SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM______________TO_______________
COMMISSION FILE NUMBER: 001-11007
TOASTMASTER INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 43-1204566
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER ID NO.)
INCORPORATION OR ORGANIZATION)
1801 N. STADIUM BLVD.
COLUMBIA, MISSOURI 65202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NUMBER (573)445-8666
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. [X]YES [ ]NO
AS OF JULY 31, 1996, THERE WERE 7,538,250 SHARES OF THE
REGISTRANT'S COMMON STOCK OUTSTANDING.
PAGE 1 OF 25 PAGES
INDEX TO EXHIBITS ON PAGE 15
<PAGE>
TOASTMASTER INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS -
QUARTERS ENDED JUNE 30, 1996 AND 1995 AND 3
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
CONSOLIDATED BALANCE SHEETS -
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1995 4
CONSOLIDATED STATEMENTS OF CASH FLOWS -
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION 7-12
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURE 14
INDEX TO EXHIBITS 15
EXHIBIT 16-25
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
QUARTER ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $32,634 $36,528 $59,374 $67,355
Cost of Sales 28,352 31,261 51,732 57,891
Gross Profit 4,282 5,267 7,642 9,464
Selling, General and Admin.
Expenses 5,398 5,203 10,382 9,894
Operating Income(Loss) (1,116) 64 (2,740) (430)
Other Expense - Interest 926 1,003 1,907 2,069
Loss Before Income Taxes (2,042) (939) (4,647) (2,499)
Income Tax Benefit (730) (331) (1,681) (799)
Net Loss $(1,312) $(608) $(2,966) $(1,700)
Net Loss Per Common and Common
Equivalent Shares Outstanding $(0.17) $(0.08) $(0.39) $(0.22)
Weighted Average Common and Common
Equivalent Shares Outstanding 7,538 7,553 7,538 7,570
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
<TABLE>
TOASTMASTER INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<CAPTION>
6/30/96 12/31/95 6/30/95
ASSETS
<S> <C> <C> <C>
Cash $ 60 $ 42 $ 49
Accounts Receivable,less allowances 33,494 64,504 39,109
Inventories
Finished Goods 37,234 30,692 38,375
Raw Matl.,WIP 10,306 10,286 11,179
LIFO/Inventory Valuation Reserve (1,884) (1,973) (1,878)
Total Inventory 45,656 39,005 47,676
Deferred Income Tax 824 824 409
Prepaid Expenses 2,901 588 1,993
Total Current Assets 82,935 104,963 89,236
Property, Plant and Equipment
Land 921 921 896
Buildings 9,074 9,048 9,038
Less:Accumulated Depreciation (4,661) (4,419) (4,177)
Machinery & Equipment 41,491 39,887 38,714
Less:Accumulated Depreciation (27,318) (25,661) (23,945)
Net Property, Plant & Equipment 19,507 19,776 20,526
Goodwill, net of accumulated
amortization 3,434 3,491 3,547
Other Assets 1,769 1,765 1,886
$107,645 $129,995 $115,195
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current Installments of Long-Term
Debt $2,186 $2,176 $2,154
Accounts Payable 8,617 5,943 11,751
Accrued Expenses 12,419 15,887 11,594
Income Taxes Payable 0 1,341
Total Current Liabilities 23,222 25,347 25,499
Long Term Debt, Excluding Current
Installments 41,242 58,190 45,993
Deferred Income Taxes 1,036 1,036 1,010
Total Liabilities 65,500 84,573 72,502
Stockholders' Equity:
Common Stock, $.10 par value 760 760 760
Additional Paid-in Capital 25,340 25,340 25,340
Minimum Pension Liability Adjustment (267) (267 (281)
Retained Earnings 16,617 19,886 17,155
Equity Adj from Foreign Currency
Translation (17) (9) (55)
42,433 45,710 42,919
Treasury Stock (288) (288) (226)
Total Stockholders' Equity 42,145 45,422 42,693
$107,645 $129,995 $115,195
</TABLE>
SEE ACCOMPANY NOTES
<PAGE>
<TABLE>
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
SIX MONTHS ENDED JUNE 30
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,966) $ (1,700)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 2,214 2,264
Gain on sale of fixed assets 0 (228)
Accounts receivable 31,010 25,337
Inventories (6,651) (10,677)
Prepaid expenses & other current assets (620) (567)
Other assets (92) (16)
Accounts payable 2,674 3,311
Accrued liabilities (3,468) (3,574)
Income taxes payable (3,034) (1,672)
Deferred income taxes 0 0 22,033 14,178
Net cash flows provided by
operating activities 19,067 12,478
Cash flows provided (used) by investing
activities:
Additions to property,plant and equipment (1,800) (1,838)
Proceeds from sale of property and plant 0 914
Net cash flows used by investing
activities (1,800) (924)
Cash flows from financing activities:
Proceeds from revolving credit agreement 70,226 80,806
Repayments of revolving credit agreement (86,079) (90,759)
Dividends paid (303) (304)
Repayment of long-term debt (1,085) (1,065)
Purchase of treasury stock 0 (208)
Net cash flows used by
financing activities (17,241) (11,530)
Foreign currency translation adjustment (8) 0
Net increase in cash 18 24
Cash at beginning of period 42 25
Cash at end of period $ 60 $ 49
Cash paid during the period for:
Interest $ 2,013 $ 2,186
Income taxes $ 1,401 $ 1,120
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
TOASTMASTER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE CONSOLIDATED FINANCIAL STATEMENTS REFLECT ALL
ADJUSTMENTS (CONSISTING ONLY OF NORMAL RECURRING
ADJUSTMENTS) WHICH ARE, IN THE OPINION OF MANAGEMENT,
NECESSARY FOR A FAIR PRESENTATION OF THE FINANCIAL POSITION
AND OPERATING RESULTS FOR THE INTERIM PERIODS. THESE
FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1995 AND NOTES THERETO CONTAINED IN THE
COMPANY'S ANNUAL REPORT TO SHAREHOLDERS INCORPORATED BY
REFERENCE IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1995. THE RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS SHOWN ARE NOT NECESSARILY INDICATIVE
OF THE RESULTS FOR THE ENTIRE FISCAL YEAR ENDING DECEMBER
31, 1996.
