<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1997.
REGISTRATION NO. 333-27149
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NOBLE INTERNATIONAL, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 3714 38-3139487
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
------------------------
33 BLOOMFIELD HILLS PARKWAY, SUITE 155
BLOOMFIELD HILLS, MICHIGAN 48304
(248) 433-3093
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MICHAEL C. AZAR, ESQ.
33 BLOOMFIELD HILLS PARKWAY, SUITE 155
BLOOMFIELD HILLS, MICHIGAN 48304
(248) 433-3093
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
TERESA TORMEY FINEMAN, ESQ. ROBERT J. MITTMAN, ESQ.
BRUCK & PERRY, A PROFESSIONAL TENZER GREENBLATT LLP
CORPORATION 405 LEXINGTON AVENUE
500 NEWPORT CENTER DRIVE, SUITE 700 NEW YORK, NEW YORK 10174
NEWPORT BEACH, CALIFORNIA 92660 TELEPHONE NO.: (212) 885-5000
TELEPHONE NO.: (714) 719-6000 FACSIMILE NO.: (212) 885-5001
FACSIMILE NO.: (714) 719-6020
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.
PRELIMINARY PROSPECTUS DATED OCTOBER 14, 1997
SUBJECT TO COMPLETION
3,300,000 SHARES
[LOGO] NOBLE INTERNATIONAL, LTD.
COMMON STOCK
All of the shares of Common Stock, no par value (the 'Common Stock'),
offered hereby (the 'Offering') are being issued and sold by Noble
International, Ltd. ('Noble' or the 'Company'). A portion of the net proceeds
from the Offering will be used to finance the acquisition by Noble of all of the
outstanding capital stock of Utilase, Inc. (the 'Utilase Acquisition') and the
balance of the outstanding capital stock of the Company's minority-owned
subsidiary, DCT Component Systems, Inc. (the 'Final DCT Acquisition').
Consummation of the Offering is conditioned upon the concurrent consummation of
each of the Utilase Acquisition and the Final DCT Acquisition (together, the
'Closing Acquisitions'). See 'Use of Proceeds' and 'Certain Transactions.'
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that any such market will develop. The Common
Stock has been approved for listing on the American Stock Exchange ('AMEX')
under the symbol 'NIL.' It is currently estimated that the initial public
offering price of the Common Stock will be between $8.00 and $10.00 per share.
For a discussion of the factors considered in determining the initial public
offering price, see 'Underwriting.'
Following the consummation of the Offering and the Closing Acquisitions,
the Company's principal shareholder will continue to own and/or control
approximately 43.8% of the outstanding Common Stock. As a result, after the
Offering, the Company's principal shareholder will continue to be able to exert
significant influence over the outcome of all matters subject to a shareholder
vote. See 'Principal Shareholders' and 'Certain Transactions.'
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE 'RISK FACTORS' BEGINNING ON PAGE 11 AND
'DILUTION' ON PAGE 20 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
------------ ---------------- ---------------
Per Share...... $ $ $
Total(3)....... $ $ $
(1) Does not include additional compensation to be received by BlueStone Capital
Partners, L.P. and Rodman & Renshaw, Inc., as representatives (the
'Representatives') of the several underwriters (the 'Underwriters'), in the
form of (i) a nonaccountable expense allowance of $250,000 and (ii) warrants
to purchase up to 330,000 shares of Common Stock (the 'Representatives'
Warrants'). The Company has also agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See 'Underwriting.'
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $900,000, including the Representatives' nonaccountable expense
allowance.
(3) The Company has granted the Representatives an option, exercisable within 45
days after the date of this Prospectus, to purchase up to 495,000 additional
shares of Common Stock, on the same terms set forth above, solely for the
purpose of covering over-allotments, if any. If the Representatives'
over-allotment option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ ,
and $ , respectively. See 'Underwriting.'
The shares of Common Stock are being offered, subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to approval
of certain legal matters by counsel and to certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify the Offering and to
reject any order in whole or in part. It is expected that delivery of the
certificates representing the shares will be made against payment therefor at
the offices of BlueStone Capital Partners, L.P., 575 Fifth Avenue, New York, New
York 10017, on or about , 1997.
BLUESTONE CAPITAL PARTNERS, L.P.
RODMAN & RENSHAW, INC.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
Company Integrity - Quality
Logo Technology
[picture of car with arrows drawn to indicate specific highlighted parts]
Automotive components, assemblies and value-added services provided by the
Company.
AVAILABLE INFORMATION
As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and, in accordance therewith, will file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). The Company intends to furnish its shareholders with annual
reports containing audited financial statements and such other periodic reports
as the Company deems appropriate or as may be required by law.
------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON
STOCK, INLCUDING PLACING STABILIZING BIDS OR EFFECTING PURCHASES OF THE COMMON
STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Each
prospective investor is urged to read this Prospectus in its entirety. As used
in this Prospectus, unless the context otherwise requires, the 'Company' or
'Noble' refers to Noble International, Ltd. and its subsidiaries, after giving
effect to the Utilase Acquisition and the Final DCT Acquisition, each of which
Closing Acquisitions will be consummated concurrent with, and as a condition to,
the consummation of the Offering. Except with respect to historical financial
statements and unless the context indicates otherwise, the description of the
Company as set forth in this Prospectus includes the operations of Prestolock
International, Ltd. ('Prestolock'), Monroe Engineering Products, Inc.
('Monroe'), Cass River Coatings, Inc., dba Vassar Industries ('Vassar'), Skandy
Corp. ('Skandy'), and Utilase Production Process, Inc. ('UPP'), each a
wholly-owned subsidiary of the Company, as well as the operations of DCT
Component Systems, Inc. ('DCT') and Utilase, Inc., dba Utilase Blank Welding
Technologies ('Utilase'), each of which will become a wholly-owned subsidiary of
the Company in connection with the Closing Acquisitions.
Except as otherwise indicated herein, the information contained in this
Prospectus, including per share data and information relating to the number of
shares of Common Stock outstanding, gives retroactive effect to a 334.213-for-1
split of the Common Stock effected on September 11, 1997 and assumes no exercise
of the Representatives' over-allotment option to purchase up to 495,000
additional shares of Common Stock. See 'Underwriting' and Note M of Notes to
Consolidated Financial Statements.
THE COMPANY
Noble is a full service, independent supplier of automotive components,
component assemblies and value-added services to the automotive industry. The
Company's customers include original equipment manufacturers ('OEMs'), such as
General Motors ('GM'), Chrysler Corporation ('Chrysler'), Ford Motor Company
('Ford') and Mitsubishi Motors Manufacturing of America ('Mitsubishi') and
direct suppliers of OEMs ('Tier I' suppliers), such as Textron Automotive
Company, GM/Delphi and United Technologies, Inc. The Company believes that it is
one of the few suppliers to Tier I companies (a 'Tier II' supplier) to provide
integrated manufacturing, design, planning, engineering and other value-added
services. While the Company is predominately a Tier II supplier to the
automotive industry, through its Utilase operations, the Company also operates
as a Tier I supplier. The Company's objective is to become one of the premier
full service Tier II suppliers to the automotive industry.
The Company has experienced substantial growth as a result of both internal
growth and acquisitions. For the year ended December 31, 1996, the Company had
pro forma combined net sales of $48.5 million and pro forma combined net income
of $1.1 million. For the six months ended June 30, 1996 and 1997, the Company
had pro forma combined net sales of approximately $23.0 million and $29.7
million, respectively, representing an increase of 29%, and pro forma combined
net income of approximately $771,000 and $1.4 million, respectively,
representing an increase of 87%.
As a result of the mature and competitive nature of the automotive
industry, the world's automakers are under intense pressure to cut costs and
development times for new products. In order to accomplish this feat, automakers
are increasingly relying on Tier I and Tier II suppliers with the capability to
design, engineer and deliver entire vehicle modules, systems and solutions.
Pricing pressure in the automotive supplier industry is intense because most
automakers wield an extraordinary amount of leverage over their suppliers.
However, management believes systems-oriented suppliers have the ability to
reduce the cost of components, while maintaining or increasing margins, as they
take control of the design and engineering function.
The Company views the acquisition of automotive suppliers that operate in
high growth niche markets, or that are strategic to the further integration of
its operations, as a fundamental part of its growth strategy. This strategy is
fueled by the consolidation presently occurring among the approximately 30,000
companies in the Tier II supplier base segment. Since its inception in 1993, the
Company has successfully completed five acquisitions and, concurrent with the
consummation of the Offering, will complete the two Closing Acquisitions.
Thereafter, the Company intends to continue to seek acquisition opportunities
which will strategically expand or
3
<PAGE>
enhance its current businesses and anticipates that any such acquisitions will
be financed through bank debt, cash flow from operations and/or the issuance of
debt or equity securities. However, while the Company regularly evaluates
possible acquisition opportunities, as of the date of this Prospectus, it has no
agreements, commitments or understandings and is not in negotiation with respect
to any potential acquisition other than the Closing Acquisitions.
In addition to the pursuit of strategic acquisitions, the Company's
business strategy includes delivering integrated component systems, providing
technological leadership and product production innovations, cross-selling to
existing customers, and developing strategic alliances and joint ventures. The
Company believes that by focusing on this strategy it can continue to capitalize
on the increasing opportunities for growth within the automotive component
supply industry.
The Company's operations include: (i) laser welding of tailored blanks and
laser welding and cutting of components; (ii) automotive manufacturing utilizing
progressive die stampings; (iii) design, engineering and assembly of automotive
glovebox latches and other automotive component systems; (iv) painting and
coating of automotive components; (v) other value-added services, such as
prototyping of automotive components and die design and construction; and (vi)
assembly, machining and distribution of components used in machine tooling.
As OEMs and Tier I suppliers continue to reduce their supplier base and
demand improved quality and enhanced technology, management believes Noble's
ability to offer these diverse, yet highly complementary, services will provide
it with a competitive advantage.
The Closing Acquisitions illustrate the benefits associated with the
Company's successful implementation of its business strategy. The Utilase
Acquisition will significantly impact the Company's operations, as Utilase is
one of the dominant suppliers of laser welded tailored blanks to the automotive
industry. The Company believes Utilase's proprietary technology and production
processes permit it to produce laser welded blanks more quickly and with higher
quality and tolerance levels than its competitors. Laser welding of blanks
offers several significant advantages over other current welding technologies,
including cost, weight and safety benefits. According to a 1995 study
commissioned by the UltraLight Steel Auto Body Consortium, a worldwide industry
association of steel producers, laser welded tailored blanks will play a
significant role in car manufacturing in the next decade as the automotive
industry is further challenged to produce lighter cars for better fuel economy,
with enhanced safety features and lower manufacturing costs. The Final DCT
Acquisition will provide the Company with additional value-added service
operations as a result of DCT's progressive die stamping and stamped extrusion
facilities and services. Progressive die stamping is a process in which steel is
passed through a series of dies in a stamping press in order to form the steel
into three-dimensional parts. Stamped extrusion is a process that involves the
forcing of steel through progressive die openings in order to produce a product
of uniform cross-sectional shape. In addition, the Utilase and Final DCT
Acquisitions will, among other things, allow the Company to integrate the
production laser welding operations of UPP, one of the Company's current
subsidiaries, and the laser welded blanking operations of Utilase, with the
progressive die stamping applications of DCT, to provide additional value-added
products and integrated systems.
The Company is a Michigan corporation and was incorporated on October 3,
1993. The Company maintains its principal executive office at 33 Bloomfield
Hills Parkway, Suite 155, Bloomfield Hills, Michigan 48304, and its telephone
number is (248) 433-3093.
ACQUISITION BACKGROUND
Pursuant to its strategic acquisition program, the Company has, since its
formation in 1993, completed five acquisitions and the partial acquisition of
DCT (such acquisitions, together with the Final DCT Acquisition and the Utilase
Acquisition, collectively referred to herein as the 'Acquisitions'). These
Acquisitions include:
o PRESTOLOCK INTERNATIONAL, LTD.--The Company completed its first
acquisition in February 1994 by acquiring, through its predecessor and now its
wholly-owned subsidiary, Prestolock, the assets of Presto Lock, Inc. for a cash
purchase price of $750,000 (the 'Prestolock Acquisition'). In July 1994, a
portion of the assets acquired, which were not strategic to the Company's
business plan, were resold by Prestolock for $500,000 in cash, plus a royalty
receivable by Prestolock through December 31, 2000. The Prestolock Acquisition
was financed through shareholder loans, all of which have subsequently been
repaid.
4
<PAGE>
Prestolock designs, engineers and assembles automobile glovebox latches.
Prestolock's engineers are included in the planning and design phase by both GM
and Chrysler and remain included in the design of new body platforms under
consideration by the OEMs and Tier I instrument panel suppliers. Prestolock had
net sales of approximately $5.5 million and $3.4 million for the twelve months
ended December 31, 1996 and the six months ended June 30, 1997, respectively,
representing 11.4% of the Company's pro forma combined net sales for each of
such periods.
o VASSAR INDUSTRIES--In January 1996, the Company completed the acquisition
of all of the outstanding capital stock of Vassar (the 'Vassar Acquisition').
The Vassar Acquisition purchase price consisted of a $200,000 stock purchase
price, paid in cash, and consulting and non-compete fees aggregating $1.8
million, payable over seven years. Payments with respect to the Vassar
Acquisition have been financed with a combination of bank debt and cash flow
from operations. An aggregate of approximately $120,000 of the net proceeds from
the Offering will be used to make final payments with respect to two of the six
Vassar consulting and non-competition agreements.
Vassar provides just-in-time painting, coating and assembly services to
OEMs and Tier I suppliers on automotive components consigned to the Company. In
addition, as defined by GM/Delphi, Vassar is a dedicated supplier providing
painting services to GM/Delphi's Saginaw Steering Division. Vassar had net sales
of approximately $5.5 million and $3.1 million for the year ended December 31,
1996 and the six months ended June 30, 1997, respectively, representing 11.3%
and 10.3%, respectively, of the Company's pro forma combined net sales for such
periods.
o MONROE ENGINEERING PRODUCTS, INC.--In January 1996, the Company also
completed the acquisition of all of the outstanding capital stock of Monroe and
certain real estate owned by an affiliate of Monroe (the 'Monroe Acquisition').
The Monroe Acquisition purchase price consisted of $6.4 million for the capital
stock, payable in installments over 16 months, and $500,000 for the real estate,
payable interest-only, on a monthly basis, until April 30, 1998 when the entire
principal amount becomes due. Payments with respect to the Monroe Acquisition
purchase price have been financed with a combination of bank debt and cash flow
from operations. A total of $500,000 of the net proceeds of the Offering will be
used to pay the final installment on the Monroe Acquisition stock purchase
price.
Monroe distributes tooling components, including adjustable handles, hand
wheels, plastic knobs, levers, handles and hydraulic clamps, used in automotive
and other manufacturing equipment. Monroe's products have international
reputations for quality in the engineering community. Monroe had net sales of
approximately $5.1 million and $2.6 million for the year ended December 31, 1996
and the six months ended June 30, 1997, respectively, representing 10.5% and
8.9%, respectively, of the Company's pro forma combined net sales for such
periods.
o SKANDY CORP.--In January 1997, the Company acquired all of the
outstanding capital stock of Skandy in exchange for 133,686 shares of the
Company's Common Stock (the 'Skandy Acquisition'). Skandy is the sales and
marketing subsidiary of Noble. Skandy's sales force consists of five full-time
sales representatives each of whom has at least 20 years of industry experience.
For the six months ended June 30, 1997, Skandy had net sales of $327,007,
representing 1.1% of the Company's pro forma combined net sales for such period.
o UTILASE PRODUCTION PROCESS, INC.--In March 1997, the Company, through its
wholly-owned subsidiary UPP, acquired certain assets of Utilase (the 'UPP
Acquisition'). The UPP Acquisition purchase price was $850,000, evidenced by a
promissory note, of which $750,000 was originally payable upon the earlier of
the consummation of the Offering or July 31, 1997, and the balance was payable
at the rate of $50,000 on each of February 28, 1998 and 1999. Subsequently, in
August 1997, such terms were amended and the entire $850,000 will be paid upon
the consummation, and out of the proceeds, of the Offering.
UPP provides the Company with both laser production welding and laser
cutting capabilities, which the Company provides to customers such as GM and
Chrysler, as well as to non-automotive customers. For the period from
March 1, 1997 through June 30, 1997, UPP had net sales of $430,495, representing
1.5% of the Company's pro forma combined net sales for the six months ended June
30, 1997.
5
<PAGE>
o DCT COMPONENT SYSTEMS, INC.--In July 1996, the Company acquired newly
issued shares representing a 37.5% minority interest in DCT (the 'Initial DCT
Acquisition') and, effective April 7, 1997, it acquired an additional 7.5%
interest in DCT from the former president of DCT for an aggregate price of
$1.00. The Company intends to exercise its right to purchase the balance of
DCT's outstanding capital stock from DCT's other shareholders in connection with
the Closing Acquisitions for $1 million in cash, payable out of the net proceeds
of the Offering.
DCT provides progressive die stamping and operates one of only six stamping
facilities approved by Chrysler to provide extrusion stampings. DCT had net
sales of approximately $23.0 million and $13.2 million for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively. On a pro
forma basis, DCT's net sales represent 47.4% and 44.6%, respectively, of the
Company's pro forma combined net sales for such periods.
o UTILASE, INC.--The Company will also acquire all of the outstanding
shares of Utilase in connection with the Closing Acquisitions. The Utilase
Acquisition purchase price is $8.2 million in cash, which will be paid from the
proceeds of the Offering, and an aggregate of approximately $10.1 million in
principal amount of promissory notes (the 'Utilase Notes'). In addition, as part
of the Utilase Acquisition, the Company will pay $1.4 million out of the
proceeds of the Offering to certain of Utilase's officers in exchange for their
agreements not to compete with Utilase.
Utilase was founded in 1986 to provide production and prototype laser
processing services and produced its first prototype of a laser welded tailored
blank in 1987. To date, Utilase has produced over 12 million laser welded
blanks, making it one of the leaders in its field. Utilase had net sales of
approximately $9.3 million for the year ended December 31, 1996 and net sales of
approximately $6.7 million for the six months ended June 30, 1997, including net
sales attributable to the operations purchased by UPP (as discussed above) until
such purchase in March 1997. On a pro forma basis, Utilase's net sales represent
19.2% and 22.6% of the Company's pro forma combined net sales for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered...................... 3,300,000 shares
Common Stock to be outstanding after the
Offering (1)............................ 7,225,006 shares
Use of Proceeds........................... The Company intends to use the net proceeds of the Offering for the
reduction of financial institution debt, payments relating to the
Utilase Acquisition, payments relating to the Final DCT Acquisition,
repayment of related party debt, payments relating to prior
Acquisitions and equipment purchases. See 'Use of Proceeds.'
Risk Factors.............................. The securities offered hereby involve a high degree of risk and
immediate substantial dilution. See 'Risk Factors' and 'Dilution.'
Proposed AMEX symbol...................... 'NIL'
</TABLE>
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(1) Includes 64,838 shares of Common Stock issued effective July 1997 in
connection with the Company's $3.8 million preferred stock financing. Does
not include 700,000 shares reserved for issuance upon the exercise of
options available for future grant under Noble's 1997 Stock Option Plan (the
'Option Plan') and 330,000 shares of Common Stock reserved for issuance upon
the exercise of the Representatives' Warrants. Also does not include an
aggregate of 58,485 shares reserved for issuance in future periods in
exchange for a covenant not to compete in connection with the Utilase
Acquisition. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,'
'Management--Stock Option Plan,' 'Certain Transactions--Other Matters' and
'Underwriting.'
6
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following sets forth summary pro forma financial data for the Company
as of June 30, 1997 and for the year ended December 31, 1996 and the six months
ended June 30, 1996 and 1997 and has been prepared to illustrate the effects of
the Closing Acquisitions and the Offering as if all of such transactions had
occurred as of January 1, 1996 with respect to the statement of operations
information and as of June 30, 1997 with respect to the balance sheet
information. The Closing Acquisitions are reflected using the purchase method
of accounting for business combinations. The pro forma financial data is
provided for comparative purposes only and does not purport to be indicative of
the results that actually would have been obtained if these transactions had
been effected on the dates indicated. The information presented below is
qualified in its entirety by, and should be read in conjunction with,
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' 'Pro Forma Financial Data,' 'Selected Financial Data' and the
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------------
1996 1996 1997
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<S> <C> <C> <C>
PRO FORMA COMBINED STATEMENTS OF OPERATIONS:
Net sales............................................................ $ 48,480 $ 23,016 $ 29,678
Cost of sales........................................................ 36,837 16,965 21,739
------------ ---------- --------------
Gross profit......................................................... 11,643 6,051 7,939
Selling, general, and administrative expense......................... 8,471 4,218 4,843
------------ ---------- --------------
Operating profit..................................................... 3,172 1,833 3,096
Interest expense..................................................... 1,806 768 1,083
Sundry, net.......................................................... 369 103 206
------------ ---------- --------------
Earnings before income taxes......................................... 1,735 1,168 2,219
Income tax expense................................................... 617 397 780
------------ ---------- --------------
Net earnings......................................................... 1,118 771 1,439
Preferred stock dividends............................................ (93) (49) (40)
------------ ---------- --------------
Net earnings on common shares........................................ $ 1,025 $ 722 $ 1,399
------------ ---------- --------------
------------ ---------- --------------
Net earnings per common share........................................ $ .14 .11 $ .20
------------ ---------- --------------
------------ ---------- --------------
Weighted average common shares outstanding........................... 7,120,390 6,577,293 7,160,160
OTHER FINANCIAL INFORMATION:
EBITDA(1)............................................................ $ 6,726 $ 3,568 $ 4,944
Ratio of EBITDA to interest expense.................................. 3.7x 4.7x 4.6x
Cash flow from:
Operating.......................................................... $ 2,386 $ 1,718 $ 698
Investing.......................................................... 1,518 (775) (3,597)
Financing.......................................................... (2,424) (362) 3,265
------------ ---------- --------------
Net cash flow...................................................... $ 1,480 $ 581 $ 366
------------ ---------- --------------
------------ ---------- --------------
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED BALANCE SHEET DATA: JUNE 30, 1997
-------------
<S> <C>
Total assets......................................... $63,999
Working capital...................................... 2,682
Total debt(2)........................................ 24,832
Shareholders' equity................................. 27,895
</TABLE>
(Footnotes on next page)
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<PAGE>
(Footnotes from previous page)
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(1) EBITDA represents income before income taxes, plus interest expense and
depreciation and amortization expense. EBITDA is not presented as, and
should not be considered, an alternative measure of operating results or
cash flows from operations (as determined in accordance with generally
accepted accounting principles), but is presented because it is a widely
accepted financial indicator of a company's ability to incur and service
debt. While commonly used, however, EBITDA is not identically calculated by
companies presenting EBITDA and is, therefore, not necessarily an accurate
means of comparison and may not be comparable to similarly titled measures
disclosed by the Company's competitors.
(2) Includes $925,000 of redeemable preferred stock.
8
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following sets forth summary historical financial data for the Company
and its consolidated subsidiaries (Prestolock, Monroe and Vassar) as of December
31, 1996 and for each of the three fiscal years in the period ended December 31,
1996 and is derived from the audited financial statements included elsewhere
herein. The summary financial data as of June 30, 1997 and for the six months
ended June 30, 1996 and 1997 sets forth summary historical financial data for
the Company and its consolidated subsidiaries (which at June 30, 1997 also
included Skandy and UPP) and is derived from the unaudited financial statements
included elsewhere herein. The comparability of the historical consolidated
financial data has been significantly impacted by the Company's acquisitions of
Monroe and Vassar in 1996 and its acquisitions of Skandy and UPP in January and
March 1997, respectively. The information presented below is qualified in its
entirety by, and should be read in conjunction with, 'Management's Discussion
and Analysis of Financial Condition and Results of Operations,' 'Pro Forma
Financial Data,' 'Selected Financial Data' and the financial statements and
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS:
Net sales............................... $ 3,305 $ 4,442 $ 16,187 $ 8,155 $ 9,733
Cost of goods sold...................... 2,261 2,911 10,587 5,153 6,445
---------- ---------- ---------- ---------- ----------
Gross profit............................ 1,044 1,531 5,600 3,002 3,288
Selling, general and administrative
expenses.............................. 915 1,030 5,088 1,956 2,232
---------- ---------- ---------- ---------- ----------
Operating profit........................ 129 501 512 1,046 1,056
Equity in loss of unconsolidated
subsidiary............................ -- -- 95 -- 65
Interest income......................... -- -- (5) -- --
Interest expense........................ 24 24 555 215 439
Sundry, net............................. (1) (29) (64) -- (55)
---------- ---------- ---------- ---------- ----------
Earnings (loss) before income taxes and
minority interest..................... 106 506 (69) 831 607
Minority interest....................... 38 67 -- -- --
Income tax expense...................... 8 30 7 283 212
---------- ---------- ---------- ---------- ----------
Net earnings (loss)..................... $ 60 $ 409 $ (76) $ 548 $ 395
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net earnings (loss) per share(1)........ $ .03 $ .15 $ (.02) $ .17 $ .10
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Weighted average common shares
outstanding........................... 1,535,170 2,807,390 3,820,390 3,277,293 3,860,168
OTHER FINANCIAL INFORMATION:
EBITDA(2)............................... $ 121 $ 566 $ 999 $ 1,286 $ 1,387
Ratio of EBITDA to interest expense..... 5.0x 23.6x 1.8x 6.0x 3.2x
Cash flow from:
Operating............................. $ (214) $ 392 $ 913 $ 987 $ (1,017)
Investing............................. (429) (203) 270 597 (506)
Financing............................. 645 (191) (713) (1,202) 1,258
---------- ---------- ---------- ---------- ----------
Net cash flow......................... $ 2 $ (2) $ 470 $ 382 $ (265)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
9
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<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total assets........................... $11,533 $ 14,851
Working capital (deficiency)........... (817) (1,719)
Total debt............................. 8,675 10,746
Shareholders' equity................... 729 1,174
</TABLE>
- ------------
(1) Net earnings (loss) per share data for 1994 and 1995 include the pro forma
tax effects attributable to Prestolock being taxed under Subchapter S of the
Internal Revenue Code through December 31, 1995.
(2) EBITDA represents income before income taxes, plus interest expense and
depreciation and amortization expense. EBITDA is not presented as, and
should not be considered, an alternative measure of operating results or
cash flows from operations (as determined in accordance with generally
accepted accounting principles), but is presented because it is a widely
accepted financial indicator of a company's ability to incur and service
debt. While commonly used, however, EBITDA is not identically calculated by
companies presenting EBITDA and is, therefore, not necessarily an accurate
means of comparison and may not be comparable to similarly titled measures
disclosed by the Company's competitors.
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<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
this Prospectus as a result of the risk factors set forth below and the matters
set forth in this Prospectus generally. The Company cautions each prospective
investor, however, that this list of factors may not be exhaustive. In analyzing
an investment in the Common Stock, prospective investors should carefully
consider, together with the other matters referred to herein, the risk factors
described below.
RELIANCE ON MAJOR CUSTOMERS
The Company's sales to the automotive industry accounted for approximately
68.5% and 72.8% of consolidated net sales for the year ended December 31, 1996
and the six months ended June 30, 1997, respectively (pro forma combined net
sales after giving effect to all of the Acquisitions represented 89.5% and
89.0%, respectively, for such period). Sales to GM, Chrysler, Ford, and their
respective Tier I suppliers, accounted for approximately 24%, 28% and 5%,
respectively, of the Company's consolidated net sales for the year ended
December 31, 1996 (pro forma combined net sales after giving effect to all of
the Acquisitions represented 38%, 39% and 8%, respectively, for such period).
For the six months ended June 30, 1997, sales to GM, Chrysler, Ford, and their
respective Tier I suppliers, accounted for approximately 27%, 30% and 6%,
respectively, of the Company's consolidated net sales (pro forma combined net
sales after giving effect to all of the Acquisitions represented 39%, 40% and
8%, respectively, for such period). Thus, the loss of GM, Chrysler or Ford or of
any of the Company's other significant customers could have a material adverse
effect on the Company. The Company, as is typical in the automotive supply
industry, has no long-term contracts with any of its customers. The Company's
OEM and Tier I customers provide annual estimates of their requirements,
however, sales are made on a short-term purchase order basis. There is
substantial and continuing pressure from the major OEMs and Tier I suppliers to
reduce costs, including the cost of products purchased from outside suppliers
such as the Company. If in the future the Company were unable to generate
sufficient production cost savings to offset price reductions, the Company's
gross margins could be adversely affected. See 'Business.'
LIMITED CONSOLIDATED OPERATING HISTORY
The Company has a limited consolidated operating history with regard to a
significant portion of its operations. Prior to the Vassar and Monroe
Acquisitions in January 1996, Prestolock represented the substantial majority of
the Company's operations. In addition, the Company's historical results of
operations for 1996 do not include the results of operations of Skandy or UPP,
which were acquired in January and March 1997, respectively, and neither the
1996 results of operations nor the results of operations for the six months
ended June 30, 1997 include the operations of DCT or Utilase. Moreover, while
the pro forma combined statements of operations of the Company included
elsewhere herein has been prepared to illustrate the effects of the Closing
Acquisitions as if such transactions had occurred as of January 1, 1996, such
pro forma combined financial data has been prepared for comparative purposes
only and does not purport to be indicative of the results that actually would
have been obtained if these Acquisitions had been effected on such earlier date.
As a result, such data is not necessarily indicative of the results that would
have been achieved if all of the businesses acquired had been operated on an
integrated basis or of the results that may be realized by the Company on a
consolidated basis in the future. See 'Pro Forma Financial Data' and
Consolidated Financial Statements.
SUBSTANTIAL OUTSTANDING INDEBTEDNESS; SIGNIFICANT LEVERAGE
In order to finance its operations, including costs relating to the
consummation of the Acquisitions, the Company has incurred substantial
indebtedness. The Company intends to use a substantial portion of the proceeds
of the Offering to repay a significant amount of its pro forma combined
indebtedness; however, the Company will, following the consummation of the
Closing Acquisitions and the Offering, continue to have approximately $20.9
million of long-term debt, including current maturities, as well as $925,000 of
preferred stock (mandatorily redeemable at the option of the holder)
outstanding, which, when compared to the Company's capitalization (including, in
capitalization, the $3.8 million of preferred stock which was issued effective
July 1997 and is redeemable only at the option of the Company), represents a
.41-to-1 ratio of indebtedness-to-
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capitalization. The Company does not expect such debt-to-capitalization ratio to
decrease in the foreseeable future as it will acquire an additional line of
credit facility with a borrowing base of at least $15 million following
the consummation of the Offering and the Closing Acquisitions (the Company has a
commitment letter from NBD Bank for a $15 million revolving line of credit
facility subject to the Company's prior completion of the Offering, and will
either enter into an agreement with NBD Bank pursuant to the terms of such
commitment or obtain a revolver from another lender on the same or better terms)
and anticipates that it will, in connection with its expansion strategy,
consummate additional acquisitions in the future, some or all of which may be
financed with additional debt. In addition, the Company has, on a pro forma
combined basis, from time to time been in violation of certain of its financial
ratio covenants and covenants relating to the issuance of preferred stock and
the payment of preferred stock dividends, requiring it to obtain waivers of
default from its lenders. In addition, the Company has from time to time, had to
negotiate extensions relating to the payment of several of its debt obligations.
Although, as of the date of this Prospectus, the Company is, on a pro forma
combined basis, in compliance with all of its debt covenants and/or has obtained
waivers of default relating thereto, there can be no assurance that, in the
event the Company were to default upon any of its loan obligations or require
additional time to repay and/or refinance certain of its indebtedness in the
future, the Company will be successful in negotiating waivers and/or extensions
relating thereto. In the event of a violation by the Company of any of its loan
covenants or other default by the Company on its obligations, the lenders could
declare the Company's indebtedness to be immediately due and payable and, in
certain cases, such as in the case of the $15 million line of credit facility to
be obtained by the Company following the consummation of the Offering, the
lenders could foreclose on some or all of the Company's assets. Moreover, to the
extent that all of the Company's assets continue to be pledged to secure
outstanding borrowings under its credit facility agreement, such assets will not
be available to secure additional indebtedness which may adversely affect the
Company's ability to borrow in the future. See 'Capitalization,' 'Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources' and 'Use of Proceeds.'
RISKS RELATING TO FUTURE ACQUISITIONS
The automotive component supply industry has undergone, and is likely to
continue to experience, consolidation as OEMs and Tier I suppliers seek to
reduce both their costs and their supplier base. The Acquisitions were pursued
by the Company, and future acquisitions may be made, in order to enable the
Company to expand into new geographic markets, add new customers, provide new
products, manufacturing and service capabilities and increase automotive model
penetration with existing customers. Integration of the Closing Acquisitions,
and any future acquisitions, will place a strain upon the Company's financial
and managerial resources. The full benefits of the Closing Acquisitions, or any
future acquisitions, will require: (i) the integration of administrative,
finance, purchasing, engineering, sales and marketing organizations; (ii) the
coordination of production efforts; and (iii) the implementation of appropriate
operational, financial and management systems and controls. There can be no
assurance that the Company will be able to integrate these operations
successfully. If the Company fails to successfully integrate the Closing
Acquisitions, or any future acquisitions, the Company's business could be
adversely affected. Moreover, while the Company will continue to explore
acquisitions of businesses and assets that it believes are compatible with its
business strategy, and regularly evaluates possible acquisition opportunities,
as of the date of this Prospectus, the Company has no agreements, commitments,
understandings or arrangements with respect to any potential acquisition other
than the Closing Acquisitions. Consequently, there is no basis for investors in
the Offering to evaluate the specific merits or risks of any potential
acquisitions that the Company may undertake following the consummation of the
Offering. Moreover, under Michigan law, various forms of business combinations
can be effected without shareholder approval and, accordingly, investors in the
Offering will, in all likelihood, neither receive nor otherwise have the
opportunity to evaluate any financial or other information which may be made
available to the Company in the future in connection with any acquisition and
must rely entirely upon the ability of management in selecting, structuring and
consummating acquisitions that are consistent with the Company's business
objectives. Although the Company will endeavor to evaluate the risks inherent in
a particular acquisition, there can be no assurance that the Company will
properly ascertain or assess all significant risk factors prior to consummating
any acquisition. See 'Business-- Strategy.'
12
<PAGE>
FAILURE TO OBTAIN BUSINESS ON NEW AND REDESIGNED MODEL INTRODUCTIONS
Certain of the Company's product lines are subject to change as the
Company's customers, including both OEMs and Tier I suppliers, introduce new or
redesigned products. The Company principally competes for new business both at
the beginning of the development phase of new vehicle models and upon the
redesign of existing models. New model development generally begins two to five
years prior to the marketing of such models to the public. Failure of the
Company to obtain business on new models or to retain or increase business on
redesigned existing models would adversely affect the Company's business.
DEPENDENCE ON CONTINUOUS IMPROVEMENT OF PRODUCTION TECHNOLOGIES
The ability of the Company to continue to meet customer specifications with
respect to performance, cost, quality and service will depend, in part, upon the
Company's ability to remain technologically competitive with its production
processes. The Company's business may therefore require from time to time
significant additional capital or other resources to meet this continuing
challenge. The inability of the Company to continuously improve its production
technologies in order to remain competitive could have a material adverse effect
on the Company's business. See 'Business--Strategy.'
DESIGN AND ENGINEERING RESOURCES
OEMs and Tier I suppliers are increasingly requiring their suppliers to
provide more design and engineering input at earlier stages in the product
development process. While the direct costs of design and engineering are
generally borne by the customer, the supplier bears the indirect cost associated
with the allocation of its limited design and engineering resources to such
product development projects, including the inability to allocate such resources
to other projects. Despite the Company's up-front dedication of design and
engineering resources, the OEMs and Tier I suppliers are under no obligation to
order the subject components or systems from the Company following their
development. In addition, in the future, the Company may in some cases, when it
deems it strategically advisable, bear the direct up-front design and
engineering costs as well. There can be no assurance that the Company's
dedication of design and engineering resources, or up-front design and
engineering expenditures, will not have a material adverse effect on the
financial condition or results of operations of the Company.
HISTORICAL WORKING CAPITAL DEFICIT; POTENTIAL NEED FOR ADDITIONAL FINANCING
Although, as of June 30, 1997, the Company had pro forma combined working
capital of approximately $2.7 million, on a historical basis it had working
capital deficits of $817,006 and approximately $1.7 million for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively. The
Company believes, based on its currently proposed plans and assumptions relating
to its operations, that the Company's anticipated revenues from operations, cash
and cash equivalent balances and borrowing availabilities under its line of
credit facilities (including under a new $15 million revolving line of credit
facility which the Company intends to finalize following the consummation of the
Offering) will be sufficient to fund its operating requirements for at least the
next 12 months, there can be no assurance that such funds will not be expended
prior thereto due to changes in economic conditions or other unforeseen
circumstances, requiring the Company to obtain additional financing prior to the
end of such period. Moreover, the Company intends to pursue, as part of its
business strategy, future growth through opportunistic acquisitions of assets or
companies involved in the automotive component supply industry, which
acquisitions may involve the expenditure of significant funds and management
time. Depending upon the nature, size and timing of future acquisitions, the
Company may be required to obtain additional debt or equity financing in
connection with such potential future acquisitions. There can be no assurance
that additional financing will be available to the Company, when and if needed,
on acceptable terms or at all. Any inability to obtain additional financing when
needed could have a material adverse effect on the Company's results of
operations and/or expansion plans. See 'Use of Proceeds,' 'Pro Forma Financial
Data,' 'Selected Financial Data' and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources.'
13
<PAGE>
OPTION OF OTHERS TO PURCHASE AN INTEREST IN VASSAR
The former shareholders of Vassar, including Christan Frampton, the current
Treasurer of Vassar, and James Lamb, a current director of Vassar, retained an
option to repurchase from the Company, for $1.00, 25% of the stock of Vassar,
which option expires when the Company's obligations under consulting agreements
with such former shareholders terminate in 2003. In the event such former
shareholders exercise this option, they will be entitled to receive 25% of any
dividends issued by Vassar and, if and when Vassar is liquidated, 25% of the
liquidating proceeds distributable to holders of Vassar common stock. To date,
none of the former Vassar shareholders have stated an interest in exercising the
option. See 'Certain Transactions--Vassar Acquisition.'
INDUSTRY CYCLICALITY AND SEASONALITY
The Company's business is largely dependent upon the automotive industry,
which is highly cyclical and dependent on consumer spending. Economic factors
adversely affecting automotive production and consumer spending could adversely
impact the Company. In addition, the automotive component supply industry is
somewhat seasonal. Increased revenues and operating income are generally
experienced during the second calendar quarter of each year as a result of the
automotive industry's spring selling season, the peak sales and production
period of the year. Decreased revenues and operating income are generally
experienced during July and December of each year as a result of scheduled OEM
plant shut downs for vacations and holidays, as well as changeovers in
production lines for new model years. The Company's historical results of
operations do not reflect cyclical or seasonal fluctuations in revenues and
operating income because the Acquisitions have resulted in a growth trend
through successive periods which has masked the effect of any such fluctuations.
There can be no assurance that the Company will not be affected by such cyclical
or seasonal fluctuations in the future.
RISK OF LABOR INTERRUPTIONS
Substantially all of the hourly employees of GM, Chrysler and Ford are
represented by the United Automobile, Aerospace and Agricultural Implement
Workers of America (the 'UAW') or the Canadian Automobile Workers Union ('CAWU')
under similar collective bargaining agreements. The UAW and CAWU collective
bargaining agreements applicable to such employees are scheduled to expire in
September 1999. The failure of GM, Chrysler, Ford or any other significant
customer of the Company to reach agreement with the UAW or CAWU relating to the
terms of a new agreement on a timely basis resulting in either a work stoppage
or strike at any of their production facilities could have a material adverse
effect on the Company. GM Truck and Bus had a strike from April 7, 1997 to May
29, 1997, which impacted the Company as follows: (i) lost sales at DCT,
Prestolock and Vassar are estimated at $200,000, $126,000 and $430,000,
respectively; and (ii) the decrease in gross profit at DCT, Prestolock and
Vassar is estimated at $50,000, $50,000 and $157,000, respectively. Chrysler's
Mound Road Plant had a strike from April 7, 1997 to May 7, 1997 which impacted
the Company as follows: (i) lost sales at DCT, Prestolock, UPP and Utilase are
estimated at $250,000, $124,000, $30,000 and $100,000, respectively; and (ii)
the decrease in gross profit at DCT, Prestolock, UPP and Utilase is estimated at
$62,000, $50,000, $12,000 and $40,000, respectively. Bertrand Faure Components
Ltd. ('Bertrand'), a customer of DCT, had a strike from May 30, 1997 to June 11,
1997, which affected DCT's sales to Bertrand through August 30, 1997 by an
estimated $223,000 and gross profit by an estimated $56,000. All of the
Company's operations are non-union, except for Vassar, whose production workers
are represented by the International Paper Workers Union ('AFL-CIO'). These
AFL-CIO workers have been out on strike since August 1, 1997. The Company's
operations have been impacted by the strike. Management estimates the cost
through August 31, 1997 to be approximately $177,000 on a pre-tax basis due to
increased overtime, labor variances, containment by the customer and security
measures.
COMPETITION
Both the automotive component supply and the tooling component industries
are highly competitive. Competition in the sale of the Company's products is
primarily based on engineering, product design, process capability, quality,
cost, delivery and responsiveness. Many of the Company's competitors are
companies, or divisions or subsidiaries of companies, that are larger and have
greater financial and other resources than the Company. In addition, with
respect to certain of its products, some of the Company's competitors, including
14
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GM/Delphi, are divisions of its OEM customers. There can be no assurance that
the Company's products will be able to compete successfully with the products of
these other companies. See 'Business--Competition.'
PRODUCT LIABILITY EXPOSURE
The Company faces an inherent business risk of exposure to product
liability claims if the failure of one of its products results in personal
injury or death, and there can be no assurance that the Company will not
experience material product liability losses in the future. In addition, if any
of the Company's products prove to be defective, the Company may be required to
participate in a recall involving such products. The Company maintains insurance
against product liability claims, but there can be no assurance that such
coverage will be adequate for liabilities ultimately incurred or that such
insurance will continue to be available to the Company on acceptable terms or at
all. A successful claim brought against the Company in excess of available
insurance coverage or a requirement to participate in any product recall may
have a material adverse effect on the Company's business.
IMPACT OF ENVIRONMENTAL REGULATION
The Company is subject to the requirements of federal, state and local
environmental and occupational health and safety laws and regulations. There can
be no assurance that the Company will always be in complete compliance with all
such requirements. The Company has made and will continue to make capital and
other expenditures to comply with environmental requirements. If a release of
hazardous substances occurs on or from the Company's properties or from any of
its disposals at offsite disposal locations, or if contamination is discovered
at any of the Company's current or former properties, the Company may be held
liable, and the amount of such liability could be material. See 'Business--
Environmental Matters.'
DEPENDENCE ON KEY PERSONNEL
The future success of the Company will largely depend on the efforts and
abilities of Robert J. Skandalaris, the Company's President and Chief Executive
Officer, Christopher L. Morin, the Company's Chief Operating Officer, its other
executive officers and John K. Baysore, the President of Utilase. The Company
has an employment agreement with Mr. Skandalaris and Utilase has an employment
agreement with Mr. Baysore. The Company does not, however, have employment
agreements with Mr. Morin or its other executive officers. The Company maintains
no key-person life insurance on the lives of any of its executives. The loss of
the services of Mr. Skandalaris could have a material adverse effect on the
Company. See 'Management.'
