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 quarter ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-7117
GENERAL HOUSEWARES CORP.
(Exact name of Registrant as specified in its Charter)
Delaware 41-0919772
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1536 Beech Street 47804
Terre Haute, Indiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (812) 232-1000
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
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
Indicate the number of shares outstanding of each of the
Registrant's classes of Common Stock as of the latest practicable
date.
Class of Common Stock Outstanding at July 31, 1997
$.33-1/3 Par Value 3,827,601
GENERAL HOUSEWARES CORP.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Condensed Statements of Income and
Retained Earnings
Three and six months ended June 30, 1997 and 1996
Consolidated Condensed Balance Sheets
June 30, 1997 and December 31, 199
Consolidated Condensed Statements of Cash Flows
Six months ended June 30, 1997 and 1996
Notes to Consolidated Condensed Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
PART I FINANCIAL INFORMATION
GENERAL HOUSEWARES CORP. & SUBSIDIARIES
(Dollars in thousands except per share amounts)
Consolidated Condensed Statement of Income
and Retained Earnings
(Unaudited)
For the three months For the six months
ended June 30, ended June 30,
1997 1996 1997 1996
Net Sales $23,415 $21,613 $44,290 $46,215
Cost of goods sold 14,848 15,038 27,118 32,001
Gross profit 8,567 6,575 17,172 14,214
Selling, general and administrative
expenses 8,671 8,986 17,766 19,733
Operating loss (104) (2,411) (594) (5,519)
Interest Expense, net 651 686 1,246 1.358
Loss from operations before
income taxes (755) (3,097) (1,840) (6,877)
Income taxes (264) (923) (655) (2,474)
Net loss for the period (491) (2,174) (1,185) (4,403)
Retained earnings, beginning of period 26,281 28,590 27,279 31,119
Less: Dividends ($.08 per common share
in 1997 and 1996) 305 301 609 601
Retained earnings, end of period $25,485 $26,115 $25,485 $26,115
Earnings per common share:
Net loss ($0.13) ($0.57) ($0.31) ($1.17)
See notes to consolidated condensed financial statements.
CONSOLIDATED CONDENSED BALANCE SHEET
As of
June 30,
1997 December 31,
(Unaudited) 1996
ASSETS
Current Assets:
Cash $ 1,124 $ 1,981
Accounts receivable, less
allowances of $2,150
($3,575 in 1996) 12,098 15,823
Inventories 23,019 18,513
Deferred tax asset 3,831 3,831
Other current assets 896 932
Income taxes refundable 1,117 -
Total current assets 42,085 41,080
Note receivable 2,581 2,707
Property, plant and
equipment, net 13,163 13,420
Other assets 5,964 6,479
Patents and other intangible
assets 3,983 4,195
Cost in excess of net assets
acquired 27,606 27,398
$ 95,382 $95,279
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of
long term debt $2,199 $2,190
Notes payable 200 -
Accounts payable 3,372 3,932
Salaries, wages and related
benefits 1,304 1,671
Accrued liabilities 3,378 3,288
Income taxes payable - 379
Total current liabilities 10,453 11,460
Long term debt 33,322 30,575
Deferred liabilities 4,830 4,754
Stockholders' equity:
Preferred stock - $1.00 par value:
Authorized - 1,000,000 shares
Common stock - $.33-1/3 par value:
Authorized - 10,000,000 shares
Outstanding - 1997 - 4,090,869
and 1996 - 4,080,736 shares. 1,364 1,361
Capital in excess of par value 24,088 23,976
Treasury stock at cost - 1997 and
1996 - 277,760 shares (3,649) (3,649)
Retained earnings 25,485 27,279
Cumulative translation
adjustment (129) (95)
Minimum pension liability (382) (382)
Total stockholders' equity 46,777 48,490
$ 95,382 $95,279
See notes to consolidated condensed financial statements.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the six months
ended June 30,
1997 1996
OPERATING ACTIVITIES:
Net loss ($1,185) ($4,403)
Adjustments to reconcile net loss
to net cash provided by
operating activities -
Depreciation and amortization 3,044 2,658
Foreign exchange loss (5) (2)
Compensation related to stock awards 35 54
Decrease (increase) in operating assets:
Increase in deferred taxes - 40
Accounts receivable 3,737 4,838
Inventory (4,435) 2,747
Other assets 344 813
Increase (decrease) in operating liabilities:
Accounts payable (557) 717
Salaries, wages and related benefits,
accrued and deferred liabilities (230) 2,773
Income taxes payable (refundable) (1,465) (3,739)
Net cash (used in ) provided by
operating activities: (717) 6,497
INVESTING ACTIVITIES:
Additions to property, plant
and equipment (1,573) (2,137)
Payment for acquisitions (987) -
Proceeds from sale of assets - 1,205
Net cash used for
investing activities (2,560) (932)
FINANCING ACTIVITIES:
Increase (decrease) in notes payable 200 (12,000)
Long-term debt borrowing 2,761 3,563
Proceeds from stock options and
employee purchases 80 141
Dividends paid (609) (601)
Net cash provided by (used for)
financing activities 2,432 (8,897)
Net decrease in cash and
cash equivalents (845) (3,332)
Cash and cash equivalents at
beginning of period 1,981 3,414
Effect of exchange rate on cash (12) (5)
Cash and cash equivalents at end
of period $1,124 $ 77
See notes to consolidated condensed financial statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands)
NOTE 1 - GENERAL
The accompanying interim Consolidated Condensed Financial Statements have been
prepared by the Company, without audit, 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. However, in the opinion of
management, the financial statements included herein reflect all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the financial information for the periods presented. The Consolidated
