<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, 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 1-4188
------
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 June 30, 1997 -- 149,910,392
<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
------------------------------
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Net sales $ 640,379 $ 572,989
Cost of sales 466,364 389,127
Selling, general, and administrative expenses 107,198 105,173
Other charges (credits), net:
Interest expense 10,521 5,924
Interest income (182) (357)
Miscellaneous, net (notes 7 and 8) (36,826) 1,176
--------- ---------
(26,487) 6,743
--------- ---------
Earnings before income taxes 93,304 71,946
Income taxes 46,709 27,196
--------- ---------
Net earnings $ 46,595 $ 44,750
========= =========
Net earnings per Common Share (note 3) $ .31 $ .30
========= =========
Dividends paid per Common Share (note 4) $ .15 $ .14
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 1
<PAGE> 3
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Net sales $ 1,242,067 $ 1,106,274
Cost of sales 898,877 755,081
Selling, general, and administrative expenses 210,561 200,658
Other charges (credits), net:
Interest expense 21,379 10,393
Interest income (470) (867)
Miscellaneous, net (notes 7 and 8) (36,286) 2,058
----------- -----------
(15,377) 11,584
----------- -----------
Earnings before income taxes 148,006 138,951
Income taxes 67,386 52,524
----------- -----------
Net earnings $ 80,620 $ 86,427
=========== ===========
Net earnings per Common Share (note 3) $ .54 $ .57
=========== ===========
Dividends paid per Common Share (note 4) $ .30 $ .28
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 2
<PAGE> 4
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1997 Dec. 31, 1996
-------------- -------------
(Unaudited)
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 36,493 $ 27,599
Receivables, less allowance for doubtful accounts
of $9,846 in 1997 and $10,900 in 1996 470,723 496,601
Inventories (note 5) 236,105 276,811
Prepaid expenses 58,806 55,709
---------- ----------
Total current assets 802,127 856,720
Property, plant, and equipment, net 699,238 721,914
Intangible and other assets, net (note 6) 382,026 475,346
---------- ----------
Total Assets $1,883,391 $2,053,980
========== ==========
</TABLE>
(Continued)
Page 3
<PAGE> 5
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1997 Dec. 31, 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 186,028 $ 399,865
Long-term debt, current 281 3,287
Payables 162,313 154,518
Accrued liabilities 204,851 185,151
----------- -----------
Total current liabilities 553,473 742,821
Other deferred liabilities 148,833 142,992
Long-term debt, non-current 154,286 154,467
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 1997 and 1996 162,677 162,677
Paid-in capital 68,313 70,829
Retained earnings 1,178,200 1,165,052
Foreign currency translation adjustment (27,972) (25,359)
Treasury shares, at cost (12,766,690 shares in
1997 and 12,924,764 shares in 1996) (354,419) (359,499)
----------- -----------
Total shareholders' equity 1,026,799 1,013,700
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,883,391 $ 2,053,980
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4
<PAGE> 6
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
( ) Denotes decrease in cash and cash equivalents
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------
June 30, 1997 June 30, 1996
------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 80,620 $ 86,427
Adjustments to reconcile net earnings to net
cash from operating activities:
Gain on sale of business (note 7) (134,447) --
Write-down of intangible assets (note 8) 81,000 --
Non-cash realignment costs (note 8) 16,000 --
Depreciation and amortization 63,839 53,290
Other 4,759 5,725
Changes in:
Receivables (3,304) 53,366
Inventories 11,647 (14,822)
Other assets (7,877) (28,416)
Payables (7,269) 5,557
Accrued liabilities (11,399) (26,881)
--------- ---------
Net cash from operating activities 93,569 134,246
Cash flows from investing activities:
Capital expenditures (80,735) (58,330)
Proceeds from sale of business (note 7) 246,500 --
Other, net 9,974 3,175
--------- ---------
Net cash from investing activities 175,739 (55,155)
Cash flows from financing activities:
Net change in notes payable (213,837) 135,197
Repayment of long-term debt (1,912) (4,438)
Cash dividends paid (44,985) (42,586)
Common Shares repurchased -- (185,482)
Other, net 320 271
--------- ---------
Net cash from financing activities (260,414) (97,038)
--------- ---------
Net change in cash and cash equivalents 8,894 (17,947)
Cash and cash equivalents at beginning of year 27,599 50,969
--------- ---------
Cash and cash equivalents at June 30 $ 36,493 $ 33,022
========= =========
Supplemental cash flow information:
Income taxes paid $ 25,837 $ 32,205
Interest paid $ 20,869 $ 9,567
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 5
<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) The Company utilizes derivative financial instruments to manage foreign
exchange and interest rate risks. The Company does not use derivative
financial instruments for any other purposes such as trading or hedging
commodity risks.
