WKI Holding Company, Inc. (the Company or WKI), is a leading manufacturer
and marketer of housewares, including bakeware, dinnerware, rangetop cookware,
kitchen and household products, cutlery and precision cutting tools. The Company
believes that its brands, including Corningware-Registered Trademark-,
Pyrex-Registered Trademark-, Corelle-Registered Trademark-, Revere
Ware-Registered Trademark-, Visions-Registered Trademark-,
EKCO-Registered Trademark-, Via-Registered Trademark-, Baker's
Secret-Registered Trademark-, Chicago Cutlery-Registered Trademark-,
OLO-Registered Trademark-, OXO-Registered Trademark- and Grilla
Gear-Registered Trademark- constitute one of the broadest and best recognized
collection of brands in the housewares industry.
The Company's business began as an unincorporated division of Corning
Incorporated (Corning) in 1915 with the invention of the heat-resistant glass
that has become known as Pyrex-Registered Trademark- glassware. In 1958, Corning
introduced Corningware-Registered Trademark- bakeware, a versatile glass-ceramic
cookware product evolved from materials originally developed for a U.S.
ballistic missile program. Corelle-Registered Trademark- dinnerware, a
proprietary three-layer, two-glass product with high mechanical strength
properties and designed for everyday use was launched in 1970.
Visions-Registered Trademark- cookware, a lower cost, clear glass-ceramic
cookware line was introduced in 1982. In 1988 Corning supplemented its cookware
product lines with the acquisition of the Revere business, which distributes
stainless steel and aluminum cookware and rangetop products known as Revere
The Company was formed in 1991 when Corning, in an effort to expand the
international sales of its consumer products, entered into a joint venture with
Vitro S.A., the leading glass manufacturer in Mexico. In connection with that
joint venture (which was unwound in 1993 when it did not achieve its strategic
and financial objectives), Corning contributed or licensed to the Company
substantially all of its assets used in Corning's consumer products business. In
November 1994, Corning and the Company sold their European, Russian, Middle
Eastern and African consumer products businesses to Newell, a significant
competitor of the Company. Currently Newell serves as the exclusive distributor
for certain of the Company's products in the stated regions. These sales
represent less than 1% of the Company's net sales in 2000.
On March 2, 1998, Corning, the Company, Borden, Inc. (Borden), and CCPC
Acquisition Corp. (CCPC Acquisition) entered into a Recapitalization Agreement
pursuant to which on April 1, 1998 (Closing Date) CCPC Acquisition acquired 92%
of the outstanding shares of common stock, par value $0.01 per share of WKI from
Corning for $110.4 million (Recapitalization). The stock acquisition was
financed by an equity investment in CCPC Acquisition by BW Holding LLC, an
affiliate of Kohlberg, Kravis Roberts & Co., L.P. (KKR), the parent company of
Borden and CCPC Acquisition. Pursuant to the Recapitalization, WKI paid a cash
dividend to Corning of $472.6 million prior to the consummation of the
Recapitalization. On July 10, 1998, post-closing adjustments to the cash
dividend were agreed upon by WKI and Corning, and the Company distributed
$10.2 million to Corning. As a result of the Recapitalization, Corning continues
to hold 2.8% of the outstanding shares of common stock of WKI.
In 1999, the Company initiated a plan to restructure its manufacturing and
supply organization as part of a program designed to reduce costs through the
elimination of under-utilized capacity, unprofitable product lines and increased
utilization of the remaining facilities. The restructuring included the
discontinuation of the commercial tableware product line and closure of the
related portion of the Company's manufacturing facility in Charleroi,
Pennsylvania. Additionally, the Company has discontinued manufacturing and
distributing rangetop cookware at its facility in Clinton, Illinois. The supply
of rangetop cookware is being sourced from third party manufacturers.
In addition, in 1999, the Company completed the acquisition of EKCO
Group, Inc. effective September 13,1999 (EKCO) and General Housewares Corp.
(GHC) on October 21, 1999 in two separate transactions. The acquisitions were
accounted for under the purchase method of accounting.
The results of operations of the acquired companies have been included in
results of operations for the Company from their dates of acquisition.
The EKCO transaction was closed by the Company on October 24, 1999 following
EKCO's initial purchase by CCPC Acquisition Corp (the Company's parent), on
September 13, 1999. Throughout this filing the Company's purchase is considered
to have occurred on September 13, 1999. The Company acquired EKCO for
approximately $239 million, including the assumption of debt, transaction fees
and a purchase price adjustment. The Company financed this acquisition through
the issuance of $150 million in common stock to the Company's parent and a short
term borrowing from an affiliate of the Company's parent.