CONTROL BY EXISTING SHAREHOLDERS
Upon consummation of the Offering, Robert J. Skandalaris will continue to
own and/or control approximately 43.8% of the outstanding Common Stock. As a
result, Mr. Skandalaris will continue to be able to exert significant influence
over the outcome of all matters submitted to a vote of the holders of Common
Stock, including the election of directors, amendments to the Company's Articles
of Incorporation and approval of significant corporate transactions. Such
consolidation of voting power could also have the effect of delaying, deterring
or preventing a change in control of the Company that might be beneficial to
other shareholders. See 'Principal Shareholders' and 'Description of Capital
Stock.'
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BYLAW AND STATUTORY PROVISIONS
Certain provisions of the Company's Articles of Incorporation and Bylaws
may inhibit changes in control of the Company not approved by the Company's
Board of Directors (the 'Board'). These provisions include: (i) a prohibition on
shareholder action through written consents; (ii) a requirement that special
meetings of shareholders be called only by the Board; (iii) advance notice
requirements for shareholder proposals and nominations; (iv) limitations on the
ability of shareholders to amend, alter or repeal the Bylaws; and (v) the
authority of the Board to issue, without shareholder approval, preferred stock
with such terms as the Board may determine. The Company will also be afforded
the protections of Sections 790 through 799 of the Michigan Business Corporation
Act, which could have similar effects. See 'Description of Capital Stock.'
15
<PAGE>
DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Company currently intends to retain any earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future. As
a holding company, the ability of the Company to pay dividends in the future
will be dependent upon the receipt of dividends or other payments from its
operating subsidiaries. The payment of dividends by such subsidiaries, other
than in stock of such subsidiaries, is restricted by the Company's current bank
loan agreements, as is the Company's ability to pay cash dividends on any class
of stock. Moreover, the Company expects that the $15 million line of credit
facility which it intends to finalize upon the consummation of the Offering and
any other future lending facilities will include similar restrictions. The
Company's ability to pay dividends, other than in stock, will also be subject to
limitations imposed by the Utilase Notes which will be issued by the Company in
connection with the Utilase Acquisition. See 'Dividend Policy' and 'Certain
Transactions.'
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or the availability of such shares for future sale will
have on the market price of the Common Stock prevailing from time to time. Sales
of substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock.
Upon consummation of the Offering, the Company will have 7,225,006 shares of
Common Stock issued and outstanding (7,720,006 if the Representatives'
over-allotment option is exercised in full), of which the 3,300,000 shares of
Common Stock sold in the Offering will be freely tradable without restriction or
further registration under the Securities Act of 1933, as amended (the
'Securities Act'), unless such shares are acquired by an 'affiliate' of the
Company as that term is defined under Rule 144 under the Securities Act ('Rule
144'). The shares of Common Stock outstanding prior to the consummation of the
Offering have not been registered under the Securities Act and may not be sold
unless they are registered or unless an exemption from registration, such as the
exemption provided by Rule 144, is available. A total of 3,408,980 of such
unregistered shares of Common Stock will become eligible for sale, pursuant to
Rule 144, subject to the volume and manner of sale limitations prescribed by
Rule 144 and to the contractual restrictions of certain 360-day 'lock-up'
agreements with BlueStone Capital Partners, L.P. ('BlueStone') described herein,
beginning 90 days from the date of this Prospectus. See 'Shares Eligible for
Future Sale' and 'Underwriting.'
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained in the future or that the market price of the Common Stock will
not decline below its initial public offering price. If an active public market
for the Common Stock does not develop, the market price and liquidity of the
Common Stock will likely be materially adversely effected. The initial public
offering price of the Common Stock, which will be determined by negotiations
between the Company and the Representatives, will not necessarily be related to
the Company's asset value, net worth or other established criteria of value and
may not be indicative of the market price for the Common Stock after the
Offering. The trading price of the Common Stock could be subject to wide
fluctuations in response to variations in the Company's quarterly operating
results, changes in earnings estimates by analysts, conditions in the Company's
businesses or general market or economic conditions. In addition, in recent
years, the stock market has experienced extreme price and volume fluctuations.
These fluctuations have had a substantial effect on the market prices for many
emerging growth companies often unrelated to the operating performance of the
specific companies. Such market fluctuations could have a material adverse
effect on the market price for the Common Stock. See 'Underwriting.'
IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS
Purchasers of Common Stock in the Offering will acquire 45.7% of the then
outstanding Common Stock for 95.5% of the total consideration paid for the then
outstanding Common Stock (based on an assumed offering price of $10.00 per
share, the high point of the anticipated range of the initial public offering
price per share) and will experience immediate and substantial dilution in net
tangible book value per share. As of June 30, 1997, the Company had a deficiency
in net tangible book value of approximately $.96 per share. After giving effect
to the
16
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sale of Common Stock offered by this Prospectus, the deduction of underwriting
discounts and the estimated expenses of the Offering, the consummation of the
Closing Acquisitions and the anticipated use of proceeds of the Offering (based
on an assumed offering price of $10.00 per share), the adjusted net tangible
book value of the Company at June 30, 1997 would have been $.19 per share,
representing an immediate dilution of $9.81 per share to purchasers in the
Offering. See 'Dilution.'
BENEFITS OF THE OFFERING TO CURRENT SHAREHOLDERS
Upon the consummation of the Offering, the current shareholders of the
Company will receive substantial benefits, including the creation of a public
trading market for their securities and the corresponding facilitation of sales
by such shareholders of their shares of Common Stock in the secondary market
(although most of such shares are subject to 360-day 'lock-up' agreements with
BlueStone and to certain limitations on resale imposed upon officers, directors
and affiliates of the Company under the Federal securities laws), as well as an
immediate increase in net tangible book value of $1.15 per share to such
shareholders based upon the adjusted net tangible book value per share after the
consummation of the Offering and the Closing Acquisitions and the application of
the estimated net proceeds of the Offering (based upon an assumed offering price
of $10.00 per share, the high point of the currently anticipated range of the
initial public offering price per share). If, at the time the existing
shareholders are able to sell their shares of Common Stock in the public market,
the market price per share remains at the initial public offering price, of
which there can be no assurance, such shareholders would realize an average gain
of $9.60 per share on the sale of their existing shares (again, based upon an
assumed offering price of $10.00 per share). See 'Dilution,' 'Principal
Shareholders,' 'Shares Eligible for Future Sale' and 'Underwriting.'
LIMITED LEAD UNDERWRITING EXPERIENCE
Although BlueStone has engaged in the investment banking business since its
formation as a broker-dealer in March 1996, and its principals have had
extensive experience in the underwriting of securities in their capacities with
other broker-dealers, this Offering constitutes one of the first public
offerings for which BlueStone has acted as lead underwriter. See 'Underwriting.'
RECENT PUBLICITY
Following the execution of the definitive agreement for the Utilase
Acquisition, and after the filing of the Company's registration statement for
the Offering with the Commission, press reports of the pending Utilase
Acquisition appeared in certain publications. These reports included statements
attributed to current Utilase management, and not to the Company, with respect
to anticipated revenues and employment levels at Utilase over the next two
years. Neither the Company nor the Representatives have confirmed, endorsed or
adopted these statements. The Company does not believe that these statements are
inconsistent with, or conflict with, the information contained in this
Prospectus.
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Prospectus contains various forward-looking statements that are based
on the Company's beliefs as well as assumptions made by and information
currently available to the Company. When used in this Prospectus, the words
'believe,' 'expect,' 'anticipate,' 'estimate' and similar expressions are
intended to identify forward-looking statements. The accuracy of such
forward-looking statements are subject to certain risks, uncertainties and
assumptions, including those identified above under 'Risk Factors.' Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated, or projected. The Company cautions potential purchasers
not to place undue reliance on any such forward-looking statements.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
3,300,000 shares of Common Stock offered hereby, are estimated to be
approximately $26,721,000 ($30,864,150 if the Representatives' over-allotment
option is exercised in full), assuming an initial public offering price of $9.00
per share (the midpoint of the currently anticipated range of the initial public
offering price) and after deducting underwriting discounts and estimated
offering expenses. The Company expects to use the net proceeds as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
ANTICIPATED USE OF NET PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ------------------------------------------------------------------------------------ ------------- -------------
<S> <C> <C>
Reduction of financial institution debt(1)(2)....................................... $11,290,000 42.3%
Payments relating to Utilase Acquisition(3)......................................... 10,450,000 39.1
Payments relating to Final DCT Acquisition(4)....................................... 1,960,000 7.3
Repayment of related party debt(5).................................................. 1,901,000 7.1
Payments relating to prior Acquisitions(6).......................................... 620,000 2.3
Equipment purchases................................................................. 500,000 1.9
------------- ------
Total............................................................................. $26,721,000 100.0%
------------- ------
------------- ------
</TABLE>
- ------------------
(1) Although the Company intends to use a significant portion of the proceeds to
repay a substantial amount of its financial institution debt, it will,
immediately following the Offering, acquire a revolving line of credit
facility with a borrowing base of at least $15 million (the Company has a
commitment letter from NBD Bank for a $15 million revolving line of credit
facility, subject to the consummation of the Offering, and will either enter
into an agreement with NBD Bank based on such commitment or with another
financial institution on the same or better terms) and intends to utilize
the resulting increased borrowing availability under such new line of credit
as necessary in the ordinary course of its business, including for increased
inventories and receivables and continued growth of the Company and its
subsidiaries. In addition, the Company may use a portion of such increased
borrowing availability to acquire businesses which the Company believes are
compatible with its business strategy; however, while the Company regularly
evaluates possible acquisition opportunities, as of the date of this
Prospectus, the Company has no agreements, commitments, understandings or
arrangements with respect to any acquisition other than the Closing
Acquisitions. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources.'
(2) Includes: (i) approximately $4.23 million for the repayment in full of
amounts outstanding under DCT's revolving line of credit facility with CIT
Group/Credit Finance, Inc. ('CIT'), which permits borrowings of up to $7.5
million (the actual borrowing base at any given time depending upon advance
formulas based on outstanding accounts receivable and inventory), bears
interest at 2.625% over CIT's prime lending rate (a total of 11.125% as of
September 30, 1997) and matures on June 1, 1998 (the 'DCT/CIT Line'); (ii)
an anticipated $3.0 million for the repayment in full of the Company's term
loan with Comerica Bank ('Comerica'), which had an outstanding principal
balance of $3.44 million as of June 30, 1997, bears interest at 1.5% above
Comerica's prime lending rate (a total of 10% as of September 30, 1997), is
payable in monthly principal installments of $78,125, plus accrued interest,
and matures on December 31, 2000 (the 'Noble/Comerica Term Loan'); (iii) an
anticipated $2.1 million for the repayment in full of DCT's term loan with
CIT, which bears interest at 2.625% above CIT's prime lending rate (a total
of 11.125% as of September 30, 1997), is payable in monthly principal
installments of $46,992, plus interest, and matures on June 1, 1998 (the
'DCT/CIT Term Loan'); (iv) an anticipated $1.1 million for the repayment in
full of Utilase's term loan with Comerica, which had an outstanding
principal balance of $1.209 million as of June 30, 1997, bears interest at
2.0% above Comerica's prime lending rate (a total of 10.5% as of September
30, 1997), is payable in monthly principal installments of $30,000, plus
interest, and matures on October 31, 2000 (the 'Utilase/Comerica Term
Loan'); and (v) approximately $842,000 for the repayment in full of amounts
outstanding under Utilase's revolving line of credit facility with Comerica,
which permits borrowings of up to $4.0 million (the actual borrowing base at
any given time depending upon advance formulas based on outstanding accounts
receivable and inventory), bears interest at 2% above Comerica's prime
lending rate (a total of 10.5% as of September 30, 1997) and matures on
December 31, 1997 (the
18
<PAGE>
'Utilase/Comerica Line'). See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources.'
(3) Includes: (i) the $8.2 million cash portion of the Utilase stock purchase
price; (ii) $1.4 million payable to various employees and shareholders of
Utilase and its parent company, DCTI, in consideration of their covenants
not to compete; and (iii) $850,000 to make the final payment due to the
former shareholders of Utilase in connection with the UPP Acquisition, each
of which payments is a condition precedent to the Utilase Acquisition. See
'Certain Transactions--UPP Acquisition' and '--Utilase Acquisition.'
(4) Includes (i) $1.0 million for the purchase of the remaining 55% interest in
DCT and (ii) $960,000 to repay DCT's loan from DCTI assumed by the Company
in connection with the Final DCT Acquisition, which loan bears interest at
the rate of 10% per annum and matures on the earlier of June 30, 1998 and
the consummation of the Final DCT Acquisition. See 'Certain Transactions--
Final DCT Acquisition.'
(5) Represents the repayment of a portion of Utilase's approximately $2.83
million aggregate amount of intercompany debt owed to DCTI and its
affiliated entities. See 'Certain Transactions--Other Matters.'
(6) Includes $500,000 payable in connection with the Monroe Acquisition and
$120,000 payable in connection with the Vassar Acquisition. See 'Certain
Transactions--Vassar Acquisition' and '--Monroe Acquisition.'
Pending their use as set forth above, the Company intends to use the net
proceeds of the Offering either to make short-term reductions in the Company's
working capital lines of credit or to invest in short-term, investment grade,
interest-bearing securities. The described use of proceeds is based upon
management's assumptions concerning certain acquisition, development, financial
and other matters which may affect the Company in the future. If the development
of the Company's business varies materially from these assumptions, the Company
may reallocate some of the proceeds in the best interests of the Company. If the
Representatives exercise their over-allotment option in full, the Company will
realize additional net proceeds of approximately $4.1 million. Such proceeds, if
received, are expected to be used for working capital and general corporate
purposes.
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock
since its incorporation. The Company currently intends to retain any earnings to
support its growth strategy and operations and does not anticipate paying cash
dividends in the foreseeable future. Payment of future dividends, if any, will
be at the discretion of the Company's Board of Directors after taking into
account various factors, including the Company's financial condition, operating
results, current and anticipated cash needs and plans for expansion. In
addition, the payment of dividends by the Company on the Common Stock is
restricted by the Company's current bank loan agreements and it is anticipated
that the new $15 million line of credit facility which the Company intends to
finalize upon the consummation of the Offering and any other future lending
facilities which the Company obtains will include similar restrictions. Such
restrictions would limit the Company's ability to pay dividends on the Common
Stock in the future. Further, the Utilase Notes, which will be delivered in
connection with the Utilase Acquisition, will require the consent of the holders
of 67% of the aggregate outstanding principal amount thereof for the Company to
declare or pay any dividends on the Common Stock, other than in shares of
capital stock. See 'Certain Transactions.'
19
<PAGE>
DILUTION
The difference between the initial public offering price per share of
Common Stock and the net tangible book value per share of Common Stock after the
Offering constitutes the dilution to investors in the Offering. Net tangible
book value per share on any given date is determined by dividing the net
tangible book value of the Company (total tangible assets less total
liabilities) on such date by the number of then outstanding shares of Common
Stock.
At June 30, 1997, net tangible book value (deficit) of the Company was
$(3,717,417), or $(.96) per share. After giving retroactive effect to the sale
of the 3,300,000 shares of Common Stock offered hereby at an assumed price of
$10.00 per share (the high point of the currently anticipated range of the
initial public offering price) and the receipt and anticipated application of
the estimated net proceeds therefrom and to the concurrent consummation of the
Closing Acquisitions, the as adjusted net tangible book value of the Company at
June 30, 1997 would have been $1,358,583, or $.19 per share, representing an
immediate increase in net tangible book value of $1.15 per share to existing
shareholders and an immediate dilution of $9.81 (98.1%) per share to investors
in the Offering.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price................................................. $10.00
Net tangible book value (deficit) before the Offering............................... $(.96)
Increase attributable to investors in the Offering.................................. 1.15
-----
Adjusted net tangible book value after the Offering................................... .19
------
Dilution to investors in the Offering................................................. $ 9.81
------
------
</TABLE>
The following table sets forth, with respect to existing shareholders and
the investors in the Offering, a comparison of the number of shares of Common
Stock purchased from the Company, the percentage ownership of such shares, the
aggregate consideration paid, the percentage of total consideration paid, and
the average price paid per share.
<TABLE>
<CAPTION>
SHARES ACQUIRED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders............................. 3,925,006 54.3% $ 1,552,962 4.5% $ 0.40
Investors in the Offering......................... 3,300,000 45.7 33,000,000 95.5 $ 10.00(1)
--------- ------- ----------- -------
7,225,006 100.0% $34,552,962 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</TABLE>
- ------------------
(1) Based on the high point of the currently anticipated range of the initial
public offering price.
The foregoing table assumes no exercise of the Representatives'
over-allotment option. If such option is exercised in full, the new investors
will have paid $37,950,000 (based on an assumed price of $10.00 per share, the
high point of the currently anticipated range of the initial public offering
price) for 3,795,000 shares of Common Stock, representing approximately 96.1% of
the total consideration for 49.2% of the total number of shares outstanding. In
addition, computations set forth in the above table exclude an aggregate of
700,000 shares of Common Stock reserved for issuance upon the exercise of
options available for future grant under the Option Plan and 330,000 shares of
Common Stock reserved for issuance upon the exercise of the Representatives'
Warrants. See 'Management--Stock Option Plan' and 'Underwriting.'
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company, as of
June 30, 1997, on: (i) a historical basis; (ii) a pro forma basis to reflect the
consummation of the Closing Acquisitions (including the utilization of a portion
of the net proceeds from the Offering in connection therewith, as well as the
sale of a corresponding number of the shares offered hereby); and (iii) a pro
forma basis, as adjusted to reflect the sale of the balance of the 3,300,000
shares of Common Stock offered hereby at an assumed price of $9.00 per share
(the midpoint of the currently anticipated range of the initial public offering
price) and the anticipated application of the estimated net proceeds therefrom.
This table should be read in conjunction with 'Pro Forma Financial Data' and the
consolidated financial statements, including the notes thereto, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------------
PRO FORMA AS
HISTORICAL PRO FORMA ADJUSTED
---------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term debt:
Current maturities of long-term institutional debt....................... $ 1,052 $ 4,197 $ 2,336
Current maturities of related party debt................................. 1,336 500 --
---------- --------- ------------
Total current maturities.............................................. 2,388(1) 4,697 2,336
---------- --------- ------------
Long-term debt:
Long-term institutional debt, less current maturities.................... 3,464 10,173 4,714
Related party debt, less current maturities.............................. 1,890 14,852 13,854
---------- --------- ------------
Total long-term debt.................................................. 5,354 25,025 18,568
---------- --------- ------------
Redeemable Preferred Stock, $100 par value: none authorized or outstanding
historical; 150,000 shares authorized pro forma and pro forma as adjusted
and 9,250 shares outstanding pro forma as
adjusted(2).............................................................. -- -- 925
Shareholders' equity(3):
Common Stock, no par value: 20,000,000 shares authorized; 3,860,168
shares issued and outstanding historical, 5,392,266 shares issued and
outstanding pro forma and 7,160,168 shares issued and outstanding pro
forma as adjusted(4).................................................. 1,086 13,482 27,807
Retained earnings........................................................ 88 88 88
---------- --------- ------------
Total shareholders' equity............................................ 1,174 13,570 27,895
---------- --------- ------------
Total capitalization................................................ $ 8,916 $43,292 $ 49,724
---------- --------- ------------
---------- --------- ------------
</TABLE>
- ------------------
(1) Does not include short-term debt of $3.0 million outstanding at June 30,
1997 which was repaid in July 1997 from the proceeds of the Company's $3.8
million preferred stock financing effective July 1997. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources.'
(2) Assumes conversion of the outstanding shares of DCT redeemable preferred
stock into preferred stock of the Company (redeemable at the option of the
holder) concurrently with the closing of the Offering. See 'Certain
Transactions' and 'Description of Capital Stock--Preferred Stock.'
(3) Does not include 38,000 shares of preferred stock (redeemable at the option
of the Company) issued in connection with the Company's $3.8 million
preferred stock financing effective July 1997. See 'Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources.'
(4) Does not include: (i) 64,838 shares of Common Stock issued effective July
1997 in connection with the Company's $3.8 million preferred stock
financing; (ii) 700,000 shares reserved for issuance upon exercise of
options available for future grant under the Option Plan; (iii) 330,000
shares of Common Stock reserved for issuance upon exercise of the
Representatives' Warrants; and (iv) 58,485 shares reserved for issuance in
future periods in exchange for a covenant not to compete in connection with
the Utilase Acquisition. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources,' 'Management--Stock Option Plan,' 'Certain Transactions' and
'Underwriting.'
21
<PAGE>
PRO FORMA FINANCIAL DATA
INTRODUCTION
The following pro forma financial data is based upon the historical
financial statements of the Company and has been prepared to illustrate the
effects of the Closing Acquisitions and the Offering. The effects of the
Offering proceeds have been isolated from the effects of the Closing
Acquisitions, except to the extent that the Offering proceeds will be used to
finance the Closing Acquisitions. The unaudited pro forma combined statement of
operations for the year ended December 31, 1996 and for the six months ended
June 30, 1996 and 1997 give effect to the Closing Acquisitions and the Offering
as if they had been completed as of January 1, 1996. The unaudited pro forma
combined balance sheet as of June 30, 1997 gives effect to the Closing
Acquisitions and the Offering as if such transactions had been completed on June
30, 1997. The Closing Acquisitions are reflected using the purchase method of
accounting for business combinations.
The pro forma financial data is provided for comparative purposes only and
does not purport to represent the actual financial position or results of
operations of the Company that actually would have been obtained if the
Closing Acquisitions had been consummated on the dates specified, nor is it
necessarily indicative of the results of operations that may be achieved in the
future.
Adjustments to the pro forma combined operating results for the Closing
Acquisitions and the Offering include changes in depreciation and amortization
to reflect the cost basis of assets acquired; changes to selling, general and
administrative expenses to remove non-recurring expenses and salaries to
officers and shareholders; changes in interest expense to reflect debt incurred
in financing the Acquisitions; and changes to the provision for income taxes to
reflect reductions resulting from the pro forma income adjustments. The pro
forma financial data is based on certain assumptions and adjustments described
in the notes thereto and should be read in conjunction therewith. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the financial statements and notes thereto included elsewhere
herein.
22
<PAGE>
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------
CLOSING
ACQUISITIONS OTHER
AND RELATED ADJUSTED OFFERING
OFFERING PROCEEDS PRO FORMA PROCEEDS PRO FORMA
NOBLE DCT UTILASE ADJUSTMENTS(AA) COMBINED ADUSTMENTS COMBINED
--------- ------- ------- ----------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $16,187 $22,988 $ 9,305 $ 48,480 $ 48,480
Cost of sales................. 10,587 20,446 5,804 36,837 36,837
--------- ------- ------- ---------- ----------
Gross profit.................. 5,600 2,542 3,501 11,643 11,643
Selling, general, and
administrative expense...... 5,088 1,961 2,060 $ (841)(BB) 8,497 $ (26)(MM) 8,471
133(CC)
1,286(DD)
(626)(EE)
(564)(FF)
--------- ------- ------- ----------------- ---------- ----------- ----------
Operating profit.............. 512 581 1,441 612 3,146 26 3,172
Interest expense.............. 555 938 631 1,049(GG) 3,077 (1,271)(NN) 1,806
(96)(HH)
Sundry, net................... (26) 104 171 95(II) 369 369
25(JJ)
--------- ------- ------- ----------------- ---------- ----------- ----------
Earnings (loss) before income
taxes....................... (69) (253) 981 (221) 438 1,297 1,735
Income tax expense............ 7 135 330 (296)(KK) 176 441(OO) 617
--------- ------- ------- ----------------- ---------- ----------- ----------
Net earnings (loss)........... (76) (388) 651 75 262 856 1,118
Preferred stock dividends..... -- -- -- (93)(LL) (93) (93)
--------- ------- ------- ----------------- ---------- ----------- ----------
Net earnings (loss) on common
shares...................... $ (76) $ (388) $ 651 $ (18) $ 169 $ 856 $ 1,025
--------- ------- ------- ----------------- ---------- ----------- ----------
--------- ------- ------- ----------------- ---------- ----------- ----------
Earnings (loss) per common
share....................... $ (.02) $ .03 $ .14(QQ)
--------- ---------- ----------
--------- ---------- ----------
Weighted average common shares
outstanding................. 3,820,390 1,532,098 5,352,488 1,767,902(PP) 7,120,390
</TABLE>
- ------------------
(AA) Includes adjustments directly attributable to the Closing Acquisitions,
including he Offering proceeds adjustments relating to the Closing
Acquisitions.
(BB) Reflects bonus paid to Company's Chief Executive Officer. Pursuant to his
employment agreement with the Company, entered into April 1997, as amended,
he is precluded from the receipt of any bonus in 1997.
(CC) Reflects the addition of the depreciation of $133,000 due to the purchase
of Competitive Technologies Investment Company ('CTIC') in connection with
the Final DCT Acquisition. See 'Certain Transactions--DCT Acquisition and
Related Matters.'
(DD) Reflects the amortization of goodwill over 20 years relating to the
purchase of CTIC totaling $14,000, the amortization of goodwill over 20
years relating to the Utilase Acquisition totaling $857,703, the
amortization of goodwill over 20 years relating to the Final DCT
Acquisition totaling $214,951, and the amortization of the covenant not to
compete obtained in connection with the Utilase Acquisition over 7 years
totaling $200,000. The amortization expense related to the purchase of CTIC
is based on the acquisition of land and building with an appraised value of
$4.3 million and the assumption of mortgage debt totalling $4.6 million.
The amortization expense related to the Utilase Acquisition is based on the
acquisition of current assets totalling $1.7 million, property and
equipment totalling $3.4 million, other assets totalling $3.6 million, the
assumption of $7.6 million in liabilities, notes to sellers totalling $10.1
million, and cash paid to sellers totalling $8.2 million. The amortization
expense related to the Final DCT Acquisition is based on the acquisition of
current assets totalling $5.4 million, property and equipment totalling
$4.8 million, the assumption of liabilities totalling $13.5 million (net of
debt forgiven totalling $16.5 million), and cash paid to sellers totalling
$1.0 million. No adjustments were made to the carrying value of the assets
acquired as management believes their book values approximate fair market
value.
(EE) Reflects the corporate allocation expense incurred by Utilase that will
cease upon its acquisition by Noble.
(Footnotes continued on next page)
23
<PAGE>
(Footnotes continued from previous page)
(FF) Reflects the elimination of rent expense in the amount of $564,000 that
will cease upon the purchase of CTIC.
(GG) Reflects imputed interest at a rate of 9.25% on the acquisition cost of
$850,000 for UPP totaling $78,625 (this interest expense adjustment is
eliminated with the payment of the $850,000 with proceeds from the
Offering), the additional interest expense of $425,000 relating to the
purchase of CTIC, and the imputed interest expense of $623,621 on the
Utilase Notes issued in connection with the Utilase Acquisition. The
Utilase Notes mature over a four-year period from the date of the Utilase
Acquisition. The Series A, B, and C Utilase Notes have a negotiated
interest rate of 6.0%, and the Series D Utilase Notes have a negotiated
interest rate of 6.5%.
(HH) Reflects the interest expense savings totaling $96,000 resulting from the
repayment of DCT's 10% note payable to DCTI in the principal amount of
$960,000.
(II) Reflects the elimination of the Company's minority interest in DCT's loss
totaling $95,239.
(JJ) Reflects the addition of rent income of $25,000 due to the purchase of
CTIC.
(KK) Reflects the tax effects of the pro forma adjustments amounting to $74,980
and the presumed utilization of DCT's loss for the year ended December 31,
1996 providing a tax benefit of $220,858.
(LL) Represents the pro forma dividends assuming the DCT preferred shares were
converted to shares of the Company's preferred stock (redeemable at the
option of the holder pursuant to a stated 'put' formula) as of January 1,
1996 and were redeemed pursuant to such formula ($37,500 per quarter)
during the period. See 'Description of Capital Stock--Preferred Stock.'
(MM) Reflects the amortization over seven years of the Vassar consulting
agreements settled with proceeds from the Offering. The basis of these
consulting agreements, as settled, totals $205,000, of which payments
totaling $85,000 have been made through June 30, 1997. The adjustment
reflects the difference between the $55,000 of consulting agreements which
were actually expensed in 1996 and the $29,286 amortization expense
allocable to 1996.
(NN) Reflects the interest expense savings totaling approximately $1.270 million
resulting from the reduction of debt through application of the Offering
proceeds. These savings include the repayment of debt totaling
approximately $13.2 million at an interest rate of 9.3% that reflects the
weighted average interest rate at January 1, 1996. The savings also include
the repayment of the $500,000 principal amount remaining outstanding under
the note issued in connection with the Monroe Acquisition at an imputed
interest rate of 8.5%.
(OO) Reflects the tax effects, at 34%, of the other Offering proceeds
adjustments.
(PP) Represents the shares of Common Stock offered hereby to the extent not
utilized to finance the Closing Acquisitions.
(QQ) Earnings per share on a pro forma combined basis adjusted for the Offering
and Closing Acquisitions.
24
<PAGE>
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
----------------------------------------------------------------------------------------------
CLOSING
ACQUISITIONS OTHER
AND RELATED ADJUSTED OFFERING
OFFERING PROCEEDS PRO FORMA PROCEEDS PRO FORMA
NOBLE DCT UTILASE ADJUSTMENTS(AA) COMBINED ADUSTMENTS COMBINED
--------- ------- ------- ----------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales....................... $ 8,155 $10,656 $ 4,205 $ 23,016 $ 23,016
Cost of sales................... 5,153 9,439 2,373 16,965 16,965
--------- ------- ------- ---------- ---------
Gross profit.................... 3,002 1,217 1,832 6,051 6,051
Selling, general, and
administrative expense........ 1,956 1,026 1,132 $ (282)(BB) 4,233 $ (15)(KK) 4,218
66(CC)
(308)(DD)
643(EE)
--------- ------- ------- ----------------- ---------- ----------- ---------
Operating profit (loss)......... 1,046 191 700 (119) 1,818 15 1,833
Interest expense................ 215 418 294 524(FF) 1,403 (635)(LL) 768
(48)(GG)
Sundry, net..................... 93 (2) 12(HH) 103 103
0(II)
--------- ------- ------- ----------------- ---------- ----------- ---------
Earnings (loss) before income
taxes......................... 831 (134) 404 (583) 518 650 1,168
Income tax expense.............. 283 0 138 (245)(JJ) 176 221(MM) 397
--------- ------- ------- ----------------- ---------- ----------- ---------
Net earnings (loss)............. 548 (134) 266 (338) 342 429 771
Preferred stock dividends....... -- -- -- (49) (49) (49)
--------- ------- ------- ----------------- ---------- ----------- ---------
Net earnings (loss) on common
shares........................ $ 548 $ (134) $ 266 $ (387) $ 293 $ 429 $ 722
--------- ------- ------- ----------------- ---------- ----------- ---------
--------- ------- ------- ----------------- ---------- ----------- ---------
Earnings per common share....... $ .17 $ .06 $ .11(OO)
--------- ---------- ---------
--------- ---------- ---------
Weighted average common shares
outstanding................... 3,277,293 1,532,098 4,809,391 1,767,902(NN) 6,577,293
</TABLE>
- ------------------
(AA) Includes adjustments directly attributable to the Closing Acquisitions,
including the Offering proceeds adjustments relating to the Closing
Acquisitions.
(BB) Reflects the elimination of rent expense in the amount of $282,000 that
will cease upon the purchase of CTIC.
(CC) Reflects the addition of the depreciation of $66,500 resulting from the
purchase of CTIC.
(DD) Reflects the corporate allocation expenses incurred by Utilase that will
cease upon its acquisition by Noble.
(EE) Reflects the amortization of goodwill over 20 years relating to the
purchase of CTIC. totaling $7,000, the amortization of goodwill over 20
years relating to the Utilase Acquisition totaling $428,852, the
amortization of goodwill over 20 years relating to the Final DCT
Acquisition totaling $107,476, and the amortization of the covenants not
to compete obtained in connection with the Utilase Acquisition over 7
years totaling $100,000. The amortization expense related to the purchase
of CTIC is based on the acquisition of land and building with an appraised
value of $4.3 million and the assumption of mortgage debt totalling $4.6
million. The amortization expense related to the Utilase Acquisition is
based on the acquisition of current assets totalling $1.7 million,
property and equipment totalling $3.4 million, other assets totalling $3.6
million, the assumption of $7.6 million in liabilities, notes to sellers
totalling $10.1 million, and cash paid to sellers totalling $8.2 million.
The amortization expense related to the Final DCT Acquisition is based on
the acquisition of current assets totalling $5.4 million, property and
equipment totalling $4.8 million, the assumption of liabilities totalling
$13.5 million (net of debt forgiven totalling $16.5 million), and cash
paid to sellers totalling $1.0 million. No adjustments were made to the
carrying value of the assets acquired as management believes their book
values approximate fair market value.
(Footnotes continued on next page)
25
<PAGE>
(Footnotes continued from previous page)
(FF) Reflects imputed interest at a rate of 9.25% on the acquisition cost of
$850,000 for UPP totaling $39,312 (this interest expense adjustment is
eliminated with the payment of the $850,000 with proceeds from the
Offering), the additional interest expense of $212,500 relating to the
purchase of CTIC, and the imputed interest expense of $311,810 on the
Utilase Notes issued in connection with the Utilase Acquisition. The
Utilase Notes mature over a four-year period from the date of the Utilase
Acquisition. The Series A, B, and C Utilase Notes have a negotiated
interest rate of 6.0%, and the Series D Utilase Notes have a negotiated
interest rate of 6.5%.
(GG) Reflects the interest expense savings totaling $48,000 resulting from the
repayment of DCT's 10% note payable to DCTI in the principal amount of
$960,000.
(HH) Reflects the addition of rent income of $12,500 due to the purchase of
CTIC.
(II) Equity adjustments to earnings related to DCT did not begin until July
1996.
(JJ) Reflects the tax effect of the pro forma adjustments amounting to
$198,277 and the presumed utilization of DCT's loss for the six months
ended June 30, 1996 providing a total benefit of $45,408.
(KK) Reflects the amortization over seven years of the Vassar consulting
agreements settled with proceeds from the Offering. The basis of these
consulting agreements, as settled, totals $205,000, of which payments
totaling $85,000 have been made through June 30, 1997. The adjustment
reflects the difference between the $30,000 expensed by the Company
relating to the consulting agreements during the six months ended June 30,
1996 and the $14,643 amortization expense allocable to such six-month
period.
(LL) Reflects the interest expense savings totaling $635,267 resulting from the
reduction of debt through application of the Offering proceeds. These
savings include the repayment of debt totaling approximately $13.2
million at an interest rate of 9.3% that reflects the weighted average
interest rate of such debt at January 1, 1996. The savings also include
the repayment of the $500,000 principal amount remaining outstanding under
the note issued in connection with the Monroe Acquisition at an imputed
interest rate of 8.5%.
(MM) Reflects the tax effects, at 34%, of the other Offering proceeds
adjustments.
(NN) Represents the shares of Common Stock offered hereby to the extent not
utilized to finance the Closing Acquisitions.
(OO) Earnings per share on a pro forma combined basis adjusted for the Offering
and the Closing Acquisitions include an adjustment to earnings related to
preferred dividends as if the preferred stock of DCT was converted to
shares of the Company's preferred stock (redeemable at the option of the
holder pursuant to a stated 'put' formula) as of January 1, 1996 and were
redeemed pursuant to such formula ($37,500 per quarter) during the period.
26
<PAGE>
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
-----------------------------------------------------------------------------------------------
CLOSING
ACQUISITIONS
AND RELATED ADJUSTED OTHER
OFFERING PROCEEDS PRO FORMA PROCEEDS PRO FORMA
NOBLE DCT UTILASE ADJUSTMENTS(AA) COMBINED ADJUSTMENTS COMBINED
--------- ------- ------- ----------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... $ 9,733 $13,240 $ 6,705 $ 29,678 $ 29,678
Cost of sales.................. 6,445 11,841 3,453 21,739 21,739
--------- ------- ------- --------- ---------
Gross profit................... 3,288 1,399 3,252 7,939 7,939
Selling, general, and
administrative expense....... 2,232 1,007 1,496 $ (282)(BB) 4,858 $ (15)(KK) 4,843
67(CC)
(305)(DD)
643(EE)
--------- ------- ------- ----------------- --------- ----------- ---------
Operating profit............... 1,056 392 1,756 (123) 3,081 15 3,096
Interest expense............... 439 513 290 524(FF) 1,718 (635)(LL) 1,083
(48)(GG)
Sundry, net.................... (10) 2 137 12(HH) 206 206
65(II)
--------- ------- ------- ----------------- --------- ----------- ---------
Earnings (loss) before income
taxes........................ 607 (119) 1,603 (522) 1,569 650 2,219
Income tax expense............. 212 27 565 (245)(JJ) 559 221(MM) 780
--------- ------- ------- ----------------- --------- ----------- ---------
Net earnings (loss)............ 395 (146) 1,038 (277) 1,010 429 1,439
Preferred stock dividends...... -- (48) -- 8 (40) (40)
--------- ------- ------- ----------------- --------- ----------- ---------
Net earnings (loss) on common
shares....................... $ 395 $ (194) $ 1,038 $ (269) $ 970 $ 429 $ 1,399
--------- ------- ------- ----------------- --------- ----------- ---------
--------- ------- ------- ----------------- --------- ----------- ---------
Earnings per common share...... $ .10 $ .18 $ .20(OO)
--------- --------- ---------
--------- --------- ---------
Weighted average common shares
outstanding.................. 3,860,168 1,532,098 5,392,266 1,767,902(NN) 7,160,168
</TABLE>
- ------------------
(AA) Includes adjustments directly attributable to the Closing Acquisitions,
including the Offering proceeds adjustments relating to the Closing
Acquisitions.
(BB) Reflects the elimination of the rent of $282,000 due to the purchase of
CTIC.
(CC) Reflects the addition of the depreciation of $66,500 due to the purchase
of CTIC.
(DD) Reflects the corporate allocation expenses incurred by Utilase that will
cease upon its acquisition by Noble.
(EE) Reflects the amortization of goodwill over 20 years relating to the
purchase of CTIC totaling $7,000, the amortization of goodwill over 20
years relating to the Utilase Acquisition totaling $428,852, the
amortization of goodwill over 20 years relating to the Final DCT
Acquisition totaling $107,476, and the amortization of the covenants not
to compete obtained in connection with the Utilase Acquisition over 7
years totaling $100,000. The amortization expense related to the purchase
of CTIC is based on the acquisition of land and building with an appraised
value of $4.3 million and the assumption of mortgage debt totalling $4.6
million. The amortization expense related to the Utilase Acquisition is
based on the acquisition of current assets totalling $1.7 million,
property and equipment totalling $3.4 million, other assets totalling $3.6
million, the assumption of $7.6 million in liabilities, notes to sellers
totalling $10.1 million, and cash paid to sellers totalling $8.2 million.
The amortization expense related to the Final DCT Acquisition is based on
the acquisition of current assets totalling $5.4 million, property and
equipment totalling $4.8 million, the assumption of liabilities totalling
$13.5 million (net of debt forgiven totalling $16.5 million), and cash
paid to sellers totalling $1.0 million. No adjustments were made to the
carrying value of the assets acquired as management believes their book
values approximate fair market value.
(FF) Reflects imputed interest at a rate of 9.25% on the acquisition cost of
$850,000 for UPP totaling $39,312 (this interest expense adjustment is
eliminated with the payment of the $850,000 with proceeds from the
Offering), the additional interest expense of $212,500 relating to the
purchase of CTIC and the imputed
(Footnotes continued on next page)
27
<PAGE>
(Footnotes continued from previous page)
interest expense on the Utilase Notes issued in connection with the
Utilase Acquisition totaling $311,810. The Utilase Notes mature over a
four-year period from the date of the Utilase Acquisition. The Series A,
B, and C Utilase Notes have a negotiated interest rate of 6.0%, and the
Series D Utilase Note has a negotiated interest rate of 6.5%.
(GG) Reflects the interest expense savings totaling $48,000 resulting from the
repayment of the 10%, $960,000 payable to DCT.
(HH) Reflects the addition of rent income of $12,500 due to the purchase of
CTIC.
(II) Reflects the elimination of the equity in loss of unconsolidated
affiliate, DCT, totaling $64,700.
(JJ) Reflects the tax effect of the pro forma adjustment amounting to $177,400
and the presumed utilization of DCT's loss for the six months ended June
30, 1997 providing a total benefit of $67,304.
(KK) Reflects the amortization over seven years of the Vassar consulting
agreements settled with proceeds from the Offering. The basis of these
consulting agreements, as settled, totaled $205,000, of which payments
totaling $85,000 have been made through June 30, 1997. The adjustment
reflects the difference between the $30,000 expensed by the Company
relating to the consulting agreements during the six months ended June 30,
1997 and the $14,643 amortization expense allocable to such six-month
period.
(LL) Reflects the interest expense savings totaling $635,267 resulting from the
reduction of debt through application of the Offering proceeds. These
savings include the repayment of debt totaling approximately $13.2
million at an interest rate of 9.3% that reflects the weighted average
interest rate of such debt at January 1, 1996. The savings also include
the repayment of the $500,000 balance remaining outstanding under the note
issued in connection with the Monroe Acquisition at an imputed interest
rate of 8.5%.
(MM) Reflects the tax effects, at 34%, of the other Offering proceeds
adjustments.
(NN) Represents the shares of Common Stock offered hereby to the extent not
utilized to finance the Closing Acquisitions.
(OO) Earnings per share on a pro forma combined basis adjusted for the Offering
and the Closing Acquisitions include an adjustment to earnings related to
preferred dividends as if the preferred stock of DCT was converted to
shares of the Company's preferred stock (redeemable at the option of the
holder pursuant to a stated 'put' formula) as of January 1, 1996 and were
redeemed pursuant to such formula ($37,500 per quarter) during the period.
The adjustment of $8,200 reflects the excess of the actual dividends paid
of $47,808 over the pro forma dividends of $39,608. See 'Description of
Capital Stock--Preferred Stock.'
