UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
/ / TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ___________________
COMMISSION FILE NUMBER: 1-12624
SYRATECH CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3354944
--------------------------------- --------------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
175 MCCLELLAN HIGHWAY
EAST BOSTON, MASSACHUSETTS 02128-9114
--------------------------------- --------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE - 617-561-2200
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTIONS 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 __ NO __X__
NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OUTSTANDING AT
SEPTEMBER 30, 1999-3,784,018
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at September 30, 1999
and December 31, 1998 1
Condensed Consolidated Statements of Operations for the three
and nine month periods ended September 30, 1999 and 1998 2
Condensed Consolidated Statements of Cash Flows for the nine
month periods ended September 30, 1999 and 1998 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
Signature 22
PART I - FINANCIAL INFORMATION
SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
September 30, December 31,
ASSETS 1999 1998
-------------------- --------------------
Current assets:
Cash and equivalents ....................................... $ 3,198 $ 9,009
Accounts receivable, net ................................... 95,206 70,128
Inventories ................................................ 122,350 86,955
Deferred income taxes ...................................... 19,104 15,866
Prepaid expenses and other ................................. 2,585 1,673
Properties held for sale ................................... 749 2,292
-------------------- --------------------
Total current assets ................................... 243,192 185,923
Property, plant and equipment, net ............................ 83,231 83,611
Purchase price in excess of net assets acquired, net ........... 6,368 6,549
Other assets, net ............................................. 7,612 8,634
-------------------- --------------------
Total .................................................. $ 340,403 $ 284,717
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable ................ $ 92,466 $ 46,201
Accounts payable ............................................ 22,703 13,883
Accrued expenses ............................................ 12,615 10,802
Accrued interest ............................................ 8,799 4,108
Accrued compensation ........................................ 2,949 2,844
Accrued advertising ......................................... 3,421 3,053
Income taxes payable ........................................ 1,175 418
-------------------- --------------------
Total current liabilities .............................. 144,128 81,309
Long-term debt ................................................ 165,000 165,000
Deferred income taxes ......................................... 19,409 19,409
Pension liability ............................................. 2,615 2,964
Stockholders' equity:
Preferred stock, $.01 par value, 500,000 shares authorized; (25,000
designated as cumulative redeemable preferred stock, 18,000 shares
issued and outstanding, liquidation value of $18,000 and includes
accrued and unpaid dividends of $5,842 and $3,874 in 1999 and 1998,
respectively ............................................... 23,842 21,874
Common stock, $.01 par value, 20,000,000 shares
authorized; 3,784,018 shares issued and outstanding ...... 38 38
Retained deficit ........................................... (14,814) (6,376)
Accumulated other comprehensive income ..................... 185 499
-------------------- --------------------
Total stockholders' equity ............................. 9,251 16,035
-------------------- --------------------
Total .................................................. $ 340,403 $ 284,717
==================== ====================
See notes to condensed consolidated financial statements.
1
SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------- -------------------------------
1999 1998 1999 1998
----------- -------------- ------------ ------------
Net sales ............................................. $ 112,587 $ 104,617 $ 197,377 $ 184,623
Cost of sales ......................................... 80,712 75,409 140,661 132,318
------------ --------------- ------------- -------------
Gross profit ..................................... 31,875 29,208 56,716 52,305
Selling, general and administrative expenses ............ 19,243 17,432 50,137 47,802
Other operating income ................................ 875 1,393 2,150 2,505
------------ --------------- ------------- -------------
Income from operations ........................... 13,507 13,169 8,729 7,008
Interest expense ...................................... (6,517) (6,354) (18,186) (17,084)
Interest income ....................................... 31 16 76 22
Other income .......................................... 756(1)
------------ --------------- ------------- -------------
Income (loss) before provision (benefit) for income
taxes .............................................. 7,021 6,831 (8,625) (10,054)
Provision (benefit) for income taxes .................. 1,756 1,909 (2,156) (2,818)
------------ --------------- ------------- -------------
Net income (loss) ................................ 5,265 4,922 (6,469) (7,236)
Preferred stock dividends accrued ..................... 657 586 1,969 1,758
------------ --------------- ------------- -------------
Net income (loss) applicable to common stockholders. $ 4,608 $ 4,336 $ (8,438) $ (8,994)
============ =============== ============= =============
Basic and diluted income (loss) per share:
Net income (loss) per common share ................... $ 1.22 $ 1.15 $ (2.23) $ (2.38)
============ =============== ============= =============
Weighted average number of shares outstanding ...... 3,784 3,784 3,784 3,784
============ =============== ============= =============
(1) Other income represents a gain on disposal of undeveloped land.
See notes to condensed consolidated financial statements.
