UNITED STATES
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 August 1, 1998
Commission file number 1-5452
ONEIDA LTD.
(Exact name of Registrant as specified in its charter)
NEW YORK 15-0405700
(State or other jurisdiction of I.R.S. Employer
Identification
incorporation or organization) Number
ONEIDA, NEW YORK 13421
(Address of principal executive offices) (Zip code)
(315) 361-3636
(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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of September 11, 1998: 16,697,038
ONEIDA LTD.
FOR THE THREE MONTHS ENDED AUGUST 1, 1998 FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION
Consolidated Statement of Operations
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II OTHER INFORMATION
No other information required to be filed for this quarter.
ITEM 6 (b)
There were no reports filed under 8-K for this quarter.
SIGNATURES
ONEIDA LTD.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
(Thousands except per AUG 1, JUL 26, AUG 1, JUL 26,
share amounts) 1998 1997 1998 1997
________ ________ ________ ________
NET SALES.......................... $104,216 $102,274 $211,271 $199,251
COST OF SALES...................... 64,962 63,533 130,398 125,114
------- ------- ------- -------
GROSS MARGIN....................... 39,254 38,741 80,873 74,137
OPERATING REVENUES................. 395 332 416 374
------- ------- ------- -------
39,649 39,073 81,289 74,511
------- ------- ------- -------
OPERATING EXPENSES:
Selling, advertising and 21,885 18,625 42,811 36,229
distribution....................
General and administrative........ 8,626 9,440 18,328 18,126
------- ------- ------- -------
Total........................... 30,511 28,065 61,139 54,355
-------- ------- ------ -------
INCOME FROM OPERATIONS............. 9,138 11,008 20,150 20,156
OTHER INCOME (EXPENSE)............. 1,148 (265) 951 (550)
INTEREST EXPENSE................... (2,047) (1,807) (3,867) (3,525)
------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES............... 8,239 8,936 17,234 16,081
PROVISION FOR INCOME TAXES......... 3,152 3,418 6,592 6,151
------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS.. 5,087 5,518 10,642 9,930
GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS........... 2,566
------- ------- ------- -------
NET INCOME......................... $5,087 $5,518 $10,642 $12,496
======= ======= ======= =======
EARNINGS PER SHARE OF COMMON STOCK:
Continuing operations:
Basic........................... $ .30 $ .34 $ .63 $ .60
Diluted......................... .30 .33 .62 .60
Net income:
Basic........................... .30 .34 .63 .76
Diluted......................... .30 .33 .62 .75
SHARES USED IN PER SHARE DATA:
Basic........................... 16,734 16,329 16,695 16,351
Diluted......................... 17,015 16,472 16,976 16,464
<FN>
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
(Thousands except per AUG 1, JUL 26, AUG 1, JUL 26,
share amounts) 1998 1997 1998 1997
------- ------- ------- -------
NET INCOME......................... $ 5,087 $ 5,518 $10,642 $12,496
OTHER COMPREHENSIVE INCOME,
NET OF TAX...................... (1,344) 157 (2,150) (163)
------- ------- ------- -------
COMPREHENSIVE INCOME............... $ 3,743 $ 5,675 $ 8,492 $12,333
======= ======= ======= =======
<FN>
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED BALANCE SHEET
AUGUST 1, 1998 AND JANUARY 31, 1998
(Thousands)
AUG 1, JAN 31,
1998 1998
------- -------
ASSETS
CURRENT ASSETS:
Cash............................................. $ 6,287 $ 3,095
Accounts receivable.............................. 65,693 61,788
Less allowance for doubtful accounts............. (1,700) (1,896)
Other accounts and notes receivable.............. 3,149 4,030
Inventories:
Finished goods.................................. 140,993 101,293
Goods in process................................ 16,468 15,797
Raw materials and supplies...................... 19,906 16,329
Other current assets............................ 11,981 9,408
------- -------
Total current assets.......................... 262,777 209,844
------- -------
PROPERTY, PLANT AND EQUIPMENT-At cost:
Land and buildings............................... 49,343 49,505
Machinery and equipment.......................... 168,515 156,767
------- -------
Total......................................... 217,858 206,272
Less accumulated depreciation.................... 128,092 121,460
-------- -------
Property, plant & equipment-net............... 89,766 84,812
-------- -------
OTHER ASSETS:
Intangible assets - net.......................... 39,293 38,885
Deferred income taxes............................ 18,820 18,820
Other assets..................................... 11,636 11,225
-------- --------
TOTAL........................................ $422,292 $363,586
