1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
COMMISSION FILE NUMBERS: 333-44473
333-77905
THE HOLMES GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2768914
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE HOLMES WAY, MILFORD MASSACHUSETTS 01757
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(508) 634-8050
(REGISTRANT'S TELEPHONE NUMBER)
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 [ ]
2
THE HOLMES GROUP, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION 3
ITEM 1. FINANCIAL STATEMENTS 3
CONSOLIDATED BALANCE SHEET AT
DECEMBER 31, 2000 AND JUNE 30, 2001 (UNAUDITED) 3
CONSOLIDATED STATEMENT OF INCOME FOR
THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30,2000 AND
JUNE 30, 2001 (UNAUDITED) 4
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE
SIX MONTHS ENDED JUNE 30, 2000 AND
JUNE 30, 2001 (UNAUDITED) 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 26
PART II. OTHER INFORMATION 27
SIGNATURES 28
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE HOLMES GROUP, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
JUNE 30,
DECEMBER 31, 2001
2000 (UNAUDITED)
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ 3,017 $ 2,981
Accounts receivable, net of allowance of $9,622 and $3,740 respectively . 124,499 113,772
Inventories ............................................................. 131,050 125,473
Prepaid expenses and other current assets ............................... 6,457 4,636
Deferred income taxes ................................................... 14,725 14,730
--------- ---------
Total current assets .................................................. 279,748 261,592
Assets held for sale .................................................... 1,624 379
Property and equipment, net ............................................. 67,582 68,644
Goodwill, net ........................................................... 83,779 82,247
Deposits and other assets ............................................... 5,850 6,656
Debt issuance costs, net ................................................ 15,286 15,110
--------- ---------
$ 453,869 $ 434,628
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of other liabilities .................................... $ 784 $ 879
Current portion of credit facility ...................................... 7,250 7,676
Accounts payable ........................................................ 30,179 35,878
Accrued expenses ........................................................ 33,345 28,402
Accrued income taxes .................................................... 4,717 7,142
--------- ---------
Total current liabilities ............................................. 76,275 79,977
Credit facility ............................................................. 225,175 217,245
Long-term debt .............................................................. 135,186 135,241
Other long-term liabilities ................................................. 7,055 7,906
Deferred income taxes ....................................................... 4,704 4,704
Commitments and contingencies Stockholders' equity(deficit):
Common stock, $.001 par value. Authorized 25,000,000 shares as of
December 31, 2000 and 28,500,000 shares as of June 30, 2001; issued
and outstanding 20,307,995 shares at December 31, 2000 and
June 30, 2001 ......................................................... 20 20
Additional paid in capital ................................................ 67,915 69,297
Accumulated other comprehensive income .................................... 241 (68)
Treasury stock, at cost (18,620,450 shares) ............................... (62,058) (62,076)
Retained earnings (deficit) ............................................... (644) (17,618)
--------- ---------
Total stockholders' equity (deficit) .................................. 5,474 (10,445)
--------- ---------
$ 453,869 $ 434,628
========= =========
The accompanying notes are an integral part of these consolidated financial
statements
4
THE HOLMES GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 2001 JUNE 30, 2000 JUNE 30, 2001
------------- ------------- ------------- -------------
Net sales .............................................. $ 121,536 $ 130,972 $ 240,093 $ 258,205
Cost of goods sold ..................................... 91,082 101,720 174,275 195,578
--------- --------- --------- ---------
Gross profit ......................................... 30,454 29,252 65,818 62,627
--------- --------- --------- ---------
Operating expenses:
Selling .............................................. 17,529 15,290 34,849 31,502
General and administrative ........................... 8,343 10,628 16,189 18,973
Product development .................................. 2,706 2,306 5,511 4,872
Restructuring costs................................... -- 1,445 -- 1,445
Plant closing costs .................................. 196 -- 340 --
Amortization of goodwill and other intangible assets . 664 650 1,326 1,300
--------- --------- --------- ---------
Total operating expenses ........................... 29,438 30,319 58,215 58,092
--------- --------- --------- ---------
Operating profit ................................... 1,016 (1,067) 7,603 4,535
--------- --------- --------- ---------
Other income and expense:
Interest and other expense, net ...................... 9,392 11,058 18,546 20,438
--------- --------- --------- ---------
Income (loss) before income taxes and equity in earnings
from joint venture ................................... (8,376) (12,125) (10,943) (15,903)
Income tax expense (benefit) ........................... (411) 1,167 (532) 2,431
Equity in earnings from joint venture .................. 193 744 336 1,360
--------- --------- --------- ---------
Net income (loss) .................................. $ (7,772) $ (12,548) $ (10,075) $ (16,974)
========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
5
THE HOLMES GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 2001
------------- -------------
Cash flows from operating activities:
Net income (loss) .......................................................... $(10,075) $(16,974)
Adjustments to reconcile net income (loss) to net cash provided by (used
for) operating activities:
Depreciation and amortization ............................................ 8,644 7,880
Amortization of debt issuance costs, discounts and other non-cash
interest expense ....................................................... 2,587 3,987
Restructuring and asset impairment charges ............................... -- 912
Change in allowance for doubtful accounts ................................ 504 (5,882)
(Gain) loss on disposal of assets ........................................ -- (559)
Deferred income taxes .................................................... 313 (5)
Changes in operating assets and liabilities:
Accounts receivable .................................................... 33,251 16,609
Inventories ............................................................ (19,787) 5,577
Prepaid expenses and other current assets .............................. 744 1,821
Deposits and other assets .............................................. (5,290) (3,641)
Accounts payable ....................................................... 4,638 5,475
Accrued expenses ....................................................... (9,907) (4,943)
Accrued income taxes ................................................... 429 2,425
-------- --------
Net cash provided by operating activities ................................ 6,051 12,682
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets held for sale and business divestitures ....... 4,753 2,053
Distribution of earnings from joint venture ................................ 907 616
Purchases of property and equipment ........................................ (11,432) (8,554)
Cash received from joint venture partner, net .............................. 1,141 700
-------- --------
Net cash used for investing activities ................................... (4,631) (5,185)
-------- --------
Cash flows from financing activities:
Borrowings (repayment) of credit facility, net of issuance costs ........... (5,125) (7,504)
Principal payments on capital lease obligations ............................ (139) --
-------- --------
Net cash (used for) financing activities ................................. (5,264) (7,504)
-------- --------
Effect of exchange rate changes on cash ...................................... 72 (29)
-------- --------
Net increase (decrease) in cash and cash equivalents ......................... (3,772) (36)
Cash and cash equivalents, beginning of period ............................... 6,647 3,017
-------- --------
Cash and cash equivalents, end of period ..................................... $ 2,875 $ 2,981
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest .................................................... $ 16,123 $ 17,332
Cash paid for (refund of) income taxes .................................... $ (504) $ 133
The accompanying notes are an integral part of these consolidated financial
statements.
6
THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
1. NATURE OF BUSINESS
The Holmes Group, Inc. ("THG"), formerly known as Holmes Products Corp.,
along with its wholly-owned subsidiary, The Rival Company ("Rival") and its
subsidiaries, acquired on February 5, 1999, designs, develops, imports and
sells consumer durable goods, including fans, heaters, humidifiers, air
purifiers, small kitchen electric appliances, personal care appliances,
filters and accessories and lighting products, to retailers throughout the
United States and Canada, and to a lesser extent, Europe, Latin America and
Asia.
Holmes Products (Far East) Limited ("HPFEL") and its subsidiaries
manufacture, source and sell consumer durable goods, including fans,
heaters and humidifiers and kitchen electrics, mainly to THG. HPFEL
operates facilities in Hong Kong, Taiwan and The People's Republic of
China.
HPFEL is a wholly-owned subsidiary of THG. Prior to the recapitalization
transaction described in Note 4, THG and HPFEL were both directly or
indirectly 80%-owned subsidiaries of Asco Investments Ltd., a subsidiary of
Pentland Group plc ("Pentland").
