<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-8088
FURON COMPANY
(Exact name of registrant as specified in its charter)
California 95-1947155
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
29982 Ivy Glenn Drive
Laguna Niguel, CA 92677
- - --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 831-5350
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Number of shares of common stock outstanding as of April 30, 1994: 8,664,822
<PAGE> 2
FURON COMPANY
INDEX
PART I
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Financial Statements
Condensed Consolidated Balance Sheets
April 30, 1994 and January 29, 1994 3-4
Condensed Consolidated Statements of Income
Three months ended April 30, 1994 and May 1,1993 5
Condensed Consolidated Statements of Cash Flows
Three months ended April 30, 1994 and May 1, 1993 6
Notes to Condensed Consolidated Financial Statements 7-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-12
</TABLE>
PART II
<TABLE>
<S> <C>
Other Information 13
Exhibit 10.12 14
Exhibit 11 28
</TABLE>
2
<PAGE> 3
FURON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
<TABLE>
<CAPTION>
April 30, January 29,
In thousands 1994 1994
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,159 $ 18,483
Accounts receivable, less allowance for
doubtful account of $695 at April 30, 1994
and $632 at January 29, 1994. 40,617 38,085
Inventories 27,084 26,279
Deferred tax benefit 8,911 9,154
Prepaid expenses and other assets 6,432 5,836
-------- --------
Total current assets 96,203 97,837
Property, plant & equipment, at cost:
Land 450 448
Buildings and leasehold improvements 13,170 13,048
Machinery and equipment 89,731 87,599
-------- --------
103,351 101,095
Less accumulated depreciation and amortization (54,764) (52,664)
-------- --------
Net property, plant and equipment 48,587 48,431
Intangible assets at cost less accumulated
amortization of $21,155 at April 30, 1994
and $20,308 at January 29, 1994. 20,515 21,359
Other assets 7,664 7,597
-------- --------
Total assets $172,969 $175,224
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
FURON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
April 30, January 29,
In thousands, except share amounts 1994 1994
- - ----------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 15,509 $ 15,465
Salaries, wages and related benefits payable 7,784 10,073
Current portion of long-term debt 6,509 6,013
Accrued restructuring charges 4,643 4,832
Income taxes payable 3,747 4,474
Other current liabilities 7,994 8,436
-------- --------
Total current liabilities 46,186 49,293
Long-term debt due after one year 18,750 20,750
Other long-term liabilities 15,413 14,950
Deferred taxes 9,388 9,416
Commitments and contingencies
Stockholders' equity
Capital stock:
Preferred stock without par value,
2,000,000 shares authorized, none
issued or outstanding - -
Common stock without par value,
15,000,000 shares authorized,
8,664,822 shares issued and
outstanding at April 30, 1994 and
8,625,706 at January 29, 1994. 35,450 35,320
Foreign currency translation adjustment (784) (1,034)
Loan to ESOP (2,688) (2,688)
Unearned compensation (565) (709)
Retained earnings 51,819 49,926
-------- --------
Total stockholders' equity 83,232 80,815
-------- --------
$172,969 $175,224
======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
FURON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
---------------------
April 30, May 1,
In thousands, except per share amounts 1994 1993
- - -----------------------------------------------------------------------
<S> <C> <C>
Net sales $74,960 $77,173
Cost of sales 53,000 56,078
------- -------
Gross profit 21,960 21,095
Selling, general and administrative expenses 17,821 17,568
Other (income), net (336) (369)
Interest expense 643 918
------- -------
Income before income taxes 3,832 2,978
Provision for income taxes 1,418 1,221
------- -------
Net income $ 2,414 $ 1,757
======= =======
Net income per share $ 0.27 $ 0.20
======= =======
</TABLE>
See accompany notes.
5
<PAGE> 6
FURON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
---------------------
April 30, May 1,
In thousands 1994 1993
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,414 $ 1,757
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 2,188 2,146
Amortization 906 888
Provision for losses on accounts receivable 89 133
Increase in deferred income taxes 215 978
Loss on sale of assets (7) 113
Working capital changes:
Accounts receivable (2,621) (4,621)
Inventories (805) 496
Accounts payable and accrued liabilities (2,244) 1,862
Accrued restructuring (105) (540)
Income taxes payable - current (728) 135
Other current assets and liabilities, net (1,542) (2,056)
Changes in other long-term operating assets
and liabilities 444 (368)
------- -------
Net cash provided by (used in) operating activities (1,796) 923
INVESTING ACTIVITIES
Purchases of property, plant and equipment (2,328) (1,874)
Proceeds from sale of divestitures - 2,200
Proceeds from sale of equipment 63 18
Proceeds from notes receivable 711 429
Increase in notes receivable (198) (997)
------- -------
Net cash used in investing activities (1,752) (224)
FINANCING ACTIVITIES
Proceeds from long-term debt - 27
Principal payments on long-term debt (1,504) (1,311)
Proceeds from issuance of common stock 131 284
Dividends paid on common stock (520) (517)
------- -------
Net cash used in financing activities (1,893) (1,517)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 117 (251)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,324) (1,069)
------- -------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,483 9,447
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $13,159 $ 8,378
======= =======
</TABLE>
See accompanying notes.
