SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission file number
December 31, 1997 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)
Registrant's telephone number, including area code: (815) 235-4171
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $1 par value per share, New York Stock Exchange
and associated Preferred Stock Purchase Chicago Stock Exchange
Rights
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. (X)
There were 159.2 million shares of the Registrant's Common Stock
outstanding as of December 31, 1997. The aggregate market value of
the shares of Common Stock (based upon the closing price on the New
York Stock Exchange on that date) beneficially owned by nonaffiliates
of the Registrant was approximately $6,417.1 million. For purposes of
the foregoing calculation only, which is required by Form 10-K, the
Registrant has included in the shares owned by affiliates those shares
owned by directors and officers of the Registrant, and such inclusion
shall not be construed as an admission that any such person is an
affiliate for any purpose.
Documents Incorporated by Reference
Part III
Portions of the Registrant's Definitive Proxy Statement for its
Annual Meeting of Stockholders to be held May 13, 1998.
<PAGE> 2
Item 1. Business
- -----------------
"Newell" or the "Company" refers to Newell Co. alone or with its
wholly-owned subsidiaries, as the context requires.
GENERAL
- -------
The Company is a manufacturer and full-service marketer of staple
consumer products sold to high-volume purchasers, including, but not
limited to, discount stores and warehouse clubs, home centers and
hardware stores, and office superstores and contract stationers. The
Company's basic business strategy is to merchandise a multi-product
offering of brand name consumer products, which are concentrated in
product categories with relatively steady demand not dependent on
changes in fashion, technology or season, and to differentiate itself
by emphasizing superior customer service. The Company's multi-product
offering consists of staple consumer products in three major product
groups: Hardware and Home Furnishings, Office Products, and
Housewares. The Company's primary financial goals are to increase
sales and earnings per share an average of 15% per year, to achieve an
annual return on beginning equity of 20% or above, to increase
dividends per share in line with earnings growth and to maintain a
prudent ratio of total debt to total capitalization, net of cash
("leverage"). For the ten years ended December 31, 1997, the
Company's compound annual growth rates for sales and earnings per
share were 15% and 17%, respectively, its average annual return on
beginning equity was 21%, its compound annual growth rate for
dividends per share was 19% and its average leverage is 26%.
The Company's growth strategy emphasizes acquisitions and
internal growth. The Company has grown both domestically and
internationally by acquiring businesses with brand name product lines
and improving the profitability of such businesses through an
integration process called "Newellization." Since 1990, the Company
has completed more than 15 major acquisitions representing more than
$2 billion in additional sales. The Company supplements acquisition
growth with internal growth, principally by introducing new products,
entering new domestic and international markets, adding new customers,
cross-selling existing product lines to current customers and
supporting its U.S.-based customers' international expansion.
Forward-looking statements in this Report are made in reliance
upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements may relate to,
but are not limited to, such matters as sales, income, earnings per
share, return on equity, capital expenditures, dividends, capital
structure, free cash flow, debt to capitalization ratios, internal
growth rates, future economic performance, management's plans, goals
and objectives for future operations and growth or the assumptions
relating to any of the forward-looking information. The Company
cautions that forward-looking statements are not guarantees since
there are inherent difficulties in predicting future results, and that
<PAGE> 3
actual results could differ materially from those expressed or implied
in the forward-looking statements. Factors that could cause actual
results to differ include, but are not limited to, those matters set
forth in this Report, the documents incorporated by reference herein
and Exhibit 99 to this Report.
PRODUCT GROUPS
- --------------
The Company's three product groups are Hardware and Home Furnishings,
Office Products, and Housewares.
HARDWARE AND HOME FURNISHINGS
-----------------------------
Window Treatments
- -----------------
The Company's window treatments business is conducted by the
Levolor Home Fashions, Newell Window Furnishings and Kirsch Window
Fashions Europe divisions. Levolor Home Fashions and Newell Window
Furnishings primarily design, manufacture or import, package and
distribute drapery hardware, made-to-order and stock horizontal and
vertical blinds, and pleated, cellular and roller shades for the
retail marketplace. Levolor Home Fashions also produces window
treatment components for custom window treatment fabricators. Kirsch
Window Fashions Europe primarily designs, manufactures, packages and
distributes drapery hardware and made-to-order window treatments for
Levolor Home Fashions, Newell Window Furnishings and Kirsch
Window Fashions Europe products are sold primarily under the trade
names of NEWELL{R}, LEVOLOR{R}, LOUVERDRAPE{R}, DEL MAR{R}, KIRSCH{R},
JOANNA{R}, ACRIMO{R} and HOFESA{R}, and the brands SPECTRIM{R}, MAGIC
FIT{R} and RIVIERA{R}.
Levolor Home Fashions and Newell Window Furnishings market their
products directly and through distributors to mass merchants, home
centers, department/specialty stores, hardware distributors, custom
shops and select contract customers, using a network of manufacturers'
representatives, as well as regional account and market-specific sales
managers. Kirsch Window Fashions Europe markets its products to mass
merchants and buying groups using a direct sales force.
Principal U.S. facilities are located in Freeport, Illinois; High
Point, North Carolina and Sturgis, Michigan. Principal foreign
facilities are located in Prescott, Ontario, Canada; Ablis, France;
Milan, Italy; Lisbon, Portugal; Vitoria, Spain; and Malmo, Sweden.
Hardware and Tools
- ------------------
The Company's hardware and tools business is conducted by the
Amerock Cabinet and Window Hardware Systems, Bulldog Fastener, EZ
<PAGE> 4
Paintr and BernzOmatic divisions. Amerock Cabinet and Window Hardware
Systems manufacture or import, package and distribute cabinet hardware
for the retail and O.E.M. marketplace and window hardware for window
manufacturers. Bulldog packages and distributes hardware, which
includes bolts, screws and mechanical fasteners. EZ Paintr
manufactures and distributes manual paint applicator products.
BernzOmatic manufactures and distributes propane/oxygen hand torches.
Amerock, Bulldog, EZ Paintr and BernzOmatic products are sold
primarily under the trade names of AMEROCK{R}, ALLISON{R}, BULLDOG{R},
STAR{R}, EZ PAINTR{R} and BERNZOMATIC{R}.
Amerock, Bulldog, EZ Paintr and BernzOmatic market their products
directly and through distributors to mass merchants, home centers,
hardware distributors, cabinet shops and window manufacturers, using a
network of manufacturers' representatives, as well as regional zone
and market-specific sales managers.
Principal facilities are located in Rockford, Illinois; Lowell,
Indiana; Memphis, Tennessee; St. Francis, Wisconsin and Medina, New
York.
Picture Frames
- --------------
The Company's picture frame business is conducted by the
Intercraft/Burnes division. Intercraft/Burnes primarily designs,
manufactures or imports, packages and distributes wood, wood composite
and metal ready-made picture frames, framed art and photo albums.
Intercraft/Burnes ready-made picture frames are sold primarily
under the trade names of INTERCRAFT{R}, DECOREL{R}, BURNES OF
BOSTON{R}, CARR{R}, Rarewoods{R} AND TERRAGRAFICS{R}, while framed art
is sold primarily under the DECOREL{R} trade name and photo albums are
sold primarily under the HOLSON{R} trade name.
Intercraft/Burnes markets its products directly to mass
merchants, warehouse clubs, grocery/drug stores and
department/specialty stores, using a network of manufacturers'
representatives, as well as regional zone and market-specific sales
managers. INTERCRAFT{R}, DECOREL{R} and HOLSON{R} products are sold
to mass merchants, while the remaining brands are sold primarily to
department/specialty stores.
Principal U.S facilities are located in Taylor, Texas;
Statesville, North Carolina; Claremont, New Hampshire; Mundelein,
Illinois; North Smithfield, Rhode Island and Covington, Tennessee.
Principal foreign facilities are located in Mississauga, Ontario,
Canada and Durango, Mexico.
<PAGE> 5
Home Storage Products
- ---------------------
The Company's home storage business is conducted by its Lee Rowan
division. Lee Rowan primarily designs, manufactures or imports,
packages and distributes wire storage and laminate products and
ready-to-assemble closet, organization and work shop cabinets.
Lee Rowan products are sold primarily under the trade names of
LEE ROWAN{R} and SYSTEM WORKS{R}.
Lee Rowan markets its products directly to mass merchants,
warehouse clubs, home centers and hardware stores, using a network of
manufacturers' representatives, as well as regional zone and
market-specific sales managers.
Principal facilities are located in Jackson, Missouri; Memphis,
Tennessee; Vista, California and Watford, Ontario, Canada.
OFFICE PRODUCTS
---------------
Markers and Writing Instruments
- -------------------------------
The Company's Markers and Writing Instruments business is
conducted by the Sanford division. Sanford primarily designs,
manufactures or imports, packages and distributes permanent/waterbase
markers, dry erase markers, overhead projector pens, highlighters,
wood-cased pencils, ballpoint pens and inks, and distributes other
writing instruments including roller ball pens and mechanical pencils
for the retail marketplace.
Sanford products are sold primarily under the trade names of
SANFORD{R}, EBERHARD FABER{R} and BEROL{R}, and the brands SHARPIE{R},
UNI-BALL{R} (used under exclusive license from Mitsubishi Pencil Co.
Ltd. and its subsidiaries), EXPO{R}, ZEZE{R}, VIS-A-VIS{R},
EXPRESSO{R} and MONGOL{R}.
Sanford markets its products directly and through distributors to
mass merchants, warehouse clubs, grocery/drug stores, office
superstores, office supply stores, contract stationers, and hardware
distributors, using a network of manufacturers' representatives, as
well as regional direct sales representatives and market-specific
sales managers.
Principal U.S. facilities are located in Bellwood, Illinois and
Lewisburg and Shelbyville, Tennessee. Principal foreign facilities
are located in Tlalnepantla, Mexico; Bogota, Colombia; Maracay,
Venezuela; King's Lynn, United Kingdom and Oakville, Ontario, Canada.
<PAGE> 6
Office Storage and Organization Products
- ----------------------------------------
The Company's office storage and organization business is
conducted through its Newell Office Products division. Newell Office
Products primarily designs, manufactures or imports, packages and
distributes desktop accessories, computer accessories, storage
products, card files, chair mats and resin-based office furniture.
Newell Office Products markets its products under the Rolodex{R},
Eldon{R} and Rogers{R} trade names.
Newell Office Products markets its products directly and through
distributors to mass merchants, warehouse clubs, grocery/drug stores,
office superstores, office supply stores and contract stationers,
using a network of manufacturers' representatives, as well as regional
zone and market-specific sales managers.
Principal facilities are located in Moca, Puerto Rico; Maryville,
Tennessee and Madison, Wisconsin.
School Supplies and Stationery
- ------------------------------
The Company's school supplies and stationery business is
conducted through its Stuart Hall division. Stuart Hall primarily
manufactures, packages and distributes its products under the STUART
HALL{R} trade name.
Stuart Hall markets its products directly and through
distributors to mass merchants, warehouse clubs, grocery/drug stores,
office supply stores and contract stationers, using a network of
manufacturers' representatives, as well as regional zone and
market-specific sales managers.
The principal facility is located in Kansas City, Missouri.
HOUSEWARES
----------
Glassware and Plasticware
- -------------------------
The Company's glassware and plasticware business is conducted by
the Anchor Hocking Consumer Glass, Anchor Hocking Specialty Glass,
Newell Plastics and Newell Europe divisions. These divisions
primarily design, manufacture, package and distribute glass and
plastic products. These products include glass ovenware, servingware,
cookware and dinnerware products and plastic microwave cookware and
food storage products. Anchor Hocking also produces foodservice
products, glass lamp parts, lighting components, meter covers and
appliance covers for the foodservice and specialty markets. Newell
Europe also produces glass components for appliance manufacturers and
<PAGE> 7
its products are marketed under exclusive license from Corning
Incorporated in Europe, the Middle East and Africa.
Anchor Hocking Consumer and Specialty Glass and Newell Plastics
products are sold primarily under the trade names of ANCHOR HOCKING{R}
and PLASTICS INC.{TM}, and the brand names of OVEN BASICS{R} and
STOWAWAYS{R}. Newell Europe's products are sold primarily under the
brand names of PYREX{R} (used under exclusive license from Corning
Incorporated in Europe, the Middle East and Africa), PYROFLAM{R},
VISIONS{R} and VITRI{R}.
Anchor Hocking Consumer and Newell Plastics market their products
directly to mass merchants, warehouse clubs, grocery/drug stores,
department/specialty stores, hardware distributors and select contract
customers, using a network of manufacturers' representatives, as well
as regional zone and market-specific sales managers. Anchor Specialty
Glass markets its products to manufacturers that supply the mass
merchant and home party channels of trade. Newell Europe markets its
products to mass merchants, industrial manufacturers and buying groups
using a direct sales force and manufacturers' representatives in some
markets.
Principal U.S. facilities are located in Lancaster, Ohio; Monaca,
Pennsylvania and St. Paul and Coon Rapids, Minnesota. Principal
foreign facilities are located in Sunderland, Great Britain; Muhltal,
Germany and Chateauroux, France.
Aluminum Cookware and Bakeware
- ------------------------------
The Company's aluminum cookware and bakeware business is
conducted by the Mirro division. Mirro primarily designs,
manufactures, packages and distributes aluminum cookware and bakeware
for the retail marketplace. Mirro also designs, manufactures,
packages and distributes various specialized aluminum cookware and
bakeware items for the food service industry. It also produces
aluminum contract stampings and components for other manufacturers and
makes aluminum and plastic kitchen tools and utensils. Mirro
manufacturing operations are highly integrated, rolling sheet stock
from aluminum ingot, and producing phenolic handles and knobs at its
own plastics molding facility.
Mirro products are sold primarily under the trade names of
MIRRO{R} and WEAREVER{R}, and the brand names of AIRBAKE{R},
CUSHIONAIRE{R}, CONCENTRIC AIR{R}, CHANNELON{R} and WEAREVER AIR{TM}.
Mirro markets its products directly to mass merchants, warehouse
clubs, grocery/drug stores, department/specialty stores, hardware
distributors, cable TV networks and select contract customers, using a
network of manufacturers' representatives, as well as regional zone
and market-specific sales managers.
Principal facilities are located in Manitowoc and Chilton,
Wisconsin.
<PAGE> 8
Hair Accessories and Beauty Organizers
- --------------------------------------
The Company's hair accessory and beauty organizer business is
conducted through its Goody division. Goody primarily designs,
manufactures or imports, packages and distributes hair accessories and
beauty organizers.
Goody products are sold primarily under the trade names GOODY{R},
ACE{R} and WILHOLD{R}.
Goody markets its products directly to mass merchants, warehouse
clubs, grocery/drug stores and department/specialty stores, using a
network of manufacturers' representatives, as well as regional zone
and market-specific sales managers.
Principle facilities are located in Peach Tree City and
Manchester, Georgia.
Export Sales
- ------------
The Company's export sales business, defined as sales of products
made in the U.S. and sold abroad, is conducted through its Newell
International division. For purposes of the table on the following
page, sales attributable to the Newell International division are
allocated to the product group that manufactured the products.
Net Sales By Product Class
- --------------------------
As of September 30, 1997, the Company began to present sales
information for its various product categories in three groups rather
than four groups. The Company's three product groups are Hardware and
Home Furnishings, Office Products, and Housewares. The Company
believes that this presentation is appropriate, because (i) it
organizes its product categories into these groups when making
operating decisions and assessing performance, and (ii) the Company
divisions included in each group sell primarily to the same retail
channel: Hardware and Home Furnishings (home centers and hardware
stores), Office Products (office superstores and contract stationers)
and Housewares (discount stores and warehouse clubs).
<PAGE> 9
The following table sets forth the amounts and percentages of the
Company's net sales for the three years ended December 31 (including
sales of acquired companies from the time of acquisition), for the
Company's three product groups and the product categories included
therein:
<TABLE>
<CAPTION>
1997 % of total 1996 % of total 1995 % of total
---- ---------- ---- ---------- ---- -----------
(In millions, except percentages)
<S> <C> <C> <C> <C> <C>
Hardware and Home Furnishings:
Window Treatments $ 562.6 18% $ 385.6 13% $ 392.0 16%
Hardware and Tools 392.6 12 383.1 13 364.3 15
Picture Frames 359.4 11 339.8 12 154.0 6
Home Storage Products 170.2 5 190.8 7 186.3 7
Total Hardware and ------- --- ------- -- ------- ---
Home Furnishings 1,484.8 46 1,299.3 45 1,096.6 44
Office Products:
Markers and Writing
Instruments 601.4 19 570.2 20 402.4 16
Office Storage and Organization 209.9 6 85.6 3 81.6 3
School Supplies and Stationery 87.9 3 86.0 3 98.2 4
----- --- ----- --- ----- ---
Total Office Products 899.2 28 741.8 26 582.2 23
Housewares:
Glassware and Plasticware 394.4 12 394.2 14 397.6 16
Cookware and Bakeware 284.3 9 273.4 9 261.9 11
Hair Accessories and
Beauty Organizers 171.6 5 164.1 6 160.1 6
----- --- ----- --- ----- ---
Total Housewares 850.3 26 831.7 29 819.6 33
Newell Consolidated $3,234.3 100% $2,872.8 100% $2,498.4 100%
======== ==== ======== ==== ======== ====
</TABLE>
Certain 1996 and 1995 amounts have been reclassified to conform
with the 1997 presentation.
GROWTH STRATEGY
- ---------------
The Company's growth strategy emphasizes acquisitions and
internal growth. The Company has grown both domestically and
internationally by acquiring businesses with brand name product lines
and improving the profitability of such businesses through an
integration process referred to as "Newellization." Since 1990, the
Company has completed more than 15 major acquisitions representing
more than $2 billion in additional sales. The Company supplements
acquisition growth with internal growth, principally by introducing
new products, entering new domestic and international markets, adding
new customers, cross-selling existing product lines to current
customers and supporting its U.S.-based customers' international
expansion.
<PAGE> 10
ACQUISITIONS AND INTEGRATION
- ----------------------------
Acquisition Strategy
- -------------------
The Company primarily grows by acquiring businesses and product
lines with a strategic fit with the Company's existing businesses. It
also seeks to acquire product lines with a number one or two position
in the markets in which they compete, a low technology level, a long
product life cycle and the potential to reach the Company's standard
of profitability. In addition to adding entirely new product lines,
the Company uses acquisitions to round out existing businesses and
fill gaps in its product offering, add new customers and distribution
channels, expand shelf space for the Company's products with existing
customers, and improve operational efficiency through shared
resources.
Newellization
- -------------
"Newellization" is the Company's well-established profit
improvement and productivity enhancement process that is applied to
integrate newly acquired product lines. The Newellization process
includes establishing a more focused business strategy, improving
customer service, reducing corporate overhead through centralization
of administrative functions and tightening financial controls. In
integrating acquired businesses, the Company typically centralizes
accounting systems, capital expenditure approval, cash management,
order processing, billing, credit, accounts receivable and data
processing operations. To enhance efficiency, Newellization also
focuses on improving manufacturing processes, eliminating
non-productive lines, reducing inventories, increasing accounts
receivable turnover and trimming excess costs.
Newellization also builds partnerships with customers and
improves sales mix profitability through program merchandising
techniques. The Newellization process usually takes approximately two
to three years to complete.
History of Acquiring and Integrating Businesses
- -----------------------------------------------
The Company's growth from a small manufacturer of drapery
hardware with approximately $15 million in annual sales in 1967 has
largely been the result of the acquisition and integration of more
than 75 businesses and product lines to build a strong multi-product
offering. Set forth below is a list of the Company's major
acquisitions since 1990 along with the approximate amount of aggregate
annual sales for the businesses acquired in the full year prior to
acquisition.
<PAGE> 11
<TABLE>
<CAPTION>
Major Acquisitions Since 1990
- -----------------------------
Acquired Trade or Annual Sales
Year Brand Name <F1> Product Category When Acquired
- ---- ----------------- ---------------- -------------
(in millions)
<S> <C> <C> <C>
1997<F4> Rolodex Office Storage and Organization $550
Kirsch Window Treatments
Eldon Office Storage and Organization
1996 Holson and Burnes of Boston Picture Frames $130
1995 Decorel Picture Frames $300
Berol Markers and Writing Instruments
1994 Del Mar and LouverDrape Window Treatments $470
Eberhard Faber (including Markers and Writing Instruments
Uni-Ball <F2>
Pyrex <F3> Glassware and Plasticware
1993 Goody Hair Accessories $500
Levolor Window Treatments
Lee Rowan Home Storage Products
1992 Sanford (including Markers and Writing Instruments $420
Sharpie and Expo)
Stuart Hall School Supplies and Stationery
Intercraft Picture Frames
1991 Rogers and Keene Office Storage and Organization $ 50
<FN>
<F1> All listed trade and brand names are trademarks, which are registered in the United States Patent and
Trademark Office.
<F2> Used under exclusive license from Mitsubishi Pencil Co. Ltd. and its subsidiaries.
<F3> Used under exclusive license from Corning Incorporated in Europe, the Middle East and Africa only.
<F4> The Company's 1997 acquisitions illustrate its goal of adding businesses with a strategic fit. In
March 1997, the Company purchased the assets of Rolodex, a manufacturer and marketer of office products, including
card files, personal organizers and paper punches. These products supplement the Company's Office Products group,
which manufactures or imports, packages and distributes desktop and computer accessories under the Rogers{R} brand
name (acquired in 1991).
In May 1997, the Company acquired Kirsch, which manufactures and distributes drapery hardware and custom
window coverings in the U. S. and abroad, primarily under the trade names of Kirsch{R}, ACRIMO{R} and HOFESA{R}. The
Company operates the Kirsch business through its Hardware and Home Furnishings group, which manufactures or imports,
packages and distributes mini-blinds, roller shades and drapery hardware.
In June 1997, the Company acquired Eldon, which is a leader in the design, manufacture and supply of computer
and plastic desktop accessories, resin-based office furniture, and storage and organization products. The Company
operates the business as part of its Office Products group (which also includes the Rogers{R} and Rolodex{R} brand
names).
</TABLE>
<PAGE> 12
Internal Growth
- ---------------
The second element of the Company's growth strategy is internal
growth. Once an acquired business has been Newellized, the Company's
strategy is to build profitable sales and contribute to the Company's
internal growth. Avenues for internal growth include introducing new
products, entering new domestic and international markets, adding new
customers, cross-selling existing product lines to current customers
and supporting its U.S.-based customers' international expansion. The
Company's goal is to achieve an internal growth rate of 3-5% per year,
and over the last five years, the Company has achieved an average of
4% annual internal growth. Internal growth is defined by the Company
as growth from its "core businesses," which include continuing
businesses owned more than two years and minor acquisitions. The
Company intends to continue to pursue internal growth opportunities to
complement its acquisition growth.
International
- -------------
The Company is pursuing international opportunities to further
its acquisition and internal growth objectives. The rapid growth of
consumer goods economies and retail structures in several regions
outside the U.S., particularly Mexico, South America and Europe, makes
them attractive to the Company by providing opportunities to acquire
businesses, develop partnerships with new foreign customers and extend
relationships with the Company's domestic customers whose businesses
are growing internationally. The Company's recent acquisitions,
combined with existing sales to foreign customers, increased its sales
outside the U.S. to approximately 17% of total sales in 1997 from
approximately 8% in 1992.
Within the last few years, the Company acquired a number of
businesses with significant foreign sales. The Company's first
significant foreign acquisition was the 1994 acquisition of Corning
Incorporated's European consumer product business, with annual sales
of approximately $130 million. Now known as Newell Europe, the
acquisition included Corning's manufacturing facilities in England,
France and Germany, as well as the trademark rights and product lines
of Pyrex{R} glass cookware used under exclusive license from Corning
Incorporated in Europe, Africa and the Middle East. The 1995
acquisition of Berol, an international manufacturer and marketer of
writing instruments provided annual international sales of more than
$80 million and several foreign manufacturing facilities. The 1997
acquisition of Kirsch added annual international sales of drapery
hardware and window coverings of approximately $150 million and
several European manufacturing facilities.
Additional information regarding acquisitions of businesses is
included in Item 6 and note 2 to the consolidated financial
statements.
<PAGE> 13
MARKETING AND DISTRIBUTION
- --------------------------
Customer Service
- ----------------
The Company believes that one of the primary ways it
distinguishes itself from its competitors is through customer service.
The Company's ability to provide superior customer service is a result
of its information technology, marketing and merchandising programs
designed to enhance the sales and profitability of its customers and
consistent on-time delivery of its products.
Information Technology
- ----------------------
The Company has become an industry leader in the application of
Electronic Data Interchange ("EDI") technology, an electronic link
between the Company and many of its retail customers, and invests in
advanced computer systems. The Company uses EDI to receive and
transmit purchase orders, invoices and payments. By replacing
paper-based processing with computer-to-computer business
transactions, EDI has cut days off the order/shipping cycle.
Building upon its EDI expertise, the Company has established
"Quick Response" programs with several major customers. These
programs allow the Company to implement customized features such as
vendor-managed inventories in which the Company manages certain or all
aspects of inventory of several product categories at customer
locations. The Company's experience is that its customers benefit
from such programs by increased inventory turnover and reduced
customer waiting periods for out-of-stock product.
On-Time Delivery
- ----------------
A critical element of the Company's customer service is
consistent on-time delivery of products to its customers. Retailers
are pursuing a number of strategies to deliver the highest-quality,
lowest-cost products to their customers. A growing trend among
retailers is to purchase on a "just-in-time" basis in order to reduce
inventory costs and increase returns on investment. As retailers
shorten their lead times for orders, manufacturers need to more
closely anticipate consumer buying patterns. The Company supports its
retail customers' "just-in-time" inventory strategies through
investments in improved forecasting systems, more responsive
manufacturing and distribution capabilities and electronic
communications. The Company manufactures the vast majority of its
products and has extensive experience in high-volume, cost-effective
manufacturing. The high-volume nature of its manufacturing processes
and the relatively consistent demand for its products enables the
Company to ship most products directly from its factories without the
need for independent warehousing and distribution centers. For 1997,
<PAGE> 14
approximately 98% of the items ordered by customers were shipped on
time, typically within two to three days of the customer's order.
