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, 1999 Commission file number: 0-2977
GENERAL MAGNAPLATE CORPORATION
(exact name of Registrant as specified in its charter)
New Jersey No. 22-1641813
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1331 U.S. Route 1 Linden, New Jersey 07036
(address of principal executive offices)
Registrant's telephone number, including area code (908) 862-6200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K [ X ]
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 16, 1999): $4,922,850
The number of shares outstanding of each of the Registrant's classes of common
stock, as of August 16, 1999: 4,669,003 one class Common Stock, no par value.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART I
Item 1. BUSINESS
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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 required end
product. 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, MAGNAGOLD, an enhanced titanium nitride PVD coating for various metals
and ultra-hard alloy steels to increase surface hardness, GOLDENEDGE, an
ultra-hard, ultra-thin TiN PVD coating for blades and all sharp-edged tools,
MAGNAPLATE HTR, for superior high temperature release on all metals, MAGNAGLIDE,
a coating developed for the exclusive use by Black & Decker for its irons, and
Magnaplate CMPT, a robotically controlled toolface production process. Each
proprietary process consists of a number of variations that can be employed to
meet customer requirements. The Registrant has obtained trademark coverage for
fifteen of these proprietary processes in the United States and on most of them
in certain foreign countries. Sales and licensing of 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, 1999.
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.
The Registrant is in one line of business, i.e., providing
synergistic coatings and other related services to its customers' products.
Financial information relating to foreign operations is as
follows:
The Company has invested net assets of $271,850 in its Ajax,
Ontario operation as of June 30, 1999.
<PAGE>
Foreign operations (principally Canada) constitute 7.5%, 8.1% and
10.0% of total sales in the three years ending June 30, 1997, 1998 and 1999,
respectively. Foreign operations constitute 3.5%, and 0%, and 0% of pre-tax
profits for the three years ended June 30, 1997, 1998 and 1999, respectively.
Marketing
- ---------
The Registrant markets its metal coating services through a staff
of twenty four 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, our web site 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, 1999 , 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, 1999, the Registrant spent
an estimated $75,000 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 Techno, Ltd. (Japan), YTTEC AB (Sweden), A.T.
Poeton & Sons, Ltd. (United Kingdom), MIFA Aluminum BV (Netherlands), and
Nussbaum (Germany). The Company 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 Registrant has an exclusive worldwide licensing agreement
with Household Products, Inc. (Black & Decker) in connection with irons using
the MAGNAGLIDE process technology and name.
<PAGE>
The contributions of the licensees amounted to 3% 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, polymers
and powdered or wire metals manufactured by large chemical and metal 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
- -------------------------------------
Many of the Company's processes are no longer covered under
patent protection, however, 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 it has 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 15 of the Registrant's processes in the United States and one
or more of the Registrant's processes in Canada and the European Community.
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 confidentiality
agreements, particularly among its more technically trained personnel, and on
trade secret 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, 1999, the Registrant had 133 employees, of whom 14
were employed in marketing and sales operations, 23 in administration and 96 in
production and quality assurance.
<PAGE>
None of the Registrant's employees in any of its plants are
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 material compliance
with all federal, state and local environmental protection laws and federal and
state occupational safety and health standards, non-compliance with which would
have a material adverse effect upon the Registrant's assets or its results of
operation. Capital expenditures made by the Registrant for enhancement and
improvement of environmental, health and safety systems represented
approximately 4% 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.
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. 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
<PAGE>
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. During the fiscal year ended June 30,
1997 the registrant completed a 7,550 square foot expansion and renovation of
this facility. Title is unencumbered.
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. During the fiscal year
ended June 30, 1998, the registrant acquired a modern 19,000 square foot
facility located in Ajax, Ontario. The building's production area is a one
story, high ceiling, steel and cinder block structure with an attached two story
office area situated on approximately 3 acres. During the same fiscal year, the
registrant completed a 2,000 square foot, one story steel and cinder block
addition onto the existing structure. Title to this property is subject to an
existing mortgage.
Item 3. LEGAL PROCEEDINGS
- -------------------------
Although the Company may from time to time be involved in routine
litigation incidental to its business, none of these actions are expected,
individually or in the aggregate, to have a material adverse impact upon the
Company or its results of operations.
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 1999.
<PAGE>
PART II
-------
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 listed on the NASDAQ National Market. The
following table sets forth the range of high and low bids for the Registrant's
Common Stock for the periods indicated, as reported by NASDAQ. These quotations
reflect inter dealer prices without detail mark-up, mark-down or commission and
may not necessarily represent actual transactions.
FISCAL PERIOD HIGH/LOW BID PRICE
------------- ------------------
1999 High Low
---- ---- ---
1st Quarter 5 3 3/4
2nd Quarter 4 9/32 4
3rd Quarter 7 4 1/4
4th Quarter 4 9/16 3
1998 High Low
---- ---- ---
1st Quarter* 3 7/8 2 15/16
2nd Quarter* 7 5/8 3 5/8
3rd Quarter 8 1/4 5 1/4
4th Quarter 7 1/2 4 3/4
Holders
- -------
The approximate number of record holders of the Registrant's Common Stock
as of June 30, 1999 was 230.
Dividends
- ---------
The Registrant has paid cash dividends on its Common Stock since
1977. Payments for the past two fiscal years are as follows:
To Holders of Record as of
Amount Date Paid the Close of Business On
- ------ --------- ------------------------
$.06 March 12, 1999 February 26, 1999
.05 October 9, 1998 September 25, 1998
.05 March 13, 1998 February 27, 1998
.05* October 10, 1997 September 26, 1997
.03* March 14, 1997 February 28, 1997
* Adjusted to reflect forward 2 for 1 stock split on December 16, 1997.
<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, 1999 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, 1999 and
the Consolidated Balance Sheets, as of June 30, 1999 and 1998 included elsewhere
herein, and such data are qualified by reference to such financial statements
and notes thereto. Data has been adjusted, as necessary, to reflect forward 2
for 1 stock split on December 16, 1997.
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Income Statement Data:
Gross Revenue ................ 11,484,476 $11,720,331 $11,453,658 $10,777,072 $10,048,857
Income Before Taxes .......... 1,941,955 2,232,410 2,533,707 2,349,529 2,086,084
Net Income ................... 1,258,205 1,474,960 1,694,687 1,486,285 1,217,305
Earnings per Share ........... $ 0.26 $ 0.30 $ 0.33 $ 0.27 $ 0.21
Dividends per Share .......... $ 0.11 $ 0.10 $ 0.065 $ 0.05 $ 0.025
Shares Outstanding:
Weighted Average Shares ...... 4,803,495 4,913,635 5,089,124 5,435,916 5,775,008
At Year End .................. 4,720,846 4,918,794 4,918,794 5,269,594 5,548,026
Selected Balance Sheet Data:
Total Assets ................. 14,501,673 $14,980,401 $13,513,276 $13,333,716 $12,923,076
Working Capital .............. 5,952,123 5,547,405 5,295,362 5,668,941 5,358,460
Long-Term Debt ............... 318,421 412,800 -0- -0- -0-
Stockholders' Equity ......... 12,066,950 12,306,811 11,451,484 11,280,432 10,902,198
Stockholders' Equity per Share $ 2.56 $ 2.50 $ 2.33 $ 2.14 $ 1.96
</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, compel General Magnaplate to improve existing coatings
or develop new processes to meet our customers' changing needs and stay
competitive.
