UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended JUNE 30, 1995 Commission file number: 0-2977
GENERAL MAGNAPLATE CORPORATION
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(exact name of Registrant as specified in its charter)
A New Jersey corporation No. 22-1641813
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1331 U.S. Route 1, Linden, New Jersey 07036
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(address of principal executive offices)
Registrant's telephone number, including area code (908) 862-6200
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, No Par Value NASDAQ under the symbol GMCC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. X
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The aggregate market value of the voting stock held by non-affiliates of the
Registrant. (The market value is computed by reference to the price at which the
stock was sold as of August 8, 1995): $6,385,275.00
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The number of shares outstanding of each of the Registrant's classes of common
stock, as of June 30, 1995: 2,774,013 one class Common Stock, no par value.
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<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report for year ended June 30, 1995, to be filed pursuant to Section
14 of the Securities and Exchange Act of 1934 within 120 days after the end
of the Registrant's 1995 fiscal year, is incorporated by reference or in
Parts I through IV
(2) Proxy and Proxy Soliciting material for Annual Meeting to be held November
8, 1995, to be filed pursuant to Section 14 of the Securities and Exchange
Act of 1934 within 120 days after the end of the Registrant's 1995 fiscal
year, is incorporated by reference or in Parts I through IV.
<PAGE>
PART I
Item 1. BUSINESS
General Magnaplate Corporation (the "Registrant") is principally engaged in
applying, through various proprietary and other processes, coatings which cannot
chip, peel or rub off and which increase the hardness, corrosion resistance,
wear resistance and/or lubricity of metal parts produced by its customers.
The Registrant applies coatings to aluminum, steel, copper alloys,
titanium, magnesium and other special alloys. Depending on the results sought,
these coatings are more resistant to corrosion, more durable and have lower
friction characteristics than the metals to which they are applied. The
Registrant terms its coatings "Synergistic" because they apply several types of
materials or metals to the base metal to form a composite coating which is then
infused to become an integral part of the underlying metal. The composition and
thickness of the coatings are controllable and thus can be varied according to
the characteristics which the Registrant's customers need for the end product
required. Because the coatings change the surface qualities of the base metal,
they can permit the use, in some applications, of underlying metals which are
less expensive, easier to shape or lighter than other metals or alloys with
similar qualities.
The Registrant's names for its main proprietary processes are: TUFRAM for
aluminum, NEDOX for most metals, MAGNAPLATE HMF for most metals, MAGNAPLATE HCR
for aluminum, CANADIZE for titanium, MAGNADIZE for magnesium, LECTROFLUOR for
all metals, HI-T-LUBE, a specialized dry film lubrication coating, PLASMADIZE, a
composite coating for extreme wear application for most metals, and MAGNAGOLD,
an enhanced titanium nitride PVD coating for various metals and ultra-hard alloy
steels to increase surface hardness. Each proprietary process consists of a
number of variations that can be employed to meet customer requirements. The
Registrant has obtained trademark coverage of these ten proprietary processes in
the United States and on two of them in certain foreign countries. Coatings
using these and other proprietary processes have represented approximately 95%
of the Registrant's total operating revenues for the fiscal year ended June 30,
1995.
The Registrant handles each job on a "custom" basis, according to each
customer's specifications. Items coated vary greatly in size and shape.
Production runs vary from a few to thousands. Prices for coating services depend
on the length of the production run, the complexity of the work and other
factors associated with custom work. The Registrant's coatings are used in the
machine tool, food processing, packaging, defense, aerospace, pharmaceutical,
pulp and paper, oil service and electronics industries, as well as in other
industries which use metal parts. Should United States Government expenditures
for military equipment increase, the Registrant expects that there will be a
greater demand for its coating services, although it cannot predict the effect
of such an increase on its profits.
The Registrant is in one line of business, i.e., providing synergistic
coatings and other related services to its customers' products. Hence there is
no financial information about industry segments.
Financial information relating to foreign operations is as follows:
Foreign operations (principally Canada) constitutes 10.1%, 8.7% and 6.3% of
total sales in the three years ending June 30, 1993, 1994 and 1995 respectively.
Foreign operations constitute 7.0%, 4.9% and 0% of pre-tax profits for the three
years ended June 30, 1993, 1994 and 1995 respectively.
Marketing
The Registrant markets its metal coating services through a staff of
twenty-two technical market support personnel, including six independent
representatives operating from its facilities in New Jersey, Texas, Wisconsin,
California and Canada. New customers also come to the Registrant through
advertising, trade shows, seminars and editorial coverage in numerous trade
journals and referrals from the Registrant's customers.
The Registrant's marketing, operation, management and engineering staffs
include persons who have training in metallurgy and other technical fields. The
Registrant's objective is to work with customers and prospective customers in
the early stages of the design and specification process, with a view toward
obtaining production contracts for the coating of the items being designed.
Coatings initially developed for one customer are, in some instances, sold by
the Registrant to other customers.
For the fiscal year ended June 30, 1995, no one customer accounted for more
than 10% of the total revenues of the Registrant.
Research and Development
The metal coatings industry is characterized by rapid technological changes
requiring the Registrant to make continuing expenditures for development of new
coatings and the improvement of existing coatings in order to meet customer
needs.
During the fiscal year ended June 30, 1995, the Registrant spent an
estimated $35,000 on unreimbursed research and development. Additional costs
incurred were paid by customers requiring special coatings and treatments. All
costs associated with the development of new processes and the maintenance and
enhancement of existing processes are charged against income as incurred or
borne by the customer in the form of contracts.
License Agreements
The Registrant has licensing agreements with the following overseas
organizations: Ulvac Japan, Ltd. (Japan), FFV YTTEC AB (Sweden), A.T. Poeton &
Sons, Ltd. (United Kingdom), and MIFA Aluminum BV (Netherlands), and will
continue seeking additional licensees. Since inception, several of these
licensees have increased their processing capabilities by taking licenses for
additional proprietary processes.
The Registrant receives periodic royalty payments under these agreements
based on sales of products to which Registrant's coating technology is applied.
The agreements also provide for two-way exchange of new and related technology
developed by Registrant and licensees.
The contributions of the licensees amounted to 2.25% of the gross revenue
of the Registrant and are expected to continue to rise.
