EXHIBIT 13
CONSOLIDATED STATEMENT OF OPERATIONS
ONEIDA LTD.
For the years ended January 1997, 1996 and 1995
(Thousands except per share amounts)
Year ended in January 1997 1996 1995
NET SALES $376,923 $363,811 $355,831
COST OF SALES 243,934 236,560 222,639
GROSS MARGIN 132,989 127,251 113,192
OPERATING EXPENSES:
Selling, advertising
and distribution 67,868 66,693 64,873
General and administrative 29,231 27,350 24,408
Total 97,099 94,043 89,281
INCOME FROM OPERATIONS 35,890 33,208 23,911
OTHER EXPENSE 832 762 596
INTEREST EXPENSE 6,503 6,877 5,922
INCOME FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES 28,555 25,569 17,393
PROVISION FOR INCOME TAXES 11,279 10,144 7,306
INCOME FROM CONTINUING
OPERATIONS 17,276 15,425 10,087
INCOME (LOSS) FROM DIS-
CONTINUED OPERATIONS (304) 2,663 3,406
NET INCOME $16,972 $18,088 $13,493
EARNINGS PER SHARE OF
COMMON STOCK
Continuing operations $1.54 $1.39 $.92
Discontinued operations (.03) .24 .32
Net income 1.51 1.63 1.24
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEET
ONEIDA LTD.
(Thousands)
ASSETS January 25, 1997 January 27, 1996
CURRENT ASSETS:
Cash $ 3,183 $ 2,847
Receivables 50,246 42,333
Inventories 124,293 126,043
Other current assets 13,291 8,585
Net assets of discontinued
operations 33,762 32,122
Total current assets 224,775 211,930
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings 45,502 42,625
Machinery and equipment 149,927 143,012
Total 195,429 185,637
Less accumulated depreciation 116,283 105,957
Property, plant and
equipment - net 79,146 79,680
OTHER ASSETS:
Cost in excess of net assets
acquired - net 30,940
Deferred income taxes 12,716 12,341
Other 2,651 2,617
TOTAL $350,228 $306,568
(Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY January 25, 1997 January 27, 1996
CURRENT LIABILITIES:
Short-term debt $15,593 $24,067
Accounts payable 14,176 13,362
Accrued liabilities 37,082 29,646
Current installments of long-
term debt 29,703 4,749
Total current liabilities 96,554 71,824
LONG-TERM DEBT 68,126 63,129
OTHER LIABILITIES:
Accrued postretirement liability 52,273 50,932
Accrued pension liability 5,666 5,209
Other liabilities 9,291 9,174
Total 67,230 65,315
STOCKHOLDERS' EQUITY:
Cumulative 6% preferred stock-
$25 par value; authorized
95,660 shares, issued 88,624
and 88,989 shares, respectively;
callable at $30 per share 2,216 2,225
Common stock-$l.00 par value;
authorized 24,000,000 shares,
issued 11,867,806 and 11,706,224
shares, respectively 11,868 11,706
Additional paid-in capital 83,103 81,150
Retained earnings 39,893 28,936
Equity adjustment from translation (8,468) (8,614)
Less cost of common stock held
in treasury; 766,241 and
672,617 shares, respectively (10,156) (8,563)
Less unallocated ESOP shares of
common stock of 8,531 and
34,347, respectively (138) (540)
Stockholders' equity 118,318 106,300
TOTAL $350,228 $306,568
See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
ONEIDA LTD.
for the years ended January 1997, 1996 and 1995
(Thousands)
Year ended in January 1997 1996 1995
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $17,276 $15,425 $10,087
Net income (loss) from
discontinued operations (304) 2,663 3,406
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 11,455 10,615 9,712
ESOP shares allocated to
participants 2,753
Deferred taxes and other
non-cash charges 2,021 (1,274) (2,976)
Decrease (increase) in
operating assets:
Receivables (2,409) (1,110) (3,488)
Inventories 11,276 (13,055) (6,552)
Other current assets (2,452) (12) (112)
Other assets 582 216 557
Increase (decrease) in accounts
payable (1,383) 1,558 (1,050)
Increase in accrued liabilities 7,452 5,118 4,017
Discontinued operations 3,228 13,309 (2,224)
Net cash provided by
operating activities 46,742 33,453 14,130
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of THC Systems, Inc. (46,600)
Property, plant and equipment
expenditures (11,540) (13,431) (12,785)
Retirement of property,
plant and equipment 645 827 1,134
Other, net (528) 67 211
Discontinued operations (11,319) (6,753) 5,640
Net cash used in investing
activities (69,342) (19,290) (17,080)
CASH FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock 2,105 1,530 1,451
Purchase of treasury
stock, net (1,593) 11 528
Net purchase/allocation
of ESOP Shares 402 (540)
Net payments under short-
term debt (8,474) (3,488) (631)
Proceeds from issuance of
long-term debt 35,388 5,000 7,000
Payment of long-term debt (5,436) (10,423) (899)
Dividends paid (6,015) (5,407) (5,367)
Discontinued operations 6,500
Net cash provided by
(used in) financing
activities (22,877) (13,317) (2,082)
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 59 (206) (152)
NET INCREASE (DECREASE) IN CASH 336 640 (1,020)
CASH AT BEGINNING OF YEAR 2,847 2,207 3,227
CASH AT END OF YEAR $ 3,183 $ 2,847 $ 2,207
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 6,575 $ 8,825 $ 6,868
Income taxes paid 9,842 9,941 8,805
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. The Company uses a 52-53 week fiscal year ending on the last
Saturday in January. The financial statements of certain foreign subsidiaries
are consolidated with those of the parent on the basis of years ending in
December.
