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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 SEPTEMBER 30, 1995
------------------
OR
[ ] 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 .
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Commission File No. 1-6220
HMI Industries Inc.
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(Exact name of registrant as specified in its charter)
DELAWARE 36-1202810
----------------------------- ------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation or
organization)
3631 Perkins, Cleveland, Ohio 44114
- ---------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 432-1990
Securities registered pursuant to Section 12(b) of the Act:
NONE (*)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 par value per share
-------------------------------------
(Title of Class)
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Indicate by check mark whether 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 ninety days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. YES X NO
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Aggregate market value of voting stock held by non-affiliates of registrant
computed by reference to the closing price on the NASDAQ Stock Exchange on
December 18, 1995 was approximately $21,800,000.
Number of shares outstanding of each of registrant's classes of common stock:
Class Outstanding December 18, 1995
- ------------------------------------ -----------------------------
Common stock, $1 par value per share 4,911,530
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in this Form 10-K.
1. Portions of the Proxy Statement for the 1996 Annual Meeting,
incorporated into Part III (Items 10, 11, 12 and 13).
Index to Exhibits is found on page 46.
This report consists of 68 pages.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PART I. Page
- ------- ----
<S> <C>
Item 1. Business
(a) General Development of Business . . . . . . . . . 4
(b) Financial Information About Industry Segments . . 5
(c) Narrative Description of Business . . . . . . . . 5
Consumer Goods. . . . . . . . . . . . . . . . 5
Manufactured Products . . . . . . . . . . . . 9
Commercial and Industrial Stamped Components . 9
Metal Formed Tubular Products . . . . . . 10
Tools, Dies and Specialty Machinery. . . . 11
Employees . . . . . . . . . . . . . . . . . . 11
Environmental Policies and Controls . . . . . 12
Methods of Production and Raw Materials . . . 12
(d) Financial Information About Foreign and
Domestic Operations and Export Sales. . . . . . 12
Executive Officers of the Registrant. . . . . . . 13
Item 2. Properties . . . . . . . . . . . . . . . . . . . . 14
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders. 15
PART II.
- --------
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . 16
Item 6. Selected Financial Data . . . . . . . . . . . . . . 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . 18
Item 8. Financial Statements and Supplementary Data . . . . 22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . 22
PART III.
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Item 10. Directors and Executive Officers of Registrant. . . 23
Item 11. Executive Compensation . . . . . . . . . . . . . . 23
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . 23
Item 13. Certain Relationships and Related Transactions. . . 23
PART IV.
- --------
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . 24
SIGNATURES . . . . . . . . . . . . . . . . . 25
INDEX TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 27
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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PART I.
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Item 1. Business.
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(a) General Development of Business
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HMI Industries Inc. (the "Company" or "registrant") was known as Health-Mor
Inc. until January, 1995. The Company was reorganized in 1968 as a Delaware
corporation, succeeding an Illinois corporation originally formed in 1928. The
business of the Company is carried out through two primary divisions. The
Consumer Goods Division manufactures and sells floor care and air filtration
products, primarily portable bagless vacuum cleaners sold under the trade names
"Filter Queen," "Princess" and "Majestic," central vacuum cleaning systems
sold under the trade names "Vacu-Queen" and "Majestic II", portable canister
vacuums sold under the trade names "Optima" and "ElektraPure", and an upright
vacuum sold under the trade name "Princess 2000". This division also sells
needleless insulin injectors under the AdvantaJet name, and certain tubular
consumer products, both of which are manufactured by subsidiaries in the
Manufactured Products Division. The operations of the Consumer Goods Division
are carried on through the operations at the Payne and Perkins Avenue
facilities in Cleveland, Ohio, and the following wholly-owned subsidiaries: HMI
Incorporated (incorporated in Ontario, Canada); Health-Mor Mexicana S.A. de
C.V. (incorporated in Mexico); Experimental Distributing Inc. (incorporated in
Ohio); Home Impressions Inc. (incorporated in Delaware); HMI Personal Care
Corp. (incorporated in Delaware); Health-Mor International, Inc., which meets
the qualifications under the Internal Revenue Code as a foreign sales
corporation (incorporated in the U.S. Virgin Islands); Health-Mor B.V.
(incorporated in the Netherlands); Health-Mor Acceptance Corporation
(incorporated in Delaware), HMI Acceptance Corporation (incorporated in
Ontario, Canada)and Health-Mor Acceptance PTY Ltd. (incorporated in Sydney,
Australia).
The Manufactured Products Division engages in the fabrication and sale of
commercial and industrial stamped components, metal formed tubular products and
machined components, and the manufacture of needleless insulin injectors. The
operations of this division are carried out by wholly-owned subsidiaries of the
Company; Bliss Manufacturing Company (incorporated in Ohio), Tube Form Inc.,
(incorporated in Ohio), and Tube-Fab Ltd., (incorporated in Ontario, Canada).
In 1995 the Company introduced the Captiva brand of filtration products,
including furnace and air conditioning filters, electrostatic cone filters and
a portable room air cleaner. The electrostatic cone filter and portable room
air cleaner provide a level of filtration that is greater than HEPA standards
(High Efficiency Particulate Air), which has been an industry standard for
years. The company also introduced the Optima brand canister
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vacuum cleaner through its Home Impressions unit. This canister unit uses a
bag filter and will be marketed through retail stores worldwide.
Through the new HMI Personal Care Corp., the Company is aggressively marketing
the Activa line of diabetic care products. Foremost among these is the
needleless insulin injector now called AdvantaJet (formerly called Preci-Jet
and Freedom Jet). Injectors for sensitive and tougher skin are also available,
as are a variety of lifestyle products that will enhance the normalcy of
diabetic patients.
(b) Financial Information About Industry Segments
---------------------------------------------
The net sales and operating income of each industry segment and the
identifiable assets attributable to each industry segment for the years ended
September 30, 1995, 1994 and 1993 are set forth in Note 11 (Business Segments)
of the Notes to the Consolidated Financial Statements found on page 41.
(c) Narrative Description of Business
---------------------------------
Consumer Goods
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The principal products of the Consumer Goods Division of the Company are floor
care and air filtration products, primarily portable vacuum cleaners and
central vacuum cleaning systems. Portable bagless vacuum cleaners are sold
under the trade names "Filter Queen," "Princess," and "Majestic". Portable
canister vacuums are sold under the trade names "Optima" and "ElektraPure."
The product line also includes an upright vacuum cleaner sold under the trade
name "Princess 2000". The central vacuum cleaning systems are sold under the
trade names "Vacu-Queen" and "Majestic II." The bagless portable and portable
canister vacuums consist of a canister type suction cleaner, motorized vacuum
cleaning head with a revolving brush ("Pow-R-Nozzle"), hose, wand, brushes and
other cleaning tools. The Company also offers accessories for use with its
bagless and canister vacuum cleaners, most of which are attached to the exhaust
outlet and may be used as room deodorizers, air circulators, and for other
blowing operations such as the spraying of liquids. The central vacuum
cleaning systems use the motorized vacuum cleaning head with a revolving brush,
as well as the hose, wand, brushes and other cleaning tools. The Company also
manufactures straight suction attachments, which do not have a motorized vacuum
cleaning head.
The Filter Queen cleaning system has been registered by Underwriters
Laboratories and Canadian Standards Authority as an Air Filtration Device,
which support filtration claims and potentially expand the market of customers.
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The Company manufactures a commercial model of its Princess and Optima vacuum
cleaners, which it sells to business and industrial users. The Company also
manufacturers vacuum cleaner power nozzle heads for other vacuum cleaner
companies on a private label basis.
The floor care products of the Consumer Goods Division are marketed throughout
the United States, Canada, Mexico and forty-five other countries. With the
exception of Mexico, the Company markets the Filter Queen Majestic through
independent distributors who sell in the home directly through their own
independent representatives and who also sell indirectly through the
representatives of smaller independent local distributors. In Mexico, the
distribution channel is comprised of Company employees. In certain foreign
markets, the Princess and the ElektraPure are also marketed in a similar
manner. Optima is marketed through retail stores, while the Princess 2000 is
marketed on a direct basis.
The Company recently opened a direct distributorship in Toledo, Ohio, under the
name Experimental Distributing, Inc. which it will use to test new marketing
strategies, lead programs and other direct sales techniques.
Home Impressions Inc. is dedicated to marketing products related to home
convenience and comfort. The product offerings are manufactured by the
Company's existing divisions as well as being sourced from other manufacturers.
New marketing techniques and distribution channels are utilized on a national
and international basis. Catalog distribution, infomercials and telemarketing
are some of the venues being tested by the Company as a means to exploit this
significant business potential.
A line of products manufactured by the tubular products group of the Company
under the name "Precise Contours" is a new direction for this division,
producing products for the first time for the consumer marketplace. Initial
offerings include telescopic flag poles, door and window security bars and a
door jam. Other products also include a luggage cart, water broom and a wood
rack.
The Home Impressions product line also includes a retail product grouping of
floor care products, including the "Optima", "Princess 2000", "ElektraPure"
and "Vacu-Queen". Except for the "Princess 2000," these products are sold
primarily through specialty retail vacuum stores in North America. The
"Princess 2000" will continue to be sold through a direct sales network which
was established in 1993. This network began in the United States with the
"Princess 2000" upright vacuum cleaner by utilizing direct sales strategies and
incorporating new, lower cost, lower investment selling techniques to allow
greater flexibility in the hiring and training of independent sales associates.
Home Impressions will begin selling the "Precise Counters" product line,
"Optima" and "Vacu-Queen" internationally at the retail level.
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Central vacuum cleaning systems are marketed worldwide under the trade name
"Vacu-Queen" through retail distributors and under the trade name "Majestic II"
through direct distributors. The Company also markets the Vacu-Queen to
building contractors and developers for installation in newly constructed homes
and apartments.
In 1994, the Company initiated the direct distribution of a line of
environmentally friendly household cleaning products. The line of six products
is currently being sold through the Filter Queen network under the brand name
`Down to Earth'.
Household Rental Systems ("HRS") provides steam cleaners and carpet shampooers
for rent to consumers through the Filter Queen direct distribution network
under the names "Easy Off" in Canada and "Easy Way" in the United States. HRS
also rents steam cleaners and carpet shampooers to consumers through leading
grocery chains, drug stores and hardware stores in Canada. The Company
estimates that HRS controls approximately 80% of this market in Canada.
Independant direct distributors also rent machines to consumers through in-home
delivery and pick up. The Easy-Way and Easy Off product lines are full lines
of cleaning solutions for use with HRS products, with other similar products or
individually. These products are sold by existing retail and Distributor
organizations. HRS products meet strong competition for the steam cleaners and
carpet shampooers from seven major competitors, most of which are larger than
HRS or are part of larger companies with greater resources than HRS.
HMI Personal Care Corp. markets the AdvantaJet needle-free insulin injector,
the Comfort Care Bed, and other health care products. Customer service is
crucial to this product line. Local advertising, telemarketing and seminars
are used to reach those consumers who can benefit from the AdvantaJet. HMI
Personal Care Corp. works with medical professionals and consumer groups to
target the customer base. There are two other devices which compete with the
AdvantaJet. The Company owns a number of patents in the United States, Canada,
United Kingdom, Japan, and various European countries covering the needleless
insulin injectors. Active distributor agreements are in effect to distribute
this product in the Japan, Korea, Spain, Italy, France and certain countries in
Africa and the Middle East.
The Company meets strong competition in the sale of its vacuum cleaners and
central vacuum systems. In the case of sales through in-home solicitation,
this competition is primarily with vacuum cleaner equipment in use in the home
at the time of the sales presentation. In the case of sales through retail
vacuum cleaner stores, this competition is with the vacuum cleaner equipment in
use in the home at the time of the customer's inquiry and
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with other brands of vacuum cleaners and central vacuum systems sold by the
particular store. There are approximately twenty-one significant vacuum
cleaner manufacturers, plus many regional and private label manufacturers, who
make over forty brand name vacuum cleaners in the United States. Most of these
are sold through department stores, discount houses, appliance shops and by
catalog, generally at substantially lower prices than the Filter Queen, and
often at lower prices than the Optima and ElektraPure. There are approximately
twenty manufacturers in the United States and Canada of central vacuum systems.
There are nine companies which compete significantly with the Company in the
United States and eight companies which compete significantly with the Company
in Canada in distribution of vacuum cleaners by in-home solicitation. Many of
its competitors in the sale of vacuum cleaners are substantially larger and
have greater resources than the Company. The Company believes that its vacuum
cleaners are competitive with other vacuum cleaners because of their
performance and warranty. It is the practice of the Company, along with other
companies in the vacuum cleaner industry, to maintain significant amounts of
inventory to meet the rapid delivery requirements of customers. The Consumer
Goods Division of the Company operates without a backlog.
The Company's Product Development Department, established to create, engineer
and oversee the market launch of new and innovative products, introduced the
"Majestic Triple Crown" throughout the world in 1994 and the Captiva family of
filtration products in 1995. Management believes these products (furnace and
air conditioning filters, electrostatic cone filter and a portable room air
cleaner) will create unparalleled air filtration in the vacuum cleaner,
filtration and other industries. This department also developed the Optima
canister vacuum cleaner, introduced in mid-1995.
The Company is expanding its parts and service business by utilizing its
extensive customer data base to market accessories and new products and
services designed as part of the Company's "Friend for Life" philosophy. The
Direct Support Plus program is designed to maintain contact with customers,
encourage add-on sales and generate referrals by utilizing these same data
bases and the Distributor network. The parts and service business is expanding
overseas.
The Company's financing program, through its subsidiaries, Health-Mor
Acceptance Corporation and HMI Acceptance Corporation continues to be expanded.
Health-Mor Acceptance PTY Ltd. was incorporated in Sydney Australia, to offer
consumer financing of the Company's products in that country. Filter Queen
distributors cite the program's original objective of increasing dealer
retention for its continued value to the distribution network. Risk is limited
through agreements between the companies and the distribution network which
provide for the disbursement of funds to the distribution network after funds
are received by the Company from
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the customer.
The Company holds trademark or trade name registration on the principal
trademarks and trade names used by the Consumer Goods Division. These
trademarks have been registered in the United States, Canada and other
countries in which the Company has distributors which sell a significant number
of units. The Company has entered into oral or written distributorship
agreements with various companies and individuals throughout the world. The
Company owns a number of patents in the United States, Canada and other
countries on various features of the Filter Queen, Vacu-Queen and related
products. The Company does not believe that its business is materially
dependent on any patent or group of patents.
In 1995, one customer of the Consumer Goods Division accounted for 12% of the
Company's consolidated revenues. American Home, Inc., Tokyo, Japan, is the
Company's largest distributor. In the event that this distributor were to go
out of business, switch to a competing product or switch to products other than
floor care products, and the lost revenues were not replaced by sales to new or
existing distributors, the loss could have a material adverse effect on the
Company. The relationship with American Home is considered stable. The
Company realizes that sales fluctuations can occur in this Distributor's
primary market, and such fluctuations, if severe enough, could have a material
impact on the Company's revenues.
