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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to
____________________
Commission File Number: 1-4704
GUARDSMAN PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-0593900
(State of incorporation) (I.R.S. employer identification no.)
3033 Orchard Vista Drive, S.E.
Suite 200
P.O. Box 1521
Grand Rapids, Michigan 49501
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (616) 957-2600
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $1.00 Par Value New York Stock Exchange
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 (<Section> 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the Registrant's Common Stock, $1.00 par
value, held by non-affiliates of the Registrant* as of March 25, 1996, was
$199,445,432 based on the closing price on that date on the New York
Stock Exchange.
As of March 25, 1996, 9,624,064 shares of the Registrant's Common Stock,
$1.00 par value, were outstanding.
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*FOR PURPOSES OF THIS COMPUTATION, IRWIN WAYNE URAN IS DEEMED TO BE A
NON-AFFILIATE OF THE REGISTRANT.
Page 1 of 100 pages
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) Any annual report to security
holders; (2) Any proxy or information statement; and (3) Any prospectus
filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933.
1. Registrant's 1995 Annual Report to Stockholders.
2. Registrant's Information Statement attached as Annex I to
Registrant's Schedule 14D-9 dated March 8, 1996.
The parts of the Form 10-K Annual Report into which the foregoing
documents are incorporated are listed in the following Cross Reference
Sheet. Only those pages of the foregoing documents which are specifically
listed in the Cross Reference Sheet are incorporated by reference.
An Exhibit Index is located on pages 21-24.
-2-
CROSS REFERENCE SHEET
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Development of the Business
On March 4, 1996, the Company entered into a merger agreement
with Lilly Industries, Inc. pursuant to which a wholly owned
subsidiary of Lilly commenced a tender offer to purchase all
outstanding shares of the Company's Common Stock (and associated
preferred stock purchase rights) at a price of $23.00 per share
in cash. Under the merger agreement, the successful completion
of the tender offer will be followed by a merger of the Lilly
subsidiary into the Company. Any Company shares that are not
acquired through the tender offer (other than shares for which
statutory appraisal rights are validly exercised) will be
converted in the merger into the right to receive $23.00 per
share in cash.
During 1995, the Company purchased the business and certain
assets of Soil Shield International, Inc., a producer and
distributor of retail-applied fabric protection products.
During 1994, the Company purchased Moline Paint Manufacturing
Co., an industrial coatings manufacturer focusing on the
agricultural/construction equipment and general industrial
markets. In addition, the Company acquired the rights to market
certain Bio Zapp paint odor eliminator products.
During 1993, the Company purchased Atlanta Sundries, Inc., the
maker of Goof-Off, a latex paint remover, and the liquid
industrial coatings business and certain assets of Mar-Lak
Products Company.
-3-
LOCATION OF
INFORMATION*
During 1992, the Company acquired in separate purchases the
liquid industrial coatings businesses and certain assets of The
Stulb Company and Reliable Coatings, Inc. The Company also
acquired a small franchise organization in the United Kingdom
during 1992. For additional information regarding acquisitions,
see Note 2 to the Consolidated Financial Statements located at
pages A60-61.
During 1991, the Company sold its contract aerosol packaging
plant and discontinued the operation of its Solidex solid-surface
business.
(b) Financial Information About
Industry Segments . . . . . . . . . . . . . . . . .A45-46, A75-77
(c) Narrative Description of Business
INDUSTRY SEGMENTS
The Company operates in two primary industries: Coatings and
Consumer Products.
PRINCIPAL PRODUCTS
COATINGS GROUP
The Company was founded in 1915 in the coatings manufacturing
business, which remains the Company's most significant industry
segment. In 1995, Coatings Group revenues accounted for 77% of
the Company's total sales. This Group develops and produces
industrial coatings primarily for sale to manufacturers of wood
and metal products. Coatings products include paints, varnishes,
enamels and lacquers which are used to finish wood household
furniture, metal office furniture, appliances,
agricultural/construction equipment, wood paneling, kitchen
cabinets and a variety of other products. Coatings are sold
primarily to durable goods manufacturers. Additionally, the Group
manufactures resins for internal use and for external sale.
_______________
* All page references preceded by the letter "A" are to the page
numbers of the 1995 Annual Report to Stockholders incorporated
herein by reference at Exhibit 13-A, page references preceded
by the letter "I" refer to pages in the Information Statement
attached as Annex I to the Company's Schedule 14D-9 dated
March 8, 1996, and other page references refer to the sequential
numbers on the original copy of the Form 10-K filed with the
Securities and Exchange Commission.
** Not applicable.
-4-
CONSUMER PRODUCTS GROUP
The Company's Consumer Products Group markets and distributes a
broad line of home care products such as One-Wipe[REGISTERED] and
Mighty Duster[REGISTERED] Dust Cloths, One-Wipe Bathroom Cleaner,
Guardsman[REGISTERED] Furniture Polish, Afta[REGISTERED] Cleaning
Products, Fabri-Coate[REGISTERED] Fabric Protection Products,
Chip Clip[REGISTERED] Products and Goof-Off[REGISTERED] Latex
Paint Remover. In addition, this Group manufactures and
distributes a variety of proprietary after-market automotive
maintenance products and industrial lubricants.
NEW PRODUCTS
The Company's Coatings and Consumer Products Groups are engaged
in research and development on several products not yet in the
production stage. New product introductions have not required
the investment of a material amount of total Company assets. See
the discussion of research and development expenditures on page
6 for additional information.
RAW MATERIALS
Raw materials are procured from a number of suppliers, chiefly by
purchase from domestic sources. Many of the raw materials used
in the Company's coatings business are derived from petroleum.
All of these materials are generally available on the open
market, although prices and availability are subject to
fluctuation from time to time. Despite incurring cost increases
related to petroleum sensitive raw materials during 1990 and in
early 1991, the Company has not experienced any significant
difficulty in obtaining raw materials.
PATENTS AND TRADEMARKS
Company trademarks or trade names include, but are not limited
to, Guardsman, One-Wipe, Fabri-Coate, Carpet Guard[REGISTERED],
Heritage[REGISTERED], Afta, Dri-Slide[REGISTERED],
Enviro+Plus[REGISTERED], Chip Clip, Goof-Off, Guardsman WoodProTM
and Company Logo. From time to time, the Company will and has
sought patent protection on inventions deemed significant.
SEASONALITY
The Company does not experience significant seasonal fluctuations
in the industries in which it operates.
WORKING CAPITAL
The practices of the Company and the industries in which it
operates do not create any unusual working capital requirements
that would be material to an understanding of the business taken
as a whole.
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CUSTOMERS
In the opinion of management, the loss of any single customer, or
group of a few customers, would not have a materially adverse
affect on the Company.
BACKLOG
There is no information concerning the Company's sales backlog
which would be material to an understanding of the business as a
whole or the Company's industry segments.
GOVERNMENT CONTRACTS
The Company has no material government contracts in either
industry segment.
COMPETITION
In the United States and Canada there are numerous manufacturers
of industrial coatings and resins. The industry is very
competitive and includes national and small regional firms.
While Guardsman is among the largest manufacturers of industrial
coatings in North America, some of the Company's competitors have
greater financial resources than the Company. Price competition
is keen and, among the larger manufacturers, competitive
advantage depends upon the manufacturer's ability to purchase the
necessary raw materials in economic quantities, to keep pace with
technological developments, to develop industrial coatings
meeting the specific and changing requirements of a variety of
customers, to adhere to strict quality control standards in
manufacturing and to make timely deliveries.
The Consumer Products industry in which the Company operates is
also extremely competitive. There are numerous competitors, many
of which have greater financial resources than the Company, and
no one competitor nor any small number of competitors is
dominant. The principal methods of competition in this industry
are price, quality, performance and service.
RESEARCH AND DEVELOPMENT
Guardsman devotes significant effort and financial resources to
company-sponsored research and development, primarily within the
Coatings Group. The Company's research and development has been
responsible for continuing refinements in the quality of its wood
and metal coatings, advances in technology that lower emissions
into the atmosphere from customers' production processes and
refinement and development of new products for the Coatings and
Consumer Products Groups. The Company spent $8.4 million for
research and development in 1995, $6.9 million in 1994 and $5.9
million in 1993. Within the Coatings Group, research and
development expenditures amounted to 4.2% of net sales in 1995,
4.4% in 1994 and 4.3% in 1993.
-6-
LOCATION OF
INFORMATION*
ENVIRONMENTAL REGULATIONS
Compliance with federal, state and local laws and regulations
governing discharges into the environment is not expected to have
a material effect upon the capital expenditures and competitive
position of the Company. For additional information regarding
the effect of environmental obligations on results of operations
and financial position, see Note 8 to the Consolidated Financial
Statements located on pages A67-68.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales
While the Company maintains foreign operations in Canada and the
United Kingdom, there are no unusual risks attendant to these
operations and neither of the Company's industry segments are
primarily dependent upon such operations.
ITEM 2. DESCRIPTION OF PROPERTY
The following table shows the location and floor space of the
principal plants owned by the Company. Also included is the industry
segment in which each plant is primarily utilized. Each plant
contains facilities for manufacturing, research, warehousing and
office space. The Company also leases administrative office space as
well as warehouse space in various locations throughout North America
and the United Kingdom.
_______________
* All page references preceded by the letter "A" are to the page
numbers of the 1995 Annual Report to Stockholders incorporated
herein by reference at Exhibit 13-A, page references preceded
by the letter "I" refer to pages in the Information Statement
attached as Annex I to the Company's Schedule 14D-9 dated
March 8, 1996, and other page references refer to the sequential
numbers on the original copy of the Form 10-K filed with the
Securities and Exchange Commission.
-7-
LOCATION OF
INFORMATION*
<TABLE>
<CAPTION>
FLOOR SPACE IN
LOCATION SQUARE FEET INDUSTRY SEGMENT
<S> <C> <C> <C>
Grand Rapids, MI 231,500 Coatings
Moline, IL 76,400 Coatings
Cornwall, ONT, Canada 68,000 Coatings
High Point, NC 59,400 Coatings
Rocky Hill, CT 57,100 Coatings
South Gate, CA 40,900 Coatings
Little Rock, AR 32,400 Coatings
Seattle, WA 29,500 Coatings
Tulsa, OK 28,200 Coatings
Fremont, MI 10,000 Consumer Products
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal proceedings and litigation
arising in the ordinary course of business. In the opinion of
management, the outcome of such proceedings and litigation
currently pending will not materially affect the Company's
consolidated financial statements. Guardsman is also subject to
existing and evolving standards related to the protection of the
environment. See Note 8 to the Consolidated Financial Statements
located at pages A67-68 for additional information.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS. . . . . . . . . . . . . . . . . . . . . . . .**
_______________
* All page references preceded by the letter "A" are to the page
numbers of the 1995 Annual Report to Stockholders incorporated
herein by reference at Exhibit 13-A, page references preceded
by the letter "I" refer to pages in the Information Statement
attached as Annex I to the Company's Schedule 14D-9 dated
March 8, 1996, and other page references refer to the sequential
numbers on the original copy of the Form 10-K filed with the
Securities and Exchange Commission.
** Not applicable.
-8-
LOCATION OF
INFORMATION*
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDERS MATTERS
(a) Market Information . . . . . . . . . . . . . . . . . . . A81
(b) Holders
<TABLE>
<CAPTION>
APPROXIMATE NUMBER
TITLE OF CLASS OF RECORD HOLDERS
<S> <C> <C>
Common Stock, $1.00 Par Value 2,395
Preferred Stock, $1.00 Par Value None
</TABLE>
(c) Dividends. . . . . . . . . . . . . . . . . . . . . . . . A81
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . .A45-46, A75-77
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(a) Full Fiscal Years. . . . . . . . . . . . . . . . . . .A46-51
(b) Interim Periods. . . . . . . . . . . . . . . . . . . . . .**
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
(a) Report of Independent Public Accountants . . . . . . .A79-80
(b) Consolidated Balance Sheets--
December 31, 1995 and 1994 . . . . . . . . . . . . . .A52-53
(c) Consolidated Statements of Income--
Years ended December 31, 1995, 1994 and 1993 . . . . . . A54
_______________
* All page references preceded by the letter "A" are to the page
numbers of the 1995 Annual Report to Stockholders incorporated
herein by reference at Exhibit 13-A, page references preceded
by the letter "I" refer to pages in the Information Statement
attached as Annex I to the Company's Schedule 14D-9 dated
March 8, 1996, and other page references refer to the sequential
numbers on the original copy of the Form 10-K filed with the
Securities and Exchange Commission.
** Not applicable.
-9-
LOCATION OF
INFORMATION*
(d) Consolidated Statements of Stockholders'
Equity--Years ended December 31, 1995, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . A55
(e) Consolidated Statements of Cash Flows--
Years ended December 31, 1995, 1994 and 1993 . . . . .A56-57
(f) Notes to Consolidated Financial Statements--
December 31, 1995. . . . . . . . . . . . . . . . . . .A58-78
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . . . . . .**
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
(a) Identification of Directors. . . . . . . . . . .A82-83, I6-7
(b) Identification of Executive Officers . . . . . . . A83, I7-8
(c) Identification of Certain
Significant Employees. . . . . . . . . . . . . . . . . . .**
(d) Family Relationships . . . . . . . . . . . . . . . . . . .**
(e) Business Experience. . . . . . . . . . . . . . . . . . .I6-8
(f) Involvement in Certain Legal
Proceedings. . . . . . . . . . . . . . . . . . .7, 8, A67-68
(g) Promoters and Control Persons. . . . . . . . . . . . . . .**
_______________
* All page references preceded by the letter "A" are to the page
numbers of the 1995 Annual Report to Stockholders incorporated
herein by reference at Exhibit 13-A, page references preceded
by the letter "I" refer to pages in the Information Statement
attached as Annex I to the Company's Schedule 14D-9 dated
March 8, 1996, and other page references refer to the sequential
numbers on the original copy of the Form 10-K filed with the
Securities and Exchange Commission.
** Not applicable.
-10-
LOCATION OF
INFORMATION*
ITEM 11. EXECUTIVE COMPENSATION
(a) Summary Compensation Table . . . . . . . . . . . . . .I11-12
(b) Option Grants Table. . . . . . . . . . . . . . . . . .I12-13
(c) Aggregated Option Exercises and
Fiscal Year-end Option Value Table . . . . . . . . . . . I13
(d) Long-term Incentive Plan Awards Table. . . . . . . . .I13-14
(e) Defined Benefit Plan Disclosure. . . . . . . . . . . .I14-15
(f) Compensation of Directors. . . . . . . . . . . . . . .I10-11
(g) Employment Contracts . . . . . . . . . . . . . . . . . . I12
(h) Additional Information with Respect
to Compensation Committee Interlocks and
Insider Participation in Compensation
Decisions. . . . . . . . . . . . . . . . . . . . . . . . I16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners. . . . . .I2
(b) Security Ownership of Management . . . . . . . . . . . . .I3
(c) Changes in Control . . . . . . . . . . . . . . . . . . .I3-4
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions With Management and Others. . . . . . . . . .**
(b) Certain Business Relationships . . . . . . . . . . . . . .**
(c) Indebtedness of Management . . . . . . . . . . . . . . . I16
(d) Transactions With Promoters. . . . . . . . . . . . . . . .**
_______________
* All page references preceded by the letter "A" are to the page
numbers of the 1995 Annual Report to Stockholders incorporated
herein by reference at Exhibit 13-A, page references preceded
by the letter "I" refer to pages in the Information Statement
attached as Annex I to the Company's Schedule 14D-9 dated
March 8, 1996, and other page references refer to the sequential
numbers on the original copy of the Form 10-K filed with the
Securities and Exchange Commission.
