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 June 29, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number: 1-13736
-------------
U.S. INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 22-3369326
incorporation or organization) (I.R.S. Employer Identification No.)
101 WOOD AVENUE SOUTH
ISELIN, NJ 08830
(Address of principal executive offices)
(908) 767-0700
(Registrant's telephone number, including area code)
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
----- -----
As of August 6, 1996, U.S. Industries, Inc. had one class of common stock, of
which 51,362,651 shares were outstanding.
<PAGE>
U.S. INDUSTRIES, INC.
INDEX
Page
No.
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated (Combined) Statements of Operations
for the Three and Nine Months Ended June 30, 1996 and 1995.......1
Consolidated Balance Sheets, June 30, 1996 (Unaudited)
and September 30, 1995...........................................2
Unaudited Consolidated (Combined) Statements of Cash Flows
for the Nine Months Ended June 30, 1996 and 1995.................3
Unaudited Consolidated Statement of Changes in Stockholders'
Equity for the Nine Months Ended June 30, 1996...................4
Notes to Consolidated (Combined) Financial Statements............5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................23
SIGNATURE....................................................................24
EXHIBIT INDEX
<PAGE>
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
U. S. INDUSTRIES, INC.
CONSOLIDATED (COMBINED) STATEMENTS OF OPERATIONS
(IN MILLIONS EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 602 $ 543 $ 1,678 $ 1,602
Operating costs and expenses:
Cost of products sold 418 373 1,145 1,100
Selling, general and administrative expenses 122 125 375 367
Goodwill impairment and nonrecurring charges -- 113 -- 113
------- ------- ------- -------
Operating income 62 (68) 158 22
Interest expense 14 27 48 74
Interest income (2) (2) (6) (5)
Other expense, net 2 4 6 8
------- ------- ------- -------
Income (loss) before income taxes, discontinued
operations and extraordinary loss 48 (97) 110 (55)
Provision for income taxes 22 10 50 28
------- ------- ------- -------
Income (loss) from continuing operations 26 (107) 60 (83)
Discontinued operations:
Income (loss) from operations of discontinued operations
(net of income tax (benefit) of $0, $(1), $(4) and $6) 0 (3) (6) 4
Gain (loss) on disposals of discontinued operations
(net of income tax (benefit) of $(1), $(3), $9 and $(7)) (2) (49) 66 (55)
------- ------- ------- -------
Income (loss) from discontinued operations (2) (52) 60 (51)
------- ------- ------- -------
Income (loss) before extraordinary loss 24 (159) 120 (134)
Extraordinary loss from early extinguishment of debt
(net of income tax benefit of $16) -- -- (25) --
------- ------- ------- -------
Net income (loss) $ 24 $ (159) $ 95 $ (134)
======= ======= ======= =======
Income from continuing operations per share $ 0.51 $ 1.15
Income (loss) from discontinued operations per share (0.04) 1.13
Extraordinary loss per share -- (0.46)
------- -------
Net income per share $ 0.47 $ 1.82
======= =======
Pro forma loss from continuing operations $ (109) $ (92)
======= =======
Pro forma net loss $ (161) $ (143)
======= =======
Pro forma loss from continuing operations per share $ (2.03) $ (1.71)
======= =======
Pro forma net loss per share $ (3.00) $ (2.66)
======= =======
</TABLE>
See notes to consolidated (combined) financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
U.S. INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT PER SHARE DATA)
June 30, September 30,
-------- -------------
1996 1995
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 44 $ 51
Trade receivables, net of allowance of $38 and $35 377 350
Inventories, net 401 382
Deferred income taxes 8 --
Other current assets 25 31
Net assets held for disposition 6 171
------- -------
Total current assets 861 985
Property, plant and equipment, net of accumulated
depreciation of $441 and $399 341 335
Deferred income taxes 18 3
Other assets 130 162
Goodwill, net 393 393
------- -------
$ 1,743 $ 1,878
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1 $ 4
Current maturities of long-term debt 5 157
Trade accounts payable 150 147
Accrued expenses and other liabilities 180 181
Income taxes payable 30 28
------- -------
Total current liabilities 366 517
Long-term debt 787 832
Other liabilities 120 117
------- -------
Total liabilities 1,273 1,466
------- -------
Commitments and contingencies
Stockholders' equity:
Common stock (par value $.01 per share, authorized 200,000,000 shares; issued
53,711,422 and 53,671,432; respectively;
outstanding 51,481,358 and 53,671,432; respectively) 1 1
Paid in capital 542 542
Deficit (9) (104)
Minimum pension liability adjustment (3) (3)
Unearned restricted stock (19) (24)
Cumulative translation adjustment -- --
Treasury stock (2,230,064 shares at June 30,
1996) at cost (42) --
------- -------
Total stockholders' equity 470 412
------- -------
$ 1,743 $ 1,878
======= =======
</TABLE>
See notes to consolidated (combined) financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
U.S. INDUSTRIES, INC.
CONSOLIDATED (COMBINED) STATEMENTS OF CASH FLOWS
(IN MILLIONS-UNAUDITED)
Nine Months Ended
June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Income (loss) from continuing operations $ 60 $ (83)
Adjustments to reconcile income (loss) from continuing operations to net cash
provided by operating activities of continuing operations:
Goodwill impairment and nonrecurring charges -- 113
Depreciation 33 31
Amortization of goodwill 9 14
Amortization of unearned restricted stock 5 --
Amortization of deferred financing costs 2 --
Provision for deferred income taxes 1 --
Provision for doubtful accounts 4 5
Changes in operating assets and liabilities, excluding the effects of
acquisition and dispositions:
(Increase) decrease in trade receivables (22) 48
Increase in inventories (11) (41)
Decrease (increase) in other current assets 5 (42)
Decrease in other assets 3 22
Decrease in trade accounts payable (4) (15)
(Decrease) increase in income taxes payable (10) 11
Decrease in accrued expenses and other liabilities (11) --
Increase (decrease) in other non-current liabilities (5) (10)
Other, net -- 13
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS 59 66
------- -------
Income (loss) from discontinued operations 60 (51)
Adjustments to reconcile income (loss) from discontinued operations to net cash
used in discontinued operations:
(Gain) loss on disposal of discontinued operations (66) 55
Decrease (increase) in net assets held for disposition 17 (10)
------- -------
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS 11 (6)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 70 60
------- -------
INVESTING ACTIVITIES:
Acquisition of companies, net of cash acquired (22) (29)
Proceeds from sale of net assets held for disposition 224 16
Purchases of property, plant and equipment (34) (46)
Proceeds from sales of fixed assets -- 1
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 168 (58)
------- -------
FINANCING ACTIVITIES:
Proceeds from long-term debt 862 1,402
Repayment of long-term debt (1,060) (102)
(Repayment) proceeds from notes payable (5) 13
Purchase of treasury stock (42) --
Repayment of debt to Hanson -- (873)
Return of capital to Hanson -- (451)
Net cash transfers from affiliates -- 48
------- -------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (245) 37
Effect of exchange rate changes on cash -- (1)
------- -------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (7) 38
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 51 28
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 44 $ 66
======= =======
</TABLE>
See notes to consolidated (combined) financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
U.S. INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(IN MILLIONS EXCEPT PER SHARE DATA)
(UNAUDITED)
Minimum Total
Pension Unearned Cumulative Stock-
Common Paid in Liability Restricted Translation Treasury holders'
Stock Capital Deficit Adjustment Stock Adjustment Stock Equity
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 $ 1 $ 542 $(104) $ (3) $ (24) $ -- $ -- $ 412
Net income 95 95
Amortization of unearned restricted stock 5 5
Purchase of 2,213,091 shares of common
stock (average cost of $18.95 per share) (42) (42)
Common stock issued (18,395 shares)
upon exercise of options -- -- --
Common stock issued (21,595 shares)
to employee and directors -- -- --
Forfeiture of 16,973 shares of unearned
restricted stock -- -- --
Translation adjustment -- --
----- ----- ----- ----- ----- -------- ----- -----
Balance at June 30, 1996 $ 1 $ 542 $ (9) $ (3) $ (19) $ -- $ (42) $ 470
===== ===== ===== ===== ===== ======== ===== =====
</TABLE>
See notes to consolidated (combined) financial statements.