The financial statements reflect the acquisition of THC Systems, Inc. as of
November 4, 1996. The financial statements also reflect the operations of
Camden Wire Company, Inc. which have been shown as discontinued operations as of
October 26, 1996. Camden was sold on February 12, 1997. The notes to the
financial statements contain information pertaining to the continuing operations
of the Company. See Notes 2 and 3 for information pertaining to the acquisition
and disposition of these subsidiaries. Prior periods have been restated to
reflect the tableware businesses as continuing operations. In addition, certain
reclassifications have been made to the financial statements for prior years to
conform to the presentation for 1997.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated principally at
year-end rates of exchange and revenue and expense accounts are translated at
average rates of exchange during the year. Net transaction gains and losses
reflected in the statement of operations were not material.
Earnings Per Share
Earnings per share are based on the weighted average number of shares of common
stock outstanding. The weighted average number of shares for earnings per share
includes the potentially dilutive effect of shares issuable under the employee
stock purchase, stock option and dividend reinvestment plans. No fully diluted
earnings per share are presented, as the difference between primary and fully
diluted earnings per share is not significant.
Inventories
Inventories are valued at the lower of cost or market. Approximately 48% of
inventories are valued under the last-in, first-out (LIFO) method, with the
remainder valued under the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the related assets, generally using the straight-
line method.
Interest relating to the cost of acquiring certain fixed assets is capitalized
and amortized over the asset's estimated useful life.
Fair Value of Financial Instruments
The estimated fair market values of the Company's financial instruments
approximate their recorded values.
2. ACQUISITION OF THC SYSTEMS, INC. (REGO CHINA)
On November 4, 1996, the Company purchased the net assets of THC Systems, Inc.
(Rego China) a leading importer of institutional china for the foodservice
industry.
The acquisition has been accounted for as a purchase and, accordingly, the
purchase price was allocated to the net assets acquired based on their book
values at the date of acquisition. Allocation of the cost to acquire Rego China
is summarized as follows:
(Thousands)
Working Capital $12,800
Cost in excess of net assets acquired 33,800
Total costs to acquire Rego China $46,600
The cost in excess of net assets acquired is being amortized on a straight-line
basis over a period of 15 years. Amortization charged to continuing operations
for the current year amounted to $561,000.
The financial statements included the results of operations of Rego China from
the date of acquisition. On a pro forma basis, assuming the acquisition had
occurred at the beginning of the year ended January 27, 1996 and based on
unaudited amounts for Rego China for the periods involved, the consolidated
results of operations of the Company for the last two years would have been as
follows:
(Thousands except per share amounts)
1997 1996
Net sales $402,867 $395,979
Net income 16,194 16,733
Net income per share of common stock 1.45 1.51
The pro forma information given above does not purport to be indicative of the
results that actually would have been obtained if the operations were combined
during the periods presented, and is not intended to be a projection of future
results or trends.
3. DISPOSITION OF CAMDEN WIRE CO., INC.
In October 1996, the Company adopted a plan of disposal of its Camden Wire Co.,
Inc. (Camden) subsidiary. Accordingly, the Company reflected the operating
results of Camden prior to the adoption of the plan as a discontinued operation.
On February 12, 1997, Camden was sold to an unrelated third party for
$43,500,000 in cash. Fourth quarter losses of Camden (subsequent to the plan of
disposal) have been deferred and will be recognized as part of the ultimate gain
realized on the sale of Camden in the first quarter of fiscal 1998.
The components of net assets of discontinued operations included in the balance
sheet, including debt to be assumed by the buyer, are as follows:
(Thousands)
1997 1996
Working capital $18,517 $18,043
Property, plant and equipment, net 41,738 35,519
Debt (15,500) (9,000)
Other liabilities (10,829) (11,411)
Deferred losses and expenses (164) (1,029)
Total $33,762 $32,122
Revenues from Camden for 1997, 1996 and 1995 were $137,960,000, $149,988,000 and
$157,122,000 respectively.
