<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 April 3, 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 1-4188
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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 April 3, 1998-- 149,807,575
<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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April 3, 1998 March 31, 1997
-------------------- ---------------------
<S> <C> <C>
Net sales $ 649,718 $ 601,688
Cost of sales 466,585 432,579
Selling, general, and administrative expenses 114,798 103,363
Restructuring costs 43,382 -
Other charges (credits), net:
Interest expense 9,826 10,858
Interest income (635) (288)
Miscellaneous, net 1,846 474
----------------- ------------------
11,037 11,044
----------------- ------------------
Earnings before income taxes 13,916 54,702
Income taxes 4,870 20,677
----------------- ------------------
Net earnings $ 9,046 $ 34,025
================= ==================
Basic and diluted net earnings per Common Share $ .06 $ .23
================= ==================
Dividends paid per Common Share $ .16 $ .15
================= ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 1
<PAGE> 3
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
April 3, 1998 Dec. 31, 1997
-------------------- ----------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,913 $ 114,024
Receivables, less allowance for doubtful accounts
of $8,544 in 1998 and $8,882 in 1997 502,675 421,911
Inventories 297,814 250,597
Other current assets 38,038 29,672
--------------- ---------------
Total current assets 864,440 816,204
Property, plant, and equipment, net 760,486 707,974
Intangible and other assets, net 409,669 399,716
--------------- ---------------
Total Assets $ 2,034,595 $ 1,923,894
=============== ===============
(Continued)
</TABLE>
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<PAGE> 4
RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
April 3, 1998 Dec. 31, 1997
-------------------- ----------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Notes payable $ 312,347 $ 223,744
Long-term debt, current 2,326 281
Payables 177,807 160,820
Accrued liabilities 196,980 182,239
--------------- ---------------
Total current liabilities 689,460 567,084
Other deferred liabilities 152,028 153,385
Long-term debt, non-current 152,816 153,163
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 1998 and 1997 162,677 162,677
Paid-in capital 65,914 68,819
Retained earnings 1,201,244 1,216,166
Accumulated other comprehensive income (33,318) (36,682)
Treasury shares, at cost (12,869,507 shares in
1998 and 12,975,131 shares in 1997) (356,226) (360,718)
--------------- ---------------
Total shareholders' equity 1,040,291 1,050,262
--------------- ---------------
Total Liabilities and Shareholders' Equity $ 2,034,595 $ 1,923,894
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
( ) Denotes decrease in cash and cash equivalents
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
April 3, 1998 March 31, 1997
------------------ -------------------
<S> <C> <C>
Operating activities:
Net earnings $ 9,046 $ 34,025
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Non-cash restructuring costs 32,058 -
Depreciation and amortization 33,294 33,599
Other 4,348 4,613
Changes in:
Receivables (35,965) (14,821)
Inventories (8,404) 1,324
Other assets (11,069) (10,527)
Payables (110) (1,645)
Accrued liabilities (14,089) (18,959)
----------------- ------------------
Net cash provided by operating activities 9,109 27,609
Investing activities:
Capital expenditures (34,093) (41,277)
Acquisition of business, net of cash (128,344) -
Other, net 12,324 8,336
----------------- ------------------
Net cash used in investing activities (150,113) (32,941)
Financing activities:
Net change in notes payable 77,337 58,238
Repayment of long-term debt (511) (3,091)
Cash dividends paid (23,968) (22,495)
Other, net 35 (432)
----------------- ------------------
Net cash provided by financing activities 52,893 32,220
----------------- ------------------
Net change in cash and cash equivalents (88,111) 26,888
Cash and cash equivalents at beginning of year 114,024 27,599
----------------- ------------------
Cash and cash equivalents at end of period $ 25,913 $ 54,487
================= ==================
Supplemental cash flow information:
Income taxes paid $ 21,153 $ 2,731
Interest paid $ 8,359 $ 8,066
================= ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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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, other than those
described under footnote (7) below, are of a normal recurring nature.
(2) Effective January 1, 1998 the Company changed its fiscal year-end to the
Friday nearest to December 31. Correspondingly, fiscal quarters will
typically be comprised of 13 weeks each, and for 1998 will end on April
3, 1998; July 3, 1998; October 2, 1998; and January 1, 1999. This change
has resulted in three additional days in the first quarter of the
current year compared to the same period a year ago.
(3) Basic and diluted net earnings per Common Share are based on the
weighted average number of Common Shares outstanding during each period.
Average shares used in the calculations were 149,777,365 and 149,898,930
for the respective periods ending April 3, 1998 and March 31, 1997. For
the periods presented, the dilutive effect of stock options is not
significant.