4
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1-BASIS OF PRESENTATION
U.S. Industries, Inc. (together with its subsidiaries, the "Company") was
organized in February 1995 and has been publicly-owned since May 31, 1995, at
which time Hanson PLC ("Hanson") paid a dividend to its shareholders consisting
of all of the then outstanding shares of the Company's common stock. Regular way
trading in the common stock commenced on the New York Stock Exchange on June 1,
1995. Prior to May 31, 1995, the Company was a wholly-owned subsidiary of
Hanson. Certain consumer, building products and industrial businesses, as well
as certain other assets and liabilities, were transferred to the Company or its
subsidiaries by Hanson or its subsidiaries pursuant to transactions consummated
on May 31, 1995 and June 5, 1995 (collectively, the "Demerger").
Prior to the Demerger, the financial statements of the Company presented the
combined results, financial position and cash flows of the individual
businesses, real estate assets and equity investments that subsequently were
transferred to the Company. Subsequent to the Demerger, the financial statements
of the Company are presented on a consolidated, legal entity basis. The
financial statements presented for periods prior to the Demerger include
management fees paid by the Company to Hanson for services. Subsequent to the
Demerger, all such services have been provided by the Company.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information,
Article 10 of Regulation S-X and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The interim financial data for the three and nine months ended June 30, 1996 and
1995 are unaudited and, in the opinion of management, reflect all adjustments
necessary for a fair presentation of the financial position and results of
operations for the interim periods on a consistent basis. Such adjustments were
of a normal and recurring nature, except as otherwise disclosed. The results of
operations for the three and nine month periods ended June 30, 1996 are not
necessarily indicative of those for the full fiscal year ended September 28,
1996. For further information, refer to the Consolidated (Combined) Financial
Statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1995.
The Company's fiscal year ends on the Saturday closest to September 30. All
three and nine month data contained herein reflect results of operations for the
13-week and 39-week periods ended on the Saturday closest to June 30, but are
presented as of such date for convenience.
5
<PAGE>
NOTE 2-INVENTORIES
Inventories consist of the following:
(in millions)
June 30, September 30,
-------- -------------
1996 1995
---- ----
(unaudited)
Finished products $ 215 $ 192
In-Process products 81 87
Raw materials 105 103
---- -----
Inventories, net $ 401 $ 382
===== =====
NOTE 3-DISCONTINUED OPERATIONS
During the nine months ended June 30, 1996, the Company adopted formal plans to
dispose of Farberware Inc. ("Farberware") and its equity investment in Ground
Round Restaurants, Inc. ("Ground Round"). During fiscal 1995, the Company
adopted formal plans to dispose of Bearing Inspection, Inc., Jade Holdings,
Inc., Piedmont Moulding Corporation ("Piedmont"), Spartus Electronics
Corporation ("Spartus") and Universal Gym Equipment, Inc. ("Universal")
(collectively with Farberware and Ground Round, the "Discontinued Operations").
In October 1995, the Company sold Blue Mountain Industries for $22.5 million in
cash, resulting in a gain of approximately $2 million, net of tax. Also, in
October 1995, the Company sold its Office Furniture Group for $143 million in
cash and a note for $5 million (which was collected during the second quarter of
fiscal 1996), and recorded a gain of approximately $66 million, net of tax. The
Company also entered into an agreement not to compete with the purchaser of the
Office Furniture Group for a period of five years in exchange for $11 million,
which will be recognized over the period of the agreement.
During the third quarter of fiscal 1996, the Company, in separate transactions,
sold most of the operating assets of Farberware, Spartus and Piedmont for
aggregate gross cash consideration of $54 million. There was no material gain or
loss as the proceeds generated from these transactions approximated the net
carrying amount of the assets sold. Also during the third quarter of fiscal
1996, the Company recorded a loss on disposal of discontinued operations of $2
million, net of a tax benefit of $1 million, to reduce the carrying value of its
equity investment in Ground Round to its estimated realizable value.
6
<PAGE>
NOTE 3-DISCONTINUED OPERATIONS--CONTINUED
The following is a summary of the operating results of the businesses classified
as discontinued operations at June 30, 1996:
(in millions - unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
Net Sales $ 33 $ 178 $ 153 $ 557
Pre-tax (loss) income $ 0 $ (4) $ (10) $ 10
Amounts classified as net assets held for disposition consist of the following
after accrual for anticipated net-of-tax losses on dispositions not yet
consummated:
(in millions)
June 30, September 30,
-------- -------------
1996 1995
---- ----
(unaudited)
Net current assets $ 10 $ 104
Property, plant and equipment, net 3 54
Other non-current (liabilities)
and assets, net (7) 13
-------- --------
Net assets held for disposition $ 6 $ 171
======== ========
NOTE 4-ACQUISITIONS
In April 1996, the Company purchased Haugh's Products Limited ("Haugh's") for
U.S. $11.7 million and the assumption of U.S. $10.5 million in debt. Haugh's is
a Canadian manufacturer of above-ground swimming pools and equipment. The
transaction has been accounted for as a purchase effective April 1, 1996 and the
results of Haugh's have been included in the Bath Products Operations since that
date.
