UNITED STATES
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 September 30, 1997
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: 1-11007
TOASTMASTER INC.
(Exact name of registrant as specified in its charter)
MISSOURI 43-1204566
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1801 NORTH STADIUM BOULEVARD, COLUMBIA, MISSOURI 65202
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(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. YES [X] NO [ ]
AT OCTOBER 31, 1997, THERE WERE 7,539,450 SHARES OF THE
REGISTRANT'S COMMON STOCK OUTSTANDING.
<PAGE>
TOASTMASTER INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Operations -
Quarters Ended September 30, 1997 and 1996 and 3
Nine Months Ended September 30, 1997 and 1996
Consolidated Balance Sheets -
September 30, 1997 and 1996 and December 31,
1996 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 10
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER NINE MONTHS
ENDED SEPT 30 ENDED SEPT 30
1997 1996 1997 1996
Net Sales $44,209 $49,321 $98,281 $108,694
Cost of Sales 35,570 39,748 80,539 91,479
Gross Profit 8,639 9,573 17,742 17,215
Selling, General
and Admin.
Expenses 5,472 6,959 16,101 17,342
Operating Income
(Loss) 3,167 2,614 1,641 (127)
Other Income - Interest 0 0 343 0
Other Expense - Interest (1,044) (1,133) (2,775) (3,039)
Income (Loss) Before
Income Taxes 2,123 1,481 (791) (3,166)
Income Tax Expense
(Benefit) 713 531 (348) (1,150)
Net Income (Loss) $1,410 $950 $(443) $(2,016)
Net Income (Loss)
Per Common and Common
Equivalent Shares
Outstanding $0.19 $0.13 $(0.06) $(0.27)
Weighted Average Common
and Common Equivalent
Shares Outstanding 7,550 7,538 7,542 7,538
<PAGE>
TOASTMASTER INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
9/30/97 12/31/96 9/30/96
ASSETS
Cash $ 112 $ 97 $ 93
Accounts Receivable,
less allowances 40,150 42,704 47,169
Inventories
Finished Goods 34,838 30,043 37,816
Raw Matl.,WIP 10,462 10,811 11,841
LIFO/Inventory Valuation
Reserve (3,065) (6,377) (1,884)
Total Inventory 42,235 34,477 47,773
Deferred Income Tax 2,280 2,280 824
Prepaid Expenses 3,221 1,562 2,319
Total Current Assets 87,998 81,120 98,178
Property, Plant and Equipment
Land 928 926 921
Buildings 9,833 9,057 9,074
Less: Accumulated
Depreciation (5,267) (4,897) (4,783)
Machinery & Equipment 45,002 42,717 42,689
Less: Accumulated
Depreciation (31,266) (29,278) (28,215)
Net Property, Plant
& Equipment 19,230 18,525 19,686
Goodwill, net of accumulated
amortization 3,294 3,378 3,406
Other Assets 1,861 1,831 1,730
$112,383 $104,854 $123,000
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current Installments of
Long-Term Debt $ 2,117 $ 2,145 $ 2,174
Accounts Payable 8,724 3,755 10,452
Accrued Expenses 12,601 13,600 13,714
Total Current
Liabilities 23,442 19,500 26,340
Long Term Debt, Excl.
Current Installments 49,090 44,611 52,679
Deferred Income Taxes 579 579 1,036
Total Liabilities 73,111 64,690 80,055
Stockholders' Equity:
Common Stock, $.10 par
value 760 760 760
Additional Paid-in Capital 25,340 25,340 25,340
Minimum Pension Liability
Adjustment (227) (227) (267)
Retained Earnings 13,696 14,591 17,416
Equity Adj. - Foreign
Currency Translation (9) (12) (16)
39,560 40,452 43,233
Treasury Stock (288) (288) (288)
Total Stockholders'
Equity 39,272 40,164 42,945
$112,383 $104,854 $123,000
<PAGE>
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED SEPT 30
1997 1996
Cash flows from operating activities:
Net loss $ (443) $ (2,016)
Adjustments to reconcile net loss
to net cash from operating activities:
Depreciation and amortization 2,814 3,337
Restructuring charge 123 0
Accounts receivable 2,554 17,335
Inventories (7,758) (8,768)
Prepaid expenses & other current
assets (1,311) (568)
Other assets (166) (101)
Accounts payable 4,972 4,509
Accrued liabilities (1,000) (2,173)
Income taxes (348) (2,504)
(120) 11,067
Net cash flows provided by (used in)
operating activities (563) 9,051
Cash flows from investing activities:
Additions to property,plant and equipment (3,423) (3,025)
Net cash flows used in investing
activities (3,423) (3,025)
Cash flows from financing activities:
Proceeds from revolving credit agreement 106,005 118,808
Repayments of revolving credit agreement (99,946) (126,808)
Proceeds from term loan 0 4,119
Dividends paid (453) (454)
Repayment of long-term debt (1,608) (1,633)
Net cash flows provided by (used in)
financing activities 3,998 (5,968)
Foreign currency translation adjustment 3 (7)
Net increase in cash 15 51
Cash at beginning of period 97 42
Cash at end of period $ 112 $ 93
Cash paid during the period for:
Interest $ 2,699 $3,033
Income taxes $ 0 $1,401
<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, 1996 and notes thereto contained in the
Company's Annual Report to Shareholders incorporated by reference
in the Annual Report on Form 10-K for the year ended December 31,
1996. The results of operations for the interim periods shown
are not necessarily indicative of the results for the entire
fiscal year ending December 31, 1997.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 UNDER THE
CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS,
FINANCIAL CONDITION OR BUSINESS" IN THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, 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, 1996.
