<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 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 0-19557
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SALTON/MAXIM HOUSEWARES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3777824
- --------------------------------- -------------------------
(State of other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
550 Business Center Drive
Mount Prospect, Illinois 60056
- --------------------------------- -------------------------
(Address of principal executive (Zip Code)
offices)
(847) 803-4600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)
Indicate by check mark whether this 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.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of February 6, 1998 -
13,086,144 shares of its $.01 par value Common Stock.
<PAGE> 2
SALTON/MAXIM HOUSEWARES, INC.
FORM 10-Q
QUARTER ENDED DECEMBER 27, 1997
INDEX
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<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C> <C> <C>
PART I FINANCIAL INFORMATION
---------------------
Item 1: Financial Statements
Balance Sheets-December 27, 1997
(Unaudited) and June 28, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations
Thirteen weeks ended
December 27, 1997 and
December 28, 1996 (Unaudited)
And Twenty-six weeks ended
December 27, 1997 and
December 28, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows
Twenty-six weeks ended
December 27, 1997 and
December 28, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial
Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2: Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II OTHER INFORMATION
-----------------
Item 1: Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<PAGE> 3
SALTON/MAXIM HOUSEWARES, INC.
BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS DEC 27, JUNE 28,
1997 1997
----------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 513 $ 2,613
Accounts receivable, net of allowances 57,960 25,647
Inventories 48,088 41,968
Prepaid expenses and other current assets 3,887 3,717
Federal income taxes refundable 0 1,105
Deferred tax assets 1,255 1,734
----------- -----------
TOTAL CURRENT ASSETS 111,703 76,784
PROPERTY, PLANT AND EQUIPMENT
Molds and tooling 16,995 14,828
Warehouse equipment 450 380
Office furniture and equipment 4,564 3,792
----------- -----------
22,009 19,000
Less accumulated depreciation (12,286) (10,684)
----------- -----------
9,723 8,316
INTANGIBLES, NET
NON-CURRENT DEFERRED TAX ASSET 4,966 4,880
INVESTMENT-WINDMERE 0 206
14,682 12,157
----------- -----------
TOTAL ASSETS $ 141,074 $ 102,343
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 24,952 $ 17,361
Accrued expenses 6,511 2,758
Revolving line of credit 57,223 37,977
Accrued interest 96 192
Current portion - Subordinated debt 0 500
----------- -----------
TOTAL CURRENT LIABILITIES 88,782 58,788
Non-Current Deferred Tax Liability 907 0
Due to Windmere 1,637 4,933
----------- -----------
TOTAL LIABILITIES 91,326 63,721
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 per value, authorized,
2,000,000 shares; no shares issued
Common stock, $.01 par value; authorized
2,000,000 shares; issued and outstanding,
1998-13,086,644 shares, 1997-13,029,144 shares 131 130
Unrealized gains on securities
available for sale 2,749 1,337
Additional paid-in capital 53,178 53,036
Less Note Receivable - Windmere (10,848) (10,848)
Retained Earnings (Accumulated deficit) 4,538 (5,034)
----------- -----------
Total stockholders' equity 49,478 38,622
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 141,074 $ 102,343
=========== ===========
</TABLE>
<PAGE> 4
SALTON/MAXIM HOUSEWARES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share data)
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
----------------------- -----------------------
12/27/97 12/28/96 12/27/97 12/28/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 102,153 $ 58,837 $ 167,926 $ 93,699
Cost of goods sold 63,610 38,598 102,307 61,978
Distribution expenses 3,514 2,212 5,793 4,005
---------- ---------- ---------- ----------
GROSS PROFIT 35,029 18,027 59,826 27,716
Selling, general and administrative expenses 24,567 10,745 41,544 17,757
---------- ---------- ---------- ----------
OPERATING INCOME 10,462 7,282 18,282 9,959