Marketing and Merchandising
- ---------------------------
The Company's objective is to develop long-term, mutually
beneficial partnerships with its customers and become their supplier
of choice. To achieve this goal, the Company has a value-added
marketing program that offers a family of leading brand name staple
products, tailored sales programs, innovative merchandising support,
in-store services and responsive top management.
The Company's merchandising skills help customers stimulate store
traffic and sales through timely advertising and innovative
promotions. The Company also assists customers in differentiating
their offerings by customizing products and packaging. Through
self-selling packaging and displays that emphasize good-better-best
value relationships, retail customers are encouraged to trade up to
higher-value, best quality products.
Customer service also involves customer contact with top-level
decision makers at the Company's divisions. As part of its
decentralized structure, the Company's division presidents are the
chief marketing officers of their product lines and communicate
directly with customers. This structure permits early recognition of
market trends and timely response to customer problems.
Multi-Product Offering
- ----------------------
The Company's increasingly broad product coverage in multiple
product lines permits it to more effectively meet the needs of its
customers. With families of leading, brand name products and
profitable new products, the Company also can help volume purchasers
sell a more profitable product mix. As a potential single source for
an entire product line, the Company can use program merchandising to
improve product presentation, optimize display space for both sales
and income and encourage impulse buying by retail customers.
Corporate Structure
- -------------------
By decentralizing its manufacturing and marketing efforts while
centralizing key administrative functions, the Company seeks to foster
a responsive entrepreneurial culture. The Company's divisions
concentrate on designing, manufacturing, merchandising, selling and
servicing their products, which facilitates product development and
responsiveness to customers. Administrative functions that are
centralized at the corporate level include cash management, accounting
systems, capital expenditure approvals, order processing, billing,
credit, accounts receivable, data processing operations and legal
functions. Centralization concentrates technical expertise in one
<PAGE> 15
location, making it easier to observe overall business trends and
manage the Company's businesses.
BACKLOG
- -------
The dollar value of unshipped factory orders is not material.
SEASONAL VARIATIONS
- -------------------
The Company's product groups are only moderately affected by
seasonal trends. Hardware and Home Furnishings products have higher
sales in the second and third quarters due to an increased level of
do-it-yourself projects completed in the summer months; Office
Products have higher sales in the second and third quarters due to the
back-to-school season; and Housewares products typically have higher
sales in the second half of the year due to retail stocking related to
the holiday season. Because these seasonal trends are moderate, the
Company's consolidated quarterly sales do not fluctuate significantly,
unless a significant acquisition is made.
FOREIGN OPERATIONS
- ------------------
Information regarding the Company's 1997, 1996 and 1995 foreign
operations is included in note 14 to the consolidated financial
statements and is hereby incorporated by reference.
RAW MATERIALS
- -------------
The Company has multiple foreign and domestic sources of supply
for substantially all of its material requirements. The raw materials
and various purchased components required for its products have
generally been available in sufficient quantities.
PATENTS AND TRADEMARKS
- ----------------------
The Company has many patents, trademarks and trade names, none of
which is considered material to the consolidated operations.
COMPETITION
- -----------
The rapid growth of high-volume retailers, such as discount
stores and warehouse clubs, home centers and hardware stores, and
office superstores and contract stationers, together with changes in
consumer shopping patterns, have contributed to a significant
consolidation of the U.S. retail industry and the formation of
dominant multi-category retailers. Other trends among retailers are
to require manufacturers to maintain or reduce product prices or
deliver products with shorter lead times, or for the retailer to
<PAGE> 16
import generic products directly from foreign sources. The
combination of these market influences creates a highly competitive
environment in which the Company's principal customers continuously
evaluate which product suppliers to use, resulting in pricing
pressures and the need for ongoing improvements in customer service.
For more than 30 years, the Company has positioned itself to
respond to the challenges of this retail environment by developing
strong relationships with large, high-volume purchasers. The Company
markets its strong multi-product offering through virtually every
category of high-volume retailer, including discount, drug, grocery
and variety chains, warehouse clubs, department, hardware and
specialty stores, home centers, office superstores, contract
stationers and military exchanges. The Company's largest customer,
Wal-Mart, accounted for approximately 15% of net sales in 1997. Other
top ten customers included Kmart, The Home Depot, The Office Depot,
Target, JC Penney, Sam's Club, United Stationers, Hechinger and Office
Max.
The Company's other principal methods of meeting its competitive
challenges are high brand name recognition, superior customer service
(including industry leading information technology, innovative
"good-better-best" marketing and merchandising programs), consistent
on-time delivery, decentralized manufacturing and marketing,
centralized administration, and experienced management.
ENVIRONMENT
- -----------
Information regarding the Company's environmental matters is
included in the Management's Discussion and Analysis section of this
report and in note 15 to the consolidated financial statements and is
hereby incorporated by reference.
EMPLOYEES
- ---------
The Company has approximately 24,600 employees, of whom
approximately 6,400 are covered by collective bargaining agreements.
<PAGE> 17
Item 2. Properties
- -------------------
The following table shows the location and general character of
the principal operating facilities owned or leased by the Company.
The executive offices are located in Beloit, Wisconsin, which is an
owned facility occupying approximately 9,000 square feet. Other
Corporate offices are located in Illinois in owned facilities at
Freeport (occupying 73,000 square feet) and Rockford (occupying 7,000
square feet). Most of the idle facilities, which are excluded from
the following list, are subleased while being held pending sale or
lease expiration. The Company considers its properties to be in
generally good condition and well-maintained, and are generally
suitable and adequate to carry on the Company's business. The
properties are used for manufacturing ("M"), distribution ("D") and
administrative offices ("A").
Owned or
Exp. Date General
Location City if Leased Character
- -------- ---- --------- ---------
UNITED STATES
Arizona Phoenix 09/04 M & D
California Irvine Owned M & D
Vista 06/03 M & D
Westminster 09/02 M
Westminster 05/99 M
Connecticut Beacon Falls Owned M
Georgia Athens Owned M
Columbus Owned D
Manchester Owned M
Peachtree City Owned A
Illinois Bellwood Owned M & A
Bellwood 11/99 M, D & A
Freeport 10/05 D
Freeport Owned A
Freeport Owned M, D & A
Mundelein 09/98 M & A
Rockford Owned M, D & A
Rockford Owned A
South Holland 01/02 M
Waukegan 07/98 D
Indiana Lowell Owned M, D & A
Middlebury Owned M
Michigan Sturgis Owned M, D & A
<PAGE> 18
Owned or
Exp. Date General
Location City if Leased Character
- -------- ---- --------- ---------
Minnesota Coon Rapids Owned M
Eagan 01/99 D
St. Paul Owned M & A
Missouri Fenton 11/99 A
Fenton 11/99 D
Jackson Owned M, D & A
Kansas City 12/05 M, D & A
Nebraska Omaha 09/98 D
New Hampshire Claremont Owned M & D
Claremont 10/00 D
New Jersey Rockaway 03/02 M
New York Medina Owned M, D & A
Ogdensburg Owned M & A
North Carolina High Point Owned M
Statesville Owned M & D
Statesville 05/98 D
Ohio Bremen Owned M
Lancaster M-T-M M
Lancaster Owned M, D & A
Pennsylvania Ambridge M-T-M D
Elysburg M-T-M D
Monaca Owned M & A
Monaca 10/03 D
Shamokin Owned M & D
Wampum M-T-M D
Puerto Rico Carolina 06/98 D & A
Moca 04/02 M & A
Rhode Island North Smithfield 05/00 A
Tennessee Covington Owned M & D
Johnson City 12/98 D
Johnson City Owned M
Lewisburg Owned M, D & A
Maryville Owned M, D & A
Memphis 12/02 M & D
Shelbyville Owned M, D & A
Texas Taylor Owned M, D & A
Waco Owned M
<PAGE> 19
Owned or
Exp. Date General
Location City if Leased Character
- -------- ---- --------- ---------
Utah Ogden Owned M
Salt Lake City 04/98 M
Wisconsin Beloit Owned A
Chilton Owned M
Madison 01/99 D
Madison M-T-M D
Madison Owned M, D & A
Manitowoc 04/99 D
Manitowoc Owned M, D & A
St. Francis Owned M, D & A
CANADA
Alberta Calgary 07/01 M
Ontario Mississauga Owned M & D
Oakville 10/99 D
Pickering 03/07 D
Prescott 12/99 M, D & A
Prescott Owned M & D
Richmond Hills 10/00 A
Toronto 08/00 M & A
Watford 01/04 M, D & A
Weston M-T-M A
EUROPE
Belgium Zellick 08/98 D & A
France Ablis 02/06 D
Avon 11/99 A
Chateauroux Owned M, D & A
Mitry Mory 03/01 D & A
Germany Hamburg 05/99 A
Muhltal Owned M, D & A
Italy Milan 12/01 A
Milan 06/98 D & A
Milan 04/99 D
Portugal Lisbon M-T-M D
Oporto Owned D
Spain Barcelona Owned D
Madrid 01/99 A
Madrid Owned D
Malaga Owned D
Tenerife M-T-M D
Vitoria Owned M
<PAGE> 20
Owned or
Exp. Date General
Location City if Leased Character
- -------- ---- --------- ---------
Sweden Malmo Owned M & A
Malmo M-T-M M & D
United Kingdom Bath Road 06/07 A
Dunstable 02/05 D & A
King's Lynn Owned M, D & A
Sunderland Owned M
Sunderland 11/99 D
Sunderland 12/00 D
Tipton M-T-M D
LATIN AMERICA
Colombia Bogota Owned M, D & A
Mexico Durango Owned M
Estado de Mexico 07/99 D & A
Tlalnepantla Owned M, D & A
Venezuela Maracay Owned M,D & A
La Hamaca Owned M & D
San Vicente Owned M
ASIA
Australia Noble Park 06/00 D & A
Item 3. Legal Proceedings
- --------------------------
Information regarding legal proceedings is included in note 15 to
the consolidated financial statements and is hereby incorporated by
reference herein.
<PAGE> 21
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
There were no matters submitted to a vote of the Company's
shareholders during the fourth quarter of fiscal year 1997.
Supplementary Item - Executive Officers of the Registrant as of
12/31/97
Name Age Present Position With the Company
- ---- --- ---------------------------------
William P. Sovey 64 Vice Chairman and Chief Executive
Officer through December 31, 1997;
Chairman of the Board effective January
1, 1998
John J. McDonough 61 Vice Chairman and Chief Executive
Officer effective January 1, 1998
Thomas A. Ferguson, Jr. 50 President and Chief Operating Officer
Donald L. Krause 58 Senior Vice President-Corporate
Controller
William T. Alldredge 57 Vice President-Finance
Richard C. Dell 51 Group President
William J. Denton 53 Group President
William K. Doppstadt 65 Vice President-Personnel Relations
William P. Sovey became Chairman of the Board effective January 1,
1998. He was Vice Chairman and Chief Executive Officer from May 1992
through December 1997. From January 1986 through May 1992, he was
President and Chief Operating Officer.
John J. McDonough was elected Vice Chairman and Chief Executive
Officer of the Company effective January 1, 1998. He has been a
Director of the Company since 1992 and was Senior Vice
President-Finance of the Company from November 1981 through June 1983.
Mr. McDonough has also been President and Chief Executive Officer of
McDonough Capital Company LLC (an investment management company) since
April 1995. Prior thereto, he was Vice Chairman and a Director of
Dentsply International Inc. (a manufacturer and distributor of dental
and medical x-ray equipment and other dental products) from 1983
through October 1995, and was Chief Executive Officer from April 1983
through February 1995.
Thomas A. Ferguson, Jr. has been President and Chief Operating Officer
since May 1992. From January 1989 to May 1992, he was
President-Operating Companies.
<PAGE> 22
Donald L. Krause was appointed Senior Vice President-Corporate
Controller in March 1990. He was President-Industrial Companies from
February 1988 to March 1990.
William T. Alldredge has been Vice President-Finance of the Company
since August 1983.
Richard C. Dell has been Group President since June 1992. He was
President of Amerock from November 1989 to June 1992. He was
President of EZ Paintr from September 1987 to November 1989.
William J. Denton has been Group President since March 1990. From
April 1989 to March 1990, he was Vice President-Corporate Controller.
He was President of Anchor Hocking Glass from August 1987 to April
1989.
William K. Doppstadt was Vice President-Personnel Relations of the
Company from 1974 through his retirement on December 31, 1997. Mr.
Doppstadt continues to serve the Company as a consultant for personnel
relations.
<PAGE> 23
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
- ----------------------------------------------------------------------
The Company's Common Stock is listed on the New York and Chicago
Stock Exchanges (symbol: NWL). As of December 31, 1997, there were
15,858 stockholders of record. The following table sets forth the
high and low sales prices of the Common Stock on the New York Stock
Exchange Composite Tape (as published in the Wall Street Journal) for
the calendar periods indicated.
1997 1996 1995
------------------ ------------------ ------------------
High Low High Low High Low
------- ------- -------- ------- -------- -------
Quarters:
First $38 3/8 $30 3/8 $28 7/8 $25 5/8 $25 1/2 $20 5/8
Second 40 1/16 36 7/8 32 25 1/2 25 22 1/4
Third 43 1/4 37 1/2 32 28 1/2 26 1/4 23 5/8
Fourth 43 3/16 35 1/8 33 1/4 28 1/4 27 1/4 23 43/64
The Company has paid regular cash dividends on its Common Stock
since 1947. On February 10, 1998, the quarterly cash dividend was
increased to $0.18 per share from the $0.16 per share that had been
paid since February 11, 1997. Prior to this date, the quarterly cash
dividend paid was $0.14 per share since February 6, 1996, which was an
increase from the $0.12 per share paid since May 11, 1995.
On December 12, 1997, the Company completed a private placement
of $500,000,000 5.25% Company-Obligated Mandatorily Redeemable
Convertible Preferred Securities of a Subsidiary Trust with a
liquidation preference of $50 per security (the "Convertible Preferred
Securities"). The trust sold the Convertible Preferred Securities to
the Initial Purchasers in reliance on Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act"). The Initial
Purchasers of the Convertible Preferred Securities were Goldman, Sachs
& Co., Morgan Stanley & Co. Incorporated, Robert W. Baird & Co.
Incorporated, Bear Stearns & Co. Inc., and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, which received an aggregate discount of
$12.50 million. The Initial Purchasers sold $496,450,000 liquidation
preference of the Convertible Preferred Securities in the United
States to qualified institutional buyers in reliance on Rule 144A
under the Securities Act. The Initial Purchasers or their
international affiliates also sold $3,550,000 liquidation preference
of the Convertible Preferred Securities outside the United States in
reliance on Regulation S under the Securities Act. Each Convertible
Preferred Security is convertible at any time in a prescribed manner
at the option of the holder into shares of common stock, par value
$1.00 per share, of the Company ("Company Common Stock") at the rate
of 0.9865 shares of Company Common Stock for each Convertible
Preferred Security (equivalent to an approximate conversion price of
$50.685 per share of Company Common Stock), subject to adjustment
under certain circumstances.
<PAGE> 24
Item 6. Selected Financial Data
- --------------------------------
The following is a summary of certain consolidated financial
information relating to the Company at December 31. The summary has
been derived in part from, and should be read in conjunction with, the
consolidated financial statements of the Company included elsewhere in
this report and the schedules thereto.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In millions, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $3,234.3 $2,872.8 $2,498.4 $2,074.9 $1,645.0
Cost of products sold 2,188.4 1,965.5 1,715.6 1,403.8 1,101.7
-------- -------- -------- -------- --------
Gross income 1,045.9 907.3 782.8 671.1 543.3
Selling, general
and administrative expenses 474.3 421.6 363.3 313.2 257.2
-------- -------- ------- -------- --------
Operating income 571.6 485.7 419.5 357.9 286.1
Nonoperating expenses (income):
Interest expense 73.6 57.0 49.8 30.0 19.1
Other, net 17.2 4.1 (1.1) (1.4) (8.5)
-------- -------- -------- --------- --------
Net 90.8 61.1 48.7 28.6 10.6
Income before income taxes 480.8 424.6 370.8 329.3 275.5
Income taxes 190.4 168.1 148.3 133.7 110.2
-------- -------- -------- -------- -------
Net income $ 290.4 $ 256.5 $ 222.5 $ 195.6 $ 165.3
======== ======== ======== ======== =======
Earnings Per Share
Basic $ 1.83 $ 1.62 $ 1.41 $ 1.24 $ 1.05
Diluted $ 1.82 $ 1.61 $ 1.40 $ 1.24 $ 1.05
Dividends per share $ 0.64 $ 0.56 $ 0.46 $ 0.39 $ 0.35
Weighted Average Shares Outstanding
Basic 159.1 158.8 158.2 157.8 157.3
Diluted 160.2 159.2 158.5 158.0 157.7
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In millions)
BALANCE SHEET DATA
Inventories $ 625.2 $ 509.5 $ 509.2 $ 420.7 $ 301.0
Working Capital 717.6 471.1 452.6 133.6 76.7
Total assets 3,943.8 3,005.1 2,927.1 2,488.3 1,952.9
Short-term debt 51.9 104.1 163.0 309.1 247.2
Long-term debt, net of
current maturities 784.0 672.0 761.6 409.0 218.1
Stockholders' equity 1,714.3 1,491.8 1,296.0 1,125.3 979.1
</TABLE>
<PAGE> 25
1993
- ----
On April 30, 1993, the Company acquired substantially all of the
assets of Levolor Corporation ("Levolor"), a manufacturer and
distributor of decorative window coverings. On September 22, 1993,
the Company acquired Lee Rowan Company, a manufacturer and marketer of
coated wire storage and organization products. On November 9, 1993,
the Company acquired Goody Products, Inc. ("Goody"), a manufacturer
and marketer of personal consumer products, including hair accessories
and beauty organizers. For these and other minor 1993 acquisitions,
the Company paid $293.1 million in cash (excluding the $13.1 million
of Goody Common Stock that the Company owned prior to the acquisition)
and assumed $30.7 million of debt.
These 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 to the fair market value of the
assets acquired and liabilities assumed and resulted in trade names
and goodwill of approximately $208.2 million.
1994
- ----
On August 29, 1994, the Company acquired the decorative window
coverings business of Home Fashions, Inc.("HFI"), including vertical
blinds and pleated shades sold under the Del Mar{R} and LouverDrape{R}
brand names. These HFI assets were combined with Levolor and together
they are operated as a single entity called Levolor Home Fashions. On
October 18, 1994, the Company acquired Faber-Castell Corporation
("Faber"), a maker and marketer of markers and writing instruments,
including wood-cased pencils and rolling ball pens, sold under the
Eberhard Faber{R} brand name. Faber was combined with Sanford and
together they are operated as a single entity called Sanford. On
November 30, 1994, the Company acquired the European consumer products
business of Corning Incorporated (now known as "Newell Europe"). This
acquisition included Corning's consumer products manufacturing
facilities in England, France and Germany, the European trademark
rights and product lines for Pyrex{R}, Pyroflam{R} and Visions{R}
brands in Europe, the Middle East and Africa, and Corning's consumer
distribution network throughout these areas under exclusive license
from Corning Incorporated. Additionally, the Company became the
distributor in Europe, the Middle East and Africa for Corning's U.S.
manufactured cookware and dinnerware brands. For these and other
minor 1994 acquisitions, the Company paid $360.8 million in cash and
assumed $12.8 million of debt.
These 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 to the fair market value of the
assets acquired and liabilities assumed and resulted in trade names
and goodwill of approximately $202.2 million.
<PAGE> 26
Subsequent Years
- ----------------
Information regarding businesses acquired in the last three years
is included in note 2 to the consolidated financial statements.
QUARTERLY SUMMARIES
Summarized quarterly data for the last three years is as follows
(unaudited):
Calendar Year 1st 2nd 3rd 4th Year
- ------------- --- --- --- --- ----
(In millions, except per share data)
1997
- ----
Net sales $629.4 $800.9 $889.9 $914.1 $3,234.3
Gross income 189.3 265.8 286.7 304.1 1,045.9
Net income 37.8 77.8 84.2 90.6 290.4
Earnings per share:
Basic 0.24 0.49 0.53 0.57 1.83
Diluted 0.24 0.49 0.53 0.56 1.82
1996
- ----
Net sales $618.2 $735.1 $761.9 $757.6 $2,872.8
Gross income 181.3 235.8 243.7 246.5 907.3
Net income 33.2 67.7 74.6 81.0 256.5
Earnings per share:
Basic 0.21 0.43 0.47 0.51 1.62
Diluted 0.21 0.43 0.47 0.50 1.61
1995
- ----
Net sales $556.6 $621.3 $651.3 $669.2 $2,498.4
Gross income 166.8 189.5 207.2 219.3 782.8
Net income 36.1 54.9 65.1 66.4 222.5
Earnings per share:
Basic 0.23 0.35 0.41 0.42 1.41
Diluted 0.23 0.35 0.41 0.41 1.40
<PAGE> 27
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition
- ----------------------------------------------------------------------
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of
the Company's consolidated results of operations and financial
condition. The discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
Introduction
- ------------
The Company's primary financial goals are to increase sales and
earnings per share an average of 15% per year, to achieve an annual
return on beginning equity ("ROE") of 20% or above, to increase
dividends per share in line with earnings growth, and to maintain a
prudent ratio of total debt to total capitalization, net of cash
("leverage"). The Company has achieved these goals over the last ten
years, increasing sales and earnings per share at compound annual
rates of 15% and 17%, respectively, averaging 21% ROE, increasing
dividends per share at a compound annual rate of 19% and averaging 26%
leverage. The Company believes that the principal factors affecting
its ability to achieve these objectives in the future are likely to be
the realized rates of both acquisition and internal growth and the
Company's continued ability to integrate acquired businesses through a
process called "Newellization."
Since 1990, the Company has nearly tripled its sales by acquiring
businesses with aggregate annual sales of more than $2 billion. The
rate at which the Company can integrate these recent acquisitions to
meet the Company's standards of profitability may affect near-term
financial results. Over the longer term, the Company's ability both
to make and to integrate strategic acquisitions will impact the
Company's financial results.
The Company pursues internal growth by introducing new products,
entering new domestic and international markets, adding new customers,
cross-selling existing product lines to current customers and
supporting its U.S. based customers' international expansion. The
Company's goal is to achieve an internal growth rate of 3-5% per year,
and over the last five years, has achieved an average of 4% annual
internal growth. Internal growth is defined by the Company as growth
from its "core businesses," which include continuing businesses owned
more than two years and minor acquisitions. The Company believes that
its future internal growth will likely depend on its continued success
in these areas, as well as external factors.
<PAGE> 28
RESULTS OF OPERATIONS
The following table sets forth for the period indicated items
from the Consolidated Statements of Income as a percentage of net
sales at December 31:
1997 1996 1995
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of products sold 67.7 68.4 68.7
----- ----- -----
Gross income 32.3 31.6 31.3
Selling, general and
administrative expenses 14.6 14.7 14.5
----- ----- -----
Operating income 17.7 16.9 16.8
Nonoperating expenses:
Interest expense 2.3 2.0 2.0
Other, net 0.5 0.1 -
----- ----- -----
Net 2.8 2.1 2.0
----- ----- -----
Income before income
taxes 14.9 14.8 14.8
Income taxes 5.9 5.9 5.9
----- ----- -----
Net income 9.0% 8.9% 8.9%
===== ===== =====
1997 vs. 1996
- -------------
Net sales for 1997 were $3,234.3 million, representing an
increase of $361.5 million or 12.6% from $2,872.8 million in 1996.
The overall increase in net sales was primarily attributable to
contributions from Rolodex (acquired in March 1997), Kirsch (acquired
in May 1997), Eldon (acquired in June 1997) and 3% internal growth.
The 1997 acquisitions are described in note 2 to the consolidated
financial statements.
As of September 30, 1997, the Company began to present sales
information for its various product categories in three groups rather
than four groups. The Company's three product groups are Hardware and
Home Furnishings, Office Products and Housewares. The Company
believes that this presentation is appropriate because it organizes
its product categories into these groups when making operating
decisions and assessing performance, and the Company divisions
included in each group sell primarily to the same retail channel:
Hardware and Home Furnishings (home centers and hardware stores),
Office Products (office superstores and contract stationers) and
Housewares (discount stores and warehouse clubs). For ease of
comparison with previously published data, certain information is also
<PAGE> 29
included separately for Hardware and Tools and Home Furnishings which
now comprise a single product group.
Net sales for each of the Company's product groups (and the
primary reasons for the increases) were as follows, in millions:
Year Ended December 31,
-----------------------
1997 1996 % Change
---- ---- --------
Home Furnishings $1,092.2 $ 916.2
Hardware and Tools 392.6 383.1
-------- --------
1,484.8 1,299.3 14.3%(1)
Office Products 899.2 741.8 21.2%(2)
Housewares 850.3 831.7 2.2%(3)
-------- --------
$3,234.3 $2,872.8 12.6%
======== ========
Primary Reasons for Increases:
(1) 2% internal growth and Kirsch (May 1997) acquisition
(2) 6% internal growth and Rolodex (March 1997) and Eldon (June 1997)
acquisitions
(3) Internal growth
Gross income as a percent of net sales in 1997 was 32.3% or
$1,045.9 million versus 31.6% or $907.3 million in 1996. Gross
margins improved as a result of cost savings achieved through the
integration of several picture frame businesses acquired by the
Company in recent years, profitability improvement at the Company's
Levolor Home Fashions division and increased gross margins at several
of the Company's other core businesses. The increase in gross margins
was offset partially by 1997 acquisitions which had gross margins
lower than the Company's average gross margins. As these acquisitions
are integrated, the Company expects its gross margins to improve.
Selling, general and administrative expenses ("SG&A") in 1997
were 14.6% of net sales or $474.3 million versus 14.7% or $421.6
million in 1996. Core business SG&A spending as a percentage of sales
decreased primarily as a result of cost savings arising from the
picture frame business integration. This decrease was offset
partially by the 1997 acquisitions, which had higher SG&A than the
Company's average SG&A as a percent of net sales. As these
acquisitions are integrated, the Company expects its SG&A spending as
a percentage of net sales to decline.