** Not applicable.
-11-
LOCATION OF
INFORMATION*
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) The following consolidated financial statements, financial
statement schedules and exhibits are filed as part of this
report:
1. FINANCIAL STATEMENTS. The consolidated financial statements of
Guardsman Products, Inc., and the report of independent public
accountants covering these financial statements, included in the
Company's 1995 Annual Report to Stockholders are incorporated herein
by reference and are listed in Item 8 of this Cross Reference Sheet.
2. FINANCIAL STATEMENT SCHEDULE.** The following consolidated financial
statement schedule is included in Item 14(d) and should be read in
conjunction with the consolidated financial statements of Guardsman
Products, Inc.:
Report of Independent Public Accountants
on Financial Statement Schedule . . . . . . . . . . . . . .Page 18
Schedule II - Valuation and Qualifying Accounts . . . .Pages 19-20
3. EXHIBITS. The exhibits included in Item 14(c) are listed on the
accompanying Exhibit Index on pages 21 to 24.
_______________
* All page references preceded by the letter "A" are to the page
numbers of the 1995 Annual Report to Stockholders incorporated
herein by reference at Exhibit 13-A, page references preceded
by the letter "I" refer to pages in the Information Statement
attached as Annex I to the Company's Schedule 14D-9 dated
March 8, 1996, and other page references refer to the sequential
numbers on the original copy of the Form 10-K filed with the
Securities and Exchange Commission.
** All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are either not required under the related instructions, are
inapplicable or equivalent disclosure has been made in the
consolidated financial statements and notes thereto, which are
included in the Registrant's 1995 Annual Report to Stockholders,
and are incorporated herein. Therefore, these schedules have
been omitted.
-12-
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following is a listing of executive compensation plans and arrangements
(also included in the accompanying Exhibit Index), noting where a copy of
each plan or arrangement can be found:
10-A Employment Agreement between the Registrant and Charles E.
Bennett - Form 10-Q for the quarter ended June 30, 1990,
Exhibit 10a.
10-B Employment Agreement between the Registrant and Edward D.
Corlett - Form 10-Q for the quarter ended June 30, 1990,
Exhibit 10b.
10-C Employment Agreement between the Registrant and Keith C.
Vander Hyde, Jr. - Form 10-Q for the quarter ended September
30, 1991, Exhibit 10b.
10-D Employment Agreement between the Registrant and Everette L.
Martin dated August 10, 1995, Pages 25 to 32.
10-E Employment Agreement between the Registrant and Henry H.
Graham, Jr. - Form 10-K for the year ended December 31, 1995,
Exhibit 10-E.
10-F Form of Guardsman Products, Inc., Supplemental Executive
Retirement Plan - Form 10-K for the year ended December 31,
1989, Exhibit 10-D.
10-G Amendments to Guardsman Products, Inc., Supplemental
Executive Retirement Plan - Form 10-K for the year ended
December 31, 1989, Exhibit 10-E.
10-H Guardsman Products, Inc., Retirement Plan for Directors,
with attached amendments - Form 10-K for the year ended
December 31, 1992, Exhibit 10-H.
10-I Guardsman Products, Inc. Pension Restoration Plan - Form 10-K
for the year ended December 31, 1995, Exhibit 10-I.
10-K Guardsman Products, Inc. 1980 Performance Award Plan -
Form 10-K for the year ended December 31, 1983, Exhibit 10-B.
10-L Guardsman Products, Inc., 1984 Incentive Stock Option Plan,
with attached amendments - Form 10-K for the year ended December
31, 1992, Exhibit 10-K.
10-M Guardsman Products, Inc., 1988 Stock Option Plan, with attached
amendments - Form 10-K for the year ended December 31, 1992,
Exhibit 10-L.
_______________
* All page references preceded by the letter "A" are to the page
numbers of the 1995 Annual Report to Stockholders incorporated
herein by reference at Exhibit 13-A, page references preceded
by the letter "I" refer to pages in the Information Statement
attached as Annex I to the Company's Schedule 14D-9 dated
March 8, 1996, and other page references refer to the sequential
numbers on the original copy of the Form 10-K filed with the
Securities and Exchange Commission.
-13-
LOCATION OF
INFORMATION*
10-N Guardsman Products, Inc., 1991 Stock Option Plan - Definitive
Proxy Statement filed April 3, 1991, Exhibit A.
10-O Guardsman Products, Inc., 1995 Long-Term Incentive Plan
- Definitive Proxy Statement filed March 27, 1995, Exhibit A.
10-Q Consulting Agreement between the Registrant and Paul K. Gaston
- Form 10-K Annual Report for the year ended December 31, 1994,
Exhibit 10-P.
10-R Amendments to Consulting Agreement between the Registrant and
Paul K. Gaston - Form 10-Q Quarterly Report for the quarter
ended September 30, 1995, Exhibits 10-A and 10-B.
10-S Trust Under Consulting Agreement between the Registrant and
Old Kent Bank dated July 31, 1995, Pages 33 to 41.
10-T Non-Qualified Stock Option Agreement between the Registrant and
Paul K. Gaston - Form 10-K Annual Report for the year ended
December 31, 1994, Exhibit 10-Q.
10-U Amendment to Non-Qualified Stock Option Agreement between the
Registrant and Paul K. Gaston dated August 10, 1995, Page 42.
(b) The Company filed a Form 8-K on November 17, 1995, in which it
reported the restructuring of its Coatings Group including the
closing of it Grand Rapids, Michigan coatings manufacturing plant
with the related business being relocated to other Company
facilities. No financial statements were filed in connection
with this Form 8-K.
(c) Exhibits required to be filed in response to this portion of
Item 14 are submitted as a separate section of this report.
(d) Financial statement schedule required to be filed in response to
this portion of Item 14 is submitted as a separate section of
this report.
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 15-16
_______________
* All page references preceded by the letter "A" are to the page
numbers of the 1995 Annual Report to Stockholders incorporated
herein by reference at Exhibit 13-A, page references preceded
by the letter "I" refer to pages in the Information Statement
attached as Annex I to the Company's Schedule 14D-9 dated
March 8, 1996, and other page references refer to the sequential
numbers on the original copy of the Form 10-K filed with the
Securities and Exchange Commission.
-14-
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
on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
GUARDSMAN PRODUCTS, INC.
(registrant)
Dated: March 28, 1996 By /S/ HENRY H. GRAHAM, JR.
Henry H. Graham, Jr.
Vice President of Finance,
Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report on Form 10-K has been signed below on March 29, 1996 by
the following persons on behalf of the registrant and in the capacities
indicated:
/S/ PAUL K. GASTON /S/ CHARLES E. BENNETT
Paul K. Gaston* Charles E. Bennett
Chairman President, Chief Executive
Officer and Director
(Principal Executive
Officer)
/S/ HENRY H. GRAHAM, JR. /S/ J. RUSSELL FOWLER
Henry H. Graham, Jr. J. Russell Fowler*
Vice President of Finance Director
Chief Financial Officer and
Treasurer
(Principal Financial and
Accounting Officer)
/S/ K. KEVIN HEPP /S/ GEORGE R. KEMPTON
K. Kevin Hepp* George R. Kempton*
Director Director
/S/ WINTHROP C. NEILSON /S/ ROBERT D. TUTTLE
Winthrop C. Neilson* Robert D. Tuttle*
Director Director
-15-
/S/ JAMES L. SADLER /S/ ROBERT W. SCHULT
James L. Sadler* Robert W. Schult*
Director Director
*By/S/ HENRY H. GRAHAM, JR.
Henry H. Graham, Jr.
Attorney-in-fact
-16-
ANNUAL REPORT ON FORM 10-K
ITEM 14(c) and (d)
FINANCIAL STATEMENT SCHEDULE
AND
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1995
GUARDSMAN PRODUCTS, INC.
GRAND RAPIDS, MICHIGAN
-17-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT
SCHEDULE
To the Stockholders and Board of Directors of Guardsman Products, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Guardsman Products,
Inc.'s annual report to stockholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 25, 1996 (except
with respect to the matter discussed in Note 15, as to which the date is March
4, 1996). Our report on the consolidated financial statements includes an
explanatory paragraph with respect to the change in the method of accounting
for income taxes in 1993 as explained in note 4 to the consolidated financial
statements. Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule listed at
Item 14(a)2 is the responsibility of the company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements.
The schedule has been subjected to the auditing procedures applied in our
audit of the basic financial statements and, in our opinion, fairly states
in all material respects the financial data required to be set forth therein
in relation to the basic financial statements taken as a whole.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
January 25, 1996 (except with respect
to the matter discussed in Note 15,
as to which the date is
March 4, 1996)
-18-
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
GUARDSMAN PRODUCTS, INC.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
AMOUNTS IN THOUSANDS
<CAPTION>
COL A COL B COL C COL D COL E
ADDITIONS
CHARGED
BALANCE AT CHARGED TO TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS-- DEDUCTIONS-- AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Deducted from asset accounts:
Accumulated amortization of
goodwill $ 3,251 $ 913 $_______ $ 270<FF> $3,894
Accumulated amortization of
other intangible assets <FA> 5,374 2,547 _______ 1,780<FF> 6,141
Accounts receivable allowances 808 648 887<FG> 569
Year ended December 31, 1994:
Deducted from asset accounts:
Accumulated amortization of
goodwill 2,657 669 _______ 75<FC> 3,251
Accumulated amortization of
other intangible assets <FA> 4,003 1,980 _______ 609<FE> 5,374
Accounts receivable allowances 859 329 _______ 380<FG> 808
Year ended December 31, 1993:
Deducted from asset accounts:
Accumulated amortization of
goodwill 2,078 518 109<FB> 48<FC> 2,657
Accumulated amortization of
other intangible assets <FA> 3,565 1,554 38<FB> 1,154<FE> 4,003
Reserve for discontinued operations 1,520 ______ ________ 358<FD> 1,162
Accounts receivable allowances 514 629 ________ 284<FG> 859
<FN>
NOTES:
<FA> Other intangible assets include costs of formulas, patents, trademarks and other costs.
<FB> Additions charged to other accounts represent accumulated amortization amounts for Armorguard
Products, Inc., which was fully consolidated effective January 1, 1993.
<FC> Deductions from accumulated amortization of goodwill represent foreign currency translation
adjustments in 1994 and 1993.
<FD> Deductions from the reserve for discontinued operations represent the disposal of associated
assets during 1994 and 1993.
-19-
<FE> Deductions from accumulated amortization of other intangible assets for 1994 and 1993 represent
the write-off of fully amortized intangible assets.
<FF> Deductions from accumulated amortization of goodwill and other intangible assets represent the
write-off of goodwill and other intangible assets as a result of the restructuring and foreign
currency translation adjustments in 1995.
<FG> Deductions from accounts receivable allowances represent doubtful accounts charged to the
allowance.
</FN>
</TABLE>
-20-
EXHIBIT INDEX
3-A Guardsman Products, Inc., Restated Certificate of Incorporation,
which was filed as an exhibit to the Registrant's Form 10-Q
Quarterly Report filed with the Securities and Exchange
Commission on November 7, 1995, is hereby incorporated by
reference.
3-B Guardsman Products, Inc., Bylaws, which was filed as an exhibit
to the Registrant's Form 10-Q Quarterly Report filed with the
Securities and Exchange Commission on August 10, 1994, are hereby
incorporated by reference.
4-A An amendment to the existing Credit Agreement (and related
Revolving Credit Note), dated July 21, 1994, between Guardsman
Products, Inc. and Comerica Bank to increase the amount the
Company can borrow from $15,000,000 to $20,000,000, which was
filed as an exhibit to the Registrant's Form 10-Q Quarterly
Report filed with the Securities and Exchange Commission on
August 10, 1994, is hereby incorporated by reference.
4-B An amendment to the existing Credit Agreement (and related
Revolving Credit Note), dated November 9, 1993, between Guardsman
Products, Inc. and Comerica Bank to increase the amount the
Company can borrow from $10,000,000 to $15,000,000, which was
filed as an exhibit to the Registrant's Form 10-K Annual Report
filed with the Securities and Exchange Commission on March 22,
1994, is hereby incorporated by reference.
4-C $10,000,000 Credit Agreement (and Related Revolving Credit Note)
between Guardsman Products, Inc. and Comerica Bank, dated June 5,
1992, which was filed as an exhibit to the Registrant's Form 10-K
Annual Report filed with the Securities and Exchange Commission
on March 23, 1993, is hereby incorporated by reference.
4-D $20,000,000 Credit Agreement (and related Note) between Guardsman
Products, Inc. and The First National Bank of Chicago, dated July
15, 1994, which as filed as an exhibit to the Registrant's Form
10-Q Quarterly Report filed with the Securities and Exchange
Commission on August 10, 1994, is hereby incorporated by
reference.
4-E The Registrant also has other classes of long-term debt
instruments outstanding. The amount of debt outstanding on these
other long-term debt instruments at the date of this Form 10-K
Annual Report does not exceed 10% of the Registrant's total
consolidated assets. The Registrant agrees to furnish copies of
agreements pertaining to such long-term indebtedness to the
Securities and Exchange Commission upon request.
-21-
10-A Employment Agreement between the Registrant and Charles E.
Bennett, which was filed as an exhibit to the Registrant's
Form 10-Q Quarterly Report filed with the Securities and Exchange
Commission on August 13, 1990, is hereby incorporated by
reference.
10-B Employment Agreement between the Registrant and Edward D.
Corlett, which was filed as an exhibit to the Registrant's
Form 10-Q Quarterly Report filed with the Securities and Exchange
Commission on August 13, 1990, is hereby incorporated by
reference.
10-C Employment Agreement between the Registrant and Keith C. Vander
Hyde, Jr., which was filed as an exhibit to the Registrant's Form
10-Q Quarterly Report filed with the Securities and Exchange
Commission on November 13, 1991, is hereby incorporated by
reference.
10-D Employment Agreement between the Registrant and Everette C.
Martin dated August 10, 1995, Pages 25 to 32.
10-E Employment Agreement between the Registrant and Henry H. Graham,
Jr., which was filed as an exhibit to the Registrant's Form 10-K
Annual Report filed with the Securities and Exchange Commission
on March 30, 1995, is hereby incorporated by reference.
10-F Form of Guardsman Products, Inc. Supplemental Executive
Retirement Plan between the Registrant and Charles E. Bennett,
Edward D. Corlett, Henry H. Graham, Jr., Everette L. Martin,
Keith C. Vander Hyde, Jr. and nine other current and former
employees, which was filed as an exhibit to the Registrant's
Form 10-K Annual Report for the year ended December 31, 1989, is
hereby incorporated by reference.
10-G Amendments to Guardsman Products, Inc. Supplemental Executive
Retirement Plan approved by Board of Directors on February 9,
1989, and November 14, 1989, which were filed as an exhibit to
the Registrant's Form 10-K Annual Report for the year ended
December 31, 1989, are hereby incorporated by reference.
10-H Guardsman Products, Inc. Retirement Plan for Directors, with
attached amendments, which was filed as an exhibit to the
Registrant's Form 10-K Annual Report filed with the Securities
and Exchange Commission on March 23, 1993, is hereby incorporated
by reference.
10-I Guardsman Products, Inc. Pension Restoration Plan which was filed
as an exhibit to the Registrant's Form 10-K Annual Report filed
with the Securities and Exchange Commission on March 30, 1995, is
hereby incorporated by reference.
-22-
10-J Form of Indemnity Agreement entered into by the Registrant with
the directors and executive officers of the Corporation, which
was filed as an exhibit to the Registrant's Form 10-K Annual
Report for the year ended December 31, 1986, is hereby
incorporated by reference.
10-K Guardsman Products, Inc. 1980 Performance Award Plan, which was
filed as an exhibit to the Registrant's Form 10-K Annual Report
for the year ended December 31, 1983, is hereby incorporated by
reference.
10-L Guardsman Products, Inc. 1984 Incentive Stock Option Plan, with
attached amendments, which was filed as an exhibit to the
Registrant's Form 10-K Annual Report filed with the Securities
and Exchange Commission on March 23, 1993, is hereby incorporated
by reference.