(4) The actual number of shares outstanding on the respective record dates is
as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
Record Date No. Shares Record Date No. Shares
----------- ---------- ----------- ----------
<S> <C> <C> <C>
February 6 149,800,456 February 7 149,975,560
</TABLE>
(5) A summary of inventories follows:
<TABLE>
<CAPTION>
April 3, 1998 Dec. 31, 1997
------------- -------------
<S> <C> <C>
FIFO Cost:
Raw materials $ 74,990 $ 65,411
Work-in-process 15,657 8,571
Finished goods 231,468 201,900
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322,115 275,882
Excess of FIFO over LIFO cost (24,301) (25,285)
-------- --------
$297,814 $250,597
======== ========
</TABLE>
(6) At April 3, 1998 and December 31, 1997, intangible and other assets, net
include the excess of cost over net assets of businesses acquired of
$314,019 and $303,618, respectively, net of accumulated amortization of
$13,464 and $13,589, respectively.
(7) In January 1998, the Company announced that the Board of Directors
authorized the finalization of a major restructuring plan, designed to
expand the Company's global market leadership and accelerate quality
growth. Major initiatives include the centralization of procurement on a
global basis, and the consolidation of manufacturing and distribution
worldwide. During the first quarter, the Company recorded a pretax
charge of $43,328, $28,198 after-tax, or $.19 per Common
Share (basic and diluted), in conjunction with the restructuring plan.
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RUBBERMAID INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands)
The first quarter charge relates primarily to the closure of three
facilities, including $32,058 for the write-down of assets to their fair
market value. The remaining charge of $11,324 is for severance benefits
relating to the elimination of approximately 575 positions, and other
restructuring costs.
(8) In June, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", which is effective for fiscal years beginning after December
15, 1997. Comprehensive income includes net income and other revenues,
expenses, gains, and losses that are excluded from net income but
included as a component of total shareholders' equity. Comprehensive
income for the quarters ended April 3, 1998 and March 31, 1997 was
$12,410 and $30,802, respectively. The difference between comprehensive
income and net income is comprised of the effect of foreign currency
translation adjustments and hedging activity in accordance with
Financial Accounting Standards Board Statement No. 52, "Foreign Currency
Translation." The accumulated balance of foreign currency translation
adjustments and hedging activity, excluded from net income, is presented
in the Condensed Consolidated Balance Sheet as "Accumulated other
comprehensive income."
(9) During January 1998, the Company completed its acquisition of Curver
Consumer Products, the European market leader in plastic consumer goods,
from DSM N.V. The acquisition includes all Curver facilities, brands,
and other assets and liabilities, in a total transaction valued at
$128,344, net of cash. The Curver acquisition was accounted for as a
purchase and was funded with a combination of debt and cash.
Page 6
<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 quarter ended April 3, 1998, increased 8% over the first
quarter of 1997. Core unit volume grew 8%. Included in the core growth were
three additional days in the period versus the prior year, which contributed
3%. Inclusion of the extra days was the result of the Company's change in its
fiscal year-end as described in Note 2 to the condensed consolidated financial
statements. Additionally, acquisitions, net of divestitures, contributed 3% to
net sales. Mitigating these gains were negative price realization and currency
translation which in total, had a negative impact of 3%.
Net earnings for the quarter ended April 3, 1998, decreased 73% over the
quarter ended March 31, 1997. Included in the results was a pre-tax charge of
$43.4 million, $28.2 million after-tax, or $.19 per Common Share (basic and
diluted) relating to the Company's restructuring activities (see below).
Excluding this expense, net earnings were 9% above the comparable 1997 quarter.
This was primarily attributable to the increase in net sales volume partially
offset by increases in selling, general, and administrative expenses.
Cost of sales as a percentage of net sales for the quarter ended April 3, 1998,
was 71.8% versus 71.9% for the comparable period in 1997. The slight decrease
was due primarily to productivity cost improvements across the business and a
decline in the price of resin, offset by lower price realization and to a
lesser extent, unfavorable product sales mix and the impact of acquisitions,
net of divestitures.
Selling, general, and administrative expenses, as a percentage of net sales,
were 17.7%, an increase over the 17.2% in the first quarter of 1997. The
increase primarily reflects the addition of Curver Consumer Products (Curver),
acquired during January 1998 (see below), and its above average level of
selling, general, and administrative costs. Additionally, the Company increased
its overall spending on marketing and brand building costs.