Competition
The metal coatings industry is highly competitive. There are many companies
which provide metal treatments which, to varying extents, are alternatives to
the Registrant's processes. However, the Registrant believes that none of the
Registrant's competitors utilize processes similar to the Registrant's
proprietary processes. The Registrant believes that it competes primarily on the
basis of its manufacturing expertise, its superior proven processes and
coatings, and its reputation for problem solving, and that its pricing is a less
significant competitive consideration than these factors.
Raw Materials
The Registrant's primary raw materials are chemicals and polymers which are
manufactured by large chemical companies and are readily available. The
Registrant blends these raw materials in its proprietary processes. The
Registrant believes that sources of supply are adequate for its needs and that
it is not substantially dependent upon any one supplier.
Protection of Proprietary Information
Several new patents have been filed on processes for surface treatments in
the US and in key foreign nations. While management believes that its existing
patents have had competitive merit, it does not believe that patent protection
is essential to the ongoing operations of the Registrant due to the know-how
developed over the past years.
The Registrant has acquired 17 United States trademarks and servicemarks,
and 13 foreign trademarks and servicemarks. These trademarks and servicemarks
cover 10 of the Registrant's processes in the United States and one or more of
the Registrant's processes in Australia, Belgium, Canada, England, France,
Israel, Japan, Switzerland, Sweden, Norway and Denmark. While management
believes these trademarks and servicemarks have competitive merit, it does not
believe that trademark and servicemark protection is essential to the ongoing
operations of the Registrant.
Many processes cannot be patented due to cost and limited market potential.
Also, the patenting process can be expensive and can result in public disclosure
of proprietary information. Therefore, the Registrant's present approach is to
treat its production processes as confidential and rely on internal
non-disclosure safeguards, including written confidential disclosure agreements,
particularly among its more technically trained personnel, and on trade secrets
laws, as well as on restrictions incorporated in its license agreements for
protection of what it regards as proprietary information about its coatings and
processes. Notwithstanding these efforts, it may be possible for competitors to
duplicate or copy the Registrant's processes.
Employees
At June 30, 1995, the Registrant had 126 employees, of whom 16 were
employed in marketing and sales operations, 23 in administration and 87 in
production and quality assurance.
The Registrant's employees in all of the Registrant's plants, New Jersey,
California, Texas, Wisconsin and Canada are not represented by labor unions.
Management believes that its relations with its employees are good.
Environmental, Safety and Health Matters
The Registrant believes it is currently in compliance with all Federal,
state and local environmental protection laws and Federal and state occupational
safety and health standards. Capital expenditures made by the Registrant for
enhancement and improvement of environmental, health and safety systems
represented approximately 5% of the Registrant's revenues, and the Registrant
anticipates that such expenditures will not exceed that level for the
foreseeable future to meet existing Federal, state and local laws and standards.
Changes in current laws and standards could require additional expenditures and
adversely affect the Registrant's operations and profitability.
<PAGE>
Item 2. PROPERTIES
The Registrant's corporate executive offices and a production facility are
located in a modern, one story, high ceiling, steel and concrete structure, with
an attached two story administrative and office area, located at 1331 U.S. Route
1, Linden, New Jersey. The Registrant owns this structure and the approximately
4 acres of land on which it is located. Total square footage within the
structure is approximately 100,000 square feet. Approximately 30% of the
premises is leased to an unrelated party. Title is unencumbered.
In November 1982, the Registrant, through its wholly-owned subsidiary,
Candida Realty Texas, purchased a manufacturing facility, including executive
offices, in Arlington, Texas (in the Dallas/Fort Worth area). This property
consists of a modern, one story, cinder block and concrete structure, containing
approximately 37,500 square feet of space located on approximately 2 acres of
land. Title is unencumbered.
In 1989, the Registrant, through its wholly-owned subsidiary Candida Realty
Texas, purchased a modern one story brick and concrete structure containing
30,401 square feet of office and manufacturing facility on 2.2 acres in
Arlington, Texas, and which property is adjacent to the existing plant of the
Registrant's Arlington operation. Approximately 10,000 square feet is available
for lease to an unrelated party. Title is unencumbered.
In 1980, the Registrant, through its wholly-owned subsidiary, Candida
Realty California, purchased a production and office facility in Ventura,
California, consisting of 4 modern, 1 story, concrete block and steel buildings,
which contain a total of approximately 32,000 square feet of space located on
approximately 2 acres of land. Title is unencumbered.
On December 28, 1989, the Registrant acquired certain assets of Ra-Tech
Inc., a Racine, Wisconsin based hard anodizing metal specialist. The operations
were incorporated under the name of General Magnaplate Wisconsin, Inc., a
wholly-owned subsidiary of Registrant. During the fiscal year ending June 30,
1991, the Registrant, through its wholly-owned subsidiary, Candida Realty
Wisconsin, Inc., acquired 16,000 square feet of production and office space in a
building located on over 2.5 acres, into which General Magnaplate Wisconsin,
Inc. moved in October, 1991 and its business is now operational. Title to this
property is subject to an existing mortgage.
On January 2, 1990 the Registrant acquired the operating assets of Dynasurf
International, Inc., an Ontario, Canada based hard metal coatings specialist.
The operations were incorporated under the name General Magnaplate Canada, Ltd.,
a wholly-owned subsidiary of Registrant, which has continued operations in the
same premises consisting of some 9,000 square feet in a one story brick
building, leased on a month to month basis.
<PAGE>
Item 3. LEGAL PROCEEDINGS
In April, 1991, a claim was served on the Canadian subsidiary, General
Magnaplate Canada, Ltd., by Dynasurf International, Inc. for $170,000
representing the unpaid contract liability for the net assets acquired by the
Canadian subsidiary from the sellers, Carrigan Industries, Ltd. and Dynasurf
International, Inc. on January 2, 1990. The subsidiary has filed a counterclaim
for environmental and other costs which result from the seller not resolving
certain environmental issues warranted in the contract of purchase. Further, a
shareholder of Dynasurf International, Inc. has also filed a claim for breach of
oral contract of employment for $162,000 which the Registrant has denied in its
related statement of defense. It is the opinion of management that the ultimate
resolution of the claims will not have a materially adverse effect on the
Registrant's financial statements.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1995.
<PAGE>
PART II
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Item 5. MARKET FOR THE Registrant's COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Market Information
The Registrant's Common Stock is traded in the over-the-counter market
under the symbol GMCC, and is reported on the National Association of Security
Dealers Automated Quotations System ("NASDAQ"). The following table sets forth
the range of high and low sales price per share of the Registrant's Common Stock
for the periods indicated, as reported by NASDAQ on the composite tape as
provided by the National Quotation Bureau, Incorporated.
