<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1995
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number 1--1416
BINKS MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-0808480
(State of incorporation) (I.R.S. Employer Identification No.)
9201 WEST BELMONT AVENUE 60131
FRANKLIN PARK, ILLINOIS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (847) 671-3000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Capital Stock, $1.00 American Stock Exchange
par value per share Chicago Stock Exchange
Capital Stock American Stock Exchange
Purchase Rights Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
-------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to
item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the 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. / /
The aggregate market value of the voting stock of the Registrant held by
non-affiliates was approximately $52,301,806 as of February 16, 1996. For
purposes of the foregoing statement only, directors and officers of the
Registrant have been assumed to be affiliates.
As of November 30, 1995, the Registrant had outstanding 3,088,837 shares
of Capital Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the definitive Proxy Incorporated into Part III
Statement for the Registrant's Annual
Meeting of Stockholders to be held on
April 30, 1996.
<PAGE>
PART I
Item 1. BUSINESS
The Registrant, a Delaware corporation incorporated on January 2,
1929, and its subsidiaries (hereinafter referred to collectively as the
"Company") are engaged in the manufacture and sale of spray finishing and
coating application equipment, of which the most important component is the
spray gun and nozzle. For marketing purposes the Company divides its
products into two general groups: standard equipment and industrial
equipment.
Standard equipment includes over fifty different models of spray
guns, a wide variety of air and fluid nozzles, a complete line of high and
low pressure material handling pumps, pressure tanks ranging in capacity from
two to sixty gallons, portable and stationary air compressors, replacement
parts for these components, and accessories such as siphon cups, pressure
cups, oil and water extractors, air and fluid regulators, ball valves, hose
connections and fittings, air and fluid hoses, and paint heaters.
Industrial equipment includes spray booths, paint circulating
systems, air replacement systems, automatic spray coating machines,
electrocoating systems, electrostatic rotating atomizers, and spray painting
robots. Many industrial equipment installations are custom designed and
engineered by the Company to satisfy the specific needs of its customers and
include various standard and industrial equipment items as components.
The spray finishing and coating application equipment comprises
complete systems as well as components for the following seven basic coatings
application methods: (1) "Compressed Air Atomization," a conventional method
employing compressed air in the spray gun to atomize, disperse and deposit
coating materials; (2) "Airless Spraying," a high speed spray method in which
hydraulic pressure developed by a material handling pump is used to atomize
the coating material by pumping it at high pressure through the nozzle of the
airless spray gun; (3) "High Volume Low Pressure (HVLP)," an offshoot of the
conventional air spray method, HVLP utilizes
<PAGE>
larger than normal volumes of air delivered at lower pressures to produce
quality finishes while complying with certain environmental regulations
governing the amounts of volatile organic compounds emitted to the
atmosphere; (4) "Electrostatic Spraying," a method which combines atomization
of the coating material by one of the methods described in items (1) and (2)
above with delivery of an electrical charge of the coating as it leaves the
spray gun, thereby attracting it to a grounded product in much the same way
as iron filings are attracted to a magnet; (5) "Powder Spraying," a recently
developed method of applying a coating material in powder form, with delivery
of an electrical charge to the coating as it leaves the spray gun as with
Electrostatic Spraying, and then hardening the coating through the
application of heat; (6) "Plural Component Spraying," the method used to
apply plural component materials such as polyurethane foams, polyesters,
gelcoats, epoxies and elastomers, and requiring special equipment for precise
metering, mixing and dispensing of the resins, catalysts and accelerators
which create such plural component materials; and (7) "Electrocoating," a
process in which the product to be coated is immersed in and conveyed through
a tank filled with water-suspended paint which is deposited by an electric
current on all exposed surfaces of the product, including surfaces which
cannot be reached by other methods.
The Company is continually engaged in experimental work on various
other coating systems. The Company spent approximately $4,025,000,
$4,265,000 and $4,837,000 during the fiscal years ended November 30, 1995,
1994, and 1993, respectively, on research activities relating to the
development of existing products or services, none of which was customer
sponsored. Such research activities are conducted primarily by a
wholly-owned subsidiary, Binks Research & Development Corporation, and by the
Company's staff of engineers.
The Company markets its standard equipment in the United States
through approximately thirteen branch offices, nine of which have warehouse
facilities, and approximately twenty-five sales offices strategically located
throughout the country. In addition, the Company distributes its standard
equipment through numerous jobbers and dealers serving the industrial finish,
refinish, maintenance painting, and painting contractor mar-
2
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kets throughout the United States and Canada. The Company also manufactures
special equipment for applications not requiring a high-quality finish.
Although some industrial equipment systems are sold through
jobbers, in most instances where the contract is in excess of $500,000 the
Company deals directly with customers, usually industrial or manufacturing
concerns, in the engineering and erection of major installations,
particularly those which require highly specialized knowledge and experience.
The following table shows the percent of total revenues of the
Registrant and its consolidated subsidiaries for each of the last three
fiscal years contributed by its two primary product lines: standard
equipment and industrial equipment. None of the other product lines of the
Registrant accounted for more than 10% of its total sales and revenues in any
of the last three fiscal years.
<TABLE>
<CAPTION>
Year Ended Standard Industrial
November 30 Equipment Equipment
----------- --------- ----------
<S> <C> <C>
1993 46.5% 53.5%
1994 43.2% 56.8%
1995 41.9% 58.1%
</TABLE>
The Company's products are sold in Europe, Asia, Africa, Latin
America and the Commonwealth Countries by the Registrant and its foreign
subsidiaries. Financial information regarding revenue, operating profit and
loss and identifiable assets attributable to each of the Registrant's
geographic areas and information regarding export sales is contained in the
Notes to Consolidated Financial Statements set forth in Part II of this
report.
The Company believes that it is the largest manufacturer of a
broad line of spray finishing and coating application equipment. There are
many other manufacturers of coating application equipment who also engage in
other lines of business, principally Graco Incorporated, Illinois Tool Works
and Nordson Corporation. The Company also competes in the United States with
foreign manufactured products which up to this time have been unsuccessful in
obtaining a significant share
3
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of the available market. As of November 30, 1995, approximately 1,802
persons were employed by the Company in the United States, Canada, England,
Australia, Sweden, France, Belgium, Italy, Germany and Japan.
The amount of business conducted with particular customers varies
significantly from year to year. Sales to the automotive industry as a whole
(which includes several different manufacturers as well as different
divisions or facilities within some manufacturers) generally have accounted
for between 10% and 15% of the Registrant's consolidated net sales in past
years.
The dollar amount of the Registrant's backlog of orders believed
to be firm as of November 30, 1995 was approximately $55,421,000 as compared
to approximately $33,586,000 as of November 30, 1994. All of the orders in
backlog as of November 30, 1995 are expected to be filled within the current
fiscal year. The dollar amount of backlog at any given time is subject to
significant variations depending upon the number of orders received and the
degree of completion of pending industrial equipment products which, by their
nature, are completed over a period of time pursuant to sizeable contracts.
The difference in backlog between November 30, 1995 and November 30, 1994 is
attributable to these factors. The business of the Registrant is not
materially affected by seasonal factors, and the Registrant's backlog is not
generally a result of such factors.
The Company purchases its requirements of aluminum, brass and
steel in the form of bar stock, rolls, tubing and sheeting as well as in the
form of castings and forgings which are manufactured by suppliers, for the
most part from Company-owned dies and patterns. The Company also purchases
certain components which it incorporates into its finished products such as
electric motors, gasoline engines, switches and gauges. The materials and
components purchased by the Company are readily available from a number of
suppliers.
The Company owns a number of United States and foreign patents
pertaining to spray equipment, components, control and memory devices, pumps
and valves, as well as presently pending applications for patents in the
United States and foreign countries. The Company does not consider its
business to be materially dependent on
4
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any single patent or group of patents, or any pending applications for
patents. The Company has registered its trademark "Binks" in the United
States and thirty-two foreign countries and has registered eleven additional
trademarks in the United States.
Federal, state and local provisions which have been enacted or
adopted regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, have not materially
affected the Company's capital expenditures, earnings or competitive position.
Item 2. PROPERTIES
The Company owns its plant and general offices in Franklin Park,
Illinois which comprise 614,500 square feet of which 554,500 square feet are
used for manufacturing and 60,000 square feet for office space.
The Company owns its branch office and warehouse in Franklin Park,
Illinois (situated in the premises described above), a branch office and
warehouse in Dallas, Texas comprising approximately 25,000 square feet, a
branch office and warehouse in Atlanta, Georgia comprising approximately
23,376 square feet and the building and land used by the Company's Poly-Craft
Systems Division in Cottage Grove, Oregon comprising approximately 24,000
square feet. The Company's branch and sales offices operate from 35 other
locations in the United States, fifteen of which are leased premises and nine
of which include warehousing space. An aggregate of approximately 146,000
square feet is leased at such locations. The Company does not regard any
such leased premises to be material.
The Registrant's foreign subsidiaries own and occupy manufacturing
and office facilities aggregating approximately 250,000 square feet and lease
property for such purposes aggregating approximately 130,000 square feet.
The Company considers its plants and physical properties to be in
good condition.
5
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Item 3. LEGAL PROCEEDINGS
In a case captioned CONTINENTAL PARTNERS GROUP, INC. V. BINKS
MANUFACTURING CO., No. 91 L 17815, filed on November 5, 1991 in the Circuit
Court of Cook County, Illinois (the "Action"), Continental Partners Group,
Inc. ("Continental") seeks recovery from the Company of $902,700 which
Continental alleges is due under the terms of a contract between Continental
and the Company dated February 20, 1990. The Action also seeks interest and
costs. The Company has filed an answer in the Action, denying any liability
to Continental under the contract alleged, and asserting that the contract
with Continental was terminated by the Company without further liability to
Continental. The claims in the Action are being vigorously contested by the
Company and the Company believes that it has meritorious defenses to such
claims.
On June 30, 1995, the Court of Appeals for the Federal Circuit, in
GRACO, INC. V. BINKS MANUFACTURING COMPANY, vacated a judgment of
infringement and an award of $2.75 million against the Company regarding
certain pumps sold prior to June 1993. The United States District Court for
the Southern District of Texas previously found that the Company had
"willfully" infringed a patent and awarded Graco treble damages, attorney
fees and costs. The Federal Circuit reversed the district court's finding
that Binks "willfully" infringed Graco's patent and the resulting enhancement
of damages and award of attorney fees. The Federal Circuit remanded the case
for findings on the issue of whether the patent was valid and infringed.
Graco asserts that on remand it will seek damages and interest of
approximately $750,000. The Company believes that there are meritorious
defenses to these claims.
6
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the period covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Registrant are listed below.
BURKE B. ROCHE, age 82, has been an officer of the Registrant
since 1947, and since 1949, he has been President and Chief Executive Officer
of the Registrant.
DORAN J. UNSCHULD, age 72, has been an officer of the Registrant
since 1965. He is presently Senior Vice President and Secretary of the
Registrant.
STEPHEN R. KENNEDY, age 62, has been an officer of the Registrant
since 1971 and is presently Vice President of the Registrant.