In July 1996, the Company purchased the ladder operations of Keller Industries,
Inc. ("Keller"), for approximately $36 million in cash plus the assumption of
certain liabilities. Keller is the second largest manufacturer and marketer of
ladders in the United States. The transaction has been accounted for as a
purchase effective July 19, 1996 and the results of Keller will be included in
the Housewares Operations from that date.
7
<PAGE>
NOTE 4-ACQUISITIONS--CONTINUED
Also in July 1996, the Company joined a consortium of companies which acquired
139,740,000 newly issued shares of All Pantronic Holdings, Limited ("All
Pantronic"), a limited liability company incorporated in Bermuda and listed on
the Stock Exchange of Hong Kong. The members of the consortium have acquired
equity interests totalling approximately 33% in All Pantronic, a manufacturer of
voltage converters and other electronic components. The Company's investment of
approximately $11 million results in an effective ownership of approximately 20%
of All Pantronic. This investment will be accounted for under the equity method
from July 1, 1996.
NOTE 5-CREDIT FACILITY AND INTEREST RATE SWAP AGREEMENTS
Long term debt is as follows:
(in millions)
June 30, September 30,
-------- -------------
1996 1995
---- ----
(unaudited)
Term loan facility $ 375 $ 600
Revolving credit facility 275 358
Other 142 31
------ ------
792 989
Less current maturities 5 157
------ ------
Long-term debt $ 787 $ 832
====== ======
Other long-term debt at June 30, 1996 includes $135 million of notes payable
with maturities due within one year which the Company expects to repay using
borrowings under the revolving credit portion of the Company's bank credit
facility (the "Credit Facility") described below. Of this amount, $112 million
was borrowed under uncommitted short-term lines of credit with aggregate
availability of $200 million.
On December 21, 1995, the Company entered into the Credit Facility, which
consists of a 4 1/2-year amortizing term loan facility in the amount of $400
million and a 5-year secured revolving credit facility of $575 million
(including a swingline loan facility in the amount of up to $50 million and a
letter of credit facility in the amount of up to $75 million). Upon entering
into the Credit Facility, the Company repaid all loans outstanding under its
previous bank credit facility with amounts borrowed at lower rates under the new
facility. The Credit Facility is guaranteed by the Company's subsidiaries that
are U.S. corporations and is secured by a first priority security interest in,
and pledge of, all outstanding capital stock of the Company's direct and
indirect subsidiaries that are U.S. corporations and 65% of the capital stock of
a foreign
8
<PAGE>
NOTE 5-CREDIT FACILITY AND INTEREST RATE SWAP AGREEMENTS--Continued
subsidiary which holds the shares of other foreign subsidiaries of the Company.
The term loan facility is subject to certain mandatory prepayments from asset
sales which will be applied to the scheduled installments of the term loan on a
pro rata basis. As such, current maturities of long-term debt includes
approximately $3 million related to mandatory prepayments required as a result
of the June 1996 sale of the assets of Piedmont (See Note 3) and the July 1996
sale of the assets of Universal (See Note 8).
Amortization payments due under the term loan facility at June 30, 1996 are as
follows:
$ 3 million July 29, 1996
$ 93 million June 15, 1998
$ 93 million June 15, 1999
$186 million June 15, 2000
Amortization payments may be satisfied by borrowing under the revolving credit
facility to the extent there is availability thereunder.
The Credit Facility places restrictions on, among other things, dividends,
liens, acquisitions and additional indebtedness. It also requires compliance
with covenants as to minimum net worth and certain other financial ratios. On
June 18, 1996, the Credit Facility was amended to increase the amount of
permitted investments and unsecured indebtedness of the Company and its
subsidiaries.
The interest rates for loans outstanding under the Credit Facility are based on
specified spreads over, at the option of the Company, (a) the London interbank
offered rate ("LIBOR") or (b) the higher of the rate of interest publicly
announced by Bank of America in San Francisco, California as its reference rate
or the federal funds rate in effect on such day (the "Base Rate"). The spread on
LIBOR-based borrowings ranges between 62.5 and 150 basis points and the spread
on Base Rate borrowings ranges between zero and 50 basis points. At June 30,
1996, the spreads were 87.5 basis points and zero basis points, respectively,
and are adjusted quarterly based on a Consolidated Leverage Ratio specified in
the Credit Facility. On August 15, 1996, such spreads will be adjusted to 62.5
basis points and zero basis points, respectively, in accordance with the
provisions of the Credit Facility. At June 30, 1996, three-month LIBOR was 5.56%
per annum. A commitment fee is payable on a quarterly basis in arrears to the
lenders under the Credit Facility on the aggregate unused amount of the
revolving credit facility. The commitment fee is adjusted quarterly based on the
Consolidated Leverage Ratio, ranges between 15 and 30 basis points per annum and
was 20 basis points per annum at June 30, 1996. On August 15, 1996 the
commitment fee will be adjusted to 15 basis points.
9
<PAGE>
NOTE 5-CREDIT FACILITY AND INTEREST RATE SWAP AGREEMENTS--Continued
At June 30, 1996 and September 30, 1995, the Company had two outstanding
tranches of interest rate protection agreements with several banks covering an
aggregate notional amount of $600 million, $250 million of which expires
September 1996 with the remainder expiring May 1997, to exchange variable rate
interest payment obligations under the respective credit facilities for fixed
rate obligations (without the exchange of the underlying principal amounts) to
manage interest rate exposures in a manner consistent with the Company's credit
facility requirements. Net payments under the agreements amounted to
approximately $2.2 million and $5.5 million, respectively, for the three and
nine months ended June 30, 1996. Under the interest rate protection agreements,
the Company receives a floating rate based on three-month LIBOR and pays a
weighted average fixed rate of 6.86% plus a spread on LIBOR as determined based
on the Consolidated Leverage Ratio.
In conjunction with the Company's repayment of all loans outstanding under its
previous credit facility during the first quarter of fiscal 1996, a net-of-tax,
noncash, extraordinary charge of approximately $25 million was incurred to
write-off unamortized deferred financing costs and to accrue for previously
deferred losses associated with the interest rate protection agreements that had
been designated as hedges of the previous credit facility. Losses associated
with such interest rate agreements were recognized as of the date of termination
of the previous credit facility. The interest rate protection agreements have
subsequently been designated as hedges of the indebtedness incurred under the
Credit Facility.
