the long-term debt caption on the balance sheet are various
senior notes. The note agreements relating thereto contain provisions which
restrict borrowings, business investments, acquisition of the Company's stock
and payment of cash dividends. At July 31, 1999, the maximum amount available
for payment of dividends was $8,464.
6. Within the Statement of Changes in Stockholders' Equity, the Company
reports comprehensive income in accordance with the Statements of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income." This
pronouncement requires the Company to report the effects of foreign currency
translation adjustments on comprehensive income.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended July 31, 1999 compared with
the quarter ended August 1, 1998
(In Thousands)
Operations
Net Sales by Product Line:
1999 1998 % Change
------- ------- -----
[S] [C] [C] [C]
Metal Products............... $72,100 $74,000 (2.6)%
Dinnerware Products.......... 25,600 21,900 16.9%
Glass/Crystal Products....... 9,500 4,200 126.2%
Other Products............... 4,873 4,116 18.4%
------- ------- -----
Total...................... $112,073 $104,216 7.5%
======= ======= =====
Consolidated net sales, for the quarter ended July 31, 1999 increased $7,857,
over the same period a year ago and set a record for the Company's second
quarter.
Significant sales increases were made in the foodservice and international
markets. The growth in dinnerware sales includes both domestic and imported
products. The Company added glass products and expanded its crystal offering in
late 1998, hence the growth in that product line. The majority of the growth in
sales of other products is attributable to sales made to the grocery store
market.
Gross margin, as a percentage of net sales, was 41.2% in the second quarter of
1999 as compared to 37.7% for the same period of 1998. The increase reflected
improved manufacturing efficiencies in 1999.
Operating Expenses
1999 1998 % Change
------- ------- ------
[S] [C] [C] [C]
Selling, advertising and
distribution................. $22,112 $21,885 1.0%
General and administrative..... 8,984 8,626 4.2%
------- ------- -----
Total........................ $31,096 $30,511 1.9%
======= ======= =====
Total operating expenses as a percentage of sales decreased to 27.7% in the
second quarter of 1999 from 29.3% last year due to strict expense control. The
slight increase in selling and distribution costs is attributable to higher
sales levels in the current year. The increase in general and administrative
costs is principally due to the operation of the Company's Australian
subsidiary, which was acquired in July 1998.
Included in other income for the quarter ended August 1, 1998 were net
settlements of three long-term contracts resulting from termination of a major
energy supply contract, the Company's lease of an office facility in Redmond
Washington and a long-term distribution relationship. Interest expense, prior
to capitalized interest, was $2,936 for the quarter ended July 31 1999, an
increase of $604 from the second quarter of 1998. This increase is due to
higher average borrowings in 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six month period ended July 31, 1999 compared with
the six month period ended August 1, 1998
(In Thousands)
Operations
Net Sales by Product Line:
1999 1998 % Change
------- ------- -----
[S] [C] [C] [C]
Metal Products............... $147,800 $148,000 (0.1)%
Dinnerware Products.......... 49,800 45,000 10.7%
Glass/Crystal Products....... 16,900 9,000 87.8%
Other Products............... 15,612 9,271 68.4%
------- ------- -----
Total...................... $230,112 $211,271 8.9%
======= ======= =====
Consolidated net sales, for the six months ended July 31, 1999 increased
$18,841, over the same period a year ago.
Significant sales increases over 1998 levels were made in all major markets-
consumer, foodservice, and international. 1999 is the first full year that the
Company expanded it's crystal product category to include glassware and new
consumer crystal lines, hence the growth in that product line. The majority of
the growth in sales of other products is attributable to continued growth in the
grocery store market.
Gross margin, (excluding the special inventory restructuring charge of $3,000),
as a percentage of net sales, was 40.5% in the first six months of 1999 as
compared to 38.3% for the same period of 1998. The increase reflected improved
manufacturing efficiencies in 1999.
Operating Expenses (exclusive of restructuring
and unusual charges)
1999 1998 % Change
------- ------- -----
[S] [C] [C] [C]
Selling, advertising
and distribution............. $45,338 $42,811 5.9%
General and administrative..... 19,342 18,328 5.5%
------- ------- -----
Total........................ $64,680 $61,139 5.8%
======= ======= =====
Total recurring operating expenses increased by $3,541 from the same period last
year, but actually decreased as a percentage of sales from 28.9% to 28.1% in
1999 due to continued strict expense control. The increase in selling and
distribution cost s is attributable to higher sales levels in the current year.
The increase in general and administrative costs is principally due to the
operation of the Company's Australian subsidiary, which was acquired in July
1998.
Included in other income for the six months ended August 1, 1998 were net
settlements of three long-term contracts resulting from termination of a major
energy supply contract, the Company's lease of an office facility in Redmond
Washington a nd a long-term distribution relationship.
