UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 27, 2002
Commission file number 1-5452
ONEIDA LTD.
(Exact name of Registrant as specified in its charter)
NEW YORK 15-0405700
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
ONEIDA, NEW YORK 13421
(Address of principal executive offices) (Zip code)
(315) 361-3636
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of June 7, 2002: 16,541,323
ONEIDA LTD.
FORM 10-Q/A
FOR THE THREE MONTHS ENDED APRIL 27, 2002
INDEX
EXPLANATORY NOTE
PART I FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED STATEMENT OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
2
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
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 April 27, 2002 no Reports on Form 8-K
were filed by the registrant.
SIGNATURES
CERTIFICATIONS
3
Explanatory Note
Oneida Ltd. hereby amends its Quarterly Report on Form 10-Q for the quarter
ended April 27, 2002, filed with the Securities and Exchange Commission on June
11, 2002. The purpose of this amendment is to restate portions of the Form 10-Q,
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 quarters April
27, 2002 and April 28, 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.
4
ONEIDA LTD.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
FOR THE
THREE MONTHS ENDED
RESTATED RESTATED
(NOTE 1) (NOTE 1)
(Thousands except per APR 27, APR 28,
share amounts) 2002 2001
-------- --------
NET SALES ................................................ $115,006 $126,806
COST OF SALES ............................................ 77,500 86,237
-------- --------
GROSS MARGIN ............................................. 37,506 40,569
OPERATING REVENUES ....................................... 368 408
-------- --------
37,874 40,977
OPERATING EXPENSES:
Selling, distribution and
administrative expenses ............................ 31,528 34,378
-------- --------
INCOME FROM OPERATIONS ................................... 6,346 6,599
OTHER (INCOME)EXPENSE .................................... (366) 138
INTEREST EXPENSE ......................................... 4,086 7,121
-------- --------
INCOME BEFORE INCOME TAXES ............................... 2,626 (660)
PROVISION FOR INCOME TAXES ............................... 978 242
-------- --------
NET INCOME ............................................... $ 1,648 $ (418)
======== ========
EARNINGS PER SHARE OF COMMON STOCK:
Net income:
Basic .............................................. $.10 $(.03)
Diluted (NOTE 3) ................................... .10 (.03)
SHARES USED IN PER SHARE DATA:
Basic .............................................. 16,530 16,411
Diluted (NOTE 3) ................................... 16,558 16,497
CASH DIVIDENDS DECLARED .................................. $.02 $.05
See notes to consolidated financial statements.
5
ONEIDA LTD.
CONSOLIDATED BALANCE SHEET
APRIL 27, 2002 AND JANUARY 26, 2002
(Unaudited)
(Dollars in Thousands)
RESTATED RESTATED
(NOTE 1) (NOTE 1)
APR 27, JAN 26,
2002 2002
-------- --------
ASSETS
CURRENT ASSETS:
Cash ............................................... $ 4,556 $ 11,112
Accounts receivable, net of allowance for doubtful
accounts of $3,554 and $3,475 ................... 79,010 78,420
Other accounts and notes receivable ................ 3,197 2,524
Inventories:
Finished goods .................................. 139,431 147,097
Goods in process ................................ 12,556 13,112
Raw materials and supplies ...................... 8,698 9,314
Other current assets ............................... 17,103 17,687
-------- --------
Total current assets ......................... 264,551 279,266
-------- --------
PROPERTY, PLANT AND EQUIPMENT-At cost:
Property, plant and equipment ...................... 254,060 252,306
Less accumulated depreciation ...................... 147,359 143,772
-------- --------
Property, plant and equipment-net ............ 106,701 108,534
-------- --------
OTHER ASSETS:
Goodwill - net ..................................... 131,198 131,796
Deferred income taxes .............................. 21,607 21,567
Other assets ....................................... 8,643 4,390
-------- --------
TOTAL ........................................ $532,700 $545,553
======== ========
See notes to consolidated financial statements.
6
ONEIDA LTD.
