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 October 27, 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 December 7, 2001: 16,504,100.
ONEIDA LTD.
FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 27, 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:
4(a)(i) Waiver and Amendment No. 1 to 2001 Amended and
Restated Note Purchase Agreement (1992) dated as of May 31, 2001,
between Oneida Ltd., Allstate Life Insurance Company and Pacific
Life Insurance Company. Waiver and Amendment No. 1 is dated
December 7, 2001.
(ii) Waiver and Amendment No. 1 to 2001 Amended and Restated
Note Purchase Agreement (1996) dated as of May 31, 2001, between
Oneida Ltd., THC Systems, Inc., Allstate Life Insurance Company,
Allstate Insurance Company and Pacific Life Insurance Company.
Waiver and Amendment No. 1 is dated December 7, 2001.
(iii) Waiver and Amendment No. 2 to Amended and Restated
Credit Agreement dated as of April 27, 2001, between Oneida Ltd.,
JPMorgan Chase Bank (formerly known as The Chase Manhattan
Bank)and the various lenders named in the Agreement. Waiver
Amendment No. 2 is dated December 7, 2001.
(b) During the quarter ended October 27, 2001 no Reports on
Form 8-K were filed by the registrant.
SIGNATURES
ONEIDA LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
(Thousands except per OCT 27, OCT 28, OCT 27, OCT 28,
share amounts) 2001 2000 2001 2000
-------- -------- -------- --------
NET SALES ......................... $128,548 $151,951 $374,782 $374,162
COST OF SALES ..................... 87,702 98,267 250,635 236,803
INVENTORY WRITEDOWN (NOTE 4) ...... 24,000
--------- --------- --------- ---------
GROSS MARGIN ...................... 40,846 53,684 124,147 113,359
OPERATING REVENUES ................ 379 4,819 1,119 6,351
--------- --------- --------- ---------
41,225 58,503 125,266 119,710
--------- --------- --------- ---------
OPERATING EXPENSES:
Selling, distribution and
administrative expenses ........ 34,319 37,587 102,419 98,613
Restructuring and unusual
Charges (NOTE 4) ............. 7,007 15,007
--------- --------- --------- ---------
INCOME FROM OPERATIONS ............ 6,906 13,909 22,847 6,090
OTHER EXPENSE ..................... 695 265 161 399
INTEREST EXPENSE .................. 5,732 7,101 18,792 14,048
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES . 479 6,543 3,894 (8,357)
PROVISION (CREDIT)FOR INCOME TAXES 179 2,437 1,451 (3,113)
--------- --------- --------- ---------
NET INCOME (LOSS) ................. $ 300 $ 4,106 $ 2,443 $ (5,244)
========= ========= ========= =========
EARNINGS PER SHARE OF COMMON STOCK:
Net income (loss):
Basic ......................... $.02 $.25 $.14 $(.33)
Diluted (NOTE 5) .............. .02 .25 .14 (.33)
SHARES USED IN PER SHARE DATA:
Basic ......................... 16,494 16,273 16,453 16,281
Diluted (NOTE 5) .............. 16,546 16,337 16,544 16,281
CASH DIVIDENDS DECLARED ........... $.10 $.15 $.30
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED BALANCE SHEETS
OCTOBER 27, 2001 AND JANUARY 27, 2001
(Unaudited)
(Dollars in Thousands)
OCTOBER 27, JAN 27,
2001 2001
--------- --------
ASSETS
CURRENT ASSETS:
Cash............................................... $ 4,720 $ 2,163
Accounts receivable, net of allowance for doubtful
Accounts of $3,447 and $3,072..................... 90,146 87,721
Other accounts and notes receivable................ 3,011 2,272
Inventories:
Finished goods.................................... 167,594 194,806
Goods in process.................................. 14,067 11,018
Raw materials and supplies........................ 8,581 10,064
Other current assets............................... 18,839 19,141
-------- --------
Total current assets............................ 306,958 327,185
-------- --------
PROPERTY, PLANT AND EQUIPMENT-At cost:
Property, plant and equipment...................... 252,306 245,558
Less accumulated depreciation...................... 143,724 135,508
-------- --------
Property, plant and equipment-net............... 108,582 110,050
-------- --------
OTHER ASSETS:
Intangible assets - net............................ 135,278 139,695
Deferred income taxes.............................. 22,513 22,833
Other assets....................................... 4,998 10,810
-------- --------
TOTAL.......................................... $578,329 $610,573
======== ========
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED BALANCE SHEETS
OCTOBER 27, 2001 AND JANUARY 27, 2001
(Unaudited)
(Dollars in Thousands)
OCTOBER 27, JAN 27,
2001 2001
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt............................... $ 10,455 $ 8,046