ERNEST F. WATTS, age 58, has been an officer of the Registrant
since 1980 and is presently Vice President of the Registrant.
JEFFREY W. LEMAJEUR, age 34, has been an officer of the Registrant
since 1992 and is presently Treasurer of the Registrant.
TERENCE P. ROCHE, age 37, has been an officer of the Registrant
since April 25, 1995 and is presently Assistant Secretary and Assistant
Treasurer. Mr. Roche has been the Industrial Sales Manager of the Company
since 1990.
CARL M. SPRINGER, age 54, has been an officer of the Registrant
since April 25, 1995 and is presently Assistant Secretary and Assistant
Treasurer. Mr. Springer has been the Electronic Products Manager of the
Company since 1978.
7
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- -----------------------------
Notes:
1. All officers' terms expire in 1996.
2. Stephen R. Kennedy is married to the niece of Burke B. Roche. Ernest F.
Watts and Terence P. Roche are nephews of Burke B. Roche. Ernest F.
Watts and Terence P. Roche are cousins. There are no other family
relationships among the executive officers of the Registrant.
3. Each of the foregoing officers has been employed by the Registrant for
more than five years except for Jeffrey W. Lemajeur, who has been an
employee of the Registrant since October of 1991. Prior to his
employment with the Registrant, Mr. Lemajeur was employed from March
1990 to October 1991 by Reuters Holdings PLC, of Chicago, Illinois, in
the capacity of Finance and Administration Manager. At Reuters, Mr.
Lemajeur was in charge of operational accounting and internal financial
reporting for Reuters' Midwest Region and supervised twenty employees.
8
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PART II
Item 5. MARKET FOR THE REGISTRANT'S CAPITAL STOCK AND RELATED SECURITY
HOLDER MATTERS
The Company's capital stock is traded on the American and Chicago
Stock Exchanges. The high and low prices for each quarterly period within the
two most recent fiscal years, as reported by such exchanges, and the dividends
declared during such periods with respect to the capital stock of the Company
are as follows:
<TABLE>
<CAPTION>
Cash
(Stock)
Dividend
Quarter Ending High Low Declared
---------------- ---- --- Per Share
---------
<S> <C> <C> <C>
February 28, 1994 23 1/2 21 7/8 .10
May 31, 1994 23 1/4 21 1/4 .10
August 31, 1994 22 1/4 19 1/2 -
November 30, 1994 22 5/8 19 3/8 .10
February 28, 1995 22 1/8 18 1/2 .10
May 31, 1995 24 3/8 21 3/4 .20
August 31, 1995 26 24 .10
November 30, 1995 25 5/8 24 1/8 .10
</TABLE>
As of November 30, 1995, there were approximately 1,278 registered
holders of the Company's capital stock, which is the only class of equity
securities of the Company outstanding. Harris Trust and Savings Bank, Chicago,
Illinois, is the transfer agent and registrar of the Company's capital stock.
9
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BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
Five years ended November 30, 1995
(not covered by Independent Auditor's Report
ITEM 6 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended November 30
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 266,003,000 $ 243,599,000 $ 210,405,000 $ 223,680,000 $222,171,000
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
Earnings before
cumulative effect
of change in
accounting principle $ 4,306,000 $ 3,415,000 $ 1,331,000 $ 1,414,000 $ 1,214,000
Cumulative effect to
December 1, 1991 of
change in accounting
for income taxes - - - 195,000(a) -
------------- ------------- ------------- ------------- ------------
Net earnings $ 4,306,000 $ 3,415,000 $ 1,331,000 $ 1,609,000 $ 1,214,000
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
Earnings per share
before cumulative
effect of change
in accounting
principle 1.39 1.11 .44 .48 .41
Cumulative effect
to December 1,
1991 of change
in accounting for
income taxes - - - .07(a) -
------------- ------------- ------------- ------------- ------------
Net earnings per share $ 1.39 $ 1.11 $ .44 $ .55 $ .41
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
Cash dividends per share $ .50 $ .30 $ .36 $ 1.00 $ 1.10
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
Total assets $ 231,101,000 $ 193,364,000 $ 179,999,000 $ 178,250,000 $184,160,000
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
Long-term debt $ 43,203,000 $ 38,114,000 $ 34,136,000 $ 33,391,000 $ 30,545,000
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
</TABLE>
(a) In 1992, the Company adopted SFAS 109, "Accounting for Income Taxes", which
was issued in February 1992. This change resulted in an increase in net
earnings of $195,000, reflecting the cumulative effect of the change on
prior periods.
10
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BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
November 30, 1995, 1994, and 1993
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Revenues generated from operations constitute the primary source of the
Company's liquidity. Short-term funds are provided for current operations
through bank loans and the issuance of bankers acceptances. The Company
maintains substantial lines of credit for general corporate purposes and to
provide support for borrowings and bankers acceptances. The total amount
available for borrowing under existing lines of credit in excess of outstanding
borrowings and bankers acceptances was approximately $21,910,000 at November 30,
1995.
The Company's cash balances decreased $37,000 for the year ended November 30,
1995. The net decrease was the result of $552,000 used in operating activities
principally due to increases in receivables and work in process inventory
relating to increased large contract activity; $6,364,000 used in investing
activities chiefly for purchases of property, plant, and equipment; $6,714,000
provided by financing activities from the issuance of long-term debt and an
increase in short-term borrowings offset by the payment of dividends; and a
$165,000 increase based on the changes in foreign exchange rates during the
year.
On November 30, 1993, the Company agreed to issue $15,000,000 of 7.14% senior
notes with a final maturity in 2008. Funding of the notes took place on
December 6, 1993 and the proceeds were used to repay a portion of the debt
outstanding under one of the Company's lines of credit. The Company will repay
the principal in 11 annual installments beginning in 1998.
In 1995, the Company paid cash dividends totaling $1,544,418 on its capital
stock compared to $926,651 in 1994.
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Net sales increased $22,404,000, or 9%, in 1995 to $266,003,000. Domestic sales
increased $9,781,000, or 8%, to $136,234,000 in 1995. International sales
increased $12,623,000, or 11%, to $129,769,000 in 1995. These increases were
the result of improving market acceptance of environmentally friendly
technologies introduced in recent years. The split between domestic and
international sales was 51% domestic and 49% international in 1995. In 1994,
domestic sales represented 52% of consolidated sales and international sales
represented 48% of consolidated sales.
Gross profit increased $10,725,000 in 1995 largely because of the increase in
sales. The percentage of gross profit to sales increased to 33% in 1995 from
31% in 1994 primarily because of improved margins on large contracts and price
increases in 1995. Selling, general, and administrative expenses increased
$7,441,000, or 11%, from 1994 to 1995 to support the increase in sales.
11
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BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
November 30, 1995, 1994, and 1993
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Interest expense increased $1,265,000, or 46%, due to higher U.S. interest rates
and increased borrowings to support the higher level of sales activity.
Contributions to employee profit sharing funds are based on profitability of the
parent company and certain subsidiaries that have profit sharing funds. Annual
amounts will vary according to contribution formulas and the related yearly
profits. Contributions of $452,000 were made in 1995 compared to $132,000 in
1994.
Other income, which decreased $212,000 in 1995, includes interest income,
exchange gains and losses, and gains on sales of fixed assets. The amount of
other income will vary based on cash balances, prevailing interest rates, the
number and condition of fixed asset replacements, and the effectiveness of
foreign currency hedging programs. In 1994, the Company sold a parcel of
undeveloped land at a pretax gain of $960,000 and in 1995, the Company sold two
buildings for pretax gains totaling $258,000 (see Note 17 to consolidated
financial statements).
Income taxes were 39% of pretax income in both 1995 and 1994. Equity earnings
were nil in 1995 compared to a $17,000 loss in 1994.
Net earnings increased $891,000 to $4,306,000 in 1995 when compared to net
earnings of $3,415,000 in 1994. This 26% increase is the result of all of the
factors mentioned above.
1994 COMPARED TO 1993
Net sales increased $33,194,000, or 16%, in 1994 to $243,599,000. Domestic
sales increased $18,596,000, or 17%, to $126,453,000 in 1994. The split between
domestic and international sales was 52% domestic and 48% international in 1994.
In 1993, domestic sales represented 51% of consolidated sales and international
sales represented 49% of consolidated sales. International sales increased
$14,598,000, or 14%, to $117,146,000 in 1994. The increase was the result of
improved domestic economic conditions as well as improving market acceptance of
technologies introduced in recent years.
Gross profit increased $4,887,000 in 1994 largely because of the increase in
sales. The percentage of gross profit to sales decreased to 31% in 1994 from
34% in 1993 primarily because of an increase in lower margin large contracts.
Selling, general, and administrative expenses increased $2,118,000, or 3%, from
1993 to 1994.
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BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
November 30, 1995, 1994, and 1993
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Interest expense increased $146,000, or less than 1%, due to the higher U.S.
interest rates offset by a reduction in interest-bearing debt of the Company
outstanding during 1994 as compared to 1993.
Contributions to employee profit sharing funds are based on profitability of the
parent company and certain subsidiaries that have profit sharing funds. Annual
amounts will vary according to contribution formulas and the related yearly
profits. Contributions of $132,000 were made in 1994 compared to $480,000 in
1993.
Other income, which increased $603,000 in 1994, includes interest income,
exchange gains and losses, and gains on sales of fixed assets. The amount of
other income will vary based on cash balances, prevailing interest rates, the
number and condition of fixed asset replacements, and the effectiveness of
foreign currency hedging programs. In 1994, the Company sold a parcel of
undeveloped land at a pretax gain of $960,000 (see Note 17 to consolidated
financial statements).
Income taxes were 39% of pretax income in 1994 as compared to 32% in 1993. The
percentage increase related to refunds of income taxes in Germany which were
substantially larger in 1993 than in 1994.
Equity earnings went from a $50,000 loss in 1993 to a $17,000 loss in 1994.
Net earnings increased $2,084,000 to $3,415,000 in 1994 when compared to net
earnings of $1,331,000 in 1993. This 157% increase is the result of all of the
factors mentioned above. There were no significant adjustments in the fourth
quarter of 1994.
13
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BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
November 30, 1995, 1994, and 1993
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
Franklin Park, Illinois
Consolidated Financial Statements
Submitted in Response to Item 8
Fiscal years ended November 30, 1995, 1994, and 1993
(With Independent Auditors' Reports Thereon)
14
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BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
Franklin Park, Illinois
CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
CONTENTS
REPORTS OF INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . 16
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS. . . . . . . . . . . . . . . . . 18
CONSOLIDATED STATEMENTS OF EARNINGS. . . . . . . . . . . . . 20
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY. . . . . . . 21
CONSOLIDATED STATEMENTS OF CASH FLOWS. . . . . . . . . . . . 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . 24
SCHEDULE:
VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II. . . . . 41
All other schedules are omitted as the required information is not applicable or
the information is presented in the accompanying consolidated financial
statements and related notes.
