<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[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 0-19431
---------
ROYAL APPLIANCE MFG. CO.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 34-1350353
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
650 ALPHA DRIVE, CLEVELAND, OHIO 44143
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(216) 449-6150
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common shares, as of the latest practicable date.
Common Shares, without par value 24,006,300
- ------------------------------------ -------------------------------
(Class) (Outstanding at August 8, 1996)
The Exhibit index appears on sequential page 14.
1
<PAGE> 2
ROYAL APPLIANCE MFG. CO. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I FINANCIAL INFORMATION
Item 1 Financial Statements
------ --------------------
Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations -
three months and six months ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows -
six months ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6-7
Item 2 Management's Discussion and Analysis of Financial
------ -------------------------------------------------
Condition and Results of Operations 8-11
-----------------------------------
Part II OTHER INFORMATION
Item 4 Submission of Matters to Vote of Security Holders 12
------ -------------------------------------------------
Item 6 Exhibits and Reports on Form 8-K 12
------ --------------------------------
Signatures 13
Exhibit Index 14
Exhibit 11* - Computation of earnings (loss) per common share. 15
----------
Exhibit 27* - Financial data schedule (EDGAR filing only)
----------
<FN>
*Numbered in accordance with Item 601 of Regulation S-K.
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
------ --------------------
ROYAL APPLIANCE MFG. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
ASSETS (Unaudited) (Note 2)
Current assets:
<S> <C> <C>
Cash $ -- $ --
Trade accounts receivable, net 31,949 43,558
Inventories 30,049 28,408
Deferred income taxes 6,254 7,230
Refundable income taxes, net -- 4,392
Prepaid expenses and other 768 1,144
--------- ---------
Total current assets 69,020 84,732
--------- ---------
Property, plant and equipment, at cost:
Land 2,356 3,405
Buildings 13,117 14,463
Molds, tooling, and equipment 43,523 37,596
Furniture and office equipment 5,587 5,352
Assets under capital leases 4,810 9,058
Leasehold improvements and other 2,565 2,565
--------- ---------
71,958 72,439
Less accumulated depreciation and amortization 33,596 30,760
--------- ---------
38,362 41,679
--------- ---------
Tooling deposits 1,517 4,047
Other 1,094 803
--------- ---------
Total assets $ 109,993 $ 131,261
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 14,441 $ 16,073
Accrued liabilities:
Advertising and promotion 3,958 7,253
Salaries, benefits, payroll taxes 3,688 3,056
Warranty and customer returns 7,500 7,600
Income taxes 670 --
Interest and other 3,809 3,963
Current portions of capital lease obligations and notes payable 646 742
--------- ---------
Total current liabilities 34,712 38,687
--------- ---------
Revolving credit agreement 13,734 28,839
Capitalized lease obligations, less current portion 3,280 7,174
Notes payable, less current portion 9,920 9,986
--------- ---------
Total long-term debt 26,934 45,999
--------- ---------
Total liabilities 61,646 84,686
--------- ---------
Commitments and contingencies (Note 3) -- --
Shareholders' equity:
Common shares, at stated value 210 210
Additional paid-in capital 41,400 41,583
Retained earnings 19,835 18,175
Cumulative translation adjustment (118) (413)
--------- ---------
61,327 59,555
Less treasury shares, at cost (1,201,000 shares at
June 30, 1996, and December 31, 1995, respectively) (12,980) (12,980)
--------- ---------
Total shareholders' equity 48,347 46,575
--------- ---------
Total liabilities and shareholders' equity $ 109,993 $ 131,261
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
-----------------------------
ROYAL APPLIANCE MFG. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------- ---------
1996 1995 1996 1995
-------- -------- --------- ---------
(Note 2) (Note 2)
<S> <C> <C> <C> <C>
Net sales $ 62,969 $ 58,255 $ 115,231 $ 107,271
Cost of sales 46,465 44,237 84,964 82,017
-------- -------- --------- ---------
Gross margin 16,504 14,018 30,267 25,254
Advertising and promotion 8,947 9,223 15,350 16,063
Other selling 2,286 2,709 4,360 5,690
General and administrative 2,571 3,183 5,615 6,460
Engineering and product development 853 852 1,624 1,831
-------- -------- --------- ---------
Income (loss) from operations 1,847 (1,949) 3,318 (4,790)
Interest expense, net 663 934 1,518 1,815
Other expense (income), net (993) 172 (922) 166
-------- -------- --------- ---------