28
<PAGE>
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------------------------------------------------------
CLOSING
ACQUISITIONS OTHER
AND RELATED ADJUSTED OFFERING
OFFERING PROCEEDS PRO FORMA PROCEEDS PRO FORMA
NOBLE DCT UTILASE ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
------- ------- ------- ----------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents................. $ 206 $ 517 $ 1,128 $ 1,851 $ 1,851
Accounts receivable, net.................. 2,855 3,852 2,229 8,936 8,936
Inventory................................. 2,653 2,988 161 5,802 5,802
Other..................................... 730 243 922 1,895 1,895
------- ------- ------- --------- ---------
Total current assets...................... 6,444 7,600 4,440 18,484 18,484
PP&E, net................................. 3,012 3,881 6,959 $ 4,347 18,199 $ 500 18,699
Goodwill.................................. 4,892 -- -- 20,125 25,017 25,017
Other..................................... 503 27 111 1,038 1,679 120 1,799
------- ------- ------- ----------------- --------- ----------- ---------
Total assets.............................. $14,851 $11,508 $11,510 $ 25,510 $63,379 $ 620 $63,999
------- ------- ------- ----------------- --------- ----------- ---------
------- ------- ------- ----------------- --------- ----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable.......................... $ 1,679 $ 4,273 $ 2,952 $ (362) $ 8,542 $ 8,542
Accrued liabilities....................... 1,093 439 389 1,921 $ 1,921
Notes payable............................. 3,003 4,045 842 7,890 (4,887) 3,003
Current maturities of long-term debt...... 1,052 2,764 381 4,197 (1,861) 2,336
Current maturities-related parties........ 1,336 -- -- (836) 500 (500) --
------- ------- ------- ----------------- --------- ----------- ---------
Total current liabilities................. 8,163 11,521 4,564 (1,198) 23,050 (7,248) 15,802
Long term debt............................ 5,354 1,350 3,784 14,537 25,025 (6,457) 18,568
Other..................................... 160 1,592 177 (1,120) 809 809
Preferred stock-redeemable................ -- 925 -- 925 925
Common stock.............................. 1,086 4 1 12,391 13,482 14,325 27,807
Paid in capital........................... -- 17,345 1,704 (19,049) -- --
Retained earnings(deficit)................ 88 (21,229) 1,280 19,949 88 88
------- ------- ------- ----------------- --------- ----------- ---------
Total liabilities and shareholders'
equity.................................. $14,851 $11,508 $11,510 $ 25,510 $63,379 $ 620 $63,999
------- ------- ------- ----------------- --------- ----------- ---------
------- ------- ------- ----------------- --------- ----------- ---------
</TABLE>
Notes: Please see following page
29
<PAGE>
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
NOTE 1: PRO FORMA BALANCE SHEET ADJUSTMENTS
The accompanying pro forma combined balance sheet as of June 30, 1997 gives
effect to the Closing Acquisitions and the Offering as if such transactions
occurred on June 30, 1997.
<TABLE>
<CAPTION>
CLOSING LIABILITIES AND SHAREHOLDERS' EQUITY
ACQUISITIONS AND ASSETS --------------------------------------------------------------
RELATED OFFERING ------------------------------------- CURRENT CURRENT ACCOUNTS CURRENT MATURITIES LONG-TERM
PROCEEDS ADJUSTMENTS: CASH PP&E GOODWILL OTHER BANK DEBT MATURITIES PAYABLE RELATED PARTIES DEBT
- --------------------- -------- ------ -------- ------ --------- ---------- -------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Utilase
Acquisition(A)..... $ (8,200) $15,350 $10,135
Utilase non-compete
payments(B)(C)..... (1,400) $1,400
Payment of note
related to UPP
Acquisition........ (836) $ (836)
DCT debt repayment... (960)
DCT purchase(D)...... (1,000) 4,880
Elimination of equity
in loss of
unconsolidated
affiliate.......... (160 )
Elimination of
receivable from
unconsolidated
affiliate.......... (362) $ (362 ) 4,402
CTIC
acquisition(E)..... $4,347 55
Offering
proceeds(F)........ 12,396
-------- ------ -------- ------ --------- ---------- -------- ----- ---------
$ 0 $4,347 $20,125 $1,038 $ 0 $ 0 $ (362 ) $ (836) $14,537
-------- ------ -------- ------ --------- ---------- -------- ----- ---------
-------- ------ -------- ------ --------- ---------- -------- ----- ---------
<CAPTION>
CLOSING LIABILITIES AND SHAREHOLDERS' EQUITY
ACQUISITIONS AND ----------------------------------------------------------
RELATED OFFERING RETAINED
PROCEEDS ADJUSTMENTS: OTHER COMMON STOCK PAID IN CAPITAL EARNINGS (DEFICIT)
- --------------------- ------- ------------ --------------- ------------------
<S> <C> <C> <C> <C>
Utilase
Acquisition(A)..... $ (1) $ (1,704) $ (1,280)
Utilase non-compete
payments(B)(C).....
Payment of note
related to UPP
Acquisition........
DCT debt repayment... $ (960)
DCT purchase(D)...... (4) (17,345) 21,229
Elimination of equity
in loss of
unconsolidated
affiliate.......... (160)
Elimination of
receivable from
unconsolidated
affiliate..........
CTIC
acquisition(E).....
Offering
proceeds(F)........ 12,396
------- ------------ --------------- -------
$(1,120) $ 12,391 $ (19,049) $ 19,949
------- ------------ --------------- -------
------- ------------ --------------- -------
</TABLE>
[/R]
30
<PAGE>
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSESS
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
NOTE 1: PRO FORMA BALANCE SHEET ADJUSTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
ASSETS --------------------------------------------------------------
OTHER OFFERING ------------------------------------- CURRENT CURRENT ACCOUNTS CURRENT MAT LONG-TERM
PROCEEDS ADJUSTMENTS: CASH PP&E GOODWILL OTHER BANK DEBT MATURITIES PAYABLE RELATED PARTIES DEBT
- --------------------- -------- ------ -------- ------ --------- ---------- -------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Payment of Offering
expenses........... $ (388)
Purchase of capital
equipment at
Vassar............. (500) $ 500
Payment of note
related to Monroe
Acquisition........ (500) $ (500)
Repayment of bank
debt(G)............ (13,205) $(4,887) $ (1,861) $(6,457)
Prepayment of Vassar
consulting
agreements......... (120) $ 120
Offering
Proceeds(H)........
-------- ------ -------- ------ --------- ---------- -------- ----- ---------
$ 0 $ 500 $ 0 $ 120 $(4,887) $ (1,861) $ 0 $ (500) $(6,457)
-------- ------ -------- ------ --------- ---------- -------- ----- ---------
-------- ------ -------- ------ --------- ---------- -------- ----- ---------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------
OTHER OFFERING RETAINED
PROCEEDS ADJUSTMENTS: OTHER COMMON STOCK PAID IN CAPITAL EARNINGS (DEFICIT)
- --------------------- ------- ------------ --------------- ------------------
<S> <C> <C> <C> <C>
Payment of Offering
expenses........... ($ 388)
Purchase of capital
equipment at
Vassar.............
Payment of note
related to Monroe
Acquisition........
Repayment of bank
debt(G)............
Prepayment of Vassar
consulting
agreements.........
Offering
Proceeds(H)........ 14,713
------- ------------ --------------- -------
$ 0 $ 14,325 $ $ 0
------- ------------ --------------- -------
------- ------------ --------------- -------
</TABLE>
- ------------------
(A) The adjustment reflects the acquisition of Utilase under the purchase method
of accounting. The excess of the purchase price over the net book value of
the assets acquired has been recorded as goodwill as management believes net
book value approximates fair value. No specifically identifiable intangible
assets will be acquired.
(B) The covenants not to compete are being amortized over the seven-year period
of the agreement.
(C) In consideration for his covenant not to compete, Jeffrey Moss, a director
of Utilase and President of DCTI will, subject to continuing compliance with
the covenant, receive 11,698 shares of Common Stock on each anniversary of
the Utilase Acquisition closing date commencing in 1999 and continuing
through 2003. The issuance of the shares will be recorded as earned pursuant
to the terms of the agreement.
(D) Reflects the acquisition of DCT under the purchase method of accounting. The
excess of the purchase price over the net book value of the assets acquired
has been recorded as goodwill as management believes net book value
approximates fair value. No specifically identifiable intangible assets will
be acquired.
(E) Reflects the acquisition of CTIC under the purchase method of accounting.
This transaction was part of the DCT acquisition accordingly, the excess of
the debt assumed over the fair market value of the real estate acquired was
recorded as goodwill.
(F) Reflects the proceeds from the Offering that were used to finance the
Closing Acquisitions.
(G) The bank debt will be reduced from the proceeds of the Offering, including
repayment of credit lines of $4.887 million, current maturities of long term
debt of $1.861 million, and long-term debt of $6.457 million. The total use
of proceeds to repay debt reflected on this table is $13.205 million which
amount will differ from the actual use of proceeds to be used for the
repayment of debt as a result of events occurring after June 30, 1997 and
before the consummation of the Closing Acquisitions and the Offering.
(H) Reflects the proceeds from the Offering, except to the extent proceeds were
used to finance the Closing Acquisitions.
31
<PAGE>
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected historical financial data as of and for each of the
three fiscal years in the period ended December 31, 1996 is derived from the
audited financial statements of Noble and should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere herein.
The selected financial data as of and for the six months ended June 30, 1996 and
1997 is derived from the unaudited financial statements of Noble included
elsewhere herein. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.'
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS:
Net sales.................................. $ 3,305 $ 4,442 $ 16,187 $ 8,155 $ 9,733
Cost of goods sold......................... 2,261 2,911 10,587 5,153 6,445
---------- ---------- ---------- ---------- ----------
Gross profit............................... 1,044 1,531 5,600 3,002 3,288
Selling, general and administrative
expense.................................. 915 1,030 5,088 1,956 2,232
---------- ---------- ---------- ---------- ----------
Operating profit........................... 129 501 512 1,046 1,056
Equity in loss of unconsolidated
subsidiary............................... -- -- 95 -- 65
Interest income............................ -- -- (5) -- --
Interest expense........................... 24 24 555 215 439
Sundry, net................................ (1) (29) (64) -- (55)
---------- ---------- ---------- ---------- ----------
Earnings (loss) before income taxes and
minority interest........................ 106 506 (69) 831 607
Minority interest.......................... 38 67 -- -- --
Income tax expense......................... 8 30 7 283 212
---------- ---------- ---------- ---------- ----------
Net earnings (loss)........................ $ 60 $ 409 $ (76) $ 548 $ 395
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net earnings (loss) per share(1)........... $ .03 $ .15 $ (.02) $ .17 $ .10
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Weighted average common shares
outstanding.............................. 1,535,170 2,807,390 3,820,390 3,277,293 3,860,160
OTHER FINANCIAL INFORMATION:
EBITDA(2).................................. $ 121 $ 566 $ 999 $ 1,286 $ 1,387
Ratio of EBITDA to interest expense........ 5.0x 23.6x 1.8x 6.0x 3.2x
Cash flow from:
Operating................................ $ (214) $ 392 $ 913 $ 987 $ (1,017)
Investing................................ (429) (203) 270 597 (506)
Financing................................ 645 (191) (713) (1,202) 1,258
---------- ---------- ---------- ---------- ----------
Net cash flow............................ $ 2 $ (2) $ 470 $ 382 $ (265)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE
--------------------------- 30,
1994 1995 1996 1997
------ ------ ------- -------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total assets............................................................ $1,189 $1,785 $11,533 $14,851
Working capital (deficiency)............................................ 295 349 (817) (1,719)
Total debt.............................................................. 152 218 8,675 10,746
Shareholders' equity.................................................... 355 624 729 1,174
</TABLE>
(Footnotes on next page)
32
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Net earnings (loss) per share data for 1994 and 1995 have been presented to
reflect the pro forma tax effects attributable to Prestolock being taxed
under Subchapter S of the Internal Revenue Code through December 31, 1995.
(2) EBITDA represents income before income taxes, plus interest expense and
depreciation and amortization expense. EBITDA is not presented as, and
should not be considered, an alternative measure of operating results or
cash flows from operations (as determined in accordance with generally
accepted accounting principles), but is presented because it is a widely
accepted financial indicator of a company's ability to incur and service
debt. While commonly used, however, EBITDA is not identically calculated by
companies presenting EBITDA and is, therefore, not necessarily an accurate
means of comparison and may not be comparable to similarly titled measures
disclosed by the Company's competitors.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company is a full service, independent supplier of automotive
components, component assemblies and value-added services to the automotive
industry. Pursuant to its strategic acquisition program, the Company has, since
its formation in 1993, completed five acquisitions, and will complete two more
in connection with the Offering. The Company completed its first acquisition in
February 1994 by acquiring the assets of Prestolock. In January 1996, the
Company completed the acquisition of all of the outstanding shares of Vassar and
Monroe. In July 1996, the Company acquired a minority interest in DCT. In
January 1997, the Company acquired all of the outstanding capital stock of
Skandy. In March 1997, the Company, through UPP, acquired certain assets of
Utilase. Concurrently with the consummation of the Offering, the Company will
also acquire all of the outstanding shares of Utilase and the balance of the
shares of DCT.
Prestolock commenced operations in February 1994 and subsequently incurred
significant engineering and other start-up costs to improve its market position
as a provider of glovebox latches to the automotive industry. The historical
operating results which include these costs are not necessarily indicative of
future operating results. As a result of the acquisition of Vassar, in January
1996, the Company enhanced its relationship with GM/Delphi, which the Company
regards as a first step in realizing its strategy of providing multiple,
integrated services to its automotive customers. DCT has experienced continued
improvement in its operating results over the past three years. As a result of
changes in DCT and the affiliation with Skandy, UPP and Utilase, it is
anticipated that DCT's operating results in the future will vary from historical
operating results due to strengthened sales efforts and the ability to provide
assembled products using production laser welding processes. The results of UPP
and Utilase are also expected to be impacted by the addition of a dedicated
sales force. Management believes Utilase's growth has been limited by the funds
available for both working capital requirements and capital expenditures for
expanding capacity. The proceeds of the Offering, the increased availability
created under existing bank lines as a result of the use of proceeds of the
Offering to reduce bank debt, and the cash generated from operations are
expected to cause Utilase's future operating results to differ from its
historical operating results.
The following analysis of the financial condition and results of operations
of the Company should be read in conjunction with 'Pro Forma Financial Data,'
'Selected Financial Data,' and the financial statements, including the notes
thereto, of the Company, Monroe, DCT and Utilase, included elsewhere in this
Prospectus. Except for the historical information contained herein, the
discussion in this Prospectus contains or may contain forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed herein, as
well as those factors discussed under 'Risk Factors' and elsewhere in this
Prospectus. Historical results are not necessarily indicative of trends in
operating results for any future periods. For example, labor interruptions at
customers' plants during 1997 have resulted in lost sales and earnings before
income taxes for the Company estimated at $1.5 million and $0.5 million,
respectively. In addition, a recent strike at Vassar has resulted in
approximately $0.2 million in increased costs bringing the total strike related
reduction in earnings before income taxes to approximately $700,000 over the
second and third quarters of fiscal 1997.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996 (Pro
Forma and Historical)
The following table sets forth certain financial data for the Company both
on a pro forma basis (giving effect to the Closing Acquisitions as reflected in
'Pro Forma Financial Data') and on a historical basis. The pro forma information
may not be indicative of actual results that would have been achieved if the
Closing Acquisitions had occurred at the beginning of the periods. See 'Pro
Forma Financial Data' and the financial statements and notes thereto appearing
elsewhere in this Prospectus.
34
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RESULTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA COMBINED HISTORICAL
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1996 1997 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales.......................................................... $23,016 $29,678 $ 8,155 $ 9,733
Cost of goods sold................................................. 16,965 21,739 5,153 6,445
------- ------- ------- -------
Gross profit....................................................... 6,051 7,939 3,002 3,288
Selling, general, and administrative expenses...................... 4,218 4,843 1,956 2,232
------- ------- ------- -------
Operating profit................................................... 1,833 3,096 1,046 1,056
Interest expense................................................... 768 1,083 215 439
Sundry, net........................................................ 103 206 -- (10)
------- ------- ------- -------
Earnings (loss) before income taxes and minority interest.......... 1,168 2,219 831 607
Minority interest.................................................. -- -- -- --
Income tax expense................................................. 397 780 283 212
------- ------- ------- -------
Net earnings....................................................... $ 771 $ 1,439 $ 548 $ 395
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Net Sales. The Company's pro forma combined net sales increased by $6.7
million, or 28.9%, to $29.7 million for the six months ended June 30, 1997 from
$23.0 million for the six months ended June 30, 1996. The increase in sales is
comprised of: (i) an increase in Utilase sales of $2.5 million, or 59.5%, to
$6.7 million from $4.2 million, due to new orders for Utilase's tailored blanks
resulting from GM's addition of several new car and truck models and a new Honda
door application; (ii) an increase in DCT sales of $2.6 million, or 24.2%, to
$13.2 million from $10.6 million, as a result of DCT receiving outsource
stamping business for Chrysler products; and (iii) an increase in Noble sales of
$1.6 million, or 19.5%, to $9.7 million from $8.1 million.
The increase in consolidated net sales for Noble for the six months ended
June 30, 1997 as compared to the six months ended June 30, 1996 is comprised of:
(i) Prestolock's increase in sales of $0.7 million, or 22.8%, to $3.4 million
from $2.7 million, which was primarily attributable to new business for the
Chrysler and GM glovebox latches; and (ii) Vassar's increase in sales of $0.3
million, or 11.6%, to $3.0 million from $2.7 million, which was primarily
attributable to new assembly and painting business awarded from GM/Delphi on
steering column shrouds for several passenger car vehicle lines. In addition,
the acquisition of UPP increased the consolidated sales of Noble by $0.4 million
for the six months ended June 1997 as compared to the prior year period.
Cost of Goods Sold. The Company's pro forma combined cost of goods sold
increased $4.7 million, or 28.1%, to $21.7 million for the six months ended June
30, 1997 from $17.0 million for the comparable 1996 period. As a percent of net
sales, pro forma combined cost of goods sold was 73% for each of such periods,
despite fluctuations at Utilase and DCT. The cost of goods sold at Utilase
decreased to 51.5% for the six months ended June 30, 1997 from 56.4% for the six
months ended June 30, 1996, as its manufacturing overhead cost was absorbed by
an increased sales base. The cost of goods sold at DCT increased to 89.4% of net
sales for the six months ended June 30, 1997 from 88.6% of net sales for the six
months ended June 30, 1996, due to obtaining Chrysler and Mitsubishi stamping
business that had higher raw material cost as compared to other business.
The cost of goods sold for Noble increased to 66.2% of its consolidated net
sales for the period ended June 30, 1997 from 63.2% of its consolidated net
sales for the period ended June 30, 1996, primarily due to increased
engineering, prototyping, and other expenses related to the Company's investment
in developing future glovebox latches. These expenses have resulted in the
awarding of new business for future periods.
Gross Profit. As a result of the foregoing factors, the Company's pro
forma combined gross profit increased $1.8 million, or 31.2%, to $7.9 million
for the six months ended June 30,1997 from $6.1 million for the six months ended
June 30, 1996.
Noble's gross profit increased by $0.3 million, or 9.6%, to $3.3 million
for the six months ended June 30, 1997 from $3.0 million for the prior year
period.
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<PAGE>
Selling, General and Administrative Expenses. Pro forma combined selling,
general and administrative expenses increased $0.6 million, or 14.8%, to $4.8
million for the six months ended June 30, 1997 from $4.2 million for the six
months ended June 30, 1996. For the period ended June 30, 1997, selling, general
and administrative expenses as a percent of net sales was 22.3%, as compared to
26.9% for the six-month period ended June 30, 1996. Selling, general and
administrative expenses at Utilase increased by $0.4 million primarily due to an
increase in personnel incurred in anticipation of new business.
Selling, general and administrative expenses at Noble increased by $0.2
million, or 14%, for the six months ended June 30, 1997 as compared to the six
months ended June 30, 1996, due to expenses incurred to establish the necessary
infrastructure to support the continued growth of the Company.
Operating Profit. As a result of the foregoing factors, the Company's pro
forma combined operating profit increased by $1.3 million, or 68.9%, to $3.1
million for the six months ended June 30, 1997 from $1.8 million for the
comparable 1996 period.
Noble's operating profit increased by $11,022, or 1.0%, to $1.1 million for
the six months ended June 30, 1997 from $1.0 million for the six months ended
June 30, 1996.
Interest Expense. Pro forma combined interest expense increased $0.3
million, or 40.3%, to $1.1 million for the six-month period ended June 30, 1997
from $0.8 million for the six-month period ending June 30, 1996. The increase
was primarily due to an increase in DCT's weighted average interest rate to
10.8% from 9.1% as a result of debt restructuring.
Noble's interest expense increased $0.2 million, or 104.8%, to $0.4 million
for the six-month period ended June 30, 1997 from $0.2 million for the prior
year period, primarily due to the financing obtained to support increased sales
as well as the financing of the Acquisitions.
Net Earnings. As a result of the foregoing factors, the Company's pro
forma combined net earnings increased by $0.6 million, or 91.2%, to $1.4 million
for the period ended June 30, 1997 from $0.8 million for the period ended June
30, 1996, after providing for income tax.
Noble's consolidated net earnings decreased by $0.1 million, or 27.9%, to
$0.4 million for the six-month period ended June 30, 1997 from $0.5 million for
the six-month period ended June 30, 1996, primarily due to increased interest
expense.
Fiscal Year Ended December 31, 1996 Compared to Fiscal Year Ended December 31,
1995 (Historical)
Net Sales. Net sales increased $11.8 million, or 264%, to $16.2 million
for the year ended December 31, 1996 from $4.4 million for the year ended
December 31, 1995. The increase was primarily attributable to the acquisitions
of Monroe and Vassar and new business at Prestolock relating to glovebox latches
for GM. The Monroe Acquisition increased sales by $5.1 million, or 114.8%, for
the year ended December 31, 1996. The Vassar Acquisition increased sales by $5.5
million, or 122.9%, for the year ended December 31, 1996. The Prestolock sales
increased the Company's net sales by $1.1 million, or 24.7%, to $5.5 million
for the year ended December 31, 1996.
Cost of Goods Sold. Cost of goods sold increased $7.7 million, or 263.7%,
to $10.6 million for the year ended December 31, 1996 from $2.9 million for the
year ended December 31, 1995. As a percentage of net sales, cost of goods sold
decreased to 65.4% for the year ended December 31, 1996 from 65.9% for the year
ended December 31, 1995. The increase in cost of goods sold was primarily
attributable to the Monroe and Vassar Acquisitions which increased the Company's
cost of goods sold by $2.0 million and $4.4 million, respectively, for the year
ended December 31, 1996, and the increased expenses at Prestolock related to the
Company's investment in developing future glovebox latches.
Gross Profit. As a result of the foregoing factors, gross profit increased
$4.1 million, or 26.6%, to $5.6 million for the year ended December 31, 1996
from $1.5 million for the year ended December 31, 1995.
Selling General and Administrative Expenses. Selling, general and
administrative expenses increased $4.1 million, or 393.8%, to $5.1 million for
the year ended December 31, 1996 from $1.0 million for the year ended December
31, 1995. The increase in selling, general and administrative expenses was
primarily attributable to:
36
<PAGE>
(i) the Monroe and Vassar Acquisitions, which increased such expenses by $1.6
million and $1.0 million, respectively, for the year ended December 31, 1996;
(ii) an increase of $1.1 million, or 110.0%, for the year ended December 31,
1996, due to the establishment of Noble as a holding company and a bonus to
Robert J. Skandalaris; and (iii) an increase of $0.3 million, or 29.2%, at
Prestolock due to increased commissions on net sales, increased personnel and
expenses incurred to move administration and engineering to Michigan.
Operating Profit. As a result of the foregoing factors, operating profit
increased $10,849, or 2.2%, to $0.5 million for the year ended December 31,
1996.
Interest Expense. Interest expense increased $0.5 million, to $0.6 million
for the year ended December 31, 1996 from $23,836 for the year ended December
31, 1995. This increase was primarily attributable to the financing of the
acquisitions of Monroe and Vassar. Included in the interest expense for 1996 is
imputed interest of $0.12 million on a related party note arising from the
Monroe Acquisition. See 'Certain Transactions-- Monroe Acquisition.'
Net Earnings (Loss). As a result of the foregoing factors, net earnings
decreased $0.5 million to a net loss of $76,363 for the year ended December 31,
1996 from net earnings of $0.4 million for the prior year after providing for
the income tax effect.
Fiscal Year Ended December 31, 1995 Compared to Fiscal Year Ended December 31,
1994 (Historical)
Net Sales. Net sales increased $1.1 million, or 34.4%, to $4.4 million for
the year ended December 31, 1995 from $3.3 million for the year ended December
31, 1994, primarily due to additional purchase orders for new parts on new car
models and an increase in tooling sales.
Cost of Goods Sold. Cost of goods sold increased $0.6 million, or 26.1%,
to $2.9 million for the year ended December 31, 1995 from $2.3 million for the
year ended December 31, 1994. As a percentage of net sales, cost of goods sold
decreased to 65.5% for the year ended December 31, 1995 from 68.4% for the year
ended December 31, 1994. This decrease was primarily due to manufacturing costs
being allocated over an increased sales base.
Gross Profit. Gross profit increased $0.5 million, or 46.7%, to $1.5
million for the year ended December 31, 1995 from $1.0 million for the year
ended December 31, 1994. As a percent of net sales, the gross profit margin
increased to 34.5% for the year ended December 31, 1995 from 31.6% for the year
ended December 31, 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.1, or 12.6%, to $1.0 million for the year
ended December 31, 1995 from $0.9 million for the year ended December 31, 1994.
This increase was primarily due to additional compensation, partially offset by
a decrease in bad debt expense.
Net Earnings. Net earnings increased $0.3 million, or 581.7%, to $0.4
million for the year ended December 31, 1995 from $60,000 for the year ended
December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements have historically been satisfied through a
combination of cash flow from operations, equipment financing, bank financing
and loans from shareholders. The Company's working capital needs and capital
equipment requirements have increased as a result of the growth of the Company
and are expected to continue to increase as a result of anticipated growth in
laser welded blanks, glovebox latch, and assembly operations. The anticipated
increase in required working capital and capital equipment requirements, and the
cash requirements for the purchase of Utilase and DCT, are expected to be met
from the net proceeds from the Offering, cash flow from operations, equipment
financing and revolving credit borrowings. As of June 30, 1997, the Company had
working capital of approximately $2.7 million on a pro forma combined basis and
a working capital deficit of $1.7 million on a historical basis.
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<PAGE>
Noble generated cash flow from operations of $0.9 million for the year
ended December 31, 1996 and used $1.0 million in operating cash flow for the six
months ended June 30, 1997. Cash flow from operating activities in these periods
was primarily the result of net earnings (loss), depreciation and amortization
offset by changes in working capital necessary to support increased sales.
The Company generated cash flow from investing activities of $0.3
million for the year ended December 31, 1996 and used $0.5 million in investing
activities for the six months ended June 30, 1997. Cash used in investing
activities during the six months ended June 30, 1997 was primarily the result of
investments in property and equipment. Investing activities for the year ended
December 31, 1996, were offset by cash acquired through the Monroe Acquisition
and the Vassar Acquisition. The Company used $0.7 million in financing
activities for the year ended December 31, 1996 and generated $1.3 million in
cash flow from financing activities for the six months ended June 30, 1997. The
financing activities in both periods were primarily the result of net repayments
and issuances of bank debt used to finance the Company's operations.
DCT used $0.3 million and $0.7 million in operating activities for the year
ended December 31, 1996 and the six months ended June 30, 1997, respectively.
Cash flow from operating activities in these periods was primarily attributable
to net losses and increases in working capital necessary to support increased
sales. Cash used in investing activities for the year ended December 31, 1996
and the six months ended June 30, 1997 was $0.2 million and $17,000,
respectively. Cash used for investing activities in these periods was primarily
the result of minimal equipment upgrades and purchases as management believes
there is sufficient available manufacturing capacity to meet anticipated demand.
Cash generated from financing activities for the year ended December 31, 1996
and the six months ended June 30, 1997 was $1.1 million and $0.6 million,
respectively. The financing activities in both periods were primarily the result
of net issuances of bank debt used to finance the Company's operations.
Utilase generated cash flow from operations of $1.8 million and $2.4
million for the year ended December 31, 1996 and the six months ended June 30,
1997, respectively. Cash flow from operations in these periods was primarily the
result of net earnings, depreciation and amortization and increased accounts
payable and accrued liabilities. Utilase generated $1.4 million from investing
activities for the year ended December 31, 1996 and used $3.1 million to finance
investing activities for the six months ended June 30, 1997. Cash provided from
investing activities for the year ended December 31, 1996, was primarily the
result of the repayment of notes receivable offset by investments in property
and equipment. Cash used in investing activities for the six months ended June
30, 1997, was primarily the result of investments in property and equipment.
Cash used in financing activities for the year ended December 31, 1996 was $2.8
million. For the six months ended June 30, 1997, Utilase generated $1.4 million
in cash flow from financing activities. Cash provided (used) by financing
activities in both periods were primarily the result of net repayments and
issuances of bank debt used to finance the Company's operations.
The Company currently has a $3.5 million secured revolving line of credit
facility, subject to qualifying accounts receivable and inventory, with Comerica
which expires on November 30, 1997 (the 'Noble/Comerica Line'). The outstanding
balance on the Noble/Comerica Line was $3.0 million at June 30, 1997. In July
1997, the Company paid off its outstanding borrowings under the Noble/Comerica
Line with proceeds from a $3.8 million preferred stock financing, in order to
create availability under the line as required by Comerica in connection with
Noble's guarantee of an $8 million equipment financing line for Utilase. (See
discussion below.) Interest on the Noble/Comerica Line is payable monthly at 1%
over Comerica's prime lending rate (a total of 9.50% at September 30, 1997). The
Company also has a term loan with Comerica, which had an outstanding principal
balance of $3.4 million at June 30, 1997, is payable in monthly principal
installments of $78,125, plus accrued interest at 1.5% over Comerica's prime
lending rate (a total of 10% at September 30, 1997), and matures December 31,
2000 (the 'Noble/Comerica Term Loan'). See 'Certain Transactions--Other
Matters.'
DCT currently has a credit facility with CIT which allows it to borrow up
to $7.5 million based upon a percentage of certain balance sheet accounts (the
'DCT/CIT Line'). At June 30, 1996 there was approximately $4.1 million
outstanding under the DCT/CIT Line, which bears interest, payable monthly, at
2.625% over CIT's prime lending rate (a total of 11.125% at September 30, 1997)
and expires June 1, 1998. DCT also has a term loan with CIT which had a balance
outstanding of $2.3 million at June 30, 1997, bears interest at 2.625% above
CIT's prime lending rate (a total of 11.125% as of September 30, 1997), is
payable in monthly installments of $46,992 plus interest and matures June 1,
1998 (the 'DCT/CIT Term Loan').
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<PAGE>
Utilase has a revolving line of credit with Comerica under which there was
$0.8 million outstanding at June 30, 1997 (the 'Utilase/Comerica Line').
Interest on the Utilase/Comerica Line is payable monthly at 2% over Comerica's
prime lending rate (a total of 10.5% at September 30, 1997) and it matures on
December 31, 1997. Utilase also has a term loan with Comerica which had an
outstanding principal balance of $1.2 million at June 30, 1997, bears interest
at 2.0% above Comerica's prime rate and matures October 31, 2000 (the
'Utilase/Comerica Term Loan'). The Utilase/Comerica Term Loan is payable in
monthly principal installments of $30,000 plus accrued interest. In addition, on
September 18, 1997, Utilase obtained an $8 million credit facility from Comerica
to be used for the purchase of equipment. The Company and its consolidated
subsidiaries are guarantors of this credit facility.
The Company intends to restructure or refinance its various credit
facilities upon the consummation of the Offering. On May 6, 1997, the Company
received a letter of intent from Comerica confirming the bank's interest in
restructuring the Company's various credit facilities by providing a $15.0
million secured revolving credit facility with a two-year term. This letter of
intent also includes confirmation of Comerica's interest in refinancing the
Company's term debt with a $10.0 million secured term loan with a five-year
term. On September 5, 1997, the Company obtained a commitment letter from NBD
Bank for a $15.0 million secured revolving credit facility with a two-year term.
The NBD Bank commitment letter, which provides the Company with an alternative
refinancing choice, provides for interest at a base rate equal to either prime
or LIBOR (at the option of the Company) plus a margin rate based upon the rate
of the Company's funded senior debt EBITDA ranging from 0% to 2.25%. The Company
intends to restructure or refinance its existing credit facilities on terms no
less favorable than those provided in the NBD Bank commitment letter immediately
following the consummation of the Offering.
The Company has, on a pro forma combined basis, from time to time been in
violation of certain of its financial debt ratio covenants and covenants
relating to the issuance of preferred stock and the payment of preferred stock
dividends, requiring it to obtain waivers of default from its lenders. In
addition, the Company has from time to time had to negotiate extensions relating
to the payment of several of its debt obligations. As of the date of this
Prospectus, however, the Company is in compliance with all of its debt covenants
and/or has obtained waivers of default relating thereto.
The Company intends to utilize a portion of the net proceeds from the
Offering to reduce its outstanding obligations to financial institutions by
$11.3 million. See 'Use of Proceeds.' The additional liquidity provided by the
reduction of the Company's existing revolving debt, and the anticipated increase
in available credit facilities, combined with the proceeds from the Offering and
cash flow from operations is expected to be sufficient to meet the Company's
currently anticipated working capital and capital expenditure needs for existing
debt service and operations, including all of the Acquisitions, for at least 12
months. There can be no assurance, however, that such funds will not be expended
prior thereto due to changes in economic conditions or other unforeseen
circumstances, requiring the Company to obtain additional financing prior to the
end of such 12-month period. In addition, the Company intends to pursue, as part
of its business strategy, future growth through opportunistic acquisitions of
assets or companies involved in the automotive component supply industry, which
acquisitions may involve the expenditure of significant funds. Depending upon
the nature, size and timing of future acquisitions, the Company may be required
to obtain additional debt or equity financing in connection with such future
acquisitions. There can be no assurance, however, that additional financing will
be available to the Company, when and if needed, on acceptable terms or at all.
INFLATION
Inflation generally affects the Company by increasing the interest expense
of floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. The Company does not believe that inflation has had any material
effect on its business over the past three years.
39
<PAGE>
BUSINESS
GENERAL
Noble is a full service, independent supplier of automotive components,
component assemblies and value-added services to the automotive industry. The
Company's customers include OEMs, such as GM, Chrysler, Ford (collectively, the
'Big Three') and Mitsubishi, and Tier I suppliers, such as Textron Automotive
Company, GM/Delphi and United Technologies, Inc. The Company believes that it is
one of the few Tier II suppliers to provide integrated manufacturing, design,
planning, engineering and other value-added services to the automotive market.
In addition, the Company also operates as a Tier I supplier with respect to its
Utilase operations.
The Company's operations include, among other things: (i) laser welding of
tailored blanks and laser welding and cutting of components; (ii) automotive
component manufacturing utilizing progressive die stamping; (iii) design,
engineering and assembly of automotive glovebox latches and other automotive
component systems; (iv) painting and coating of automotive components; (v) other
value-added services such as prototyping of automotive components and die design
and construction; and (vi) assembly, machining and distribution of components
used in machine tooling.
INDUSTRY OVERVIEW
As a result of the mature and competitive nature of the automotive
industry, the world's automakers are under intense pressure to cut costs and
development times for new products. In order to accomplish this feat, automakers
are increasingly relying on Tier I suppliers with the capability to design,
engineer and deliver entire vehicle modules, systems and solutions. Pricing
pressure in the automotive supplier industry is intense because most automakers
wield an extraordinary amount of leverage over their suppliers. However,
management believes systems-oriented suppliers have the ability to reduce the
cost of components as they take control of the design and engineering function.
The Tier I suppliers have made similar demands on Tier II suppliers to provide
integrated systems and sub-systems, as well as to accept more responsibility.
These changing industry relationships have resulted in a consolidation of the
Tier I and Tier II suppliers, since many of them do not have the financial
resources or operational capability to accept these increased responsibilities.
Such companies are either going out of business or selling their businesses to
other Tier I and Tier II suppliers. In addition, those Tier I and Tier II
suppliers that choose to remain in the industry are increasingly consolidating
in order to achieve operating efficiencies that will allow them to respond to
these increasing demands.
STRATEGY
The Company's objective is to become one of the premier full service Tier
II suppliers to the automotive industry, through both internal growth and
acquisitions. The key element of the Company's strategic plan is the
identification of alternative methods to assist OEMs and Tier I suppliers in
meeting their cost reduction needs. The Company intends to implement its
strategy through the pursuit of strategic acquisitions, the delivery of
integrated component systems, technological leadership and product production
innovations, cross-selling to existing customers, and the development of
strategic alliances and joint ventures. The Company believes that by focusing on
this strategy it can continue to capitalize on the increasing opportunities for
growth within the automotive component supply industry and increase both its
sales volumes and model penetration with existing customers and its creation of
new business.
Strategic Acquisitions
The Company views the strategic acquisition of automotive suppliers that
operate in high-growth niche markets, or that are strategic to the further
integration of its operations, as a fundamental part of its growth strategy. The
Company continually seeks strategic acquisition opportunities within the highly
fragmented automotive component supply business. Specifically, the Company seeks
to acquire businesses that will enable the Company to broaden its product
offerings, access new niche markets and new geographic regions, obtain
additional manufacturing capabilities and develop new customer relationships.
Since its inception in 1993, the Company has successfully integrated five
acquisitions, which have contributed to broadening its product mix. Concurrent
with the Offering, it intends to complete the two Closing Acquisitions, which it
believes will further
40
<PAGE>
contribute to the Company's growth by providing it with a dominant position in a
niche market and additional integration opportunities for its existing
operations. The Company believes that its extensive knowledge of the automotive
component supply industry provides it with an important competitive advantage in
identifying domestic acquisition opportunities and that its considerable
experience in integrating acquired businesses will continue to provide it with
significant growth opportunities.
Delivery of Integrated Component Systems
Management has positioned the Company to meet the demands of OEMs and Tier
I suppliers for additional product responsibility and the delivery of integrated
component systems. The Company has identified numerous individual components it
currently produces that are suitable for additional processing and assembly by
the Company in order to produce an integrated system for delivery to OEMs and
Tier I suppliers. The Company believes that the adoption of and focus on a
systems approach is crucial to achieving significant sales growth and increasing
profitability. As an example, by enlarging upon the Company's engineering and
design capabilities, the Company expects to promote further vertical integration
of its manufacturing and assembly operations and to increase the scope and
complexity of the projects it undertakes, thereby expanding the Company's
product offerings.
For example, the Company believes that current design, engineering and
assembly responsibilities in connection with its glovebox latch business can be
expanded to include in-house manufacturing of latch components, as well as of
the entire glovebox as an integrated system for insertion into an instrument
panel. In addition, a significant portion of the Company's painting business
involves the painting of steering columns and related shrouds for GM/Delphi,
which can now be expanded to include the assembly of steering columns after
painting. Further, as a result of its stamping and laser welding capabilities,
the Company has recently been able to combine the stamping of door latch
components with laser welding of such components to produce a value-added
product. With the Utilase and Final DCT Acquisitions, the Company will be able
to integrate its current component laser welding services with the laser welding
of tailored blanks performed by Utilase and the progressive die stamping
applications of DCT, to provide additional value-added products and integrated
systems.
Providing Technological Leadership and Product Innovation
The Company takes a proactive approach to product line introduction and
expansion. The Company's team of highly talented and experienced engineers work
closely with the advance engineering teams of the OEMs and Tier I suppliers to
provide solutions and enhancements to the passenger car and light truck
production process by incorporating the Company's technologies. By providing
this level of service, management believes the Company is in a more competitive
position.
Cross-Selling to Existing Customer
The Company focuses on leveraging its relationships with its customers to
obtain additional business by cross-selling the services of each of its business
units. For example, because Vassar's painting and coating facility serves as a
dedicated facility to GM/Delphi, Vassar has been able to leverage its
relationship with GM/Delphi to obtain additional component assembly business.
Management strongly believes that the ability to provide customers with a full
line of products and services designed to meet their increasing demands
distinguishes the Company from its competitors and provides it with a
competitive advantage.
Building Strategic Alliances/Joint Ventures
In an effort to maximize profitability and support future growth, the
Company will evaluate strategic alliances and joint ventures on an ongoing basis
and seek opportunities that allow it to expand the scope of its operations, add
sales and marketing capabilities and share capital expenditures, while
continuing to control production quality. The Company is currently evaluating
several opportunities, which, if successful, could increase distribution of
several products. For example, the Company intends to pursue participation in
OEM sponsored minority-owned business mentoring programs.
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OPERATIONS
Laser Welding and Cutting of Components
The Company provides laser welding and cutting services for a variety of
automotive components. The process of laser welding involves the concentration
of a beam of light, producing energy densities of from 16 to 20 million watts
per square inch, at the point where two metal pieces are to be joined. Laser
welding allows rapid weld speeds with low heat input, thus minimizing topical
distortion of the metal and resulting in ductile and formable welds that have
mechanical properties comparable to, or in some cases superior to, the metal
being welded. Laser welds provide improved visual aesthetics as well as less
likelihood of the rattling associated with multi-piece, spot-welded assemblies.
The process of laser cutting involves the same concentrated light-beam
production of energy, but uses a different wavelength and mode. A coherent beam
of single wavelength light is focused on a small area of the metal piece to be
cut, where the optical energy is converted into thermal energy intense enough to
melt and vaporize the affected area.
Some of the laser processes performed by UPP for the Company include the
laser welding of latch strike plates for Chrysler's B-van mini-van doors and the
welding of covers onto fuel chargers as an aftermarket part. In addition, UPP
also provides laser cutting services for the reverse transmission bands on
certain Chrysler trucks and the hydroform rails for GM's Chevrolet Corvettes.
Laser Welding of Tailored Blanks
Utilase is one of the dominant suppliers of laser welded tailored blanks to
the automotive industry. Laser welding of blanks offers significant advantages
over other blank welding technologies, including cost, weight and safety
benefits. The Company believes that Utilase has developed a proprietary
technology and production process that permits it to produce laser welded blanks
more quickly and with higher quality and tolerance levels than its competitors.
In 1995, the UltraLight Steel Auto Body Consortium, a worldwide industry
association of steel producers, commissioned a study which concluded that laser
welded tailored blanks will play a significant role in car manufacturing in the
next decade as the automotive industry is further challenged to produce lighter
cars for better fuel economy, with enhanced safety features and lower
manufacturing costs. In addition, the study identified 18 potential applications
for laser welding of tailored blanks per vehicle. An additional 13 potential
applications have been identified by Utilase. These 31 potential applications,
if adopted by OEMs, could provide significant levels of growth in the tailored
blanking segment of the industry.
The manufacture of conventional (non-tailored) blanks begins with the
cutting of part-specific pieces from larger coils, or rolls, of sheet metal.
These blanks are then stamped or formed into a part for ultimate spot-weld
assembly into an end product at the OEM. Conventional blanks are cut from a
single steel coil and possess a uniform thickness, strength, coating and alloy.
In many cases, a particular product requires a part to possess different
characteristics in certain areas. When conventional blanks are used, achieving
these differences requires reinforcements and additional processing or the use
of material with the required characteristic throughout the entire part. In
addition, when conventional blanks are used, blanks must be stamped separately
prior to being welded together. This results in increased design, assembly and
tooling costs, as well as increased waste associated with cutting irregularly
shaped parts for reinforcement from single sheets of steel.
Tailored blanks are combinations of flat sheet metal of varying thickness,
strength, coating and/or alloy which, when welded together prior to stamping,
result in a product that possesses the desired characteristics in the
appropriate areas of the finished stampings. The use of tailored blanks in
automotive applications results in cost, weight and safety benefits. Use of
tailored blanks frequently decreases the number of dies required to produce the
finished product and eliminates the spot welds required to fasten reinforcements
to conventional blanks. As a result, tooling costs are decreased due to the
elimination of dies and manufacturing costs are decreased due to elimination of
stamping and spot-welding operations. Steel utilization is also improved as a
result of the ability to assemble smaller, irregular parts into a single
tailored blank. The Company estimates that use of tailored blanks can decrease
manufacturing scrap by as much as 30% in certain applications. In addition, by
permitting the use of varying weights of steel and eliminating the need for
reinforcements, tailored blanks can result in decreased vehicle weight and
improved gas mileage. For example, many automotive applications require the use
of zinc-coated steel, which is more expensive than uncoated steel, in order to
improve corrosion resistance. When
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conventional blanks are used in such applications, coated steel must be used for
an entire sub-assembly even when only a portion of the sub-assembly requires
corrosion resistance. On the other hand, the use of tailored blanks in such
applications permits the manufacturer to limit its use of coated steel to those
areas where it is specifically needed. For each reinforcement included in a
sub-assembly produced using conventional blanks, costs are incurred for design,
development, engineering, prototyping and die tryout. The use of tailored blanks
eliminates these costs and shortens the product development cycle.
