<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, 1998.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission file number 0-20274
-------
THE RIVAL COMPANY
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-0794462
------------------------------- -------------------
(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
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(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
----- -----
(2) Yes X No
----- -----
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, 1998, the registrant had 9,293,477 shares of
common stock, par value $.01 per share, outstanding.
1
<PAGE>
THE RIVAL COMPANY
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<S> <C>
PART I. - FINANCIAL INFORMATION Page
ITEM 1. Financial Statements
(1) Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of
September 30, 1998, September 30, 1997, and
June 30, 1998. 3
Condensed Consolidated Statements of Operations
for the three months ended September 30, 1998 and
September 30, 1997. 4
Condensed Consolidated Statements of Cash Flows for
the three months ended September 30, 1998 and
September 30, 1997. 5
(2) Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 10
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
THE RIVAL COMPANY AND SUBSIDIARIES
-----------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1998 and 1997 and June 30, 1998
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
09/30/98 09/30/97 06/30/98
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 1,209 $ 476 $ 309
Accounts receivable 73,837 85,696 75,106
Inventories 113,008 118,106 101,714
Deferred income taxes 2,361 2,584 2,379
Prepaid expenses 2,044 2,097 1,376
-------- -------- --------
Total current assets 192,459 208,959 180,884
Property, plant and equipment, net 37,606 47,008 46,045
Goodwill 59,859 61,688 60,418
Other assets 10,004 5,301 4,767
-------- -------- --------
$299,928 $322,956 $292,114
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 66,335 $ 78,175 $ 58,200
Current portion of long-term debt 6,000 4,000 6,000
Trade accounts payable 19,823 20,758 15,056
Income taxes payable -- 3,497 403
Other payables and accrued expenses 13,894 13,992 11,618
-------- -------- --------
Total current liabilities 106,052 120,422 91,277
Long-term debt, less current portion 78,000 84,000 78,000
Deferred income taxes and other liabilities 5,085 5,009 6,222
Stockholders' equity:
Common stock 98 98 98
Paid-in capital 45,972 45,656 45,971
Retained earnings 71,978 72,865 76,463
Treasury stock, at cost (6,952) (4,438) (5,608)
Foreign currency translation adjustments (305) (656) (309)
-------- -------- --------
Total stockholders' equity 110,791 113,525 116,615
-------- -------- --------
$299,928 $322,956 $292,114
======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
THE RIVAL COMPANY AND SUBSIDIARIES
--------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended September 30, 1998 and September 30, 1997
(amounts in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
---------------------
09/30/98 09/30/97
--------- ---------
<S> <C> <C>
Net sales $ 80,052 $ 96,697
Cost of sales 59,577 71,119
Cost of Sales, plant restructuring 2,833 --
--------- ---------
Total Cost of sales 62,410 71,119
--------- ---------
Gross profit 17,642 25,578
Selling expenses 12,166 12,999
General and administrative expenses 2,942 3,255
Plant restructuring expenses 4,887 --
Amortization of goodwill and
other intangibles 685 779
--------- ---------
Operating income (loss) (3,038) 8,545
Interest expense 2,484 2,587
Miscellaneous, net 345 3
--------- ---------
Earnings (loss) before income taxes (5,867) 5,955
Income tax expense (benefit) (2,033) 2,229
--------- ---------
Net earnings (loss) $ (3,834) $ 3,726
========= =========
Weighted average common shares outstanding 9,348 9,449
========= =========
Net earnings (loss) per share (Basic EPS) $ (0.41) $ 0.39
========= =========
Weighted average common and
common equivalent shares
outstanding 9,348 9,663
========= =========
Net earnings (loss) per share (Diluted EPS) $ (0.41) $ 0.39
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
THE RIVAL COMPANY AND SUBSIDIARIES
------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1998 and September 30, 1997
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
---------------------
09/30/98 09/30/97
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (3,834) $ 3,726
Adjustments to reconcile net earnings to
net cash used by operating activities:
Depreciation and amortization 2,934 2,679
Non-cash restructuring changes 6,717 --
Deferred taxes (1,182) --
Other 303 78
Changes in assets and liabilities:
Accounts receivable 1,052 (11,033)
Inventories (13,232) (12,819)
Prepaid expenses (668) (722)
Accounts payable and accruals 5,264 5,772
Income taxes payable (403) 2,266
--------- ---------