10-M Guardsman Products, Inc. 1988 Stock Option Plan, with attached
amendments, which was filed as an exhibit to the Registrant's
Form 10-K Annual Report filed with the Securities and Exchange
Commission on March 23, 1993, is hereby incorporated by
reference.
10-N Guardsman Products, Inc. 1991 Stock Option Plan, which was filed
as an exhibit to the Registrant's Definitive Proxy Statement
filed with the Securities and Exchange Commission on April 3,
1991, is hereby incorporated by reference.
10-O Guardsman Products, Inc., 1995 Long-Term Incentive Plan, which
was filed as an exhibit to the Registrant's Definitive Proxy
Statement filed with the Securities and Exchange Commission on
March 27, 1995, is hereby incorporated by reference.
10-P Guardsman Products, Inc. 1988 Dividend Reinvestment and Stock
Purchase Plan, which was filed as an exhibit to the Registrant's
Form 10-K Annual Report for the year ended December 31, 1988, is
hereby incorporated by reference.
10-Q Consulting Agreement between the Registrant and Paul K. Gaston,
which was filed as an exhibit to the Registrant's Form 10-K
Annual Report filed with the Securities and Exchange Commission
on March 30, 1995, is hereby incorporated by reference.
10-R Amendments to Consulting Agreement between the Registrant and
Paul K. Gaston, which were filed as an exhibit to the
Registrant's Form 10-Q Quarterly Report filed with the Securities
and Exchange Commission on November 7, 1995, are hereby
incorporated by reference.
-23-
10-S Trust Under Consulting Agreement between the Registrant and Old
Kent Bank dated July 31, 1995, Pages 33 to 41.
10-T Non-Qualified Stock Option Agreement between the Registrant and
Paul K. Gaston, which was filed as an exhibit to the Registrant's
Form 10-K Annual Report filed with the Securities and Exchange
Commission on March 30, 1995, is hereby incorporated by
reference.
10-U Amendment to Non-Qualified Stock Option Agreement between the
Registrant and Paul K. Gaston dated August 10, 1995, Page 42.
10-V Stockholder Agreement between the Registrant and James L. and
John H. Sadler which was filed as an exhibit to the Registrant's
Form 10-K Annual Report filed with the Securities and Exchange
Commission on March 30, 1995, is hereby incorporated by
reference.
10-W Amendment to Stockholder Agreement between the Registrant and
James L. and John H. Sadler dated November 9, 1995, Page 43.
10-X Noncompetition Agreement between the Registrant and James L.
Sadler which was filed as an exhibit to the Registrant's Form
10-K Annual Report filed with the Securities and Exchange
Commission on March 30, 1995, is hereby incorporated by reference.
11 Statement Re: Computation of Per Share Income, Page 44.
13 Excerpts from 1995 Annual Report to Stockholders, Pages 45 to
85.
21 List of Subsidiaries, Page 86.
23 Consent of Independent Public Accountants, Page 87.
24 Powers of Attorney, Pages 88 to 100.
-24-
EXHIBIT 10-D
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated August 10, 1995 ("Agreement"), by and
between GUARDSMAN PRODUCTS, INC., a Michigan corporation, of 3033 Orchard
Vista Drive, S.E., Suite 200, Post Office Box 1521, Grand Rapids, Michigan
49506 ("Guardsman"), and EVERETTE L. MARTIN of 718 Gatewood, High Point,
North Carolina 27262 ("Executive"), and the parties agree as follows:
R E C I T A L S :
A. Executive is currently employed with Guardsman pursuant to an
Employment Agreement between Guardsman and Executive dated May 14, 1992.
B. The parties desire to modify the above-referenced Employment
Agreement in order to specifically provide for and accommodate Executive's
plans for retirement.
C. The parties intend this Employment Agreement to entirely
supersede and replace any previous Employment Agreement.
AGREEMENT
THEREFORE, for and in consideration of the terms and conditions
herein, the parties agree as follows:
1. EMPLOYMENT. The parties agree that Guardsman shall continue to
employ Executive, and Executive shall continue employment with Guardsman,
upon the terms and conditions set forth in this Agreement. The Employment
Agreement dated May 14, 1992, is hereby terminated, and the parties intend
that it shall be entirely replaced and superseded by this Agreement.
2. TERM OF AGREEMENT. The term of this Agreement shall continue
through December 31, 1997, and shall thereupon terminate unless earlier
terminated as provided herein.
3. COMPENSATION. During Executive's employment with Guardsman, he
shall be paid an annual salary, annual bonuses, and other fringe benefits,
as determined from time to time by the Board of Directors of Guardsman
("Board"), subject to the following:
A. SALARY. Executive shall continue to be paid his
current salary of One Hundred Fifty Thousand Dollars ($150,000)
-25-
through December 31, 1995. Thereafter, he shall receive an
annual salary of One Hundred Thousand Dollars ($100,000). Salary
shall be paid monthly.
B. BONUS. Executive will not participate in any new
Performance Award Plan beginning after December 31, 1995.
Executive will, however, continue as a participant in the
existing Performance Award Plans in accordance with the terms and
conditions of those plans. These plans are three (3) year
rolling plans, based on profitability objectives for three (3)
years. There are three (3) existing plans, ending at the end of
calendar years 1995, 1996, and 1997, respectively. Executive
shall be entitled to receive payment under the terms of these
plans, it being understood that the payment of the last plan, if
any, will be made in 1998.
Executive shall also participate in the Annual Bonus
Plan for 1995. No other bonuses shall be paid unless authorized
by the Board.
C. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Executive
shall remain in the Guardsman Supplemental Executive Retirement
Plan ("SERP") (dated January 1, 1990) for the term of this
Agreement. For purposes of eligibility for benefit and payment
of benefit under the SERP, Executive shall be deemed to have
completed fifteen (15) years (180 months) as an officer,
divisional officer, or other key employee as of December 31,
1997. Termination prior to December 31, 1997, would result in
the appropriate reduction in the amount of benefit as described
in the SERP.
D. INSURANCE. Guardsman will continue to provide health
insurance for Executive and his dependents under such group or
other health plans as obtained by Guardsman, comparable to such
insurance as is provided to Guardsman employees holding positions
comparable to that of Executive. This insurance will be
maintained up to Executive's sixty-fifth (65th) birthday (even if
Executive retires from the company prior to that time) so long as
Executive is not in breach of this Agreement. Executive shall
pay the contribution for such insurance as is required by
employees at the level of responsibility Executive is then
working or, if retired, was working at the time of retirement.
E. BUSINESS EXPENSES. Executive will be reimbursed for
his normal ongoing business expenses, including any club dues and
fees that are currently being reimbursed by Guardsman, in the
same manner as other key executives of Guardsman holding
positions comparable to that of Executive, for the term of this
Agreement.
-26-
F. STOCK OPTIONS. Executive's existing stock options will
remain in effect for the term of this Agreement according to the
terms of said options. Any new grants of stock options during
the term of this Agreement will be given at a level commensurate
with other such grants to persons at the level of responsibility
at Guardsman which Executive is then working, as determined by
the Board in its sole discretion.
G. VACATION. Executive shall be entitled to vacation time
consistent with the vacation policy of Guardsman as in effect
from time to time.
H. OTHER. Any other compensation or benefits shall be at
the sole discretion of the Board.
4. DUTIES. Executive will be available on an "as needed" basis to
assist Guardsman in the transition of new personnel to his present
position, in anticipation of Executive's retirement, and will further be
available as an advisor to the sales force and the customer base of the
wood-coatings group of Guardsman. This Agreement anticipates that
Executive may be reducing his actual work hours, but Executive shall spend
at least fifty percent (50%) of the time previously devoted to business in
the business and affairs of Guardsman. Executive agrees that he will not
be employed by anyone other than Guardsman for the term of this Agreement.
Executive shall be reasonably available to Guardsman's North
Carolina facility. So long as Executive is reasonably available to the
North Carolina facility, Executive shall not be required to relocate or
spend any substantial amount of time outside of the North Carolina area,
except for travel not substantially in excess of Executive's present
business travel obligations.
5. LOYALTY AND CONFIDENTIALITY. Executive agrees that during his
employment with Guardsman he will not, without the prior approval of the
Board, either for himself or on behalf of any other person, firm, or
corporation, directly or indirectly divert or attempt to divert from
Guardsman any business opportunity or business whatsoever, or attempt to
negatively influence any Guardsman customers or potential Guardsman
customers with whom Executive may have dealings. Executive shall be loyal
to Guardsman during his employment and shall forever hold in strictest
confidence and shall not use or disclose any information, technique,
process, development, or experimental work, trade secret, customer lists,
or other secret and confidential matter relating to the products, services,
sales, employees, or business of Guardsman, except as such disclosure or
use may be required in connection with Executive's work for Guardsman.
Upon termination of his employment with Guardsman, Executive shall deliver
to Guardsman any and all materials relating to Guardsman's business
including, without limitation, all customer lists, keys, financial
-27-
information, business notes, business plans, credit cards, memoranda,
specifications, and documents. Executive shall not retain any photocopies
or other facsimiles of such materials.
6. TERMINATION. Executive's employment and this Agreement may be
terminated prior to the end of the term hereof (Paragraph 2) as follows:
A. DEATH. If Executive, while in the employ of Guardsman,
shall die prior to the expiration of this term of employment,
this Agreement shall terminate upon Executive's death which, for
purposes of this Agreement, shall be deemed to have occurred on
the last day of the month in which his death occurs. Guardsman
shall continue to pay salary at the rate set forth in Paragraph
3, above, for a period of three (3) months following the date of
death, but not beyond the term of this Agreement.
If Executive should die while any amount would still be
payable to him hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement to the beneficiary designated by Executive in a
writing delivered to Guardsman or, if there be no such designated
beneficiary, to his estate.
B. DISABILITY. If Executive shall be unable to
substantially perform the duties described in Paragraph 4 above
for a period of nine (9) successive months by reason of illness
or other similar incapacity or disability, this Agreement may be
terminated as of the end of any calendar month following such
nine (9) months by Guardsman, based upon a determination that
Executive is disabled and by notice in writing to that effect to
Executive. Executive can terminate this Agreement in the same
circumstances by presenting his resignation in writing to
Guardsman. Any determination as to whether Executive is disabled
shall be made by a licensed physician selected by agreement of
Guardsman and Executive or, if they cannot agree upon a
physician, then by a majority of a panel of three (3) licensed
physicians, one selected by Guardsman, one selected by Executive,
and the third selected by the first two. If this Agreement is
terminated by Guardsman pursuant to this Subparagraph 6(B), the
compensation provided in Paragraph 3 of this Agreement shall
continue for such period as the Board shall in its sole
discretion deems appropriate but not beyond the term of this
Agreement. If this Agreement is terminated by Executive pursuant
to this Subparagraph 6(B), the compensation provided in Paragraph
3 of this Agreement shall continue for such period as the Board
deems appropriate, but not less than the period provided in
Guardsman's employee disability policy in effect at the time of
the termination.
-28-
C. TERMINATION FOR CAUSE. Guardsman shall have the right
to terminate Executive's employment for "Cause." For purposes of
this Agreement, "Cause" shall be limited to:
(i) the willful and continued failure by Executive to
substantially perform assigned duties consistent with
Paragraph 4 above (other than any failure resulting from an
illness or other similar incapacity or disability), after a
demand for substantial performance is delivered to Executive
on behalf of the Board which specifically identifies the
manner in which it is alleged that Executive has not
substantially performed his duties; or
(ii) the willful engaging by Executive in misconduct
which is materially injurious to Guardsman, monetarily or
otherwise.
For purposes of this Subparagraph C, no act or failure to act on
Executive's part shall be considered "willful" unless done, or
omitted to be done, by Executive not in good faith and without
reasonable belief that his action or omission was in the best
interests of Guardsman. Notwithstanding the foregoing, Executive
shall not be deemed to have been terminated for Cause unless and
until: there shall have been delivered to him a copy of a notice
of termination on behalf of the Board; and after reasonable
notice to him and an opportunity for him, together with his
counsel (at his own expense), to be heard before the Board, at
least two-thirds of the Board finds, in their reasonable
opinions, that Executive was guilty of conduct set forth above in
Clause (i) or (ii) and specifying the particulars thereof in
detail.
D. TERMINATION BY EXECUTIVE. Executive shall have the
right to terminate his employment with Guardsman by providing
written notice of the termination to Guardsman, if Guardsman
shall materially breach its obligations under this Agreement.
E. TERMINATION BY NOTICE. Guardsman and Executive shall
each have the right to terminate their employment relationship
for reasons other than those provided in this Paragraph 6 by
giving thirty (30) days' written notice to the other party
specifying the date of termination.
F. RETIREMENT. Executive shall have the option to retire
on his sixty-second (62nd) birthday and terminate this Agreement.
Upon such termination, salary payments shall cease, but Executive
shall continue to participate in the bonus [Paragraph 3(B)
herein] and shall continue to receive health insurance [Paragraph
3(D) herein] and all other benefits provided under this Agreement
pursuant to the terms of this Agreement.
-29-
7. SEVERANCE PAY.
A. If Executive's employment shall be terminated by
Guardsman by the provision of thirty (30) days' written notice
pursuant to Subparagraph 6(E) of this Agreement, or if
Executive's employment is terminated by Executive under
Subparagraph 6(D) of this Agreement, Executive shall be entitled
to receive severance pay for the remainder of the period of
employment provided in this Agreement in the amount and upon the
terms of the compensation under Paragraph 3 herein, which would
have been paid if the employment had not been terminated, so long
as Executive is not in competition with Guardsman as defined in
Paragraph 8.
B. MITIGATION OF SEVERANCE PAY. Executive shall not be
required to mitigate the amount of any payments of severance
benefits provided in this Paragraph 7 by seeking other employment
or otherwise, nor shall the amount of any payment provided in
this Paragraph 7 be reduced by any compensation earned by
Executive as a result of his employment with another employer
after termination, or otherwise.
8. COVENANT NOT TO COMPETE. Recognizing that his skill, experience,
and knowledge are unique and are a material inducement to Guardsman to
enter into this Agreement, Executive agrees that during his employment
pursuant to this Agreement, Executive will not participate directly or
indirectly, in the ownership, management, financing, operation, or control
of any business which is the same as or similar to the present or future
businesses of Guardsman or its subsidiaries. Executive shall also not
provide consulting services or serve as an employee, officer, or director
for any such business during his employment pursuant to this Agreement.
Executive is not prohibited by this paragraph, however, from owning an
insignificant amount of stock of any corporation whose shares are publicly
traded on any national or regional stock exchange or over the counter, so
long as that ownership is in no case more than five percent (5%) of the
outstanding shares of the corporation.
9. EXECUTIVE LIABILITY INSURANCE COVERAGE AND INDEMNIFICATION.
Nothing in this Agreement shall deprive Executive, both during and
subsequent to the termination of his employment pursuant to this Agreement,
of the benefits of Guardsman's existing or hereafter obtained executive
liability insurance coverage, subject to the terms and conditions of such
coverage, nor of any right to indemnification under Guardsman's Restated
Certificate of Incorporation and Bylaws or under any indemnification
agreement between Guardsman and Executive, subject to the limitations on
indemnification set forth therein.
-30-
10. SUCCESSORS. This Agreement shall be binding on and shall inure
to the benefit of the successors, heirs, representatives, and assigns of
the parties. Nothing in this Agreement, however, shall be construed to
allow Executive to assign this Agreement.
