<PAGE>
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 JUNE 30, 1999
/ / TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ___________________
COMMISSION FILE NUMBER: 1-12624
SYRATECH CORPORATION
--------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3354944
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
175 MCCLELLAN HIGHWAY
EAST BOSTON, MASSACHUSETTS 02128-9114
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE - 617-561-2200
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTIONS 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 NO X
---- ----
NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OUTSTANDING AT
JUNE 30, 1999 -- 3,784,018
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
--------
<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at June 30, 1999
and December 31, 1998 1
Condensed Consolidated Statements of Operations for the three
and six month periods ended June 30, 1999 and 1998 2
Condensed Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1999 and 1998 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
Signature 22
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents ...................................... $ 868 $ 9,009
Accounts receivable, net .................................. 41,256 70,128
Inventories ............................................... 124,378 86,955
Deferred income taxes ..................................... 20,200 15,866
Prepaid expenses and other ................................ 3,044 1,673
Properties held for sale .................................. 1,305 2,292
--------- ---------
Total current assets .................................. 191,051 185,923
Property, plant and equipment, net ........................... 83,795 83,611
Purchase price in excess of net assets acquired, net ......... 6,428 6,549
Other assets, net ............................................ 7,958 8,634
--------- ---------
Total ................................................. $ 289,232 $ 284,717
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable ............... $ 64,751 $ 46,201
Accounts payable .......................................... 14,766 13,883
Accrued expenses .......................................... 9,175 10,802
Accrued interest .......................................... 3,832 4,108
Accrued compensation ...................................... 2,916 2,844
Accrued advertising ....................................... 2,601 3,053
Income taxes payable ...................................... 561 418
--------- ---------
Total current liabilities ............................. 98,602 81,309
Long - term debt ............................................. 165,000 165,000
Deferred income taxes ........................................ 19,409 19,409
Pension liability ............................................ 2,435 2,964
Stockholders' equity:
Preferred stock, $.01 par value, 500,000 shares authorized;
(25,000 designated as cumulative redeemable preferred stock,
18,000 shares issued and outstanding, liquidation value of
$18,000 and includes accrued and unpaid dividends of $5,186
and $3,874 in 1999 and 1998, respectively 23,186 21,874
Common stock, $.01 par value, 20,000,000 shares
authorized; 3,784,018 shares issued and outstanding 38 38
Retained deficit .......................................... (19,422) (6,376)
Accumulated other comprehensive income (loss) ............. (16) 499
--------- ---------
Total stockholders' equity ............................ 3,786 16,035
--------- ---------
Total ................................................. $ 289,232 $ 284,717
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales ........................................... $ 42,064 $ 42,248 $ 84,790 $ 80,006
Cost of sales ....................................... 30,062 30,166 59,949 56,909
-------- -------- -------- --------
Gross profit ...................................... 12,002 12,082 24,841 23,097
Selling, general and administrative expenses ........ 14,368 14,707 30,894 30,370
Other operating income .............................. 578 580 1,275 1,112
-------- -------- -------- --------
Loss from operations .............................. (1,788) (2,045) (4,778) (6,161)
Interest expense .................................... (5,956) (5,744) (11,669) (10,730)
Interest income ..................................... 5 1 45 6
Other income ........................................ 756(1) 756(1)
-------- -------- -------- --------
Loss before benefit for income taxes .............. (6,983) (7,788) (15,646) (16,885)
Benefit for income taxes ............................ (1,747) (2,180) (3,912) (4,727)
-------- -------- -------- --------
Net loss .......................................... (5,236) (5,608) (11,734) (12,158)
Preferred stock dividends accrued ................... 656 586 1,312 1,172
-------- -------- -------- --------
Net loss applicable to common stockholders ........ $ (5,892) $ (6,194) $(13,046) $(13,330)
-------- -------- -------- --------
-------- -------- -------- --------
Basic and diluted loss per share:
Net loss per common share ......................... $ (1.56) $ (1.64) $ (3.45) $ (3.52)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of shares outstanding ... 3,784 3,784 3,784 3,784
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
(1) Other income represents a gain on disposal of undeveloped land.
See notes to condensed consolidated financial statements.
2
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................. $(11,734) $(12,158)
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Depreciation and amortization ...................... 4,175 3,658
Deferred income taxes .............................. (4,334) (4,927)
Gain on disposal of assets ......................... (671)
Other .............................................. (530) 292
Increase (decrease) in cash due to changes in:
Accounts receivable .............................. 28,872 24,908
Inventories ...................................... (37,423) (27,546)
Prepaid expenses and other ....................... (1,371) (466)
Accounts payable and accrued expenses ............ (1,399) (7,661)
Income taxes payable ............................. 143 119
-------- --------
Net cash provided by (used in) operations ............ (24,272) (23,781)
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment ......... (3,852) (8,110)
Proceeds from sale of assets ....................... 1,782
Other .............................................. (37) 167
-------- --------
Net cash used in investing activities ................ (2,107) (7,943)
-------- --------
Cash flows from financing activities:
Change in revolving loan facilities ................ 18,550 30,688
Other .............................................. (312) (651)
-------- --------
Net cash provided by (used in) financing activities .. 18,238 30,037
-------- --------
Net decrease in cash and equivalents ................. (8,141) (1,687)
Cash and equivalents, beginning of period ............ 9,009 2,981
-------- --------
Cash and equivalents, end of period .................. $ 868 $ 1,294
-------- --------
-------- --------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. FINANCIAL INFORMATION
The accompanying unaudited interim condensed consolidated financial
statements of Syratech Corporation and Subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These interim condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes included in the Company's 1998 Annual Report on
Form 10 - K.
In the opinion of management, the interim condensed consolidated financial
statements reflect all adjustments, which consist only of normal and recurring
adjustments, necessary for a fair presentation of the interim periods. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year.
2. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
------- -------
<S> <C> <C>
Cash paid during the period for:
Interest ...................... $10,893 $10,483
------- -------
------- -------
Income taxes .................. $ 456 $ 607
------- -------
------- -------
Supplemental schedule of non-cash
financing activities:
Accrued cumulative redeemable
preferred stock dividends .... $ 1,312 $ 1,172
------- -------
------- -------
</TABLE>
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- -----------
<S> <C> <C>
Raw materials ...... $ 15,090 $ 12,953
Work-in-process .... 7,745 6,484
Finished goods ..... 101,543 67,518
-------- --------
Total .... $124,378 $ 86,955
-------- --------
-------- --------
</TABLE>
4
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
The benefit for income taxes for the three and six month periods ended June 30,
1999 and 1998, respectively, have been computed using the estimated effective
full year tax rates. Realization of the income tax benefit is dependent upon
generating sufficient future taxable income. Although realization is not
assured, management believes it is more likely than not that the income tax
benefit will be realized through future taxable earnings.
5. REVOLVING LOAN FACILITIES AND NOTES PAYABLE
On May 30,1999, the Company renewed its Wallace International de Puerto Rico,
Inc. $1,000 credit facility. The renewed facility expires on May 30, 2000.
On June 16, 1999 the Company's C.J. Vander Ltd. subsidiary renewed its overdraft
facility which was entered into on March 16, 1998 ("Overdraft Facility"). The
renewal changed the amount of the borrowings provided under the facility from
Pounds 500 to Pounds 250. Borrowings made under the Overdraft Facility bear
interest at the bank's base rate plus 1%. The Overdraft Facility contains
customary covenants, and borrowings are secured by substantially all of the
assets of C.J.Vander Ltd. The Overdraft is due on demand and expires on August
30, 1999.
6. COMPREHENSIVE LOSS
Comprehensive loss consists of the following:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Net loss applicable to common stockholders .... $(13,046) $(13,330)
Other comprehensive income:
Foreign currency translation adjustments .... (515) (307)
-------- --------
Comprehensive loss ............................ $(13,561) $(13,637)
-------- --------
-------- --------
</TABLE>
Accumulated other comprehensive income reported in the Condensed Consolidated
Balance Sheets consists only of foreign currency translation adjustments.