The dimensional accuracy of an automobile is a function of the fit and
finish of individual components and the associated assembly operations. Tailored
blanks improve dimensional accuracy by decreasing the number of separate
components, eliminating the need for reinforcements and decreasing required
assembly operations. This results in improved fit and finish, reduced wind noise
and a quieter ride. Because tailored blanks are stamped after welding, the welds
have higher reliability than spot welds made on conventional blanks after
stamping. Weld defects on tailored blanks, if any, are likely to become apparent
upon stamping, resulting in improved quality control. Tailored blanks can also
improve the crashworthiness ratings of automobiles since their welds are stiffer
and provide continuous load-carrying ability.
Design and Engineering
The development of new automobile models generally begins two to five years
prior to the marketing of such models to the public. The Company's engineering
staff typically works with OEM and Tier I engineers early in the development
phase to design components to meet OEM or Tier I specifications on new or
redesigned models. The Company presently offers engineering services for all its
products.
The Company designs, engineers and assembles automobile glovebox latches
under the brand name Prestolock(Registered). The design and engineering of a new
Prestolock(Registered) latch begins two to three years prior to actual
production. After a new latch is designed, the Company produces prototype
latches and builds the required tooling for production parts. The Company then
contracts with manufacturers for the various component parts of the latch and
begins the assembly planning process.
Prestolock's engineers are included in the planning and design phase by
both GM and Chrysler, and remain up to date with the new body platforms under
consideration by the OEMs and Tier I instrument panel suppliers. Automotive
glovebox latches are required to comply with certain safety standards and to be
engineered to fit securely into the glovebox. Historically, the Company's
primary customer for Prestolock(Registered) latches has been GM, with the
Company currently supplying approximately 58% of GM's glovebox latch
requirements. Beginning in 1997, the Company also began supplying glovebox
latches to Chrysler and management anticipates, based upon Chrysler's current
production estimates, that the Company will supply approximately 42% of
Chrysler's 1998 model year requirements.
Stamping, Painting and Assembly
The Company, through DCT, manufactures a variety of automotive components
utilizing progressive die stampings. Progressive die stamping is a process in
which steel is passed through a series of dies in a stamping press in order to
form the steel into three-dimensional parts. DCT's stamping presses range in
size from 75 tons to 800 tons, providing the flexibility to stamp flat-rolled
steel and steel blanks ranging in thickness from .028 inches to .25 inches.
DCT's products are sold primarily to both OEMs and Tier I suppliers, DCT's
stamping operations also include the production of parts through extrusion
stamping, a process that involves the forcing of steel through a die opening, by
restricting movement in other directions, in order to produce a product of
uniform cross-sectional shape. DCT operates one of only six stamping facilities
approved by Chrysler to provide extrusion stampings.
Through Vassar, the Company also provides painting and coating services to
OEMs and Tier I suppliers on automotive components consigned to the Company for
processing and re-delivery to the customer on a just-in-time basis. Since 1986,
Vassar has operated as a dedicated GM/Delphi supplier, painting steering column
component parts for GM/Delphi's Saginaw Steering Division. As an extension of
its relationship with GM/Delphi, the Company also provides steering column
sequencing and shoe release and air pump assembly services.
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While the Company is actively pursuing and developing additional assembly
business as part of its overall integration strategy, historically the Company's
assembly business primarily consisted of the production of glovebox latches at
Prestolock. Following Prestolock's design and engineering of a latch, the
approximately eight to 12 component parts are contract manufactured on a
competitive bid basis. These components are then delivered to Prestolock for
assembly into a completed glovebox latch assembly.
The Company also provides other value-added services such as prototyping
and mold design and construction. The Company also designs, engineers and
produces precision tools and dies for use in its own stamping operations.
Distribution of Tooling Components
The Company, through Monroe, distributes tooling components, including
adjustable handles, hand wheels, plastic knobs, levers, handles, hydraulic
clamps, drills, jigs and permanent magnets to non-automotive customers. The
Company's primary tooling component product line is Kipp(Registered) brand
standard and heavy duty adjustable handles, representing approximately one-half
of its tooling component sales. The Company also distributes Elesa(Registered)
brand high tensile plastic hand wheels, knobs, handles and levers, representing
approximately one-quarter of tooling component sales. The other products
distributed through Monroe are purchased from a variety of suppliers, none of
which represents more than 10% of the Company's tooling component sales.
Although most tooling component products are sold off the shelf, the Company
does perform some light machining of parts for custom orders.
The Company is the primary North American distributor for Kipp(Registered)
products and holds the U.S. patent rights to Kipp(Registered) adjustable
handles. The Company also holds non-exclusive rights to distribute
Elesa(Registered) products throughout North America. Kipp(Registered) is based
in Germany and Elesa(Registered) is based in Italy. Both product lines have
international reputations for quality in the engineering community. The Company
has recently been successful in challenging a patent infringement,
reestablishing its position as the sole United States source for certain
Kipp(Registered) adjustable handles. See 'Legal Proceedings' below.
MARKETING AND SALES
Automotive Supply
Historically, a number of independent sales representatives were engaged in
connection with the Company's operations. As a result of the Acquisitions, the
Company is in the process of consolidating sales representation in-house (i.e.,
within Skandy) in order to provide a more focused sales effort with lower costs.
The Company's sales representatives and project managers have experience in
representing both Tier I and Tier II automotive suppliers. The Company's
in-house sales force (excluding Utilase) currently consists of five full-time
sales representatives, although expansion to approximately eight full-time
salespersons is anticipated within the next 12 months. Management believes that
the Company's in-house sales team provides it with significant marketing
advantages. The Company's salesmen and project managers are involved in product
planning and spend a significant amount of time consulting with OEM engineers in
order to facilitate the integration of the Company's products into future
automotive models. Prior to its acquisition by the Company, Skandy acted as an
independent sales representative for a number of automotive suppliers other than
the Company and its affiliates, and it continues to do so. Additional
non-affiliate sale representation relationships may be pursued in the future for
product lines that are not competitive with those of the Company.
Due to the product specific nature of Utilase's sales presentations,
marketing efforts for Utilase are currently handled by a separate, dedicated
in-house sales force. Orders for tailored blanks are typically placed by OEMs
directly with producers of coiled steel. Further processing steps, such as
blanking, are done either by the steel producer or by an independent processor
sub-contracted by the steel producer. As part of its product line expansion
strategy, the Company plans on offering blanking and other services currently
provided by independent processors. Project managers at Utilase work closely
with OEMs during the design phase to promote the specification of Utilase as the
processor prior to the placing of orders by OEMs with steel producers.
Relationships with domestic steel producers are also maintained in order to
obtain sub-contracting work for which no processor has been specified by an OEM.
Working with OEM product development teams from the
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early stages of new body platform concepts, the Company intends to increase
efforts to encourage the design of laser welded tailored blanks into new
platforms and vehicles.
Tooling Components
The Company's tooling component products are sold through catalogs as well
as through a network of regional distributors of Kipp(Registered) and
Elesa(Registered) products. There are approximately 78 wholesale distributors
located throughout the United States offering the Company's products. These
distributors sell to industrial manufacturing companies such as GM, Chrysler,
Caterpillar Inc. and Deere & Company. In addition, there are three distributors
of the Company's products in Canada and one in Mexico.
CUSTOMERS
Sales to the automotive industry constitute a substantial portion of the
Company's net sales. The Company's remaining sales are primarily to the tooling
component industry. In 1996, sales to the automotive industry accounted for
approximately 68.5% of the consolidated net sales of the Company (89.5% of its
pro forma combined net sales giving effect to all of the Acquisitions) with GM,
Chrysler and Ford, including their respective Tier I suppliers, accounting for
substantially all of the Company's historical and pro forma net sales to the
automotive industry.
The Company works closely with its major customers during the design and
development stages of their products. The Company believes that its commitment
to quality, service and just-in-time delivery has enabled it to build and
maintain strong and stable customer relationships.
SUPPLIERS AND RAW MATERIALS
The raw materials required for the Company's operations include steel,
paint, plastic and gases such as carbon dioxide and argon. The Company obtains
its raw materials from a variety of suppliers. With the exception of Monroe's
purchase of tooling components from Kipp(Registered) and Elesa(Registered), the
Company does not believe that it is dependent upon any of its suppliers despite
concentration of purchasing of certain materials from a few sources. For
example, approximately 65% of the paint used at Vassar is purchased from a
single supplier, although other suppliers of the same or similar materials are
readily available. Management believes that volume purchasing from a single
source can provide pricing advantages. The Company typically purchases its raw
materials on a purchase order basis as needed and has generally been able to
obtain adequate supplies of raw materials for its operations.
COMPETITION
Both the automotive component supply and tooling component industries are
highly competitive. Competition in the sale of all of the Company's products is
primarily based on engineering, product design, process capability, quality,
cost, delivery and responsiveness. The Company believes that its performance
record in these respects places it in a strong competitive position. Many of the
Company's competitors are larger and have greater financial and other resources
than the Company. In addition, with respect to certain of its products, some of
the Company's competitors, such as GM/Delphi, are divisions of its OEM
customers. There can be no assurance that the Company's products will be able to
compete successfully with the products of these other companies.
ENVIRONMENTAL MATTERS
The Company is subject to environmental laws and regulations concerning
emissions to the air, discharges to waterways, and generation, handling,
storage, transportation, treatment and disposal of waste materials. The Company
is also subject to other Federal and state laws and regulations regarding health
and safety matters. Each of the Company's production facilities has permits and
licenses allowing and regulating air emissions and water discharges. The Company
believes that it is currently in compliance with applicable environmental and
health and safety laws and regulations, however, these laws and regulations are
constantly evolving and it is impossible to predict whether compliance with
these laws and regulations may have a material adverse effect on the Company in
the future.
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PATENTS AND TRADEMARKS
The Company holds the registered U.S. trademarks 'Presto' and 'Prestolock'
used in connection with its glovebox latch business. The Company also holds U.S.
Patent No. 4,598,614 entitled 'Hand Lever Turning Mechanism' which provides the
Company with the exclusive right to distribute certain Kipp(Registered) brand
adjustable handles, which incorporate such technology, in the United States. The
Company's rights under this patent were recently upheld in United States
District Court in an action commenced by the Company against an entity which was
found by the Court to be infringing upon the patent through the sale of similar
hand levers. See 'Legal Proceedings.' Utilase has proprietary technology and
equipment that constitute trade secrets which it has chosen not to register in
order to avoid public disclosure thereof.
SEASONALITY
The Company's business is largely dependent upon the automotive industry,
which is highly cyclical and is dependent on consumer spending. Economic factors
adversely affecting automotive production and consumer spending could adversely
impact the Company. In addition, the automotive component supply industry is
somewhat seasonal. Increased revenues and operating income are generally
experienced during the second calendar quarter as a result of the automotive
industry's spring selling season, the peak sales and production period of the
year. Decreased revenues and operating income are generally experienced during
July and December of each year as a result of scheduled OEM plant shut downs for
vacations and holidays, as well as changeovers in production lines for the new
model year. The Company's historical results of operations do not reflect
cyclical or seasonal fluctuations in revenues and operating income because the
Acquisitions have resulted in a growth trend through successive periods which
has masked the effect of any such fluctuations.
LEGAL PROCEEDINGS
The Company faces an inherent business risk of exposure to product
liability claims in the event that the failure of one of its products results in
personal injury or death, and there can be no assurance that the Company will
not experience any material product liability losses in the future. In addition,
if any of the Company's products prove to be defective, the Company may be
required to participate in a recall involving such products. The Company
maintains insurance against product liability claims, but there can be no
assurance that such coverage will be adequate for liabilities ultimately
incurred or that such insurance will continue to be available to the Company on
acceptable terms or at all. A successful claim brought against the Company in
excess of available insurance coverage or a requirement to participate in any
product recall may have a material adverse effect on the Company.
On December 4, 1994, Monroe filed an action in United States District
Court, Eastern District of Michigan, against J.W. Winco, Inc. for infringement
of Monroe's U.S. Patent for a hand lever turning mechanism, which patent
protects Monroe's exclusive right to distribute certain Kipp(Registered) brand
adjustable handles in the United States. On June 17, 1996, a judgment was
entered in favor of Monroe on the issue of infringement. On August 13, 1997, the
United States Court of Appeals for the Federal Circuit affirmed the trial
court's finding of infringement with respect to one of the litigated parts but
overturned the finding of infringement with respect to the second part. A
hearing on the damages related to the infringing part is pending.The Company
does not believe that the decision will have a material adverse effect on the
Company.
On December 10, 1995, Utilase filed an action in Wayne County Circuit Court
in the State of Michigan against Mark Williamson, a former employee of Utilase,
for misappropriation of trade secrets, breach of confidentiality and non-compete
agreements and related claims. The action was subsequently removed to federal
court. On May 6, 1997, Utilase obtained an injunction in United States District
Court, Eastern District of Michigan, prohibiting Mr. Williamson from becoming
employed in any capacity without establishing to the satisfaction of the court
that the proposed employment does not involve laser blank welding. On May 6,
1997, Utilase filed a related action in United States District Court, Eastern
District of Michigan, against Olympic Steel, Inc. for breach of contract,
misappropriation of trade secrets, and tortuous interference with contract.
Following the Utilase Acquisition, the former principal shareholder of Utilase,
which is controlled by James Bronce Henderson, III, a nominee for director of
the Company, will continue to have the right to control the actions of Utilase
with respect to the litigation, including decisions with respect to whether to
bring actions against
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additional parties, subject to the requirement of the Company's reasonable
consent for any settlement. Any cash or property recovered in connection with
the litigation will be divided equally with such former principal shareholder of
Utilase and the Company's portion will be deposited into a sinking fund to be
applied against payment of the Utilase Notes delivered by the Company in
connection with the Utilase Acquisition. See 'Certain Transactions.'
From time to time, the Company is involved in lawsuits arising in the
ordinary course of its business. In addition, the Company is a party to certain
lawsuits arising in connection with the Acquisitions. In management's opinion,
the outcome of such pending matters will not have a material adverse effect on
the Company's business, financial condition or results of operations. See
'Certain Transactions.'
PROPERTIES
All of the Company's current operations, with the exception of one assembly
plant, are conducted at facilities located in the greater Detroit area of
Michigan. The Company's existing facilities are adequate for current operations.
Management currently anticipates that additional facilities will be leased as
needed and that sufficient facilities for the Company's needs are readily
available.
The following is a summary of the location, ownership status, size and
function of each of the Company's facilities:
<TABLE>
<CAPTION>
APPROXIMATE
OWNED OR SIZE
FACILITY LOCATION LEASED (SQ.FT.) PRIMARY USE
- ------------------------------------------- -------- ----------- -------------------------------------------------
<S> <C> <C> <C>
Bloomfield Hills Pkwy,
Bloomfield Hills, Michigan Leased 10,145 Executive Offices, Sales and Engineering
Enterprise Drive, Vassar, Michigan Owned (1) 30,000 Painting and Assembly
Sherman Street, Vassar, Michigan Leased 14,600 Painting and Assembly
El Paso, Texas Leased 13,700 Prestolock(Registered) Assembly
34683 Centaur, Clinton Township, Michigan Leased(2) 9,250 Warehouse
34660 Centaur, Clinton Township, Michigan Leased(2) 54,470 Stamping
34706 Centaur, Clinton Township, Michigan Leased(2) 12,692 Warehouse and Engineering
34728 Centaur, Clinton Township, Michigan Leased(2) 13,675 Warehouse
34635 Nova, Mt. Clemens, Michigan Leased(2) 12,200 Die Maintenance
Woodward Avenue, Bloomfield Hills, Michigan Leased 1,417 Tooling Component Sales
Harbor Springs, Michigan Owned (3) 9,600 Tooling Component Warehouse Distribution Facility
20530 Hoover Road, Detroit, Michigan Leased(4) 50,937 Laser Welding and Tailored Blanks
20201 Hoover Road, Detroit, Michigan Leased(4) 11,110 Utilase Production Process
20101 Hoover Road, Detroit, Michigan Leased(4) 210,000 Laser Welding and Tailored Blanks
Brantford, Ontario, Canada Leased 89,330 Laser Welding and Tailored Blanks
</TABLE>
- ------------------
(1) Purchased pursuant to a Land Contract dated October 26, 1994 from Cass River
Investment Company, an entity affiliated with a former controlling
shareholder of Vassar. See 'Certain Transactions.'
(2) Each of these facilities is leased by DCT from Competitive Technologies
Investment Company which is controlled by affiliates of the Company. The
Company will acquire ownership of this landlord entity concurrently with the
consummation of its purchase of the balance of the outstanding capital stock
of DCT. See 'Certain Transactions.' A portion of the 34683 Centaur facility
is sublet to a local law enforcement agency for storage purposes.
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(3) Purchased pursuant to a Land Contract dated April 30, 1996 from the former
controlling shareholder of Monroe who is currently an affiliate of the
Company, for an aggregate purchase price of $500,000 payable in monthly
installments of interest only at the rate of 12% per annum with all
outstanding principal and accrued interest due April 30, 1998. See 'Certain
Transactions.'
(4) The Hoover Road facilities are leased from entities controlled by an
affiliate of the Company. See 'Certain Transactions.'
EMPLOYEES
As of August 31, 1997, the Company, including DCT and Utilase, had
approximately 602 employees, including 398 production employees, 45 sales and
clerical employees and 41 management and administrative employees, as well as
approximately 68 leased production workers at Prestolock and 50 leased
production workers at Utilase. Upon consummation of the Utilase Acquisition, the
Company intends to discontinue this leasing arrangement for the 50 production
workers at Utilase. It is anticipated the subject workers will be hired as
employees of the Company on similar terms. All of the Company's operations are
non-union except for Vassar, whose production workers are represented by the
AFL-CIO. The AFL-CIO workers have been out on strike since August 1, 1997.
Management estimates that increased costs relating to the strike were
approximately $177,000 through August 31, 1997 on a pre-tax basis due to
increased overtime, labor variances, containment by the customer and security
measures. There has been no other recent history of labor strikes or unrest at
any of the Company's facilities. The Company believes that its relations with
its employees are satisfactory. In addition, management believes the available
labor force in the geographic areas where its facilities are located is
sufficient to provide the workers required for the Company's anticipated
expansion over the next 12 months.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning each
director, nominee for director and executive officer of the Company. Upon
consummation of the Offering, Christopher L. Morin, James Bronce Henderson, III,
Richard J. Reason, Timothy F. Healy, Daniel J. McEnroe and Anthony R. Tersigni
have agreed to become directors of the Company. Messrs. Richard V. Balgenorth
and Michael C. Azar will resign as directors, but remain as executive officers.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ----------------------------- --- ------------------------------------------------ --------
<S> <C> <C> <C>
Robert J. Skandalaris........ 44 President, Chief Executive Officer and Director 1993
Christopher L. Morin......... 38 Chief Operating Officer, Director Nominee --
Richard V. Balgenorth........ 49 Treasurer, Chief Financial Officer and Director 1996
Michael C. Azar.............. 33 General Counsel, Secretary and Director 1996
James Bronce Henderson, III.. 46 Director Nominee (Chairman) --
Richard J. Reason............ 69 Director Nominee --
Timothy F. Healy............. 44 Director Nominee --
Daniel J. McEnroe............ 35 Director Nominee --
Anthony R. Tersigni.......... 48 Director Nominee --
</TABLE>
Robert J. Skandalaris the Company's founder, currently serves as President,
Chief Executive Officer and Director. Prior to founding the Company in 1993, Mr.
Skandalaris was Vice Chairman and a shareholder of The Oxford Investment Group,
Inc., a Michigan-based merchant banking firm. From 1987 until its sale in 1993,
Mr. Skandalaris served as Chairman and Chief Executive Officer of Acorn Asset
Management, a privately held investment advisory firm. Mr. Skandalaris began his
career as a Certified Public Accountant with the national accounting firm of
Touche Ross & Co. Mr. Skandalaris also serves as a Manager of Twenty-First
Century Advisors, LLC, an investment fund manager, which acts as the investment
manager of two funds, one of which, Twenty-First Century Advisor Offshore Fund,
Ltd., is publicly traded on the Irish Stock Exchange. In addition, since 1995
Mr. Skandalaris has served as a Manager of Invest L'Inc. Partners, LLC, a
consulting firm, and from 1994 to March 1997, Mr. Skandalaris served as the
Chairman of River Capital, Inc., an investment banking firm.
Christopher L. Morin joined the Company on June 1, 1997 as its Chief
Operating Officer. From July 1994 to June 1997, Mr. Morin was the Chief
Operating Officer of Talon Automotive LLC, a privately held automotive supplier
with over $200 million in annual revenues. Prior to joining Talon Automotive,
LLC in 1994, Mr. Morin was the Vice President of operations for Irvin Automotive
Products, an operating division of Takata North America. Mr. Morin began his
career as a production supervisor and has held management positions in
materials, quality, sales and marketing and operations. Mr. Morin will be
appointed to the Board of Directors upon consummation of the Offering.
Richard V. Balgenorth joined the Company on May 1, 1996 as its Chief
Financial Officer and was elected to the Board of Directors in December 1996.
From 1990 to 1996, Mr. Balgenorth was a member of the Mergers and Acquisitions
Group in NBD Bank's Capital Markets Division. Mr. Balgenorth began his career as
a Certified Public Accountant with the national accounting firm of Arthur
Andersen, LLP.
Michael C. Azar joined the Company in November 1996 as its General Counsel
and Secretary and was elected to the Board of Directors in December 1996. Prior
to joining the Company, Mr. Azar was employed as General Counsel to River
Capital, Inc., an investment banking firm, from January through November 1996.
From 1988 to 1995, Mr. Azar practiced law with the firm of Mason, Steinhardt,
Jacobs and Perlman in Southfield, Michigan.
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James Bronce Henderson, III will be appointed as Chairman of the Company's
Board of Directors upon consummation of the Offering. Since 1989, Mr. Henderson
has served as the Chairman and Chief Executive Officer of DCT, Inc., the
privately held parent company of Utilase and the majority owner of DCT prior to
their acquisitions by the Company in connection with the Closing Acquisitions.
Mr. Henderson has served on the Chrysler CEO Round Table since July 1995 and is
a past chairman of the Michigan/Japan Foundation. Mr. Henderson will serve as a
member of the Board of Directors pursuant to an agreement entered into in
connection with the DCT Acquisition. See 'Certain Transactions.'
Richard J. Reason will be appointed to the Board of Directors upon
consummation of the Offering. In 1968, Mr. Reason founded Monroe and has served
as its President since inception.
Timothy F. Healy will be appointed to the Board of Directors upon
consummation of the Offering. Mr. Healy is the President and Chief Operating
Officer of Irvin Automotive Products, an operating division of Takata North
America. Mr. Healy joined Irvin Automotive Products in 1987, holding management
positions in sales, marketing and operations before being appointed President in
January 1994. Prior to joining Irvin Automotive Products, Mr. Healy held various
sales and marketing positions with Diversified General, now operating as Gen-
Corp., and Indian Head Industries.
Daniel J. McEnroe will be appointed to the Board of Directors upon
consummation of the Offering. Since 1995, Mr. McEnroe has been the Treasurer of
Detroit Diesel Corporation. Mr. McEnroe also serves as a member of the board of
directors and as a representative on the Credit Committee of Detroit Diesel
Capital Corporation, a joint venture of Detroit Diesel Corporation. Prior to
joining Detroit Diesel Corporation, Mr. McEnroe served as Assistant Treasurer of
Penske Corporation, a privately held holding company whose operating entities
include Detroit Diesel Corporation. Mr. McEnroe has been a Certified Public
Accountant since 1985 and a Chartered Financial Analyst since 1991.
Anthony R. Tersigni will be appointed to the Board of Directors upon
consummation of the Offering. Dr. Tersigni is the President and Chief Executive
Officer of St. John Health System, an integrated health delivery system
headquartered in Detroit, Michigan. Prior to joining St. John Health System in
1995, Dr. Tersigni was President and Chief Executive Officer of Oakland General
Health Systems, Inc., in Madison Heights, Michigan from 1987 through 1995. Dr.
Tersigni holds a doctorate in Organizational Development.
Directors are elected to serve until the next annual meeting of
shareholders or until a successor is duly elected and qualified. Executive
officers are duly elected by the Board of Directors to serve until their
respective successors are elected and qualified.
Each of the Company's subsidiaries maintains its own board of directors
which oversees operational issues at each respective subsidiary. Each of these
boards of directors consists of five members, with the Company's Chief Operating
Officer serving as the chairman of each subsidiary. Outside directors are
included as deemed appropriate by the management and chairman of each
subsidiary.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee
Promptly following the consummation of the Offering, the Board of Directors
will establish an Audit Committee comprised of Messrs. James Bronce Henderson,
III, Daniel J. McEnroe, and Anthony R. Tersigni, all of whom will be independent
directors. The Audit Committee will make recommendations concerning the
engagement of independent public accountants, review with the independent public
accountants the plans of the audit engagement, approve professional services
provided by the independent accountants, review the independence of the
independent accountants and review the adequacy of the Company's internal
accounting controls.
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<PAGE>
Compensation Committee
Promptly following the consummation of the Offering, the Board of Directors
will establish a Compensation Committee which will be comprised solely of
independent directors. The Compensation Committee will establish compensation
policies and determine compensation for the Company's and each of its
subsidiaries' executive officers in addition to administering the Company's 1997
Stock Option Plan, described elsewhere herein.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the total compensation earned by the Chief
Executive Officer and the only other executive officer who received compensation
in excess of $100,000 during the fiscal year ended December 31, 1996, for
services rendered to the Company in all capacities during such year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE(1)
------------------------------------------
RESTRICTED
STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS
- --------------------------------------------------- ---- -------- -------- ----------
<S> <C> <C> <C> <C>
Robert J. Skandalaris.............................. 1996 $ 94,000 $960,000(2) --
President, Chief Executive Officer and Director
Mark A. Davis...................................... 1996 $112,400 -- $ 32,000(4)
Former President, General Counsel and Director(3)
</TABLE>
- ------------------
(1) Does not include any value that might be attributable to job-related
personal benefits, the annual value of which has not exceeded the lesser of
10% of annual salary plus bonus or $50,000 for each executive officer.
(2) Mr. Skandalaris has agreed to forego any bonus for the year ended December
31, 1997. See '--Employment Agreements.'
(3) Mr. Davis served as an officer and director of Noble from July 1996 to
October 1996. Prior thereto, Mr. Davis was employed as an officer of
Prestolock from January 1996 to July 1996. Compensation set forth in the
table includes Mr. Davis' salaries at Prestolock and Noble.
(4) Represents the book value of shares of Common Stock issued to Mr. Davis on
January 1, 1996. These shares were subsequently repurchased from Mr. Davis
when he left the Company in October 1996 by Robert J. Skandalaris, as
assignee of the Company's right to repurchase pursuant to Mr. Davis'
Shareholder's Agreement with the Company. See 'Certain Transactions.'
EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement (the 'Employment
Agreement') with Robert J. Skandalaris, its President and Chief Executive
Officer, dated April 2, 1997. The Employment Agreement provides for an initial
term of three years, with an unlimited number of successive three-year renewals
subject to the election by either party not to renew the Employment Agreement.
The Employment Agreement provides for a base salary of $225,000 per annum
commencing May 1, 1997 and continuing for the remainder of the term of
employment. Mr. Skandalaris is also entitled to an incentive bonus for each
fiscal year in an amount to be determined by the Compensation Committee of the
Board (other than for 1997, for which year Mr. Skandalaris has agreed to forgo
any bonus) as well as to participate in any executive bonus or other incentive
compensation program adopted by the Company. In the event that Mr. Skandalaris'
employment is terminated by the Company, without cause, or by reason of his
death or disability, or in the event that the Employment Agreement is not
renewed, the Company is obligated to pay to Mr. Skandalaris, as severance and/or
liquidated damages, an amount equal to three times his annual base salary at the
time of termination plus any incentive bonus due under the Employment Agreement.
Prior to April 1, 1997, the Company did not have an employment agreement with
Robert J. Skandalaris.
Utilase has an employment agreement with its President, John K. Baysore
which was entered into on April 7, 1997 in contemplation of the Utilase
Acquisition. Mr. Baysore's employment agreement has a term of three years and
provides for an initial base salary of $175,000 per annum, with increases to be
determined by Utilase's board of directors. Mr. Baysore is eligible to receive
annual bonus awards as follows: (i) from April 7, 1997 to December 31, 1997, 8%
of the excess of Utilase's net income over $1.0 million; (ii) for calendar year
1998, 4.5% of the excess of Utilase's net income over $2.5 million; and (iii)
for calendar 1999, 2.25% of the excess of Utilase's net income over $6.0
million. If Mr. Baysore's employment is terminated by Utilase without
51
<PAGE>
cause, he is entitled to a lump sum severance payment equal to one time his
annual base salary. Mr. Baysore's employment agreement also contains a covenant
not to compete for the term of his employment agreement and for a period of
three years thereafter, for which Mr. Baysore shall receive $200,000 upon
closing of the Utilase Acquisition out of the proceeds of the Offering. See
'Certain Transactions.'
BOARD OF DIRECTORS
Directors who are employees of the Company receive no compensation, as
such, for their service as members of the Board. Directors who are not employees
of the Company receive an attendance fee of $1,000 for each Board meeting or
committee meeting attended in person by that director and $250 for each
telephonic Board meeting or committee meeting in which such director
participated; however, fees for in-person meetings of the Board and committees
may not exceed $1,000 per day. All directors are reimbursed for expenses
incurred in connection with attendance at meetings. In addition, directors are
eligible to participate in the Company's 1997 Stock Option Plan, which will
become effective upon consummation of the Offering.
STOCK OPTION PLAN
The Company intends to adopt the 1997 Stock Option Plan (the 'Option Plan')
effective upon consummation of the Offering. The Option Plan provides for the
grant to employees, officers, directors, consultants and independent contractors
of non-qualified stock options as well as for the grant to employees of stock
options that qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986 (the 'Code'). The Option Plan has a 10 year term.
The purpose of the Option Plan is to enable the Company to attract and retain
qualified persons as employees, officers and directors and others whose services
are required by the Company, and to motivate such persons by providing them with
an equity participation in the Company. Under the Option Plan, 700,000 shares of
the Company's Common Stock are reserved for issuance, subject to adjustment upon
occurrence of certain events affecting the capitalization of the Company.
The Option Plan will be administered by the Compensation Committee of the
Board of Directors which has, subject to specified limitations, the full
authority to grant options and establish the terms and conditions for vesting
and exercise thereof. The exercise price of incentive stock options granted
under the Option Plan is required to be no less than the fair market value of
the Common Stock on the date of grant (110% in the case of a greater than 10%
shareholder). The exercise price of non-qualified stock options is required to
be no less than 85% of the fair market value of the Common Stock on the date of
grant. Options may be granted for terms of up to 10 years (5 years in the case
of incentive stock options granted to greater than 10% shareholders). No
optionee may be granted incentive stock options such that the fair market value
of the options which first become exercisable in any one calendar year exceeds
$100,000. If an optionee ceases to be employed by, or ceases to have a
relationship with the Company, such optionee's options expire six months after
termination of the employment or consulting relationship by reason of death, one
year after termination by reason of permanent disability, immediately upon
termination for cause and three months after termination for any other reason.
In order to exercise an option granted under the Option Plan, the optionee
must pay the full exercise price of the option with respect to the shares being
purchased. Payment may be made either: (i) in cash; (ii) at the discretion of
the Committee, by delivering shares of Common Stock already owned by the
optionee that have a fair market value equal to the applicable exercise price;
or (iii) in the form of such other consideration as may be determined by the
Committee and permitted by applicable law.
Subject to the foregoing, the Committee has broad discretion to describe
the terms and conditions applicable to options granted under the Option Plan.
The Committee may at any time discontinue granting options under the Option Plan
or otherwise suspend, amend or terminate the Option Plan and may, with the
consent of an optionee, make such modification of the terms and conditions of
such optionee's option as the Committee shall deem advisable. However, the
Committee has no authority to make any amendment or modifications to the Option
Plan or any outstanding option which would: (i) increase the maximum number of
shares which may be purchased pursuant to options granted under the Option Plan,
either in the aggregate or by any optionee, except in connection with certain
antidilution adjustments; (ii) change the designation of the class of employees
eligible to receive qualified options; (iii) extend the term of the Option Plan
or the maximum option period thereunder; (iv) decrease the minimum qualified
option price or permit reductions of the price at which shares may be purchased
for qualified options granted under the Option Plan, except in connection with
certain antidilution adjustments; or
52
<PAGE>
(v) cause qualified stock options issued under the Option Plan to fail to meet
the requirements of incentive stock options under Section 422 of the Code. Any
such amendment or modification shall be effective immediately, subject to
shareholder approval thereof within 12 months before or after the effective
date. No option may be granted during any suspension or after termination of the
Option Plan.
The Option Plan is designed to meet the requirements of an incentive stock
option plan as defined in Code Section 422. As a result, an optionee will
realize no taxable income, for federal income tax purposes, upon either the
grant of an incentive stock option under the Option Plan or its exercise. If no
disposition of the shares acquired upon exercise is made by the optionee within
two years from the date of grant or within one year from the date the shares are
transferred to the optionee, any gain realized upon the subsequent sale of the
shares will be taxable as a capital gain. In such case, the Company will be
entitled to no deduction for federal income tax purposes in connection with
either the grant or the exercise of the option. If, however, the optionee
disposes of the shares within either of the periods mentioned above, the
optionee will realize earned income in an amount equal to the excess of the fair
market value of the shares on the date of exercise (or the amount realized on
disposition if less) over the exercise price, and the Company will be allowed a
deduction for a corresponding amount.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Articles of Incorporation and Bylaws provide for
indemnification of directors and officers. The Company believes such
indemnification will assist the Company in continuing to attract and retain
talented directors and officers in light of the risk of litigation directed
against directors and officers of publicly held corporations. The Company's
Articles of Incorporation and Bylaws provide that the Company shall indemnify
each person who may serve or who has served at any time as a director or
officer, or who at the request of the Board of Directors of the Company may
serve or at any time has served as director or officer of another corporation or
enterprise, and such person's respective heirs, administrators, successors and
assigns, against any and all expenses, including judgments, attorneys' fees and
amounts paid in settlement (before and after suit is commenced), actually and
necessarily incurred by such person in connection with the defense or settlement
of any claim, action, suit or proceeding in which such person is made a party,
or are a party, or which may be asserted against them by reason of being or
having been a director or officer of the Company or any such other corporation
or enterprise, if such person acted in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Company, or its shareholders, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such person's conduct was not
unlawful. Such indemnification shall be in addition to any other rights to which
those indemnified may be entitled under any law, bylaw, agreement, vote of
shareholders or otherwise.
The Michigan Business Corporation Act permits Michigan corporations to
limit the personal liability of directors for a breach of their fiduciary duty.
The Company's Articles of Incorporation limit liability to the maximum extent
permitted by law. The Company's Articles of Incorporation provide that a
director of the Company shall not be personally liable to the Company or its
shareholders for monetary damages for breach of the director's fiduciary duty.
However, the Articles of Incorporation do not eliminate or limit the liability
of a director for any of the following: (i) breach of the director's duty of
loyalty to the Company or its shareholders; (ii) acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law;
(iii) a transaction from which the director derives an improper personal
benefit; (iv) making an unlawful loan to a director, officer or employee of the
Company; and (v) declaring an unlawful dividend or distribution to shareholders.
As a result of this provision, shareholders of the Company may be unable to
recover monetary damages against directors for actions taken by them which
constitute negligence or gross negligence or which are in violation of their
fiduciary duties, although it may be possible to obtain injunctive or other
equitable relief with respect to such actions. If equitable remedies are found
not to be available to shareholders in any particular case, shareholders may not
have any effective remedy against the challenged conduct.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
53
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth as of the date of this Prospectus and as
adjusted to reflect the sale of the 3,300,000 shares offered hereby, certain
information known to the Company concerning the beneficial ownership of the
Common Stock by: (i) each person known by the Company to own more than 5% of the
Common Stock; (ii) each director of the Company and each person who will become
a director of the Company immediately following the consummation of the
Offering; (iii) each officer of the Company named in the Summary Compensation
Table; and (iv) all officers and directors of the Company as a group. Except as
otherwise indicated, each shareholder listed below has sole voting and
investment power with respect to the shares beneficially owned by such person.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
SHARES BENEFICIALLY OWNED
NAME AND ADDRESS OF NUMBER OF SHARES -----------------------------------
BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ------------------------------------- ------------------ --------------- --------------
<S> <C> <C> <C>
Robert J. Skandalaris(1)............. 3,162,994(2) 80.59% 43.78%
Richard G. Skandalaris(1)............ 233,950(3) 5.96% 3.24%
Daniel J. Brunell(1)................. 200,528 5.11% 2.78%
James D. Skandalaris(1).............. 200,528(3) 5.11% 2.78%
Richard V. Balgenorth................ 83,554 2.13% 1.16%
Michael C. Azar...................... 40,106 1.02% 0.56%
James Bronce Henderson, III.......... 133,686 3.41% 1.85%
Richard J. Reason.................... -- 0.00% 0.00%
Timothy F. Healy..................... -- 0.00% 0.00%
Daniel J. McEnroe.................... -- 0.00% 0.00%
All officers and directors as a group
(six persons after the Offering)... 3,420,340 87.14% 47.34%
</TABLE>
- ------------------
(1) The addresses of these individuals are as follows: 33 Bloomfield Hills
Parkway, Suite 155, Bloomfield Hills, Michigan 48304.
(2) Includes 150,396 shares of Common Stock held by Robert J. Skandalaris as
custodian for his three minor children; 534,742 shares of Common Stock over
which Mr. Skandalaris exercises voting power pursuant to certain Voting
Agreements and Powers of Attorney; and 64,838 shares of Common Stock owned
by Twenty-First Century Off-Shore Fund, Ltd., a Bahamian open-ended
corporation, an investment fund the investment manager of which is a limited
liability company of which Mr. Skandalaris is a member. See 'Certain
Transactions.'
(3) Represents shares of Common Stock which, although owned by the holder
indicated, are also included in those beneficially owned by Mr. Robert
Skandalaris, as he has sole voting power with respect to these shares
pursuant to a Voting Agreement and Power of Attorney.
54
<PAGE>
CERTAIN TRANSACTIONS
PRESTOLOCK ACQUISITION
On February 25, 1994, Prestolock acquired the assets of Presto Lock, Inc.
('PLI') for $750,000 in cash. The assets were purchased from Midlantic National
Bank, which had acquired the PLI assets as the result of a foreclosure. At the
time of the Prestolock Acquisition, Prestolock was owned by: Robert J.
Skandalaris, the President, Chief Executive Officer, principal shareholder and a
director of the Company; Daniel J. Brunell, the President of Vassar and a
shareholder of the Company; and Richard G. Skandalaris, the President of
Prestolock, a shareholder of the Company and the brother of Robert J.
Skandalaris. PLI was not an affiliate of Prestolock. In July 1994, Prestolock
sold a portion of the acquired assets (the padlock division assets) to The
Eastern Company ('Eastern') resulting in cash proceeds to Prestolock of
$500,000. Prestolock sold these non-automotive assets because they were, in
management's opinion, not strategic to its business plan. Prestolock also
entered into a Sales Service Consulting Agreement with Eastern which provides
that Prestolock will provide up to 20 hours per month of consulting services in
exchange for an annual royalty equal to 3% of Eastern's gross sales of certain
non-automotive padlock products. The Sales Service Consulting Agreement expires
on December 31, 2000. Prestolock received $42,501 and $47,022 in fees from
Eastern for services rendered in 1995 and 1996, respectively. On January 1,
1996, the Company entered into an agreement with the Prestolock shareholders
whereby the Company acquired all of the outstanding shares of Prestolock in
exchange for 2,673,704 shares of Common Stock.
VASSAR ACQUISITION
Effective January 1, 1996, the Company completed the acquisition of all of
the outstanding shares of Vassar for aggregate consideration of $2.0 million,
including a stock purchase price of $200,000 paid in cash and consulting and
non-competition fees aggregating $1.8 million payable to six former Vassar
shareholders, including Christan Frampton, the current Treasurer of Vassar and
James Lamb, a current director of Vassar. These consulting agreements provide
for 24 monthly payments to such former shareholders in the aggregate monthly
amount of $25,000 beginning in January 1996, followed by 60 monthly payments in
the aggregate monthly amount of $20,000. The Company's obligations pursuant to
the consulting agreements are secured by the equipment and fixtures of Vassar.
The selling shareholders of Vassar retained an option to repurchase 25% of the
Common Stock of Vassar for $1, which option expires when the Company's
obligations under the consulting agreements are discharged. The Vassar shares
issuable upon exercise of such option are not convertible into shares of the
Company's Common Stock. In July 1996, Ms. Frampton surrendered her consulting
agreement in exchange for 7,687 shares of the Company's Common Stock. In January
1997, the consulting agreements with two of the former Vassar shareholders,
including James Lamb, which together represented 20% of the aggregate consulting
fee commitment, were amended to provide for the Company's payment of an
aggregate of $120,000 to such persons within 30 days of the consummation of the
Offering in full satisfaction of its obligations thereunder. The Company intends
to utilize $120,000 of the net proceeds of the Offering to satisfy such
arrangements. In March 1997, two former Vassar shareholders, including Eugene
Oldford, the former controlling shareholder of Vassar, filed a lawsuit against
the Company for payments allegedly owed pursuant to their consulting agreements.
The Company's position is that it is entitled to cease payments under these
consulting agreements due to the breach by these former shareholders of their
covenants not to compete. This litigation is not expected to have a material
impact on the business of the Company. In connection with the Vassar
Acquisition, the Company also acquired an approximately 30,000 square foot
painting and assembly facility subject to an October 26, 1994 Land Contract with
Cass River Investment Company, an entity affiliated with Mr. Oldford, providing
for an aggregate purchase price of $600,000, payable in monthly installments of
$7,280 over a term of 10 years and bearing interest at a rate of 8% per annum.
MONROE ACQUISITION
Effective January 1, 1996, the Company completed the Monroe Acquisition,
pursuant to which it acquired all of the outstanding shares of Monroe from
Richard J. Reason, individually and as trustee of a revocable trust, and from an
irrevocable trust for the benefit of Mr. Reason's children. The aggregate
consideration was $6.85 million, including: (i) a stock purchase price of $6.35
million, payable in installments over 16 months and (ii) a
55
<PAGE>
real estate purchase price of $500,000, payable pursuant to a Land Contract
dated April 30, 1996, which provides for monthly interest payments at the rate
of 12% per annum, and a principal balloon payment on April 30, 1998. The
obligations of the Company under the Land Contract are guaranteed by Robert J.