Operating income in 1997 was 17.7% of net sales or $571.6 million
versus 16.9% or $485.7 million in 1996. The increase in operating
margins was primarily due to cost savings as a result of the picture
frame business integration, profitability improvement at the Company's
Levolor Home Fashions division and increased core business gross
<PAGE> 30
margins, offset partially by 1997 acquisitions which had average
operating margins lower than the Company's average operating margins.
Net nonoperating expenses in 1997 were 2.8% of net sales or $90.8
million versus 2.1% or $61.1 million in 1996. The $29.7 million
increase was due primarily to a $16.6 million increase in interest
expense and an $8.3 million increase in amortization of trade names
and goodwill (as a result of additional borrowings and capitalized
goodwill related to the 1997 acquisitions), and a $7.0 million
decrease in dividend income. Dividend income decreased as a result of
the conversion on October 15, 1996 by The Black & Decker Corporation
("Black & Decker") of 150,000 shares of privately placed Black &
Decker convertible preferred stock, Series B, owned by the Company
(purchased at a cost of $150.0 million) into 6.4 million shares of
Black & Decker Common Stock. Prior to conversion, the preferred stock
paid a 7.75% cumulative dividend, aggregating $2.9 million per
quarter, before the effect of income taxes. If Black & Decker
continues to pay dividends at the current rate ($0.12 per share of
Black & Decker Common Stock quarterly), the dividends paid to the
Company on the shares of Black & Decker Common Stock owned by the
Company as a result of the conversion would total $0.8 million per
quarter, before the effect of income taxes. For supplementary
information regarding other nonoperating expenses, see note 13 to the
consolidated financial statements.
For both 1997 and 1996, the effective tax rate was 39.6%. See
note 12 to the consolidated financial statements for an explanation of
the effective tax rate.
Net income for 1997 was $290.4 million, representing an increase
of $33.9 million or 13.2% from 1996. Basic earnings per share in 1997
increased 13.0% to $1.83 versus $1.62 in 1996; diluted earnings per
share in 1997 increased 13.0% to $1.82 versus $1.61 in 1996. The
increases in net income and earnings per share were primarily
attributable to cost savings arising from the picture frame business
integration, profitability improvement at the Company's Levolor Home
Fashions division, cost savings as a result of the Kirsch integration
into the Newell Window Furnishings division and increased operating
margins at several of the Company's other core businesses.
1996 vs. 1995
- -------------
Net sales for 1996 were $2,872.8 million, representing an
increase of $374.4 million or 15.0% from $2,498.4 million in 1995.
The overall increase in net sales was primarily attributable to
contributions from the 1995 acquisitions of Decorel and Berol, the
1996 acquisition of Holson Burnes, and internal growth of 4%. The
1995 and 1996 acquisitions are described in note 2 to the consolidated
financial statements.
<PAGE> 31
Net sales for each of the Company's product groups (and the
primary reasons for the increases) were as follows, in millions:
Year Ended December 31,
-----------------------
1996 1995 % Change
---- ---- --------
Home Furnishings $ 916.2 $ 732.3
Hardware and Tools 383.1 364.3
-------- --------
1,299.3 1,096.6 18.5%(1)
Office Products 741.8 582.2 27.4%(2)
Housewares 831.7 819.6 1.5%(3)
-------- --------
$2,872.8 $2,498.4 15.0%
======== ========
Primary Reasons for Increases:
(1) 5% internal growth and Decorel (October 1995) and Holson Burnes
(January 1996) acquisitions
(2) 3% internal growth and Berol (November 1995) acquisition
(3) 4% internal growth offset by weaker than expected sales at Newell
Europe as a result of soft European retail conditions
Gross income as a percent of net sales for 1996 was 31.6% or
$907.3 million versus 31.3% or $782.8 million in 1995. Gross margins
improved slightly, primarily as a result of increases in gross margins
from the businesses acquired in 1995 and 1994.
SG&A in 1996 was 14.7% of net sales or $421.6 million versus
14.5% or $363.3 million in 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 Holson Burnes.
Net nonoperating expenses for 1996 were 2.1% of net sales or
$61.1 million versus 2.0% or $48.7 million in 1995. The $12.4 million
increase was due to a $7.2 million increase in interest expense and a
$4.3 million increase in amortization of trade names and goodwill (as
a result of additional borrowings and capitalized goodwill related to
the 1995 and 1996 acquisitions). For supplementary information
regarding other nonoperating expenses, see note 13 to the consolidated
financial statements.
The effective tax rate was 39.6% in 1996 versus 40.0% in 1995.
See note 12 to the consolidated financial statements for an
explanation of the effective tax rate.
Net income for 1996 was $256.5 million, representing an increase
of $34.0 million or 15.3% from 1995. Basic earnings per share in 1996
increased 14.9% to $1.62 versus $1.41 in 1995; diluted earnings per
share in 1996 increased 15.0% to $1.61 versus $1.40 in 1995. The
increases in net income and earnings per share were primarily
attributable to contributions from Berol (net of associated interest
<PAGE> 32
expense and goodwill amortization) and an improvement in operating
margins at several of the core businesses.
International Operations
- ------------------------
The Company's non-U.S. business is growing at a faster pace than
its business in the United States. This growth outside the U.S. has
been fueled by recent international acquisitions, which supplemented
sales of the Company's existing Canadian businesses and sales of
Newell International, the Company's subsidiary responsible for the
majority of exports of the Company's products. For the year ended
December 31, 1997, the Company's non-U.S. business accounted for
approximately 17% of sales and 14% of operating income (see note 14 to
the consolidated financial statements). Growth of both the U.S. and
the non-U.S. businesses is shown below, dollars in millions:
Year Ended December 31,
-----------------------
1997 1996 % Change
---- ---- --------
(in millions)
Net sales:
- U.S. $2,694.7 $2,458.2 9.6%
- Non-U.S. 539.6 414.6 30.2
-------- --------
Total $3,234.3 $2,872.8 12.6%
======== ========
Operating income:
- U.S. $ 494.5 $ 437.7 13.0%
- Non-U.S. 77.1 48.0 60.6
-------- --------
Total $ 571.6 $ 485.7 17.7%
======== ========
Year Ended December 31,
-----------------------
1996 1995 % Change
---- ---- --------
(in millions)
Net sales:
- U.S. $2,458.2 $2,157.0 14.0%
- Non-U.S. 414.6 341.4 21.4
-------- --------
Total $2,872.8 $2,498.4 15.0%
======== ========
Operating income:
- U.S. $ 437.7 $ 389.1 12.5%
- Non-U.S. 48.0 30.4 57.9
-------- --------
Total $ 485.7 $ 419.5 15.8%
========= ========
<PAGE> 33
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Sources:
- -------
The Company's primary sources of liquidity and capital resources
include cash provided from operations and use of available borrowing
facilities.
Cash provided by operating activities in 1997 was $387.1 million,
representing an increase of $19.8 million from $367.3 million for
1996, primarily due to an increase in net income.
Cash provided by financing activities totaled $449.1 million in
1997, primarily due to proceeds from the issuance of Company-Obligated
Mandatorily Redeemable Convertible Preferred Securities of a
Subsidiary Trust. These proceeds, which were obtained in December
1997, were used to pay down commercial paper, which was used to fund
the earlier 1997 acquisitions.
The Company has short-term foreign and domestic uncommitted lines
of credit with various banks which are available for short-term
financing. Borrowings under the Company's uncommitted lines of credit
are subject to discretion of the lender. The Company's uncommitted
lines of credit do not have a material impact on the Company's
liquidity. Borrowings under the Company's uncommitted lines of credit
at December 31, 1997 totaled $39.2 million.
During 1997, the Company amended and restated its revolving
credit agreement to permit the Company to borrow, repay and reborrow
funds in an aggregate amount up to $1.3 billion, at a floating
interest rate. The revolving credit agreement will terminate in
August 2002. At December 31, 1997, there were no borrowings under the
revolving credit agreement.
In lieu of borrowings under the Company's revolving credit
agreement, the Company may issue up to $1.3 billion 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 December 31, 1997, $517.0 million (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 December 31, 1997, the
Company had not yet issued any securities under that registration
statement.
At December 31, 1997, the Company had outstanding $263.0 million
(principal amount) of medium-term notes issued under a previous shelf
<PAGE> 34
registration statement with maturities ranging from five to ten years
at an average rate of interest equal to 6.3%.
Uses:
- ----
The Company's primary uses of liquidity and capital resources
include acquisitions, dividend payments and capital expenditures.
Cash used in acquiring businesses was $715.3 million, $58.2
million and $187.8 million in 1997, 1996 and 1995, respectively. In
1997, the Company acquired Rolodex, Kirsch and Eldon and made other
minor acquisitions for cash purchase prices totaling $737.8 million.
In 1996, the Company acquired Holson Burnes and completed other minor
acquisitions for consideration that included cash of $42.6 million.
In 1995, the Company completed acquisitions with total cash purchase
prices of $210.6 million. All of these acquisitions were accounted
for as purchases and were paid for with proceeds obtained from the
issuance of commercial paper, medium-term notes, notes payable under
the Company's lines of credit or shares of the Company's Common Stock.
Capital expenditures were $98.4 million, $94.2 million and $82.6
million in 1997, 1996 and 1995, respectively.
The Company has paid regular cash dividends on its Common Stock
since 1947. On February 10, 1998, the quarterly cash dividend was
increased to $0.18 per share from the $0.16 per share that had been
paid since February 11, 1997. Prior to this date, the quarterly cash
dividend paid was $0.14 per share since February 6, 1996, which was an
increase from the $0.12 per share paid since May 11, 1995. Dividends
paid during 1997, 1996 and 1995 were $101.8 million, $88.9 million and
$72.8 million, respectively.
Retained earnings increased in 1997, 1996 and 1995 by $188.6
million, $167.6 million and $149.7 million, respectively. The average
dividend payout ratio to Common stockholders in 1997, 1996 and 1995
was 35%, 35% and 33%, respectively (represents the percentage of
earnings per share paid in cash to stockholders).
Working capital at December 31, 1997 was $717.6 million compared
to $471.1 million at December 31, 1996 and $452.6 million at December
31, 1995. The current ratio at December 31, 1997 was 2.08:1 compared
to 1.74:1 at December 31, 1996 and 1.67:1 at December 31, 1995.
Working capital and the current ratio increased in 1997 as a result of
the 1997 acquisitions.
Total debt to total capitalization (total debt is net of cash and
cash equivalents, and total capitalization includes total debt,
Company-Obligated Mandatorily Redeemable Convertible Preferred
Securities of a Subsidiary Trust and stockholders' equity) was .27:1
at December 31, 1997, .34:1 at December 31, 1996 and .40:1 at December
31, 1995.
<PAGE> 35
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.
Environmental Matters
- ---------------------
As of December 31, 1997, the Company was involved in various
matters concerning federal and state environmental laws and
regulations, including 35 matters in which they have been identified
by the U.S. Environmental Protection Agency and certain state
environmental agencies as potentially responsible parties ("PRPs") at
contaminated sites under the Federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") and equivalent
state laws. In assessing its environmental response costs, the
Company has considered several factors, including: the extent of the
Company's volumetric contribution at each site relative to that of
other PRPs; the kind of waste; the terms of existing cost sharing and
other applicable agreements; the financial ability of other PRPs to
share in the payment of requisite costs; the Company's prior
experience with similar sites; environmental studies and cost
estimates available to the Company; the effects of inflation on cost
estimates; and the extent to which the Company's and other parties'
status as PRPs are disputed. Based on information available to it,
the Company's estimate of environmental response costs associated with
these matters as of December 31, 1997 ranged between $16.7 million and
$24.1 million. As of December 31, 1997, the Company had a reserve
equal to $20.3 million for such environmental response costs in the
aggregate. No insurance recovery was taken into account in
determining the Company's cost estimates or reserve, nor do the
Company's cost estimates or reserve reflect any discounting for
present value purposes. Because of the uncertainties associated with
environmental investigations and response activities, the possibility
that the Company could be identified as a PRP at sites identified in
the future that require the incurrence of environmental response costs
and the possibility of additional sites as a result of businesses
acquired, actual costs to be incurred by the Company may vary from the
Company's estimates. Subject to difficulties in estimating future
environmental response costs, the Company does not expect that any sum
it may have to pay in connection with environmental matters in excess
of amounts reserved will have a material effect on its consolidated
financial statements.
Market Risk
- -----------
The Company's market risk is impacted by changes in interest
rates, foreign currency exchange rates, and certain commodity prices.
Pursuant to the Company's policies, natural hedging techniques and
derivative financial instruments may be utilized to reduce the impact
of adverse changes in market prices. The Company does not hold or
issue derivative instruments for trading purposes, and has no material
<PAGE> 36
sensitivity to changes in market rates and prices on its derivative
financial instrument positions.
The Company's primary market risk is interest rate exposure,
primarily in the United States. The Company manages interest rate
exposure through its conservative debt ratio target and its mix of
fixed and floating rate debt. Interest rate exposure was reduced
significantly in 1997 from the issuance of $500 million 5.25%
Company-Obligated Mandatorily Redeemable Convertible Preferred
Securities of a Subsidiary Trust, the proceeds of which reduced
commercial paper. Interest rate swaps may be used to adjust interest
rate exposures when appropriate based on market conditions, and, for
qualifying hedges, the interest differential of swaps is included in
interest expense.
The Company's foreign exchange risk management policy emphasizes
hedging anticipated intercompany and third-party commercial
transaction exposures of one year duration or less. The Company
focuses on natural hedging techniques of the following form: (1)
offsetting or netting of like foreign currency flows, (2) structuring
foreign subsidiary balance sheets with appropriate levels of debt to
reduce subsidiary net investments and subsidiary cash flows subject to
conversion risk, (3) converting excess foreign currency deposits into
U.S. dollars or the relevant functional currency and (4) avoidance of
risk by denominating contracts in the appropriate functional currency.
In addition, the Company utilizes forward contracts and purchased
options to hedge commercial and intercompany transactions. Gains and
losses related to qualifying hedges of commercial transactions are
deferred and included in the basis of the underlying transactions.
Derivatives used to hedge intercompany transactions are marked to
market with the corresponding gains or losses included in the
consolidated statements of income.
Due to the diversity of its product lines, the Company does not
have material sensitivity to any one commodity. The Company manages
commodity price exposures primarily through the duration and terms of
its vendor contracts.
Based on the Company's overall interest rate, currency rate and
commodity price exposures at December 31, 1997, management of the
Company believes that a short-term change in any of these exposures
will not have a material effect on the consolidated financial
statements of the Company.
Year 2000 Computer Compliance
- -----------------------------
In order to address the "Year 2000 Problem" relating to the
inability of certain computer software programs to process 2-digit
year-date codes after December 31, 1999, the Company has conducted a
comprehensive review of its computer systems and formulated a plan to
modify or replace programs where necessary. It is anticipated that
all reprogramming efforts for major systems will be completed by
December 31, 1998, allowing more than adequate time for testing. The
<PAGE> 37
Company has received confirmations from its primary vendors and
customers that they have plans underway to address this issue as well.
Management believes that the total cost of implementing the Year 2000
plan will not be significant to the Company's financial results.
Forward Looking Statements
- --------------------------
Forward-looking statements in this Report are made in reliance
upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements may relate to,
but are not limited to, such matters as sales, income, earnings per
share, return on equity, capital expenditures, dividends, capital
structure, free cash flow, debt to capitalization ratios, internal
growth rates, future economic performance, management's plans, goals
and objectives for future operations and growth or the assumptions
relating to any of the forward-looking information. The Company
cautions that forward-looking statements are not guarantees since
there are inherent difficulties in predicting future results, and that
actual results could differ materially from those expressed or implied
in the forward-looking statements. Factors that could cause actual
results to differ include, but are not limited to, those matters set
forth in the Company's Annual Report on Form 10-K, the documents
incorporated by reference therein and in Exhibit 99 thereto.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section entitled "Market Risk" in the Company's
Management's Discussion and Analysis of Results of Operations and
Financial Condition (Part II, Item 7).
<PAGE> 38
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
Report of Independent Public Accountants
----------------------------------------
To the Stockholders and Board of Directors of Newell Co.:
We have audited the accompanying consolidated balance sheets of
Newell Co. (a Delaware corporation) and subsidiaries as of December
31, 1997, 1996 and 1995, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. These consolidated
financial statements are the responsibility of Newell Co.'s
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Newell Co. and subsidiaries as of December 31, 1997, 1996 and 1995,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in
Part IV Item 14(a)(2) of this Form 10-K is presented for purposes of
complying with the Securities and Exchange Commission's rules and is
not a part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein
in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Milwaukee, Wisconsin
January 27, 1998
<PAGE> 39
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31,
1997 1996 1995
---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C>
Net sales $3,234,261 $2,872,817 $2,498,414
Cost of products sold 2,188,343 1,965,500 1,715,585
---------- ---------- ----------
GROSS INCOME 1,045,918 907,317 782,829
Selling, general and administrative expenses 474,328 421,630 363,356
---------- ---------- ----------
OPERATING INCOME 571,590 485,687 419,473
Nonoperating expenses (income):
Interest expense 73,621 56,989 49,812
Other, net 17,170 4,064 (1,124)
---------- ---------- ----------
Net 90,791 61,053 48,688
---------- ---------- ----------
Income Before Income Taxes 480,799 424,634 370,785
Income taxes 190,397 168,155 148,314
---------- ---------- ----------
NET INCOME $ 290,402 $ 256,479 $ 222,471
========== ========== ==========
Earnings per share
Basic $1.83 $1.62 $1.41
Diluted 1.82 1.61 1.40
Weighted average shares outstanding
Basic 159,079 158,764 158,212
Diluted 160,214 159,187 158,530
</TABLE>
See notes to consolidated financial statements.
<PAGE> 40
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 36,103 $ 4,360 $ 58,771
Accounts receivable, net 524,613 404,170 390,296
Inventories, net 625,208 509,504 509,245
Deferred income taxes 130,451 121,152 107,499
Prepaid expenses and other 65,245 68,928 67,063
----------- ----------- -----------
TOTAL CURRENT ASSETS 1,381,620 1,108,114 1,132,874
MARKETABLE EQUITY SECURITIES 307,121 240,789 53,309
OTHER LONG-TERM INVESTMENTS 51,020 58,703 203,857
OTHER ASSETS 143,893 119,168 122,702
PROPERTY, PLANT AND EQUIPMENT, NET 696,086 555,434 530,285
TRADE NAMES AND GOODWILL, NET 1,364,072 922,846 884,084
----------- ----------- -----------
TOTAL ASSETS $ 3,943,812 $ 3,005,054 $ 2,927,111
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 39,220 $ 70,877 $ 104,017
Accounts payable 132,374 105,333 113,927
Accrued compensation 79,306 65,632 73,057
Other accrued liabilities 388,741 324,719 317,184
Income taxes 11,663 37,209 13,043
Current portion of long-term debt 12,721 33,243 59,031
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 664,025 637,013 680,259
LONG-TERM DEBT 783,980 672,033 761,578
OTHER NON-CURRENT LIABILITIES 183,041 156,691 158,321
DEFERRED INCOME TAXES 90,120 47,477 30,987
MINORITY INTEREST 8,352 - -
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDARIES
CONSOLIDATED BALANCE SHEETS (CONT'D.)
December 31,
1997 1996 1995
---- ---- ----
(In thousands)
<C> <C> <C> <C>
COMPANY-OBLIGATED MANDATORILY
REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF A SUBSIDIARY TRUST 500,000 - -
STOCKHOLDERS' EQUITY
Common stock - authorized shares,
400.0 million at $1 par value; 159,236 158,871 158,626
Outstanding shares:
1997 - 159.2 million
1996 - 158.9 million
1995 - 158.6 million
Additional paid-in capital 204,105 197,889 190,860
Retained earnings 1,294,750 1,106,146 938,567
Net unrealized gain on securities
available for sale 78,839 36,595 15,912
Cumulative translation adjustment (22,636) (7,661) (7,999)
----------- ----------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,714,294 1,491,840 1,295,966
----------- ----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,943,812 $ 3,005,054 $2,927,111
=========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 42
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
1997 1996 1995
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $290,402 $256,479 $222,471
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 129,943 116,362 101,722
Deferred income taxes 59,000 44,700 40,747
Net gain on sale of marketable equity securities (2,853) - (15,819)
Investment write-off - 1,339 16,000
Equity earnings of investment (5,831) (6,364) (5,993)
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable 976 1,812 16,380
Inventories 18,285 27,256 (4,444)
Other current assets (5,412) 37 (4,629)
Accounts payable (19,306) (25,564) (14,941)
Accrued liabilities and other (78,134) (48,731) (74,752)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 387,070 367,326 276,742
INVESTING ACTIVITIES
Acquisitions, net (715,316) (58,213) (187,788)
Expenditures for property, plant and equipment (98,406) (94,237) (82,562)
Purchase of marketable equity securities - (3,513) -
Sale of marketable securities 6,389 - 37,324
Disposals of non-current assets and other 5,082 8,429 (1,372)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (802,251) (147,534) (234,398)
FINANCING ACTIVITIES
Proceeds from issuance of debt 141,073 1,193 315,191
Proceeds from the issuance of company-obligated
mandatorily redeemable convertible preferred
securities of a subsidiary trust 500,000 - -
Proceeds from exercised stock options and other 6,581 7,274 7,100
Payments on notes payable and long-term debt (96,732) (194,108) (250,589)
Cash dividends (101,798) (88,900) (72,766)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 449,124 (274,541) (1,064)
Exchange rate effect on cash (2,200) 338 2,599
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D.)
Year Ended December 31,
1997 1996 1995
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31,743 (54,411) 43,879
Cash and cash equivalents at beginning of year 4,360 58,771 14,892
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 36,103 $ 4,360 $ 58,771
========= ========= =========
Supplemental cash flow disclosures -
Cash paid during the year for:
Income taxes $ 158,700 $123,700 $129,300
Interest 66,900 55,400 44,800
</TABLE>
See notes to consolidated financial statements.
<PAGE> 44
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Net Unrealized
Gain On
Add'l Securities Cumulative
Common Paid-In Retained Available Translation
Stock Capital(1) Earnings for Sale Adjustment
------ -------- -------- -------------- -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 157,844 $ 175,218 $ 788,862 $ 9,868 $ (6,466)
Net income 222,471
Cash dividends:
Common stock $0.46 per share (72,766)
Stock issued for acquisitions 381 8,943
Exercise of stock options 412 6,759
Change in net unrealized
gain on securities
available for sale 6,044
Foreign currency translation
and other (11) (60) (1,533)
--------- ------- --------- -------- ----------
Balance at December 31, 1995 158,626 190,860 938,567 15,912 (7,999)
Net income 256,479
Cash dividends:
Common stock $0.56 per share (88,900)
Exercise of stock options 245 7,088
Change in net unrealized
gain on securities
available for sale 20,683
Foreign currency translation
and other (59) 338
-------- -------- --------- ------- -------
Balance at December 31, 1996 158,871 197,889 1,106,146 36,595 (7,661)
Net income 290,402
Cash dividends:
Common stock $0.64 per share (101,798)
Exercise of stock options 365 6,818
Change in net unrealized
gain on securities
available for sale 42,244
Foreign currency translation
and other (602) (14,975)
--------- --------- ----------- -------- --------
Balance at December 31, 1997 $ 159,236 $ 204,105 $ 1,294,750 $ 78,839 $ (22,636)
========= ========= =========== ======== ==========
</TABLE>
(1) Net of treasury stock (at cost) of $665, $199 and $161 as of December
31, 1997, 1996 and 1995, respectively.
See notes to consolidated financial statements.
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1) SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial
statements include the accounts of Newell and its majority owned
subsidiaries ("the Company") after elimination of intercompany
accounts and transactions.
Use of estimates: The preparation of these financial statements
required the use of certain estimates by management in determining the
Company's assets, liabilities, revenue and expenses and related
disclosures.
Revenue Recognition: Sales of merchandise are recognized upon
shipment to customers.
Disclosures about Fair Value of Financial Instruments: The
following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Long-term Investments: The fair value of the investment in
convertible preferred stock of The Black & Decker Corporation
("Black & Decker") in 1995 was based on an independent appraisal.
This preferred stock was converted into Black & Decker Common
Stock on October 15, 1996 and reclassified to Long-term
Marketable Equity Securities at December 31, 1996.
Long-term Debt: The fair value of the Company's long-term debt
issued under the medium-term note program is estimated based on
quoted market prices which approximate cost. All other
significant long-term debt is pursuant to floating rate
instruments whose carrying amounts approximate fair value.
Company-Obligated Mandatorily Redeemable Convertible Preferred
Securities of a Subsidiary Trust: The fair value of the
company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust was $522.5 million at December
31, 1997.
Allowances for Doubtful Accounts: Allowances for doubtful
accounts at December 31 totaled $17.7 million in 1997, $13.2 million
in 1996 and $11.0 million in 1995.
Inventories: Inventories are stated at the lower of cost or
market value. Cost of certain domestic inventories (approximately
81%, 86% and 89% of total inventories at December 31, 1997, 1996 and
1995, respectively) was determined by the "last-in, first-out"
("LIFO") method; for the balance, cost was determined using the
"first-in, first-out" ("FIFO") method. If the FIFO inventory
valuation method had been used exclusively, inventories would have
increased by $17.9 million, $26.0 million and $29.0 million at
December 31, 1997, 1996 and 1995, respectively.
<PAGE> 46
The components of inventories at December 31, net of the LIFO
reserve, were as follows:
1997 1996 1995
------- ------- -------
(In millions)
Materials and supplies $ 136.0 $ 124.5 $ 147.7
Work in process 100.6 87.9 87.5
Finished products 388.6 297.1 274.0
------- ------ -------
$ 625.2 $ 509.5 $ 509.2
======= ======= =======
Inventory reserves at December 31 totaled $92.6 million in 1997,
$81.2 million in 1996 and $67.3 million in 1995.
Other Long-term Investments: At December 31, 1995, the Company
owned 150,000 shares of privately placed Black & Decker convertible
preferred stock, Series B, purchased at a cost of $150.0 million. On
October 15, 1996, in accordance with the terms of the preferred stock,
Black & Decker exercised its option to convert the preferred stock
into 6.4 million shares of Black & Decker Common Stock. As a result
of the conversion, the Common Stock is classified as a Long-term
Marketable Equity Security in the December 31, 1997 and 1996
consolidated balance sheets.