7. EMPLOYEE BENEFIT PLANS
At December 31, 1998, the Company had employment agreements with certain
officers and employees for terms ranging from three to five years. As of July 8,
1999, the Company entered into an additional employment agreement with an
executive officer. These agreements provide for minimum annual salaries
aggregating $2,580 and certain other benefits.
5
<PAGE>
8. RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1999, the Company adopted the provisions of Statement of
Opinion No. 98-1, "Accounting for Costs of Computer Software Developed or
Obtained for Internal Use," which requires certain expenditures made for
internal use software to be capitalized. The provisions of this opinion did not
have a material effect on the Company's condensed consolidated financial
statements upon adoption.
In June 1998, the Financial Accounting Standards Board Issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The new standard requires that all
companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
whether there will be any impact of SFAS No. 133 on the Company's consolidated
financial statements upon adoption, which is required in the first quarter of
2001.
9. SEGMENT DISCLOSURES
The Company has identified only one distinct and reportable segment: Home
Entertainment and Decorative Products, which generates revenue from two types of
product offerings: Tabletop and Giftware, and Seasonal. The following table
presents the Company's net sales in these product categories for the periods
presented:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
------- -------
<S> <C> <C>
Tabletop and Giftware .... $76,555 $70,050
Seasonal ................. 8,235 9,956
------- -------
Total .................... $84,790 $80,006
------- -------
------- -------
</TABLE>
10. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The following supplemental condensed consolidating financial statements as of
and for the periods ending June 30, 1999 and 1998 present separate financial
information for the Company ("Issuer/Guarantor Parent"), the Guarantor
Subsidiaries, and the Non-Guarantor Subsidiaries. Certain prior year amounts
have been reclassified to conform with the 1999 presentation. Separate financial
statements of each guarantor are not presented because management believes that
such statements would not be materially different from the information presented
herein.
6
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
JUNE 30, 1999
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents .................................. $ $ 155 $ 713 $ $ 868
Accounts receivable, net .............................. 34,738 6,518 41,256
Inventories ........................................... 118,241 6,096 41 124,378
Deferred income taxes ................................. 11,270 8,930 20,200
Prepaid expenses and other ............................ 113 2,223 708 3,044
Properties held for sale .............................. 887 418 1,305
--------- --------- --------- --------- ---------
Total current assets ................................ 11,383 165,174 14,453 41 191,051
Property, plant and equipment, net ...................... 79,797 4,047 (49) 83,795
Purchase price in excess of net assets acquired, net .... 6,428 6,428
Other assets, net ....................................... 7,829 129 7,958
Investment .............................................. 180,192 (180,192) --
--------- --------- --------- --------- ---------
Total ............................................... $ 199,404 $ 251,528 $ 18,500 $(180,200) $ 289,232
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable ........... $ $ 64,700 $ 51 $ $ 64,751
Accounts payable ...................................... 10,637 4,129 14,766
Accrued expenses ...................................... 235 8,508 432 9,175
Accrued interest ...................................... 3,832 -- -- 3,832
Accrued compensation .................................. 2,654 262 2,916
Accrued advertising ................................... 2,601 2,601
Income taxes payable .................................. 6 561 (6) 561
--------- --------- --------- --------- ---------
Total current liabilities ........................... 4,067 89,106 5,435 (6) 98,602
Long-term debt .......................................... 165,000 165,000
Deferred income taxes ................................... 6,157 13,252 19,409
Pension liability ....................................... 2,435 2,435
Intercompany (receivable) payable ....................... (20,455) 33,243 (11,417) (1,371) --
Stockholders' equity .................................... 44,635 113,492 24,482 (178,823) 3,786
--------- --------- --------- --------- ---------
Total ............................................... $ 199,404 $ 251,528 $ 18,500 $(180,200) $ 289,232
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
7
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents .................................. $ $ 7,496 $ 1,513 $ $ 9,009
Accounts receivable, net .............................. 65,260 4,868 70,128
Inventories ........................................... 81,680 5,234 41 86,955
Deferred income taxes ................................. 9,009 6,857 15,866
Prepaid expenses and other ............................ 113 1,089 471 1,673
Properties held for sale .............................. 1,838 454 2,292
--------- --------- --------- --------- ---------
Total current assets ................................ 9,122 164,220 12,540 41 185,923
Property, plant and equipment, net ...................... 79,908 3,753 (50) 83,611
Purchase price in excess of net assets acquired, net .... 6,549 6,549
Other assets, net ....................................... 8,457 177 8,634
Investment in subsidiaries .............................. 179,442 (179,442)
--------- --------- --------- --------- ---------
Total ............................................... $ 197,021 $ 250,854 $ 16,293 $(179,451) $ 284,717
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable ........... $ $ 45,837 $ 358 $ 6 $ 46,201
Accounts payable ...................................... 11,509 2,374 13,883
Accrued expenses ...................................... 38 10,288 476 10,802
Accrued interest ...................................... 3,832 276 4,108
Accrued compensation .................................. 2,502 342 2,844
Accrued advertising ................................... 3,053 3,053
Income taxes payable .................................. 198 (198) 418 418
--------- --------- --------- --------- ---------
Total current liabilities ........................... 4,068 73,267 3,968 6 81,309
Long-term debt .......................................... 165,000 165,000
Deferred income taxes ................................... 6,157 13,252 19,409
Pension liability ....................................... 2,964 2,964
Intercompany (receivable) payable ....................... (30,589) 43,224 (11,274) (1,361)
Stockholders' equity .................................... 52,385 118,147 23,599 (178,096) 16,035
--------- --------- --------- --------- ---------
Total ............................................... $ 197,021 $ 250,854 $ 16,293 $(179,451) $ 284,717
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
8
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales .................................................... $ $ 31,881 $ 18,189 $ (8,006) $ 42,064
Cost of sales ................................................ 23,742 14,326 (8,006) 30,062
-------- -------- -------- -------- --------
Gross profit ............................................... 8,139 3,863 12,002
Selling, general and administrative expenses ................. 112 11,234 3,026 (4) 14,368
Other operating income ....................................... 578 578
-------- -------- -------- -------- --------
Income (loss) from operations .............................. (112) (2,517) 837 4 (1,788)
Interest expense ............................................. (4,893) (1,058) (5) (5,956)
Interest income .............................................. (1) 3 3 5
Other income ................................................. 756 756
-------- -------- -------- -------- --------
Income (loss) before provision (benefit) for income taxes .. (5,006) (2,816) 835 4 (6,983)
Provision (benefit) for income taxes ......................... (1,171) (655) 79 (1,747)
-------- -------- -------- -------- --------
Net income (loss) .......................................... (3,835) (2,161) 756 4 (5,236)
Preferred stock dividends accrued ............................ 656 656
-------- -------- -------- -------- --------
Net income (loss) applicable to common stockholders ........ $ (4,491) $ (2,161) $ 756 $ 4 $ (5,892)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
9
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales .................................................... $ $ 34,053 $ 15,998 $ (7,803) $ 42,248
Cost of sales ................................................ 25,315 12,654 (7,803) 30,166
-------- -------- -------- -------- --------
Gross profit ............................................... 8,738 3,344 12,082
Selling, general and administrative expenses ................. 112 11,435 3,198 (38) 14,707
Other operating income ....................................... 580 580
-------- -------- -------- -------- --------
Income (loss) from operations .............................. (112) (2,117) 146 38 (2,045)
Interest expense ............................................. (4,893) (843) (8) (5,744)
Interest income .............................................. 1 1
-------- -------- -------- -------- --------
Income (loss) before provision (benefit) for income taxes .. (5,005) (2,959) 138 38 (7,788)
Provision (benefit) for income taxes ......................... (1,391) (859) 70 (2,180)
-------- -------- -------- -------- --------
Net income (loss) .......................................... (3,614) (2,100) 68 38 (5,608)
Preferred stock dividends accrued ............................ 586 586
