<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ANTHONY INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-2077125
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
4900 SOUTH EASTERN AVENUE
LOS ANGELES, CALIFORNIA 90040
(213) 724-2800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
B.I. FORESTER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ANTHONY INDUSTRIES, INC.
4900 SOUTH EASTERN AVENUE
LOS ANGELES, CALIFORNIA 90040
(213) 724-2800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
ROBERT A. CANTONE, ESQ. ROBERT B. KNAUSS, ESQ.
PROSKAUER ROSE GOETZ & MENDELSOHN LLP MUNGER, TOLLES & OLSON
1585 BROADWAY 355 SOUTH GRAND AVENUE
NEW YORK, NEW YORK 10036 LOS ANGELES, CALIFORNIA 90071-1560
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reimbursement plans, check the following box: [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING AGGREGATE AMOUNT OF
TO BE REGISTERED(1) REGISTERED PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1 4,600,000(3) $16.25 $74,750,000 $25,776
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) This Registration Statement also covers a total of 4,600,000 Preferred
Stock Purchase Rights, which are currently transferable with and only with
the shares of Common Stock registered hereby.
(2) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
registration fee.
(3) Includes shares issuable upon exercise of the Underwriters' over-allotment
option.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
DATED APRIL 27, 1995
PROSPECTUS
4,000,000 SHARES
ANTHONY INDUSTRIES, INC.
[LOGO OF ANTHONY INDUSTRIES, INC.]
COMMON STOCK
($1 PAR VALUE)
All of the shares of Common Stock of Anthony Industries, Inc. ("Anthony" or the
"Company") offered hereby are being sold by the Company.
The Common Stock of the Company is traded on the New York Stock Exchange under
the symbol "ANT." On April 26, 1995, the last reported sale price per share of
the Common Stock, as reported by the New York Stock Exchange, was $16.375.
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD CAREFULLY
CONSIDER THE MATTERS SET FORTH UNDER "CERTAIN INVESTMENT CONSIDERATIONS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT COMPANY (1)
<S> <C> <C> <C>
Per Share................................. $ $ $
Total (2)................................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Before deducting offering expenses payable by the Company estimated at
$ .
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to 600,000 additional shares of Common Stock at the Price to Public, less
Underwriting Discount, solely to cover over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
The Common Stock is offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the shares of Common Stock will be made at the
office of Salomon Brothers Inc, Seven World Trade Center, New York, New York,
or through the facilities of The Depository Trust Company, on or about ,
1995.
SALOMON BROTHERS INC
A.G. EDWARDS & SONS, INC.
SMITH BARNEY INC.
The date of this Prospectus is , 1995.
<PAGE>
[GRAPHIC MATERIAL]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE PACIFIC STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
2
<PAGE>
[GRAPHIC MATERIAL]
2A
<PAGE>
[GRAPHIC MATERIAL]
2B
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), pertaining
to the Common Stock covered by this Prospectus. This Prospectus omits certain
information and exhibits included in that Registration Statement, copies of
which may be obtained upon payment of a fee prescribed by the Commission or may
be examined free of charge at the principal office of the Commission in
Washington, D.C.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices located
at Room 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661
and at Suite 1300, 7 World Trade Center, New York, New York 10048. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Company's Common Stock is listed on the New York Stock Exchange and
the Pacific Stock Exchange (Symbol: ANT), and reports and information
concerning the Company can be inspected at the New York Stock Exchange at 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are by this reference incorporated in and made a part of this
Prospectus:
(1) the Annual Report on Form 10-K for the year ended December 31, 1994
including the portions of the Company's proxy statement dated April 10,
1995 incorporated by reference in such Report;
(2) the Quarterly Report on Form 10-Q for the quarter ended March 31, 1995;
(3) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated November 14, 1980, as amended
by the amendment to Application or Report on Form 8 dated December 30,
1987; and
(4) the description of the Rights and the Rights Agreement contained in the
Company's Registration Statement on Form 8-A dated August 21, 1989.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and to be part of this Prospectus from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents or into this Prospectus) will be
provided without charge to each person, including any beneficial owner to whom
this Prospectus is delivered, upon a written or oral request to Anthony
Industries, Inc., Attention: Susan E. McConnell, Secretary, 4900 South Eastern
Avenue, Los Angeles, California 90040, telephone number (213) 724-2800. Unless
the context otherwise requires, all references to the "Company" or "Anthony" in
this Prospectus refer to Anthony Industries, Inc. and its subsidiaries.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere or incorporated by reference
in this Prospectus. Unless otherwise indicated, all information in this
Prospectus has been adjusted to reflect stock dividends and assumes that the
Underwriters' over-allotment option is not exercised.
THE COMPANY
Anthony Industries, Inc. ("Anthony" or the "Company") is a leading designer,
manufacturer and marketer of brand name sporting goods and other recreational
products. The Company is also a major supplier of selected industrial products.
Anthony's sporting goods products include several well known, high quality
brand names such as K2 and Olin alpine skis, K2 snowboards, K2 Exotech in-line
skates, Shakespeare fishing rods and reels, Stearns personal flotation devices,
raingear and wetsuits, ProFlex full-suspension mountain bikes and Dana Design
and Wilderness Experience backpacks. The Company also produces and markets
Hilton active apparel, K2 ski apparel, Charles Bastion golf apparel and NASCAR
licensed apparel. In addition, the Company constructs Anthony swimming pools in
five regions across the country. Anthony's industrial products consist
primarily of Shakespeare monofilament line used in weed trimmers, in paper
mills and as fishing line; Shakespeare fiberglass marine antennas and light
poles; and Simplex coated and laminated products. Founded in 1946, Anthony has
grown to over $500 million in annual sales through a combination of internal
growth and strategic acquisitions.
In recent years, the Company has aggressively expanded into several of what
are recognized as the fastest growing sporting goods markets in the United
States, including in-line skates, snowboards, full-suspension mountain bikes
and fly fishing equipment. Management believes that these newer products have
benefited from Anthony's experience in increasing its market share positions
with other Company products, many of which are now the #1 brands in their
respective markets. For example, in the United States, K2 has the #1 market
position in alpine skis, and management believes that Stearns has the #1 market
position in personal flotation devices and Shakespeare's Ugly Stik is the top
selling line of fishing rods.
Anthony's overall business strategy is to focus on targeted products and
markets where the Company believes it can establish a profitable leadership
position. The key components of this business strategy are to (i) offer high
quality, brand name products; (ii) develop and introduce new and innovative
products; (iii) promote Anthony's product lines through highly tailored,
creative marketing; (iv) enhance and maintain the Company's well established
distribution networks; and (v) focus continuously on operating efficiencies.
Anthony distributes its sporting goods products through extensive
distribution networks of sporting goods retailers, specialty shops and mass
merchandisers in the U.S. and through distributors in more than 40 foreign
countries. The Company believes that the strength of its established
distribution networks, combined with Anthony's well recognized brand names and
reputation for developing and introducing innovative products, have allowed it
to more quickly introduce new products and grow acquired products.
The Company's growth strategy is to solidify its position as a leading
sporting goods company by identifying growth segments within the sporting goods
industry and entering these markets through (i) the introduction of new
products with distinctive designs and features; (ii) extending Anthony's well
recognized brand names into new product categories; (iii) fully utilizing the
Company's extensive distribution networks through increased product
penetration; and (iv) pursuing strategic acquisitions. Management has
demonstrated a successful track record of growing both internally developed and
acquired products into profitable brands with leading market share positions.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered....................... 4,000,000 shares
Common Stock Outstanding after the Offer- 15,874,128 shares
ing.......................................
Use of Proceeds............................ To reduce the amount outstanding under the
Company's bank revolving credit line under
which funds may be reborrowed for general
corporate purposes, including the financing
of product sales growth, the development of
new products and strategic acquisitions. See
"Use of Proceeds."
