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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended October 2, 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
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(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
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(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 October 2, 1998 -- 149,975,785
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The undersigned registrant hereby amends its Form 10-Q filed with the
Securities and Exchange Commission on November 4, 1998, for the quarterly period
ended October 2, 1998, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, to add certain disclosures in Note 8 to the Consolidated
Financial Statements and Management's Discussion and Analysis of Results of
Operations and Financial Condition. This amendment replaces the registrant's
Quarterly Report on Form 10-Q for the quarterly period ended October 2, 1998 in
its entirety.
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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Oct. 2, 1998 Sept. 30, 1997
------------ --------------
<S> <C> <C>
Net sales $ 628,582 $ 583,349
Cost of sales 449,989 429,113
Selling, general and administrative expenses 121,564 103,668
Restructuring costs 21,812 --
Other charges (credits), net:
Interest expense 9,941 7,998
Interest income (516) (444)
Miscellaneous, net (1,159) 2,557
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8,266 10,111
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Earnings before income taxes 26,951 40,457
Income taxes 9,433 10,331
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Net earnings $ 17,518 $ 30,126
========= =========
Basic and diluted net earnings per Common Share $ .12 $ .20
========= =========
Dividends paid per Common Share $ .16 $ .15
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------
Oct. 2, 1998 Sept. 30, 1997
------------ --------------
<S> <C> <C>
Net sales $1,936,829 $1,825,416
Cost of sales 1,383,564 1,327,990
Selling, general and administrative expenses 353,805 314,229
Restructuring costs 73,740 16,000
Other charges (credits), net:
Interest expense 29,634 29,377
Interest income (1,839) (914)
Miscellaneous, net (23,749) (49,729)
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4,046 (21,266)
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Earnings before income taxes 121,674 188,463
Income taxes 42,586 77,717
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Net earnings $ 79,088 $ 110,746
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Basic and diluted net earnings per Common Share $ .53 $ .74
========== ==========
Dividends paid per Common Share $ .48 $ .45
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Oct. 2, 1998 Dec. 31, 1997
------------ -------------
(Unaudited)
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 35,528 $ 114,024
Receivables, less allowance for doubtful accounts
of $9,487 in 1998 and $8,882 in 1997 493,670 391,282
Inventories 311,189 250,597
Other current assets 112,454 60,301
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Total current assets 952,841 816,204
Property, plant and equipment, net 784,228 707,974
Intangible and other assets, net 445,995 399,716
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Total Assets $2,183,064 $1,923,894
========== ==========
</TABLE>
(Continued)
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RUBBERMAID INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Oct. 2, 1998 Dec. 31, 1997
------------ -------------
(Unaudited)
Liabilities and Shareholders' Equity
------------------------------------
<S> <C> <C>
Current liabilities:
Notes payable $ 434,128 $ 223,744
Long-term debt, current 251 281
Payables 154,928 160,820
Accrued liabilities 213,014 182,239
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Total current liabilities 802,321 567,084
Other deferred liabilities 171,302 153,385
Long-term debt, non-current 152,556 153,163
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 64,867 68,819
Retained earnings 1,223,299 1,216,166
Accumulated other comprehensive income (40,595) (36,682)
Treasury shares, at cost (12,701,297 shares in
1998 and 12,975,131 shares in 1997) (353,363) (360,718)
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Total shareholders' equity 1,056,885 1,050,262
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Total Liabilities and Shareholders' Equity $2,183,064 $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>
Nine Months Ended
-------------------------------------
Oct. 2, 1998 Sept. 30, 1997
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<S> <C> <C>
Operating activities:
Net earnings $ 79,088 $ 110,746
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Non-cash restructuring costs 32,197 16,000
Gain on sale of businesses (24,141) (134,447)
Asset impairment charges -- 81,000
Depreciation and amortization 98,147 92,757
Other 10,172 8,462
Changes in:
Receivables (35,581) 5,516
Inventories (11,888) (4,142)
Other assets (34,959) (14,596)
Payables (30,321) (30,627)
Accrued liabilities (11,184) (13,865)
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Net cash provided by operating activities 71,530 116,804
Investing activities:
Capital expenditures (119,828) (109,961)
Acquisition of businesses, net of cash (216,965) --
Net proceeds from sale of businesses 62,262 246,500
Other, net 118 5,587
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Net cash provided by (used in) investing
activities (274,413) 142,126
Financing activities:
Net change in notes payable 199,118 (164,169)
Proceeds from long-term debt 8,471 --
Repayment of long-term debt (11,497) (1,973)
Cash dividends paid (71,895) (67,455)
Common Shares repurchased -- (2,575)
Other, net 190 (308)
--------- ---------
Net cash provided by (used in) financing
activities 124,387 (236,480)
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Net change in cash and cash equivalents (78,496) 22,450
Cash and cash equivalents at beginning of year 114,024 27,599
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Cash and cash equivalents at end of period $ 35,528 $ 50,049
========= =========
Supplemental cash flow information:
Income taxes paid $ 50,460 $ 27,742
Interest paid $ 23,960 $ 26,528
========= =========
</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 except per share amounts)
(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 (8) 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 one less day in the third quarter and two additional days in
the nine months ended October 2, 1998, compared to the same periods in the
prior year.
