4
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ____________.
Commission file number 1-3329
WILSON BROTHERS
(Exact name of registrant as specified in its charter)
(Each name of registrant as specified in its charter)
ILLINOIS 36-1971260
(State or other jurisdiction of (I.R.S. Employee
incorporation or organization) Identification No)
902 South Main Street 15474
Point Marion, PA (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, (412) 725-5231
including area code:
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock. $1.00 Par Value
Title of Class
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or l5(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ x ]
The aggregate market value of the voting stock held by non-
affiliates cannot be determined since no established market
exists for the Company's common stock.
There were 3,321,039 shares of the registrant's common
stock ($l.00 par value) outstanding at March 1, 1996, of which
non-affiliates and affiliates held 1,776,386 and 1,544,653
shares, respectively, representing 53.5% and 46.5%, respectively,
of the registrant's common stock outstanding.
PART I
Item 1. Business.
General Development of Business
Wilson Brothers was incorporated in Illinois in 1898.
Reference herein to "the Company" includes collectively Wilson
Brothers and its subsidiaries unless the content indicates
otherwise. The Company's principal executive offices are located
at 902 South Main Street, Point Marion, PA 15474.
During the 1996 fiscal year, the Company had one active,
wholly-owned subsidiary - Houze Glass Corporation, a Pennsylvania
corporation ("Houze") located in Point Marion, Pennsylvania,
which is engaged in the specialty decoration of glass and ceramic
items.
At the beginning of fiscal year 1993 approximately 53.7% of
the Company's common stock was owned by DWG Corporation ("DWG").
On April 23, 1993, DWG Acquisition Group L.P. acquired 28.6% of
DWG's then outstanding shares of common stock. DWG Acquisition
Group L.P. subsequently changed its name to Triarc Companies,
Inc. ("Triarc").
On September 28, 1993, the Company's Board of Directors
authorized the sale or liquidation of all of its operating
businesses. On December 28, 1993, Triarc entered into a
Securities Purchase Agreement with Bruce Paparella and Warren B.
Kanders (the "Purchase Agreement"). Pursuant to the Purchase
Agreement, on January 10, 1994, Mr. Paparella acquired from
Triarc 1,296,436 shares of the Company's common stock, Mr.
Kanders acquired from Triarc 648,217 shares of the Company's
common stock, Triarc assigned to Mr. Paparella and Mr. Kanders
that certain note made by the Company and owned by Triarc with a
remaining principal balance of $1,500,000 which note bears
interest at the prime rate and at the time was convertible into
956,937 shares of the Company's common stock (the "Convertible
Note"), and Triarc assigned to Mr. Paparella and Mr. Kanders cer
tain accounts receivable by Triarc in the amount at September 30,
1993 of $1,230,000 (the "Accounts Receivable"). As a consequence
of said transactions, Mr. Paparella owned a 75% interest in the
Convertible Note and the Accounts Receivable and Mr. Kanders ob
tained a 25% interest in the Convertible Note and the Accounts
Receivable and, Mr. Paparella and Mr. Kanders together owned ap
proximately 59% of the Company's outstanding common stock and, as
a result of such transactions, may be deemed to have controlled
the Company. The Company has been informed that, effective
December 30, 1994, Mr. Kanders entered into three separate stock
purchase agreements pursuant to which Mr. Kanders transferred the
aggregate of 648,217 shares of the Company's common stock owned
by him to four individuals, including Mr. Paparella who purchased
348,217 shares for $5,000. The remainder of these shares were
sold by Mr. Kanders to three individuals who are not related to
Mr. Paparella. In addition, the Company has been informed that,
on December 22, 1994 Mr. Kanders made a gift of his 25% portion
of the Convertible Note, which was convertible into 239,234
shares of Common Stock (representing 6.9% of the Common Stock on
a fully diluted basis assuming the Convertible Note was fully
converted into such shares of Common Stock), and Mr. Kanders' 25%
interest in the Accounts Receivable to a charitable foundation,
Choate Rosemary Hall Foundation, Inc., leaving Mr. Kanders with
no remaining beneficial interest in the Company's common stock.
On April 18, 1995, John Sanford, the Company's then Vice
President and Chief Financial Officer, acquired in a private
transaction with Mr. Walter Carucci, a $362,500 interest in such
convertible note which is convertible into 231,259 shares of the
Company's Common Stock and, as such, Mr. Sanford may be deemed to
be the beneficial owner of 231,259 shares issuable to him upon
his election to convert his interest in the notes. On April 21,
1996, Mr. Bruce Paparella, the Company's President, Chief
Executive Officer and a Director died from cancer. On September
6, 1996, in a private transaction, the Estate of Mr. Paparella
sold to Mr. Sanford 1) a 37.5% interest in such Note in the
principal sum of $562,500, which is convertible into 358,852
shares of the Company's Common Stock, 2) certain accounts
receivable in the amount of $461,250 of the Company, and 3)
1,644,653 shares of the Company's common stock, for an aggregate
purchase price of $330,000. On November 22, 1996, Mr. Sanford,
in a private transaction, made gifts to non-affiliated persons of
1) 100,000 shares of the Company's Common Stock, and 2) $56,250
of the principal amount plus accrued interest of the Convertible
Note, which is convertible into 35,886 shares of the Company's
Common Stock. As a result of these transactions, as of December
31, 1996, Mr. Sanford beneficially owns 1,544,653 shares of the
Company's outstanding Common Stock, representing 46.5% of such
Common Stock outstanding, and is the beneficial owner of 554,226
shares issuable to him upon his election to convert his interest
in the Note, constituting an aggregate beneficial interest in
2,098,879 shares of the Common Stock of the Company representing
approximately 54.2% of the Common Stock of the Company and may be
deemed to control the Company.
Mr. Sanford is the Company's Chief Executive Officer and a
member of the Board of Directors.
From September 28, 1993 through January 9, 1994, the
Company's two wholly-owned subsidiaries, Houze and Northern
Engineering Corporation, a Delaware corporation ("Northern"),
were treated as discontinued operations. As of January 10, 1994,
however, the Company's Board of Directors deemed it in the
Company's best interest to continue the operations of Houze.
Accordingly, the consolidated financial statements for each of
the periods presented have been restated to reflect only the
operations of Northern as discontinued.
On May 12, 1994, the Company sold all of the outstanding
shares of Northern to a corporation controlled by a former
director of the Company. In consideration for the sale of the
Northern shares, the Company received $10,000, plus a secured
promissory note (the "Note") in the principal amount of $750,000
repayable on or before May 1, 1999, which bears interest payable
quarterly at 8 percent per annum. Such note is collateralized by
certain real property of Northern (the "Mortgaged Property").
The Mortgaged Property was not appraised in connection with the
transaction. If the Mortgaged Property is sold, all of the
principal and interest is immediately due and payable. Effective
October 28, 1994, the Company agreed to reduce the percentage
from 50 percent to 30 percent of the amount that the Company
shall be entitled to receive if the Mortgaged Property is sold in
excess of $750,000. In exchange, the purchaser made a partial
prepayment of the principal of the Note in the amount of $150,000
which was paid by November 7, 1994, and agreed to make an
additional $150,000 partial prepayment which was paid on January
15, 1995. The purchaser had the option to prepay the remaining
principal balance of the Note by June 30, 1995. Such prepayment
was not made, and therefore, the purchaser was to additionally
compensate the Company $50,000 by July 15, 1995, of which only
$10,000 has been paid. As a result, the Company believes that
the principal amount of the Note and accrued interest thereon may
not be collectible, and therefore as of September 30, 1995 made a
full valuation reserve in the financial statements of $450,000
for the principal balance and $6,000 for the accrued interest
balance on the note as well as the $40,000 balance on the option
fee. The Company intends to pursue all opportunities for
collection, including repossession and liquidation of the
Mortgaged Property.
On November 16, 1995, the Company received $472,541
representing the net proceeds distributed in connection with the
resolution of all litigation claims of Northern, retained by the
Company after the sale of Northern, with Pennsylvania Engineering
Corporation. These proceeds were applied to interest and
principal under the Note. The Consolidated Financial Statements
included elsewhere in this Annual Report on Form 10-K reflect the
stock sale of Northern.
Industry Segments
The Company presently operates in one business segment.
Business
Wilson Brothers is a holding company whose business is
conducted through Houze. Through Houze, the Company is engaged
in the specialty decoration of glass and ceramic items.
Except as described below, the Company does not anticipate
that present environmental regulations will materially affect its
capital expenditures, earnings or competitive position. To date,
the Company has not been required to make significant capital
expenditures in order to meet current environmental standards.
As of December 31, 1996, the Company had approximately 87
employees of which 24 were salaried employees and the remainder
were hourly personnel. Workers are represented by the American
Flint Glass Workers Union under a contract which expires in March
1999. The Company believes its relations with its employees are
satisfactory.
Except as described below, patents, trademarks, licenses,
franchises and concessions are not material to the business of
the Company. Working capital requirements of the Company are
expected to be fulfilled from operating cash flow supplemented by
a revolving line of credit facility arranged with a bank on March
4, 1994 and extended on various dates through maturity on
December 31, 1997. During the last three years, the Company has
not had any material expenditures for Company or customer
sponsored research and development activities. No single
customer accounted for more than 10% of the Company's
consolidated revenues in 1996.
