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 July 28, 2001
Commission file number 1-5452
ONEIDA LTD.
(Exact name of Registrant as specified in its charter)
NEW YORK 15-0405700
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
ONEIDA, NEW YORK 13421
(Address of principal executive offices) (Zip code)
(315) 361-3636
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of September 7, 2001: 16,488,687.
ONEIDA LTD.
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JULY 28, 2001
INDEX
PART I FINANCIAL INFORMATION
Consolidated Statement of Operations
Consolidated Balance Sheets
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None
(b) During the quarter ended July 28, 2001 no Reports on
Form 8-K were filed by the registrant.
SIGNATURES
2
ONEIDA LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
(Thousands except per JUL 28, JUL 29, JUL 28, JUL 29,
share amounts) 2001 2000 2001 2000
-------- -------- -------- --------
NET SALES....................... $119,428 $104,010 $246,234 $222,211
COST OF SALES................... 77,652 66,090 162,932 138,536
INVENTORY WRITEDOWN (NOTE 4) ... 24,000 24,000
-------- -------- -------- --------
GROSS MARGIN.................... 41,776 13,920 83,302 59,675
OPERATING REVENUES.............. 333 1,270 740 1,532
-------- -------- -------- --------
42,109 15,190 84,042 61,207
-------- -------- -------- --------
OPERATING EXPENSES:
Selling, distribution and
administrative expenses...... 34,134 29,777 68,100 61,026
Restructuring and unusual
Charges (NOTE 4) .......... 8,000 8,000
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS... 7,975 (22,587) 15,942 (7,819)
OTHER INCOME (EXPENSE).......... 672 (114) 534 (133)
INTEREST EXPENSE................ 5,939 4,089 13,060 6,948
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 2,708 (26,790) 3,416 (14,900)
PROVISION (CREDIT)FOR INCOME TAXES 1,005 (9,973) 1,273 (5,551)
-------- -------- -------- --------
NET INCOME (LOSS)......... ...... $ 1,703 $(16,817) $ 2,143 $(9,349)
======== ======== ======== ========
EARNINGS PER SHARE OF COMMON STOCK:
Net income (loss):
Basic....................... $.10 $(1.04) $ .13 $(.58)
Diluted (NOTE 5)............ .10 (1.04) .13 (.58)
SHARES USED IN PER SHARE DATA:
Basic....................... 16,459 16,209 16,433 16,286
Diluted (NOTE 5)............ 16,553 16,209 16,519 16,286
CASH DIVIDENDS DECLARED......... $.05 $.10 $.10 $.20
See notes to consolidated financial statements.
3
ONEIDA LTD.
CONSOLIDATED BALANCE SHEETS
JULY 28, 2001 AND JANUARY 27, 2001
(Unaudited)
(Dollars in Thousands)
JULY 28, JAN 27,
2001 2001
------- -------
ASSETS
CURRENT ASSETS:
Cash............................................... $ 2,671 $ 2,163
Accounts receivable, net of allowance for doubtful.
accounts of $2,536 and $3,072..................... 84,675 87,721
Other accounts and notes receivable................ 3,145 2,272
Inventories:
Finished goods.................................... 175,831 194,806
Goods in process.................................. 11,767 11,018
Raw materials and supplies........................ 9,206 10,064
Other current assets............................... 14,636 19,141
-------- --------
Total current assets............................ 301,931 327,185
-------- --------
PROPERTY, PLANT AND EQUIPMENT-At cost:
Property, plant and equipment...................... 250,242 245,558
Less accumulated depreciation...................... 140,184 135,508
-------- --------
Property, plant and equipment-net............... 110,058 110,050
-------- --------
OTHER ASSETS:
Intangible assets - net............................ 136,287 139,695
Deferred income taxes.............................. 23,217 22,833
Other assets....................................... 11,518 10,810
-------- --------
TOTAL.......................................... $583,011 $610,573
======== ========
See notes to consolidated financial statements.
4
ONEIDA LTD.