Skandalaris. Mr. Reason currently serves as the President and a director of
Monroe and upon consummation of the Offering will become a member of the
Company's Board of Directors. Concurrent with the Monroe Acquisition, Monroe
entered into a 28-month employment agreement with Mr. Reason, which provides for
an annual salary of $200,004, as well as deferred compensation payments of
$2,000 per month, for a three-year period commencing May 1, 1998. The Company
intends to use $500,000 of the net proceeds of the Offering to pay the final
installment of the stock purchase price due in connection with the Monroe
Acquisition.
DCT ACQUISITION AND RELATED MATTERS
On July 1, 1996, the Company acquired newly issued shares representing
37.5% of the outstanding shares of DCT for $1 and the option to acquire, subject
to certain limitations, an additional 14.1% of DCT's outstanding shares from
DCT's other shareholders, including James Bronce Henderson, III, who will become
Chairman of the Company's Board of Directors upon consummation of the Offering,
for $1.00 through July 31, 2001. On June 9, 1997, DCT assigned to the Company
its rights under a Stock Redemption Agreement between DCT and Peter Raab, a
former officer and employee of DCT, pursuant to which, effective April 7, 1997,
the Company exercised its rights to acquire Mr. Raab's 7.5% interest in DCT for
$1.00. In connection with the Initial DCT Acquisition, the shareholders of DCT
agreed to write-off and forgive all existing debt to affiliates and
shareholders, except for an unsecured term note payable to DCT, Inc. ('DCTI'), a
company controlled by Mr. Henderson, in the principal amount of $960,000, which
bore interest at the rate of 10% per annum and had an original maturity date of
June 30, 1998 (the 'DCTI Loan'). As a result, during the year ended December 31,
1996, an aggregate of $15,325,865 of indebtedness to DCTI and $1,515,579 of
indebtedness to shareholders and former shareholders of DCT was forgiven and
written off. In addition, in December 1996, pursuant to agreements between the
Company, DCT and Richard J. Reason, a director nominee, DCT indebtedness to Mr.
Reason in the aggregate amount of $1.0 million was converted into 10,000 shares
of the preferred stock of DCT, which shares will be converted into 10,000 shares
of preferred stock of the Company (mandatorily redeemable pursuant to a
designated 'put' formula at the option of Mr. Reason) upon the consummation of
the Offering. The Company also received irrevocable proxies from Messrs.
Henderson and Raab providing the Company with the authority to direct the vote
of these shareholders on all matters except with respect to the merger,
liquidation or sale of substantially all of DCT, or other extraordinary items.
In addition, the Company and such other shareholders of DCT agreed to certain
put and call provisions with respect to the purchase by the Company of the
balance of the outstanding shares of DCT. See 'Description of Capital Stock--
Preferred Stock.'
Pursuant to a March 15, 1997 Letter Agreement and an Agreement of Amendment
dated August 26, 1997 (the 'August 26 Amendment'), the Company's rights to
purchase the balance of the DCT shares owned by Mr. Henderson and the other DCT
shareholders, representing a 55% interest in DCT, were modified. These
agreements provide that: (i) on the earlier of the consummation of the Offering
or December 31, 1997, the Company will repay the $960,000 DCTI Loan; (ii) on the
earlier of the consummation of the Offering or December 31, 1997, the Company
shall acquire the remaining shares of DCT for $1 million (the 'Final DCT
Purchase Price'); and (iii) as of the consummation of the Offering, Mr.
Henderson will serve as a member of the Company's Board and its chairman until
December 31, 1999. The Company intends to complete the Final DCT Acquisition
upon the consummation, and using $1.96 million of the net proceeds, of the
Offering.
DCT leases five separate facilities aggregating approximately 102,287
square feet located in Clinton Township and Mt. Clemens, Michigan, pursuant to
leases expiring September 30, 1998, from Competitive Technologies Investment
Company ('CTIC'), an entity controlled by Mr. Henderson, at an aggregate rent of
$47,000 per month. CTIC will be purchased by the Company concurrent with the
consummation of the Final DCT Acquisition for no additional consideration other
than assumption of the debt encumbering such properties aggregating
approximately $4.402 million at June 30, 1997. One of the facilities owned by
CTIC, and leased by DCT, is encumbered by a mortgage securing a promissory note
in the original principal amount of $238,000 in favor of The Bank of Bloomfield
Hills. Robert J. Skandalaris is a principal shareholder of The Bank of
Bloomfield Hills and its holding company, Bloomfield Hills Bancorp, Inc. The
mortgage originated in 1992, prior to the existence of any affiliate
relationship between Mr. Skandalaris and DCT or CTIC.
56
<PAGE>
Concurrent with the closing of the Initial DCT Acquisition, the Company and
DCT entered into a Management Agreement pursuant to which the Company provides
executive and general supervision over the business activities of DCT for an
annual fee of $100,000, payable in monthly installments of $8,333. Upon
consummation of the Offering and the Final DCT Acquisition, the Company will
terminate the Management Agreement.
SKANDY ACQUISITION
Effective January 1, 1997, the Company acquired all of the outstanding
capital stock of Skandy from Richard G. Skandalaris, the sole shareholder of
Skandy, in exchange for 133,686 shares of the Company's Common Stock. For the
years ended December 31, 1995 and 1996, Skandy received commissions for sales
representation services provided to Prestolock of $20,460 and $106,387,
respectively.
UPP ACQUISITION
On March 1, 1997, the Company, through its wholly-owned subsidiary UPP,
acquired certain assets of Utilase, a majority owned subsidiary of DCTI. The UPP
Acquisition purchase price was $850,000, payable by delivery of the Company's
promissory note (secured by the assets acquired), providing for payment of
$750,000 upon the earlier of July 31, 1997 or the consummation of the Offering
and $50,000 on each of February 1, 1998 and 1999 (the 'UPP Note'). The UPP Note
bears no stated rate of interest but provides for a default rate of interest of
10% per annum. Pursuant to the August 26 Amendment referred to above, the entire
$850,000 principal amount under the UPP Note now becomes due and payable upon
the earlier to occur of the consummation of the Offering or December 31, 1997.
The Company intends to use $850,000 of the net proceeds of the Offering to make
the required payment.
UPP leases 11,110 square feet of space in Detroit, Michigan from an entity
controlled by Mr. Henderson, pursuant to a three-year lease expiring February
28, 2000, at an annual rent of $38,885, plus its pro rata share of taxes,
utilities and other common charges. The Company believes that such lease is at
least as favorable to the Company as could be obtained from an unaffiliated
third party.
UTILASE ACQUISITION
On April 7, 1997, the Company entered into a Stock Purchase Agreement with
Utilase and its shareholders (DCTI and John K. Baysore), providing for the
acquisition by the Company of all of the outstanding capital stock of Utilase on
the earlier of the consummation of the Offering and December 31, 1997. Mr.
Baysore is the President of Utilase and will remain the President of Utilase
following the Utilase Acquisition. The Stock Purchase Agreement provides for a
purchase price of $8.2 million in cash and the Company's delivery of the Utilase
Notes (Series A, B, C and D) in the aggregate original principal amount of
$10,134,544.
A summary of the principal terms of the Utilase Notes is as follows: (i)
the Series A notes in the aggregate principal amount of $1,886,792 will bear
interest at the rate of 6% per annum until the first anniversary of the closing
of the Utilase Acquisition (the 'Utilase Closing Date') after which they bear
interest at the rate of 10% per annum and become due and payable at the option
of the holder if the note is not paid within 180 days of such first anniversary
date; (ii) the Series B notes in the aggregate principal amount of $1,779,993
will bear interest at the rate of 6% per annum until the second anniversary of
the Utilase Closing Date, increasing to 10% per annum thereafter, and become due
and payable at the option of the holder if the notes are not paid within 90 days
of such second anniversary date; (iii) the Series C notes in the aggregate
principal amount of $3,358,477 will bear interest at the rate of 6% per annum
until the third anniversary of the Utilase Closing Date, increasing to 10% per
annum thereafter, and become due and payable at the option of the holder if the
notes are not paid within 90 days of such third anniversary date; and (iv) the
Series D notes in the aggregate principal amount of $3,109,292 will bear
interest at the rate of 6.5% per annum until the fourth anniversary of the
Utilase Closing Date, increasing to 10% per annum thereafter. For so long as any
amount is outstanding under the Utilase Notes, the written consent of the
holders of at least 67% of the aggregate outstanding principal amount thereof is
required for the Company to (a) declare or pay any dividend or other
distribution on its shares (other than in shares of capital stock) or (b) redeem
or set apart funds for the purchase or redemption of any shares of its capital
stock through a sinking fund or otherwise, except, subject to certain
limitations, pursuant to the Shareholders Agreements discussed below. If the
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Company is in default under the Utilase Notes, the written consent of the
holders of at least 67% of the aggregate outstanding principal of the Utilase
Notes is required for the Company to (1) effect any sale, lease or other
conveyance, other than as security for a loan from a senior lender, of all or
substantially all of the assets of the Company, (2) effect any consolidation or
merger involving the Company (except solely to, with or among Noble and its
subsidiaries), (3) effect any reclassification or other change of any stock or
any recapitalization of Noble, or (4) permit any subsidiary to issue or sell
stock of such subsidiary, except to Noble or any wholly owned subsidiary of
Noble.
Pursuant to the August 26 Amendment, the Company's right to acquire
Utilase, and the remaining shares of DCT, is expressly contingent upon: (i) the
Company's completion of the Utilase Acquisition; (ii) UPP's prior payment of the
$850,000 UPP Note issued in connection with the UPP Acquisition; (iii) the
Company's prior payment of the Final DCT Purchase Price; (iv) the Company's
purchase of CTIC, and (v) the Company's payment of the DCTI Loan. The Utilase
Stock Purchase Agreement also provides that certain employees and shareholders
of Utilase and DCTI, including Messrs. Henderson and Baysore, will receive
payments aggregating $1.4 million on the Utilase Closing Date in exchange for
covenants not to compete with Utilase. Mr. Henderson will receive $200,000 in
exchange for his covenant not to compete with Utilase for the longer of seven
years from the Utilase Closing Date or two years from the date he ceases to be a
director of the Company. Mr. Baysore will receive $200,000 in exchange for his
covenant not to compete with Utilase for a period of three years from the date
of termination of his employment with Utilase pursuant to his employment
agreement. Jeffrey A. Moss, a director of Utilase and the President of DCTI,
will receive $1 million on the Utilase Closing Date and 11,697 shares of the
Company's Common Stock on each anniversary of the Utilase Closing Date,
commencing in 1999 and continuing through 2003, in exchange for his covenant not
to compete with Utilase for the longer of seven years from the Utilase Closing
Date or two years after he ceases to be a director of Utilase. The Company also
obtained a covenant not to compete from DCTI with a term of seven years for no
additional consideration. The covenants not to compete of Messrs. Henderson and
Moss and of DCTI terminate in the event of a default under the Utilase Notes
which is not cured within 60 days.
Utilase leases an approximately 50,937 square foot facility located in
Detroit, Michigan from an entity controlled by Mr. Henderson pursuant to a
three-year lease expiring February 14, 1999, at an annual rent of $148,167, and
an approximately 210,000 square foot facility in Detroit, Michigan from an
entity controlled by Mr. Henderson pursuant to a five-year lease expiring April
30, 2002. Pursuant to the terms of the latter lease, Utilase is acquiring
occupancy of the larger building in stages, with one-half having been acquired
in August, 1997 and the balance to be acquired in April 1998. Upon full
occupancy, Utilase will vacate its smaller facility and DCTI will assume the
lease obligations relating thereto.
Effective May 1, 1994, Utilase began leasing employees from DCTI. Lease
expenses for these employees for the years ended December 31, 1994, 1995 and
1996 were $328,392, $2.4 million and $2.8 million, respectively. Upon
consummation of the Utilase Acquisition, the Company intends to discontinue this
leasing arrangement. It is anticipated that the subject workers will be hired as
employees of the Company on similar terms.
OTHER MATTERS
Certain shareholders of the Company have entered into voting agreements and
powers of attorney with the Company granting to Robert J. Skandalaris an
irrevocable proxy to vote their shares of Common Stock on all matters. These
voting agreements also bind after-acquired shares and shares transferred to
third parties. An aggregate of 534,742 shares, representing 7.4% of the
outstanding shares after giving effect to the Offering, are subject to such
voting agreements. These shares are owned by James D. Skandalaris, Richard G.
Skandalaris, George J. Skandalaris, Joseph J. Skandalaris and Robert J.
Skandalaris as trustee for his minor children. These same shareholders (in the
case of Richard G. Skandalaris, only as to 50,132 of his shares), as well as
Daniel Brunell, the President of Vassar, are parties to Shareholders Agreements,
which terminate upon the consummation of the Offering, prohibiting the transfer
of their Common Stock without the consent of the Company and providing for the
repurchase of their shares by the Company at net book value at any time at the
election of the Company or upon death or termination as an employee or director
of the Company. The Company had a similar Shareholder's Agreement with Mark A.
Davis, its former President. When Mr. Davis left the Company in October 1996,
the Company assigned its right to repurchase Mr. Davis' shares of Common Stock
to
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Robert J. Skandalaris. Mr. Skandalaris purchased 267,370 shares of Common Stock
owned by Mr. Davis for $60,000 on November 27, 1996. In July 1997, new
Shareholders Agreements were entered into between the Company and certain
employee-shareholders, including Richard V. Balgenorth and Michael C. Azar, the
Chief Financial Officer and General Counsel of the Company, respectively, and
Richard G. Skandalaris (as to 183,818 of his shares), which provide the Company
with the option to repurchase their shares of Common Stock upon death or
termination of employment, based upon a book value formula.
On January 15, 1996, the Company received a loan of $300,000 from James D.
Skandalaris, the father of Robert J. Skandalaris, evidenced by an unsecured
promissory note with interest at 10% per annum, payable monthly, with the
principal balance due upon demand. In addition, on March 1, 1994, James D.
Skandalaris made a loan of $90,000 to Prestolock, evidenced by an unsecured
demand note with interest only payments due monthly at a rate of 10% per annum.
Effective June 30, 1997, James D. Skandalaris entered into a letter agreement
with the Company and Prestolock providing that no demand for repayment of the
principal balance of either the January 15, 1996 or March 1, 1994 notes will be
made until after December 30, 1998.
On April 30, 1996, Robert J. Skandalaris made a loan of $1 million to the
Company evidenced by an unsecured promissory note due on April 30, 2000, bearing
interest at the rate of 7% per annum with interest only payable monthly.
Effective July 30, 1997, the Company issued 38,000 shares of its Series A
Preferred Stock, and 64,838 shares of Common Stock, to Twenty-First Century
Off-Shore Fund, Ltd., a Bahamian open-ended corporation ('Twenty-First
Century'), for $3.8 million. The investment manager of Twenty-First Century is a
limited liability company in which Robert J. Skandalaris is a member. The
proceeds of Twenty-First Century's $3.8 million investment were utilized to
reduce the Noble/Comerica Line in order to satisfy Comerica's requirement that
the Company have at least $2.3 million in available credit facilities prior to
the funding of Utilase's $8 million equipment financing line, of which the
Company is a guarantor. See '--Utilase Acquisition' and 'Capital Stock--
Preferred Stock.'
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000 shares of
Preferred Stock, $100 par value, of which 38,000 shares are currently
outstanding and 20,000,000 shares of Common Stock, no par value, of which
3,925,006 shares are currently issued and outstanding.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by the laws of the State of Michigan, but without further action by the
Company's shareholders, to provide for the issuance of Preferred Stock in one or
more series, to establish from time to time the number of shares to be included
in such series, to fix the designations, powers, preferences, and rights of the
shares of each such series and any qualifications, limitations, or restrictions
thereof, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding) without any
further vote or action by the shareholders. The Board may authorize and issue
Preferred Stock with voting or conversion rights that could adversely affect the
voting power or other rights of the holders of Common Stock. In addition, the
issuance of Preferred Stock may have the effect of delaying, deterring or
preventing a change in control of the Company.
The Company issued 38,000 shares of its Series A Preferred Stock in
connection with a $3.8 million financing in July 1997. The Series A Preferred
Stock has a stated value of $100 per share, accrues 10% annual cumulative
dividends, payable quarterly, has no voting rights and is redeemable at any
time, at the option of the Company, in whole or in part, at a per share price
equal to the stated value per share, plus accumulated and unpaid dividends.
Concurrent with the consummation of the Offering, the holder of 10,000
shares of the preferred stock of DCT will convert such shares into 10,000 shares
of Preferred Stock of the Company pursuant to a Conversion Agreement entered
into between such holder, DCT and Noble in December 1996. Upon conversion, the
shares of Preferred Stock issued by the Company will have a stated value of $100
per share, a liquidation preference of $100 per share, no voting rights and be
entitled to a 10% annual cumulative dividend payable quarterly. In
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addition, such shares of Preferred Stock will be subject to mandatory redemption
by the Company at the option of the holder, at a price of $100 per share,
pursuant to the following 'put' formula: (a) 375 shares may be put to the
Company during the first 10 days of the first month of each calendar quarter
beginning January 1, 1997 and ending October 10, 2001 and (b) 2,500 shares may
be put to the Company during the period from December 21 through December 31,
2001. See 'Certain Transactions--DCT.'
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Accordingly, the holders of a majority of the shares entitled to vote in
any election of directors may elect all of the directors standing for election.
Subject to the preferences that may be applicable to any then outstanding
Preferred Stock, the holders of Common Stock will be entitled to receive such
dividends, when, as and if declared by the Board from time to time out of
legally available funds. Upon the liquidation, dissolution or winding up of the
Company, the holders of Common Stock will be entitled to share ratably in all
assets of the Company that are legally available for distribution, after payment
of all debts and other liabilities and subject to the prior rights of holders of
any Preferred Stock then outstanding. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights.
MICHIGAN BUSINESS CORPORATION ACT AND CERTAIN CHARTER PROVISIONS
The provisions of the Company's Articles of Incorporation and Bylaws and
the Michigan Business Corporation Act (the 'MBCA') summarized below may have the
effect of discouraging, delaying, or preventing hostile takeovers, including
those that might result in a premium over the market price, or discouraging,
delaying, or preventing changes in control or management of the Company.
Chapter 7A of the Michigan Business Corporation Act. Under Chapter 7A of
the MBCA, 'business combinations' (defined to include, among other transactions,
mergers, consolidations, certain dispositions of assets or shares and certain
recapitalizations) between a Michigan corporation and an 'Interested
Shareholder' (defined generally as the direct or indirect beneficial owner of at
least 10% of the voting power of the corporation's outstanding shares or an
affiliate of the corporation which had such 10% ownership within the preceding
two years) can only be consummated if it is approved by at least 90% of the
votes of each class of the corporation's shares entitled to vote thereon and by
at least two-thirds of such votes not held by the Interested Shareholder or its
affiliates, unless certain price and other conditions imposed by Chapter 7A are
satisfied. The Board of Directors may elect to exempt business combinations with
a particular Interested Shareholder from the requirements of Chapter 7A at any
time before the Interested Shareholder attains that status.
Chapter 7B of the Michigan Business Corporation Act. Under Chapter 7B of
the MBCA, 'control shares' (defined as shares, which when added to all other
shares of a Michigan corporation owned by a person or with respect to which that
person may exercise or direct the exercise of voting power, would entitle that
person, immediately after the acquisition of the shares, to exercise or direct
the exercise of voting power in the election of directors in excess of threshold
levels of 20%, 33 1/2% or a majority of all voting power) acquired in a 'control
share acquisition' (defined to include the acquisition, directly or indirectly,
by any person of ownership of, or the power to exercise the voting power with
respect to, issued and outstanding control shares) have the same voting rights
as were accorded the shares before the control share acquisition only to the
extent granted by resolution approved by the shareholders of the corporation. To
have such a resolution considered by the shareholders of the corporation, the
acquiring person must deliver an 'acquiring person statement' to the corporation
and the Michigan Department of Commerce, Corporation and Securities Bureau. To
be approved by the shareholders, the resolution must be approved by a majority
of the votes cast by the holders of the Common Stock and a majority of the votes
cast by the holders of shares of each class or series entitled to vote thereon,
excluding 'interested shares' (defined to include shares held by the acquiring
person or any member of his group, an officer of the corporation and any
director who is also an employee of the corporation). The practical effect of
Chapter 7B of the MBCA is to require that a person making a tender offer for
shares of a corporation condition the offer on shareholder approval of the
person's right to vote the shares to be acquired.
If authorized by the corporation's articles of incorporation or bylaws,
control shares acquired in a control share acquisition with respect to which no
acquiring person statement has been filed may be redeemed by the corporation at
any time more than 60 days after the end of the control share acquisition at
'fair value.' If authorized by the corporation's articles of incorporation or
bylaws, control shares acquired in a control share
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acquisition which are not accorded full voting rights may be redeemed by the
corporation at their 'fair value.' Unless otherwise provided in the
corporation's articles of incorporation or bylaws, in the event that control
shares acquired in a control share acquisition are accorded full voting rights
and the acquiring person has acquired a majority of all voting power of the
corporation, the shareholders of the corporation, other than the acquiring
person, have dissenters' rights with respect to their shares. 'Fair value' means
a value not less than the highest price paid per share by the acquiring person
in the control share acquisition.
The provisions of Chapter 7B automatically apply to the Company, although
the Board of Directors or the shareholders may elect to remove the Company from
the application of Chapter 7B. The Board has no plans to elect to remove the
Company from the application of Chapter 7B and is not aware of any plans or
proposals to do so. Further, none of the provisions discussed above have been
included in the Company's Articles of Incorporation or Bylaws.
Articles of Incorporation and Bylaws. The Company's Articles of
Incorporation and Bylaws contain a number of other provisions relating to
corporate governance and to the rights of shareholders. These provisions
include: (i) a prohibition on shareholder action through written consents;
(ii) a requirement that special meetings of shareholders be called only by the
Board; (iii) advance notice requirements for shareholder proposals and
nominations; (iv) limitations on the ability of shareholders to amend, alter or
repeal the Bylaws; and (v) the authority of the Board to issue without
shareholder approval preferred stock with such terms as the Board may determine.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the shares of Common Stock of the
Company is American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor,
New York, New York 10005.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have 7,225,006 shares
of Common Stock outstanding. All 3,300,000 of the shares to be sold in the
Offering will be freely tradable without restriction or further registration
under the Securities Act unless held by 'affiliates' of the Company as that term
is defined under the Securities Act. The remaining 3,925,006 shares of Common
Stock outstanding will be deemed 'restricted' stock, as that term is defined
under Rule 144, and may only be sold pursuant to an effective registration
statement under the Securities Act, in compliance with the exemption provisions
of Rule 144 or pursuant to another exemption under the Securities Act. Such
restricted shares of Common Stock will become eligible for sale, under Rule 144,
subject to the volume and manner of sale limitations prescribed by Rule 144 and
to the contractual restrictions described below, at various times commencing 90
days following the date of this Prospectus.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person (or persons whose shares are
aggregated), including an affiliate of the Company, who has owned restricted
shares of Common Stock beneficially for at least one year, is entitled to sell,
in brokerage transactions within any three-month period, a number of shares
(including non-restricted shares of the same class) equal to the greater of one
percent of the total number of outstanding shares of the same class or the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least the three
months immediately preceding the sale and who has beneficially owned shares of
Common Stock for at least two years is entitled to sell such shares under Rule
144 without regard to any of the limitations described above.
The officers, directors and 1% or greater beneficial shareholders of the
Company and their affiliates have entered into lock-up agreements with BlueStone
wherein they have agreed not to sell any of their shares for a period of 360
days after the date of this Prospectus without the prior written consent of
BlueStone. See 'Underwriting.'
Prior to the Offering, there has not been any public market for the Common
Stock. No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price of
the Common Stock prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could adversely affect
the prevailing market price and the ability of the Company to raise equity
capital in the future.
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UNDERWRITING
The underwriters named below (collectively, the 'Underwriters') for which
BlueStone Capital Partners, L.P. ('BlueStone') and Rodman & Renshaw, Inc. are
acting as representatives (the 'Representatives'), have agreed severally, not
jointly, subject to the terms and conditions contained in the underwriting
agreement between the Company and the Underwriters (the 'Underwriting
Agreement'), to purchase from the Company, and the Company has agreed to sell to
the several Underwriters, the 3,300,000 shares of Common Stock offered hereby.
The number of shares of Common Stock that each Underwriter has agreed to
purchase is set forth opposite its name below:
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------ ---------
BlueStone Capital Partners, L.P. ...
Rodman & Renshaw, Inc...............
---------
Total.......................... 3,300,000
---------
---------
The Underwriters are committed on a 'firm commitment' basis to purchase and
pay for all of the shares of Common Stock offered hereby (other than shares
offered pursuant to the over-allotment option) if any shares are purchased. The
shares of Common Stock are being offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters and subject
to approval of certain legal matters by counsel and to certain other conditions.
Through the Representatives, the several Underwriters have advised the
Company that they propose to offer the shares of Common Stock to the public at
the public offering price set forth on the cover page of this Prospectus. The
Underwriters may allow to certain dealers who are members of the National
Association of Securities Dealers, Inc. ('NASD') concessions, not in excess of
$ per share, of which not in excess of $ per share may be reallowed
to other dealers who are members of the NASD. After the commencement of the
Offering, the public offering price, concessions and reallowance may be changed.
The Company has granted the Representatives an option, exercisable for 45
days following the date of this Prospectus, to purchase up to 495,000 additional
shares of Common Stock at the public offering price set forth on the cover page
of this Prospectus, less the underwriting discounts and commissions. The
Representatives may exercise this option in whole or, from time to time, in
part, solely for the purpose of covering over-allotments, if any, made in
connection with the sale of the shares of Common Stock offered hereby.
The Company has agreed to pay to the Representatives individually, and not
as representatives of the Underwriters, an aggregate nonaccountable expense
allowance of $250,000, $50,000 of which has been paid as of the date of this
Prospectus. The Company has also agreed to pay all expenses in connection with
qualifying the shares of Common Stock offered hereby for sale under the laws of
such states as the Representatives may designate, including expenses of counsel
retained for such purpose by the Representatives.
The Company has agreed to issue to the Representatives and their designees,
for an aggregate of $330, the Representatives' Warrants to purchase up to
330,000 shares of Common Stock, at an exercise price of $ per share (120%
of the initial public offering price per share). The Representatives' Warrants
may not be transferred for one year following the date of this Prospectus,
except to the officers and partners of the Representatives or the Underwriters
or members of the selling group, and are exercisable at any time, and from time
to time, during the four-year period commencing one year following the date of
this Prospectus (the 'Warrant Exercise Term'). During the Warrant Exercise Term,
the holders of the Representatives' Warrants are given, at nominal cost, the
opportunity to profit from a rise in the market price of the Common Stock. To
the extent that the Representatives' Warrants are exercised or exchanged,
dilution to the interests of the Company's shareholders will occur. Further, the
terms upon which the Company will be able to obtain additional equity capital
may be adversely affected since the holders of the Representatives' Warrants can
be expected to exercise them at a time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in the Representatives' Warrants. Any profit
realized by the
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Representatives on the sale of the Representatives' Warrants or the underlying
shares of Common Stock may be deemed additional underwriting compensation.
Subject to certain limitations and exclusions, the Company has agreed to
register, at the request of the holders of a majority of the Representatives'
Warrants and at the Company's expense, the Representatives' Warrants and the
shares of Common Stock underlying the Representatives' Warrants under the
Securities Act on one occasion during the Warrant Exercise Term and to include
such Representatives' Warrants and such underlying shares in any appropriate
registration statement that is filed by the Company during the seven years
following the date of this Prospectus.
All of the Company's officers, directors and shareholders owing 1% or more
of the outstanding Common Stock have agreed that, for the 360-day period
following the date of this Prospectus, they will not, without the prior written
consent of BlueStone, directly or indirectly sell, offer for sale, transfer,
pledge or otherwise dispose of any securities of the Company or exercise any
registration right relating to any securities of the Company.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales in excess of 3% of the number of shares of Common Stock
offered hereby to discretionary accounts.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities in connection with the Registration Statement of which this
Prospectus forms a part, including liabilities under the Securities Act.
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price of the shares of Common
Stock has been determined by negotiation between the Company and the
Representatives and is not necessarily related to the Company's asset value, net
worth or other established criteria of value. Among the factors considered in
determining the offering price are the Company's financial condition and
prospects, management, market prices of similar securities of comparable
publicly-traded companies, certain financial and operating information of
companies engaged in activities similar to those of the Company and the general
condition of the securities market.
In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created by the Underwriters in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common Stock; and syndicate
short positions created by the Underwriters involve the sale by the Underwriters
of a greater number of securities than they are required to purchase from the
Company in the Offering. The Underwriters also may impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker-dealers in
respect of the securities sold in the Offering for their account may be
reclaimed by the syndicate Underwriters if such shares of Common Stock are
repurchased by the syndicate Underwriters in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock, which may be higher than the price that might
otherwise prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the AMEX, the
over-the-counter market or otherwise.
The Underwriters may also place bids or purchase shares to reduce a short
position created in connection with the Offering. Short positions are created by
persons who sell shares which they do not own in anticipation of purchasing
shares at a lower price in the market to deliver in connection with the earlier
sale. Short positions tend to place downward pressure on the market price of a
stock.
The Representatives and/or the Underwriters may impose a penalty bid by
reclaiming the selling concession to be paid to an Underwriter or selected
dealer when the securities sold by the Underwriter or selected dealer are
purchased to reduce a short position created in connection with the Offering.
BlueStone was organized and registered as a broker-dealer with the
Commission and the National Association of Securities Dealers, Inc. in March
1996. Although, since its organization, BlueStone has engaged in the investment
banking business and its principals have had significant experience in the
underwriting of securities in their capacities with other broker-dealers, the
Offering will constitute one of the first public offerings for which BlueStone
has acted as lead manager.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Bruck & Perry, A Professional Corporation, Newport
Beach, California. Certain legal matters will be passed on for the Underwriters
by Tenzer Greenblatt LLP, New York, New York.
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EXPERTS
The consolidated financial statements of Noble International, Ltd., the
financial statements of DCT Component Systems, Inc. and the financial statements
of Utilase, Inc. as of December 31, 1996 and 1995, and for each of the three
years in the period ended December 31, 1996, and the financial statements of
Monroe Engineering Products, Inc. as of December 31, 1995 and for each of the
two years in the period ended December 31, 1995, included in this Prospectus
have been audited by Grant Thornton LLP, independent certified public
accountants, as stated in their reports appearing herein and elsewhere in the
Registration Statement and have been so included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-l under the Securities Act, with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the shares of Common Stock offered by this
Prospectus, reference is made to such Registration Statement and exhibits.
Copies of the Registration Statement together with exhibits thereto may be
obtained from the Commission at its principal office at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 upon payment of the charges prescribed by the
Commission or may be examined without charge at the public reference facilities
maintained at the principal office of the Commission. The Commission also
maintains a Web site that contains reports, proxy and information statements and
other materials that are filed through the Commission's Electronic Data
Gathering, Analysis, and Retrieval System ('EDGAR'). Information filed via EDGAR
may be obtained at this Web site at http:\\www.sec.gov. Following consummation
of the Offering, the Company's Common Stock will be traded on the AMEX.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
NOBLE INTERNATIONAL, LTD. CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants....................................................... F-2
Consolidated Balance Sheets--December 31, 1996 and 1995 and June 30, 1997 (unaudited).................... F-3
Consolidated Statements of Operations--For the years ended December 31, 1996, 1995 and 1994 and the six
months ended June 30, 1996 and 1997 (unaudited)....................................................... F-4
Consolidated Statement of Shareholders' Equity--For the years ended December 31, 1996, 1995 and 1994 and
the six months ended June 30, 1996 and 1997 (unaudited)............................................... F-5
Consolidated Statements of Cash Flows--For the years ended December 31, 1996, 1995 and 1994 and the six
months ended June 30, 1996 and 1997 (unaudited)....................................................... F-6
Notes to Consolidated Financial Statements............................................................... F-8
MONROE ENGINEERING PRODUCTS, INC.
Report of Independent Certified Public Accountants....................................................... F-21
Balance Sheet--December 31, 1995......................................................................... F-22
Statements of Earnings and Retained Earnings--For the years ended December 31, 1995
and 1994.............................................................................................. F-23
Statements of Cash Flows--For the years ended December 31, 1995 and 1994................................. F-24
Notes to Financial Statements............................................................................ F-25
DCT COMPONENT SYSTEMS, INC.
Report of Independent Certified Public Accountants....................................................... F-27
Balance Sheets--December 31, 1996 and 1995 and June 30, 1997 (unaudited)................................. F-28
Statements of Operations--For the years ended December 31, 1996, 1995 and 1994 and the six months ended
June 30, 1996 and 1997 (unaudited).................................................................... F-29
Statement of Shareholders' Deficit--For the years ended December 31, 1996, 1995 and 1994 and the six
months ended June 30, 1996 and 1997 (unaudited)....................................................... F-30
Statements of Cash Flows--For the years ended December 31, 1996, 1995 and 1994 and the six months ended
June 30, 1996 and 1997 (unaudited).................................................................... F-31
Notes to Financial Statements............................................................................ F-33
UTILASE, INC.
Report of Independent Certified Public Accountants....................................................... F-41
Balance Sheets--December 31, 1996 and 1995 and June 30, 1997 (unaudited)................................. F-42
Statements of Operations--For the years ended December 31, 1996, 1995 and 1994 and the six months ended
June 30, 1996 and 1997 (unaudited).................................................................... F-43
Statement of Shareholders' Equity--For the years ended December 31, 1996, 1995 and 1994 and the six
months ended June 30, 1996 and 1997 (unaudited)....................................................... F-44
Statements of Cash Flows--For the years ended December 31, 1996, 1995 and 1994 and the six months ended
June 30, 1996 and 1997 (unaudited).................................................................... F-45
Notes to Financial Statements............................................................................ F-46
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Noble International, Ltd.
We have audited the accompanying consolidated balance sheets of Noble
International, Ltd. (a Michigan corporation) and Subsidiaries as of December 31,
1995 and 1996 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits 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 our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the consolidated financial position of Noble
International, Ltd. and Subsidiaries as of December 31, 1995 and 1996, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
Grant Thornton LLP
Detroit, Michigan
May 9, 1997 (except for Note M
as to which the date is September 15, 1997)
F-2
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1995 1996 1997
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents....................................... $ 1,297 $ 471,412 $ 206,241
Accounts receivable, trade, net of allowance for doubtful
accounts of $21,481, $10,148 and $0 at December 31, 1995 and
1996 and June 30, 1997, respectively......................... 740,700 1,566,551 2,854,920
Due from affiliate.............................................. -- -- 361,906
Due from shareholder............................................ -- 60,000 --
Inventories..................................................... 578,743 2,285,361 2,652,784
Prepaid expenses and other assets............................... 5,332 177,012 368,554
---------- ----------- -----------
Total Current Assets....................................... 1,326,072 4,560,336 6,444,405
Property, Plant and Equipment, net................................ 445,089 1,848,759 3,011,971
Other Assets
Goodwill, net of accumulated amortization of $272,007 at
December 31, 1996 and $407,137 at June 30, 1997.............. -- 5,026,254 4,891,124
Sundry.......................................................... 13,504 97,164 503,532
---------- ----------- -----------
13,504 5,123,418 5,394,656
---------- ----------- -----------
$1,784,665 $11,532,513 $14,851,032
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND EQUITY
Current Liabilities
Note payable to bank............................................ $ 45,000 $ 1,402,708 $ 3,003,395
Current maturities of long-term debt............................ -- 1,059,021 1,052,550
Current maturities of notes payable--related parties............ 111,500 882,613 1,336,333
Accounts payable................................................ 473,567 1,359,127 1,679,083
Accrued liabilities............................................. 188,364 666,673 893,578
Income taxes payable............................................ -- 7,200 198,849
Dividends payable............................................... 158,759 -- --
---------- ----------- -----------
Total Current Liabilities.................................. 977,190 5,377,342 8,163,788
Long-Term Debt, excluding current maturities...................... -- 3,830,477 3,463,598
Notes payable--related parties, excluding current maturities...... 61,042 1,500,000 1,890,000
Other Long-Term Liabilities....................................... 33,655 -- --
Investment in Unconsolidated Subsidiary........................... -- 95,239 159,939
Commitments and Contingencies (Note I)............................ -- -- --
Minority Interest................................................. 88,410 -- --
Shareholders' Equity
Common stock, no par value, authorized 20,000,000 shares, issued
and outstanding 2,673,704 and 3,726,482 shares in 1995 and
1996, respectively and 3,860,168 shares at June 30, 1997..... 341,909 1,036,634 1,086,134
Retained earnings (deficit)..................................... 282,459 (307,179) 87,573
---------- ----------- -----------
624,368 729,455 1,173,707
---------- ----------- -----------
$1,784,665 $11,532,513 $14,851,032
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
--------------------------------------- ------------------------
1994 1995 1996 1996 1997
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................. $3,305,787 $4,442,225 $16,186,811 $8,155,378 $9,733,787
Cost of goods sold........................ 2,261,460 2,910,696 10,587,175 5,153,845 6,445,298
---------- ---------- ----------- ---------- ----------
Gross profit....................... 1,044,327 1,531,529 5,599,636 3,001,533 3,288,489
Selling, general and administrative
expenses................................ 915,420 1,030,263 5,087,521 1,956,291 2,232,225
---------- ---------- ----------- ---------- ----------
Operating profit................... 128,907 501,266 512,115 1,045,242 1,056,264
Other income (expense)
Equity in loss of unconsolidated
subsidiary........................... -- -- (95,239) -- (64,700)
Interest income......................... -- -- 4,632 -- --
Interest expense........................ (23,579) (23,836) (555,058) (214,286) (438,834)
Sundry, net............................. 652 29,036 64,387 -- 54,233
---------- ---------- ----------- ---------- ----------
(22,927) 5,200 (581,278) (214,286) (449,301)
---------- ---------- ----------- ---------- ----------
Earnings (loss) before income taxes
and minority interest........... 105,980 506,466 (69,163) 830,956 606,963
Minority Interest......................... 38,585 67,195 -- -- --
---------- ---------- ----------- ---------- ----------
Earnings (loss) before income taxes....... 67,395 439,271 (69,163) 830,956 606,963
Income tax expense...................... 7,600 30,562 7,200 283,000 212,211
---------- ---------- ----------- ---------- ----------
Net earnings (loss)................ $ 59,795 $ 408,709 $ (76,363) $ 547,956 $ 394,752
---------- ---------- ----------- ---------- ----------
---------- ---------- ----------- ---------- ----------
Earnings (loss) per share................. $ (.02) $ .17 $ .10
----------- ---------- ----------
----------- ---------- ----------
Pro forma earnings data
Earnings before income taxes, as
reported............................. $ 67,395 $ 439,271
Pro forma income tax expense............ 17,200 169,000
---------- ----------
Pro forma net earnings.................. $ 50,195 $ 270,271
---------- ----------
---------- ----------
Pro forma net earnings per share........ $ .03 $ .10
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
EARNINGS
COMMON (ACCUMULATED
STOCK DEFICIT) TOTAL
---------- ------------ ----------
<S> <C> <C> <C>
Balance at January 1, 1994 (334,213 shares)......................... $ 1,000 $ -- $ 1,000
Issuance of 2,339,491 shares of common stock........................ 340,909 -- 340,909
Dividend payable to Prestolock shareholders......................... -- (46,978) (46,978)
Net earnings........................................................ -- 59,795 59,795
---------- ------------ ----------
Balance at December 31, 1994........................................ 341,909 12,817 354,726
Dividend payable to Prestolock shareholders......................... -- (139,067) (139,067)
Net earnings........................................................ -- 408,709 408,709
---------- ------------ ----------
Balance at December 31, 1995........................................ 341,909 282,459 624,368
Transfer of capital attributable to termination of Prestolock
S-Corporation election............................................ 513,275 (513,275) --
Net loss............................................................ -- (76,363) (76,363)
Issuance of 1,052,778 shares of common stock........................ 181,450 -- 181,450
---------- ------------ ----------
Balance at December 31, 1996........................................ 1,036,634 (307,179) 729,455
Issuance of 133,686 shares of common stock (unaudited).............. 49,500 -- 49,500
Net earnings (unaudited)............................................ -- 394,752 394,752
---------- ------------ ----------
Balance at June 30, 1997 (unaudited)................................ $1,086,134 $ 87,573 $1,173,707
---------- ------------ ----------
---------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
------------------------------------ ------------------------
1994 1995 1996 1996 1997
-------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings (loss)................................... $ 59,795 $ 408,709 $ (76,363) $ 547,956 $ 394,752
Minority interest..................................... 38,585 67,195 -- -- --
Adjustments to reconcile net earnings to net cash
provided by (used in) operations
Loss on disposal of asset......................... -- -- 1,571 -- --
Depreciation of property, plant and equipment..... 29,696 103,040 247,339 101,674 205,895
Provision for doubtful accounts................... 62,058 8,205 -- -- --
Amortization of goodwill.......................... -- -- 265,885 138,952 135,130
Equity in loss of unconsolidated subsidiary....... -- -- 95,239 -- 64,700
Stock issued in exchange for services............. -- -- 32,000 -- --
Changes in operating assets and liabilities
Increase in accounts receivable................. (522,093) (208,401) (63,963) (266,784) (1,590,275)
Increase in inventories......................... (257,669) (220,874) (14,760) (116,306) (367,423)
(Increase) decrease in prepaid expenses......... (31,711) 26,379 (173,020) (211,266) (191,542)
(Increase) decrease in other assets............. (19,045) 5,544 -- (34,989) (406,368)
Increase in accounts payable.................... 419,886 185,872 488,947 571,133 319,956
Increase in income taxes payable................ -- -- 7,200 -- 191,649
Increase in accrued liabilities................. 6,948 16,170 102,427 256,157 226,905
-------- ---------- ---------- ---------- ----------
Net cash (used in) provided by operating
activities.................................. (213,550) 391,839 912,502 986,527 (1,016,621)
Cash Flows From Investing Activities
Purchase of property, plant and equipment............. (179,514) (202,451) (362,801) (35,816) (506,314)
Sale of assets of Padlock Division of Prestolock,
Inc................................................. 500,000 -- -- -- --
Purchase of assets of Prestolock, Inc................. (750,000) -- -- -- --
Acquisitions of businesses, net of cash acquired...... -- -- 632,947 632,947 --
-------- ---------- ---------- ---------- ----------
Net cash (used in) provided by investing
activities.................................. (429,514) (202,451) 270,146 597,131 (506,314)
Cash Flows From Financing Activities
Proceeds from notes payable--related parties.......... 151,500 (60,348) 1,310,000 1,300,000 35,427
Repayments of notes payable--related parties.......... -- -- (26,499) (1,152) (5,000)
Capital lease payments................................ (10,222) (49,600) -- -- --
Proceeds from issuance of common stock................ 340,909 -- -- -- --
Prestolock shares acquired by minority shareholders... 109,091 10,000 -- -- --
Distributions to shareholders of acquired entities.... -- (62,009) (1,282,859) (1,282,859) --
Proceeds from long-term debt.......................... -- -- 4,213,151 1,940,000 --
Payments on long-term debt............................ -- (20,348) (6,164,034) (5,303,093) (373,350)
Net proceeds from note payable to bank................ 54,081 (9,081) 1,237,708 2,145,000 1,600,687
-------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities.................................. 645,359 (191,386) (712,533) (1,202,104) 1,257,764
-------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash............... 2,295 (1,998) 470,115 381,554 (265,171)
Cash at beginning of period............................. 1,000 3,295 1,297 1,297 471,412
-------- ---------- ---------- ---------- ----------
Cash at end of period................................... $ 3,295 $ 1,297 $ 471,412 $ 382,851 $ 206,241
-------- ---------- ---------- ---------- ----------
-------- ---------- ---------- ---------- ----------
Supplemental cash flow disclosure Cash paid for:
Interest.............................................. $ 22,000 $ 21,000 $ 392,417 $ 153,286 $ 428,682
-------- ---------- ---------- ---------- ----------
-------- ---------- ---------- ---------- ----------
Taxes................................................. $ -- $ 8,000 $ 37,830 $ -- $ 20,000
-------- ---------- ---------- ---------- ----------
-------- ---------- ---------- ---------- ----------
Fair value of assets acquired, including goodwill....... $6,207,434 $6,207,434
Liabilities assumed..................................... (907,436) (907,436)
Debt issued............................................. (6,221,719) (6,221,719)
Cash paid............................................... 288,774 288,774
---------- ----------
Net cash acquired....................................... $ 632,947 $ 632,947
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
Supplemental Disclosure of Non-cash Financing Activity:
During the year ended December 31, 1995 the Company entered into
capital lease transactions for equipment aggregating $109,491.
