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 September 30, 1995
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 0-1349
Stanhome Inc.
___________________________________________________________________________
(Exact name of registrant as specified in its charter)
Massachusetts 04-1864170
____________________________________ _______________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Western Avenue, Westfield, Massachusetts 01085
___________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 413-562-3631
___________________________________________________________________________
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 Yes [X] No [_]
September 30,
1995 1994
____ ____
Shares Outstanding:
Common Stock with
Associated Rights 18,590,589 19,240,950
Total number of pages
contained herein 23
Index to Exhibits is
on page 22
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
------------------------------
STANHOME INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1995 and DECEMBER 31, 1994
(Unaudited)
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and certificates of deposit $ 22,873,952 $ 19,349,839
Marketable securities, at cost (which
approximates market value) 14,358 2,000
Notes and accounts receivable, net 194,127,243 140,696,603
Inventories 111,391,483 116,015,060
Prepaid advertising 46,839,308 40,099,913
Other prepaid expenses 10,061,968 6,513,723
------------ ------------
Total current assets 385,308,312 322,677,138
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost 131,310,196 125,995,626
Less - Accumulated depreciation and
amortization 72,305,293 68,036,607
------------ ------------
59,004,903 57,959,019
------------ ------------
OTHER ASSETS:
Goodwill and other intangibles, net 121,819,191 121,586,984
Other 10,469,706 9,899,491
------------ ------------
132,288,897 131,486,475
------------ ------------
$576,602,112 $512,122,632
============ ============
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
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<TABLE>
STANHOME INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1995 and DECEMBER 31, 1994
(Unaudited)
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes and loans payable $125,866,234 $ 39,022,890
Accounts payable 58,022,253 63,072,000
Federal, state and foreign taxes
on income 26,931,395 37,062,510
Accrued expenses--
Payroll and commissions 18,048,653 17,423,516
Royalties 9,589,899 7,974,606
Vacation, sick and
postretirement benefits 8,635,958 9,435,495
Pensions and profit sharing 7,112,812 9,055,259
Other 31,900,093 37,171,244
------------ ------------
Total current liabilities 286,107,297 220,217,520
------------ ------------
LONG-TERM LIABILITIES:
Foreign employee severance obligations 12,280,071 13,207,097
Pensions 9,988,870 9,302,239
------------ ------------
Total long-term liabilities 22,268,941 22,509,336
------------ ------------
SHAREHOLDERS' EQUITY
Common stock 3,153,530 3,153,530
Capital in excess of par value 39,388,627 37,376,690
Retained earnings 377,495,105 362,946,840
Cumulative translation adjustments ( 26,343,074) ( 27,660,727)
------------ ------------
393,694,188 375,816,333
Less - Shares held in
treasury, at cost 125,468,314 106,420,557
------------ ------------
Total shareholders' equity 268,225,874 269,395,776
------------ ------------
$576,602,112 $512,122,632
============ ============
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
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<PAGE>
<TABLE>
STANHOME INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED SEPTEMBER 30, 1995 and 1994 (Unaudited)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NET SALES $205,706,026 $193,255,053
COST OF SALES 92,267,826 85,032,087
------------ ------------
GROSS PROFIT 113,438,200 108,222,966
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE 90,037,720 86,244,463
------------ ------------
OPERATING PROFIT 23,400,480 21,978,503
Interest expense ( 1,928,605) ( 209,719)
Other income, net ( 744,444) 936,331
------------ ------------
INCOME BEFORE INCOME TAXES 20,727,431 22,705,115
Income taxes 8,859,754 9,587,971
------------ ------------
NET INCOME $ 11,867,677 $ 13,117,144
============ ============
EARNINGS PER COMMON SHARE,
Primary and fully diluted $ .63 $ .67
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
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<PAGE>
<TABLE>
STANHOME INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 and 1994 (Unaudited)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NET SALES $600,064,554 $553,616,075
COST OF SALES 258,261,290 229,323,679
------------ ------------
GROSS PROFIT 341,803,264 324,292,396
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE 281,631,069 266,500,132
------------ ------------
OPERATING PROFIT 60,172,195 57,792,264
Interest expense ( 5,207,637) ( 513,583)
Other income, net ( 1,340,622) 2,123,646
------------ ------------
INCOME BEFORE INCOME TAXES 53,623,936 59,402,327
Income taxes 24,136,822 26,543,970
------------ ------------
NET INCOME 29,487,114 32,858,357
RETAINED EARNINGS, beginning
of period 362,946,840 338,753,939
Cash dividends, $.795 per share
in 1995 and $.765 per share
in 1994 ( 14,938,849) ( 14,797,122)
------------ ------------
RETAINED EARNINGS, end of period $377,495,105 $356,815,174
============ ============
EARNINGS PER COMMON SHARE:
Primary $1.56 $1.68
Fully diluted $1.55 $1.67
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
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<PAGE>
