SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement (Revised)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Section 240.14a-11(c) or Section 240.14a-12
LATSHAW ENTERPRISES, INC.
(Name of Registrant as Specified in its Charter)
James S. Swenson
2420 Pershing, Suite 400
Kansas City, MO 64108
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14-a(6)(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
*Set forth the amount on which the filing fee is calculated
and state how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Notes: The Registrant is filing a Revised Rule 13e-3
Transaction Statement concurrently with the
Revised Preliminary Proxy Statement. The filing
fee of $125.00 will be paid with the filing of
the Definitive Proxy Statement.
LATSHAW ENTERPRISES, INC.
2533 South West Street
Wichita, Kansas 67217
(316) 942-7266
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 14, 1996
The annual meeting of the stockholders of Latshaw Enterprises, Inc.,
a Delaware corporation, will be held at the 1st Floor Conference Room, Air
World's Ambassador II Building, 11020 Ambassador Drive, Kansas City,
Missouri, on Saturday, December 14, 1996, at 11:00 A.M., C.S.T., for the
following purposes:
1. To consider and act upon a proposal to approve an amendment to
Article FOURTH of the corporation's Certificate of Incorporation
which would effect a 1-for-50 reverse stock split of the
corporation's common stock, $2.00 par value per share (the
"Common Stock"), and in connection therewith, would reduce the
number of authorized shares of Common Stock from 1,500,000 shares
to 30,000 shares and increase the par value of the Common Stock
from $2.00 per share to $100.00 per share.
No fractional shares of new Common Stock will be issued in
connection with the proposed reverse stock split. Each holder of
shares of Common Stock not divisible by 50 as of the effective
date of the proposed reverse stock split will, in lieu of
receiving fractional shares, have the option to either
(a) purchase from other stockholders otherwise entitled to
fractional shares a sufficient fractional share interest to
"round-up" to a full share of Common Stock, to the extent such
fractions of shares are available from other stockholders, at a
price of $7.50 per share of Common Stock or (b) sell such
holder's fractional share interest to other stockholders or to
the corporation at the same price.
2. To consider and act upon a proposal to elect two directors of the
corporation as set forth in the accompanying Proxy Statement.
3. To consider and act upon a proposal to ratify the selection of
Ernst & Young as independent auditors for the corporation and its
subsidiaries for the present fiscal year.
4. To consider and transact such other business as may properly come
before the meeting.
Stockholders of record at the close of business on November 5, 1996
are entitled to vote at the meeting.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
TO INSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE AS SOON AS
POSSIBLE. Sending in your Proxy now will not interfere with your rights
to attend the meeting or to vote your shares personally at the meeting if
you wish to do so.
All stockholders are cordially invited to attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Michael E. Bukaty
President and
Chief Operating Officer
DATE: November 8, 1996
Wichita, Kansas
LATSHAW ENTERPRISES, INC.
2533 South West Street
Wichita, Kansas 67217
November 8, 1996
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Latshaw Enterprises, Inc. (the
"Company"), for the annual meeting of stockholders on December 14, 1996.
If the accompanying Proxy is signed and returned the shares represented
by the Proxy will be voted in accordance with the specifications thereon. If
the manner of voting such shares is not indicated on the Proxy, they will be
voted for (a) the approval of Proposal 1 to amend Article FOURTH of the
Company's Certificate of Incorporation to effect a 1-for-50 reverse stock
split of the Company's common stock, $2.00 par value per share (the "Common
Stock"), and in connection therewith, to reduce the number of authorized
shares of Common Stock from 1,500,000 shares to 30,000 shares and increase
the par value of the Common Stock from $2.00 per share to $100.00 per share,
(b) the nominees for directors named herein and (c) the ratification of the
selection of the independent auditors for the Company.
A stockholder may revoke his or her Proxy at any time before it is
voted by giving to the Secretary of the Company written notice of revocation
bearing a later date than the Proxy, by submission of a later-dated Proxy,
or by revoking the Proxy and voting in person at the annual meeting of
stockholders. Attendance at the annual meeting of stockholders will not in
and of itself constitute a revocation of a Proxy. Any written notice
revoking a Proxy should be sent to Mr. David G. Carr, Secretary, Latshaw
Enterprises, Inc., 2533 South West Street, Wichita, Kansas 67217.
A copy of the Company's annual report for the fiscal year ended October
28, 1995 is enclosed herewith. Such report is not incorporated in this Proxy
Statement and is not to be deemed a part of the proxy soliciting material,
except as expressly provided herein.
VOTING
Stockholders of record at the close of business on November 5, 1996,
are entitled to notice of and to vote at the meeting. There were ________
shares of common stock outstanding at the close of business on that date.
Stockholders are entitled to vote cumulatively for the election of
directors, which means that each stockholder is entitled to cast as many
votes as shall equal the number of shares held by him times the number of
directors to be elected, and such votes may all be cast for a single director
or may be distributed among the directors to be elected as the stockholder
wishes. Unless otherwise indicated on the Proxy, authority will be granted
to the persons named in the Proxy to vote the shares represented by the Proxy
cumulatively for the election of directors in accordance with their
discretion. Stockholders are entitled to one vote per share on all other
matters.
Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business. In
tabulating the votes cast on proposals presented to stockholders, abstentions
are counted and broker non-votes are not counted for purposes of determining
whether a proposal has been approved.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT 1
VOTING 1
SUMMARY 3
ANNUAL STOCKHOLDERS' MEETING 3
REVERSE STOCK SPLIT 3
Proposed Amendment to Certificate of Incorporation 3
Exchange of Certificates 3
Fractional Share Program 4
Purposes of the Reverse Stock Split 4
Reasons for the Reverse Stock Split 4
Effects of the Reverse Stock Split 5
Fairness of the Reverse Stock Split 6
Federal Income Tax Consequences 7
Conduct of the Company's Business After
the Reverse Stock Split 7
Appraisal Rights 7
Costs and Financing of the Reverse Stock Split 7
Vote Required 8
PROPOSED AMENDMENT OF ARTICLE FOURTH OF CERTIFICATE OF
INCORPORATION TO EFFECT REVERSE STOCK SPLIT 8
SPECIAL FACTORS 9
Purposes of the Reverse Stock Split 9
Reasons for the Reverse Stock Split 9
Effects of the Reverse Stock Split 11
Fairness of the Reverse Stock Split 13
Federal Income Tax Consequences 17
Conduct of the Company's Business After the Reverse Stock Split 18
Appraisal Rights 19
EXCHANGE OF CERTIFICATES 19
FRACTIONAL SHARE PROGRAM 20
COSTS AND FINANCING OF THE REVERSE STOCK SPLIT 21
FINANCIAL INFORMATION 21
BOARD OF DIRECTORS DISCRETION 22
MARKET FOR COMMON STOCK, DIVIDENDS AND STOCK PURCHASES 23
VOTE REQUIRED 24
ELECTION OF DIRECTORS 25
SELECTION OF AUDITORS 30
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 30
MANAGEMENT OF THE COMPANY 33
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS 34
CERTAIN TRANSACTIONS AND RELATIONSHIPS 43
STOCKHOLDER PROPOSALS 43
GENERAL 43
ADDITIONAL INFORMATION 43
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 44
ANNEXES 45
APPENDICES:
A. Article FOURTH of the Certificate of Incorporation,
as currently in effect A-1
B. Article FOURTH of the Certificate of Incorporation,
as proposed to be amended B-1
SUMMARY
The following is a summary of certain information contained in this
Proxy Statement. This summary is provided to assist the stockholders in
their review of this Proxy Statement. This summary should not be
considered complete and is qualified in its entirety by the more detailed
information appearing elsewhere herein, incorporated by reference herein
and appearing in the Appendices attached hereto.
ANNUAL STOCKHOLDERS' MEETING
The annual meeting of the stockholders of Latshaw Enterprises, Inc.,
a Delaware corporation, will be held at the First Floor Conference Room,
Air World's Ambassador II Building, 11020 Ambassador Drive, Kansas City,
Missouri, on December 14, 1996, at 11:00 A.M., C.S.T. The matters to be
considered and voted upon at the meeting are (1) an amendment to Article
FOURTH of the Company's Certificate of Incorporation which would effect a
1-for-50 reverse stock split ("Reverse Stock Split") of the Company's
Common Stock, (2) the election of two directors, (3) the ratification of
the selection of Ernst & Young as independent auditors for the Company and
(4) such other business as may properly come before the meeting.
REVERSE STOCK SPLIT
Proposed Amendment to Certificate of Incorporation
The Board of Directors of the Company has unanimously adopted,
declared advisable and directed to be submitted to a vote of the
stockholders a proposed amendment to Article FOURTH of the Company's
Certificate of Incorporation to effect a 1-for-50 reverse stock split of
the Company's Common Stock, and in connection therewith, to reduce the
authorized shares of Common Stock from 1,500,000 shares to 30,000 shares
and to increase the par value of the Common Stock from $2.00 per share to
$100.00 per share. The amendment provides that upon its effective date,
the number of outstanding shares of Common Stock of the Company shall be
reduced so that each fifty (50) shares of Common Stock issued and
outstanding ("Existing Common Stock") will be automatically reclassified,
combined and converted into one (1) share of Common Stock of the par value
of One Hundred Dollars ($100.00) per share ("New Common Stock").
Exchange of Certificates
Following the Reverse Stock Split, if approved, stockholders who own
50 shares of Existing Common Stock or a multiple thereof, will receive one
share of New Common Stock for each 50 shares of Existing Common Stock, and
stockholders who do not own a multiple of 50 shares of Existing Common
Stock will be entitled to participate in the Fractional Share Program
described below in lieu of receiving certificates for fractional shares of
New Common Stock. After the Reverse Stock Split is effected, transmittal
instructions will be mailed to stockholders with respect to the exchange
of certificates and participation in the Fractional Share Program. See
"Exchange of Certificates."
Fractional Share Program
No fractional shares of New Common Stock will be issued in connection
with the Reverse Stock Split. Each holder of shares of Existing Common
Stock not divisible by 50 as of the effective date of the Reverse Stock
Split will, in lieu of receiving fractional shares, have the option for 60
days after such effective date to either (a) purchase from other
stockholders otherwise entitled to fractional shares a sufficient
fractional share interest to "round-up" to a full share of New Common
Stock, to the extent such fractions of shares are available from other
stockholders, at a price of $7.50 per share of Existing Common Stock or
(b) sell such holder's fractional share interest to other stockholders or
to the Company at the same price (the "Fractional Share Program"). Unless
and until a stockholder purchases a fractional share interest to round up
to a full share of New Common Stock, such holder shall have no further
interest as a stockholder in respect of such fractional shares.
If stockholders wish to purchase more fractional share interests than
those which have been offered for sale and not rounded up by other
stockholders, the desire of some stockholders to purchase additional
fractional share interests will not be met. The Exchange Agent (as
defined hereinbelow) will, on a first-come, first-served basis, in order
of receipt, match the transmittal forms of stockholders wishing to
purchase fractional share interests with those of stockholders wishing to
sell their fractional share interests. It is in the interests of
stockholders who wish to purchase fractional interests to execute and
return the transmittal form to the Exchange Agent at the earliest
practicable date after receipt of such form by the stockholders after the
effective date of the Reverse Stock Split. See "Fractional Share
Program."
Purposes of the Reverse Stock Split
The purposes of the Reverse Stock Split are (a) to reduce the number
of stockholders of record of the Company to less than 300 persons in order
to terminate the registration of the Company's Common Stock under the
Securities Exchange Act of 1934 (the "1934 Act"), (b) to reduce the number
of small stockholder accounts administered by the Company and (c) to allow
holders of fewer than 50 shares a means of selling their shares without
incurring disproportionately high brokerage and other costs. See "Special
Factors - Purposes of the Reverse Stock Split".
Reasons for the Reverse Stock Split
The Board of Directors decided to propose the Reverse Stock Split
in order to (a) reduce administrative costs incurred by the Company in
connection with the continued registration of the Company's Common Stock
under the 1934 Act, (b) reduce administrative costs incurred by the Company
in connection with the maintenance of small stockholder accounts and
(c) allow small stockholders to liquidate their shares easily.
The Board of Directors first considered the appropriateness and
desirability of various courses of action to reduce the administrative
costs of the Company in 1994. At that time, for the reasons set forth
above, the Board of Directors approved an amendment to Article FOURTH
which is substantially the same as the current proposed amendment to
Article FOURTH. Before the Board submitted the proposed amendment to the
stockholders at the 1994 annual meeting of stockholders of the Company, a
large institutional investor which had been a long-term stockholder of the
Company informed the Board that it objected to the proposed amendment to
Article FOURTH and the termination of the registration of the Common Stock
under the 1934 Act. The Board of Directors decided to table the proposed
amendment of Article FOURTH for reconsideration at a later time.
In a series of transactions in June and July, 1996, John Latshaw
acquired all of the shares of Common Stock held by the stockholder. The
transactions were effected on the open market through an independent
broker, and were unsolicited by Mr. Latshaw. The Board of Directors
decided that because the objecting stockholder had sold all of its shares,
it was an appropriate time to again consider a reverse stock split and
other possible courses of action to reduce the administrative costs of the
Company. The Board of Directors again determined that a 1-for-50 reverse
stock split was in the best interests of the Company and its stockholders,
for the reasons set forth above. See "Special Factors - Reasons for the
Reverse Stock Split."
Effects of the Reverse Stock Split
The Company expects that as a result of the Reverse Stock Split, the
number of stockholders of record of the Company will be reduced from
approximately 429 stockholders to approximately 155 - 241 stockholders,
depending upon the number of stockholders otherwise entitled to fractional
shares in the Reverse Stock Split who elect and are able to "round-up" to
a full share of New Common Stock.
Shares of Common Stock are currently registered under the 1934 Act.
Such registration may be terminated upon application by the Company to the
Securities and Exchange Commission if there are fewer than 300 holders of
record of Common Stock. After the Reverse Stock Split is effected, the
Company intends to terminate registration of the Common Stock under the
1934 Act. Termination of registration would substantially reduce the
information required to be furnished by the Company to its stockholders
and to the Securities and Exchange Commission and would make certain
provisions of the 1934 Act no longer applicable to the Company and
officers and directors of the Company.
The Company's Common Stock is currently traded in the over-the-
counter market. There are presently two market makers in the Company's
Common Stock. There is no assurance that the market makers in the Common
Stock will continue to act in that capacity now or in the future,
including after the Reverse Stock Split or after the Company terminates
the registration of its Common Stock. Upon termination of the
registration of the Common Stock under the 1934 Act, the reduction in
public information concerning the Company and the termination of the
Company's status as a reporting company may adversely affect the liquidity
and market value of the Common Stock. In addition, the increase in the
per share price of the Common Stock and the decrease in the number of
shares of Common Stock outstanding as a result of the Reverse Stock Split
may also adversely affect the liquidity and market value of the Common
Stock.
Following the Reverse Stock Split, holders of fewer than 50 shares of
Existing Common Stock will cease to be stockholders or have any interest
in the equity or future prospects of the Company, unless such stockholders
"round-up" to a full share of New Common Stock.
The Company estimates that the Reverse Stock Split will reduce the
number of shares of Existing Common Stock of the Company by up to 4,320
shares (less than 1% of outstanding shares) at a cost to the Company
(including expenses) of $35,000 - $67,400, depending upon the number of
stockholders otherwise entitled to fractions of shares who elect to round-
up to a whole share of New Common Stock. The Company estimates that
termination of the registration of the Common Stock under the 1934 Act
will save the Company approximately $75,000 per year in legal, accounting
and other expenses.
With respect to unaffiliated stockholders of the Company, upon
termination of the registration of the Common Stock under the 1934 Act,
the information required to be furnished by the Company to its
stockholders and to the Securities and Exchange Commission will be
substantially reduced and certain provisions of the 1934 Act will no
longer be applicable to the Company, which may adversely affect such
unaffiliated stockholders. The liquidity and market value of the shares
of Common Stock held by unaffiliated stockholders may be adversely
affected by the Reverse Stock Split and by the termination of the
registration of the Common Stock under the 1934 Act.
With respect to executive officers, directors and other affiliates
of the Company, in the event the registration of the Common Stock is
terminated under the 1934 Act: (a) executive officers, directors and other
affiliates would no longer be subject to many of the reporting
requirements and restrictions of the 1934 Act, including without
limitation the short-swing profit provisions of the Section 16, (b)
executive officers, directors and other affiliates of the Company may be
deprived of the ability to dispose of shares of Common Stock pursuant to
Rule 144, as amended and (c) executive officers exercising stock options
under the 1987 Employee Stock Benefit Plan would no longer receive shares
registered under the Securities Act of 1933.
The amendment to Article FOURTH will reduce the number of authorized
shares of Common Stock from 1,500,000 shares to 30,000 shares and increase
the par value thereof from $2.00 to $100.00 per share. With the exception
of the number of authorized shares and the par value thereof, the terms of
the Common Stock before and after the Reverse Stock Split will remain the
same. The number of authorized shares of Class C Common Stock and
authorized shares of Preferred Stock will not be reduced by the amendment
of Article FOURTH. Consequently, the Reverse Stock Split will increase
the potential dilution of the voting rights and equity interests of
holders of Common Stock upon any future issuance of Class C Common Stock
or Preferred Stock. See "Special Factors - Effects of the Reverse Stock
Split."
Fairness of the Reverse Stock Split.
The Board of Directors of the Company believes that the Reverse Stock
Split, including the price per share of Existing Common Stock to be paid
to stockholders otherwise entitled to fractional shares of New Common
Stock, is fair to such stockholders and to the remaining stockholders of
the Company.
The Company did not obtain an independent fairness opinion in
connection with the proposed Reverse Stock Split. The Company's book
value per share exceeds by a substantial amount the price per share at
which stockholders otherwise entitled to fractional shares of New Common
Stock may "round-up" to a full share of New Common Stock or sell such
holders' fractional share interests to other stockholders or to the
Company. As discussed below, the Board decided that a market-based
valuation was appropriate in setting the price because stockholders would
have the right to sell shares or to buy shares, to the extent fractions of
shares were available, and that net book value, liquidation value and
going concern value were not relevant to such a valuation. See "Special
Factors - Fairness of the Reverse Stock Split" and "Financial
Information."
Federal Income Tax Consequences
THE FOLLOWING DISCUSSION SUMMARIZING CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS BASED ON CURRENT LAW AND IS INCLUDED FOR GENERAL
INFORMATION ONLY. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS
TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX EFFECTS OF THE REVERSE STOCK
SPLIT IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
The receipt of New Common Stock in exchange for Existing Common Stock
will not result in recognition of gain or loss to the stockholder. The
receipt of cash by a stockholder in lieu of fractions of shares pursuant to
the Reverse Stock Split will be a taxable transaction for federal income tax
purposes. Any cash paid to round-up a fractional share interest will
generally be treated as a purchase and such amount will be added to the
basis of the fractional share. See "Special Factors - Federal Income Tax
Consequences."
Conduct of the Company's Business After the Reverse Stock Split
The Company expects its business and operations to continue as they
are currently being conducted and the Reverse Stock Split as such is not
anticipated to have any effect upon the conduct of such business. See
"Special Factors - Conduct of the Company's Business After the Reverse
Stock Split".
Appraisal Rights
Pursuant to the Delaware General Corporation Law, there will be no
appraisal rights for dissenting stockholders if the Reverse Stock Split is
approved. See "Special Factors - Appraisal Rights."
Costs and Financing of the Reverse Stock Split
The Company will pay total consideration of up to $32,400 for the
purchase of fractional share interests in the Reverse Stock Split,
depending upon the number of stockholders otherwise entitled to fractions
of shares who elect to round-up to a full share of New Common Stock. In
addition, the Company will incur additional transactional expenses of
approximately $35,000, which includes the normal costs of preparing and
mailing proxy materials and conducting the annual meeting of stockholders.
The Company intends to finance this transaction from current working
capital. See "Costs and Financing of the Reverse Stock Split."
Vote Required
Approval of the Reverse Stock Split requires the affirmative vote of
the holders of at least a majority of the outstanding shares of Common
Stock entitled to vote thereon. The officers and directors of the Company
currently own and have the right to vote in the aggregate 180,450 shares
of Common Stock which are entitled to be voted on the proposed Reverse
Stock Split and which constitute approximately 36.3% of the outstanding
Common Stock, and have indicated to the Board that they recommend and
intend to vote such shares in favor of the proposed Reverse Stock Split.
Con-Lib Holding Company owns 88,000 shares of Common Stock, or
approximately 17.7% of the outstanding Common Stock, and Gerard J.
Mos III, the General Manager of Con-Lib Holding Company, has informed the
Board that he intends to vote such shares in favor of the Reverse Stock
Split. Under the terms of the Company's Employee Stock Ownership Plan and
Trust, the ESOT Administrative Committee of the Board of Directors has the
sole power to instruct the Trustee of the Trust with respect to the voting
of approximately 40,400 shares held by the Trust, or 8.1% of the
outstanding shares of the Common Stock. The members of the ESOT
Administrative Committee are David M. Pangrac, Chairman and L. Chandler
Smith, both of whom are directors of the Company. The ESOT Administrative
Committee and the Trustee have informed the Board that they intend to
abstain from voting such shares, with the result that participants in the
ESOT will be able to instruct the Trustee as to how to vote such shares.
Participants in the ESOT currently have the right to instruct the Trustee
as to how to vote the remaining 58,201 shares held by the ESOT. See
"Security Ownership of Certain Beneficial Owners and Management" and "Vote
Required."
PROPOSAL 1
PROPOSED AMENDMENT OF ARTICLE FOURTH OF
CERTIFICATE OF INCORPORATION TO EFFECT REVERSE STOCK SPLIT
The Board of Directors of the Company has unanimously adopted,
declared advisable and directed to be submitted to a vote of the
stockholders a proposed amendment to Article FOURTH of the Company's
Certificate of Incorporation to effect a 1-for-50 reverse split of the
Company's Common Stock, and in connection therewith, to reduce the
authorized shares of Common Stock from 1,500,000 shares to 30,000 shares
and to increase the par value of the Common Stock from $2.00 per share to
$100.00 per share. The amendment provides that upon its effective date,
the number of outstanding shares of Common Stock of the Company shall be
reduced so that each fifty (50) shares of Existing Common Stock issued and
outstanding will be automatically reclassified, combined, and converted
into one (1) share of New Common Stock of the par value of One Hundred
Dollars ($100.00) per share. Article FOURTH of the Certificate of
Incorporation as it currently exists, and the proposed new Article FOURTH
of the Certificate of Incorporation, are attached to this Proxy Statement
as Appendix A and Appendix B, respectively, and are incorporated herein by
reference. The proposed amendment to Article FOURTH also changes all
references to "Common Stock" in Article FOURTH to "Class A Common Stock".
This amendment is intended to eliminate any possible confusion between the
Common Stock and "Class C Common Stock", which is the other class of
common stock currently authorized in Article FOURTH. In connection with
the proposed Reverse Stock Split, the Company has filed a Rule 13e-3
Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") with the
Securities and Exchange Commission.
If it is approved by the stockholders, the Reverse Stock Split,
including the reduction in the number of shares of authorized Common
Stock, will be accomplished by the filing of an amendment to the Company's
Certificate of Incorporation with the Secretary of State of the State of
Delaware. The Board of Directors reserves the right to abandon the
Reverse Stock Split if it determines that it is in the best interests of
the Company and the stockholders to do so. See "Board of Directors
Discretion". The Company plans to file the amendment as soon as
practicable if the amendment is approved at the annual meeting of
stockholders or at any adjournment. Under the Delaware General
Corporation Law, the amendment to the Certificate will become effective on
the date of filing, unless the Company specifies otherwise (such date of
filing being referred to hereinafter as the "Effective Date").
Following the Reverse Stock Split, if approved, stockholders who own
50 shares of Existing Common Stock or a multiple thereof, will receive one
share of New Common Stock for each 50 shares of Existing Common Stock when
sent in for exchange, and stockholders who do not own a multiple of 50
shares of Existing Common Stock will be entitled to participate in the
Fractional Share Program described hereinbelow in lieu of receiving
certificates for fractional shares of New Common Stock. See "Exchange of
Certificates" and "Fractional Share Program."
SPECIAL FACTORS
Purposes of the Reverse Stock Split
The purposes of the Reverse Stock Split are (a) to reduce the number
of stockholders of record of the Company to less than 300 persons in order
to terminate the registration of the Company's Common Stock under the 1934
Act, (b) to reduce the number of small stockholder accounts administered
by the Company and (c) to allow holders of fewer than 50 shares a means of
selling their shares without incurring disproportionately high brokerage
and other costs.
Reasons for the Reverse Stock Split
The Board of Directors decided to propose the Reverse Stock Split
in order to (a) reduce administrative costs incurred by the Company in
connection with the continued registration of the Company's Common Stock
under the 1934 Act, (b) reduce administrative costs incurred by the Company
in connection with the maintenance of small stockholder accounts and
(c) allow small stockholders to liquidate their shares easily.
As of June 28, 1996, there were 429 stockholders of record of the
Company. On such date, 274 of such stockholders owned fewer than 50
shares of Common Stock. Although holders of fewer than 50 shares
constitute 63.9% of the stockholders of record of the Company, such
stockholders own less than 1% of the outstanding shares of Common Stock.
Of these, there are 173 stockholders of record who own ten or fewer
shares. These stockholders have little economic interest in the Company.
The Company must incur significant general and administrative costs
related to its status as a public reporting company under the federal
securities laws. These costs include legal and accounting expenses
involved in the preparation of the annual report and other periodic
reports filed with the Securities and Exchange Commission and the costs of
printing and mailing proxy materials and annual and quarterly reports to
stockholders. In addition, the Company incurs indirect costs as a result
of, among other things, the executive time expended to prepare and review
such filings. The Board of Directors believes that the Company will save
approximately $75,000 per year in reduced administrative costs as a result
of the termination of the registration of the Common Stock under the 1934
Act and the reduction in the number of small stockholder accounts.
The Company also believes that holders of fewer than 50 shares may be
deterred from selling their shares in the public market because of
disproportionately high brokerage and other costs which such stockholders
would incur in selling such shares. The Reverse Stock Split offers
stockholders owning less than 50 shares an economical way of disposing of
their shares.
The Board of Directors first considered the appropriateness and
desirability of various courses of action to reduce the administrative
costs of the Company in 1994. At that time, for the reasons set forth
above, the Board of Directors approved an amendment to Article FOURTH of
the Certificate of Incorporation in order to effect a 1-for-50 reverse
stock split of the Common Stock. The proposed amendment was substantially
the same as the current proposed amendment to Article FOURTH. The other
provisions of that proposed reverse stock split, including the fractional
share program, were substantially the same as the provisions of the
currently proposed Reverse Stock Split, except that price at which holders
of fractions of shares could buy or sell fractions of shares in that
fractional share program was $7.00 per share. Before the Board submitted
the proposed amendment to the stockholders at the 1994 annual meeting of
stockholders of the Company, a large institutional investor which had been
a long-term stockholder of the Company informed the Board that it objected
to the proposed amendment to Article FOURTH and the termination of the
registration of the Common Stock under the 1934 Act. The Board of
Directors decided to table the proposed amendment of Article FOURTH for
reconsideration at a later time.
In a series of transactions in June and July, 1996, John Latshaw
acquired all of the shares of Common Stock held by the stockholder. The
transactions were effected on the open market through an independent
broker, and were unsolicited by Mr. Latshaw. The Board of Directors
decided that because the objecting stockholder had sold all of its shares,
it was an appropriate time to again consider a reverse stock split and
other possible courses of action to reduce the administrative costs of the
Company. The Board of Directors again determined that a 1-for-50 reverse
stock split was in the best interests of the Company and its stockholders,
for the reasons set forth above.
Effects of the Reverse Stock Split
(1) Reduction in Number of Stockholders. The Company expects that
as a result of the Reverse Stock Split, the number of stockholders of
record of the Company will be reduced from approximately 429 stockholders
to approximately 155 - 241 stockholders, depending upon the number of
stockholders otherwise entitled to fractional shares in the Reverse Stock
Split who elect to "round-up" to a full share of New Common Stock.
(2) Termination of Exchange Act Registration. Shares of Existing
Common Stock are currently registered under the 1934 Act. Such
registration may be terminated upon application by the Company to the
Securities and Exchange Commission if there are fewer than 300 holders of
record of Common Stock. The Board of Directors intends to terminate the
registration of the Common Stock under the 1934 Act as soon as practicable
after the Reverse Stock Split is effected. Termination of registration of
shares of Common Stock would substantially reduce the information required
to be furnished by the Company to its stockholders and to the Securities
and Exchange Commission and would make certain provisions of the 1934 Act,
such as the short-swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a), and the requirements of
Rule 13e-3 with respect to "going private" transactions, no longer
applicable to the Company. Furthermore, affiliates of the Company may be
deprived of the ability to dispose of shares of Common Stock pursuant to
Rule 144, as amended.
(3) Effects on Market for Shares. The Company's Common Stock is
currently traded in the over-the-counter market. There are presently two
market makers in the Company's Common Stock. Neither of the market makers
is bound by any agreement to continue as a market maker for the Company's
Common Stock under any circumstances, and each market maker may
discontinue acting as a market maker at any time at its pleasure. Thus,
there can be no assurance that the market makers will continue to act in
that capacity now or in the future, including after the Reverse Stock
Split or after the Company terminates the registration of its Common
Stock. Even if the market makers in the Common Stock continue to act as
such after the Reverse Stock Split or after the Company terminates the
registration of its Common Stock, the reduction in public information
concerning the Company and the termination of the Company's status as a
reporting company may adversely affect the liquidity and market value of
the Common Stock. In addition, the increase in the per share price of the
Common Stock and the decrease in the number of shares of Common Stock
outstanding as a result of the Reverse Stock Split may also adversely
affect the liquidity and market value of the Common Stock.
(4) Effect on Holders of Less than 50 Shares of Existing Common
Stock. Following the Reverse Stock Split, holders of fewer than 50 shares
of Existing Common Stock will receive payment for their shares and will
cease to be stockholders or have any further interest in the equity or
future prospects of the Company unless and until such stockholders "round-
up" to a full share of New Common Stock. Such stockholders who do not or
cannot round-up to a full share of New Common Stock will not participate
in the possible future growth and prosperity of the Company.
(5) Effects on the Company. The Company estimates that the Reverse
Stock Split will reduce the number of shares of Existing Common Stock of
the Company by up to 4,320 shares (less than 1% of outstanding shares) at
a cost to the Company (including expenses) of $35,000 - $67,400, depending
upon the number of stockholders otherwise entitled to fractions of shares
who elect to round-up to a whole share of New Common Stock. The Reverse
Stock Split will also reduce the number of stockholders of the Company.
See "Effects of the Reverse Stock Split -- Reduction in Number of
Stockholders." Termination of registration of shares of Common Stock
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Securities and Exchange Commission
and would make certain provisions of the 1934 Act no longer applicable to
the Company. See "Effects of the Reverse Stock Split -- Termination of
Exchange Act Registration." The liquidity and market value of the shares
of Common Stock of the Company may be adversely affected by the Reverse
Stock Split and by termination of the registration of the Common Stock
under the 1934 Act. See "Effects of the Reverse Stock Split -- Effects on
Market for Shares." The Reverse Stock Split will also change the capital
structure of the Company. See "Effects of the Reverse Stock Split --
Effect on the Authorized Stock and Outstanding Common Stock." The
Company estimates that termination of the registration of the Common Stock
under the 1934 Act will save the Company approximately $75,000 per year in
legal, accounting and other expenses.
(6) Effect on Unaffiliated Stockholders. Termination of
registration of shares of Common Stock would substantially reduce the
information required to be furnished by the Company to its stockholders
and to the Securities and Exchange Commission and would make certain
provisions of the 1934 Act no longer applicable to the Company, which may
adversely affect unaffiliated stockholders. See "Effects of the Reverse
Stock Split -- Termination of Exchange Act Registration." The liquidity
and market value of the shares of Common Stock held by unaffiliated
stockholders may be adversely affected by the Reverse Stock Split and by
termination of the registration of the Common Stock under the 1934 Act.