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. Management believes
that these factors are responsible for the Company's financial stability.
Financial Condition
Liquidity and Capital Resources
Three Years Ended June 30, 1999
Cash and cash equivalents increased to $706,187 at June 30, 1999 from
$680,570 at June 30, 1996. Of the total cash and cash equivalents, $6,309,233
net cash was provided by the operating activities, $3,270,566 was used in
investing activities and $3,013,050 was used by financing activities. During the
three year period, the Registrant's cash provided by operating activities was
principally comprised of $ 4,427,852 provided by net income, $ 1,917,067 for
depreciation and amortization, $453,300 for accrued deferred compensation and a
$372,917 decrease in Marketable Securities, while primarily being reduced by
accounts payable and accrued liabilities of $485,805. During the three year
period, the Registrant's investment activities were primarily comprised of
$2,811,478 for additions to property, plant and equipment, and patents and
trademarks, $123,734 used for additions to deferred compensation contracts and
$339,126 for additions to cash surrender value-life insurance, while $536,672
was provided from the collection of a note receivable from an affiliated party.
The increase in net cash used in financing activities was principally from the
acquisition of treasury stock $1,998,531 and the payment of dividends of $
1,357,927.
Working capital of $5,952,123 increased $283,182, or 5.0%, during the
three year period ended June 30, 1999 and the working capital ratio increased to
10.86 to 1 from 6.31 to 1 as of June 30, 1996. The working capital increased due
to the net effect of the increase in the mark to market value of the marketable
securities portfolio, the increase in Accounts Receivables-trade, net of
allowance for doubtful accounts and the paydown of Accounts Payable and accrued
liabilities.
All per share numbers give retroactive effect to the December 16,
1997 two for one forward stock split. Stockholders' equity per share at June 30,
1999 increased $.42 to $2.56 per share compared with $2.50, $2.33, and $2.14 at
June 30, 1998, 1997, and 1996, respectively. The increase is primarily due to
the excess income earned over dividends paid and the cost of treasury stock
acquired for the three year period. As previously authorized by the Board,
548,748 shares of GMCC stock were purchased in the three year period at the cost
<PAGE>
of $2,246,860. Of the repurchased shares, 350,800 shares were retired and
canceled while the remaining 197,948 are currently being held in the treasury,
leaving the Company with 4,720,846 shares outstanding at June 30, 1999. Under
the Registrant's current buyback program, the Company is authorized to
repurchase shares of its common stock from time to time up to the total purchase
price of $1,500,000. The Company has purchased $982,825 in shares under the
current program.
Management believes internal cash flow from operations and/or
incomes from marketable securities to be sufficient to provide the capital
resources necessary to support future operating needs, and does not currently
anticipate material capital expenditures that will have significant impact on
future cash flows.
Results of Operations Fiscal 1999 vs. 1998 vs. 1997
- ---------------------------------------------------
Total revenue for 1999 of $11,484,476 represented a decrease of
$235,855, or 2.0%, over 1998 revenue, while total revenue for 1998 was
$11,720,331, an increase of $266,673 or 2.3% over 1997.
The decrease in total revenue for 1999 over 1998 represents
decreases in sales of $410,301 or 3.8% and royalty and licensee income of $6,053
or 1.8%, partially offset by an increase in investment and other income of
$180,499 or 35.2%.
The increase in total revenue for 1998 over 1997 resulted from
increases in sales of $299,070 or 2.8% and royalty and licensee income of
$47,335 or 10.2%, partially offset by a decrease in investment and other income
of $79,732 or 18.8%.
Sales for 1999, 1998 and 1997 were $10,453,071, $10,863,372, and
$10,564,302, respectively, representing approximately 91%, 93% and 92% of total
revenue in each respective year. Sales at the Canadian facility increased
$167,856. The New Jersey, Texas, California and Wisconsin facilities had lower
sales this year compared to the same period in 1998. The slight decline in sales
for the New Jersey facility is attributable to a general industrial slowdown.
The reduced sales for the Texas facility reflect continued low levels of oil
exploration due to the low price of crude oil experienced during the quarter.
Although crude oil prices have increased recently, the Company has not yet seen
an increased level of exploration activity in its Southwestern United States
market. Oil drilling and related suppliers represent a significant portion of
the customer base for the Texas facility. Reduced sales for the California
facility reflect slowdowns in the airframe and electronics industries served by
the plant, caused both by the Asian economic crises, which slowed orders of
parts for items such as aircraft, and the continued decrease in military
contracting. The Wisconsin facility's main customer base is in the food, and
pulp and paper industries which currently are not expanding their manufacturing
plants, resulting in no expenditures for our surface enhancement processes used
on new equipment. Sales for the fiscal year ended 1998 compared with 1997 showed
increased sales at New Jersey, Texas, and Canadian facilities of $479,512,
$1,207 and $89,291 respectively. The decreased sales at the California and
Wisconsin facilities for the year ended 1998 as compared to the year ended 1997
reflect the same factors discussed above in the comparison of the years ended
1999 and 1998.
<PAGE>
Royalty and license income was $337,528 in 1999, $343,581 in
1998, and $423,313 in 1997. The decrease in current year royalties of 1.8%, or
$6,053 as compared with the year ended 1998, is the result of the Company
receiving the final licensee fee payment of $50,000 in 1998 from Black & Decker
for the exclusive use of the Company's trademark name Magnaglide. There was no
comparable payment from Black & Decker in 1999. In addition, the decrease from
1997 versus 1998 of 18.8%, or $79,732, is directly attributed to the decrease in
royalties from our Japanese licensee and the impact of the turmoil experienced
during 1998 in the Asian market on their business.
Investment income for 1999, 1998 and 1997 was $693,877, $513,378
and $466,043, respectively. Investment income increased 35.1%, or $180,499 for
the year ended 1999 compared to the same period in 1998, reflecting the
continuing upward movement in investment markets during the twelve months ended
June 30, 1999. Investment income increased 10.2%, or $47,335, in the year ended
1998 as compared to the same period in 1997, reflecting the same factors
discussed for the year ended 1999. The Company maintains an investment portfolio
to enhance earnings and provide liquidity for future cash needs. The portfolio
is composed of equity securities, U.S. Treasury Securities and obligations of
U.S. Government agencies and government sponsored entities, and corporate debt.
