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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE -
ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 28, 1997 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER 0-19557
SALTON/MAXIM HOUSEWARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3777824
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION
MOUNT PROSPECT, ILLINOIS 60056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES (ZIP CODE)
(847) 803-4600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether this 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 __
The aggregate market value of the Common Stock held by non-affiliates of the
Registrant as of September 22, 1997 was approximately $115,633,653, computed on
the basis of the last reported sale price per share ($8.875) of such stock on
the NASDAQ National Market. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
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 number of shares of the Registrant's Common Stock outstanding as of
September 25, 1997 was 13,029,144.
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DOCUMENTS INCORPORATED BY REFERENCE:
PART OF FORM 10-K DOCUMENT INCORPORATED BY REFERENCE
------------------------------ ---------------------------------------------
Part III (Items 10, 11, 12 and Portions of the Registrant's Definitive Proxy
13) Statement to be used in connection with
its 1997 Annual Meeting of Stockholders.
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CERTAIN STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY RESULTS, TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE,
AMONG OTHERS, THE FOLLOWING: ECONOMIC CONDITIONS AND RETAIL ENVIRONMENT; THE
TIMELY DEVELOPMENT, INTRODUCTION AND CUSTOMER ACCEPTANCE OF THE COMPANY'S
PRODUCTS; COMPETITIVE PRODUCTS AND PRICING; DEPENDENCE ON FOREIGN SUPPLIERS AND
SUPPLY AND MANUFACTURING CONSTRAINTS; THE COMPANY'S RELATIONSHIP AND
CONTRACTUAL ARRANGEMENTS WITH KEY CUSTOMERS, SUPPLIERS AND LICENSORS;
CANCELLATION OR REDUCTION OF ORDERS; THE RISKS RELATING TO PENDING LEGAL
PROCEEDINGS AND OTHER FACTORS BOTH REFERENCED AND NOT REFERENCED IN THIS ANNUAL
REPORT ON FORM 10-K. WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS
"ESTIMATE," "PROJECT," "ANTICIPATED," "EXPECT," "INTEND," "BELIEVE," AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
PART I
ITEM 1. BUSINESS
GENERAL
Salton/Maxim Housewares, Inc. (the "Company") designs and markets a
broad range of kitchen and home appliances, personal and beauty care appliances
and decorative quartz wall and alarm clocks under the brand names of Salton(R),
Maxim(R), Breadman(R), Juiceman(R), Salton Creations(R), Salton Time(R),
White-Westinghouse(R) and Farberware(R). The kitchen and home appliances
currently marketed by the Company include espresso/cappuccino makers, waffle
makers, rice cookers, coffee makers, sandwich makers, toasters, bread baking
machines, Hotray(R) Warming trays, juice extractors, fans, fan heaters, irons,
ice cream and yogurt makers, and a wide variety of other food preparation
appliances. The Company's personal and beauty care appliances include hair
dryers, Wet Tunes(R) shower radios, shavers, curling irons, makeup mirrors,
massagers, manicure systems and facial saunas. The Company also markets, under
a joint venture agreement, a thermal household grill product under the name
"George Foreman's Lean Mean Fat Reducing Grilling Machine(R)." Mr. Foreman is
both a former Olympic champion and a former World Boxing Organization's heavy
weight champion of the world. The Company contracts for the manufacture of most
of its products with independent manufacturers located overseas, primarily in
the Far East and Europe. The Company also manufactures and assembles certain
appliances in its plant located in Kenilworth, New Jersey.
On July 1, 1996, the Company acquired substantially all of the assets and
certain liabilities of Block China Corporation ("Block China"). Block(R) China
designs and markets tabletop products, including china, crystal and glassware
primarily under the brand names Block(R), Atlantis(R) Crystal and Gear(R).
On July 11, 1996, the Company consummated a transaction with
Windmere-Durable Holdings, Inc. ("Windmere"), pursuant to that certain Stock
Purchase Agreement dated February 27, 1996, as amended (the "Stock Purchase
Agreement"). Windmere is a corporation engaged principally in manufacturing and
distributing a wide variety of personal care products and household appliances.
Pursuant to the Stock Purchase Agreement, Windmere purchased from the Company
6,508,572 newly issued shares of Common Stock (the "Purchase"), which
represented 50% of the outstanding shares of Common Stock of the Company on
February 27, 1996 after giving effect to the Purchase. As consideration for the
purchase, Windmere paid the Company: (i) $3,254,286 in cancellation of a loan;
(ii) a subordinated promissory note in the aggregate principal amount of
$10,847,620 (the "Note"), which Note is payable in five years and is secured by
certain assets of Windmere and its domestic subsidiaries and guaranteed by such
domestic subsidiaries; and (iii) 748,112 shares of Windmere's common stock.
Windmere's common stock is traded on the NYSE. Windmere was also granted an
option to purchase up to 485,000 shares of Common Stock at $4.83 per share,
which option is
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exercisable only if and to the extent that options to purchase shares of Common
Stock which were outstanding on February 27, 1996 are exercised.
In connection with the Purchase, Windmere and the Company also entered
into a Stockholder Agreement (the "Stockholder Agreement") and a Registration
Rights Agreement (the "Registration Agreement"). Pursuant to the Stockholder
Agreement, Windmere is entitled to designate for election, so long as its
ownership does not fall below 15%, that percentage of the Company's directors
as is proportionate to its stock ownership percentage; provided that the number
of directors designated by Windmere will in no event exceed 50% of the total
number of directors. The following persons designated by Windmere were elected
as directors of the Company on July 11, 1996: David M. Friedson, Chairman of
the Board, President and Chief Executive Officer of Windmere; Harry D.
Schulman, Senior Vice President of Windmere; Laurence S. Chud, M.D., Vice
President Investment Banking of CP Banker & Company; and James Connolly,
President of KQED Books and Video. There is now a total of eight directors
serving on the Company's Board of Directors. The Stockholder Agreement also
contains provisions which, subject to specified time periods and exceptions,
restrict the disposition by Windmere of shares of Common Stock and restrict
purchases by Windmere of additional shares of Common Stock that would increase
its percentage ownership interest.
The Company and Windmere also entered into a Marketing Cooperation
Agreement (the "Marketing Cooperation Agreement"). Pursuant to the Marketing
Cooperation Agreement, until Windmere's interest in the Company is less than
30% for at least ten consecutive days, each of the Company and Windmere has
agreed to participate in a variety of mutually satisfactory marketing
cooperation efforts designed to expand the market penetration of each party.
The Company also entered into a letter agreement dated April 30, 1997 (the
"Letter Agreement") with Windmere, pursuant to the Marketing Cooperation
Agreement. The Letter Agreement provides that the Company pay to Windmere a
fee in consideration of Windmere's marketing cooperation efforts in connection
with the Company's supply contract with Kmart and Windmere's guarantee of the
Company's obligations under such contract.
In January, 1997, the Company entered into a major supply contract with
the Kmart Corporation for Kmart to purchase, distribute, market and sell
certain products under the White-Westinghouse brand name licensed to Salton.
Under the terms of the contract, Salton supplies Kmart a broad range of kitchen
and home appliances under the White-Westinghouse brand name. Kmart is the
exclusive discount department store to market these White-Westinghouse
products.
In the second quarter of 1997, Windmere licensed the right to use the
Farberware(TM) name for small electric appliances. Farberware(TM) is a
time-honored trade name in the cookware and small electric appliance industry.
Under the Marketing Cooperation Agreement, the Company obtained the exclusive,
worldwide right to distribute Farberware(TM) small electric appliances.
On June 19, 1997, Salton/Maxim acquired the assets of Jonal Crystal
Ltd.("Jonal") from Sterling Cut Glass. Jonal imports, distributes and contract
manufactures glassware and crystal for the gift, tabletop and housewares
industries. Jonal products, which include the Crystal Kiss(TM) line of
glassware and giftware featuring the famous shape of the Hershey's Chocolate
Kiss, are offered as additional tabletop products under Block China.
The Company's product strategy focuses on developing new products and
enhancing existing products, then marketing those products under its
established brand names to service the needs of a broad range of retailers and
satisfy the different tastes, preferences and budgets of consumers. The Company
designs its products in many contemporary styles and colors and with a wide
variety of features. Management believes that the Company has a reputation in
the industry for excellence in design, creative packaging and marketing of
products, and innovative technology. It was the first to introduce warming
trays, a combination espresso/cappuccino/drip coffee maker, shower radios,
bread makers capable of using multiple grains of flours and Cell-U-Memo,(TM)
the first voice memo recorder for use on cellular phones. The Company has had a
number of products selected as top rated or best buy by various consumer
magazines.
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The Company sells its products throughout the United States primarily to
department stores, gourmet and lifestyle merchants, upscale mass merchandisers
and through other direct distribution channels, direct mail catalogs and
showrooms, specialty stores, warehouse clubs and beauty supply distributors.
The Company markets through its own sales force and a network of approximately
151 independent commissioned sales representatives. Further, the Company sells
certain of its products, primarily Juiceman(R) and the George Foreman Grills(R),
direct to consumers through the use of paid half- hour television programs
commonly referred to as "infomercials."
The Company believes that its principal strengths include its marketing
capabilities, its reputation with retailers, its proven ability to develop new
products and enhance existing products, and its established brand names.
PRODUCTS
Salton/Maxim Housewares, Inc. markets kitchen and home appliances,
tabletop products (including china, crystal and glassware), time products, gift
products, and personal and beauty care appliances. Kitchen and home appliances
are marketed primarily under the Salton(R), Maxim(R), Breadman(R), Juiceman(R),
George Foreman Grills(R), White-Westinghouse(R) and Farberware(R) brand names.
Tabletop products are marketed primarily under the Block(R) China, Atlantis(R)
Crystal and Gear(R) brand names. Personal and beauty care appliances and gift
products are marketed under the Salton Creations(R) brand name and time
products under the Salton Time(R) brand name. The Salton(R) brand name has been
in continuous use since 1947 and the Maxim(R) name since 1970. The Company
believes that the White-Westinghouse(R) and Farberware(R) brand names have
time-honored traditions throughout the world.
The marketing of the Company's products under its brand names permits the
Company to service the needs of a broad range of retailers and satisfy the
different tastes, preferences and budgets of consumers. Products are designed
to meet the needs of a broad range of consumers at a wide range of pricing
points. These products include full-featured or upscale models or designs as
well as those which are marketed to budget conscious consumers.
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The following table sets forth the approximate amounts and percentages of
the Company's net sales by product category during the periods shown.
FISCAL YEAR ENDED
(DOLLARS IN THOUSANDS)
JUNE 28, 1997 JUNE 29, 1996 JULY 1, 1995
------------------- ------------------- -------------------
PERCENT PERCENT PERCENT
NET SALES OF TOTAL NET SALES OF TOTAL NET SALES OF TOTAL
--------- -------- --------- -------- --------- --------
Kitchen and Home
Appliances $155,972 85.3% $91,479 92.2% $70,168 91.1%
Tabletop Products(1) 16,756 9.2%
Personal and Beauty
Care Appliances, Gifts
and Time Products 10,078 5.5% 7,723 7.8% 6,823 8.9%
--------- -------- --------- -------- --------- --------
$182,806 100.0% $99,202 100.0% $76,991 100.0%
========= ======== ========= ======== ========= ========
(1)The Company entered this category of business in fiscal year 1997
upon the acquisition of substantially all of the assets and certain
liabilities of Block(R) China Corporation, a tabletop product company,
on July 1, 1996. The Block(R) China division of the Company designs
and markets tabletop products including china, crystal and
glassware. The Block product line was further augmented on June 19,
1997 with the acquisition of the assets of Jonal Crystal Ltd. from
Sterling Cut Glass. Jonal products include the Crystal Kiss(R) line of
glassware and giftware featuring the famous shape of the Hershey's
Chocolate Kiss.