Manufactured Products
- ---------------------
The Manufactured Products Division of the Company consists of commercial and
industrial stamped components, metal formed tubular products, machined
components, tools, dies and specialty products and production of needle-less
insulin injection systems.
Commercial and Industrial Stamped Components
- --------------------------------------------
Bliss Manufacturing Company ("Bliss"), a wholly-owned subsidiary of the
Company, engages in the manufacture of various types of sheet metal stamping
and sub-assemblies, and painting and welding in conjunction therewith, for
customers in the automotive manufacturing, materials handling equipment,
military, and plumbing industries. The products manufactured by Bliss are sold
primarily to original equipment manufacturers, mostly in the Midwest.
In 1995, as in 1994, Bliss continued to increase its capacity with
state-of-the-art technology by adding additional computer controlled presses
and a plasma cutting machine. This equipment provides the flexibility to
produce low volume and prototype work for customers on a quick turn around
basis without the need for costly dies. A new large press line currently being
installed in its Newton Falls plant will enhance Bliss' capabilities in this
area.
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The ISO 9002 approval granted to Bliss by Freightliner and Volvo has provided
additional opportunities as well for special truck order requests.
The customers of Bliss issue releases for parts depending upon their own
requirements. Therefore, Bliss operates without a backlog.
The business of Bliss is significantly dependent upon several automotive
manufacturers. One customer of Bliss, Ford Motor Company, accounted for almost
11% of the registrant's consolidated revenues in 1995. In the event that all
Ford Motor Company business were to cease immediately, and the revenues were
not replaced with sales to other customers, whether existing or new, the loss
could have a material adverse effect on the registrant and its subsidiaries,
taken as a whole. However, the registrant believes that its relationship with
Ford Motor Company is good and, although it anticipates the loss of business
for particular parts from time to time as the products in which those parts are
incorporated are discontinued or substantially changed, the registrant believes
that it can, at least in part, make up for such losses through existing or new
customers.
Metal Formed Tubular Products
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Tube Form Inc. ("Tube Form"), a wholly-owned subsidiary of the Company, engages
in the bending and sale of steel, aluminum and copper tubing. Tube Form
markets its products principally throughout the United States primarily to
industrial consumers in the appliance, vacuum cleaner, machine tool, marine,
pneumatic, hydraulic and trucking industries.
Tube Form has begun the manufacture of a new line of products for the consumer
marketplace under the name brand name "Precise Contours." Initial product
offerings include telescopic flag poles, door and window security bars and a
door jam. Other products also include a luggage cart, water broom and a wood
rack.
Tube Form experiences strong competition from thousands of competitors, none of
whom has any sizable share of the market for such products.
Aggregate sales backlog on September 30, 1995 and 1994 were approximately
$3,614,000 and $3,760,000, respectively. It is expected that this operation
will fill its entire backlog in the current fiscal year.
Precision Tube Formers, a division of Tube Form, operates in similar
markets to Tube Form but also supplies tubular assemblies to the aerospace
market in the United States.
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Tube-Fab Ltd. ("Tube-Fab"), a wholly-owned subsidiary of the Company, is
engaged in the manufacture of high quality tubular products for the aircraft,
military, communications and specialty architectural industries.
Tube-Fab experiences strong competition from numerous competitors, none of whom
has any sizable share of the market for such products.
Sales backlog on September 30, 1995 and 1994 was approximately $570,000 and
$1,350,000, respectively. It is expected that this backlog will be filled
during the current fiscal year.
Tools, Dies and Specialty Machinery
- -----------------------------------
Machined Products Division ("MPD"), a division of Tube-Fab, engages in the
manufacture and sale of precision machined components for aircraft engines for
the aerospace industry. The work performed is primarily subcontract work for
engine manufacturers. In addition, MPD continues its work with Spar Aerospace
manufacturing components for the Canadarm Joint Motor Modules for the Space
Station Freedom. MPD has numerous competitors in the machining field, none of
whom has any sizable market share. MPD also manufactures the needless insulin
injection system sold by HMI Personal Care Corp.
Sales backlog for MPD as of September 30, 1995 and 1994 was approximately
$439,000 and $391,000, respectively. It is expected that this backlog will be
filled during the current fiscal year.
Employees
- ---------
The Company and its subsidiaries employed 1,187 persons at September 30, 1995
throughout the world.
Environmental Policies and Controls
- -----------------------------------
To the best of the Company's knowledge, it is in compliance with all applicable
Federal, State and local laws relating to the protection of the environment.
It does not anticipate that any laws or regulations relating to the protection
of the environment will have any material effect on its earnings, capital
expenditures, or competitive position. The Company does not anticipate making
any material capital expenditures for environmental control facilities during
the current and succeeding fiscal years.
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Methods of Production and Raw Materials
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The Consumer Goods Division of the Company assembles finished parts purchased
from various suppliers. Tube Form and Tube-Fab purchase metal tubing from
various suppliers and engage in finishing operations, such as bending, beading
and flaring. MPD manufactures needle-less insulin injectors and precision
machined parts for the aerospace industry. Bliss purchases steel (both coil
and blank) from various suppliers and stamps metal parts for its customers.
Bliss also engages in welding and painting of certain parts, including the
painting of parts for other companies.
The Company and its subsidiaries have good relationships with their suppliers
and do not anticipate any problems in obtaining any necessary raw materials or,
if necessary, in obtaining alternative sources of supply.
(d) Financial Information About Foreign and Domestic Operations
-----------------------------------------------------------
and Export Sales
----------------
Financial information relating to foreign and domestic operations for the years
ended September 30, 1995, 1994 and 1993 are set forth in Note 11 (Business
Segments) of the Notes to Consolidated Financial Statements found on page 41.
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Executive Officers of the Registrant
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<TABLE>
<CAPTION>
Name Age Position and Terms of Service as Officer
- ---- --- ----------------------------------------
<S> <C> <C>
Kirk W. Foley 53 Chairman and Chief Executive Officer (1)
William M. Duvall 65 Chairman and Chief Executive Officer,
Bliss Mfg. Co. (2)
William A. Adams 49 President and Chief Operating Officer,
Bliss Mfg. Co. (3)
Kevin Dow 39 Vice President - Finance and
Administration and Treasurer(4)
<FN>
(1) Mr. Foley served as President and Chief Executive Officer of the
Company from 1989 to 1991, as Vice Chairman from 1988 to 1991 and as Chairman
and Chief Executive Officer since 1991. Mr. Foley has served as Chairman of
Tube-Fab Ltd., a subsidiary of the Company, since 1987 and has served as
President of HMI Incorporated, a subsidiary of the Company, since 1988.
(2) Mr. Duvall is Chairman of the Board of Bliss Manufacturing Co. and
its Chief Executive Officer. Mr. Duvall served as President of Bliss from 1990
until 1993.
(3) Mr. Adams has been the President and Chief Operating Officer of
Bliss Manufacturing Co. since August, 1993. Mr. Adams was the Vice President
and General Manager of Tridon, Inc. from 1992 to July, 1993. Mr. Adams was Vice
President - Manufacturing and Technology for Tridon Ltd. from 1988 to 1992.
(4) Mr. Dow has served as Vice President - Finance and Administration
of the Company since 1989. He has served as Treasurer since August, 1995.
</TABLE>
Kevin Dow, Vice President-Finance and Administration, is the first cousin of
Barry L. Needler, a director.
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Item 2. Properties
The following table sets forth by industry segment, the location, character and
size (in square feet) of the real estate used in the operations of the Company
and its subsidiaries at September 30, 1995:
<TABLE>
<CAPTION>
Square Feet
----------------
Location Character Owned Leased
- -------- --------- ----- ------
<S> <C> <C> <C>
CONSUMER GOODS DIVISION
Floor Care Products
- -------------------
United States of America
- ------------------------
Cleveland, Ohio Office, Plant & 315,420(1)
Warehouse
Toledo, Ohio Office 2,400
Bradley, Illinois Office & warehouse 7,516
Mexico
- ------
Mexico City Offices 13,500
Canada
- ------
Rexdale, Ontario Office 7,000
Mississauga, Ontario Warehouse 11,902
Moncton, New Brunswick Office & Warehouse 3,000
Dorval, Quebec Office & Warehouse 4,762
Winnipeg, Manitoba Office & Warehouse 2,473
Calgary, Alberta Office & Warehouse 4,500
Edmonton, Alberta Office & Warehouse 2,026
Burnaby, British Columbia Office & Warehouse 4,500
MANUFACTURED PRODUCTS DIVISION
Metal Formed Tubing
- -------------------
Bedford Heights, Ohio Office, Plant & 76,238
Warehouse
Mississauga, Ontario Office & Plant 26,000
</TABLE>
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Tools, Dies & Specialty Machinery
- ---------------------------------
<TABLE>
<S> <C> <C>
Charlottetown, Office, Plant & 20,000
Prince Edward Island Warehouse
Metal Stamping
- --------------
Newton Falls, Ohio Office, Plant & 400,000
Warehouse
Youngstown, Ohio Office, Plant & 150,000
Warehouse
</TABLE>
(1) The Company is in the process of moving its production and office
facilities to a new location with 210,000 square feet. The old production and
office facility of 105,420 square feet will be sold upon the Company vacating
the facility.
The Company owns a 25,000 square foot building in Lombard, Illinois which was
leased during 1994 with an option to purchase at any time under the ten year
lease term. Under the terms of the agreement, the lessee is responsible for all
operating expenses related to the property and the lease payments equal the
debt service for the outstanding indebtedness incurred for the original
purchase of the property. All other property owned or leased by registrant is
fully utilized by registrant or is leased to third parties.
Item 3. Legal Proceedings
Claims arising in the ordinary course of business are pending against the
Company. Although these are in various stages of the litigation process,
management believes that none of these matters will have a material adverse
effect on the consolidated financial position, results of operations or
liquidity of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
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PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The common stock of the Company was listed and traded on the American Stock
Exchange under the symbol HMI through December 19, 1994. On December 20, 1994,
the Company ceased to trade on that exchange and moved to the NASDAQ Stock
Market under the symbol HMII. As of September 30, 1995, there were
approximately 292 stockholders of record.
A summary of the dividends declared and the quarterly high and low sales price
of the Company's common stock on the Nasdaq Stock Exchange or American Stock
Exchange for the years ended September 30, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995
High Low Dividend
<S> <C> <C> <C>
1st Quarter 16 1/2 13 1/4 $ .0830
2nd Quarter 16 3/4 15 $ .0875
3rd Quarter 17 15 1/4 $ .0875
4th Quarter 16 1/4 14 $ .0875
</TABLE>
<TABLE>
<CAPTION>
1994
High Low Dividend
<S> <C> <C> <C>
1st Quarter 14 3/8 11 1/4 $ .075
2nd Quarter 19 1/8 12 7/8 $ .083
3rd Quarter 16 5/8 12 1/2 $ .083
4th Quarter 14 5/8 13 $ .083
</TABLE>
The declaration and payment of quarterly dividends is at the discretion of the
Board of Directors, which may raise, lower or omit the dividend in any quarter.
It is expected that dividends will continue to be declared and paid quarterly.
Under the terms of the Note Purchase Agreement entered into by the Company in
November 1990, dividend payments can not exceed 50% of the cumulative net
income of the Company since 1990 over a base amount established in the
agreement. The restriction remains in effect until the notes are paid in full
in 1997.
16
<PAGE> 17
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Five Year Summary of Operations
For the nine
For the years ended September 30, month ended
September 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Revenues From Continuing Operations $137,594,631 $134,986,961 $100,826,935 $84,887,587 $60,792,156
Operating Costs and Expenses (B) $128,115,705 $124,002,401 $ 91,252,491 $78,136,308 $55,752,363
Other Income (Expense), net $ (1,798,451) $ (1,422,167) $ (1,741,843) $(1,831,594) $(1,279,273)
Income From Continuing Operations
Before Income Taxes $ 7,680,475 $ 9,562,393 $ 7,832,601 $ 4,919,685 $ 3,760,520
Income Margin on continuing operations
before income taxes 5.6% 7.1% 7.8% 5.8% 6.2%
Income Taxes $ 2,065,800 $ 3,115,304 $ 2,665,837 $ 1,846,600 $ 1,087,473
Income Tax Rate 26.9% 32.6% 34.0% 37.5% 28.9%
Income From Continuing Operations $ 5,614,675 $ 6,447,089 $ 5,166,764 $ 3,073,085 $ 2,673,047
Income Margin on Continuing Operations 4.1% 4.8% 5.1% 3.6% 4.4%
Loss From Discontinued Operations -- -- $ (297,000) -- $ (206,000)
Cumulative Effect-
Change of Accounting for Income Taxes -- $ 719,016 -- -- --
Net Income $ 5,614,675 $ 7,166,105 $ 4,869,764 $ 3,073,085 $ 2,467,047
Net Income Margin 4.1% 5.3% 4.8% 3.6% 4.1%
PER SHARE DATA:
Net Revenues From continuing Operations $ 28.22 $ 27.61 $ 20.78 $ 17.52 $ 12.54
Income From Continuing Operations 1.15 $ 1.32 $ 1.07 $ .63 $ .55
Loss From Discontinued Operations $ -- $ -- $ (.06) $ -- $ (.04)
Net Income $ 1.15 $ 1.47 $ 1.01 $ .63 $ .51
Cash Dividends $ .346 $ .324 $ .301 $ .301 $ .226
Weighted Average Number of Common
Shares Outstanding 4,876,599 4,888,395 4,851,192 4,846,011 4,847,651
Total Assets $ 84,273,931 $ 77,431,812 $ 65,102,787 $54,909,802 $53,237,530
Long-Term Debt $ 14,050,715 $ 13,176,973 $ 8,800,956 $ 9,159,316 $10,516,050
Stockholders' Equity $ 42,339,313 $ 39,717,582 $ 34,442,194 $31,482,159 $29,873,471
Book Value Per Share $ 8.68 $ 8.13 $ 7.10 $ 6.50 $ 6.16
Working Capital $ 25,607,284 $ 22,941,184 $ 18,189,328 $16,499,832 $16,126,038
Ratio of Current Assets to Current
Liabilities 1.98 1.99 1.9 2.3 2.4
Percent of Earnings on Average
Stockholders' Equity 13.7% 19.3% 14.8% 10.0% 8.4%
Percent of All Dividends to Net Income 30.1% 22.1% 30.1% 47.7% 44.6%
Stock High 17 19 1/8 13 3/4 8 1/4 6 3/4
Stock Low 13 1/4 11 1/4 5 5/8 5 1/8 4 3/8
Average Annual Price to Earnings Ratio 13.2 10.3 9.6 10.5 10.8
Average Annual Dividend Yield 2.3% 2.1% 3.1% 4.5% 4.1%
</TABLE>
(A) The Company adopted a fiscal year ending September 30 during 1991,
therefore the Five Year Summary includes data as of and for the years ended
September 30, 1995, 1994, 1993 and 1992, and for the nine months ended
September 30, 1991. In 1994 the Company acquired the assets of Household
Rental Systems. On January 13, 1994 and August 6, 1992 the Company declared 3
for 2 common stock splits in the form of dividends payable February 22, 1994
and September 22, 1992. All share and per share information has been restated
to reflect the effects of such splits in the Five Year Summary of Operations.