<TABLE>
STANHOME INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 and 1994 (Unaudited)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net cash used by operating activities ($42,613,521) ($12,625,636)
----------- -----------
INVESTING ACTIVITIES:
Purchase of property, plant
and equipment ( 8,380,613) ( 4,503,887)
Payments for acquisitions ( 1,402,840) ( 12,978,935)
Proceeds from sale of property,
plant and equipment 1,274,098 2,265,461
Other, principally marketable
securities ( 12,165) ( 12,610,392)
----------- -----------
Net cash used by investing activities ( 8,521,520) ( 27,827,753)
----------- -----------
FINANCING ACTIVITIES:
Cash dividends ( 14,938,849) ( 14,797,122)
Exchanges and purchases of common stock ( 19,438,450) ( 9,534,403)
Notes and loans payable 86,421,953 18,411,727
Exercise of stock options 2,026,183 3,313,800
Other common stock issuance 376,447 284,131
----------- -----------
Net cash provided/(used) by
financing activities 54,447,284 ( 2,321,867)
----------- -----------
Effect of exchange rate changes on
cash and cash equivalents 211,870 579,394
----------- -----------
Increase/(decrease) in cash and
cash equivalents 3,524,113 ( 42,195,862)
Cash and cash equivalents,
beginning of year 19,349,839 53,333,754
----------- -----------
Cash and cash equivalents,
end of quarter $22,873,952 $11,137,892
=========== ===========
SUPPLEMENTAL CASH FLOW DATA
Cash paid for:
Interest $ 4,926,419 $ 564,036
Income taxes $34,296,980 $15,655,020
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
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<PAGE>
STANHOME INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements and related notes
included herein have been prepared by the Company, without audit except for
the December 31, 1994 condensed balance sheet, which was derived from the
Annual Report on Form 10-K, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. The information furnished reflects all normal
recurring adjustments which are, in the opinion of management, necessary to
a fair statement of the results for the interim periods. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and related notes to consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
1. ACCOUNTING POLICIES:
The Company's financial statements for the three and nine months ended
September 30, 1995 have been prepared in accordance with the accounting
policies described in Note 1 to the December 31, 1994 consolidated
financial statements included in the Company's 1994 Annual Report on Form
10-K. Marketable securities with maturities of three months or less are
considered to be cash equivalents but there were none at September 30, 1995
and December 31, 1994. The cash flows' cash and cash equivalents at
September 30, 1995 are equal to the cash and certificates of deposit on the
September 30, 1995 balance sheet. Notes and accounts receivable were net
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<PAGE>
of allowance for doubtful accounts of $18,431,000 at September 30, 1995 and
$15,249,000 at December 31, 1994.
The Company recognizes revenue as merchandise is turned over to the
shipper.
2. INVENTORY CLASSES:
The major classes of inventories at September 30 and December 31
were as follows (in thousands):
September 30, December 3l,
1995 1994
---- ----
Raw materials and supplies $ 8,018 $ 7,071
Work in process 1,166 818
Finished goods in transit 12,790 9,949
Finished goods 89,418 98,177
-------- --------
$111,392 $116,015
======== ========
3. OTHER INCOME, NET:
Other income, net for the quarters and nine months ended September
30, 1995 and 1994 consists of the following (in thousands):
Quarters Ended September 30
---------------------------
1995 1994
---- ----
Interest income $ 613 $ 918
Other assets amortization ( 1,045) ( 594)
Other items, net ( 313) 613
------ ------
($ 745) $ 937
====== ======
Nine Months Ended September 30
------------------------------
1995 1994
---- ----
Interest income $2,119 $2,888
Other assets amortization ( 3,062) ( 1,796)
Other items, net ( 398) 1,032
------ ------
($1,341) $2,124
====== ======
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<PAGE>
4. EARNINGS PER COMMON SHARE (BASIS OF CALCULATION):
Earnings per common share are based on the average number of
common shares outstanding and common share equivalents for the periods
covered. For the third quarters of 1995 and 1994, there were no
differences in earnings per share between primary and fully diluted
earnings per share computations. There were slight differences for the
nine months ended September 30, 1995 and 1994 where 18,888,161 shares
for 1995 and 19,596,767 shares for 1994 were utilized as the average
number of shares for the primary computations, including common share
equivalents of 40,345 and 241,097 for 1995 and 1994, respectively. For
the third quarter, the average number of shares utilized in the fully
diluted computation was 18,840,554 and 19,513,969 shares for 1995 and
1994, respectively. The average number of shares utilized in the fully
diluted computation for the nine months ended September 30 was
18,984,314 for 1995 and 19,618,973 for 1994. Both 1995 fully diluted
computations included common share equivalents of 136,498 and both 1994
fully diluted computations included common share equivalents of
263,303. The lower average number of shares for the third quarter and
first nine months of 1995 primarily resulted from the repurchase of
shares as part of the Company's repurchase program.