The Company has a 49% ownership interest in American Tool
Companies, Inc., a manufacturer of hand tools and power tool accessory
products marketed primarily under the VISE-GRIP{R} and IRWIN{R}
trademarks. This investment is accounted for on the equity method
with a net investment of $51.0 million at December 31, 1997.
Long-term Marketable Equity Securities: Long-term Marketable
Equity Securities classified as available for sale are carried at fair
value with adjustments to fair value reported separately, net of tax,
as a component of stockholders' equity (and excluded from earnings).
Long-term marketable equity securities at December 31 are summarized
as follows:
1997 1996 1995
---- ---- ----
(In millions)
Aggregate market value $ 307.1 $ 240.8 $ 53.3
Aggregate cost 176.8 180.3 26.8
------ ------ ------
Unrealized gain $ 130.3 $ 60.5 $ 26.5
======= ======= ======
During 1995, the Company received proceeds of $37.3 million from
the sale of Long-term Marketable Equity Securities and recorded a gain
of $15.8 million on the sale. Gains and losses on the sales of
Long-term Marketable Equity Securities are based upon
the average cost of securities sold.
<PAGE> 47
Property, Plant and Equipment: Property, plant and equipment at
December 31 consisted of the following:
1997 1996 1995
---- ---- ----
(In millions)
Land $ 33.8 $ 21.1 $ 16.2
Buildings and
improvements 272.1 206.9 194.8
Machinery and
equipment 835.4 699.6 620.2
-------- -------- --------
1,141.3 927.6 831.2
Allowance for
depreciation (445.2) (372.2) (300.9)
-------- -------- --------
$ 696.1 $ 555.4 $ 530.3
======== ======== ========
Replacements and improvements are capitalized. Expenditures for
maintenance and repairs are charged to expense. The components of
depreciation are provided by annual charges to income calculated to
amortize, principally on the straight-line basis, the cost of the
depreciable assets over their depreciable lives. Estimated useful
lives determined by the Company are as follows:
Buildings and improvements 20-40 years
Machinery and equipment 5-12 years
Trade Names and Goodwill: The cost of trade names and the excess
of cost over identifiable net assets of businesses acquired are
amortized over 40 years on a straight-line basis. Total accumulated
amortization of trade names and goodwill was $136.7 million, $103.2
million and $78.2 million at December 31, 1997, 1996 and 1995,
respectively.
Subsequent to an acquisition, the Company periodically evaluates
whether later events and circumstances have occurred that indicate the
remaining estimated useful life of goodwill may warrant revision or
that the remaining balance of goodwill may not be recoverable. If
factors indicate that goodwill should be evaluated for possible
impairment, the Company would use an estimate of the relevant
business' undiscounted net cash flow over the remaining life of the
goodwill in measuring whether the goodwill is recoverable.
<PAGE> 48
Accrued Liabilities: Accrued Liabilities at December 31 included
the following:
1997 1996 1995
---- ---- ----
(In millions)
Customer accruals $ 131.7 $ 91.4 $ 83.7
Accrued self-insurance
liability 42.1 46.3 39.7
Customer accruals are promotional allowances and rebates given to
customers in exchange for their selling efforts. The self-insurance
accrual is primarily for workers' compensation and is estimated based
upon historical claim experience.
Foreign Currency Translation: Foreign currency balance sheet
accounts are translated into U.S. dollars at the rates of exchange in
effect at fiscal year end. Income and expenses are translated at the
average rates of exchange in effect during the year. The related
translation adjustments are made directly to a separate component of
stockholders' equity. International subsidiaries operating in highly
inflationary economies translate non-monetary assets at historical
rates, while net monetary assets are translated at current rates, with
the resulting translation adjustment included in net income. Foreign
currency transaction gains and losses were immaterial in 1997, 1996
and 1995.
Earnings per share: The earnings per share amounts are computed
based on the weighted average monthly number of shares outstanding
during the year. "Basic" earnings per share is calculated by dividing
net income (before cumulative effect of accounting change) by weighted
average shares outstanding. "Diluted" earnings per share is
calculated by dividing net income (before cumulative effect of
accounting change) by weighted average shares outstanding, including
the assumption of the exercise and/or conversion of all potentially
dilutive securities ("in the money" stock options and Company-
Obligated Mandatorily Redeemable Convertible Preferred Securities of a
Subsidiary Trust). Effective December 31, 1997, the Company adopted
SFAS No. 128, "Earnings Per Share." As a result, the Company's
reported earnings per share for 1996 and 1995 were restated. The
impact on previously reported earnings per share was immaterial.
Accounting Principles Adopted: 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." The adoption of this statement in 1996 was not material
to the consolidated financial statements.
In 1995, FASB also issued SFAS No. 123, "Accounting for Stock
Based Compensation." The Company adopted the disclosure requirements
of this statement (see note 11 to the consolidated financial
statements) and will continue to apply APB Opinion No. 25 to its stock
option plans.
Reclassification: Certain 1996 and 1995 amounts have been
reclassified to conform with the 1997 presentation.
<PAGE> 49
2) ACQUISITIONS OF BUSINESSES
1995
- ----
On October 2, 1995, the Company acquired Decorel Incorporated
("Decorel"), a manufacturer and marketer of ready-made picture frames.
Decorel was combined with Intercraft. On November 2, 1995, the
Company acquired Berol Corporation ("Berol"), a designer, manufacturer
and marketer of markers and writing instruments. Berol was combined
with Sanford. For these and other minor 1995 acquisitions, the
Company paid $210.6 million in cash, issued 379,507 shares of the
Company's Common Stock (valued at approximately $9.5 million) and
assumed $144.2 million of debt.
These 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 to the fair market value of the
assets acquired and liabilities assumed and resulted in trade names
and goodwill of approximately $181.1 million.
1996 and 1997
- -------------
On January 19, 1996, the Company acquired The Holson Burnes
Group, Inc. ("Holson Burnes"), a manufacturer and marketer of photo
albums and picture frames. Holson Burnes was combined with
Intercraft, creating the Intercraft/Burnes division.
On March 5, 1997, the Company purchased Insilco Corporation's
Rolodex business unit ("Rolodex"), a marketer of office products
including card files, personal organizers and paper punches. Rolodex
was integrated into the Company's Newell Office Products division. On
May 30, 1997, the Company acquired Cooper Industries Incorporated's
Kirsch business ("Kirsch"), a manufacturer and distributor of drapery
hardware and custom window coverings in the United States and
international markets. The Kirsch North American operations were
combined with the Newell Window Furnishings division. The European
operations of Kirsch exist as a separate division called Kirsch Window
Fashions Europe. On June 13, 1997, the Company acquired Rubbermaid
Incorporated's office products business, including the ELDON{R} brand
name (now referred to as "Eldon"). Eldon is a designer, manufacturer
and supplier of computer and plastic desk accessories, resin-based
office furniture and storage and organization products. Eldon was
integrated into the Company's Newell Office Products division. For
these and other minor acquisitions, the Company paid $780.4 million in
cash and assumed $59.9 million of debt. The 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 trade names
and goodwill of approximately $562.4 million. The final adjustments
<PAGE> 50
to the purchase price allocations are not expected to be material to
the consolidated financial statements.
The unaudited consolidated results of operations for the years
ended December 31, 1997 and 1996 on a pro forma basis, as though the
Holson Burnes, Rolodex, Kirsch and Eldon businesses had been acquired
on January 1, 1996, are as follows:
1997 1996
---- ----
(In millions, except per share amounts)
Net sales $3,453.4 $3,446.7
Net income 284.4 250.3
Earnings per share 1.79 1.58
<PAGE> 51
3) CREDIT ARRANGEMENTS
The Company has short-term foreign and domestic uncommitted lines
of credit with various banks, which are available for short-term
financing. Borrowings under the Company's uncommitted lines of credit
are subject to discretion of the lender. The Company's uncommitted
lines of credit do not have a material impact on the Company's
liquidity. Borrowings under the Company's uncommitted lines of credit
at December 31, 1997 totaled $39.2 million.
The following is a summary of borrowings under foreign and
domestic lines of credit at December 31:
1997 1996 1995
---- ---- ----
(In millions)
Notes payable to banks:
Outstanding at year-end
- borrowing $ 39.2 $ 70.9 $ 104.0
- weighted average
interest rate 4.5% 4.7% 6.6%
Average for the year
- borrowing $ 124.4 $ 99.4 $ 102.4
- weighted average
interest rate 5.4% 5.3% 6.7%
Maximum borrowing
outstanding during
the year $399.3 $120.0 $137.8
The Company can also issue commercial paper, as described in note
4 to the consolidated financial statements. The following is a
summary of commercial paper at December 31:
1997 1996 1995
---- ---- ----
(In millions)
Commercial paper:
Outstanding at year-end
- borrowing $ 517.0 $ 404.0 $ 448.6
- average interest rate 6.5% 5.9% 5.8%
Average for the year
- borrowing $ 731.3 $ 512.3 $ 410.4
- average interest rate 5.6% 5.3% 6.0%
Maximum borrowing
outstanding during
the year $1,177.6 $ 594.0 $ 500.0
<PAGE> 52
4) LONG-TERM DEBT
The following is a summary of long-term debt at December 31:
1997 1996 1995
---- ---- ----
(In millions)
Medium-term notes $ 263.0 $ 295.0 $ 345.0
Commercial paper 517.0 404.0 448.6
Other long-term debt 16.7 6.2 27.0
------- ------- -------
796.7 705.2 820.6
Current portion (12.7) (33.2) (59.0)
------- -------- --------
$784.0 $ 672.0 $ 761.6
======= ======== ========
During 1997, the Company amended and restated its revolving
credit agreement to permit the Company to borrow, repay and reborrow
funds in an aggregate amount up to $1.3 billion, at a floating
interest rate. The revolving credit agreement will terminate in
August 2002. At December 31, 1997, there were no borrowings under the
revolving credit agreement.
In lieu of borrowings under the Company's revolving credit
agreement, the Company may issue up to $1.3 billion 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 December 31, 1997, $517.0 million (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 December 31, 1997, the
Company had not yet issued any securities under that registration
statement.
At December 31, 1997, the Company had outstanding $263.0 million
(principal amount) of medium-term notes issued under a previous shelf
registration statement with maturities ranging from five to ten years
at an average rate of interest equal to 6.3%.
The revolving credit agreement permits the Company to borrow
funds using Committed loans (Base Rate loans or Committed LIBOR loans)
or Competitive loans (Set Rate loans or Competitive LIBOR loans), as
selected by the Company. The terms of these agreements require, among
other things, that the Company maintain a certain Total Debt to Total
Capital Ratio as defined in these agreements. As of December 31,
1997, the Company was in compliance with these agreements.
<PAGE> 53
The aggregate maturities of Long-Term Debt outstanding at
December 31, 1997, are as follows:
Year Aggregate Maturities
---- --------------------
(In millions)
1998 $ 12.7
1999 8.0
2000 148.0
2001 0.9
2002 617.1
Thereafter 10.0
-------
$ 796.7
=======
5) COMPANY-OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF A SUBSIDIARY TRUST OF THE COMPANY
In December 1997, a wholly owned subsidiary trust of the Company
issued 10,000,000 of its 5.25% convertible quarterly income preferred
securities (the "Convertible Preferred Securities"), with a
liquidation preference of $50 per security, to certain institutional
buyers. The Convertible Preferred Securities represent an undivided
beneficial interest in the assets of the trust. Each of the
Convertible Preferred Securities is convertible at the option of the
holder into shares of the Company's Common Stock at the rate of 0.9865
shares of Common Stock for each preferred security (equivalent to the
approximate conversion price of $50.685 per share of Common Stock),
subject to adjustment in certain circumstances. Holders of the
Convertible Preferred Securities are entitled to a quarterly cash
distribution at the annual rate of 5.25% of the $50 liquidation
preference commencing March 1, 1998. The Convertible Preferred
Securities are subject to a limited guarantee by the Company and are
callable by the Company initially at 103.15% of the liquidation
preference beginning in December 2001 and decreasing over time to 100%
of the liquidation preference beginning in December 2007.
The trust invested the proceeds of this issuance of Convertible
Preferred Securities in $500 million of the Company's 5.25% Junior
Convertible Subordinated Debentures due 2027 (the "Debentures"). The
Debentures are the sole assets of the trust, mature on December 1,
2027, bear interest at the rate of 5.25%, payable quarterly,
commencing March 1, 1998, and are redeemable by the Company beginning
in December 2001. The Company may defer interest payments on the
Debentures for a period not to exceed 20 consecutive quarters during
which time distribution payments on the Convertible Preferred
Securities are also deferred. Under this circumstance, the Company
may not declare or pay any cash distributions with respect to its
capital stock or debt securities that rank pari passu with or junior
to the Debentures. The Company has no current intention to exercise
its right to defer payments of interest on the Debentures.
<PAGE> 54
The Convertible Preferred Securities are reflected as outstanding
in the Company's consolidated financial statements as Company-
Obligated Mandatorily Redeemable Convertible Preferred Securities of a
Subsidiary Trust.
6) DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative
financial instruments and does not use them for trading purposes.
They are used to manage certain interest rate and foreign currency
risks.
Interest rate swap agreements are utilized to convert certain
floating rate debt instruments into fixed rate debt. Cash flows
related to interest rate swap agreements are included in interest
expense over the terms of the agreements.
The Company uses forward exchange contracts and options to hedge
certain purchase commitments denominated in currencies other than the
domestic currency. Unamortized premiums are included in other assets
in the consolidated balance sheets. Gains and losses relating to
qualifying hedges of firm commitments are deferred and are recognized
in income or expense as adjustments of carrying amounts when the
hedged transaction occurs.
The Company does not obtain collateral or other security to
support derivative financial instruments subject to credit risk but
monitors the credit standing of the counterparties.
7) LEASES
The Company has minimum rental payments through the year 2007
under noncancellable operating leases as follows:
Year Minimum Payments
----- ----------------
(In millions)
1998 $23.2
1999 15.2
2000 9.9
2001 8.0
2002 6.2
Thereafter 15.6
-----
$78.1
<PAGE> 55
Total rental expense for all operating leases was approximately
$50.4 million, $45.0 million and $38.3 million in 1997, 1996 and 1995,
respectively.
8) EMPLOYEE BENEFIT RETIREMENT PLANS
The Company and its subsidiaries have noncontributory pension and
profit sharing plans covering substantially all of its foreign and
domestic employees. Pension plan benefits are generally based on
years of service and/or compensation. The Company's funding policy is
to contribute not less than the minimum amounts required by the
Employee Retirement Income Security Act of 1974 or local statutes to
assure that plan assets will be adequate to provide retirement
benefits. Due to the overfunded status of most of the pension plans,
contributions to these plans were insignificant during the past three
years.
The net periodic pension cost components for all significant
pension plans for the years ended December 31 are as follows:
1997 1996 1995
---- ---- ----
(In millions)
Service cost-benefits earned
during the year $ 15.7 $ 16.0 $ 14.3
Interest cost on projected
benefit obligation 38.5 36.1 35.0
Actual return on assets (124.1) (74.0) (64.0)
Net amortization and
other components 70.7 24.3 17.5
----- ---- ----
Total pension
plan expense $ 0.8 $ 2.4 $ 2.8
===== ==== ====
The principal actuarial assumptions used are as follows:
1997 1996 1995
---- ---- ----
(In percent)
Measurement of projected
benefit obligation:
Discount rate 7.75% 7.75% 7.75%
Long-term rate of
compensation increase 5.00% 5.00% 5.00%
Long-term rate of return
on plan assets 9.00% 9.00% 9.00%
<PAGE> 56
The following table sets forth the funded status of the pension
plans and the amount recognized in the Company's consolidated balance
sheets:
Plans Whose Assets Exceed
Accumulated Benefits
1997 1996 1995
---- ---- ----
(In millions)
Actuarial present value of
benefit obligations:
- Vested $467.7 $413.9 $329.0
- Nonvested 13.1 10.6 10.1
----- ----- -----
Accumulated benefit
obligation 480.8 424.5 339.1
Effect of projected future
salary increases 26.5 20.5 15.2
----- ----- -----
Projected benefit
obligation 507.3 445.0 354.3
Plan assets at
market value (primarily
Common Stock and
fixed income investments) 713.8 585.8 463.1
----- ----- -----
Plan assets in excess of
projected benefit
obligation 206.5 140.8 108.8
Unrecognized transition
net asset (6.0) (7.3) (4.5)
Unrecognized prior
service cost (7.1) (7.7) (3.0)
Unrecognized net gain (116.0) (54.5) (21.9)
----- ----- -----
Net pension asset in
Other Non-current
Assets $ 77.4 $ 71.3 $ 79.4
===== ===== =====
<PAGE> 57
Plans Whose Accumulated
Benefits Exceed Assets
1997 1996 1995(1)
---- ---- ----
(In millions)
Actuarial present value of
benefit obligations:
Vested $ 43.2 $ 17.8 $ 89.2
Nonvested 11.9 9.1 10.5
----- ----- -----
Accumulated benefit
obligation 55.1 26.9 99.7
Effect of projected future
salary increases 13.3 10.3 17.9
----- ----- -----
Projected benefit
obligation 68.4 37.2 117.6
Plan assets at
market value (primarily
Common Stock and
fixed income investments) 22.2 - 75.9
----- ----- -----
Plan assets less than
projected benefit
obligation (46.2) (37.2) (41.7)
Unrecognized transition
net (asset) obligation 0.6 2.3 (3.1)
Unrecognized prior
service cost 2.1 0.9 1.1
Unrecognized net loss 10.9 7.5 11.3
----- ----- -----
Net pension liability
in Other Non-current
Liabilities $(32.6) $(26.5) $(32.4)
===== ===== =====
(1) During 1995, the defined benefit plan covering certain hourly
employees contained a temporary unfunded obligation. This plan
was fully funded in 1996.
Total expense under all profit sharing plans was $7.6 million,
$6.6 million and $5.5 million for the years ended December 31, 1997,
1996 and 1995, respectively.
<PAGE> 58
9) RETIREE HEALTH CARE
Several of the Company's subsidiaries currently provide retiree
health care benefits for certain employee groups.
The components of the net postretirement health care cost for the
years ended December 31 are as follows:
1997 1996 1995
---- ---- ----
(In millions)
Service cost-benefits
attributed to service
during the period $1.6 $2.1 $1.7
Interest cost on accumulated
postretirement benefit
obligation 8.0 7.7 7.5
Net amortization
and deferral (0.2) (0.3) (0.5)
--- --- ---
Net postretirement
health care cost $9.4 $9.5 $8.7
=== === ===
The following table reconciles the accumulated postretirement
benefit obligation as recognized in the Company's consolidated balance
sheets at December 31:
1997 1996 1995
---- ---- ----
(In millions)
Accumulated postretirement
benefit obligation:
Retirees $ (88.0) $ (63.5) $ (67.4)
Fully eligible active
plan participants (3.1) (5.5) (5.6)
Other active plan
participants (23.8) (28.1) (23.4)
---- ---- ----
Accumulated postretirement
benefit obligation (114.9) (97.1) (96.4)
Market value of assets - - -
----- ---- ----
Funded status (114.9) (97.1) (96.4)
Unrecognized net gain (18.3) (13.0) (13.0)
Other Non-current
Liability $(133.2) $(110.1) $(109.4)
===== ===== =====
The actuarial calculation assumed a 9% increase in the health
care cost trend rate for fiscal year 1997. The assumed rate decreases
<PAGE> 59
one percent every year through the year 2000 to 6% and remains
constant beyond that point. The health care cost trend rate has a
significant effect on the amounts reported. For example, a one
percentage point increase in the health care cost trend rate would
increase the accumulated postretirement benefit obligation by $5.7
million and increase net periodic cost by $0.8 million. The discount
rate used in determining the accumulated postretirement benefit
obligation was 7.5% in 1997 and 7.75% in both 1996 and 1995.
10) STOCKHOLDERS' EQUITY
The Company's Common Stock consists of 400.0 million authorized
shares, with a par value of $1 per share. Of the total unissued
common shares at December 31, 1997, total shares in reserve included
8.5 million shares for issuance under the Company's stock option
plans.
Each share of Common Stock includes a preferred stock purchase
right (a "Right"). Each Right will entitle the holder, until the
earlier of October 31, 1998 or the redemption of the Rights, to buy
one four-hundredth of a share of a new series of preferred stock,
denominated "Junior Participating Preferred Stock, Series B," at a
price of $25 per one four-hundredth of a share (as adjusted to reflect
stock splits since the issuance of the Rights). This preferred stock
is nonredeemable and will have 100 votes per share. The Company has
reserved 500,000 Series B preferred shares for issuance upon exercise
of such Rights. The Rights will be exercisable only if a person or
group acquires 20% or more of voting power of the Company or announces
a tender offer following which it would hold 30% or more of the
Company's voting power.
In the event that any person becomes the beneficial owner of 30%
or more of the Company's voting stock, the Rights (other than Rights
held by the 30% stockholder) would become exercisable for that number
of shares of the Company's Common Stock having a market value of two
times the exercise price of the Right. Furthermore, if, following the
acquisition by a person or group of 20% or more of the Company's
voting stock, the Company was acquired in a merger or other business
combination or 50% or more of its assets were sold, or in the event of
certain types of self-dealing transactions by a 20% stockholder, each
Right (other than Rights held by the 20% stockholder) would become
exercisable for that number of shares of Common Stock of the Company
(or the surviving company in a business combination) having a market
value of two times the exercise price of the Right.
The Company may redeem the Rights at one cent per Right prior to
the occurrence of an event that causes the Rights to become
exercisable for Common Stock. The Board of Directors may terminate
the Company's right to redeem the Rights prior to the time the Rights
become exercisable for Common Stock at any time after a group or
person acquires 20% or more of the Company's voting stock under
certain circumstances.
<PAGE> 60
11) STOCK OPTIONS
The Company's stock option plans are accounted for under APB
Opinion No. 25. As a result, the Company grants fixed stock options
under which no compensation cost is recognized. Had compensation cost
for the plans been determined consistent with FASB Statement No. 123,
the Company's net income and earnings per share would have been
reduced to the following pro forma amounts for the years ended
December 31:
1997 1996
---- ----
(In thousands, except per share data)
Net income: As reported $290,402 $256,479
Pro forma 287,249 254,787
Basic EPS: As reported $1.83 $1.62
Pro forma 1.81 1.60
Because the FASB Statement No. 123 method of accounting has not
been applied to options granted prior to January 1, 1995, the
resulting pro forma compensation cost may not be representative of
that to be expected in future years.
The Company may grant up to 8.0 million shares under the 1993
Stock Option Plan, of which, the Company has granted 1.9 million
shares and cancelled 0.3 million shares through December 31, 1997.
Under this plan, the option exercise price equals the Common Stock's
closing price on the date of grant, vests over a five-year period and
expires after ten years.
<PAGE> 61
The following summarizes the changes in number of shares of
Common Stock under option:
1997
--------------
Weighted Average
Shares Exercise Price
------ ----------------
Outstanding at
beginning of year 1,860,064 $22
- Granted 395,600 38
- Exercised (364,587) 18
- Cancelled (68,688) 22
---------
Outstanding at
end of year 1,822,389 25
=========
Exercisable at
end of year 886,445 19
=========
Weighted average
fair value of
options granted
during the year $ 13
=========
The 1,822,389 options outstanding at December 31, 1997 have
exercise prices between $12 and $43 and are summarized below:
Options Outstanding
--------------------------------------------------------
Weighted
Range of Number Weighted Average
Exercise Outstanding at Average Remaining
Prices December 31, 1997 Exercise Price Contractual Life
- -------- ----------------- -------------- ----------------
$12-15 201,914 $14 3
16-25 905,025 20 6
26-35 327,950 20 8
36-43 387,500 37 9
---------
12-43 1,822,389 25 7
=========
<PAGE> 62
The 886,445 options exercisable at December 31, 1997 have
exercise prices between $12 and $35 and are summarized below:
Options Exercisable
-----------------------------------
Range of Number Weighted
Exercise Exercisable at Average
Prices December 31, 1997 Exercise Price
- -------- ----------------- --------------
$12-15 191,914 $14
16-25 625,661 20
26-35 68,870 27
-------
12-35 886,445 19
=======
1996
--------------
Weighted Average
Shares Exercise Price
------ ----------------
Outstanding at
beginning of year 1,945,730 $20
- Granted 301,850 28
- Exercised (243,596) 17
- Cancelled (143,920) 21
---------
Outstanding at
end of year 1,860,064 22
=========
Exercisable at end of year 999,118 18
=========
Weighted average fair value of
options granted during
the year $10
=========
<PAGE> 63
1995
--------------
Weighted Average
Shares Exercise Price
------ ----------------
Outstanding at
beginning of year 2,155,758 $19
- Granted 284,250 24
- Exercised (411,528) 16
- Cancelled (82,750) 21
---------
Outstanding at
end of year 1,945,730 20
=========
Exercisable at
end of year 1,113,118 17
=========
Weighted average
fair value of
options granted
during the year $9
=========
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions used for grants in 1997, 1996 and 1995, respectively:
risk-free interest rate of 6.3%, 6.4% and 6.6%; expected dividend
yields of 1.8%, 1.8% and 1.8%; expected lives of 9.9, 9.9 and 9.5
years; and expected volatility of 23%, 20% and 20%.