(B) Depreciation expense from continuing operations was $2,353,681, $2,043,761,
$1,761,731, and $1,707,279 for the years ended September 30, 1995, 1994, 1993
and 1992 respectively, and $1,216,491 for the nine months ended September 30,
1991.
17
<PAGE> 18
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
The working capital balance at September 30, 1995 was $25,607,000 an increase
of 12% from the September 30, 1994 balance of $22,941,000 and an increase of
41% from the September 30, 1993 balance of $18,189,000.
The effect of foreign exchange fluctuations is primarily limited to the
Canadian and Mexican operations. The Consolidated Statements of Cash Flows
incorporates the effects of foreign exchange in each of the categories
presented. The impact of the devaluation in Mexico during the year of
$1,700,000 has been reflected as a component of equity based on the nature of
the Company's investment and intended timing of repayment of the amounts due.
The value of the Mexican Peso versus the US dollar continues to fluctuate. In
managements' opinion, the amount of additional adjustments, if, any, would not
have a material effect on consolidated shareholders' equity.
The Company's cash decreased $119,000 during the year ended September 30, 1995.
Accounts receivable increased by $2,306,000 and finance contracts receivables
increased by $278,000. These increases reflect the sales growth in the
Consumer Goods Division, particularly in international markets. Finance
Contracts Receivable increases (non-current increased by $980,383) reflect the
success of this program in assisting and in supporting the Company's
distribution channel in Australia, Canada, Mexico and the United States of
America. This amount was reduced as stated above, due to the devaluation of
the Mexican Peso during the year. Inventories increased by $1,896,000 on
account of the introduction of Optima, Captiva and Empress products in the
Consumer Goods Division and planned increases in finished goods to meet
Consumer Goods Division demand. Unamortized trademarks of $1,557,000
represent amounts paid at the time of the Household Rental Systems acquisition
which will be expended during the remainder of the term of the license
agreements. Accounts payable increased by $435,000, due to the increases in
amounts payable to the participants in the Consumer Goods Division distribution
channel as funds are collected on finance Contracts Receivable in inventories
and on account of the increase in inventories.
At September 30, 1995, $5,000,000 of the unsecured, 9.86%, seven year private
placement term notes were outstanding. This debt, obtained in November 1990 to
finance the acquisition of Bliss Manufacturing Company, requires annual
principal payments in November of each year of $1,666,667 through 1997.
Capital expenditures during 1995 were $4,807,000, compared to $4,070,000 in
1994. In 1995, capital expenditures in the Consumer
18
<PAGE> 19
Goods operation were $2,712,000 and in the Manufactured Products Division
$2,095,000. The largest addition during the year was the acquisition of a
210,000 square foot facility in Cleveland to relocate the production and
assembly operations of the Consumer Goods Division and the Company's corporate
activities. Amounts expended in this regard totaled $690,000. Capital
acquisitions in the Household Rental Systems operations were $515,000 for steam
cleaning and shampooing machines to increase the fleet of rental machines and
begin the distribution of these machines in the USA market. New product
tooling investments were $375,000 and tooling replacement costs totaled
$197,000. During the year, the Company invested $228,000 in modifications and
improvements to the computer hardware and software acquired in 1994. During
the year the new filter cone manufacturing machine was completed at a total
cost of $450,000 (of which $60,000 remains to be paid). Additions in the
Manufactured Products Division include $622,000 to prepare the Bliss
Manufacturing building in Newton Falls, Ohio for a new press line for
additional capacity. Among the larger assets added at Bliss' stamping
operations were three used 1,000 ton presses ($186,000), a turret punch press
($356,000), a plasma cutter ($113,000), and a brake press ($50,000), all of
which add capacity for work received in 1995 and in anticipation of work
targeted in upcoming periods. Other additions in this operation include
$105,000 of building additions and improvements and $98,000 for various
computer upgrading and office additions. Expenditures in the tubular products
group were $86,000 for an automatic tube cutting machine, $41,000 for tooling
upgrades and $68,000 for building improvements.
The Company plans to continue making improvements to its recently acquired
facility and plans on spending up to $3,000,000 during the next twelve months
on improvements and modifications thereto. The date of relocation from the
Company's existing Cleveland production facilities will take place in the
second fiscal quarter of 1996. The Company has sold the existing facility
which is set to close on January 31, 1996 and provide proceeds of approximately
$500,000.
The outstanding balance on the Company's line of credit was $9,704,000 at
September 30, 1995, which bears interest at a half of a percent less than the
prime lending rate. This facility was renegotiated in 1995 for $13,000,000 and
is available through May 1997. The 1993 financing of the acquisition of
Household Rental Systems was accomplished through the utilization of $5,000,000
of the line of credit. Interest expense for 1995 was primarily related to the
Private Placement unsecured term notes and borrowing on the line of credit.
Other interest relates to the Industrial Revenue Bonds on the Lombard property,
interest on capital leases and interest paid on Distributors deposits.
Management believes the Company's long-term liquidity needs will continue to be
met by cash flow from operations, its access to the line of credit, and its
potential to borrow from existing debt sources.
19
<PAGE> 20
RESULTS OF OPERATIONS
1995 COMPARED WITH 1994
Net revenues for the twelve months in 1995 were $137,595,000 as compared to
$134,987,000 in 1994 while operating income decreased from $10,985,000 to
$9,479,000 in 1995. The continued erosion of the Mexican economy and its
effect on sales and profits from the Mexican business, operating inefficiencies
at the Company's Tube Form operations and the labor disruption at the Bliss
Manufacturing operation during the last quarter combined to offset the growth
experienced in the Consumer Goods Division business throughout Asia, Europe and
the USA. The swift devaluation of the peso in Mexico and the subsequent
collapse of the Mexican consumer economy caused a rapid sales decline and
necessitated the write-off of receivables and consumer financing paper.
Management estimates that these events reduced revenues by over $3.0 million
and operating income by over $1.5 million. In order to hedge against further
currency declines, a plan to produce carpet shampoo (rental) machines in Mexico
was implemented in 1995. Although the Mexican situation has stabilized, an
immediate turnaround in the economy there is not expected. Additionally, the
Company's Tube Form operation experienced a decline in profitability due to the
erosion of its efficiency of operations and corresponding cost increases.
Management estimates that these developments reduced operating income by
$1,050,000 in 1995. Plans to restructure Tube Form, thereby reducing operating
and overhead costs, will be finalized and implemented in early 1996.
The Company's gross margin on its entire operations were 32% as compared to 31%
in 1994. Gross margins in the Consumer Goods Division were 43% (44% in 1994)
and 18% in the Manufactured Products Division (unchanged from 1994). The
slight decline in the Consumer Goods Division gross margin is due to the
decline in the Mexican market which has historically had higher gross margins
due to the fact that the Company owns the entire distribution channel, unlike
the remainder of the operation. Generally, the effects of inflation on costs
have not been a significant factor to the Company. For the most part, cost
increases continue to follows the trend of inflation and the Company has been
able and continues to be able to pass these increases through in the form of
price increases without any significant effect on sales volume. In the
minority of cases where there is customer resistance to raising prices due to
increased costs, the Company has successfully pursued, in some cases, materials
substitution to accomplish comparable gross margins.
Selling, general and administrative expenses as a percentage of revenues were
26% in 1995 as compared to 23% in 1994. Selling expenses increased over 1994
as a result of the entry into new markets and to support the launch of new
programs on a global basis.
Other income consists of interest earned on cash balances and royalty income.
Costs associated with non-compete agreements arising from acquisitions were
expensed during the year leaving no unamortized costs at September 30, 1995, as
compared to $400,000 at September 30, 1994.
The effective tax rate for 1995 was 27% as compared to 33% for 1994. The 27%
rate includes the benefit of tax loss carry forwards in Mexico due to the
Company's implementation of a strategy to produce in Mexico the steam and
shampooing machines previously purchased from a third party and used in
existing Household Rental Systems business and to be used in the expanding USA
market. It is anticipated that for 1996 the effective tax rate for the company
will approach a more normalized rate of 37%.
20
<PAGE> 21
RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
Net Sales for the twelve months in 1994 were $134,987,000 as compared to
$100,827,000 in 1993. The Manufactured Products Division continues to show
solid growth in the Commercial and Industrial stamping operations. Consumer
Goods Division revenues continue to grow through increased market penetration
in existing markets, continued success in the Mexican operations and expansion
abroad.
Due to the mandate of the Financial Accounting Standards Board of Standard No.
109 - Accounting for Income Taxes, the Company included a one- time gain of
$719,016 in Net Income.
The Company's gross margin on its entire operations increased to 31% compared
to 30% in 1993. Gross Margins in the Consumer Goods Division were 44% (40% in
1993) and 18% in the Manufactured Products Division (19% in 1993). The
increase in gross margin in the Consumer Goods Division reflects the change of
product mix by the addition of Household Rental Systems and the growth of the
Mexican operations.
Cost increases followed the trend of inflation and the Company was able to pass
these increases through in the form of price increases without any significant
effect on sales volume.
Selling, general and administrative expenses as a percentage of sales from
continuing operations was 23% in 1994 compared to 20% in 1993. The increase in
selling costs are attributable to the growth in the Mexican operations and the
addition of the Household Rental
21
<PAGE> 22
Systems operations, both sales activities contribute the highest gross
margins in the Company.
Other income includes interest earned on cash balances and royalty income.
The Company recorded $400,000 of amortization related to non-compete agreements
arising from acquisitions. There remained $400,000 of unamortized amounts for
these non-compete agreements at September 30, 1994.
The effective tax rate for 1994 was 33% as compared to 34% for 1993. The 33%
rate includes tax refunds received. The 34% rate includes a 2.6% benefit from
the application of all available foreign tax credits taken in 1993.
Item 8. Financial Statements and Supplementary Data
Reference is made to the Index to Financial Statements included on page of
this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure Not applicable.
21
<PAGE> 23
PART III.
Item 10. Directors and Executive Officers of Registrant
See Item 13.
Item 11. Executive Compensation
See Item 13.
Item 12. Security Ownership of Certain Beneficial Owners and Management
See Item 13.
Item 13. Certain Relationships and Related Transactions
Information provided under the captions "Principal Holders of Voting
Securities," "Election of Directors," "Committees and Compensation of the Board
of Directors", "Security Ownership of Directors and Management", "Executive
Compensation", and "Related Transactions" in the Proxy Statement for the 1996
Annual Meeting of Shareholders is incorporated herein by reference. See
"Executive Officers of the Registrant" following Item 1 in this Report for
information concerning executive officers.
23
<PAGE> 24
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this Report.
1. Financial Statements
Reference is made to the Index To Financial Statements,
included as page 27 of this report.
2. Financial Statement Schedules
Reference is made to the Index To Financial Statements,
included as page 27 of this report.
3. Exhibits
Reference is made to the Index To Exhibits, included as
page 46 of this report.
(b) Reports on Form 8-K. No report on Form 8-K was filed during the
last quarter of 1995.
(c) Exhibits Reference is made to the Index To Exhibits, included as
page of this report.
(d) Financial Statement Schedules. Not Applicable
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HMI INDUSTRIES INC.
(Registrant)
January 4, 1996 by /s/Kevin Dow
---------------------------
KEVIN DOW
Vice President - Finance
and Administration and
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
/s/ Kirk W. Foley
- ------------------------
KIRK W. FOLEY
Chairman, Chief Executive
Officer and Director
01/04/96
- --------
Date
/s/ Robert J. Abrahams /s/ Donald L. Baker
- ---------------------- --------------------
ROBERT J. ABRAHAMS DONALD L. BAKER
Director Director
01/04/96 01/04/96
- -------- --------
Date Date
/s/ Moffat Dunlap /s/ Grace McCarthy
- -------------------- -------------------
MOFFAT DUNLAP GRACE MCCARTHY
Director Director
01/04/96 01/04/96
- -------- --------
Date Date
25
<PAGE> 26
/s/John S. Meany Jr. /s/ Barry L. Needler
- -------------------- ----------------------
JOHN S. MEANY, JR. BARRY L. NEEDLER
Director Director
01/04/96 01/04/96
- -------- --------
Date Date
/s/Frank Rasmussen /s/ Ivan Winfield
- -------------------- ------------------
FRANK RASMUSSEN IVAN WINFIELD
Director Director
01/04/96 01/04/96
- -------- --------
Date Date
26
<PAGE> 27
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants for the years ended September
- ---------------------------------
30, 1995, 1994 and 1993...................................... 28
Financial Statements
- --------------------
Consolidated Balance Sheets September 30, 1995 and 1994..... 29
Consolidated Statements of Income - for the years ended
September 30, 1995,1994 and 1993............................ 30
Consolidated Statements of Stockholders' Equity for the
years ended September 30, 1995, 1994 and 1993 .............. 31
Consolidated Statements of Cash Flows for the years ended
September 30, 1995, 1994 and 1993 ........................... 32
Notes to Consolidated Financial Statements................... 33 - 45
</TABLE>
Schedules other than those listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
consolidated financial statements, the notes thereto or in Management's
Discussion and Analysis of Financial Condition and Results of Operations.
27
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders, HMI Industries Inc.
We have audited the accompanying consolidated balance sheets of HMI Industries
Inc. and its subsidiaries as of September 30, 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 September 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the 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 consolidated financial position of HMI Industries
Inc. and its subsidiaries as of September 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1995 in conformity with generally
accepted accounting principles.
As described in Notes 1 and 8 to the Consolidated Financial Statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," in 1994.
/s/ Coopers & Lybrand L.L.P.
