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 June 30, 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 JULY 31, 1998, THERE WERE 7,551,950 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 June 30, 1998 and 1997 and 3
Six Months Ended June 30, 1998 and 1997
Consolidated Balance Sheets -
June 30, 1998 and 1997 and December 31, 1997 4
Consolidated Statements of Cash Flows -
Six Months Ended June 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 7-9
ITEM 3. Quantitative and Qualitative Disclosures about
Market Risk 9
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security
Holders 10
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
1998 1997 1998 1997
Net Sales $29,441 $27,757 $55,067 $54,072
Cost of Sales 25,171 22,790 46,488 44,970
Gross Profit 4,270 4,967 8,579 9,102
Selling, General
and Admin. Expenses 4,885 5,573 9,863 10,628
Operating (Loss) (615) (606) (1,284) (1,526)
Other Income -
Interest 0 343 0 343
Other Expense -
Interest 908 868 1,763 1,730
(Loss) Before
Income Taxes (1,523) (1,131) (3,047) (2,913)
Income Tax
(Benefit) (511) (419) (1,153) (1,060)
Net (Loss) $(1,012) $ (712) $(1,894) $(1,853)
Basic and Diluted
(Loss) per
Common Share $ (0.13) $ (0.09) $ (0.25) $ (0.25)
Weighted Average
Shares Used in
Computation:
Basic Earnings
per Common
Share 7,551 7,538 7,545 7,538
Diluted Earnings
per Common
Share 7,594 7,538 7,587 7,538
<PAGE>
TOASTMASTER INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
6/30/98 12/31/97 6/30/97
ASSETS
Cash $ 127 $ 178 $ 79
Accounts Receivable,less
allowances 23,603 42,396 23,202
Inventories
Finished Goods 38,534 26,029 34,842
Raw Matl.,WIP 8,305 7,157 9,012
LIFO/Inventory Valuation
Reserve (855) (1,360) (3,777)
Total Inventory 45,984 31,826 40,077
Deferred Income Tax 0 0 2,280
Prepaid Expenses 2,346 2,145 2,423
Income Taxes Receivable 4,893 4,070 1,829
Total Current Assets 76,953 80,615 69,890
Property, Plant and Equipment
Land 928 928 928
Buildings 10,101 9,885 9,769
Less:Accumulated Depreciation (5,649) (5,393) (5,141)
Machinery & Equipment 46,165 45,661 43,614
Less:Accumulated Depreciation (33,138) (31,818) (30,543)
Net Property, Plant &
Equipment 18,407 19,263 18,627
Goodwill, net of accumulated
amortization 3,209 3,265 3,322
Other Assets 3,138 3,148 1,875
$101,707 $106,291 $93,714
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current Installments of
Long-Term Debt $ 2,077 $ 2,104 $ 2,124
Accounts Payable 7,156 4,383 8,410
Accrued Expenses 11,913 12,936 11,510
Deferred Income Taxes 1,456 1,456 0
Total Current Liabilities 22,602 20,879 22,044
Long Term Debt, Excl.
Current Installments 38,447 42,597 32,782
Deferred Income Taxes 801 801 579
Other Liabilities 747 695 300
Total Liabilities 62,597 64,972 55,705
Stockholders' Equity:
Common Stock, $.10 par value 760 760 760
Additional Paid-in Capital 25,340 25,344 25,340
Retained Earnings 13,680 15,878 12,437
Accumulated Other
Comprehensive Income (429) (375) (240)
39,351 41,607 38,297
Treasury Stock (241) (288) (288)
Total Stockholders' Equity 39,110 41,319 38,009
$101,707 $106,291 $93,714
<PAGE>
TOASTMASTER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED JUNE 30
1998 1997
Cash flows from operating activities:
Net loss $ (1,894) $ (1,853)
Adjustments to reconcile net loss
to net cash from operating activities:
Depreciation and amortization 1,947 1,868
Gain on sale of prop., plant and equip. (16) 0
Restructuring charge 0 123
Accounts receivable 18,793 19,502
Inventories (14,158) (5,600)
Prepaid expenses & other current
assets (201) (1,629)
Other assets 8 (134)
Accounts payable 2,773 4,655
Accrued liabilities (971) (1,790)
Income taxes (823) (1,061)
7,352 15,934
Net cash flows provided by
operating activities 5,458 14,081
Cash flows used in investing activities:
Additions to property, plant
and equipment (1,103) (1,946)
Proceeds from sale of prop.,
plant and equip. 85 0
Net cash flows used in investing
activities (1,018) (1,946)
Cash flows from financing activities:
Proceeds from revolving credit
agreement 71,454 60,414
Repayments of revolving credit
agreement (74,565) (71,184)
Dividends paid (302) (301)
Repayment of long-term debt (1,065) (1,081)
Stock options exercised 41 0
Net cash flows used in
financing activities (4,437) (12,152)
Foreign currency translation adjustment (54) (1)
Net increase (decrease) in cash (51) (18)
Cash at beginning of period 178 97
Cash at end of period $ 127 $ 79
Cash paid during the period for:
Interest $ 1,806 $ 1,871
Income taxes $ 0 $ 0
<PAGE>
TOASTMASTER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying financial statements as of June 30, 1998 and
June 30, 1997 and for the quarter and the six 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 June 30, 1998, other
comprehensive loss was $31 thousand and the total comprehensive
loss was $1.043 million. For the quarter ended June 30, 1997,
other comprehensive loss was $1 thousand and the total
comprehensive loss was $713 thousand. For the six months ended
June 30, 1998, other comprehensive loss was $54 thousand and the
total comprehensive loss was $1.9 million. For the six months
ended June 30, 1997, other comprehensive loss was $1 thousand and
the total comprehensive loss was $1.9 million.
