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 November 2, 1996.
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(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of 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 19, 1996, computed by reference to the
closing bid price on January 17, 1997 as quoted by Mesirow Capital,
Inc., Chicago, Illinois was $760,200. 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 19, 1996 was 9,922 shares.
<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.
Recent Events
On December 14, 1996, the stockholders of the Company approved
a one for fifty reverse stock split of the issued and outstanding
common stock of the Company. The reverse stock split became
effective as of the close of business on December 18, 1996. All
references herein to numbers of shares and per share amounts have
been retroactively restated to reflect the reverse stock split.
On December 19, 1996, the Company filed a certification and
notice on Form 15 with the Securities and Exchange Commission
("SEC") to terminate the registration of the Company's common stock
under Section 12(g) of the Securities Exchange Act of 1934
("Exchange Act"). Under the rules of the SEC, such deregistration
should occur on March 18, 1997.* Also, the Company intends to seek
termination of its reporting requirements under Section 15(d) of
the Exchange Act, which requires the filing of annual, quarterly
and current reports with the SEC, as soon as it qualifies for
termination.* The Company intends to continue providing annual and
quarterly reports to stockholders.*
The Board of Directors has approved an amendment to the
Company's Certificate of Incorporation which would effect a
20-for-1 forward stock split of the issued and outstanding common
stock of the Company, subject to stockholder approval at a
stockholders' meeting to be held on April 19, 1997.* The proposed
amendment, if approved, would increase the number of shares of
common stock of the Company available for trading.
*This statement is a forward-looking statement, which is subject to
certain risks and uncertainties. See Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Forward Looking Statements."
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 fourteen 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 1996, Mary Kay Cosmetics, Inc. accounted for 11% of net
sales. In fiscal 1995, Mary Kay Cosmetics, Inc. accounted for 12%
of net sales. Sales by the Company to Mary Kay Cosmetics, Inc.
accounted for 14% and Toro Corp. accounted for 10% of net sales in
fiscal 1994.
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 somewhat below 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.
The Company acquired the operating assets of I.H. Molding,
Inc. in Dallas, Texas in September 1, 1995. 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
1996 fiscal year, the Company owned 78,764 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 6 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 525 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, 1996(1)
[S] [C] [C] [S]
John Latshaw 75 1987(2) Chairman of the Board of
Directors, Managing
Director and Chief
Executive Officer
Michael E. Bukaty 60 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.
(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 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
</TABLE>
Helton, Inc.
Morrison, Tennessee
<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 is 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 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 during fiscal year 1996. At November 2,
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 1997. 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 November 2, 1996.*
*This statement is a forward-looking statement, which is subject to
certain risks and uncertainties. See Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Forward Looking Statements."
Item 4 - Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on December 14,
1996.
At the meeting, the stockholders (i) approved an amendment of
Article FOURTH of the Certificate of Incorporation to effect a 1
for 50 reverse stock split of the Company's common stock;
(ii) elected two directors for three-year terms and (iii) ratified
the appointment of Ernst & Young as independent auditors of the
corporation for the fiscal year ended November 2, 1996. 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. Approval of Amendment of Certificate of Incorporation
For: 353,924
Against: 30,781
Abstained: 33
Broker
Nonvotes: 0
2. Election of Directors
Nominees Votes For Votes Withheld
Michael E. Bukaty 369,960 14,778
John Latshaw 369,960 14,778
3. Ratification of Independent Auditors
For: 374,067
Against: 3,574
Abstained: 7,097
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
following table sets forth the high and low bid quotations of the
stock for each quarter during the past two fiscal years. All
quotations have been retroactively restated to reflect a 1-for-50
reverse stock split that occurred on December 19, 1996.
<TABLE>
1996 1995
HIGH LOW HIGH LOW
<C> <S> <C> <C> <S> <C> <C> <S> <C>
Nov. - Jan. 350 - 300 425 - 350
Feb. - Apr. 312.5 - 300 350 - 350
May - Jul. 375 - 312.5 400 - 350
Aug. - Oct. 425 - 375 400 - 350
</TABLE>
The source of the high and low bid quotations provided above
as Mesirow Capital, Inc., Chicago, Illinois.
The Company had approximately 147 shareholders of record on
December 19, 1996.
No cash dividends were declared during fiscal years 1995 or
1996. 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 1996, sales increased 8.0 percent to $44,407,000 from the
1995 level of $41,102,000. Sales increased 6.1 percent in 1995
from the 1994 total of $38,732,000. Included in sales for 1996 are
a full year of revenues attributable to the I.H. Molding Division
totaling $2,191,000. This division was acquired in September of
1995 and contributed $331,000 to revenues for fiscal 1995. In
1996, all of the Company's product groups experienced similar
percentage sales increases. Improvement in the general economic
conditions appear to have had a favorable effect on many of our
customers. The increase in revenues in 1996 (other than the
portion attributable to the inclusion of the revenues of the I.H.
Molding Division for the full year) resulted primarily from new
product introductions.
Gross profit as a percentage of sales was 22.6 percent in 1996
compared to 21.8 percent in 1995 and 24.5 percent in 1994. The
improvement in 1996 resulted from manufacturing efficiencies and
higher sales volume. In 1995, increased raw material costs were
experienced by all the Company's product groups which was the
primary cause for the decrease in gross profit for 1995 when
compared to 1994.
In 1996, selling, general and administration expense was
$6,899,000 which is 15.5 percent of sales compared with $6,474,000
or 15.8 percent in 1995 and $6,795,000 or 17.5 percent in 1994.
Increases in selling, general and administrative expense since 1994
are due primarily to costs associated with higher sales volumes
such as commissions and performance incentives. In addition, 1994
expenses included $250,000 and $150,000 of nonrecurring 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 1996 was $513,000 compared to $523,000
and $361,000 in 1995 and 1994, respectively. The decrease in 1996
was due to lower interest rates. The increase in 1995 was the
result of higher bank debt which was used to finance acquisitions
as well as inventory and receivable growth due to the increased
sales volume. Borrowing costs in 1995 were also higher because of
the increase in interest rates the Company paid on its outstanding
convertible subordinated debentures and bank borrowing compared to
1994.
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, the Company's
marketable equity securities were carried at the lower of aggregate
cost or market value. For 1994, Latshaw Enterprises had an
unrealized gain on these securities of $712,000. In 1994, the
Company had a realized loss on the sale of marketable equity
securities of $997,000.
In 1996, the Company sold its investment in EduCare Community
Living Corp. to VOCA Holding Incorporated for cash and notes. This
resulted in the Company recording a capital gain of $189,000.