Income (loss) before income taxes 2,177 (3,055) 2,722 (6,771)
Income tax expense (benefit) 849 (1,167) 1,062 (2,505)
-------- -------- --------- ---------
Net income (loss) $ 1,328 $ (1,888) $ 1,660 $ (4,266)
======== ======== ========= =========
Net income (loss) per common share $ .05 $ (.08) $ .07 $ (.18)
Weighted average number of common shares
and equivalents outstanding (in thousands) 24,296 23,999 24,142 23,999
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
-----------------------------
ROYAL APPLIANCE MFG. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months
Ended June 30,
---------------------
1996 1995
--------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 1,660 $ (4,266)
--------- --------
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization 3,834 5,471
Compensatory effect of stock options (213) 29
Gain on disposal of tooling, property, plant and equipment (648) --
(Increase) decrease in assets:
Trade accounts receivable, net 11,609 10,360
Inventories (1,641) (4,909)
Refundable, deferred, and accrued income taxes 6,038 (3,278)
Prepaid expenses and other 365 127
Other (186) (162)
Increase (decrease) in liabilities:
Trade accounts payable (1,620) 6,309
Accrued advertising and promotion (3,295) (5,595)
Accrued salaries, benefits, and payroll taxes 632 100
Accrued warranty and customer returns (100) --
Accrued interest and other 84 202
--------- --------
Total adjustments 14,859 8,654
--------- --------
Net cash from operating activities 16,519 4,388
--------- --------
Cash flows from investing activities:
Purchases of tooling, property, plant, and equipment, net (5,846) (5,091)
Decrease in tooling deposits 2,530 820
Proceeds from sale of plants and equipment 2,237 --
--------- --------
Net cash from investing activities (1,079) (4,271)
--------- --------
Cash flows from financing activities:
Proceeds from bank debt 122,856 45,555
Payments on bank debt (137,961) (50,038)
(Payments) proceeds from note payable (198) 4,450
Payments on capital lease obligations (169) (159)
Proceeds from exercise of stock options 30 --
--------- --------
Net cash from financing activities (15,442) (192)
--------- --------
Effect of exchange rate changes on cash 2 75
--------- --------
Net increase in cash -- --
--------- --------
Cash at beginning of period -- --
--------- --------
Cash at end of period $ -- $ --
========= ========
Supplemental disclosure of cash flow information:
Cash payments (refunds) for:
Interest $ 1,432 $ 2,183
========= ========
Income taxes, net $ (4,976) $ 773
========= ========
Supplemental schedule of noncash investing and financing activities:
Exchange of certain tooling for the forgiveness of related note payable $ -- $ 586
========= ========
Assignment of capital lease obligation to buyer $ 3,690 $ --
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
ROYAL APPLIANCE MFG. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1: BASIS OF PRESENTATION
The financial information for Royal Appliance Mfg. Co. and Subsidiaries
(the Company) included herein is unaudited; however, such information reflects
all adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the
consolidated statements of financial position as of June 30, 1996 and 1995. It
is suggested that these condensed financial statements be read in conjunction
with the consolidated financial statements and the notes thereto included in the
Company's latest shareholders' annual report (Form 10-K).
The results of operations for the three and six month periods ended June
30, 1996, are not necessarily indicative of the results to be expected for the
full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts and related disclosures. Actual results
could differ from those estimates.
The Company's revenue recognition policy is to recognize revenues when
products are shipped.
Net income (loss) per share is computed based on the weighted average
number of common and common equivalent shares outstanding and when applicable is
adjusted for the assumed conversion of shares issuable upon exercise of options,
after the assumed repurchase of common shares with the related proceeds.
NOTE 2: INVENTORIES
Inventories are stated at the lower of cost or market. In September 1995,
the Company changed its method of accounting for domestic inventories from the
last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. As
required by generally accepted accounting principles, the Company has
retroactively adjusted prior years' financial statements for this change.
Management believes the FIFO method will provide a better matching of current
costs and current revenues due to past and future decreases in costs and changes
in the mix of products as the Company introduces new products into the
marketplace over time.