6
<PAGE> 7
FURON COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1994
(Unaudited)
1. GENERAL
The accompanying unaudited consolidated financial statements have been
condensed in certain respects and should therefore, be read in
conjunction with the consolidated financial statements and related
notes thereto contained in the Company's Annual Report to Shareholders
on Form 10-K for the fiscal year ended January 29,1994. Certain
reclassifications have been made to prior year amounts in order to be
consistent with the current year presentation.
In the opinion of the Company, the accompanying unaudited, condensed
consolidated financial statements contain all adjustments necessary
(consisting only of normal recurring accruals) to present fairly the
financial position of the Company as of April 30, 1994, and the
results of its operations and cash flows for the three months ended
April 30, 1994 and May 1, 1993. The results of its operations for the
three months ended April 30, 1994 are not necessarily indicative of
the results to be expected for the full year.
For the purpose of the Condensed Consolidated Statements of Cash
Flows, the Company considers all highly liquid debt instruments
purchased with original maturities of three months or less to be cash
equivalents.
Income taxes paid for the three months ended April 30, 1994 and May 1,
1993 were $1,900,000 and $450,000, respectively.
2. INVENTORIES
Substantially all inventories are valued at the lower of cost
(first-in, first-out) or market, and are summarized as follows:
<TABLE>
<CAPTION>
April 30, January 29,
In thousands 1994 1994
------------------------------------------------------------
<S> <C> <C>
Raw materials and purchased parts $11,199 $11,333
Work-in-process 7,264 6,865
Finished goods 8,621 8,081
------- -------
$27,084 $26,279
======= =======
</TABLE>
7
<PAGE> 8
FURON COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1994
(Unaudited)
3. INTANGIBLES
Intangible assets acquired in business combinations are summarized as
follows:
<TABLE>
<CAPTION>
April 30, January 29,
In thousands 1994 1994
------------------------------------------------------------------
<S> <C> <C>
Goodwill $ 340 $ 351
Other intangible assets 20,175 21,008
------- -------
$20,515 $21,359
======= =======
</TABLE>
4. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
April 30, January 29,
In thousands 1994 1994
------------------------------------------------------------------
<S> <C> <C>
Loans under bank credit agreements due
through fiscal 1998 $25,250 $26,750
Other 9 13
------- -------
Total long-term debt 25,259 26,763
Less current portion (6,509) (6,013)
------- -------
Due after one year $18,750 $20,750
======= =======
</TABLE>
At April 30, 1994, the weighted average interest rate on the loans
under bank credit agreements was 9.4%.
On August 29, 1988, the Company entered into an 8-year Interest Rate
Swap agreement. The notional amount of the swap totaled $20,000,000
at April 30, 1994. The swap agreement effectively changes the
Company's interest rate exposure on its borrowings to a fixed interest
rate of 9.938 plus a .75% spread, on the notional portion of the
facility.
Interest paid for the three months ended April 30, 1994 and May 1,
1993, was $623,000 and $895,000, respectively.
5. CONTINGENCIES
At April 30, 1994, the Company has approximately $1,315,000 of
foreign currency hedge contracts outstanding consisting of forward
contracts. The contracts reflect the selective hedging of the Belgium
Franc with varying maturities up to six months. Net unrealized
gains/losses from hedging activities were not material as of April 30,
1994.
8
<PAGE> 9
FURON COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1994
(Unaudited)
5. CONTINGENCIES (CONTINUED)
At April 30, 1994, the Company is obligated under irrevocable letters
of credit totaling $3,453,000.
The Company is currently involved in litigation arising in the normal
course of business. Management of the Company is of the opinion that
such litigation will have no material effect on the Company's
consolidated financial position or results of operations.
9
<PAGE> 10
FURON COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated sales for the three months ended April 30, 1994 of $75 million
represented a 2.9% decrease compared with the same period in the prior year.
When removing the effect of the businesses to be divested, sales from
continuing operations increased 6.5%.
The Company continues to benefit from a recovering U.S. economy. Total
Consolidated sales in the first quarter were 11% above the fourth quarter of FY
1994. Strong improvements were seen in Industrial Capital Goods and Mobile
Equipment markets. Improvement was also noted in the Electronics, Medical and
Beverage sectors. Commercial Aircraft and Aerospace/Defense markets, however,
remain soft. Despite a continued weak European economy, the Company's foreign
divisions realized strong demand in Italy and the U.K., with Germany lagging.