During 1996, the Company borrowed $500,000 under a land contract to
purchase land and a building owned by a former shareholder of Monroe.
During 1996, the Company financed the $6,350,000 acquisition price of
a subsidiary, of which, through December 31, 1996, $5,850,000 had been
paid.
Notes payable--related party of $61,040 were retired in 1996 by the
issuance of 50,132 shares of the Company's common stock.
During the period ended June 30, 1997, the Company acquired Skandy
Corp. by issuance of 133,686 shares of common stock valued at $49,500.
During the period ended June 30, 1997, the Company financed the
purchase of $813,293 of machinery and equipment by the issuance of a note
payable to Utilase, Inc.
The accompanying notes are an integral part of these financial statements
F-7
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE A-- BASIS OF PRESENTATION, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements as of and for the year
ended December 31, 1996, include Noble International, Ltd. and its wholly-owned
subsidiaries, Prestolock International, Ltd. ('Prestolock'); Monroe Engineering
Products, Inc. ('Monroe') and Cass River Coating, Inc. (dba Vassar Industries,
'Vassar'). ('Noble' or collectively the 'Company'.) At June 30, 1997, and for
the six months then ended, the consolidated financial statements also include
Skandy Corp. and Utilase Production Process, Inc.
Noble's investment in DCT Component Systems, Inc. (DCT) is accounted for
under the equity method. (See Note I)
The consolidated financial statements as of December 31, 1995 and for year
then ended and for the period from February 22, 1994 through December 31, 1994
include Noble and Prestolock. Prior to January 1, 1996, Noble and Prestolock had
a common controlling shareholder. Effective January 1, 1996, Noble acquired
Prestolock by issuing 2,673,704 shares of Noble common stock in exchange for all
of the issued and outstanding stock of Prestolock. This transaction has been
accounted for in a manner similar to a pooling of interests due to the common
control and include Prestolock's results of operations from February 22, 1994,
the date the controlling shareholder of Noble acquired Prestolock. The assets
acquired by the principal shareholder on February 22, 1994 consisted of:
<TABLE>
<S> <C>
Padlock division assets................................................ $500,000
Accounts receivable.................................................... 80,469
Inventory.............................................................. 100,200
Property and equipment................................................. 69,331
--------
$750,000
--------
--------
</TABLE>
On July 21, 1994, the Company sold the Padlock division for $500,000.
Income earned by this division through July 21, 1994 was not significant.
The effect of the Prestolock consolidation on net earnings and related per
share amounts for the years ended December 31, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Increase in net earnings................................. $120,580 $348,924
Increase in earnings per share........................... $.08 $.12
</TABLE>
The assets of Prestolock were recorded at their historical cost basis and
no goodwill was recorded.
All significant intercompany balances and transactions have been eliminated
in consolidation.
Nature of Operations
Noble is a holding company which through its subsidiaries manufactures a
variety of components and provides design, engineering, painting, assembly and
other services for the automotive industry. One of its subsidiaries is a
distributor of tooling components. (See Note L) The principal market for its
products is the United States.
F-8
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE A--BASIS OF PRESENTATION, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES--(CONTINUED)
Significant Accounting Policies
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
Interim Financial Data
The consolidated financial statements and related notes thereto as of June
30, 1997 and for the six months ended June 30, 1996 and 1997 are unaudited. The
information reflects all adjustments, consisting only of normal recurring
entries, that, in the opinion of management, are necessary to present fairly the
financial position, results of operations and cash flows of the Company for the
periods indicated. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the full fiscal year.
Cash and Cash Equivalents
For purposes of the statement of cash flows, all investments with a
maturity of less than three months are considered to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for
using the straight line and various accelerated methods over the estimated
useful lives of the assets which range from 5 to 39 years for buildings and
improvements and 3 to 10 years for machinery and equipment. Expenditures for
maintenance and repairs are charged to expense as incurred.
Goodwill
Goodwill is the excess of cost over the fair value of net assets acquired
and is amortized over a 20 year period on the straight line method. On an
ongoing basis, management reviews the valuation and amortization of goodwill. As
part of the review, the Company estimates the value of and the estimated
undiscounted future net income expected to be generated by the related
subsidiary to determine that no impairment has occurred.
Through December 31, 1995, Prestolock was taxed under Subchapter S of the
Internal Revenue Code. As a result, federal income taxes were payable personally
by the shareholders of Prestolock. Accordingly, the financial statements for
1994 and 1995 do not provide for federal income taxes attributable to
Prestolock's earnings.
The Company records the provision for federal and state income taxes
pursuant to Statement of Financial Accounting Standards No. 109, 'Accounting for
Income Taxes' ('Statement 109').
Under the asset and liability method mandated by Statement 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and the effect
of operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period that includes
the enactment date.
F-9
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE A--BASIS OF PRESENTATION, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES--(CONTINUED)
Fair Value of Financial Instruments
The Company's financial instruments include long-term debt. The carrying
value of the debt approximates its estimated fair value based upon quoted market
prices.
Minority Interest
Minority interest represents the minority shareholders' interest in
Prestolock. Minority interest amounted to 24% and 12% at December 31, 1994 and
1995, respectively.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Earnings Per Share
Earnings per share are based on the weighted average number of common
shares outstanding during each year. The 133,686 shares issued in January, 1997
have been deemed outstanding for all periods presented for purposes of computing
earnings per share. The weighted average number of shares outstanding during
1994, 1995, and 1996 was 1,535,170, 2,807,390 and 3,820,390, respectively and
3,277,293 and 3,860,168 at June 30, 1996 and June 30, 1997, respectively.
NOTE B--INVENTORIES
The major components of inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
-------- ---------- JUNE 30,
1997
----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials and purchased parts.......................... $289,588 $ 434,776 $ 710,935
Work in process............................................ -- 4,987 1,179
Finished goods............................................. 85,620 1,565,427 1,705,093
Unbilled customer tooling.................................. 203,535 280,171 235,577
-------- ---------- ----------
$578,743 $2,285,361 $2,652,784
-------- ---------- ----------
-------- ---------- ----------
</TABLE>
F-10
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE C--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
-------- ---------- JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Buildings and improvements................................. $ -- $1,199,077 $ 1,237,615
Machinery and equipment.................................... 521,042 881,813 2,138,399
Furniture and fixtures..................................... 56,783 93,445 167,428
-------- ---------- -----------
577,825 2,174,335 3,543,442
Less accumulated depreciation and amortization............. 132,736 379,376 585,271
-------- ---------- -----------
445,089 1,794,959 2,958,171
Land..................................................... -- 53,800 53,800
-------- ---------- -----------
$445,089 $1,848,759 $ 3,011,971
-------- ---------- -----------
-------- ---------- -----------
</TABLE>
NOTE D--LINE OF CREDIT AND LONG-TERM DEBT
The Company has a secured line of credit facility with a bank, which allows
it to borrow up to $3,000,000 subject to qualifying accounts receivable and
inventory. At December 31, 1996 the outstanding balance was $1,402,708
($3,003,395 at June 30, 1997) and availability was $2,163,000 ($45,000 at June
30, 1997). Interest is payable monthly at one percent over the bank's prime
lending rate. (Effective rate of 9.25% at December 31, 1996). The facility
expires on April 30, 1997. Subsequent amendments to the agreement increased the
borrowing base to $3,500,000 and extended the maturity to November 30, 1997.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Term note, payable in monthly installments of $78,125 commencing on
January 1, 1997, plus interest at 1.5% above the bank's prime lending
rate (effective rate of 9.75% at December 31, 1996). The note is
collateralized by accounts receivable, inventory, equipment, and the
issued and outstanding common stock of the company and the Company's
subsidiaries. The note is due December 2000. ......................... $3,750,000 $ 3,437,500
Term note, payable in monthly installments of $5,600, including interest
at one percent above the bank's prime lending rate (effective rate of
9.25% at December 31, 1996). The note is secured by real estate and is
due September 2001. .................................................. 463,151 451,187
Unsecured term note, payable in monthly installments of $2,500 plus
interest at a rate of 5%. The note is due September 2001. ............ 141,750 126,750
Land contract, payable in monthly installments of $7,280, including
interest at a rate of 8%. The note is secured by a building and is due
September 2004. ...................................................... 503,331 479,119
Other................................................................... 31,266 21,592
------------ -----------
4,889,498 4,516,148
Less current maturities................................................. 1,059,021 1,052,550
------------ -----------
$3,830,477 $ 3,463,598
------------ -----------
------------ -----------
</TABLE>
F-11
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE D--LINE OF CREDIT AND LONG-TERM DEBT--(CONTINUED)
The aggregate maturities of long-term debt by year as of December 31, 1996
are as follows:
<TABLE>
<S> <C>
1997........................................................ $1,059,021
1998........................................................ 1,057,689
1999........................................................ 1,059,604
2000........................................................ 1,063,439
2001........................................................ 434,745
Thereafter.................................................. 215,000
----------
$4,889,498
----------
----------
</TABLE>
The Company's loan agreement underlying the $3,750,000 term loan contains
restrictive covenants including the maintenance of certain financial ratios. The
loan agreement also restricts the payment of dividends, repurchase of common
stock, and acquisition of fixed assets. As of December 31, 1996, the Company was
in violation of certain of the covenants. On April 25, 1997, the Company's
lender waived these defaults and amended the covenant provisions such that the
Company was in compliance with the terms of the amended covenants.
NOTE E--LEASES
The Company leases buildings and equipment under operating leases with
unexpired terms ranging from a month to month basis to three years. Rent expense
for all operating leases was approximately $55,800, $69,900 and $193,000 for the
years ended December 31, 1994, 1995 and 1996, respectively and $85,000 and
$154,000 for the six months ended June 30, 1996 and 1997.
The Company has capital lease agreements for computer equipment and
machinery. At December 31, 1995 and 1996, property and equipment includes
$125,529 and $109,491, respectively and accumulated depreciation includes
$23,564 and $50,004, respectively, recorded under capital leases. The related
obligation of approximately $30,000 is included in current liabilities at
December 31, 1996.
Future aggregate minimum rentals under the above lease agreements are not
significant.
NOTE F--INCOME TAXES
Income taxes have been charged (credited) to operations as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------- --------------------
1994 1995 1996 1996 1997
------ ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal................................................. $ -- $ -- $ 7,200 $283,000 $204,000
State and local......................................... 7,600 30,562 -- -- 8,211
------ ------- ------- -------- --------
7,600 30,562 7,200 283,000 212,211
Deferred:
Federal................................................. -- -- (15,000) -- --
Increase in valuation allowance......................... -- -- 15,000 -- --
------ ------- ------- -------- --------
-- -- -- -- --
------ ------- ------- -------- --------
Total income tax expense............................. $7,600 $30,562 $ 7,200 $283,000 $212,211
------ ------- ------- -------- --------
------ ------- ------- -------- --------
</TABLE>
F-12
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE F--INCOME TAXES--(CONTINUED)
A reconciliation of the actual federal income tax (benefit) expense to the
expected amounts computed by applying the statutory tax rate percent to earnings
or losses before income taxes is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Expected federal income tax (benefit)................. $11,700 $149,350 $(23,500) $283,000 $206,000
Prestolock earnings not subject to tax................ (41,000) (118,630) -- -- --
Nondeductible items................................... -- -- 10,200 -- 3,000
Net operating loss not utilized....................... 20,900 -- -- -- --
Utilization of net operating loss..................... -- (20,900) -- -- --
State taxes........................................... (2,584) (10,391) -- -- (3,000)
Increase in valuation allowance....................... -- -- 15,000 -- --
Surtax exemption and other, net....................... 10,984 571 5,500 -- (2,000)
------- -------- -------- -------- --------
Actual income tax expense............................. $ -- $ -- $ 7,200 $283,000 $204,000
------- -------- -------- -------- --------
------- -------- -------- -------- --------
</TABLE>
Deferred income tax assets and liabilities at December 31, 1996 and 1995
and June 30, 1997 are not significant.
NOTE G--RELATED PARTY TRANSACTIONS
Notes payable to related parties consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1995 1996 1997
-------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land contract, payable to the former principal shareholder and an officer
of Monroe, interest only payments due monthly at an annual interest rate
of 12%. The contract is secured by real estate acquired in connection
with the purchase of Monroe and is due April 1998. ..................... $ -- $ 500,000 $ 500,000
Term note, payable to the former principal shareholder of, and an officer
of Monroe, with imputed interest at 8.5%. The note is secured by a
personal guaranty of an officer of Noble and is due on the earlier of
the closing of a public offering of Noble's common stock or December 31,
1997. .................................................................. -- 487,613 500,000
Unsecured demand notes, payable to a related party, interest only payments
due monthly at an annual interest rate of 10%........................... 90,000 390,000 --
Promissory note to related party, interest only payments due monthly at
10%. The note matures on December 31, 1998.............................. -- -- 390,000
Unsecured term note, payable to Prestolock minority shareholder in annual
installments of $20,348 plus interest at an annual interest rate of
7%...................................................................... 81,391 -- --
Unsecured term note payable to the principal shareholder of Noble due in
April 2000 with interest at 7%. Amounts outstanding are subordinated to
the bank financing discussed in Note D. ................................ -- 1,000,000 1,000,000
</TABLE>
F-13
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE G--RELATED PARTY TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1995 1996 1997
-------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to Utilase, Inc. in the amount of $850,000 due on the earlier
of the closing of an initial public offering of the Company's Common
Stock or December 31, 1997. The note is secured by machinery and
equipment and interest has been imputed at 8.5%. ....................... $ -- $ -- $ 836,333
Other..................................................................... $ 1,151 $ 5,000 --
-------- ---------- -----------
172,542 2,382,613 3,226,333
Less current maturities................................................. 111,500 882,613 1,336,333
-------- ---------- -----------
$ 61,042 $1,500,000 $ 1,890,000
-------- ---------- -----------
-------- ---------- -----------
</TABLE>
The aggregate maturities of notes payable to related parties as of December
31, 1996 are as follows:
<TABLE>
<S> <C>
1997.................................................................. $ 882,613
1998.................................................................. 500,000
1999.................................................................. --
2000.................................................................. 1,000,000
----------
$2,382,613
----------
----------
</TABLE>
NOTE H--SIGNIFICANT CUSTOMERS
For the year ended December 31, 1995, three customers accounted for 68%
(42%, 14% and 12%) of net sales.
The Company had one customer which accounted for 37% of consolidated net
sales in 1996.
One customer accounted for 39% of consolidated net sales during the six
months ended June 30, 1996 and 1997.
NOTE I--ACQUISITIONS
1. DCT COMPONENT SYSTEMS, INC.
On July 1, 1996, the Company acquired 1,343 shares of common stock of DCT,
representing 37.5% of DCT's outstanding stock in exchange for $1. Concurrent
with the transaction, the following agreements were executed.
Stock Redemption Agreement--DCT entered into a stock redemption agreement
with its president whereby DCT at anytime has the option and upon death or
termination of employment is required to redeem the 269 shares owned by him.
Effective April 7, 1997 Noble acquired the 269 shares from the president of DCT
upon his severance from the Company thereby increasing Noble's ownership to 45%.
Purchase Option--The Company has an option, through July, 2001, to acquire
from certain shareholders of DCT, an additional 14.1% of DCT's outstanding stock
in exchange for $1.00.
Pursuant to the terms of the option agreement, the option cannot be
exercised until the later of the occurrence of the following events:
F-14
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE I--ACQUISITIONS--(CONTINUED)
1) January 1, of the year following the write off of certain
intercompany debt between DCT and an affiliated company controlled by the
selling shareholders of DCT (see debt forgiveness discussion below).
2) The payment by DCT of at least $100,000 principal amount pursuant
to a certain promissory note to a company controlled by the selling
shareholder of DCT.
Put/Call Agreement--From July 1, 1998 through June 30, 2000, the selling
shareholders of DCT have the right to sell all, but not less than all, of their
shares to the Company. The price required to be paid by the Company will be
based on earnings before interest, taxes, depreciation and amortization, with
further modifications as defined, for the 12 months preceding the date of the
put, multiplied by a factor of three.
From July 1, 2000 through June 30, 2002, the Company has a call option on
all, but not less than all, of the shares owned by the selling shareholders. The
price is based on the same formula as the put price except the multiple is four.
If exercised, twenty five percent of the purchase price is payable in cash with
the balance payable in equal quarterly installments over a five year period with
interest at 10%.
Simultaneous with the exercise of the put or call option, Noble will be
required to purchase the entity controlled by the selling shareholders of DCT
that owns the facilities in which DCT operates.
Debt Forgiveness--The selling shareholders and DCT agreed to write-off and
forgive all existing intercompany and shareholder debt except for a promissory
note for $960,000. The intercompany debt was with a company controlled by one of
the selling shareholders. The amount and nature of debt forgiven and written off
during the year ended December 31, 1996 was as follows:
<TABLE>
<S> <C>
Intercompany......................................................... $15,325,865
Shareholders and former shareholders................................. 1,515,579
-----------
$16,841,444
-----------
-----------
</TABLE>
Executive Bonus Pool--DCT adopted an Executive Bonus Pool (Pool), awards
from which are at the sole discretion of DCT's Board of Directors. The Pool will
be twenty percent of earnings before taxes, as defined. In consideration for the
forgiveness of the intercompany debt discussed above, one-half of the bonus pool
for the period January 1, 1997 through December 31, 1999 will be payable to an
affiliate of the company controlled by the selling shareholders. (See Note M)
Management Agreement--The Company and DCT entered into a management
agreement whereby DCT will pay the Company $100,000 per year.
Voting Agreement--The Company received irrevocable proxies from the other
shareholders of DCT providing the Company the authority to direct the vote of
the shareholder on all matters except with respect to the merger, liquidation or
sale of substantially all of DCT, or other extraordinary matters.
Indemnification Agreement--The Company agreed to indemnify the selling
shareholders and certain entities controlled by the selling shareholder against
59.1% of any liabilities arising from claims which maybe brought against the
indemnitors arising from their guarantees of certain indebtedness of DCT.
F-15
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE I--ACQUISITIONS--(CONTINUED)
Condensed financial information of DCT as of December 31, 1996 and June 30,
1997 and for the year and six month period then ended, follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Balance Sheet Data:
Current assets............................................ $ 7,188,030 $ 7,600,177
Current liabilities....................................... $ 8,892,215 $11,520,668
(Deficit)................................................. $ (3,686,546) $(3,879,896)
Operating Data:
Net sales................................................. $ 22,988,115 $13,239,791
Gross profit.............................................. $ 2,542,579 $ 1,399,063
Net loss.................................................. $ (387,524) $ (145,542)
</TABLE>
The acquisition of the DCT shares has been accounted for under the equity
method of accounting, and accordingly the Company's proportionate share of DCT's
results of operations for the period from July 1, 1996 through December 31, 1996
is reflected in the accompanying financial statements as equity in losses of
unconsolidated affiliate.
2. MONROE ENGINEERING PRODUCTS, INC.
Effective January 1, 1996, Noble acquired all of the outstanding shares of
Monroe Engineering Products, Inc. (Monroe) in exchange for $6,350,000 payable in
installments over 16 months. At December 31, 1996, $500,000 remains to be paid
which is due on April 30, 1997 and is guaranteed by the principal shareholder of
the Company. The Company also acquired the real estate utilized by Monroe for
$500,000 pursuant to the terms of a land contract which requires monthly
interest payments of $4,931 for two years ending May 1, 1998 at which point the
entire principal amount is due.
Simultaneously with the acquisition, the Company entered into an Employment
and Deferred Compensation Agreement with one of the selling shareholders
providing for the employment of such person by the Company for 28 months and at
an annual salary of $200,000 and payments of $2,000 per month for a three year
period commencing May 1, 1998.
The acquisition of Monroe has been accounted for under the purchase method,
and accordingly the results of operations of Monroe from January 1, 1996 are
included in the accompanying financial statements.
3. VASSAR INDUSTRIES
Effective January 1, 1996, the Company acquired all of the common stock of
Vassar in exchange for $200,000.
In addition, the Company entered into consulting agreements with the
selling shareholders of Vassar whereby the Company will pay to such selling
shareholders $1,800,000 as follows: 24 monthly payments of $25,000 followed by
sixty monthly installments of $20,000. The Company's obligations under the
agreement have been collateralized by the equipment and fixtures at Vassar.
The shareholders of Vassar retain an option to repurchase 25% of the stock
of Vassar for $1 which expires when the Company's obligations under the
consulting agreements are discharged.
F-16
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE I--ACQUISITIONS--(CONTINUED)
In January, 1997 the Company and two of the selling shareholders
representing twenty percent of the commitment referred to above, amended their
consulting agreements. Pursuant to the terms of the amendment, these consultants
will receive an aggregate of $120,000 within thirty days after the closing of a
public offering of the Company's common stock. This payment will satisfy the
Company's obligations under the amendment. In March, 1997 two of the selling
shareholders sued the Company for payments allegedly owed pursuant to their
consulting agreements. The Company believes it was entitled to cease payments
under these agreements due to breaches of covenants not to compete. During the
year ended December 31, 1996, $120,000 was paid to these consultants. Since the
Company ceased payments, $75,000 has been accrued and is included in the
accompanying interim financial statements as of and for the six months ended
June 30, 1997.
The acquisition of Vassar has been accounted for as a purchase, and,
accordingly, the results of operations of Vassar from January 1, 1996 are
included in the accompanying financial statements.
4. PRO-FORMA INFORMATION
The following unaudited pro forma consolidated results of operations for
the year ended December 31, 1995 is presented as if the Monroe and Vassar
acquisitions had been made at January 1, 1995. The unaudited pro forma
information is not necessarily indicative of either the results of operations
that would have occurred had the purchase been made at January 1, 1995 or the
future results of the combined operations.
<TABLE>
<S> <C>
Net sales................................................ $15,992,703
Net earnings............................................. $ 1,078,744
Earnings per share....................................... $ .40
</TABLE>
NOTE J--NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standards No. 128, Earnings Per Share ('Statement 128'),
which: (i) replaces the presentation of primary earnings per share (EPS) with a
presentation of basic EPS; (ii) requires dual presentation of basic and diluted
EPS on the face of the consolidated statements of income regardless of whether
basic and diluted EPS are the same; and (iii) requires a reconciliation of the
numerator and denominator used in computing basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed in a manner similar to
fully diluted EPS pursuant to APB Opinion 15.
Statement 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. Statement 128 requires restatement of all prior-period EPS
data presented. The adoption of this standard is not expected to have a material
effect on the disclosure of earnings per share in the financial statements.
The Company intends to adopt a stock option plan (the 1997 Plan) prior to
the completion of a planned public offering. The plan will provide for the grant
to employees, officers, directors, consultants and independent contractors
non-qualified stock options as well as for the grant to employees of qualified
stock options. The plan will have a ten year term. Under the 1997 plan, 700,000
shares of the Company's common stock will be reserved for issuance.
The Plan will be administered by the Compensation Committee of the Board of
Directors, which will have the authority, subject to certain limitations, to
grant options and to establish the terms and conditions for vesting
F-17
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE J--NEW ACCOUNTING PRONOUNCEMENTS--(CONTINUED)
and exercise thereof. The exercise price of the incentive stock options granted
will be no less than the fair market value of the common stock on the date of
grant. The exercise price of its non-qualified options is required to be no less
than the fair market value of the common stock on the date of grant. The terms
of the options will not exceed ten years from the date of grant.
The Company intends to account for the stock option plan under APB Opinion
No. 25, 'Accounting for Stock Issued To Employees.' The disclosures required by
SFAS No. 123, 'Accounting for Stock Based Compensation' will be provided.
NOTE K--PREFERRED STOCK
Effective December 31, 1996, in connection with the retirement by DCT of a
$1,000,000 promissory note to a related party through the exchange of 10,000
shares of DCT's 10% cumulative mandatory redeemable preferred stock, the Company
entered into an exchange agreement with the holder of the DCT preferred.
Pursuant to the agreement, at any time subsequent to the completion of an
initial public offering by Noble, the DCT preferred shares are convertible into
an equivalent number of preferred shares of Noble. The Noble preferred shares
will have similar rights and preferences as provided for by the DCT shares. On
April 1, 1997 the Company authorized 150,000 shares of preferred stock. At June
30, 1997, $925,000 of preferred shares were outstanding at DCT. (See Note M)
NOTE L--INDUSTRY SEGMENTS
In 1994 and 1995, the Company's operations were restricted to automotive
component supply.
Effective for the year ended December 31, 1996, the Company classifies its
operations into two industry segments: automotive component supply (Prestolock
and Vassar) and tooling component supply (Monroe). The Company's operations by
business segment for the year ended December 31, 1996 follows:
<TABLE>
<CAPTION>
AUTOMOTIVE TOOLING
COMPONENT COMPONENT
SUPPLY SUPPLY CORPORATE CONSOLIDATED
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales............................................. $11,088,560 $5,098,251 $ -- $ 16,186,811
Operating profit (loss)............................... 175,306 1,469,624 (1,132,815) 512,115
Identifiable assets................................... 3,902,299 7,394,180 357,901 11,654,380
Depreciation and amortization......................... 232,684 280,540 -- 513,224
Capital expenditures.................................. 362,801 500,000 -- 862,801
Investment in unconsolidated subsidiary............... (95,239) -- -- (95,239)
Equity in loss of unconsolidated subsidiary........... (95,239) -- -- (95,239)
</TABLE>
NOTE M--SUBSEQUENT EVENTS
The following events occurred subsequent to December 31, 1996.
Skandy Corp. Acquisition--Effective January 1, 1997, the Company acquired
100% of the issued and outstanding common shares of Skandy Corp. (Skandy) in
exchange for 133,686 shares of the Company's stock. Skandy is a manufacturers
representative firm and was owned by a relative of the principal shareholder of
the Company. The acquisition of Skandy Corp. will be accounted for in a manner
similar to a pooling of interests. The 133,686 shares were valued at $49,500,
which approximates Skandy's net book value at the date of this acquisition.
F-18
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE M--SUBSEQUENT EVENTS--(CONTINUED)
Utilase, Inc.--Effective March 1, 1997, Utilase Production Process, Inc. a
newly formed, wholly-owned subsidiary (UPP) of Noble acquired certain of the
operating assets of Utilase, Inc. (Utilase) a wholly-owned subsidiary of DCT,
Inc. DCT, Inc. is controlled by the same principals who controlled DCT (See Note
K) prior to the DCT acquisition by the Company. The purchase price was $850,000
represented by a non-interest bearing note, collateralized by the acquired
assets, with $750,000 due on July 31, 1997 and $50,000 payable on each of
February 1, 1998 and 1999. The business acquired provides laser welding, cutting
and heat treating of metal products for the automotive industry. The debt and
assets acquired were recorded at approximately $814,000, the discounted value of
the note at 8.50%.
On April 7, 1997 the Company entered into a stock purchase agreement
whereby the Company will acquire all of the outstanding stock of Utilase, Inc.
(see above). The stock purchase agreement provides for a purchase price of
$8,200,000 payable in cash from the proceeds of a public offering, and
$10,134,554 in subordinated promissory notes. Additionally, certain individuals
will receive payments of $1,400,000 in exchange for covenants not to compete.
The Company also agreed to issue 11,698 shares of its common stock annually for
a period of five years commencing in 1999, as partial consideration for one of
these covenants. Utilase will provide laser-welded tailored blanks to the
automotive industry.
On March 15, 1997, Noble and the other shareholders of DCT modified certain
of the purchase and related agreements entered into on July 1, 1996 (See Note J)
whereby subject to the occurrence of certain events, and in contemplation of a
proposed public offering of common stock by Noble, the following will occur:
On or before July 1, 1997, Noble shall pay $960,000 owed to the
selling shareholders by DCT pursuant to a promissory note with an original
maturity of June 30, 1998.
Noble shall acquire the remaining shares of DCT in exchange for a
promissory note ('purchase note'). The shares shall be valued as of
December 31, 1998 pursuant to a put formula, but in no event less than
$1,000,000. The promissory note will be interest bearing and be due on
February 15, 1999 and will be collateralized by the acquired shares.
The principal selling shareholder will serve as a member of Noble's
board of directors and its chairman until December 31, 1999.
As previously agreed (see Note I), Noble will acquire the entity
(CTIC) controlled by the selling Shareholder of DCT, that owns the
facilities in which DCT operates. Noble will assume the debt underlying
these facilities which approximates $4,600,000 at December 31, 1996
($4,400,000 at June 30, 1997).
Upon payment of the purchase note, DCT's obligation to remit one-half
of the bonus pool, as defined, to an affiliate of the selling shareholders,
will terminate.
On August 26, 1997, Noble and the selling shareholders of Utilase and DCT
entered into an Agreement of Amendment whereby Noble's right to acquire the
Utilase shares and the March 15, 1997 agreement covering the acquisition price
of the DCT shares are contingent upon the simultaneous occurrence of each of the
following:
Noble's completion of the purchase of the Utilase shares.
Noble's payment of the $850,000 note issued in connection with the
March 1, 1997 asset acquisition by UPP (the due date of which was extended
to the earlier of December 31, 1997 or the consummation of a public
offering of the Company's common stock).
Noble's payment of $1,000,000 to the selling shareholders of DCT in
exchange for their shares.
Noble's purchase of CTIC from the selling shareholders of DCT.
F-19
<PAGE>
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE M--SUBSEQUENT EVENTS--(CONTINUED)
Noble's payment of the $960,000 promissory note owed by DCT to the
selling shareholders and any accrued interest thereon.
Additionally, it was agreed that any failure by Noble to fulfill any
of its obligations under the various purchase agreements as amended,
underlying the acquisition of Utilase, and the asset acquisition agreement
entered into by UPP will render the agreements null and void.
On April 1, 1997, the board of directors and shareholders of the Company
approved an increase in the number of authorized common shares to 20,000,000.
On September 11, 1997, the Board of Directors approved a 334.213 to 1 stock
split. All share and per share data have been restated to reflect the stock
split.
Effective July 30, 1997, Noble issued 38,000 shares of its Series A, 10%
cumulative preferred shares and 64,841 common shares to an off-shore investment
fund, the investment manager of which is a limited liability company of which
Noble's majority shareholder is a manager, in exchange for $3,800,000.
On June 30, 1997, The Holder of the DCT Preferred Shares (See Note K)
notified the company of his intent to convert the shares to preferred shares of
the company concurrent with the closing of an initial public offering of the
Company's common stock.
The issuance of the preferred and common shares effective July 30, 1997,
constituted a default under the $3,750,000 term loan discussed in Note D. On
September 11, 1997, the lender waived any default attributable to the issuance
of the new shares.
F-20
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Monroe Engineering Products, Inc.
We have audited the accompanying balance sheet of Monroe Engineering Products,
Inc. (a Michigan corporation) as of December 31, 1995, and the related
statements of earnings and retained earnings, and cash flows for each of the two
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on
our audits.
We conducted our audits 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 Monroe Engineering Products,
Inc. as of December 31, 1995, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
Grant Thornton LLP
Detroit, Michigan
March 4, 1997
F-21
<PAGE>
MONROE ENGINEERING PRODUCTS, INC.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash............................................................................................. $ 678,472
Accounts receivable--trade....................................................................... 353,131
Inventories...................................................................................... 1,525,653
Prepaid expenses................................................................................. 14,026
----------
Total Current Assets........................................................................ 2,571,282
Property and Equipment
Machinery and equipment.......................................................................... 107,268
Furniture and fixtures........................................................................... 61,315
Leasehold improvements........................................................................... 43,684
----------
212,267
Less accumulated depreciation.................................................................... (204,534)
----------
Net property and equipment.................................................................. 7,733
Other assets....................................................................................... 53,442
----------
$2,632,457
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt............................................................. $ 163,333
Distribution payable............................................................................. 1,124,100
Accounts payable--trade.......................................................................... 149,123
Accrued liabilities.............................................................................. 13,200
----------
Total Current Liabilities................................................................... 1,449,756
Long-Term Debt, net of current maturities.......................................................... 141,751
Shareholders' Equity
Common stock--voting, par value $10 per share: authorized 2,600 shares, issued and outstanding
944 shares.................................................................................... 9,440
Common stock--non-voting, par value $10 per share: authorized 2,400 shares, issued and
outstanding 906 shares........................................................................ 9,060
Retained earnings................................................................................ 1,022,450
----------
Total shareholders' equity.................................................................. 1,040,950
----------
$2,632,457
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-22
<PAGE>
MONROE ENGINEERING PRODUCTS, INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
DECEMBER 31,
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Net sales.......................................................................... $5,254,071 $5,384,064
Cost of sales...................................................................... 2,078,653 2,164,544
---------- ----------
Gross profit................................................................ 3,175,418 3,219,520
Selling, general and administrative expenses....................................... 1,745,729 2,094,402
---------- ----------
Operating profit............................................................ 1,429,689 1,125,118
Other income (expense)
Interest expense................................................................. (64,905) (36,556)
Interest income.................................................................. 9,697 27,804
Sundry, net...................................................................... (353) 7,737
---------- ----------
(55,561) (1,015)
---------- ----------
Net earnings....................................................................... 1,374,128 1,124,103
Retained earnings--beginning of year............................................... 615,849 1,589,977
Distributions...................................................................... (400,000) (1,691,630)
---------- ----------
Retained earnings--end of year..................................................... $1,589,977 $1,022,450
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-23
<PAGE>
MONROE ENGINEERING PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
DECEMBER 31,
<TABLE>
<CAPTION>
1994 1995
---------- -----------
<S> <C> <C>
Cash Flows From Operating Activities
Net earnings.................................................................... $1,374,128 $ 1,124,103
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization................................................ 30,912 21,049
Gain on sale of property and equipment....................................... -- (7,634)
Changes in assets and liabilities
(Increase) decrease in accounts receivable................................. (120,781) 76,261
Increase in inventories.................................................... (84,814) (221,035)
Increase in prepaid expenses............................................... (58) (12,708)
Increase in other assets................................................... (3,000) (1,500)
Decrease (increase) in accounts payable.................................... (130,337) 49,996
Decrease in accrued liabilities............................................ 9,260 3,200
---------- -----------
Net cash provided by operating activities............................... 1,075,310 1,031,732
Cash Flows From Investing Activities
Purchases of property and equipment............................................. (53,137) (1,668)
Proceeds from sale of property and equipment.................................... -- 63,500
---------- -----------
Net cash (used in) provided by investing activities..................... (53,137) 61,832
Cash Flows From Financing Activities
Repayment of loan payable--stockholder.......................................... -- (754,005)
Proceeds from loan payable--stockholder......................................... 754,005 --
Principal payments of long-term debt............................................ (913,333) (163,333)
Distributions to shareholders'.................................................. (400,000) (567,530)
---------- -----------
Net cash used in financing activities................................... (559,328) (1,484,868)
---------- -----------
Net increase (decrease) in cash......................................... 462,845 (391,304)
Cash at beginning of year......................................................... 606,931 1,069,776
---------- -----------
Cash at end of year............................................................... $1,069,776 $ 678,472
---------- -----------
---------- -----------
Supplemental disclosure of cash flow information:
Cash paid for interest.......................................................... $ 64,905 $ 36,556
---------- -----------
---------- -----------
Non-cash financing activities:
During 1995, the Company declared a distribution of earnings in the amount of
$1,124,100 which was paid in 1996.
</TABLE>
The accompanying notes are an integral part of the financial statements
F-24
<PAGE>
MONROE ENGINEERING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
NOTE A--NATURE OF OPERATIONS
Monroe Engineering Products, Inc. (Monroe) is a distributor of various
tooling components. The principal market for its products is the United States.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories consist of finished goods purchased from manufacturers.
Inventory is stated at the lower of cost (moving average) or market (net
realizable value).
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for
using the straight line and various accelerated methods over the estimated
useful lives of the assets which range from 5 to 15 years for buildings and
improvement and 3 to 10 years for machinery and equipment.
Income Taxes
The shareholders of the Company have elected Subchapter S corporation
status under the Internal Revenue Code. Accordingly, federal income taxes on the
net earnings of the Company are payable personally by its shareholders.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE C--LONG-TERM DEBT
Notes payable at December 31, 1995 consisted of an unsecured note in the
amount of $171,500. Required monthly payments through September 2001 are $2,500
plus interest at a rate of 5%.
Contract payable--claim settlement in the amount of $133,334 at December
31, 1995 represented the balance due on a settlement with a former employee.
NOTE D--LEASE OBLIGATIONS
Monroe leases its office facilities at a monthly rental amount of $1,771.
This lease expires June 30, 1999. Total rent paid on this lease was $21,255 for
the years ended December 31, 1994 and 1995.
Monroe leases its warehouse facilities from a stockholder on a month to
month basis at a monthly rental amount of $2,500. Total rent paid on this lease
was $30,000 for the years ended December 31, 1994 and 1995.
F-25
<PAGE>
MONROE ENGINEERING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
NOTE D--LEASE OBLIGATIONS--(CONTINUED)
Future minimum rental payments are as follows:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
1996........................................................... $21,255
1997........................................................... 21,255
1998........................................................... 21,255
1999........................................................... 10,628
-------
$74,393
-------
-------
</TABLE>
NOTE E--RELATED PARTY TRANSACTIONS
Included in interest expense is $54,005 and $27,156 paid to a stockholder
during the years ended December 31, 1994 and 1995, respectively. These amounts
were paid in connection with a $700,000 advance in 1994 which was paid in 1995.
NOTE F--SIGNIFICANT CUSTOMERS AND SUPPLIERS
Major Customers
For the years ended December 31, 1994 and 1995, 15.5% and 14.8%,
respectively, of the corporation's sales were to one customer in the machine
tool industry.
Major Suppliers
For the years ended December 31, 1994 and 1995, 83.3% and 81.3%,
respectively, of the materials inventory was purchased from two suppliers.
For the years ended December 31, 1994 and 1995, approximately 76% of the
Company's revenue was derived from sales of these two suppliers' product line.
NOTE G--SALE OF THE COMPANY
Effective January 1, 1996 all of Monroe's outstanding shares were acquired
by Noble International, Ltd. in exchange for a $6,350,000 installment note.
F-26
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
DCT Component Systems, Inc.
We have audited the accompanying balance sheets of DCT Component Systems, Inc.
(a Michigan corporation) as of December 31, 1995 and 1996 and the related
statements of operations, shareholders' deficit and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits 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 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 consolidated financial position of DCT Component
Systems, Inc. as of December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Grant Thornton LLP
Detroit, Michigan
May 9, 1997 (except for Note M
as to which the date is September 15, 1997)
F-27
<PAGE>
DCT COMPONENT SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash.............................................................. $ 3,875 $ 608,563 $ 517,600
Accounts receivable
Trade (net of allowance of $186,000 in 1995 and $125,000 in
1996 and $131,733 at June 30, 1997).......................... 2,395,917 3,318,382 3,620,241
Related parties................................................ 407,048 233,392 231,177
Inventories....................................................... 2,310,426 2,255,388 2,349,693
Unbilled customer tooling......................................... 82,120 419,065 638,901
Prepaid expenses and other assets................................. 179,723 150,209 117,534
Deferred income taxes............................................. -- 196,000 118,000
Notes receivable, current maturities.............................. 7,031 7,031 7,031
----------- ----------- -----------
Total Current Assets......................................... 5,386,140 7,188,030 7,600,177
Property and Equipment--net......................................... 4,766,500 4,234,833 3,881,072
Note Receivable, net of current maturities.......................... 36,248 29,217 26,730
----------- ----------- -----------
$10,188,888 $11,452,080 $11,507,979
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to bank.............................................. $ 2,576,298 $ 2,896,076 $ 4,045,538
Current maturities of long-term debt.............................. 2,787,052 982,425 2,763,655
Accounts payable
Trade.......................................................... 3,213,302 3,854,128 3,910,813
Related parties................................................ 277,358 225,990 361,906
Accrued liabilities............................................... 1,222,092 933,596 438,756
----------- ----------- -----------
Total Current Liabilities.................................... 10,076,102 8,892,215 11,520,668
Long-term Debt, net of current maturities........................... 3,263,125 3,603,411 1,350,207
Notes Payable--Related Parties...................................... 16,638,127 960,000 960,000
Deferred Income Taxes............................................... -- 683,000 632,000
Commitments and Contingencies (Note I).............................. -- -- --
Redeemable Preferred Stock
$100 par value, authorized 10,000 shares, issued and outstanding
10,000 and 9,250 shares at December 31, 1996 and June 30,
1997........................................................... -- 1,000,000 925,000
Shareholders' Deficit
Common stock--$1 par value, authorized--200,000 shares issued and
outstanding 2,000 at December 31, 1995 and 3,582 shares at
December 31, 1996 and June 30, 1997............................ 2,000 3,582 3,582
Additional paid-in capital........................................ 857,250 17,345,112 17,345,112
Accumulated deficit............................................... (20,647,716) (21,035,240) (21,228,590)
----------- ----------- -----------
Total shareholders' deficit.................................. (19,788,466) (3,686,546) (3,879,896)
----------- ----------- -----------
$10,188,888 $11,452,080 $11,507,979
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-28
<PAGE>
DCT COMPONENT SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................ $27,719,743 $23,335,664 $22,988,115 $10,655,537 $13,239,791
Cost of sales........................ 28,523,220 22,724,107 20,445,536 9,438,517 11,840,728
----------- ----------- ----------- ----------- -----------
Gross (loss) profit........... (803,477) 611,557 2,542,579 1,217,020 1,399,063
Selling, general and administrative
expenses........................... 5,406,531 3,196,468 1,961,680 1,025,549 1,006,688
----------- ----------- ----------- ----------- -----------
Operating (loss) profit....... (6,210,008) (2,584,911) 580,899 191,471 392,375
Other (income) expense
Interest expense................... 1,328,758 2,300,562 937,337 418,345 513,175
Gain (loss) on sale of property and
equipment....................... 493,207 (10,326) 4,721 -- --
Interest income.................... (87,276) (70,376) (3,349) (953) (1,060)
Sundry, net........................ (28,112) 6,427 (105,286) (92,367) (1,198)
----------- ----------- ----------- ----------- -----------
1,706,577 2,226,287 833,423 325,025 510,917
----------- ----------- ----------- ----------- -----------
Loss before income taxes............. (7,916,585) (4,811,198) (252,524) (133,554) (118,542)
Income tax expense--deferred......... -- -- 135,000 -- 27,000
----------- ----------- ----------- ----------- -----------
Net loss...................... $(7,916,585) $(4,811,198) $ (387,524) $ (133,554) $ (145,542)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-29
<PAGE>
DCT COMPONENT SYSTEMS, INC.