11. NOTICE. Notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered or certified mail,
return receipt requested, postage prepaid, addressed to Executive at the
address set forth on the first page of this Agreement, or to Guardsman at
its principal executive offices to the attention of the President of
Guardsman with a copy to the Secretary of Guardsman, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
12. MODIFICATION OR WAIVER. No provisions of this Agreement may be
amended, modified, waived, or discharged except by writing signed by the
parties. No waiver by either party of any breach by the other party of any
condition or provision of this Agreement shall be deemed a waiver of
similar or dissimilar provisions. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions of this Agreement shall not
be deemed a waiver of such term, covenant, or condition, nor shall any
waiver or relinquishment of any right or power hereunder at any one or more
times be deemed waiver or relinquishment of such right or power at any
other time.
13. GOVERNING LAW. This Agreement was entered into in the State of
Michigan and shall be construed and interpreted in accordance with the laws
of the State of Michigan.
14. CONSTRUCTION. Each party has read and understands this
Agreement, and has had the opportunity to receive independent legal advice
from its attorneys with respect to the advisability of entering into this
Agreement. Any ambiguity in this Agreement shall not be construed against
the drafter, but rather the terms hereof shall be given a reasonable
interpretation as if each party had in fact drafted the Agreement.
15. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
16. ENTIRE AGREEMENT. This Agreement constitutes an integration of
the entire agreement of the parties, and supersedes and replaces any prior
agreement, written or oral. Any representation, warranty, promise, or
condition, whether written or oral, not specifically incorporated herein
shall not be binding upon the parties.
-31-
IN WITNESS WHEREOF, Guardsman has caused this Agreement to be
executed by a duly authorized corporate officer and Executive has executed
this Agreement as of the date and year first above written.
GUARDSMAN PRODUCTS, INC.
By /S/ CHARLES E. BENNETT
Charles E. Bennett
President and CEO
/S/ EVERETTE L. MARTIN
Everette L. Martin - Executive
-32-
EXHIBIT 10-S
TRUST UNDER CONSULTING AGREEMENT FOR PAUL K. GASTON
This Agreement made this 31st day of July, 1995, by and between
GUARDSMAN PRODUCTS, INC. ("Company") and OLD KENT BANK ("Trustee").
WHEREAS, Company has entered into a Consulting Agreement with
Paul K. Gaston, dated as of January 1, 1994, pursuant to which the Company
has agreed to defer compensation ("Plan");
WHEREAS, Company has incurred liability under the terms of such
Plan with respect to Mr. Gaston:
WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Mr. Gaston in such manner and
at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded agreement and shall not affect the status of the
Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees for purposes of Title I of the Employee Retirement Income
Security Act of 1974; and
WHEREAS, it is the intention of Company to make contributions to
the Trust to provide itself with a source of funds to assist it in meeting
its liabilities under the Plan.
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held, and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST.
(a) Company hereby deposits with Trustee in trust
$127,144.74, which shall become the principal of the Trust to be
held, administered, and disposed of by Trustee as provided in
this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code
of 1986, as amended, and shall be construed accordingly.
-33-
(d) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of Company and
shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against Company. Any assets
held by the Trust will be subject to the claims of Company's
general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) Within 30 days following each June 30 and December 31,
after the Trust has become irrevocable pursuant to Section 1(b)
hereof, Company shall be required to irrevocably deposit
additional cash or other property to the Trust in an amount
sufficient to pay each Plan participant or beneficiary the
benefits payable pursuant to the terms of the Plan as of each
such date.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) Company shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in respect
of each Plan participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to Trustee
for determining the amounts so payable, the form in which such
amount is to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts.
Except as otherwise provided herein, Trustee shall make payments
to the Plan participants and their beneficiaries in accordance
with such Payment Schedule. The Trustee shall make provision for
the reporting and withholding of any federal, state, or local
taxes that may be required to be withheld with respect to the
payment of benefits pursuant to the terms of the Plan and shall
pay amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld, and
paid by Company.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by
Company or such party as it shall designate under the Plan, and
any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the
-34-
terms of this Plan. Company shall notify Trustee of its decision
to make payment of benefits directly prior to the time amounts
are payable to participants or their beneficiaries. In addition,
if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the
terms of the Plan, Company shall make the balance of each such
payment as it falls due. Trustee shall notify Company where
principal and earnings are not sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent.
Company shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) Company is unable to pay its debts as they
become due, or (ii) Company is subject to a pending proceeding as
a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of Company
under federal and state law as set forth below.
(i) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in
writing of Company's Insolvency. If a person claiming to be
a creditor of Company alleges in writing to Trustee that
Company has become Insolvent, Trustee shall determine
whether Company is Insolvent and, pending such
determination, Trustee shall discontinue payment of benefits
to Plan participants or their beneficiaries.
(ii) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person
claiming to be a creditor alleging that Company is
Insolvent, Trustee shall have no duty to inquire whether
Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished
to Trustee and that provides Trustee with a reasonable basis
for making a determination concerning Company's solvency.
(iii) If at any time Trustee has determined that
Company is Insolvent, Trustee shall discontinue payments to
Plan participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their
-35-
beneficiaries to pursue their rights as general creditors of
Company with respect to benefits due under the Plan or
otherwise.
(iv) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after Trustee has
determined that Company is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or
their beneficiaries under the terms of the Plan for the period of
such discontinuance, less the aggregate amount of any payments
made to Plan participants or their beneficiaries by Company in
lieu of the payments provided for hereunder during any such
period of discontinuance.
SECTION 4. PAYMENTS TO COMPANY. Except as provided in Section 3
hereof, after the Trust has become irrevocable, Company shall have no right
or power to direct Trustee to return to Company or to divert to others any
of the Trust assets before all payment of benefits have been made to Plan
participants and their beneficiaries pursuant to the terms of the Plan.
SECTION 5. INVESTMENT AUTHORITY.
(a) When directed by the Company, trustee shall invest in
or retain securities (including stock or rights to acquire stock)
or obligations issued by Company. The Company expressly waives
any diversification of investments that might otherwise be
necessary, or required under the laws of the State of Michigan,
or any other applicable state or federal law. All rights
associated with assets of the Trust shall be exercised by Trustee
or the person designated by Trustee, and shall in no event be
exercisable by or rest with Plan participants.
(b) The Trustee may invest and reinvest the issues of the
Trust as the Trustee, in its sole discretion, may deem
appropriate, including, without limitation, improved and
unimproved real property (whether or not income producing); other
common and preferred stocks; shares or certificates of
participation issued by investment companies; investment trusts
and mutual funds; common or pooled investment funds; bonds;
debentures; mortgages; deeds of trust; insurance and annuity
-36-
contracts; notes secured by real or personal property; leases;
ground leases; limited partnership interests; real or personal
property interests owned, developed, or managed by joint ventures
or limited partnerships; obligations of governmental bodies, both
domestic and foreign; notes, commercial paper, certificates of
deposit, and other securities or evidences of indebtedness,
secured or unsecured, including variable amount notes,
convertible securities of all types and kinds, interest-bearing
savings or deposit accounts with any federally insured bank
(including the Trustee) or any federally insured savings and loan
association; and any other property permitted as trust
investments under applicable law. Such investment may also
include shares of investment companies to which Trustee or an
affiliate of Trustee serves as an investment advisor, dealer,
transfer agent, custodian, or has other business or contractual
relationship. The Trustee is authorized to invest in any common
or pooled investment fund or mutual fund now or hereafter
maintained or advised by the Trustee and any interest-bearing
savings or deposit accounts with the banking department of the
Trustee.
(c) Company shall have the right at anytime, and from time
to time in its sole discretion, to substitute assets of equal
fair market value for any asset held by the Trust. This right is
exercisable by Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
SECTION 6. DISPOSITION OF INCOME. During the term of this Trust, all
income received by the Trust, net of expenses and taxes, shall be
accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE. Trustee shall keep accurate and
detailed records of all investments, receipts, disbursements, and all other
transactions required to be made, including such specific records as shall
be agreed upon in writing between Company and Trustee. Within 30 days
following the close of each calendar year and within 60 days after the
removal or resignation of Trustee, Trustee shall deliver to Company a
written account of its administration of the Trust during such year or
during the period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments, receipts,
disbursements, and other transactions effected by it, including a
description of all securities and investments purchased and sold with the
cost or net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash, securities, and
other property held in the Trust at the end of such year or as of the date
of such removal or resignation, as the case may be.
-37-
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
with like aims, provided, however, that Trustee shall incur no
liability to any person for any action taken pursuant to a
direction, request, or approval given by Company which is
contemplated by, and in conformity with, the terms of the Plan or
this Trust and is given in writing by Company. In the event of a
dispute between Company and a party, Trustee may apply to a court
of competent jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising
in connection with this Trust, Company agrees to indemnify
Trustee against Trustee's costs, expenses, and liabilities
(including, without limitation, attorneys' fees and expenses)
relating thereto and to be primarily liable for such payments.
If Company does not pay such costs, expenses, and liabilities in
a reasonably timely manner, Trustee may obtain payment from the
Trust.
(c) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties
or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants, or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) Trustee shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, Trustee shall
have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor Trustee, or
to loan to any person the proceeds of any borrowing against such
policy.
(f) Notwithstanding any powers granted to Trustee pursuant
to this Trust Agreement or to applicable law, Trustee shall not
have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within
the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
-38-
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE. Company shall pay
all administrative and Trustee's fees and expenses. If not so paid, the
fees and expenses shall be paid from the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to
Company, which shall be effective 30 days after receipt of such
notice unless Company and Trustee agree otherwise.
(b) Trustee may be removed by Company on 30 days' notice or
upon shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment
of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation,
removal, or transfer, unless Company extends the time limit.
(d) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective
date of resignation or removal under paragraphs (a) or (b) of
this section. If no such appointment has been made, Trustee may
apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative
expenses of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with
Section 10(a) or (b) hereof, Company may appoint any third party,
such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor
to replace Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee,
who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The
former Trustee shall execute any instruments necessary or
reasonably requested by Company or the successor Trustee to
evidence the transfer.
(b) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing
Trust assets, subject to Sections 7 and 8 hereof. The successor
Trustee shall not be responsible for and Company shall indemnify
and defend the successor Trustee from any claim or liability
-39-
resulting from any action or inaction of any prior Trustee or
from any other past event, or any condition existing at the time
it becomes successor Trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written
instrument executed by Trustee and Company. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the
Plan or shall make the Trust revocable after it has become
irrevocable with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer entitled
to benefits pursuant to the terms of the Plan. Upon termination
of the Trust, any assets remaining in the Trust shall be returned
to Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the
Plan, Company may terminate this Trust prior to the time all
benefit payments under the Plan have been made. All assets in
the Trust at termination shall be returned to Company.
SECTION 13. MISCELLANEOUS.
(a) Any provisions of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered, or subjected to attachment, garnishment, levy,
execution, or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of Michigan.
-40-
SECTION 14. EFFECTIVE DATE. The effective date of this Trust
Agreement shall be July 31, 1995.
GUARDSMAN PRODUCTS, INC.
By /S/CHARLES E. BENNETT
Its PRESIDENT AND CEO
Grantor
OLD KENT BANK
By /S/BRIAN T. DEUBY
Its VICE PRESIDENT
Trustee
-41-
EXHIBIT 10-U
AMENDMENT TO STOCK OPTION AGREEMENT
This is an Amendment effective as of August 10, 1995, to a
certain Stock Option Agreement dated November 10, 1994, between GUARDSMAN
PRODUCTS, INC., a Delaware corporation, and PAUL K. GASTON pursuant to
action of the Board of Directors of Guardsman Products, Inc.
Paragraph 2 of the November 10, 1994, Stock Option Agreement is
amended in its entirety as of the effective date of this Amendment to read
as follows:
2. TERM. The right to exercise this option, in whole or
in part, up to a total of 50,000 shares, shall commence on
December 31, 1994, for a period of 10 years thereafter. If any
portion of this option is not exercised during the 10-year period
of exercisability, the unexercised portion of the option shall
lapse.
Except as herein amended, said Option Agreement remains in full
force and effect as written.
GUARDSMAN PRODUCTS, INC.
By /S/ WINTHROP C. NIELSON, III
Winthrop C. Nielson, III
Chairman, Organization/Compensation
Committee
GRANTEE:
/S/ PAUL K. GASTON
Paul K. Gaston
-42-
EXHIBIT 10-W
AMENDMENT TO STOCKHOLDER AGREEMENT
This Amendment to Stockholder Agreement is dated as of November
9, 1995. The following terms are incorporated by reference into the
Stockholder Agreement dated as of August 31, 1994 by and between Guardsman
Products, Inc., John H. Sadler, and James L. Sadler. Notwithstanding any
contrary terms, the Stockholder Agreement is hereby amended and the parties
agree as follows:
1. Section 11 of the Stockholder Agreement entitled "Voting of
Shares" is deleted in its entirety and the Stockholders, as defined in the
Stockholder Agreement, shall have no continuing obligations under Section
11 of the Stockholder Agreement.
2. Except as specifically set forth in this Amendment to Stockholder
Agreement, the Stockholder Agreement shall remain in full force and effect
without further amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment to
Stockholder Agreement on the date first set forth above.
GUARDSMAN PRODUCTS, INC.
By: /S/ PAUL K. GASTON
Its: CHAIRMAN
JAMES L. SADLER
/S/ JAMES L. SADLER
JOHN H. SADLER
/S/ JOHN H. SADLER
-43-
EXHIBIT 11
<TABLE>
STATEMENT RE: COMPUTATION OF PER SHARE INCOME
GUARDSMAN PRODUCTS, INC.
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
(Amounts in thousands,
except per share data)
<S> <C> <C> <C>
Weighted average shares outstanding 9,515 8,465 7,849
Increase in dilutive incremental
shares issuable upon exercise
of stock options as computed
by maximum dilutive methods 120 46 101
9,635 8,511 7,950
Income
Continuing operations before
cumulative effect of change
in accounting principle $1,432 $5,903 $4,521
Cumulative effect of change
in accounting principle -0- -0- 150
Net income $1,432 $5,903 $4,671
Fully diluted income per share
Continuing operations before
cumulative effect of change in
accounting principle $ .15 $ .69 $ .57
Cumulative effect of change
in accounting principle -0- -0- .02
Net income $ .15 $ .69 $ .59
</TABLE>
NOTE: The income per share amounts for 1994 and 1993 noted above
differ from the net income per share of $.70 per share and
$.60 per share, respectively, reported in the consolidated
financial statements. These differences result from the
inclusion of outstanding stock options using maximum dilutive
methods in the above calculations, which were excluded from
the earnings per share reported in the consolidated financial
statements because they were not materially dilutive (i.e.,
less than 3%).
-44-
EXHIBIT 13
<TABLE>
GUARDSMAN PRODUCTS, INC.
SELECTED FINANCIAL INFORMATION
<CAPTION>
YEAR ENDED DECEMBER 31 1995 1994 1993 1992 1991
SUMMARY OF OPERATIONS
(In Thousands, Except Per
Share Amounts)
<S> <C> <C> <C> <C> <C>
Net sales $ 250,574 $ 201,888 $ 177,806 $ 152,197 $ 140,927
Income, net of income taxes 1,432<F*> 5,903 4,671 1,978 956
Income per common share .15<F*> .70 .60 .27 .13
Cash dividends per common share .33 .32 .32 .41 .50
SUMMARY OF FINANCIAL POSITION
(In Thousands)
Total assets $ 148,049 $ 137,052 $ 96,954 $ 83,494 $ 79,777
Long-term debt, net of
current maturities 27,757 27,805 19,013 14,464 9,568
Stockholders' equity 63,817 64,426 45,362 42,200 44,002
Working capital 45,498 42,373 33,796 28,818 25,112
OTHER SUPPLEMENTAL INFORMATION
Number of employees 1,060 1,109 860 791 757
Average shares outstanding 9,515,199 8,464,639 7,849,101 7,433,416 7,370,900
INDUSTRY SEGMENT OPERATIONS
(Audited and In Thousands)
NET SALES
Coatings Group $ 194,095 $ 155,967 $ 133,216 $ 116,768 $ 107,131
Consumer Products Group 56,506 46,042 44,618 35,480 33,906
250,601 202,009 177,834 152,248 141,037
Inter-segment sales (27) (121) (28) (51) (110)
Consolidated net sales $ 250,574 $ 201,888 $ 177,806 $ 152,197 $ 140,927
-45-
OPERATING PROFIT
Coatings Group $ 1,414<F**> $ 8,738 $ 7,053 $ 3,973 $ 1,895
Consumer Products Group 6,681 5,533 5,524 4,323 4,502
8,095 14,271 12,577 8,296 6,397
Corporate expenses-net (3,871) (3,618) (4,417) (4,611) (3,931)
Interest expense (2,131) (1,188) (991) (703) (1,026)
Costs of pooling of interest (529)
Investment income 587 374 376 372 425
Income before income taxes $ 2,680 $ 9,839 $ 7,016 $ 3,354 $ 1,865
IDENTIFIABLE ASSETS
Coatings Group $ 107,834 $ 102,593 $ 66,642 $ 56,141 $ 53,980
Consumer Products Group 28,563 25,475 20,092 16,165 16,079
Corporate 11,652 8,984 10,220 11,188 9,718
Total $ 148,049 $ 137,052 $ 96,954 $ 83,494 $ 79,777
<FN>
<F*>Includes restructuring charges which decreased net income by $6,635 or $.70 per share.