<TABLE>
<CAPTION>
FISCAL PERIOD HIGH/LOW SALES PRICE
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1995 High Low
---- ---- ---
<S> <C> <C> <C>
1st Quarter 4 5/8 3 7/8
2nd Quarter 4 3/4 3 3/4
3rd Quarter 6 1/2 4 3/8
4th Quarter 6 5
<CAPTION>
1994 High Low
---- ---- ---
<S> <C> <C> <C>
1st Quarter 7 3 1/4
2nd Quarter 8 6 1/4
3rd Quarter 7 5 1/2
4th Quarter 6 4 1/4
</TABLE>
Holders
The approximate number of security holders of the Registrant's Common Stock
as of June 30, 1995 was 912.
Dividends
The Registrant has paid cash dividends on its Common Stock since 1977.
Payments for the past five fiscal years are as follows:
<TABLE>
<CAPTION>
To Holders of Record as of
Amount Date Paid the Close of Business On
------ --------- ---------------------------
<S> <C> <C>
$.05 March 1, 1995 February 20, 1995
.04 January 28, 1994 January 14, 1994
.08 June 15, 1993 June 4, 1993
.03 October 4, 1991 September 13, 1991
.015 April 5, 1991 March 8, 1991
.03 October 5, 1990 September 14, 1990
.02 April 6, 1990 March 9, 1990
.02 October 6, 1989 September 15, 1989
</TABLE>
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data with respect to the
Consolidated Statements of Income of the Company for the five years ended June
30, 1995 and the Consolidated Balance Sheets of the Registrant as of the end of
such years. The selected financial data for the five years are derived from
financial statements for such years and as of such dates as examined by
Mauriello, Franklin & LoBrace, independent auditors, including the Consolidated
Financial Statements for the three years ended June 30, 1995 and the
Consolidated Balance Sheets, as of June 30, 1995 and 1994 included elsewhere
herein, and such data are qualified by reference to such financial statements
and notes thereto.
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Income Statement Data:
Gross Revenue........................... $10,048,857 $ 9,893,134 $10,302,712 $8,690,238 $10,801,832
Income Before Taxes..................... 2,086,084 2,033,177 2,111,418 401,277 1,978,563
Net Income.............................. 1,217,305 1,323,575 1,341,853 194,429 1,242,059
Earnings per share...................... $.42 $.44 $.44 $.06 $.40
Dividends per share..................... $.05 $.04 $.08 $.03 $.045
Shares Outstanding:
Weighted Average Shares............... 2,887,504 3,040,331 3,051,694 3,078,148 3,092,844
At Year End........................... 2,774,013 2,956,194 3,051,694 3,051,694 3,092,844
Selected Balance Sheet Data:
Total Assets............................ $12,923,076 $12,782,623 S12,260,467 $11,285,651 S12,234,565
Working Capital......................... 5,358,460 4,907,254 3,538,425 2,416,642 2,313,023
Long-Term Debt.......................... -0- 175,682 510,763 593,113 672,339
Stockholders' Equity.................... 10,902,198 10,830,153 10,156,354 9,097,506 9,177,627
Stockholders' Equity per share.......... $3.93 $3.66 $3.33 $2.98 $2.97
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Business Environment
General Magnaplate Corporation is principally engaged in applying, through
various proprietary and other processes, synergistic coatings for metal parts
produced by its customers. Rapid technological advances, typical of the coatings
industry, compels General Magnaplate to improve existing coatings or develop new
processes to meet our customers' changing needs.
Management believes that it competes primarily on the basis of
manufacturing expertise, its superior proven proprietary processes and coatings,
and its reputation for problem solving, and that its pricing is a less
significant competitive consideration than these factors. These factors are
responsible for our continuing growth of marketshare as well as our financial
stability in an uncertain economy. Management expects that there will be a
greater demand for its coating services although it cannot predict the impact on
future earnings.
Financial Condition
Liquidity and Capital Resources
Three Years Ended 1995
In the three-year period ended June 30, 1995, $4,547,830 net cash was
provided from operating activities of which $2,660,432 net cash was used in
investing activities and $2,545,367 net cash was used in financing activities,
resulting in a decrease in cash and cash equivalents of $657,969.
The principle sources of cash from operating activities have been: net
income of $3,882,733; depreciation and amortization of $1,975,199; allowance for
unrealized losses marketable securities of $252,564; and accrued deferred
compensation $324,000.
The principal uses of cash from operating activities have been: deferred
income taxes $147,953; a decrease in foreign currency translation adjustment of
$102,834; and a decrease in working capital of $1,576,093.
The principal sources of cash from investing activities have been:
redemption of cash surrender value - life insurance of $465,078; and proceeds
from sales of marketable securities of $3,101,962.
The principal uses of cash from investing activities have been: additions
to marketable securities of $5,232,039; additions to property, plant and
equipment of $727,580; and unimproved land held for investment of $285,000.
The principal uses of cash from financial activities have been: reduction
of long-term debt by $495,160; acquisition of treasury stock at the cost of
$1,463,756; payment of dividends to shareholders in the amount of $511,451; and
short-term bank payment of $75,000.
Working capital of $5,358,460 increased by $2,941,818 or 122% during the
three-year period and the working capital ratio increased to 5.5 to 1 from 3.3
to 1 at June 30, 1992. Stockholders' Equity per share at June 30, 1995 increased
32.8% to $3.93 per share compared with $2.98 per share at June 30, 1992. During
1995, 182,181 shares held in the treasury at the cost of $1,001,105 were retired
and canceled. During 1994, 95,500 treasury shares costing $462,651 were retired
and canceled.
<PAGE>
Management believes that internal cash flows and proceeds from the sale of
and/or dividends or interest from marketable securities are expected to be
sufficient to provide the capital resources necessary to support future
operating needs, and does not anticipate any material expenditures which will
have a significant impact on future cash flows. The Company has available an
unsecured line of credit of $500,000.