Gross profit as a percentage of sales for the first quarter ended April 30,
1994 was up 2% over the same period the prior year to 29.3%. Similarly, when
removing the effect of the businesses to be divested, gross profit as a
percentage of sales for continuing operations increased from 28.8% to 29.6%.
The higher gross profit percentage is the result of improvements in material
cost by approximately 1% as a percentage of sales; primarily due to scrap
reduction and process improvements. In addition, manufacturing overhead
improved by approximately 1%. When removing the effect of the three businesses
sold in the prior year, manufacturing overhead increased slightly, partially
offsetting the improvement in material cost.
Selling, general and administrative expense as a percentage of sales was 23.8%
during the three months ended April 30, 1994 compared to 22.8% for the same
period in the prior year. Contributing to higher general and administrative
expenses were salary increases, as well as, increased expenditures on
marketing, process redesign and organizational structure improvements. An
increase in product development expenses reflects a higher emphasis on material
technology research and development activity.
Interest expense for the three months ended April 30, 1994 decreased 30% from
the same period of the prior year. The decrease is due to the reduction in
outstanding debt. Amounts owing under the Company's bank credit facility
decreased $8.75 million from the prior year first quarter. As debt continues
to be repaid, a higher proportion of the remaining debt is covered by a fixed
interest rate swap agreement.
Pretax results of operations improved 28.7% to a profit of $3.8 million from
$2.9 million for the three months ended April 30, 1994 and May 1, 1993,
respectively. With revenues from continuing operations up, profitability
continues to improve. Major contributors to this sustained performance are
higher gross profit due to sales volume increase, as well as, reductions in
interest expense. Income before taxes also includes lower than expected group
insurance expenses resulting from a sustained trend of lower than expected
claims experience.
10
<PAGE> 11
FURON COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
The following table presents the Company's results of continuing operations and
divestiture operation(s) to be divested during the first quarter of the current
and prior year:
<TABLE>
<CAPTION>
Three months ended
- - ---------------------------------------------------------------------------------------------------------------
In thousands April 30, 1994 May 1, 1993
- - --------------------------------------------------------------------- ------------------------------------
Continuing Divestiture Continuing Divestiture
Operations Operation Total Operations Operations Total
--------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $72,386 $2,574 $74,960 $67,994 $9,179 $77,173
Cost of sales 50,937 2,063 53,000 48,378 7,700 56,078
------- ------ ------- ------- ------ -------
Gross profit 21,449 511 21,960 19,616 1,479 21,095
Selling, general
and administrative
expenses 17,610 211 17,821 16,252 1,316 17,568
Other expense
(income), net (636) 300 (336) (525) 154 (369)
Interest expense 643 - 643 911 7 918
------- ------ ------- ------- ------ -------
Income before income
taxes $ 3,832 $ - $ 3,832 $ 2,978 $ - $ 2,978
======= ====== ======= ======= ====== =======
</TABLE>
Included in Other expense (income) net, is the elimination of $286,000 of
pretax profit from the first quarter ended April 30, 1994 and $73,000 of pretax
profit from the first quarter ended May 1, 1993 for the divested businesses.
The Company's effective tax rate for the first quarter ended April 30, 1994 was
37% as compared to 41% for the same period in the prior year. The decrease in
the effective tax rate was primarily due to the increase in tax benefits
realized from the amortization of certain intangible assets, acquired in fiscal
1990, as a result of the resolution of an Internal Revenue Service audit.
11
<PAGE> 12
FURON COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition remained strong at April 30, 1994. Working
capital increased $1.5 million during the first quarter to a total of $50.0
million. This increase occurred despite a $5.3 million decrease in cash and
cash equivalents. The decrease is partially due to increases in accounts
receivable and inventory resulting from improved first quarter sales volume.
Also contributing to the decrease was the timing of incentive compensation
payments, salaries and wages accruals, and the payment of $1.5 million of prior
period income taxes related to the settlement of the aforementioned Internal
Revenue Service audit.
When compared to the same period of the prior fiscal year the cash and cash
equivalents balance increased $5 million while long term debt decreased nearly
$9 million. The Company's current debt to equity ratio is .3:1.0.
The Company continues to believe that it generates sufficient cash flow from
its operations to finance near and long-term internal growth, capital
expenditures and the principal and interest payments on its loan payable to
banks. The Company will continue to evaluate its employment of capital
resources including asset management and other sources of financing.
The Company continually reviews possible acquisitions and should the Company
make a substantial acquisition, it could require the utilization of the
remaining $30 million available from its existing credit facility or financing
from other sources. Cash and cash equivalents at April 30, 1994 was $13
million.