4. INCOME TAXES
The Company accounts for taxes in accordance with Statement of Financial
Accounting Standards (FAS) No. 109, Accounting for Income Taxes, which requires
the use of the liability method of computing deferred income taxes. Under the
liability method, deferred income taxes are based on the tax effect of temporary
differences between the financial statement and tax bases of assets and
liabilities and are adjusted for tax rate changes as they occur.
The components of the deferred tax assets and liabilities are as follows:
(Thousands)
1997 1996
Deferred Income Taxes:
Postretirement Benefits $20,081 $20,401
Employee Benefits 8,060 7,320
Other 578 (176)
Total Deferred Tax Assets 28,719 27,545
Depreciation (9,746) (10,652)
Total 18,973 16,893
Current Deferred 6,257 4,552
Non-Current Deferred $12,716 $12,341
The provision for income taxes consists of the following:
(Thousands)
1997 1996 1995
Current tax expense:
U.S. Federal $10,097 $11,005 $6,202
Foreign 2,621 2,079 599
State 641 610 617
13,359 13,694 7,418
Deferred tax expense (2,080) (3,550) (112)
Total $11,279 $10,144 $7,306
The income tax provision differed from the total income tax expense as computed
by applying the statutory U.S. Federal income tax rate to income before income
taxes. The reasons for the differences are as follows:
(Thousands)
1997 1996 1995
Statutory U.S. Federal taxes $ 9,994 $8,949 $6,087
Difference due to:
Foreign taxes 153 (37)
State taxes 354 393 402
Other 778 802 854
Provision for taxes $11,279 $10,144 $7,306
The following presents the U.S. and non-U.S. components of income before income
taxes.
(Thousands)
1997 1996 1995
U.S. income $21,682 $19,685 $14,782
Non - U.S. income 6,873 5,884 2,611
Income from continuing
operations $28,555 $25,569 $17,393
Discontinued operations are shown net of income tax (benefit) expense of
$(280,000), $1,538,000 and $2,034,000 for 1997, 1996 and 1995, respectively.
5. RECEIVABLES
Receivables by major classification are as follows:
(Thousands)
1997 1996
Accounts receivable $47,384 $41,762
Other accounts and notes 4,659 1,969
receivable
Less allowance for doubtful (1,797) (1,398)
accounts
Receivables $50,246 $42,333
6. INVENTORIES
Inventories by major classification are as follows:
(Thousands)
1997 1996
Finished goods $ 93,339 $ 93,827
Goods in process 14,798 17,120
Raw materials and supplies 16,156 15,096
Total $124,293 $126,043
Excess of replacement cost over
LIFO value of inventories $ 25,000 $ 27,800
7. LEASES
The Company leases numerous factory stores, warehouses and office facilities.
Lease expense charged to operations was $5,973,000, $6,314,000 and $6,008,000,
for 1997, 1996 and 1995, respectively.
Future minimum lease payments and related sublease income for all non-cancelable
operating leases having a remaining term in excess of one year at January 1997
are as follows:
(Thousands)
Lease Sublease
Commitment Income
1998 $ 5,872 $ 1,290
1999 5,741 1,287
2000 4,580 1,273
2001 3,361 1,016
2002 2,697 818
Remainder through 2008 13,251 1,159
Total $35,502 $6,843
Under the provisions of some leases, the Company pays taxes, maintenance,
insurance and other operating expenses related to leased premises. Sublease
income relates to an office facility for which the Company has currently sublet
all of the facility.
8. SHORT-TERM DEBT AND COMPENSATING BALANCES
The Company has been granted lines of credit to borrow at interest rates up to
the prime rate from various banks. Certain credit lines call for the maintenance
of compensating balances of up to 1.14% of the credit line or fees in lieu
thereof. At January 1997, the Company had lines of credit of $86,000,000 of
which $71,000,000 was available.
The average outstanding balances of short-term debt for the fiscal years ending
January 1997 and January 1996 were $35,793,000 and $35,109,000, respectively,
computed by using daily balances and the weighted interest rates of 5.9% in 1997
and 6.5% in 1996.