Cleveland, Ohio
December 15, 1995
28
<PAGE> 29
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, September 30,
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 570,759 $ 690,177
Accounts receivable (net of allowance
$1,549,897 and $1,120,860 for doubtful accounts) 26,025,887 23,719,891
Finance contracts receivable 3,925,838 3,647,592
Notes receivable 1,049,389 430,461
Inventories:
Finished goods 7,074,061 5,985,143
Work-in-progress, raw material and supplies 10,407,830 9,600,778
Deferred income taxes 1,248,854 1,125,186
Prepaid expenses 1,348,088 1,006,686
----------- -----------
Total current assets 51,650,706 46,205,914
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land 800,640 814,305
Buildings and improvements 10,427,581 8,614,001
Machinery and equipment 19,483,281 17,176,306
----------- -----------
30,711,502 26,604,612
Less accumulated depreciation 15,699,102 13,387,351
----------- -----------
Net property, plant and equipment 15,012,400 13,217,261
----------- -----------
OTHER ASSETS:
Finance contracts receivable (less amounts due within one year) 2,222,525 1,242,142
Long-term notes receivable (less amounts due within one year) 334,123 334,123
Cost in excess of net assets of acquired businesses
(net of amortization of $2,740,965 and $2,363,305) 12,985,128 13,362,786
Deferred income taxes 377,245 507,458
Unamortized trademarks 1,557,078 2,430,498
Other 134,726 131,630
----------- -----------
Total other assets 17,610,825 18,008,637
----------- -----------
$84,273,931 $77,431,812
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 2,204,384 $ 587,060
Trade accounts payable 10,940,597 10,505,967
Dividends payable 429,716 406,200
Income taxes payable 2,768,079 2,501,300
Accrued expenses and other liabilities 7,673,887 7,239,226
Long-term debt due within one year 2,026,759 2,024,977
----------- -----------
Total Current liabilities 26,043,422 23,264,730
----------- -----------
LONG-TERM LIABILITIES:
Long-term debt (less amounts due within one year) 14,050,715 13,176,973
Deferred income taxes 542,741 506,732
Other 1,297,740 765,795
----------- -----------
Total long-term liabilities 15,891,196 14,449,500
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $5 par value; authorized, 300,000 shares;
issued, none
Common stock, $1, par value; authorized, 10,000,000 shares;
issued, 5,295,556 shares 5,295,556 5,295,556
Capital in excess of par value 7,521,851 7,223,367
Retained earnings 34,034,294 30,111,101
Cumulative translation adjustment (2,663,904) (869,016)
----------- -----------
44,187,797 41,761,008
Less common stock in treasury, at cost (1,848,484) (2,043,426)
----------- -----------
Total stockholders' equity 42,339,313 39,717,582
----------- -----------
$84,273,931 $77,431,812
=========== ===========
</TABLE>
See notes to consolidated financial statements.
29
<PAGE> 30
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended September 30,
REVENUES: 1995 1994 1993
<S> <C> <C> <C>
Net product sales $136,573,798 $133,602,990 $100,411,123
Financing revenues 1,020,833 1,383,971 415,812
------------ ------------ ------------
137,594,631 134,986,961 100,826,935
------------ ------------ ------------
OPERATING COSTS AND EXPENSES:
Cost of products sold 92,895,554 92,524,746 70,785,767
Selling, general and administrative expenses 35,220,151 31,477,655 20,466,724
------------ ------------ ------------
128,115,705 124,002,401 91,252,491
------------ ------------ ------------
OPERATING INCOME 9,478,926 10,984,560 9,574,444
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest and other income 53,796 314,315 169,134
Interest expense (1,452,247) (1,336,482) (1,156,111)
Acquisition related costs-
Non-compete agreement amortization (400,000) (400,000) (754,866)
------------ ------------ ------------
(1,798,451) (1,422,167) (1,741,843)
------------ ------------ ------------
Income from continuing operations
before income taxes 7,680,475 9,562,393 7,832,601
------------ ------------ ------------
PROVISION FOR INCOME TAXES:
Current 2,023,808 3,424,738 3,000,458
Deferred expense (benefit) 41,992 (309,434) (334,621)
------------ ------------ ------------
2,065,800 3,115,304 2,665,837
------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS 5,614,675 6,447,089 5,166,764
Loss from discontinued operations
net of income taxes ($.06 per share) -- -- (297,000)
Cumulative effect-change of accounting
for income taxes (Note-1 $.15 per share) -- 719,016 --
------------ ------------ ------------
NET INCOME $ 5,614,675 $ 7,166,105 $ 4,869,764
============ ============ ============
PER SHARE OF COMMON STOCK:
Income from continuing operations $ 1.15 $ 1.32 $ 1.07
Net income $ 1.15 $ 1.47 $ 1.01
</TABLE>
See notes to consolidated financial statements.
30
<PAGE> 31
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Common stock
------------ Capital in Cumulative Treasury Stock Total
Issued Excess of Retained Translation -------------------- Stockholders'
Shares Amount Par Value Earnings Adjustment Shares Amount Equity
------ ------ ---------- -------- ---------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1992 3,530,396 $3,530,396 $7,189,627 $22,886,987 ($18,824) 299,722 ($2,106,027) $31,482,159
Net income 4,869,764 4,869,764
Cash dividends-
$.452 per share (1,464,738) (1,464,738)
Treasury shares issued 5,960 (1,500) 10,540 16,500
Foreign currency
translation adj (461,491) (461,491)
--------- ---------- ---------- ----------- ----------- ------- ----------- -----------
Balance at
September 30, 1993 3,530,39 3,530,396 7,195,587 26,292,013 (480,315) 298,222 (2,095,487) 34,442,194
Net income 7,166,105 7,166,105
Cash dividends-
$.324 per share (1,581,857) (1,581,857)
Treasury shares issued 27,780 (11,200) 52,061 79,841
Stock split 1,765,160 1,765,160 (1,765,160) 149,111 --
Foreign currency
translation adjustment (388,701) (388,701)
Balance at --------- ---------- ---------- ----------- ----------- ------ ----------- -----------
September 30, 1994 5,295,556 5,295,556 7,223,367 30,111,101 (869,016) 436,133 (2,043,426) 39,717,582
Net income 5,614,675 5,614,675
cash dividend
$.346 per share (1,691,482) (1,691,482)
Treasury shares issued 298,484 (41,607) 194,942 493,426
Foreign currency
translation adjustment (1,794,888) (1,794,888)
--------- ---------- ---------- ----------- ----------- ------ ----------- -----------
Balance at
September 30, 1995 5,295,556 $5,295,556 $7,521,851 $34,034,294 ($2,663,904) 394,526 ($1,848,484) $42,339,313
========= ========== ========== =========== =========== ======= =========== ===========
</TABLE>
31
<PAGE> 32
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended September 30,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,614,675 $ 7,166,105 $ 4,869,764
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,768,822 3,380,062 2,139,390
Provision for losses on receivables 641,562 998,846 354,072
Provision for loss on asset write down -- -- 450,000
Compensation Expense 380,576 -- --
Deferred income taxes (53,923) (1,350,425) (532,328)
Changes in operating assets and liabilities:
Increase in receivables (5,916,069) (4,911,232) (6,920,018)
Increase in inventories (2,191,579) (1,503,059) (3,726,447)
Decrease (increase) in prepaid expenses (429,965) 63,588 427,138
Increase in trade accounts payable 3,301,638 2,454,217 3,172,657
Increase (decrease) in accrued expenses and other
liabilities (1,545,968) (1,794,399) 3,657,687
Increase (decrease) in income taxes payable (245,319) 721,657 1,204,968
Other, net (186,780) 295,924 (638,231)
----------- ----------- -----------
Net cash provided by operating activities 3,137,670 5,521,284 4,458,652
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business -- (4,875,000) --
Capital additions (3,805,326) (3,509,116) (1,429,026)
Proceeds from the disposition of fixed assets -- 8,000 134,796
Collection of notes receivable 300,000
----------- ----------- -----------
Net cash used in investing activities (3,805,326) (8,076,116) (1,294,230)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt transactions-
Increase in debt 4,117,324 6,328,482 52,635
Payments on debt (2,012,371) (1,832,605) (2,084,619)
----------- ----------- -----------
Cash provided by (used in) debt transactions 2,104,953 4,495,877 (2,031,984)
----------- ----------- -----------
Equity transactions-
Dividends paid (1,669,565) (1,541,970) (1,464,742)
Sale of treasury shares 112,850 79,841 16,500
----------- ----------- -----------
Cash used in equity transactions (1,556,715) (1,462,129) (1,448,242)
----------- ----------- -----------
Cash provided by (used in) financing activities 548,238 3,033,748 (3,480,226)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (119,418) 478,916 (315,804)
Cash and cash equivalents at
beginning of year 690,177 211,261 527,065
----------- ----------- -----------
Cash and cash equivalents at
end of year $ 570,759 $ 690,177 $ 211,261
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
32
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of HMI Industries Inc. ("the Company") and the following
wholly-owned subsidiaries; Tube Form, Inc. (Tube Form), Tube-Fab Ltd.
(Tube-Fab), Bliss Manufacturing Company (Bliss), Health-Mor B.V.,
Health-Mor International, Inc., HMI Incorporated (HMI Inc.),
Health-Mor Acceptance Corporation, HMI Acceptance Corporation,
Health-Mor Acceptance Pty. Ltd., Health-Mor Mexicana S.A. de C.V., HMI
Personal Care Products, Home Impression Inc. And experimental
Distributing Inc. All material intercompany transactions have been
eliminated in the consolidated financial statements.
CASH EQUIVALENTS
Cash equivalents consist of short-term highly liquid negotiable
instruments with a maturity within 90 days from the date of purchase.
COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES
Cost in excess of net assets of acquired businesses are being
amortized on a straight-line basis over a 40-year period. Cost in
excess of net assets acquired of $881,121 which related to the
acquisition of Tube Form in 1970 will not be amortized unless there is
a decrease in its value.
The Company regularly assesses the aggregate carrying value of such
excess based upon the profitability and performance of the acquired
businesses. If there is a diminution in value, recorded balances will
be adjusted.
INVENTORIES
Inventories are stated at the lower of cost or market and are valued
using the last-in, first-out (LIFO) and the first-in, first out (FIFO)
cost methods. Inventories on the LIFO method were 54.0% and 55.8% of
inventories in 1995 and 1994, respectively. If the FIFO method had
been used for all inventories, their value would have been
approximately $18,496,000 and $16,758,000 at September 30, 1995 and
1994, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is
provided on the straight-line and declining balance methods over
estimated useful lives of 10 to 40 years for buildings and
improvements and 3 to 10 years for machinery and equipment.
Improvements which extend the useful life of property, plant and
equipment are capitalized, and maintenance and repairs are expensed.
When property, plant and equipment is retired or othwise disposed of,
the cost and accumulated depreciation are removed from the appropriate
accounts and any gain or loss is included in current income.
33
<PAGE> 34
INCOME TAXES
The Company accounts for income taxes pursuant to the provisions of
Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes." SFAS 109 was adopted on October 1,
1993 and applied prospectively from that date. Under SFAS 109, the
tax consequences in the future years for differences between the
financial and tax basis of assets and liabilities at year end are
reflected as deferred income taxes. The impact of adopting SFAS 109
was an increase in net income of $719,016 or $.15 per share in fiscal
1994.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest was $1,477,552, $1,417,816, and $1,156,111 for
the years ended September 30, 1995, 1994 and 1993, respectively.
During 1994, the Company acquired approximately $941,000 of fixed
assets which were financed through capitalized lease obligations.
During 1995, the Company acquired approximately $470,000 of fixed
assets which were not paid for as of September 30, 1995. Additionally,
approximately $754,000 of accounts receivable were converted to notes
receivable.
INCOME PER SHARE
On January 13, 1994, the Board of Directors declared a 3 for 2 common
stock split in the form of dividends payable on February 22, 1994. All
share and per share information has been restated to reflect the
effect of such split.
Income per share of common stock is based upon the weighted-average
number of common shares and common share equivalents outstanding. The
weighted-average number of common shares and common share equivalents
outstanding during 1995, 1994 and 1993 was 4,876,599, 4,888,395 and
4,851,192 respectively.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the
1995 presentation.
2. DISCONTINUED OPERATIONS
On January 26, 1989 the Company adopted a formal plan to discontinue
the operations of HMI Credit, a wholly-owned subsidiary, and to
dispose of all related assets. During the fiscal period ended
September 30, 1991, all records were transferred to storage and the
building in Lombard, Illinois was closed. During the year ended
September 30, 1993, the real estate market in the greater Chicago area
required that management review the carrying value of the property. A
write down of $450,000 ($297,000 net of tax) was recorded and is
reflected as a loss from discontinued operations. During the fiscal
year 1994 and continuing throughout 1995, the property was leased to a
third party, with an option to purchase at any time during the ten
year lease term. The tenant is responsisble for all operating
expenses related to the property and the lease payments equal the debt
service for the variable rate industrial revenue development bonds
originally issued to finance the property. The minimum lease payments
under the
34
<PAGE> 35
terms of the agreement approximate $144,000 per year for the next
five years. The related bonds are payable in equal monthly
installments of $12,000, including interest at 5.4% with the final
installment due May 1, 2004.
The land and building have been reclassified to fixed assets and the
debt obligation has been included in its respective long-term
categories in the accompanying financial statements.
3. NOTES RECEIVABLE
Long-term notes receivable consist of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Related parties (Note 13) $ 629,710 $611,480
Other 753,802 153,104
---------- --------
1,383,512 764,584
Less amounts due within
one year 1,049,389 430,461
---------- --------
$ 334,123 $334,123
========== ========
</TABLE>
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accrued compensation $2,499,538 $3,050,643
Accrued taxes 780,098 432,504
Accrued interest 212,197 237,322
Pension and profit sharing 826,775 1,481,963
Employees savings accounts
generally bearing
interest at 7% 130,731 131,873
Other 3,224,548 1,904,921
---------- ----------
$7,673,887 $7,239,226
========== ==========
</TABLE>
5. LINE OF CREDIT
The Company has a $13,000,000 line of credit with a bank at prime less
1% (7.75% at September 30, 1995) of which $9,704,384 was outstanding
at September 30, 1995. The commitment is available through May, 1997,
and $7,500,000 of the outstanding amount has been classified as
long-term debt as of September 30, 1995. Commitment fees for unused
amounts on the line of credit are insignificant.
35
<PAGE> 36
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Seven year, 9.86% promissory
notes, interest payable semi-annually
and principal payments
commencing November,
1992 through 1997 $ 5,000,000 $ 6,666,666
Distributor deposits bearing
interest of (5.12% to 7.0%) at
September 30, 1995
payable 180 days after
termination of distributor
agreement 1,530,126 1,142,229
Capitalized lease obligations
bearing interest at 3.74% to 8.0%
due in monthly installments
of $26,346 (including interest)
through July, 1999 976,600 1,237,626
Bank line of credit-Note 5 7,500,000 5,000,000
Industrial Revenue Development
Bonds bearing interest of
5.4%, due in monthly
installments of $12,000,
through May, 2004 1,070,748 1,155,429
----------- -----------
16,077,474 15,201,950
Less amounts due within
one year 2,026,759 2,024,977
----------- -----------
$14,050,715 $13,176,973
=========== ===========
</TABLE>
The principal amount of long-term debt payable in the five years
ending September 30, 1996 through 2000 is $2,026,759, $9,551,571,
$2,050,778, $279,942 and $120,172, The weighted average interest rate
on short term borrowing at September 30, 1995 and 1994 was 8.41% and
9.13%, respectively. The Company believes the Bank line of credit
will be renewed upon its expiration in May, 1997. The seven year
promissory notes and the Bank line of credit contain various covenants
pertaining to maintenance of certain financial ratios. In addition,
dividend payments can not exceed 50% of the cumulative net income
since 1990 over a base amount established by the promissory note
agreements.