The Company has adopted Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities,(SFAS 115). Under SFAS 115, securities are classified as securities
held to maturity based on management's intent and the Company's ability to hold
them to maturity. Such securities are stated at cost, adjusted for unamortized
purchase premiums and discounts. Securities that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities, which are carried at market value. Realized gains and losses and
gains and losses from marking the portfolio to market value are included in
investment income. Securities not classified as securities held to maturity or
trading securities are classified as securities available for sale, and are
stated at fair value. Unrealized gains and losses on securities available for
sale are excluded from results of operations, and are reported as a separate
component of stockholders' equity, net of taxes. Securities classified as
available for sale include securities that may be sold in response to changes in
interest rates, changes in prepayment risks, or other similar circumstances.
Management determines the appropriate classification of securities at
the time of purchase. At June 30, 1999 all of the Company's investment
securities were classified as trading securities.
The $180,499 increase in investment income for the year ended
1999 versus the 1998 year is primarily attributable to the mark to market
adjustments to the portfolio. Although the Company's portfolio will continue to
be subject to market changes, management believes the portfolio is well
diversified and is a prudent cash management tool for investing the Company=s
excess cash. The $47,335 increase for the year ended 1998 versus 1997 reflects
the same factors discussed above.
As a result of the factors discussed above, gross revenue for the
year ended 1999 totaled $11,484,476, a decrease of 2.0%, or $235,855 as compared
to the fiscal year ended 1998. Gross Revenue for the year ended 1998 totaled
$11,720,331, an increase of 2.3% or $266,673 versus the fiscal year ended 1997.
<PAGE>
Total costs and expenses were $9,542,521 in the year ended June
30, 1999, an increase of $54,600 or 0.6% as compared to 1998. Primary components
of costs and expenses included costs of sales of $5,015,361, an increase of
$295,464 over cost of sales of $4,719,897 for the same period last year, selling
and administration expense of $3,829,047, a decline of $232,785 from selling and
administrative expenses of $4,061,832 in the same period of last year, and
depreciation and amortization expenses of $667,557, an increase of $19,436 over
depreciation and amortization expenses of $648,121 in the same period of last
year. The increase in the costs of sales reflects increased prices in raw
material costs and higher production wages, and the decline in selling and
administrative expenses reflects the Company's reduced sales. Total costs and
expenses for the fiscal year ended 1998 were $9,487,921, representing an
increase of $567,970 over 1997. Primary components of costs and expenses
included in 1998 included cost of sales of $4,719,897, an increase of $301,649
as compared to total costs of sales of $4,418,248 in 1997, selling and
administration expenses of $4,061,832 , an increase of $161,752 over the same
period in 1997, and depreciation and amortization expense of $648,121 an
increase of $46,732 compared to the same period in 1997. The higher selling and
administrative costs in 1998 are attributable to the increased sales during the
period. Costs of sales increased for higher raw material prices as well as the
increase in sales. As a percentage of total revenue, total costs and expenses
wre 83.1% in 1999, 80.9% in 1998, and 77.9% in 1997. The increase in total costs
and expenses is primarily due to increases in raw material costs, increases in
depreciation from adding Plasmadize processing lines at the Wisconsin plant, and
higher labor costs due to the addition of sales staff and low unemployment
rates.
Income before corporate income taxes was $1,941,955 in the fiscal
year ended June 30, 1999, a decrease of 13.0%, or $290,455 from the $2,232,410
achieved in the same period 1998.
Income before corporate income taxes for the fiscal year ended
June 30, 1998 was $2,232,410, a decrease of 11.9%, or $301,297 from 1997 income.
Corporate income taxes and the effective tax rate for 1999 were $683,750 and
35.2%, respectively, in 1998, $757,450 and 33.9% and $839,020 and 33.1% in 1997.
Based on the above, net income in the fiscal year ended 1999 of
$1,258,205 decreased $216,755 or 14.7% from the $1,474,960 in the same period of
1998. Net income decreased $219,727 or 13.0% for the fiscal year ended 1998 as
compared to net income of $1,694,687 for fiscal year ended 1997.
Earnings per share in 1999, 1998 and 1997 were $.26, $.30 and
$.33, respectively. In the current year, 186,948 shares of GMCC stock were
purchased and are being held in the treasury. During 1998, 15,000 shares of GMCC
stock were purchased and placed in treasury, 4,000 of these shares were
subsequently issued as employee compensation and the remaining 11,000 shares are
still being held in the treasury. During the fiscal year ended 1997, 350,800
shares of treasury stock were canceled and retired, resulting in weighted
average shares outstanding of 4,803,495, 4,913,635 and 5,089,124 in 1999, 1998
and 1997, respectively.
Year 2000
- ---------
The Company has recognized the need to ensure that its computer
systems will not be adversely affected by the upcoming calendar year 2000. The
Company has assessed how it may be impacted by Year 2000 and has formulated and
commenced implementation of a comprehensive plan to address known issues to its
computer systems. The plan, as it relates to computer systems, involves a
combination of software modification, upgrades and replacement. The accounting
<PAGE>
software has already been upgraded at this time, at a cost of $12,000. The
Company estimates that any additional costs of Year 2000 compliance will not be
material. However, the Company cannot measure the impact that the Year 2000
issue will have on its vendors, suppliers, customers and other parties with
which it conducts business.
Market Risk
- -----------
The Company's Canadian operations expose the Company to potential
foreign currency exchange risk on cash flows related to sales, expenses and
financing transactions. The Company believes its exposure to currency rate risk
is not material, and the Company has not used currency exchange contracts to
address this risk.
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 filed as part of this
report.
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
--------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
The following provides certain information regarding the
Directors and Executive Officers of the Registrant:
S. THOMAS AITKEN, 61, former President and Chairman of the Board
of Peoples BanCorp, Fairfield, NJ. Mr. Aitken has been a Director since 1970.
CANDIDA C. AVERSENTI, 47, President and Chief Executive Officer,
Mrs. Aversenti joined the Company in 1982 as Assistant to the Vice
President-Marketing, became Vice President- Marketing in May 1984, was elected
to the Board of Directors in August 1984, Executive Vice President in November
1984, President and Chief Operating Officer in November 1986, and Chief
Executive Officer in July, 1999. She was formerly Assistant to the Director of
Labor Relations at Standard Brands, Inc. (now RJR Nabisco Inc.). She is a
graduate (Cum Laude) of Boston College, of Endicott Junior College (with
Honors), of the Paralegal Institute of New York, and was previously employed by
the Company during the summers of 1970-1974.
EDMUND V. AVERSENTI, JR., 55 Vice President and Secretary, and
appointed Chief Operating Officer in July, 1999. He has been employed by the
Company since June, 1985. For the five years prior thereto he was District
Manager (West) for M&T Chemicals Corp. with the Furane Division and Plating
Chemicals Division.
