<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
------------------ TO
------------------
COMMISSION FILE NO. 1-8009
UNR INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 36-3060977
- -------------------------------------------- --------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
332 SOUTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60604-4385
- -------------------------------------------- --------------------
(Address of Principal Executive Office) (Zip Code)
</TABLE>
(312) 341-1234
(Registrant's Telephone Number Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- -------------------------------------------------------------------------------------------- --------------------------
<S> <C>
Common Stock $.01 par value................................................................. Chicago Stock Exchange
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by checkmark 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 checkmark 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. __
As of March 15, 1996, 52,715,824 shares of common stock were outstanding.
The aggregate market value of stock held by nonaffiliates is $166,600,000 based
upon the average bid and asked prices of such stock as of March 15, 1996.
Documents incorporated by reference:
(1) Annual Report to Stockholders of Registrant for the fiscal year ended
December 31, 1995. Certain information therein is incorporated by reference into
Part I, Part II and Part IV hereof.
(2) Proxy Statement for the Annual Meeting of Shareholders to be held on May 9,
1996. Certain information therein is incorporated by reference into Part III
hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS
UNR Industries, Inc. a Delaware corporation ("Registrant" or "UNR"), was
organized in 1979 as a holding company.
On July 29, 1982, Registrant and ten of its subsidiaries, filed separate
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the Northern District
of Illinois, Eastern Division. The Registrant was designated as
debtor-in-possession and its operations continued in the ordinary course of
business.
On March 15, 1989, Registrant and the seven subsidiaries not having been
previously discharged, filed a Disclosure Statement and a Consolidated Plan of
Reorganization ("Plan") with the Bankruptcy Court. Effective June 2, 1989, the
Registrant's Plan of Reorganization was confirmed by the Bankruptcy Court
following acceptance of the Plan by the Registrant's creditors and stockholders.
Pursuant to the Plan, 42,404,847 shares of common stock of the reorganized
Registrant were issued to the UNR Asbestos-Disease Claims Trust (the "Trust"),
the unsecured creditors and to the existing and future asbestos claimants in
full discharge of all claims. The Plan also provided that all proceeds from the
litigation against certain insurance companies would become unencumbered assets
of the Registrant. Existing shareholders retained 3,687,378 shares of common
stock and received six-year warrants to purchase an additional 3,687,378 shares
of common stock at $5.15 per share.
On December 31, 1992, Unarco Industries, Inc. and UNR, Inc. merged into UNR
Industries, Inc. All remaining subsidiaries became wholly owned subsidiaries of
UNR Industries, Inc., except Holco Corporation which remains a wholly owned
subsidiary of Leavitt Structural Tubing Company, a wholly owned subsidiary of
UNR Industries, Inc.
On June 11, 1993, UNR received a letter from the Trust, holder at that time
of 62% of the common stock of the Registrant, proposing that UNR's Board of
Directors consider retaining a financial adviser to solicit third-party
proposals for acquisition of UNR through a merger or other business combination
in which UNR's shareholders would receive cash for their shares and to advise
whether any such proposed transactions would be fair from a financial point of
view to UNR's shareholders.
On June 22, 1993, UNR's Board of Directors established a Special Committee
of independent directors to consider and to implement appropriate action in
response to the Trust's proposal, including the solicitation and evaluation of
offers for acquisition of UNR and to make a report and recommendation to the
Board of Directors.
On August 4, 1993, the Special Committee engaged J.P. Morgan Securities Inc.
as its financial adviser. On February 9, 1994, UNR announced that the proposals
received were subject to conditions and that none of the proposals indicated a
per share value greater than $6.50. On February 22, 1994, UNR announced that the
proposals received were either inadequate or too conditional to warrant
recommendations by the Special Committee to the Board of Directors, that all
discussions with potential buyers had been terminated and that all efforts to
seek further offers had ceased.
In 1994, the Registrant sold the industrial storage rack business of its
Material Handling Division. In 1993, the Registrant sold its Midwest Steel and
Midwest CATV Divisions. Accordingly, operating results of these divisions were
reclassified to discontinued operations.
On September 7, 1995, the Registrant announced that its Board of Directors
authorized Company management to explore the sale of all or a majority of its
common stock. J.P. Morgan Securities Inc. was retained to assist in this
process.
On January 26, 1996, the Registrant announced that efforts to sell the
entire Company did not result in a satisfactory offer, and that it would begin
discussions with multiple parties regarding the sale of four of its five
operating divisions and focus on the growth and development of its UNR-ROHN
Division ("ROHN"). ROHN manufactures towers, poles, antenna mounts and shelters
for the telecommunications industry and provides turnkey installation services
for these products, custom fabrication and custom hot-dip galvanizing. ROHN also
manufactures livestock equipment for the farm and exposition centers.
The four divisions to be sold, which are treated as discontinued operations
for financial reporting purposes, are as follows:
- UNR Leavitt Division, a manufacturer of structural and mechanical steel
tubing which are used in a broad range of commercial and consumer products.
- Unarco Commercial Products Division, a manufacturer of steel and plastic
shopping carts, supermarket stock handling equipment and luggage carts.
- UNR Home Products Division, a manufacturer of stainless steel and
composite sinks for residential use.
- Real Time Solutions, Inc., a wholly owned subsidiary of the Registrant
that was acquired in 1993, is engaged in providing computerized warehouse
management and control systems.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Information required under this section appears as Note 11 to the 1995
Consolidated Financial Statements of the Registrant included as Exhibit 13 to
this Form 10-K and incorporated herein by reference.
1
<PAGE>
(c) NARRATIVE DESCRIPTION OF BUSINESS
Registrant manufactures and markets towers, poles, masts and mounts used as
support structures for antennae and concrete and fiberglass shelters and
cabinets to house electronic telecommunications equipment. The
telecommunications markets served by these products include cellular, personal
communications systems, enhanced specialized mobile radio, paging services,
radio and television broadcast, wireless cable, private microwave systems,
military communications systems, direct broadcast satellite and network
switching.
Registrant also manufactures a line of livestock handling products sold to
farmers, ranchers, fairs and exposition and equestrian facilities, privacy
fencing sold to the military and other customers and provides custom fabrication
and hot-dip galvanizing services. These items represent in the aggregate less
than ten percent of Registrant's revenues.
Registrant's telecommunications products are sold directly to customers and
through distributors throughout the United States and to international markets.
All of the raw materials required for the manufacture of Registrant's
products are readily available from a number of different suppliers.
PATENTS
The Registrant has a number of patents and trademarks, none of which are
considered material to the consolidated operations.
EMPLOYEES
As of December 31, 1995, the Registrant employed approximately 700 people.
Collective bargaining agreements cover approximately 300 employees at its
facilities in Peoria, Illinois, and Frankfort, Indiana. The unions are the
United Automobile, Aerospace and Agricultural Implement Workers of America (UAW)
in Peoria and the Retail, Wholesale and Department Store Union (RWDSU) in
Frankfort. The Registrant considers its relations with its employees to be good.
COMPETITION
The Registrant competes with a number of manufacturers in each of its
products. Although the available information does not permit the Registrant to
provide accurate data as to its precise competitive position, the Registrant
believes it has a significant share in the product classes in which it
participates. The principal methods of competition are price, quality and
product service.
BACKLOG AND FOREIGN SALES
The Registrant's backlog of firm orders was approximately $26.9 million at
December 31, 1995, and $25.8 million at December 31, 1994. It is anticipated
that all of the backlog orders will be filled during the current year. The
stated backlog is not necessarily indicative of company sales or profits for any
future period.
Foreign sales of the Registrant in 1995, 1994 and 1993 were approximately
$8.5 million, $7.4 million and $5.1 million, respectively.
OTHER
The Registrant employs some environmentally hazardous materials in its
manufacturing processes, including oils and solvents. The Registrant has made
expenditures to comply with environmental laws and regulations, including
investigation and remediation of ground and water contamination, and expects to
make such expenditures in the future to comply with existing and probable
requirements. While such expenditures to date have not materially affected the
Registrant's capital expenditures, competitive position, financial condition or
results of operations, there can be no assurance that more stringent regulations
or enforcement in the future will not have such effects.
In some cases, the Registrant has notified state or federal authorities of a
possible need to remedy sites it previously operated. The Registrant has also
been notified by various state and federal governmental authorities that they
believe it may be a "potentially responsible party" or otherwise have
responsibility with respect to clean-up obligations at certain hazardous and
other waste disposal sites which were not owned or operated by the Registrant.
In some such cases, the Registrant has effected settlements with the relevant
authorities or other parties for immaterial amounts. In other cases, the
Registrant is participating in negotiations for settlement with the relevant
authorities or other parties or has notified the authorities that it denies
liability for clean-up obligations. At all such sites, costs which may be
incurred are difficult to accurately predict until the level of contamination is
determined. The Registrant, after consultation with legal counsel and with
environmental experts, believes that the ultimate outcome with respect to all of
these sites will not have a material effect on the Registrant's financial
condition or on the results of its operations.
2
<PAGE>
ITEM 2. PROPERTIES.
The following table sets forth information concerning location, size, use
and nature of the principal manufacturing facilities owned or leased by the
Registrant (for continuing operations only). The Registrant believes its plants
are suitable for their purposes, are well maintained and are adequately insured.
Not included in the table are leased warehouses, aggregating 25,800 square feet
and the Registrant's sales offices, all of which are leased.
<TABLE>
<CAPTION>
LOCATION USE SQUARE FOOTAGE LEASED OR OWNED
- -------------- -------------------------------- ---------------- ------------------------------
<S> <C> <C> <C>
Peoria, IL Tower & Poles 400,000 Owned
Frankfort, IN Towers & Livestock Equipment 50,000 Owned
Frankfort, IN Towers & Livestock Equipment 87,500 Leased (Expiration 12/31/96)
Bessemer, AL Equipment Shelters 250,000 Leased (Expiration 9/15/11)
</TABLE>
The Registrant uses a wide variety of standard and specialized machine
tools, many varying types of equipment and many different manufacturing
processes in producing its products. The Registrant considers, that in general,
its plants are equipped with modern and well-maintained equipment. The
Registrant's operations make virtually full use of all existing facilities.
ITEM 3. LEGAL PROCEEDINGS.
The Registrant is involved in various pending legal proceedings and claims
arising in the normal course of business. Although the outcome of such
proceedings and claims cannot be determined with certainty, the Registrant,
after consultation with legal counsel, considers that such matters, individually
or in the aggregate, will not have a materially adverse effect on the
Registrant's operations or its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no matters submitted to a vote of security holders during
the fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of the Registrant are as follows:
<TABLE>
<CAPTION>
NAME AGE EXPERIENCE/TENURE
- ------------------------- ---- ---------------------------------------------------------
<S> <C> <C>
Thomas A. Gildehaus...... 55 Chief Executive Officer and President (since July 1992);
Director since July 1992; Director, Executive Vice
President of Deere & Company, manufacturer of farm and
construction equipment (1980-1992).
Henry Grey............... 42 Senior Vice President, Chief Financial Officer and
Treasurer (since 1994); Vice President --Finance and
Treasurer (1986-1994); Senior Manager, Arthur Andersen
& Co., (1974-1986).
Victor E. Grimm.......... 59 Vice President, Corporate Secretary and General Counsel
(since October 1992); Partner, Bell, Boyd & Lloyd,
Attorneys (1967-Present).
</TABLE>
All of the executive officers are elected by the Board of Directors at the
annual meeting for one-year terms and serve until such time as their respective
successors are duly elected and qualified.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Registrant's Common Stock is publicly traded in the over-the-counter
market on the NASDAQ National Market System and is listed on the Chicago Stock
Exchange. The Registrant's Common Stock bears the symbol UNRI.
The high and low bids are as reported in the Wall Street Journal Quotations
from the NASDAQ National Market System.
<TABLE>
<CAPTION>
DIVIDENDS
PER
COMMON STOCK HIGH LOW SHARE
- --------------------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
1994
First Quarter............................................................ $ 7 1/8 $ 5 5/8 $ .20
Second Quarter........................................................... 6 5 1/4 --
Third Quarter............................................................ 6 1/8 5 1/8 --
Fourth Quarter........................................................... 6 5/8 5 7/8 --
1995
First Quarter............................................................ $ 7 1/8 $ 5 1/4 $ 1.55
Second Quarter........................................................... 7 7/8 5 3/8 --
Third Quarter............................................................ 9 3/4 7 1/4 --
Fourth Quarter........................................................... 9 3/8 7 7/16 1.00
1996
First Quarter (through March 15)......................................... $ 9 $ 7 5/8 $--
</TABLE>
As of March 15, 1996 the Registrant had 3,099 record holders of its Common
Stock.