<F**>Includes pretax restructuring charges of $10,458.
</FN>
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
1995 COMPARED TO 1994
Net sales increased 24.1% to a record $250,574,000 in 1995 from
$201,888,000 in 1994. Coatings Group sales, including inter-segment sales,
increased $38,128,000 (24.4%) to a record $194,095,000. The Group's liquid
and powder coatings product lines realized an increase in net sales of
$31,697,000, representing both an increase in unit volume and in average
selling prices. Included in the Group's 1995 results was a full year's
impact together with an increase in sales for Moline Paint Manufacturing
Co., which was acquired on August 31, 1994, and an increase in sales for
the Wood Coatings lines, which were partially offset by declines in sales
of Metal Coatings exclusive of Moline. The Group's resin product lines
reported an increase in net sales of $6,431,000 representing a volume
increase, due primarily to increased customer demand, and an increase in
the average selling price, due primarily to product mix. Compared to 1994,
the Consumer Products Group's net sales, including inter-segment sales,
increased $10,464,000 (22.7%) to a record $56,506,000. Approximately 65%
of the increase is due to sales for the business of Soil Shield
International, Inc., which was acquired on January 30, 1995. The Group's
Specialty Products, Interior Care, and Atlanta Sundries product lines all
-46-
reported double-digit sales growth, which was partially offset by a
decrease in sales of the Group's Household lines.
Consolidated gross profit as a percentage of sales was 33.9% in 1995
compared to 34.2% in 1994. The Coatings Group experienced a decrease in
gross profit margin due primarily to the effects of repetitive increases in
raw material costs as well as an increase, as a percentage of overall sales
in 1995, in the resin sales, which carry relatively lower margins. The
Consumer Products Group reported an increase in their gross profit rate in
1995, primarily due to a shift in product mix toward the higher-margin
interior care products.
Operating expenses, before restructuring charges, increased between the two
periods reflecting the increased sales levels and the acquisitions of
Moline and Soil Shield, including amortization expenses associated with
these acquisitions. As a percentage of sales, however, selling, general
and administrative expenses decreased to 28.0% in 1995 from 28.9% in 1994.
Operating profit before corporate expenses and restructuring charges
increased 30.0% to $18,553,000 in 1995 from $14,271,000 in 1994. Operating
profit in the Coatings Group before corporate expenses and restructuring
charges increased $3,134,000 (35.9%) primarily due to sales growth and the
acquisition of Moline. The Consumer Products Group's operating profit
before corporate expenses increased $1,148,000 (20.7%) primarily due to the
Group's sales growth, the acquisition of Soil Shield and an increase in
gross profit.
In 1995, the Company recorded restructuring charges totaling $10,458,000,
or $.70 per share after taxes. These charges included costs associated
with the restructuring plans announced on November 14, 1995, which
primarily included the closure of the Grand Rapids, Michigan coatings
manufacturing plant. In addition, these charges included costs of other
corporate structure changes and studies of reorganization and shareholder
value options. The decision to close the Grand Rapids plant was based on
studies undertaken to improve manufacturing and distribution efficiencies,
in which the Company concluded that monies for capital improvements would
be more effectively spent on its newer, more modern facilities.
Furthermore, the closure of the plant and consolidation of the business
into other facilities, which is expected to be completed in early 1996, was
also in response to the current competitive environment in the industrial
coatings industry. As a result of the restructuring, the Company will
achieve profitability gains from higher capacity utilization and the
reduction in administrative overhead as production is relocated to other
plants. For additional information, see Note 3 to the Consolidated
Financial Statements.
Interest expense increased from $1,188,000 in 1994 to $2,131,000 in 1995
due to increases in average borrowings outstanding and variable interest
rates. The increase in borrowings resulted primarily from debt associated
with acquisitions of businesses in the latter part of 1994 and early 1995.
-47-
Interest rates rose during the early part of 1995 and, as a result,
interest expense as a percentage of average debt outstanding increased to
6.7% in 1995 compared to 6.0% in 1994.
The Company's effective tax rate during 1995 was 46.6% (38.6% before the
effect of restructuring charges) compared to an effective rate of 40.0%
during 1994. The effective tax rates for both periods were influenced by
the relationship of permanent differences to estimated taxable income.
Net income before restructuring charges totaled $8,067,000 for 1995
compared to $5,903,000 for 1994, an increase of 36.7%. Net income per
share before restructuring charges increased 21.4% to $.85 per share in
1995 compared to $.70 per share in 1994. There were an average of 12% more
shares outstanding during 1995 than there were in 1994, resulting primarily
from the acquisition of Moline. Including the effect of restructuring
charges, net income in 1995 totaled $1,432,000 or $.15 per share.
1994 COMPARED TO 1993
Net sales increased 13.5% to $201,888,000 in 1994 from $177,806,000 in
1993. Coatings Group sales, including inter-segment sales, increased
$22,751,000 (17.1%) to $155,967,000 due primarily to increases in unit
volume. The Group's liquid and powder coatings product lines realized an
increase in net sales of $20,718,000, representing a volume increase as
well as an increase in average selling prices. Approximately 62% of the
Group's 1994 sales increase represented sales for Moline Paint
Manufacturing Co., which was acquired on August 31, 1994. The Group's
resin product lines experienced an increase in net sales of $2,027,000
representing a volume increase due primarily to increased customer demand.
The Consumer Products Group's net sales, including inter-segment sales,
increased $1,424,000 (3.2%) to $46,042,000 led by growth in sales in the
Group's United Kingdom, Household and Atlanta Sundries product lines. This
growth offsets the decline in automotive after-market products, which were
unusually strong in 1993 due to special purchasing programs of a certain
automotive account not repeated in 1994.
Consolidated gross profit as a percentage of sales was 34.2% in 1994
compared to 34.3% in 1993. Despite significant increases in the cost of
raw materials, the Coatings Group reported a gross profit margin in 1994
which approximated the 1993 level, due primarily to a change in product
mix. The Consumer Products Group reported an increase in their gross
profit rate in 1994, primarily due to a shift in product mix away from
automotive after-market products.
Operating expenses increased between the two periods reflecting the
increased sales levels and the acquisition of Moline, including
amortization expenses associated with the acquisition. Nonetheless,
selling, general and administrative expenses, as a percentage of sales,
decreased to 28.9% in 1994 from 29.6% in 1993.
-48-
Operating profit before corporate expenses increased 13.5% to $14,271,000
in 1994 from $12,577,000 in 1993. Operating profit in the Coatings Group
increased $1,685,000 (23.9%) primarily due to sales growth and the
acquisition of Moline. The Consumer Products Group's operating profit
before corporate expenses rose slightly but was comparable with 1993.
Increases in the Consumer Products Group's operating profit due to sales
growth and an increase in gross profit, as a percentage of sales, were
mainly offset by transition expenses associated with Atlanta Sundries,
Inc., which was acquired by the Consumer Products Group in December 1993.
Interest expense increased from $991,000 in 1993 to $1,188,000 in 1994 due
to increases in average borrowings outstanding and variable interest rates.
The increase in borrowings resulted primarily from debt associated with
acquisitions of businesses in 1994 and the latter part of 1993. Interest
rates rose during 1994 and, as a result, interest expense as a percentage
of average debt outstanding increased to 6.0% in 1994 compared to 5.5% in
1993.
Also included as a charge to 1993 income is $529,000 of non-recurring costs
associated with the acquisition of Atlanta Sundries, Inc. These costs were
reflected as current period expenses since the acquisition was accounted
for as a pooling of interests.
The Company's effective tax rate during 1994 was 40.0% compared to an
effective rate of 35.6% during 1993. The increase in the effective tax
rate for 1994 was due primarily to a one-time benefit taken in 1993 for the
deduction of losses associated with the Company's investment in Armorguard
Products, Inc. The effective tax rates for both periods, before the 1993
one-time deduction, were influenced by the relationship of permanent
differences to estimated taxable income.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
implementation of SFAS No. 109 resulted in a one-time benefit of $150,000
or $.02 per share recorded as "Cumulative Effect of Change in Accounting
Principle." Also effective January 1, 1993, the Company adopted SFAS No.
106, "Accounting for Postretirement Benefits Other Than Pensions." The
adoption of this standard did not have a material effect on the Company's
results of operations or financial position.
Net income totaled $5,903,000 for 1994 compared to $4,671,000 for 1993, an
increase of approximately 26%. Net income per share increased
approximately 17% to $.70 per share in 1994 compared to $.60 per share in
1993. There were an average of 8% more shares outstanding during 1994 than
there were in 1993, resulting primarily from the acquisition of Moline.
-49-
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
During 1995, the Company's operations generated net cash flows of
$11,110,000. During the same period, the Company made cash payments of
$1,376,000 associated with the purchase of businesses, invested $5,933,000
in fixed assets and other investments and paid dividends of $3,141,000.
During the year, borrowings decreased by $439,000. Stock issued under
employee and stockholder plans generated $841,000 in cash flows.
During 1995, accounts receivable, inventory and accounts payable increased
$4,566,000, $868,000 and $3,454,000, respectively. These increases
primarily reflect higher sales volume as well as the acquisition of Soil
Shield. Working capital increased 7.4% to $45,498,000 at the end of 1995.
The current ratio was 2.2 to 1 at December 31, 1995 and 2.4 to 1 at
December 31, 1994. Debt as a percentage of capitalization was 30.4% at
December 31, 1995 compared to 30.2% at the end of 1994.
Management believes that internally generated funds will be adequate to
finance future property and equipment additions and meet existing
obligations under the long-term borrowing agreements. The Company
anticipates that any business acquisitions in the future will be financed
with cash flows from operations or by the issuance of long-term debt or
common stock.
Guardsman has short-term lines of credit which provide for unsecured
borrowings up to $6,099,000. There were no amounts outstanding under these
agreements during 1995. In addition, the Company has three revolving
credit agreements which are classified as long-term. At year-end,
$27,700,000 of the total $41,099,000 available under long-term borrowing
arrangements was outstanding. The long-term debt agreements include
certain restrictive covenants with which the Company was in compliance
throughout the year. At December 31, 1995, retained earnings totaled
$8,240,000 all of which was available for payment of cash dividends and
redemption of capital stock as provided by the debt agreements. For
additional information regarding credit arrangements and long-term debt,
see Note 5 to the Consolidated Financial Statements.
In November 1995, the Board of Directors approved an open market stock
repurchase program pursuant to which Guardsman may purchase up to 500,000
shares of its Common Stock targeted for use in connection with Company
shareholder and employee stock purchase plans and other corporate purposes.
As of December 31, 1995, there had been no significant activity under this
plan.
Like other companies in its industry, Guardsman is subject to existing and
evolving standards related to the protection of the environment. As a
result, it is the Company's policy to establish reserves for site
restoration costs and related claims where it is probable a liability
exists and the amount can be reasonably estimated. These reserves are
-50-
adjusted as information becomes available upon which a more accurate
estimate of eventual costs can be made. Such estimates are subject to
numerous variables, the effects of which are difficult to measure,
including the stage of the investigations, the nature of potential
remedies, the joint and several liability with other potentially
responsible parties, availability of insurance and government funds and
other issues. Accordingly, the ultimate cost of these matters cannot be
determined at this time and may not be resolved for a number of years. The
reserves represent the Company's best estimate of probable exposures at
this time. Based upon information currently available, it is not
anticipated that the outcome of these environmental matters will materially
affect the Company's consolidated financial position. The ultimate effect
of these matters on the Company's results of operations cannot be predicted
because any such effect depends on the amount and timing of charges to
operations resulting from new information as it becomes available. For
additional information regarding environmental obligations, see Note 8 to
the Consolidated Financial Statements.
On March 4, 1996, the Company entered into a definitive agreement pursuant
to which Lilly Industries, Inc. (Lilly) will acquire all of the outstanding
common stock of Guardsman. Under the terms of the agreement, Lilly,
through a wholly-owned subsidiary, commenced a cash tender offer for all
Guardsman shares, including the associated preferred stock purchase rights,
at a price of $23.00 per share in cash. Upon successful completion of the
tender offer, the shares of Guardsman stock not purchased in the tender offer
(other than shares for which statutory appraisal rights are validly exercised)
will be cashed out at $23.00 per share in a statutory merger. Guardsman's
three largest stockholders, collectively representing approximately 50%
of Guardsman's outstanding shares, have entered into separate agreements
with Lilly supporting the transaction. The transaction remains subject
to regulatory approval and certain other conditions.
