<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 SEPTEMBER 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)
<TABLE>
<S> <C>
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)
</TABLE>
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
SEPTEMBER 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 September 30, 1999
and December 31, 1998 1
Condensed Consolidated Statements of Operations for the three
and nine month periods ended September 30, 1999 and 1998 2
Condensed Consolidated Statements of Cash Flows for the nine
month periods ended September 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>
September 30, December 31,
ASSETS 1999 1998
-------------------- --------------------
<C> <C> <C>
Current assets:
Cash and equivalents ....................................... $ 3,198 $ 9,009
Accounts receivable, net ................................... 95,206 70,128
Inventories ................................................ 122,350 86,955
Deferred income taxes ...................................... 19,104 15,866
Prepaid expenses and other ................................. 2,585 1,673
Properties held for sale ................................... 749 2,292
-------------------- --------------------
Total current assets ................................... 243,192 185,923
Property, plant and equipment, net ............................ 83,231 83,611
Purchase price in excess of net assets acquired, net ........... 6,368 6,549
Other assets, net ............................................. 7,612 8,634
-------------------- --------------------
Total .................................................. $ 340,403 $ 284,717
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable ................ $ 92,466 $ 46,201
Accounts payable ............................................ 22,703 13,883
Accrued expenses ............................................ 12,615 10,802
Accrued interest ............................................ 8,799 4,108
Accrued compensation ........................................ 2,949 2,844
Accrued advertising ......................................... 3,421 3,053
Income taxes payable ........................................ 1,175 418
-------------------- --------------------
Total current liabilities .............................. 144,128 81,309
Long-term debt ................................................ 165,000 165,000
Deferred income taxes ......................................... 19,409 19,409
Pension liability ............................................. 2,615 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 $5,842 and $3,874 in 1999 and 1998,
respectively ............................................... 23,842 21,874
Common stock, $.01 par value, 20,000,000 shares
authorized; 3,784,018 shares issued and outstanding ...... 38 38
Retained deficit ........................................... (14,814) (6,376)
Accumulated other comprehensive income ..................... 185 499
-------------------- --------------------
Total stockholders' equity ............................. 9,251 16,035
-------------------- --------------------
Total .................................................. $ 340,403 $ 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 September 30, Nine Months Ended September 30,
---------------------------------- -------------------------------
1999 1998 1999 1998
----------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales ............................................. $ 112,587 $ 104,617 $ 197,377 $ 184,623
Cost of sales ......................................... 80,712 75,409 140,661 132,318
------------ --------------- ------------- -------------
Gross profit ..................................... 31,875 29,208 56,716 52,305
Selling, general and administrative expenses ............ 19,243 17,432 50,137 47,802
Other operating income ................................ 875 1,393 2,150 2,505
------------ --------------- ------------- -------------
Income from operations ........................... 13,507 13,169 8,729 7,008
Interest expense ...................................... (6,517) (6,354) (18,186) (17,084)
Interest income ....................................... 31 16 76 22
Other income .......................................... 756(1)
------------ --------------- ------------- -------------
Income (loss) before provision (benefit) for income
taxes .............................................. 7,021 6,831 (8,625) (10,054)
Provision (benefit) for income taxes .................. 1,756 1,909 (2,156) (2,818)
------------ --------------- ------------- -------------
Net income (loss) ................................ 5,265 4,922 (6,469) (7,236)
Preferred stock dividends accrued ..................... 657 586 1,969 1,758
------------ --------------- ------------- -------------
Net income (loss) applicable to common stockholders. $ 4,608 $ 4,336 $ (8,438) $ (8,994)
============ =============== ============= =============
Basic and diluted income (loss) per share:
Net income (loss) per common share ................... $ 1.22 $ 1.15 $ (2.23) $ (2.38)
============ =============== ============= =============
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>
Nine Months Ended September 30,
-------------------------------------------
1999 1998
-------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................. $ (6,469) $ (7,236)
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Depreciation and amortization ..................... 6,282 5,648
Deferred income taxes ............................. (3,238) (3,634)
Gain on disposal of assets ........................ (788)
Other ............................................. (350) (372)
Increase (decrease) in cash due to changes in:
Accounts receivable ........................... (25,078) (22,062)
Inventories ................................... (35,395) (29,552)
Prepaid expenses and other .................... (912) 157
Accounts payable and accrued expenses ......... 15,797 9,995
Income taxes payable .......................... 757 584
---------------- ---------------
Net cash used in operations .......................... (49,394) (46,472)
---------------- ---------------
Cash flows from investing activities:
Purchases of property, plant and equipment .......... (4,907) (10,637)
Proceeds from sale of assets ......................... 2,351
Other ............................................... 62 18
---------------- ---------------
Net cash used in investing activities .................. (2,494) (10,619)
---------------- ---------------
Cash flows from financing activities:
Change in revolving loan facilities ................ 46,265 57,385
Other .............................................. (188) (611)
---------------- ---------------
Net cash provided by financing activities ............. 46,077 56,774
---------------- ---------------
Net decrease in cash and equivalents ................... (5,811) (317)
Cash and equivalents, beginning of period .............. 9,009 2,981
---------------- ---------------
Cash and equivalents, end of period .................... $ 3,198 $ 2,664
================ ===============
</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>
Nine Months Ended September 30,
----------------------------------------
1999 1998
----------------- -----------------
<S> <C> <C>
Cash paid during the period for:
Interest............................................. $ 12,406 $ 11,960
================= =================
Income taxes......................................... $ 543 $ 842
================= =================
Supplemental schedule of non-cash financing activities:
Accrued cumulative redeemable
preferred stock dividends ........................... $ 1,969 $ 1,758
================= =================
</TABLE>
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Raw materials............... $ 14,498 $ 12,953
Work-in-process............. 6,513 6,484
Finished goods.............. 101,339 67,518
----------------- -----------------
Total............. $ 122,350 $ 86,955
================= =================
</TABLE>
4
<PAGE>
4. INCOME TAXES
The provision (benefit) for income taxes for the three and nine month periods
ended September 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
(pound)500 to (pound)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 February
22, 2000.
6. COMPREHENSIVE LOSS
Comprehensive loss consists of the following:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Net loss applicable to common stockholders ..... $ (8,438) $ (8,994)
Other comprehensive income: ...................