Houze is engaged in the specialty decoration of glass,
ceramic and, commencing in 1996, plastic items. Sales are made
through sales representatives and are generally for advertising
specialties, premiums, souvenirs and the retail trade. Houze's
core business, which is highly competitive, consists principally
of the decoration of mugs which are sold to advertising specialty
distributors. Custom imprinted tumblers or coffee mugs generally
lend more exposure per advertising dollar to customers because of
their frequency of use in the business atmosphere. From time to
time, Houze also obtains special contract orders. Such special
contract orders do no necessarily occur each year and there were
no significant contract orders in 1994, 1995 or 1996. The
decorative glass business is highly competitive, particularly in
connection with items such as tumblers, mugs and glasses. The
particular markets targeted by the ceramic mug segment are
pharmaceutical companies that utilize the "magic" process to
demonstrate a change which occurs when a particular medication is
prescribed. Houze also targets companies that desire to
advertise a particular product or perhaps a change in the company
(i.e., name or logo). Houze competes on the basis of price,
quality and design. Many of its competitors are much larger
companies, with far greater resources. Anchor Hocking
Corporation and Libbey Owens Ford Company are dominant in this
industry. Using price, quality, service and expertise of design
as priorities, the Company believes that it can maintain a
competitive edge in the advertising specialty market.
For the last three years the custom decorated ceramic mug
product line has been approximately 85% of Houze's overall
business.
Management is currently looking to expand Houze's decorative
products to include custom imprinted ceramic steins, shot
glasses, and travel mugs. Additionally, the Company is
decorating beverage coolers, plastic items, and sublimated mugs.
Houze is continuing to use the "magic" process which is a
thermal chromatic process whereby ceramic pigment is activated by
either high or low temperatures. This allows for a visual change
in the product to reveal an advertisement or artistic effect.
This process is now available through other manufacturers in
United States. Consequently, competition in this market area is
increasing to some extent.
Houze purchases much of its raw material supplies of glass
and ceramic items from five principal suppliers. However,
management believes that such raw materials are readily available
from other sources at competitive prices.
Houze enters into licensing agreements with customers which
permit Houze to imprint specific logos or designs directly on
products.
In recent years, Houze's sales have been greatest during the
fall quarter as a result of customers' holiday programs. Backlog
or orders believed to be firm as of December 31, 1996 was
$223,000 compared to $310,000 at year end 1995. Backlog orders
are filled within the current fiscal year.
Because the ceramic mug business is dependent on imported
ware, Houze is required to maintain inventories to cover needs
for 45 - 60 days at a minimum. If a shortfall occurs, inventory
is supplemented with ware purchased from a distributor located in
the United States. Houze does not offer extended payment terms
to customers.
Houze is not dependent on any single customer because of
Houze's method of distribution. Houze is a member of the
Advertising Specialty Institute and a supplier to the advertising
industry. Houze maintains a nationwide distribution network
through over 13,800 distributors offering Houze products.
As an advertising specialty supplier, no material portion of
Houze's business is affected by renegotiation of profits or
termination of contracts at the election of any governmental
agency.
In February 1993, the Company became aware that certain of
Houze's products may have concentrations of lead and cadmium at
levels which might constitute hazardous waste. While after
testing, it was ascertained that products currently being
produced are within acceptable levels, certain products,
generally those produced prior to 1980, had unacceptable levels
of lead and cadmium. These products had been disposed of in a
disposal site located on Houze's property. The Pennsylvania
Department of Environmental Regulation (PDER) and the Company
agreed to a consent order on September 22, 1994, which outlines a
plan for Houze to remove and encapsulate all of the hazardous
waste and thereby comply with residual waste pile closure
requirements. The Company intends to fully comply with the
requirements of the consent order. The estimated cost of the
Company's original plan of remediation was increased during 1993
by $700,000 from $200,000, based on advice from its consultant,
which was provided for in the 1993 consolidated financial
statements. At December 31, 1996, the reserve balance was
$820,000 reflecting charges of $25,000, $41,000 and $14,000 in
actual remediation expenses incurred during 1996, 1995 and 1994,
respectively. While the Company believes that the total cost of
the plan provided by the PDER in the consent order discussed
above will not exceed the amount reserved, the Company is unable
at this time to make a final determination of the cost of
implementation, and therefore, has not adjusted such reserve
beyond that arising from actual remediation expenditures. On
February 11, 1997, PDER granted Houze an extension in the consent
order until June 30, 1997. The final costs to complete the plan
of remediation may be substantial in relation to the consolidated
financial position of the Company, which could have a material
adverse effect on its results of operations and liquidity.
The Company has no foreign operations or any material export
sales.
Subsequent Events
On February 13, 1997, in a private transaction, Choate
Rosemary Hall Foundation, Inc. sold to Mr. Sanford pursuant to a
Note and Accounts Receivable Purchase Agreement (i) their
interest of $375,000 principal amount of the Convertible Note,
which is convertible into 239,234 shares of the Company's Common
Stock, and (ii) their interest in the Accounts Receivable for an
aggregate purchase price of $200,000.
As a result of the above transaction, Mr. Sanford is the
beneficial holder of (i) $1,243,750 of the Convertible Note
convertible at any time into 793,460 shares of Common Stock, and
(ii) 1,544,653 shares of the Company's Common Stock, constituting
approximately 56.8 percent of the Company's outstanding Common
Stock.
On April 9, 1997, the Company entered into a stock purchase
agreement with G&L Consultants, Inc. to purchase 90 percent
ownership, represented by 171,000 shares of the outstanding
common stock of LM Plastics, Inc., a North Carolina corporation
with its principal office in Shelby, North Carolina. The
purchase price for the common stock consisted of the payment of
$1, plus a personal indemnity by Mr. Sanford to G&L Consultants,
Inc. for the payment of a promissory note from the LM Plastics,
Inc. to a bank in the original principal amount of $70,000. The
Company has the option to purchase at any time, or after 3 years
is obliged to purchase at the request of G&L consultants, Inc.,
the remaining 10 percent outstanding shares for the amount of
$10,450, with such price increasing at an annual rate of 20
percent for each month after April 9, 1997.
Item 2. Properties.
Operations of Houze occupy a facility in Point Marion,
Pennsylvania which has approximately 175,000 square feet of
manufacturing and office space on a 16 acre site. Such facility
is substantially utilized.
Item 3. Legal Proceedings.
In December 1993, a civil action was brought in the United
States District Court for the Western District of Pennsylvania
against the Company, Houze and Triarc Companies, Inc. ("Triarc"),
the former parent of the Company, by the former chief operating
officer of Houze. The complaint alleged that such officer was
owed bonuses in the amount of approximately $116,000 plus
interest on said amount. The amount of the claim for bonuses had
been recorded in the consolidated financial statements of the
Company. The Company and Houze answered the claim and asserted
certain counterclaims. By agreement dated January 1, 1995, the
Company, Houze and Triarc agreed to settle the claims and
counterclaims. The agreement provides that Houze will pay the
former officer the aggregate amount of $37,500 in several
installments, all of which has been paid as of December 31, 1996.
The $116,000 reserve for this claim was reduced accordingly as of
December 31, 1994.
While the Company is not currently engaged in litigation,
the Company is from time to time involved in routine litigation
incidental to its business. The Company does not believe that
any of such routine litigation will have a material adverse
effect on its consolidated financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
There is no current established public trading market for
the Company's common stock.
Prior to September 14, 1993, the high and low sales prices
for the common stock of the Company as listed on the Pacific
Stock Exchange were as follows:
Prices
Year and Period High Low
1993
First Quarter $.75 $.50
Second Quarter .875 .50
Third Quarter .875 .125
From September 14, 1993 through December 31, 1993, the range
of high and low bid information for the common stock of the
Company was as follows:
Prices
Year and Period High Low
1993
Fourth Quarter (9/14 to 12/13) $.0625 $.03125
Such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may
not necessarily represent actual transactions.
On September 14, 1993, the Company's common stock was
delisted from the Pacific Stock Exchange for failure to comply
with minimum listing criteria. Since that time the Company's
common stock has been traded over the counter through National
Quotation Bureau's "pink sheets". Since December 12, 1993, the
"pink sheets" has listed no bid for the Company's common stock.
As of December 31, 1996, there were 3,027 record holders of
the Company's common stock.
The Company did not declare or pay any cash dividends during
the past three years. The applicable provisions of the Business
Corporation Act of Illinois, the Company's jurisdiction of
incorporation, limit the payment of dividends to an amount equal
to the difference between the assets of a corporation and its
liabilities. Under such provisions at December 31, 1996, no
dividends were permitted to be paid. The Company has no present
plans for the payment of any dividends.
On January 10, 1994, pursuant to a Securities Purchase
Agreement dated December 28, 1993 among Bruce Paparella, Warren
B. Kanders and Triarc Companies, Inc. ("Triarc"), (i) Mr.
Paparella acquired from Triarc 1,296,436 shares of the Company's
common stock, (ii) Mr. Kanders acquired from Triarc 648,217
shares of the Company's common stock, (iii) Triarc assigned to
Mr. Paparella and Mr. Kanders that certain note made by the
Company and owned by Triarc with a remaining principal balance of
$1,500,000 which note bears interest at the prime rate and at the
time was convertible into 956,937 shares of Common Stock (the
"Note"), and (iv) Triarc assigned to Mr. Paparella and Mr.
Kanders certain accounts receivable held by Triarc in the amount
at September 30, 1993 of $1,230,000 (the "Accounts Receivable").
Triarc is the successor to DWG Corporation ("DWG"), the former
controlling shareholder of the Company. As a consequence of said
transactions, Mr. Paparella obtained a 75% interest in the Note
and the Accounts Receivable and Mr. Kanders obtained a 25%
interest in the Note and the Accounts Receivable.