2. BASIS OF CONSOLIDATION
The accompanying unaudited financial statements include the accounts of THG
and its wholly-owned subsidiaries, Rival, HPFEL, Holmes Manufacturing
Corp., Holmes Air (Taiwan) Corp. and Holmes Motor Corp. The accompanying
unaudited financial statements also include the accounts of Rival's direct
and indirect wholly-owned subsidiaries, Bionaire International B.V., Patton
Building Products, Inc. (which has subsequently been merged into Rival),
Patton Electric Company, Inc. (which has subsequently been merged into
Rival), Patton Electric (Hong Kong) Limited, Rival Consumer Sales
Corporation, The Holmes Group Canada, Ltd., Rival de Mexico S.A. de C.V.
and Waverly Products Company, Ltd. and HPFEL's wholly-owned subsidiaries,
Esteem Industries Ltd., Raider Motor Corp., Dongguan Huixin Electrical
Products Company, Ltd., Holmes Products (Europe) Ltd., Dongguan Holmes
Products Ltd. and Dongguan Raider Motor Corp. Ltd. All significant
inter-company balances and transactions have been eliminated.
THG and its consolidated subsidiaries, including Rival, HPFEL and their
respective subsidiaries, are referred to herein as the "Company."
3. ACQUISITION
On February 5, 1999, THG completed its acquisition of Rival for an
aggregate of $279.6 million, including $129.4 million cash paid in
connection with a tender offer for all of the outstanding shares of Common
Stock of Rival (including payments to optionees), $142.9 million to
refinance Rival's outstanding debt and $7.3 million in acquisition costs.
The acquisition was made utilizing cash on hand, borrowings under an
amended and restated Credit Facility entered into in connection with the
acquisition, the issuance of $31.3 million of senior subordinated notes and
proceeds of $50.0 million from the sale of THG's common stock to investment
funds affiliated with THG's majority shareholder, certain members of
Holmes' management and to certain other co-investors. This acquisition has
been accounted for as a purchase, and the results of operations of Rival
have been included in the consolidated financial statements since the date
of acquisition. The excess of the purchase price over the fair value of the
net assets acquired was approximately $88.5 million and $88.7 million,
before $6.3 million and $4.9 million of accumulated amortization at June
30, 2001 and December 31, 2000, respectively and is being amortized on a
straight-line basis over 35 years.
7
THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In connection with the acquisition, THG recorded a restructuring reserve of
$6.4 million as an assumed liability in accordance with EITF 95-3,
"Recognition of Liabilities in Connection with a Purchase Business
Combination."
Management determined that certain restructuring actions would be required
to effectively integrate the Rival operations into THG. These restructuring
actions were comprised primarily of the elimination of certain overlapping
positions within the management and support staff layers of the combined
company, relocation of key home environment personnel from Kansas City, MO
to Milford, MA, consolidation of the Rival Hong Kong and Canadian offices
into other existing local offices, and closure of the Warrensburg, MO
manufacturing facility.
These actions resulted in the elimination of 216 Rival employees from a
combination of the Rival Warrensburg facility and the Kansas City, Canada
and Hong Kong offices. Severance for some of these employees will be paid
during the remainder of fiscal 2001.
Exit costs related to these restructuring plans are comprised primarily of
lease exit costs for Canada and Hong Kong and facility closure and exit
costs related to the Warrensburg facility. At December 31, 1999, the Hong
Kong consolidation was completed resulting in exit costs of $0.1 million.
The Montreal, Canada and the Warrensburg, Missouri facility closures were
completed during fiscal 2000. The Warrensburg facility was sold during the
first quarter of 2001 which resulted in a gain of approximately $559,000.
Proceeds from the sale were approximately $1,965,000.
On June 28, 2001, the Company announced that the Sedalia, Missouri
manufacturing plant would be closed. The activities of this plant will be
moved to the other existing plants in Clinton, Missouri and Jackson,
Mississippi. As a result, approximately 300 additional manufacturing,
engineering and office positions were eliminated. In connection with the
foregoing, the Company recorded a $727,000 restructuring charge for the
severance and other employee related costs in accordance with EITF 94-3 "
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". Severance costs for these employees will be paid during
the remainder of 2001 and into 2002. Additionally, the Company recorded a
$718,000 charge for restructuring associated with the Sedalia plant
closure. These charges represent asset write-downs of redundant property,
plant and equipment and facility exit costs. The remaining net book value
of the Sedalia plant has been shown as assets held for sale in the
Consolidated June 30, 2001 balance sheet.
The reserve activity for fiscal 2001 is as follows (in thousands):
Employee Facility Total
Severance and Exit and Accrued
Relocation Costs Other Costs Restructuring
---------------- ----------- -------------
Balance at December 31, 2000 $ 712 $ 233 $ 945
Restructuring charges 727 718 1,445
Cash payments/adjustments
recorded in fiscal 2001 (304) (901) (1,205)
------- ----- -------
Balance at June 30, 2001 $ 1,135 $ 50 $ 1,185
The cash payments/adjustments recorded in fiscal 2001 primarily include the
cash payments made for severance in the first half of 2001 and the write
down recorded in connection with the Sedalia plant closure.
8
THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Following the Rival acquisition, the Company divested two of Rival's
non-core business units. On October 8, 1999, the Company sold the assets of
Rival's sump and utility pump division for $11.4 million. The proceeds
received for the assets exceeded the net asset values recorded by $0.7
million. On December 21, 1999, the Company sold the net assets of Rival's
industrial and building supply products businesses for proceeds of $9.7
million, net of contingent consideration of $2.7 million. The contingent
consideration was based on certain performance metrics and actual final
inventory counts. Excluding the contingent consideration, the book value of
the assets sold exceeded the proceeds by $5.5 million. Due to the proximity
of the transactions to the original Rival acquisition date, the net loss on
these transactions of $4.7 million was recorded as an increase to goodwill.
4. RECAPITALIZATION
On November 26, 1997, the Company and its stockholders consummated an
agreement to perform the following: (i) the stockholders of HPFEL
contributed their shares of common stock to THG in exchange for 2,750,741
shares of THG's common stock (ii) THG issued 4,718,579 shares of its common
stock to outside investors and certain executive officers of the Company
for approximately $15.5 million, net of related issuance costs, (iii) the
Company repaid all amounts outstanding to Pentland affiliates and repaid
all amounts outstanding on the Company's trade acceptances, including
accrued interest, and (iv) THG redeemed 18,620,450 shares of its common
stock held by Pentland for approximately $62.1 million. In connection with
these transactions, THG issued $105.0 million of 9 7/8% Senior Subordinated
Notes due in November 2007 and borrowed $27.5 million under a new line of
credit facility.
The transactions described above have been accounted for as a leveraged
recapitalization of the Company. The Company has retained its historical
cost basis of accounting, due to the significant minority shareholders
which remained. The shares redeemed from Pentland have been recorded as
treasury stock, at cost.
5. UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting of
normal recurring accruals, considered necessary for a fair presentation of
the Company's financial position as of June 30, 2001 and the Company's
results of operations and cash flows for the six months ended June 30, 2000
and 2001. This interim financial information and notes thereto should be
read in conjunction with the Company's Annual Report on Form 10-K for the
year ended December 31, 2000. Due to the seasonality of the Company's
business, the Company's consolidated results of operations for the three
and six month periods ended June 30, 2001 are not necessarily indicative of
the results to be expected for any other interim period or the entire
fiscal year.
6. INVENTORIES
All inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method on approximately 80%
of the inventories and the last-in, first-out method (LIFO) for the
remaining 20% of the inventory. Inventories are as follows:
9
THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 2000 June 30, 2001
----------------- -------------
Finished goods $ 97,375,000 $ 92,617,000
Raw materials and Work-in-process 33,299,000 32,931,000
------------ ------------
130,674,000 125,548,000
LIFO allowance 376,000 (75,000)
------------ ------------
$131,050,000 $125,473,000
============ ============
7. LONG-TERM DEBT
Senior Subordinated Notes
In connection with the recapitalization transactions described in Note 4
and the Rival acquisition described in Note 3, THG issued $105.0 million
and $31.3 million, respectively, in senior subordinated notes, maturing on
November 15, 2007 (the "Notes"). The Notes bear interest at 9 7/8%, payable
semi-annually on May 15 and November 15. No principal is due until the
maturity date.
The Notes are subordinated to the Company's other debt, including the
Credit Facility (as described below) and capital leases. The Notes are
guaranteed by THG's current and future domestic subsidiaries (see Note 12)
on a full, unconditional and joint and several basis, but are otherwise
unsecured.
THG can, at its option, redeem the Notes at any time after November 15,
2002, subject to a fixed schedule of redemption prices which declines from
104.9% to 100% of the face value. However, THG may redeem up to $43.3
million of the Notes prior to such date at a price of 109.875% of face
value upon issuance of equity securities. Additionally, upon certain sales
of stock or assets or a change of control of THG, THG must offer to
repurchase all or a portion of the Notes at a redemption price of 101% of
face value.