CONSOLIDATED BALANCE SHEETS
JULY 28, 2001 AND JANUARY 27, 2001
(Unaudited)
(Dollars in Thousands)
JULY 28, JAN 27,
2001 2001
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt............................... $ 9,706 $ 8,046
Accounts payable.............................. 32,832 33,097
Accrued liabilities........................... 37,431 55,582
Accrued income taxes.......................... 3,362 4,153
Dividends payable............................. 1,748 2,522
Current installments of long-term debt........ 8,614 9,239
-------- --------
Total current liabilities.................. 93,693 112,639
-------- --------
LONG-TERM DEBT................................. 280,144 282,815
-------- --------
OTHER LIABILITIES:
Accrued postretirement liability.............. 56,996 56,108
Accrued pension liability..................... 16,233 15,557
Other liabilities............................. 13,068 19,146
-------- --------
Total other liabilities.................... 86,297 90,811
-------- --------
STOCKHOLDERS' EQUITY:
Cumulative 6% preferred stock; $25 par
value; authorized 95,660 shares, issued
86,037 and 86,698 shares,
callable at $30 per share.................... 2,151 2,167
Common stock $1 par value; authorized
48,000,000 shares, issued 17,787,419
and 17,702,666 shares........................ 17,787 17,703
Additional paid-in capital.................... 83,741 82,956
Retained earnings............................. 57,888 57,495
Accumulated other comprehensive loss.......... (14,335) (11,423)
Less cost of common stock held in
treasury; 1,300,666 and 1,314,508 shares..... (24,355) (24,590)
-------- --------
Stockholders' Equity........................ 122,877 124,308
-------- --------
TOTAL..................................... $583,011 $610,573
======== ========
See notes to consolidated financial statements.
5
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 28, 2001
(Unaudited)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
-------------------------------------------------------
Balance at April 28, 2001 17,722 $17,722 $2,167 $83,103 $57,081
Stock plan activity, net. 65 65 638
Purchase/retirement of
Treasury stock, net...... (16)
Cash dividends declared
($.05 per share)...... (896)
Net income...............$ 1,703 1,703
Other comprehensive
loss.................. (227)
-------
Comprehensive income.... $ 1,476
=======
-------------------------------------------
Balance at July 28, 2001. 17,787 $17,787 $2,151 $83,741 $57,888
===========================================
Accum.
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
-------------------------------------------------------
Balance at April 28, 2001 $(14,108) $(24,355)
Stock plan activity, net.
Purchase/retirement of
Treasury stock, net......
Cash dividends declared
($.05 per share)......
Net loss.................
Other comprehensive
loss.................. (227)
-------------------------------------------------------
Balance at July 28, 2001. $(14,335) $(24,355)
=======================================================
See notes to consolidated financial statements
6
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 29, 2000
(Unaudited)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
------------------------------------------------------
Balance at April 29, 2000 17,630 $17,630 $2,171 $82,315 $70,446
Stock plan activity, net. 34 34 324
Purchase/retirement of
Treasury stock, net......
Cash dividends declared
($.10 per share)...... (1,659)
Net loss................$(16,817) (16,817)
Other comprehensive
income............... (1,031)
--------
Comprehensive loss......$(17,848)
========
--------------------------------------------
Balance at July 29, 2000 17,664 $17,664 $2,171 $82,639 $51,970
============================================
Accum.
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
-----------------------------------------------------
Balance at April 29, 2000 $(11,705) $(24,825) ($1,486)
Stock plan activity, net.
Purchase/retirement of
Treasury stock, net...... (622)
Cash dividends declared
($.10 per share)......
Net loss.................
Other comprehensive
loss.................. (1,031)
Allocation of ESOP shares 769
-----------------------------------------------------
Balance at July 29, 2000 $(12,736) $(25,447) ($717)
=====================================================
See notes to consolidated financial statements.
7
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 28, 2001
(Unaudited)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
-------------------------------------------------------
Balance at Jan 27, 2001.. 17,703 $17,703 $2,167 $82,956 $57,495
Stock plan activity, net. 84 84 785
Purchase/retirement of
Treasury stock, net...... (16)
Cash dividends declared
($.10 per share)...... (1,750)
Net income...............$ 2,143 2,143
Other comprehensive
loss.................. (2,912)
-------
Comprehensive loss...... $ (769)
=======
---------------------------------------------
Balance at July 28, 2001. 17,787 $17,787 $2,151 $83,741 $57,888
=============================================
Accum.
