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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended January 26, 2002 Commission File Number 1-5452
ONEIDA LTD.
163-181 KENWOOD AVENUE
ONEIDA, NEW YORK 13421-2899
(315) 361-3636
NEW YORK 15-0405700
(State of Incorporation) (I.R.S. Employer Identification No.)
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange
Title of Class on which registered
-------------- -------------------
Common Stock, par value $1.00 per share New York Stock Exchange
with attached Preferred Stock purchase rights
Securities registered pursuant to Section 12(g) of the Act:
6% Cumulative Preferred Stock, par value $25 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on a closing price of $14.75 per share as reported on the New
York Stock Exchange Composite Index on April 15, 2002 was $233,923,860.
The number of shares of Common Stock ($1.00 par value) outstanding as of April
15, 2002, was 16,584,873.
Documents Incorporated by Reference
1. Portions of Oneida Ltd.'s Definitive Proxy Statement dated April 25, 2002
(Part III of Form 10-K).
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Page 0 of 58. See list of Exhibits on pages 11-15.
Explanatory Note
Oneida Ltd. hereby amends its Annual Report on Form 10-K for the year ended
January 26, 2002, filed with the Securities and Exchange Commission on April 26,
2002. The purpose of this amendment is to restate portions of the Financial
Statements attached hereto pursuant to Items 6, 7, 8 and 14 hereof, including
Management's Discussion and Analysis, the Consolidated Statements of Operations,
the Consolidated Balance Sheets, the Consolidated Statements of Changes in
Stockholders' Equity, Consolidated Statements of Cash Flows and the Notes to the
Consolidated Financial Statements as of and for the years ended January 26, 2002
and January 27, 2001, as set forth in the original filing. The restatement is
related to adjustments made to the purchase accounting for the August 2000
acquisition of Delco International, Ltd. and its subsequent operations.
In order to preserve the nature and character of the disclosures set forth in
such items as originally filed, this report continues to speak as of the date of
the original filing, and, unless otherwise stated to the contrary, the Company
has not updated the disclosures in this report to speak as of a later date.
PART I
ITEM 1. BUSINESS.
a. General.
The Company (unless otherwise indicated by the context, the term "Company" means
Oneida Ltd. and its consolidated subsidiaries) was incorporated in New York in
1880 under the name Oneida Community, Limited. In 1935, the Company's name was
changed to Oneida Ltd. It maintains its executive offices in Oneida, New York.
Since its inception, the Company has manufactured and marketed tableware -
initially silverplated and, later, sterling and stainless steel products. By
acquiring subsidiaries, entering into strategic distributorship arrangements and
expanding its own tableware lines, the Company has diversified into the
manufacture and distribution of commercial and retail china dinnerware and the
distribution of other tableware, kitchenware and gift items, most notably
crystal and glass stemware, barware and giftware.
b. Industry Segments.
The Company's operations and assets are in one principal industry: tableware
products. The Company's principal industry segments are grouped around the
manufacture and distribution of three major product categories: metalware,
dinnerware and glassware. The Company also distributes a variety of other
tabletop accessories, kitchen utensils and giftware.
Information regarding the Company's operations by industry segment for the years
ended January 26, 2002, January 27, 2001 and January 29, 2000 is set forth on
page 27 of the Company's Annual Report to Stockholders for the year ended
January 26, 2002, parts of which are incorporated herein by reference.
c. Narrative Description of Business.
Principal Products.
Metalware:
Metalware is comprised of stainless steel, silverplated and sterling silver
flatware (forks, knives, spoons and serving pieces), stainless steel and
silverplated holloware (bowls, trays, and tea and coffee sets), cutlery and
cookware.
The principal source of the Company's flatware is the Company's Sherrill, New
York manufacturing facility. In addition, the Company also utilizes the
facilities of Oneida Mexicana, S.A., its wholly owned subsidiary located in
Toluca, Mexico, to manufacture flatware patterns that are not produced in
Sherrill, New York. The Company also imports flatware and cutlery from several
international sources.
1
The Company, through its Oneida International, Inc. subsidiary, manufactures
stainless steel holloware in Shanghai, China. The Company also imports stainless
steel and silverplated holloware products from several international sources.
The Company imports its aluminum and stainless steel cookware from several
international sources.
Dinnerware:
Dinnerware includes domestic and imported china, porcelain and stoneware plates,
bowls, cups, mugs, and a variety of serving pieces.
In June 2000, the Company acquired substantially all of the assets of Sakura,
Inc., a leading marketer of consumer dinnerware and accessories. In business for
over 40 years, Sakura's focus is on ceramic, porcelain and melamine dinnerware
and accessories. Sakura's products carry both proprietary designs and designs
licensed from a wide spectrum of leading artists and designers, including Debbie
Mumm and Warren Kimble. The Company imports its consumer dinnerware from several
international sources.
Buffalo China, Inc. is a leading manufacturer of vitreous china for the
foodservice industry. Buffalo China also operates a subsidiary, Ceramica de
Juarez, S.A. de C.V., located in Juarez, Mexico. Ceramica de Juarez produces
holloware and other specialty china pieces that are not manufactured in Buffalo,
including fully finished items and bisque china which is then finished in
Buffalo. THC Systems, Inc., another of the Company's subsidiaries, is a leading
importer and marketer of vitreous china and porcelain dinnerware for the
foodservice industry. THC does business under the REGO tradename.
The Company is also the exclusive distributor of certain china dinnerware
products manufactured by Schonwald and Noritake Co., Inc. for the United States
foodservice and institutional markets.
Glassware:
The Company's Glassware segment includes glass and crystal stemware, barware,
serveware, giftware and decorative pieces.
In September 1997, the Company became the exclusive distributor of Schott
Zwiesel crystal products in the foodservice and consumer markets of the United
States, Mexico and the Caribbean. In 1999, this distribution relationship was
extended to include the foodservice and consumer markets of Australia, New
Zealand, and Central and South America. In 2000, the foodservice and consumer
markets of the United Kingdom were added as well. Schott Zwiesel is a German
manufacturer of fine crystal stemware, barware and giftware. The Company markets
Schott Zwiesel's crystal products under both the Schott Zwiesel and Oneida
names.
In February 1999, the Company became the exclusive distributor of the crystal
products manufactured by Cristalleria Artistica La Piana, SpA, also known as
CALP, for the consumer and foodservice markets in the United States. CALP is an
Italian manufacturer of fine 24% lead crystal stemware, giftware and decorative
pieces. The Company will continue to market CALP's crystal products under CALP's
trademarks of RCR, CAPRI, DA VINCI, PRIMA VERA and CRISTALLO, as well as under
the Oneida name.
In addition to the distribution of Schott and CALP crystal, the Company
significantly expanded its self-branded glassware lines in 1998 with the
introduction of Oneida glassware for both foodservice and consumer use. Oneida
imports its glassware from several foreign sources, but is supplied primarily by
Pasabahce Cam Sanayii ve Ticaret A.S., a Turkish glassware manufacturer. In
April 2000, the Company and Pasabahce formalized their relationship whereby the
Company will act as Pasabahce's exclusive foodservice distributor in the United
States, Canada, Mexico and the Caribbean, and for certain products in Australia
and New Zealand.
The Company has and will continue to import other glass and crystal stemware,
barware, serveware, giftware and decorative pieces from several international
sources.
2
Other Tabletop Accessories:
The Company, in recent years, expanded its product offerings beyond its main
metalware, dinnerware and glassware segments. These other products include
ceramic and plastic serveware, kitchen and table linens, picture frames and
decorative pieces distributed primarily by the Company's Encore Promotions and
Kenwood Silver subsidiaries.
The percentages of metalware, dinnerware, glassware and other tabletop
accessories sales to total consolidated sales for the fiscal years, which end in
January, are as follows:
2002 2001 2000
---- ---- ----
Metalware: 65% 66% 68%
Dinnerware: 27% 25% 21%
Glassware: 7% 8% 8%
Other Tabletop Accessories: 1% 1% 3%
Principal Markets.
Consumer:
Consumer marketing focuses on individual consumers, and the Company's
wide-ranging consumer marketing activities include both retail and direct
operations. The Company's retail accounts include national and regional
department store chains, mass merchandise and discount chains, specialty shops
and local establishments. The Company's direct accounts serve business customers
in the premium, incentive, mail order and direct selling markets. The Company
also reaches consumers with its Kenwood Silver Company, Inc. and Encore
Promotions, Inc. subsidiaries, both of which play a significant role in the
marketing of the Company's products. Kenwood Silver Company, Inc. operates a
chain of 64 Oneida factory outlet stores in resort and destination shopping
areas across the United States, while Encore Promotions, Inc. runs supermarket
redemption programs featuring a variety of tableware and household items. The
Company also markets its products via its web site, www.oneida.com.
Most consumer orders are filled directly by the Company from its primary
distribution center located in Sherrill, New York. For some accounts, however,
orders are fulfilled by one of the Company's two other distribution centers
which are located in Ontario, California and Nashville, Tennessee.
Foodservice:
The Company serves foodservice and institutional accounts of all kinds,
including restaurants, hotels, resorts, convention centers, food distributors,
airlines, cruise lines, hospitals and educational institutions.
In August 2000, the Company acquired all outstanding shares of Delco
International, Ltd., a leading marketer of foodservice tableware products for
more than 60 years. Delco's mass-market customer base includes distributors,
restaurant and hotel chains and institutional accounts, while Delco's ABCO
division is the tableware source for over 50 airlines worldwide.
While most foodservice orders are filled directly by the Company from its
primary distribution centers in Sherrill and Buffalo, New York, some orders are
filled by the Company's other distribution centers which are located in Ontario,
California and Nashville, Tennessee. The Company also utilizes third party
warehouses located in Long Beach, California; Miami, Florida; Charlotte, North
Carolina; and Fond du Lac, Wisconsin to service certain foodservice customers.
International:
International activities span both the consumer and foodservice markets
described above, and include the marketing and sale of the Company's
domestically manufactured and internationally sourced products throughout the
world.
All sales and marketing functions in the Canadian market are served by the
Company's Oneida Canada, Limited subsidiary while all sales and marketing
functions in the Mexican, Central and South American and Caribbean markets are
served by the Company's Oneida, S.A. de C.V. subsidiary.
3
In June 2000, the Company's English subsidiary, Oneida U.K. Limited, acquired
all outstanding shares of London-based Viners of Sheffield Limited. Oneida U.K.
Limited and Viners of Sheffield Limited, the leading marketer of consumer
flatware and cookware in the U.K., currently serve the Company's European,
African, Middle and Far Eastern and Asian and Pacific markets.
The Australian and New Zealand markets are served by the Company's subsidiary,
Oneida Australia, Pty Ltd. In addition to marketing the Company's existing
products, Oneida Australia Pty Ltd. continues the businesses of two 1998
acquisitions: Stanley Rogers & Son, a leading importer and marketer of stainless
steel and silverplated flatware to retail customers in Australia and New
Zealand, and Westminster China, a leading importer and marketer of porcelain
dinnerware to the foodservice industry in Australia and New Zealand.
The Company owns approximately 97% of Oneida International, Inc., a corporation
formed to market tabletop products of Italian design, some of which are
manufactured in Italy while others are manufactured in Shanghai, China or
sourced internationally. Oneida International, Inc. develops and markets these
and other of the Company's products in the international foodservice market
through its Italian subsidiary, Oneida Italy, S.r.l.
In addition to the foregoing, the Company also uses a network of independent
representatives and distributors to market and sell the Company's products in
countries where the Company does not have offices or employees of its own.
International orders for both foodservice and consumer products are filled by
the Company from a variety of locations, including the Company's United States
distribution centers in Sherrill, New York and Nashville, Tennessee, as well as
the Company's international facilities in Niagara Falls, Canada; Toluca, Mexico;
London, England; Bangor, Northern Ireland; Melbourne, Australia; and Vercelli,
Italy. In addition, many orders are shipped directly from the suppliers to the
Company's international customers.
Raw Materials.
The principal raw materials used by the Company in its manufacture of metalware
are stainless steel, brass, silver and gold. For china, they are various clays,
flint, aluminum oxide and glass frite. These materials are purchased in the open
market to meet current requirements and have historically been available in
adequate supply from multiple sources. The Company experienced no significant or
unusual problems in the purchase of raw materials during the fiscal year ended
January 2002. Although the Company has successfully met its raw materials
requirements in the past, there may in the future be temporary shortages or
sharp increases in the prices of raw materials due to a number of factors such
as transportation disruptions, or production or processing delays. For example,
the price of nickel, one of the components of stainless steel, a principal
ingredient of the Company's metalware products, has been volatile since late
1999. While it is impossible to predict the timing or impact of future shortages
and price increases, such shortages and increases have not in the past had any
material adverse effects on the Company's operations.
Intellectual Property.
The Company owns and maintains many design patents in the United States and
Canada. These patents, along with numerous copyrights, protect the Company's
product designs and decorations. In addition, the Company has registered its
most significant trademarks in the United States and many foreign countries. The
consumer, foodservice and international operations use a number of trademarks
and trade names which are advertised and promoted extensively including ONEIDA,
ABCO, BUFFALO CHINA, COMMUNITY, DELCO, HEIRLOOM, LTD, NORTHLAND, REGO, ROGERS,
SAKURA, SANT'ANDREA and VINERS OF SHEFFIELD. Taken as a whole, the Company's
intellectual property, especially the market recognition associated with the
ONEIDA name, is a material, although intangible, corporate asset.
4
Licenses.
The Company continues to explore opportunities to capitalize on the ONEIDA name
in new product categories. One vehicle for this expansion has been licensing the
ONEIDA name for use by third parties on products complementary to the Company's
own core tableware lines. Examples include agreements with Robinson Knife
Manufacturing Co., Inc. and Trendex Home Designs, Inc. for the manufacture and
marketing of ONEIDA kitchen tools and accessories and ONEIDA kitchen and table
linens, respectively. In addition, the Company also maintains license agreements
that allow it to market lines of flatware under the WEDGWOOD and ROYAL DOULTON
names, a line of dinnerware, flatware, glassware and related accessories under
the COCA-COLA name and lines of dinnerware and flatware under the RUSSEL WRIGHT
name. The Company began selling its WEDGWOOD flatware and RUSSEL WRIGHT
dinnerware in the Spring of 2002. The RUSSEL WRIGHT flatware will follow in the
Summer of 2002 and the COCA-COLA tableware and ROYAL DOULTON flatware in late
2002. Neither the terms nor the effects of any of the Company's license
agreements are material.
Seasonality of Business.
Although consumer operations normally do a greater volume of business during
October, November and December primarily because of holiday-related orders for
metalware, dinnerware and glassware products, our businesses are not considered
seasonal.
Customer Dependence.
No material part of the Company's business is dependent upon a single customer,
the loss of which would have a materially adverse effect. Sufficient inventories
of metalware, dinnerware, glassware and other products are maintained by the
Company to respond promptly to orders.
Backlog Orders.
