THIRD QUARTER 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period Ended September 30, 1996
Commission File Number 1-9608
NEWELL CO.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3514169
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Newell Center
29 East Stephenson Street
Freeport, Illinois 61032-0943
(Address of principal executive offices)
(Zip Code)
(815)235-4171
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
Number of shares of Common Stock outstanding
as of October 21, 1996: 158,828,298
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 761,902 $ 651,321 $2,115,227 $1,829,231
Cost of products sold 518,198 444,085 1,454,387 1,265,730
-------- -------- --------- ---------
GROSS INCOME 243,704 207,236 660,840 563,501
Selling, general and
administrative expenses 105,349 87,004 324,540 268,795
-------- -------- --------- ---------
OPERATING INCOME 138,355 120,232 336,300 294,706
Nonoperating expenses (income):
Interest expense 14,746 12,623 43,664 36,848
Other 657 (888) 1,462 (2,347)
-------- -------- --------- ---------
Net nonoperating expenses (income) 15,403 11,735 45,126 34,501
-------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 122,952 108,497 291,174 260,205
Income taxes 48,320 43,399 115,659 104,082
-------- -------- --------- ---------
NET INCOME $ 74,632 $ 65,098 $ 175,515 $ 156,123
======== ======== ========= =========
Earnings per share $ 0.47 $ 0.41 $ 1.11 $ 0.99
======== ======== ========= =========
Dividends per share $ 0.14 $ 0.12 $ 0.42 $ 0.34
======== ======== ========= =========
Weighted average shares 158,790 158,362 158,739 158,095
======== ======== ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
Unaudited
(In thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 52,203 $ 58,771
Accounts receivable, net 452,401 390,296
Inventories 521,217 509,245
Deferred income taxes 65,913 107,499
Prepaid expenses and other 85,449 67,063
--------- ---------
TOTAL CURRENT ASSETS 1,177,183 1,132,874
MARKETABLE EQUITY SECURITIES 62,760 53,309
OTHER LONG-TERM INVESTMENTS 207,654 203,857
OTHER ASSETS 119,253 122,702
PROPERTY, PLANT AND EQUIPMENT, NET 551,563 530,285
TRADE NAMES AND GOODWILL 908,534 888,215
--------- ---------
TOTAL ASSETS $3,026,947 $2,931,242
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
Unaudited
(In thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 93,219 $ 104,017
Accounts payable 97,740 113,927
Accrued compensation 55,431 73,057
Other accrued liabilities 328,468 317,184
Income taxes 18,875 13,043
Current portion of long-term debt 41,257 59,031
--------- ---------
TOTAL CURRENT LIABILITIES 634,990 680,259
LONG-TERM DEBT 804,859 761,578
OTHER NONCURRENT LIABILITIES 152,741 158,321
DEFERRED INCOME TAXES 20,924 30,987
STOCKHOLDERS' EQUITY
Common stock issued at $1 par value 158,805 158,626
Additional paid-in capital 196,844 190,860
Retained earnings 1,047,417 938,567
Net unrealized gain on securities
available for sale 21,583 15,912
Cumulative translation adjustment (11,216) (3,868)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,413,433 1,300,097
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,026,947 $2,931,242
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-------------------------
1996 1995
---- ----
Unaudited
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 175,515 $ 156,123
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 86,974 69,719
Deferred income taxes 31,882 21,519
Net gain on marketable equity securities - (15,819)
Write-off of investments 1,339 16,000
Other (5,270) (5,559)
Changes in Current Accounts:
Accounts receivable (48,550) (35,055)
Inventories 9,407 (8,674)
Other current assets (17,312) 3,200
Accounts payable (26,119) (23,815)
Accrued liabilities and other (12,309) (39,051)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 195,557 138,588
-------- --------
INVESTING ACTIVITIES:
Acquisitions, net (45,650) (47,637)
Expenditures for property, plant and equipment (54,157) (53,319)
Sale of marketable equity securities - 37,324
Disposal of noncurrent assets and other (11,393) 2,079
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (111,200) (61,553)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of debt 92,744 124,245
Proceeds from exercised stock options and other 6,163 5,348
Payments on notes payable and long-term debt (123,166) (150,140)
Cash dividends (66,666) (53,740)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (90,925) (74,287)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (6,568) 2,748
Cash and cash equivalents at beginning of year 58,771 14,892
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 52,203 $ 17,640
======== ========
Supplemental cash flow disclosures:
Cash paid during the year for -
Interest $ 45,073 $ 36,553
Income taxes 70,917 78,101
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
NEWELL CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - The condensed financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission, and
reflect all adjustments necessary to present a fair statement of
the results for the periods reported, subject to normal recurring
year-end audit adjustments, none of which is material. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and
the notes thereto included in the Company's latest Annual Report on
Form 10-K.