STATEMENT OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance January 1, 1994.................................. $2,000 $ 857,250 $ (7,919,933) $(7,060,683)
Net loss................................................. -- -- (7,916,585) (7,916,585)
------ ----------- ------------ -----------
Balance December 31, 1994................................ 2,000 857,250 (15,836,518) (14,977,268)
Net loss................................................. -- -- (4,811,198) (4,811,198)
------ ----------- ------------ -----------
Balance December 31, 1995................................ 2,000 857,250 (20,647,716) (19,788,466)
Debt forgiveness......................................... -- 16,489,444 -- 16,489,444
Issuance of 1,582 shares of common stock................. 1,582 (1,582) -- --
Net loss................................................. -- -- (387,524) (387,524)
------ ----------- ------------ -----------
Balance December 31, 1996................................ 3,582 17,345,112 (21,035,240) (3,686,546)
Preferred stock dividends (unaudited).................... -- -- (47,808) (47,808)
Net loss (unaudited)..................................... -- -- (145,542) (145,542)
------ ----------- ------------ -----------
Balance June 30, 1997 (unaudited)........................ $3,582 $17,345,112 $(21,228,590) $(3,879,896)
------ ----------- ------------ -----------
------ ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-30
<PAGE>
DCT COMPONENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows (Used In) Provided By Operating
Activities
Net earnings (loss)........................... (7,916,585) $(4,811,198) $ (387,524) $(133,554) $(145,542)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Interest expense......................... -- 1,244,538 -- -- --
Deferred income taxes.................... -- -- 135,000 -- 27,000
Depreciation and amortization............ 1,811,874 1,583,115 719,941 359,700 370,587
Loss (gain) on sale of property and
equipment.............................. 493,207 (10,326) 4,721 -- --
Changes in assets and liabilities
(Increase) decrease in accounts
receivable........................... (2,157,596) 3,676,352 (829,585) (627,295) (299,644)
(Increase) decrease in inventories..... (958,266) 1,745,335 (281,907) 128,230 (314,141)
Decrease (increase) in prepaid
expenses............................. 174,418 (80,721) 29,514 117,190 32,675
Decrease in notes receivable........... 375,175 339,834 7,031 2,274 2,487
(Decrease) increase in accounts
payable.............................. (418,488) (1,850,345) 589,458 511,029 192,601
(Decrease) increase in accrued
liabilities.......................... (528) 730,990 (288,496) (718,501) (517,648)
---------- ----------- ----------- --------- ---------
Net cash (used in) provided by
operating activities............... (8,596,789) 1,323,036 (301,847) (360,927) (651,625)
Cash Flows Used In Investing Activities
Purchases of property and equipment............. (870,950) (37,011) (201,431) (85,615) (16,826)
Proceeds from sale of property and equipment.... 757,583 19,121 8,416 -- --
---------- ----------- ----------- --------- ---------
Net cash used in investing
activities......................... (113,367) (17,890) (193,015) (85,615) (16,826)
Cash Flows Provided By (Used In) Financing
Activities
Dividends paid................................ -- -- -- -- (25,000)
Preferred stock redemption.................... -- -- -- -- (75,000)
Repayment of notes payable--related parties... (1,000,000) -- -- -- --
Proceeds from notes payable--related
parties..................................... 11,639,218 3,114,893 795,298 373,555 --
Principal payments of long-term debt.......... (4,497,094) (2,651,912) (2,835,040) (920,680) (471,974)
Proceeds from long-term debt.................. 1,930,963 282,509 2,819,514 -- --
Net proceeds (repayments) note payable to
bank........................................ 732,925 (3,412,746) 319,778 1,042,209 1,149,462
---------- ----------- ----------- --------- ---------
Net cash provided by (used in)
financing activities............... 8,806,012 (2,667,256) 1,099,550 495,084 577,488
---------- ----------- ----------- --------- ---------
Net increase (decrease) in cash...... 95,856 (117,572) 604,688 48,542 (90,963)
Cash--beginning of period......................... 25,591 121,447 3,875 3,875 608,563
---------- ----------- ----------- --------- ---------
Cash--end of period............................... $ 121,447 $ 3,875 $ 608,563 $ 52,417 $ 517,600
---------- ----------- ----------- --------- ---------
---------- ----------- ----------- --------- ---------
Supplemental Disclosure of Cash Flow Information
Cash paid for interest.......................... $1,383,646 $ 1,084,759 $ 960,298 $ 418,345 $ 540,085
---------- ----------- ----------- --------- ---------
---------- ----------- ----------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-31
<PAGE>
Supplemental Disclosure of Non-Cash Financing Activities:
During 1996, various related parties forgave $16,841,444 in notes
payable, net of $80,776 in accounts receivable, in conjunction with the
sale of 37.5% of DCT's common stock to Noble International, Ltd. See Note
K.
During 1996, a $1,000,000 demand note payable to an officer of a
company related through common ownership was exchanged for $1,000,000 in
mandatory redeemable preferred stock. See Note L.
Dividends of $22,808 payable on the preferred stock are included in
accrued liabilities at June 30, 1997.
The accompanying notes are an integral part of these financial statements
F-32
<PAGE>
DCT COMPONENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE A--NATURE OF OPERATIONS
DCT Component Systems, Inc. (DCT) is a Michigan based manufacturer that
primarily produces stamped parts for automotive related companies located
primarily in North America.
NOTE B--SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
Interim Financial Data
The consolidated financial statements and related notes thereto as of June
30, 1997 and for the six months ended June 30, 1996 and 1997 are unaudited. The
information reflects all adjustments, consisting only of normal recurring
entries, that, in the opinion of management, are necessary to present fairly the
financial position, results of operations and cash flows of DCT for the periods
indicated. Results of operations for the interim periods are not necessarily
indicative of the results of operations for the full fiscal year.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value).
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for
using the straight line and various accelerated methods over the estimated
useful lives of the assets which range from 5 to 40 years for buildings and
improvements and 3 to 15 years for furniture and fixtures and machinery and
equipment. Expenditures for maintenance and repairs are charged to expense as
incurred.
Unbilled Customer Tooling
The costs to manufacture and supply customer-owned tooling are recorded as
unbilled tooling costs when incurred. Amounts incurred are charged to cost of
sales and revenue is recognized when the tooling is shipped and billed to
customers.
Income Taxes
DCT records the provision for federal and state income taxes pursuant to
Statement of Financial Accounting Standards No. 109, 'Accounting for Income
Taxes.'
Under the asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and the effect of operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years which those
temporary differences are expected to be recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in the period that includes the enactment date.
F-33
<PAGE>
DCT COMPONENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE B--SUMMARY OF ACCOUNTING POLICIES--(CONTINUED)
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from the estimates.
Fair Value of Financial Instruments
DCT's financial instruments include long-term debt. The carrying value of
the long-term debt approximates its estimated fair value based upon quoted
market prices.
NOTE C--INVENTORIES
The major components of inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials and purchased parts......................... $ 879,187 $ 663,046 $ 683,622
Work in process........................................... 488,663 717,212 561,666
Finished goods............................................ 670,481 875,130 1,104,405
Perishable tooling........................................ 272,095 -- --
----------- ----------- -----------
$ 2,310,426 $ 2,255,388 $ 2,349,693
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
NOTE D--PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Leasehold improvements.................................... $ 694,279 $ 694,279 $ 683,000
Machinery and equipment................................... 10,739,419 10,924,198 10,952,303
Furniture and fixtures.................................... 229,826 229,826 229,826
----------- ----------- -----------
11,663,524 11,848,303 11,865,129
Less accumulated depreciation............................. 6,897,024 7,613,470 7,984,057
----------- ----------- -----------
$ 4,766,500 $ 4,234,833 $ 3,881,072
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
NOTE E--NOTE PAYABLE TO BANK AND LONG-TERM DEBT
DCT has a secured line of credit facility with a lender, which allows it to
borrow up to $7,000,000 based upon a percentage of certain balance sheet
accounts. $2,896,076 was outstanding at December 31, 1996 ($4,045,538 at June
30, 1997) and $383,209 ($177,081 at June 30, 1997) was available. Interest is
payable monthly at 2.625% over the bank's prime lending rate (effective rate of
10.875% at December 31, 1996). This credit facility expires on June 1, 1998.
F-34
<PAGE>
DCT COMPONENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE E--NOTE PAYABLE TO BANK AND LONG-TERM DEBT--(CONTINUED)
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ---------- JUNE 30,
1997
----------
(UNAUDITED)
<S> <C> <C> <C>
Term loan, payable in monthly installments of $46,992, plus
interest at the bank's prime lending rate plus 2.625%
(10.875% at December 31, 1996) with a balloon payment of
$1,785,690 on June 1, 1998. The loan is collateralized by
all the assets of DCT. ..................................... $ -- $2,584,560 $2,302,608
Term loans, payable to former shareholders in monthly
installments of $10,000, including interest at a rate of 8%,
increasing to $15,000 and $20,000 in August, 1997 and
August, 1998, respectively. The loans are collateralized by
stock of DCT. .............................................. 529,287 314,108 265,875
Unsecured term loan, payable to a former shareholder, calling
for semi-annual interest payments until June 1, 2000 when
the principal balance is due. A portion of this loan was
forgiven during 1996. (See Note K).......................... 171,829 65,924 65,924
Unsecured term loan, calling for monthly interest payments at
a rate of 12%, through July 1, 1998, thereafter principal
payments of $6,879 plus interest at a rate of 8% through
June 1, 2003. A portion of this loan was forgiven during
1996. (See Note K).......................................... 884,133 412,763 412,763
Term loans, payable in monthly installments of $31,542,
including interest at a rate of 8.25%. The loans are
collateralized by various property and equipment and are due
in November, 2000. ......................................... 1,506,740 1,208,481 1,066,692
Demand loan, calling for monthly interest payments at the
bank's prime lending rate plus 1%. The loan was cross-
collateralized with the line of credit and other bank debt.
The principal was due and paid in 1996. .................... 1,093,750 -- --
Demand loan, calling for monthly interest payments at the
bank's prime lending rate plus 1.5%. The loan was
cross-collateralized with the line of credit and other bank
debt. The loan was due and paid in 1996. ................... 124,176 -- --
Term loans, payable in monthly installments of $33,336 plus
interest at the bank's prime lending rate plus 1%. The loan
was cross-collateralized with the line of credit and other
bank debt. The loan was due and paid in 1996. .............. 593,223 -- --
Unsecured term loan, payable in monthly installments of
$31,250 plus interest at a rate of 8.75%. The loan was due
and paid in 1996. .......................................... 125,000 -- --
Unsecured demand loan, calling for monthly interest payments
at a rate of 12%. As of December 31, 1996, the loan was paid
off by the issuance of $1,000,000 of mandatory redeemable
preferred stock. (See Note L.).............................. 1,000,000 -- --
</TABLE>
F-35
<PAGE>
DCT COMPONENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE E--NOTE PAYABLE TO BANK AND LONG-TERM DEBT--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured non-interest bearing term loan, payable in monthly
installments of $6,207. The loan was due and paid in
1996........................................................ 22,039 -- --
---------- ---------- ----------
6,050,177 4,585,836 4,113,862
Less current portion..................................... 2,787,052 982,425 2,763,655
---------- ---------- ----------
$3,263,125 $3,603,411 $1,350,207
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The aggregate maturities of long-term debt by year at December 31, 1996 are
as follows:
<TABLE>
<S> <C>
1997.................................................................. $ 982,425
1998.................................................................. 1,091,001
1999.................................................................. 987,802
2000.................................................................. 909,599
2001.................................................................. 477,420
Thereafter............................................................ 137,589
-----------
$4,585,836
-----------
-----------
</TABLE>
The $2,584,560 ($2,302,608 at June 30, 1997) term loan agreement and credit
facility contain restrictions on acquisitions, dividend payments, and advances
to officers and shareholders. At December 31, 1996 and June 30, 1997, all
long-term debt and the notes payable to related parties are subordinated to the
line of credit and the $2,584,560 term loan. At December 31, 1996 DCT was in
default of certain covenants contained in the secured line of credit facility
and the $2,584,560 term loan. On April 29,1997, the lender agreed to waive the
defaults under these agreements (See Note M).
NOTE F--INCOME TAXES
The tax effects of temporary differences that give rise to significant
deferred tax assets and liabilities at December 31, 1996 and 1995 and June 30,
1997 are as follows:
<TABLE>
<CAPTION>
DEFERRED DEFERRED
TAX TAX
DECEMBER 31, 1996 ASSETS LIABILITIES
- --------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Property and equipment depreciation........................................ $ -- $ 683,000
Allowance for doubtful accounts............................................ 43,000 --
Inventory.................................................................. 87,000 --
Other, net................................................................. 66,000 --
---------- -----------
$ 196,000 $ 683,000
---------- -----------
---------- -----------
</TABLE>
F-36
<PAGE>
DCT COMPONENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE F--INCOME TAXES--(CONTINUED)
<TABLE>
<CAPTION>
DEFERRED DEFERRED
TAX TAX
DECEMBER 31, 1995 ASSETS LIABILITIES
- --------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Property and equipment depreciation........................................ $ -- $ 365,000
Allowance for doubtful accounts............................................ 63,000 --
Inventory.................................................................. 40,000 --
Net operating loss carryover............................................... 5,255,000 --
Other, net................................................................. 154,000 --
---------- -----------
5,512,000 365,000
Less: Valuation allowance.................................................. 5,147,000 --
---------- -----------
$ 365,000 $ 365,000
---------- -----------
---------- -----------
</TABLE>
<TABLE>
<CAPTION>
DEFERRED DEFERRED
TAX TAX
JUNE 30, 1997 ASSETS LIABILITIES
- ----------------------------------------------------------------------------- -------- -----------
<S> <C> <C>
Property and equipment depreciation.......................................... $ -- $ 632,000
Allowance for doubtful accounts.............................................. 45,000 --
Inventory.................................................................... -- --
Net operating loss carryover................................................. 83,000 --
Other, net................................................................... 73,000 --
-------- -----------
201,000 632,000
Less: Valuation allowance.................................................... (83,000) --
-------- -----------
$118,000 $ 632,000
-------- -----------
-------- -----------
</TABLE>
A reconciliation of the expected income tax benefit computed at statutory
rates to the actual benefit reflected in the accompanying consolidated financial
statements follows.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------- ---------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Expected tax (benefit) at statutory rates... $(2,692,000) $(1,636,000) $ (85,000) $(45,000) $ (56,000)
Increase (decrease) in valuation allowance.. 2,692,000 1,636,000 (5,147,000) 45,000 83,000
Tax effect of debt forgiveness included as a
component of additional paid in capital... -- -- 5,360,000 -- --
Other, net.................................. -- -- 7,000 -- --
----------- ----------- ----------- -------- ---------
Income tax expense.......................... $ -- $ -- $ 135,000 $ -- $ 27,000
----------- ----------- ----------- -------- ---------
----------- ----------- ----------- -------- ---------
</TABLE>
At June 30, 1997, DCT has a net operating loss carryover of approximately
$240,000 which will expire in 2012.
NOTE G--RELATED PARTY TRANSACTIONS
DCT leases facilities under a month-to-month operating lease from an entity
related through common ownership. The lease currently requires monthly payments
of $47,000. The total amount of rent paid to the related party during the years
ended December 31, 1994, 1995 and 1996 was $562,000, $564,000, and $564,000,
respectively, and $282,000 for each of the six months periods ended June 30,
1996 and 1997.
F-37
<PAGE>
DCT COMPONENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE G--RELATED PARTY TRANSACTIONS--(CONTINUED)
DCT has sales to and purchases from an entity related through common
ownership. Sales to this company were approximately $210,000, $451,000 and
$328,000 in 1994, 1995 and 1996, respectively. Sales for the six months ended
June 30, 1996 and 1997 were $109,038 and $61,460. DCT purchased approximately
$620,000, $0 and $233,000 in 1994, 1995 and 1996, respectively. Purchases for
the six months ended June 30, 1996 and 1997 were $62,612 and $125,971.
During the year ended December 31, 1996 and for the six months ended June
30, 1997 and 1996, DCT paid management fees of $83,333, $33,332 and $58,999,
respectively, to Noble International, Ltd., a 37.5% (45% at June 30, 1997)
shareholder of DCT. (See Note K)
Notes payable--related parties consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured term loan, payable to an entity related through common
ownership, calling for monthly interest only payments at a rate of 10%.
The loan is due on June 30, 1998. ...................................... $ -- $960,000 $960,000
Unsecured demand loan, payable to an entity related through common
ownership, bearing interest at 8%. This loan was forgiven during 1996.
(See Note K)............................................................ 15,490,567 -- --
Unsecured demand loans, payable to stockholders, bearing no interest.
These loans were forgiven during 1996. (See Note K)..................... 1,147,560 -- --
----------- -------- --------
$16,638,127 $960,000 $960,000
----------- -------- --------
----------- -------- --------
</TABLE>
NOTE H--SIGNIFICANT CUSTOMER
DCT has one customer which accounts for 10% or more of net sales. Sales to
this customer were approximately $6,042,000, $7,041,000 and $7,260,000 during
1994, 1995 and 1996, respectively. ($4,199,000 and $5,124,000 for the six months
ended June 30, 1996 and 1997), respectively.
NOTE I--COMMITMENTS AND CONTINGENCIES
DCT and an entity related through common ownership ('related entity') were
co-makers on two notes payable to the General Retirement System of the City of
Detroit ('Retirement System'). The notes aggregated $34,000,000 with interest at
10%.
In October, 1996, the related entity and the Retirement System restructured
the debt whereby the related entity issued $23,650,000 of 15% cumulative
preferred stock and a note for $15,000,000 which bears interest at 12.5%. The
note matures in July 2003 and is collateralized, in part, by the Company's
common stock.
The proceeds from the original notes, and the preferred stock and debt
issued in connection with the restructuring in October of 1996 have been
recorded by the related entity.
Although the related entity has confirmed its intention to repay the note,
DCT remains liable as a co-maker. (See Note M)
NOTE J--PROFIT SHARING PLAN
DCT maintains a profit-sharing plan for substantially all employees
established pursuant to Internal Revenue Code Section 401(k). DCT at its
discretion, may match up to 6% of participating employees' annual wages.
F-38
<PAGE>
DCT COMPONENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE J--PROFIT SHARING PLAN--(CONTINUED)
Participating employees may also contribute up to 6% of their annual
compensation. There were no contributions made to the plan by DCT during the
years ended December 31, 1994, 1995 and 1996, and the six months ended June 30,
1996 and 1997.
NOTE K--CHANGE IN OWNERSHIP
On July 1, 1996, Noble International, Ltd. (Noble) acquired 1,343 common
shares of DCT, representing 37.5% of The Company's outstanding stock in exchange
for $1. Concurrent with the transaction, the following agreements were executed:
Stock Redemption Agreement--DCT entered into a stock redemption agreement
with its president whereby the Company at its discretion or upon his death or
termination will redeem the 269 shares acquired by him during 1996. The purchase
price, which is payable at DCT's option in a lump sum or in five annual
installments is based on the change in book value per share (as defined) of DCT
subsequent to January 1, 1997. Effective April 7, 1997, Noble acquired the 269
shares from the president of DCT upon his severance from DCT thereby increasing
Noble's ownership to 45%.
Purchase Option--Noble has an option, through July, 2001, to acquire from
the selling stockholders of DCT, an additional 14.1% of DCT's outstanding stock
in exchange for $1.00. Upon exercise of the option, Noble would own 59.1% of the
issued and outstanding shares of DCT.
Pursuant to the terms of the option agreement, the option cannot be
exercised until the later of the occurrence of the following events:
1) January 1 of the year following the write off of certain
intercompany debt between DCT and an affiliated company controlled by the
selling shareholders of DCT (see debt forgiveness discussion below).
2) The payment by DCT of at least $100,000 principal amount pursuant
to a certain promissory note to a company controlled by the selling
shareholder of DCT.
In the event the option is exercised, Noble must simultaneously acquire a
59.1% interest in a partnership controlled by the selling shareholders of DCT.
The partnership owns the facilities out of which DCT operates. (See Note G)
Put/Call Agreement--The selling stockholders have the right to put all, but
not less than all, of their shares to Noble. The put price is based on earnings
before interest, taxes, depreciation and amortization, with further
modifications as defined, for the twelve months preceding the date of the put,
multiplied by a factor of three. The put will be effective from July 1, 1998
through June 30, 2000.
Noble has a call option on all, but not less than all, of the shares owned
by the selling shareholders. The call price is based on the same formula as the
put price except the multiple is four. If exercised, twenty five percent of the
purchase price is immediately due with the balance payable in equal quarterly
installments over a five year period with interest at 10%. The call will be
effective from July 1, 2000 through June 30, 2002.
Debt Forgiveness--The selling stockholders and DCT agreed to write-off all
existing intercompany and stockholder debt except for a promissory note for
$960,000. The intercompany debt including interest of
F-39
<PAGE>
DCT COMPONENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE K--CHANGE IN OWNERSHIP--(CONTINUED)
$1,244,538, was with a company controlled by the selling stockholders. The
amount and nature of debt forgiven was as follows:
<TABLE>
<S> <C>
Intercompany......................................................... $15,325,865
Stockholder and former stockholders.................................. 1,515,579
------------
$16,841,444
------------
------------
</TABLE>
The debt forgiven exceeded the available net operating loss carryover by
approximately $1,035,000. This amount has been used to reduce the tax basis in
property and equipment and accordingly, the amount reflected as additional
contributed capital is net of $352,000 of deferred income taxes.
Executive Bonus Pool--DCT adopted an Executive Bonus Pool (Pool), awards
from which are at the sole discretion of the Board of Directors. The Pool will
be twenty percent of earnings before taxes, as defined. In consideration for the
forgiveness of the intercompany debt discussed above, one-half of the bonus pool
for the period January 1, 1997 through December 31, 1999 will be payable to the
company controlled by the selling shareholders that forgave the related debt.
Management Agreement--Noble and DCT entered into a management agreement
whereby DCT will pay Noble $100,000 per year. Payments under this agreement
amounted to $83,333 for 1996.
Voting Agreement--Noble received irrevocable proxies from the remaining
shareholders providing Noble the authority to direct the vote of the shareholder
on all matters except: The merger, liquidation or sale of substantially all of
DCT; the acquisition of a business entity for greater than $250,000 in cash; or
any single capital expenditure in excess of $250,000.
Indemnification Agreement--Noble agreed to indemnify the selling
shareholders and certain entities controlled by one of the selling shareholders
against 59.1% of any liabilities arising from claims which may be brought
against the indemnitors arising from their guarantees of certain indebtedness of
DCT.
NOTE L--REDEEMABLE PREFERRED STOCK
On December 31, 1996 DCT authorized 10,000 shares of $100 par value
preferred stock and issued them in full payment of a $1,000,000 promissory note
owed to an officer of a subsidiary of Noble. Dividends on the preferred stock
are cumulative and stated at 10%. Concurrently with the issuance of the
preferred stock, DCT and the holder entered into a put agreement whereby the
holder can put 375 shares at par to DCT quarterly through October, 2001, and can
put 2,500 shares at par during December 2001. Unexercised puts can be
accumulated and exercised subsequent to the original put date. Simultaneously
with the execution of these agreements, Noble and the holder executed an
exchange agreement whereby the holder, at any time after the completion of an
initial public offering by Noble, can convert the 10,000 preferred shares of DCT
into the equivalent number of Noble preferred shares. During the six months
ended June 30, 1997, $75,000 of this preferred stock was redeemed.
NOTE M--SUBSEQUENT EVENTS
On September 4, 1997 and September 11, 1997, DCT received waivers of
defaults under the term loan agreement and credit facility (See Note E) relating
to the payment of dividends on, and redemptions of, the preferred stock.
Pursuant to the terms of resolutions adopted by the Retirement System (See
Note I) on June 18, 1997 and September 10, 1997, DCT was discharged,
contemporaneously with the closing of the Final DCT Acquisition, as a co-maker
on The Notes and the collateral interests in DCT's Common Stock was released.
F-40
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Utilase, Inc.
We have audited the accompanying balance sheets of Utilase, Inc. (a Michigan
corporation and a wholly owned subsidiary of DCT, Inc.) as of December 31, 1996
and 1995, and the related statements of operations, shareholder's equity and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits 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 Utilase, Inc. as of December
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Grant Thornton LLP
Detroit, Michigan
May 12, 1997 (except for Note L,
as to which the date is September 15, 1997)
F-41
<PAGE>
UTILASE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents........................................ $ 900 $ 405,972 $ 1,127,719
Accounts receivable, net of allowance of $2,000 in 1995 and
$24,000 in 1996 and at June 30, 1997.......................... 1,525,313 1,638,747 2,229,423
Inventories...................................................... 192,470 233,605 160,735
Prepaid expenses and other....................................... 21,436 20,389 85,952
Note receivable--current portion................................. -- -- 836,333
---------- ---------- -----------
Total Current Assets........................................ 1,740,119 2,298,713 4,440,162
---------- ---------- -----------
Property and Equipment, net........................................ 3,362,422 4,928,930 6,959,247
Other Assets....................................................... 61,739 61,104 110,217
Note Receivable--Related Parties, net.............................. 3,565,753 -- --
---------- ---------- -----------
$8,730,033 $7,288,747 $11,509,626
---------- ---------- -----------
---------- ---------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Note payable to bank............................................. $1,545,302 $ -- $ 841,688
Accounts payable
Bank overdraft 119,596 -- --
Trade......................................................... 473,782 635,225 2,516,192
Related parties............................................... 96,355 239,201 25,256
Accrued liabilities.............................................. 71,925 291,619 410,879
Deferred income taxes............................................ 140,000 70,000 70,000
Federal income tax payable....................................... 249,611 351,953 319,000
Current maturities of long-term debt............................. 429,996 789,999 380,695
---------- ---------- -----------
Total Current Liabilities................................... 3,126,567 2,377,997 4,563,710
Note Payable--Related Parties--Net 3,284,799 1,250,893 2,826,867
Long-Term Debt, net of current maturities.......................... 1,009,171 1,536,503 957,647
Deferred income taxes.............................................. 129,000 177,000 177,000
Commitments and Contingencies (Notes H and K)...................... -- -- --
Shareholder's Equity
Common stock--$1 par value, 50,000 shares authorized 1,000 shares
issued and outstanding........................................ 1,000 1,000 1,000
Additional contributed capital................................... 1,588,314 1,703,414 1,703,414
Retained earnings (accumulated deficit).......................... (408,818) 241,940 1,279,988
---------- ---------- -----------
Total Shareholder's Equity.................................. 1,180,496 1,946,354 2,984,402
---------- ---------- -----------
$8,730,033 $7,288,747 $11,509,626
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-42
<PAGE>
UTILASE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
--------------------------------------- ------------------------
1994 1995 1996 1996 1997
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................. $5,725,098 $6,115,760 $ 9,305,436 $4,205,451 $6,704,864
Cost of sales............................. 3,976,792 4,718,559 5,804,356 2,373,034 3,453,293
---------- ---------- ----------- ---------- ----------
Gross profit....................... 1,748,306 1,397,201 3,501,080 1,832,417 3,251,571
Selling and administrative expenses....... 1,302,439 1,790,567 2,059,630 1,131,820 1,496,152
---------- ---------- ----------- ---------- ----------
Operating profit................... 445,867 (393,366) 1,441,450 700,597 1,755,419
Other income (expense)
Gain on sale of equipment............... -- 1,135,478 -- -- 4,759
Miscellaneous (income expense), net..... 88,793 36,694 132,374 2,494 20,008
Interest income......................... 129,823 397,169 38,633 -- 112,279
Interest expense........................ (299,509) (555,355) (631,746) (293,613) (289,417)
---------- ---------- ----------- ---------- ----------
(80,893) 1,013,986 (460,739) (296,107) (152,371)
---------- ---------- ----------- ---------- ----------
Earnings before income taxes....... 364,974 620,620 980,711 404,490 1,603,048
Income tax expense........................ 369,700 211,011 329,953 138,000 565,000
---------- ---------- ----------- ---------- ----------
Net earnings (loss)................ $ (4,726) $ 409,609 $ 650,758 $ 266,490 $1,038,048
---------- ---------- ----------- ---------- ----------
---------- ---------- ----------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-43
<PAGE>
UTILASE, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS
COMMON CONTRIBUTED (ACCUMULATED
STOCK CAPITAL DEFICIT) TOTAL
------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Balance at January 1, 1994.................................. $1,000 $1,588,314 $ (813,701) $ 775,613
Net loss.................................................... -- -- (4,726) (4,726)
------ ---------- ------------ ----------
Balance at December 31, 1994................................ 1,000 1,588,314 (818,427) 770,887
Net earnings................................................ -- -- 409,609 409,609
------ ---------- ------------ ----------
Balance at December 31, 1995................................ 1,000 1,588,314 (408,818) 1,180,496
Rent absorbed by affiliated company (Note D)................ -- 115,100 -- 115,100
Net earnings................................................ -- -- 650,758 650,758
------ ---------- ------------ ----------
Balance at December 31, 1996................................ 1,000 1,703,414 241,940 1,946,354
Net earnings (unaudited).................................... -- -- 1,038,048 1,038,048
------ ---------- ------------ ----------
Balance at June 30, 1997 (unaudited)........................ $1,000 $1,703,414 $1,279,988 $2,984,402
------ ---------- ------------ ----------
------ ---------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-44
<PAGE>
UTILASE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
-------------------------------------- ------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings (loss)........................ $ (4,726) $ 409,609 $ 650,758 $ 266,490 $1,038,048
Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities
Depreciation and amortization........... 540,064 519,908 558,185 288,341 235,179
Gain on sale of equipment............... -- (1,135,478) -- -- (4,759)
Deferred income taxes (benefit)......... 280,900 (38,600) (22,000) -- --
Rent absorbed by affiliated Company..... -- -- 115,100 55,700 --
Imputed interest income................. -- -- -- -- (23,040)
Changes in assets and liabilities
Accounts payable and accrued
liabilities........................ 160,582 5,790 523,913 521,147 1,786,282
Accounts receivable................... 530,718 (602,652) (113,434) 60,406 (590,676)
Prepaid expenses and other assets..... 23,486 16,191 1,682 12,426 (114,676)
Inventories........................... (43,031) (9,895) (41,135) (735) 72,870
Income taxes payable.................. 88,800 160,811 102,342 (111,611) (32,953)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
operating activities............. 1,576,793 (674,316) 1,775,411 1,092,164 2,366,275
Cash Flows Provided by (Used In) Investing
Activities
Additions to property and equipment........ (795,460) (1,738,588) (2,124,693) (1,929,574) (3,074,030)
Issuance of notes receivable--related
party, net of collections............... (1,322,187) (388,148) 3,565,753 641,811 --
Proceeds from disposal of equipment........ -- 1,240,000 -- -- --
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities......................... (2,117,647) (886,736) 1,441,060 (1,287,763) (3,074,030)
Cash Flows From Financing Activities
Bank overdraft............................. -- 119,596 (119,596) (119,596) --
Proceeds from long-term debt............... 500,000 -- 1,536,500 1,192,335 132,261
Repayment of long-term debt................ (388,333) (322,500) (649,165) -- (1,120,421)
Net borrowings (repayment) under notes
payable to bank......................... 620,181 (780,381) (1,545,302) 629,923 841,688
Net borrowings (repayment) of notes
payable--related party.................. (150,285) 2,504,528 (2,033,836) (1,357,075) 1,575,974
---------- ---------- ---------- ---------- ----------
Net cash provided by (used)
financing activities............. 581,563 1,521,243 (2,811,399) 345,587 1,429,502
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents................................ 40,709 (39,809) 405,072 149,988 721,747
Cash and cash equivalents beginning of
period..................................... -- 40,709 900 900 405,972
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents end of
period..................................... $ 40,709 $ 900 $ 405,972 $ 150,888 $1,127,719
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-45
<PAGE>
UTILASE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE A-- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Utilase, Inc. ('Utilase') is a manufacturer and fabricator of automotive
parts using laser welding technology. Utilase is a wholly owned subsidiary of
DCT, Inc. Through February 28, 1997, Utilase was comprised of two divisions,
Blank Welding Technologies and Production Services (See Note L). The principal
market for its products is the United States.
Significant Accounting Policies
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
Interim Financial Data
The consolidated financial statements and related notes thereto as of June
30, 1997 and for the six months ended June 30, 1996 and 1997 are unaudited. The
information reflects all adjustments, consisting only of normal recurring
entries, that, in the opinion of management, are necessary to present fairly the
financial position, results of operations and cash flows of Utilase for the
periods indicated. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the full fiscal year.
Cash Equivalents
For purposes of the statement of cash flows, Utilase considers all highly
liquid investments with a maturity of three months or less when purchased to be
cash equivalents.
Inventory Valuation
Inventories are valued at lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method for raw materials and the specific
identification method for all other inventories.
Property and Equipment
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets which range
from 5 to 40 years for improvements and 3 to 15 years for machinery and
equipment.
Fair Value of Financial Instruments
Utilase's financial instruments include long-term debt. The carrying value
of the long-term debt approximates its market value based upon quoted market
prices.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-46
<PAGE>
UTILASE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE B--INVENTORIES
The major components of inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials..................................................... $ 13,880 $ 33,015 $ 31,245
Finished goods.................................................... 122,984 195,790 129,490
Spare parts....................................................... 55,606 4,800 --
-------- -------- -----------
$192,470 $233,605 $ 160,735
-------- -------- -----------
-------- -------- -----------
</TABLE>
NOTE C--PROPERTY AND EQUIPMENT
Property and equipment at December 31 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment....................................... $3,716,990 $4,519,645 $2,621,137
Leasehold and improvements.................................... 646,053 646,053 75,459
Office and computer equipment................................. 493,601 496,667 176,070
Construction-in-process....................................... 723,436 2,042,408 5,061,438
---------- ---------- ----------
5,580,080 7,704,773 7,934,104
Less--Accumulated depreciation................................ (2,217,658) (2,775,843) (974,857)
---------- ---------- ----------
$3,362,422 $4,928,930 $6,959,247
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
NOTE D--RELATED PARTY TRANSACTIONS
Purchases and Accounts Payable
Utilase purchases stamping services from parties that are related through
common ownership. These purchases totaled $319,170, $280,905 and $218,071 in
1994, 1995 and 1996, respectively and resulted in accounts payable of $90,283
and $9,613 at December 31, 1995 and 1996 and $15,868 at June 30, 1997. These
purchases totaled $232,215 and $138,217 for the six months ended June 30, 1996
and 1997.
Employee Lease Expense
Effective May 1, 1994, Utilase began leasing salaried employees from a
company related through common ownership. The cost of leased employees,
including related payroll taxes and fringe benefits, for the years ended
December 31, 1994, 1995 1996 was $328,392, $641,838 and $777,522, respectively
and is included in selling and administrative expenses in the accompanying
statements of operations. During the six months ended June 30, 1996 and 1997,
lease expense was $499,182 and $747,928, respectively.
Effective January 1, 1995, Utilase began leasing hourly employees from a
company related through common ownership. The cost of leased hourly employees,
including related payroll taxes and fringe benefits, was $1,867,028, $2,096,413
for the years ended December 31, 1995 and 1996, respectively, and is included as
cost of sales in the accompanying statements of operations. The cost of leased
hourly employees for the six months ended June 30, 1996 and 1997, was $867,257
and $1,114,033, respectively.
F-47
<PAGE>
UTILASE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE D--RELATED PARTY TRANSACTIONS--(CONTINUED)
Selling and Administrative
Beginning in 1995, selling and administrative expenses include allocations
to Utilase of corporate administrative expenses incurred by Utilase's parent
company. Such allocations amounted to $805,200 and $626,485 for the years ended
December 31, 1995 and 1996 and $308,741 and $304,959 for the six months ended
June 30, 1996 and 1997, respectively.
Note Receivable
At December 31, 1995, Utilase had a note receivable from a related entity
totaling $3,565,753. This note was unsecured with interest at 10% in 1995 and
1996, respectively. Total interest income related to this note was $145,823 and
$397,169 in 1994 and 1995, respectively.
Notes Payable
At December 31, 1995, 1996 and June 30, 1997, Utilase had notes payable to
DCT, Inc. totaling $3,284,799, $1,250,893 and $2,826,867, respectively. Total
interest expense related to these notes was $38,196, $171,492 and $247,605 for
the year ended December 31, 1994, 1995 and 1996, respectively, and $100,381 and
$196,297 for the six months ended June 30, 1996 and 1997.
Facilities Rental
Utilase rents a facility from an entity related through common ownership.
The total amount of rent paid to the related party during each of the years
ended December 31, 1994 and 1995 was $118,800. During the year ended December
31, 1996, $3,700 was paid and no further rent was charged, accordingly $115,100
($55,700 at June 30, 1996) has been reflected as expense and additional paid in
capital. This facility was used by the Production Services Division (See Note
L).
NOTE E--NOTE PAYABLE TO BANK
Outstanding debt under a revolving line-of-credit with a bank totaled
$1,545,302 at December 31, 1995 (none at December 31, 1996 and $841,688 at June
30, 1997). The interest rate on Utilase's line-of-credit is prime plus 2%
(10.25% at December 31, 1996 and 10.5% at June 30, 1997) and is collateralized
by eligible accounts receivable and inventory, as defined in the agreement.
F-48
<PAGE>
UTILASE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE F--LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to bank secured by equipment interest at the prime rate
plus 2% (effective rate of 10.25% at December 31, 1996 and June 30,
1997), payable in monthly installments of $8,333 plus interest through
May 1999.............................................................. $ 366,667 $ 250,002 $ --
Note payable to bank secured by equipment and guaranteed by
shareholders/officers of Utilase, interest at 7.6% payable in monthly
installments of $27,500 plus interest through December 31, 1998....... 1,072,500 687,500 --
Note payable to bank collateralized by accounts receivable, inventory
and equipment. Payable in monthly installments of $30,000 plus
interest at 2% above the bank's prime lending rate (effective rate of
10.25% at December 31, 1996 and June 30, 1997)........................ -- 1,389,000 1,209,000
Notes payable in sixty monthly installments of $2,750, including
interest from 8.9% to 9.9% collateralized by equipment................ -- -- 129,342
---------- ---------- -----------
1,439,167 2,326,502 1,338,342
Less current maturities....................................... (429,996) (789,999) (380,695)
---------- ---------- -----------
$1,009,171 $1,536,503 $ 957,647
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The aggregate maturities of long-term debt by year are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 790,000
1998........................................................ 790,000
1999........................................................ 437,502
2000........................................................ 309,000
----------
$2,326,502
----------
----------
</TABLE>
NOTE G--INCOME TAXES
Prior to May 1, 1994, Utilase was a Subchapter S corporation under the
provisions of the Internal Revenue Code. As such, taxable income of Utilase was
included in the individual tax returns of shareholders for federal income tax
purposes. As of May 1, 1994, Utilase elected to be taxed as a Subchapter C
Corporation under the provisions of the Internal Revenue Code, and recorded
deferred tax assets and liabilities based on the difference between the
financial statements bases and tax bases of corresponding liabilities and assets
using enacted tax rates in effect for the year in which the differences are
expected to reverse.
Utilase files its tax return as part of the DCT, Inc. consolidated group.
DCT, Inc. allocates tax amounts to its individual subsidiaries to approximate
the tax provision, assets and liabilities that would be recorded if the entities
filed their tax returns on a separate company basis.
F-49
<PAGE>
UTILASE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE G--INCOME TAXES--(CONTINUED)
The provision (credit) for federal and state income taxes consists of the
following:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Currently payable.................................... $ 88,800 $249,611 $351,953 $138,000 $565,000
Deferred............................................. 280,900 (38,600) (22,000) -- --
-------- -------- -------- -------- --------
Total provision (credit)................... $369,700 $211,011 $329,953 $138,000 $565,000
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
The tax effects of temporary differences that give rise to significant
deferred tax liabilities at December 31, 1995 and 1996 follows.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Property and equipment depreciation....................................................... $129,000 $177,000
Change from cash to accrual basis of tax accounting....................................... 140,000 70,000
-------- --------
$269,000 $247,000
-------- --------
-------- --------
</TABLE>
A reconciliation of the expected income tax computed at the statutory rates
to the actual expense reflected in the accompanying statement of operations for
the year ended December 31, 1994 follows:
<TABLE>
<S> <C>
Expected tax at statutory rates................................................... $122,200
Deferred taxes recorded upon termination of Subchapter S election................. 247,500
--------
Income tax expense................................................................ $369,700
--------
--------
</TABLE>
NOTE H--OPERATING LEASES
The Company leases a facility under an operating lease expiring February
15, 1999. Total rent expense under the lease for the years ended December 31,
1994, 1995 and 1996 was $106,968, $148,566 and $145,658, respectively. Total
rent expense for the six months ended June 30, 1996 and 1997 was $71,574 and
$144,112, respectively.
Minimum future rental payments under this non-cancelable operating lease
are:
<TABLE>
<S> <C>
1997.................................................. $148,167
1998.................................................. 148,167
1999.................................................. 12,347
</TABLE>
In 1997, the Company entered into an eight year operating lease for a
facility in Canada requiring monthly payments of approximately $20,500 ($27,900
Canadian).
NOTE I--SIGNIFICANT CUSTOMERS
Substantially all of the Utilase's revenues resulted from sales to major
automotive suppliers in North America. During 1994, two customers accounted for
48%, and during 1995 and 1996 three customers accounted for 51% of revenues.
Three customers accounted for 56% of revenues for the six months ended June 30,
1996 and five customers accounted for 72% of revenues for the six months ended
June 30, 1997.
F-50
<PAGE>
UTILASE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
NOTE J--HEALTH INSURANCE
Utilase is self-insured for a portion of the health insurance provided to
employees. Utilase is liable for the first $75,000 of claims per employee each
year. Claims exceeding $75,000 are paid by an insurance carrier. As of December
31, 1995 and 1996, Utilase has recorded an accrual which management believes is
adequate to cover the costs of claims incurred under this program.
NOTE K--COMMITMENTS AND CONTINGENCIES
Utilase is involved in various legal proceedings which have arisen in the
ordinary course of its business. Management believes that the outcome of these
proceedings will not have a materially adverse effect on Utilase's financial
position or results of operations.
DCT, Inc. (parent company of Utilase) and other entities and individuals
affiliated with the parent company were co-makers or guarantors on two notes
payable to the General Retirement System of The City of Detroit ('Retirement
System'). The notes aggregated $34,000,000 with interest at 10% through July
2003. Additional interest accrues at 1.25% through July 2003, at which time a
balloon payment is due for the remaining principal and interest.
In October, 1996, the parent company and the Retirement System restructured
the debt whereby the parent company issued $23,650,000 of preferred stock and a
note for $15,000,000 which bears interest at 12.5%. The note matures in July
2003, and is collateralized, in part, by Utilase's common stock, property and
equipment.
The proceeds for the original notes and the preferred stock and debt issued
in connection with the restructuring in October 1996 have been recorded by the
parent company.