The effect of the change in accounting method decreased the loss for the
six months ended June 30, 1995, by $76 and had no effect on the earnings per
common share.
Inventories at June 30, 1996, and December 31, 1995, consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------- -------
<S> <C> <C>
Finished goods $16,127 $15,400
Work in process and purchased parts 13,922 13,008
------- -------
Inventories at FIFO cost $30,049 $28,408
======= =======
</TABLE>
6
<PAGE> 7
ROYAL APPLIANCE MFG. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 3: COMMITMENTS AND CONTINGENCIES
At June 30, 1996, the Company estimates having contractual commitments
for future advertising and promotional expense of approximately $7,500,
including commitments for television advertising through December 31, 1996.
Other contractual commitments for items in the normal course of business total
approximately $1,000.
NOTE 4: DEBT
The Company's revolving credit facility has a maturity date of April 1,
1999, and is classified as long-term at June 30, 1996. The facility provides for
revolving credit up to $60,000, subject to a borrowing base formula as defined
in the agreement. The maximum amount allowable to the Company under the
borrowing base formula was $34,000 as of June 30, 1996 resulting in availability
of approximately $20,000. The agreement requires monthly payments of interest
only through maturity. The facility provides for pricing options at the bank's
base lending rate and LIBOR plus a rate spread as defined in the agreement. At
June 30, 1996, the bank's base lending rate was 8.25%. In addition, the Company
pays a commitment fee at the annual rate of 0.375% on the unused portion of the
facility.
The revolving credit facility contains covenants which require, among
other things, the achievement of minimum net worth levels and the maintenance of
certain financial ratios. The Company was in compliance with all applicable
covenants as of June 30, 1996. The revolving credit facility is collateralized
by the Company's domestic inventory, trade accounts receivable, equipment and
general intangibles.
The carrying amount of the Company's revolving credit facility and
mortgage notes payable approximate fair market value.
7
<PAGE> 8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
---------------------
RESULTS OF OPERATIONS
- ---------------------
Net sales increased 8.1% for the second quarter and increased 7.4% for
the six month period ended June 30, 1996, compared with the same periods in the
prior year. The increase in the second quarter was due primarily to sales of the
new Dirt Devil(R) Broom Vac(TM), which was introduced in the first quarter of
1996, and the new Dirt Devil(R) Ultra Hand Vac(TM) and new Dirt Devil(R) Ultra
MVP(TM) upright, which were both introduced late in the second quarter of 1996.
The increase in net sales for the six months ended June 30, 1996, was due
primarily to sales of the new Dirt Devil(R) Broom Vac(TM). The increase in net
sales for the second quarter and six months period ended June 30, 1996, was
partially offset by a decrease in sales of upright vacuum cleaners and the
elimination of the Company's European operations, which were sold in the fourth
quarter of 1995. Overall sales to the top 5 customers (all of which are major
retailers) increased, but declined slightly as a percentage of net sales in the
first six months of 1996. Sales to the top 5 customers accounted for
approximately 55.7% of net sales as compared with approximately 56.1% in the
first six months of 1995. The Company believes that its dependence on sales to
its largest customers will continue.
Gross margin, as a percent of net sales, increased from 24.1% for the
second quarter 1995 to 26.2% in the second quarter 1996 and from 23.5% in the
first six months of 1995 to 26.3% in the first six months of 1996. The gross
margin percentage was positively affected in 1996 primarily by the introduction
of the Dirt Devil(R) Broom Vac(TM), lower product returns and the elimination of
the Company's European operations.
Advertising and promotion expenses decreased 3.0% for the second quarter
1996 and decreased 4.4% for the six month period ended June 30, 1996 compared
with the same periods in 1995. The decrease in advertising and promotion
expenses was due to the elimination of European advertising, partially offset by
an increase in domestic advertising and promotion. The Company intends to
continue emphasizing cooperative advertising and television as its primary
methods of advertising and promotion. The Company's advertising expenditures are
not specifically related to anticipated sales. For example, the amount of
advertising and promotional expenditures may be concentrated during new product
introductions and critical retail shopping periods during the year, particularly
the fourth quarter.