Tableware operations had order backlogs of $26,238,300 as of March 13, 2002 and
$34,365,000 as of March 23, 2001. This backlog is expected to be filled during
the current fiscal year, principally in the first quarter. The amount of backlog
is reasonable for the tableware industry.
Market Conditions and Competition.
The Company is the only domestic manufacturer of a complete line of stainless
steel, silverplated and sterling flatware. The Company believes that it is the
largest producer of stainless steel and silverplated flatware in the world. The
Company's dinnerware, holloware and crystal and glass lines, along with its
flatware lines, make the Company a truly complete tableware supplier. The
Company faces competition from several domestic companies that market both
imported and domestically manufactured lines and from hundreds of importers
engaged exclusively in marketing foreign-made tableware products. In recent
years, there is also competition from department and specialty stores and
foodservice establishments that import foreign-made tableware products under
their own private labels for their sale or use. The Company strives to maintain
its market position through product diversity, design innovation, and brand
strength, especially among consumers.
The metalware, dinnerware and glassware businesses are each highly competitive.
The principal factors affecting domestic consumer competition are design, price,
quality and packaging. Other factors that have an effect on consumer competition
are availability of replacement pieces, and product warranties. In the opinion
of the Company, no one factor is dominant and the significance of the different
competitive factors varies from customer to customer.
The principal factors affecting domestic foodservice competition are price,
service and quality. The Company's foodservice products and service are highly
regarded in this industry, and we are one of the largest sources of commercial
china dinnerware and stainless steel and silverplated tableware in the United
States.
The principal factors affecting international competition are brand recognition,
design and quality. Other factors affecting the Company's participation in the
international market include competition with local suppliers and high import
duties, both of which increase the Company's costs relative to local producers.
5
Research and Development.
The Company places a considerable emphasis on excellence in development and
design. To achieve this end, the Company maintains full time in-house design and
engineering departments that continuously develop, test and improve products and
manufacturing methods. Independent designers and collaborative efforts with
other companies contribute to the Company's emphasis on development and design.
The Company's actual expenditures on research and development activities during
the past three fiscal years, however, have not been material.
Environmental Compliance.
The Company does not anticipate that compliance with federal, state and local
environmental laws and regulations will have any material effect upon the
capital expenditures, earnings or competitive position of the Company. The
Company does not anticipate any material capital expenditures for environmental
control facilities for the remainder of the current fiscal year or the
succeeding fiscal year.
Employment.
The Company and its subsidiaries employed approximately 2,580 employees in
domestic operations and 1,390 employees in foreign operations as of March 1,
2002. The Company maintains positive relations with its domestic and foreign
employees. With the exception of its Buffalo China, Inc. subsidiary, the
Company's facilities are not unionized. The employees of Buffalo China Inc.'s
manufacturing facility in Buffalo, New York are represented by the Glass,
Molders, Pottery, Plastics & Allied Workers International Union AFL-CIO, CLC and
its local union No. 76A. The current collective bargaining agreement between
Buffalo China, Inc. and the Glass, Molders, Pottery, Plastics & Allied Workers
International Union AFL-CIO, CLC and its local union No. 76A expires on July 31,
2005. The Company has experienced no work stoppages or strikes in the past five
years.
Forward Looking Information.
With the exception of historical data, the information contained in this Form
10-K, 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; underutilization of the
Company's plants and factories; and the amount and rate of growth of the
Company's selling, general and administrative expenses.
ITEM 2. PROPERTIES.
The principal properties of the Company and its subsidiaries are situated at the
following locations and have the following characteristics:
Approximate Square Footage
--------------------------
Ontario, California Warehouse 206,000
Buffalo, New York Manufacturing China 257,000
Buffalo, New York Offices, Warehouse and China Decorating Facility 203,000
Buffalo, New York Offices and Warehouse 82,000
Oneida, New York Executive Administrative Offices 95,000
Sherrill, New York Manufacturing Stainless Steel, Silverplated
and Sterling Flatware 1,082,000
6
Approximate Square Footage
--------------------------
Sherrill, New York Offices and Warehouse 206,000
Sherrill, New York Manufacturing Knives 135,000
Nashville, Tennessee Warehouse 293,000
Melbourne, Australia Offices and Warehouse 60,000
Niagara Falls, Ontario, Offices and Warehouse 120,000
Canada
Shanghai, China Manufacturing Foodservice Holloware 55,000
London, England Offices and Warehouse 30,000
Bangor, N. Ireland Offices and Warehouse 32,000
Vercelli, Italy Offices, Warehouse and Manufacturing
Stainless Steel Holloware 84,000
Juarez, Mexico Manufacturing China 65,000
Mexico City, Mexico Offices and Warehouse 32,000
Toluca, Mexico Manufacturing Stainless Steel Flatware 75,000
All of these buildings are owned by the Company with the following exceptions:
o Ownership of the 206,000 square foot Sherrill, New York warehouse and
office property was transferred to the Oneida County Industrial Development
Agency on February 25, 2000 in exchange for various tax concessions from the
county. The property will remain in the ownership of the Oneida County
Industrial Development Agency for a term of fifteen years, upon the expiration
of which the property will be conveyed back to the Company.
o Ownership of the 203,000 square foot Buffalo, New York office, warehouse
and decorating property was transferred to the Erie County Industrial
Development Agency on February 29, 2000 in exchange for various tax concessions
from the county. The property will remain in the ownership of the Erie County
Industrial Development Agency for a term of fifteen years, upon the expiration
of which the property will be conveyed back to Buffalo China.
o The offices and warehouses in Ontario, California; Nashville, Tennessee;
Melbourne, Australia; Mexico City, Mexico; Bangor, Northern Ireland; and London,
England are leased.
In addition to the land primarily associated with its manufacturing operations,
the Company owns approximately 600 additional acres in the cities of Sherrill
and Oneida and the town of Vernon, New York.
The Company leases sales offices and/or showrooms in New York City and Melville
and Malta, New York. The Company also leases retail outlet space in numerous
locations throughout the United States through its subsidiary, Kenwood Silver
Company, Inc., and in several locations in the United Kingdom through its
subsidiary, Oneida U.K. Limited.
All of the Company's buildings are located on sufficient property to accommodate
any further expansion or development planned over the next five years. The
properties are served adequately by transportation facilities, are well
maintained and are adequate for the purposes for which they are intended and
used.
7
ITEM 3. LEGAL PROCEEDINGS.
On December 8, 1998, the Oneida Indian Nation of New York, the Oneida Tribe of
Indians of Wisconsin and the Oneida of the Thames, as Plaintiffs, along with The
United States of America, as Intervenor, moved to amend their Complaint filed on
May 3, 1974 in the United States District Court for the Northern District of New
York against the Counties of Madison and Oneida, New York. The Amended Complaint
sought to add the State of New York, New York State Thruway Authority,
Utica-Rome Motorsports, Inc., Niagara Mohawk Power Corporation and the Oneida
Valley National Bank, individually and as representatives of the class of
similarly situated private landowners in Madison and Oneida Counties. The
Complaint alleged that during the nineteenth century the Oneidas' lands were
improperly transferred. The Oneidas sought title to the property as well as
monetary damages. The Company's headquarters and main manufacturing and
distribution facilities are located within this land claim area. On September
25, 2000 the Judge ruled that the private landowners, including the Company,
could not be added as Defendants in this action.
On February 16, 2002, the Oneida Indian Nation of New York, the State of New
York and Madison and Oneida Counties announced an agreement in principle to
resolve the longstanding land claim. Later that month, to demonstrate their
opposition to the announced settlement, the Oneida Tribe of Indians of Wisconsin
began filing suits against private owners of commercial property within the land
claim area. To date, approximately 40 such suits have been filed by the Oneida
Tribe of Indians of Wisconsin. As of the date hereof, the Company has not been
made the subject of such a suit.
In addition to the foregoing, the Company is involved in various routine legal
proceedings incidental to the operation of its business. Other than as discussed
herein, the Company's Management does not believe there is any ongoing or
pending litigation with a possible material effect on the financial position of
the Company.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF STOCKHOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
Page 55 of this Report.
ITEM 6. SELECTED FINANCIAL DATA.
Page 56 of this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Pages 47 through 54 of this Report.
ITEM 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
Pages 47 through 54 of this Report.
8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Pages 22 through 55 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Information required to be furnished under Items 10 through 13 of this Part is
set forth in, and incorporated by reference to, the Company's definitive Proxy
Statement dated April 25, 2002 (File 1-5452), at the respective pages indicated.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Pages 2 through 5 of the Company's definitive Proxy Statement.
Executive Officers of the Registrant
As of April 15, 2002, the persons named below are the executive officers of the
Company and all have been elected to serve in the capacities indicated at the
pleasure of the Oneida Ltd. Board of Directors. No family relationships exist
among any of the executive officers named, nor is there any arrangement or
understanding pursuant to which any person was selected as an officer.
Principal Business Affiliations During
Name, Age and Positions with Company Past Five Years
----------------------------------------- --------------------------------------
Allan H. Conseur, 53 Mr. Conseur was elected Executive Vice
Executive Vice President and President in 1999. He also has held the
a Director positions of President, THC Systems,
Inc. since 1996 and President, Oneida
International, Inc. since 1998. He
joined the Company in 1996.
Harold J. DeBarr, 57 Mr. DeBarr was elected Corporate Senior
Corporate Senior Vice President, Vice President in 1999. He had been
Manufacturing and Engineering Senior Vice President, Manufacturing
and Engineering since 1996.
----------------------------------------- ---------------------------------------
Gregg R. Denny, 45 Mr. Denny was elected Chief Financial
Chief Financial Officer Officer in June 2000. He had been Vice
President of Purchasing since April
2000, Managing Director of Oneida's
Australian operation since 1998 and
Director of Purchasing since 1996.
Principal Business Affiliations During
Name, Age and Positions with Company Past Five Years
----------------------------------------- --------------------------------------
J. Peter Fobare, 52 Mr. Fobare assumed responsibility for
Senior Vice President and General the Consumer Direct Division in 1999.
Manager, Consumer Retail and Direct He had been Senior Vice President and
Divisions and a Director General Manager of the Consumer Retail
Division for more than five years prior
to 1999.
9
Oliver B. Hasler, 38 Mr. Hasler was elected Senior Vice
Senior Vice President and Managing President and Managing Director,
Director, International Division International Division in 2000. He had
been Managing Director of Oneida's
Latin American operation since 1998 and
General Manager of Oneida Mexicana
since 1995.
Robert J. Houle, 60 Mr. Houle was elected Corporate Vice
Corporate Vice President, Human President in 1999. He had been Vice
Resources President, Human Resources and
Manufacturing Administration for more
than five years prior to 1999.
James E. Joseph, 41 Mr. Joseph was elected Senior Vice
Senior Vice President and General President and General Manager,
Manager, Foodservice Division Foodservice Division in August 2000. He
had been Senior Vice President,
International Division since March 2000,
Vice President and Managing Director of
Oneida's European, African and Asian
operations since 1998 and Managing
Director of Oneida's Latin American
operation since 1994.
Peter J. Kallet, 55 Mr. Kallet was elected Chairman in 2000
Chairman of the Board, President and He has been Chief Executive Officer
Chief Executive Officer and a Director since 1998 and President and Chief
Operating Officer since 1996. He had
been Senior Vice President and General
Manager of the Company's Foodservice
Division for more than five years prior
. to 1996.
Thomas E. Lowe, 51 Mr. Lowe was elected President of Encore
President, Encore Promotions, Inc. Promotions, Inc. in 2001. He had been Senior
Vice President, Marketing since 2000. Mr.
Lowe joined the Company in 2000.
Robert L. Lupica, 40 Mr. Lupica was elected Senior Vice President
Senior Vice President and in 1999. He has been General Manager of the
General Manager, Buffalo Operations Company's Buffalo Operations since 1996. Mr.
Lupica joined the Company in 1996.
Catherine H. Suttmeier, 45 Ms. Suttmeier was elected Corporate Vice
Corporate Vice President, Secretary and President in 1999. She has been Vice
General Counsel and a Director President, Secretary and General Counsel for
more than five years prior to 1999.
ITEM 11. EXECUTIVE COMPENSATION.
Pages 6 through 10 of the Company's definitive Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Pages 1, 2, 4, 6 and 7 of the Company's definitive Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pages 1 through 5 of the Company's definitive Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.
10
(a) 1. Financial Statements:
Consolidated Statements of Operations for the fiscal years ended 2002,
2001 and 2002 (page 22 of this Report).
Consolidated Balance Sheets for the fiscal years ended 2002 and 2001
(page 23 of this Report).
Consolidated Statements of Changes in Stockholders' Equity for the
fiscal years ended 2002, 2001 and 2000 (page 24 of this Report).
Consolidated Statements of Cash Flows for the fiscal years ended 2002,
2001 and 2000 (page 25 of this Report).
Notes to Consolidated Financial Statements (pages 26 through 45 of
this Report).
Independent Auditor's Report (page 46 of this Report).
2. Financial Statement Schedule:
Schedule II, Valuation and Qualifying Accounts, for fiscal years ended
2002, 2001 and 2000 (page 21 of this Report).
Report of Independent Accountants on Financial Statement Schedule
(page 20 of this Report).
All other schedules have been omitted because of the absence of conditions under
which they are required or because the required information is included in the
financial statements submitted.
3. Exhibits:
(3)(i) The Company's Restated Articles of Incorporation, as amended,
which are incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended January 29, 2000.
(ii) The Company's By-Laws, as amended and restated, which are
incorporated by reference to the Registrant's Annual Report
on Form 10-K for the year ended January 29, 2000.
(4)(a)(i) Amended and Restated Credit Agreement dated as of April 27,
2001, between Oneida Ltd., The Chase Manhattan Bank and the
various lenders named in the Agreement, which is incorporated
by reference to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended April 28, 2001.
11
(ii) Security Agreement dated as of April 27, 2001 between Oneida
Ltd., THC Systems, Inc., the subsidiaries of Oneida Ltd. which
are signatories to the Agreement and The Chase Manhattan Bank, as
collateral agent for the Secured Parties named in the Agreement,
which is incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 28, 2001.
(iii) Amendment No. 1 to the Security Agreement dated as of April 27,
2001 between Oneida Ltd., THC Systems, Inc., the subsidiaries of
Oneida Ltd. which are signatories to the Agreement and The Chase
Manhattan Bank, as collateral agent for the Secured Parties named
in the Agreement, which is incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
April 28, 2001. Amendment No. 1 is dated as of April 27, 2001.
(iv) Pledge Agreement dated as of April 27, 2001 between Oneida Ltd.,
the subsidiaries of Oneida Ltd. which are signatories to the
Agreement and The Chase Manhattan Bank, as collateral agent for
the Secured Parties named in the Agreement, which is incorporated
by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended April 28, 2001.
(v) Amendment No. 1 to Amended and Restated Credit Agreement dated as
of April 27, 2001, between Oneida Ltd., The Chase Manhattan Bank
and the various lenders named in the Agreement, which is
incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended April 28, 2001. Amendment No. 1
is dated May 31, 2001.