Foreign currency translation adjustments ....... (314) (270)
---------- ----------
Comprehensive loss ............................. $ (8,752) $ (9,264)
---------- ----------
</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>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
Nine Months Ended September 30,
-------------------------------------
1999 1998
--------------- -----------------
<S> <C> <C>
Tabletop and Giftware .............. $ 155,107 $ 135,484
Seasonal ........................... 42,270 49,139
--------------- -----------------
Total .............................. $ 197,377 $ 184,623
=============== =================
</TABLE>
10. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The following supplemental condensed consolidating financial statements as of
and for the periods ending September 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 to 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
SEPTEMBER 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 ............................ $ 274 $ 2,924 $ 3,198
Accounts receivable, net ........................ 85,915 9,291 95,206
Inventories ..................................... 116,042 6,267 $ 41 122,350
Deferred income taxes ........................... $ 12,556 6,548 19,104
Prepaid expenses and other ...................... 1,841 744 2,585
Properties held for sale ......................... 318 431 749
------------- -------- ------- --------- ----------
Total current assets ........................ 12,556 210,938 19,657 41 243,192
Property, plant and equipment, net ................. 79,261 4,019 (49) 83,231
Purchase price in excess of net assets acquired, net.. 6,368 6,368
Other assets, net .................................. 7,473 139 7,612
Investment ......................................... 180,192 (180,192) -
============= ============= ============ ============== ===============
Total ....................................... $200,221 $296,706 $23,676 $(180,200) $340,403
============= ============= ============ ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable ....... $ 92,044 $ 422 $ 92,466
Accounts payable ................................. 15,019 7,684 22,703
Accrued expenses ................................. $ 235 12,060 320 12,615
Accrued interest ................................. 8,369 430 8,799
Accrued compensation ............................. 2,625 324 2,949
Accrued advertising .............................. 3,421 3,421
Income taxes payable ............................. 6 1,175 $ (6) 1,175
------------- ------------- ------------ -------------- ---------------
Total current liabilities ................... 8,604 125,605 9,925 (6) 144,128
Long-term debt ..................................... 165,000 165,000
Deferred income taxes .............................. 6,157 13,252 19,409
Pension liability ................................... 2,615 2,615
Intercompany (receivable) payable .................. (20,453) 34,315 (13,862) - -
Stockholders' equity ............................... 40,913 120,919 27,613 (180,194) 9,251
------------- ------------- ------------ -------------- ---------------
Total ....................................... $200,221 $296,706 $23,676 $(180,200) $340,403
============= ============= ============ ============== ===============
</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 SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales ........................................... $ $ 87,913 $ 40,479 $ (15,805) $ 112,587
Cost of sales ....................................... 64,480 32,037 (15,805) 80,712
---------- -------- -------- ---------- ---------
Gross profit ...................................... 23,433 8,442 31,875
Selling, general and administrative expenses ........ 113 14,237 4,907 (14) 19,243
Other operating income .............................. 875 875
---------- -------- -------- ---------- ---------
Income (loss) from operations ..................... (113 10,071 3,535 14 13,507
Interest expense .................................... (4,894) (1,609) (14) (6,517)
Interest income ..................................... 8 23 31
Other income ........................................
----------- -------- -------- ---------- ----------
Income (loss) before provision (benefit) for
income taxes .................................... (5,007) 8,470 3,544 14 7,021
Provision (benefit) for income taxes ................ (1,286) 2,428 614 1,756
------------ -------- -------- ---------- ---------
Net income (loss) ................................. (3,721) 6,042 2,930 14 5,265
Preferred stock dividends accrued ................... 657 657
----------- -------- -------- ---------- ---------
Net income (loss) applicable to common
stockholders ..................................... $ (4,378) $ 6,042 $ 2,930 $ 14 $ 4,608
=========== ======== ======= ========= =========
</TABLE>
9
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales ........................................... $ $ 72,320 $ 44,260 $ (11,963) $ 104,617
Cost of sales ....................................... 52,750 34,622 (11,963) 75,409
---------- -------- -------- ---------- ---------
Gross profit ...................................... 19,570 9,638 29,208
Selling, general and administrative expenses ........ 113 11,444 5,918 (43) 17,432
Other operating income .............................. 1,393 1,393
---------- -------- -------- ---------- ---------
Income (loss) from operations ..................... (113) 9,519 3,720 43 13,169
Interest expense .................................... (4,893) (1,433) (28) (6,354)
Interest income ..................................... 1 (1) 16 16
----------- -------- -------- ---------- ----------
Income (loss) before provision (benefit) for
income taxes .................................... (5,005) 8,085 3,708 43 6,831
Provision (benefit) for income taxes ................ (1,172) 2,458 623 1,909
------------ -------- -------- ---------- ---------
Net income (loss) ................................. (3,833) 5,627 3,085 43 4,922
Preferred stock dividends accrued ................... 586 586
----------- -------- -------- ---------- ---------
Net income (loss) applicable to common
stockholders ..................................... $ (4,419) $ 5,627 $ 3,085 $ 43 $ 4,336
=========== ======== ======== ========== ========
</TABLE>
10
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales ............................... $ $155,043 $ 73,977 $ (31,643) $ 197,377
Cost of sales .......................... 114,026 58,278 (31,643) 140,661
------------- --------------- --------------- --------------- -----------
Gross profit ...................... 41,017 15,699 56,716
Selling, general and administrative
expenses .............................. 338 39,317 10,506 (24) 50,137
Other operating income ................. 2,150 2,150
------------- --------------- --------------- --------------- -----------
Income (loss) from operations ....... (338) 3,850 5,193 24 8,729
Interest expense ......................... (14,680) (3,477) (29) (18,186)
Interest income ........................ 47 29 76
Other income ........................... 756 756
------------- --------------- --------------- --------------- -----------
Income (loss) before provision (benefit)
for income taxes (15,018) 1,176 5,193 24 (8,625)
Provision (benefit) for income taxes ..... (3,547) 525 866 (2,156)
------------- --------------- --------------- --------------- -----------
Net income (loss) ................... (11,471) 651 4,327 24 (6,469)
Preferred stock dividends accrued ........ 1,969 1,969
------------- --------------- --------------- --------------- -----------
Net income (loss) applicable to common
stockholders ........................ $(13,440) $ 651 $ 4,327 $ 24 $ (8,438)
============= =============== =============== =============== ===========
</TABLE>
11
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- --------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales .................................... $ $ 138,876 $ 71,365 $ (25,618) $ 184,623
Cost of sales ............................... 102,328 55,608 (25,618) 132,318
------------- --------------- ---------------- --------------- ---------------
Gross profit ........................... 36,548 15,757 52,305
Selling, general and administrative expenses .. 338 35,797 11,774 (107) 47,802
Other operating income ...................... 2,505 2,505
-------------- --------------- ---------------- --------------- ---------------
Income (loss) from operations .......... (338) 3,256 3,983 107 7,008
Interest expense ............................ (14,676) (2,369) (39) (17,084)
Interest income ............................. 1 21 22
------------- --------------- ---------------- --------------- ---------------
Income (loss) before provision (benefit)
for income taxes ........................ (15,013) 887 3,965 107 (10,054)
Provision (benefit) for income taxes ........ (3,889) 325 746 (2,818)
------------- --------------- ---------------- --------------- ---------------
Net income (loss) ....................... (11,124) 562 3,219 107 (7,236)
Preferred stock dividends accrued ........... 1,758 1,758
------------- --------------- ---------------- --------------- ---------------
Net income (loss) applicable to common
stockholders .......................... $(12,882) $ 562 $ 3,219 $ 107 $ (8,994)
============= =============== ================ =============== ===============
</TABLE>
12
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 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) ........................... $ (11,471) $ 651 $ 4,327 $ 24 $ (6,469)
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization ............ 1,067 4,758 457 6,282
Deferred income taxes .................... (3,547) 309 (3,238)
Gain on disposal of assets ................ (788) (788)
Other ..................................... (350) (350)
Increase (decrease) in cash due to changes in:
Accounts receivable .................. (20,655) (4,423) (25,078)
Inventories .......................... (34,362) (1,033) (35,395)
Prepaid expenses and other ........... 113 (752) (273) (912)
Accounts payable and accrued expenses .. 4,733 5,928 5,136 15,797
Income taxes payable ................. (198) 198 757 757
Intercompany account .................. 9,386 (6,781) (2,581) (24) -
------------- --------------- ---------------- -------------- ---------------
Net cash (used in) provided by operations ... 83 (51,844) 2,367 (49,394)
------------- --------------- ---------------- -------------- ---------------
Cash flows from investing activities:
Purchases of property, plant and equipment... (4,073) (834) (4,907)
Proceeds from sale of assets ............... 2,351 2,351
Other ..................................... (66) 128 62