KITCHEN AND HOME APPLIANCES
The Company designs and markets an extensive line of kitchen and home
appliances under the Salton(R), Maxim(R), Breadman(R) Juiceman(R), George
Foreman Grills(R), White-Westinghouse(R) and Farberware(R) brand names. The
Company currently markets approximately 544 different models under its brand
names in this category. The Salton(R) brand name was first introduced in 1947
through the Hotray(R), a product still marketed by the Company. Other product
introductions have featured innovative technology and design applications and
opened up new product classifications for household use. These introductions
include the first triple function coffee appliance in the United States, (the
Cafe Salton(R), an espresso/cappuccino/drip coffee maker), a yogurt maker, a
peanut butter machine, George Foreman Grills(R) and the Wet Tunes(R) shower
radios. The Salton(R) brand name has been in continuous use since 1947 and
the Maxim(R) name since 1970. The Company believes that the
White-Westinghouse(R) and Farberware(R) brand names have time-honored
traditions throughout the world.
The category includes kitchen and home appliances that are coffee and tea
related products, thermal products, health conscious products, food preparation
products, and fans, fan heaters and humidifiers.
Coffee and Tea Related Products
Coffee and tea related products include combination
espresso/cappuccino/drip coffee makers, coffee makers, coffee urns, coffee
percolators, ice tea/ice coffee makers and a broad range of coffee related
accessories, including coffee mills and grinders, mug warmer sets, electric
kettles and replacement carafes.
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These products include:
1,2,3 Spresso(R), a patented, easy to use espresso/cappuccino coffee maker.
This machine has a vertical brewing system and is unique in the marketplace.
It operates cleanly, utilizing espresso coffee pods that are vacuum packed for
freshness. The pods are fully bio-degradable. The product is simple to operate
and a novice maker of expresso/cappuccino can operate the product in minutes.
The Three For All(R), a combination espresso/cappuccino/drip coffee maker
with a patented 2 cup adapter for direct cappuccino-espresso brewing. The
Company believes that the Three For All(R) coffee/cappuccino maker resulted in
the creation of a new product category in the small kitchen appliance industry.
The Cappuccino Expres(R), a line of cappuccino espresso makers which make
two to four cups of espresso in minutes. The patented steam jet froths milk for
cappuccino while the coffee brews.
In addition, the Company offers coffee urns and percolators traditional to
the Farberware brand name.
Thermal Products
Thermal products include bread bakers, sandwich makers, toasters, waffle
makers, toaster ovens and irons.
These products include:
Breadman(R) thermal products offer l-l/2 pound capacity Breadman(R) and
the 2 pound capacity Breadman Plus(R), automatic bread bakers. These bread
machines are pre-programmed to know exactly how long to mix, knead, rise and
bake healthy, whole grain breads. The consumer just needs to add the
ingredients and set the proper cycle to bake the bread. A window allows the
consumer to see the entire bread making process without opening the lid. The
machines have a programmable timer that allows a preset bake time up to twelve
hours in advance. Additionally, the "Ultimate" breadmaking machine, Breadman
Ultimate(R), has advanced software and patented features. It includes over 100
programs, fuzzy programming, pause buttons and a patented integrated fruit, nut
and herb dispenser.
Thermal products also include the Salton Snack 'N' Sandwich maker series
as well as a range of toasters, including Cool Touch and toaster ovens offered
under the Salton(R), Maxim(R), White-Westinghouse(R) and Farberware(R) brand
names.
Health Conscious Products
Health conscious products include a wide assortment of food preparation
products targeted to health conscious consumers who are interested in preparing
foods such as yogurt, juices and ice cream from natural ingredients. These
products range from ice cream makers and yogurt makers to a variety of juicers,
juice extractors, rice cookers and vegetable steamers. The principal products
include: the Nutritionist(R) line of cool touch sealed environment rice cookers;
the Yogurt Maker, a thermostatically controlled unit for producing homemade
yogurt; the Big Chill(R), a frozen yogurt and ice cream maker; and a series of
automatic rice cookers and steamers.
George Foreman's Lean Mean Fat Reducing Grilling Machines(R) (the "George
Foreman Grills") are also included in this group. These products, which have
unique, patented designs, grill meat, fish, chicken and vegetables evenly in
minutes. The grills are double non-stick coated and the sloped cooking surfaces
with patented grooves channels away measurable amounts of greasy fats into a
separate tray.
Juiceman(R) health conscious products include:
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The Juiceman(R) Jr , a l/4 horsepower juicer offered at a competitive
price. The machine is designed for fresh and healthy juicing using a
wide variety of fruits and vegetables.
The Juiceman(R) II, a preferred juicer used by serious health, fitness and
juicing advocates. It has a powerful 1/2 horsepower, 690 watt motor, built-in
speed control, and an extra large feed tube and pulp receptacle.
The Juiceman(R) 210 and the Juiceman(R) 410 are elite professional series
models with patented dual electronic speed controls.
Food Preparation Products
Food preparation products offer customers a broad range of food
preparation appliances such as electric woks, crepe makers, mixers, can
openers, blenders, hand-held blenders, choppers and warming trays. These
appliances include:
The Professional Wok, consisting of a 6- 1/2 quart capacity die-cast
aluminum body with heavy gauge aluminum dome cover. A patented 1600 watt
heating element design allows for even heat distribution for successful cooking
with an electric wok.
The Electric Brunch Pan, an electric pan with thick aluminum for uniform
heat distribution, an easy to clean non-stick coating and a ready light to
indicate proper cooking temperatures.
The Donut Bites(R), an electric donut maker, makes six light, crispy baked
donuts, and other dessert creations. It has a cool touch housing and non-stick
surface for easy use.
Food preparation appliances have been expanded to offer a range of these
type of basic appliances under the White-Westinghouse(R) and Farberware(R) brand
names.
Fans, Fan Heaters and Humidifiers
Fans, fan heaters and humidifiers are marketed under the
White-Westinghouse(R) brand name.
TABLETOP PRODUCTS
The Company entered this category of business in fiscal year 1997 upon the
acquisition of substantially all of the assets and certain liabilities of Block
China Corporation, a tabletop products company, on July 1, 1996. The Block(R)
China division of the Company designs and markets tabletop products including
china, crystal and glassware. The Block product line was further augmented on
June 19, 1997 with the acquisition of the assets of Jonal Crystal Ltd. from
Sterling Cut Glass. Jonal products include the Crystal Kiss(R) line of
glassware and giftware featuring the famous shape of the Hershey's Chocolate
Kiss.
Tabletop products include crystal products offered under the Block(R),
Atlantis(R) and Jonal(R) brand names, fine china and basic dinnerware
in various designs and patterns under the Block(R) brand name, ceramic
products under the Block(R) brand name and, under license, products utilizing
the shapes and brands of Nabisco(R), such as Oreo Cookies(R) and Animal
Crackers(R). In addition, Block(R) provides the Gear(R) line of products
including Father Christmas(R) Country Farm(TM), Country Orchard(TM), and
Country Village(TM). The combined Block China and Jonal product line offers
approximately 2,096 different products. These products are primarily marketed
by department stores, gift stores, specialty shops and other upscale merchants.
PERSONAL AND BEAUTY CARE APPLIANCES, GIFTS AND TIME PRODUCTS
The Company introduced personal and beauty care appliances under the
Salton Creations(R) brand name in January 1989, and presently markets
approximately 91 models of
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these and related products. Salton Creations(R) hair dryers feature high quality
materials, long life motors and innovative design high air flow systems. Hair
dryers are offered in various sizes, shapes and colors, and are designed to mix
form and function to enable consumers to correctly address power and heat to
hair type and styling needs.
The Company designs and markets a variety of other personal and beauty
care appliances under the Salton Creations(R) brand name, including curling
irons and brushes, make-up mirrors, massagers, manicure systems and shower
radios. The Wet Tunes(R) series of shower radios, introduced under the
Salton(R) brand name in 1984, features an AM/FM radio with waterproof mylar
speakers and wall mount brackets. Wet Tunes(R) radios are offered in several
different shapes, sizes and colors. Also included in this series are the Wet
Reflections(R), which has a light and fog-free mirror, the Wet Cassette(R) and
the Wet Lantern(R). In addition to Salton Creations, these type appliances
commenced being offered under the White-Westinghouse(R) brand name in fiscal
year 1997.
The Company also has a "gifts" program designed for department stores.
Under this program, the Company provides department stores with practical,
special occasion, small gift products. The Company's gifts programs included
the mini tool kit, calcutape, travel smoke alarm, emergency auto flasher,
deluxe art kit and the 7-piece gardening kit.
The Company's Salton Time(R) products include decorative quartz wall and
alarm clocks and have approximately 213 different models. Salton Time(R) has
introduced a number of innovative products such as the waterproof Wet Times(R)
indoor/outdoor clock.
NEW PRODUCT DEVELOPMENT
Management believes that the enhancement and extension of the Company's
existing products and the development of new product categories are necessary
for the Company's continued success and growth. The Company directs the style
and content of its products to meet customer requirements for quality, product
mix and pricing. Company employees work closely with both retailers and
suppliers to identify trends in consumer preferences and to generate new
product ideas. The Company's product design and engineering department
evaluates new ideas and seeks to develop new products and improvements to
existing products to satisfy industry requirements and changing consumer
preferences.
During fiscal 1997, the Company introduced 232 new product models, 173 new
models in the kitchen and home appliance product lines and 59 in the personal
and beauty care, gifts and time products. The introduction of products under
the White-Westinghouse(R) and Farberware(R) brands added approximately 74 new
models.
During fiscal 1996, the Company introduced 95 new product models, 45 new
models in the kitchen and home appliance product lines and 50 in the personal
and beauty care, gifts and time products.
MARKETING AND DISTRIBUTION
The Company's products are marketed throughout the United States under its
brand names of Salton(R), Maxim(R), Breadman(R), Juiceman(R), Salton
Creations(R) Salton Time(R), George Foreman Grills(R) White Westinghouse(R),
Farberware(R), Block(R) China, Atlantis(R) and Gear(R), primarily through
department stores, gourmet and lifestyle merchants, upscale mass
merchandisers, direct mail catalogs and showrooms, national chains, specialty
stores, warehouse clubs and beauty supply distributors. The Company is also
expanding its retailer base for certain of its products to include drug stores,
supermarkets and medium scale mass merchandisers, as well as additional
retailers within its existing channels of distribution.
The Company's total net sales to its five largest customers during fiscal
1997 and 1996 were 47% and 55%, respectively. One of the company's customers,
Kmart Corporation accounted for in excess of 10% of the Company's net sales
during fiscal 1997. In fiscal 1996, two of the Company's customers, Federated
Department Stores (including the merged operations of Macy's and its
affiliates) and Dayton Hudson and its affiliates, each
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accounted for in excess of 10% of the Company's net sales. The combined net
sales to these two entities, which consisted of eight distinct buying units for
Federated Department Stores and three distinct buying units for Dayton Hudson
(including its Target and Mervyn's subsidiary), represented 28% of the
Company's net sales during fiscal 1996.
The Company closely manages credit policies with respect to its customer
base. The Company has not suffered significant credit losses to date, during a
period of time when many major retailers, including customers of the Company,
experienced significant financial difficulties, some filing for protection
under bankruptcy laws. However, a significant concentration of the Company's
business activity is with entities whose ability to meet their obligations with
the Company is dependent upon prevailing economic conditions within the retail
industry.