One of the Company's subsidiaries was notified by the Environmental Protection
Agency that it has been named as a potentially responsible party in connection
with the clean up of hazardous wastes at two sites: The Solvents Recovery
Service of New England site in Southington, Connecticut (notified in June
1992); and the Gallups Quarry site in Plainfield, Connecticut (notified April
1993). Since these matters are in their preliminary stages, no assurance can
be given at this time concerning the ultimate outcome. However, based on
preliminary investigations to determine the nature of the subsidiary's
potential liability and the estimated amount of remedial costs necessary to
clean up the sites, the Company presently does not expect these matters to have
a material adverse effect on its consolidated financial position or results of
operations.
12
<PAGE> 13
FURON COMPANY
PART II
OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6. Exhibits and Reports Form 8-K.
(a) Exhibits
10.12 1993 Non-employee Directors' Stock Compensation Plan
11. Statement re: computation of net income per share.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended April 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FURON COMPANY
----------------------
REGISTRANT
/S/ MONTY A. HOUDESHELL /S/ KOICHI HOSOKAWA
- - --------------------------------------- --------------------------------
Monty Houdeshell, Vice President, Koichi Hosokawa
Chief Financial Officer and Treasurer Controller
May 23, 1994
13
<PAGE> 1
EXHIBIT 10.12
FURON COMPANY
1993 NON-EMPLOYEE DIRECTORS' STOCK COMPENSATION PLAN
(Effective as of November 17, 1993)
14
<PAGE> 2
FURON COMPANY
1993 NON-EMPLOYEE DIRECTORS' STOCK COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I TITLE, PURPOSE AND AUTHORIZED SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Annual Retainer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Annual Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3. Award Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4. Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6. Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7. Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.8. Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.9. Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.10. Disinterested Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.11. Dividend Equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.12 Dividend Equivalent Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.13. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.14. Eligible Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.15. Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.16. Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.17. Nontransferability Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.18. Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.19. Restricted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.20. Stock Unit or Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.21. Stock Unit Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV ANNUAL ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE V BENEFIT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1. Cash Payment of Annual Retainer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2. Restricted Shares Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.3. Stock Units Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4. Adjustments in Case of Changes in Common Stock; Fractional Interests . . . . . . . . . . . . . . . . . 7
5.5. Company's Right to Withhold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1. The Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.2. Committee Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3. Rights and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
15
<PAGE> 3
<TABLE>
<S> <C>
6.4. Indemnity and Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII PLAN CHANGES AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1. Limitation on Eligible Directors' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.2. Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.3. Benefits Not Assignable; Obligations Binding Upon Successors . . . . . . . . . . . . . . . . . . . . . 11
8.4. California Law Governs; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.5. Headings Not Part of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
16
<PAGE> 4
FURON COMPANY
1993 NON-EMPLOYEE DIRECTORS' STOCK COMPENSATION PLAN
(Effective as of November 17, 1993)
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
This Plan shall be known as the "Furon Company 1993
Non-Employee Directors' Stock Compensation Plan" and shall be effective as of
November 17, 1993. The purpose of this Plan is to attract, motivate and retain
experienced and knowledgeable directors who are not officers or employees of
Furon Company or one or more of its subsidiaries. The total number of shares
of Common Stock that may be delivered pursuant to awards under this Plan is
25,000, subject to adjustments contemplated by Section 5.4.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Plan they shall
have the meaning specified below unless the context clearly indicates to the
contrary:
2.1. Annual Retainer for any one-year period shall mean the
annual compensation paid to a member of the Board of Directors for the one-year
term of service commencing on the date of the Annual Shareholders Meeting
(exclusive of meeting fees or other special fees paid to a director) in the
amount of $14,000 or such other amount as may from time to time be approved by
the Board of Directors.
2.2. Annual Shareholders Meeting shall mean the regular annual
meeting of the shareholders of the Company held no earlier than June 1 of each
year.
2.3. Award Date shall mean the date of the Annual Shareholders
Meeting that follows the date of an Eligible Director's election made pursuant
to Article IV with respect to the Annual Retainer payable to him or her for the
one year term of service commencing on the date of such Annual Shareholders
Meeting.
2.4. Board of Directors shall mean the Board of Directors of
the Company.
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<PAGE> 5
2.5. Change in Control shall have the meaning specified for
such term under the Furon Company Deferred Compensation Plan.
2.6. Code shall mean the Internal Revenue Code of 1986, as
amended.
2.7. Common Stock shall mean the Common Stock of the Company.
2.8. Committee shall mean the Compensation Committee of the
Board of Directors acting in accordance with Article VI.
2.9. Company shall mean Furon Company, a California
corporation and its successors and assigns.
2.10. Disinterested Director shall mean a member of the Board
who is a disinterested or outside director within the meaning of any applicable
regulatory requirements, including Rule 16b-3 as promulgated pursuant to the
Exchange Act.
2.11. Dividend Equivalent shall mean the amount credited to a
Participant's Dividend Equivalent Account pursuant to Section 5.3.
