SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission file number
December 31, 1994 1-9608
NEWELL CO.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3514169
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
Newell Center
29 East Stephenson Street, Freeport, Illinois 61032-0943
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (815)235-4171
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $1 par value per share, and New York Stock Exchange
associated Preferred Stock Purchase Rights Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. (X)
1
There were 157.9 million shares of the Registrant's common
stock outstanding as of January 31, 1995. The aggregate market value
of the shares of common stock (based upon the closing price on the New
York Stock Exchange on that date) beneficially owned by nonaffiliates
of the Registrant was approximately $3,326.5 million. For purposes of
the foregoing calculation only, which is required by Form 10-K, the
Registrant has included in the shares owned by affiliates those shares
owned by directors and officers of the Registrant, and such inclusion
shall not be construed as an admission that any such person is an
affiliate for any purpose.
Documents Incorporated by Reference
Part III
Portions of the Registrant's Definitive Proxy Statement for its
Annual Meeting of Stockholders to be held May 10, 1995, which was
filed March 17, 1995.
2
PART I
Item 1. Business
-----------------
"Newell" or the "Company" refers to Newell Co. alone or with its
wholly-owned subsidiaries, as the context requires.
GENERAL
-------
Newell is a manufacturer and full-service marketer of high-volume
consumer products serving the needs of volume purchasers. The
Company's basic strategy is to merchandise a multi-product offering of
brand-name consumer products, with an emphasis on excellent customer
service, in order to achieve maximum results for its stockholders.
Each group of the Company's products is manufactured and sold by a
subsidiary or division (each referred to herein as a "division," even
if separately incorporated).
The Company manages the activities of its divisions through
executives at the corporate level, to whom the divisional managers
report, and controls financial activities through centralized
accounting, capital expenditure reporting, cash management, order
processing, billing, credit, accounts receivable and data processing
operations. The production and marketing functions of each division,
however, are conducted with substantial independence. Each division
is managed by employees who make day-to-day operating and sales
decisions and participate in an incentive compensation plan that ties
a significant part of their compensation to their division's return on
assets and sales growth. The Company believes that this allocation of
responsibility and system of incentives fosters an entrepreneurial
approach to management that has been important to the Company's
success.
INDUSTRY SEGMENTS
-----------------
Since the beginning of 1993, after the sale of its closures
business on December 31, 1992, over 90% of the Company's revenues are
derived from consumer products and, as such, the Company operates in a
single industry segment. Prior to 1993, the Company operated in two
industry segments, Consumer Products and Industrial Products.
Consumer Products are sold through a variety of retail and
wholesale distribution channels. Industrial Products were sold
directly and through distributors. Intersegment sales were not
material.
3
PRODUCTS
--------
HOUSEWARES
COOKWARE AND BAKEWARE. The Company's cookware and bakeware
business is conducted by the Mirro division, which manufactures
aluminum cookware, bakeware and kitchen utensils. Mirro's
manufacturing operations are highly integrated, rolling its own sheet
stock from aluminum ingot, and producing phenolic handles and knobs at
its own plastics molding facility. Principal facilities are located
in Manitowoc and Chilton, Wisconsin and Salina, Kansas.
Mirro products are sold primarily under the brand names of
MIRRO(r), FOLEY(r) and WEAREVER(r), and the trade names of AIRBAKE(r),
CUSHIONAIRE(r), CUSHIONAIRE PRO(tm), CONCENTRIC AIRE(r), CHANNELON(r)
and LIMITED EDITION by WEAREVER(tm) . Mirro also manufactures canning
accessories, pressure cookers/canners and various specialized cookware
and bakeware items for the food service industry. It also produces
aluminum contract stampings and components for other manufacturers and
makes aluminum and plastic kitchen tools and utensils. Mirro markets
its products directly to mass merchants, warehouse clubs, grocery/drug
stores, department/specialty stores, hardware distributors, cable TV
networks, and select contract customers, using a network of
manufacturers' representatives, as well as regional zone and market-
specific sales managers.
OTHER. Anchor Hocking Glass - glass ovenware, tabletop,
household and foodservice products; Anchor Hocking Plastics - plastic
microwave cookware and food storage containers; Plastics, Inc. - food
processing and foodservice items; Goody - personal consumer products
including hair accessories and beauty organizers; Anchor Specialty
Glass - glass lamp parts, lighting components, meter covers and
appliance covers; and Newell Europe - glass cookware and dinnerware
marketed in Europe, the Middle East and Africa only.
HOME FURNISHINGS
DECORATIVE WINDOW COVERINGS. In 1993, Newell acquired Levolor,
entering the custom made-to-order non-drapery window coverings market.
In 1994, Newell acquired another custom made-to-order business, Home
Fashions, Inc. and the two businesses were subsequently combined into
Levolor Home Fashions ("Levolor"). Levolor is a full-line manufacturer
and marketer of decorative window coverings sold through volume
purchasers and specialty stores. There are three major brand names:
Levolor, DelMar and LouverDrape.
Levolor products are sold primarily under the trade names of
OVATION(tm), MONACO(r), MARK I(tm) and RIVIERA(r) (for custom
products). Levolor also markets stock horizontal and vertical window
coverings. DelMar products are sold primarily under the trade names
of GRAND CLASSIQUE(r), NOUVELLE(r), LIGHT GARDE(tm), ESPIRIT(tm),
4
ENCHANTE(r) and SOFTLIGHT(r). LouverDrape sells primarily under the
LouverDrape name including sales direct to fabricators, such as stock
components, and also under the CAROUSEL(r) and GOLDEN TOUCH(r) trade
names.
Levolor's principal facility is in Greensboro, North Carolina.
Levolor has a total of 15 manufacturing facilities in the United
States and two in Canada.
WINDOW FURNISHINGS. Newell Window Furnishings ("Window
Furnishings") manufactures drapery hardware, window shades, and other
window treatments. Principal facilities are located in Freeport,
Illinois and Prescott, Ontario. Window Furnishings' products are sold
primarily under the brand name of NEWELL(r) and the trade names of
VISIONS(r), SPECTRIM(r), MAGIC FIT(r) and DESIGNERS GUILD(tm). Window
Furnishings also markets custom "size in store" programs for mini
blinds and window shades under the SPECTRIM(r) trade name.
Window Furnishings markets its products directly to mass
merchants, home centers, hardware distributors, department/specialty
stores and select contract customers, using a network of regional
sales managers, customer specific national account managers and
manufacturers' representatives.
OTHER. Lee/Rowan - coated wire storage and organization
products; Intercraft - ready-made picture frames; and Dorfile and
System Works - home storage and shelving systems.
OFFICE PRODUCTS
MARKERS AND WRITING INSTRUMENTS. In 1992, Newell acquired
Sanford, entering the markers and writing instruments market. In
1994, Newell acquired another marker and writing instrument company,
Faber-Castell (whose products are marketed under the Eberhard Faber
brand name), and the two businesses were subsequently combined. The
combined Sanford operation manufactures permanent/waterbase markers,
rolling ball pens, wood-cased pencils, highlighters, porous tip pens,
dry erase markers and overhead projector pens. Sanford manufactures
its own inks and assembles products in its manufacturing location in
Bellwood, Illinois, manufactures wood-cased pencils in Lewisburg,
Tennessee and imports other writing instruments. Sanford products are
sold in the mass market and via traditional commercial office products
channels. Principal trade names are SHARPIE(r), UNIBALL(r), EBERHARD
FABER(r), VIS A VIS(r), EXPO(r), MAJOR ACCENT(r), EXPRESSO(r),
MONGOL(r), ECOWRITER(r), PINK PEARL(r), VELVET(r) and AMERICAN(r).
Sanford sells its products directly and through distributors, using
its direct sales force and making limited use of manufacturers'
representatives.
OTHER. Stuart Hall - school supplies, stationery and office
supplies; and Newell, Rogers and Keene Office Products - desktop and
office accessories.
5
HARDWARE
CABINET AND WINDOW HARDWARE. The Company's Amerock division
offers a broad line of cabinet and window hardware, which is primarily
manufactured at its facility in Rockford, Illinois. These products
are sold under the AMEROCK(r) and ALLISON(r) brand names, and the
NATURAL ELEGANCE(tm), TRUE ELEGANCE(tm), EXPRESSIONS(tm), COLORS(tm)
and RUSTIC FINISHES(tm) trade names and include knobs, pulls, hinges,
drawer slides, catches, various window hardware components, towel bars
and tissue holders. Amerock also produces convenience and storage
products such as pantry storage systems, lazy susans for corner
cabinets and wire storage products.
Amerock markets its products directly and through distributors,
using its own sales force and a complement of manufacturers'
representatives.
OTHER. EZ Paintr - manual paint applicator products; BernzOmatic
- propane and propane/oxygen hand torches and accessories; and Bulldog
- household hardware.
6
MARKETING AND DISTRIBUTION
--------------------------
During 1994, sales to Wal-Mart Stores, Inc. and subsidiaries
amounted to approximately 15% of consolidated sales; each of the
Company's other customers, individually, amounted to less than 10%.
Most of the Company's customers are retailers who rely on a
single or principal source of each of the consumer products that they
sell. Accordingly, the divisions focus their marketing effort not on
the ultimate consumer, but on the retailer, and compete with other
suppliers for business. The Company's strategy is to emphasize
excellent customer service, innovative merchandising programs and a
quality multiproduct offering. The Company's computerized order
processing system allows it to receive orders from its customers on a
computer-to-computer basis. This system, and the ability to fill and
ship orders promptly, are important competitive factors since they
reduce a customer's order processing costs and allow the customer to
minimize the inventory it must carry. The divisions maintain sales
and service organizations to be responsive to the needs of their
customers.
BACKLOG
-------
The dollar value of unshipped factory orders is not material.
SEASONAL VARIATIONS
-------------------
The divisions are only moderately affected by seasonal trends.
Housewares products typically have higher sales in the second half of
the year due to retail stocking related to the holiday season, Home
Furnishings and Hardware products have higher sales in the second and
third quarters due to an increased level of do-it-yourself projects
completed in the summer months and Office Products have higher sales
in the second and third quarters due to the back-to-school season. As
a result of these moderate seasonal trends, the Company's consolidated
quarterly sales do not fluctuate significantly.
7
NET SALES BY PRODUCT CLASS
--------------------------
The following table sets forth the amounts and percentages of the
Company's net sales for the three years ended December 31, 1994
(including sales of acquired companies only from the time of
acquisition), for the groups of similar products described previously.
Year Ended December 31,
1994 % 1993 % 1992 %
------- ------- -------
(In millions, except percentages)
Housewares:
Cookware and Bakeware $ 280.9 14% $ 264.7 16% $ 262.8 18%
Other * 410.9 20 264.1 16 244.6 17
------- ------- -------
Total Housewares 691.8 34 528.8 32 507.4 35
------- ------- -------
Home Furnishings:
Decorative Window Coverings
and Furnishings 317.8 15 222.7 13 85.0 6
Other * 325.0 16 202.8 13 77.3 5
------- ------- -------
Total Home Furnishings 642.8 31 425.5 26 162.3 11
------- ------- -------
Office Products:
Markers and Writing
Instruments 212.6 10 156.0 10 142.0 10
Other * 170.6 8 184.7 11 136.0 9
------- ------- -------
Total Office Products 383.2 18 340.7 21 278.0 19
------- ------- -------
Hardware:
Cabinet and Window Hardware 186.3 9 179.4 11 182.7 13
Other * 170.8 8 155.9 9 142.8 9
------- ------- -------
Total Hardware 357.1 17 335.3 20 325.5 22
Sold Businesses:
Industrial - Caps & Closures - - - - 160.6 12
- Counselor - - 14.7 1 17.9 1
------- ------- -------
Total Sold Businesses - - 14.7 1 178.5 13
------- ------- -------
Newell Consolidated $2,074.9 100% $1,645.0 100% $1,451.7 100%
======= === ======= === ======= ===
* This category is comprised of many different product classes, each
representing less than 10% of net sales.
8
ACQUISITIONS AND DIVESTITURES OF BUSINESSES
-------------------------------------------
At the foundation of the Company's growth strategy is
acquisitions. Since the late 1960s, acquisitions have been the
Company's primary vehicle for growth. Over the years, the Company has
acquired more than 50 companies, and in the 1990s alone, the Company
completed ten major acquisitions, representing nearly $1.5 billion in
additional sales.
Twenty-five years ago, the Company was a small drapery hardware
manufacturer with $20 million in sales. Today, the Company is an
international consumer goods supplier with annualized sales of over
$2.5 billion. This dramatic growth is largely the result of using
acquisitions as the vehicle to execute a multi-product offering
strategy supported by internal growth from existing product lines.
In its acquisition planning, the Company looks for branded,
staple product lines sold to volume purchasers. These product lines
must have the potential to reach the Company's high standard of
profitability, have a low technology level and a long product life
cycle. In addition to adding entirely new product lines, acquisitions
can be beneficial in rounding out existing businesses by filling gaps
in the product offering, adding new customers and distribution
channels and improving operational efficiency through shared
resources.