5. FINANCIAL INSTRUMENTS:
The Company enters into various short-term foreign exchange
agreements during the year, all of which are held for purposes other than
trading. The purpose of the Company's foreign currency hedging activities
is to reduce the risk that the eventual settlement of foreign currency
transactions will be adversely affected by changes in exchange rates. The
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<PAGE>
Company's various subsidiaries import products in foreign currencies and
from time to time will enter into agreements or build foreign currency
deposits as a partial hedge against currency fluctuations on inventory
purchases. Gains and losses on these agreements are deferred and recorded
as a component of cost of sales when the related inventory is sold. At
September 30, 1995, there were no open inventory purchase agreements and
deferred amounts were not material. The Company makes short-term foreign
currency intercompany loans to various international subsidiaries and
utilizes agreements to fully hedge these transactions against currency
fluctuations. The cost of these agreements is included in the interest
charged to the subsidiaries and expensed monthly as the interest is
accrued. The intercompany interest eliminates upon consolidation and any
gains and losses on the agreements are recorded as a component of other
income. The Company receives dividends, technical service fees, royalties
and other payments from its subsidiaries and licensees. From time to time,
the Company will enter into foreign currency forward agreements as a
partial hedge against currency fluctuations on these current receivables.
Gains and losses are recognized or the credit or debit offsets the foreign
currency payables. As of September 30, 1995, net deferred amounts on
outstanding agreements were not material and all current agreements have
expiration dates in 1995. The outstanding agreement amounts (notional
value) at September 30, 1995, are as follows (in thousands):
Canada $ 6,707
Germany 4,509
Italy 1,561
France 1,225
U.S. 250
-------
Total $14,252
=======
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<PAGE>
6. LICENSE AGREEMENT:
In January 1995, the Company entered into an agreement with a third
party to license the domestic operations of its Worldwide Direct Selling
Group. The business licensed, known as Stanley Home Products ("SHP"),
marketed home care, personal care and cosmetic items to consumers through
direct selling programs. The agreement calls for the third party to
license the trademarks and formulas of SHP for use in the U.S., Puerto Rico
and Canada, and remit to the Company royalties based on sales of the
related products. The licensed areas recorded net sales of approximately
$9 million and $28 million in the third quarter and first nine months of
1994, respectively, and operating losses of approximately $.8 million and
$1.9 million in the third quarter and first nine months of 1994,
respectively. These sales represented approximately 17% of the Worldwide
Direct Selling Group's first nine months 1994 net sales and 5% of the
Company's consolidated net sales for the same period.
The transfer of the businesses was completed in the second quarter of
1995. In connection with this agreement, the Company closed administrative
and distribution facilities in the U.S. and Puerto Rico during the first
quarter of 1995. Management believes that the total costs to exit the SHP
operations, including employee severance benefits, will be offset in 1995
by a comparable amount of gains, approximately $6 million, net, primarily
from the sale of SHP's distribution facilities. The costs to exit the SHP
operations have not had and are not expected to have a material adverse
impact on the Company's future operating results or financial condition.
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<PAGE>
STANHOME INC.