Condensed Financial Statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
1996 Annual Report on Form 10-K.
NOTE 2 - INVENTORIES
June 30, December 31,
1996 1996
Raw materials $ 3,760 $ 2,873
Work in process 1,072 953
Finished goods 18,836 15,629
23,668 19,455
LIFO Reserve (649) (942)
Total, net $23,019 $18,513
NOTE 3 - PROPERTIES
June 30, December 31,
1997 1996
Land $ 648 $ 648
Buildings 6,626 6,890
Equipment 24,792 23,519
Total 32,066 31,057
Depreciation (18,903) (17,637)
Total, net $13,163 $13,420
NOTE 4 - LOAN COVENANTS
Terms of the Company's Bank Credit Agreement and Senior Notes Agreement
require that the Company maintain certain minimum financial ratios. As of
March 31, 1997, the Company anticipated second quarter non-compliance
relative to fixed charges and dividend tests included in both the Bank Credit
Agreement and Senior Notes Agreement. Waivers having less restrictive
covenants were received from the Company's lenders for the second quarter.
The Company was in compliance with the requirements of these waivers at June
30, 1997.
NOTE 5 - ACQUISITION ACTIVITY
Effective June 25, 1997 the Company acquired two product lines that will
become part of the Company's Precision Cutting Tool segment. The acquisition
was accounted for as a purchase. The net assets and purchase price are not
material. Related goodwill from the acquisition will be amortized over 15
years.
In connection with the issuance of restricted stock related to the acquisition
of Olfa Products Group in October 1994, the Company agreed, under certain
circumstances, to make payments of up to $600 to the former owners of Olfa
Products Group. Pursuant thereto, $300 was paid in the second quarter of
1997; this resulted in a $300 increase in goodwill.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(In thousands)
Financial Condition
Referring to the Company's financial condition as of June 30, 1997 as
contrasted with December 31, 1996, inventories increased while accounts
receivable decreased. The increase in inventories over year-end 1996 is a
result of seasonal inventory build. The accounts receivable decrease is also a
result of the Company's seasonality in operations.
Results of Operations
As reported in 1996, the Company sold the assets of its cast iron and cast
aluminum cookware division (Sidney Division) effective August 1, 1996.
Results of operations in the first six months of 1996 include activity related
to the Sidney Division, and as a result, year-to-year comparisons with 1996
results include 1996 Sidney Division activity.
Net sales for the three-month period ended June 30, 1997 were $23,415, an
increase of 8% as compared to net sales of $21,613 for the same period in
1996. Net sales for the six-month period ended June 30, 1997 were $44,290, a
decrease of 4% as compared to net sales of $46,215 for the same period in
1996. The increase in second quarter sales was driven primarily by growth
(new distribution and new product introduction) in the kitchen and household
tools line. While the line's growth also added to first quarter 1997 sales as
compared to the prior year, offsetting declines in Sidney Division sales as a
result of the third quarter 1996 divestiture caused a drop in sales for the
first six months of 1997. Second quarter 1997 gross profit increased $1,992
from the comparable period in 1996 while gross profit for the first six months
of 1997 increased $2,958 over 1996 amounts. The increase in gross profit for
the quarter and the first half resulted primarily from unfavorable
manufacturing variances experienced in 1996 associated with the operation of
the Sidney Division at reduced capacity and the operation of the Company's
other plants in 1996 at reduced levels as compared to 1997 (resulting from the
Company's inventory reduction efforts last year) and a favorable mix in sales
for 1997 as compared to 1996 also resulting from the divestiture of the Sidney
Division in the third quarter of last year. The second quarter was also
favorably impacted by increased sales volume in 1997 as compared to 1996.
Partially offsetting these favorable items were some sales at reduced pricing
in 1997 in an effort to remove selected excess or discontinued inventory.
Selling, general and administrative expenses for the three-month period ended
June 30, 1997 were $8,671 as compared to $8,986 for the same period in 1996.
While certain variable costs such as warehousing and selling expenses
increased due to the increase in sales volume and continued investments in
customer service initiatives, administrative costs decreased due to a $1,200
second quarter 1996 charge related to the Sidney Division divestiture.
Selling, general and administrative costs for the first six months of 1997
were $17,766 as compared to $19,733 for the same period in 1996. Included in
1996 expense for the first six months is $2,275 of non-operating charge
directly related to the divestiture of the Sidney division. Excluding that
non-operating charge, there was minimal change in selling, general and
administrative costs for the first six months of the current year.
The operating loss for the three-month period ended June 30, 1997 was $104 as
compared to an operating loss of $2,411 for the three months ended June 30,
1996. The operating loss for the first six months of 1997 was $594 vs. an
operating loss of $5,519 for the comparable period in 1996. Interest expense
for the three months ended June 30, 1997 was $651 as compared to $686 for the
same period in 1996. For the six months ended June 30, 1997 interest expense
was $1,246 as compared to $1,358 for the first six months of 1996. The net
loss of $491 for the second quarter of 1997 and $1,185 for the first six
months of 1997 compare to a net loss of $2,174 and $4,403 for the three and
six months ended June 30, 1996, respectively. Related quarterly and
year-to-date loss per share improved from ($0.57) and ($1.17) in 1996 to
($0.13) and ($0.31) in 1997, respectively.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
11a. Primary Earnings Per Share
Reports on Form 8-K - There were no reports on Form 8-K
filed for the three months ended June 30, 1997.
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.
GENERAL HOUSEWARES CORP.
Dated: August 12, 1997 Robert L. Gray
Robert L. Gray
Vice President Finance
and Treasurer
Chief Financial Officer
Mark S. Scales
Mark S. Scales
Vice President,
Corporate Controller,
Chief Accounting Officer