2. THE LOAN AND SECURITY AGREEMENT BETWEEN THE COMPANY AND
FLEET CAPITAL CORPORATION WAS AMENDED AS OF JULY 12, 1996.
THE AMENDMENT INCREASED THE TERM LOAN FROM A BALANCE $5.9
MILLION TO $10 MILLION, WITH MONTHLY PAYMENTS CONTINUING
THROUGH NOVEMBER 2001. THE AMENDMENT ALSO EXTENDED THE
EXPIRATION DATE OF THE LOAN AGREEMENT TO NOVEMBER 2001.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE
STATEMENTS MADE IN THIS REPORT ON FORM 10-Q ARE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS, FINANCIAL CONDITION OR BUSINESS COULD DIFFER
MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL CONDITION OR
BUSINESS, OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR
BUSINESS CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW UNDER THE
CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS,
FINANCIAL CONDITION OR BUSINESS," AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THE COMPANY'S REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
The following discussion should be read in conjunction with the
attached financial statements and notes thereto, and with the
Company's audited consolidated financial statements and notes
thereto for the fiscal year ended December 31, 1995.
The Company believes that sales of many of its products are
seasonal, with higher sales occurring during the spring and early
summer months for fans and during the fall and winter months for
forced air and radiant heaters and humidifiers. In addition, the
Company believes that significant quantities of its products are
given as gifts, and therefore sell in larger volumes during the
Christmas shopping season. Net sales reflect a reduction from
revenues of amounts related to sales discount programs, including
absorption of out-bound freight and certain allowances for
advertising, the latter of which are accounted for by certain
competitors as "advertising" expense. The Company views these
amounts as price reductions, thereby reducing net sales and
lowering gross profits as well as selling, general and
administrative expense. As used in this Quarterly Report on Form
10-Q, the term "revenues" are recorded net of product returns and
are before deduction of items referred to above that are used in
computing net sales. During the periods discussed below, net
sales averaged approximately 94% of revenues.
RESULTS OF OPERATIONS
Net sales were $32.6 million for the quarter ended June 30, 1996,
a decrease of $3.9 million or 11% from the $36.5 million for the
quarter ended June 30, 1995. Net sales were $59.4 million for
the six months ended June 30, 1996, a decrease of $8 million or
12% from $67.4 million for the six months ended June 30, 1995.
Revenues in the quarter ended June 30, 1996 for kitchen
countertop <PAGE> appliances were $24.6 million, a decrease of 17% from
the quarter ended June 30, 1995. Kitchen countertop appliance
revenues for the six months ended June 30, 1996 were $46.2
million, a decrease of 17% from the comparable period in 1995.
Due to increasing competition for shelf placement, as well as a
maturing product category, shipments of the Bread BoxTM automatic
breadmaker decreased $4 million and $5.6 million for the quarter
and six months, respectively. In addition, a continued
cautiousness on the part of retailers and heavy returns
negatively impacted appliance sales.
Environmental products revenues for the quarter ended June 30,
1996 were $1.5 million, a slight decrease from $1.8 million for
the second quarter of 1995. Revenues for environmental products
for the six months ended June 30, 1996 were $1.6 million, a
decrease of 41% from $2.8 million for the six months ended June
30, 1995, due to a reduction in fan sales.
Time products revenues were $8.8 million for the quarter ended
June 30, 1996, an increase of 25% from the quarter ended June 30,
1995. Revenues for the six months ended June 30, 1996 were $15.1
million, up 14% from $13.3 million for the comparable period in
1995. The increase is due to gains in shelf placement with two
major customers.
Sales to the five largest customers for the second quarter of
1996 represented approximately 45.4% of revenues. Sales to the
five largest customers in the second quarter of 1995 were 45% of
revenues. For the six months ended June 30, 1996, sales to the
five largest customers were approximately 43.7% of revenues
compared to approximately 45% for the same period in 1995.