15
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[LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Binks Manufacturing Company
Franklin Park, Illinois
We have audited the accompanying consolidated balance sheet of Binks
Manufacturing Company and consolidated subsidiaries as of November 30, 1995, and
the related consolidated statements of earnings, stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Binks Manufacturing
Company and consolidated subsidiaries as of November 30, 1995, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles. Also in our opinion, the related
financial statement schedule when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ Crowe, Chizek and Company LLP
-----------------------------
Crowe, Chizek and Company LLP
Oak Brook, Illinois
February 9, 1996
16
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[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Binks Manufacturing Company:
We have audited the accompanying consolidated balance sheet of Binks
Manufacturing Company (the Company) and consolidated subsidiaries as of
November 30, 1994, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the years in the two-year
period then ended. In connection with our audits of the consolidated
financial statements, we also have audited the supplemental schedule of
valuation and qualifying accounts as of, and for the two years ended November
30, 1994. These consolidated financial statements and supplemental schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Binks
Manufacturing Company and consolidated subsidiaries as of November 30, 1994,
and the results of their operations and their cash flows for each of the
years in the two-year period ended November 30, 1994, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
---------------------
KPMG Peat Marwick LLP
Chicago, Illinois
February 10, 1995
17
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $8,526,579 $8,563,975
Receivables, net 90,726,024 68,213,783
Inventories 86,207,065 74,910,746
Other current assets 5,221,633 4,308,213
------------ ------------
Total current assets 190,681,301 155,996,717
Investments and other assets:
Investments in and advances to unconsolidated
subsidiaries 1,090,926 1,090,926
Goodwill 2,695,029 2,779,257
Deferred income taxes 896,162 642,550
Patents and trademarks 604,205 581,352
Other investments and assets 4,506,789 4,889,211
------------ ------------
Total investments and other assets 9,793,111 9,983,296
Property, plant, and equipment, at cost:
Land 1,802,741 2,148,550
Buildings 21,718,695 20,768,675
Machinery and equipment 41,664,173 36,247,047
------------ ------------
65,185,609 59,164,272
Less accumulated depreciation 34,559,300 31,780,447
------------ ------------
Net property, plant, and equipment 30,626,309 27,383,825
------------ ------------
$231,100,721 $193,363,838
------------ ------------
------------ ------------
</TABLE>
(Continued)
18
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 30, 1995 and 1994
1995 1994
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $5,318,572 $3,744,188
Bank overdrafts 4,636,774 1,913,398
Current maturities of long-term debt 1,084,627 766,733
Accounts payable 53,968,666 35,285,881
Accrued employees' profit sharing contributions 11,095 307,148
Accrued expenses
Payroll, commissions, etc. 7,465,820 6,631,078
Taxes, other than income taxes 1,583,082 1,429,858
Other 7,997,752 5,442,583
Income taxes 2,012,430 1,236,725
------------ ------------
Total current liabilities 84,078,818 56,757,592
Deferred compensation 8,724,887 7,833,384
Deferred income taxes 489,655 430,845
Long-term debt, less current maturities 43,202,519 38,114,463
------------ ------------
Total liabilities 136,495,879 103,136,284
Stockholders' equity:
Capital stock, $1 par value; authorized
12,000,000 shares; issued 3,088,837 shares
in 1995 and 1994 3,088,837 3,088,837
Additional paid-in capital 24,504,446 24,504,446
Retained earnings 66,670,721 63,908,974
Foreign currency translation adjustments 340,838 (1,274,703)
------------ ------------
Total stockholders' equity 94,604,842 90,227,554
------------ ------------
Commitments and contingencies
(Notes 12, 13, and 15)
$231,100,721 $193,363,838
------------ ------------
------------ ------------
See accompanying notes to consolidated financial statements.
19
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended November 30, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- ------------
<S> <C> <C> <C>
Net sales $ 266,003,140 $ 243,598,662 $210,404,590
Cost of goods sold 178,940,365 167,261,002 138,953,746
-------------- -------------- ------------
GROSS PROFIT 87,062,775 76,337,660 71,450,844
Selling, general, and administrative
expenses 76,064,671 68,624,007 66,506,027
-------------- -------------- ------------
OPERATING INCOME 10,998,104 7,713,653 4,944,817
Other expenses (income):
Interest expense 4,032,203 2,767,138 2,621,137
Contributions to employees' profit
sharing funds 451,861 132,349 479,944
Other income, net (568,651) (781,141) (178,354)
-------------- -------------- ------------
3,915,413 2,118,346 2,922,727
-------------- -------------- ------------
Earnings before income taxes and
equity in earnings (loss) of
unconsolidated subsidiaries 7,082,691 5,595,307 2,022,090
Income taxes 2,776,526 2,163,078 641,226
-------------- -------------- ------------
Earnings before equity in earnings
(loss) of unconsolidated subsidiaries 4,306,165 3,432,229 1,380,864
Equity in earnings (loss) of
unconsolidated subsidiaries - (16,815) (50,000)
-------------- -------------- ------------
NET EARNINGS $4,306,165 $3,415,414 1,330,864
-------------- -------------- ------------
-------------- -------------- ------------
Net earnings per share $ 1.39 $ 1.11 $ .44
-------------- -------------- ------------
-------------- -------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended November 30, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Foreign
Additional Currency
Capital Paid-in Retained Translation Treasury
Stock Capital Earnings Adjustments Shares Total
----------- ------------ ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at
November 30,
1992 $ 3,061,929 $ 24,367,869 $ 64,772,865 $(1,132,557) $(3,367,758) $87,702,348
Net earnings - - 1,330,864 - - 1,330,864
Foreign currency
translation
adjustments - - - (3,113,386) - (3,113,386)
Stock dividends 26,908 136,577 (3,562,081) - 3,367,758 (30,838)
Cash dividends
($.36-1/3 per
share) - - (1,121,437) - - (1,121,437)
----------- ------------ ------------ --------- --------- -----------
Balance at
November 30,
1993 3,088,837 24,504,446 61,420,211 (4,245,943) - 84,767,551
Net earnings - - 3,415,414 - - 3,415,414
Foreign currency
translation
adjustments - - - 2,971,240 - 2,971,240
Cash dividends
($.30 per share) - - (926,651) - - (926,651)
----------- ------------ ------------ --------- --------- -----------
Balance at
November 30,
1994 3,088,837 24,504,446 63,908,974 (1,274,703) - 90,227,554
Net earnings - - 4,306,165 - - 4,306,165
Foreign currency
translation
adjustments - - - 1,615,541 - 1,615,541
Cash dividends
($.50 per share) - - (1,544,418) - - (1,544,418)
Balance at
November 30,
1995 $ 3,088,837 $ 24,504,446 $ 66,670,721 $ 340,838 $ - $94,604,842
----------- ------------ ------------ --------- --------- -----------
----------- ------------ ------------ --------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended November 30, 1995, 1994, and 1993
<TABLE>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $4,306,165 $3,415,414 $1,330,864
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization:
Property, plant, and equipment 3,764,864 3,270,696 3,210,826
Goodwill and other 177,292 200,812 154,520
Equity in (earnings) loss of
unconsolidated subsidiaries - 16,815 50,000
Deferred compensation, net of
payments 493,396 465,281 456,381
Deferred income taxes (1,294,756) (121,917) (52,209)
Other, net 188,521 (618,390) 162,818
Cash provided by (used in) changes in:
Receivables (18,935,954) (3,098,842) (2,610,239)
Inventories (10,341,343) (2,077,136) (3,421,581)
Other current assets (529,690) (1,333,348) 1,402,201
Accounts payable 17,588,785 (6,601,393) 9,227,181
Accrued employees' profit sharing
contributions 28,882 (349,861) 422,077
Accrued expenses 2,229,119 3,250,586 497,402
Income taxes 1,606,984 (1,099,569) 206,822
---------- ---------- ----------
Net cash provided by (used in)
operating activities (717,735) (4,680,852) 11,037,063
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and
equipment (7,663,783) (4,184,878) (3,881,031)
Proceeds from sale of property, plant,
and equipment 2,024,802 1,614,888 44,292
Net increase in other assets (559,977) (1,301,923) (1,278,962)
---------- ---------- ----------
Net cash used in investing activities (6,198,958) (3,871,913) (5,115,701)
</TABLE>
(Continued)
22
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended November 30, 1995, 1994, and 1993
<TABLE>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid $(1,544,418) $(926,651) $(1,121,437)
----------- ----------- -----------
Payments for fractional shares
relating to stock dividends - - (30,838)
Proceeds from long-term borrowings 6,069,097 4,381,897 1,247,400
Net increase (decrease) in short-term
borrowings 3,867,982 3,809,812 (2,574,854)
Principal payments on long-term debt (1,678,788) (944,452) (657,518)
----------- ---------- -----------
Net cash provided by (used in)
financing activities 6,713,873 6,320,606 (3,137,247)
----------- ---------- -----------
Effect of exchange rate changes on cash 165,424 632,097 (271,771)
Net increase (decrease) in cash and
cash equivalents (37,396) (1,600,062) 2,512,344
----------- ---------- -----------
Cash and cash equivalents at
Beginning of year 8,563,975 10,164,037 7,651,693
----------- ---------- -----------
End of year $8,526,579 $8,563,975 $10,164,037
----------- ---------- -----------
----------- ---------- -----------
Supplemental cash flow disclosures
Cash paid for:
Interest $4,350,000 $2,559,000 $2,441,000
Income taxes 3,422,000 4,012,000 3,104,000
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and consolidated subsidiaries in the United States,
United Kingdom, Canada, Belgium, Italy, Germany, Japan, and France (see Note 6
for information relating to the unconsolidated subsidiaries). The subsidiary in
the United Kingdom is included on the basis of its September 30 fiscal year end.
All material intercompany balances and transactions have been eliminated in
consolidation.
TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS: Foreign currency
financial statements have been translated in accordance with Statement of
Financial Accounting Standards No. 52. Under this standard, assets and
liabilities are translated at current exchange rates and income and expenses are
translated at average rates of exchange for the year. Adjustments resulting
from the translation process are reported in a separate component of equity and
are not included in the determination of net earnings.
INVENTORIES: Inventories are stated at the lower of cost (first-in, first-out)
or market (net realizable value).
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES: Investments in unconsolidated
subsidiaries are reflected in the consolidated financial statements at cost plus
equity in undistributed net earnings or losses and foreign currency translation
adjustments.
LONG-TERM EQUIPMENT INSTALLATION CONTRACTS: Profits on long-term equipment
installation contracts are recorded on the basis of the estimated percentage of
completion of individual contracts determined under the cost-to-cost method.
Estimated losses on long-term contracts are charged to earnings in the year a
loss becomes apparent.
PROPERTY, PLANT, AND EQUIPMENT: Depreciation of property, plant, and equipment
is computed primarily by the straight-line method using the following useful
lives:
<TABLE>
<CAPTION>
Classification Years
-------------- -----
<S> <C>
Buildings 25 - 50
Machinery and equipment 4 - 12
</TABLE>
The charge to income from amortization of assets under capital leases is
included in depreciation expense.