9. ACCRUED LIABILITIES
Accrued liabilities by major classification are as follows:
(Thousands)
1997 1996
Accrued vacation pay $ 6,205 $ 5,949
Accrued wage incentive 7,440 6,764
Accrued wages and commissions 5,408 4,465
Accrued income taxes 4,847 3,221
Dividends payable 1,476 1,357
Other accruals 11,706 7,890
Total $37,082 $29,646
10. LONG-TERM DEBT
Long-term debt at January 1997 and 1996 consisted of the following:
1997 1996
Senior notes, 8.52% due January
15, 2002, payable $4,285,710
annually $21,428 $25,714
Senior notes, 7.49% due November
1, 2008, payable $3,890,000
annually beginning November
1, 2000 $35,000
Notes payable at various
interest rates (6.20% - 6.38%),
due February 20, 2001 40,000 40,000
Other debt at various interest
rates (5.44% -9.25%) due
through 2000 1,401 2,164
Total 97,829 67,878
Less amounts currently due 29,703 4,749
Long-term debt $68,126 $63,129
Certain note agreements restrict borrowings, business investments, acquisition
of the Company's stock and payment of cash dividends. The Company is
contractually obligated to pay $4,703,000 of long-term debt during fiscal 1998.
Upon receipt of the proceeds from the sale of Camden, the Company made advance
payments of $25,000,000 on its $40,000,000 notes payable, due February 20, 2001.
The aggregate amounts of long-term maturities due each year are as follows:
(Thousands)
1998 $29,703
1999 4,738
2000 4,632
2001 8,361
2002 23,176
After 27,219
Total $97,829
Total interest costs incurred by the Company are presented net of capitalized
interest of $276,000, $413,000, and $347,000 for 1997, 1996 and 1995,
respectively.
11. RETIREMENT BENEFIT AND EMPLOYEE SECURITY PLANS
Pension Plans
The Company maintains defined contribution and benefit plans covering
substantially all employees in the United States and Canada. Employees of the
Silversmiths Division are covered by both an Employee Stock Ownership Plan
(ESOP), and a defined benefit floor plan. Dividends on all ESOP shares are added
to participant accounts. Future contributions to the ESOP will be primarily in
the form of cash.
The Company also maintains salary deferral 401(k) plans covering substantially
all employees.
The net periodic pension cost for the Company's various defined benefit plans
for 1997, 1996 and 1995 were as follows:
(Thousands)
1997 1996 1995
Service cost-benefits earned
during the year $1,913 $1,509 $1,031
Interest cost on projected
benefit obligation 2,537 2,243 1,501
Actual return on plan assets (2,715) (3,090) 278
Net amortization and deferral 901 1,627 (1,448)
Net periodic pension cost $2,636 $2,289 $1,362
Plan assets consist primarily of stocks, bonds, and cash equivalents. The
following table presents a reconciliation of the funded status of the plans and
assumptions used at January 1997 and 1996.
(Thousands)
U.S. PLANS FOREIGN PLAN
1997 1996 1997 1996
Plan assets at fair value $18,653 $15,439 $6,280 $5,703
Actuarial present value
of benefit obligations:
Vested benefits 16,431 16,614 4,362 4,272
Nonvested benefits 13,324 16,740 234 193
Accumulated Benefit
obligation 29,755 33,354 4,596 4,465
Projected future salary
increases 805 910 1,132 1,020
Projected benefit obligation 30,560 34,264 5,728 5,485
Plan assets more (less)
than projected
benefit obligation (11,907) (18,825) 552 218
Unrecognized net losses 6,677 14,621 830 1,168
Unrecognized prior service
cost 832 396 9 9
Unrecognized net asset (1,268) (1,401) (282) (368)
Accrued pension asset
liability $(5,666) $(5,209) $ 1,109 1,027
Discount rate 7.5% 7.0% 7.5% 7.5%
Expected long-term rate
of return on assets 8.5% 8.5% 8.5% 8.5%
Rate of increase in
compensation levels 4.0% 4.5% 5.0% 5.0%
The net pension cost associated with the Company's defined contribution plans,
including the cost of shares allocated to the ESOP, was $1,537,000, $1,504,000
and $2,753,000, for 1997, 1996 and 1995, respectively.
Postretirement Health Care and Life Insurance Benefits
The Company reimburses a portion of the health care and life insurance benefits
for the majority of its retired employees who have attained specified age and
service requirements.
Net periodic postretirement benefit cost for 1997, 1996 and 1995 included the
following components:
(Thousands)
1997 1996 1995
Service cost of benefits earned $1,124 $ 791 $ 983
Interest cost on accumulated
postretirement benefit
obligation 3,048 2,991 3,070
Net amortization and deferral (681) (848) (629)
Net periodic postretirement
benefit cost $3,491 $2,934 $3,424
The following table sets forth the status of the Company's postretirement plans,
which are unfunded, at January 1997 and January 1996:
(Thousands)
1997 1996
Accumulated postretirement benefit
obligation:
Retirees $21,546 $23,427
Fully eligible active
plan participants 5,268 5,349
Other active plan participants 16,535 17,966
Accrued postretirement benefit
cost 43,349 46,742
Unrecognized prior service cost 7,084 7,748
Unrecognized net gain (loss) 3,840 (1,558)
Accrued postretirement benefit
cost 54,273 52,932
Less current portion 2,000 2,000
Accrued postretirement benefit
cost-net 52,273 50,932
Discount rate 7.6% 7.1%
Health care inflation rate 8.5% 9.0%
The 1997 health care inflation rate was assumed to decrease gradually to 5% by
the year 2003 and remain at that level thereafter. An increase in the assumed
health care inflation rate by 1% per year would increase the accumulated
postretirement benefit obligation at January 1997 by $4,678,000 and the net
periodic postretirement benefit cost for 1997 by $534,000.