The Company has been informed that, effective December
30, 1994, Mr. Kanders entered into three separate stock purchase
agreements pursuant to which Mr. Kanders transferred the
aggregate of 648,217 shares of the Company's Common Stock owned
by him to four individuals, including Mr. Paparella who purchased
348,217 shares for $5,000. The remainder of these shares were
sold by Mr. Kanders to three individuals who are not related to
Mr. Paparella. In addition, the Company has been informed that,
on December 22, 1994 Mr. Kanders made a gift of his 25% portion
of the Convertible Note which was convertible into 239,234 shares
of Common Stock (representing 6.9% of the Common Stock on a fully
diluted basis assuming the Convertible Note was fully converted
into such shares of Common Stock) and Mr. Kanders 25% interest in
the Accounts Receivable to a charitable foundation, Choate
Rosemary Hall Foundation, Inc., leaving Mr. Kanders with no
remaining beneficial interest in the Company's Common Stock. On
April 18, 1995, John Sanford, the Company's then Vice President
and Chief Financial Officer, acquired, in a private transaction
with Mr. Carucci, a $362,500 interest in such convertible note
which is convertible into 231,259 shares of the Company's Common
Stock and, as such, Mr. Sanford may be deemed to be the
beneficial owner of 231,259 shares issuable to him upon his
election to convert his interest in the notes. On April 21,
1996, Mr. Bruce Paparella, the Company's President, Chief
Executive Officer and a Director died from cancer. On September
6, 1996, in a private transaction, the Estate of Mr. Paparella
sold to Mr. Sanford 1) a 37.5% interest in such Note in the
principal sum of $562,500, which is convertible into 358,852
shares of the Company's Common Stock, 2) certain accounts
receivable in the amount of $461,250 of the Company, and 3)
1,644,653 shares of the Company's common stock, for an aggregate
purchase price of $330,000. November 22, 1996, Mr. Sanford, in a
private transaction, made gifts to non-affiliated persons of 1)
100,000 shares of the Company's Common Stock, and 2) $56,250 of
the principal amount plus accrued interest of the Convertible
Note, which is convertible into 35,886 shares of the Company's
Common Stock. As a result of these transactions, as of December
31, 1996, Mr. Sanford beneficially owns 1,544,653 shares of the
Company's outstanding Common Stock, representing 46.5% of such
Common Stock outstanding, and is the beneficial owner of 554,226
shares issuable to him upon his election to convert his interest
in the Note, constituting an aggregate beneficial interest in
2,098,879 shares of the Common Stock of the Company representing
approximately 54.2% of the Common Stock of the Company and may be
deemed to control the Company.
Mr. Sanford is the Company's Chief Executive Officer.
Item 6. Selected Financial Data.(1)
For the Year 1996 1995 1994 1993 1992
Net sales $5,715 $5,041 $5,495 $7,021 $8,280
Operating profit (loss) $ 14 $ (517) $(652) $(2,251)
$ (1,082)
Loss from
continuing operations $ (58)$ (602) $(588) $(3,492)
$ (1,376)
Loss from discontinued
operations, net of tax $ - $ (-) $ (161) $(1,837)
$ (976)
Net loss $(58) $(602) $(749) $(5,329) $
(2,352)
Loss per common and
equivalent share:
Continuing operations $(0.02) $(0.18) $(0.18) $(1.05)
$ (0.42)
Discontinued operations - - (0.05)
(0.55) (0.29)
Net loss $(0.02) $(0.18) $(0.23) $ (1.60)
$ (0.71)
Shares used in computing
loss per common and
equivalent share 3,321 3,321 3,321 3,321 3,321
Cash dividend per share $ - $ - $ - $ -
$ -
At Year-End
Total assets $1,998 $2,095 $2,655 $3,104 $7,290
Long-term debt $ - $ - $ - $ 9 $ 25
Note payable to majority
owners and others $ 1,500 $1,500 $1,500 $1,500
$ 1,500
(1) Restated to reflect the operations of Northern Engineering
Corporation as discontinued.1
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Forward-Looking Statements
The following discussion contains certain forward-looking
statements with respect to anticipated results which are subject
to a number of risks and uncertainties. From time to time, the
Company may publish forward-looking statements relating to such
matters as anticipated financial performance, business prospects,
technological developments, new products, research and
development activities and similar matters. The Private
Securities Litigation Reform Act of 1995 provides safe harbor for
forward-looking statements. In order to comply with the terms of
the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements. The risks
and uncertainties that may effect the operations, performance,
development and results of the Company's business include, among
other things, the following: business conditions and growth in
the Company's industry; general economic conditions; the addition
or loss of significant customers; the loss of key personnel;
product development; competition; fluctuations in foreign
currency exchange rates; rising costs of raw materials and the
unavailability of sources of supply; the timing of orders placed
by the Company's customers; failure by the Company's subsidiary,
Houze, to renegotiate its credit facility beyond the current
expiry date of December 31, 1997; and other risk factors listed
from time to time in the Company's quarterly reports.
Trends
Due to the continued decline in sales and the negative
impact of increased competition, the Company discontinued the
operations of Northern, which represented the Company's
industrial crane business, effective September 28, 1993, and such
operations were subsequently sold as discussed elsewhere herein.
The following discussion and analysis of financial condition
pertains primarily to Houze, which represents the remaining
business of the Company.
Houze continues to face significant competition,
particularly in its core business which consists principally of
the decoration of mugs which are sold to advertising specialty
distributors. In an effort to gain market share and to compete
with its competitors, many of which are larger companies with far
greater resources, Houze instituted price reductions for large
orders and has increased its marketing efforts to retail
distributors and holders of licensed products. Additionally,
Houze has made significant improvements to its customer services
area in response to the higher level of service demanded by its
customers.
Liquidity
The Company's consolidated cash and equivalents, were
$170,000 at December 31, 1996 compared to $428,000 at December
31, 1995. During this period, cash and equivalents decreased
primarily due to an increase in accounts receivable, reduction of
short term debt and operating losses.
From June 1987 through May 1989, the Company made certain
secured loans to Pennsylvania Engineering Corporation ("PEC")
which may be deemed to have been an affiliate of the Company at
such time, and in connection therewith, at December 31, 1994 the
Company was owed a principal balance of $1,555,000 on its
outstanding loans to PEC and $1,032,000 of accrued interest and
$78,000 of fees. Such outstanding loans to PEC were payable on
demand, bore interest at the prime rate plus 3% and are
collateralized by a mortgage on certain real property owned by
PEC's subsidiary, Lectromelt Corporation. On February 4, 1992,
PEC and its subsidiaries, Birdsboro Corporation and Lectromelt
Corporation, filed petitions for relief under Chapter 7 of the
Federal Bankruptcy Code in the United States Bankruptcy Court for
the Western District of Pennsylvania. A trustee was appointed in
such proceedings on February 7, 1992. In accordance with Chapter
7 of the Code, upon such appointment the trustee assumed
jurisdiction over the assets and all powers with respect to the
business of PEC and such subsidiary. On December 28, 1994 the
Company received $60,000 in satisfaction of the mortgage from the
sale of certain real property owned by PEC's subsidiary,
Lectromelt Corp. Such proceeds were applied to accrued interest
receivable and a comparable amount was charged against the
valuation reserve and recorded as other income in the statement
of operations. On September 11, 1995, the Company and the
Bankruptcy Trustee for PEC entered into a Settlement Agreement
pursuant to which the Company's claims against PEC were
recognized as an allowed, general unsecured claim in the amount
of $1,399,986 and provided for a contingent minimum distribution
to the Company in settlement of such claim in an amount equal to
at least 33 percent of its allowed claim. The Settlement
Agreement permitted the Company to withdraw from the settlement
if the Trustee's proposed distribution plan provided for
distribution to the Company of less than 33 percent of the
recognized claim. On October 16, 1995, the Bankruptcy Court
approved the Trustee's settlement with the Company and on
November 16, 1995 the Trustee made a distribution to the Company
in the amount of $472,541 in full and final settlement of the
Company's claim against PEC. Such proceeds were applied to
accrued interest receivable, and a comparable amount was charged
against the valuation reserve and recorded as other income in the
statement of operations.
On March 11, 1994, Houze entered into an agreement with a
bank for a revolving line of credit facility in an amount not to
exceed $400,000. The line of credit has since been increased to
$500,000 and extended to December 31, 1997. Advances on such
line of credit bear interest at the lending bank's prime rate
plus 3.5%. In addition, the bank is entitled to reimbursement of
fees for auditing Houze's accounts receivable during the term of
the commitment. Advances are collateralized by accounts
receivable, inventory and an assignment of a $50,000 Certificate
of Deposit from Fay Penn Economic Development Council and
$100,000 Certificates of Deposit from the Company, and are
guaranteed by the Company and Mr. Sanford. No assurances can be
given as to the success of obtaining an extension or refinancing
subsequent to December 31, 1997. A failure by Houze to
renegotiate such credit facility beyond December 31, 1997 would
have a material adverse effect on the Company.
For the year ended December 31, 1996, the Company
compensated the Estate of Mr. Paparella $18,750 for management
services. The Company compensated Mr. Sanford $67,000 for
management services for the year ended December 31, 1996, of
which $12,000 has been deferred. Mr. Sanford's annual
compensation for 1997 will be $12,000.