------------- --------------- --------------- -------------- ---------------
Net cash used in investing activities ....... (1,788) (706) (2,494)
------------- --------------- --------------- -------------- ---------------
Cash flows from financing activities:
Change in revolving loan facilities ....... 46,201 64 46,265
Other ..................................... (83) 209 (314) (188)
------------- --------------- --------------- -------------- ---------------
Net cash provided by (used in) financing
activities................................... (83) 46,410 (250) 46,077
------------- --------------- --------------- -------------- ---------------
Net decrease in cash and equivalents ........ (7,222) 1,411 (5,811)
Cash and equivalents, beginning of period ... 7,496 1,513 9,009
============= =============== =============== ============== ===============
Cash and equivalents, end of period .......... $ - $ 274 $ 2,924 $ - $ 3,198
============= =============== =============== ============== ===============
</TABLE>
13
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 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) ......................................... $ (11,124) $ 562 $ 3,219 $ 107 $ (7,236)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operations:
Depreciation and amortization .......................... 1,063 4,217 368 5,648
Deferred income taxes .................................. (3,889) 255 (3,634)
Other .................................................. (372) (372)
Increase (decrease) in cash due to changes in:
Accounts receivable ................................ (9,851) (12,211) (22,062)
Inventories ........................................ (29,267) (285) (29,552)
Prepaid expenses and other assets ................... (113) 390 (120) 157
Accounts payable and accrued expenses .............. 3,893 1,040 5,062 9,995
Income taxes payable ............................... (1) 154 431 584
Intercompany account ............................... 10,509 (13,710) 3,308 (107)
----------- ------------- --------------- ----------- ----------
Net cash provided by (used in) operations ................. 338 (46,582) (228) (46,472)
----------- ------------- --------------- ----------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment .............. (10,425) (212) (10,637)
Other ................................................... 20 (2) 18
----------- ------------- ------------- ------------ ---------
Net cash used in investing activities ..................... (10,405) (214) (10,619)
----------- ------------- --------------- ------------ ---------
Cash flows from financing activities:
Change in revolving loan facilities ..................... 57,010 375 57,385
Other ................................................... (356) 15 (270) (611)
----------- ------------- --------------- --------
Net cash provided by (used in) financing activities ........ (356) 57,025 105 56,774
----------- ------------- --------------- --------
Net increase (decrease) in cash and equivalents ........... (18) 38 (337) (317)
Cash and equivalents, beginning of period ................. 18 91 2,872 2,981
=========== ============= =============== =========== ========
Cash and equivalents, end of period ........................ $ - $ 129 $ 2,535 $ - $ 2,664
=========== ============= =============== ============ ========
</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 SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
Net sales increased 7.6% to $112.6 million for the three months ended
September 30, 1999 from $104.6 million for the three months ended September
30, 1998. Higher sales of candle items and increased sales of licensed
giftware products to specialty retailers was partially offset by lower sales
of certain seasonal products. Changes in normal product prices did not
materially impact net sales.
Gross profit increased 9.1% to $31.9 million for the three months ended
September 30, 1999 from $29.2 million for the three months ended September
30, 1998. Gross profit as a percentage of sales was 28.3% for the 1999 third
quarter compared to 27.9% for the comparable 1998 period. The increase of 0.4
percentage points primarily reflects the higher margin carried by the line of
licensed giftware, which was offset by the increased royalty expense related
to this line. Gross profit as a percentage of sales was not materially
impacted by changes in product pricing.
Selling, general and administrative expenses ("S, G & A expenses") of $19.2
million increased to 17.1% as a percentage of net sales for the three months
ended September 30, 1999 from 16.7% or $17.4 million for the comparable 1998
period. The 0.4 percentage point increase in S, G & A expenses to sales for
the three months ended September 30, 1999 primarily reflects the higher
royalty expense noted above and higher provisions for bad debts.
Income from operations of $13.5 million and $13.2 million for the three
months ended September 30, 1999 and September 30, 1998, respectively,
included other operating income of $0.9 million and $1.4 million,
respectively, resulting primarily from Farberware license revenue. The $0.5
million decrease in other operating income was due to non-recurring income
recorded in 1998 for recovery of accounts receivable related to 1997 sales of
discontinued Farberware product.
Interest expense was $6.5 million for the three months ended September 30,
1999 compared to $6.4 million in the same period of 1998. This increase
results from increased borrowings for working capital purposes partially
offset by lower interest rates on the Company's Revolving Credit Facility.
The provision for income taxes was $1.8 million for the three months ended
September 30, 1999 compared to $1.9 million for the three months ended
September 30, 1998. The estimated effective income tax rate of 25% for the
three months ended September 30, 1999 compares to a slightly higher 28% rate
for the same period in the prior year.
15
<PAGE>
Net income applicable to common stockholders for the three month periods
ended in September 30, 1999 and 1998 was $4.6 million and $4.3 million,
respectively or $1.22 and $1.15, respectively, per basic and diluted share,
on adjusted weighted average shares of 3,784,018 in both periods.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
Net sales increased 6.9% to $197.4 million for the nine months ended
September 30, 1999 from $184.6 million for the nine months ended September
30, 1998. This increase is primarily due to increased sales of a new line of
licensed giftware products to specialty retailers and increased sales of
candle giftware, partially offset by decreased sales of certain seasonal
products. Changes in normal product prices did not materially impact net
sales.
Gross profit increased 8.4% to $56.7 million for the nine months ended
September 30, 1999 from $52.3 million for the nine months ended September 30,
1998. Gross profit as a percentage of sales was 28.7% for the nine months
ended September 30, 1999 compared to 28.3% for the comparable 1998 period.
The 0.4 percentage point increase primarily reflects the higher margin
carried by the new line of licensed giftware which was 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 $50.1
million improved to 25.4% as a percentage of net sales for the nine months
ended September 30, 1999 from 25.9% or $47.8 million for the comparable 1998
period. The 0.5 percentage point decrease in S, G & A expenses to sales for
the nine months ended September 30, 1999 reflects the growth in sales volume,
a decrease in personnel and related costs due to consolidation activities
accomplished in 1998, increased bad debt expense, and the higher royalty
expense noted above.
Income from operations was $8.7 million and $7.0 million for the nine months
ended September 30, 1999 and 1998, respectively, and included other operating
income of $2.2 million and $2.5 million in 1999 and 1998, respectively. The
decrease in other operating income is due to the 1998 collection of
previously reserved doubtful accounts receivable noted above.
Other income of $0.8 million for the nine months ended September 30, 1999,
represents a gain on disposal of undeveloped land.
Interest expense was $18.2 million for the nine months ended September 30,
1999 compared to $17.1 million in the same period of 1998. This increase
results from increased borrowings for working capital purposes partially
offset by lower interest rates on the Company's Revolving Credit Facility.
The benefit for income taxes was $2.2 million for the nine months ended
September 30, 1999 compared to $2.8 million for the nine months ended
September 30, 1998. The estimated effective income tax rate of 25% for the
nine months ended September 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 nine month periods ended
in September 30, 1999 and 1998 was $8.4 million and $9.0 million,
respectively or $2.23 and $2.38, 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 nine months ended September 30,
1999 was $49.4 million. The principal uses of cash were the normal seasonal
increase in accounts receivable and inventory. Inventories at September 30,
1999 are at a higher level compared to the same period in the prior year
primarily due to a higher mix of domestic versus foreign giftware customer
orders for the remainder 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 $4.9 million for the nine months
ended September 30, 1999 and the Company expects to spend approximately $2.1
million during the remainder of 1999. These expenditures include 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 September 30, 1999 and for the quarter then ended.
Availability under the Revolving Credit Facility, net of outstanding letters
of credit, was $27.1 million at September 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 fourteen thousand dollars at September 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 (pound)500 to (pound)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 February 22, 2000. Availability under the Overdraft
Facility was (pound)78 at September 30, 1999.
The Notes due April 15, 2007, 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. In the future, the
Company may from time to time repurchase Notes on the open market as may be
allowed under the terms of its Revolving Credit Facility, as amended, and the
terms of its Senior Notes Indenture.
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
Notes 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 has entered into an agreement for the sale of its Revere,
Massachusetts warehouse and distribution facility which is expected to be
completed during the fourth quarter of 1999. Distribution activities will
continue in this facility, under a short-term lease, until relocated.