-------- -------- -------- -------- --------
Net income (loss) applicable to common stockholders ........ $ (4,200) $ (2,100) $ 68 $ 38 $ (6,194)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
10
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales ................................................... $ $ 67,130 $ 33,498 $ (15,838) $ 84,790
Cost of sales ............................................... 49,546 26,241 (15,838) 59,949
-------- -------- -------- ---------- --------
Gross profit .............................................. 17,584 7,257 24,841
Selling, general and administrative expenses ................ 225 25,080 5,599 (10) 30,894
Other operating income ...................................... 1,275 1,275
-------- -------- -------- ---------- --------
Income (loss) from operations ............................. (225) (6,221) 1,658 10 (4,778)
Interest expense ............................................ (9,786) (1,868) (15) (11,669)
Interest income ............................................. 39 6 45
Other income ................................................ 756 756
-------- -------- -------- ---------- --------
Income (loss) before provision (benefit) for income taxes . (10,011) (7,294) 1,649 10 (15,646)
Provision (benefit) for income taxes ........................ (2,261) (1,903) 252 (3,912)
-------- -------- -------- ---------- --------
Net income (loss) ......................................... (7,750) (5,391) 1,397 10 (11,734)
Preferred stock dividends accrued ........................... 1,312 1,312
-------- -------- -------- ---------- --------
Net income (loss) applicable to common stockholders ....... $ (9,062) $ (5,391) $ 1,397 $ 10 $(13,046)
-------- -------- -------- ---------- --------
-------- -------- -------- ---------- --------
</TABLE>
11
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales .................................................... $ $ 66,556 $ 27,105 $(13,655) $ 80,006
Cost of sales ................................................ 49,578 20,986 (13,655) 56,909
-------- -------- -------- -------- --------
Gross profit ............................................... 16,978 6,119 23,097
Selling, general and administrative expenses ................. 225 24,353 5,856 (64) 30,370
Other operating income ....................................... 1,112 1,112
-------- -------- -------- -------- --------
Income (loss) from operations .............................. (225) (6,263) 263 64 (6,161)
Interest expense ............................................. (9,783) (936) (11) (10,730)
Interest income .............................................. 1 5 6
-------- -------- -------- -------- --------
Income (loss) before provision (benefit) for income taxes .. (10,008) (7,198) 257 64 (16,885)
Provision (benefit) for income taxes ......................... (2,717) (2,133) 123 (4,727)
-------- -------- -------- -------- --------
Net income (loss) .......................................... (7,291) (5,065) 134 64 (12,158)
Preferred stock dividends accrued ............................ 1,172 1,172
-------- -------- -------- -------- --------
Net income (loss) applicable to common stockholders ........ $ (8,463) $ (5,065) $ 134 $ 64 $(13,330)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
12
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ...................................... $ (7,750) $ (5,391) $ 1,397 $ 10 $(11,734)
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization ........................ 628 3,246 301 4,175
Deferred income taxes ................................ (2,261) (2,073) (4,334)
Gain on disposal of assets ........................... (671) (671)
Other ................................................ (530) (530)
Increase (decrease) in cash due to changes in:
Accounts receivable ................................ 30,522 (1,650) 28,872
Inventories ........................................ (36,561) (862) (37,423)
Prepaid expenses and other ......................... (1,134) (237) (1,371)
Accounts payable and accrued expenses .............. 197 (3,227) 1,631 (1,399)
Income taxes payable ............................... (198) 198 143 143
Intercompany account ............................... 9,384 (9,242) (132) (10) --
-------- -------- -------- ------- --------
Net cash (used in) provided by operations .............. -- (24,863) 591 (24,272)
-------- -------- -------- ------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment ........... (3,081) (771) (3,852)
Proceeds from sale of assets ......................... 1,782 1,782
Other ................................................ (239) 202 (37)
-------- -------- -------- ------- --------
Net cash used in investing activities .................. (1,538) (569) (2,107)
-------- -------- -------- ------- --------
Cash flows from financing activities:
Change in revolving loan facilities .................. 18,857 (307) 18,550
Other ................................................ 203 (515) (312)
-------- -------- -------- ------- --------
Net cash provided by (used in) financing activities .... -- 19,060 (822) 18,238
-------- -------- -------- ------- --------
Net decrease in cash and equivalents ................... -- (7,341) (800) (8,141)
Cash and equivalents, beginning of period .............. 7,496 1,513 9,009
-------- -------- -------- ------- --------
Cash and equivalents, end of period .................... $ -- $ 155 $ 713 $ -- $ 868
-------- -------- -------- ------- --------
-------- -------- -------- ------- --------
</TABLE>
13
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ...................................... $ (7,291) $ (5,065) $ 134 $ 64 $(12,158)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operations:
Depreciation and amortization ........................ 708 2,731 219 3,658
Deferred income taxes ................................ (2,717) (2,210) (4,927)
Other ................................................ 292 292
Increase (decrease) in cash due to changes in:
Accounts receivable ................................ 26,953 (2,045) 24,908
Inventories ........................................ (26,757) (789) (27,546)
Prepaid expenses and other assets .................. (113) (56) (297) (466)
Accounts payable and accrued expenses .............. (643) (9,015) 1,997 (7,661)
Income taxes payable ............................... (1) 42 78 119
Intercompany account ............................... 10,414 (9,391) (959) (64)
-------- -------- -------- ------- --------
Net cash provided by (used in) operations .............. 357 (22,476) (1,662) (23,781)
-------- -------- -------- ------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment ........... (7,881) (229) (8,110)
Other ................................................ 167 167
-------- -------- -------- ------- --------
Net cash used in investing activities .................. (7,714) (229) (7,943)
-------- -------- -------- ------- --------
Cash flows from financing activities:
Change in revolving loan facilities .................. 30,240 448 30,688
Other ................................................ (356) -- (295) (651)
-------- -------- -------- ------- --------
Net cash provided by (used in) financing activities .... (356) 30,240 153 30,037
Net increase (decrease) in cash and equivalents ........ 1 50 (1,738) (1,687)
Cash and equivalents, beginning of period .............. 18 91 2,872 2,981
-------- -------- -------- ------- --------
Cash and equivalents, end of period .................... $ 19 $ 141 $ 1,134 $ -- $ 1,294
-------- -------- -------- ------- --------
-------- -------- -------- ------- --------
</TABLE>
14
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Except for the historical information contained
in this Quarterly Report on Form 10-Q, the matters discussed are forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, general
economic and business conditions; industry capacity; industry trends; overseas
expansion; the loss of major customers; changes in demand for the Company's
products; the timing of orders received from customers; cost and availability of
raw materials; dependence on foreign sources of supply; changes in business
strategy or development plans; availability and quality of management;
availability, terms and deployment of capital; and the seasonal nature of the
business. For additional information concerning these and other important
factors that may cause the Company's actual results to differ materially from
expectations and underlying assumptions, please refer to the reports filed by
the Company with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Net sales decreased 0.4% to $42.1 million for the three months ended June 30,
1999 from $42.2 million for the three months ended June 30, 1998. Changes in
normal product prices did not materially impact net sales.
Gross profit of $12.0 million for the three months ended June 30, 1999
approximated the $12.1 million for the three months ended June 30, 1998. Gross
profit as a percentage of sales was 28.5% for the 1999 first quarter compared to
28.6% for the comparable 1998 period. The slight change in gross profit as a
percentage of sales was not materially impacted by change in product pricing.
Selling, general and administrative expenses ("S, G & A expenses") of $14.4
million improved to 34.2% as a percentage of net sales for the three months
ended June 30, 1999 from 34.8% or $14.7 million for the comparable 1998 period.
The 0.6 percentage point decrease in S,G & A expenses to sales for the three
months ended June 30, 1999 primarily reflects a decrease in personnel and
related costs due to consolidation activities accomplished in 1998.
Loss from operations was $1.8 million and $2.0 million for the second quarter of
1999 and 1998, respectively, and included other operating income of $0.6 million
primarily from Farberware license revenue in both periods.
Other income of $0.8 million for the three months ended June 30, 1999,
represents a gain on disposal of undeveloped land.