See "Effects of the Reverse Stock Split -- Effect on Market for Shares."
The Reverse Stock Split will also change the capital structure of the
Company. See "Effects of the Reverse Stock Split -- Effect on the
Authorized Stock and Outstanding Common Stock."
(7) Effect on Affiliates of the Company. Following the Reverse
Stock Split, executive officers, directors and other affiliates of the
Company holding fewer than 50 shares of Existing Common Stock will
participate in the Fractional Share Program on the same basis as other
holders of fewer than 50 shares. Executive officers, directors and other
affiliates holding 50 or more shares will receive shares of New Common
Stock and, if applicable, participate in the Fractional Share Program on
the same basis as unaffiliated stockholders. In the event the
registration of the Common Stock is terminated under the 1934 Act:
(a) executive officers, directors and other affiliates would no longer be
subject to any of the reporting requirements and restrictions of the 1934
Act, including without limitation the short-swing profit provisions of the
Section 16, (b) executive officers, directors and other affiliates of the
Company may be deprived of the ability to dispose of shares of Common
Stock pursuant to Rule 144, as amended and (c) executive officers
exercising stock options under the 1987 Employee Stock Benefit Plan would
no longer receive shares registered under the Securities Act of 1933. See
"Effects of the Reverse Stock Split -- Termination of Exchange Act
Registration."
(8) Effect on Authorized Stock and Outstanding Common Stock. The
amendment to Article FOURTH will reduce the number of authorized shares of
Common Stock from 1,500,000 shares to 30,000 shares and increase the par
value thereof from $2.00 to $100.00 per share. The number of authorized
shares of Class C Common Stock (1,000,000) and authorized shares of
Preferred Stock (500,000) will not be reduced by the amendment of Article
FOURTH. There are no shares of Class C Common Stock or Preferred Stock
currently issued or outstanding. Because the number of authorized shares
of Class C Common Stock and Preferred Stock will not be reduced in the
Reverse Stock Split, the Reverse Stock Split will increase the potential
dilution of the voting rights and equity interests of holders of Common
Stock upon any future issuance of Class C Common Stock or Preferred Stock.
The voting power of authorized Common Stock will be reduced in the Reverse
Stock Split to 30,000 shares with one vote per share, while the authorized
Class C Common Stock will remain at 1,000,000 shares with 50 votes per
share and the authorized Preferred Stock will remain at 500,000 shares.
The Reverse Stock Split is not intended to change the proportionate equity
interests of the Company's existing stockholders; however, some incidental
change can be expected to occur in connection with the elimination of
fractional shares. Any increase which does occur in any stockholder's
proportionate equity interest as a result of the Reverse Stock Split is
not expected to exceed 1% of outstanding shares. The Company's stated
capital, which is calculated by multiplying the par value per share of
Common Stock by the number of shares of Common Stock outstanding, will
remain the same except for a less than 1% decrease that may result from
the repurchase by the Company of fractional shares. With the exception of
the number of authorized shares and the par value thereof, the terms of the
Common Stock before and after the Reverse Stock Split will remain the same.
(9) Adjustment of Debentures and Employee Stock Options. If the
Reverse Stock Split is effected, the conversion price of the Variable
Interest Rate Convertible Subordinated Debentures due 2022 will be
appropriately adjusted, and the Pension and Compensation Committee of the
Board of Directors will take such action as it deems necessary to make
equitable adjustments to any outstanding employee stock options.
Fairness of the Reverse Stock Split.
The Board of Directors of the Company believes that the Reverse Stock
Split, including the price per share of Existing Common Stock to be paid
to stockholders otherwise entitled to fractional shares of New Common
Stock, is fair to such stockholders and to the remaining stockholders of
the Company. In deciding upon the fairness of the Reverse Stock Split,
the Board of Directors of the Company gave consideration to numerous
factors, including those described below and the reasons for the Reverse
Stock Split set forth in "Reasons for the Reverse Stock Split" above.
The Board considered a number of factors in determining whether it
was in the best interests of the Company and its stockholders to undertake
a transaction to reduce the number of stockholders to less than 300
persons in order to terminate the registration of its Common Stock under
the 1934 Act. The Board of Directors reviewed and discussed with
management of the Company materials which had been prepared by management
and previously distributed to the Board relating to cost savings to be
achieved by terminating the registration of the Common Stock. The Board
of Directors determined that cost savings of approximately $75,000 per
year could be achieved if the Company terminated the registration. The
Board of Directors also considered the time and effort currently required
of management to comply with the reporting and other requirements
associated with continued registration of the Common Stock under the 1934
Act. The Board of Directors considered the effect that terminating the
registration of the Common Stock might have on the market for the Common
Stock and the ability of stockholders to buy and sell shares. The Board
of Directors determined that the cost savings and reduced burden on
management to be achieved by terminating registration of the Common Stock
under the 1934 Act outweighed any potential detriment from termination of
registration.
The Board of Directors considered several different transactions to
accomplish the reduction in the number of stockholders to less than 300
persons. The Board of Directors considered a tender offer to all
stockholders other than management and members of the Board of Directors.
The Board of Directors determined that the Company would have to incur an
unacceptably high amount of additional debt in order to effect a tender
offer to all stockholders other than management and members of the Board
of Directors. The Board discussed the relative merits of an odd-lot
tender offer and the Reverse Stock Split. The Board of Directors
considered with respect to the Reverse Stock Split whether stockholders
otherwise entitled to fractions of shares should be given the opportunity
to round-up to a full share of New Common Stock, to the extent fractions
of shares were available, so that such stockholders could remain
stockholders of the Company if they so desired. The Board of Directors
decided that the Reverse Stock Split would be preferable to an odd-lot
tender offer because it was certain to significantly reduce the number of
small stockholder accounts and was certain to reduce the number of
stockholders of record to less than 300 persons. The Board of Directors
also decided that the Reverse Stock Split should include a round-up
feature to permit stockholders to remain stockholders of the Company if
they so desired, to the extent fractions of shares were available.
In considering the price to be paid to stockholders otherwise
entitled to fractional shares of New Common Stock in the Reverse Stock
Split, the Board reviewed and discussed with management materials which
management had prepared and previously distributed to the Board regarding
the valuation of shares of Existing Common Stock. The materials prepared
by management included (i) the Company's audited financial statements for
fiscal year 1995, (ii) the Company's Form 10-Q for the second quarter of
fiscal year 1996, (iii) a listing of bid prices for the Common Stock for
fiscal years 1994 and 1995 and the first three quarters of 1996, (iv) a
summary of stock repurchases by the Company for fiscal years 1990 - 1995
and the first two quarters of fiscal year 1996, and (v) an internal
forecast of operating results for fiscal year 1996.
The internal forecast of operating results for fiscal year 1996
prepared by management contained the following projections for the Company
and its subsidiaries on a consolidated basis for fiscal year 1996:
operating revenues of $43,764,000, net profit of $1,326,000, earnings per
share (primary) of $2.57 per share and earnings per share (fully diluted)
of $1.45 per share. The number of shares used in the calculation of the
forecast of earnings per share (primary) was 515,000 shares and the number
of shares used in the calculation of earnings per share (fully diluted)
was 1,015,000 shares. For a description of the calculation of per share
results on a primary versus a fully diluted basis, see Exhibit 11,
"Primary and Fully Diluted Net Income per Common Share Computation,"
contained on page 23 of the Company's 1995 Annual Report to Stockholders
included as an Annex to this Proxy Statement, Exhibit 11 to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 3, 1996
included as an Annex to this Proxy Statement, Exhibit 11 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 4, 1996 included
as an Annex to this Proxy Statement and Exhibit 11 to the Company's
Quarterly Report on Form 10-Q/A (Amendment No. 1) for the quarter ended
August 3, 1996 included as an Annex to this Proxy Statement. The internal
forecast as disclosed herein is a forward-looking statement. The internal
forecast was based upon assumptions that are inherently subject to
significant economic, competitive, legislative, and regulatory
uncertainties, all of which are difficult to predict and many of which are
beyond the control of the Company. There can be no assurance that the
forecast will be realized, and actual results may be higher or lower than
those shown.
The Board of Directors decided that the most appropriate valuation
methods for valuing the shares of Existing Common Stock for purposes of
the Reverse Stock Split were (a) current market prices, (b) recent
historical market prices, (c) prices paid in recent stock repurchases by
the Company and (d) the prices at which shares had recently been purchased
by a member of the Board of Directors from a large institutional investor
which had been a long-term stockholder of the Company. The Board of
Directors decided that a market-based valuation of the Common Stock was
appropriate because stockholders would have the right to sell shares or to
buy shares, to the extent fractions of shares were available. The Board
of Directors determined that net book value, liquidation value and
going concern value were not relevant to such a valuation, because only a
market-based valuation would be appropriate in connection with the
Fractional Share Program. The Board of Directors decided that holders of
fractions of shares wishing to round-up and remain stockholders of the
Company would be discouraged from doing so if a valuation other than a
market-based valuation was used. In addition, the Board determined that
the cost of determining liquidation value and going concern value with any
degree of accuracy would be prohibitively high given the small number of
shares involved in the transaction. See "Financial Information".
The Board of Directors considered recent historical market prices and
current market prices of the Common Stock. The Board reviewed high and
low bid prices for the Common Stock for the first three quarters of fiscal
year 1996, which ranged from $6.00 to $7.50 per share. See "Market for
Common Stock, Repurchases and Dividends". The current market price of the
Common Stock as quoted by the primary market maker for the Company was
$7.50 bid and $8.50 asked. The Board considered recent repurchases made
by the Company. The Company purchased 3,635 shares during the first two
quarters of fiscal year 1996 at an average price of $6.60 per share. The
Board of Directors also considered the prices at which a member of the
Board of Directors, John Latshaw, had recently purchased shares on the
open market from a large institutional investor which had been a long-term
stockholder of the Company. Mr. Latshaw purchased 56,100 shares of Common
Stock at an average price of $7.38 per share from the stockholder in a
series of unsolicited transactions on the open market. After
consideration of all of this information, the Board of Directors
determined that a fair price per share of Existing Common Stock to be paid
for fractions of shares was $7.50 per share, and that stockholders
otherwise entitled to fractional shares of New Common Stock would be given
the right to round-up to a full share of New Common Stock, to the extent
fractional shares are available, at the same price.
The Board of Directors believes that the proposed Reverse Stock Split
is in the best interests of the Company and its stockholders because it
will reduce administrative costs and provide small stockholders with an
economical way to dispose of their shares. The Board believes that the
price to be paid for fractional shares is fair, based upon the following
factors: (a) the price equals the current bid price of $7.50 per share,
(b) the price exceeds the average purchase price per share of $7.38 at
which John Latshaw acquired 56,100 shares from a large institutional
investor which had been a long-term stockholder of the Company, (c) the
price equals the highest bid price of the Common Stock during the first
three quarters of 1996 and is well within the range of high and low bid
prices of $7.00 to $8.50 per share for fiscal year 1995 and $6.00 to $8.50
per share for fiscal year 1994, (d) the price exceeds the average price of
$6.60 per share at which the Company repurchased 3,635 shares during the
first two quarters of 1996, is slightly less than the average price of
$7.64 per share at which the Company repurchased 3,700 shares during
fiscal year 1995 and exceeds the average price of $7.22 per share at which
the Company repurchased 3,831 shares during fiscal year 1994,
(e) stockholders would be given an opportunity to round-up to a full share
of New Common Stock at a price of $7.50 per share of Existing Common
Stock, to the extent fractions of shares are available and
(f) stockholders otherwise entitled to fractions of shares would save
brokerage and other costs in disposing of their fractional share interests
or in rounding up to a full share. Except as specifically stated above,
the Board did not assign relative weights to the factors listed above
which were considered in approving the transaction or in setting the
price. At August 3, 1996, the net book value per common share (Primary)
was $23.71 and the net book value per common share (Fully Diluted) was
$12.33. For a description of the calculation of net book value per share
on a primary versus fully diluted basis, see "Financial Information."
Although the Board determined that net book value was not relevant in
determining the price to be paid for fractional shares, and net book value
per share exceeds such price by a substantial amount, the Board believes
that the price to be paid for fractional shares is fair for the reasons
set forth above. See "Financial Information."
The transaction is not structured so that approval of at least a
majority of unaffiliated stockholders is required. No independent
committee of the Board of Directors has reviewed the fairness of the
Reverse Stock Split. No unaffiliated representative acting solely on
behalf of the stockholders for the purpose of negotiating the terms of the
Reverse Stock Split or preparing a report covering the fairness of the
Reverse Stock Split was retained by the Company or by a majority of
directors who are not employees of the Company. The Company did not
obtain any report, opinion or appraisal from an outside party relating to
the consideration or the fairness of the consideration to be offered to
stockholders or the fairness of the Reverse Stock Split to the Company and
its unaffiliated stockholders. The Board determined that the cost of
obtaining a fairness opinion would be prohibitively high given the small
number of shares involved in the transaction. The Reverse Stock Split
involves the purchase and sale of approximately 4,320 shares of Common
Stock at $7.50 per share, for a total purchase price of $32,400. The
Board obtained a cost estimate from an investment banking firm for a
fairness opinion in connection with the Reverse Stock Split of $80,000
to $100,000, plus expenses. The Board of Directors believes that the
transaction is fair notwithstanding the absence of such a committee,
representative or appraisal. The Board believes that the transaction is
procedurally fair because after consideration of all aspects of the
proposed transaction as described above, all of the directors, including
the directors who are not employees of the Company, approved the Reverse
Stock Split.
Federal Income Tax Consequences
THE FOLLOWING DISCUSSION SUMMARIZES CERTAIN FEDERAL INCOME TAX
CONSEQUENCES. THIS DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY.
NO OPINION OF COUNSEL OR RULING FROM THE INTERNAL REVENUE SERVICE HAS
BEEN SOUGHT OR OBTAINED WITH RESPECT TO THE FEDERAL, STATE OR LOCAL INCOME
TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT. BECAUSE OF THE COMPLEXITY OF
THE INTERNAL REVENUE CODE AND BECAUSE TAX CONSEQUENCES MAY VARY DEPENDING
ON THE PARTICULAR FACTS RELATING TO EACH STOCKHOLDER, STOCKHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL AND FOREIGN
TAX EFFECTS OF THE REVERSE STOCK SPLIT IN LIGHT OF THEIR INDIVIDUAL
CIRCUMSTANCES.
The proposed Reverse Stock Split will not be a taxable transaction to
the Company as the transaction qualifies for nonrecognition treatment
under the Internal Revenue Code of 1986, as amended (the "Code").
The receipt of New Common Stock in exchange for Existing Common Stock
will not result in the recognition of gain or loss by a stockholder in the
New Common Stock, and the stockholder's adjusted tax basis will be the
same as the stockholder's adjusted tax basis in the Existing Common Stock.
The receipt of cash by a stockholder in exchange for Existing Common
Stock, however, will be a taxable transaction for federal income tax
purposes.
A stockholder owning fewer than 50 shares who does not "round-up" to
a full share of New Common Stock will receive only cash in the
transaction. This receipt of cash will generally result in the
recognition of gain or loss equal to the difference between the cash
received and the stockholder's adjusted tax basis in the surrendered
Common Stock. Assuming the Existing Common Stock is held as a capital
asset, the gain or loss recognized will be capital gain or loss, which
will be long-term capital gain or loss if the stockholder's holding period
for the Common Stock exceeds one year.
A stockholder who owns 50 or more shares of Existing Common Stock,
but who does not hold a number of shares of Existing Common Stock that is
evenly divisible by 50 and does not "round-up" will receive both shares of
New Common Stock and cash in lieu of fractional shares of New Common
Stock. The federal income tax treatment of the cash received will be the
same as described above, unless it is determined that the Reverse Stock
Split has the "effect of the distribution of a dividend" under the Code
(taking into account the constructive ownership rules). If it is
determined that the Reverse Stock Split has such an effect, the cash
received in lieu of fractional shares of New Common Stock will be treated
as a dividend to the extent of the stockholder's ratable share of the
Company's undistributed earnings and profits, and the balance of the cash
will be treated as received in exchange for property. Taxable gain or
loss will be realized on this exchange for property in an amount equal to
the difference between the portion of the cash not treated as a dividend
and the stockholder's adjusted tax basis in the Common Stock exchanged for
cash. The Code provisions that dictate whether the cash received will
have the "effect of the distribution of a dividend" are complex and are
beyond the scope of this discussion.
In the event a stockholder decides to "round-up" a fractional share
interest, the amount paid to accomplish the "round-up" will generally be
added to the stockholder's tax basis in the fractional shares.
Stockholders will be required to provide their social security or
other taxpayer identification numbers (or, in some instances, additional
information) to the Exchange Agent (as defined below) in connection with
the Reverse Stock Split to avoid backup withholding requirements that
might otherwise apply. See "Exchange of Certificates" and "Fractional
Share Program." The letter of transmittal will require each stockholder
to deliver such information when the Existing Common Stock certificates
are surrendered following the Effective Date. Failure to provide such
information may result in backup withholding.
Conduct of the Company's Business After the Reverse Stock Split
The Company expects its business and operations to continue as they
are currently being conducted and the Reverse Stock Split is not
anticipated to have any effect upon the conduct of such business. Upon
termination of the registration of the Common Stock under the 1934 Act,
the Company will thereafter cease the filing of periodic reports, proxy
statements and other reports and documents otherwise required to be filed
with the Securities and Exchange Commission.
Other than as described in this Proxy Statement, neither the Company
nor its management has any current plans or proposals to effect any
extraordinary corporate transaction, such as a merger, reorganization or
liquidation; to sell or transfer any material amount of its assets; to
change its Board of Directors or management; to materially change its
dividend policy or indebtedness or capitalization; or otherwise to effect
any material change in its corporate structure or business.
Appraisal Rights
No appraisal rights are available under the Delaware General
Corporation Law to any stockholder who dissents from the proposal to
approve the Reverse Stock Split. There may exist other rights or actions
under state law for stockholders who are aggrieved by reverse stock splits
generally. Although the nature and extent of such rights or actions are
uncertain and may vary depending upon the facts or circumstances,
stockholder challenges to corporate action in general are related to the
fiduciary responsibilities of corporate officers and directors and to the
fairness of corporate transactions.
EXCHANGE OF CERTIFICATES
As soon as practicable after the Effective Date of the Reverse Stock
Split, transmittal forms will be mailed to each holder of record of
certificates formerly representing shares of Existing Common Stock. The
transmittal forms are to be used in forwarding such certificates for
surrender in exchange for (a) certificates representing the whole number
of shares of New Common Stock to which such stockholder is entitled and
(b) any cash which may be payable in lieu of any fractional share interest
to which such stockholder would otherwise be entitled. Stockholders may
also use the same transmittal form to elect to "round-up" their fractional
share interests. Such transmittal forms will be accompanied by
instructions specifying other details of the exchange and the "round-up"
feature. The Reverse Stock Split will occur at the Effective Date without
any further action on the part of stockholders of the Company and without
regard to the date or dates on which certificates formerly representing
shares of Existing Common Stock are physically surrendered. On the
Effective Date, each certificate formerly representing shares of Existing
Common Stock, until surrendered and exchanged as described above, will be
deemed for all corporate purposes to evidence ownership of the resulting
number of shares of New Common Stock and the right to either receive an
amount of cash for any fractional share interests or round-up to a full
share of New Common Stock, as provided below. See "Fractional Share
Program".
Until stockholders have surrendered their stock certificates for
reissuance of New Common Stock, such stockholders will not be entitled to
receive (i) dividends, if any, declared or payable to holders of record of
New Common Stock, (ii) certificates representing the shares of New Common
Stock to which such stockholders are entitled, or (iii) cash payments in
lieu of fractional share interests. Such amounts, if any, will be
remitted to the stockholder entitled thereto, without interest, at the
time such Existing Common Stock certificates are surrendered for exchange,
subject to applicable state laws relating to abandoned property. No
service charges or brokerage commissions will be payable by stockholders
in connection with the Reverse Stock Split. HOLDERS SHOULD SUBMIT
CERTIFICATES WHEN THEY RECEIVE TRANSMITTAL FORMS.
FRACTIONAL SHARE PROGRAM
No fractional shares of New Common Stock will be issued as a result
of the Reverse Stock Split, and fractional share interests will not
entitle the holder thereof to exercise any right of a stockholder with
respect thereto. In lieu of issuing certificates evidencing fractional
shares, each stockholder whose holdings on the Effective Date are not
evenly divisible by 50 will be given the option, exercisable within 60
days after the Effective Date, of either (a) purchasing from other
stockholders otherwise entitled to fractional shares a sufficient
fractional share interest to "round-up" to a full share of New Common
Stock, to the extent such fractions of shares are available from other
stockholders, at a price based upon a price of $7.50 per share of Existing
Common Stock or (b) selling such stockholder's fractional share interest
to other stockholders or to the Company at the same price.
UMB Bank, N.A., or such other person (including the Company) as shall
be designated by the executive officers of the Company, will act as agent
(the "Exchange Agent") for the stockholders in connection with the
purchase and sale of fractional share interests for the purpose of
combining such interests into whole shares. The transmittal form, which
will be sent to stockholders after the Effective Date of the Reverse Stock
Split, will ask each stockholder otherwise entitled to fractions of shares
of New Common Stock to designate whether such stockholder wishes to (i)
sell such stockholder's fractional share interest or (ii) purchase a
sufficient fractional share interest from other stockholders to round-up
such stockholder's fractional share interest to a whole share of New
Common Stock. The transmittal form will specify the form of payment which
must accompany the transmittal form in order for an election to round-up
to be effective.
The Exchange Agent will, on a first-come, first-served basis, in
order of receipt, match the transmittal forms of stockholders wishing to
purchase fractional share interests with those of stockholders wishing to
sell their fractional share interests. It is in the interests of
stockholders who wish to purchase fractional interests to execute and
return the transmittal form to the Exchange Agent at the earliest
practicable date after receipt of such form by the stockholders. If
stockholders wish to purchase more fractional share interests than those
which have been offered for sale by other stockholders, the desire of some
stockholders to purchase additional fractional share interests will not be
met. Stockholders will not be permitted to purchase a larger fractional
share interest than is necessary to round-up to the next highest whole
number of shares of New Common Stock.
If a holder of fractional shares submits a transmittal form electing
to purchase a fractional share interest from other stockholders (together
with the purchase price for such fractional share interest), and a
sufficient number of such fractional share interests are available for
purchase from other stockholders, such holder's fractional share interest
shall be rounded-up to whole share of New Common Stock.
If a holder of fractional shares submits a transmittal form electing
to purchase a fractional share interest from other stockholders, and a
sufficient number of such fractional share interests are not available for
purchase from other stockholders, such holder's fractional interest shall
be cashed out, through a matching transaction with another stockholder.
If a holder of fractional shares submits a transmittal form electing
to sell such stockholder's fractional share interest, such fractional
interest shall be cashed out, either through a matching transaction with
another stockholder or via purchase by the Company.
The period during which stockholders will be able to make the
aforementioned election will expire 60 days after the Effective Date. Any
stockholder whose transmittal form is not received by the Exchange Agent
within such period will be deemed to have elected to sell any fractional
share interest held by such stockholder. Any fractional share interests
not purchased by other stockholders will be purchased by the Company.
COSTS AND FINANCING OF THE REVERSE STOCK SPLIT
The total cost to be incurred by the Company in the Reverse Stock
Split for purchase of fractional share interests depends upon the number
of stockholders otherwise entitled to fractions of shares who elect to
purchase fractional share interests to round-up to a full share of New
Common Stock. If all shares under 50 shares denomination are so purchased
by stockholders, the Company will incur no costs in purchasing such
shares. If none of such shares are purchased by stockholders, the Company
will pay approximately $32,400 to purchase such shares.
The Company will pay all expenses in connection with the Reverse
Stock Split. The following table sets forth the approximate amount of
expenses expected to be incurred in connection with the effectuation of
the Reverse Stock Split:
Approximate
Item Amount
Legal................................ $ 25,000
Printing............................. 5,000
Mailing.............................. 2,500
Transfer Agent....................... 2,000
Filing Fees.......................... 300
TOTAL.......................... $ 34,800
These expenses include the normal costs of preparing and mailing
proxy material and conducting the annual meeting of stockholders. The
Company intends to finance this transaction from current working capital.
FINANCIAL INFORMATION
The Company hereby incorporates by reference (a) the Financial
Statements and the notes thereto contained on pages 26 through 46 of the
Company's 1995 Annual Report to Stockholders ("Annual Report") included as
an Annex to this Proxy Statement, (b) the report of independent certified
public accountants thereon contained on page 25 of the Annual Report,
(c) the Financial Statement Schedule contained on page 22 of the Annual
Report, (d) Selected Financial Data contained on pages 47 and 48 of the
Annual Report, (e) Management's Discussion and Analysis of Financial
Condition and Results of Operations contained on pages 13 through 18 of
the Annual Report, (f) the Financial Statements and notes thereto
contained on pages 3 through 5 of the Company's Quarterly Report on Form
10-Q/A (Amendment No. 1) for the period ended August 3, 1996
("Quarterly Report") included as an Annex to this Proxy Statement and
(g) Management's Discussion and Analysis of Financial Condition and Other
Information contained on pages 6 through 8 of the Quarterly Report.
In addition, the following sets forth certain financial information
for the Company and its subsidiaries for and as of the following periods
and dates:
Nine Months Ended Year Ended
August 3, July 29, October 28, October 29,
1996 1995 1995 1994
Ratio of Earnings 4.79 to 5.17 to 4.08 to 5.72 to
to Fixed Charges 1 1 1 1
August 3, October 28,
1996 1995
Book Value Per Share
Primary: $23.71 $21.19
Fully Diluted: $12.33 $11.07
The number of common shares outstanding for purposes of calculation
of net book value per common share (Primary) is based upon the sum of
(i) the number of outstanding common shares and (ii) additional shares
assuming the exercise of dilutive stock options (determined using the
"treasury stock method"). The number of common shares deemed outstanding
for purposes of the calculation of book value per common share (Primary)
at October 28, 1995 was 547,000 shares and at August 3, 1996 was 542,000
shares.
The number of common shares deemed outstanding for purposes of
computation of net book value per share (Fully Diluted) is
based upon the sum of the following: (i) the number of outstanding common
shares, (ii) additional shares assuming the exercise of dilutive stock
options (determined using the "treasury stock method') and (iii) 500,000
additional shares assuming the conversion of the variable interest
rate convertible debentures. The number of common shares deemed
outstanding for purposes of computation of net book value per share (Fully
Diluted) at October 28, 1995 was 1,047,000 shares and at August 3, 1996
was 1,042,000 shares. See Note 1 of the Notes to Consolidated Financial
Statements on pages 33 through 35 of the Annual Report.
BOARD OF DIRECTORS DISCRETION
Although the Board of Directors requests stockholder approval of the
proposed amendment to Article FOURTH of the Certificate of Incorporation,
the Board reserves the authority to decide, in its discretion, to withdraw
the proposed amendment from the agenda of the annual stockholders' meeting
prior to any stockholder vote thereon or to abandon the Reverse Stock
Split after such vote and before the Effective Date. Although the Board
presently believes that the proposed amendment is in the best interests of
the Company and its stockholders, and thus has recommended a vote for the
proposed amendment, the Board nonetheless believes that it is prudent to
recognize that, between the date of this Proxy Statement and the Effective
Date, factual circumstances could possibly change such that it might not
be appropriate or desirable to effect the Reverse Stock Split at this
time. If the Board decides to withdraw the proposed amendment from the
agenda of the annual stockholders' meeting, the Board will notify the
stockholders of such decision promptly by mail and by announcement at the
meeting. If the Board decides to abandon the Reverse Stock Split after
the meeting and before the Effective Date, the Board will notify the
stockholders of such decision promptly by mail.
<PAGE>
MARKET FOR COMMON STOCK, DIVIDENDS AND STOCK PURCHASES
Market for Common Stock.
The Company's Common Stock, $2.00 par value per share, is traded on
the over-the-counter market. There are two market makers in the Company's
stock. As of November 5, 1996, there were ________ shares outstanding
held by approximately ___ stockholders of record. The high and low bid
quotations of the stock for each quarter during the past two full fiscal
years and the first three quarters of the current fiscal year were:
High Low
Fiscal 1994
November, 1993 - January, 1994............... $7.50 $6.00
February, 1994 - April, 1994................. 8.00 6.50
May, 1994 - July, 1994....................... 8.13 7.50
August, 1994 - October, 1994................. 8.50 7.50
Fiscal 1995
November, 1994 - January, 1995............... $8.50 $7.00
February, 1995 - April, 1995................. 7.00 7.00
May, 1995 - July, 1995....................... 8.00 7.00
August, 1995 - October, 1995................. 8.00 7.00
Fiscal 1996
November, 1995 - January, 1996............... $7.00 $6.00
February, 1996 - April, 1996................. 6.25 6.00
May, 1996 - July, 1996....................... 7.50 6.25
The source of the high and low bid quotations provided above was
Mesirow Capital, Inc., Chicago, Illinois.
Dividends.
No cash dividends were declared during fiscal years 1994 or 1995 or
during the first three quarters of fiscal year 1996. The Company does not
currently expect to pay cash dividends in the immediate future. Under the
existing agreement with their lender, the Company and Wescon Products
Company, the Company's largest subsidiary, have agreed that Wescon
Products Company may make only such payments to the Company as are
provided in the Company's corporate budget, not to exceed $125,000 per
month.
Stock Repurchases by Company.
The Company made the following purchases of Common Stock during each
quarter of the past two full fiscal years and the first three quarters of
the 1996 fiscal year:
Amount of Range of Average
Securities Prices Purchase
Purchased Paid Price
Fiscal 1994
November, 1993 - January, 1994........ 899 $4.25-6.75 $6.00
February, 1994 - April, 1994.......... 116 4.25-8.00 7.25
May, 1994 - July, 1994................ 1,933 6.50-8.00 7.49
August, 1994 - October, 1994.......... 883 7.50-8.00 7.87
Fiscal 1995
November, 1994 - January, 1995........ 520 7.75-8.50 8.29
February, 1995 - April, 1995.......... 391 7.00-8.50 7.02
May, 1995 - July, 1995................ 2,104 7.00-8.50 7.48
August, 1995 - October, 1995.......... 685 7.00-8.00 7.97
Fiscal 1996
November, 1995 - January, 1996........ 1,395 6.00-8.00 6.99
February, 1996 - April, 1996.......... 2,240 6.00-8.00 6.35
May, 1996 - July, 1996................ 1,341 6.00-7.00 6.18
During the sixty days prior to October 8, 1996, the Company made
three purchases of Common Stock from former employees in Wichita, Kansas
pursuant to the ESOT. The Company purchased 7 shares at $7.50 per share
on August 19, 1996, 139 shares at $7.50 per share on August 19, 1996 and
329 shares at $7.50 per share on September 13, 1996.