Proceeds from this sale were used to reduce bank borrowings.
The Company's effective income tax rate was 34 percent in
1996. The income tax rate was 38 percent and 42 percent in 1995
and 1994, respectively. See Footnote 5 to the Consolidated
Financial Statements for a reconciliation of the income tax
provision to the amount computed at the Federal statutory rate.
The lower tax rate in 1996 is principally attributable to the net
effect of capital loss carryforwards utilized in 1996 to offset
capital gains incurred from the sale of marketable equity
securities, and unrealized gains on marketable securities recorded
in 1996. The higher tax 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 these
securities.
The Company had net income of $1,939,000, $1,329,000 and
$1,193,000 for 1996, 1995 and 1994, 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 $10,643,000 in 1996,
$8,991,000 in 1995 and $8,427,000 in 1994. The ratio of current
assets to current liabilities was 2.5, 2.1 and 2.2 at the end of
1996, 1995 and 1994, respectively.
In 1996, net cash provided by operating activities totaled
$3,769,000 resulting from net income of $1,939,000; $1,898,000 from
noncash depreciation and amortization charges; and a $649,000
increase in accounts payable, less the cash required to fund the
$1,237,000 increase in accounts receivable resulting from the
increase in sales. These and other funds were used by the Company
to purchase $2,072,000 of property, plan and equipment and to
reduce bank borrowings by $1,910,000. 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 depreciation and
amortization charges, less the effects of cash required to fund an
increase in receivables and a reduction in accounts payable. These
funds, combined with additional bank borrowings, were used by the
Company to acquire the operating assets of I.H. Molding for
$637,000 in cash and purchase other property, plan 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 $1,395,000 in noncash depreciation and amortization
charges, less the effects of cash required to fund the increases in
working capital needed 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.
At November 2, 1996, the Company through its subsidiary,
escon Products Company, had an unused line of credit for short
term bank borrowings of $5,200,000 remaining of the $7,000,000
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 $25,000 at November 2, 1996 on a $350,000 bank line
of credit, with interest at prime plus 1.25 percent. This line of
credit is collateralized by inventory and 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.
*This statement is a forward-looking statement, which is subject to
certain risks and uncertainties. See "Forward Looking Statements"
below.
Forward-Looking Statements
Certain statements contained in this Annual Report on Form
10-K 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-K. 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 including, 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 statements of plans or objectives
of the Company or its management or Board of Directors, such plans
or objectives are subject to change or revision at any time.
The forward-looking statements specifically identified in
Item 1 of this Form 10-K which relate to the intentions of the
Company are subject to change by the Board of Directors at any
time. With respect to the forward-looking statement specifically
identified in Item 1 of this Form 10-K regarding the proposed 20-
for-1 forward stock split, such proposed stock split is subject to
the approval of the stockholders of the Company and, even if
approved by the stockholders, may be abandoned by the Board of
Directors of the Company at any time prior to its effective date.
The forward-looking statements specifically identified in
Item 3 of this Form 10-K, which relate to the Company's expected
costs and liability in connection with the environmental matter
described therein, are 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.
With respect to the forward-looking statement specifically
identified above in Item 7 of this Form 10-K 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.
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 required to be provided under Items 10 through
13 will be filed by amendment on or before March 3, 1997, to the
extent required by the reporting requirements of Sections 13(a) and
15(d) of the Securities Exchange Act of 1934.
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
November 2, 1996, October 28, 1995 and October 29, 1994
Consolidated Balance Sheets - November 2, 1996 and October 28,
1995.
Consolidated Statements of Cash Flows - for the years ended
November 2, 1996, October 28, 1995 and October 29, 1994
Consolidated Statements of Shareholders' Equity - for the
years ended November 2, 1996, October 28, 1995 and October 29,
1994
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) Amendment to Certificate of Incorporation of
Latshaw Enterprises, Inc.
(3)(b) Certificate of Incorporation of Latshaw
Enterprises, Inc., as amended.
(3)(c) 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 1997 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.
(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 23, 1997
<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 23, 1997
John Latshaw of Directors, Managing
Director, Chief
Executive Officer and
Director
*/s/Michael E. Bukaty President, Chief January 23, 1997
Michael E. Bukaty Operating Officer
and Director
/s/David G. Carr Senior Vice-President, January 23, 1997
David G. Carr Chief Financial and
Accounting Officer,
and Secretary
*/s/Eliz. A. Reid-Scott Director January 23, 1997
Elizabeth A. Reid-Scott
*/s/L. Chandler Smith Director January 23, 1997
L. Chandler Smith
*By:/s/ David G. Carr
David G. Carr
Attorney-in-Fact
- -186201
<PAGE>
Latshaw Enterprises, Inc.
Schedule I - Condensed Financial Information of Registrant
Condensed Balance Sheets
<TABLE>
November 2, October 28,
1996 1995
(Thousands of Dollars)
Assets
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 82 $ 90
Marketable equity securities 591 450
Refundable income taxes - 116
Prepaid expenses 308 306
Total current assets 981 962
Property, plant and equipment, net 13 19
Deferred income taxes 367 393
Other assets (principally investments in
subsidiaries net of amounts due to/from
subsidiaries) 17,069 15,088
$18,430 $16,462
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 247 $ 242
Accounts payable 121 153
Accrued expenses 815 801
Deferred income taxes 87 31
Current portion of deferred compensation 137 138
Total current liabilities 1,407 1,365
Long-term debt 2,500 2,500
Pensions and deferred compensation 698 742
Postretirement benefit obligation 243 266
Shareholders' equity:
Common stock 2,004 2,004
Additional paid-in capital 4,899 4,899
Unrealized gains on marketable equity securities 112 22
Retained earnings 16,904 14,965
23,919 21,890
Less cost of treasury stock (10,337) (10,301)
13,582 11,589
$18,430 $16,462
</TABLE>
<PAGE>
Latshaw Enterprises, Inc.
Schedule I - Condensed Financial Information of Registrant (continued)
Condensed Statements of Income
<TABLE>
Year ended
November 2, October 28, October 29,
1996 1995 1994
(Thousands of Dollars)
<S> <C> <C> <C> <S>
Management fee income $1,123 $1,119 $1,127
Selling, general and
administrative expenses 1,293 1,298 1,440
Interest expense 513 237 185
Loss on sale of marketable
equity securities - - 997
Unrealized gain on marketable
equity securities - - (712)
Gain on sale of other
investments (189) - -
Other - net (147) 32 (21)
Loss before income taxes, equity
in net income of subsidiaries (347) (448) (762)
Income tax benefit (184) (150) (126)
Equity in net income of
subsidiaries 2,102 1,627 1,829
Net income $1,939 $1,329 $1,193
</TABLE>
<PAGE>
Latshaw Enterprises, Inc.