NYSE Symbol................................ ANT
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------- ------------------
1990 1991 1992 1993 1994 1994 1995(1)
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $376,611 $370,256 $402,047 $431,640 $502,444 $109,735 $145,018
Gross profit........... 103,546 98,353 106,041 110,274 131,542 26,682 35,306
Operating income....... 11,887 16,246 18,529 21,415 26,236 1,916 5,241
Income before provision
for income taxes...... 4,468 10,680 12,911 16,961 20,333 710 2,727
Net income............. 2,723(2) 6,605 8,521 11,121 13,033 460 2,087
Net income per share... $ .24(2) $ .57 $ .73 $ .94 $ 1.09 $ .04 $ .17
OTHER OPERATING DATA:
Gross margin........... 27.5% 26.6% 26.4% 25.5% 26.2% 24.3% 24.3%
Operating margin....... 3.2% 4.4% 4.6% 5.0% 5.2% 1.7% 3.6%
Capital expenditures... $ 14,007 $ 5,052 $ 7,131 $ 8,715 $ 11,620 $ 1,880 $ 4,468
Depreciation expense... 8,422 8,710 8,687 8,190 7,705 2,059 2,157
Research and
development expense... 3,300 2,900 3,538 4,290 6,298 1,509 2,250
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1995
------------------------
AT DECEMBER 31, 1994 ACTUAL AS ADJUSTED (3)
-------------------- -------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............. $150,246 $149,655 $149,655
Total assets................ 304,414 327,993 327,993
Long-term debt, net of cur-
rent portion............... 109,921 110,822
Shareholders' equity........ 98,996 101,895
</TABLE>
- --------
(1) The Company maintains its books using a 52/53-week year ending on the last
Sunday of December. The year ending December 31, 1995 will consist of 53
weeks with the additional week included in the first quarter. All other
years presented above consist of 52 weeks.
(2) Includes a restructuring charge of $1.8 million after tax and is prior to
an extraordinary loss, net of tax benefit, of $1.0 million, or $.09 per
share, reflecting the write-off of an unamortized original issue discount
relating to the redemption of convertible subordinated debentures.
(3) As adjusted to give effect to (i) the sale by the Company of the 4,000,000
shares of Common Stock being offered hereby at an assumed price of $ per
share, less estimated underwriting discounts and offering expenses payable
by the Company and (ii) the application of the net proceeds therefrom. See
"Use of Proceeds."
----------------
Approximately 20% of the Company's Common Stock outstanding prior to this
offering is owned by the Company's employees through its Employee Stock
Ownership Plan or "ESOP." The Company's principal executive offices are located
at 4900 South Eastern Avenue, Los Angeles, California 90040, and its telephone
number is (213) 724-2800.
5
<PAGE>
CERTAIN INVESTMENT CONSIDERATIONS
COMPETITION AND PRODUCT INNOVATION
The sporting goods and recreational products markets are generally highly
competitive, with competition mainly centering on product innovation,
performance and styling, price, marketing and delivery. The Company's
historical sales growth has been attributable in part to its introduction of
new products. The Company believes that its future success will depend, among
other things, upon its continued ability to introduce innovative, well received
products, and there can be no assurance of its ability to do so. In addition, a
major innovation by one of its competitors could have a negative effect on the
sales of one or more of the Company's lines of products. Competition in
sporting goods and recreational products (other than snowboards, active wear
and swimming pools) consists of a relatively small number of large producers,
some of whom have greater financial or other resources than the Company. While
Anthony believes that its well recognized brand names, established distribution
networks and reputation for developing and introducing innovative products have
been key factors in its successful introduction of sporting goods products,
there are no significant technological or capital barriers to entry into many
sporting goods and recreational products markets. These markets face
competition from other leisure activities, and sales of leisure products are
affected by changes in consumer tastes, which are difficult to predict. Certain
of the Company's industrial products, such as paperboard container components,
are subject to intense price competition. Some industrial products competitors
have greater financial or other resources than the Company.
SEASONALITY AND QUARTERLY FLUCTUATIONS
Sales of the Company's sporting goods and other recreational products are
generally highly seasonal and in many instances are dependent on weather
conditions. The Company's industrial products are mildly seasonal. This
seasonality causes the Company's financial results to vary from quarter to
quarter, and the Company's sales are usually weakest in the first quarter. The
timing of new product introductions and changes in marketing, research and
development and other expenditures can also impact quarterly results. In
addition, the nature of the Company's ski and snowboard businesses requires it
to make relatively large investments in inventory in anticipation of these
products' selling season, which runs from June through December, and relatively
large investments in receivables during and shortly after such season. The
rapid delivery requirements of the Company's customers for other sporting goods
products and active apparel also result in investment in significant amounts of
inventory. The Company believes that another factor in its level of inventory
investment is the shift by certain of its sporting goods customers from
substantial purchases of pre-season inventories to deferral of deliveries until
the products' retail seasons. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Sources of
Capital."
GENERAL ECONOMIC CONDITIONS AND DISCRETIONARY CONSUMER SPENDING
Sales of sporting goods and other recreational products including, in
particular, swimming pools depend to a large extent on general economic
conditions, including the amount of discretionary income available for leisure
activities, consumer confidence and the availability of consumer credit at
reasonable interest rates. Sales of the Company's industrial products are
dependent to varying degrees upon economic conditions in the domestic housing,
container and paper industries.
FOREIGN SOURCING
Within the Company's sporting goods and other recreational product lines,
certain components and finished products are manufactured or assembled abroad.
For example, a major portion of the Company's fishing rods and reels are
currently manufactured in the People's Republic of China and its
6
<PAGE>
in-line skates are manufactured by a vendor in Korea. The production of these
foreign sourced components and products could be subject to interruption as a
result of local unrest, currency exchange fluctuations, increased tariffs,
trade difficulties or other factors.
RAW MATERIALS
Although the Company has not experienced any substantial difficulty in
obtaining raw materials, from time to time raw materials used in the production
of the Company's products have been and may continue to be subject to price
increases. Recycled corrugated scrap paper, a raw material used in the
production of the Company's insulative sheathing, has become materially more
expensive, a trend which the Company believes may continue. This increasing
cost has had and could continue to have a significant impact on the
profitability of the insulative sheathing line. While the Company has been able
to raise its insulative sheathing prices to partially offset the increasing
cost of this raw material, no assurances can be given of the Company's
continued ability to do so.
PRODUCT LIABILITY CLAIMS
Certain of the Company's products are used in recreational settings which
carry inherent risks including the possibility of serious bodily injury. From
time to time the Company is named as a defendant in lawsuits asserting product
liability claims relating to its sporting goods and other recreational products
and, in particular, its swimming pools, diving boards and pool filters. To
date, none of these lawsuits has had a material effect on the Company, and the
Company does not believe that any lawsuit now pending could reasonably be
expected to have such an effect. The Company maintains product liability,
general liability and excess liability insurance coverage. No assurances can be
given that such insurance will continue to be available at an acceptable cost
to the Company or that such coverage will be sufficient to cover one or more
large claims, or that insurers will not successfully disclaim coverage as to
any pending or future claim.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and the
Delaware General Corporation Law, the ownership by the Company's Employee Stock
Ownership Plan of approximately 20% of the Common Stock outstanding prior to
this offering and the Company's outstanding Preferred Stock Purchase Rights
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, control of the
Company. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of Common Stock. See "Description of
Capital Stock."