Proceeds from the sale, after expenses, will be used to fund capital
expenditures and reduce the Company's indebtedness.
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
and under its operating leases) and fund planned capital expenditures through
December 31, 1999.
YEAR 2000 CONVERSION
The Company has 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 all of 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 exposure is
18
<PAGE>
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's expenditures for Year 2000 compliance have not been material to its
financial condition or results of operations in any given year.
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 $115,500 as of September 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 Advice of Borrowing Terms between C.J. Vander Ltd. and
Nat West P.L.C. dated August 27, 1999.
EX-10.2 Purchase and Sale Agreement dated August 27, 1999, between
175 Amlegion Revere Realty Trust and Lyme Properties LLC.
EX-11 Computation of Net Income (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
September 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: November 15, 1999
/s/ AMI A. TRAUBER
-------------------------------------------------
Ami A. Trauber
Executive Vice President, Chief Financial Officer,
Treasurer (Principal Financial and
Accounting Officer)
22
<PAGE>
INDEX TO EXHIBITS
FILED WITH SYRATECH CORPORATION
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1999
EXHIBIT NO.
EX-10.1 Advice of Borrowing Terms between C.J. Vander Ltd. and
Nat West P.L.C. dated August 27, 1999.
EX-10.2 Purchase and Sale Agreement dated August 27, 1999
between 175 Amlegion Revere Realty Trust and Lyme
Properties LLC.
EX-11 Computation of Net Loss per Common Share.
EX-27 Financial Data Schedule.
<PAGE>
EX-10.1
ADVICE OF BORROWING TERMS
RELATIONSHIP OFFICE: South Yorkshire Corporate DATE: 27th August 1999
Business Centre
BORROWER(S) REGISTERED NUMBER:
C J Vander limited 763852
We intend that the facilities listed in Part 1 of the attached Facility Schedule
(the "on-demand facilities") should remain available to the borrower(s) until 22
February 2000 and all facilities should be reviewed on or before that date. The
facilities are, however, subject to the following:
- - the terms and conditions below,
- - the specific conditions applicable to an individual facility as detailed
in the Facility Schedule,
- - the Security detailed in the attached Security Schedule, and
- - the attached General Terms.
ALL AMOUNTS OUTSTANDING ARE REPAYABLE ON DEMAND WHICH MAY BE MADE BY US AT OUR
DISCRETION AT ANY TIME AND THE FACILITIES MAY BE WITHDRAWN, REDUCED, MADE
SUBJECT TO FURTHER CONDITIONS OR OTHERWISE VARIED BY US GIVING NOTICE IN
WRITING.
CONDITIONS:
The following conditions must be satisfied at all times while the facilities are
outstanding, but this will not affect our right to demand repayment at any time:
- - Monthly management accounts to be provided to us within 21 days of the end
of the month to which they relate; to include Profit & Loss, Balance Sheet
and Aged Debtor/Creditor listings with suitable commentary / explanations
re any divergence from budget.
- - Lombard Natwest Commercial Services to have undertaken debtor book review
by February 2000.
- - Binding Letter of Comfort from Syratech to be provided within one month.
- - The group facility is to only be set up following the Guarantees and
Mortgage Debenture being signed.
- - Facilities remain available subject to our agreed lending formula
calculated on the following basis:
[Debtors LESS THAN 3 months + Stock] x 40% to cover utilised facilities
in a ratio GREATER THAN OR EQUAL TO 2:1
Given the current lack lustre trading of C J Vander Ltd and insolvent balance
sheet footings {ie treating the parental support as a long term liability},
whilst we will continue to extend existing levels of support on the basis of the
clear integrity of the parent undertaking, we must reserve our rights to an
increase in the interest rate margin charged to 2% above the Banks Base Rate
from time to time {currently 5.0%}.
/s/ A. Tyas
Corporate Manager
For and on behalf of
National Westminster Bank Plc
<PAGE>
ACCEPTANCE:
To signify your agreement to the terms and conditions outlined above please sign
and return the enclosed copy of this Advice of Borrowing Terms within 28 days.
FORM OF ACCEPTANCE
I accept the facility/facilities on the above terms and conditions and confirm
that I have been authorized by the Board(s) of Directors of the Borrower(s) to
sign this Form of Acceptance on behalf of the Borrower(s).
By (name and title): /s/ Peter H. Minchin, Director of Finance Date 13/9/99
For and on behalf of: C J Vander Limited
2
<PAGE>
FACILITY SCHEDULE
PART 1 - FACILITIES REPAYABLE ON DEMAND:
<TABLE>
<CAPTION>
GROUP COMPOSITE FACILITY
- ---------------------------------------------- ----------------------------------------------- --------------------------
<S> <C> <C>
Accounts included in the NAME: ACCOUNT NUMBER:
Group Facility C. J Vander Limited 29885477
Arrangement: International Silver Company Limited 29922224
- ---------------------------------------------- --------------------------------------------------------------------------
Limit: Gross L250,000
- ---------------------------------------------- --------------------------------------------------------------------------
Limit: Net L250,000
- ---------------------------------------------- --------------------------------------------------------------------------
Purpose: To finance working capital / Issue of Documentary Credits
- ---------------------------------------------- --------------------------------------------------------------------------
Repayment: Fully fluctuating
- ---------------------------------------------- --------------------------------------------------------------------------
1st Debit Interest Rate: 1.00% above the Bank's Base rate for the overdraft only
- ---------------------------------------------- --------------------------------------------------------------------------
2nd Debit Interest Rate: 4.00% above the Bank's Base rate on borrowing in excess of agreed
facilities for the overdraft only
- ---------------------------------------------- --------------------------------------------------------------------------
Interest Payable: Quarterly
- ---------------------------------------------- --------------------------------------------------------------------------
Arrangement Fee: L2,500 was debited on 6/10/98, for the full year period to 6/10/99
- ---------------------------------------------- --------------------------------------------------------------------------
Excess Fees: We will be entitled to charge an excess fee at the Bank's
published rate for each day any agreed limit is exceeded (see our
"Services & Charges for Business Customers" brochure for details).
- ---------------------------------------------- --------------------------------------------------------------------------
</TABLE>
The following Facilities are included within the Group Composite Facility Limit
arrangement.
<TABLE>
<CAPTION>
OVERDRAFT: BASE RATE
- ---------------------------------------------- --------------------------------------------------------------------------
<S> <C>
Account Number 29885477; sort code 56 00 09
- ---------------------------------------------- --------------------------------------------------------------------------
Name of Borrower C J Vander Limited
- ---------------------------------------------- --------------------------------------------------------------------------
Limit: Composite within L250,000
- ---------------------------------------------- --------------------------------------------------------------------------
Purpose: To finance working capital/periodic sterling silver purchases
- ---------------------------------------------- --------------------------------------------------------------------------
Repayment: Fully fluctuating
- ---------------------------------------------- --------------------------------------------------------------------------
1st Debit Interest Rate: 1% above the Bank's Base rate
- ---------------------------------------------- --------------------------------------------------------------------------
2nd Debit Interest Rate: 4% above the Bank's Base rate on borrowing overL250,000
or in excess of agreed facilities.
- ---------------------------------------------- --------------------------------------------------------------------------
Interest Payable: Quarterly
- ---------------------------------------------- --------------------------------------------------------------------------
Arrangement Fee: L2,500 was debited on 6/10/98, for the full year period to 6/10/99.
L1,250 due on 6/10 to cover period to 22/2/2000
- ---------------------------------------------- --------------------------------------------------------------------------
Excess Fees: We will be entitled to charge an excess fee at the Bank's published
rate for each day any agreed limit is exceeded (see our "Services and
Charges for Business Customers" brochure for details).