3
<PAGE>
On January 15, 1991, the Registrant paid a $.20 regular cash dividend to
Stockholders of record on December 20, 1990.
On January 15, 1992, the Registrant paid a $.20 regular and $1.00
extraordinary cash dividend to Stockholders of record on December 31, 1991.
On February 1, 1993, the Registrant paid a $.20 regular and $2.00
extraordinary cash dividend to Stockholders of record on January 15, 1993.
On December 1, 1993, the Registrant paid a $1.20 extraordinary cash dividend
to Stockholders of record on November 16, 1993.
On April 1, 1994, the Registrant paid a $.20 regular cash dividend to
Stockholders of record on March 18, 1994.
On April 17, 1995, the Registrant paid a $.25 regular cash dividend and a
$1.30 extraordinary cash dividend to Stockholders of record on April 3, 1995.
On December 28, 1995, the Registrant paid a $1.00 extraordinary cash
dividend to Stockholders of record on December 18, 1995.
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Five Year Summary of Operations 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 142,216 $ 107,026 $ 73,811 $ 67,262 $ 69,803
Cost of products sold 98,996 73,060 51,846 46,250 45,687
- -----------------------------------------------------------------------------------------------------------------
Gross Profit 43,220 33,966 21,965 21,012 24,116
- -----------------------------------------------------------------------------------------------------------------
Operating Income 29,862 18,580 9,710 9,579 13,795
- -----------------------------------------------------------------------------------------------------------------
Interest income, net 1,839 1,174 551 3,586 7,214
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 31,701 19,754 10,261 13,165 21,009
Income tax provision 12,700 7,900 4,100 5,000 7,800
- -----------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 19,001 11,854 6,161 8,165 13,209
Discontinued operations--
Income from operations, net of tax 10,275 21,971 12,623 121,718 3,359
Loss on dispositions, net of tax -- (2,500) -- (6,200) --
- -----------------------------------------------------------------------------------------------------------------
Net Income $ 29,276 $ 31,325 $ 18,784 $ 123,683 $ 16,568
- -----------------------------------------------------------------------------------------------------------------
Net Income (Loss) Per Share:
Continuing operations $ .37 $ .24 $ .13 $ .18 $ .30
Discontinued operations--
Income from operations, net of tax .20 .45 .27 2.70 .07
Loss on dispositions, net of tax -- (.05) -- (.14) --
- -----------------------------------------------------------------------------------------------------------------
Net Income Per Share $ .57 $ .64 $ .40 $ 2.74 $ .37
- -----------------------------------------------------------------------------------------------------------------
Dividends Declared Per Common Share $ 2.55 $ .20 $ 1.20 $ 2.20 $ 1.20
- -----------------------------------------------------------------------------------------------------------------
Weighted Average Common Shares Outstanding 51,813 49,318 47,369 45,040 44,894
- -----------------------------------------------------------------------------------------------------------------
Five-Year Summary of Financial Data
- -----------------------------------------------------------------------------------------------------------------
Total Assets $ 161,226 $ 258,106 $ 229,505 $ 353,624 $ 294,842
Stockholders' Equity 127,764 220,596 193,384 232,981 206,272
Dividends Declared 132,274 9,738 57,691 102,517 53,745
Return on Assets 18.2% 12.1% 8.2% 35.0% 5.6%
Return on Stockholders' Equity 22.9% 14.2% 9.7% 53.1% 8.0%
Capital Expenditures 2,303 3,335 781 683 4,468
Depreciation and Amortization 1,433 1,358 1,353 1,341 1,189
Long-Term Liabilities 4,671 4,867 2,949 3,136 3,334
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Prior year results have been restated to reflect the 1992 discontinuance of
Midwest CATV and Midwest Steel, the 1994 discontinuance of Unarco Material
Handling and the 1995 discontinuance of UNR Leavitt, Unarco Commercial Products,
UNR Home Products and Real Time Solutions, Inc.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's Discussion and Analysis appearing on pages 26 through 27 of UNR
Industries, Inc. 1995 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is incorporated by reference from the
Statements of Income, Statements of Cash Flows, Balance Sheets, Statements of
Changes in Stockholders' Equity and Notes to Financial Statements included in
the UNR Industries, Inc. 1995 Annual Report to Stockholders.
4
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item with respect to the directors and the
Executive Officers of the Registrant is hereby incorporated by reference to
Registrant's definitive proxy statement to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, which proxy statement is anticipated to be filed within
120 days after the end of Registrant's fiscal year ended December 31, 1995.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item with respect to executive compensation is
hereby incorporated by reference to Registrant's definitive proxy statement to
be filed pursuant to Regulation 14A promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, which proxy statement is
anticipated to be filed within 120 days after the end of Registrant's fiscal
year ended December 31, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is hereby incorporated by reference to
Registrant's definitive proxy statement to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, which proxy statement is anticipated to be filed within
120 days after the end of the Registrant's fiscal year ended December 31, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is hereby incorporated by reference to
Registrant's definitive proxy statement to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, which proxy statement is anticipated to be filed within
120 days after the end of the Registrant's fiscal year ended December 31, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
The information required by this item is incorporated by reference
in Item 8 of this report.
2. The following financial schedule for the years 1995, 1994 and 1993 is
submitted herewith:
Schedule II--Allowance for Doubtful Accounts.
All other schedules have been omitted because they are not applicable or not
required.
3. Exhibits:
The following list sets forth the exhibits to this Form 10-K as required by
Item 601 of Regulation S-K. Certain exhibits are filed herewith, while the
balances are hereby incorporated by reference to documents previously filed with
the Securities and Exchange Commission. Exhibits hereto incorporated by
reference to such other filed documents are indicated by an asterisk.
EXHIBIT NO.
(2) *Plan of Reorganization incorporated herein by reference from Exhibit A of
the 1989 first quarter Form 10-Q.
(3) *Amended and Restated Certificate of Incorporation dated March 13, 1980,
filed as an exhibit to the 1990 Form 10-K.
*Certificate of Amendment dated June 2, 1989, to amended and restated
Certificate of Incorporation filed as an exhibit to the 1990 Form 10-K.
*Certificate of Amendment dated July 12, 1990, to amended and restated
Certificate of Incorporation filed as an exhibit to the 1990 Form 10-K.
*Amended and Restated By-Laws dated May 5, 1994, filed as an exhibit to the
1993 Form 10-K.
(4) *Warrant Agreement (including form of warrant) issued pursuant to the
provisions of Article III of the Registrant's Consolidated Plan of
Reorganization confirmed on June 2, 1989, filed as an exhibit to the 1989
Form 10-K.
(9) None.
(10) Material Contracts:
*UNR Industries, Inc. 1992 Restricted Stock Plan, filed as an exhibit to the
1992 Form 10-K.
*Employment Agreement entered into between UNR Industries, Inc. and Thomas
A. Gildehaus, President and Chief Executive Officer, filed as an exhibit to
the 1992 Form 10-K.
*Form of Change of Control Agreements entered into between UNR Industries,
Inc., and Henry Grey, Senior Vice President-Finance & Treasurer, and Victor
E. Grimm, Vice President, Corporate Secretary and General Counsel, filed as
an exhibit to the 1992 Form 10-K.
5
<PAGE>
*UNR Industries, Inc. Supplemental Executive Retirement Plan effective as of
January 1, 1993, filed as an exhibit to the 1993 Form 10-K.
*1994 Stock Option Plan incorporated by reference from Exhibit A of Proxy
Statement dated October 11, 1994.
*1994 Executive Stock Purchase Plan incorporated by reference from Exhibit B
of Proxy Statement dated October 11, 1994.
*Form of Executive Stock Purchase Agreement with Thomas A. Gildehaus, Henry
Grey and Victor E. Grimm dated September 9, 1994, filed as an exhibit to the
1994 third quarter 10-Q.
Agreements with J.P. Morgan Securities Inc. dated June 22, 1995, and
February 9, 1996.
The SEC File Number for Unarco Industries, Inc., Registrant's predecessor
was 1-3296; for Registrant the SEC File Number is 1-8009.
(11) The computation can be determined from report.
(12) Not applicable.
(13) Registrant's 1995 Annual Report to Shareholders.
(16) Not applicable.
(18) None.
(21) List of Subsidiaries of Registrant.
(22) Not applicable.
(23) Consent of Independent Public Accountants.
(24) None.
(27) Financial data schedule.
(28) None.
(b) No Form 8-K was filed for the quarter ended December 31, 1995.
(c) Exhibits--See 10, 13, 21, 23 and 27 above.
(d) None.
6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE
To the Stockholders and Board of Directors of UNR Industries, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in UNR Industries, Inc.'s 1995
Annual Report to Stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated March 7, 1996. Our audit was made for the
purpose of forming an opinion on the basic consolidated financial statements
taken as a whole. The supplemental schedule included in Part IV, Item 14(a)
(Allowance for Doubtful Accounts) is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic consolidated financial statements taken
as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 7, 1996
7
<PAGE>
SCHEDULE II
ALLOWANCE FOR DOUBTFUL ACCOUNTS (IN THOUSANDS)
Changes in the allowance for doubtful accounts for the three years ended
December 31 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance--beginning of year....................................................................... $ 1,010 $ 1,256 $ 2,300
Add (deduct)
- --Provision charged to income.................................................................... 507 1,340 4
- --Bad debts written-off.......................................................................... (261) (296) (119)
--------- --------- ---------
Balance--end of year............................................................................. $ 1,256 $ 2,300 $ 2,185
--------- --------- ---------
--------- --------- ---------
</TABLE>
8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNR INDUSTRIES, INC.
/s/ THOMAS A. GILDEHAUS
---------------------------------------
Thomas A. Gildehaus
CHIEF EXECUTIVE OFFICER, PRESIDENT &
DIRECTOR
March 15, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
March 15, 1996 /s/ THOMAS A. GILDEHAUS
--------------------------------------------------------
Thomas A. Gildehaus
CHIEF EXECUTIVE OFFICER, PRESIDENT & DIRECTOR
March 15, 1996 /s/ HENRY GREY
--------------------------------------------------------
Henry Grey
SENIOR VICE PRESIDENT & CHIEF FINANCIAL
OFFICER PRINCIPAL FINANCIAL OFFICER
March 15, 1996 /s/ VICTOR E. GRIMM
--------------------------------------------------------
Victor E. Grimm
VICE PRESIDENT, CORPORATE SECRETARY & GENERAL COUNSEL
March 15, 1996 /s/ JOHN A. SALADINO
--------------------------------------------------------
John A. Saladino
CONTROLLER & ASSISTANT SECRETARY
March 15, 1996 /s/ CHARLES M. BRENNAN III
--------------------------------------------------------
Charles M. Brennan III
DIRECTOR
March 15, 1996 /s/ DARIUS W. GASKINS, JR.
--------------------------------------------------------
Darius W. Gaskins, Jr.
DIRECTOR
March 15, 1996 /s/ GENE LOCKS
--------------------------------------------------------
Gene Locks
DIRECTOR, CHAIRMAN OF THE BOARD
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
March 15, 1996 /s/ RUTH R. MCMULLIN
--------------------------------------------------------
Ruth R. McMullin
DIRECTOR
March 15, 1996 /s/ THOMAS F. MEAGHER
--------------------------------------------------------
Thomas F. Meagher
DIRECTOR
March 15, 1996 /s/ ROBERT B. STEINBERG
--------------------------------------------------------
Robert B. Steinberg
DIRECTOR
March 15, 1996 /s/ WILLIAM J. WILLIAMS
--------------------------------------------------------
William J. Williams
DIRECTOR
</TABLE>
10
<PAGE>
Exhibit 10
JPMORGAN
[LETTERHEAD]
June 22, 1995
The Board of Directors
UNR Industries, Inc.