Interest expense was $6.0 million for the three months ended June 30, 1999
compared to $5.7 million in the same period of 1998. This increase results from
increased borrowings for working capital purposes partially off set by lower
interest rates on the Company's Revolving Credit Facility.
The benefit for income taxes was $1.7 million for the three months ended June
30, 1999 compared to $2.2 million for the three months ended June 30, 1998. The
estimated effective income tax rate of 25% for the three months ended June 30,
1999 compares to a slightly higher 28% rate for the same period in the prior
year.
15
<PAGE>
Net loss applicable to common stockholders for the three month periods ended in
June 30, 1999 and 1998 was $5.9 million and $6.2 million, respectively or $1.56
and $1.64, respectively, per basic and diluted share, on adjusted weighted
average shares of 3,784,018 in both periods.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net sales increased 6.0% to $84.8 million for the six months ended June 30, 1999
from $80.0 million for the six months ended June 30, 1998. This increase is
primarily due to increased sales of a new line of licensed giftware products to
specialty retailers. Changes in normal product prices did not materially impact
net sales.
Gross profit increased 7.6% to $24.8 million for the six months ended June 30,
1999 from $23.1 million for the six months ended June 30, 1998. Gross profit as
a percentage of sales was 29.3% for the first half of 1999 compared to 28.9% for
the comparable 1998 period. The 0.4 point percentage gross profit increase
primarily reflects the higher margin carried by the new line of licensed
giftware which was partially offset by the increased royalty expense related to
this line. The change in gross profit as a percentage of sales was not
materially impacted by change in product pricing.
Selling, general and administrative expenses ("S, G & A expenses") of $30.9
million improved to 36.4% as a percentage of net sales for the six months ended
June 30, 1999 from 38.0% or $30.4 million for the comparable 1998 period. The
1.6 percentage point decrease in S,G & A expenses to sales for the six months
ended June 30, 1999 reflects the growth in sales volume, a decrease in personnel
and related costs due to consolidation activities accomplished in 1998, and the
higher royalty expense noted above.
Loss from operations was $4.8 million and $6.2 million for the first half of
1999 and 1998, respectively, and included other operating income of $1.3 million
and $1.1 million in 1999 and 1998, respectively. The increase in other operating
income is due to increased Farberware license revenue.
Other income represents the gain on disposal of the undeveloped land.
Interest expense was $11.7 million for the six months ended June 30, 1999
compared to $10.7 million in the same period of 1998. This increase results from
increased borrowings for working capital purposes partially off set by lower
interest rates on the Company's Revolving Credit Facility.
The benefit for income taxes was $3.9 million for the six months ended June 30,
1999 compared to $4.7 million for the six months ended June 30, 1998. The
estimated effective income tax rate of 25% for the six months ended June 30,
1999 compares to a slightly higher 28% rate for the same period in the prior
year.
Net loss applicable to common stockholders for the six month periods ended in
June 30, 1999 and 1998 was $13.0 million and $13.3 million, respectively or
$3.45 and $3.52, respectively, per basic and diluted share, on adjusted weighted
average shares of 3,784,018 in both periods.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the six months ended June 30, 1999 was
$24.3 million. The principal use of cash was the customary increase in inventory
in preparation for the fall selling season. Partially offsetting this was the
seasonal collection of accounts receivable. Inventories at June 30, 1999 are at
a higher level compared to the same period in the prior year primarily due to a
decision to schedule production of Rauch Christmas finished goods earlier than
last year to improve shipping performance, and to a higher mix of domestic
versus foreign giftware customer orders for the last half of 1999 which requires
stocking higher levels of inventory at our domestic warehouses.
The Company's working capital requirements are seasonal and tend to be highest
in the period from September through November due to the Christmas selling
season. Accounts receivable tend to decline during December and the first
quarter as receivables generated during the third and fourth quarters are
collected and remain lower until the next peak season beginning in September.
16
<PAGE>
Capital expenditures were approximately $3.9 million for the six months ended
June 30, 1999 and the Company expects to spend approximately $3.1 million during
the remainder of 1999. These expenditures primarily relate to computer equipment
and systems for the warehouse and distribution facility in Mira Loma, CA,
computer equipment and systems for the Company's East Boston office facility,
and machinery, equipment and tools and dies for the Company's manufacturing
facilities.
The Company's Revolving Credit Facility, dated April 16, 1997, amended effective
as of July 31, 1997, December 31, 1997, March 30, 1998 and December 31, 1998,
provides for $130.0 million of borrowings including a $30.0 million sublimit for
the issuance of standby and commercial letters of credit. Borrowings made under
the Revolving Credit Facility bear interest at a rate equal to, at the Company's
option, the Eurodollar Rate plus 225 basis points or the Prime Rate plus 50
basis points. The Revolving Credit Facility expires on April 16, 2002. Pursuant
to the terms of the Revolving Credit Facility as amended, the Company is
required during February and March of each year to maintain excess availability
of at least $25.0 million. The obligations of the Company under the Revolving
Facility are secured by inventory and accounts receivable of the Company and its
domestic subsidiaries and by a pledge of 100% of the domestic subsidiaries' and
at least 65% of the foreign subsidiaries' outstanding capital stock. The
Revolving Credit Facility contains customary covenants for the Company and the
subsidiary borrowers, including but not limited to capital expenditures, and
minimum consolidated net worth on or after December 31, 1997 of at least $1.00
(not in thousands). In addition, the Revolving Credit Facility, as amended as of
December 31, 1998, includes covenants requiring a minimum ratio of earnings
before interest, income taxes, depreciation, amortization, and certain
adjustments ("EBITDA"), as defined, including funded debt to EBITDA and fixed
charge coverage ratios, as defined. The Company is in compliance with the
covenants, as amended, as of June 30, 1999 and for the quarter then ended.
Availability under the Revolving Credit Facility, net of outstanding letters of
credit, was $23.7 million at June 30, 1999.
One of the Company's Puerto Rican subsidiaries has a $1.0 million facility (the
"Facility"), expiring on May 30, 2000. The Facility bears interest at a rate
equal to, at the Company's option, the Eurodollar Rate plus 175 basis points or
the bank's Prime Rate less 25 basis points. Availability under the Facility was
$0.2 million at June 30, 1999.
On June 16, 1999 the Company's C.J. Vander Ltd. subsidiary renewed its overdraft
facility which was entered into on March 16, 1998 ("Overdraft Facility"). The
renewal changed the amount of the borrowings provided under the facility from
Pounds 500 to Pounds 250. Borrowings made under the Overdraft Facility bear
interest at the bank's base rate plus 1%. The Overdraft Facility contains
customary covenants, and borrowings are secured by substantially all of the
assets of C.J.Vander Ltd. The Overdraft is due on demand and expires on August
30, 1999. Availability under the Overdraft Facility was Pounds 222 at June 30,
1999.
The Notes due April 15, 2007, issued in connection with the Merger, require
interest payments to be made semi-annually on April 15 and October 15. The Notes
are general unsecured obligations of the Company and rank pari passu in right of
payment with all current and future unsubordinated indebtedness of the Company,
including borrowings under the Revolving Credit Facility. However, all
borrowings under the Revolving Credit Facility are secured by a first priority
lien on the accounts receivable and inventory of the Company and its domestic
subsidiaries. Consequently, the obligations of the Company under the Notes are
effectively subordinated to its obligations under the Revolving Credit Facility
to the extent of such assets. The Notes are redeemable in whole or in part, at
the Company's option, after April 15, 2002.
The Company's ability to pay dividends is restricted by the terms of the
Revolving Credit Facility and the Note Indenture.
The liquidation preference of the Company's Cumulative Redeemable Preferred
Stock is $1,000 per share plus accrued but unpaid dividends. Holders of the
Cumulative Redeemable Preferred Stock are entitled, subject to the rights of
creditors, in the event of any voluntary or involuntary liquidation of the
Company, to an amount in cash equal to $1,000 for each share outstanding plus
all accrued and unpaid dividends. The rights of holders of the Cumulative
Redeemable Preferred Stock upon liquidation of the Company rank prior to those
of the holders of Syratech Common Stock.