The Company relies on its management's ability to determine the existence
and extent of available markets for its products. Company management has
extensive marketing and sales background and devotes a significant portion of
its time to marketing-related activities. The Company markets its products
primarily through its own sales force and approximately 151 independent sales
representatives. The Company's representatives are located throughout the
United States and Canada and are paid a commission based upon sales in their
respective territories. The Company's sales representative agreements are
generally terminable by either party upon 30 days notice.
Management directs its marketing efforts toward retailers and believes
that obtaining favorable product placement at the retail level is an important
factor in its business, especially when introducing new products. The Company
has an advanced electronic data interchange system to receive customer orders
and transmit shipping and invoice information electronically in response to
many retailers' preference for paperless order systems.
In addition to directing its marketing efforts toward retailers, the
Company provides promotional support for its products with the aid of national
television, radio and print advertising, cooperative advertising with
retailers, and in-store displays and product demonstrations. The Company
believes that these promotional activities are important to strengthening the
Company's brand name recognition.
The Company also emphasizes the design and packaging of its products in
order to increase their appeal to consumers and to stand out among other brands
on retailers' shelves. Management believes that distinctive packaging, designed
to answer consumers' questions concerning the Company's products, has resulted
in increased shelf space and greater sales. Many of the Company's products are
sold with instruction books and/or recipe books. Furthermore, the Company
includes VHS Video Manuals(R) with selected products to provide step by step
guidelines for the use and care of such products.
SOURCES OF SUPPLY
Most of the Company's products are manufactured to the Company's
specifications by over 46 unaffiliated manufacturers located primarily in Far
East locations, such as Hong Kong, the People's Republic of China and Taiwan,
and in Europe. The Company also purchased inventory from Durable Electrical
Metal Factory, Ltd., a wholly owned subsidiary of Windmere, of $23,511,000,
$3,200,000, and $2,089,000 in 1997, 1996, and 1995, respectively. Management
believes that the Company maintains good business relationships with its
overseas manufacturers. The Company also manufactures and assembles woks and
warming trays in its plant located in Kenilworth, New Jersey.
The Company does not maintain long-term purchase contracts with
manufacturers and operates principally on a purchase order basis. The Company
believes that it is not currently dependent on any single manufacturer for any
of its products. However, during fiscal 1997, three manufacturers, including
Durable, accounted for approximately 19%, 13% and 12% respectively, of the
Company's product purchases. Two of these manufacturers are located in Hong
Kong and China, while the third manufacturer is located in Korea. During
fiscal 1996, two manufacturers located in Hong Kong and China accounted for
approximately 26% and 15%, respectively of the Company's product purchases.
The Company believes that
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the loss of any one manufacturer would not have a long-term material adverse
effect on the Company because other manufacturers with which the Company does
business would be able to increase production to fulfill the Company's
requirements. However, the loss of a supplier could, in the short-term,
adversely effect the Company's business until alternative supply arrangements
were secured.
Because of the overseas locations of its manufacturers, the Company is
subject to the risk of production delays due to the unavailability of parts and
components, transportation delays due to strikes and work stoppages, political
unrest, import restrictions and other factors which could have an adverse
effect on the business of the Company.
The Company's purchase orders are generally made in United States dollars
in order to maintain continuity in the Company's pricing structure and to limit
exposure to currency fluctuations. The Company's policy is to maintain an
inventory base to service the seasonal demands of its customers. In certain
instances, the Company places firm commitments for products from six to twelve
months in advance of receipt of firm orders from customers.
The Company believes that it has enjoyed good working relations with its
manufacturers located in Hong Kong and the People's Republic of China.
Management believes that production currently conducted in the People's
Republic of China could be relocated to other low cost Far East manufacturing
locations, including Hong Kong, with only temporary disruption and delay.
However, the Company could be adversely affected if supply or demand for its
products decreases significantly due to a disruption in production and
delivery, or due to higher prices which result from increased manufacturing
costs or unfavorable changes in trade policy.
Quality assurance is particularly important to the Company and its product
shipments are required to satisfy quality control tests established by its
internal product design and engineering department. The Company employs
independent agents to perform quality control inspections at the manufacturers'
factories during the manufacturing process and prior to acceptance of goods.
COMPETITION
The Company's industries are mature and highly competitive. Competition is
based upon price and quality, as well as innovation in the design of
replacement models and in marketing and distribution approaches. The Company
competes with established companies having substantially greater facilities,
personnel, financial and other resources than those of the Company. In the sale
of kitchen and home appliances, the Company competes with, among others,
Toastmaster, Rival, Hamilton Beach Krups, Rowenta, Inc., Black and Decker, and
Sunbeam/Oster. In the sale of tabletop products, the Company competes with,
among others, Mikasa, Lennox, Miller Rogaska, Villeroy Boch, Waterford Crystal
and Baccarat Crystal. In the sale of personal care small appliances, the
Company principally competes with, among others, Clairol, Inc. (wholly-owned
subsidiary of Bristol-Myers Squibb Company), Conair Corporation, Vidal Sassoon
and Andis.
Management believes that the success of the Company is dependent on the
ability of the Company to offer a broad range of existing products and to
continually introduce new products and enhancements to existing products which
have substantial consumer appeal based upon price, design, performance and
features. The Company also believes that its trademarks, particularly Salton,
Maxim, Breadman, Juiceman, Salton Creations and Salton Time, and Block are
important to the Company's ability to compete effectively. Management further
believes that the White-Westinghouse and Farberware brand names provide the
Company with additional capability to provide the consumer market with
appealing, well priced products to meet competition.
EMPLOYEES
As of June 28, 1997, the Company employed 175 persons, of whom
approximately 49 persons, who work at the Company's Kenilworth, New Jersey
facility, were covered by a collective bargaining agreement which expires
February 28, 1999. The Company generally
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considers its relationship with employees to be satisfactory and has never
experienced a work stoppage.
REGULATION
The Company is subject to federal, state and local regulations concerning
the environment, occupational safety and health, and consumer products safety.
In general, the Company has not experienced difficulty complying with such
regulations and compliance has not had an adverse effect on the Company's
business. Most of the Company's products are listed by Underwriters
Laboratories, Inc. ("UL"), an independent, not-for-profit corporation engaged
in the testing of products for compliance with certain public safety standards.
Satisfaction of the standards of UL for the Company's consumer electrical
appliances is important to the Company and the Company has not experienced
difficulty in satisfying such standards.
BACKLOG
Orders for the Company's products are typically subject to cancellation
until shipment. Customer order patterns vary from year to year, largely because
of annual differences in consumer acceptance of product lines, product
availability, marketing strategies, inventory levels of retailers and
differences in overall economic conditions. As a result, comparisons of backlog
as of any date in a given year with backlog at the same date in a prior year
are not necessarily indicative of sales for that entire given year. As of June
28, 1997, the Company had a backlog of approximately $83 million compared to
approximately $60 million as of June 29, 1996. The Company does not believe
that backlog is necessarily indicative of the Company's future results of
operations or prospects.
SEASONALITY
The Company believes that sales of its products are seasonal, with higher
sales during the months of August through November.
TRADEMARKS, PATENTS AND LICENSING ARRANGEMENTS
The Company holds a number of patents and trademarks registered in the
United States and foreign countries for various products and processes. The
Company has registered its trademarks with the United States Patent and
Trademark Office. The Company considers these trademarks to be of considerable
value and of material importance to its business.
The Company holds numerous domestic and international patents, including
design patents. The Company believes that none of the Company's product lines
is dependent upon any single patent or group of patents.
During 1996, the Company entered into license agreements with White
Consolidated Industries, Inc. for use of the White-Westinghouse trademark for
small kitchen appliances, personal care products, fans, heaters, air cleaners
and humidifiers. The license agreements grant the Company the exclusive right
and license to use the White-Westinghouse trademark in the United States and
Canada in exchange for certain license fees, royalties and minimum royalties.
The license agreements also contain minimum sales requirements which, if not
satisfied, may result in the termination of the agreements. The license
agreements are also terminable upon a breach by the Company.
The Company has a joint venture agreement (the "Joint Venture") with
George Foreman Products, Inc., a Nevada corporation, and Benjamin H., a
California corporation. The name of the Joint Venture is "Salton/Maxim Presents
George Foreman, A Joint Venture." The Joint Venture is engaged solely in the
business of acquiring, selling and distributing a thermal household grill
product under the name "George Foreman's Lean Mean Fat Reducing Grilling
Machine." Each "Joint Venture" partner has certain percentage ownership
interests in the venture. Mr. Foreman is both a former Olympic champion and a
former World Boxing Organization's heavy weight champion of the world.
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In the second quarter of 1997, Windmere licensed the right to use the
Farberware name for small electrical appliances. Farberware is a time-honored
trade name in the cookware and small electric appliance industry. Under the
Marketing Cooperation Agreement, the Company obtained the exclusive, worldwide
right to distribute Farberware small electric appliances.
The Company has other licensing arrangements with various other companies
to market products bearing the trademark or likeness of the subject matter of
the license. These licenses include the right to market various products under
Gino's East Pizza, Hulk Hogan, Gear, Taco Bell, Hershey Kiss, Warner Bros.
characters, Andy Warhol, Marilyn Monroe, James Dean, Campbell Soup and Nabisco.
The Company believes that these other license arrangements are important
to the Company to demonstrate its creativity and versatility in product design
and the enhancement of existing products. However, the Company does not
believe that its product lines are dependent upon any single license or group
of these other licenses.
WARRANTIES
The Company's products are generally sold with a limited one-year warranty
from the date of purchase. In the case of defects in material or workmanship,
the Company agrees to replace or repair the defective product without charge.
To date, the Company has not experienced significant warranty claims.
ITEM 2. PROPERTIES
The Company does not own any facilities. A summary of the Company's leased
properties is as follows:
LOCATION DESCRIPTION AREA(SQ. FT.) EXPIRATION
-------- ----------- ------------- ----------
Mt. Prospect, IL Executive
offices,
warehousing and
repair facility 34,600 June 30, 1999
Rancho Dominguez, CA Warehouse and
distribution
facility 340,672 October 31, 2002
Harrison, NJ Warehouse and
distribution facility 146,555 May 31, 2002
Kenilworth, NJ Manufacturing
and
warehouse/distribution
facilities 97,800 March 31, 2000
Long Beach, CA Warehouse and
distribution
facility 34,328 March 14, 1998
New York, NY Block sales office 11,500 December 31, 1998
Gurnee, IL Retail outlet 6,141 January 31, 2000
Mt. Prospect, IL Consumer Services 3,018 June 30, 1999
Long Branch, NJ Retail outlet 1,200 Month-to-month
Chicago, IL Block Atlantis
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retail store 560 October 15, 2007
Facilities in public warehouses have been used to service the Company's
needs during the last twelve months.
ITEM 3. LEGAL PROCEEDINGS
The Company, White Consolidated, Inc. ("White Consolidated"),
Windmere-Durable Holdings, Inc. and certain other parties have been named as
defendants in litigation filed by Westinghouse Electric Corporation
("Westinghouse") in the United States District Court for the Western District
of Pennsylvania on December 18, 1996. The action arises from a dispute between
Westinghouse and White Consolidated over rights to use the "Westinghouse"
trademark for consumer products, based on transactions between Westinghouse and
White Consolidated in the 1970's and the parties' subsequent conduct.
Procedural motions concerning the jurisdiction in which the dispute should be
heard have been filed by the parties. The action seeks, among other things, a
preliminary injunction enjoining the defendants from using the trademark,
unspecified damages and attorneys' fees. Pursuant to the Company's license
agreements with White Consolidated, White Consolidated is defending the Company
and is obligated to indemnify the Company from and against any and all claims,
losses and damages arising out of the action, including the costs of
litigation. Due to the inherent uncertainties of the litigation process, the
Company is unable to predict the outcome of this litigation. If the outcome of
this litigation is adverse to the Company, it could terminate or otherwise
adversely affect the Company's ability to market and sell products under the
White-Westinghouse brand name to Kmart and other retailers.