Interest expense, prior to capitalized interest, was $5,796 for the six months
ended July 31, 1999, an increase of $1,487 from the same period in 1998. This
increase is due to higher average borrowings in the first half of 1999. These
borrowings w ere for working capital needs as well as the construction of two
major distribution facilities.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six month period ended July 31, 1999 compared with
the six month period ended August 1, 1998
(In Thousands)
For the first six months of 1999, the Company recorded a $35,800 charge for
restructuring and other unusual items. This total includes $3,000 of inventory
writedowns due to discontinuing certain product lines, $11,000 of charges
related to operation s restructuring, $12,000 of long-term asset impairments and
$9,800 of other unusual charges. Key components of the restructuring are the
closure of the Company's flatware manufacturing facility in Niagara Falls,
Canada; consolidation of the Company' s international operations; and further
elimination of positions and underperforming product lines.
The majority of the $11,000 restructuring charge made in the first quarter of
1999 relates to early retirement benefits, severance and associated employee
benefit costs. The closure of the Canadian manufacturing facility, which was
substantially completed in the first quarter, resulted in the reduction of
approximately 150 jobs. The intent of the total strategic restructuring plan is
to reduce the Company's worldwide employment of 4,800 jobs by approximately 12%.
This is being accomplished by means of the above mentioned plant closure and
further international and domestic job consolidations, as well as through normal
attrition and the extension of early retirement and termination packages.
Through the first six months, the Company incurred $7,700 of these restructuring
costs.
The asset writedowns are related to goodwill associated with the purchase of an
Italian subsidiary and the writedown of manufacturing fixed assets that will no
longer be utilized due to the closing of the Oneida Canada plant and the exiting
of certain product lines. The full $12,000 of non-cash charges were recorded
against the respective assets to reduce them to net realizable value in the
first quarter of 1999. The Company recorded a $3,000 non-cash inventory reserve
charge as a component of cost of sales during the first quarter to reduce
discontinued product lines to net realizable value. $1,470 has been written off
against the reserve to date.
During the first quarter, the Company expensed $9,800 of unusual items. These
were costs related to an unsolicited takeover attempt as well as costs incurred
to overcome unique market barriers in the foodservice glassware market. Through
the first half, approximately $5,000 of these unusual expense payments were
made.
In January 1999, the Company initiated restructuring efforts by means of a
workforce reduction that was accomplished through job consolidations and early
retirements. The Company accrued $5,000 to account for the severance and
related employee benefits for this phase. As of the end of the second quarter,
approximately $400 of benefits remain unpaid. The majority of the restructuring
and unusual expense payments will be completed by year-end. The Company expects
to reduce expenses by $12,000 i n 1999 and by $20,000 per year thereafter as a
result of the restructuring plan.
Liquidity & Financial Resources
During the first half of this year, the Company spent approximately $11,200 on
capital projects focused primarily on its distribution and manufacturing
facilities. The Company expects to invest another $14,000 on similar projects
during the remainder of the current fiscal year. The Company is currently
constructing a 206,000 square foot warehouse at its main facility in Sherrill,
NY. This project, which should be completed in early 2000, will cost
approximately $10,000. By consolidating Northeast distribution in this one
facility, the Company expects to both lower costs and improve customer service.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six month period ended July 31, 1999 compared with
the six month period ended August 1, 1998
(In Thousands)
Year to date, $3,200 was spent on purchasing common shares either as treasury
stock or as contributions to its ESOP plan. Management believes there is
sufficient liquidity to support the Company's ongoing funding requirements from
future operations as well as the availability of bank lines of credit. At July
31, 1999, the Company had unused short-term credit lines equal to $51,000.
Working capital as of July 31, 1999 totaled $157,073.
Year 2000 Compliance
Year 2000 issues relate to the ability of computer systems to distinguish data
which contains dates beyond December 31, 1999. The Company has created and
implemented a comprehensive Year 2000 compliance plan. The Company holds regular
compliance meetings to receive information and input from all of the Company's
main operating areas.
As part of its compliance plan, the Company has reviewed all of its software and
information processing systems and identified date sensitive functions. The
Company began testing those systems in the first quarter of 1999. Testing is
substantially complete. Any systems found to be noncompliant are being modified
to ensure that they operate properly prior to the Year 2000. The Company's main
accounting, logistics, warehouse management and payroll systems are currently
Year 2000 compliant. The Company anticipates that its remaining systems will be
Year 2000 compliant by the end of September.
To date, the Company has identified and contacted its major customers,
suppliers, service providers and business partners. Each of these entities
received a letter informing them of the Company's plans and state of readiness
and asking that they in turn share their own Year 2000 plans by returning a
questionnaire to the Company. In addition to its compliance plan, the Company
is developing contingency plans based upon the outcomes of the systems tests
that are being conducted.