332 South Michigan Avenue
Chicago, Illinois 60604
Attention: Mr. Thomas A. Gildehaus
President and Chief Executive Officer
Members of the Board:
This letter confirms our understanding (the "Agreement") that UNR Industries,
Inc. (together with its subsidiaries and affiliates, the "Company") has
engaged J.P. Morgan Securities Inc. ("J.P. Morgan") to act as the Company's
exclusive financial advisor with respect to the Company's analysis and review
of its general corporate and financial strategies and its consideration of
various potential strategic or financial transactions, including any sale,
merger, consolidation, or any other business combination, in one or a series
of transactions, involving all or a portion of the stock, assets, or business
of the Company or any of its subsidiaries or divisions (each, a "Business
Combination"), any repurchase by the Company of a significant amount of its
securities, any recapitalization of the Company, or any spin-off, split-off,
or other extraordinary dividend in excess of $1.00 per share on the Company's
common stock, in cash, securities, or other assets, to stockholders of the
Company (each of the foregoing, including any Business Combination, a
"Transaction").
As discussed, we propose to undertake certain services on your behalf as part
of our mandate to assist you in analyzing and evaluating various strategic
and financial alternatives, including to the extent requested by you:
(i) assisting you in preparing an offering memorandum describing the Company,
its operations, historical performance, and future prospects,
(ii) identifying and contacting selected qualified acquirors acceptable to
you, (iii) arranging for potential acquirors to conduct business
investigations, (iv) assisting you in negotiating the financial aspects of
any proposed Transaction, and (v) delivering an opinion to the Board of
Directors of the Company, if requested, as to the fairness to the Company's
stockholders from a financial point of view of the consideration to be
received by the Company's stockholders in any proposed Transaction (an
"Opinion").
As compensation for the services to be rendered hereunder by J.P. Morgan, the
Company agrees to pay J.P. Morgan (i) an engagement fee (the "Engagement
Fee") of $200,000 payable promptly upon execution of this Agreement,
(ii) a success fee as described below (the "Success Fee"), and (iii) a no-go
fee (the "No-Go Fee") of $300,000, payable 12 months from the date of this
Agreement in the event that a bona fide written proposal (or proposals) for a
Business Combination (or Business Combinations), determined by the Board of
Directors to be reasonably acceptable, is received from a third party (or
parties) during the
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<PAGE>
term of this Agreement, and the Company has rejected such proposal (or
proposals) and no alternative Transactions are or become available to the
Company during the term of this Agreement.
The Success Fee (except as otherwise provided in this paragraph) referred to
in clause (ii) above shall be in an amount equal to (1) 0.70% (70 basis
points) of the Aggregate Transaction Value (as hereinafter defined) if only
one Business Combination is consummated by the Company and (2) .80% (80 basis
points) of the Aggregate Transaction Value if two or more Business
Combinations are consummated. If the Company consummates any sale or other
transfer of stock, assets or business of its Home Products division to
Franke, Inc. (a "Home Products Transaction"), the foregoing Success Fee
structure shall not apply to such Transaction and J.P. Morgan shall receive
instead a Success Fee equal to .35% (35 basis points) of the Aggregate
Transaction value of such Home Products Transaction; PROVIDED, however, that
the Success Fee structure slated in the first sentence of this paragraph
shall apply to any Transaction involving the Home Products division other
than such a sale or other transfer to Franke, Inc. The Engagement Fee paid to
J.P. Morgan hereunder shall be credited to any Success Fee payable to J.P.
Morgan hereunder. A Success Fee shall be payable with respect to each
Transaction in cash upon consummation of such Transaction. In the event that
the Company enters into a Transaction other than a Business Combination, J.P.
Morgan and the Company will negotiate, in good faith, a mutually agreeable
Success Fee, which will take into account, among other things, the results
obtained and the custom and practice among investment bankers acting in
similar transactions.
For purposes of this Agreement, "Aggregate Transaction Value" means the
aggregate amount of consideration received by the Company and/or its
stockholders (treating any shares issuable upon exercise of options,
warrants, or other rights of conversion as outstanding) in all Transactions,
plus the amount of any debt securities or other liabilities assumed,
redeemed, or remaining outstanding or equity securities redeemed or remaining
outstanding in connection with all Transactions, plus, without duplication,
the value of any securities, cash, or other assets (in the case of
distributions to the Company's common stockholders, including only
extraordinary dividends in excess of $1.00 per share on the Company's common
stock) distributed to stockholders of the Company since the date hereof.
For purposes of this Agreement, a Transaction shall be deemed to have been
consummated upon the earliest of any of the following events to occur:
(a) the acquisition by another person of at least 80% of the outstanding
common stock of, or voting power in, the Company; (b) a merger or
consolidation of the Company with another person; (c) the acquisition by
another person of assets of the Company representing at least 5% of the
Company's book value; (d) acquisition by the Company (including any such
acquisition by any shareholder of the Company) of at least 20% of its
outstanding equity securities; (e) consummation of any recapitilization; or
(f) the receipt by stockholders of the Company of any cash, securities, or
other assets to be distributed in any spin-off, split-off or other
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<PAGE>
extraordinary dividend (in the case of distributions to the Company's common
stockholders, including only such distributions in excess of $1.00 per share
of the Company's common stock).
If the consideration or other value received in any Business Combination is
paid in whole or in part in the form of securities, the value of such
securities, for purposes of calculating the Success Fee, shall be the fair
market value thereof, as the parties hereto shall mutually agree, on the day
prior to the consummation of the Business Combination; PROVIDED, HOWEVER,
that if such securities consist of securities with an existing public trading
market, the value thereof shall be determined by the last sales price for
such securities on the last trading day thereof prior to such consummation.
If all or a portion of the consideration is related to or contingent upon the
future earnings or operations of the Company, the portion of J.P. Morgan's
compensation relating thereto shall be calculated and shall be paid at the
time the Transaction is consummated based upon the estimated net present
value thereof.
The Company agrees to provide J.P. Morgan all financial and other information
requested by it for the purpose of its assignment hereunder. In performing
its services hereunder (including, without limitation, in giving any
Opinion), J.P. Morgan shall be entitled to rely upon and assume, without
independent verification, the accuracy and completeness of all information
that is publicly available and of all information that has been furnished to
it by the Company or otherwise reviewed by J.P. Morgan , and J.P. Morgan
shall not assume any responsibility nor have any liability therefor. J.P.
Morgan shall have no obligation to conduct any valuation or appraisal of any
assets or liabilities. For the execution of its assignment, J.P. Morgan shall
establish a team of qualified individuals from appropriate specialty areas
within J.P. Morgan & Co. Incorporated, including Morgan Guaranty Trust
Company of New York.
Any financial advice rendered by J.P. Morgan pursuant to this Agreement may
not be disclosed publicly in any manner without J.P. Morgan's prior written
approval and will be treated by the Company as confidential. J.P. Morgan
understands that its Opinion may be reproduced in full in any proxy or
information statement mailed to stockholders of the Company and agrees to
provide its written approval for such use.
In order to coordinate our efforts with respect to possible Transactions,
during the period of our engagement hereunder neither the Company nor any
representative thereof (other than J.P. Morgan) will initiate discussions
regarding a Transaction except through J.P. Morgan. If the Company or its
management receives an inquiry regarding a Transaction (other than the Home
Products Transaction), they will promptly advise J.P. Morgan of such inquiry
in order that J.P. Morgan may evaluate the person making such inquiry and its
interest and assist the Company in any resulting negotiations.
The Company agrees to reimburse J.P. Morgan promptly upon request from time
to time for all reasonable expenses (including, without limitation, travel,
communication, and document production expenses, and the fees and
disbursements of counsel) incurred by J.P. Morgan in
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<PAGE>
performing its engagement hereunder, whether or not a Transaction is
consummated. The Company also agrees to indemnify J.P. Morgan and certain
other entities and persons as set forth on Schedule I attached hereto.
This Agreement may be terminated by either the Company or J.P. Morgan at any
time upon giving written notice to the other party. No such termination will
affect (i) J.P. Morgan's rights to receive fees accrued prior to such
termination or to receive reimbursement of its expenses as set forth above,
(ii) the rights of J.P. Morgan or any other Indemnified Person (as defined in
Schedule I hereto) to receive indemnification and contribution, or (iii) the
Company's confidentiality obligations hereunder. In addition, if at any time
prior to the expiration of 18 months after any such termination by the
Company or expiration of this Agreement a Transaction is consummated, J.P.
Morgan will be entitled to payment in full or the Success Fee.
It is understood that if the Company completes a transaction in lieu of any
Transaction for which J.P. Morgan is entitled to compensation pursuant to
this Agreement, J.P. Morgan and the Company will negotiate in good faith
appropriate compensation for J.P. Morgan in an amount to be mutually agreed
upon, which will take into account, among other things, the results obtained
and the custom and practice among investment bankers acting in similar
transactions.
If the foregoing correctly sets forth the agreement between the Company and
J.P. Morgan, please sign and return the enclosed copy of this Agreement,
whereupon it shall become our binding agreement to be governed by New York
law.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ C. H. Randolph Lyon
-----------------------
Name: C. H. Randolph Lyon
Title: Managing Director
Accepted as of the
date first above written:
UNR INDUSTRIES, INC.
By: /s/ T. A. Gildehaus
------------------------
Name: Thomas A. Gildehaus
Title: President and Chief Executive Officer
4
<PAGE>
JPMORGAN
[LETTERHEAD]
February 9, 1996
The Board of Directors
UNR Industries, Inc.
332 South Michigan Avenue
Chicago, Illinois 60604
Attention: Mr. Thomas A. Gildehaus
President and Chief Executive Officer
Members of the Board:
This letter confirms our understanding (the "Agreement") that UNR
Industries, Inc. (together with its subsidiaries and affiliates, the
"Company") has engaged J.P. Morgan Securities Inc. ("J.P. Morgan") to act as
the Company's exclusive financial advisor with respect to the sale, merger,
consolidation, or any other business combination, in one or a series of
transactions, involving all or a portion of the stock, assets, or business of
any of the following divisions of the Company, either separately or in
combination (each, a "Transaction"): UNR-Leavitt, Unarco Commercial Products,
UNR-Home Products and Real Time Solutions (each, a "Division" and
collectively, the "Divisions"). This Agreement replaces the previous
Agreement between the Company and J.P. Morgan dated June 22, 1995 which is,
therefore, terminated. J.P. Morgan hereby waives the No-Go Fee under that
Agreement.
As discussed, we propose to undertake certain services on your behalf,
including to the extent requested by you: (i) assisting you in preparing an
offering memorandum describing each Division, its operations, historical
performance, and future prospects, (ii) identifying and contacting selected
qualified acquirors acceptable to you, (iii) arranging for potential
acquirors to conduct business investigations, (iv) assisting you in
negotiating the financial aspects of any proposed Transaction, and (v)
delivering an opinion to the Board of Directors of the Company, if requested,
as to the fairness to the Company's stockholders from a financial point of
view of the consideration to be received by the Company in any proposed
Transaction (an "Opinion").
As compensation for the services to be rendered hereunder by J.P. Morgan, the
Company agrees to pay J.P. Morgan (i) a Success Fee as hereinafter-defined,
or (ii) a No-Go Fee of $300,000 payable 12 months from the date of this
Agreement in the event that no definitive agreement to consummate a
Transaction has been executed. The Success Fee shall be an amount equal to
(i) 1.25% (125 basis points) of the Aggregate Transaction Value (as
hereinafter defined) up to $175,000,000 plus 5% (500 basis points) of the
Aggregate Transaction Value in excess of $175,000,000 if all the Divisions
are sold, or (ii), in the event that the divestiture of all Divisions is not
consummated for any reason, the Success Fee shall be the sum of and be
defined as follows: (a) 1.00% of the Transaction Value for UNR-Leavitt up to
$100,000,000 and 5% of the Transaction Value over $100,000,000; (b) 1.25% of
the Transaction Value for Unarco Commercial Products up to $40,000,000 and 3%
of the
1
<PAGE>
Transaction Value over $40,000,000; (c) 2.00% of the Transaction Value for
UNR-Home Products up to $15,000,000 and 5% of the Transaction Value over
$15,000,000; and (d) 2.00% of the Transaction Value for Real Time Solutions
up to $15,000,000 and 5% of the Transaction Value over $15,000,000. The
Success Fee shall be payable with respect to each Transaction in cash upon
consummation of such Transaction subject to a minimum Success Fee of $500,000
for the first Transaction. To the extent that J.P. Morgan is entitled to
Success Fees greater than $500,000 as a result of the first Transaction and
a subsequent Transaction(s), the Success Fee(s) for the subsequent
Transaction(s) shall be adjusted so that J.P. Morgan does not receive more
compensation than it would be entitled in clause (ii) of the second sentence
of this paragraph. The $200,000 engagement fee paid under the previous
Agreement between the Company and J.P. Morgan dated June 22, 1995 shall be
credited against the Success Fee(s) payable to J.P. Morgan hereunder.