Employee Security Plan
The Company maintains an employee security plan which provides severance
benefits for all eligible employees of the Company and its subsidiaries who lose
their jobs in the event of a change in control as defined by the plan.
Employees are eligible if they have one year or more of service and are not
covered by a collective bargaining agreement. The plan provides two and one half
months of pay for each year of service, up to twenty-four months maximum, and a
continuation of health care and life insurance benefits on the same basis.
12. STOCK PURCHASE PLAN
At January 1997, under the terms of a stock purchase plan, the Company has
reserved 941,846 shares of common stock for issuance to its employees. The
purchase price of the stock is the lower of 90% of the market price at the time
of grant or at the time of exercise. The option price for the shares outstanding
at January 1997 is $16.88.
1997 1996 1995
Outstanding at beginning
of year 449,413 453,010 426,770
Exercised during the year (123,353) (45,701) (110,175)
Expired during the year (355,039) (440,839) (322,712)
Granted during the year 494,550 482,943 459,127
Outstanding at end of year 465,571 449,413 453,010
Average per share price of
rights exercised $13.50 $13.83 $11.00
Rights to purchase are exercisable on date of grant. Unexercised rights expire
on June 30 of each year and become available for future grants. Employees are
entitled to purchase one share of common stock for each $250 of their earnings
for the calendar year preceding July 1.
The consolidated statement of operations does not contain any charges as a
result of accounting for this plan.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation", (FAS
123) effective for 1996, which establishes a fair-value-based method of
accounting for stock compensation plans with employees and others.
Alternatively, the statement allows that entities may continue to account for
stock-based compensation plans in accordance with Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees", with
disclosure of pro forma amounts reflecting the difference between cost charged
to operations pursuant to APB No. 25 and compensation cost that would have been
charged to operations had FAS 123 been applied.
The Company has elected to continue to follow APB No. 25 in accounting for its
stock-based compensation plans.
Application of the fair-value-based accounting provision of FAS 123 results in
the following pro forma amounts of net income and earnings per share:
(Thousands Except Per Share Amounts)
1997 1996
Net Income from Continuing Operations
As reported $17,276 $15,425
Pro forma 16,001 14,466
Net Income:
As reported 16,972 18,088
Pro forma 15,697 17,129
Earnings Per Share from Continuing Operations:
As reported 1.54 1.39
Pro forma primary earnings per share 1.42 1.30
Earnings Per Share:
As reported 1.51 1.63
Pro forma primary earnings per share 1.40 1.54
The fair value for these options was estimated at the date of grant using a
Black-Scholes options pricing model with the following weighted average
assumptions for 1997 and 1996: risk-free interest rates of 5.63% and 5.88%;
dividend yields of 2.77% and 3.25%; volatility factors of the expected market
price of the Company's common stock of 23.9% and 22.7% and a weighted average
expected life of the option of 9 months. The fair value per share for the
options granted during 1997 and 1996 was $4.30 and $3.31 respectively.
For purposes of these pro forma disclosures, the estimated fair value of the
options is expensed in the year of issue.
13. STOCK OPTION, RESTRICTED STOCK AWARD PLAN AND RIGHTS PLANS
At January 1997, under the terms of its incentive stock option plans, the
Company has reserved shares of common stock for issuance to selected key
employees.
Options were granted at prices equal to the fair market value on the date of the
grant and may be paid for in cash or by tendering previously held common stock
of the Company at the time the option is exercised.
Stock options are non-transferable other than on death, are partially
exercisable one year from the date of grant and expire ten years from date of
grant.
Option Price
No. of Per (Thousands)
Shares Share Total
Outstanding at:
January 1994 700,315 9.00-15.00 $8,897
Granted 152,000 13.63 2,071
Exercised (107,500) 9.00-15.00 (1,290)
Expired (6,936) 9.00-15.00 (86)
Outstanding at:
January 1995 737,879 9.00-15.00 9,592
Exercised (106,086) 9.00-15.00 (1,266)
Outstanding at:
January 1996 631,793 9.00-15.00 8,326
Exercised (56,531) 9.00-15.00 (709)
Expired (29,987) 9.00-15.00 (378)
Outstanding at:
January 1997 545,275 9.00-15.00 $7,239
Shares remaining available
for grant 316,200
Total exercisable as
of January 1997 412,475
At the time options are exercised the proceeds of the shares issued are credited
to the related stockholders' equity accounts. There are no charges to income in
connection with the options.