Net cash used by operating activities (3,049) (10,053)
--------- ---------
Cash flows from investing activities:
Capital expenditures (1,813) (2,189)
Other (351) (9)
--------- ---------
Net cash used by investing activities (2,164) (2,198)
--------- ---------
Cash flows from financing activities:
Net borrowings under
working capital loans 8,135 13,100
Dividends paid (651) (567)
Treasury stock repurchases (1,344) --
Other (27) --
--------- ---------
Net cash provided by
financing activities 6,113 12,533
--------- ---------
Net increase in cash 900 282
--------- ---------
Cash at beginning of period 309 194
--------- ---------
Cash at end of period $ 1,209 $ 476
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
THE RIVAL COMPANY AND SUBSIDIARIES
-----------------------
Notes to Condensed Consolidated Financial Statements
Three Months Ended September 30, 1998 and September 30, 1997
Note 1
- ------
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, 1998 and 1997 and the results of its operations and
its cash flows for the three months ended September 30, 1998 and 1997. The June
30, 1998, 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, 1998, such information and
footnotes have not been duplicated herein.
Note 2 Seasonality
- ------------------
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
- ------------------
The following is a summary of inventories at September 30, 1998 and 1997 and
June 30, 1998 (in thousands):
<TABLE>
<CAPTION>
Sept. 30, 1998 Sept. 30, 1997 June 30, 1998
-------------- -------------- -------------
<S> <C> <C> <C>
Raw materials and
work in progress $ 38,804 $ 51,402 $ 40,518
Finished goods 80,294 72,369 67,061
-------- -------- --------
119,098 123,771 107,579
Less LIFO allowance (6,090) (5,665) (5,865)
-------- -------- --------
$113,008 $118,106 $101,714
======== ======== ========
</TABLE>
Note 4 Business Segments
- ------------------------
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, showerheads, electric space heaters, and utility pumps
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.
6
<PAGE>
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.
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, 1998 and 1997 is as follows (in
thousands):
<TABLE>
<CAPTION>
September Kitchen Home
1998 Electrics Environment Industrial International Other Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $41,754 $20,016 $8,822 $ 8,082 $1,378 $80,052
Gross profit 11,475 4,112 2,148 1,976 764 20,475
Selling expenses 5,162 2,972 1,982 1,417 633 12,166
Contribution margin 6,313 1,140 166 559 131 8,309
September Kitchen Home
1997 Electrics Environment Industrial International Other Total
- -----------------------------------------------------------------------------------------
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
</TABLE>
Gross profit differs from that reported in the accompanying condensed
consolidated statement of operations as the cost of sales related to plant
restructuring has not been allocated to any reportable segment.
Note 5 Comprehensive Income
- ----------------------------
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income" which establishes rules for the reporting of
comprehensive income and its components. Comprehensive income consists of net
income and foreign currency translation adjustments as presented in the
following table. The adoption of Statement No. 130 had no impact on total
stockholders' equity.
<TABLE>
<CAPTION>
Three months ended
--------------------
09/20/98 09/30/97
-------- --------
<S> <C> <C>
Net earnings (loss) $(3,834) $3,726
Foreign currency translation adjustments 4 (24)
------- ------
Total comprehensive income (loss) $(3,830) $3,702
======= ======
</TABLE>
Note 6 Treasury Stock Purchases
- --------------------------------
During the quarter ended September 1998, the Company repurchased 105,400 shares
of its common stock at an average price of $12.75 per share. The purchases were
financed through borrowings under the Company's revolving credit agreement.
7
<PAGE>
Note 7 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 ("APB 15") and related
interpretations. Statement No. 128 has been adopted in the accompanying
financial statements with retroactive application. Basic earnings per share
excludes dilution and is computed by dividing net earnings by the weighted
average number of common shares outstanding for the period. Diluted earnings
per share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock. Diluted earnings per 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 earnings per share in the September 1997 quarter and are therefore included
in the computation of diluted earnings per share for such period. Diluted
earnings per share in the accompanying statement of operations is identical to
the primary earnings per share previously presented in accordance with APB 15.