7
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the 4,000,000
shares of Common Stock offered hereby, at an assumed offering price of $
per share, after deducting estimated underwriting discounts and expenses of the
offering payable by the Company, are approximately $ million. Such net
proceeds will be used to reduce amounts outstanding under the Company's $85
million unsecured bank revolving credit line (the "Credit Line"), which
indebtedness was $69.0 million at March 31, 1995. Borrowings under the Credit
Line have been used in part for the development, introduction and growth of new
products and for strategic acquisitions. The Company may reborrow amounts
repaid under the Credit Line for general corporate purposes, which may include
the financing of product sales growth, the development of new products and
strategic acquisitions. The Company currently has no agreements or
understandings with respect to any prospective acquisition. The Credit Line
becomes due on June 28, 1997. Amounts outstanding under the Credit Line
currently bear interest at the London Interbank Offered Rate plus a margin of
3/4 percent and the line provides for a commitment fee of 3/8 percent of its
unused portion. As of April 21, 1995, the average interest rate payable under
the Credit Line was 6 7/8 percent. The Company has recently entered into an
additional $40 million 364-day unsecured revolving credit facility (the "Short-
Term Facility") with the same lenders, and providing for substantially the same
covenants, interest rate options and commitment fees as under the Credit Line.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Sources of Capital."
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "ANT." The following table sets forth,
for the quarters indicated, the reported high and low sales prices of the
Common Stock, as reported by the New York Stock Exchange, as well as the cash
dividends paid per share, all of which have been retroactively adjusted to
reflect five percent stock dividends paid in the fourth quarter of each year.
On April 26, 1995, the last reported sale price for the Company's Common Stock
on the New York Stock Exchange was $16.375 per share.
<TABLE>
<CAPTION>
CASH
HIGH LOW DIVIDENDS
------- ------- ---------
<S> <C> <C> <C>
FISCAL YEAR 1993:
First Quarter.................................. $12 1/2 $10 7/8 $.10
Second Quarter................................. 13 5/8 11 1/8 .10
Third Quarter.................................. 14 7/8 11 7/8 .10
Fourth Quarter................................. 15 1/4 13 3/8 .105
FISCAL YEAR 1994:
First Quarter.................................. $17 1/2 $ 14 $.105
Second Quarter................................. 15 1/8 13 7/8 .105
Third Quarter.................................. 16 7/8 14 3/8 .105
Fourth Quarter................................. 17 3/8 16 .11
FISCAL YEAR 1995:
First Quarter.................................. $16 7/8 $15 1/8 $.11
Second Quarter (through 1995).............
</TABLE>
The Company has paid a cash dividend on the Common Stock since 1978. The
timing, amount and form of dividends depends on, among other things, the
Company's results of operations, financial condition, cash requirements and
other factors deemed relevant by the Board of Directors. The Company's Credit
Line and Short-Term Facility have identical covenants which restrict amounts
available for payment of cash dividends on the Company's Common Stock, and
certain other debt agreements of the Company also contain covenants restricting
cash dividends, although these covenants are less restrictive than those
contained in the Credit Line and Short-Term Facility. As of March 31, 1995, the
Company had retained earnings of $7.7 million available for the payment of cash
dividends under such restrictions.
8
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of March 31, 1995, and as adjusted to give
effect to (i) the sale by the Company of the 4,000,000 shares of Common Stock
offered hereby at an assumed price of $ per share, less estimated
underwriting discounts and offering expenses payable by the Company, and (ii)
the application of the net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
AT MARCH 31, 1995
--------------------
AS
ACTUAL ADJUSTED
-------- --------
<S> <C> <C>
Short-term bank loans.................................. $ 35,432(1) $ 35,432(1)
Current portion of long-term debt...................... 2,902 2,902
-------- --------
Total short-term debt.............................. $ 38,334 $ 38,334
======== ========
Long-term debt, net of current portion:
Credit Line.......................................... $ 66,500 $
8.39% unsecured senior notes due through 2004........ 40,000 40,000
Floating rate notes due through 2001................. 4,226 4,226
Other................................................ 96 96
-------- --------
Total long-term debt............................... 110,822
-------- --------
Shareholders' equity:
Preferred Stock, $1 par value, 12,500,000 shares au-
thorized,
none issued......................................... -- --
Common Stock, $1 par value, 40,000,000 shares autho-
rized, 12,355,187 shares issued; 16,355,187 shares
issued,
as adjusted(2)...................................... 12,355 16,355
Additional paid-in capital........................... 67,229
Retained earnings.................................... 29,775 29,775
Employee Stock Ownership Plan and stock option loans. (3,908) (3,908)
Treasury shares at cost, 481,059 shares.............. (4,189) (4,189)
Cumulative translation adjustment.................... 633 633
-------- --------
Total shareholders' equity......................... 101,895
-------- --------
Total capitalization............................. $212,717 $
======== ========
</TABLE>
- -------
(1) Subsequent to March 31, 1995, the Company entered into the Short-Term
Facility and presently intends to refinance a portion of the short-term
bank loans with borrowings under the Short-Term Facility. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Sources of Capital."
(2) Excludes all shares of Common Stock issuable upon exercise of outstanding
options, of which options to exercise 163,550 shares of Common Stock were
exercisable as of March 31, 1995.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
The following table sets forth selected consolidated financial data of the
Company. The financial data as of and for each of the five years ended December
31, 1994 has been derived from the Consolidated Financial Statements of the
Company audited by Ernst & Young LLP, the Company's independent auditors. The
financial data as of and for the three months ended March 31, 1994 and 1995
have been derived from unaudited financial statements but include all
adjustments (consisting only of normal recurring adjustments) that management
considers necessary for a fair presentation of such results for these periods.
Operating results for the three month period ended March 31, 1995 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1995. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------- ---------------------
1990 1991 1992 1993 1994 1994 1995(1)
-------- -------- -------- -------- -------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............. $376,611 $370,256 $402,047 $431,640 $502,444 $ 109,735 $ 145,018
Cost of products sold. 273,065 271,903 296,006 321,366 370,902 83,053 109,712
-------- -------- -------- -------- -------- --------- ---------
Gross profit.......... 103,546 98,353 106,041 110,274 131,542 26,682 35,306
Selling expenses...... 53,659 46,723 52,199 52,254 61,023 14,157 17,477
General and adminis-
trative
expenses............. 38,000 35,384 35,313 36,605 44,283 10,609 12,588
-------- -------- -------- -------- -------- --------- ---------
Operating income...... 11,887 16,246 18,529 21,415 26,236 1,916 5,241
Interest expense...... 8,766 6,906 6,777 5,759 7,481 1,574 2,832
Other (income)........ (1,347) (1,340) (1,159) (1,305) (1,578) (368) (318)
-------- -------- -------- -------- -------- --------- ---------
Income before provi-
sion for
income taxes......... 4,468 10,680 12,911 16,961 20,333 710 2,727
Provision for income
taxes................ 1,745 4,075 4,390 5,840 7,300 250 640
-------- -------- -------- -------- -------- --------- ---------
Income before extraor-
dinary item.......... 2,723 (2) 6,605 8,521 11,121 13,033 460 2,087
Extraordinary item.... (988)(3) -- -- -- -- -- --
-------- -------- -------- -------- -------- --------- ---------
Net income............ $ 1,735 $ 6,605 $ 8,521 $ 11,121 $ 13,033 $ 460 $ 2,087
======== ======== ======== ======== ======== ========= =========
Net income per share:
Before extraordinary
item................ $ .24 $ .57 $ .73 $ .94 $ 1.09 $ .04 $ .17
======== ======== ======== ======== ======== ========= =========
Net income........... $ .15 $ .57 $ .73 $ .94 $ 1.09 $ .04 $ .17
======== ======== ======== ======== ======== ========= =========
Weighted average
shares
outstanding.......... 11,369 11,577 11,635 11,798 11,919 11,909 11,957
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
--------------------------------------------------- ---------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets.. $147,017 $152,439 $168,916 $187,756 $232,848 $194,480 $ 252,006
Total assets.......... 220,551 221,650 236,200 257,279 304,414 263,255 327,993
Total current liabili-
ties................. 78,754 87,197 73,095 69,976 82,602 74,519 102,351
Long-term debt, net of
current portion...... 53,750 43,451 68,525 87,271 109,921 88,743 110,822
Shareholders' equity.. 78,137 80,663 83,598 88,656 98,996 88,710 101,895
</TABLE>
- -------
(1) The Company maintains its books using a 52/53-week year ending on the last
Sunday of December. The year ending December 31, 1995 will consist of 53
weeks with the additional week included in the first quarter. All other
years presented above consist of 52 weeks.
