SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission file number
December 31, 1996 1-9608
NEWELL CO.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3514169
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
Newell Center
29 East Stephenson Street, Freeport, Illinois 61032-0943
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (815)235-4171
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $1 par value per share, and New York Stock Exchange
associated Preferred Stock Purchase Rights Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
2
There were 158.9 million shares of the Registrant's common
stock outstanding as of December 31, 1996. The aggregate market
value of the shares of common stock (based upon the closing price
on the New York Stock Exchange on that date) beneficially owned
by nonaffiliates of the Registrant was approximately $4,754.3
million. For purposes of the foregoing calculation only, which
is required by Form 10-K, the Registrant has included in the
shares owned by affiliates those shares owned by directors and
officers of the Registrant, and such inclusion shall not be
construed as an admission that any such person is an affiliate
for any purpose.
Documents Incorporated by Reference
Part III
Portions of the Registrant's Definitive Proxy Statement for
its Annual Meeting of Stockholders to be held May 7, 1997, which
will be filed March 14, 1997.
3
PART I
Item 1. Business
- -----------------
"Newell" or the "Company" refers to Newell Co. alone or with
its wholly-owned subsidiaries, as the context requires.
GENERAL
- -------
Newell is a manufacturer and full-service marketer of high-
volume consumer products serving the needs of volume purchasers.
The Company's basic strategy is to merchandise a multi-product
offering of brand-name consumer products, with an emphasis on
excellent customer service, in order to achieve maximum results
for its stockholders. Each group of the Company's products is
manufactured and sold by a subsidiary or division (each referred
to herein as a "division," even if separately incorporated).
The Company manages the activities of its divisions through
executives at the corporate level, to whom the divisional
managers report, and controls financial activities through
centralized accounting, capital expenditure reporting, cash
management, order processing, billing, credit, accounts
receivable and data processing operations. The production, sales
and servicing functions of each division, however, are conducted
with substantial independence. Each division is managed by
employees who make day-to-day operating and sales decisions and
participate in an incentive compensation plan that ties a
significant part of their compensation to their division's
results. The Company believes that this allocation of
responsibility and system of incentives fosters an
entrepreneurial approach to management that has been important to
the Company's success.
4
INDUSTRY SEGMENTS
- -----------------
The Company operates in a single industry segment consisting
of Consumer Products sold through a variety of retail and
wholesale distribution channels.
PRODUCTS
- --------
HOME FURNISHINGS
----------------
Window Treatments
- -----------------
The Company's window treatments business is conducted by the
Levolor Home Fashions and Newell Window Furnishings divisions.
Levolor Home Fashions and Newell Window Furnishings primarily
manufacture made-to-order and stock horizontal and vertical
blinds; pleated, cellular and pull shades; and window hardware
for the retail marketplace. Levolor Home Fashions also produces
window treatment components for custom window treatment
fabricators.
Levolor Home Fashions and Newell Window Furnishings products
are sold primarily under the trade names of NEWELL{r},
LEVOLOR{r}, LOUVERDRAPE{r}, DEL MAR{r}, and JOANNA{r}, and the
brands SPECTRIM{r}, MAGIC FIT{r} and RIVIERA{r}.
Levolor Home Fashions and Newell Window Furnishings market
their products directly and through distributors to mass
merchants, home centers, department/specialty stores, hardware
distributors, custom shops and select contract customers, using a
network of manufacturers' representatives, as well as regional
zone and market-specific sales managers.
Levolor Home Fashions and Newell Window Furnishings design,
manufacture or import, package and distribute their window
treatments products. Principal facilities are located in
Freeport, Illinois and High Point, North Carolina. Levolor Home
Fashions and Newell Window Furnishings have many facilities in
the U.S. and Canada.
Picture Frames
- --------------
The Company's picture frame business is conducted by the
Intercraft division. Intercraft primarily manufactures wood,
wood composite and metal ready-made picture frames, framed art
and photo albums.
5
Intercraft ready-made picture frames are sold primarily
under the trade names of INTERCRAFT{r}, DECOREL{r}, BURNES OF
BOSTON{r}, CARR{r}, RAREWOODS{r} AND TERRAGRAFICS{r}, while
framed art is sold primarily under the DECOREL{r} trade name and
photo albums are sold primarily under the HOLSON{r} trade name.
Intercraft markets products directly to mass merchants,
warehouse clubs, grocery/drug stores and department/specialty
stores, using a network of manufacturers' representatives, as
well as regional zone and market-specific sales managers.
INTERCRAFT{r}, DECOREL{r} and HOLSON{r} products are sold to mass
merchants, while the remaining brands are sold to
department/specialty stores.
Intercraft designs, manufactures, packages and distributes
picture frames, framed art and photo albums. Principal
facilities are located in Taylor, Texas; Statesville, North
Carolina; Mississauga, Ontario; Clairmont, New Hampshire;
Mundelein, Illinois; North Smithfield, Rhode Island; and Durango,
Mexico.
Home Storage Products
- ---------------------
Lee Rowan{r} and System Works{r} - coated wire storage, home
storage, shelving systems and organization products.
6
HOUSEWARES
----------
Glassware and Plasticware
- -------------------------
The Company's glassware and plasticware business is
conducted by the Anchor Hocking and Newell Europe divisions.
Anchor Hocking and Newell Europe design, manufacture, package and
distribute glass and plastic products. These products include
glass ovenware, servingware, cookware and dinnerware products and
plastic microwave cookware and food storage products. Anchor
Hocking also produces foodservice products, glass lamp parts,
lighting components, meter covers and appliance covers for the
foodservice and specialty markets. Newell Europe also produces
glass components for appliance manufacturers and its products are
marketed in Europe, the Middle East and Africa only.
Anchor Hocking products are sold primarily under the trade
names of ANCHOR HOCKING{r} and PLASTICS INC.{tm}, and the brand
names of OVEN BASICS{r} and STOWAWAYS{r}. Newell Europe's
products are sold primarily under the brand names of PYREX{r},
PYROFLAM{r}, VISION{r} and VITRI{r}.
Anchor Hocking markets its products directly to mass
merchants, warehouse clubs, grocery/drug stores, department/
specialty stores, hardware distributors and select contract
customers, using a network of manufacturers' representatives, as
well as regional zone and market-specific sales managers. Newell
Europe markets its products to mass merchants, industrial
manufacturers and buying groups using a direct sales force.
Principal facilities are located in Lancaster, Ohio; Monaca,
Pennsylvania; St. Paul and Coon Rapids, Minnesota; Sunderland,
Great Britain; Muhtal, Germany and Chateauroux, France.
Aluminum Cookware and Bakeware
- ------------------------------
The Company's aluminum cookware and bakeware business is
conducted by the Mirro division. Mirro primarily manufactures
aluminum cookware and bakeware for the retail marketplace. Mirro
also manufactures various specialized aluminum cookware and
bakeware items for the food service industry. It also produces
aluminum contract stampings and components for other
manufacturers and makes aluminum and plastic kitchen tools and
utensils.
Mirro products are sold primarily under the trade names of
MIRRO{r} and WEAREVER{r}, and the brand names of AIRBAKE{r},
CUSHIONAIRE{r}, CONCENTRIC AIR{r}, CHANNELON{r} and WEAREVER
AIRE{tm}.
7
Mirro markets its products directly to mass merchants,
warehouse clubs, grocery/drug stores, department/specialty
stores, hardware distributors, cable TV networks and select
contract customers, using a network of manufacturers'
representatives, as well as regional zone and market-specific
sales managers.
Mirro manufacturing operations are highly integrated,
rolling its own sheet stock from aluminum ingot, and producing
phenolic handles and knobs at its own plastics molding facility.
Principal facilities are located in Manitowoc and Chilton,
Wisconsin and Salina, Kansas.
Hair Accessories and Beauty Organizers
- --------------------------------------
Goody{r} - personal consumer products including hair
accessories and beauty organizers.
8
OFFICE PRODUCTS
---------------
Markers and Writing Instruments
- -------------------------------
The Company's Markers and Writing Instruments business is
conducted by the Sanford division. Sanford primarily manufactures
permanent/waterbase markers, dry erase markers, overhead
projector pens, highlighters, wood-cased pencils and inks, and
distributes other writing instruments including roller ball
pens, ball-point pens and mechanical pencils for the retail
marketplace.
Sanford products are sold primarily under the trade names of
SANFORD{r}, EBERHARD FABER{r} and BEROL{r}, and the brands
SHARPIE{r}, UNI-BALL{r}, EXPO{r}, ZEZE{r}, VIS-A-VIS{r},
EXPRESSO{r} and MONGOL{r}.
Sanford markets its products directly and through
distributors to mass merchants, warehouse clubs, grocery/drug
stores, office superstores, office supply stores, contract
stationers, and hardware distributors, using a network of
manufacturers' representatives, as well as regional zone and
market-specific sales managers.
Principal facilities are located in Bellwood, Illinois; and
Lewisburg and Shelbyville, Tennessee. Principal foreign
facilities are located in Tlalnepantla, Mexico, Bogota, Colombia
and Canada.
Other
- -----
Stuart Hall - school supplies, stationery and office
supplies; and Newell, Rogers and Keene Office Products - desktop
and computer accessories.
HARDWARE AND TOOLS
------------------
Hardware
- --------
The Company's hardware business is conducted by the Amerock
and Bulldog Fastener divisions. Amerock primarily manufactures
cabinet hardware for the retail marketplace. Amerock also
manufactures window hardware for window manufacturers. Bulldog
packages and distributes hardware which includes bolts, screws
and mechanical fasteners.
Amerock and Bulldog products are sold primarily under the
trade names of AMEROCK{r}, ALLISON{r}, BULLDOG{r} and VSI{r}.
9
Amerock and Bulldog market their products directly and
through distributors to mass merchants, home centers, hardware
distributors, cabinet shops and window manufacturers, using a
network of manufacturers' representatives, as well as regional
zone and market-specific sales managers.
Amerock designs, manufactures, packages and distributes its
hardware products. Bulldog Fastener Company packages and
distributes its products. Principal facilities are located in
Rockford, Illinois and Memphis, Tennessee.
Tools
- -----
EZ Paintr - manual paint applicator products and BernzOmatic
- - propane and propane/oxygen hand torches.
MARKETING AND DISTRIBUTION
- --------------------------
Sales to Wal-Mart Stores, Inc. amounted to approximately 15%
of consolidated sales in 1996, 14% in 1995 and 15% in 1994.
Sales to each of the Company's other customers, individually,
amounted to less than 10% of consolidated net sales.
Most of the Company's customers are retailers that rely on a
single or principal source for each of the consumer products that
they sell. Accordingly, the divisions focus their marketing
effort on the retailer, not on the ultimate consumer, and compete
with other suppliers for business. The Company's strategy is to
emphasize excellent customer service, innovative merchandising
programs and a quality multi-product offering. As part of its
customer service programs, the Company's computer systems allow
it to receive and process orders for its customers entirely on an
electronic basis. The Company also offers vendor managed
inventory systems to its customers, with which the Company
manages inventory at customer locations. These programs, and the
ability to fill and ship orders promptly, are important
competitive factors since they reduce a customer's order
processing costs and allow the customer to minimize the inventory
it must carry. The divisions also maintain sales and service
organizations to be responsive to the needs of their customers.
BACKLOG
- -------
The dollar value of unshipped factory orders is not
material.
10
SEASONAL VARIATIONS
- -------------------
The divisions are only moderately affected by seasonal
trends. Home Furnishings and Hardware and Tool products have
higher sales in the second and third quarters due to an increased
level of do-it-yourself projects completed in the summer months;
Housewares products typically have higher sales in the second
half of the year due to retail stocking related to the holiday
season; and Office Products have higher sales in the second and
third quarters due to the back-to-school season. The Company's
consolidated quarterly sales do not fluctuate significantly,
unless a significant acquisition is made, since these seasonal
trends are moderate.
11
NET SALES BY PRODUCT CLASS
- --------------------------
The following table sets forth the amounts and percentages
of the Company's net sales for the three years ended December 31,
1996 (including sales of acquired companies from the time of
acquisition), for the classes of similar products described
previously.
Year Ended December 31,
1996 % 1995 % 1994 %
---- ---- ----
(In millions, except percentages)
Home Furnishings:
Window Treatments $ 385.6 13% $ 392.0 16% $ 317.8 15%
Picture Frames 339.8 12 154.0 6 135.9 7
Home Storage Products 190.8 7 186.3 7 189.1 9
-------- -------- --------
Total Home Furnishings 916.2 32 732.3 29 642.8 31
-------- -------- --------
Housewares:
Glassware and Plasticware 394.2 14 397.6 16 256.3 12
Cookware and Bakeware 273.4 9 261.9 11 280.9 14
Hair Accessories and
Beauty Organizers 164.1 6 160.1 6 154.6 8
-------- -------- --------
Total Housewares 831.7 29 819.6 33 691.8 34
-------- -------- --------
Office Products:
Markers and Writing
Instruments 570.2 20 402.4 16 212.6 10
Other * 171.6 6 179.8 7 170.6 8
-------- -------- --------
Total Office Products 741.8 26 582.2 23 383.2 18
-------- -------- --------
Hardware & Tools
Hardware 214.1 7 202.7 8 208.8 10
Tools 169.0 6 161.6 7 148.3 7
-------- -------- --------
Total Hardware & Tools 383.1 13 364.3 15 357.1 17
-------- -------- --------
Newell Consolidated $2,872.8 100% $2,498.4 100% $2,074.9 100%
======== === ======== === ======== ===
* This category is comprised of different product classes, each
representing less than 10% of net sales.
Certain 1995 and 1994 amounts have been reclassified to
conform with the 1996 presentation.
12
ACQUISITIONS OF BUSINESSES
- --------------------------
At the foundation of the Company's growth strategy is
acquisitions. Since the late 1960s, acquisitions have been the
Company's primary vehicle for growth. Over the last 30 years,
the Company has acquired more than 70 companies. In the last
five years alone, the Company has completed 13 major
acquisitions, representing nearly $2.0 billion in additional
sales.