In addition to the interest rate protection agreements noted above, in May and
July 1996, the Company entered into various interest rate protection agreements
with several banks to manage its interest rate exposures consistent with the
Company's credit facility requirements. The terms of the agreements are as
follows:
Notional Amount Commencement Date Maturity Date
- --------------- ----------------- -------------
$150 million September 30, 1996 September 30, 1997
$100 million May 30, 1997 September 30, 1997
$100 million May 30, 1997 May 30, 1998
$100 million May 30, 1997 September 30, 1998
$100 million September 30, 1997 September 30, 1998
Under the interest rate protection agreements, the Company will receive a
floating rate based on three-month LIBOR and will pay a weighted average fixed
rate on the various agreements which will range from 6.23% to 6.30% plus a
spread on LIBOR as determined based on the Consolidated Leverage Ratio.
10
<PAGE>
NOTE 6-EARNINGS PER SHARE
Pro Forma Net Income Per Share - Fiscal 1995 earnings per share information
excludes historical net income per common share calculated in accordance with
Accounting Principles Board Opinion No. 15, "Earnings per share" ("APB 15") as
such information is not indicative of the Company's continuing capital
structure. Pro forma income from continuing operations and net income per share
are calculated as if (a) the Demerger had been consummated at the beginning of
the periods presented; (b) the changes in the Company's capital structure
resulting from the Demerger, including the utilization of the previous credit
facility (see Note 5 to the Consolidated (Combined) Financial Statements
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995), had occurred on such date; (c) the Company had incurred
certain general and administrative corporate costs in place of previously
allocated management fees; and (d) compensation expense related to the
restricted share grants pursuant to the Stock Option Plan (see Note 13 to the
Consolidated (Combined) Financial Statements contained in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995) had been
incurred for the entire period.
Weighted Average Common Shares Outstanding - The weighted average number of
common shares outstanding during the three and nine month periods ended June 30,
1996 were 51,557,870 and 52,464,438, respectively.
NOTE 7-COMMITMENTS AND CONTINGENCIES
Certain present and former operating sites, or portions thereof, currently or
previously owned and/or leased by current or former operating units of the
Company are the subject of investigations, monitoring or remediation under the
federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA" or "superfund"), the federal Resource Conservation and Recovery Act or
comparable state statutes or agreements with third parties. These proceedings
are in various stages ranging from initial investigations to active settlement
negotiations to implementation of the clean-up or remediation of sites.
A number of present and former operating units of the Company have been named as
Potentially Responsible Parties ("PRPs") at approximately 17 off-site disposal
sites under CERCLA or comparable state statutes in a number of federal and state
proceedings. In each of these matters the operating unit of the Company is
working with the governmental agencies involved and other PRPs to address
environmental claims in a responsible and appropriate manner.
At June 30, 1996, the Company had accrued $13 million for environmental related
liabilities of which the Company is aware. The Company believes that the range
of liability for such matters is between $10 million and $22 million.
11
<PAGE>
NOTE 7-COMMITMENTS AND CONTINGENCIES--CONTINUED
Also, certain of the Company's subsidiaries are defendants or plaintiffs in
lawsuits that have arisen in the normal course of business. While certain of
these matters involve substantial amounts, it is management's opinion, based on
the advice of counsel, that the ultimate resolution of such litigation will not
have a material adverse effect on the Company's financial condition, results of
operations or cash flows.
NOTE 8 - SUBSEQUENT EVENTS
In July 1996, the Company purchased the ladder operations of Keller and an
investment in All Pantronic. (See Note 4.)
In July 1996, the Company sold most of the assets of Universal for gross cash
consideration of $4.3 million and a note for $3.6 million. Universal had
previously been classified as a discontinued operation. (See Note 3).
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Company's operations are grouped into three segments: Consumer, Building
Products and Industrial. The results of all operations sold or classified as
available for sale are excluded from the Management's Discussion and Analysis of
Financial Condition and Results of Operations for all periods presented. See
Note 3 to the Consolidated (Combined) Financial Statements.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS (in millions)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES
Consumer Group
Housewares.......................................... $ 110 $ 82 $ 311 $ 262
Recreation and Leisure ............................. 71 69 198 181
Footwear ........................................... 38 39 124 130
Textiles ........................................... 32 36 101 109
------- ------- -------- --------
251 226 734 682
------- ------- -------- --------
Building Products Group
Bath Products....................................... 104 81 234 206
Lighting Products and Systems....................... 128 126 373 367
------- ------- -------- --------
232 207 607 573
------- ------- -------- --------
Industrial Group
Automotive Components............................... 102 92 286 298
Other Industrial Products........................... 17 18 51 49
------- ------- -------- --------
119 110 337 347
------- ------- -------- --------
TOTAL NET SALES............................ $ 602 $ 543 $ 1,678 $ 1,602
======= ======= ======== ========
OPERATING INCOME
Consumer Group
Housewares.......................................... $ 23 $ 15 $ 67 $ 51
Recreation and Leisure.............................. 0 (14) 1 (17)
Footwear............................................ 5 5 14 16
Textiles ........................................... 1 0 4 6
------- ------- -------- --------
29 6 86 56
------- ------- -------- --------
Building Products Group
Bath Products....................................... 20 15 37 34
Lighting Products and Systems....................... 8 (92) 24 (82)
------- ------- -------- --------
28 (77) 61 (48)
------- ------- -------- --------
Industrial Group
Automotive Components.............................. 9 9 25 31
Other Industrial Products.......................... 2 1 5 3
------- ------- -------- --------
11 10 30 34
Corporate expenses and management fees................... (6) (7) (19) (20)
------- ------- -------- --------
TOTAL OPERATING INCOME.................... $ 62 $ (68) $ 158 $ 22
======= ======= ======== ========
</TABLE>
13
<PAGE>
THREE MONTHS ENDED JUNE 30, 1996
COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
INTRODUCTION
- ------------
The Company had sales of $602 million and operating income of $62 million for
the quarter ended June 30, 1996, increases of $59 million (10.9%) and $130
million, respectively, compared to the third quarter of fiscal 1995. During the
third quarter of fiscal 1995, the Company recorded nonrecurring charges
totalling $113 million to write-off permanently impaired goodwill from previous
acquisitions and to consolidate certain under-utilized Lighting Products and
Systems Operations facilities. Excluding the nonrecurring charges, operating
income increased $17 million (37.8%) compared to the third quarter of fiscal
1995.
CONSUMER GROUP
- --------------
The Consumer Group had sales of $251 million and operating income of $29 million
for the quarter ended June 30, 1996, increases of $25 million (11.1%) and $23
million, respectively, over the third quarter of fiscal 1995. Fiscal 1995
results include a nonrecurring charge of $13 million to reflect the permanent
impairment of goodwill affecting the Recreation and Leisure Operations.
Excluding the nonrecurring charge, operating income increased $10 million
(52.6%) compared to the third quarter of fiscal 1995.