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
------------------------------------------------------
Balance at Jan 27, 2001.. $(11,423) $(24,590)
Stock plan activity, net.
Purchase/retirement of
Treasury stock, net...... 235
Cash dividends declared
($.05 per share)......
Net Income...............
Other comprehensive
loss.................. (2,912)
-------------------------------------------------------
Balance at July 28, 2001. $(14,335) $(24,355)
=======================================================
See notes to consolidated financial statements.
8
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 29, 2000
Unaudited)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
-------------------------------------------------------
Balance at Jan 29, 2000.. 17,603 $17,603 $2,175 $81,887 $64,630
Stock plan activity, net. 61 61 752
Purchase/retirement of
Treasury stock, net...... (4)
Cash dividends declared
($.20 per share)...... (3,311)
Net loss.................$ (9,349) (9,349)
Other comprehensive
loss................ (946)
--------
Comprehensive loss .... $(10,295)
========
---------------------------------------------
Balance at July 29, 2000. 17,664 $17,664 $2,171 $82,639 $51,970
=============================================
Accum.
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
-------------------------------------------------------
Balance at Jan 29, 2000.. $(11,790) $(19,712) ($1,486)
Stock plan activity, net.
Purchase/retirement of
Treasury stock, net...... (5,735)
Cash dividends declared
($.20 per share)......
Net loss.................
Other comprehensive
loss.................. (946)
Allocation of ESOP shares 769
-------------------------------------------------------
Balance at July 29, 2000 $(12,736) $(25,447) ($717)
=======================================================
See notes to consolidated financial statements.
9
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 28, 2001 AND JULY 29, 2000
(Unaudited)
(In Thousands)
FOR THE
SIX MONTHS ENDED
JULY 28, JULY 29,
2001 2000
------- -------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)................................... $ 2,143 $ (9,349)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 9,366 7,574
Provision for impairment of inventory
and long-term assets............................ 29,000
Deferred taxes and other non-cash
charges and credits............................. (2,264) 1,476
Decrease (increase) in operating assets:
Receivables....................................... 2,173 6,150
Inventories....................................... 18,705 (37,262)
Other current assets.............................. 4,785 (1,983)
Other assets...................................... (3,470) (1,517)
Increase (decrease) in accounts payable............ (265) 747
Decrease in accrued liabilities.................... (19,034) (18,379)
------- --------
Net cash provided (used) by operating activities 12,139 (23,543)
------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures-net...... . (5,726) (6,215)
Purchase of subsidiaries, net of cash acquired..... (60,496)
Other, net.......................................... (12) (191)
------- ---------
Net cash used in investing activities........... (5,738) (66,902)
------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.............. 868 813
Issuance (purchase) of treasury stock............... 219 (5,739)
(Decrease) increase in short-term debt-net.......... 1,660 (28,201)
Payment of long-term debt........................... (3,296) (64,802)
Proceeds from issuance of long-term debt............ 193,720
Dividends paid...................................... (2,432) (3,311)
Allocation of ESOP shares--net...................... 769
------- --------
Net cash (used) provided by financing activities (2,981) 93,249
------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH............... (2,912) (946)
------- --------
NET INCREASE IN CASH.................................. 508 1,858
CASH AT BEGINNING OF YEAR............................. 2,163 3,899
------- --------
CASH AT END OF PERIOD................................. $ 2,671 $ 5,757
======= ========
See notes to consolidated financial statements.
10
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Thousands)
1. The consolidated financial statements for the three and six months ended July
28, 2001 and July 29, 2000 are unaudited; in the opinion of the Company such
unaudited consolidated financial statements include all adjustments (which
comprise only normal recurring accruals) necessary for a fair presentation of
the results of such periods.
The results of operations for the three and six months ended July 28, 2001 are
not necessarily indicative of the results of operations to be expected for the
year ending January 26, 2002. The consolidated financial statements and notes
thereto should be read in conjunction with the consolidated financial statements
and notes for the years ended in January 2001 and 2000 included in the Company's
January 27, 2001 Annual Report to the Securities and Exchange Commission on Form
10-K and the Company's Form 8-K that was filed with the Securities and Exchange
Commission on August 9, 2000.