In accordance with an agreement with the Company's former
lender, DWG made a principal payment on December 31, 1982 on the
Company's behalf and purchased interest notes which were issued
by the Company to such lender in payment of accrued interest.
Pursuant to a Conversion Rights Agreement entered into between
the Company and DWG, the obligations of the Company arising from
the principal payment by DWG and purchase of interest notes were
convertible into newly-issued shares of the Company's common
stock. In 1983, DWG converted $651,445 principal amount of
interest notes into 651,445 shares of the Company's common stock.
In November and December 1988, the Company repaid all outstanding
interest notes which aggregated $2,132,000, repaid $4.5 million
of the $6.0 million note evidencing such principal payment and
paid substantially all accrued interest owed to DWG. The
remaining principal balance of a $1.5 million note owed to Triarc
Companies, Inc., successor to DWG, as of December 31, 1993 bears
interest at the prime rate and is convertible into 956,937 shares
of the Company's common stock. Effective January 10, 1994, such
convertible note was purchased by Mr. Bruce Paparella and Mr.
Warren B. Kanders in connection with their acquisition of common
stock from Triarc Companies, Inc., as described elsewhere herein.
On December 22, 1994, Mr. Kanders donated his 25% rights in such
note to a charitable institution. On April 18, 1995, John
Sanford, the Company's Vice President and Chief Financial
Officer, acquired a $362,500 interest in such convertible note
which is convertible into 231,259 shares of the Company's Common
Stock and, as such, Mr. Sanford may be deemed to be the
beneficial owner of 231,259 shares issuable to him upon his
election to convert his interest in the notes. On April 21,
1996, Mr. Bruce Paparella, the Company's President, Chief
Executive Officer and a Director died from cancer. On September
6, 1996, in a private transaction, the Estate of Mr. Paparella
sold to Mr. Sanford 1) a 37.5% interest in such Note in the
principal sum of $562,500, which is convertible into 358,852
shares of the Company's Common Stock, 2) certain accounts
receivable in the amount of $461,250 of the Company, and 3)
1,644,653 shares of the Company's common stock, for an aggregate
purchase price of $330,000. November 22, 1996, Mr. Sanford, in a
private transaction, made gifts to non-affiliated persons of 1)
100,000 shares of the Company's Common Stock, and 2) $56,250 of
the principal amount plus accrued interest of the Convertible
Note, which is convertible into 35,886 shares of the Company's
Common Stock. As a result of these transactions, as of December
31, 1996, Mr. Sanford beneficially owns 1,544,653 shares of the
Company's outstanding Common Stock, representing 46.5% of such
Common Stock outstanding, and is the beneficial owner of 554,226
shares issuable to him upon his election to convert his interest
in the Note, constituting an aggregate beneficial interest in
2,098,879 shares of the Common Stock of the Company representing
approximately 54.2% of the Common Stock of the Company and may be
deemed to control the Company.
The Company has incurred losses from operations and as of
December 31, 1996, the Company had a stockholders' deficiency of
$4.1 million and a consolidated working capital deficit of $2.3
million.
The Company's ability to meet its cash requirements in the
next year is dependent upon substantial improvement in the
results of operations and cash flows, maintaining and renewing
its financing from its bank or others. If these conditions are
not satisfactorily achieved, the Company may be unable to
generate sufficient cash flow to meet its requirements, including
payments of amounts which may be expended for environmental
remediation described elsewhere herein, and therefore, may be
unable to continue operations.
The financial statements have been prepared on a going
concern basis, and accordingly, do not include any adjustments
relating to the recoverability and classification of recorded
asset amounts nor the amounts and classification of liabilities
that might be necessary should the Company be unable to continue
in existence or be required to sell its assets.
Capital Resources
Capital expenditures of Houze, were $12,000, $0 and $16,000
in 1996, 1995 and 1994, respectively. The Company does not
anticipate any material capital expenditures in 1997, other than
expenditures by Houze for environmental remediation described
below.
As described elsewhere herein, the Company became aware that
certain of the products of Houze may have concentrations of lead
and cadmium at levels which might constitute hazardous waste.
While after testing, it was ascertained that products currently
being produced are within acceptable levels, certain products,
generally those produced prior to 1980, had unacceptable levels
of lead and cadmium. These products had been disposed of in a
disposal site located on Houze property. The Pennsylvania
Department of Environmental Regulation (PDER) and the Company
agreed to a consent order on September 22, 1994, which outlines a
plan for Houze to remove and encapsulate all of the hazardous
waste and thereby comply with residual waste pile closure
requirements. The Company intends to fully comply with the
requirements of the consent order. The estimated cost of the
Company's original plan of remediation was increased during 1993
by $700,000 from $200,000, based on advice from its consultant,
which was provided for in the consolidated financial statements.
On December 31, 1996, the reserve balance was $820,000 reflecting
charges of $25,000, $41,000 and $14,000 in actual remediation
expenses incurred during 1996, 1995 and 1994, respectively.
While the Company believes that the total cost of the plan
provided by the PDER in the consent order discussed above will
not exceed the amount reserved, the Company is unable at this
time to make a final determination of the cost of implementation,
and therefore, has not adjusted such reserve beyond that arising
from actual remediation expenditures. On February 11, 1997, PDER
granted Houze an extension in the consent order until June 30,
1997. The final costs to complete the plan of remediation may be
substantial in relation to the consolidated financial position of
the Company, which could have a material adverse effect on its
and liquidity.
Inflation and Changing Prices
Management believes that inflation did not have a
significant effect on gross margins during the last three years.
Results of Operations
1996 Compared with 1995
Net sales increased to $5.7 million in 1996 from $5.0
million in 1995. The increase in net sales resulted from
increased marketing and sales efforts initiated in 1995, as well
as special orders related to the 1996 Olympics. During 1996,
sales orders related to the 1996 Olympics aggregated $.5 million.
The Company sold 3.1 million units of decorative mugs and
glassware at an average price of approximately $1.82 versus 2.6
million units sold at an average price of $1.91 in 1995. In
addition, the Company sold .15 and .5 million units of
"misprinted mugs at an average price of $.07 and of $.07, for
1996 and 1995, respectively, for which the inventory values were
reduced to zero in prior years when such mugs were produced,
because they were deemed not salable.
While selling, general and administrative expenses have
decreased from $1.4 million in 1995 to $1.3 million in 1996, due
to decreased legal fees and salaries, selling, general and
administrative expenses of Houze increased by $.1 million due to
increased estimated charges for bad debts, and salaries.
1995 Compared with 1994
Net sales decreased to $5.0 million in 1995 from $5.5
million in 1994. The decrease in net sales and cost of sales was
primarily due to continued erosion of market share resulting from
increased competitive pressures, decreased pricing and the lack
of special contract orders which have supported sales volumes of
Houze in prior years.
The Company sold 2.6 million units of decorative mugs and
glassware at an average price of approximately $1.91 in 1995
versus 3.1 million units sold at an average price of $1.79 in
1994. The .5 million unit decrease in sales volume reduced the
Company's sales by approximately $895,000. However, average
sales price per unit increased by $.12 which offset such reduced
unit volume sales during 1995 by approximately $312,000. In
addition, the Company sold .5 million units of "misprinted mugs"
at an average price of $.07, for which the inventory value was
reduced to zero in 1994 when such mugs were produced, because
they were deemed not salable.
The Company's general and administrative expenses were
$113,000 higher in 1995 primarily due to increased legal fees in
connection with the settlement with PEC and other litigation
described elsewhere herein.
Other income included the collection of $472,500 from the
final settlement of the Company's claims against PEC, offset by a
$457,000 allowance for principal and interest due from the sale
of Northern which the Company believes may not be collectible.
Item 8. Financial Statements and Supplementary Data Index.
Report of Independent Public Accountants 15
Consolidated Financial Statements:
Consolidated Balance Sheets - December 31, 1996 and
1995 16
Consolidated Statements of Operations and
Accumulated Deficit -
Three years ended December 31, 1996 17
Consolidated Statements of Cash Flows - Three years
ended December 31, 1996 18
Notes to Consolidated Financial Statements 19
Financial Statement Schedules: Schedules included are
set forth in Item 14.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wilson Brothers:
We have audited the accompanying consolidated balance sheets of
Wilson Brothers (an Illinois corporation) and subsidiaries as of
December 31, 1996 and 1995 and the related consolidated
statements of operations and accumulated deficit and cash flows
for each of the three years in the period ended December 31,
1996. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Wilson Brothers and subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 13 to the consolidated financial
statements, the Company has suffered recurring losses from
operations and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note 13. The consolidated financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed
in Item 14.(A) 2. is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole. The schedule does not include any adjustments that might
result from the outcome of the uncertainty regarding the Company
discussed above.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
April 2, 1997 (except with respect to
the matter discussed in Note 14, as to which the date
is April 9, 1997)
Item 8. Financial Statements and Supplementary Data.