2.12 Dividend Equivalent Account shall mean the bookkeeping
account maintained by the Company on behalf of each Eligible Director which is
credited with Dividend Equivalents in accordance with Section 5.3.
2.13. Effective Date shall mean November 17, 1993.
2.14. Eligible Director shall mean a member of the Board of
Directors who is not an officer or employee of the Company or one or more of
its subsidiaries.
2.15. Exchange Act shall mean the Securities Exchange Act of
1934, as amended from time to time.
2.16. Fair Market Value shall mean on any particular date the
last price for the Common Stock on such date, as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through the NASDAQ National
Market Reporting System or a similar organization if the NASD is no longer
reporting such information or, if there is no trading of the Common Stock on
such date, then the last price for the Common Stock as furnished by the NASD on
the next preceding date on which there was trading in such shares.
2.17. Nontransferability Period shall mean the period
commencing on the Award Date and ending on the
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<PAGE> 6
earlier of (i) the fifth anniversary of such Award Date or (ii) the date the
Eligible Director ceases to be a director of the Company; provided, however,
that such period shall in no case be less than six months.
2.18. Plan shall mean the Furon Company 1993 Non-Employee
Directors' Stock Compensation Plan.
2.19. Restricted Shares shall mean shares of Common Stock which
are subject to restrictions on transferability during the Nontransferability
Period, as provided in Section 5.2.
2.20. Stock Unit or Unit shall mean a non-voting unit of
measurement which is deemed to be equivalent to one outstanding share of Common
Stock of the Company solely for purposes of this Plan.
2.21. Stock Unit Account shall mean the bookkeeping account
maintained by the Company on behalf of each Eligible Director which is credited
with Stock Units in accordance with Section 5.3.
ARTICLE III
PARTICIPATION
Each Eligible Director shall be automatically eligible to
participate in this Plan. An Eligible Director shall become a Participant in
this Plan upon his or her election as a director of the Company.
ARTICLE IV
ANNUAL ELECTION
On or before each November 30, commencing on November 30, 1993
and ending on November 30, 2003, each Eligible Director who desires to
participate in this Plan for the next year shall make an irrevocable election
to receive his or her Annual Retainer payable for the Eligible Director's
one-year term of service commencing on the date of the next Annual Shareholders
Meeting in (i) cash, in accordance with Section 5.1, (ii) Restricted Shares, in
accordance with Section 5.2, or (iii) Stock Units, in accordance with Section
5.3. Such election shall be in writing on forms provided by the Company. If
an Eligible Director fails to make such an election with respect to his or her
Annual Retainer payable for a particular one-year
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<PAGE> 7
term of service or if the Eligible Director is elected as a director of the
Company subsequent to the date for such election, the Eligible Director shall
be deemed to have elected to receive, assuming his or her continued service
during such one-year term of service, the Annual Retainer in cash in accordance
with Section 5.1.
ARTICLE V
BENEFIT OPTIONS
5.1. Cash Payment of Annual Retainer. If an Eligible Director
elects (or is deemed to have elected) to receive his or her Annual Retainer in
cash, the Eligible Director (or, in the event of his or her death, the Eligible
Director's Beneficiary) shall receive the amount of the Annual Retainer for his
or her one-year term of service payable in four equal installments on each
regular quarterly meeting of the Board of Directors occurring during such term,
regardless of whether the Eligible Director actually attends each of such
meetings. If the Eligible Director's services terminate during his or her
one-year term of service, the Eligible Director (or, his or her Beneficiary)
shall not be entitled to receive the unearned and unpaid balance of the Annual
Retainer, if any, payable for such one-year term of service.
5.2. Restricted Shares Option.
(a) If an Eligible Director elects pursuant to Article IV to
receive his or her Annual Retainer in Restricted Shares, he or she shall be
allocated on the Award Date a number of Restricted Shares determined by first
dividing the Annual Retainer by the Fair Market Value of a share of Common
Stock on the Award Date and then by multiplying that number of Restricted
Shares by 1.1.
(b) An Eligible Director shall be 100% vested in his or her
Restricted Shares, provided, however, that such Restricted Shares shall be
subject to certain restrictions on transferability described in subsection (c).
