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
<PAGE>
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.
<PAGE>
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
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.
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>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the date
indicated.
Signature Title Date
*/s/ John Latshaw Chairman of the Board January 18, 1996
John Latshaw of Directors, Managing
Director, Chief
Executive Officer and
Director
*/s/ Michael E. Bukaty President, Chief January 18, 1996
Michael E. Bukaty Operating Officer
and Director
/s/ David G. Carr Senior Vice-President, January 18, 1996
David G. Carr Chief Financial and
Accounting Officer,
and Secretary
*/s/ James C. Gale Director January 18, 1996
James C. Gale
*/s/Elizabeth A. Reid-Scott Director January 18, 1996
Elizabeth A. Reid-Scott
*/s/L. Chandler Smith Director January 18, 1996
L. Chandler Smith
*By:/s/ David G. Carr
David G. Carr
Attorney-in-Fact
<PAGE>
Latshaw Enterprises, Inc.
Schedule I - Condensed Financial Information of Registrant
Condensed Balance Sheets
<TABLE>
October 28, October 29,
1995 1994
(Thousands of Dollars)
Assets
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 90 $ 126
Marketable equity securities 450 415
Accounts receivable - 1
Refundable income taxes 116 -
Deferred income taxes - 17
Prepaid expenses 306 264
Total current assets 962 823
Property, plant and equipment, net 19 16
Deferred income taxes 393 379
Other assets (principally investments in
subsidiaries net of amounts due to/from
subsidiaries) 15,088 13,767
$16,462 $14,985
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 242 $ 169
Accounts payable 153 240
Accrued expenses 801 738
Deferred income taxes 31 -
Current portion of deferred compensation 138 160
Total current liabilities 1,365 1,307
Long-term debt 2,500 2,500
Pensions and deferred compensation 742 684
Postretirement benefit obligation 266 288
Shareholders' equity:
Common stock 2,004 2,004
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 treasury stock (10,301) (10,449)
11,589 10,206
$16,462 $14,985
</TABLE>
<PAGE>
Latshaw Enterprises, Inc.
Schedule I - Condensed Financial Information of Registrant (continued)
Condensed Statements of Income
<TABLE>
Year ended Year ended Year ended
October 28, October 29, October 30,
1995 1994 1993
(Thousands of Dollars)
<S> <C> <C> <C> <S>
Management fee income $1,119 $1,127 $ -
Selling, general and
administrative expenses 1,298 1,440 1,332
Interest expense 237 185 179
Loss on sale of marketable
equity securities - 997 -
Unrealized gain on marketable
equity securities - (712) -
Other - net 32 (21) (14)
Loss before income taxes, equity
in net income of subsidiaries
and cumulative effects of changes
in accounting principles (448) (762) (1,497)
Income tax benefit (150) (126) (665)
Equity in net income of
subsidiaries 1,627 1,829 2,536
Income before cumulative
effects of changes in
accounting principles 1,329 1,193 1,704
Cumulative effects of adopting
new methods of accounting
for income taxes and
postretirement benefits - - (514)
Net income $1,329 $1,193 $1,190
</TABLE>
<PAGE>
Latshaw Enterprises, Inc.
Schedule I - Condensed Financial Information of Registrant (continued)
Condensed Statements of Cash Flows
<TABLE>
Year ended Year ended Year ended
October 28, October 29, October 30,
1995 1994 1993
(Thousands of Dollars)
Cash used in operating
<S> <C> <C> <C>
activities $ (877) $ (715) $(1,337)
Investing activities:
Proceeds from sale of
marketable equity securities - 158 -
Purchases of property, plant
and equipment (9) (5) (4)
Purchase of subsidiary (637) (690) -
Advances from subsidiaries 1,765 1,603 700
1,119 1,066 696
Financing activities:
Payments of notes payable (250) (246) (242)
Proceeds from issuance of
long-term debt - - 2,500
Payment of long-term debt - - (1,250)
Purchase of treasury stock (28) (28) (435)
(278) (274) 573
Increase (decrease) in cash $ (36) $ 77 $ (68)
</TABLE>
<PAGE>
Latshaw Enterprises, Inc.