The Company has typically acquired companies with unrealized
profit potential. "Newellization" is the profit improvement and
productivity enhancement process that is implemented to bring newly
acquired product lines up to the Company's high standards of
profitability.
Elements of the Newellization process at newly acquired companies
include establishing a focused business strategy, improving customer
service, building partnerships with customers, eliminating corporate
overhead through centralization of administrative functions, trimming
excess costs, tightening financial controls, improving manufacturing
efficiency, pruning nonproductive product lines and reducing
inventories, increasing trade receivable turnover and improving sales
mix profitability through the application of program merchandising
techniques.
As part of the Newellization process to improve profitability,
sales can often decline as unprofitable product lines are reduced or
eliminated. In the Newell strategy, once a company has been fully
Newellized and is under good control, it is expected to begin building
profitable sales and contribute to the Company's internal sales
growth.
9
Additional information regarding acquisitions and divestitures of
businesses is included in note 2 to the consolidated financial
statements.
FOREIGN OPERATIONS
------------------
Canadian sales of the Company were approximately 6% of the
Company's total net sales in 1994, 1993 and 1992. The Company's
international division coordinates export sales of consumer products
to all other foreign countries, totaling less than 3% of 1994 total
net sales. Other foreign sales were less than 1% of the Company's
total net sales in all three years.
All of the Company's products are sold by the Canadian
subsidiaries; however, only decorative window coverings and
furnishings, picture frames and home hardware are manufactured in
Canada.
On November 30, 1994, the Company acquired the European consumer
products business of Corning Incorporated (now known as Newell
Europe). This acquisition included Corning's consumer products
manufacturing facilities in England, France and Germany, the European
trademark rights and product lines for Pyrex, Pyroflam and Visions
brands in Europe, the Middle East and Africa, and Corning's consumer
distribution network throughout these areas (Pyrex and Visions are
registered trademarks of Corning Incorporated). Additionally, the
Company became the distributor in Europe, the Middle East and Africa
for Corning's U.S.-manufactured cookware and dinnerware brands.
RAW MATERIAL
------------
The Company expects to have multiple sources of supply for
substantially all of its material requirements. The raw materials and
various purchased components required for its products have generally
been available in sufficient quantities.
PATENTS AND TRADEMARKS
----------------------
The Company has a number of patents and trademarks, none of which
is considered material to the consolidated operations.
COMPETITION
-----------
The Company competes with a number of well-established domestic
and foreign manufacturers that serve the markets for its products.
Many of the Company's products also compete against a number of
substitute products. Although the available information does not
10
permit the Company to form a reliable opinion as to its precise
competitive position within these markets, the Company believes it has
a significant share in many of the markets.
ENVIRONMENT
-----------
The Company is subject to various laws regulating the discharge
of materials into the environment or otherwise relating to the
protection of the environment. Regulation in this area is in the
process of development, including changes in the standards of
enforcement of existing laws and enactment of new laws. Although the
Company, like other companies engaged in similar businesses, is a
party to various proceedings relating to environmental matters and
makes capital expenditures for environmental projects, it does not
believe that the Company will have material capital expenditures for
environmental control facilities during the current or succeeding
fiscal year.
EMPLOYEES
---------
The Company employs approximately 20,000 persons, of whom
approximately 5,000 are covered by collective bargaining agreements.
In June 1994, there was a one-week strike at the EZ Paintr division,
affecting 163 employees. There were no strikes during 1993. In
October 1992, there was a three-week strike at the Anchor Consumer
Glass division. The Company believes that its employee relations are
good.
11
Item 2. Properties
-------------------
The following table shows the location and general character of
the principal operating facilities owned or leased by the Company.
The executive offices are located in Beloit, Wisconsin, which is an
owned facility occupying approximately 9,000 square feet. Other
Corporate offices are located in owned facilities in Freeport,
Illinois (occupying 59,000 square feet) and in Rockford, Illinois
(occupying 7,000 square feet). Most of the idle facilities, which are
excluded from the following list, are subleased while being held
pending sale or lease expiration. The Company considers its
properties to be in generally good condition and well-maintained, and
are generally suitable and adequate to carry on the Company's
business.
Location City General Character
-------- ----------- -----------------
Alabama Phoenix City Distribution
Arizona Bisbee Distribution
California Garden Grove Manufacturing
Los Angeles Manufacturing
Santa Monica Manufacturing
Vista Manufacturing and Distribution
Westminster Manufacturing, Distribution and Administrative Office
Canada Calgary, AB Manufacturing
Mississauga, ON Manufacturing and Distribution
Oakville, ON Distribution and Administrative Office
Pickering, ON Distribution
Prescott, ON Manufacturing
Scarborough, ON Administrative Office
Toronto, ON Manufacturing, Distribution and Administrative Office
Watford, ON Manufacturing, Distribution and Administrative Office
Weston, ON Administrative Office
Europe Avon, France Administrative Office
Bagneaux, France Manufacturing and Distribution
Bath Road,
Slough, England Administrative Office
Berhamsted,
England Administrative Office
Brussels,
Belgium Distribution
Chateauroux,
France Manufacturing
12
Location City General Character
-------- ----------- -----------------
Deptford,
Sunderland
England Distribution
Las Rozas,
Madrid, Spain Administrative Office
Lisburn Terrace
Sunderland,
England Distribution
Milan, Italy Distribution and Administrative Office
Muhltal, Germany Manufacturing
Sunderland,
England Manufacturing
Zellick, Belgium Distribution and Administrative Office
Georgia Ashburn Manufacturing and Administrative Office
Columbus Distribution
Manchester Manufacturing and Administrative Office
Hawaii Waipahu Manufacturing
Illinois Bedford Park Manufacturing, Distribution and Administrative Office
Bellwood Manufacturing, Distribution and Administrative Office
Freeport Manufacturing, Distribution and Administrative Office
Rockford Manufacturing, Distribution and Administrative Office
South Holland Manufacturing
Kansas Salina Manufacturing and Distribution
Minnesota Coon Rapids Manufacturing
Eagan Distribution
St. Paul Manufacturing and Administrative Office
Missouri Jackson Manufacturing
Kansas City Manufacturing, Distribution and Administrative Office
Nebraska Omaha Distribution
New Jersey Kearny Manufacturing and Administrative Office
Newark Manufacturing, Distribution and Administrative Office
Parsippany Administrative Office
Rockaway Manufacturing
New York Medina Manufacturing, Distribution and Administrative Office
Ogdensburg Manufacturing
North Carolina Greensboro Administrative Office
Statesville Manufacturing and Distribution
13
Location City General Character
-------- ----------- -----------------
Ohio Bremen Manufacturing
Lancaster Manufacturing, Distribution and Administrative Office
Pennsylvania Ambridge Distribution
Evans City Distribution
Monaca Manufacturing and Administrative Office
Puerto Rico Carolina Distribution and Administrative Office
Tennessee Johnson City Manufacturing
Lewisburg Manufacturing, Distribution and Administrative Office
Memphis Distribution and Administrative Office
Texas Dallas Manufacturing
Taylor Manufacturing, Distribution and Administrative Office
Utah Ogden Manufacturing
Salt Lake City Manufacturing
West Virginia Weirton Manufacturing
Wisconsin Beloit Administrative Office
Chilton Manufacturing
Madison Manufacturing, Distribution and Administrative Office
Manitowoc Manufacturing, Distribution and Administrative Office
Milwaukee Distribution
St. Francis Manufacturing, Distribution and Administrative Office
14
Item 3. Legal Proceedings
--------------------------
Information regarding legal proceedings is included in note 15 to
the consolidated financial statements and is hereby incorporated by
reference herein.
As previously reported in the Company's Current Report on Form 8-K
dated June 20, 1994, Plastics, Inc. ("Plastics"), a subsidiary of the
Company, pled guilty to a single criminal charge of violating the
Federal antitrust laws based on its understanding that sometime after
December 1, 1991, former officers of Plastics agreed with certain
competitors to raise list prices on certain disposable injection-molded
commercial plasticware, which agreement(s) ended on or before December
8, 1992. During 1994, class action antitrust complaints on behalf of
customers were filed against Plastics and other manufacturers in the
United States District Court for the Eastern District of Pennsylvania
(the "Philadelphia cases"), the United States District Court for the
Middle District of Florida (the "Florida cases"), the Superior Court of
California, San Francisco County (the "California cases") and the
Ontario Court of Justice, Toronto, Ontario, Canada seeking civil
damages. Plastics has entered into settlement agreements relating to
the Philadelphia, Florida and California cases which provide for
aggregate payments of $4 million and which are subject to approval by
each of the respective courts. Management believes that resolution of
these cases will not have a material effect on the Company's
consolidated financial position or results of operations.
15
Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
There were no matters submitted to a vote of the Company's
security holders during the fourth quarter of fiscal year 1994.
Supplementary Item - Executive Officers of the Registrant
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- -------------------------------------
William P. Sovey 61 Vice Chairman and
Chief Executive Officer
Thomas A. Ferguson 47 President and
Chief Operating Officer
Donald L. Krause 55 Senior Vice President-
Corporate Controller
William T. Alldredge 55 Vice President-Finance
Richard C. Dell 49 Group President
William J. Denton 50 Group President
William K. Doppstadt 62 Vice President-Personnel Relations
William P. Sovey has been Vice Chairman and Chief Executive Officer
since July 1992. From January 1986 through July 1992, he had been
President and Chief Operating Officer.
Thomas A. Ferguson has been President and Chief Operating Officer
since May 1992. From January 1989 to May 1992, he was President-
Operating Companies.
William T. Alldredge has been Vice President-Finance of the Company
since August 1983.
Donald L. Krause was appointed Senior Vice President-Corporate
Controller in March 1990. He was President-Industrial Companies from
February 1988 to March 1990.
Richard C. Dell has been Group President since June 1992. He was
President of Amerock from November 1989 to June 1992. At EZ Paintr,
he was President from September 1987 to November 1989.
William J. Denton has been Group President since March 1990. From
April 1989 to March 1990, he was Vice President-Corporate Controller.
He was President of Anchor Hocking Glass from August 1987 to April
1989.
William K. Doppstadt has been Vice President-Personnel Relations of
the Company since 1974.
16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
-------------------------------------------------
The Company's common stock is listed on the New York and Chicago
Stock Exchanges (symbol: NWL). The following table sets forth the
high and low sales prices of the common stock on the New York Stock
Exchange Composite Tape (as published in the Wall Street Journal) for
the calendar periods indicated as adjusted for the two-for-one stock
split discussed below.
Year Ended December 31
1994 1993
------------------- -------------------
High Low High Low
--------- -------- --------- --------
Quarters:
First $21 13/16 $19 1/8 $21 1/4 $16 7/16
Second 23 1/4 19 19 7/8 16 7/16
Third 23 7/8 21 7/8 18 1/2 15 9/16
Fourth 22 3/8 20 1/2 21 17 1/2
On December 31, 1994 there were 10,290 record holders of the
Company's common stock.
The Company has paid regular cash dividends on its common stock
since 1947. On May 13, 1993, the quarterly cash dividend was
increased to $0.09 per share from the $0.08 per share that had been
paid since February 15, 1991. The quarterly cash dividend was again
increased to $0.10 per share on May 12, 1994.
In August 1994, the Company's Board of Directors declared a two-
for-one common stock split in the form of a 100% stock distribution of
the Company's common stock, which was paid on September 1, 1994 to
stockholders of record on August 15, 1994. All per share data was
adjusted to reflect the two-for-one stock split.
Item 6. Selected Financial Data
--------------------------------
The following is a summary of certain consolidated financial
information relating to the Company. The summary has been derived in
part from, and should be read in conjunction with, the consolidated
financial statements of the Company included elsewhere in this report
and the schedules thereto.
17
Year Ended December 31,
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(In millions, except per share data)
INCOME STATEMENT DATA
Net sales $2,074.9 $1,645.0 $1,451.7 $1,259.0 $1,204.4
Cost of products sold 1,403.8 1,101.7 997.3 845.6 820.0
-------- -------- -------- -------- --------
Gross income 671.1 543.3 454.4 413.4 384.4
Selling, general
and administrative
expenses 313.2 257.2 201.1 182.2 174.3
Restructuring costs - - 20.9 - -
-------- -------- -------- -------- --------
Operating income 357.9 286.1 232.4 231.2 210.1
Nonoperating expenses
(income):
Interest expense 30.0 19.1 20.4 13.2 13.1
Other (1.4) (8.5) (65.6) (6.0) (13.2)
-------- -------- -------- -------- --------
Net 28.6 10.6 (45.2) 7.2 (0.1)
-------- -------- -------- -------- --------
Income before income
taxes and cumulative
effect of accounting
change 329.3 275.5 277.6 224.0 210.2
Income taxes 133.7 110.2 114.3 88.4 84.7
-------- -------- -------- -------- --------
Net income before
cumulative effect
of accounting
change 195.6 165.3 163.3 135.6 125.5
Cumulative effect of
accounting change - - (44.2) - -
-------- -------- -------- -------- --------
Net income $ 195.6 $ 165.3 $ 119.1 $ 135.6 $ 125.5
======== ======== ======== ======== ========
EARNINGS PER SHARE DATA
Before cumulative
effect of
accounting change $1.24 $1.05 $ 1.05 $0.89 $0.84
Cumulative effect of
accounting change - - (0.29) - -
-------- -------- -------- -------- --------
Earnings per share $1.24 $1.05 $0.76 $0.89 $0.84
======== ======== ======== ======== ========
Cash dividends per
share $0.39 $0.35 $0.30 $0.30 $0.25
======== ======== ======== ======== ========
18
Item 6. Selected Financial Data (Cont.)