2
SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
Nine Months Ended September 30,
-------------------------------------------
1999 1998
-------------------- -------------------
Cash flows from operating activities:
Net loss ............................................. $ (6,469) $ (7,236)
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Depreciation and amortization ..................... 6,282 5,648
Deferred income taxes ............................. (3,238) (3,634)
Gain on disposal of assets ........................ (788)
Other ............................................. (350) (372)
Increase (decrease) in cash due to changes in:
Accounts receivable ........................... (25,078) (22,062)
Inventories ................................... (35,395) (29,552)
Prepaid expenses and other .................... (912) 157
Accounts payable and accrued expenses ......... 15,797 9,995
Income taxes payable .......................... 757 584
---------------- ---------------
Net cash used in operations .......................... (49,394) (46,472)
---------------- ---------------
Cash flows from investing activities:
Purchases of property, plant and equipment .......... (4,907) (10,637)
Proceeds from sale of assets ......................... 2,351
Other ............................................... 62 18
---------------- ---------------
Net cash used in investing activities .................. (2,494) (10,619)
---------------- ---------------
Cash flows from financing activities:
Change in revolving loan facilities ................ 46,265 57,385
Other .............................................. (188) (611)
---------------- ---------------
Net cash provided by financing activities ............. 46,077 56,774
---------------- ---------------
Net decrease in cash and equivalents ................... (5,811) (317)
Cash and equivalents, beginning of period .............. 9,009 2,981
---------------- ---------------
Cash and equivalents, end of period .................... $ 3,198 $ 2,664
================ ===============
See notes to condensed consolidated financial statements.
3
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. FINANCIAL INFORMATION
The accompanying unaudited interim condensed consolidated financial statements
of Syratech Corporation and Subsidiaries (the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These interim condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes included in the Company's 1998 Annual Report on Form 10 K.
In the opinion of management, the interim condensed consolidated financial
statements reflect all adjustments, which consist only of normal and recurring
adjustments, necessary for a fair presentation of the interim periods. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year.
2. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Nine Months Ended September 30,
----------------------------------------
1999 1998
----------------- -----------------
Cash paid during the period for:
Interest............................................. $ 12,406 $ 11,960
================= =================
Income taxes......................................... $ 543 $ 842
================= =================
Supplemental schedule of non-cash financing activities:
Accrued cumulative redeemable
preferred stock dividends ........................... $ 1,969 $ 1,758
================= =================
3. INVENTORIES
Inventories consisted of the following:
September 30, December 31,
1999 1998
----------------- -----------------
Raw materials............... $ 14,498 $ 12,953
Work-in-process............. 6,513 6,484
Finished goods.............. 101,339 67,518
----------------- -----------------
Total............. $ 122,350 $ 86,955
================= =================
4
4. INCOME TAXES
The provision (benefit) for income taxes for the three and nine month periods
ended September 30, 1999 and 1998, respectively, have been computed using the
estimated effective full year tax rates. Realization of the income tax benefit
is dependent upon generating sufficient future taxable income. Although
realization is not assured, management believes it is more likely than not that
the income tax benefit will be realized through future taxable earnings.
5. REVOLVING LOAN FACILITIES AND NOTES PAYABLE
On May 30,1999, the Company renewed its Wallace International de Puerto Rico,
Inc. $1,000 credit facility. The renewed facility expires on May 30, 2000.
On June 16, 1999 the Company's C.J. Vander Ltd. subsidiary renewed its overdraft
facility, which was entered into on March 16, 1998 ("Overdraft Facility"). The
renewal changed the amount of the borrowings provided under the facility from
(pound)500 to (pound)250. Borrowings made under the Overdraft Facility bear
interest at the bank's base rate plus 1%. The Overdraft Facility contains
customary covenants, and borrowings are secured by substantially all of the
assets of C.J.Vander Ltd. The Overdraft is due on demand and expires on February
22, 2000.
6. COMPREHENSIVE LOSS
Comprehensive loss consists of the following:
Nine Months Ended September 30,
---------------------------------
1999 1998
---------- ----------
Net loss applicable to common stockholders ..... $ (8,438) $ (8,994)
Other comprehensive income: ...................
Foreign currency translation adjustments ....... (314) (270)
---------- ----------
Comprehensive loss ............................. $ (8,752) $ (9,264)
---------- ----------
Accumulated other comprehensive income reported in the Condensed Consolidated
Balance Sheets consists only of foreign currency translation adjustments.
7. EMPLOYEE BENEFIT PLANS
At December 31, 1998, the Company had employment agreements with certain
officers and employees for terms ranging from three to five years. As of July 8,
1999, the Company entered into an additional employment agreement with an
executive officer. These agreements provide for minimum annual salaries
aggregating $2,580 and certain other benefits.
5
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1999, the Company adopted the provisions of Statement of
Opinion No. 98-1, "Accounting for Costs of Computer Software Developed or
Obtained for Internal Use," which requires certain expenditures made for
internal use software to be capitalized. The provisions of this opinion did not
have a material effect on the Company's condensed consolidated financial
statements upon adoption.
In June 1998, the Financial Accounting Standards Board Issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The new standard requires that all
companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
whether there will be any impact of SFAS No. 133 on the Company's consolidated
financial statements upon adoption, which is required in the first quarter of
2001.
9. SEGMENT DISCLOSURES
The Company has identified only one distinct and reportable segment: Home
Entertainment and Decorative Products, which generates revenue from two types of
product offerings: Tabletop and Giftware, and Seasonal. The following table
presents the Company's net sales in these product categories for the periods
presented:
Nine Months Ended September 30,
-------------------------------------
1999 1998
--------------- -----------------
Tabletop and Giftware .............. $ 155,107 $ 135,484
Seasonal ........................... 42,270 49,139
--------------- -----------------
Total .............................. $ 197,377 $ 184,623
=============== =================
10. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The following supplemental condensed consolidating financial statements as of
and for the periods ending September 30, 1999 and 1998 present separate
financial information for the Company ("Issuer/Guarantor Parent"), the
Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries. Certain prior
year amounts have been reclassified to conform to the 1999 presentation.