From a small manufacturer of drapery hardware with about
$20.0 million in sales and $2.0 million in net income in the late
1960s, Newell has grown an average of nearly 20% per year and is
now an international consumer goods supplier with annual sales
approaching $3.0 billion and net income exceeding $250.0 million.
This dramatic growth is largely the result of acquisitions,
supplemented by internal growth.
In its acquisition planning, the Company looks for branded,
staple product lines sold to volume purchasers. These product
lines must have the potential to reach the Company's high
standard of profitability, a low technology level and a long
product life cycle. In addition to adding entirely new product
lines, acquisitions can be beneficial in rounding out existing
businesses by filling gaps in the product offering, adding new
customers and distribution channels, improve operational
efficiency through shared resources and create critical mass.
The Company has typically acquired companies that it
believes have unrealized profit potential. "Newellization" is
the profit improvement and productivity enhancement process that
is applied to newly acquired product lines to bring them up to
the Company's standards of profitability.
Elements of the Newellization process at newly acquired
companies include establishing a focused business strategy,
improving customer service, building partnerships with customers,
reducing corporate overhead through centralization of
administrative functions, trimming excess costs, tightening
financial controls, improving manufacturing efficiency, pruning
nonproductive product lines and reducing inventories, increasing
trade receivable turnover and improving sales mix profitability
through the application of program merchandising techniques.
As part of the Newellization process to improve
profitability, sales can often decline as unprofitable product
lines are reduced or eliminated. In the Newell strategy, once a
company has been Newellized (the process usually takes about two
years), it is expected to begin building profitable sales and
contribute to the Company's internal growth. Internal growth has
averaged 5% annually over the past five years.
13
On January 30, 1997, the Company signed a letter of intent
with Cooper Industries, Inc. to acquire Cooper's Kirsch Division.
Kirsch manufactures and distributes drapery hardware and custom
window coverings in the U.S. and abroad. Consummation of the
acquisition is subject to execution of a definitive agreement and
receipt of the necessary government approvals. On March 5, 1997,
the Company purchased the Rolodex business unit of Insilco
Corporation. Rolodex is a marketer of office products including
card files, personal organizers and paper punches.
Additional information regarding acquisitions of businesses
is included in note 2 to the consolidated financial statements.
FOREIGN OPERATIONS
- ------------------
Geographic segment information regarding the Company's 1996
and 1995 foreign operations is included in note 13 to the
consolidated financial statements.
RAW MATERIAL
- ------------
The Company expects to have multiple foreign and domestic
sources of supply for substantially all of its material
requirements. The raw materials and various purchased components
required for its products have generally been available in
sufficient quantities.
PATENTS AND TRADEMARKS
- ----------------------
The Company has many patents, trademarks and trade names,
none of which is considered material to the consolidated
operations.
COMPETITION
- -----------
The markets in which the Company competes are highly
competitive, with a number of well-established domestic and
foreign manufacturers. In addition, many of the Company's
products compete with a number of substitute products. The
Company believes, however, that it has a significant share in
many of its markets and is either number one or number two in
virtually all of its respective fields.
The Company's principal methods of competition are customer
service, price, brand name identification, merchandising
programs, domestic manufacturing resources and breadth of product
line offerings. The Company's strategy is to emphasize excellent
customer service, innovative merchandising programs and a quality
multi-product offering. The Company also believes that its
14
customer service programs and systems, which include delivery of
quality products on time and innovative good-better-best
merchandising programs, give it a competitive advantage. The
Company's principal customers are sophisticated volume
purchasers, which consider a combination of all of these factors
in determining where to purchase products.
ENVIRONMENT
- -----------
Information regarding the Company's environmental matters is
included in the Management's Discussion and Analysis section of
this report.
EMPLOYEES
- ---------
The Company has approximately 22,100 employees, of whom
approximately 5,600 are covered by collective bargaining
agreements.
15
Item 2. Properties
- -------------------
The following table shows the location and general character
of the principal operating facilities owned or leased by the
Company. The executive offices are located in Beloit, Wisconsin,
which is an owned facility occupying approximately 9,000 square
feet. Other Corporate offices are located in owned facilities in
Freeport, Illinois (occupying 59,000 square feet) and in
Rockford, Illinois (occupying 7,000 square feet). Most of the
idle facilities, which are excluded from the following list, are
subleased while being held pending sale or lease expiration. The
Company considers its properties to be in generally good
condition and well-maintained, and are generally suitable and
adequate to carry on the Company's business. The properties are
used for manufacturing ("M"), distribution ("D") and
administrative offices ("A").
Owned or
Exp. Date General
Location City If Leased Character
- -------- ------------ --------- ------------
Australia Chadstone, Melbourne 01/97 D & A
Arizona Phoenix 03/04 M, D & A
Belgium Zellick 10/98 D & A
California Beaumont 11/97 D
Garden Grove 09/97 M
Ontario 12/97 D
Vista 06/03 M & D
Westminster 03/97 A
Westminster 05/99 D
Westminster 09/97 M
Canada Brampton, ON 09/97 M & D
Calgary, AB 07/01 M
Mississauga, ON Owned M & D
Oakville, ON 10/97 D & A
Pickering, ON 03/07 D
Prescott, ON Owned M
Prescott, ON 12/97 D
Richmond Hills, ON 10/00 A
Toronto, ON 08/00 M & A
Toronto, ON 02/98 D
Watford, ON 01/04 M, D & A
Weston, ON M-T-M A
16
Owner or
Exp. Date General
Location City If Leased Character
- -------- ------------ --------- ------------
Colombia Bogota Owned M, D & A
England Bath Road 06/07 A
Dunstable 02/05 D & A
King's Lynn Owned M, D & A
Sunderland 11/99 D
Sunderland 12/00 D
Sunderland Owned M
France Avon 11/99 A
Chateauroux Owned M, D & A
Georgia Athens Owned M
Columbus Owned D
Manchester Owned M
Morrow M-T-M D
Peachtree City Owned A
Germany Muhltal Owned M
Hawaii Kapolei 07/98 M
Illinois Bellwood 11/99 M, D & A
Bellwood Owned M & A
Freeport Owned M, D & A
Freeport 12/98 D
Freeport Owned A
Mundelein 09/97 M & A
Rockford Owned M, D & A
South Holland 12/97 M
Waukegan 07/98 D
Indiana Lowell Owned M, D & A
Italy Milan 12/01 A
Milan 04/99 D
Kansas Salina Owned M & D
Salina 06/97 D
Mexico Durango Owned M
Tlalnepantla Owned M, D & A
Minnesota Coon Rapids Owned M
Eagan 01/99 D
St. Paul Owned M & A
17
Owned or
Exp. Date General
Location City If Leased Character
- -------- ------------ --------- ------------
Missouri Fenton 12/99 A
Jackson Owned M, D & A
Kansas City 12/05 M, D & A
Nebraska Omaha 09/98 D
New Hampshire Claremont Owned M & D
Claremont 10/97 D
New Jersey Rockaway 03/98 M
New York Medina Owned M, D & A
Ogdensburg Owned M
North Carolina High Point Owned M & A
Statesville Owned M & D
Ohio Bremen Owned M
Columbus 12/97 D
Lancaster Owned M, D & A
Lancaster M-T-M M
Pennsylvania Ambridge M-T-M D
Monaca Owned M & A
Monaca M-T-M D
Wampum M-T-M D
Puerto Rico Carolina 06/98 D & A
Rhode Island Lincoln M-T-M D
North Smithfield 05/05 A
Spain Madrid 12/97 A
Tennessee Johnson City 12/97 D
Johnson City Owned M
Lewisburg Owned M, D & A
Memphis 02/06 M, D & A
Memphis 01/98 D
Shelbyville Owned M, D & A
Shelbyville 02/97 D
Texas Taylor Owned M, D & A
Utah Ogden Owned M
Salt Lake City 04/98 M
18
Owned or
Exp. Date General
Location City If Leased Character
- -------- ------------ --------- ------------
West Virginia Weirton Owned M
Wisconsin Beloit Owned A
Chilton Owned M
Madison Owned M, D & A
Madison 03/97* D
Manitowoc 04/98 D
Manitowoc Owned M, D & A
South Milwaukee 06/97* D
St. Francis Owned M, D & A
* Lease not extended past this date.
Item 3. Legal Proceedings
- --------------------------
Information regarding legal proceedings is included in note
14 to the consolidated financial statements and is hereby
incorporated by reference herein.
19
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
There were no matters submitted to a vote of the Company's
shareholders during the fourth quarter of fiscal year 1996.
Supplementary Item - Executive Officers of the Registrant as
of 12/31/96
NAME AGE PRESENT POSITION WITH THE COMPANY
- ---- ---- ---------------------------------
William P. Sovey 63 Vice Chairman and Chief Executive Officer
Thomas A. Ferguson, Jr. 49 President and Chief Operating Officer
Donald L. Krause 57 Senior Vice President-Corporate Controller
William T. Alldredge 56 Vice President-Finance
Richard C. Dell 50 Group President
William J. Denton 52 Group President
William K. Doppstadt 64 Vice President-Personnel Relations
William P. Sovey has been Vice Chairman and Chief Executive
Officer since July 1992. From January 1986 through July 1992, he
had been President and Chief Operating Officer.
Thomas A. Ferguson, Jr. has been President and Chief Operating
Officer since May 1992. From January 1989 to May 1992, he was
President-Operating Companies.
Donald L. Krause was appointed Senior Vice President-Corporate
Controller in March 1990. He was President-Industrial Companies
from February 1988 to March 1990.
William T. Alldredge has been Vice President-Finance of the
Company since August 1983.
Richard C. Dell has been Group President since June 1992. He was
President of Amerock from November 1989 to June 1992. He was
President of EZ Paintr from September 1987 to November 1989.
William J. Denton has been Group President since March 1990.
From April 1989 to March 1990, he was Vice President-Corporate
Controller. He was President of Anchor Hocking Glass from August
1987 to April 1989.
William K. Doppstadt has been Vice President-Personnel Relations
of the Company since 1974.
20
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
- ------------------------------------------------------------
The Company's common stock is listed on the New York and
Chicago Stock Exchanges (symbol: NWL). As of December 1996,
there were 14,577 stockholders of record. The following table
sets forth the high and low sales prices of the common stock on
the New York Stock Exchange Composite Tape (as published in the
Wall Street Journal) for the calendar periods indicated.
Year Ended December 31,
-------------------------------------------------
1996 1995
---------------------- ----------------------
High Low High Low
---------- ---------- ---------- ----------
Quarters:
First $28 7/8 $25 5/8 $25 1/2 $20 5/8
Second 32 25 1/2 25 22 1/4
Third 32 28 1/2 26 1/4 23 5/8
Fourth 33 1/4 28 1/4 27 1/4 23 43/64
The Company has paid regular cash dividends on its common
stock since 1947. On February 11, 1997, the quarterly cash
dividend was increased to $0.16 per share from the $0.14 per
share that had been paid since February 6, 1996. Prior to this
date, the quarterly cash dividend had been paid at $0.12 per
share since May 11, 1995, which was an increase from the $0.10
per share paid since May 12, 1994.
Item 6. Selected Financial Data
- --------------------------------
The following is a summary of certain consolidated financial
information relating to the Company. The summary has been
derived in part from, and should be read in conjunction with, the
consolidated financial statements of the Company included
elsewhere in this report and the schedules thereto.
21
Year Ended December 31,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(In millions, except per share data)
INCOME STATEMENT DATA
Net sales $2,872.8 $2,498.4 $2,074.9 $1,645.0 $1,451.7
Cost of products sold 1,965.5 1,715.6 1,403.8 1,101.7 997.3
-------- -------- -------- -------- --------
Gross income 907.3 782.8 671.1 543.3 454.4
Selling, general
and administrative
expenses 421.6 363.3 313.2 257.2 201.1
Restructuring costs - - - - 20.9
-------- -------- -------- -------- --------
Operating income 485.7 419.5 357.9 286.1 232.4
Nonoperating expenses
(income):
Interest expense 57.0 49.8 30.0 19.1 20.4
Other 4.1 (1.1) (1.4) (8.5) (65.6)
-------- -------- -------- -------- --------
Net 61.1 48.7 28.6 10.6 (45.2)
-------- -------- -------- -------- --------
Income before income
taxes and cumulative
effect of accounting
change 424.6 370.8 329.3 275.5 277.6
Income taxes 168.1 148.3 133.7 110.2 114.3
-------- -------- -------- -------- --------
Net income before
cumulative effect
of accounting
change 256.5 222.5 195.6 165.3 163.3
Cumulative effect of
accounting change - - - - (44.2)
-------- -------- -------- -------- --------
Net income $ 256.5 $ 222.5 $ 195.6 $ 165.3 $ 119.1
======== ======== ======== ======== ========
EARNINGS PER SHARE DATA
Before cumulative
effect of
accounting change $1.62 $1.41 $1.24 $1.05 $ 1.05
Cumulative effect of
accounting change - - - - (0.29)
-------- -------- -------- -------- --------
Earnings per share $1.62 $1.41 $1.24 $1.05 $0.76
======== ======== ======== ======== ========
Cash dividends per
share $0.56 $0.46 $0.39 $0.35 $0.30
======== ======== ======== ======== ========
22
*****
Item 6. Selected Financial Data (Cont.)
