FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission File Number: 0-20274
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THE RIVAL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 43-0794462
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
800 E. 101st Terrace, Kansas City, Missouri 64131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 943-4100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $ .01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
----- ----- ----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant is $128,750,000 as of August 30,1996. The non-inclusion of shares
held by directors, officers and beneficial owners of more than 5% of the
outstanding stock shall not be deemed an admission that such persons are
affiliates of the Registrant.
9,729,667
---------------------------------------------------------------------
(number of shares of common stock outstanding as of August 30, 1996.)
Documents Incorporated by Reference
Part I and Part II incorporate information by reference from the registrant's
Annual Report to Stockholders for the fiscal year ended June 30, 1996. Part III
incorporates information by reference from the Registrant's definitive Proxy
Statement, to be filed with the Commission for its 1996 Annual Meeting of
Stockholders.
<PAGE>
PART I
Item 1. Business.
The Rival Company, the registrant, together with its subsidiaries, is
referred to herein as "Rival" or as the "Company". The Company's executive
offices are located at 800 E. 101st Terrace, Kansas City, Missouri 64131,
and its telephone number is (816) 943-4100. The Rival Company was incorporated
in Delaware on April 7, 1986 for the purpose of acquiring Rival Manufacturing
Company.
General
The Company is a leading designer, manufacturer and marketer of a variety
of products including small kitchen and personal care appliances such as Crock
Pot (REGISTERED TRADEMARK) slow cookers, can openers and massagers; products
for the home environment including space heaters, air purifiers, humidifiers
and fans; and home improvement and industrial products such as sump, well and
utility pumps, household ventilation, door chimes, ceiling fans and industrial
fans.
Since 1992, Rival's sales have grown from $163.5 million to $313.9 million
largely as the result of six acquisitions that enabled Rival to expand its
product line beyond kitchen appliances, its main products for over sixty
years. As a consequence, Rival has begun selling to several new classes of
customers, notably national hardware/home centers and industrial supply
dealers, and has broadened its international presence.
Between April 1995 and April 1996, the Company made three acquisitions:
* Patton Electric Company ("Patton") which manufactures fans and space
heaters for household and industrial use was acquired in April 1995.
Prior to the acquisition, Patton's annual sales were approximately
$40.0 million.
* Fasco Consumer Products, Inc. ("Fasco") which manufactures an assortment
of products including household ventilation, ceiling fans, door chimes
and heaters was acquired in January 1996. Fasco generates annual sales
of approximately $40.0 million in the home center, building supply and
industrial distribution channels.
* Bionaire, Inc. ("Bionaire") which assembles and sells air purifiers and
humidifiers for household use was acquired in April, 1996. Bionaire
has annual sales of approximately $57.0 million with retail distribution
in the U.S., Canada and Europe.
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These three businesses contributed $72.5 million to fiscal 1996 consolidated
sales.
The Company distributes the Rival (REGISTERED TRADEMARK), Rival Select
(TRADEMARK), Simer (REGISTERED TRADEMARK), Pollenex (REGISTERED TRADEMARK),
Patton (REGISTERED TRADEMARK), Bionaire (REGISTERED TRADEMARK), Fasco
(REGISTERED TRADEMARK) and White Mountain (REGISTERED TRADEMARK) product lines
to substantially all major retail outlets in the U.S. and Canada, including
such mass merchants as Kmart, Target and Wal-Mart; hardware/home centers such
as Ace Hardware, Home Depot and Lowes; department stores, catalog showrooms
and warehouse clubs. The Company also sells Patton commercial fans and
Fasco building supply and home products to industrial and electrical dealers
and distributors. The Company has focused its resources to provide its
customers with superior service, product innovation and marketing support. To
accomplish this, the Company has developed automated ordering, shipping,
invoicing and data storage and retrieval systems that are linked to the
retailers "point-of-sale" systems. These automated systems are supported by
close coordination between the traffic, warehousing, sales support and finance
departments of the retailer and the Company.
The Company believes that its highly integrated and cost effective
manufacturing represents a competitive strength. The Company manufactures
approximately 70% of the products it sells. Its manufacturing facilities,
(eight in the U.S. and one in Canada) produce electric motors, molded plastic
components, screw machine parts, stampings and stoneware. The Company
believes that the ability to manufacture the majority of its products in
North America is one of the Company's fundamental strengths. Manufacturing
capability gives the Company flexibility, bargaining power with third party
vendors, quality control, and quick response time. The ability to manufacture
is also helpful in evaluating a prospective acquisition.
The Company believes it has significant opportunities for continued growth
through the enhancement of existing product lines, new product development,
and product line acquisitions. The Company believes that product line
acquisitions will continue to be a significant factor in the future growth
of the Company. The continuing consolidation within the retail sector, the
increasing automation demands and the trend of major retailers to reduce the
number of suppliers are expected to provide opportunities to acquire product
lines with established positions and shelf space. The Company also believes
that its relationships with major retailers and its existing broad product
offering can enhance the shelf space of product lines which Rival may acquire.
The Company believes that it has adequate access to financing and that its
recent experience in making successful acquisitions will facilitate future
acquisitions.
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Products
The Company has broad retail distribution in each of the following product
categories in which it competes:
Kitchen Kitchen
Heating Motor-Driven Other Electric Water
Appliances Appliances Appliances Products
- - ---------- ---------- ---------- --------
Slow cookers Can openers Space heaters Sump, utility
Indoor grills Blenders Simmering pot- and well pumps
Steamers Hand mixers pourri cookers Showerheads
Toasters Stand mixers Ice cream Water
Hot pots Food processors freezers filtration
and kettles Slicers Massagers
Grinders Air purifiers
Ice crushers Fans
Humidifiers
Irons
Door chimes
Household
ventilation
The following table indicates the Company's net sales by product category
for the periods presented:
Years ended June 30
----------------------
(in millions)
Product Category 1996 1995 1994
---------------- ------ ------ ------
Kitchen heating appliances $116.4 $ 98.3 $ 96.3
Kitchen motor-driven appliances 34.7 39.0 38.5
Other electric appliances 128.7 63.1 49.4
Water products 34.1 31.3 45.0
------ ------ ------
Total $313.9 $231.7 $229.2
====== ====== ======
The market for the small electric appliances sold by the Company is mature
and highly competitive. As a result, the Company anticipates that growth will
continue to be achieved principally through a combination of the enhancement
of previously existing product lines, new product introductions, expansion of
the customer base for Simer, Fasco and Patton products and additional product
line acquisitions.
Product Development
The Company has an internal product development team dedicated to product
line enhancements, and the introduction of new products. As part of this
effort, the Company maintains its own engineering and development department
to conduct research activities relating to the improvement of existing
products and the development of new products. This department presently
consists of over 50 people, including engineers, product designers, draftsmen
and product managers. The Company also retains the services of outside
engineering and design consultants from time to time. The
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Company's expenditures for product engineering and development were $3.1
million, $2.5 million and $1.8 million for the years ended June 30, 1996, 1995
and 1994, respectively. Costs associated with changes to existing products and
the development of new products are charged to operations as incurred. As a
result of acquisitions, the Company has been able to significantly strengthen
the engineering and development department without increasing the department's
expenditures as a percent of the Company's net sales.
Internal product development is critical, not only for growth, but also to
maintain existing market share. The Company regularly enhances existing
products by adding new features and modernizing their design in order to
maintain their visual appeal and competitiveness.
Acquisitions
For a number of years, the Company's growth strategy has included the
selective acquisitions of modest sized product lines. The Company acquires a
product line when it believes it can use either its manufacturing or
distribution strengths to reduce costs or increase sales. The Company has
had sufficient resources to more aggressively pursue this strategy since its
initial public offering in June 1992. In fiscal 1993, the Company acquired
the assets of Simer Pump, a $22 million assembler of sump, well and utility
pumps and of Pollenex Corporation, a $28 million marketer of massagers,
showerheads and air cleaners. In fiscal 1994, the Company acquired operating
assets of White Mountain Freezer, Inc., a $3 million manufacturer of premium
quality ice cream freezers. In 1995, the Company acquired Patton Electric
Company, a $40 million manufacturer of space heaters and fans for household
and industrial use. And in 1996, the Company acquired Fasco Consumer Products,
Inc. which generates approximately $40 million in sales of household
ventilation products, ceiling fans, door chimes and other household products
to retailers and electrical wholesale distributors and it acquired Bionaire,
Inc. with $57 million in sales of humidifiers and air purifiers to retailers.
The housewares industry includes hundreds of companies with limited
product offerings and annual sales below $50 million. The fragmented nature
of the industry together with the continuing retail consolidation and
increasing automation requirements are expected to result in additional
acquisition opportunities. The Company believes that given its strong
financial condition, broad customer base, manufacturing expertise and recent
acquisition experience, it is poised to capitalize on such opportunities. As
such, product line acquisitions remain a key component of the Company's long
term growth strategy.
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Marketing
The vast majority of the Company's sales are to the retail trade. For
this business, the Company directs its marketing efforts at the retailer. The
Company's products are sold in all major channels of distribution including
mass merchants, hardware/home centers, department stores, catalog showrooms,
warehouse clubs, drug stores, military exchanges, mail order companies and
premium companies. Rival's broad distribution to retailers throughout the
U.S. and Canada was a key consideration in each of the six acquisitions
consummated by the Company since 1992. Simer's, Patton's and Fasco's strong
distribution in hardware/home centers in conjunction with the Rival and
Pollenex product lines has provided the Company with the opportunity to
combine the strengths of each of the sales organizations. The consolidated
group can thus focus its combined efforts on the retail trade which provides
the Company and its customers with efficiencies in distribution, warehousing,
computer systems and sales and buying personnel. The Patton and Fasco
acquisitions also provide the Company with a new class of customers, the
industrial and electrical distributors.
The approximate breakdown of the Company's sales by class of customer is
as follows:
Years ended June 30
-------------------
Class of Customer 1996 1995 1994
----------------- ---- ---- ----
Mass Merchant 47% 48% 49%
Hardware/Home Center 17 17 20
Department Store 9 12 12
Catalog Showroom 5 8 7
Electrical and Industrial Distributor 10 2 --
Drug Store, Warehouse Clubs and Other 12 13 12
---- ---- ----
100% 100% 100%
==== ==== ====
The Company reaches its customers through its sales organization which
consists of a combination of in-house sales managers, field sales associates
and independent manufacturers' representative firms.
The Company's largest customer, Wal-Mart (including Sam's Wholesale Club),
accounted for 26% of net sales in fiscal 1996, 28% of net sales in fiscal 1995
and 27% of net sales in fiscal 1994. The Company's next five largest customers
in fiscal 1996 represented 18% of net sales. While the Company does not have
long-term contractual relationships with any of its customers, it has been
doing business with Wal-Mart and with its next five largest customers
continuously for over ten years. The strategy of providing quality products
at a promotional price is consistent
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with the marketing strategy of mass merchants who often use promotions in the
small appliance department to create consumer traffic in their stores.
The Company works closely with its retail customers in planning their
marketing programs and promotions. The Company's advertising strategy is
designed to supplement the marketing programs of its customers. Rather than
stressing national advertising, the Company devotes approximately 80% of its
advertising budget to more cost-effective cooperative advertising with
retailers, such as circulars and inserts. The cooperative advertising
provides identification of the Company's various brand names together with the
name of the retailer.
Customer Service
The Company's major customers have developed programs of "Quick Response"
to reduce inventory and related carrying costs and improve in-stock positions.