Accounts payable.............................. 29,783 33,097
Accrued liabilities........................... 39,229 55,582
Accrued income taxes.......................... 9,370 4,153
Dividends payable............................. 827 2,522
Current installments of long-term debt........ 8,240 9,239
-------- --------
Total current liabilities.................. 97,904 112,639
-------- --------
LONG-TERM DEBT................................. 272,155 282,815
-------- --------
OTHER LIABILITIES:
Accrued postretirement liability.............. 57,477 56,108
Accrued pension liability..................... 16,742 15,557
Other liabilities............................. 11,837 19,146
-------- --------
Total other liabilities.................... 86,056 90,811
-------- --------
STOCKHOLDERS' EQUITY:
Cumulative 6% preferred stock; $25 par
value; authorized 95,660 shares, issued
86,036 and 86,698 shares,
callable at $30 per share.................... 2,151 2,167
Common stock $1 par value; authorized
48,000,000 shares, issued 17,790,918
and 17,702,666 shares........................ 17,791 17,703
Additional paid-in capital.................... 83,788 82,956
Retained earnings............................. 58,188 57,495
Accumulated other comprehensive loss.......... (15,461) (11,423)
Less cost of common stock held in
treasury; 1,294,274 and 1,314,508 shares..... (24,243) (24,590)
------- -------
Stockholders' Equity........................ 122,214 124,308
-------- -------
TOTAL..................................... $578,329 $610,573
======== ========
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED OCTOBER 27, 2001
(Unaudited)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
----------------------------------------------------------
Balance at July 28, 2001........ 17,787 $17,787 $2,151 $83,741 $57,888
Stock plan activity, net........ 4 4 47
Purchase/retirement of
Treasury stock, net.............
Net income...................... $ 300 300
Other comprehensive
loss......................... (1,126)
-------
Comprehensive loss.............. $ (826)
=======
----------------------------------------------
Balance at October 27, 2001..... 17,791 $17,791 $2,151 $83,788 $58,188
==============================================
Accum.
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
-----------------------------------------------------
Balance at July 28, 2001...... $(14,335) $(24,355)
Stock plan activity, net......
Purchase/retirement of
Treasury stock, net........... 112
Net income....................
Other comprehensive
loss....................... (1,126)
-----------------------------------------------------
Balance at October 27, 2001... $(15,461) $(24,243)
=====================================================
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED OCTOBER 28, 2000
(Unaudited)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
----------------------------------------------------------
Balance at July 29, 2000........ 17,664 $17,664 $2,171 $82,639 $51,970
Stock plan activity, net........ 26 26 299
Purchase/retirement of
Treasury stock, net............. (1)
Cash dividends declared
($.10 per share)............. (1,672)
Net income...................... $4,106 4,106
Other comprehensive
Loss......................... (955)
-------
Comprehensive income............ $3,151
=======
---------------------------------------------------
Balance at October 28, 2000..... 17,690 $17,690 $2,170 $82,938 $54,404
===================================================
Accum.
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
----------------------------------------------------
Balance at July 29, 2000...... $(12,736) $(24,447) $(717)
Stock plan activity, net......
Purchase/retirement of
Treasury stock, net........... (196)
Cash dividends declared
($.10 per share)...........
Net loss......................
Other comprehensive
loss....................... (955)
----------------------------------------------------
Balance at October 28, 2000... $(13,691) $(24,643) $(717)
====================================================
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED OCTOBER 27, 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 $57,495
Stock plan activity, net........ 88 88 832
Purchase/retirement of
Treasury stock, net............. (16)
Cash dividends declared
($.10 per share)............. (1,750)
Net income...................... $ 2,443 2,443
Other comprehensive
loss......................... (4,038)
-------
Comprehensive loss.............. $(1,595)
=======
---------------------------------------------
Balance at October 27, 2001..... 17,791 $17,791 $2,151 $83,788 $58,188
=============================================
Accum.