- ---------------------------------------------- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DOCUMENTARY CREDITS
- ---------------------------------------------- --------------------------------------------------------------------------
<S> <C>
Name of Borrower: C J Vander Limited
- ---------------------------------------------- --------------------------------------------------------------------------
Limit: Composite within L250,000
- ---------------------------------------------- --------------------------------------------------------------------------
Purpose: Documentary Letters of Credit
- ---------------------------------------------- --------------------------------------------------------------------------
Terms of Credit: As appropriate to each document
- ---------------------------------------------- --------------------------------------------------------------------------
Documents required Application form to be given for each document
- ---------------------------------------------- --------------------------------------------------------------------------
Other Conditions: To not exceed Composite facility which also includes overdraft
- ---------------------------------------------- --------------------------------------------------------------------------
Fees: Subject to separate tariff which will have been agreed with you in
advance.
- ---------------------------------------------- --------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CHEQUE NEGOTIATIONS
- ---------------------------------------------- --------------------------------------------------------------------------
<S> <C>
Name of Borrower: C J Vander Limited
- ---------------------------------------------- --------------------------------------------------------------------------
Limit: L10,000
- ---------------------------------------------- --------------------------------------------------------------------------
Purpose: Negotiation of Foreigh Cheues with Recourse
- ---------------------------------------------- --------------------------------------------------------------------------
Fees: Subject to separate tariff, calculated on sterling value of cheque.
Information available upon request or at the time the service is
provided.
- ---------------------------------------------- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT RISK
- ---------------------------------------------- --------------------------------------------------------------------------
<S> <C>
Name of Borrower: C J Vander Limited
- ---------------------------------------------- --------------------------------------------------------------------------
Limit/Frequency: L200,000 per month
- ---------------------------------------------- --------------------------------------------------------------------------
Type and Purpose: Payroll and creditor payments via BACs
- ---------------------------------------------- --------------------------------------------------------------------------
</TABLE>
4
<PAGE>
SECURITY SCHEDULE
We rely on the security detailed below [and require additional security where
specified] to repay, on demand, all your current and future liabilities [both
actual and contingent] to us. These liabilities include, without limitation,
those incurred by you under the facility(ies) specified in the Facility
Schedule.
<TABLE>
<CAPTION>
- ------------------------------ ------------------------------------------ -----------------------------------
DATE EXECUTED/NEW: SECURITY GIVEN/TO BE GIVEN BY:
- ------------------------------ ------------------------------------------ -----------------------------------
<S> <C> <C>
27/09/89 Cross Guarantee Structure between C J Vander Ltd Roberts
& Belk Ltd, John Biggin Ltd,
Modern Silverware Products Ltd,
Vander Properties Ltd and C J
Vander (Antiques) Ltd.
- ------------------------------ ------------------------------------------ -----------------------------------
13/01/74 Mortgage Debenture Fixed and Floating charge over all
company assets given by C J
Vander Ltd
- ------------------------------ ------------------------------------------ -----------------------------------
11/11/85 Supplemental Charge Specific charge over book debts
of C J Vander Ltd
- ------------------------------ ------------------------------------------ -----------------------------------
30/01/74 Mortgage Debenture Debenture Fixed & Floating charge
over all company assets given
by Roberts & Belk Ltd.
- ------------------------------ ------------------------------------------ -----------------------------------
04/09/91 Supplemental Charge Specific charge over book debts of
Roberts & Belk Ltd.
- ------------------------------ ------------------------------------------ -----------------------------------
26/04/78 Mortgage Debenture Fixed & Floating charge over all
company assets given by John
Biggin Ltd.
- ------------------------------ ------------------------------------------ -----------------------------------
12/03/92 Mortgage Debenture Fixed & Floating charge over all
company assets given by Modern
Silverware Products Ltd.
- ------------------------------ ------------------------------------------ ------------------------------------
27/09/89 Mortgage Debenture Fixed & Floating charge over all
company assets given by C J Vander
(Antiques) Ltd.
- ------------------------------ ------------------------------------------ ------------------------------------
To come Cross guarantee between C J Vander Ltd &
International Silver Co. Ltd
- ------------------------------ ------------------------------------------ ------------------------------------
To come Mortgage Debenture incorporating an International Silver Co. Ltd
equitable charge over Vander House.
- ------------------------------ ------------------------------------------ ------------------------------------
</TABLE>
5
<PAGE>
EX -10.2
PURCHASE AND SALE AGREEMENT
1. PARTIES
This 27th day of August, 1999, Faye A. Florence, Leonard Florence and
E. Merle Randolph, Trustees of 175 Amlegion Realty Trust, u/d/t dated April 10,
1995, and recorded with the Suffolk County Registry of Deeds in Book 19689, Page
295, with an address c/o Syratech Corporation, 175 McClellan Highway, P.O. Box
9114, E. Boston, MA 01228-9114 (hereinafter referred to as "Seller") agrees to
sell and Lyme Properties, LLC, On The Common, P.O. Box 266, Lyme, NH 03768,
(hereinafter referred to as "Buyer"), agrees to buy, upon the terms hereinafter
set forth, the premises described in Paragraphs 2 and 3 below.
2. DESCRIPTION
The land commonly known as and numbered 135 American Legion Highway,
Revere, Massachusetts, more particularly described in EXHIBIT A attached hereto
and hereby made a part hereof together with all buildings thereon, improvements
thereto and appurtenances thereof (the "Premises").
3. TITLE DEED
The Premises are to be conveyed by quitclaim deed to Buyer,
which deed shall convey a good and clear record and marketable title thereto,
free from all encumbrances, except:
(a) Provisions of all applicable building, zoning, health,
land use control, or other laws, ordinances or regulations which may affect the
use, maintenance or ownership of the Premises.
<PAGE>
(b) Such real estate and personal property taxes for the
current fiscal tax year as are not due and payable at the time of the closing,
which the Buyer shall assume and agree to pay.
(c) Any liens for municipal betterments payable after June 18,
1999, which at the time of closing the Buyer shall assume and agree to pay by
execution of such instruments as Seller may require.
(d) (i) Any covenant, restriction, easement, or other matter
of record recorded with the Suffolk County Registry of Deeds prior to June 18,
1999, (ii) any covenant, restriction, easement, tenancy or other matter of
record recorded with said Deeds after June 18, 1999, to which the Buyer has not
objected as set forth in Paragraph 8 hereof and (iii) the following leases: (1)
a lease dated November 12, 1992 by and between Syroco, Inc. and Oceanair, Inc.
(the "Oceanair Lease"); (2) a lease dated July 11, 1994 by and between Syroco,
Inc. and Trend-Lines, Inc. (the "Trend-Lines Lease"); and (3) a lease to be
dated as of the Closing Date hereof by and between Buyer and Syratech
Corporation (the "Syratech Lease ", and together with the Oceanair Lease and
Trend-Lines Lease, collectively the "Leases").
4. SELLER'S REPRESENTATIONS AND COVENANTS.
Seller hereby covenants with Buyer that:
(a) LEASE AMENDMENTS, ETC. After the date hereof and continuing to the
Closing Date, Seller shall not amend, modify or terminate, or waive any
obligation of a tenant under, any Lease, or enter into any new lease or
occupancy arrangement with respect to all or any part of the Premises, without,
in each instance, obtaining the prior written consent of Buyer, which consent
Buyer may withhold or delay in the Buyer's sole discretion.
-2-
<PAGE>
(b) OTHER AGREEMENTS. Prior to the Closing Date, Seller shall not (i)
enter into any new agreement which will affect in any material respect the use
or operation of the Premises after the Closing Date and which is not cancelable
upon more than thirty (30) days' notice without premium or penalty or (ii)
amend, modify, renew or terminate any Ancillary Agreement (as hereinafter
defined), without, in each instance, obtaining Buyer's prior written consent,
which consent Buyer may withhold or delay in Buyer's sole discretion.
