<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 September 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 1-4188
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RUBBERMAID INCORPORATED
-----------------------
(Exact name of registrant as specified in its charter)
OHIO 34-0628700
---- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1147 AKRON ROAD, WOOSTER, OHIO 44691
------------------------------------
(Address of principal executive offices and zip code)
330-264-6464
------------
(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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
------ -----
Common Shares, Par Value $1.00, Outstanding at September 30, 1996 -- 149,760,672
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
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Sept. 30, 1996 Sept. 30, 1995
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<S> <C> <C>
Net sales $632,694 $641,520
Cost of sales 438,361 453,802
Selling, general, and administrative expenses 114,724 101,184
Other charges (credits), net:
Interest expense 5,292 3,900
Interest income (244) (145)
Miscellaneous, net 433 2,347
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5,481 6,102
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Earnings before income taxes 74,128 80,432
Income taxes 28,020 30,143
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Net earnings $ 46,108 $ 50,289
======== =======
Net earnings per Common Share (note 2) $ .31 $ .32
======= =======
Dividends paid per Common Share (note 3) $ .14 $ .125
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 3
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
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Sept. 30, 1996 Sept. 30, 1995
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<S> <C> <C>
Net sales $1,738,968 $1,762,220
Cost of sales 1,193,442 1,250,321
Selling, general, and administrative expenses 315,382 288,360
Other charges (credits), net:
Interest expense 15,685 9,102
Interest income (1,111) (2,751)
Miscellaneous, net 2,491 4,005
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17,065 10,356
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Earnings before income taxes 213,079 213,183
Income taxes 80,544 79,943
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Net earnings $ 132,535 $ 133,240
========= ==========
Net earnings per Common Share (note 2) $ .88 $ .84
========= =========
Dividends paid per Common Share (note 3) $ .42 $ .375
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
Sept. 30, 1996 Dec. 31, 1995
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(Unaudited)
Assets
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 43,034 $ 50,969
Receivables, less allowance for doubtful accounts
of $9,526 in 1996 and $10,467 in 1995 512,208 499,203
Inventories (note 4) 259,248 251,723
Other current assets 58,017 49,312
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Total current assets 872,507 851,207
Property, plant, and equipment, net 642,923 626,637
Intangible and other assets, net (note 5) 239,016 213,684
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Total Assets $1,754,446 $1,691,528
========= =========
</TABLE>
(Continued)
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<PAGE> 5
RUBBERMAID INCORPORATED AND SUBSIDIARIES (Continued)
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
Sept. 30, 1996 Dec. 31, 1995
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(Unaudited)
Liabilities and Shareholders' Equity
------------------------------------
<S> <C> <C>
Current liabilities:
Notes payable $ 267,891 $ 116,539
Long-term debt, current 1,329 5,957
Payables 123,060 102,003
Accrued liabilities 200,897 190,233
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Total current liabilities 593,177 414,732
Other deferred liabilities 138,900 135,244
Long-term debt, non-current 4,543 6,179
Shareholders' equity:
Preferred stock, without par value.
Authorized 20,000,000 shares; none issued - -
Common Shares of $1 par value.
Authorized 400,000,000 shares; issued
162,677,082 shares in 1996 and 1995 162,677 162,677
Paid-in capital 70,621 70,825
Retained earnings 1,167,653 1,098,670
Foreign currency translation adjustment (23,866) (18,420)
Treasury shares, at cost (12,916,410 shares in
1996 and 6,473,220 shares in 1995) (359,259) (178,379)
--------- ---------
Total shareholders' equity 1,017,826 1,135,373
--------- ---------
Total Liabilities and Shareholders' Equity $1,754,446 $1,691,528
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 6
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
( ) Denotes decrease in cash and cash equivalents
Nine Months Ended
-----------------
Sept. 30, 1996 Sept. 30, 1995
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $132,535 $133,240
Adjustments to reconcile net earnings to net
cash from operating activities:
Depreciation and amortization 78,198 80,591
Other 10,760 9,166
Changes in:
Receivables (15,630) (128,460)
Inventories (7,525) (16,991)
Other assets (38,291) (16,543)
Payables 21,057 20,355
Accrued liabilities 9,317 (7,141)
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Net cash from operating activities 190,421 74,217
Cash flows from investing activities:
Capital expenditures (95,506) (103,069)
Purchase of marketable securities - (99,151)
Proceeds from sale of marketable securities - 158,200
Other, net 843 (28,799)
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Net cash used for investing activities (94,663) (72,819)
Cash flows from financing activities:
Net change in notes payable 151,352 120,168
Repayment of long-term debt (6,264) (1,803)
Cash dividends paid (63,552) (59,791)
Common Shares repurchased (185,482) (102,487)
Other, net 253 678
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Net cash used for financing activities (103,693) (43,235)
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Net change in cash and cash equivalents (7,935) (41,837)
Cash and cash equivalents at beginning of year 50,969 92,249
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Cash and cash equivalents at September 30 $ 43,034 $ 50,412
======= ======
Supplemental cash flow information:
Income taxes paid $ 42,704 $ 66,477
Interest paid $ 16,103 $ 9,282
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 7
RUBBERMAID INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
----------------------------------------------------------------
(Dollars in thousands)
(1) In the opinion of management the information furnished herein includes all
the adjustments necessary for a fair presentation of the results for the
interim periods and all such adjustments are of a normal recurring nature.