(Continued)
24
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES: The Company uses the asset and liability method of accounting for
income taxes. Under this 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 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 in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
RESEARCH AND DEVELOPMENT EXPENSES: Research and development costs are charged
to expense when incurred. Total research and development costs charged to
expense were $4,025,000, $4,265,000 and $4,837,000 in 1995, 1994, and 1993,
respectively.
NET EARNINGS PER SHARE: Net earnings per share are based on the weighted
average number of shares of capital stock outstanding (3,088,837 shares in 1995,
3,088,837 shares in 1994 and 3,010,999 shares in 1993).
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, cash and cash
equivalents include cash on hand and amounts due from banks with original
maturities of three months or less.
GOODWILL: Goodwill represents excess costs of acquired companies over the fair
value of their net tangible assets. These excess costs related to subsidiaries
acquired are being amortized on a straight-line basis over 40 years.
FOREIGN EXCHANGE CONTRACTS: Certain domestic and foreign subsidiaries enter
into foreign exchange contracts as a hedge against accounts receivable and
accounts payable denominated in currencies other than the currency used in the
subsidiaries' countries of incorporation. Market value gains and losses on the
foreign exchange contracts are recognized and offset the foreign exchange gains
or losses on the related accounts receivable and accounts payable.
FAIR VALUE OF FINANCIAL INSTRUMENTS: Based on current market rates, the fair
value approximates the carrying value for all financial instruments as of
November 30, 1995 and November 30, 1994.
(Continued)
25
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 2 - RECEIVABLES
Net receivables are comprised of the following at November 30:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Trade $87,440,321 $66,554,643
Unconsolidated subsidiaries 1,349,835 1,267,945
Costs and estimated earnings in excess of
billings on uncompleted contracts 600,407 636,468
Other 3,543,511 2,249,566
----------- -----------
92,934,074 70,708,622
Less allowance for doubtful receivables 2,208,050 2,494,839
----------- -----------
$90,726,024 $68,213,783
----------- -----------
----------- -----------
</TABLE>
Comparative information with respect to uncompleted long-term equipment
installation contracts at November 30, follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Expenditures and estimated earnings on
uncompleted contracts $18,218,453 $9,248,871
Less applicable billings 19,258,895 10,872,917
----------- -----------
$(1,040,442) $(1,624,046)
----------- -----------
----------- -----------
Included in the accompanying balance sheets
Costs and estimated earnings in excess of
billings on uncompleted contracts
included in receivables $ 600,407 $ 636,468
Billings in excess of costs and estimated
earnings on uncompleted contracts
included in accounts payable (1,640,849) (2,260,514)
----------- -----------
$(1,040,442) $(1,624,046)
----------- -----------
----------- -----------
</TABLE>
(Continued)
26
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 3 - INVENTORIES
Inventories at November 30 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Finished goods and service parts $44,927,667 $38,945,906
Work in process 37,812,390 33,275,077
Raw material 3,467,008 2,689,763
----------- -----------
$86,207,065 $74,910,746
----------- -----------
----------- -----------
</TABLE>
NOTE 4 - CONSOLIDATED FOREIGN SUBSIDIARIES
Financial data relating to the consolidated foreign subsidiaries is summarized
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Total assets $120,399,000 $90,888,000 $85,501,000
Total liabilities 78,975,000 52,003,000 49,210,000
------------ ------------ ------------
Equity $41,424,000 $38,885,000 $36,291,000
------------ ------------ ------------
------------ ------------ ------------
Net sales $129,769,000 $117,146,000 $102,548,000
------------ ------------ ------------
------------ ------------ ------------
Net earnings $2,213,000 $ 856,000 $2,318,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
NOTE 5 - INTANGIBLE ASSETS
The cost and accumulated amortization of intangible assets are summarized as
follows:
<TABLE>
<CAPTION>
1995 1994
----------------------- -----------------------
Patents and Patents and
Goodwill Trademarks Goodwill Trademarks
--------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Cost $3,368,533 $1,076,012 $3,368,533 $ 991,358
Accumulated amortization (673,504) (471,807) (589,276) (410,006)
---------- ---------- --------- ---------
$2,695,029 $ 604,205 $2,779,257 $ 581,352
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
</TABLE>
(Continued)
27
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 6 - UNCONSOLIDATED SUBSIDIARIES
Financial data relating to an unconsolidated domestic and two foreign
subsidiaries are summarized below. All intercompany transactions have been
eliminated.
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- ----------
<S> <C> <C> <C>
Total assets $ 5,294,000 $ 5,429,000 $5,433,000
Total liabilities 6,576,000 6,520,000 5,395,000
----------- ----------- ----------
Equity (1,282,000) (1,091,000) 38,000
Net sales 3,157,000 2,668,000 5,293,000
----------- ----------- ----------
Net loss $ (829,000) $(1,117,000) $ (452,000)
----------- ----------- ----------
----------- ----------- ----------
Equity in earnings (loss) $ -- $ (17,000) $ (50,000)
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
NOTE 7 - LINES OF CREDIT
The Company had unused lines of credit of $21,910,000 at November 30, 1995.
Foreign $10,960,000
Domestic 10,950,000
-----------
$21,910,000
-----------
-----------
(Continued)
28
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 8 - LONG-TERM DEBT
Consolidated long-term debt consists of the following at November 30:
<TABLE>
<CAPTION>
1995 1994
------------- -----------
<S> <C> <C>
6.24% to 6.64% in 1995 and 6.12% to 6.85% in
1994 bankers acceptances due in various
maturities through May 31, 1996 under
lines of credit expiring in 1997 $25,000,000 $19,800,000
7.14% senior notes maturing through 2008 15,000,000 15,000,000
Obligations under capital leases 652,463 1,008,149
Secured loans
Interest free maturing through 1998 282,145 334,076
10.25% maturing in 1995 - 53,124
Interest free maturing in 2001 793,407 510,977
6.6% in 1995 and 7.35% in 1994
maturing through 2000 419,052 433,481
7.20% maturing through 2001 692,060 877,320
9.75% maturing in 1995 - 54,734
6.00% maturing in 1996 308,138 303,354
9.75% maturing through 2000 172,753 187,973
7.40% maturing through 1998 23,697 -
10.25% in 1995 and 10.40% in 1994
maturing through 1997 324,361 318,008
8.00% maturing through 2005 619,070 -
------------- -----------
44,287,146 38,881,196
Less current maturities 1,084,627 766,733
------------- -----------
Long-term debt, less current maturities $ 43,202,519 $38,114,463
------------- -----------
------------- -----------
</TABLE>
The aggregate maturities of long-term debt due in each of the years 1996 through
2000 are $1,084,627, $26,047,424, $567,121, $1,688,427, and $1,619,594,
respectively. In addition, the note agreements include various financial
performance requirements.
(Continued)
29
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 9 - INCOME TAXES
The Company files a consolidated federal income tax return which includes all
U.S. subsidiaries. Federal income taxes for each U.S. subsidiary are computed
separately and are payable to the parent company.
No provision is made for U.S. federal income taxes which would be payable if
undistributed earnings of foreign subsidiaries were paid as dividends to the
Company. If such earnings, which aggregate $32,358,000 at November 30, 1995,
were to be distributed, the resulting U.S. federal income taxes would be largely
offset by foreign tax credits that would be generated as a result of such
distributions. The 1995 taxable income of the U.S. parent company includes
$1,289,000 in dividends from its foreign subsidiaries and $2,587,000 in foreign
taxes deemed paid on the dividends. Available foreign tax credits at
November 30, 1995 totaled $2,864,000 arising mainly from the payment of
dividends from foreign subsidiaries. The available foreign tax credits will
expire through the year 2000 as follows: $870,000 in 1998, $526,000 in 1999, and
$1,468,000 in 2000.
Income tax expense (benefit) is comprised as follows:
<TABLE>
<CAPTION>
State
U.S. and
Federal Foreign Local Total
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
1995
Current $ 1,455,830 $ 2,305,452 $ 310,000 $ 4,071,282
Deferred (434,257) (860,499) - (1,294,756)
----------- ----------- --------- -----------
$ 1,021,573 $ 1,444,953 $ 310,000 $ 2,776,526
----------- ----------- --------- -----------
----------- ----------- --------- -----------
1994
Current $ 1,707,915 $ 592,479 $ 202,678 $ 2,503,072
Deferred (212,452) (127,542) - (339,994)
----------- ----------- --------- -----------
$ 1,495,463 $ 464,937 $ 202,678 $ 2,163,078
----------- ----------- --------- -----------
----------- ----------- --------- -----------
1993
Current $ 16,152 $ 1,683,988 $ (25,016) $ 1,675,124
Deferred (440,924) (592,974) - (1,033,898)
----------- ----------- --------- -----------
$ (424,772) $ 1,091,014 $ (25,016) $ 641,226
----------- ----------- --------- -----------
----------- ----------- --------- -----------
</TABLE>
(Continued)
30
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 9 - INCOME TAXES (Continued)
Actual income tax expense differed from the amounts computed by applying the
U.S. federal income tax rate of 34% to pretax income as a result of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
Computed "expected" tax expense (34%
in 1995, 1994, and 1993) $2,408,000 $1,903,000 $688,000
Differences between U.S. and foreign tax rates 277,000 132,000 424,000
Nondeductible expenses 381,000 319,000 326,000
State and local income taxes, net of federal
income tax benefit 205,000 134,000 (17,000)
Research tax credit (267,000) (60,000) (149,000)
Foreign local (other than income) taxes (53,000) (47,000) (155,000)
Change in the beginning-of-the-year balance
of the valuation allowance for deferred tax
assets allocated to income tax expense 1,038,000 869,000 (198,000)
Refund of foreign taxes resulting from
distribution of prior years' earnings - (256,000) (665,000)
Benefit (expense) not recorded for foreign net
operating loss generation or utilization (114,000) 195,000 385,000
Foreign tax credits in excess of domestic taxes
on dividends from foreign subsidiaries (1,209,000) (858,000) -
Other items 110,526 (167,922) 2,226
---------- ---------- --------
Provision for income taxes $2,776,526 $2,163,078 $641,226
---------- ---------- --------
---------- ---------- --------
</TABLE>
The significant components of deferred income tax expense (benefit) attributable
to pretax income for the years ended November 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax expense (benefit) (exclusive of the
effect of the other component listed below) $(2,332,756) $(1,208,994)
Increase in beginning-of-the-year balance
of the valuation allowance for deferred tax assets 1,038,000 869,000
----------- -----------
$(1,294,756) $ (339,994)
----------- -----------
----------- -----------
</TABLE>
(Continued)
31
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 9 - INCOME TAXES (Continued)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
Earnings (loss) before income taxes and equity
in earnings or loss of unconsolidated
subsidiaries:
Domestic $3,502,000 $4,408,000 $(1,485,000)
Foreign 3,581,000 1,187,000 3,507,000
---------- ---------- -----------
$7,083,000 $5,595,000 $2,022,000
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at November 30, 1995 and
1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax assets:
Deferred compensation $2,536,000 $2,325,000
Inventories 615,000 462,000
Allowance for doubtful receivables 276,000 336,000
Foreign tax credit carryforward 2,864,000 1,433,000
Investment in limited partnership 242,000 255,000
Accrued expenses 836,000 606,000
Other, net 12,000 -
---------- ----------
Total gross deferred tax assets 7,381,000 5,417,000
Less valuation allowance 1,907,000 869,000
---------- ----------
Total deferred tax assets 5,474,000 4,548,000
---------- ----------
Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation and capitalized interest 2,240,000 2,180,000
Long-term contracts 204,000 216,000
Other, net - 413,000
---------- ----------
Total gross deferred liabilities 2,444,000 2,809,000
---------- ----------
Net deferred tax assets $3,030,000 $1,739,000
---------- ----------
---------- ----------
</TABLE>
The valuation allowance for deferred tax assets as of December 1, 1992 was
$198,000. The net change in the total valuation allowance for the years ended
November 30, 1995, 1994, and 1993 was an increase of $1,038,000, an increase of
$869,000 and a decrease of $198,000, respectively.