The Housewares Operations reported sales of $110 million and operating income of
$23 million for the quarter ended June 30, 1996, increases of $28 million
(34.1%) and $8 million (53.3%), respectively, from the third quarter of fiscal
1995. The third fiscal quarter benefitted from record international sales of
vacuum cleaners, offsetting softer market conditions in the United States.
International sales afford a higher margin due to differing product mix. The
third fiscal quarter also benefitted from favorable factory cost absorption due
to higher production rates, as well as improved pricing. The Company's domestic
lawn and garden tool operations performed well relative to the third quarter of
fiscal 1995 due to favorable weather in its principal selling areas, lower raw
material costs, and growth at key accounts which offset softness in its Canadian
tool operations as the Canadian economy remains weak.
The Recreation and Leisure Operations had sales of $71 million and operating
income of $0 million for the quarter ended June 30, 1996, improvements of $2
million (2.9%) and $14 million, respectively, from the third quarter of fiscal
1995. Fiscal 1995 results include a nonrecurring charge of $13 million to
reflect the permanent impairment of goodwill of a golf club subsidiary.
Excluding the nonrecurring charge, operating income improved $1 million compared
to the third quarter of fiscal 1995. During the third fiscal quarter, the
Company's toy subsidiary had sharply lower sales of high margin promotional
items and recorded a $2 million provision for inventory markdowns. The
substantial decline in promotional toy sales had more than offset the benefit
obtained from relatively strong sales of collectible products. Sales of golf
putter products
14
<PAGE>
contributed strongly to the improvements in the Company's golf club business.
Also, the absence of approximately $1 million in charges for obsolete golf club
inventory taken during the third fiscal quarter of the previous year favorably
impacts quarter-on-quarter comparisons, excluding the charge for goodwill
impairment.
The Footwear Operations had sales of $38 million and operating income of $5
million for the quarter ended June 30, 1996, a decrease in sales of $1 million
(2.6%) and unchanged operating income, respectively, from the third quarter of
fiscal 1995. Weak western fashion boot sales continued to affect the Company's
footwear operations during the current quarter. This more than offset steady
results in other product lines but was mitigated by reductions in discretionary
spending. Generally weak retail conditions in the western footwear market
continued through the current quarter.
The Textiles Operations had sales of $32 million and operating income of $1
million for the quarter ended June 30, 1996, a decrease of $4 million (11.1%)
and an improvement of $1 million, respectively, from the third quarter of fiscal
1995. The prolonged period of market softness continued during the third fiscal
quarter, depressing sales of tricot, lace, and dyed yarns. Also during the third
fiscal quarter, the Company recorded a provision of $0.5 million for inventory
markdowns. The improvement in operating income is attributable to the absence of
a $1.2 million inventory charge taken during the third quarter of fiscal 1995
and to strong sales of textile machinery.
BUILDING PRODUCTS GROUP
- -----------------------
The Building Products Group had sales of $232 million and operating income of
$28 million for the quarter ended June 30, 1996, increases of $25 million
(12.1%) and $105 million, respectively, from the third quarter of fiscal 1995.
Fiscal 1995 results include nonrecurring charges taken by the Lighting Products
and Systems Operations of $98 million to reflect the permanent impairment of
goodwill and $2 million to consolidate certain under-utilized facilities.
Excluding the nonrecurring charges, operating income increased $5 million
(21.7%) compared to the third quarter of fiscal 1995.
The Bath Products Operations had sales of $104 million and operating income of
$20 million for the quarter ended June 30, 1996, increases of $23 million
(28.4%) and $5 million (33.3%), respectively, compared to the third quarter of
fiscal 1995. The Company's domestic operations experienced a record third
quarter due to strong shipments of spas and baths to home improvement centers.
Results for the Company's international bath products operations approximated
the third quarter of fiscal 1995.
The Lighting Products and Systems Operations had sales of $128 million and
operating income of $8 million for the quarter ended June 30, 1996, increases of
$2 million (1.6%) and $100 million, respectively, from the third quarter of
fiscal 1995. Fiscal 1995 results include nonrecurring charges of $98 million to
reflect the permanent impairment of goodwill and $2 million to
15
<PAGE>
consolidate certain under-utilized facilities. Excluding the nonrecurring
charges, operating income approximated that of the third quarter of fiscal 1995.
The continued strength of the Company's outdoor lighting subsidiaries,
accelerating improvement in its retail lighting subsidiary, cost reductions and
reduced goodwill amortization offset weak results in its construction-related
lighting business caused by soft market conditions.
INDUSTRIAL GROUP
- ----------------
The Industrial Group had sales of $119 million and operating income of $11
million for the quarter ended June 30, 1996, increases of $9 million (8.2%) and
$1 million (10.0%), respectively, from the third quarter of fiscal 1995.
The Automotive Components Operations had sales of $102 million and operating
income of $9 million for the quarter ended June 30, 1996, an increase in sales
of $10 million (10.9%) and substantially unchanged operating income,
respectively, from the third quarter of fiscal 1995. Results of the Company's
premium automotive leather business improved over the third quarter of fiscal
1995, which had been negatively effected by the threatened trade sanctions on
foreign vehicles containing its products. The plastic and metal automotive
components businesses benefitted from cost reductions and manufacturing
efficiencies. These improvements were offset by reduced operating income in the
Company's powdered metals business which did not have the benefit of gains from
rising copper prices as in the prior year period.
The Other Industrial Products Operations had sales of $17 million and operating
income of $2 million for the quarter ended June 30, 1996, a decrease in sales of
$1 million (5.6%) and an increase in operating income of $1 million (100%),
respectively, from the third quarter of fiscal 1995. Favorable polypropylene
film sales volume and mix more than offset the adverse impact of the current
business downturn in the high technology market which has resulted in reduced
orders and margin erosion in sales of leadframes.
INTEREST AND TAXES
- ------------------
Interest expense was $14 million in the three months ended June 30, 1996, a $13
million (48.1%) decrease from the third quarter of fiscal 1995. The decrease
reflects lower levels of debt outstanding and lower average interest rates.
Prior to the Demerger, outstanding indebtedness was comprised primarily of notes
payable to Hanson with interest at fixed rates which were higher than those
currently incurred on the Company's bank indebtedness. Interest income totalled
$2 million in the three months ended June 30, 1996, unchanged from the
comparable period of the third quarter of fiscal 1995.
The provision for income taxes totalled $22 million in the three months ended
June 30, 1996 on pre-tax income of $48 million (a 45.8% effective tax rate) as
compared to a $10 million provision on pre-tax loss of $97 million in the third
quarter of fiscal 1995. The prior year period included nonrecurring charges for
the permanent impairment of nondeductible goodwill.