Other selling expenses decreased 15.6% for the second quarter 1996 and
decreased 23.4% for the six month period ended June 30, 1996 compared with the
same periods in 1995. The largest component of other selling expenses are
internal sales and marketing personnel compensation and commissions to outside
manufacturers' representatives, however, no such commissions are incurred on
sales made directly to certain large retail customers. The Company has reduced
its dependency on manufacturers' representatives resulting in lower commissions
for the second quarter and the six month period ended June 30, 1996, compared
with the same periods in 1995. The decline in manufacturers' representatives
commissions were offset partially by increases in internal sales and marketing
personnel.
General and administrative expenses decreased 19.2% for the second
quarter 1996 and decreased 13.1% for the six month period ended June 30, 1996
compared with the same periods in 1995 due primarily to the company's divesture
of its European operations. General and administrative expenses decreased as a
percentage of net sales from 6.0% to 4.9% for the six month period ended June
30, 1996, and from 5.5% to 4.1% for the second quarter. The principal components
are compensation (including benefits), insurance, travel and professional
services.
Interest expense decreased 29.0% for the second quarter 1996 and
decreased 16.4% for the six month period ended June 30, 1996 compared with the
same periods in 1995. The decrease in interest expense resulted primarily from
lower levels of variable rate borrowings to finance working capital and capital
expenditures.
8
<PAGE> 9
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS) (CONTINUED)
- --------------------------------------------
Other expense (income) principally reflects the effect of foreign
currency transaction gains or losses related to the Company's international
assets. The amount also includes the gain from the sale of a facility of $638,
and the proceeds from insurance reimbursement of legal expenses of $319 in June
1996.
Due to the factors discussed above, the Company had income before income
taxes for the second quarter and six months ended June 30, 1996 of $2,177 and
$2,722 respectively as compared to a loss before income taxes for the second
quarter and six months period ended June 30, 1995 of $3,055 and $6,771,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company has used working capital and the proceeds from the sale of
two facilities to fund its operations, capital expenditures and its reduction in
long-term debt. Working capital was $34,308 at June 30, 1996, a decrease of
25.5% over December 31, 1995 level, wich contributed to the Company's reduction
in long-term debt. Current liabilities decreased by $3,975 reflecting in part a
$1,632 reduction of trade accounts payable and a reduction of $3,295 of
advertising and promotion, which was partially offset by an increase in income
taxes and salaries, benefits and payroll taxes. Current assets decreased by
$15,712 reflecting in part a $11,609 reduction of trade accounts receivable and
a $5,368 reduction of refundable and deferred income taxes, which was partially
offset by an increase in inventory of $1,641.
In the first six months of 1996, the Company utilized $3,316 of cash for
capital purchases, including approximately $2,400 of tooling related to the new
Dirt Devil(R) Ultra Hand Vac(TM) and Dirt Devil(R) Ultra MVP(TM) upright.
The Company's revolving credit facility has a maturity date of April 1,
1999, and is classified as long-term at June 30, 1996. The facility provides for
revolving credit up to $60,000, subject to a borrowing base formula as defined
in the agreement. The maximum amount allowable to the Company under the
borrowing base formula was $34,000 as of June 30, 1996 resulting in the
availability of approximately $20,000. The agreement requires monthly payments
of interest only through maturity. The facility provides for pricing options at
the bank's base lending rate and LIBOR plus a rate spread as defined in the
Agreement. At June 30, 1996, the bank's base lending rate was 8.25%. In
addition, the Company pays a commitment fee at the annual rate of .375% on the
unused portion of the facility.
The revolving credit facility contains covenants which require, among
other things, the achievement of minimum net worth levels and the maintenance of
certain financial ratios. The Company was in compliance with all applicable
covenants as of June 30, 1996. The revolving credit facility is collateralized
by the Company's domestic inventory, trade accounts receivable, certain real
estate, equipment and general intangibles.
During the second quarter of 1996, the Company sold two facilities which
were previously closed in 1995. The aggregate net proceeds are $2,237 in cash
and the assumption of $3,690 of capital lease liability by the buyer.
The Company believes that its revolving credit facility along with cash
generated by operations will be sufficient to provide for the Company's
anticipated working capital and capital expenditure requirements for the next
twelve months.