These programs have continued to grow in importance as retailers have reduced
their overall number of vendors in order to minimize freight, warehousing and
vendor support costs, such as paperwork and personnel costs. In conjunction
with the retailers' systems, the Company has developed automated ordering,
shipping and invoicing systems and has been able to combine products sold
under more than one of the Company's brand names to certain retailers to help
minimize the retailers' support costs.
Point of sales information is utilized to generate orders through an
Electronic Data Interchange ("EDI") computer system. Additionally, the
Company's distribution facilities in Clinton, Missouri, New Haven, Indiana,
and Fayetteville, North Carolina incorporate state-of-the-art computer systems
that provide information on shipping directly back to the customers' systems.
The Company believes that its accommodation of its customers' "Quick-Response"
programs has further solidified its position as a key supplier to its most
important customers.
Manufacturing
The Company's nine plants, eight of which are in the U.S and one in
Canada, manufacture and assemble approximately 70% of the products it sells.
The Company's remaining products are produced, to its specifications,
primarily in China. The Company's plants are highly integrated and produce
electric motors, injection molded plastic components, screw machine parts,
stampings and stoneware.
The ability to manufacture the majority of its products in North America
is one of the Company's fundamental strengths. Manufacturing capability gives
the Company flexibility, bargaining power with third party vendors, quality
control, and quick response time when high demand for a product results in
customers placing
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reorders with short delivery dates.
The Company operates four manufacturing and assembly facilities in rural
Missouri (Clinton, Sedalia, Sweet Springs and Warrensburg), near Kansas City,
Missouri. A facility in Flowood, Mississippi produces the stoneware for the
Company's Crock-Pot (REGISTERED TRADEMARK) slow cookers, Potpourri Crocks
(REGISTERED TRADEMARK) and Crock Grills (REGISTERED TRADEMARK). Additionally,
the Company operates two former Patton facilities in Indiana, a former Fasco
facility in North Carolina and a Bionaire assembly operation in Lachine,
Quebec. In the past five years, the Company has spent approximately $25
million to build a new distribution facility in Clinton, Missouri and to
significantly upgrade manufacturing capabilities.
Seasonality
A significant percentage of the products sold by the Company are given as
gifts and, as such, sell at larger volumes during the holiday season.
Therefore, sales during the months of August through November are at a higher
level than during the other months of the year. Additionally, the Company's
working capital requirements, primarily inventories and receivables, peak
during the fall. The Company meets these seasonal working capital needs
through borrowings under its revolving credit facility. Five of the Company's
product lines have sales with specific seasonal trends. These are space
heaters and humidifiers which are sold primarily during the fall and winter,
and ice cream freezers, pumps and fans which are sold primarily during the
spring and summer.
Competition
The markets for the Company's products are mature and highly competitive.
Competition is based upon price, access to retail shelf space, product
enhancements, new product introductions, as well as marketing support and
distribution systems. There has been a recent trend toward consolidation
within the industry, most notably with the mergers of Sunbeam with Oster and
Hamilton Beach with Proctor Silex, resulting in these companies, together with
Black & Decker, each generating annual sales of small electric household
appliances which are significantly higher than sales of the Company. Other
significant competitors include Wayne Home Equipment, Masco, Nortek, Teledyne,
Honeywell, Holmes, Duracraft, National Presto, Toastmaster, and West Bend.
Smaller manufacturers compete with the Company on a limited product offering
basis. A few European manufacturers, such as Braun, Group SEB and Moulinex
have established niches in the small electric household appliance market,
particularly in the high-end department store trade.
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Trademarks and Patents
The Company considers its various trademarks to be a valuable tool in the
marketing of its products. Of particular importance to the Company are the
Rival (REGISTERED TRADEMARK), Rival Select (TRADEMARK), Simer (REGISTERED
TRADEMARK), Pollenex (REGISTERED TRADEMARK), Patton (REGISTERED TRADEMARK),
Bionaire (REGISTERED TRADEMARK), White Mountain (REGISTERED TRADEMARK) and the
Crock-Pot (REGISTERED TRADEMARK) trademarks. In the course of its operations,
the Company files patent applications covering various aspects of the items
produced. While the Company's mechanical and design patents in the aggregate
are considered to be of importance to the Company, the overall business is not
dependent upon any single patent or group of patents.
Regulation
The Company is subject to federal, state and local regulations concerning
the environment, occupational safety and health, and consumer products safety.
The Company has not experienced significant difficulty in complying with such
regulations and compliance has not had a material adverse effect on the
Company's business. All of the Company's electric-powered products are listed
by Underwriters Laboratories, Inc. or the Canadian Underwriters Laboratories,
Inc., which are independent, not-for-profit corporations engaged in the
testing of products for compliance with certain public safety standards.
Foreign Operations
The Company markets and distributes its products in Canada through its
wholly-owned subsidiary, Rival Manufacturing Company of Canada Ltd
("Rival-Canada"). Net sales, operating income and identifiable assets of
Rival-Canada are as follows:
Years ended June 30
------------------------
1996 1995 1994
------ ------ ------
Net sales $6,944 $6,899 $6,968
Operating income (loss) 34 62 (363)
Identifiable assets 3,282 2,612 2,449
As a result of the acquisition of Bionaire in April 1996, the Company now
has a much stronger international presence. During calendar 1995, Bionaire
had sales in Canada of approximately $15 million and produced an additional
$10 million in international sales, primarily in Europe, through its wholly
owned subsidiary in the Netherlands. Bionaire's contribution to the Company's
business was not significant in fiscal 1996 and is not included in the above
table.
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Employees
The Company has approximately 2,500 full-time associates including 240
salaried personnel, except during August through November when employment will
likely increase by approximately 10%. Approximately 420 hourly associates at
the Flowood, Mississippi plant are represented by a labor organization under
a collective bargaining agreement which expires in December 1998.
Additionally, approximately 175 hourly associates at the Bionaire assembly
facility in Montreal are represented by a labor organization under a
collective bargaining agreement which expires in June 1999. The Company
considers its labor relations to be excellent and has experienced no work
stoppage or labor dispute during the past ten years.
Item 2. Properties
Square
Location Feet Present Use
-------- ------- -----------
Kansas City, Missouri 32,000 General Offices
Sedalia, Missouri 224,000 Manufacturing & assembly
Clinton, Missouri 164,000 Manufacturing & assembly
279,000 Warehousing & distribution
Sweet Springs, Missouri 125,000 Manufacturing, assembly
& warehousing
Warrensburg, Missouri 68,000 Manufacturing & assembly
Flowood, Mississippi 142,000 Manufacturing
New Haven, Indiana 302,000 Manufacturing & Distribution
Peru, Indiana 172,000 Assembly & warehousing
Fayetteville, North
Carolina 282,500 Manufacturing & assembly
60,000 Warehousing & distribution
Lachine, Quebec 128,000 Assembly, warehousing
and distribution
The Company owns the Clinton, Sweet Springs, Flowood, New Haven, Peru and
Fayetteville plants and 157,000 square feet of the Sedalia plant. The
Warrensburg plant and 67,000 square feet of the Sedalia plant are occupied
under long-term leases which give the Company the option to purchase the
relevant property at a nominal cost. The general offices are occupied under
a lease through 2005. The Lachine, Quebec facility is leased through June
2000 with renewal options.
Item 3. Legal Proceedings.
The Company is party to various product liability lawsuits relating to its
products and incidental to its business. The Company believes that many of
the personal injury and damage claims brought against it arise from the
misuse or misapplication of the Company's products and rarely involve
manufacturing defects. In
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such cases, the Company vigorously defends against such actions. Historically,
product liability awards have rarely exceeded the Company's individual per
occurrence self-insured retention. There can be no assurance, however, that
the Company's future product liability experience will be consistent with its
past experience. The Company believes that the ultimate conclusion of the
various pending claims and lawsuits of the Company will not have a material
adverse affect on the consolidated financial statements of the Company.
Item 4. Submission of Matters to be a Vote of Security Holders.
None.
PART II
Item 5. Market for the registrant's common equity and related stockholder
matters.
Incorporated herein by reference from the information provided under the
caption "Common Stock Price Range" in the Company's Annual Report to
Stockholders for the fiscal year ended June 30, 1996, page 32.
Item 6. Selected financial data.
Incorporated herein by reference from the Company's Annual Report to
Stockholders for the fiscal year ended June 30, 1996, page 14.
Item 7. Management's discussion and analysis of financial condition and
results of operations.
Incorporated herein by reference from the Company's Annual Report to
Stockholders for the fiscal year ended June 30, 1996, pages 15-19.
Item 8. Financial statements and supplementary data.
Incorporated herein by reference from the Company's Annual Report to
Stockholders for the fiscal year ended June, 30, 1996, pages 20-31.
Item 9. Changes in and disagreements with accountants on accounting and
financial disclosure.
None.
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PART III
Item 10. Directors and executive officers of the registrant.
Item 11. Executive compensation.
Item 12. Security ownership of certain beneficial owners and management.
Item 13. Certain relationships and related transactions.
Information incorporated into Items 10, 11, 12 and 13 above by reference
from the information included under the captions entitled "Nominees for
Election," "Executive Officers," "Executive Compensation," "Security
Ownership of Certain Beneficial Owners and Management" and "Related Party
Transaction" in the Company's definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A with respect to its 1996 Annual Meeting
of Stockholders.
PART IV
Item 14. Exhibits, financial statement schedules and reports on Form 8-K.
a) The financial statements and schedules listed in the accompanying
index to consolidated financial statements and financial statement schedules
on page 13 are filed as part of this report.
b) The exhibits listed in the accompanying index to exhibits are filed as
part of this report.
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THE RIVAL COMPANY AND SUBSIDIARIES
Index to Consolidated Financial Statements
and Financial Statement Schedules
INDEX
Page Reference
------------------------
Annual Report
to
Form 10-K Stockholders
--------- ------------
Independent Auditors' Report 31
Financial Statements:
Consolidated Balance Sheets--June
30, 1996 and 1995 20
Consolidated Statements of Earnings--
Years Ended June 30, 1996, 1995,
and 1994 21
Consolidated Statements of Stockholders'
Equity--Years Ended June 30, 1996,
1995, and 1994 22
Consolidated Statements of Cash Flows--
Years Ended June 30, 1996, 1995 and 1994 23
Notes to Consolidated Financial Statements 24-31
Financial Statement Schedule:
Independent Auditors' Report on
Financial Statement Schedule
and Consent 14
Schedule VII - Valuation and
Qualifying Accounts 15
13
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INDEPENDENT AUDITORS' REPORT ON FINANCIAL
STATEMENT SCHEDULE AND CONSENT
The Board of Directors
The Rival Company:
The audits referred to in our report dated August 2, 1996 included the related
financial statement schedule as of June 30, 1996 and for each of the years in
the three-year period ended June 30, 1996, included in the 1996 annual report
on Form 10-K. This financial statement schedule is the responsibility of The
Rival Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits. In our opinion such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We consent to incorporation by reference in the registration statement (No.
33-69392) on Form S-8 of The Rival Company of the above report and our report
dated August 2, 1996 relating to the consolidated balance sheets of The Rival
Company and subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1996, which report
is incorporated by reference in the June 30, 1996 annual report on Form 10-K
of The Rival Company.