----------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(In millions)
WEIGHTED AVERAGE SHARES 157.8 157.3 155.8 151.5 148.9
BALANCE SHEET DATA
Inventories $ 420.7 $ 301.0 $ 226.2 $ 215.3 $ 197.8
Working Capital 133.6 76.7 219.5 187.9 236.7
Total assets 2,488.3 1,952.9 1,569.6 1,187.5 1,000.4
Short-term debt 309.1 247.2 97.1 2.1 11.2
Long-term debt, net of
current maturities 409.0 218.1 176.8 176.6 90.3
Stockholders' equity 1,125.3 979.1 859.4 728.8 610.0
(1) On February 14, 1992, a subsidiary of the Company merged with
Sanford Corporation ("Sanford"), a designer, manufacturer and marketer
of marking and writing instruments, plastic desk accessories, file
storage boxes and other office and school supplies. The Company
issued approximately 13.8 million shares of common stock for all the
common stock of Sanford. This transaction was accounted for as a
pooling of interests; therefore, prior financial statements were
restated to reflect this merger.
On July 8, 1992, the Company acquired Stuart Hall Company, Inc.
("Stuart Hall"), a manufacturer of school supplies, stationery and
office supplies. The Company issued 1.6 million shares of common
stock for all the common stock of Stuart Hall. On October 1, 1992,
the Company acquired substantially all of the assets of Intercraft
Industries, L.P., and all of the capital stock of Intercraft
Industries of Canada, Inc. (collectively, "Intercraft"), manufacturers
of ready-made picture frames. The purchase price was $175.0 million
in cash. These transactions were accounted for as purchases;
therefore, the results of operations for Stuart Hall and Intercraft
are included in the accompanying consolidated financial statements
since their respective dates of acquisition. The cost of these 1992
acquisitions was allocated to the fair market value of assets acquired
and liabilities assumed and resulted in goodwill of approximately
$161.9 million.
On April 30, 1993, the Company acquired substantially all of the
assets of Levolor Corporation ("Levolor"), a manufacturer and
distributor of decorative window coverings. The purchase price was
$72.5 million in cash. On September 22, 1993, the Company acquired
Lee/Rowan Co. ("Lee/Rowan"), a manufacturer and marketer of coated
wire storage and organization products. The purchase price was $73.5
million in cash. On November 9, 1993, the Company acquired Goody
19
Products, Inc. ("Goody"), a manufacturer and marketer of personal
consumer products including hair accessories and beauty organizers.
The purchase price, excluding the cost of Goody common stock that the
Company owned prior to the acquisition, was $147.1 million in cash.
These transactions were accounted for as purchases; therefore, the
results of operations for Levolor, Lee/Rowan and Goody are included in
the accompanying consolidated financial statements since their
respective dates of acquisition. The cost of the 1993 acquisitions
was allocated to the fair market value of assets acquired and
liabilities assumed and resulted in goodwill of approximately $208.2
million.
As part of the Goody acquisition, the Company acquired the
capital stock of Opti-Ray, Inc. ("Opti-Ray"), a designer and marketer
of fashion sunglasses and non-prescription reading glasses. As of
January 1, 1994, the Company sold the capital stock of Opti-Ray to
Benson Eyecare Corporation. The net assets of Opti-Ray, which
totalled $8.5 million, are included in Other Assets as of December 31,
1993. The operating results of Opti-Ray from the date of acquisition
to December 31, 1993 are excluded from the Consolidated Statements of
Income and are not material.
On August 29, 1994, the Company acquired Home Fashions,
Inc.("HFI"), a manufacturer and marketer of decorative window
coverings, including vertical blinds and pleated shades. The purchase
price was $130.4 million in cash. This company was combined with
Levolor and together they are operated as a single entity called
Levolor Home Fashions. On October 18, 1994, the Company acquired
Faber-Castell Corporation, which is a leading maker and marketer of
markers and writing instruments, including wood-cased pencils and
rolling ball pens, whose products are marketed under the Eberhard
Faber brand name ("Eberhard Faber"). The purchase price was $136.5
million in cash. This company was combined with Sanford and together
they are operated as single entity called Sanford. On November 30,
1994, the Company acquired the European consumer products business of
Corning Incorporated (now known as Newell Europe). This acquisition
included Corning's consumer products manufacturing facilities in
England, France and Germany, the European trademark rights and product
lines for Pyrex, Pyroflam and Visions brands in Europe, the Middle
East and Africa, and Corning's consumer distribution network
throughout these areas (Pyrex and Visions are registered trademarks of
Corning Incorporated). Additionally, the Company became the
distributor in Europe, the Middle East and Africa for Corning's U.S.-
manufactured cookware and dinnerware brands. The purchase price was
$86.4 million in cash. These transactions were accounted for as
purchases; therefore, the results of operations for HFI, Eberhard
Faber and Newell Europe are included in the accompanying consolidated
financial statements since their respective dates of acquisition. The
cost of the 1994 acquisitions was allocated on a preliminary basis to
the fair market value of assets acquired and liabilities assumed and
resulted in goodwill of approximately $163.0 million.
20
The unaudited consolidated results of operations for the years
ended December 31, 1994 and 1993 on a pro forma basis, as though
Levolor, HFI, Lee/Rowan, Goody, Eberhard Faber and Newell Europe each
had been acquired on January 1, 1993, are as follows:
1994 1993
--------- ---------
(In millions, except per share data)
Net sales $2,455.5 $2,439.4
Net income 195.1 167.1
Earnings per share 1.24 1.06
(2) In August 1994, the Company's Board of Directors declared a two-
for-one common stock split in the form of a 100% stock distribution of
the Company's common stock, which was paid on September 1, 1994 to
stockholders of record on August 15, 1994. All per share data was
adjusted to reflect the two-for-one stock split.
(3) The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No.'s 112 and 115, "Employers'
Accounting for Postemployment Benefits" and "Accounting for Certain
Investments in Debt and Equity Securities." The Company adopted these
statements in 1994. The adoption of these statements did not have a
material effect on the consolidated financial statements.
(4) In 1992, the Company adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions." Adoption of this
standard did not have a material effect on the annual expense for
postretirement benefits. As part of adopting this standard, the
Company recorded, in the first quarter of 1992, a one-time, non-cash
charge against earnings of $71.7 million before taxes and $44.1
million after taxes, or $0.29 per share. The effect of the change on
1992 net income before cumulative effect of accounting change was not
material to any of the consolidated financial statements.
(5) On December 31, 1992, the Company sold its closures business for
a $210.0 million note receivable due and paid January 4, 1993. The
Company recognized a net pre-tax gain of $82.9 million on the sale.
Sales for this business totalled $160.6 million in 1992.
21
QUARTERLY SUMMARIES
Summarized quarterly data for the last three years are as follows
(unaudited):
Calendar Year 1st 2nd 3rd 4th Year
--------------- -------- -------- -------- -------- --------
(In millions, except per share data)
1994
----
Net sales $ 443.5 $ 493.5 $ 553.2 $ 584.7 $2,074.9
Gross income 134.8 159.9 179.2 197.2 671.1
Net income 31.5 44.0 58.0 62.1 195.6
Earnings per share .20 .28 .37 .39 1.24
1993
----
Net sales $ 334.2 $ 372.7 $ 456.7 $ 481.4 $1,645.0
Gross income 104.5 121.7 149.1 168.0 543.3
Net income 27.7 34.5 47.6 55.5 165.3
Earnings per share .18 .22 .30 .35 1.05
1992
----
Net sales $ 310.1 $ 318.0 $ 402.1 $ 421.5 $1,451.7
Gross income 93.1 101.0 122.6 137.7 454.4
Before cumulative
effect of
accounting change:
Net income 27.4 35.2 43.0 57.7 163.3
Earnings per share .18 .23 .27 .37 1.05
After cumulative
effect of
accounting change:
Net income (16.8) 35.2 43.0 57.7 119.1
Earnings per share (.11) .23 .27 .37 .76
22
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition
------------------------------------------------
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of
the Company's consolidated results of operations and financial
condition. The discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
The following table sets forth for the period indicated items
from the Consolidated Statements of Income as a percentage of net
sales.
Year Ended December 31,
1994 1993 1992
------ ------ ------
Net sales 100.0% 100.0% 100.0%
Cost of products sold 67.7 67.0 68.7
------ ------ ------
Gross income 32.3 33.0 31.3
Selling, general
and administrative expenses ("SG&A") 15.1 15.6 13.9
Restructuring costs - - 1.4
------ ------ ------
Operating income 17.2 17.4 16.0
Nonoperating expenses (income):
Interest expense 1.4 1.1 1.4
Other (0.1) (0.5) (4.5)
------ ------ ------
Net 1.3 0.6 (3.1)
------ ------ ------
Income before income taxes and
cumulative effect of accounting change 15.9 16.8 19.1
Income taxes 6.5 6.7 7.9
------ ------ ------
Net income before cumulative effect
of accounting change 9.4 10.1 11.2
Cumulative effect of accounting change - - (3.0)
------ ------ ------
Net income 9.4% 10.1% 8.2%
====== ====== ======
23
1994 vs. 1993:
Net sales for 1994 were $2,074.9 million, representing an
increase of $429.9 million or 26.1% from 1993. Net sales for each
of the Company's product groups were as follows, in millions:
1994 1993 %Change
-------- -------- -------
Housewares $ 691.8 $ 528.8 30.8%
Home Furnishings 642.8 425.5 51.1
Office Products 383.2 340.7 12.5
Hardware 357.1 335.3 6.5
Sold Businesses - 14.7 N/A
-------- -------- -------
$2,074.9 $1,645.0 26.1%
======== ========
The overall increase in net sales was primarily attributable to
the acquisitions of Levolor, HFI, Lee/Rowan, Goody and Eberhard Faber,
which are described in note 2 to the consolidated financial
statements, and internal growth of 6%. Sales in the housewares group
were positively impacted by the Goody acquisition and 5% internal
growth. The increase in home furnishings was attributable to the
Levolor, HFI and Lee/Rowan acquisitions and internal growth of 10%.
The increase in office products was due to the Eberhard Faber
acquisition and 6% internal growth. The increase in the hardware
group was solely due to internal growth. "Sold businesses" represents
the sales in 1993 of Counselor, which was divested in October 1993.
Internal growth is defined as sales growth from continuing businesses
owned more than two years.
Gross income as a percent of net sales for 1994 was 32.3% versus
33.0% in 1993. The decrease was due to lower than average gross
margins from the businesses acquired in 1993 and 1994.
SG&A as a percent of net sales in 1994 was 15.1% versus 15.6% in
1993. The decrease was due to 6% internal growth, with only slight
increases in spending levels.
Operating income as a percent of net sales was 17.2% in 1994
versus 17.4% in 1993.
Net nonoperating expenses were $28.6 million in 1994 versus $10.6
million in 1993. The increase was due to additional interest expense
of $10.9 million, incremental goodwill amortization of $5.3 million
resulting from recent acquisitions, and a $6.0 million charge incurred
in connection with a plea agreement by a subsidiary of the Company
with the U.S. Government. The increase was offset by a $1.5 million
payment received from the settlement of a lawsuit and a $1.9 million
increase in equity earnings from American Tool Companies, Inc., in
which the Company has a 47% ownership interest.
24
The effective tax rate was 40.6% in 1994 and 40.0% in 1993. See
note 12 to the consolidated financial statements for an explanation of
the effective tax rate and deferred tax issues.
Net income for 1994 was $195.6 million, representing an increase
of $30.3 million or 18.3% from 1993. Earnings per share for 1994 were
up 18.1% to $1.24 versus $1.05 in 1993. The increases in net income
and earnings per share were primarily attributable to contributions
from the 1993 acquisitions and internal growth, net of increases in
net nonoperating expenses.