VOTE REQUIRED
Approval of the Reverse Stock Split requires the affirmative vote of
the holders of at least a majority of the outstanding shares of Common
Stock entitled to vote thereon. The officers and directors of the Company
currently own and have the right to vote in the aggregate 180,450 shares
of Common Stock, or approximately 36.3% of the outstanding Common Stock,
and have each indicated to the Board that they recommend and intend to
vote such shares in favor of the proposed Reverse Stock Split. Con-Lib
Holding Company owns 88,000 shares of Common Stock, or approximately 17.7%
of the outstanding Common Stock, and Gerard J. Mos III, the General
Manager of Con-Lib Holding Company, has informed the Board that he intends
to vote such shares in favor of the Reverse Stock Split. Under the terms
of the Company's Employee Stock Ownership Plan and Trust, the ESOT
Administrative Committee of the Board of Directors has the sole power to
instruct the Trustee of the Trust with respect to the voting of
approximately 40,400 shares held by the Trust, or 8.1% of the outstanding
shares of the Common Stock. The members of the ESOT Administrative
Committee are David M. Pangrac, Chairman and L. Chandler Smith, both of
whom are directors of the Company. The ESOT Administrative Committee and
the Trustee have informed the Board that they intend to abstain from
voting such shares, with the result that participants in the ESOT will be
able to instruct the Trustee as to how to vote such shares. Participants
in the ESOT currently have the right to instruct the Trustee as to how to
vote the remaining 58,201 shares held by the ESOT. See "Security
Ownership of Certain Beneficial Owners and Management."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
PROPOSAL 1 CONCERNING THE AMENDMENT OF ARTICLE FOURTH OF THE CERTIFICATE
OF INCORPORATION TO EFFECT A 1-FOR-50 REVERSE STOCK SPLIT.
PROPOSAL 2
ELECTION OF DIRECTORS
Two directors are to be elected at the meeting. The Board of
Directors presently consists of seven directors divided into three
classes, Class A consisting of three directors and Classes B and C
consisting of two directors each. One class of directors is elected each
year to hold office for a three-year term and until the successors of such
class are duly elected and qualified, or until their earlier resignation
or removal. The terms of office of the Class C directors will expire upon
the election of their successors at the 1996 annual stockholders' meeting.
The stockholders will be asked to elect each of the nominees listed
below as a Class C director for a term of three years and until his
successor is elected and qualified or until his earlier resignation or
removal. Management expects both of such nominees to be available for
election, but in the event that either of them should become unavailable,
the persons named in the accompanying Proxy will vote for a substitute
nominee or nominees if so designated by the Board of Directors. The two
nominees receiving the greatest number of votes will be elected directors
at the meeting.
Percentage of
Outstanding
Shares of Shares of
A Common Stock Common Stock
Director Beneficially Beneficially
of the Owned Owned
Principal Company October 8, October 8,
Name Age Occupation(1) Since 1996(2)(3) 1996
NOMINEES FOR ELECTION AT ANNUAL MEETING
Michael E. Bukaty 59 President and 1984 23,420(5) 4.5%
(Class C) Chief Operating
Officer of
the Company and
President and
Chief Executive
Officer of
Wescon Products
Company, Wichita,
Kansas, a
wholly-owned
subsidiary of
the Company.(4)
John Latshaw 74 Chairman of the 1987 454,834(7) 58.2%
(Class C) Board of Directors,
Managing Director
and Chief
Executive Officer
of the Company,
and Chairman of
the Board of
Directors of Wescon
Products Company,
Wichita, Kansas,
a wholly-owned
subsidiary of
the Company.(6)
DIRECTORS WHOSE TERMS EXPIRE IN 1997
James C. Gale 46 Managing Director 1987 2,700(9) (*)
(Class A) of Gruntal & Co.,
Inc., New York,
investment
bankers.(8)
Elizabeth A. 36 Self-Employed/ 1988 10(11) (*)
Reid-Scott Private
(Class A) Investor.(10)
L. Chandler Smith 76 Director of 1967 100 (*)
(Class A) Corporate
Development of
the Company.(12)
Percentage of
Outstanding
Shares of Shares of
A Common Stock Common Stock
Director Beneficially Beneficially
of the Owned Owned
Principal Company October 8 October 8,
Name Age Occupation(1) Since 1996(2)(3) 1996
DIRECTORS WHOSE TERMS EXPIRE IN 1998
Constance H. 39 Private 1989 100(14) (*)
Latshaw Investor.(13)
(Class B)
David M. Pangrac 54 Consultant 1989 10 (*)
(Class B) employed by
Pangrac &
Associates
Consultants, Inc.,
Port Aransas,
Texas, network and
communications
consultants.(15)
(*) Denotes beneficial ownership of less than 1% of outstanding common
stock.
(1) Unless otherwise indicated, each of the directors has had the same
principal occupation during the last five years. All directors are
citizens of the United States of America.
(2) Unless otherwise indicated, each director has sole voting and
investment power with respect to the shares listed.
(3) Shares owned by the Latshaw Enterprises, Inc. Employee Stock
Ownership Plan and Trust, which is administered by the ESOT
Administrative Committee of the Board of Directors of the Company,
are not included in the shares owned by individual directors, except
for shares allocated to the accounts of individual directors which
may be voted by such directors under the terms of the Trust. See
footnote (8) on page 32 hereof.
(4) Mr. Bukaty has also served as President of Coast Wire & Plastic Tech,
Inc., Gardena, California, a wholly-owned subsidiary of the Company
and a cable and wire manufacturer, since December 1993, and as
President of I.H. Molding, Inc., Dallas, Texas, a wholly-owned
subsidiary of Wescon Products Company and a manufacturer of plastic
products, since September 1995. Mr. Bukaty's business address is
2533 South West Street, Wichita, Kansas 66217.
(5) Includes 12,400 shares which Mr. Bukaty has the present right to
acquire upon conversion of Variable Interest Rate Convertible
Subordinated Debentures due November 8, 2022 owned by him, 6,000
shares which Mr. Bukaty has the present right to acquire under the
1987 Employee Stock Benefit Plan and 1,760 shares allocated to
Mr. Bukaty's account in the Company's Employee Stock Ownership Plan
and Trust which Mr. Bukaty has the right to vote.
(6) Mr. Latshaw has also served as Chairman of the Board of Helton, Inc.,
McMinnville, Tennessee, an 80% owned subsidiary of the Company and a
manufacturer of plastic products, since August 1993, as Chairman of
the Board and Chief Executive Officer of Coast Wire & Plastic Tech,
Inc., Gardena, California, a wholly-owned subsidiary of the Company
and a cable and wire manufacturer, since December 1993, and as
Chairman of the Board and Chief Executive Officer of I.H. Molding,
Inc., Dallas, Texas, a wholly-owned subsidiary of Wescon Products
Company and a manufacturer of plastic products, since September 1995.
Mr. Latshaw served as Chairman of the Board of Directors of Latshaw
Garden & Leisure, Inc., a subsidiary of the Company and formerly a
distributor of consumer products and garden tools, from July 1989
until it liquidated its inventory in 1992. Mr. Latshaw is the father
of Constance H. Latshaw and Elizabeth A. Reid-Scott, directors of the
Company. Mr. Latshaw's business address is 5049 Wornall, Apt. 3C,
Kansas City, Missouri 64112.
(7) Includes 278,000 shares which Mr. Latshaw has the present right to
acquire upon conversion of Variable Interest Rate Convertible
Subordinated Debentures due November 8, 2022 owned by him, 6,000
shares which Mr. Latshaw has the present right to acquire pursuant to
the 1987 Employee Stock Benefit Plan and 1,848 shares allocated to
Mr. Latshaw's account in the Company's Employee Stock Ownership Plan
and Trust which Mr. Latshaw has the right to vote. See footnote (7)
on page 32 hereof.
(8) From 1989 until 1992, Mr. Gale also served as Managing Director of
Maiden Lane Associates, Ltd., merchant bankers, New York, New York.
Mr. Gale also serves as a director of Adage, Inc. Mr. Gale's
business address is 717 5th Avenue, 13th Floor, New York, New York
10022.
(9) Includes 2,500 shares which are held by a trust for Mr. Gale's
daughter. As trustee, Mr. Gale has sole voting power with respect to
such shares.
(10) Ms. Reid-Scott has been self-employed as a motion picture
screenwriter and private investor during the past five years. Ms.
Reid-Scott is the sister of Constance H. Latshaw and the daughter of
John Latshaw. Ms. Reid-Scott's business address is c/o John Latshaw,
5049 Wornall, Apt. 3C, Kansas City, Missouri 64112.
(11) The amount of shares shown in the table does not include 266,000
shares held by Con-Lib Holding Company. See footnote (6) on page 31
hereof.
(12) Mr. Smith's business address is 6405 Metcalf, Suite 308, Overland
Park, Kansas 66202.
(13) Constance H. Latshaw has been self-employed as a private investor
during the past five years, and is the sister of Elizabeth A. Reid-
Scott and the daughter of John Latshaw. Ms. Latshaw's business
address is c/o John Latshaw, 5049 Wornall, Apt. 3C, Kansas City,
Missouri 64112.
(14) The amount of shares shown in the table does not include 266,000
shares held by Con-Lib Holding Company. See footnote (6) on page 31
hereof.
(15) Mr. Pangrac was employed by TimeWarner Cable, Englewood, Colorado, a
cable television provider, as Vice President of Engineering from 1992
to 1994 and as Director of Engineering from 1990 to 1992. TimeWarner
Cable was formerly known as American Television and Communications
Corp. Mr. Pangrac's business address is 518 Marina Drive, Port
Aransas, Texas 78373.
There were two meetings of the Board of Directors during the last
fiscal year. The Board of Directors has an Executive Committee and a
Pension and Compensation Committee. The Executive Committee met eight
times and the Pension and Compensation Committee met one time during the
last fiscal year. All directors attended 75 percent or more of the total
number of all meetings of the Board and of committees of which they are
members during the last fiscal year.
The Executive Committee consists of Messrs. Latshaw, Chairman, Bukaty
and Smith. The Executive Committee has and exercises all of the powers of
the Board of Directors in the management of the business of the Company in
interim periods between meetings of the Board of Directors, except as
specifically prohibited by the Bylaws of the Company. The Pension and
Compensation Committee consists of Messrs. Smith, Chairman, Gale and
Pangrac. The Pension and Compensation Committee is authorized to review
the compensation policies of the Company and its subsidiaries and to make
recommendations to the Board of Directors and management, and has the
authority to grant stock options to employees and to interpret and
administer the 1987 Employee Stock Benefit Plan. The Company does not
have standing audit or nominating committees of the Board of Directors or
committees performing similar functions.
Section 16(a) Beneficial Ownership Reporting Compliance.
During the 1995 fiscal year, Michael E. Bukaty, an executive officer
and director of the Company, filed late one Form 4 reporting a single
transaction.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF
THE NOMINEES FOR DIRECTOR PRESENTED IN PROPOSAL 2.
<PAGE>
PROPOSAL 3
SELECTION OF AUDITORS
The Board of Directors has selected Ernst & Young to examine the
accounts of the Company and its subsidiaries for the current fiscal year.
Unless otherwise directed, the proxies will be voted to ratify such
selection.
Representatives of Ernst & Young are expected to be present at the
stockholders' meeting to make any statement they may desire and to respond
to appropriate questions concerning the audit report.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
PROPOSAL 3 CONCERNING THE RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT PUBLIC ACCOUNTANTS.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table shows as of October 8, 1996, unless otherwise
indicated, the total number of shares of common stock of the Company
beneficially owned by (i) persons known to be beneficial owners of more
than 5% of the outstanding common stock, (ii) the executive officers
listed in the Summary Compensation Table on page 35 hereof, and (iii) all
directors and executive officers of the Company as a group. The
beneficial ownership of shares by individual directors is shown in the
table in pages 26 and 27 hereof and is incorporated herein by reference.
Percentage of
Outstanding
Percentage of Shares Benefi-
Shares Outstanding cially Owned
Beneficially Shares Benefi- on a Fully-
Beneficial Owner Owned(1) cially Owned(2) Diluted Basis(3)
Michael E. Bukaty 23,420(4) 4.5% 2.3%
2533 South West Street
Wichita, KS. 67217
David G. Carr 7,076(5) 1.4% 0.7%
2533 South West Street
Wichita, KS. 67217
Con-Lib Holding Company 266,000(6) 39.4% 26.1%
Gerard J. Mos III,
General Manager
No. 3 Dunford Circle
Kansas City, MO 64112
John Latshaw 454,834(7) 58.2% 44.5%
5049 Wornall, Apt. 3C
Kansas City, MO 64112
Latshaw Enterprises, Inc. 98,601(8) 19.8% 9.7%
Employee Stock Ownership
Plan and Trust
P. O. Box 419226
Kansas City, MO 64141
Boatmen's Bancshares, Inc. 25,725(9) 5.2% 2.5%
Boatmen's Trust Company
One Boatmen's Plaza
St. Louis, MO 63101
All Directors and
Executive Officers
of the Company as
a Group 582,267(10) 72.3% 57.0%
(1) Unless otherwise indicated, each person has sole voting and
investment power with respect to the shares listed.
(2) The calculation of the percentage of outstanding shares of
common stock beneficially owned by a beneficial owner or group
of beneficial owners, as the case may be, assumes that only the
currently exercisable stock options or convertible securities
held by that owner or group have been exercised or converted
into common stock and that no other outstanding stock options or
convertible securities have been exercised or converted.
(3) The calculation of the percentage of outstanding shares of
common stock beneficially owned on a fully-diluted basis assumes
that all currently exercisable outstanding stock options have
been exercised and that all outstanding convertible securities
have been converted into common stock.
(4) Includes 12,400 shares which Mr. Bukaty has the present right to
acquire upon conversion of Variable Interest Rate Convertible
Subordinated Debentures due November 8, 2022 owned by him, 6,000
shares which Mr. Bukaty has the present right to acquire under
the 1987 Employee Stock Benefit Plan and 1,760 shares allocated
to Mr. Bukaty's account in the Company's Employee Stock
Ownership Plan and Trust which Mr. Bukaty has the right to vote.
(5) Includes 2,400 shares which Mr. Carr has the present right to
acquire upon conversion of Variable Interest Rate Convertible
Subordinated Debentures due November 8, 2022 owned by him, 3,000
shares which Mr. Carr has the present right to acquire under the
1987 Employee Stock Benefit Plan and 976 shares allocated to
Mr. Carr's account in the Company's Employee Stock Ownership
Plan and Trust which Mr. Carr has the right to vote.
(6) Con-Lib Holding Company is a Missouri general partnership (the
"Partnership") whose partners are Elizabeth A. Reid-Scott,
Constance H. Latshaw, a trust for the benefit of Elizabeth A.
Reid-Scott and a trust for the benefit of Constance H. Latshaw.
Gerard J. Mos III serves as the General Manager of the
Partnership. As General Manager, Mr. Mos has the power to vote
and dispose of the shares held by the Partnership except to the
extent Mr. Mos is instructed otherwise by a majority in interest
of the partners. Mr. Mos, as the trustee of the trust for the
benefit of Elizabeth A. Reid-Scott and the trust for the benefit
of Constance H. Latshaw, has the power to direct the voting and
disposition of the shares held by the Partnership on behalf of
the trusts. The trusts hold in the aggregate a 90% interest in
the Partnership. Mr. Mos has no beneficial interest in the
shares held by the Partnership. Elizabeth A. Reid-Scott and
Constance H. Latshaw have no voting or investment power with
respect to the shares held by the Partnership and disclaim
beneficial ownership of such shares. The amount of shares shown
in the table includes 178,000 shares of common stock which the
Partnership has the present right to acquire upon conversion of
Variable Interest Rate Convertible Subordinated Debentures due
November 8, 2022 owned by it.
(7) Includes 278,000 shares which Mr. Latshaw has the present right
to acquire upon conversion of Variable Interest Rate Convertible
Subordinated Debentures due November 8, 2022 owned by him, 6,000
shares which Mr. Latshaw has the present right to acquire
pursuant to the 1987 Employee Stock Benefit Plan and 1,848
shares allocated to Mr. Latshaw's account in the Company's
Employee Stock Ownership Plan and Trust.
(8) Shares beneficially owned as of August 3, 1996. UMB Bank, N.A.,
10th and Grand Avenue, Kansas City, Missouri, serves as Trustee
of the Company's Employee Stock Ownership Plan and Trust. The
Trust is administered by the ESOT Administrative Committee of
the Board of Directors of the Company, which Committee has the
sole power to instruct the Trustee with respect to the
investment of the shares owned by the Trust and with respect to
the voting of 40,400 of the shares. Participants have the right
to instruct the Trustee as to how to vote the remaining 58,201
shares to the extent such stock is allocated to each such
participant. Under the terms of the Trust, if the Committee
fails to instruct the Trustee as to how to vote the 40,400
shares, the Trustee shall vote such stock and if the Trustee
abstains from voting the 40,400 shares, the Trustee is required
to vote such stock in accordance with instructions received from
each participant to the extent such stock is allocated to each
such participant. To the extent voting instructions are
requested from participants and are not received by the Trustee
by a stated deadline, the Trustee shall vote such stock as the
Committee shall instruct and if the Committee fails to instruct
the Trustee as to how to vote such stock, the Trustee shall vote
such stock in the manner deemed appropriate by the Trustee. As
of August 3, 1996, the members of the Committee were
Mr. Pangrac, Chairman, and Mr. Smith, both of whom are directors
of the Company.
(9) Shares beneficially owned as of December 31, 1995, as reported
in a Schedule 13G dated February 7, 1995 filed with the
Securities and Exchange Commission. In the Schedule 13G,
Boatmen's Bancshares, Inc. and Boatmen's Trust Company disclosed
that they had sole voting power with respect to 25,725 shares
and sole dispositive power with respect to 25 shares.
(10) Includes 292,800 shares which executive officers and directors
have the present right to acquire upon conversion of Variable
Interest Rate Convertible Subordinated Debentures due November
8, 2022 owned by them, 15,000 shares which executive officers
and directors have a present right to acquire under the 1987
Employee Stock Benefit Plan, 2,500 shares held by a director as
trustee for a family member and 98,601 shares held by the
Company's Employee Stock Ownership Plan and Trust. The amount
shown does not include 266,000 shares held by Con-Lib Holding
Company. See footnote (6) above.
MANAGEMENT OF THE COMPANY
The following table provides the names of the executive officers
of the Company, their ages and positions and the years in which they
first became executive officers of the Company:
An Executive
Officer of the Positions and Offices
Name Age Company Since Held with the Company (1)
John Latshaw 74 1987(2) Chairman of the Board of
Directors, Managing
Director and Chief
Executive Officer
Michael E. Bukaty 59 1984(3) President and Chief
Operating Officer
David G. Carr 51 1984(4) Senior Vice-President,
Chief Financial Officer
and Secretary
(1) Unless otherwise indicated, each of the executive officers has
held the same position with the Company during the last five
years. Any other principal occupations or employment of such
persons during the past five years is also indicated below. All
of the executive officers of the Company are citizens of the
United States of America.
(2) Mr. Latshaw also serves as Chairman of the Board of Directors of
Wescon Products Company, Wichita, Kansas, a wholly-owned
subsidiary of the Company and a manufacturer. In addition, Mr.
Latshaw has served as Chairman of the Board of Helton, Inc.,
McMinnville, Tennessee, an 80% owned subsidiary of the Company
and a manufacturer of plastic products, since August 1993, as
Chairman of the Board and Chief Executive Officer of Coast Wire
& Plastic Tech, Inc., Gardena, California, a wholly-owned
subsidiary of the Company and a cable and wire manufacturer,
since December 1993, and as Chairman of the Board and Chief
Executive Officer of I.H. Molding, Inc., Dallas, Texas, a
wholly-owned subsidiary of Wescon Products Company and a
manufacturer of plastic products, since September 1995. Mr.
Latshaw served as Chairman of the Board of Directors of Latshaw
Garden & Leisure, Inc., a subsidiary of the Company and formerly
a distributor of consumer products and garden tools, from July
1989 until it liquidated its inventory in 1992. Mr. Latshaw is
the father of Constance H. Latshaw and Elizabeth A. Reid-Scott,
directors of the Company.
(3) Mr. Bukaty also serves as President and Chief Executive Officer
of Wescon Products Company, Wichita, Kansas, a wholly-owned
subsidiary of the Company and a manufacturer. In addition, Mr.
Bukaty has served as President of Coast Wire & Plastic Tech,
Inc., Gardena, California, a wholly-owned subsidiary of the
Company and a cable and wire manufacturer, since December 1993,
and as President of I.H. Molding, Inc., Dallas, Texas, a wholly-
owned subsidiary of Wescon Products Company and a manufacturer
of plastic products, since September 1995.
(4) Mr. Carr also serves as Senior Vice President, Chief Financial
Officer, Secretary and Treasurer of Wescon Products Company,
Wichita, Kansas, a wholly-owned subsidiary of the Company and a
manufacturer. Mr. Carr has also served as Secretary/Treasurer
and a director of Coast Wire & Plastic Tech, Inc., Gardena,
California, a wholly-owned subsidiary of the Company and a cable
and wire manufacturer, since December 1993, and as
Secretary/Treasurer and a director of I.H. Molding, Inc.,
Dallas, Texas, a wholly-owned subsidiary of Wescon Products
Company and a manufacturer of plastic products, since September
1995. Mr. Carr's business address is 2533 South West Street,
Wichita, Kansas 67217.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information concerning the compensation
of directors and executive officers of the Company for the fiscal
year ended October 28, 1995. Compensation information for the fiscal
year ended November 2, 1996 will be provided in the Annual Report on
Form 10-K for such fiscal year and the proxy statement for the 1997
annual meeting of stockholders, to the extent the Company is then
subject to the reporting requirements of the Securities Exchange Act
of 1934.
SUMMARY COMPENSATION TABLE
The following table provides certain summary information
concerning compensation paid or accrued by the Company to or on
behalf of (i) the Company's Chief Executive Officer and (ii) each
executive officer of the Company during the fiscal year ended October
28, 1995 who received compensation in excess of $100,000 for services
rendered in all capacities to the Company and its subsidiaries during
the fiscal year.
Annual Compensation Long-Term
Compensation
Name and Fiscal
Principal Position Year No. of Shares All
Underlying Other
Stock Options Compen-
Salary Bonus Granted sation
($) ($) (#) ($)
John Latshaw 1995 $174,000 $66,864 0 $5,280(1)
Chairman of the 1994 166,000 56,000 0 5,824
Board, Managing 1993 165,250 50,000 10,000 6,328
Director and Chief
Executive Officer
Michael E. Bukaty 1995 $174,000 $66,864 0 $5,2141)
President and 1994 166,000 56,000 0 6,098
Chief Operating 1993 155,250 50,000 10,000 5,598
Officer
David G. Carr 1995 $100,860 $30,084 0 $3,934(1)
Senior Vice Presi- 1994 92,500 24,000 0 3,699
dent and Chief 1993 88,000 21,000 5,000 3,203
Financial Officer
(1) The amounts shown consist of (i) Company contributions under the
Company's Employee Stock Ownership Plan and Trust allocated during
fiscal year 1995 to Mr. Latshaw's account in the amount of 255 shares
of common stock valued at $1,530, to Mr. Bukaty's account in the amount
of 244 shares valued at $1,464 and to Mr. Carr's account in the amount
of 132 shares valued at $792 and (ii) 50% matching contributions by
the Company during fiscal year 1995 under the Company's 401(k) salary
reduction plan in the amount of $3,750 to the account of Mr. Latshaw,
$3,750 to the account of Mr. Bukaty and $3,142 to the account of Mr.
Carr under the Plan.
AGGREGATE OPTION EXERCISES AND
FISCAL YEAR-END OPTION VALUE TABLE
The following table shows the number and value of shares of Common Stock
represented by outstanding stock options held by each of the named executive
officers as of October 28, 1995. No options were exercised during the 1995
fiscal year.
Number of Shares of Value of Unexercised
Common Stock Underlying In-the-Money
Unexercised Options at Options at
October 28, 1995(#) October 28, 1995($)
Options Options Options Options
Name Exercisable Unexercisable Exercisable Unexercisable
John Latshaw 3,000 7,000 3,000 7,000
Michael E. Bukaty 3,000 7,000 3,000 7,000
David G. Carr 1,500 3,500 1,500 3,500
PENSION PLAN TABLE
The following table shows the estimated annual straight life annuity
benefits payable upon retirement to participants in the Company's
retirement income plan, based upon specified base salary and years of
service classifications.
Annual
Base
Salary Years of Service at age 65
5 10 15 20 25 30 & Over
$ 75,000 $ 4,041 $ 8,082 $ 12,122 $ 16,163 $ 20,204 $ 24,245
100,000 5,707 11,415 17,122 22,830 28,537 34,245
125,000 7,374 14,748 22,122 29,497 36,871 44,245
150,000 9,041 18,082 27,122 36,163 45,204 54,245
175,000 10,707 21,415 32,122 42,830 53,537 64,245
200,000 12,374 24,748 37,122 49,497 61,871 74,245
225,000 14,041 28,082 42,122 56,163 70,204 84,245
The retirement income plan is available to salaried employees of the
Company and salaried employees of Wescon Products Company and Helton,
Inc., two subsidiaries of the Company. The Company makes such
contributions to the plan as are actuarially determined to be necessary
to provide for plan funding. The plan provides for an annual straight
life annuity payments after 30 years of service at age 65 equal to 40% of
the employee's average base salary for the five highest consecutive years
of salary during the last fifteen years of employment, reduced by 40% of
the employee's annual primary social security benefit. The pension is
reduced proportionately for less than 30 years of service and is reduced
for retirement before age 65. The plan provides that covered
compensation per year for purposes of the plan may not exceed $150,000.
The amount of compensation of Messrs. Latshaw, Bukaty and Carr covered
under the plan is their salary as set forth in the Summary Compensation
Table, excluding for Messrs. Latshaw and Bukaty compensation received for
service as directors of the Company, and subject to the $150,000 limit
described above. The amount of covered compensation for fiscal year 1995
was $150,000 for Mr. Latshaw, $150,000 for Mr. Bukaty and $100,860 for
Mr. Carr. Mr. Latshaw has seven years of service, Mr. Bukaty has fifteen
years of service and Mr. Carr has twelve years of service under the plan.
PENSION AND COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Pension and Compensation Committee are
L. Chandler Smith, Chairman, James C. Gale and David M. Pangrac.
L. Chandler Smith is a consultant to the Company, and holds the
title of Director of Corporate Development of the Company. Mr. Smith
served as Chairman of the Executive Committee of the Board of Directors
of the Company from September, 1987 until November, 1989, was Chairman of
the Board of Directors of the Company prior to September, 1987, and was
Chief Executive Officer of the Company prior to March, 1984. Mr. Smith
is a director of Helton, Inc., an 80% owned subsidiary of the Company,
and served as Chairman of the Board of Helton, Inc. until August, 1993.
Mr. Smith received no compensation for such service. David G. Carr,
Senior Vice President, Chief Financial Officer and Secretary of the
Company, serves as a director of Helton, Inc and a director of Coast Wire
& Plastic Tech, Inc. During the last fiscal year, the Company made
payments totalling $95,721 to Mr. Smith and a corporation wholly-owned by
Mr. Smith. The amount paid includes $50,971 paid to Mr. Smith under a
supplemental retirement agreement. Such agreement provides for payments
to Mr. Smith during his lifetime of $4,248 per month, with $3,186 per
month to be paid to his present wife during her lifetime in the event of
his death. The agreement requires Mr. Smith to render consulting
services to the Company and not to compete with the Company. An
additional amount of $31,750 was paid under an agreement between the
Company and a corporation wholly-owned by Mr. Smith pursuant to which the
corporation is to be paid a specified amount per month, currently $2,750,
plus incidental expenses, for exploring prospective acquisitions for the
Company. The agreement may be terminated by either party as of the end
of any calendar month by giving the other party notice prior to the end
of the preceding calendar month. In addition, Mr. Smith was paid $6,000
as compensation for his services as a director and a member of the
Executive Committee of the Board of Directors of the Company and a $7,000
bonus for services rendered to the Company.
COMPENSATION OF DIRECTORS
Directors of the Company receive compensation of $4,000 per annum,
plus $500 and out-of-pocket traveling expenses for attendance at each
Board meeting. Directors who are members of the Executive Committee also
receive $1,000 per annum.
PENSION AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Pension and Compensation Committee, a Committee of the Board of Directors
composed of the non-employee directors listed at the end of this report
(the "Committee"). All issues pertaining to executive compensation are
reviewed by the Committee and recommendations are submitted by the
Committee to the full Board of Directors for approval.
Compensation Policy.
The Company's executive compensation policy is designed to promote
the short-term and long-term performance of the Company.
In furtherance of this policy, three principal elements of executive
compensation -- base salary, annual bonuses, and stock options -- are
used to motivate and reward the accomplishment of annual corporate
objectives, to provide variability in individual awards based on
contributions to business results, and to maintain a competitive
compensation package to attract, retain and motivate individuals of the
highest professional quality.
Base Salary.
The Committee generally reviews the base salary levels of executive
officers at the end of each fiscal year. In determining its
recommendations to the Board, the Committee examines the financial
condition and the operating results over the last fiscal year of the
Company and/or the subsidiary employing the executive, the level of
fringe and other benefits currently provided to the executive by the
Company and the individual performance of the executive. The Committee's
recommendations are based upon its subjective review of these factors,
and is not based upon any specific criteria or financial performance
measure.
In October 1994, the Committee recommended that the executive
officers receive increases in base salary of 5% for fiscal year 1995,
based upon the Committee's conclusions that the operating results for
fiscal year 1994 and the Company's financial condition were very good and
that the executive officers had performed well. The Board of Directors
approved this recommendation.
Key Management Bonus System and Annual Bonuses.
Upon the recommendation of the Committee, the Company adopted for
the 1995 fiscal year a Key Management Bonus System relating to the
performance of Wescon Products Company ("Wescon"), its principal
subsidiary. Under the 1995 bonus plan, Michael E. Bukaty, President and
Chief Operating Officer of the Company and President and Chief Executive
Officer of Wescon, had the opportunity to receive a cash bonus award
based upon the level of the "Corporate return on investment". The
Corporate return on investment was defined as Wescon's consolidated pre-
tax annual operating profit for fiscal year 1995 divided by the monthly
average of total assets of Wescon less liabilities of Wescon to outside
third parties. The 1995 Bonus System provided for no bonus up to a 12%
return on investment and an increasing bonus for returns of 12-26% up to
a maximum possible bonus of $72,300 for Mr. Bukaty. Under the plan, a
cash bonus award equal to approximately 113% of Mr. Bukaty's bonus would
also be allocated for discretionary distribution by Mr. Bukaty in amounts
and to employees of the Company and Wescon of his choice. Payment was to
be made based upon audited financial results. The Company has adopted a
similar plan for the 1996 fiscal year.
The bonus plan for the 1995 fiscal year was substantially the same
as the 1994 bonus plan, except for the addition of an additional
corporate return on investment target for 1995. The 1994 bonus plan had
provided an increasing bonus for returns of 12-21% up to a maximum
possible bonus of $56,000. The Committee determined that because of the
excellent performance of the Company in 1994, the highest bonus target
would be achieved for that year. The Committee decided that it would
provide greater incentive for the executive officers of Wescon and be in
the best interests of the Company to add to the Plan for 1995 an
additional corporate return on investment target of 26%, with a higher
possible payout to Mr. Bukaty of $72,300 at such level and a
correspondingly higher possible amount for discretionary distribution by
Mr. Bukaty to employees of the Company and Wescon.
The Company also pays discretionary annual bonuses to executive
officers and key employees of the Company and its subsidiaries on an
irregular basis upon the recommendation of the Committee. In making
determinations as to recommended bonuses, the Committee reviews the same
factors considered in determining base salary, as described above. The
Committee's recommendations are based upon its subjective review of these
factors, and is not based upon any specific criteria or financial
performance measure. As described below, the Committee recommended a
bonus of $66,864 to John Latshaw in October 1995.
Stock Options.
The Committee, as well as the Board of Directors, believes that
stock ownership through stock options by key employees is a major
incentive in aligning the interests of employees and stockholders,
because value is only provided if the stock price increases and because
stock options have an effective long-term reward and retention function.
The Committee administers the Company's 1987 Employee Stock Benefit
Plan. Under the Plan, the Committee may grant options for up to 60,000
shares of the common stock of the Company to key employees who are in
positions in which their decisions, actions and counsel have a
significant impact upon the profitability and success of the Company or
any subsidiary. Options granted under the Plan may be either Incentive
Stock Options, which qualify for special tax treatment under the Internal
Revenue Code, or Non-Qualified Stock Options, which do not so qualify.