17
<PAGE>
Dividends on shares of Cumulative Redeemable Preferred Stock are cumulative from
the date of issue and are payable when and as may be declared from time to time
by the Board of Directors of the Company. Such dividends accrue on a daily basis
(whether or not declared) from the original date of issue at an annual rate per
share equal to 12% of the original purchase price per share, with such amount to
be compounded annually on each December 31 so that if the dividend is not paid
for any year the unpaid amount will be added to the original purchase price of
the Cumulative Redeemable Preferred Stock for the purpose of calculating
succeeding years' dividends.
The Cumulative Redeemable Preferred Stock is redeemable at any time at the
option of the Company, in whole or in part, at $1,000 per share plus all
accumulated and unpaid dividends, if any, at the date of redemption. Subject to
the Company's existing debt agreements, the Company must redeem all outstanding
Cumulative Redeemable Preferred Stock in the event of a public offering of
equity, a change of control or certain sales of assets.
The Company's level of indebtedness will have several important effects on its
future operations, including (i) a substantial portion of the Company's cash
flow from operations must be dedicated to the payment of interest on its
indebtedness and will not be available for other purposes, (ii) covenants
contained in the Revolving Credit Facility and the indenture governing the Note
will require the Company to meet certain financial tests, and other restrictions
may limit its ability to borrow funds or to dispose of assets and may affect the
Company's flexibility in planning for, and reacting to, changes in its business
including possible acquisition activities, and (iii) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired.
The Company believes that funds generated from operations and borrowings
available under the Revolving Credit Facility will be sufficient to finance the
Company's working capital requirements, provide for all known obligations of the
Company (including the obligations of the Company under the $165.0 million Notes
issued in connection with the Merger and under its operating leases) and fund
planned capital expenditures through December 31, 1999.
YEAR 2000 CONVERSION
The Company has substantially completed its assessment of Year 2000 compliance
and determined the critical systems to evaluate, modify and test. The Company
believes that it has modified the critical systems to comply with Year 2000
requirements and is in the process of modifying and testing certain other
systems that are not Year 2000 compliant. Principal testing of the critical
systems has been successfully completed on schedule and the Company will
continue further testing and certification of these systems as it approaches the
year 2000. The Company currently believes it will be able to modify, replace, or
mitigate all of its affected systems in time to avoid any material detrimental
impact on its operations. If the Company determines that it may be unable to
remediate and properly test affected systems on a timely basis, the Company
intends to develop appropriate contingency plans for any critical systems at the
time such determination is made. While the Company is not presently aware of any
significant exposure that its systems will not be properly remediated on a
timely basis, there can be no assurances that all year 2000 remediation
processes will be completed and properly tested before the year 2000, or that
contingency plans will sufficiently mitigate the risk of a year 2000 readiness
problem.
The Company has communicated with its significant suppliers, customers, and
critical business partners to determine the extent to which the Company may be
vulnerable in the event that those parties fail to properly remediate their own
year 2000 issues. The Company has completed the modification and testing of its
Electronic Data Interchange ("EDI") systems used to process orders and
communicate with certain customers. The Company is able to process 6 digit dates
for customers using older versions of the American National Standards Institute
("ANSI") and Voluntary Inter-industry Communications Standard ("VICS") 3070
specification and is listed as a compliant vendor on the web site of the
National Retail Federation. In addition, the Company is currently processing
8-digit dates (which are inherently Year 2000 compliant) in accordance with the
ANSI and VICS 4010 specification with those customers who are able to accept and
transmit this version. The Company will develop appropriate contingency plans in
the event that a significant
18
<PAGE>
exposure is identified relative to the dependencies on third-party systems.
While the Company is not presently aware of any such significant exposure, there
can be no guarantee that the systems of third-parties on which the Company
relies will be converted in a timely manner, or that a failure to properly
convert by another company would not have a material adverse effect on the
Company. Potential sources of risk include (a) the inability of principal
suppliers to be Year 2000 ready, which could result in delays in product
deliveries from such suppliers, and (b) disruption of the distribution channel,
including ports, transportation vendors, and the Company's own distribution
centers as a result of a general failure of systems and necessary infrastructure
such as electricity supply. The Company believes that its actions with suppliers
will minimize these risks. An interruption of the Company's ability to conduct
its business due to a year 2000 readiness problem could have a material adverse
effect on the Company.
The Company currently believes that the expenditures necessary to be Year 2000
compliant will not be material to its financial condition or results of
operations in any given year. The costs of compliance and estimated completion
dates for the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party modification plans
and other factors. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, and the
ability to locate and correct all relevant computer codes, replace embedded
computer chips in affected systems or equipment; and the actions of governmental
agencies or other third parties with respect to Year 2000 problems.
ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1999, the Company adopted the provisions of Statement of
Opinion No. 98-1, "Accounting for Costs of Computer Software Developed or
Obtained for Internal Use," which requires certain expenditures made for
internal use software to be capitalized. The provisions of this opinion did not
have a material effect on the Company's condensed consolidated financial
statements.
In June 1998, the Financial Accounting Standards Board Issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The new standard requires that all
companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
whether there will be any impact of SFAS No. 133 on the Company's consolidated
financial statements upon adoption, which is required in the first quarter of
2001.
19
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk primarily through its borrowing
activities. The Company's short-term borrowings are substantially all
denominated in U.S. dollars and bear interest at variable rates primarily based
on either a prime rate or the London Interbank Offering Rate ("LIBOR"). The
effect of a 10% change in the prime or LIBOR rate would not have a material
impact on the Company's financial results. The Company also has fixed debt
financing of $165,000 of 11% Senior Notes due April 15, 2007 that had a fair
value of $103,950 as of June 30, 1999 based upon recent private market trades.
There is inherent roll-over risk for these borrowings as they mature and are
renewed at current market rates. The extent of this risk is not quantifiable or
predictable because of the variability of future interest rates and the
Company's future financing requirements. Currently, the Company does not enter
into financial instruments transactions for trading or other speculative
purposes or to manage interest rate exposure, and does not have investments in
debt or equity securities.
The Company transacts sales and purchases primarily in U.S. Dollars and
maintains minimum cash balances denominated in foreign currencies. The Company
does not enter into foreign currency hedge transactions. Through December 31,
1998, foreign currency fluctuations have not had a material impact on the
Company's consolidated financial position or results of operations or cash flows
in any one year and the Company does not believe that its exposure to foreign
currency rate fluctuations is material.
20
<PAGE>
PART II-OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EX-10.1 Letter Agreement between Banco Popular and Wallace
International de Puerto Rico, Inc. dated June 1, 1999.
EX-10.2 Letter Agreement between C.J. Vander Ltd. and Nat West
P.L.C. dated August 5, 1999.
EX-10.3 Employment Agreement dated as of July 8, 1999 between Ami A.
Trauber and the Company.
EX-11 Computation of Net Loss per Common Share.
EX-27 Financial Data Schedule.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the three months ended
June 30, 1999.
21
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
SIGNATURE
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.
Syratech Corporation
Dated: August 13, 1999
/S/ AMI A. TRAUBER
----------------------------------------
Ami A. Trauber
Executive Vice President, Chief Financial
Officer, Treasurer (Principal Financial
and Accounting Officer)
22
<PAGE>
Exhibit 10.1
BANCO POPULAR
June 1, 1999
Mr. E. Merle Randolph
Executive Vice President
Syratech Corporation
PO Box 9114
E. Boston, MA 02128-9114
Dear Mr. Randolph:
We are pleased to inform you that Banco Popular de Puerto Rico has favorably
considered the renewal of the line of credit facilities available to Wallace
International de Puerto Rico, Inc. in the amount of $1,000,000.00, until May 30,
2000.
Please, be advised that the current line of Credit Agreement with amendments and
guaranties will continue in full force and effect.