The Notes contain certain restrictions and covenants, including limitations
(based on certain financial ratios) on THG's ability to pay dividends,
repurchase stock or incur additional debt (other than borrowings under the
Credit Facility and other enumerated exceptions). The Notes are
cross-defaulted to payment defaults under the Credit Facility.
Credit Facility
The Company entered into an amended and restated Credit Facility agreement
in February, 1999 in connection with the Rival acquisition. The Credit
Facility consisted of a tranche A term loan of $40.0 million that matures
February 5, 2005, a tranche B term loan of $85.0 million that matures
February 5, 2007 and a $140.0 million revolving credit facility that
matures February 5,2005. Availability under the Credit Facility is reduced
by outstanding letters of credit. As of June 30, 2001, the Company's
availability was $33.7 million, net of outstanding letters of credit
totaling $4.8 million. The Credit Facility bears interest at variable rates
based on either the prime rate or eurodollar, at the Company's option, plus
a margin which, in the case of the tranche A term loan and the revolving
credit facility, varies depending upon certain financial ratios. The Credit
Facility, and the guarantees thereof by the Company's domestic
subsidiaries, are secured by substantially all of the Company's domestic
and certain foreign assets. The Credit Facility is cross-defaulted to the
Notes Indentures.
10
THE HOLMES GROUP, INC. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company's financial performance in the fourth quarter of 2000 resulted
in a default, as of December 31, 2000, of certain financial ratio covenants
in the Credit Facility as previously amended. The lending group agreed to a
Forbearance Agreement with respect to such defaults on April 13, 2001. On
May 7, 2001, the Credit Facility was further amended to waive the defaults
and to revise certain of the financial ratio covenants through June 30,
2002. In addition, the maximum revolving credit availability under the
Credit Facility has been increased from $140.0 million to an aggregate of
$180.0 million through January 31, 2002, decreasing to an aggregate of
$155.0 million through July 1, 2002 and $115.0 million thereafter, subject
at all times to a borrowing base formula.
As partial consideration for the amendments and the limited waiver, the
Company issued warrants to the lenders to acquire up to 5% of THG's common
stock on a fully-diluted basis. The warrants are exercisable at a price of
$5.04 per share, and expire May 7, 2006. Additionally, the majority
stockholder agreed to provide a $43.5 million guarantee in support of the
increased revolving credit commitment. The fair value of the warrants was
approximately $1.4 million and was recorded as a charge to interest expense
during the second quarter of 2001.
The Credit Facility as amended, and the Notes Indentures include certain
financial and operating covenants, which, among other things, restrict the
ability of the Company to incur additional indebtedness, grant liens, make
investments and take certain other actions. The ability of the Company to
meet its debt service obligations will be dependent upon the future
performance of the Company, which will be impacted by general economic
conditions and other factors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Forward-Looking
Statements."
Long term debt consists of the following:
(in thousands) December 31, 2000 June 30,2001
----------------- ------------
Credit Facility, with a weighted average interest rate of
10.1% and 8.7% at December 31, 2000 and June 30, 2001,
respectively .......................................... $232,425 $224,921
9 7/8% Senior Subordinated Notes, net of unamortized
discount of $1.1 million at December 31, 2000 and $1.0
million at June 30, 2001 .............................. 135,186 135,241
-------- --------
Total debt .............................................. 367,611 360,162
Less current maturities ................................. 7,250 7,676
-------- --------
Long-term debt .......................................... $360,361 $352,486
Effective May 7, 1999 the Company entered into an interest rate collar
transaction agreement with its lending bank. The interest rate collar
consists of a cap rate of 6.5% and a floor rate of 4.62%. The one-time
premium payment for the collar was $225,000 and the agreement terminates
March 31, 2002. Quarterly on the last business day of March, June,
September and December beginning September 30, 1999 if the LIBOR interest
rate at the lending bank is greater than the cap rate, the lending bank
agrees to pay the Company a notional amount as described in the agreement
multiplied by the number of days in that quarter over 365 days times the
difference between the LIBOR rate and the cap rate. If on the other hand
the LIBOR rate is less than the floor rate, the Company would have to pay
the lending bank based on the same calculation. If the LIBOR rate is
between the cap and floor rate, no payments would be necessary by either
party. The LIBOR interest rate at June 30, 2001 was 3.71%, therefore the
Company will owe approximately $198,000 in the third quarter to the lending
bank.
11
THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income." This Statement establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income consists of net earnings and foreign currency
translation adjustments as presented in the following table.
Three months ended
(in thousands) June 30, 2000 June 30, 2001
------------- -------------
Net Earnings (loss) .................... $(7,772) $(12,548)
Foreign currency translation adjustments 121 17
------- -------
Comprehensive income (loss) .......... $(7,651) $(12,531)
Six months ended
(in thousands) June 30, 2000 June 30, 2001
------------- -------------
Net Earnings (loss) .................... $(10,075) $(16,974)
Foreign currency translation adjustments (502) (309)
-------- --------
Comprehensive income (loss) .......... $(10,577) $(17,283)
9. BUSINESS SEGMENTS
The Company adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"), during 1998. SFAS 131
established standards for reporting information about business segments in
annual financial statements. It also established standards for related
disclosures about products and services, major customers and geographic
areas. Business segments are defined as components of a business about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group,
in deciding how to allocate resources and in assessing performance. The
business segments are managed separately because each segment represents a
strategic business unit whose main business is entirely different. The
adoption of SFAS 131 did not affect the Company's results of operations or
financial position.
The Company currently manages its operations through three business
segments: consumer durables, international and Far East. The consumer
durables segment sells products including fans, heaters, humidifiers, air
purifiers, Crock-Pot (R) slow cookers, toasters, ice cream freezers, can
openers, showerheads, massagers and lighting products to retailers
throughout the U.S. The consumer durables segment is made up of home
environment products and kitchen electric products, which are considered
one business segment due to the similar customer base and distribution
channels. The international segment sells the Company's products outside
the U.S. The Far East segment is the manufacturing and sourcing operation
located primarily at HPFEL.
12
THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The International and Other category in 2001 represents the International
segment. For 2000, the other category represented the International segment
and the divested industrial and building supply segment combined as neither
accounted for over 10% of net sales individually. Summary financial
information for each reportable segment for the three and six month periods
ended June 30, 2001 and 2000 is as follows (in thousands):
Consumer International Consolidated
THREE MONTHS ENDED Durables Far East and Other Eliminations Total
-------- -------- ------------- ------------ ------------
June 30, 2001
Net sales ............ $ 113,248 $ 63,281 $ 11,883 $ (57,440) $ 130,972
Operating income(loss) (7,046) 5,032 537 410 (1,067)
June 30, 2000
Net sales ............ $ 107,675 $ 57,473 $ 10,401 $ (54,013) $ 121,536
Operating income(loss) (1,132) 3,190 (1,072) 30 1,016
SIX MONTHS ENDED
June 30, 2001
Net sales ............ $ 224,237 $128,000 $ 22,330 $(116,362) $ 258,205
Operating income(loss) (8,825) 11,780 845 735 4,535
June 30, 2000
Net sales ............ $ 210,502 $116,258 $ 22,205 $(108,872) $ 240,093
Operating income(loss) 497 9,465 (2,419) 60 7,603
The following information is summarized by geographic area (in thousands):
Other Consolidated
United States Far East International Total
------------- -------- ------------- ------------
Net sales:
Three months ended June 30, 2001 $113,248 $ 5,841 $ 11,883 $130,972
Three months ended June 30, 2000 107,675 3,460 10,401 121,536
Six months ended June 30, 2001 . $224,237 $ 11,638 $ 22,330 $258,205
Six months ended June 30, 2000 . 210,502 7,386 22,205 240,093
Identifiable assets:
June 30, 2001 .................. 36,168 32,261 594 69,023
December 31, 2000 .............. 37,777 30,654 775 69,206
Net sales are grouped based on the geographic origin of the transaction.
The "Other International" area is comprised of sales of products that
originated in Europe, Mexico, Latin America and Canada.
The Company's manufacturing entities in the Far East sell completed
products to THG in the United States at intercompany transfer prices which
reflect management's estimate of amounts which would be charged by an
unrelated third party. These sales are eliminated in consolidation. The
remaining Far East sales are to unrelated third parties.
13
THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. CONTINGENCIES
The Company is involved in litigation and is the subject of claims arising
in the normal course of its business. In the opinion of management, based
upon discussions with legal counsel, no existing litigation or claims will
have a materially adverse effect on the Company's financial position or
results of operations and cash flows.