Separate financial statements of each guarantor are not presented because
management believes that such statements would not be materially different
from the information presented herein.
6
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1999
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ----------------------------------------------------------
ASSETS
Current assets:
Cash and equivalents ............................ $ 274 $ 2,924 $ 3,198
Accounts receivable, net ........................ 85,915 9,291 95,206
Inventories ..................................... 116,042 6,267 $ 41 122,350
Deferred income taxes ........................... $ 12,556 6,548 19,104
Prepaid expenses and other ...................... 1,841 744 2,585
Properties held for sale ......................... 318 431 749
------------- -------- ------- --------- ----------
Total current assets ........................ 12,556 210,938 19,657 41 243,192
Property, plant and equipment, net ................. 79,261 4,019 (49) 83,231
Purchase price in excess of net assets acquired, net.. 6,368 6,368
Other assets, net .................................. 7,473 139 7,612
Investment ......................................... 180,192 (180,192) -
============= ============= ============ ============== ===============
Total ....................................... $200,221 $296,706 $23,676 $(180,200) $340,403
============= ============= ============ ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable ....... $ 92,044 $ 422 $ 92,466
Accounts payable ................................. 15,019 7,684 22,703
Accrued expenses ................................. $ 235 12,060 320 12,615
Accrued interest ................................. 8,369 430 8,799
Accrued compensation ............................. 2,625 324 2,949
Accrued advertising .............................. 3,421 3,421
Income taxes payable ............................. 6 1,175 $ (6) 1,175
------------- ------------- ------------ -------------- ---------------
Total current liabilities ................... 8,604 125,605 9,925 (6) 144,128
Long-term debt ..................................... 165,000 165,000
Deferred income taxes .............................. 6,157 13,252 19,409
Pension liability ................................... 2,615 2,615
Intercompany (receivable) payable .................. (20,453) 34,315 (13,862) - -
Stockholders' equity ............................... 40,913 120,919 27,613 (180,194) 9,251
------------- ------------- ------------ -------------- ---------------
Total ....................................... $200,221 $296,706 $23,676 $(180,200) $340,403
============= ============= ============ ============== ===============
7
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ----------------------------------------------------------
ASSETS
Current assets:
Cash and equivalents ............................. $ $ 7,496 $ 1,513 $ $ 9,009
Accounts receivable, net ......................... 65,260 4,868 70,128
Inventories ...................................... 81,680 5,234 41 86,955
Deferred income taxes ............................ 9,009 6,857 15,866
Prepaid expenses and other ....................... 113 1,089 471 1,673
Properties held for sale ........................... 1,838 454 2,292
------------- ---------- ------------ -------------- ---------------
Total current assets ........................... 9,122 164,220 12,540 41 185,923
Property, plant and equipment, net .................... 79,908 3,753 (50) 83,611
Purchase price in excess of net assets acquired, net .. 6,549 6,549
Other assets, net ................................... 8,457 177 8,634
Investment in subsidiaries .......................... 179,442 (179,442)
============= ============= ============ ============== ===============
Total ........................................ $ 197,021 $ 250,854 $ 16,293 $(179,451) $ 284,717
============= ============= ============ ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable ........ $ $ 45,837 $ 358 $ 6 $ 46,201
Accounts payable .................................. 11,509 2,374 13,883
Accrued expenses .................................. 38 10,288 476 10,802
Accrued interest .................................. 3,832 276 4,108
Accrued compensation .............................. 2,502 342 2,844
Accrued advertising ............................... 3,053 3,053
Income taxes payable .............................. 198 (198) 418 418
------------- ------------- ------------ -------------- --------------
Total current liabilities .................... 4,068 73,267 3,968 6 81,309
Long-term debt ....................................... 165,000 165,000
Deferred income taxes ............................... 6,157 13,252 19,409
Pension liability .................................... 2,964 2,964
Intercompany (receivable) payable ................... (30,589) 43,224 (11,274) (1,361)
Stockholders' equity .................................. 52,385 118,147 23,599 (178,096) 16,035
------------- ------------- ------------ -------------- -------------
Total .......................................... $ 197,021 $ 250,854 $ 16,293 $(179,451) $ 284,717
============= ============= ============ ============== ==============
8
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ----------------------------------------------------------
Net sales ........................................... $ $ 87,913 $ 40,479 $ (15,805) $ 112,587
Cost of sales ....................................... 64,480 32,037 (15,805) 80,712
---------- -------- -------- ---------- ---------
Gross profit ...................................... 23,433 8,442 31,875
Selling, general and administrative expenses ........ 113 14,237 4,907 (14) 19,243
Other operating income .............................. 875 875
---------- -------- -------- ---------- ---------
Income (loss) from operations ..................... (113 10,071 3,535 14 13,507
Interest expense .................................... (4,894) (1,609) (14) (6,517)
Interest income ..................................... 8 23 31
Other income ........................................