Schedule I - Condensed Financial Information of Registrant (continued)
Condensed Statements of Cash Flows
<TABLE>
Year ended
November 2, October 28, October 29,
1996 1995 1994
(Thousands of Dollars)
Cash used in operating
<S> <C> <C> <C>
activities $ (1,345) $ (877) $ (715)
Investing activities:
Proceeds from sale of
other investments 216 - -
Proceeds from sale of
marketable equity
securities - - 158
Purchases of property, plant
and equipment - (9) (5)
Purchase of subsidiary - (637) (690)
Advances from subsidiaries 1,500 1,765 1,603
1,716 1,119 1,066
Financing activities:
Payments of notes payable (343) (250) (246)
Proceeds from issuance of
long-term debt - - -
Payment of long-term debt - - -
Purchase of treasury stock (36) (28) (28)
(379) (278) (274)
Increase (decrease) in cash $ (8) $ (36) $ 77
</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
$1,800,000 and $3,100,000 of line of credit borrowings outstanding at
November 2, 1996 and October 28, 1995, 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 $274,000 and $327,000 of long-term
debt outstanding at November 2, 1996 and October 28, 1995, respectively,
owed by Helton, Inc., an 80%-owned subsidiary.
Latshaw Enterprises, Inc.
Schedule II - Valuation and Qualifying Accounts
Year ended November 2, 1996
<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 November
2, 1996:
Deducted from asset
accounts:
Allowance for
<S> <C> <C> <C> <C> <C> <C> <C> <C>
doubtful accounts $ 121 $ 72 $ - $ 31(1) $ 162
Reserve for
inventory
obsolescence 49 140 - 135(3) 54
Valuation reserve
for deferred tax
assets 1,385 - - 130(4) 1,255
$ 1,555 $ 212 $ - $ 296 $ 1,471
Year ended October
28, 1995:
Deducted from asset
accounts:
Allowance for
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(4) 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(4) 2
Valuation reserve for
deferred tax assets 1,160 238 - - 1,398
$ 1,988 $ 271 $ - $ 749 $1,510
</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) Reduction in reserve attributable to the effect of capital
loss carryforwards utilized to off set gains incurred from
the sale of marketable securities (in 1996) and
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) Amendment to Certificate of Incorporation of
Latshaw Enterprises, Inc.
(3)(b) Certificate of Incorporation of Latshaw
Enterprises, Inc., as amended.
(3)(c) 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 1997 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).
<PAGE>
Assigned
Exhibit
Number Description of Exhibit
(11) Computation of Net Income Per Share.
(21) Subsidiaries of Latshaw Enterprises, Inc.
(24) Powers of Attorney
(27) Financial Data Schedule
(99) Company Financial Statements
EXHIBIT 3(A)
AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
LATSHAW ENTERPRISES, INC.
Latshaw Enterprises, Inc. filed a Certificate of Amendment with
the Delaware Secretary of State effective December 18, 1996, amending
Article FOURTH of its Certificate of Incorporation to read in its entirety
as follows:
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:
<PAGE>
(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.
EXHIBIT 3(B)
CERTIFICATE OF INCORPORATION OF
LATSHAW ENTERPRISES, INC.,
AS AMENDED
FIRST: The name of the corporation is Latshaw Enterprises, Inc.
SECOND: The address of its registered office in the State of
Delaware is No. 100 West Tenth Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
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.
FIFTH: The names and mailing addresses of the incorporators are
as follows:
Name Mailing Address
Oscar S. Brewer 27th Floor, Commerce Tower
Kansas City, Missouri 64199
Theodore C. Beckett 27th Floor, Commerce Tower
Kansas City, Missouri 64199
Hudson Lee McGuire, Jr. 27th Floor, Commerce Tower
Kansas City, Missouri 64199
SIXTH: At all elections of directors of the corporation each
holder of stock entitled to vote thereon shall be entitled to as many
votes as shall equal the number of votes which (except for this
provision as to cumulative voting) such holder would be entitled to
cast for the election of directors with respect to the shares of stock
of such holder multiplied by the number of directors to be elected.
Such holder may cast all of such votes for a single director or may
distribute them among the number to be voted for or for any two or
more of them as such holder may see fit.
SEVENTH: In furtherance, and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:
1. To make, alter, amend or repeal the By-Laws of
the corporation; and
2. To set apart out of any of the money or funds of
the corporation available for dividends a reserve
or reserves for any proper purpose or to abolish
any such reserve in the manner in which it was
created.
The By-laws of the corporation may be altered, amended or repealed by
the stockholders of the corporation only upon the affirmative vote of
three-fourths (3/4) or more of the total number of outstanding shares of
the corporation entitled to vote thereon.
EIGHTH: Any merger or consolidation of this corporation with
another corporation for which stockholder approval is required by the
laws of the State of Delaware, and any sale, lease or exchange of all
or substantially all of the property and assets of this corporation,
including its good will and its corporate franchises, and any
dissolution of this corporation, may be approved only by the
affirmative vote of three-fourths (3/4) or more of the total number of
outstanding shares of the corporation entitled to vote thereon.
NINTH: The corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders hereby are granted subject
to this reservation, provided, however, that the provisions of Article
SIXTH, Article EIGHTH or this Article NINTH of this Certificate of
Incorporation may be amended only by the affirmative vote of
three-fourths (3/4) or more of the total number of outstanding shares of
the corporation entitled to vote upon such amendment.
TENTH: The business and affairs of this corporation shall be
managed by or under the direction of its Board of Directors. The
total number of directors which shall constitute the whole Board of
Directors shall be fixed from time to time in the By-laws, such number
of directors in no event to exceed twelve (12) persons. The directors
shall be divided into three classes, as nearly equal in number as
possible, to be designated as Class A, Class B and Class C. At the
annual meeting of the stockholders to be held on March 7, 1975, or at
any adjournment thereof, the Class A directors shall be elected for a
term of one year, the Class B directors shall be elected for a term of
two years, and the Class C directors shall be elected for a term of
three years. At each annual election thereafter, the successors to
the class of directors whose terms expire in that year shall be
elected for terms of three years.
Directors must be stockholders of the corporation, but there
shall be no other qualifications for election as directors. Each
director shall hold office for the term for which he is elected and
qualified, or until his earlier resignation or removal.