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS SEGMENTS of the Company's operations are summarized on Page
20. A discussion and analysis of the segments follows:
GIFTWARE
Giftware Group sales increased for the third quarter and first nine
months primarily due to unit volume growth from existing lines and from new
businesses acquired in 1994. The new businesses accounted for 10% of the
third quarter 18% increase in sales and 10% of the year-to-date 24%
increase in sales. Sales in the United States benefited from an expansion
of the Company's program of extended accounts receivable terms on Christmas
related merchandise. This facilitated the shipment of Christmas related
orders sooner this year versus last year. The extended accounts receivable
are not expected to have a material impact on bad debts. Since the new
businesses acquired in 1994 recorded sales in the fourth quarter of 1994
and considering the impact of the Company's expanded credit program, the
rate of sales increase achieved for the first nine months is not expected
to be maintained during the fourth quarter of 1995. International results
increased and, including the new businesses, international sales
represented 15% of year-to-date 1995 sales compared to 10% in 1994. The
Precious Moments line represented 46% of total year-to-date sales in 1995
and 1994. The Cherished Teddies line represented 13% of total year-to-date
sales in 1995 compared to 16% in 1994. Operating profit for the third
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<PAGE>
quarter decreased as a percentage of sales compared to 1994 due to lower
margins from the new businesses. Operating profit for the first nine
months increased as a percentage of sales compared to 1994, despite lower
margins from the new businesses, as a result of lower percentage of
selling, general and administrative expenses principally due to the
favorable impact of the sales increase on fixed costs.
DIRECT RESPONSE
Direct Response Group sales increased in the third quarter and first
nine months due principally to unit volume growth in dolls and figurines.
International sales and operating losses increased for the quarter and year-
to-date. International sales represented 10% of the first nine months
sales compared to 9% in 1994. Year-to-date total Group doll sales
accounted for 32% of 1995 sales compared to 29% in 1994, while plate sales
accounted for 41% of sales in 1995 compared to 55% in 1994. All other
categories of sales, which are primarily figurines, increased to 27% of
sales in 1995 compared to 16% in 1994. Market conditions for the direct
response businesses for the Company's products continue to be soft and very
competitive with many product offerings and ads going against weakness in
consumer spending. These conditions have significantly increased
advertising expense to 52% of sales in 1995 compared to 47% in 1994 due to
reduced response rates to ads, a significantly lower success rate for
product introductions which have increased over 1994, and a resistance by
customers to higher prices. Additionally, product returns and bad debts on
installment billing programs have increased. Reflecting these poor market
conditions combined with postage, paper and advertising rate increases, the
Group recorded an operating loss for the third quarter and first
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<PAGE>
nine months. Some of the key management group have been replaced. If the
market conditions do not improve, it is expected that the Group's operating
performance will not improve for the balance of the year.
DIRECT SELLING
Comparable Direct Selling results for the third quarter and first
nine months excluding the United States and Puerto Rico operations, which
in 1995 have been licensed to a third party, are as follows:
Third Quarter
-------------
1995 1994 % Change
---- ---- --------
Sales $ 33,715 $ 34,788 ( 3)
Operating profit 1,739 1,090 60
First Nine Months
-----------------
1995 1994 % Change
---- ---- --------
Sales $133,588 $140,762 ( 5)
Operating profit 13,074 15,474 ( 16)
European sales for the quarter and first nine months were level with
1994, and represented 88% of total 1995 year-to-date sales. Operating
profit, compared to 1994, increased 184% for the seasonally slow third
quarter on a small base due to lower selling and marketing expenses but
decreased 10% for the first nine months, and represented 90% of total year-
to-date 1995 operating profit. For the quarter and year-to-date, sales
decreased in Italy and higher year-to-date selling, general and
administrative expenses in Italy reduced operating margins. First nine
months 1995 European local currency sales and operating profit translated
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<PAGE>
at 1994 average exchange rates would have resulted in a 5% sales decrease
and a 14% operating profit decrease. Sales for the Mexican and Venezuelan
group decreased 20% and 35%, respectively, for the third quarter and first
nine months resulting primarily from the devaluation of the Mexican peso
compared to 1994. The group's third quarter and year-to-date operating
profit decreased 12% and 47%, respectively, due to the peso devaluation
and the resulting unfavorable economic impact. The United States and
Puerto Rico direct selling operations in 1995 have been assumed by a third
party. The assets of these businesses, not assumed by the third party,
have been and are being disposed during 1995 and, as of September 30,
1995, amounted to $3.2 million in inventories and $1.3 million of net
property plant and equipment. The severance and other exit costs are
expected to approximate $6 million, which should be offset by gains on the
sale of assets of the business.
GENERAL CORPORATE EXPENSE increased for the quarter and first nine
months due to higher compensation, benefits and general expenses
consistent with the Company programs.