9
<PAGE> 10
QUARTERLY OPERATING RESULTS
- ---------------------------
The following table presents certain unaudited consolidated quarterly
operating information for the Company and includes all adjustments (consisting
only of normal recurring adjustments and a change in the valuation method of
accounting for inventory, from the LIFO method to the FIFO method) that the
Company considers necessary for a fair presentation of such information for the
interim periods.
<TABLE>
<CAPTION>
Three Months Ended*
------------------------------------------------------------
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
1996 1996 1995 1995 1995 1995
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net sales $62,969 $52,262 $96,303 $ 66,990 $ 58,255 $ 49,016
Gross margin 16,504 13,763 27,502 16,253 14,018 11,236
Net income (loss) 1,328 332 2,789 (12,279) (1,888) (2,378)
Net income (loss) per
common share .05 .01 .12 (.51) (.08) (.10)
<FN>
* See Note 2 of Notes to Consolidated Financial Statements
</TABLE>
The Company's business is highly seasonal. The Company believes that a
significant percentage of certain of its products, particularly hand vacs and
broom vacs, are given as gifts and therefore may sell in larger volumes during
the Christmas shopping season. Because of the Company's continued dependency on
its major customers, the timing of purchases by these major customers could
cause quarterly fluctuations in the Company's net sales. As a consequence,
results in prior quarters are not necessarily indicative of future results of
operations.
OTHER
- -----
Competition is dependent upon price, quality, extension of product lines,
and advertising and promotion expenditures. Additionally, competition is
influenced by innovation in the design of replacement models and by marketing
and approaches to distribution. The Company has experienced heightened
competition in the upright market segment, and believes that its net sales and
market share in the domestic upright market segment have been negatively
affected by competitive pricing and by the increased advertising expenditures of
its competitors. The Company's most significant competitors in the domestic
vacuum cleaner market are Hoover and Eureka, and Black & Decker in the hand-held
market. Most of the competitors are subsidiaries of companies that are more
diversified and have greater financial resources than the Company. The Company's
past and future success is dependent upon continued innovation in the design of
replacement upright and hand-held models as well as in new innovative niche
products utilizing the Dirt Devil(R) brandname.
INFLATION
- ---------
The Company does not believe that inflation by itself has had a material
effect on the Company's results of operations. However, as the Company
experiences price increases from its suppliers, which may include increases due
to inflation, retail pressures may prevent the Company from increasing its
prices.
10
<PAGE> 11
LITIGATION
- ----------
The Company is involved in various claims and litigation arising in the
normal course of business. In the opinion of management, the ultimate resolution
of these actions will not materially affect the consolidated financial position,
results of operations, or cash flows of the Company.
ACCOUNTING STANDARDS
- --------------------
The Company has selected the disclosure-only option of Statement of
Financial Accounting Standards "SFAS" No. 123, Accounting for Stock-Based
Compensation. The Company expects the implementation of SFAS No. 123 will not
have a material impact on its consolidated financial position and results of
operations.
FORWARD-LOOKING STATEMENTS
- --------------------------
Forward-looking statements in this Form 10-Q are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof. Potential risks and
uncertainties include, but are not limited to, general business and economic
conditions; the financial strength of the retail industry particularly the major
mass retail channel; the competitive pricing environment within the vacuum
cleaner segment of the floor care industry; the cost and effectiveness of
planned advertising, marketing and promotional campaigns and the dependence upon
the Company's ability to continue to successfully develop and introduce
innovative products.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 4 - Submission of Matters to a Vote of Security Holders
------ ---------------------------------------------------
(a) The Company's annual meeting of shareholders was held
April 30, 1996.
(b) At the annual meeting, the Company's shareholders
elected Messrs. Jack Kahl Jr., Michael J. Merriman, and
John P. Rochon, as Class I Directors for a two year
term which expires at the annual shareholders meeting
in 1998.
The term of office of Messrs. E. Patrick Nalley,
Joseph B. Richey II, and R. Louis Schneeberger, the
Class II Directors, continued after the 1996 meeting;
such term expires at the annual shareholders meeting in
1997.
(c) At the annual meeting, the Company's shareholders
ratified the appointment of Coopers & Lybrand L.L.P. as
auditors of the Company for 1996. The holders of
22,002,505 common shares voted to ratify the
appointment, the holders of 222,562 common shares voted
against the ratification, and the holders of 63,595
common shares abstained.