======== ========
<FN>
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED BALANCE SHEET
AUGUST 1, 1998 AND JANUARY 31, 1998
(Thousands)
AUG 1, JAN 31,
1998 1998
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt.................................. $ 67,540 $ 12,717
Accounts payable................................. 26,792 21,735
Accrued liabilities.............................. 33,503 41,686
Accrued income taxes............................. 10,817 7,966
Dividends payable................................ 1,705 1,695
Current installments of long-term debt........... 4,811 4,711
------- -------
Total current liabilities..................... 145,168 90,510
------- -------
LONG-TERM DEBT.................................... 69,542 69,415
------- -------
OTHER LIABILITIES:
Accrued postretirement liability................. 53,819 53,114
Accrued pension liability....................... 6,354 6,303
Other liabilities................................ 10,819 8,987
-------- -------
Total......................................... 70,992 68,404
------- -------
STOCKHOLDERS' EQUITY:
Cumulative 6% preferred stock; $25 par
value; authorized 95,660 shares, issued
87,925 and 88,001 shares, respectively,
callable at $30 per share....................... 2,198 2,200
Common stock $1 par value; authorized
48,000,000 shares, issued 17,354,978
and 17,091,509 shares, respectively............. 17,355 17,091
Additional paid-in capital....................... 79,165 76,007
Retained earnings................................ 60,159 54,620
Equity adjustment from translation............... (10,819) (8,669)
Less cost of common stock held in
treasury; 643,922 and 468,568 shares,
respectively.................................... (11,160) (5,632)
Less unallocated ESOP shares of common
stock of 9,292 and 13,866 respectively.......... (308) (360)
------- -------
Stockholders' Equity.......................... 136,590 135,257
-------- --------
TOTAL........................................ $422,292 $363,586
======== ========
<FN>
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 1, 1998 and JULY 26, 1997
(In Thousands)
FOR THE
SIX MONTHS ENDED
AUG 1, JULY 26,
1998 1997
------- -------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income ........................................... $10,642 $12,496
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation......................................... 6,688 5,870
Amortization of intangibles.......................... 1,516 1,314
Deferred taxes and other non-cash
charges and credits............................... 403 (1,179)
Decrease (increase) in operating assets:
Receivables.......................................... (3,308) (2,925)
Inventories.......................................... (45,115) (7,715)
Other current assets................................. (2,641) (2,845)
Other assets......................................... 39 (2,477)
Increase in accounts payable......................... 4,923 2,939
Increase (decrease) in accrued liabilities........... (5,464) 7,273
------- -------
Net cash provided by (used in) operating activities... (32,317) 12,751
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures............ (12,171) (7,139)
Retirement of property, plant and equipment........... 208 1,081
Proceeds from sale of discontinued operations......... 33,763
Other, net............................................ (246) 68
------- -------
Net cash provided by (used in) investing activities.... (12,209) 27,773
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock................ 3,244 4,478
Purchase of treasury stock............................ (4,947) (7,417)
Issuance of restricted stock plan shares.............. 178 82
Purchase/retirement of preferred stock................ (2) (6)
Purchase (allocation) of ESOP shares -net............. (529) (30)
Issuance (payments) of short-term debt -net.......... 54,823 (6,093)
Proceeds from issuance of long term debt.............. 449
Payment of long-term debt............................. (222) (25,205)
Dividends paid........................................ (5,103) (4,343)
------- -------
Net cash provided by (used in) financing activity...... 47,891 (38,534)
------- -------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH................ (173) (107)
------- -------
NET INCREASE IN CASH.................................... 3,192 1,883
CASH AT BEGINNING OF YEAR............................... 3,095 3,183
------- -------
CASH AT END OF PERIOD................................... $ 6,287 $ 5,066
======= =======
Supplemental Cash Flow Disclosures:
Interest paid ......................................... $ 3,989 $ 3,861
Income taxes paid...................................... 4,887 3,654
<FN> See notes to consolidated financial statements.