(c) On or promptly after the Award Date, a certificate or
certificates representing an Eligible Director's Restricted Shares shall be
registered in the Eligible Director's name. The Eligible Director shall
thereupon be a stockholder with respect to all the shares of Common Stock
represented by such certificate or certificates and shall have all the rights
of a stockholder with respect to all such shares, including the right to vote
such shares and to receive all dividends and other distributions
20
<PAGE> 8
(subject to the provisions of subsection (d)) paid with respect to such shares;
provided, however, that such shares shall be subject to the restrictions
described herein. CERTIFICATES OF COMMON STOCK REPRESENTING RESTRICTED SHARES
SHALL BE IMPRINTED WITH A LEGEND TO THE EFFECT THAT NEITHER THE SHARES
REPRESENTED THEREBY NOR ANY INTEREST THEREIN MAY BE SOLD, EXCHANGED,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF DURING THE
NONTRANSFERABILITY PERIOD. Each transfer agent for the Common Stock shall be
instructed to the same effect with respect to such shares. Such certificates
shall remain in the physical custody of the Company. The Company will issue
unlegended certificates in exchange for such certificates after the expiration
of the Nontransferability Period. Notwithstanding anything else contained
herein, upon the occurrence of a Change in Control during the
Nontransferability Period, the restrictions described herein shall immediately
lapse.
(d) In the event that, as a result of an event giving rise to
an adjustment described in Section 5.4, the Eligible Director shall, as the
owner of Restricted Shares, receive new or additional or different shares of
stock or securities, the certificate or certificates for, or other evidences
of, such new or additional or different shares or securities shall also be
imprinted with a legend as provided in subsection (c) and shall remain in the
physical custody of the Company, and all provisions of this Plan relating to
the restrictions and lapse of restrictions shall thereupon be applicable to
such new or additional or different shares or securities; provided, however,
that if the Eligible Director shall receive rights or warrants with respect to
any of such Restricted Shares, such rights or warrants may be held, exercised,
sold or otherwise disposed of by the Eligible Director, without regard to such
restrictions.
5.3. Stock Units Option.
(a) Stock Unit Account; Allocation of Units. If an Eligible
Director elects pursuant to Article IV to receive his or her Annual Retainer in
Stock Units, the Company shall credit on the Award Date to the Stock Unit
Account of such Eligible Director a number of Units determined by first
dividing the Annual Retainer by the Fair Market Value of a share of Common
Stock on the Award Date and then by multiplying that number of Units by 1.1.
Such number of units shall be subject to adjustment in accordance with Section
5.4.
An Eligible Director's Stock Unit Account shall be a memorandum
account on the books of the Company. The Units credited to an Eligible
Director's Stock Unit Account shall be used solely as a device for the
determination of the number of shares of Common Stock to be eventually
21
<PAGE> 9
distributed to such Eligible Director in accordance with this Plan. The Units
shall not be treated as property or as a trust fund of any kind. All shares of
Common Stock or other amounts attributed to the Units shall be and remain the
sole property of the Company, and each Eligible Director's rights in the Units
is limited to receive shares of Common Stock in the future as herein provided.
No Eligible Director shall be entitled to any voting or other shareholder
rights with respect to Units granted under this Plan.
(b) Dividend Equivalent Account. The Company shall establish
a Dividend Equivalent Account for each Eligible Director, which account shall
be a memorandum account on the books of the Company. An Eligible Director's
Dividend Equivalent Account shall be credited with amounts equal to the amount
of cash dividends and cash distributions that would have been payable on each
Unit if such Unit had been an issued and outstanding share of Common Stock of
the Company. Such Dividend Equivalents shall be credited on the record dates
of such dividends or other distributions of Common Stock. No earnings shall
accrue on the Dividend Equivalents credited to an Eligible Director's Dividend
Equivalent Account.
(c) Vesting. The rights of each Eligible Director in respect
of his or her Stock Unit Account and Dividend Equivalent Account shall at all
times be fully vested.
(d) Distribution of Benefits. Upon making an election
pursuant to Article IV to receive his or her Annual Retainer in the form of
Stock Units, each Eligible Director shall elect to receive a distribution of
amounts credited to his or her Stock Unit Account and Dividend Equivalent
Account in a lump sum or in annual installments for up to a five year period,
commencing upon the earlier of (i) his or her termination from service on the
Board or (ii) the expiration of some other fixed period specified by the
Eligible Director at the time of the election; provided, however, that in
either case, no shares of Common Stock or Divided Equivalents attributable to
Units shall be distributed sooner than one year after the Award Date.
Notwithstanding the preceding sentence, in the event of a Change in Control,
amounts credited to an Eligible Director's Stock Unit Account and Dividend
Equivalent Account shall be distributed immediately.
(e) Manner of Distribution. Stock Units credited to an
Eligible Director's Stock Unit Account shall be distributed in an equivalent
number of shares of the Company's Common Stock. In addition, amounts credited
to an
22
<PAGE> 10
Eligible Director's Dividend Equivalent Account shall be distributed in cash.
(f) Restrictions on Transferability. Notwithstanding
anything else contained herein to the contrary, shares of Common Stock
distributed to an Eligible Director pursuant to Section 5.3(e) shall be subject
to the same restrictions on transferability described in Section 5.2(c) of this
Plan during the Nontransferability Period but with such period commencing as of
the Award Date of the related Unit; provided, however, that upon the occurrence
of a Change in Control, such restrictions shall immediately lapse.