11. RECLASSIFICATIONS
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period presentation.
12. CONDENSED CONSOLIDATING INFORMATION
The senior subordinated notes described in Note 7 were issued by THG and
are guaranteed by Rival and its domestic subsidiary and Holmes
Manufacturing Corp. ("Manufacturing"), Holmes Motor Corp. ("Motor") and
Holmes Air (Taiwan) Corp. ("Taiwan"), but are not guaranteed by THG's other
subsidiary, HPFEL, or Rival's five foreign subsidiaries. The guarantor
subsidiaries are directly or indirectly wholly-owned by THG, and the
guarantees are full, unconditional and joint and several. The following
condensed consolidating financial information presents the financial
position, results of operations and cash flows of (i) THG, as parent, as if
it accounted for its subsidiaries on the equity method, (ii) Rival (on a
consolidated basis following its acquisition by THG, Manufacturing, Motor
and Taiwan, the guarantor subsidiaries, and (iii) HPFEL, Bionaire
International B.V., The Holmes Group Canada, Ltd., Waverly Products
Company, Ltd., and Rival de Mexico S.A. de C.V., the non-guarantor
subsidiaries. There were no transactions between Rival, Manufacturing,
Motor and Taiwan during any of the periods presented. Taiwan and
Manufacturing had no revenues or operations during the periods presented.
As further described in Note 15 of the Company's audited financial
statements for the year ended December 31, 2000, included in the Company's
Form 10-K, as amended, as filed with the Securities and Exchange
Commission, certain of HPFEL's subsidiaries in China have restrictions on
distributions to their parent companies.
14
CONSOLIDATING BALANCE SHEET DECEMBER 31, 2000 (IN THOUSANDS)
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents ..... $ 175 $ 959 $ 1,883 -- $ 3,017
Accounts receivable, net ...... 51,725 49,459 23,315 -- 124,499
Inventories ................... 51,181 52,637 32,396 $ (5,164) 131,050
Prepaid expenses and other
current assets ............. 2,922 74 3,461 -- 6,457
Deferred income taxes ......... 5,300 9,911 (486) -- 14,725
Due from affiliates ........... 223,445 89 29,138 (252,672) --
--------- --------- --------- --------- ---------
Total current assets ....... 334,748 113,129 89,707 (257,836) 279,748
--------- --------- --------- --------- ---------
Assets held for sale ............ -- 1,624 -- -- 1,624
Property and equipment, net ..... 5,482 30,671 31,429 -- 67,582
Goodwill, net ................... -- 83,779 -- -- 83,779
Deposits and other assets ....... 21,806 3,110 511 (4,291) 21,136
Investments in consolidated
subsidiaries .................. 41,217 -- -- (41,217) --
--------- --------- --------- --------- ---------
$ 403,253 $ 232,313 $ 121,647 $(303,344) $ 453,869
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of
other liabilities .......... $ -- $ -- $ 784 -- $ 784
Current portion of
credit facility ............ 7,250 -- -- -- 7,250
Accounts payable ............... 7,367 (2,261) 29,264 $ (4,191) 30,179
Accrued expenses ............... 15,835 12,298 5,212 -- 33,345
Accrued income taxes ........... (10) 2,521 2,206 -- 4,717
Due to affiliates .............. 6,976 221,939 23,757 (252,672) --
--------- --------- --------- --------- ---------
Total current liabilities .. 37,418 234,497 61,223 (256,863) 76,275
--------- --------- --------- --------- ---------
Credit facility ................. 225,175 -- -- -- 225,175
--------- --------- --------- --------- ---------
Long-term debt .................. 135,186 -- -- -- 135,186
--------- --------- --------- --------- ---------
Other long-term liabilities ..... -- -- 7,055 -- 7,055
--------- --------- --------- --------- ---------
Deferred income taxes ........... -- 4,704 -- -- 4,704
--------- --------- --------- --------- ---------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value . 20 2 -- (2) 20
Common stock, $1 par value .... -- -- 100 (100) --
Additional paid in capital .... 67,915 -- -- -- 67,915
Accumulated other comprehensive
income ..................... 241 -- 241 (241) 241
Treasury stock ................ (62,058) -- -- -- (62,058)
Retained earnings(deficit) .... (644) (6,890) 53,028 (46,138) (644)
--------- --------- --------- --------- ---------
Total stockholders' equity
(deficit) ................ 5,474 (6,888) 53,369 (46,481) 5,474
--------- --------- --------- --------- ---------
$ 403,253 $ 232,313 $ 121,647 $(303,344) $ 453,869
========= ========= ========= ========= =========
15
CONSOLIDATING BALANCE SHEET JUNE 30, 2001 (IN THOUSANDS)
(UNAUDITED)
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents ..... $ 746 $ 1,060 $ 1,175 -- $ 2,981
Accounts receivable, net ...... 39,811 56,576 17,385 -- 113,772
Inventories ................... 40,413 60,876 28,673 $ (4,489) 125,473
Prepaid expenses and other
current assets ............. 2,173 40 2,423 -- 4,636
Deferred income taxes ......... 5,300 9,911 (481) -- 14,730
Due from affiliates ........... 213,387 89 54,132 (267,608) --
--------- --------- --------- --------- ---------
Total current assets ....... 301,830 128,552 103,307 (272,097) 261,592
--------- --------- --------- --------- ---------
Assets held for sale ............ -- 379 -- -- 379
Property and equipment, net ..... 6,466 29,323 32,855 -- 68,644
Goodwill, net ................... -- 82,247 -- -- 82,247
Deposits and other assets ....... 22,206 3,191 1,260 (4,891) 21,766
Investments in consolidated
subsidiaries .................. 58,539 -- -- (58,539) --
--------- --------- --------- --------- ---------
$ 389,041 $ 243,692 $ 137,422 $(335,527) $ 434,628
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of
other liabilities .......... $ -- $ -- $ 879 -- $ 879
Current portion of
credit facility ............ 7,676 -- -- -- 7,676
Accounts payable ............... 4,703 5,470 30,596 $ (4,891) 35,878
Accrued expenses ............... 14,821 9,792 3,789 -- 28,402
Accrued income taxes ........... 706 2,753 3,683 -- 7,142
Due to affiliates .............. 19,094 222,483 25,931 (267,508) --
--------- --------- --------- --------- ---------
Total current liabilities .. 47,000 240,498 64,878 (272,399) 79,977
--------- --------- --------- --------- ---------
Credit facility ................. 217,245 -- -- -- 217,245
--------- --------- --------- --------- ---------
Long-term debt .................. 135,241 -- -- -- 135,241
--------- --------- --------- --------- ---------
Other long-term liabilities ..... -- -- 7,906 -- 7,906
--------- --------- --------- --------- ---------
Deferred income taxes ........... -- 4,704 -- -- 4,704
--------- --------- --------- --------- ---------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value . 20 2 -- (2) 20
Common stock, $1 par value .... -- -- 100 (100) --
Additional paid in capital .... 69,297 -- -- -- 69,297
Accumulated other comprehensive
income ..................... (68) -- (68) 68 (68)
Treasury stock ................ (62,076) -- -- -- (62,076)
Retained earnings(deficit) .... (17,618) (1,512) 64,606 (63,094) (17,618)
--------- --------- --------- --------- ---------
Total stockholders' equity
(deficit) ................ (10,445) (1,510) 64,638 (63,128) (10,445)
--------- --------- --------- --------- ---------
$ 389,041 $ 243,692 $ 137,422 $(335,527) $ 434,628
========= ========= ========= ========= =========
16
CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS)
(UNAUDITED)
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Net sales .................... $ 55,103 $ 53,150 $ 67,296 $ (54,013) $ 121,536
Cost of goods sold ........... 45,681 40,614 58,830 (54,043) 91,082
--------- --------- --------- --------- ---------
Gross profit (loss) ........ 9,422 12,536 8,466 30 30,454
--------- --------- --------- --------- ---------
Operating expenses:
Selling .................... 6,418 8,875 2,236 -- 17,529
General and administrative . 3,346 2,124 2,873 -- 8,343
Product development ........ 2,163 543 -- -- 2,706
Plant closing costs ........ -- 196 -- -- 196
Amortization of goodwill and
other intangible assets . -- 650 14 -- 664
--------- --------- --------- --------- ---------
Total operating expenses ... 11,927 12,388 5,123 -- 29,438
--------- --------- --------- --------- ---------
Operating profit (loss) .... (2,505) 148 3,343 30 1,016
--------- --------- --------- --------- ---------
Other income and expense:
Other (income) expense, net -- -- -- -- --
Interest and other expense,
net ..................... 9,326 (11) 77 -- 9,392
--------- --------- --------- --------- ---------
Total other (income)
expense ............... 9,326 (11) 77 -- 9,392
--------- --------- --------- --------- ---------
Income (loss) before income
taxes and equity in income
of and equity in earnings
from joint venture ......... (11,831) 159 3,266 30 (8,376)
Equity in earnings from joint
venture .................... 193 -- -- -- 193
Income tax expense (benefit) . (979) 460 108 -- (411)
--------- --------- --------- --------- ---------
Income (loss) before equity in
income of consolidated
subsidiaries ............... (10,659) (301) 3,158 30 (7,772)
Equity in income of