CONSOLIDATED BALANCE SHEET
APRIL 27, 2002 AND JANUARY 26, 2002
(Unaudited)
(Dollars in Thousands)
RESTATED RESTATED
(NOTE 1) (NOTE 1)
APR 27, JAN 26,
2002 2002
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt .................................... $ 7,206 $ 11,430
Accounts payable ................................... 24,425 24,848
Accrued liabilities ................................ 38,541 39,199
Accrued income taxes ............................... 6,246 5,145
Dividends payable .................................. 352 363
Current installments of long-term debt ............. 4,907 3,956
-------- --------
Total current liabilities .................... 81,677 84,941
-------- --------
LONG-TERM DEBT ........................................ 244,223 256,170
-------- --------
OTHER LIABILITIES:
Accrued postretirement liability ................... 57,429 56,410
Accrued pension liability .......................... 14,899 15,206
Other liabilities .................................. 8,987 8,725
-------- --------
Total ........................................ 81,315 80,341
-------- --------
STOCKHOLDERS' EQUITY:
Cumulative 6% preferred stock; $25 par
value; authorized 95,660 shares, issued
86,036 shares, callable at $30 per share ........ 2,151 2,151
Common stock $1 par value; authorized
48,000,000 shares, issued 17,820,537
and 17,809,235 shares ........................... 17,821 17,809
Additional paid-in capital ......................... 84,081 83,965
Retained earnings .................................. 61,934 60,638
Accumulated other comprehensive loss ............... (16,368) (16,328)
Less cost of common stock held in
treasury; 1,285,679 shares ...................... (24,134) (24,134)
-------- --------
Stockholders' Equity ............................ 125,485 124,101
-------- --------
TOTAL ........................................ $532,700 $545,553
======== ========
See notes to consolidated financial statements
7
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED APRIL 27, 2002
(Unaudited)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
--------------------------------------------------------
Balance at Jan 26, 2002
Restated (Note 1) ...... 17,809 $17,809 $2,151 $83,965 $60,638
Stock plan activity, net... 12 12 116
Purchase/retirement of
Treasury stock, net ....
Cash dividends declared
($.02 per share) ....... (352)
Net income ................ $1,648 1,648
Other comprehensive
Loss ................... (40)
------
Comprehensive income ...... $1,608
======
----------------------------------------------
Balance at Apr 27, 2002
Restated (Note 1) ...... 17,821 $17,821 $2,151 $84,081 $61,934
==============================================
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
--------------------------------------
Balance at Jan 26, 2002
Restated (Note 1) ...... $(16,328) $(24,134)
Other comprehensive
loss ................... (40)
------------------------------------
Balance at Apr 27, 2002
Restated (Note 1) ...... $(16,368) $(24,134)
====================================
See notes to consolidated financial statements.
8
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED APRIL 28, 2001
(Unaudited)
Add'l
Comp. Common Common Pref'd Paid-in Retained
Income Shares Stock Stock Capital Earnings
--------------------------------------------------------
Balance at Jan 27, 2001
Restated (Note 1) ...... 17,703 $17,703 $2,167 $82,956 $55,693
Stock plan activity, net... 19 19 147
Purchase/retirement of
Treasury stock, net ....
Cash dividends declared
($.05 per share) ....... (855)
Net income (loss) ......... $ (418) (418)
Other comprehensive
Loss ................... (2,595)
-------
Comprehensive income ...... $(3,013)
=======
----------------------------------------------
Balance at Apr 28, 2001
Restated (Note 1) ...... 17,722 $17,722 $2,167 $83,103 $54,420
==============================================
Other Comp Treasury Unallocated
Income (Loss) Stock ESOP
--------------------------------------
Balance at Jan 27, 2001
Restated (Note 1) ..... $(11,423) $(24,590)
Treasury stock, net ...... 235
Other comprehensive
loss .................. (2,595)
------------------------------------
Balance at Apr 28, 2001
Restated (Note 1) ..... $(14,018) $(24,355)
====================================
See notes to consolidated financial statements.