12) INCOME TAXES
The provision for income taxes for the years ended December 31
consists of the following:
1997 1996 1995
------ ------ ------
(In millions)
Current:
- Federal $ 95.1 $ 97.3 $ 89.3
- State 17.2 15.5 15.9
- Foreign 19.1 10.6 2.4
------ ------ ------
131.4 123.4 107.6
Deferred 59.0 44.7 40.7
------ ------ ------
Total $190.4 $168.1 $148.3
====== ====== ======
<PAGE> 64
The components of the net deferred tax asset at December 31 are
as follows:
1997 1996 1995
---- ---- ----
(In millions)
Deferred tax assets:
-Accruals, not currently
deductible for tax purposes $115.3 $108.0 $105.1
-Postretirement liabilities 52.6 43.5 43.6
-Inventory reserves 33.7 28.3 16.5
-Self-insurance liability 15.4 16.5 13.2
-Other 0.3 1.4 0.8
----- ----- -----
217.3 197.7 179.2
Deferred tax liabilities:
-Accelerated depreciation (59.4) (46.4) (45.5)
-Prepaid pension asset (31.1) (30.5) (31.6)
-Unrealized gain on
securities available
for sale (51.5) (23.9) (10.6)
-Amortization of intangibles (11.9) (4.1) -
-Other (23.1) (19.1) (15.0)
----- ----- -----
(177.0) (124.0) (102.7)
----- ----- -----
Net deferred tax asset $ 40.3 $ 73.7 $ 76.5
====== ====== ======
The net deferred tax asset is classified in the consolidated
balance sheets at December 31 as follows:
1997 1996 1995
---- ---- ----
(In millions)
Current net deferred
income tax asset $130.4 $121.2 $107.5
Non-current deferred
income tax liability (90.1) (47.5) (31.0)
----- ----- -----
$ 40.3 $ 73.7 $ 76.5
===== ===== =====
<PAGE> 65
A reconciliation of the U.S. statutory rate to the effective
income tax rate for the years ended December 31 is as follows:
1997 1996 1995
---- ---- ----
(In percent)
Statutory rate 35.0% 35.0% 35.0%
Add (deduct) effect of:
-State income taxes, net
of federal income tax effect 3.6 3.6 4.3
-Nondeductible trade names
and goodwill amortization 1.6 1.5 1.4
-Other (0.6) (0.5) (0.7)
--- --- ---
Effective rate 39.6% 39.6% 40.0%
==== ==== ====
No U.S. deferred taxes have been provided on the undistributed
non-U.S. subsidiary earnings which are considered to be permanently
invested. At December 31, 1997, the estimated amount of total
unremitted non-U.S. subsidiary earnings is $62.9 million.
The non-U.S. component of income before income taxes was $64.5
million in 1997, $40.4 million in 1996 and $19.3 million in 1995.
13) OTHER NONOPERATING EXPENSES (INCOME)
Total other nonoperating expenses (income) for the years ended
December 31 consist of the following:
1997 1996 1995
---- ---- ----
(In millions)
Trade names and goodwill
amortization $31.9 $23.6 $19.3
Equity earnings* (5.8) (6.4) (6.0)
Interest income (5.3) (3.7) (1.9)
Dividend income (4.0) (11.0) (12.8)
Net gain on marketable
equity securities (2.9) - (15.8)
Minority interest in income
of subsidiary trust 1.5 - -
Write-downs in carrying value
of a long-term foreign
investment accounted for
under the equity method - 1.3 16.0
Other 1.8 0.3 0.1
---- ---- ----
$17.2 $ 4.1 $(1.1)
===== ===== =====
* Equity earnings in American Tool Companies, Inc., in which the
Company has a 49% interest.
<PAGE> 66
14) OTHER OPERATING INFORMATION
Industry Segment Information
The Company is a manufacturer and full-service marketer of staple
consumer products sold to high-volume purchasers, including, but not
limited to, discount stores and warehouse clubs, home centers and
hardware stores, and office superstores and contract stationers. The
Company's multi-product offering consists of products in three major
product groups: Hardware and Home Furnishings, Office Products, and
Housewares.
Product Principal
Product Group Categories Brands (1)
- ------------- ---------- ----------
Hardware and Window Treatments Levolor
Home Furnishings LouverDrape
Del Mar
Newell
Kirsch
Hardware Amerock
and Tools Bulldog
EZ Paintr
BernzOmatic
Picture Frames Intercraft
Decorel
Burnes of Boston
Holson
Home Storage Lee Rowan
Products System Works
- ---------------------------------------------------------------------
Office Products Markers and Writing Sanford
Instruments Eberhard Faber
Berol
Office Storage and Rogers
Organization Eldon
Rolodex
School Supplies Stuart Hall
and Stationery
- ---------------------------------------------------------------------
Housewares Glassware and Anchor Hocking
Plasticware Pyrex (2)
Aluminum Cookware Mirro
and Bakeware WearEver
<PAGE> 67
Product Principal
Product Group Categories Brands (1)
- ------------- ---------- ----------
Housewares Hair Accessories Goody
Ace
Wilhold
(1) All listed brand names are trademarks, which are registered in
the United States Patent and Trademark Office.
(2) Used under exclusive license from Corning Incorporated and its
subsidiaries in Europe, the Middle East and Africa only.
Sales to Wal-Mart Stores, Inc. and subsidiaries amounted to
approximately 15% of consolidated net sales in both 1997 and 1996 and
14% in 1995. Sales to each of the Company's other customers,
individually, amounted to less than 10% of consolidated net sales.
Geographic Information
Prior to the 1994 acquisition of Newell Europe, the 1995
acquisition of Berol, and the 1997 acquisition of Kirsch, the Company
operated principally in the United States. The Company now operates
in several non-U.S. locations, including Australia, Canada, Colombia,
England, France, Germany, Italy, Mexico, Portugal, Spain, Sweden and
Venezuela. Summary financial information by geographic area included
in the consolidated financial statements as of and for the years ended
December 31 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -------------------
% of % of % of
$ Total $ Total $ Total
------- ----- ------- ----- ------- -----
(In millions) (In millions) (In millions)
<S> <C> <C> <C> <C> <C> <C>
Net sales:
-U.S. $2,694.7 83.3% $2,458.2 85.6% $2,157.0 86.3%
-Non-U.S. 539.6 16.7 414.6 14.4 341.4 13.7
------- ----- ------- ----- ------- -----
Total $3,234.3 100.0% $2,872.8 100.0% $2,498.4 100.0%
======= ===== ======= ===== ======= =====
Operating income:
-U.S. $ 494.5 86.5% $ 437.7 90.1% 389.1 92.8%
-Non-U.S. 77.1 13.5 48.0 9.9 30.4 7.2
------- ----- ------- ----- ------- -----
Total $ 571.6 100.0% $ 485.7 100.0% $ 419.5 100.0%
======= ===== ======= ===== ======= =====
Total assets at December 31:
-U.S. $3,274.1 83.0% $2,573.2 85.6% $2,501.0 85.4%
-Non-U.S. 669.7 17.0 431.9 14.4 426.1 14.6
------- ----- ------- ----- ------- -----
Total $3,943.8 100.0% $3,005.1 100.0% $2,927.1 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
<PAGE> 68
Sales between geographic areas are not material. The Company's
export sales, defined as sales of products made in the U.S. and sold
primarily by the Company's export division to foreign customers, were
approximately 2.8% of consolidated net sales in 1997, 2.5% in 1996 and
2.9% in 1995 (financial information is included in the non-U.S.
category in the tables above).
15) LITIGATION
The Company and its subsidiaries are subject to certain legal
proceedings and claims, including the environmental matters described
below, that have arisen in the ordinary conduct of its business.
As of December 31, 1997, the Company was involved in various
matters concerning federal and state environmental laws and
regulations, including 35 matters in which they have been identified
by the U.S. Environmental Protection Agency and certain state
environmental agencies as potentially responsible parties ("PRPs") at
contaminated sites under the Federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") and equivalent
state laws.
In assessing its environmental response costs, the Company has
considered several factors, including: the extent of the Company's
volumetric contribution at each site relative to that of other PRPs;
the kind of waste; the terms of existing cost sharing and other
applicable agreements; the financial ability of other PRPs to share in
the payment of requisite costs; the Company's prior experience with
similar sites; environmental studies and cost estimates available to
the Company; the effects of inflation on cost estimates; and the
extent to which the Company's and other parties' status as PRPs are
disputed.
Based on information available to it, the Company's estimate of
environmental response costs associated with these matters as of
December 31, 1997 ranged between $16.7 million and $24.1 million. As
of December 31, 1997, the Company had a reserve equal to $20.3 million
for such environmental response costs in the aggregate. No insurance
recovery was taken into account in determining the Company's cost
estimates or reserve, nor do the Company's cost estimates or reserve
reflect any discounting for present value purposes.
Because of the uncertainties associated with environmental
investigations and response activities, the possibility that the
Company could be identified as a PRP at sites identified in the future
that require the incurrence of environmental response costs and the
possibility of additional sites as a result of businesses acquired,
actual costs to be incurred by the Company may vary from the Company's
estimates.
Subject to difficulties in estimating future environmental
response costs, the Company does not expect that any sum it may have
to pay in connection with environmental matters in excess of amounts
<PAGE> 69
reserved will have a material adverse effect on its consolidated
financial statements.
The Company is involved in several legal proceedings relating to
the importation and distribution of vinyl mini-blinds made with
plastic containing lead stabilizers. In 1996, the Consumer Product
Safety Commission found that such stabilizers deteriorate over time
from exposure to sunlight and heat, causing lead dust to form on
mini-blind surfaces and presenting a health risk to children under six
years of age.
In July 1996, the California Attorney General and the Alameda
County District Attorney filed a civil suit against 12 named
companies, including a subsidiary of the Company, alleging failure to
warn consumers adequately about the presence of lead in accordance
with California law and seeking injunctions, civil penalties and
restitutionary relief.
In August 1996, 15 companies, including a subsidiary of the
Company, were named as defendants in a national and California private
class action in Sacramento County Superior Court. In October 1997, 16
additional companies were named as defendants in this case, in which
the plaintiffs currently allege that the Company's subsidiary used
false and misleading advertising and employed unfair or fraudulent
business practices in connection with the presence of lead in their
blinds.
The plaintiffs seek injunctive relief, restitution of purchase
price, suit costs, and reasonable attorneys' fees with respect to
their claims against the Company's subsidiary. The Company has agreed
to indemnify several of its retail customers that are named as
defendants in one or both of these cases for liability directly
related to actions or omissions of the Company. These two cases were
coordinated in 1997, a coordination trial judge was appointed, and
discovery is proceeding.
In February 1997, a subsidiary of the Company was named as the
defendant in another case involving the importation and distribution
of vinyl mini-blinds containing lead, which was filed as an Illinois
and national private class action in the Cook County Chancery
Division. In this case, the plaintiffs alleged violations of the
Illinois Consumer Fraud and Deceptive Trade Practices Act and the
Illinois version of the Uniform Deceptive Trade Practices Act, breach
of implied warranty, fraud, negligent misrepresentation, negligence,
unjust enrichment, and reception and retention of money unlawfully
received. The plaintiffs seek injunctive relief, unspecified damages,
suit costs and punitive damages.
Although management of the Company cannot predict the ultimate
outcome of these matters with certainty, it believes that their
ultimate resolution will not have a material effect on the Company's
consolidated financial statements.
<PAGE> 70
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure
- ---------------------------------------------------------------------
None.
<PAGE> 71
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Information regarding executive officers of the Company is
included as a Supplementary Item at the end of Part I of this Form
10-K.
Information regarding directors of the Company is included in the
Company's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held May 13, 1998 ("Proxy Statement") under the
caption "Proposal 1 Election of Directors," which information is
hereby incorporated by reference herein.
Information regarding compliance with Section 16(a) of the
Exchange Act is included in the Proxy Statement under the caption
"Section 16(a) Beneficial Ownership Compliance Reporting," which
information is hereby incorporated by reference herein.
<PAGE> 72
Item 11. Executive Compensation
- --------------------------------
Information regarding executive compensation is included in the
Proxy Statement under the caption "Proposal 1 - Election of Directors
- - Information Regarding Board of Directors and Committees," the
captions "Executive Compensation - Summary; - Option Grants in 1997; -
Option Exercises in 1997; - Pension and Retirement Plans; - Employment
Security Agreements," and the caption "Executive Compensation
Committee Interlocks and Insider Participation," which information is
hereby incorporated by reference herein.
<PAGE> 73
Item 12. Security Ownership of Certain Beneficial Owners and
Management
- -------------------------------------------------------------
Information regarding security ownership is included in the Proxy
Statement under the caption "Certain Beneficial Owners," which
information is hereby incorporated by reference herein.
<PAGE> 74
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Not applicable.
<PAGE> 75
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
- ----------------------------------------------------------------
(a)(1) The following is a list of the financial statements of
Newell Co. included in this report on Form 10-K which are filed
herewith pursuant to Item 8:
Report of Independent Public Accountants
Consolidated Statements of Income - Years Ended December 31,
1997, 1996 and 1995
Consolidated Balance Sheets - December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years Ended December 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements - December 31, 1997,
1996 and 1995
(2) The following consolidated financial statement schedule of
the Company included in this report on Form 10-K is filed
herewith pursuant to Item 14(d) and appears immediately preceding
the Exhibit Index:
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
--------------------------------------------------
(3) The exhibits filed herewith are listed on the Exhibit Index
filed as part of this report on Form 10-K. Each management
contract or compensatory plan or arrangement of the Company
listed on the Exhibit Index is separately identified by an
asterisk.
(b) Reports on Form 8-K:
Registrant filed a Report on Form 8-K, dated December 12, 1997,
relating to the public announcement of its completion of a
private placement of $500,000,000 of convertible preferred
securities of a subsidiary trust.
<PAGE> 76
<TABLE>
<CAPTION>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
-------------------------------------------------
Additions
----------------------
Charged Charged
Balance at to Costs to Other Balance at
Beginning and Accounts Deductions End of
Description of Period Expenses (A) (B) Period
- ----------- --------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts
for the years ended:
December 31, 1997 $ 13,190 $3,899 $8,321 $(7,737) $17,673
December 31, 1996 11,014 6,034 2,200 (6,058) 13,190
December 31, 1995 10,886 2,838 1,990 (4,700) 11,014
</TABLE>
Note A - Represents recovery of accounts previously written off, along with
reserves of acquired businesses.
Note B - Represents accounts charged off.
<TABLE>
<CAPTION>
Balance at Balance at
Beginning Other End of
of Period Provision Write-offs (C) Period
--------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Inventory reserves for
the years ended:
December 31, 1997 $ 81,154 $22,569 $(30,332) $19,203 $92,594
December 31, 1996 67,275 22,251 (30,721) 22,349 81,154
December 31, 1995 51,599 8,621 (17,200) 24,255 67,275
</TABLE>
Note C - Represents reserves of acquired businesses, including provisions for
product line rationalization.
<PAGE> 77
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Registrant
By /s/ William T. Alldredge
------------------------
William T. Alldredge
Vice President-Finance
Date March 5, 1998
------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on March 5, 1998, by the
following persons on behalf of the Registrant and in the capacities
indicated.
Signature Title
--------- -----
/s/ William P. Sovey Chairman of the Board and Director
- --------------------------------
William P. Sovey
/s/ John J. McDonough Vice Chairman of the Board, Chief
- -------------------------------- Executive Officer and Director
John J. McDonough (Principal Executive Officer)
/s/ Thomas A. Ferguson, Jr. President and Chief Operating Officer
- -------------------------------- and Director
Thomas A. Ferguson, Jr.
/s/ Donald L. Krause Senior Vice President-Corporate Controller
- -------------------------------- (Principal Accounting Officer)
Donald L. Krause
/s/ William T. Alldredge Vice President-Finance
- ------------------------------- (Principal Financial Officer)
William T. Alldredge
/s/ Alton F. Doody Director
- ------------------------------
Alton F. Doody
/s/ Gary H. Driggs Director
- ------------------------------
Gary H. Driggs
<PAGE> 78
/s/ Daniel C. Ferguson Director
- ------------------------------
Daniel C. Ferguson
/s/ Robert L. Katz Director
- ------------------------------
Robert L. Katz
/s/ Elizabeth Cuthbert Millett Director
- ------------------------------
Elizabeth Cuthbert Millett
/s/ Cynthia A. Montgomery Director
- ------------------------------
Cynthia A. Montgomery
/s/ Allan P. Newell Director
- ------------------------------
Allan P. Newell
/s/ Henry B. Pearsall Director
- ------------------------------
Henry B. Pearsall
<PAGE> 79
<TABLE>
<CAPTION>
(C) EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
<S> <S> <S> <S>
Item 3. Articles of 3.1 Restated Certificate of Incorporation of Newell Co., as amended as of
Incorporation September 7, 1995 (incorporated by reference to Exhibit 3.1 to the
and By-Laws Company's Annual Report on Form 10-K for the year ended December 31, 1995
(the "1995 Form 10-K").
3.2 By-Laws of Newell Co., as amended through November 9, 1995 (incorporated by
reference to Exhibit 4.2 to Pre-effective Amendment No. 1 to the Company's
Registration Statement on Form S-3, Reg. No.33-64225, filed January 23,
1996).
Item 4. Instruments 4.1 Restated Certificate of Incorporation of Newell Co., as amended as
defining the of September 7, 1995, is included in Item 3.1.
rights of
security
holders,
including
indentures
4.2 By-Laws of Newell Co., as amended through November 9, 1995, are
included in Item 3.2.
4.3 Rights Agreement dated as of October 20, 1988 between the
Company and First Chicago Trust Company of New York (formerly
known as Morgan Shareholders Services Trust Company)(incorporated by
reference to Exhibit 4 to the Company's Current Report on Form 8-K dated
October 25, 1988).
4.4 Indenture dated as of April 15, 1992, between the Company and The Chase
Manhattan Bank (National Association), Trustee (incorporated by reference to
Exhibit 4.4 to the Company's Report on Form 8 amending the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1992).
Pursuant to item 601(b)(4)(iii)(A) of Regulation S-K, the Company is not
filing certain documents. The Company agrees to furnish a copy of each such
document upon the request of the Commission.
Item 10. Material *10.1 The Newell Long-Term Savings and Investment Plan, as amended and
Contracts restated effective May 1, 1993 (incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1993 (the "June 1993 Form 10-Q")).
*10.2 The Company's Amended and Restated 1984 Stock Option Plan, as amended
through February 14, 1990 (incorporated by reference to Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1990
(the "1990 Form 10-K")).
*10.3 Newell Co. Deferred Compensation Plan, as amended, effective October 23,
1986 (incorporated by reference to Exhibit 10.3 to the 1995 Form 10-K.
PAGE 80
*10.4 Newell Operating Company's ROA Cash Bonus Plan, effective January 1, 1977,
as amended (incorporated by reference to Exhibit 10.8 to the 1981 Form
S-14).
*10.5 Newell Operating Company's ROI Cash Bonus Plan, effective July 1, 1966, as
amended (incorporated by reference to Exhibit 10.9 to the 1981 Form S-14).
*10.6 Newell Operating Company's Pension Plan for Salaried and Clerical Employees,
as amended and restated, effective January 1, 1989 (incorporated by
reference to Exhibit 10.2 to the June 1993 Form 10-Q).
*10.7 Newell Operating Company's Pension Plan for Factory and Distribution
Hourly-Paid Employees, as amended and restated, effective January 1, 1984
(incorporated by reference to Exhibit 10.10 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1985 (File No. 0-7843) (the
"1985 Form 10-K").
*10.8 Newell Operating Company's Supplemental Retirement Plan for Key Executives,
effective January 1, 1982, as amended (incorporated by reference to
Amendment No. 2 to the Company's Registration Statement on Form S-14, File
No. 2-71121, filed February 2, 1982).
*10.9 Form of Employment Security Agreement with six executive officers
(incorporated by reference to Exhibit 10.10 to the 1990 Form 10-K).
10.10 Form of Placement Agency Agreement relating to private placement to
accredited investors of unsecured notes of the Company (incorporated by
reference to Exhibit 10.20 to the 1993 Form 10-K).
10.11 Amended and Restated Credit Agreement dated as of June 12, 1995 and amended
and restated as of August 5, 1997 among the Company, certain of its affiliates,
The Chase Manhattan Bank (National Association), as Agent, and the banks whose
names appear on the signature pages thereto (incorporated by reference to
Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997).
10.12 Amended and Restated Trust Agreement, dated as of December 12, 1997 among
Newell Co., as Depositor, The Chase Manhattan Bank, as Property Trustee,
Chase Manhattan Delaware Trustee and C.R. Davenport, Brett E. Gries
and Ronn L. Claussen, as Administrative Trustees (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement on Form
S-3, File No. 333-47261, filed March 3, 1998 (the "1998 Form S-3").
10.13 Junior Convertible Subordinated Indenture for the 5.25% Convertible
Subordinated Debentures, dated as of December 12, 1997, among Newell Co. and
The Chase Manhattan Bank, as Indenture Trustee (incorporated by reference to
Exhibit 4.3 to the 1998 Form S-3).
10.14 Registration Rights Agreement, dated December 12, 1997, between Newell
Financial Trust I and Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated, Robert W. Baird & Co. Incorporated, Bear, Sterns & Co. Inc.
and Merrill Lynch & Co., as Initial Purchasers (incorporated by reference to
Exhibit 10.1 to the 1998 Form S-3).
PAGE 81
10.15 Shareholders' Agreement and Irrevocable Proxy, dated as of June 21, 1985,
among American Tool Companies, Inc., Newell Co., Allen D. Petersen,
Kenneth L. Cheloha, Robert W. Brady, William L. Kiburz, Flemming Andresen
and Ane C. Patterson.
10.16 Newell Co. 1993 Stock Option Plan, effective February 9, 1993, as amended
through November 6, 1997.
Item 11. Exhibit 11 Statement of Computation of Earnings per Share of Common Stock.
Item 12. Exhibit 12 Statement of Computation of Earnings to Fixed Charges.
Item 21. Subsidiaries 21.1 Significant Subsidiaries of the Company.
of the
Registrant
Item 23. Consent of 23.1 Consent of Arthur Andersen LLP.
experts and
counsel
Item 27. Financial 27 Financial Data Schedule.
Data Schedule
Item 99. Additional 99 Safe Harbor Statement.
Exhibits
</TABLE>
* Management contract or compensatory plan or arrangement of the Company.
EXHIBIT 10.15
SHAREHOLDERS' AGREEMENT
AND
IRREVOCABLE PROXY
dated as of
June 21, 1985
by
and
among
American Tool Companies, Inc.
Newell Co.
Allen D. Petersen
Kenneth L. Cheloha
Robert W. Brady
William L. Kiburz
Flemming Andresen and
Ane C. Patterson
<PAGE> 83
SHAREHOLDERS' AGREEMENT
AND
IRREVOCABLE PROXY
Agreement, dated as of June 21, 1985, by and among American
Tool Companies, Inc., a corporation incorporated under the laws of
Delaware (the "Corporation"), Newell Co., a corporation incorporated
under the laws of Delaware ("Newell"), Messrs. Allen D. Petersen
("ADP"), Kenneth L. Cheloha ("Cheloha"), Robert W. Brady ("Brady"),
William L. Kiburz ("Kiburz") and Flemming Andresen ("Andersen"), and
Ane C. Patterson ("Patterson"). Newell, ADP, Cheloha, Brady, Kiburz,
Andersen and Patterson are sometimes hereinafter referred to
individually as a "Shareholder" and collectively as the
"Shareholders". Shareholders excluding Newell are sometimes
hereinafter referred to individually as a "Management Shareholder" and
collectively as the "Management Shareholders".
W I T N E S S E T H:
WHEREAS, Newell and the Corporation have entered into a
Securities Purchase Agreement dated as of June 21, 1985 (the "Newell
Purchase Agreement"), pursuant to which Newell has purchased, and the
Corporation has allotted, issued and sold to Newell, on the terms and
subject to the conditions set forth therein, shares of Class A Common
Stock, par value $.1O per share, of the Corporation ("Class A Common
Stock"), shares of Class B Common Stock, par value $.10 per share, of
the Corporation ("Class B Common Stock") (Class A Common Stock and
Class B Common Stock are sometimes hereinafter referred to together as
"Common Stock"), shares of Convertible Preferred Stock, par value $100
per share, of the Corporation ("Preferred Stock") and warrants to
purchase additional shares of Class A and Class B Common Stock; and
WHEREAS, Newell has purchased a subordinated note from
Petersen Manufacturing Co., Inc. ("PMC") in the principal amount of
$14,000,000, on the terms and subject to the conditions set forth in
that certain Subordinated Loan Agreement dated as of June 21, 1985
between Newell and PMC (the "Subordinated Loan Agreement"); and
WHEREAS, the Management Shareholders and the Corporation
have entered into a Stock Purchase Agreement dated as of June 1, 1985
(the "Management Purchase Agreement"), pursuant to which each
Management Shareholder has purchased, and the Corporation has
allotted, issued and sold to each such Management Shareholder, on the
terms and subject to the conditions set forth therein, shares of Class
A and Class B Common Stock; and
WHEREAS, ADP and Newell have entered into a Put Agreement
and a Call Agreement, each dated as of June 21, 1985 (collectively,
the "Put and Call Agreements"), pursuant to which ADP has the right to
<PAGE> 84
put, and Newell has the right to call, shares of Class B Common Stock
on the terms and conditions set forth therein; and
WHEREAS, the Corporation and the Shareholders desire to
enter into certain agreements with respect to the management of the
Corporation, the voting and transfer of Common Stock and rights to
acquire such Common Stock now owned or hereafter acquired by each of
the Shareholders and certain other matters;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. PRIOR AGREEMENTS.
All prior agreements and understandings among any of the
parties hereto with respect to the issuance, purchase, sale or voting
of Common Stock or other securities of the Corporation, other than (i)
the Newell Purchase Agreement, (ii) the Management Purchase Agreement,
(iii) the Put and Call Agreements, (iv) the Subordinated Loan
Agreement and (v) the warrants, dated June 21, 1985, of the
Corporation issued to Newell (the "Warrants"), are hereby superseded
and terminated and shall have no further force or effect.
2. OWNERSHIP OF COMMON STOCK, PREFERRED STOCK AND
WARRANTS. On the date hereof, after taking into account the Common
Stock, Preferred Stock and Warrants purchased by Newell pursuant to
the Newell Purchase Agreement and the Common Stock purchased by the
Management Shareholders pursuant to the Management Purchase Agreement,
each Shareholder represents and warrants that it, he or she owns, free
and clear of any liens, pledges or encumbrances, except for the shares
subject to the Put and Call Agreements, the respective amounts of
Common Stock, Preferred Stock and Warrants or other rights to acquire
Common Stock, whether presently exercisable or exercisable at some
future time (the Preferred Stock, Warrants and other rights to acquire
Common Stock, whether presently exercisable or exercisable at some
future time, are sometimes hereinafter referred to as "Rights"), set
forth opposite such Shareholder's name below:
<PAGE> 85
<TABLE>
<CAPTION>
Number of Number of Number of
Shares of Class Shares of Class Shares of Number of
A Common Stock B Common Stock Preferred Stock Warrant Units
Name Owned Owned Owned Owned
---- -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Newell 3,500 - 4,649(2) 3,500 (3)(4)
ADP 3,972 34,920 (1) - -
Patterson 484 3,034 - -
Cheloha 261 1,640 - -
Brady 261 1,640 - -
Kiburz 261 1,640 - -
Andersen 261 1,640 - -
</TABLE>
(1) 10,014 shares of Class B Common Stock are subject to the Put and
Call Agreements entered into with Newell.