Results of Operations
Fiscal 1995 vs 1994 vs 1993
Gross revenue for 1995 of $10,048,857 was an increase of $155,723 or 1.6%
while 1994 showed a decline in gross revenue of $409,578 or 4.1%. Net sales in
1995 increased $84,737 or .9%; royalty income decreased $18,034 or 8.0%;
investment and other income increased $89,020 or 80.1%. In 1994, net sales
decreased $281,348 or 2.9%; royalty income rose $13,573 or 5.9%; investment and
other income decreased $141,803 or 56.1%.
Sales for 1995, 1994 and 1993 were $9,623,025, $9,538,288 and $9,819,636
respectively. Management expects positive trends at all locations in the
upcoming year.
Royalty income was $225,658 in 1995, $243,692 in 1994 and $230,119 in 1993.
Negotiations are continuing to take place regarding potential new licensees
worldwide.
Investment and other income was $200,174 in 1995, $111,154 in 1994 and
$252,957 in 1993. The increase in 1995 was principally due to an increase in
marketable securities of approximately $1.4 million and the addition of high
yield fixed income investments to our portfolio. The decline in 1994 can be
directly attributed to the volatility in the stock market during that year.
Total costs and expenses in 1995 were $7,962,773, an increase of $102,816
or 1.3% compared with $7,859,957 in 1994, which was a decrease of $331,337 or
4.2% from 1993. As a percentage of gross revenue, total costs and expenses were
79.2% in 1995, 79.4% in 1994 and 79.5% in 1993. Management has successfully
stabilized costs in direct proportion to revenue and continues to monitor
spending.
Reflecting the above, income before corporate income taxes was $2,086,084
for 1995, an increase of $52,907 or 2.6% compared with $2,033,177 for 1994, a
decrease of $78,241 or 2.6% from 1993.
Corporate income taxes and the effective tax rate were $868,779 and 41.7%
for 1995, $709,602 and 34.9% for 1994 and $769,602 and 36.4% for 1993.
Based on the above, net income of $1,217,305 decreased $106,270 or 8.7% in
1995 compared with $1,323,575 in 1994, a decrease of $18,278 or 1.4% from 1993.
This decrease is primarily attributable to the heavy tax burden placed on
earnings this year. Earnings per share in 1995, 1994 and 1993 were $.42, $.44
and $.44 respectively. In the three-year period from 1993-1995, 277,681 shares
of treasury stock ware canceled and retired. Average shares outstanding in 1995
were 2,774,013, in 1994 were 3,040,331 and in 1993 were 3,051,694.
<PAGE>
Management believes the existing legal matters as detailed in Note 10 of
the Consolidated Financial Statements will have no significant impact on future
earnings.
The Russian joint venture is on hold pending financing from world banking
sources which are still under consideration.
No other significant financial matters are expected in future months which
will have adverse material impact on earnings
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The accompanying Consolidated Financial Statements and related Schedules of
the Registrant and its wholly-owned subsidiaries have been filed with the
Securities and Exchange Commission and are incorporated herein by reference.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and have therefore
been omitted.
Item 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change of accountants nor any disagreements.
<PAGE>
PART III
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Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE Registrant
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of the Shareholders to be held
on November 8, 1995, to be filed pursuant to Section 14 of the Securities and
Exchange Act of 1934 within 120 days after the end of the Registrant's 1995
fiscal year.
Item 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of the Shareholders to be held
on November 8, 1995, to be filed pursuant to Section 14 of the Securities and
Exchange Act of 1934 within 120 days after the end of the Registrant's 1995
fiscal year.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of the Shareholders to be held
on November 8, 1995, to be filed pursuant to Section 14 of the Securities and
Exchange Act of 1934 within 120 days after the end of the Registrant's 1995
fiscal year.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of the Shareholders to be held
on November 8, 1995, to be filed pursuant to Section 14 of the Securities and
Exchange Act of 1934 within 120 days after the end of the Registrant's 1995
fiscal year.
PART IV
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Item 14. EXHIBITS. FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report.
(1) Financial Statements: The following Consolidated Financial Statements of
General Magnaplate Corporation and Report of Independent Auditors are
incorporated by reference:
Consolidated Balance Sheet - June 30, 1995 and 1994
Consolidated Statement of Income - Fiscal Years Ended June 30, 1995, 1994
and 1993
Consolidated Statement of Shareholders' Equity - Three-Year Period Ended
June 30, 1995
Consolidated Statement of Cash Flows - Fiscal Years Ended June 30, 1995,
1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Auditors
Consent of Independent Auditors
<PAGE>
(2) Financial Statement Schedules: The following financial statement schedule of
General Magnaplate Corporation for the fiscal years ended June 30, 1995,
1994 and 1993 is filed as part of this report and should be read in
conjunction with the Consolidated Financial Statements of General Magnaplate
Corporation.
Schedule VIII Valuation and Qualifying Accounts
(3) Exhibits: The Exhibits listed below are immediately following the financial
statement schedule and are filed as part of, or incorporated by reference
into, this Report.
Exhibit No. Description
1 List of Subsidiaries
2 Performance Graph
(b) Reports on Form 8-K: No reports were filed by the Company during the fiscal
quarter ended June 30, 1995.
<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.
GENERAL MAGNAPLATE CORPORATION
------------------------------
(Registrant)
Date: September 20, 1995 By: /s/ Charles P. Covino
------------------ ---------------------------------
Charles P. Covino
Chairman, Board of Directors
(Chief Executive Officer and
Principal Financial Officer)
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.
Date: September 20, 1995 /s/ Candida C. Aversenti
------------------ -------------------------------------
Candida C. Aversenti
President and Director
Date: September 20, 1995 /s/ Edward A. Partenope, Jr.
------------------ -------------------------------------
Edward A. Partenope, Jr.
Director
Date: September 20, 1995 /s/ Susan E. DeFalco
------------------ -------------------------------------
Susan E. DeFalco
Assistant Vice President
and Principal Accounting Officer
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of General Magnaplate Corporation and Wholly-owned Subsidiaries of our report
dated August 11, 1994, included in the 1995 Annual Report to Shareholders of
General Magnaplate Corporation and Wholly-Owned Subsidiaries.
Our audits also included the financial statement schedule of General Magnaplate
Corporation and Wholly-Owned Subsidiaries listed in Item 14(a). This schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
/s/Mauriello, Franklin, & LoBrace P.C.
MAURIELLO, FRANKLIN, & LoBRACE, P.C.