9
ONEIDA LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 27, 2002 AND APRIL 28, 2001
(Unaudited)
(In Thousands)
FOR THE
THREE MONTHS ENDED
RESTATED RESTATED
(NOTE 1) (NOTE 1)
APR 27, APR 28,
2002 2001
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income .............................................. $ 1,648 $ (418)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ........................ 4,146 4,536
Deferred taxes and other non-cash
charges and credits ............................... 724 (4,852)
Decrease (increase) in operating assets:
Receivables ....................................... (1,263) (2,672)
Inventories ....................................... 8,696 7,822
Other current assets .............................. (2,522) 1,200
Other assets ...................................... (4,253) (594)
Increase (decrease) in accounts payable .............. (423) 480
Increase (decrease) in accrued liabilities ........... 931 (7,150)
-------- -------
Net cash provided (used) by operating activities .. 7,684 (1,648)
-------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditure-net............ (1,880) (2,648)
Proceeds from sale of marketable securities ............. 3,106
Other, net .............................................. 16 (2)
-------- -------
Net cash used in investing activities ............. 1,242 (2,650)
-------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock .................. 129 166
Issuance of treasury stock .............................. 235
(Decrease)/Increase in short-term debt-net .............. (4,224) 4,186
Payment of long-term debt ............................... (12,325)
Proceeds from issuance of long-term debt ................ 1,330 6,263
Dividends paid .......................................... (352) (1,670)
-------- -------
Net cash provided by financing activities ......... (15,442) 9,180
-------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .................... (40) (2,595)
-------- -------
NET (DECREASE)INCREASE IN CASH ............................. (6,556) 2,287
CASH AT BEGINNING OF YEAR .................................. 11,112 2,163
-------- -------
CASH AT END OF PERIOD ...................................... $ 4,556 $ 4,450
======== =======
See notes to consolidated financial statements.
10
ONEIDA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Thousands)
1. The statements for the three months ended April 27, 2002 and April 28, 2001
are unaudited; in the opinion of the Company such unaudited statements include
all adjustments (which comprise only normal recurring accruals) necessary for a
fair presentation of the results of such periods. The results of operations for
the three months ended April 27, 2002 are not necessarily indicative of the
results of operations to be expected for the year ending January 25, 2003. The
consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes for the years ended in
January 2002 and 2001 included in the Company's January 26, 2002 Annual Report
to the Securities and Exchange Commission on Form 10-K/A.
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 THREE MONTHS ENDED APR 27, 2002
As Prev. Increase
Reported (Decrease) Restated
-------- -------- --------
Selling, distribution
and administrative expenses ...... $31,442 $ 86 $31,528
Provision for income taxes .......... 1,010 (32) 978
Net income .......................... 1,702 (54) 1,648
Earnings per share
(basic and diluted) .............. $.10 $.00 $.10
Net income for the quarter ended April, 2002 decreased from $1,702 as previously
reported to $1,648 as restated. This reduction results from recognition of
additional compensation expense of $86, net of an associated income tax benefit
of $32.
11
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED APR 28, 2001
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Cost of Sales ....................... $85,281 $ 956 $86,237
Selling, distribution
and administrative expenses ...... 33,966 412 34,378
Provision for income taxes .......... 264 (506) (242)
Net income (loss) ................... 444 (862) (418)
Earnings per share
(basic and diluted) .............. $.02 $(.05) $(.03)
Net income (loss) for the three month period ended April 2001 decreased from
$444 and $.02 per share as previously reported to ($418) and ($.03) per share as
restated as a result of the recognition of additional compensation expense of
$339, cost of sales of $956, integration costs of $73, less an income tax
benefit of $506.