- ----------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(In millions)
WEIGHTED AVERAGE SHARES 158.8 158.2 157.8 157.3 155.8
BALANCE SHEET DATA
Inventories $ 509.5 $ 509.2 $ 420.7 $ 301.0 $ 226.2
Working Capital 471.1 452.6 133.6 76.7 219.5
Total assets 3,005.1 2,927.1 2,488.3 1,952.9 1,569.6
Short-term debt 104.1 163.0 309.1 247.2 97.1
Long-term debt, net of
current maturities 672.0 761.6 409.0 218.1 176.8
Stockholders' equity 1,491.8 1,296.0 1,125.3 979.1 859.4
1992
- ----
On February 14, 1992, a subsidiary of the Company merged
with Sanford Corporation ("Sanford"), a designer, manufacturer
and marketer of marking and writing instruments, plastic desk
accessories, file storage boxes and other office and school
supplies. The Company issued approximately 27.8 million shares
of common stock for all the common stock of Sanford (valued at
approximately $686.7 million). This transaction was accounted
for as a pooling of interests; therefore, prior financial
statements were restated to reflect this merger.
On July 8, 1992, the Company acquired Stuart Hall Company,
Inc. ("Stuart Hall"), a manufacturer of school supplies,
stationery and office supplies. On October 1, 1992, the Company
acquired substantially all of the assets of Intercraft
Industries, L.P., and all of the capital stock of Intercraft
Industries of Canada, Inc. (collectively, "Intercraft"),
manufacturers of ready-made picture frames. For these and other
minor acquisitions, the Company paid $175.0 million in cash,
issued 3.2 million shares of common stock for all the common
stock of Stuart Hall (valued at approximately $54.6 million), and
assumed $82.4 million of debt. These transactions were accounted
for as purchases; therefore results of operations are included in
the accompanying consolidated financial statements since their
respective dates of acquisition. The acquisition costs were
allocated to the fair market value of the assets acquired and
liabilities assumed and resulted in trade names and goodwill of
approximately $161.9 million.
In 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions."
Adoption of this standard did not have a material effect on the
23
annual expense for postretirement benefits. As part of adopting
this standard, the Company recorded, in the first quarter of
1992, a one-time, non-cash charge against earnings of $71.7
million before taxes and $44.1 million after taxes, or $0.29 per
share. The effect of the charge on 1992 net income before
cumulative effect of accounting change was not material to the
consolidated financial statements.
On December 31, 1992, the Company sold its closures business
for a $210.0 million note receivable due and paid January 4,
1993. The Company recognized a net pre-tax gain of $82.9 million
on the sale. Sales for this business totaled $160.6 million in
1992.
1993
- ----
On April 30, 1993, the Company acquired substantially all of
the assets of Levolor Corporation ("Levolor"), a manufacturer and
distributor of decorative window coverings. On September 22,
1993, the Company acquired Lee Rowan Company ("Lee Rowan"), a
manufacturer and marketer of coated wire storage and organization
products. On November 9, 1993, the Company acquired Goody
Products, Inc. ("Goody"), a manufacturer and marketer of personal
consumer products including hair accessories and beauty
organizers. For these and other minor 1993 acquisitions, the
Company paid $293.1 million in cash (excluding the $13.1 million
of Goody common stock that the Company owned prior to the
acquisition) and assumed $30.7 million of debt.
These transactions were accounted for as purchases;
therefore results of operations are included in the accompanying
consolidated financial statements since their respective dates of
acquisition. The acquisition costs were allocated to the fair
market value of the assets acquired and liabilities assumed and
resulted in trade names and goodwill of approximately $208.2
million.
Subsequent Years
- ----------------
Information regarding 1994, 1995 and 1996 acquisitions of
businesses is included in note 2 to the consolidated financial
statements.
24
QUARTERLY SUMMARIES
Summarized quarterly data for the last three years are as
follows (unaudited):
Calendar Year 1st 2nd 3rd 4th Year
- ------------- -------- -------- -------- -------- --------
(In millions, except per share data)
1996
----
Net sales $ 618.2 $ 735.1 $ 761.9 $ 757.6 $2,872.8
Gross income 181.3 235.8 243.7 246.5 907.3
Net income 33.2 67.7 74.6 81.0 256.5
Earnings per share .21 .43 .47 .51 1.62
1995
----
Net sales $ 556.6 $ 621.3 $ 651.3 $ 669.2 $2,498.4
Gross income 166.8 189.5 207.2 219.3 782.8
Net income 36.1 54.9 65.1 66.4 222.5
Earnings per share .23 .35 .41 .42 1.41
1994
----
Net sales $ 443.5 $ 493.5 $ 553.2 $ 584.7 $2,074.9
Gross income 134.8 159.9 179.2 197.2 671.1
Net income 31.5 44.0 58.0 62.1 195.6
Earnings per share .20 .28 .37 .39 1.24
25
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
- ----------------------------------------------------------
The following discussion and analysis provides information
which management believes is relevant to an assessment and
understanding of the Company's consolidated results of operations
and financial condition. The discussion should be read in
conjunction with the consolidated financial statements and notes
thereto.
RESULTS OF OPERATIONS
The following table sets forth for the period indicated
items from the Consolidated Statements of Income as a percentage
of net sales.
Year Ended December 31,
1996 1995 1994
------ ------ ------
Net sales 100.0% 100.0% 100.0%
Cost of products sold 68.4 68.7 67.7
------ ------ ------
Gross income 31.6 31.3 32.3
Selling, general
and administrative expenses 14.7 14.5 15.1
------ ------ ------
Operating income 16.9 16.8 17.2
Nonoperating expenses (income):
Interest expense 2.0 2.0 1.4
Other 0.1 - (0.1)
------ ------ ------
Net 2.1 2.0 1.3
------ ------ ------
Income before income taxes 14.8 14.8 15.9
Income taxes 5.9 5.9 6.5
------ ------ ------
Net income 8.9% 8.9% 9.4%
===== ===== =====
26
1996 vs. 1995
- -------------
Net sales for 1996 were $2,872.8 million, representing an
increase of $374.4 million or 15.0% from $2,498.4 million in
1995. The overall increase in net sales was primarily
attributable to contributions from the 1995 acquisitions of
Decorel and Berol, the 1996 acquisition of Holson Burnes, and
internal growth of 4% (internal growth is defined as growth from
the Company's "core businesses," which include continuing
businesses owned more than two years and minor acquisitions
completed during the last two years). All of the acquisitions
are described in note 2 to the consolidated financial statements.
Net sales for each of the Company's product groups (and the
primary reasons for the increases) were as follows, in millions:
Year Ended December 31, Primary Reasons
1996 1995 %Change for Increases
-------- -------- ------- ------------------
Home Furnishings $ 916.2 $ 732.3 25.1% Decorel October 1995 and
Holson Burnes January
1996 acquisitions and
6% internal growth
Housewares 831.7 819.6 1.5 4% internal growth offset
by weaker than expected
sales at Newell Europe
as a result of soft
European retail
conditions
Office Products 741.8 582.2 27.4 Berol November 1995
acquisition and 3%
internal growth
Hardware & Tools 383.1 364.3 5.2 Internal growth
-------- --------
$2,872.8 $2,498.4 15.0%
======== ========
Gross income as a percent of net sales for 1996 was 31.6%
versus 31.3% in 1995. Gross margins improved slightly, primarily
as a result of increases in gross margins from the businesses
acquired in 1995 and 1994.
Selling, general and administrative expenses ("SG&A") as a
percent of net sales in 1996 were 14.7% versus 14.5% in 1995.
There was no material change in spending at the core businesses;
the increase as a percentage of sales was primarily due to SG&A
at Holson Burnes.
27
Net nonoperating expenses for 1996 were $61.1 million versus
$48.7 million in 1995. The $12.4 million change included a $7.2
million increase in interest expense and a $4.3 million increase
in amortization of trade names and goodwill as a result of
additional borrowings and capitalized goodwill related to the
1996 and 1995 acquisitions. For supplementary information
regarding other nonoperating expenses, see note 12 to the
consolidated financial statements.
The effective tax rate was 39.6% in 1996 versus 40.0% in
1995. See note 11 to the consolidated financial statements for
an explanation of the effective tax rate.
Net income for 1996 was $256.5 million, representing an
increase of $34.0 million or 15.3% from 1995. Earnings per share
for 1996 were up 14.9% to $1.62 versus $1.41 in 1995. The
increases in net income and earnings per share were primarily
attributable to contributions from Berol (net of associated
interest expense and goodwill amortization) and an improvement in
operating margins at several of the core businesses.
INTERNATIONAL OPERATIONS
- ------------------------
Until a few years ago, the Company's overseas business was
conducted by Newell International, an exporter of the Company's
products. Newell International, with 1996 sales approaching
$60.0 million, had consistently increased sales since it was
established more than two decades ago.
Then, in November 1994, the Company began a major emphasis
on overseas expansion with the acquisition of Corning's $130.0
million European consumer products business. Now known as Newell
Europe, the acquisition included Corning's manufacturing
facilities in England, France and Germany. The purchase also
included the trademark rights and product lines of Pyrex{r}, one
of the most recognized brands in Europe (see note 2 to the
consolidated financial statements).
More recently, the 1995 acquisition of Berol, an
international manufacturer and marketer of writing instruments,
provided the Company with international sales of more than $80.0
million and extensive foreign manufacturing facilities.
Recent acquisitions, combined with existing sales by Newell
International and by Canadian businesses (approximately $145.0
million), have pushed Newell's international business to almost
15% of sales and 10% of operating income (see note 13 to the
consolidated financial statements for a more detailed geographic
segment breakdown). The non-U.S. business is growing at a faster
pace than the U.S. business, as shown below:
28
Year Ended December 31,
----------------------------------
1996 1995 % Change
-------- -------- --------
(in millions)
Net sales:
U.S. $2,458.2 $2,157.0 14.0%
Non-U.S. 414.6 341.4 21.4
-------- --------
Total $2,872.8 $2,498.4 15.0%
======== ========
Operating income:
U.S. $ 437.7 $ 389.1 12.5%
Non-U.S. 48.0 30.4 57.9
-------- --------
Total $ 485.7 $ 419.5 15.8%
======== ========
The Company expects this trend to continue as it pursues its
substantial international growth opportunities.
29
1995 vs. 1994
- -------------
Net sales for 1995 were $2,498.4 million, representing an
increase of $423.5 million or 20.4% from $2,074.9 million in
1994. The overall increase in net sales was primarily
attributable to contributions from the 1995 acquisitions of
Decorel and Berol, and the 1994 acquisitions of HFI, Faber and
Newell Europe (all of which are described in note 2 to the
consolidated financial statements). Internal growth was lower
than expected in 1995 due to a sluggish retail environment. Net
sales for each of the Company's product groups (and the primary
reasons for the increases) were as follows, in millions:
Year Ended December 31,
-------------------------------- Primary Reasons
1995 1994 %Change for Increases
-------- -------- -------- ----------------------
Housewares $ 819.6 $ 691.8 18.5% Newell Europe November
1994 acquisition
Home Furnishings 732.3 642.8 13.9 Decorel October 1995
acquisition and
HFI August 1994
acquisition
Office Products 582.2 383.2 51.9 Berol November 1995
acquisition,
Faber October 1994
acquisition and
9% internal growth
Hardware & Tools 364.3 357.1 2.0 Internal growth
-------- --------
$2,498.4 $2,074.9 20.4%
======== ========
Gross income as a percent of net sales for 1995 was 31.3%
versus 32.3% in 1994. The decrease was due to lower than average
gross margins from the businesses acquired in 1995 and 1994.
SG&A as a percent of net sales in 1995 was 14.5% versus
15.1% in 1994. The decrease was due to lower spending at the
Company's core businesses and low levels of SG&A at Faber.
Net nonoperating expenses for 1995 were $48.7 million versus
$28.6 million in 1994. The $20.1 million change included a $19.8
million increase in interest expense and a $3.9 million increase
in amortization of trade names and goodwill as a result of
additional borrowings and capitalized goodwill related to the
1995 and 1994 acquisitions. For supplementary information
regarding other nonoperating expenses, see note 12 to the
consolidated financial statements.
30
The effective tax rate was 40.0% in 1995 versus 40.6% in
1994. See note 11 to the consolidated financial statements for
an explanation of the effective tax rate.
Net income for 1995 was $222.5 million, representing an
increase of $26.9 million or 13.8% from 1994. Earnings per share
for 1995 were up 13.7% to $1.41 versus $1.24 in 1994. The
increases in net income and earnings per share were primarily
attributable to contributions from the 1995 and 1994 acquisitions
(net of associated interest expense and goodwill amortization)
and an increase in operating margins at several of the core
businesses.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
SOURCES:
- -------
The Company's primary sources of liquidity and capital
resources include cash provided from operations and use of
available borrowing facilities.
Operating activities provided net cash of $367.3 million
during 1996, an increase of $90.6 million from $276.7 million in
1995. This increase was primarily due to an increase in net
income and effective working capital management in 1996.
During 1996, the Company amended its revolving credit
agreement with 23 banks to provide for a five-year $900.0 million
agreement which will terminate in June 2001. Under this
agreement, the Company may borrow, repay and reborrow funds in an
aggregate amount up to $900.0 million, at a floating interest
rate. At December 31, 1996, there were no borrowings under the
revolving credit agreement.
In lieu of borrowings under the Company's revolving credit
agreement, the Company may issue up to $900.0 million of
commercial paper. The Company's revolving credit agreement
provides the committed backup liquidity required to issue
commercial paper. Accordingly, commercial paper may only be
issued up to the amount available for borrowing under the
Company's revolving credit agreement. At December 31, 1996,
$404.0 million (face or principal amount) of commercial paper was
outstanding. The entire amount is classified as long-term debt.
At December 31, 1996, the Company had outstanding $295.0
million (principal amount) of medium-term notes with maturities
ranging from five to ten years at an average rate of interest
equal to 6.4%.
The Company has a universal shelf registration statement
under which the Company may issue up to $500.0 million of debt
and equity securities, subject to market conditions. At December
31
31, 1996, the Company had not yet issued any securities under
this registration statement.
The Company has short-term foreign and domestic uncommitted
lines of credit with various banks which are available for short-
term financing. Borrowings under the Company's uncommitted lines
of credit are subject to discretion of the lender. The Company's
uncommitted lines of credit do not have a material impact on the
Company's liquidity. Borrowings under the Company's uncommitted
lines of credit at December 31, 1996 totalled $70.9 million.