Gross profit was $4.3 million (13.1% of net sales) for the
quarter ended June 30, 1996 and $5.3 million (14.4% of net sales)
for the quarter ended June 30, 1995. For the six months ended
June 30, 1996 gross profit was $7.6 million (13% of net sales)
compared to $9.5 million (14.1% of net sales) for the same period
in 1995. The decreases, as a percentage of net sales, were
primarily attributable to manufacturing inefficiencies caused by
production shutdowns. The shutdowns were required in an effort
to maintain inventories at an acceptable level.
Selling, general and administrative expenses for the quarter
ended June 30, 1996 were $5.4 million compared to $5.2 million
for the same period of 1995. For the six months ended June 30,
such expenses were $10.4 million in 1996 and $9.9 million in
1995. The increase in expenses is due in part to a gain
realized in 1995 from the sale of unused land, which was netted
against administrative expenses, that was not duplicated in 1996.
In addition, the Company increased spending in the engineering
department, including leased computers with modeling software, as
well as additional personnel. The further devaluation of the
Mexican peso, included in general and administrative expenses,
could have a negative effect on the Company's future operating
results in Mexico.
Interest expense decreased to $926 thousand for the quarter ended
June 30, 1996 from $1 million for the same period last year. For
the six months ended June 30, interest expense was $1.9 million
in 1996 compared to $2.1 million in 1995. The decrease in
interest was from lower rates and lower borrowing levels caused
by lower average accounts receivable.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require substantial working capital. The
Company has used available cash flow from operations and
borrowings under its revolving credit agreement to finance
additional working capital, to retire long-term debt and to fund
capital expenditures.
Net cash flows provided by operating activities for the six
months ended June 30, 1996 were $19.1 million. Since December
31, 1995, accounts receivable decreased $31 million and
inventories increased $6.7 million. The decrease in accounts
receivable, as well as a portion of the increase in inventory,
was attributable to normal seasonal patterns, as well as the
reduction in sales. A significant portion of the fourth quarter
1995 shipments was due for payment during the first quarter. The
slowdown in retail purchasing caused finished goods to be at a
higher than anticipated level.
Net cash flows used for additions to property, plant and
equipment were $1.8 million and were primarily used for tooling
to produce new products, as well as to purchase new equipment.
Net cash flows used by financing activities were $17.2 million
for the six months ended June 30, 1996, and resulted primarily
from repayments under the revolving credit agreement.
Amounts outstanding under the revolving credit agreement at June
30, 1996 were $34.9 million and other long-term debt was $8.5
million, including the current portion of $2.2 million. The
terms of and collateral for the revolving credit agreement and
long-term debt are described in Note 3 of the Notes to the Annual
Financial Statements contained in the Company's 1995 Annual
Report to shareholders, which note is incorporated herein by
reference. The loan agreement described in Note 3, referred to
above, was amended in July 1996, increasing the balance of the
term loan from $5.9 million to $10 million and extending the
expiration of the term loan from September 1997 to November 2001.
The expiration of the revolving agreement was extended from
November 1999 to November 2001.
The Company could borrow an additional $14.7 million under the
amended revolving credit agreement at June 30, 1996.
Principal payments on the long-term debt are expected to be
funded from internally generated cash flow and future borrowings.
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL
CONDITION OR BUSINESS
In order to take advantage of the safe harbor provisions for
forward-looking statements contained in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, added to those Acts
by the Private Securities Litigation Reform Act of 1995, the
Company is hereby identifying important risks and uncertainties
that could affect the Company's actual results of operations,
financial condition or business and could cause the Company's
actual results of operations, financial condition or business to
differ materially from its historical results of operations,
financial condition or business, or the results of operations,
financial condition or business contemplated by forward-looking
statements made herein or elsewhere orally or in writing, by, or
on behalf of, the Company. Factors that could cause or
contribute to such differences include, but are not limited to,
those factors described below.
COMPETITION AND IMPORTANCE OF NEW PRODUCT INTRODUCTIONS
The product categories in which the Company competes are mature
and highly competitive. Competition is based upon price and
quality, as well as innovation in the design of new products and
replacement models and in marketing and distribution approaches.
The Company believes that new product introductions and
enhancements of existing products, as well as their continued
market acceptance, are material factors in its growth and
profitability. No assurance can be given that the Company will
continue to be successful in introducing new products or further
enhancing existing products to meet customer needs and
expectations.
RELIANCE ON CERTAIN CUSTOMERS
The Company's revenues in the aggregate with respect to its five
largest customers during 1993, 1994 and 1995 were approximately
46.8%, 47.7% and 45.7%, respectively, of its total revenues.
During 1993, 1994 and 1995, Wal-Mart (including Sam's Clubs)
accounted for approximately 31%, 30% and 29%, respectively, of
the Company's revenues. Although the Company has
long-established relationships with many of its customers, the
Company does not have long-term supply contracts with them. A
decrease in business from any of its major customers could have a
material adverse effect on the Company's results of operations
and financial condition, as has been true in the past.