BALANCE SHEET AT APRIL 27, 2002
As Prev. Increase
Reported (Decrease) Restated
-------- --------- --------
Other current assets ................ $ 17,956 $ (853) $ 17,103
Property, plant & equipment ......... 253,898 162 254,060
Goodwill - net ...................... 133,475 (2,277) 131,198
Deferred income taxes ............... 19,240 2,367 21,607
Accrued liabilities ................. 37,206 1,335 38,541
Accrued income taxes ................ 4,848 1,398 6,246
Retained earnings ................... 65,268 (3,334) 61,934
The consolidated balance sheet as of April 2002 has been restated to reflect the
effects of the adjustments described above. Retained earnings has been decreased
$3.3 million from $65.2 million as previously reported to $61.9 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 $133.5 million
as previously reported to $131.2 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, to increase
net deferred tax assets related to the acquisition of $1.9 million, and to
reduce accumulated amortization of goodwill by $640. The remaining changes to
other current assets, property, plant and equipment, deferred income taxes,
accrued liabilities and accrued income taxes were the result of balance sheet
reclassifications as part of the restatement process.
12
BALANCE SHEET AT JANUARY 26, 2002
As Prev. Increase
Reported (Decrease) Restated
-------- ---------- --------
Other current assets ................ $ 18,540 $ (853) $ 17,687
Property, plant & equipment ......... 252,144 162 252,306
Goodwill - net ...................... 134,073 (2,277) 131,796
Deferred income taxes ............... 19,181 2,386 21,567
Accrued liabilities ................. 37,950 1,249 39,199
Accrued income taxes ................ 3,696 1,449 5,145
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, to
increase net deferred tax assets related to the acquisition of $1.9 million, and
to reduce accumulated amortization of goodwill by $640. The remaining changes to
other current assets, property, plant and equipment, deferred income taxes,
accrued liabilities and accrued income taxes 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.
2. The provision for income taxes is based on pre-tax income for financial
statement purposes with an appropriate deferred tax provision to give effect to
changes in temporary differences between the financial statements and tax bases
of assets and liabilities. The temporary differences arise principally from
restructuring charges, postretirement benefits, depreciation and other employee
benefits.
3. Basic and diluted earnings per share are presented for each period in which a
statement of operations is presented. Basic earnings per share is computed by
dividing income less preferred stock dividends by the weighted average shares
actually outstanding for the period. Diluted earnings per share includes the
potentially dilutive effect of shares issuable under the employee stock purchase
and incentive stock option plans.
13
The following is a reconciliation of basic earnings per share to diluted
earnings per share for the three months ended April 27, 2002 and April 28, 2001:
Preferred Earnings
Net Stock Adjusted Average Per
Income Dividends Net Income Shares Share
--------------------------------------------------------------------------------
2002 Restated (Note 1):
Basic earnings
per share ............ $1,648 $(32) $1,616 16,530 $ .10
Effect of stock options.. 28
Diluted earnings
per share ............ 1,648 (32) 1,616 16,558 .10
--------------------------------------------------------------------------------
2002 As Reported:
Basic earnings
per share ............ $1,702 $(32) $1,670 16,530 $ .10
Effect of stock options.. 28
Diluted earnings
per share ............ 1,702 (32) 1,670 16,558 .10
--------------------------------------------------------------------------------
2001 Restated (Note 1):
Basic earnings(loss)
per share ............ $ (418) $(32) $ (450) 16,411 $(.03)
Effect of stock options.. 86
Diluted earnings(loss)
per share ............ (418) (32) (450) 16,497 (.03)
--------------------------------------------------------------------------------
2001 As Reported:
Basic earnings
per share ............ $ 444 $(32) $ 412 16,411 $ .02
Effect of stock options.. 86
Diluted earnings
per share ............ 444 (32) 412 16,497 .02
--------------------------------------------------------------------------------
4. Included in the long-term debt caption on the balance sheet are various
senior notes. The note agreements relating thereto contain provisions which,
among other things, require maintenance of certain financial ratios related to
levels of indebtedness, minimum net worth and interest coverage levels. The
covenants limit certain types of payments including dividends, capital
expenditures, intercompany indebtedness and letters of credit. Under the
provisions of the amended note agreements, at April 27, 2002, the Company was
able to declare dividends of up to $375 per quarter.
5. 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,
14
airlines, cruise lines, schools and healthcare facilities. The Company's
operations are located in the United States, Canada, Mexico, Italy, Australia,
The United Kingdom, Hong Kong and China.