Any director or the entire Board of Directors may be removed only
for cause by the holders of a majority of the shares of the
corporation then entitled to vote at an election of directors.
A majority of the total number of directors of the corporation
shall constitute a quorum for the transaction of business, and the
vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
The provisions of this Article TENTH may be amended, altered or
repealed only by the affirmative vote of three-fourths (3/4) or more of
the total number of outstanding shares of the corporation entitled to
vote upon such amendment.
ELEVENTH: No action required to be taken or which may be taken
at any annual or special meeting of the stockholders of the
corporation may be taken without a vote of stockholders cast at such
meeting and the power of stockholders to consent in writing to the
taking of any action without a meeting and without a vote is
specifically denied.
The provisions of this Article ELEVENTH may be amended, altered
or repealed only by the affirmative vote of three-fourths (3/4) or more
of the total number of outstanding shares of the corporation entitled
to vote upon such amendment.
TWELFTH: (a) A director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit.
(b) The corporation shall, unless prohibited by law,
indemnify any person who is or was a director or officer, or is or was
serving at the request of the corporation as a director or officer of
another corporation or organization, against all expenses paid or
incurred by him in connection with, arising out of or resulting from
any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative,
and whether brought by or in the right of the corporation or such
other corporation, organization or otherwise, which he may be
involved, or threatened to be involved, as a party or otherwise, by
reason of the fact that he is or was a director or officer, provided
such person did not act in bad faith or in a manner he believed
opposed to the best interests of the corporation. The termination of
any claim, action, suit or proceeding by judgment, order, settlement
(whether with or without court approval), conviction, or upon a plea
of guilty or of nolo contendere or its equivalent shall not create a
presumption that such person did not meet the standard of conduct set
forth in this paragraph (b). As used in this Article TWELFTH the term
"expenses" shall include, but not be limited to, all liabilities,
costs, attorneys' fees and disbursements, amounts of judgments, fines
or penalties against, and amounts paid in settlement by, such person.
(c) Any indemnification under paragraph (b) of this
Article TWELFTH shall be made by the corporation upon a determination
that the person claiming indemnification under said paragraph (b) is
entitled to indemnification under the provisions of said paragraph.
Such determination shall be made, after ten (10) days prior written
notice by the corporation to the person claiming indemnification, by
either (i) a majority vote of a quorum consisting of directors of the
corporation who were not parties to such claim, action, suit or
proceeding or (ii) independent legal counsel selected by the Board of
Directors, who may be regular counsel for the corporation, which
independent counsel shall be approved in writing by the person
claiming indemnification (which approval may not be unreasonably
withheld), in a written opinion delivered to the corporation. Such
determination shall be made by said counsel if (A) the quorum of
directors described in (i) above is not obtainable, or, even if
obtainable, such a quorum so directs, or (B) the person claiming
indemnification so directs by written notice to the corporation no
later than ten (10) days after receipt by such person of written
notice from the corporation that a determination is to be made.
(d) Notwithstanding the provisions of paragraphs (b)
and (c) of this Article TWELFTH, to the extent that any person who is
or was a director or officer of the corporation, or is or was serving
at the request of the corporation as a director or officer of another
corporation or organization, has been successful on the merits or
otherwise with respect to any claim, action, suit or proceeding of the
character described in paragraph (b), or with respect to any issue or
matter therein, such person shall be indemnified by the corporation
against all expenses, as defined in paragraph (b), paid or incurred by
him in connection therewith.
(e) The rights to indemnification, advancement of
expenses and limitation of personal liability provided by this Article
TWELFTH shall not be deemed exclusive of any other rights to which any
person who is or was a director or officer of the corporation, or is
or was serving at the request of the corporation as a director or
officer of another corporation or organization, may be entitled under
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office, and shall continue as
to a person who ceased to be a director or officer, and shall inure to
the benefit of the heirs, executors and administrators of such a
person. The rights to indemnification, advancement of expenses and
limitation of personal liability provided by this Article TWELFTH
shall continue as to a person who ceased to be a director or officer
for an unlimited period of time from and after the time such person
ceased to be a director or officer and shall not be reduced or
impaired in any way by any amendment, alteration, change or repeal of
the By-laws or Certificate of Incorporation of the corporation which
may occur subsequent to the time such person ceased to be a director
or officer.
(f) The corporation may, to the extent permitted from
time to time by applicable law, enter into indemnification agreements
with such persons described in paragraph (b) as the Board of Directors
may from time to time determine, to indemnify such persons from and
against any or all expenses, as defined in paragraph (b), that any
such person may at any time pay or incur by reason of the fact he is
or was a director or officer of the corporation, or he is or was
serving at the request of the corporation as a director of officer of
another corporation or organization.
(g) The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation or
organization, against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him
against such liability on behalf of such person under the provisions
of this Article TWELFTH. For purposes of this Article TWELFTH,
"insurance on behalf of" any such person shall mean both insurance
directly insuring such person against any such liability and insurance
insuring the corporation's payment of its indemnification obligations
to such person under this Article TWELFTH or under the General
Corporation Law of the State of Delaware. In the event that insurance
on behalf of any such person is in effect immediately prior to the
time such person ceased to be a director or officer, the corporation
shall continue to maintain in effect such insurance on behalf of such
person, or other similar policies of insurance, which policies (i)
will continue in effect for a period of not less than six years from
and after the time when such person ceased to be a director or
officer, in amounts not less than the amounts in effect immediately
prior to the time when he ceased to be a director or officer, (ii)
will have insuring clauses, retention amounts and exclusions not less
favorable than those contained in the insurance policies in effect
immediately prior to the time when he ceased to be a director or
officer, (iii) will have discovery clauses guaranteeing extension of
coverage for a three year period after any cancellation of such
policies by the insurers, and (iv) will provide that any notification
given by the insurers under said policies shall also be given to the
person who ceased to be a director or officer. The rights to
continuation of insurance coverage provided by this paragraph (g)
shall not be reduced or impaired in any way by any amendment,
alteration, change or repeal of the By-laws or Certificate of
Incorporation of the corporation which may occur subsequent to the
time such person ceased to be a director or officer.
(h) Expenses incurred by any person who is or was a
director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer of another
corporation or organization, in defending a civil or criminal action,
suit or proceeding shall be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt by
the corporation of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the corporation as provided
in this Article TWELFTH.