consolidated subsidiaries .. 2,887 -- -- (2,887) --
--------- --------- --------- --------- ---------
Net income (loss) ............ $ (7,772) $ (301) $ 3,158 $ (2,857) $ (7,772)
========= ========= ========= ========= =========
17
CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED JUNE 30, 2001 (IN THOUSANDS)
(UNAUDITED)
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Net sales .................... $ 43,902 $ 69,346 $ 75,164 $ (57,440) $ 130,972
Cost of goods sold ........... 41,020 53,630 64,920 (57,850) 101,720
--------- --------- --------- --------- ---------
Gross profit (loss) ........ 2,882 15,716 10,244 410 29,252
--------- --------- --------- --------- ---------
Operating expenses:
Selling .................... 8,646 3,870 2,774 -- 15,290
General and administrative . 6,574 2,153 1,901 -- 10,628
Product development ........ 2,359 (53) -- -- 2,306
Restructuring charges ...... -- 1,445 -- -- 1,445
Amortization of goodwill and
other intangible assets . -- 650 -- -- 650
--------- --------- --------- --------- ---------
Total operating expenses ... 17,579 8,065 4,675 -- 30,319
--------- --------- --------- --------- ---------
Operating profit (loss) .... (14,697) 7,651 5,569 410 (1,067)
--------- --------- --------- --------- ---------
Other income and expense:
Other (income) expense, net (245) 328 (404) -- (321)
Interest and other expense,
net ..................... 9,023 2,382 (26) -- 11,379
--------- --------- --------- --------- ---------
Total other (income)
expense ............... 8,778 2,710 (430) -- 11,058
--------- --------- --------- --------- ---------
Income (loss) before income
taxes and equity in income
of and equity in earnings
from joint venture ......... (23,475) 4,941 5,999 410 (12,125)
Equity in earnings from joint
venture .................... 744 -- -- -- 744
Income tax expense (benefit) . 561 -- 606 -- 1,167
--------- --------- --------- --------- ---------
Income (loss) before equity in
income of consolidated
subsidiaries ............... (23,292) 4,941 5,393 410 (12,548)
Equity in income of
consolidated subsidiaries .. 10,744 -- -- (10,744) --
--------- --------- --------- --------- ---------
Net income (loss) ............ $ (12,548) $ 4,941 $ 5,393 $ (10,334) $ (12,548)
========= ========= ========= ========= =========
18
CONSOLIDATING INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS)
(UNAUDITED)
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Net sales .................... $ 120,878 $ 93,389 $ 134,698 $(108,872) $ 240,093
Cost of goods sold ........... 96,209 72,138 114,860 (108,932) 174,275
--------- --------- --------- --------- ---------
Gross profit (loss) ........ 24,669 21,251 19,838 60 65,818
--------- --------- --------- --------- ---------
Operating expenses:
Selling .................... 14,726 15,717 4,406 -- 34,849
General and administrative . 5,653 4,550 5,986 -- 16,189
Product development ........ 4,310 1,201 -- -- 5,511
Plant closing costs ........ -- 340 -- -- 340
Amortization of goodwill and
other intangible assets . -- 1,296 30 -- 1,326
--------- --------- --------- --------- ---------
Total operating expenses ... 24,689 23,104 10,422 -- 58,215
--------- --------- --------- --------- ---------
Operating profit (loss) .... (20) (1,853) 9,416 60 7,603
--------- --------- --------- --------- ---------
Other income and expense:
Other (income) expense, net -- 58 (280) -- (222)
Interest and other expense,
net ..................... 18,845 (22) (55) -- 18,768
--------- --------- --------- --------- ---------
Total other (income)
expense ............... 18,845 36 (335) -- 18,546
--------- --------- --------- --------- ---------
Income (loss) before income
taxes and equity in income
of and equity in earnings
from joint venture ......... (18,865) (1,889) 9,751 60 (10,943)
Equity in earnings from joint
venture .................... 336 -- -- -- 336
Income tax expense (benefit) . (1,178) (85) 731 -- (532)
--------- --------- --------- --------- ---------
Income (loss) before equity in
income of consolidated
subsidiaries ............... (17,351) (1,804) 9,020 60 (10,075)
Equity in income of
consolidated subsidiaries .. 7,276 -- -- (7,276) --
--------- --------- --------- --------- ---------
Net income (loss) ............ $ (10,075) $ (1,804) $ 9,020 $ (7,216) $ (10,075)
========= ========= ========= ========= =========
19
CONSOLIDATING INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 2001 (IN THOUSANDS)
(UNAUDITED)
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Net sales .................... $ 107,486 $ 116,751 $ 150,330 $(116,362) $ 258,205
Cost of goods sold ........... 94,823 89,846 128,006 (117,097) 195,578
--------- --------- --------- --------- ---------
Gross profit (loss) ........ 12,663 26,905 22,324 735 62,627
--------- --------- --------- --------- ---------
Operating expenses:
Selling .................... 16,550 9,839 5,113 -- 31,502
General and administrative . 10,836 3,551 4,586 -- 18,973
Product development ........ 4,447 425 -- -- 4,872
Restructuring charges ...... -- 1,445 -- -- 1,445
Amortization of goodwill and
other intangible assets . -- 1,300 -- -- 1,300
--------- --------- --------- --------- ---------
Total operating expenses ... 31,833 16,560 9,699 -- 58,092
--------- --------- --------- --------- ---------
Operating profit (loss) .... (19,170) 10,345 12,625 735 4,535
--------- --------- --------- --------- ---------
Other income and expense:
Other (income) expense, net 340 (203) (414) -- (277)
Interest and other expense,
net ..................... 15,576 5,168 (29) -- 20,715
--------- --------- --------- --------- ---------
Total other (income)
expense ............... 15,916 4,965 (443) -- 20,438
--------- --------- --------- --------- ---------
Income (loss) before income
taxes and equity in income
of and equity in earnings
from joint venture ......... (35,086) 5,380 13,068 735 (15,903)
Equity in earnings from joint
venture .................... 1,360 -- -- -- 1,360
Income tax expense (benefit) . 941 -- 1,490 -- 2,431
--------- --------- --------- --------- ---------
Income (loss) before equity in
income of consolidated
subsidiaries ............... (34,667) 5,380 11,578 735 (16,974)
Equity in income of
consolidated subsidiaries .. 17,693 -- -- (17,693) --
--------- --------- --------- --------- ---------
Net income (loss) ............ $ (16,974) $ 5,380 $ 11,578 $ (16,958) $ (16,974)
========= ========= ========= ========= =========
20
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 2001 (IN THOUSANDS)
(UNAUDITED)
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
-------- ------------ ------------ ------------
SIX MONTHS ENDED JUNE 30, 2000
Net cash provided by operating activities .......... $(21,875) $ 9,152 $ 18,774 $ 6,051
-------- -------- -------- --------
Cash flows from investing activities:
Acquisition of business, net of cash acquired .... -- -- -- --
Contribution in joint venture .................... -- -- -- --
Distribution of earnings from joint venture ...... 907 -- -- 907
Cash received from joint venture partner ......... -- -- 1,141 1,141
Proceeds from assets held for sale
And business divestitures ...................... 701 4,052 -- 4,753
Purchases of property and equipment .............. (1,467) (1,660) (8,305) (11,432)
-------- -------- -------- --------
141 2,392 (7,164) (4,631)
-------- -------- -------- --------
Cash flows from financing activities:
Net repayment of line of credit .................. -- -- -- --
Issuance of common stock ......................... -- -- -- --
Borrowings (repayments) of long-term debt,
net of issuance costs .......................... -- -- -- --
Borrowings (repayments) on credit facility,
net of issuance costs .......................... (5,125) -- -- (5,125)
Principal payments on capital lease obligations .. -- -- (139) (139)
Other net activity with Parent ................... 27,043 (11,778) (15,265) --
-------- -------- -------- --------
Net cash used for financing activities ......... 21,918 (11,778) (15,404) (5,264)
-------- -------- -------- --------
Effect of exchange rate changes on cash ............ -- -- 72 72
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 184 (234) (3,722) (3,772)
Cash and cash equivalents, beginning of period ..... 192 795 5,660 6,647
-------- -------- -------- --------
Cash and cash equivalents, end of period ........... $ 376 $ 561 $ 1,938 $ 2,875
======== ======== ======== ========
SIX MONTHS ENDED JUNE 30, 2001
Net cash provided by operating activities .......... $ 22,297 $ (8,573) $ (1,042) $ 12,682
-------- -------- -------- --------
Cash flows from investing activities:
Acquisition of business, net of cash acquired .... -- -- -- --
Contribution in joint venture .................... -- -- -- --
Distribution of earnings from joint venture ...... 616 -- -- 616
Cash received from joint venture partner ......... -- -- 700 700
Proceeds from assets held for sale
And business divestitures ...................... 2,053 -- -- 2,053
Purchases of property and equipment .............. (1,737) (1,545) (5,272) (8,554)
-------- -------- -------- --------
