<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission file number 0-20274
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THE RIVAL COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 43-0794462
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 E. 101st Terrace, Kansas City, MO 64131
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(816) 943-4100
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal
year, if changed since last report)
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.
(l) Yes X No
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(2) Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
As of September 30, 1997, the registrant had 9,448,847 shares of
common stock, par value $.01 per share, outstanding.
1
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THE RIVAL COMPANY
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PART I. - FINANCIAL INFORMATION Page
<C> <S> <C>
ITEM 1. Financial Statements
(1) Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of
September 30, 1997, September 30, 1996, and
June 30, 1997. 3
Condensed Consolidated Statements of Earnings
for the three months ended September 30, 1997
and September 30, 1996. 4
Condensed Consolidated Statements of Cash Flows for
the three months ended September 30, 1997 and
September 30, 1996. 5
(2) Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 9
</TABLE>
2
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PART I - FINANCIAL INFORMATION
THE RIVAL COMPANY AND SUBSIDIARIES
----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 and 1996 and June 30, 1997
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
09/30/97 09/30/96 06/30/97
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<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 476 $ 195 $ 194
Accounts receivable 85,696 90,583 74,663
Inventories 118,106 116,385 105,287
Deferred income taxes 2,584 1,602 2,584
Prepaid expenses 2,097 3,149 1,375
--------- --------- ---------
Total current assets 208,959 211,914 184,103
Property, plant and equipment, net 47,008 41,823 46,695
Goodwill 61,688 59,562 62,314
Other assets 5,301 6,074 5,493
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$ 322,956 $ 319,373 $ 298,605
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 78,175 $ 69,306 $ 65,075
Current portion of long-term debt 4,000 4,000 4,000
Trade accounts payable 20,758 25,172 15,477
Income taxes payable 3,497 3,592 1,231
Other payables and accrued expenses 13,992 14,226 13,501
--------- --------- ---------
Total current liabilities 120,422 116,296 99,284
Long-term debt, less current portion 84,000 88,000 84,000
Deferred income taxes and other liabilities 5,009 4,232 4,931
Stockholders' equity:
Common stock 98 98 98
Paid-in capital 45,656 45,519 45,656
Retained earnings 72,865 66,032 69,706
Treasury stock, at cost (4,438) (310) (4,438)
Foreign currency translation adjustments (656) (494) (632)
--------- --------- ---------
Total stockholders' equity 113,525 110,845 110,390
--------- --------- ---------
$ 322,956 $ 319,373 $ 298,605
========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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THE RIVAL COMPANY AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three months ended September 30, 1997 and September 30, 1996
(amounts in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
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09/30/97 09/30/96
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<S> <C> <C>
Net sales $ 96,697 $ 99,650
Cost of sales 71,119 71,067
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Gross profit 25,578 28,583
Selling expenses 12,999 13,309
General and administrative expenses 3,255 3,305
Amortization of goodwill and
other intangibles 779 741
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Operating income 8,545 11,228
Interest expense 2,587 2,491
Other expense, (income) net 3 (18)
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Earnings before income taxes 5,955 8,755
Income tax expense 2,229 3,479
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Net earnings $ 3,726 $ 5,276
========= =========
Weighted average common and
common equivalent shares
outstanding 9,663 9,948
========= =========
Net earnings per common share $ 0.39 $ 0.53
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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THE RIVAL COMPANY AND SUBSIDIARIES
--------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1997 and September 30, 1996
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
-------------------
09/30/97 09/30/96
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,726 $ 5,276
Adjustments to reconcile net earnings to
net cash used by operating activities:
Depreciation and amortization 2,679 2,465
Other 78 113
Changes in assets and liabilities:
Accounts receivable (11,033) (16,480)
Inventories (12,819) (14,355)
Prepaid expenses (722) (1,007)
Accounts payable and accruals 5,772 5,507
Income taxes payable 2,266 3,395
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Net cash used by operating activities (10,053) (15,086)
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Cash flows from investing activities:
Capital expenditures (2,189) (3,167)
Other (9) 88
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Net cash used by investing activities (2,198) (3,079)
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Cash flows from financing activities:
Net borrowings under
working capital loans 13,100 17,410
Dividends paid (567) (585)
Other -- 32
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Net cash provided by
financing activities 12,533 16,857
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Net increase (decrease) in cash 282 (1,308)
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Cash at beginning of period 194 1,503
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Cash at end of period 476 195
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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THE RIVAL COMPANY AND SUBSIDIARIES
--------------------------------
Notes to Condensed Consolidated Financial Statements
Three Months Ended September 30, 1997 and September 30, 1996
Note 1
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In the opinion of Management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting of normal recurring
accruals) considered necessary to present fairly the financial position of the
Company as of September 30, 1997 and the results of its operations and its cash
flows for the three months ended September 30, 1997 and September 30, 1996. The
June 30, 1997, condensed consolidated balance sheet has been derived from the
audited consolidated financial statements as of that date. These financial
statements have been prepared in accordance with the instructions to Form 10-Q.