36
<PAGE> 37
7. LONG-TERM COMPENSATION PLAN
The Company adopted the Helath-Mor Inc. 1992 Omnibus Long-Term
Compensation Plan ("Plan") in 1992. The Plan provides for the
granting of stock options, stock appreciation rights, restricted
stock awards, phantom stock and/or performance shares to key
employees of the Company and its Subsidiaries and stock options for
the non employee directors of the Company. Options granted under the
plan expire up to ten years after the date of grant if not exercised
and may be exercisable in whole or in part at the discretion of the
Committee established by the Board of Directors. The option price may
not be less than the fair market value at the date of the grant.
Additional information regarding shares subject to option is as
follows:
<TABLE>
<CAPTION>
SHARES SUBJECT AVERAGE OPTION
TO OPTION PRICE PER SHARE
-------------- ---------------
<S> <C> <C>
Outstanding
September 30, 1992 199,125 $ 7.40
Granted 74,625 7.87
Exercised (2,250) 7.33
-------
September 30, 1993 271,500 7.53
Granted 54,000 13.08
Exercised (11,200) 7.44
-------
September 30, 1994 314,300 8.49
Granted 94,000 16.18
Exercised (13,594) 7.35
Cancelled (13,031) 7.54
-------
SEPTEMBER 30, 1995 381,675 10.46
=======
</TABLE>
At September 30, 1995, 225,000 shares were reserved for the plan.
The Company does not expect to adopt the recognition provisions of
the recently issued SFAS No. 123 "Accounting for Stock-Based
Compensation". Disclosures required by new accounting standard will
be included in future financial statements pursuant to the effective
date criteria.
8. INCOME TAXES
The provision for income taxes relating to continuing operations
consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $1,844,078 $3,017,619 $2,634,747
State and local 154,730 357,119 345,711
Foreign 25,000 50,000 20,000
---------- ---------- ----------
2,023,808 3,424,738 3,000,458
Deferred expense
(benefit) 41,992 (309,434) (334,621)
---------- ---------- ----------
$2,065,800 $3,115,304 $2,665,837
========== ========== ==========
</TABLE>
37
<PAGE> 38
A reconciliation of the provision for income taxes at the Federal
statutory rate to that included in the Consolidated Statements of
Income related to earnings from continuing operations is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Tax at Federal
statutory rate
of 34% $2,611,793 $3,251,214 $2,663,084
Increases
(reductions)
in taxes
resulting from:
State income
taxes, net
of related
Federal
income tax
benefit 102,122 235,699 228,169
Foreign Sales
Corporation
earnings (548,500) (208,000) (234,000)
Amortization
of cost in
excess of net
assets of
acquired
businesses 128,404 128,404 128,404
Reversal of
valuation allowance
on net operating loss (496,537) -- --
Foreign income
taxes, net 25,000 (33,906) 87,823
Foreign tax
credits utilized -- -- (200,000)
Other--net 243,518 (258,107) (7,643)
---------- ---------- ----------
$2,065,800 $3,115,304 $2,665,837
========== ========== ==========
</TABLE>
Effective October, 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." The new requirements resulted in a "cumulative
adjustment from a change in accounting principle" of $719,016,
representing reversal of amounts previously expensed. The statement
was applied prospectively, and prior year financial statements have
not been restated.
38
<PAGE> 39
The components of deferred tax assets and liabilities are comprised of
the following at September 30,
<TABLE>
<CAPTION>
1994 1995
----------- ----------
<S> <C> <C>
Gross deferred tax assets:
Operating loss carryforward $ 496,537 --
Receivable and inventory reserves 408,830 $ 493,270
Accrued compensation 107,236 396,218
Benefits insurance reserves 115,290 119,350
Lombard property reserves 302,400 308,000
State franchise taxes 60,480 116,348
Other 131,209 195,263
---------- ----------
1,621,982 1,628,449
---------- ----------
Gross deferred tax liabilities:
Deferred DISC income 91,954 125,499
Depreciation 477,327 408,257
---------- ----------
569,281 533,756
---------- ----------
Net deferred tax asset $1,052,701 $1,094,693
========== ==========
</TABLE>
The most significant impact of this pronouncement was the
consideration of the need to provide a valuation allowance for the
Company's deferred tax asset. The Company has determined that it
should fully reserve against this potential tax asset to the extent it
represents excess available tax net operating loss carryforwards for
certain foreign subsidiaries and divisions. Accordingly, such
benefits will be realized only as, and if, they are used to reduce
future tax expense. The Mexican NOL was recognized as an asset in 1995
due to revised operating plans contractually guaranteed for that unit.
Object to evaluation of the continuing need for such valuation
allowance, or until fully realized. Income taxes paid during the
years ended September 30, 1995, 1994 and 1993 were $1,622,986,
$3,543,281 and $1,923,295, respectively. In October, 1993, the
Company agreed to modifications in its federal income tax returns
filed for the years 1988 to 1990 resulting from an Internal Revenue
Service audit. The proposed adjustments included a foreign tax credit
carryforward of approximately $200,000 ($.06 per share) which was
utilized for the year ended September 30, 1993.
Foreign net operating loss carryforwards (including Mexico)
approximately $2,627,000 for tax are available to offset future
taxable income. The carryforwards will expire in 2003 through 2010.
Undistributed earnings of foreign subsidiaries are reinvested in their
operations and therefore, no provision is made for additional income
taxes that might be payable on such earnings.
39
<PAGE> 40
9. PROFIT SHARING AND PENSION PLANS
Bliss and Tube Form have defined contribution plans which cover
substantially all employees. The Bliss plan contribution is at
management's discretion and is allocated based on a percentage of
each employee's wages. The Tube Form plan requires an annual
contribution of a specified percentage of each employees wage, with a
minimum contribution of $660 per employee. The Company and Tube-Fab
have qualified profit sharing plans which cover substantially all
employees. The overall contribution to the Company's plan and the
allocation method is at the discretion of the Board of Directors.
The allocation to the participants is based on either a fixed amount
per participant, a percentage of eligible wages, or a combination of a
fixed amount and a percentage of eligible wages. The required annual
contribution to the Tube-Fab plan is based upon a percentage of net
income after certain adjustments. The allocation to the participants
is based upon a formula established in the plan. Profit sharing and
pension plan expense for all plans for the years ended September 30,
1995, 1994 and 1993 was $1,042,741, $1,547,125 and $1,304,650,
respectively.
10. COMMITMENTS AND CONTINGENCIES
GUARANTEES AND LEASES
The Company has guaranteed certain surety bonds totalling $1,260,000
executed by distributors. The Company is obligated under certain
operating leases for facilities which expire on various dates through
1995. The minimum annual lease payments under these agreements
including renewal options, if exercised, are $97,284, $82,936, $82,936
and $58,746 for the years ending September 30, 1996, 1997, 1998 and
1999, respectively. Rental expense for all leases and other
short-term needs was $756,000, $919,000 and $562,000 for the years
ended September 30, 1995, 1994 and 1993, respectively.
LITIGATION
Various claims arising in the ordinary course of business are pending
against the Company. In the opinion of management none of these
matters will have a material adverse effect on the consolidated
financial position, results of operations or liquidity of the
Company.
EXECUTIVE COMPENSATION AGREEMENT
During 1994, the Company negotiated a five year Compensation Agreement
with the Chief Executive Officer, Kirk W. Foley which was ratified at
the 1995 Annual shareholders' Meeting. The Agreement combines
salary, incentive compensation, loans, stock options and Phantom Stock
to employ Mr. Foley and emphasize the Company's objectives of
maintaining a stable, long-term organization, increasing shareholder
liquidity, expanding the Company's equity base and focusing efforts on
increasing the return on capital employed.
40
<PAGE> 41
11. BUSINESS SEGMENTS
<TABLE>
<CAPTION>
For the years ended September 30,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Revenues
Consumer
Goods Division $ 69,480,065 $ 68,259,662 $ 49,692,415
Manufactured
Products Division 68,114,566 66,727,299 51,134,520
------------ ------------ ------------
$137,594,631 $134,986,961 $100,826,935
============ ============ ============
Operating Income
Consumer
Goods Division $ 3,612,321 $ 4,364,873 $ 3,786,095
Manufactured
Products Division 5,866,605 6,619,687 5,788,349
------------ ------------ ------------
$ 9,478,926 $ 10,984,560 $ 9,574,444
============ ============ ============
Depreciation:
Consumer
Goods Division $ 1,166,171 $ 937,874 $ 801,382
Manufactured
Products Division 1,187,510 1,105,887 960,359
------------ ------------ ------------
$ 2,353,681 $ 2,043,761 $ 1,761,741
============ ============ ============
Assets:
Consumer
Goods Division $ 53,947,318 $ 46,591,028 $ 35,762,931
Manufactured
Products Division 30,326,613 30,840,784 29,339,831
------------ ------------ ------------
$ 84,273,931 $ 77,431,812 $ 65,102,762
============ ============ ============
Capital Expenditures:
Consumer
Goods Division $ 2,712,382 $ 2,180,386 $ 728,999
Manufactured
Products Division 2,094,979 1,328,730 1,146,019
------------ ------------ ------------
$ 4,807,361 $ 3,509,116 $ 1,875,018
============ ============ ============
Export Sales and Royalties:
All Foreign
Countries $ 30,014,691 $ 21,886,491 $ 19,001,555
============ ============ ============
Operating Income:
North American $ 7,918,439 $ 9,660,250 $ 8,229,356
Foreign 1,560,487 1,324,310 1,345,088
------------ ------------ ------------
$ 9,478,926 $ 10,984,560 $ 9,574,444
============ ============ ============
</TABLE>
41
<PAGE> 42
Assets and liabilities are translated at current exchange rates, and
income and expenses are translated using weighted average exchange
rates. The effects of these translation adjustments, as well as gains
and losses from certain intercompany transactions, are reported in a
separate component of shareholders' equity. Such adjustments will
affect net income only upon sale or liquidation of the underlying
foreign investments, which is not contemplated at this time. Exchange
gains and losses from transactions in a currency other than the local
currency of the entity involved are included in income. Net
transaction and translation adjustments are not significant.
Canadian and Mexican sales are not considered export sales. The
Company's major foreign operations are located in Canada and Mexico.
Business activities are conducted principally in local currency.
Identifiable assets of Canadian and Mexican operations were
$14,319,414 and $15,937,169 at September 30, 1995 and 1994,
respectively. Identifiable revenues of Canadian and Mexican
operations for the years ended September 30, 1995, 1994 and 1993 were
$18,687,652, $21,618,946 and $11,746,724, respectively. Sales by the
Manufactured Products segment to two customers were approximately 19%
and 25% of the Company's total sales in 1995 and 1994, respectively.
Sales to one customer in the Consumer Goods segment represent 12%
and 8% of the Company's total sales in 1995 and 1994 respectively. At
September 30, 1995 and 1994, the Company's receivables from companies
in the automotive industry were approximately 9% and 23%,
respectively, of the consolidated receivables.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995
----
DEC. 31 MARCH 31 JUNE 30 SEPT. 30
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $32,414,130 $37,155,141 $34,240,866 $33,784,494
Gross profit as previously
reported $10,559,040 $12,232,669 $12,708,767 $ 8,178,108
Adjustments of cost of
goods sold (178,629) (339,243) (1,256,538) 1,774,410
----------- ----------- ----------- -----------
Restated gross profit $10,380,411 $11,893,426 $11,452,229 $ 9,952,518
=========== =========== =========== ===========
Net income as previously
reported $ 1,827,051 $ 1,841,926 $ 1,609,480 $ 336,218
Adjustments to net income (116,109) (220,508) (816,750) 1,153,367
----------- ----------- ----------- -----------
Restated net income $ 1,710,942 $ 1,621,418 $ 792,730 $ 1,489,585
=========== =========== =========== ===========
Per share of common stock:
Net income as previously
reported $ 0.37 $ 0.37 $ 0.32 $ 0.10
Adjustments to net
income -0.02 -0.04 -0.16 0.22
----------- ----------- ----------- -----------
Restated net income $ 0.35 $ 0.33 $ 0.16 $ 0.32
=========== =========== =========== ===========
</TABLE>
The first three quarters of 1995 have been restated as shown above.
Inventory analysis revealed
42
<PAGE> 43
that costs in the Tubular operations were understated for some items
previously sold under contract and erroneous accounting entries
relating to inventory errors from the Consumer Goods business unit.
These errors occurred during fiscal 1995 and have been resolved.
<TABLE>
<CAPTION>
1994
----
Dec. 31 March 31 June 30 Sept. 30
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $28,898,029 $33,800,893 $37,213,509 $35,074,530
Gross profit $ 9,474,845 $11,128,768 $11,707,919 $10,150,683
Income from continuing
operations $ 1,389,298 $ 1,521,733 $ 1,701,136 $ 1,834,922
Cumulative effect
of change in
accounting for
income taxes $ 719,016 -- -- --
Net income $ 2,108,314 $ 1,521,733 $ 1,701,136 $ 1,834,922
Per share of
common stock:
Income from continuing
operations $ 0.29 $ .31 $ .35 $ .37
Cumulative effect
of change in
accounting for
income taxes $ .15 $ -- $ -- $ --
Net income $ .44 $ .31 $ .35 $ .37
</TABLE>
13. RELATED PARTY TRANSACTIONS
On October 15, 1991, the Company purchased for $139,000 certain computer
equipment, computer software, and other assets from JCL Medical Systems Ltd.
(JCL) based on independent appraisals. These assets are used in management of
the Company's databases for Warranty Registration, Mail Order Programs and
Distributor/Dealer Performance activities. At that time JCL was owned by two
directors of the Company. At the same time, the Company entered into a four
year agreement with JCL to provide computer program and supervision services,
all of which relate to the maintenance and processing of the aforementioned
databases for $168,000. These services were previously paid for on a monthly
basis as incurred.
The Company pays Fairway Inc., a corporation controlled by a director of the
Company, an annual consulting fee of $100,000 for assisting in obtaining
professional advice on Company matters. In 1989, the Company advanced $203,401
to three companies which were controlled by two directors of the Company. In
accordance with the terms of the agreement of these advances, collectibility is
assured by these directors or corporations they control. The advance bears
interest a Canadian prime plus one and one-half percent (9.5% at September 30,
1995). The balance of $295,587 is reflected in current assets as a note
receivable at September 30, 1995.