USES:
- ----
The Company's primary uses of liquidity and capital
resources include capital expenditures, dividend payments and
acquisitions.
Capital expenditures were $94.2 million, $82.6 million and
$66.0 million in 1996, 1995 and 1994, respectively.
The Company has paid regular cash dividends on its common
stock since 1947. On February 11, 1997, the quarterly cash
dividend was increased to $0.16 per share from the $0.14 per
share that had been paid since February 6, 1996. Prior to this
date, the quarterly cash dividend had been paid at $0.12 per
share since May 11, 1995, which was an increase from the $0.10
per share paid since May 12, 1994. Dividends paid during 1996,
1995 and 1994 were $88.9 million, $72.8 million and $61.5
million, respectively. In August 1994, the Company's Board of
Directors declared a two-for-one common stock split in the form
of a 100% stock distribution of the Company's common stock, which
was paid on September 1, 1994 to stockholders of record on August
15, 1994. All per share data has been adjusted to reflect the
two-for-one stock split.
Retained earnings increased in 1996, 1995 and 1994 by $167.6
million, $149.7 million and $134.0 million, respectively. The
average dividend payout ratio to common stockholders in 1996,
1995 and 1994 was 35%, 33% and 31%, respectively (represents the
percentage of earnings per share paid in cash to stockholders).
In 1996, the Company acquired Holson Burnes and completed
other minor acquisitions for a total cash purchase price of $42.6
million. In 1995 and 1994, the Company completed acquisitions
with total cash purchase prices of $210.6 million and $360.8
million, respectively. All of these acquisitions were accounted
for as purchases and were paid for with proceeds obtained from
the issuance of commercial paper, medium-term notes, notes
payable under the Company's lines of credit or shares of the
Company's common stock.
32
The increases in current assets, current liabilities,
property, plant and equipment and trade names and goodwill during
1996, 1995 and 1994 were primarily due to the acquisitions
occurring in those years.
Working capital at December 31, 1996 was $471.1 million
compared to $452.6 million at December 31, 1995 and $133.6
million at December 31, 1994. The current ratio at December 31,
1996 was 1.74:1 compared to 1.67:1 at December 31, 1995 and
1.17:1 at December 31, 1994. The working capital and current
ratio increased in 1996 and 1995 versus 1994 as a result of
increased current assets related to acquired businesses coupled
with lower levels of short-term debt. Total debt to total
capitalization (net of cash and cash equivalents) was .34:1 at
December 31, 1996, .40:1 at December 31, 1995 and .38:1 at
December 31, 1994. The ratio decreased in 1996 primarily as a
result of paying down debt with cash provided from operations.
The Company believes that cash provided from operations and
available borrowing facilities will continue to provide adequate
support for the cash needs of existing businesses; however,
certain events, such as significant acquisitions, could require
additional external financing.
In 1995, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." The
adoption of this statement in 1996 was not material to the
consolidated financial statements.
In 1995, the FASB also issued SFAS No. 123, "Accounting for
Stock Based Compensation." The Company adopted the disclosure
requirements of this statement (see note 10 to the consolidated
financial statements) and will continue to apply APB Opinion No.
25 to its stock option plans.
Environmental Matters
- ---------------------
The Company is involved in various environmental remediation
and other compliance activities, including activities arising
under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund") and similar state
statutes. Certain information regarding these activities is
included in note 14 to the consolidated financial statements.
Based on information currently available to it, the Company has
estimated that remediation costs associated with these activities
will be between $9.6 million and $17.3 million. As of December
31, 1996, the Company had a reserve equal to $15.9 million for
such remediation costs in the aggregate. Because of the
uncertainties associated with environmental assessment and
remediation activities, the possibility that sites could be
identified in the future that require environmental remediation
33
and the possibility of additional sites as a result of businesses
acquired, actual costs to be incurred by the Company may vary
from the Company's estimates. Subject to difficulties in
estimating future environmental costs, the Company does not
expect that any sums it may have to pay in connection with
environmental matters in excess of amounts reserved will have a
material adverse effect on its consolidated financial statements.
Outlook
- -------
The Company's primary financial goals are to maintain return
on beginning equity ("ROE") at 20% or above and increase earnings
per share ("EPS") an average of 15% per year, while maintaining a
prudent ratio of total debt to total capital ("leverage"). The
Company has achieved these goals over the last ten years,
averaging 21% ROE, increasing EPS 20% and averaging 28% leverage.
The factors affecting the Company's ability to achieve these
goals in the future will be the rates of internal and acquisition
growth.
In terms of internal growth, the Company has achieved an
average of 5% internal growth over the last five years. This has
been accomplished by adding new customers, cross-selling existing
product lines to current customers, cultivating the Company's
relationships with volume purchasers, entering new markets, and,
most important, introducing new products. The rate at which the
Company grows internally in 1997 and beyond will likely depend on
its success in these areas. For 1997, the rate of internal
growth is expected to be in the 3-5% range. In addition, the
Company's internal growth rate may be impacted by external
factors, such as the strength of retail economies (primarily in
the U.S. and to a lesser extent in Canada, Central and South
America, and Europe), the nature of the mareketplace (which can
be influenced by large and well-established manufacturers as well
as large volume purchasers, many of which are much larger than
the Company and have significant bargaining power) and the risks
associated with doing business internationally (including
currency fluctuations, tariffs, nationalization and other
political and regulatory risks).
In terms of acquisition growth, since 1990 the Company has
more than doubled its size, acquiring businesses with annual
sales of almost $2.0 billion. The rate at which the Company can
integrate these recent acquisitions, in order to meet the
Company's high standards of profitability, may affect near-term
EPS growth. Over the longer term, the Company's ability to make
and integrate strategic acquisitions will impact the EPS growth
rate.
On October 15, 1996, Black & Decker exercised its option to
convert the 150,000 shares of privately placed Black & Decker
preferred stock owned by the Company (purchased at a cost of
34
$150.0 million) into 6.4 million shares of Black & Decker common
stock. Prior to conversion, the preferred stock paid a 7.75%
cumulative dividend, aggregating $10.2 million annually or $0.07
per Newell common share, net of tax. Based on historical
information, the dividends paid to the Company on the shares of
Black & Decker Common Stock owned by the Company are expected to
total $2.7 million annually, or $0.02 per Newell common share,
net of tax.
Forward-looking statements made in this section and other
sections of this report are made in reliance upon the safe harbor
provisions of the private Securities Litigation Reform Act of
1995. Such forward-looking statements are subject to risks and
uncertainties which are generally discussed here. Additional
information regarding such risks and uncertainties is included in
Exhibit 99 to the 1996 10-K Report, which identifies in greater
detail the risk factors which could cause the Company's actual
financial results to differ materially from results forecast or
estimated by the Company in forward-looking statements.
35
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
Report of Independent Public Accountants
----------------------------------------
To the Stockholders and Board of Directors of Newell Co.:
We have audited the accompanying consolidated balance sheets of
Newell Co. (a Delaware corporation) and subsidiaries as of
December 31, 1996, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996.
These consolidated financial statements are the responsibility of
Newell Co.'s management. Our responsibility is to express an
opinion on these consolidated financial statements 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, the financial statements referred to above
present fairly, in all material respects, the financial position
of Newell Co. and subsidiaries as of December 31, 1996, 1995 and
1994, and the results of their operations and their cash flows
for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed
in Part IV Item 14(a)(2) of this Form 10-K is presented for purposes of
complying with the Securities and Exchange Commission's rules and
is not a part of the basic financial statements. This schedule
has been subjected to the auditing procedures applied in our
audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 27, 1997.
36
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
(In thousands, except per share data)
Net sales $2,872,817 $2,498,414 $2,074,934
Cost of products sold 1,965,500 1,715,585 1,403,786
---------- ---------- ----------
GROSS INCOME 907,317 782,829 671,148
Selling, general and
administrative expenses 421,630 363,356 313,283
---------- ---------- ----------
OPERATING INCOME 485,687 419,473 357,865
Nonoperating expenses (income):
Interest expense 56,989 49,812 29,970
Other 4,064 (1,124) (1,397)
---------- ---------- ----------
Net 61,053 48,688 28,573
---------- ---------- ----------
Income before income taxes 424,634 370,785 329,292
Income taxes 168,155 148,314 133,717
---------- ---------- ----------
NET INCOME $ 256,479 $ 222,471 $ 195,575
========== ========== ==========
Earnings per share $1.62 $1.41 $1.24
========== ========== ==========
Weighted average shares outstanding 158,764 158,212 157,774
========== ========== ==========
See notes to consolidated financial statements.
37
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1996 1995 1994
---------- ---------- ----------
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,360 $ 58,771 $ 14,892
Accounts receivable, net 404,170 390,296 335,806
Inventories, net 509,504 509,245 420,654
Deferred income taxes 121,152 107,499 90,063
Prepaid expenses and other 68,928 67,063 56,256
---------- ---------- ----------
TOTAL CURRENT ASSETS 1,108,114 1,132,874 917,671
MARKETABLE EQUITY SECURITIES 240,789 53,309 64,740
OTHER LONG-TERM INVESTMENTS 58,703 203,857 214,044
OTHER ASSETS 119,168 122,702 133,652
PROPERTY, PLANT AND EQUIPMENT, NET 555,434 530,285 454,597
TRADE NAMES AND GOODWILL 922,846 884,084 703,572
---------- ---------- ----------
TOTAL ASSETS $3,005,054 $2,927,111 $2,488,276
========== ========== ==========
See notes to consolidated financial statements.
38
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
December 31,
1996 1995 1994
---------- ---------- ----------
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 70,877 $ 104,017 $ 209,720
Accounts payable 105,333 113,927 112,269
Accrued compensation 65,632 73,057 57,785
Other accrued liabilities 324,719 317,184 296,554
Income taxes 37,209 13,043 8,271
Current portion of long-term debt 33,243 59,031 99,425
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 637,013 680,259 784,024
LONG-TERM DEBT 672,033 761,578 408,986
OTHER NONCURRENT LIABILITIES 156,691 158,321 152,697
DEFERRED INCOME TAXES 47,477 30,987 17,243
STOCKHOLDERS' EQUITY
Common stock - authorized shares,
400.0 million at $1 par value;
Outstanding shares: 158,871 158,626 157,844
1996 - 158.9 million
1995 - 158.6 million
1994 - 157.8 million
Additional paid-in capital 197,889 190,860 175,218
Retained earnings 1,106,146 938,567 788,862
Net unrealized gain on securities
available for sale 36,595 15,912 9,868
Cumulative translation adjustment (7,661) (7,999) (6,466)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,491,840 1,295,966 1,125,326
---------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,005,054 $2,927,111 $2,488,276
========== ========== ==========
See notes to consolidated financial statements.
39
NEWELL CO. AND SUBSIDIARIES -- CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995 1994
--------- --------- ---------
(In thousands)
OPERATING ACTIVITIES:
Net income $ 256,479 $ 222,471 $ 195,575
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation and amortization 116,362 101,722 72,485
Deferred income taxes 44,700 40,747 30,673
Net gains(losses) on:
Marketable equity securities - (15,819) (373)
Write-off of investment 1,339 16,000 -
Equity earnings of investment (6,364) (5,993) (5,661)
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable 1,812 16,380 (254)
Inventories 27,256 (4,444) (13,798)
Other current assets 37 (4,629) 4,187
Accounts payable (25,564) (14,941) (5,626)
Accrued liabilities and other (48,731) (74,752) (38,782)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 367,326 276,742 238,426
--------- --------- ---------
INVESTING ACTIVITIES:
Acquisitions, net (58,213) (187,788) (345,392)
Expenditures for property, plant
and equipment (94,237) (82,562) (66,026)
Purchase of marketable equity securities (3,513) - -
Sale of marketable equity securities - 37,324 1,053
Disposals of noncurrent assets and other 8,767 1,227 2,628
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (147,196) (231,799) (407,737)
--------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of debt 1,193 315,191 402,708
Proceeds from exercised stock options and other 7,274 7,100 2,799
Payments on notes payable and long-term debt (194,108) (250,589) (162,638)
Cash dividends (88,900) (72,766) (61,532)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (274,541) (1,064) 181,337
--------- --------- ---------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (54,411) 43,879 12,026
Cash and cash equivalents at beginning of year 58,771 14,892 2,866
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,360 $ 58,771 $ 14,892
========= ========= ========
Supplemental cash flow disclosures:
Cash paid during the year for:
Income taxes $ 123,700 $ 129,300 $ 115,900
Interest 55,400 44,800 31,100
See notes to consolidated financial statements.
40
NEWELL CO. AND SUBSIDIARIES -- CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Net
Unrealized
Gain On
Add'l Securities Cumulative
Common Paid-In Retained Available Translation
Stock Capital(1) Earnings for Sale Adjustment
------ --------- -------- ---------- -----------
(In thousands, except per share data)
Balance at December 31, 1993 $78,793 $ 249,588 $ 654,819 N/A $ (4,055)
Net income 195,575
Fair value adjustment for
securities available for
sale at January 1, 1994 $ 3,353
Cash dividends:
Common stock $0.39 per share (61,532)
Stock split, form of 100%
stock dividend 78,910 (78,910)
Exercise of stock options 155 4,604
Change in net unrealized
gain on securities
available for sale 6,515
Foreign currency translation
and other (14) (64) (2,411)
-------- -------- -------- ------- -------
Balance at December 31, 1994 157,844 175,218 788,862 9,868 (6,466)
Net income 222,471
Cash dividends:
Common stock $0.46 per share (72,766)
Stock issued for acquisitions 381 8,943
Exercise of stock options 412 6,759
Change in net unrealized
gain on securities
available for sale 6,044
Foreign currency translation
and other (11) (60) (1,533)
-------- ------ -------- ------ --------
Balance at December 31, 1995 158,626 190,860 938,567 15,912 (7,999)
Net income 256,479
Cash dividends:
Common stock $0.56 per share (88,900)
Exercise of stock options 245 7,088
Change in net unrealized
gain on securities
available for sale 20,683
Foreign currency translation
and other (59) 338
------- ------- --------- ------- -------
Balance at December 31, 1996 $158,871 $ 197,889 $1,106,146 $ 36,595 $ (7,661)
======= ======= ========= ======= =======
(1) Net of treasury stock (at cost) of $199, $161 and $134 as of December 31,
1996, 1995 and 1994, respectively.