The following tabulation represents voting for the
class I Directors
<TABLE>
<CAPTION>
Name FOR WITHHELD AUTHORITY
---- --- ------------------
<S> <C> <C> <C>
Mr. Kahl 22,123,996 164,666
Mr. Merriman 22,118,531 170,131
Mr. Rochon 22,109,170 179,492
</TABLE>
The Company's shareholders also approved the 1996 Key
Employee Long-Term Incentive Plan (the "Plan"). Under
the Plan, which was adopted by the Board of Directors
on February 16, 1996, incentive stock options and
non-qualified stock options may be granted to senior
officers and employees of the Company or its
subsidiaries with respect to the Company's common
shares. The holders of 12,025,429 common shares voted
in favor of the plan, the holders of 1,531,057 common
shares voted against the plan, and the holders of
156,540 common shares abstained.
(d) Not applicable
ITEM 6 - Exhibits and Reports on Form 8-K
------ --------------------------------
Forms 8-K - None
The following documents are furnished as an exhibit and
numbered pursuant to Item 601 of Regulation S-K:
Exhibit 11 - Computation of earnings (loss) per common
share.
Exhibit 27 - Financial data schedule (EDGAR filing
only)
12
<PAGE> 13
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.
Royal Appliance Mfg. Co.
--------------------------------------------------
(Registrant)
Michael J. Merriman
--------------------------------------------------
Michael J. Merriman
Chief Executive Officer, President and Director
(Principal Executive and Financial Officer)
Date: August 8, 1996 Richard G. Vasek
---------------- --------------------------------------------------
Richard G. Vasek
Controller, Secretary and Chief Accounting Officer
(Principal Accounting Officer)
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Exhibit 11 - Computation of earnings (loss) per common share 15
Exhibit 27 - Financial data schedule (EDGAR filing only)
</TABLE>
14
<PAGE> 1
EXHIBIT 11
- ----------
ROYAL APPLIANCE MFG. CO. AND SUBSIDIARIES
FORM 10-Q
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30
---------------- --------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income (loss) applicable to
common shares (A) $ 1,328,000 $ (1,888,000) $ 1,660,000 $ (4,266,000)
=========== ============ =========== ============
Primary:
Weighted average common shares
outstanding for the period 24,003,000 23,999,000 24,001,000 23,999,000
Dilutive stock options -
based on the treasury stock
method using average market
price 293,000 -- 141,000 --
----------- ------------ ----------- ------------
TOTALS 24,296,000 23,999,000 24,142,000 23,999,000
=========== ============ =========== ============
Fully diluted:
Weighted average shares outstanding 24,003,000 23,999,000 24,001,000 23,999,000
Dilutive stock options -
based on the treasury stock
method using the period-ended
market price if higher than
the average market price 293,000 -- 248,000 --
----------- ------------ ----------- ------------
TOTALS 24,296,000 23,999,000 24,249,000 23,999,000
=========== ============ =========== ============
Income (loss) per common and
common equivalent share:
Primary $ .05 $ (.08) $ .07 $ (.18)
Fully diluted (B) $ .05 $ (.08) $ .07 $ (.18)
<FN>
(A) Prior period amount has been restated to reflect a change in the
valuation method of accounting for inventory from the LIFO method to
the FIFO method.
(B) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required for statement of operations
presentation because it results in dilution of less than 3 percent.
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE SIX MONTHS 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-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 31,949
<ALLOWANCES> 0
<INVENTORY> 30,049
<CURRENT-ASSETS> 69,020
<PP&E> 71,958
<DEPRECIATION> 33,596
<TOTAL-ASSETS> 109,993
<CURRENT-LIABILITIES> 34,712
<BONDS> 26,934
<COMMON> 210
0
0
<OTHER-SE> 61,117
<TOTAL-LIABILITY-AND-EQUITY> 109,993
<SALES> 115,231
<TOTAL-REVENUES> 115,231
<CGS> 84,964
<TOTAL-COSTS> 84,964
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,518
<INCOME-PRETAX> 2,722
<INCOME-TAX> 1,062
<INCOME-CONTINUING> 1,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,660
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