In 1988, the Company loaned Amherst Tanti U.S. Inc., a corporation owned by
an officer of
43
<PAGE> 44
the Company, $334,123, which is reflected in other assets as long-term note
receivable at September 30, 1995. This note shall be forgiven in the
future if the net income of the Company reaches certain specified levels.
14. MAJOR VENDOR
In 1991, the Company entered into an agreement that provided for the potential
acquisition of Holland Electro B.V. of Rotterdam, the Netherlands, contingent
upon attaining certain earnings targets in the two year period ended
September 30, 1992. These earnings targets were not reached and accordingly,
no consideration was paid. The Company has the ability, at its sole
discretion, to effect the acquisition of Holland Electro B.V., in the future
for no consideration. The Company has also entered into various agreements with
Holland Electro B.V. to provide for the supply of certain floor care products
for the Company's non-direct marketing channel. The agreements include the
purchase of machinery and equipment, tooling, intellectual property and
patents, licensing and distribution arrangements, warehousing and technical
support. Holland Electro B.V. will supply Elektra Pure to the Company for
North American distribution, and additional products to other world markets
utilizing the tooling and intellectual property purchased by the company. The
total consideration paid by the Company for these assets was $503,000. In
addition, the licensing and distribution agreements require Holland Electro
B.V. to pay the Company one Netherlands Guilder for each unit manufactured and
the Company is obligated to pay Holland Electro B.V. $2.50 for each Holland
Electro B.V. product sold by the Company. Net royalty revenue accrued by the
Company was $22,000 in 1995, $25,000 in 1994 and $36,000 in 1993. The Company
has paid in advance for inventory to be acquired from Holland Electro B.V. The
advances, royalties and other receivables total $1,607,000 at September 30,
1995. During 1995 and 1994, the Company purchased $348,000 and $78,000
respectively, of product from Holland Electro B.V.
During 1992, the Company completed the purchase of certain electric motor
production equipment from Holland Electro B.V. for $406,000. The Company
continues to negotiate the sale of these assets to a third party.
The Company is contingently liable under a Conditional Purchase Agreement
to Holland Electro B.V.'s bank in the amount of $1,200,000. If the contingent
liability were called upon by the bank, the Company would take possession of
finished goods and work in progress inventories and sell them into existing
markets. In addition to the ongoing supply of the aforementioned products,
the Holland Electro B.V. Rotterdam facility performs the services of a
distribution center for the Company's European market. In addition to
warehousing, the center manages the handling and documentation associated with
all incoming and outbound shipments. Other activities include assistance with
European regulatory approvals and providing office space and communication
facilities for the Company's management. For these services, the Company has
contracted with Holland Electro B.V. to pay approximately $33,000 monthly.
44
<PAGE> 45
15. ACQUISITION
On December 1, 1993, the Company purchased all of the assets of the Household
Rental System Division of Reckitt & Colman Canada, Inc. for $4,875,000
utilizing internal cash and the Company's line of credit facility. In
addition, a contingent Earn Out of $1,650,000 may be paid over a ten year
period dependent upon business expansion and revenue generation. Household
Rental Systems rents carpet cleaning machines and sells products to homeowners
primarily through retail stores in Canada. The Agreement includes a license
right for various time periods in Canada and the U.S. to the Easy-Off brand
names in carpet care applications, which is owned by Reckitt & Colman
(Overseas) Ltd. The amounts assigned to these agreements are being amortized
over the life of the agreements. The accumulated amortization for these
agreements as of September 30, 1995 and 1994 was $1,932,017 and $963,546,
repectively.
45
<PAGE> 46
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Location
------------------------------------------------
Exhibit Page in Incorporated by
Number Exhibit Title This Report Reference From
- ---------- --------------- ------------------ ----------------
<S> <C> <C> <C>
3.1 Certificate of Pages 47 - 54
Incorporation
3.2 Bylaws Pages 55 - 68
10 Material Proxy Statement
Contracts Annual Meeting
of Stockholders
January 19, 1995
Exhibit B
11 Statement re: Note 1 on Page
Computation of 34 of the
per share Financial
earnings Statements
21 Subsidiaries of Page 4
Registrant
27 Financial Data Schedule
</TABLE>
46
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
HMI INDUSTRIES INC.
FIRST: The name of the company is HMI Industries Inc.
SECOND: The address of its registered office in the
State of Delaware is No. 100 West Tenth Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be
conducted or promoted is:
To develop, manufacture, fabricate, assemble,
purchase or otherwise acquire, lease, rent, store,
sell, trade, exchange, job, import, export, deal in or deal
with, or transfer or otherwise dispose of vacuum cleaners and
other household and institutional appliances, and any
accessories, parts, aids, materials, liquids or solvents used
or usable in connection therewith.
To conduct any lawful business or to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
To acquire, and pay for in cash, stock or bonds of
this corporation or otherwise, the good will, rights, assets
and property, and to undertake or assume the whole or any part
of the obligations or liabilities of any person, firm,
association or corporation.
To acquire, hold, use, sell, assign, lease, grant
licenses in respect of, mortgage or otherwise dispose of
letters patent of United States or any foreign country, patent
rights, licenses and privileges, inventions, improvements and
processes, copyrights, trademarks and trade names,
relating to or useful in connection with any business of this
corporation.
To acquire by purchase, subscription or otherwise,
and to take receive, hold, own, use or otherwise employ,
guarantee, sell, assign, exchange, transfer, mortgage, pledge,
lend or otherwise dispose of or deal in and with any of the
shares of the capital stock, or any voting trust certificates
in respect of the shares of capital stock, scrip, warrants,
rights, bonds, debentures, notes, trust receipts, and other
securities, obligations, choses in action and evidences of
indebtedness or interest issued or created by any
corporations, joint stock companies, syndicates, associations,
firms, trusts or persons, public or private, or by the
governmental of the United States of America, or by any
foreign government, or by any state, territory, province,
municipality or other
47
<PAGE> 2
political subdivision or by any government agency, and as
owner thereof to possess and exercise all the rights, powers
and privileges of ownership, do any and all acts and things
necessary or advisable for the preservation, protection,
improvement and enhancement in value thereof.
To borrow or raise money for any of the purposes of
the corporation and, from time to time without limit as to
amount, to draw, make, accept, endorse, execute, issue and
deliver promissory notes, drafts, bills of exchange, warrants,
bonds, debentures and other negotiable or non-negotiable
instruments and evidences of indebtedness, and to secure the
payment and full performance of any thereof and of the
interest thereon by mortgage upon or pledge, conveyance or
assignment in trust of the whole or any part of the assets of
the corporation, whether real, personal or mixed (including
intangibles) and whether at the time owned or thereafter
acquired, and to sell, pledge or otherwise dispose of such
promissory notes, bonds, debentures and other instruments or
obligations of the corporation for its corporate purposes.
To purchase, receive, take by grant, gift, devise,
bequest or otherwise, lease, or otherwise acquire, own, hold,
improve, employ, use and otherwise deal in and with real or
personal property, or any interest therein, wherever situated,
and to sell, convey, lease, exchange, transfer, assign or
otherwise dispose of, or mortgage or pledge, all or any of the
corporation's property and assets, or any interest therein,
wherever situated.
In general, to possess and exercise all the powers
and privileges granted by the General Corporation Law of
Delaware or by any other law of Delaware or by this
certificate of incorporation together with any powers
incidental thereto, so far as such powers and privileges are
necessary or convenient to the conduct, promotion or
attainment of the business or purposes of the corporation.
The business and purposes specified in the foregoing
clauses shall, except where otherwise expressed, be in no way
limited or restricted by reference to, or inference from, the
terms of any other clause in this certificate of
incorporation, but business and purposes specified in each of
the foregoing clauses of this article shall be regarded as
independent business and purposes.
FOURTH: The total number of shares of capital
stock which the corporation shall have authority to issue is
ten million three hundred thousand (10,300,000) shares, of
which ten million (10,000,000) shares shall be common stock
having a par value of One Dollar ($1.00) per share and three
hundred thousand (300,000) shares shall be preferred stock
having a par value of Five Dollars ($5.00) per share. Subject
to the requirement of Section 242 (d) (1) of the General
Corporation Law of Delaware, the authorized number of shares
of either common or preferred stock may be increased or
decreased by the affirmative vote
48
<PAGE> 3
(taken without regard to class) of the holders of a
majority of the capital stock of the corporation entitled to
vote. The common stock and the preferred stock may be issued
in classes or series from time to time with such voting powers
and such designations, preferences, and relative,
participation, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall
be stated and expressed in the resolution or resolutions
providing for the issue of such common stock or preferred
stock or any class or series thereof adopted by the Board of
Directors pursuant to the authority hereby vested in it.
Without limitation on the generality of the foregoing, the
common stock and the preferred stock, and any class or series
thereof, may have such voting powers, full or limited, or no
voting powers, as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors
providing for the issue of such common stock or preferred
stock, or any class or series thereof. The preferred stock, or
any class of series thereof, may be made subject to redemption
at such time or times and at such price or prices, may be made
convertible into, or exchangeable for, shares of any other
class or classes or of any other series of any class of stock
of the corporation at such price or prices or at such rates of
exchange and with such adjustments, and shall be subject to
such provisions as to reissue upon redemption or purchase by
or surrender to the corporation, including the prohibition
thereof, as shall be stated and expressed in the resolution or
resolutions adopted by the Board of Directors providing for
the issue of such preferred stock or any class or series
thereof; and further, each holder of such preferred stock and
of any class or series thereof shall be entitled to receive
dividends at such rates, on such conditions, with such
preferences (whether cumulative or noncumulative) and at such
times, and to have such rights upon the dissolution of, or
upon any distribution of assets of, the corporation, as shall
also be stated and expressed in the said resolution or
resolutions adopted by the Board of Directors as aforesaid.
FIFTH: The name and mailing address of the
incorporation is as follows:
Name Mailing Address
---- ---------------
Charles D. Leist 135 W. LaSalle Street, Chicago, Illinois
60603
SIXTH: The board of directors shall initially
consist of three members, the same being:
Name Mailing Address
---- ---------------
Frank C. Callahan 203 N. Wabash Avenue, Chicago, Illinois 60601
Albert E. Kramer 203 N. Wabash Avenue, Chicago, Illinois 60601
George P. Brit 203 N. Wabash Avenue, Chicago, Illinois 60601
SEVENTH: The corporation is to have perpetual
existence.
49
<PAGE> 4
EIGHTH: In furtherance and not in limitation of the
powers conferred by statute, the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the
corporation.
To authorize and cause to be executed
mortgages and liens upon the real and personal property of the
corporation.
To set apart out of any of the funds of the
corporation available for dividends a reserve or reserves for
any proper purpose and to abolish any such reserve in the
manner in which it was created.
By a majority of the whole board, to
designate one or more committees, each committee to consist of
two or more of the directors of the corporation. The board
may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee,
to the extent provided in the resolution or in the by-laws of
the corporation, shall have and may exercise the powers of the
board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it;
provided, however, the by-laws may provide that in the absence
or disqualification of any member of such committee or
committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the
place of any such absent or disqualified member.
NINTH: Each member of the board of directors and of
any committee designated by the board of directors shall, in the
performance of his duties, be fully protected in relying in good faith
upon the books of account or reports made to the corporation by any of
its officers, or by an independent certified public accountant, or by an
appraiser selected with reasonable care by the board of directors or by
any such committee, or in relying in good faith upon other records of
the corporation.
TENTH: Meetings of stockholders may be held within
or without the State of Delaware, as the by-laws may provide. The
books of the corporation may be kept (subject to any provision contained
in the statutes) outside the State of Delaware at such place or places
as may be designated from time to time by the board of directors or in
the by-laws of the corporation.
ELEVENTH: The corporation reserves the right to
amend, alter, change or repeal any provision contained in this
certificate of incorporation, in the manner now or hereafter prescribed
by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
50
<PAGE> 5
TWELFTH: In the event that any Business Combination
with any Related Person has not been approved, adopted or authorized by
the affirmative vote of two-thirds of the Continuing Directors, the
terms of such Business Combination either must be approved, adopted or
authorized by at least 80% of the Voting Stock entitled to be voted
(regardless of whether or not any vote of stockholders of the corporation
is otherwise required by law or agreement), or must provide that the
holders of all shares of each class, and of each series of each class,
of outstanding Voting Stock shall be entitled to receive (and such
Related Person shall be obligated to assure the receipt of) cash,
securities and other property having a fair value as determined by a
majority of the Continuing Directors, and Other Consideration, if any,
of aggregate value per share not less than the higher of (1) the highest
prices per share that such Related Person paid to acquire any shares of
such class or series, as the case may be, pursuant to a tender offer,
cash purchase, open market transaction or privately negotiated sale not
effected on the open market at any time prior to the record date set to
determine the stockholders entitled to vote on the proposed Business
Combination, and (2) the Highest Recent Price per share.
For the purposes of this article twelfth:
(I) The term 'Business Combination' shall mean (a)
any merger, consolidation or exchange of shares of the
corporation and/or any of its subsidiaries with or into,
or proposed by or on behalf of, any Related Person,
regardless of which entity is the survivor; (b) any sale,
lease, exchange, transfer, mortgage or any other security
device, or other disposition of assets (other than the
sales of products or services in the ordinary course of
business) of the corporation (including any securities of
subsidiaries) and/or any of its subsidiaries collectively
having an aggregate net book value exceeding 50% of the
stockholders' equity in the corporation according to the
corporation's most recently published annual or quarterly
consolidated balance sheet, to any Related Person, in one
or more transactions; (C) any sale, lease, exchange,
transfer, mortgage or any other security device, or other
disposition, of assets having a fair value, as determined
by a majority of the Continuing Directors, exceeding 50%
of the stockholder's equity in the corporation according
to its most recently published annual or quarterly
balance sheet, by any Related Person, or proposed by or
on behalf of any Related Person, to corporation and/or
any of its subsidiaries; (d) any issuance or transfer of
any securities of the corporation and/or any of its
subsidiaries by the Corporation and/or any of its
subsidiaries to any Related Person, other than pro rata
to all stockholders of the corporation; (e) any
reclassification of shares or recapitalization of the
corporation or any of its subsidiaries that would have
the effect of increasing the voting power of any Related
Person in the corporation, other than solely by
fractional share settlements in a pro rata stock dividend
or split; (f) any issuance or transfer of any securities
of any Related Person to the corporation and/or any of
its subsidiaries, other than pro rata to all stockholders
of the Related Person; (g) any liquidation or dissolution
of the corporation proposed by or on behalf of any
Related Person; or (h) any plan,
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<PAGE> 6
agreement, contract, proposal or other arrangement
providing for any of the above transactions.