The Company is a party to various other actions and proceedings incident
to its normal business operations. The Company believes that the outcome of
such litigation will not have a material adverse effect on the financial
condition or results of operations of the Company. The Company also has product
liability and general liability insurance policies in amounts it believes to be
reasonable given its current level of business. Although historically the
Company has not had to pay any material product liability claims, it is
conceivable that the Company could incur claims for which it is not insured.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT(1)
The following is a list of the executive officers of the Company. The
executive officers are elected each year and serve at the pleasure of the Board
of Directors.
NAME AGE POSITION AND OFFICE HELD
---- --- ------------------------
Leonhard Dreimann 49 President and Chief Executive Officer
David C. Sabin 47 Chairman of the Board and Secretary
William B. Rue 50 Chief Operating Officer and Senior Vice
President
(1) The description of Executive Officers called for in this item is
included pursuant to Instruction 3 to Section (b) of Item 401 of
Regulation SK.
Set forth below is a brief description of the background of those
executive officers of the Company who are not also Directors of the Company.
Information with respect to the background of those executive officers who are
also Directors of the Company is incorporated herein by reference as set forth
in Part III, Item 10, of the Company's Annual Report on Form 10-K.
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William B. Rue has served as Chief Operating Officer and Senior Vice
President since December, 1994 and as Chief Financial Officer, Vice President
and Treasurer of the Company since September, 1988. From 1985 to 1988, he was
Treasurer of SEVKO, Inc. From 1982 to 1984, he was Vice President-Finance of
Detroit Tool Industries Corporation. Prior to that time, Mr. Rue had been
employed since 1974 by the accounting firm of Touche Ross & Co.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The registrant's Common Stock is traded on the NASDAQ National Market
under the symbol "SALT". The following table sets forth the range of high and
low bid prices of the Common Stock for the years ended June 28, 1997 and June
29, 1996 as reported by the NASDAQ system.
HIGH LOW
---- ---
YEAR ENDED JUNE 28, 1997
First Quarter 8 5/8 4 1/2
Second Quarter 8 3/4 6 1/4
Third Quarter 9 5 5/8
Fourth Quarter 8 1/4 6 3/8
YEAR ENDED JUNE 29, 1996
First Quarter 3 3/8 1 5/8
Second Quarter 4 1/8 2 1/2
Third Quarter 4 2 1/2
Fourth Quarter 5 1/4 2 1/4
As of September 17, 1997, there were approximately 416 holders of record
of the common stock of the Company. The Company has paid no dividends on the
Common stock and it is the Company's present intention to retain earnings to
finance the expansion of its business. The Company's current lending agreement
further restricts its ability to pay dividends.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for Salton/Maxim Housewares,
Inc. are derived from the Company's audited financial statements. The following
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the audited financial statements and related notes thereto. (In thousands,
except per share data.)
STATEMENT OF OPERATIONS DATA
JUNE 28, JUNE 29, JULY 1, JULY 2, JUNE 26,
1997 1996 1995 1994 1993
-------- -------- ------- -------- --------
Net sales $182,806 $ 99,202 $76,991 $ 48,807 $ 50,661
Cost of sales 121,590 66,923 55,552 37,333 39,814
Distribution expenses 7,809 5,856 4,569 3,412 3,746
-------- -------- ------- -------- --------
Gross profit 53,407 26,423 16,870 8,062 7,101
Selling, general, and administrative
expenses 42,944 21,343 13,142 8,470 8,467
-------- -------- ------- -------- --------
Operating income (loss) 10,463 5,080 3,728 (408) (1,366)
Interest expense, net 4,063 3,934 3,057 2,047 1,643
Class action lawsuit expense 489 142
-------- -------- ------- -------- --------
Income (loss) before taxes 6,400 1,146 671 (2,944) (3,151)
-------- -------- ------- -------- --------
Income tax expense (benefit) 2,001 (3,450) 20
-------- -------- ------- -------- --------
Net income (loss) $ 4,399 $ 4,596 $651 $(2,944) $(3,151)
======== ======== ======= ======== ========
Weighted average shares outstanding 13,082 6,628 5,901 5,050 4,950
Net income (loss) per share $ 0.34 $0.69 $0.11 $ (0.58) $ (0.64)
BALANCE SHEET DATA:
Working capital $ 17,996 $ 12,244 $ 9,072 $ 9,290 $ 10,768
Total assets 102,343 59,481 41,121 38,635 35,797
Long-term debt 4,933 3,754 900 4,374 974
Stockholders' equity 38,622 19,925 15,329 10,736 13,638
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for the fiscal year ended June 28, 1997 were $182.8 million, an
increase of approximately $83.6 million or 84.3% compared to net sales of $99.2
million for the fiscal year ended June 29, 1996. This increase is primarily
attributable to increased sales of the Juiceman juice extractors and George
Foreman Grills, private label programs and the addition of Block China and
White-Westinghouse sales under the Kmart program. Net sales of
White-Westinghouse products to Kmart approximated 16% of net sales. Sales
under the Kmart agreement are expected to increase in anticipation of Kmart
instituting a broad range program under the White- Westinghouse trade name.
Gross profit in 1997 was $53.4 million or 29.2% of net sales as compared
to $26.4 million or 26.6% in 1996. Cost of goods sold during the period
decreased to 66.5% of net sales compared to 67.5% in 1996. Distribution
expenses were $7.8 million or 4.3% of net sales in 1997 compared to $5.9
million or 5.9% of net sales in the same period in 1996. Gross profit and costs
of goods sold in 1997 as a percentage of net sales were improved primarily due
to a more favorable mix of sales of higher gross margin items when compared to
1996.
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Selling, general and administrative expenses increased to $42.9 million or
23.5% of net sales in 1997 compared to $21.3 million or 21.5% of net sales for
the same period in 1996. Expenditures for television, certain media and
cooperative advertising coverages and royalty expenses were $25.7 million or
14.1% of net sales in 1997 when compared to $10.9 million or 11.0% of net sales
in 1996. The remaining selling, general and administrative costs were $17.2
million or 9.4% of net sales in 1997 compared to $10.4 million or 10.5% of net
sales in 1996. The dollar increase was primarily attributable to higher costs
for additional personnel, trade show expenses, sales commissions and various
other costs related to the higher level of sales.
Net interest expense was approximately $4.1 million for 1997 compared to
$3.9 million for 1996. The Company's rate of interest on amounts outstanding
was a weighted average annual rate of 10.5% in 1997 compared to 11.1% in 1996.
The average amount outstanding under the Company's revolving line of credit
increased about $9.3 million when compared to the average amount outstanding in
the same period a year ago. This increase was used primarily to finance higher
net sales and a seasonal build in inventory. Interest expense during the
period was offset by interest income earned on the promissory note from
Windmere issued to the Company for stock sales in July 1996.
The Company had income before income taxes of $6.4 million in 1997
compared to income before income taxes of $1.1 million in 1996. Net operating
loss carryforwards and resultant deferred tax assets were used in both periods
to significantly offset current income taxes payable. Net income after income
taxes was $4.4 million or $0.34 per share in 1997 compared to net income after
income taxes of $4.6 million or $0.69 per share in 1996. Also during 1996, the
Company had re-assessed the measurement of deferred tax assets based on
available evidence and concluded that these assets at June 29, 1996 were
anticipated to be realized. Accordingly, the Company released previously
recorded valuation allowances which resulted in an income tax benefit of $3.5
million in 1996. Excluding the effect of this income tax benefit, net income
after income taxes would have been $1.1 million in 1996 compared to net income
after income taxes of $4.4 million in 1997. Weighted average common shares
outstanding were 13,071,757 in 1997 compared to 6,628,236 in 1996. Weighted
average common shares increased as a result of the Windmere transaction.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales for the fiscal year ended June 29, 1996 were $99.2 million as
compared to net sales of $77 million for the fiscal year ended July 1, 1995, an
increase of 28.8% or $22.2 million. This increase in sales was primarily
attributable to increased sales of the Breadman(TM) and Juiceman(TM) products.
Gross profit in 1996 was $26.4 million or 26.6% of net sales as compared
to $16.9 million or 21.9% of net sales in 1995. Cost of goods sold decreased
during the period to 67.5% of net sales compared to 72.2% in 1995. Distribution
expenses were approximately $5.9 million or 5.9% of net sales in 1996 as
compared to $4.6 million or 5.9% of net sales in 1995. Freight out expenses
increased to $2.9 million or 3.0% of net sales in 1996 from $2.3 million or
3.0% of net sales in 1995 due to the increase in net sales. However, gross
profit and cost of goods sold in 1996 as a percentage of net sales were
improved primarily due to a continuing shift towards more favorable mix of
sales of higher gross margin items when compared to 1995.
Selling, general and administrative expenses increased to $21.3 million or
21.5% of net sales in 1996 compared to $13.1 million or 17.1% of net sales in
1995. Expenditures for television, certain media and cooperative advertising
coverages of the Company and its products increased about $5.4 million in 1996
compared to 1995. Sales commissions in 1996 were $1.2 million or 1.2% of net
sales compared to $1.2 million or 1.5% of net sales in 1995. Variable costs
associated with selling activities increased to $3.6 million or 3.6% of net
sales in 1996 compared to $1.8 million or 2.4% of net sales in 1995. This
increase is primarily attributable to increases of royalties on sales of
licensed products and selling and administrative costs associated with the
Company's direct television sales
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programs. All other costs were $6.3 million or 6.4% of net sales in 1996
compared to $5.2 million or 6.8% of net sales in 1995.
Interest expense in 1996 was approximately $3.9 million as compared to
$3.1 million a year ago. The Company's rate of interest on amounts outstanding
was a weighted average annual rate of 11.1% in 1996 compared to 11.2% in 1995.
The average amount outstanding under the Company's revolving line of credit
increased about $7.4 million when compared to the average amount outstanding in
the same period a year ago. This and other working capital increases were used
primarily to finance higher net sales and higher levels of inventory and
accounts receivable in 1996 when compared to 1995.
The Company had net income after income taxes of $4.6 million or $0.69 per
share in 1996 compared to net income after income taxes of $651,000 or $0.11
per share in 1995. The Company accounts for income taxes using the asset and
liability approach prescribed by Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes." The Company has re-assessed the
measurement of deferred tax assets based on available evidence and concluded
that these assets at June 29, 1996 are anticipated to be realized. Accordingly,
the Company released previously recorded valuation allowances which resulted in
an income tax benefit of $3.5 million in 1996 compared to an income tax expense
of $20,000 in 1995. Excluding the effect of this income tax benefit, net income
after income taxes would have been $1.1 million in 1996 compared to net income
after income taxes of $651,000 in 1995. Net operating loss carryforwards were
used in 1996 and 1995 to significantly offset the income taxes payable.
Weighted average common shares outstanding were 6,628,236 in 1996 and 5,901,133
in 1995.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1997, the Company used net cash of $9.0 million in operating
activities and net cash of $6.3 million in investing activities. This resulted
primarily from the growth in sales in the period and higher levels of inventory
and receivables, acquisition of the Block China tabletop product line, as well
as increased investment in capital assets, primarily tooling. Financing
activities provided cash of $17.9 million for these purposes from increased
line of credit proceeds and a $4.9 million short term note with Windmere which
bears interest at 9.8% per annum. At June 28, 1997, the Company had
approximately $38 million outstanding as drawings under its revolving line of
credit (the "Facility"). Typically, given the seasonal nature of the Company's
business, the Company's borrowings tend to be the highest in mid-summer to
fall. Under the terms of the Facility, the Company had the ability at June 28,
1997 to borrow a total of approximately $38.6 million. The Company will
continue to incur short-term borrowings in order to finance working capital
requirements. The Company's ability to fund its operating activities is
directly dependent upon its rate of growth, ability to effectively manage its
inventory, the terms under which it extends credit to its customers and its
ability to collect under such terms and its ability to access external sources
of financing. The Company believes that its internally generated funds,
together with funds available under the Facility and other potential external
financing sources, will provide sufficient funding to meet the Company's
capital requirements and its operating needs for at least the next 12 months.