For the September 1998 quarter, common stock options are anti-dilutive and are
excluded from the calculation of diluted earnings per share.
Note 8 Restructuring Charges
- -----------------------------
The Company recorded restructuring charges during the September 1998 quarter
totaling $7.7 million pretax ($4.7 million after tax) related to the previously
announced closing of two manufacturing plants and three distribution centers.
The charges include $2.8 million in cost of sales to recognize the cost of
components in excess of their salvage value on products being transferred to
overseas manufacturers together with inefficiencies resulting from the
announcement at plants scheduled for closure. The balance of the $7.7 million
charge represents the estimated loss on disposal of properties together with
severance and other costs. The Company expects to incur approximately $1.3
million in additional restructuring charges during the balance of fiscal 1999
related to ongoing plant inefficiencies and costs of moving equipment and
inventories to its other facilities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net sales were $80.1 million in the quarter ended September 30, 1998 compared to
$96.7 million in the prior year. The sales decline affected most of the
Company's major lines of business. Kitchen electrics posted a 16% decline from
$49.6 million to $41.8 million. Sales to retailers are not consistent with
retail point of sale information received from our major retail customers
indicating that at least a substantial portion of the sales decline relates to
shrinking retail inventories. Home environment sales declined $6.4 million
(24%). Much of this decline was in the Bionaire air cleaners and humidifiers.
Major customers are shifting their assortments to newly introduced products that
will be available for shipment during October and November. The international
business unit had significant sales gains during fiscal 1998, however, sales
declined during the September 1998 quarter by $2.2 million (22%) largely as a
result of currency devaluations in key Latin American markets.
8
<PAGE>
Gross profit before restructuring costs was $20.5 million (25.6% of sales)
compared to $25.6 million (26.5% of sales) in the prior year. This 0.9% decline
in gross profit as a percent of sales was the result of various factors
including competition in space heaters, lower profitability in Canada due to the
weak currency and increased shipping costs from Asia. These factors offset
improvements that have been achieved in other categories including can openers
and air cleaners. After the restructuring costs, gross profit was $17.6 million
(22.0% of sales).
Selling expenses were $12.2 million (15.2% of sales) for the current quarter
compared to $13.0 million (13.4% of sales) in the prior year. The higher selling
expenses as a percentage of sales was primarily due to spreading fixed costs
over the smaller sales base. Commission expense increased as a percentage of
sales due to a higher percentage of total sales made through independent sale
representatives. General and administrative expenses decreased nearly 10% to
$2.9 million due to a decline in legal expenses.
Interest expense declined from $2.6 million to $2.5 million due to a $4 million
payment on long term debt and lower borrowings on the revolving credit
agreement. Other non-operating expense of $0.3 million primarily represents
losses from foreign currency exchange relative to the Canadian dollar and the
Mexican peso.
Net loss for the quarter was $3.8 million ($0.41 per share) compared to net
earnings of $3.7 million ($0.39 per share) in the prior year. Excluding the $4.7
million after tax cost of the restructuring, earnings for the September 1998
quarter were $0.9 million ($0.10 per share).
Liquidity and Capital Resources
As of September 30, 1998 the Company had $84 million in long term debt
(including $6 million current portion) and $100 million in revolving loan
commitments. Revolving credit loans outstanding were $66.3 million as of such
date. The long-term debt requires periodic principal payments including $6.0
million in January 1999 and $7.0 million in January 2000 and has a final
maturity in 2008. The revolving credit facilities include a $75 million U.S.
bank line, which expires in March 2000, 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, 1998. The U.S. revolving
credit facility currently bears interest at a floating rate of LIBOR plus .75%.
During the three months ended September 30, 1998, the Company used $3.0 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. The Company also repurchased
105,400 shares of its common stock for $1.3 million during the September 1998
quarter. These cash requirements are funded through borrowings on the working
capital line.