EKCO is a manufacturer and marketer of branded consumer products. EKCO's
products include household items such as bakeware, kitchen and household tools,
cleaning products, brooms, brushes and mops. The Company exited its cleaning
product line in 2000.
The Company acquired GHC for approximately $159 million, including the
repayment of debt and transaction fees. The Company financed the acquisition
through the issuance of $50 million Junior Cumulative Preferred Stock to Borden
and additional borrowings under the Company's existing credit facilities.
GHC manufactures and markets consumer durable goods with principal lines of
business consisting of kitchen and household tools, precision cutting tools,
kitchen cutlery and cookware.
During 2000, the Company dedicated extensive resources to the integration of
the acquired businesses of EKCO and GHC. The integration included the
consolidation of acquired distribution facilities into a new 700,000 square foot
distribution center in Monee, Illinois, redesigning the Company's
enterprise-wide computer system to accommodate the acquired facilities and new
business lines, combining sales, marketing, finance, executive administration,
human resources and information technology efforts. By the end of 2000, most
integration activities were complete. The integration process contributed to the
Company's substantial indebtedness in 2000, and for the period ended
December 31, 2000, the Company failed to satisfy certain covenants under its
existing credit facility.
In order to meet its funding requirements and comply with its financial
covenants in the senior credit facility, the Company amended and restated its
senior credit facility effective April 12, 2001 (the Amended and Restated Credit
Agreement) and, has extended its $40.0 million short-term line of credit from
Borden until the date 91 days after the perfection of the collateral under the
Amended and Restated Credit Agreement after which Borden will provide to the
Company a $25.0 million revolving credit facility. These actions have resulted
in an additional $50.0 million in long-term financing commitments, which expire
on March 30, 2004. The Amended and Restated Credit Agreement also waived the
financial covenants for the quarter ended December 31, 2000 and amended the
future financial covenants beginning March 31, 2001. (See Item 7--Management's
Discussion and Analysis).
In addition, in April 2001, the Company announced a restructuring of certain
manufacturing and distribution operations led by the Company's new President and
Chief Executive Officer, Steven G. Lamb.
Mr. Lamb joined the Company in January 2001, bringing to the Company his
extensive experience in acquisition integration, supply chain optimization,
operational restructurings, customer focus and continuous improvement.
The Company's products are sold primarily in the bakeware, dinnerware,
rangetop cookware, kitchen and household tools, cleaning products, cutlery and
precision cutting tools categories under
core brand names. The following table sets forth the sales of the Company's
products in their primary categories from 1998 through 2000.
YEAR ENDED DECEMBER 31,
2000 1999 (4) 1998
-------- -------- --------
NET SALES (1)
Bakeware.................................................... $286,278 $234,889 $202,649
Dinnerware.................................................. 174,692 178,598 182,938
Kitchen/Household Tools..................................... 138,666 36,013 --
Rangetop Cookware........................................... 102,380 99,349 103,231
Cutlery..................................................... 32,678 10,091 --
Precision Cutting Tools..................................... 21,202 3,684 --
Cleaning Products (2)....................................... 13,834 6,674 --
Other (3)................................................... 57,851 64,236 54,623
-------- -------- --------
Total....................................................... $827,581 $633,534 $543,441
======== ======== ========
(1) Certain 1999 and 1998 amounts have been reclassified to conform with 2000
presentation. In addition, net sales have been reclassified to exclude
shipping and handling costs in accordance with newly issued accounting
standards. The impact of this change increased net sales by $22.1 million,
$16.0 million and $10.4 million for the years ended December 2000, 1999 and
1998, respectively. (See Note 2 to the financial statements.)
(2) Product line was exited in 2000.
(3) "Other" sales include selected kitchen accessories manufactured by third
parties, which are principally sold through the Company-operated factory
(4) Reflects net sales for EKCO and GHC from September 13, 1999 and October 21,
CORNINGWARE-Registered Trademark-. Corningware-Registered Trademark-
cookware was introduced in 1958 as the cookware that "does it all," going from
freezer to oven to stovetop to refrigerator to table. This versatility results
from the Corningware-Registered Trademark- manufacturing process, which creates
a glass-ceramic material with high resistance to thermal shock. This
glass-ceramic material was originally fabricated for missile nose cones due to
its ability to withstand thermal extremes. Corningware-Registered Trademark-
products are available in a variety of sizes and shapes including round, oval,
square and rectangle. They are appropriate for microwaving as well as serving.