The Company has a restricted stock award plan for key employees who are expected
to have a significant impact on the performance of the Company. The stock is
restricted from being sold, transferred or assigned and is forfeitable until it
vests, generally over a three (3) year period. Amounts of awards are determined
by the Management Development and Executive Compensation Committee of the
Company's Board of Directors. Compensation expense relating to awards of
restricted stock are recognized over the vesting period.
The Company maintains a shareholder rights plan. The rights were distributed to
shareholders at the rate of one right per share. The rights entitle the holder
to purchase one additional share of voting common stock at a substantial
discount and are exercisable only in the event of the acquisition of 20% or more
of the Company's voting common stock, or the commencement of a tender or
exchange offer under which the offeror would own 30% or more of the Company's
voting common stock. The rights will expire on December 13, 1999.
14. OPERATIONS BY INDUSTRY SEGMENT
The Company's operations and assets are in one principal industry: tableware
products. The Company's tableware operations, which are located in the United
States, Canada, Mexico, Italy and the United Kingdom, involve the manufacture
and distribution of stainless, plated and sterling flatware, silverplated and
stainless holloware, vitreous, porcelain and bone china, cutlery and crystal.
These products are sold directly to a broad base of retail outlets including
department stores, mass merchandisers and chain stores. Additionally, these
products are sold to special sales markets, which include customers who use
them as premiums, incentives and business gifts. The Company also sells
flatware, holloware and commercial chinaware directly or through distributors to
foodservice operations worldwide, including hotels, restaurants, airlines,
schools and health care facilities. The Company does not derive more than 10% of
its total revenues from any individual customer, government agency or export
sales. Operating profit by geographic segment is revenue less operating costs,
excluding interest and income taxes. North American sales are substantially
comprised of U.S. domestic sales.
Segment information by geographic area for the three years ended January 1997,
1996 and 1995 were as follows:
(Thousands)
1997 1996 1995
NET SALES:
North America $356,590 $349,232 $324,193
Other foreign operations 20,333 14,579 11,638
Total $376,923 $363,811 $335,831
OPERATING PROFIT:
North America $39,114 $37,036 $27,970
Other foreign operations 1,858 1,019 712
Operating profit 40,972 38,055 28,682
Corporate expense 5,914 5,609 5,367
Interest expense 6,503 6,877 5,922
Income before income taxes $28,555 $25,569 $17,393
IDENTIFIABLE ASSETS:
North America $338,506 $296,440 $290,269
Other foreign operations 8,539 7,281 5,010
Total 347,045 303,721 295,279
Corporate assets-cash 3,183 2,847 2,207
Total $350,228 $306,568 $297,486
DEPRECIATION EXPENSE:
North America $10,892 $10,209 $9,311
Other foreign operations 563 406 401
Total $11,455 $10,615 $ 9,712
PROPERTY, PLANT AND EQUIPMENT
ADDITIONS:
North America $11,099 $12,030 $10,599
Other foreign operations 467 404 844
Total $11,566 $12,434 $11,443
15. CHANGES IN STOCKHOLDERS' EQUITY
Following is a summary of the changes in Stockholders' Equity for the three
years ended January 1997.