To the extent that information and footnotes required by generally accepted
accounting principles for complete financial statements are contained in or
consistent with the audited consolidated financial statements incorporated by
reference in the Company's Form 10-K for the year ended June 30, 1997, such
information and footnotes have not been duplicated herein.
Note 2
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The results of operations for the three months ended September 30, are not
indicative of the results to be expected for the full year due to the seasonal
nature of the Company's operations.
Note 3 Inventories
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The following is a summary of inventories at September 30, 1997 and 1996 and
June 30, 1997 (in thousands):
<TABLE>
<CAPTION>
Sept. 30, 1997 Sept. 30, 1996 June 30, 1997
-------------- -------------- -------------
<S> <C> <C> <C>
Raw materials and
work in progress $ 51,402 $ 45,794 $ 52,933
Finished goods 72,369 75,360 57,794
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123,771 121,154 110,727
Less LIFO allowance (5,665) (4,769) (5,440)
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$118,106 $116,385 $105,287
======== ======== ========
</TABLE>
Note 4 Business Segments
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The Rival Company manages its operations through four business units:
kitchen electrics and personal care (kitchen electrics), home environment,
industrial and building supply (industrial) and international. The kitchen
electrics business unit sells products including Crock-Pot(R) slow cookers,
toasters, ice cream freezers, can openers and massagers to retailers throughout
the U.S. The home environment business unit sells products including fans, air
purifiers, humidifiers, electric space heaters, utility pumps and household
ventilation to retailers throughout the U.S. The industrial group sells products
including industrial fans and drum blowers, household ventilation, ceiling fans,
door chimes and electric heaters to electrical and industrial wholesale
distributors throughout the U.S. The international business unit sells the
Company's products outside the U.S.
The Company is reporting business segment information in accordance with the
provisions of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" which was issued in June
1997.
The Rival Company evaluates performance based upon contribution margin,
which it defines as gross margin less selling expenses. Administrative functions
such as finance and management information systems are centralized and are not
allocated to the business units. The various business units share manufacturing
and distribution facilities. Costs of operating the manufacturing plants are
allocated to the business units through full-absorption standard costing and
distribution costs are allocated based upon volume shipped from each
distribution center.
6
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Summary financial information for each reportable segment, together with
non-business unit results consisting of sales directly to consumers, for the
three month periods ended September 30, 1997 and 1996 is as follows (in
thousands):
<TABLE>
<CAPTION>
September Kitchen Home
1997 Electrics Environment Industrial International Other Total
- ------------------- --------- ----------- ---------- ------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net sales $49,601 $26,366 $9,076 $10,320 $1,334 $96,697
Gross profit 13,955 5,598 2,426 2,840 759 25,578
Selling expenses 5,714 3,076 2,143 1,683 383 12,999
Contribution margin 8,241 2,522 283 1,157 376 12,579
September Kitchen Home
1996 Electrics Environment Industrial International Other Total
- ------------------- --------- ----------- ---------- ------------- ------ -------
Net sales $50,402 $31,694 $9,684 $ 7,065 $ 805 $99,650
Gross profit 15,406 7,810 2,395 2,439 533 28,583
Selling expenses 5,443 3,278 2,692 1,579 317 13,309
Contribution margin 9,963 4,532 (297) 860 216 15,274
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net sales were $96.7 million in the quarter ended September 30, 1997 compared to
$99.7 million in the prior year. The sales decline was primarily in the home
environment products and resulted from later than normal shipments of seasonal
products, such as heaters, and a decline in sales of humidifiers and air
cleaners. Sales of products in the kitchen electrics business unit decreased by
2% due to delayed ordering by retailers of holiday-season products.
International sales increased by $3.3 million, due primarily to sales in Latin
America.
Gross profit was $25.6 million (26.5% of sales) for the quarter ended September
30, 1997 compared to $28.6 million (28.7% of sales) in the prior year. The
decline in gross margins as a percentage of sales was due in part, to a change
in sales mix. Sales declines of certain high margin products including novelty
massagers and air purifiers were offset by increased sales of lower margin
products including promotionally priced irons. Start-up costs related to
transferring production of major product lines including heaters, humidifiers
and air purifiers from plants closed during last year's restructuring to the
Company's other plants, also contributed to the lower margins. Evidence of
improved efficiency in plant operations and an upturn in gross margin emerged in
September, after unfavorable variances in July and August.