16
<PAGE>
NINE MONTHS ENDED JUNE 30, 1996
COMPARED TO NINE MONTHS ENDED JUNE 30, 1995
INTRODUCTION
- ------------
The Company had sales of $1,678 million and operating income of $158 million for
the nine months ended June 30, 1996, increases of $76 million (4.7%) and $136
million, respectively, compared to the same period of fiscal 1995. During the
third quarter of fiscal 1995, the Company recorded nonrecurring charges
totalling $113 million to write-off permanently impaired goodwill from previous
acquisitions and to consolidate certain under-utilized Lighting Products and
Systems Operations facilities. Excluding nonrecurring charges, operating income
increased $23 million (17.0%) compared to the same period of fiscal 1995.
CONSUMER GROUP
- --------------
The Consumer Group had sales of $734 million and operating income of $86 million
for the nine months ended June 30, 1996, increases of $52 million (7.6%) and $30
million, respectively, from the comparable period of fiscal 1995. Fiscal 1995
results include a nonrecurring charge of $13 million to reflect the permanent
impairment of previously acquired goodwill, affecting the Recreation and Leisure
Operations. Excluding the nonrecurring charge, operating income increased $17
million (24.6%) compared to the same period of fiscal 1995.
The Housewares Operations reported sales of $311 million and operating income of
$67 million for the nine months ended June 30, 1996, increases of $49 million
(18.7%) and $16 million (31.4%), respectively, from the comparable period of
fiscal 1995. Year-to-date, record international sales of vacuum cleaners offset
softer market conditions in the United States. International sales afford a
higher margin due to differing product mix. The current period has also
benefitted from favorable factory cost absorption due to the overall higher
production rates as well as higher pricing. The Company's domestic lawn and
garden tool operations also performed well relative to prior year due to strong
winter and spring tool sales in its principal areas, lower raw material costs,
and growth at key accounts which helped to offset softness in the Company's
Canadian tool operations.
The Recreation and Leisure Operations had sales of $198 million and operating
income of $1 million for the nine months ended June 30, 1996, improvements of
$17 million (9.4%) and $18 million, respectively, from the comparable period of
fiscal 1995. Fiscal 1995 results include a nonrecurring charge of $13 million to
reflect the permanent impairment of previously acquired goodwill of a golf club
subsidiary. Excluding the nonrecurring charge, operating income improved $5
million compared to the same period of fiscal 1995. Sales of golf putters
(product line acquired
17
<PAGE>
March 1995) and the absence of approximately $1 million in inventory
obsolescence charges taken during the comparable period of fiscal 1995 to
reflect write-offs of certain obsolete products led to improvement in the
Company's golf club business. This was partially offset by the downturn at the
Company's toy subsidiary which suffered from poor sales in its current
promotional line.
The Footwear Operations had sales of $124 million and operating income of $14
million for the nine months ended June 30, 1996, decreases of $6 million (4.6%)
and $2 million (12.5%), respectively, from the comparable period of fiscal 1995.
Weak demand for high-margin western boots more than offset cost reductions and
steady results in other product lines.
The Textiles Operations had sales of $101 million and operating income of $4
million for the nine months ended June 30, 1996, decreases of $8 million (7.3%)
and $2 million (33.3%), respectively, from the comparable period of fiscal 1995.
Weak demand for lace, tricot and dyed yarns was the principal cause of the
decline. The effect of this was somewhat tempered by the absence of an inventory
charge of $1.8 million taken during the comparable period of the prior year.
BUILDING PRODUCTS GROUP
- -----------------------
The Building Products Group had sales of $607 million and operating income of
$61 million for the nine months ended June 30, 1996, increases of $34 million
(5.9%) and $109 million, respectively, from the comparable period of fiscal
1995. Fiscal 1995 results include nonrecurring charges taken by the Lighting
Products and Systems Operations of $98 million to reflect the permanent
impairment of goodwill and $2 million to consolidate certain under-utilized
facilities. Excluding the nonrecurring charges, operating income increased $9
million (17.3%) compared to the same period of fiscal 1995.
The Bath Products Operations had sales of $234 million and operating income of
$37 million for the nine months ended June 30, 1996, increases of $28 million
(13.6%) and $3 million (8.8%), respectively, from the comparable period of
fiscal 1995. Strong international sales more than offset weaker conditions for
domestic spa and bath sales during the first six months of the current fiscal
year. However, the third fiscal quarter was a record quarter for the Company's
domestic bath operations as shipments and margins improved dramatically.
The Lighting Products and Systems Operations had sales of $373 million and
operating income of $24 million for the nine months ended June 30, 1996,
increases of $6 million (1.6%) and $106 million, respectively, from the
comparable period of fiscal 1995. Fiscal 1995 results include nonrecurring
charges of $98 million to reflect the permanent impairment of goodwill and $2
million to consolidate certain under-utilized facilities. Excluding nonrecurring
charges, operating income increased $6 million (33.3%) compared to the same
period of fiscal 1995. Strong results for the Company's outdoor lighting
subsidiaries, cost reductions and reduced goodwill amortization bolstered
operating income, excluding nonrecurring charges, despite soft construction
market conditions.
18
<PAGE>
INDUSTRIAL GROUP
- ----------------
The Industrial Group had sales of $337 million and operating income of $30
million for the nine months ended June 30, 1996, decreases of $10 million (2.9%)
and $4 million (11.8%), respectively, from the comparable period of fiscal 1995.
The Automotive Components Operations had sales of $286 million and operating
income of $25 million for the nine months ended June 30, 1996, decreases of $12
million (4.0%) and $6 million (19.4%), respectively, from the comparable period
of fiscal 1995. Sales and operating income from the Company's premium automotive
leather business declined due to weakness in certain sectors served by the
Company and the unfavorable impact of the strike at General Motors. While sales
at the Company's powdered metals business increased slightly over the prior year
period, operating income decreased as there was no comparable benefit from
rising copper prices as in the prior year period. The Company's plastic and
metal automotive components businesses produced moderate increases in operating
income on slightly lower sales due to cost reductions and manufacturing
efficiencies.
The Other Industrial Products Operations had sales of $51 million and operating
income of $5 million for the nine months ended June 30, 1996, increases of $2
million (4.1%) and $2 million (66.7%), respectively, from the comparable period
of fiscal 1995. Improved sales volume and mix of polypropylene films more than
offset weakness in the semi-conductor dependent leadframe market.
INTEREST AND TAXES
- ------------------
Interest expense was $48 million in the nine months ended June 30, 1996, a $26
million (35.1%) decrease from the comparable period of the prior fiscal year.
The decrease reflects lower levels of debt outstanding as well as lower average
interest rates. Prior to the Demerger, outstanding indebtedness was comprised
primarily of notes payable to Hanson with interest of fixed rates which were
higher than those currently incurred on the Company's bank indebtedness.