See notes to consolidated financial statements.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1) SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial
statements include the accounts of Newell and its majority owned
subsidiaries ("the Company") after elimination of intercompany
accounts and transactions.
Use of estimates: The preparation of these financial
statements required the use of certain estimates by management in
determining the Company's assets, liabilities, revenue and
expenses and related disclosures.
Revenue Recognition: Sales of merchandise are recognized
upon shipment to customers.
Disclosures about Fair Value of Financial Instruments: The
following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Long-term Investments: The fair value of the investment in
convertible preferred stock of The Black & Decker
Corporation ("Black & Decker") in 1995 and 1994 was based on
an independent appraisal. This preferred stock was
converted into Black & Decker common stock on October 15,
1996 and reclassified to Long-term Marketable Equity
Securities at December 31, 1996.
Long-term Debt: The fair value of the Company's long-term
debt issued under the medium-term note program is estimated
based on quoted market prices which approximate cost. All
other significant long-term debt is pursuant to floating
rate instruments whose carrying amounts approximate fair
value.
Allowances for Doubtful Accounts: Allowances for doubtful
accounts at December 31 totalled $13.2 million in 1996, $11.0
million in 1995 and $10.9 million in 1994.
42
Inventories: Inventories are stated at the lower of cost or
market value. Cost of certain domestic inventories
(approximately 86%, 89% and 87% of total inventories at December
31, 1996, 1995 and 1994, respectively) was determined by the
"last-in, first-out" ("LIFO") method; for the balance, cost was
determined using the "first-in, first-out"("FIFO") method. If
the FIFO inventory valuation method had been used exclusively,
inventories would have increased by $26.0 million, $29.0 million
and $12.3 million at December 31, 1996, 1995 and 1994,
respectively.
The components of inventories at the end of each year, net
of the LIFO reserve, were as follows:
December 31,
1996 1995 1994
---- ---- ----
(In millions)
Materials and supplies $124.5 $147.7 $ 81.7
Work in process 87.9 87.5 98.9
Finished products 297.1 274.0 240.1
------ ------ ------
$509.5 $509.2 $420.7
===== ===== =====
Inventory reserves at December 31 totalled $81.2 million in
1996, $67.3 million in 1995 and $51.6 million in 1994.
Other Long-term Investments: At December 31, 1995 and 1994,
the Company owned 150,000 shares of privately placed Black &
Decker convertible preferred stock, Series B, purchased at a cost
of $150.0 million. On October 15, 1996, in accordance with the
terms of the preferred stock, Black & Decker exercised its option
to convert the preferred stock into 6.4 million shares of Black &
Decker common stock. As a result of the conversion, the common
stock is classified as a Long-term Marketable Equity Security in
the December 31, 1996 consolidated balance sheet.
The Company has a 49% ownership interest in American Tool
Companies, Inc., a manufacturer of hand tools and power tool
accessory products marketed primarily under the VISE-GRIP and
IRWIN trademarks. This investment is accounted for on the equity
method with a net investment of $45.4 million.
Long-term Marketable Equity Securities: Long-term
Marketable Equity Securities classified as available for sale are
carried at fair value with adjustments to fair value reported
separately, net of tax, as a component of stockholders' equity
(and excluded from earnings). Long-term marketable equity
securities at the end of each year are summarized as follows:
43
December 31,
1996 1995 1994
---- ---- ----
(In millions)
Aggregate market value $240.8 $ 53.3 $ 64.7
Aggregate cost 180.3 26.8 48.3
----- ------ ------
Unrealized gain $ 60.5 $ 26.5 $ 16.4
===== ===== =====
During 1995, the Company received proceeds of $37.3 million
from the sale of Long-term Marketable Equity Securities and
recorded a gain of $15.8 million on the sale. Gains and losses
on the sales of Long-term Marketable Equity Securities are based
upon the average cost of securities sold.
Property, Plant and Equipment: Property, plant and
equipment at the end of each year consisted of the following:
December 31,
1996 1995 1994
---- ---- ----
(In millions)
Land $ 21.1 $ 16.2 $ 9.6
Buildings and improvements 206.9 194.8 164.8
Machinery and equipment 699.6 620.2 515.8
------- ------- -------
927.6 831.2 690.2
Allowance for depreciation (372.2) (300.9) (235.6)
------- ------ ------
$ 555.4 $ 530.3 $ 454.6
======= ====== ======
The components of depreciation are provided by annual
charges to income calculated to amortize, principally on the
straight-line basis, the cost of the depreciable assets over
their depreciable lives. Estimated useful lives determined by
the Company are as follows:
Buildings and improvements 20-40 years
Machinery and equipment 5-12 years
Replacements and improvements are capitalized. Expenditures
for maintenance and repairs are charged to expense.
Trade Names and Goodwill: The cost of trade names and the
excess of cost over identifiable net assets of businesses
acquired are being amortized over 40 years on a straight-line
basis. Total accumulated amortization of trade names and
44
goodwill was $99.7 million, $76.3 million and $57.0 million at
December 31, 1996, 1995 and 1994, respectively.
Subsequent to an acquisition, the Company periodically
evaluates whether later events and circumstances have occurred
that indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may
not be recoverable. When factors indicate that goodwill should
be evaluated for possible impairment, the Company uses an
estimate of the relevant business's undiscounted net income over
the remaining life of the goodwill in measuring whether the
goodwill is recoverable.
Accrued Liabilities: Accrued Liabilities at the end of each
year included the following:
December 31,
1996 1995 1994
---- ---- ----
(In millions)
Customer accruals $ 91.4 $ 83.7 $ 74.9
Accrued self-insurance liability 46.3 39.7 38.7
Customer accruals are promotional allowances and rebates
given to customers in exchange for their selling efforts. The
self-insurance accrual is primarily for workers' compensation and
is estimated based upon historical claim experience.
Foreign Currency Translation: Foreign currency balance
sheet accounts are translated into U.S. dollars at the rates of
exchange in effect at fiscal year end. Income and expenses are
translated at the average rates of exchange in effect during the
year. The related translation adjustments are made directly to a
separate component of stockholders' equity. Foreign currency
transaction gains and losses were insignificant in 1996, 1995 and
1994.
Earnings per share: The earnings per share amounts are
computed based on the weighted average monthly number of shares
outstanding during the year. Common stock equivalents assumed
with the stock option plans are not materially dilutive to
earnings per share.
Accounting Principles Adopted: In 1995, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of." The adoption of this statement
in 1996 was not material to the consolidated financial
statements.
45
In 1995, the FASB also issued SFAS No. 123, "Accounting for
Stock Based Compensation." The Company adopted the disclosure
requirements of this statement (see note 10 to the consolidated
financial statements) and will continue to apply APB Opinion No.
25 to its stock option plans.
Reclassification: Certain 1995 and 1994 amounts have been
reclassified to conform with the 1996 presentation.
46
2) ACQUISITIONS OF BUSINESSES
1994
- ----
On August 29, 1994, the Company acquired Home Fashions,
Inc.("HFI"), a manufacturer and marketer of decorative window
coverings, including vertical blinds and pleated shades sold
under the Del Mar and LouverDrape brand names. HFI was combined
with Levolor and together they are operated as a single entity
called Levolor Home Fashions. On October 18, 1994, the Company
acquired Faber-Castell Corporation ("Faber"), a maker and
marketer of markers and writing instruments, including wood-cased
pencils and rolling ball pens, sold under the Eberhard Faber
brand name. Faber was combined with Sanford and together they
are operated as a single entity called Sanford. On November 30,
1994, the Company acquired the European consumer products
business of Corning Incorporated (now known as "Newell Europe").
This acquisition included Corning's consumer products
manufacturing facilities in England, France and Germany, the
European trademark rights and product lines for Pyrex, Pyroflam
and Visions brands in Europe, the Middle East and Africa, and
Corning's consumer distribution network throughout these areas
(Pyrex and Visions are registered trademarks of Corning
Incorporated). Additionally, the Company became the distributor
in Europe, the Middle East and Africa for Corning's U.S.
manufactured cookware and dinnerware brands. For these and other
minor 1994 acquisitions, the Company paid $360.8 million in cash
and assumed $12.8 million of debt.
These transactions were accounted for as purchases;
therefore results of operations are included in the accompanying
consolidated financial statements since their respective dates of
acquisition. The acquisition costs were allocated to the fair
market value of the assets acquired and liabilities assumed and
resulted in trade names and goodwill of approximately
$202.2 million.
47
1995
- ----
On October 2, 1995, the Company acquired Decorel
Incorporated ("Decorel"), a manufacturer and marketer of ready-
made picture frames. Decorel was combined with Intercraft. On
November 2, 1995, the Company acquired Berol Corporation
("Berol"), a designer, manufacturer and marketer of markers and
writing instruments. Berol was combined with Sanford. For these
and other minor 1995 acquisitions, the Company paid $210.6
million in cash, issued 379,507 shares of the Company's common
stock (valued at approximately $9.5 million) and assumed $144.2
million of debt.
These transactions were accounted for as purchases;
therefore results of operations are included in the accompanying
consolidated financial statements since their respective dates of
acquisition. The acquisition costs were allocated to the fair
market value of the assets acquired and liabilities assumed and
resulted in trade names and goodwill of approximately
$181.1 million.
48
1996
- ----
On January 19, 1996, the Company acquired The Holson Burnes
Group, Inc. ("Holson Burnes"), a manufacturer and marketer of
photo albums and picture frames. For this and other minor 1996
acquisitions, the Company paid $42.6 million in cash and assumed
$44.4 million of debt.
These transactions were accounted for as purchases;
therefore results of operations are included in the accompanying
consolidated financial statements since their respective dates of
acquisition. The acquisition costs were allocated on a
preliminary basis to the fair market value of the assets acquired
and liabilities assumed and resulted in trade names and goodwill
of approximately $37.0 million. The final adjustments to the
purchase price allocation are not expected to be material to the
financial statements.
The unaudited consolidated results of operations for the
years ended December 31, 1996 and 1995 on a pro forma basis, as
though Decorel, Berol and Holson Burnes had been acquired on
January 1, 1995, are as follows:
1996 1995
-------- --------
(In millions, except per share data)
Net sales $2,877.3 $2,867.8
Net income 255.5 200.1
Earnings per share 1.61 1.26
49
3) CREDIT ARRANGEMENTS
The Company has short-term foreign and domestic uncommitted
lines of credit with various banks and a commercial paper program
which are available for short-term financing. Borrowings under
the Company's uncommitted lines of credit are subject to
discretion of the lender. The Company's uncommitted lines of
credit do not have a material impact on the Company's liquidity.
Borrowings under the Company's uncommitted lines of credit at
December 31, 1996 totalled $70.9 million.
The following is a summary of borrowings under foreign and
domestic lines of credit:
1996 1995 1994
---- ---- ----
(In millions)
Notes payable to banks:
Outstanding at year-end
- borrowing $ 70.9 $104.0 $ 92.6
- weighted average interest rate 4.7% 6.6% 6.0%
Average for the year
- borrowing 99.4 102.4 21.5
- weighted average interest rate 5.3% 6.7% 4.9%
Maximum borrowing outstanding
during the year 120.0 137.8 119.3
The Company also can issue up to $900.0 million of
commercial paper. The revolving credit facilities, as described
in note 4 to the consolidated financial statements, provide the
committed backup liquidity required to issue commercial paper.
The following is a summary of commercial paper:
1996 1995 1994
---- ---- ----
(In millions)
Commercial paper:
Outstanding at year-end
- borrowing $404.0 $448.6 $417.1
- average interest rate 5.9% 5.8% 6.0%
Average for the year
- borrowing 512.3 410.4 324.8
- average interest rate 5.3% 6.0% 4.4%
Maximum borrowing outstanding
during the year 594.0 500.0 479.0
50
4) LONG-TERM DEBT
The following is a summary of long-term debt:
December 31,
1996 1995 1994
---- ---- ----
(In millions)
Medium-term notes $295.0 $345.0 $186.0
Commercial paper 404.0 448.6 300.0
Other long-term debt 6.2 27.0 22.4
705.2 820.6 508.4
Current portion (33.2) (59.0) (99.4)
------ ------ ------
$672.0 $761.6 $409.0
===== ===== =====
During 1996, the Company amended its revolving credit
agreement to provide for a five-year $900.0 million agreement
which will terminate in June 2001. Under this agreement, the
Company may borrow, repay and reborrow funds in an aggregate
amount up to $900.0 million, at a floating interest rate. At
December 31, 1996, there were no borrowings under the revolving
credit agreement.
In lieu of borrowings under the Company's revolving credit
agreement, the Company may issue up to $900.0 million of
commercial paper. The Company's revolving credit agreement
provides the committed backup liquidity required to issue
commercial paper. Accordingly, commercial paper may only be
issued up to the amount available for borrowing under the
Company's revolving credit agreement. At December 31, 1996,
$404.0 million (face or principal amount) of commercial paper was
outstanding. The entire amount is classified as long-term debt.
At December 31, 1996, the Company had outstanding $295.0
million (principal amount) of medium-term notes with maturities
ranging from five to ten years at an average rate of interest
equal to 6.4%.
The Company has a universal shelf registration statement
under which the Company may issue up to $500.0 million of debt
and equity securities, subject to market conditions. At December
31, 1996, the Company had not yet issued any securities under
this registration statement.