(i) All rights provided any officer or director by
this Article TWELFTH shall be contract rights. No amendment,
alteration, addition, change or repeal of this Article TWELFTH, of any
other Article of the Certificate of Incorporation or of the By-laws
shall in any way increase the personal liability or alleged personal
liability of any director of the corporation or in any way impair or
reduce the rights to indemnification or advancement of expenses
provided by this Article TWELFTH to any officer or director, with
respect to any acts or omissions of such officer or director occurring
prior to such amendment, alteration, addition, change or repeal.
(j) For purposes of this Article TWELFTH, references
to "the corporation" shall include, in addition to the resulting or
surviving corporation in a consolidation or merger, any constituent
corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had,
continued, would have had power and authority to indemnify its
directors and officers, so that any person who is or was a director or
officer of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director or officer of
another corporation or organization, shall stand in the same position
under the provisions of this Article TWELFTH with respect to the
resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had continued.
(k) In the event that any part of this Article TWELFTH
shall be found in any action, suit or proceeding to be invalid or
ineffective, the validity and the effect of the remaining parts shall
not be affected and the corporation shall indemnify such directors or
officers to the full extent required by the remaining parts of this
Article TWELFTH, or to the full extent permitted by the General
Corporation Law of the State of Delaware, whichever results in greater
recovery to such directors or officers.
EXHIBIT (10)(A)
FISCAL 1997
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 1997 only.
2. Payment will be made by December 31, 1997, based on audited
fiscal results.
3. To receive the bonus due December 31, 1997, the employee
must be active and on the payroll at fiscal year end.
Bonus Table
FISCAL 1997 PLAN
Bonus Earned
1997 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
November 2, October 28, October 29,
1996 1995 1994
(In Thousands Except Per Share Data)
Primary
Net income applicable to common
<S> <C> <C> <C>
shareholders $1,939 $1,329 $1,193
Weighted average number of
common shares outstanding
during the period 9,977 9,923 9,840
Add - common equivalent shares
(determined using the "treasury
stock method") representing
shares issuable upon the
exercise of stock options
granted 341 395 405
Weighted average number of
common and common equivalent
shares outstanding 10,318 10,318 10,245
Net income per share $187.92 $128.80 $115.62
Fully Diluted
Net income $1,939 $1,329 $1,193
Add - interest expense of
convertible subordinated
debentures 151 145 113
Net income applicable to
common shareholders $2,090 $1,474 $1,306
Weighted average number of
common shares outstanding
during the period 9,977 9,904 9,840
Add - common equivalent shares
(determined using the "treasury
stock method") representing
shares issuable upon the
exercise of stock options
granted 427 420 447
Add - dilutive convertible
subordinated debentures 10,000 10,000 10,000
20,404 20,324 20,287
Net income per share $102.43 $72.72 $64.38
</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 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
November 2, 1996.
Dated: January 17, 1997
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
November 2, 1996.
Dated: January 17, 1997
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
November 2, 1996.
Dated: January 17, 1997
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
November 2, 1996.
Dated: January 17, 1997
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
November 2, 1996.
Dated: January 17, 1997
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> NOV-2-1996
<PERIOD-START> OCT-29-1995
<PERIOD-END> NOV-2-1996
<EXCHANGE-RATE> 1
<CASH> 240
<SECURITIES> 591
<RECEIVABLES> 7,952
<ALLOWANCES> 0
<INVENTORY> 7,767
<CURRENT-ASSETS> 17,808
<PP&E> 20,864
<DEPRECIATION> 13,487
<TOTAL-ASSETS> 25,831
<CURRENT-LIABILITIES> 7,165
<BONDS> 2,500
<COMMON> 2,004
0
0
<OTHER-SE> 4,899
<TOTAL-LIABILITY-AND-EQUITY> 25,831
<SALES> 44,407
<TOTAL-REVENUES> 44,407
<CGS> 34,376
<TOTAL-COSTS> 41,474
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 513
<INCOME-PRETAX> 2,933
<INCOME-TAX> 994
<INCOME-CONTINUING> 1,939
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,939
<EPS-PRIMARY> 187.92
<EPS-DILUTED> 102.43
</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
November 2, 1996 and October 28, 1995, and the related consolidated
statements of income, shareholders' equity and cash flows for
each of the three fiscal years in the period ended November 2, 1996.
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 November 2, 1996
and October 28, 1995, and the consolidated results of their
operations and their cash flows for each of the three fiscal years in
the period ended November 2, 1996, 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.
/s/Ernst & Young LLP
Ernst & Young LLP
December 11, 1996, except for
Note 10, as to which the date
is December 14, 1996
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Balance Sheets
November 2, October 28,
1996 1995
(In Thousands)
Assets
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 240 $ 319
Marketable equity securities
(Notes 3 and 6) 591 450
Accounts and notes receivable,
less allowance for doubtful
accounts of $162,000 in 1996
and $121,000 in 1995 (Note 3) 7,952 6,787
Inventories (Notes 2 and 3) 7,767 8,056
Refundable income taxes - 116
Deferred income taxes (Note 5) 784 691
Prepaid expenses 474 399
Total current assets 17,808 16,818
Property, plant and equipment (Note 3):
Land 166 166
Buildings and improvements 4,182 4,028
Machinery and equipment 14,122 12,770
Transportation equipment 70 51
Furniture and fixtures 2,324 2,167
20,864 19,182
Less accumulated depreciation
and amortization (13,487) (12,107)
7,377 7,075
Noncompete agreement, less
accumulated amortization
of $129,000 in 1996 and
$18,000 in 1995 (Note 9) 426 537
Other assets 220 218
$25,831 $24,648
<PAGE>
November 2, October 28,
1996 1995
(In Thousands)
</TABLE>
<TABLE>
<CAPTION>
Liabilities and shareholders' equity
Current liabilities:
<S> <C> <C> <C> <C>
Notes payable (Note 3) $ 2,072 $ 3,470
Accounts payable 2,756 2,107
Customer deposits 68 166
Income taxes payable 54 -
Accrued expenses:
Salaries, wages and commissions 569 587
Vacation 486 435
Deferred compensation 137 138
Insurance 312 251
Property taxes 188 171
Other 355 338
Current portion of long-term
debt (Note 3) 57 53
Current portion of noncompete
obligation (Note 9) 111 111
Total current liabilities 7,165 7,827
Long-term debt, less current
portion (Note 3) 2,717 2,774
Noncompete obligation, less
current portion (Note 9) 222 333
Pensions and deferred compensation
(Note 4) 1,645 1,621
Postretirement benefit obligation
(Note 4) 243 266
Deferred income taxes (Note 5) 257 238
Shareholders' equity
(Notes 3, 6, 7 and 10):
Preferred stock, no par value:
Authorized shares - 500,000,
none issued - -
Common stock, $100 par value:
Authorized shares - 30,000
Issued shares - 20,043 2,004 2,004
Class C common stock, $2 par value:
Authorized shares - 1,000,000,
none issued - -
Additional paid-in capital 4,899 4,899
Unrealized gains on marketable
equity securities 112 22
Retained earnings 16,904 14,965
23,919 21,890
Less cost of common stock held
in treasury, 10,113 shares
in 1996 and 10,004 shares
in 1995 (10,337) (10,301)
13,582 11,589
$25,831 $24,648
</TABLE>
See accompanying notes.