Cordially,
/s/ Jose Alfredo Moreda
Vice President & Manager
Mayaguez Commercial Banking Center (412)
sdt
c Ami A. Trauber
Executive Vice President, Chief Financial Officer
Syratech Corporation
Pedro J. Rodriguez
Banco Popular de Puerto Rico
<PAGE>
Exhibit 10.2
NATWEST
Private & Confidential
Mr. P Minchin
C J Vander Ltd
Starnhill House
Starnhill Close
Ecclesfield, Sheffield
S35 9TG
5 August 1999
Dear Peter,
YOUR FACILITIES WITH US
Your banking requirements, as set out in Advice of Borrowing Terms (AOBT) dated
19/03/99, are due for review.
To allow for our forthcoming meeting, I have arranged for the present facilities
(excluding those which are subject to separate documentation) to remain
available until 30/08/99.
The facilities remain subject to the terms and conditions specified and referred
to in the AOBT, Including our right to repayment on demand at any time.
I look forward to meeting with you on 16/08/99 when I will be accompanied by
Steve Palmer our International Banking Manager to discuss your future
requirements in more detail.
Yours sincerely
/s/ A Tyas
Corporate Manager
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 8, 1999, between SYRATECH
CORPORATION, a Delaware corporation (the "Company"), and AMI A. TRAUBER (the
"Executive").
The Executive has been acting as a Vice President, the
Treasurer and the Chief Financial Officer of the Company, since February 1, 1998
(the "Initial Employment Date"). The Board of Directors of the Company (the
"Board") has requested that the Executive enter into this Agreement so that the
Company may (i) be assured of the services of the Executive on a full-time basis
for a period of not less than three years from the Initial Employment Date, and
(ii) have the benefit of the Executive's services as an advisor, and the
Executive's covenant not to compete with the Company, for a period (determined
as hereinafter provided) following the Executive's term of full-time employment.
In consideration of the covenants and agreements herein
contained, the parties agree as follows:
1. EMPLOYMENT AND ACCEPTANCE; TERM.
1.1 The Company hereby employs the Executive, and the
Executive hereby accepts employment from the Company, for a term of service
(including a term of full-time employment and a term of advisory service)
determined in accordance with this Agreement.
1.2 The Executive's term of full-time employment
pursuant to this Agreement shall be deemed to have commenced on the Initial
Employment Date and,
<PAGE>
2
unless otherwise terminated pursuant to Section 4 of this Agreement, shall
continue until the later of (i) the third anniversary of the Initial Employment
Date, or (ii) the thirtieth (30th) day following receipt of a written notice of
termination, given either by the Company to the Executive or by the Executive to
the Company, which notice shall state that it is being given pursuant to Section
1.2 of this Agreement. The Executive's term of advisory service (the "Advisory
Period") shall begin on the day next following the last day of the Executive's
term of full-time employment in accordance with this Agreement (the "Full Time
Ending Date") and shall end on the earliest to occur of (a) the third
anniversary of the Full Time Ending Date, (b) that date which shall follow the
Full Time Ending Date by a number of days equal to the product obtained by
multiplying 183 by the number of full years ("year" being defined as a period of
365 calendar days) of the Executive's full-time employment elapsed between the
Initial Employment Date and the Full Time Ending Date, and (c) that date which
shall be the 183rd day following the giving of notice to the Executive by the
Company (which notice may be given at any time during the final 183 days of the
Executive's term of full-time employment or at any time thereafter) that it
elects to terminate the Executive's Advisory Period. The earliest to occur of
such dates is hereinafter called the "Advisory Period Termination Date."
2. DUTIES AND AUTHORITY.
2.1 DUTIES DURING TERM OF FULL-TIME EMPLOYMENT.
During the Executive's term of full-time employment the Executive shall devote
his full working time and energies to the business and affairs of the Company.
The Executive agrees during such term to use his best efforts, skill and
abilities to promote the Company's interests; to
<PAGE>
3
serve as a director and officer of the Company if elected by the
stockholders or Board; to serve as a director and officer of any corporation
which is a subsidiary of the Company if elected by the stockholders or board
of directors of such subsidiary corporation ; and to perform such duties
(consistent with his status as set forth below in this Section 2) as may be
assigned to him by the Board or by the Chief Executive Officer of the Company
(the "CEO") or his designee. During his term of full-time employment, the
Executive shall not, directly or indirectly, without the prior consent of the
members of the Board, acting unanimously, render any services to any other
person, or acquire any interests of any type in any other person, in conflict
with his full-time, exclusive position as Chief Financial Officer of the
Company; provided, however, that the foregoing shall not be deemed to
prohibit the Executive from (a) acquiring, solely as an investment and
through market purchases, securities of any entity which are registered under
Section 12 of the Securities Exchange Act of 1934 and which are publicly
traded so long as he is not part of any control group of such entity, (b)
acquiring, solely as an investment, any securities of, or interests in, any
other entity so long as he remains a passive investor in such entity and does
not become part of any control group thereof and so long as such entity has
no material business connection with the Company or any of its subsidiaries,
(c) serving as a director of any other entity that is not in competition with
the Company or any of its subsidiaries and which has no material business
connection with the Company or any of its subsidiaries including any
connection as supplier or customer; or (d) devoting such time and energy as
the Executive deems appropriate consistent with his duties hereunder to the
work of eleemosynary institutions of the Executive's choosing.
<PAGE>
4
2.2 AUTHORITY. Subject to the direction and control
of the Board, during the Executive's term of full-time employment the Executive
shall be a Vice President and the Chief Financial Officer of the Company and, as
such, shall have the power and authority now provided for in Sections 5.8 and
5.10 of Article 5 of the Bylaws of the Company. The Executive will perform his
services subject only to the direction and control of the Board and the CEO or
the CEO's designee and will report to the CEO or his designee and, if requested
to do so, to the Board.
2.3 DUTIES DURING ADVISORY PERIOD. During the
Executive's Advisory Period (as determined in accordance with Section 1.2), the
Executive will provide such advisory services concerning the business, affairs
and management of the Company as may be reasonably requested by the Board and
the CEO or his designee but shall not be required to devote more than the
equivalent of 40 full working days each year to such services, which shall be
performed at a time and place selected by the Company that is reasonably
convenient to the Executive. The Executive may, subject to the restrictions of
Sections 7 and 8, engage in other employment during the Advisory Period, and the
Company shall use its best efforts to require his advisory services under this
Agreement at times and places compatible with his other employment or with his
private activities. If requested by the Board and elected, the Executive shall
serve, without additional compensation, as a member of the Board and/or
Executive Committee and other committees of the Board during the Advisory
Period. During the Advisory Period the Company shall supply the Executive with
such secretarial and other services (including
<PAGE>
5
transportation and the use of office facilities) as shall be necessary to the
performance of his duties under this Section.
3. COMPENSATION.
3.1 BASE SALARY DURING TERM OF FULL-TIME EMPLOYMENT.
The Company shall pay or cause to be paid to the Executive during the term of
full-time employment a base salary of not less than Three Hundred Twenty-Five
Thousand Dollars ($325,000) per annum, payable in monthly or more frequent
installments in accordance with the Company's regular payroll practices for
senior executives. It is expressly contemplated that the Company may, in its
discretion but without any obligation, increase the Executive's base salary for
one or more specified and limited periods during the term of full-time
employment.
3.2 BASE SALARY DURING ADVISORY PERIOD. The Company
shall pay or cause to be paid to the Executive during the Advisory Period annual
compensation in an amount equal to 25% of the Executive's base salary. As used
in this Section 3.2, the term "base salary" shall mean the average annual base
salary paid by the Company to the Executive during the Executive's term of
full-time employment. Such compensation shall be paid in monthly or more
frequent installments in accordance with the Company's regular payroll practices
for senior executives. Amounts paid to the Executive pursuant to this Section
3.2 shall not diminish or otherwise adversely affect any retirement benefits to
which the Executive might otherwise be entitled.
3.3 OTHER BENEFITS.
<PAGE>
6
6
3.3.1 During the term of full-time
employment the Executive shall remain eligible to participate and shall be
entitled to participate in any pension, profit-sharing, bonus, stock award,
stock option or similar plan or program of the Company now existing or
established hereafter, to the extent that he is eligible under the general
provisions thereof. The retirement benefits accorded to certain key executives
pursuant to individual contracts shall not be deemed to be a pension plan for
purposes of this Section 3.3.1.