Kansas City, Missouri /s/ KPMG Peat Marwick, LLP
--------------------------
September 9, 1996 KPMG Peat Marwick, LLP
14
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SCHEDULE VII
THE RIVAL COMPANY AND SUBSIDIARIES
______________
VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)
Additions Additions
Beginning Charged to from Deductions Ending
Balance Expense Acquisitions (A) Balance
------- ------- ------------ ----- -------
Allowance for collection
loss and discounts:
Year ended 6-30-96 $1,909 $ 463 $ 547 $ 134 $2,785
Year ended 6-30-95 $1,693 $ 356 $ 351 $ 491 $1,909
Year ended 6-30-94 $1,752 $ 685 -- $ 744 $1,693
(A): Write-off of accounts and changes in discount allowances.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE RIVAL COMPANY
By: /s/ Thomas K. Manning
-------------------------------
Chief Executive Officer
September 9, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated below.
Signature Title Date
- - --------- ----- ----
/s/ Thomas K. Manning
- - -------------------------
Thomas K. Manning Chairman of the Board of September 9, 1996
Directors, Chief Executive
Officer
(Principal Executive Officer)
/s/ William L. Yager
- - -------------------------
William L. Yager President, Chief Operating September 9, 1996
Officer and Director (Principal
Financial Officer)
/s/ Stanley D. Biggs
- - -------------------------
Stanley D. Biggs Vice President, Chief Financial September 9, 1996
Officer
(Principal Accounting Officer)
/s/ William S. Endres
- - -------------------------
William S. Endres Sr. V.P. Sales and Marketing September 9, 1996
and Director
/s/ Darrel M. Sanders
- - -------------------------
Darrel M. Sanders Sr. V.P. Operations and September 9, 1996
Director
/s/ Jack J. Culberg
- - -------------------------
Jack J. Culberg Director September 9, 1996
/s/ Todd Goodwin
- - -------------------------
Todd Goodwin Director September 9, 1996
/s/ John E. Grimm, III
- - -------------------------
John E. Grimm, III Director September 9, 1996
/s/ Lanny R. Julian
- - -------------------------
Lanny R. Julian Director September 9, 1996
/s/ Noel Thomas Patton
- - -------------------------
Noel Thomas Patton Director September 9, 1996
/s/ Beatrice B. Smith
- - -------------------------
Beatrice B. Smith Director September 9, 1996
16
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INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Exhibit Page
- - ------ ------- ----
2 (a) Agreement of Sale, dated September 11, 1992 between the
Rival Company and the Marley Company, relative to the
acquisition by the Company of specified assets of Simer
Pump (incorporated by reference to Exhibit 2 to
Registrant's Form 8-K dated as of September 15, 1992).
(b) Purchase Agreement by and between The Rival Company and
Pollenex Corporation dated April 30, 1993 (incorporated
by reference to Exhibit 1 to Registrant's Form 8-K dated
as of April 30, 1993).
(c) Purchase Agreement by and among Rival Acquisition Company,
The Rival Company and Patton Electric Company, Inc.,
Giant Lion Trading, Ltd. and Noel Thomas Patton and Eve
M. Patton dated April 21, 1995 (incorporated by reference
to Exhibit 1 to Registrant's Form 8-K dated as of April
21, 1995).
(d) Stock Purchase Agreement between H.S. Investments, Inc.
as seller, and The Rival Company, as buyer as of
December 29, 1995 (incorporated by reference to Exhibit 2
to Form 8-K dated as of January 2, 1996).
(e) Offer to purchase all of the Common Shares of Bionaire
Inc. (Offering Circular) dated March 5, 1995
(incorporated by reference to Exhibit 1 to Form 8-K
dated as of April 2, 1996).
3 (a) Restated Certificate of Incorporation of The Rival
Company, a Delaware corporation (the "Company")
(incorporated by reference to Exhibit 3(a) to
Registrant's Form 10-K for the year ended June 30, 1992).
(b) Bylaws of the Company (incorporated by reference to
Exhibit 3(b) to Registrant's Form 10-Q for the quarter
ended December 31, 1994).
4 (a) Form of Certificate representing shares of Common Stock,
par value $.01 per share (incorporated by reference to
Exhibit 4(a) to Registrant's Registration Statement on
Form S-1, Registration Number 33-46794 dated June 2,
1992 ("Registrant's S-1")).
(b) Form of Certificate of Ownership and Merger of The Rival
Company into Rival Manufacturing Company (incorporated
by reference to Registrant's S-1).
10(a) Note Purchase Agreement for $50,000,000 Senior Unsecured
Notes dated as of July 23, 1993 between the Company and
the Purchasers listed therein (incorporated by
reference to Registrant's Form 10-K for the year ended
June 30, 1993).
(b) Note Purchase Agreement for $50,000,000 Senior Unsecured
Notes dated as of April 15, 1996 between the Company and
The Purchasers listed therein (incorporated by
reference to Registrant's Form 10-Q for the quarter
ended March 31, 1996).
(c) Credit Agreement for a $75,000,000 Revolving Credit
Facility dated as of April 15, 1996 between the
Company, the banks listed therein and, NationsBank of
Texas, N.A. as agent (incorporated by reference to
Registrant's Form 10-Q for the quarter ending March 31,
1996).
17
<PAGE>
(d) ** The Company's 1986 Stock Option Plan, as amended and
restated (incorporated by reference to Exhibit 10(a) to
Registrant's S-1).
(e) ** The Company's 1994 Stock Option Plan (incorporated by
reference to Exhibit A to Registrant's Proxy Statement,
dated September 23, 1994 for its 1994 Annual Meeting of
Shareholders).
(f) ** Rival Secular Trust Agreement (incorporated by reference
to Exhibit 10(e) to Registrant's S-1).
(g) ** Employment Agreements, dated as of February 1, 1989
between the Company and Thomas K. Manning, William S.
Endres, Darrel Sanders and William L. Yager
(incorporated by reference to Registrant's Form 10-K
for the year ended June 30, 1993).
(h) * Employment Agreement dated as of March 1, 1996 between
the Company and Richard M. Bertelli.
(i) * Description of The Rival Company, Management Incentive
** Compensation Plan.
11 * Statement regarding computation of earnings per share of
the Company.
13 * Annual Report to Stockholders for fiscal year ended June
30, 1996 (except for those pages which are specifically
incorporated herein by reference, the Company's Annual
Report is not to be deemed filed as part of this
report.)
21 * List of subsidiaries of the Company.
23 * Independent auditors' consent
- - -------------------
* Filed herewith
** Management contract or compensation plan arrangement
required to be filed as an exhibit pursuant to Item
14(c) of Form 10-K.
__________________
The above exhibits may be obtained by Shareholders upon written
request to the Office of the Secretary, 800 E. 101st Terrace,
Kansas City, Missouri 64131.
18
<PAGE>
Exhibit 10(h)
-------------
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of March 1,
1996, by and between THE RIVAL COMPANY, a Delaware corporation (the
"Company"), and Richard M. Bertelli (the "Executive").
A. Executive is currently employed as the Vice President of the Company.
B. The Company and Executive desire to continue such employment and to
provide economic security to the Executive, on the terms hereinafter set
forth, in the event such employment is terminated under certain circumstances.
Accordingly, in consideration of the foregoing premises, and for other
valuable consideration, the adequacy of which is hereby acknowledged, the
Company and the Executive, intending to be legally bound, hereby agree as
follows:
1. In the event that the Executive's employment is terminated by the
Company other than for "just cause" (as defined in numerical paragraph 2
hereof) or Executive terminates his employment for stated "good cause" (as
defined in numerical paragraph 3 hereof), the Company shall be obligated to
pay Executive (or his estate if Executive shall have died after being
discharged) six months severance pay, which shall equal such number of
months multiplied by the Executive's Annual Base Salary, divided by 12. For
purposes of this Agreement, Executive's Annual Base Salary shall equal the
base salary paid to Executive by the Company during the one year period ending
on the last day of the most recent pay period preceding the date of
termination, provided that if Executive has been employed by the Company for a
shorter period, the base salary for such shorter period shall be annualized.
Such severance pay shall be paid to Executive (or his estate) in substantially
equal monthly installments on the first day of each of the six months
commencing with the month immediately following the month in which his
employment with the Company is terminated.
2. The term "just cause", for purposes of termination of Executive's
employment for "just cause", shall mean (a) the Executive's violation of any
reasonable rule or regulation of the Board of Directors or the Executive's
superior or the Chief Executive Officer of the Company that results in
significant damage to the Company or which, after written notice to do so,
Executive fails to make reasonable efforts to correct within a reasonable
time, (b) any refusal by Executive to comply with a reasonable, direct order,
(c) any wilful misconduct by Executive in the responsibilities reasonably
assigned to him, (d) any refusal by Executive to perform his job as required
to meet Company objectives or (e) the Executive's performing services for any
other corporation or person which competes with the Company while he is
employed by the Company and without the written approval of the Chief
Executive Officer of the Company; provided, however, that
<PAGE>
there shall be a rebuttable presumption that any discharge of Executive by the
Company within two (2) years after there has been a "change in control" (as
defined in numerical paragraph 4 hereof) is a discharge other than for "just
cause."
3. The term "good cause", for purposes of termination by Executive of
Executive's employment for "good cause" shall mean: (a) any reduction in
Executive's salary, benefits or annual bonus not substantially commensurate
with reductions for other executive employees of the Company, (b) the
involuntary relocation or proposed involuntary relocation of Executive outside
the Kansas City and Clinton areas by the Company, (c) the assignment to
Executive of services and responsibilities not approved by Executive which are
not substantially commensurate with the executive and managerial services and
responsibilities which he is then performing for the Company or (d) a good
faith belief by Executive that Executive can no longer perform his duties for
the Company because of actions taken by the Company.
4. For purposes of this Agreement, a "change in control" shall mean (a)
the acquisition, directly or indirectly, by any "person" or "group" of
"persons" (as the terms are used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 and the rules thereunder) of beneficial ownership of
securities of the Company or of securities of the Company's ultimate parent
corporation representing 30% or more of the combined voting power of the then
outstanding securities of such corporation, (b) any merger, consolidation or
sale of all or a substantial part of the assets of the Company or (c) a change
in the Board of Directors such that a majority of a Board of Directors of the
Company or the Company's ultimate parent corporation ceases to consist of
Continuing Directors ("Continuing Director " means any person who was a member
of the Board of Directors of the Company or the ultimate parent corporation,
as the case may be, as of the date hereof, and any person who subsequently
becomes a member of such Board of Directors if such person's appointment,
election or nomination for election to such Board of Directors is recommended
or approved by a majority of the then Continuing Directors of such Board of
Directors).
5. The Company acknowledges and agrees that Executive shall be entitled to
receive all of the payments provided for herein regardless of any income which
Executive may receive from other sources after the termination of his
employment with the Company.
6. Nothing in this Agreement shall confer upon Executive the right to
continue in the employ of the Company or any of its subsidiaries or, subject
to the terms hereof, shall affect any right which the Company or any of its
subsidiaries may have to terminate the employment of the Executive. No
benefit provided herein is intended or shall be deemed to be granted to
Executive in lieu of any benefits, rights or privileges to which may be
entitled while he is an employee of the Company under any retirement, pension,
insurance, hospitalization, stock option, stock purchase, incentive
compensation or other plan of the Company which may now be in effect or which
may hereafter be adopted, it
<PAGE>
being understood that Executive shall have the same rights and privileges to
participate in such plans while employed by the Company as any other executive
employee of the Company.