932 (1,545) (4,572) (5,185)
-------- -------- -------- --------
Cash flows from financing activities:
Net repayment of line of credit .................. -- -- -- --
Borrowings (repayments) of long-term debt,
net of issuance costs .......................... -- -- -- --
Borrowings (repayments) on credit facility,
net of issuance costs .......................... (7,504) -- -- (7,504)
Principal payments on capital lease obligations .. -- -- -- --
Other net activity with Parent ................... (15,154) 10,219 4,935 --
-------- -------- -------- --------
Net cash used for financing activities ......... (22,658) 10,219 4,935 (7,504)
-------- -------- -------- --------
Effect of exchange rate changes on cash ............ -- -- (29) (29)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 571 101 (708) (36)
Cash and cash equivalents, beginning of period ..... 175 959 1,883 3,017
-------- -------- -------- --------
Cash and cash equivalents, end of period ........... $ 746 $ 1,060 $ 1,175 $ 2,981
======== ======== ======== ========
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Holmes Group, Inc., formerly known as Holmes Products Corp., is a leading
developer, manufacturer and marketer of quality, branded home appliances,
including home environment, small kitchen and personal care appliances. Our home
environment products include fans, heaters, humidifiers and air purifiers. We
believe that we have a leading U.S. market share in each of these product
categories. Our kitchen appliances include Crock-Pot(R) slow cookers, can
openers, ice cream freezers and other similar small kitchen electric appliances.
In some of these categories we hold a leading market share. Our personal care
products include massagers and showerheads. We believe that our strong market
position and success are attributable to our continuous product innovation,
engineering and manufacturing expertise, close customer partnerships, breadth of
product offerings, reputation for quality, and presence and experience in the
Far East.
Our products are sold under the Holmes(R), Rival(R), Crock-Pot(R), White
Mountain(R), Pollenex(R), Bionaire(R), Patton(R), Family Care(R) and Titan(R)
brand names. These products are sold to consumers through major retail chains,
including mass merchants, do-it-yourself home centers, warehouse clubs,
hardware, department and specialty stores and national drug store chains. We
believe that the strength, scope and visibility of our retail account base
provide a competitive advantage with respect to brand recognition, access to
shelf space and penetration of the consumer market.
Sales of our products are highly seasonal, and counter-seasonal weather can
adversely affect our results of operations. Within the home environment product
line, sales of fans occur predominantly from January through June, and sales of
heaters and humidifiers occur predominantly from July through December. Although
kitchen appliances, personal care products and certain home environment products
such as air purifiers and lighting products are used year-round, the nature of
these products tend to draw increased sales during the winter months when people
are indoors and, as a result, sales of these products tend to be greatest in
advance of the winter months from July through December. Additionally, because
many of the kitchen and personal care products we sell are given as gifts, we
sell more of these products in anticipation of the holiday season. When holiday
shipments are combined with seasonal products such as heaters and humidifiers,
our sales during the months of August through November are generally at a higher
level than during the other months of the year. In addition to the seasonal
fluctuations in sales, we experience seasonality in gross profit, as margins
realized on fan products tend to be lower than those realized on heater,
humidifier and air purifier products.
On February 5, 1999 Holmes completed its acquisition of Rival. In connection
with the acquisition, as described in Note 3 of the Company's Notes to
Consolidated Financial Statements included herein, we issued an additional $31.3
million of senior subordinated notes due in November 2007, bearing interest at 9
7/8%, and amended and restated our existing $100 million credit facility to have
a total availability of $325 million. We also sold $50 million of common stock
in a private placement to investment funds affiliated with Berkshire Partners
LLC (Holmes' majority shareholder), and to members of management and certain
other co-investors. The initial borrowings under the credit facility, together
with the net proceeds of the equity investment and the offering of the Notes,
were used to consummate the Rival acquisition, refinance Rival's then existing
indebtedness, and pay the fees and expenses of the transaction.
Holmes had completed a recapitalization transaction in November 1997, in which
it issued $105 million of senior subordinated notes due in November 2007,
bearing interest at 9 7/8%, and entered into a $100 million line of credit
facility, of which approximately $27.5 million was initially drawn. The proceeds
of these borrowings were used to repay all existing indebtedness (primarily a
22
line of credit and other current debt facilities) and redeem a significant
portion of the previous majority shareholder's common stock.
Accordingly, commencing in November 1997, we had a significantly higher level of
borrowing and a corresponding higher level of interest expense than in the past.
The Rival acquisition and the related financing transactions consummated on
February 5, 1999 further increased our indebtedness and interest expense
substantially.
COMPARISON OF THREE MONTH PERIODS ENDED JUNE 30, 2001 AND JUNE 30, 2000
Net Sales. Net sales for the second quarter of fiscal 2001, which ended June 30,
2001, were $131.0 million compared to $121.5 million for the second quarter of
fiscal 2000, which ended June 30, 2000, an increase of $9.5 million or 7.8%.
This increase was primarily due to increased shipments of kitchen electric
products over the corresponding period of 2000. International shipments also
increased in the first quarter of 2001 versus the first quarter of 2000, driven
by shipments in Mexico and Latin America and in the Far East. The Far East
increase was due to increased sales by our motor joint venture with General
Electric. These increases were in part offset by a decline in home environment
shipments in the second quarter of 2001 versus 2000 due to the carryover fan
inventory from the cooler than anticipated 2000 summer season. Unfavorable
temperatures during the second quarter of 2001 also impacted fan shipments.
Gross Profit. Gross profit for the second quarter of 2001 was $29.3 million
compared to $30.5 million for the second quarter of 2000, a decrease of $1.2
million or 3.9%. This was due to a higher proportion of third-party sourced
items (particularly kitchen electrics), which have a lower margin than products
we manufacture in-house, as well as reduced in-house manufacturing of fans due
to the high carryover inventory from the cooler than anticipated 2000 summer
season. Also, the retail fan shipments during the second quarter of 2001 were at
lower overall margins due to the carryover inventory at higher 2000 season
costs. Distribution and warehousing costs were also higher, again due to the
carryover fan inventory from the 2000 summer season. We also had sales of low
margin closeouts which increased sales with no gross profit impact. Lastly,
discounts and allowances were higher during the second quarter of 2001 versus
2000, which also negatively impacted gross margin.
Selling Expenses. Selling expenses for the second quarter of 2001 were $15.3
million compared to $17.5 million for the second quarter of 2000, a decrease of
$2.2 million or 12.6%. As a percentage of net sales, selling expenses decreased
to 11.7% for the second quarter of 2001 from 14.4% for the second quarter of
2000. The selling expense decrease was due to a reduction in several sales and
marketing expenses such as sales samples, print and trade advertising and sales
travel expenses. These reductions resulted from our effort to lower spending
throughout the Company.
General and Administrative Expenses. General and administrative expenses for the
second quarter of 2001 were $10.6 million compared to $8.3 million for the
second quarter of 2000, an increase of $2.3 million or 27.7%. As a percentage of
net sales, general and administrative expenses increased to 8.1% for the second
quarter of 2001 from 6.8% for the second quarter of 2000. The increase in
general and administrative expense was attributable to a number of factors
including bank and consulting fees associated with the May 7, 2001 amended
credit facility, insurance costs and our management information systems ("MIS")
infrastructure. Excluding the impact of the expenses related to the bank
amendment, general and administrative expenses were approximately 7.4% of net
sales during the three months ended June 30, 2001.