2. The provision for income taxes is based on pre-tax income for financial
statement purposes with an appropriate deferred tax provision to give effect to
changes in temporary differences between the financial statements and tax bases
of assets and liabilities. The temporary differences arise principally from
restructuring charges, postretirement benefits, depreciation and other employee
benefits.
3. On June 13, 2000, the Company purchased all of the stock of Viners of
Sheffield, Ltd. (Viners), a London based marketer of flatware and cookware in
the United Kingdom, for approximately $25,000 in cash. On June 30, 2000, the
Company acquired all of the net assets of Sakura, Inc. (Sakura) a domestic
importer of consumer dinnerware, for approximately $40,000 in cash. On August 9,
2000, the Company completed the acquisition of the stock of Delco International
Ltd. (Delco), a leading foodservice tableware supplier for $60,000 in cash.
The above three acquisitions were recorded using the purchase method of
accounting and accordingly, their operating results have been included in the
Company's consolidated financial statements since their respective acquisition
dates. Excess purchase price over the net fair value of assets acquired
(including certain acquisition costs) totaled $113,346. These intangibles,
primarily goodwill, are being amortized over forty years using the straight line
method.
11
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Thousands)
4. During the year ended January 27, 2001, the Company recorded restructuring
and unusual charges totaling $39,000. Included in this total was an inventory
writedown of $24,000 related to product rationalization as a result of recent
acquisitions as well as significant other stock keeping unit reductions. The
Company established a $24,000 inventory reserve in the second quarter of 2000,
approximately half of which was utilized through the most recent year end. In
the second quarter and first half of the current year, $3,400 and
$8,300,respectively, of the reserve was utilized to dispose of excess and
discontinued product.
The remainder of the restructuring and unusual costs accrued of $15,000 related
primarily to the consolidation of sales, marketing, logistics and administrative
functions, realignment of product lines, "make versus buy" decisions and the
impairment of certain manufacturing and procurement assets. All assets
identified as impaired were written down by $5,000 to their net realizable value
in the prior year. Other restructuring payments made to date totaled $8,700, of
which $1,200 and $2,200 were paid in the current quarter and year to date.
There were no significant adjustments made to the original accruals for
restructuring and unusual charges.
5. Basic and diluted earnings per share are presented for each period in which a
statement of operations is presented. Basic earnings per share is computed by
dividing income less preferred stock dividends by the weighted average shares
actually outstanding for the period. Diluted earnings per share includes the
potentially dilutive effect of shares issuable under the employee stock purchase
and incentive stock option plans.
The following is a reconciliation of basic earnings per share to diluted
earnings per share for the three months ended July 28, 2001 and July 29, 2000:
Net Preferred Adjusted Earnings
Income Stock Net Income Average Per
(Loss) Dividends (Loss) Shares Share
--------------------------------------------------------------------------------
2001:
Basic earnings
per share.............. $1,703 $(32) $1,671 16,459 $.10
Effect of stock options. 94
Diluted earnings
per share.............. 1,703 (32) 1,571 16,553 .10
--------------------------------------------------------------------------------
2000:
Basic earnings(loss)
per share.............. $(16,817) (33) (16,850) 16,209 $(1.04)
Effect of stock options. 0
Diluted earnings(loss)
per share.............. (16,817) (33) (16,850) 16,209 $(1.04)
--------------------------------------------------------------------------------
12
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Thousands)
The following is a reconciliation of basic earnings per share to diluted
earnings per share for the six months ended July 28, 2001 and July 29, 2000:
Net Preferred Adjusted Earnings
Income Stock Net Income Average Per
(Loss) Dividends (Loss) Shares Share
--------------------------------------------------------------------------------
2001:
Basic earnings
per share.............. $2,143 $(64) $2,079 16,433 $.13
Effect of stock options. 86
Diluted earnings
per share.............. 2,143 (64) 2,079 16,519 .13
--------------------------------------------------------------------------------
2000:
Basic earnings (loss)
per share.............. $(9,349) (65) (9,414) 16,286 $(.58)
Effect of stock options. 0
Diluted earnings (loss)
per share.............. (9,349) (65) (9,414) 16,286 (.58)
--------------------------------------------------------------------------------
6. Included in the long-term debt caption on the balance sheet are various
senior notes. The note agreements relating thereto contain provisions which,
among other things require maintenance of certain financial ratios related to
levels of indebtedness, minimum net worth and interest coverage levels. The
covenants limit certain types of payments including dividends and investments.