The Company uses a limited number of foreign exchange instruments to hedge
firm and anticipated commitments and net investments in foreign
subsidiaries. Instruments have included forward contracts, currency swaps,
foreign currency loans, and foreign currency options, all in the same
currency as the hedged commitment and net investment. In accordance with
Statement No. 52, "Foreign Currency Translation" (FAS 52), before hedge
accounting is applied, derivative financial instruments are designated and
considered effective as hedges. When hedging commitments, gains and losses
on financial instruments are deferred and recognized in income in the same
period as the hedged transaction. When hedging net investments in foreign
subsidiaries, gains and losses on financial instruments are included in
the foreign currency translation adjustment. The fair value of these
foreign currency instruments is estimated using current market prices
provided by an outside quotation service. Should the Company terminate the
foreign exchange instrument or the underlying hedged transaction, the
Company would follow the applicable principles of FAS 52.
The Company also uses floating-to-fixed interest rate swap agreements on a
portion of its floating interest rate debt. Before hedge accounting is
utilized, the swap agreement is designated to a specific debt instrument
or commercial paper facility and the terms are closely related to the
terms of the debt instrument or commercial paper facility. After
designation, interest is recorded on the notional portion of debt covered
by the agreements at the revised interest rate. Gains or losses on
interest rate swap agreements terminated are deferred and recognized as a
component of interest expense over the shorter of the term of the
underlying debt obligation or the term of the terminated swap agreement.
If the underlying debt obligation is retired, the Company would mark the
swap agreement to market and recognize the related gain or loss.
(3) Net earnings per Common Share is computed based on average shares
outstanding of 149,918,851 and 150,348,835 for the respective 1997 and
1996 three-month periods and 149,906,300 and 152,241,168 for the
respective 1997 and 1996 six-month periods.
Page 6
<PAGE> 8
RUBBERMAID INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
----------------------------------------------------------------
(Dollars in thousands)
(4) The actual number of shares outstanding on the respective record dates is
as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------- ---------------------------------
Record Date No. Shares Record Date No. Shares
----------- ---------- ----------- ----------
<S> <C> <C> <C>
February 7 149,975,560 February 9 154,412,532
May 16 149,916,146 May 17 149,772,666
</TABLE>
(5) A summary of inventories follows:
<TABLE>
<CAPTION>
June 30, 1997 Dec. 31, 1996
------------- -------------
<S> <C> <C>
FIFO Cost
Raw materials $ 71,035 $ 83,250
Work-in-process 12,491 11,494
Finished goods 184,394 213,000
--------- ---------
267,920 307,744
Excess of FIFO over LIFO cost (31,815) (30,933)
--------- ---------
$ 236,105 $ 276,811
========= =========
</TABLE>
(6) At June 30, 1997 and December 31, 1996, intangible and other assets, net
includes the excess of cost over net assets of businesses acquired of
$305,882 and $380,524, respectively, net of accumulated amortization of
$9,679 and $28,385, respectively.
(7) On June 13, 1997, the Company completed the sale of its Office Products
business to Newell Co. The transaction included the sale of the worldwide
manufacturing and distribution facilities, related equipment and
inventory for $246.5 million, resulting in a one-time pre-tax gain of
$134.4 million, $79.4 million after-tax or 53(cent) per share.
(8) The Company wrote-down certain intangible assets and revised its
realignment costs for a total pre-tax charge in the second quarter of
$97.0 million, $69.7 million after-tax or 47(cent) per share. The
intangible asset write-down related to acquisitions which are now
integrated into the core businesses.
(9) In February, 1997, the Financial Accounting Standards Board issued
statement No. 128, "Earnings per Share" (FAS 128), which is effective for
financial statements issued for periods ending after December 15, 1997.
FAS 128 replaces primary earnings per share (EPS) with a presentation of
basic EPS and requires dual presentation of basic and diluted EPS on the
face of the income statement. Furthermore, a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation is required. The
application of FAS 128 is not expected to result in EPS amounts
materially different from the amounts reported.
Page 7
<PAGE> 9
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 June 30, 1997, benefiting from
acquisitions and improving core unit volume, increased 12% over the second
quarter of 1996. Acquisitions, net of divestitures, contributed 11% and core
continuing unit volume added 4%. Mitigating these unit gains were negative price
realization and foreign currency translation of 3%. Core unit volume growth in
all businesses remained sound with the Juvenile Products business improving from
a very poor first quarter. For the six-month period ended June 30, 1997, net
sales increased by 12%. Acquisitions, net of divestitures, contributed 13% and
core unit volume 2%, offset by negative price realization and currency
translation of 3%.
Net earnings for the second quarter of 1997 increased 4% over the comparable
1996 period. Included in the results of the quarter was a non-operating
after-tax gain of $79.4 million offset by a non-operating after-tax charge of
$69.7 million. Excluding the one-time non-operating items, net earnings are 18%
below the comparable 1996 quarter, reflecting higher resin and other material
costs, lower price realization, unfavorable product sales mix, and higher
interest costs, which offset productivity gains and strong control over selling,
general and administrative expenses. For the six-month period ended June 30,
1997, net earnings are 7% below the first half of 1996. Excluding the one-time
non-operating items, net earnings are 18% lower for the comparable period,
reflecting year-over-year resin and other material inflation, lower price
realization, unfavorable product sales mix, and higher interest costs.