(Continued)
32
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 9 - INCOME TAXES (Continued)
The U.S. federal income tax returns of the Company have been examined through
November 30, 1990. An examination of the years ended November 30, 1991 and
November 30, 1992 is currently in progress.
NOTE 10 - EMPLOYEE BENEFITS
The Company and certain subsidiaries maintain profit sharing plans covering most
of their employees. Additionally, the Company maintains a deferred compensation
plan for officers and key employees. The total expense related to these plans
was $1,042,000 in 1995, $781,000 in 1994 and $1,078,000 in 1993.
NOTE 11 - QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of quarterly financial data for the years ended November 30, 1995 and
1994 follows:
<TABLE>
<CAPTION>
Quarter ended
---------------------------------------------------------
Feb. 28, 1995 May 31, 1995 Aug. 31, 1995 Nov. 30, 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $58,994,000 $64,374,000 $67,871,000 $74,764,000
Gross profit $20,583,000 $21,740,000 $22,680,000 $22,060,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings $ 1,409,000 $ 869,000 $ 1,020,000 $ 1,008,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings per share $ .46 $ .28 $ .33 $ .32
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Quarter ended
---------------------------------------------------------
Feb. 28, 1994 May 31, 1994 Aug. 31, 1994 Nov. 30, 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $53,240,000 $59,347,000 $55,543,000 $75,469,000
Gross profit $17,142,000 $19,545,000 $20,377,000 $19,274,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings $ 727,000 $ 1,180,000 $ 645,000 $ 863,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings per share $ .24 $ .38 $ .21 $ .28
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
(Continued)
33
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 12 - LEASES
The following is an analysis of the leased property under capital leases
included in property, plant, and equipment at November 30:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Land $ - $ 33,496
Buildings 292,340 512,915
Machinery and equipment 784,994 796,618
--------- ---------
1,077,334 1,343,029
Less accumulated depreciation 318,873 418,488
--------- ---------
$ 758,461 $ 924,541
--------- ---------
--------- ---------
</TABLE>
The following is a schedule by years of future minimum lease payments under
capital leases together with the present value of the net minimum lease payments
as of November 30, 1995:
<TABLE>
<CAPTION>
Year ending November 30
-----------------------
<S> <C>
1996 $261,753
1997 256,450
1998 219,831
1999 37,595
--------
Total 775,629
Less amount representing interest 123,166
--------
Present value of net minimum lease payments $652,463
--------
--------
</TABLE>
The Company occupies certain offices and uses certain equipment under operating
lease arrangements. A summary of rent expense under such arrangements follows:
<TABLE>
<CAPTION>
Year ended November 30
----------------------
<S> <C>
1995 $2,820,000
1994 2,707,000
1993 2,476,000
</TABLE>
(Continued)
34
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 12 - LEASES (Continued)
The following is a schedule by years of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of November 30, 1995:
<TABLE>
<CAPTION>
Year ending
November 30
----------
<S> <C>
1996 $1,685,000
1997 1,613,000
1998 1,094,000
1999 452,000
2000 156,000
----------
Total $5,000,000
----------
----------
</TABLE>
It is expected that, in the normal course of business, most leases that expire
will be renewed or replaced by leases on other properties; thus, it is
anticipated that future annual rent expense will not be materially less than the
amount shown for 1995.
NOTE 13 - CONTINGENCIES
On June 30, 1995, the Court of Appeals for the Federal Circuit, in GRACO, INC.
V. BINKS MANUFACTURING COMPANY, vacated a judgment of infringement and an award
of $2.75 million against the Company regarding certain pumps sold prior to June
1993. The United States District Court for the Southern District of Texas
previously found that the Company had "willfully" infringed a patent and awarded
Graco treble damages, attorney fees and costs. The Federal Circuit reversed the
district court's finding that Binks "willfully" infringed Graco's patent and the
resulting enhancement of damages and award of attorneys' fees. The Federal
Circuit remanded the case for findings on the issues of whether the patent was
valid and infringed. Graco asserts that on remand it will seek damages and
interest of approximately $750,000. The Company believes that there are
meritorious defenses to these claims and thus no provision for any liability has
been made in the financial statements.
The Company is the defendant in a lawsuit filed by former financial advisors
seeking approximately $900,000 under the terms of a contract. Management
believes that all required payments have been made and no further amounts have
been provided for.
The Company has certain contingent liabilities resulting from litigation and
claims incident to the ordinary course of business. Management believes that
the probable resolution of such contingencies will not materially affect the
financial position or results of operations of the Company.
(Continued)
35
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 14 - INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC
AREAS
<TABLE>
<CAPTION>
United Other
States France England Canada Areas Consolidated
------------ ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended November 30, 1995
Net sales $136,234,000 $61,888,000 $25,091,000 $11,727,000 $31,063,000 $266,003,000
Operating income (loss) 6,582,000 3,541,000 1,033,000 208,000 (366,000) 10,998,000
Interest expense (4,032,000)
Contributions to employees' profit
sharing funds (452,000)
Other income, net 569,000
------------
Earnings before income taxes and
equity in loss of unconsolidated
subsidiaries $ 7,083,000
------------
------------
Identifiable assets at November 30, 1995 $118,662,000 $51,327,000 $23,011,000 $ 6,434,000 $27,881,000 $227,315,000
------------ ---------- ----------- ----------- -----------
------------ ---------- ----------- ----------- -----------
Investments in and advances to
unconsolidated subsidiaries 1,091,000
Goodwill 2,695,000
------------
Total assets at November 30, 1995 $231,101,000
------------
------------
</TABLE>
(Continued)
36
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 14 - INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC
AREAS (Continued)
<TABLE>
United Other
States France England Canada Areas Consolidated
------------ ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended November 30, 1994
Net sales $126,453,000 $50,417,000 $28,948,000 $ 7,215,000 $30,566,000 $243,599,000
Operating income (loss) 5,754,000 554,000 624,000 (270,000) 1,051,000 7,713,000
Interest expense (2,767,000)
Contributions to employees' profit
sharing funds (132,000)
Other income, net 781,000
------------
Earnings before income taxes and
equity in loss of unconsolidated
subsidiaries $ 5,595,000
------------
------------
Identifiable assets at November 30, 1994 $103,074,000 $33,449,000 $21,816,000 $ 5,585,000 $25,570,000 $189,494,000
------------ ---------- ----------- ----------- -----------
------------ ---------- ----------- ----------- -----------
Investments in and advances to
unconsolidated subsidiaries 1,091,000
Goodwill 2,779,000
------------
Total assets at November 30, 1994 $193,364,000
------------
------------
</TABLE>
(Continued)
37
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 14 - INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC
AREAS (Continued)
<TABLE>
United Other
States France England Canada Areas Consolidated
------------ ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended November 30, 1993
Net sales $107,857,000 $45,831,000 $16,065,000 $ 6,060,000 $34,592,000 $210,405,000
Operating income (loss) 264,000 3,133,000 482,000 (1,090,000) 2,156,000 4,945,000
Interest expense (2,621,000)
Contributions to employees' profit
sharing funds (480,000)
Other income, net 178,000
------------
Earnings before income taxes and
equity in loss of unconsolidated
subsidiaries $ 2,022,000
------------
------------
Identifiable assets at November 30, 1993 $ 93,531,000 $35,661,000 $17,646,000 $ 6,023,000 $23,167,000 $176,028,000
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Investments in and advances to
unconsolidated subsidiaries 1,108,000
Goodwill 2,863,000
------------
Total assets at November 30, 1993 $179,999,000
------------
------------
</TABLE>
(Continued)
38
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 14 - INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT
GEOGRAPHIC AREAS (Continued)
The Company and its subsidiaries are engaged in one major line of business, the
manufacture and sale of spray finishing and coating application equipment. The
Company and its subsidiaries grant credit to customers, with the automotive
industry generally accounting for between 10% and 15% of annual consolidated net
sales.
In 1995, 1994, and 1993 no single customer accounted for more than 10% of sales.
NOTE 15 - STOCKHOLDER RIGHTS PLAN
On February 2, 1990, the Company declared a dividend distribution of one Right
for each outstanding share of Capital Stock of the Company to the stockholders
of record on February 13, 1990. Certain terms of the Rights were amended on
January 21, 1991. Each Right, when exercisable, entitles the registered holder
to purchase from the Company one share of Capital Stock at a price of $100 per
share, subject to adjustment. The Rights become exercisable ten days after the
earliest to occur of (i) public announcement that a person or group of
associated or affiliated persons acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding Capital Stock of the
Company (the Stock Acquisition Date), (ii) the commencement of, or an
announcement of an intention to make, a tender offer or exchange offer if, upon
consummation thereof, any person or group of associated or affiliated persons
would be the beneficial owner of 15% or more of the outstanding Capital Stock of
the Company, or (iii) the Board of Directors declares any person owning 10% or
more of the outstanding Capital Stock of the Company to be an "Adverse Person"
pursuant to the criteria set forth in the Rights Agreement.
If a person or group of associated or affiliated persons becomes the beneficial
owner of 15% or more of the outstanding Capital Stock of the Company, the
Company is the surviving corporation in a merger and the Capital Stock remains
outstanding, an acquiring person engages in certain self-dealing transactions,
or the Board of Directors declares any person to be an "Adverse Person", subject
to certain adjustments and other conditions, each Right not owned or transferred
by the acquiring person or Adverse Person will entitle the holder to purchase
one share of Capital Stock of the Company at a purchase price of 20% of its then
market value. In addition, if the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power is sold, subject to certain adjustments and other conditions, each
Right will entitle the holder to purchase capital stock of the acquiring company
having a market value of $200 for a purchase price of $100.
(Continued)
39
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
NOTE 15 - STOCKHOLDER RIGHTS PLAN (Continued)
The Rights are redeemable by the Company at any time prior to 20 days after the
Stock Acquisition Date, at $0.01 per Right, at the Company's option. After the
Stock Acquisition Date, the Rights may not be exercised until the Company's
right of redemption has expired. The Rights expire on February 2, 2000. Until
a Right is exercised, the holder of a Right, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
receive dividends.