----------- -------- -------- ---------- ----------
Income (loss) before provision (benefit) for
income taxes .................................... (5,007) 8,470 3,544 14 7,021
Provision (benefit) for income taxes ................ (1,286) 2,428 614 1,756
------------ -------- -------- ---------- ---------
Net income (loss) ................................. (3,721) 6,042 2,930 14 5,265
Preferred stock dividends accrued ................... 657 657
----------- -------- -------- ---------- ---------
Net income (loss) applicable to common
stockholders ..................................... $ (4,378) $ 6,042 $ 2,930 $ 14 $ 4,608
=========== ======== ======= ========= =========
9
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ----------------------------------------------------------
Net sales ........................................... $ $ 72,320 $ 44,260 $ (11,963) $ 104,617
Cost of sales ....................................... 52,750 34,622 (11,963) 75,409
---------- -------- -------- ---------- ---------
Gross profit ...................................... 19,570 9,638 29,208
Selling, general and administrative expenses ........ 113 11,444 5,918 (43) 17,432
Other operating income .............................. 1,393 1,393
---------- -------- -------- ---------- ---------
Income (loss) from operations ..................... (113) 9,519 3,720 43 13,169
Interest expense .................................... (4,893) (1,433) (28) (6,354)
Interest income ..................................... 1 (1) 16 16
----------- -------- -------- ---------- ----------
Income (loss) before provision (benefit) for
income taxes .................................... (5,005) 8,085 3,708 43 6,831
Provision (benefit) for income taxes ................ (1,172) 2,458 623 1,909
------------ -------- -------- ---------- ---------
Net income (loss) ................................. (3,833) 5,627 3,085 43 4,922
Preferred stock dividends accrued ................... 586 586
----------- -------- -------- ---------- ---------
Net income (loss) applicable to common
stockholders ..................................... $ (4,419) $ 5,627 $ 3,085 $ 43 $ 4,336
=========== ======== ======== ========== ========
10
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------------------------------------------------------
Net sales ............................... $ $155,043 $ 73,977 $ (31,643) $ 197,377
Cost of sales .......................... 114,026 58,278 (31,643) 140,661
------------- --------------- --------------- --------------- -----------
Gross profit ...................... 41,017 15,699 56,716
Selling, general and administrative
expenses .............................. 338 39,317 10,506 (24) 50,137
Other operating income ................. 2,150 2,150
------------- --------------- --------------- --------------- -----------
Income (loss) from operations ....... (338) 3,850 5,193 24 8,729
Interest expense ......................... (14,680) (3,477) (29) (18,186)
Interest income ........................ 47 29 76
Other income ........................... 756 756
------------- --------------- --------------- --------------- -----------
Income (loss) before provision (benefit)
for income taxes (15,018) 1,176 5,193 24 (8,625)
Provision (benefit) for income taxes ..... (3,547) 525 866 (2,156)
------------- --------------- --------------- --------------- -----------
Net income (loss) ................... (11,471) 651 4,327 24 (6,469)
Preferred stock dividends accrued ........ 1,969 1,969
------------- --------------- --------------- --------------- -----------
Net income (loss) applicable to common
stockholders ........................ $(13,440) $ 651 $ 4,327 $ 24 $ (8,438)
============= =============== =============== =============== ===========
11
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- --------------- -------------- ------------ ------------
Net sales .................................... $ $ 138,876 $ 71,365 $ (25,618) $ 184,623
Cost of sales ............................... 102,328 55,608 (25,618) 132,318
------------- --------------- ---------------- --------------- ---------------
Gross profit ........................... 36,548 15,757 52,305
Selling, general and administrative expenses .. 338 35,797 11,774 (107) 47,802
Other operating income ...................... 2,505 2,505
-------------- --------------- ---------------- --------------- ---------------
Income (loss) from operations .......... (338) 3,256 3,983 107 7,008
Interest expense ............................ (14,676) (2,369) (39) (17,084)
Interest income ............................. 1 21 22
------------- --------------- ---------------- --------------- ---------------
Income (loss) before provision (benefit)
for income taxes ........................ (15,013) 887 3,965 107 (10,054)
Provision (benefit) for income taxes ........ (3,889) 325 746 (2,818)
------------- --------------- ---------------- --------------- ---------------
Net income (loss) ....................... (11,124) 562 3,219 107 (7,236)
Preferred stock dividends accrued ........... 1,758 1,758
------------- --------------- ---------------- --------------- ---------------
Net income (loss) applicable to common
stockholders .......................... $(12,882) $ 562 $ 3,219 $ 107 $ (8,994)
============= =============== ================ =============== ===============
12
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- --------------- ------------- -------------- ------------
Cash flows from operating activities:
Net income (loss) ........................... $ (11,471) $ 651 $ 4,327 $ 24 $ (6,469)
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization ............ 1,067 4,758 457 6,282
Deferred income taxes .................... (3,547) 309 (3,238)
Gain on disposal of assets ................ (788) (788)
Other ..................................... (350) (350)
Increase (decrease) in cash due to changes in:
Accounts receivable .................. (20,655) (4,423) (25,078)
Inventories .......................... (34,362) (1,033) (35,395)
Prepaid expenses and other ........... 113 (752) (273) (912)
Accounts payable and accrued expenses .. 4,733 5,928 5,136 15,797
Income taxes payable ................. (198) 198 757 757
Intercompany account .................. 9,386 (6,781) (2,581) (24) -
------------- --------------- ---------------- -------------- ---------------
Net cash (used in) provided by operations ... 83 (51,844) 2,367 (49,394)
------------- --------------- ---------------- -------------- ---------------
Cash flows from investing activities:
Purchases of property, plant and equipment... (4,073) (834) (4,907)
Proceeds from sale of assets ............... 2,351 2,351