7. As consideration for the execution of this Agreement by the Company,
Executive covenants and agrees as follows:
(a) During the term of and at all times after the termination (whether by
the Company or the Executive) of Executive's employment with the Company,
Executive shall keep confidential and not disclose to any person, firm or
corporation (other than the Company, a person designated in writing by the
Company, or as may otherwise be required by law or reasonable business
practice), the trade secrets or confidential information or knowledge relating
to the business of the Company or its affiliates or subsidiaries, including,
without limiting the generality of the foregoing: (i) the names of the
Company's agents, suppliers and customers; (ii) the contractual arrangements
between the Company and its agents, suppliers or customers; (iii) the
financial details (including credit and discount terms) of the Company's
relationship with its agents, suppliers or customers; (iv) the names of
prospective customers and their requirements; (v) information concerning the
Company's financial structure or operating results; (vi) information
concerning all inventions, products, discoveries, improvements, processes,
manufacturing, marketing and service methods or techniques, developments,
ideas, concepts, designs, styles, specifications, knowhow, strategies and
data, whether or not patentable or registerable under copyright or similar
statues, owned by the Company; (vii) information concerning the remuneration
paid by the Company to its employees; or (viii) any other matter which is not
readily available to the public relating to the business of the Company.
(b) All correspondence, notes, recordings, files, keys, computer programs
(whether source code or object code) and other materials and reproductions
thereof pertaining in any respect to the Company, its subsidiaries or
affiliates or any of their respective businesses, shall be the property of and
shall be delivered to and retained by the Company upon Executive's termination
of employment with the Company.
8. Executive acknowledges that the provisions of numerical paragraph 7
hereof are reasonable and necessary to protect the legitimate interests of the
Company and its subsidiaries and affiliates (such subsidiaries and affiliates,
whether now in existence or coming into existence later during the term of
this Employment Agreement, being third-party intended beneficiaries of
numerical paragraph 7 of this Agreement) and that any violation by Executive
of any provision of numerical paragraph 7 will cause irreparable injury to the
Company, its subsidiaries and affiliates. Executive acknowledges that the
Company, its subsidiaries and affiliates are entitled to appropriate
injunctive relief in any court of competent jurisdiction to enforce their
rights hereunder, in addition to any other rights available to them at law or
in equity.
<PAGE>
9. In the event Executive commences litigation to enforce his rights under
this Agreement and prevails in such litigation, Executive shall be entitled to
recover his costs and expenses, including reasonable attorneys' fees.
10. No delay or omission to exercise any right, power or remedy accruing
under this Agreement shall impair any such right, power or remedy nor shall it
be construed to be a waiver of any such right, power or remedy or of any
similar right, power or remedy to which a party thereafter becomes entitled.
Any waiver, permit, consent or approval of any kind or character under this
Agreement, or any waiver of any provisions or conditions of this Agreement,
must be in writing and shall be effective only to the extent specifically set
forth in such writing.
11. If any part of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part by reason of any rule of law or public policy, such part shall be
deemed to be severed from the remainder of this Agreement for the purpose only
of the particular legal proceedings in question and all other covenants and
provisions of this Agreement shall in every other respect continue in full
force and effect and no covenant or provision shall be deemed dependent upon
any other covenant or provision.
12. This Agreement shall inure to and be binding upon the parties hereto
and their respective heirs, successors and assigns, including, without
limitation, any person, partnership or corporation which may acquire all or
substantially all of the Company's assets and business or with or into which
the Company may be consolidated or merged, and this provision shall apply in
the event of any subsequent merger, consolidation or transfer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
THE RIVAL COMPANY
By:
-------------------------------
Thomas K. Manning
President
EXECUTIVE:
------------------------------------
Richard M. Bertelli
Vice President of Sales
Exhibit 10(i)
The Rival Company
Management Incentive Compensation Plan
Each year, under the Management Incentive Bonus Plan, the Committee
establishes a goal relating to the Company's operating income that sets the
minimum and maximum bonus pools that may be earned. No bonus is paid to the
Chief Executive Officer, the President, the Chief Financial Officer or the
Senior Vice Presidents if a minimum level of budgeted operating income is not
achieved. The incentive pool is established as a percentage of operating
income earned by the Company over the threshold. A majority of the incentive
pool generated by reaching the target is distributed in cash ratably to
designated executive officers and managers at year-end based on a weighing of
positions and base salaries. The remaining portion of the incentive pool is
distributed to outstanding performers within the eligible group based on the
recommendation of the CEO to the Committee. The targeted and maximum bonuses
payable to executive officers represent a significant portion of an
executive's total compensation (25-30% of the total compensation derived from
a combination of base salary, bonus and stock options).
Exhibit 11
THE RIVAL COMPANY AND SUBSIDIARIES
Earnings Per Share
(in thousands except per share data)
Years Ended June 30
-------------------
Primary Earnings Per Share* 1996 1995 1994
- - -------------------------- -------- -------- --------
Net earnings $ 14,239 $ 13,985 $ 14,317
======== ======== ========
Weighted average common and common
equivalent shares outstanding 9,950 9,505 9,475
-------- -------- --------
Earnings per common and common
equivalent shares $ 1.43 $ 1.47 $ 1.51
-------- -------- --------
Computation of weighted average
common and common equivalent
shares outstanding:
Average common shares
outstanding 9,725 9,312 9,248
Average number of
options outstanding 557 433 367
Less treasury shares acquired
with proceeds from exercise
of options (332) (240) (140)
-------- -------- --------
Weighted average common and common
equivalent shares outstanding 9,950 9,505 9,475
======== ======== ========
* Fully diluted earnings per share is equal to primary earnings per share for
all periods presented.
Consolidated Statements of Earnings Data
(In thousands, except per share amounts)
Years ended June 30, 1996 1995 1994 1993 1992
- - -----------------------------------------------------------------------------
Net sales $313,864 $231,711 $229,233 $184,451 $163,516
Cost of sales 230,207 168,406 162,703 130,979 118,711
------------------------------------------------
Gross profit 83,657 63,305 66,530 53,472 44,805
Selling, general and
administrative expenses 51,258 34,908 37,885 30,243 25,716
Amortization of goodwill 1,735 1,327 1,233 1,109 1,098
------------------------------------------------
Operating income 30,664 27,070 27,412 22,120 17,991
Interest expense 7,117 4,216 4,113 3,560 7,763
Other expenses 295 120 205 301 599
------------------------------------------------
Earnings before income taxes
and extraordinary item 23,252 22,734 23,094 18,259 9,629
Income tax expense 9,013 8,749 8,777 7,023 3,953
------------------------------------------------
Earnings before
extraordinary item 14,239 13,985 14,317 11,236 5,676
Extraordinary loss,
extinguishment of debt, net - - - 510 1,750
------------------------------------------------
Net earnings $ 14,239 $ 13,985 $ 14,317 $ 10,726 $ 3,926
================================================
Net earnings attributable
to common stock $ 14,239 $ 13,985 $ 14,317 $ 10,726 $ 2,989
================================================
Net earnings per
common share $ 1.43 $ 1.47 $ 1.51 $ 1.14 $ 0.51
================================================
Dividends per common share $ 0.20 $ 0.16 $ 0.12 $ - $ -
================================================
Weighted average common and
common equivalent shares
outstanding (1) 9,950 9,505 9,475 9,417 5,905
================================================
(1) Stock options are included as common stock equivalents.
Consolidated Balance Sheet Data
(In thousands, except per share amounts)
At June 30, 1996 1995 1994 1993 1992
------------------------------------------------
Working capital $ 91,396 $ 60,293 $ 60,063 $ 52,225 $ 22,912
Total assets 288,251 204,368 151,467 139,666 106,443
Long-term debt
(less current portion) 88,000 42,000 46,000 50,000 25,000
Stockholders' equity 106,148 93,805 76,104 62,085 51,415
* The tables above should be read in conjunction with the Company's
consolidated financial statements and notes, which appear herein on pages
20-30, inclusive.
Page 14
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Consolidated Statements of Earnings Data
(Expressed as a percentage of sales)
Years ended June 30, 1996 1995 1994
------------------------
Net sales 100.0% 100.0% 100.0%
Cost of sales 73.3 72.7 71.0
-----------------------
Gross profit 26.7 27.3 29.0
Selling, general and administrative expenses 16.3 15.0 16.5
Amortization of goodwill 0.6 0.6 0.5
-----------------------
Operating income 9.8 11.7 12.0
Interest expense 2.3 1.8 1.8
Other expenses 0.1 0.1 0.1
-----------------------
Earnings before income taxes 7.4 9.8 10.1
Income tax expense 2.9 3.8 3.9
-----------------------
Net earnings 4.5% 6.0% 6.2%
=======================
Net Sales by Product Category
($ in millions)
The Company's sales generally fall into four product categories:
* Kitchen heating appliances such as Crock Pot (REGISTERED TRADEMARK)
slow cookers, steamers, indoor grills and toasters;
* Kitchen motor driven appliances such as can openers, slicers, mixers,
food processors and blenders;
* Other electric appliances such as space heaters, fans, simmering
potpourri cookers, household ventilation, ice cream freezers, air
cleaners, humidifiers, door chimes and massagers; and
* Water products such as sump, utility and well pumps, shower heads and
water filtration devices.
(Pie chart)
1994 Net Sales ($ in millions)
- - -------------------------------------------
Kitchen Heating Appliances $ 96.3
Other Electric Appliances $ 49.4
Water Products $ 45.0
Kitchen Motor-Driven Appliances $ 38.5
------
$229.2
======
(Pie chart)
1995 Net Sales ($ in millions)
- - -------------------------------------------
Kitchen Heating Appliances $ 98.3
Other Electric Appliances $ 63.1
Water Products $ 31.3
Kitchen Motor-Driven Appliances $ 39.0
------
$231.7
======
(Pie chart)
1996 Net Sales ($ in millions)
- - -------------------------------------------
Kitchen Heating Appliances $116.4
Other Electric Appliances $128.7
Water Products $ 34.1
Kitchen Motor-Driven Appliances $ 34.7
------
$313.9
======
Page 15
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The Company's sales grew from $231.7 million in fiscal 1995 to $313.9 million
in fiscal 1996. Much of this growth was the result of three acquisitions:
* Patton Electric Company ("Patton") which manufactures fans and space
heaters for household and industrial use was acquired in April 1995.
Prior to the acquisition, Patton's annual sales were approximately $40.0
million.
* Fasco Consumer Products, Inc. ("Fasco") which manufactures an assortment
of products including household ventilation, ceiling fans, door chimes
and heaters was acquired in January 1996. Fasco generates annual sales
of approximately $40.0 million in the home center, building supply and
industrial distribution channels.
* Bionaire, Inc. ("Bionaire") which assembles and sells air purifiers and
humidifiers for household use was acquired in April, 1996. Bionaire has
annual sales of approximately $57.0 million with retail distribution in
the U.S., Canada and Europe.
Together, Patton, Fasco and Bionaire contributed $72.5 million to fiscal
1996 consolidated sales. Patton contributed $10.9 million to fiscal 1995
consolidated sales.
In addition to sales growth through these acquisitions, the Company's other
products grew by $20.6 million (9%) during fiscal 1996. The majority of this
increase was in kitchen heating appliances which increased by $18.7 million.