(2) Includes a restructuring charge of $1.8 million after tax.
(3) Reflects an extraordinary loss, net of tax benefit, on the write-off of an
unamortized original issue discount relating to the redemption of
convertible subordinated debentures.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
During the past five years, the Company has experienced substantial growth
with net sales increasing to $502.4 million in 1994 from $376.6 million in
1990. During this same period, operating income increased to $26.2 million from
$11.9 million and net income increased to $13.0 million from $1.7 million. The
Company's sales growth has been due principally to successful new product
introductions and brand extensions and secondarily to strategic acquisitions.
The Company is presently focused primarily on the growth of its sporting goods
and other recreational products businesses, which represented 66% of net sales
in 1994.
The Company's operating margin has increased each of the past five years to
5.2% in 1994 compared to 3.2% in 1990. Contributing to this operating margin
improvement were lower selling and general and administrative expenses as a
percentage of net sales as well as benefits achieved from the Anthony
Improvement Process, which encompasses basic and advanced management methods
designed to increase productivity, reduce cycle time, lower costs and improve
quality. These margin gains were partially offset in 1993 and 1994 by
significant costs incurred in converting the U.S. ski manufacturing plant to
the production of cap skis and the resulting higher manufacturing costs. See
"Business--Sporting Goods and Other Recreational Products." Gross margins on
cap skis improved during 1994, and management believes there is further
opportunity for production efficiencies.
RESULTS OF OPERATIONS
The following table summarizes net sales for the Company's principal business
segments:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
31, MARCH 31,
-------------------- --------------------
1992 1993 1994 1994 1995(1)
------ ------ ------ --------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Sporting Goods and Other
Recreational Products.............. $266.6 $285.5 $332.1 $ 69.9 $ 94.7
Industrial Products................. 135.4 146.1 170.3 39.8 50.3
------ ------ ------ --------- ---------
Total........................... $402.0 $431.6 $502.4 $ 109.7 $ 145.0
====== ====== ====== ========= =========
</TABLE>
- --------
(1) The Company maintains its books using a 52/53-week year ending on the last
Sunday of December. The year ending December 31, 1995 will consist of 53
weeks with the additional week included in the first quarter. All other
years presented above consist of 52 weeks.
THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1994
Net sales for the three months ended March 31, 1995 advanced 32.2% to a
record $145.0 million compared to $109.7 million in the comparable period of
1994. Net income for the first quarter of 1995, boosted by a $0.3 million
foreign tax settlement, rose to $2.1 million, or $.17 per share, from $0.5
million, or $.04 per share, for the first quarter of 1994. Earnings in the
prior year quarter were adversely impacted by the costs of the cap ski
conversion discussed above.
Net Sales. In the sporting goods and other recreational products group, net
sales increased 35.5% to $94.7 million in the 1995 quarter compared to $69.9
million in 1994. This record first quarter is attributable in part to sharply
increased domestic sales of Shakespeare fishing rods and reels resulting from
increased demand for Ugly Stik fishing rods and for several new rods, reels,
kits and combos. Sales of K2 Exotech in-line skates, which were introduced late
in the first quarter of 1994, increased in
11
<PAGE>
the corresponding 1995 quarter. Shipments of Stearns active water sports
products were up significantly and benefited from strong growth in demand for
personal flotation devices, wetsuits and related neoprene products. Sales of
active apparel to the promotional or "advertising specialty" market, shipments
of ProFlex mountain bikes and sales of backpacks by the recently acquired Dana
Design business also contributed to the growth of the group, although to a
lesser extent. Partially offsetting this sales growth was a decline in swimming
pool completions, primarily caused by heavy rains throughout much of California
during the first quarter.
Net sales of the industrial products group increased 26.4% to $50.3 million
in the first three months of 1995 compared to $39.8 million in the comparable
period of 1994. The increase in sales was due mainly to gains in shipments of
building products, paperweaving monofilaments and fiberglass light poles.
Gross Profit. Gross profit increased 32.3% to $35.3 million in the first
quarter of 1995 compared to $26.7 million in the first quarter of 1994,
although as a percentage of net sales it was comparable to the 1994 period. The
1994 period included the costs of the cap ski conversion. Gross profit in 1995
was impacted by higher costs of recycled corrugated scrap paper, which is a raw
material used in the production of the Company's insulative sheathing, and by
higher manufacturing costs in the fiberglass light pole business.
Costs and Expenses. Selling expenses increased 23.5% to $17.5 million in the
first three months of 1995 compared to $14.2 million in the comparable period
of 1994, although as a percentage of net sales they declined to 12.1% for the
1995 period compared to 12.9% in the 1994 period. The percentage decline was
primarily volume related.
General and administrative expenses increased $2.0 million in the quarter to
$12.6 million from $10.6 million in 1994, although as a percentage of net sales
they declined to 8.7% from 9.7%. The dollar increase was caused mainly by
higher spending on product development, other expenditures to support growth
and inclusion of Dana Design and other smaller acquisitions.
Operating Income. Operating income increased to $5.2 million, or 3.6% of net
sales, in the three months ended March 31, 1995 compared to $1.9 million, or
1.7% of net sales, in the comparable 1994 period. The percentage increase is
due to reductions in selling expenses and general and administrative expenses
as a percentage of net sales. The volume-related earnings increases of several
of the Company's businesses in 1995 were partially offset by the normal
seasonal negative results of the ski and pool businesses. The seasonal loss of
the K2 business declined as compared with the prior year's quarter whereas the
decline in pool sales discussed above widened that business' seasonal loss. The
Company believes that the impact on operating income of the additional week in
1995's first quarter as compared to the 1994 period was not significant.
Interest Expense. Interest expense increased $1.3 million in the first
quarter of 1995 compared to the first quarter of 1994. Higher interest rates
accounted for $0.5 million of the increase, and a $39.6 million higher level of
average borrowings, incurred to support the recent growth in sales, accounted
for the remainder.
Income Taxes. The provision for income taxes for the 1995 first quarter has
been reduced as a result of a $0.3 million foreign tax settlement.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Net sales increased 16.4% to $502.4 million in 1994 compared to
$431.6 million in 1993. Net income increased 17.2% to $13.0 million, or $1.09
per share, in 1994 compared to $11.1 million, or $.94 per share, in 1993.
12
<PAGE>
Net Sales. In the sporting goods and other recreational products group, net
sales increased 16.3% to $332.1 million in 1994 compared to $285.5 million in
1993. Approximately one-half of the improvement was attributable to the
Company's successful introduction of K2 Exotech in-line skates, increased
demand worldwide for K2 snowboards and inclusion for the full year of the
rapidly growing ProFlex mountain bike business acquired in October 1993. Growth
was also achieved from product extensions such as the introduction of 54 styles
of Hilton and USA active apparel for the advertising specialty market and new
models of Stearns raingear, wetsuits and water ski vests, all introduced since
January 1, 1993, along with several new models of fishing rods, reels, and kit
and combo series. Unit sales of Anthony swimming pools in 1994 increased for
the first time since 1988, reflecting higher overall activity within the
industry. Sales also benefited from increased penetration in the swimming pool
remodeling market. Partially offsetting these gains were lower sales of skis to
the economically depressed European and Japanese markets.
In the industrial products group, net sales increased 16.6% to $170.3 million
in 1994 compared to $146.1 million in 1993. Over one-half of the improvement
was attributable to the Simplex products business, which produces coated and
laminated paperboard products, protective building wrap and synthetic
commercial building coatings. This business benefited from increased
penetration of Finestone commercial coatings, expanded models of building wrap
and improved housing starts and shipments into the Japanese market which drove
sales of insulative sheathing to a record level. Improved market penetration,
particularly of fiberglass light poles and paperweaving monofilament line in
the United Kingdom, generated the majority of the sales gains in the
Shakespeare fiberglass business and the Shakespeare monofilament business,
respectively, which are the other two businesses of the industrial products
group.