Interest income was $6 million in the nine months ended June 30, 1996, a $1
million increase from the comparable period of the prior fiscal year. The
increase was attributable to higher average foreign cash balances invested
during the current period.
The provision for income taxes totalled $50 million in the nine months ended
June 30, 1996 on pre-tax income of $110 million (a 45.5% effective tax rate) as
compared to a $28 million provision on pre-tax loss of $55 million in the nine
months ended June 30, 1995. The prior year period included nonrecurring charges
for the permanent impairment of nondeductible goodwill.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary sources of liquidity and capital resources are cash
provided from operations, borrowings under the Credit Facility described below
and proceeds from sales of non- strategic businesses and assets.
On December 21, 1995, the Company and its subsidiaries entered into the Credit
Facility, which consists of a 4 1/2-year secured amortizing term loan facility
in the amount of $400 million and a 5- year secured revolving credit facility of
$575 million (including a swingline loan facility in an amount of up to $50
million and a letter of credit facility in the amount of up to $75 million).
During the first quarter of fiscal 1996 a net-of-tax, noncash, extraordinary
charge of approximately $25 million was incurred to write-off unamortized
deferred financing costs associated with its previous bank credit facility and
to recognize previously deferred losses associated with the interest rate
protection agreements which had been designated as hedges of the previous credit
agreement.
Proceeds from the sales of net assets held for disposition and cash provided by
operations exceeded the cash used to purchase common stock of the Company for
treasury and to fund capital expenditures and acquisitions, leading to an
overall decrease in outstanding indebtedness. Remaining required amortization
under the term loan facility is as follows: $3 million on July 29, 1996; $93
million on June 15, 1998; $93 million on June 15, 1999; and $186 million on June
15, 2000. Amortization payments may be satisfied by borrowing under the
revolving credit facility to the extent there is availability thereunder. The
term loan facility is subject to certain mandatory prepayments from asset sales
which will be applied to the scheduled installments of the term loan on a pro
rata basis. The revolving credit facility matures on December 15, 2000.
The Credit Facility places restrictions on, among other things, dividends,
liens, acquisitions and additional indebtedness. It also requires compliance
with covenants as to minimum net worth and certain other financial ratios. On
June 18, 1996, the Credit Facility was amended to increase the amount of
permitted investments and unsecured indebtedness of the Company and its
subsidiaries.
The interest rates for loans outstanding under the Credit Facility are based on
specified spreads over, at the option of the Company, (a) the London interbank
offered rate ("LIBOR") or (b) the higher of the rate of interest publicly
announced by Bank of America in San Francisco, California as its reference rate
or the federal funds rate in effect on such day (the "Base Rate"). The spread on
LIBOR-based borrowings ranges between 62.5 and 150 basis points and the spread
on Base Rate borrowings ranges between zero and 50 basis points. At June 30,
1996 the spreads were 87.5 basis points and zero basis points, respectively, and
are adjusted quarterly based on a Consolidated Leverage Ratio specified in the
Credit Facility. On August 15, 1996, such spreads will be adjusted to 62.5 basis
points and zero basis points, respectively, in accordance with the provisions of
the Credit Facility. At June 30, 1996, three-month LIBOR was 5.56% per annum. A
commitment fee is payable on a quarterly basis in arrears to the lenders under
the Credit Facility on the aggregate unused amount of the revolving credit
facility. The commitment fee is adjusted quarterly based on
20
<PAGE>
the Consolidated Leverage Ratio, ranges between 15 and 30 basis points per annum
and was 20 basis points per annum at June 30, 1996. On August 15, 1996 the
commitment fee will be adjusted to 15 basis points. The Company's existing
interest rate protection agreements covering an aggregate notional amount of
$600 million, $250 million of which expires in September 1996, have been
designated as hedges of indebtedness incurred under the Credit Facility.
In addition to the interest rate protection agreements noted above, in May and
July 1996, the Company entered into various interest rate protection agreements
with several banks to manage its interest rate exposures consistent with the
Company's credit facility requirements. The terms of the agreements are as
follows:
Notional Amount Commencement Date Maturity Date
- --------------- ----------------- -------------
$150 million September 30, 1996 September 30, 1997
$100 million May 30, 1997 September 30, 1997
$100 million May 30, 1997 May 30, 1998
$100 million May 30, 1997 September 30, 1998
$100 million September 30, 1997 September 30, 1998
Under the interest rate protection agreements, the Company will receive a
floating rate based on three-month LIBOR and will pay a weighted average fixed
rate on the various agreements which will range from 6.23% to 6.30% plus a
spread on LIBOR, as determined based on the Consolidated Leverage Ratio.
Net cash provided by operating activities was $70 million for the nine months
ended June 30, 1996 compared to $60 million for the comparable period of fiscal
1995. Of this, $59 million and $66 million, respectively, were provided by
continuing operations.
Net cash provided by investing activities was $168 million for the nine months
ended June 30, 1996 compared to net cash used of $58 million for the comparable
period of fiscal 1995. The nine months ended June 30, 1996 included proceeds of
$224 million from the sale of net assets held for disposition, partially offset
by capital expenditures of $34 million and acquisition of companies of $22
million.
Net cash used in financing activities was $245 million for the nine months ended
June 30, 1996 compared to net cash provided by financing activities of $37
million for the comparable period of fiscal 1995. The change is attributable to
long-term debt and note repayments in excess of new borrowings totalling $203
million and the purchase of $42 million of the Company's common stock for
treasury.
During the third quarter of fiscal 1996, the Company recorded a loss on disposal
of discontinued operations of $2 million, net of a tax benefit of $1 million, to
reduce the carrying value of its equity investment in Ground Round to its
estimated realizable value.
21
<PAGE>
At June 30, 1996, the Company had current maturities of long-term debt and
short-term notes payable aggregating $6 million as well as $88 million of unused
availability under uncommitted short-term lines of credit. The Company also had
$300 million of unused credit available under its long-term revolving credit
facility at June 30, 1996. The Company believes that cash provided from
operations, availability under the unused credit facilities and the net proceeds
of further dispositions of non-strategic businesses and assets will provide
adequate support for the Company's cash needs for working capital, capital
expenditures for existing businesses and future amortization payments under the
term loan facility.
Total stockholders' equity increased by $58 million from September 30, 1995 to
June 30, 1996 principally due to net income for the nine months ended June 30,
1996, offset by purchases of 2,213,091 of the Company's common shares for
treasury at an average price of $18.95 per share for a total cash outlay of
approximately $42 million. An odd-lot repurchase program, established to
purchase shares from stockholders who owned fewer than 100 shares of common
stock, expired on December 1, 1995 and accounted for 683,304 of the shares
purchased. An additional share purchase program to allow for purchases of up to
$50 million in the aggregate of the Company's common stock, inclusive of
purchases made through the odd-lot repurchase program, accounted for the balance
of shares purchased. Such purchases may be made from time to time in the open
market or through private transactions at prices deemed acceptable by
management. As of August 6, 1996, approximately $44 million of the $50 million
authorization was utilized.