1993 vs. 1992:
-------------
Net sales for 1993 were $1,645.0 million, representing an
increase of $193.3 million or 13.3% from 1992. Net sales for each of
the Company's product groups were as follows, in millions:
1993 1992 %Change
-------- -------- -------
Housewares $ 528.8 $ 507.4 4.2%
Home Furnishings 425.5 162.3 162.2
Office Products 340.7 278.0 22.6
Hardware 335.3 325.5 3.0
Sold Businesses 14.7 178.5 N/A
-------- --------
$1,645.0 $1,451.7 13.3%
======== ========
The overall increase in net sales was attributable to the
acquisitions of Stuart Hall, Intercraft, Levolor, Lee/Rowan and Goody,
which are described in note 2 to the consolidated financial
statements, and internal growth of 4%. Sales in the housewares group
were positively impacted by the Goody acquisition. The increase in
home furnishings was attributable to the Intercraft, Levolor and
Lee/Rowan acquisitions and continued expansion in the home center
channel of trade. The increase in office products was due to the
Stuart Hall acquisition and Sanford's continued expansion in the mass
market channel of trade. The increase in the hardware group was
solely due to internal growth. "Sold businesses" represents the sales
of the closures business, which was divested in December 1992, and
Counselor, which was sold in October 1993.
Gross income as a percent of net sales for 1993 was 33.0% versus
31.3% in 1992. The increase was due to lower gross margins at the
divested closures business in 1992 and increased gross margins at
Sanford in 1993.
SG&A as a percent of net sales in 1993 was 15.6% versus 13.9% in
1992. The increase was due to lower SG&A at the divested closures
25
business in 1992 and higher SG&A at recently acquired Intercraft and
Levolor.
Operating income as a percent of net sales in 1993 was 17.4%
versus 16.0% in 1992. In 1992, the Company recorded $20.9 million in
restructuring costs, of which $17.4 million was recorded in the fourth
quarter. The primary components of this charge were costs associated
with the closing of a manufacturing facility and severance costs
related to businesses acquired in transactions accounted for under the
pooling of interests method.
Net nonoperating expenses for 1993 were $55.7 million higher than
1992, due to an $82.9 million gain recognized on the sale of the
closures business in 1992. The gain was reduced by approximately
$39.2 million of special charges in 1992, including costs associated
with the Stanley Works investment ($14.0 million), write-offs of
certain intangible assets ($11.7 million) and costs associated with
prior acquisitions and the establishment of other reserves ($13.5
million). In addition, incremental goodwill amortization was $3.4
million due to recent acquisitions, and there were no gains on
securities sales in 1993 compared to $8.6 million in 1992.
The effective tax rate was 40.0% in 1993 and 41.2% in 1992. See
note 12 to the consolidated financial statements for an explanation of
the effective tax rate and deferred tax issues.
Net income for 1993 was $165.3 million, representing an increase
of $46.2 million or 38.8% from 1992. Earnings per share for 1993 were
up 38.2% to $1.05 versus $0.76 in 1992.
In 1992, the Company adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions." As part of adopting
this standard, the Company recorded, in the first quarter of 1992, a
one-time, non-cash charge against earnings of $71.7 million before
taxes and $44.1 million after taxes, or $0.29 per share. The deferred
income tax benefit increased $27.6 million as a result of adopting
this statement. See note 9 to the consolidated financial statements
for additional information.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources
include cash provided from operations and use of available borrowing
facilities.
Operating activities provided net cash of $238.4 million during
1994, an increase of $208.3 million from $30.1 million in 1993. This
change was primarily due to the discontinuation of a $125.0 million
sale of trade receivables program in the third quarter of 1993,
26
payment of income taxes in 1993 related to the gain on the sale of the
closures business and an increase in net income in 1994.
The Company has foreign and domestic lines of credit with various
banks and a commercial paper program which are available for short-
term financing. Under the line of credit arrangements, the Company
may borrow up to $360.0 million (of which $267.4 million was available
at December 31, 1994) based upon such terms as the Company and the
respective banks have mutually agreed upon.
The Company has a shelf registration statement covering up to
$500.0 million of debt securities, of which $257.0 million was
available for additional borrowings as of December 31, 1994. Pursuant
to the shelf registration, at December 31, 1994 the Company had
outstanding $186.0 million (principal amount) of medium-term notes
with maturities ranging from one to five years at an average rate of
interest equal to 6.6%. The fair value of these notes was $185.1
million at December 31, 1994. The Company had outstanding $153.0
million on December 31, 1993 and 1992, and the fair value of these
notes was $158.3 million at December 31, 1993 and $160.9 million at
December 31, 1992.
The Company entered into a three-year $300.0 million revolving
credit agreement in August 1993, and a $100.0 million, 364-day
revolving credit agreement in each of November 1993 and August 1994.
The November 1993 364-day revolving credit agreement was renewed for
an additional 364 days. Under these agreements, the Company may
borrow, repay and reborrow funds in an aggregate amount up to $500.0
million, at a floating interest rate. At December 31, 1994, there
were no borrowings under the revolving credit agreements.
In lieu of borrowings under the credit agreements, the Company
may issue up to $500.0 million of commercial paper. The Company's
revolving credit agreements referred to above provide the committed
backup liquidity required to issue commercial paper. Accordingly,
commercial paper may only be issued up to the amount available under
the Company's revolving credit agreements. At December 31, 1994,
$417.1 million (face or principal amount) of commercial paper was
outstanding, all of which was supported by the revolving credit
agreements. The short-term portion of this balance was $117.1
million, which is classified as notes payable. The remaining $300.0
million is classified as long-term debt under the three-year revolving
credit agreement.
The Company's primary uses of liquidity and capital resources
include capital expenditures, dividend payments and acquisitions.
Capital expenditures were $66.0 million, $58.9 million and $77.6
million in 1994, 1993 and 1992, respectively.
27
The Company has paid regular cash dividends on its common stock
since 1947. On May 13, 1993, the quarterly cash dividend was
increased to $0.09 per share from the $0.08 per share that had been
paid since February 15, 1991. The quarterly cash dividend was again
increased to $0.10 per share on May 12, 1994. In August 1994, the
Company's Board of Directors declared a two-for-one common stock split
in the form of a 100% stock distribution of the Company's common
stock, which was paid on September 1, 1994 to stockholders of record
on August 15, 1994. All per share data has been adjusted to reflect
the two-for-one stock split.
Retained earnings increased in 1994, 1993 and 1992 by $134.0
million, $111.1 million and $68.6 million, respectively. The average
dividend payout ratio to common stockholders in 1994, 1993 and 1992
(before the cumulative effect of accounting change) was 31%, 33% and
29%, respectively.
In 1994, the Company acquired HFI, Faber-Castell Corporation
(whose products are marketed under the Eberhard Faber brand name) and
the European consumer products business of Corning Incorporated (now
known as Newell Europe), with purchase prices of $130.4 million,
$136.5 million and $86.4 million, respectively. All of these
acquisitions were accounted for as purchases and were paid for with
proceeds obtained from the issuance of commercial paper, medium-term
notes and notes payable under the Company's lines of credit.
The increases in current assets, current liabilities, property,
plant and equipment and goodwill during 1993 and 1994 are primarily
due to the acquisitions occurring in those years.
Working capital at December 31, 1994 was $133.6 million compared
to $76.7 million at December 31, 1993. The current ratio at December
31, 1994 was 1.17:1 compared to 1.13:1 at December 31, 1993. The
total debt to total capitalization was .39:1 at December 31, 1994 and
.32:1 at December 31, 1993.
The Company believes that cash provided from operations and
available borrowing facilities will continue to provide adequate
support for the cash needs of existing businesses; however, certain
events, such as significant acquisitions, could require additional
external financing.
The Financial Accounting Standards Board issued SFAS No.'s 112
and 115, "Employers' Accounting for Postemployment Benefits" and
"Accounting for Certain Investments in Debt and Equity Securities."
The Company adopted these statements in 1994. The adoption of these
statements did not have a material effect on the consolidated
financial statements.
28
Environmental Matters
---------------------
The Company is involved in various environmental remediation and
other compliance activities, including activities arising under the
federal Comprehensive Environmental Response, Compensation and
Liability Act ("Superfund") and similar state statutes. Certain
information regarding these activities is included in note 15 to the
consolidated financial statements. Based on information currently
available to it, the Company has estimated that remediation costs
associated with these activities will be between $12.5 million and
$17.5 million. As of December 31, 1994, the Company had a reserve
equal to $14.5 million for such remediation costs in the aggregate.
Because of the uncertainties associated with environmental assessment
and remediation activities, the possibility that sites could be
identified in the future that require environmental remediation and
the possibility of additional sites as a result of businesses acquired,
actual costs to be incurred by the Company may vary from the Company's
estimates. Subject to the imprecision in estimating future environmental
costs, the Company does not expect that any sum it may have to pay in
connection with environmental matters in excess of amounts reserved
will have a material adverse effect on its consolidated financial
position, liquidity or results of operations.
Outlook
-------
The Company's primary financial goals are to maintain return on
beginning equity at 20% or above and increase earnings per share an
average of 15% per year, while maintaining a ratio of total debt to
total capital (leverage) at a level of approximately 33%. The Company
has achieved its goals over the last ten years, averaging 21% ROE,
increasing EPS 20% and averaging 29% leverage. The factors affecting
the Company's ability to achieve these goals in the future will be the
rates of internal and acquisition growth.
In terms of internal growth, the Company has achieved 4-6%
internal sales growth in each of the last 4 years, and at the same
time, has improved its core operating margins. Operating margins may
be under pressure near-term, however, as a result of rising raw
material costs. The Company intends to offset these costs through
price increases to its customers, but is not certain to what extent
the cost increases can be offset since its customers are primarily
volume retailers with significant bargaining power.
In terms of acquisition growth, since 1990 the Company has more
than doubled its size, acquiring businesses with annual sales of
almost $1.5 billion. The rate at which the Company can integrate
these recent acquisitions, in order to meet the Company's high
standards of profitability, may affect near-term EPS growth. Over the
longer term, the Company's ability to make strategic acquisitions will
impact the EPS growth rate.
29
Item 8. Financial Statements and Supplementary Data
------- -------------------------------------------
30
Report of Independent Public Accountants
----------------------------------------
To the Stockholders and Board of Directors of Newell Co.:
We have audited the accompanying consolidated balance sheets of Newell
Co. (a Delaware corporation) and subsidiaries as of December 31, 1994,
1993 and 1992, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1994. These consolidated financial
statements are the responsibility of Newell Co.'s management. Our
responsibility is to express an opinion on these consolidated
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 financial position of Newell Co.
and subsidiaries as of December 31, 1994, 1993 and 1992, and the
results of their operations and their cash flows for each of the three
years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles.
As explained in note 9 to the consolidated financial statements,
effective January 1, 1992, the Company changed its method of
accounting for post-retirement benefits other than pensions.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 28, 1995.
31
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands, except per share amounts)
Net sales $2,074,934 $1,645,036 $1,451,656
Cost of products sold 1,403,786 1,101,720 997,269
--------- -------- ---------
GROSS INCOME 671,148 543,316 454,387
Selling, general and
administrative expenses 313,283 257,186 201,063
Restructuring costs - - 20,933
--------- --------- ---------
OPERATING INCOME 357,865 286,130 232,391
Nonoperating expenses (income):
Interest expense 29,970 19,062 20,417
Other (1,397) (8,488) (65,590)
--------- --------- ---------
Net 28,573 10,574 (45,173)
--------- --------- ---------
Income before income taxes
and cumulative effect of
accounting change 329,292 275,556 277,564
Income taxes 133,717 110,222 114,293
--------- --------- ---------
Net income before cumulative
effect of accounting change 195,575 165,334 163,271
Cumulative effect of
accounting change - - (44,134)
--------- --------- ---------
NET INCOME $ 195,575 $ 165,334 $ 119,137
========= ========= =========
Earnings per share
before cumulative effect
of accounting change $1.24 $1.05 $1.05
Cumulative effect of
accounting change - - (0.29)
---- ---- ----
Earnings per share $1.24 $1.05 $0.76
==== ==== ====
Weighted average shares 157,774 157,269 155,878
======= ======= =======
See notes to consolidated financial statements.
32
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1994 1993 1992
---- ---- ----
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 14,892 $ 2,866 $ 28,008
Receivable from sale of business - - 210,000
Accounts receivable, net 335,806 256,468 57,795
Inventories 420,654 301,016 226,230
Deferred income taxes 90,063 73,461 38,991
Prepaid expenses and other 56,256 42,217 33,611
-------- --------- --------
TOTAL CURRENT ASSETS 917,671 676,028 594,635
MARKETABLE EQUITY SECURITIES 64,740 48,974 62,964
OTHER LONG-TERM INVESTMENTS 183,372 177,891 174,080
OTHER ASSETS 182,906 165,911 119,977
PROPERTY, PLANT AND EQUIPMENT, NET 454,597 370,382 292,760
GOODWILL 684,990 513,761 325,163
------- ------- -------
TOTAL ASSETS $2,488,276 $1,952,947 $1,569,579
========= ========= =========
See notes to consolidated financial statements.