3.3.2 During the Executive's term of
full-time employment and during the Advisory Period, the Executive shall also
be entitled to participate on the same basis as other senior executives or
retired senior executives of the Company, as applicable, in any group
insurance, hospitalization, medical, health and accident, disability, or
similar plans and programs (collectively, "Insurance Plans") of the Company
now existing or hereafter established to the extent that he is eligible under
the general provisions thereof; provided, however, that in the event the
Advisory Period commences prior to the 65th anniversary of then Executive's
date of birth, the Company, at its expense, shall cause the Executive's
coverage under all such Insurance Plans that were in effect at the
termination of the Executive's term of full-time employment to continue until
the 65th anniversary of the Executive's date of birth or, if earlier, the
termination of the Advisory Period, as if the Executive had remained a
full-time employee of the Company until such date.
4. TERMINATION OF SERVICE.
<PAGE>
7
4.1 DISCHARGE FOR CAUSE. The Board may discharge the
Executive for cause at any time and thereby terminate the Executive's term of
service. Such discharge shall be effected by written notice (the "Discharge
Notice") to the Executive which shall specify the reasons for the Executive's
discharge and the effective date thereof. As used herein, the term "for cause"
shall mean (i) criminal conduct (evidenced by a conviction other than a
conviction for a traffic violation or other minor offense), (ii) willful
violation of any material policy of the Company (including, for example, the
Company's Securities Trading Policy or its Sexual Harassment Policy) or (iii)
willful violation of written directions from the Board or the CEO or his
designee (which directions must not be materially inconsistent with the
provisions of this Agreement). Upon termination pursuant to this Section 4.1,
this Agreement and all benefits hereunder shall terminate, except (a) that such
discharge and termination shall not affect any vested rights that the Executive
may have at the time of discharge and termination pursuant to any insurance or
other death benefit (excluding the death benefit provided for in Section 4.3),
bonus, retirement, severance pay or stock award plans or arrangements of the
Company or any subsidiary, or any stock option plan or any options granted
thereunder, which rights shall continue to be governed by the provisions of such
plans and arrangements, and (b) as otherwise provided in Sections 6, 7 and 8.
4.2 DISABILITY. The Executive's term of full-time
employment may be terminated by the Company if the Executive becomes disabled
during his employment hereunder so that he is unable substantially to perform
his services hereunder for six consecutive months. Such termination shall be
determined by resolution of the
<PAGE>
8
Board after the expiration of said six months, said termination to be
operative on the effective date determined in such resolution, which such
effective date shall not be sooner than thirty days after written notice to
the Executive of the adoption of such resolution. The Company shall pay the
Executive his full compensation through such effective date. Amounts paid to
the Executive pursuant to this Section 4.2 shall not (i) diminish or
otherwise adversely affect the retirement benefits, if any, to which the
Executive might otherwise be entitled, or (ii) affect any rights which the
Executive may have at the time of termination pursuant to any insurance or
other death benefit, bonus, retirement, severance pay or stock award plans or
arrangements of the Company or any subsidiary, or any stock option plan or
any options granted thereunder, which rights shall continue to be governed by
the provisions of such plans and arrangements. No Advisory Period shall
follow a termination of the Executive's employment pursuant to this Section
4.2.
4.3 DEATH. If the Executive shall die during t he
term of this Agreement, this Agreement and all benefits hereunder shall
terminate except that (i) if death occurs during the term of full-time
employment, the Executive's Estate shall be entitled to receive the Executive's
final base salary as defined in Section 3.2 to the last day of the sixth month
next following the month in which his death occurs; (ii) if death occurs during
the Advisory Period, the Executive's Estate shall be entitled to receive the
compensation being paid to him under Section 3.2 immediately before his death to
the last day of the sixth month next following the month in which his death
occurs or, if earlier, the month in which the Advisory Period otherwise would
have ended pursuant to Section 1.2; (iii) such termination shall not affect any
vested rights which the Executive
<PAGE>
9
may have at the time of his death pursuant to any insurance or other death
benefit, bonus, retirement, or stock award plans or arrangements of the
Company or any subsidiary, or any stock option plan or any vested options
granted thereunder, which rights shall continue to be governed by the
provisions of such plans and arrangements.
4.4 DISCHARGE WITHOUT CAUSE; DIMINUTION OF DUTIES AND
RESPONSIBILITIES. The Company retains the right to discharge the Executive
without cause at any time by written notice of termination of full-time
employment given to the Executive, which notice shall become effective no sooner
than 30 days after receipt thereof. Notwithstanding the failure of the Company
to give such notice, if, following a change of control of the Company, the
Executive shall not be continued during the term of his full-time employment
hereunder as a Vice President and Chief Financial Officer of the Company with
the responsibilities, powers and authority provided in Section 2.2, the
Executive shall have the right to terminate his term of full-time employment
under this Agreement by giving written notice to the Company at any time within
ninety days after such event. The Executive's term of full-time employment shall
terminate on the effective date specified in such notice which effective date
shall be no sooner than thirty days following the date on which such notice is
given. If the Company discharges the Executive without cause, or, if the
Executive terminates his term of full-time employment pursuant to this Section,
the Executive shall continue to receive, as severance compensation, all of the
compensation provided in Section 3.1 hereof, and shall be entitled to all of the
benefits which he would otherwise be entitled to receive (including, but not
limited to, the benefits referred to in Section 3.3 hereof), for and during the
period ending
<PAGE>
10
on the third anniversary of the Initial Employment Date; and, moreover, from
and after the date when such payments cease, the Executive shall be relieved
of his obligations under Section 8 of this Agreement. For the purpose of
determining the other benefits which the Executive would otherwise have
received under Section 3.3 during each year of the term of full-time
employment had such termination not occurred, it shall be assumed that the
Executive would have received benefits (including executive bonuses but
excluding stock awards, stock options and other similar incentive
compensation) equal to those that he received with respect to the last fiscal
year of the Company ended during the term of his full-time employment. In
addition, the Company shall at its expense cause the Executive's coverage
under all of the Company's Insurance Plans which were in effect at the
termination of the Executive's term of full-time employment to continue until
his 65th birthday or, if earlier, the third anniversary of the Initial
Employment Date, as if he had remained a full-time employee of the Company
until such date.
5. EXPENSES.
Upon submission of proper vouchers, which shall be subject to
review by the CEO or his designee, the Company will pay or reimburse the
Executive for all transportation, hotel and living expenses incurred by the
Executive on business trips taken with the approval of the CEO or his designee
outside the metropolitan Boston area, and for all other business and
entertainment expenses reasonably incurred by him in connection with the
business of the Company and its subsidiaries during the term of his service
hereunder (including his term of full-time employment and the Advisory Period),
all in
<PAGE>
11
accordance with Company policies in effect on the date hereof and/or hereafter
from time to time during the term of this Agreement.
6. INDEMNIFICATION.
The Company will indemnify the Executive and his legal
representatives to the extent permitted by the laws of the State of Delaware and
the existing By-laws of the Company or any other applicable laws or the
provisions of any other corporate document of the Company, and the Executive
shall be entitled to the protection of any insurance policies the Company may
elect to maintain generally for the benefit of its directors and officers,
against all costs, charges and expenses whatsoever incurred or sustained by him
or his legal representatives in connection with any action, suit or proceeding
to which he or his legal representatives may be made a party by reason of his
being or having been a director or officer of the Company or any of its
subsidiaries, or action taken purportedly on behalf of the Company or any of its
subsidiaries. The Company will, upon request by the Executive, promptly advance
or pay any amounts for costs, charges or expenses (including but not limited to
legal fees and expenses incurred by counsel retained by the Executive) in
respect of his right to indemnification hereunder, subject to later
determination as to the Executive's ultimate right to receive such advances. The
provisions of this Section 6 will survive any termination of this Agreement.