Glass and plastic covers are included with the following product lines:
Corningware-Registered Trademark- French White-TM-,
Corningware-Registered Trademark- Classics-TM- and
Corningware-Registered Trademark- Pop-Ins-TM-.
PYREX-Registered Trademark-. Pyrex-Registered Trademark- products are made
of borosilicate and tempered soda lime glass and are available in a number of
colors, shapes and sizes for a variety of cooking functions. The Company's
Pyrex-Registered Trademark- products comprise six sub-brands:
Pyrex-Registered Trademark- Bakeware, Pyrex-Registered Trademark- Prepware,
Pyrex-Registered Trademark- Storage, Pyrex-Registered Trademark- Storage
Deluxe-TM-, Pyrex-Registered Trademark- Portables-Registered Trademark- and
Pyrex-Registered Trademark- Servware.
EKCO-REGISTERED TRADEMARK-. EKCO-Registered Trademark- products consist of
a broad line of uncoated bakeware products including cookie sheets, muffin tins,
brownie pans, loaf pans and similar items.
BAKER'S SECRET-Registered Trademark-. Baker's Secret-Registered Trademark-
products consist of a broad line of non-stick coated and insulated "no burn"
FARBERWARE-Registered Trademark-. Farberware-Registered Trademark- brand
name products consist of non-stick coated and uncoated bakeware items, which are
sourced and sold under a sublicense with Meyer Marketing Co. Ltd.
CUISINART-Registered Trademark-. Cuisinart-Registered Trademark- brand name
products consist of premium non-stick coated bakeware items, which are sourced
and sold under a license with Conair Corporation.
VIA-Registered Trademark-. Via-Registered Trademark- products include
baking equipment such as cooling racks, cookie cutter sets and cast aluminum
CORELLE-Registered Trademark-. Corelle-Registered Trademark-, the Company's
dinnerware product line developed in 1971, is produced using a proprietary
manufacturing process. This manufacturing process combines three layers of glass
and allows the Company to manufacture a dinnerware that is durable and
break/chip resistant, as well as light, thin and stackable.
OTHER DINNERWARE. Corelle-Registered Trademark- cups and mugs are produced
in a process which involves pressing and glazing the shapes.
The Company also manufactures a glass tableware product through a pressing
process that is sold in similar channels as the Corelle-Registered Trademark-
line. Corelle-Registered Trademark- mugs are also produced from a glass ceramic
substrate through a pressing process to yield a durable and aesthetically
REVERE WARE-Registered Trademark-. The Company's Revere
Ware-Registered Trademark- brand products include stainless steel, hard anodized
and aluminum non-stick cookware that is sourced from global manufacturers.
The Company's Revere Ware-Registered Trademark- stainless steel cookware
products are comprised of a number of lines including the traditional
Revere-Registered Trademark- Copper Clad-TM- and TriPly Bottom-TM-,
Revere-Registered Trademark- Copper Cuisine-TM-, Revere-Registered Trademark-
Chef's Supreme-TM-, Revere-Registered Trademark- Gourmet Solutions-TM-and
ProLine-TM- by Revere-Registered Trademark- sub brands. Certain
Revere-Registered Trademark- Gourmet Solutions-TM- products feature patented
double pour spouts and colander covers for convenient pouring and straining.
ProLine-TM- by Revere-Registered Trademark- Cookware is a professional quality,
stainless steel product which competes at higher price points. Other
Revere-Registered Trademark- product lines include: ProLine Limited-TM- by
Revere-Registered Trademark-, which features hard anodized aluminum exteriors,
stainless steel interiors and glass lids; Revere-Registered Trademark- Chef's
Preference-TM-, Revere-Registered Trademark- Liberation-TM-, and
Revere-Registered Trademark- Culinary Advantage-TM- which all include non-stick
aluminum construction, pour spouts and straining lids; and Ultra Glide-TM- by
Revere-Registered Trademark- which is a line of non-stick aluminum skillets.