Gross Profit. Gross profit increased 19.3% to $131.5 million, or 26.2% of net
sales in 1994 compared to $110.3 million, or 25.5% of net sales, in 1993. This
improvement in gross profit margin resulted from an improved sales mix and
gains in efficiency from ongoing applications of the Anthony Improvement
Process, particularly at the Stearns, Hilton, Shakespeare monofilament and
Simplex businesses. Overall gross profit in dollars also improved despite the
costs of the cap ski conversion. Margin and gross profit were unfavorably
impacted by the dramatic increase in the cost of recycled corrugated scrap
paper.
Costs and Expenses. Selling expenses increased 16.8% to $61.0 million in 1994
compared to $52.3 million in 1993, although as a percentage of net sales they
were comparable to the prior year. The increase resulted primarily from
inclusion of the mountain bike business for a full year and increased spending
in support of new products in the in-line skate, mountain bike, snowboard and
apparel businesses, partially offset by reductions in the pool business.
General and administrative expenses increased 21.0% to $44.3 million in 1994
compared to $36.6 million in 1993. The increase reflects the inclusion of the
mountain bike business for a full year, significant research and development
expenditures primarily at the K2 business, investments in systems and personnel
primarily at the Hilton business, and continuation of other expenditures to
support the growth of the Company.
Operating Income. Operating income increased 22.5% to $26.2 million in 1994,
or 5.2% of net sales, compared to $21.4 million, or 5.0% of net sales, in 1993.
The percentage increase is due to the higher gross profit margin partially
offset by higher general and administrative expenses.
Interest Expense. Interest expense increased $1.7 million in 1994. Higher
domestic interest rates accounted for $0.5 million of the increase, and a $17.4
million higher level of average borrowings, incurred to acquire the mountain
bike business and support the growth of several product lines, accounted for
the remainder.
13
<PAGE>
Other Income. Other income of $1.6 million includes certain royalty, interest
and other miscellaneous income, $1.2 million of which is reported as a
component of segment operating profit.
Income Taxes. Income tax expense included a $0.6 million reclassification of
state tax previously recorded as selling and general and administrative
expenses. See Note 4 to Notes to Consolidated Financial Statements.
Segment Information. Total segment operating profit (before interest,
corporate expenses and taxes) increased 24.8% to $32.7 million in 1994 compared
to $26.2 million in 1993. In the sporting goods and other recreational products
group, operating profit rose 31.1% to $16.0 million in 1994 compared to $12.2
million in 1993. The group benefited from the Company's introduction of several
new fishing rods, reels, and kit and combo series in the U.S. and from lower
manufacturing costs abroad. Sales-related earnings gains also contributed to
the group's improvement, particularly from K2 snowboards and the successful
introduction of certain Stearns and Hilton products. Partially offsetting these
profit gains were the costs of the cap ski conversion and the impact of
declining sales in the European and Japanese ski markets. In the industrial
products group, operating profit increased 19.3% to $16.7 million in 1994
compared to $14.0 million in 1993. The improvement was mainly due to sales-
related earnings and efficiency gains at Shakespeare Monofilament and Simplex.
See Note 11 to Notes to Consolidated Financial Statements.
YEAR ENDED DECEMBER 31, 1993 COMPARED WITH YEAR ENDED DECEMBER 31, 1992
Net sales increased 7.4% to $431.6 million in 1993 compared to $402.0 million
in 1992. Net income increased 30.5% to $11.1 million, or $.94 per share, in
1993 compared to $8.5 million, or $.73 per share, in 1992.
Net Sales. Net sales of the sporting goods and other recreational products
group increased 7.1% to $285.5 million in 1993 compared to $266.6 million in
1992. Favorable weather conditions in the U.S. provided a boost to sales of K2
skis. The popularity of K2 snowboards pushed sales of this product up to nearly
double 1992's level. Sales of Shakespeare fishing tackle in the United States
benefited from an increased distribution of Ugly Stik fishing rods, a growing
acceptance of the new series of fishing reels introduced and an increase in
shipments of fishing line. Several new products introduced by Stearns and
Hilton including wetsuits and raingear and new styles of Hilton active apparel
for the advertising specialty markets also contributed to increased sales. A
focused marketing effort in the pool remodeling business and the October 1993
acquisition of the ProFlex mountain bike business also helped to increase
sales. Offsetting these gains was the lingering impact of the recession in the
Northeast and California, which resulted in lower new pool and pool cover
sales, and decreased sales of fishing tackle and alpine skis in Europe and
Japan.
Net sales of the industrial products group increased 7.9% to $146.1 million
in 1993 compared to $135.4 million in 1992. Increased housing starts and a
wider distribution of building products sales in the United States and Japan
produced sales gains in Thermo-ply, Finestone and other building products.
Sales of fiberglass light poles and ornamental poles increased over the prior
year as a result of new product introductions, broader distribution in the
marketplace and improved product quality. Higher sales of monofilament line
also contributed to the industrial products group's sales increase.
Gross Profit. Gross profit increased 4.0% to $110.3 million, or 25.5% of net
sales, in 1993 compared to $106.0 million, or 26.4% of net sales, in 1992. The
decline of gross profit as a percentage of net sales was largely due to the
costs of the cap ski conversion. The percentage decline also reflects the
development cost of the K2 Exotech in-line skates and higher manufacturing
training costs incurred at Stearns as a result of increased production. Other
factors affecting the gross profit percentage were largely offsetting: cost
reductions attained through the Anthony Improvement Process at the Simplex and
Shakespeare monofilament and fiberglass businesses were offset by higher costs
at the
14
<PAGE>
Company's distribution businesses in Europe, which arose from the devaluation
of European currencies in 1993.
Costs and Expenses. Selling expenses increased 0.1% to $52.3 million in 1993
compared to $52.2 million in 1992, although as a percentage of net sales they
declined to 12.1% in 1993 from 13.0% in 1992. This percentage decline resulted
largely from the recession-related contraction of sales of fishing rods and
reels and skis in the European market. Partially offsetting this were spending
increases at the Hilton business to increase penetration into new markets and
better serve its customers.
General and administrative expenses increased 3.7% to $36.6 million in 1993
compared to $35.3 million in 1992. The increase reflects performance-based
compensation and the Company's investments in personnel, training and systems
for improving the quality of products and services.
Operating Income. Operating income increased 15.6% to $21.4 million in 1993,
or 5.0% of net sales, compared to $18.5 million, or 4.6% of net sales, in 1992.
The percentage increase resulted from lower selling, general and administrative
expenses as a percentage of net sales, partially offset by a lower gross profit
margin.
Interest Expense. Interest expense declined by a net amount of $1.0 million
in 1993. Lower worldwide interest rates produced a benefit of $1.7 million,
which was partially offset by $0.7 million of higher interest incurred
domestically on a $12 million increase in average bank debt arising from
working capital required for higher sales of sporting goods and other
recreational products.
Other Income. Other income of $1.3 million includes certain royalty, interest
and other miscellaneous income, of which $0.4 million is reported as a
component of segment operating profit.