(vi) 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, which is
incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended October 27, 2001. Waiver and
Amendment No. 2 is dated December 7, 2001.
(vii) Amendment No. 3 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, which is incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
year ended January 26, 2002. Amendment No. 3 is dated as of April
23, 2002
(viii) Amended and Restated Collateral Agency and Intercreditor
Agreement dated as of April 23, 2002 between Allstate Life
Insurance Company, Allstate Insurance Company, Pacific Life
Insurance Company, JPMorgan Chase Bank and the various lenders
named in the Agreement, which is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended
January 26, 2002.
12
(ix) Amendment No. 1 to Pledge Agreement dated as of April 27, 2001
between Oneida Ltd., the subsidiaries of Oneida Ltd. which are
signatories to the Agreement and JPMorgan Chase Bank (formerly
known as The Chase Manhattan Bank), as collateral agent for the
Secured Parties named in the Agreement, which is incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
year ended January 26, 2002. Amendment No. 1 is dated as of April
23, 2002.
(x) Security Agreement dated as of April 23, 2002 between Kenwood
Silver Company, Inc. and JPMorgan Chase Bank, as collateral agent
for the Secured Parties named in the Agreement, which is
incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended January 26, 2002.
(xi) Pledge Agreement dated as of April 23, 2002 between Kenwood
Silver Company, Inc. and JPMorgan Chase Bank, as collateral agent
for the Secured Parties named in the Agreement, which is
incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended January 26, 2002.
(xii) Mortgage, Assignment of Leases and Rents and Security Agreement
dated as of April 23, 2002 between Buffalo China, Inc., The Erie
County Industrial Development Agency and JPMorgan Chase Bank, as
collateral agent for the Secured Parties named in the Agreement,
which is incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended January 26, 2002.
(xiii) Mortgage Spreader Agreement dated as of April 23, 2002 between
Buffalo China, Inc., The Erie County Industrial Development
Agency and JPMorgan Chase Bank, as collateral agent for the
Secured Parties named in the Agreement, which is incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
year ended January 26, 2002.
(xiv) Mortgage, Assignment of Leases and Rents and Security Agreement
dated as of April 23, 2002 between Buffalo China, Inc., The Erie
County Industrial Development Agency and JPMorgan Chase Bank, as
collateral agent for the Secured Parties named in the Agreement,
which is incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended January 26, 2002.
(xv) Mortgage Spreader Agreement dated as of April 23, 2002 between
Buffalo China, Inc., The Erie County Industrial Development
Agency and JPMorgan Chase Bank, as collateral agent for the
Secured Parties named in the Agreement, which is incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
year ended January 26, 2002.
(xvi) Mortgage, Assignment of Leases and Rents and Security Agreement
dated as of April 23, 2002 between Oneida Ltd., The Oneida County
Industrial Development Agency and JPMorgan Chase Bank, as
collateral agent for the Secured Parties named in the Agreement,
which is incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended January 26, 2002.
(xvii) Mortgage Spreader Agreement dated as of April 23, 2002 between
Oneida Ltd., The Oneida County Industrial Development Agency and
JPMorgan Chase Bank, as collateral agent for the Secured Parties
named in the Agreement, which is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended
January 26, 2002.
13
(xviii) Mortgage, Assignment of Leases and Rents and Security
Agreement dated as of April 23, 2002 between Oneida Ltd., The
Oneida County Industrial Development Agency and JPMorgan Chase
Bank, as collateral agent for the Secured Parties named in the
Agreement, which is incorporated by reference to the Registrant's
Annual Report on Form 10-K for the year ended January 26, 2002.
(ixx) Mortgage Spreader Agreement dated as of April 23, 2002 between
Oneida Ltd., The Oneida County Industrial Development Agency and
JPMorgan Chase Bank, as collateral agent for the Secured Parties
named in the Agreement, which is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended
January 26, 2002.
(xx) 2001 Amended and Restated Note Purchase Agreement dated as of May
31, 2001, between Oneida Ltd., THC Systems, Inc., Allstate Life
Insurance Company, Allstate Insurance Company and Pacific Life
Insurance Company, which is incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
April 28, 2001.
(xxi) 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,
which is incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended October 27, 2001.
Waiver and Amendment No. 1 is dated December 7, 2001.
(xxii) Amendment No. 2 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, which is
incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended January 26, 2002. Amendment No. 2 is
dated April 23, 2002.
(b) Amended and Restated Rights Agreement adopted by the Board of
Directors on October 27, 1999 and dated December 3, 1999, which
is incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended January 29, 2000.
(10)(a)(i) Employment Agreement with one executive employee of the
Company dated March 12, 1999, which is incorporated by reference
to the Registrant's Annual Report on Form 10-K for the year ended
January 29, 2000.
(ii) Employment Agreements with 8 executive employees of the Company
dated November 15, 1999, which are incorporated by reference to
the Registrant's Annual Report on Form 10-K for the year ended
January 26, 2002.
(b) Oneida Ltd. Management Incentive Plan adopted by the Board of
Directors on February 24, 1988, as amended, which is incorporated
by reference to the Registrant's Annual Report on Form 10-K for
the year ended January 30, 1999.
(c) Oneida Ltd. 1998 Stock Option Plan adopted by the Board of
Directors and approved by stockholders on May 27, 1998, which is
incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended January 30, 1999.
14
(d) Oneida Ltd. 1998 Non-Employee Director Stock Option Plan adopted
by the Board of Directors and approved by stockholders on May 27,
1998, which is incorporated by reference to the Registrant's
Annual Report on Form 10-K for the year ended January 30, 1999.
(e) Oneida Ltd. Employee Security Plan adopted by the Board of
Directors on July 26, 1989, which is incorporated by reference to
the Registrant's Annual Report on Form 10-K for the year ended
January 29, 2000.
(f) Amended and Restated Oneida Ltd. Restricted Stock Award Plan
adopted by the Board of Directors on March 29, 2000 and approved
by the stockholders on May 31, 2000, which is incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
year ended January 27, 2001.
(g) Amended and Restated Oneida Ltd. Deferred Compensation Plan for
Key Employees adopted by the Board of Directors on October 27,
1999 and effective November 1, 1999, which is incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
year ended January 29, 2000.
(h) Oneida Ltd. Restoration Plan adopted by the Board of Directors on
February 28, 2000, which is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended
January 29, 2000.
(i) Oneida Ltd. 2000 Non-Employee Directors' Equity Plan adopted by
the Board of Directors on March 29, 2000 and approved by the
stockholders on May 31, 2000, which is incorporated by reference
to the Registrant's Annual Report on Form 10-K for the year ended
January 27, 2001.
(21) Subsidiaries of the Registrant, which are incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
year ended January 26, 2002.
(99.2) Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(99.3) Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) During the quarter ended January 26, 2002 no Reports on Form 8-K were filed
by the Registrant.
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ONEIDA LTD.
By: /s/ PETER J. KALLET
----------------------------
Peter J. Kallet
Chairman of the Board, President
and Chief Executive Officer
Date: March 26, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
Principal Executive Officer
/s/ PETER J. KALLET Chairman of the Board, President and March 26, 2003
--------------------------------- Chief Executive Officer
Peter J. Kallet
Principal Financial Officer
/S/ GREGG R. DENNY Chief Financial Officer March 26, 2003
---------------------------------
Gregg R. Denny
Principal Accounting Officer
/s/ THOMAS A. FETZNER Vice President and Corporate Controller March 26, 2003
---------------------------------
Thomas A. Fetzner
The Board of Directors
/s/ WILLIAM F. ALLYN Director March 26, 2003
---------------------------------
William F. Allyn
/s/ R. QUINTUS ANDERSON Director March 26, 2003
---------------------------------
R. Quintus Anderson
/s/ GEORGIA S. DERRICO Director March 26, 2003
---------------------------------
Georgia S. Derrico
/s/ J. PETER FOBARE Director March 26, 2003
---------------------------------
J. Peter Fobare
16
Signature Title Date
--------- ----- ----
/s/ GREGORY M. HARDEN Director March 26, 2003
---------------------------------
Gregory M. Harden
/s/ PETER J. KALLET Director March 26, 2003
---------------------------------
Peter J. Kallet
/s/ PETER J. MARSHALL Director March 26, 2003
---------------------------------
Peter J. Marshall
/s/ WHITNEY D. PIDOT Director March 26, 2003
---------------------------------
Whitney D. Pidot
/s/ CATHERINE H. SUTTMEIER Director March 26, 2003
---------------------------------
Catherine H. Suttmeier
/s/ WILLIAM M. TUCK Director March 26, 2003
---------------------------------
William M. Tuck
17
CERTIFICATION
I, Peter J. Kallet certify that:
1. I have reviewed this annual report on Form 10-K/A of Oneida Ltd.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weakness in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 2, 2003 By: /s/ PETER J. KALLET
-------------------------------
Peter J. Kallet
Chairman of the Board, President
and Chief Executive Officer
18
CERTIFICATION
I, Gregg R. Denny certify that:
1. I have reviewed this annual report on Form 10-K/A of Oneida Ltd.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
b) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weakness in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 2, 2003 By: /s/ GREGG R. DENNY
-----------------------
Gregg R. Denny
Chief Financial Officer
19
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors and
Stockholders of Oneida Ltd.
Our audits of the consolidated financial statements referred to in our report
dated February 25, 2002, except for Note 11, as to which the date is April 25,
2002 and except for Note 1, as to which the date is February 24, 2003, appearing
in the 2002 Annual Report on Form 10-K/A of Oneida Ltd. also included an audit
of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K/A.
In our opinion, the financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
-------------------------------
Syracuse, New York
February 25, 2002
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (File Nos. 2-84304, 33-49462, 333-10795, 333-66425 and
333-87007) and Form S-3 (File No. 33-64608) of Oneida Ltd. of our report dated
February 25, 2002, except for Note 11, as to which the date is April 25, 2002
and except for Note 1, as to which the date is February 24, 2003, relating to
the consolidated financial statements, which appears in this Form 10-K/A. We
also consent to the incorporation by reference of our report dated February 25,
2002 relating to the financial statement schedule, which appears in this Form
10-K/A.
/s/ PricewaterhouseCoopers LLP
-------------------------------
Syracuse, New York
April 1, 2003
20
SCHEDULE II
ONEIDA LTD.
AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 2002, 2001 AND 2000
(Thousands)
---------------------------------------- ---------- ---------- ---------- ----------
Column A Column B Column C Column D Column E
---------------------------------------- ---------- ---------- ---------- ----------
Additions
Balance at Charged to Balance at
Beginning Cost and End of
Description of Period Expenses Deductions Period
---------------------------------------- ---------- ---------- ---------- ----------
YEAR ENDED JANUARY 26, 2002:
Reserves deducted from assets to
Which they apply:
Accounts receivable reserves ..... $ 3,072 $ 2,797 $ 2,394(b) $ 3,475
======= ======= ======= =======
Inventory reserves ............... $13,323 $ 435 $ 9,164(d) $ 4,594
======= ======= ======= =======
YEAR ENDED JANUARY 27, 2001:
Reserves deducted from assets to
Which they apply:
Accounts receivable reserves ..... $ 1,409 $ 2,802(a) $ 1,139(b) $ 3,072
======= ======= ======= =======
Inventory reserves ............... $ 1,172 $26,021(c) $13,870(d) $13,323
======= ======= ======= =======
YEAR ENDED JANUARY 29, 2000:
Reserves deducted from assets to
Which they apply:
Accounts receivable reserves .... $ 1,520 $ 823 $ 934(b) $ 1,409
======= ======= ======= =======
Inventory reserves ............... $ 1,466 $ 4,010(c) $ 4,304(d) $ 1,172
======= ======= ======= =======
----------
(a) Includes $1,319 of reserve additions from acquisitions. These amounts were
not charged to expense.
(b) Adjustments and doubtful accounts written off.
(c) Includes restructuring charges of $24,000 and $3,000 in 2001 and 2000,
respectively.
(d) Adjustments and inventory disposals.
21
CONSOLIDATED STATEMENTS OF OPERATIONS
ONEIDA LTD.
For the years ended January 2002, 2001 and 2000
(Thousands except per share amounts)
------------------------------------
Restated Restated
(Note 1) (Note 1)
Year ended in January 2002 2001 2000
---------------------------------------------- -------- -------- --------
Net sales .................................... $499,237 $515,522 $495,056
Cost of sales ................................ 337,307 329,758 299,071
Inventory writedown .......................... 24,000 3,000
-------- -------- --------
Gross margin ................................. 161,930 161,764 192,985
Other operating revenues ..................... 1,513 6,466 861
-------- -------- --------
163,443 168,230 193,846
-------- -------- --------
Operating expenses:
Selling, distribution and administrative
charges ................................ 135,726 132,817 128,038
Restructuring costs and unusual charges ... 15,008 41,300
-------- --------
Total .................................. 135,726 147,825 169,338
-------- -------- --------
Income from operations ....................... 27,717 20,405 24,508
Other income (expense) ...................... 7,134 (579) 202
Interest expense ............................. 23,171 21,602 10,875
-------- -------- --------
Income (loss) before income taxes ........... 11,680 (1,776) 13,835
Provision for income taxes ................... (4,657) (1,326) (8,324)
-------- -------- --------
Net income (loss) ............................ $ 7,023 $ (3,102) $ 5,511
======== ======== ========
Earnings (loss) per share of common stock
Basic ............................... $ .42 $ (.20) $ .33
Diluted ............................. .42 (.20) .32
See notes to consolidated financial statements.
22
CONSOLIDATED BALANCE SHEETS
ONEIDA LTD.
(Dollars in Thousands)
-------------------------
Restated Restated
(Note 1) (Note 1)
January 26, January 27,
2002 2001
----------- -----------
ASSETS
Cash ............................................... $ 11,112 $ 2,163
Receivables ........................................ 80,944 89,993
Inventories ........................................ 169,523 214,026
Other current assets ............................... 17,687 26,517
-------- --------
Total current assets ............................... 279,266 332,699
-------- --------
Property, plant and equipment ...................... 108,534 112,213
Goodwill--net of accumulated amortization
of $18,572 and $13,850 .......................... 131,796 138,918
Deferred income taxes .............................. 21,567 22,041
Other assets ....................................... 4,390 8,047
-------- --------
Total assets ....................................... $545,553 $613,918
======== ========
LIABILITIES
Short-term debt .................................... $ 11,430 $ 8,046
Accounts payable ................................... 24,848 33,097
Accrued liabilities ................................ 44,707 67,404
Current installments of long-term debt ............. 3,956 9,239
-------- --------
Total current liabilities .......................... 84,941 117,786
-------- --------
Long-term debt ..................................... 256,170 282,815
Accrued postretirement liability ................... 56,410 56,108
Accrued pension liability .......................... 15,206 15,557
Other liabilities .................................. 8,725 19,146
-------- --------
Total liabilities .................................. 421,452 491,412
-------- --------
STOCKHOLDERS' EQUITY
Cumulative 6% preferred stock--$25 par value;
authorized 95,660 shares, issued 86,036 and
86,698 shares; callable at $30 per share ........ 2,151 2,167
Common stock--$l.00 par value; authorized
48,000,000 shares, issued 17,809,235 and
17,702,666 shares ............................... 17,809 17,703
Additional paid-in capital ......................... 83,965 82,956
Retained earnings .................................. 60,638 55,693
Accumulated other comprehensive loss ............... (16,328) (11,423)
Less cost of common stock held in treasury;
1,285,679 and 1,314,508 shares .................. (24,134) (24,590)
-------- --------
Stockholders' equity ............................... 124,101 122,506
-------- --------
Total liabilities and stockholders' equity ......... $545,553 $613,918
======== ========
See notes to consolidated financial statements.