The vast majority of the Company's sales are in product lines which are
relatively mature and provide a stable base of revenues. Future growth is
expected to be generated primarily from 1) the introduction of new products
and product lines under each of the Company's brand names, 2) expansion and
enhancement of the customer base and distribution for Patton, Simer and Fasco
products, 3) future acquisitions and 4) increased sales through international
markets.
Fiscal 1996 compared to Fiscal 1995
Net Sales
Net sales increased $82.2 million to $313.9 million for the year ended June
30, 1996 ("fiscal 1996") compared to $231.7 million for the year ended June
30, 1995 ("fiscal 1995"). The majority ($61.6 million) of the $82.2 million
increase reflected the sales contributions of Patton, Fasco and Bionaire,
companies acquired between April 1995 and April 1996. Excluding these acquired
businesses, sales increased by $20.6 million (9%), primarily from an $18.7
million increase in kitchen heating appliance sales. A modest price increase
combined with higher unit sales, especially of toasters and Crock Pot
(REGISTERED TRADEMARK) slow cookers, contributed to the sales growth.
Gross Profit
Gross profit was $83.7 million (26.7% of net sales) in fiscal 1996 compared to
$63.3 million (27.3% of net sales) in fiscal 1995. The decline in the gross
margin as a percentage of sales was the result of low margins on sales of
Patton products caused by the high cost of component inventories purchased in
the April 1995 acquisition, and unfavorable variances resulting from failure
of overseas suppliers to deliver components.
(Bar chart)
Net Sales (Millions of Dollars)
- - --------------------------------------
1992 $163.5
1993 $184.5
1994 $229.2
1995 $231.7
1996 $313.9
(Bar chart)
Operating Income (Millions of Dollars)
- - --------------------------------------
1992 $ 18.0
1993 $ 22.1
1994 $ 27.4
1995 $ 27.1
1996 $ 30.7
Page 16
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses totaled $51.3 million (16.3% of
net sales) in fiscal 1996 compared to $34.9 million (15.0% of net sales) in
fiscal 1995. Selling expenses increased as a percentage of net sales from
11.2% to 12.7%. The higher selling expense percentage was primarily the result
of the operations of Fasco and Bionaire. Excluding these businesses, selling
expenses were 11.6% as compared to 11.2% in the prior year with the increase
being the result of incremental spending on print and television advertising
to promote the Crock Pot (REGISTERED TRADEMARK) slow cooker. Selling expenses
for Fasco and Bionaire totaled $5.8 million (24.3% of net sales). These
expenses were especially high due to the seasonality of Bionaire sales
(Bionaire was acquired in the fourth fiscal quarter and less than 10% of annual
volume is shipped during such quarter) and the incomplete integration of
Bionaire and Fasco businesses into the consolidated entity. General and
administrative expenses were $11.4 million in fiscal 1996 compared to $8.9
million in 1995. The increase was generally required to support the company's
growth. General and administrative expenses as a percentage of net sales
declined from 3.8% to 3.6%.
Interest Expense
Interest expense was $7.1 million in fiscal 1996 compared to $4.2 million in
fiscal 1995. Total average borrowings increased from $66 million to $106
million due to the aforementioned acquisitions. The average interest rate
increased from 6.1% to 6.7% as a result of higher interest rates on the
revolving credit facility and the issuance of 10 year notes in April 1996 at
an interest rate of 7.21%.
Income Taxes
Effective income tax rates were 38.8% in fiscal 1996 compared to 38.5% in
fiscal 1995. The statutory rate was 35% in each year. The difference between
the statutory rate and the effective rate is primarily due to nondeductible
amortization of goodwill recorded as a result of the 1986 acquisition of the
Company, provisions for state income taxes and differences between the rate of
taxation between the Company's U.S. and international operations.
Net Earnings
Net earnings were $14.2 million ($1.43 per share) in fiscal 1996 compared to
$14.0 million ($1.47 per share) in fiscal 1995. The decrease in net earnings
per share reflects additional shares issued by the Company in conjunction with
the acquisition of Patton.
Fiscal 1995 compared to Fiscal 1994
Net Sales
Net sales were $231.7 million for the year ended June 30, 1995 ("fiscal 1995")
compared to $229.2 million for the year ended June 30, 1994 ("fiscal 1994").
Sales of kitchen heating appliances and kitchen motor-driven appliances
increased slightly despite a combination of slow retail sales and efforts by
retailers to reduce their inventories during the third and fourth fiscal
quarters. Sales of other electric appliances increased $13.7 million due to
the Patton acquisition which contributed $10.9 million to the fourth quarter
sales together with higher sales of Pollenex air cleaners. Sales of water
products declined $13.7 million due primarily to lower sales of Simer pumps
which resulted from dry weather in key midwestern markets, especially when
compared to unusually heavy rainfall during fiscal 1994.
(Bar chart)
Interest Expense (Millions of Dollars)
- - --------------------------------------
1992 $ 7.8
1993 $ 3.6
1994 $ 4.1
1995 $ 4.2
1996 $ 7.1
(Bar chart)
Stockholders' Equity (Millions of Dollars)
- - --------------------------------------
1992 $ 51.4
1993 $ 62.1
1994 $ 76.1
1995 $ 93.8
1996 $106.1
Page 17
<PAGE>
Gross Profit
Gross profit was $63.3 million (27.3% of net sales) in fiscal 1995 compared to
$66.5 million (29.0% of net sales) in fiscal 1994. The decline in gross
margins was primarily the result of increasing raw material costs.
Substantially all significant raw materials: plastics, aluminum, steel and
cardboard increased dramatically throughout fiscal 1995. A price increase
implemented in January 1995 partially offset these cost increases. Retailers
and consumers remain extremely price conscious which has made it difficult for
the Company as well as others in the industry to increase prices sufficiently
to maintain margins.
Selling, General and Administrative Expense
Selling, general and administrative expenses totaled $34.9 million (15.0% of
net sales) in fiscal 1995 compared to $37.9 million (16.5% of net sales) in
fiscal 1994. Selling expenses decreased as a percentage of sales from 12.1% to
11.2%. Advertising expenses were lower by $1.1 million (.5% of sales) due to
utilizing less regional television advertising as well as improved control
over cooperative advertising with the Company's retail customers. Selling
expenses in fiscal 1994 also included non-recurring costs related to the post-
acquisition Pollenex transition as well as significant expenditures for Rival
Select (TRADEMARK) packaging design. General and administrative expenses were
$8.9 million in fiscal 1995 compared to $10.2 million in fiscal 1994. Legal
and professional expenses declined as fiscal 1994 included costs related to a
secondary stock offering and the completion of an EPA clean-up in Mississippi.
The management incentive bonus accrual was also lower in fiscal 1995.
Interest Expense
Interest expense was $4.2 million in fiscal 1995 compared to $4.1 million in
fiscal 1994. Total average borrowings decreased slightly from $65.5 million to
$63.8 million. This decrease in borrowings was more than offset by an increase
in the average interest rate from 6.1% to 6.5%.
Income Taxes
Effective income tax rates were 38.5% in fiscal 1995 compared to 38.0% in
fiscal 1994. The statutory rate was 35% in each year. The difference between
the statutory rate and the effective rate is primarily due to nondeductible
amortization of goodwill recorded as a result of the 1986 acquisition of the
Company and provisions for state income taxes. The increase in the effective
income tax rate from 1994 to 1995 is the result of legislation increasing
Missouri corporate income taxes.
Net Earnings
Net earnings were $14.0 million ($1.47 per share) in fiscal 1995 compared to
$14.3 million ($1.51 per share) in fiscal 1994. The decrease in net earnings
resulted from lower gross margins as a percentage of sales. The Company was,
however, able to offset much of the gross margin decline by reducing selling,
general and administrative costs by $3.0 million (from 16.5% of sales to 15.0%
of sales).
Liquidity & Capital Resources
The Company generated earnings plus depreciation and amortization of $22.5
million in fiscal 1996, $20.6 million in fiscal 1995 and $21.1 million in
fiscal 1994. In recent years, the Company has used its operating cash flows to
make significant investments in its business as evidenced by the $75.2 million
spent on four acquisitions and the investment of $16.6 million in plant and
equipment during the three years ended June 30, 1996.
Cash provided by operating activities was $3.4 million in fiscal 1996, $9.2
million in fiscal 1995
(Bar chart)
Net Earnings (Millions of Dollars)
- - --------------------------------------
1992 $ 3.9
1993 $ 10.7
1994 $ 14.3
1995 $ 14.0
1996 $ 14.2
(Bar chart)
Dividends Per Share
- - --------------------------------------
1992 $ 0.0
1993 $ 0.0
1994 $ 0.12
1995 $ 0.16
1996 $ 0.20
Page 18
<PAGE>
and $14.9 million in fiscal 1994. The amount of net cash provided by operating
activities can fluctuate significantly as a result of changes in accounts
receivable and inventory balances. During fiscal 1996, strong fourth quarter
sales resulted in a significant increase in accounts receivable.
Investing activities have resulted in a net use of cash during each of the
past three fiscal years due to expenditures for property, plant and equipment
together with acquisitions. Capital expenditures were $5.9 million in fiscal
1996, $4.9 million in fiscal 1995 and $5.9 million in fiscal 1994.
Cash flows from financing activities in fiscal 1996 consisted primarily of
$50 million borrowed in a private placement under a ten year, 7.21% unsecured
note purchase agreement. Additionally, the Company had a net increase in
borrowings under its working capital loans of $7.8 million during fiscal 1996.
During fiscal 1994, $50 million was received from the sale of unsecured notes
with a 6.42% fixed rate in a private placement. The majority of the proceeds
from the 1994 transaction was used to retire term loans under a previous bank
credit agreement.
The Company's operations require significant amounts of working capital,
particularly during the fall of each year. Sales are on terms which generally
range from 30 days to 75 days, resulting in substantial accounts receivable
balances. Due to the seasonal nature of the business, the Company builds
inventory levels during the spring and summer in anticipation of a heavy
August through November selling season for Rival, Pollenex and Bionaire
products. Historically, inventory levels peak in August. The Company
relies on revolving credit loans to finance these work-ing capital require-
ments.
As of June 30, 1996, the Company had $92 million in long term debt
(including $4 million current portion) and $85 million in revolving loan
commitments. Revolving credit loans outstanding were $51.9 million as of such
date. The long term debt requires periodic principal payments including $4.0
million for each of the next two years and has a final maturity in 2008. The
revolving credit facilities include a $75 million U.S. bank line and a
Canadian facility for the Canadian dollar equivalent of U.S. $10.0 million.
The U.S. revolving credit facility expires in June 1999 and currently bears
interest at a floating rate of LIBOR plus .75%. In addition, the Company is
required to pay a fee of .25% on the unused portion of the commitment.
The term notes and the revolving credit loans include financial covenants
regarding minimum net worth, minimum fixed charge coverage ratios and maximum
leverage ratios. The borrowings under the U.S. revolving credit facility are
required to be $45 million or less for a period of 45 consecutive days each
year. No assets of the Company are pledged to secure any indebtedness.
Management believes that cash generated from operations, together with the
revolving loan commitments will be sufficient to meet its cash requirements
for the foreseeable future.
Inflation
The Company believes that its business is not affected by inflation, except to
the extent the economy in general is affected thereby.