EKCO-Registered Trademark-. EKCO-Registered Trademark- brand products
include stainless steel and aluminum cookware that is made by other
manufacturers. The Company's EKCO-Registered Trademark- brand of stainless steel
products are comprised of the EKCO-Registered Trademark- Endura-TM-, the
EKCO-Registered Trademark- Enterna-Registered Trademark- line,
EKCO-Registered Trademark- Copperelle-TM- and EKCO-Registered Trademark-. The
Company's EKCO-Registered Trademark- brand of non-stick aluminum products are
comprised of the EKCO-Registered Trademark- Resolutions-TM- line, the
EKCO-Registered Trademark- Radiance-TM- line and the EKCO-Registered Trademark-
Generations-TM- line. The EKCO product lines are marketed through all channels
VISIONS-Registered Trademark-. Introduced in the United States in 1982,
Visions-Registered Trademark- products are made with a translucent pyroceram
material that allows customers to see what they are cooking. The Company manages
Visions-Registered Trademark- as a specialty line focused on promotional
programs and markets Visions-Registered Trademark- products in areas where
water-based cooking and simmering are relevant to a market's or community's
KITCHEN AND HOUSEHOLD TOOLS
EKCO-Registered Trademark- AND VIA-Registered Trademark-. The Company
markets and sells a broad line of kitchenware products which it sources from
third parties, including the following: kitchen tools and gadgets such as
ladles and other cooking accessories, and peelers, corkscrews, whisks, can
openers and similar items, marketed under the EKCO-Registered Trademark-, EKCO
PRO-TM-, Baker's Secret-Registered Trademark- and Via-Registered Trademark-
trademarks; stainless steel and porcelain-on-steel kettles and carafes under the
EKCO-Registered Trademark- and Via-Registered Trademark- trademarks; cookware
under the EKCO-Registered Trademark- trademark; and more than 130 tools, gadgets
and bakeware items under the Cuisinart-Registered Trademark- brand name, which
is licensed from Conair Corporation. The Company also markets stainless steel
flatware, mixing bowls and colanders. The Company markets more than 1000
kitchenware items, including multiple colors of the same item and various
packaging combinations particularly in its line of kitchen tools and gadgets,
using what the Company believes to be one of the most extensive merchandising
and promotional programs in the industry. The program employs a "good, better,
best" strategy, which the Company feels, clearly defines packaging and product
design. EKCO-Registered Trademark- products are classified as good, EKCO PRO
products (including the sub-brands, Fresh Catch and Barworks) are classified as
better and Softsides-TM- products are classified as best.
OXO-Registered Trademark-. The Company markets a broad line of kitchen and
household tools under the OXO Good Grips-Registered Trademark-, OXO
Softworks-TM-, OXO Touchables-TM- and OXO Basics-TM- brand names. The OXO brand
products are developed in the United States and produced by Original Equipment
Manufacturers (OEM) in Asia according to WKI's specifications. WKI has been
expanding its assortment of OXO brand products from kitchen tools to household
cleaning tools, gardening tools, hand tools and automotive cleaning tools. Many
of the kitchen/household tools sold by WKI under the OXO brand utilize a
proprietary handle which is covered by patents owned by the Company that run
through December 2007. OXO brand products are distributed primarily in the
United States through department stores, gourmet and specialty outlets and mass
GRILLA GEAR-Registered Trademark-. Grilla Gear is a line of barbecue tools
and accessories under the Grilla Gear-TM- brand. This product line consists of
high quality, design-oriented products related to outdoor dining and home
entertainment, such as grilling tools, aprons, mitts, timers, magnets, etc.
EKCO-Registered Trademark- AND CLEAN RESULTS-Registered Trademark-. The
Company marketed a line of cleaning products for home use, including brooms,
brushes and mops, marketed under the EKCO-Registered Trademark- and Clean
Results-Registered Trademark- trademarks. The Company exited the product line in
CHICAGO CUTLERY-Registered Trademark-. The Company markets under the Chicago
Cutlery-Registered Trademark- brand, fifteen retail product lines and three
commercial product lines. Eight of these product lines, including the commercial
lines, are manufactured in the Wauconda, Illinois manufacturing facility and
feature the exclusive Taper Grind-Registered Trademark- edge for maximum
sharpness. These knives, individually crafted by hand, are made with special
high-carbon stainless steel making them easy to re-sharpen and better able to
maintain a sharp edge. The Company's Chicago Cutlery-Registered Trademark-
product lines include Walnut Tradition-TM--Registered Trademark-, 440A-TM-,
Legacy-TM-, Precedent-TM-, American Pride-TM-, Cherrywood-TM-, Walnut
Forged-TM-, Basics-TM-, Performa-TM-, Premier-TM-, Paradigm-TM-, Essentials-TM-,
Classic Chef-TM-, American Carver-TM-, and Chef's Professional-TM-. Commercial
product lines marketed to the meat and poultry processing industries include
Chicago Blue-TM-, Straight Molded-TM- and Biocurve-TM-lines.