23
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ONEIDA LTD.
for the years ended January 2002, 2001 and 2000
(Thousands)
----------------------------------------------------------------------------------------------
Accum.
Addt'l Other Unalloc.
Comp. Common Common Preferred Paid-in Retained Comp. Treasury ESOP
Income Shares Stock Stock Capital Earnings Inc.(loss) Stock Shares
------- ------ ------- --------- ------- -------- ---------- -------- --------
Balance January 1999 ....... 17,423 $17,423 $2,185 $79,737 $65,870 $(11,079) $(13,888)
Stock plan activity, net ... 187 187 2,151
Purchase/retirement
of treasury stock--net... (6,471)
Cancelled stock............ (7) (7) (10) (1)
Cash dividendsdeclared
($.40 per share)......... (6,751)
Net income ................. $ 5,511 5,511
Other comprehensive loss ... (711) (711)
-------
Comprehensive income........ $ 4,800
=======
ESOP activity--net.......... 647 $(1,486)
-------- -------
Balance January 2000 ....... 17,603 17,603 2,175 81,887 64,630 (11,790) (19,712) (1,486)
Stock plan activity, net.... 109 109 1,067
Purchase/retirement of
treasury stock--net...... (5,976)
Cancelled stock............. (9) (9) (8) 2
Cash dividendsdeclared
($.35 per share)......... (5,835)
Net loss ................... $(3,102) (3,102)
Other comprehensive income.. 367 367
-------
Comprehensive loss.......... $(2,735)
=======
ESOP activity--net.......... 1,098 1,486
-------- -------
Balance January 2001
Restated (Note 1)........ 17,703 17,703 2,167 82,956 55,693 (11,423) (24,590)
Stock plan activity, net.... 106 106 1,009
Purchase/retirement of
treasury stock--net...... (16) 456
Cash dividendsdeclared
($.17 per share)......... (2,078)
Net income.................. $ 7,023 7,023
Other comprehensive loss.... (4,905) (4,905)
-------
Comprehensive income ....... $ 2,118
=======
Balance January 2002
Restated (Note 1)........ 17,809 $17,809 $2,151 $83,965 $60,638 $(16,328) $(24,134)
====== ======= ====== ======= ======= ======== ========
See notes to consolidated financial statements.
24
CONSOLIDATED STATEMENTS OF CASH FLOWS
ONEIDA LTD.
for the years ended January 2002, 2001 and 2000
(Thousands)
Restated Restated
(Note1) (Note 1)
Year ended in January 2002 2001 2000
-------------------------------------------------------- -------- ----------- --------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) ................................... $ 7,023 $ (3,102) $ 5,511
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................. 17,095 14,807 13,812
Impairment of long-term assets ................ 29,000 11,100
Gain on marketable securities ................. (8,646)
Deferred taxes and other non-cash charges ..... (8,455) (6,859) 1,294
Decrease (increase) in operating assets:
Receivables ................................ 9,049 7,923 (8,690)
Inventories ................................ 43,866 (29,381) 3,600
Other current assets ....................... 14,408 2,923 (1,729)
Other assets ............................... (2,947) (7,636) 3,092
Increase (decrease) in accounts payable ....... (8,249) (1,425) 4,947
Increase (decrease) in accrued liabilities .... (21,037) (9,259) 8,975
-------- --------- --------
Net cash provided by (used in) operating
activities .............................. 42,107 (3,009) 41,912
-------- --------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Sale/(purchase) of subsidiaries and minority
interest ......................................... 6,604 (122,190)
Property, plant and equipment expenditures--net ..... (8,057) (14,685) (22,156)
Proceeds from sale of marketable securities ......... 1,547
Proceeds from disposal of assets held for sale ...... 3,823
Other--net .......................................... (26) 552 (1,020)
-------- --------- --------
Net cash provided by (used in) investing
activities .............................. 3,891 (136,323) (23,176)
-------- --------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock .............. 1,107 1,166 2,320
(Purchase)/issuance of treasury stock--net .......... 447 (4,883) (5,824)
(Purchase)/allocation of ESOP shares--net ........... 1,486 (1,486)
(Payments)/borrowings of short-term debt--net ....... 3,384 (24,671) (24,408)
Proceeds from issuance of long-term debt ............ 1,025 275,000 25,790
Payment of long-term debt ........................... (32,953) (105,871) (5,680)
Dividends paid ...................................... (4,238) (4,998) (6,751)
-------- --------- --------
Net cash provided by (used in)
financing activities .................... (31,228) 137,229 (16,039)
-------- --------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ................ (5,821) 367 (711)
-------- --------- --------
NET INCREASE (DECREASE) IN CASH ........................ 8,949 (1,736) 1,986
CASH AT BEGINNING OF YEAR .............................. 2,163 3,899 1,913
-------- --------- --------
CASH AT END OF YEAR .................................... $ 11,112 $ 2,163 $ 3,899
======== ========= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for:
Interest ......................................... $ 25,309 $ 19,695 $ 10,993
Income taxes ..................................... 1,056 7,629 6,089
Non-cash investing activity:
Receipt of marketable securities ................. 7,099
Unrealized gain on marketable securities ......... 916
See notes to consolidated financial statements.
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. RESTATEMENT
In November, 2002 the company announced that it would restate financial results
for its accounting for the August 2000 acquisition of Delco International Ltd.
The company concluded that adjustments were needed to its initial purchase price
allocation to record compensation related to employment agreements, and
inventory and repacking, moving and temporary warehousing related to inventory
and other period costs previously recorded as goodwill, and to appropriately
recognize the deferred tax effects of the acquisition. In addition,
reclassifications were made between various balance sheet accounts, including
inventory, receivables, fixed assets, goodwill, other assets, and accrued
liabilities to properly classify fair value and other adjustments associated
with the acquisition. The cumulative effect of these restatements results in the
recognition from August 2000 through July 2002 of additional compensation
expense, integration expenses, and tax expense totaling $3.4 million as compared
to what was previously reported. On December 5, 2002, the Company announced in a
press release that it intended to file the restatement, and by letter dated
December 13, 2002, the SEC notified the Company that it was conducting an
informal inquiry regarding the restatement. The Company is fully cooperating
with the SEC in the informal inquiry.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JAN 26, 2002
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Cost of sales ............................. $336,113 $ 1,194 $337,307
Gross margin ............................... 163,124 (1,194) 161,930
Selling, distribution
and administrative expenses ............. 134,574 1,152 135,726
Income (loss) from operations .............. 30,063 (2,346) 27,717
Income (loss) before
income taxes ............................ 14,026 (2,346) 11,680
Provision (benefit) for
income taxes ............................ 5,525 (868) 4,657
Net income (loss) .......................... 8,501 (1,478) 7,023
Earnings per share
(basic and diluted) ..................... $ .51 $ (.09) $ .42
Net income for the year ended January, 2002 decreased from $8,501 as previously
reported to $7,023 as restated. This reduction results from recognition of
additional cost of sales of $1,194 primarily related to inventory repacking and
moving costs, compensation expense of $435 and integration costs of $717, net of
an associated income tax benefit of $868.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JAN 27, 2001
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Selling, distribution
and administrative expenses ............ 133,113 (296) 132,817
Income from operations .................... 20,109 296 20,405
Income (loss) before
income taxes ........................... (2,072) 296 (1,776)
Provision (benefit) for
income taxes ........................... (772) 2,098 1,326
Net income (loss) ......................... (1,300) (1,802) (3,102)
Earnings per share
(basic and diluted) .................... $ (.09) $ (.11) $ (.20)
26
Net loss for the year ended January, 2001 increased from $(1.3) million as
previously reported to $(3.1) million as restated. This reduction results from
the recognition of additional compensation expense and income tax expense of
$346 and $2,098, respectively, net of a goodwill amortization benefit of $642
due to a correction in the amortization period.
BALANCE SHEET AT JANUARY 26, 2002
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Other current assets ........................ $ 18,540 $ (853) $ 17,687
Property, plant & equipment ................. 108,372 162 108,534
Goodwill - net .............................. 134,073 (2,277) 131,796
Deferred income taxes ....................... 19,181 2,386 21,567
Accrued liabilities ......................... 42,009 2,698 44,707
Retained earnings ........................... 63,918 (3,280) 60,638
The consolidated balance sheet as of January 2002 has been restated to reflect
the effects of the adjustments described above. Retained earnings has been
decreased $3.3 million from $63.9 million as previously reported to $60.6
million as restated to recognize the cumulative effect of increased compensation
expense of $1.0 million, increased cost of sales of $1.2 million, increased
integration costs of $500, reduced goodwill amortization of $640, and increased
income tax expense of $1.2 million. Goodwill has been restated downward from
$134.1 million as previously reported to $131.8 million as restated principally
to reflect the reversal of compensation and integration costs included in the
purchase price allocation approximating $3.2 million, reclassify $2.2 million of
fair value adjustments and exit costs from accrued liabilities into goodwill,
increase net deferred tax assets related to the acquisition of $1.9 million, and
reduce accumulated amortization of goodwill by $642. The remaining changes to
other current assets, property, plant and equipment, deferred income taxes and
accrued liabilities were the result of balance sheet reclassifications as part
of the restatement process.
BALANCE SHEET AT JANUARY 27, 2001
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Inventory ................................... $214,988 $ (962) $214,026
Other current assets ........................ 27,757 (1,240) 26,517
Goodwill - net .............................. 141,195 (2,277) 138,918
Deferred income taxes ....................... 22,833 (792) 22,041
Accrued liabilities ......................... 70,873 (3,469) 67,404
Retained earnings ........................... 57,495 (1,802) 55,693
The consolidated balance sheet as of January 2001 has been restated to reflect
the effects of the adjustments described above. Retained earnings has been
decreased $1.8 million from $57.5 million as previously reported to $55.7
million as restated to recognize the cumulative effect of increased compensation
expense of $346, reduced goodwill amortization of $640 and increased income tax
expense of $2.1 million. Goodwill has been restated downward from $141.2 million
as previously reported to $138.9 million as restated principally to reflect the
reversal of compensation and integration costs included in the purchase price
allocation approximating $3.2 million, reclassify $2.2 million of fair value
adjustments and exit costs from accrued liabilities into goodwill, increase net
deferred tax assets related to the acquisition of $1.9 million, and reduce
accumulated amortization of goodwill by $640. The remaining changes to
inventory, other current assets, deferred income taxes and accrued liabilities
were the result of balance sheet reclassifications as part of the restatement
process.
Due to the restated financial results for the 2001 fiscal year, the company was
not in compliance with certain of its loan covenants with respect to its senior
notes and revolving credit agreement. Waivers for the non-compliance have been
obtained from the Company's lenders.
27
2. ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. The Company uses a 52-53 week fiscal year ending on the last
Saturday in January. The financial statements of certain foreign subsidiaries
are consolidated with those of the parent on the basis of years ending in
December. Certain reclassifications have been made to the financial statements
for prior years to conform to the presentation for 2002.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Comprehensive Income (Loss)
SFAS No. 130, "Reporting Comprehensive Income", requires companies to report a
measure of operations called comprehensive income. This measure, in addition to
net income, includes as income or loss, the following items, which if present
are included in the equity section of the balance sheet: unrealized gains and
losses on certain investments in debt and equity securities; foreign currency
translation; and minimum pension liability adjustments. The Company has reported
comprehensive income within Consolidated Statements of Shareholders' Equity.
Foreign Currency Translation
Assets and liabilities of certain non-U.S. subsidiaries are translated at
current exchange rates, and related revenues and expenses are translated at
average exchange rates in effect during the period. Resulting translation
adjustments are recorded as a component of accumulated other comprehensive
income.
Earnings Per Share
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 net 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.
Inventories
Inventories are valued at the lower of cost or market. Approximately 8% and 18%
of inventories are valued under the last-in, first-out (LIFO) method in 2002 and
2001, respectively, with the remainder valued under the first-in, first-out
(FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the related assets, generally using the
straight-line method. The depreciable lives assigned to buildings are 20-50
years while equipment is depreciated over 2-16 years.
Interest relating to the cost of acquiring certain fixed assets is capitalized
and amortized over the asset's estimated useful life.
Investments in Marketable Securities
The Company classifies its marketable securities as available for sale in
accordance with the provisions of Statement of Financial Accounting Standards
No. 115 "Accounting for Certain Investments in Debt and Equity Securities".
These securities are carried at fair market value in other current assets, with
unrealized gains and losses, net of tax, reported in stockholders' equity as a
component of other comprehensive income (loss).
28
In 2002, the Company had other income of $8,646,000 related to the receipt of
Prudential Financial common shares. These shares were received by the Company, a
Prudential shareholder, as part of Prudential's conversion from a mutual
insurance company to a stock enterprise. One-sixth of the shares were sold in
2002. Unrealized gains on the remaining shares of $577,000 (net of tax) were
recorded as a component of other comprehensive income (loss) in the Company's
equity section.
Goodwill
Goodwill resulted from the allocation of the purchase price of the acquisition
of certain businesses. These assets are amortized using the straight-line method
over 10-40 years. Amortization expense was $4,722,000, $3,789,000 and $2,905,000
in 2002, 2001 and 2000, respectively, as restated. During 2001 the Company
revised the estimated life of one asset from 15 to 40 years. This change in
estimate increased 2002 and 2001 income by $400,000 compared to 2000. The
Company assesses the recoverability of its intangible assets by determining
whether the amortization over the remaining life of its goodwill can be
recovered through undiscounted future operating cash flows and reviews for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable.
Fair Value of Financial Instruments
The estimated fair market values of the Company's financial instruments,
principally long-term debt, are estimated using discounted cash flows, based on
current market rates for similar borrowings. The carrying amounts for short-term
borrowings approximate their recorded values.
Revenue Recognition
For financial accounting purposes, sales are recorded when goods are shipped.
The Company's general policy is not to allow customer returns unless they are
specifically preauthorized.
Treasury Stock
Treasury stock purchases are recorded at cost. During 2001 and 2000 the Company
purchased 319,100 and 305,000 shares of treasury stock at an average cost of
$18.78 and $22.27, respectively. The Company purchases treasury stock primarily
to improve stockholder value. As of January 2002, the Company has been
authorized by the Board of Directors to repurchase up to 252,900 additional
shares.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses amounted to
$3,315,000, $4,145,000, and $3,817,000, during 2002, 2001 and 2000,
respectively.