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands)
1. The statements for the six months ended August 1, 1998 and July 26, 1997
are unaudited; in the opinion of the Company such unaudited statements
include all adjustments (which comprise only normal recurring accruals)
necessary for a fair presentation of the results of such periods. The
consolidated financial statements for the year ended January 30, 1999 are
subject to adjustment at the end of the year when they will be audited by
independent auditors. The results of operations for the six months ended
August 1, 1998 are not necessarily indicative of the results of
operations to be expected for the year ending January 30, 1999. The
consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes for the year ended in
January 1998 and 1997 included in the Company's January 31, 1998 Annual
Report to the Securities and Exchange Commission on Form 10-K.
2. On February 12, 1997, Camden Wire Company was sold to an unrelated third
party for $43,500 in cash. The sale resulted in an after tax gain of
$2,566 (net of applicable income taxes of $3,716) or $0.15 per diluted
share. Operating losses of Camden for the fourth quarter of 1996 and the
first quarter of 1997 totaling $1,200 were deferred and deducted from the
gain for financial statement purposes.
3. The provision for income taxes is based on pre-tax income for financial
statement purposes with an appropriate deferred tax provision to give
effect to changes in temporary differences between the financial
statements and tax bases of assets and liabilities. The temporary
differences arise principally from postretirement benefits, depreciation,
and other employee benefits.
4. The Company adopted SFAS No. 128, "Earnings Per Share," as of January 31,
1998. Under the new standard, basic and diluted earnings per share are
presented for each period in which a statement of operations is
presented. Basic earnings per s hare is computed by dividing income less
preferred stock dividends by the weighted average shares actually
outstanding for the period. Diluted earnings per share includes the
potentially dilutive effect of shares issuable under the employee stock
purchase and incentive stock option plans.
The following is a reconciliation of basic earnings per share to diluted
earnings per share for the six months ending August 1, 1998 and July 26,
1997:
Earnings
Net Preferred Adjusted Average Per
Income Dividends Income Shares Share
- --------------------------------------------------------------------------------
[S] [C] [C] [C] [C] [C]
1998: Basic earnings per share $10,642 $(66) $10,576 16,695 $.63
Effect of stock options 281
------
Diluted earnings per share 10,642 (66) 10,576 16,976 .62
- --------------------------------------------------------------------------------
1997: Basic earnings per share 12,496 (66) 12,430 16,351 .76
Effect of stock options 113
------
Diluted earnings per share 12,496 (66) 12,430 16,464 .76
- --------------------------------------------------------------------------------
5. Included in the long-term debt caption on the balance sheet are various
senior notes. The note agreements relating thereto contain provisions
which restrict borrowings, business investments, acquisition of the
Company's stock and payment of cash dividends. At August 1, 1998, the
maximum amount available for payment of dividends was $15,991.
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands)
6. Effective February 1, 1998, the Company adopted Statements of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income." This
pronouncement requires the Company to report the effects of foreign
currency translation adjustments on comprehensive income. The following
is a reconciliation of other comprehensive income on a before and after
tax basis for the quarter and six months ended August 1, 1998 and July
26, 1997:
For the Quarter Ended
August 1, July 26,
1998 1997
-------- --------
[S] [C] [C]
Foreign currency translation adjustments $(2,179) $ 256
Tax effect of foreign currency
translation adjustments 835 (99)
-------- --------
Other comprehensive income $(1,344) $ 157
======== ========
For the Six Months Ended
August 1, July 26,
1998 1997
-------- --------
[S] [C] [C]
Foreign currency translation adjustments $(3,484) $ (264)
Tax effect of foreign currency
translation adjustments 1,334 101
-------- --------
Other comprehensive income $(2,150) $ (163)
======== ========
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended August 1, 1998 compared with
the quarter ended July 26, 1997
(In Thousands)
Operations
Consolidated net sales, for the quarter ended August 1, 1998 increased $1,942,
over the same period a year ago.
Net Sales by Division: 1998 1997 % Change
-------- -------- --------
[S] [C] [C] [C]
Consumer Products Markets.................. $ 51,328 $ 49,881 2.9 %
Foodservice Markets........................ 52,888 52,393 .9 %
-------- --------
Total.................................... $104,216 $102,274 1.9 %
======== ========
Net Sales by Product Line: 1998 1997 % Change
-------- -------- --------
[S] [C] [C] [C]
Metal Products............................. $ 72,804 $ 78,751 (7.6)%
Dinnerware Products........................ 21,926 19,432 12.8 %
Other Products............................. 9,486 4,091 131.9 %
-------- --------
Total.................................... $104,216 $102,274 1.9 %
======== ========
The increase in consumer sales and other product lines is primarily attributable
to the Company's entry into the grocery store segment. This growth was partially
offset by sales decreases in the department store and national account chains.