REGENT SHEFFIELD-REGISTERED TRADEMARK-. Regent
Sheffield-Registered Trademark- and Wiltshire-Registered Trademark- are licensed
brand names from Regent Sheffield LTD and McPherson's LTD for distribution in
the United States, South America and Canada. The product lines are positioned
up-market and distributed to both traditional retail and department stores trade
channels. All product lines except for Infinity Edge and Titanium Edge, are
manufactured in Asia. The Company markets under the Regent
Sheffield-Registered Trademark- name in the United States and South America and
the Wiltshire-Registered Trademark- and Regent Sheffield-Registered Trademark-
names in Canada. The Company markets nine complete lines of knives for
consumers. The Company's Regent Sheffield-Registered Trademark- and
Wiltshire-Registered Trademark- product lines
include Laser-TM-, Classic Series, StaySharp-TM-, SoftSides-TM-, Titanium
Edge-TM-, Forged, Forged Commercial, Infinity Edge-TM- and Forme-TM-.
PRECISION CUTTING TOOLS
OLFA. The Company and OLFA Corporation of Osaka, Japan, executed a ten-year
agreement naming the Company's OLFA Products Group as the exclusive distributor,
in the United States and Canada, of precision cutting tools and accessories
manufactured by OLFA Corporation. The agreement expires in 2004. The Company
believes that relations with OLFA Corporation are strong and that a long-term
relationship will continue. Products of the OLFA Products Group are sold to
industrial users, and through distributors as well as directly to hobby, craft,
hardware and fabric stores.
OLO. The OLO business consists of rolling scissors and carton openers. The
OLO products are manufactured domestically by a third party and are purchased as
finished goods by the Company. OLO products are sold to industrial users, and
distributors as well as directly to hobby, craft, hardware and fabric stores.
ACCESSORIES. The Company's "Other" sales include selected kitchen
accessories manufactured by third parties. These products are sold primarily in
the Company--operated factory stores.
NEW PRODUCT DEVELOPMENT
New products are developed using a disciplined development process adopted
by the Company. This process is designed to reduce the risk associated with new
product development projects through the early assessment of a product's market
viability, and to compress product development cycle time through the use of the
Company's proprietary design and modeling software. This new product development
process leverages the Company's extensive qualitative and quantitative research
knowledge and has reduced development time, focused resources on projects with
high market potential and decreased large expenditures on product concepts with
low market viability.
MARKETING AND DISTRIBUTION
The Company's products are sold in the United States and in over 60 foreign
countries. In the United States (which accounted for approximately 80% of the
Company's net sales in 2000), the Company sells both on a wholesale basis to
retailers, distributors and other accounts that resell the Company's products
and on a retail basis through Company-operated outlet stores.
In the United States, the Company sells to approximately 2,800 customers
made up primarily of mass merchants, department stores and specialty retailers,
as well as through other channels, including retail food stores, hardware
stores, drug stores and catalog showrooms.
The Company operates 170 outlet stores in 40 states, located primarily in
outlet malls. The Company's outlet stores, which carry an extensive range of the
Company's products, enable the Company to participate in broader distribution
and to profitably sell slower-moving inventory. The Company believes that its
outlet stores, which also sell complementary kitchen accessories, have developed
marketing and pricing strategies that generate sales which supplement, rather
than compete with, its wholesale customers. The Company-operated outlet stores
also promote and strengthen the
Company's brands, enabling the Company to provide customers a broader assortment
of products beyond those that are commonly stocked by third party retailers.
The Company's 60-person international sales force, together with localized
distribution and marketing capabilities, have allowed the Company to become an
established marketer of bakeware and dinnerware in Canada, Korea, Australia,
Japan, Singapore, Taiwan, Hong Kong, Mexico, Brazil, and the United Kingdom. In
addition to the direct sales forces, products are exported from the United
States through distributors and agents who provide marketing support to
supermarkets, mass merchandising stores, specialty stores and department stores.
EUROPEAN, RUSSIAN, MIDDLE EASTERN AND AFRICAN CONSUMER PRODUCTS BUSINESS
In November 1994, Corning and the Company sold to Newell all of the
outstanding stock of Corning Consumer Limited (CC Limited), Corning Consumer
GmbH (CC GmbH) and Corning Consumer S.A (CCSA), subsidiaries of Corning and the
Company through which the Company's consumer products business was conducted in
Europe, Russia, the Middle East, and Africa (collectively, the Territory).
Corning and the Company granted to Newell, CC Limited, CC GmbH and CCSA the
exclusive right to use certain trademarks within the Territory. Newell has the
exclusive right to use the Pyrex-Registered Trademark- and Visions trademarks
within the Territory.