Note 2 - On October 2, 1995, the Company acquired Decorel Incorporated
("Decorel"), a manufacturer and marketer of ready-made picture
frames. On November 2, 1995, the Company acquired Berol Corporation
("Berol"), a designer, manufacturer and marketer of markers and
writing instruments. For these and other minor 1995 acquisitions,
the Company paid $209.0 million in cash, issued 379,507 shares of
the Company's Common Stock (valued at $9.5 million) and assumed
$144.4 million of debt. On January 22, 1996, the Company acquired
The Holson Burnes Group, Inc. ("Holson Burnes"), a manufacturer and
marketer of photo albums and picture frames. The Company paid
$34.6 million in cash and assumed $44.4 million of debt. All of
these 1995 and 1996 transactions were accounted for as purchases;
therefore results of operations are included in the accompanying
consolidated financial statements since their respective dates of
acquisition. The acquisition costs were allocated on a preliminary
basis to the fair market value of the assets acquired and
liabilities assumed and resulted in goodwill of approximately
$198.2 million. The total adjustments to the purchase price
allocations are not expected to be material to the financial
statements.
The unaudited consolidated results of operations for the nine
months ended September 30, 1996 and 1995 on a pro forma basis,
as though Decorel, Berol and Holson Burnes had been acquired on
January 1, 1995, are as follows:
1996 1995
---- ----
(In millions, except per share data)
Net sales $2,119.7 $2,145.7
Net income 174.5 146.6
Earnings per share 1.10 0.93
<PAGE> 7
Note 3- The components of inventories at the end of each period, net of the
LIFO reserve, were as follows:
September 30, December 31,
1996 1995
------------- ------------
(In millions)
Materials and supplies $119.9 $147.7
Work in process 96.6 87.5
Finished products 304.7 274.0
----- -----
$521.2 $509.2
===== =====
Note 4- Long-term marketable equity securities at the end of each period are
summarized as follows:
September 30, December 31,
1996 1995
------------- ------------
(In millions)
Aggregate market value $ 62.8 $ 53.3
Aggregate cost 26.8 26.8
----- -----
Unrealized gain $ 36.0 $ 26.5
===== =====
Long-term marketable equity securities are carried at fair value with
adjustments for fair value reported separately as a component of
stockholders' equity and are excluded from earnings.
Note 5- Property, plant and equipment at the end of each period consisted
of the following:
September 30, December 31,
1996 1995
------------- ------------
(In millions)
Land $ 21.5 $ 16.2
Buildings and improvements 205.2 194.8
Machinery and equipment 663.5 620.2
----- -----
890.2 831.2
Allowance for depreciation (338.6) (300.9)
----- -----
$ 551.6 $ 530.3
====== ======
Note 6- Long-term debt at the end of each period consisted of the following:
September 30, December 31,
1996 1995
------------- ------------
(In millions)
Medium-term notes $295.0 $345.0
Commercial paper 534.0 448.6
Other long-term debt 17.2 27.0
----- -----
846.2 820.6
Current portion (41.3) (59.0)
----- -----
$804.9 $761.6
===== =====
<PAGE> 8
Commercial paper in the amount of $534.0 million is classified as
long-term since it is supported by the revolving credit agreement
discussed under Management's Discussion and Analysis - Liquidity and
Capital Resources.
Note 7- In 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." This statement was adopted
by the Company on January 1, 1996. The impact of adopting this
statement was not material to the consolidated financial statements.
Also, in 1995, the FASB issued SFAS No. 123, "Accounting for Stock
Based Compensation." The Company adopted this statement effective
January 1, 1996 and will provide the required additional disclosures
in the footnotes to the annual consolidated financial statements.
Note 8- On October 15, 1996, the Company announced that in the fourth quarter
of 1996, it will record a substantial unrealized gain as a result of
the conversion of its holdings of Black & Decker Corporation
convertible preferred stock into Black & Decker common stock.