(Thousands)
Equity
Additional Adjustment Unallocated
Common Common Prefered Paid-in Retained from Treasury ESOP
Shares Stock Stock Capital Earnings Translation Stock Shares
Balance
Jan. 1994 11,429,843 $11,430 $2,236 $78,423 $8,129 $(2,461) $(9,102) $(2,742)
Stock
purchase plan 110,175 110 1,112
Dividend
reinvestment
plan 80 528 (11)
Restricted
stock plan 7,920 8 118
Stock option
plan, net 32,026 32 (6) 7
Cash dividends
declared ($.48
per share) (5,367)
Net income 13,493
ESOP shares
allocated to
participants 2,753
Equity
adjustment
from translation (3,574)
Balance
Jan. 1995 11,579,964 11,580 2,230 79,740 16,255 (6,035) (8,574)
Stock
purchase plan 45,701 46 586
Dividend
reinvestment
plan 56 276
Restricted
stock plan 4,348 4 67
Stock option
plan, net 76,211 76 699
Purchase/
retirement of
treasury stock (5) 2 (265)
Cash dividends
declared ($.48
per share) (5,407)
Net income 18,088
Purchase of
ESOP shares (2,004)
ESOP shares
allocated to
participants 1,464
Equity
adjustment
from translation (2,579)
Balance 11,706,224 11,706 2,225 81,150 28,936 (8,614) (8,563) (540)
Jan. 1996
Stock
purchase plan 123,353 124 1,542
Dividend
reinvestment
plan 305 248
Restricted
stock plan 5,054 5 (16)
Stock option
plan, net 33,175 33 313
Purchase/
retirement of
treasury stock (9) (191) (1,841)
Cash
dividends
declared ($.52
per share) (6,015)
Net income 16,972
Purchase of
ESOP shares (1,102)
ESOP shares
allocated to
participants 1,504
Equity
adjustment
from translation
146
Balance
Jan. 1997 11,867,806 $11,868 $2,216 $83,103 $39,893 $(8,468) $(10,156) $(138)
16. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(Thousands except per share amounts)
Quarter Ended
April 27, July 27, October 26, January 25,
1996 1996 1996 1997
Net sales $ 82,890 $86,307 $101,280 $106,446
Gross margin 27,791 30,265 35,233 39,700
Income from continuing
operations 2,522 3,101 5,306 6,347
Net income 2,669 2,755 5,201 6,347
Earnings per share
Continuing operations .23 .28 .47 .56
Net income .24 .24 .47 .56
Quarter Ended
April 29, July 29, October 28, January 27,
1995 1995 1995 1996
Net sales $80,266 $89,382 $100,628 $93,535
Gross margin 28,759 30,445 34,194 33,853
Income from continuing
operations 2,375 2,832 4,795 5,423
Net income 3,385 3,450 5,345 5,908
Earnings per share
Continuing operations .22 .26 .42 .49
Net income .30 .31 .48 .53
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Oneida Ltd.
We have audited the accompanying consolidated balance sheet of Oneida Ltd. as of
January 25, 1997 and January 27, 1996, and the related consolidated statement of
operations and cash flows for each of the three years in the period ended
January 25, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Oneida Ltd. as of
January 25, 1997 and January 27, 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
January 25, 1997 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
a professional services firm
/s/ Coopers & Lybrand L.L.P.
Syracuse, New York
February 20, 1997
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Thousands)
1997 1996 1995
Net Sales:
Consumer Products Markets $202,607 $209,096 $187,971
Foodservice Markets 174,316 154,715 147,860
Total 376,923 363,811 335,831
Gross Margin 132,989 127,251 113,192
% Net Sales 35.3% 35.0% 33.7%
Operating Expense 97,099 94,043 89,281
% Net Sales 25.8% 25.9% 26.6%
Fiscal year ended January 1997 compared with fiscal year ended January 1996
Operations
1997 consolidated net sales were $13,112, or 3.6% higher than in the previous
year. Sales of foodservice products increased 12.7 % over the prior year levels,
partially due to the acquisition of Rego China in the last quarter of 1997.
Sales of consumer products decreased 3.1% from 1996, due to market softness in
the first half of the year. This trend was reversed in the latter half of 1997.
International sales of the above products were up 23.3% from the prior year,
reflecting growth in all major foreign markets, including Mexico, Canada and
Europe.
Gross margin as a percent of net sales increased to 35.3% from 35.0% in 1996
partly because of improved tableware plant manufacturing efficiencies.
Operating expenses increased by $3,056 or 3.2% over 1996. Of this increase,
$2,078 is attributable to the acquisition of Rego China. Exclusive of the Rego
operations, selling and distribution costs remain constant with 1996 levels.
When the Rego administrative costs are factored out, general and administrative
costs increased by 3.8%, principally due to higher employee profit sharing
accruals resulting from higher operating income.
1997 interest expense (prior to capitalized interest) decreased by $511 or 7.0%.
The decline in interest expense was principally due to lower average interest
rates on the Company's borrowings.
Liquidity and Financial Resources
During the current year, the Company has invested approximately $11,600 in
capital additions, primarily in its manufacturing facilities. The Company plans
to spend $16,000 on similar capital projects in 1998.
In the fourth quarter, the Company purchased substantially all of the assets of
Rego China (See Note 2 to the Financial Statements). As part of this
transaction, the Company borrowed $35,000 of long-term debt.
Consequently, total outstanding debt increased from $21,477 or 23.4% during
1997. The Company sold its Camden Wire subsidiary on February 12, 1997 (See
Note 3 to the Financial Statements). This sale resulted in the Company
receiving $43,500 in cash. The majority of these proceeds were used to pay
down outstanding debt. Cash from 1997 operations is expected to provide
sufficient liquidity for all of the Company's capital needs.
In 1997, the Mexican peso did not experience the rapid devaluation present in
the prior two years. However, the cumulative devaluation over the past three
years has been sufficient to denote Mexico as having a hyper-inflationary
economy for accounting purposes. Accordingly, in 1998, the Company will begin
accounting for its Mexican operations as hyper-inflationary, using the
methodology of Financial Accounting Standard (FAS) No. 52. This will entail
reflecting translation adjustments in the income statement, rather than as a
charge/credit to stockholders' equity. Management believes the impact on the
Company's financial statements in 1998 will not be material.