The Company currently has budgeted approximately $3.6 million in capital
expenditures for the fiscal year ending June 27, 1998.
The Company from time to time explores additional or new sources of
financing. While the Company has been able to maintain access to external
financing sources, no assurance can be given that such access will continue or
that the Company will be successful in obtaining new or replacement sources of
financing.
During the fiscal year, the Company had a $45,000,000 Facility with a
commercial lender (the "Lender"). Borrowings under this Facility bore interest
at 2% over the Lender's established prime rate, payable monthly.
On June 30, 1997, the Company amended and extended its Facility (the
"Amended Facility") with the lender to September, 30, 2000. The Amended
Facility provides for borrowings up to $75,000,000 and it bears interest at 1%
over the Lender's established
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prime rate, payable monthly, and includes a provision which provides the
Company the ability to reduce its borrowing rate, based on the London InterBank
Offered Rate (LIBOR), on up to 75% of outstanding borrowings. The Company may
further reduce its interest rate by meeting certain performance provisions.
The Amended Facility is secured by a first lien on substantially all the
Company's assets. Credit availability is based on a formula related to trade
accounts receivable, inventories and outstanding letters of credit. It
contains restrictive financial covenants, the more significant of which require
the Company to maintain specified ratios of total liabilities to net worth,
minimum tangible net worth, and minimum earnings before interest, taxes,
depreciation and amortization. Other covenants also limit the Company's
activities in mergers or acquisitions and sales of substantial assets.
Compliance with these covenants effectively restricts the ability of the
Company to pay dividends, and also requires the Company to apply cash receipts
to pay down borrowings under the Facility.
The Company entered into a major supply contract with Kmart Corporation on
January 27, 1997. Under the contract, the Company supplies Kmart with small
kitchen appliances, personal care products, heaters, fans and electrical air
cleaners and humidifiers under the White-Westinghouse brand name. Kmart is
the exclusive discount department store to market these White-Westinghouse
products.
On July 11, 1996, the Company concluded its transaction with
Windmere-Durable Holdings, Inc. ("Windmere"), pursuant to that certain Stock
Purchase Agreement dated February 27, 1996, as amended (the "Stock Purchase
Agreement"). Windmere is a corporation engaged principally in manufacturing and
distributing a wide variety of personal care products and household appliances.
Pursuant to the Stock Purchase Agreement, Windmere purchased from the Company
6,508,572 newly issued shares of Common Stock (the "Purchase"), which
represented 50% of the outstanding shares of Common Stock of the Company on
February 27, 1996 after giving effect to the Purchase. As consideration for the
Purchase, Windmere paid the Company: (i) $3,254,286 in cancellation of a loan,
as described below; (ii) a subordinated promissory note in the aggregate
principal amount of $10,847,620 (the "Note"), which Note is secured by certain
assets of Windmere and its domestic subsidiaries and guaranteed by such
domestic subsidiaries; and (iii) 748,112 shares of Windmere's common stock.
Windmere's common stock is traded on the NYSE. A portion of the consideration
for the Purchase was paid by the cancellation of the Company's obligation to
repay a loan in the principal amount of $3,254,286 which Windmere had made to
the Company in April 1996. The Note is payable five years from the closing date
of the purchase and bears interest at 8% per annum payable quarterly. Windmere
was also granted an option to purchase up to 485,000 shares of Common Stock at
$4.83 per share, which option is exercisable only if and to the extent that
options to purchase shares of Common Stock which were outstanding on February
27, 1996 are exercised.
The Company and Windmere entered into a Marketing Cooperation Agreement on
July 11, 1996 (the "Marketing Cooperation Agreement"). Pursuant to the
Agreement, until Windmere's interest in the Company is less than 30% for at
least ten consecutive days, each of the Company and Windmere has agreed to
participate in a variety of mutually satisfactory marketing cooperation efforts
designed to expand the market penetration of each party. Consequently, the
Company entered into a letter agreement dated April 30, 1997 (the "Letter
Agreement") with Windmere. The Letter Agreement provides that the Company pay
to Windmere a fee in consideration of Windmere's marketing cooperation efforts
in connection with the Company's supply contract with Kmart and Windmere's
guarantee of the Company's obligations under such contract. The effect of all
transactions with Windmere was to reduce 1997 net income by approximately
$126,000.
On July 1, 1996, the Company acquired substantially all of the assets and
certain liabilities of Block China Corporation, a tabletop products company.
The new Block China Division designs and markets table top products, including
china, crystal and glassware. The consideration paid by the Company consisted
of $1,485,000 in cash and an earn-out of up to $500,000 and 150,000 shares of
Common Stock based on the Block China Division's financial performance over a
three-year period.
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ACCOUNTING PRONOUNCEMENTS
The Company will be required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings per Share." The Company believes that the
adoption of this statements will not have a material effect on the Company's
financial statements.
EFFECTS OF INFLATION AND FOREIGN CURRENCY EXCHANGE
The results of operations of the Company for the periods discussed have
not been significantly affected by inflation or foreign currency fluctuation.
The Company generally negotiates its purchase orders with its foreign
manufacturers in United States dollars. Thus, the Company's cost under any
purchase order is not subject to change after the time the order is placed due
to exchange rate fluctuations. However, the weakening of the United States
dollar against local currencies could result in certain manufacturers
increasing the United States dollar prices for future product purchases.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following pages contain the Financial Statements and Supplementary
Data as specified by Item 8 of Part II of Form 10-K.
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Salton/Maxim Housewares, Inc.
Mount Prospect, Illinois
We have audited the accompanying balance sheets of Salton/Maxim Housewares,
Inc. as of June 28, 1997 and June 29, 1996 and the related statements of
earnings, of stockholders' equity and of cash flows for each of the three years
in the period ended June 28, 1997. Our audits also included the financial
statement schedule listed in the Index at Item 14 of the Annual Report on Form
10-K. These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Salton/Maxim Housewares, Inc. as of June
28, 1997 and June 29, 1996 and the results of its operations and its cash
flows for each of the three years in the period ended June 28, 1997 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
Deloitte & Touche LLP
September 24, 1997
Chicago, Illinois
22
23
SALTON/MAXIM HOUSEWARES, INC.
BALANCE SHEETS
JUNE 28, 1997 AND JUNE 29, 1996
1997 1996
---- ----
ASSETS
------
CURRENT ASSETS:
Cash $ 2,612,871 $ 3,983
Accounts receivable, less allowance:
1997--$2,400,000; 1996--$1,900,000 25,646,677 15,870,626
Inventories 41,967,801 28,287,965
Prepaid expenses and other current assets 3,717,062 1,934,006
Federal income taxes refundable 1,105,336
Deferred tax assets 1,734,414 1,949,315
------------ -----------
Total current assets 76,784,161 48,045,895
PROPERTY, PLANT AND EQUIPMENT:
Molds and tooling 14,827,525 12,373,478
Warehouse equipment 380,487 296,168
Office furniture and equipment 3,792,035 1,929,683
------------ -----------
19,000,047 14,599,329
Less accumulated depreciation (10,684,016) (8,367,736)
------------ -----------
8,316,031 6,231,593
INTANGIBLES, NET OF ACCUMULATED AMORTIZATION 4,880,006 3,670,533
NON-CURRENT DEFERRED TAX ASSETS 205,580 1,533,069
INVESTMENT IN WINDMERE COMMON STOCK 12,156,820
------------ -----------
TOTAL ASSETS $102,342,598 $59,481,090
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Revolving line of credit $ 37,977,230 $24,095,382
Accounts payable 17,361,238 10,057,195
Accrued expenses 2,757,790 1,164,851
Accrued interest payable 191,807 67,932
Current portion--Subordinated Debt 500,000 416,669
------------ -----------
Total current liabilities 58,788,065 35,802,029
LONG-TERM PORTION SUBORDINATED DEBT 500,000
DUE TO WINDMERE 4,932,730 3,254,286
------------ -----------
Total Liabilities 63,720,795 39,556,315
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized,
2,000,000 shares, no shares issued
Common Stock, $.01 par value; authorized,
20,000,000 shares; shares issued and outstanding:
1997-13,029,144; 1996-6,508,572 130,291 65,086
Unrealized gains on securities available for sale 1,337,250
Additional paid-in capital 53,035,981 29,292,946
Less note receivable from stock issuance (10,847,620)
Accumulated deficit (5,034,099) (9,433,257)
------------ -----------
Total stockholders' equity 38,621,803 19,924,775
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $102,342,598 $59,481,090
============ ===========
See Notes to Consolidated Financial Statements.
23
24
SALTON/MAXIM HOUSEWARES, INC.