Sales by reportable segment for the first quarter of 2002 and 2001 were as
follows:
(000)
-------------------------------------------------
Metal Dinnerware Glass Other Total
------- ---------- ------ ------ --------
2002 Net Sales $69,600 $36,200 $7,100 $2,106 $115,006
2001 Net Sales $83,500 $33,900 $7,900 $1,506 $126,806
6. In June 2001, the Financial Accounting Standards Board approved Statement of
Financial Accounting Standards No. 142 "goodwill and other Intangible Assets"
("SFAS 142"). We adopted SFAS 142 effective January 27, 2002. Under this
standard, amortization of goodwill and certain intangible assets, including
certain intangibles recorded as a result of past business combinations, is to be
discontinued upon adoption of SFAS 142. The new standard requires that goodwill
and intangible assets be tested for impairment on an annual basis. The Company
will be performing the tests of goodwill and indefinite lived intangible assets
in the second fiscal quarter of 2002. No material impact on the earnings or
financial position of the Company is expected due to the adoption of SFAS 142.
The following is a reconciliation assuming goodwill and other intangible assets
had been accounted for in accordance with the provisions of SFAS 142 in the
quarter ended April 28, 2001. The net income is restated as discussed in Note 1.
FOR THE
THREE MONTHS ENDED
RESTATED RESTATED
(NOTE 1) (NOTE 1)
APR 27, APR 28,
2002 2001
-------- --------
Net income (loss) ....................................... $1,648 $(418)
Adjustments (net of income taxes):
Goodwill amortization ................................ 576
------ -----
Adjusted net income ..................................... $1,648 $ 158
====== =====
Earnings per share:
Basic:
Net income (loss) .................................... $ .10 $(.03)
Adjusted net income .................................. .10 .01
Diluted:
Net income (loss) .................................... $ .10 $(.03)
Adjusted net income .................................. .10 .01
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended April 27, 2002 compared with
the quarter ended April 28, 2001
(In Thousands)
The Management's Discussion and Analysis of Financial Condition and Results
of Operations presented below reflects the impact of the restatements to the
Company's previously reported Consolidated Financial Statements as further
discussed below.
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.
Net income for the quarter ended April, 2002 decreased from $1,702 as previously
reported to $1,648 as restated while earnings per share remained unchanged at
$.10. This reduction results from recognition of additional compensation expense
of $86, net of an associated income tax benefit of $32.
Net income (loss) for the three month period ended April 2001 decreased from
$444 and $.02 per share as previously reported to ($418) and ($.03) per share as
restated as a result of the recognition of additional compensation expense of
$339, cost of sales of $956, integration costs of $73, less an income tax
benefit of $506.
The consolidated balance sheet as of April 2002 has been restated to reflect the
effects of the adjustments described above. Retained earnings has been decreased
$3.3 million from $65.2 million as previously reported to $61.9 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 $133.4 million
as previously reported to $131.2 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, to increase
net deferred tax assets related to the acquisition of $1.9 million, and
16
to reduce accumulated amortization of goodwill by $640. The remaining changes
to other current assets, property, plant and equipment, deferred income taxes,
accrued liabilities and accrued income taxes were the result of balance sheet
reclassifications as part of the restatement process.
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, to
increase net deferred tax assets related to the acquisition of $1.9 million, and
to reduce accumulated amortization of goodwill by $640. The remaining changes to
other current assets, property, plant and equipment, deferred income taxes,
accrued liabilities and accrued income taxes were the result of balance sheet
reclassifications as part of the restatement process.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended April 27, 2002 compared with
the quarter ended April 28, 2001
(In Thousands)
Operations
Net Sales by Product Line:
Three Months Ended
2002 2001 %Change
-------- -------- -------
Metal products ................................. $ 69,600 $ 83,500 (16.6)
Dinnerware Products ............................ 36,200 33,900 6.8
Glass products ................................. 7,100 7,900 (10.1)
Other Products ................................. 2,106 1,506 39.8
-------- -------- -----
Total ....................................... $115,006 $126,806 (9.3)
======== ======== =====
Quarterly Review
Consolidated net sales for the quarter ended April 27, 2002 were $11,800 lower
than in the first quarter of the prior year, reflecting continuing softness in
the overall economy. In spite of slowdowns in consumer and foodservice sales
levels, sales of dinnerware products increased in both markets.