At July 28, 2001, the maximum amount available for payment of dividends was
$3,269.
During the first quarter of 2001, the Company and its lenders negotiated revised
covenant levels and entered into a security agreement collateralizing the
Company's debt with all of the domestic assets (excluding real estate holdings)
of the Company and certain of its material domestic subsidiaries, as well as a
majority of its investment in Oneida UK Limited. The Company is currently in
compliance with all financial covenants.
7. The Company's operations and assets are in one principal industry; tableware
products. The Company's reportable segments are grouped around the manufacture
and distribution of three major product categories: metal tableware, china
dinnerware and glass tabletop products. The Company also distributes a variety
of other tabletop accessories. These products are sold directly to a broad base
of retail outlets including department stores, mass merchandisers, Oneida Home
stores and chain stores. Additionally, these products are sold to special sales
markets, which include customers who use them as premiums, incentives and
business gifts. The Company also sells directly or through distributors to
foodservice operations worldwide, including hotels, restaurants, airlines,
13
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Thousands)
cruise lines, schools and healthcare facilities. The Company's operations are
located in the United States, Canada, Mexico, Italy, Australia, The United
Kingdom and China.
Sales by reportable segment for the second quarter and first half of 2001 and
2000 were as follows:
(000)
-----
Second Quarter Metal Dinnerware Glass Other Total
-------------- ------------------------------------------------
2001 Net Sales $78,400 $32,800 $7,200 $1,028 $119,428
2000 Net Sales $64,800 $28,900 $8,000 $2,310 $104,010
Year to date Metal Dinnerware Glass Other Total
------------ ------------------------------------------------
2001 Net Sales $161,900 $66,700 $15,100 $2,534 $246,234
2000 Net Sales $144,400 $58,000 $16,300 $3,511 $222,211
8. In June 2001, the Financial Accounting Standards Board approved Statements of
Financial Accounting Standards No. 141 "Business Combinations" ("SFAS 141") and
No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which are effective
June 30, 2001 and December 31, 2001 respectively, for the Corporation. SFAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Under SFAS 142, amortization of
goodwill, including goodwill recorded in past business combinations, will
discontinue upon adoption of this standard. In addition, goodwill recorded as a
result of business combinations completed during the six-month period ending
December 31, 2001 will not be amortized. All goodwill and intangible assets will
be tested for impairment in accordance with the provisions of the Statement. The
Corporation is currently reviewing the provisions of SFAS 141 and SFAS 142 and
assessing the impact of adoption.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended July 28, 2001 compared with
the quarter ended July 29, 2000
(In Thousands)
Operations
Net Sales by Product Line:
Three Months Ended July
2001 2000 %Change
------- ------- -----
Metal products....... $ 78,400 $64,800 21.0
Dinnerware Products.. 32,800 28,900 13.5
Glass products....... 7,200 8,000 (10.0)
Other Products....... 1,028 2,310 (55.5)
-------- -------- ----
Total............... $119,428 $104,010 14.8
======== ======== ====
Quarterly Review
Consolidated net sales for the quarter ended July 28, 2001 increased $15,418
over the same period a year ago. The increase in metal and dinnerware product
sales is attributable to the acquisition of the Delco flatware offering in the
second half of 2000 and the Viners flatware and Sakura dinnerware product lines
in June of 2000. The slowdown in consumer spending negatively affected domestic
sales through consumer channels, which decreased by 5.8% from the same quarter
last year. Sales in domestic foodservice markets increased 30.6% over the second
quarter of 2000, primarily attributable to the Delco acquisition. Domestic
foodservice sales totaled 49.1% of the Company's sales in the current quarter.
During the same period, international sales grew by 25.1%, primarily due to the
Viners acquisition, accounting for 17.3% of the Company's total second quarter
sales.