Wilson Brothers and Subsidiaries
CONSOLIDATED BALANCE SHEETS
As of December 31
1996 1995
Assets (In thousands)
Current assets
Cash and equivalents $ 170 $ 428
Receivables, less allowance of $160,000 in 1996
and $130,000 in 1995 1,059 785
Inventories 332 436
Other 74 33
Total current assets 1,635 1,682
Properties, at cost 2,285 2,296
Less accumulated depreciation (1,922) (1,883)
363 413
Note receivable, less valuation reserve of $490,000 in 1996
and $450,000 in 1995
- - - -
$ 1,998 $2,095
Liabilities and Stockholders' Deficit
Current liabilities:
Short-term borrowings $ 140 $ 249
Accounts payable 705 621
Accrued salaries and other employee costs 259
381
Environmental reserve 820 845
Accrued interest due affiliates 415 377
Accrued interest due others 84 -
Due to affiliates 1,230 1,230
Other current liabilities 217 206
Total current liabilities 3,870 3,909
Notes payable to affiliates 1,244 1,500
Notes payable to others 256 -
Other liabilities 639 727
2,139 2,227
Commitments and Contingencies
Stockholders' deficit:
Preferred stock, $1 par value; authorized 5,000,000
shares; none issued -
-
Common stock, $1 par value; authorized 10,000,000
shares; issued and outstanding 3,321,039 shares 3,321
3,321
Capital in excess of par value 7,464 7,464
Minimum pension liability (23) (111)
Accumulated deficit (14,773) (14,715)
Total stockholders' deficit (4,011) (4,041)
$1,998 $2,095
See accompanying notes to consolidated financial statements.
Wilson Brothers and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Three years ended December 31
1996 1995 1994
(In thousands except per share amou
nts)
Net sales $5,715 $5,041 $5,495
Cost of sales 4,324 4,109 4,811
Selling, general and administrative expenses 1,377
1,449 1,336
5,701 5,558 6,147
Income (loss) from continuing operations 14 (517)
(652)
Other expense (income):
Interest expense 57 38 52
Interest expense - affiliates 102 127 105
Interest income (78) (39) (38)
Provision for doubtful notes and interest
receivable from affiliate 40 457 -
Other income (49) (498) (183)
72 85 (64)
Loss from continuing operations before
provision for income taxes (58) (602)
(588)
Provision for income taxes - - -
Loss from discontinued
operations - - (161)
Net loss (58) (602) (749)
Accumulated deficit - beginning of year (14,715) (14,113)
(13,364)
Accumulated deficit - end of year $ (14,773) $(14,715) $
(14,113)
Loss per share:
Continuing operations $(0.02) $(.018) $(0.18)
Discontinued operations - - (0.05)
$(0.02) $(0.18) $(0.23)
See accompanying notes to consolidated financial statements.
Wilson Brothers and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three years ended December 31
1996 1995 1994
(In thousands)
Cash flows from operating activities:
Net loss from continuing operations $ (58) $ (602)$(58
8)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 62 84 124
Gain on sale of assets (5) - (29)
Provision on uncollectible notes
receivable from former affiliate - 450 -
(Increase) decrease in receivables, net (274) 130
116
Decrease in inventories 104 61 49
Increase in other current assets (41) (23) (10)
(Decrease) increase in accounts payable 84 (73)
116
Increase (decrease) in accrued salaries and
other employee costs (122) 109 (140)
Increase in accrued interest 122 126 107
Increase in other current liabilities 11 27
48
(Decrease) in environmental reserve (25) (41)
(14)
Net cash provided by (used in) operating activities (14
2) 208 (221)
Cash flows from investing activities:
Capital expenditures (12) - (16)
Proceeds from sale of properties 5 - 30
Proceeds from sale of discontinued operations - -
10
Net cash provided by (used in) investing activities (7)
- - - 24
Cash flows from financing activities:
Repayment of long-term debt (4) (4) (18)
Increase (decrease) in short-term borrowings (105) (62)
201
Repayment of note receivable - 150 150
Net cash provided by financing activities (109) 84
333
Net increase (decrease) in cash and equivalents (258)
292 136
Cash and equivalents at beginning of period 428 136
- - -
Cash and equivalents at end of period $ 170 $ 428
$ 136
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 36 $ 38 $ 29
Income taxes $ - $ - $ -
See accompanying notes to consolidated financial statements.
Wilson Brothers and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(1) Basis of Presentation
Wilson Brothers (the "Company") is a holding company whose
business is conducted through its wholly-owned subsidiary
Houze Glass Company ("Houze"). Houze operates in the
specialty advertising business and engages in the decoration
of glass and ceramic items. Houze's products are primarily
distributed throughout the United States through sales
representatives.
Principles of Consolidation
All significant intercompany items and transactions have
been eliminated in consolidation.
On April 23, 1993, DWG Acquisition Group L.P. acquired
shares of DWG Corporation ("DWG"), representing 28.6% of
DWG's then outstanding shares of common stock. DWG
subsequently changed its name to Triarc Companies, Inc.
("Triarc"). DWG owned at the time approximately 53.7% of
the Company's outstanding common stock.
On January 10, 1994, pursuant to a Securities Purchase
Agreement dated December 28, 1993 among Bruce Paparella,
Warren B. Kanders and Triarc, Mr. Paparella acquired from
Triarc 1,296,436 shares of the Company's common stock, and
Mr. Kanders acquired from Triarc 648,217 shares of the
Company's common stock, collectively replacing Triarc as 59
percent ownership of the Company's outstanding common stock.
In addition, Triarc assigned to Mr. Paparella (75 percent)
and Mr. Kanders (25 percent) the $l,500,000 outstanding
balance of note payable to parent ("Convertible Note") and
certain accounts receivable ("Accounts Receivable") held by
Triarc in the amount at September 30, 1993 of $l,230,000.
Effective December 30, 1994, Mr. Kanders entered into three
separate stock purchase agreements pursuant to which Mr.
Kanders transferred the aggregate of 648,217 shares of the
Company's Common Stock owned by him to four individuals,
including Mr. Paparella who purchased 348,217 shares for
$5,000. The remainder of these shares were sold by Mr.
Kanders to three individuals who are not related to Mr.
Paparella. In addition, the Company has been informed that,
on December 22, 1994 Mr. Kanders made a gift of his 25%
portion of the Convertible Note which was convertible into
239,234 shares of Common Stock (representing 6.9% of the
Common Stock on a fully diluted basis assuming the
Convertible Note was fully converted into such shares of
Common Stock) and Mr. Kanders' 25% interest in the Accounts
Receivable to a charitable foundation, leaving Mr. Kanders
with no remaining beneficial interest in the Company's
Common Stock. On April 18, 1995, John Sanford, the
Company's Vice President and Chief Financial Officer,
acquired a $362,500 interest in such convertible note which
is convertible into 231,259 shares of the Company's Common
Stock and, as such, Mr. Sanford may be deemed to be the
beneficial owner of 231,259 shares issuable to him upon his
election to convert his interest in the notes. On April 21,
1996, Mr. Bruce Paparella, the Company's President, Chief
Executive Officer and a Director died from cancer. On
September 6, 1996, in a private transaction, the Estate of
Mr. Paparella sold to Mr. Sanford 1) a 37.5% interest in
such Note in the principal sum of $562,500, which is
convertible into 358,852 shares of the Company's Common
Stock, 2) certain accounts receivable in the amount of
$461,250 of the Company, and 3) 1,644,653 shares of the
Company's common stock, for an aggregate purchase price of
$330,000. On November 22, 1996, Mr. Sanford, in a private
transaction, made gifts to non-affiliated persons of 1)
100,000 shares of the Company's Common Stock, and 2) $56,250
of the principal amount plus accrued interest of the
Convertible Note, which is convertible into 35,886 shares of
the Company's Common Stock. As a result of these
transactions, as of December 31, 1996, Mr. Sanford
beneficially owns 1,544,653 shares of the Company's
outstanding Common Stock, representing 46.5% of such Common
Stock outstanding, and is the beneficial owner of 554,226
shares issuable to him upon his election to convert his
Wilson Brothers and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
interest in the Note, constituting an aggregate beneficial
interest in 2,098,879 shares of the Common Stock of the
Company representing approximately 54.2% of the Common Stock
of the Company and may be deemed to control the Company.
(2) Summary of Significant Accounting Policies
Use of Estimates
The preparation of the 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 period. Actual results could differ
from those estimates.
Properties
Properties are carried at cost less accumulated
depreciation. Depreciation is computed on the straight-line
method over the estimated useful lives of the assets ranging
from four to forty years.
Assets which have been fully depreciated are retained in the
accounts for as long as they are useful to operations. Upon
disposition, it is the Company's policy to eliminate from
the accounts the carrying value of the asset and the related
accumulated depreciation or amortization and to credit or
charge the resulting profit or loss to operations.
The Company adopted SFAS No. 121 - "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of", which has no material effect on the Company's
reported financial position or results of operations.
Loss per Share
Loss per share has been computed using only the weighted
average number of outstanding shares of common stock
(3,321,039 shares in each year), since the inclusion of
common stock equivalents (shares issuable upon conversion of
the note referred to in Note 9) would be antidilutive.
The Financial Accounting Standards Board has issued a new
standard, "Earnings per Share" (SFAS 128"). SFAS 128
provides for revisions to the current method of calculating
earnings per share and for the disclosure of certain
information about the capital structure of the reporting
entity. SFAS 128 will become effective on December 15,
1997; early adoption is not permitted. The Company does not
believe that the new pronouncement will impact its present
calculation of earnings per share.
Concentration of Credit Risk
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and
accounts and notes receivable. The Company places its cash
with high quality financial institutions.
Wilson Brothers and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash and Equivalents
The Company classifies as cash and equivalents all highly
liquid investments with a maturity of three months or less
when purchased.
(3) Discontinued Operations
On September 28, 1993, the Company's Board of Directors authorized the sale
or liquidation of its wholly-owned subsidiary Northern Engineering
Corporation ("Northern"), the Company's crane business
segment. Accordingly, the consolidated financial statements
for each of the periods presented have been restated to
reflect such business segment as discontinued. On May 12,
1994, the Company sold all of the outstanding shares of
Northern to a corporation controlled by a former director of
the Company.