Although the parent company has confirmed its intention to repay the note,
the Company remains contingently liable. (See Note L)
NOTE L--SUBSEQUENT EVENTS
Effective March 1, 1997 Utilase sold the operating assets of its Production
Services Division to a subsidiary of Noble International, Ltd. (Noble) in
exchange for a $850,000, non-interest bearing promissory note. The note is
payable in installments of $750,000 due no later than July 31, 1997 and $50,000
each on February 1, 1998 and 1999. The face amount of the note has been
discounted at 8.5%. The Company recorded a gain of $4,759 on the sale.
On April 7, 1997, the shareholders of Utilase entered into an agreement to
sell all of the issued and outstanding shares of Utilase to Noble. The stock
purchase agreement provides for a purchase price of $8,200,000 payable in cash
from the proceeds of a proposed public offering of Noble and $10,134,555 in
subordinated promissory notes. Additionally, certain individuals will receive
payments of $1,400,000 in exchange for covenants not to compete.
On August 26, 1997 the selling shareholder of Utilase and Noble entered
into an Agreement of Amendment whereby Noble's right to acquire the Utilase
shares are contingent upon the simultaneous occurrence of certain events,
including Noble's payment of the $850,000 promissory note the due date of which
was extended to the earlier of December 31, 1997 or the consummation of a public
offering of Noble's common stock. Any failure by Noble to fulfill any of its
obligations under the purchase agreements, as amended, underlying the
acquisitions of Utilase and its Production Services Division will render the
agreements null and void.
Pursuant to the terms of resolutions adopted by the Retirement System (See
Note K) on June 18, 1997 and September 10, 1997, the Retirement System will
discharge, contemporaneously with the closing of the Utilase acquisition, its
security interests in Utilase's common stock and its lien against the assets of
Utilase.
F-51
<PAGE>
Company Laser Welded
Logo Door Inner Panel
[picture of car door inner panel]
Eliminates Hinge and Mirror Reinforcement
Eliminates Tolerance Stack-up
Eliminates Manufacturing Costs
Improves Side Impact Crash Worthiness
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary............................. 3
Risk Factors................................... 11
Use of Proceeds................................ 18
Dividend Policy................................ 19
Dilution....................................... 20
Capitalization................................. 21
Pro Forma Financial Data....................... 22
Selected Financial Data........................ 32
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 34
Business....................................... 40
Management..................................... 49
Principal Shareholders......................... 54
Certain Transactions........................... 55
Description of Capital Stock................... 59
Shares Eligible for Future Sale................ 61
Underwriting................................... 62
Legal Matters.................................. 63
Experts........................................ 64
Additional Information......................... 64
Index to Financial Statements.................. F-1
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE HEREOF) ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,300,000 SHARES
[LOGO] NOBLE INTERNATIONAL, LTD.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
BLUESTONE CAPITAL PARTNERS, L.P.
RODMAN & RENSHAW, INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of this offering are estimated to be as follows. All of such
expenses will be paid by the Registrant.
<TABLE>
<CAPTION>
ITEM
--------
<S> <C>
Securities and Exchange Commission Registration Fee............ $12,700
National Association of Securities Dealers, Inc. Filing Fee.... 4,691
AMEX Fees...................................................... 35,000
Printing Expenses(1)(2)........................................
Transfer Agent and Registrar Fees(1)(2)........................
Accounting Fees and Expenses(1)(2).............................
Legal Fees and Expenses(1)(2) (not including Blue Sky).........
Blue Sky Fees and Expenses(1)(2)...............................
Miscellaneous Expenses(1)(2)...................................
-------
Total(1)(2)...............................................
-------
-------
</TABLE>
- ------------------
(1) Estimated.
(2) To be filed by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 561 through 571 of the Michigan Business Corporation Act set forth
the conditions and limitations governing the indemnification of officers,
directors and other persons as follows:
'Section 561. INDEMNIFICATION FOR EXPENSES, JUDGMENTS, FINES AND
SETTLEMENTS; PLEA OF NOLO CONTENDERE, EFFECT. A corporation shall have
power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative or investigative and
ther formal or informal, other than an action by or in the right of the
corporation, by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, whether for profit or not,
against expenses, including attorneys' fees, judgments, penalties, fees and
amounts paid in settlement actually and reasonably incurred by him or her
in connection with such action, suit or proceeding if the person acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation or its shareholders, and
with respect to any criminal action or proceeding, if the person had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit, or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, does not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the
best interests of the corporation or its shareholders, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
or her conduct was unlawful.
'Section 562. INDEMNIFICATION FOR EXPENSE INCURRED FOR DEFENSE OR
SETTLEMENT OF LITIGATION; NEGLIGENCE OR MISCONDUCT; EXTENT OF
INDEMNIFICATION. A corporation has the power to indemnify a person who was
or is a party or is threatened to be made a party to a threatened, pending,
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he or she is or
was a director, officer, employee, or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise,
whether for profit or not, against expenses, including attorneys' fees, and
amounts paid in settlement actually and reasonably incurred by the person
in connection with the action or suit, if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation or its shareholders. Indemnification
shall not be made for a claim,
II-1
<PAGE>
issue, or matter in which the person has been found liable to the
corporation except to the extent authorized in section 564c.
'Section 563. SUCCESS IN DEFENSE OF LITIGATION. To the extent that a
director, officer, employee, or agent of a corporation has been successful
on the merits or otherwise in defense of an action, suit, or proceeding
referred to in section 561 or 562, or in defense of a claim, issue, or
matter in the action, suit, or proceeding, he or she shall be indemnified
against actual and reasonable expenses, including attorneys' fees, incurred
by him or herein connection with the action, suit or proceeding and an
action, suit or proceeding brought to enforce the mandatory indemnification
provided in this subsection.
'Section 564a. DETERMINING PERMISSIBILITY OF INDEMNIFICATION AND
REASONABLENESS OF EXPENSES.
(1) An indemnification under section 561 or 562, unless ordered by the
court, shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee, or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in sections 561 and 562 and upon an evaluation of
the reasonableness of expenses and amounts paid in settlement. This
determination and evaluation shall be made in any of the following ways:
(a) By a majority vote of a quorum of the board consisting of
directors who are not parties or threatened to be made parties to the
action, suit, or proceeding.
(b) If a quorum cannot be obtained trader subdivision (a), by majority
vote of a committee duly designated by the board and consisting solely of 2
or more directors not at the time parties or threatened to be made parties
to the action, suit, or proceeding.
(c) By independent legal counsel in a written opinion, which counsel
shall be selected in 1 of the following ways:
(i) By the board or its committee in the manner prescribed in
subdivision (a) or (b).
(ii) If a quorum of the board cannot be obtained under subdivision
(a) and a committee cannot be designated under subdivision (b), by the
board.
(d) By all independent directors who are not parties or threatened to
be made parties to the action, suit, or proceeding.
(e) By the shareholders, but shares held by directors, officers,
employees, or agents who are parties or threatened to be made parties to
the action, suit, or proceeding may not be voted.
(2) In the designation of a committee under subsection (1)(b) or in the
selection of independent legal counsel under subsection (1)(c)(ii), all
directors may participate.
(3) If a person is entitled to indemnification under section 561 or 562 for
a portion of expenses, including reasonable attorneys' fees, judgments,
penalties, lines, and amounts paid in settlement, but not for the total amount,
the corporation may indemnify the person for the portion of the expenses,
judgments, penalties, fines, or amounts paid in settlement for which the person
is entitled to be indemnified.
'Section 564b. ADVANCEMENT OF REASONABLE EXPENSES PRIOR TO FINAL
DISPOSITION; CONDITIONS.
(1) A corporation may pay or reimburse the reasonable expenses incurred by
a director, officer, employee, or agent who is a party or threatened to be made
a party to an action, suit, or proceeding in advance of final disposition of the
proceeding if all of the following apply:
(a) The person furnishes the corporation a written affirmation of his
or her good faith belief that he or she has met the applicable standard of
conduct set forth in sections 561 and 562.
(b) The person furnishes the corporation a written undertaking,
executed personally or on his or her behalf, to repay the advance if it is
ultimately determined that he or she did not meet the standard of conduct.
(c) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this act.
II-2
<PAGE>
(2) The undertaking required by subsection (1)(b) must be an unlimited
general obligation of the person but need not be secured.
(3) Determinations and evaluations under this section shall be made in the
manner specified in section 564a.
'Section 564c. APPLICATION TO COURT FOR INDEMNIFICATION. A director,
officer, employee, or agent of the corporation who is a party or threatened to
be made a party to an action, suit, or proceeding may apply for indemnification
to the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court after giving any notice it
considers necessary may order indemnification if it determines that the person
is fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he or she met the applicable standard of conduct
set forth in sections 561 and 562 or was adjudged liable as described in section
562, but if he or she was adjudged liable, his or her indemnification is limited
to reasonable expenses incurred.
'Section 565. NONEXCLUSIVITY OF STATUTE; RIGHTS OF OTHER PERSONS;
CONTINUATION OF RIGHTS.
(1) The indemnification or advancement of expenses provided under sections
561 to 564c is not exclusive of other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles of
incorporation, bylaws, or a contractual agreement. The total amount of expenses
advanced or indemnified from all sources combined shall not exceed the amount of
actual expenses incurred by the person seeking indemnification or advancement of
expenses.
(2) The indemnification provided for in sections 561 to 565 continues as to
a person who ceases to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, personal representatives, and administrators
of the person.
'Section 567. INSURANCE AGAINST LIABILITY. A corporation shall have power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, partner, trustee,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity or arising out of his or her status as such,
whether or not the corporation would have power to indemnify him or her against
liability under sections 561 to 565.
'Section 569. CORPORATION; CONSTRUCTION OF REFERENCES TO. For purposes of
sections 561 to 567, 'corporation' includes all constituent corporations
absorbed in a consolidation or merger and the resulting or surviving
corporation, so that a person who is or was a director, officer, partner,
trustee, employee, or agent of such constituent corporation or is or was serving
at the request of the constituent corporation as a director, officer, employee
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise whether for profit or not shall stand in the same
position under the provisions of this section with respect to the resulting or
surviving corporation as the person would if he or she had served the resulting
or surviving corporation in the same capacity.
'Section 571. DEFINITIONS. For the purposes of sections 561 to 567:
(a) 'Fines' shall include any excise taxes assessed on a person with
respect to an employee benefit plan.
(b) 'Other enterprises' shall include employee benefit plans.
(c) 'Serving at the request of the corporation' shall include any
service as a director, officer, employee, or agent of the corporation which
imposes duties on, or involves services by, the director, officer,
employee, or agent with respect to an employee benefit plan, its
participants, or its beneficiaries.
(d) A person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be considered to have acted
in a manner 'not opposed to the best interests of the corporation or its
shareholders' as referred to in sections 561 and 562.
II-3
<PAGE>
Article VIII of the Registrant's Articles of Incorporation limit the
liability for breaches of fiduciary duty by directors to the fullest extent
provided by law as follows:
'A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for a breach of
fiduciary duty as a director, except for liability (a) for any breach of
the director's duty of loyalty to the corporation or its shareholders; (b)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (c) resulting from a violation of
ss.551(1) of the Michigan Business Corporation Act; or (d) for any
transaction from which the director derived an improper personal benefit.
In the event the Michigan Business Corporation Act is amended to authorize
corporate action further eliminating liability of directors of a
corporation, this Article VIII shall be deemed to be amended to include
such further elimination of liability such that the liability of directors
of the corporation is limited to the fullest extent permitted by the
Michigan Business Corporation Act, as so amended. Any repeal, modification
or adoption of any provisions in these Articles of Incorporation
inconsistent with this Article shall not adversely affect any right or
protection of a director of the corporation existing at the time of such
repeal, modification or adoption.'
Article VII of the Registrant's Bylaws provides for indemnification of the
Registrant's directors, officers and agents, to advance expenses for defense of
litigation and to purchase and maintain insurance on behalf of any director or
officer of the Registrant against any liability asserted against or incurred by
them in such capacity or arising out of their status as such whether or not
Registrant would have the power to indemnify such director or officer against
any liability under the provisions of such Article or Michigan law and authorize
the Board to extend such indemnity to others as follows:
'7.1. Third Party Proceeding. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to a
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal,
other than an action by or in the right of the Corporation, by reason of
the fact that he or she is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer, partner, or trustee of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise, whether for profit
or not, against expenses, including attorneys' fees, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by
him or her in connection with the action, suit, or proceeding, If the
person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Corporation or its
shareholders, and the person submits a written claim for indemnification as
hereinafter provided, and with respect to a criminal action or proceeding,
if the person had no reasonable cause to believe his or her conduct was
unlawful, and the person submits a written claim for indemnification as
hereinafter provided. The termination of an action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation
or its shareholders, or, with respect to a criminal action or proceeding,
did not have reasonable cause to believe that his or her conduct was
unlawful. The right to indemnification conferred in this Section shall be a
contract right. The Corporation may, by action of its Board of Directors,
or by action of any person to whom the Board of Directors has delegated
such authority, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
'7.2. Derivative Shareholder Liability. The Corporation shall
indemnify any person who was or is a party to or is threatened to be made a
party to a threatened, pending, or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of
the fact that he or she is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer, partner, or trustee of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise, whether for profit
or not, against expenses, including attorneys' fees, and amounts paid in
settlement actually and reasonably incurred by the person in connection
with the action or suit, if the person acted in good faith and in a manner
the person reasonably believed to be in or not opposed to the best
interests of the Corporation or its shareholders, and the person submits a
written claim of indemnification as hereinafter provided. However,
indemnification shall not be made for a particular action, issue, or matter
in which the person has been found liable to the Corporation unless and
only to the extent that the court in
II-4
<PAGE>
which the action or suit was brought (or another court of competent
jurisdiction) has determined upon application that, despite the
adjudication of liability but in view of all the relevant circumstances,
the person is fairly and reasonably entitled to indemnification for the
reasonable expenses he or she incurred. The right to indemnification
conferred in this Section shall be a contract right. The Corporation may,
by action of its Board of Directors, or by action of any person to whom the
Board of Directors has delegated such authority, provide indemnification to
employees and agents of the Corporation with the same scope and effect as
the foregoing indemnification of directors and officers.
'7.3. Determination of Indemnification. Any indemnification under
Section 7.1 or 7.2 of this Article, unless ordered by a court, shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in
the circumstances because he or she has met the applicable standard of
conduct set forth in Section 7.1 or 7.2 of this Article and upon an
evaluation of the reasonableness of expenses and amounts paid in
settlement. This determination and evaluation shall occur within 30 days
after a written claim for indemnification has been received by the
Corporation, and shall be made in any of the following ways:
(1) By a majority vote of a quorum of the board consisting of
directors who are not parties or threatened to be made parties to the
action, suit or proceeding;
(2) If the quorum described in subparagraph (1) is not obtainable,
then by a majority of a committee duly designated by the board and
consisting solely of two or more directors not at the time parties or
threatened to be made parties to the action, suit, or proceeding;
(3) By independent legal counsel in a written opinion, which
counsel shall be selected in one of the following ways:
(A) By the board or its committee in the manner prescribed in
subparagraphs (1) and (2),
(B) If a quorum of the board cannot be obtained under
subparagraph (1) and a committee cannot be designated under
subparagraph (2), by the board;
(4) By all independent directors who are not parties or threatened
to be made parties to the action, suit, or proceeding; and
(5) By the shareholders, but shares held by directors, officers,
employees, or agents who are parties or threatened to be made parties to
the action, suit, or proceeding may not be voted.
In the designation of a committee under subparagraph (2) or in the
selection of independent legal counsel under subparagraph (3)(B), all directors
may participate.
If a person is entitled to indemnification under Sections 7.1 or 7.2 of
this Article for a portion of expenses, including reasonable attorneys' fees,
judgments, penalties, fines, and amounts paid in settlement, but not for the
total amount thereof, the Corporation shall indemnify the person for the portion
of the expenses, judgments, penalties, fines, or amounts paid in settlement for
which the person is entitled to be indemnified.
'7.4. Payment of Defense Expenses in Advance. The Corporation shall pay or
reimburse the reasonable expenses incurred by a director or officer who is a
party or threatened to be made a party to an action, suit, or proceeding in
advance of final disposition of the proceeding if all of the following apply:
(1) The person furnishes the Corporation a written affirmation of his
or her good faith belief that he or she has met the applicable standard of
conduct set forth in Sections 7.1 and 7.2.
(2) The person furnishes the Corporation a written undertaking,
executed personally or on his or her behalf to repay the advance if it is
ultimately determined that he or she did not meet the standard of conduct.
(3) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this section or
the Michigan Business Corporation Act.
The undertaking shall be by unlimited general obligation of the person on
whose behalf advances are made but need not be secured. Determination of
payments under Section 7.4 shall be made in the manner described in Section
7.3(1)-(5).
'7.5. Right of Officer or Director to Bring Suit. If a claim for
indemnification under this Section is not paid in full by the Corporation within
forty-five (45) days after a written claim has been received by the Corporation,
II-5
<PAGE>
the officer or director who submitted the claim (hereinafter the 'indemnitee')
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in any such suit
or in a suit brought by the Corporation to recover advances, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
claim. In any action brought by the indemnitee to enforce a right under this
Section (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
required undertaking, if any, has been tendered to the Corporation) it shall be
a defense that, and in any action brought by the Corporation to recover advances
the Corporation shall be entitled to recover such advances if, the indemnitee
has not met the applicable standard of conduct set forth in Section 7.1 or
Section 7.2. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Sections 7.1 or 7.2, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its shareholders) that the indemnitee has not met such
applicable standard of conduct, shall be a defense to an action brought by the
indemnitee or create a presumption that the indemnitee has not met the
applicable standard of conduct. In any action brought by the indemnitee to
enforce a right hereunder or by the Corporation to recover payments by the
Corporation of advances, the burden of proof shall be on the Corporation.
'7.6. Other Indemnification. The indemnification or advancement of expenses
provided under Sections 1 through 5 is not exclusive to other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
the Corporation's Articles of Incorporation, bylaws, or a contractual agreement.
However, the total amount of expenses advanced or indemnified from all sources
combined shall not exceed the amount of actual expenses incurred by the person
seeking indemnification or advancement of expenses. The indemnification provided
for in Sections 7.1 through 7.5 continues as to a person who ceases to be a
director, officer, partner, or trustee and shall inure to the benefit of the
heirs, executors, and administrations of the person.
'7.7. Liability Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity or arising out of his or her status as such, whether or not the
Corporation would have power to indemnify him or her against liability under the
Michigan Business Corporation Act or this section.
'7.8. Definitions. For purposes of this section, 'the Corporation' includes
all constituent corporations absorbed in a consolidation or merger and the
resulting or surviving corporation, so that a person who is or was a director,
officer, employee, or agent of the constituent corporation or is or was serving
at the request of the constituent corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise whether for profit or not
shall stand in the same position under the provisions of this paragraph with
respect to the resulting or surviving corporation as the person would if he or
she had served the resulting or surviving corporation in the same capacity.
'7.9. Employee Benefit Plans. For purposes of this section, 'other
enterprises' shall include employee benefit plans; 'fines' shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
'serving at the request of the Corporation' shall include any service as a
director or officer of the Corporation which imposes duties on, or involves
services by, the director or officer with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be considered to have acted
in a manner 'not opposed to the best interests of the Corporation or its
shareholders' as referred to in Sections 7.1 and 7.2.
'7.10. Severability. The invalidity or unenforceability of any provision of
this Article VII shall not effect the validity or enforceability of the
remaining provisions of this Article VII.'
Reference is made to Section of the Underwriting Agreement, a copy of
which is filed as part of Exhibit 1.1 to the Registration Statement, for
information concerning indemnification arrangements among the Registrant and the
Underwriters.
II-6
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
No securities of the Registrant which were not registered under the
Securities Act of 1933, as amended, have been issued or sold by the Registrant
within the past three years except for the following:
<TABLE>
<CAPTION>
NAME OR NUMBER OF
CLASS OF PERSONS DATE OF SALE SHARES CONSIDERATION
- ---------------------------------------------- ------------ ---------- ---------------------------------------
<S> <C> <C> <C>
Robert J. Skandalaris......................... 1/1/96 66,843 Issued as an antidilution adjustment in
connection with the Prestolock
Acquisition.
Mark A. Davis................................. 1/1/96 267,371 Issued for services valued at $32,000.
Prestolock shareholders....................... 1/1/96 2,673,704 Issued pursuant to a Stock Exchange
Agreement between Noble and Prestolock.
Richard G. Skandalaris........................ 10/15/96 50,132 Issued in consideration of cancellation
of $61,042.82 of indebtedness.
Richard G. Skandalaris........................ 1/1/97 133,686 Issued pursuant to a Stock Exchange
Agreement between Noble and Skandy.
</TABLE>
The Company believes that the foregoing transactions were exempt from the
registration provisions of the Securities Act of 1933 pursuant to Section 4(2)
of such Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are filed herewith and made a part hereof:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------- --------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
1.1(1) -- Form of Underwriting Agreement
2.1(1) -- Stock Purchase Agreement dated April 7, 1997 among the Company, Utilase, Inc., the
Shareholders of Utilase, Inc.
3.1(1) -- Certificate of Amendment to the Articles of Incorporation of the Company
3.2(1) -- Amended and Restated Bylaws of the Company
4.1(1) -- Form of Representatives' Warrant Agreement, including form of Warrant
4.2(1) -- Forms of Series A Subordinated Promissory Notes
4.3(1) -- Forms of Series B Subordinated Promissory Notes
4.4(1) -- Forms of Series C Subordinated Promissory Notes
4.5(1) -- Forms of Series D Subordinated Promissory Notes
5.1(2) -- Opinion of Bruck & Perry, A Professional Corporation as to the legality of the securities
being registered
10.1(1) -- Bill of Sale dated February 25, 1994 pertaining to the assets acquired by Prestolock
International, Ltd. from Midlantic National Bank
10.2(1) -- Trademark Agreement entered into February 25, 1994 between Prestolock International, Ltd. and
Presto Lock, Inc.
10.3(1) -- Asset Purchase Agreement dated as of July 21, 1994 between Prestolock International, Ltd. and
the Eastern Company for the sale of certain assets
10.4(1) -- Non-Competition Agreement dated as of July 21, 1994 between Prestolock International, Ltd.
and the Eastern Company
10.5(1) -- Trademark License Agreement dated July 21, 1994 between Prestolock International, Ltd. and
the Eastern Company
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------- --------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
10.6(1) -- Sales Service Consulting Agreement dated July 21, 1994 between Prestolock International, Ltd.
and the Eastern Company
10.7(1) -- Tax Free Stock Exchange Agreement made effective as of January 1, 1996 between the Company
and Robert J. Skandalaris and Daniel J. Brunell
10.8(1) -- Stock Purchase Agreement dated January 1, 1996 among the Company and Cass River Coatings,
Inc., Gene Oldford, Kevin Redding, Chris Frampton, Jan Wojeichowski, Pat Patterson, and Jim
Lamb
10.9(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Eugene
Oldford
10.10(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Kevin
Redding
10.11(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Chris
Frampton
10.12(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Jan
Wojeichowski
10.13(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Pat
Patterson
10.14(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Jim Lamb
10.15(1) -- Stock Option Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Gene
Oldford, Kevin Redding, Chris Frampton, Jan Wojeichowski, Pat Patterson, and Jim Lamb
10.16(1) -- Security Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Eugene
Oldford, Kevin Redding, Chris Frampton, Jan Wojeichowski, Pat Patterson, and Jim Lamb
10.17(1) -- Land Contract dated October 26, 1994 between Cass River Investment Company and Cass River
Coatings, Inc.
10.18(1) -- Stock Purchase Agreement dated January 1, 1996 between the Company and Richard J. Reason,
individually and as Trustee of his Revocable Living Trust dated April 9, 1979 and The Richard
J. Reason Irrevocable Trust for the Benefit of Victoria Aldrich and Peter Reason dated
October 12, 1992
10.19(1) -- Promissory Note dated January 1, 1996 in the original principal amount of $2,231,000
delivered by the Company in favor of The Richard J. Reason Irrevocable Trust for the Benefit
of Victoria Aldrich and Peter Reason dated October 12, 1992
10.20(1) -- Promissory Note dated January 1, 1996 in the original principal amount of $4,119,000
delivered by the Company in favor of Richard J. Reason, Trustee of his Revocable Living Trust
dated April 9, 1979
10.21(1) -- Guaranty of Robert Skandalaris ($500,000) dated January 1, 1996 for the benefit of The
Richard J. Reason Irrevocable Trust for the Benefit of Victoria Aldrich and Peter Reason
dated October 12, 1992
10.22(1) -- Memorandum of Land Contract dated April 30, 1996 between Richard J. Reason Agreement of Trust
dated April 9, 1979 and Monroe Engineering Products, Inc.
10.23(1) -- Guaranty of Robert Skandalaris dated April 30, 1996 of Monroe Engineering Products, Inc.'s
obligations under Land Contract
10.24(1) -- Employment and Deferred Compensation Agreement dated January 1, 1996 between Monroe
Engineering Products, Inc. and Richard Reason, as amended December 30, 1996
10.25(1) -- Loan Agreement dated April 30, 1996 among Comerica Bank and the Registrant, Monroe
Engineering Products, Inc., Prestolock International, Ltd. and Cass River Coatings, Inc.
including Amendment No. 3 dated April 30, 1997
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------- --------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
10.26(1) -- Stock Purchase Agreement dated July 1, 1996, between DCT Component Systems, Inc., a Michigan
corporation, James Bronce Henderson, III, David C. Stone, the Company, and Peter Raab
10.27(1) -- Stock Redemption Agreement dated July 1, 1996 between Peter Raab and DCT Components Systems,
Inc.
10.28(1) -- Management Agreement dated July 1, 1996 between DCT Component Systems, Inc. and the Company
10.29(1) -- Voting Agreement and Irrevocable Proxies dated July 1, 1996 by and among DCT Component
Systems, Inc., James Bronce Henderson III, and David C. Stone, and Robert Skandalaris as the
representative of the Company
10.30(1) -- Shareholder Agreement among the Company, James Bronce Henderson, III, David C. Stone, Peter
Raab and DCT Component Systems, Inc. dated July 1, 1996
10.31(1) -- Executive Bonus Pool for DCT Components Systems, Inc.
10.32(1) -- License Agreement dated July 1, 1996, by and between James Bronce Henderson, III and John C.
Fox as licensors, and DCT Component Systems, Inc., as licensee
10.33(1) -- Employment Agreement between DCT Component Systems, Inc. and Peter Raab dated July 18, 1994,
as amended June 30, 1996
10.34(1) -- Loan and Security Agreement dated June 27, 1996 between DCT Component Systems, Inc. and the
CIT Group/Credit Finance, Inc.
10.35(1) -- Loan Agreement between DCT Component Systems, Inc. and Deutsche Financial Services Holding
Company
10.36(1) -- Line of Credit Promissory Note ($960,000) made by DCT Component Systems, Inc. in favor of DCT
Companies, Inc.
10.37(1) -- Put Agreement dated December 31, 1996 by DCT Component Systems, Inc. in favor of Richard J.
Reason as Trustee of the Richard J. Reason Revocable Living Trust dated April 9, 1979 and
agreed to by the Company
10.38(1) -- Conversion Agreement dated December 31, 1996 among DCT Component Systems, Inc., the Company
and Holder
10.39(1) -- Memorandum of Understanding dated July 1, 1996 and August 3, 1996 outlining terms and
conditions pursuant to which James Bronce Henderson III and Norma M. Stone agree to loan
funds to DCT Component Systems, Inc.
10.40(1) -- Stock Exchange Agreement dated as of January 1, 1997 among the Company, Richard G.
Skandalaris and Skandy Corp.
10.41(1) -- Asset Purchase Agreement dated February 28, 1997 and effective March 1, 1997 between Utilase
Production Process, Inc. and Utilase, Inc.
10.42(1) -- Promissory Note dated February 28, 1997 made by the Company and Utilase Production Process,
Inc. in favor of Utilase, Inc. in the principal amount of $850,000.
10.43(1) -- Security Agreement dated February 28, 1997 among the Company and Utilase Production Process,
Inc. and Utilase, Inc.
10.44(1) -- Escrow Agreement dated April 7, 1997 among the Company, Utilase, Inc., and Jaffe, Raitt,
Heuer & Weiss
10.45(1) -- Form of Non-Compete Agreement between Utilase, Inc. and James Bronce Henderson III
10.46(1) -- Form of Non-Compete Agreement between the Company and Jeffrey A. Moss
10.47(1) -- Form of Non-Compete Agreement between Utilase, Inc. and DCT, Inc.
10.48(1) -- Employment Agreement dated April 7, 1997 between Utilase, Inc. and John K. Baysore
10.49(1) -- Registration Rights Agreement dated April 7, 1997 among the Company, Utilase, Inc., James
Bronce Henderson, III and Jeffrey A. Moss
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------- --------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
10.50(1) -- Shareholders' Agreement dated April 7, 1997 among the Company, Utilase, Inc., Robert J.
Skandalaris and James Bronce Henderson, III
10.51(1) -- Shareholder Agreement
10.52(1) -- Voting Agreement and Power of Attorney
10.53(1) -- 1997 Stock Option Plan of Registrant
10.54(1) -- $300,000 Promissory Note dated January 15, 1996 in favor of James D. Skandalaris
10.55(1) -- $90,000 Promissory Note dated March 1, 1994 in favor of James D. Skandalaris
10.56(1) -- $1,000,000 Promissory Note dated April 30, 1996 in favor of Robert J. Skandalaris
10.57(1) -- Agreement of Amendment dated August 26, 1997 among the Company, Utilase Production Process,
Inc., Robert J. Skandalaris, DCT, Inc., DCT Component Systems, Inc., Utilase, Inc., James
Bronce Henderson, III, John K. Baysore and David C. Stone
10.58(1) -- Letter Agreement between James D. Skandalaris, the Company and Prestock regarding extension
of promissory notes.
21.1(1) -- Subsidiaries of the Registrant
23.1 -- Consent of Grant Thornton LLP
23.2(2) -- Consent of Bruck & Perry, A Professional Corporation (included in its opinion to be filed as
Exhibit 5.1 to the Registration Statement)
24.1(1) -- Power of Attorney (contained on Page II-14, the signature page)
27.1(1) -- Financial Data Schedule
99.1(1) -- Consent of James Bronce Henderson III to identification as director nominee
99.5(1) -- Consent of Anthony R. Tersigni to identification as director nominee
99.6 -- Consent of Richard J. Reason to identification as director nominee
99.7(1) -- Letter Agreement dated March 15, 1997 among DCT Companies, Inc., James Bronce Henderson III,
David C. Stone and the Company
99.8(1) -- Commitment Letter from Comerica Bank to Utilase, Inc. and Robert J. Skandalaris dated March
26, 1997
99.9(1) -- Commitment Letter from NBD Bank to the Company dated September 5, 1997
99.10 -- Consent of Timothy F. Healy to identification as director nominee.
99.11 -- Consent of Daniel J. McEnroe to identification as director nominee.
99.12 -- Consent of Christopher L. Morin to identification as director nominee.
</TABLE>
- ------------------
(1) Previously filed.
(2) To be filed by Amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
II-10
<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denomination and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described above in Item 14, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be a part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to its registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bloomfield
Hills, State of Michigan, on October 14, 1997.
NOBLE INTERNATIONAL, LTD.
By: /s/ MICHAEL C. AZAR
-----------------------
Michael C. Azar
Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
* President, Chief Executive Officer and October 14, 1997
- ------------------------------------------ Director (Principal Executive Officer)
Robert J. Skandalaris
* Treasurer, Chief Executive Officer and October 14, 1997
- ------------------------------------------ Director (Principal Financial and
Richard V. Balgenorth Accounting Officer)
/s/ MICHAEL C. AZAR Director October 14, 1997
- ------------------------------------------
Michael C. Azar
/s/ MICHAEL C. AZAR
- ------------------------------------------
Michael C. Azar
as Attorney-in-fact
</TABLE>
II-12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------- --------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
1.1(1) -- Form of Underwriting Agreement
2.1(1) -- Stock Purchase Agreement dated April 7, 1997 among the Company, Utilase, Inc., the
Shareholders of Utilase, Inc.
3.1(1) -- Certificate of Amendment to the Articles of Incorporation of the Company
3.2(1) -- Amended and Restated Bylaws of the Company
4.1(1) -- Form of Representatives' Warrant Agreement, including form of Warrant
4.2(1) -- Forms of Series A Subordinated Promissory Notes
4.3(1) -- Forms of Series B Subordinated Promissory Notes
4.4(1) -- Forms of Series C Subordinated Promissory Notes
4.5(1) -- Forms of Series D Subordinated Promissory Notes
5.1(2) -- Opinion of Bruck & Perry, A Professional Corporation as to the legality of the securities
being registered
10.1(1) -- Bill of Sale dated February 25, 1994 pertaining to the assets acquired by Prestolock
International, Ltd. from Midlantic National Bank
10.2(1) -- Trademark Agreement entered into February 25, 1994 between Prestolock International, Ltd. and
Presto Lock, Inc.
10.3(1) -- Asset Purchase Agreement dated as of July 21, 1994 between Prestolock International, Ltd. and
the Eastern Company for the sale of certain assets
10.4(1) -- Non-Competition Agreement dated as of July 21, 1994 between Prestolock International, Ltd.
and the Eastern Company
10.5(1) -- Trademark License Agreement dated July 21, 1994 between Prestolock International, Ltd. and
the Eastern Company
10.6(1) -- Sales Service Consulting Agreement dated July 21, 1994 between Prestolock International, Ltd.
and the Eastern Company
10.7(1) -- Tax Free Stock Exchange Agreement made effective as of January 1, 1996 between the Company
and Robert J. Skandalaris and Daniel J. Brunell
10.8(1) -- Stock Purchase Agreement dated January 1, 1996 among the Company and Cass River Coatings,
Inc., Gene Oldford, Kevin Redding, Chris Frampton, Jan Wojeichowski, Pat Patterson, and Jim
Lamb
10.9(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Eugene
Oldford
10.10(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Kevin
Redding
10.11(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Chris
Frampton
10.12(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Jan
Wojeichowski
10.13(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Pat
Patterson
10.14(1) -- Consulting Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Jim Lamb
10.15(1) -- Stock Option Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Gene
Oldford, Kevin Redding, Chris Frampton, Jan Wojeichowski, Pat Patterson, and Jim Lamb
10.16(1) -- Security Agreement dated January 31, 1996 between Cass River Coatings, Inc. and Eugene
Oldford, Kevin Redding, Chris Frampton, Jan Wojeichowski, Pat Patterson, and Jim Lamb
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10.17(1) -- Land Contract dated October 26, 1994 between Cass River Investment Company and Cass River
Coatings, Inc.
10.18(1) -- Stock Purchase Agreement dated January 1, 1996 between the Company and Richard J. Reason,
individually and as Trustee of his Revocable Living Trust dated April 9, 1979 and The Richard
J. Reason Irrevocable Trust for the Benefit of Victoria Aldrich and Peter Reason dated
October 12, 1992
10.19(1) -- Promissory Note dated January 1, 1996 in the original principal amount of $2,231,000
delivered by the Company in favor of The Richard J. Reason Irrevocable Trust for the Benefit
of Victoria Aldrich and Peter Reason dated October 12, 1992
10.20(1) -- Promissory Note dated January 1, 1996 in the original principal amount of $4,119,000
delivered by the Company in favor of Richard J. Reason, Trustee of his Revocable Living Trust
dated April 9, 1979
10.21(1) -- Guaranty of Robert Skandalaris ($500,000) dated January 1, 1996 for the benefit of The
Richard J. Reason Irrevocable Trust for the Benefit of Victoria Aldrich and Peter Reason
dated October 12, 1992
10.22(1) -- Memorandum of Land Contract dated April 30, 1996 between Richard J. Reason Agreement of Trust
dated April 9, 1979 and Monroe Engineering Products, Inc.
10.23(1) -- Guaranty of Robert Skandalaris dated April 30, 1996 of Monroe Engineering Products, Inc.'s
obligations under Land Contract
10.24(1) -- Employment and Deferred Compensation Agreement dated January 1, 1996 between Monroe
Engineering Products, Inc. and Richard Reason, as amended December 30, 1996
10.25(1) -- Loan Agreement dated April 30, 1996 among Comerica Bank and the Registrant, Monroe
Engineering Products, Inc., Prestolock International, Ltd. and Cass River Coatings, Inc.
including Amendment No. 3 dated April 30, 1997
10.26(1) -- Stock Purchase Agreement dated July 1, 1996, between DCT Component Systems, Inc., a Michigan
corporation, James Bronce Henderson, III, David C. Stone, the Company, and Peter Raab
10.27(1) -- Stock Redemption Agreement dated July 1, 1996 between Peter Raab and DCT Components Systems,
Inc.
10.28(1) -- Management Agreement dated July 1, 1996 between DCT Component Systems, Inc. and the Company
10.29(1) -- Voting Agreement and Irrevocable Proxies dated July 1, 1996 by and among DCT Component
Systems, Inc., James Bronce Henderson III, and David C. Stone, and Robert Skandalaris as the
representative of the Company
10.30(1) -- Shareholder Agreement among the Company, James Bronce Henderson, III, David C. Stone, Peter
Raab and DCT Component Systems, Inc. dated July 1, 1996
10.31(1) -- Executive Bonus Pool for DCT Components Systems, Inc.
10.32(1) -- License Agreement dated July 1, 1996, by and between James Bronce Henderson, III and John C.
Fox as licensors, and DCT Component Systems, Inc., as licensee
10.33(1) -- Employment Agreement between DCT Component Systems, Inc. and Peter Raab dated July 18, 1994,
as amended June 30, 1996
10.34(1) -- Loan and Security Agreement dated June 27, 1996 between DCT Component Systems, Inc. and the
CIT Group/Credit Finance, Inc.
10.35(1) -- Loan Agreement between DCT Component Systems, Inc. and Deutsche Financial Services Holding
Company
10.36(1) -- Line of Credit Promissory Note ($960,000) made by DCT Component Systems, Inc. in favor of DCT
Companies, Inc.
10.37(1) -- Put Agreement dated December 31, 1996 by DCT Component Systems, Inc. in favor of Richard J.
Reason as Trustee of the Richard J. Reason Revocable Living Trust dated April 9, 1979 and
agreed to by the Company
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10.38(1) -- Conversion Agreement dated December 31, 1996 among DCT Component Systems, Inc., the Company
and Holder
10.39(1) -- Memorandum of Understanding dated July 1, 1996 and August 3, 1996 outlining terms and
conditions pursuant to which James Bronce Henderson III and Norma M. Stone agree to loan
funds to DCT Component Systems, Inc.
10.40(1) -- Stock Exchange Agreement dated as of January 1, 1997 among the Company, Richard G.
Skandalaris and Skandy Corp.
10.41(1) -- Asset Purchase Agreement dated February 28, 1997 and effective March 1, 1997 between Utilase
Production Process, Inc. and Utilase, Inc.
10.42(1) -- Promissory Note dated February 28, 1997 made by the Company and Utilase Production Process,
Inc. in favor of Utilase, Inc. in the principal amount of $850,000.
10.43(1) -- Security Agreement dated February 28, 1997 among the Company and Utilase Production Process,
Inc. and Utilase, Inc.
10.44(1) -- Escrow Agreement dated April 7, 1997 among the Company, Utilase, Inc., and Jaffe, Raitt,
Heuer & Weiss
10.45(1) -- Form of Non-Compete Agreement between Utilase, Inc. and James Bronce Henderson III
10.46(1) -- Form of Non-Compete Agreement between the Company and Jeffrey A. Moss
10.47(1) -- Form of Non-Compete Agreement between Utilase, Inc. and DCT, Inc.
10.48(1) -- Employment Agreement dated April 7, 1997 between Utilase, Inc. and John K. Baysore
10.49(1) -- Registration Rights Agreement dated April 7, 1997 among the Company, Utilase, Inc., James
Bronce Henderson, III and Jeffrey A. Moss
10.50(1) -- Shareholders' Agreement dated April 7, 1997 among the Company, Utilase, Inc., Robert J.
Skandalaris and James Bronce Henderson, III
10.51(1) -- Shareholder Agreement
10.52(1) -- Voting Agreement and Power of Attorney
10.53(1) -- 1997 Stock Option Plan of Registrant
10.54(1) -- $300,000 Promissory Note dated January 15, 1996 in favor of James D. Skandalaris
10.55(1) -- $90,000 Promissory Note dated March 1, 1994 in favor of James D. Skandalaris
10.56(1) -- $1,000,000 Promissory Note dated April 30, 1996 in favor of Robert J. Skandalaris
10.57(1) -- Agreement of Amendment dated August 26, 1997 among the Company, Utilase Production Process,
Inc., Robert J. Skandalaris, DCT, Inc., DCT Component Systems, Inc., Utilase, Inc., James
Bronce Henderson, III, John K. Baysore and David C. Stone
10.58(1) -- Letter Agreement between James D. Skandalaris, the Company and Prestock regarding extension
of promissory notes.
21.1(1) -- Subsidiaries of the Registrant
23.1 -- Consent of Grant Thornton LLP
23.2(2) -- Consent of Bruck & Perry, A Professional Corporation (included in its opinion to be filed as
Exhibit 5.1 to the Registration Statement)
24.1(1) -- Power of Attorney (contained on Page II-14, the signature page)
27.1(1) -- Financial Data Schedule
99.1(1) -- Consent of James Bronce Henderson III to identification as director nominee
99.5(1) -- Consent of Anthony R. Tersigni to identification as director nominee
99.6 -- Consent of Richard J. Reason to identification as director nominee
99.7(1) -- Letter Agreement dated March 15, 1997 among DCT Companies, Inc., James Bronce Henderson III,
David C. Stone and the Company
99.8(1) -- Commitment Letter from Comerica Bank to Utilase, Inc. and Robert J. Skandalaris dated March
26, 1997
99.9(1) -- Commitment Letter from NBD Bank to the Company dated September 5, 1997
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99.10 -- Consent of Timothy F. Healy to identification as director nominee.
99.11 -- Consent of Daniel J. McEnroe to identification as director nominee.
99.12 -- Consent of Christopher L. Morin to identification as director nominee.
</TABLE>
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(1) Previously filed.
(2) To be filed by Amendment.
<PAGE>
Exhibit 23.1
CONSENT OF GRANT THORNTON LLP
We have issued our reports dated May 9, 1997, accompanying the financial
statements of Noble International, Ltd. and DCT Component Systems, Inc., our
report dated March 4, 1997 accompanying the financial statements of Monroe
Engineering Products, Inc., and our report dated May 12, 1997, accompanying
the financial statements of Utilase, Inc., contained in the Registration
Statement and Prospectus. We consent to the use of the aforementioned reports in
the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts."
/s/ Grant Thornton LLP
Detroit, Michigan
October 14, 1997
<PAGE>
Exhibit 99.6
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director
nominee of Noble International, Ltd. in the within Registration Statement on
Form S-1.
/s/ Richard J. Reason
----------------------------
RICHARD J. REASON
<PAGE>
Exhibit 99.10
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director
nominee of Noble International, Ltd. in the within Registration Statement on
Form S-1.
/s/ Timothy F. Healy
----------------------------
TIMOTHY F. HEALY
<PAGE>
Exhibit 99.11
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director
nominee of Noble International, Ltd. in the within Registration Statement on
Form S-1.
/s/ Daniel J. McEnroe
----------------------------
DANIEL J. MCENROE
<PAGE>
Exhibit 99.12
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director
nominee of Noble International, Ltd. in the within Registration Statement on
Form S-1.
/s/ Christopher L. Morin
----------------------------
CHRISTOPHER L. MORIN