Schedule I - Condensed Financial Information of Registrant (continued)
Notes to Condensed Financial Statements
A. Basis of Presentation
In the parent-company-only financial statements, the Company's investment
in subsidiaries is stated at cost plus equity in undistributed earnings of
subsidiaries since date of acquisition. Parent-company-only financial
statements should be read in conjunction with the Company's consolidated
financial statements.
B. Guarantee
Wescon Products Company, a wholly-owned subsidiary of the Company, has
$3,100,000 and $1,700,000 of line of credit borrowings outstanding at
October 28, 1995 and October 29, 1994, respectively. Under the terms
of the related debt agreements, the Company has guaranteed the payment
of all principal and interest. The Company has also guaranteed the
payment of principal and interest on $327,000 and $376,000 of long-term
debt outstanding at October 28, 1995 and October 29, 1994, respectively,
owed by Helton, Inc., an 80%-owned subsidiary.
C. Reclassifications
Certain amounts in the 1994 financial statements have been reclassified to
conform to the 1995 presentation.
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
</TABLE>
(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.
<PAGE>
EXHIBIT INDEX
Assigned
Exhibit
Number Description of Exhibit
(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
EXHIBIT (10)(A)
FISCAL 1996
KEY MANAGEMENT BONUS SYSTEM
WESCON PRODUCTS
President
1. Minimum entry level for participation in the bonus program
is at a 12% Corporate return on investment.
2. The maximum level up to which bonus payments will be made is
a 26% Corporate return on investment per the table below.
Key Management
A bonus amount equal to 112.5% of President's bonus will be
allocated for the President to make discretionary distribution in
amounts and to participants of his choice.
Payments
1. This plan is for fiscal 1996 only.
2. Payment will be made by December 31, 1996, based on audited
fiscal results.
3. To receive the bonus due December 31, 1996, the employee
must be active and on the payroll at fiscal year end.
Bonus Table
FISCAL 1996 PLAN
Bonus Earned
1996 Corporate ROI President Discretion Total
<TABLE>
<C> <C> <S> <C> <S> <C>
12% 11% of Salary 12% of Salary $ 40,000
15% 25% of Salary 28% of Salary 93,000
18% 30% of Salary 34% of Salary 113,000
21% 35% of Salary 39% of Salary 130,000
26% 43% of Salary 48% of Salary 160,000
</TABLE>
<PAGE>
Definitions
1. "Wescon Products" is the Wescon consolidated operations
including the assets, liabilities, revenue and expenses
identifiable as Consumer Products and I.H. Molding, Inc.
2. "Corporate investment" is the monthly average of the total
of all the assets less the liabilities to outside third
parties in Wescon.
3. "Corporate return on investment" is Wescon Products'
consolidated annual operating profit before income taxes
divided by the average monthly Corporate investment in
Wescon.
Exhibit 11
Latshaw Enterprises, Inc.
Primary and Fully Diluted Net Income
per Common Share Computation
<TABLE>
<CAPTION>
Year ended Year ended Year ended
October 28, October 29, October 30,
1995 1994 1993
(In Thousands Except Per Share Data)
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 23 - Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-24298) pertaining to the Employees'
Stock Benefit Plan of Latshaw Enterprises, Inc. of our report
dated December 12, 1995, with respect to the consolidated financial
statements and schedules of Latshaw Enterprises, Inc. included in
the Annual Report (Form 10-K) for the year ended October 28, 1995.
/s/Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
January 19, 1996
EXHIBIT 24
POWER OF ATTORNEY
The undersigned hereby appoints Michael E. Bukaty and
David G. Carr, and each of them, with full power of substitution,
as his attorney-in-fact, to execute in the name and on behalf of
the undersigned the Form 10-K Annual Report of Latshaw
Enterprises, Inc., and any amendments thereto, to be filed with
the Securities and Exchange Commission for its fiscal year ended
October 28, 1995.