(2) Net earnings per Common Share is computed based on average shares
outstanding of 149,763,971 and 157,742,939 for the respective 1996 and
1995 three-month periods and 151,378,149 and 159,395,030 for the
respective nine-month periods.
(3) The actual number of shares outstanding on the respective record dates is
as follows:
1996 1995
---------------------------- -------------------------------
Record Date No. Shares Record Date No. Shares
----------- ---------- ----------- ----------
February 9 154,412,532 February 10 161,008,984
May 17 149,772,666 May 12 159,652,695
August 9 149,760,766 August 11 157,664,643
(4) A summary of inventories follows:
Sept. 30, 1996 Dec. 31, 1995
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FIFO cost:
Raw materials $ 85,421 $ 73,862
Work-in-process 13,295 14,346
Finished goods 190,954 193,991
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289,670 282,199
Excess of FIFO over LIFO cost (30,422) (30,476)
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$259,248 $251,723
======= =======
(5) At September 30, 1996, and December 31, 1995, intangible and other
assets, net include the excess of cost over net assets of businesses
acquired of $137,712 and $137,736, respectively, net of accumulated
amortization of $25,328 and $21,452, respectively.
(6) In October 1996, the Company completed the acquisition of Graco
Children's Products Inc., a juvenile furnishings company which has the
leading market position in early childhood products such as strollers,
play yards and infant swings. The Company paid an aggregate of $320
million in the cash transaction and utilized available cash resources to
fund the acquisition. The Company will account for the acquisition as a
purchase transaction.
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<PAGE> 8
RUBBERMAID INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
Net sales for the three-month period ended September 30, 1996, were 1% less than
the third quarter of 1995. Core continuing unit volume was up 6%, while price
realization in the quarter had a negative impact of 4%, reflective of the more
aggressive stance that has been taken to increase floor space and improve unit
volume, particularly in opening price point items. Acquisitions added 2%, while
divested and discontinued SKU's had a negative 5% impact. Core continuing unit
volume growth in most of the business units remained sound, and essentially
offset a decline at Juvenile Products. For the nine-month period ended September
30, 1996, net sales of $1.739 billion were 1% lower than the comparable 1995
period.
Net earnings for the third quarter of 1996 of $46.1 million were 8% below the
comparable 1995 period earnings of $50.3 million, reflecting the disappointing
sales in the Juvenile Products line of large outdoor activity and play items,
lower price realization, and higher selling, general and administrative and
interest costs. Net earnings for the nine months of 1996 of $132.5 million were
slightly below the nine-month 1995 net earnings of $133.2 million as
productivity gains from realignment were offset by the negative impact of
unfavorable operating variances, lower selling prices, and the increase in
interest expense.
Cost of sales as a percent of net sales for the three-month and nine-month
year-to-date periods ended September 30, 1996, were 69.3% and 68.6%,
respectively, compared to 70.7% and 71.0% for the comparable year ago periods.
The year-over-year improvement reflects productivity gains and other structural
improvements in cost and customer service that had more than offset decreased
price realization and unfavorable operating variances in the first quarter.
However, the degree of improvement was adversely affected by increased resin
costs in the third quarter. LIFO was a $1.5 million charge in the third quarter
of 1996 compared to a $4.1 million charge in the third quarter of 1995. LIFO
adjustments represent the Company's expectation of both cost levels and year-end
inventory quantities compared with the levels at the beginning of the year.
Selling, general, and administrative expenses as a percent of net sales were
18.1% for both the three-month and nine-month periods compared with 15.8% and
16.4%, respectively, for the comparable year ago periods. The increase is
attributable to globalization efforts, the addition of acquisitions made in the
last twelve months, and additional marketing activities.