OUTLOOK
- -------
Overall, the Company's businesses have been performing stronger than expected.
Assuming a continuation of this positive trend and current economic conditions,
the Company presently anticipates that fiscal 1996 earnings per share from
continuing operations will approximate $1.75 per share.
NOTE
- ----
The preceding forward-looking statement represents management's best judgment as
to what may occur in the future. However, the Company's actual results for the
current and future fiscal periods will depend upon a number of economic,
competitive and other factors, some which are outside the Company's control and
could cause actual results for these periods to differ materially from those
expressed herein.
22
<PAGE>
PART II. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.16(d) First Amendment, dated June 18, 1996, to the Credit Facility
dated December 21, 1995 among USI American Holdings, Inc.,
U.S. Industries, Inc., Various Banks, Bank of America National
Trust and Savings Association as Agent and BA Securities Inc.
As Arranger.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarterly period
ended June 29, 1996.
23
<PAGE>
SIGNATURE
---------
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.
U.S. INDUSTRIES, INC.
Date: August 13, 1996 /s/ Frank R. Reilly
-----------------------------
Frank R. Reilly
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
24
<PAGE>
U.S. INDUSTRIES, INC.
EXHIBIT INDEX
10.16(d) First Amendment, dated June 18, 1996, to the Credit Facility
dated December 21, 1995 among USI American Holdings, Inc., U.S.
Industries, Inc., Various Banks, Bank of America National Trust
and Savings Association as Agent and BA Securities Inc. As
Arranger.
27 Financial Data Schedule.
FIRST AMENDMENT TO CREDIT AGREEMENT
This Agreement, dated as of June 18, 1996 (this "First
Amendment"), is entered into among USI AMERICAN HOLDINGS, INC., a Delaware
corporation (the "Company"), USI FUNDING, INC. a Delaware corporation ("USI
Funding" and together with the Company, each a "Borrower" and, collectively, the
"Borrowers"), U.S. INDUSTRIES, INC. (the "Parent"), the several financial
institutions party to the Credit Agreement referred to below (the "Banks"), BANK
OF AMERICA ILLINOIS, as Issuing Bank and Swingline Bank, BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent, and BA SECURITIES, INC., as
Arranger.
RECITALS
The Borrowers, the Parent, the Banks, the Issuing Bank, the
Swingline Bank, the Agent and the Arranger are parties to a Credit Agreement
dated as of May 12, 1995, as amended and restated as of December 21, 1995 (the
"Credit Agreement"). Capitalized terms used and not otherwise defined or amended
in this First Amendment shall have the meanings respectively assigned to them in
the Credit Agreement.
Subject to the terms and conditions set forth below, the Agent
and the undersigned Banks are willing to amend certain provisions of the Credit
Agreement and consent to certain transactions as herein provided.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreement hereinafter set forth, the parties hereto mutually agree as follows:
A. AMENDMENTS
1. Section 8.04(i) of the Credit Agreement is hereby amended
by (1) deleting the number "$5,000,000" appearing therein and (2) inserting the
number "$100,000,000" in lieu thereof.
2. Section 8.05(e) of the Credit Agreement is hereby amended
by (1) deleting the number "$100,000,000" appearing therein and (2) inserting
the number "$200,000,000" in lieu thereof.
<PAGE>
B. REPRESENTATIONS AND WARRANTIES
The Parent and each Borrower hereby represent and warrant to
the Agent and the Banks that:
1. There exists to Default or Event of Default both before and
after giving effect to this First Amendment;
2. The representations and warranties of the Parent and each
Borrower pursuant to the Credit Agreement are true on and as of the date hereof
as if made on and as of said date (except to the extent such representations and
warranties expressly refer to an earlier date, in which case they shall be true
and correct as of such earlier date);
3. The making and performance by the Parent and each Borrower
of this First Amendment have been duly authorized by all corporate action; and
4. No consent, approval, authorization, permit or license from
any federal or state regulatory authority is required in connection with the
making or performance of the Credit Agreement as amended hereby.
C. CONDITIONS PRECEDENT
This First Amendment will become effective on the date (the
"First Amendment Effective Date") on which the Agent shall have received in form
and substance satisfactory to it, all of the following:
1. Copies of resolutions passed by the Board of Directors of
each Borrower, certified by the Secretary or an Assistant Secretary of the
applicable Borrower as being in full force and effect on the date hereof,
authorizing the execution, delivery and performance of the Credit Agreement as
hereby amended;
2. Certificates of incumbency certifying the names of the
officers of each Borrower authorized to sign this First Amendment, together with
the true signatures of such officers; and
3. Counterparts of this First Amendment executed by the Agent,
the Issuing Bank, the Swingline Bank, the Parent, each Borrower and the Majority
Banks (or, in the case of any party as to which an executed counterpart shall
not have been received, the Agent shall have received
2
<PAGE>
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party).
D. MISCELLANEOUS
1. This First Amendment may be signed in any number of
counterparts, each of which shall be an original, with same effect as if the
signatures thereto and hereto were upon the same instrument.
2. Except as herein specifically amende, all terms, covenants
and provisions of the Credit Agreement shall remain in full force and effect and
shall be performed by the parties hereto according to its terms and provisions
and all references therein or in any other Loan Document shall henceforth refer
to the Credit Agreement as amended by this First Amendment.
3. This First Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
3
NYFS11...:\95\78595\0014\1323\AGR8126X.380
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-END> Jun-29-1996
<CASH> 44
<SECURITIES> 0
<RECEIVABLES> 415
<ALLOWANCES> 38
<INVENTORY> 401
<CURRENT-ASSETS> 861
<PP&E> 782
<DEPRECIATION> 441
<TOTAL-ASSETS> 1,743
<CURRENT-LIABILITIES> 366
<BONDS> 787
0
0
<COMMON> 1
<OTHER-SE> 469
<TOTAL-LIABILITY-AND-EQUITY> 1,743
<SALES> 1,678
<TOTAL-REVENUES> 1,678
<CGS> 1,145
<TOTAL-COSTS> 1,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 48
<INCOME-PRETAX> 110
<INCOME-TAX> 50
<INCOME-CONTINUING> 60
<DISCONTINUED> 60
<EXTRAORDINARY> (25)
<CHANGES> 0
<NET-INCOME> 95
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.82
</TABLE>