Segment Information. Total segment operating profit (before interest,
corporate expenses and taxes) increased 15.9% to $26.2 million in 1993 compared
to $22.6 million in 1992. The sporting goods and other recreational products
group, which reported operating profit of $12.2 million, accounted for a $0.6
million increase. Higher domestic sales of fishing tackle and continuing
foreign manufacturing cost economies produced record worldwide fishing tackle
earnings. Gains were also achieved at Anthony Pools, which significantly
narrowed its losses due to strong gains in remodeling and its continuing focus
on the Anthony Improvement Process, and at the Hilton business, which benefited
from higher overall sales. Largely offsetting these gains were lower ski
earnings resulting from the costs of the cap ski conversion and the development
cost of the in-line skate program. The industrial products group reported an
improvement of $3.0 million in operating profit to $14.0 million for the
current year. Earnings of the building products and light pole businesses
improved due to increased volume and cost reductions from improvements made in
the manufacturing processes. Earnings of the Shakespeare monofilament business
improved largely as a result of increased volume. See Note 11 to Notes to
Consolidated Financial Statements.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's operating activities used $15.7 million of cash during 1994
whereas 1993 operating activities provided cash of $10.3 million. The Company's
operating activities used $12.9 million of cash during the three months ended
March 31, 1995 as compared with $2.3 million of cash used during the three
months ended March 31, 1994. The recent increased use of cash has been due
primarily to financing higher levels of accounts receivable and inventories
arising from the growth in sales of in-line skates, snowboards, raingear,
wetsuits, fishing rods and reels and full-suspension mountain bikes and from
the recent acquisitions of Dana Design and Wilderness Experience. The Company
believes that another factor in its increased level of inventory investment is
the shift by certain of its sporting goods customers from substantial purchases
of pre-season inventories to deferral of deliveries until the products' retail
seasons. In the industrial products group, cash generated from operations has
been
15
<PAGE>
partially offset by the purchase of additional inventories in anticipation of
further cost increases for recycled corrugated scrap paper. See "Business--
Foreign Sourcing and Raw Materials."
Net cash used for investment activities in 1994 decreased to $8.6 million
from $12.5 million in 1993; net cash used for investing activities increased to
$5.1 million in the three months ended March 31, 1995 from $0.9 million used in
the three months ended March 31, 1994. The increase in cash used in the current
year's quarter was the result of expenditures made to increase manufacturing
capacity and improve manufacturing efficiencies, primarily at the monofilament,
ski and fiberglass light pole plants. No material commitments for capital
expenditures existed at March 31, 1995.
The Company's principal long-term borrowing facility is the $85 million
Credit Line which becomes due on June 28, 1997. At March 31, 1995, $69.0
million was outstanding under this line and, as adjusted to give effect to the
sale of Common Stock offered hereby and the use of proceeds therefrom, such
amount would be $ . See "Use of Proceeds." The Company has recently
entered into the additional $40 million 364-day unsecured revolving Short-Term
Facility with the same lenders and providing for substantially the same
covenants, interest rate options and commitment fees as under the Credit Line.
The Company also has several foreign and domestic short-term lines of credit,
of which $35.4 million was outstanding at March 31, 1995. The Company presently
intends to refinance a portion of these short-term bank loans with borrowings
under the Short-Term Facility. The Company also has $40 million of 8.39%
unsecured senior notes due through 2004, payable in nine equal annual principal
payments beginning in 1996. For information regarding the Company's interest
rate swap agreements, see Note 5 of the Notes to Consolidated Financial
Statements.
The Company anticipates its cash needs in 1995 will be provided from
operations and from borrowings under its Credit Line and Short-Term Facility
and other existing credit lines.
16
<PAGE>
BUSINESS
GENERAL
Anthony is a leading designer, manufacturer and marketer of brand name
sporting goods and other recreational products. The Company is also a major
supplier of selected industrial products. Anthony's sporting goods products
include several well known, high quality brand names such as K2 and Olin alpine
skis, K2 snowboards, K2 Exotech in-line skates, Shakespeare fishing rods and
reels, Stearns personal flotation devices, raingear and wetsuits, ProFlex full-
suspension mountain bikes and Dana Design and Wilderness Experience backpacks.
The Company also produces and markets Hilton active apparel, K2 ski apparel,
Charles Bastion golf apparel and NASCAR licensed apparel. In addition, the
Company constructs Anthony swimming pools in five regions across the country.
Anthony's industrial products consist primarily of Shakespeare monofilament
line used in weed trimmers, in paper mills and as fishing line; Shakespeare
fiberglass marine antennas and light poles; and Simplex coated and laminated
products. Founded in 1946, Anthony has grown to over $500 million in annual
sales through a combination of internal growth and strategic acquisitions.
In recent years, the Company has aggressively expanded into several of what
are recognized as the fastest growing sporting goods markets in the United
States, including in-line skates, snowboards, full-suspension mountain bikes
and fly fishing equipment. Management believes these newer products have
benefited from Anthony's experience in increasing its market share positions
with other Company products, many of which are now the #1 brands in their
respective markets. For example, in the United States, K2 has the #1 market
position in alpine skis, and management believes that Stearns has the #1 market
position in personal flotation devices and Shakespeare's Ugly Stik is the top
selling line of fishing rods.
BUSINESS STRATEGY
Anthony's overall business strategy is to focus on targeted products and
markets where the Company believes it can establish a profitable leadership
position. The following are the key components of this business strategy:
High Quality, Brand Name Products. Anthony sells distinctive, high quality
products with well recognized brand names in a broad range of prices. For
example, the Company sells products in the premium segment, such as ProFlex
mountain bikes, which have suggested retail prices as high as $3,500.00, and in
the value segment, such as Stearns active water sports products and Shakespeare
fishing rods and reels. K2 offers skis in a broad range of styles for a variety
of conditions and types of skiing at numerous price points, from the MSL with
its unique "Isolator" vibration damping technology at a suggested retail price
of $589.00 to the Select 7.2 at a suggested retail price of $325.00. The
Company believes that the strength of its brand names and its reputation for
quality allow it to compete based on performance and not solely on the basis of
price.
Product Innovation. The Company strives to be a leader in product innovation
and many of its products are designed with distinctive features for consumers
who demand high performance and advanced capabilities. In 1994, for example,
the Company introduced in-line skates under the K2 Exotech brand which
incorporated several new and desirable features, including a soft mesh and
leather upper designed for improved comfort and a rigid plastic cuff for
support. In early 1995, K2 introduced a revolutionary step-in binding system
for snowboards, jointly developed with Shimano Inc., called the Clicker. The
Company has also successfully adapted its existing technology for use in new
applications. Fiberglass technology, which is used by Anthony in the
manufacture of Shakespeare fishing rods and marine radio antennas, is now
utilized on a larger scale in the production of its Shakespeare fiberglass
light and utility poles, which are manufactured in lengths of up to 45 feet.
Anthony's commitment to product innovation is reflected in its research and
development expenditures, which in 1994 increased $2.0 million to $6.3 million.
17
<PAGE>
Creative Marketing. Anthony promotes its product lines through highly
tailored, creative marketing designed to highlight the most important product
attributes in the most effective manner. Anthony believes, for example, that
retail purchasers of skis, in-line skates and snowboards are influenced
significantly by shop employees at the time of purchase as well as by the
Company's creative advertising. K2, consequently, focuses its marketing efforts
on providing shop employees with regular clinics to enhance its image with
these personnel and on developing fun and irreverent advertising which
highlights K2 products. For Stearns active water sports products, which are
largely sold by mass merchandisers and sporting goods chains, the Company
focuses its marketing efforts on providing unique packaging to assist the
consumer in identifying and selecting products. For Shakespeare fishing rods
and reels, which compete against several other brand name products, Anthony has
utilized print and media advertising to target end users.
Worldwide Distribution Networks. Anthony has well established distribution
networks for its products, many of which have international markets. The
Company believes it has developed these networks as a result of excellent
service and timely delivery of high quality products offering meaningful
values. Importantly, the Company believes that the strength of its established
distribution networks, combined with Anthony's well recognized brand names and
reputation for developing and introducing innovative products, have allowed it
to more quickly introduce new products and grow acquired products. The
Company's distribution networks are tailored to the nature and prices of its
various lines of products. For example, Anthony distributes certain of its
popular priced sporting goods products such as active water sports products and
fishing rods and reels through sporting goods chains and mass merchandisers,
while high performance, high priced products, such as full-suspension mountain
bikes and backpacks, are sold primarily through specialty retail shops. Alpine
skis, snowboards and in-line skates are sold through specialty retail shops and
sporting goods chains.