Other charges, net were $5.5 million versus last year's third quarter of $6.1
million, and $17.1 million for the first nine-months of 1996 versus $10.4
million for the nine months of 1995. The unfavorable comparison for nine months
is primarily due to the increase in net interest expense which is attributable
to debt incurred to fund the share repurchase program.
The effective tax rate for the third quarter was the same as the first and
second quarter rates of 37.8% versus 37.5% in 1995. The effective tax rate for
all of 1995 was 37.5%. The increase represents increased growth in our
international operations, which typically have higher taxation rates.
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<PAGE> 9
RUBBERMAID INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Changes in Financial Condition
- ------------------------------
During the first nine months of 1996, cash and cash equivalents decreased by
$7.9 million as cash generated from operations of $190.4 million was exceeded by
cash used for investing activities of $94.7 million and cash used for financing
activities of $103.7 million. Cash generated from operations was primarily the
result of net earnings, non cash depreciation and amortization charges and
increased payables exceeding the impact of increases in other assets and
receivables. Management's focus on all aspects of working capital (in
particular, inventories, receivables, and payables) added $155 million to cash
flow over the year ago period. Cash used for investing activities was primarily
for capital expenditures, reflecting continued investment in the business. Cash
used for financing activities consisted primarily of dividends paid to
shareholders and the repurchase of Common Shares for the Company's treasury
funded by an increase in notes payable.
Other
- -----
As part of the Company's plan to add a prudent amount of debt to its capital
structure and enhance long-term shareholder value, it initiated a commercial
paper program in February 1996. As of September 30, 1996, $225.9 million was
outstanding. In January 1996, the Company filed a Form S-3 registration
statement to permit the sale from time to time of senior debt securities for
proceeds of up to $400 million. The Company intends to use any net proceeds from
the sale of the senior debt securities for general corporate purposes which may
include the refinancing of indebtedness. As of September 30, 1996, no debt had
been issued against this registration statement.
As part of the Company's previously announced two-year strategic realignment
program, approximately 45% of SKUs, and related inventory and machinery and
equipment, were to be eliminated to improve operating efficiencies. At the end
of the third quarter of 1996, this SKU reduction is substantially complete,
positioning the Company for a positive impact in customer service and
distribution logistics. The Company also has begun the physical realignment of
facilities to accomplish further improvements in operating effectiveness. The
year-to-date favorable impact realized as a result of the realignment activity
was largely offset by costs associated with the realignment of facilities, which
in accordance with Generally Accepted Accounting Principles were not included in
the realignment reserve, and costs to fund the global information systems
project.
In April 1996 the Company signed a ten-year agreement with IBM to create and
manage a common, global information system. The system will provide real-time
interface among all of the Company's locations to streamline business worldwide,
reduce costs, and strengthen the Company's competitive position.
On October 2, Rubbermaid Incorporated acquired Graco Children's Products Inc.
for $320 million in cash (refer to Note 6 of the Condensed Consolidated
Financial Statements).
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<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibit and Reports on Form 8-K.
(a) Exhibit 27. Financial Data schedule.
(b) On October 16, 1996, Registrant filed a Form 8-K reporting on
the October 2, 1996, acquisition of Graco Children's Products
Inc. Based upon SEC transition guidance for adopting amended
Rule 3-05 of Regulation S-X, Registrant will not file any
financial statements of the acquired business or any pro forma
financial information relating thereto.
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.
RUBBERMAID INCORPORATED
DATE: November 8, 1996 /s/ James A. Morgan
------------------------ -----------------------------
James A. Morgan
Senior Vice President,
General Counsel and Secretary
DATE: November 8, 1996 /s/ George C. Weigand
------------------------ -------------------------------
George C. Weigand
Senior Vice President and
Chief Financial Officer
- 9 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND RELATED
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE-MONTH PERIOD
ENDED SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 43,034
<SECURITIES> 0
<RECEIVABLES> 479,289
<ALLOWANCES> 9,526
<INVENTORY> 259,248
<CURRENT-ASSETS> 872,507
<PP&E> 1,317,792
<DEPRECIATION> 674,869
<TOTAL-ASSETS> 1,754,446
<CURRENT-LIABILITIES> 593,177
<BONDS> 4,543
<COMMON> 162,677
0
0
<OTHER-SE> 855,149
<TOTAL-LIABILITY-AND-EQUITY> 1,754,446
<SALES> 1,738,968
<TOTAL-REVENUES> 1,738,968
<CGS> 1,193,442
<TOTAL-COSTS> 1,508,824
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,685
<INCOME-PRETAX> 213,079
<INCOME-TAX> 80,544
<INCOME-CONTINUING> 132,535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,535
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
</TABLE>