(c) NOTICES. During the term of this Agreement, Seller shall promptly
deliver to Buyer true and complete copies of any notices received from or given
by Seller to: (a) any tenant under a Lease; or (b) the parties to the Ancillary
Agreements.
(d) ORGANIZATION AND POWER. Seller is a nominee trust validly existing
under the laws of The Commonwealth of Massachusetts and has full power and
authority to own its assets, including the Premises, to carry on the business in
which it is engaged and to perform the transactions contemplated by this
Agreement. At the time of closing, Seller will deliver to Buyer a Trustee's
Certificate in recordable form.
(e) DUE AUTHORIZATION; EFFECT OF TRANSACTION. No provision of the
charter documents of Seller, or of any agreement, instrument or understanding or
judgment, decree, injunction, rule or regulation to which Seller is a party or
by which it is bound, has been or will be violated by the execution and delivery
by Seller of this Agreement or by the performance or satisfaction of any
agreement or condition herein contained upon its part to be performed or
satisfied; and all requisite authorizations and consents for such execution,
delivery, performance and satisfaction by a judicial or administrative body,
governmental authority or other party have been duly obtained.
-3-
<PAGE>
(f) LITIGATION. The Seller has not received notice of any action or
proceeding (i) which questions the validity of this Agreement or any action
taken or to be taken pursuant hereto, (ii) which involves the business,
operation, affairs or condition of the Premises, (iii) which involves
condemnation or eminent proceedings against any part of the Premises or (iv)
which involves the Leases.
(g) LEASES, ETC. Seller has not entered into any agreement, option or
lease, or other claim for occupancy of the Premises other than the Oceanair
Lease and the Trend-Lines Lease, complete copies of which are attached hereto as
Exhibit B. Except as set forth on Exhibit B, no Lease has been amended and each
Lease constitutes the entire agreement between Seller and the applicable tenant
thereunder with respect to the matters set forth therein. Seller has not
received any notice from any tenant claiming a default by Seller under any Lease
or any other condition giving rise to either a right of set off against the
payment of rent or a right to terminate any Lease by a tenant and, to the best
of Seller's knowledge, both Seller and the tenants under the Leases have
performed all material obligations thereunder. The Rent Roll attached hereto as
Exhibit C accurately sets forth the date through which rent has been paid under
each Lease and the security deposit paid and held pursuant to each Lease.
(h) ANCILLARY AGREEMENTS. Seller has not entered into, any employment,
management, operating, service or maintenance agreements relating to the
Premises, except for the agreements attached hereto as Exhibit D (the "Ancillary
Agreements"). The copies of the Ancillary Agreements heretofore made available
by Seller to Buyer for examination, are complete copies thereof, have not been
amended except as evidenced by amendments similarly delivered, and constitute
the entire agreement between Seller and the respective other parties
-4-
<PAGE>
thereto in respect of the subject matter thereof, and there are no other
material agreements of a similar nature affecting the Premises.
5. PURCHASE PRICE
The agreed purchase price for said Premises is Twenty-Nine
Million Five Hundred Thousand and 00/100 Dollars ($29,500,000.00). A
non-refundable deposit of Three Hundred Thousand and 00/100 Dollars
($300,000.00) (the "Initial Deposit") has been paid by the Buyer prior to this
date. Two Million Six Hundred Fifty Thousand and 00/100 Dollars ($2,650,000.00)
have been paid as an additional deposit on this date (the "Additional Deposit"),
(the Initial Deposit and Additional Deposit shall collectively be referred to as
the "Deposit") and is non-refundable except in the event of a default by Seller
pursuant to Section 17 below. The remainder of the purchase price, as set forth
above, is to be paid on the Closing Date in immediately available funds, or at
Seller's option, by certified or bank check or by wire transfer.
6. TIME FOR PERFORMANCE; DELIVERY OF DEED
Such deed and other documents to be delivered by Seller and Buyer
hereunder at the time of closing shall be delivered at the offices of Hutchins,
Wheeler & Dittmar, 101 Federal Street, Boston, Massachusetts 02110 at 10 o'clock
A.M. ninety (90) days from the date hereof (or, in the event such date falls on
a weekend or holiday, to the next business day thereafter) (the "Closing Date"),
unless otherwise extended as hereinafter provided. The purchase price shall be
held in escrow pending a rundown of title and recording of Seller's deed. Time
is of the essence of this Agreement.
-5-
<PAGE>
7. POSSESSION AND CONDITION OF PREMISES
On the Closing Date, Seller shall deliver to Buyer full possession of
the Premises, free and clear of all tenants and occupants, except for the
tenants under the Leases, the Premises to be then in the same condition as they
now are (except that Buyer consents to the installation of a new sign panel to
the pylon sign located at the Premises), reasonable wear and tear excepted.
Seller will cooperate with Buyer and shall use reasonable efforts to obtain
estoppel certificates in the form of Exhibit E hereto dated not more than 15
days prior to the Closing Date executed by the tenants under the Oceanair Lease
and Trend-Lines Lease, and a commercially reasonable Subordination,
Nondisturbance and Attornment Agreement from each tenant.
8. EXTENSION TO PERFECT TITLE OR MAKE PREMISES CONFORM
In the event any defects of title have arisen after June 18, 1999,
which can be cured by the payment of money, Buyer shall have the right to cure
the same prior to closing, but shall not be obligated to expend more than
Twenty-Five Thousand and 00/100 Dollars ($25,000.00), and any amount so expended
shall be credited against the purchase price payable by Buyer. If there are any
such after-arising defects in title which cannot be cured by the payment of
money, Buyer shall notify Seller in writing of the same at least thirty (30)
days prior to the Closing Date and Seller shall be obligated to use reasonable
efforts to cure the same. If despite Seller's reasonable efforts, Seller cannot
cure any such defect, Seller shall have no further obligation to Buyer
concerning title and Buyer shall have the right to waive any such after-arising
defects in title and take title to the Premises subject thereto, or Buyer may
elect to terminate this Agreement. In no event shall Seller's obligations to use
reasonable efforts to cure any title defect require the expenditure of more than
Twenty-Five Thousand and 00/100 Dollars ($25,000.00). Anything
-6-
<PAGE>
herein to the contrary notwithstanding, such limitation shall not apply to
voluntary encumbrances granted or assumed by Seller. If the Seller shall be
unable to give title or to make conveyance, or to deliver possession of the
Premises, all as herein stipulated, or if at the time of the delivery of the
deed the Premises do not conform with the provisions hereof, then the Seller
shall use reasonable efforts to remove any defects in title as provided by
Paragraph 4(d) and this Paragraph 8, or to deliver possession as provided
herein, or to make the said Premises conform to the provisions hereof, as the
case may be, in which event the time for performance shall be extended for a
period of thirty (30) days, or, in the event such date falls on a weekend or
holiday, to the next business day thereafter.
9. FAILURE TO PERFECT TITLE OR MAKE PREMISES CONFORM
If at the expiration of the extended time for performance the Seller
shall have failed to remove any defects in title as set forth herein, deliver
possession, or make the Premises conform, as the case may be, all as herein
agreed, then, at the Buyer's option, any payments made under this Agreement,
except for the Initial Deposit which the Seller shall be entitled to keep, shall
be forthwith refunded to Buyer and all other obligations of the parties hereto
shall cease and this Agreement shall be void and without recourse to the parties
hereto.
10. BUYER'S ELECTION TO ACCEPT TITLE
Notwithstanding anything in this Agreement to the contrary, the Buyer
shall have the election at either the original or any extended time for
performance, to accept such title as the Seller can deliver to the Premises and
to pay therefor the full purchase price without deduction, in which case the
Seller shall convey such title.
