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 March 31, 1998
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 APRIL 30, 1998, THERE WERE 7,545,150 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 MARCH 31, 1998 AND 1997 3
CONSOLIDATED BALANCE SHEETS -
MARCH 31, 1998 AND 1997 AND DECEMBER 31, 1997 4
CONSOLIDATED STATEMENTS OF CASH FLOWS -
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7-8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
SIGNATURE 9
<PAGE>
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED MAR 31
1998 1997
Net Sales $25,626 $26,315
Cost of Sales 21,318 22,181
Gross Profit 4,308 4,134
Selling, General and Admin. Expenses 4,977 5,054
Operating (Loss) (669) (920)
Other Expense - Interest 855 862
(Loss) Before Income Taxes (1,524) (1,782)
Income Tax (Benefit) (642) (641)
Net (Loss) $ (882) $(1,141)
Basic and Diluted (Loss) per
Common Share $ (0.12) $ (0.15)
Weighted Average Shares Used in Computation:
Basic Earnings per Common Share 7,539 7,538
Diluted Earnings per Common Share 7,579 7,538
<PAGE>
TOASTMASTER INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
3/31/98 12/31/97 3/31/97
ASSETS
Cash $ 89 $ 178 $ 92
Accounts Receivable,
less allowances 23,157 42,396 25,376
Inventories
Finished Goods 34,397 26,029 30,140
Raw Matl., WIP 9,335 7,157 10,808
LIFO/Inventory
Valuation Reserve (1,247) (1,360) (4,472)
Total Inventory 42,485 31,826 36,476
Deferred Income Tax 0 0 2,280
Prepaid Expenses 2,641 2,145 2,283
Income Taxes Receivable 4,418 4,070 1,428
Total Current Assets 72,790 80,615 67,935
Property, Plant and
Equipment
Land 928 928 928
Buildings 9,898 9,885 9,057
Less: Accumulated
Depreciation (5,520) (5,393) (5,018)
Machinery & Equipment 46,091 45,661 43,356
Less: Accumulated
Depreciation (32,382) (31,818) (29,838)
Net Property,
Plant & Equipment 19,015 19,263 18,485
Goodwill, net of
accumulated
amortization 3,237 3,265 3,350
Other Assets 3,140 3,148 1,898
$98,182 $106,291 $91,668
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current Installments of
Long-Term Debt $ 2,090 $ 2,104 $ 2,135
Accounts Payable 7,427 4,383 5,999
Accrued Expenses 13,348 12,936 11,924
Deferred Income Taxes 1,456 1,456 0
Total Current
Liabilities 24,321 20,879 20,058
Long Term Debt,
Excl. Current
Installments 32,076 42,597 31,884
Deferred Income Taxes 801 801 579
Other Liabilities 721 695 275
Total Liabilities 57,919 64,972 52,796
<PAGE>
Stockholders' Equity:
Common Stock, $.10
par value 760 760 760
Additional Paid-in
Capital 25,344 25,344 25,340
Retained Earnings 14,845 15,878 13,299
Accumulated Other
Comprehensive
Income (398) (375) (239)
40,551 41,607 39,160
Treasury Stock (288) (288) (288)
Total Stockholders'
Equity 40,263 41,319 38,872
$98,182 $106,291 $91,668
<PAGE>
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
QUARTER ENDED MAR 31
1998 1997
Cash flows from operating activities:
Net loss $ (882) $ (1,141)
Adjustments to reconcile net loss to net
cash from operating activities:
Depreciation and amortization 966 938
Loss from disposition of
prop. and equip. 40 0
Restructuring charge 0 123
Accounts receivable 19,239 17,328
Inventories (10,659) (1,999)
Prepaid expenses &
other current assets (496) (1,489)
Other assets 7 (112)
Accounts payable 3,044 2,244
Accrued liabilities 438 (1,401)
Income taxes (348) (660)
12,231 14,972
Net cash flows provided by
operating activities 11,349 13,831
Cash flows used in investing activities:
Additions to property, plant and
equipment (729) (948)
Net cash flows used in investing
activities (729) (948)
Cash flows from financing activities:
Proceeds from revolving credit
agreement 35,275 28,962
Repayments of revolving credit
agreement (45,277) (41,165)
Dividends paid (151) (151)
Repayment of long-term debt (533) (534)
<PAGE>
Net cash flows used in
financing activities (10,686) (12,888)
Foreign currency translation adjustment (23) 0
Net increase (decrease) in cash (89) (5)
Cash at beginning of period 178 97
Cash at end of period $ 89 $ 92
Cash paid during the period for:
Interest $ 970 $ 978
Income taxes $ 0 $ 0
<PAGE>
TOASTMASTER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying financial statements as of March 31, 1998
and March 31, 1997 and for the three months then ended are
unaudited. The balance sheet as of December 31, 1997 has been
derived from the audited balance sheet as of that date. 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, 1997 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,
1997. The results of operations for the interim periods shown
are not necessarily indicative of the results for the entire
fiscal year ending December 31, 1998.