In consideration for the sale of the Northern shares, the
Company received $10,000, plus a secured promissory note
(the "Note") in the principal amount of $750,000 repayable
on or before May 1, 1999, which bears interest payable
quarterly at 8 percent per annum. Such note is
collateralized by certain real property of Northern (the
"Mortgaged Property"). The Mortgaged Property was not
appraised in connection with the transaction. If the
Mortgaged Property is sold, all of the principal and
interest is immediately due and payable.
Effective October 28, 1994, the Company agreed to reduce the
percentage from 50 percent to 30 percent of the amount that
the Company shall be entitled to receive if the Mortgaged
Property is sold in excess of $750,000. In exchange, the
purchaser made a partial prepayment of the principal of the
Note in the amount of $150,000 which was paid by November 7,
1994, and has made an additional $150,000 partial prepayment
on January 15, 1995. The purchaser had the option to prepay
the remaining principal balance of the Note by June 30,
1995. Such prepayment was not made, and therefore, the
purchaser was to additionally compensate the Company $50,000
by July 15, 1995, of which $10,000 has been paid. As a
result, the Company believes that the principal amount of
the Note and accrued interest thereon may not be
collectible, and therefore has made a full valuation reserve
in the December 31, 1996 financial statements in the amount
of $490,000 for principal, plus $6,000 for accrued interest.
The Company intends to pursue all opportunities for
collection, including repossession and liquidation of the
Mortgaged Property.
Sales of Northern were $662,000 for the year ended December
31, 1994.
(4) Inventories
Inventories, stated at the lower of cost (first-in, first-
out basis) or market, consisting of materials, labor and
overhead, are as follows:
December 31,
1996 1995
Raw materials $313,000 $365,000
Work in process - 1,000
Finished goods 19,000 70,000
$332,000 $436,000
Wilson Brothers and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) Properties
The following is a summary of the major classifications of
properties:
December 31
1996 1995
Classification
Land $18,000 $18,000
Buildings and improvements 667,000 678,000
Machinery and equipment 1,600,000 1,600,000
2,285,000 2,296,000
Less: accumulated depreciation 1,922,000 1,883,000
$363,000 $413,000
(6) Notes Receivable from Affiliates
From June 1987 through May 1989, the Company made certain
secured loans to Pennsylvania Engineering Corp. ("PEC"),
which may be deemed to have been an affiliate of the
Company. In connection therewith, as of December 31, 1994,
the Company was owed a principal balance of $1,555,000 on
its outstanding loans to PEC and $1,032,000 of accrued
interest and $78,000 of fees. PEC filed for bankruptcy. On
December 28, 1994, the Company received $60,000 in
satisfaction of the mortgage from the sale of certain real
property owned by PEC's subsidiary, Lectromelt Corporation.
Such proceeds were applied to accrued interest receivable,
and a comparable amount was charged against the valuation
reserve and recorded as other income in the statement of
operations. On September 11, 1995, the Company and the
Bankruptcy Trustee for PEC entered into a Settlement
Agreement pursuant to which the Company's claims against PEC
were recognized as an allowed, general unsecured claim in
the amount of $1,399,986. On October 16, 1995, the
Bankruptcy Court approved the Trustee's settlement with the
Company and on November 16, 1995 the Trustee made a
distribution to the Company in the amount of $472,541 in
full and final settlement of the Company's claim against
PEC. Such proceeds were applied to accrued interest
receivable, and a comparable amount was charged against the
valuation reserve and recorded as other income in the
statement of operations.
(7) Income Taxes and Other Liabilities
As a result of the change in ownership effective January 10,
1994 as described in Note 1, substantially all of the
Company's pre-acquisition Federal income tax loss
carryforwards and tax credit carryforwards have been
eliminated. As of December 31, 1996 and 1995, the Company
provided a full valuation allowance for the net deferred tax
assets of $1,024,000 and $1,005,000, respectively. The
deferred tax assets primarily result from the 1996 and 1995
net losses and certain differences in the tax basis and book
basis of inventories, receivables and liabilities.
The reported tax provision and a computed tax benefit based
on the loss from continuing operations before income taxes
are reconciled as follows:
Wilson Brothers and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Year ended December 31,
1996 1995 1994
(In thousands)
Loss from continuing operations before
income taxes $(58) $(602) $(588)
Statutory rate 35% 35% 35%
Computed tax benefit from continuing operations (20) (211)
(206)
Computed tax benefit from
discontinued operations - - (56)
Total computed tax benefit (20) (211) (262)
Increase in taxes resulting from:
Effect of net operating losses for which
no tax benefit is available 20 211 262
$ - $ - $ -
(8) Short-term Borrowings
On March 4, 1994, Houze entered into an agreement with a
bank for a revolving line of credit facility in an amount
not to exceed $400,000. Advances on such line of credit
bear interest at the lending bank's prime rate plus 3.5%.
In addition, the bank is entitled to reimbursement of fees
for auditing Houze's accounts receivable during the term of
the commitment. Advances are collateralized by accounts
receivable, inventory and an assignment of a $50,000
Certificate of Deposit from Fay Penn Economic Development
Council and $100,000 Certificates of Deposit from the
Company, and are guaranteed by the Company and Mr. Sanford,
the Company's Chief Executive Officer. On March 11, 1994,
Houze was advanced $160,000 of the revolving line of credit
and used the proceeds to repay the then outstanding
borrowings under the previous accounts receivable financing
arrangement. The revolving line of credit facility maturity
was extended from December 31, 1995 to December 31, 1997
with a limit of $500,000. No assurances can be given as to
the success of obtaining an extension or refinancing
subsequent to December 31, 1997. A failure by Houze to
renegotiate such credit facility would have a material
adverse effect on the Company.
The short-term borrowings of Houze as of and for the years
ended December 31 are as follows:
1996 1995 1994
End of year balance $140,0 $245, $307,0
00 000 00
Maximum amount
outstanding during the $419,0 $380, $349,0
year 00 000 00
Average balance $280, $171,0
outstanding during the $259,0 000 00
year 00
Weighted average 11.5% 11.8% 15.9%
interest rate during
the year
Interest rate at year 11.3% 11.5% 11.5%
end
Wilson Brothers and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(9) Notes Payable to Affiliates and Others
Notes payable to majority owners as of December 31, 1996 and
December 31, 1995 in the aggregate amount of $1,500,000
bears interest at the prime rate and is convertible to
956,937 shares of the Company's common stock. As of
December 31, 1995, Mr. Paparella was the owner of a 37.5%
interest in such Note and, as such, was the beneficial owner
of 358,852 shares of the Company's Common Stock issuable to
Mr. Paparella upon his election to convert his interest in
the Note. In December 1994, Mr. Kanders made a gift of his
25% interest in the Note to a charitable foundation and such
charitable foundation is the beneficial owner of 239,234
shares of the Company's Common Stock issuable upon
conversion of its interest in the Note. On April 18, 1995,
John Sanford, the Company's then Vice President and Chief
Financial Officer, acquired a $362,500 interest in such
convertible note. As a result, Mr. Sanford may be deemed
the beneficial owner of 231,259 shares issuable to him upon
his election to convert his interest in the notes.
Conversion by the majority owners would be dilutive of their
individual percentage ownership of the Company's aggregate
outstanding common stock. On April 21, 1996, Mr. Bruce
Paparella, the Company's President, Chief Executive Officer
and a Director died from cancer. On September 6, 1996, in a
private transaction, the Estate of Mr. Paparella sold to Mr.
Sanford a 37.5% interest in such Note in the principal sum
of $562,500, which is convertible into 358,852 shares of the
Company's Common Stock. On November 22, 1996, in a private
transaction, Mr. Sanford made gifts to a non-affiliated
person of $56,250 principal amount and accrued interest of
the Convertible note which is convertible into 35,886 shares
of the Company's Common Stock. As a result of this
transaction, as of December 31, 1996, Mr. Sanford is the
beneficial owner of 554,226 shares issuable to him upon his
election to convert his interest in the Note, constituting
an aggregate beneficial interest in 2,098,879 shares of the
Common Stock of the Company representing approximately 54.2%
of the Common Stock of the Company and may be deemed to
control the Company.
(10) Pension Plan
Houze has a defined benefit plan covering hourly-paid
employees. Contributions are computed using the projected
unit credit method of funding, the objective of which is to
fund each participant's benefits under the plan as they
accrue. Houze's funding policy is to contribute the minimum
amount required by the Employee Retirement Income Security
Act of 1974. During 1996, 1995 and 1994, no contributions
were required to be made under the plan.
The net periodic pension cost for the plan in 1996, 1995 and
1994 was $42,000, $45,000 and $42,000, respectively. The
components of the net periodic pension cost are as follows:
Year ended December 31,
1996 1995 1994
(In thousands)
Current service cost $ 41 $ 52 $ 55
Interest cost on projected
benefit obligation 43 43 43
Actual return on assets 96 (3) (10)
Unrealized (gain) loss on
plan experience (129) (38) (37)
Amortization of unrecognized
net asset at transition (9) (9) (9)
Net periodic pension cost $ 42 $ 45 $ 42
Wilson Brothers and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the plans' projected funded
status:
December 31,
1996 1995
(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $647,000 in 1996 and $657,000 in 1995 $ 658$ 676
Reconciliation of funded status:
Plan assets at fair value $ 635 $565
Projected benefit obligation 658 676
Plan assets in excess (short) of projected benefit
obligation (23) (111)
Unrecognized net (gain) loss from plan experience (17) 53
Unrecognized prior service cost 37 37
Unrecognized net asset at January 1, 1987,
amortized over 13 to 17 years (72) (72)
Additional minimum liability $(75) $(93)
An assumed discount rate of 7% for 1996 and 1995, and
long-term rate of return on assets of 8% for 1996 and 1995,
were used in developing this data. Plan assets are invested
in a managed portfolio, consisting primarily of corporate
bonds and common stock.