In accordance with a provision of the original private placement
agreement, Black & Decker exercised its option to convert the
preferred stock to common stock. The conversion of the preferred
stock into common stock will increase the Company's investment in
Black & Decker recorded on its balance sheet by approximately $110.0
million pre-tax, resulting in an after-tax unrealized gain of
approximately $67.0 million, which has the effect of increasing
stockholders' equity but does not affect the income statement.
The Series B preferred stock paid a 7.75% cumulative dividend,
aggregating $10.2 million annually or $0.07 per share, net of tax.
Following conversion, the annual dividends provided to the Company by
the Black & Decker common stock are expected to total $2.7 million
annually, or $0.02 per share, net of tax. The common stock is
classified as available for sale under the SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
Note 9- See Part II, Item 1, Legal Proceedings for an explanation of the
Company's current proceedings.
<PAGE> 9
PART I. Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
Results of Operations
- ---------------------
The following table sets forth for the periods indicated the items from the
Consolidated Statements of Income as a percentage of net sales.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 68.0 68.2 68.8 69.2
---- ---- ---- ----
GROSS INCOME 32.0 31.8 31.2 30.8
Selling, general and
administrative expenses 13.8 13.3 15.3 14.7
---- ---- ---- ----
OPERATING INCOME 18.2 18.5 15.9 16.1
Nonoperating expenses (income):
Interest expense 2.0 1.9 2.1 2.0
Other 0.1 (0.1) - (0.1)
---- ---- ---- ----
Net nonoperating expenses (income) 2.1 1.8 2.1 1.9
---- ---- ---- ----
INCOME BEFORE INCOME TAXES 16.1 16.7 13.8 14.2
Income taxes 6.3 6.7 5.5 5.7
---- ---- ---- ----
NET INCOME 9.8% 10.0% 8.3% 8.5%
===== ===== ===== =====
</TABLE>
<PAGE> 10
Three Months Ended September 30, 1996 vs. Three Months Ended September 30, 1995
- -------------------------------------------------------------------------------
Net sales for the third quarter of 1996 were $761.9 million, representing an
increase of $110.6 million or 17.0% from $651.3 million in the third quarter of
1995. The overall increase in net sales was primarily attributable to
contributions from Decorel (acquired September 1995), Berol (acquired November
1995), Holson Burnes (acquired January 1996) and internal growth of 4%.
Internal growth is defined as growth from continuing businesses owned more than
two years, including minor acquisitions ("core businesses"). Net sales for
each of the Company's product groups were as follows (in millions):
<TABLE>
<CAPTION>
Primary Reasons
1996 1995 % Change for Change
---- ---- -------- ----------------
(In millions)
<S> <C> <C> <C> <C>
Office Products $209.0 $149.4 39.9% Berol acquisition and
7% internal growth
Home Furnishings 234.8 191.9 22.4% Decorel and Holson
Burnes acquisitions
and 3% internal growth
Housewares 218.4 210.8 3.6% Internal growth
Hardware & Tools 99.7 99.2 0.5% Internal growth
----- -----
$761.9 $651.3 17.0%
===== =====
</TABLE>
Gross income in the third quarter of 1996 was 32.0% of net sales or $243.7
million versus 31.8% or $207.2 million in the third quarter of 1995. Gross
margins improved slightly, primarily as a result of increases in gross margins
at Eberhard Faber (acquired October 1994) and Newell Europe (acquired December
1994).
Selling, general and administrative expenses ("SG&A") in the third quarter of
1996 were 13.8% of net sales or $105.3 million versus 13.3% or $87.0 million in
the third quarter of 1995. There was no material change in spending at the
core businesses; the increase as a percentage of sales was primarily due to
SG&A at Decorel, Berol and Holson Burnes.
Operating income in the third quarter of 1996 was 18.2% of net sales or $138.4
million versus 18.5% or $120.2 million in the third quarter of 1995. The
slight decline in operating income as a percentage of net sales was
attributable to SG&A at Decorel, Berol and Holson Burnes.
<PAGE> 11
Net nonoperating expenses in the third quarter of 1996 were 2.1% of net sales
or $15.4 million versus 1.8% or $11.7 million in the third quarter of 1995 and
are summarized as follows (in millions):
1996 1995 $ Change
------------ ------------ --------
(In millions)
Interest expense (1) $ 14.8 $ 12.6 $ 2.2
Interest income (0.7) (0.3) (0.4)
Goodwill amortization 6.1 4.8 1.3
Dividend income (3.3) (3.4) 0.1
Equity earnings in American Tool
Companies, Inc. (2) (1.6) (2.0) 0.4
Other 0.1 - 0.2
----- ----- -----
$ 15.4 $ 11.7 $ 3.7
===== ===== =====
(1) The increase in interest expense was due to additional borrowings for
the 1995 and 1996 acquisitions.