For purposes of this Agreement, "Transaction Value" means the amount of
consideration received by the Company in each Transaction, plus the amount of
any debt securities or other liabilities (excluding accounts payable and
accrued expenses) assumed by the purchaser as reflected on the Division's
financial statements immediately prior to closing plus any other liabilities
assumed by the Purchaser but not reflected on the Division's financial
statements and not incurred by the Division in the normal course of business
all as contemplated in the draft Asset Purchase and Sale Agreement provided
to potential purchasers. "Aggregate Transaction Value" means the sum of the
Transaction Values for all of the Divisions.
If the consideration or other value received in any Transaction is paid in
whole or in part in the form of securities, the value of such securities, for
purposes of calculating the Success Fee, shall be the fair market value
thereof, as the parties hereto shall mutually agree, on the day prior to the
consummation of the Transaction; PROVIDED, HOWEVER, that if such securities
consist of securities with an existing public trading market, the value
thereof shall be determined by the last sales price for such securities on
the last trading day thereof prior to such consummation. If all or a portion
of the consideration is related to or contingent upon the future earnings or
operations of the Company, the portion of J.P. Morgan's compensation relating
thereto shall be calculated and shall be paid at the time the Transaction is
consummated based upon the estimated net present value thereof as the parties
hereto shall mutually agree.
The Company agrees to provide J.P. Morgan all financial and other information
requested by it for the purpose of its assignment hereunder. In performing
its services hereunder (including, without limitation, in giving any
Opinion), J.P. Morgan shall be entitled to rely upon and assume, without
independent verification, the accuracy and completeness of all information
that is publicly available and of all information that has been furnished to
it by the Company or otherwise reviewed by J.P. Morgan, and J.P. Morgan shall
not assume any responsibility nor have any liability therefor. J.P. Morgan
shall have no obligation to conduct any valuation or appraisal of any assets
or liabilities. For the execution of its assignment, J.P. Morgan shall
establish a team of qualified individuals from appropriate speciality areas
within J.P. Morgan & Co. Incorporated, including Morgan Guaranty Trust
Company of New York.
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<PAGE>
Any financial advice rendered by J.P. Morgan pursuant to this Agreement may
not be disclosed publicly in any manner without J.P. Morgan's prior written
approval and will be treated by the Company as confidential. J.P. Morgan
understands that its Opinion may be reproduced in full in any proxy or
information statement mailed to stockholders of the Company and agrees to
provide its written approval for such use.
In order to coordinate our efforts with respect to possible Transactions,
during the period of our engagement hereunder neither the Company nor any
representative thereof (other than J.P. Morgan) will initiate discussions
regarding a Transaction except through J.P. Morgan. If the Company or its
management receives an inquiry regarding a Transaction, they will promptly
advise J.P. Morgan of such inquiry in order that J.P. Morgan may evaluate the
person making such inquiry and its interest and assist the Company in any
resulting negotiations.
The Company agrees to reimburse J.P. Morgan promptly upon request from time
to time for all reasonable expenses (including, without limitation, travel,
communication, and document production expenses, and the fees and
disbursements of counsel) incurred by J.P. Morgan in performing its
engagement hereunder, whether or not a Transaction is consummated. The
Company also agrees to indemnify J.P. Morgan and certain other entities and
persons as set forth on Schedule I attached hereto.
This Agreement may be terminated by either the Company or J.P. Morgan at any
time upon giving written notice to the other party. No such termination will
affect (i) J.P. Morgan's rights to receive fees accrued prior to such
termination or to receive reimbursement of its expenses as set forth above,
(ii) the rights of J.P. Morgan or any other Indemnified Person (as defined in
Schedule I hereto) to receive indemnification and contribution, or (iii) the
Company's confidentiality obligations hereunder. In addition, if at any time
prior to the expiration of 18 months after any such termination by the
Company or expiration of this Agreement a Transaction is consummated, J.P.
Morgan will be entitled to payment in full of the Success Fee.
It is understood that if the Company completes a transaction in lieu of any
Transaction for which J.P. Morgan is entitled to compensation pursuant to
this Agreement, including but not limited to the sale of the Company, any
repurchase by the Company of a significant amount of its securities, any
recapitalization of the Company, or any spin-off, split-off, or extraordinary
dividend (aside from those related to the Transactions contemplated in this
Agreement), J.P. Morgan and the Company will negotiate in good faith
appropriate compensation for J.P. Morgan is an amount to be mutually agreed
upon, which will take into account, among other things, the results obtained
and the custom and practice among investment bankers acting in similar
transactions.
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If the foregoing correctly sets forth the agreement between the Company and
J.P. Morgan, please sign and return the enclosed copy of this Agreement,
whereupon it shall become our binding agreement to be governed by New York
law.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ Gregory L. Guyett
------------------------
Name: Gregory L. Guyett
Title: Vice President
Accepted as of the
date first above written:
UNR INDUSTRIES, INC.
By: __________________________
Name: Thomas A. Gildehaus
Title: President and Chief Executive Officer
4
<PAGE>
JPMorgan
SCHEDULE I
UNR Industries, Inc. (the "Company") referred to in the attached agreement
(the "Agreement"), agrees to indemnify and hold harmless J.P. Morgan
Securities Inc. ("J.P. Morgan") and its affiliates, and the respective
directors, officers, agents, and employees of J.P. Morgan and its affiliates
and each other entity or person, if any, controlling J.P. Morgan or any of its
affiliates within the meaning of either Section 15 of the Securities Act of
1933,,as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended, (J.P. Morgan and each such entity or person being referred to as an
"Indemnified Person") from and against any losses, claims, demands,
damages, or liabilities (or actions in respect thereof) relating to or arising
out of activities performed pursuant to the Agreement, the transactions
contemplated thereby or J.P. Morgan's role in connection therewith, and to
reimburse J.P. Morgan and any other Indemnified Person on a current basis for
all expenses (including, without limitation, reasonable fees and
disbursements of counsel) incurred by J.P. Morgan or any such other
Indemnified Person n connection with pending or threatened litigation to
which J.P. Morgan (or any other Indemnified Person) is a party, in each case,
as such expenses are incurred or paid. The Company will not, however, be
responsible for any such losses, claims, damages, liabilities, or expenses of
any Indemnified Person that are determined by final and nonappealable
judgment of a court of competent jurisdiction to have resulted primarily from
actions taken or omitted to be taken by such Indemnified Person in bad faith
or from such Indemnified Person's gross negligence or willful misconduct. The
Company also agrees that no Indemnified Person shall have any liability
(whether direct or indirect, in contract, tort or otherwise) to the Company
for or in connection with the Agreement, any transactions contemplated
thereby or J.P. Morgan's role in connection therewith, except for any such
liability for losses, claims, damages, liabilities or expenses incurred by
the Company that are determined by final and nonappealable judgment of a
court of competent jurisdiction to have resulted primarily from actions taken
or omitted to be taken by such Indemnified Person in bad faith or from such
Indemnified Person's gross negligence or willful misconduct.
Upon receipt by an Indemnified Person of actual notice of a claim, action or
proceeding against such Indemnified Person in respect of which indemnity may
be sought hereunder, such Indemnified Person shall promptly notify the
Company with respect thereto. In addition, an Indemnified Person shall
promptly notify the Company after any action is commenced (by way of service
with a summons or other legal process giving information as to the nature and
basis of the claim) against such Indemnified Person. In any event, failure so
to notify the Company shall not relieve the Company from any liability which
the Company may have on account of this indemnity or otherwise, except to the
extent the Company shall have been materially prejudiced by such failure. The
Company will, if requested by any Indemnified Person, assume the defense of
any litigation or proceeding in respect of which indemnity may be sought
hereunder, including the employment of counsel reasonably satisfactory to
J.P. Morgan and the payment of the fees and expenses of such counsel, in
which event, except as provided below, the Company shall not be liable for
the fees and expenses of any other counsel retained by any
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Indemnified Person in connection with such litigation or proceeding. In any
such litigation or proceeding the defense of which the Company shall have so
assumed, and Indemnified Person shall have the right to participate in such
litigation or proceeding and to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Company and such Indemnified Person shall have mutually agreed
in writing to the retention of such counsel, or (ii) the named parties to any
such litigation or proceeding (including any impleaded parties) include the
Company and such Indemnified Person and representation of both parties by the
same counsel would, in the opinion of counsel to such Indemnified Person, be
inappropriate due to actual or potential differing interests between the
Company and such Indemnified Person. The Company shall not be liable for any
settlement of consent or if there be a final judgment for the plaintiff, the
Company agrees to indemnify the Indemnified Person from and against any loss
or liability by reason of such settlement or judgment. If the Company assume
the defense of any litigation or proceeding, the Company will not settle such
litigation or proceeding without J.P. Morgan's written consent, which shall
not be unreasonably withheld.
The provisions contained in this Schedule I shall remain operative and
in full force and effect regardless of the expiration or any termination of
the Agreement.
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THREE-YEAR SUMMARY OF FINANCIAL DATA (in thousands except per share data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
THREE-YEAR SUMMARY OF OPERATIONS 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $142,216 $107,026 $ 73,811
Cost of products sold 98,996 73,060 51,846
- ----------------------------------------------------------------------------------------------------------
GROSS PROFIT 43,220 33,966 21,965
- ----------------------------------------------------------------------------------------------------------
OPERATING INCOME 29,862 18,580 9,710
- ----------------------------------------------------------------------------------------------------------
Interest income, net 1,839 1,174 551
- ----------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 31,701 19,754 10,261
Income tax provision 12,700 7,900 4,100
- ----------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 19,001 11,854 6,161
Discontinued operations-
Income from operations, net of tax 10,275 21,971 12,623
Loss on disposition, net of tax -- (2,500) --
- ----------------------------------------------------------------------------------------------------------
NET INCOME $ 29,276 $ 31,325 $ 18,784
- ----------------------------------------------------------------------------------------------------------
Net Income Per Share-
Continuing operations $ .37 $ .24 $ .13
Discontinued operations-
Income from operations .20 .45 .27
Loss on disposition -- (.05) --
- ----------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE $ .57 $ .64 $ .40
- ----------------------------------------------------------------------------------------------------------
Dividends Declared Per
Common Share $ 2.55 $ .20 $ 1.20
- ----------------------------------------------------------------------------------------------------------
Weighted Average Common
Shares Outstanding 51,813 49,318 47,369
- ----------------------------------------------------------------------------------------------------------
THREE-YEAR SUMMARY OF FINANCIAL DATA
- ----------------------------------------------------------------------------------------------------------
Total Assets $161,226 $258,106 $229,505
Stockholders' Equity 127,764 220,596 193,384
Dividends Declared 132,274 9,738 57,691
Return on Assets 18.2% 12.1% 8.2%
Return on Stockholders' Equity 22.9% 14.2% 9.7%
Capital Expenditures 2,303 3,335 781
Depreciation and Amortization 1,433 1,358 1,353
Long-Term Liabilities 4,671 4,867 2,949
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Prior year results have been restated to reflect the 1994 discontinuance of
Unarco Material Handling and the 1995 discontinuance of UNR Leavitt, Unarco
Commercial Products, UNR Home Products and Real Time Solutions, Inc.
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TO OUR STOCKHOLDERS:
1995 was a successful, although challenging, year for our Company. The Company
recently announced a decision to sell four of our operating divisions and to
retain the ROHN Division, which continued its rapid growth in 1995. ROHN's 1995
sales expanded to $142.2 million, or 33 percent, over 1994. Operating earnings
grew to $29.9 million, an increase of over 60 percent. Because of ROHN's
outstanding performance, UNR's restated operating income from continuing
operations reached another record level in 1995, marking the third consecutive
year in which operating earnings established a new record.
During 1995, the Company paid a regular dividend of $.25 per share, a 25 percent
increase over 1994's regular dividend of $.20. In addition, the Company paid a
total of $2.30 in extraordinary dividends. Despite the payment of approximately
$132.3 million in total dividends, the Company's financial structure remains
strong with a debt-to-equity ratio of 4 percent and a current ratio of 2 to 1.