Under the Plan, the purchase price of the common stock subject to each
option is determined by the Committee at the time that such option is
granted and the price may not be less than 100 percent of the fair market
value of the common stock on the date of grant. The Committee meets on
an irregular basis to consider the granting of options under the Plan.
No options were granted under the Plan during the 1995 fiscal year.
Most executive officers and key employees have been granted options under
the Plan. All of the options granted under the Plan have been five-year
options vesting over a four-year period.
Compensation of Chief Executive Officer.
John Latshaw is Chairman of the Board, Managing Director and Chief
Executive Officer of the Company. In October 1994, the Committee
recommended that Mr. Latshaw's base salary for fiscal year 1995 be
increased by 5%, from $160,000 to $168,000, based upon the Committee's
conclusions that the operating results for fiscal year 1994 and the
Company's financial condition were very good and that the executive
officers, including Mr. Latshaw, had performed well. The Board of
Directors approved the Committee's recommendation.
Mr. Latshaw does not participate in the Key Management Bonus System,
and receives bonuses at the end of each fiscal year to the extent
recommended by the Committee and approved by the Board of Directors. In
determining whether to recommend a bonus for Mr. Latshaw for a fiscal
year, the Committee considers the extent to which bonuses were paid out
to other executive officers under the Key Management Bonus System, and
reviews the factors considered in determining base salary of executive
officers described above. Upon a review of the factors, the Committee
recommended a bonus of $66,864 to John Latshaw in October 1995. The
principal factors relied upon by the Committee in making its decision
were the financial condition and recent operating results of the Company,
the amount of the bonus earned by Mr. Bukaty and Mr. Latshaw's job
performance and contribution to profits. The Board of Directors approved
the Committee's recommendations.
Deductibility Cap on Compensation Exceeding $1,000,000
The Committee does not believe that proposed Internal Revenue
Service regulations regarding non-deductibility of annual compensation in
excess of $1,000,000 will have any impact upon the Company, given the
current salary and bonus levels of officers of the Company and given the
proposed treatment in the regulations of compensation under the Company's
stock option plan. However, the Committee will continue to consider the
effect of the new regulations upon the Company's executive compensation
policies.
L. Chandler Smith, Chairman
James C. Gale
David M. Pangrac
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
Set forth below is a line graph comparing the Company's cumulative
total shareholder return on its common stock with the cumulative total
return of the Media General Composite Index and a peer group constructed
by the Company. The table assumes the investment at the close of
business on November 2, 1990 of $100 in the Company's common stock, the
portfolio represented in the Media General Composite Index and the
portfolio consisting of companies in the peer group, and assumes that all
dividends were reinvested. The returns of each corporation in the peer
group have been weighted according to the corporation's market
capitalization.
The peer group constructed by the Company consists of 40 companies
in the database of Media General Financial Services, Inc. which are
included within the following Standard Industrial Classifications: 3089
- - Plastic Products, Not Elsewhere Classified, 3524 - Lawn and Garden
Tractors and Lawn and Garden Equipment, and 3751 - Motorcycles, Bicycles
and Parts. These companies are: Ag-Bag International Limited, American
Biltrite, Inc., American Filtrona Corporation, Applied Extrusion
Technologies, Inc., Aptar Group, Inc., Armstrong World Industries, Inc.,
Atlantis Plastics, Inc., Calnetics Corporation, Cimco, Inc., Consolidated
Mercantile Corp., Decora Industries, Inc., Ek Chor China Motorcycle Co.,
Envirodyne Industries, Inc., Essef Corporation, Glassmaster Company,
Harley-Davidson, Inc., Huffy Corporation, Illinois Tool Works Inc., Intek
Diversified Corporation, Liqui-Box Corporation, Lunn Industries, Inc.,
Myers Industries, Inc., OnGard Systems, Inc., Premark International,
Inc., PVC Container Corporation, Roadmaster Industries, Inc., Rotonics
Manufacturing Inc., Rubbermaid Incorporated, Safety First, Inc., Sealed
Air Corporation, Seda Specialty Packaging Corp., Selfix, Inc., Sun Coast
Plastics, Inc., Synetic, Inc., Thermal Industries, Inc., The Toro
Company, Tomkins PLC, Top Source Technologies, Inc., Tredegar Industries,
Inc. and Triple S Plastics, Inc.
The following four companies were included in the peer group for
last year's proxy statement and are not included in this year's peer
group, because they no longer appear in the database under the relevant
Standard Industrial Classifications: Park-Ohio Industries, Inc., Portage
Industries Corporation, Ropak Corporation and Wedco Technology, Inc. In
addition, twelve companies which did not appear in last year's peer group
are included in this year's peer group because each is now included in
the relevant Standard Industrial Classifications. These companies are
Ag-Bag International Limited, Applied Extrusion Technologies, Inc., Aptar
Group, Inc., Ek Chor China Motorcycle Co., Envirodyne Industries, Inc.,
Glassmaster Company, Intek Diversified Corporation, Lunn Industries,
Inc., OnGard Systems, Inc., Safety First, Inc., Seda Specialty Packaging
Corp. and Triple S Plastics, Inc.
Because of the number of different lines of business engaged in by
the Company, the nature of its competitors and its relatively small size,
the Company cannot construct a group of truly comparable companies for
its peer group. To construct its peer group, the Company has selected
all companies in the database of Media General Financial Services, Inc.
which are included within certain Standard Industrial Classifications in
which the Company does business. This database includes companies which
are substantially larger than the Company and companies whose common
stock is substantially more actively traded.
Comparison of Five Year Cumulative Total Return Among
Latshaw Enterprises, Inc., Media General Composite Index
and Peer Group Index
Note: The required performance graph is not included in this electronic
filing. The graph has been provided to stockholders of the Company
and a paper copy of the performance graph has been submitted
supplementally to the Company's Branch Chief in the Division of
Corporation Finance.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name 11/02/90 11/01/91 10/30/92 10/29/93 10/28/94 10/27/95
Latshaw
Enterprises, Inc. 100.0 57.14 57.14 85.71 121.43 85.71
Media General
Composite Index (1) 100.0 130.84 137.19 165.85 172.64 202.96
Peer Group Index (2) 100.0 175.14 189.42 244.94 256.90 291.99
</TABLE>
(1) Index of approximately 8,000 companies prepared by Media General
Financial Services, Inc.
(2) The companies in the peer group are listed above on page 41.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
For a description of payments made by the Company to L. Chandler
Smith, a director of the Company, during fiscal year 1995, see
"Pension and Compensation Committee Interlocks and Insider
Participation".
STOCKHOLDER PROPOSALS
Any appropriate stockholder proposal intended to be presented
for action at the 1997 annual stockholders' meeting must be received
by the Company by July 11, 1997, for inclusion in the proxy material
relating to such meeting.
GENERAL
Management knows of no matters which will be presented for
consideration at the meeting other than those stated in the Notice of
Annual Meeting which is part of the Proxy Statement. If any other
matters do properly come before the meeting, it is intended that the
persons named in the accompanying Proxy will vote thereon in
accordance with their judgment.
In addition to the solicitation of proxies from stockholders by
use of the mails, it is expected that a limited number of employees
of the Company, without additional compensation except payment of
out-of-pocket expenses, may solicit proxies from stockholders by
telephone, telegraph and personal visits. It is expected that banks,
brokerage houses and others will be requested to forward the
soliciting material to their principals and obtain authorization for
the execution of proxies. All costs of solicitation, including the
costs of preparing, assembling and mailing this Proxy Statement and
all papers which now accompany or may hereafter supplement the same,
as well as the reasonable out-of-pocket expenses incurred by the
above-mentioned banks, brokerage houses and others, will be borne by
the Company.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the
1934 Act and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the
"Commission"). The Company has filed a Schedule 13E-3 with the
Commission in connection with the proposed Reverse Stock Split. As
permitted by the rules and regulations of the Commission, this Proxy
Statement does not contain all of the information set forth in the
Schedule 13E-3. The Schedule 13E-3, including exhibits and other
filings made by the Company as described above, may be inspected
without charge, and copies may be obtained at prescribed rates, at
the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549; and at regional offices of the Commission at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of
such materials can also be obtained upon payment of the Commission's
prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site, which contains reports, proxy and information
statements and other information regarding registrants that, like the
Company, file electronically with the Commission, at the following
address: http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a
statement contained in this Proxy Statement or in any subsequently
filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
The following documents filed with the Securities and Exchange
Commission by the Company are incorporated into this Proxy Statement
by reference:
The Company hereby incorporates by reference (a) the Financial
Statements and the notes thereto contained on pages 26 through 46 of
the Company's 1995 Annual Report to Stockholders ("Annual Report")
included as an Annex to this Proxy Statement, (b) the report of
independent certified public accountants thereon contained on page 25
of the Annual Report, (c) the Financial Statement Schedule contained
on page 22 of the Annual Report, (d) Selected Financial Data
contained on pages 47 and 48 of the Annual Report, (e) Management's
Discussion and Analysis of Financial Condition and Results of
Operations contained on pages 13 through 18 of the Annual Report,
(f) the Financial Statements and notes thereto contained on pages 3
through 5 of the Company's Quarterly Report on Form 10-Q/A (Amendment
No. 1) for the period ended August 3, 1996 ("Quarterly Report") included
as an Annex to this Proxy Statement and (g) Management's Discussion and
Analysis of Financial Condition and Other Information contained on pages
6 through 8 of the Quarterly Report.
ANNEXES
The following documents are being delivered to the Company's
shareholders together with this Proxy Statement.
Annual Report to Stockholders for the year ended October 28, 1995.
Amendment No. 1 to the Form 10-K of the Company for the year ended
October 28, 1995.
Quarterly Report on Form 10-Q for the quarter ended February 3, 1996.
Quarterly Report on Form 10-Q for the quarter ended May 4, 1996.
Quarterly Report on Form 10-Q/A (Amendment No. 1) for the quarter
ended August 3, 1996.
BY ORDER OF THE BOARD OF DIRECTORS
DATE: November 8, 1996 Michael E. Bukaty
President and
Chief Operating Officer
APPENDIX A
ARTICLE FOURTH OF THE
CERTIFICATE OF INCORPORATION OF
LATSHAW ENTERPRISES, INC.
AS CURRENTLY IN EFFECT
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is Three Million
(3,000,000) shares consisting of:
1. 1,500,000 shares of Common Stock ("Common Stock") of the
par value of Two Dollars ($2.00) per share;
2. 1,000,000 shares of Class C Common Stock ("Class C Common
Stock") of the par value of Two Dollars ($2.00) per share; and
3. 500,000 shares of Preferred Stock without par value.
No holder of shares of any class of stock of the Corporation shall have
any preemptive or other right to subscribe for or purchase any shares of
any class of stock of the Corporation, or any securities convertible into
shares of stock of any class which at any time may be issued or sold by
the Corporation, other than such right, if any, as the Board of Directors
in its discretion may determine.
Preferred Stock
The Preferred Stock may be issued from time to time in one or more
series with such distinctive serial designations and for such
consideration as may be fixed by the Board of Directors. The Preferred
Stock of all series shall be in all respects entitled to the same
preferences, rights and privileges and subject to the same
qualifications, limitations and restrictions, except that different
series of Preferred Stock may vary with respect to those provisions as
shall be determined and fixed by the Board of Directors as hereinafter
provided. Each share of Preferred Stock of any one series shall have the
same rights as and be identical in all respects with all the other shares
of Preferred Stock of that series.
The Board of Directors is empowered, subject to the other provisions
of this Article FOURTH, to determine and fix by resolution or resolutions
providing for the issuance of any series:
(a) The number of shares to constitute such series and the
designation thereof;
(b) The voting powers, full, limited or contingent,
if any, to which holders of shares of such series shall be entitled;
(c) The dividend rate or rates, the conditions and dates upon
which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or
classes or series of stock, and whether such dividends shall be
cumulative or noncumulative;
(d) Whether or not the shares of such series shall be
redeemable and, if redeemable, the redemption price and the other
terms and conditions of redemption;
(e) The amount, if any, which the shares of such series
shall be entitled to receive before any distribution or payment shall
be made to holders of the Common Stock and Class C Common Stock in the
event of any liquidation, dissolution or winding up of the affairs
of the Corporation, whether voluntary or involuntary, or of any
proceedings resulting in any distribution of all, or substantially
all, of its assets to its stockholders;
(f) Whether or not the shares of such series shall be
entitled to the benefit of a sinking or retirement fund to be applied
to the purchase or redemption of shares of the series, and, if so
entitled, the amount of such fund and the manner of its application,
including the price or prices at which the shares may be redeemed or
purchased through the application of such fund;
(g) Whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class of
stock of the Corporation and, if convertible or exchangeable, the
conversion price or prices or rate or rates of conversion or
exchange and all other terms and conditions of conversion or
exchange; and
(h) Such other designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof as the directors may deem
advisable and as shall be stated in said resolution or resolutions.
Common Stock and Class C Common Stock
(a) The powers, preferences and rights of the Common Stock
and Class C Common Stock, and the qualifications, limitations or
restrictions thereof, shall be in all respects identical, except as
otherwise required by law or expressly provided in this Certificate
of Incorporation.
(b) The Common Stock and Class C Common Stock may be issued
from time to time for such consideration not less than the par value
thereof as may be fixed by the Board of Directors.
(c) (1) At each annual or special meeting of stockholders,
each holder of Common Stock shall be entitled to one (1) vote in
person or by proxy for each share of Common Stock standing in his
name on the stock transfer records of the Corporation and each
holder of Class C Common Stock shall be entitled to fifty (50) votes
in person or by proxy for each share of Class C Common Stock
standing in his name on the stock transfer records of the
Corporation except as otherwise provided herein or in Article Sixth.
(2) Except as otherwise provided herein or required
by law, the holders of Common Stock and Class C Common Stock shall
vote together as a single class, subject to any voting rights which
may be granted to holders of Preferred Stock. Notwithstanding the
foregoing, the holders of Common Stock and Class C Common Stock
shall each be entitled to vote separately as a class with respect to
(i) amendments to this Certificate of Incorporation that alter or
change the powers, preferences or special rights of the shares of
the respective classes of stock so as to affect them adversely,
(ii) amendments to this Certificate of Incorporation changing the
number of authorized shares of Class C Common Stock, but the holders
of Common Stock and Class C Common Stock shall vote together as a
single class in order to change the number of authorized shares of
Common Stock, and (iii) such other matters as may require class
votes under the General Corporation Law of the State of Delaware.
(d) Subject to the rights of the holders of Preferred Stock
and subject to any other provisions of this Certificate of
Incorporation as amended from time to time, holders of Common Stock
and Class C Common Stock shall be entitled to share equally, on a
per share basis, in any dividends and other distributions in cash,
stock or property of the Corporation as may be declared thereon by
the Board of Directors from time to time out of assets or funds of
the Corporation legally available therefor, provided that in the
case of dividends or other distributions declared that are payable
in shares of Common Stock or Class C Common Stock, the dividends
payable in shares of Common Stock shall be payable to only holders
of Common Stock and the dividends payable in shares of Class C
Common Stock shall be payable only to holders of Class C Common
Stock. The Common Stock may be subdivided or combined and stock
dividends may be paid on the Common Stock without the subdivision or
combination or payment of a stock dividend or stock split to the
holders of Class C Common Stock. Similarly, the Class C Common
Stock may be subdivided or combined and stock dividends may be paid
on the Class C Common Stock without the subdivision or combination
or payment of a stock dividend or stock split to the holders of
Common Stock.
(e) In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, after there
shall have been paid or set aside for the holders of the shares of
Preferred Stock and any other class having preference over the
Common Stock and Class C Common Stock in such event the full
preferential amounts to which they are respectively entitled, the
remaining net assets of the corporation shall be distributed pro
rata to the holders of the Common Stock and Class C Common Stock, in
cash or in kind.
(f) Each share of Common Stock shall have the same rights
as, and be identical in all respects with, all the other shares of
Common Stock. Each share of Class C Common Stock shall have the
same rights as, and be identical in all respects with, all other
shares of Class C Common Stock.
APPENDIX B
ARTICLE FOURTH OF THE
CERTIFICATE OF INCORPORATION OF
LATSHAW ENTERPRISES, INC.
AS PROPOSED TO BE AMENDED
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is One Million Five Hundred
and Thirty Thousand (1,530,000) shares consisting of:
1. 30,000 shares of Class A Common Stock ("Class A Common
Stock") of the par value of One Hundred Dollars ($100.00) per share;
2. 1,000,000 shares of Class C Common Stock ("Class C Common
Stock") of the par value of Two Dollars ($2.00) per share; and
3. 500,000 shares of Preferred Stock without par value.
No holder of shares of any class of stock of the Corporation shall have
any preemptive or other right to subscribe for or purchase any shares of
any class of stock of the Corporation, or any securities convertible into
shares of stock of any class which at any time may be issued or sold by
the Corporation, other than such right, if any, as the Board of Directors
in its discretion may determine.
Preferred Stock
The Preferred Stock may be issued from time to time in one or more
series with such distinctive serial designations and for such
consideration as may be fixed by the Board of Directors. The Preferred
Stock of all series shall be in all respects entitled to the same
preferences, rights and privileges and subject to the same
qualifications, limitations and restrictions, except that different
series of Preferred Stock may vary with respect to those provisions as
shall be determined and fixed by the Board of Directors as hereinafter
provided. Each share of Preferred Stock of any one series shall have the
same rights as and be identical in all respects with all the other shares
of Preferred Stock of that series.
The Board of Directors is empowered, subject to the other provisions
of this Article FOURTH, to determine and fix by resolution or resolutions
providing for the issuance of any series:
(a) The number of shares to constitute such series and the
designation thereof;
(b) The voting powers, full, limited or contingent, if any,
to which holders of shares of such series shall be entitled;
(c) The dividend rate or rates, the conditions and dates
upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or
classes or series of stock, and whether such dividends shall be
cumulative or noncumulative;
(d) Whether or not the shares of such series shall be
redeemable and, if redeemable, the redemption price and the other
terms and conditions of redemption;
(e) The amount, if any, which the shares of such series
shall be entitled to receive before any distribution or payment shall
be made to holders of the Class A Common Stock and Class C Common Stock
in the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, or of
any proceedings resulting in any distribution of all, or
substantially all, of its assets to its stockholders;
(f) Whether or not the shares of such series shall be
entitled to the benefit of a sinking or retirement fund to be applied
to the purchase or redemption of shares of the series, and, if so
entitled, the amount of such fund and the manner of its application,
including the price or prices at which the shares may be redeemed or
purchased through the application of such fund;
(g) Whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class of
stock of the Corporation and, if convertible or exchangeable, the
conversion price or prices or rate or rates of conversion or
exchange and all other terms and conditions of conversion or
exchange; and
(h) Such other designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof as the directors may deem
advisable and as shall be stated in said resolution or resolutions.
Class A Common Stock and Class C Common Stock
(a) The powers, preferences and rights of Class A Common
Stock and Class C Common Stock, and the qualifications, limitations
or restrictions thereof, shall be in all respects identical, except as
otherwise required by law or expressly provided in this Certificate
of Incorporation.
(b) Class A Common Stock and Class C Common Stock may be
issued from time to time for such consideration not less than the
par value thereof as may be fixed by the Board of Directors.
(c) (1) At each annual or special meeting of stockholders,
each holder of Class A Common Stock shall be entitled to one (1)
vote in person or by proxy for each share of Class A Common Stock
standing in his name on the stock transfer records of the
Corporation and each holder of Class C Common Stock shall be
entitled to fifty (50) votes in person or by proxy for each share of
Class C Common Stock standing in his name on the stock transfer
records of the Corporation except as otherwise provided herein or in
Article Sixth.
(2) Except as otherwise provided herein or required
by law, the holders of Class A Common Stock and Class C Common Stock
shall vote together as a single class, subject to any voting rights
which may be granted to holders of Preferred Stock. Notwithstanding
the foregoing, the holders of Class A Common Stock and Class C Common
Stock shall each be entitled to vote separately as a class with
respect to (i) amendments to this Certificate of Incorporation that
alter or change the powers, preferences or special rights of the
shares of the respective classes of stock so as to affect them
adversely, (ii) amendments to this Certificate of Incorporation
changing the number of authorized shares of Class C Common Stock,
but the holders of Class A Common Stock and Class C Common Stock
shall vote together as a single class in order to change the number
of authorized shares of Class A Common Stock, and (iii) such other
matters as may require class votes under the General Corporation Law
of the State of Delaware.
(d) Subject to the rights of the holders of Preferred Stock
and subject to any other provisions of this Certificate of
Incorporation as amended from time to time, holders of Class A
Common Stock and Class C Common Stock shall be entitled to share
equally, on a per share basis, in any dividends and other
distributions in cash, stock or property of the Corporation as may
be declared thereon by the Board of Directors from time to time out
of assets or funds of the Corporation legally available therefor,
provided that in the case of dividends or other distributions
declared that are payable in shares of Class A Common Stock or
Class C Common Stock, the dividends payable in shares of Class A
Common Stock shall be payable to only holders of Class A Common
Stock and the dividends payable in shares of Class C Common Stock
shall be payable only to holders of Class C Common Stock. The Class
A Common Stock may be subdivided or combined and stock dividends may
be paid on the Class A Common Stock without the subdivision or
combination or payment of a stock dividend or stock split to the
holders of Class C Common Stock. Similarly, the Class C Common
Stock may be subdivided or combined and stock dividends may be paid
on the Class C Common Stock without the subdivision or combination
or payment of a stock dividend or stock split to the holders of
Class A Common Stock.
(e) In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, after there
shall have been paid or set aside for the holders of the shares of
Preferred Stock and any other class having preference over Class A
Common Stock and Class C Common Stock in such event the full
preferential amounts to which they are respectively entitled, the
remaining net assets of the corporation shall be distributed pro
rata to the holders of Class A Common Stock and Class C Common
Stock, in cash or in kind.
(f) Each share of Class A Common Stock shall have the same
rights as, and be identical in all respects with, all the other
shares of Class A Common Stock. Each share of Class C Common Stock
shall have the same rights as, and be identical in all respects
with, all other shares of Class C Common Stock.
Reverse Stock Split
On the effective date of the amendment revising Article FOURTH and
adding this paragraph to Article FOURTH ("Effective Date"), the number of
outstanding shares of Common Stock of the Corporation shall be reduced so
that each fifty (50) shares of Common Stock issued and outstanding will
be automatically reclassified, combined, and converted into one (1) share
of Class A Common Stock of the par value of One Hundred Dollars ($100.00)
per share. No fractions of shares will be issued, and on the Effective
Date, stockholders otherwise entitled to receive fractions of shares,
unless and until such fractions of shares are combined with other
fractions of shares resulting in full shares within a period of time to
be set by the Corporation's Board of Directors, shall have no further
interest as stockholders in respect of such fractions of shares and shall
be entitled to receive from the Corporation in cash the fair value, as
determined by the Board of Directors, of such fractions of shares.
PROXY
The undersigned hereby appoints John Latshaw, Michael E. Bukaty and David G.
Carr, and each of them, as proxies for the undersigned at the Annual Meeting
of Stockholders of Latshaw Enterprises, Inc., at the First Floor Conference
Room, Air World's Ambassador II Building, 11020 Ambassador Drive, Kansas City,
Missouri on December 14, 1996, at 11:00 A.M., C.S.T., and at any adjournment,
to vote the shares of stock the undersigned would be entitled to vote, if
personally present, upon the election of directors, the proposals below, and
any other matter brought before the meeting, all as set forth in the November
8, 1996 Proxy Statement.
THE DIRECTORS RECOMMEND A VOTE "FOR" APPROVAL OF THE FOLLOWING PROPOSAL:
Proposal 1. Approval of an amendment to Article FOURTH of the Company's
Certificate of Incorporation which would effect a 1-for-50
reverse stock split of the Company's common stock . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . ___ FOR ___ AGAINST ___ ABSTAIN
THE DIRECTORS RECOMMEND THAT THE FOLLOWING AUTHORITY BE "GRANTED":
Proposal 2. Authority granted to or withheld from proxies to vote for Michael
E. Bukaty and John Latshaw (or a substitute nominee or nominees
designated by the Board of Directors if any of them becomes
unavailable) as directors . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . ___ GRANTED ___ WITHHELD
THE DIRECTORS RECOMMEND A VOTE "FOR" APPROVAL OF THE FOLLOWING PROPOSAL:
Proposal 3. Ratification of the appointment of Ernst & Young as independent
auditors for the Company. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . ___ FOR ___ AGAINST ___ ABSTAIN
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY PARTICULAR NOMINEE OR
NOMINEES, YOU MAY DO SO BY STRIKING OUT THE NAME OF SUCH NOMINEE(S) IN
PROPOSAL 2 ABOVE.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE DEEMED MARKED "FOR" ON
PROPOSALS 1 AND 3, MARKED "GRANTED" ON PROPOSAL 2, AND VOTED ACCORDINGLY.
Please mark your Proxy, date and sign it on the other side and return it
promptly in the accompanying envelope, which requires no postage if mailed
in the United States.
PROXY
For Annual Meeting of Stockholders of Latshaw Enterprises, Inc., December 14,
1996, at 11:00 A.M., C.S.T., First Floor Conference Room, Air World's
Ambassador II Building, 11020 Ambassador Drive, Kansas City, Missouri.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Please mark your Proxy on the other side. Date and sign your name below as
it appears on the Proxy.
________________________________
Stockholder
Dated:__________________________, 1996
If shares are held jointly, every holder
should sign. If executed by a corporation,
an authorized officer should sign. Executors,
administrators and trustees should so indicate
when signing.
<PAGE>
VOTING INSTRUCTIONS
TO: ESOT PARTICIPANTS AND BENEFICIARIES
FROM: ESOT ADMINISTRATIVE COMMITTEE OF THE LATSHAW ENTERPRISES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
RE: VOTING SHARES OF LATSHAW ENTERPRISES, INC.
COMMON STOCK ALLOCATED TO ESOT ACCOUNTS
DATE: NOVEMBER 8, 1996
- -----------------------------------------------------------------
Pursuant to Section 8.04 of the Company's Employee Stock Ownership
Plan and Trust (the "Plan"), you are entitled to direct the Trustee of the
Plan as to the manner in which certain shares of the Latshaw Enterprises,
Inc. common stock allocated to your account in the Plan (or to the account
with respect to which you are a beneficiary) shall be voted with respect to
various matters described in the enclosed Proxy Statement.
The enclosed Proxy Statement and Notice of the Annual meeting of the
stockholders of the Company are identical to the ones being sent to all
stockholders of the Company to solicit their vote with respect to various
matters described in the enclosed Proxy Statement. Please review them
carefully before you decide how to vote. Please indicate your vote on the
enclosed card and return it in the enclosed pre-addressed, postage-paid
envelope. The Trustee of the Plan will then vote the shares allocated to
your account in accordance with your directions.
<PAGE>
DIRECTIONS CONCERNING VOTE OF
ALLOCATED SHARES OF
LATSHAW ENTERPRISES, INC.
PURSUANT TO THE
LATSHAW ENTERPRISES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(THE "ESOP") AT THE
ANNUAL MEETING OF THE STOCKHOLDERS
TO BE HELD DECEMBER 14, 1996
The undersigned hereby directs UMB Bank, N.A., Trustee of the ESOP
(the "Trustee"), to vote all shares of stock of Latshaw Enterprises, Inc.
(the "Company") which are allocated to the undersigned's account under the
ESOP at the Annual Meeting of the Stockholders of the Company to be held at
the First Floor Conference Room, Air World's Ambassador II Building, 11020
Ambassador Drive, Kansas City, Missouri, on December 14, 1996, commencing at
11:00 a.m. (Central Time) of that day and at any adjournment or adjournments
thereof, with respect to the following and any other matter brought before
the meeting, all as set forth in the November 8, 1996 Proxy Statement.
THE DIRECTORS RECOMMEND A VOTE "FOR" APPROVAL OF THE FOLLOWING PROPOSAL:
Proposal 1. Approval of an amendment to Article FOURTH of the Company's
Certificate of Incorporation which would effect a 1-for-50
reverse stock split of the Company's common stock . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . ___ FOR ___ AGAINST ___ ABSTAIN
THE DIRECTORS RECOMMEND THAT THE FOLLOWING AUTHORITY BE "GRANTED":
Proposal 2. Authority granted to or withheld from proxies to vote for
Michael E. Bukaty and John Latshaw (or a substitute nominee
or nominees designated by the Board of Directors if any of
them becomes unavailable) as directors . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . ___ GRANTED ___ WITHHELD
THE DIRECTORS RECOMMEND A VOTE "FOR" APPROVAL OF THE FOLLOWING PROPOSAL:
Proposal 3. Ratification of the appointment of Ernst & Young as independent
auditors for the Company. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . ___ FOR ___ AGAINST ___ ABSTAIN
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY PARTICULAR NOMINEE OR
NOMINEES, YOU MAY DO SO BY STRIKING OUT THE NAME OF SUCH NOMINEE(S) IN
PROPOSAL 2 ABOVE.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE DEEMED MARKED "FOR" ON
PROPOSALS 1 AND 3, MARKED "GRANTED" ON PROPOSAL 2, AND VOTED ACCORDINGLY.
Please mark your directions above, date and sign this card on the other side
and return it promptly in the accompanying envelope, which requires no postage
if mailed in the United States.
If the undersigned fails to direct the Trustee, certain shares allocated to
the undersigned's account under the ESOP will be voted by the Trustee in the
manner directed by the ESOT Administrative Committee of the Board of Directors
of the Company, and if the Committee fails to instruct the Trustee as to how
to vote such shares, the Trustee will vote such shares in the manner deemed
appropriate by the Trustee.
DATED: __________________________, 1996 ___________________________________
Signature
SSN:_______________________________
NAME:______________________________
(Please Print)
Please insert date of signing and
sign your full and correct name and
indicate your social security number.
Please also print your name in the
space provided below your signature.
Executors, administrators and trustees
should so indicate when signing.
THE TRUSTEE MUST RECEIVE YOUR
DIRECTIONS BY DECEMBER 9, 1996.
ANNEX TO PROXY STATEMENT
The Cover Page of the Report is titled "Latshaw Enterprises, Inc.
1995 Annual Report."
Listed in the lower left hand corner of the Cover Page are
the following:
Wescon
Latshaw Tools
Helton
Coast
I.H. Molding
<PAGE>
CORPORATE DIRECTORY
DIRECTORS OFFICERS
Michael E. Bukaty John Latshaw
President and Chief Operating Officer Chairman of the Board,
LATSHAW ENTERPRISES, INC. Chief Executive Officer
and Managing Director
James C. Gale Michael E. Bukaty
Managing Director President and
Gruntal & Co., Inc. Chief Operating Officer
New York, New York
Investment Banker David G. Carr
Senior Vice President,
Constance H. Latshaw Chief Financial Officer
Private Investor and Secretary
John Latshaw GENERAL CORPORATE DATA
Chairman of the Board,
Chief Executive Officer and General Counsel
Managing Director Hillix, Brewer, Hoffhaus
LATSHAW ENTERPRISES, INC. Whittaker & Wright
2420 Pershing Road
David M. Pangrac Kansas City, Missouri 64108
President
Pangrac & Associates Consultants, Inc. Auditors
Port Aransas, Texas Ernst & Young
1200 Main Street
Elizabeth A. Reid-Scott Kansas City, Missouri 64105
Private Investor
Common Stock
L. Chandler Smith Traded in
Director of Corporate Development over-the-counter market
LATSHAW ENTERPRISES, INC.