(2) The Company has a 49% ownership interest.
The effective tax rate was 39.3% in 1996 versus 40.0% in 1995.
Net income for the third quarter of 1996 was $74.6 million, representing an
increase of $9.5 million or 14.6% from the third quarter of 1995. Earnings per
share for the third quarter of 1996 increased 14.6% or $0.47 versus $0.41 in
the third quarter of 1995. The increases in net income and earnings per share
were primarily attributable to contributions from Berol, Decorel and Holson
Burnes (net of associated interest expense and goodwill amortization) and an
improvement in operating margins at several of the core businesses.
<PAGE> 12
Nine Months Ended September 30, 1996 vs. Nine Months Ended September 30, 1995
- -----------------------------------------------------------------------------
Net sales for the first nine months of 1996 were $2,115.2 million, representing
an increase of $286.0 million or 15.6% from $1,829.2 million in the first nine
months of 1995. The overall increase in net sales was primarily attributable
to contributions from Decorel, Berol, Holson Burnes and internal growth of 3%.
Net sales for each of the Company's product groups were as follows (in
millions):
<TABLE>
<CAPTION>
Primary Reasons
1996 1995 % Change for Change
-------- -------- -------- ---------------
(In millions)
<S> <C> <C> <C> <C>
Office Products $579.0 $444.7 30.2% Berol acquisition
Home Furnishings 656.9 526.7 24.7% Decorel and Holson
Burnes acquisitions
and 4% internal growth
Housewares 584.4 579.0 0.9% 3% internal growth
offset by week European
retail conditions
Hardware & Tools 294.9 278.8 5.8% Internal growth
------- -------
$2,115.2 $1,829.2 15.6%
======= =======
</TABLE>
Gross income in the first nine months of 1996 was 31.2% of net sales or $660.8
million versus 30.8% or $563.5 million in the first nine months of 1995. Gross
margins improved slightly, primarily as a result of an increase in gross
margins at Eberhard Faber and Newell Europe.
Selling, general and administrative expenses in the first nine months of 1996
were 15.3% of net sales or $324.5 million versus 14.7% or $269.0 million in
the first nine months of 1995. There was no material change in spending at the
core businesses; the increase as a percentage of sales was primarily due to
SG&A at Decorel, Berol and Holson Burnes.
Operating income in the first nine months of 1996 was 15.9% of net sales or
$336.3 million versus 16.1% or $294.7 million in the first nine months of 1995.
The slight decline in operating income as a percentage of net sales was
attributable to SG&A at Decorel, Berol and Holson Burnes.
<PAGE> 13
Net nonoperating expenses in the first nine months of 1996 were 2.1% of net
sales or $45.1 million versus 1.9% or $34.5 million in the first nine months of
1995 and are summarized as follows (in millions):
1996 1995 $ Change
------------ ------------ --------
(In millions)
Interest expense (1) $ 43.7 $ 36.8 $ 6.9
Interest income (2.8) (1.2) (1.6)
Goodwill amortization 17.6 13.9 3.7
Dividend income (9.6) (9.8) 0.2
Equity earnings in American Tool
Companies, Inc. (2) (5.3) (5.6) 0.3
Intangible asset write-off (3) 1.3 16.0 (14.7)
Sale of marketable equity
securities (4) - (15.8) 15.8
Other 0.2 0.2 -
----- ----- -----
$ 45.1 $ 34.5 $10.6
===== ===== ====
(1) The increase in interest expense was due to additional borrowings for
the 1995 and 1996 acquisitions.
(2) The Company has a 49% ownership interest.
(3) The decrease was due primarily to a $16.0 million write-down in
carrying value of a long-term foreign investment in 1995.
(4) The change was due to a $15.8 million gain recognized on the sale of
a long-term marketable equity security in 1995.
The effective tax rate was 39.7% in 1996 versus 40.0% in 1995.
Net income for the first nine months of 1996 was $175.5 million, representing
an increase of $19.4 million or 12.4% from the first nine months of 1995.