(ii) The term 'Related Person' shall mean and include
collectively (a) any Person which, alone or together with
its Affiliates and Associates, Beneficially Owns shares
of capital stock of the corporation having more than 15%
of the voting power of the outstanding Voting Stock of
Corporation, (b) any Affiliate or Associate of any such
Persons, and (C) any other person with which such Person
or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of Voting
Stock of the corporation.
(iii) The term 'Person' shall mean and include any
individual, corporation, partnership, firm, association,
trust or other person or entity or group (whether or
not it has a legal identity).
(iv) The term 'Affiliate' shall mean any Person that
directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is
under common control with, a specified Person.
(v) The term 'Associate' shall mean (i) any person of
which a specified Person is a director, officer or
partner or is, directly or indirectly, the Beneficial
Owner of 10% or more of any class of its equity
securities, (ii) any trust or other estate in which a
specified Person has a substantial beneficial interest or
as to which such specified Person serves as trustee or in
a similar capacity, and (iii) any relative or spouse of a
specified Person, or any relative of such spouse.
(vi) The terms 'Beneficially Owns' and 'Beneficial
Owner' shall refer to either or both of the following
powers possessed by any person, directly or indirectly,
through any contract, arrangement, understanding,
relationship, or otherwise, either alone or shared with
others: (a) voting power, including the power to vote,
or to direct the voting of, a security; or (b) investment
power, including either a right to acquire or the power
to dispose of, or to direct the acquisition or
disposition of, a security.
(vii) The term 'Voting Stock' shall mean all outstanding
shares of capital stock to the corporation entitled to
vote generally in the election of Directors, other than
any stock having such right only by reason of the
occurrence of a contingency.
(viii) The term 'Continuing Director' shall mean a
Director who is not a Related Person and who was not
proposed for election as a Director by or on behalf
of a Related Person.
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<PAGE> 7
(ix) The term 'Highest Recent Price' of any class or
series of Voting Stock shall mean the highest sale price
reported during the 30 day period immediately preceding
the date in question of a share of such stock on the
Composite Tape for American Stock Exchange-Listed Stocks,
or if such stock is not quoted on such Composite Tape, on
the American Stock Exchange, or if such stock is not
listed on such Exchange, on the principal United States
securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or,
if such stock is not listed on any such exchange, the
highest asked quotation for a share of such stock
reported during the 30-day period preceding the date in
question on the National Association of Securities
Dealers, Inc. Automated Quotations Systems or any system
then in use, or if no such quotations are available, the
fair value on the date in question of a share of such
stock as determined by a majority of Continuing
Directors.
(x) The term 'Other Consideration' shall apply in a
Business Combination in which the corporation is the
surviving or acquiring corporation, and shall mean the
stock of the corporation retained by its existing public
stockholders.
Continuing Directors, in making determinations pursuant
to this article twelfth, may engage for the account of the corporation such
persons, including investment banking firms and the independent accountants who
have reported on the most recent audited financial statements of the
corporation, and utilize employees and agents of the corporation, who will in
the judgment of the Continuing Directors, be of assistance of them. Any such
determination when made in good faith of the basis of such information and
assistance as was then reasonably available for such purpose, shall be
conclusive and binding upon the corporation and its stockholders.
THIRTEENTH: No action that requires the vote or
consent of stockholders of the corporation may be taken without a meeting
and vote of stockholders.
FOURTEENTH: Notwithstanding any other provisions of
this certificate of incorporation or the bylaws of the corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, this
certificate of incorporation or the by-laws of the corporation), the amendment
or repeal of article twelfth, thirteenth or fourteenth of this certificate of
incorporation shall require the affirmative vote of the holders of shares
representing at least 80% of the shares of Voting Stock as defined in article
twelfth entitled to be voted thereon.
FIFTEENTH: No director of the corporation shall be
liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for
acts or omission not in good faith or which involve intentional misconduct or
knowing violation of law; (iii) under Section 174 of the Delaware General
Corporation Law relating to unlawful payment of a dividend or unlawful stock
purchase
53
<PAGE> 8
or redemption; or (iv) for any transaction from which the director derived an
improper personal benefit.
THE UNDERSIGNED, being the incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, makes this certificate, hereby
declaring and certifying that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand this 11th day of
October, 1968.
/s/ Charles D.Leist
- ------------------
Incorporator
STATE OF ILLINOIS)
) SS
COUNTY OF COOK )
BE IT REMEMBERED that on this 11th day of October, A.D., 1968,
personally came before me, a Notary Public for the State of Illinois, Charles
D. Leist, the party to the foregoing certificate of incorporation, known to me
personally to be such, and acknowledge the said certificate to be his act and
deed and that the facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Louise G. Walker
--------------------
Notary Public
54
<PAGE> 1
Exhibit 3.2
HMI INDUSTRIES INC.
BY-LAWS
ARTICLE I
Offices
-------
Section 1. REGISTERED OFFICE. The registered office of the
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. OTHER OFFICES. The corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
Stockholders and Stockholder Meetings
-------------------------------------
Section 1. ANNUAL MEETING. An Annual Meeting of the Stockholders
shall be held each year, beginning with the year 1989, for the purpose of
electing directors by written ballot and a plurality vote, and for the
transaction of such other business as may properly come before the meeting.
Such Annual Meeting shall be held each year at such time and on such business
day as the Board of Directors may determine each year. If the Annual Meeting
for the election of directors is not held on the day designated herein or
pursuant hereto, the Board of Directors shall cause the meeting to be held as
soon thereafter as convenient.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the Chairman of the Board or the President or the Board of Directors,
and shall be called by the Secretary at the written request of stockholders
owning not less than ten (10) percent of the outstanding shares of the capital
stock of the corporation entitled to vote. Such written request of
stockholders must be made at least seventy-five (75) days prior to the first
day upon which an annual meeting of stockholders may be held pursuant to these
by-laws, and state the purpose or purposes of the proposed meeting.
Section 3. PLACE OF MEETING. The Board of Directors may from time to
time designate any place, either within or without the State of Delaware, as
the place of meeting for any annual or special meeting of stockholders. If no
such designation is made by the Board of Directors with respect to a special
meeting called other than by the Board itself, the officer calling such meeting
shall designate a place in the City of Chicago, State of Illinois, where such
meeting shall be held.
55
<PAGE> 2
Section 4. NOTICE OF MEETING. Written notice stating the place, day
and hour of a meeting and the purpose or purposes for which the meeting is to
be held, shall be given, unless a statute specifies a different time period,
not less than ten nor more than fifty days before the date of the meeting,
either personally or by mail, to each stockholder of record entitled to vote at
such meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the corporation. Business transacted at any meeting of
stockholders shall be limited to the purposes stated in the notice of such
meeting.
Section 5. VOTING LISTS. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. Upon the willful neglect or refusal of the
directors to produce such a list at any meeting for the election of directors,
they shall be ineligible for election to any office at such meeting.
Section 6. QUORUM. A majority of the outstanding shares of the
capital stock of the corporation entitled to vote, and represented in person or
by proxy, shall constitute a quorum at a meeting of stockholders. If less than
a majority of such outstanding shares are represented at a meeting, a majority
of the shares so represented may adjourn the meeting from time to time without
further notice of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, of if after the adjournment, a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting.
Section 7. VOTING OF SHARES. Unless otherwise provided by or pursuant
to Article Fourth of the Certificate of Incorporation, and subject to the
provisions of Section 1, Article VIII of these by-laws and Section 213 of the
General Corporation Law of the State of Delaware, such stockholder shall be
entitled at every meeting of stockholders to one vote in person or by proxy for
each share of the capital stock having voting power held by such stockholder.
Any such proxy shall be in writing and shall be filed with the Secretary of the
corporation before or at the time of the meeting. No such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period.
Section 8. DECISION BY MAJORITY. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by
56
<PAGE> 3
proxy shall decide any questions brought before such meeting, unless the
question is one upon which by express provision of statute or of the
Certificate of Incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Section 9. INFORMAL ACTION BY STOCKHOLDERS. Subject to Section 271 of
the General Corporation Law of Delaware, whenever the vote of stockholders at a
meeting is required or permitted to be taken for or in connection with any
corporate action by any provision of statute, the meeting and vote of
stockholders may be dispensed with if all of the stockholders who would have
been entitled to vote upon the action if such meeting were held shall consent
in writing to such corporate action being taken.
ARTICLE III
Board of Directors
------------------
Section 1. GENERAL POWERS. The business and affairs of the
corporation shall be managed by its Board of Directors except as may be
otherwise provided by statute, the Certificate of Incorporation or these
by-laws.
Section 2. NUMBER, TENURE AND QUALIFICATIONS.
(a) The number of directors of the corporation shall be fixed
by resolution of the Board of Directors from time to time but shall not be less
than three nor more than eleven; provided, however, that the number of
directors shall not be reduced so as to shorten the term of any director at the
time in office. Except as provided in Section 3 of Article III, directors
shall be elected at a meeting of stockholders held in accordance with Section
1, Article II. Directors need not be stockholders of the corporation.
(b) The Board of Directors shall be divided into three
classes, as nearly equal in numbers as the then total number of directors
constituting the entire Board permits with the term of office of one class
expiring each year. At the annual meeting of stockholders in January, 1995
directors of the first class shall be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of the second class
shall be elected to hold office for a term expiring at the second succeeding
annual meeting and directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting. At each subsequent
annual meeting of stockholders the successors to the class of directors whose
term shall then expire shall be elected to hold office for a term expiring at
the third succeeding annual meeting.
Section 3. VACANCIES. Subject to Section 223 of the General
Corporation Law of the State of Delaware, newly created directorships resulting
from any increase in the authorized number of directors and vacancies on the
Board of directors occurring for any other reason may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director and any directors so chosen shall hold office until the next
election of the class for which such directors have been chosen and until their
successors shall be elected and qualified.
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<PAGE> 4
Section 4. REGULAR MEETINGS. A regular meeting of a newly elected Board
of Directors shall be held without other notice than this By-Law, immediately
after, and at the same place as, the annual meeting of stockholders. The Board
of Directors may provide, by resolution, the time and place, either within or
without the State of Delaware, for the holding of additional regular meeetings
without other notice than such resolution.
Section 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board of the President, and shall be
called by the Secretary at the written request of any two directors. The
officer calling special meetings as aforesaid may fix the time and designate
any place, either within or without the State of Delaware, for holding any
special meeting of the Board of Directors called by him.
Section 6. NOTICE. Notice of any special meeting shall be given at
least two days prior thereto by written notice personally or mailed to each
director at his business address, or by telegram. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail, so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called
or convened. Except as otherwise provided by statute, neither the business to
be transacted at, nor the purpose of, a special meeeting of the Board of
Directors need be specified in the notice of such meeting.
Section 7. QUORUM -- MANNER OF ACTION. A majority of the number of
directors then in office shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority if present at a meeting, the directors present may adjourn the meeting
from time to time without notice other than an announcement at the meeting,
until a quorum is present. The vote of the majority of the directors present
at a meeting at which there is a quorum shall be the act of the Board
of Directors.
Section 8. EXONERATION FROM LIABILITY IN CERTAIN CASES. If there is
any violation of the provisions of Sections 160, 173 or 243 of the General
Corporation Law of the State of Delaware (involving payment of an unlawful
dividend or an unlawful purchase or redemption of the capital stock of the
corporation) for which members of the Board of Directors under whose
administration the same shall have been done may be jointly and severally
liable to the corporation under Section 174 of said General Corporation Law,
any director who may have been absent when the same was done, or who may have
dissented from the act or resolution by which the same was done, may exonerate
himself from such liability by causing his dissent to be entered on the books
containing the minutes of the proceedings of the directors at the time the
same was done, or immediately after he has notice of the same.
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<PAGE> 5
Section 9. RELIANCE ON BOOKS OF ACCOUNT, ET CETERA. Each member of the
Board of Directors and of any committee designated by the Board of Directors,
shall in the performance of his duties, be fully protected in relying in good
faith upon the books of account or other records of the corporation or upon
reports made to, or statements prepared for, the corporation by any of its
officers, or by independent certified public accountants, or by an appraiser
selected with reasonable care by the Board of Directors or by any such
committee.
Section 10. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and the writing or writings are filed with minutes of its proceedings.
Section 11. COMPENSATION. The directors may be paid their expenses,
if any, of attending any meeting of the Board of Directors, and may also be
paid either a fixed sum for attendance at each meeting of the Board of
Directors or a stated amount as monthly, quarterly or annual compensation.
Members of special or standing committees of the Board of Directors may be
allowed like compensation for performing their duties on such committees. No
such payment shall preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
ARTICLE IV
Committees of Board of Directors
--------------------------------
Section 1. FORMATION OF COMMITTEES. The Board of Directors may by
resolution adopted by a majority of the whole board designate one or more
committees, each committee to consist of two or more directors of the
corporation. Any such committee, to the extent provided in such a resolution,
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers that require it. Each such
committee shall have such name as may be determined from time to time by the
Board of Directors.
Section 2. APPOINTMENT OF MEMBERSHIP. The Board of Directors by
resolution adopted by a majority of the whole board shall appoint the directors
who shall be members of any such committee, each such member to hold office
until the next regular annual meeting of the Board of Directors following his
appointment and until his successor is appointed and qualified. Any member of
such a committee may be removed at any time with or without cause, and any
vacancy (whether created by removal, resignation or otherwise) may be filled,
by a resolution adopted in like manner by the Board of Directors. The Board of
Directors may also designate in any such resolution one or more directors as
alternative members of any such committee, who may replace any absent or
disqualified member at any meeting of the committee; but if there be no such
designation, the member or members of any such committee present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
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<PAGE> 6
Section 3. MEETINGS. Regular meetings of any such committee may be
held without notice at such times and places as the committee may fix from time
to time by resolution. Special meetings of a committee may be called by the
presiding officer thereof upon not less than one day's notice stating the
place, date and hour of the meeting, which notice may be written or oral or by
telegram. If such notice is mailed, it shall be deemed to be delivered when
deposited in the mail addressed to a member at his business address, and if
sent by telegram, when delivered to the telegraph company. Any member of a
committee may waive notice of a meeting; and no such notice need be given to a
member of a committee who attends a meeting in person. The notice of a meeting
of a committee need not state the business proposed to be transacted at the
meeting.
Section 4. QUORUM. A majority of the members of a committee appointed
or designated as provided in Section 2 of this Article IV, shall constitute a
quorum for the transaction of business at any meeting thereof. Any action by a
committee must be authorized by the affirmative vote of a majority of the
members present at a meeting at which a quorum exists.
Section 5. ACTION WITHOUT A MEETINGS. Any action required or permitted
to be taken at any meeting of a committee may be taken without a meeting if all
regular members of the committee consent thereto in writing, and the writing or
writings are filed with the minutes of its proceedings.