Interest expense 1,699 1,159 2,962 2,099
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 8,763 6,123 15,320 7,860
Income taxes 3,315 2,146 5,748 2,754
---------- ---------- ---------- ----------
NET INCOME $ 5,448 $ 3,977 $ 9,572 $ 5,106
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 13,533,520 13,259,814 13,475,146 12,896,673
EARNINGS PER COMMON SHARE: BASIC $0.40 $0.31 $0.73 $0.40
EARNINGS PER COMMON SHARE: DILUTED $0.40 $0.30 $0.71 $0.40
</TABLE>
<PAGE> 5
SALTON/MAXIM HOUSEWARES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
26 WEEKS ENDED
-----------------------
12/27/97 12/28/96
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income: $ 9,572 $ 5,106
Adjustments to reconcile net income
to net cash used in operating activities:
Changes in deferred taxes 481 700
Depreciation and amortization 1,886 1,533
Changes in assets and liabilities:
Accounts receivable (32,313) (22,060)
Inventories (6,120) (2,411)
Federal income taxes refundable 1,105
Prepaid expenses and other
current assets (170) (2,491)
Accounts payable 7,589 3,885
Accrued expenses 3,658 2,927
---------- -----------
NET CASH USED IN (14,312) (12,811)
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,380) (1,774)
Block acquisition and related payments (2,138)
---------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (3,380) (3,912)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving line of credit 19,246 12,663
Proceeds from subordinated debt and due to Windmere 5,000
Common stock issued 142
Offering costs associated with stock issue (486)
Repayments of subordinated debt and due to Windmere (3,796) (417)
NET CASH PROVIDED BY
FINANCING ACTIVITIES ---------- -----------
15,592 16,760
---------- -----------
NET INCREASE/(DECREASE) IN CASH $(2,100) $37
Cash, beginning of period 2,613 4
---------- -----------
CASH, END OF PERIOD $513 $41
========== ===========
CASH PAID DURING THE PERIOD FOR:
Interest $3,058 $2,059
Income taxes $1,473 $58
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
In the quarter ended September 28, 1996 a long-term debt obligation of
$3,254,286 was canceled by the consummation of a transaction with
Windmere-Durable Holdings, Inc. ("Windmere").
In addition, the Company received a $10,847,620 note receivable and 748,112
shares of Windmere common stock in exchange for 6,508,572 newly issued shares
of common stock of the Company.
<PAGE> 6
SALTON/MAXIM HOUSEWARES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS.
The financial statements have been prepared from the Company's books
without audit and are subject to year end adjustments. The interim financial
statements reflect all adjustments (consisting of only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of financial information. The interim financial statements should
be read in conjunction with the audited financial statements and notes thereto
included in the Salton/Maxim Housewares, Inc. 1997 Annual Report to
Shareholders on Form 10-K. The results of operations for the interim periods
should not be considered indicative of results to be expected for the full year.
Certain items in the 1997 financial statements have been reclassified to
conform with the current year presentation.
2. EARNINGS PER COMMON SHARE.
The Company adopted Statement of Financial Accounting Standards No.
128-Earnings per Share in the second quarter. Basic net income is computed
based upon the weighted average number of common shares outstanding. Diluted
net income per common share is computed based upon the weighted average number
of common shares outstanding, adjusted for dilutive common stock equivalents
applying the treasury stock method.
3. EVENTS OF THE 26 WEEKS ENDED DECEMBER 27, 1997.
On June 30, 1997, the Company amended and extended its revolving credit
facility (the "Amended Facility") with its lender to September, 30, 2000. The
Amended Facility provides for borrowings up to $75,000,000 and it bears
interest at 1% over the lender's established prime rate, payable monthly, and
includes a provision which provides the Company the ability to reduce its
borrowing rate, based on the London InterBank Offered Rate (LIBOR), on up to
75% of outstanding borrowings. The Company may further reduce its interest
rate by meeting certain performance provisions.