Earnings per share for the first nine months of 1996 increased 12.1% to $1.11
versus $0.99 in the first nine months of 1995. The increases in net income and
earnings per share were primarily attributable to contributions from Eberhard
Faber and Berol (net of associated interest expense and goodwill amortization)
and an improvement in operating margins at several of the core businesses.
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources include cash
provided from operations and use of available borrowing facilities.
Operating activities provided net cash of $195.6 million during the first nine
months of 1996, an increase of $57.0 million from $138.9 million in the
comparable period of 1995. This change was primarily due to a concentrated
effort to reduce inventory levels, as well as a decrease in the inventory
needed to service customers (in response to the weak retail conditions in the
last quarter of 1995 and the first quarter of 1996). The changes in deferred
taxes and accrued liabilities are the result of a 1995 IRS audit settlement,
for which there had been a reserve.
The Company has short-term foreign and domestic committed and uncommitted lines
of credit with various banks and a commercial paper program which are available
for short-term financing. Borrowings under the Company's uncommitted lines of
credit at September 30, 1996 totalled $16.6 million, based upon such terms as
the Company and the respective banks have mutually agreed upon. Borrowings
under the Company's uncommitted lines of credit at the discretion of the
lender. The Company's uncommitted lines of credit do not have a material
impact on the Company's liquidity.
At September 30, 1996, the Company had outstanding $295.0 million (principal
amount) of medium-term notes with maturities ranging from one to five years at
an average rate of interest equal to 6.4%. The Company had outstanding $345.0
million of medium-term notes at December 31, 1995.
In June 1996, the Company amended its revolving credit agreement to be a five-
year $750.0 million agreement which will terminate in June 2001. Under this
agreement, the Company may borrow, repay and reborrow funds in an aggregate
amount up to $750.0 million, at a floating interest rate. At September 30,
1996, there were $93.7 million of borrowings outstanding under the revolving
credit agreement.
In lieu of borrowings under the Company's revolving credit agreement, the
Company may issue up to $750.0 million of commercial paper. The Company's
revolving credit agreement provides the committed backup liquidity required to
issue commercial paper. Accordingly, commercial paper may only be issued up to
the amount available for borrowing under the Company's revolving credit
agreement. At September 30, 1996, $534.0 million (face or principal amount)
of commercial paper was outstanding. The entire amount is classified as long-
term debt.
The Company has a universal shelf registration statement under which the
Company may issue up to $500.0 million of debt and equity securities, subject
to market conditions. At September 30, 1996, the Company had not yet issued
any securities under this registration statement.
The Company's primary uses of liquidity and capital resources are capital
expenditures, dividend payments and acquisitions.
Capital expenditures were $54.2 million and $53.3 million in the first nine
months of 1996 and 1995, respectively.
<PAGE> 15
The Company has paid regular cash dividends on its common stock since 1947. On
February 6, 1996, the quarterly cash dividend was increased to $0.14 per share
from the $0.12 per share that had been paid since May 11, 1995. Dividends paid
were $66.7 million and $53.7 million in the first nine months of 1996 and 1995,
respectively. This increase in dividends paid affected retained earnings,
which increased by $108.9 million and $102.4 million in the first nine months
of 1996 and 1995, respectively.
In 1996, the Company acquired Holson Burnes for $34.6 million in cash and the
assumption of $44.4 million of debt. This acquisition was accounted for as a
purchase and the cash portion of the purchase price was paid for with proceeds
obtained from the issuance of commercial paper.
Working capital at September 30, 1996 was $542.2 million compared to $452.6
million at December 31, 1995. The current ratio at September 30, 1996 was
1.85:1 compared to 1.67:1 at December 31, 1995. Total debt to total
capitalization (net of cash and cash equivalents) was .39:1 at September 30,
1996 and .40:1 at December 31, 1995.
The Company believes that cash provided from operations and available borrowing
facilities will continue to provide adequate support for the cash needs of
existing businesses; however, certain events, such as significant acquisitions,
could require additional external financing.
<PAGE> 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Reference is made to the discussion in Item 1 of Part II of the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996 with respect to the action brought by the Attorney General of the
State of California and the District Attorney for Alameda County,
California, against 12 companies, including a subsidiary of the
Company, and other unnamed companies (the "Attorney General Case").
On September 6, 1996, the Company and several of its co-defendants
filed an answer in this action, denying all material allegations and
claims and pleading numerous affirmative defenses.