Stock Transfer Agent,
Registrar and Dividend
This Fiscal 1995 Annual Report on Disbursing Agent
Form 10-K includes the financial United Missouri Bank, N.A.
statements but excludes pages of 928 Grand Avenue
routine exhibits contained in the Kansas City, MO 64141
Form 10-K filed with the Securities
and Exchange Commission. We will Corporate Headquarters
furnish the excluded exhibits to and Wescon Products
you upon request. 2533 S. West Street
P.O. Box 7710
David G. Carr Wichita, KS 67277
Secretary Telephone (316)942-7266
<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 28, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6072
LATSHAW ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware 44-0427150
(State of incorporation) (I.R.S. Employer
Identification No.)
2533 South West Street
Wichita, Kansas 67217
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(316) 942-7266
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.00 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of the voting stock held by non-
affiliates of the registrant (persons other than directors,
officers and beneficial owners of more than 5% of the outstanding
stock) as of December 31, 1995, computed by reference to the mean
of the closing bid and asked prices on January 2, 1996 as quoted by
Mesirow Capital, Inc., Chicago, Illinois was $821,873. The non-
inclusion of shares held by directors, officers and beneficial
owners of more than 5% of the outstanding stock shall not be deemed
to constitute an admission that such persons are affiliates of the
registrant within the meaning of the Securities Exchange Act of
1934.
The number of outstanding shares of the registrant's common
stock as of December 31, 1995 was 500,324 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part of the Form 10-K
Into Which the
Document
Description of Document is Incorporated
The information included under the
captions entitled "Election of
Directors," "Security Ownership of
Certain Beneficial Owners and
Management," "Compensation of
Directors and Executive Officers,"
and "Certain Transactions and
Relationships" in the registrant's
definitive proxy statement to be
filed with the Commission pursuant
to Regulation 14A with respect to
its 1996 annual meeting of stockholders. Part III
PART I
Item 1 - Business.
Latshaw Enterprises, Inc., formerly known as Conchemco,
Incorporated (the "Company"), is a holding company and through its
affiliated subsidiaries, Wescon Products Company, Helton, Inc.,
Coast Wire & Plastic Tech, Inc. and I.H. Molding, Inc., produces
and markets component parts for a wide range of original equipment
manufacturers as well as consumer products. In addition to its
holding company activities, the Company has also invested in the
equity securities of other publicly traded corporations.
Wescon Products Company
Wescon Products Company ("Wescon"), the Company's largest
subsidiary, operates from two plants in Wichita, Kansas and
consists of three divisions.
The Controls Division serves principally manufacturers of
equipment utilizing small gasoline powered engines. Light-duty
controls are produced for regulating the operation of the engines,
both for throttling and for the government mandated consumer
products safety controls now required for lawn-mowing machines.
While Wescon is one of the largest producers of controls for the
outdoor power equipment industry, investments have been made over
the past several years for expansion of the Controls Division into
the medium-duty controls area of the market. These controls are
designed for regulating hydraulically and mechanically powered
truck and off-road equipment industries. Although these are mature
markets, they represent a significant opportunity for expansion
into related industries of higher technology.
The Plastics Division produces custom injection molded
products and provides related services for a wide range of
customers. This Division has continued to expand its customer base
by providing services in the areas of mold design, product design,
material selection, mold manufacturing, and automated secondary
assembly. These services are purchased by companies in the outdoor
power equipment industry, the cosmetic industry, and a wide variety
of companies in the industrial sector. Thick sectioned packages
such as jars, powder cases, lids, and caps are presently
manufactured on this Division's 33 injection molding machines.
Secondary manufacturing processes further support Wescon's entry
into this market by providing customers with services such as hot
stamping, pad printing, hinge pin insertion, sonic welding, and
engraving. In the industrial sector, parts are molded for
equipment components such as handles for welding guns, hose
couplings, battery cases, housings for electronic assemblies, and
housings for telecommunications equipment.
The Consumer Products Division was formed thirteen years ago.
Hand tools have been designed and manufactured through this
Division to further utilize Wescon's existing equipment now used
for the manufacture of Controls and Plastics products. Products
presently being manufactured and marketed under the name "Latshaw
Tools" include a broad line of automotive oriented hand-held snow
and ice removal tools under the "ICE BREAKER" trade name and a
family of ratcheting tools under the "MR. RATCHET" trade name. The
MR. RATCHET tools include a ratcheting nutdriver tool set, a
ratcheting screwdriver with six interchangeable tips and a fixed
shaft non-ratcheting screwdriver with twenty-eight tips. These new
consumer and professional products are marketed through hardware
chains, automotive parts stores, grocery chains, and a wide variety
of mass merchandisers. They are designed to appeal to the more
discriminating buyer.
All of the products are distributed throughout the United
States through direct salesmen and manufacturers' representatives.
In fiscal 1995, Mary Kay Cosmetics, Inc. accounted for 12% of net
sales. In fiscal 1994, Mary Kay Cosmetics, Inc. accounted for 14%
of net sales and Toro Corp. accounted for 10%. Sales by the
Company to Mary Kay Cosmetics, Inc. accounted for 15% and Toro
Corp. accounted for 11% of net sales in fiscal 1993.
Mechanical controls are produced by at least six manufacturers
and the Company believes that Wescon is the major supplier of
controls to the outdoor power equipment industry, which includes
walk-behind and riding mowers, garden tractors, tillers, edgers and
snow removal equipment. Plastic injection molding production is a
highly competitive business, with many producers throughout the
United States. Wescon's consumer product business is subject to
extensive competition.
Backlogs of Wescon are about the same as last year's levels.
Sales volume has little seasonal variation, with the exception of
the third quarter (May-July), when volume is lower than the other
quarters.
Raw materials are readily available from both foreign and
domestic sources.
Helton, Inc.
Helton, Inc. ("Helton"), an 80% owned subsidiary acquired by
the Company in 1990, is located in Morrison, Tennessee. It
manufactures vacuum formed reusable plastic containers for original
equipment manufacturers in the automotive and marine industries.
In 1992, Helton began production of plastic component parts for
furniture manufacturers.
Coast Wire & Plastic Tech, Inc.
Coast Wire & Plastic Tech, Inc. began operations in 1993 when
the Company acquired the operating assets of Coast Wire Tech, Inc.,
Gardena, California. This subsidiary manufactures high performance
specialty electrical wire and low noise cable for commercial
electronic applications.
I.H. Molding, Inc.
On September 1, 1995, the Company acquired the operating
assets of I.H. Molding, Inc. in Dallas, Texas for $1,226,000. This
wholly owned subsidiary of Wescon Products Company has seven
injection molding machines which produce molded plastic products
for a wide range of customers. Secondary manufacturing processes
available to these customers include hot stamping, pad printing,
hinge pin insertion, sonic welding and shrink wrap packaging.
Investment Activities
In addition to its holding company activities, the Company has
also invested in the common stock of Stifel Financial Corp., whose
headquarters are located in St. Louis, Missouri. As of the end of
1995 fiscal year, the Company owned 75,014 shares, or approximately
1.8%, of the outstanding common stock of Stifel Financial Corp.
Stifel Financial Corp. and its subsidiaries are engaged in general
securities brokerage, public and corporate finance, and investment
advisory businesses.
The common stock of Stifel Financial Corp. is traded on the
New York Stock Exchange. See Note 7 of the Notes to Consolidated
Financial Statements set forth in this Form 10-K which is included
herein by reference.
Employees
The Company has approximately 500 employees and considers
relations with its employees to be good.
Industry Segment Information
Industry segment information concerning the Company is not
presented herein. Management of the Company has determined that
none of the Company's subsidiaries or divisions thereof constitute
reportable industry segments under applicable accounting standards.
Executive Officers of the Company
<TABLE>
An Executive Positions and Offices
Officer of the Held with the Company
Name Age Company Since as of December 31,1995(1)
<S> <C> <C> <S>
John Latshaw 74 1987(2) Chairman of the Board of
Directors, Managing
Director and Chief
Executive Officer
Michael E. Bukaty 59 1984(3) President and Chief
Operating Officer
David G. Carr 50 1984(4) Senior Vice-President,
Chief Financial Officer
and Secretary
(1) Unless otherwise indicated, each of the executive officers has
held the same position with the Company during the last five
years. Any other principal occupations or employment of such
persons during the past five years is also indicated below.
(2) Mr. Latshaw also serves as Chairman of the Board of Directors
of Wescon Products Company, a wholly-owned subsidiary of the
Company and a manufacturer. In addition, Mr. Latshaw has
served as Chairman of the Board of Helton, Inc., an 80% owned
subsidiary of the Company and a manufacturer of plastic
products, since August 1993, as Chairman of the Board and
Chief Executive Officer of Coast Wire & Plastic Tech, Inc., a
wholly-owned subsidiary of the Company and a cable and wire
manufacturer, since December 1993, and as Chairman of the
Board and Chief Executive Officer of I.H. Molding, Inc., a
wholly-owned subsidiary of Wescon Products Company and a
manufacturer of plastic products, since September 1995. Mr.
Latshaw served as Chairman of the Board of Directors of
Latshaw Garden & Leisure, Inc., a subsidiary of the Company
and formerly a distributor of consumer products and garden
tools, from July 1989 until it liquidated its inventory in
1992. Mr. Latshaw is the father of Constance H. Latshaw and
Elizabeth A. Reid-Scott, directors of the Company.
(3) Mr. Bukaty also serves as President and Chief Executive
Officer of Wescon Products Company, a wholly-owned subsidiary
of the Company and a manufacturer. In addition, Mr. Bukaty
has served as President of Coast Wire & Plastic Tech, Inc., a
wholly-owned subsidiary of the Company and a cable and wire
manufacturer, since December 1993, and as President of I.H.
Molding, Inc., a wholly-owned subsidiary of Wescon Products
Company and a manufacturer of plastic products, since
September 1995.
(4) Mr. Carr also serves as Senior Vice President, Chief Financial
Officer, Secretary and Treasurer of Wescon Products Company,
a wholly-owned subsidiary of the Company and a manufacturer.
Mr. Carr has also served as Secretary/Treasurer and a director
of Coast Wire & Plastic Tech, Inc., a wholly-owned subsidiary
of the Company and a cable and wire manufacturer, since
December 1993, and as Secretary/Treasurer and a director of
I.H. Molding, Inc., a wholly-owned subsidiary of Wescon
Products Company and a manufacturer of plastic products,
since September 1995.
</TABLE>
Item 2 - Properties.
The Company operates the principal facilities listed below,
all of which are considered well-maintained and suitable for the
purpose for which they are being used:
Approximate
Location Floor Space Leased or Owned
Wescon Products Company
Wichita, Kansas
<TABLE>
<C> <S> <C> <S> <C> <S>
1. Controls Division Plant 110,000 sq. ft. Owned
2. Plastics Division Plant 75,000 sq. ft. Owned
Helton, Inc.
Morrison, Tennessee
</TABLE>
<TABLE>
<C> <S> <C> <S> <C> <S>
1. Plastics Vacuum Forming 40,000 sq. ft. Owned
Plant
</TABLE>
I.H. Molding, Inc.
Dallas, Texas
<TABLE>
<C> <S> <C> <S> <C> <S>
1. Plastic Injection 20,000 sq. ft. Leased
Molding Plant
</TABLE>
Coast Wire & Plastic Tech, Inc.
Gardena, California
<TABLE>
<C> <S> <C> <S> <C> <S>
1. Electrical Wire Forming 20,000 sq. ft. Leased
Plant
</TABLE>
Item 3 - Legal Proceedings.
Except as set forth below, there are no material pending legal
proceedings other than ordinary routine litigation incidental to
the business, to which either the Company or its subsidiaries are
a party or of which any of the property of such entities is the
subject.
On August 13, 1993 the Company received an inquiry from the
United States Environmental Protection Agency ("EPA") concerning
the disposal of hazardous substances at the Doepke-Holliday Super
Fund Site (the "Site") in Johnson County, Kansas. In the letter,
the EPA stated that it had information indicating that wastes from
the Company were disposed of at the Site. The Company has no
records of any such disposal of wastes at the Site. However, the
Company no longer has access to most of the records of two
divisions which it operated during the relevant time period and
subsequently sold, a paint and chemical coatings division and a
manufactured housing division.
The Company has agreed to participate in the Holliday
Remediation Task Force (the Task Force), a group of potentially
responsible parties for the Site. The Task Force currently has 40
active members and is negotiating participation by other
potentially responsible parties. Parties who join the task force
agree to participate at one of five specified levels of
contribution based upon the Task Force's assessment of liability
and to pay a portion of future response and remediation costs based
upon their specified level of contribution. The Company will
participate in the third contribution level and the Task Force's
preliminary estimate of the amount of financial contribution which
may be required from the Company at that level is $75,000 to
$100,000. A consent decree between the Task Force and the EPA has
not been executed; neither ultimate liability nor costs are
ascertainable at this time. Based upon the information provided by
the Task Force, the Company estimates the amount of the financial
contribution by the Company, including legal and consulting costs
associated with the contingency, that may be required will be
$150,000.
At October 29, 1994, the Company accrued a current liability
of $150,000 relating to this contingency. The Company paid
approximately $25,000 with respect to this matter during fiscal
year 1995, and its accrued expenses at October 28, 1995 includes a
current liability of $125,000 relating to this contingency. The
Company does not expect final closure of this matter during fiscal
year 1996. As a result of this matter, the Company has requested
copies of insurance policies that were in effect during the period
the contamination allegedly took place. The Company plans to
evaluate the coverage that existed during this period and determine
whether a claim should be filed with the carrier. The Company's
ability to obtain contribution from the insurance carrier is not
ascertainable at this time.
In the event the Company ultimately pays certain costs as a
potentially responsible party, it is the opinion of management,
based upon currently available information, that any such costs or
liability is not likely to materially vary from the amount accrued
at October 28, 1995.
Item 4 - Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on October 6,
1995.
At the meeting, the stockholders (i) elected two directors for
three-year terms and (ii) ratified the appointment of Ernst & Young
as independent auditors of the corporation for the fiscal year
ended October 28, 1995. The number of votes cast for, against and
withheld, and the number of abstentions and broker nonvotes as to
each such matter, including a separate tabulation with respect to
each nominee for director, are set forth below:
1. Election of Directors
Nominees Votes For Votes Withheld
<TABLE>
<S> <C> <C> <C>
Constance H. Latshaw 376,246 8,711
David M. Pangrac 377,227 7,730
</TABLE>
2. Ratification of Independent Auditors
For: 376,944
Against: 5,630
Abstained: 2,383
Broker
Nonvotes: 0
PART II
Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters.
The Company's common stock is traded on the over-the-counter
market. There are two market makers in the Company's stock. The
high and low bid quotations of the stock for each quarter during
the past two fiscal years were:
<TABLE>
1995 1994
HIGH LOW HIGH LOW
<C> <S> <C> <C> <S> <C> <C> <S> <C>
Nov. - Jan. 8 1/2 - 7 7 1/2 - 6
Feb. - Apr. 7 - 7 8 - 6 1/2
May - Jul. 8 - 7 8 1/8 - 7 1/2
Aug. - Oct. 8 - 7 8 1/2 - 7 1/2
</TABLE>
The source of the high and low bid quotations provided above
was Mesirow Capital, Inc., Chicago, Illinois.
The Company had approximately 450 shareholders of record on
December 31, 1995.
No cash dividends were declared during fiscal years 1994 or
1995. The Company does not currently expect to pay cash dividends
in the immediate future. Under the existing agreement of the
Company and Wescon Products Company, the Company's largest
subsidiary, with their primary lender, Wescon Products Company may
make only such payments to the Company as are provided in the
Company's corporate budget, not to exceed $125,000 per month.
Item 6 - Selected Financial Data.
The information included in the schedule entitled "Five Year
Summary" contained in Exhibit 99 to this Form 10-K is
incorporated herein by reference.
Item 7. - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
In 1995, sales increased 6.1% to $41,102,000 from the 1994
level of $38,732,000. This compares to a 25.2% increase in 1994
from the 1993 level of $30,941,000. Included in the sales numbers
for 1995 are revenues of $331,000 which were attributable to
Latshaw's acquisition and operation of the assets of I. H. Molding,
Inc. in Dallas, Texas. This acquisition was completed September 1,
1995. In 1995, all the Company's product groups experienced sales
increases. In the first six months of 1995 sales increased 15.1%
and in the last six months sales decreased 3.2% compared to
comparable periods in 1994. The decrease in sales volume for the
second half of 1995 appears to be the result of a general slowing
of the economy.
Gross profit as a percentage of sales was 21.8% in 1995
compared to 24.5% in 1994 and 22.9% in 1993. The improvement in
1994 resulted from manufacturing efficiencies and higher sales
volume. In 1995, increased raw material costs were experienced by
all of the Company's product groups, which was the primary cause
for the decrease in gross profit.
In 1995, selling, general and administration expense was
$6,474,000, which is 15.8% of sales, compared with $6,795,000 or
17.5% in 1994 and $5,445,000 or 17.6% in 1993. The increase in
selling, general and administrative expense since 1993 was due
primarily to costs associated with higher sales volumes such as
commissions and performance incentives. In addition, 1994 expenses
include $250,000 and $150,000 of nonrecurring costs related to the
termination of a long term lease agreement and an environmental
contingency reserve, respectively. Excluding these expenses in
1994, selling, general and administrative expenses have been
decreasing as a percent of sales because of the economies of scale
gained as a result of the higher sales volume.
Interest expense for 1995 was $523,000 compared to $361,000 and
$277,000 in 1994 and 1993, respectively. The increases in both
1995 and 1994 were due to higher bank debt which was used to
finance acquisitions as well as inventory and receivables growth as
a result of increased sales volume. Borrowing costs in 1995 and
1994 were also higher because of the increase in interest rates the
Company paid on its outstanding convertible subordinated debentures
and bank borrowings.
In 1994 and 1993, the Company had realized losses on the sale
of marketable equity securities of $997,000 and $2,587,000,
respectively. In May 1993, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity
Securities." The Company adopted the provisions of the new standard
for investments held as of or acquired after October 30, 1994. In
accordance with SFAS No. 115, prior period financial statements
have not been restated to reflect the change in accounting
principle. Under SFAS No. 115, marketable equity securities held
by the Company are classified as available for sale. Available for
sale securities are carried at fair market value, with the
unrealized gains and losses, net of tax, reported as a separate
component of shareholders equity. For 1994 and 1993, the Company's
marketable equity securities were carried at the lower of aggregate
cost or market value. For 1994 and 1993 Latshaw had unrealized
gains on these securities of $712,000 and $3,168,000, respectively.
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standards ("SFAS) No. 106, "Employers'
Accounting for Post Retirement Benefits Other Than Pensions" and
SFAS No. 109 "Accounting for Income Taxes," both of which have been
adopted by the Company in its Consolidated Financial Statements for
the year ended October 30, 1993. The cumulative effect of adopting
SFAS No. 106 and SFAS No. 109 decreased 1993 net income by $241,000
and $440,000, respectively.
The Company's effective income tax rate was 38% in 1995. The
Company had an income tax rate of 42% in 1994 and a 9% rate in
1993. See Footnote 6 to the Consolidated Financial Statements for
a reconciliation of the income tax provision to the amount computed
at the Federal statutory rate. The higher rate in 1994 is
principally attributable to an increase in the valuation reserve
resulting from the effect of increased capital loss carryforwards
related to the sale of marketable equity securities in 1994, net of
the $712,000 reduction of cumulative unrealized capital losses on
marketable equity securities. The lower rate in 1993 is
principally attributable to decreases in the valuation reserve,
originally provided in accordance with SFAS No. 109. Such
decreases in the valuation reserve related to the $3,168,000
reduction of cumulative unrealized capital losses on marketable
equity securities, net of the effect of increased capital loss
carryforwards resulting from the sale of securities in 1993, and
the effect of the improved profitability of the Company's
operations in 1993.
Latshaw had net income of $1,329,000, $1,193,000 and
$1,190,000 for 1995, 1994 and 1993, respectively. Higher sales,
new product introductions and improved operating efficiencies
contributed to the growth of net income for those years.
At year end, net working capital was $8,991,000 in 1995,
$8,427,000 in 1994 and $7,632,000 in 1993. The ratio of current
assets to current liabilities was 2.1, 2.2, and 2.4 at the end of
1995, 1994 and 1993, respectively.
In 1995, net cash provided by operating activities totaled
$1,676,000 resulting from net income of $1,329,000 and $1,570,000
from noncash charges for depreciation, less the effects of cash
requirements to fund an increase in receivables and a reduction in
accounts payable. These funds combined with additional bank
borrowings were used by Latshaw to acquire the operating assets of
I.H. Molding for $637,000 in cash and purchase other property,
plant and equipment of $1,916,000. Net cash provided by operating
activities in 1994 totaled $1,938,000 resulting primarily from
$1,193,000 in net income and significant noncash charges for
depreciation and amortization, less the effects of cash required to
fund the increases in working capital required to support increased
sales. These funds combined with additional bank borrowings were
used by the Company to acquire the operating assets of Coast Wire
& Plastic, Tech, Inc. for $690,000 and purchase $1,919,000 of
property, plant and equipment. In 1993, net cash provided by
operating activities totaled $710,000, resulting from improved net
income and higher noncash charges for depreciation and
amortization, less the effects of the noncash gains on marketable
equity securities and the use of cash required to fund increases in
accounts receivable and inventories caused by higher sales volume.
The cash provided by operating activities and the $2,500,000 in
proceeds from the issuance of convertible subordinated debentures
on November 6, 1992 allowed the Company to retire a $1,250,000 note
payable to a shareholder and purchase $2,192,000 of property, plant
and equipment.
At October 28, 1995, the Company, through its subsidiary,
Wescon Products Company, has an unused line of credit for
short-term bank borrowings of $2,900,000 remaining of the
$6,000,000 available, providing for interest at prime. This line
of credit is collateralized by equipment, real estate, marketable
equity securities, inventories, and accounts receivable. The
Company, through its subsidiary, Helton, Inc., also has outstanding
borrowings of $125,000 at October 28, 1995 on a $350,000 bank line
of credit, with interest at prime plus 1.25 percent. This line of
credit is collateralized by inventory accounts receivable of
Helton, Inc. Management believes that the combination of funds
available through its bank lines of credit along with the
anticipated cash flow from operations will provide the capital
resources necessary to meet the Company's current working capital
needs. Despite the Company's existing capital resources,
opportunities may arise that Management believes would enhance the
value of the Company that could require financing not currently
provided for. There were no significant capital expenditure
commitments outstanding at the end of the fiscal year.
Item 8 - Financial Statements and Supplementary Data.
The information in the Consolidated Statements of Income,
Consolidated Balance Sheets, Consolidated Statements of Cash Flows,
Consolidated Statements of Shareholders' Equity, Notes to
Consolidated Financial Statements and Report of Independent
Auditors in Exhibit 99 to this Form 10-K is incorporated into this
Item 8 by reference.
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.
Item 11 - Executive Compensation.
Item 12 - Security Ownership of Certain Beneficial Owners and
Management.
Item 13 - Certain Relationships and Related Transactions.
The information included under the captions entitled "Election
of Directors," "Security Ownership of Certain Beneficial Owners and
Management," "Compensation of Directors and Executive Officers" and
"Certain Transactions and Relationships" in the Company's
definitive proxy statement to be filed with the Commission pursuant
to Regulation 14A with respect to its 1995 annual meeting of
stockholders, is incorporated into Items 10, 11, 12, and 13 above
by reference.
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a)(1) Financial Statements. The following financial statements
contained in Exhibit 99 to this Form 10-K are incorporated herein
by reference:
Consolidated Statements of Income - for the years ended
October 28, 1995, October 29, 1994 and October 30, 1993
Consolidated Balance Sheets - October 28, 1995 and October 29,
1994
Consolidated Statements of Cash Flows - for the years ended
October 28, 1995, October 29, 1994 and October 30, 1993
Consolidated Statements of Shareholders' Equity - for the
years ended October 28, 1995, October 29, 1994 and October 30,
1993
Notes to Consolidated Financial Statements
Report of Independent Auditors
(a)(2) Financial Statement Schedules.
The following financial statement schedules attached hereto
are incorporated herein by reference:
Schedule I - Condensed Financial Information of Registrant
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable or the information is contained in the financial
statements or notes thereto.
(a)(3) Exhibits.
(3)(a) Certificate of Incorporation of Latshaw
Enterprises, Inc. as amended (incorporated by
reference from Exhibit (3)(b) to the Form 10-Q
filed by the Company with the Commission for the
quarter ended August 3, 1991).
(3)(b) By-laws of Latshaw Enterprises, Inc., as amended
(incorporated by reference from Exhibit (3)(d) to
the Form 10-Q filed by the Company with the
Commission for the quarter ended August 3, 1991).
(4)(a) Form of Indenture between Latshaw Enterprises, Inc.
and Mark Twain Bank, respecting Debentures due
November 2022 (incorporated by reference from
Exhibit 4(a) to Post-Effective Amendment No. 1 to
the Registration Statement on Form S-2,
Registration No. 33-51088, filed by the Company
with the Commission on October 8, 1992).
(4)(b) Form of Debenture due November 2022 (incorporated
by reference from Exhibit 4(b) to Post-Effective
Amendment No. 1 to the Registration Statement on
Form S-2, Registration No. 33-51088, filed by the
Company with the Commission on October 8, 1992).
(10)(a) Fiscal 1996 Key Management Bonus System.
(10)(b) 1987 Employee Stock Benefit Plan (incorporated by
reference from Exhibit (10)(d) to the Annual Report
on Form 10-K filed by the Company for the fiscal
year ended October 29, 1988).
(10)(c) Stock Option Agreement executed pursuant to the
1987 Employee Stock Benefit Plan (incorporated by
reference from Exhibit (10)(e) to the Annual Report
on Form 10-K filed by the Company with the
Commission for the fiscal year ended October 29,
1988).
(11) Computation of Net Income Per Share
(21) Subsidiaries of Latshaw Enterprises, Inc.
(23) Consent of Ernst & Young
(24) Powers of Attorney
(27) Financial Data Schedule
(99) Company Financial Statements
(b) Reports on Form 8-K
No Form 8-K's were filed during the last quarter of the period
covered by this report.
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.
LATSHAW ENTERPRISES, INC.
(Registrant)
By: /s/ David G. Carr
David G. Carr
Senior Vice-President, Chief
Financial Officer and
Secretary
Dated: January 18, 1996
<PAGE>
Latshaw Enterprises, Inc.
Schedule II - Valuation and Qualifying Accounts
Year ended October 28, 1995
<TABLE>
<CAPTION>
Additions
Charged to
Balance at Charged to Other Balance
Beginning Cost and Accounts- Deductions- at End of
Description of Period Expenses Describe Describe Period
(Thousands of Dollars)
Year ended October
28, 1995:
Deducted from asset
accounts:
Allowance for
<S> <C> <C> <C> <C> <C> <C> <C> <C>
doubtful accounts $ 110 $ 67 $ - $ 56(1) $ 121
Reserve for
inventory
obsolescence 2 130 - 83(3) 49
Valuation reserve
for deferred tax
assets 1,398 - - 13(6) 1,385
$1,510 $197 $ - $ 152 $1,555
Year ended October
29, 1994:
Deducted from asset
accounts:
Allowance for
doubtful accounts $ 96 $ 31 $ - $ 17(1) $ 110
Marketable equity
securities valuation
allowance - lower
of cost or market 712 - - 712(2) -
Reserve for
inventory
obsolescence 20 2 - 20(3) 2
Valuation reserve
for deferred tax
assets 1,160 238 - - 1,398
$1,988 $271 $ - $ 749 $1,510
Year ended October
30, 1993:
Deducted from asset
accounts:
Allowance for
doubtful accounts $ 89 $ 23 $ - $ 16(1) $ 96
Marketable equity
securities valuation
allowance - lower
of cost or market 3,880 - - 3,168(2) 712
Reserve for
inventory
obsolescence 33 20 - 33(3) 20
Valuation reserve for
deferred tax assets 1,721(4) - - 561(5) 1,160
$5,723 $ 43 $ - $ 3,778 $1,988
(1) Uncollectible accounts written off, net of recoveries.
(2) Unrealized gains on marketable equity security portfolio.
(3) Inventory to which this reserve was related was disposed.
(4) Valuation reserve recorded effective November 1, 1992 in connection
with the adoption of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes."
(5) Reduction in reserve attributable to improved profitability of the
Company on the estimated realizability of certain deferred tax
assets as well as a reduction in net realized and unrealized
capital losses on marketable equity securities on which a
valuation reserve was previously provided.
(6) Reduction in reserve attributable to unrealized capital gains on
marketable equity securities on which a valuation reserve was
previously provided.
</TABLE>
<PAGE>
Exhibit 11
Latshaw Enterprises, Inc.
Primary and Fully Diluted Net Income
per Common Share Computation
[CAPTION]
Year ended Year ended Year ended
October 28, October 29, October 30,
1995 1994 1993
(In Thousands Except Per Share Data)
<TABLE>
Primary
Net income applicable to common
<S> <C> <C> <C>
shareholders $1,329 $1,193 $1,190
Weighted average number of
common shares outstanding
during the period 496 492 506
Add - common equivalent shares
(determined using the "treasury
stock method") representing
shares issuable upon the
exercise of stock options
granted 20 20 3
Weighted average number of
common and common equivalent
shares outstanding 516 512 509
Net income per share $2.58 $2.33 $2.34
Fully Diluted
Net income $1,329 $1,193 $1,190
Add - interest expense of
convertible subordinated
debentures 145 113 113
Net income applicable to
common shareholders $1,474 $1,306 $1,303
Weighted average number of
common shares outstanding
during the period 496 492 506
Add - common equivalent shares
(determined using the "treasury
stock method") representing
shares issuable upon the
exercise of stock options
granted 21 23 10
Add - dilutive convertible
subordinated debentures 500 500 485
1,017 1,015 1,001
Net income per share $ 1.45 $ 1.29 $ 1.30
</TABLE>
EXHIBIT (21)
SUBSIDIARIES OF LATSHAW ENTERPRISES, INC.
1. Wescon Products Company, a Delaware corporation
2. Helton, Inc., a Tennessee corporation
3. Coast Wire and Plastic Tech, Inc., a Delaware corporation
4. I.H. Molding, Inc., a Texas corporation (a subsidiary of
Wescon Products Company).
EXHIBIT 99
Report of Independent Auditors
The Shareholders and Board of Directors
Latshaw Enterprises, Inc.
We have audited the accompanying consolidated balance sheets of
Latshaw Enterprises, Inc. and subsidiaries (the Company) as of
October 28, 1995 and October 29, 1994, and the related consolidated
statements of income, shareholders' equity and cash flows for
each of the three fiscal years in the period ended October 28, 1995.
Our audits also included the financial statement schedules listed
in the Index at Item 14(a). These financial statements and schedules
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules
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 consolidated financial
position of Latshaw Enterprises, Inc. and subsidiaries at October 28,
1995 and October 29, 1994, and the consolidated results of their
operations and their cash flows for each of the three fiscal years in
the period ended October 28, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
As discussed in Notes 5 and 6 to the consolidated financial statements,
in 1993 the Company changed its method of accounting for postretirement
benefits other than pensions and income taxes.