Springfield, New Jersey
August 14, 1995
<PAGE>
MAURIELLO, FRANKLIN & LoBRACE
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
45 SPRINGFIELD AVENUE, SPRINGFIELD, NEW JERSEY 07091
TELEPHONE (201) 379 5400 FAX (201) 379-3696
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders of General Magnaplate Corporation:
We have audited the accompanying consolidated balance sheets of General
Magnaplate Corporation and Wholly-Owned Subsidiaries as of June 30, 1995, and
June 30, 1994 and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended June 30,
1995. Our audits also included the financial statement schedule listed in the
index at Item 14(a). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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 statement. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and Wholly-Owned
subsidiaries at June 30, 1995 and June 30, 1994 and the results of their
operations and cash flows for each of the three years in the period ended June
30, 1995, in conformity with generally accepted accounting principles. Also, In
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ Mauriello, Franklin, & LoBrace P.C.
August 11, 1995
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents .................. $ 369,276 $ 1,332,266
Marketable securities (Note 1) ............. 4,128,758 2,741,331
Accounts receivable -- trade, net of
allowance for doubtful accounts of
$106,000 (June 30, 1994-$111,000) ........ 1,328,954 1,311,496
Inventories (Note 1) ....................... 271,518 275,250
Prepaid expenses ........................... 170,141 150,116
Other current assets ....................... 292,814 171.583
------------ ------------
Total current assets ................... $ 6,561,461 $ 5,982,042
Property, plant, and equipment, at
cost, net of accumulated
depreciation (Notes 1 and 2) ............... 5,427,711 5,773,515
Cash surrender value of officers' life
insurance, net ............................. 555,141 511,818
Note receivable - sale of land (Note 9) ...... 235,000 -0-
other assets (Note 3) ........................ 143,763 515,248
------------ ------------
Total assets ............................. $ 12,923,076 $ 12,782,623
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------------------------------------ ------------ -------------
<S> <C> <C>
Current liabilities:
Current maturity of long-term debt
(Note 5) ............................ $ 177,544 $ 335,662
Accounts payable ...................... 193,360 190,413
Accrued liabilities (Note 7) .......... 644,593 522,315
Corporate income taxes payable ........ 187,504 26,398
------------ ------------
Total current liabilities ........... $ 1,203,001 $ 1,074,788
------------ ------------
Long-term liabilities:
Long-term debt (Note 5) ............... $ -0- $ 175,682
Rent security deposit ................. 7,877 -0-
Accrued deferred compensation (Note 8) 810,000 702,000
------------ ------------
Total long-term liabilities ......... $ 817,877 $ 877,682
------------ ------------
Total liabilities ................... $ 2,020,878 $ 1,952,470
------------ ------------
Contingencies (Note 10)
Stockholders' equity:
Common stock--no par value
Authorized--5,000,000 shares
Issued and outstanding--2,774,013
shares (1994--2,956,194 shares) ..... $ 223,180 $ 223,180
Retained earnings ..................... 10,798,949 10,727,996
Foreign currency translation adjustment
(Note 1) ............................ (119,931) (121,023)
------------ ------------
Total stockholders' equity .......... $ 10,902,198 $ 10,830,153
------------ ------------
Total liabilities and
stockholders' equity .............. $ 12,923,076 $ 12,782,623
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
Foreign
Currency
Common Retained Translation
Stock Earnings Adjustment
-------- ----------- -----------
<S> <C> <C> <C>
Balance, July 1, 1992 $223,180 $ 8,891,423 $ (17,097)
Net income for year ended
June 30, 1993 -0- 1,341,853 -0-
Dividends paid -0- (244,136) -0-
Foreign currency translation
adjustment -0- -0- (38,869)
-------- ----------- ---------
Balance, June 30, 1993 $223,180 $ 9,989,140 $ (55,966)
Net income for year ended
June 30, 1994 -0- 1,323,575 -0-
Dividends paid -0- (122,068) -0-
Acquisition and retirement of
95,500 shares of treasury
stock -0- (462,651) -0-
Foreign currency translation
adjustment -0- -0- (65,057)
-------- ----------- ---------
Balance, June 30, 1994 $223,180 $10,727,996 $(121,023)
Net income for year ended
June 30, 1995 -0- 1,217,305 -0-
Dividends paid -0- (145,247) -0-
Acquisition and retirement of
182,181 shares of treasury
stock -0- (1,001,105) -0-
Foreign currency translation
adjustment -0- -0- 1,092
-------- ----------- ----------
Balance, June 30, 1995 $223,180 $10,798,949 $(119,931)
======== =========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Gross revenue:
Sales .................... $ 9,623,025 $ 9,538,288 $ 9,819,636
Royalty and license income 225,658 243,692 230,119
Investment and other
income, net (Note 1) ... 200,174 111,154 252,957
------------ ------------ ------------
$ 10,048,857 $ 9,893,134 $ 10,302,712
------------ ------------ ------------
Costs and expenses:
Cost of sales ............ $ 3,912,387 $ 3,804,162 $ 4,013,573
Selling and
administration ......... 3,392,307 3,383,838 3,390,322
Depreciation and
amortization ........... 619,238 628,002 732,459
Interest ................. 38,841 43,955 54,940
------------ ------------ ------------
$ 7,962,773 $ 7,859,957 $ 8,191,294
------------ ------------ ------------
Income before corporate
income taxes ............. $ 2,086,084 $ 2,033,177 $ 2,111,418
Corporate income taxes
(Notes 1 and 6) .......... 868,779 709,602 769,565
------------ ------------ ------------
Net income ................. $ 1,217,305 $ 1,323,575 $ 1,341,853
============ ============ ============
Earnings per share (Note 1) $ .42 $ .44 $ .44
============ ============ ============
Weighted average shares
outstanding (Note 1) ..... 2,887,504 3,040,331 3,051,694
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................... $ 1,217,305 $ 1,323,575 $ 1,341,853
----------- ----------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .............. $ 619,238 $ 628,002 $ 727,959
Provision for losses on accounts receivable 17,635 2,000 (32,000)
Allowance for unrealized losses on
marketable securities .................... -- 252,564 --
Loss (gain) on sale of marketable securities 19,271 (45,839) 4,147
Gain on sale of land held for investment ... (25,000) -- --
Deferred taxes ............................. (1,133) (82,376) (64,444)
Deferred compensation ...................... 108,000 108,000 108,000
Foreign currency translation adjustment .... 1,092 (65,057) (38,869)
Change in operating assets and liabilities:
Marketable securities .................... (1,406,698) -- --
Accounts receivable ...................... (35,093) 47,147 (183,354)
Inventories .............................. 3,732 (19,467) (8,559)