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Income
Year ended
November 2, October 28, October 29,
1996 1995 1994
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Net sales $44,407 $41,102 $38,732
Cost of sales 34,376 32,146 29,230
Gross profit 10,031 8,956 9,502
Selling, general and
administrative expenses 6,899 6,474 6,795
Interest expense 513 523 361
Interest income (14) (15) (16)
Loss on sale of marketable
equity securities - - 997
Unrealized gain on marketable
equity securities - - (712)
Gain on sale of other
investments (189) - -
Other - net (111) (160) 13
Income before income taxes 2,933 2,134 2,064
Income tax provision (Note 5) 994 805 871
Net Income 1,939 1,329 1,193
</TABLE>
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Income (continued)
Year ended
November 2, October 28, October 29,
1996 1995 1994
(In Thousands, Except Per Share Data)
Net income per common and common
equivalent share (Note 10):
<S> <C> <C> <C>
Primary: $187.92 $128.80 $115.62
Fully diluted: $102.43 $ 72.72 $ 64.38
Common and common equivalent
shares outstanding (Note 10):
Primary 10,318 10,318 10,245
Fully diluted 20,404 20,324 20,287
</TABLE>
See accompanying notes.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Unrealized
Gains on Total
Additional Marketable Share-
Common Paid-In Equity Retained Treasury holders'
Stock Capital Securities Earnings Stock Equity
(In Thousands)
Balance at
October 30,
<C> <C> <C> <C> <S> <C> <C> <C>
1993 $2,004 $5,101 $ - $12,443 $(10,567) $ 8,981
Net income - - - 1,193 - 1,193
Purchase of
77 shares
of
common stock - - - - (28) (28)
Contribution
of 141
shares of
common stock
(at market)
to Employee
Stock
Ownership
Trust - (86) - - 146 60
Balance at October
29, 1994 2,004 5,105 - 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 74
shares of common
stock - - - - (28) (28)
Contribution of
171 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
Net income - - - 1,939 - 1,939
Purchase of 109
shares of common
stock - - - - (36) (36)
Change in
unrealized gains,
net of income
taxes of $51,000 - - 90 - - 90
Balance at November
2, 1996 $2,004 $4,899 $112 $16,904 $(10,337) $13,582
</TABLE>
See accompanying notes.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended
November 2, October 28, October 29,
1996 1995 1994
(In Thousands)
Operating activities
<S> <C> <C> <C>
Net income $1,939 $1,329 $1,193
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 1,770 1,552 1,373
Amortization 128 18 22
Pensions and
deferred compensation 23 28 (49)
Gain on sale of property, plant
and equipment _ (20) (1)
Gain on sale of other
investments (189) - -
Loss on sale of marketable
equity securities - - 997
Unrealized gain on marketable
equity securities - - (712)
Contribution to Employee Stock
Ownership Trust funded through
issuance of treasury stock - 60 60
Provision for losses on accounts
receivable 72 67 31
Deferred income taxes (125) 25 145
Postretirement benefits (23) (22) (39)
Changes in operating assets and
liabilities affecting cash and
cash equivalents:
Accounts and notes receivable (1,237) (723) (1,015)
Inventories 289 (169) (1,282)
Refundable income taxes 116 (116) 138
Prepaid expenses 273 329 106
Accounts payable 649 (836) 474
Customer deposits (98) 56 78
Income taxes payable 54 - 3
Accrued expenses 128 98 416
Net cash provided by operating
activities 3,769 1,676 1,938
</TABLE>
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (continued)
Year ended
November 2, October 28, October 29,
1996 1995 1994
(In Thousands)
Investing activities
Proceeds from sale of marketable
<S> <C> <S> <C> <C> <C> <C>
equity securities $ - $ - $ 158
Purchases of property, plant
and equipment (2,072) (1,916) (1,919)
Proceeds from sale of
other investments 216 - -
Proceeds from sale of property,
plant and equipment - 24 39
Acquisition of assets of
I.H. Molding, Inc. and
Coast Wire and Plastic Tech,
Inc. (Note 9) - (637) (690)
Other (46) 17 56
Net cash used in investing
activities (1,902) (2,512) (2,356)
Financing activities
Proceeds from issuance of
notes payable 2,125 3,692 2,885
Principal payments on notes
payable and noncompete
obligations (3,982) (2,644) (2,296)
Proceeds from issuance of
long-term debt - - 410
Principal payments of
long-term debt (53) (49) (543)
Purchases of treasury stock (36) (28) (28)
Net cash provided by (used in)
financing activities (1,946) 971 428
Increase (decrease) in cash and
cash equivalents (79) 135 10
Cash and cash equivalents at
beginning of year 319 184 174
Cash and cash equivalents at
end of year $ 240 $ 319 $ 184
</TABLE>
See accompanying notes.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
November 2, 1996
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. (Coast Wire);
its 80%-owned subsidiary, Helton Incorporated (formerly Helton and Helton
Sales); and Wescon's wholly-owned subsidiary, I.H. Molding, Inc. (I.H.
Molding). 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." During 1995, 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 were not 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 $346,000 and $430,000
as of November 2, 1996 and October 28, 1995, respectively, at the Helton
Incorporated subsidiary, and $204,000 and $98,000 as of November 2, 1996 and
October 28, 1995, respectively, 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.
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. See Note
10 regarding the reverse stock split approved by the Board of Directors in
December 1996.
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.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Financial Instrument
The carrying value of the Company's financial instruments, including cash and
cash equivalents, accounts and notes receivable, notes payable, accounts
payable and long-term debt, approximates their fair market value.
Advertising
The Company expenses advertising costs as incurred. Advertising expense
charged to operations amounted to approximately $316,000, $218,000 and
$348,000 in 1996, 1995 and 1994, respectively.