CHARLES P. COVINO, 75, Chairman, Board of Directors, and a
founding Director since 1959. He retired as Chief Executive Officer in July,
1999. He is the inventor of all the Company's proprietary processes and directs
all new process development. He has over 90 patents and trademarks worldwide. He
is a graduate of Manhattan College and studied at New York University Graduate
School of Business. Previously, he had studied mechanical engineering at the
University of Alabama during service in World War II. He has an honorary degree
of Doctor of Humane Letters from Philathea University in London, Ontario,
Canada, and honorary degree of Doctor of Science from Manhattan College, and has
been a consultant to NASA, The Atomic Energy Commission, the United Nations and
the Bureau of Naval Weapons.
EDWARD A. PARTENOPE, JR., 41. Since 1986, Mr. Partenope has been
a management and computer consultant. During 1984-1986, he served as Assistant
Vice President/Corporate Planning for the Company. From 1981-1984, he was
President of Silocon Computer Co., Inc., a New Jersey automation and management
consulting firm. Mr. Partenope has been a director since 1987.
JAMES H. WALLWORK, 68, was the former owner/partner of Wallwork
Brothers, Inc., a HVAC wholesale distributor. Mr. Wallwork was a New Jersey
State Senator from 1968-1981. He is a West Point graduate (1952), and served in
the U.S. Army occupation forces from 1953-1955, and as a Major in the National
Guard from 1956-1966.
<PAGE>
The Executive Officers of the Company who are not also Directors
are as follows:
Name Age Position
---- --- --------
Walter P. Alina 67 Vice President
Walter P. Alina joined the Company as Vice President in 1979.
From 1967 to 1979 he was Plant Manager for Paramount Plating Co., a metal
plating company.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
Registrant's officers and directors, and persons who own more than ten percent
of a registered class of the Registrant's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required by
regulation of the Securities and Exchange Commission to furnish the Registrant
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received
by it, or written representations from certain reporting persons that no Forms 5
were required for those persons, the Registrant believes that, during the fiscal
year ended June 30, 1999, all filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were met.
Item 11. EXECUTIVE COMPENSATION
- -------------------------------
The following table sets forth certain information with respect
to the Company's Chief Executive Officer and each of the Directors or Executive
Officers of the Company and its subsidiaries as to whom aggregate cash and cash
equivalent forms of remuneration during the fiscal year ended June 30, 1999
exceeded $100,000. All remuneration described in the table was paid by the
Company.
<TABLE>
<CAPTION>
Name and Principal Position Summary Compensation Table
--------------------------- --------------------------
Salary Bonus Other (1)
------ ----- ---------
<S> <C> <C> <C> <C>
Charles P. Covino (2) 1999 $186,123 $273,643 $4,276
Chairman, Board of Directors 1998 $179,255 $292,614* $3,031
and Chief Executive Officer 1997 $179,255 $352,122* $3,591
Candida C. Aversenti 1999 $158,112 $ 70,551 $7,347
President and 1998 $152,256 $ 77,090 $7,427
Chief Operating Officer 1997 $152,549 $ 87,598 $7,099
Edmund Aversenti, Jr. (3) 1999 $145,394 $ 70,551 $3,210
Vice President, Secretary and 1998 $109,996 $ 77,090 $5,495
Corporate Director of Operations 1997 $104,615 $ 87,598 $3,540
</TABLE>
*Includes royalty payments of $112,509, $114,527, and $141,105 respectively.
<PAGE>
(1) Includes disability insurance premiums, life insurance premiums, and a
company automobile.
(2) Does not include the Company's obligation to provide a nonqualified
retirement pension plan to its chief executive officer, Dr. Charles P.
Covino, which provides a monthly benefit dependent on date of retirement
and is payable for a period of fifteen years to the officer or to his wife
in the event of his death. The total accrued deferred compensation up to
and including the fiscal year ended June 30, 1999 amounted to $1,242,000.
(3) Does not include the Company's obligation to fund deferred compensation
contracts based on 10% of annual compensation. The total accrued deferred
compensation up to and including the fiscal year ended June 30, 1999
amounted to $150,002 for Candida C. Aversenti and $111,200 for Edmund V.
Aversenti, Jr.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
The following table sets forth, as of June 30, 1999, information
as to the shares of Common Stock of the Company owned by each director and by
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
Amount and Nature
of Beneficial Percent
Name Interest (1) of Class
- ---- ------------ --------
<S> <C> <C>
S. Thomas Aitken (2) .............................. 46,080 .98%
Walter Alina(6) ................................... 16,000 .34%
Edmund V. Aversenti, Jr. (5) ...................... 977,681 20.71%
Candida C. Aversenti (3) .......................... 977,681 20.71%
Charles P. Covino (4) ............................. 2,125,510 45.02%
Harold F. Levin (7) ............................... 2,898 .06%
Edward A. Partenope, Jr ........................... 4,000 .08%
James H. Wallwork ................................. 1,000 .02%
All current directors, and executive officers
as a group (8 persons) ............................ 3,173,169 67.22%
</TABLE>
<PAGE>
(1) Unless otherwise indicated, each such beneficial owner holds the sole
voting and investment power over the shares beneficially owned.
(2) S. Thomas Aitken owns 19,800 shares in joint tenancy with his former wife,
included herein.
(3) Includes 58,681 shares owned of record or beneficially by Edmund V.
Aversenti, Jr., Ms. Aversenti's spouse. Also includes 285,600 shares held
by Ms. Aversenti for the benefit of her children. Ms. Aversenti disclaims
any beneficial interest in these shares.
(4) Includes 513,188 shares held beneficially or of record by Mr. Covino's
spouse and 287,661 shares held by trusts of which Mr. Covino is the
trustee.
(5) Includes 919,000 shares held of record or beneficially by Candida
Aversenti, Mr. Aversenti's spouse, and 8,681 shares held by Mr. Aversenti
for the benefit of his children. Ms. Aversenti disclaims any beneficial
interest in these shares.
(6) Walter Alina owns these shares in trust with his wife.
(7) Harold F. Levin disclaims any interest in shares held by his daughter,
daughter-in-law and granddaughters.
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of June 30, 1999,
with respect to any person (including any "group") as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), who is
known to management of the Company to be the beneficial owner of more than five
percent (5%) of any class of the Company's voting securities.
<TABLE>
<CAPTION>
Number of Shares Percent
Name Beneficially Owned of Ownership
- ---- ------------------ ------------
<S> <C> <C>
Sylvia A. Covino 2,125,510(1) 45.02%
</TABLE>
(1) Includes 1,612,322 shares held beneficially or of record by Mr. Charles P.