/s/Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
December 12, 1995
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Balance Sheets
October 28, October 29,
1995 1994
(In Thousands)
Assets
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 319 $ 184
Marketable equity securities
(Notes 4 and 7) 450 415
Accounts and notes receivable,
less allowance for doubtful
accounts of $121,000 in 1995
and $110,000 in 1994 (Note 4) 6,787 5,939
Inventories (Notes 3 and 4) 8,056 7,721
Refundable income taxes (Note 6) 116 -
Deferred income taxes (Note 6) 691 663
Prepaid expenses 399 405
Total current assets 16,818 15,327
Property, plant and equipment (Note 4):
Land 166 166
Buildings and improvements 4,028 3,704
Machinery and equipment 12,770 11,641
Transportation equipment 51 48
Furniture and fixtures 2,167 1,938
19,182 17,497
Less accumulated depreciation
and amortization (12,107) (11,086)
7,075 6,411
Noncompete agreement, less
accumulated amortization
of $18,000 (Note 2) 537 -
Other assets 218 226
$24,648 $21,964
<PAGE>
October 28, October 29,
1995 1994
(In Thousands)
</TABLE>
<TABLE>
<CAPTION>
Liabilities and shareholders' equity
Current liabilities:
<S> <C> <C> <C> <C>
Notes payable (Note 4) $ 3,470 $ 2,099
Accounts payable 2,107 2,828
Customer deposits 166 110
Accrued expenses:
Salaries, wages and commissions 587 579
Vacation 435 427
Deferred compensation 138 160
Insurance 251 176
Property taxes 171 151
Other 338 321
Current portion of long-term
debt (Note 4) 53 49
Current portion of noncompete
obligation (Note 2) 111 -
Total current liabilities 7,827 6,900
Long-term debt, less current
portion (Note 4) 2,774 2,827
Noncompete obligation, less
current portion (Note 2) 333 -
Pensions and deferred compensation
(Note 5) 1,621 1,571
Postretirement benefit obligation
(Note 5) 266 288
Deferred income taxes (Note 6) 238 172
Shareholders' equity
(Notes 4, 7, and 8):
Preferred stock, no par value:
Authorized shares - 500,000,
none issued - -
Common stock, $2 par value:
Authorized shares - 1,500,000
Issued shares - 1,002,162 2,004 2,004
Class C common stock, $2 par value:
Authorized shares - 1,000,000
in 1992, none issued - -
Additional paid-in capital 4,899 5,015
Unrealized gains on marketable
equity securities 22 -
Retained earnings 14,965 13,636
21,890 20,655
Less cost of common stock held
in treasury, 500,187 shares
in 1995 and 505,058 shares
in 1994 (10,301) (10,449)
11,589 10,206
$24,648 $21,964
See accompanying notes.
</TABLE>
Latshaw Enterprises, Inc. and Subsidiaries
[CAPTION]
<TABLE>
Consolidated Statements of Income
Year ended
October 28, October 29, October 30,
1995 1994 1993
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Net sales $41,102 $38,732 $30,941
Cost of sales 32,146 29,230 23,851
Gross profit 8,956 9,502 7,090
Selling, general and
administrative expenses 6,474 6,795 5,445
Interest expense 523 361 277
Interest income (15) (16) (19)
Loss on sale of marketable
equity securities - 997 2,587
Unrealized gain on marketable
equity securities - (712) (3,168)
Other - net (160) 13 (78)
Income before income taxes and
cumulative effects of changes in
accounting principles 2,134 2,064 2,046
Income tax provision (Note 6) 805 871 175
Income before cumulative effects of
changes in accounting principles 1,329 1,193 1,871
Cumulative effects of adopting new
methods of accounting for income
taxes and postretirement benefits
(Notes 5 and 6) - - (681)
Net income $ 1,329 $ 1,193 $ 1,190
</TABLE>
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
[CAPTION]
Consolidated Statements of Income (continued)
<TABLE>
Year ended
October 28, October 29, October 30,
1995 1994 1993
(In Thousands, Except Per Share Data)
Net income per common and common
equivalent share:
Primary:
Income before cumulative
effects of changes in
<S> <C> <C> <C> <C>
accounting principles $ 2.58 $ 2.33 $ 3.68
Cumulative effects of changes
in accounting principles - - (1.34)
Net income $ 2.58 2.33 $ 2.34
Fully diluted:
Income before cumulative
effects of changes in
accounting principles $ 1.45 $ 1.29 $ 1.98
Cumulative effects of changes
in accounting principles - - (.68)
Net income $ 1.45 $ 1.29 $ 1.30
Common and common equivalent
shares outstanding:
Primary 516 512 509
Fully diluted 1,017 1,015 1,001
</TABLE>
See accompanying notes.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Unrealized
Gains on
Additional Marketable Total
Common Paid-In Equity Retained Treasury Shareholders'
Stock Capital Securities Earnings Stock Equity
(In Thousands)
Balance at
October 31,
<C> <C> <C> <C> <S> <C> <C> <C>
1992 $2,004 $5,548 $ - $11,253 $(10,699) $ 8,106
Net income - - - 1,190 - 1,190
Purchase of
112,901
shares of
common stock - - - - (435) (435)
Contribution
of 26,909
shares of
common stock
(at market)
to Employee
Stock
Ownership
Trust - (447) - - 567 120
Balance at October
30, 1993 2,004 5,101 - 12,443 (10,567) 8,981
Net income - - - 1,193 - 1,193
Purchase of 3,831
shares of common
stock - - - - (28) (28)
Contribution of
7,059 shares of
common stock
(at market) to
Employee Stock
Ownership Trust - (86) - - 146 60
Balance at October
29, 1994 2,004 5,015 - 13,636 (10,449) 10,206
Adjustment to
beginning balance
for change in
accounting method,
net of income
taxes of $5,000 - - 9 - - 9
Change in unrealized
gains, net of
income taxes of
$8,000 - - 13 - - 13
Net income - - - 1,329 - 1,329
Purchase of 3,700
shares of common
stock - - - - (28) (28)
Contribution of
8,571 shares of
common stock
(at market) to
Employee Stock
Ownership Trust - (116) - - 176 60
Balance at October
28, 1995 $2,004 $4,899 $22 $14,965 $(10,301) $11,589
</TABLE>
See accompanying notes.
Latshaw Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended
October 28, October 29, October 30,
1995 1994 1993
(In Thousands)
Operating activities
<S> <C> <C> <C>
Net income $1,329 $1,193 $1,190
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 1,570 1,395 1,024
Deferred compensation 28 (49) 11
Gain on sale of property, plant
and equipment (20) (1) (37)
Loss on sale of marketable
equity securities - 997 2,587
Unrealized gain on marketable
equity securities - (712) (3,168)
Contribution to Employee Stock
Ownership Trust funded through
issuance of treasury stock 60 60 60
Provision for losses on accounts
receivable 67 31 23
Deferred income taxes 25 145 242
Postretirement benefits (22) (39) 327
Changes in operating assets and
liabilities affecting cash and
cash equivalents:
Accounts and notes receivable (723) (1,015) (942)
Inventories (169) (1,282) (1,559)
Refundable income taxes (116) 138 33
Prepaid expenses 329 106 279
Accounts payable (836) 474 404
Customer deposits 56 78 (30)
Income taxes payable - 3 -
Accrued expenses 98 416 266
Net cash provided by operating
activities 1,676 1,938 710
</TABLE>
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (continued)
Year ended
October 28, October 29, October 30,
1995 1994 1993
(In Thousands)
Investing activities
Proceeds from sale of marketable
<S> <C> <S> <C> <C> <C> <C>
equity securities $ - $ 158 $ 503
Purchases of property, plant
and equipment (1,916) (1,919) (2,192)
Proceeds from sale of property,
plant and equipment 24 39 42
Acquisition of assets of
I.H. Molding, Inc. and
Coast Wire and Plastic Tech,
Inc. (Note 2) (637) (690) -
Other 17 56 (11)
Net cash used in investing
activities (2,512) (2,356) (1,658)
Financing activities
Proceeds from issuance of
notes payable 3,692 2,885 2,595
Principal payments of notes
payable (2,644) (2,296) (2,492)
Proceeds from issuance of
long-term debt - 410 2,500
Principal payments of
long-term debt (49) (543) (1,295)
Purchases of treasury stock (28) (28) (435)
Net cash provided by financing
activities 971 428 873
Increase (decrease) in cash and
cash equivalents 135 10 (75)
Cash and cash equivalents at
beginning of year 184 174 249
Cash and cash equivalents at
end of year $ 319 $ 184 $ 174
</TABLE>
See accompanying notes.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
October 28, 1995
1. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Latshaw
Enterprises, Inc. (the Company), its wholly-owned subsidiaries, Wescon
Products Company (Wescon) and Coast Wire & Plastic Tech, Inc., its 80%-
owned subsidiary Helton Incorporated (formerly Helton and Helton Sales),
and Wescon's wholly-owned subsidiary, I.H. Molding, Inc. All intercompany
accounts, transactions and profits have been eliminated.
Marketable Equity Securities
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company adopted the
provisions of the new standard for investments held as of or acquired
after October 30, 1994. In accordance with SFAS No. 115, prior period
financial statements have not been restated to reflect the change in
accounting principle.
Under SFAS No. 115, marketable equity securities held by the Company are
classified as available-for-sale. Available-for-sale securities are
carried at fair market value, with the unrealized gains and losses,
net of tax, reported in a separate component of shareholders'
equity. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities, if any, are included
in the consolidated statements of income. The cost of securities sold is
based on the specific identification method. The balance of shareholders'
equity as of October 30, 1994 was increased by $9,000 (net of $5,000 in
deferred income taxes) to reflect the net unrealized holding gains on
securities classified as available-for-sale previously carried at the lower
of aggregate cost or market value.
Inventories
Inventories are stated at the lower of cost using the last-in, first-out
(LIFO) method or market. Inventories of approximately $430,000 and $594,000
as of October 28, 1995 and October 29, 1994, respectively, at the Helton
Incorporated subsidiary, and $98,000 as of October 28, 1995 at the I.H.
Molding subsidiary are stated at the lower of cost, using the first-in,
first-out (FIFO) method, or market.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost.
Depreciation is computed over the estimated useful lives of the
assets using the straight-line method for financial reporting
purposes and primarily accelerated methods for income tax purposes.
Income Taxes
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes," is used in accounting for income taxes, whereby deferred
tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. On November 1, 1992,
the Company adopted the provisions of SFAS No. 109. (See Note 6.)
Prior to the adoption of SFAS No. 109, income tax expense was determined
in accordance with Accounting Principles Board Opinion No. 11.
Net Income Per Share
The computation of primary earnings per common and common equivalent share
is based on the weighted average number of outstanding common shares and
additional shares assuming the exercise of dilutive stock options.
The computation of fully diluted earnings per share further assumes
conversion of the variable interest rate convertible debentures.
Credit Concentrations
The Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral from its customers. The
Company grants extended credit terms of up to 120 days to approved customers
with established credit histories. The Company establishes an allowance
for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends and other information.
The Company's cash and cash equivalents are placed in high quality, major,
domestic banks which limit the amount of credit exposure.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Cash Equivalents
The Company considers all short-term, highly liquid investments purchased
with maturities of three months or less to be cash equivalents.
2. Acquisitions
On September 1, 1995, the Company acquired I.H. Molding, Incorporated (I.H.
Molding). I.H. Molding is primarily engaged in the manufacture, distribution
and selling of injection molding products. The total purchase price of
approximately $1,226,000 was financed with available cash drawn from
Wescon's bank line of credit, the assumption of certain liabilities of the
selling shareholders totaling $145,000, and the issuance of a five-year
noncompete agreement between the former shareholders and certain employees
of I.H. Molding and the Company. Under the terms of the noncompete
agreement, the Company has agreed to make five annual payments to the former
I.H. Molding shareholders and employees of $111,000 per year with the first
installment paid at closing. The asset related to the noncompete payments
of $555,000 is being amortized using the straight line method over the
term of the agreement.
On December 23, 1993, the Company acquired Coast Wire & Plastic Tech,
Incorporated (Coast Wire). Coast Wire is primarily engaged in the
manufacture and supply of high performance specialty electrical wire and
low noise cable for commercial electronic applications. The total
purchase price of approximately $690,000 was financed with available
cash drawn from Wescon's bank line of credit.
Both acquisitions have been accounted for using the purchase method of
accounting, and the results of operations for both companies have been
included in the respective year's accompanying consolidated financial
statements since the date of acquisition. The cost of both acquisitions
has been allocated on the basis of the estimated fair market value of
the assets acquired and liabilities assumed. No goodwill was recorded
as a result of either acquisition.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
October 28, October 29,
1995 1994
(In Thousands)
<S> <C> <C>
Raw materials $5,829 $5,659
Work-in-process and
finished goods 2,183 2,110
8,012 7,769
Adjustment to LIFO cost 44 (48)
$8,056 $7,721
</TABLE>
4. Notes Payable and Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of the following:
October 28, October 29,
1995 1994
(In Thousands)
Variable interest rate convertible
debentures, interest payable
semiannually at prime plus 1%, due
<C> <C> <C> <C>
November 8, 2022 $2,500 $2,500
Mortgage note payable in monthly
installments of $6,292, including
interest at 7.5%, due January 2001 327 376
2,827 2,876
Less current portion 53 49
$2,774 $2,827
</TABLE>
The prime rate at October 28, 1995 was 8.75%. The mortgage note payable is
collateralized by a real estate mortgage on a building with an approximate
carrying value of $564,000 at October 28, 1995. The aggregate principal
amounts of long-term debt maturing in the next five fiscal years are as
follows: 1996 - $53,000; 1997 - $57,000; 1998 - $61,000; 1999 - $66,000;
and 2000 - $71,000.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Notes Payable and Long-Term Debt (continued)
On November 6, 1992, the Company issued $2,500,000 of variable interest
rate debentures, due November 8, 2022. On or after January 1, 1995, the
debentures are redeemable at the option of the Company, in whole or in part,
at redemption prices declining from 105% of their principal amount. The
debentures are convertible at any time prior to maturity, unless previously
redeemed, into the Company's common stock at a conversion price of $5 per
share. A portion of the proceeds from the financing was used to retire
a $1,250,000 note payable to shareholder.
At October 28, 1995, the Company, through its subsidiary, Wescon, has an
unused line of credit for short-term bank borrowings of $2,900,000 remaining
of the $6,000,000 available, providing for interest at prime. This line
of credit is collateralized by equipment, real estate, marketable equity
securities, inventories and accounts receivable. The line of credit
agreement limits cash dividends, loans or other cash transfers from
Wescon to the Company. At October 28, 1995, restricted net assets of
Wescon were approximately $21,691,000. The Company, through its subsidiary,
Helton Incorporated, also has outstanding borrowings of $125,000 at
October 28, 1995 on a $350,000 bank line of credit, with interest at
prime plus 1.25%. The line of credit is collateralized by inventory
and accounts receivable of Helton Incorporated. The weighted average
interest rate on these line of credit agreements was 9.2% and 7.9% in
1995 and 1994, respectively.
The Company finances certain property, liability, workmen's compensation,
and officer and director insurance premiums and has issued notes payable
totaling $323,000 and $238,000 during 1995 and 1994, respectively, under
which payments are due monthly in the following year. At October 28, 1995
and October 29, 1994, the outstanding balance under these notes payable
amounted to $245,000 and $169,000, respectively. The weighted average
interest rate on these notes payable was 8.4% and 8.3% in 1995 and 1994,
respectively.
Interest payments on notes payable and long-term debt were $493,000,
$335,000 and $203,000 in 1995, 1994 and 1993, respectively.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Employee Compensation and Benefits
The Company and its subsidiaries have two defined benefit pension plans
(Retirement Income Plan and Hourly Plan) covering substantially all
employees. The benefits are based on years of service.
The Company's funding policy is to contribute each year the net periodic
pension cost as determined according to SFAS No. 87, "Employers' Accounting
for Pensions." However, the contribution for any year will not be less than
the minimum required contribution nor greater than the maximum tax deductible
contribution.
A summary of the net periodic pension cost for the defined benefit plans
follows:
<TABLE>
<CAPTION>
1995 1994 1993
(In Thousands)
Service cost - benefits earned
<S> <C> <C> <C>
during the period $ 126 $ 135 $ 125
Interest cost on projected
benefit obligation 434 406 415
Actual return on plan assets (471) (413) (411)
Net amortization and deferral (97) (36) (67)
$ (8) $ 92 $ 62
</TABLE>
Assumptions used in accounting for the defined benefit plans were as follows:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
Weighted average discount rate 8.25% 7.0% 7.0%
Rates of increase in compensation
levels 5.0% 5.0% 5.0%
Expected long-term rate of return
on assets 9.0% 8.0% 8.0%
</TABLE>
The effect of changing the weighted average discount rate and the expected
long-term rate of return on assets in 1995 was not material.
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets at October 28, 1995 and October 29, 1994
for the Company's defined benefit pension plans.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Employee Compensation and Benefits (continued)
Actuarial present value of benefit obligations information is as follows:
<TABLE>
<CAPTION>
October 28, 1995 October 29, 1994
Retirement Retirement
Income Hourly Income Hourly
Plan Plan Plan Plan
(In Thousands)
Vested benefit
<S> <C> <C> <C> <C>
obligation $ 4,168 $1,180 $ 3,889 $1,008
Accumulated benefit
obligation $ 4,256 $1,200 $ 3,960 $1,028
Plan assets at fair
value $ 3,757 $1,653 $ 3,677 $1,520
Projected benefit
obligation 4,736 1,200 4,350 1,028
Projected benefit
obligation less
(more) than plan
assets (979) 453 (673) 492
Unrecognized net
gain (27) (36) (255) (115)
Unrecognized
transition net
asset, net of
amortization (89) (229) (102) (262)
Net pension asset
(liability)
recognized in the
consolidated
balance sheet $(1,095) $ 188 $(1,030) $ 115
</TABLE>
At October 28, 1995, approximately 40% of the plans' assets were invested in
U.S. Government securities and 60% were invested in Separate Pooled Fund
Accounts of the plans' trustee.
The Company has an Employee Stock Ownership Trust covering substantially all
employees. Company contributions are charged to expense when approved
annually by the Board of Directors. In each of the last three years, the
Company made a $60,000 contribution to the Employee Stock Ownership Trust
which was funded by the issuance of 8,571, 7,059 and 10,909 shares of the
Company's treasury stock in 1995, 1994 and 1993, respectively. The $60,000
contribution accrued at October 31, 1992 was funded through the issuance of
16,000 shares of the Company's treasury stock with a market value of $60,000
in 1993.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Employee Compensation and Benefits (continued)
Additionally, the Company has a defined contribution 401(k) plan which covers
substantially all employees. The Company contributes a specified percentage
of each participant's annual compensation up to certain limits as defined in
the plan. For fiscal years 1995, 1994 and 1993, the Company recorded expense
related to the plan of approximately $138,000, $133,000 and $114,000,
respectively.
During the year ended October 30, 1993, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
This statement requires that the projected future cost of retiree health
and life insurance be recognized as an expense as employees render service
instead of when the benefits are paid. The cumulative effect as of November
1, 1992 of adopting SFAS No. 106 decreased net income by $241,000, net of the
related tax effect of $124,000 ($0.47 per share - primary and $0.24 per
share - fully diluted). The effect of changes in the plan and actuarial
assumptions during the year resulted in a net decrease of the postretirement
benefit costs of approximately $38,000.
The Company has supplemental retirement agreements with certain former
officers. Expenses of $172,000, $124,000 and $128,000 have been recognized
in 1995, 1994 and 1993, respectively, related to these agreements.
6. Income Taxes
Effective November 1, 1992, the Company changed its method of accounting
for income taxes from the deferred method to the liability method required
by SFAS No. 109, "Accounting for Income Taxes." The cumulative effect of
adopting SFAS No. 109 as of November 1, 1992 decreased net income by
$440,000 ($0.87 per share - primary and $0.44 per share - fully diluted).
The application of the new income tax rules had an immaterial effect on net
income during the year ended October 30, 1993.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
as of October 28, 1995 and October 29, 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
(In Thousands)
Deferred tax assets:
Capital loss carryforward on
<C> <S> <C> <C>
marketable equity securities $1,398 $1,398
Pension and deferred compensation
accrual 697 675
Vacation accrual 170 166
Postretirement benefit obligation 104 112
Workers' compensation accrual 98 69
Other - net 149 109
Total deferred tax assets 2,616 2,529
Deferred tax liabilities:
Depreciation (379) (317)
Tooling amortization (249) (186)
Prepaid insurance (120) (104)
Other - net (30) (33)
Total deferred tax liabilities (778) (640)
1,838 1,889
Valuation allowance for deferred tax
assets (1,385) (1,398)
Net deferred tax assets $ 453 $ 491
</TABLE>
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes (continued)
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
(In Thousands)
Current:
<S> <C> <C> <C>
Federal $650 $661 $249
State 130 65 -
Total current 780 726 249
Deferred:
Federal 22 130 (63)
State 3 15 (11)
Total deferred 25 145 (74)
$805 $871 $175
</TABLE>
A reconciliation of the income tax provision to the amounts computed at the
federal statutory rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Provision at statutory rate $726 $702 $696
State income taxes, net of
federal tax benefit 88 53 -
Change in valuation reserve (13) 238 (561)
Contribution of qualified use
property - (43) -
Other 4 (79) 40
$805 $871 $175
</TABLE>
The change in the valuation reserve for the year ended October 29, 1994
is principally attributable to the effect of increased capital loss
carryforwards resulting from the sale of marketable equity securities
in 1994, net of the $712,000 reduction of cumulative unrealized capital
losses on marketable equity securities, on which valuation reserves were
previously provided.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes (continued)
The change in the valuation reserve for the year ended October 30, 1993
is principally attributable to the $3,168,000 reduction of cumulative
unrealized capital losses on marketable equity securities, on which
valuation reserves were previously provided, net of the effect of
increased capital loss carryforwards resulting from the sale of marketable
equity securities in 1993. The valuation reserve was further reduced by
$250,000 due to the effect of the improved profitability of the Company
operations in 1993 on the estimated realizability of certain deferred
tax assets in the future years.
Income tax payments were $892,000, $725,000 and $406,000 in 1995, 1994
and 1993, respectively. In addition, the Company received income tax
refunds of $140,000 and $190,000 in 1994 and 1993, respectively.
7. Marketable Equity Securities
The following is a summary of available-for-sale marketable equity
securities:
<TABLE>
October 28, October 29,
1995 1994
(In Thousands)
<S> <C> <C>
Cost $415 $415
Gross unrealized gains 35 15
Gross unrealized losses - (1)
Estimated fair value $450 $429
</TABLE>
8. Stock Options
The Company has a stock benefit plan that provides for the purchase of the
Company's stock by key employees at the fair market value of the shares at
the date of grant. Shareholders approved the employee stock benefit plan
in fiscal 1988, and 60,000 common shares were reserved for stock options.
The terms of options are determined at the discretion of the Compensation
Committee of the Board of Directors, except that no option shall be fully
or partially exercisable less than one year or more than 10 years after
the date of grant. Options currently granted become exercisable in
increasing amounts on each anniversary date of the grant over the four
years following the date of grant.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Stock Options (continued)
During 1988, options for the purchase of 50,000 shares were granted at an
exercise price of $18 per share. During 1990, shareholders approved a stock
option exchange plan under which 15,000 of these options were exchanged
for the same number of options at an exercise price of $15 per share,
the fair market value of the Company's stock on the exchange date. The
remaining 35,000 options expired during 1993. On February 3, 1993, options
for the purchase of 45,000 shares were granted at an exercise price of
$5 per share, the fair market value of the Company's stock on the date of
grant. The options to purchase 15,000 shares, issued in connection with
the stock option exchange plan discussed above, expired in 1995. There
were no stock options granted in 1994 or 1995.
There have been no stock options canceled (except as related to the stock
option exchange plan) or exercised since the inception of the plan. At
October 28, 1995, of the 45,000 outstanding options, there were 13,500
options exercisable under the stock benefit plan.
9. Commitments and Contingencies
The Company has entered into noncancelable operating leases for office,
manufacturing and warehouse space, automobiles and certain equipment.
The remaining commitments for future minimum lease payments under these
leases (in thousands) are as follows:
<TABLE>
<C> <C>
1996 $240
1997 123
1998 61
1999 14
$438
</TABLE>
Total rent expense for the years ended October 28, 1995, October 29, 1994
and October 30, 1993 was $304,000, $262,000 and $155,000, respectively.
At October 28, 1995, the Company is contingently liable for letters of
credit outstanding totaling $1,680,000, which guarantee various trade and
insurance activities.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. Commitments and Contingencies (continued)
The Company has been identified as a potentially responsible party by the
United States Environmental Protection Agency (EPA) concerning the disposal
of hazardous substances at the Doepke-Holliday Super Fund Site (the Site)
in Johnson County, Kansas. The EPA informed the Company that it had
information indicating that wastes from the Company were disposed at the
Site.
On April 1, 1994, the EPA sent a draft consent decree indicating a desire
to negotiate a remedial action. The EPA has released an estimate of
between $9,000,000 and $11,500,000 for the total clean up and response
costs at the Site.
The Company has been asked to participate in the Holliday Remediation Task
Force (the Task Force), a group of potentially responsible parties for the
Site. The Task Force currently has 40 active members and is negotiating
participation by other potentially responsible parties. The parties who
join the Task Force must agree to participate at one of five specified
levels of contribution based on the Task Force's assessment of liability
and to pay a portion of future response and remediation costs based on
their specified level of contribution. The Company has agreed to join
the Task Force and participate in the third contribution level. The
Company estimates the remaining amount of financial contribution,
including legal and consulting costs associated with the contingency,
that may yet be required at the third highest contribution level at
approximately $125,000.
At October 28, 1995 and October 29, 1994, other accrued expenses includes
a current liability of $125,000 and $150,000, respectively, relating to
this contingency. As a result of this matter, the Company has requested
copies of insurance policies that were in effect during the period the
contamination allegedly took place. The Company plans to evaluate the
coverage that existed during this period and determine whether a claim
should be filed with the carrier. The Company's ability to obtain
contribution from the insurance carrier is not ascertainable at this time.
It is the opinion of management, based on currently available information,
that remaining costs to be incurred through participation in the Task Force
are not likely to materially vary from the amount accrued at October 28, 1995.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Industry Information
The Company is a manufacturer and marketer of mechanical controls, cable
devices, wire and screw machine parts, and precision injection molded and
vacuum-formed plastic parts for use primarily by original equipment
manufacturers. The Company also buys, or manufactures and markets, a
limited number of consumer products for resale in the retail market.
Sales to one customer accounted for 12% of net sales in 1995, and sales
to two customers accounted for 24% and 26% of net sales in 1994 and 1993,
respectively.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Five-Year Summary
1995 1994 1993 1992 1991
(In Thousands, Except Per Share Data)
Summary of operations
<S> <C> <C> <C> <C> <C>
Net sales $41,102 $38,732 $30,941 $26,366 $20,775
Cost of sales 32,146 29,230 23,851 21,615 18,250
Gross profit 8,956 9,502 7,090 4,751 2,525
Selling, general
and administrative
expenses 6,474 6,795 5,445 5,301 4,587
Interest expense 523 361 277 227 591
Interest income (15) (16) (19) (41) (19)
Loss (gain) on sale
of marketable equity
securities - 997 2,587 (333) 1,045
Unrealized gain on
marketable equity
securities - (712) (3,168) (30) (1,680)
Other - net (160) 13 (78) (55) (145)
Income (loss) before
income taxes,
extraordinary item
and cumulative effects
of changes in
accounting principles 2,134 2,064 2,046 (318) (1,854)
Income tax provision
(benefit) 805 871 175 (108) (596)
Income (loss) before
extraordinary item
and cumulative
effects of changes
in accounting
principles 1,329 1,193 1,871 (210) (1,258)
Extraordinary item -
tax benefit
from utilization
of capital loss
carryforwards - - - 124 216
Income (loss) before
cumulative effects of
changes in accounting
principles 1,329 1,193 1,871 (86) (1,042)
Cumulative effects
of adopting
new methods
of accounting
for income taxes
and postretirement
benefits - - (681) - -
Net income (loss) $ 1,329 $ 1,193 $ 1,190 $ (86) $(1,042)
</TABLE>
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Five-Year Summary (continued)
1995 1994 1993 1992 1991
(In Thousands, Except Per Share Data)
Common stock data
Net income (loss)
per common and
common equivalent
share:
<S><C> <C> <C> <C> <C> <C>
Primary $ 2.58 $ 2.33 $ 2.34 $ (.15) $ (1.80)
Fully diluted $ 1.45 $ 1.29 $ 1.30 $ (.15) $ (1.80)
Book value per share $ 23.09 $ 20.53 $ 18.18 $ 13.98 $ 14.17
Weighted average
common and common
equivalent shares
outstanding:
Primary 516 512 509 586 580
Fully diluted 1,017 1,015 1,001 586 580
Balance sheet data
Current assets $16,818 $15,327 $13,011 $10,411 $14,115
Property, plant and
equipment - net 7,075 6,411 5,843 4,680 4,541
Deferred income taxes - - - 339 113
Noncompete agreement 537 - - - -
Other assets 218 226 212 201 179
$24,648 $21,964 $19,066 $15,631 $18,948
Current liabilities $ 7,827 $ 6,900 $ 5,379 $ 4,258 $ 8,760
Long-term debt 2,774 2,827 2,775 1,764 467
Noncompete obligation 333 - - - -
Pensions and deferred
compensation 1,621 1,571 1,528 1,503 1,528
Postretirement benefit
obligation 266 288 327 - -
Deferred income taxes 238 172 76 - -
Shareholders' equity 11,589 10,206 8,981 8,106 8,193
$24,648 $21,964 $19,066 $15,631 $18,948
Working capital $ 8,991 $ 8,427 $ 7,632 $ 6,153 $ 5,355
</TABLE>
<PAGE>
ANNEX TO PROXY STATEMENT
FORM 10-Q/A
(Amendment No. 1)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1996
Commission file number 1-6072
LATSHAW ENTERPRISES, INC.
Name of Registrant
Delaware 44-0427150
State of Incorporation IRS Employer I.D. Number
2533 S. West Street
Wichita, Kansas 67217
Address of principal executive offices
(316) 942-7266
Registrant's telephone number
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 [ ]
Common Stock, $2 Par Value-496,999 Shares Outstanding at 8-3-96
EXPLANATORY NOTE
This Form 10-Q/A of Latshaw Enterprises, Inc. is being filed to
amend the following: (1) Index - Part I, Item 1, "Consolidated
Statements of Income - For the three months and six months ended
August 3, 1996 and July 29, 1995" changed to "Consolidated Statements
of Operations - For the three months and nine months ended August 3,
1996 and July 29, 1995"; (2) Index - Part I, Item 1, "Consolidated
Statements of Cash Flows - For the six months ended August 3, 1996
and July 29, 1995" changed to "Consolidated Statements of Cash Flows -
For the nine months ended August 3, 1996 and July 29, 1995"; (3) Part I,
Item 1, Header - "LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME" changed to "LATSHAW ENTERPRISES,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS"; (4) Part I,
Item, 1, under LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS, Caption over third and fourth columns -
"Six Months Ended" changed to "Nine Months Ended,"; (5) Part I, Item 1,
under LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF CASH FLOWS, Caption - "Six Months Ended" changed to "Nine Months Ended";
(6) Part II, Item 1, first line of second full paragraph, "United Stated"
changed to "United States."
INDEX
LATSHAW ENTERPRISES, INC.
Part I. Financial Information
Item 1. Condensed Financial Statements (Unaudited).
Consolidated Balance Sheets - August 3, 1996 and October
28, 1995.
Consolidated Statements of Operations - For the three months
and nine months ended August 3, 1996 and July 29, 1995.
Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows - For the nine months
ended August 3, 1996 and July 29, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K.
Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In thousands)
<TABLE>
<CAPTION>
August 3, October 28,
1996 1995
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 308 $ 319
Marketable equity securities,
at lower of cost or market 522 450
Accounts and notes receivable-net 6,058 6,787
Inventories, at lower of cost
(LIFO) or market 7,683 8,056
Refundable income taxes 116 116
Deferred income taxes 691 691
Prepaid expenses 74 399
Total current assets 15,452 16,818
Property, plant and equipment at cost 20,263 19,182
Less accumulated depreciation
and amortization (13,141) (12,107)
7,122 7,075
Noncompete agreement - net 462 537
Other assets 224 218
$23,260 $24,648
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 1,057 $ 3,470
Accounts payable 2,259 2,107
Accrued expenses 1,726 2,086
Current portion of long-
term debt 53 53
Current portion of non-
compete obligation 111 111
Income taxes payable 16 -
Total current liabilities 5,222 7,827
Long-term debt, less current portion 2,735 2,774
Noncompete obligation, less current
portion 333 333
Pensions and deferred compensation 1,587 1,621
Postretirement benefit obligation 294 266
Deferred income taxes 238 238
Shareholders' equity
Preferred stock, no par value:
Authorized shares - 500,000,
none issued - -
Common stock, $2 par value:
Authorized shares - 1,500,000
Issued shares - 1,002,162 2,004 2,004
Class C common stock, $2 par
value: Authorized shares -
1,000,000 in 1992, none issued - -
Additional paid-in capital 4,899 4,899
Unrealized gains on marketable
securities 68 22
Retained earnings 16,213 14,965
23,184 21,890
Less cost of common stock
held in treasury,
505,163 shares in 1996
and 500,187 in 1995 (10,333) (10,301)
12,851 11,589
$23,260 $24,648
(This is an unaudited statement)
</TABLE>
<PAGE>
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 9,630 $ 8,374 $33,015 $31,128
Cost of sales 7,729 6,868 25,656 24,191
Gross Profit 1,901 1,506 7,359 6,937
Selling, general and
administrative expenses 1,539 1,427 4,918 4,627
Interest expense 94 124 414 368
Other - net 5 15 46 39
Income (loss) before
income taxes 263 (60) 1,981 1,903
Income tax (benefit)
provision 96 (22) 733 707
Net income (loss) $ 167 $ (38) $ 1,248 $ 1,196
Net income (loss) per common
and common equivalent shares:
Primary $ .32 $ (.07) $ 2.42 $ 2.32
Fully Diluted $ .20 $ .00 $ 1.34 $ 1.29
Common and common equivalent
shares outstanding:
Primary 516 515 515 516
Fully Diluted 1,016 1,018 1,015 1,019
(This is an unaudited statement)
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements:
The condensed financial statements included herein have been prepared
by the Company without audit, and in the opinion of management, reflect
all the adjustments necessary to fairly present the Company's results
of operations for the period. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual
report.
Net Income Per Share
The computation of primary earnings per common and common equivalent share
is based on the weighted average number of outstanding common shares and
additional shares assuming the exercise of dilutive stock options. The
computation of fully diluted earnings per share further assumes conversion
of the variable interest rate convertible debentures.
<PAGE>
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
August 3, July 29,
1996 1995
Operating activities
<S> <C> <C>
Net income $1,248 $1,196
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,109 861
Deferred compensation (34) (6)
Post retirement benefit obligation 28 23
Provision for loss on accounts
receivable 20 18
Changes in operating assets and
liabilities affecting cash and
cash equivalents:
Accounts and notes receivable 709 835
Inventories 373 (896)
Prepaid expenses 325 363
Accounts payable 152 (1,036)
Accrued expenses (370) (343)
Net cash provided by operating activities 3,560 1,015
Investing activities
Purchases of property, plant and equipment (1,081) (1,037)
Other (6) 4
Net cash used in investing activities (1,087) (1,033)
Financing activities
Payments of notes payable (3,789) (1,946)
Proceeds from the issuance of notes
payable 1,376 2,074
Payments of long-term debt (39) (37)
Purchase of treasury stock (32) (23)
Net cash provided by (used in) financing
activities (2,484) 68
Increase in cash and cash equivalents (11) 50
Cash and cash equivalents at beginning of period 319 184
Cash and cash equivalents at end of period $ 308 $ 234
(This is an unaudited statement)
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales revenue for the third quarter, as well as for the nine months
of 1996, was higher than the same period in 1995. Sales revenue for
the third quarter of 1996 was $9,630,000, an increase of 15.0 percent
over the $8,374,000 level in 1995. For the nine months of 1996, sales
revenue was $33,015,000 which represents a 6.1 percent increase over
the same period in 1995 of $31,128,000. Included in the sales number
for 1996 are revenues of $656,000 for the third quarter and $1,645,000
for the nine months which is attributable to Latshaw's acquisition and
operation of the assets of I.H. Molding, Inc. in Dallas, Texas. This
acquisition was completed in September of 1995. Excluding the I.H.
Molding revenue, comparable year-to-year divisional sales increased
7.2 percent and 0.8 percent for the three month and nine month period,
respectively. Improving general economic conditions appear to be the
primary reason for this increased demand for Company products.
Gross profit for the third quarter of 1996 was 19.7 percent versus 18.0
percent for the same period in 1995. This improvement resulted from
operating efficiencies due to the higher sales volume. For the nine
months of both 1996 and 1995 gross profit was 22.3 percent.
Selling, general and administrative expenses for the third quarter and
the nine months of 1996 were higher when compared to the same periods
in 1995. However, as a percentage of sales, these costs were equal to
or lower in 1996 than in 1995. The higher costs in 1996 were primarily
the result of increases in commissions and performance bonuses based
upon improved sales and expenses associated with the purchase of
I.H. Molding.
Interest expense was $94,000 for the third quarter of 1996 compared
to $124,000 for the same period a year earlier. For the nine months in
1996, interest expense was $414,000 versus $368,000 in 1995. The lower
interest expense in the third quarter of 1996 was due to the Company's
repayment of bank borrowings in reduction of its existing bank lines
of credit and lower interest rates. The higher costs for the nine months
in 1996 were primarily due to additional debt incurred to meet working
capital needs during the year plus bank borrowings used to fund the purchase
of the I.H. Molding assets in September of 1995.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company adopted the
provisions of the new standard for investments held as of or acquired
after October 30, 1994. Under SFAS No. 115, marketable equity securities
held by the Company are classified as available for sale. Available for
sale securities are carried at fair market value, with the unrealized
gains and losses, net of tax, reported as a separate component of share-
holders' equity.
The effective income tax rate for the first nine months of 1996 and 1995
was 37.0 and 37.2 percent, respectively.
The Company had net income for the third quarter of 1996 of $167,000 or
$.32 per share (primary) and $.20 per share (fully diluted) compared to
a net loss of $.07 per share (primary) on a net loss of $38,000 for the
third quarter of 1995. For the nine months of 1996, there was a per share
net profit of $2.42 (primary) and $1.34 (fully diluted) on total net profit
of $1,248,000. This compares to a $2.32 per share profit (primary) and
$1.29 per share (fully diluted) on total net profit of $1,196,000 for the
same period in 1995.
The computation of primary earnings per common and common equivalent share
is based on the weighted average number of outstanding common shares and
additional shares assuming the exercise of dilutive stock options. The
computation of fully diluted earnings per share further assumes conversion
of the variable interest rate convertible debentures.
For the nine months of 1996 and 1995, the Company had net cash balances
provided from operations of $3,560,000 and $1,015,000, respectively. These
funds were used to pay down existing bank lines of credit and/or for the
purchase of property and equipment. The increase in 1996 is principally
due to improved control of inventory levels in 1996 and a larger reduction
in accounts payable in 1995.
As of August 3, 1996, the Company, through its subsidiary, Wescon Products
Company, had an unused line of credit for short-term bank borrowing of
$6,000,000 remaining on the $7,000,000 available, providing for interest
at prime. The Company, through its subsidiary, Helton, Inc., had an
unused bank line of credit at August 3, 1996 of $350,000. Management
believes that the combination of funds available through its bank lines
of credit along with the anticipated cash flow from operations will provide
the capital resources necessary to meet the Company's working capital needs.*
Despite the Company's existing capital resources, opportunities may arise
that Management believes would increase the value of the Company that could
require financing not currently provided for. There were no significant
capital expenditure commitments outstanding at August 3, 1996 that have not
been previously disclosed.
*This statement is a forward-looking statement, which is subject
to certain risks and uncertainties. See PART II, Item 5, "Forward-
Looking Statements."
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Except as set forth below, there are no material pending legal proceedings
other than ordinary routine litigation incidental to the business, to which
either the Company or its subsidiaries are a party or of which any of the
property of such entities is the subject.
On August 13, 1993 the Company received an inquiry from the United States
Environmental Protection Agency ("EPA") concerning the disposal of hazardous
substances at the Doepke-Holliday Super Fund Site (the "Site") in Johnson
County, Kansas. In the letter, the EPA stated that it had information
indicating that wastes from the Company were disposed of at the Site. The
Company has no records of any such disposal of wastes at the Site. However,
the Company no longer has access to most of the records of two divisions
which it operated during the relevant time period and subsequently sold, a
paint and chemical coatings division and a manufactured housing division.
The Company has agreed to participate in the Holliday Remediation Task Force
(the "Task Force"), a group of potentially responsible parties for the Site.
The Task Force currently has 40 active members and is negotiating partici-
pation by other potentially responsible parties. Parties who join the Task
Force agree to participate at one of five specified levels of contribution
based upon the Task Force's assessment of liability and to pay a portion of
future response and remediation costs based upon their specified level of
contribution. The Company will participate in the third contribution level
and the Task Force's preliminary estimate of the amount of financial contri-
bution which may be required from the Company at that level is $75,000 to
$100,000. A consent decree between the Task Force and the EPA has been
executed and filed with the United States District Court for the District
of Kansas. Neither ultimate liability nor costs are ascertainable at this
time. Based upon the information provided by the Task Force, the Company
estimates the amount of the financial contribution by the Company, including
legal and consulting costs associated with the contingency, that may be
required will be $150,000.*
At October 29, 1994, the Company accrued a current liability of $150,000
relating to this contingency. The Company paid approximately $25,000 with
respect to this matter during fiscal year 1995, and $14,000 for the first
nine months of fiscal 1996. At August 3, 1996, the Company had an accrued
liability of $111,000 relating to the contingency. The Company does not
expect final closure of this matter during fiscal year 1996. As a result
of this matter, the Company has requested copies of insurance policies that
were in effect during the period the contamination allegedly took place.
The Company plans to evaluate the coverage that existed during this period
and determine whether a claim should be filed with the carrier. The
Company's ability to obtain contribution from the insurance carrier is not
ascertainable at this time.
In the event the Company ultimately pays certain costs as a potentially
responsible party, it is the opinion of management, based upon currently
available information, that any such costs or liability are not likely to
materially vary from the amount accrued at August 3, 1996.*
*This statement is a forward-looking statement, which is subject to certain
risks and uncertainties. See PART II, Item 5, "Forward-Looking Statements."
Item 5. Other Information
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q which
are not statements of historical fact constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, including, without limitation, the statements specifically
identified as forward-looking statements in this Form 10-Q. In addition,
certain statements in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases, and in oral statements
made by or with the approval of an authorized executive officer of the
Company which are not statements of historical fact constitute forward-
looking statements within the meaning of the Act. Examples of forward-
looking statements include, but are not limited to: (i) projections of
revenues, income or loss, earnings or loss per share, capital expenditures,
the payment or non-payment of dividends, capital structure and other
financial items, (ii) statements of plans and objectives of the Company or
its management or Board of Directors, including plans or objectives relating
to the products or services of the Company, (iii) statements of future
economic performance, and (iv) statements of assumptions underlying the
statements described in (i), (ii) and (iii).
Forward-looking statements made by or on behalf of the Company involve
risks and uncertainties which may cause actual results to differ materially
from those in such statements. Some important factors that could cause the
actual results to differ materially from those discussed in the forward-
looking statements include, but are not limited to: changes in general
economic conditions; competitive, regulatory or tax changes that affect
the cost of or demand for the Company's products; weather conditions;
adverse litigation results; failure to achieve cost-saving goals; changes
in raw material prices or availability; loss of one or more significant
customers; inflation; and changes in environmental regulation. Other
factors not identified herein could also have such an effect.
With respect to the forward-looking statement specifically identified in
PART I, Item 2 of this Form 10-Q regarding the adequacy of the Company's
capital resources, such statement is subject to several risks and
uncertainties including, without limitation: the future economic performance
of the Company (which is dependent in part upon the factors described above);
the ability of the Company's subsidiary, Wescon Products Company, to renew
its $7,000,000 line of credit, which expires in February, 1997, for the same
amount and upon substantially the same terms; future acquisitions of other
businesses not currently anticipated by management of the Company; and other
material expenditures not currently anticipated by management.
The forward-looking statements specifically identified in PART II, Item 1
of this Form 10-Q, which relates to the Company's expected costs and
liability in connection with the environmental matter described therein,
is subject to a number of risks and uncertainties, including, without
limitation: the actual costs of the clean-up may exceed those currently
projected; the Site may contain undiscovered conditions requiring further
remediation costs; the entities engaged by the Task Force to effect the
clean-up may fail to correctly remediate the Site; the EPA may reopen its
claims against all responsible parties, including the Company, as permitted
under the Consent Decree; and a third party may make claims against the
Company related to the Site. The occurrence of any of the foregoing may
cause the Company to incur additional liability or costs.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Primary and Fully Diluted Net Income
per Common Share Computation
(27) Financial Data Schedule
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
LATSHAW ENTERPRISES, INC.
/s/Michael E. Bukaty
Michael E. Bukaty
President
/s/David G. Carr
David G. Carr
Sr. Vice President, C.F.O.
October 1, 1996
<PAGE>
EXHIBIT INDEX
Assigned
Exhibit Number Description of Exhibit
(11) Primary and Fully Diluted Net Income
per Common Share Computation
(27) Financial Data Schedule [Not attached]
<PAGE>
Latshaw Enterprises, Inc.
Primary and Fully Diluted Net Income
per Common Share Computation
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
(In thousands except per share data)
Primary
Net income (loss) applicable
<S> <C> <C> <C> <C>
to common shareholders $167 $(38) $1,248 $1,196
Weighted average number
of common shares
outstanding during
the period 498 495 499 496
Add - common equivalent
shares (determined using
the "treasury stock
method") representing
shares issuable upon the
exercise of stock
options granted 18 20 16 20
Weighted average number
of common and common
equivalent shares
outstanding 516 515 515 516
Net income (loss)
per share $ .32 $ (.07) $ 2.42 $ 2.32
Fully Diluted
Net income (loss) $ 167 $ (38) $1,248 $1,196
Add - interest expense
of convertible
subordinated debentures 37 38 113 110
Net income applicable to
common shareholders $ 204 $ - $1,361 $1,306
Weighted average number
of common shares
outstanding during
the period 498 495 499 496
<PAGE>
Add - common equivalent
shares (determined using
the "treasury stock
method") representing
shares issuable upon the
exercise of stock options
granted 18 23 16 23
Add - dilutive convertible
subordinated debentures 500 500 500 500
Weighted average number of
common and common
equivalent shares
outstanding 1,016 1,018 1,015 1,019
Net income per share $ .20 $ - $1.34 $1.29
</TABLE>
<PAGE>
FORM 10-K/A-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 28, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6072
LATSHAW ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware 44-0427150
(State of incorporation) (I.R.S. Employer Identification No.)
2533 South West Street
Wichita, Kansas 67217
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (316) 942-7266
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.00 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of the voting stock held by non-
affiliates of the registrant (persons other than directors, officers
and beneficial owners of more than 5% of the outstanding stock) as
of December 31, 1995, computed by reference to the mean of the
closing bid and asked prices on January 2, 1996 as quoted by Mesirow
Capital, Inc., Chicago, Illinois was $821,873. The non-inclusion of
shares held by directors, officers and beneficial owners of more
than 5% of the outstanding stock shall not be deemed to constitute
an admission that such persons are affiliates of the registrant
within the meaning of the Securities Exchange Act of 1934.
The number of outstanding shares of the registrant's common
stock as of December 31, 1995 was 500,324 shares.
<PAGE>
PART III
Item 10 - Directors and Executive Officers of the Registrant.
<TABLE>
<CAPTION>
Percentage of
Outstanding
Shares of Shares of
A Common Stock Common Stock
Director Beneficially Beneficially
of the Owned Owned
Principal Company February 10, February 10,
Name Age Occupation(1) Since 1996(2)(3) 1996
DIRECTORS WHOSE TERMS EXPIRE IN 1996
<S> <C> <S> <C> <C> <C>
Michael E. Bukaty 59 President and 1984 23,420(5) 4.5%
(Class C) Chief Operating
Officer of
the Company and
President and
Chief Executive
Officer of
Wescon Products
Company, a
wholly-owned
subsidiary of
the Company.(4)
John Latshaw 74 Chairman of the 1987 664,315(7) 69.0%
(Class C) Board of Directors,
Managing Director
and Chief
Executive Officer
of the Company,
and Chairman of
the Board of
Directors of Wescon
Products Company,
a wholly-owned
subsidiary of
the Company.(6)
DIRECTORS WHOSE TERMS EXPIRE IN 1997
James C. Gale 46 Managing Director 1987 2,700(9) (*)
(Class A) of Gruntal & Co.,
Inc., New York,
investment
bankers.(8)
Elizabeth A. 36 Self-Employed/ 1988 10 (*)
Reid-Scott Private
(Class A) Investor.(10)
L. Chandler Smith 76 Director of 1967 100 (*)
(Class A) Corporate
Development of
the Company.
DIRECTORS WHOSE TERMS EXPIRE IN 1998
Constance H. 39 Private 1989 100 (*)
Latshaw Investor.(11)
(Class B)
David M. Pangrac 53 Consultant 1989 10 (*)
(Class B) employed by
Pangrac &
Associates
Consultants, Inc.,
network and
communications
consultants.(12)
</TABLE>
(*)Denotes beneficial ownership of less than 1% of outstanding
common stock.
(1) Unless otherwise indicated, each of the directors has had the
same principal occupation during the last five years.
(2) Unless otherwise indicated, each director has sole voting and
investment power with respect to the shares listed.
(3) Shares owned by the Latshaw Enterprises, Inc. Employee Stock
Ownership Plan and Trust, which is administered by the ESOT
Administrative Committee of the Board of Directors of the
Company, are not included in the shares owned by individual
directors, except for shares allocated to the accounts of
individual directors which may be voted by such directors under
the terms of the Trust. See footnote (8) under Item 12
hereof.
(4) Mr. Bukaty has also served as President of Coast Wire & Plastic
Tech, Inc., a wholly-owned subsidiary of the Company and a
cable and wire manufacturer, since December 1993, and as
President of I.H. Molding, Inc., a wholly-owned subsidiary of
Wescon Products Company and a manufacturer of plastic products,
since September 1995.
(5) Includes 12,400 shares which Mr. Bukaty has the present right
to acquire upon conversion of Variable Interest Rate
Convertible Subordinated Debentures due November 8, 2022 owned
by him, 6,000 shares which Mr. Bukaty has the present right to
acquire under the 1987 Employee Stock Benefit Plan and 1,760
shares allocated to Mr. Bukaty's account in the Company's
Employee Stock Ownership Plan and Trust which Mr. Bukaty has
the right to vote.
(6) Mr. Latshaw has also served as Chairman of the Board of Helton,
Inc., an 80% owned subsidiary of the Company and a manufacturer
of plastic products, since August 1993, as Chairman of the
Board and Chief Executive Officer of Coast Wire & Plastic Tech,
Inc., a wholly-owned subsidiary of the Company and a cable and
wire manufacturer, since December 1993, and as Chairman of the
Board and Chief Executive Officer of I.H. Molding, Inc., a
wholly-owned subsidiary of Wescon Products Company and a
manufacturer of plastic products, since September 1995. Mr.
Latshaw served as Chairman of the Board of Directors of Latshaw
Garden & Leisure, Inc., a subsidiary of the Company and
formerly a distributor of consumer products and garden tools,
from July 1989 until it liquidated its inventory in 1992. Mr.
Latshaw is the father of Constance H. Latshaw and Elizabeth A.
Reid-Scott, directors of the Company.
(7) Includes 278,000 shares which Mr. Latshaw has the present right
to acquire upon conversion of Variable Interest Rate
Convertible Subordinated Debentures due November 8, 2022 owned
by him, 6,000 shares which Mr. Latshaw has the present right to
acquire pursuant to the 1987 Employee Stock Benefit Plan, 1,848
shares allocated to Mr. Latshaw's account in the Company's
Employee Stock Ownership Plan and Trust which Mr. Latshaw has
the right to vote and 266,000 shares owned by Con-Lib Holding
Company. See footnote (7) under Item 12 hereof.
(8) From 1989 until 1992, Mr. Gale also served as Managing Director
of Maiden Lane Associates, Ltd., merchant bankers, New York,
New York. Mr. Gale also serves as a director of Adage, Inc.
and Prins Recycling Corp.
(9) Includes 2,500 shares which are held by a trust for Mr. Gale's
daughter. As trustee, Mr. Gale has sole voting power with
respect to such shares.
(10) Ms. Reid-Scott has been self-employed as a motion picture
screenwriter and private investor during the past five years,
except during the period from July, 1989 until February, 1991,
when she served as Vice President of Product Development of
Latshaw Garden & Leisure, Inc. Ms. Reid-Scott is the sister of
Constance H. Latshaw and the daughter of John Latshaw.
(11) Constance H. Latshaw has been self-employed as a private
investor during the past five years, and is the sister of
Elizabeth A. Reid-Scott and the daughter of John Latshaw.
(12) Mr. Pangrac was employed by TimeWarner Cable, a cable
television provider, as Vice President of Engineering from 1992
to 1994 and as Director of Engineering from 1990 to 1992.
TimeWarner Cable was formerly known as American Television and
Communications Corp.
During the 1995 fiscal year, Michael E. Bukaty, an executive officer
and director of the Company, filed late one Form 4 reporting a single
transaction.
<PAGE>
Item 11 - Executive Compensation.
SUMMARY COMPENSATION TABLE
The following table provides certain summary information
concerning compensation paid or accrued by the Company to or on
behalf of (i) the Company's Chief Executive Officer and (ii) each
executive officer of the Company during the fiscal year ended
October 28, 1995 who received compensation in excess of $100,000 for
services rendered in all capacities to the Company and its
subsidiaries during the fiscal year.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Compensation
Name and Fiscal
Principal Position Year No. of Shares
Underlying All
Stock Options Other
Salary Bonus Granted Compensation
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
John Latshaw 1995 $174,000 $66,864 0 $5,280(1)
Chairman of the 1994 166,000 56,000 0 5,824
Board, Managing 1993 165,250 50,000 10,000 6,328
Director and Chief
Executive Officer
Michael E. Bukaty 1995 $174,000 $66,864 0 $5,214(1)
President and 1994 166,000 56,000 0 6,098
Chief Operating 1993 155,250 50,000 10,000 5,598
Officer
David G. Carr 1995 $100,860 $30,084 0 $3,934(1)
Senior Vice Presi- 1994 92,500 24,000 0 3,699
dent and Chief 1993 88,000 21,000 5,000 3,203
Financial Officer
</TABLE>
(1) The amounts shown consist of (i) Company contributions under the
Company's Employee Stock Ownership Plan and Trust allocated during fiscal
year 1995 to Mr. Latshaw's account in the amount of 255 shares of common
stock valued at $1,530, to Mr. Bukaty's account in the amount of 244
shares valued at $1,464 and to Mr. Carr's account in the amount of 132
shares valued at $792 and (ii) 50% matching contributions by the Company
during fiscal year 1995 under the Company's 401(k) salary reduction plan
in the amount of $3,750 to the account of Mr. Latshaw, $3,750 to the
account of Mr. Bukaty and $3,142 to the account of Mr. Carr under the
Plan.
<PAGE>
AGGREGATE OPTION EXERCISES AND
FISCAL YEAR-END OPTION VALUE TABLE
The following table shows the number and value of shares of Common Stock
represented by outstanding stock options held by each of the named
executive officers as of October 28, 1995. No options were exercised
during the 1995 fiscal year.
<TABLE>
<CAPTION>
Number of Shares of Value of Unexercised
Common Stock Underlying In-the-Money
Unexercised Options at Options at
October 28, 1995(#) October 28, 1995($)
Options Options Options Options
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
John Latshaw 3,000 7,000 3,000 7,000
Michael E. Bukaty 3,000 7,000 3,000 7,000
David G. Carr 1,500 3,500 1,500 3,500
</TABLE>
PENSION PLAN TABLE
The following table shows the estimated annual straight life
annuity benefits payable upon retirement to participants in the
Company's retirement income plan, based upon specified base salary
and years of service classifications.
<TABLE>
<CAPTION>
Annual
Base
Salary Years of Service at age 65
5 10 15 20 25 30 & Over
<C> <C> <C> <C> <C> <C> <C>
$ 75,000 $ 4,041 $ 8,082 $ 12,122 $ 16,163 $ 20,204 $ 24,245
100,000 5,707 11,415 17,122 22,830 28,537 34,245
125,000 7,374 14,748 22,122 29,497 36,871 44,245
150,000 9,041 18,082 27,122 36,163 45,204 54,245
175,000 10,707 21,415 32,122 42,830 53,537 64,245
200,000 12,374 24,748 37,122 49,497 61,871 74,245
225,000 14,041 28,082 42,122 56,163 70,204 84,245
</TABLE>
The retirement income plan is available to salaried employees of
the Company and salaried employees of Wescon Products Company and
Helton, Inc., two subsidiaries of the Company. The Company makes
such contributions to the plan as are actuarialy determined to be
necessary to provide for plan funding. The plan provides for an
annual straight life annuity payments after 30 years of service at
age 65 equal to 40% of the employee's average base salary for the
five highest consecutive years of salary during the last fifteen
years of employment, reduced by 40% of the employee's annual primary
social security benefit. The pension is reduced proportionately for
less than 30 years of service and is actuarialy reduced for
retirement before age 65. The plan provides that, commencing in
1994, covered compensation per year for purposes of the plan may not
exceed $150,000. The amount of compensation of Messrs. Latshaw,
Bukaty and Carr covered under the plan is their salary as set forth
in the Summary Compensation Table, excluding for Messrs. Latshaw and
Bukaty compensation received for service as directors of the Company,
and subject to the $150,000 limit described above. The amount of
covered compensation for fiscal year 1995 was $150,000 for Mr.
Latshaw, $150,000 for Mr. Bukaty and $100,860 for Mr. Carr.
Mr. Latshaw has seven years of service, Mr. Bukaty has fifteen years
of service and Mr. Carr has twelve years of service under the plan.
PENSION AND COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Pension and Compensation Committee
are L. Chandler Smith, Chairman, James C. Gale and David M. Pangrac.
L. Chandler Smith is a consultant to the Company, and holds the
title of Director of Corporate Development of the Company. Mr. Smith
served as Chairman of the Executive Committee of the Board of
Directors of the Company from September, 1987 until November, 1989,
was Chairman of the Board of Directors of the Company prior to
September, 1987, and was Chief Executive Officer of the Company prior
to March, 1984. Mr. Smith is a director of Helton, Inc., an 80%
owned subsidiary of the Company, and served as Chairman of the Board
of Helton, Inc. until August, 1993. Mr. Smith received no
compensation for such service. David G. Carr, Senior Vice President,
Chief Financial Officer and Secretary of the Company, serves as a
director of Helton, Inc and a director of Coast Wire & Plastic Tech,
Inc. During the last fiscal year, the Company made payments
totalling $95,721 to Mr. Smith and a corporation wholly-owned by Mr.
Smith. The amount paid includes $50,971 paid to Mr. Smith under a
supplemental retirement agreement. Such agreement provides for
payments to Mr. Smith during his lifetime of $4,248 per month, with
$3,186 per month to be paid to his present wife during her lifetime
in the event of his death. The agreement requires Mr. Smith to
render consulting services to the Company and not to compete with the
Company. An additional amount of $31,750 was paid under an agreement
between the Company and a corporation wholly-owned by Mr. Smith
pursuant to which the corporation is to be paid a specified amount
per month, currently $2,750, plus incidental expenses, for exploring
prospective acquisitions for the Company. The agreement may be
terminated by either party as of the end of any calendar month by
giving the other party notice prior to the end of the preceding
calendar month. In addition, Mr. Smith was paid $6,000 as
compensation for his services as a director and a member of the
Executive Committee of the Board of Directors of the Company and a
$7,000 bonus for services rendered to the Company.
COMPENSATION OF DIRECTORS
Directors of the Company receive compensation of $4,000 per
annum, plus $500 and out-of-pocket traveling expenses for attendance
at each Board meeting. Directors who are members of the Executive
Committee also receive $1,000 per annum.
Item 12 - Security Ownership of Certain Beneficial Owners and
Management
The following table shows as of February 10, 1996, unless
otherwise indicated, the total number of shares of common stock of
the Company beneficially owned by (i) persons known to be beneficial
owners of more than 5% of the outstanding common stock, (ii) the
executive officers listed in the Summary Compensation Table in Item
11 hereof, and (iii) all directors and executive officers of the
Company as a group. The beneficial ownership of shares by
individual directors is shown in the table in Item 10 hereof and is
incorporated herein by reference.
<TABLE>
<CAPTION>
Percentage of
Outstanding
Percentage of Shares Benefi-
Shares Outstanding cially Owned
Beneficially Shares Benefi- on a Fully-
Beneficial Owner Owned(1) cially Owned(2) Diluted Basis(3)
<S> <C> <C> <C>
Michael E. Bukaty 23,420(4) 4.5% 2.3%
2533 South West Street
Wichita, KS. 67217
David G. Carr 7,076(5) 1.4% 0.7%
2533 South West Street
Wichita, KS. 67217
Con-Lib Holding Company 266,000(6) 39.2% 26.0%
Gerard J. Mos III,
General Manager
No. 3 Dunford Circle
Kansas City, MO 64112
John Latshaw 664,315(7) 69.0% 64.8%
No. 3 Dunford Circle
Kansas City, MO 64112
Latshaw Enterprises, Inc. 102,579(8) 20.5% 10.0%
Employee Stock Ownership
Plan and Trust
P. O. Box 419226
Kansas City, MO 64141
Lazard Freres & Co., L.L.C. 54,800(9) 10.6% 5.3%
One Rockefeller Plaza
New York, N.Y. 10020
Boatmen's Bancshares, Inc. 25,725(10) 5.1% 2.5%
Boatmen's Trust Company
One Boatmen's Plaza
St. Louis, MO 63101
All Directors and
Executive Officers of
the Company as a Group 795,026(11) 80.6% 77.6%
(1) Unless otherwise indicated, each person has sole voting and
investment power with respect to the shares listed.
(2) The calculation of the percentage of outstanding shares of
common stock beneficially owned by a beneficial owner or group
of beneficial owners, as the case may be, assumes that only the
currently exercisable stock options or convertible securities
held by that owner or group have been exercised or converted
into common stock and that no other outstanding stock options or
convertible securities have been exercised or converted.
(3) The calculation of the percentage of outstanding shares of
common stock beneficially owned on a fully-diluted basis assumes
that all currently exercisable outstanding stock options have
been exercised and that all outstanding convertible securities
have been converted into common stock.
(4) Includes 12,400 shares which Mr. Bukaty has the present right to
acquire upon conversion of Variable Interest Rate Convertible
Subordinated Debentures due November 8, 2022 owned by him, 6,000
shares which Mr. Bukaty has the present right to acquire under
the 1987 Employee Stock Benefit Plan and 1,760 shares allocated
to Mr. Bukaty's account in the Company's Employee Stock
Ownership Plan and Trust which Mr. Bukaty has the right to vote.
(5) Includes 2,400 shares which Mr. Carr has the present right to
acquire upon conversion of Variable Interest Rate Convertible
Subordinated Debentures due November 8, 2022 owned by him, 3,000
shares which Mr. Carr has the present right to acquire under the
1987 Employee Stock Benefit Plan and 976 shares allocated to
Mr. Carr's account in the Company's Employee Stock Ownership
Plan and Trust which Mr. Carr has the right to vote.