RETAIL INDUSTRY
The Company sells its products to retailers, including mass
merchandisers, department stores, catalog showrooms, hardware
cooperatives, wholesale clubs, military exchanges and other
retailers. Certain of such retailers have engaged in leveraged
buyouts or transactions in which they incurred a significant
amount of debt, and some are currently operating under the
protection of bankruptcy laws. Retail sales depend, in part, on
general economic conditions and a significant further decline in
such conditions could have a negative impact on sales by
retailers of the type of products offered by the Company. A
significant deterioration in the <PAGE> financial condition of the
Company's major customers, or in the retail environment in
general, could have a material adverse effect on the Company's
sales and profitability. In addition, as a result of the desire
of retailers to more closely manage inventory levels, there is a
growing trend among retailers to make purchases on a
"just-in-time" basis which requires the Company to shorten its
lead time for production in certain cases and more closely
anticipate demand and could in the future require the carrying of
additional inventories by the Company.
SEASONALITY AND VARIABILITY OF QUARTERLY RESULTS AND STOCK PRICE
The Company believes that sales of many of its products are
seasonal, with higher sales occurring during the spring and early
summer months for fans and during the fall and early winter
months for forced air and radiant heaters and humidifiers. In
addition, the Company believes that a significant percentage of
certain of its products are given as gifts, and therefore sell in
larger volumes during the Christmas shopping season. Gross
profits are usually lower in the first quarter than in the fourth
quarter due to lower sales volume, and correspondingly lower
production volumes, and the concentration of sales of lower
margin items in the early part of the year. In addition, the
Company's quarterly results of operations could be adversely
affected by the timing of new product introductions, competitive
pricing pressures, fluctuations in product returns, increases in
selling, general and administrative expenses, changes in interest
rates, overall market conditions and other factors. Operating
results also can vary between quarters of the same or different
years due to, among other things, changes in product mix,
limitations on the timing of price increases and variances in the
cost of raw materials. As a result, the Company experiences
variability in its operating results on a quarterly basis, which
may make quarterly year-to-year comparisons less meaningful. In
addition, the Company's stock price may experience significant
price and volume fluctuations in response to internal and
external factors which cause variations in its quarterly results
of operations and the stock markets.
DEPENDENCE UPON EXECUTIVE OFFICERS
The development of the Company's business has been largely
dependent on the efforts of Robert H. Deming, Daniel J. Stubler
and John E. Thompson. The loss of the services of one or more of
these officers could have a material adverse effect on the
Company. The Company has entered into an employment agreement
with each of these officers.
FLUCTUATIONS IN PRICES OF RAW MATERIALS
The Company purchases its raw materials from various outside
sources. The price and availability of raw materials can
fluctuate and periods of shortage are possible. The principal
raw materials used by the Company in producing its products are
aluminum, steel and plastic, together with paperboard packaging,
and are purchased at prevailing market prices. The price and
availability of raw materials are determined by constantly
changing market forces over which the Company has limited
control. Moreover, there can be no assurance that the Company
would be able to recover increases in raw materials prices
through price increases of its products. A significant increase
in the price of raw materials and/or a significant shortage <PAGE> of
raw materials could have a material adverse effect on the
Company's results of operations and financial condition.
CREDIT AGREEMENT RESTRICTIONS
The Company's revolving credit and term loan agreement with its
existing lender contains certain restrictions on the Company,
including requirements as to the maintenance of net worth and
certain financial ratios, minimum levels of income and working
capital, payment of cash dividends or purchases of treasury
stock, additions to property, plant and equipment and incurrence
of additional indebtedness. There can be no assurance that the
Company will be able to achieve and maintain compliance with the
prescribed financial ratio tests or other requirements of the
revolving credit and term loan agreement. The Company has
successfully sought and received waivers and amendments to its
revolving credit and term loan agreement on various occasions.
If further waivers or amendments are requested by the Company,
there can be no assurance that the Company's lender will again
grant such requests. The failure to obtain any such waivers or
amendments would reduce the Company's flexibility to respond to
adverse industry conditions and could have a material adverse
effect on the Company's results of operations, financial
condition and business.
EXPOSURE TO CURRENCY EXCHANGE RATES
Although the Company is not dependent upon unaffiliated foreign
companies for the manufacture of most of its products (with the
notable exception of the Breadbox automatic breadmaker, among
others), the Company's operations nevertheless are subject to
fluctuations in foreign currency exchange rates relative to the
United States dollar. The operations of the Company's
wholly-owned subsidiary, Toastmaster de Mexico S.A. de C.V.,
particularly could be adversely affected by the devaluation of
the peso relative to the dollar. In addition, a strengthening of
the United States dollar relative to local currencies abroad will
reduce the cost of imported products and benefit the Company
relatively less than those of its competitors who rely more
heavily on imported products.