Gross margin as a percentage of net sales was 35.0% in the second quarter of
2001 as compared to 36.5% for the same period of 2000. The decrease in gross
margin this quarter is due to product mix changes related to the above
referenced downturn in consumer sales in 2001. To meet the lower demand, the
Company's manufacturing plants operated at a lower capacity in the current
quarter, generating unfavorable variances.
Total operating expenses increased by $4,358, or 14.6%, from the same quarter
last year due to the inclusion of the three acquisitions that took place in the
late second and third quarters of 2000. As a percentage of sales, operating
expenses remained flat with the same quarter last year at 28.6%.
During the second and third quarters of 2000, the Company recorded restructuring
and unusual charges totaling $39,000. Included in this total was an inventory
writedown of $24,000 related to product rationalization as a result of recent
acquisitions as well as significant other stock keeping unit reductions. The
Company established a $24,000 inventory reserve in the second quarter of 2000,
approximately half of which was utilized through the most recent year end. In
the second quarter of the current year, another $3,400 of the reserve was
utilized to dispose of excess and discontinued product.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended July 28, 2001 compared with
the quarter ended July 29, 2000
(In Thousands)
The remainder of the restructuring costs accrued of $15,000 related primarily to
the consolidation of sales, marketing, logistics and administrative functions,
realignment of product lines, "make versus buy" decisions and the impairment of
certain manufacturing and procurement assets. All assets identified as impaired
were written down by $5,000 to their net realizable value in the prior year.
Other restructuring payments made to date totaled $8,700, of which $1,200 was
paid in the current quarter.
There were no significant adjustments made to the original accruals for
restructuring and unusual charges.
Interest expense, prior to capitalized interest, was $6,065 for the quarter
ended July 28, 2001, an increase of $1,715 from the second quarter of 2000.
This increase is due to higher average borrowings incurred in the current
quarter. The increase in debt levels is attributable to the funding of the
acquisitions made by the Company in 2000.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months ended July 28, 2001 compared with
the six months ended July 29, 2000
(In Thousands)
Operations
Net Sales by Product Line:
Six Months Ended July
2001 2000 %Change
------- ------- -----
Metal products....... $161,900 $144,400 12.1
Dinnerware Products.. 66,700 58,000 15.0
Glass products....... 15,100 16,300 ( 7.4)
Other Products....... 2,534 3,511 (27.8)
-------- -------- ----
Total............... $246,234 $222,211 10.4
======== ======== ====
Year to date review
Consolidated net sales for the six months ended July 28, 2001 increased $24,023
over the same period a year ago. The increase in metal and dinnerware product
sales is attributable to the acquisition of the Delco flatware offering in the
second half of 2000 and the Viners flatware and Sakura dinnerware product lines
in June of 2000. Increases from the Company's 2000 acquisitions were somewhat
offset by declines in the Company's core businesses, particularly in all
consumer product markets. Year to date, sales of domestic consumer products have
declined 11.3% over the same period last year. Due to the Delco acquisition,
domestic foodservice sales now account for slightly less than one-half of the
Company's 2001 sales. Sales to domestic foodservice customers have increased by
30.4% over the first half of 2000. International sales increased by 23.6%, to
$42,444 from the same period last year, primarily due to the Viners acquisition.
Gross margin as a percentage of net sales for the first six months of the
current year was 33.8% as compared to 37.7% for the same period of 2000. This
decrease in gross margin is primarily related to a slowdown in consumer product
sales in 2001. These products tend to yield a higher gross margin than
foodservice sales. In addition, to match the lower demand while still decreasing
inventories, the Company's production facilities have been operating at a lower
capacity than in 2000, thus generating negative manufacturing variances.
Total operating expenses increased by $7,074, or 11.6%, over the first six
months of the prior year due to the inclusion of the three acquisitions that
took place in the late second and third quarters of 2000. As a percentage of
sales, operating expenses were 27.7% in the current year to date, compared to
27.5% in 2000. The Company completed the integration of the Delco operations
into its existing foodservice operations in the first quarter of 2001. This has
lowered fixed operating costs and should continue to do so over the course of
the rest of this year.