Restructuring and Unusual Costs
In the year ended January 2001, the Company recorded a $39,008,000 charge for
restructuring and other unusual items. This charge reduced 2001 net income by
$24,500,000, or $1.50 per share. This total includes $10,008,000 related
primarily to the consolidation of sales, marketing, logistics and administrative
functions, along with the realignment of product lines, warehouses and "make
versus buy" decisions primarily related to the Company's ongoing efforts to
streamline operations, as well as remove acquisition-related redundancies
involving Delco, Sakura and Viners (See Note 2 of Notes to the Consolidated
Financial Statements for a complete discussion on acquisition activity). Through
January 2002, $9,520,000 was expended towards these efforts; the remainder will
be paid in 2003. The 2001 earnings also included an inventory writedown of
$24,000,000 related to product rationalization. A $24,000,000 inventory reserve
was established; through 2002, $20,858,000 of this reserve was utilized to
liquidate excess and obsolete product. The remaining product will be disposed of
in 2003. The Company also recorded a charge of $5,000,000 to recognize
impairment of certain manufacturing tools and product procurement assets. All
impaired assets have been written down to their net realizable value in 2001.
There are no anticipated adjustments needed for any of the restructuring or
unusual expense accruals.
In the year ended January 2000, the Company recorded a $44,300,000 charge for
restructuring and other unusual items. This total included $3,000,000 of
inventory writedowns due to discontinuing certain product lines, $11,000,000 of
charges related to operations restructuring, $12,000,000 of long-term asset
impairments and $18,300,000 of other unusual charges. These charges reduced net
income by $1.83 per share.
29
Key components of the 2000 restructuring included the closure of the Company's
flatware manufacturing facility in Niagara Falls, Canada; consolidation of the
Company's international operations; and further elimination of positions and
underperforming product lines.
The majority of the $11,000,000 restructuring charge related to early retirement
benefits, severance and associated employee benefit costs. The closure of the
Canadian manufacturing facility, which was substantially completed in the first
quarter, resulted in the reduction of approximately 150 jobs. The intent of the
total strategic restructuring plan was to reduce the Company's worldwide
employment. This was accomplished by means of the above mentioned plant closure
and further international and domestic job consolidations, as well as through
normal attrition and the extension of early retirement and termination packages.
The Company actually paid all 2000 restructuring costs by the end of 2001.
The asset writedowns were related to goodwill associated with the purchase of a
subsidiary and the writedown of manufacturing fixed assets that will no longer
be utilized due to the closing of the Oneida Canada plant and the exiting of
certain product lines. The full $12,000,000 of non-cash charges were recorded
against the respective assets to reduce them to net realizable value. The
Company recorded a $3,000,000 non-cash inventory reserve charge as a component
of cost of sales to reduce discontinued product lines to net realizable value.
This reserve was fully utilized to dispose of the discontinued products in 2000.
In the year ended January 2000, the Company expensed $18,300,000 of unusual
items. These were costs related to an unsolicited takeover attempt, litigation
costs and costs incurred to overcome unique market barriers in the foodservice
glassware market. Approximately $16,000,000 of these unusual expense payments
were made during that year; the rest occurred in 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 the this standard. 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
through sale or by other means. SFAS 144 is effective for the 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.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses accounting for restructuring
and similar costs. SFAS No. 146 replaces previous accounting guidance,
principally Emerging issues Task Force Issue No. 94-3 "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." Under Issue 94-3, a
liability for an exit cost was recognized at the date of the company's
commitment to an exit plan. SFAS No. 146 requires that the liability costs
associated with an exit or disposal activity be recognized when the liability is
incurred. SFAS No. 146 also established that the liability should initially be
measured and recorded at fair value. This standard is effective beginning
January 1, 2003 and will impact the accounting for exit or disposal activities,
if any, initiated on or after that date.
3. ACQUISITIONS
On June 13, 2000, the Company purchased all of the stock of Viners of Sheffield,
Ltd. (Viners) for approximately $25,000,000 in cash. London based Viners is a
long established marketer of flatware and cookware in the United Kingdom.
30
On June 30, 2000, the Company acquired all of the net assets of Sakura, Inc.
(Sakura) for approximately $40,000,000 in cash. Sakura, based in New York City,
is a leading importer and marketer of consumer dinnerware.
On August 9, 2000, the Company completed the acquisition of the stock of Delco
International Ltd. (Delco) (including its wholly owned subsidiary Delco
Tableware International and its ABCO International division) for approximately
$60,000,000 in cash. Delco, headquartered in Long Island, New York, is a leading
supplier of tableware products to the foodservice industry (Note 1).
The above three acquisitions were recorded using the purchase method of
accounting and accordingly, the operating results of Viners, Sakura and Delco
have been included in the accompanying consolidated financial statements since
their respective dates of acquisition. Excess purchase price over the net fair
value of assets acquired (including certain acquisition costs) totaled
$110,455,000. These intangible assets (primarily goodwill) are being amortized
over forty years using the straight line method.
On June 2, 2000, the Company entered into a three year $275,000,000 bank
revolving credit agreement. This facility was utilized to fund the above three
acquisitions, as well as to refinance the majority of the Company's outstanding
credit facilities and term loans. See Note 10 for further discussion of long
term debt arrangements.
As the Company's 2001 financial statements only include a partial year of the
three acquired companies operating results, the following unaudited pro forma
information is provided to present a summary of the operations of the Company,
Viners, Sakura and Delco, as if the acquisitions had occurred on January 31,
1999.
(thousands except per share amounts)
------------------------------------
Restated
(Note 1)
2001 2000
-------- --------
Net sales $570,565 $611,051
Net income (loss) (6,264) 3,868
Earnings (loss) per share of common stock
Basic (.39) .23
Diluted (.39) .23
The pro forma data given above is for informational purposes only and does not
purport to be indicative of the results that would have been obtained if the
operations had been combined during the periods presented. This information is
not intended to be indicative of future results or trends.
4. INCOME TAXES
The Company accounts for taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires the
use of the liability method of computing deferred income taxes. Under the
liability method, deferred income taxes are based on the tax effect of temporary
differences between the financial statement and tax bases of assets and
liabilities and are adjusted for tax rate changes as they occur.
The components of the deferred tax assets and liabilities are as follows:
31
(Thousands)
-------------------
Restated Restated
(Note 1) (Note 1)
2002 2001
-------- --------
Deferred income taxes:
Postretirement benefits ............................... $22,310 $22,058
Employee benefits ..................................... 12,189 12,764
Inventory reserves ................................. 2,219 5,889
Other ................................................. (2,354) 1,801
------- -------
Total deferred tax assets ............................. 34,364 42,512
Depreciation .......................................... (9,694) (9,506)
Marketable securities .............................. (2,966) 0
Acquisition intangibles ............................ (1,216) 414
------- -------
Total ........................................... 20,488 33,420
Current deferred (benefit) liability .................. (1,079) 11,379
------- -------
Non-Current deferred tax assets ....................... $21,567 $22,041
======= =======
The provision (credit) for income taxes consists of the following:
(Thousands)
-----------------------------
Restated Restated
(Note 1) (Note 1)
2002 2001 2000
-------- -------- -------
Current tax (benefit) expense:
U.S. Federal ............................... $(12,737) $ 2,886 $ 8,255
Foreign .................................... 3,497 3,805 2,502
State ...................................... 174 573 643
-------- ------- -------
(9,066) 7,264 11,400
Deferred tax expense (benefit) ................ 13,723 (5,938) (3,076)
-------- ------- -------
Total tax expense .......................... $ 4,657 $ 1,326 $ 8,324
======== ======= =======
The income tax provision differed from the total income tax expense as computed
by applying the statutory U.S. Federal income tax rate to income before income
taxes. The reasons for the differences are as follows:
(Thousands)
----------------------------
Restated Restated
(Note 1) (Note 1)
2002 2001 2000
-------- -------- ------
Statutory U.S. Federal taxes .......... $3,971 $ (604) $4,842
Difference due to:
Foreign taxes ...................... 474 844 2,522
State taxes ........................ 115 378 418
Other .............................. 97 708 542
------ ------ ------
Provision for taxes ................ $4,657 $1,326 $8,324
====== ====== ======
32
The following presents the U.S. and non-U.S. components of income before income
taxes.
(Thousands)
------------------------------
Restated Restated
(Note1) (Note 1)
2002 2001 2000
-------- -------- -------
U.S. income (loss) ............................ $ 2,788 $(10,510) $15,606
Non-U.S. income (loss) ........................ 8,892 8,734 (1,771)
------- -------- -------
Income (loss) before income taxes .......... $11,680 $ (1,776) $13,835
======= ======== =======
5. RECEIVABLES
Receivables by major classification are as follows:
(Thousands)
------------------
2002 2001
------- -------
Accounts receivable ....................................... $81,895 $90,793
Other accounts and notes receivable ....................... 2,524 2,272
Less allowance for doubtful accounts ...................... (3,475) (3,072)
------- -------
Receivables ............................................ $80,944 $89,993
======= =======
6. INVENTORIES
Inventories by major classification are as follows:
(Thousands)
-------------------
Restated
(Note 1)
2002 2001
-------- --------
Finished goods ........................................... $147,097 $193,844
Goods in process ......................................... 13,112 11,018
Raw materials and supplies ............................... 9,314 9,164
-------- --------
Total .............................................. $169,523 $214,026
======== ========
Excess of replacement cost over LIFO value of
inventories ........................................... $ 9,300 $ 13,000
======== ========
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment by major classification are as follows:
(Thousands)
-------------------
Restated
(Note 1)
2002 2001
-------- --------
Land and buildings ....................................... $ 70,141 $ 71,065
Machinery and equipment .................................. 182,165 176,656
-------- --------
Total ................................................. 252,306 247,721
Less accumulated depreciation ............................ 143,772 135,508
-------- --------
Property, plant and equipment-- net ...................... $108,534 $112,213
======== ========
Depreciation expense totalled $12,373,000, $11,018,000, and $10,907,000 for
2002, 2001 and 2000, respectively.
33
8. COMMITMENTS
The Company leases factory stores, equipment, warehouses and office facilities.
Lease expense charged to operations was $8,476,000, $8,888,000, and $7,169,000
for 2002, 2001 and 2000, respectively.
In September 2001, the Company entered into a new three year distribution
agreement with a supplier. This contract stipulates purchase commitments through
the term of the agreement. In addition, the Company is required to maintain a
$1,000,000 stand-by letter of credit for the first two years of the agreement.
In 2002 purchase commitments under this agreement amounted to $1,933,000.
Future minimum payments for all non-cancelable operating leases and purchase
commitments having a remaining term in excess of one year at January 2002 are as
follows:
(Thousands)
-----------
Commitment
----------
2003.............................................................. $13,747
2004.............................................................. 13,470
2005.............................................................. 9,183
2006.............................................................. 2,254
2007.............................................................. 1,438
Remainder......................................................... 3,632
-------
Total.......................................................... $43,724
=======
Under the provisions of some leases, the Company pays taxes, maintenance,
insurance and other operating expenses related to leased premises.
9. SHORT-TERM DEBT AND COMPENSATING BALANCES
The Company has been granted lines of credit to borrow at interest rates up to
the prime rate from various banks. At January 2002, the Company had lines of
credit of $24,301,000 of which $12,870,000 was available.
The weighted average outstanding balances of short-term debt for the fiscal
years ending January 2002 and 2001 were $11,062,000 and $25,687,000; the
weighted interest rates for the same periods were 6.0% and 6.6%, respectively.
The weighted average interest rates on short-term debt outstanding at year end
was 4.85% and 6.95% for 2002 and 2001, respectively.
10. ACCRUED LIABILITIES
Accrued liabilities by major classification are as follows:
(Thousands)
-------------------
Restated Restated
(Note 1) (Note 1)
2002 2001
-------- --------
Accrued vacation pay ..................................... $ 5,385 $ 5,929
Accrued wage incentive ................................... 4,973
Accrued wages and commissions ............................ 5,174 7,230
Accrued income taxes ..................................... 5,245 12,008
Accrued workers' compensation ............................ 9,575 9,699
Dividends payable ........................................ 363 2,522
Accrued acquisition costs ................................ 4,585 4,871
Accrued other employee benefits .......................... 6,233 6,687
Accrued interest payable ................................. 1,076 3,214
Other accruals ........................................... 7,071 10,271
------- -------
Total ................................................. $44,707 $67,404
======= =======
34
11. LONG-TERM DEBT
Long-term debt at January 2002 and 2001 consisted of the following:
(Thousands)
-------------------
2002 2001
-------- --------
Senior notes, 8.52% due January 15, 2002,
payable $4,285,710 annually ........................... $ 4,286
Senior notes, 8.99% due May 31, 2005, payable
$3,890,000 annually ................................... $ 27,220 31,110
Notes payable at various interest rates (2.38%-5.44%),
due February 1, 2004 .................................. 231,000 246,500
Other debt at various interest rates (3.00%-8.95%)
due through 2010 ...................................... 1,906 10,158
-------- --------
Total ................................................. 260,126 292,054
Less current portion ..................................... 3,956 9,239
-------- --------
Long-term debt ........................................... $256,170 $282,815
======== ========
On June 2, 2000, the Company entered into a three year $275,000,000 revolving
credit agreement. This facility was utilized to fund the three acquisitions made
in 2001 and to refinance the majority of the Company's outstanding credit
facilities and term loans. This debt carries a floating interest rate indexed to
LIBOR plus 3.5%. Interest is payable either at the earlier of quarterly or note
maturity.
During the first quarter of 2002, 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 its
investment in Oneida UK Limited. At the end of the third and fourth quarters of
2002, the Company was not in compliance with its consolidated interest coverage
and consolidated leverage covenants. In December the Company entered into a
Waiver and Amendment with its lenders to resolve the third quarter
non-compliance.
In April 2002 the Company and its lenders entered into an amendment to the
facility. The amendment waived the year-end non-compliance and made a number of
changes to the revolving credit agreement. Under the amendment, the maturity of
the revolving debt has been extended to February 1, 2004 from May 31, 2003. The
Company has provided additional collateral to the lenders in the form of
domestic real estate holdings. The commitments under the facility stepped down
to $245,000,000 upon signing of the amendment and will further step down to
$235,000,000 at February 3, 2003 and to $205,000,000 on January 31, 2004. In
addition, there are limitations on dividends, capital expenditures, intercompany
indebtedness and letters of credit. After giving effect to the amendment, the
Company could have borrowed up to an additional $14,000,000 under the revolving
credit agreement at January 26, 2002. The amendments continue certain financial
covenants, the most restrictive of which limits the Company's total debt
outstanding to a pre-determined multiple of the prior rolling twelve months
earnings before interest, taxes, depreciation and amortization. The estimated
fair value of the Company's long-term debt at January 2002 approximated book
value. At January 2001 the carrying value of the Company's long-term debt
approximated $291,344,000.