Reclassifications
Certain amounts in the 1995 and 1994 consolidated financial statements and
accompanying notes have been reclassified to conform with the 1996
presentation.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
November 2, October 28,
1996 1995
(In Thousands)
<S> <C> <C>
Raw materials $5,495 $5,829
Work-in-process and
finished goods 2,236 2,183
7,731 8,012
Adjustment to LIFO cost 36 44
$7,767 $8,056
</TABLE>
3. Notes Payable and Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of the following:
November 2, October 28,
1996 1995
(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 274 327
2,774 2,827
Less current portion 57 53
$2,717 $2,774
</TABLE>
The prime rate at November 2, 1996 was 8.25%. The mortgage note payable is
collateralized by a real estate mortgage on a building with an approximate
carrying value of $542,000 at November 2, 1996. The aggregate principal
amounts of long-term debt maturing in the next five fiscal years are as
follows: 1997 - $57,000; 1998 - $61,000; 1999 - $66,000; 2000 - $71,000;
and 2001 - $19,000.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. Notes Payable and Long-Term Debt (continued)
On or after January 1, 1995, the variable interest rate convertible
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.
At November 2, 1996, the Company, through its subsidiary, Wescon, has an
unused line of credit for short-term bank borrowings of $5,200,000 remaining
of the $7,000,000 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 November 2, 1996, restricted net assets of
Wescon were approximately $23,842,000. The Company, through its subsidiary,
Helton Incorporated, also has outstanding borrowings of $25,000 at
November 2, 1996 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 8.5% and 9.2% in
1996 and 1995, respectively.
The Company finances certain property, liability, workers' compensation,
and officer and director insurance premiums and has issued notes payable
totaling $348,000 and $323,000 during 1996 and 1995, respectively, under
which payments are due monthly in the following year. At November 2, 1996
and October 28, 1995, the outstanding balance under these notes payable
amounted to $247,000 and $245,000, respectively. The weighted average
interest rate on these notes payable was 10.6% and 8.4% in 1996 and 1995,
respectively.
Interest payments on notes payable and long-term debt were $498,000,
$493,000 and $335,000 in 1996, 1995 and 1994, respectively.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. 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>
1996 1995 1994
(In Thousands)
Service cost - benefits earned
<S> <C> <C> <C>
during the period $ 151 $ 126 $ 135
Interest cost on projected
benefit obligation 438 434 406
Actual return on plan assets (468) (471) (413)
Net amortization and deferral (53) (97) (36)
$ 68 $ (8) $ 92
</TABLE>
Assumptions used in accounting for the defined benefit plans were as follows:
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Weighted average discount rate 7.75% 7.50% 8.25%
Rates of increase in compensation
levels 5.0% 5.0% 5.0%
Expected long-term rate of return
on assets 9.0% 9.0% 8.0%
</TABLE>
The effect of changing certain assumptions in 1996 and 1995, as described
above, was not material.
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets at November 2, 1996 and October 28, 1995
for the Company's defined benefit pension plans.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Employee Compensation and Benefits (continued)
Actuarial present value of benefit obligations information is as follows:
<TABLE>
<CAPTION>
November 2, 1996 October 28, 1995
Retirement Retirement
Income Hourly Income Hourly
Plan Plan Plan Plan
(In Thousands)
Vested benefit
<S> <C> <C> <C> <C>
obligation $ 4,398 $1,269 $ 4,168 $1,180
Accumulated benefit
obligation $ 4,495 $1,269 $ 4,256 $1,200
Plan assets at fair
value $ 3,596 $1,711 $ 3,757 $1,653
Projected benefit
obligation 5,030 1,293 4,736 1,200
Projected benefit
obligation less
(more) than plan
assets (1,434) 418 (979) 453
Unrecognized net
(gain) loss 292 21 (27) (36)
Unrecognized
transition net
asset, net of
amortization (76) (196) (89) (229)
Net pension asset
(liability)
recognized in the
consolidated
balance sheet $(1,218) $ 243 $(1,095) $ 188
</TABLE>
At November 2, 1996, approximately 45% of the plans' assets were invested in
U.S. Government securities and 55% 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 1996, the Company elected to discontinue
contributions to the Employee Stock Ownership Trust. In 1995 and 1994, the
Company made a $60,000 contribution to the Employee Stock Ownership Trust
which was funded by the issuance of 171 and 141 shares of the Company's
treasury stock in 1995 and 1994, respectively.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. 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 1996, 1995 and 1994, the Company recorded expense
related to the plan of approximately $181,000, $138,000 and $133,000,
respectively.
The Company has supplemental retirement agreements with certain former
officers under which $93,000, $172,000 and $124,000 of related expenses have
been recognized in 1996, 1995 and 1994, respectively. In accordance with
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," the Company recognizes the projected future cost of retiree health
and life insurance as an expense as employees render service instead of when
the benefits are paid.
5. Income Taxes
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 November 2, 1996 and October 28, 1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
(In Thousands)
Deferred tax assets:
Capital loss carryforward on
<C> <S> <C> <C>
marketable equity securities $1,324 $1,398
Pension and deferred compensation
accrual 695 697
Vacation accrual 189 170
Postretirement benefit obligation 95 104
Workers' compensation accrual 122 98
Other - net 158 149
Total deferred tax assets 2,583 2,616
Deferred tax liabilities:
Depreciation (373) (379)
Tooling amortization (278) (249)
Prepaid insurance (120) (120)
Other - net (30) (30)
Total deferred tax liabilities (801) (778)
1,782 1,838
Valuation allowance for deferred tax
assets (1,255) (1,385)
Net deferred tax assets $ 527 $ 453
</TABLE>
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
(In Thousands)
Current:
<S> <C> <C> <C>
Federal $ 942 $650 $661
State 177 130 65
Total current 1,119 780 726
Deferred:
Federal (106) 22 130
State (19) 3 15
Total deferred (125) 25 145
$ 994 $805 $871
</TABLE>
A reconciliation of the income tax provision to the amounts computed at the
federal statutory rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Provision at statutory rate $997 $726 $702
State income taxes, net of
federal tax benefit 104 88 53
Change in valuation reserve (130) (13) 238
Contribution of qualified use
property - - (43)
Other 23 4 (79)
$994 805 $871
</TABLE>
The change in valuation reserve, and the resulting lower effective income
tax rate, for the year ended November 2, 1996, is principally attributable
to the effect of capital loss carryforwards utilized in 1996 to offset
capital gains incurred from the sale of marketable equity securities, and
unrealized capital gains on marketable equity securities recorded in 1996. At
November 2, 1996, the Company had capital loss carryforwards of $3,395,000
of which $2,398,000 expires in 1997 and $997,000 expires in 1998.