33
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
December 31,
1994 1993 1992
---- ---- ----
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 209,720 $ 189,003 $ 65,030
Accounts payable 112,269 72,832 37,553
Accrued compensation 48,461 36,525 32,203
Other accrued liabilities 305,878 222,508 147,926
Income taxes 8,271 20,244 60,344
Current portion of long-term debt 99,425 58,200 32,045
------- ------- -------
TOTAL CURRENT LIABILITIES 784,024 599,312 375,101
LONG-TERM DEBT 408,986 218,090 176,849
OTHER NONCURRENT LIABILITIES 152,697 156,400 158,251
DEFERRED INCOME TAXES 17,243 - -
STOCKHOLDERS' EQUITY
Par value of common stock issued 157,844 78,793 78,338
Additional paid-in capital 175,352 249,625 239,503
Retained earnings 788,862 654,819 543,765
Net unrealized gain on securities
available for sale 9,868 N/A N/A
Cumulative translation adjustment (6,466) (4,055) (2,208)
Treasury stock (at cost) (134) (37) (20)
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,125,326 979,145 859,378
--------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,488,276 $1,952,947 $1,569,579
========= ========= =========
See notes to consolidated financial statements.
34
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
OPERATING ACTIVITIES:
Net income $ 195,575 $ 165,334 $ 119,137
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Cumulative effective of
accounting change - - 44,134
Depreciation and amortization 72,485 64,262 53,881
Deferred income taxes 30,673 19,757 (14,914)
Net gains on:
Sale of businesses - (1,233) (82,945)
Marketable equity securities (373) - (8,616)
Write-off of intangible assets - - 11,664
Other (5,661) (3,811) (4,377)
Changes in current accounts, excluding
the effects of acquisitions and sale
of businesses:
Accounts receivable (254) (129,562) 39,010
Inventories (13,798) (6,328) 26,715
Other current assets, accounts payable,
accrued liabilities and other (40,221) (78,288) 54,548
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 238,426 30,131 238,237
--------- --------- ---------
INVESTING ACTIVITIES:
Acquisitions (345,392) (309,846) (177,317)
Expenditures for property, plant
and equipment (66,026) (58,898) (77,613)
Sale of businesses - 219,638 -
Sale of marketable equity securities 1,053 - 72,879
Purchase of other investments - (1,660) (11,930)
Disposals of noncurrent assets and other 2,628 (16,141) (18,060)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (407,737) (166,907) (212,041)
--------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of debt 402,708 232,852 181,320
Proceeds from exercised stock options
and other 2,799 5,216 9,023
Payments on notes payable and long-term debt (162,638) (72,154) (168,513)
Cash dividends (61,532) (54,280) (46,261)
--------- --------- ---------
NET CASH PROVIDED BY(USED IN)
FINANCING ACTIVITIES 181,337 111,634 (24,431)
--------- --------- ---------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 12,026 (25,142) 1,765
Cash and cash equivalents at beginning of year 2,866 28,008 42,512
Sanford decrease in cash in December 1991 - - (16,269)
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 14,892 $ 2,866 $ 28,008
========= ======== ========
See notes to consolidated financial statements.
35
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Net
Unrealized
Gain on
Common & Add'l Securities Cumulative
Treasury Paid-In Retained Available Translation
Stock Capital Earnings for Sale Adjustment
-------- ------- -------- ----------- -----------
(In thousands, except per share amounts)
Balance at December 31, 1991 $ 76,030 $175,448 $475,200 $ N/A $ 2,123
Adjustment to conform fiscal
year of Sanford Corporation (4,311)
Net income 119,137
Cash dividends:
Common stock $0.30 per share (46,261)
Stock issued for acquisition 1,582 52,999
Exercise of stock options 720 8,318
Tax benefit on stock options 2,736
Foreign currency translation
and other (14) 2 (4,331)
------- ------- ------- ------- -------
Balance at December 31, 1992 $ 78,318 $239,503 $543,765 $ N/A $ (2,208)
Net income 165,334
Cash dividends:
Common stock $0.35 per share (54,280)
Stock issued for acquisition 44 1,715
Exercise of stock options 445 4,789
Tax benefit on stock options 3,585
Foreign currency translation
and other (51) 33 (1,847)
------- ------- ------- ------- -------
Balance at December 31, 1993 $ 78,756 $249,625 $654,819 $ N/A $ (4,055)
Net income 195,575
Fair value adjustment for
securities available for
sale at January 1, 1994 3,353
Cash dividends:
Common stock $0.39 per share (61,532)
Stock split, form of 100%
stock dividend 78,910 (78,910)
Exercise of stock options 155 2,723
Tax benefit on stock options 1,881
Change in net unrealized
gain on securities
available for sale 6,515
Foreign currency translation
and other (111) 33 (2,411)
------- ------- ------- ------- -------
Balance at December 31, 1994 $ 157,710 $175,352 $788,862 $ 9,868 $ (6,466)
======== ======= ======= ======= =======
See notes to consolidated financial statements.
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
1) SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and its majority owned
subsidiaries after elimination of intercompany accounts and
transactions.
Revenue Recognition: Sales of merchandise are recognized upon
shipment to customers.
Disclosures about Fair Value of Financial Instruments: The
following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and Cash Equivalents: The carrying amounts approximate fair
value because of the short maturity of these instruments.
Marketable Equity Securities: The fair values of these
investments are based upon quoted market prices.
Long-term Investments: The fair value of the investment in
convertible preferred stock of the Black & Decker Corporation
("Black & Decker") was based in part on an independent appraisal.
Long-term Debt: The fair value of the Company's long-term debt
issued under the medium-term note program is estimated based on
quoted market prices. The carrying value of all other long-term
debt outstanding approximates fair value due to the floating
rates charged on these instruments.
Derivatives: Premiums paid or received related to interest rate
swap agreements are amortized into interest expense over the terms of
the agreements. Unamortized premiums are included in other assets or
accrued liabilities in the consolidated balance sheets.
Gains and losses relating to qualifying hedges of firm
commitments or anticipated transactions also are deferred and are
recognized in income as adjustments of carrying amounts when the
hedged transaction occurs.
Accounts Receivable: On December 5, 1991, the Company received
$104.7 million from a sale of an interest in trade receivables, with
limited recourse, pursuant to an agreement that permits the Company to
sell trade receivables, with limited recourse, to the purchaser from
time to time. A $125.0 million interest was outstanding at December
31, 1992. At both December 31, 1994 and 1993, there was no interest
in trade receivables sold under this agreement.
Allowances for Doubtful Accounts: Allowances for doubtful
accounts at December 31, totalled $10.9 million in 1994, $6.2 million
in 1993 and $5.6 million in 1992.
Inventories: Inventories are stated at the lower of cost or
market value. Cost of certain domestic inventories (approximately
87%, 83% and 81% of total inventories at December 31, 1994, 1993 and
1992, respectively) was determined by the "last-in, first-out"
("LIFO") method; for the balance, cost was determined using the
"first-in, first-out"("FIFO") method.
If the FIFO inventory valuation method had been used exclusively,
inventories would have been increased by $12.3 million, $9.2 million
and $8.0 million at December 31, 1994, 1993 and 1992, respectively.
The components of inventories at the end of each year, net of the
LIFO reserve, were as follows:
December 31,
1994 1993 1992
---- ---- ----
(In millions)
Materials and supplies $ 81.7 $ 71.3 $ 56.1
Work in process 98.9 49.6 39.7
Finished products 240.1 180.1 130.4
----- ----- -----
$420.7 $301.0 $226.2
===== ===== =====
Long-term Marketable Equity Securities: Long-term marketable
equity securities at the end of each year are summarized as follows:
December 31,
1994 1993 1992
---- ---- ----
(In millions)
Aggregate market value $ 64.7 $ 54.6 $ 64.1
Aggregate cost 48.3 49.0 63.0
----- ----- -----
Unrealized gain, net $ 16.4 $ 5.6 $ 1.1
===== ===== ======
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
SFAS No. 115 requires, among other things, that securities classified
as "available for sale" be carried at fair value; however, fair value
adjustments are excluded from earnings and reported separately as a
component of stockholders' equity. This new standard, which was
adopted prospectively by the Company effective January 1, 1994, did
not have a material impact on the consolidated financial statements.
The Company considers all long-term marketable equity securities as
available for sale.
Other Long-Term Investments: The Company owns 150,000 shares of
privately placed Black & Decker convertible preferred stock, Series B,
purchased at a cost of $150.0 million. The Series B preferred shares
pay a 7 3/4% cumulative dividend, are convertible into Black & Decker
common stock at $23.62 per share, and have voting rights equivalent to
the common stock into which they are convertible. These shares have
restrictions on disposition by the Company, and Black & Decker has the
38
option at the end of ten years to repurchase the remaining preferred
shares and any common stock issued upon conversion then held by the
Company. The market value of this investment approximated cost at
December 31, 1994, 1993 and 1992. In addition, the Company has a 47%
ownership in American Tool Companies, Inc., a manufacturer of hand
tools and power tool accessory products marketed primarily under the
VISE-GRIP and IRWIN trademarks. This investment is accounted for on
the equity method with a net investment of $33.4 million included in
Other Long-Term Investments at December 31, 1994.
Property, Plant and Equipment: Property, plant and equipment at
the end of each year consisted of the following:
December 31,
1994 1993 1992
---- ---- ----
(In millions)
Land $ 9.6 $ 7.1 $ 6.7
Buildings and improvements 164.8 136.5 101.8
Machinery and equipment 515.8 419.1 347.0
------ ------ ------
690.2 562.7 455.5
Allowance for depreciation (235.6) (192.3) (162.7)
------ ------ ------
$ 454.6 $ 370.4 $ 292.8
====== ====== ======
Depreciation of property, plant and equipment (stated at cost) is
provided for by annual charges to income calculated to amortize,
principally on the straight-line basis, the cost of the depreciable
assets over their estimated useful lives, which range from five to
forty years. Replacements and improvements of fixed assets are
capitalized. Expenditures for maintenance and repairs are charged to
expense.
Goodwill: Excess of cost over identifiable net assets of
businesses acquired is being amortized over 40 years on a straight-
line basis. Subsequent to an acquisition, the Company continually
evaluates whether later events and circumstances have occurred that
indicate the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not be
recoverable. When factors indicate that goodwill should be evaluated
for possible impairment, the Company uses an estimate of the related
division's undiscounted net income over the remaining life of the
goodwill in measuring whether the goodwill is recoverable.
Accumulated amortization of goodwill was $57.0 million, $42.1 million
and $32.0 million at December 31, 1994, 1993 and 1992, respectively.
39
Accrued Liabilities: Accrued liabilities at the end of each year
included the following:
December 31,
1994 1993 1992
---- ---- ----
(In millions)
Promotion and advertising accruals $ 76.5 $ 54.4 $ 37.5
Accrued insurance reserves 36.0 36.3 29.8
Foreign Currency Translation: Financial statements of foreign
subsidiaries are translated in U.S. dollars in accordance with the
provisions of SFAS No. 52. Foreign currency transaction gains and
losses were insignificant in 1994, 1993 and 1992.
Cash Flows: For purposes of the Consolidated Statements of Cash
Flows, the Company considers all short-term, highly liquid investments
with an original maturity of three months or less to be cash
equivalents. Cash paid for income taxes and interest were as follows:
December 31,
1994 1993 1992
---- ---- ----
(In millions)
Income taxes $115.9 $144.7 $ 81.5
Interest 31.1 18.9 14.5
Reclassification: Certain 1992 and 1993 amounts have been
reclassified to conform with the 1994 presentation.
40
2) ACQUISITIONS AND DIVESTITURES OF BUSINESSES
On February 14, 1992, a subsidiary of the Company merged with
Sanford Corporation ("Sanford"), a designer, manufacturer and marketer
of marking and writing instruments, plastic desk accessories, file
storage boxes and other office and school supplies. The Company
issued approximately 13.8 million shares of common stock for all the
common stock of Sanford. This transaction was accounted for as a
pooling of interests; therefore, prior financial statements were
restated to reflect this merger.
On July 8, 1992, the Company acquired Stuart Hall Company, Inc.
("Stuart Hall"), a manufacturer of school supplies, stationery and
office supplies. The Company issued 1.6 million shares of common
stock for all the common stock of Stuart Hall. On October 1, 1992,
the Company acquired substantially all of the assets of Intercraft
Industries, L.P., and all of the capital stock of Intercraft
Industries of Canada, Inc. (collectively, "Intercraft"), manufacturers
of ready-made picture frames. The purchase price was $175.0 million
in cash. These transactions were accounted for as purchases;
therefore, the results of operations for Stuart Hall and Intercraft
are included in the accompanying consolidated financial statements
since their respective dates of acquisition. The cost of these 1992
acquisitions was allocated to the fair market value of assets acquired
and liabilities assumed and resulted in goodwill of approximately
$161.9 million.