Fiscal year ended January 1996 compared with fiscal year ended January 1995
Operations
1996 consolidated net sales were $27,980, or 8.3% higher than in the previous
year. Tableware sales increased in both the domestic consumer and foodservice
markets, as well as internationally. Tableware sales increased in both the
domestic consumer and foodservice markets, as well as internationally.
Tableware sales benefited from the introduction of several well received new
patterns and increased distribution efficiencies. In particular, significant
sales increases were achieved in the retail department store and mass
merchandise markets.
Gross margin as a percent of net sales increased to 35.0% from 33.7% in 1995.
Improved sales volume and manufacturing efficiencies were realized in the
Company's tableware plants.
Operating expenses increased by $4,762, or 5.3% over 1995. Selling and
distribution costs rose by 2.8%, in direct relation to the higher sales level
realized by the Company this year. In contrast, general and administrative costs
increased by 12.1%, primarily due to higher employee benefit and profit sharing
accruals.
1996 Interest expense (prior to capitalized interest) increased by $1,021 or
16.3%. The rise in interest expense was principally due to the effect of
increased interest rates on the Company's variable rate borrowings in 1996
versus 1995.
FIVE YEAR SUMMARY
ONEIDA LTD.
(Thousands except per share amounts)
Year ended in January 1997 1996 1995 1994 1993
OPERATIONS
Net sales $376,923 $363,811 $335,831 $322,511 $328,679
Gross margin 132,989 127,251 113,192 110,487 108,550
Interest expense 6,503 6,877 5,922 6,271 8,228
Income before income taxes
and cumulative effect 28,555 25,569 17,393 15,274 4,789
Income taxes 11,279 10,144 7,306 6,356 1,814
Income (loss) from
continuing operations 17,276 15,425 10,087 8,919 (28,867)
Income (loss) from
discontinued operations (304) 2,663 3,406 1,743 (4,385)
Net income (loss) 16,972 18,088 13,493 10,662 (33,252)
Cash dividends declared-
Preferred stock 133 134 134 135 136
Common stock 5,882 5,273 5,233 5,129 5,090
PER SHARE OF COMMON STOCK
Income before accounting
changes 1.51 1.63 1.24 1.01 .28
Continuing operations 1.54 1.39 .92 .84 (2.88)
Discontinued operations (.03) .24 .32 .17 (.44)
Net income (loss) 1.51 1.63 1.24 1.01 (3.32)
Dividends declared .52 .48 .48 .48 .48
Book value 10.47 9.46 8.53 7.97 7.39
FINANCIAL DATA
Current assets 224,775 211,930 205,168 189,171 192,197
Working capital 128,221 140,106 134,386 123,263 122,306
Total assets 350,228 306,568 297,486 280,527 247,305
Long-term debt 68,126 63,129 68,277 66,301 72,906
Stockholders' equity 118,318 106,300 95,196 85,913 77,664
Additions to property,
plant and equipment 11,566 12,434 11,443 10,813 11,879
Property, plant and
equipment-at cost 195,429 185,637 177,166 166,529 157,976
Accumulated depreciation 116,283 105,957 97,474 88,182 80,297
SHARES OF CAPITAL STOCK
Outstanding at end of year
Preferred 89 89 89 89 91
Common 11,093 10,999 10,902 10,498 10,205
Weighted average number
of common shares out-
standing during the year 11,138 11,019 10,784 10,393 10,056
SALES OF MAJOR PRODUCTS BY PERCENT
OF TOTAL SALES
Consumer 54% 57% 56% 56% 54%
Foodservice 46% 43% 44% 44% 46%
AVERAGE NUMBER OF
EMPLOYEES 4,525 4,690 4,534 4,672 4,652
Dividends and Price Range of the Company's Common Stock
The Company's Common Stock is listed on the New York Stock Exchange and trades
under the symbol OCQ. The total number of stockholders of record at January 1997
was 4,069. The following table sets forth the high and low sale prices per share
of the Company's Common Stock for the periods indicated on the Composite Tape,
and cash dividends declared for the quarters in the Company's 1997 and 1996
fiscal years.
JANUARY 1997 JANUARY 1996
Fiscal Dividends Fiscal Dividends
Quarter High Low Per Share Quarter High Low Per Share
First.....$17.50 $14.88 $.13 First.....$15.25 $13.38 $.12
Second.... 18.75 15.50 .13 Second.... 15.88 14.00 .12
Third..... 15.88 14.50 .13 Third..... 16.75 15.00 .12
Fourth.... 18.25 14.25 .13 Fourth.... 17.63 15.13 .12