CUSTOMER SERVICE: SALES AND MARKETING SUPPORT
Management believes that service is a key part of the Company's product
offering. The close relationships and frequent contact with large customers
provide the Company with sales opportunities and application ideas. The Company,
through its sales team, provides its customers with sales and marketing support.
In addition, as of October 1999, the Company contracted its consumer information
center responsibilities with Modern Marketing Concepts, Inc. Modern Marketing
Concepts, Inc. has a team dedicated to the Company's business that responds to
consumer complaints, product liability claims, warranty claims, rebate programs,
store referrals and special order fulfillment offers.
The Company's domestic customers are served by a combination of Company
salespeople and independent, commissioned representatives. The Company's top 100
accounts are serviced by the Company's direct sales force teams, each consisting
of four or five salespeople which are organized (i) by account, for the
Company's most significant customers and (ii) by four channel teams, focusing on
department stores, specialty stores, regional mass merchandisers, and clubs,
hardware and food/ continuity. The teams are directly accountable for revenues,
allowances and promotional spending. The Company's sales teams dedicate their
primary focus to the largest customers. Members of the sales teams regularly
call on the Company's customers to develop an in-depth understanding of each
customer's competitive environment and opportunities. Smaller wholesale accounts
are serviced by approximately 40 independent, commissioned sales
representatives. The Company's 60-person international sales force, with
personnel located in twelve countries, work with local retailers and
distributors to optimize product assortment, consumer promotions and advertising
for local preferences.
The Company provides its customers with extensive marketing support. The
Company conducts extensive research on housewares industry trends, including
consumer color and design preferences.
The market for the Company's products is highly competitive and the
housewares industry is trending toward consolidation. Competition in the United
States is affected not only by domestic manufacturers but also by the large
volume of foreign imports. Recently the Company has experienced increased
competition in the U.S. from low-cost Far-Eastern competitors and expects this
trend to continue in the future. The market for housewares outside the U.S. and
Europe is relatively fragmented and differs by country and region.
Internationally, depending on the country or region, the Company competes with
other U.S. companies operating abroad, locally manufactured goods and
international companies competing in the worldwide bakeware, dinnerware and
rangetop cookware categories.
A number of factors affect competition in the sale of the Company's
products, including, but not limited to quality, price competition and price
point parameters established by the Company's various distribution channels.
Shelf space is a key factor in determining retail sales of bakeware, dinnerware
and rangetop cookware products. A competitor that is able to maintain or
increase the amount of retail space allocated to its product may gain a
competitive advantage for that product. In addition, new product introductions
are an important factor in the categories in which the Company's products
compete. Other important competitive factors are brand identification, style,
design, packaging and the level of service provided to customers.
The Company has, from time to time, experienced price and market share
pressure from certain competitors in certain product lines, particularly in the
bakeware category where metal products of competitors have created retailer
price and margin pressures, and in the rangetop cookware category where
non-stick aluminum products have increased their share of rangetop cookware
sales at the expense of stainless steel products due to the durability and ease
of cleaning of new non-stick coatings.
The importance of these competitive factors varies from customer to customer
and from product to product.
In the United States, the Company sells to approximately 2,800 customers
made up primarily of mass merchants, department stores and specialty retailers,
as well as through other channels, including retail food stores, hardware
stores, drug stores, catalog showrooms and its Company-operated factory stores.
In 2000, 1999 and 1998, one customer, Wal-Mart Stores, Inc. accounted for
approximately 15%, 16% and 15%, respectively, of the Company's gross sales.
MANUFACTURING AND RAW MATERIALS
Sand, soda ash, borax, limestone, lithia-containing spars, alumina, cullet,
stainless steel, plastic compounds, hardwood products, tin plate steel-copper
and corrugated packaging materials are the principal raw materials used by the
Company. The Company purchases its raw materials on the spot market and through
long-term contracts with suppliers. All of these materials are available from
various suppliers and the Company is not limited to any single supplier for any
of these materials. Management believes that adequate quantities of these
materials are and will continue to be available from various suppliers. The
Company's molded plastic products and certain components of its kitchenware and
household tools products are manufactured from plastic resin, which is produced
from petroleum-based raw materials. Plastic resin prices may fluctuate as a
result of changes in natural gas and crude oil prices and the capacity, supply
and demand for resin and the petrochemical intermediates from which it is
produced. The Company sources certain products from third party suppliers. The
Company believes that alternative sources of supply at competitive prices are
available from other manufacturers of substantially identical products.