5.4. Adjustments in Case of Changes in Common Stock;
Fractional Interests. In the event of any stock dividend, stock split,
recapitalization, merger, consolidation, combination or exchange of shares,
sale of all or substantially all of the assets of the Company, split-up,
split-off, spin-off, liquidation or similar change in capitalization or any
distribution to holders of the Company's Common Stock other than cash dividends
and distributions, the Committee shall make appropriate adjustments in the
number of Restricted Shares or Units reserved for issuance under this Plan and
in the number of Units theretofore allocated to Eligible Directors so as to
maintain the appropriate proportionate numbers of Units. Such adjustments
shall be conclusive and binding for all purposes of this Plan. No fractional
Units or Restricted Shares shall be issued under this Plan and all such
fractions shall be disregarded.
5.5. Company's Right to Withhold. The Eligible Director shall
pay or provide for payment of the amount of any taxes which the Company may be
required to withhold with respect to the benefits hereunder.
ARTICLE VI
ADMINISTRATION
6.1. The Committee. The Committee hereunder shall consist of
two (2) or more Disinterested Directors appointed from time to time by the
Board of Directors to serve at its pleasure. Any member of the Committee may
resign by delivering a written resignation to the Board of Directors. Members
of the Committee shall not receive any additional compensation for
administration of this Plan.
6.2. Committee Action. The Committee may, for the purpose of
administering this Plan, choose a Secretary who may be, but is not required to
be, a member of the
23
<PAGE> 11
Committee, who shall keep minutes of the Committee's proceedings and all
records and documents pertaining to the Committee's administration of this
Plan. A member of the Committee shall not vote or act upon any matter which
relates solely to himself or herself as a Participant in this Plan. The
Secretary may execute any certificate or other written direction on behalf of
the Committee. Action of the Committee with respect to the administration of
this Plan shall be taken pursuant to a majority vote or by unanimous written
consent of its members.
6.3. Rights and Duties. Subject to the limitations of this
Plan, the Committee shall be charged with the general administration of this
Plan and the responsibility for carrying out its provisions, and shall have
powers necessary to accomplish those purposes, including, but not by way of
limitation, the following:
(a) To construe, interpret and administer this Plan;
(b) In accordance with the formula provisions of this Plan,
to determine the number of Units or Restricted Shares to be allocated on behalf
of an Eligible Director;
(c) To make all other determinations required by this Plan;
(d) To compute and certify the amount of benefits payable to
Participants;
(e) To authorize all payments pursuant to this Plan;
(f) To maintain all the necessary records for the
administration of this Plan; and
(g) To make and publish rules for the administration,
interpretation and regulation of this Plan.
The determination of the Committee in good faith as to any
disputed question or controversy and the Committee's calculation of benefits
payable to Participants shall be conclusive. In performing its duties, the
Committee shall be entitled to rely on information, opinions, reports or
statements prepared or presented by: (i) officers or employees of the Company
whom the Committee believes to be reliable and competent as to such matters;
and (ii) counsel (who may be employees of the Company), independent accountants
and other persons as to matters which the Committee believes to be within such
persons' professional or expert competence. The Committee shall be fully
protected with respect to any action taken or omitted
24
<PAGE> 12
by it in good faith pursuant to the advice of such persons. The Committee may
delegate ministerial, non-discretionary functions to individuals who are
officers or employees of the Company.
6.4. Indemnity and Liability. All expenses of the Committee
shall be paid by the Company and the Company shall furnish the Committee with
such clerical and other assistance as is necessary in the performance of its
duties. No member of the Committee shall be liable for any act or omission of
any other member of the Committee nor for any act or omission on his or her own
part, excepting only his or her own willful misconduct or gross negligence. To
the extent permitted by law, the Company shall indemnify and save harmless each
member of the Committee against any and all expenses and liabilities arising
out of his or her membership on the Committee, excepting only expenses and
liabilities arising out of his or her own willful misconduct or gross
negligence, as determined by the Board of Directors.
ARTICLE VII
PLAN CHANGES AND TERMINATION
The Board of Directors shall have the right to amend this Plan in
whole or in part from time to time or may at any time suspend or terminate this
Plan; provided, however, that no amendment or termination shall cancel or
otherwise adversely affect in any way any Eligible Director's rights with
respect to Restricted Shares allocated to him or her or with respect to Units
previously credited to his or her Stock Unit Account or to any amounts
previously credited to his or her Dividend Equivalent Account. Such amendments
shall be stated in an instrument in writing, certified in the same manner and
at the time therein set forth, and all Eligible Directors shall be bound
thereby upon receipt of notice thereof. Notwithstanding the preceding, the
provisions of Articles III and V shall not be amended more than once every six
months (other than as may be necessary to conform to any applicable changes in
the Code or the rules thereunder), unless such amendment would be consistent
with the provisions of Rule 16b-3(c)(2)(ii) (or any successor provision)
promulgated under the Exchange Act.