(11)
Related Party Transactions
There were no charges from affiliates for the years ended
December 31, 1996 and 1995. The Company was charged $19,000
during 1994 for consulting services provided by a firm of
which a former officer of the Company is a partner.
For information concerning certain other transactions
between the Company and other corporations which may be
deemed to be affiliates of the Company, see other Notes
included elsewhere herein.
(12) Business Segments
Continuing operations comprise one business segment: the
decorative glass segment. No single customer accounted for
10% or more of consolidated net sales in 1996, 1995 or 1994.
(13) Commitments and Contingencies
The Company has incurred losses from operations and as of
December 31, 1996, the Company had a stockholders'
deficiency of $4.1 million and a consolidated working
capital deficit of $2.3 million.
The Company's ability to meet its cash requirements in the
next year is dependent upon substantial improvement in the
results of operations and cash flows, maintaining and
renewing its financing from its bank or others. If these
conditions are not satisfactorily achieved, the Company may
be unable to generate sufficient cash flow to meet its
requirements, including payments of amounts which may be
expended for environmental remediation described below, and
therefore, may be unable to continue operations.
Wilson Brothers and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The financial statements have been prepared on a going
concern basis, and accordingly, do not include any
adjustments relating to the recoverability and
classification of recorded asset amounts nor the amounts and
classification of liabilities that might be necessary should
the Company be unable to continue in existence or be
required to sell its assets.
The Company has become aware that certain of the products of
Houze may have concentrations of lead and cadmium at levels
which might constitute hazardous waste. While after
testing, it was ascertained that products currently being
produced are within acceptable levels, certain products,
generally those produced prior to 1980, had unacceptable
levels of lead and cadmium. These products had been
disposed of in a disposal site located on the property of
the decorative glass segment. The Pennsylvania Department
of Environmental Regulation ("PDER") and the Company agreed
to a consent order on September 22, 1994, which outlines a
plan for Houze to remove and encapsulate all of the
hazardous waste and thereby comply with residual waste pile
closure requirements. The Company intends to fully
comply with the requirements of the consent order. On
February 11, 1997, PDER granted Houze an extension in the
consent order until June 30, 1997. The estimated cost of
the Company's original plan of
remediation was increased during 1993 by $700,000 from
$200,000, based on advice from its outside consultant. The
additional costs were provided for in the 1993 consolidated
financial statements. At December 31, 1996 the reserve
balance was $820,000.
While the Company believes that the total cost of the plan
agreed to by the PDER in the consent order discussed above
will not exceed the amount reserved, the Company is unable
at this time to make a final determination of the cost of
implementation, and therefore, has not adjusted such
reserve. During the years ended December 31, 1996, 1995 and
1994, $25,000, $41,000 and $14,000, respectively, was
charged to the reserve for costs incurred in connection with
the Company's compliance with the PDER's plan to encapsulate
all of the hazardous waste.
By agreement dated January 1, 1995, the Company, Houze and
Triarc agreed to settle an outstanding claim by a former
officer of Houze for bonuses owed. The agreement provided
that Houze pay to the former officer the aggregate amount of
$37,500 in several installments by December 31, 1996 of
which $31,350 was paid in 1995, and $6,150 was paid in 1996.
The original amount of such claim previously recorded in the
financial statements of approximately $116,000 plus interest
was reduced accordingly.
In addition to the litigation noted above, and as discussed
under Item 3 Legal Proceedings, the Company is from time to
time involved in other routine litigation incidental to its
business, the outcome of which in the opinion of management
will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
(14) Subsequent Events
On February 13, 1997, in a private transaction, Choate
Rosemary Hall Foundation, Inc. sold to Mr. Sanford pursuant
to a Note and Accounts Receivable Purchase Agreement (i)
their interest of $375,000 principal amount of the
Convertible Note, which is convertible into 239,234 shares
of the Company's Common Stock, and (ii) their interest in
the Accounts Receivable for an aggregate purchase price of
$200,000.
As a result of the above transaction, Mr. Sanford is the
beneficial holder of (i) $1,243,750 of the Convertible Note
convertible at any time into 793,460 shares of Common Stock,
and (ii) 1,544,653
Wilson Brothers and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
shares of the Company's Common Stock, constituting
approximately 56.8 percent of the Company's outstanding
Common Stock.
On April 9, 1997, the Company entered into a stock purchase
agreement with G&L Consultants, Inc. to purchase 90 percent
ownership, represented by 171,000 shares of the outstanding
common stock of LM Plastics, Inc., a North Carolina
corporation with its principal office in Shelby, North
Carolina. The purchase price for the common stock consisted
of the payment of $1, plus a personal indemnity by Mr.
Sanford to G&L Consultants, Inc. for the payment of a
promissory note from the LM Plastics, Inc. to a bank in the
original principal amount of $70,000. The acquisition will
be accounted for using the purchase method. The Company has
the option to purchase at any time, or after 3 years is
obliged to purchase at the request of G&L Consultants, Inc.,
the remaining 10 percent outstanding shares for the amount
of $10,450, with such price increasing at an annual rate of
20 percent for each month after April 9, 1997.
The results of operations of LM Plastics, Inc. for the year
ended December 31, 1996 were not material in relation to the
financial statements of the Company.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The table below sets forth the names, ages and positions of
the Company's directors and executive officers:
Name Age Position
John Sanford 31 President, Chief
Financial Officer,
Treasurer, Secretary
and Director
Brett R. Smith 31 Director
Frank Zanin 30 Director
The Board of Directors currently consist of three directors.
Mr. Arthur Williams, Vice President and Secretary resigned as a
director and officer on April 4, 1995. Mr. Nicholson resigned on
May 12, 1994, which was concurrent with the purchase of Northern
by a company under his control. Mr. Nicholson was paid $10,000
during the period he was a director. Mr. Sanford was appointed
to the Board of Directors in April 1995 filling the vacancy of
Mr. Nicholson. Directors are elected at the annual meeting of
shareholders, and hold office until the next succeeding annual
meeting of shareholders or until their successors are elected and
qualified. Mr. Paparella who was appointed to the Board of
Directors on January 10, 1994 to fill vacancies created by the
resignation of members of the Board of Directors who were elected
by the former controlling shareholder of the Company, died on
April 21, 1996. Mr. Brett R. Smith and Mr. Frank Zanin were
appointed to the Board of Directors on April 17, 1997 and April
24, 1997, respectively, to fill the vacancies created by the
death of Mr. Paprella and resignation of Mr. Williams. Directors
who are employees of the Company do not receive an annual
retainer or meeting attendance fees.
The Company's officers are elected by the Board of Directors
and hold office at the discretion of the Board.
John Sanford has been President since , 1996 and previously
served as Vice President, Treasurer and Chief Financial Officer
of the Company since March 7, 1994. He also became Secretary and
Director in April 1995. Since September 1993, Mr. Sanford has
been an equity trader for Carr Securities Corp., a New York
brokerage firm. From August 1991 through September 1993, Mr.
Sanford was earning his M.B.A. degree at the University of North
Carolina at Chapel Hill. Mr. Sanford was the President of
Fortress Marine Construction from August 1990 through August
1991.
Brett R. Smith has been a director since April 17, 1997, and
since 1993 co-founded and has been a principal of Counter Culture
Coffee in Durham, North Carolina. From Fall 1991 to Spring 1993
earned his M.B.A. at the University of North Carolina at Chapel
Hill.
Frank Zanin has been a director since April 24, 1997, and
since Fall 1993 has served as a Financial Analyst for Roper
Health Systems Inc. Previously, he was earning his M.B.A. degree
at William and Mary through 1991.
Item 11. Executive Compensation.
During the year ended December 31, 1996, the Company
compensated the Estate of Bruce Paparella $18,750 and John
Sanford $67,000 for management services, respectively, of which
$12,000 of Mr. Sanford's compensation has been deferred. Mr.
Sanford's annual compensation for 1997 will be $12,000.
All of the Company's executive officers hold positions with
non-affiliated companies (see Item 10) that pay compensation to
such officers. Each such officer devotes the time necessary to
the Company and to his non-affiliated employer as is necessary
for the effective discharge of his duties. The Company is unable
to estimate the approximate amount of time spent by the officers
listed in Item 10 on the affairs of the Company and its
subsidiaries. No minimum amount of time is required to be
devoted to such affairs by any such officers.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth information regarding the
beneficial ownership of shares of the Company's Common Stock, as
of March 1, 1997, by each person who beneficially owns more than
five percent of such shares, by each director of the Company, by
each executive officer named in Item 10 and by all directors and
executive officers of the Company as a group. Each person named
in the table has sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by him or
it, except as otherwise set forth in the notes to the table.
Name and Address Amount of
of Beneficial Owner Beneficial Percent
Ownership
John Sanford
17 Battery Place
New York, NY 2,098,879(1) 54.2%
10004
All Directors and
Executive 2,098,879 54.2%
Officers (1
person)
(1) Includes 1,544,653 shares as to which Mr. Sanford has sole
voting and dispositive power and 554,226 shares issuable upon
conversion of that certain promissory note made by the Company in
the principal amount of $1,500,000 as to which Mr. Sanford has a
57.9 percent interest.