(Bar chart)
Total Assets (Millions of Dollars)
- - --------------------------------------
1992 $106.4
1993 $139.7
1994 $151.5
1995 $204.4
1996 $288.3
(Bar chart)
Working Capital (Millions of Dollars)
- - --------------------------------------
1992 $ 22.9
1993 $ 52.2
1994 $ 60.1
1995 $ 60.3
1996 $ 91.4
(Bar chart)
Long-Term Debt (Millions of Dollars)
- - --------------------------------------
1992 $ 25.0
1993 $ 50.0
1994 $ 46.0
1995 $ 42.0
1996 $ 88.0
Page 19
<PAGE>
Consolidated Balance Sheets
(In thousands)
June 30, 1996 1995
- - -----------------------------------------------------------------------------
Assets
Current assets:
Cash $ 1,503 $ 193
Accounts receivable 74,103 43,492
Inventories 102,030 81,104
Deferred income tax charges 1,602 860
Prepaid expenses 2,142 835
------------------
Total current assets 181,380 126,484
Property, plant and equipment, net 40,345 27,072
Goodwill 60,086 48,186
Other assets 6,440 2,626
------------------
$288,251 $204,368
==================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to bank $ 51,896 $ 37,627
Current portion of long-term debt 4,000 4,000
Trade accounts payable 20,354 14,972
Accrued interest 2,232 1,488
Income taxes payable 197 577
Other payables and accrued expenses 11,305 7,527
------------------
Total current liabilities 89,984 66,191
Long-term debt, less current portion 88,000 42,000
Deferred income taxes and other liabilities 4,119 2,372
Stockholders' equity:
Common stock, $0.01 par value.
Authorized 15,000,000 shares; issued, 9,755,064 in
1996 and 9,740,330 in 1995; outstanding, 9,729,667
in 1996 and 9,714,933 in 1995 97 97
Paid-in capital 45,488 45,366
Foreign currency translation (468) (395)
Treasury stock, at cost (310) (310)
Retained earnings 61,341 49,047
------------------
Total stockholders' equity 106,148 93,805
Commitments and contingencies
------------------
$288,251 $204,368
==================
See accompanying notes to consolidated financial statements.
Page 20
<PAGE>
Consolidated Statements of Earnings
(In thousands, except per share amounts)
Years ended June 30, 1996 1995 1994
- - -----------------------------------------------------------------------------
Net sales $313,864 $231,711 $229,233
Cost of sales 230,207 168,406 162,703
----------------------------
Gross profit 83,657 63,305 66,530
Selling expenses 39,884 26,019 27,722
General and administrative expenses 11,374 8,889 10,163
Amortization of goodwill 1,735 1,327 1,233
----------------------------
Operating income 30,664 27,070 27,412
----------------------------
Other expenses:
Interest expense 7,117 4,216 4,113
Miscellaneous, net 295 120 205
----------------------------
Total other expenses 7,412 4,336 4,318
----------------------------
Earnings before income taxes 23,252 22,734 23,094
Income tax expense 9,013 8,749 8,777
----------------------------
Net earnings $ 14,239 $ 13,985 $ 14,317
============================
Weighted average common and common equivalent
shares outstanding 9,950 9,505 9,475
============================
Net earnings per common share $ 1.43 $ 1.47 $ 1.51
============================
See accompanying notes to consolidated financial statements.
Page 21
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
(In thousands, except share amounts)
Foreign Total
Common Paid-In Currency Treasury Retained Stockholders'
Stock Capital Translation Stock Earnings Equity
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance June 30, 1993 $91 $39,188 $(235) $(310) $23,351 $ 62,085
Common stock issued - 160,980 shares 2 28 - - - 30
Foreign currency translation
adjustments - - (174) - - (174)
Compensation expense from issuance
of non-qualified stock options,
net of income tax benefit of $55 - 95 - - - 95
Income tax benefit recognized upon
exercise of non-qualified stock
options - 865 - - - 865
Dividends paid - - - - (1,114) (1,114)
Net earnings - - - - 14,317 14,317
------------------------------------------------------------
Balance June 30, 1994 93 40,176 (409) (310) 36,554 76,104
Common stock issued - 9,370 shares - 43 - - - 43
Foreign currency translation
adjustments - - 14 - - 14
Compensation expense from issuance
of non-qualified stock options,
net of income tax benefit of $18 - 32 - - - 32
Income tax benefit recognized upon
exercise of non-qualified stock
options - 43 - - - 43
Purchase of common stock for treasury
- 427,100 shares - - - (6,824) - (6,824)
Common stock issued relative to the
acquisition of a business - 850,000
shares 4 5,072 - 6,824 - 11,900
Dividends paid - - - - (1,492) (1,492)
Net earnings - - - - 13,985 13,985
------------------------------------------------------------
Balance June 30, 1995 97 45,366 (395) (310) 49,047 93,805
Common stock issued - 14,734 shares - 30 - - - 30
Foreign currency translation
adjustments - - (73) - - (73)
Income tax benefit recognized upon
exercise of non-qualified stock
options - 92 - - - 92
Dividends paid - - - - (1,945) (1,945)
Net earnings - - - - 14,239 14,239
------------------------------------------------------------
Balance June 30, 1996 $97 $45,488 $(468) $(310) $61,341 $106,148
============================================================
See accompanying notes to consolidated financial statements.
</TABLE>
Page 22
<PAGE>
Consolidated Statements of Cash Flows
(In thousands)
Years ended June 30, 1996 1995 1994
- - -----------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net earnings $14,239 $13,985 $14,317
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 8,293 6,638 6,828
Provision for losses on accounts receivable 463 356 685
Deferred income taxes (402) 260 (284)
Issuance and exercise of non-qualified
stock options 92 75 960
Other - - (287)
Changes in assets and liabilities,
net of acquisitions:
Accounts receivable (15,101) (2,610) (4,857)
Inventories (3,727) (5,435) (5,307)
Prepaid expenses 455 248 432
Income taxes (380) 171 (717)
Accounts payable and accruals (567) (4,537) 3,092
-------------------------
Total adjustments (10,874) (4,834) 545
-------------------------
Net cash provided by operating activities 3,365 9,151 14,862
-------------------------
Cash Flows from Investing Activities:
Capital expenditures (5,873) (4,905) (5,867)
Acquisition of businesses (47,670) (25,269) (2,265)
Other (278) 329 (200)
-------------------------
Net cash used in investing activities (53,821) (29,845) (8,332)
-------------------------
Cash Flows from Financing Activities:
Borrowings under working capital loans 122,854 85,627 64,900
Repayment of working capital loans (115,100) (52,600) (78,300)
Borrowings under term loan agreements 50,000 - 50,000
Repayment of long-term debt (4,000) (4,000) (42,000)
Net proceeds from issuance of common stock 30 43 30
Dividends paid (1,945) (1,492) (1,114)
Purchase of common stock for treasury - (6,824) -
-------------------------
Net cash provided (used) by
financing activities 51,839 20,754 (6,484)
-------------------------
Effect of Exchange Rate Changes on Cash (73) 14 (174)
-------------------------
Net Increase (Decrease) in Cash 1,310 74 (128)
Cash at Beginning of Period 193 119 247
-------------------------
Cash at End of Period $ 1,503 $ 193 $ 119
=========================
See accompanying notes to consolidated financial statements.
Page 23
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except per share data)
1. Summary of Significant Accounting Policies
Operations of The Rival Company and its Subsidiaries
The Rival Company and its subsidiaries ("the Company") design, manufacture and
market small household appliances, personal care appliances, commercial and
industrial fans, ventilation equipment as well as sump, well and utility
pumps. The Company sells its products to retail and industrial customers,
primarily in the U.S. and Canada. The Company's raw materials are readily
available, and the Company is not dependent on any small group of suppliers.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of The Rival
Company and its direct and indirect wholly-owned subsidiaries: Bionaire Inc.
("Bionaire - Canada"), Bionaire Corporation ("Bionaire - U.S."), Bionaire
International B.V. ("Bionaire - Europe"), Fasco Consumer Products, Inc.
("Fasco"), Pollenex Corporation ("Pollenex"), Patton Electric Company, Inc.
("Patton"), Patton Electric (Hong Kong) Limited ("PEHK"), Rival Manufacturing
Company of Canada, Ltd. ("Rival-Canada") and Waverly Products Company, Ltd.
All significant intercompany account balances and transactions have been
eliminated in consolidation.
Inventories
Approximately 45% of the Company's inventories are stated at the lower of LIFO
(last-in, first-out method) cost or market at June 30, 1996 (55% at June 30,
1995). The balance of the inventories is stated at the lower of FIFO (first-
in, first-out) cost or market.
Depreciation
Depreciation on property, plant and equipment is computed on a straight-line
basis over the estimated useful lives of the assets which range from 3 to 10
years on furniture and fixtures as well as machinery and equipment and 10 to
40 years on buildings and improvements.
Goodwill
The excess of the purchase price paid in the 1986 acquisition of the Company
over the estimated fair value of the net assets acquired (goodwill) is being
amortized on a straight-line basis over a period of forty years. The goodwill
resulting from subsequent acquisitions is being amortized on a straight-line
basis over periods ranging from 15 to 30 years. The Company assesses the
recoverability of goodwill by determining whether the amortization of the
goodwill balance over its remaining life can be recovered through undiscounted
future operating cash flows. Goodwill is reflected in the accompanying
Consolidated Balance Sheets net of accumulated amortization of $12,220,249 and
$10,485,000 at June 30, 1996 and 1995, respectively.
Other Assets
Other assets include non-compete agreements with an aggregate unamortized
balance of $4.2 million. Such agreements are being amortized over their
contractual terms which range from three to eight years.
Income Taxes
The Company and its domestic subsidiaries file a consolidated federal income
tax return.
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in earnings in the period that includes the enactment date.
Research and Development
Research and development costs are expensed when incurred. Such costs were
$3,136,000 in 1996, $2,502,000 in 1995 and $1,847,000 in 1994.
Self-insurance
Rival maintains a self-insurance program against general and product liability
claims, as well as medical claims and workers' compensation claims, with
excess coverage above the Company's self-insured retention. Provisions for
such claims are accrued based upon the Company's estimate of its aggregate
liability.
The Company does not provide any postretirement benefits other than
pensions.
Net Sales
The Company recognizes revenue at the time products are shipped to its
customers. Sales to one of the Company's customers were 26%, 28% and 27% of
consolidated net sales for the years ended June 30, 1996, 1995 and 1994,
respectively.
Page 24
<PAGE>
The Company's customer base consists primarily of retailers and
distributors who sell to retailers throughout the United States and Canada. As
such, a significant concentration of the Company's business activity is with
entities whose ability to meet their obligations with the Company is dependent
upon prevailing economic conditions within the retail industry.
Foreign Currency Translation
Assets and liabilities in foreign currencies are translated into dollars at
the rates prevailing at the balance sheet date. Revenues and expenses are
translated at average rates for the year. The net exchange differences
resulting from these translations are reported in stockholders' equity, net of
tax effects.
Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, notes payable to bank and
trade accounts payable approximates fair value because of the short maturity
of these instruments. The fair value of the Company's long-term debt ($89.8
million at June 30, 1996) was estimated using current interest rates for
similar debt. The carrying amount of long-term debt at June 30, 1996 was $92.0
million. The fair value of the Company's interest rate swap agreement ($.5
million at June 30, 1996) represents the estimated amount the Company would
pay to settle the swap agreement.
Net Earnings per Common Share
Net earnings per common share is computed based upon the weighted average
number of common shares and dilutive common equivalent shares outstanding.