Several major retailers continued to adjust their metal tableware inventories.
Gross margin, as a percentage of net sales, was 37.7% in the second quarter of
1998 as compared to 37.9% for the same period of 1997.
Operating Expenses 1998 1997 % Change
-------- -------- ---------
[S] [C] [C] [C]
Selling, advertising and distribution...... $ 21,885 $ 18,625 17.5 %
General and administrative................. 8,626 9,440 (8.6)%
--------- --------
Total.................................... $ 30,511 $ 28,065 8.7 %
======== ========
Total operating expenses increased by $2,446 from the same period last year.
The majority of the selling expense increase was related to costs associated
with the Company's entry into the consumer dinnerware, glassware and grocery
store markets. A s a percent of total sales, selling and distribution expenses
increased to 21.0% from 18.2% in the prior year. The decrease in administrative
costs is primarily attributable to lower employee profit sharing accruals.
Included in miscellaneous income for the quarter, are the net settlement of
three long-term contracts resulting from termination of a major energy vendor
supply contract, the Company's lease of an office facility in Redmond,
Washington and a long-ter m distribution relationship. Interest expense, prior
to capitalized interest, was $2,332 for the three months, an increase of $475
from the first six months of 1997. This increase is due to higher average
borrowings in 1998. These short-term borrowings were incurred to finance the
inventories needed for expansion into the glassware, consumer dinnerware and
grocery store product categories as well as normal seasonal inventory increases.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six month period ended August 1, 1998 compared with
the six month period ended July 26, 1997
(In Thousands)
Operations
Consolidated net sales, for the six month period ended August 1, 1998 increased
by $12,020, over the same period a year ago.
Net Sales by Division: 1998 1997 % Change
-------- -------- --------
[S] [C] [C] [C]
Consumer Products Markets.................. $103,709 $ 96,713 7.2 %
Foodservice Markets........................ 107,562 102,538 4.9 %
-------- --------
Total.................................... $211,271 $199,251 6.0 %
======== ========
Net Sales by Product Line: 1998 1997 % Change
-------- -------- --------
[S] [C] [C] [C]
Metal Products............................. $149,186 $153,574 (2.9)%
Dinnerware Products........................ 43,284 38,712 11.8 %
Other Products............................. 18,801 6,965 170.0 %
-------- --------
Total.................................... $211,271 $199,251 6.0 %
======== ========
The majority of the increase in consumer markets and other product lines is
attributable to the Company's entry into the grocery store sales channel, by
means of acquiring the business of Encore Promotions, Inc. in the second quarter
of 1997. Foodservice sales grew in all categories, particularly commercial
dinnerware.
Gross margin, as a percentage of net sales, was equal to 38.3% for the first six
months of 1998 and 37.2% for the same period of 1997. The increase reflects a
richer product mix sold in the first quarter of 1998, versus the same period of
1997.
Operating Expenses 1998 1997 % Change
------- ------- --------
[S] [C] [C] [C]
Selling, advertising and distribution...... $42,811 $36,229 18.2 %
General and administrative................. 18,328 18,126 1.1 %
------- -------
Total.................................... $61,139 $54,355 12.5 %
======= =======
Total operating expenses increased by $6,784 from the same period last year.
The selling and distribution expense increase was due to both incremental sales
and start-up costs related to the Company's entry into the consumer dinnerware,
glassware an d grocery store markets. As a percent of total sales, selling and
distribution expenses increased to 20.3% from 18.2% in the prior year.