INTERNATIONAL ECONOMIES AND CURRENCY
The Latin American operations in Mexico and Venezuela have experienced
highly inflationary economies with rapidly changing prices in local
currencies. These conditions, with the resulting adverse impact on local
economies, have made it difficult for operations in these locations to
achieve consistent adequate operating margins. In addition, the
strengthening of the dollar versus Latin American currencies has resulted
in lower U.S. dollar results for these operations. European operations
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were favorably impacted by higher currency translation rates in 1995
compared to 1994. The value of the U.S. dollar versus international
currencies where the Company conducts business will continue to impact the
future results of these businesses. In addition to the currency risks, the
Company's international operations, including sources of imported products,
are subject to other risks of doing business abroad, including import or
export restrictions and changes in economic and political climates.
The fluctuations in net sales and operating profit margins from
quarter to quarter are partially due to the seasonal characteristics of the
Company's business segments.
INTEREST EXPENSE AND OTHER INCOME, NET
Net interest expense increased due to higher borrowing levels
principally for the 1994 acquisitions and the stock buy back program.
Other assets amortization of goodwill increased due to the impact from the
1994 acquisitions. The year-to-date amortization for Giftware in 1995 was
$2.6 million compared to $1.3 million in 1994 and the amortization for
Direct Response was $.5 million in 1995 and $.5 million in 1994. Year-to-
date other income, net last year includes $1.2 million in gains on the
sale of distribution centers in the U.S. and Puerto Rico.
THE EFFECTIVE TAX RATE year-to-date of 45% was the same as 1994
despite international rate increases, and higher non deductible goodwill
in 1995. This was due principally to earnings mix with a lower ratio of
foreign income to United States income, which has a lower rate.
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<PAGE>
FINANCIAL CONDITION
The Company has historically satisfied its capital requirements with
internally generated funds and short-term loans. Working capital
requirements have seasonal variations during the year and are generally
greatest during the third quarter.
The major sources of funds from operating activities in the first
nine months of 1995 were from net income, depreciation, amortization and
lower inventory levels. The major uses were increased accounts receivable
which increased due to the higher sales volume and marketing programs
(particularly the expansion of the Company's Giftware program of extended
accounts receivable terms on Christmas related merchandise); increased
prepaid expenses from higher advertising in direct response; lower
accounts payable and accrued expenses due principally to timing and the
payment of year end payrolls and benefits; and lower accrued taxes due to
timing of payments. The first nine months 1995 working capital increases
in receivables, inventories and prepaids compared to 1994 reflect
increases to support higher levels of sales.
The major uses of cash in investing activities in the first nine
months of 1995 were for capital expenditures and payments related to
acquisition liabilities. Capital expenditure commitments for $15 million
are forecasted for 1995. Due to the Company's exit from the United States
direct selling business, the Company had for sale, as of September 30,
1995, four United States distribution facilities with a total appraised
value of approximately $6 million, net. One of the facilities was sold
for $2.3 million, net in October. The Company has an acquisition program,
and may utilize funds for this purpose in the future. The Italian
subsidiary invests excess cash in short-term investments which change from
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time to time based on availability and rates. The level of changes of
marketable securities from period to period principally represents
investment alternatives versus certificates of deposit, time deposits, and
intercompany loans.
The major uses of cash in financing activities were for dividends to
shareholders and purchases of common stock. Purchases of common stock
principally included shares repurchased by the Company. During the first
nine months this year, the Company repurchased 652,017 shares for
$19,350,000. The Company has an authorized program to purchase shares of
stock for the Company treasury from time to time in the open market,
depending on market conditions, and may utilize funds for this purpose in
the future. On June 6, 1995, the repurchase of up to 2,000,000 shares was
newly authorized and, at September 30, 1995, 1,745,000 shares remained
available for purchase under the program. The Company's earnings, cash
flow, and available debt capacity have made and make stock repurchases, in
the Company's view, one of its best investment alternatives. The major
source of funds for the seasonal working capital requirements, investing
activities and financing activities was an increase in borrowings, which
also increased due to reduced intercompany loans which fluctuate depending
on market condition rates. Total stock options outstanding at the
exercise price amounted to $85 million at September 30, 1995 and the
Company could receive these funds in the future if the options are
exercised.