Operating Efficiencies. In 1991, management established the Anthony
Improvement Process which encompasses basic and advanced management methods
designed to increase productivity, reduce cycle time, lower costs and improve
quality. The Anthony Improvement Process has been introduced and continues to
be implemented at each operating unit and has facilitated the integration of
acquired businesses. The results to date include improved product quality,
enhanced customer satisfaction and contributions to operating income which
increased to $26.2 million, or 5.2% of net sales, in 1994 compared to $11.9
million, or 3.2% of net sales, in 1990.
GROWTH STRATEGY
The Company's growth strategy is to solidify its position as a leading
sporting goods company by identifying growth segments within the sporting goods
industry and entering these markets through (i) the introduction of new
products with distinctive designs and features; (ii) extending Anthony's well
recognized brand names into new product categories; (iii) fully utilizing the
Company's extensive distribution networks through increased product
penetration; and (iv) pursuing strategic acquisitions. Cash flow generated by
the Company's industrial products businesses has been and is expected to
continue to be used in part to fund the growth of the Company's sporting goods
businesses.
Internal Growth. Anthony's well recognized brand names, established
distribution networks and reputation for developing and introducing innovative
products, have enabled the Company to successfully leverage existing brand
names into new product categories. The Company introduced its internally
designed and manufactured line of K2 snowboards in 1990, and, aided in part by
a rapidly expanding market, the Company's sales of snowboards have grown
dramatically. Anthony has also successfully extended the K2 brand outside of
winter-related products by introducing K2 Exotech in-line
18
<PAGE>
skates. The Company's established position as a supplier to mass merchandisers
and sporting goods chains, many of whom place a premium on branded products,
has allowed it to extend the Stearns lines into raingear, wetsuits, towables
and snorkeling equipment and the Shakespeare lines into new fishing rods,
reels, kits and combos and moderately priced fly fishing packages. Hilton
continuously updates its active apparel, introducing over 54 products since
January 1, 1993.
Strategic Acquisitions. The Company has a successful track record of making
strategic acquisitions which have expanded its range of sporting goods products
and increased the number of markets in which the Company operates. Consistent
with its growth strategy, the Company continuously evaluates acquisition
opportunities, focusing in particular on whether each opportunity competes in a
sporting goods market the Company has targeted and has high quality products.
Recent Acquisitions. In 1993, Anthony entered the fast growing market for
full-suspension mountain bikes through the acquisition of Girvin, the maker of
ProFlex mountain bikes. Since this acquisition, the Company believes its
marketing and financial capabilities, combined with Girvin's engineering and
design strengths, have contributed to increased sales of mountain bikes which,
boosted by a rapidly expanding market, were 67% higher in 1994 than in 1993.
More recently, Anthony entered the backpack market through the acquisitions of
Dana Design and Wilderness Experience. The Company believes that its
manufacturing expertise, marketing capabilities and financial support will
benefit these businesses.
Prior Acquisitions. Anthony has made several successful prior acquisitions,
including the 1985 purchase of K2, which had sales of approximately $30 million
when acquired and today is the #1 selling alpine ski brand in the U.S., and, in
part by extending the K2 name to other products, Anthony has increased total K2
brand sales to approximately $100 million in 1994. In addition, the Olin ski
line, which was acquired in 1988, has experienced substantial domestic sales
increases and now holds the #6 market share position at retail in the United
States. Anthony entered the active water sports products market through its
1988 acquisition of Stearns, and largely as a result of new product
introductions, Stearns' sales have increased to $47.1 million in 1994 from
$30.1 million in 1988.
19
<PAGE>
SPORTING GOODS AND OTHER RECREATIONAL PRODUCTS
Net sales of sporting goods and other recreational products were $332.1
million in 1994, $285.5 million in 1993 and $266.6 million in 1992. The
following table lists the Company's principal sporting goods and other
recreational products and the brand names under which they are sold.
<TABLE>
<CAPTION>
PRODUCT BRAND NAME
------- ----------
<S> <C>
SPORTING GOODS
Alpine Skis K2, Olin
Cross-Country Skis Madshus
Snowboards K2
In-Line Skates K2 Exotech
Fishing Rods and Reels Shakespeare, Ugly Stik
Active Water Sports Products Stearns
Full-Suspension Mountain Bikes ProFlex, Girvin
Backpacks Dana Design, Wilderness Experience
ACTIVE AND SPORTING APPAREL
Imprinted Active Apparel Hilton, USA
Golf Apparel Charles Bastion
Licensed Apparel NASCAR
Ski Apparel K2
HOME RECREATIONAL PRODUCTS
Concrete Swimming Pools Anthony
Motorized Swimming Pool Covers Poolsaver
</TABLE>
SPORTING GOODS
The Company's sporting goods products include alpine and cross-country skis,
snowboards, in-line skates, fishing rods and reels, active water sports
products, full-suspension mountain bikes and backpacks. Net sales of sporting
goods products were $224.6 million in 1994, $192.7 million in 1993 and $170.8
million in 1992.
Alpine Skis. The Company sells its alpine skis under the names K2 and Olin
principally in the United States, Europe and Japan. According to Ski Industries
of America, a trade association ("SIA"), the alpine ski market approximated
$1.5 billion at retail in 1994. K2 offers skis in a broad range of styles for a
variety of conditions and types of skiing at numerous price points, and in 1994
had the #1 retail market share of alpine skis sold in the United States. In
recent years, Olin skis, which offer performance enhancement features to
recreational skiers, have captured market share from competitors and ranked #6
in U.S. retail sales in 1994. As reported by SIA, six of the ten top selling
ski models sold at retail in the U.S. during the 1994-1995 season were K2 or
Olin skis. While participation rates for alpine skiing have been relatively
flat during the past few years, the market shares of K2 and Olin skis have
increased due to their popularity among retail purchasers resulting from their
high quality, innovative features, attractive graphics, creative marketing and
their domestic production. According to Sports Research Inc., K2 and Olin skis
were rated #1 and #2, respectively, in retailer approval ratings for the 1994-
1995 season.
Recent improvements in K2 and Olin skis include the Company's introduction of
cap skis in 1994. Cap skis, unlike traditional skis manufactured with separate
sidewalls, are fabricated with a single piece
20
<PAGE>
of material from edge to edge. These skis have a sleeker look and improved
graphics. Virtually all K2 and Olin skis now manufactured are cap skis. In
1994, the Company introduced several new models of skis including the MSL with
its unique "Isolator" vibration damping technology. Management believes that
these new models have been well received in the market, in part due to the
awards and other recognition received from several ski industry publications.
These new products have increased K2's average sales price per pair of skis.
K2 and Olin skis are manufactured by the Company in the United States and
Norway. They are sold to specialty retail shops and sporting goods chains in
the U.S. by independent sales representatives and in Europe and Japan through
independent and Company-owned distributors. K2 alpine skis are marketed to
skiers ranging from beginners to top racers using youthful and often irreverent
advertising. Olin skis are marketed toward more mature and affluent purchasers.
To assist in its marketing efforts, the Company sponsors amateur and
professional skiers including Phil and Steve Mahre and Glen Plake.
Cross-Country Skis. The Company's cross-country skis, which are manufactured
in the Company's plant in Norway, are sold under the name Madshus for a
retailer/distributor which owns the rights to the Madshus name and resells the
skis principally in Europe.
Snowboards. The Company introduced K2 snowboards and snowboard bindings in
1990. The Company began selling snowboard boots in 1993. The snowboard market
has grown dramatically in recent years with SIA estimating that approximately
220,000 snowboards were sold during the 1993-1994 season as compared with
135,000 snowboards sold during the 1992-1993 season. As estimated by SIA,
snowboarding retail sales were approximately $135 million during the 1993-1994
season. Due in large measure to this market growth, the Company's sales of
snowboards were 50% higher in 1994 than 1993. While the snowboard market is
highly fragmented with over 100 competitors, Anthony is one of the few
manufacturers of snowboards, with most of its competition sourcing their
products from other manufacturers. The Company believes that its manufacturing
capability will provide a competitive advantage as the industry begins to
consolidate. Like its alpine skis, K2 snowboards are of high quality, have
attractive graphics and are creatively marketed.