Covino, Ms. Covino's spouse. Ms. Covino disclaims any beneficial ownership
interest in these shares.
Charles P. Covino, Sylvia A. Covino, Candida C. Aversenti and
Edmund V. Aversenti, Jr. own or control 3,103,191 shares or 65.7% of the
outstanding 4,720,846 shares of the Company. Although each disclaims any
beneficial interest in the shares held by the others, they will continue to be
able to exercise substantial control over the affairs of the Company and may be
deemed "parents" of the Company as such term is defined in the Rules and
Regulations under the Securities Act of 1933.
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
Edward A. Partenope, Jr., Director was paid $46,403 during fiscal
year 1999 for management and consulting services to the Company.
PART IV
-------
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 filed as part of this Report and should
be read in conjunction with the Consolidated Financial Statement
Schedules of General Magnaplate Corporation:
Consolidated Balance Sheet - June 30, 1999 and 1998
Consolidated Statement of Income - Fiscal Years Ended
June 30, 1999, 1998 and 1997
Consolidated Statement of Shareholders' Equity -
Three-Year Period Ended June 30, 1999
Consolidated Statement of Cash Flows - Fiscal Years
Ended June 30, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Independent Auditors
Consent of Independent Auditors
(2) Financial Statement Schedules: The following financial statement
schedule of General Magnaplate Corporation for the fiscal years
ended June 30, 1999, 1998 and 1997 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 this
Report.
Exhibit No. Description
1 List of Subsidiaries
(b) Reports on Form 8-K: No reports were filed by the Company during
the period ended June 30, 1999.
<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)
By: /s/Charles P. Covino
--------------------
Charles P. Covino
Chairman, Board of Directors
(Principal Financial Officer)
September 28, 1999
------------------
(Date)
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.
/s/Candida C. Aversenti
-----------------------
Candida C. Aversenti
CEO President and Director
September 28, 1999
------------------
(Date)
/s/Edward A. Partenope, Jr.
---------------------------
Edward A. Partenope, Jr.
Director
September 28, 1999
------------------
(Date)
/s/Susan E. Neri
----------------
Susan E. Neri
Assistant Vice President
and Principal Accounting Officer
September 28, 1999
------------------
(Date)
<PAGE>
/s/Edmund V. Aversenti, Jr.
---------------------------
Edmund V. Aversenti, Jr.
COO, Secretary and Director
September 28, 1999
------------------
(Date)
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED
JUNE 30, 1999, 1998, AND 1997
<PAGE>
Mauriello, Franklin,& LoBrace
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS 45 Springfield Avenue
Springfield, New Jersey 07081
(973) 379-5400, FAX (973) 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, 1999
and June 30, 1998 and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended June 30, 1999. 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 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, 1999 and June 30, 1998 and the results of
their operations and cash flows for each of the three years in the period ended
June 30, 1999, 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.
---------------------------------------
Mauriello, Franklin & LoBrace, P.C.
August 9, 1999
PAGE 1
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
ASSETS 1999 1998
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................... $ 706,187 $ 1,301,317
Marketable securities (Note 1) ................. 3,914,486 3,136,420
Accounts receivable--trade, net of
allowance for doubtful accounts of
$108,000 (June 30, 1998-$93,000) ............. 1,258,263 1,326,070
Inventories (Note 1) ........................... 363,067 355,285
Prepaid expenses ............................... 140,157 190,817
Other current assets ........................... 173,870 169,229
----------- -----------
Total current assets ....................... $ 6,556,030 $ 6,479,138
Property, plant, and equipment, at
cost, net of accumulated
depreciation (Notes 1 and 2) ................... 6,175,325 6,331,313
Cash surrender value of officers' life
insurance ...................................... 1,003,288 874,811
Note receivable-officer (Note 8) ................. -0- 490,686
Note receivable-related party partnership (Note 8) -0- 195,000
Other assets (Note 3) ............................ 767,030 609,453
----------- -----------
Total assets ................................. $14,501,673 $14,980,401
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 2
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
- ------------------------------------ ------------ ------------
<S> <C> <C>
Current liabilities:
Current maturity of long-term debt ...................... $ 29,736 $ 29,841
Accounts payable ........................................ 171,111 434,915
Accrued liabilities (Note 6) ............................ 340,100 426,234
Corporate income taxes payable .......................... 62,960 40,743
------------ ------------
Total current liabilities ............................. $ 603,907 $ 931,733
------------ ------------
Long-term liabilities:
Accrued deferred compensation (Note 7) ................... $ 1,503,202 $ 1,319,864
Long-term debt (Note 4) .................................. 318,421 412,800
Rent security deposit .................................... 9,193 9,193
------------ ------------
Total long-term liabilities ........................... $ 1,830,816 $ 1,741,857
------------ ------------
Total liabilities ..................................... $ 2,434,723 $ 2,673,590
------------ ------------
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock--no par value
Authorized--20,000,000 shares (1998 - 5,000,000 shares)
Issued--4,918,794 shares of which 197,948 and 11,000
shares are held as treasury stock .................... $ 223,180 $ 223,180
Retained earnings ....................................... 13,066,205 12,338,744
Accumulated other comprehensive loss (Note 1) ........... (173,885) (189,388)
------------ ------------
$ 13,115,500 $ 12,372,536
Less--cost of treasury stock ............................ (1,048,550) (65,725)
------------ ------------
Total stockholders' equity ........................... $ 12,066,950 $ 12,306,811
------------ ------------
Total liabilities and stockholders' equity ............ $ 14,501,673 $ 14,980,401
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 3
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1999, 1998, AND 1997
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Gross revenue:
Sales ............................ $10,453,071 $10,863,372 $10,564,302
Royalty and license income ....... 337,528 343,581 423,313
Investment and other
income, net (Note 1) ........... 693,877 513,378 466,043
----------- ----------- -----------
$11,484,476 $11,720,331 $11,453,658
----------- ----------- -----------
Costs and expenses:
Cost of sales .................... $ 5,015,361 $ 4,719,897 $ 4,418,248
Selling and administration ....... 3,829,047 4,061,832 3,900,080
Depreciation and amortization .... 667,557 648,121 601,389
Interest ......................... 30,556 58,071 234
----------- ----------- -----------
$ 9,542,521 $ 9,487,921 $ 8,919,951
----------- ----------- -----------
Income before corporate income taxes $ 1,941,955 $ 2,232,410 $ 2,533,707
Corporate income taxes
(Notes 1 and 5) .................. 683,750 757,450 839,020
----------- ----------- -----------
Net income ......................... $ 1,258,205 $ 1,474,960 $ 1,694,687
=========== =========== ===========
Earnings per share (Note 1) ........ $ .26 $ .30 $ .33
=========== =========== ===========
Weighted average shares
outstanding ...................... 4,803,495 4,913,635 5,089,124
=========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 4
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1997, 1998, AND 1999
Accumulated
Other
Common Retained Comprehensive Treasury
Stock Earnings Loss Stock Total