-7-
<PAGE>
11. ACCEPTANCE OF DEED
The acceptance and recording of a deed by the Buyer shall be deemed to
be a full performance and discharge of every agreement and obligation herein
contained or expressed, and Buyer thereafter shall have no right or claim
against Seller with respect to this Agreement or the Premises, including,
without limitation, any claim relating to the condition of the Premises or any
state of facts regarding the Premises, including any set forth in this
Agreement, whether or not known to the Seller or discoverable by the Seller at
the time of the execution of the Agreement, at the time of the delivery of the
deed, or at any other time. Buyer agrees that its purchase of the Premises is
made on an "as-is" basis.
12. USE OF PURCHASE MONEY TO CLEAR TITLE
To enable the Seller to make conveyance as herein provided, the Seller
may, at the time of delivery of the deed, use the purchase money or any portion
thereof to clear the title of any or all encumbrances or interests and the
parties may make arrangements for the delivery and recording of any such
discharges after delivery of the deed in accordance with prevailing conveyancing
practices.
13. ADJUSTMENTS
The following are to apportioned as of the Closing Date:
(a) rents and additional rents under the Leases to the extent
that the same have been collected. If any tenant is in arrears in the payment of
rent as of the Closing Date, rents received from such tenant after the Closing
Date shall be applied in the following priority; (i) first of the month in which
the Closing Date occurs, (ii) the period following Closing Date until
-8-
<PAGE>
the Buyer shall be current in its collection from such tenant and (iii) then to
the period prior to the Closing Date which amount shall be remitted to the
Seller or credited against rental payments due from the Seller to the Buyer
under the Syratech Lease.
(b) all unapplied security deposits will be transferred to the
Buyer.
(c) all water, sewer, real estate taxes, fuel, value and other
customarily apportioned items will be adjusted as of the Closing Date in
accordance with local custom.
(d) all CAM and percentage rent charges shall be adjusted
between the parties hereto post-closing only when and as received by the Buyer.
The Buyer shall provide to the Seller reasonably detailed accountings of any and
all monies so received attributable to CAM and percentage rent by March 1, 2000.
The cost of all transfer taxes arising out of the recording of the deed in
connection with this transaction shall be borne by the Seller. The costs of
title search and certification, title insurance (if any) and recording costs
arising out of this transaction shall be borne in accordance with prevailing
conveyancing practices in Suffolk County, Massachusetts.
14. ADJUSTMENT OF UNASSESSED AND ABATED TAXES
If the amount of said taxes is not known at the time of the delivery of
the deed, they shall be apportioned on the basis of the taxes assessed for the
preceding year, with a reapportionment as soon as the new tax rate and valuation
can be ascertained; and, if the taxes which are to be apportioned shall
thereafter be reduced by abatement, the amount of such abatement, less the
reasonable cost of obtaining the same, shall be apportioned between the parties,
provided that neither party shall be obligated to institute or prosecute
proceedings for an abatement except as herein agreed. The provisions of this
Paragraph 14 shall survive delivery of the deed hereunder.
-9-
<PAGE>
15. BROKERAGE
The Buyer and Seller represent and warrant that neither has dealt with
a broker or agent other than Nordblom Company, with respect to this transaction
or with respect to the Premises. Each party covenants and agrees, on account of
its actions with respect to this sale, to indemnify, hold harmless and defend
the other party from and against all claims for brokerage or commission by any
party, other than Nordblom Company, on account of this sale. Seller shall be
responsible for the commission owed to Nordblom Company. The provisions of this
Paragraph 15 shall survive delivery of the deed hereunder.
16. DEPOSIT
The Additional Deposit shall be held in escrow by Hutchins, Wheeler &
Dittmar, subject to the terms of this Agreement, and shall be duly accounted for
at the time of closing. Any income earned on the Additional Deposit (which shall
be part of the Deposit) shall be credited against the purchase price or paid to
Buyer, except in the case of a default hereunder, in which case interest shall
follow the Additional Deposit. Seller's Federal Tax Identification Number is
04-6812249. Buyer's Federal Tax Identification Number is 04-3368226.
17. DEFAULT; DAMAGES
If Buyer shall fail to fulfill the Buyer's agreements herein, the
Deposit shall be retained by the Seller as liquidated damages, and this
Agreement shall terminate without further recourse to Buyer, at law or in
equity. If Seller shall fail to fulfill Seller's agreements herein, the
Additional Deposit shall be returned to Buyer, and this Agreement shall
terminate without further recourse to Seller, at law or in equity.
-10-
<PAGE>
18. NO ASSIGNMENT
Upon seven (7) days' prior written notice thereof to Seller, Buyer may
assign its rights under this Agreement, but in the event of any such assignment,
shall remain liable for the payment of all amounts due and payable hereunder and
for the full performance of the covenants and conditions of this Agreement.
19. BUYER'S ACKNOWLEDGMENT RE: WARRANTIES
Buyer represents, warrants and agrees that there have been no
representations, warranties or agreements made by or on behalf of Seller as to
any matters concerning the Premises including but not limited to its area,
topography, climate, air, water, water rights, utilities, present or future
zoning, soil, subsoil, the uses for which the Premises are suited, the presence
of oil or hazardous waste thereon, drainage, or access or with respect to the
compliance by the Premises with any law, bylaw or regulation of any governmental
authority, except as specifically set forth in this Agreement. No patent or
latent physical condition of the Premises whether or not now known or
discoverable or whenever discovered shall affect the rights of any party hereto.
Any agreements, warranties or representations not expressly set forth in this
Agreement shall in no way bind Seller or Buyer, and Buyer expressly waives any
right of rescission and all claims for damages against Seller, its agents and
employees, by reason of any other such statement, representation, warranty,
promise or agreement. This Agreement contains the entire agreement between the
parties hereto and no addition to or modification of any term or provision of
this Agreement shall be effective unless set forth in a writing signed by both
Seller and Buyer.
-11-
<PAGE>
20. RIGHT OF ENTRY; INSPECTION CONTINGENCY
From the date hereof through the Closing Date, Buyer or its authorized
representative(s) shall have the right to enter on the Premises at reasonable
times, to inspect and measure the Premises, to show the Premises to contractors,
engineers, architects, surveyors, insurers, and lenders.
21. PERMITS AND APPROVALS FOR USE OF PREMISES
Seller makes no representation or warranty as to the existence,
issuance, status or any other matter relating to any permits, licenses and other
permissions or approvals required from any state, federal, city or other public
authority for the operation of the Premises or for any other purposes and Buyer
agrees that the nonexistence of or any defect in the same shall be Buyer's sole
responsibility and that Seller shall have no obligation to provide the same or
cure any defect in the same as a condition to Buyer's obligations hereunder.
The foregoing notwithstanding, the Seller agrees that the Seller shall
cooperate with the Buyer in all reasonable respects in connection with the
pursuit of any permits, special permits, approvals, or other filings the Buyer
is required to make to any applicable state or local authority in connection
with the anticipated development of the Premises. Seller's obligation to
cooperate as set forth above shall be at no cost or expense to the Seller.