The melting units operated by the Company require either electric or natural
gas energy input. Back-up procedures and systems to replace the primary source
of these energy inputs are in place in each of the Company's relevant
facilities. Ongoing programs exist within each of the Company's glass melting
facilities to reduce energy consumption. Furthermore, rates for electric and
natural gas energy have been fixed contractually in many of the Company's plants
to avoid the negative impact of market fluctuations in prices. The Company does
not engage in any hedging activities for commodity trading relating to its
supply of raw materials.
However, the replacement of certain raw material suppliers has in the past,
and may in the future, have an adverse effect on the Company's operations and
financial performance and significant increases in the cost of any of the
principal raw materials used by the Company could have a material adverse effect
on its results of operations.
PATENTS AND TRADEMARKS
The Company owns numerous United States and foreign trademarks and trade
names and has applications for the registration of trademarks and trade names
pending in the United States and abroad. The Company's most significant owned
trademarks and/or trade names include Corelle-Registered Trademark-,
Revere-Registered Trademark-, Revere Ware-Registered Trademark-,
Visions-Registered Trademark-, EKCO-Registered Trademark-, Baker's
Secret-Registered Trademark-, Via-Registered Trademark-, Good
Grips-Registered Trademark- and OXO-Registered Trademark-. Other significant
trademarks used by the Company are Corningware-Registered Trademark-,
Pyrex-Registered Trademark- Chicago Cutlery-Registered Trademark-,
Farberware-Registered Trademark-, Regent Sheffield-Registered Trademark-,
Wiltshire-Registered Trademark-, OLO-Registered Trademark-, and Grilla
Gear-Registered Trademark-. Upon the consummation of the Recapitalization on
April 1, 1998, Corning granted to the Company fully paid, royalty-free licenses
to use the Corningware-Registered Trademark- trademark, servicemark and
tradename and the Pyroceram-Registered Trademark- trademark in the field of
housewares and to use the Pyrex-Registered Trademark- trademark in the fields of
housewares and durable consumer products. These licenses are exclusive licenses,
subject to the prior exclusive licenses granted to Newell and certain of its
subsidiaries and provide for renewable ten-year terms, which the Company may
renew indefinitely. In addition, in connection with the Recapitalization, the
Company entered into an agreement with Corning under which the Company is
licensed to continue to use "Corning" in connection with the Company's business
until April 1, 2001 (or up to five years in the case of certain molds used in
the manufacturing process). The Company has extended this license for one year,
expiring April 1, 2002, as it relates to the use of the name "Corning Revere
The Company also owns and has the exclusive right to use numerous United
States and foreign patents, and has patent applications pending in the United
States and abroad. In addition to its patent portfolio, the Company possesses a
wide array of un-patented proprietary technology and knowledge. The Company also
licenses certain intellectual property rights to or from third parties.
Concurrent with the Recapitalization, Corning granted to the Company a fully
paid, royalty-free license of patents and know-how (including evolutionary
improvements) owned by Corning that pertain to or have been used in the
Company's business. Furthermore, the Company and Corning entered into a
five-year technology support agreement (renewable at the option of the Company
for an additional five years), pursuant to which Corning will provide to the
Company (at the Company's option) engineering, manufacturing technology, and
research and development services, among others, at Corning's standard internal
The Company believes that its patents, trademarks, trade names, service
marks and other proprietary rights are important to the development and conduct
of its business and the marketing of its products. As such, the Company
vigorously protects its intellectual property rights.
The Company's facilities and operations are subject to certain federal,
state, local and foreign laws and regulations relating to environmental
protection and human health and safety, including those governing wastewater
discharges, air emissions, and the use, generation, storage, treatment,
transportation and disposal of hazardous and non-hazardous materials and wastes
and the remediation of contamination associated with such disposal. Because of
the nature of its business, the Company has incurred, and will continue to
incur, capital and operating expenditures and other costs in complying with and
resolving liabilities under such laws and regulations.
Certain of the Company's facilities have lengthy manufacturing histories
and, over such time, have used or generated and disposed of substances, which
are or may be considered hazardous. Pursuant to the terms and conditions of the
Recapitalization, Corning has agreed to indemnify the Company for certain costs
and expenses that may be incurred in the future by the Company arising from
pre-Recapitalization environmental events, conditions or matters and as to which
notice is provided within specified time periods. Corning has agreed to
indemnify the Company for (i) 80% of such costs and expenses up to an aggregate
of $20.0 million and (ii) 100% of such costs and expenses in excess of
$20.0 million. The indemnification agreement expires on April 1, 2005.