We are also pleased to note that the return on year-end shareholder equity rose
to 23 percent in 1995, surpassing the objective of 15 percent established in
1992.
On September 7, 1995, we announced our intention to sell the entire Company. We
had previously
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offered the Company for sale in 1993, but that effort did not generate
satisfactory bids, primarily because of some unresolved legal and tax related
issues. Those issues were largely resolved in 1994 and 1995. In the course of
offering the Company for sale in 1995, it became apparent that there was
substantial interest in each of the individual operating divisions. However,
there was not a similarly strong interest in the acquisition of the entire
Company, and our Board of Directors concluded that the bids received for the
Company as a whole did not represent the Company's full value.
In January 1996, based upon the interest expressed by potential buyers in our
operating divisions and on the outstanding past performance and future growth
potential of ROHN, our Board of Directors made the strategic decision to sell
four of our operating divisions, Leavitt Tube, Unarco Commercial Products, UNR
Home Products, and Real Time Solutions, Inc. The Board determined that the
Company's energies and resources should be focused on the opportunity that ROHN
provides for future growth and profitability. Accordingly, we have retained J.P.
Morgan Securities Inc. to assist in the sale of the other four divisions. The
sale process is well underway, and strong interest has been expressed by both
strategic and financial buyers in the four divisions offered for sale. We are
confident these divisions will be sold in a reasonable time for fair values.
The four divisions to be sold have been classified as discontinued operations
for financial reporting purposes. Thus, the 1995 Annual Report presents the
financial performance of ROHN on a stand-alone basis, restating prior years
financials to reflect the past performance of the "new" UNR.
ROHN provides tremendous opportunity. As the North American market leader in
communications towers, poles and shelters, ROHN is perfectly positioned to
continue its double digit growth. ROHN also enjoys a premier international
reputation and is prepared to supply the burgeoning telecommunications industry
with towers, poles, shelters, mounts and other products on a global basis. In
the pages that follow, ROHN's products, markets, facilities and growth prospects
are more fully described. We are excited about the continuing opportunity
provided by ROHN, and we are committed to successfully exploiting that
opportunity to continue our record of providing superior total shareholder
returns.
Sincerely,
Thomas A. Gildehaus
President and Chief Executive Officer
3
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In 1948, Dwight Rohn produced his first tower for home television reception.
Today, ROHN stands as one of the world's leaders in the design, manufacture
and installation of communication towers and shelters used in radio,
television, cellular telephone and other wireless communication systems.
ROHN's product lines now fill a broad range of telecommunications needs:
towers, poles, masts and mounts used as support structures for antennae, and
shelters and cabinets to house electronic equipment necessary for the
operation of each communications site. The telecommunications markets served
by ROHN include cellular, personal communications systems (PCS), enhanced
specialized mobile radio, paging services, radio and television broadcast,
wireless cable, private microwave systems, military communications systems,
direct broadcast satellite and networking switching.
With more than 800,000 square feet of production facilities in Illinois, Indiana
and Alabama, ROHN is one of North America's largest manufacturers of towers,
poles and shelters, backed by a 700 person workforce of skilled labor and highly
trained professionals. The Company's innovative products, which enjoy superior
brand name recognition and a premium quality image, are distributed
internationally from locations in the United States and Mexico.
Not since the day Bell called Watson have events prompted such explosive growth
in America's telecommunications industry. Personal communications products, such
as cellular telephones, have sparked that explosion. Today, millions of
Americans would not think of leaving their home or business without one. Demand
is nowhere near its plateau; new products and technologies continue to push
costs down, expand service offerings and fuel industry growth. Demand for
wireless communication products and services is now heating up worldwide,
offering new markets and new opportunities to those companies prepared to
respond.
ROHN is ready. As one of North America's largest manufacturers of towers, poles
and shelters for wireless communications systems, the Company is uniquely
prepared to build the infrastructure for the telecommunications systems of the
future.
[GRAPHIC]
MAJOR TELECOMMUNICATION
MARKETS
Cellular
Personal Communications
Systems (PCS)
Enhanced Specialized
Mobile Radio (ESMR)
Paging Services
Radio television
broadcast
Wireless cable
Private microwave
Direct
Broadcast
Satellite
(DBS)
[GRAPHIC]
Guyed
Towers
Self-
supporting
towers
Fiberglass
equipment
shelters
Concrete
equipment
shelters
Cabinets
Steel poles
Fiberglass poles
Concrete poles
Satellite antenna mounts
Antenna masts and tubing
Receiver mounts
T.V. tripods
MAJOR PRODUCTS
4
<PAGE>
Outstanding products and superior customer service have translated into three
consecutive years of solid growth and profitability. Sales for 1995 exceeded
1994 results by 33 percent, and operating income grew over 60 percent.
[GRAPHIC]
SALES
[GRAPHIC]
OPERATING INCOME
Demand in the cellular telephone industry for both towers and shelters has
fueled the Company's strong performance. Indeed, 90 percent of ROHN's revenues
are derived from the telecommunications industry.
The expanding worldwide demand for cellular products has translated into strong
growth among ROHN's largest customers. In 1990, only two of ROHN's top 10
accounts purchased more than $1 million of goods and services. In 1995, all of
ROHN's top 10 accounts exceeded that level--and several made multi-million
dollar purchases. This growth represents more than a ten-fold increase in sales
among ROHN's top customers, attesting to the premium quality of ROHN's products
and services.
PRODUCTS THAT SET ROHN APART
TOWERS AND POLES. With more than 500,000 square feet of manufacturing capacity,
ROHN keeps pace with growing demand for its premier line of guyed and self-
supporting towers and poles. These products span a broad range, varying in price
from less than $10,000 to over $1,000,000. ROHN also produces a line of
consumer, wireless and satellite products, including telescoping masts, tripods,
non-penetrating roof mounts and brackets used in broadcast, two-way radio, home
television and military applications.
To meet the increasing demand for its towers, poles and other mounting
structures, ROHN is adding a new hot-dip galvanizing facility at its Peoria,
Illinois plant. In addition, a $6,000,000 project is underway at the Frankfort,
Indiana facility, which will include 175,000 square feet of manufacturing space
under one roof.
[GRAPHIC]
5
<PAGE>
SHELTERS AND CABINETS. Critical to the successful operation of wireless
communications systems is secure on-site housing of electronic communications
equipment. ROHN's concrete and fiberglass shelters and cabinets are widely used
by telecommunications service providers to safeguard this valuable equipment.
Concrete structures represent the largest part of ROHN's shelter business,
generating approximately 75 percent of shelter revenues.
Shelters are manufactured at a modern 250,000 square foot facility in Bessemer,
Alabama. These products are designed and engineered for customers' specific
needs and applications. In addition to shelter design and construction,
ROHN provides personnel and facilities for the installation of electronic
communications equipment within these units, allowing ROHN's customers to
provide telecommunications service more quickly.
TURNKEY INSTALLATION SERVICES. For clients who need their systems up and
operating quickly and efficiently, ROHN provides turnkey installation services
that are unparalleled in the industry. ROHN not only meets the exacting client
and industry design standards for precision-built shelters and towers, but it
also provides site preparation, foundation installation, tower erection, shelter
installation and antenna and transmission line installation services.
AGRICULTURAL AND OTHER PRODUCTS. Approximately 8 percent of ROHN's revenues are
derived from agricultural products, custom hot-dip galvanizing, custom
fabrication and other products. ROHN's agricultural products include livestock
handling products sold to farmers, ranchers, equestrian facilities and fairs and
expositions. ROHN also manufactures privacy fencing products sold to government
facilities and other customers.
6
<PAGE>
CELLULAR PHONES. The most popular personal communications product, the cellular
telephone, is used by more than 20 million subscribers. Usage is expected to
increase dramatically as rates for cellular phone service begin to fall. To
accommodate that growth, the industry will require substantial expansion of the
infrastructure that makes cellular service available nationwide. Currently,
cellular carriers are increasing coverage in rural areas and expanding coverage
in urban and suburban areas to accommodate increased subscriber usage. To
improve and expand the system, more than 14,000 cell sites could be added by the
year 2000. With each site requiring up to $100,000 for shelters and towers,
expenditures of $1.4 billion for such products is a real possibility.
[GRAPHIC]
[GRAPHIC]
THE ENGINES OF FUTURE GROWTH
PERSONAL COMMUNICATIONS SYSTEMS (PCS). One of the newest forms of wireless
communications is PCS, a digital based technology. During the past year many
telecommunications firms invested nearly $8 billion to purchase rights from the
Federal Communications Commission for broadcast frequencies required for PCS.
These companies have the management skill, financial resources and corporate
vision to make PCS an international reality--and they are highly motivated to
realize a prompt return on their large investments.
PCS will enjoy significant service advantages, including integration of voice,
data, messaging, faxing and paging into one handset and with greater clarity and
transmission quality. PCS will ultimately provide nationwide coverage,
eliminating the potential for interruption of service.
PCS service providers are expected to build their systems as rapidly as
possible. Building the PCS network will require substantial infrastructure
investment. Because the system broadcasts at a higher frequency, but with a
lower powered signal, PCS will require an estimated four times more cell sites
than cellular telephone to cover the same geographic area. As a result, PCS
service providers anticipate activating as many as 100,000 sites by the year
2000. The cost of shelters, towers and other mounting equipment for each site is
expected to range upwards from $20,000, requiring a total potential investment
in excess of $2.8 billion.
Several factors will influence the pace and timing of the PCS infrastructure
build-out. Site acquisition and zoning are hurdles, particularly when 100,000
sites may be required. In addition, certain PCS technologies remain to be
perfected and refined. While these issues may present obstacles to the rapid
development of PCS networks, several systems are under development, and others
are on the drawing boards. Some networks are expected to be operational in 1996.
7
<PAGE>
GLOBAL MARKETS. While the domestic market looks promising, international
growth of wireless communications also provides great opportunity. Typically,
new technologies can languish until consumers build a comfort level with the
product or service. However, wireless communications already is
internationally accepted. Wireless communications systems also are
considerably less expensive to develop and to expand than wireline systems.
These factors make wireless communications a popular option in many
developing countries which need telecommunications networks that can keep
pace with rapid economic growth. ROHN already has a substantial international
presence, having sold towers and other equipment in more than 54 countries.
Currently, ROHN is manufacturing a communications tower for Indonesia that
will be nearly as tall as the Eiffel Tower. In addition, many of ROHN's
domestic and foreign clients, which include the major telecommunications
providers and carriers, are rapidly expanding their presence in emerging
markets, and ROHN intends to be a part of that expansion.
Finally, global demand for wireless communications is strong, while market
penetration is negligible. Outside the U.S., fewer than 20 million cellular
telephones are in use. In South America, for example, less than 1 percent of
Argentina's population uses cellular phones. In Asia, less than 2 percent of
Indonesians use cellular phones. Considering the opportunity offered by
international expansion, ROHN anticipates rapid development of global markets.
ROHN has already taken significant steps to be a strong participant in the
infrastructure build-out. The Company continues to build relationships with
leading service providers and equipment manufacturers in the industry. ROHN's
expanding engineering capabilities, skilled workforce, growing manufacturing
facilities, and enhanced service capabilities and management systems will
provide it with the ability to supply high quality products in a timely and
efficient manner.
The Company's international operations are also expanding. ROHN currently
operates a sales office in Mexico City. During the coming years, ROHN plans
to continue to develop overseas markets through its U.S. customers and
through the establishment of partnerships and facilities in key developing
countries. The facilities will enable the Company to improve service to its
multinational clients.
Domestic growth--rapid global expansion--cellular or PCS. Whatever the shape
of the revolution in telecommunications, ROHN stands ready. With well-known,
high quality product lines, experienced personnel, unmatched production
facilities and a leading role in the industry, ROHN is prepared to capitalize
on the global transformation of the telecommunications industry.