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1996 ............. $223,180 $ 11,178,589 $ (121,337) $ 0 $ 11,280,432
Comprehensive income:
Net income for year ended
June 30, 1997 .................. 0 1,694,687 0 0 1,694,687
Foreign exchange transaction
adjustment .................... 0 0 (15,622) 0 (15,622)
------------
Total comprehensive income .... $ 1,679,065
Dividends paid ($.065 per share) .. 0 (335,604) 0 0 (335,604)
Acquisition and retirement of
350,800 shares of treasury stock 0 (1,172,409) 0 0 (1,172,409)
--------- ------------ ------------ ------------ ------------
Balance, June 30, 1997 ............ $223,180 $ 11,365,263 $ (136,959) $ 0 $ 11,451,484
Comprehensive income:
Net income for year ended
June 30, 1998 ................. 0 1,474,960 0 0 1,474,960
Foreign currency translation
adjustment ..................... 0 0 (52,429) 0 (52,429)
------------
Total comprehensive income ..... $ 1,422,531
Dividends paid ($.10 per share) ... 0 (491,579) 0 0 (491,579)
Acquisition of 15,000 shares of
treasury stock ................. 0 0 0 (91,625) (91,625)
Issuance of 4,000 shares of
treasury stock as employee
compensation ................... 0 (9,900) 0 25,900 16,000
--------- ------------ ------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1998 ............ $ 223,180 $12,338,744 $ (189,388) $ (65,725) $ 12,306,811
Comprehensive income:
Net income for year ended
June 30, 1999 ................. 0 1,258,205 0 0 1,258,205
Foreign currency translation
adjustment .................... 0 0 15,503 0 15,503
------------
Total comprehensive income .... $ 1,273,708
Dividends paid ($.11 per share) ... 0 (530,744) 0 0 (530,744)
Acquisition of 186,948 shares of
treasury stock ................ 0 0 0 (982,825) (982,825)
---------- ----------- ----------- -------------- ------------
Balance, June 30, 1999 ............ $ 223,180 $13,066,205 $ (173,885) $ (1,048,550) $ 12,066,950
========== =========== =========== ============== ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 5
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999, 1998, AND 1997
CASH FLOWS FROM OPERATING ACTIVITIES: 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income ..................................................... $ 1,258,205 $ 1,474,960 $ 1,694,687
----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating
activities:
Depreciation and amortization ................................ $ 667,557 $ 648,121 $ 601,389
Provision for losses on accounts receivable .................. 75,044 21,956 14,374
Realized and unrealized gains from marketable securities ..... (33,884) (29,183) (31,915)
Loss (gain) on disposal of property and equipment ............ (15,100) 42,948 --
Deferred taxes ............................................... (83,625) (52,443) (47,966)
Compensation issued in treasury shares ....................... -- 16,000 --
Deferred compensation ........................................ 151,744 152,216 149,340
Foreign currency translation adjustment ...................... 15,503 (52,429) (15,622)
Change in operating assets and liabilities:
Marketable securities ....................................... (744,182) (231,461) 1,348,560
Accounts receivable ......................................... (7,237) 78,445 (186,000)
Inventories ................................................. (7,782) (52,197) (30,015)
Other current assets ........................................ 11,954 13,339 (13,979)
Accounts payable and accrued liabilities .................... (349,938) 116,637 (252,504)
Corporate income taxes ...................................... 54,358 (125,358) 63,400
Rent security deposit ....................................... -- -- 1,316
----------- ----------- -----------
Total adjustments ....................................... $ (265,588) $ 546,591 $ 1,600,378
----------- ----------- -----------
Net cash provided by operating activities .................... $ 992,617 $ 2,021,551 $ 3,295,065
----------- ----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Note receivable-officer ........................................ $ -- $ -- $ (550,000)
Collection-note receivable-related party partnership ........... 195,000 40,000 --
Installment collections-note receivable-officer ................ 257,393 39,274 5,005
Additions to property, plant, and equipment .................... (496,067) (1,653,940) (506,565)
Proceeds from sale of equipment ................................ 17,100 -- --
Additions to deferred compensation contracts ................... (32,823) (43,751) (47,160)
Additions to patents and trademarks ............................ (40,148) (50,666) (64,092)
Additions to cash surrender value-life insurance .............. (128,477) (122,663) (87,986)
----------- ----------- -----------
Net cash used in investing activities ........................ $ (228,022) $(1,791,746) $(1,250,798)
----------- ----------- -----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 6
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999 1998, AND 1997
1999 1998 1997
---- ---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C> <C>
Mortgage financing costs paid ................ $ -- $ (4,749) $ --
Proceeds from long-term debt ................. -- 457,925 --
Principal payments on long-term debt ......... (94,484) (15,284) --
Acquisition of treasury stock ................ (734,497) (91,625) (1,172,409)
Dividends paid ............................... (530,744) (491,579) (335,604)
----------- ------------ -----------
Net cash used in financing activities ...... $(1,359,725) $ (145,312) $(1,508,013)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents $ (595,130) $ 84,493 $ 536,254
Cash and cash equivalents, beginning of year ... 1,301,317 1,216,824 680,570
----------- ----------- -----------
Cash and cash equivalents, end of year ......... $ 706,187 $ 1,301,317 $ 1,216,824
=========== =========== ===========
Supplementary cash flow data:
Interest paid ................................ $ 30,556 $ 58,071 $ 234
Income taxes paid ............................ $ 713,017 $ 935,251 $ 823,586
Non-cash financing transaction:
Collection of note receivable-officer in form
of 34,748 shares of the Company's common
stock held as treasury shares .............. $ 248,328 $ 0 $ 0
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 7
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1--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.
Nature of Business
The Company provides synergistic coatings and other related
services to commercial customers' products from five plants located in the
United States and Canada. In addition it has licensed its patented and
proprietary processes to foreign licensees.
Marketable Securities
- ---------------------
All marketable securities are considered trading securities and
are valued at fair market value in accordance with FASB No. 115. Realized and
unrealized gains and losses are reported in current period income. Net
unrealized holding gains (losses) on trading securities of $33,884, $29,183, and
$31,915, were reported for the years 1999, 1998, and 1997, respectively. Market
value exceeded cost by $94,604 and $60,719 at June 30, 1999 and 1998
respectively.
Inventories
- -----------
Inventories consist principally of industrial supplies and
coating 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 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 10 years.
PAGE 8
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1--Summary of Significant Accounting Policies (Continued)
- --------------------------------------------------------------
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 reporting periods.
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 Accumulated Other Comprehensive Loss component of
shareholders' equity, while gains and losses resulting from foreign currency
transactions are generally included in income.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
- -----------------
Certain amounts in the 1998 consolidated financial statements
have been reclassified to conform with the 1999 presentation.