<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 WORDS
"SHOULD," "WILL BE," "INTENDED," "CONTINUE," "BELIEVE," "MAY,"
"EXPECT," "HOPE," "ANTICIPATE," "GOAL," "FORECAST" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
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 increased 5.8% to $29.4 million for the quarter ended
June 30, 1998 from $27.8 million for the quarter ended June 30,
1997. For the six months ended June 30, 1998, net sales
increased 1.8% to $55.1 million from $54.1 million for the
comparable period in 1997.
Kitchen appliance revenues were $23.1 million for the second
quarter of 1998, an increase of 3.6% from $22.3 million for the
same period in 1997. Revenues from kitchen appliances for the
six months ended June 30, 1998 increased 1.9% to $43.2 million
from $42.4 million for the six months ended June 30, 1997.
Decreases in breadmaker and toaster sales in both the second
quarter and the six months were offset by strong sales of
griddles, irons and other appliances.
<PAGE>
Time products revenues were $7.6 million for the quarter ended
June 30, 1998, an increase of 22.6% from $6.2 million for the
quarter ended June 30, 1997. For the six months ended June 30,
1998, revenues from time products were $14.5 million, an increase
of 8.2% from $13.4 million for the same period in 1997. The
increase in both periods was primarily from increased sales of
clocks with the Timex and Indiglo brand names.
Environmental products revenues were minimal, compared to $500
thousand and $900 thousand for the quarter and six months ended
June 30, 1997, respectively.
Revenues from the five largest customers for the second quarter
of 1998 represented approximately 45.1% of revenues. The five
largest customers accounted for 48.9% of revenues for the second
quarter of 1997. For the six months ended June 30, 1998,
revenues from the five largest customers were 46.2%. The five
largest customers accounted for 46.4% of revenues for the six
months ended June 30, 1997.
Gross profit was $4.3 million, 14.6% of net sales, for the
quarter ended June 30, 1998, a decrease from $5 million, or 18%
of net sales, for the comparable period in 1997. Gross profit
also decreased for the six months ended June 30, 1998 to $8.6
million, or 15.6% of net sales, from $9.1 million, or 16.8% of
net sales, for the same period in 1997. The decrease as a
percentage of net sales was primarily due to the product mix sold
and increased health care and workers' compensation costs.
Selling, general and administrative expenses for the quarter
ended June 30, 1998 decreased to $4.9 million compared to $5.6
million for the second quarter of 1997. For the six months ended
June 30, 1998, selling, general and administrative expenses were
$9.9 million, a decrease from $10.6 million for the same period
in 1997. Cost controls initiated earlier in the year contributed
to the reduction in expense. Interest income of $343 thousand in
the second quarter of 1997 was from an expected income tax refund
from prior years. Interest expense was up slightly at $908
thousand for the quarter ended June 30, 1998 from $868 thousand
for the same period in 1997. Interest expense for the six months
ended June 30, 1998 was unchanged at $1.7 million as compared to
the same period 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 provided by operating activities for the six
months ended June 30, 1998 were $5.5 million. Since December 31,
1997, there was a reduction in accounts receivable of $18.8
million, an increase in inventory of $14.2 million and an
increase in accounts payable of $2.8 million as a result of
normal seasonal patterns.
Cash flows used for additions to property, plant and equipment of
$1.1 million include the cost of new equipment and tooling for
new and existing products. Net cash flows used in financing
activities were $4.4 million for the six months ended June 30,
1998, and were primarily from repayments under the revolving
credit agreement.
<PAGE>
At June 30, 1998, amounts outstanding under the revolving credit
agreement were $32.2 million. The Company could borrow an
additional $7.8 million under the terms of the revolving credit
agreement at June 30, 1998. Other long-term debt was $8.3
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.
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 June 30, 1998, accounts receivable included $834
thousand denominated in Canadian dollars and $1.1 million
denominated in Mexican pesos. The Company does not purchase or
sell foreign currency futures or forwards.
<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 12,
1998. The following items were submitted to a vote:
Item 1. Edward J. Williams and James L. Hesburgh were
elected as Class I directors. Class III directors (Robert H.
Deming and Daniel J. Stubler) and Class II directors (John E.
Thompson and S B. Rymer) continue to serve on the Board until the
annual meeting of stockholders in 2000 and 1999, respectively.
The vote with respect to the election of directors was as
follows:
Mr. Williams Mr.Hesburgh
AFFIRMATIVE VOTES 6,941,553 6,942,863
WITHHELD AUTHORITY 23,923 22,613
Item 2. The selection of KPMG Peat Marwick LLP as the
Company's independent auditors for the year ending December 31,
1998 was approved. The vote was as follows:
AFFIRMATIVE VOTES 6,952,194
NEGATIVE VOTES 4,223
ABSTENTIONS 9,059
A total of 6,965,476 shares were voted. No broker non-votes were
received.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 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.
August 7, 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 JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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