8
<PAGE>
STATEMENTS OF INCOME (in thousands except per share data)
UNR INDUSTRIES, INC. AND SUBSIDIARIES for the years ended December 31, 1995,
1994 and 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET SALES $142,216 $107,026 $ 73,811
Cost of products sold 98,996 73,060 51,846
- ---------------------------------------------------------------------------------------------------------
GROSS PROFIT $ 43,220 $ 33,966 $ 21,965
Selling expense 5,232 6,256 5,086
Administrative and general expenses 8,126 9,130 7,169
- ---------------------------------------------------------------------------------------------------------
OPERATING INCOME $ 29,862 $ 18,580 $ 9,710
Interest income 2,445 1,786 1,237
Interest expense (606) (612) (686)
- ---------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES $ 31,701 $ 19,754 $ 10,261
Income tax provision 12,700 7,900 4,100
- ---------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS $ 19,001 $ 11,854 $ 6,161
- ---------------------------------------------------------------------------------------------------------
Discontinued operations:
Income from operations, net of $7,000, ($1,900), and
$6,800 taxes in 1995, 1994 and 1993, respectively 10,275 21,971 12,623
Loss on disposition, net of $1,500 tax benefit -- (2,500) --
- ---------------------------------------------------------------------------------------------------------
NET INCOME $ 29,276 $ 31,325 $ 18,784
- ---------------------------------------------------------------------------------------------------------
Net Income Per Share:
Continuing operations $ .37 $ .24 $ .13
Discontinued operations-
Income from operations .20 .45 .27
Loss on disposition -- (.05) --
- ---------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE $ .57 $ .64 $ .40
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
BALANCE SHEETS (in thousands)
UNR INDUSTRIES, INC. AND SUBSIDIARIES as of December 31, 1995 and 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
ASSETS 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,878 $ 68,991
Accounts, notes and other receivables, less allowance
for doubtful accounts of $2,185 in 1995 and $2,300 in 1994 17,464 19,775
Inventories 27,549 21,209
Deferred income taxes 7,876 10,400
Prepaid expenses 988 966
- -------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 59,755 121,341
- -------------------------------------------------------------------------------------------------
PLANT AND EQUIPMENT:
Land 1,008 784
Buildings 11,516 11,180
Machinery and equipment 17,129 16,114
- -------------------------------------------------------------------------------------------------
29,653 28,078
Less-Accumulated depreciation (17,827) (17,038)
- -------------------------------------------------------------------------------------------------
TOTAL PLANT AND EQUIPMENT 11,826 11,040
- -------------------------------------------------------------------------------------------------
OTHER ASSETS:
Deferred income taxes -- 10,200
Net assets of discontinued operations 89,026 115,108
Other 619 417
- -------------------------------------------------------------------------------------------------
TOTAL ASSETS $161,226 $258,106
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
10
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ 6,000 $ --
Current portion of long-term liabilities 190 189
Accounts payable 5,236 6,222
Accrued expenses-
Payroll related 2,445 2,319
Insurance related 5,600 5,600
Customer deposits 4,150 5,933
Income taxes 513 907
Other 4,657 5,942
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 28,791 27,112
- ---------------------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES-NOTES AND CAPITAL LEASES 4,671 4,867
- ---------------------------------------------------------------------------------------------------------
WARRANTS -- 5,531
- ---------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, authorized-60,000 shares,
issued-52,495 shares in 1995 and 51,577 shares in 1994 525 516
Capital surplus 66,898 130,497
Retained earnings 67,843 102,023
- ---------------------------------------------------------------------------------------------------------
135,266 233,036
Less- 326 treasury shares in 1995 and 631 treasury shares
in 1994, at cost (1,595) (2,751)
- Notes receivable from officers (5,525) (9,100)
- Unearned portion of restricted stock (382) (589)
- ---------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 127,764 220,596
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $161,226 $258,106
- ---------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
STATEMENTS OF CASH FLOWS (in thousands)
UNR INDUSTRIES, INC. AND SUBSIDIARIES for the years ended December 31, 1995,
1994 and 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 29,276 $ 31,325 $ 18,784
Adjustments for noncash items included in net income-
Depreciation and amortization 1,433 1,358 1,353
Provision for deferred employee compensation 183 383 211
Deferred income tax 12,700 7,900 4,100
Discontinued operations charge -- 2,500 --
Operating requirements-
Accounts receivable (increase) decrease 2,311 (7,314) (3,058)
Income tax refund receivable decrease -- 52,603 --
Inventories (increase) (6,339) (6,754) (89)
Prepaid expenses (increase) decrease 162 (556) 182
Accounts payable and accrued expenses increase (decrease) (3,322) 9,206 1,812
Discontinued operations 11,286 (8,802) 1,943
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 47,690 $ 81,849 $ 25,238
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment $ (2,303) $ (3,335) $ (781)
Increase in other assets (118) (245) (123)
Proceeds from the sale of discontinued operations 13,820 1,412 13,757
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities $ 11,399 $ (2,168) $ 12,853
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in long-term liabilities $ (195) $ (181) $ (187)
Increase in long-term liabilities -- 2,100 --
Proceeds from short-term borrowings 6,000 -- 5,100
Payment of short-term borrowings -- (5,100) --
Dividends paid (132,274) (9,738) (160,208)
Loans to officers -- (9,100) --
Repayment of officers' loans 3,575 -- --
Common stock issued 692 10,103 6,210
- ---------------------------------------------------------------------------------------------------------------
Net cash (used for) financing activities $ (122,202) $ (11,916) $(149,085)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents $ (63,113) $ 67,765 $(110,994)
Cash and cash equivalents, beginning of period 68,991 1,226 112,220
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 5,878 $ 68,991 $ 1,226
- ---------------------------------------------------------------------------------------------------------------
Cash paid during the year for interest $ 606 $ 612 $ 686
- ---------------------------------------------------------------------------------------------------------------
Cash paid during the year for income taxes $ 1,792 $ 1,602 $ 2,454
- --------------------------------------------------------------------------------------------------------------
Treasury stock issued for the acquisition
of Real Time Solutions, Inc. $ -- $ -- $ 4,159
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (in thousands except per share
data)
UNR INDUSTRIES, INC. AND SUBSIDIARIES for the years ended December 31, 1995,
1994 and 1993
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCK
- --------------------------------------------------------------------------------------------------------------------
SHARES CAPITAL RETAINED
ISSUED AMOUNT SURPLUS EARNINGS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1992 46,917 $117,294 $ -- $ 121,586
Net Income -- -- -- 18,784
Issuance of treasury
stock for acquisition -- -- 1,819 --
Issuance of restricted stock 78 122 393 --
Amortization of
restricted shares -- -- -- --
Cash dividends-
$1.20 per share -- -- (1,806) (58,148)
Stock options exercised 608 597 812 --
Stock options tax benefit -- -- 1,193 --
Warrants exercised 1,239 1,957 2,065 (200)
Change in stock par value -- (119,482) 119,482 --
Warrants reclassification -- -- (6,947) (2,792)
- -------------------------------------------------------------------------------------------------------------------
Balance December 31, 1993 48,842 $488 $117,011 $ 79,230
Net Income -- -- -- 31,325
Issuance of restricted stock 66 1 377 --
Amortization of
restricted shares -- -- -- --
Notes receivable from
officers for stock purchase 1,650 17 9,100 --
Cash dividends -
$.20 per share -- -- -- (9,738)
Stock options exercised 17 -- 35 --
Stock options tax benefit -- -- 31 --
Warrants exercised 1,002 10 3,943 1,206
- -------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 51,577 $516 $130,497 $ 102,023
Net Income -- -- -- 29,276
Issuance of restricted stock 19 -- -- --
Amortization of
restricted shares -- -- -- --
Repayment of officers' loans -- -- --
Cash dividends -
$2.55 per share -- -- (67,257) (65,017)
Restricted stock canceled -- -- (72) --
Warrants exercised 868 9 2,820 1,377
Warrants canceled -- -- 726 184
Directors' stock plan 31 -- 184 --
- -------------------------------------------------------------------------------------------------------------------
BALANCE
DECEMBER 31, 1995 52,495 $ 525 $66,898 $67,843
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
TREASURY STOCK
- -----------------------------------------------------------------------------------------------------------------------
RESTRICTED N/R
SHARES AMOUNT STOCK FROM
OFFICERS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1992 (1,347) $(5,608) $(291) $--
Net Income -- -- --
Issuance of treasury
stock for acquisition 616 2,339 -- --
Issuance of restricted stock -- -- (514) --
Amortization of
restricted shares -- -- 211 --
Cash dividends-
$1.20 per share -- -- -- --
Stock options exercised -- -- -- --
Stock options tax benefit -- -- -- --
Warrants exercised 100 518 -- --
Change in stock par value -- -- -- --
Warrants reclassification -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Balance December 31, 1993 (631) $(2,751) $(594) $--
Net Income -- -- -- --
Issuance of restricted stock -- -- (378) --
Amortization of
restricted shares -- -- 383 --
Notes receivable from
officers for stock purchase -- -- -- (9,100)
Cash dividends -
$.20 per share -- -- -- --
Stock options exercised -- -- -- --
Stock options tax benefit -- -- -- --
Warrants exercised -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 (631) $(2,751) $(589) $(9,100)
Net Income -- -- -- --
Issuance of restricted stock -- -- -- --
Amortization of
restricted shares -- -- 183 --
Repayment of officers' loans -- -- -- 3,575
Cash dividends -
$2.55 per share -- -- -- --
Restricted stock canceled -- -- 24 --
Warrants exercised 305 1,156 -- --
Warrants canceled -- -- -- --
Directors' stock plan -- -- -- --
BALANCE
DECEMBER 31, 1995 (326) $(1,595) $(382) $(5,525)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS
UNR Industries, Inc. ("UNR" or the "Company") manufactures towers, poles, mounts
and related accessories used principally to support telecommunications antennae
for wireless communications, such as private microwave, cellular telephone,
personal communications systems (PCS), commercial and amateur broadcasting and
home television. The Company also produces shelters and cabinets of concrete and
fiberglass to house electronic telecommunications equipment.
The Company conducts its business principally through its ROHN Division which
has manufacturing facilities in Peoria, Illinois (towers and poles), Frankfort,
Indiana (tower components and mounts), and Bessemer, Alabama (shelters).
The Company's products are sold through distributors and directly to customers
throughout the United States and to international markets. No single customer
accounts for more than 10% of net sales. International sales accounted for
approximately six percent of net sales in 1995.
The Company has a number of patents and trademarks. Management believes the loss
of any one of these patents or trademarks would not have a materially adverse
effect on its operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The financial statements include the consolidated accounts of UNR and its
subsidiaries. All significant intercompany transactions have been eliminated in
consolidation.
(b) CASH EQUIVALENTS
The Company considers all highly liquid short-term investments purchased with a
maturity of three months or less and all treasury bills to be cash equivalents.
Cash equivalents are carried at cost which approximates market value.
(c) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method. Inventory costs include material, labor
and factory overhead.
Total inventories in 1995 and 1994 included the following classifications (In
Thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $12,254 $8,289
Work-in-process 3,791 3,102
Raw materials 11,504 9,818
- -------------------------------------------------------------------------------
Total Inventories $27,549 $21,209
- -------------------------------------------------------------------------------
</TABLE>
(d) PLANT AND EQUIPMENT
Land, buildings and equipment are carried at cost. Expenditures for maintenance
and repairs are charged directly against income; major renewals and betterments
are capitalized. When properties are retired or otherwise disposed of, the
original cost and accumulated depreciation are removed from the respective
accounts and the profit or loss resulting from the disposal is reflected in
income.
The Company provides for depreciation of plant and equipment over the estimated
useful lives of the assets (buildings--20 to 40 years; machinery and equipment--
3 to 15 years). Depreciation is generally provided on the straight-line method
for financial reporting purposes and on accelerated methods for tax purposes.
14
<PAGE>
(e) INCOME TAXES
Under Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" (SFAS 109), the Company recognizes deferred tax liabilities and assets
for the expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns.
On December 21, 1992, the Internal Revenue Service issued final regulations
under Section 468B "Special Rules for Designated Settlement Funds." Prior to the
issuance of these tax regulations, the Company had significant unrecorded net
operating loss carry-forwards resulting from extraordinary reorganization
charges included in the 1989 Statement of Income. Through 1992, these charges
were deducted for income tax purposes only to the extent expenditures were
actually made by the UNR Asbestos-Disease Claims Trust (the "Trust").
The Section 468B regulations deal with the tax treatment of the Company's 1989
transfer of 29.4 million shares of UNR stock to the Trust. Based on these
regulations, the Company and Trust elected to treat the Trust as a Qualified
Settlement Fund ("QSF") on January 1, 1993, which entitled the Company to a tax
deduction equivalent to the value of the stock held by the Trust on that date.