Selling expenses were $13.0 million (13.4% of sales) for the current quarter
compared to $13.3 million (13.4% of sales) in the prior year. The decline in
selling expenses reflects a decrease in fixed costs from the consolidation of
certain sales and administrative functions.
General and administrative expenses decreased 1.5% to $3.3 million. Substantial
savings were achieved due to the consolidation of certain administrative
functions in Canada, however, these were largely offset by increased legal and
professional expenses incurred involving the Company's intellectual property.
Interest expense increased from $2.5 million to $2.6 million due to increased
borrowings.
Net earnings for the quarter ended September 30, 1997 were $3.7 million ($0.39
per share) compared to $5.3 million ($0.53 per share) for the same period in the
prior year.
Liquidity and Capital Resources
As of September 30, 1997 the Company had $88 million in long term debt
(including $4 million current portion) and $100 million in revolving loan
commitments. Revolving credit loans outstanding were $78.2 million as of such
date. The long-term debt requires periodic principal payments including $4.0
million in January 1998 and $6.0 million in January 1999 and has a final
maturity in 2008. The revolving credit facilities include a $75 million U.S.
bank line, which expires in June 1999, and a Canadian facility for the Canadian
dollar equivalent of U.S. $10.0 million. The Company also has a $15 million
seasonal bank line, which expires on December 31, 1997. The U.S. revolving
credit facility currently bears interest at a floating rate of LIBOR plus .75%.
7
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During the three months ended September 30, 1997, the Company used $10.1 million
of cash for operating activities. The Company historically requires a
significant amount of cash each fall to fund its build-up in inventories and
accounts receivable during its peak-selling season. These cash requirements are
funded through borrowings on the working capital line.
The Company plans to make capital expenditures of approximately $8.0 million
during fiscal 1998. Management believes that cash generated from operations and
its bank credit facilities will be sufficient to meet its cash requirements for
the foreseeable future.
Net Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, 'Earnings Per Share' which revises the calculation and presentation
provisions of Accounting Principles Board Opinion 15 and related
interpretations. Statement No. 128 is effective for the Company's quarter ending
December 31, 1997. Retroactive application will be required. The Company
believes the adoption of Statement No. 128 will not have a significant effect on
its reported earnings per share.
PART II - OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11 Schedule regarding computation of per share
earnings.
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE RIVAL COMPANY
Dated: October 31, 1997 By: /s/ William L. Yager
------------------------
William L. Yager
President and Chief
Operating Officer
(Duly Authorized Officer)
8
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Exhibit 11
THE RIVAL COMPANY AND SUBSIDIARIES
Earnings Per Share
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months ended
September 30,*
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<S> <C> <C>
1997 1996
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Net earnings $3,726 $5,276
====== ======
Weighted average common and common
equivalent shares outstanding 9,663 9,948
====== ======
Earnings per common and common
equivalent shares $0.39 $0.53
====== ======
Computation of weighted average
common and common equivalent
shares outstanding:
Average common shares outstanding 9,449 9,730
Average number of options outstanding 828 684
Less treasury shares acquired with
proceeds from exercise of options (614) (466)
------ ------
Weighted average common and common
equivalent shares outstanding 9,663 9,948
====== ======
</TABLE>
*Fully diluted earnings per share are equal to primary earnings per share
for both periods presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Form 10-Q for the three months ended September 30, 1996 and 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997
<PERIOD-START> JUL-01-1997 JUL-01-1996
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> 476 195
<SECURITIES> 0 0
<RECEIVABLES> 88,203 93,749
<ALLOWANCES> 2,507 3,166
<INVENTORY> 118,106 116,385
<CURRENT-ASSETS> 208,959 211,914
<PP&E> 80,195 73,222
<DEPRECIATION> 33,187 31,399
<TOTAL-ASSETS> 322,956 319,373
<CURRENT-LIABILITIES> 120,422 116,296
<BONDS> 84,000 88,000
0 0
0 0
<COMMON> 98 98
<OTHER-SE> 113,427 110,747
<TOTAL-LIABILITY-AND-EQUITY> 322,956 319,373
<SALES> 96,697 99,650
<TOTAL-REVENUES> 96,697 99,650
<CGS> 71,119 71,067
<TOTAL-COSTS> 71,119 71,067
<OTHER-EXPENSES> 17,033 17,355
<LOSS-PROVISION> 232 208
<INTEREST-EXPENSE> 2,587 2,491
<INCOME-PRETAX> 5,955 8,755
<INCOME-TAX> 2,229 3,479
<INCOME-CONTINUING> 3,726 5,276
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,726 5,276
<EPS-PRIMARY> .39 .53
<EPS-DILUTED> .39 .53
</TABLE>