Other ..................................... (66) 128 62
------------- --------------- --------------- -------------- ---------------
Net cash used in investing activities ....... (1,788) (706) (2,494)
------------- --------------- --------------- -------------- ---------------
Cash flows from financing activities:
Change in revolving loan facilities ....... 46,201 64 46,265
Other ..................................... (83) 209 (314) (188)
------------- --------------- --------------- -------------- ---------------
Net cash provided by (used in) financing
activities................................... (83) 46,410 (250) 46,077
------------- --------------- --------------- -------------- ---------------
Net decrease in cash and equivalents ........ (7,222) 1,411 (5,811)
Cash and equivalents, beginning of period ... 7,496 1,513 9,009
============= =============== =============== ============== ===============
Cash and equivalents, end of period .......... $ - $ 274 $ 2,924 $ - $ 3,198
============= =============== =============== ============== ===============
13
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998
ISSUER/ NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
Cash flows from operating activities:
Net income (loss) ......................................... $ (11,124) $ 562 $ 3,219 $ 107 $ (7,236)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operations:
Depreciation and amortization .......................... 1,063 4,217 368 5,648
Deferred income taxes .................................. (3,889) 255 (3,634)
Other .................................................. (372) (372)
Increase (decrease) in cash due to changes in:
Accounts receivable ................................ (9,851) (12,211) (22,062)
Inventories ........................................ (29,267) (285) (29,552)
Prepaid expenses and other assets ................... (113) 390 (120) 157
Accounts payable and accrued expenses .............. 3,893 1,040 5,062 9,995
Income taxes payable ............................... (1) 154 431 584
Intercompany account ............................... 10,509 (13,710) 3,308 (107)
----------- ------------- --------------- ----------- ----------
Net cash provided by (used in) operations ................. 338 (46,582) (228) (46,472)
----------- ------------- --------------- ----------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment .............. (10,425) (212) (10,637)
Other ................................................... 20 (2) 18
----------- ------------- ------------- ------------ ---------
Net cash used in investing activities ..................... (10,405) (214) (10,619)
----------- ------------- --------------- ------------ ---------
Cash flows from financing activities:
Change in revolving loan facilities ..................... 57,010 375 57,385
Other ................................................... (356) 15 (270) (611)
----------- ------------- --------------- --------
Net cash provided by (used in) financing activities ........ (356) 57,025 105 56,774
----------- ------------- --------------- --------
Net increase (decrease) in cash and equivalents ........... (18) 38 (337) (317)
Cash and equivalents, beginning of period ................. 18 91 2,872 2,981
=========== ============= =============== =========== ========
Cash and equivalents, end of period ........................ $ - $ 129 $ 2,535 $ - $ 2,664
=========== ============= =============== ============ ========
14
SYRATECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Except for the historical information
contained in this Quarterly Report on Form 10-Q, the matters discussed are
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company, or industry results, to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, among others, general economic and business conditions; industry
capacity; industry trends; overseas expansion; the loss of major customers;
changes in demand for the Company's products; the timing of orders received
from customers; cost and availability of raw materials; dependence on foreign
sources of supply; changes in business strategy or development plans;
availability and quality of management; availability, terms and deployment of
capital; and the seasonal nature of the business. For additional information
concerning these and other important factors that may cause the Company's
actual results to differ materially from expectations and underlying
assumptions, please refer to the reports filed by the Company with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
Net sales increased 7.6% to $112.6 million for the three months ended
September 30, 1999 from $104.6 million for the three months ended September
30, 1998. Higher sales of candle items and increased sales of licensed
giftware products to specialty retailers was partially offset by lower sales
of certain seasonal products. Changes in normal product prices did not
materially impact net sales.
Gross profit increased 9.1% to $31.9 million for the three months ended
September 30, 1999 from $29.2 million for the three months ended September
30, 1998. Gross profit as a percentage of sales was 28.3% for the 1999 third
quarter compared to 27.9% for the comparable 1998 period. The increase of 0.4
percentage points primarily reflects the higher margin carried by the line of
licensed giftware, which was offset by the increased royalty expense related
to this line. Gross profit as a percentage of sales was not materially
impacted by changes in product pricing.
Selling, general and administrative expenses ("S, G & A expenses") of $19.2
million increased to 17.1% as a percentage of net sales for the three months
ended September 30, 1999 from 16.7% or $17.4 million for the comparable 1998
period. The 0.4 percentage point increase in S, G & A expenses to sales for
the three months ended September 30, 1999 primarily reflects the higher
royalty expense noted above and higher provisions for bad debts.
Income from operations of $13.5 million and $13.2 million for the three
months ended September 30, 1999 and September 30, 1998, respectively,
included other operating income of $0.9 million and $1.4 million,
respectively, resulting primarily from Farberware license revenue. The $0.5
million decrease in other operating income was due to non-recurring income
recorded in 1998 for recovery of accounts receivable related to 1997 sales of
discontinued Farberware product.
Interest expense was $6.5 million for the three months ended September 30,
1999 compared to $6.4 million in the same period of 1998. This increase
results from increased borrowings for working capital purposes partially
offset by lower interest rates on the Company's Revolving Credit Facility.