Cost of sales as a percent of net sales for the three-month and six-month
periods ended June 30, 1997, was 72.8% and 72.4%, respectively, compared to
67.9% and 68.3% for the comparable 1996 periods. The year-over-year margin
decline was caused by significantly higher raw material costs, a higher mix of
low margin products, lower price realization and unfavorable operating variances
resulting from the volume declines of Juvenile Products. LIFO expense for the
second quarter of 1997 was $0.2 million compared to a $0.6 million credit a year
ago.
Selling, general and administrative expenses as a percent of net sales was 16.7%
and 17.0% for the three-month and six-month periods, respectively, compared with
18.4% and 18.1% for the comparable 1996 periods. The improvement reflects the
volume growth and the benefits being realized from realignment activities.
Other charges (credits), net was a credit of $26.5 million for the quarter
versus an expense of $6.7 million last year, and a credit of $15.4 million for
the first half of 1997 versus an expense of $11.6 million for the first half of
1996. The net credits reflect a $134.4 million pre-tax gain on the divestiture
of the Office Products business partially offset by a charge of $16.0 million
for realignment activities, $81.0 million in asset impairment charges and
increased interest expense year-over-year.
The effective tax rate in the second quarter of 1997 was 50.1% compared with
37.8% a year ago. The second quarter rate is impacted by the non-operating
activities in the quarter. The effective tax rate on operating activities was
reduced to 34% in the second quarter, primarily resulting from beneficial
international tax planning strategies.
Page 8
<PAGE> 10
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 six months of 1997, cash and cash equivalents increased $8.9
million as cash generated from operations of $93.6 million and investing
activities of $175.7 million exceeded cash used for financing activities of
$260.4 million. Cash generated from operations was primarily the result of net
earnings, non-cash charges for asset impairment, realignment, depreciation and
amortization, and decreased inventory levels exceeding the impact of unfavorable
changes in other working capital items and the divestiture gain. Cash from
investing activities was provided by the proceeds from the sale of the Office
Products business offset by capital expenditures. Cash used in financing
activities consisted primarily of the repayment of notes and dividends paid to
shareholders.
Other
- -----
During the second quarter of 1997, the sale of the Office Products business was
completed, realignment cost estimates were increased, and certain intangible
assets were written down. See the Notes to the Condensed Consolidated Financial
Statements for further information.
Page 9
<PAGE> 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
At the Annual Meeting of Shareholders held on April 22, 1997, the
Shareholders of Registrant voted on the following matters with
results as indicated:
PROPOSAL I
----------
The election of five Directors to the classes of Directors whose
terms expire as indicated below:
<TABLE>
<CAPTION>
Class For Vote Withheld
------ -------------- ---------------
<S> <C> <C> <C>
Scott S. Cowen 1999 119,661,079 11,722,628
Karen N. Horn 2000 119,722,526 11,661,181
William D. Marohn 2000 119,762,696 11,621,011
Jan Nicholson 2000 119,791,688 11,592,019
Wolfgang R. Schmitt 2000 119,558,850 11,824,856
</TABLE>
PROPOSAL II
-----------
A proposal to approve Registrant's 1997 Management Incentive Plan.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For 126,275,544 Abstain 1,050,935
Against 4,057,227 Broker Non-Vote -0-
</TABLE>
PROPOSAL III
------------
A proposal to approve the Amended and Restated 1989 Stock
Incentive and Option Plan.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For 93,478,078 Abstain 1,137,471
Against 17,314,596 Broker Non-Vote 19,453,561
</TABLE>
Item 6. Exhibit and Reports on Form 8-K
(a) Exhibit 27. Financial Data schedule.
(b) On June 18, 1997, Registrant filed a report on Form 8-K
reporting the sale of its Office Products business to Newell
Co.
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: August 8, 1997 /s/ James A. Morgan
---------------------------- -----------------------------------
James A. Morgan
Senior Vice President,
General Counsel and Secretary
DATE: August 8, 1997 /s/ George C. Weigand
---------------------------- -----------------------------------
George C. Weigand
Senior Vice President and
Chief Financial Officer
Page 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
<THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND RELATED CONDENSED
CONSOLIDATED STATEMENT OF EARNINGS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 36,493
<SECURITIES> 0
<RECEIVABLES> 424,794
<ALLOWANCES> 9,846
<INVENTORY> 236,105
<CURRENT-ASSETS> 802,127
<PP&E> 1,315,786
<DEPRECIATION> 616,548
<TOTAL-ASSETS> 1,883,391
<CURRENT-LIABILITIES> 553,473
<BONDS> 154,286
<COMMON> 162,677
0
0
<OTHER-SE> 864,122
<TOTAL-LIABILITY-AND-EQUITY> 1,883,391
<SALES> 1,242,067
<TOTAL-REVENUES> 1,242,067
<CGS> 898,877
<TOTAL-COSTS> 898,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,379
<INCOME-PRETAX> 148,006
<INCOME-TAX> 67,386
<INCOME-CONTINUING> 80,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,620
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