During the second and third quarters of 2000, the Company recorded restructuring
and unusual charges totaling $39,000. Included in this total was an inventory
writedown of $24,000 related to product rationalization as a result of recent
acquisitions as well as significant other stock keeping unit reductions. The
Company established a $24,000 inventory reserve in the first half of 2000,
approximately half of which was utilized through the most recent year end. In
the current year, another $8,300 of the reserve was utilized to dispose of
excess and discontinued product.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months ended July 28, 2001 compared with
the six months ended July 29, 2000
(In Thousands)
The remainder of the restructuring costs accrued of $15,000 related primarily to
the consolidation of sales, marketing, logistics and administrative functions,
realignment of product lines, "make versus buy" decisions and the impairment of
certain manufacturing and procurement assets. Of these costs, $8,000 were
expensed in first half of 2000. All assets identified as impaired were written
down by $5,000 to their net realizable value in the prior year. Other
restructuring payments made to date totaled $8,700, of which $2,200 was paid in
the current year. There were no significant adjustments made to the original
accruals for restructuring and unusual charges.
Interest expense, prior to capitalized interest, was $13,277 for the six months
ended July 28, 2001, an increase of $5,852 from the second quarter of 2000. This
increase is due to higher average borrowings outstanding in 2001, attributable
to the funding of the acquisitions made by the Company in 2000.
Liquidity & Financial Resources
A prime objective of the Company in 2001 is to strengthen its balance sheet and
reduce debt. During the first half of 2001, continual significant progress has
been made toward attaining these goals. Year to date, inventories has been
reduced by $19,000, while debt and current liabilities have declined by $21,600.
The Company spent approximately $5,700 on capital projects focused primarily on
its manufacturing facilities and retail fixturing. Capital spending for the
remainder of 2001 is anticipated to be approximately $3,500.
Included in the long-term debt caption on the balance sheet are various senior
notes. The note agreements relating thereto contain provisions which, among
other things require maintenance of certain financial ratios related to levels
of indebtedness, minimum net worth and interest coverage levels. The covenants
limit certain types of payments including dividends and investments. At July 28,
2001, the maximum amount available for payment of dividends was $3,269.
During the first quarter of 2001, the Company was not in compliance with certain
of its debt covenants. The lenders waived violation of these covenants and
amended the covenants to agreed upon levels. The Company collateralized its debt
with all domestic assets (excluding real estate holdings) and a majority of its
investment in Oneida UK. The Company is currently in compliance with all
financial covenants.
Management believes there is sufficient liquidity to support the Company's
ongoing funding requirements from future operations as well as the availability
of bank lines of credit. Working capital was $208,238 as of July 28, 2001.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months ended July 28, 2001 compared with
the six months ended July 29, 2000
(In Thousands)
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board approved Statements of
Financial Accounting Standards No. 141 "Business Combinations" ("SFAS 141") and
No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which are effective
June 30, 2001 and December 31, 2001 respectively, for the Corporation. SFAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Under SFAS 142, amortization of
goodwill, including goodwill recorded in past business combinations, will
discontinue upon adoption of this standard. In addition, goodwill recorded as a
result of business combinations completed during the six-month period ending
December 31, 2001 will not be amortized. All goodwill and intangible assets will
be tested for impairment in accordance with the provisions of the Statement. The
Corporation is currently reviewing the provisions of SFAS 141 and SFAS 142 and
assessing the impact of adoption.
Forward Looking Information
With the exception of historical data, the information contained in this Form
10-Q, as well as those other documents incorporated by reference herein, is
forward-looking. For the purposes of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions readers that
changes in certain factors could affect the Company's future results and could
cause the Company's future consolidated results to differ materially from those
expressed herein. Such factors include, but are not limited to: general economic
conditions in the Company's markets; difficulties or delays in the development,
production and marketing of new products; the impact of competitive products and
pricing; certain assumptions related to consumer purchasing patterns;
significant increases in interest rates or the level of the Company's
indebtedness; major slowdowns in the retail, travel or entertainment industries;
the loss of several of the Company's major customers; under utilization of the
Company's plants and factories; the amount and rate of growth of the Company's
selling, general and administrative expenses.
19
ONEIDA LTD
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
JULY 28, 2001
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ONEIDA LTD
(Registrant)
Date: September 10, 2001
/s/ GREGG R. DENNY
------------------
Gregg R. Denny
Chief Financial Officer
20