35
The aggregate amounts of long-term maturities due each fiscal year are as
follows:
(Thousands)
-----------
2002.............................................................. $ 3,956
2003.............................................................. 5,585
2004.............................................................. 234,918
2005.............................................................. 15,570
2006.............................................................. 21
After............................................................. 76
--------
Total.......................................................... $260,126
========
Total interest costs incurred by the Company are presented net of capitalized
interest of $407,000, $1,112,000 and $1,346,000 for 2002, 2001 and 2000,
respectively.
12. RETIREMENT BENEFIT AND EMPLOYEE SECURITY PLANS
Pension Plans
The Company maintains defined benefit plans covering the majority of employees
in the United States. Employees of the Silversmiths Division are covered by both
an Employee Stock Ownership Plan (ESOP), and a defined benefit floor plan.
Dividends on all ESOP shares are added to participant accounts. Future
contributions to the ESOP will be in the form of either cash or treasury shares.
The Company also maintains a salary deferral 401(k) plan covering substantially
all employees.
The net periodic pension cost for the Company's various defined benefit plans
for 2002, 2001 and 2000 were as follows:
(Thousands)
----------------------------
2002 2001 2000
------- ------- -------
Service cost .................................... $ 1,497 $ 1,078 $ 1,697
Interest cost ................................... 2,682 2,213 2,710
Expected return on plan assets .................. (2,198) (2,226) (2,611)
Net amortization ................................ (388) (830) (296)
Effect of settlement/curtailment ................ 4,487
------- ------- -------
Net periodic pension cost .................... $ 1,593 $ 235 $ 5,987
======= ======= =======
36
Plan assets consist primarily of stocks, bonds, and cash equivalents. The
following table presents a reconciliation of the funded status of the plans and
assumptions used at January 2002 and 2001.
(Thousands)
-------------------
2002 2001
-------- --------
Change in benefit obligation
Benefit obligation-beginning of year .................... $(37,374) $(32,661)
Service cost ............................................ (1,497) (1,078)
Interest cost ........................................... (2,682) (2,213)
Benefits paid ........................................... 2,932 2,610
Actuarial gain (loss) ................................... (5,752) (4,032)
-------- --------
Benefit obligation-end of year .......................... (44,373) (37,374)
-------- --------
Change in plan assets
Fair value of plan assets-beginning of year ............. 27,156 27,528
Actual return on plan assets ........................... (1,827) 1,528
Employer contribution ................................... 2,035 710
Benefits paid ........................................... (2,932) (2,610)
-------- --------
Fair value of plan assets-end of year ................... 24,432 27,156
-------- --------
Funded status ........................................... (19,941) (10,218)
Unrecognized net (gains)/losses ......................... 3,764 (6,090)
Unrecognized prior service cost ......................... 1,466 1,398
Unrecognized net asset .................................. (495) (647)
-------- --------
Accrued benefit cost .................................... $(15,206) $(15,557)
======== ========
Weighted average assumptions as of the end of
January
Discount rate ........................................... 6.9% 7.4%
Expected return on plan assets .......................... 8.4% 8.4%
Rate of compensation increase ........................... 3.4% 3.6%
The net pension cost associated with the Company's defined contribution plans
was $1,490,000 and $1,854,000 for 2001 and 2000, respectively.
Postretirement Health Care and Life Insurance Benefits
The Company reimburses a portion of the health care and life insurance benefits
for the majority of its retired employees who have attained specified age and
service requirements.
Net periodic postretirement benefit cost for 2002, 2001 and 2000 included the
following components:
(Thousands)
---------------------------
2002 2001 2000
------- ------- -------
Service cost .................................... $ 1,354 $ 1,316 $ 1,734
Interest cost ................................... 5,233 4,298 4,287
Net amortization ................................ 198 (681) (55)
Curtailment gain ................................ (1,384)
-------
Net periodic postretirement benefit cost ........ $ 5,401 $ 4,933 $ 5,966
======= ======= =======
The Company recorded a curtailment gain of $1,384,000 as a component of 2002 net
periodic postretirement expense. This gain resulted from reductions in the
Company's domestic workforce.
37
The following table sets forth the status of the Company's postretirement plans,
which are unfunded, at January 2002 and 2001:
(Thousands)
-------------------
2002 2001
-------- --------
Change in benefit obligation
Benefit obligation - beginning of year .................. $(61,924) $(59,943)
Service cost ............................................ (1,354) (1,316)
Interest cost ........................................... (5,233) (4,298)
Benefits paid ........................................... 6,267 5,031
Employee contributions .................................. (568) (635)
Amendments .............................................. (540) 5,278
Actuarial loss .......................................... (15,172) (6,041)
-------- --------
Benefit obligation - end of year ........................ $(78,524) $(61,924)
======== ========
Funded status ........................................... $(78,524) $(61,924)
Unrecognized net losses ................................. 22,488 11,562
Unrecognized prior service cost ......................... (4,374) (9,146)
-------- --------
Accrued postretirement benefit cost ..................... (60,410) (59,508)
Less current portion ................................. 4,000 3,400
-------- --------
Accrued postretirement benefit cost ..................... $(56,410) $(56,108)
======== ========
Weighted average assumptions as of the end of
January
Discount rate ........................................... 6.9% 7.3%
Healthcare inflation rate ............................... 11.2% 6.5%
The 2002 health care inflation rate was assumed to decrease gradually to 5% by
the year 2008 and remain at that level thereafter. A 1% variation in the assumed
health care inflation rates would cause the accumulated postretirement benefit
obligation at January 2002 to increase by $11,736,000 and decrease by
$10,149,000. Additionally, this would increase and decrease the net periodic
postretirement benefit cost for 2002 by $1,110,000 and $939,000 respectively.
Employee Security Plan
The Company maintains an employee security plan which provides severance
benefits for all eligible employees of the Company and its subsidiaries who lose
their jobs in the event of a change in control as defined by the plan. Employees
are eligible if they have one year or more of service and are not covered by a
collective bargaining agreement. The plan provides two and one half months of
pay for each year of service, up to twenty-four months maximum, and a
continuation of health care and life insurance benefits on the same basis.
13. STOCK PLANS
Stock Purchase Plan
At January 2002, under the terms of a stock purchase plan, the Company has
reserved 407,012 shares of common stock for issuance to its employees. The
purchase price of the stock is the lower of 90% of the market price at the time
of grant or at the time of exercise. The option price for the shares outstanding
at January 26, 2002 is $11.25.
2002 2001 2000
--------- --------- ---------
Outstanding at beginning of year ............. 342,212 406,324 396,821
Exercised during the year .................... (110,803) (56,192) (62,232)
Expired during the year ...................... (268,139) (403,701) (354,715)
Granted during the year ...................... 363,151 395,781 426,450
--------- --------- ---------
Outstanding at end of year ................... 326,421 342,212 406,324
========= ========= =========
Average per share price of rights exercised .. $ 16.35 $ 20.30 $ 22.28
========= ========= =========
38
Rights to purchase are exercisable on date of grant. Unexercised rights expire
on June 30 of each year and become available for future grants. Employees are
entitled to purchase one share of common stock for each $250 of their earnings
for the calendar year preceding July 1.
The consolidated statement of operations does not contain any compensation
expense as a result of accounting for this plan.
Stock Option Plans
At January 2002, under the terms of its incentive stock option plans, the
Company has reserved shares of common stock for issuance to selected key
employees and non-employee directors.
Options were granted at exercise prices equal to the fair market value on the
date of the grant and may be paid for in cash or by tendering previously held
common stock of the Company at the time the option is exercised. Stock options
are non-transferable other than on death, vest over five years from date of
grant and expire ten years from date of grant.
Option Price
--------------------------
No. of Per (Thousands)
Shares Share Total
--------- ------------ -----------
Outstanding at
January 1999 ...................... 732,293 $ 6.00-28.13 $11,677
Granted ........................... 176,000 25.56-25.88 4,501
Exercised ......................... (127,338) 6.00-22.58 (1,491)
Expired ........................... (35,999) (641)
--------- -------
Outstanding at
January 2000 ...................... 744,956 7.58-28.13 14,046
Granted ........................... 344,000 18.38-19.00 6,327
Exercised ......................... (29,972) 7.58-9.08 (255)
Expired ........................... (35,929) (781)
--------- -------
Outstanding at
January 2001 ...................... 1,023,055 7.58-28.13 19,337
Granted ........................... 319,500 16.60-17.40 5,308
Exercised ......................... (80,083) 7.58-16.60 (851)
Expired ........................... (87,615) (1,761)
--------- -------
Outstanding at
January 2002 ...................... 1,174,857 7.58-28.13 $22,033
========= =======
39
Options exercisable under the plan at January 2002, 2001 and 2000 amounted to
428,436, 311,310, and 217,296, respectively. The weighted average exercise price
of options exercisable at January 2002, 2001 and 2000 was $18.68, $16.47, and
$12.73, respectively.
Options Outstanding at January 2002
---------------------------------------------------------------
Weighted
Average Weighted
Range of Options Remaining Life Average
Exercise Prices Outstanding In Years Exercise Price
--------------- ----------- -------------- --------------
$ 7.58 14,400 1.25 $ 7.58
9.08-12.42 131,087 4.32 11.41
16.60-19.00 623,036 8.50 17.53
21.88-28.13 406,334 6.82 23.39
------------ --------- ---- ------
1,174,857
============ ========= ==== ======
Options Exercisable at January 2002
----------------------------------------------
Weighted
Range of Number Average
Exercise Prices Exercisable Exercise Price
--------------- ----------- --------------
$ 7.58 14,400 $ 7.58
9.08-12.42 115,974 11.28
16.60-19.00 69,912 18.44
21.88-28.13 228,150 23.21
------------ ------- ------
428,436
============ ======= ======
At the time options are exercised, the proceeds of the shares issued are
credited to the related stockholders' equity accounts. There are no charges to
income in connection with the options.
Restricted Stock Award Plan
The Company has a restricted stock award plan for key employees who are expected
to have a significant impact on the performance of the Company. The stock is
restricted from being sold, transferred or assigned and is forfeitable until it
vests, generally over a three year period. Amounts of awards are determined by
the Management Development and Executive Compensation Committee of the Company's
Board of Directors. Compensation expense, amounts of which are immaterial,
relating to awards of restricted stock are recognized over the vesting period.
Shareholder Rights Plan
The Company maintains a shareholder rights plan. The rights were distributed to
shareholders at the rate of one right per share. The rights entitle the holder
to purchase one additional share of voting common stock at a substantial
discount and are exercisable only in the event of the acquisition of 20% or more
of the Company's voting common stock, or the commencement of a tender or
exchange offer under which the offeror would own 20% or more of the Company's
voting common stock. The rights will expire on December 13, 2009.
Accounting for Stock Plans
The Company has elected to continue following APB No. 25 in accounting for its
stock-based compensation plans. Under APB No. 25, compensation expense is not
required to be recognized for the Company's stock based compensation plans.
Under Statement of Financial Accounting Standards No. 123 ("SFAS 123")
"Accounting for Stock Based Compensation" , compensation expense is recognized
for the fair value of the options on the date of grant over the vesting period
of the options.
40
Application of the fair-value-based accounting provision of SFAS 123 results in
the following pro forma amounts of net income and earnings per share:
(Thousands Except Per Share Amounts)
------------------------------------
Restated Restated
(Note 1) (Note 1)
2002 2001 2000
-------- -------- ------
Net Income (loss):
As restated $7,023 $(3,102) $5,511
Pro forma 4,790 (5,030) 2,667
Earnings (loss) Per Share:
As restated: Basic .42 (.20) .33
Diluted .42 (.20) .32
Pro forma: Basic .28 (.32) .15
Diluted .28 (.32) .15
The fair value for both the Stock Purchase Plan and Stock Option Plan was
estimated at the date of grant using a Black-Scholes options pricing model.
The valuation of the Stock Purchase Plan used the following weighted average
assumptions for 2002, 2001 and 2000, respectively: risk-free interest rates of
3.37%, 5.83% and 4.82%; dividend yields of .98%, 2.25% and 1.42%; volatility
factors of the expected market price of the Company's common stock of 39.1%,
29.3% and 58.5% and a weighted average expected life of the option of 9 months.
The fair value per share for the options granted during 2002, 2001 and 2000 was
$5.51, $4.37 and $9.15, respectively. The estimated fair value of the options is
expensed in the year of issue in calculating pro forma amounts.
The valuation of the Stock Option Plan used the following weighted average
assumptions for 2002, 2001 and 2000, respectively: risk free interest rate of
4.99%, 6.53% and 5.71%; dividend yield of 1.05%, 2.0% and 2.0%; volatility
factor of the expected price of the Company's common stock of 37.7%, 36.2% and
33.2% and an expected life of 5.56, 5.74 and 5.74 years. The fair value per
share for the options granted during 2002, 2001 and 2000 was $6.50, $6.90 and
$6.83, respectively. The estimated fair value of the options is expensed over
the five-year vesting period in calculating pro forma amounts.
41
14. EARNINGS PER SHARE
The following is a reconciliation of basic earnings per share to diluted
earnings per share for 2002, 2001 and 2000:
Preferred
Net Stock Adjusted Average Earnings
(Thousands except per share amounts) Income Dividends Net Income Shares Per Share
------------------------------------ ------- --------- ---------- ------- ---------
2002 Restated (Note 1):
Basic earnings per share $ 7,023 (130) 6,893 16,468 $ .42
Effect of stock options 51
Diluted earnings per share 7,023 (130) 6,893 16,519 .42
------- ---- ------ ------ -----
2002 As Reported:
Basic earnings per share $ 8,501 (130) 8,371 16,468 $ .51
Effect of stock options 51
Diluted earnings per share 8,501 (130) 8,371 16,519 .51
------- ---- ------ ------ -----
2001 Restated (Note 1):
Basic earnings (loss) per share (3,102) (130) (3,232) 16,300 (.20)
Effect of stock options
Diluted earnings (loss)per share (3,102) (130) (3,232) 16,300 (.20)
------- ---- ------ ------ -----
2001 As Reported:
Basic earnings (loss) per share (1,300) (130) (1,430) 16,300 (.09)
Effect of stock options
Diluted earnings (loss)per share (1,300) (130) (1,430) 16,300 (.09)
------- ---- ------ ------ -----
2000: Basic earnings per share 5,511 (130) 5,381 16,524 .33
Effect of stock options 148
Diluted earnings per share 5,511 (130) 5,381 16,672 .33
------- ---- ------ ------ -----
15. OPERATIONS BY INDUSTRY SEGMENT
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,
cruise lines, schools and healthcare facilities. The Company's tableware
operations are located in the United States, Canada, Mexico, Italy, Australia,
the United Kingdom, China and Hong Kong.
The accounting policies of the reportable segments are the same as those
described in Note 1 of the Notes to Consolidated Financial Statements. The
Company evaluates the performance of its segments based upon operating income
excluding restructuring and unusual charges, interest, miscellaneous income and
expenses, corporate expenses and income taxes. The Company does not derive more
than 10% of its total revenues from any individual customer, government agency
or export sales.