-51-
<TABLE>
GUARDSMAN PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
DECEMBER 31 (IN THOUSANDS, EXCEPT SHARE AMOUNTS) 1995 1994
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 6,776 $ 5,630
Accounts receivable, less allowances
of $569 in 1995 and $808 in 1994 34,083 29,517
Inventories
Finished products 16,949 16,680
Raw materials and work in process 15,243 14,644
32,192 31,324
Deferred income taxes 4,083 1,866
Other current assets 6,822 5,224
Total current assets 83,956 73,561
Property, plant and equipment
Land 2,543 2,559
Buildings 16,640 15,920
Machinery and equipment 26,869 27,469
Construction in progress 594 718
46,646 46,666
Accumulated depreciation 18,591 18,689
28,055 27,977
Goodwill, less accumulated amortization
of $3,894 in 1995 and $3,251 in 1994 19,405 20,336
Other intangibles, less accumulated
amortization of $6,141 in 1995 and
$5,374 in 1994 11,893 12,587
Other assets 4,740 2,591
$ 148,049 $137,052
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-52-
<TABLE>
GUARDSMAN PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
DECEMBER 31 (IN THOUSANDS, EXCEPT SHARE AMOUNTS) 1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable $ 22,740 $ 19,286
Accrued compensation 4,130 4,142
Other accrued expenses 6,613 7,157
Restructuring reserves 4,257
Income taxes 665 510
Current maturities of long-term debt 53 93
Total current liabilities 38,458 31,188
Long-term debt 27,757 27,805
Deferred compensation and pension costs 8,672 7,041
Other liabilities 9,345 6,592
Stockholders' equity
Preferred stock, $1 par value, terms to be
determined when issued - authorized and
unissued - 1,000,000 shares
Common stock, $1 par value
authorized - 30,000,000 shares
outstanding - 9,558,993
shares in 1995, 9,482,199 shares
in 1994 9,559 9,482
Additional paid-in capital 47,324 46,560
Retained earnings 8,240 9,949
Cumulative translation adjustments (1,306) (1,565)
Total stockholders' equity 63,817 64,426
$ 148,049 $ 137,052
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-53-
<TABLE>
GUARDSMAN PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
YEAR ENDED DECEMBER 31 (IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS) 1995 1994 1993
<S> <C> <C> <C>
Net sales $ 250,574 $ 201,888 $ 177,806
Cost of sales 165,618 132,984 116,943
84,956 68,904 60,863
Selling, general and administrative
expenses 70,274 58,251 52,703
Restructuring charges 10,458
Interest expense 2,131 1,188 991
Costs of pooling of interests
transaction 529
Investment income (587) (374) (376)
Income before income taxes and
cumulative effect of change in
accounting principle 2,680 9,839 7,016
Income taxes 1,248 3,936 2,495
Income before cumulative effect
of change in accounting principle 1,432 5,903 4,521
Cumulative effect of change
in accounting principle 150
Net income $ 1,432 $ 5,903 $ 4,671
Income per common share:
Before cumulative effect of change
in accounting principle $ .15 $ .70 $ .58
Cumulative effect of change
in accounting principle .02
Net income $ .15 $ .70 $ .60
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-54-
<TABLE>
GUARDSMAN PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN RETAINED TRANSLATION
(In Thousands, Except Per Share Amounts) STOCK CAPITAL EARNINGS ADJUSTMENTS
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $ 7,453 $ 31,039 $ 4,437 $ (729)
Net income for 1993 4,671
Cash dividends - $.32 per share (2,400)
Stock issued under employee
and stockholder plans 101 1,057 (223)
Stock issued for business acquired
under pooling of interests 359 (359) 409
Foreign currency translation (453)
Balance at December 31, 1993 7,913 31,737 6,894 (1,182)
Net income for 1994 5,903
Cash dividends - $.32 per share (2,787)
Stock issued under employee
and stockholder plans 69 663 (61)
Stock issued for business acquired 1,500 14,160
Foreign currency translation (383)
Balance at December 31, 1994 9,482 46,560 9,949 (1,565)
Net income for 1995 1,432
Cash dividends - $.33 per share (3,141)
Stock issued under employee
and stockholder plans 77 764
Foreign currency translation 259
Balance at December 31, 1995 $ 9,559 $ 47,324 $ 8,240 $ (1,306)
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-55-
<TABLE>
GUARDSMAN PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31 (IN THOUSANDS)
1995 1994 1993
<S> <C> <C> <C>
Operations
Net income $ 1,432 $ 5,903 $ 4,671
Adjustments to reconcile net
income to cash provided by
operations
Depreciation and amortization 6,944 5,489 4,674
Restructuring charges 10,458
Deferred income taxes (4,026) (634) (864)
Deferred compensation and
pension costs 915 804 575
Other - net 1,555 518 720
Changes in certain working
capital items
Accounts receivable (3,585) (2,101) (3,630)
Inventories (2,696) (4,373) (3,282)
Other current assets (1,594) (231) 693
Accounts payable 2,363 1,171 2,880
Accrued expenses (656) 44 250
Cash provided by operations 11,110 6,590 6,687
Investing Activities
Purchase of businesses (1,376) (5,712) (3,359)
Additions to property, plant
and equipment (5,317) (3,410) (3,230)
Other - net (616) 141 (803)
Cash used by investing activities (7,309) (8,981) (7,392)
Financing Activities
Cash dividends paid (3,141) (2,787) (2,400)
Proceeds from revolving lines
of credit and other long-term
debt 63,649 38,586 34,437
Payments on revolving lines of
credit and other long-term debt (64,088) (32,891) (30,429)
Stock issued under employee and
stockholder plans 841 671 935
Cash (used) provided by financing
activities (2,739) 3,579 2,543
-56-
Effect of foreign currency rate
changes on cash 84 (30) (208)
Increase in cash and cash equivalents 1,146 1,158 1,630
Cash and cash equivalents at
beginning of year 5,630 4,472 2,842
Cash and cash equivalents at
end of year $ 6,776 $ 5,630 $ 4,472
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-57-
GUARDSMAN PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND FOREIGN EXCHANGE
The consolidated financial statements include the accounts of
Guardsman Products, Inc. and its wholly-owned subsidiaries (Guardsman
or the Company). All significant intercompany transactions and
accounts are eliminated.
Assets and liabilities of foreign subsidiaries are translated into
U.S. dollars at exchange rates in effect at the end of the year. The
unrealized gains or losses that result from this process are shown in
the cumulative translation adjustments section of stockholders'
equity. Revenues and expenses are translated using average exchange
rates that prevailed during the year.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Cash equivalents are recorded at cost, which approximates current
market value.
INVENTORIES
Inventories are stated at the lower of cost or market, using the
first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation of
plant and equipment is provided on the straight-line method based upon
the estimated useful lives of the assets as follows: buildings, 10 to
40 years; and machinery and equipment, 3 to 20 years. Depreciation
expense totaled $3,484,000 in 1995, $2,840,000 in 1994 and $2,602,000
in 1993.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the amount by which the cost of businesses
purchased exceeds the fair value of the net assets acquired. Goodwill
and other intangible assets are amortized over periods ranging from 5
-58-
to 40 years using the straight-line method. The Company continually
evaluates whether events and circumstances have occurred that indicate
the remaining estimated useful life of goodwill and other intangible
assets may warrant revision or that the remaining balance may not be
recoverable. When factors indicate that the asset should be evaluated
for possible impairment, the Company uses an estimate of the related
business segment's undiscounted net cash flows over the remaining life
of the asset in measuring whether the asset is recoverable. Such
adjustments were not significant in 1995, 1994 and 1993. Other
intangible assets in the accompanying balance sheet include, among
other things, formulas totaling $8,386,000 and $9,928,000 at December
31, 1995 and 1994, respectively.
LONG-TERM ASSETS
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" (SFAS No. 121). The
Company is required to adopt the provisions of SFAS No. 121 beginning
in 1996. Based on information currently available, the Company does
not expect the impact of adopting this statement to have a material
effect on its financial condition or results of operations.
RESEARCH AND DEVELOPMENT
Research and development expenditures, primarily in the Coatings
Group, are charged to income as incurred. Research and development
expenditures amounted to $8,389,000 in 1995, $6,860,000 in 1994 and
$5,932,000 in 1993.
INCOME TAXES
Income taxes are based on income reported for financial statement
purposes. Deferred income tax balances represent the tax effect of
temporary differences between the financial reporting basis and the
tax basis of certain assets and liabilities.
INCOME PER COMMON SHARE
Income per common share is based on the weighted average number of
shares of common stock outstanding. Shares available for purchase
under stock incentive plans are not reflected in the computation of
income per common share since the effect would not be material.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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
-59-
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
The Company is partially self-insured for general and product
liabilities and workers' compensation. Self-insurance liabilities are
estimated using methods management believes are reasonable and
appropriate. These methods are based on historical information along
with certain assumptions about future events. Changes in assumptions
for such matters as legal actions, medical costs as well as changes in
actual experience could cause these estimates to change in the near
term.
NOTE 2
ACQUISITIONS OF BUSINESSES
Effective January 30, 1995, the Company purchased the business and
certain assets of Soil Shield International, Inc. (Soil Shield), a
producer and distributor of retail-applied fabric protection products.
The Company's aggregate acquisition cost for this business totaled
$1,327,000. Financing for the acquisition was provided by cash flows
from operations and long-term borrowings under the Company's revolving
lines of credit. The Company is servicing the former Soil Shield
customers from its existing facilities. The acquisition of Soil
Shield did not have a material effect on the Company's financial
statements.
On August 31, 1994, the Company purchased 100% of the stock of Moline
Paint Manufacturing Co. (Moline). The consideration for the stock of
Moline included 1.5 million shares of Guardsman Common Stock valued at
$10.44 per share, approximately $6,000,000 in cash and the assumption
of approximately $3,100,000 in outstanding debt of Moline. Moline is
an industrial coatings manufacturer focusing on the
agricultural/construction equipment and general industrial markets.
Management intends to continue Moline's operations along substantially
the same lines of business.
The purchase agreement provides for certain contingent payments
including a contingent adjustment for stock price. In the event that
the price of Guardsman Common Stock does not equal or exceed $18 per
share during the four year period subsequent to the acquisition date,
based on the highest trading price on any twenty days during this
period, then Guardsman shall pay the sellers the difference between
the highest trading price, as defined, and $18 per share multiplied by
the 1.5 million shares issued pursuant to the acquisition.
-60-
In addition, the sellers entered into non-competition agreements
valued at $5,014,000, which represents the present value discounted at
7.75% of payments totaling $7,679,000 to be paid over a period of
twelve years. The Company will recognize the cost ratably over the
term of the agreements.
The acquisition of Moline was accounted for as a purchase.
Accordingly, the purchase price was allocated to the net assets
acquired based upon their estimated fair market values. The excess of
the purchase price over the estimated fair value of net assets
acquired amounted to approximately $13 million, which has been
accounted for as goodwill and is being amortized over 40 years using
the straight-line method.
The accompanying consolidated statements of income reflect the
operating results of Moline since the effective date of the
acquisition. Pro forma unaudited consolidated operating results of
the Company and Moline for the years ended December 31, 1994 and 1993,
assuming the acquisition had been made as of January 1, 1994 and 1993,
are summarized below (in thousands, except per share amount):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Net sales $ 227,346 $ 210,150
Net income 4,656 4,680
Earnings per share .49 .50
</TABLE>
These pro forma results have been prepared for comparative purposes
only and include certain adjustments such as additional depreciation
expense as a result of a step-up in the basis of fixed assets,
additional amortization expense as a result of goodwill and other
intangible assets and increased interest expense on acquisition debt.
They do not purport to be indicative of the results of operations
which actually would have resulted had the combination been in effect
on January 1, 1994 and 1993, or of future results of operations of the
consolidated entities.
In December 1993, the Company exchanged approximately 359,000 shares
of its common stock valued at $15 per share for all the outstanding
shares of Atlanta Sundries, Inc., the maker of Goof-Off latex paint
remover and other related consumer products. The acquisition was
accounted for as a pooling of interests. Since the acquisition did
not have a material effect on periods prior to 1993, they have not
been restated.
-61-
NOTE 3
RESTRUCTURING CHARGES
Included in the accompanying Consolidated Statements of Income is
$10,458,000 in pretax restructuring charges, which reduced net income
by $6,635,000 or $.70 per share for the year ended December 31, 1995.
This charge primarily includes expenses associated with the closure of
the Company's Grand Rapids, Michigan coatings manufacturing plant.
Restructuring charges consisted of facilities, equipment and inventory
write-offs, termination benefits, and other costs associated with the
restructuring. Approximately 100 employees were terminated as a
result of the facility closing and job elimination process, which will
be partially offset by employee additions at other facilities as
production is relocated. The closure of the manufacturing facility
and job elimination process was largely complete in mid-January 1996.
The components of the restructuring charges and the amounts paid or
charged against these reserves during 1995 were as follows (in
thousands):
<TABLE>
<CAPTION>
COSTS PAID ENDING
PROVISION OR CHARGED BALANCE
<S> <C> <C> <C>
Facilities, equipment and inventories $ 5,736 $ 827 $ 4,909
Termination benefits 3,380 158 3,222
Other costs 1,342 451 891
$ 10,458 $ 1,436 $ 9,022
</TABLE>
NOTE 4
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This
change resulted in a one-time additional net tax benefit of $150,000
or $.02 per share at January 1, 1993 which is recorded under the
caption "Cumulative Effect of Change in Accounting Principle" in the
accompanying Consolidated Statements of Income.
The provision for income taxes attributable to continuing operations
is summarized as follows (in thousands):
-62-
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Currently payable:
Federal $ 2,436 $ 3,048 $ 1,986
State 689 481 418
Foreign 2,149 1,127 670
5,274 4,656 3,074
Deferred expense (credit):
Federal (3,350) (624) (615)
State (305) (88) (70)
Foreign (371) (8) 106
(4,026) (720) (579)
Total $ 1,248 $ 3,936 $ 2,495
</TABLE>
The components of income (loss) before income taxes are (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Domestic $(1,892) $ 7,259 $ 4,732
Foreign 4,572 2,580 2,284
$ 2,680 $ 9,839 $ 7,016
</TABLE>
A reconciliation of income taxes attributable to continuing operations
calculated at the applicable federal statutory rate of 34% to the
provision for income taxes follows (in thousands):
-63-
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Tax at federal statutory rate $ 911 $ 3,345 $ 2,385
Adjustments to taxes at statutory rate:
State income taxes, net of
federal income tax reduction 253 259 249
Nondeductible losses of subsidiaries
and other investments 109
Benefit of tax deduction from U.S.
subsidiary (325) (417)
Nondeductible amortization of intangible
assets 507 215 200
Other (98) 117 (31)
Income taxes $ 1,248 $ 3,936 $ 2,495
Effective income tax rate 46.6% 40.0% 35.6%
</TABLE>
The following represents the components of deferred tax assets and
liabilities at December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Deferred compensation and pension costs $ 2,850 $ 2,626
Environmental obligations 1,803 1,775
Reserves for self-insured losses 814 656
Inventory valuation reserves 743 646
Intangible assets 730 468
Warranty reserves 815 427
Reserves for restructuring charges 3,076
Other items 744 816
Total deferred tax assets 11,575 7,414
Deferred tax liabilities:
Basis difference in acquired assets 2,836 2,975
Property, plant and equipment 2,700 2,499
Other items 147 74
Total deferred tax liabilities 5,683 5,548
Net deferred tax assets $ 5,892 $ 1,866
</TABLE>
Income and remittance taxes have not been recorded on $4.6 million of
undistributed earnings of foreign subsidiaries, either because any
taxes on dividends would be offset substantially by foreign tax
credits or because the Company considers these earnings indefinitely
-64-
reinvested in the foreign operations. For those earnings which are
indefinitely reinvested, it is not practical to determine the amount
of additional tax liabilities that would be incurred if such earnings
were repatriated.
Income tax payments, net of refunds, amounted to $5,127,000,
$5,535,000 and $3,050,000 in 1995, 1994 and 1993, respectively.
NOTE 5
CREDIT ARRANGEMENTS AND LONG-TERM DEBT
The Company has two short-term revolving credit agreements. The
Company may borrow up to $5 million under a domestic agreement at
substantially the same rates available under the long-term revolving
lines of credit discussed below. The Company's Canadian subsidiary
has an operating credit facility which permits borrowings up to
$1,500,000 Canadian at the same rates available under the Canadian
long-term facility described below. There were no amounts outstanding
under these agreements during 1995, 1994 and 1993.
The Company has three revolving credit agreements which are classified
as long-term. During 1994, the Company increased its available long-term
borrowings under two domestic revolving lines of credit, which
expire in June and July 1997, from $25 million to $40 million. The
interest rate options generally utilized by the Company under the
agreements include 5/8% over the Federal Funds Rate and transaction
rates, which are determined at the date of borrowing on balances which
mature in one to twenty-nine days. A revolving term credit
arrangement through the Canadian subsidiary, which expires January 1,
1997, provides for borrowings up to $1,500,000 Canadian at the prime
interest rate, Base Rate Canada or 3/4% above London Interbank Offered
Rate (LIBOR).
Long-term debt consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revolving lines of credit $ 27,700 $ 27,700
Other long-term debt 110 198
27,810 27,898
Less current maturities 53 93
Long-term debt $ 27,757 $ 27,805
</TABLE>
-65-
Maturities of long-term debt are set forth below (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1996 $ 53
1997 27,736
1998 21
</TABLE>
The debt agreements include certain restrictive covenants with which
the Company was in compliance throughout the year. At December 31,
1995, the Company's retained earnings totaled $8,240,000, all of which
was available for the payment of cash dividends and redemption of
capital stock as provided by the debt agreements.
To manage exposure to interest rate risk, the Company utilizes an
interest rate swap agreement, which has a notional amount of
$6,000,000 and an expiration date of January 1999. The Company pays a
fixed rate of 5.74% and receives a floating rate based on LIBOR. The
counterparty to this agreement is a high credit quality financial
institution.