On April 30, 1993, the Company acquired substantially all of the
assets of Levolor Corporation ("Levolor"), a manufacturer and
distributor of decorative window coverings. The purchase price was
$72.5 million in cash. On September 22, 1993, the Company acquired
Lee/Rowan Co. ("Lee/Rowan"), a manufacturer and marketer of coated
wire storage and organization products. The purchase price was $73.5
million in cash. On November 9, 1993, the Company acquired Goody
Products, Inc. ("Goody"), a manufacturer and marketer of personal
consumer products including hair accessories and beauty organizers.
The purchase price, excluding the cost of Goody common stock that the
Company owned prior to the acquisition, was $147.1 million in cash.
These transactions were accounted for as purchases; therefore, the
results of operations for Levolor, Lee/Rowan and Goody are included in
the accompanying consolidated financial statements since their
respective dates of acquisition. The cost of the 1993 acquisitions
was allocated to the fair market value of assets acquired and
liabilities assumed and resulted in goodwill of approximately $208.2
million.
As part of the Goody acquisition, the Company acquired the
capital stock of Opti-Ray, Inc. ("Opti-Ray"), a designer and marketer
of fashion sunglasses and non-prescription reading glasses. As of
January 1, 1994, the Company sold the capital stock of Opti-Ray to
Benson Eyecare Corporation. The net assets of Opti-Ray, which
41
totalled $8.5 million, are included in Other Assets as of December 31,
1993. The operating results of Opti-Ray from the date of acquisition
to December 31, 1993 are excluded from the Consolidated Statements of
Income and are not material.
On August 29, 1994, the Company acquired Home Fashions,
Inc.("HFI"), a manufacturer and marketer of decorative window
coverings, including vertical blinds and pleated shades. The purchase
price was $130.4 million in cash. This company was combined with
Levolor and together they are operated as single entity called Levolor
Home Fashions. On October 18, 1994, the Company acquired Faber-
Castell Corporation, which is a leading maker and marketer of markers
and writing instruments, including wood-cased pencils and rolling ball
pens, whose products are marketed under the Eberhard Faber brand name
("Eberhard Faber"). The purchase price was $136.5 million in cash.
This company was combined with Sanford and together they are operated
as a single entity called Sanford. On November 30, 1994, the Company
acquired the European consumer products business of Corning
Incorporated (now known as Newell Europe). This acquisition included
Corning's consumer products manufacturing facilities in England,
France and Germany, the European trademark rights and product lines
for Pyrex, Pyroflam and Visions brands in Europe, the Middle East and
Africa, and Corning's consumer distribution network throughout these
areas (Pyrex and Visions are registered trademarks of Corning
Incorporated). Additionally, the Company became the distributor in
Europe, the Middle East and Africa for Corning's U.S.-manufactured
cookware and dinnerware brands. The purchase price was $86.4 million
in cash. These transactions were accounted for as purchases;
therefore, the results of operations for HFI, Eberhard Faber and
Newell Europe are included in the accompanying consolidated financial
statements since their respective dates of acquisition. The cost of
the 1994 acquisitions was allocated on a preliminary basis to the fair
market value of assets acquired and liabilities assumed and resulted
in goodwill of approximately $163.0 million.
The unaudited consolidated results of operations for the years
ended December 31, 1994 and 1993 on a pro forma basis, as though
Levolor, HFI, Lee/Rowan, Goody, Eberhard Faber and Newell Europe each
had been acquired on January 1, 1993, are as follows:
1994 1993
---- ----
(In millions, except per share data)
Net sales $2,455.5 $2,439.4
Net income 195.1 167.1
Earnings per share 1.24 1.06
On December 31, 1992, the Company sold its closures business for
a $210.0 million note receivable due and paid January 4, 1993. The
Company recognized a net pre-tax gain of $82.9 million on the sale.
Sales for this business totalled $160.6 million in 1992.
42
3) RESTRUCTURING COSTS
In the year ended December 31, 1992, the Company recorded $20.9
million in restructuring costs, of which $17.4 million was recorded in
the fourth quarter. The primary components of this charge included
costs associated with the closing of a manufacturing facility and
severance costs related to businesses acquired in transactions
accounted for under the pooling-of-interests method.
43
4) CREDIT ARRANGEMENTS
The Company has foreign and domestic lines of credit with various
banks and a commercial paper program which are available for short-
term financing. Under the line of credit arrangements, the Company
may borrow up to $360.0 million (of which $267.4 million was available
at December 31, 1994) based upon such terms as the Company and the
respective banks have mutually agreed upon.
In connection with $35.0 million of the line of credit facilities
noted above, the Company has agreed to maintain compensating balances,
generally at 2.5% of the credit facility. Compensating balances are
not restricted as to withdrawals and serve as part of the Company's
minimum operating cash balances.
The following is a summary of line of credit notes payable to
banks:
1994 1993 1992
---- ---- ----
(In millions)
Notes payable to banks:
Outstanding at year-end
- borrowing $ 92.6 $ 50.3 $ 65.0
- average interest rate 6.0% 3.3% 3.9%
Average for the year
- borrowing 21.5 37.3 42.9
- average interest rate 4.9% 3.3% 3.9%
Maximum borrowing outstanding
during the year 119.3 138.0 118.0
In 1993, the Company began issuing commercial paper under a
$400.0 million program, which was subsequently increased to $500.0
million. The revolving credit facilities, as described in note 5 to
the consolidated financial statements, provide the committed backup
liquidity required to issue commercial paper. Three dealers were
engaged to market the program.
The following is a summary of commercial paper:
1994 1993 1992
---- ---- ----
(In millions)
Commercial paper:
Outstanding at year-end
- borrowing $417.1 $138.7 N/A
- average interest rate 6.0% 3.3% N/A
Average for the year
- borrowing 324.8 4.4 N/A
- average interest rate 4.4% 3.3% N/A
Maximum borrowing outstanding
during the year 479.0 138.7 N/A
44
5) LONG-TERM DEBT
The following is a summary of long-term debt:
December 31,
1994 1993 1992
---- ---- ----
(In millions)
Medium-term notes $186.0 $153.0 $153.0
Revolving Credit Agreement:
Commercial paper 300.0 - N/A
Loans payable to banks - 100.0 30.0
Other long-term debt 22.4 23.3 25.9
----- ----- -----
508.4 276.3 208.9
Current portion (99.4) (58.2) (32.0)
----- ----- -----
$409.0 $218.1 $176.9
===== ===== =====
The Company has a shelf registration statement covering up to
$500.0 million of debt securities, of which $257.0 million was
available for additional borrowings as of December 31, 1994. Pursuant
to the shelf registration, at December 31, 1994, the Company had
outstanding $186.0 million (principal amount) of medium-term notes
with maturities ranging from one to five years at an average rate of
interest equal to 6.6%. The fair value of these notes was $185.1
million at December 31, 1994. The Company had outstanding $153.0
million on December 31, 1993 and 1992, and the fair value of these
notes was $158.3 million at December 31, 1993 and $160.9 million at
December 31, 1992.
The Company entered into a three-year $300.0 million revolving
credit agreement in August 1993, and a $100.0 million, 364-day
revolving credit agreement in each of November 1993 and August 1994.
The November 1993 364-day revolving credit agreement was renewed for
an additional 364 days. Under these agreements, the Company may
borrow, repay and reborrow funds in an aggregate amount up to $500.0
million, at a floating interest rate. At December 31, 1994, there
were no borrowings under the revolving credit agreements.
In lieu of borrowings under the credit agreements, the Company
may issue up to $500.0 million of commercial paper. The Company's
revolving credit agreements referred to above provide the committed
backup liquidity required to issue commercial paper. Accordingly,
commercial paper may only be issued up to the amount available under
the Company's revolving credit agreements. At December 31, 1994,
$417.1 million (face or principal amount) of commercial paper was
outstanding, all of which was supported by the revolving credit
agreements. The short-term portion of this balance was $117.1
million, which is classified as notes payable. The remaining $300.0
million is classified as long-term debt under the three-year revolving
credit agreement.
45
The revolving credit agreements permit the Company to borrow
funds using Syndicated loans (Base Rate loans or Eurodollar loans),
Money Market loans (LIBOR Market loans or Set Rate loans) or
Acceptance liabilities, as selected by the Company. The terms of
these agreements require, among other things, that the Company
maintain a certain Total Debt to Total Capital Ratio and a minimum
Operating Income to Interest Expense Ratio, all capitalized terms as
defined in these agreements. As of December 31, 1994, the Company was
in compliance with these agreements.
The aggregate maturities of long-term debt outstanding at
December 31, 1994, are as follows:
Year Aggregate Maturities
---- --------------------
(In millions)
1995 $ 99.4
1996 358.2
1997 33.5
1998 1.5
1999 7.6
Thereafter 8.2
-----
$508.4
=====
46
6) DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative
financial instruments and does not use them for trading purposes.
They are used to manage certain interest rate and foreign currency
risks.
Interest rate swap agreements are utilized to convert certain
floating rate debt instruments into fixed rate debt or to convert
certain floating rate debt based on federal funds rates to floating
rate debt based upon commercial paper rates. As of December 31, 1994,
the Company was party to one interest rate swap agreement which
terminates in June 1996. The agreement requires the Company to pay on
a monthly basis the amounts by which the commercial paper rate exceeds
the Federal Funds rate on $50.0 million of debt.
The Company uses forward exchange contracts to hedge certain
purchase commitments denominated in currencies other than the domestic
currency (primarily Japanese yen and U.S. dollar for the Company's
Canadian subsidiary). The term of the currency derivatives is rarely
more than one year. The purpose of the Company's foreign currency
hedging activities is to protect the Company from some of the risk of
foreign currency fluctuations on foreign denominated purchases.
As of December 31, 1994, the Company had contracts to buy 150
million Japanese yen and the Company's Canadian subsidiary had several
contracts to buy 7.3 million U.S. dollars. The deferred unrealized
gains and losses, based upon dealer quotes from hedging firm
purchases, are not material.
The Company is exposed to credit losses in the event of non-
performance by the counterparties to its interest rate swap and
foreign exchange contracts. The Company anticipates, however, that
counterparties will be able to satisfy fully their obligations under
the contracts. The Company does not obtain collateral or other
security to support financial instruments subject to credit risk but
monitors the credit standing of the counterparties. The market value
of all the Company's derivatives approximates its carrying value.
47
7) LEASES
The Company leases manufacturing, distribution and office
facilities, as well as transportation and data processing equipment
under noncancellable leases which expire at various dates through the
year 2007.
Future minimum rental payments under noncancellable operating
leases are as follows:
Year Minimum Payments
---- ----------------
(In millions)
1995 $20.6
1996 16.7
1997 11.9
1998 7.8
1999 6.1
Thereafter 18.1
----
$81.2
====
Total rental expense for all operating leases was approximately
$31.8 million, $26.0 million and $18.9 million in 1994, 1993 and 1992,
respectively.
48
8) EMPLOYEE BENEFIT RETIREMENT PLANS
The Company and its subsidiaries have noncontributory pension
plans covering substantially all employees. Pension plan benefits are
generally based on years of service and/or compensation. The
Company's funding policy is to contribute not less than the minimum
amounts required by the Employee Retirement Income Security Act of
1974 or additional amounts to assure that plan assets will be adequate
to provide retirement benefits. Due to the overfunded status of most
of the pension plans, contributions to these plans were insignificant
during the past three years. Total expense under all pension and
profit sharing plans was $8.5 million, $3.2 million and $1.7 million
for the years ended December 31, 1994, 1993 and 1992, respectively.
The net periodic pension cost components for the U.S. pension
plans are as follows:
1994 1993 1992
---- ---- ----
(In millions)
Service cost-benefits earned
during the year $ 13.4 $ 8.3 $ 6.7
Interest cost on projected
benefit obligation 31.3 27.3 26.2
Actual return on assets (31.3) (42.7) (20.8)
Net amortization and
other components (9.4) 6.8 (13.1)
----- ----- -----
Total U.S. pension plan
expense(income) $ 4.0 $ (.3) $ (1.0)
===== ===== =====
The principal actuarial assumptions used are as follows:
1994 1993 1992
---- ---- ----
(In percent)
Measurement of projected
benefit obligation:
Discount rate 8% 7.25% 7.75%
Long-term rate of
compensation increase 5% 5% 5%
Long-term rate of return on
plan assets 9% 9% 9%
49
The following table sets forth the funded status of the U.S.
pension plans and the amount recognized in the Company's consolidated
balance sheets:
Plans Whose Plans Whose
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets
----------- -----------
1994 1993 1994 1993
---- ---- ---- ----
(In millions)
Actuarial present value of
benefit obligations:
Vested $347.1 $352.1 $ 21.1 $ 18.3
Nonvested 12.0 13.3 4.8 5.3
----- ----- ----- -----
Accumulated benefit
obligation 359.1 365.4 25.9 23.6
Effect of projected future
salary increases 20.9 18.1 5.7 6.8
----- ----- ----- -----
Projected benefit obligation 380.0 383.5 31.6 30.4
Plan assets at market value
(primarily common stock and
fixed income investments) 469.2 448.0 6.1 4.1
----- ----- ----- -----
Plan assets in excess of (less
than) projected benefit obligation 89.2 64.5 (25.5) (26.3)
Unrecognized transition (net asset)
obligation (13.5) (11.2) 1.7 1.2
Unrecognized net (gain)loss (7.5) 11.6 5.1 5.5
----- ----- ----- -----
Net pension asset (liability)
recognized in the consolidated
balance sheets $ 68.2 $ 64.9 $(18.7) $(19.6)
===== ===== ===== =====
50
9) RETIREE HEALTH CARE
Several of the Company's subsidiaries currently provide retiree
health care benefits for certain employee groups. In 1992, the
Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." This standard requires
that the expected cost of retiree health benefits be charged to
expense during the years that the employees render service rather than
the Company's past practice of recognizing these costs on a cash
basis. As part of adopting this standard, the Company recorded, in
the first quarter of 1992, a one-time, non-cash charge against
earnings of $71.7 million before taxes and $44.1 million after taxes,
or $0.29 per share. The Company had previously recorded $37.5 million
relating to this liability. This cumulative adjustment as of January
1, 1992 represents the discounted present value of expected future
retiree health benefits attributed to employees' service rendered
prior to that date. The effect of the change on 1992 net income
before cumulative effect of accounting change was not material to any
of the consolidated financial statements.