STATEMENTS OF EARNINGS
YEARS ENDED JUNE 28, 1997, JUNE 29, 1996, AND JULY 1, 1995
1997 1996 1995
------------ ----------- -----------
Net sales $182,806,323 $99,202,415 $76,991,270
Cost of goods sold 121,590,232 66,923,141 55,551,782
Distribution expenses 7,808,631 5,856,477 4,569,681
------------ ----------- -----------
Gross profit 53,407,460 26,422,797 16,869,807
Selling, general and administrative expenses 42,944,341 21,342,872 13,142,207
------------ ----------- -----------
Operating income 10,463,119 5,079,925 3,727,600
Interest expense, net 4,063,197 3,934,325 3,056,570
------------ ----------- -----------
Income before income taxes 6,399,922 1,145,600 671,030
Income tax expense (benefit) 2,000,764 (3,449,884) 20,000
------------ ----------- -----------
Net income $ 4,399,158 $ 4,595,484 $ 651,030
============ =========== ===========
Weighted average common and common
equivalent shares outstanding 13,082,254 6,628,236 5,901,133
Net income per common and common
equivalent share $ 0.34 $ 0.69 $ 0.11
See Notes To Consolidated Financial Statements
24
25
SALTON/MAXIM HOUSEWARES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 28, 1997, JUNE 29, 1996, AND JULY 1, 1995
Unrealized
Gains on Less Note
Securities Additional Receivable Total
Common Held for Paid In from sales Accumulated Stockholders'
Shares Stock Sale Capital of stock Deficit Equity
------ ----- ---- ------- ---------- ------- ------
BALANCE, July 2, 1994 5,100,000 $51,000 $25,364,875 $(14,679,771) $ 10,736,104
Class Action lawsuit
settlement 394,520 3,945 896,055 900,000
Conversion of
subordinated debt
and related accrued
interest to equity 1,014,052 10,141 3,032,016 3,042,157
Net income for fiscal
1995 651,030 651,030
---------- -------- ----------- ------------- -------------
BALANCE, July 1, 1995 6,508,572 65,086 29,292,946 (14,028,741) 15,329,291
Net income for
fiscal 1996 4,595,484 4,595,484
---------- -------- ----------- ------------- -------------
BALANCE, June 29, 1996 6,508,572 65,086 29,292,946 (9,433,257) 19,924,775
Issuance of
common stock 6,508,572 65,085 23,650,352 $(10,847,620) 12,867,817
Issuance of warrants 82,303 82,303
Unrealized gains on
securities available
for sale $1,337,250 1,337,250
Employee stock option
shares exercised 12,000 120 10,380 10,500
Net income fiscal 1997 4,399,158 4,399,158
---------- -------- ---------- ----------- ------------- ------------- -------------
BALANCE, June 28, 1997 13,029,144 $130,291 $1,337,250 $53,035,981 $(10,847,620) $ (5,034,099) $ 38,621,803
========== ======== ========== =========== ============= ============= =============
See Notes to Consolidated Financial Statements
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26
SALTON/MAXIM HOUSEWARES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 28, 1997, JUNE 29, 1996, AND JULY 1, 1995
1997 1996 1995
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $4,399,158 $4,595,484 $651,030
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Change in deferred taxes 822,332 (3,482,384)
Depreciation and amortization 3,136,060 2,195,510 1,986,369
Changes in assets and liabilities:
Accounts receivable (9,776,051) (2,395,175) (2,323,909)
Inventories (13,679,836) (8,847,133) 617,614
Prepaid expenses and other current assets (1,783,056) (892,342) 562,545
Federal income tax refund (1,105,336)
Accounts payable 7,304,043 4,650,026 2,056,488
Accrued expenses 1,592,939 546,215 39,134
Accrued class action lawsuit settlement
fees (100,000)
Accrued interest 123,875 59,206 44,186
---------- ---------- ----------
Net cash provided by (used in) operating
activities (8,965,872) (3,570,593) 3,533,457
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,608,389) (4,279,838) (2,327,490)
Block acquisition and related payments (1,739,280)
---------- ---------- ----------
Net cash used in investing activities (6,347,669) (4,279,838) (2,327,490)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving line of credit 13,881,848 6,234,938 1,071,384
Repayment of subordinated note payable to
bank (416,999) (583,331)
Proceeds from subordinated debt and due to
Windmere 4,932,730 3,254,286 1,000,000
Offering costs associated with stock issue (485,650)
Common stock issued 10,500
Payment for product line acquisitions (814,939) (2,529,571)
Financing costs (242,389) (743,431)
---------- --------- ----------
Net cash provided by (used in) financing
activities 17,922,429 7,848,565 (1,201,618)
---------- --------- ----------
NET INCREASE (DECREASE) IN CASH 2,608,888 (1,866) 4,349
CASH -- Beginning of Year 3,983 5,849 1,500
---------- --------- ----------
CASH -- End of Year $2,612,871 $3,983 $5,849
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $3,939,322 $3,510,123 $2,780,008
Income taxes $1,697,500 $10,000 $20,000
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
A long-term debt obligation of $3,254,286 was
canceled by the consummation of a transaction
with Windmere-Durable Holdings, Inc.("Windmere").
In addition, the Company received a $10,847,620
note receivable and 748,112 shares of Windmere
common stock in exchange for 6,508,572 newly
issued shares of common stock of the Company.
See Notes to Consolidated Financial Statements.
26
27
SALTON/MAXIM HOUSEWARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 28, 1997, JUNE 29, 1996, AND JULY 1, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Salton/Maxim Housewares, Inc.("SMHI") and its subsidiaries (the "Company")
principally import, distribute and sell kitchen and home appliances
under the brand names of Salton(R), Maxim(R), Breadman(R), Juiceman(R), Salton
Creations(R), Salton Time(R), White-Westinghouse(R) and Farberware(R) through
major retail markets and direct marketing distribution channels in the United
States. The Company also designs and markets tabletop products, including
china, crystal and glassware.
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of SMHI and its subsidiaries, Home Creations Direct, Ltd.
and Salton Hong Kong, Ltd. Salton Hong Kong, Ltd. is a foreign corporation
which was organized under the laws of Hong Kong in fiscal year 1997.
Intercompany balances and transactions are eliminated in consolidation.
USE OF ESTIMATES -- In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
ACCOUNTING PERIOD -- The Company's fiscal year ends on the Saturday
closest to June 30. The fiscal years ended June 28, 1997, June 29, 1996 and
July 1, 1995 each consisted of 52 weeks.
INVENTORIES -- Inventories are stated at the lower of cost or market. Cost
is determined on the first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated
at cost. Expenditures for maintenance costs and repairs are charged against
income. Depreciation is provided on the straight-line basis over the estimated
useful lives of the assets, not to exceed 5 years. For tax purposes, assets are
depreciated using accelerated methods.
INTANGIBLE ASSETS -- Intangible assets, which are amortized over their
estimated useful lives, consist of:
USEFUL LIFE JUNE 28, JUNE 29,
(IN YEARS) 1997 1996
----------- ---- ----
Goodwill 10-40 $1,926,454 $ 295,238
Financing and organization costs 2-5 171,778 411,129
Patents and trademarks 5-20 2,781,774 2,964,166
---------- ----------
Intangible assets, net $4,880,006 $3,670,533
========== ==========
Accumulated amortization of intangible assets was $3,770,866 at June 28,
1997, and $2,951,087 at June 29, 1996.
Long-lived assets are reviewed for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. If such review indicates that the carrying amount of
long-lived assets is not recoverable, the carrying amount of such assets is
reduced to estimated recoverable value.
REVENUE RECOGNITION -- The Company recognizes revenues when goods are
shipped to its customers.
27
28
DISTRIBUTION EXPENSES -- Distribution expenses consist primarily of
freight, warehousing, and handling costs of products sold.
ADVERTISING -- The Company sponsors various programs under which it
participates in the cost of advertising and other promotional efforts for
Company products undertaken by its retail customers. Advertising and promotion
costs associated with these programs are recognized in the period in which the
advertising or other promotion is performed by the retailer.
The Company's tradenames and, in some instances, specific products, also
are promoted from time to time through direct marketing channels, primarily
television. Advertising and promotion costs are expensed in the period in
which direct customer response occurs.
INCOME TAXES -- The Company accounts for income taxes using the asset and
liability approach. The measurement of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that, based on available evidence,
management does not expect to be realized.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE -- Net income per common
share is computed based upon the weighted average number of common and common
equivalent shares (which include dilutive stock options) outstanding.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of financial
instruments included in current assets and liabilities approximate fair values
due to the short-term maturities of these instruments. Investment in Windmere
common stock is accounted for as "available for sale" and is carried at fair
value.
ACCOUNTING PRONOUNCEMENTS -- The Company will be required to adopt
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per
Share" in fiscal 1998. The Company believes that the adoption of this
statement will not have a material effect on the Company's financial
statements.
2. WINDMERE TRANSACTION
On July 11, 1996, the Company consummated a transaction (the "Windmere
Transaction") with Windmere-Durable Holdings, Inc. ("Windmere"), pursuant to a
Stock Purchase Agreement dated February 27, 1996, as amended (the "Stock
Purchase Agreement"). Windmere is a corporation engaged principally in
manufacturing and distributing a wide variety of personal care products and
household appliances. Pursuant to the Stock Purchase Agreement, Windmere
purchased from the Company 6,508,572 newly issued shares of Common Stock (the
"Purchase"), which represented 50% of the outstanding shares of Common Stock of
the Company on February 27, 1996 after giving effect to the Purchase. As
consideration for the purchase, Windmere paid the Company: (i) $3,254,286 in
cancellation of a loan, as described below; (ii) a subordinated promissory note
in the aggregate principal amount of $10,847,620 (the "Note"), which Note is
payable July 11, 2001, bears interest at 8%, payable quarterly, and is secured
by certain assets of Windmere and its domestic subsidiaries and guaranteed by
such domestic subsidiaries; and (iii) 748,112 shares of Windmere's common
stock. Windmere's common stock is traded on the NYSE. A portion of the
consideration for the Purchase was paid by the cancellation of the Company's
obligation to repay a loan in the principal amount of $3,254,286 which Windmere
had made to the Company in April 1996. Windmere was also granted an option to
purchase up to 485,000 shares of Common Stock at $4.83 per share, which option
is exercisable only if and to the extent that options to purchase shares of
Common Stock which were outstanding on February 27, 1996 are exercised.
3. BLOCK CHINA ACQUISITION
On July 1, 1996, the Company acquired substantially all of the assets and
certain liabilities of Block China Corporation, a tabletop product company in a
transaction accounted for as a purchase. The Block China Division of the
Company designs and markets tabletop products, including china, crystal and
glassware. The consideration paid by the Company consisted of $1,485,000 in
cash and a warrant to purchase 25,000 shares of Common Stock with an exercise
price of $4.75. The consideration also included an earn-out of up to $500,000
and 150,000 shares of Common Stock based on financial performance over a
three-year period of the Division. The operating results of Block China before
its acquisition by the Company are not material.
28
29
4. REVOLVING LINE OF CREDIT AND LETTERS OF CREDIT
During the 1997 fiscal year, the Company had a $45,000,000 revolving line
of credit (the "Facility") with a commercial lender (the "Lender"). Borrowings
under this Facility bore interest at 2% over the Lender's established prime
rate, payable monthly.
On June 30, 1997, the Company amended its Facility (the "Amended
Facility") with the lender. It expires on September 30, 2000 and provides for
borrowings up to $75,000,000. The Amended Facility bears interest at 1% over
the Lender's established prime rate, payable monthly and includes a provision
which provides the Company the ability to reduce its borrowing rate, based on
the London InterBank Offered Rate (LIBOR), on up to 75% of outstanding
borrowings. The Company may further reduce its interest rate by meeting
certain performance provisions.
The Amended Facility is secured by a first lien on substantially all the
Company's assets. Credit availability is based on a formula related to trade
accounts receivable, inventories and outstanding letters of credit. The
Amended Facility contains restrictive financial covenants, the more significant
of which require the Company to maintain specified ratios of total liabilities
to net worth, minimum tangible net worth, and minimum earnings before interest,
taxes, depreciation and amortization. Other covenants also limit the Company's
activities in mergers or acquisitions and sales of substantial assets.
Compliance with these covenants effectively restricts the ability of the
Company to pay dividends, and also requires the Company to apply cash receipts
to pay down borrowings under the Facility.
Information regarding short-term borrowings under revolving lines of
credit is:
JUNE 28, JUNE 29,
1997 1996
---- ----
Balance at end of fiscal period $37,977,230 $24,095,382
Interest rate at end of fiscal period 10.5% 10.25%
Maximum amount outstanding at any month-end $43,632,702 $37,494,590
Average amount outstanding $35,191,494 $25,891,256
Weighted average interest rate during fiscal period 10.5% 11.1%
Outstanding letters of credit at end of fiscal period $2,915,815 $1,242,335
5. SUBORDINATED DEBT AND DUE TO WINDMERE
SUBORDINATED DEBT
The Company has 10% subordinated notes payable aggregating $500,000. The
notes have an effective maturity date of September 1, 1997.
The Company had a $1,000,000 promissory note payable at the prime rate of
interest to a bank. The note was subordinated to the commercial lender and was
secured by subordinated liens on substantially all of the Company's assets. At
June 29, 1996, approximately $417,000 remained outstanding under the note and
the note was repaid in fiscal year 1997.
DUE TO WINDMERE
The Company had amounts due to Windmere, including Durable Electrical
Metal Factory, Ltd., a wholly owned subsidiary of Windmere ("Durable"),
totaling approximately $9,141,000, including notes payable of $4,932,730, at
June 28, 1997. These amounts primarily represented working capital advances by
Windmere to the Company to fund the development of the White-Westinghouse(R)
and Farberware(R) product lines, as well as interest and trade accounts payable.