Payments of interest due under the Company's borrowings amounted to
$2,001,000 in 1995, $1,174,000 in 1994 and $978,000 in 1993.
NOTE 6
FAIR VALUE OF FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK
The carrying amount of the Company's financial instruments included in
current assets and current liabilities approximates the fair value due
to their short-term nature. The Company's long-term debt reprices
frequently at the then-prevailing market interest rates. As of
December 31, 1995 and 1994, carrying value approximated the fair value
of the Company's long-term debt.
The carrying amount of the Company's interest rate swap agreement
represents interest due or accrued as reflected in the Consolidated
Balance Sheets. The estimated fair value of the interest rate swap
agreement was based upon dealer quotations for the amount which might
be realized from a transfer, sale or termination of such agreement.
The fair values were $(66,000) and $467,000 at December 31, 1995 and
1994, respectively, while the carrying values were immaterial as of
those dates.
-66-
NOTE 7
LEASES
The Company has noncancelable operating leases covering certain
machinery and equipment, automobiles and buildings which expire at
various dates through the year 2000. Certain leases contain purchase
and renewal options.
Rental expense under all operating leases was $1,740,000, $1,529,000
and $1,349,000 in 1995, 1994 and 1993, respectively. At December 31,
1995, future minimum rental payments under noncancelable operating
leases are due as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1996 $ 1,413
1997 1,235
1998 997
1999 844
2000 429
Thereafter 8
Total $ 4,926
</TABLE>
NOTE 8
CONTINGENCIES
Like other companies in its industry, Guardsman is subject to existing
and evolving standards related to the protection of the environment.
As a result, it is the Company's policy to establish reserves for site
restoration costs and related claims where it is probable a liability
exists and the amount can be reasonably estimated. These reserves are
adjusted as information becomes available upon which a more accurate
estimate of eventual costs can be made. Such estimates are subject to
numerous variables, the effects of which are difficult to measure,
including the stage of the investigations, the nature of potential
remedies, the joint and several liability with other potentially
responsible parties, availability of insurance and government funds
and other issues. Accordingly, the ultimate cost of these matters
cannot be determined at this time and may not be resolved for a number
of years. As such, it is reasonably possible that current estimates
could change in the near term. The reserves of $4,810,000, of which
$700,000 and $4,110,000 are included in other accrued expenses and
other liabilities, respectively, at December 31, 1995, represent the
Company's best estimate of probable exposures at this time. Based
upon information currently available, it is not anticipated that the
outcome of these environmental matters will materially affect the
-67-
Company's consolidated financial position. The ultimate effect of
these matters on the Company's results of operations cannot be
predicted because any such effect depends on the amount and timing of
charges to operations resulting from new information as it becomes
available.
At December 31, 1995, approximately $600,000 included in other current
assets represents probable reimbursements from certain of the
Company's insurance carriers and from a state government agency for
costs expended and to be expended for certain site restoration
activities.
The Company is also involved in legal proceedings and litigation
arising in the ordinary course of business. In the opinion of
management, the outcome of such proceedings and litigation currently
pending will not materially affect the Company's consolidated
financial statements.
NOTE 9
PENSION PLANS
The Company has four noncontributory primary defined benefit pension
plans covering substantially all of its employees. A plan covering
non-union employees provides pension benefits based upon a retiree's
earnings of the five consecutive calendar years during employment in
which the retiree received the highest level of compensation. Plans
covering union employees provide pension benefits at stated amounts
for each year of service. The Company's policy is to fund the minimum
actuarially computed annual contribution required under ERISA.
The following table sets forth the funded status and amounts
recognized in the Consolidated Balance Sheets for the Company's
primary defined benefit pension plans at December 31, (in thousands):
-68-
<TABLE>
<CAPTION>
1995 1994
PLANS WHOSE PLAN WHOSE PLANS WHOSE PLAN WHOSE
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
<S> <C> <C> <C> <C>
Pension assets at fair value $ 23,377 $ 3,702 $ 20,076 $ 3,287
Actuarial present value of
accumulated plan benefits:
Vested 16,902 4,040 14,931 3,740
Non-vested 488 715 97
17,390 4,040 15,646 3,837
Effect of estimated future
increases in compensation 5,607 5,506
Projected benefit obligation
of service rendered to date 22,997 4,040 21,152 3,837
Plan assets in excess of
(less than) projected benefit
obligation 380 (338) (1,076) (550)
Accrued pension costs
recognized
in the balance sheet 5,550 912 5,199 208
Adjustment to recognize
minimum liability 342
Unrecognized net pension assets $ 5,930 $ 574 $ 4,123 $ 0
</TABLE>
<TABLE>
<CAPTION>
1995 1994
PLANS WHOSE PLAN WHOSE PLANS WHOSE PLAN WHOSE
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
<S> <C> <C> <C> <C>
Components of unrecognized
net pension assets:
Net experience gains $ 6,463 $ 659 $ 4,644 $ 438
Transition assets (liabilities) 311 (21) 333 (187)
Prior service costs (844) (64) (854) (593)
Adjustment to recognize
minimum liability 342
$ 5,930 $ 574 $ 4,123 $ 0
</TABLE>
-69-
During 1995, the Company changed its method of recognizing the market-related
value of plan assets from the fair value to a calculated value
that recognizes changes in fair value in a systematic and rational
manner over not more than five years. This change did not have a
material affect on the Company's financial statements.
At December 31, 1995, plan assets of the four primary defined benefit
plans were invested in listed common stocks (46%), fixed income
securities (36%), Guardsman common stock (9%) with a market value of
$2,430,000, life insurance contracts (3%) and short-term investments
(6%).
In addition to the four primary defined benefit pension plans, the
Company also has a supplemental executive retirement plan (the SERP),
a pension restoration plan and a directors' retirement plan, all of
which are unfunded defined benefit plans. The actuarial present value
of accumulated plan benefits related to the Company's SERP, pension
restoration plan and directors' retirement plan totaled $1,595,000 and
$1,493,000 at December 31, 1995 and 1994, respectively. Accrued
pension costs of $1,924,000 and $1,878,000 related to these three
plans were recorded at December 31, 1995 and 1994, respectively.
The assumptions used in accounting for defined benefit plans for the
three years presented are set forth below:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Weighted-average assumed discount rates 7.75% 8.25% 7.75%
Rates of compensation increase 4.50% 5.00% 5.00%
Weighted-average expected long-term rate
of return on plan assets 8.50% 8.50% 8.50%
</TABLE>
Guardsman also maintains defined contribution plans covering the
employees of its Canadian and United Kingdom subsidiaries and a 401(k)
plan for all of its non-bargaining domestic employees.
-70-
The following is a summary of pension expense recognized by the
Company (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Defined benefit plans:
Service cost - benefits earned during
the period $ 1,287 $ 1,090 $ 945
Interest cost on projected benefit
obligations 2,252 1,950 1,805
Actual loss (return) on plan assets (4,733) 1,013 (2,698)
Net amortization (deferral) 2,376 (3,244) 598
Curtailment cost 615
Net pension cost of defined benefit
plans 1,797 809 650
Defined contribution plans 225 198 146
Total pension expense $ 2,022 $ 1,007 $ 796
</TABLE>
In connection with the closing of the Grand Rapids, Michigan facility,
as further discussed in Note 3 to the Consolidated Financial
Statements, the Company recognized curtailment expenses in 1995
associated with the union pension plan and the postretirement medical
plan. These curtailments were classified as restructuring charges in
the accompanying Consolidated Statements of Income.
NOTE 10
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Substantially all domestic employees of the Company, other than
employees of Moline, are eligible upon retirement for certain
healthcare and life insurance benefits. The postretirement healthcare
plans are unfunded contributory plans and contain other cost-sharing
features such as deductibles, life-time benefit limits and
coinsurance.
The following table sets forth amounts recognized in the Consolidated
Balance Sheets at December 31 (in thousands):
-71-
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $ 1,113 $ 1,277
Fully eligible active participants 459 572
Other active participants 116 154
Unfunded status 1,688 2,003
Unrecognized net transition obligation (1,081) (1,286)
Unrecognized net loss (436)
Accrued postretirement benefit cost $ 607 $ 281
</TABLE>
The following is a summary of postretirement benefit cost recognized
by the Company (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost $ 16 $ 19 $ 16
Interest cost 139 130 119
Net amortization 71 77 71
Curtailment cost 91
Net periodic postretirement benefit cost $ 317 $ 226 $ 206
</TABLE>
The transitional liability upon implementation of Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" in 1993 of $1,430,000 is
being accrued ratably over a 20 year period. The discount rate
assumed in determining the actuarial value of the plans'
postretirement benefit obligation was 7.75% and 8.25% at December 31,
1995 and 1994, respectively. The annual assumed rate of increase in
the per capita cost of covered benefits, or healthcare cost trend
rate, will be 10.675% in 1996, uniformly decreasing to 5.25% in 2003
and thereafter. A 1% increase in the assumed healthcare cost trend
rate would not have a material effect on the postretirement benefit
obligation or the periodic cost of the plans.
NOTE 11
EMPLOYEE INCENTIVE PLANS
The Company's 1992 Employee Stock Purchase Plan provides eligible
employees the option to purchase the Company's common stock at a price
equal to 85% of the market price at the date of purchase.
-72-
The Company has set aside 519,923 shares of common stock under its
1984 Incentive Stock Option Plan for the grant of options to directors
and key management employees. In addition, the Company has reserved
330,000 and 360,000 shares of common stock for granting of stock
options to directors and key management employees under its 1988 and
1991 Stock Option Plans, respectively. In addition, 470,000 shares
of common stock were reserved for the granting of stock options and
other incentives to directors and key management employees under the
1995 Long-Term Incentive Plan. Certain of these options qualify as
nontaxable under the Internal Revenue Code.
Stock option activity under the various plans is presented below (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Shares under Employee Stock Purchase Plan:
Outstanding at beginning of year 7 5 23
Granted 18 19 20
Exercised (18) (17) (17)
Canceled (21)
Outstanding and exercisable at end
of year 7 7 5
Available for grant at end of year 49 66 85
Purchase price per share of options
exercised <FA> $10.36 to $7.86 to $10.31 to
$11.42 $10.68 $13.81
Market price per share of options
exercised <FA> $12.19 to $9.25 to $12.13 to
$13.44 $12.56 $16.25
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Shares under Performance Award,
Stock Option and Long-Term Incentive
Plans:
Outstanding at beginning of year 461 428 478
Granted 234 205 125
Exercised (44) (44) (100)
Terminated (72) (128) (75)
Outstanding at end of year 579 461 428
Exercisable at end of year 482 386 401
Available for grant at end of year 551 243 385
</TABLE>
-73-
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Purchase price per share of options:
Outstanding <FB> $9.13 to $9.13 to $7.82 to
$14.75 $14.75 $14.75
Exercised <FA> $9.13 to $7.82 to $8.28 to
$12.50 $14.75 $14.75
Market price per share of options
exercised <FA> $11.00 to $11.50 to $10.75 to
$15.00 $16.50 $16.38
<FN>
<FA> At date of exercise.
<FB> Market value at date of grant.
</FN>
</TABLE>
In addition, 50,000 shares of common stock have been reserved for
issuance under a one-time grant in November 1994 of stock options to
the Chairman of the Board of the Company. These shares, which were
granted at the fair market value of the stock at the date of grant,
are fully exercisable as of December 31, 1995.
The Company has a performance award plan under which performance award
units may be granted to key management employees. Performance award
units include a performance allotment expressed in dollars and options
to purchase common stock. Performance allotments aggregating
$495,000, $353,000 and $222,000 were granted under the plan in 1995,
1994 and 1993, respectively. Such allotments are payable in 1998,
1997 and 1996, respectively, if specified performance levels, measured
in terms of income before income taxes, are achieved by the Company
during the three year period subsequent to the grant.
Distributions, payable in cash, to key employees under various bonus
plans are based primarily upon sales and income before income taxes.
Expense incurred under the plans was $3,744,000, $2,523,000 and
$1,928,000 for 1995, 1994 and 1993, respectively.
NOTE 12
STOCK RIGHTS PLAN
On December 31, 1995, the Company had outstanding 9,558,993 Series A
Preferred Stock Purchase Rights (Rights). The Rights were originally
issued in August 1986 as a dividend to holders of the Company's common
stock at the rate of one Right for each share of common stock
-74-
outstanding. Each Right entitles the holder thereof, until August 27,
1996, to buy one one-hundredth (1/100) of a share of Series A
Preferred Stock at an exercise price of $60.00. The exercise price
and the number of shares of Series A Preferred Stock issuable upon the
exercise of the Rights are subject to adjustment in certain cases to
prevent dilution. The Rights are evidenced by common stock
certificates and are not exercisable or transferable apart from the
common stock until ten days after a person (exclusive of persons
holding 20% or more of the Company's common stock on August 8, 1986)
acquires 20% or more or makes a tender or exchange offer for 30% or
more of the common stock. If, after a person acquires 20% or more of
the common stock, the Company is acquired in a merger or other
business combination transaction (including one in which the Company
is the surviving corporation), or if certain other conditions are met,
each Right will entitle its holder to purchase, at the then current
exercise price of the Right, that number of shares of common stock of
either the acquiring company or Guardsman, as the case may be, which
at the time of such transaction would have a market value of two times
the exercise price of the Right. The Rights do not have any voting
rights and are redeemable, at the option of the Company, at a price of
$0.05 per Right prior to any person acquiring beneficial ownership of
at least 20% of the common stock. The Rights expire on August 27,
1996. So long as the Rights are not separately transferable, the
Company will issue one Right with each new share of common stock
issued.
NOTE 13
BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company operates in two industries, Coatings and Consumer
Products. Coatings involves the production and distribution of
industrial paints, varnishes, enamels and lacquers primarily for sale
to manufacturers of wood and metal products. Additionally, the Group
manufactures resins for internal use and external sale. Consumer
Products includes the distribution of furniture polishes, wood
treatments, dust cloths, cleaning fluids, paint sundries and other
household products to retailers. Consumer Products also manufactures
and distributes a variety of proprietary after-market automotive
maintenance products and industrial lubricants.
As summarized in the segment information below and on pages 45 and 46,
identifiable assets are those assets that are used by each of the
Company's industry segments and foreign operations presented. Capital
expenditures exclude the cost of capital assets acquired in business
combinations. Corporate assets are principally cash, marketable
securities, prepaid expenses, deferred income tax assets and corporate
fixed assets. Operating profit does not include general corporate
-75-
expenses, interest expense, investment income, costs of pooling of
interests transactions, and income taxes. Sales between segments are
at cost plus a small percentage markup.
Business segment financial information follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Capital expenditures
Coatings $ 4,375 $ 2,686 $ 2,582
Consumer Products 851 627 622
Corporate 91 97 26
Total $ 5,317 $ 3,410 $ 3,230
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Depreciation and amortization
Coatings $ 5,741 $ 4,350 $ 3,428
Consumer Products 1,093 982 1,068
Corporate 110 157 178
Total $ 6,944 $ 5,489 $ 4,674
</TABLE>
Financial information by geographic area is set forth below (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net sales
United States $216,410 $175,665 $156,662
Canada 26,827 19,424 15,687
Europe 7,337 6,799 5,457
Consolidated $250,574 $201,888 $177,806
Operating profit
United States $ 3,183<F*> $ 11,050 $ 9,894
Canada 2,751 1,395 1,177
Europe 2,161 1,826 1,506
8,095 14,271 12,577
Corporate expenses - net (3,871) (3,618) (4,417)
Interest expense (2,131) (1,188) (991)
Costs of pooling of interests (529)
Investment income 587 374 376
Income before income taxes $ 2,680 $ 9,839 $ 7,016
-76-
Identifiable assets
United States $114,472 $107,298 $ 68,098
Canada 17,976 14,102 12,866
Europe 3,949 4,964 3,351
Corporate 11,652 10,688 12,639
Total $148,049 $137,052 $ 96,954
<FN>
<F*>Includes pretax restructuring charges of $10,458.