(3) Certain reclassifications were made to the 1997 financial statements to
conform to the current year presentation.
(4) 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 149,968,518 and 149,829,683 for the
respective 1998 and 1997 three-month periods and 149,869,757 and
149,875,244 for the respective nine-month periods. For the periods
presented, the dilutive effect of stock options is not significant.
(5) 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
May 15 149,849,381 May 16 149,916,146
August 14 149,974,158 August 15 149,804,652
</TABLE>
(6) A summary of inventories follows:
<TABLE>
<CAPTION>
Oct. 2, 1998 Dec. 31, 1997
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<S> <C> <C>
FIFO Cost:
Raw materials $ 78,176 $ 65,411
Work-in-process 16,262 8,571
Finished goods 235,161 201,900
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329,599 275,882
Excess of FIFO over LIFO cost (18,410) (25,285)
-------- --------
$311,189 $250,597
======== ========
</TABLE>
(7) At October 2, 1998 and December 31, 1997, intangible and other assets, net,
include the excess of cost over fair value of net assets of businesses
acquired of $367,706 and $303,618, respectively, net of accumulated
amortization of $17,976 and $13,589, respectively.
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RUBBERMAID INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands except per share amounts)
(8) In January 1998, the Company announced that the Board of Directors
authorized the completion 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
third quarter, the Company recorded a pretax charge of $21,812, or $14,178
after-tax, or $.09 per Common Share, in conjunction with the restructuring
plan.
For the nine months ended October 2, 1998 the pretax restructuring charge
is $73,740, or $47,931 after-tax, or $.32 per Common Share, which relates
primarily to the closure of four facilities. Included in this line item
on the condensed consolidated statement of earnings is approximately
$32,197 for the write-down of property, plant and equipment and the excess
of purchase price over net assets acquired. During this nine month
period, management reached decisions to exit the activities in certain
domestic and foreign operations, thus necessitating a reevaluation of the
cash flows related to these operations. It was determined that the future
cash flows on an undiscounted basis (before taxes and interest) were not
sufficient to recover the carrying value of the long-lived assets
effected by these decisions. Management determined the fair value of these
assets using discounted cash flows. Restructuring costs also included
severance benefits relating to the elimination of approximately 600
positions, expenditures incurred for the review of consolidated operations
and distribution facilities in North America and Europe and other
restructuring activities. At October 2, 1998, $8,992 remains in accrued
liabilities for employee severance costs and other costs that have been
incurred, but not paid.
(9) 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 earnings and other revenues, expenses,
gains, and losses that are excluded from net earnings but included as a
component of total shareholders' equity. Comprehensive income for the
quarters ended October 2, 1998 and September 30, 1997 was $13,424 and
$29,757, respectively, while, for the nine-month periods then ended,
comprehensive income was $75,175 and $107,764, respectively. The difference
between comprehensive income and net earnings 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 earnings,
is presented in the Condensed Consolidated Balance Sheet as "Accumulated
other comprehensive income."
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RUBBERMAID INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands except per share amounts)
(10) 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.
In June 1998, the Company acquired certain assets of Century Products
Company (Century) from Wingate Partners, a Dallas-based private equity
investment partnership. Century is a producer and marketer of infant
products, including car seats and car seat strollers. The transaction,
valued at $82,596, includes the purchase of operations in Canton,
Macedonia, and Twinsburg, Ohio and in Mexico, as well as associated working
capital and brand names. The Century acquisition was accounted for as a
purchase and was funded with debt.
The operating results of these acquisitions have been included in the
consolidated financial statements since their dates of acquisition. On a
pro forma basis, if the results of operations of these acquisitions had
been combined with the Company's results since January 1, 1997, net sales,
net earnings and per share amounts would not have been materially
different.
The excess of cost over fair value of net assets acquired in these
acquisitions was $86,505.