7. PROTECTION OF CONFIDENTIAL INFORMATION.
7.1 COVENANT. The Executive acknowledges that his
employment by the Company will, throughout the term of this Agreement, bring him
into close contact with many confidential affairs of the Company, including
information about
<PAGE>
12
costs, profits, markets, sales, products, key personnel, pricing policies,
operational methods, technical processes and other business affairs and
methods, plans for future development and other information not readily
available to the public. The Executive further acknowledges that the services
to be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character. The Executive further acknowledges
that the business of the Company is international in scope, and that the
nature of the Executive's services, position and expertise are such that he
is capable of competing with the Company from nearly any location in the
Western Hemisphere. In recognition of the foregoing, the Executive covenants
and agrees that he will keep secret all material confidential matters of the
Company that are not otherwise in the public domain and will not (otherwise
than in the ordinary course of the Company's business) intentionally disclose
them to any Competitive Business (as defined in Section 8.3) either during or
after the term of this Agreement except with the Company's prior written
consent.
7.2 SPECIFIC REMEDY. If the Executive commits a
material breach of any of the provisions of Section 7.1, the Company shall have,
in addition to the other remedies provided by law, the right and remedy to have
such provisions specifically enforced by any court having equity jurisdiction,
it being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company.
7.3 The provisions of this Section 7 shall survive
any termination of this Agreement.
<PAGE>
13
8. NON-COMPETITION.
8.1 COVENANT. (a) In recognition of the
considerations described in Section 7.1 and in the preamble to this Agreement,
the Executive agrees that he shall not, without the written permission of the
Company or unless relieved of his obligations hereunder in accordance with
Section 4.4, (i) enter into the employ of or render any services to any person,
firm, corporation or other entity engaged in any "Competitive Business" (as
defined in Section 8.3), (ii) engage in any Competitive Business for his own
account or (iii) become interested in any Competitive Business as an individual,
partner, shareholder, creditor, director, officer, principal, agent, employee,
trustee, consultant, advisor or in any other relationship or capacity; provided,
however, that nothing contained in this Section 8.1 shall be deemed to prohibit
the Executive from acquiring, solely as an investment through market purchases,
up to five percent (5%) of the voting securities of any entity which are
registered under Section 12 of the Securities Exchange Act of 1934 and which are
publicly traded so long as he is not, and does not become, part of any control
group of such corporation.
(b) The provisions of paragraph (a) of this
Section shall apply for and during the term of the Executive's service
(including the term of full-time employment and the Advisory Period, if any)
hereunder and, following termination of the Executive's full-time employment
(including, without limitation, termination of the Executive's full-time
employment pursuant to Section 4.1) or the end of the Advisory Period, if any,
for an additional period of eighteen months or such lesser number of days as
shall be equal to the number of days that shall have elapsed between the Initial
<PAGE>
14
Employment Date and the Executive's last day of full-time employment, provided,
however, that if the Executive's term of full time employment shall be
terminated pursuant to Section 4.4, the Executive's obligations under Section 8
shall be limited as provided in Section 4.4.
8.2 SPECIFIC REMEDY. In the event of a breach or
threatened breach by the Executive of Section 8.1, the Company shall, in
addition to the other remedies provided by law, have the right and remedy to
have such provisions specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any breach or threatened
breach of Section 8.1 will cause irreparable injury to the Company and that
money damages will not provide an adequate remedy to the Company.
Notwithstanding anything to the contrary contained in this Agreement, all
options and other incentive awards granted to the Executive and all
retirement, insurance and other benefits to which the Executive is entitled
under any plan or agreement of the Company shall continue to be governed by
the provisions of such plan or agreement upon the occurrence of any of the
events referred to in Section 8.1.
8.3 "COMPETITIVE BUSINESS". The phrase "Competitive
Business" as used in this Agreement shall mean any line of business that is
substantially the same as any line of any operating business engaged in or
conducted by the Company and which, during, or at the expiration of, the term of
the Executive's full-time employment, the Company was engaged in or conducting,
or had, to the knowledge of the Executive, definitively planned to engage in or
conduct, and which during the fiscal year of the Company next preceding the date
as of which the determination of competitive stature
<PAGE>
15
needs to be made constituted at least 3% of the gross sales of the Company
and its subsidiaries. The Executive may, without being deemed in violation of
Section 8.1, become a partner or employee of, or otherwise acquire an
interest in, a stock or business brokerage firm, a consulting or advisory
firm, an investment banking firm, or a similar organization (whether in
partnership, corporate or other form) which, as part of its business, trades
or invests in securities of Competitive Businesses or which represents or
acts as agent or advisor for Competitive Businesses, but only on the
condition that the Executive shall not personally render any services in
connection with any such Competitive Business, either directly to such
Competitive Business or other persons or to his firm in connection therewith.
9. NOTICES.
All notices, requests, consents and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram, or mailed first-class, postage prepaid, by registered or certified
mail, as follows (or to such other or additional address as either party
shall designate by notice in writing to the other in accordance herewith):
9.1 If to the Company:
Syratech Corporation
175 McClellan Highway
East Boston, Massachusetts 02128-9114
Attention: Chief Executive Officer
(with a copy, similarly addressed
but Attention: Legal Department)
<PAGE>
16
9.2 If to the Executive, to him at his address on the
personnel records of the Company.
10. GENERAL.
10.1 GOVERNING LAW. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts applicable to agreements made and to be performed entirely in
Massachusetts, except that the provisions of Section 6 shall be governed by the
laws of the State of Delaware.
10.2 CAPTIONS. The Section headings contained herein
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
10.3 ENTIRE AGREEMENT. This Agreement sets forth the
entire agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, between the parties.
10.4 NO OTHER REPRESENTATIONS. No representation,
promise or inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
10.5 ASSIGNABILITY. This Agreement, and the
Executive's rights and obligations hereunder, may not be assigned by the
Executive. The Company may assign its rights, together with its obligations,
hereunder in connection with any sale,
<PAGE>
17
transfer or other disposition of all or substantially all of its business and
assets; and such rights and obligations shall inure to, and be binding upon, any
successor to the business or substantially all of the assets of the Company,
whether by merger, purchase of stock or assets or otherwise, which shall
expressly assume such obligations.
10.6 AMENDMENTS; WAIVERS. This Agreement may be
amended, modified, superseded, canceled, renewed or extended and the terms or
covenants hereof may be waived, only by a written instrument executed by both of
the parties hereto, or in the case of a waiver, by the party waiving compliance.
The failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach of any other term or
covenant contained in this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
SYRATECH CORPORATION
By: /s/David V. Harkins
Director
/s/Ami A. Trauber
<PAGE>
EXHIBIT 11
SYRATECH CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER COMMON SHARE (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
BASIC AND DILUTED LOSS PER SHARE:
Net loss per common share ....... $ (1.56) $ (1.64) $ (3.45) $ (3.52)
-------- -------- -------- ---------
-------- -------- -------- ---------
Weighted average number of
shares outstanding ............ 3,784 3,784 3,784 3,784
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY INFORMATION EXTRACTED FROM THE SYRATECH
CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AS FILED AS PART OF THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH QUARTERLY REPORT ON FORM 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 868
<SECURITIES> 0
<RECEIVABLES> 48,082
<ALLOWANCES> 6,826
<INVENTORY> 124,378
<CURRENT-ASSETS> 191,051
<PP&E> 127,423
<DEPRECIATION> 43,628
<TOTAL-ASSETS> 289,232
<CURRENT-LIABILITIES> 98,602
<BONDS> 165,000
0
23,186
<COMMON> 38
<OTHER-SE> (19,438)
<TOTAL-LIABILITY-AND-EQUITY> 289,232
<SALES> 84,790
<TOTAL-REVENUES> 84,790
<CGS> 59,949
<TOTAL-COSTS> 59,949
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,669
<INCOME-PRETAX> (15,646)
<INCOME-TAX> (3,912)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,046)
<EPS-BASIC> (3.45)
<EPS-DILUTED> (3.45)
</TABLE>