42
Segment information for the three years ended January 2002, 2001 and 2000 are as
follows:
(Thousands) Metal Dinnerware Glass Other Total
------------------------------------- -------- ---------- ------- ------- --------
2002: Restated (Note 1)
Net sales $324,100 $137,300 $32,400 $ 5,437 $499,237
Operating income 14,772 20,217 (300) (502) 34,187
Depreciation and amortization 13,661 3,434 17,095
2001: Restated (Note 1)
Net sales $338,600 $130,000 $38,900 $ 8,022 $515,522
Operating income 43,100 20,500 700 (222) 64,078
Depreciation and amortization 11,435 3,372 14,807
2000: Net sales $337,600 $106,200 $37,100 $14,156 $495,056
Operating income 58,400 13,400 2,200 311 74,311
Depreciation and amortization 9,781 4,031 13,812
The following table reconciles segment operating income to pretax income (loss):
(Thousands)
-----------------------------
Restated Restated
(Note 1) (Note 1)
2002 2001 2000
-------- -------- -------
Total segment operating income ................ $34,187 $64,078 $74,311
Restructuring and unusual charges ............. 39,008 44,300
Corporate expenses ............................ 6,470 4,665 5,503
------- ------- -------
Consolidated operating income ................. 27,717 20,405 24,508
Interest expense .............................. 23,171 21,602 10,875
Other income/(expense) ........................ 7,134 (579) 202
------- ------- -------
Pretax income (loss) .......................... $11,680 $(1,776) $13,835
======= ======= =======
Financial information relating to the Company's sales and long-lived assets by
geographic area is as follows:
(Thousands)
------------------------------
Restated
(Note 1)
2002 2001 2000
-------- -------- --------
Net Sales:
Domestic ................................... $414,240 $434,145 $426,121
Foreign operations ......................... 84,997 81,377 68,935
-------- -------- --------
Total ................................... $499,237 $515,522 $495,056
======== ======== ========
Long-lived assets:
Domestic ................................... $228,408 $240,207 $148,310
Foreign operations ......................... 37,770 39,755 19,185
-------- -------- --------
Total ................................... $266,178 $279,962 $167,495
======== ======== ========
43
16. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(Thousands except per share amounts)
Quarter Ended
------------------------------------------------
Restated (Note 1) April 28, July 28, October 27, January 26,
2002 2001 2001 2001 2002
----------------------------- --------- -------- ----------- -----------
Net sales ................... $126,806 $119,428 $128,548 $124,455
Gross margin ................ 40,569 41,538 40,846 38,977
Net income .................. (418) 1,301 196 5,941
Earnings per share:
Basic .................... (.03) .08 .01 .36
Diluted .................. (.03) .08 .01 .36
Quarter Ended
------------------------------------------------
Restated (Note 1) April 29, July 29, October 28, January 27,
2001 2000 2000 2000 2001
----------------------------- --------- -------- ----------- -----------
Net sales ................... $118,201 $104,010 $151,951 $141,360
Gross margin ................ 45,755 13,920 53,684 48,405
Net income (loss) ........... 7,467 (16,817) 4,077 2,171
Earnings (loss) per share:
Basic .................... .45 (1.04) .25 .13
Diluted .................. .45 (1.04) .25 .13
The following are reconciliations of our quarterly operating results from
unaudited financial information previously filed to this restated financial
information. The quarters ended July 29, 2000 and April 29, 2000 were not
affected by the restatement. See Note 1 to consolidated financial statements for
description of restatement:
FOR THE THREE MONTHS ENDED JAN 26, 2002
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Net sales ................................... $124,455 $124,455
Gross margin ................................ 38,977 38,977
Net income .................................. 6,057 (116) 5,941
Earnings per share
basic .................................... $ .37 $ (.01) $ .36
diluted .................................. .36 .36
FOR THE THREE MONTHS ENDED OCT 27, 2001
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Net sales ................................... $128,548 $128,548
Gross margin ................................ 40,846 40,846
Net income .................................. 300 (104) 196
Earnings per share
basic .................................... $ .02 $(.01) $ .01
diluted .................................. .02 (.01) .01
FOR THE THREE MONTHS ENDED JULY 28, 2001
44
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Net sales ................................... $119,428 $119,428
Gross margin ................................ 41,776 (238) 41,538
Net income .................................. 1,703 (402) 1,301
Earnings per share
basic .................................... $ .10 $(.02) $ .08
diluted .................................. .10 (.02) .08
FOR THE THREE MONTHS ENDED APR 28, 2001
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Net sales ................................... $126,806 $126,806
Gross margin ................................ 41,525 (956) 40,569
Net income (loss) ........................... 441 (859) (418)
Earnings (loss) per share
basic .................................... $ .02 $ (.05) $ (.03)
diluted .................................. .02 (.05) (.03)
FOR THE THREE MONTHS ENDED JAN 27, 2001
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Net sales ................................... $141,360 $141,360
Gross margin ................................ 48,405 48,405
Net income .................................. 3,944 (1,773) 2,171
Earnings per share
basic .................................... $ .24 $ (.11) $ .13
diluted .................................. .24 (.11) .13
FOR THE THREE MONTHS ENDED OCT 28, 2000
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Net sales ................................... $151,951 $151,951
Gross margin ................................ 53,684 53,684
Net income .................................. 4,106 (29) 4,077
Earnings per share
basic .................................... $ .25 $ .25
diluted .................................. .25 .25
45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Oneida Ltd.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows present fairly, in all material respects, the financial position of Oneida
Ltd. (the "Company") and its subsidiaries at January 26, 2002 and January 27,
2001 and the results of their operations and their cash flows for each of the
three years in the period ended January 26, 2002 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 1, the Company has restated its consolidated financial
statements as of and for the years ended January 26, 2002 and January 27, 2001.
/s/ PricewaterhouseCoopers LLP
Syracuse, New York
February 25, 2002, except for Note 11,
as to which the date is April 25, 2002
and except for Note 1, as to which the
date is February 24, 2003
46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Restatement
In November, 2002 the company announced that it would restate financial results
for its accounting for the August 2000 acquisition of Delco International Ltd.
The company concluded that adjustments were needed to its initial purchase price
allocation to record compensation related to employment agreements, and
inventory and repacking, moving and temporary warehousing related to inventory
and other period costs previously recorded as goodwill, and to appropriately
recognize the deferred tax effects of the acquisition. In addition,
reclassifications were made between various balance sheet accounts, including
inventory, receivables, fixed assets, goodwill, other assets, and accrued
liabilities to properly classify fair value and other adjustments associated
with the acquisition. The cumulative effect of these restatements results in the
recognition from August 2000 through July 2002 of additional compensation
expense, integration expenses, and tax expense totaling $3.4 million as compared
to what was previously reported. On December 5, 2002, the Company announced in a
press release that it intended to file the restatement, and by letter dated
December 13, 2002, the SEC notified the Company that it was conducting an
informal inquiry regarding the restatement. The Company is fully cooperating
with the SEC in the informal inquiry.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JAN 26, 2002
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Cost of sales .............................. $336,113 $ 1,194 $337,307
Gross margin ................................ 163,124 (1,194) 161,930
Selling, distribution
and administrative expenses .............. 134,574 1,152 135,726
Income (loss) from operations ............... 30,063 (2,346) 27,717
Income (loss) before
income taxes ............................. 14,026 (2,346) 11,680
Provision (benefit) for
income taxes ............................. 5,525 (868) 4,657
Net income (loss) ........................... 8,501 (1,478) 7,023
Earnings per share
(basic and diluted) ...................... $ .51 $ (.09) $ .42
Net income for the year ended January, 2002 decreased from $8,501 as previously
reported to $7,023 as restated. This reduction results from recognition of
additional cost of sales of $1,194 primarily related to inventory repacking and
moving costs, compensation expense of $435 and integration costs of $717, net of
an associated income tax benefit of $868.
47
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JAN 27, 2001
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Selling, distribution
and administrative expenses .............. 133,113 (296) 132,817
Income from operations ...................... 20,109 296 20,405
Income (loss) before
income taxes ............................. (2,072) 296 (1,776)
Provision (benefit) for
income taxes ............................. (772) 2,098 1,326
Net income (loss) ........................... (1,300) (1,802) (3,102)
Earnings per share
(basic and diluted) ...................... $ (.09) $ (.11) $ (.20)
Net loss for the year ended January, 2001 increased from $(1.3) million as
previously reported to $(3.1) million as restated. This reduction results from
the recognition of additional compensation expense and income tax expense of
$346 and $2,098, respectively, net of a goodwill amortization benefit of $642
due to a correction in the amortization period.
BALANCE SHEET AT JANUARY 26, 2002
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Other current assets ........................ $ 18,540 $ (853) $ 17,687
Property, plant & equipment ................. 108,372 162 108,534
Goodwill - net .............................. 134,073 (2,277) 131,796
Deferred income taxes ....................... 19,181 2,386 21,567
Accrued liabilities ......................... 42,009 2,698 44,707
Retained earnings ........................... 63,918 (3,280) 60,638
The consolidated balance sheet as of January 2002 has been restated to reflect
the effects of the adjustments described above. Retained earnings has been
decreased $3.3 million from $63.9 million as previously reported to $60.6
million as restated to recognize the cumulative effect of increased compensation
expense of $1.0 million, increased cost of sales of $1.2 million, increased
integration costs of $500, reduced goodwill amortization of $640, and increased
income tax expense of $1.2 million. Goodwill has been restated downward from
$134.1 million as previously reported to $131.8 million as restated principally
to reflect the reversal of compensation and integration costs included in the
purchase price allocation approximating $3.2 million, reclassify $2.2 million of
fair value adjustments and exit costs from accrued liabilities into goodwill,
increase net deferred tax assets related to the acquisition of $1.9 million, and
reduce accumulated amortization of goodwill by $642. The remaining changes to
other current assets, property, plant and equipment, deferred income taxes and
accrued liabilities were the result of balance sheet reclassifications as part
of the restatement process.
48
BALANCE SHEET AT JANUARY 27, 2001
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Inventory ................................... $214,988 $ (962) $214,026
Other current assets ........................ 27,757 (1,240) 26,517
Goodwill - net .............................. 141,195 (2,277) 138,918
Deferred income taxes ....................... 22,833 (792) 22,041
Accrued liabilities ......................... 70,873 (3,469) 67,404
Retained earnings ........................... 57,495 (1,802) 55,693
The consolidated balance sheet as of January 2001 has been restated to reflect
the effects of the adjustments described above. Retained earnings has been
decreased $1.8 million from $57.5 million as previously reported to $55.7
million as restated to recognize the cumulative effect of increased compensation
expense of $346, reduced goodwill amortization of $640 and increased income tax
expense of $2.1 million. Goodwill has been restated downward from $141.2 million
as previously reported to $138.9 million as restated principally to reflect the
reversal of compensation and integration costs included in the purchase price
allocation approximating $3.2 million, reclassify $2.2 million of fair value
adjustments and exit costs from accrued liabilities into goodwill, increase net
deferred tax assets related to the acquisition of $1.9 million, and reduce
accumulated amortization of goodwill by $640. The remaining changes to
inventory, other current assets, deferred income taxes and accrued liabilities
were the result of balance sheet reclassifications as part of the restatement
process.
Due to the restated financial results for the 2001 fiscal year, the company was
not in compliance with certain of its loan covenants with respect to its senior
notes and revolving credit agreement. Waivers for the non-compliance have been
obtained from the Company's lenders.
Restated Restated
(Note 1) (Note 1)
2002 2001 2000
-------- -------- --------
Net Sales:
Metal Products ............................ $324,100 $338,600 $337,600
Dinnerware Products ....................... 137,300 130,000 106,200
Glass Products ............................ 32,400 38,900 37,100
Other Products ............................ 5,437 8,022 14,156
-------- -------- --------
Total .................................. 499,237 515,522 495,056
Gross Margin ................................. 161,930 185,764 195,985
% Net Sales ............................... 32.4% 36.0% 39.6%
Operating Expenses-recurring ................. 135,726 132,817 128,038
% Net Sales ............................... 27.2% 25.8% 25.9%
Fiscal year ended January 2002 compared
With fiscal year ended January 2001
Strategic Acquisitions
In 2001, the Company made three strategic acquisitions, laying the foundation
for future growth.
On June 13, 2000, the Company completed the acquisition of Viners of Sheffield,
Ltd., a privately held company, for approximately $25,000,000 in cash. London
based Viners is a long established marketer of flatware and cookware in the
United Kingdom. Viners has been integrated with the Company's United Kingdom
branch operation, allowing for a much greater market share in that country,
while maintaining the fixed costs of one operation. The above table, as well as
the Consolidated Statements of Operations and Cash Flows include six and
one-half months of Viners activity in 2001.
49
On June 30, 2000, Oneida purchased substantially all of the net assets of
Sakura, Inc. for approximately $40,000,000 in cash. Sakura is a leading importer
and marketer of consumer dinnerware in the United States. This acquisition has
greatly enhanced the Company's presence in the consumer dinnerware segment. The
above table, as well as the Company's consolidated financial statements reflect
seven months of Sakura operations in 2001.
On August 9, 2000, the Company purchased the stock of Delco International Ltd.,
a privately owned concern, for approximately $60,000,000 in cash. Delco is a
leading marketer of tableware products in the foodservice industry. The Company
has integrated Delco's operations and systems with its own. Included in the
accompanying consolidated financial statements is one-half year of Delco 2001
operating results.
For a more complete discussion of the Company's acquisition activities, see Note
2 of the Notes to the Consolidated Financial Statements.
Operations
(2002 results include a full year of sales for the acquisitions above, as
compared to a half year in 2001.) 2002 sales decreased from 2001 levels by
$16,285 or 3.2%. This decrease occurred in all product groups except for
dinnerware. Sales of domestic consumer products (primarily metal) were 11% lower
than in the prior year. Lagging consumer demand was experienced throughout the
year, especially after the terrorist attacks and subsequent erosion of the
United States economy. Domestic foodservice sales accounted for approximately
43% of the Company's total sales in 2002. While foodservice sales were strong
throughout the first half of the year, the events of September 11, and the
resultant decline in the travel and entertainment industries, had an immediate
and significant negative effect on the Company's foodservice business. It is
expected that the Company will regain all of its foodservice business, with the
possible exception of flatware sales to airlines, which are not material. The
increase in dinnerware sales, which occurred in the consumer market, is related
to the inclusion of a full year of Sakura operations. The decreases in sales of
glass and other products were distributed among all customer groups.
International sales increased by 4.3%, to $85,000, primarily due to the Viners
acquisition.
Gross margin as a percentage of net sales was 32.4% in 2002, as compared to
36.0% in 2001. Throughout 2002, the Company slowed down all of its manufacturing
facilities to match lower customer demand, while continuing to decrease
inventories. This decrease in volume generated negative manufacturing variances
which is the reason for the margin decline.
Operating expenses (excluding restructuring and unusual charges) increased by
$2,909, or 2.2% over 2001, primarily due to a full year of non-cash amortization
of acquisition related intangibles. The Company has fully integrated the Viners
and Delco organizations into its existing operations.