The provision for income taxes was $1.8 million for the three months ended
September 30, 1999 compared to $1.9 million for the three months ended
September 30, 1998. The estimated effective income tax rate of 25% for the
three months ended September 30, 1999 compares to a slightly higher 28% rate
for the same period in the prior year.
15
Net income applicable to common stockholders for the three month periods
ended in September 30, 1999 and 1998 was $4.6 million and $4.3 million,
respectively or $1.22 and $1.15, respectively, per basic and diluted share,
on adjusted weighted average shares of 3,784,018 in both periods.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
Net sales increased 6.9% to $197.4 million for the nine months ended
September 30, 1999 from $184.6 million for the nine months ended September
30, 1998. This increase is primarily due to increased sales of a new line of
licensed giftware products to specialty retailers and increased sales of
candle giftware, partially offset by decreased sales of certain seasonal
products. Changes in normal product prices did not materially impact net
sales.
Gross profit increased 8.4% to $56.7 million for the nine months ended
September 30, 1999 from $52.3 million for the nine months ended September 30,
1998. Gross profit as a percentage of sales was 28.7% for the nine months
ended September 30, 1999 compared to 28.3% for the comparable 1998 period.
The 0.4 percentage point increase primarily reflects the higher margin
carried by the new line of licensed giftware which was offset by the
increased royalty expense related to this line. The change in gross profit as
a percentage of sales was not materially impacted by change in product
pricing.
Selling, general and administrative expenses ("S, G & A expenses") of $50.1
million improved to 25.4% as a percentage of net sales for the nine months
ended September 30, 1999 from 25.9% or $47.8 million for the comparable 1998
period. The 0.5 percentage point decrease in S, G & A expenses to sales for
the nine months ended September 30, 1999 reflects the growth in sales volume,
a decrease in personnel and related costs due to consolidation activities
accomplished in 1998, increased bad debt expense, and the higher royalty
expense noted above.
Income from operations was $8.7 million and $7.0 million for the nine months
ended September 30, 1999 and 1998, respectively, and included other operating
income of $2.2 million and $2.5 million in 1999 and 1998, respectively. The
decrease in other operating income is due to the 1998 collection of
previously reserved doubtful accounts receivable noted above.
Other income of $0.8 million for the nine months ended September 30, 1999,
represents a gain on disposal of undeveloped land.
Interest expense was $18.2 million for the nine months ended September 30,
1999 compared to $17.1 million in the same period of 1998. This increase
results from increased borrowings for working capital purposes partially
offset by lower interest rates on the Company's Revolving Credit Facility.
The benefit for income taxes was $2.2 million for the nine months ended
September 30, 1999 compared to $2.8 million for the nine months ended
September 30, 1998. The estimated effective income tax rate of 25% for the
nine months ended September 30, 1999 compares to a slightly higher 28% rate
for the same period in the prior year.
Net loss applicable to common stockholders for the nine month periods ended
in September 30, 1999 and 1998 was $8.4 million and $9.0 million,
respectively or $2.23 and $2.38, respectively, per basic and diluted share,
on adjusted weighted average shares of 3,784,018 in both periods.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the nine months ended September 30,
1999 was $49.4 million. The principal uses of cash were the normal seasonal
increase in accounts receivable and inventory. Inventories at September 30,
1999 are at a higher level compared to the same period in the prior year
primarily due to a higher mix of domestic versus foreign giftware customer
orders for the remainder of 1999 which requires stocking higher levels of
inventory at our domestic warehouses.
The Company's working capital requirements are seasonal and tend to be
highest in the period from September through November due to the Christmas
selling season. Accounts receivable tend to decline during December and the
first quarter as receivables generated during the third and fourth quarters
are collected and remain lower until the next peak season beginning in
September.
16
Capital expenditures were approximately $4.9 million for the nine months
ended September 30, 1999 and the Company expects to spend approximately $2.1
million during the remainder of 1999. These expenditures include computer
equipment and systems for the warehouse and distribution facility in Mira
Loma, CA, computer equipment and systems for the Company's East Boston office
facility, and machinery, equipment and tools and dies for the Company's
manufacturing facilities.
The Company's Revolving Credit Facility, dated April 16, 1997, amended
effective as of July 31, 1997, December 31, 1997, March 30, 1998 and December
31, 1998, provides for $130.0 million of borrowings including a $30.0 million
sublimit for the issuance of standby and commercial letters of credit.
Borrowings made under the Revolving Credit Facility bear interest at a rate
equal to, at the Company's option, the Eurodollar Rate plus 225 basis points
or the Prime Rate plus 50 basis points. The Revolving Credit Facility expires
on April 16, 2002. Pursuant to the terms of the Revolving Credit Facility as
amended, the Company is required during February and March of each year to
maintain excess availability of at least $25.0 million. The obligations of
the Company under the Revolving Facility are secured by inventory and
accounts receivable of the Company and its domestic subsidiaries and by a
pledge of 100% of the domestic subsidiaries' and at least 65% of the foreign
subsidiaries' outstanding capital stock. The Revolving Credit Facility
contains customary covenants for the Company and the subsidiary borrowers,
including but not limited to capital expenditures, and minimum consolidated
net worth on or after December 31, 1997 of at least $1.00 (not in thousands).