29
30
The Company and Windmere entered into a Marketing Cooperation Agreement on
July 11, 1996 (the "Marketing Cooperation Agreement"). Pursuant to this
agreement, until Windmere's interest in the Company is less than 30% for at
least ten consecutive days, each of the Company and Windmere has agreed to
participate in a variety of mutually satisfactory marketing cooperation efforts
designed to expand the market penetration of each party. Consequently, the
Company entered into a letter agreement dated April 30, 1997 (the "Letter
Agreement") with Windmere. The Letter Agreement provides that the Company pay
to Windmere a fee in consideration of Windmere's marketing cooperation efforts
in connection with the Company's supply contract with Kmart and Windmere's
guarantee of the Company's obligations under such contract.
Windmere and the Company entered into a loan agreement dated April 8, 1996
pursuant to which Windmere loaned $3,254,286 to the Company (the "Loan"). The
principal balance of the Loan, together with all interest accrued thereon at 8%
per annum, was due and payable upon the closing of the Windmere Transaction,
described in Note 2, provided, however, that upon the request of the Company,
Windmere agreed that $3,254,286 of the consideration payable by Windmere in the
Windmere Transaction would be applied against the total amount outstanding and
due under the Loan.
On July 11, 1996, the Company requested that the cash portion of the
Windmere Transaction be applied to the Loan, thereby effectively canceling the
Loan. In addition, the Company paid Windmere approximately $54,000 in interest
at that date under the Loan.
The effect of all transactions with Windmere was to reduce 1997 net income
by approximately $126,000.
6. CAPITAL STOCK
The Company has authorized 20,000,000 shares of $.01 par value common
stock. At June 29, 1996 and July 1, 1995, there were 6,508,572 shares issued
and outstanding. As more fully described in Note 2 "Windmere Transaction" on
July 11, 1996, Windmere purchased from the Company 6,508,572 newly issued
shares of common stock which represented 50% of the outstanding shares of
common stock of the Company on February 27, 1996 after giving effect to the
transaction.
The Company has authorized 2,000,000 shares of $.01 par value preferred
stock. To date, no shares of preferred stock have been issued.
7. STOCK OPTION PLANS
In October 1995, SFAS No. 123, "Accounting For Stock-Based Compensation,"
was issued and is effective for financial statements for fiscal years beginning
after December 1995. As permitted by the statement, the Company will continue
to measure compensation cost for stock option plans in accordance with
Accounting Principles Board Opinion No. 25, "Accounting For Stock Issued to
Employees." Accordingly, no compensation cost has been recognized for its
fixed stock option plans. Had compensation cost for the company's stock option
plans been determined consistent with the fair value method outlined in SFAS
No. 123, the impact on the Company's net income and earnings per common share
would have been as follows:
1997 1996
Net Income ---- ----
As reported $4,399,158 $4,595,484
Pro forma $4,192,582 $4,509,515
Primary earnings per share
As reported $0.34 $0.69
Pro forma $0.32 $0.68
30
31
Options to purchase common stock of the Company have been granted to
employees under the 1992 and 1995 stock option plans at prices equal to the
fair market value of the stock on the dates the options were granted. Options
have also been granted to non-employee directors of the company, which are
exercisable one year after the date of grant. All options granted expire 10
years from the date of grant.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model. The following assumptions were
used during the respective years to estimate the fair value of options granted:
1997 1996
---- ----
Dividend yield 0.0% 0.0%
Expected volatility 65.96% 62.37%
Risk-free interest rate 6.11% 6.11%
Expected life of options 7.92 years 7.69 years
In addition, on July 11, 1996 Windmere was granted an option to purchase
up to 485,000 shares of common stock at $4.83 per share. This option is
excercisable only if and to the extent that options to purchase shares of
common stock which were outstanding on February 27, 1996 are exercised. A
summary of the Company's fixed stock options for the fiscal years ended June
28, 1997 and June 29, 1996 is as follows:
1997 1996
---- ----
Weighted- Weighted-
Shares Average Shares Average
(000) Exercise Price (000) Exercise Price
------- -------------- ----- --------------
Outstanding at beginning of year 485 $4.827 271 $6.664
Granted 493 4.881 214 2.500
Exercised (12) 0.875
Expired
Forfeited
----- ------ --- ------
Outstanding at end of year 966 $4.904 485 $4.827
Options exercisable at end of year 958 $4.878 271 $6.664
Weighted-average fair value of
options granted during the year $4.542 $1.920
The following information summarizes the stock options outstanding
at June 28, 1997:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Shares Contractual Exercise Shares Exercise
Range of Exercise Prices (000) Life (years) Price (000) Price
------------------------ ------ ------------ -------- ------- --------
$0.875 - $2.500 323 7.77 $2.052 323 $2.052
$4.830 - $5.375 505 8.91 4.852 505 4.852
$8.000 - $12.000 138 4.65 11.768 130 12.000
------------------------------------- ---------------------------------------
$0.875 - $12.000 966 N/A N/A 958 $4.878
8. RELATED PARTY TRANSACTIONS
The Company purchased inventory from Durable of $23,511,000, $3,200,000,
and $2,089,000 in 1997, 1996, and 1995, respectively. The Company owed Durable
approximately $3,120,000 at June 28, 1997 for current charges.
The Company recorded inventory purchases and commissions with Markpeak,
Ltd., a Hong Kong company, of approximately $7,815,000 and $432,000
respectively in 1997, $10,233,000 and $739,000, respectively in 1996, and
$8,314,000 and $563,000, respectively in 1995. At June 28, 1997, the Company
owed Markpeak, Ltd. approximately $1,475,000 for current charges. A director of
the Company is the Managing Director of Markpeak, Ltd.
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32
During fiscal year 1997, the Company had purchases of approximately
$162,000 as compared to sales of approximately $919,000 in fiscal year 1996,
from Duquesne Financial Corporation ("Duquesne"). The Chairman of the Company
is an executive officer of Duquesne. As of June 28, 1997, the Company owed
Duquesne approximately $7,000 related to inventory purchases.
The Company paid Shapiro, Devine and Craparo, Inc. ("SDC"), a
manufacturers representation firm, commissions of approximately $241,000,
$160,000 and $196,000 in 1997, 1996 and 1995, respectively. A director of the
Company was a co-founder of SDC. At June 28, 1997, the Company owed SDC
approximately $31,400 for current commissions.
9. COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and equipment under long-term
operating leases. Rental expense under all leases was approximately $1,183,000
$665,000, and $633,000, for the fiscal periods ended June 28, 1997, June 29,
1996, and July 1, 1995, respectively.
The future minimum rental commitments as of June 28, 1997 were as follows:
Fiscal Year Ending
1998 $1,564,286
1999 2,666,095
2000 2,077,444
2001 1,967,532
2002 1,119,470
----------
Total $9,394,827
==========
The Company has employment agreements with its three executive officers
which are in effect until December 15, 1997.
The Company has license agreements with White Consolidated Industries,
Inc.("White Consolidated"), which require minimum royalty payments through the
year 2011. The current level of royalty payments are in excess of the minimum
requirements. The Company also has various license agreements with other
parties for periods usually not exceeding three years. The agreements are then
typically renewable upon mutual consent. These license agreements require
royalty payments based on the sales of licensed product in the period. Total
royalties paid under these agreements, including the White Consolidated
agreement, were $6,300,000 in fiscal year 1997, $1,600,000 in fiscal year 1996
and $453,000 in fiscal year 1995.
10. LEGAL PROCEEDINGS
The Company, White Consolidated, Windmere and certain other parties
have been named as defendants in litigation filed by Westinghouse Electric
Corporation ("Westinghouse") in the United States District Court for the
Western District of Pennsylvania on December 18, 1996. The action arises from
a dispute between Westinghouse and White Consolidated over rights to use the
"Westinghouse" trademark for consumer products, based on transactions between
Westinghouse and White Consolidated in the 1970's and the parties' subsequent
conduct. Procedural motions concerning the jurisdiction in which the dispute
should be heard have been filed by the parties. The action seeks, among other
things, a preliminary injunction enjoining the defendants from using the
trademark, unspecified damages and attorneys' fees. Pursuant to the Company's
license agreements with White Consolidated, White Consolidated is defending the
Company and is obligated to indemnify the Company from and against any and all
claims, losses and damages arising out of the action, including the costs of
litigation.
The Company is a party to various other legal actions and proceedings
incident to its normal business operations. Management believes that the
outcome of all the Company's litigation will not have a material adverse effect
on its financial condition or results of operations.
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33
11. SUPPLY CONTRACT AND MAJOR CUSTOMERS
The Company entered into a major supply contract with Kmart Corporation
("Kmart") on January 31, 1997. Under the contract, the Company supplies Kmart
with small kitchen appliances, personal care products, heaters, fans and
electrical air cleaners and humidifiers under the White-Westinghouse brand
name. In fiscal year 1997, sales to Kmart approximated 16% of total net sales
of the Company.
The Company's net sales in the aggregate to its five largest customers
during the fiscal years ended June 28, 1997, June 29, 1996 and July 1, 1995
were 47%, 55% and 52% of total net sales in these periods, respectively. In
addition to Kmart, one customer accounted for 9%, 15%, and 11% of total net
sales during the fiscal years ended June 28, 1997, June 29, 1996, and July 1,
1995, respectively. Another customer accounted for 9%, 13%, and 15%,
respectively, over the same fiscal years.
Although the Company has long-established relationships with many of its
customers, with the exception of Kmart Corporation, it does not have long-term
contracts with any of its customers. A significant concentration of the
Company's business activity is with department stores, upscale mass
merchandisers, specialty stores, and warehouse clubs whose ability to meet
their obligations to the Company is dependent upon prevailing economic
conditions within the retail industry.
12. INCOME TAXES
Deferred taxes based upon differences between the financial statement and
tax bases of assets and liabilities and available tax carryforwards consisted
of:
Fiscal Year Ended
June 28, 1997 June 29, 1996
------------- -------------
Allowance for doubtful accounts $ 960,000 $ 776,340
Depreciation and amortization (1,060,680) (759,000)
Other deferred items, net (302,415) (208,282)
Net operating loss carry-forwards 2,349,579 2,659,323
Inventory reserves and capitalization 713,568 1,014,003
Unrealized gains on securities available for sale (720,058)
----------- ----------
Net deferred tax asset $ 1,939,994 $3,482,384
=========== ==========
During 1996, the Company re-assessed the measurement of deferred tax
assets based on available evidence and concluded that a valuation allowance was
unnecessary. Accordingly, the valuation allowance of $3,463,066 was eliminated
in the fourth quarter of fiscal 1996.
The Company has net loss carry-forwards at June 28, 1997 expiring as
follows:
YEAR CARRY-FORWARD EXPIRES AMOUNT
- -------------------------- ------
2007 $ 768,000
2008 2,336,000
2009 2,665,000
2010 60,000
2011 45,000
----------
Total $5,874,000
==========
As a result of certain transactions, the Company's ability to utilize its
net operating loss carryforwards to offset otherwise taxable income is limited
annually under Internal Revenue Code Section 382. The amount of such annual
limitation is approximately $2,000,000.
33
34
A reconciliation of the statutory federal income tax rate to the effective
rate was as follows:
Fiscal Years Ended
------------------
June 28, June 29, July 1,
1997 1996 1995
---- ---- ---
Statutory federal income tax rate 35.0% 35.0% 35.0%
Effective state tax rate 4.8% 4.8% 4.8%
Permanent differences 2.3%
Effect of foreign tax rate (8.8)%
Utilization of operating loss carryforwards (34.6)% (36.8%)
Change in valuation allowance (296.9)
Other (2.0)% (9.4)% %
------ ------- -----
Effective income tax rate 31.3% (301.1)% 3.0%
====== ======= =====
U.S. income taxes were not provided on certain unremitted earnings of
Salton Hong Kong, Ltd. which the Company considers to be permanent investments.
The cumulative amount of U.S. income taxes which have not been provided
totaled approximately $699,000 at June 28, 1997.