Product Development Expenses. Product development expenses for the second
quarter of 2001 were $2.3 million compared to $2.7 million for the second
quarter of 2000, a decrease of $0.4 million or 14.8%. The expenditures in 2001
relate to the development of a number of new products in the home environment
and kitchen product lines.
Restructuring Costs. Restructuring costs for the second quarter of 2001 were
$1.4 million. These costs related to the closure of the Sedalia, Missouri
manufacturing plant announced in June 2001. The costs were made up of certain
employee termination benefits and property, plant and equipment write-downs.
23
Plant Closing Costs. There were no plant closing costs in the second quarter of
2001. The closing costs in 2000 were associated with the closing of the
Fayetteville, North Carolina plant.
Interest and Other Expense, Net. Interest and other expense, net for the second
quarter of 2001 was $11.1 million compared to $9.4 million for the second
quarter of 2000, an increase of $1.7 million or 18.1%. The increase in interest
expense was primarily due to higher debt levels during the first quarter of 2001
versus 2000. Additionally, we recorded, as interest expense, approximately $1.4
million with respect to the warrants issued as part of the amended credit
facility and limited waiver dated May 7, 2001.
Income Tax Expense (Benefit). The income tax expense for the second quarter of
2001 was $1.2 million compared to a benefit of $0.4 million in 2000. The income
tax expense in 2001 was largely due to the establishment of a valuation reserve
primarily against losses experienced in the U.S. and a tax expense on income
taxed in foreign jurisdictions.
Equity in Earnings from Joint Venture. We recorded $0.7 million in equity in
earnings from our joint venture with General Electric for the shipment of motors
from the Joint Venture in 2001 versus $0.2 million in the second quarter of
2000.
Net Loss. As a result of the foregoing factors, our net loss for the second
quarter of 2001 was $12.5 million, compared to a net loss of $7.8 million in the
second quarter of 2000.
COMPARISON OF SIX MONTH PERIODS ENDED JUNE 30, 2001 AND JUNE 30, 2000
Net Sales. Net sales for the first half of fiscal 2001, which ended June 30,
2001, were $258.2 million compared to $240.1 million for the first half of
fiscal 2000, which ended June 30, 2000, an increase of $18.1 million or 7.5%.
Excluding the sales related to the residual sourcing agreements for the pump and
industrial businesses, which were divested in the fourth quarter of 1999, net
sales increased approximately 9.6% versus the first half of 2000. This increase
was primarily due to increased shipments of kitchen electric products over the
corresponding period of 2000. International shipments also increased in the
first half of 2001 versus the first half of 2000, driven by shipments in Mexico
and Latin America and in the Far East. The Far East increase was due to
increased sales by our motor joint venture with General Electric. These
increases were in part offset by a decline in home environment shipments due to
the carryover for inventory from the cooler than anticipated 2000 summer season.
Unfavorable temperatures during the first half of 2001 also impacted fan
shipments. Sales for the divested businesses in the first half of 2000 were $4.5
million pursuant to supply agreements with the buyers.
Gross Profit. Gross profit for the first half of 2001 was $62.6 million compared
to $65.8 million for the first half of 2000, a decrease of $3.2 million or 4.9%.
This was due to reduced in-house manufacturing of fans due to the higher
carryover inventory from the cooler than anticipated 2000 summer season. Also,
the retail fan shipments during the first half of 2001 were at lower overall
margins due to the carryover inventory at higher 2000 season costs. Distribution
and warehousing costs were also higher, again due to the carryover fan inventory
from the 2000 summer season. We also had sales of low margin closeouts which
increased sales with no gross profit impact. Lastly, discounts and allowances
were slightly higher during the first half of 2001 versus 2000, which also
negatively impacted gross margin.
Selling Expenses. Selling expenses for the first half of 2001 were $31.5 million
compared to $34.8 million for the first half of 2000, a decrease of $3.3 million
or 9.5%. As a percentage of net sales, selling expenses decreased to 12.2% for
the first half of 2001 from 14.5% for the first half of 2000. The selling
expense decrease was due to a reduction in several sales and marketing expenses
such as selling commissions, sales samples, print and trade advertising and
sales travel expenses. These reductions resulted from our effort to lower
spending throughout the Company.
24
General and Administrative Expenses. General and administrative expenses for the
first half of 2001 were $19.0 million compared to $16.2 million for the first
half of 2000, an increase of $2.8 million or 17.3%. As a percentage of net
sales, general and administrative expenses increased to 7.4% for the first half
of 2001 from 6.7% for the first half of 2000. The increase in general and
administrative expense was attributable to a number of factors including
increased bank and consulting fees associated with the May 7, 2001 amended
Credit Facility, insurance expense and MIS Infrastructure. Excluding the impact
of the additional costs related to the May 7 amendment, General and
Administrative Expenses were approximately 7.0% of net sales.
Product Development Expenses. Product development expenses for the first half of
2001 were $4.9 million compared to $5.5 million for the first half of 2000, a
decrease of $0.6 million or 10.9%. The decreased expenditures in 2001 reflects
the integration of the Holmes and Rival product development activities into one
central department.
Restructuring Costs. Restructuring costs for the first half of 2001 were $1.4
million. These costs related to the closure of the Sedalia, Missouri
manufacturing plant announced in June 2001. The cost were made up of certain
employee termination benefits and property, plant and equipment write-downs.
Plant Closing Costs. There were no plant closing costs in the first half of
2001. The closing costs in 2000 were associated with the closing of the
Fayetteville, North Carolina plant.
Interest and Other Expense, Net. Interest and other expense, net for the first
half of 2001 was $20.4 million compared to $18.5 million for the first half of
2000, an increase of $1.9 million or 10.3%. The increase was due to higher
interest expense due to increased debt levels during the first half of 2001
versus 2000. Additionally, we recorded, as interest expense, approximately
$1.4 million with respect to the warrants issued as part of the amended credit
facility and limited waiver dated May 7, 2001.
Income Tax Expense (Benefit). The income tax expense for the first half of 2001
was $2.4 million compared to a benefit of $0.5 million in 2000. The income tax
expense in 2001 was largely due to the establishment of a valuation reserve
primarily against losses experienced in the U.S. and a tax expense on income
taxed in foreign jurisdictions.
Equity in Earnings from Joint Venture. We recorded $1.4 million in equity in
earnings from our joint venture with General Electric for the shipment of motors
from the Joint Venture in 2001 versus $0.3 million in the first half of 2000.
Net Loss. As a result of the foregoing factors, our net loss for the first
half of 2001 was $17.0 million, compared to a net loss of $10.1 million in the
first half of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Analysis of Cash Flows.
Following the recapitalization transaction in November 1997 and the Rival
acquisition in February 1999, we have funded our liquidity requirements with
cash flows from operations and borrowings under the Credit Facility. Our primary
liquidity requirements are for working capital and to service our indebtedness.
While there can be no assurance, we believe that existing cash resources, cash
flows from operations and borrowings under the recently amended Credit Facility
will be sufficient to meet our liquidity needs for the next twelve months,
during which time we will continue to carefully evaluate our financing
requirements.
Cash provided by operations for the six months ended June 30, 2000 and 2001 was
$6.1 million and $12.7 million, respectively. Cash provided by operations in the
first half of 2001 primarily reflected a $16.6 million decrease in accounts
receivable levels, as heavy cash collection activity typically follows the
seasonally higher sales activity during the fourth quarter of the fiscal year.
Cash used for investing for the six months ended June 30, 2000 and 2001 was $4.6
million and $5.2 million, respectively. Cash used for investing in the first
half of 2001 reflected capital expenditures of approximately $8.6 million offset
by additional cash received from our joint venture partner as
25
part of their contribution towards joint venture capital equipment. We also
received $0.6 million in earnings distributions from the joint venture.
Additionally, we received $2.1 million in proceeds from the sale of the
Warrensburg, Missouri facility and manufacturing machinery.
Cash used for financing activities for the six months ended June 30, 2000 and
2001 was $5.3 million and $7.5 million, respectively. Cash used for financing in
the first half of 2001 reflected repayments of the credit facility using cash
flows from operations.
Financing Arrangements.