In addition, the Revolving Credit Facility, as amended as of December 31,
1998, includes covenants requiring a minimum ratio of earnings before
interest, income taxes, depreciation, amortization, and certain adjustments
("EBITDA"), as defined, including funded debt to EBITDA and fixed charge
coverage ratios, as defined. The Company is in compliance with the covenants,
as amended, as of September 30, 1999 and for the quarter then ended.
Availability under the Revolving Credit Facility, net of outstanding letters
of credit, was $27.1 million at September 30, 1999.
One of the Company's Puerto Rican subsidiaries has a $1.0 million facility
(the "Facility"), expiring on May 30, 2000. The Facility bears interest at a
rate equal to, at the Company's option, the Eurodollar Rate plus 175 basis
points or the bank's Prime Rate less 25 basis points. Availability under the
Facility was fourteen thousand dollars at September 30, 1999.
On June 16, 1999 the Company's C.J. Vander Ltd. subsidiary renewed its
overdraft facility, which was entered into on March 16, 1998 ("Overdraft
Facility"). The renewal changed the amount of the borrowings provided under
the facility from (pound)500 to (pound)250. Borrowings made under the
Overdraft Facility bear interest at the bank's base rate plus 1%. The
Overdraft Facility contains customary covenants, and borrowings are secured
by substantially all of the assets of C.J.Vander Ltd. The Overdraft is due on
demand and expires February 22, 2000. Availability under the Overdraft
Facility was (pound)78 at September 30, 1999.
The Notes due April 15, 2007, require interest payments to be made
semi-annually on April 15 and October 15. The Notes are general unsecured
obligations of the Company and rank pari passu in right of payment with all
current and future unsubordinated indebtedness of the Company, including
borrowings under the Revolving Credit Facility. However, all borrowings under
the Revolving Credit Facility are secured by a first priority lien on the
accounts receivable and inventory of the Company and its domestic
subsidiaries. Consequently, the obligations of the Company under the Notes
are effectively subordinated to its obligations under the Revolving Credit
Facility to the extent of such assets. The Notes are redeemable in whole or
in part, at the Company's option, after April 15, 2002. In the future, the
Company may from time to time repurchase Notes on the open market as may be
allowed under the terms of its Revolving Credit Facility, as amended, and the
terms of its Senior Notes Indenture.
The Company's ability to pay dividends is restricted by the terms of the
Revolving Credit Facility and the Note Indenture.
The liquidation preference of the Company's Cumulative Redeemable Preferred
Stock is $1,000 per share plus accrued but unpaid dividends. Holders of the
Cumulative Redeemable Preferred Stock are entitled, subject to the rights of
creditors, in the event of any voluntary or involuntary liquidation of the
Company, to an amount in cash equal to $1,000 for each share outstanding plus
all accrued and unpaid dividends. The rights of holders of the Cumulative
Redeemable Preferred Stock upon liquidation of the Company rank prior to
those of the holders of Syratech Common Stock.
17
Dividends on shares of Cumulative Redeemable Preferred Stock are cumulative from
the date of issue and are payable when and as may be declared from time to time
by the Board of Directors of the Company. Such dividends accrue on a daily basis
(whether or not declared) from the original date of issue at an annual rate per
share equal to 12% of the original purchase price per share, with such amount to
be compounded annually on each December 31 so that if the dividend is not paid
for any year the unpaid amount will be added to the original purchase price of
the Cumulative Redeemable Preferred Stock for the purpose of calculating
succeeding years' dividends.
The Cumulative Redeemable Preferred Stock is redeemable at any time at the
option of the Company, in whole or in part, at $1,000 per share plus all
accumulated and unpaid dividends, if any, at the date of redemption. Subject to
the Company's existing debt agreements, the Company must redeem all outstanding
Cumulative Redeemable Preferred Stock in the event of a public offering of
equity, a change of control or certain sales of assets.
The Company's level of indebtedness will have several important effects on
its future operations, including (i) a substantial portion of the Company's
cash flow from operations must be dedicated to the payment of interest on its
indebtedness and will not be available for other purposes, (ii) covenants
contained in the Revolving Credit Facility and the indenture governing the
Notes will require the Company to meet certain financial tests, and other
restrictions may limit its ability to borrow funds or to dispose of assets
and may affect the Company's flexibility in planning for, and reacting to,
changes in its business including possible acquisition activities, and (iii)
the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate
purposes or other purposes may be impaired.
The Company has entered into an agreement for the sale of its Revere,
Massachusetts warehouse and distribution facility which is expected to be
completed during the fourth quarter of 1999. Distribution activities will
continue in this facility, under a short-term lease, until relocated.
Proceeds from the sale, after expenses, will be used to fund capital
expenditures and reduce the Company's indebtedness.
The Company believes that funds generated from operations and borrowings
available under the Revolving Credit Facility will be sufficient to finance the
Company's working capital requirements, provide for all known obligations of the
Company (including the obligations of the Company under the $165.0 million Notes
and under its operating leases) and fund planned capital expenditures through
December 31, 1999.