ADDITIONAL FACTORS
Additional risks and uncertainties that may affect future results
of operations, financial condition or business of the Company
include, but are not limited to: (i) demand for the Company's
products; (ii) the effect of economic and industry conditions on
prices for the Company's products and its cost structure; (iii)
the ability to keep pace with technological change including
developing and implementing technological advances timely and
cost-effectively in order to lower its cost structure, to provide
better service and remain competitive; (iv) adverse publicity,
news coverage by the media, or negative reports by brokerage
firms, industry and financial analysts regarding the Company or
its products which may have the effect of reducing the
reputation, goodwill or customer demand for, or confidence in,
the Company's products; (v) the ability to attract and retain
capital for growth and operations on competitive terms; and (vi)
changes in accounting policies and practices.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Stockholders of Toastmaster Inc.
was held on May 14, 1996. The following items were submitted to
a vote:
Item 1. John E. Thompson and S B. Rymer were elected as
Class II directors. Class III directors (Robert H. Deming and
Daniel J. Stubler) and Class I directors (Edward J. Williams and
James L. Hesburgh) continue to serve on the Board until the
annual meeting of stockholders in 1997 and 1998, respectively.
The vote with respect to the election of directors was as
follows:
Mr. Thompson Mr.Rymer
AFFIRMATIVE VOTES 7,339,923 7,333,863
WITHHELD AUTHORITY 30,969 37,029
Item 2. The selection of KPMG Peat Marwick LLP as the
Company's independent auditors for the year ending December 31,
1996 was approved. The vote was as follows:
AFFIRMATIVE VOTES 7,360,579
NEGATIVE VOTES 4,282
ABSTENTIONS 6,031
No broker non-votes were received.
ITEM 6. EXHIBITS AND REPORTS ON FORMS 8K
(a) Exhibits
Exhibit No. Description
4.3.10 Tenth Amendment to Loan and Security Agreement, dated
as of July 12, 1996, between the Registrant and Fleet
Capital Corporation (filed as Exhibit 10.1.10)
10.1.10 Tenth Amendment to Loan and Security Agreement, dated
as of July 12, 1996, between the Registrant and Fleet
Capital Corporation.
No reports on Form 8-K were filed during the quarter ended June
30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: TOASTMASTER INC.
August 13, 1996 BY: /s/ John E. Thompson
John E. Thompson
Executive Vice President
Chief Financial Officer
Signing on behalf of the registrant
and as principal financial officer
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description Page
4.3.10 Tenth Amendment to Loan and Security 16-25
Agreement, dated as of July 12, 1996,
between the Registrant and Fleet Capital
Corporation (filed as Exhibit 10.1.10)
10.1.10 Tenth Amendment to Loan and Security
Agreement, dated as of July 12, 1996, 16-25
between the Registrant and Fleet Capital
Corporation.
27 Financial Data Schedule *
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 60
<SECURITIES> 0
<RECEIVABLES> 36,126
<ALLOWANCES> 2,632
<INVENTORY> 45,656
<CURRENT-ASSETS> 82,935
<PP&E> 19,507
<DEPRECIATION> 31,979
<TOTAL-ASSETS> 107,645
<CURRENT-LIABILITIES> 23,222
<BONDS> 0
0
0
<COMMON> 760
<OTHER-SE> 41,385
<TOTAL-LIABILITY-AND-EQUITY> 107,645
<SALES> 59,374
<TOTAL-REVENUES> 59,374
<CGS> 51,732
<TOTAL-COSTS> 51,732
<OTHER-EXPENSES> 10,382
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WAIVER,
TENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND
AMENDMENT TO TERM LOAN NOTE
THIS WAIVER, TENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND AMENDMENT TO TERM LOAN NOTE (this "Amendment") is made as of
July 12, 1996, by and between TOASTMASTER INC., a Missouri
corporation ("Borrower") and FLEET CAPITAL CORPORATION, a Rhode
Island corporation, as successor by merger to Fleet Capital
Corporation, a Connecticut corporation ("Lender").
PRELIMINARY STATEMENTS:
A. Borrower and Lender are parties to that certain Loan
and Security Agreement dated as of November_19, 1993, (as amended
from time to time, the "Loan Agreement"). Capitalized terms used
but not defined herein shall have the meanings given them in the
Loan Agreement.
B. Borrower and Lender now desire to amend certain
provisions of the Loan Agreement on and subject to the terms
hereof.
TERMS OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
mutual promises and agreements hereinafter set forth, the parties
hereto agree as follows:
. Amendments to Loan Agreement and other Loan Documents.
The Loan Agreement and all other Loan Documents are hereby
amended by modifying all references therein to "Lender" to refer
to Fleet Capital Corporation, a Rhode Island corporation.
. Amendments to Loan Agreement. The Loan Agreement is
hereby amended as follows:
<PAGE>
(a) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby amended by modifying the definition of Bank
to read as follows:
Bank - Fleet National Bank
(b) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby further amended by adding the following
definition of Base Rate-Term Loan thereto:
Base Rate-Term Loan - A fluctuating interest rate
per annum equal on each day to the sum of (i) the Base
Rate, plus (ii) three-fourths of one percent (.75%) per
annum.
(c) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby further amended by adding the following
definition of Base Rate Term Loan Portion thereto:
Base Rate Term Loan Portion - That portion of the
Term Loan bearing interest at the Base Rate-Term Loan
pursuant to Section 3.1(A) hereof.
(d) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby further amended by adding the following
definition of Fixed Rate Term Loan Portion thereto:
Fixed Rate Term Loan Portion - That portion of the
Term Loan bearing interest at a fixed rate per annum
pursuant to Section 3.1(A)(i) hereof.