In August 1995 the Company entered into a five year $200 million
multicurrency revolving credit agreement with various banks which can be
used for working capital, investing and financing activities. The
agreement has an annual facility and agency fee as well as a margin
supplement for Eurocurrency rate loans where more than one third of the
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commitment is utilized. The agreement contains financial covenants that
include requirements, as defined, for minimum net worth, interest coverage
and maximum borrowings. None of these covenants is expected to have an
adverse effect on the Company's ability to operate in the future. The
Company currently believes that cash from operations and available
financing alternatives are adequate to meet anticipated requirements for
working capital, dividends, capital expenditures, the stock repurchase
program and other needs.
Fluctuations in the value of the U.S. dollar versus international
currencies affect the U.S. dollar translation value of international
currency denominated balance sheet items. The changes in the balance sheet
dollar values due to international currency translation fluctuations are
recorded as a component of shareholders' equity. International currency
fluctuations of $1,318,000 reduced the cumulative translation component
which reduced the shareholders' equity decrease in the first nine months of
1995. The translation adjustments to the balance sheet that produced the
1995 change in the cumulative translation component of shareholders' equity
were decreases in working capital by $64,000; increases in net property,
plant and equipment and other assets by $1,544,000; and increases in long-
term liabilities by $162,000. The Company depends upon its international
operations to pay dividends and to make other payments to the Company. The
Company's international operations are subject to the risks of doing
business abroad including currency, economic and political.
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<TABLE>
STANHOME INC.
SALES AND OPERATING PROFIT BY BUSINESS SEGMENT
FOR THE THIRD QUARTER AND FIRST NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
(In Thousands)
<CAPTION>
Third Quarter First Nine Months
------------------------------ ----------------------------
- ---
1995 1994 Percent 1995 1994 Percent
Actual Actual Change Actual Actual Change
------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net Sales:
Giftware $138,150 $116,913 18% $366,231 $294,685 24%
Direct Response 33,986 33,494 1 102,811 92,362 11
Direct Selling 33,715 43,535 (23) 133,588 168,632 (21)
Eliminations ( 145) ( 687) ( 2,565) ( 2,063)
-------- -------- -------- --------
Total Net Sales $205,706 $193,255 6% $600,065 $553,616 8%
======== ======== ======== ========
Operating Profit:
Giftware $ 25,462 $ 21,851 17% $ 56,874 $ 45,027 26%
Direct Response ( 1,290) 2,100 ( 2,158) 5,901
Direct Selling 1,739 245 610 13,074 13,533 ( 3)
Corporate ( 2,511) ( 2,218) (13) ( 7,618) ( 6,669) (14)
-------- -------- -------- --------
Total Operating Profit $ 23,400 $ 21,978 6% $ 60,172 $ 57,792 4%
======== ======== ======== ========
</TABLE>
-20-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
- Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the Quarter for which this report is filed.
All other items hereunder are omitted because either such item is
inapplicable or the response to it is negative.
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.
STANHOME INC.
(Registrant)
Date: November 10, 1995 /s/ G. William Seawright
_____________________________________
G. William Seawright
President and Chief Executive Officer
Date: November 10, 1995 /s/ Allan G. Keirstead
_____________________________________
Allan G. Keirstead
Chief Administrative and Financial
Officer
-21-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Reg. S-K
Item 601 Exhibit 10-Q Page No.
_________ _______ _____________
<S> <C> <C>
27 Financial Data Schedule 23
</TABLE>
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 22,873,952
<SECURITIES> 14,358
<RECEIVABLES> 212,558,362
<ALLOWANCES> 18,431,119
<INVENTORY> 111,391,483
<CURRENT-ASSETS> 385,308,312
<PP&E> 131,310,196
<DEPRECIATION> 72,305,293
<TOTAL-ASSETS> 576,602,112
<CURRENT-LIABILITIES> 286,107,297
<BONDS> 0
0
0
<COMMON> 3,153,530
<OTHER-SE> 265,072,344
<TOTAL-LIABILITY-AND-EQUITY> 576,602,112
<SALES> 600,064,554
<TOTAL-REVENUES> 600,064,554
<CGS> 258,261,290
<TOTAL-COSTS> 258,261,290
<OTHER-EXPENSES> 278,448,764
<LOSS-PROVISION> 3,182,305
<INTEREST-EXPENSE> 5,207,637
<INCOME-PRETAX> 53,623,936
<INCOME-TAX> 24,136,822
<INCOME-CONTINUING> 29,487,114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,487,114
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.55
</TABLE>