22. NOTICES
All notices required hereunder shall be given in writing by registered
or certified mail, return receipt requested, or by any nationally recognized
overnight delivery company as follows:
-12-
<PAGE>
a. If to Seller: To the address set forth in
paragraph one hereof
Attention E. Merle Randolph
Fax No. (617) 561-0275
with a copy to: Faye A. Florence, Esquire
Fax No. (617) 568-1361
and with a copy to: Craig M. Tateronis, Esquire
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Fax No. (617) 951-1295
b. If to Buyer: David E. Clem
Lyme Properties, LLC
P.O. Box 266
On The Common
Lyme, NH 03768
Fax No. (603) 795-4789
with a copy to: Phil Harrison
Lyme Properties, LLC
P.O. Box 266
On The Common
Lyme, NH 03768
Fax No. (603) 795-4789
and with a copy to: Patrick C. Toomey, Esquire
Gadsby & Hannah, LLP
225 Franklin Street
Boston, MA 02110
Fax No. (617) 345-7050
23. CONSTRUCTION OF AGREEMENT
This instrument, executed in triplicate, is to be construed as a
Massachusetts contract, is to take effect as a sealed instrument, sets forth the
entire agreement between the parties, is binding upon and inures to the benefit
of the parties hereto and their respective permitted successors and assigns, and
may be canceled, modified or amended only by a written instrument
-13-
<PAGE>
executed by both Seller and Buyer. The captions and marginal notes are used as a
matter of convenience and are not to be considered a part of this Agreement or
to be used in determining the intent of the parties to it. For purposes of any
action or proceeding involving this Agreement, each party expressly submits to
the jurisdiction of all federal and state courts located in the Commonwealth of
Massachusetts and consents that any order, process, notice of motion or other
application to or by any of said courts or a judge thereof may be served within
or without such courts's jurisdiction by registered mail or personal service,
provided that a reasonable time for appearance is allowed (but not less than the
time afforded by any law or rule), and waives any right to contest the
appropriateness of any action brought in any such court based upon lack of
personal jurisdiction, improper venue or FORUM NON CONVENIENS.
24. FURTHER ASSURANCES Following the execution of this Agreement, Buyer
and Seller shall cooperate fully with each other so as to take any and all
actions and execute any and all documents as are reasonably necessary to
facilitate the transaction contemplated by this Agreement.
25. AS IS
The Premises is sold "as is" and as shown, and no representations have
been made by Seller in regard to its condition except those contained in this
Agreement. Buyer and Seller agree that they have incorporated in this Agreement
their entire understanding and no oral statement or prior written statement made
by either of them or by any other person extrinsic to this Agreement shall have
any force or effect. Buyer agrees that Buyer is not relying on any
representations, oral or written, concerning the age, condition, workmanship or
suitability of the Premises or any part thereof for any purposes made by any
person, other than those
-14-
<PAGE>
representations expressly set forth in this Agreement or in other documents
expressly made a part hereof.
26. LEASES
Buyer agrees to enter into a new lease with Wallace International
Silversmiths, Inc. ("Wallace"), on the Closing Date hereunder, in the lease form
attached hereto as Exhibit F, and incorporated herein by reference. Any
assignment of Buyer's rights under this Agreement as set forth in Section 18
above shall be subject to Wallace's rights under this Section 26.
27. ESCROW PROVISION.
The Additional Deposit shall be held and controlled, as specified in
this Agreement, by Seller's attorneys, Hutchins, Wheeler & Dittmar (for the
purposes hereof, the "Escrow Agent"). It is understood and agreed that the
Escrow Agent shall promptly, when collected by it, place the Additional Deposit
in an insured interest-bearing account at a bank, trust company or institutional
depositary in Boston, Massachusetts. At the closing hereunder, the Additional
Deposit will be credited or paid to Seller, and all interest which has been
earned on the Additional Deposit shall be credited against the purchase price or
paid to Buyer. If the closing does not occur for any reason whatsoever and this
Agreement is terminated, then all such interest will be delivered with and paid
to the party ultimately receiving the Additional Deposit. The Escrow Agent will
have no responsibility to maximize such interest, but only to place the
Additional Deposit in an account as provided for herein promptly upon collection
thereof by the Escrow Agent. The Escrow Agent will not be liable for any failure
of the institution in which the Additional Deposit is being held. It is
acknowledged that the Escrow Agent is counsel for Seller, and Buyer agrees that
Escrow Agent may continue to act as such counsel notwithstanding its role
-15-
<PAGE>
as Escrow Agent even in the event of any dispute between the parties relating to
this transaction. In the event of any dispute relating to the right of
possession or the disposition of the Additional Deposit, the Escrow Agent will
retain dominion and control over the same until such dispute shall have been
settled by mutual agreement of Buyer and Seller with notice thereof to Escrow
Agent, whereupon the Additional Deposit will be paid over in accordance with
such mutual agreement of the parties; or, if such dispute is taken to a court of
competent jurisdiction, the Additional Deposit will be paid over into the
custody of such court or otherwise paid over in accordance with the final order,
decree or judgment of such court. It is contemplated that the Escrow Agent will
not incur any cost or expense in the performance of its duties hereunder; and,
in the event of a dispute, Escrow Agent shall be reimbursed for its reasonable
out-of-pocket costs and expenses incurred in connection with such dispute and
the settlement thereof, such reimbursement to be made between Buyer and Seller
as they may mutually agree incident to the settlement of such dispute; or, if
such dispute shall be resolved by a final order, decree or judgment by a court
as aforesaid, such reimbursement shall be made by the unsuccessful party in such
proceeding. In no event shall Escrow Agent be under any duty to institute or
defend any such proceeding nor shall Escrow Agent be required under any
circumstances to take any action requested by Seller or Buyer until indemnified
to Escrow Agent's reasonable satisfaction by the party or parties requesting
such action. Escrow Agent shall not be liable to any party except for actions
taken in bad faith.
-16-
<PAGE>
Executed as an instrument under seal as of the date first above
written.
SELLER: BUYER:
175 AMLEGION REVERE REALTY TRUST LYME PROPERTIES, LLC
By: /s/ FAYE A. FLORENCE /s/ DAVID CLEM
------------------------------ -----------------------------
Faye A. Florence, trustee Name: David Clem
and not individually Title: Director
By: /s/ LEONARD FLORENCE
------------------------------
Leonard Florence, trustee
and not individually
By: /s/ E. MERLE RANDOLPH
------------------------------
E. Merle Randolph, trustee
and not individually
-17-
<PAGE>
EXHIBIT A
(Property Description for land located at
135 American Legion Highway, Revere, MA)
The premises consist of land, with the improvements thereon, known as
and numbered 135 American Legion Highway, located and shown as Parcel 001A,
Block 297 on Assessor's Map 017, and 101 American Legion Highway, located and
shown as Lot #1 on a Plan entitled "Subdivision Plan of Land in Revere, Mass.
owned by Stuart Pratt, Trustee of Legion Realty Trust," prepared by Linenthal
Eisenberg Anderson, Douglas L. Liston, Registered Land Surveyor, dated May 10,
1985 and recorded with the Suffolk County Registry of Deeds in Book 11625, Page
266.
The parcel of land known as and numbered 135 American Legion Highway,
located and shown as Parcel 001A, Block 297 on Assessor's Map 017 is more
particularly described on the remaining pages of this Exhibit A.
-18-
<PAGE>
EXHIBIT B
LEASE AGREEMENTS
-19-
<PAGE>
EXHIBIT D
ANCILLARY AGREEMENTS
-20-
<PAGE>
EX-11
SYRATECH CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------------- ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
BASIC AND DILUTED INCOME (LOSS) PER SHARE:
Net income (loss) per common share ................. $ 1.22 $ 1.15 $ (2.23) $ (2.38)
============= ============= ============= ============
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 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,198
<SECURITIES> 0
<RECEIVABLES> 103,346
<ALLOWANCES> 8,140
<INVENTORY> 122,350
<CURRENT-ASSETS> 243,192
<PP&E> 128,575
<DEPRECIATION> 45,344
<TOTAL-ASSETS> 340,403
<CURRENT-LIABILITIES> 144,128
<BONDS> 165,000
0
23,842
<COMMON> 38
<OTHER-SE> (14,629)
<TOTAL-LIABILITY-AND-EQUITY> 340,403
<SALES> 197,377
<TOTAL-REVENUES> 197,377
<CGS> 140,661
<TOTAL-COSTS> 140,661
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,186
<INCOME-PRETAX> (8,625)
<INCOME-TAX> (2,156)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,438)
<EPS-BASIC> (2.23)
<EPS-DILUTED> (2.23)
</TABLE>