Common stock options, which are common stock equivalents, have a dilutive
effect on net earnings per common share in all periods and are therefore
included in the computation of net earnings per common share.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
amounts.
2. Acquisitions
On January 2, 1996, the Company acquired 100% of the Common Stock of Fasco
Consumer Products, Inc. ("Fasco"), a Fayetteville, North Carolina manufacturer
of heating, ventilating and other convenience products that are distributed
through wholesale and retail markets with annual sales of approximately $40
million.
On April 3, 1996, the Company, through a wholly-owned Canadian subsidiary,
completed the acquisition of Bionaire, Inc. ("Bionaire"). Bionaire, which had
annual sales of approximately $57 million and is headquartered in Lachine,
Quebec, assembles and markets air purifiers, humidifiers and related
accessories such as replacement filters.
The Company paid $23.5 million in cash for the stock of Fasco together with
a non-compete agreement from the seller and its affiliates. The stock of
Bionaire was acquired for $25 million cash. The acquisitions were accounted
for as purchases and, accordingly, the purchase prices were allocated to the
assets acquired and the liabilities assumed based upon their respective fair
values. The purchase prices and the allocation of such amounts to assets
acquired and liabilities assumed are summarized as follows (in thousands):
--------------------------------------------------------------------------
Cash paid for Fasco $23,532
Cash paid for Bionaire 24,993
Acquisition expenses incurred 675
-------
$49,200
=======
Cash $ 1,530
Inventory 17,199
Accounts receivable 15,973
Property, plant and equipment 13,153
Prepaid expenses 1,762
Non-compete agreement 4,000
Goodwill 13,635
Liabilities assumed (18,052)
-------
$49,200
=======
Page 25
<PAGE>
2. Acquisitions, continued
In April 1995, the Company acquired substantially all of the assets of Patton
Electric Company, Inc. ("Patton") together with certain assets of its
affiliated companies. Patton is a manufacturer of fans and space heaters for
consumer and industrial use which had annual sales of approximately $40
million at the time of acquisition. The Company paid approximately $25 million
in cash, issued 850,000 shares of its common stock, which were valued at $11.9
million, and assumed certain liabilities of Patton.
The consolidated operating results of the Company for the fiscal years
ended June 30, 1996 and 1995 on a proforma basis as though the Patton, Fasco
and Bionaire acquisitions had occurred on July 1, 1994 would be as follows (in
thousands, except per share amounts) (unaudited):
1996 1995
--------------------------------------------------------------------------
Revenues $383,646 $363,045
Operating income 35,310 37,185
Net earnings 14,995 17,770
Earnings per share $ 1.51 $ 1.74
Weighted average common and common equivalent
shares outstanding 9,950 10,190
The proforma results of operations are not necessarily indicative of the
actual operating results that would have occurred had the acquisitions been
consummated on July 1, 1994 or of future operating results on a combined
basis.
The operating results of Patton, Fasco and Bionaire have been included in
the consolidated results of the Company since the date of their respective
acquisitions. During fiscal 1995, Patton operations contributed $10.9 million
in net sales. Patton, Fasco and Bionaire contributed a combined $72.5 million
in net sales to the fiscal 1996 consolidated results.
3. Accounts Receivable
Accounts receivable consist of (in thousands):
at June 30, 1996 1995
--------------------------------------------------------------------------
Trade $76,258 $45,154
Other 630 247
-----------------
76,888 45,401
Less allowance for collection losses and discounts (2,785) (1,909)
-----------------
$74,103 $43,492
=================
4. Inventories
Inventories consist of (in thousands):
at June 30, 1996 1995
--------------------------------------------------------------------------
Raw materials $ 37,442 $ 33,221
Work in process 5,028 1,741
Finished goods 64,103 49,924
-------------------
106,573 84,886
Valuation to lifo (4,543) (3,782)
-------------------
$102,030 $ 81,104
===================
If LIFO inventories had been stated at the lower of FIFO cost or market,
earnings before income taxes would have been $761,000, $544,000 and $223,000
higher for the years ended June 30, 1996, 1995 and 1994, respectively.
Page 26
<PAGE>
5. Property, Plant and Equipment
Property, plant and equipment is summarized as follows (in thousands):
at June 30, 1996 1995
--------------------------------------------------------------------------
Land $ 958 $ 633
Buildings and improvements 19,601 14,432
Machinery and equipment 44,247 30,184
Furniture and fixtures 5,248 3,411
-----------------
70,054 48,660
Less accumulated depreciation (29,709) (21,588)
-----------------
$40,345 $27,072
=================
6. Notes Payable and Long-Term Debt
On April 15, 1996, the Company entered into a $75 million unsecured revolving
line of credit with a group of banks (the "Revolving Credit Facility").
Borrowings under the Revolving Credit Facility bear interest at floating rates
determined at the Company's option to be LIBOR plus .75% or prime. In
addition, the Company is required to pay a fee of .25% per annum on the unused
portion of the commitment. At June 30, 1996, $43.5 million was outstanding
under the Revolving Credit Facility. Bionaire also has a revolving credit
facility through a Canadian bank for the Canadian Dollar equivalent of U.S.
$10 million. As of June 30, 1996, U.S. $8.4 million was outstanding under the
credit line.
On April 19, 1996, the Company sold $50 million in unsecured notes in a
private placement. The notes bear interest at a rate of 7.21%, and have a
final maturity in 2008. In conjunction with the sale of these notes, the
Company entered into a twelve year interest rate swap transaction with Bank of
America, N.A. in the notional amount of $25 million. The effect of the swap
transaction was to convert the interest payment stream on $25 million of the
notes to a variable rate which is approximately 0.45% above the prevailing six
month LIBOR rate. Income or expense associated with the interest rate swap
agreement is recognized on the accrual basis as an adjustment to interest
expense.
On July 23, 1993, the Company sold $50 million in unsecured notes in a
private placement. These notes bear interest at a per annum rate of 6.42%
which is paid semiannually and have a final maturity in 2003. The balance
outstanding on June 30, 1996 was $42 million.
Installment payments on the long-term debt for the next five fiscal years
are as follows: 1997, $4,000,000; 1998, $4,000,000; 1999, $6,000,000; 2000,
$7,000,000; 2001, $7,000,000.
The unsecured notes and the Revolving Credit Facility include financial
covenants regarding minimum net worth, minimum fixed charge coverage ratio and
maximum leverage ratios. At June 30, 1996, the Company had $18.0 million in
unrestricted retained earnings available for future dividends.
Average borrowings, maximum borrowings and the year-end interest rate
(exclusive of commitment fees) on working capital loans under the Revolving
Credit Facility were as follows (in thousands):
Years ended June 30, 1996 1995 1994
--------------------------------------------------------------------------
Average borrowings $53,047 $15,700 $16,104
Maximum borrowings $84,650 $38,800 $32,600
Year-end rate 6.31% 6.70% 5.40%
Total interest paid on all indebtedness during the years ended June 30,
1996, 1995 and 1994 was $6,373,000, $4,189,000 and $2,959,000, respectively.
7. Income Taxes
Income tax expense (benefit) is comprised of the following (in thousands):
Years ended June 30, 1996 1995 1994
--------------------------------------------------------------------------
Current:
Federal $ 9,356 $ 7,629 $ 8,592
State and local 549 811 705
Foreign (490) 49 (181)
---------------------------
Total current tax expense 9,415 8,489 9,116
Deferred tax expense (402) 260 (339)
---------------------------
Total income tax expense $ 9,013 $ 8,749 $ 8,777
===========================
Page 27
<PAGE>
7. Income Taxes, continued
The tax effects of temporary differences that result in deferred assets and
(liabilities) are presented below (in thousands). There were no valuation
allowances provided for deferred tax assets.
at June 30, 1996 1995
--------------------------------------------------------------------------
Depreciation $(3,516) $(1,904)
Inventory (1,436) (1,550)
Pension plan costs (469) (626)
-----------------
Total deferred tax liabilities (5,421) (4,080)
-----------------
Bad debts 461 406
Reserves not currently deductible 1,876 1,804
Carryforward of Canadian income tax benefit 500 -
Other 408 358
-----------------
Total deferred tax assets 3,245 2,568
-----------------
Net deferred tax liabilities $(2,176) $(1,512)
=================
A reconciliation of the U.S. statutory rates to the Company's effective tax
rates is as follows:
Years ended June 30, 1996 1995 1994
--------------------------------------------------------------------------
Income tax expense at statutory rate 35.0% 35.0% 35.0%
State income tax expense net of
federal income tax benefit 1.5 2.4 2.1
Amortization of goodwill 1.8 1.7 1.7
Other .5 (.6) (.8)
-------------------------
Effective tax rate 38.8% 38.5% 38.0%
========================
Total income taxes paid, net of refunds, during the years ended June 30,
1996, 1995 and 1994 was $9,703,000, $8,275,000 and $8,968,000, respectively.
The Company has foreign investment tax credits approximating $1,200,000 and
domestic and foreign net operating loss carryforwards approximating $650,000
and $1,900,000, respectively, with respect to its acquisition of Bionaire.
Utilization of these carryforwards is subject to limitation and such
carryforwards expire through 2010.
8. Pension and Retirement Plans
The Company has noncontributory defined benefit pension and retirement plans
covering salaried and certain hourly employees. The components of the net
periodic pension cost (benefit) of the plans are as follows (in thousands):
Years ended June 30, 1996 1995 1994
--------------------------------------------------------------------------
Service cost-benefits earned during the period $ 566 $ 535 $ 454
Interest cost on projected benefit obligation 826 765 690
Actual return on plan assets (2,528) (936) (529)
Net amortization and deferral 1,631 128 (334)
---------------------------
Net periodic pension expense (benefit) $ 495 $ 492 $ 281
===========================
Page 28
<PAGE>
The following table sets forth the plans' funded status and the amounts
included in the Company's Consolidated Balance Sheets (in thousands):
at June 30, 1996 1995
--------------------------------------------------------------------------
Actuarial present value of accumulated
benefit obligations:
Vested $ 9,536 $ 9,124
Non-vested 771 347
-----------------
Accumulated benefit obligation 10,307 9,471
Excess of projected benefit obligation over
accumulated benefit obligation 1,655 1,709
-----------------
Projected benefit obligation 11,962 11,180
=================
Fair value of plan assets 13,959 10,906
=================
Plan assets in excess of (less than)
projected benefit obligation 1,997 (274)
Unrecognized net (gain) loss (635) 2,040
Unrecognized prior service cost 231 32
Unrecognized net transition asset
(amortized over 22 years) (1,025) (1,119)
-----------------
Prepaid pension cost $ 568 $ 679
=================
As of June 30, 1996, approximately 4% of pension plan assets were invested
in cash equivalents, 36% were invested in an intermediate term bond fund which
consisted primarily of U.S. Government obligations and 60% were invested in
common stocks. Significant pension plan assumptions are as follows:
Years ended June 30, 1996 1995 1994
--------------------------------------------------------------------------
Discount rate 7.50% 7.50% 7.50%
Expected long-term rate of return on plan assets 8.00% 8.25% 8.25%
Salary increase rate 4.50% 4.50% 5.00%
The Company has a Savings Plan (401K) which allows employees to make
voluntary contributions of up to 15% of annual compensation, as defined. The
Company makes partial matching contributions which were $95,000, $71,000 and
$64,000 for the years ended June 30, 1996, 1995 and 1994, respectively.