2. The loan and security agreement between the Company and
Fleet Capital Corporation, as described in note 3 in the Notes to
Consolidated Financial Statements contained in the Company's
Annual Report to Shareholders, was amended as of March 11, 1998.
The amendment reduced by .5% the interest rate under the London
Interbank Offering Rate(LIBOR) option for borrowings under the
revolving credit and term loan provisions of the agreement.
3. Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." The adjustments that were previously made through
stockholders' equity for the minimum pension liability and
foreign currency adjustments will now be disclosed as other
comprehensive income. For the quarter ended March 31, 1998,
other comprehensive loss was $23 thousand and the total
comprehensive loss was $905 thousand. For the quarter ended
March 31, 1997, other comprehensive income was zero and the total
comprehensive loss was $1.1 million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
WHEN USED IN THIS REPORT ON FORM 10-Q, THE WORDS "SHOULD",
"EXPECT", "ANTICIPATE", "BELIEVE" AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY 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, 1997, 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, 1997.
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 2.6% to $25.6 million for the quarter ended
March 31, 1998 from $26.3 million for the quarter ended March 31,
1997. Kitchen appliance revenues were relatively unchanged at
$20.2 million for the first quarter of 1998, compared to $20.1
million for the same period in 1997. A decline in toaster
shipments was offset by increases in other categories. Time
products revenues decreased 4.2% from $7.2 million for the first
quarter of 1997 to $6.9 million for the quarter ended March 31,
1998. The loss of wall clock business with a major customer,
beginning in the second half of 1997, was the primary reason for
the decline.
<PAGE>
Sales to the five largest customers for the quarter ended March
31, 1998 represented approximately 49.3% of revenues. Sales to
the five largest customers for the first quarter of 1997 were
44.3% of revenues.
For the quarter ended March 31, 1998, gross profit improved to
16.8% of net sales or $4.3 million, compared to 15.7% of net
sales or $4.1 million for the comparable period in 1997. The
increase was primarily due to lower material prices.
Selling, general and administrative expenses for the quarter
ended March 31, 1998 decreased slightly to $5.0 million compared
to $5.1 million for the first quarter of 1997. Interest expense
decreased slightly to $855 thousand in 1998 from $862 thousand in
1997 for the quarter ended March 31.
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 three
months ended March 31, 1998 were $11.3 million. A reduction in
accounts receivable of $19.2 million and an increase in accounts
payable of $3.0 million were offset by an increase in inventory
of $10.7 million, all of which are the result of normal seasonal
patterns.
Cash flows used for additions to property, plant and equipment of
$729 thousand include the cost of new equipment and tooling for
new and existing products. Net cash flows used in financing
activities were $10.7 million for the three months ended March
31, 1998, and were primarily from repayments under the revolving
credit agreement.
At March 31, 1998, amounts outstanding under the revolving credit
agreement were $25.3 million. The Company could borrow an
additional $12.6 million under the terms of the revolving credit
agreement at March 31, 1998. Other long-term debt was $8.9
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 1997
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 flows and future
borrowings. The revolving credit agreement expires in November
2001.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company has transactions denominated in foreign currencies as
discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1997 Annual
Report. At March 31, 1998, accounts receivable included $1.5
million denominated in Canadian dollars and $1.2 million
denominated in Mexican pesos.
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
March 31, 1998.
<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.
May 13, 1998 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 MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-END> MAR-31-1998
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<ALLOWANCES> 2,680
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<TOTAL-ASSETS> 98,182
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<COMMON> 760
<OTHER-SE> 39,503
<TOTAL-LIABILITY-AND-EQUITY> 98,182
<SALES> 25,626
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