For the first six months of 1998, the Company had non-recurring net
miscellaneous income resulting from the termination of three contracts including
a long-term energy supply contract, a lease on an office building in Redmond,
Washington and a long-term distribution agreement. Interest expense, prior to
capitalized interest, was $4,309 for the six months ended August 1, 1998, an
increase of $684 from the first six months of 1997. This increase is due to
higher average borrowings in 1998. These short-term borrowings were incurred to
finance the inventories needed for expansion into the glassware, consumer
dinnerware and grocery store product categories.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six month period ended August 1, 1998 compared with
the six month period ended July 26, 1997
(In Thousands)
Liquidity & Financial Resources
During the first half of this year, the Company spent approximately $12,000 on
capital projects focused primarily on it's distribution and manufacturing
facilities. The Company expects to invest another $14,000 on similar projects
during the remainder of the current fiscal year. Inventories increased by
$45,000 in the first six months of 1998. The majority of this was due to a
build up of inventories to support new product categories. In recognition of
the Company's 250th consecutive dividend, the Board of Directors, at its May 27,
1998 meeting, authorized the payment of a special one time dividend equal to ten
cents per common share outstanding at June 10, 1998 at a cost of approximately
$1,700. At the August 26, 1998 Board of Directors meeting, approval was given to
buyback 500,000 shares of the Company's common stock.
Management believes there is sufficient liquidity to support the Company's
ongoing funding requirements from future operations as well as the availability
of bank lines of credit. At August 1, 1998, the Company had unused short-term
credit lines equal to $8,235 as well as unused availability under a long-term
revolving line of credit totaling $24,000. Working capital as of August 1, 1998
totaled $117,609.
Year 2000 Compliance
Year 2000 issues relate to the ability of computer systems to distinguish data
which contains dates beyond December 31, 1999. The Company has created and is
in the process of implementing a comprehensive Year 2000 compliance plan. The
Company holds regular compliance meetings to receive information and input from
all of the Company's main operating areas.
As part of its compliance, plan the Company has reviewed all of its software and
information processing systems and identified date sensitive functions. The
Company plans to begin testing those systems in the first quarter of 1999. If
necessary, those systems will be modified to ensure that they operate properly
prior to the Year 2000. The Company's main accounting, logistics, warehouse
management and payroll systems are currently Year 2000 compliant. The Company
anticipates that its remaining major computer systems will be Year 2000
compliant by December 1998, and that its more minor computer systems will be
Year 2000 compliant by July 1999. To date, the Company has identified and
contacted its major customers, suppliers, service providers and business
partners. Each of these entities received a letter informing them of the
Company's plans and state of readiness and asking that they in turn share their
own Year 2000 plans by returning a questionnaire to the Company. In addition to
its compliance plan, the Company will develop a contingency plan based upon the
outcomes of the systems to be conducted during the first quarter of 1999.
The Company believes it is devoting appropriate resources to resolve its Year
2000 issues in a timely manner and believes that its compliance program will
result in all internal systems being prepared for Year 2000 processing. The
compliance plan is proceeding on schedule and to date no unforeseen difficulties
have arisen. Based upon the work performed to date, the Company presently
believes that the likelihood of the Year 2000 having a material result on its
operations, liquidity or financial position is remote. The Company estimates
that its direct Year 2000 compliance costs will not exceed $500,000, of which to
date approximately $100,000 has been incurred and expensed.
Notwithstanding the foregoing, the Company could be adversely affected if its
customers, suppliers, service providers, business partners and/or governmental
agencies continue to utilize systems that are not Year 2000 compliant. This
failure could affect the Company's ability to purchase raw materials, receive
orders and transact business with its financial institutions, any of which could
constitute a material and immeasurable financial risk to the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six month period ended August 1, 1998 compared with
the six month period ended July 26, 1997
(In Thousands)
Risk Factors
With the exception of historical data, the information contained in this Form
10-Q, as well as those other documents incorporated by reference herein, is
forward-looking. For the purposes of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions readers that
changes in certain factors could affect the Company's future results and could
cause the Company's future consolidated results to differ materially from those
expressed herein. Such factors include, but are not limited to: general
economic conditions in the Company's markets; difficulties or delays in the
development, production and marketing of new products; the impact of competitive
products and pricing; certain assumptions related to consumer purchasing
patterns; significant increases in interest rates or the level of the Company's
indebtedness; major slowdowns in the retail, travel or entertainment industries;
the loss of several of the Company's major consumer and/or foodservice
customers; underutilization of the Company's plants and factories; the amount
and rate of growth of the Company's selling, general and administrative
expenses; and the inability of the Company or its customers, suppliers, service
providers or business partners, as well as governmental agencies, to resolve
Year 2000 issues in a timely manner.
ONEIDA LTD
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
August 1, 1998
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.
ONEIDA LTD
(Registrant)
Date: September 14, 1998
Edward W. Thoma
Senior Vice President Finance
-----------------------------