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
---------------------------------------------------
Balance at Jan 27, 2001....... $(11,423) $(24,590)
Stock plan activity, net......
Purchase/retirement of
Treasury stock, net........... 347
Cash dividends declared
($.10 per share)...........
Net Income....................
Other comprehensive
loss....................... (4,038)
---------------------------------------------------
Balance at October 27, 2001... $(15,461) $(24,243)
===================================================
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED OCTOBER 28, 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 $64,630
Stock plan activity, net........ 87 87 1,051
Purchase/retirement of
Treasury stock, net............. (5)
Cash dividends declared
($.30 per share)............. (4,982)
Net loss........................ $(5,244) (5,244)
Other comprehensive
loss....................... (1,901)
-------
Comprehensive loss.............. $(7,145)
=======
------------------------------------------------
Balance at October 28, 2000..... 17,690 $17,690 $2,170 $82,938 $54,404
================================================
Accum.
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
----------------------------------------------------
Balance at Jan 29, 2000....... $(11,790) $(19,712) $(1,486)
Stock plan activity, net......
Purchase/retirement of
Treasury stock, net........... (4,931)
Cash dividends declared
($.30 per share)...........
Net loss......................
Other comprehensive
loss....................... (1,901)
Allocation of ESOP shares..... 769
----------------------------------------------------
Balance at October 28, 2000... $(13,691) $(24,643) $ (717)
====================================================
See notes to consolidated financial statements.
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 27, 2001 AND OCTOBER 28, 2000
(Unaudited)
(In Thousands)
FOR THE
NINE MONTHS ENDED
OCT 27, OCT 28,
2001 2000
------- -------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)................................... $ 2,443 $ (5,244)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 13,950 11,911
Provision for impairment of inventory
and long-term assets............................ 29,000
Deferred taxes and other non-cash
charges and credits............................. (1,931) (11,990)
Decrease (increase) in operating assets:
Receivables....................................... (3,164) (10,373)
Inventories....................................... 25,124 (46,540)
Other current assets.............................. 583 2,507
Other assets...................................... (3,555) (9,735)
Increase (decrease) in accounts payable............ (3,314) 8,696
Decrease in accrued liabilities.................... (11,497) 5,095
-------- ---------
Net cash provided (used) by operating activities 18,639 (26,673)
-------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures-net....... (7,539) (8,990)
Purchase of subsidiaries, net of cash acquired..... (117,976)
Other, net.......................................... 6,580 737
-------- ---------
Net cash used in investing activities........... (959) (126,229)
-------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.............. 913 1,138
Issuance (purchase) of treasury stock............... 338 (4,937)
Purchase (allocation) of ESOP shares - net 769
(Decrease) increase in short-term debt-net.......... 2,409 (27,629)
Payment of long-term debt........................... (11,660) (197,020)
Proceeds from issuance of long-term debt............ 387,036
Dividends paid...................................... (3,085) (4,982)
-------- ---------
Net cash (used) provided by financing activities (11,085) 154,375
-------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH............... (4,038) (1,901)
-------- --------
NET INCREASE (DECREASE) IN CASH....................... 2,557 (428)
CASH AT BEGINNING OF YEAR............................. 2,163 3,899
-------- --------
CASH AT END OF PERIOD................................. $ 4,720 $ 3,471
======== ========
See notes to consolidated financial statements.
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Thousands)
1. The consolidated financial statements for the three and nine months ended
October 27, 2001 and October 28, 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 nine months ended October 27, 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 approximately $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.