(11) In April 1998, the Company sold the assets representing the operations of
the decorative coverings product line to Decora Industries, Inc., a global
manufacturer and supplier of consumer decorative self-adhesive products and
surface coverings. The net proceeds from this sale of $51,262 resulted in a
pretax gain of $24,141, or $.10 per Common Share for the quarter ended July
3, 1998.
(12) On October 21, 1998, the Company announced that it had entered into a
definitive agreement and plan of merger pursuant to which Rubbermaid will
become a wholly owned subsidiary of Newell Co. through a tax-free exchange
of shares. The transaction will be accounted for as a pooling-of-interests.
The merger agreement, which has been approved unanimously by the boards of
directors of both companies, calls for Rubbermaid shareholders to receive
0.7883 shares of Newell common stock for each share of Rubbermaid common
stock they own. Newell will issue approximately 118 million shares of
common stock to Rubbermaid shareholders and will assume approximately $500
million in net debt. Rubbermaid shareholders will own approximately 40
percent of the combined company. The transaction is subject to normal
regulatory approvals and to the approval of Rubbermaid and Newell
shareholders and is expected to close in January 1999.
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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 October 2, 1998, increased 8% over the third
quarter of 1997. Core unit volume grew 5%. Acquisitions, net of divestitures,
contributed 7% to net sales. Mitigating these gains were price realization and
currency translation which in total, had a negative impact of 4%. The core
volume at the Juvenile Products business continued to be unfavorably impacted by
a major customer's change in buying practices, which negatively affected
consolidated net sales by 1%. The Home Products business experienced slower than
expected volume growth due to an overall slowing of demand at retail coupled
with retailer inventory controls. Additionally, core growth was negatively
impacted 1% due to the loss of sales related to a fire at the Company's
Commercial Play Systems facility in Farmington, Missouri. For the nine-month
period ended October 2, 1998, net sales increased by 6%. Acquisitions, net of
divestitures, contributed 5% and core unit volume 4%, offset by negative price
realization and currency translation of 3%.
Net earnings for the quarter ended October 2, 1998, decreased 42% from the
quarter ended September 30, 1997. Included in the 1998 quarterly results was a
pretax charge of $21.8 million relating to the Company's restructuring
activities (see below). Excluding this expense, net earnings were 5% above the
comparable 1997 quarter. For the nine-month period ended October 2, 1998, net
earnings decreased 29% from the nine-month period ended September 30, 1997.
Included in the 1998 results was a non-operating pretax gain on the sale of the
decorative coverings product line of $24.1 million offset by a $73.7 million
pretax restructuring charge. The prior year results include a non-operating,
pretax gain on the divestiture of the Office Products business of $134.4 million
offset by a $16 million pretax restructuring charge and an $81 million pretax
asset impairment charge. Excluding both the current year and prior year
restructuring and the non-operating items, net earnings were 11% above the
comparable 1997 period. This was primarily attributable to the increase in net
sales volume and resin deflation, partially offset by lower price realization,
higher selling, general, and administrative expenses which were impacted by
acquisitions and increased consumer advertising spending.
Cost of sales as a percentage of net sales for three-month and nine-month
periods ended October 2, 1998, was 71.6% and 71.4%, respectively, compared to
73.6% and 72.7% for the comparable 1997 periods. The decrease as a percentage of
net sales was due primarily to productivity cost improvements across the
business and a decline in the price of resin, offset by lower price realization.
Selling, general, and administrative expenses, as a percentage of net sales, was
19.3% and 18.3% for the three-month and nine-month periods ended October 2,
1998, respectively, compared with 17.8% and 17.2% for the comparable 1997
periods. The increase primarily reflects the addition of Curver Consumer
Products (Curver), acquired during January 1998 (see the Notes to the Condensed
Consolidated Financial Statements for further information), and its above
average level of selling, general, and administrative costs. Additionally, the
Company increased its overall spending on marketing and brand building programs.
Restructuring charges incurred during the third quarter of 1998 aggregated to a
pretax charge of $21.8 million, $14.2 million after-tax, or $.09 per Common
Share. Year-to-date, the pretax charges totaled $73.7 million, $47.9 million
after-tax, or $.32 per Common Share. Approximately $41.5 million of the $73.7
million of charges have been or will be settled in cash.