The components of the net postretirement health care cost are as
follows:
1994 1993 1992
---- ---- ----
(In millions)
Service cost-benefits attributed
to service during the period $ 2.0 $ 1.1 $ 1.3
Interest cost on accumulated
postretirement benefit obligation 7.3 8.1 8.4
--- --- ---
Net postretirement health care cost $ 9.3 $ 9.2 $ 9.7
=== === ===
A reconciliation of the accumulated postretirement benefit
obligation to the liability recognized in the consolidated balance
sheets is as follows:
1994 1993 1992
---- ---- ----
(In millions)
Accumulated postretirement
benefit obligation:
Retirees $ (65.2) $ (73.0) $ (79.5)
Fully eligible active plan participants (6.0) (5.2) (8.2)
Other active plan participants (21.1) (22.8) (20.9)
------ ------ -----
Accumulated postretirement benefit
obligation (92.3) (101.0) (108.6)
Market value of assets - - -
------ ------ ------
Funded status (92.3) (101.0) (108.6)
Unrecognized net(gain) (16.7) (8.4) (0.3)
------ ------ ------
Other Noncurrent Liability $(109.0) $(109.4) $(108.9)
====== ====== ======
51
The actuarial calculation assumes a 12% increase in the health
care cost trend rate for fiscal year 1994. The assumed rate decreases
one percent every year through the sixth year to six percent and
remains constant beyond that point. The health care cost trend rate
has a significant effect on the amounts reported. For example, a one
percentage point increase in the health care cost trend rate would
increase the accumulated postretirement benefit obligation by $6.0
million and increase net periodic cost by $0.8 million. The discount
rate used in determining the accumulated postretirement benefit
obligation was 8% in 1994, 7.25% in 1993 and 7.75% in 1992.
52
10) STOCKHOLDERS' EQUITY AND PER SHARE DATA
The Company's common stock consists of 300.0 million authorized
shares, with a par value of $1 per share. Of the total unissued
common shares at December 31, 1994, total shares in reserve included
10.1 million shares for issuance under the Company's stock option
plans.
Each share of common stock includes a preferred stock purchase
right (a "Right"). Each Right will entitle the holder, until the
earlier of October 31, 1998 or the redemption of the Rights, to buy
one four-hundredth of a share of a new series of preferred stock,
denominated "Junior Participating Preferred Stock, Series B," at a
price of $25 per one four-hundredth of a share (as adjusted to reflect
stock splits since the issuance of the Rights). This preferred stock
is nonredeemable and will have 100 votes per share. The Company has
reserved 500,000 Series B preferred shares for issuance upon exercise
of such Rights. The Rights will be exercisable only if a person or
group acquires 20% or more of voting power of the Company or announces
a tender offer following which it would hold 30% or more of the
Company's voting power.
In the event that any person becomes the beneficial owner of 30%
or more of the Company's voting power, the Rights (other than Rights
held by the 30% stockholder) would become exercisable for that number
of shares of the Company's common stock having a market value of two
times the exercise price of the Right. Furthermore, if, following the
acquisition by a person or group of 20% or more of the Company's
voting power, the Company were acquired in a merger or other business
combination or 50% or more of its assets were sold, or in the event of
certain types of self-dealing transactions by a 20% stockholder, each
Right (other than Rights held by the 20% stockholder) would become
exercisable for that number of shares of common stock of the Company
(or the surviving company in a business combination) having a market
value of two times the exercise price of the Right.
The Company may redeem the Rights at one cent per Right prior to
the occurrence of an event that causes the Rights to become
exercisable for common stock. The Board of Directors may terminate
the Company's right to redeem the Rights under certain circumstances
at any time after a group or person acquires 20% or more of the
Company's voting power.
The earnings per share amounts are computed based on the weighted
average monthly number of shares outstanding during the year. On
September 1, 1994, a two-for-one split of the Company's common stock
was effected in the form of a stock dividend of one share of stock on
each share of stock outstanding at the close of business on August 15,
1994.
53
Accordingly, all share and per share data have been restated to
retroactively reflect the stock split. Common stock was credited $1
and additional paid-in capital was charged a like amount for each
share of stock issued pursuant to the stock split.
54
11) STOCK OPTIONS
Under the terms of the Company's stock option plans, all options
are granted at prices at least equal to the market value on the date
of grant and expire five years, five years and ninety days, ten years,
or ten years and one day thereafter.
The following summarizes the changes in number of shares of
common stock under option:
Range of
Number of Per Share
Shares Option Prices
--------- -------------
Outstanding at December 31, 1991 3,059,524 $ 3.84 - $21.75
Stuart Hall Grants Assumed 229,110 3.88 - 10.35
Intercraft Options Granted 400,000 18.00 - 18.00
Granted 333,200 19.95 - 24.44
Exercised (1,433,622) 3.88 - 14.88
Cancelled (35,332) 3.88 - 13.31
---------
Outstanding at December 31, 1992 2,552,880 3.84 - 24.44
Granted 431,860 16.44 - 19.38
Goody Grants Assumed 53,210 8.63 - 15.16
Exercised (881,428) 3.88 - 16.44
Cancelled (74,322) 10.35 - 10.35
---------
Outstanding at December 31, 1993 2,082,200 3.84 - 24.44
Granted 454,400 19.88 - 22.38
Exercised (273,196) 3.84 - 19.19
Cancelled (107,646) 7.34 - 21.75
---------
Outstanding at December 31, 1994 2,155,758 3.84 - 24.44
=========
Options outstanding on December 31, 1994, are exercisable at an
average price of $19.11 and expire on various dates from January 22,
1995 to November 1, 2004.
At December 31, 1994, there were 7.9 million shares available for
grant of future options.
55
12) INCOME TAXES
During 1992, the Company adopted SFAS No. 109, "Accounting for
Income Taxes." The impact of adopting this standard was not material
to any of the consolidated financial statements of the Company for
1992.
The provision for income taxes consists of the following:
1994 1993 1992
---- ---- ----
(In millions)
Current:
Federal $ 82.3 $ 70.5 $ 104.0
State 19.1 19.0 24.6
Foreign 1.6 0.9 0.6
------ ------ ------
103.0 90.4 129.2
Deferred 30.7 19.8 (14.9)
------ ------ ------
Total $ 133.7 $ 110.2 $ 114.3
====== ====== ======
The components of the net deferred tax asset are as follows:
1994 1993 1992
---- ---- ----
(In millions)
Deferred tax assets:
Accruals, not currently
deductible for tax purposes $ 79.5 $ 65.1 $ 47.2
Pension and postretirement accruals 44.9 48.0 43.3
Insurance accruals 14.1 11.3 10.3
Inventory valuation 6.2 2.1 -
Other 3.0 2.2 12.2
----- ----- -----
147.7 128.7 113.0
Deferred tax liabilities:
Accelerated depreciation (37.1) (26.3) (24.9)
Prepaid pension (24.2) (24.5) (20.7)
Inventory valuation - - (9.9)
Unrealized gain on
securities available for sale (6.5) - -
Amortizable intangibles (4.1) - -
Other (2.9) (1.6) (2.0)
------ ------ ------
(74.8) (52.4) (57.5)
------ ------ ------
Net deferred tax asset $ 72.9 $ 76.3 $ 55.5
====== ====== ======
56
The net deferred tax asset is classified in the consolidated balance sheets as follows:
1994 1993 1992
---- ---- ----
(In millions)
Current deferred income taxes $ 90.1 $ 73.5 $ 39.0
Noncurrent deferred income taxes:
Included in Other Assets - 2.8 16.5
Liability (17.2) - -
------ ------ ------
$ 72.9 $ 76.3 $ 55.5
====== ====== ======
57
A reconciliation of the United States statutory rate to the effective income tax rate is as follows:
1994 1993 1992
---- ---- ----
(In percent)
Statutory rate 35.0% 35.0% 34.0%
Add (deduct) effect of:
State income taxes, net of
federal income tax effect 4.5 4.5 4.8
Nondeductible goodwill charges 1.3 0.9 2.7
Miscellaneous (0.2) (0.4) (0.3)
---- ---- ----
Effective rate 40.6% 40.0% 41.2%
==== ==== ====
No United States deferred taxes have been provided on
undistributed non-United States subsidiary earnings of $30.5 million,
which are considered to be permanently invested.
The non-United States component of income before income taxes was
$3.5 million in 1994 and $1.8 million in both 1993 and 1992.
58
13) OTHER NONOPERATING EXPENSES(INCOME)
Total other nonoperating expenses(income) consist of the
following:
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In millions)
Interest income $ (1.0) $ (.9) $ (2.5)
Dividend income (12.6) (12.9) (14.1)
Equity in earnings of
American Tool Companies, Inc. (5.7) (3.8) (3.4)
Amortization of goodwill 15.4 10.1 6.7
Net (gains)losses on:
Sale of businesses - (1.2) (82.9)
Stanley Works securities
and other related costs - - 14.0
Marketable equity securities (0.4) - (8.6)
Costs associated with legal
settlements, prior acquisitions
and other 2.9 0.2 13.5
Write-off of intangibles - - 11.7
----- ----- -----
$ (1.4) $ (8.5) $(65.6)
===== ===== =====
59
14) OTHER OPERATING INFORMATION
INDUSTRY SEGMENTS
Since the beginning of 1993, after the sale of its closures
business on December 31, 1992, over 90% of the Company's revenues are
derived from consumer products and, as such, the Company operates in a
single industry segment. Prior to 1993, the Company operated in two
industry segments, Consumer Products and Industrial Products.
Consumer Products are sold through a variety of retail and
wholesale distribution channels. Industrial Products were sold
directly and through distributors. Intersegment sales were not
material.
Consumer Industrial Corporate
Products Products & Other Consolidated
-------- ---------- ---------- ------------
(In millions)
1992
----
Net sales $1,205.7 $246.0 $ - $1,451.7
Operating income 209.7 27.6 (4.9) 232.4
Total assets 679.9 51.2 838.5 1,569.6
Depreciation and
amortization expense 35.1 7.1 11.7 53.9
Capital expenditures 61.2 13.4 3.0 77.6
GENERAL INFORMATION
The Company's segment information necessarily includes
allocations of expenses and assets shared by its segments. Although
such allocations were made on a reasonable basis, the assets and
operating income do not necessarily reflect how such data might appear
if the segments were operated as separate businesses.
Sales to Wal-Mart Stores, Inc. and subsidiaries amounted to
approximately 15% of consolidated sales in 1994, and 14% in both 1993
and 1992. Each of the other customers amounted to less than 10% in
all three years.
Export sales were less than 10% of consolidated sales in 1994,
1993 and 1992.
Total assets are those assets that are used in the Company's
operations in each industry segment. Corporate assets are located
exclusively in the United States and consist principally of cash,
marketable equity securities, goodwill and notes receivable. Prior to
the acquisition of Newell Europe, the Company operated principally in
the North American geographic segment.
60
15) LITIGATION
The Company and its subsidiaries are subject to certain legal
proceedings and claims, including the environmental matters described
below, that have arisen in the ordinary conduct of its business.
Although management of the Company cannot predict the ultimate outcome
of these matters with certainty, it believes that their ultimate
resolution will not have a material effect on the Company's
consolidated financial statements.