The Amended Facility is secured by a first lien on substantially all the
Company's assets. Credit availability is based on a formula related to trade
accounts receivable, inventories and outstanding letters of credit. It
contains restrictive financial covenants, the more significant of which
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<PAGE> 7
require the Company to maintain specified ratios of total liabilities to net
worth, minimum tangible net worth, and minimum earnings before interest, taxes,
depreciation and amortization. Other covenants also limit the Company's
activities in mergers or acquisitions and sales of substantial assets.
Compliance with these covenants effectively restricts the ability of the
Company to pay dividends, and also requires the Company to apply cash receipts
to pay down borrowings under the Facility.
The Company, White Consolidated, Inc. ("White Consolidated"),
Windmere-Durable Holdings, Inc. (''Windmere") and certain other parties have
been named as defendants in litigation filed by Westinghouse Electric
Corporation ("Westinghouse") in the United States District Court for the
Western District of Pennsylvania on December 18, 1996. The action arises from
a dispute between Westinghouse and White Consolidated over rights to use the
"Westinghouse" trademark for consumer products, based on transactions between
Westinghouse and White Consolidated in the 1970's and the parties' subsequent
conduct. The action seeks, among other things, a preliminary injunction
enjoining the defendants from using the trademark, unspecified damages and
attorneys' fees. Pursuant to the Company's license agreements with White
Consolidated, White Consolidated is defending the Company and is obligated to
indemnify the Company from and against any and all claims, losses and damages
arising out of the action, including the costs of litigation. This action is
scheduled for trial in Pittsburgh, Pennsylvania on or about September 14, 1998
or as soon thereafter as the Court's schedule permits. Due to the inherent
uncertainties of the litigation process, the Company is unable to predict the
outcome of this litigation. If the outcome of this litigation is adverse to
the Company, it could terminate or otherwise adversely affect the Company's
ability to market and sell products under the White-Westinghouse brand name to
Kmart Corporation and other retailers.
Subsequent to December 27, 1997, certain of the Company's customers,
namely HomePlace Stores, Inc. and Venture, filed for protection under Chapter
11 of the U.S. Bankruptcy Code. These customers owed the Company amounts
aggregating approximately $2.4 million. Provision of approximately $1.0
million was made in the quarter ended December 27, 1997 for the estimated
potential losses from these Chapter 11 bankruptcy filings.
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED DECEMBER 27, 1997 COMPARED WITH THIRTEEN WEEKS
ENDED DECEMBER 28, 1996.
Net sales for the quarter ended December 27, 1997 were $102.2
million, an increase of approximately $43.3 million or 73.6% compared to net
sales of $58.8 million for the quarter ended December 28, 1996. This increase
is primarily attributable to increased sales of the Juiceman(R) juice
extractors, George Foreman Grills(R), Farberware(R) products and
White-Westinghouse(R) sales under the Kmart program. Net sales of
White-Westinghouse(R) products to Kmart approximated 19.8% of net sales in this
quarter. The White-Westinghouse program to Kmart commenced in calendar year
1997.
Subsequent to December 27, 1997, certain of the Company's customers,
namely HomePlace Stores, Inc. and Venture, filed for protection under Chapter
11 of the U.S. Bankruptcy Code. These customers owed the Company amounts
aggregating approximately $2.4 million. Provision of approximately $1.0
million was made in the quarter ended December 27, 1997 for the estimated
potential losses from these Chapter 11 bankruptcy filings.
Gross profit in the second quarter of fiscal 1998 was $35.0 million or
34.3% of net sales as compared to $18.0 million or 30.6% of net sales in 1997.
Cost of goods sold during the period decreased to 62.3% of net sales compared
to 65.6% in 1997. Distribution expenses were $3.5 million or 3.4% of net sales
in 1998 compared to $2.2 million or 3.8% of net sales in the same period in
1997. Gross profit and costs of goods sold in 1998 as a percentage of net
sales were improved primarily due to a more favorable mix of sales in their
respective channels of distribution when compared to 1997.