The restructuring plan, approved by the
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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. The costs incurred in the third quarter primarily
reflect the expenses associated with projects that commenced in the first
quarter. The centralization of the procurement organization was completed near
the end of the first quarter. Purchasing decisions previously spread among the
respective operating divisions were combined into one central buying
organization. With a common buying organization, the Company is better able to
take advantage of higher volume purchases. In addition, associates more expert
in understanding marketplace factors that impact purchase decisions and capable
of more skillful negotiation in pricing common raw materials, packaging,
component parts and other services and materials were added to the
organization. Centralized procurement is expected to provide approximately $80
million of the anticipated $200 million restructuring savings goal. In the area
of strategic management of operations, no significant new North American
projects began in the third quarter. Rather, the focus was on completing those
projects that were started in the first quarter: the closure of a plastics
houseware's molding and warehouse operation in the State of New York; the
closure of a commercial play systems warehouse and manufacturing facility in
Australia; and the closure of a small cleaning products manufacturing operation
in North Carolina. The Company consolidated those operations into other
existing company facilities, lowering its overhead and freight expense. In
addition, the Company eliminated its Asia Pacific regional headquarters with a
resulting reduction in administrative staff and exited a joint venture
relationship in Japan. The Company also completed the review and analysis of
its North American manufacturing and distribution strategies to improve its
capability of offering consistent, complete and on-time delivery of customer
orders on a just-in-time response basis. The review of the operations and
distribution facilities in Europe has been completed and the initial project
has been announced which is the closing of a facility in France. Previously
completed as well as remaining projects related to the restructuring of
facilities, processes and equipment should result in approximately $120
million of the anticipated $200 million restructuring savings goal. If the 1998
restructuring program goes forward as currently envisioned, the Company will
incur further charges which could approximate $125 million, related primarily
to plant closures and reconfiguration of existing facilities. Based on the
current plans, which are still being finalized, the majority of the future
charges will be settled in cash. The Company anticipates charges continuing
through the completion of the 1998 program. The Company believes the program
will be substantially complete by the end of 2000. However, residual efforts
may extend to 2001. Restructuring charges of $16 million incurred in the second
quarter of 1997 related to the completion of the 1995 realignment program.
Other charges (credits), net, was $8.3 million for the three-month period ended
October 2, 1998 versus $10.1 for the comparable period in 1997. For the
nine-month period ended October 2, 1998, Other charges (credits), net, was $4.0
million versus a credit of $21.3 million for the comparable period of 1997. For
the quarter, interest expense was $9.9 million, up from $8.0 million in 1997.
Year-to-date, interest was $29.6 million versus $29.4 million for the first nine
months of 1997. The slight increase in interest expense is due to the financing
of the Curver and Century transactions coupled with an increase in working
capital, partially offset by lower interest rates and the proceeds on the sale
of the decorative coverings product line. Miscellaneous, net, for the quarter
aggregated to a credit of $1.2 million versus $2.6 million of expense for the
third quarter of 1997. The change in Miscellaneous, net, is primarily due to an
increase in royalty income as well as insurance proceeds from the Commercial
Play Systems fire that occurred at the Company's Farmington, Missouri facility.
Year-to-date, Miscellaneous, net, totaled $23.7 million of income versus $49.7
million in 1997. The current year credit reflects a $24.1 million pretax gain on
the sale of the decorative coverings product line. The 1997 amount includes a
$134.4 million pretax gain on the divestiture of the Office Products business
offset by a charge of $81 million relating to asset impairments.
The effective tax rate for the third quarter and the year-to date of 1998 was
35.0%, compared with 25.5% in the prior year third quarter and 41.2% for the
1997 year-to-date. The lower effective tax rate in the 1997 third quarter was
the result of adjustments necessary to bring the nine-month effective tax rate
on operating activities to 33%. The nine-month rate in 1997 reflects the tax
effects of the non-operating activities in the second quarter of that year. 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 it to enter into rate reducing strategies
that continue, but to a lesser extent, in 1998.
Changes in Financial Condition
- ------------------------------
During the first nine months of 1998, cash and cash equivalents decreased by
$78.5 million as cash used in investing activities, $274.4 million, exceeded
cash provided by operations, $71.5 million, and from financing activities,
$124.4 million. Cash used for investing activities was primarily the result of
the Company's acquisitions of Curver and Century as well as investments in
capital expenditures offset by the proceeds from the sale of the decorative
coverings products line. Cash provided by operations was primarily the result of
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net earnings, excluding the gain on the sale of the decorative coverings product
line, and non-cash charges relating to restructuring costs, and depreciation and
amortization exceeding the increase in working capital. Cash provided by
financing activities primarily consisted of increases in notes payable less cash
dividends paid to shareholders.