The Company is also aware that at several EKCO facilities, hazardous
substances and/or oil have been detected and that additional investigation will
be and remedial action will or may be required. American Home Products, the
prior owner of two locations, has provided indemnification to EKCO for pre-1984
conditions at those sites. The Company is also aware that three former GHC
facilities are involved with private parties and state agencies in the review
and evaluation, or remediation, of identified environmental contamination
In addition, in 1999 the Ohio Environmental Protection Agency (Ohio EPA)
notified the Company that its Massillon, Ohio manufacturing facility was in
violation of certain federal and state clean air act regulations. In
December 2000, the Company submitted a proposal listing pollution control
alternatives for review by the state. The proposal is currently under review.
Should the Company be required to implement the control regulations proposed by
the Ohio EPA, the Company estimates the cost of certain capital improvements to
be approximately $1.2 million.
Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated. Environmental accruals are routinely reviewed on an interim basis.
The Company has accrued approximately $2 million at December 31, 2000 for
probable environmental remediation and restoration liabilities. This is
management's best estimate of these liabilities. Based on currently available
information and analysis, the Company believes that it is reasonably possible
that costs associated with such liabilities may exceed current reserves by
amounts that may prove insignificant, or by amounts, in the aggregate, of up to
approximately $2 million.
The Company is subject to various federal, state and local laws affecting
its business, including various environmental, health, fire and safety
standards. See "Environmental Matters." The Company is also subject to the Fair
Labor Standards Act and various state laws governing such matters as minimum
wage requirements, overtime and other working conditions and citizenship
requirements. The Company believes that its operations are in material
compliance with applicable laws and regulations.
At December 31, 2000, the Company had approximately 5,200 employees,
approximately one-third of which were covered by collective bargaining
agreements. The agreement with the International
Association of Machinists, which affects approximately 185 employees, expires
September 29, 2001. All other collective bargaining agreements expire after
December 31, 2002.
Additional information in response to Item 1 is found in Item 6, Five-Year
Selected Financial Data, appearing on page 15, Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations, appearing on
pages 16 through 31, and Note 13 to the Consolidated Financial Statements
appearing on pages 56 through 58.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The factors discussed below,
among others, could cause actual results to differ materially from those
contained in forward-looking statements made in this report, including without
limitation, in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," in the Company's related press releases and in oral
statements made by authorized officers of the Company. When used in this report,
any press release or oral statement, the words "looking forward," "estimate,"
"project," "anticipate," "expect," "intend," "believe" and similar expressions
are intended to identify a forward-looking statement. Forward-looking statements
are not guarantees of future performance and are subject to risks, uncertainties
and other factors (many of which are beyond the Company's control) that could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. The forward-looking statements
regarding such matters are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments, as well as other factors it
believes are appropriate in the circumstances. Whether actual results and
developments will conform with the Company's expectations and predictions,
however, is subject to a number of risks and uncertainties, in addition to the
risk factors discussed above, including: integration of the Company's
acquisitions of General Housewares Corp. and EKCO Group, Inc.; Company's ability
to comply with the terms of its existing credit facilities; a global economic
slowdown in any one, or all, of the Company's sales categories; loss of sales as
the Company streamlines and focuses on strategic accounts; unpredictable
difficulties or delays in the development of new product programs; increasing
reliance on third party manufacturers, increased difficulties in obtaining a
consistent supply of basic raw materials such as sand, soda ash, steel or copper
and energy inputs such as electrical power or natural gas at stable pricing
levels; development by the Company of an adequate administrative infrastructure;
technological shifts away from the Company's technologies and core competencies;
unforeseen interruptions to the Company's business with its largest customers
resulting from, but not limited to, financial instabilities or inventory
excesses; the effects of extreme changes in monetary and fiscal policies in the
United States and abroad, including extreme currency fluctuations and unforeseen
inflationary pressures such as those recently experienced by certain Asian
economies; drastic and unforeseen price pressures on the Company's products or
significant cost increases that cannot be recovered through price increases or
productivity improvements; significant changes in interest rates or in the
availability of financing for the Company or certain of its customers; loss of
any material intellectual property rights; any difficulties in obtaining or
retaining the management or other human resource competencies that the Company
needs to achieve its business objectives; and other factors, many of which are
beyond the control of the Company. Consequently, all of the forward-looking
statements made in this Form 10-K are qualified by these cautionary statements,
and there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially realized,
that they will have the expected consequences to or effects on the Company and
its subsidiaries or their business or operations.