(e) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby further amended by adding the following
definition of LIBO Rate-Term Loan thereto:
LIBO Rate-Term Loan - A fluctuating interest rate
per annum equal to the sum of:
(i) the rate of interest per annum (adjusted to
reflect reserve, deposit insurance or other similar
<PAGE> requirements to which the Bank may be subject) at which
deposits in United States dollars are offered to Lender
by prime banks in the London interbank market at or
about 11:00 a.m. (London time) on such day (or if such
day is not a Business Day, on the next preceding
Business day) for a thirty (30), sixty (60), ninety
(90) or one hundred-eighty (180) day period, as
applicable, in an amount approximately equal to the
principal amount of the LIBO Rate Term Loan Portion,
plus
(ii) two and one-fourth of one percent (2.25%)
per annum.
(f) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby further amended by adding the following
definition of LIBO Rate Period thereto:
LIBO Rate Period - Any period of 30 days, 60 days,
90 days or 180 days, commencing on a Business Day,
selected by Borrower as provided in Section 3.1(I)
hereof; provided, however that no LIBO Rate Period
shall extend beyond the last day of the Original Term,
unless Borrower and Lender have agreed to an extension
of the Original Term beyond the expiration of the LIBO
Rate Period in question and that, with respect to any
LIBO Rate Term Loan Portion, no applicable LIBO Rate
Period shall extend beyond the scheduled installment
payment date for such LIBO Rate Term Loan Portion. If
any LIBO Rate Period so selected shall end on a date
that is not a Business Day, such LIBO Rate Period shall
instead end on the next preceding or succeeding
Business Day as determined by Lender in accordance with
the then current banking practice in London; provided,
that Borrower shall not be required to pay double
interest, even though the preceding LIBO Rate Period
ends and the new LIBO Rate Period begins on the same
day. Each determination by Lender of the LIBO Rate
Period shall, in the absence of manifest error, be
conclusive.
(g) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby further amended by adding the following
definition of LIBO Rate Term Loan Option thereto:
<PAGE>
LIBO Rate Term Loan Option - The option granted
pursuant to Section 3.1(I) to have the interest on all
or any portion of the principal amount of the Term Loan
based on the LIBO Rate-Term Loan.
(h) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby further amended by adding the following
definition of LIBO Rate Term Loan Portion thereto:
LIBO Rate Term Loan Portion - That portion of the
Term Loan specified in a LIBO Rate Term Loan Request
which is not less than $1,000,000 and is an integral
multiple of $100,000, which does not exceed the
outstanding balance of the Term Loan not already
subject to a LIBO Rate Term Loan Option and, which, as
of the date of the LIBO Rate Term Loan Request
specifying such LIBO Rate Term Loan Portion, has met
the conditions for basing interest on the LIBO
Rate-Term Loan in Section 3.1(I) hereof and the LIBO
Rate Period of which was commenced and not terminated.
(i) Section 1.1 of the Loan Agreement [RELATING TO DEFINED
TERMS] is hereby further amended by adding the following
definition of LIBO Rate Term Loan Request thereto:
LIBO Rate Term Loan Request - A notice in writing
(or by telephone confirmed by telex, telecopy or other
facsimile transmission on the same day as the telephone
request) from Borrower to Lender requesting that
interest on a portion of the Term Loan be based on the
LIBO Rate Term Rate, specifying: (i) the first day of
the LIBO Rate Period; (ii) the length of the LIBO Rate
Period consistent with the definition of that term; and
(iii) the dollar amount of the LIBO Rate Term Loan
Portion consistent with the definition of such term.
(j) Section 3.1(A) of the Loan Agreement [RELATING TO
INTEREST AND CHARGES ON THE TERM LOAN] is hereby deleted in
its entirety and replaced with the following new Section
3.1(A):
(A) Term Loan. Borrower shall pay interest on
<PAGE> the outstanding principal amount of the Term Loan Note
as follows:
(i) To and including September 13, 1997,
Borrower shall pay interest on $5,880,948 of the
outstanding principal amount of the Term Loan
Note, less principal payments received under the
Term Loan Note during such period, at a fixed
interest rate per annum equal to nine and
twenty-two one-hundredths of one percent (9.22%);
(ii) To and including September 13, 1997,
Borrower shall pay interest on the outstanding
principal amount of the Term Loan Note which is
not subject to the fixed rate described in subpart
(i) above at either the Base Rate-Term Loan or the
LIBO Rate-Term Loan, as provided in Section 3.1(I)
hereof; and
(iii) From and after September 14, 1997,
Borrower shall pay interest on the entire
outstanding principal amount of the Term Loan Note
at either the Base Rate-Term Loan or the LIBO
Rate-Term Loan, as provided in Section 3.1(I)
hereof.
(k) Section 3.1 of the Loan Agreement [RELATING TO INTEREST
AND CHARGES] is hereby amended by adding the following as
Section 3.1(I) thereof:
(I) LIBO Rate-Term Loan and Base Rate-Term Loan
Option.
(i) LIBO Rate-Term Loan Option.