Other Matters
- -------------
Business Development
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, sold
through retail channels. In June 1998, the Company acquired Century Products.
Headquartered in Macedonia, Ohio, Century is a leading producer of infant
products such as car seats and car seat strollers. Also during the second
quarter, the sale of the decorative coverings product line to Decora Industries,
Inc. was closed. For further information on these transactions, See the Notes to
the Condensed Consolidated Financial Statements.
Year 2000
The Company has conducted a comprehensive review of its information systems to
identify potential Year 2000 issues. A Year 2000 Corporate Oversight Committee
(COC) was formed to deal with both non-information technology (non-IT) and
information technology (IT) issues. Its members represent all major functional
areas within the Company. The COC has developed an initial Year 2000 concerns
list, conducted strategic planning sessions, launched a Corporate Year 2000
Awareness program and corresponded with suppliers requesting Year 2000
certification. Communications with major customers are underway and further
customer discussions are planned to continue to identify, test and remediate
potential issues. The COC has appointed a facilitator within each business who
is responsible for identifying potential impacts on both IT and non-IT systems
at their specific business, prioritizing each risk, and developing and
implementing remediation plans where necessary. The COC is currently focusing
on identification of any significant non-IT system issues and remediation or
contingency requirements associated with identified issues.
The Company has developed plans in each of the business units to correct and
upgrade existing IT systems where potential failures could occur. In addition,
certain business units have been transitioned to a new global information
system, which is Year 2000 compliant, and other business units may be
transitioned to the new system prior to the Year 2000. The Company presently
believes that with modifications to existing software and the current focus on
non-IT issues, the Year 2000 issue will not pose significant operational
problems for the Company.
To date the funds which have been spent on specific Year 2000 issues have not
been material to the Company and based upon issues which have been identified to
date, future costs associated with the matter are not expected to have a
material impact on the business. While the Company is confident that the Year
2000 issues are manageable and will be dealt with in a timely fashion, this
conclusion is forward looking and involves uncertainty and risks. The ultimate
result may be impacted by a variety of factors such as, but not limited to,
remediation of existing IT systems, the failure to identify problems associated
with non-IT systems which could materially impact the Company's ability to
transact its business and problems associated with supplier or customer
information systems which could have a similar impact.
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Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (FAS 133), which
is effective in 1999. FAS No. 133 requires companies to record derivatives on
the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
under the standard for hedge accounting. The Company is currently assessing the
effect of this standard, but does not anticipate a material impact on the
results of operations.
Newell Merger
On October 21, 1998, the Company announced that it had entered into a definitive
agreement and plan of merger pursuant to which Rubbermaid will become a wholly
owned subsidiary of Newell Co. through a tax-free exchange of shares. The
transaction will be accounted for as a pooling-of-interests. The combined
company, to be called Newell Rubbermaid Inc., would have pro forma 1998 sales in
excess of $6 billion.
The merger agreement, which has been approved unanimously by the boards of
directors of both companies, calls for Rubbermaid shareholders to receive
0.7883 shares of Newell common stock for each share of Rubbermaid common stock
they own. Newell will issue approximately 118 million shares of common stock to
Rubbermaid shareholders and will assume approximately $500 million in net debt.
Rubbermaid shareholders will own approximately 40 percent of the combined
company. The transaction is subject to normal regulatory approvals and to the
approval of Rubbermaid and Newell shareholders and is expected to close in
January 1999.
Page 13
<PAGE> 14
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 filed for the quarter ended
October 2, 1998. On October 21, 1998 Registrant filed a Form
8-K reporting the execution of an Agreement and Plan of merger
pursuant to which Registrant will become a wholly owned
subsidiary of 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: February 2, 1999 (s) James A. Morgan
----------------------------------
James A. Morgan
Senior Vice President,
General Counsel and Secretary
DATE: February 2, 1999 (s) George C. Weigand
-------------------------------
George C. Weigand
Senior Vice President and
Chief Financial Officer
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF OCTOBER 2, 1998 AND RELATED CONDENSED
CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED OCTOBER 2, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
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<PERIOD-START> JAN-01-1998
<PERIOD-END> OCT-02-1998
<CASH> 35,528
<SECURITIES> 0
<RECEIVABLES> 503,157
<ALLOWANCES> 9,487
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<CGS> 1,383,564
<TOTAL-COSTS> 1,737,369
<OTHER-EXPENSES> 73,740
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,634
<INCOME-PRETAX> 121,674
<INCOME-TAX> 42,586
<INCOME-CONTINUING> 79,088
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