The Company and its subsidiaries are also involved in various
matters concerning federal and state environmental laws and
regulations, including seventeen matters in which they have been
identified by the U.S. Environmental Protection Agency and certain
state environmental agencies as potentially responsible parties
("PRPs") at hazardous waste disposal sites under the Comprehensive
Environmental Response, Compensation and Liability Act ("Superfund")
and equivalent state laws. In assessing its remediation costs, the
Company has considered several factors, including: the extent of the
Company's volumetric contribution at each site relative to that of
other PRPs; the kind of waste; where applicable, the terms of existing
cost sharing and other agreements; the ability of other PRPs to share
in the payment of requisite costs; the Company's prior experience with
environmental remediation; environmental studies and cost estimates
available to the Company; the effects of inflation on cost estimates;
and the extent to which the Company's and other party's status as a
PRP is disputed. Based on information currently available to it, the
Company's estimate of remediation costs associated with these matters
ranges between $12.5 million and $17.5 million. As of December 31,
1994, the Company had a reserve equal to $14.5 million for such
remediation costs in the aggregate. Insufficient information is
available to the Company to permit it reasonably to reflect any
unasserted claims in its reserve or cost estimates. No insurance
recovery was taken into account in determining the Company's cost
estimates or reserve nor do the Company's cost estimates or reserve
reflect any discounting for present value purposes.
61
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure
-----------------------------------------------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Information regarding executive officers of the Company is
included as a Supplementary Item at the end of Part I of this Form
10-K.
Information regarding directors of the Company is included
in the Company's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held May 10, 1995 ("Proxy Statement") under the
caption "Proposal 1 -Election of Directors," which information is
hereby incorporated by reference herein.
Information regarding compliance with Section 16(a) of the
Exchange Act is included in the Proxy Statement under the caption
"Compliance with Forms 3, 4 and 5 Reporting Requirements," which
information is hereby incorporated by reference herein.
Item 11. Executive Compensation
----------------------
Information regarding executive compensation is included in
the Proxy Statement under the caption "Proposal 1 - Election of
Directors - Information Regarding Board of Directors and Committees,"
the captions "Executive Compensation - Summary; - Option Grants in
1994; - Option Exercises in 1994; - Pension and Retirement Plans; and -
Employment Security Agreements," and the caption "Executive
Compensation Committee Interlocks and Insider Participation," which
information is hereby incorporated by reference herein.
Item 12. Security Ownerships of Certain Beneficial Owners
and Management
-------------------------------------------------
Information regarding security ownership is included in the
Proxy Statement under the caption "Certain Beneficial Owners," which
information is hereby incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Not Applicable.
62
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
------------------------------------------------------
(a) (1) The following is a list of the financial statements
of Newell Co. included in this report on Form 10-K
which are filed herewith pursuant to Item 8:
Report of Independent Public Accountants
Consolidated Statements of Income - Years Ended
December 31, 1994, 1993 and 1992
Consolidated Balance Sheets - December 31, 1994, 1993
and 1992
Consolidated Statements of Cash Flows - Year Ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity - Years
Ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements - December
31, 1994, 1993 and 1992
(2) The following is a list of the consolidated
financial statement schedules of the Company included
in this report on Form 10-K which are filed herewith
pursuant to Item 14(d) and appear immediately preceeding
the Exhibit Index:
Schedule VIII - Valuation and Qualifying Accounts
(3) The exhibits filed herewith are listed on the
Exhibit Index filed as part of this report on Form 10-
K. Each management contract or compensatory plan or
arrangement of the Company listed on the Exhibit Index
is separately identified by an asterisk.
(b) Reports on Form 8-K
(1) Registrant filed a Report on Form 8-K dated October
18, 1994 reporting the issuance of a press release
announcing the completion of its purchase of Faber-
Castell Corporation.
(2) Registrant filed a Report on Form 8-K dated October
20, 1994 reporting the issuance of a press release
regarding the results for the quarter ended September
30, 1994.
(3) Registrant filed a Report on Form 8-K dated
November 30, 1994 reporting the issuance of a press
release announcing the completion of its purchase of
Corning's European consumer business.
63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NEWELL CO.
Registrant
By /s/ William T. Alldredge
--------------------------------
William T. Alldredge
Vice President-Finance
Date March 24, 1995
--------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 24, 1995, by the following persons on behalf
of the Registrant and in the capacities indicated.
Signature Title
--------- -----
/s/ William P. Sovey Vice Chairman and Chief Executive Officer
----------------------------- (Principal Executive Officer)
William P. Sovey
/s/ Thomas A. Ferguson President and Chief Operating
----------------------------- Officer and Director
Thomas A. Ferguson
/s/ Donald L. Krause Senior Vice President-Corporate Controller
----------------------------- (Principal Accounting Officer)
Donald L. Krause
/s/ William T. Alldredge Vice President-Finance
----------------------------- (Principal Financial Officer)
/s/ Daniel C. Ferguson Chairman of the Board
-----------------------------
Daniel C. Ferguson
/s/ William R. Cuthbert Director
-----------------------------
William R. Cuthbert
/s/ Alton F. Doody Director
-----------------------------
Alton F. Doody
/s/ Gary H. Driggs Director
-----------------------------
Gary H. Driggs
/s/ Robert L. Katz Director
-----------------------------
Robert L. Katz
64
/s/ John J. McDonough Director
-----------------------------
John J. McDonough
/s/ Allan P. Newell Director
-----------------------------
Allan P. Newell
/s/ Henry B. Pearsall Director
-----------------------------
Henry B. Pearsall
65
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
NEWELL CO. AND SUBSIDIARIES
__________________________________________________________________________________
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
__________________________________________________________________________________
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginning costs and other accounts Deductions end
Description of Period expenses (A) (B) of period
----------- ---------- ---------- -------------- ---------- ----------
Allowance for
doubtful accounts:
Year ended
December 31, 1994 $6,226 $2,780 $3,996 $(2,116) $10,886
Year ended
December 31, 1993 5,577 2,068 1,420 (2,839) 6,226
Year ended
December 31, 1992 4,104 1,493 2,028 (2,048) 5,577
Note A - Represents recovery of accounts previously written off, along with
reserves of acquired businesses.
Note B - Represents accounts charged off.
66
(C) EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
Item 3. Articles of 3.1 Restated Certificate of Incorporation
Incorporation of Newell Co., as amended as of November
and By-Laws 3, 1994.
3.2 By-Laws of Newell Co., as amended through
November 2, 1994.
Item 4. Instruments 4.1 Restated Certificate of Incorporation of
defining the Newell Co., as amended as of November 3,
rights of 1994, is included in item 3.1.
security
holders, 4.2 By-Laws of Newell Co., as amended through
including November 2, 1994, are included in Item 3.2.
indentures
4.3 Rights Agreement dated as of October 20,
1988 between the Company and First Chicago
Trust Company of New York (formerly
known as Morgan Shareholders Services
Trust Company)(incorporated by reference
to Exhibit 4 to the Company's Current
Report on Form 8-K dated October 25, 1988).
4.4 Indenture dated as of April 15, 1992,
between the Company and The Chase
Manhattan Bank (National Association).
Trustee (incorporated by reference to
Exhibit 4.4 to the Company's Report on
Form 8 amending the Company's Quarterly
Report on Form 10-Q for the period ended
March 31, 1992).
Pursuant to item 601(b)(4)(iii)(A) of
Regulation S-K, the Company is not filing
certain documents. The Company agrees
to furnish a copy of each such document
upon the request of the Commission.
Item 10. Material *10.1 The Newell Long-Term Savings and
Contracts Investment Plan, as amended and restated
effective May 1, 1993 (incorporated by
reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1993 (the
"June 1993 Form 10-Q").
67
Exhibit
Number Description of Exhibit
------- ----------------------
*10.2 The Company's Amended and Restated 1984
Stock Option Plan, as amended through
February 14, 1990 (incorporated by
reference to Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the year
ended December 31, 1990 (the "1990 Form
10-K")).
*10.3 a. Newell Operating Company's Deferred
Compensation Plan, effective August 1,
1980 (incorporated by reference to Exhibit
10.7 to the Company's Registration
Statement on Form S-14, File No. 2-71121,
filed March 4, 1981 (the "1981 Form
S-14")).
b. Amendment I to Newell Operating
Company's Deferred Compensation Plan,
effective October 22, 1986 (incorporated
by reference to Exhibit 10.5b to the
Company's Annual Report on Form 10-K for
the year ended December 31, 1986 (File No.
0-7843 (the "1986 Form 10-K")).
*10.4 Newell Operating Company's ROA Cash Bonus
Plan, effective January 1, 1977, as
amended (incorporated by reference to
Exhibit 10.8 to the 1981 Form S-14).
*10.5 Newell Operating Company's ROI Cash
Bonus Plan, effective July 1, 1966, as
amended (incorporated by reference to
Exhibit 10.9 to the 1981 Form S-14).
*10.6 Newell Operating Company's Pension Plan
for Salaried and Clerical Employees, as
amended and restated, effective January 1,
1989 (incorporated by reference to
Exhibit 10.2 to the June 1993 Form 10-Q).
68
Exhibit
Number Description of Exhibit
------- ----------------------
*10.7 Newell Operating Company's Pension Plan
for Factory and Distribution Hourly-Paid
Employees, as amended and restated,
effective January 1, 1984 (incorporated
by reference to Exhibit 10.10 to the
Company's Annual Report on Form 10-K for
the year ended December 31, 1985
(File No. 0-7843)(the "1985 Form 10-K")).
*10.8 Newell Operating Company's Supplemental
Retirement Plan for Key Executives,
effective January 1, 1982, as amended
(incorporated by reference to Amendment
No. 2 to the Company's Registration
Statement on Form S-14, File No. 2-71121,
filed February 2, 1982).
10.9 Securities Purchase Agreement dated
June 21, 1985 between American Tool
Companies, Inc. and the Company (incor-
porated by reference to Exhibit 10.13
to the 1985 Form 10-K).
*10.10 Form of Employment Security Agreement
with six executive officers (incorpor-
ated by reference to Exhibit 10.10 to
the 1990 Form 10-K).
10.11 Letter Agreement dated as of August 13,
1991 between The Black & Decker Corpora-
tion and the Company (incorporated by
reference to Exhibit 1 to the Company's
Statement on Schedule 13D dated
August 22, 1991).
10.12 Standstill Agreement dated as of
September 24, 1991 between The Black &
Decker Corporation and the Company
(incorporated by reference to Exhibit 3
to Amendment No. 1 to the Company's
Statement on Schedule 13D dated
September 26, 1991 (the "Schedule 13D
Amendment")).
69
Exhibit
Number Description of Exhibit
------- ----------------------
10.13 Receivables Sale Agreement dated
September 6, 1991 among the Company,
Asset Securitization Cooperative
Corporation ("ASCC") and Canadian
Imperial Bank of Commerce, as Adminis-
trative Agent ("Canadian Imperial Bank")
(incorporated by reference to Exhibit 4
to the Schedule 13D Amendment).
10.14 Stock Purchase Agreement dated as of
October 23, 1992 among CMB Holdings
(USA), Inc., Anchor Hocking Corporation
and the Company (incorporated by refer-
ence to Exhibit 2 to the Company's
Current Report on Form 8-K dated
October 23, 1992).
*10.15 Newell Co. 1993 Stock Option Plan,
effective February 9, 1993 (incorporated
by reference to the Company's Registration
Statement on Form S-8, File No. 33-67632,
filed August 19, 1994).
10.16 Credit Agreement dated as of August 13,
1993, amended and restated as of
November 19, 1993, among the Company,
certain of its affiliates, The Chase
Manhattan Bank (National Association), as
Agent, and the banks whose names appear on
the signature pages thereto (incorporated
by reference to Exhibit 10.18 to the
Company's Annual Report on Form 10-K for
the year ended December 31, 1993 (the "1993
Form 10-K)).
10.17 Agreement and Plan of Merger dated
August 2, 1993 among the Company, GPI
Acquisition Co. and Goody Products, Inc.
(incorporated by reference to Exhibit 1
to Amendment No. 9 to the Company's State-
ment on Schedule 13D dated August 5, 1993).
10.18 Form of Placement Agency Agreement relat-
ing to private placement to accredited
investors of unsecured notes of the
Company (incorporated by reference to
Exhibit 10.20 to the 1993 Form 10-K).
70
Exhibit
Number Description of Exhibit
------- ----------------------
10.19 364-Day Credit Agreement dated as of
November 19, 1993 among the Company,
certain of its affiliates, The Chase
Manhattan Bank (National Association), as
Agent and the banks whose names appear on
the signature pages thereto (incorporated
by reference to Exhibit 10.21 to the 1993
Form 10K).
10.20 364-Day Credit Agreement dated as of
August 11, 1994 among the Company, certain
of its affiliates, The Chase Manhattan Bank
(National Association), as Agent and the
banks whose names appear on the signature
pages thereto.
Item 21. Subsidiaries 21.1 Subsidiaries of the Company.
of the
Registrant
Item 23. Consent of 23.1 Consent of Arthur Andersen LLP.
experts and
counsel
Item 27. Financial 27 Financial Data Schedule.
Data Schedule
* Management contract or compensatory plan or arrangement of the Company.
71