(A) Upon the conditions that: (1)
Lender shall have received a LIBO Rate Term
Loan Request from Borrower at least 3
Business Days prior to the first day of the
LIBO Rate Period requested, (2) there shall
have occurred no change in applicable law
which would make it unlawful for Lender to
obtain deposits of U.S. dollars in the London
<PAGE> interbank foreign currency deposits market,
(3) as of the date of the LIBO Rate Term Loan
Request and the first day of the LIBO Rate
Period, there shall exist no Default or Event
of Default, (4) Lender is able to obtain
deposits of U.S. dollars in the London
interbank foreign currency deposits market in
the applicable amounts and for the requested
LIBO Rate Period, and (5) as of the first
date of the LIBO Rate Period, there are no
more than two (2) outstanding LIBO Rate Term
Loan Portions including the LIBO Rate Term
Loan Portion being requested; then interest
on the LIBO Rate Term Loan Portion requested
during the LIBO Rate Period requested will be
based on the applicable LIBO Rate-Term Loan.
(B) Each LIBO Rate Term Loan Request
shall be irrevocable and binding on Borrower.
Borrower shall indemnify Lender for any loss,
penalty or expense incurred by Lender due to
the failure on the part of Borrower to
fulfill, on or before the date specified in
any LIBO Rate Term Loan Request, the
applicable conditions set forth in this
Agreement or due to the prepayment of the
applicable LIBO Rate Term Loan Portion prior
to the last day of the applicable LIBO Rate
Period, including, without limitation, any
loss (including loss of anticipated profits)
or expense incurred by reason of the
liquidation or redeployment of deposits or
other funds acquired by Lender to fund or
maintain the requested LIBO Rate Term Loan
Portion.
(C) If any legal requirement shall (1)
make it unlawful for Lender to fund through
the purchase of U.S. dollar deposits any LIBO
Rate Term Loan Portion or otherwise give
effect to its obligations as contemplated
under this Section 3.1(I), or (2) shall
impose on Lender any costs based on or
measured by the excess above a specified
level of the amount of a category of deposits
or other liabilities of Lender which includes
<PAGE> deposits by reference to which the LIBO
Rate-Term Loan is determined as provided
herein or a category of extensions of credit
or other assets of Lender which includes any
LIBO Rate Term Loan Portion, or (3) shall
impose on Lender any restrictions on the
amount of such a category of liabilities or
assets which Lender may hold, then, in each
such case, Lender may, by notice thereof to
Borrower, terminate this LIBO Rate Term Loan
Option. Any LIBO Rate Term Loan Portion
subject thereto shall immediately bear
interest thereafter at the rate and in the
manner provided for Base Rate Term Loan
Portions pursuant to subsection 3.1(I)(ii)
below. Borrower shall indemnify Lender
against any loss, penalty or expense incurred
by Lender due to liquidation or redeployment
of deposits or other funds acquired by Lender
to fund or maintain any LIBO Rate Term Loan
Portion that is terminated hereunder.
(ii) Base Rate-Term Loan Option. Borrower
shall pay interest on the Base Rate Term Loan
Portion outstanding under the Term Loan Note at a
per annum rate equal to the Base Rate-Term Loan.
(l) Section 3.5 of the Loan Agreement [RELATING TO TERM OF
AGREEMENT] is hereby deleted in its entirety and replaced
with the following new Section 3.5:
3.5. Term of Agreement. Subject to Lender's right
to cease making Loans to Borrower at any time upon or
after the occurrence of any Default or Event of
Default, the provisions of this Agreement shall be in
effect for a period commencing on the date hereof
through and including November 18, 2001 (the "Original
Term"), and this Agreement shall automatically renew
itself for successive one (l) year periods thereafter
(the "Renewal Terms"), unless terminated as provided in
Section 3.6 hereof.
(m) The first paragraph of Section 3.6(B) of the Loan
Agreement [RELATING TO TERMINATION] is hereby deleted in its
<PAGE> entirety and replaced with the following new Section 3.6(B):
(B) At the effective date of such termination,
Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other
charges owing under the terms of this Agreement and any
of the other Loan Documents), a termination charge for
the loss of the bargain and not as a penalty, an amount
equal to (i) $400,000 if termination occurs during the
Original Term at any time on or prior to November 18,
1999; and (ii) $200,000 if termination occurs during
the period from November 18, 1999, through and
including November 18, 2001, or during any Renewal
Term. If termination occurs on the last day of the
Original Term or any Renewal Term thereafter, no
termination charge shall be payable.
(n) Section 9.3(C) of the Loan Agreement [RELATING TO
QUARTERLY PRE-TAX EARNINGS] is hereby amended to provide
that Borrower shall achieve Adjusted Net Earnings from
Operations plus Federal, State and local income taxes
deducted in the computation thereof of not less than
($4,650,000) (loss) for the period of January 1 through June
30, 1996, and not less than ($2,575,000) (loss) for the
period of January 1 through September 30, 1996 (i.e., the
actual loss for such periods shall be no greater than the
indicated loss). The current provisions contained in
Section 9.3(C), which require Borrower to achieve Adjusted
Net Earnings from Operations plus Federal, State and local
income taxes deducted in the computation thereof of not less
than the amounts shown below at the end of the corresponding
time period (in the case of an indicated periodic loss, the
actual loss shall be not greater than the indicated loss)
Period Amount
January 1 through March 31 ($3,300,000)(loss)
January 1 through June 30 ($4,500,000)(loss)
January 1 through September 30 ($2,575,000)(loss)
shall continue to apply to all other periods.