It is the expectation of the Company that this Plan shall be
continued for a period of 10 years following the date of Board approval of this
Plan, but continuance of this Plan is not assumed as a contractual obligation
of the Company. In the event that the Board of Directors decides
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<PAGE> 13
to discontinue and terminate this Plan, it shall notify the Committee of its
action in an instrument in writing, certified in the same manner as this Plan,
and this Plan shall be terminated at the time therein set forth, and all
Participants shall be bound thereby.
ARTICLE VIII
MISCELLANEOUS
8.1. Limitation on Eligible Directors' Rights. Participation
in this Plan shall not give any Eligible Director the right to continue to
serve as a member of the Board or any rights or interests other than as herein
provided. No Eligible Director shall have any right to any payment or benefit
hereunder except to the extent provided in this Plan. This Plan shall create
only a contractual obligation on the part of the Company as to such amounts and
shall not be construed as creating a trust. This Plan, in and of itself, has
no assets. Eligible Directors shall have only the rights of general unsecured
creditors of the Company with respect to amounts credited and benefits payable,
if any, on their Stock Unit Account and Dividend Equivalent Account.
8.2. Beneficiaries.
(a) Upon forms provided by the Company each Eligible Director
shall designate in writing the Beneficiary or Beneficiaries (as defined in
Section 8.3(b)) whom such Eligible Director desires to receive any payments
payable after his or her death. An Eligible Director from may from time to
time change his or her designated Beneficiary or Beneficiaries without the
consent of such Beneficiary or Beneficiaries by filing a new designation in
writing with the Committee. However, if a married Eligible Director wishes to
designate a person other than his or her spouse as Beneficiary, such
designation shall be consented to in writing by the spouse. The Eligible
Director may change any election designating a Beneficiary or Beneficiaries
without any requirement of further spousal consent if the spouse's consent so
provides. Notwithstanding the foregoing, spousal consent shall not be
necessary if it is established that the required consent cannot be obtained
because the spouse cannot be located or because of other circumstances
prescribed by the Committee. The Company and the Committee may rely on the
Eligible Director's designation of a Beneficiary or Beneficiaries last filed in
accordance with the terms of this Plan.
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<PAGE> 14
(b) An Eligible Director's "Beneficiary" or "Beneficiaries"
shall be the person, persons, trust or trusts entitled by will or the laws of
descent and distribution to receive the benefits specified in the Eligible
Director's beneficiary designation in the event of the Eligible Director's
death, and shall mean the Eligible Director's executor or administrator if no
other Beneficiary is identified and able to act under the circumstances.
8.3. Benefits Not Assignable; Obligations Binding Upon
Successors. Benefits of an Eligible Director under this Plan shall not be
assignable or transferable and any purported transfer, assignment, pledge or
other encumbrance or attachment of any payments or benefits under this Plan, or
any interest therein, other than by operation of law or pursuant to Section
8.2, shall not be permitted or recognized. Obligations of the Company under
this Plan shall be binding upon successors of the Company.
8.4. California Law Governs; Severability. The validity of
this Plan or any of its provisions shall be construed, administered and
governed in all respects under and by the laws of the State of California. If
any provisions of this instrument shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.
8.5. Headings Not Part of Plan. Headings and subheadings in
this Plan are inserted for reference only and are not to be considered in the
construction of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused its duly authorized
officer to execute this Plan document as of the date first written above.
FURON COMPANY
By /s/ DONALD D. BRADLEY
------------------------------------
Its General Counsel and Secretary
-----------------------------
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<PAGE> 1
EXHIBIT 11
FURON COMPANY
Computation of Net Income Per Share
<TABLE>
<CAPTION>
April 30, May 1,
Three months ended 1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY NET INCOME PER SHARE
Earnings
Net income $2,414,000 $1,757,000
========== ==========
Shares
Weighted average number
of common shares
outstanding 8,655,000 8,595,000
Shares issuable from
assumed exercise of stock
options 286,000 324,000
---------- ----------
Average shares as adjusted 8,941,000 8,919,000
---------- ----------
Primary net income per share $ .27 $ .20
========== ==========
FULLY DILUTED NET INCOME PER SHARE
Earnings
Net income $2,414,000 $1,757,000
========== ==========
Shares
Weighted average
number of common shares
outstanding 8,655,000 8,595,000
Shares issuable from assumed
exercise of stock options 286,000 324,000
---------- ----------
Average shares as adjusted
for full dilution 8,941,000 8,919,000
========== ==========
Fully diluted net income per share $ .27 $ .20
========== ==========
</TABLE>
28