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)
5. Income Taxes (continued)
Income tax payments were $950,000, $892,000 and $725,000 in 1996, 1995 and
1994, respectively. In addition, the Company received income tax refunds
of $140,000 in 1994.
6. Marketable Equity Securities
The following is a summary of available-for-sale marketable equity
securities:
<TABLE>
November 2, October 28,
1996 1995
(In Thousands)
<S> <C> <C>
Cost $415 $415
Gross unrealized gains 176 35
Estimated fair value $591 450
</TABLE>
7. 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 1,200 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)
7. Stock Options (continued)
Under the stock benefit plan, options to purchase 300 shares of common
stock at $750 per share and 900 shares at $250 per share were outstanding
at October 29, 1994. During 1995, the options to purchase 300 shares at $750
per share expired. There has been no additional stock option activity in
1995 or 1996. Options to purchase 900 shares remain outstanding at
November 2, 1996, of which options to purchase 540 shares are exercisable.
8. 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>
1997 $ 456
1998 420
1999 357
2000 302
2001 301
Thereafter 50
$1,886
</TABLE>
Total rent expense during fiscal 1996, 1995 and 1994 was $357,000, $304,000
and $262,000, respectively.
At November 2, 1996, the Company is contingently liable for letters of
credit outstanding totaling $1,415,181, which guarantee various trade and
insurance activities.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. 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 $111,000.
At November 2, 1996 and October 28, 1995, other accrued expenses include
a current liability of $111,000 and $125,000, 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 November 2,
1996.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. Acquisitions
On September 1, 1995, the Company acquired 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. 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.
10. Subsequent Events
In December 1996, the Company's shareholders approved an amendment to the
Company's Certificate of Incorporation providing for a 1 for 50 reverse
stock split and a change in par value of its common stock to $100 per share.
Fractional shares resulting from the reverse stock split may be redeemed by
the Company at $7.50 per share (on a pre-split basis). On December 14, 1996,
the Board of Directors approved a 20 for 1 stock split and a change in par
value of its common stock to $5 per share. This amendment to the
Certificate of Incorporation will be submitted to a vote by the shareholders
in April 1997. All share information in the accompanying consolidated
financial statements has been adjusted to give retroactive effect to the 1 for
50 reverse stock split approved by the shareholders.
11. 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 11% and 12% of net sales in 1996 and 1995,
respectively, and sales to two customers accounted for 24% of net sales
in 1994.
Latshaw Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Quarterly Financial Data (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In Thousands, Except Per Share Data)
Year ended November 2, 1996
Product sales $12,018 $11,367 $9,630 $11,392
Gross profit 2,728 2,730 1,901 2,672
Net income 487 594 167 691
Net income per share:
Primary 47.01 57.89 16.18 66.83
Fully diluted 25.83 31.15 10.04 35.81
Year ended October 28, 1995
Product sales 11,072 11,682 8,374 9,974
Gross profit 2,511 2,921 1,506 2,018
Net income (loss) 473 761 (38) 133
Net income (loss) per share:
Primary 45.61 73.94 (3.69) 12.91
Fully diluted 25.02 39.31 (3.69) 8.41
The above quarterly financial data is unaudited, but in the opinion of
management, all adjustments necessary for a fair presentation of the
selected data for these interim periods presented have been included.
<PAGE>
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Five-Year Summary
1996 1995 1994 1993 1992
(In Thousands, Except Per Share Data)
Summary of operations
<S> <C> <C> <C> <C> <C>
Net sales $44,407 $41,102 $38,732 $30,941 $26,366
Cost of sales 34,376 32,146 29,230 23,851 21,615
Gross profit 10,031 8,956 9,502 7,090 4,751
Selling, general
and administrative
expenses 6,899 6,474 6,795 5,445 5,301
Interest expense 513 523 361 277 227
Interest income (14) (15) (16) (19) (41)
Loss (gain) on sale
of marketable equity
securities - - 997 2,587 (333)
Gain on sale of
investment (189) - - - -
Unrealized gain on
marketable equity
securities - - (712) (3,168) (30)
Other - net (111) (160) 13 (78) (55)
Income (loss) before
income taxes,
extraordinary item
and cumulative effects
of changes in
accounting principles 2,933 2,134 2,064 2,046 (318)
Income tax provision
(benefit) 994 805 871 175 (108)
Income (loss) before
extraordinary item and
cumulative effects of
changes in accounting
principles 1,939 1,329 1,193 1,871 (210)
Extraordinary item -
tax benefit
from utilization
of capital loss
carryforwards - - - - 124
Income (loss) before
cumulative effects of
changes in accounting
principles 1,939 1,329 1,193 1,871 (86)
Cumulative effects of
adopting new methods of
accounting for income
taxes and post-
retirement benefits - - - (681) -
Net income (loss) $ 1,939 1,329 $ 1,193 1,190 $ (86)
</TABLE>
Latshaw Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Five-Year Summary (continued)
1996 1995 1994 1993 1992
(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 $ 187.92 $ 128.80 $ 115.62 $ 116.63 $ (7.34)
Fully diluted $ 102.43 $ 72.72 $ 64.38 $ 65.11 $ (7.34)
Book value per share $ 1,367.77 $ 1,154.40 $ 1,026.55 $ 909.19 $ 698.97
Weighted average
common and common
equivalent shares
outstanding:
Primary 10,318 10,318 10,245 10,203 11,713
Fully diluted 20,404 20,324 20,287 20,012 11,713
Balance sheet data
Current assets $17,808 $16,818 $15,327 $13,011 $10,411
Property, plant and
equipment - net 7,377 7,075 6,411 5,843 4,680
Deferred income taxes - - - - 339
Noncompete agreement 426 537 - - -
Other assets 220 218 226 212 201
$25,831 $24,648 $21,964 $19,066 $15,631
Current liabilities $ 7,165 $ 7,827 $ 6,900 $ 5,379 $ 4,258
Long-term debt 2,717 2,774 2,827 2,775 1,764
Noncompete obligation 222 333 - - -
Pensions and deferred
compensation 1,645 1,621 1,571 1,528 1,503
Postretirement benefit
obligation 243 266 288 327 -
Deferred income taxes 257 238 172 76 -
Shareholders' equity 13,582 11,589 10,206 8,981 8,106
$25,831 $24,648 $21,964 $19,066 $15,631
Working capital $10,643 $ 8,991 $ 8,427 $ 7,632 $ 6,153
</TABLE>