(o) Section 9.3(D) of the Loan Agreement [RELATING TO
<PAGE> ANNUAL PROFITABILITY] is hereby amended to provide that
Borrower shall achieve Adjusted Net Earnings from Operations
of not less than $580,000 for the fiscal year ending
December 31, 1996. The current provisions contained in
Section 9.3(D), which require Borrower to achieve Adjusted
Net Earnings from Operations of not less than $2,900,000
during each fiscal year, shall continue to apply to all
other periods.
(p) Section 9.3(E) of the Loan Agreement [RELATING TO DEBT
SERVICE COVERAGE] is hereby amended to provide that Borrower
shall maintain, as of December 31, 1996, for the immediately
preceding twelve months, a ratio of Net Cash Flow to Debt
Service of not less than 0.39 to 1.0. The current
provisions contained in Section 9.3(E), which require
Borrower to maintain, as of December 31st of each year for
the immediately preceding twelve months, a ratio of Net Cash
Flow to Debt Service of not less than 1.3 to 1.0, shall
continue to apply to all other periods.
. Advance Under Term Loan and Modification of Repayment
Schedule. The original principal amount outstanding under the
Term Loan Note was $10,833,332. As of July 12, 1996, the
principal amount of the Term Loan outstanding had been reduced to
$5,880,948. Lender hereby agrees to make an additional advance
to Borrower under the Term Loan in the amount of $4,119,052, and
Borrower and Lender hereby agree to add the amount of this
advance to the unpaid principal balance outstanding under the
Term Loan Note. Accordingly, subsections (b) and (c) of the
terms governing payment of principal and interest set forth in
the Term Loan Note are hereby amended to read as follows:
(b) Principal shall be payable in equal
installments of $154,762 each, with the first such
payment to be payable on the first day of August, 1996,
and on the like day of each succeeding month
thereafter, to and including the first day of November,
2001;
(c) On November 18, 2001, a final payment equal
to the entire unpaid principal balance hereof, together
with any and all accrued interest thereon and any other
amounts due hereunder, shall be immediately due and
payable.
<PAGE>
. Fee. Borrower agrees to pay Lender, on the date
hereof, a fully earned, non-refundable fee in the amount of
$100,000.
. Amendment to Participation Agreement. This Amendment
shall not be effective until Lender shall have received an
executed Third Amendment to Participation Agreement from both
Harris Trust and Savings Bank and Firstar Financial Services, a
Division of Firstar Bank Milwaukee, N.A., in form and substance
satisfactory to Lender and its counsel.
. No Claims; Liens Unimpaired. Borrower acknowledges
that, as of the date hereof, it has no actual knowledge of any
existing claims, defenses (personal or otherwise) or rights of
setoff or recoupment whatsoever with respect to the Loan
Agreement or any of the other Loan Documents. Borrower agrees
that this Amendment in no way acts as a release or relinquishment
of any Liens in favor of the Lender securing payment of any of
the Obligations.
. No Other Amendments or Waivers. Except as expressly
set forth herein, there are no other agreements or
understandings, written or oral, between Borrower and Lender
relating to the Loan Agreement and/or the other Loan Documents
that are not fully and completely set forth or described herein.
Except to the extent specifically amended hereby, all terms and
provisions of the Loan Agreement and the other Loan Documents
shall remain in full force and effect in accordance with their
respective terms, and no provisions thereof have been waived,
except as specifically set forth herein.
. Further Assurances. Borrower agrees to execute such
other and further documents and instruments as Lender may request
to implement the provisions of this Amendment.
. Amendments. No provision of this Amendment may be
amended, modified or waived, except by an instrument in writing
signed by the Lender.
. Counterparts; Faxed Signatures. This Amendment may be
executed in one or more counterparts and by different parties on
different counterparts, each of which shall be deemed an original
<PAGE> instrument and all of which taken together shall constitute one
and the same agreement. A signature of a party delivered by
telecopy or other electronic communication shall constitute an
original signature of such party.
. Incorporation by Reference; Statement Required by
Section 432.045, Mo. Rev. Stat.
(a) Each of the Notes and the other Loan Documents is
incorporated herein in full by this reference, provided,
however, that if there is any inconsistency between this
Amendment and such other Loan Documents (as amended by this
Amendment), this Amendment shall govern.
(b) ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A
DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT
ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR)
FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE
REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING,
WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE
AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed on the date specified at the
beginning hereof.
TOASTMASTER INC.
By:/s/ John E. Thompson
Name: John E. Thompson
Title: Executive Vice President
Chief Financial Officer
<PAGE>
FLEET CAPITAL CORPORATION
By: /s/ Alan R. Meier
Name: Alan R. Meier
Title: Senior Vice President