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 current quarter and first nine months of the current year, $800 and $9,100,
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 $9,700, of
which $1,000 and $3,200 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 October 27, 2001 and October 28,
2000:
Net Preferred Adjusted Earnings
Income Stock Net Income Average Per
(Loss) Dividends (Loss) Shares Share
--------------------------------------------------------------------------------
2001:
Basic earnings
per share.............. $300 $(32) $ 268 16,494 $.02
Effect of stock options. 52
Diluted earnings
per share.............. 300 (32) 268 16,546 .02
--------------------------------------------------------------------------------
2000:
Basic earnings
per share.............. $4,106 (33) 4,073 16,273 $.25
Effect of stock options. 64
Diluted earnings
per share.............. 4,106 (33) 4,073 16,337 $.25
--------------------------------------------------------------------------------
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 nine months ended October 27, 2001 and October 28,
2000:
Net Preferred Adjusted Earnings
Income Stock Net Income Average Per
(Loss) Dividends (Loss) Shares Share
--------------------------------------------------------------------------------
2001:
Basic earnings
per share.............. $2,443 $(96) $2,347 16,453 $.14
Effect of stock options. 91
Diluted earnings
per share.............. 2,443 (96) 2,347 16,544 .14
--------------------------------------------------------------------------------
2000:
Basic earnings (loss)
per share.............. $(5,244) (98) (5,342) 16,281 $(.33)
Effect of stock options. 0
Diluted earnings (loss)
per share.............. (5,244) (98) (5,342) 16,281 (.33)
--------------------------------------------------------------------------------
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 October 27, 2001, the maximum amount available for payment of dividends was
$2,606.
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. At October 27, 2001, the
Company was not in compliance with its consolidated interest coverage and
consolidated leverage covenants. The Company has entered into a Waiver and
Amendment with its lenders and expects to complete a further amendment to the
covenants and to provide further collateral.
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
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Thousands)
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,
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 third quarter and first nine months of 2001
and 2000 were as follows:
(000)
---
Third Quarter
------------- Metal Dinnerware Glass Other Total
---------------------------------------------
2001 Net Sales $ 80,400 $38,400 $8,900 $ 848 $128,548
2000 Net Sales $ 99,200 $41,700 $9,300 $1,751 $151,951
Year to date
------------ Metal Dinnerware Glass Other Total
---------------------------------------------
2001 Net Sales $242,300 $105,100 $24,000 $3,382 $374,782
2000 Net Sales $243,600 $ 99,700 $25,600 $5,262 $374,162
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"). SFAS 141 is
currently effective and SFAS 142 is effective January 27,2002 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.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets" ("SFAS 144"). SFAS 144 provides guidance on the accounting
for long-lived assets to be held and used and for assets to be disposed of
though sale or by other means. SFAS 144 is effective for fiscal years beginning
after December 15, 2001. The Company does not expect the adoption of SFAS 144 to
have a material impact on the earnings or financial position of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended October 27, 2001 compared with the quarter
ended October 28, 2000
(In Thousands)
Operations
Net Sales by Product Line:
Three Months Ended October
2001 2000 %Change
------- ------- -----
Metal products....... $ 80,400 $ 99,200 (19.0)
Dinnerware products.. 38,400 41,700 (7.9)
Glass products....... 8,900 9,300 (4.3)
Other products....... 848 1,751 (51.6)
-------- -------- -----
Total............... $128,548 $151,951 (15.4)
======== ======== =====
Quarterly Review
Consolidated net sales for the quarter ended October 27, 2001 decreased by
$23,403 from the third quarter of 2000. This decline was noted across all
markets and product lines. The slowdown in consumer spending noted in the first
half of 2001 became more pronounced following the events of September 11 and the
resulting impact on the domestic economy. Sales to domestic consumer markets
dropped 16.5% from the third quarter 2000 level. Domestic foodservice sales,
which totaled 41.6% of the Company's sales in the current quarter, were
especially impacted by the United States terrorist attacks. During the six weeks
remaining after September 11, the Company saw a dramatic decrease in orders from
its foodservice customers, as Americans traveled and dined out less. During the
same period, international sales decreased by 13.8% from the same period last
year. Sales in international markets accounted for 15.1% of the Company's total
third quarter sales.
Gross margin as a percentage of net sales was 31.8% in the third quarter of 2001
as compared to 35.3% for the same period of 2000. The decrease in gross margin
this quarter is attributable to the above referenced downturn in consumer and
foodservice sales in 2001. To meet the lower demand, the Company's manufacturing
plants operated at a lower capacity in the current quarter. The Company's
domestic flatware plant operated on a reduced workweek during October, while the
domestic china plant had an unscheduled two week shutdown. These actions
prevented the build up of inventory, but generated negative manufacturing
variances.
Total operating expenses decreased by $3,268, or 8.7%, from the same quarter
last year. As a percentage of sales, the current quarter operating expenses
increased by 2.0% from the same period last year to 26.7%.