Selling, general and administrative expenses increased to $24.6 million
or 24.0% of net sales in the second quarter of fiscal 1998 compared to $10.7
million or 18.3% of net sales for the same period in 1997. Expenditures for
television (primarily for increased sales and promotional activity in the form
of half hour television programs called infomercials for the Juiceman Juice
Extractors and George Foreman Grills), royalty expenses, certain other media
and cooperative advertising coverages, and trade show expenses, were $18.5
million or 18.2% of net sales in the current quarter compared to $7.0
million or 11.9% of net sales in the comparable prior year quarter. The
remaining selling, general and administrative costs were $6.1 million or 5.9%
of net sales in the current quarter compared to $3.7 million or 6.3% of net
sales in the comparable prior year quarter. These
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<PAGE> 9
increases were primarily attributable to higher costs for additional personnel,
sales commissions and various costs related to the higher level of sales.
Net interest expense was approximately $1.7 million for the quarter
compared to $1.2 million for the same quarter in 1997. The Company's rate of
interest on amounts outstanding was a weighted average annual rate of 10.0% in
the quarter ended December 27, 1997 compared to 11.3% in the comparable prior
year quarter. The average amount outstanding under the Company's revolving
line of credit increased about $25.4 million when compared to the average
amount outstanding in the same period a year ago. This increase was used
primarily to finance higher net sales and a seasonal build in accounts
receivable and inventory. Interest expense during the period was offset by
interest income earned on the note receivable from Windmere.
The Company had income before income taxes of $8.8 million in the second
quarter of fiscal 1998 compared to income before income taxes of $6.1 million
in the second quarter of 1997. The Company had net income after income taxes
in the second quarter of 1998 of $5.4 million compared to net income after
income taxes of $4.0 million in the second quarter of 1997. Basic earnings per
common share were $.40 per share on weighted average common shares outstanding
of 13,475,146 compared to $.31 per share on weighted average common shares
outstanding of 13,017,144 in the second quarter of 1997. Diluted earnings per
common share were $.40 per share on weighted average common shares outstanding,
including dilutive common stock equivalents, of 13,533,520 in the second
quarter of 1998 compared to $0.30 per share on weighted average common shares
outstanding, including dilutive common stock equivalents, of 13,259,814 in the
second quarter of 1997.
TWENTY-SIX WEEKS ENDED DECEMBER 27, 1997 COMPARED WITH TWENTY-SIX WEEKS
ENDED DECEMBER 28, 1996.
Net sales in the first half of fiscal year 1998 were $167.9 million, an
increase of approximately $74.2 million or 79.2%, compared to net sales of
$93.7 million in the first half of fiscal year 1997. This increase is
primarily attributable to increased sales of the Juiceman(R) juice extractors,
George Foreman Grills(R), Farberware(R) products and White-Westinghouse(R)
sales under the Kmart program. Net sales of White-Westinghouse(R) products to
Kmart approximated 18.1% of net sales. The White-Westinghouse(R) program to
Kmart commenced in calendar year 1997.
Subsequent to December 27, 1997, certain of the Company's customers,
namely HomePlace Stores, Inc. and Venture, filed for protection under Chapter
11 of the U.S. Bankruptcy Code. These customers owed the Company amounts
aggregating approximately $2.4 million. Provision of approximately $1.0
million was made in the first half ended December 27, 1997 for the estimated
potential losses from these Chapter 11 bankruptcy filings.
Gross profit in the first half of fiscal 1998 was $59.8 million or 35.6%
of net sales as compared to $27.7 million or 29.6% of net sales in 1997. Cost
of goods sold during the period decreased to 60.9% of net sales compared to
66.2% in 1997. Distribution expenses were approximately $5.8 million or 3.4%
of
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<PAGE> 10
net sales in 1998 compared to $4.0 million or 4.3% of net sales in the same
period in 1997. Gross profit and costs of goods sold in 1998 as a
percentage of net sales were improved primarily due to a more favorable mix of
sales in their respective channels of distribution when compared to 1997.