NOTE 16 - FOREIGN EXCHANGE CONTRACTS
At November 30, 1995, the Company had contracts maturing from December 7, 1995
to May 31, 1996 to purchase $6,196,000 in foreign currency ($1,046,000 of
British pounds sterling and $5,150,000 of French francs). The Company does not
hold or issue financial instruments for speculative trading purposes. Foreign
exchange forward contracts are used to reduce exposure of currency movements
affecting the existing foreign currency denominated assets and liabilities
resulting primarily from trade receivables and payables.
NOTE 17 - GAINS ON SALES OF LAND AND BUILDINGS
In the first quarter of 1995, the Company sold two buildings in the United
States. The pretax gains on these sales amounted to $258,000 and are included
in other income in the consolidated statement of earnings. The after tax gains
on these sales totaled $127,000.
In May of 1994, the Company sold a parcel of undeveloped land adjacent to one of
its facilities that was not being utilized. The pretax gain on this sale
amounted to $960,000 and is included in other income in the consolidated
statement of earnings. The after tax gain on this sale was $575,000.
40
<PAGE>
BINKS MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1995, 1994, and 1993
- ------------------------------------------------------------------------------
SCHEDULE II
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
---------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS- DEDUCTIONS- END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE(A) DESCRIBE OF PERIOD
----------- ---------- ---------- ----------- ----------- -----------
- ---------------------------------------------------------------------------------------
<S> <S> <S> <S> <S> <S>
1995:
Allowance for doubtful
receivables $2,494,839 $304,948 $ 88,419 $680,156(b) $2,208,050
Deferred tax asset
valuation allowance 869,000 1,038,000 - - 1,907,000
- ---------------------------------------------------------------------------------------
1994:
Allowance for doubtful
receivables $1,972,132 $935,386 $ 79,012 $491,691(b) $2,494,839
Deferred tax asset
valuation allowance - 869,000 - - 869,000
- ---------------------------------------------------------------------------------------
1993:
Allowance for doubtful
receivables $2,293,525 $654,444 $(185,079) $790,758(b) $1,972,132
Deferred tax asset
valuation allowance 198,000 - - 198,000(c) -
- ---------------------------------------------------------------------------------------
</TABLE>
(a) Effect of fluctuation in foreign currency translation rates.
(b) Uncollectible accounts charged off, net of recoveries.
(c) Reduction of deferred tax asset valuation allowance.
- -------------------------------------------------------------------------------
41
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors. The information required in response to this item
regarding directors of the Registrant will be contained in the Registrant's
definitive Proxy Statement (the "Proxy Statement") for its Annual Meeting of
Stockholders to be held on April 30, 1996 under the caption "Election of
Directors" and is incorporated herein by reference.
(b) Executive Officers of the Registrant. The information required
in response to this item regarding executive officers of the Registrant is
contained in Part I of this report and is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information required in response to this item will be contained in
the Proxy Statement under the captions "Executive Compensation" and "Information
Regarding Directors" and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in response to this item will be contained in
the Proxy Statement under the captions "Election of Directors" and "Voting
Securities" and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this item will be contained in
the Proxy Statement under the
42
<PAGE>
caption "Election of Directors" and is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements - see Item 8 (pages 14-40)
2. Financial Statement Schedules:
II. Valuation and Qualifying
Accounts (page 41)
All other schedules are omitted as the required information is not
applicable or the information is presented in the accompanying consolidated
financial statements and related notes.
Exhibits
3.1 Amended and Restated Certificate of Incorporation was filed as
Exhibit 3.1 to the Registrant's Form 10-K for its fiscal year
ended November 30, 1993 and is incorporated herein by reference
thereto.
3.2 Amended and Restated By-laws, as of January 21, 1991, was filed
as Exhibit 3.2 to the Registrant's Form 10-K for its fiscal year
ended November 30, 1993 and is incorporated herein by reference
thereto.
4.1 Revolving Credit Agreement, dated as of February 24, 1992,
between the Registrant and NBD Bank, N.A., as amended April 1,
1993,
43
<PAGE>
was filed as Exhibit 4.1 to the Registrant's Form 10-K for
its fiscal year ended November 30, 1993 and is incorporated
herein by reference thereto.
4.2 Amendment, dated August 25, 1994, to the Revolving Credit
Agreement, dated as of February 24, 1992 between the Registrant
and NBD Bank, N.A., was filed as Exhibit 4.2 to the Registrant's
Form 10-K for its fiscal year ended November 30, 1994 and is
incorporated herein by reference thereto.
4.3 Note Purchase Agreement, dated as of November 30, 1993 among
Binks Manufacturing Company and the Purchasers named therein, was
filed as Exhibit 4.2 to the Registrant's Form 10-K for its fiscal
year ended November 30, 1993 and is incorporated herein by
reference thereto.
4.4 Amended and Restated Rights Agreement, dated as of February 2,
1990 and amended and restated as of January 21, 1991, between
Binks Manufacturing Company and Continental Bank, N.A., was filed
as Exhibit 4.3 to the Registrant's Form 10-K for its fiscal year
ended November 30, 1993 and is incorporated herein by reference
thereto.
9.1 Voting Trust Agreement, dated December 15, 1948, and an Amendment
thereto, dated as of December 15, 1992 by and between the holders
of voting trust certificates issued under the original Voting
Trust Agreement, were filed as Exhibit 9.1 to the
44
<PAGE>
Registrant's Form 10-K for its fiscal year ended November
30, 1993 and is incorporated herein by reference thereto.
*10.1(a) Form of Executive Retirement Income Contracts between the
Registrant and Burke B. Roche, William W. Roche, Doran J.
Unschuld, Stephen R. Kennedy and Ernest F. Watts is filed as
Exhibit 10.1(a) to this Form 10-K.
*10.1(b) Form of Amendment to Executive Retirement Income Contract
(for the individuals named in Item 10.1(a) other than Burke
B. Roche) was filed as Exhibit 10.1(b) to the Registrant's
Form 10-K for its fiscal year ended November 30, 1993 and is
incorporated herein by reference thereto.
*10.2 Form of Employment Security Agreement between the Registrant
and Burke B. Roche, Doran J. Unschuld, Stephen R. Kennedy
and Ernest F. Watts was filed as Exhibit 10.2 to the
Registrant's Form 10-K for its fiscal year ended November
30, 1993 and is incorporated herein by reference thereto.
* These Exhibits are management contracts or compensatory plans or
arrangements required to be filed as Exhibits to this Form 10-K.
45
<PAGE>
*10.3 Forms of Employment Security Agreements between the
Registrant and certain key employees were filed as Exhibit
10.3 to the Registrant's Form 10-K for its fiscal year ended
November 30, 1993 and is incorporated herein by reference
thereto.
*10.4 Form of Insurance Maintenance Agreement between the
Registrant and each of its directors and officers was filed
as Exhibit 10.4 to the Registrant's Form 10-K for its fiscal
year ended November 30, 1993 and is incorporated herein by
reference thereto.
*10.5 Binks Death Benefit Plan for Executive Personnel between the
Registrant and certain key employees was filed as Exhibit
10.5 to the Registrant's Form 10-K for its fiscal year ended
November 30, 1993 and is incorporated herein by reference
thereto.
10.6 Loan Agreement, dated November 27, 1992 between the
Registrant and Comerica Bank, relating to a $5,000,000
line of credit was filed as Exhibit 10.6 to the
Registrant's Form 10-K for its fiscal year ended
November 30, 1993 and is incorporated herein by reference
thereto.
* These Exhibits are management contracts or compensatory plans or
arrangements required to be filed as Exhibits to this Form 10-K.
46
<PAGE>
10.7 Amendment No. 1, dated November 26, 1993, to Loan Agreement dated
November 27, 1992, between the Registrant and Comerica Bank was
filed as Exhibit 10.7 to the Registrant's Form 10-K for its
fiscal year ended November 30, 1994 and is incorporated herein by
reference thereto.
10.8 Amendment No. 2, dated February 21, 1995, to Loan Agreement dated
November 27, 1992 between the Registrant and Comerica Bank is
filed as Exhibit 10.8 to this Form 10-K.
10.9 Loan Agreement, dated January 16, 1996, between the Registrant
and The American National Bank and Trust Company of Chicago,
relating to a $5,000,000 line of credit, is filed as Exhibit 10.9
to this Form 10-K.
21.1 List of subsidiaries was filed as Exhibit 22.1 to the
Registrant's Form 10-K for its fiscal year ended November 30,
1993 and is incorporated herein by reference thereto.
27.1 Financial Data Schedule is filed as Exhibit 27.1 to this Form 10-
K.
(b) Reports on Form 8-K:
None
47
<PAGE>
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.
Binks Manufacturing Company
By: /s/ Burke B. Roche
-----------------------------
Burke B. Roche
President and Chairman of
the Board
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 and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Burke B. Roche Chairman of the Board
- -------------------------- Chief Executive Officer, February 27, 1996
Burke B. Roche President and Director
(Principal Executive
Officer and Principal
Financial Officer)
/s/ Jeffrey W. Lemajeur
- -------------------------- Treasurer February 27, 1996
Jeffrey W. Lemajeur
(Principal Accounting
Officer)
/s/ Jacques DeFreitas
- ------------------------- Director February 27, 1996
Jacques DeFreitas
/s/ William W. Roche
- ------------------------- Director February 27, 1996
William W. Roche
/s/ John J. Schornack
- ------------------------- Director February 27, 1996
John J. Schornack
/s/ Doran J. Unschuld
- ------------------------- Director February 27, 1996
Doran J. Unschuld
48
<PAGE>
EXHIBIT INDEX
Binks Manufacturing Company
Form 10-K for fiscal year ended
November 30, 1995
Page Number
-----------
3.1 Amended and Restated Certificate of **
Incorporation
3.2 Amended and Restated By-laws **
4.1 Revolving Credit Agreement, dated as **
of February 24, 1992, between the
Registrant and NBD Bank, N.A.
4.2 Amendment, dated August 25, 1994, to
the Revolving Credit Agreement, dated **
as of February 24, 1992 between the
Registrant and NBD Bank, N.A.
4.3 Note Purchase Agreement, dated as of
November 30, 1993, among the **
Registrant and the Purchasers named
therein
4.4 Amended and Restated Rights Agreement **
9.1 Voting Trust Agreement, as amended **
*10.1(a) Form of Executive Retirement Income
Contracts
*10.1(b) Form of Amendment to Executive **
Retirement Income Contract
*10.2 Form of Employment Security Agreement **
with certain executive officers
*10.3 Forms of Employment Security **
Agreements with certain key employees
*10.4 Form of Insurance Maintenance **
Agreement between the Registrant and
each of its directors and officers.
* These Exhibits are management contracts or compensatory plans or
arrangements required to be filed as Exhibits to this Form 10-K.
** Incorporated by reference.
49
<PAGE>
*10.5 Binks Death Benefit Plan for **
Executive Personnel
10.6 Loan Agreement, dated November 27, **
1992, between the Registrant and
Comerica Bank
10.7 Amendment No. 1, dated November 26, **
1993, to Loan Agreement dated
November 27, 1992, between the
Registrant and Comercia Bank
10.8 Amendment No. 2, dated February 21,
1995, to Loan Agreement dated
November 27, 1992 between the
Registrant and Comerica Bank
10.9 Loan Agreement, dated January 16,
1996, between the Registrant and The
American National Bank and Trust
Company of Chicago
21.1 List of subsidiaries **
27.1 Financial Data Schedule
* These Exhibits are management contracts or compensatory plans or
arrangements required to be filed as Exhibits to this Form 10-K.