</FN>
</TABLE>
NOTE 14
SUMMARIZED QUARTERLY OPERATING RESULTS (UNAUDITED)
Selected quarterly financial data is summarized as follows (in
thousands, except share and per share data):
<TABLE>
<CAPTION>
1995 QUARTERS
FIRST SECOND THIRD FOURTH TOTAL
<S> <C> <C> <C> <C> <C>
Net sales $ 64,340 $ 63,317 $ 61,481 $ 61,436 $ 250,574
Gross profit 21,280 21,593 19,999 22,084 84,956
Net income 1,672 2,377 1,354 (3,971) 1,432
Net income per common
share $ .18 $ .25 $ .14 $ (.42) $ .15
Weighted average shares
outstanding 9,484,154 9,495,754 9,529,767 9,550,234 9,515,199
</TABLE>
<TABLE>
<CAPTION>
1994 QUARTERS
FIRST SECOND THIRD FOURTH TOTAL
<S> <C> <C> <C> <C> <C>
Net sales $ 44,950 $ 48,946 $ 51,102 $ 56,890 $ 201,888
Gross profit 15,719 17,220 17,441 18,524 68,904
Net income 1,165 1,831 1,682 1,225 5,903
Net income per common
share $ .15 $ .23 $ .20 $ .13 $ .70
Weighted average shares
outstanding 7,940,876 7,956,326 8,470,159 9,474,283 8,464,639
</TABLE>
-77-
Included in the third and fourth quarters of 1995 were pretax
restructuring charges totaling approximately $470,000, or $.03 per
share after taxes, and $9,988,000, or $.67 per share after taxes,
respectively. See Note 3 to the Consolidated Financial Statements.
NOTE 15
SUBSEQUENT EVENT
On March 4, 1996, the Company entered into a definitive agreement
pursuant to which Lilly Industries, Inc. (Lilly) will acquire all of
the outstanding common stock of Guardsman. Under the terms of the
agreement, Lilly, through a wholly-owned subsidiary, will make a cash
tender offer for all Guardsman shares, including the associated
rights, at a price of $23.00 per share in cash, and upon successful
completion of the tender offer, the stock not tendered will be cashed
out at $23.00 per share in a statutory merger. Guardsman's three
largest stockholders, collectively representing approximately 50% of
Guardsman's outstanding shares, have entered into separate agreements
with Lilly supporting the transaction. The transaction remains subject
to regulatory approval and certain other conditions.
RESPONSIBILITIES FOR FINANCIAL STATEMENTS
Management is responsible for the integrity of the financial data
reported by Guardsman and its subsidiaries. This responsibility
requires preparing financial statements in accordance with generally
accepted accounting principles and reporting data which, using
management's best judgment, fairly reflects Guardsman's financial
position and results of operations. To gather and control financial
data, the Company establishes and maintains accounting systems
adequately supported by internal controls. Management believes that a
high level of internal control is maintained by the selection and
training of qualified personnel, by the establishment and
communication of accounting and business policies and by internal
audits.
Arthur Andersen LLP, independent public accountants, are engaged to
audit and to render an opinion as to whether management's financial
statements, considered in their entirety, present fairly Guardsman's
consolidated financial position and operating results. Their audit
was conducted in accordance with generally accepted auditing
standards, and their report is included herein.
-78-
The Audit Committee of the Board of Directors, composed of five
outside directors, meets regularly with management, the internal
auditor and the independent public accountants to review the
activities of each.
/S/ CHARLES E. BENNETT /S/ HENRY H. GRAHAM, JR.
Charles E. Bennett Henry H. Graham, Jr.
President and Vice President of Finance
Chief Executive Officer and Chief Financial
Officer
January 25, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
Guardsman Products, Inc.
We have audited the accompanying consolidated balance sheets of
Guardsman Products, Inc. and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Guardsman
Products, Inc. and subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for the three
years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
-79-
As explained in note 4 to the consolidated financial statements, in
1993, the Company changed its method of accounting for income taxes to
adopt the provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes."
/S/ ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
January 25, 1996 (except with respect to the matter discussed
in Note 15, as to which the date is March 4, 1996)
STOCKHOLDER INFORMATION
10-K INFORMATION
Upon written request of any stockholder, management will provide, at
no charge, a copy of the Form 10-K as filed with the Securities and
Exchange Commission, less exhibits. Send your request to Mr. Jeffrey
M. Suerth, Secretary of the Company, Guardsman Products, Inc., P.O.
Box 1521, Grand Rapids, Michigan 49501-1521.
COMMON STOCK
The Common Stock of the Company is listed on the New York Stock
Exchange (Symbol: GPI).
TRANSFER AGENT AND REGISTRAR
Chemical Mellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660
(800) 851-9677
-80-
<TABLE>
QUARTERLY COMMON STOCK DATA
<CAPTION>
INCOME DIVIDENDS MARKET PRICE
PER SHARE PER SHARE HIGH LOW
<S> <C> <C> <C> <C>
1995
1st Quarter $ .18 $ .08 $12 5/8 $ 9 7/8
2nd Quarter .25 .08 13 12 3/4
3rd Quarter .14<F*> .08 15 1/4 12 3/4
4th Quarter (.42)<F*> .09 14 1/4 11 1/4
1994
1st Quarter $ .15 $ .08 $16 5/8 $12 1/8
2nd Quarter .23 .08 12 3/4 9
3rd Quarter .20 .08 12 3/8 9
4th Quarter .13 .08 12 7/8 10 1/8
<FN>
<F*>Included in the third and fourth quarter of 1995 were restructuring
charges totaling $.03 per share and $.67 per share, respectively.
</FN>
</TABLE>
Stockholders of record totaled 2,395 and 1,780 at December 31, 1995
and 1994, respectively.
-81-
AN EQUAL OPPORTUNITY EMPLOYER
It is the policy of Guardsman to recruit, hire, employ and promote the
best qualified employees and applicants for employment without regard
to race, color, religion, national origin or sex. Positive action
will be taken and continued to ensure the fulfillment of this policy.
DIRECTORS AND OFFICERS
DIRECTORS
*Paul K. Gaston
Chairman of the Board of the Corporation
Charles E. Bennett
President and
Chief Executive Officer of the Corporation
*John Russell Fowler
Retired Chairman of the Board
Jacobson Stores, Inc.
**Grant C. Gentry
Chairman of the Board
Bromar, Inc.
K. Kevin Hepp
Retired Senior Vice President
Owens-Illinois, Inc.
*George R. Kempton
Chairman of the Board and
Chief Executive Officer
Kysor Industrial Corporation
Winthrop C. Neilson
Managing Director
Neilson/Hetrick Consulting Group
*James L. Sadler
Retired President and
Chief Operating Officer
Moline Paint Manufacturing Co.
Robert W. Schult
President
Nestle Food Company
-82-
*Robert D. Tuttle
Retired Chairman of the Board
SPX Corporation
*Member of the Audit Committee
**Advisory member of the Board of
Directors
CORPORATE OFFICERS
Charles E. Bennett
President and
Chief Executive Officer
Edward D. Corlett
Vice President,
Metal Coatings Group
Henry H. Graham, Jr.
Vice President of Finance,
Chief Financial Officer and
Treasurer
Everette L. Martin
Vice President,
Wood Coatings Group
Keith C. Vander Hyde, Jr.
Vice President,
Consumer Products Group
Jeffrey M. Suerth
Vice President, Communications
and Public Relations
and Secretary
ADMINISTRATIVE OFFICERS
Glenn A. Belter
Vice President, Information Services
Robert H. Ripley
Vice President, Corporate Environmental
and Technical Affairs
Anthony O. Sanders
Vice President, Human Resources
-83-
FACILITY LOCATIONS
Corporate Offices
3033 Orchard Vista SE
P.O. Box 1521
Grand Rapids, MI 49501
(616) 957-2600
FAX (616) 957-1236
Consumer Products
4999 36th Street, S.E.
P.O. Box 88010
Grand Rapids, MI 49512
(616) 940-2900
FAX (616) 956-8010
Cornwall
1915 Second Street W
Cornwall, ONT K6H 5T1
Canada
(613) 932-8960
FAX (613) 932-4439
Fremont
411 Darling Avenue N
Fremont, MI 49412
(616) 924-3950
FAX (616) 924-2085
Grand Rapids Resin
1350 Steele Avenue SE
Grand Rapids, MI 49507
(616) 452-5181
FAX (616) 241-3624
High Point
2147 Brevard Road
P.O. Box 1029
High Point, NC 27261
(910) 889-6344
FAX (910) 841-6790
Little Rock
1900 E 145th Street
Little Rock, AR 72206
(501) 897-4356
FAX (501) 897-4902
-84-
Los Angeles
9845 Miller Way
South Gate, CA 90280
(310) 927-5501
FAX (310) 927-1800
Moline
5400 23rd Avenue
Moline, IL 61265
(309) 762-7546
FAX (309) 762-9604
Rocky Hill
145 Dividend Road
P.O. Box 918
Rocky Hill, CT 06067
(860) 563-2811
FAX (860) 721-9832
Seattle
13535 Monster Road
Seattle, WA 98178
(206) 772-6550
FAX (206) 772-3050
Specialty Coatings
2147 Brevard Road
P.O. Box 1029
High Point, NC 27261
(910) 889-6344
FAX (910) 841-6790
Tulsa, Oklahoma
5111 East 36th Street North
Tulsa, OK 74115
(918) 428-2506
FAX (918) 425-8523
United Kingdom
152 Milton Park
Abingdon
Oxfordshire OX14 4SD
England
01144-235-833009
FAX 01144-235-553058
-85-
EXHIBIT 21
SUBSIDIARIES OF GUARDSMAN PRODUCTS, INC.
1. Guardsman Products Limited, an Ontario, Canada corporation (wholly
owned).
2. G.C.I. Insurance Company, Limited, a Bermuda corporation (wholly
owned).
3. Guardsman UK Limited, a United Kingdom corporation (wholly owned).
4. Armorguard Products, Inc., a New Jersey corporation (wholly owned).
5. Atlanta Sundries, Inc., a Georgia corporation (wholly owned).
6. Guardsman Chemical International, Limited, a Virgin Islands
corporation (wholly owned).
7. Moline Paint Manufacturing Co., an Illinois corporation (wholly
owned).
8. Moline Paint Manufacturing Co.-Tulsa, an Oklahoma corporation (wholly
owned subsidiary of Moline Paint Manufacturing Co.).
-86-
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Guardsman Products, Inc.
As independent public accountants, we hereby consent to the incorporation
of our reports incorporated by reference in this Form 10-K, into the
Company's previously filed Form S-8 Registration Statements, as amended,
File Numbers 2-72787, 2-92445, 33-20034, 33-25483, 33-46778, 33-46780,
33-46781, 33-61689 and 33-61707 and Form S-3 Registration Statements, as
amended, File Numbers 33-19908 and 33-78606.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
March 28, 1996
-87-
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned, does hereby appoint Paul K. Gaston,
Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended
December 31, 1995, and any and all amendments to said
report on Form 10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1992 Employee Stock Purchase
Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Dividend Reinvestment and Stock
Purchase Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Security Builder Plan or
Section 401(k) Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1991 Stock Option Plan;
-88-
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1995 Long-Term Incentive Plan.
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the Moline
Paint Manufacturing Co. 401(k) Profit-Sharing Plan, and
interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully and purposes as each of the undersigned might
or could do in person, hereby ratifying and approving the act of said
attorneys and each of them.
Dated: March 27, 1996
/S/ PAUL K. GASTON /S/ CHARLES E. BENNETT
Paul K. Gaston Charles E. Bennett
Chairman and Director President, Chief Executive Officer
and Director
/S/ HENRY H. GRAHAM, JR.
Henry H. Graham, Jr.
Vice President of Finance, Chief
Financial Officer and Treasurer
POWER OF ATTORNEY
The undersigned, GEORGE R. KEMPTON, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended
December 31, 1995, and any and all amendments to said
report on Form 10-K;
-89-
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Dividend Reinvestment and Stock
Purchase Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Security Builder Plan or
Section 401(k) Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1992 Employee Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1995 Long-Term Incentive Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the Moline
Paint Manufacturing Co. 401(k) Profit-Sharing Plan, and
interests in the Plan.
-90-
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 16, 1996
/S/ GEORGE R. KEMPTON
George R. Kempton
Director
POWER OF ATTORNEY
The undersigned, JOHN RUSSELL FOWLER, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended
December 31, 1995, and any and all amendments to said
report on Form 10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Dividend Reinvestment and Stock
Purchase Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Security Builder Plan or
Section 401(k) Plan, and interests in the Plan;
-91-
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1992 Employee Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1995 Long-Term Incentive Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the Moline
Paint Manufacturing Co. 401(k) Profit-Sharing Plan, and
interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 16, 1996
/S/ JOHN RUSSELL FOWLER
John Russell Fowler
Director
POWER OF ATTORNEY
The undersigned, K. KEVIN HEPP, does hereby appoint Paul K. Gaston,
Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended
December 31, 1995, and any and all amendments to said
report on Form 10-K;
-92-
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Dividend Reinvestment and Stock
Purchase Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Security Builder Plan or
Section 401(k) Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1992 Employee Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1995 Long-Term Incentive Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the Moline
Paint Manufacturing Co. 401(k) Profit-Sharing Plan, and
interests in the Plan.
-93-
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 16, 1996
/S/ K. KEVIN HEPP
K. Kevin Hepp
Director
POWER OF ATTORNEY
The undersigned, WINTHROP C. NEILSON, III, does hereby appoint Paul
K. Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of
them severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended
December 31, 1995, and any and all amendments to said
report on Form 10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Dividend Reinvestment and Stock
Purchase Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Security Builder Plan or
Section 401(k) Plan, and interests in the Plan;
-94-
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1992 Employee Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1995 Long-Term Incentive Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the Moline
Paint Manufacturing Co. 401(k) Profit-Sharing Plan, and
interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 16, 1996
/S/ WINTHROP C. NEILSON, III
Winthrop C. Neilson, III
Director
POWER OF ATTORNEY
The undersigned, ROBERT D. TUTTLE, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended
December 31, 1995, and any and all amendments to said
report on Form 10-K;
-95-
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Dividend Reinvestment and Stock
Purchase Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Security Builder Plan or
Section 401(k) Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1992 Employee Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1995 Long-Term Incentive Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the Moline
Paint Manufacturing Co. 401(k) Profit-Sharing Plan, and
interests in the Plan.
-96-
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 16, 1996
/S/ ROBERT D. TUTTLE
Robert D. Tuttle
Director
POWER OF ATTORNEY
The undersigned, JAMES L. SADLER, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended
December 31, 1995, and any and all amendments to said
report on Form 10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Dividend Reinvestment and Stock
Purchase Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Security Builder Plan or
Section 401(k) Plan, and interests in the Plan;
-97-
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1992 Employee Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1995 Long-Term Incentive Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the Moline
Paint Manufacturing Co. 401(k) Profit-Sharing Plan, and
interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 16, 1996
/S/ JAMES L. SADLER
James L. Sadler
Director
POWER OF ATTORNEY
The undersigned, ROBERT W. SCHULT, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended
December 31, 1995, and any and all amendments to said
report on Form 10-K;
-98-
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Dividend Reinvestment and Stock
Purchase Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. Security Builder Plan or
Section 401(k) Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1992 Employee Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the
Guardsman Products, Inc. 1995 Long-Term Incentive Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's common
stock $1 par value, to be issued pursuant to the Moline
Paint Manufacturing Co. 401(k) Profit-Sharing Plan, and
interests in the Plan.
-99-
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 16, 1996
/S/ ROBERT W. SCHULT
Robert W. Schult
Director
-100-