Selling, general and administrative expenses increased to $41.5 million
or 24.7% of net sales in the first half of fiscal 1998 compared to $17.8
million or 19.0% of net sales for the same period in 1997. Expenditures for
television (primarily for increased sales and promotional activity in the form
of half hour television programs called infomercials for the Juiceman Juice
Extractors and George Foreman Grills), royalty expenses, certain other media
and cooperative advertising coverages and trade show expenses, were $29.6
million or 17.6% of net sales in the current period when compared to $11.1
million or 11.8% of net sales in the comparable prior year period. The
remaining selling, general and administrative costs were $11.9 million or 7.1%
of net sales in the current half compared to $6.6 million or 7.1% of net sales
in the same period in fiscal 1997. These increases were primarily attributable
to higher costs for additional personnel, sales commissions and various other
costs related to the higher level of sales.
Net interest expense was approximately $3.0 million for the first half
of fiscal 1998 compared to $2.1 million for the same period in fiscal 1997.
The Company's rate of interest on amounts outstanding was a weighted average
annual rate of 9.5% in the first half of fiscal 1998 compared to 10.8% in the
same period in fiscal 1997. The average amount outstanding under the Company's
revolving line of credit increased about $23.3 million when compared to the
average amount outstanding in the same period in fiscal 1997. This increase
was used primarily to finance higher net sales and a seasonal build in accounts
receivable and inventory. Interest expense during the period was offset by
interest income earned on the note receivable from Windmere.
The Company had income before income taxes of $15.3 million in the first
half of fiscal 1998 compared to income before income taxes of $7.8 million in
the first half of 1997. The Company had net income after income taxes in the
first half of 1998 of $9.6 million compared to net income after income taxes of
$5.1 million in the first half of 1997. Basic earnings per common share were
$.73 per share on weighted average common shares outstanding of 13,075,682
compared to $.40 per share on weighted average common shares outstanding of
12,659,530 in the first half of 1997. Diluted earnings per common share were
$.71 per share on weighted average common shares outstanding, including
dilutive common stock equivalents, of 13,386,150 in the first half of 1998
compared to $.40 per share on weighted average common shares outstanding,
including dilutive common stock equivalents, of 12,896,673 in the first half of
1997.
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<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of fiscal 1998, the Company used net cash of $14.3
million in operating activities and net cash of approximately $3.4 million in
investing activities. This resulted primarily from the growth in sales in the
period and higher levels of inventory and receivables, as well as increased
investment in capital assets, primarily tooling. Financing activities provided
cash of $15.6 million for these purposes primarily from increased line of
credit proceeds of $19.2 million, offset by repayments of notes of
approximately $3.8 million. At December 27, 1997, the Company had
approximately $57.2 million outstanding as drawings under its revolving line of
credit. Typically, given the seasonal nature of the Company's business, the
Company's borrowings tend to be the highest in mid-summer to fall. The Company
had the ability at December 27, 1997 to borrow a total of $75 million. The
Company will continue to incur short-term borrowings in order to finance
working capital requirements. The Company's ability to fund its operating
activities is directly dependent upon its rate of growth, ability to
effectively manage its inventory, the terms under which it extends credit to
its customers and its ability to collect under such terms and its ability to
access external sources of financing. The Company believes that its internally
generated funds, together with funds available under its revolving credit
agreement and other potential external financing sources, will provide
sufficient funding to meet the Company's capital requirements and its operating
needs for at least the next 12 months.
The Company from time to time explores additional or new sources of
financing. While the Company has been able to maintain access to external
financing sources, no assurance can be given that such access will continue or
that the Company will be successful in obtaining new or replacement sources of
financing.
On June 30, 1997, the Company amended and extended the revolving credit
agreement (the "Amended Facility") with its lender to September 30, 2000. The
Amended Facility provides for borrowings up to $75,000,000 and it bears
interest at 1% over the lender's established prime rate, payable monthly, and
includes a provision which provides the Company the ability to reduce its
borrowing rate, based on the London InterBank Offered Rate (LIBOR), on up to
75% of outstanding borrowings. The Company may further reduce its interest
rate by meeting certain performance provisions.