PAGE 9
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2--Property, Plant and Equipment
- -------------------------------------
Property, plant and equipment are as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Land ................................... $ 1,027,234 $ 1,030,025
Buildings .............................. 3,676,245 3,677,341
Building improvements .................. 3,778,226 3,670,396
Factory machinery ...................... 4,309,406 3,995,672
Office equipment ....................... 694,328 674,261
Transportation equipment ............... 319,400 309,251
----------- -----------
Total .................................. $13,804,839 $13,356,946
Less--accumulated depreciation ......... 7,629,514 7,025,633
----------- -----------
Net .................................... $ 6,175,325 $ 6,331,313
=========== ===========
</TABLE>
Note 3--Other Assets
Other assets are as follows:
<TABLE>
<CAPTION>
June 30,
<S> <C> <C>
Patents and trademarks, at cost, net of
accumulated amortization of $130,435
and $113,241 ............................ $ 143,879 $ 120,925
Deferred income taxes ..................... 369,001 298,463
Deferred compensation costs ............... 249,815 185,398
Mortgage financing costs .................. 4,335 4,667
--------- ---------
$ 767,030 $ 609,453
========= =========
</TABLE>
<PAGE>
Note 4--Long-Term Debt
- ----------------------
The Company borrowed $457,925 from Business Development Bank of
Canada on March 31, 1998 payable in equal monthly principal installments of
$2,478 together with interest of 7.6% per annum commencing June 23, 1998 with
the final payment due April 23, 2013. The note is secured by a first mortgage on
real estate owned in Ajax, Ontario.
Current maturities of the debt for the five years ended June 30,
2004 are as follows: 2000 - $29,736; 2001 - $29,736; 2002 - $29,736; 2003 -
$29,736; and 2004 - $29,736.
PAGE 10
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5--Corporate Income Taxes
Components of corporate income tax expense are as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------------------
1999 1998 1997
---- ---- ----
Current:
<S> <C> <C> <C>
Federal ............. $ 658,863 $ 700,469 $ 770,806
State ............... 108,512 109,424 116,180
Foreign ............. 0 0 0
--------- --------- ---------
$ 767,375 $ 809,893 $ 886,986
--------- --------- ---------
Deferred:
Federal ............. $ (65,970) $ (39,842) $ (36,992)
State ............... (17,655) (12,601) (10,974)
Foreign ............. 0 0 0
--------- --------- ---------
$ (83,625) $ (52,443) $ (47,966)
--------- --------- ---------
Total ................. $ 683,750 $ 757,450 $ 839,020
========= ========= =========
</TABLE>
<PAGE>
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,
-----------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Based on U.S. statutory federal tax
rate of 34% .............................. $ 660,265 $ 759,019 $ 846,840
Increase (decrease) in taxes resulting from:
State taxes, net of federal tax benefit .. 59,966 66,903 69,436
Foreign loss (income) .................... 14,116 13,472 (30,472)
Realized investment losses (income) ...... 0 (29,000) (13,951)
Non-taxable income ....................... (53,875) (49,366) (31,027)
Other .................................... 3,278 (3,578) (1,806)
--------- --------- ---------
Total ............................. $ 683,750 $ 757,450 $ 839,020
========= ========= =========
Effective tax rate ......................... 35.2% 33.9% 33.1%
</TABLE>
PAGE 11
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5--Corporate Income Taxes (Continued)
- ------------------------------------------
The Canadian subsidiary has available an unused tax benefit of
$76,588 in the form of operating loss carryforwards of approximately U.S.
$161,000 to reduce future Canadian taxable income. These carryforwards
principally expire in 2002 and 2006. The tax benefit has been substantially
utilized in the calculation of deferred taxes.
Components of deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
June 30,
------------------------
<S> <C> <C>
Operating loss carryforwards $ 94,205 $ 43,900
Deferred compensation 625,332 546,550
Bad debts and vacation pay 51,467 38,380
Depreciation and amortization (269,933) (186,450)
Unrealized investment income (62,986) (17,737)
--------- ---------
$ 438,085 $ 424,643
Valuation allowance 17,617 87,800
-------- ---------
$ 420,468 $ 336,843
========= =========
Reported as:
Other current assets $ 51,467 $ 38,380
Other assets 369,001 298,463
--------- ---------
$ 420,468 $ 336,843
========= =========
</TABLE>
<PAGE>
Note 6--Accrued Liabilities
- ---------------------------
Accrued liabilities are as follows:
<TABLE>
<CAPTION>
June 30,
------------------------
1999 1998
---- ----
<S> <C> <C>
Compensation $ 220,020 $ 347,184
Payroll, sales, and property taxes 108,310 29,168
401-k plan contribution 5,522 20,040
Environmental and other costs 6,248 29,842
--------- ---------
$ 340,100 $ 426,234
========= =========
</TABLE>
PAGE 12
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7--Employee Benefits
- -------------------------
The Company maintains a 401(k) savings plan which covers all U.S.
employees. The Company matches 50% of voluntary pre-tax employee participant
contributions not to exceed 2% 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. There
were no significant changes in the plan in the current year. Total expense under
the plan was $56,007 in 1999, $45,356 in 1998, and $39,791 in 1997.
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 sales, pre-tax income
and royalty income. Total expense under these plans was $428,726 in 1999,
$520,465 in 1998, and $594,397 in 1997.
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 obligation
over the active term of employment of the officer. The Company is also accruing
and funding deferred compensation contracts with two other officers based on 10%
of annual compensation. Total expense under these three obligations was $151,744
in 1999, $152,216 in 1998, and $149,340 in 1997.
<PAGE>
Note 8--Related Party Transactions
- ----------------------------------
The Company engaged in the following related party transactions:
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Was charged computer consulting
services by an outside director of the
Company; $46,403 $56,369 $52,686
Accrued interest income on an original
installment note receivable dated June
30, 1996 of $235,000 due from a limited
partnership controlled by a stockholder
of the Company. The note is secured by
a deed of trust on the Texas real
estate and shall be collected in (5)
equal annual principal installments of
$47,000 plus interest of 6.83% per
annum commencing July 1, 1999 with the
final amount due July 1, 2003. The
partnership prepaid a principal payment
of $40,000 on June 30, 1998 and paid
off the balance of $195,000 on January
4, 1999. $ 6,660 $16,050 $16,050
</TABLE>
PAGE 13
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8--Related Party Transactions (Continued)
- ----------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Charged interest income on a mortgage
note receivable dated December 6, 1996
of $550,000 from its chief executive
officer. The note was being collected
in (34) equal monthly installments of
$3,814 which includes interest of 6.16%
per annum commencing February 1, 1997
with the final balloon collection
payment of $512,124 due December 16,
1999. The outstanding receivable
balance of $495,801 was collected in
full on February 12, 1999 of which
$247,473 was cash and $248,328 was in
the form of 34,748 shares of the
Company's common stock. $20,591 $32,707 $14,066
</TABLE>
Note 9--Fair Value of Financial Instruments
- -------------------------------------------
Cash and Cash Equivalents, Accounts Receivable, Accounts Payable, and Accrued
Liabilities--The carrying amount approximates fair value because of the short
maturity of these instruments.