Item 13. Certain Relationships and Transactions.
In connection with the sale of control of the Company
pursuant to a Securities Purchase Agreement dated December 28,
1993, Triarc Companies, Inc. ("Triarc"), the former controlling
shareholder of the Company, assigned to Bruce Paparella,
President and Chief Executive Officer of the Company and Warren
B. Kanders, a beneficial owner of more than 5% of the Company's
common stock, the $1,500,000 outstanding balance of a note (the
"Note") by the Company and certain accounts receivable (the
"Accounts Receivable") of the Company held by Triarc in the
amount, at September 30, 1993, of $1,230,000.
Effective December 30, 1994, Mr. Kanders entered into three
separate stock purchase agreements, whereby Mr. Kanders
transferred all of his shares of the Company's common stock to
four individuals, including Mr. Paparella who purchased 348,217
shares for $5,000. In addition, on December 22, 1994, Mr.
Kanders made a gift of his portion of the Note and Accounts
Receivable to a charitable foundation, leaving him with no
remaining beneficial interest in the Company's common stock. On
April 18, 1995, John Sanford, the Company's Vice President and
Chief Financial Officer, acquired a $362,500 interest in such
convertible note which is convertible into 231,259 shares of the
Company's Common Stock and, as such, Mr. Sanford may be deemed to
be the beneficial owner of 231,259 shares issuable to him upon
his election to convert his interest in the notes. On April 21,
1996, Mr. Bruce Paparella, the Company's President, Chief
Executive Officer and a Director died from cancer. On September
6, 1996, in a private transaction, the Estate of Mr. Paparella
sold to Mr. Sanford 1) a 37.5% interest in such Note in the
principal sum of $562,500, which is convertible into 358,852
shares of the Company's Common Stock, 2) certain accounts
receivable in the amount of $461,250 of the Company, and 3)
1,644,653 shares of the Company's common stock, for an aggregate
purchase price of $330,000. November 22, 1996, Mr. Sanford, in a
private transaction, made gifts to non-affiliated persons of 1)
100,000 shares of the Company's Common Stock, and 2) $56,250 of
the principal amount plus accrued interest of the Convertible
Note, which is convertible into 35, 886 shares of the Company's
Common Stock. As a result of these transactions, as of December
31, 1996, Mr. Sanford beneficially owns 1,544,653 shares of the
Company's outstanding Common Stock, representing 46.5% of such
Common Stock outstanding, and is the beneficial owner of 554,226
shares issuable to him upon his election to convert his interest
in the Note, constituting an aggregate beneficial interest in
2,098,879 shares of the Common Stock of the Company representing
approximately 54.2% of the Common Stock of the Company and may be
deemed to control the Company.
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports
on Form 8-K.
(A) 1. Financial Statements:
See Index to Financial Statements (Item 8)
2. Financial Statement Schedule:
II. Valuation and Qualifying Accounts -
Three years ended December 31, 1996.
All other schedules are omitted as the
required information is inapplicable or the
information is presented in the financial
statements or the notes thereto.
3. Exhibits:
Copies of the following exhibits are available at a
charge of $.25 per page upon written request to the
Secretary of the Company at 902 South Main Street,
Point Marion, PA 15474.
3.1 Articles of Incorporation (including all
amendments thereto) of Wilson Brothers,
incorporated herein by reference to Wilson
Brothers Form 10-K for the year ended December 31,
1980, Exhibit 3.1.
3.2 By-Laws of Wilson Brothers, incorporated herein by
reference to Wilson Brothers Form 10-K for the
year ended December 31, 1980, Exhibit 3.2.
4.1 Conversion Rights Agreement dated as of April 1,
1982 by and between Wilson Brothers and DWG
Corporation, incorporated herein by reference to
Wilson Brothers Form 10-Q for the quarter ended
June 30, 1982, Exhibit 4.2.
4.2 Amendment to Conversion Rights Agreement dated
April 1, 1982, incorporated herein by reference to
Wilson Brothers Form 10-K for the year ended
December 31, 1984, Exhibit 4.1.
10.1 Loan Agreement dated March 11, 1994 by and between
Houze Glass Corporation and Integra Bank/South,
incorporated by reference to Wilson Brothers Form
10-K for the year ended December 31, 1993, Exhibit
10.1.
10.2 Security Agreement dated March 11, 1994, by and between
Houze Glass Corporation and Integra Bank/South, incorporated by
reference to Wilson Brothers Form 10-K for the year ended
December 31, 1993, Exhibit 10.2.
10.3 Revolving Credit Note dated September 14, 1994 between
Houze Glass Corporation and Integra Bank/South, incorporated by
reference to Wilson Brothers Form 10-K for the year ended
December 31, 1994, Exhibit 10.3.
10.4 First Amendment to Loan Agreement and Note Modification
Agreement dated September 14, 1994 between Houze Glass
Corporation and Integra Bank/South, incorporated by reference to
Wilson Brothers Form 10-K for the year ended December 31, 1994,
Exhibit 10.4.
10.5 Amended and Restated Security Agreement dated December
30, 1994 between Houze Glass Corporation and Integra/Bank
Pittsburgh, incorporated by reference to Wilson Brothers Form 10-
K for the year ended December 31, 1994, Exhibit 10.5.
10.6 Third Amendment to Loan Agreement and Note
Modification Agreement between Houze Glass
Corporation and Integra Bank/South dated July 21,
1995, incorporated by reference to Wilson Brothers
Form 10-K for the year ended December 31, 1995,
Exhibit 10.7.
10.7 Fourth Amendment to Loan Agreement and Note
Modification Agreement between Houze Glass
Corporation and Integra Bank/South dated July 21,
1995, incorporated by reference to Wilson Brothers
Form 10-K for the year ended December 31, 1995,
Exhibit 10.8.
11.1 Computation of Earnings (Loss) per Common and
Equivalent Share - Five Years Ended December 31,
1996.*
__________________
* being filed herewith.
(B) Reports on Form 8-K
The registrant did not file any reports on Form 8-K
during the three months ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WILSON BROTHERS
Dated: April 30, 1997 By: /s/ John Sanford
John Sanford
President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
indicated and on the dates indicated.
Date Signature Titles
April 30, /s/ John Sanford President, Chief Executive
1997 John Sanford Officer and Director
(Principal Executive Officer)
April 30, /s/ Brett R. Smith Director
1997 Brett R. Smith
April 30, /s/ Frank Zanin Director
1997 Frank Zanin
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
II. Valuation and Qualifying Accounts - Three 34
years ended December 31, 1996
Schedule II
WILSON BROTHERS AND SUBSIDIARIES
Valuation and Qualifying Accounts
Three years ended December 31, 1996
Additions
Balance charged Deduction Balance
at to s at
Description beginnin costs and from end
g expenses reserves of year
of year
Year ended December 31, 1996:
Receivables - allowance
for doubtful $130,000 $86,000 $56,000 $160,000
accounts
Note receivable - $450,000 $40,000 $ $490,000
valuation reserve --
Accrued interest - $6,000 $ $ $6,000
valuation reserve - --
Year ended December 31, 1995:
Receivables - allowance $243,000 $96,000 $210,000 $130,000
for
doubtful
accounts
Notes receivable
from affiliate- $2,665,0 $ $2,665,00 $ -
valuation 00 -- 0 -
reserve
Note receivable - $ $450,000 $ $450,000
valuation reserve -- --
Accrued interest - $ $6,000 $ $6,000
valuation reserve -- --
Year ended December 31, 1994:
Receivables - allowance
for $220,000 $58,000 $35,000 $243,000
doubtful accounts
Notes receivable from $2,725,0 $ $60,000 $2,665,00
affiliate - 00 -- 0
valuation reserve
EXHIBIT INDEX
Pa
ge
10.9 Fifth Amendment to Loan 36
Agreement and Note
Modification Agreement
between Houze Glass
Corporation and National
City Bank of Pennsylvania
June 18, 1996
10.8 Sixth Amendment to Loan 45
Agreement and Note
Modification Agreement
between Houze Glass
Corporation and National
City Bank of Pennsylvania
December 20, 1996
11.1 Computation of Earnings 53
(Loss) per Common and
Equivalent Share - five
years ended December 31,
1996
Exhibit 11.1
WILSON BROTHERS AND SUBSIDIARIES
Computation of Earnings (Loss) per Common and Equivalent Share
Five Years Ended December 31, 1996
(In thousands, except per share amounts)
1996 1995 1994 1993 1992
Loss from continuing operations $ (58) $ (602) $ (588)
$(3,492) $ (1,376)
Loss from discontinued operations, net of tax - -
(161) (1,837)(976)
Add: Interest on note payable
to majority owner * * *
* *
(58) (602) (749)(2,352) (968)
- - -
- - - -
Adjusted net loss $(58) $ (602) $(749)$(2,352) $
(968)
Average common stock and common
equivalents:
Common stock 3,321 3,321 3,321 3,321 3,321
Note payable to majority owner,
including interest thereon * * * *
*
3,321 3,321 3,321 3,321 3,321
Loss per common and
equivalent share:
Continuing operations $(0.02)$(0.18) $(0.18)$(1.05)$(
0.42)
Discontinuing operations - - (0.05) (0.55)
(0.29)
Net loss $(0.02)$(0.18) $(0.23)$(1.60)$(
0.71)
*Antidilutive
_______________________________
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