*****
34
35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 as to the Directors of the
Company is incorporated herein by referenced to the information set forth under
the caption "Election of Directors" in the Company's definitive Proxy Statement
for the 1997 Annual Meeting of Stockholders, since such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the end of the Company's fiscal year pursuant to Regulation 14A. Information
required by this Item 10 as to the executive officers of the Company is
included in Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference to
the information set forth under the caption "Compensation of Directors and
Executive Officers" in the Company's definitive Proxy Statement for the 1997
Annual Meeting of Stockholders, since such Proxy Statement will be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the Company's fiscal year pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by reference to
the information set forth under the caption "Stock Ownership of Principal
Holders and Management" in the Company's definitive Proxy Statement for the
1997 Annual Meeting of Stockholders, since such Proxy Statement will be filed
with the Securities and Exchange Commission not later than 120 days after the
end of the Company's fiscal year pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS
The information required by this Item 13 is incorporated by reference to
the information set forth under the caption "Certain Transactions" in the
Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders, since such Proxy Statement will be filed with the Securities and
Exchange Commission not later than 120 days after the end of the Company's
fiscal year pursuant to Regulation 14A.
35
36
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON REPORT 8-K
(a)(1) FINANCIAL STATEMENTS
The following Financial Statements of the registrant and its subsidiaries
are included in Part II, Item 8:
PAGE
----
Independent Auditors' Report 22
Balance Sheets June 28, 1997 and June 29, 1996 23
Statements of Earnings for the Years Ended June 28, 1997,
June 29, 1996 and July 1, 1995 24
Statements of Stockholders' Equity for the Years Ended June 28,
1997, June 29, 1996 and July 1, 1995 25
Statements of Cash Flows for the Years Ended June 28, 1997,
June 29, 1996 and July 1, 1995 26
Notes to the Consolidated Financial Statements 27
(a)(2) FINANCIAL STATEMENTS SCHEDULES
The following Financial Statement Schedules of the Registrant are included
in Item 14 hereof.
PAGE
----
Schedule VIII-Valuation and Qualifying Accounts 39
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
(a)(3) EXHIBITS
(b) No reports on Form 8-K were filed during the quarter ended June 28,
1997.
36
37
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 on the 25th day of
September, 1997.
SALTON/MAXIM HOUSEWARES, INC.
By: /s/ LEONHARD DREIMANN
----------------------------------
Leonhard Dreimann
President and Chief Executive
Officer
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 indicated on September 25, 1997:
SIGNATURE
- ---------
/s/ LEONHARD DREIMANN President, Chief Executive Officer and Director
- ------------------------- (Principal Executive Officer)
Leonhard Dreimann
/s/ WILLIAM B. RUE Senior Vice President, Chief Operating Officer,
- ------------------------- Treasurer and Chief Financial Officer (Principal
William B. Rue Accounting and Financial Officer)
/s/ DAVID C. SABIN Director
- -------------------------
David C. Sabin
/s/ FRANK DEVINE Director
- -------------------------
Frank Devine
/s/ BERT DOORNMALEN Director
- -------------------------
Bert Doornmalen
/s/ DAVID M. FRIEDSON Director
- -------------------------
David M. Friedson
/s/ HARRY D. SCHULMAN Director
- -------------------------
Harry D. Schulman
Director
- -------------------------
Laurence S. Chud, M.D.
Director
- -------------------------
James Connolly
37
38
The following page contains the Financial Statement Schedules as specified
by Item 14(a)(2) of Part IV of Form 10-K. The report of Deloitte & Touche LLP
thereon appears at page 18 of this Form 10-K.
38
39
SALTON/MAXIM HOUSEWARES, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED JUNE 28, 1997
CHARGED TO
BEGINNING COSTS AND ENDING
BALANCE EXPENSES DEDUCTIONS BALANCE
------- ---------- ---------- -------
YEAR ENDED JULY 1, 1995:
Allowance for returns,
allowances and doubtful accounts $1,900,000 $2,567,270 $(2,567,270) $1,900,000
YEAR ENDED JUNE 29, 1996:
Allowance for returns,
allowances and doubtful accounts $1,900,000 $5,213,815 $(5,213,815) $1,900,000
YEAR ENDED JUNE 28, 1997:
Allowance for returns,
allowances and doubtful accounts $1,900,000 $8,984,832 $(8,484,832) $2,400,000
39
40
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
3.1 Amended and Restated Certificate of Incorporation of
Registrant. Incorporated by reference to the Registrant's
Registration Statement on Form S-1 (Registration
No. 33-42097).
3.2 By-laws of the Registrant. Incorporated by reference to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-42097).
4.1 Third Amended and Restated Promissory Note, dated July
28, 1994, payable to Financo Investor Fund, L.P.
Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 2,
1994.
4.2 Specimen Certificate for shares of Common Stock, $.01
par value, of the Registrant. Incorporated by reference
to the Registrant's Registration Statement on Form S-1
(Registration No. 33-42097).
10.1 Loan and Security Agreement dated December 20, 1991 by
and between LaSalle National Bank and the Registrant.
Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended
December 28, 1991.
10.2 Amendment No. 1 to the Loan and Security Agreement by and
between LaSalle National Bank and the Registrant dated
May 6, 1992. Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 28, 1992.
10.3 Waiver Letter dated September 24, 1992, to the Loan and
Security Agreement by and between LaSalle National Bank
and the Registrant. Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 27, 1992.
10.4 Waiver and Amendments No. 3, 4 and 5, dated as of May 28,
June 30, and September 14, 1993, respectively, to the
Loan and Security Agreement by and between LaSalle
National Bank and the Registrant. Incorporated by
reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 26, 1993.
10.5 Waiver and Amendment No. 6, dated as of March 15, 1994,
to the Loan and Security Agreement by and between
LaSalle National Bank and the Registrant. Incorporated
by reference to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 26, 1994.
10.6 Amendment No. 7, dated as of July 28, 1994, to the Loan
and Security Agreement by and between LaSalle National
Bank and the Registrant. Incorporated by reference to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended July 2, 1994.
10.7 Standstill Agreement, dated July 28, 1994, between
Financo Investors Fund, L.P. and the Registrant.
Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 2,
1994.
10.9 Substitute and Amended Note, dated as of August 4, 1994,
payable to LaSalle National Bank. Incorporated by
reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 2, 1994.
40
41
10.10 Loan and Security Agreement, dated as of July 28, 1994, by and
between the Registrant and the Foothill Capital Corporation.
Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended July 2, 1994.
10.11 Salton/Maxim Housewares, Inc. Stock Option Plan. Incorporated
by reference to the Registrant's Registration Statement on form S-1
(Registration No. 33-42097).
10.12 Stockholders Agreement, dated August 6, 1991, by and among the
Registrant, Braddock Financial Corporation, Financo Investors Fund,
L.P., and Mesirow Private Equity, Inc. (successor to Mesirow Venture
Capital, Inc.) as the authorized representative of Mesirow Capital
Partners III, Mesirow Capital Partners IV, Mesirow Capital Partners
and Allied Investment Corporation. Incorporated by reference to the
Registrant's Registration Statement on Form S-1 (Registration No.
33-42097).
10.13 Lease, dated January 30, 1990, by and between 164 Delaney
Street Partnership and the Registrant, as amended by a First
Amendment to Lease Agreement and Second Amendment to Lease Agreement
and Second Amendment to Lease Agreement. Incorporated by reference t
the Registrant's Registration Statement on Form S-1 (Registration No
33-42097).
10.14 Lease, dated April 23, 1984, by and between OTR, as agent for
the State Teachers Retirement Board of Ohio, and the Registrant, as
assignee under an Assignment and Assumption of Lessee's Interest
under Lease Agreement dated September 30, 1988. Incorporated by
reference to the Registrant's Registration Statement on Form S-1
(Registration No. 33-42097).
10.15 Form of Sales Representative Agreement generally used by and
between the Registrant and its sales representatives. Incorporated b
reference to the Registrant's Registration Statement on Form S-1
(Registration No. 33-42097).
10.16 Stock Registration Rights Agreement, dated as of August 6,
1991, by and between the Registrant, Braddock Financial Corporation,
Financo Investors Fund, L.P., Mesirow Capital Partners II, Mesirow
Capital Partners IV, Mesirow Capital Partners V and Allied Investmen
Corporation. Incorporated by reference to the Registrant's
Registration Statement on Form S-1 (Registration No. 33-42097).
10.17 Employment Agreement dated October 17, 1991 between the
Registrant and Leonhard Dreimann. Incorporated by reference to the
Registrant's Registration Statement on Form S-1 (Registration No.
33-42097).
10.18 Employment Agreement dated October 17, 1991 between the
Registrant and David C. Sabin. Incorporated by reference to the
Registrant's Registration Statement on Form S-1 (Registration No.
33-42097).2
10.19 Employment Agreement dated October 17, 1991 between the
Registrant and William B. Rue. Incorporated by reference to the
Registrant's Registration Statement on Form S-1 (Registration No.
33-42097).
10.20 Salton/Maxim Housewares, Inc. Incentive Bonus Plan.
Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-42097).
10.21 Fourth Amendment to Loan and Security Agreement dated as of
September 19, 1995 between the Registrant and the Foothill Capital
Corporation. Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 1, 1995.
41
42
10.22 Salton/Maxim Housewares, Inc. 1995 Employee Stock Option
Plan. Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended December 30, 1995.
10.23 Salton/Maxim Housewares, Inc. Non-Employee Directors
Stock Option Plan. Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 30, 1995.
10.24 Asset Purchase Agreement dated July 1, 1996 by and among
the Registrant, Block China Corporation and Robert C.
Block Incorporated by reference from the Company's
Current Report on Form 8-K dated July 1, 1996.
10.25 Stock Purchase Agreement, dated as of February 27, 1996,
by and between the Registrant and Windmere-Durable
Holdings, Inc. Incorporated by reference to the
Registrant's Current Report on Form 8-K dated February
27, 1996.
10.26 Subordinated Promissory Note dated July 11, 1996 in the
principal amount of $10,847,620 issued by
Windmere-Durable Holdings, Inc. to the Registrant.
Incorporated by reference to the Registrant's Current
Report on Form 8-K dated July 11, 1996.
10.27 Stockholder Agreement dated July 11, 1996 between the
Registrant and Windmere-Durable Holdings, Inc.
Incorporated by reference to the Registrant's Current
Report on Form 8-K dated July 11, 1996.
10.28 Registration Rights Agreement dated July 11, 1994 between
the Registrant and Windmere-Durable Holdings, Inc.
Incorporated by reference to the Registrant's Current
Report on Form 8-K dated July 11, 1996.
10.29 Marketing Cooperation Agreement dated July 11, 1996
between the Registrant and Windmere-Durable Holdings,
Inc. Incorporated by reference to the Registrant's
Current Report on Form 8-K dated July 11, 1996.
10.30 License Agreement dated as of February 1, 1996 by and
between White Consolidated Industries Inc. and the
Registrant. Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q/A for the
fiscal quarter ended December 28, 1996.
10.31 License Agreement dated as of May 21, 1996 by and between
White Consolidated Industries Inc. and the Registrant.
Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q/A for the fiscal quarter ended
December 28, 1996.
10.32 Purchase, Distribution and Marketing Agreement dated as
of January 27, 1997 between the Registrant and Kmart
Corporation. Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q/A for the
fiscal quarter ended December 28, 1996.
42
43
10.33 Letter Agreement dated April 30, 1997 between the Registrant and
Windmere-Durable Holdings Inc. Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 29, 1997.
10.34 Amended and Restated Loan and Security Agreement, dated as of
June 30, 1997, by and between the Registrant and the Foothill Capital
Corporation.
27 Financial Data Schedule
43