In 2002, the Company had miscellaneous income of $8,646,000 related to the
receipt of Prudential Financial common shares. These shares were received by the
Company, a Prudential policyholder, as part of Prudential's conversion from a
mutual insurance company to a stock enterprise. One sixth of these shares were
sold in 2002. It is the intention of management to sell the remaining shares in
2003 and use the proceeds to reduce debt.
Interest expense, prior to capitalized interest, was $23,578,000 in 2002, an
increase of $864,000 over the prior year. This increase is due to higher average
borrowings throughout 2002, the effect of which was somewhat offset by lower
prevailing interest rates. In mid 2001, the Company increased outstanding debt
by $122,000,000 to make the three acquisitions described above. The Company's
2002 debt levels dropped by $28,544,000 over the course of the year.
50
Fiscal year ended January 2001 compared
with fiscal year ended January 2000
Operations
2001 net sales increased by $20,466,000 or 4.1% over 2000. This growth stemmed
from the combination of increased sales from the above acquisitions, offset by a
decline in the Company's core consumer business. Sales of metal products were
flat with 2000 levels. Metal sales to the Company's consumer channels decreased
significantly, as continued softness prevailed in the retail marketplace. This
was somewhat offset by the inclusion of a half year of Delco sales. The increase
in dinnerware sales is directly attributable to the addition of the Sakura
consumer product offering in the second half of 2001. Sales of glass products
increased nearly 5% over 2000 levels. Sales of other products have declined,
reflecting the discontinuance of certain lower profit product lines.
Excluding a $24,000,000 restructuring charge related to inventory reduction,
gross margin was 36.0% in 2001,as compared to 39.6% in the prior year. Several
factors contributed to this decline in gross margin. The product offerings of
the acquired companies have lower gross margins than the existing Oneida
business. Product mix in the traditional business was also a factor, as the
decline in retail sales included products that carry higher margins. Finally, in
the fourth quarter of 2000, the Company made a conscious decision to slow
production in its manufacturing facilities to avoid increasing inventories
during the current market slowdown. This resulted in the realization of negative
manufacturing variances.
Operating expenses (excluding restructuring and unusual charges) decreased
slightly as a percentage of net sales.
In the year ended January 2001, the Company recorded a $39,008,000 charge for
restructuring and other unusual items. This charge reduced net income by
$24,500,000 or $1.50 per share. This total includes $10,008,000 related
primarily to the consolidation of sales, marketing, logistics and administrative
functions, along with the realignment of product lines, warehouses and "make
versus buy" decisions. This has been the continuation of the Company's ongoing
efforts to streamline operations, as well as remove acquisition-related
redundancies involving Delco, Sakura and Viners (See Note 2 of Notes to the
consolidated Financial Statements for a complete discussion on acquisition
activity.) Restructuring expenditures were $6,200,000 and $3,320,000 in 2001 and
2002, respectively. The remainder will be paid in 2003.
2001 earnings also included an inventory writedown of $24,000,000 related to
product rationalization as a result of the recent acquisitions as well as
significant other stockkeeping unit reductions. A $24,000,000 inventory reserve
was established; through year end 2001, approximately half of this reserve was
utilized to liquidate excess and obsolete product. $8,900,000 of the reserve was
utilized for product liquidations in 2002. The remainder will be used in 2003.
The Company recorded a charge of $5,000,000 to recognize impairment of certain
manufacturing tools and product procurement assets. All impaired assets have
been written down to their net realizable value in 2001. There are no
anticipated adjustments needed for any of the restructuring or unusual expense
accruals.
2001 interest expense (prior to capitalized interest) increased to $22,714,000
from $12,221,000 in the prior year. The increase is due to higher average
borrowings and interest rates incurred by the Company in 2001. Debt levels
increased to fund the Company's acquisitions, as well as for working capital
needs.
Liquidity and Financial Resources
In the year ended 2002, the Company generated cash flow from operations of
$41,945,000. A prime objective of the Company has been to strengthen its balance
sheet and reduce debt. Considerable progress has been made toward that goal, as
inventories decreased by over $45,000,000 and debt and current liabilities have
declined by over $65,000,000. In addition to debt repayments of $28,544,000, the
Company significantly reduced liabilities related to compensation and benefits,
acquisition related costs, interest and dividends payable. In 2002,
approximately $8,000,000 was spent on capital projects, focused primarily on
manufacturing facilities and retail fixturing. A similar level of capital
expenditures is projected for 2003.
51
The following table details the Company's long term commitments by due date:
Less than After
Obligation Total 1 year 1-3 years 3 years
----------------------- -------- --------- --------- -------
Long term debt $260,126 $ 3,956 $256,073 $ 97
Operating leases 25,506 7,570 12,866 5,070
Unconditional purchase
obligations 18,218 6,177 12,041
-------- ------- -------- ------
Total $303,850 $17,643 $280,980 $5,167
======== ======= ======== ======
On June 2, 2000, the Company entered into a three-year $275,000,000 revolving
credit agreement. This facility was utilized to fund the three acquisitions made
in 2001 and to refinance the majority of the Company's outstanding credit
facilities and term loans. This debt carries a floating interest rate indexed to
LIBOR plus 3.5%. Interest is payable either at the earlier of quarterly or note
maturity.
During the first quarter of 2002, the Company was not in compliance with its
consolidated interest coverage and consolidated leverage convenants in the
revolving credit agreement. The most restrictive of these covenants limits the
Company's total debt outstanding to a predetermined multiple of the prior
rolling twelve months earnings before interest, taxes, depreciation and
amortization. The lenders waived violation of these covenants and amended the
covenants to new agreed upon levels. The Company collateralized its debt under
this facility with all of its domestic assets (excluding real estate holdings)
and a majority of its investment in Oneida UK Limited. At the end of the third
quarter of 2002, the Company was not in compliance with these covenants in the
facility, which the lenders waived.
At the end of the 2002 fiscal year, the Company was again not in compliance with
its consolidated interest coverage and consolidated leverage covenants. In April
2002 the Company and its lenders entered into an amendment to the facility. The
amendment waived the year-end non-compliance and made a number of changes to the
revolving credit agreement.
Under the amendment, the maturity of the revolving debt has been extended to
February 1, 2004 from May 31, 2003. The Company has provided additional
collateral to the lenders in the form of domestic real estate holdings. The
commitments under the facility stepped down to $245,000,000 upon signing of the
amendment and will further step down to $235,000,000 at February 3, 2003 and to
$205,000,000 on January 31, 2004. In addition, there are limitations on
dividends, capital expenditures, intercompany indebtedness and letters of
credit. The consolidated interest coverage and consolidated leverage covenants
have been amended to new agreed upon levels. Under the amendment, until the
second fiscal quarter of 2004, the Company may declare dividends of up to
$375,000 per quarter, so long as its net income (as defined in the facility) for
the preceding rolling four quarters equals or exceeds $4,000,000. Thereafter,
dividend declarations may be increased if certain improved results are achieved.
So long as the Company achieves the required $4,000,000 of net income and
otherwise remains in compliance with the revolving credit facility, it can
continue paying dividends at the current rate.
After giving effect to the amendment, the Company could have borrowed up to an
additional $14,000,000 under the revolving credit agreement at January 26, 2002.
The Company believes that it will remain in compliance during 2003 with the
covenants and other provisions of its revolving credit agreement. However, the
Company might not be able to remain in compliance if its net sales in 2003 were
to decline from the level achieved in 2002. A number of other factors could also
cause the Company to cease complying with its facility. In that event, if the
lenders were unwilling to waive the non-compliance, they could restrict the
ability of the Company to borrow undrawn funds under the facility and could
require the immediate repayment of all outstanding borrowings thereunder.
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 as of January 2002 totaled
$194,325,000.
52
The Company has foreign exchange exposure related to its foreign operations in
Mexico, Canada, Italy, Australia, the United Kingdom, China and Hong Kong (see
Note 14 for details on the Company's foreign operations). Translation
adjustments recorded in the income statement were not of a material nature.
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 the this standard. All goodwill
and intangible assets will be tested for impairment in accordance with the
provisions of the Statement. The Company 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 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 through
sale or by other means. SFAS 144 is effective for the 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.
Critical Accounting Policies
The company's accounting policies are more fully described in Footnote 1 of the
Notes to Consolidated Financial Statements in its Annual Report for the years
ended January 2002 and 2001 included in the January 26, 2002 Annual Report to
the Securities and Exchange Commission on Form 10-K filed in April, 2002. As
disclosed in Note 1, the preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions about future events that affect the amounts reported in the
financial statements and accompanying footnotes. Future events and their effects
cannot be determined with absolute certainty. Therefore, the determination of
estimates requires the exercise of judgment. Actual results occasionally will
differ from those estimates, and such differences may be material to the
Consolidated Financial Statements.
The most significant accounting estimates inherent on the preparation of the
company's financial statements includes estimates as to the recovery of accounts
receivable, inventory, goodwill, other long-lived assets and deferred tax
assets. Various assumptions and other factors underlie the determination of
these significant estimates. The process of determining significant estimates is
fact specific and takes into account factors such as historical experience,
current and expected economic conditions, product mix and actuarial
determinations. The Company re-evaluates these significant factors as facts and
circumstances dictate. Historically, actual results have not differed
significantly from those determined using the estimates described above.
The valuation of the company's pension, other post-retirement plans and self
insured workers compensation plan require the use of assumptions and estimates
that are used to develop actuarial valuations of expenses and
assets/liabilities. These assumptions include discount rates, investment
returns, projected salary increases and benefits, and mortality rates. The
actuarial assumptions used in the company's pension reporting are reviewed
annually and compared with external benchmarks to help assure that they
actuarially account for the company's future pension and other post-retirement
obligations. Changes in assumptions and future investment returns could
potentially have a material impact on pension expense and related funding
requirements.
The company offers various sales discounts and co-op advertising incentives to a
broad base of customers. These discounts and incentives, along with net freight
costs, are recorded as a reduction of sales. The company records accruals for
these discounts and incentives as sales occur. Management regularly reviews the
adequacy of the accruals based on current customer purchases. The amounts due to
customers are paid or deducted from accounts receivable balances throughout the
year.
53
Forward Looking Information
With the exception of historical data, the information contained in this report,
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.
Quantitative and Qualitative Disclosures About Market Risk
The company's market risk is impacted by changes in interest rates and foreign
currency exchange rates. Pursuant to the company's policies, the company does
not hold or issue any significant derivative financial instruments.
The company's primary market risk is interest rate exposure in the United
States. Historically, the company manages interest rate exposure through a mix
of fixed and floating rate debt. The majority of the company's debt is currently
at floating rates. Based on floating rate borrowings outstanding at January
2003, a 1% change in the rate would result in a corresponding change in interest
expense of $2.1 million.
There have been no other material changes to the Company's disclosures related
to certain market risks as reported under Part II, Item 7A, "Quantitative and
Qualitative Disclosures About Market Risk," in the Annual Report of the Company
to the U.S. Securities and Exchange Commission on Form 10-K for the year ended
January 26, 2002.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and our Chief Financial Officer have carried out an
evaluation, with the participation of the company's management, of the design
and operation of the Company's "disclosure controls and procedures" (as defined
in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) within 90 days of the date of this report. That evaluation
included consideration of those controls in light of the just completed review
of the Company's financial statements for the prior 8 quarters. Based upon that
evaluation, each has concluded that the Company's "disclosure controls and
procedures" are effective to insure that information required to be disclosed in
the reports that we file under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified by the Securities and
Exchange Commission's rules and regulations.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls, nor any significant
deficiencies or material weaknesses in such controls requiring corrective
actions, subsequent to the date of their evaluation.
54
Dividends and Price Range of the Company's Common Stock
The Company's Common Stock is listed on the New York Stock Exchange and trades
under the symbol OCQ. The total number of stockholders of record at January 2002
was 3,790. The following table sets forth the high and low sale prices per share
of the Company's Common Stock for the periods indicated on the Composite Tape,
and cash dividends declared for the quarters in the Company's 2002 and 2001
fiscal years.
JANUARY 2002 JANUARY 2001
--------------- ---------------
Fiscal Dividends Fiscal Dividends
Quarter High Low Per Share Quarter High Low Per Share
------- ------ ------ --------- ----------- ------ ------ ---------
First $18.10 $15.50 $.05 First...... $21.06 $16.00 $.10
Second 20.33 16.24 .05 Second..... 19.94 17.25 .10
Third 18.35 12.55 .05 Third...... 18.13 10.94 .10
Fourth 14.05 11.35 .02 Fourth..... 18.50 10.06 .05
55
FIVE YEAR SUMMARY
ONEIDA LTD.
(Thousands except per share amounts)
Year ended January 2002 2001 2000 1999 1998
------------------------------------------- ------- ------- ------- ------- -------
OPERATIONS
Net sales .............................. $ 499.2 $ 515.5 $ 495.1 $ 465.9 $ 442.9
Gross margin ........................... 161.9 185.8 196.0 173.0 168.1
Depreciation and amortization expense .. 17.1 14.8 13.8 15.8 13.8
Operating income 1 ..................... 27.7 59.4 68.8 45.1 50.7
Income from continuing operations 1 .... 26.1
Income from discontinued operations .... 2.6
Net income 1 ........................... 7.0 21.4 35.9 22.8 28.7
Cash dividends declared
Preferred stock .................. .1 .1 .1 .1 .1
Common Stock ..................... 2.0 5.7 6.6 8.4 7.6
PER SHARE OF COMMON STOCK
Continuing operations 1&2 .............. 1.55
Discontinued operations 1&2 ............ .16
Net income 1&2 ......................... .42 1.30 2.15 1.35 1.71
Dividends declared ..................... .17 .40 .40 .50 .45
FINANCIAL DATA
Total assets ........................... 545.6 613.9 449.2 442.1 363.6
Working capital ........................ 194.3 214.9 145.1 140.1 119.3
Total debt ............................. 271.6 300.1 146.2 150.5 86.8
Stockholders' equity ................... 124.1 122.5 133.3 140.3 135.3
SHARES OF CAPITAL STOCK
Outstanding at end of year
Preferred ........................ 86 87 87 87 88
Common ........................... 16,523 16,388 16,465 16,607 16,609
Weighted average number of common shares
Outstanding during the year. 2 ... 16,519 16,387 16,672 16,888 16,740
SALES OF MAJOR PRODUCTS BY PERCENT OF
TOTAL SALES
Metal products ......................... 65% 66% 68% 73% 77%
Dinnerware products .................... 27% 25% 21% 20% 19%
Glass products ......................... 7% 8% 8% 4% 3%
Other products ......................... 1% 1% 3% 3% 1%
(1) Amounts are before restructuring and other unusual charges of $39.0, $44.3
and $5.0 for the years ended January 2001, 2000 and 1999, respectively. In
2001 and 2000 restructuring charges included in cost of sales were $24.0
and $3.0. These charges reduced net income by $24.5, or $1. 50 per share;
$30.4, or $1.83 per share and $3.1, or $.19 per share in 2001, 2000 and
1999, respectively.
(2) diluted basis
56