(6) Con-Lib Holding Company is a Missouri general partnership (the
"Partnership") whose partners are John Latshaw, a trust for the
benefit of Elizabeth A. Reid-Scott and a trust for the benefit
of Constance H. Latshaw. Gerard J. Mos III serves as the
General Manager of the Partnership. As General Manager, Mr. Mos
has the power to vote and dispose of the shares held by the
Partnership except to the extent Mr. Mos is instructed otherwise
by a majority in interest of the partners. Mr. Latshaw, as the
holder of a 50.2% interest in the Partnership, has the power to
instruct Mr. Mos as to the voting and disposition of the shares
held by the Partnership if he so chooses. Mr. Mos has no
beneficial interest in the shares held by the Partnership.
Elizabeth A. Reid-Scott and Constance H. Latshaw have no voting
or investment power with respect to the shares held by the
Partnership and disclaim beneficial ownership of such shares.
The amount of shares shown in the table includes 178,000 shares
of common stock which the Partnership has the present right to
acquire upon conversion of Variable Interest Rate Convertible
Subordinated Debentures due November 8, 2022 owned by it.
(7) Includes 278,000 shares which Mr. Latshaw has the present right
to acquire upon conversion of Variable Interest Rate Convertible
Subordinated Debentures due November 8, 2022 owned by him, 6,000
shares which Mr. Latshaw has the present right to acquire
pursuant to the 1987 Employee Stock Benefit Plan, 1,848 shares
allocated to Mr. Latshaw's account in the Company's Employee
Stock Ownership Plan and Trust which Mr. Latshaw has the right
to vote and 266,000 shares owned by Con-Lib Holding Company.
See footnote (6) above.
(8) Shares beneficially owned as of December 31, 1995. UMB Bank,
N.A., 10th and Grand Avenue, Kansas City, Missouri, serves as
Trustee of the Company's Employee Stock Ownership Plan and
Trust. The Trust is administered by the ESOT Administrative
Committee of the Board of Directors of the Company, which
Committee has the sole power to instruct the Trustee with
respect to the investment of the shares owned by the Trust and
with respect to the voting of 42,105 of the shares.
Participants have the right to instruct the Trustee as to how to
vote the remaining 60,474 shares to the extent such stock is
allocated to each such participant. Under the terms of the
Trust, if the Committee fails to instruct the Trustee as to how
to vote the 42,105 shares, the Trustee shall vote such stock and
if the Trustee abstains from voting the 42,105 shares, the
Trustee is required to vote such stock in accordance with
instructions received from each participant to the extent such
stock is allocated to each such participant. To the extent
voting instructions are requested from participants and are not
received by the Trustee by a stated deadline, the Trustee shall
vote such stock as the Committee shall instruct and if the
Committee fails to instruct the Trustee as to how to vote such
stock, the Trustee shall vote such stock in the manner deemed
appropriate by the Trustee. As of December 31, 1995, the
members of the Committee were Mr. Pangrac, Chairman, and Mr.
Smith, both of whom are directors of the Company.
(9) Shares beneficially owned as of December 31, 1995, as reported
in a Schedule 13-G dated February 14, 1996, filed with the
Securities and Exchange Commission.
(10) Shares beneficially owned as of December 31, 1995, as reported
in a Schedule 13G dated February 7, 1995 filed with the
Securities and Exchange Commission. In the Schedule 13G, Boatmen's
Bancshares, Inc. and Boatmen's Trust Company disclosed that they
had sole voting power with respect to 25,725 shares and sole
dispositive power with respect to 25 shares.
(11) Includes 292,800 shares which executive officers and directors
have the present right to acquire upon conversion of Variable
Interest Rate Convertible Subordinated Debentures due November
8, 2022 owned by them, 15,000 shares which executive officers
and directors have a present right to acquire under the 1987
Employee Stock Benefit Plan, 2,500 shares held by a director as
trustee for a family member, 266,000 shares held by Con-Lib
Holding Company and 102,579 shares held by the Company's
Employee Stock Ownership Plan and Trust.
<PAGE>
Item 13 - Certain Relationships and Related Transactions.
For a description of payments made by the Company to L. Chandler
Smith, a director of the Company, during fiscal year 1995, see "Pension and
Compensation Committee Interlocks and Insider Participation".
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.
LATSHAW ENTERPRISES, INC.
(Registrant)
By:/s/ David G. Carr
David G. Carr
Senior Vice-President, Chief
Financial Officer and
Secretary
Dated: February 21, 1996
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 3, 1996
Commission file number 1-6072
LATSHAW ENTERPRISES, INC.
Name of Registrant
Delaware 44-0427150
State of Incorporation Employer's I.D. Number
2533 S. West Street
Wichita, Kansas 67217
Address of principal executive offices
(316) 942-7266
Registrant's telephone number
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 [ ]
Common Stock, $2 Par Value -- 500,580 Shares Outstanding at 2-3-96
<PAGE>
INDEX
LATSHAW ENTERPRISES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited).
Consolidated Balance Sheets - February 3, 1996 and October 28, 1995.
Consolidated Statements of Income - For the three months ended
February 3, 1996 and January 28, 1995.
Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows - For the three months ended
February 3, 1996 and January 28, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In thousands)
</TABLE>
<TABLE>
<CAPTION>
February 3, October 28,
1996 1995
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 584 $ 319
Marketable equity securities 478 450
Accounts and notes receivable - net 8,518 6,787
Inventories, at lower of cost (LIFO)
or market 7,663 8,056
Refundable income taxes 116 116
Deferred income taxes 691 691
Prepaid expenses 186 399
Total Current Assets 18,236 16,818
Property, plant and equipment at cost 19,766 19,182
Less accumulated depreciation and
amortization (12,458) (12,107)
7,308 7,075
Noncompete agreement - net 509 537
Other assets 244 218
$26,297 $24,648
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 4,603 $ 3,470
Accounts payable 2,580 2,107
Accrued expenses 1,474 2,086
Current portion of long-term debt 53 53
Current portion of noncompete obligation 111 111
Income taxes payable 164 -
Total current liabilities 8,985 7,827
Long-term debt, less current portion 2,761 2,774
Noncompete obligation, less current portion 333 333
Pensions and deferred compensation 1,610 1,621
Postretirement benefit obligation 275 266
Deferred income taxes 248 238
Shareholders' equity
Preferred stock, no par value:
Authorized shares - 500,000, none issued - -
Common stock, $2 par value:
Authorized shares - 1,500,000
Issued shares - 1,002,162 2,004 2,004
Class C common stock, $2 par value:
Authorized shares - 1,000,000 in 1992,
none issued - -
Additional paid-in capital 4,899 4,899
Unrealized gains on available-
for-sale securities 40 22
Retained earnings 15,452 14,965
22,395 21,890
Less cost of common stock held
in treasury, 501,582 shares in
1996 and 500,187 in 1995 (10,310) (10,301)
12,085 11,589
$ 26,297 $ 24,648
</TABLE>
(This is an unaudited statement)
<PAGE>
<TABLE>
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
<CAPTION>
Three Months Ended
February 3, January 28,
1996 1995
<S> <C> <C>
Net sales $ 12,018 $ 11,072
Cost of sales 9,290 8,561
Gross Profit 2,728 2,511
Selling, general and administrative expenses 1,798 1,634
Interest expense 149 113
Other - net 10 12
Income before income taxes 771 752
Income tax provision 284 279
Net income $ 487 $ 473
Net income per common and
common equivalent share:
Primary $ .94 $ .91
Fully Diluted $ .52 $ .50
Common and common equivalent
shares outstanding:
Primary 518 519
Fully diluted 1,018 1,019
</TABLE>
(This is an unaudited statement)
Notes to Consolidated Financial Statements:
The condensed financial statements included herein have been prepared by the
Company without audit, and in the opinion of management, reflect all the
adjustments necessary to fairly present the Company's results of operations
for the period. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. Although the
Company believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report.
<PAGE>
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
[CAPTION]
<TABLE>
Three Months Ended
February 3, January 28,
1996 1995
Operating activities
<S> <C> <C>
Net income $ 487 $ 473
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 379 285
Deferred compensation (11) (2)
Post retirement benefit obligation 9 8
Provision for loss on accounts receivable 7 6
Changes in operating assets and liabilities
affecting cash and cash equivalents:
Accounts and notes receivable (1,738) (1,676)
Inventories 393 148
Prepaid expenses 213 153
Accounts payable 473 (216)
Accrued expenses (612) (355)
Income taxes payable 164 240
Net cash used in operating activites (236) (846)
Investing activities
Purchases of property, plant and equipment (584) (344)
Other (26) (17)
Net cash used in investing activities (610) (361)
Financing activities
Payments of notes payable (167) (58)
Proceeds from issuance of notes payable 1,300 1,292
Payments of long-term debt (13) (12)
Purchase of treasury stock (9) (4)
Net cash provided by financing activities 1,111 1,218
Increase in cash and cash equivalents 265 11
Cash and cash equivalents at beginning
of period 319 184
Cash and cash equivalents at end of period $ 584 $ 195
(This is an unaudited statement)
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Net sales for the first quarter of 1996 increased 8.5 percent to
$12,018,000 compared to $11,072,000 for the same period in 1995. Included in
the sales numbers for 1996 are revenues of $532,000 which were attributable
to Latshaw's acquisition and operation of the assets of I.H. Molding, Inc.
in Dallas, Texas. This acquisition was completed September 1, 1995. Excluding
the I.H. Molding revenue, comparable year-to-year divisional sales increased
3.7 percent. Although the Company is experiencing sales increases, the rate of
growth has been slowing. This appears to be a reflection of the trend in the
general economy.
Gross profit was 22.7 percent in the first quarter of 1996 compared to
22.7 percent for the same period in 1995. Slightly higher material costs were
offset by operating efficiencies resulting from the higher sales volume. The
Company has seen the price of certain components of raw material such as
plastic resin and wire begin to plateau and in some cases decrease. Management
does not know whether this trend will continue.
Selling, general and administrative expenses increased $164,000 in the
first quarter of 1996 when compared to the same period in 1995. As a
percentage of sales these costs were 15.0 percent in 1996 versus 14.8
percent in 1995. The higher costs in 1996 were primarily the result of
increased commissions and performance bonuses due to the higher sales volume.
Interest expense was $149,000 for the first quarter of 1996 compared to
$113,000 for the same period a year earlier. This increase was due to
additional debt incurred to meet the working capital requirements of higher
sales volume plus bank borrowings used to fund asset acquisitions.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company adopted the provisions
of the new standard for investments held as of or acquired after October 30,
1994. Under SFAS No. 115, marketable equity securities held by the Company
are classified as available for sale. Available for sale securities are
carried at fair market value, with the unrealized gains and losses, net of
tax, reported as a separate component of shareholders' equity.
The effective income tax rate was 36.8 percent in the first quarter of
1996 compared to 37.1 percent in the first quarter of 1995.
The Company had net income for the first quarter in 1996 of $487,000 or
94 cents per share (primary) and 52 cents per share (fully diluted). For the
same period in 1995 the Company had a net profit of $473,000 or 91 cents per
share (primary) and 50 cents per share (fully diluted).
The computation of primary earnings per common and common equivalent
share is based on the weighted average number of outstanding common shares and
additional shares assuming the exercise of dilutive stock options. The
computation of fully diluted earnings per share assumes conversion of the
variable interest rate convertible debentures.
In the first quarter of 1996, the Company used $236,000 in its operating
activities and $584,000 for its investment in property, plant and equipment.
These cash uses were funded by drawing on the available bank lines of credit.
Growth in trade receivables was the primary reason for this cash
requirement which resulted primarily from the effects of higher sales volume.
As of February 3, 1996, the Company, through its subsidiary Wescon
Products, had an unused line of credit for short-term bank borrowings of
$1,600,000 remaining on the $6,000,000 available, providing for interest at
prime. The Company, through its subsidiary Helton, Inc., also has outstanding
borrowings of $75,000 at February 3, 1996 on a $350,000 bank line of credit.
Management believes that the combination of funds available through its bank
lines of credit along with the anticipated cash flow from operations will
provide the capital resources necessary to meet the Company's working capital
needs. Despite the Company's existing capital resources, opportunities may
arise that Management believes would enhance the value of the Company that
could require financing not currently provided for. There were no significant
capital expenditure commitments outstanding at February 3, 1996.
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
Except as set forth below, there are no material pending legal
proceedings other than ordinary routine litigation incidental
to the business, to which either the Company or its subsidiaries are a party
or of which any of the property of such entities is the subject.
On August 13, 1993 the Company received an inquiry from the United States
Environmental Protection Agency ("EPA") concerning the disposal of hazardous
substances at the Doepke-Holliday Super Fund Site (the "Site") in Johnson
County, Kansas. In the letter, the EPA stated that it had information
indicating that wastes from the Company were disposed of at the Site. The
Company has no records of any such disposal of wastes at the Site. However,
the Company no longer has access to most of the records of two divisions which
it operated during the relevant time period and subsequently sold, a paint and
chemical coatings division and a manufactured housing division.
The Company has agreed to participate in the Holliday Remediation
Task Force (the Task Force), a group of potentially responsible parties for
the Site. The Task Force currently has 40 active members and is negotiating
participation by other potentially responsible parties. Parties who join the
task force agree to participate at one of five specified levels of
contribution based upon the Task Force's assessment of liability and to pay a
portion of future response and remediation costs based upon their specified
level of contribution. The Company will participate in the third contribution
level and the Task Force's preliminary estimate of the amount of financial
contribution which may be required from the Company at that level is $75,000
to $100,000. A consent decree between the Task Force and the EPA has been
executed and filed with the United States District Court for the District of
Kansas. Neither ultimate liabilty nor costs are ascertainable at this time.
Based upon the information provided by the Task Force, the Company estimates
the amount of the financial contribution by the Company, including legal and
consulting costs associated with the contingency, that may be required will
be $150,000.
At October 29, 1994, the Company accrued a current liability of $150,000
relating to this contingency. The Company paid approximately $25,000 with
respect to this matter during fiscal year 1995, and its accrued expenses at
October 28, 1995 and February 3, 1996 includes a current liability of
$125,000 relating to this contingency. The Company does not expect final
closure of this matter during fiscal year 1996. As a result of this matter,
the Company has requested copies of insurance policies that were in effect
during the period the contamination allegedly took place. The Company plans
to evalute the coverage that existed during this period and determine whether
a claim should be filed with the carrier. The Company's ability to obtain
contribution from the insurance carrier is not ascertainable at this time.
In the event the Company ultimately pays certain costs as a
potentially responsible party, it is the opinion of management, based
upon currently available information, that any such costs or liability
are not likely to materially vary from the amount accrued at October 28,
1995 and February 3, 1996.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Primary and Fully Diluted Net Income
per Common Share Computation
(27) Financial Data Schedule
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LATSHAW ENTERPRISES, INC.
Registrant
March 19, 1996 /s/ Michael E. Bukaty
Date Michael E. Bukaty
President
March 19, 1996 /s/ David G. Carr
Date David G. Carr
Sr. Vice President, CFO
<PAGE>
EXHIBIT INDEX
Assigned
Exhibit Number Description of Exhibit
(11) Primary and Fully Diluted
Net Income per Common Share
Computation
(27) Financial Data Schedule [Not attached]
<PAGE>
EXHIBIT 11
Latshaw Enterprises, Inc.
<TABLE>
Primary and Fully Diluted Net Income
per Common Share Computation
<CAPTION>
Three Months Ended
February 3, January 28,
1996 1995
Primary
Net income applicable
<S> <C> <C> <C> <C>
to common shareholders $ 487 $ 473
Weighted average number of common
shares outstanding during the period 501 497
Add - common equivalent shares (determined
using the "treasury stock method")
representing shares issuable upon the
exercise of stock options granted 17 22
Weighted average number of common and
common equivalent shares outstanding 518 519
Net income per share $ .94 $ .91
Fully Diluted
Net income $ 487 $ 473
Add - interest expense of convertible
subordinated debentures 39 37
Net income applicable to common shareholders $ 526 $ 510
Weighted average number of common shares
outstanding during the period 501 497
Add - common equivalent shares (determined
using the "treasury stock method") representing
shares issuable upon the exercise of stock
options granted 17 22
Add - dilutive convertible subordinated
debentures 500 500
Weighted average number of common and
common equivalent shares outstanding 1,018 1,019
Net income per share $ .52 $ .50
</TABLE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 4, 1996
Commission file number 1-6072
LATSHAW ENTERPRISES, INC.
Name of Registrant
Delaware 44-0427150
State of Incorporation IRS Employer I.D. Number
2533 S. West Street
Wichita, Kansas 67217
Address of principal executive offices
(316) 942-7266
Registrant's telephone number
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 [ ]
Common Stock, $2 Par Value-498,340 Shares Outstanding at 5-4-96
<PAGE>
INDEX
LATSHAW ENTERPRISES, INC.
Part I. Financial Information
Item 1. Condensed Financial Statements (Unaudited).
Consolidated Balance Sheets - May 4, 1996 and October
28, 1995.
Consolidated Statements of Income - For the three months
and six months ended May 4, 1996 and April 29, 1995.
Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows - For the six months
ended May 4, 1996 and April 29, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K.
Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In thousands)
<TABLE>
<CAPTION>
May 4, October 28,
1996 1995
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 574 $ 319
Marketable equity securities 522 450
Accounts and notes receivable-net 7,351 6,787
Inventories, at lower of cost
(LIFO) or market 7,044 8,056
Refundable income taxes 116 116
Deferred income taxes 691 691
Prepaid expenses 168 399
Total current assets 16,466 16,818
Property, plant and equipment at cost 20,109 19,182
Less accumulated depreciation
and amortization (12,796) (12,107)
7,313 7,075
Noncompete agreement - net 504 537
Other assets 217 218
$24,500 $24,648
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 2,326 $ 3,470
Accounts payable 2,068 2,107
Accrued expenses 1,670 2,086
Current portion of long-
term debt 53 53
Current portion of non-
compete obligation 111 111
Income taxes payable 378 -
Total current liabilities 6,606 7,827
Long-term debt, less current portion 2,748 2,774
Noncompete obligations, less current
portion 333 333
Pensions and deferred compensation 1,598 1,621
Postretirement benefit obligation 285 266
Deferred income taxes 238 238
Shareholders' equity
Preferred stock, no par value:
Authorized shares - 500,000,
none issued - -
Common stock, $2 par value:
Authorized shares - 1,500,000
Issued shares - 1,002,162 2,004 2,004
Class C common stock, $2 par
value: Authorized shares -
1,000,000 in 1992, none issued - -
Additional paid-in capital 4,899 4,899
Unrealized gains on marketable
securities 68 22
Retained earnings 16,046 14,965
23,017 21,890
Less cost of common stock
held in treasury,
503,822 shares in 1996
and 500,187 in 1995 (10,325) (10,301)
12,692 11,589
$24,500 $24,648
</TABLE>
(This is an unaudited statement)
<PAGE>
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 4, April 29, May 4, April 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $11,367 $11,682 $23,385 $22,754
Cost of sales 8,637 8,762 17,927 17,323
Gross Profit 2,730 2,920 5,458 5,431
Selling, general and
administrative expenses 1,581 1,566 3,379 3,200
Interest expense 171 131 320 244
Other - net 31 12 41 24
Income before income taxes 947 1,211 1,718 1,963
Income tax provision 353 450 637 729
Net income $ 594 $ 761 $1,081 $ 1,234
Net income per common and
common equivalent share:
Primary $ 1.16 $ 1.48 $ 2.10 $ 2.39
Fully Diluted $ .62 $ .79 $ 1.14 $ 1.28
Common and common equivalent
shares outstanding:
Primary 513 515 515 517
Fully Diluted 1,013 1,015 1,015 1,017
</TABLE>
(This is an unaudited statement)
<PAGE>
Notes to Consolidated Financial Statements:
The condensed financial statements included herein have been prepared
by the Company without audit, and in the opinion of management, reflect
all the adjustments necessary to fairly present the Company's results
of operations for the period. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual
report.
Net Income Per Share
The computation of primary earnings per common and common equivalent share
is based on the weighted average number of outstanding common shares and
additional shares assuming the exercise of dilutive stock options. The
computation of fully diluted earnings per share further assumes conversion
of the variable interest rate convertible debentures.
<PAGE>
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
May 4, April 29,
1996 1995
Operating activities
<S> <C> <C>
Net income $1,081 $1,234
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 722 573
Deferred compensation (23) (4)
Postretirement benefit obligation 19 15
Provision for loss on accounts
receivable 12 2
Changes in operating assets and
liabilities affecting cash and
cash equivalents:
Accounts and notes receivable (576) (1,447)
Inventories 1,012 (103)
Prepaid expenses 231 202
Accounts payable (39) 59
Accrued expenses (416) (211)
Income taxes 352 145
Net cash provided by operating activities 2.375 465
Investing activities
Purchases of property, plant and equipment (927) (685)
Other 1 (7)
Net cash used in investing activities (926) (692)
Financing activities
Payments of notes payable (2,520) (1,045)
Proceeds from the issuance of notes
payable 1,376 1,374
Payments of long-term debt (26) (24)
Purchase of treasury stock (24) (7)
Net cash provided by (used in) financing
activities (1,194) 298
Increase in cash and cash equivalents 255 71
Cash and cash equivalents at beginning of period 319 184
Cash and cash equivalents at end of period $ 574 $ 255
</TABLE>
(This is an unaudited statement)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales revenue for the second quarter of 1996 was $11,367,000. This
represents a 2.7 percent decrease when compared to the same quarter
in 1995 when sales were $11,682,000. For the first six months of 1996,
sales revenue was $23,385,000 or a 2.8 percent increase compared to
1995 revenues of $22,754,000. Included in the sales figures for the
three and six months of 1996 are revenues of $457,000 and $989,000,
respectively, which were attributable to Latshaw's acquisition and
operation of the assets of I.H. Molding in Dallas, Texas. This acqui-
sition was completed September 1, 1995. Excluding the I.H. Molding
revenue, comparable year-to-year divisional sales decreased 6.6 percent
and 1.6 percent for the three month and six month period, respectively.
Slowing general economic conditions appear to be contributing to a
weaker demand for the Company's products.
Gross profit in the second quarter of 1996 was 24.0 percent versus 25.0
percent in the second quarter of 1995. A shift in the sales mix to
products with lower profit margins combined with competitive pressure
were the primary cause for the declines in 1996.
Selling, general and administrative expenses increased $15,000 in the
second quarter and $179,000 for the six months of 1996. As a percent
of sales for the six month period, these costs amounted to 14.4 percent
in 1996 compared to 14.1 percent in 1995. The higher costs in 1996 were
mainly the result of acquisition expenses associated with the purchase
of I.H. Molding.
Interest expense was $171,000 for the second quarter of 1996 compared
to $131,000 for the same period a year earlier. For the six months in
1996, interest expense was $320,000 versus $244,000 in 1995. The higher
costs in 1996 were primarily due to additional debt incurred to meet
working capital needs plus bank borrowings used to fund the purchase of
the I.H. Molding assets in September of 1995.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company adopted the
provisions of the new standard for investments held as of or acquired
after October 30, 1994. Under SFAS No. 115, marketable equity securities
held by the Company are classified as available for sale. Available for
sale securities are carried at fair market value, with the unrealized
gains and losses, net of tax, reported as a separate component of share-
holders' equity.
The effective income tax rate was 37.1 percent for the first six months of
both 1996 and 1995.
The Company had net income for the second quarter of 1996 of $594,000 or
$1.16 per share (primary) and $.62 per share (fully diluted) compared to
a net profit of $1.48 per share (primary) and $.79 per share (fully diluted)
on net income of $761,000 for the second quarter of 1995. For the six
months of 1996, there was a per share net profit of $2.10 (primary) and
$1.14 (fully diluted) on total net profit of $1,081,000. This compares to
a $2.39 per share profit (primary) and $1.28 per share (fully diluted) on
total net profit of $1,234,000 for the same period in 1995.
The computation of primary earnings per common and common equivalent share
is based on the weighted average number of outstanding common shares and
additional shares assuming the exercise of dilutive stock options. The
computation of fully diluted earnings per share further assumes conversion
of the variable interest rate convertible debentures.
For the six months of 1996 and 1995, the Company had net cash balances
provided from operations of $2,375,000 and $465,000, respectively. These
funds were used to pay down existing bank lines of credit and/or for the
purchase of property and equipment.
As of May 4, 1996, the Company, through its subsidiary, Wescon Products
Company, had an unused line of credit for short-term bank borrowing of
$4,800,000 remaining on the $7,000,000 available, providing for interest
at prime. The Company, through its subsidiary, Helton, Inc., had an
unused bank line of credit at May 4, 1996 of $350,000. Management believes
that the combination of funds available through its bank lines of credit
along with the anticipated cash flow from operations will provide the
capital resources necessary to meet the Company's working capital needs.*
Despite the Company's existing capital resources, opportunities may arise
that Management believes would increase the value of the Company that could
require financing not currently provided for. There were no significant
capital expenditure commitments outstanding at May 4, 1996 that have not
been previously disclosed.
*This statement is a forward-looking statement, which is subject
to certain risks and uncertainties. See PART II, Item 5, "Forward-
Looking Statements."
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Except as set forth below, there are no material pending legal proceedings
other than ordinary routine litigation incidental to the business, to which
either the Company or its subsidiaries are a party or of which any of the
property of such entities is the subject.
On August 13, 1993 the Company received an inquiry from the United Stated
Environmental Protection Agency ("EPA") concerning the disposal of hazardous
substances at the Doepke-Holliday Super Fund Site (the "Site") in Johnson
County, Kansas. In the letter, the EPA stated that it had information
indicating that wastes from the Company were disposed of at the Site. The
Company has no records of any such disposal of wastes at the Site. However,
the Company no longer has access to most of the records of two divisions
which it operated during the relevant time period and subsequently sold, a
paint and chemical coatings division and a manufactured housing division.
The Company has agreed to participate in the Holliday Remediation Task Force
(the "Task Force"), a group of potentially responsible parties for the Site.
The Task Force currently has 40 active members and is negotiating partici-
pation by other potentially responsible parties. Parties who join the Task
Force agree to participate at one of five specified levels of contribution
based upon the Task Force's assessment of liability and to pay a portion of
future response and remediation costs based upon their specified level of
contribution. The Company will participate in the third contribution level
and the Task Force's preliminary estimate of the amount of financial contri-
bution which may be required from the Company at that level is $75,000 to
$100,000. A consent decree between the Task Force and the EPA has been
executed and filed with the United States District Court for the District
of Kansas. Neither ultimate liability nor costs are ascertainable at this
time. Based upon the information provided by the Task Force, the Company
estimates the amount of the financial contribution by the Company, including
legal and consulting costs associated with the contingency, that may be
required will be $150,000.*
At October 29, 1994, the Company accrued a current liability of $150,000
relating to this contingency. The Company paid approximately $25,000 with
respect to this matter during fiscal year 1995, and its accruede expenses
at October 28, 1995 and May 4, 1996 includes a current liability of $125,000
relating to this contingency. The Company does not expect final closure of
this matter during fiscal year 1996. As a result of this matter, the
Company has requested copies of insurance policies that were in effect
during the period the contamination allegedly took place. The Company plans
to evaluate the coverage that existed during this period and determine
whether a claim should be filed with the carrier. The Company's ability to
obtain contribution from the insurance carrier is not ascertainable at this
time.
In the event the Company ultimately pays certain costs as a potentially
responsible party, it is the opinion of management, based upon currently
available information, that any such costs or liability are not likely to
materially vary from the amount accrued at October 28, 1995 and May 4, 1996.*
*This statement is a forward-looking statement, which is subject to certain
risks and uncertainties. See PART II, Item 5, "Forward-Looking Statements."
Item 5. Other Information
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q which
are not statements of historical fact constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, including, without limitation, the statements specifically
identified as forward-looking statements in this Form 10-Q. In addition,
certain statements in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases, and in oral statements
made by or with the approval of an authorized executive officer of the
Company which are not statements of historical fact constitute forward-
looking statements within the meaning of the Act. Examples of forward-
looking statements include, but are not limited to: (i) projections of
revenues, income or loss, earnings or loss per share, capital expenditures,
the payment or non-payment of dividends, capital structure and other
financial items, (ii) statements of plans and objectives of the Company or
its management or Board of Directors, including plans or objectives relating
to the products or services of the Company, (iii) statements of future
economic performance, and (iv) statements of assumptions underlying the
statements described in (i), (ii) and (iii).
Forward-looking statements made by or on behalf of the Company involve
risks and uncertainties which may cause actual results to differ materially
from those in such statements. Some important factors that could cause the
actual results to differ materially from those discussed in the forward-
looking statements include, but are not limited to: changes in general
economic conditions; competitive, regulatory or tax changes that affect
the cost of or demand for the Company's products; weather conditions;
adverse litigation results; failure to achieve cost-saving goals; changes
in raw material prices or availability; loss of one or more significant
customers; inflation; and changes in environmental regulation. Other
factors not identified herein could also have such an effect.
With respect to the forward-looking statement specifically identified in
PART I, Item 2 of this Form 10-Q regarding the adequacy of the Company's
capital resources, such statement is subject to several risks and
uncertainties including, without limitation: the future economic performance
of the Company (which is dependent in part upon the factors described above);
the ability of the Company's subsidiary, Wescon Products Company, to renew
its $7,000,000 line of credit, which expires in February, 1997, for the same
amount and upon substantially the same terms; future acquisitions of other
businesses not currently anticipated by management of the Company; and other
material expenditures not currently anticipated by management.
The forward-looking statements specifically identified in PART II, Item 1
of this Form 10-Q, which relates to the Company's expected costs and
liability in connection with the environmental matter described therein,
is subject to a number of risks and uncertainties, including, without
limitation: the actual costs of the clean-up may exceed those currently
projected; the Site may contain undiscovered conditions requiring further
remediation costs; the entities engaged by the Task Force to effect the
clean-up may fail to correctly remediate the Site; the EPA may reopen its
claims against all responsible parties, including the Company, as permitted
under the Consent Decree; and a third party may make claims against the
Company related to the Site. The occurrence of any of the foregoing may
cause the Company to incur additional liability or costs.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Primary and Fully Diluted Net Income
per Common Share Computation
(27) Financial Data Schedule
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
LATSHAW ENTERPRISES, INC.
/s/Michael E. Bukaty
Michael E. Bukaty
President
/s/David G. Carr
David G. Carr
Sr. Vice President, C.F.O.
June 17, 1996
<PAGE>
EXHIBIT INDEX
Assigned
Exhibit Number Description of Exhibit
(11) Primary and Fully Diluted Net Income
per Common Share Computation
(27) Financial Data Schedule [Not attached]
<PAGE>
EXHIBIT 11
Latshaw Enterprises, Inc.
Primary and Fully Diluted Net Income
per Common Share Computation
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 4, April 29, May 4, April 29,
1996 1995 1996 1995
(In thousands except per share data)
Primary
Net income applicable to
<S> <C> <C> <C> <C>
common shareholders $594 $761 $1,081 $1,234
Weighted average number
of common shares
outstanding during
the period 499 497 500 497
Add - common equivalent
shares (determined using
the "treasury stock
method") representing
shares issuable upon the
exercise of stock
options granted 14 18 15 20
Weighted average number
of common and common
equivalent shares
outstanding 513 515 515 517
Net income per share $1.16 $ 1.48 $ 2.10 $ 2.39
Fully Diluted
Net income $ 594 $ 761 $1,081 $1,234
Add - interest expense
of convertible
subordinated debentures 37 37 76 72
Net income applicable to
common shareholders $631 $ 798 $1,157 $1,306
Weighted average number
of common shares
outstanding during
the period 499 497 500 497
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Add - common equivalent
shares (determined using
the "treasury stock
method") representing
shares issuable upon the
exercise of stock options
granted 14 18 15 20
Add - dilutive convertible
subordinated debentures 500 500 500 500
Weighted average number of
common and common
equivalent shares
outstanding 1,013 1,015 1,015 1,017
Net income per share $ .62 $ .79 $1.14 $1.28
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