(2) 4,649 shares of Preferred Stock are convertible into 11,940
shares of Class B Common Stock.
(3) 1,000 shares of Class A Common Stock and 6,273 shares of Class B
Common Stock may be purchased at any time prior to June 21, 1990, upon
exercise of the Warrant for 1,000 units.
(4) Up to 2,500 shares of Class A Common Stock and 15,682 shares of
Class B Common Stock may be purchased, upon exercise of the Warrant
for 2,500 Units, following certain defaults, if any, by PMC under the
Subordinated Loan Agreement.
3. TERM OF AGREEMENT.
(a) Except as otherwise provided herein, this Agreement
shall commence on the date hereof and shall continue in full force and
effect until the earlier of ten years from the date hereof or the
occurrence of any of the following events, at which time this
Agreement shall automatically terminate:
(i) Upon the mutual Consent in writing of all of the
parties hereto;
(ii) upon the sale of all of the outstanding Common
Stock and Rights by all but one of the Shareholders; or
(iii) Upon the voluntary or involuntary dissolution of
the Corporation.
<PAGE> 86
(b) Except to the extent set forth in Section 6 hereof with
respect to Newell's right to purchase shares of Common Stock in the
event of the IPO (as defined hereinafter), the provisions of Sections
6, 7, 8, 9, 10 and 16 hereof shall be of no further force or effect
immediately upon the issuance by the Corporation of Common Stock in an
underwritten public offering pursuant to one or more effective
registration statements under the U.S. Securities Act of 1933, as
amended (the "Securities Act"); PROVIDED, HOWEVER, that, in all other
respects, the provisions of this Agreement shall remain in full force
and effect.
(c) In the event either ADP or Newell, together with any
transferees of either such Shareholder pursuant to Section 7(b)(i) or
7(b)(ii) hereof, shall cease to be the beneficial owner of ten percent
(10%) or more of the then issued and outstanding shares of Class A
Common Stock, such Shareholder (and/or any such transferee) shall
cease to be a party to (or a "Shareholder" as used in) this Agreement
and, subject to Section 3(d) hereof, this Agreement shall no longer be
binding upon or inure to the benefit of such Shareholder (and/or any
such transferee).
(d) Nothing contained in this Section 3 shall affect or
impair any rights or obligations arising prior to or at the time of,
or that may arise by an event causing, (i) the termination of this
Agreement pursuant to Section 3(a) hereof, (ii) the termination of the
specified provisions of this Agreement pursuant to Section 3(b) hereof
or (iii) the termination of the application of this Agreement to any
party resulting from the operation of Section 3(c) hereof.
4. IRREVOCABLE PROXY.
Each of Patterson, Cheloha, Brady, Kiburz and Andersen
hereby grants to, and is deemed to have executed in favor of, ADP an
irrevocable proxy to vote all of the shares of Class A Common Stock
owned by the grantor of the proxy, at all meetings of the stockholders
of the Corporation or to give written consents in lieu of voting such
shares, on all matters submitted to stockholders for vote, including
but not limited to the election of directors of the Corporation as
provided in Section 5 hereof. The proxy granted to ADP with respect
to any shares of Common Stock shall terminate and be of no further
force and effect with respect to such shares which are sold by the
grantor of the proxy in accordance with the provisions of Section
7(b)(iii) or 8 hereof, or in the event ADP shall cease to be a party
to this Agreement in accordance with Section 3(c) hereof or upon ADP's
death.
5. VOTING AGREEMENT; DESIGNATION OF NOMINEES.
(a) Subject to the application to certain Shareholders of
the provisions of Section 4 hereof, each Shareholder agrees that from
and after the date hereof, such Shareholder will vote (or cause to be
<PAGE> 87
voted) all Common Stock beneficially owned by such Shareholder so as
to elect as the entire Board of Directors of the Corporation (the
"Board"), and thereafter for the TERM OF THIS AGREEMENT to continue in
office, (i) four persons designated by ADP and (ii) three persons
designated by Newell, which designation will be made by each of ADP
and Newell by written notice to the other after prior consultation
with the other; PROVIDED, HOWEVER, in the event that ADP or Newell
shall cease to be a party to this Agreement in accordance with Section
3(c) hereof, no remaining party to this Agreement shall be under any
obligation to vote its, his or her Common Stock to elect to the Board
or continue in office such former party or its designees.
(b) Each of ADP and Newell may at any time Cause any of the
persons designated by him or it to serve as a member of the Board to
be removed as a member of the Board with or without cause and, upon
the written request of either ADP or Newell, each other Shareholder
agrees to vote, subject to Section 4 hereof, all of its, his or her
Common Stock, as and to the extent provided in Section 5(a) hereof, to
effect such removal. In the event that there is a vacancy in the
Board caused by the death, resignation or removal of a person
designated by ADP or Newell to serve as a member of the Board, each
other Shareholder agrees to vote, subject to Section 4 hereof, all of
its, his or her Common Stock, as and to the extent provided in Section
5(a) hereof, to elect to the Board, and thereafter to continue in
office, such substitute director as ADP or Newell, as the case may be,
designates after consultation with the Corporation.
(c) Subject to Section 4 hereof, each Shareholder agrees,
upon the request of ADP or Newell (and for so long as ADP or Newell is
a party hereto), to grant to ADP and Newell a proxy to vote, or to
give a written consent with respect to, all of the Common Stock
beneficially owned by the grantor of the proxy for the election to the
Board or the removal from the Board of the person or persons
designated by ADP and Newell pursuant to Section 5(a) or 5(b) hereof.
6. MAINTENANCE OF INTEREST OF NEWELL. The Corporation
hereby grants to Newell, as long as it owns any shares of Class A
Common Stock, the right to maintain its equity and voting interest in
the Corporation as follows:
(a) Except with respect to the issuance of Common Stock
(and/or options with respect thereto) to employees of the Corporation
and/or its subsidiaries pursuant to a stock purchase plan, stock
option plan, stock bonus plan or other similar arrangement or
combination thereof approved by the Board pursuant to which a number
of shares aggregating not more than five percent (5%) of the
outstanding shares of Class A Common Stock and a number of shares
aggregating not more than five percent (5%) of the outstanding shares
of Class B Common Stock, on the date hereof may be issued, the
Corporation shall, within thirty (30) days following any issuance
(whether or not for consideration) or sale by the Corporation of any
<PAGE> 88
Common Stock, notify Newell thereof in writing, which notice shall
specify the kind and amount of Common Stock that the Corporation has
issued or sold and contain a detailed description of the terms of such
issuance or sale (including the issuance or sale price, if any), and
shall offer to Newell, to the extent that no adjustment is made in the
Warrant Purchase Price under the Warrants, the opportunity to acquire,
at the "per share or equivalent price" described below, such number of
shares of such Common Stock as shall allow Newell, immediately
following the issuance or sale of all such Common Stock, to be the
owner, in the aggregate, of its Proportionate Equity Interest (as
hereinafter defined); PROVIDED, HOWEVER, that with respect to the
issuance and sale by the Corporation of Common Stock in an
underwritten initial public offering pursuant to an effective
registration statement under the Securities Act (the "IPO"), the
Corporation shall, not less than thirty (30) days prior to the filing
of the registration statement in respect thereof, notify Newell in
writing of the Corporation's intent to file such registration
statement, which notice shall contain the proposed terms of the IPO,
and Newell shall have a period of fifteen (15) days following the
Corporation's notice within which to notify the Corporation, by
written notice, of its irrevocable election to exercise its right to
acquire, in the event of such IPO, shares of Common Stock pursuant to
this Section 6(a). Following the receipt by the Corporation of such
notice, the Corporation shall have the right, in its sole discretion,
not to proceed with the IPO. For the purposes hereof, "Proportionate
Equity Interest" with respect to Newell shall mean the respective
percentages of issued and outstanding shares of Class A and Class B
Common Stock owned by Newell immediately prior to each such issuance
or sale. For the purpose of computing the Proportionate Equity
Interest of Newell the following shall be assumed: (1) the complete
conversion of all Rights that consist of securities convertible into
Common Stock; and (2) the exercise and/or purchase of all Common Stock
purchasable pursuant to all other Rights (excluding those purchasable
upon exercise of the Warrants following certain defaults, if any, by
PMC under the Subordinated Loan Agreement). The "per share or
equivalent price", if any, payable by Newell and all other terms and
conditions of the offer to Newell, shall be identical to that paid and
agreed to by the other parties in connection with such issuance or
sale; PROVIDED, HOWEVER, that if the purchase price was paid by other
parties in kind or is for any other reason of a type of consideration
which Newell cannot readily deliver, Newell shall nevertheless be
entitled to pay the purchase price in cash, such price to be an amount
equal to the monetary equivalent value to the Corporation of such
consideration in kind or other consideration which Newell cannot
readily deliver, as determined in good faith by the Board.
(b) Except as otherwise provided for in Section 6(a) in
respect of the issuance and sale by the Corporation of Common Stock in
the IPO, Newell shall have a period of thirty (30) days following the
Corporation's notice pursuant to Section 6(a) hereof within Which it
may elect, by written notice thereof, to purchase the Common Stock
<PAGE> 89
offered to it pursuant to Section 6(a) hereof. Newell's election to
purchase the Common Stock offered pursuant to Section 6(a) hereof may
be for all and not part of the Common Stock so offered. The closing
of the purchase by Newell of the Common Stock offered pursuant to
Section 6(a) hereof shall occur at the offices of the Corporation in
DeWitt, Nebraska, at such time as may be specified in the written
notice of election of Newell, which shall be no less than five (5) nor
more than thirty (30) days after the date of such notice of election
to purchase, except with respect to the purchase by Newell of Common
Stock following the issuance and sale of Common Stock pursuant to the
IPO, the closing shall occur not more than twenty (20) days after the
effective date of the registration statement filed in connection
therewith.
(c) Any and all Common Stock to be issued by the
Corporation to Newell pursuant to this Section 6 shall be duly
authorized and validly issued as fully paid and non-assessable.
7. RESTRICTIONS ON SALE OR OTHER DISPOSITION OF SHARES BY
SHAREHOLDERS.
(a) Subject to Section 3(b) hereof and except as provided
in Sections 8, 9 and 10 hereof and/or as otherwise permitted by this
Section 7 and except for any sales pursuant to the Put and Call
Agreements, during the period of time commencing on the date hereof
and continuing until the termination of this Agreement, no
Shareholder, either directly or indirectly, shall sell, assign,
mortgage, hypothecate, transfer, pledge, create a security interest in
or lien upon, encumber, give, place in trust, or otherwise voluntarily
or involuntarily dispose of any Common Stock or Rights now owned or
hereafter acquired by such Shareholder.
(b) Notwithstanding anything to the contrary contained in
Section 7(a) hereof, each Shareholder shall have the right to transfer
his, her or its Common Stock or Rights as follows:
(i) Each Management Shareholder shall have the right
to transfer any or all of the Common Stock and Rights, if
any, owned by him or her for no consideration or at a price
to be determined in the sole discretion of such Shareholder,
provided that (a) the transfer is to (I) his or her spouse,
his or her issue, and/or a trust or trusts for the benefit
of his or her spouse and/or issue, or (II) any other
Management Shareholder, and (b) whether the transfer is made
during his or her lifetime or by testamentary bequest in the
event of his or her death, each transferee agrees in
writing, at the time of the transfer, to be bound by all of
the provisions of this Agreement which would be applicable
to the transferring Shareholder if he or she continued to
own the Common Stock or Rights so transferred.
<PAGE> 90
(ii) Newell may at any time hereafter transfer any or
all of its Common Stock or Rights to any direct or indirect
wholly-owned subsidiary of Newell upon such terms as may be
agreed upon by Newell and its transferee; PROVIDED, HOWEVER,
that any such transferee shall acquire the Common Stock or
Rights so transferred subject to all the terms and
conditions of this Agreement; and FURTHER PROVIDED that if
at any time such transferee subsidiary shall cease to be a
direct or indirect wholly-owned subsidiary of Newell, all
such Common Stock and Rights, if any, so transferred shall
revert immediately to Newell.
(iii) Each Shareholder shall have the right, to
sell his, her or its Common Stock or Rights free and clear
of the terms, provisions and restrictions of this Agreement
in a bona fide public offering of securities pursuant to a
registration statement under the Securities Act.
In the event of any transfer in accordance with the provisions of this
Section 7(b), prompt written notice of the transfer shall be delivered
by the transferring Shareholder to the Corporation and each of the
other Shareholders, and, in the case of any transfer pursuant to
Section 7(b)(i) or (ii) hereof, references herein to "Shareholder" or
"Shareholders" shall include each such permitted transferee.
8. SALE BY NEWELL OR ADP.
(a) If at any time Newell proposes to sell all or any
portion of its Common Stock and Rights to a bona fide purchaser or
purchasers, Newell shall provide each Management Shareholder with not
less than thirty (30) days' prior written notice of such proposed
sale, which notice shall include all of the terms and conditions of
such proposed sale, and each Management Shareholder shall have the
option, exercisable by written notice to Newell within thirty (30)
days after the receipt of Newell's notice to such Shareholder, to
elect to require Newell to arrange for such bona fide purchaser or
purchasers to purchase all or the same proportionate part of such
Management Shareholder's Common Stock at the same time and upon the
same terms and conditions at which Newell sells its Common Stock and
Rights. For purposes of this Agreement, the proportionate part shall
be based on the assumption that Newell's ownership of Common Stock
includes shares of Common Stock exercisable upon exercise of Rights.
As to any Management Shareholder who shall so elect, Newell shall
either (i) arrange for the proposed purchaser or purchasers to
purchase all or the same proportional part of such Management
Shareholder's Common Stock at the same time and upon the same terms
and conditions at which Newell sells its Common Stock and Rights, or
(ii) not effect the proposed sale to such purchaser or purchasers.
(b) If at any time ADP proposes to sell all or any portion
of his Common Stock to a bona fide purchaser or purchasers, ADP shall
<PAGE> 91
provide Newell and each of the other Management Shareholders (each of
Newell and such other Management Shareholders are sometimes
individually referred to in this Section 8(b) as an "Offeree" and
collectively as the "Offerees") with not less than thirty (30) days'
prior written notice of such proposed sale or exchange, which notice
shall include all the material terms and conditions of such proposed
sale or exchange and shall identify the purchaser or purchasers. Each
Offeree shall have the option, exercisable by written notice to ADP
within thirty (30) days after the receipt of ADP's notice by such
Offeree, to require ADP to arrange for such bona fide purchaser or
purchasers to purchase all or the same proportionate part of such
Offeree's Common Stock at the same time and upon the same terms and
conditions at which ADP sells his Common Stock. If any Offeree shall
so elect, ADP shall either (i) arrange for the proposed purchaser or
purchasers to purchase all or the same proportionate part of such
Offeree's Common Stock at the same time as and upon the same terms and
conditions at which ADP sells his Common Stock, or (ii) not effect the
proposed sale to such purchaser or purchasers.
(c) In the event that any of the foregoing requires the
purchase price of Common Stock to be derived from a sale of Rights,
the price per share of Common Stock shall be $550 plus 1/1,000 of the
consideration for the sale of the Rights and if the sale price of the
Rights are to be determined from purchase of Common Stock, it shall be
the sale price per share of the Common Stock less $550, which sum
shall be multiplied by 1,000.
9. DEATH OR DISABILITY OF A MANAGEMENT SHAREHOLDER.
(a) In the event of the death or disability (as hereinafter
defined) of any of Cheloha, Brady, Kiburz or Andersen, or in the event
of the death of Patterson, his or her executor, administrator or
committee, as the case may be, shall, on the tenth (10th) day after
appointment of such executor, administrator, or committee by a court
of competent jurisdiction, be deemed to have offered for sale to ADP
all of the Common Stock owned by such deceased or disabled Shareholder
at the date of death or disability, at the price and upon the terms
and conditions hereinafter set forth in Sections 11 and 12 hereof, and
ADP shall have a period of thirty (30) days after the date of such
appointment in which to accept such offer, which acceptance may be for
all or part of the Common Stock so offered. If ADP elects to accept
all or part of the Common Stock so offered, he shall so signify within
such thirty (30) day period by written notice thereof to the personal
representative of such deceased or disabled Shareholder, the other
Management Shareholders and the Corporation.
As used herein, disability shall mean a physical or mental
illness or incapacity which prevents the disabled individual from
performing his customary business duties for a continuous period of
twelve (12) months.
<PAGE> 92
(b) If ADP, for any reason, fails to accept all o the
Common Stock offered pursuant to Section 9(a) above within such thirty
(30) day period, then a succeeding offer of the Common Stock not
accepted by ADP shall be deemed to have been made, immediately upon
the expiration of such thirty (30) day period, upon the terms and
conditions hereinafter set forth in Sections 11 and 12 hereof, to the
other Management Shareholders, provided that such Management
Shareholders are then owners of shares of Common Stock, in proportion
to each such other Management Shareholder's respective ownership of
Common Stock, or in such proportions as they shall otherwise agree,
and each such Management Shareholder shall have a further period of
twenty (20) days within which to accept such offer, which acceptance
may be for all or part of the Common Stock so offered. Any such
Management Shareholder electing to accept all or part of the Common
Stock so offered shall so signify by written notice to the personal
representative of the deceased or disabled Shareholder and the Corpo-
ration.
(c) In the event that one or more of such other Management
Shareholders fails or declines to accept the offer to purchase all of
the Common Stock offered pursuant to Section 9(b) above, then a
succeeding offer of such unaccepted shares of Common Stock shall,
immediately upon the expiration of the twenty (20) day period provided
for in Section 9(b) above, be deemed to have been made to the Corpo-
ration upon the terms and conditions hereinafter set forth in Sections
11 and 12 hereof, and the Corporation shall immediately be deemed to
have accepted all such shares of Common Stock so offered. The
Corporation shall have the right, at its sole discretion to assign to
any of its wholly-owned subsidiaries its rights and obligations under
this Section 9 and the performance by any such subsidiary shall
constitute performance by the Corporation for purposes of this Section
9.
(d) Notwithstanding anything to the contrary contained in
this Section 9, ADP, the other Management Shareholders and the
Corporation may, either during the thirty (30) day period referred to
in Section 9(a) above or the twenty (20) day period referred to in
Section 9(b) above, agree each to purchase shares from the deceased or
disabled Shareholder, in such proportions as they may agree, so long
as all of the Common Stock offered for sale are purchased by them, and
so long as they shall so signify within such thirty (30) or twenty
(20) day period by a joint notice to the representative of such
deceased or disabled Shareholder.
(e) No written notice of offer need be mailed by the
personal representative of such deceased or disabled Shareholder
except that written notice of the issuance of letters testamentary or
letters of administration shall be given to ADP, the other Management
Shareholders and the Corporation by the personal representative of
such deceased or disabled Shareholder.
<PAGE> 93
(f) In the event that at any time the Corporation's surplus
is insufficient to enable the Corporation, as a purchaser hereunder,
to purchase shares which it elects or agrees to purchase, the
Shareholders (for themselves and their respective heirs, successors,
personal representatives and assigns) agree that they shall forthwith
take appropriate steps to effect a sufficient reduction of the stated
capital of the Corporation to enable such purchase to be made Solely
for the purpose of effecting such reduction in stated capital, the
Shareholders grant to, and are hereby deemed to have executed in favor
of each other (and their respective heirs, successors, personal
representatives and assigns):
(a) An irrevocable proxy to vote all of the shares of
the Corporation owned by the grantor of the proxy in favor
of a reduction in stated capital at a meeting of the
Shareholders of the Corporation held to vote upon and
authorize such reduction in stated capital; and
(b) An irrevocable power of attorney to sign and file
any and all papers required to be signed and filed by the
grantor of the power of attorney in order to effect the
requisite reduction in stated capital.
10. TERMINATION OF EMPLOYMENT.
(a) In the event the employment of any of Cheloha, Brady,
Kiburz or Andersen with the Corporation and all of its subsidiaries
(direct or indirect) is terminated without Cause (as hereinafter
defined), or if any of Cheloha, Brady, Kiburz or Andersen shall
voluntarily terminate his employment with the Corporation and all of
its subsidiaries at any time following the fifth anniversary of the
date hereof, such Shareholder shall be deemed immediately to have
offered, in accordance with the provisions of Sections 9, 11 and 12
hereof, all of the Common Stock owned by such Shareholder at the time
of such termination for sale to ADP, the other Management Shareholders
and the Corporation.
(b) In the event any of Cheloha, Brady, Kiburz or Andersen
shall voluntarily terminate his employment with the Corporation and
all of its subsidiaries prior to the fifth anniversary of the date
hereof, or the Corporation shall cause or direct PMC to terminate such
Shareholder's employment for Cause, such Shareholder shall be deemed
immediately to have offered in accordance with the provisions of
Sections 9, 11 and 12 hereof, all of the Common Stock owned by him at
the time of such termination for sale to ADP, the other Management
Shareholders and the Corporation.
(c) For purposes of this Section 10, any of the following
acts shall constitute termination of employment for Cause:
<PAGE> 94
(i) the commitment of any material breach of any of
the provision or covenants of such Shareholder's
employment agreement;
(ii) any act of gross negligence in the performance of
such Shareholder's duties or obligations as an employed
of the Corporation or any of its direct or indirect
subsidiaries; or
(iii) any material act of misfeasance, malfeasance,
disloyalty, dishonesty or breach of trust against the
Corporation or any of its direct or indirect
subsidiaries.
11. PURCHASE PRICE.
(a) The purchase price of any Common Stock owned by a
Shareholder and offered for sale or sold pursuant to the provisions of
Section 9 or 10(a) of this Agreement shall be the greater of (i) an
amount equal to the amount such Shareholder would have received on the
date of such offer and sale, had he invested the subscription price of
such Common Stock on the Closing Date in an investment which yielded
10% per annum, compounded annually, but which investment and yield
remained unpaid until the date of such offer, or (ii) the fair market
value thereof and, if such Common Stock is not publicly traded, fair
market value for purposes hereof shall be deemed the "Book Value" (as
hereinafter defined) of such Common Stock as at the end of the last
preceding fiscal year.
(b) The purchase price of any Common Stock owned by a
Shareholder and offered for sale or sold pursuant to the provisions of
Section 10(b) of this Agreement shall be, if prior to the fifth
anniversary of the date hereof, the greater of (i) 70% of the
subscription price of such Common Stock as provided in the Management
Purchase Agreement or (ii) the "Book Value" (as hereinafter defined)
of such Common Stock, provided that in no event shall such purchase
price exceed the subscription price thereof provided in the Management
Purchase Agreement, and thereafter, the lesser of such subscription
price or "Book Value".
(c) For purposes of this Agreement, "Book Value" shall be
the common shareholders' equity per share as of the relevant date, as
determined by the certified public accountants regularly engaged by
the Corporation, in accordance with generally accepted accounting
principles and the regular methods and practices used by the
Corporation in keeping its books, applied on a consistent basis.
(d) The determination of Book Value by the regular
certified public accountants for the Corporation shall be final,
conclusive and binding upon all of the parties hereto, including the
<PAGE> 95
successors, assigns, heirs, and personal representatives of the
Shareholders.
12. PROCEDURE ON TRANSFER AND PAYMENT OF PURCHASE PRICE.
(a) The closing date for the sale of any Common Stock sold
pursuant to the provisions of Section 9 or 10 of this Agreement shall
be not later than ninety (90) days after an offer is accepted or
deemed accepted pursuant to Section 9 or 10 of this Agreement, or if
such ninetieth (90th) day shall be a Saturday, Sunday or legal
holiday, then the next business day thereafter. The closing shall
take place at the then offices of the Corporation, or at such other
place as may be agreed upon in writing by all interested parties.
(b) Payment in full of the purchase price for any Common
Stock sold pursuant to the provisions of Section 9 or 10 of this
Agreement shall be made in cash or by certified check delivered at the
closing and such payment shall be made against delivery of
certificates representing such Common Stock, endorsed in blank or
accompanied by appropriate stock powers endorsed in blank, with
signatures guaranteed, and further accompanied by any requisite stock
transfer tax stamps and in the case of purchase from a legal
representative, the certificates representing such Common Stock shall
also be accompanied by a certificate of the appointment of the
representative, a certified copy of the Will, if any, and an affidavit
to the effect that all legacies, debts, claims and taxes have been
paid or are amply provided for, and other applicable state tax waivers
and releases of tax liens.
(c) If for any reason any Common Stock being purchased is
not transferred and delivered as herein provided, the Corporation or
its then-President, Vice-President or Secretary, is hereby authorized
and empowered to make, execute and deliver any and all assignments,
transfers and powers of attorney, in writing, necessary or required
for the transfer of such Common Stock on the books of the Corporation
and to cause such Common Stock to be transferred and the certificates
therefor issued to be cancelled and new certificates issued to the
purchaser or purchasers thereof, as the case may be, and thereafter
the retiring Shareholder's rights or those of his personal
representatives, as the case may be, shall be limited to the right to
receive and collect the purchase price hereunder. Any Common Stock
delivered or transferred subject to the terms hereof shall thereafter
remain subject to the terms and conditions hereof.
13. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. If, at any time and from
time to time after the Corporation has effected a bona fide public
offering of Common Stock pursuant to an effective registration
statement under the Securities Act, the Corporation shall receive
written notice from Newell, which notice states that Newell desires to
<PAGE> 96
transfer ten percent (10%) or more of the then issued and outstanding
shares of Class A or Class B Common Stock under circumstances that
would result in a public distribution (within the meaning of the
Securities Act) of such Common Stock and require the filing of a
registration statement under the Securities Act, then the Corporation
shall, at the request of Newell, cause to be prepared and filed an
appropriate registration statement under the Securities Act to allow
the sale of such shares as soon as practicable after the receipt of
such notice, and the Corporation will use its best efforts to cause
such registration to become effective; PROVIDED, HOWEVER, that, that
(i) the Corporation shall not have any obligation to effect more than
four registrations of Common Stock for Newell under this Section 9(a)
and (ii) the Corporation shall not have any obligation to cause a
registration statement to be prepared and filed under this Section
13(a) within ninety (90) days after any registration statement filed
pursuant to Section 13(b) hereof has become or been declared
effective.