YEAR 2000 CONVERSION
The Company has completed its assessment of Year 2000 compliance and determined
the critical systems to evaluate, modify and test. The Company believes that it
has modified the critical systems to comply with Year 2000 requirements and is
in the process of modifying and testing certain other systems that are not Year
2000 compliant. Principal testing of the critical systems has been successfully
completed on schedule and the Company will continue further testing and
certification of these systems as it approaches the year 2000. The Company
currently believes it will be able to modify, replace, or mitigate all of its
affected systems in time to avoid any material detrimental impact on its
operations. If the Company determines that it may be unable to remediate and
properly test affected systems on a timely basis, the Company intends to develop
appropriate contingency plans for any critical systems at the time such
determination is made. While the Company is not presently aware of any
significant exposure that all of its systems will not be properly remediated on
a timely basis, there can be no assurances that all year 2000 remediation
processes will be completed and properly tested before the year 2000, or that
contingency plans will sufficiently mitigate the risk of a year 2000 readiness
problem.
The Company has communicated with its significant suppliers, customers, and
critical business partners to determine the extent to which the Company may be
vulnerable in the event that those parties fail to properly remediate their own
year 2000 issues. The Company has completed the modification and testing of its
Electronic Data Interchange ("EDI") systems used to process orders and
communicate with certain customers. The Company is able to process 6 digit dates
for customers using older versions of the American National Standards Institute
("ANSI") and Voluntary Inter-industry Communications Standard ("VICS") 3070
specification and is listed as a compliant vendor on the web site of the
National Retail Federation. In addition, the Company is currently processing
8-digit dates (which are inherently Year 2000 compliant) in accordance with the
ANSI and VICS 4010 specification with those customers who are able to accept and
transmit this version. The Company will develop appropriate contingency plans in
the event that a significant exposure is
18
identified relative to the dependencies on third-party systems. While the
Company is not presently aware of any such significant exposure, there can be no
guarantee that the systems of third parties on which the Company relies will be
converted in a timely manner, or that a failure to properly convert by another
company would not have a material adverse effect on the Company. Potential
sources of risk include (a) the inability of principal suppliers to be Year 2000
ready, which could result in delays in product deliveries from such suppliers,
and (b) disruption of the distribution channel, including ports, transportation
vendors, and the Company's own distribution centers as a result of a general
failure of systems and necessary infrastructure such as electricity supply. The
Company believes that its actions with suppliers will minimize these risks. An
interruption of the Company's ability to conduct its business due to a year 2000
readiness problem could have a material adverse effect on the Company. The
Company's expenditures for Year 2000 compliance have not been material to its
financial condition or results of operations in any given year.
ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1999, the Company adopted the provisions of Statement of
Opinion No. 98-1, "Accounting for Costs of Computer Software Developed or
Obtained for Internal Use," which requires certain expenditures made for
internal use software to be capitalized. The provisions of this opinion did not
have a material effect on the Company's condensed consolidated financial
statements.
In June 1998, the Financial Accounting Standards Board Issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The new standard requires that all
companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
whether there will be any impact of SFAS No. 133 on the Company's consolidated
financial statements upon adoption, which is required in the first quarter of
2001.
19
SYRATECH CORPORATION AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk primarily through its borrowing
activities. The Company's short-term borrowings are substantially all
denominated in U.S. dollars and bear interest at variable rates primarily
based on either a prime rate or the London Interbank Offering Rate ("LIBOR").
The effect of a 10% change in the prime or LIBOR rate would not have a
material impact on the Company's financial results. The Company also has
fixed debt financing of $165,000 of 11% Senior Notes due April 15, 2007 that
had a fair value of $115,500 as of September 30, 1999 based upon recent
private market trades. There is inherent roll-over risk for these borrowings
as they mature and are renewed at current market rates. The extent of this
risk is not quantifiable or predictable because of the variability of future
interest rates and the Company's future financing requirements. Currently,
the Company does not enter into financial instruments transactions for
trading or other speculative purposes or to manage interest rate exposure,
and does not have investments in debt or equity securities.
The Company transacts sales and purchases primarily in U.S. Dollars and
maintains minimum cash balances denominated in foreign currencies. The Company
does not enter into foreign currency hedge transactions. Through December 31,
1998, foreign currency fluctuations have not had a material impact on the
Company's consolidated financial position or results of operations or cash flows
in any one year and the Company does not believe that its exposure to foreign
currency rate fluctuations is material.
20
PART II-OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EX- 10.1 Advice of Borrowing Terms between C.J. Vander Ltd. and
Nat West P.L.C. dated August 27, 1999.
EX-10.2 Purchase and Sale Agreement dated August 27, 1999, between
175 Amlegion Revere Realty Trust and Lyme Properties LLC.
EX-11 Computation of Net Income (loss) per Common Share.
EX-27 Financial Data Schedule.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the three months ended
September 30, 1999.
21
SYRATECH CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Syratech Corporation
Dated: November 15, 1999
/s/ AMI A. TRAUBER
-------------------------------------------------
Ami A. Trauber
Executive Vice President, Chief Financial Officer,
Treasurer (Principal Financial and
Accounting Officer)
22
INDEX TO EXHIBITS
FILED WITH SYRATECH CORPORATION
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1999
EXHIBIT NO.
EX-10.1 Advice of Borrowing Terms between C.J. Vander Ltd. and
Nat West P.L.C. dated August 27, 1999.
EX-10.2 Purchase and Sale Agreement dated August 27, 1999
between 175 Amlegion Revere Realty Trust and Lyme
Properties LLC.
EX-11 Computation of Net Loss per Common Share.
EX-27 Financial Data Schedule.