Dated: December 26, 1995
By:/s/L. Chandler Smith
L. Chandler Smith, Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Michael E. Bukaty and
David G. Carr, and each of them, with full power of substitution,
as his attorney-in-fact, to execute in the name and on behalf of
the undersigned the Form 10-K Annual Report of Latshaw
Enterprises, Inc., and any amendments thereto, to be filed with
the Securities and Exchange Commission for its fiscal year ended
October 28, 1995.
Dated: December 26, 1995
By:/s/James C. Gale
James C. Gale, Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Michael E. Bukaty and
David G. Carr, and each of them, with full power of substitution,
as his attorney-in-fact, to execute in the name and on behalf of
the undersigned the Form 10-K Annual Report of Latshaw
Enterprises, Inc., and any amendments thereto, to be filed with
the Securities and Exchange Commission for its fiscal year ended
October 28, 1995.
Dated: December 26, 1995
By:/s/David G. Carr
David G. Carr,
Senior Vice President, Chief
Financial and Accounting
Officer, and Secretary
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Michael E. Bukaty and
David G. Carr, and each of them, with full power of substitution,
as his attorney-in-fact, to execute in the name and on behalf of
the undersigned the Form 10-K Annual Report of Latshaw
Enterprises, Inc., and any amendments thereto, to be filed with
the Securities and Exchange Commission for its fiscal year ended
October 28, 1995.
Dated: December 26, 1995
By:/s/Michael E. Bukaty
Michael E. Bukaty
President, Chief Operating
Officer and a Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Michael E. Bukaty and
David G. Carr, and each of them, with full power of substitution,
as his attorney-in-fact, to execute in the name and on behalf of
the undersigned the Form 10-K Annual Report of Latshaw
Enterprises, Inc., and any amendments thereto, to be filed with
the Securities and Exchange Commission for its fiscal year ended
October 28, 1995.
Dated: December 26, 1995
By:/s/John Latshaw
John Latshaw
Chairman of the Board of
Directors, Managing Director,
Chief Executive Officer
and a Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Michael E. Bukaty and
David G. Carr, and each of them, with full power of substitution,
as her attorney-in-fact, to execute in the name and on behalf of
the undersigned the Form 10-K Annual Report of Latshaw
Enterprises, Inc., and any amendments thereto, to be filed with
the Securities and Exchange Commission for its fiscal year ended
October 28, 1995.
Dated: December 26, 1995
By:/s/Elizabeth A. Reid-Scott
Elizabeth A. Reid-Scott, Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-START> OCT-30-1994
<PERIOD-END> OCT-28-1995
<EXCHANGE-RATE> 1
<CASH> 319
<SECURITIES> 450
<RECEIVABLES> 6,787
<ALLOWANCES> 0
<INVENTORY> 8,056
<CURRENT-ASSETS> 16,818
<PP&E> 19,182
<DEPRECIATION> 12,107
<TOTAL-ASSETS> 24,648
<CURRENT-LIABILITIES> 7,827
<BONDS> 2,500
<COMMON> 2,004
0
0
<OTHER-SE> 4,899
<TOTAL-LIABILITY-AND-EQUITY> 24,648
<SALES> 41,102
<TOTAL-REVENUES> 41,102
<CGS> 32,146
<TOTAL-COSTS> 38,968
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 523
<INCOME-PRETAX> 2,134
<INCOME-TAX> 805
<INCOME-CONTINUING> 1,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,329
<EPS-PRIMARY> 2.58
<EPS-DILUTED> 1.45
</TABLE>
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
</TABLE>
See accompanying notes.
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
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
<TABLE>
<CAPTION>
Consolidated Statements of Income (continued)
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.
<PAGE>
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>