Other current assets ..................... 15,683 (40,357) (33,385)
Accounts payable and accrued liabilities . 125,225 (40,401) (154,604)
Corporate income taxes ................... 166,471 (113,723) 118,413
Rent security deposit .................... 7,877 (25,000) --
----------- ----------- -----------
Total adjustments ...................... $ (383,700) $ 605,493 $ 443,304
----------- ----------- -----------
Net cash provided by operating activities .... $ 833,605 $ 1,929,068 $ 1,785,157
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of marketable securities ... $ -- $ 2,801,944 $ 300,018
Additions to marketable securities ............. -- (3,757,167) (1,474,872)
Additions to property, plant, and equipment .... (268,647) (259,900) (199,033)
Unimproved land held for investment ............ -- -- (285,000)
Reduction in (additions to) other assets ....... (4,473) (5,693) 27,313
Redemption of (additions to) cash surrender
value life insurance ......................... (43,323) 667,078 (158,677)
----------- ----------- -----------
Net cash used in investing activities ........ $ (316,443) $ (553,738) $(1,790,251)
----------- ----------- -----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term bank borrowing (payment) .............. $ -- $ -- $ (75,000)
Reduction in long-term debt ...................... (333,800) (80,519) (80,841)
Acquisition of treasury stock .................... (1,001,105) (462,651) --
Dividends paid ................................... (145,247) (122,068) (244,136)
----------- ----------- -----------
Net cash used in financing activities .......... $(1,480,152) $ (665,238) $ (399,977)
----------- ----------- -----------
Increase (decrease) in cash and
cash equivalents ................................. $ (962,990) $ 710,092 $ (405,071)
Cash and cash equivalents, beginning of year ....... 1,332,266 622,174 1,027,245
----------- ----------- -----------
Cash and cash equivalents, end of year ............. $ 369,276 $ 1,332,266 $ 622,174
=========== =========== ===========
Supplementary cash flow data:
Interest paid .................................... $ 38,841 $ 43,955 $ 54,940
Income taxes paid ................................ 702,308 966,537 715,596
Non-cash transactions:
Sale of land in consideration for note receivable $ 310,000 -0- -0-
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note l -- Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of General
Magnaplate Corporation and its wholly-owned subsidiaries; accordingly all
intercompany transactions and balances have been eliminated in consolidation.
Marketable Securities
Effective July 1, 1994 all marketable securities are considered trading
securities and are valued at fair market value in accordance with FAS 115. As of
June 30, 1995 these securities were comprised of United States, Canadian and
corporate bonds (46%), preferred and common stocks (27%), and stock mutual funds
(27%). Market value exceeded cost by $41,466 at June 30, 1995.
In prior years marketable securities were valued at the lower of cost or
market resulting in an allowance for unrealized loss of $252,564 at June 30,
1994. There is no effect on retained earnings from the change in accounting
principle.
Inventories
Inventories consist principally of industrial supplies and plating
solutions which are valued at the lower of FIFO cost or market and are included
in Cost of Sales.
Depreciation and Amortization
Property, plant and equipment are stated at cost and depreciation is
provided principally on a straight line basis using estimated service lives of
3-5 years for transportation equipment, 5-10 years for factory machinery and
office equipment, and 10-39 years for buildings and building improvements.
Expenditures for renewals and betterments are capitalized. Items of identifiable
property which are sold, retired, or otherwise disposed of are removed from the
asset accounts, and any gains or losses thereon are reflected in income.
Patents and trademarks are amortized on a straight line basis over periods
not exceeding 17 years.
Corporate Income Taxes
Taxes are provided based on income reported for financial statement
purposes, including deferred taxes which are principally provided due to
temporary differences between financial and tax reporting of certain revenue and
expense items.
Company Earnings Per Share
Earnings per share of common stock have been computed based on the weighted
average number of shares outstanding during the period.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Foreign Currency Translation Adjustment
Assets and liabilities of the subsidiary operating in Canada are translated
into U.S. dollars using the exchange rate in effect at the balance sheet date.
Results of operations are translated using the average exchange rate prevailing
throughout the period. The effects of exchange rate fluctuations on translating
foreign currency assets and liabilities into U.S. dollars are included as part
of the Foreign Currency Translation Adjustment component of shareholders'
equity, while gains and losses resulting from foreign currency transactions are
generally included in income.
Segment Information
The Company is in one line of business. It provides synergistic coatings
and other related services to its customers' products.
<PAGE>
Note 2 -- Property, Plant and Equipment
Property, plant and equipment are as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Land ..................................... $ 805,350 $ 805,350
Buildings ................................ 3,366,208 3,366,208
Building improvements .................... 3,007,478 2,898,335
Factory machinery ........................ 5,064,890 4,961,642
Office equipment ......................... 822,687 805,340
Transportation equipment ................. 224,440 232,399
------------ ------------
Total .................................... $ 13,291,053 $ 13,069,274
Less -- accumulated depreciation ......... 7,863,342 7,295,759
------------ ------------
Net ...................................... $ 5,427,711 $ 5,773,515
============ ============
</TABLE>
Note 3 -- Other Assets
Other assets are as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------
1995 1994
-------- --------
<S> <C> <C>
Patents and trademarks, at
cost, net of accumulated
amortization ............................... $ 30,414 $ 28,295
Unamortized deferred mortgage
fees ........................................ 1,178 3,612
Deferred income taxes ........................ 112,171 198,341
Investment in unimproved land ................ -0- 285,000
-------- --------
$143,763 $515,248
======== ========
</TABLE>
Note 4 -- Note Payable - Bank
The Company maintains an unsecured line of credit of $500,000 with Bank
One, Racine, NA which expires October 31, 1995. As of June 30, 1995 and 1994,
the Company owed $-0- against the line. Interest is charged at the prevailing
prime business rate.