** Incorporated by reference.
50
<PAGE>
EXECUTIVE RETIREMENT INCOME CONTRACT
* * *
THIS AGREEMENT made this 1st day of December, 1980, between BINKS
MANUFACTURING COMPANY, a corporation duly organized and existing under the laws
of the State of Delaware ("Company") and ("Executive").
The Executive is a valued executive or managerial employee and has
been in the continuous employ of the Company for many years, during which period
his services have materially contributed to the growth and development of the
Company's business. In order to offer an inducement to the Executive to remain
in the employ of the Company until he reaches Retirement Date the following
Agreement has been reached:
In consideration of the foregoing and of the mutual covenants herein
contained, it is agreed by the parties hereto as follows:
1. DEFINITIONS. The following terms used in this Agreement shall have
the meaning specified below unless the context clearly indicates to the
contrary.
(a) "Employment period" shall mean that period commencing with
the date hereof and continuing until the Executive's termination of employment.
(b) "Retirement period" shall be that period commencing on the
Executive's retirement date and continuing until the expiration of 120
consecutive months.
(c) "Retirement date" shall be the first day of the month
immediately following the date of the Executive's termination
<PAGE>
of employment with the Company (a) other than by dismissal for cause on or after
his 65th birthday, or (b) prior to his 65th birthday on account of disability,
dismissal without cause or resignation with the consent of the Company as
provided herein, which shall be the date for commencing payment of retirement
benefits to which be may be entitled hereunder.
(d) "Disability" shall mean a physical or mental condition of the
Executive which in the judgment of the Company, based upon a medical report of
a duly licensed physician appointed by the Company or other evidence
satisfactory to the Company, permanently prevents the Executive from
satisfactorily performing his usual duties of any other work available with the
Company for which he is qualified by reason of training, education or
experience.
(e) "Termination of employment" shall mean the severance of
service with the Company for any reason.
(f) "Dismissal for cause" shall mean a dismissal by reason of (1)
fraud or dishonesty, (2) employment by or assistance to a competitor of the
Company, (3) sharing of so-called "trade secrets" of the Company with a
competitor of the Company, (4) lack of faithful, diligent and competent
performance in the duties assigned to the Executive, not caused by disability as
herein defined, (5) failure to follow and implement corporate policy of the
Company, (6) deliberate and willful failure to perform in the manner, and at the
level, and with the standard required by the position occupied by the Executive,
or (7) violation by the Executive of any of his covenants and agreements set
forth in this Agreement.
(g) "Assistance to a competitor" shall mean becoming or being an
owner, partner, officer, director, stockholder or employee of a business which
conducts a business in competition with the business of the Company, and shall
also mean being an agent or an independent contractor in any manner which,
- 2 -
<PAGE>
in the opinion of the Company shall be in competition with the business of the
Company. None of the conditions in this paragraph shall prohibit the Executive
from purchasing or holding for investment any shares of stock or other
securities of any corporation whose securities are listed upon a recognized
securities exchange, or from making any investment in or becoming a director of
any noncompeting business.
(h) "Beneficiary" shall mean the person or persons (natural or
otherwise) designated by the Executive to receive benefits provided hereunder
after his death by his written signed instrument filed with and accepted by the
Company.
(i) All determinations and judgments required pursuant to the
terms of this Paragraph 1 shall be made by the Company, and its decision in each
such case shall be final, complete and conclusively binding on all parties and
for all purposes hereunder.
2. EMPLOYMENT PERIOD DUTIES AND COMPENSATION. During the employment
period, the Executive agrees to serve the Company in an executive or managerial
capacity with such duties as may be reasonably assigned to him from time to time
by the Company, such duties to be substantially of the same character as those
now assigned to the Executive, and the Executive shall devote his entire time,
energy and attention exclusively to the business of the Company except during
usual vacation periods and except to the extent reasonably required by the
Executive for the supervision of his own personal investments.
The Executive shall receive such compensation as shall be
determined from time to time by the Company, plus participation in such profit
sharing, insurance and other employee benefits as are made available to
executive or managerial employees.
3. RETIREMENT INCOME. As additional compensation for his services
during the employment period and during the
- 3 -
<PAGE>
period prior thereto if any the Company shall pay the Executive during his
retirement period a yearly retirement income, subject to the conditions herein
provided, of 1 % of his average annual salary (exclusive of bonuses, profit
sharing and other employee benefits) for the 5 full fiscal years of the Company
(or lesser number of such years employed by the Company) immediately preceding
his retirement date, multiplied by the number of full fiscal years he was
employed by the Company from date of first employment by the Company. Such
yearly retirement income shall be paid to the Executive in monthly installments
unless otherwise agreed by the parties.
In the event that the Executive shall voluntarily resign from the
Company prior to his 65th birthday without the consent of the Company, or in the
event that the Company shall dismiss the Executive for cause at any time, any
and all rights of the Executive under the terms of this Agreement shall
thereupon immediately terminate and shall thereafter be of no effect.
Upon the Executive's termination of employment prior to his 65th
birthday by reason of (a) disability as herein defined, or (b) for any reason,
other than his voluntary resignation without the consent of the Company or his
dismissal for cause, or upon his termination of employment on or after his 65th
birthday for any reason except dismissal for cause, the Executive's retirement
date shall be the first day of the month following such termination of
employment and there shall be paid to him retirement benefits of the amount and
subject to the conditions herein stated.
All retirement benefits payable hereunder shall be contingent
upon the Executive's abstention from assistance to a competitor of the Company
as herein defined during the retirement period. In the event of breach of such
condition all future retirement benefit payments shall be forfeited, but all
such benefits previously paid shall be non-forfeitable. In lieu of forfeiting
all future retirement benefits the Company may in its discretion
- 4 -
<PAGE>
reduce the amount of such benefits, or temporarily suspend and forfeit the same
and thereafter continue their payments for the remainder of the retirement
period in whole or in part. The failure of the Company to reduce or discontinue
payments after any one or more of such breaches of the Executive shall not be
regarded as a waiver of its right to reduce or discontinue any such payments at
a later date.
4. DEATH AND OTHER FRINGE BENEFITS. Upon the death of the Executive
prior to his retirement date the Company shall pay his beneficiary a death
benefit equal to 10 times what his yearly retirement income would have been
hereunder had his date of death been his retirement date, payable in monthly
installments commencing the first of the month coincident with or next
succeeding his death and continuing for 120 consecutive months or such lesser
number of months as the Company and beneficiary agree.
In the event of the Executive's death during his retirement
period the Company shall pay his beneficiary the retirement income payments in
the amount and at the time they would have become payable to the Executive had
he lived.
During the retirement period the Executive shall also be
eligible, to the extent permitted by applicable law, to participate in any group
life insurance, health and accident insurance or medical expense reimbursement
plan maintained and offered by the Company generally for those retired executive
and managerial employees having this or similar retirement income contracts.
The beneficiary of the Executive shall be such person or persons,
natural or otherwise, and in the amounts to each if more than one, as shall be
designated by him in writing filed with and accepted by the Company. If no
designated beneficiary shall be living or in existence on any payment date the
Executive's estate shall be his beneficiary to whom all death benefits
thereafter due shall be paid.
- 5 -
<PAGE>
5. MERGER OR CONSOLIDATION. If the Company shall at any time be merged
or consolidated with any other corporation or if substantially all of the assets
of the Company are transferred to another corporation, the provisions of this
Agreement shall be binding upon and inure to the benefit of the successor
corporation. In the event that the terms of this paragraph shall be applicable,
the Board of Directors of the Company acting immediately prior to the time of
any such merger, consolidation or transfer of assets shall appoint a committee
of not less than three members and the committee so appointed shall, from and
after the date of merger, consolidation or transfer of assets, have the powers,
authorities, duties and discretions herein in this Agreement given to the
Company (except the authority given in paragraph 2 hereof regarding the
Executive's salary during the employment period). Such committee shall thereupon
become the "Company" for the purposes of this Agreement (except as herein in
this paragraph noted), and all decisions of such committee shall bind any such
successor corporation. In the event that any member of the original committee
appointed pursuant to the terms of this paragraph shall be unable to act or to
continue to act as a member of such committee the members then acting on such
committee shall appoint a successor member thereof as long as the terms of this
Agreement require the existence of the Company.
6. ASSIGNMENT OF BENEFITS. The interests of the Executive and
beneficiaries in payments hereunder shall not be subject to the claims of any
creditor, any spouse for alimony or support, or others, or to legal process, and
may not be voluntarily or involuntarily alienated or encumbered.
7. FACILITY OF PAYMENT. If amounts become payable to a minor or to a
person under legal disability or to a person not adjudicated incompetent but
who, by reason of illness or mental or physical disability, is in the opinion of
the Company unable properly to manage his or her affairs, then such amounts
shall be paid or expanded only in such of the following ways as the Company
deems
- 6 -
<PAGE>
best; (a) to the recipient directly; (b) to the legally appointed guardian or
conservator of the recipient; (c) to a custodian for the recipient under a
Uniform Gifts to Minors Act; (d) by the Company directly for the benefit of the
recipient; (e) to an adult relative or friend in reimbursement for amounts
properly advanced for the benefit of the recipient.
8. TERMINATION OF CONTRACT. While the Company expects to continue this
contract until fully performed, it reserves the right by action of its Board of
Directors to terminate the contract in whole or in part at any time during the
Executive's employment period by written notice to the Executive, except that
upon such termination the Executive shall be entitled to an amount of retirement
income and death benefits computed hereunder as if such termination date was his
retirement date, provided he satisfies all other requirements herein stated for
the payment of such benefits. The payment of such retirement income or death
benefits, however, shall not commence until the Executive attains his actual
retirement date as herein defined or dies prior thereto.
9. PRIOR AGREEMENTS. This Agreement terminates all prior individual
retirement income contracts if any between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
-------------------------------
EXECUTIVE
ATTEST: BINKS MANUFACTURING COMPANY
BY: BY:
----------------------------- -----------------------------
Secretary President
(corporate seal)
- 7 -
<PAGE>
AMENDMENT NO. 2 TO
LETTER AGREEMENT AND PROMISSORY NOTE
THIS AMENDMENT NO. 2, dated as of the 21st day of February, 1995, by and
between BINKS MANUFACTURING COMPANY, a Delaware corporation, of Franklin Park,
Illinois (herein called "Company"), and COMERICA BANK, a Michigan banking
corporation, of Detroit, Michigan (herein called "Bank");
WITNESSETH:
WHEREAS, said parties desire to amend that certain Letter Agreement dated
November 27, 1992, entered into by and between Company and Bank, as amended by
Amendment No. 1 dated as of November 26, 1993 (herein called the "Agreement");
WHEREAS, said parties further desire to amend that certain Promissory Note
dated November 27, 1992, executed by Company to Bank in the original amount of
Five Million Dollars ($5,000,000.00), as amended by said Amendment No. 1 (herein
called the "Note").