The Amended Facility is secured by a first lien on substantially all the
Company's assets. Credit availability is based on a formula related to trade
accounts receivable, inventories and outstanding letters of credit. It
contains
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<PAGE> 12
restrictive financial covenants, the more significant of which require the
Company to maintain specified ratios of total liabilities to net worth, minimum
tangible net worth, and minimum earnings before interest, taxes, depreciation
and amortization. Other covenants also limit the Company's activities in
mergers or acquisitions and sales of substantial assets. Compliance with these
covenants effectively restricts the ability of the Company to pay dividends,
and also requires the Company to apply cash receipts to pay down borrowings
under the Facility.
Certain statements in this Quarterly Report on Form 10-Q constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: economic conditions and retail environment; the
timely development, introduction and customer acceptance of the Company's
products; competitive products and pricing; dependence on foreign suppliers and
supply and manufacturing constraints; the Company's relationship and
contractual arrangements with key customers, suppliers and licensors;
cancellation or reduction of orders; the risks relating to pending legal
proceedings and other factors both referenced and not referenced in this
Quarterly Report on Form 10-Q. When used in this Quarterly Report on Form 10-Q,
the words "estimate," "project," "anticipated," "expect," "intend," "believe,"
and similar expressions are intended to identify forward-looking statements.
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<PAGE> 13
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The Company, White Consolidated, Inc. ("White Consolidated"),
Windmere-Durable Holdings, Inc. and certain other parties have been named as
defendants in litigation filed by Westinghouse Electric Corporation
("Westinghouse") in the United States District Court for the Western District
of Pennsylvania on December 18, 1996. The action arises from a dispute between
Westinghouse and White Consolidated over rights to use the "Westinghouse"
trademark for consumer products, based on transactions between Westinghouse and
White Consolidated in 1970's and the parties' subsequent conduct. The action
seeks, among other things, a preliminary injunction enjoining the defendants
from using the trademark, unspecified damages and attorneys' fees. Pursuant to
the Company's licenses agreements with White Consolidated, White Consolidated
is defending the Company and is obligated to indemnify the Company from and
against any and all claims, losses and damages arising out of the action,
including the costs of litigation. This action is scheduled for trial in
Pittsburgh, Pennsylvania on or about September 14, 1998 or as soon thereafter
as the Court's schedule permits. Due to the inherent uncertainties of the
litigation process, the Company is unable to predict the outcome of this
litigation. If the outcome of this litigation is adverse to the Company, it
could terminate or otherwise adversely affect the Company's ability to market
and sell products under the White-Westinghouse brand name to Kmart Corporation
and other retailers.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
None
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<PAGE> 14
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.
SALTON/MAXIM HOUSEWARES, INC.
Date: February 10, 1998 /s/ WILLIAM B. RUE
------------------------------
William B. Rue
Senior Vice President and
Chief Operating Officer
(Duly Authorized Officer
of the Registrant)
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<PAGE> 15
EXHIBIT INDEX
Exhibit Number Description of Document
- -------------- -----------------------
27 Financial Data Schedule
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> DEC-27-1997
<EXCHANGE-RATE> 1
<CASH> 513
<SECURITIES> 0
<RECEIVABLES> 57,960
<ALLOWANCES> 5,692
<INVENTORY> 48,088
<CURRENT-ASSETS> 111,703
<PP&E> 22,010
<DEPRECIATION> 12,286
<TOTAL-ASSETS> 141,074
<CURRENT-LIABILITIES> 88,782
<BONDS> 2,544
0
0
<COMMON> 131
<OTHER-SE> 49,617
<TOTAL-LIABILITY-AND-EQUITY> 141,074
<SALES> 167,926
<TOTAL-REVENUES> 167,926
<CGS> 102,307
<TOTAL-COSTS> 108,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,962
<INCOME-PRETAX> 15,320
<INCOME-TAX> 5,748
<INCOME-CONTINUING> 9,572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,572
<EPS-PRIMARY> .73
<EPS-DILUTED> .71
</TABLE>