This deduction substantially reduced the Company's 1993 income tax liability and
also generated tax loss carry-backs and carry-forwards. The Company received
Federal and state income tax refunds of approximately $52.6 million as a result
of the carry-backs. Based on these developments, the Company recorded a tax
benefit (net of a valuation allowance of approximately $20.0 million) of $90.0
million or $1.99 per share in the fourth quarter of 1992.
Total income tax expense/(benefit) for the years ended December 31, 1995, 1994,
and 1993, was allocated as follows (In Thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations $12,700 $7,900 $4,100
Discontinued operations (net of $10,000 valuation
allowance reversal in 1994) 7,000 (3,400) 6,800
Stockholder's equity, for compensation
expense for tax purposes in excess
of amounts recognized for financial
reporting purposes (155) (31) (1,193)
- -------------------------------------------------------------------------------------------------
$19,545 $4,469 $9,707
- -------------------------------------------------------------------------------------------------
</TABLE>
Income tax expense attributable to income from continuing operations consists of
current provisions of $1.6 million, $1.5 million and $.2 million and deferred
provisions of $11.1 million, $6.4 million and $3.9 million for the years ended
December 31, 1995, 1994 and 1993, respectively.
Income tax expense attributable to income from continuing operations was
$12,700, $7,900, and $4,100, for the years ended December 31, 1995, 1994 and
1993, respectively, and differed from the U.S. Federal statutory income tax rate
as follows (In Thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1995 1994 1993
Amount % Amount % Amount %
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed statutory provision $11,100 35 $6,900 35 $3,600 35
State taxes net of Federal effect 1,600 5 1,000 5 500 5
- -----------------------------------------------------------------------------------------------------
Total provision $12,700 40 $7,900 40 $4,100 40
- -----------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
(e) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995 and
1994 are as follows (In Thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net operating loss carry-forwards $ 5,700 $ 18,900
Depreciation (1,018) (1,400)
Accrued insurance reserves 2,099 2,099
Other, net 1,095 1,001
- ----------------------------------------------------------------------------------------
Net deferred tax assets $ 7,876 $ 20,600
- ----------------------------------------------------------------------------------------
</TABLE>
The Company has available approximately $15.0 million of net operating loss
carry-forwards for both continuing and discontinued operations, to offset
future taxable income through 2008. The Company also has general business tax
credits of $3.4 million which are available to reduce future Federal income
taxes through 2002. A portion of these credits begin to expire starting in
1997. Alternative minimum tax (AMT) credits of approximately $6.3 million are
available to reduce future Federal taxable income over an indefinite period.
The deferred tax assets related to the general business tax credits and AMT
are included in Discontinued Operations, net of the valuation allowance
discussed below. As a result of adopting SFAS 109 in 1992, the Company has
recognized the benefit of approximately $98.0 million of its net operating
loss carry-forwards and tax credits realized or expected to be realized
through 1996. The utilization of the net operating loss carry-forwards
depends on future taxable income during the applicable carry-forward periods.
The Company has therefore provided a valuation allowance as required under
SFAS 109 to reflect the inherent uncertainty of projections as to future
events. In 1994, the Company reversed $10.0 million (or $.20 per share) of
the valuation allowance recorded in 1992 and included it in Discontinued
Operations. This reversal in the valuation allowance to $10.0 million was
made based upon management's judgment regarding the realizability of the net
operating loss and credit carry-forwards.
(f) NET INCOME PER SHARE
Net income per share of common stock is based upon the weighted average number
of common shares outstanding during the year. The weighted average common shares
were 51,813,000 in 1995, 49,318,000 in 1994 and 47,369,000 in 1993. Dilution,
which would result if all outstanding options were exercised, is not significant
to the net income per share computation.
(g) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(h) PENSION AND PROFIT SHARING PLANS
The Company and its subsidiaries have defined benefit or defined contribution
retirement plans covering substantially all of their employees. Included in
these plans are certain union-sponsored plans to which the Company makes annual
contributions equal to the amounts accrued. The total pension expense for union-
sponsored plans for 1995, 1994, and 1993 was approximately $660,000, $460,000
and $360,000, respectively. The Company has one trustee-administered profit
sharing plan covering all eligible employees. Discretionary contributions of
$96,000, $83,000 and $59,000 were made and charged to expense in 1995, 1994 and
1993, respectively. Total pension expense for Company-sponsored plans for 1995,
1994 and 1993 was $184,000, $148,000 and $118,000, respectively. Pension expense
includes the following components (In Thousands):
16
<PAGE>
(h) PENSION AND PROFIT SHARING PLANS (CONTINUED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 220 $ 202 $ 198
Interest on projected benefit obligations 365 315 270
Actual return on plan assets (417) (356) (323)
Net amortization and deferral 16 (13) (27)
- -----------------------------------------------------------------------------------------------------
Net pension expense $ 184 $ 148 $ 118
- -----------------------------------------------------------------------------------------------------
The status of the plans at the respective year ends was as follows (In Thousands):
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fair market value of plan assets $6,043 $4,959 $4,382
- -----------------------------------------------------------------------------------------------------
Actuarial present value of benefits for services rendered to date:
Accumulated benefit obligation based on salaries
to date, including vested benefits of $3,928, $3,496
and $2,944 in 1995, 1994 and 1993, respectively $3,952 $3,508 $2,965
Additional benefits based on estimated future
salary levels 1,237 1,057 878
- -----------------------------------------------------------------------------------------------------
Projected benefit obligations $5,189 $4,565 $3,843
- -----------------------------------------------------------------------------------------------------
Excess of plan assets over projected
benefit obligations $ 854 $ 394 $ 539
Unrecognized net transitional asset 56 64 73
Unrecognized market (gain) (391) (290) (913)
Unrecognized prior service costs 84 92 --
- -----------------------------------------------------------------------------------------------------
Prepaid/(accrued) pension liability recognized
on the balance sheet at year-end $ 603 $ 260 $ (301)
- -----------------------------------------------------------------------------------------------------
</TABLE>
The expected long-term rate of return on plan assets was 8.0% for 1995, 1994 and
1993. The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of
accumulated benefit obligations were 8.0% and 4.0%, respectively, in 1995, 1994
and 1993.
(3) DISCONTINUED OPERATIONS
On September 7, 1995, the Company announced that its Board of Directors
authorized Company management to explore the sale of all or a majority of the
common stock of the Company. On January 26, 1996, the Company announced that
efforts to sell the entire Company did not result in a satisfactory offer and
that it would begin discussions with multiple parties regarding the sale of
four of its five operating divisions in order to focus fully on the strategic
growth and development of its ROHN Division, a supplier of goods and services
to the telecommunications industry. The divisions to be sold are the Leavitt
Tube division, a producer of mechanical and structural steel tubing, the
Commercial Products division, a manufacturer of steel and plastic shopping
carts, the Home Products division, a manufacturer of stainless steel and
composite sinks and the Real Time Solutions (RTS) subsidiary, a supplier of
"pick-to-light" inventory picking systems. The sale of these units, expected
to be concluded in 1996, is anticipated to result in a gain. Total sales of
these operations were $242 million, $265 million, and $239 million for the
years ended December 31, 1995, 1994 and 1993, respectively. Net assets of
these divisions are classified as "Net assets of discontinued operations" in
the accompanying balance sheets and are as follows (In Thousands):
17
<PAGE>
(3) DISCONTINUED OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 73,427 $ 98,168
Plant and equipment, net 50,802 59,270
Other assets 7,364 6,573
Current liabilities (28,161) (30,491)
Long-term liabilities (14,406) (18,412)
- ----------------------------------------------------------------------------
$ 89,026 $115,108
- ----------------------------------------------------------------------------
</TABLE>
On January 31, 1995, the Company entered into a definitive agreement to sell its
industrial storage rack business to The Renco Group, Inc., a private holding
company. This sale was consummated on March 31, 1995. Net assets of this
operation for the prior year are classified as "Net assets of discontinued
operations" in the accompanying balance sheets. In 1994, the after-tax $2.5
million provision for estimated loss on disposition included a write-down of
these assets to estimated net realizable values and estimated costs of disposing
of this operation.
(4) LITIGATION AND ENVIRONMENTAL
The Company is involved in various pending legal proceedings and claims arising
in the normal course of its business. Although the outcome of such proceedings
and claims cannot be determined with certainty, the Company is of the opinion,
after consultation with counsel, that such proceedings and claims, individually
or in the aggregate, are not material to its business or financial condition.
The Company is working with environmental authorities concerning testing and
possible remediation at a manufacturing site, the costs of which are difficult
to predict. The Company, after consultation with environmental experts, is of
the opinion that the ultimate outcome will not be material to its business or
financial condition.
(5) LEASES
The Company leases certain of its facilities and equipment under operating
leases or capital leases, as defined by SFAS No. 13. The Company's property
under capital leases, which is included in plant and equipment, consists of
$2,743,000 at December 31, 1995, and $2,924,000 at December 31, 1994 (see Note
6).
Future minimum payments for operating leases at December 31, 1995, are $837,000
in 1996, $134,640 in 1997, $68,400 in 1998, and $66,225 in 1999. Rental expense
under operating leases was approximately $1,248,000 in 1995, $1,186,000 in 1994
and $1,137,000 in 1993. Some of the leases contain renewal options for varying
periods from two to five years.
(6) LONG-TERM BORROWINGS
Total borrowings of the Company at December 31, 1995 and 1994, consisted of the
following (In Thousands):
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Mortgage notes payable at 7.5% to 8.0% $ 2,118 $2,132
Capital leases 2,743 2,924
Short-term borrowings 6,000 --
- ----------------------------------------------------------------------------
Total $10,861 $5,056
- ----------------------------------------------------------------------------
Classified in the balance sheets as follows:
Short-term borrowings $ 6,000 $ --
Current portion of long-term liabilities 190 189
Notes and capital leases 4,671 4,867
- ----------------------------------------------------------------------------
Total $10,861 $5,056
- ----------------------------------------------------------------------------
</TABLE>
18
<PAGE>
(6) LONG-TERM BORROWINGS (CONTINUED)
In October 1994, the Company expanded its line of credit for short-term
borrowings with a bank from $20.0 million to $35.0 million. Under the terms of
the agreement, interest rates are determined at the time of borrowing with
interest payable at the prevailing prime rate or LIBOR rate plus 1%, at the
Company's option.
At December 31, 1995, outstanding borrowings totaled $6.0 million at an average
interest rate of 6.75%. Such credit agreement is secured by certain accounts
receivable of the Company and its subsidiaries. The commitment fee on the unused
portion of the facility is 1/4% per annum.
Aggregate annual payments required on secured debt, including capitalized
leases, are $6,190,000 in 1996, $178,000 in 1997, $175,000 in 1998, $175,000 in
1999, $175,000 in 2000 and $3,968,000 thereafter.
(7) STOCK OPTION PLAN
The Company had two stock option plans at December 31, 1995, the Key Executives'
Stock Option Plan and the 1994 Stock Option Plan.
The Key Executives' Stock Option Plan was approved by the shareholders of the
Company on July 12, 1990. This Plan provides for granting of non-qualified and
incentive stock options, and reserves for the issuance of up to 2,500,000
authorized but unissued shares of common stock. Options granted under this Plan
were exercisable at a price equal to the fair market value at the date of grant
and expired in ten years. At December 31, 1995, 1,153,000 common shares were
available for granting under this Plan. There were no outstanding options under
this Plan at December 31, 1995.
The 1994 Stock Option Plan was approved by the shareholders of the Company on
November 1, 1994. This Plan provides for granting of non-qualified options and
reserves for the issuance of up to 500,000 shares. Outstanding options granted
under this Plan are exercisable at a price equal to the fair market value at the
date of grant, reduced by the amount of any "Extraordinary Dividend" made after
the date of grant, and expire in five years. Each option is exercisable upon the
attainment of certain stock price thresholds, adjusted for extraordinary
dividends, or fifty-four months, whichever comes earlier. At December 31, 1995,
55,000 common shares were available for granting under this Plan.