The Company believes that sales of many of its products are
seasonal, with significant quantities of its products 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 95% of revenues.
RESULTS OF OPERATIONS
Net sales decreased 10.3% to $44.2 million for the quarter ended
September 30, 1997 from $49.3 million for the quarter ended
September 30, 1996. For the nine months ended September 30,
1997, net sales decreased 9.6% to $98.3 million from $108.7
million for the comparable period in 1996.
Kitchen appliance revenues were $35.5 million for the third
quarter of 1997, a decrease of 10.6% from $39.7 million for the
same period in 1996. Revenues from kitchen appliances for the
nine months ended September 30, 1997 decreased 9.2% to $77.9
million from $85.8 million for the nine months ended September
30, 1996. Shipping delays at the end of the quarter, as well as
a decreased emphasis on opening price point toasters, caused the
decline in revenues.
Time products revenues were $10.3 million for the quarter ended
September 30, 1997, an increase of 2% from $10.1 million for the
quarter ended September 30, 1996. For the nine <PAGE> months ended
September 30, 1997, revenues from time products were $23.7
million, a decrease of 6% from $25.2 million for the same period
in 1996. As previously announced, a significant customer changed
to a different supplier for wall clocks. The resulting decrease
in revenue was partially offset by increased business with new
and existing customers.
Environmental products revenues were minimal, as the phase out of
this product line continues through 1997.
Revenues from the five largest customers for the third quarter of
1997 represented approximately 43.7% of revenues. The five
largest customers represented 42.8% of revenues for the third
quarter of 1996. For the nine months ended September 30, 1997,
revenues from the five largest customers were 44.5%. Revenues
from the five largest customers were 42.7% for the nine months
ended September 30, 1996.
Gross profit as a percentage of net sales was unchanged at 19.5%,
$8.6 million, for the quarter ended September 30, 1997, and $9.6
million, for the comparable period in 1996. Gross profit
increased for the nine months ended September 30, 1997 to $17.7
million, or 18% of net sales, from $17.2 million, or 15.8% of
net sales, for the same period in 1996. The increase as a
percentage of net sales was primarily due to product mix and
lower fixed manufacturing costs, resulting from the restructuring
implemented during the fourth quarter of 1996.
Selling, general and administrative expenses for the quarter
ended September 30, 1997 decreased to $5.5 million compared to
$7.0 million for the third quarter of 1996. For the nine months
ended September 30, 1997, selling, general and administrative
expenses were $16.1 million, a decrease from $17.3 million for
the same period in 1996. Selling and advertising expenses,
including commissions and co-operative advertising, decreased
with the lower sales. In addition, the Company did not
experience the same level of bad debts in 1997 as occurred in the
third quarter of 1996. Interest income of $343 thousand for the
nine months ended September 30, 1997 was from an expected income
tax refund from prior years. Interest expense decreased to $1.0
million for the quarter ended September 30, 1997 from $1.1
million for the same period in 1996. Interest expense for the
nine months ended September 30 decreased to $2.8 million in 1997
from $3.0 million in 1996. The decrease was primarily due to
lower borrowing levels in 1997.
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 used in operating activities for the nine months
ended September 30, 1997 were $563 thousand. Since December 31,
1996, there was a reduction in accounts receivable of $2.6
million, an increase in inventory of $7.8 million and an increase
in accounts payable of $5.0 million as a result of normal
seasonal patterns.
Cash flows used for additions to property, plant and equipment of
$3.4 million include the cost of new equipment and tooling for
new and existing products, as well as, construction costs for a
warehouse addition for the time products division. Net cash
flows provided by financing activities were $4.0 million for the
nine months ended September 30, 1997, and were primarily from
additional borrowings under the revolving credit agreement.
<PAGE>
At September 30, 1997, amounts outstanding under the revolving
credit agreement were $41.3 million. The Company could borrow an
additional $10.2 million under the terms of the revolving credit
agreement at September 30, 1997. Other long-term debt was $9.9
million, including the current portion of $2.1 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
Consolidated Financial Statements contained in the Company's 1996
Annual Report to shareholders, which note is incorporated herein
by reference.
Principal payments on the long-term debt are expected to be
funded from internally generated cash flow and future borrowings.
The revolving credit agreement expires in November 2001.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" which revises the
calculation and presentation provisions of Accounting Principles
Board Opinion 15 and related interpretations. Statement No. 128
is effective for the Company's fiscal year ending December 31,
1997. Retroactive application will be required. The Company
believes the adoption of Statement No. 128 will not have a
significant effect on its reported earnings per share.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: TOASTMASTER INC.
November 12, 1997 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
<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 SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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