Marketable Securities--The carrying amount approximates fair value because such
securities are valued based on market quotes.
Notes Receivable - Related Parties--The carrying amount approximates fair value
because of similar rates on issues offered to the Corporation under some or
similar provisions.
Accrued Deferred Compensation and Long-Term Debt--The carrying amount
approximates fair value because such liability is being valued based on current
market values.
<PAGE>
Note 10--Commitments and 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. Further, a shareholder of Dynasurf
International, Inc. also filed a claim for breach of oral contract of employment
for $119,000. The Subsidiary 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.
The Company reached an out of court agreement with the plaintiffs
on September 9, 1996 wherein the plaintiffs were collectively paid the sum of
$65,000 in full settlement of their claim. Such settlement did not have an
adverse effect on the Company's financial statements.
PAGE 14
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10--Commitments and Contingencies (Continued)
- --------------------------------------------------
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.
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.
Lease Commitment
- ----------------
The Company leases warehouse space in its New Jersey facility to
a tenant under an operating lease expiring December 31, 1999. Minimum future
rentals to be received on the lease as of June 30, 1999 are as follows: 1999-00
- - $60,844.
Note 11--Advertising
- --------------------
The Company expenses the cost of advertising as incurred, except
for direct-response advertising comprised of magazine ads and sales brochures
which are capitalized and amortized over their expected period of future
benefit.
Advertising materials of $56,885 and $68,264 were reported as
assets at June 30, 1999 and 1998 respectively. Advertising expense was reported
of $336,000, $358,000, and $335,000 for 1999, 1998, and 1997 respectively.
PAGE 15
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12--Segment Reporting (In $000's)
- --------------------------------------
The Company adopted FASB Statement No 131, "Disclosures about
Segments of a Business Enterprise and Related Information" effective with the
year ended June 30, 1999. This standard requires companies to disclose selected
financial data by operating segment.
The Company operates in two business segments: 1) the application
of synergistic coatings and other related services to customer products and 2)
investment in marketable securities.
<TABLE>
<CAPTION>
Coatings and Related Services
---------------------------------
U.S. Foreign Total Investments Consolidated
---- ------- ----- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
1999 $ 9,646 $ 1,388 $11,034 $ 486 b) $11,485
1998 10,270 1,184 11,454 297 b) 11,720
1997 9,996 1,216 11,212 276 b) 11,454
Costs and expenses:
1999 $ 8,482 $ 1,054 a)$ 9,536 $ 41 b) $ 9,542
1998 8,561 920 a) 9,481 38 b) 9,488
1997 8,157 755 a) 8,912 42 b) 8,920
Net operating income:
1999 $ 1,164 $ 334 $ 1,498 $ 444 $ 1,942
1998 1,708 264 1,972 260 2,232
1997 1,838 462 2,300 234 2,534
Total assets at year-end:
1999 $ 8,637 $ 1,608 $10,245 $ 4,257 $14,502
1998 10,246 1,336 10,582 3,398 14,980
1997 9,950 402 10,352 3,161 13,513
</TABLE>
a) Includes 100% of depreciation and interest expense
b) Net of intercompany investment management fees for 1999, 1998, and 1997
of $35, $31, and $34 respectively.
PAGE 16
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13--Quarterly Financial Data (Unaudited)
- ---------------------------------------------
Summarized quarterly financial data for the years ended June 30,
1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1999:
- -------------------------
Quarter Ended
--------------------------------------------------------
Sept. 30 Dec. 31 March 31 June 30
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Gross revenue $2,656,792 $3,137,045 $2,810,826 $2,879,813
Gross profit 1,327,776 1,380,634 1,390,358 1,338,942
Net income 174,955 401,023 311,594 370,633
Earnings per share $ .04 $ .08 $ .07 $ .08
<CAPTION>
Year Ended June 30, 1998:
- -------------------------
Quarter Ended
--------------------------------------------------------
Sept. 30 Dec. 31 March 31 June 30
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Gross revenue $2,895,501 $2,961,995 $2,893,094 $2,969,741
Gross profit 1,504,646 1,580,004 1,449,062 1,609,763
Net income 345,013 382,658 295,367 451,922
Earnings per share $ .07 $ .08 $ .06 $ .09
</TABLE>
PAGE 17
<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, 1999:
Allowance for doubtful accounts $ 93,000 $ 75,044 $ 60,044 $108,000
Accumulated amortization:
Patents 113,241 17,194 -- 130,435
Year ended June 30, 1998:
Allowance for doubtful accounts $ 116,000 $ 21,956 $ 44,956 $ 93,000
Accumulated amortization:
Patents 100,481 12,760 -- 113,241
Year ended June 30, 1997:
Allowance for doubtful accounts $137,000 $ 14,375 $ 35,375 $116,000
Accumulated amortization:
Patents 82,388 18,039 -- 100,481
</TABLE>
(A) Write-offs, net of recoveries
PAGE 18
<PAGE>
Mauriello, Franklin,& LoBrace
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS 45 Springfield Avenue
Springfield, New Jersey 07081
(973) 379-5400, FAX (973) 379-3696
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 9, 1999, included in the 1998 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 10, 1999
<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.
72 Orchard Road
Ajax, Ontario Canada L1S 6L1
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 1
Linden, New Jersey 07036
Candida Realty Wisconsin, Inc.
1331 U.S. Route 1
Linden, New Jersey 07036
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 706,187
<SECURITIES> 3,914,486
<RECEIVABLES> 1,366,263
<ALLOWANCES> 108,000
<INVENTORY> 363,067
<CURRENT-ASSETS> 6,556,030
<PP&E> 13,804,839
<DEPRECIATION> 7,629,514
<TOTAL-ASSETS> 14,501,673
<CURRENT-LIABILITIES> 603,907
<BONDS> 0
0
0
<COMMON> 223,180
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,066,950
<SALES> 10,453,071
<TOTAL-REVENUES> 11,484,476
<CGS> 5,015,361
<TOTAL-COSTS> 9,542,521
<OTHER-EXPENSES> 30,556
<LOSS-PROVISION> 75,044
<INTEREST-EXPENSE> 30,556
<INCOME-PRETAX> 1,941,955
<INCOME-TAX> 683,750
<INCOME-CONTINUING> 1,258,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,258,205
<EPS-BASIC> .26
<EPS-DILUTED> 0
</TABLE>