NOW THEREFORE, in consideration of the premises, and for other valuable
consideration, Company and Bank and Bank hereby agree as follows:
1. The Agreement is hereby amended as follows:
(a) Sections 1(r), 7(c), and 9(c)(v) are each amended by deleting all
references therein to the term "sixty (60)", and replacing the same
with "one hundred eighty (180)".
(b) Section 1(v) is hereby amended in its entirety as follows:
"(v) `Termination Date' means February 28, 1996."
(c) Section 3 is hereby amended by inserting the following language after
the words "Repayment Date" at the end of the second sentence thereof:
"; provided, however, in the event that such Repayment Date for
any such Quoted Rate Loan shall be more than ninety (90) days
after the date of such Quoted Rate Loan, interest thereon shall
also be payable at intervals of ninety (90) days from the date
thereof"
2. The maturity date of the Note shall be February 28, 1996, in lieu of
February 28, 1995.
<PAGE>
3. The form of Request for Bankers Acceptance and Power of Attorney attached
to the Agreement as Exhibit "C" is hereby amended and restated in its entirety
to conform to the Request for Bankers Acceptance and Power of Attorney attached
to this Amendment No. 2 as Exhibit "C".
Company hereby acknowledges that Bank has extended to Binks de Mexico, S.A.
de C.V. (herein called "Binks de Mexico"), a Subsidiary (as defined in the
Agreement) of Company, a line of credit in the principal amount of One Hundred
Fifty Thousand Dollars ($150,000.00), subject to a Letter Agreement dated as of
February 28, 1995, by and between Bank and Binks de Mexico (herein called the
"Binks de Mexico Agreement"). Company previously executed and delivered unto
Bank a Guaranty dated January 19, 1993, wherein Company unconditionally
guaranteed the repayment of all indebtedness of Binks de Mexico to Bank, and
Company hereby acknowledges, ratifies and affirms its liabilities and
obligations under said Guaranty. Company further acknowledges and agrees that,
to the extent of the principal amount outstanding at any time under the Binks de
Mexico Agreement, the maximum amount available for borrowing under and pursuant
to the terms and conditions of the Agreement, whether Loans or Acceptance, shall
be reduced by a like amount.
Company hereby represents and warrants that, after giving effect to the
amendments contained herein, (a) execution, delivery and performance of this
Amendment and any other documents and instruments required under this Amendment
or the Agreement are within Company's corporate powers, have been duly
authorized, are not in contravention of law or the terms of Company's Articles
of Incorporation or Bylaws, and do not require the consent or approval of any
governmental body, agency, or authority; and this Amendment and any other
documents and instruments required under this Amendment or the Agreement, will
be valid and binding in accordance with their terms; (b) the continuing
representations and warranties of Company set forth in Sections 15(a) through
15(f) (provided that Schedule 15(c) is hereby amended to include the information
set forth in Annex 1 attached hereto) of the Agreement are true and correct on
and as of the date hereof with the same force and effect as if made on and as of
the date hereof; (c) the continuing representations and warranties of Company
set forth in Section 15(g) of the Agreement are true and correct as of the date
hereof with respect to the most recent financial statements furnished to the
Bank by Company in accordance with Section 16(a) of the Agreement; and (d) no
Default or Event of Default has occurred and is continuing as of the date
hereof.
This Amendment shall be effective as of the date hereof.
Except as modified hereby, all of the terms and conditions of the Agreement
shall remain in full force and effect.
2
<PAGE>
Capitalized terms used but not otherwise expressly defined herein shall
have the meanings ascribed to them in the Agreement.
WITNESS the due execution hereof on the day and year first above written.
COMERICA BINKS MANUFACTURING COMPANY
By:/s/ Pietro Sarcina By:/s/ Burke B. Roche
-------------------------------- ------------------------------------
Its: Vice President Its: President
------------------------------ ----------------------------------
By:
------------------------------------
Its:
----------------------------------
3
<PAGE>
[Letterhead]
January 16, 1996
Mr. Burke B. Roche
President
Binks Manufacturing Company
9201 W. Belmont Avenue
Franklin Park, IL 60131-2887
Dear Mr. Roche:
The American National Bank and Trust Company of Chicago (the "Bank") is
pleased to extend our line of credit in favor of Binks Manufacturing Company
(the "Borrower") in the amount of $5,000,000 six months, from April 30, 1996
through October 31, 1996 (the "Maturity Date") unless the line of credit is
terminated on an earlier date as set forth below.
a) Loans under this line of credit will be evidenced and governed by the
Bank's standard form of master note (the "Note"), a copy of which is
attached hereto, and will bear interest, at Borrower's option, at:
i) a rate equal to the sum of the Bank's corporate base rate of
interest announced by the Bank from time to time, changing when
and as the corporate base rate changes, with interest payable
on the last business day of each month, on the Maturity Date,
and on demand thereafter (computed on the basis of a 365-day
year and actual days elapsed); or
ii) subject to availability and for a maturity not to exceed 180
days, at a fixed rate equal to the sum of 100 basis points plus
the Eurodollar rate, where the Eurodollar rate is the rate at
which deposits in U.S. dollars in the amount and for a maturity
corresponding to that of the loan are offered by the Bank in
the offshore interbank market at approximately 10:00 a.m.
(Chicago time) two business days prior to the date on which
such loan is made, adjusted for maximum statutory reserve
requirements; or
<PAGE>
Mr. Burke B. Roche
January 16, 1996
Page Two
iii) banker's acceptance financing in 30-day increments, up to
180 days, will be available to the Borrower.
b) No interest period for or maturity of a loan hereunder shall extend
beyond the Maturity Date. Interest and fees will be computed on the basis
of actual days elapsed on a 360-day year basis, except for interest on
loans under option (a) (i) which will be computed on the basis of actual
days elapsed on a 365-day year basis.
c) The Borrower will use the proceeds of the loans hereunder for working
capital purposes.
d) The Bank shall have no obligation to make a loan hereunder (and all
outstanding loans and accrued and unpaid interest, at the option of the
Bank, may be declared immediately due and payable without notice) if (i)
there is any failure by the Borrower to pay principal, interest, fees, or
other obligations when due under this letter, the Note, or any other
agreement or arrangement with the Bank, (ii) there exists, and is
continuing, any default under the Note, or any violation or failure to
comply with any provision of the Note, (iii) any litigation is pending or
threatened against the Borrower which would be reasonably likely to have a
material adverse effect on its financial condition or results of
operations, (iv) there is a material default, beyond the period of grace
provided with respect thereto, under any agreement governing indebtedness
of the Borrower, with respect to which there is an aggregate outstanding
principal amount in excess of $500,000, (v) any petition is filed by or
against the Borrower under the Federal Bankruptcy Code or similar state law
and such petition remains undismissed or unstayed for a period of 30 days.
The Bank may require a certificate of compliance with these conditions from
the Borrower's Chief Financial Officer or Treasurer as a condition to
making any loan hereunder.
e) The Bank has a valid copy of the Revolving Credit Agreement executed
between the Borrower and NBD Bank, N.A. dated February 24, 1992 and all
amendments, additions, or renewals thereto to and including the date hereof
(the most recent amendment being dated August 25, 1994). Borrower will
<PAGE>
Mr. Burke B. Roche
January 16, 1996
Page Three
deliver to Bank within 45 days of execution, copies of all future
amendments, additions, or renewals of said Revolving Credit Agreement.
As soon as available and in any event within 45 days after the end of each
fiscal quarter of the Company, the unaudited consolidated and consolidating
balance sheet as of the end of such fiscal quarter and the related
consolidated and consolidating statements of earnings, stockholders'
equity and cash flows of the Company and its consolidated Subsidiaries for
the period commencing at the end of the previous fiscal year and ending
with the end of such quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding date or period of the
preceding fiscal year, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief financial officer of the
applicable person as having been prepared in accordance with GAAP, together
with a certificate of the chief financial officer of the Company stating
the (A) no Default of Event of Default has occurred and is continuing or,
if any Default or Event of Default has occurred and is continuing, a
statement setting forth the details thereto and the action which the
applicable person has taken and proposes to take with respect thereto.
As soon as available and in any event within 90 days after the end of each
fiscal year of the Company a copy of the audited consolidated balance sheet
of the Company and its consolidated Subsidiaries and the related
consolidated statements of earnings, stockholders' equity and cash flow for
such fiscal year, with a customary audit report of Crowe Chizek, or other
independent certified public accountants selected by the Company and
reasonably acceptable to Bank, without qualifications unacceptable to Bank,
together with a copy of the certificate of such accountants, annually
presented to NBD Bank, N.A., stating that they have reviewed the Credit
Agreement currently in existence between Borrower and NBD Bank, N.A., and
stating further whether, in the course of their review of such financial
statements, they have become aware of any Default or Event of Default and,
if such a Default or Event of Default than exists and is continuing, a
statement setting forth the nature and status thereof.
<PAGE>
Mr. Burke B. Roche
January 16, 1996
Page Four
Promptly upon the filing or making thereof, copies of each annual report,
proxy or financial statement or other communication sent to the Company's
stockholders generally and copies of all annual, regular, periodic and
special reports and registration statements which the Company may file or
be required to file with the Securities and Exchange Commission or with any
securities exchange or the National Association of Securities Dealers, Inc.
Borrower shall make available all documents reasonably requested by Bank,
including any and all agreements with third parties, and a copy of the
compliance certificate required pursuant to section 6.1 d(ii) of the NBD
revolving credit agreement.
f) THIS LETTER AND NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS. BOTH PARTIES HERETO WAIVE TRIAL BY JURY IN THE
EVENT THIS LETTER OR THE NOTE BECOMES THE SUBJECT OF A DISPUTE.
Mr. Roche, we are pleased to continue to provide this financing arrangement
for Binks Manufacturing Company.
Should you have any questions or concerns regarding this matter, please do
not hesitate to contact me.
Sincerely,
/s/ Stephen J. Clingen
Stephen J. Clingen
Second Vice President
(312) 661-5035
SJC:tml
Accepted this 18th day of January, 1996.
BINKS MANUFACTURING COMPANY
By: /s/ Burke B. Roche
-----------------------------
Burke B. Roche
President
Date: /s/ Burke B. Roche 1/18/96
--------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<CASH> 8,527
<SECURITIES> 0
<RECEIVABLES> 90,726
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<INVENTORY> 86,207
<CURRENT-ASSETS> 190,681
<PP&E> 65,186
<DEPRECIATION> 34,560
<TOTAL-ASSETS> 231,101
<CURRENT-LIABILITIES> 84,079
<BONDS> 43,203
0
0
<COMMON> 3,089
<OTHER-SE> 91,516
<TOTAL-LIABILITY-AND-EQUITY> 231,101
<SALES> 266,003
<TOTAL-REVENUES> 266,003
<CGS> 178,940
<TOTAL-COSTS> 178,940
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 7,083
<INCOME-TAX> 2,777
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