(b) "PIGGYBACK" REGISTRATION RIGHTS. The Corporation
shall, at least thirty (30) days prior to the filing of a registration
statement under the Securities Act relating to the public offering of
any class of its equity securities, or any security of the Corporation
convertible into or exercisable for any class of its equity
securities, by the Corporation or any of its security holders, give
written notice of such proposed filing and of the proposed date
thereof to the Shareholders, and if, on or before the twentieth (20th)
day following the date on which such notice is given, the Corporation
shall receive a written request from any of such Shareholders
requesting that the Corporation include among the securities covered
by such registration statement or prospectus the Common Stock owned by
such Shareholder for offering for sale in a manner and on terms set
forth in such request, the Corporation shall include such shares in
such registration statement or prospectus, if filed, so as to permit
such shares to be sold or disposed of in the manner and on the terms
of the offering thereof set forth in such request.
(c) TERMS AND CONDITIONS OF REGISTRATION OR QUALIFICATION.
In connection with any registration statement filed pursuant to
Section 13(a) or 13(b) hereof the following provisions shall apply:
(i) Each Shareholder shall, if requested by the
managing underwriter, agree not to sell publicly any shares
of the Corporation held by such Shareholder (other than the
shares so registered) for a period of up to 120 days
following the effective date of the registration statement
or prospectus relating to such offering.
(ii) If such registration statement shall be filed
pursuant to Section 13(b) hereof and if the Corporation's
managing underwriter advises that the inclusion in such
registration or qualification of some or all of the shares
<PAGE> 97
of the Shareholders sought to be registered by such
Shareholders creates a substantial risk that the proceeds or
price per share the Corporation will derive from such
registration or qualification will be reduced or that the
number of shares to be registered or qualified at the
instance of the Corporation plus the number of shares sought
to be registered or qualified by the Shareholders and any
other security holders of the Corporation is too large a
number to be reasonably sold, the number of shares sought to
be registered or qualified for each Shareholder and each
other security holder of the Corporation shall be reduced,
pro rata in proportion to the number of shares sought to be
registered or qualified by all such persons, to the extent
necessary to reduce the number of shares to be registered or
qualified to the number recommended by the managing
underwriter.
(iii) The Shareholders will promptly provide the
Corporation with such information as it shall reasonably
request in order to prepare such registration statement or
prospectus.
(iv) All expenses in connection with the preparation
of any registration statement or prospectus filed pursuant
to Section 13(a) or 13(b), including, without limitation,
any and all legal and accounting fees (but not including
fees and disbursements of counsel for, or other experts
retained by any Shareholder), shall be borne by the
Corporation, except that each Shareholder shall be required
to bear that portion of the additional SEC, NASD and Blue
Sky registration and filing fees attributable solely to the
inclusion of such Shareholder's shares of Common Stock.
(v) Following the filing date of such registration
statement, the Corporation shall, upon the request of the
Shareholders, forthwith supply such number of prospectuses
(including preliminary prospectuses and amendments and
supplements thereto) meeting the requirements of the
Securities Act as shall be requested by the Shareholders to
permit the Shareholders to make a public distribution of
their shares, provided that the Shareholders furnish the
Corporation with such appropriate information relating to
the Shareholders' intentions in connection therewith as the
Corporation shall reasonably request in writing.
(vi) The Corporation shall use its best efforts to
cause each registration statement filed pursuant to Section
13(a) or 13(b) hereof to become effective as expeditiously
as possible and shall prepare and file such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be necessary
<PAGE> 98
to keep such registration statement or prospectus effective
and to comply with the provisions of the Securities Act or
the securities laws of any state where the registration
statement or prospectus has been filed with respect to the
offer and sale or other disposition of the shares covered by
such registration statement or prospectus during the period
required for distribution of the shares, which period shall
not be in excess of nine (9) months from the effective date
of such registration statement or prospectus.
(vii) The Corporation shall select the underwriter or
underwriters, if any, who are to undertake any offering of
securities with respect to which the Shareholders may have
registration rights pursuant to Section 13(b) hereof and the
underwriter selected by Newell in a registration pursuant to
Section 13(a) shall be reasonably acceptable to the
Corporation.
(d) INDEMNIFICATION.
(i) In the event of the registration or qualification
of any shares of the Shareholders under the Securities Act
pursuant to the provisions of this Section 13, the
Corporation agrees to indemnify and hold harmless each
Shareholder thereby offering such shares for sale (a
"seller"), each underwriter, broker or dealer, if any, of
such shares, and each other person, if any, who controls any
such seller, underwriter, broker or dealer within the
meaning of the Securities Act, from and against any and all
losses, claims, damages or liabilities (or actions in
respect thereof), joint or several, to which such seller,
underwriter, broker or dealer or controlling person may
become subject under the Securities Act or the applicable
securities laws or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained
in any registration statement under which such shares were
registered or qualified under the Securities Act, any
preliminary prospectus or final prospectus relating to such
shares, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
or any violation by the Corporation of any rule or
regulation under the Securities Act applicable to the
Corporation or relating to any action or inaction required
by the Corporation in connection with any such registration
or qualification and will reimburse each such seller,
underwriter, broker or dealer and each such controlling
person for any legal or other expenses reasonably incurred
<PAGE> 99
by such seller, underwriter, broker or dealer or controlling
person in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Corporation will not be liable in any such
case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission
made in a such registration statement, such preliminary pro-
spectus, such final prospectus or such amendment or
supplement thereto in reliance upon and in conformity with
written information furnished to the Corporation by such
seller, underwriter, broker, dealer or controlling person
specifically and expressly for use in the preparation
thereof.
(ii) In the event of the registration of any shares of
the Shareholders under the Securities Act for sale pursuant
to the provisions hereof, each seller and each other person,
if any, who controls any such seller, within the meaning of
the Securities Act, agrees severally, and not jointly, to
indemnify and hold harmless the Corporation, each person who
controls the Corporation within the meaning of the
Securities Act, and each officer and director of the
Corporation from and against any losses, claims, damages or
liabilities, joint or several, to which the Corporation,
such controlling person or any such officer or director may
become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under
which such shares were registered or qualified under the
Securities Act, any preliminary prospectus or final
prospectus relating to such shares, or any amendment or sup-
plement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, which untrue statement or
alleged untrue statement or omission or alleged omission was
made therein in reliance upon and in conformity with written
information furnished to the Corporation by such seller or
controlling person specifically for use in connection with
the preparation thereof or arise out of or are based upon
any violation by such seller or controlling person of any
rule or regulation under the Securities Act or any action or
inaction required by the Corporation in connection with such
registration or qualification, and will reimburse the
Corporation, such controlling person of the Corporation and
each such officer or director of the Corporation for any
legal or any other expenses reasonably incurred by them in
<PAGE> 100
connection with investigating or defending any such loss,
claim, damage, liability, or action.
(iii) Promptly after receipt by a person entitled
to indemnification under this Section 13(d) (an "indemnified
party") of notice of the commencement of any action or claim
relating to any registration statement filed under Section
13(a) or 13(b) hereof or as to which indemnity may be sought
hereunder, such indemnified party will, if a claim for
indemnification hereunder in respect thereof is to be made
against any other party hereto (an "indemnifying party"),
give written notice to such indemnifying party of the
commencement of such action or claim, but the omission so to
notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party
otherwise than pursuant to the provisions of this Section
13(d) and shall also not relieve the indemnifying party of
its obligations under this Section 13(d) except to the
extent that the omission results in a failure of actual
timely notice to the indemnifying party or such indemnifying
party is damaged solely as a result of the failure to give
timely notice. In case any such action is brought against
an indemnified party, and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be
entitled (at its own expense) to participate in and, to the
extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense, with
counsel satisfactory to such indemnified party, of such
action and/or to settle such action and, after notice from
the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party for any
legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof,
other than the reasonable cost of investigation; PROVIDED,
HOWEVER, that no indemnifying party and no indemnified party
shall enter into any settlement agreement which would impose
any liability on such other party or parties without the
prior written consent of such other party, or parties,
unless such other party, or parties, are fully indemnified
to its or their satisfaction, as the case may be, against
any such liability.
14. ISSUANCE OF ADDITIONAL COMMON STOCK; AFTER ACQUIRED
COMMON STOCK.
(a) The Board may, from time to time, authorize the
issuance of additional Common Stock or Rights to the Shareholders or
to other persons for a purchase price to be determined by the Board;
PROVIDED, HOWEVER, that the Corporation, for a period of one (1) year
from the date hereof, shall not issue any additional Common Stock,
<PAGE> 101
except pursuant to a stock purchase plan, stock option plan, stock
bonus plan or other similar arrangement approved by the Board.
(b) Except as provided in Section 3(b) hereof, all of the
provisions of this Agreement shall apply to all Common Stock or Rights
now owned or which may be issued or transferred to a Shareholder or to
his transferee in consequence of any additional issuance, purchase,
exchange or reclassification of Common Stock, corporate reorganization
or any other form of recapitalization, or stock split, stock dividend
or which are acquired by a Shareholder in any other manner.
15. REPRESENTATIONS OF THE SHAREHOLDERS AND THE
CORPORATION.
(a) Each Management Shareholder hereby represents that he
or she has the legal right and capacity to enter into this Agreement
and that he or she fully understands the terms of this Agreement.
(b) Each of Newell and the Corporation hereby represents
that it is authorized, and has all requisite power and authority, to
execute and deliver this Agreement and form the obligations created
hereby, and that this Agreement has been duly and validly executed by
it and constitutes its valid and binding obligation enforceable in
accordance with its terms.
16. RECORDS AND REPORTS. The Corporation hereby covenants
and agrees with Newell that the Corporation shall accurately and
fairly maintain its books of account in accordance with generally
accepted accounting principles; employ independent certified public
accountants approved by the Board to make annual audits of its
accounts in accordance with generally accepted auditing standards;
permit Newell and its representatives to have access to and to examine
its properties, books and records (and to copy and make extracts
therefrom) at such reasonable times and intervals as Newell may
request and to discuss its affairs, finances and accounts with its
officers and auditors, all to such reasonable extent and at such
reasonable times and intervals as Newell may request; and furnish to
Newell all of the financial reports described in Section 6.1 of the
Subordinated Loan Agreement. Newell hereby agrees that any information
received by it in its capacity as a Shareholder or through its
representation on the Board, or pursuant to this Section 16, including
information received by it pursuant to the Subordinated Loan
Agreement, shall be maintained in confidence; PROVIDED, HOWEVER, that
such obligation shall not apply to any information which becomes known
to the public through no fault of Newell; and PROVIDED, FURTHER, that
Newell, upon the written consent of the Corporation, which consent
shall not be unreasonably withheld, may reveal such information to
prospective transferees of Common Stock or Rights owned by it.
17. LEGEND. Each certificate representing Common Stock or
Rights owned by the Shareholders or by any persons subject to the
<PAGE> 102
provisions of this Agreement shall (in addition to any other
legend(s)) have stamped, printed or typed thereon the following legend
(or a legend substantially similar thereto):
"This certificate and the shares (or the rights,
options or warrants to purchase shares)
represented hereby are subject to and shall be
transferable only in accordance with the
provisions of a certain Shareholders' Agreement,
dated as of June 21, 1985, among American Tool
Companies, Inc., Newell Co., Ane C. Patterson and
Messrs. Petersen, Cheloha, Brady, Kiburz and
Andresen, a copy of which is on file with the
Secretary of American Tool Companies, Inc."
18. AGREEMENT BY THE CORPORATION. No transfer of Common
Stock or Rights made in contravention of this Agreement shall be
recognized by the Corporation, and the Corporation will not at any
time permit any transfer to be made on its books or records of the
certificates representing the Common Stock or Rights of the
Shareholders or any other person subject to the provisions of this
Agreement, unless such transfer is made pursuant to and in accordance
with the terms and conditions of this Agreement.
19. SPECIFIC PERFORMANCE. The Shareholders agree that
inasmuch as the Common Stock is closely held and the market therefor
is limited, irreparable damage would result if this Agreement is not
specifically enforced. Therefore, each of the parties hereto hereby
consents that the restrictions on the transfer of Common Stock and
Rights and the obligations to offer for sale Common Stock and Rights
contained in Sections 7, 8, 9 and 10 hereof shall be enforceable in a
court of equity by a decree of specific performance, and that
injunctive relief may be granted to any party hereto in connection
therewith. Such remedies shall be cumulative and not exclusive and
shall be in addition to any other rights or remedies which any party
may have under this Agreement or otherwise.
20. COMPLETE AGREEMENT. Except as otherwise provided in
Section 1 hereof, this Agreement constitutes the complete
understanding among the parties with respect to its subject matter and
no alteration or modification of any of its provisions shall be valid
unless made in writing and signed by all of the parties hereto.
21. SECTION HEADINGS. The section headings contained in
this Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
22. SUCCESSORS AND ASSIGNS. All of the terms of this
Agreement shall inure to the benefit of and shall be binding upon the
heirs, executors, administrators, personal representatives, successors
<PAGE> 103
and permitted assigns of the Shareholders and upon the successors and
assigns of the Corporation.
23. NOTICES. All notices, offers, acceptances and other
communications required or permitted hereunder shall be sufficiently
given if (a) in writing and personally delivered or (b) sent by
registered or certified mail, postage paid, return receipt requested,
as follows:
(a) If to the Corporation:
American Tool Companies, Inc.
P.O. 337
Dewitt, Nebraska 68541
Attn: President
(b) If to Newell:
Newell Co.
Newell Center
29 East Stephenson Street
Freeport, Illinois 61032
Attn: Vice President - Finance
(c) If to any of the other Shareholders, to the address set
forth below such party's name:
Allen D. Petersen Robert W. Brady
American Tool Companies, Inc. American Tool Companies, Inc.
DeWitt, Nebraska 68341 DeWitt, Nebraska 68341
Kenneth L. Cheloha William L. Kiburz
American Tool Companies, Inc. American Tool Companies, Inc.
DeWitt, Nebraska 68341 DeWitt, Nebraska 68341
Flemming Associates Ane C. Patterson
Petersen International 150 Haskill Basin Road
Corporation Whitefish, Montana 59937
2333 Waukegan Road
Bannockburn, Illinois 60015
Any party may change the address to which each such notice or
communication shall be sent by giving written notice to the other
parties of such new address in the manner provided herein for giving
notice.
24. GOVERNING LAW. This Agreement shall be governed by,
and construed and enforced in accordance with the laws of Nebraska
without giving effect to the provisions, policies or principles
thereof respecting conflict or choice of laws.
<PAGE> 104
25. COMMON STOCK. As used herein the term "Common Stock"
shall mean and include the shares of Class A and Class B common stock
of the Corporation authorized on the date hereof and shall also
include any shares of any class of the Corporation thereafter
authorized which shall not be limited to a fixed sum or percentage in
respect of the rights of the holders hereof to participate in
dividends and in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
26. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all
of which taken together shall constitute one and the same agreement.
27. FURTHER ASSURANCES. Each of the Shareholders agrees to
vote its or his Common Stock and to execute and deliver such documents
and instruments as may be necessary or advisable in order to implement
the foregoing provisions of this Agreement.
28. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
<PAGE> 105
IN WITNESS WHEREOF, the parties have signed this Agreement
as of the date first set forth above.
AMERICAN TOOL COMPANIES, INC. NEWELL Co.
By: __________________________ By: __________________________
Name: Name:
Title: Title:
______________________________
ALLEN D. PETERSEN
______________________________
KENNETH L. CHELOHA
______________________________
ROBERT W. BRADY
______________________________
WILLIAM L. KIBURZ
______________________________
FLEMMING ANDRESEN
______________________________
ANE C. PATTERSON
EXHIBIT 10.16
NEWELL CO.
AMENDED 1993 STOCK OPTION PLAN
---------------------
SECTION 1. PURPOSE
The purpose of the 1993 Stock Option Plan of Newell Co. (the
"Plan") is to benefit Newell Co. (the "Company") and its Subsidiaries
(as defined in Section 2) by recognizing the contributions made to the
Company by officers and other key employees (including Directors of
the Company who are also employees) of the Company and its
Subsidiaries, to provide such persons with additional incentive to
devote themselves to the future success of the Company, and to improve
the ability of the Company to attract, retain and motivate
individuals, by providing such persons with a favorable opportunity to
acquire or increase their proprietary interest in the Company over a
period of years through receipt of options to acquire common stock of
the Company. In addition, the Plan is intended as an additional
incentive to members of the Board of Directors of the Company who are
not employees of the Company ("Non-Employee Directors") to serve on
the Board of Directors of the Company (the "Board") and to devote
themselves to the future success of the Company by providing them with
a favorable opportunity to acquire or increase their proprietary
interest in the Company through receipt of options to acquire common
stock of the Company.
The Company may grant stock options which constitute "incentive
stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or stock
options which do not constitute ISO ("NSOs") (ISOs and NSOs being
hereinafter collectively referred to as "Options").
SECTION 2. ELIGIBILITY
Non-Employee Directors shall participate in the Plan only in
accordance with the provisions of Section 5 of the Plan. The
Committee (as defined in Section 3) shall initially, and from time to
time thereafter, select those officers and other key employees
(including Directors of the Company who are also employees)
(collectively referred to herein as "Key Employees") of the Company or
any other entity of which the Company is the direct or indirect
beneficial owner of not less than fifty percent (50%) of all issued
and outstanding equity interests ("Subsidiaries"), to participate in
the Plan on the basis of the special importance of their services in
the management, development and operations of the Company or its
<PAGE> 107
Subsidiaries (each such Director and Key Employee receiving Options
granted under the Plan is referred to herein as an "Optionee").
SECTION 3. ADMINISTRATION
3.1 THE COMMITTEE
The Plan shall be administered by the Compensation Committee
of the Board (the "Committee"). The Committee shall be comprised of
two (2) or more members of the Board. All members of the Committee
shall satisfy the "disinterested" administration requirements set
forth in Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"), or any successor rule or
regulation. If at any time any member of the Committee does not
satisfy such disinterested administration requirements, no Options
shall be granted under this Plan to any person until such time as all
members of the Committee satisfy such requirements. No person who is
an officer or employee of the Company or any Subsidiary shall be a
member of the Committee.
3.2 AUTHORITY OF THE COMMITTEE
No person, other than members of the Committee, shall have
any authority concerning decisions regarding the Plan. Subject to the
express provisions of this Plan, including but not limited to Section
5, the Committee shall have sole discretion concerning all matters
relating to the Plan and Options granted hereunder. The Committee, in
its sole discretion, shall determine the Key Employees of the Company
and its Subsidiaries to whom, and the time or times at which Options
will be granted, the number of shares to be subject to each Option,
the expiration date of each Option, the time or times within which the
Option may be exercised, the cancellation of the Option (with the
consent of the holder thereof) and the other terms and conditions of
the grant of the Option. The terms and conditions of the Options need
not be the same with respect to each Optionee or with respect to each
Option.
The Committee may, subject to the provisions of the Plan,
establish such rules and regulations as it deems necessary or
advisable for the proper administration of the Plan, and may make
determinations and may take such other action in connection with or in
relation to the Plan as it deems necessary or advisable. Each
determination or other action made or taken pursuant to the Plan,
including interpretation of the Plan and the specific terms and
conditions of the Options granted hereunder by the Committee shall be
final and conclusive for all purposes and upon all persons including,
but without limitation, the Company, its Subsidiaries, the Committee,
the Board, officers and the affected employees of the Company and/or
its Subsidiaries and their respective successors in interest.
<PAGE> 108
No member of the Committee shall, in the absence of bad
faith, be liable for any act or omission with respect to service on
the Committee. Service on the Committee shall constitute service as a
Director of the Company so that members of the Committee shall be
entitled to indemnification pursuant to the Company's Restated
Certificate of Incorporation and By-Laws.
SECTION 4. SHARES OF COMMON STOCK SUBJECT TO PLAN
4.1 The total number of shares of common stock, par value $1.00
per share, and associated preferred stock purchase rights of the
Company (the "Common Stock"), that may be issued and sold under the
Plan shall initially be 4,000,000. The total number of shares of
Common Stock that may be available for Options under the Plan shall be
adjusted on January 1 of each calendar year, within the Applicable
Period (as defined below), so that the total number of shares of
Common Stock that may be issued and sold under the Plan as of January
1 of each calendar year within the Applicable Period shall be equal to
five percent (5%) of the outstanding shares of Common Stock of the
Company on such date; provided, however, that no such adjustment shall
reduce the total number of shares of Common Stock that may be issued
and sold under the Plan below 4,000,000. For purposes of the
preceding sentence, Applicable Period shall be the ten-year period
commencing on January 1, 1993 and ending on December 31, 2002. The
aforementioned total number of shares of Common Stock shall be
adjusted in accordance with the provisions of Section 4.2 hereof.
Notwithstanding the foregoing, the total number of shares of Common
Stock that may be subject to ISOs under the Plan shall be 4,000,000
shares of Common Stock, adjusted in accordance with the provisions of
Section 4.2 hereof. With respect to Options granted to Optionees who
are not subject to Section 16 of the 1934 Act, the number of shares of
Common Stock delivered by any such Optionee or withheld by the Company
on behalf of any such Optionee pursuant to Sections 8.2 or 8.3 of the
Plan shall once again be available for issuance pursuant to subsequent
Options. Any shares of Common Stock subject to issuance upon exercise
of Options but which are not issued because of a surrender (other than
pursuant to Sections 8.2 or 8.3 of the Plan), forfeiture, expiration,
termination or cancellation of any such Option, to the extent
consistent with applicable law, rules and regulations, shall once
again be available for issuance pursuant to subsequent Options.
4.2 The number of shares of Common Stock subject to the Plan and
to Options granted under the Plan shall be adjusted as follows: (a)
in the event that the number of outstanding shares of Common Stock is
changed by any stock dividend, stock split or combination of shares,
the number of shares subject to the Plan and to Options previously
granted thereunder shall be proportionately adjusted, (b) in the event
of any merger, consolidation or reorganization of the Company with any
other corporation or corporations, there shall be substituted on an
equitable basis as determined by the Board of Directors, in its sole
discretion, for each share of Common Stock then subject to the Plan
<PAGE> 109
and for each share of Common Stock then subject to an Option granted
under the Plan, the number and kind of shares of stock, other
securities, cash or other property to which the holders of Common
Stock of the Company are entitled pursuant to the transaction, and (c)
in the event of any other change in the capitalization of the Company,
the Committee, in its sole discretion, shall provide for an equitable
adjustment in the number of shares of Common Stock then subject to the
Plan and to each share of Common Stock then subject to an Option
granted under the Plan. In the event of any such adjustment, the
exercise price per share shall be proportionately adjusted.
SECTION 5. GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS
5.1. GRANTS
All grants of Options to Non-Employee Directors shall be
automatic and non-discretionary. Grants of Options to Non-Employee
Directors shall be made under both paragraph (a) and paragraph (b) of
this Section 5.1 as set forth below.
(a) Each individual who is a Non-Employee Director
on the effective date of the Plan who was first elected to
the Board after May 1, 1992 shall be granted automatically a
NSO to purchase 5,000 shares of Common Stock on the
effective date on the Plan. Each individual who is a Non-
Employee Director (other than a Non-Employee Director who
was previously an employee Director) on the effective date
of the Plan who was first elected to the Board prior to May,
1992, shall be granted automatically a NSO to purchase 5,000
shares of Common Stock on the fifth anniversary of the date
such Director was last granted a NSO under the Company's
Amended and Restated 1984 Stock Option Plan. Each
individual who becomes a Non-Employee Director (other than a
Non-Employee Director who was previously an employee
Director) after the effective date of the Plan shall be
granted automatically a NSO to purchase 5,000 shares of
Common Stock on the date he or she becomes a Non-Employee
Director. Each individual who is a Non-Employee Director on
the effective date of the Plan and who was previously an
employee Director shall be granted automatically a NSO to
purchase 5,000 shares of Common Stock on the fifth
anniversary of the date the Director was last granted an
Option. Each individual who is an employee Director of the
Company on the effective date of the Plan and who thereafter
becomes a Non-Employee Director shall be granted
automatically a NSO to purchase 5,000 shares of Common Stock
on the fifth anniversary of the date the Director was last
granted an Option. Thereafter, each Non-Employee Director
who holds NSOs granted pursuant to this Section 5.1(a) shall
be granted automatically an additional NSO to purchase 5,000
<PAGE> 110
shares of Common Stock on the fifth anniversary of the date
the Director was last granted an Option.
(b) Each individual who is a Non-Employee Director on
November 6, 1997 shall be granted automatically a NSO to
purchase 5,000 shares of Common Stock on November 6, 1997.
Thereafter, each such Non-Employee Director shall be granted
an additional NSO to purchase 5,000 shares of Common Stock
on the fifth anniversary of the date the Director was last
granted an Option pursuant to this paragraph 5.1(b). Each
individual who becomes a Non-Employee Director after
November 6, 1997 shall be granted automatically a NSO to
purchase 5,000 shares of Common Stock on the date he or she
becomes a Non-Employee Director. Thereafter, each such Non-
Employee Director shall be granted automatically an
additional NSO to purchase 5,000 shares of Common Stock on
the fifth anniversary of the date the Director was last
granted an Option pursuant to this paragraph 5.1(b).
5.2 EXERCISE PRICE AND PERIOD
The per share Option exercise price of each such NSO granted
to a Non-Employee Director shall be the "Fair Market Value," on the
date on which the Option is granted, of the Common Stock subject to
the Option. "Fair Market Value" shall mean the closing sales price of
the Common Stock on the New York Stock Exchange Composite Tape (as
reported in THE WALL STREET JOURNAL, Midwest Edition). Each such NSO
shall become exercisable with respect to one-fifth of the total number
of shares of Common Stock subject to the Option on the date twelve
months after the date of its grant and with respect to an additional
one-fifth of the total number of shares of Common Stock subject to the
Option at the end of each twelve-month period thereafter during the
succeeding four years. Each NSO shall expire on the date ten years
after the date of grant.