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 third quarter of the current year, another $800 of the reserve was utilized
to dispose of excess and discontinued product.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended October 27, 2001 compared with the quarter
ended October 28, 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 $1,000 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 $5,838 for the quarter
ended October 27, 2001, a decrease of $1,586, or 21.4%, from the third quarter
of 2000. This decrease is due to a combination of lower average borrowings
(primarily as a result of inventory reduction) and outstanding interest rates in
the current quarter as compared to a year ago.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months ended October 27, 2001 compared with the nine
months ended October 28, 2000
(In Thousands)
Operations
Net Sales by Product Line:
Nine Months Ended October
2001 2000 %Change
------- ------- -----
Metal products....... $242,300 $243,600 (.5)
Dinnerware Products.. 105,100 99,700 5.4
Glass products....... 24,000 25,600 (6.3)
Other Products....... 3,382 5,262 (35.7)
-------- -------- -----
Total............... $374,782 $374,162 .2
======== ======== =====
Year to date review
Consolidated net sales for the nine months ended October 27, 2001 increased
slightly over the same period a year ago. Increases from the Company's 2000
acquisitions were offset by declines in the Company's existing businesses,
particularly in all consumer product markets. Year to date, sales of consumer
products (primarily metal) have declined 13.4% over the same period last year.
Lagging domestic consumer demand experienced in the first half of this year was
further dampened by the recent terrorist attacks and subsequent erosion of the
United States economy. Due to the Delco acquisition in mid 2000, domestic
foodservice sales have increased to account for 45.2% of the Company's 2001
sales. The events of September 11 had a significant immediate negative effect on
the Company's foodservice business, as Americans have reduced their travel and
entertainment spending. In spite of these events, sales to foodservice customers
have increased by 11.7% over the same period last year. International sales
increased by 8.8%, to $61,864 from the same period last year, primarily due to
the Viners acquisition.
Gross margin as a percentage of net sales for the first nine months of the
current year was 33.1% as compared to 36.7% for the same period of 2000, due
largely to slowing down the volume of the Company's manufacturing plants. To
match 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 $3,807, or 3.9%, over the first nine
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 27.3% in the current year to date, compared to
26.5% 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,
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months ended October 27, 2001 compared with the nine
months ended October 28, 2000
(In Thousands)
approximately half of which was utilized through the most recent year end. In
the current year, another $9,100 of the reserve was utilized to dispose of
excess and discontinued product.
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 $9,700, of which $3,200 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 $19,086 for the nine months
ended October 27, 2001, an increase of $4,274 from the same period 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 mid 2000. Debt levels
have dropped throughout the current year, due to inventory reductions, from a
high point in the third quarter of 2000.
Liquidity & Financial Resources
A prime objective of the Company in 2001 has been to strengthen its balance
sheet and reduce debt. During the first nine months of 2001, continual progress
has been made toward attaining these goals. Year to date, inventories has been
reduced by $25,600, while debt and current liabilities have declined by $25,400.
The Company spent approximately $7,500 on capital projects focused primarily on
its manufacturing facilities and retail fixturing. Capital spending for the
remainder of 2001 is anticipated to be approximately $1,500.
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 October
27, 2001, the maximum amount available for payment of dividends was $2,606.
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. At October 27, 2001, the
Company was not in compliance with its consolidated interest coverage and
consolidated leverage covenants. The Company has entered into a Waiver and
Amendment with its lenders and expects to complete a further amendment to the
covenants and to provide further collateral.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months ended October 27, 2001 compared with
the nine months ended October 28, 2000
(In Thousands)
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 $209,055 as of October 27, 2001.
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"). SFAS 141 is
currently effective and SFAS 142 is effective January 27, 2002 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.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets" ("SFAS 144"). SFAS 144 provides guidance on the accounting
for long-lived assets to be held and used and for assets to be disposed of
though sale or by other means. SFAS 144 is effective for fiscal years beginning
after December 15, 2001. The Company does not expect the adoption of SFAS 144 to
have a material impact on the earnings or financial position of the Company.
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.
ONEIDA LTD
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
OCTOBER 27, 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: December 10, 2001
/s/ GREGG R. DENNY
-------------------
Gregg R. Denny
Chief Financial Officer
STATEMENT OF DIFFERENCES
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The less-than-or-equal-to sign shall be expressed as................... <=