On August 6, 1996, 15 companies, including a subsidiary of the
Company, and other unnamed companies, were named as defendants in a
national and state private class action in the Superior Court of
the State of California, County of Sacramento (the "Sacramento Case"),
which represents a consolidation of three such actions filed in
California in June and July 1996. In this case, the plaintiffs allege
that some or all of these companies breached an implied warranty
accompanying the sale of their mini-blinds, committed fraud by
concealment, used false and misleading advertising, and employed
unlawful, unfair or fraudulent business practices, in connection with
the presence of lead in mini-blinds manufactured or sold by such
companies. The plaintiffs seek injunctive relief, unspecified damages,
restitution of purchase price, costs of the suit (including reasonable
attorneys' fees), prejudgment interest and, with respect to the claim
of fraud by concealment, punitive damages.
On October 4, 1996, a Petition for Coordination filed by one of
the defendants requesting coordination of the Attorney General
Case and the Sacramento Case was granted. As a result, all
proceedings in both actions are stayed automatically until such
time as the California Judicial Council appoints a coordination
trial judge.
On October 30, 1996, the Company accepted tenders of defense of, and
agreed to requests for indemnification from, two of its retailer
customers that are named as defendants in one or both of the above-
referenced actions. In addition, the Company accepted another
tender of defense of, and agreed to a request for indemnification
from, one of these retailer customers with respect to a third case
(the "Texas Case") in which it was named as a defendant. The
Company accepted a similar tender concerning the Texas Case from a
company (on behalf of itself and another retailer customer of the
Company), which sold its imported vinyl mini-blind division (the
"Division") to the Company. The Texas Case was filed as a private
class action in the 11th Judicial District Court in Harris County,
Texas on July 11, 1996 and alleges, among other things, that 10
companies, including the Division, violated the Texas Deceptive
Trade Practices Act and breached express and implied warranties
of merchantability by importing or distributing vinyl mini-
blinds containing lead. The plaintiffs, which are commercial multi-
family dwelling owners in Harris County that purchased vinyl
mini-blinds from the defendants, seek actual damages, prejudgment and
postjudgment interest, punitive damages, court costs and reasonable
attorneys' fees. Each of the Company's acceptances is limited to
liability directly related to actions or omissions of the Company.
<PAGE> 17
Although management of the Company cannot predict the ultimate
outcome of this matter with certainty, it believes that their
ultimate resolution will not have a material impact on the
Company's consolidated financial statements.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits:
27 Financial Data Schedule
b) Reports on Form 8-K:
None
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWELL CO.
Date November 8, 1996 /s/ William T. Alldredge
----------------- ---------------------------------
William T. Alldredge
Vice President - Finance
Date November 8, 1996 /s/ Brett E. Gries
----------------- ---------------------------------
Brett E. Gries
Vice President - Accounting & Tax
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the Newell Co.
and Subsidiaries Consolidated Balance
Sheets and Statements of Income and is
qualified in its entirety by reference to
such financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 52,203
<SECURITIES> 0
<RECEIVABLES> 452,401
<ALLOWANCES> (8,941) <F1>
<INVENTORY> 521,217
<CURRENT-ASSETS> 1,177,183
<PP&E> 890,146 <F2>
<DEPRECIATION> (338,583) <F2>
<TOTAL-ASSETS> 3,026,947
<CURRENT-LIABILITIES> 634,990
<BONDS> 804,859
0
0
<COMMON> 158,805
<OTHER-SE> 1,254,628
<TOTAL-LIABILITY-AND-EQUITY> 3,026,947
<SALES> 2,115,227
<TOTAL-REVENUES> 660,840
<CGS> 1,454,387
<TOTAL-COSTS> 1,778,927
<OTHER-EXPENSES> 45,126
<LOSS-PROVISION> 2,856 <F1>
<INTEREST-EXPENSE> 43,664
<INCOME-PRETAX> 291,174
<INCOME-TAX> 115,659
<INCOME-CONTINUING> 175,515
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175,515
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
<FN>
<F1> Allowances for doubtful accounts are reported as contra accounts to
accounts receivable. The corporate reserve for bad debts is a
percentage of trade receivables based on the bad debts experienced
in one or more past years, general economic conditions, the age of
the receivables and other factors that indicate the element of
uncollectibility in the receivables outstanding at the end of the
period.
<F2> See notes to consolidated financial statements.
</TABLE>