The revolving credit agreement permits the Company to borrow
funds using Syndicated loans (Base Rate loans or Eurodollar
loans), Money Market loans (LIBOR Market loans or Set Rate loans)
or Acceptance liabilities, as selected by the Company. The terms
51
of these agreements require, among other things, that the Company
maintain a certain Total Debt to Total Capital Ratio and a
minimum Operating Income to Interest Expense Ratio, as defined in
these agreements. As of December 31, 1996, the Company was in
compliance with these agreements.
The aggregate maturities of Long-term Debt outstanding at
December 31, 1996, are as follows:
Year Aggregate Maturities
---- --------------------
(In millions)
1997 $ 33.2
1998 1.1
1999 8.0
2000 148.0
2001 404.9
Thereafter 110.0
------
$705.2
======
52
5) DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative
financial instruments and does not use them for trading purposes.
They are used to manage certain interest rate and foreign
currency risks.
Interest rate swap agreements are utilized to convert
certain floating rate debt instruments into fixed rate debt.
Premiums paid related to interest rate swap agreements are
amortized into interest expense over the terms of the agreements.
As of December 31, 1996, the Company did not have any interest
rate swaps outstanding.
The Company uses forward exchange contracts to hedge certain
purchase commitments denominated in currencies other than the
domestic currency. Unamortized premiums are included in other
assets in the consolidated balance sheets. Gains and losses
relating to qualifying hedges of firm commitments are deferred
and are recognized in income as adjustments of carrying amounts
when the hedged transaction occurs.
As of December 31, 1996, certain forward purchase contracts
to purchase approximately 2.5 billion Japanese yen for $22.3
million through June 1997 were outstanding. As of December 31,
1996, certain forward purchase contracts to purchase
approximately $14.2 million for 19.2 million Canadian dollars
through February 1997 were outstanding.
The Company does not obtain collateral or other security to
support financial instruments subject to credit risk but monitors
the credit standing of the counterparties.
6) LEASES
The Company has minimum rental payments through the year
2007 under noncancellable operating leases as follows:
53
Year Minimum Payments
---- ----------------
(In millions)
1997 $24.8
1998 16.2
1999 9.6
2000 6.3
2001 5.1
Thereafter 17.9
-----
$79.9
=====
Total rental expense for all operating leases was
approximately $45.0 million, $38.3 million and $31.8 million in
1996, 1995 and 1994, respectively.
54
7) EMPLOYEE BENEFIT RETIREMENT PLANS
The Company and its subsidiaries have noncontributory
pension and profit sharing plans covering substantially all of
its foreign and domestic employees. Pension plan benefits are
generally based on years of service and/or compensation. The
Company's funding policy is to contribute not less than the
minimum amounts required by the Employee Retirement Income
Security Act of 1974 or local statutes to assure that plan assets
will be adequate to provide retirement benefits. Due to the
overfunded status of most of the pension plans, contributions to
these plans were insignificant during the past three years.
The net periodic pension cost components for all significant
pension plans are as follows:
Year Ended December 31,
----------------------------
1996 1995 1994
==== ==== ====
(In millions)
Service cost-benefits earned
during the year $ 16.0 $ 14.3 $ 13.4
Interest cost on projected
benefit obligation 36.1 35.0 31.3
Actual return on assets (74.0) (64.0) (31.3)
Net amortization and
other components 24.3 17.5 (9.4)
------ ------ ------
Total pension plan expense $ 2.4 $ 2.8 $ 4.0
===== ===== =====
The principal actuarial assumptions used are as follows:
1996 1995 1994
---- ---- ----
(In percent)
Measurement of projected
benefit obligation:
Discount rate 7.75% 7.75% 8%
Long-term rate of
compensation increase 5% 5% 5%
Long-term rate of return on
plan assets 9% 9% 9%
55
The following table sets forth the funded status of the
pension plans and the amount recognized in the Company's
consolidated balance sheets:
Plans Whose Plans Whose
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets
------------ -----------
1996 1995 1994 1996 1995(1) 1994
---- ---- ---- ---- ---- ----
(In millions)
Actuarial present value of
benefit obligations:
Vested $413.9 $329.0 $347.1 $ 17.8 $ 89.2 $ 21.1
Nonvested 10.6 10.1 12.0 9.1 10.5 4.8
------ ------ ------ ------ ------ ------
Accumulated benefit
obligation 424.5 339.1 359.1 26.9 99.7 25.9
Effect of projected future
salary increases 20.5 15.2 20.9 10.3 17.9 5.7
----- ----- ----- ---- ---- ----
Projected benefit
obligation 445.0 354.3 380.0 37.2 117.6 31.6
Plan assets at market value
(primarily common stock and
fixed income investments) 585.8 463.1 469.2 - 75.9 6.1
----- ----- ----- ---- ----- ----
Plan assets in excess of
(less than) projected
benefit obligation 140.8 108.8 89.2 (37.2) (41.7) (25.5)
Unrecognized transition
(net asset) obligation (7.3) (4.5) (13.5) 2.3 (3.1) 1.7
Unrecognized prior
service cost (7.7) (3.0) - .9 1.1 -
Unrecognized net (gain)loss (54.5) (21.9) (7.5) 7.5 11.3 5.1
------ ------ ------ ---- ----- -----
Net pension asset (liability)
in Other Noncurrent
Assets and Other
Noncurrent Liabilities $ 71.3 $ 79.4 $68.2 $(26.5) $(32.4) $(18.7)
===== ===== ==== ===== ===== =====
56
Total expense under all profit sharing plans was $6.6
million, $5.5 million and $4.5 million for the years ended
December 31, 1996, 1995 and 1994, respectively.
(1) During 1995, the defined benefit plan covering certain
hourly employees contained a temporary unfunded obligation. This
plan was fully funded in 1996.
57
8) RETIREE HEALTH CARE
Several of the Company's subsidiaries currently provide
retiree health care benefits for certain employee groups.
The components of the net postretirement health care cost
are as follows:
Year Ended December 31,
1996 1995 1994
---- ---- ----
(In millions)
Service cost-benefits attributed
to service during the period $ 2.1 $ 1.7 $ 2.0
Interest cost on accumulated
postretirement benefit obligation 7.7 7.5 7.3
Net amortization and deferral (0.3) (0.5) -
----- ---- ----
Net postretirement health care cost $ 9.5 $ 8.7 $ 9.3
===== ==== ====
The following table reconciles the accumulated
postretirement benefit obligation as recognized in the Company's
consolidated balance sheets:
December 31,
1996 1995 1994
---- ---- ----
(In millions)
Accumulated postretirement
benefit obligation:
Retirees $ (63.5) $ (67.4) $ (65.2)
Fully eligible active plan participants (5.5) (5.6) (6.0)
Other active plan participants (28.1) (23.4) (21.1)
------- ------- ------
Accumulated postretirement benefit
obligation (97.1) (96.4) (92.3)
Market value of assets - - -
----- ----- -----
Funded status (97.1) (96.4) (92.3)
Unrecognized net gain (13.0) (13.0) (16.7)
----- ----- -----
Other Noncurrent Liability $(110.1) $(109.4) $(109.0)
====== ====== ======
The actuarial calculation assumed a 10% increase in the
health care cost trend rate for fiscal year 1996. The assumed
rate decreases one percent every year through the year 2000 to 6%
and remains constant beyond that point. The health care cost
trend rate has a significant effect on the amounts reported. For
example, a one percentage point increase in the health care cost
58
trend rate would increase the accumulated postretirement benefit
obligation by $6.3 million and increase net periodic cost by $0.9
million. The discount rate used in determining the accumulated
postretirement benefit obligation was 7.75% in both 1996 and 1995
and 8% in 1994.
9) STOCKHOLDERS' EQUITY
The Company's common stock consists of 400.0 million
authorized shares, with a par value of $1 per share. Of the
total unissued common shares at December 31, 1996, total shares
in reserve included 8.8 million shares for issuance under the
Company's stock option plans.
Each share of common stock includes a preferred stock
purchase right (a "Right"). Each Right will entitle the holder,
until the earlier of October 31, 1998 or the redemption of the
Rights, to buy one four-hundredth of a share of a new series of
preferred stock, denominated "Junior Participating Preferred
Stock, Series B," at a price of $25 per one four-hundredth of a
share (as adjusted to reflect stock splits since the issuance of
the Rights). This preferred stock is nonredeemable and will have
100 votes per share. The Company has reserved 500,000 Series B
preferred shares for issuance upon exercise of such Rights. The
Rights will be exercisable only if a person or group acquires 20%
or more of voting power of the Company or announces a tender
offer following which it would hold 30% or more of the Company's
voting power.
In the event that any person becomes the beneficial owner of
30% or more of the Company's voting power, the Rights (other than
Rights held by the 30% stockholder) would become exercisable for
that number of shares of the Company's common stock having a
market value of two times the exercise price of the Right.
Furthermore, if, following the acquisition by a person or group
of 20% or more of the Company's voting power, the Company were
acquired in a merger or other business combination or 50% or more
of its assets were sold, or in the event of certain types of
self-dealing transactions by a 20% stockholder, each Right (other
than Rights held by the 20% stockholder) would become exercisable
for that number of shares of common stock of the Company (or the
surviving company in a business combination) having a market
value of two times the exercise price of the Right.
The Company may redeem the Rights at one cent per Right
prior to the occurrence of an event that causes the Rights to
become exercisable for common stock. The Board of Directors may
terminate the Company's right to redeem the Rights prior to the
time the Rights become exercisable for common stock at any time
after a group or person acquires 20% or more of the Company's
voting power under certain circumstances.
59
10) STOCK OPTIONS
The Company's stock option plans are accounted for under APB
Opinion No. 25. As a result, the Company grants fixed stock
options under which no compensation cost is recognized. Had
compensation cost for the plans been determined consistent with
FASB Statement No. 123, the Company's net income and earnings per
share would have been reduced to the following pro forma amounts:
Year Ended December 31,
--------------------------
1996 1995
-------- --------
Net income: As reported $256,479 $222,471
Pro forma 254,787 221,345
Primary EPS: As reported $1.62 $1.41
Pro forma 1.60 1.40
Because the FASB Statement No. 123 method of accounting has
not been applied to options granted prior to January 1, 1995, the
resulting pro forma compensation cost may not be representative
of that to be expected in future years.
The Company may grant up to 9.7 million shares under the
plans, of which, the Company has granted 3.1 million shares and
cancelled 2.2 million shares through December 31, 1996. Under
the plans, the option exercise price equals the common stock's
closing price on date of grant, vests over a five-year period and
expires after ten years.
The following summarizes the changes in number of shares of
common stock under option:
60
1996 1995 1994
---------------------- ------------------ ----------------------
Weighted Weighted Weighted
Avg. Exercise Avg. Exercise Avg. Exercise
Shares Price Shares Price Shares Price
------ ------------ ------ ------------ ------ ------------
Outstanding at
beginning of year 1,945,730 $20 2,155,758 $19 2,082,200 $17
Granted 301,850 28 284,250 24 454,400 21
Exercised (243,596) 17 (411,528) 16 (273,196) 11
Cancelled (143,920) 21 (82,750) 21 (107,646) 9
Outstanding at ---------- --- ---------- --- ---------- ---
end of year 1,860,064 22 1,945,730 20 2,155,758 19
========= ========= =========
Exercisable at
end of year 999,118 18 1,113,118 17 1,079,278 16
========= ========= =========
Weighted average
fair value of
options granted
during the year $10 $9
========= =========
100% of 1,860,064 options outstanding at December 31, 1996
have exercise prices between $3.875 and $31.625.
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with the
following assumptions used for grants in 1996 and 1995,
respectively: risk-free interest rate of 6.4% and 6.6%; expected
dividend yields of 1.8% and 1.8%; expected lives of 9.9 years and
9.5 years; and expected volatility of 20% and 20%.
61
11) INCOME TAXES
The provision for income taxes consists of the following:
Year Ended December 31,
----------------------------
1996 1995 1994
---- ---- ----
(In millions)
Current:
Federal $ 96.2 $ 88.5 $ 82.3
State 16.6 16.7 19.1
Foreign 10.6 2.4 1.6
------- ------ ------
123.4 107.6 103.0
Deferred 44.7 40.7 30.7
------- ----- ------
Total $ 168.1 $ 148.3 $ 133.7
====== ====== ======
The components of the net deferred tax asset are as follows:
December 31,
---------------------------------
1996 1995 1994
---- ---- ----
(In millions)
Deferred tax assets:
Accruals, not currently
deductible for tax purposes $ 108.0 $ 105.1 $ 79.5
Postretirement liabilities 43.5 43.6 44.9
Inventory reserves 28.3 16.5 6.2
Self-insurance liability 16.5 13.2 14.1
Other 1.4 0.8 3.0
------- ------- -------
197.7 179.2 147.7
Deferred tax liabilities:
Accelerated depreciation (46.4) (45.5) (37.1)
Prepaid pension asset (30.5) (31.6) (24.2)
Unrealized gain on securities
available for sale (23.9) (10.6) (6.5)
Amortization of intangibles (4.1) - -
Other (19.1) (15.0) (7.0)
------ ------- -------
(124.0) (102.7) (74.8)
Net deferred tax asset $ 73.7 $ 76.5 $ 72.9
====== ====== ======
62
The net deferred tax asset is classified in the consolidated balance
sheets as follows:
December 31,
----------------------------
1996 1995 1994
---- ---- ----
(In millions)
Current net deferred income
tax asset $ 121.2 $ 107.5 $ 90.1
Noncurrent deferred
income tax liability (47.5) (31.0) (17.2)
------- ------- -------
$ 73.7 $ 76.5 $ 72.9
====== ====== ======
A reconciliation of the U.S. statutory rate to the effective income
tax rate is as follows:
Year Ended December 31,
----------------------------
1996 1995 1994
---- ---- ----
(In percent)
Statutory rate 35.0% 35.0% 35.0%
Add (deduct) effect of:
State income taxes, net of
federal income tax effect 3.6 4.3 4.5
Nondeductible trade names
and goodwill amortization 1.5 1.4 1.3
Other (0.5) (0.7) (0.2)
---- ---- -----
Effective rate 39.6% 40.0% 40.6%
==== ==== ====
No U.S. deferred taxes have been provided on the
undistributed non-U.S. subsidiary earnings which are considered
to be permanently invested. At December 31, 1996, the estimated
amount of total unremitted non-U.S. subsidiary earnings is $37.7
million.