<PAGE>
Note 5 -- Long-Term Debt
Long-term debt is as follows:
<TABLE>
<CAPTION>
June 30,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Note payable Nations Bank in original amount of $650,000 secured by deed of
trust on Arlington, Texas real estate and payable in equal monthly principal
installments of $5,000 together with interest calculated at the bank's
prevailing prime business rate + 3/4% per annum commencing May 31, 1990 and
continuing until April 30, 1995 at which time the unpaid note was paid in full. $ -0- $315,000
Note payable Bank one, Racine, NA in the original amount of $260,000
secured by a first mortgage on Racine, Wisconsin real estate and payable in
equal monthly installments of $2,955 commencing November 1, 1990 and continuing
until October 1, 1995 at which time the note balance is due in full. Interest is
computed at the bank's base lending rate plus .4% per annum subject to a floor
of 7% and a ceiling of 13% per annum. 177,544 196,344
-------- --------
$177,544 $511,344
Less--debt due within one year 177,544 335,662
-------- --------
Total long-term debt $ -0- $175,682
======== ========
</TABLE>
Current maturities of long-term debt at June 30, 1995 for the five years
ending June 30, 2000 are as follows: 1996 - $177,544; 1997 - $-0-; 1998 - $-0-;
1999 - $-0-; and 2000 - $-0-.
<PAGE>
Note 6 -- Corporate Income Taxes
Components of corporate income tax expense are as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal ........... $ 770,988 $ 700,189 $ 673,991
State ............. 98,925 91,789 160,018
Foreign ........... -0- -0- -0-
--------- --------- ---------
$ 869,913 $ 791,978 $ 834,009
--------- --------- ---------
Deferred:
Federal ........... $ 3,658 $ (72,949) $ (67,715)
State ............. (4,792) (9,427) 3,271
Foreign ........... -0- -0- -0-
--------- --------- ---------
$ (1,134) $ (82,376) $ (64,444)
--------- --------- ---------
Total ............... $ 868,779 $ 709,602 $ 769,565
========= ========= =========
</TABLE>
A reconciliation of the provision for income taxes compared with the
amounts at the U.S. statutory tax is as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Based on U.S. statutory
federal tax rate of 34% ....... $ 709,268 $ 691,280 $ 717,882
Increase (decrease) in taxes
resulting from:
State taxes, net of
federal tax benefit ....... 62,128 54,359 105,612
Unutilized foreign loss
(income) .................. 47,775 (34,028) (50,031)
Other ....................... 26,348 (2,009) (3,898)
Unrealized investment losses 23,260 -0- -0-
--------- --------- ---------
Total .................. $ 868,779 $ 709,602 $ 769,565
========= ========= =========
Effective tax rate .............. 41.7% 34.9% 36.4%
</TABLE>
The Canadian subsidiary has available unused tax benefits in the form of
operating loss carryforwards of approximately U.S. $225,000 to reduce future
Canadian taxable income. These carryforwards principally expire in 1999 and
2002.
<PAGE>
Components of deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
June 30,
----------------------------
1995 1994
--------- ---------
<S> <C> <C>
Deferred compensation .................... $ 340,200 $ 280,800
Bad debts and vacation pay ............... 49,692 52,323
Net unrealized losses .................... 37,612 93,023
Accelerated depreciation ................. (228,029) (203,886)
--------- ---------
$ 199,475 $ 222,260
Valuation allowance ...................... -0- 23,919
--------- ---------
$ 199,475 $ 198,341
========= =========
Reported as:
Other current asset .................... 87,304 -0-
Non-current asset ...................... 112,171 198,341
--------- ---------
199,475 198,341
========= =========
</TABLE>
Note 7 -- Accrued Liabilities
Accrued liabilities are as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------
1995 1994
--------- ---------
<S> <C> <C>
Compensation ................................... $ 375,276 $ 216,368
Payroll, sales, and property taxes ............. 73,247 101,408
401-K plan contribution ........................ 44,014 57,705
Environmental and other costs .................. 152,056 146,834
--------- ---------
$ 644,593 $ 522,315
========= =========
</TABLE>
Note 8 -- Employee Benefits
The Company maintains a 401(k) savings plan which covers all full time U.S.
employees. The Company matches 50% of voluntary pre-tax employee participant
contributions up to 4% of compensation as well as providing discretionary
contributions based on compensation for all employees. Employer discretionary
contributions, which are forfeited due to employee termination prior to the full
seven year vesting period, revert back to the Company. Total expense under the
plan was $43,501 in 1995, $44,219 in 1994, and $44,143 in 1993.
Pursuant to employment contracts and letter agreements with officers and
key employees, the Company maintains non-qualified incentive compensation plans
which are based on the realization of pre-tax income and royalty income. Total
expense under these plans was $406,683 in 1995, $379,722 in 1994, and $431,483
in 1993.
<PAGE>
In addition the Company is obligated to provide a non-qualified retirement
pension to its chief executive officer. Such obligation provides a monthly
benefit of $7,100 and is payable for a period of fifteen years to the officer,
or to his wife in the event of his death. The Company is accruing the present
value of its obligation over the active term of employment of the officer.
Note 9 -- Sale of Land to Related Party
On June 30, 1995 the Texas real estate subsidiary sold 7 acres of
unimproved land in Carrollton, Texas to a limited partnership controlled by a
shareholder of the Company at an independently appraised price of $310,000.
The Company received cash of $75,000 in July 1995 and an installment note
receivable of $235,000 secured by a deed of trust on the Texas real estate. The
note bears interest of 6.83% per annum collectible annually for three years.
Thereafter the note shall be collected in (5) equal annual principal
installments of $47,000 commencing July 1, 1999 with the final collection due
July 1, 2004 plus interest of 6.83% per annum.
Note 10 -- Contingencies
Litigation
In April, 1991, a claim was served on the Canadian subsidiary, General
Magnaplate Canada, Ltd., by Dynasurf International, Inc. for $170,000
representing the unpaid contract liability for the net assets acquired by the
Canadian subsidiary from the sellers, Carrigan Industries, Ltd. and Dynasurf
International, Inc. on January 2, 1990.
The subsidiary has filed a counterclaim for environmental and other costs
incurred which resulted from the seller not resolving certain environmental
issues warranted in the contract of purchase.
Further, a shareholder of Dynasurf International, Inc. has also filed a
claim for breach of oral contract of employment for $162,000 which the Company
has denied in their related statement of defense.
It is the opinion of management that the ultimate resolution of both claims
will not have a materially adverse effect on the Company's financial statements.
Environmental
The Company is subject to extensive U.S. and Canadian federal, state,
provincial and local environmental laws and regulations. These laws, which are
constantly changing, regulate the storage and discharge of chemical materials
into the environment. The Company has received various communications from
regulatory authorities concerning certain environmental matters and believes
that the costs of these matters are not reasonably likely to have a material
adverse effect on the Company's consolidated financial condition, results of
operations, or liquidity.
Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of its cash, marketable securities and trade
receivables.
<PAGE>
The Company's cash and marketable securities are in high-quality securities
placed with a wide array of institutions with high credit and investment
ratings. This investment policy limits the Company's exposure to concentrations
of credit risk.
The trade receivable balances, reflecting the Company's diversified sources
of revenue, are dispersed across many different geographic areas. As a
consequence, concentrations of credit risk are limited. The Company routinely
assesses the financial strength of its customers and generally does not require
collateral to support its credit sales.
Note 11 -- Related Party Transactions
The Company was charged legal and computer consulting services by two
outside directors of the Company in the ordinary course of business as follows:
1995 - $59,648; 1994 - $94,917; 1993 - $50,707.
<PAGE>
Note 12 -- Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for the years ended June 30, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
Quarter Ended
Year Ended ----------------------------------------------------------------
June 30, 1995 Sept. 30 Dec. 31 March 31 June 30
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Gross revenue .... $2,434,985 $2,264,688 $2,534,049 $2,815,135
Gross profit ..... 1,273,211 1,439,000 1,472,143 1,526,284
Net income ....... 272,822 164,841 313,588 466,054
Earnings per share $ .09 $ .06 $ .11 $ .17
<CAPTION>
Quarter Ended
Year Ended ----------------------------------------------------------------
June 30, 1994 Sept. 30 Dec. 31 March 31 June 30
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Gross revenue .... $2,464,196 $2,593,560 $2,356,561 $2,478,817
Gross profit ..... 1,373,359 1,387,793 1,489,145 1,483,829
Net income ....... 306,147 326,813 281,662 408,953
Earnings per share $ .10 $ .11 $ .09 $ .14
</TABLE>
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
Schedule VIII -- Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- ---------- ---------- ---------- ----------
Balance At Charged To Balance At
Beginning Costs and (A) End Of
Classification Of Year Expenses Deductions Year
- -------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended June 30, 1995:
- -------------------------
Allowance for doubtful
accounts $111,000 $17,636 $22,636 $106,000
Accumulated
amortization:
Patents 77,362 2,353 -- 79,715
Mortgage finance
costs and fees 11,427 2,434 10,449 3,412
Allowance for unrealized
loss (gain)-marketable
securities 252,565 252,565 (41,466) (41,466)
Year ended June 30, 1994:
- -------------------------
Allowance for doubtful
accounts $109,000 $27,921 $25,921 $111,000
Accumulated
amortization:
Patents 74,440 2,922 -- 77,362
Mortgage finance
costs and fees 8,618 2,809 -- 11,427
Allowance for unrealized
loss--marketable
securities -- 252,565 -- 252,565
Year ended June 30, 1993:
- -------------------------
Allowance for doubtful
accounts
Trade $ 77,053 $49,385 $17,438 $109,000
Note receivable -- 33,528 -- 33,528
Accumulated
amortization:
Patents 72,247 2,193 -- 74,440
Mortgage finance
costs and fees 5,810 2,808 -- 8,618
</TABLE>
<PAGE>
EXHIBIT 1
SUBSIDIARIES OF GENERAL MAGNAPLATE CORPORATION
General Magnaplate Texas, Inc.
801 Avenue G East
Arlington, Texas 76011
General Magnaplate California
2707 Palma Drive
Ventura, California 93003
General Magnaplate Wisconsin, Inc.
2924 Rapids Drive
Racine, Wisconsin 53404
General Magnaplate Canada, Ltd.
119 McMaster Avenue
Ajax, Ontario Canada L1S 2E6
GMIC, Corp.
1331 U.S. Route 1
Linden, New Jersey 07036
Theoretical Research Institute
1331 U.S. Route 1
Linden, New Jersey 07036
Tufram, Inc.
1331 U.S. Route 1
Linden, New Jersey 07036
Candida Realty Co., Inc.
1331 U.S. Route 1
Linden, New Jersey 07036
Candida Realty of Texas, Inc.
1331 U.S. Route 1
Linden, New Jersey 07036
Candida Realty California
1331 U.S. Route l
Linden, New Jersey 07036
Candida Realty Wisconsin, Inc.
1331 U.S. Route l
Linden, New Jersey 07036
<PAGE>
EXHIBIT 2
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
---------------------- FISCAL YEAR ENDING -----------------------
COMPANY 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
GENERAL MAGNAPLATE CP 100 106.35 70.94 81.87 104.32 113.52
INDUSTRY INDEX 100 78.61 106.47 139.57 196.10 295.54
BROAD MARKET 100 94.22 101.52 124.62 136.66 160.27
</TABLE>
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX
THE INDUSTRY INDEX CHOSEN WAS:
SIC CODE 347 - COATING, ENGRAVING, & ALLIED SERVICES
THE CURRENT COMPOSITION OF THE INDEX IS AS FOLLOWS:
AZTEC MANUFACTURING CO
BMC IND INC
GENERAL MAGNAPLATE CP
HARVEY UNIVERSAL INC
KINARK CP
MARGATE IND INC
MATERIAL SCIENCES CP
SOURCE: MEDIA GENERAL FINANCIAL SERVICES
P.O. BOX 85333
RICHMOND, VA 23293
PHONE: 1-(800) 446-7922
FAX: 1-(804) 649-6097
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 369,276
<SECURITIES> 4,128,758
<RECEIVABLES> 1,434,954
<ALLOWANCES> 106,000
<INVENTORY> 271,518
<CURRENT-ASSETS> 6,561,461
<PP&E> 13,291,053
<DEPRECIATION> 7,863,342
<TOTAL-ASSETS> 12,923,076
<CURRENT-LIABILITIES> 1,203,001
<BONDS> 0
<COMMON> 223,180
0
0
<OTHER-SE> 10,679,018
<TOTAL-LIABILITY-AND-EQUITY> 12,923,076
<SALES> 9,623,025
<TOTAL-REVENUES> 10,048,857
<CGS> 3,912,387
<TOTAL-COSTS> 3,993,909
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 17,636
<INTEREST-EXPENSE> 38,841
<INCOME-PRETAX> 2,086,084
<INCOME-TAX> 868,779
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,217,305
<EPS-PRIMARY> .42
<EPS-DILUTED> 0
</TABLE>