Information relating to these Plans are summarized below (In Thousands Except
Per Share Data):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Average
Shares Option
Subject to Price per
Options Share
- --------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding December 31, 1992 625 $2.961
Granted -- --
Exercised (608) 2.314
Canceled -- --
- --------------------------------------------------------------------------------------
Outstanding December 31, 1993 17 $2.078
Granted 405 5.525
Exercised (17) 2.078
Canceled -- --
- --------------------------------------------------------------------------------------
Outstanding December 31, 1994 405 $5.525
Granted 40 6.780
Exercised -- --
Canceled -- --
- --------------------------------------------------------------------------------------
Outstanding December 31, 1995 445 $5.638
- --------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
(8) RESTRICTED STOCK PLAN
The UNR Industries, Inc. Restricted Stock Plan was approved by the shareholders
of the Company on July 30, 1992. The Plan provides for the granting of
restricted stock to certain key employees and reserves for issuance of 1,000,000
shares of common stock.
The Company had 162,264 and 197,563 shares of restricted stock outstanding at
December 31, 1995, and 1994, respectively. Of the current shares outstanding,
50,000 were awarded to the Company's President and CEO in connection with his
employment agreement and 112,264 shares were issued to certain key employees of
the Company. These shares have the same dividend and voting rights as other
common stock, except that extraordinary dividends on restricted stock held by
employees other than the President are paid in the form of additional shares of
restricted stock. Restricted stock is considered to be currently issued and
outstanding. The cost of the restricted stock, determined as the fair market
value of the shares at the date of grant, is expensed ratably over a three- to
five-year vesting period. Such expense amounted to $183,000 in 1995 and $383,000
in 1994.
(9) STOCKHOLDERS' EQUITY
In connection with the Company's Plan of Reorganization, effective June 2, 1989,
stockholders of record as of that date, retained their common stock and received
one warrant for each share of common stock owned with the right to purchase an
additional share of common stock at $5.15 per share until June 14, 1995.
Additionally, upon exercise, warrantholders were entitled to receive any
extraordinary dividend (as defined) paid or payable by the Company. The amount
related to the Company's potential obligation to pay extraordinary dividends to
such warrantholders upon conversion ($4.20 per warrant) was classified as
Warrants in the accompanying 1994 balance sheet. At December 31, 1995 and 1994,
the number of outstanding convertible warrants were 0 and 1,316,881,
respectively.
On September 24, 1990, the Company announced that its Board of Directors had
authorized the acquisition, through both negotiated transactions involving large
blocks and open-market purchases, of up to 1.5 million shares of its common
stock to be held as treasury shares and be available to meet requirements of its
Key Executives' Stock Option Plan. As of December 31, 1995 and 1994, 1,133,565
shares have been purchased.
On May 6, 1993, the Company's stockholders approved a reduction in the par value
per share of common stock from $2.50 to $.01. This resulted in a $119,482,000
reduction in Common Stock and a corresponding increase to Capital Surplus.
On December 28, 1995, the Company paid an extraordinary dividend of $1.00 per
share to stockholders of record as of the close of business on December 18,
1995.
On April 17, 1995, the Company paid a regular dividend of $.25 per share and an
extraordinary dividend of $1.30 per share to stockholders of record as of the
close of business on April 3, 1995.
On April 1, 1994, the Company paid a regular dividend of $.20 per share to
stockholders of record as of the close of business on March 18, 1994.
On December 1, 1993, the Company paid an extraordinary dividend of $1.20 per
share to stockholders of record as of the close of business on November 16,
1993. This dividend was a non-taxable return of distribution.
On February 1, 1993, the Company paid a regular dividend of $.20 and an
extraordinary dividend of $2.00 per share to stockholders of record as of the
close of business on January 15, 1993. Both dividends are non-taxable return of
capital distributions.
20
<PAGE>
(10) RELATED PARTY TRANSACTIONS
The Company presently holds three notes receivable for a total of $5,525,000
from executive officers of the Company. These notes are related to the 1994
Executive Stock Purchase Plan approved by shareholders of the Company on
November 1, 1994. Under the Plan, executive officers purchased 1,650,000 shares
of common stock from the Company, at the then fair market value. Shares were
paid for in cash in the amount of the par value of the stock and the balance in
promissory notes due in three years. The notes are interest free (although
interest is imputed for tax purposes), except in the event a participant resigns
from the Company, is terminated for cause or, if the stock is sold within three
years, the notes become due and interest at the applicable Federal rate is
applied retroactively from the date of the notes. Dividends, net of Federal and
state taxes, are applied to the principal of the notes. In 1995, dividends
reduced the outstanding balance from $9,100,000 at December 31, 1994, to
$5,525,000 at December 31, 1995. If the stock is not sufficient to satisfy the
loan balance at maturity, the participant can transfer the shares in partial
payment of the note and is personally liable for that portion of the note
exceeding 25% of the loan balance.
(11) BUSINESS SEGMENT INFORMATION
The Company operates predominantly in a single industry as a manufacturer of
towers, poles and shelters for the telecommunications industry. This industry is
strongly influenced by the growth in demand for wireless telecommunications
services.
The Company's export sales are less than 10% of total revenues. Revenues and
identifiable assets are related to its U.S. operations and no one other
geographic area accounts for more than 10% of total revenues or 10% of total
assets.
21
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
First Second Third Fourth Year
- --------------------------------------------------------------------------------------------------------
1995
<S> <C> <C> <C> <C> <C>
Net Sales $37,180 $41,080 $32,994 $30,962 $142,216
- --------------------------------------------------------------------------------------------------------
Gross profit 11,064 12,345 10,067 9,744 43,220
- --------------------------------------------------------------------------------------------------------
Operating income 7,198 8,524 7,449 6,691 29,862
- --------------------------------------------------------------------------------------------------------
Income from
continuing operations 4,886 5,292 4,606 4,217 19,001
- --------------------------------------------------------------------------------------------------------
Discontinued operations:
Income from operations, net of tax 2,987 2,502 2,465 2,321 10,275
- --------------------------------------------------------------------------------------------------------
Net Income $7,873 $ 7,794 $7,071 $ 6,538 $ 29,276
- --------------------------------------------------------------------------------------------------------
Net Income Per Share
Continuing operations $ .10 $ .10 $ .09 $ .08 $ .37
Discontinued operations:
Income from operations, net of tax .06 .05 .05 .04 .20
- --------------------------------------------------------------------------------------------------------
Net Income Per Share $ .16 $ .15 $ .14 $ .12 $ .57
- --------------------------------------------------------------------------------------------------------
1994
Net Sales $21,434 $25,096 $28,906 $31,590 $107,026
- --------------------------------------------------------------------------------------------------------
Gross profit 6,313 7,109 9,525 11,019 33,966
- --------------------------------------------------------------------------------------------------------
Operating income 3,087 3,956 5,960 5,577 18,580
- --------------------------------------------------------------------------------------------------------
Income from
continuing operations 1,842 2,448 3,842 3,722 11,854
- --------------------------------------------------------------------------------------------------------
Discontinued operations:
Income from operations, net of tax 2,766 3,217 2,621 13,367 21,971
Loss on disposition, net of tax -- (2,500) -- -- (2,500)
- --------------------------------------------------------------------------------------------------------
Net Income $ 4,608 $ 3,165 $6,463 $17,089 $ 31,325
- --------------------------------------------------------------------------------------------------------
Net Income (Loss) Per Share
Continuing operations $ .04 $ .05 $ .08 $ .07 $ .24
Discontinued operations:
Income from operations .06 .07 .05 .26 .45
Loss on disposition -- (.05) -- -- (.05)
- --------------------------------------------------------------------------------------------------------
Net Income Per Share $ .10 $ .07 $ .13 $ .33 $ .64
- --------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of UNR Industries, Inc.:
We have audited the accompanying consolidated balance sheets of UNR INDUSTRIES,
INC. (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1995 and 1994,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of UNR Industries, Inc.
and Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 7, 1996
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR 1995 VERSUS YEAR 1994
NET SALES FROM CONTINUING OPERATIONS. Net sales from continuing operations in
1995 were $142.2 million versus $107.0 million in 1994 or an increase of 32.9%.
The sales increase is due primarily to the rapid growth of wireless
telecommunications services. In addition, 1995 represented the first full year
of production in the expanded Bessemer, Alabama, shelter facility. The 1995
sales are the highest in the Company's history on a continuing operations basis,
and 1995 is the third consecutive year of record sales.
GROSS PROFIT. In 1995, gross profit as a percentage of sales was 30.4%, just
below the prior year's 31.7%. This decrease is due to competitive pressures in
the tower market and the fact that shelters, which carry a lower gross margin
percentage, now represent a greater portion of sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses (SG&A) in 1995 were 9.4% of sales versus 14.4% in 1994.
This reduction reflects cost containment measures taken throughout the Company
and the resulting ability to produce greater sales with less costs.
INTEREST EXPENSE. Interest expense decreased due to lower average levels of
borrowings versus the prior year.
INTEREST INCOME. Interest income increased over the prior year due to generally
greater levels of available cash offset somewhat by lower prevailing interest
rates during 1995 versus 1994.
INCOME TAXES. See footnote 2(e) for a complete discussion of UNR's taxes.
INTERNATIONAL. International sales, which represented 6.0% of the Company's
sales, increased 14.9% from the prior year. Gains were made primarily in South
America and the Far East, while last year's sales increase driver, Mexico,
suffered this year due to economic problems. The Company feels that foreign
markets will be growth vehicles for the future.
YEAR 1994 VERSUS YEAR 1993
NET SALES FROM CONTINUING OPERATIONS. Net sales from continuing operations in
1994 were $107.0 million versus $73.8 million in 1993 or an increase of 45.0%.
The sales increase is due to the growing wireless telecommunications
communications market and the required towers and shelters for
this growth.
GROSS PROFIT. In 1994, gross profit as a percentage of sales was 31.7% as
compared with 29.8% in 1993. The increase is due primarily with the benefits of
running a facility at higher levels without adding fixed costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses (SG&A) in 1994 were 14.4% of sales versus 16.6% in 1993.
The percentage decrease is due to the Company's ability to produce greater sales
without adding proportional costs.
INTEREST EXPENSE. Interest expense decreased from the prior year due to lower
outstanding debt levels in 1994 versus 1993.
INTEREST INCOME. Interest income increased over the prior year due to generally
greater levels of available cash in 1994 versus 1993.
INCOME TAXES. See footnote 2(e) for a complete discussion of UNR's taxes.
INTERNATIONAL. International sales, which represented 6.9% of the Company's
sales, increased 45.1% from 1993. The increase is due primarily to sales into
Mexico through the Company's Mexican subsidiary.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES. Cash flow during 1995 was a negative $63.1
million which included a payment of $132.3 million in dividends. The Company's
financial condition continues to be strong at the end of 1995, with working
capital of $31.0 million. The Company's working capital ratio, a measure of
short-term liquidity, decreased from 4.5 to 1 in 1994 to 2.1 to 1 in 1995. Both
measures are considered strong indicators of liquidity.
Capital expenditures were $2.3 million in 1995 versus $3.3 million in 1994.
Capital expenditures in 1994 included the expansion of the plant in Bessemer,
Alabama, which produces concrete and fiberglass shelters. The Company's current
operating plan calls for capital spending in 1996 to be approximately $12.0
million, which includes the building of a new facility in Frankfort, Indiana.
The Company expects to meet its ongoing working capital and capital expenditure
requirements from operating cash flows, borrowings through industrial revenue
bonds and under a $35.0 million short-term credit facility and the proceeds from
the sale of its discontinued operations. In addition, the Company's strong
unleveraged balance sheet allows it to access funds, if needed, from the capital
markets.
INFLATION. The impact of inflation on UNR's operations is principally related to
steel price volatility which can moderately affect earnings from time to time.
25
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
As independent public accountants, we hereby consent to the incorporation of
our reports included or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statement File No. 33-51732.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 25, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,878
<SECURITIES> 0
<RECEIVABLES> 19,649
<ALLOWANCES> 2,185
<INVENTORY> 27,549
<CURRENT-ASSETS> 59,755
<PP&E> 29,653
<DEPRECIATION> 17,827
<TOTAL-ASSETS> 161,226
<CURRENT-LIABILITIES> 28,791
<BONDS> 4,671
0
0
<COMMON> 525
<OTHER-SE> 127,239
<TOTAL-LIABILITY-AND-EQUITY> 161,226
<SALES> 142,216
<TOTAL-REVENUES> 142,216
<CGS> 98,996
<TOTAL-COSTS> 13,358
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,839
<INCOME-PRETAX> 31,701
<INCOME-TAX> 12,700
<INCOME-CONTINUING> 19,001
<DISCONTINUED> 10,275
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,276
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