Gross margin as a percentage of net sales was 32.6% in the first quarter of
2002, comparable to the 32.0% realized for the same period of 2001. As was done
through most of 2001, the Company ran its manufacturing facilities at lower
volumes to better match incoming order levels. This resulted in overhead
variances and plant utilization inefficiencies.
Total operating expenses decreased by $2,850, or 8.3%, from the same quarter
last year. This decrease is attributable to the reduction of goodwill
amortization of $918, in accordance with the adoption of FAS # 142 and continued
efforts to reduce operating costs. As a percentage of sales, operating expenses
were slightly higher than the same quarter last year at 27.4% compared to 27.1%
Interest expense, prior to capitalized interest, was $4,112 for the quarter
ended April 27, 2002, a decrease of $3,100 from the first quarter of 2001. This
decrease is due to significantly lower average borrowings and lower prevailing
interest rates incurred throughout the current quarter.
Liquidity & Financial Resources
A prime objective of the Company since mid-2000 has been to strengthen its
balance sheet and reduce debt. During the first quarter of 2002, continued
significant progress was made toward these goals. Inventories were decreased by
an additional $9,000 during the quarter and debt was reduced by approximately
$15,000 in the same period. Cash flow generated from operations for the first
quarter was $7,684, as compared to a net operating usage of cash of $1,648 in
the prior year's first quarter. During the first quarter of 2002, the Company
received approximately $3,100 from the sale of marketable equity securities.
These proceeds were directly applied to pay down debt. The Company spent
approximately $1,900 in the first quarter on capital projects focused primarily
on its manufacturing facilities. Capital spending for the remainder of 2002 is
anticipated to be approximately $8,100.
18
Included in the long-term debt caption on the balance sheet are various senior
notes. The note agreements relating thereto contain provisions which, among
other things require maintenance of certain financial ratios related to levels
of indebtedness, minimum net worth and interest coverage levels. The covenants
limit certain types of payments including dividends, capital expenditures,
intercompany indebtedness and letters of credit. Under the provisions of the
amended note agreements, at April 27, 2002, the Company was able to declare
dividends of $375 per quarter.
Management believes there is sufficient liquidity to support the Company's
ongoing funding requirements from future operations as well as the availability
of bank lines of credit. Working capital was $182,874 as of April 27, 2002 as
compared to $194,325 at January 26, 2002.
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.
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.
19
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.
Forward Looking Information
With the exception of historical data, the information contained in this Form
10-Q, as well as those other documents incorporated by reference herein, is
forward-looking. For the purposes of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions readers that
changes in certain factors could affect the Company's future results and could
cause the Company's future consolidated results to differ materially from those
expressed herein. Such factors include, but are not limited to: general economic
conditions in the Company's markets; difficulties or delays in the development,
production and marketing of new products; the impact of competitive products and
pricing; certain assumptions related to consumer purchasing patterns;
significant increases in interest rates or the level of the Company's
indebtedness; major slowdowns in the retail, travel or entertainment industries;
the loss of several of the Company's major customers; under utilization of the
Company's plants and factories; the amount and rate of growth of the Company's
selling, general and administrative expenses.
ITEM 3. 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 October
2002, a 1% change in the rate would result in a corresponding change in interest
expense of $2.3 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.
ITEM 4. 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
20
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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ONEIDA LTD.
(Registrant)
Date: April 2, 2003 /s/ GREGG R. DENNY
------------------------------
Gregg R. Denny
Chief Financial Officer
21
CERTIFICATION
I, Peter J. Kallet certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Oneida Ltd.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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
quarterly 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 quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly 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
22
6. The registrant's other certifying officers and I have indicated in
this quarterly 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
23
CERTIFICATION
I, Gregg R. Denny certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Oneida Ltd.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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
quarterly 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 quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly 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
24
6. The registrant's other certifying officers and I have indicated in
this quarterly 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
25