Restructuring charges incurred during the first quarter of 1998 aggregated to a
pretax charge of $43.4 million. The restructuring plan, approved by the Board
of Directors in January 1998, seeks to achieve $200 million in savings by the
end of the year 2000. The goal is to realize $30 million of savings in 1998,
another $100 million in 1999 and the remainder by the end of 2000. The
strategic focus of the restructuring is threefold: (1) Centralize the
procurement function on a global basis so as to capture the scale advantages of
the Company's size; (2) Centralize the strategic management of operations so as
to reduce divisional redundancy of assets and more quickly drive best practices
on efficiencies, automation, and cost controls throughout the entire business;
(3) Allow divisional management to fully focus on the consumer and customer
areas of product development, marketing, customer service, business planning,
and category management. On the procurement side, the organizational alignment
to a centralized staff is complete. In the area of strategic management of
operations, some individual actions have taken place. Specifically, the Company
has shut down its home products manufacturing facility in upstate New York and
has transferred the equipment to other locations. Sales and administrative
staffing in Asia has been reduced and the commercial products manufacturing
facility in Australia has been closed. Finally, the Company has sold its
interest in the Japanese home products joint venture to its partner and has
replaced it with a licensing and technology agreement that maintains brand and
consumer continuity in the Japanese retail market.
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<PAGE> 9
RUBBERMAID INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Other charges, net, were $11.0 million for both the quarters ended April 3,
1998, and March 31, 1997, respectively. Interest expense declined from the
prior year primarily due to lower average debt levels. Offsetting this decrease
were increases in other charges which include royalties, amortization of
goodwill, gains and losses on fixed asset disposals, foreign exchange gains and
losses, and other miscellaneous non-operating activities.
The effective tax rate for the first quarter of 1998 was 35.0%, compared with
37.8% in the prior year first quarter. The current year rate has increased from
the overall 1997 effective tax rate on operations of 32.4%. In 1997, the
Company was able to take advantage of global expansion initiatives that allowed
them to enter into rate reducing strategies.
Changes In Financial Condition
- ------------------------------
During the first quarter of 1998, cash and cash equivalents decreased by $88.1
million as cash used for investing activities, $150.1 million, exceeded cash
generated from operations, $9.1 million, and from financing activities, $52.9
million. Cash used for investing activities was primarily the result of the
Company's acquisition of Curver as well as investments in capital expenditures.
Cash generated from operations was primarily the result of net earnings and
non-cash charges relating to restructuring, depreciation and amortization
exceeding the increase in working capital. Cash provided from financing
activities primarily consisted of increases in notes payable less cash
dividends paid to shareholders.
Other
- -----
In January 1998, the Company's acquisition of Curver from DSM N.V., a Dutch
chemical and materials company was completed. Curver, based in Goirle, The
Netherlands, is Europe's largest producer of plastic consumer products for
indoor and outdoor use sold through retail channels. This acquisition had a
slightly dilutive effect on the Company's first quarter 1998 results of
operations. See Note 9 to the condensed consolidated financial statements.
During March 1998, the Company announced its intention to sell the decorative
covering product line to Decora. This transaction closed early in the second
quarter.
Page 8
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibit and Reports on Form 8-K.
(a) Exhibit 27. Financial Data Schedule.
(b) There were no reports on Form 8-K for the three months ended
April 3, 1998.
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
-----------------------
(Registrant)
DATE: May 14, 1998 /s/ James A. Morgan
------------------------- --------------------------------
James A. Morgan
Senior Vice President,
General Counsel and Secretary
DATE: May 14, 1998 /s/ George C. Weigand
------------------------- ----------------------------------
George C. Weigand
Senior Vice President and
Chief Financial Officer
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF APRIL 3, 1998 AND RELATED CONDENSED
CONSOLIDATED STATEMENT OF EARNINGS FOR THE THREE MONTH PERIOD ENDED APRIL 3,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-1999
<PERIOD-START> JAN-01-1998
<PERIOD-END> APR-03-1998
<CASH> 25,913
<SECURITIES> 0
<RECEIVABLES> 511,219
<ALLOWANCES> 8,544
<INVENTORY> 297,814
<CURRENT-ASSETS> 864,440
<PP&E> 1,568,023
<DEPRECIATION> 807,537
<TOTAL-ASSETS> 2,034,595
<CURRENT-LIABILITIES> 689,460
<BONDS> 152,816
0
0
<COMMON> 162,677
<OTHER-SE> 877,614
<TOTAL-LIABILITY-AND-EQUITY> 2,034,595
<SALES> 649,718
<TOTAL-REVENUES> 649,718
<CGS> 466,585
<TOTAL-COSTS> 581,383
<OTHER-EXPENSES> 43,382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,826
<INCOME-PRETAX> 13,916
<INCOME-TAX> 4,870
<INCOME-CONTINUING> 9,046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,046
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