SECTION 6. GRANTS OF OPTIONS TO EMPLOYEES
6.1 GRANT
Subject to the terms of the Plan, the Committee may from
time to time grant Options, which may be ISOs or NSOs, to Key
Employees of the Company or any of its Subsidiaries. Unless otherwise
expressly provided at the time of the grant, Options granted under the
Plan to Key Employees will be ISOs.
6.2 OPTION AGREEMENT
Each Option shall be evidenced by a written Option Agreement
specifying the type of Option granted, the Option exercise price, the
terms for payment of the exercise price, the expiration date of the
Option, the number of shares of Common Stock to be subject to each
<PAGE> 111
Option and such other terms and conditions established by the
Committee, in its sole discretion, not inconsistent with the Plan.
6.3 EXPIRATION
Except to the extent otherwise provided in or pursuant to
Section 7, each Option shall expire, and all rights to purchase shares
of Common Stock shall expire, on the tenth anniversary of the date on
which the Option was granted.
6.4 EXERCISE PERIOD
Except to the extent otherwise provided in or pursuant to
Section 7, or in the proviso to this sentence, Options shall become
exercisable pursuant to the following schedule: with respect to one-
fifth of the total number of shares of Common Stock subject to Option
on the date twelve months after the date of its grant and with respect
to an additional one-fifth of the total number of shares of Common
Stock subject to the Option at the end of each twelve-month period
thereafter during the succeeding four years; provided, however, that
the Committee, in its sole discretion, shall have the authority to
shorten or lengthen the exercise schedule with respect to any or all
Options, or any part thereof, granted to Key Employees under the Plan.
6.5 REQUIRED TERMS AND CONDITIONS OF ISOS
Each ISO granted to a Key Employee shall be in such form and
subject to such restrictions and other terms and conditions as the
Committee may determine, in its sole discretion, at the time of grant,
subject to the general provisions of the Plan, the applicable Option
Agreement, and the following specific rules:
(a) Except as provided in Section 6.5(d), the per
share exercise price of each ISO shall be the Fair Market
Value of the shares of Common Stock on the date such ISO is
granted.
(b) The aggregate Fair Market Value (determined with
respect to each ISO at the time such Option is granted) of
the shares of Common Stock with respect to which ISOs are
exercisable for the first time by an individual during any
calendar year (under all incentive stock option plans of the
Company and its parent and subsidiary corporations) shall
not exceed $100,000. If the aggregate Fair Market Value
(determined at the time of grant) of the Common Stock
subject to an Option, which first becomes exercisable in any
calendar year exceeds the limitation of this Section 6.5(b),
so much of the Option that does not exceed the applicable
dollar limit shall be an ISO and the remainder shall be a
NSO; but in all other respects, the original Option
Agreement shall remain in full force and effect.
<PAGE> 112
(c) As used in this Section 6, the words "parent" and
"subsidiary" shall have the meanings given to them in
Section 425(e) and 425(f) of the Code.
(d) Notwithstanding anything herein to the contrary,
if an ISO is granted to an individual who owns stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of
its parent or subsidiary corporations, within the meaning of
Section 422(b)(6) of the Code, (i) the purchase price of
each share of Common Stock subject to the ISO shall be not
less than one hundred ten percent (110%) of the Fair Market
Value of the Common Stock on the date the ISO is granted,
and (ii) the ISO shall expire and all rights to purchase
shares thereunder shall cease no later than the fifth
anniversary of the date the ISO was granted.
(e) No ISOs may be granted under the Plan after
February 9, 2003.
6.6 REQUIRED TERMS AND CONDITIONS OF NSOS
Each NSO granted to Key Employees shall be in such form and
subject to such restrictions and other terms and conditions as the
Committee may determine, in its sole discretion, at the time of grant,
subject to the general provisions of the Plan, the applicable Option
Agreement, and the following specific rule: the per share exercise
price of each NSO shall be the Fair Market Value of the shares of
Common Stock on the date the NSO is granted; provided however, that in
no event may the exercise price be less than the par value of the
shares of Common Stock subject to such NSO.
SECTION 7. EFFECT OF TERMINATION OF EMPLOYMENT
7.1 TERMINATION GENERALLY
Except as provided in Sections 7.2, 7.3 and 11, or by the
Committee, in its sole discretion, any Option held by an Optionee
whose employment with the Company and its Subsidiaries or during
service on the Board is terminated for any reason, shall terminate on
the date of termination of employment or service on the Board. The
transfer of employment from the Company to a Subsidiary, or from a
Subsidiary to the Company, or from a Subsidiary to another Subsidiary,
shall not constitute a termination of employment for purposes of the
Plan. Options granted under the Plan shall not be affected by any
change of duties in connection with the employment of the Optionee or
by leave of absence authorized by the Company or a Subsidiary.
<PAGE> 113
7.2 DEATH AND DISABILITY
In the event of the death or Disability (as defined below)
of an Optionee during employment with the Company or any of its
Subsidiaries or during service on the Board, all Options held by the
Optionee shall become fully exercisable on such date of death or
Disability. Each of the Options held by such an Optionee shall expire
on the earlier of (a) the first anniversary of the date of death or
Disability and (b) the date that such Option expires in accordance
with its terms. For purposes of this Section 7.2, "Disability" shall
mean the inability of an individual to engage in any substantial
gainful activity by reason of any medical determinable physical or
mental impairment which is expected to result in death or which has
lasted or can be expected to last for a continuous period of not less
than twelve (12) months. The Committee, in its sole discretion, shall
determine the date of any Disability.
7.3 RETIREMENT OF EMPLOYEES
(a) KEY EMPLOYEES (OTHER THAN KEY EMPLOYEES WHO ARE ALSO
DIRECTORS OF THE COMPANY). In the event the employment of a Key
Employee with the Company and/or its Subsidiaries (other than a Key
Employee who is also a Director of the Company) shall be terminated by
reason of Employee Retirement, all Options held by the Key Employee
shall become fully exercisable. Each of the Options held by such a
Key Employee shall expire on the earlier of (i) the first anniversary
of the date of the Employee Retirement and (ii) the date that such
Option expires in accordance with its terms. For purposes of this
Section 7.3, "Employee Retirement" shall mean retirement of a Key
Employee at age 65. In the event the employment of a Key Employee
with the Company and/or its Subsidiaries shall be terminated by reason
of a retirement that is not an Employee Retirement as herein defined,
the Committee may, in its sole discretion, determine that the
exercisability and exercise periods set forth in this Section 7.3(a)
shall be applicable to Options held by such Key Employee.
(b) NON-EMPLOYEE DIRECTORS. In the event the service of a
Non-Employee Director on the Board shall be terminated by reason of
the retirement of such Non-Employee Director of the Company in
accordance with the Company's retirement policy for Directors, any
Option or Options granted to such Non-Employee Director shall continue
to vest and remain exercisable pursuant to Section 5, in the same
manner and to the same extent as if such Director had continued his or
her service on the Board during such period.
(c) KEY EMPLOYEES WHO ARE ALSO DIRECTORS. Section 7.3(b)
shall be applicable to Options held by any Key Employee who is also a
Director in the event the employment of such Key Employee with the
Company and/or its Subsidiaries shall be terminated by reason of
Employee Retirement, so long as the service of such Key Employee on
the Board continues after such Employee Retirement. Section 7.3(a)
<PAGE> 114
shall be applicable to Options held by any Key Employee who is also a
Director in the event the employment of such Key Employee with the
Company and/or its Subsidiaries shall be terminated by reason of
Employee Retirement, if such Key Employee ceases to be a Director on
the date of such Key Employee's Employee Retirement.
SECTION 8. EXERCISE OF OPTIONS
8.1. NOTICE
A person entitled to exercise an Option may do so by
delivery of a written notice to that effect specifying the number of
shares of Common Stock with respect to which the Option is being
exercised and any other information the Committee may prescribe. The
notice shall be accompanied by payment as described in Section 8.2.
The notice of exercise shall be accompanied by the Optionee's copy of
the writing or writings evidencing the grant of the Option. All
notices or requests provided for herein shall be delivered to the
Secretary of the Company.
8.2 EXERCISE PRICE
Except as otherwise provided in the Plan or in any Option
Agreement, the Optionee shall pay the purchase price of the shares of
Common Stock upon exercise of any Option (a) in cash, (b) in cash
received from a broker-dealer to whom the Optionee has submitted an
exercise notice consisting of a fully endorsed Option (however, in the
case of an Optionee subject to Section 16 of the 1934 Act, this
payment option shall only be available to the extent such insider
complies with Regulation T issued by the Federal Reserve Board), (c)
by delivering shares of Common Stock having an aggregate Fair Market
Value on the date of exercise equal to the Option exercise price, (d)
by directing the Company to withhold such number of shares of Common
Stock otherwise issuable upon exercise of such Option having an
aggregate Fair Market Value on the date of exercise equal to the
Option exercise price, (e) in the case of a Key Employee, by such
other medium of payment as the Committee, in its discretion, shall
authorize at the time of grant, or (f) by any combination of (a), (b),
(c), (d) and (e). In the case of an election pursuant to (a) or (b)
above, cash shall mean cash or a check issued by a federally insured
bank or savings and loan, and made payable to Newell Co. In the case
of payment pursuant to (b), (c) or (d) above, the Optionee's election
must be made on or prior to the date of exercise and shall be
irrevocable. In the case of an Optionee who is subject to Section 16
of the 1934 Act and who elects payment pursuant to (d) above, the
election must be made in writing either (i) within the ten (10)
business days beginning on the third business day following release of
the Company's quarterly or annual summary of earnings and ending on
the twelfth business day following such day, or (ii) at least six (6)
months prior to the date of exercise of such Option. In lieu of a
separate election governing each exercise of an Option, an Optionee
<PAGE> 115
may file a blanket election with the Committee which shall govern all
future exercises of Options until revoked by the Optionee. The
Company shall issue, in the name of the Optionee, stock certificates
representing the total number of shares of Common Stock issuable
pursuant to the exercise of any Option as soon as reasonably
practicable after such exercise, provided that any shares of Common
Stock purchased by an Optionee through a broker-dealer pursuant to
clause (b) above shall be delivered to such broker-dealer in
accordance with 12 C.F.R. Section 220.3(e)(4) or other applicable
provision of law.
8.3 TAXES GENERALLY
At the time of the exercise of any Option, as a condition of
the exercise of such Option, the Company may require the Optionee to
pay the Company an amount equal to the amount of the tax the Company
or any subsidiary may be required to withhold to obtain a deduction
for federal and state income tax purposes as a result of the exercise
of such Option by the Optionee or to comply with applicable law.
8.4 PAYMENT OF TAXES
At any time when an Optionee is required to pay an amount
required to be withheld under applicable income tax or other laws in
connection with the exercise of an Option, the Optionee may satisfy
this obligation in whole or in part by (a) directing the Company to
withhold such number of shares of Common Stock otherwise issuable upon
exercise of such Option having an aggregate Fair Market Value on the
date of exercise equal to the amount of tax required to be withheld,
or (b) delivering shares of Common Stock of the Company having an
aggregate Fair Market Value equal to the amount required to be
withheld. In the case of payment of taxes pursuant to (a) or (b)
above, the Optionee's election must be made on or prior to the date of
exercise and shall be irrevocable. The Committee may disapprove any
election or delivery or may suspend or terminate the right to make
elections or deliveries. In the case of an Optionee who is subject to
Section 16 of the 1934 Act, an election to withhold shares of Common
Stock must be made in writing either (a) six months prior to the
exercise date, (b) during a period beginning on the third business day
following the date of release for publication of the Company's
quarterly or annual summary consolidated statements of revenue and
income and ending on the twelfth business day following such date or
(c) more than six months and one day from the later of the date of the
grant of the Option hereunder to such person or the date of the most
recent transaction by such person which is treated as a purchase of
the Common Stock of the Company pursuant to the 1934 Act and the rules
and regulations thereunder, and which is not exempt from Section 16(b)
of the 1934 Act. In lieu of a separate election governing each
exercise of an Option, an Optionee may file a blanket election with
the Committee which shall govern all future exercises of Options until
revoked by the Optionee.
<PAGE> 116
SECTION 9. TRANSFERABILITY OF OPTIONS
No Option granted pursuant to the Plan shall be transferable
otherwise than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the
Code.
SECTION 10. RIGHTS AS STOCKHOLDER
An Optionee or a transferee of an Optionee pursuant to Section 9
shall have no rights as a stockholder with respect to any Common Stock
covered by an Option or receivable upon the exercise of an Option
until the Optionee or transferee shall have become the holder of
record of such Common Stock, and no adjustments shall be made for
dividends in cash or other property or other distributions or rights
in respect to such Common Stock for which the record date is prior to
the date on which the Optionee shall have in fact become the holder of
record of the shares of Common Stock acquired pursuant to the Option.
SECTION 11. CHANGE IN CONTROL
11.1 EFFECT OF CHANGE IN CONTROL
Notwithstanding any of the provisions of the Plan or any
Option Agreement evidencing Options granted hereunder, upon a Change
in Control of the Company (as defined in Section 11.2) all outstanding
Options shall become fully exercisable and all restrictions thereon
shall terminate in order that Optionees may fully realize the benefits
thereunder. Further, in addition to the Committee's authority set
forth in Section 3, the Committee, as constituted before such Change
in Control, is authorized, and has sole discretion, as to any Option,
either at the time such Option is granted hereunder or any time
thereafter, to take any one or more of the following actions: (a)
provide for the purchase of any such Option, upon the Optionee's
request, for an amount of cash equal to the difference between the
exercise price and the then Fair Market Value of the Common Stock
covered thereby had such Option been currently exercisable; (b) make
such adjustment to any such Option then outstanding as the Committee
deems appropriate to reflect such Change in Control; and (c) cause any
such Option then outstanding to be assumed, by the acquiring or
surviving corporation, after such Change in Control.
11.2 DEFINITION OF CHANGE IN CONTROL
The term "Change in Control" shall mean the occurrence, at
any time during the specified term of an Option granted under the
Plan, of any of the following events:
(a) The occurrence of any "Distribution Date," as such
term is defined in Section 3 of the Rights Agreement between
the Company and First Chicago Trust Company of New York
<PAGE> 117
dated October 20, 1988, as such may be amended from time to
time;
(b) The Company is merged or consolidated or
reorganized into or with another corporation or other legal
person (an "Acquiror") and as a result of such merger,
consolidation or reorganization less than 50% of the
outstanding voting securities or other capital interests of
the surviving, resulting or acquiring corporation or other
person are owned in the aggregate by the stockholders of the
Company, directly or indirectly, immediately prior to such
merger, consolidation or reorganization, other than the
Acquiror or any corporation or other person controlling,
controlled by or under common control with the Acquiror;
(c) The Company sells all or substantially all of its
business and/or assets to an Acquiror, of which less than
50% of the outstanding voting securities or other capital
interests are owned in the aggregate by the stockholders of
the Company, directly or indirectly, immediately prior to
such sale, other than the Acquiror or any corporation or
other person controlling, controlled by or under common
control with the Acquiror; or
(d) The election to the Board, without the
recommendation or approval of the incumbent Board, of the
lesser of (i) three Directors or (ii) Directors constituting
a majority of the number of Directors of the Company then in
office.
SECTION 12. POSTPONEMENT OF EXERCISE
The Committee may postpone any exercise of an Option for such
time as the Committee in its sole discretion may deem necessary in
order to permit the Company (a) to effect, amend or maintain any
necessary registration of the Plan or the shares of Common Stock
issuable upon the exercise of an Option under the Securities Act of
1933, as amended, or the securities laws of any applicable
jurisdiction, (b) to permit any action to be taken in order to (i)
list such shares of Commons Stock on a stock exchange if shares of
Common Stock are then listed on such exchange or (ii) comply with
restrictions or regulations incident to the maintenance of a public
market for its shares of Common Stock, including any rules or
regulations of any stock exchange on which the shares of Common Stock
are listed, or (c) to determine that such shares of Common Stock and
the Plan are exempt from such registration or that no action of the
kind referred to in (b)(ii) above needs to be taken; and the Company
shall not be obligated by virtue of any terms and conditions of any
Option or any provision of the Plan to recognize the exercise of an
Option or to sell or issue shares of Common Stock in violation of the
Securities Act of 1933 or the law of any government having
<PAGE> 118
jurisdiction thereof. Any such postponement shall not extend the term
of an Option and neither the Company nor its directors or officers
shall have any obligation or liability to an Optionee, to the
Optionee's successor or to any other person with respect to any shares
of Common Stock as to which the Option shall lapse because of such
postponement.
SECTION 13. TERMINATION OR AMENDMENT OF PLAN
The Board or the Committee may terminate, suspend, or amend the
Plan, in whole or in part, from time to time, without the approval of
the stockholders of the Company to the extent allowed by law;
provided, however, that (a) no Plan amendment shall be effective until
approved by the stockholders of the Company insofar as stockholder
approval thereof is required in order for the Plan to continue to
satisfy the requirements of Rule 16b-3 under the 1934 Act, and (b) the
provisions of the Plan applicable to Non-Employee Directors may not be
amended more than once every six (6) months, except to comply with
changes in the Code and the Employee Retirement Income Security Act,
or the rules and regulations under each.
The Committee may correct any defect or supply an omission or
reconcile any inconsistency in the Plan or in any Option granted
hereunder in the manner and to the extent it shall deem desirable, in
its sole discretion, to effectuate the Plan.
No amendment or termination of the Plan shall in any manner
affect any Option theretofore granted without the consent of the
Optionee, except that the Committee may amend the Plan in a manner
that does affect Options theretofore granted upon a finding by the
Committee that such amendment is in the best interest of holders of
outstanding Options affected thereby.
This Plan is intended to comply with all applicable requirements
of Rule 16b-3 or its successors under the 1934 Act, insofar as
participants subject to Section 16 of the 1934 Act are concerned. To
the extent any provision of the Plan does not so comply, the provision
shall, to the extent permitted by law and deemed advisable by the
Committee, be deemed null and void with respect to such participants.
<PAGE> 119
SECTION 14. EFFECTIVE DATE
The Plan has been adopted and authorized by the Board of
Directors for submission to the stockholders of the Company. If the
Plan is approved by the affirmative vote of a majority of the shares
of the voting stock of the Company entitled to be voted by the holders
of stock represented at a duly held stockholders' meeting, it shall be
deemed to have become effective as of February 9, 1993. Options may
be granted under the Plan prior, but subject, to approval of the Plan
by stockholders of the Company and, in each such case, the date of
grant shall be determined without reference to the date of approval of
the Plan by the stockholders of the Company.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
-------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C>
Basic earnings per share:
Net income $290,402 $256,479 $222,471
Weighted average shares outstanding 159,079 158,764 158,212
Basic earnings per share: $1.83 $1.62 $1.41
Diluted earnings per share:
Net income $290,402 $256,479 $222,471
Minority interest in income of subsidiary trust, net of tax 881
-------- -------- --------
Net income, assuming conversion of all
applicable securities $291,283 $256,479 $222,471
Weighted average shares outstanding 159,079 158,764 158,212
Incremental common shares applicable to common stock
options based on the average market price during the period 622 423 318
Average common shares issuable assuming conversion of the
Company-Obligated Mandatorily Redeemable Convertible
Preferred Securities of a Subsidiary Trust 513
-------- -------- --------
Weighted average shares outstanding assuming full dilution 160,214 159,187 158,530
Diluted earnings per share, assuming conversion of all
applicable securities $1.82 $1.61 $1.40
</TABLE>
EXHIBIT 12
STATEMENT OF COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
----------------------------------
<TABLE>
<CAPTION>
For The Year Ended December 31,
-------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands, except ratio data)
<S> <C> <C> <C> <C> <C>
Earnings available to fixed charges:
Income before income taxes $480,799 $424,634 $370,785 $329,292 $275,556
Fixed charges -
Interest expense 73,621 56,989 49,812 29,970 19,062
Portion of rent determined
to be interest (1) 16,633 14,855 12,634 10,494 8,580
Minority interest in income
of subsidiary trust 1,458
Eliminate equity in earnings (5,831) (6,364) (5,993) (5,661) (3,811)
-------- -------- -------- -------- --------
$566,680 $490,114 $427,238 $364,095 $299,387
======== ======== ======== ======== ========
Fixed charges:
Interest expense $ 73,621 $ 56,989 $ 49,812 $ 29,970 $ 19,062
Portion of rent determined
to be interest (1) 16,633 14,855 12,634 10,494 8,580
Minority interest in income
of subsidiary trust 1,458 -
-------- --------- --------- --------- ---------
$ 91,712 $ 71,844 $ 62,446 $ 40,464 $ 27,642
======== ========= ========= ========= =========
Ratio of earnings to
fixed charges 6.18 6.82 6.84 9.00 10.83
======== ========= ========= ========= =========
</TABLE>
(1) A standard ratio of 33% was applied to gross rent expense to
approximate the interest portion of short-term and long-term leases.
EXHIBIT 21.1
SIGNIFICANT SUBSIDIARIES
------------------------
<TABLE>
<CAPTION>
NAME JURISDICTION OF ORGANIZATION OWNERSHIP
- ---- ---------------------------- ---------
<S> <C> <C>
Anchor Hocking Corporation Delaware 100% of stock owned by Newell Operating
Company
Berol Corporation Delaware 100% of stock owned by Newell Co.
Faber-Castell Corporation New Jersey 100% of stock owned by Newell Co.
Intercraft Company Delaware 100% of stock owned by Newell Co.
Newell Investments Inc. Delaware 100% of stock owned by Newell Operating
Company
Newell Operating Company Delaware 77.5% of stock owned by Newell Co.;
22.5% of stock owned by Anchor Hocking
Corporation
Newell Window Furnishings, Inc. Delaware 100% of stock owned by Newell Operating
Company
Pen and Pencil, Inc. Illinois 100% of stock owned by Newell Co.
Sanford Investment Company Delaware 21.29% of stock owned by Berol
Corporation; 35.37% of stock owned by
Faber-Castell Corporation; and 43.34%
of stock owned by Pen and Pencil, Inc.
Sanford, L.P. Illinois (limited partnership) Newell Operating Company is the general
partner and Sanford Investment Company
is the limited partner
</TABLE>
EXHIBIT 23.1
[ARTHUR ANDERSEN LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation of our report dated January 27, 1998 included in Form
10-K, into the Company's previously filed Form S-8 Registration
Statement File Nos. 33-24447, 33-25196, 33-40641, 33-67620, 33-67632,
33-51063, 33-51961, 33-62047 and 333-38621, Form S-3 Registration
Statement File Nos. 33-64225 and 333-47261 and Post-Effective Amendment
No. 1 to Form S-4 on Form S-8 Registration Statement File Nos. 33-49282
and 33-44957.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 20, 1998
EXHIBIT 99
NEWELL SAFE HARBOR STATEMENT
----------------------------
Information provided by the Company, including certain of the
matters contained in this the Company's Annual Report on Form 10-K
(the "1997 Report") and the documents incorporated by reference
therein, may constitute forward-looking statements, as defined by the
Private Securities Litigation Reform Act of 1995 (the "Reform Act").
Such forward-looking statements may relate to, but are not limited to,
such matters as sales, income, earnings per share, return on equity,
capital expenditures, dividends, capital structure, free cash flow,
debt to capitalization ratios, internal growth rates, future economic
performance, management's plans, goals and objectives for future
operations and growth or the assumptions relating to any of the
forward-looking information. Such statements generally are
accompanied by words such as "intend," "anticipate," "believe,"
"estimate," "project," "expect," "should" or similar statements. The
Company cautions that forward-looking statements are not guarantees
since there are inherent difficulties in predicting future results,
and that actual results could differ materially from those expressed
or implied in the forward-looking statements. Factors that could
cause actual results to differ include, but are not necessary limited
to, those discussed below and the matters set forth generally in the
1997 Report and the documents incorporated by reference therein. This
Exhibit is included pursuant to the Reform Act and with the intention
of obtaining the benefits of the so called "safe harbor" provisions of
the Reform Act.
Retail Economy
- --------------
The Company's business depends on the strength of the retail
economies in various parts of the world, primarily in the U.S. and to
a lesser extent in Asia (including Australia and New Zealand), Canada,
Europe (including the Middle East and Africa) and Latin America
(including Mexico and Central America), which are affected by such
factors as consumer demand, the condition of the consumer products
retail industry and weather conditions. In recent years, the consumer
products retail industry has been characterized by intense competition
and consolidation among both product suppliers and retailers.
Nature of the Marketplace
- -------------------------
The Company competes with numerous other manufacturers and
distributors of consumer products, many of which are large and
well-established. In addition, the Company's principal customers are
volume purchasers, many of which are much larger than the Company and
have strong bargaining power with suppliers. The rapid growth of
large mass merchandisers, such as discount stores, warehouse clubs,
home centers and office superstores, together with changes in consumer
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shopping patterns, have contributed to a significant consolidation of
the consumer products retail industry and the formulation of dominant
multi-category retailers. Other trends among retailers are to require
manufacturers to maintain or reduce product prices or deliver products
with shorter lead times, or for the retailer to import generic
products directly from foreign sources. The combination of these
market influences has created an intensely competitive environment in
which the Company's principal customers continuously evaluate which
product suppliers to use, resulting in pricing pressures and the need
for ongoing improvements in customer service.
Growth by Acquisition
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The acquisition of companies that sell branded, staple consumer
product lines to volume purchasers is one of the foundations of the
Company's growth strategy. The Company's ability to continue to make
sufficient strategic acquisitions at reasonable prices and to
integrate the acquired businesses within a reasonable period of time
are important factors in the Company's future earnings growth.
Foreign Operations
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Foreign operations, which include manufacturing in Canada,
Mexico, Colombia, Venezuela and many countries in Europe, and
importing products from the Far East, increasingly are becoming
important to the Company's business. Foreign operations can be
affected by factors such as currency devaluation and other currency
fluctuations, tariffs, nationalization, exchange controls, limitations
on foreign investment in local businesses and other political,
economic and regulatory risks.