The Company believes it is devoting appropriate resources to resolve its Year
2000 issues in a timely manner and believes that its compliance program will
result in all internal systems being prepared for Year 2000 processing. The
compliance plan is proceeding on schedule and to date no unforeseen significant
difficulties have arisen. Based upon the work performed to date, the Company
presently believes that the likelihood of the Year 2000 having a material result
on its operations, liquidity or financial position is remote. The Company
estimates that its direct Year 2000 compliance costs will not exceed $500, of
which to date approximately $400 has been incurred and expensed.
Notwithstanding the foregoing, the Company could be adversely affected if its
customers, suppliers, service providers, business partners and/or governmental
agencies continue to utilize systems that are not Year 2000 compliant. This
failure could affect the Company's ability to purchase raw materials, receive
orders and transact business with its financial institutions among other things,
any of which could constitute a material and immeasurable financial risk to the
Company.
Contingencies-Legal Proceedings
On December 8, 1998, the Oneida Indian Nation of New York, the Oneida Tribe of
Indians of Wisconsin and the Oneida of Thames, as Plaintiffs, along with the
United States of America, as Intervenor, moved to amend their Complaint filed on
May 3, 1974 i n the United States District Court for the Northern District of
New York against the counties of Oneida and Madison, New York. The amended
Complaint seeks to add the State of New York, New York State Thruway Authority,
Utica-Rome Motorsports, Inc., Niagara Mohawk Power Corporation and the Oneida
Valley National Bank, individually and as representatives of the class of
similarly situated private landowners in Madison and Oneida counties. The
Complaint alleges that during the nineteenth century the Oneidas' lands were
improperly transferred. The Oneidas seek title to the property as well as
monetary damages. The Corporation's headquarters and main manufacturing and
distribution facilities are located within this land claim area.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six month period ended July 31, 1999 compared with
the six month period ended August 1, 1998
(In Thousands)
The Corporation filed a motion to intervene with the United States District
Court for the Northern District of New York on February 26, 1999. The Judge's
decision on whether private landowners will be added as Defendants is expected
in 1999.
Forward Looking Information
With the exception of historical data, the information contained in this Form
10-Q, as well as those other documents incorporated by reference herein, is
forward-looking. For the purposes of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions readers that
changes in certain factors could affect the Company's future results and could
cause the Company's future consolidated results to differ materially from those
expressed herein. Such factor s include, but are not limited to: general
economic conditions in the Company's markets; difficulties or delays in the
development, production and marketing of new products; the impact of competitive
products and pricing; certain assumptions related to consumer purchasing
patterns; significant increases in interest rates or the level of the Company's
indebtedness; major slowdowns in the retail, travel or entertainment industries;
the loss of several of the Company's major customers; underutilization of the
Company's plants and factories; the amount and rate of growth of the Company's
selling, general and administrative expenses; and the inability of the Company
or its customers, suppliers, service providers or business partners, as well as
governmental agencies, to resolve Year 2000 issues in a timely manner.
<PAGE>
ONEIDA LTD
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
July 31, 1999
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.
ONEIDA LTD
(Registrant)
Date: September 10, 1999
Edward W. Thoma
Senior Vice President,
Finance
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ONEIDA LTD. FOR THE THREE MONTHS ENDED JULY 31, 1999 AND
IS QUALIFIED IN IT'S ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
2000
<S> <C>
<FISCAL-YEAR-END> JAN-30-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> JUL-31-1999
<PERIOD-TYPE> 3-MOS
<CASH> 4,001
<SECURITIES> 0
<RECEIVABLES> 80,315
<ALLOWANCES> 1,728
<INVENTORY> 199,807
<CURRENT-ASSETS> 296,954
<PP&E> 225,018
<DEPRECIATION> 128,216
<TOTAL-ASSETS> 455,520
<CURRENT-LIABILITIES> 139,881
<BONDS> 79,862
0
2,175
<COMMON> 17,577
<OTHER-SE> 104,271
<TOTAL-LIABILITY-AND-EQUITY> 455,520
<SALES> 230,112
<TOTAL-REVENUES> 230,528
<CGS> 137,009
<TOTAL-COSTS> 140,009
<OTHER-EXPENSES> 97,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,019
<INCOME-PRETAX> (12,413)
<INCOME-TAX> (1,688)
<INCOME-CONTINUING> (10,725)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,725)
<EPS-BASIC> (.65)<F1>
<EPS-DILUTED> (.65)
<FN>
<F1> The amount reported as EPS-PRIMARY is actually Earnings Per Share-Basic,
as the Company adopted SFAS 128 "Earnings Per Share" as of January 31, 1998.
</TABLE>