9. Leases
The Company maintains operating leases on equipment, warehouse and office
properties. Rental expense under such leases amounted to $790,000, $406,000
and $385,000 for the years ended June 30, 1996, 1995 and 1994, respectively.
Future rental commitments under noncancellable operating leases with a
remaining term in excess of one year at June 30, 1996 are as follows (in
thousands):
Year ending June 30
--------------------------------------------------------------------------
1997 $1,910
1998 $1,851
1999 $1,689
2000 $1,359
2001 $ 707
Thereafter $2,306
Future rental commitments include approximately $400,000 per year through
December 2000 related to a Bionaire facility in New York which is not being
used. A $500,000 reserve for loss under this lease was recorded in connection
with the acquisition of Bionaire. The Company is attempting to sublease this
facility.
Page 29
<PAGE>
10. Compensation Arrangements
At the 1994 shareholders' meeting, the 1994 Stock Option Plan was approved.
The Plan provides for the granting of options to purchase 700,000 shares of
common stock. Additionally, the 1986 Stock Option Plan provided for the
granting of options to purchase 742,000 shares of common stock. Options
granted under the plans may be either incentive stock options or nonqualified
stock options. The option price for incentive stock options under the plans is
to be the greater of par value or fair market value on the date of grant. The
option price for nonqualified stock option under the plans is to be determined
by the Company's Board of Directors, but may not be less than par value. At
the end of each year following the date of grant, 25% of the options become
exercisable, with accumulation privileges.
During the year ended June 30, 1996, the Company granted incentive stock
options to purchase 177,000 shares of common stock for prices ranging from
$16.00 to $24.13 per share which were the market values of the Company's
common stock on the dates of grant.
Options to purchase 319,161 shares were exercisable at June 30, 1996. As of
June 30, 1996 there were 106,531 outstanding options at an exercise price of
$.19 per share, 166,490 options at exercise prices between $11.00 and $13.00,
133,200 options at exercise prices between $15.00 and $20.00 and 281,600
options at exercise prices in excess of $20.00. Option activity for the three
years ended June 30, 1996 was as follows:
Outstanding Shares
--------------------------------------------------------------------------
June 30, 1993 470,130
==========================================================================
Granted 119,000
Exercised at $.19 per share (160,980)
Cancelled (6,325)
--------------------------------------------------------------------------
June 30, 1994 421,825
==========================================================================
Granted 137,800
Exercised at $.19 per share to $12.75 per share (9,370)
Cancelled (12,700)
--------------------------------------------------------------------------
June 30, 1995 537,555
==========================================================================
Granted 177,000
Exercised at $.19 per share to $11.13 per share (14,734)
Cancelled (12,000)
--------------------------------------------------------------------------
June 30, 1996 687,821
==========================================================================
The Company provides an incentive compensation plan for certain members of
management. Bonuses under the plan are computed based upon actual earnings
from operations compared to budgeted earnings from operations. Bonuses under
the plan were $750,000 for 1996, $450,000 for 1995 and $1,025,000 for 1994.
Prior to January 1, 1995, a related party of a director of the Company
rendered financial advisory and other services to the Company for an annual
fee, plus expenses. Such fees and expenses amounted to $100,000 and $207,000
for the years ended June 30, 1995 and 1994, respectively.
11. Contingencies
The Company is party to various product liability lawsuits relating to its
products and incidental to its business. The Company believes that many of the
personal injury and damage claims brought against it arise from the misuse or
misapplication of the Company's products and rarely involve manufacturing
defects. In such cases, the Company vigorously defends against such actions.
Historically, product liability awards have rarely exceeded the Company's
individual per occurrence self-insured retention. There can be no assurance,
however, that the Company's future product liability experience will be
consistent with its past experience. The Company believes that the ultimate
conclusion of the various pending claims and lawsuits of the Company will not
have a material adverse effect on the consolidated financial statements of the
Company.
Page 30
<PAGE>
12. Unaudited Quarterly Financial Data
Unaudited quarterly financial data is as follows (amounts in thousands except
per share amounts):
Sept. Dec. March June
Fiscal 1996 1995 1995 1996 1996
--------------------------------------------------------------------------
Net sales $73,897 $97,450 $61,916 $80,601
Gross profit 21,416 27,310 16,658 18,273
Operating income 9,826 13,982 4,432 2,424
Net earnings $ 5,093 $ 7,456 $ 1,572 $ 118
==========================================================================
Net earnings per common share $ 0.51 $ 0.75 $ 0.16 $ 0.01
==========================================================================
Sept. Dec. March June
Fiscal 1995 1994 1994 1995 1995
--------------------------------------------------------------------------
Net sales $61,398 $78,087 $39,624 $52,602
Gross profit 17,699 22,074 11,032 12,500
Operating income 8,277 11,287 3,831 3,675
Net earnings $ 4,403 $ 6,297 $ 1,750 $ 1,535
==========================================================================
Net earnings per common share $ 0.46 $ 0.66 $ 0.19 $ 0.16
==========================================================================
Independent Auditors' Report
The Board of Directors and Stockholders
The Rival Company:
We have audited the accompanying consolidated balance sheets of The Rival
Company and subsidiaries as of June 30, 1996 and 1995 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Rival
Company and subsidiaries as of June 30, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1996, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Kansas City, Missouri
August 2, 1996
Page 31
<PAGE>
Investor Information
Corporate Headquarters
800 East 101st Terrace
Kansas City, Missouri 64131
[816] 943-4100
SEC Form 10-K
Stockholders may receive a copy of the Corporation's 1996 Annual Report to the
Securities and Exchange Commission on Form 10-K free of charge by writing to
the Office of the Secretary.
Annual Meeting
The 1996 annual meeting of shareholders will be held at 9:00 a.m., local time,
on Wednesday, November 13, 1996, at the Overland Park Marriott, 10800 Metcalf
Avenue, Overland Park, Kansas. Formal notice of the meeting, a proxy statement
and proxy form will be mailed separately to all shareholders of record at the
close of business on September 15, 1996. Management urges all shareholders to
vote their proxies and thus participate in the decisions that will be made at
this meeting.
Registrar & Transfer Agent
UMB Bank, N.A., P.O. Box 410064
Kansas City, MO 64141
For change of name, address, or to replace lost stock certificates, write
the UMB Bank, N.A. at the above address, or phone: [816] 860-7445.
Independent Auditors
KPMG Peat Marwick LLP
1600 Commerce Bank Building
Kansas City, MO 64106
Security Analyst Contact
Security analyst inquiries are welcome.
Please direct them to Mr. William L. Yager,
President and Chief Operating Officer at 816-943-4100.
Common Stock Price Range
The Common Stock of The Rival Company is traded on The Nasdaq stock market
under the symbol RIVL. Stock price quotations can be found in major daily
newspapers and in The Wall Street Journal.
The Rival Company made its initial public offering of common stock at a
price of $10.50 per share on June 2, 1992. The following table shows the range
of high and low sales prices of the Company's common stock for fiscal 1996 and
1995.
Fiscal 1996 High Low
--------------------------------------------------------------------------
First Quarter ended September 30 $20.25 $14.25
Second Quarter ended December 31 23.00 19.25
Third Quarter ended March 31 24.25 20.50
Fourth Quarter ended June 30 25.75 22.25
Fiscal 1995 High Low
--------------------------------------------------------------------------
First Quarter ended September 30 $22.00 $19.38
Second Quarter ended December 31 26.25 14.50
Third Quarter ended March 31 18.00 15.00
Fourth Quarter ended June 30 16.50 14.00
At June 30, 1996, there were 9,729,667 shares outstanding and 237
stockholders of record. A substantial number of shares of common stock are
held in "street name." The number of individual stockholders is believed to be
approximately 3,000.
Dividends
The Board of Directors approved an increase in the quarterly dividend to $0.06
per share effective in September 1996. Future dividend payments are subject to
approval of the Board of Directors. The Company paid dividends of $0.20 per
share in fiscal 1996 and $0.16 per share in fiscal 1995.
Page 32
<PAGE>
Directors and Executive Officers
Board of Directors
Thomas K. Manning (1), Chairman of the Board and Chief Executive Officer
William L. Yager, President and Chief Operating Officer
William S. Endres, Senior Vice President-Sales and Marketing
Darrel M. Sanders, Senior Vice President-Operations
Jack J. Culberg (1), investor and former Chairman of the Board of The Rival
Company
Todd Goodwin (1, 2), Partner, Gibbons Goodwin van Amerongen, Investment
bankers
John E. Grimm III (2), Chairman and Chief Executive Officer
Midbrook, Inc., Consultants
Lanny R. Julian (2, 3), President, Donlan Marketing Group, L.L.C.,
a marketing consulting company
Noel Thomas Patton (3), investor and former owner, Chairman and Chief
Executive Officer of Patton Electric Company, Inc.
Beatrice Smith, Ph.D. (1, 3), Dean, College of Human Environmental Sciences
University of Missouri - Columbia
1 Member, Executive Committee
2 Member, Compensation and Stock Option Committee
3 Member, Audit Committee
Officers
Thomas K. Manning, Chairman of the Board and Chief Executive Officer
William L. Yager, President and Chief Operating Officer
William S. Endres, Senior Vice President-Sales and Marketing
Darrel M. Sanders, Senior Vice President-Operations
Stanley D. Biggs, Vice President, Chief Financial Officer and Corporate
Secretary
Gerald E. Byle, Vice President-International Sales
Michael T. Fuller, Vice President-Industrial Sales
Philip J. Gyori, Vice President-Marketing
Sidney W. Hose, Vice President-Home Environment
James Houchen, Vice President-Materials Management
A. Aykut Ozgunay, Vice President-Engineering
Jon K. Patterson, Vice President-Management Information Systems
Trademarks
Trademarks of The Rival Company mentioned in this Annual Report include Rival,
Rival Select, Simer, Pollenex, Patton, Bionaire, Crock Pot, Crock Grill,
Potpourri Crock and White Mountain.
(COPYRIGHT) The Rival Company 1996
Page 33
Exhibit 21
THE RIVAL COMPANY
List of Subsidiaries
Bionaire Corporation
Bionaire France
Bionaire, Inc.
Bionaire International B.V.
Fasco Consumer Products, Inc.
Patton Electric Company, Inc.
Patton Electric (Hong Kong) Limited
RC Acquisition, Inc.
Rival Consumer Sales Corporation
Rival Manufacturing Company of Canada Ltd.
Waverly Products Company, Ltd.
Exhibit 23
INDEPENDENT AUDITORS' REPORT ON FINANCIAL
STATEMENT SCHEDULE AND CONSENT
The Board of Directors
The Rival Company:
The audits referred to in our report dated August 2, 1996 included the related
financial statement schedule as of June 30, 1996 and for each of the years in
the three-year period ended June 30, 1996, included in the 1996 annual report
on Form 10-K. This financial statement schedule is the responsibility of The
Rival Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits. In our opinion such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We consent to incorporation by reference in the registration statement (No.
33-69392) on Form S-8 of The Rival Company of the above report and our report
dated August 2, 1996 relating to the consolidated balance sheets of The Rival
Company and subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1996, which report
is incorporated by reference in the June 30, 1996 annual report on Form 10-K
of The Rival Company.
Kansas City, Missouri /s/ KPMG Peat Marwick, LLP
--------------------------
September 9, 1996 KPMG Peat Marwick, LLP
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This schedule contains summary financial information extracted from the 10-K
for the period ended June 30, 1996, and is qualified in its entirety by
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</LEGEND>
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<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1995
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