The non-U.S. component of income before income taxes was
$40.4 million in 1996, $19.3 million in 1995 and $3.5 million in
1994.
63
12) OTHER NONOPERATING EXPENSES(INCOME)
Total other nonoperating expenses(income) consist of the
following:
Year Ended December 31,
-----------------------------
1996 1995 1994
---- ---- ----
(In millions)
Interest income $ (3.7) $ (1.9) $ (1.0)
Trade names and goodwill amortization 23.6 19.3 15.4
Dividend income (11.0) (12.8) (12.6)
Equity earnings in American Tool
Companies, Inc., in which the
Company has a 49% interest (6.4) (6.0) (5.7)
Write-downs in carrying value
of a long-term foreign
investment accounted for under
the equity method 1.3 16.0 -
Net gain on marketable
equity securities - (15.8) (0.4)
Other 0.3 0.1 2.9
------ ------ ------
$ 4.1 $ (1.1) $ (1.4)
===== ===== =====
13) OTHER OPERATING INFORMATION
INDUSTRY SEGMENT INFORMATION
The Company operates in a single industry segment: the
Company is a manufacturer and full-service marketer of high-
volume, brand-name, staple consumer products sold to volume
purchasers. The Company's consumer products are sold through a
variety of retail and wholesale distribution channels.
The Company's consumer products and the primary brand names
under which they are sold include:
64
Primary
Product Group Product Class Brand Names
- ------------- ------------- -----------
Home Furnishings Window Treatments Newell{r}
Levolor{r}
LouverDrape{r}
Del Mar{r}
Joanna{r}
Picture Frames Intercraft{r}
Decorel{r}
Holson Burnes{r}
Home Storage Products Lee Rowan{r}
System Works{r}
Housewares Glassware & Plasticware Anchor Hocking{r}
Pyrex{r} (1)
Aluminum Cookware & Bakeware Mirro{r}
WearEver{r}
Hair Accessories Goody{r}
Ace{r}
Office Products Markers & Writing Instruments Sanford{r}
Eberhard Faber{r}
Berol{r}
School Supplies & Stationery Stuart Hall{r}
Desktop & Computer Accessories Rogers{r}
Keene{r}
Hardware & Tools Hardware Amerock{r}
Bulldog{r}
Paint Applicators EZ Paintr{r}
Hand Torches BernzOmatic{r}
(1) Pyrex is marketed in Europe, the Middle East and Africa and
is a registered trademark of Corning Incorporated.
Sales to Wal-Mart Stores, Inc. and subsidiaries amounted to
approximately 15% of consolidated net sales in 1996, 14% in 1995
and 15% in 1994. Sales to each of the Company's other customers,
individually, amounted to less than 10% of consolidated net
sales.
65
GEOGRAPHIC SEGMENT INFORMATION
Prior to the 1994 acquisition of Newell Europe and the 1995
acquisition of Berol, the Company operated principally in the
United States. Since these acquisitions, the Company operates in
several non-U.S. locations including Australia, Canada, England,
France, Germany, Mexico and Colombia. Summary financial
information by geographic area included in the consolidated
financial statements is as follows:
1996 1995
------------------- --------------------
% of % of
$ Total $ Total
----------- ----- ------------ -----
(In millions) (In millions)
Net sales:
U.S. $2,458.2 85.6% $2,157.0 86.3%
Non-U.S. 414.6 14.4 341.4 13.7
-------- ------ --------- ----
Total $2,872.8 100.0% $2,498.4 100.0%
======= ===== ======= =====
Operating income:
U.S. $ 437.7 90.1% $ 389.1 92.8%
Non-U.S. 48.0 9.9 30.4 7.2
-------- ---- ------- ----
Total $ 485.7 100.0% $ 419.5 100.0%
======= ===== ======= =====
Total assets at December 31:
U.S. $2,610.2 86.9% $2,501.0 85.4%
Non-U.S. 394.9 13.1 426.1 14.6
Total $3,005.1 100.0% $2,927.1 100.0%
======= ===== ======= =====
Sales between geographic areas are not material. The
Company's export sales, defined as sales of existing divisions'
products made in the U.S. and sold by the Company's export
division to foreign customers, were approximately 2.0% of net
sales in 1996 and 2.2% in 1995 (financial information is included
in the non-U.S. category in the above table).
66
14) LITIGATION
The Company and its subsidiaries are subject to certain
legal proceedings and claims, including the environmental matters
described below, that have arisen in the ordinary conduct of its
business.
The Company and its subsidiaries are involved in various
matters concerning federal and state environmental laws and
regulations, including 17 matters in which they have been
identified by the U.S. Environmental Protection Agency and
certain state environmental agencies as potentially responsible
parties ("PRPs") at hazardous waste disposal sites under the
Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund") and equivalent state laws. In assessing its
remediation costs, the Company has considered several factors,
including: the extent of the Company's volumetric contribution
at each site relative to that of other PRPs; the kind of waste;
where applicable, the terms of existing cost sharing and other
agreements; the financial ability of other PRPs to share in the
payment of requisite costs; the Company's prior experience with
environmental remediation; environmental studies and cost
estimates available to the Company; the effects of inflation on
cost estimates; and the extent to which the Company's and other
parties' status as PRPs are disputed. Based on information
currently available to it, the Company's estimate of remediation
costs associated with these matters ranges between $9.6 million
and $17.3 million. As of December 31, 1996, the Company had a
reserve equal to $15.9 million for such remediation costs in the
aggregate. No insurance recovery was taken into account in
determining the Company's cost estimates or reserve nor do the
Company's cost estimates or reserve reflect any discounting for
present value purposes.
The Company is involved in several legal proceedings
relating to the importation and distribution of vinyl mini-blinds
made with plastic containing lead stabilizers. In 1996, the
Consumer Product Safety Commission found that such stabilizers
deteriorate over time from exposure to sunlight and heat, causing
lead dust to form on mini-blind surfaces and presenting a health
risk to children under six years of age. In July 1996, the
California Attorney General and the Alameda County District
Attorney filed a civil suit against 12 named companies, including
a subsidiary of the Company, alleging failure to warn consumers
adequately about the presence of lead in accordance with
California law and seeking injunctions, civil penalties and
restitutionary relief. In August 1996, 15 companies, including a
subsidiary of the Company, were named as defendants in a national
and California private class action in Sacramento County Superior
Court. In this case, the plaintiffs allege that these companies
67
breached an implied warranty, committed fraud by concealment,
used false and misleading advertising, and employed unfair or
fraudulent business practices in connection with the presence of
lead in their blinds. The plaintiffs seek injunctive relief,
unspecified damages, restitution of purchase price, suit costs,
prejudgment interest and, with respect to the claim of fraud by
concealment, punitive damages. The Company has agreed to
indemnify several of its retailer customers that are named as
defendants in one or both of these cases for liability directly
related to actions or omissions of the Company. These two cases
were recently coordinated, a coordination trial judge was
appointed, and discovery is expected to begin shortly.
Although management of the Company cannot predict the
ultimate outcome of these matters with certainty, it believes
that their ultimate resolution will not have a material effect on
the Company's consolidated financial statements.
68
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
- -------- -------------------------------------------------
Information regarding executive officers of the Company
is included as a Supplementary Item at the end of Part I of this
Form 10-K.
Information regarding directors of the Company is
included in the Company's Definitive Proxy Statement for the
Annual Meeting of Stockholders to be held May 7, 1997 ("Proxy
Statement") under the caption "Proposal 1 -Election of
Directors," which information is hereby incorporated by reference
herein.
Information regarding compliance with Section 16(a) of
the Exchange Act is included in the Proxy Statement under the
caption "Section 16(a) Beneficial Ownership Compliance
Reporting," which information is hereby incorporated by reference
herein.
Item 11. Executive Compensation
- -------- ----------------------
Information regarding executive compensation is
included in the Proxy Statement under the caption "Proposal 1 -
Election of Directors - Information Regarding Board of Directors
and Committees," the captions "Executive Compensation - Summary;
- - Option Grants in 1996; - Option Exercises in 1996; - Pension
and Retirement Plans; - Employment Security Agreements," and the
caption "Executive Compensation Committee Interlocks and Insider
Participation," which information is hereby incorporated by
reference herein.
Item 12. Security Ownerships of Certain Beneficial Owners and
- ------- Management
----------------------------------------------------
Information regarding security ownership is included in
the Proxy Statement under the caption "Certain Beneficial
Owners," which information is hereby incorporated by reference
herein.
69
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
Not Applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
- -------- on Form 8-K
---------------------------------------------------
(a) (1) The following is a list of the financial
statements of Newell Co. included in this report on
Form 10-K which are filed herewith pursuant to Item 8:
Report of Independent Public Accountants Consolidated
Statements of Income - Years Ended December 31, 1996,
1995 and 1994
Consolidated Balance Sheets - December 31, 1996, 1995
and 1994
Consolidated Statements of Cash Flows - Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity - Years
Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements - December
31, 1996, 1995 and 1994
(2) The following is a list of the consolidated
financial statement schedules of the Company included
in this report on Form 10-K which are filed herewith
pursuant to Item 14(d) and appear immediately preceding
the Exhibit Index:
Schedule VIII - Valuation and Qualifying Accounts
(3) The exhibits filed herewith are listed on the
Exhibit Index filed as part of this report on Form 10-
K. Each management contract or compensatory plan or
arrangement of the Company listed on the Exhibit Index
is separately identified by an asterisk.
(b) Reports on Form 8-K: None
70
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.
NEWELL CO.
Registrant
By /s/ William T. Alldredge
------------------------
William T. Alldredge
Vice President-Finance
Date March 24, 1997
----------------------
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below on March 24, 1997, by
the following persons on behalf of the Registrant and in the
capacities indicated.
Signature Title
--------- -------
/s/ Daniel C. Ferguson Chairman of the Board and Director
- ------------------------
Daniel C. Ferguson
/s/ William P. Sovey Vice Chairman of the Board, Chief Executive
- ------------------------ Officer and Director
William P. Sovey (Principal Executive Officer)
/s/ Thomas A. Ferguson, Jr. President and Chief Operating Officer
- ------------------------- and Director
Thomas A. Ferguson, Jr.
/s/ Donald L. Krause Senior Vice President-Corporate Controller
- ------------------------- (Principal Accounting Officer)
Donald L. Krause
/s/ William T. Alldredge Vice President-Finance
- ------------------------- (Principal Financial Officer)
William T. Alldredge
/s/ Alton F. Doody Director
- -------------------------
Alton F. Doody
/s/ Gary H. Driggs Director
- -------------------------
Gary H. Driggs
71
/s/ Robert L. Katz Director
- -------------------------
Robert L. Katz
/s/ John J. McDonough Director
- -------------------------
John J. McDonough
/s/ Elizabeth Cuthbert Millett Director
- ------------------------------
Elizabeth Cuthbert Millett
/s/ Cynthia A. Montgomery Director
- -----------------------------
Cynthia A. Montgomery
/s/ Allan P. Newell Director
- -----------------------------
Allan P. Newell
/s/ Henry B. Pearsall Director
- -----------------------------
Henry B. Pearsall
72
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
NEWELL CO. AND SUBSIDIARIES
Additions
-------------
Charged Charged
Balance at to Costs to Other Balance at
Beginning and Accounts Deductions End of
Description of Period Expenses (A) (B) Period
- ---------------- --------- -------- --------- ---------- ----------
Allowance for
doubtful accounts
for the years ended:
December 31, 1996 $ 11,014 $ 6,034 $2,200 $(6,058) $ 13,190
December 31, 1995 10,886 2,838 1,990 (4,700) 11,014
December 31, 1994 6,226 2,780 3,996 (2,116) 10,886
Note A - Represents recovery of accounts previously written off,
along with reserves of acquired businesses.
Note B - Represents accounts charged off.
Balance at Balance at
Beginning Other End of
of Period Provision Write-offs (C) Period
--------- --------- ---------- ---- ----------
Inventory reserves
for the years ended:
December 31, 1996 $ 67,275 $ 22,251 $(30,721) $ 22,349 $ 81,154
December 31, 1995 51,599 8,621 (17,200) 24,255 67,275
December 31, 1994 28,995 9,901 (16,178) 28,881 51,599
Note C - Represents reserves of acquired businesses, including
provisions for product line rationalization.
73
(C) EXHIBIT INDEX
Exhibit
Number Description of Exhibit
-------- ----------------------
Item 3. Articles of 3.1 Restated Certificate of
Incorporation Incorporation of Newell Co.,
and By-Laws as amended as of
September 7, 1995.
3.2 By-Laws of Newell Co., as
amended through November 9,
1995 (incorporated by
reference to Exhibit 4.2 to
Pre-effective Amendment No. 1
to the Company's Registration
Statement on Form S-3, Reg.
No. 33-64225, filed January
23, 1996).
Item 4. Instruments 4.1 Restated Certificate of
defining the Incorporation of Newell
rights of Co., as amended as of
security September 7, 1995, is
holders, included in Item 3.1.
including
indentures
4.2 By-Laws of Newell Co., as
amended through November 9,
1995, are included in Item
3.2.
4.3 Rights Agreement dated as of
October 20, 1988 between the
Company and First Chicago
Trust Company of New York
(formerly known as Morgan
Shareholders Services Trust
Company) (incorporated by
reference to Exhibit 4 to the
Company's Current Report on
Form 8-K dated October 25,
1988).