We issued $105.0 million of 9 7/8% Senior Subordinated Notes due November 2007
(the "Notes") in November 1997, and an additional $31.3 million of Notes in
February, 1999. While we may repurchase Notes from time to time in open market
or privately negotiated transactions, the Notes are not redeemable at our option
prior to November 15, 2002. Thereafter, the Notes are subject to redemption at
any time at our option, in whole or in part, at stated redemption prices. Annual
interest payments on the Notes are approximately $13.5 million. The payment of
principal and interest on the Notes is subordinated to the prior payment in full
of all our senior debt, including borrowings under the Credit Facility. The
Notes are guaranteed by our domestic subsidiaries but are otherwise unsecured.
We entered into an amended and restated Credit Facility with a syndicate of
banks in February, 1999 in connection with the Rival acquisition. The Credit
Facility consisted of a tranche A term loan of $40.0 million that matures
February 5, 2005, a tranche B term loan of $85.0 million that matures February
5, 2007 and a $140.0 million revolving credit facility that matures February 5,
2005.
Availability under the Credit Facility is reduced by outstanding letters of
credit. As of June 30, 2001, our availability was $33.7 million, net of
outstanding letters of credit totaling $4.8 million. The Credit Facility bears
interest at variable rates based on either the prime rate or eurodollar rate, at
our option, plus a margin which, in the case of the tranche A term loan and the
revolving credit facility, varies depending upon certain financial ratios. The
Credit Facility, and the guarantees thereof by our domestic subsidiaries, are
secured by substantially all of our domestic and certain foreign assets. The
Credit Facility is cross-defaulted to the Notes Indentures.
Our financial performance in the fourth quarter of 2000 resulted in a default,
as of December 31, 2000, of certain financial ratio covenants in the Credit
Facility as previously amended. The lending group agreed to a Forbearance
Agreement with respect to such defaults on April 13, 2001. On May 7, 2001, the
Credit Facility was further amended to waive the defaults and to revise certain
of the financial ratio covenants through June 30, 2002. In addition, the maximum
revolving credit availability under the Credit Facility has been increased from
$140.0 million to an aggregate of $180.0 million through January 31, 2002,
decreasing to an aggregate of $155.0 million through July 1, 2002 and $115.0
million thereafter, subject at all times to a borrowing base formula. As partial
consideration for the amendments and limited waiver, we issued warrants to the
lenders to acquire up to 5% of Holmes' common stock on a fully-diluted basis.
The warrants are exercisable at a price of $5.04 per share, and expire May 7,
2006. Additionally, Berkshire Partners LLC, our equity partners, agreed to
provide a $43.5 million guarantee in support of the increased revolving credit
commitment. The fair value of the warrants was approximately $1.4 million and
was recorded as a charge to interest expense during the second quarter of 2001.
The Credit Facility, as amended, and the Notes Indentures include certain
financial and operating covenants which, among other things, restrict our
ability to incur additional indebtedness, make investments and take certain
other actions. Our ability to meet our debt service obligations will be
dependent upon the future performance, which will be impacted by general
economic conditions and other factors. See "Forward-Looking Statements."
26
FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this
quarterly report, are or may be forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "intends," "expects," and similar
expressions are intended to identify forward-looking statements. Various
economic and competitive factors could cause actual results or events to differ
materially from those discussed in such forward-looking statements, including
without limitation, our degree of leverage (including the need to comply with
covenants in our various financing agreements), our dependence on major
customers and key personnel, the integration of the Rival acquisition (as
described herein), competition, risks associated with foreign manufacturing,
risks of the retail industry, potential product liability claims, the cost of
labor and raw materials and the other factors which are discussed in our most
recent Registration Statement on Form S-4 (File No. 333-77905), and from time to
time in our reports filed with the Securities and Exchange Commission.
Accordingly, such forward-looking statements do not purport to be predictions of
future events or circumstances and may not be realized.
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 (FAS 141), "Business Combinations" and
No. 142 (FAS 142), "Goodwill and Other Intangible Assets." FAS 141 supercedes
Accounting Principles Board Opinion No. 16, "Business Combinations." FAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, establishes specific criteria for
the recognition of intangible assets separately from goodwill, and requires that
unallocated negative goodwill be written off immediately as an extraordinary
gain instead of being deferred and amortized. Provisions of FAS 141 will be
effective for the Company's business acquisitions that are consummated after
July 1, 2001. FAS 142 supercedes Accounting Principles Board Opinion No. 17,
"Intangibles Assets," and addresses the accounting for goodwill and intangible
assets subsequent to their acquisition. Under FAS 142, goodwill and indefinite
lived intangible assets will no longer be amortized but will be tested for
impairment at least annually at the reporting unit level. In addition, the
amortization period of intangible assets with finite lives will no longer be
limited to forty years. The general provisions of FAS 142 will be effective for
the Company as of the beginning of fiscal 2002. However, certain provisions will
be effective for all business acquisitions consummated after June 30, 2001.
Management believes the adoption of FAS 142 in fiscal 2002 will result in a
significant decrease in amortization of goodwill and intangibles on the
consolidated statement of income and its currently in the process of quantifying
the impact.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At June 30, 2001, the carrying value of our debt totaled $360.2 million
(including capital leases), which approximated its fair value. This debt
includes amounts at both fixed and variable interest rates. For fixed rate debt,
interest rate changes affect the fair market value but do not impact earnings or
cash flows. Conversely, for variable rate debt, interest rate changes generally
do not affect the fair market value but do impact earnings and cash flows,
assuming other factors are held constant.
At June 30, 2001, the Company had fixed rate debt of $135.2 million (including
capital leases) and variable rate debt of $224.9 million. Holding other
variables constant (such as foreign exchange rates and debt levels), a one
percentage point decrease in interest rates would increase the unrealized fair
market value of fixed rate debt by approximately $6.5 million. Based on the
amounts of variable rate debt outstanding at June 30, 2001, the earnings and
cash flows impact for the next year resulting from a one percentage point
increase in interest rates would be approximately $2.2 million, holding other
variables constant.
In order to help minimize our interest rate exposure, effective May 7, 1999, we
entered into an interest rate collar transaction agreement with our agent bank.
This arrangement is described in Note 7 of Notes to Consolidated Financial
Statements.
27
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in various legal proceedings incident to our normal business
operations, including product liability and patent and trademark litigation.
Management believes that the outcome of such litigation will not have a material
adverse effect on our business, financial condition or results of operations. We
have product liability and general liability insurance policies in amounts
management believes to be reasonable. There can be no assurance, however, that
such insurance will be adequate to cover all potential product or other
liability claims against us. We also face exposure to voluntary or mandatory
product recalls in the event that our products are alleged to have manufacturing
or safety defects. We do not maintain product recall insurance.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held a Special Meeting in lieu of an Annual Meeting of Stockholders on May
16, 2001. At the meeting, each of the following matters was approved by a vote
of 17,759,583 shares of Common Stock, out of 20,336,567 shares outstanding and
eligible to vote:
(a) Re-election of our six incumbent directors;
(b) Increasing our authorized Common Stock from 25,000,000 shares to
28,500,000 shares; and
(c) Increasing the number of shares of Common Stock reserved for issuance
under our 1997 Stock Option Plan from 4,260,978 shares to 4,460,978
shares.
ITEM 5. OTHER INFORMATION
Appointment of New President and CEO
We announced on August 13, 2001 that Peter Martin, formerly Group President at
Newell Rubbermaid, has joined Holmes as President and CEO. Jordan A. Kahn,
founder of the Holmes Group, will continue as Chairman of the Board of
Directors. Mr. Martin is expected to assume his new duties as of August 20,
2001.
Investor Conference Call
We will hold a telephone conference call on August 21, 2001 at 2 p.m., Eastern
time in order for investors and other interested stakeholders to hear
management's views on our results of operations during the first quarter of
2001. If you are interested in accessing the call in listen-only mode, please
fax the following information to Kay Ford, Executive Assistant, at 508-422-1676:
- Name of Participant(s)
- Company Affiliation
- Nature of Business
- Address
- Phone, Fax and E-mail
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.1 Executive Employment and Non-Competition Agreement by and
between the Company and Peter Martin dated as of August 1,
2001.
b. Reports on Form 8-K:
Not applicable
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE HOLMES GROUP, INC.
------------------------------------
Registrant
August 14, 2001 By: /s/ Jordan A. Kahn
--------------------------------
Jordan A. Kahn, President,
Chief Executive Officer
(Principal Executive Officer)
August 14, 2001 By: /s/ Ira B. Morgenstern
--------------------------------
Ira B. Morgenstern,
Chief Financial Officer
(Principal Financial and
Accounting Officer)