Section 6. PROCEDURE. Unless its presiding officer shall have been
designated by a majority of the whole Board of Directors, a committee shall
elect a presiding officer from among its members. It shall keep regular
minutes of its proceedings and report any action taken by it to the next
meeting of the Board of Directors or when otherwise required.
ARTICLE V
Officers
--------
Section 1. NUMBER OF OFFICERS. The officers of the corporation shall
be a Chairman of the Board, a Vice Chairman of the Board, a President, one or
more Executive or other Vice Presidents (the number thereof to be determined by
the Board of Directors from time to time), a Secretary and a Treasurer. Each
of such officers shall be elected and his compensation fixed by the Board of
Directors, but none of them, other than the Chairman of the Board, Vice
Chairman of the Board, and the President, need be members of the Board of
Directors. Any two or more of such offices may be held by the same person,
except that the Office of Secretary shall not be held by either the Chairman of
the Board or the President. The Board of Directors shall designate the
Chairman of the Board or the President to be the Chief Executive Officer of the
Corporation.
Section 2. ELECTION AND TERM OF SUCH OFFICERS. The officers of the
corporation to be elected by the Board of Directors shall be elected annually
at the regular meeting of the Board of Directors held after each annual meeting
of the stockholders. Each such officer shall hold office
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until his successor shall have been duly elected and qualified or until he
shall earlier resign or have been removed in the manner hereinafter provided.
Section 3. DESIGNATION OF ASSISTANT OFFICERS AND AGENTS. The Board
of Directors may designate such other assistant officers and agents as it
shall deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the Board of Directors.
Section 4. REMOVAL. Any officer, assistant officer or agent may be
removed by the Board of Directors whenever in its judgment the best interest
of the corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
of an officer or designation of an assistant officer or agent shall not of
itself create contract rights.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal or otherwise, may be filled by the Board of Directors.
Section 6. THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
of the Corporation shall in general supervise and direct all of the business
and affairs of the corporation. He shall have the power to sign, with the
Secretary or any other proper officer of the corporation thereunto duly
authorized by the Board of Directors, certificates for shares of the capital
stock of the corporation and any deeds, mortgages, bonds, debentures,
contracts or other instruments which the Board of Directors has authorized to
be executed, except in cases where the authority to sign and execute the same
shall be expressly vested by the Board of Directors or these by-laws in some
other officer, assistant officer, employee or agent of the corporation, or
shall be required to be otherwise signed or executed.
Section 7. THE CHAIRMAN OF THE BOARD. The Board of Directors may
elect one of its members to serve as Chairman of the Board. He shall preside
at all meetings of the Board of Directors and of the stockholders but shall
have the power, in his discretion, at any time, to delegate these duties to
the Vice Chairman of the Board, the President or to some other officer or
director of the corporation. He shall have all such other duties as may be
prescribed from time to time by the Board of Directors. He shall be
ex-officio a member of all standing committees to which he is not appointed
by the Board of Directors.
Section 8. THE VICE CHAIRMAN OF THE BOARD. The Board of Directors
may elect one of its members to serve as Vice Chairman of the Board. The
Vice Chairman shall have such duties as may be delegated to him by the Chief
Executive Officer or the Board of Directors. In the absence of the Chairman
of the Board and in the absence of any delegation of authority by the
Chairman of the Board to another officer or director of the corporation, he
shall preside at any meetings of the Board of Directors and of the
Stockholders.
Section 9. THE PRESIDENT. In the absence of the designation by the
Board of Directors of a Chief Executive Officer, the President shall act as
the chief executive officer of the corporation. In the absence of the
Chairman of the Board and the Vice Chairman of the Board and in the
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<PAGE> 8
absence of any delegation of authority by the Chairman of the Board to another
officer or director of the corporation, he shall preside at any meetings of
the Board of Directors and of the Stockholders. He shall be ex-officio a
member of all standing committees to which he is not appointed by the Board of
Directors. He shall have all such other duties as may be prescribed by the
Board of Directors or the Chief Executive Officer from time to time.
Section 10. THE VICE PRESIDENT. In the absence of the Chairman of the
Board, Vice Chairman of the Board and the President, or in the event of their
death, inability or refusal to act, the Vice President (or in the event there
be more than one Vice President, the Executive Vice President, or if there be
no Executive Vice President, then the Vice Presidents in the order designated
at the time of their election, or in the absence of any such designation, then
in the order of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Apart therefrom, the Vice Presidents shall
perform such other duties as may be prescribed from time to time by the Board
of Directors or the Chief Executive Officer.
Section 11. THE SECRETARY. The Secretary shall: (a) attend all
meetings of the stockholders, Board of Directors and any committees of the
Board of Directors and record the proceedings of those meetings in one or more
minute books provided for that purpose; (b) see that all notices are duly
given in accordance with the provisions of these by-laws or as required by
law; (c) be custodian of the corporate records and of the seal of the
corporation and see that the seal of the corporation is affixed to all
documents the execution of which on behalf of the corporation under its seal
is duly authorized; (d) keep a register of the post office address of each
stockholder; (e) sign with the Chief Executive Officer or other duly
authorized officer, certificates for shares of the corporation, the issuance
of which shall have been authorized by resolution of the Board of Directors;
(f) have general corporate responsibility for the stock transfer books of the
corporation and for the performance of the stock transfer agent and registrar;
and (g) in general perform all duties incident to the office of Secretary and
such other duties as from time to time may be assigned to him by the Board of
Directors or the Chief Executive Officer.
Section 12. THE TREASURER. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
(b) receive money due and payable to the corporation from any source whatever
and deposit all such money in the name of the corporation in such banks, trust
companies or other depositories as may be designated by the Board of
Directors; (c) disburse the funds of the corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements; (d) render
to the Chief Executive Officer, and when requested by it, to the Board of
Directors, an account of all his transactions as Treasurer and of the
financial condition of the corporation; and (e) in general perform all the
duties incident to the office of Treasurer and such duties as from time to
time may be assigned to him by the Board of Directors or Chief Executive
Officer. If required by the Board of Directors, the Treasurer shall give a
bond, in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors, for the faithful discharge of his duties and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money, securities, and
other property belonging to the corporation in his possession or control.
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Section 13. THE CONTROLLER. The Board of Directors may elect a
Controller who shall have charge of and be responsible for the books of account
of the corporation and keep or cause to be kept therein a full and accurate
record of the receipts and disbursements of the corporation and who shall
perform such other duties as may be assigned to him by the Board of Directors
or the Chief Executive Officer.
Section 14. GENERAL DUTIES OF OFFICERS. In the absence of the
Chairman of the Board, Vice Chairman of the Board, President or a Vice
President, the Treasurer or Secretary of the corporation is empowered to sign
any document required to be signed by the Chairman of the Board, Vice Chairman
of the Board, President or any Vice President.
ARTICLE VI
Stock Certificates
------------------
Section 1. CERTIFICATES FOR SHARES. The certificates representing
shares of the capital stock of the corporation shall be in such form as shall
be determined by the Board of Directors. Each holder of shares of stock in the
corporation shall be entitled to have such a certificate signed by or in the
name of the corporation by the Chairman of the Board, the President or a Vice
President, and by the Secretary or an Assistant Secretary of the corporation,
certifying the number of shares owned by him. If such certificate is
countersigned by a transfer agent or registrar other than the corporation
itself or one of its employees, the signatures of the officers upon the
certificate may be facsimiles. In the event that any officer, transfer agent
or registrar who has signed or whose facsimile signature has been placed upon a
certificate shall cease to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer, transfer agent or registrar on the date of
issue.
Section 2. CERTIFICATES FOR DIFFERENT CLASSES OF STOCK. If the
corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the corporation shall set forth on the face or
back of the certificates which it will issue to represent each class or series
of stock, a statement that the corporation will fumish without charge to each
stockholder who so requests, the designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 3. LOST CERTIFICATES. The corporation may issue a new
certificate of stock in place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed. When issuing such new
certificate the corporation may require as a condition precedent to the
issuance thereof, that the owner of any certificate or certificates alleged to
have been lost, stolen or destroyed, or his legal representative, (a) file with
the corporation an affidavit attesting to the fact that the certificate
theretofore issued is lost, stolen or destroyed and (b) give the corporation a
bond in such sum as it may direct to indemnify it against any claim that may be
made against it on
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account of the alleged loss, theft or destruction of such certificate or the
issuance of such new certificate.
Section 4. TRANSFERS OF STOCK. Upon surrender to the corporation or
its transfer agent of a certificate for shares of stock duly endorsed or
accompanied by the proper evidence of succession, assignment or authority to
transfer, the corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and properly record the transaction upon
its books.
Section 5. REGISTERED STOCKHOLDERS. The corporation may treat the
registered owner of shares on the books of the corporation as the person
exclusively entitled to vote the shares, and to receive notices and dividends
with respect thereto, and shall not be bound to recognize any equitable or
other claim to, or interest in, such shares in any other person even though the
corporation has notice thereof, except as otherwise provided by Delaware law.
ARTICLE VII
Indemnification
---------------
Section 1. LIMITED INDEMNIFICATION OF DIRECTORS AND OFFICERS. Subject
to the limitations of subsection (c) of this Section 1, the corporation shall
indemnify each of its directors and officers to the extent set forth in
subsections (a) and (b) hereof:
(a) ACTION OR SUIT BY OR IN THE RIGHT OF THE CORPORATION. Each
director and officer of the corporation who was or is a party, or is threatened
to be made a party,
-- to any threatened, pending or completed action or suit, by or in the
fight of the corporation, to procure a judgment in its favor,
-- by reason of the fact that he is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise,
shall be and is indemnified against expenses (including attorneys' fees)
actually and reasonable incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in, and not opposed to, the best interests of the
corporation; PROVIDED THAT no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless, and only to the extent that, the Court of
Chancery of Delaware, or the court in which such action or suit was brought,
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
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(b) ACTION OR SUIT OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
Each director or officer of the corporation who was or is a party, or is
threatened to be made a party,
-- to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than
an action or suit by or in the right of the corporation),
-- by reason of the fact that he is or was a director or officer of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
shall be and is indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Provided that the termination of any action, suit or proceeding
by judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE
or its equivalent, shall not, of itself, create a presumption that the
director or officer
-- did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of the
corporation, and
-- with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(c) LIMITATIONS ON INDEMNIFICATION. No indemnification shall be made
by the corporation under subsections (a) and (b) of this Section 1 unless
ordered by a court or it is determined in the specific case that
indemnification of such director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsections
(a) or (b) hereof Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding refeffed to, or (2) if such a quorum
is not obtainable, or even if obtainable, when a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(3) by the stockholders.
Section 2. GENERAL INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any
other provision of this Article VII to the contrary notwithstanding, to the
extent that a director or officer of the corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b) of said Section 1, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
Section 3. ADVANCE PAYMENT IN INDEMNIFICATION CASES. Expenses
incurred by any director or officer of the corporation in defending a civil or
criminal action, suit or proceeding refeffed to in subsections (a) or (b) of
said Section 1 may be paid by the corporation in advance of final
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disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article VII.
Section 4. CONTINUITY AND NONEXCLUSIVITY OF INDEMNIFICATION. The
indemnification and advancement of expenses provided by or granted pursuant to
this Article VII shall, unless otherwise provided when so authorized, continue
with respect to any director or officer of the corporation after he has ceased
to hold his office and shall inure to the benefit of his heirs, executors and
administrators. Any such indemnification (whether as expressly provided
herein or as extended pursuant to Section 5 of this Article VII) shall not be
deemed exclusive of any other rights to which the person seeking
indemnification may be entitled under any other By-Law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 5. EXTENSION OF BENEFITS OF INDEMNIFICATION. The rights of
indemnification to which directors and officers of the corporation are
entitled pursuant to this Article VII may, in similar circumstances, be
extended by resolution of the Board of Directors to any other person who is or
was an employee or agent of the corporation, or while not a director or
officer of the corporation, is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. Any such action by the
Board of Directors shall be consistent with the requirements of Section 145 of
the General Corporation Law of the State of Delaware, and may be either
general or confined to specific cases.
Section 6. INDEMNIFICATION INSURANCE. The corporation may purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprises,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
indemnifies him against such liability under, or pursuant to, the provisions
of this Article VII.
ARTICLE VIII
General Provision
-----------------
Section 1. FIXING RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
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meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
Section 2. DIVIDENDS. Subject to the statutes and any provision with
respect to dividends made by or pursuant to the Certificate of Incorporation,
dividends may be declared on the capital stock of the corporation at any
meeting of the Board of Directors held in accordance with these by-laws and may
be paid in cash, in property, or in shares of the corporation. Before
declaration or payment of any dividend the Board of Directors may set aside out
of any funds of the corporation available for dividends, such reserve or
reserves as the Directors in their absolute discretion feel to be proper or
conducive to the interest of the corporation, and may modify or abolish any
such reserve or reserves.
Section 3. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the statutes or of the Certificate of
Incorporation or of these by-laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Neither the business to
be transacted at, nor the purpose of, any meeting need be specified in any
written waiver of notice.
Section 4. ANNUAL REPORT. The Board of Directors shall present at each
annual meeting of stockholders and, when called for by a vote of the
stockholders, at any special meeting, a full and complete report of the
business and condition of the corporation.
Section 5. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority as the Board of Directors
may grant with respect thereto may be either general or confined to specific
instances.
Section 6. CHECKS, DRAFTS, ET CETERA. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation, shall be signed by such officer or
officers or such other person or persons as the Board of Directors may from
time to time designate.
Section 7. STOCK OF OTHER CORPORATIONS. In the absence of specific
action by the Board of Directors, the Chairman of the Board shall have
authority to vote and to empower others to vote, on behalf of the corporation,
the securities of other corporations, both domestic and foreign, held by the
corporation.
Section 8. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 9. CORPORATE SEAL. The Board of Directors shall provide a
corporate seal, which shall be circular in form and shall have inscribed
thereon the name of the corporation, the state of incorporation and the words
"Corporate Seal". The seal may be used by causing it or a facsimile thereof to
be impressed or affixed, or in any other manner reproduced.
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<PAGE> 14
Section 10. SEVERABILITY -- AMENDMENTS. If any provision of these
by-laws, or its application to any person or circumstances, is held invalid,
the remainder of these by-laws, and the application of such provision to other
persons or circumstances, shall not be affected. These by-laws and any
provision thereof may be altered, amended or repealed at any meeting of the
Board of Directors.
68
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<TOTAL-REVENUES> 137,594,631
<CGS> 92,895,554
<TOTAL-COSTS> 128,115,705
<OTHER-EXPENSES> 346,204
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,452,247
<INCOME-PRETAX> 7,680,475
<INCOME-TAX> 2,065,800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,614,675
<EPS-PRIMARY> $1.15
<EPS-DILUTED> $1.15
</TABLE>