The Company plans to make capital expenditures of approximately $12.0 million to
$14.0 million during fiscal 1999 including expansion of its Missouri facilities
as part of the plant restructuring. Management believes that cash generated from
operations and its bank credit facilities will be sufficient to meet its cash
requirements for the foreseeable future.
9
<PAGE>
Computer Systems and the Year 2000
During the past several years, the Company has replaced all of its significant
computer software applications as part of normal system upgrades. All of the new
systems are, according to the software vendors, year 2000 compliant (i.e.
support proper processing of transactions relating to the year 2000 and beyond).
The Company has created a task force to test all of its significant software and
to determine whether embedded technology, such as microcontrollers, contained in
its machinery and equipment is Year 2000 compliant. In addition, the task force
will review the Year 2000 compliance of its key suppliers and service providers
in an effort to reduce the potential adverse effect on its operations from non-
compliance by such parties. The task force is currently expected to complete its
review by June 30, 1999. As systems are tested, the Company intends to develop
contingency plans for systems that exhibit possible Year 2000 problems. The cost
of the task force's activities is not expected to be significant.
Forward Looking Information
This form 10-Q contains "forward-looking statements" about business operations,
financial performance and market conditions. Such statements are subject to
certain risks, uncertainties and other factors that can affect the Company's
businesses and cause actual results to differ materially from those contained in
any forward-looking statement. The additional restructuring charges expected
during the balance of fiscal 1999 are estimates of management based upon
information currently available. Due to a number of risks and uncertainties
involved in completing the restructuring, actual restructuring charges may be
materially different from those currently anticipated.
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 30, 1998 By: /s/ William L. Yager
------------------------
William L. Yager
President and Chief
Operating Officer
(Duly Authorized Officer)
10
<PAGE>
Exhibit 11
THE RIVAL COMPANY AND SUBSIDIARIES
Earnings Per Share
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months ended
September 30
------------
1998 1997
---- ----
<S> <C> <C>
Net earnings (loss) $(3,834) $3,726
======= ======
Weighted average common and common
equivalent shares outstanding 9,348 9,663
======= ======
Earnings per common and common
equivalent shares $ (0.41) $ 0.39
======= ======
Computation of weighted average
common and common equivalent
shares outstanding:
Average common shares outstanding 9,348 9,449
Average number of options outstanding 879 828
Less treasury shares acquired with
proceeds from exercise of options (781) (614)
------- ------
Weighted average common and common
equivalent shares outstanding 9,446 9,663
======= ======
</TABLE>
a) The common stock equivalents are anti-dilutive and, therefore, are excluded
from the presentation in the Condensed Consolidated Statements of Operations
for the quarter ended September 30, 1998.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
September 1998 Form 10-Q 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-30-1999 JUN-30-1998
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 1,209 476
<SECURITIES> 0 0
<RECEIVABLES> 75,932 88,203
<ALLOWANCES> 2,095 2,507
<INVENTORY> 113,008 118,106
<CURRENT-ASSETS> 192,459 208,959
<PP&E> 78,217 80,195
<DEPRECIATION> 40,611 33,187
<TOTAL-ASSETS> 299,928 322,956
<CURRENT-LIABILITIES> 106,052 120,422
<BONDS> 78,000 84,000
0 0
0 0
<COMMON> 98 98
<OTHER-SE> 110,693 113,427
<TOTAL-LIABILITY-AND-EQUITY> 299,928 322,956
<SALES> 80,052 96,697
<TOTAL-REVENUES> 80,052 96,697
<CGS> 62,410 71,119
<TOTAL-COSTS> 62,410 71,119
<OTHER-EXPENSES> 20,680 17,033
<LOSS-PROVISION> 217 232
<INTEREST-EXPENSE> 2,484 2,587
<INCOME-PRETAX> (5,867) 5,955
<INCOME-TAX> (2,033) 2,229
<INCOME-CONTINUING> (3,834) 3,726
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,834) 3,726
<EPS-PRIMARY> (0.41) .39
<EPS-DILUTED> (0.41) .39
</TABLE>