74
Exhibit
Number Description of Exhibit
-------- ----------------------
4.4 Indenture dated as of April
15, 1992, between the Company
and The Chase Manhattan Bank
(National Association).
Trustee (incorporated by
reference to Exhibit 4.4 to
the Company's Report on Form 8
amending the Company's
Quarterly Report on Form 10-Q
for the quarterly period ended
March 31, 1992).
Pursuant to item 601(b)
(4)(iii)(A) of Regulation S-K,
the Company is not filing
certain documents. The
Company agrees to furnish a
copy of each such document
upon the request of the
Commission.
Item 10. Material *10.1 The Newell Long-term Savings
and Contracts Investment Plan,
as amended and restated
effective May 1, 1993
(incorporated by reference to
Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q
for the quarterly period ended
June 30, 1993 (the "June 1993
Form 10-Q")).
*10.2 The Company's Amended and
Restated 1984 Stock Option
Plan, as amended through
February 14, 1990
(incorporated by reference to
Exhibit 10.2 to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1990 (the "1990 Form 10-K")).
75
Exhibit
Number Description of Exhibit
-------- ----------------------
*10.3 Newell Co. Deferred
Compensation Plan, as amended,
effective October 23, 1986
(incorporated by reference to
Exhibit 10.3 to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1995).
*10.4 Newell Operating Company's ROA
Cash Bonus Plan, effective
January 1, 1977, as amended
(incorporated by reference to
Exhibit 10.8 to the 1981 Form
S-14).
*10.5 Newell Operating Company's ROI
Cash Bonus Plan, effective
July 1, 1966, as amended
(incorporated by reference to
Exhibit 10.9 to the 1981 Form
S-14).
*10.6 Newell Operating Company's
Pension Plan for Salaried and
Clerical Employees, as amended
and restated, effective
January 1, 1989 (incorporated
by reference to Exhibit 10.2
to the June 1993 Form 10-Q).
*10.7 Newell Operating Company's
Pension Plan for Factory and
Distribution Hourly-Paid
Employees, as amended and
restated, effective January 1,
1984 (incorporated by
reference to Exhibit 10.10 to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 1985 (File No.
0-7843) (the "1985 Form
10-K")).
76
Exhibit
Number Description of Exhibit
-------- ----------------------
*10.8 Newell Operating Company's
Supplemental Retirement Plan
for Key Executives, effective
January 1, 1982, as amended
(incorporated by reference to
Amendment No. 2 to the
Company's Registration
Statement on Form S-14, File
No. 2-71121, filed February 2,
1982).
10.9 Securities Purchase Agreement
dated June 21, 1985 between
American Tool Companies, Inc.
and the Company (incorporated
by reference to Exhibit 10.13
to the 1985 Form 10-K).
*10.10 Form of Employment Security
Agreement with six executive
officers (incorporated by
reference to Exhibit 10.10 to
the 1990 Form 10-K).
10.11 Letter Agreement dated as of
August 13, 1991 between The
Black & Decker Corporation and
the Company (incorporated by
reference to Exhibit 1 to the
Company's Statement on
Schedule 13D dated August 22,
1991).
10.12 Standstill Agreement dated as
of September 24, 1991 between
The Black & Decker Corporation
and the Company (incorporated
by reference to Exhibit 3 to
Amendment No. 1 to the
Company's Statement on
Schedule 13D dated September
26, 1991).
77
Exhibit
Number Description of Exhibit
-------- ----------------------
*10.13 Newell Co. 1993 Stock Option
Plan, effective February 9,
1993 (incorporated by
reference to the Company's
Registration Statement on Form
S-8, File No. 33-67632, filed
August 19, 1994).
10.14 Form of Placement Agency
Agreement relating to private
placement to accredited
investors of unsecured notes
of the Company (incorporated
by reference to Exhibit 10.20
to the 1993 Form 10-K).
10.15 Five Year Credit Agreement
dated as of June 12, 1995
among the Company, certain of
its affiliates, The Chase
Manhattan Bank (National
Association), as Agent, and
the banks whose names appear
on the signature pages thereto
(incorporated by reference to
Exhibit 10.2 to the June 1995
Form 10-Q).
10.16 Amendment No. 1 dated as of
June 7, 1996 to Five Year
Credit Agreement dated as of
June 12, 1995 among the
Company, certain of its
affiliates, The Chase
Manhattan Bank (National
Association), as Agent, and
the banks whose names appear
on the signature pages thereto
(incorporated by reference to
Exhibit 10.17 to the Company's
Quarterly Report on Form 10-Q
for the quarterly period ended
June 30, 1996).
78
Exhibit
Number Description of Exhibit
-------- ----------------------
Item 21. Subsidiaries 21.1 Subsidiaries of the Company.
of the
Registrant
Item 23. Consent of 23.1 Consent of Arthur Andersen
experts and LLP.
counsel
Item 27. Financial 27 Financial Data Schedule.
Data Schedule
Item 99. Additional 99 Safe Harbor Statement.
Exhibits
* Management contract or compensatory plan or arrangement of the
Company.
EXHIBIT 21.1
SUBSIDIARIES
Jurisdiction
of
Name Organization Ownership
- ---- ------------ ---------
Anchor Hocking Consumer Delaware 100% of stock owned by Anchor Hocking Corporation
Glass Corporation
Anchor Hocking Corporation Delaware 100% of stock owned by Newell Operating Company
Ashland Products, Inc. Delaware 100% of stock owned by Newell Co.
Berol Blue Ribbon Corp. Kentucky 100% of stock owned by Berol Corporation
Berol Canada Inc. Ontario, Canada 100% of stock owned by Berol Corporation
Berol Corporation Delaware 100% of stock owned by Newell Co.
Berol Corporation Massachusetts 100% of stock owned by Berol Corporation
(Delaware)
Berol Corporation Nevada 100% of stock owned by Berol Corporation
(Delaware)
Berol Corporation Puerto Rico 100% of stock owned by Berol Corporation
(Delaware)
Berol Limited United Kingdom 100% of stock owned by Berol Corporation
Berol Pen Company North Carolina 100% of stock owned by Berol Corporation
Berol Trademarks, Inc. Delaware 100% of stock owned by Berol Corporation
Newell Sanford S.A. Colombia 43.41% of stock owned by Berol Pen Corporation;
14.00% of stock owned by Ember Investment Company;
16.91% of stock owned by Furth Corporation; 13.00%
of stock owned by Loral Corporation; 12.68% of
stock owned by Terbal Corporation
Berol, S.A. de C.V. Mexico 81.35% of stock owned by Berol Corporation; 18.55%
of stock owned by Newell Co. leaving .1% by other
individuals
80
Jurisdiction
of
Name Organization Ownership
- ---- ------------ ---------
Berol Trademarks, Inc. Delaware 100% of stock owned by Berol Corporation
DAX Manufacturers, Inc. New York 100% of stock owned by Intercraft Company
DeComex USA, Inc. Delaware 100% of stock owned by Intercraft Company
Decorel Canada, Inc. Ontario, Canada 100% of stock owned by Intercraft Company
Decorel, S.A. de C.V. Mexico .002% (1 share) of Series B of the fixed portion
of capital stock and 1.03% of the variable portion
of capital stock owned by Decorel Incorporated;
99.998% of Series B of the fixed portion of
capital stock and 98.97% of Series B of the
variable portion of capital stock owned by Decomex
USA, Inc.
Ember Investment Corp. Delaware 100% of stock owned by Berol Corporation
Empire Enterprises, Inc. Tennessee 100% of stock owned by Berol Corporation
Empire Leasing Company Delaware 75% of stock owned by Berol Corporation; 25% of
stock owned by Berol Canada Inc.
Faber-Castell Corporation New Jersey 100% of stock owned by Newell Co.
Furth Corporation Delaware 100% of stock owned by Berol Corporation
Goody Products, Inc. Delaware 100% of stock owned by Newell Co.
Intercraft Company Delaware 100% of stock owned by Newell Co.
Lee Rowan Company Missouri 100% of stock owned by Newell Co.
Loral Corporation Delaware 100% of stock owned by Berol Corporation
Newell Australia Pty, Ltd. Victoria, Australia 100% owned by Newell Investments Inc.
Newell Consumer Products Germany 100% of stock owned by Newell Investments Inc.
Products GmbH
Newell Finance Company Delaware 100% of stock owned by Newell Operating Company
Newell Holdings France S.A.S. France 1% of stock owned by Newell Operating Company; 99%
of stock owned by Newell Investments Inc.
81
Jurisdiction
of
Name Organization Ownership
- ---- ------------ ---------
Newell Holdings U.K. Limited United Kingdom 100% of stock owned by Newell Investments Inc.
Newell Consumer Iberica S.A. Spain 100% of stock owned by Newell S.A.
Newell Industries Canada, Inc. Ontario, Canada 87.2% of stock owned by Newell Operating Company;
12.8% of stock owned by Goody Products, Inc.
Newell International Jamaica 100% of stock owned by Newell Co.
Corporation, Limited
Newell Investment Co. Ltd. Ontario, Canada 100% of stock owned by Newell Co.
Newell Investments Inc. Delaware 100% of stock owned by Newell Operating Company
Newell Limited United Kingdom 100% of stock owned by Newell Holdings U.K.
Limited
Newell Operating Company Delaware 77.5% of stock owned by Newell Co.; 22.5% of stock
owned by Anchor Hocking Corporation
Newell Puerto Rico, Ltd. Delaware 100% of stock owned by Anchor Hocking Corporation
Newell S.A. France 99% of stock owned by Newell Holdings France
S.A.S.; remaining 1% owned by nominees as required
by statute
Newell S.p.A. Italy 100% of stock owned by Newell S.A.
Newell Window Furnishings, Inc. Delaware 100% of stock owned by Newell Operating Company
NSM Industries, Inc. New Jersey 100% of stock owned by Faber-Castell Corporation
N.V. Newell Benelux S.A. Belgium 99% of stock owned by Newell S.A.; Remaining 1%
owned by nominees as required by statute
Osmiroid International England & Wales Cum. Pfd. - 100% by Berol Limited Common - 99.9%
by Berol Limited Common - .01% by E.G. Lewis
(nominee)
Philips Canada, Inc. Ontario, Canada 100% of stock owned by Philips Industries, Inc.
Pen and Pencil, Inc. Illinois 100% of stock owned by Newell Co.
82
Jurisdiction
of
Name Organization Ownership
- ---- ------------ ---------
Philips Industries, Inc. New York 100% of stock owned by Newell Co.
Plastics, Inc. Delaware 100% of stock owned by Anchor Hocking Corporation
Sanford Investment Company Delaware 21.29% of stock owned by Berol Corporation; 35.37%
of stock owned by Faber-Castell Corporation; and
43.34% of stock owned by Pen and Pencil, Inc.
Sanford, L.P. Illinois Newell Operating Company is the general partner and
(limited and Sandford Investment Company is the limited partner.
partnership)
Sterling Plastics Co. New Jersey 100% of stock owned by Sanford Corporation
Stuart Hall Company, Inc. Missouri 100% of stock owned by Newell Co.
Terbal Corporation Delaware 100% of stock owned by Berol Corporation
EXHIBIT 23.1
[ARTHUR ANDERSEN LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated January 27, 1997 included in Form
10-K, into the Company's previously filed Form S-8 Registration
Statements File Nos. 33-24447, 33-25196, 33-40641, 33-67620, 33-67632,
33-51063, 33-51961 and 33-62047, Form S-3 Registration Statement File
No. 33-64225, Post-Effective Amendment No. 1 on Form S-8 to Form S-4
Registration Statements File Nos. 33-49282 and 33-44957.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 25, 1997
EXHIBIT 99
Newell Safe Harbor Statement
----------------------------
Information provided by the Company may contain certain
forward-looking information, which, as defined by the Private
Securities Litigation Reform Act of 1995 (the "Act"), may relate
to such matters as sales, income, earnings per share, return on
equity, capital expenditures, dividends, capital structure, free
cash flow, debt to capitalization ratios, internal growth rates,
future economic performance, management's plans and objectives
for future operations or the assumptions relating to any of the
forward-looking information. This Safe Harbor Statement is being
made pursuant to the Act and with the intention of obtaining the
benefits of the so-called "safe harbor" provisions of the Act.
The Company cautions that forward-looking statements are not
guarantees since there are inherent difficulties in predicting
future results, and that actual results could differ materially
from those expressed or implied in the forward-looking
statements. Factors that could cause actual results to differ
include, but are not necessarily limited to, the following:
o RETAIL ECONOMY. The Company's business depends on the
strength of the retail economies in various parts of the world,
primarily in the U.S. and to a lesser extent in Australia,
Canada, Central and South America, and Europe, which are affected
by such factors as consumer demand, the condition of the retail
industry and weather conditions. Recently, the retail industry
has been characterized by intense competition and consolidation.
o NATURE OF THE MARKETPLACE. The Company competes with
numerous other manufacturers and distributors, many of which are
large and well-established. In addition, the Company's principal
customers are volume purchasers, many of which are much larger
than the Company and have significant bargaining power. The
combination of these market influences creates a very competitive
marketplace, resulting in difficulty in raising prices and the
need to provide superior services to customers. These
competitive pressures increase the risk of losing substantial
customers.
o GROWTH BY ACQUISITION. The acquisition of companies that
sell branded, staple product lines to volume purchasers is one of
the foundations of the Company's growth strategy. The Company's
ability to continue to make strategic acquisitions at reasonable
prices and to integrate the acquired businesses within a
reasonable period of time are important factors in the Company's
future earnings growth potential.
o FOREIGN OPERATIONS. Foreign operations, currently in
Canada, Mexico, Colombia and Europe and sourcing from the Far
East, are of increasing importance to the Company's business.
Foreign operations can be affected by factors such as devaluation
and other currency fluctuations, tariffs, nationalization and
other political and regulatory risks.
5