The Company made an important innovation in its snowboard line in early 1995
when it introduced the Clicker, a revolutionary step-in binding system for
snowboards jointly developed with Shimano Inc. The Clicker is among the first
commercially available step-in binding systems for snowboards. The Clicker will
enable snowboarders to release and refasten the binding easily, which among
other things will facilitate entering and exiting ski lifts.
K2 snowboards are manufactured by the Company in the United States. They are
sold to specialty retail shops and sporting goods chains in the U.S. by
independent sales representatives and in Europe and Japan through independent
and Company-owned distributors. Like K2 skis, K2 snowboards are marketed using
youthful and irreverent advertising, and the Company sponsors professional and
amateur snowboarders.
In-Line Skates. The Company introduced its K2 Exotech in-line skates in 1994.
The in-line skate market has grown dramatically in recent years. According to
the National Sporting Goods Association, a trade association ("NSGA"), in-line
skating participation rates increased 57% to 19.5 million people in 1994
compared to 1993. According to an industry source, the domestic market for in-
line skates was estimated to be in excess of $500 million at wholesale in 1994.
Anthony's in-line skates are priced at the mid to upper end of the industry. K2
Exotech skates are attractive and of high quality and have innovative features
such as a soft mesh and leather upper designed for improved comfort and a rigid
plastic cuff for support. The Company's in-line skates also offer high quality
in-line skate components such as Hyper(TM) wheels and TwinCam(TM) bearings,
which are manufactured by others.
21
<PAGE>
K2 Exotech in-line skates are manufactured to Company specifications by a
vendor in Korea. They are sold to specialty retail shops and sporting goods
chains in the U.S. by independent sales representatives and in Europe and Japan
through independent and Company-owned distributors.
Fishing Rods and Reels. The Company sells fishing rods, reels and fishing
line in most of the world. According to a market research report compiled by
the Paumanok Group, the annual U.S. market for fishing rods and reels was
estimated at $850 million at retail. The NSGA reported that fishing was the
fourth largest U.S. sport in 1994, with approximately 45.7 million
participants. The Company believes that Shakespeare's Ugly Stik models have
been the best selling fishing rods in the U.S. over the past 18 years. The
success of these fishing rods has allowed the Company to establish a strong
position with retailers, thereby increasing sales of new rods, reels and kits
and combos. The Company has also recently introduced moderately priced fly
fishing equipment. Shakespeare rods and reels are manufactured principally in
the People's Republic of China, although blanks for the Ugly Stik fishing rod
are made by the Company in the United States. Shakespeare products are sold
directly by the Company and through independent sales representatives to mass
merchandisers (two of which in the aggregate purchase more than one-half of the
Company's fishing rods and reels), specialty shops and chain stores. The
Company has recently entered the fishing rod and reel market in Japan, which it
believes is an attractive market.
Active Water Sports Products. The Company sells Stearns flotation vests,
jackets and suits ("personal flotation devices"), cold water immersion
products, wetsuits and raingear in the United States and in certain foreign
countries. The Company believes that Stearns has the #1 market share for
personal flotation devices and is among the leading distributors of wetsuits in
the United States. A recent issue of Sail Magazine ranked Stearns personal
flotation devices #1 in brand recognition and #1 in brand preference. Stearns
has recently introduced towables, which are inflatable flotation products towed
behind waterski boats, and a full line of snorkeling equipment (consisting of
masks, snorkels and fins). In the United States, occupants of boats are
required by law either to wear or have available personal flotation devices
meeting Coast Guard standards. Stearns personal flotation devices are
manufactured to such standards and are subject to rigorous testing for
certification by Underwriters Laboratories. Stearns manufactures its personal
flotation devices in the U.S. and its other products are outsourced from Asian
manufacturers. Stearns products are sold principally through an in-house
marketing staff and independent sales representatives to mass merchandisers,
specialty shops and chain stores and to the off-shore oil industry, commercial
fishermen and other commercial users.
Full-Suspension Mountain Bikes. Girvin, which was acquired by the Company in
October 1993, designs and distributes high quality full-suspension mountain
bikes and components under the names ProFlex, Girvin, Flexstem and Vector in
the United States and internationally. The mountain bike market in the U.S., as
represented by sales of independent bicycle dealers, is estimated to be
approximately $650 million at wholesale based upon recent information compiled
by Bicycle Retailer & Industry News, an industry publication. The Company
believes that full-suspension bikes are a fast growing segment of the mountain
bike market due to the performance and comfort provided by full-suspension
bikes which have shock absorbing elements for both front and rear wheels,
thereby improving climbing ability and decreasing rider fatigue and off-road
vibration. Girvin is a pioneer of full-suspension, and the Company believes it
is the largest distributor of full-suspension mountain bikes in the United
States. Its ProFlex 855 model was recently named "Dual Suspension Bike of the
Year" by Mountain Biking Magazine and was named the Grand Award winner for
recreational products in Popular Science's 1994 Best of What's New edition.
Girvin manufactures certain components, including front forks, at its facility
in the United States. The bikes are assembled to Girvin's specifications by a
vendor in Taiwan and are distributed through an in-house marketing staff and by
independent sales representatives to independent bicycle dealers in the U.S.,
and through distributors internationally. To assist in its marketing efforts,
Girvin co-sponsors the BMW/ProFlex mountain bike team.
22
<PAGE>
Backpacks. Dana Design, which was acquired by the Company in February 1995,
is the #1 manufacturer and distributor of high-end backpacks in the U.S.
according to Outdoor Retailer Magazine. Dana Design products are known for
their comfort, high quality and innovative features, such as custom fitting.
Dana Design backpacks are manufactured by the Company in the United States for
sale by independent sales representatives to specialty retailers in the United
States. The Wilderness Experience backpacks and other related apparel lines
were acquired by the Company in December 1994, and offer products at more
popular price points. The Company believes that its manufacturing expertise,
marketing capabilities and financial support will benefit these businesses.
ACTIVE AND SPORTING APPAREL
The Company's active and sporting apparel products include Hilton active
apparel, K2 ski apparel, Charles Bastion golf apparel and NASCAR licensed
apparel. Net sales of active and sporting apparel products were $40.1 million
in 1994, $34.9 million in 1993 and $35.3 million in 1992.
Active Wear. The Company's Hilton business manufactures and distributes
jackets, shirts, fleece tops and other active wear under the Hilton and USA
brand names. These products are primarily sold in the United States to
advertising specialty customers, embroiderers and screen printers who in turn
sell imprinted items, including garments, to corporate buyers, among others.
Hilton and USA apparel is manufactured by the Company in the United States and
is of high quality. The Company believes that its quick response to orders
placed is critical to the success of the Hilton advertising specialty business.
In addition, the Company continually updates Hilton and USA merchandise,
introducing over 54 new products since January 1, 1993. Hilton and USA products
are sold through catalogs, by a direct sales force and by independent sales
representatives. The Company has recently introduced a line of Charles Bastion
golf shirts and a broad line of NASCAR licensed apparel.
Ski Apparel. K2 ski apparel is manufactured to the Company's specifications
by various suppliers located in Europe and Asia. K2 apparel, which is sold
principally in Europe, is of high quality and sold at higher price points. The
apparel is principally sold through independent distributors for which the
Company receives royalty income except in Germany where it is sold through a
Company-owned distributor.
HOME RECREATIONAL PRODUCTS
The Company's home recreational products consist of Anthony pools and pool
equipment and Poolsaver swimming pool covers. Net sales of home recreational
products were $67.4 million in 1994, $57.9 million in 1993 and $60.5 million in
1992.
Anthony Pools constructs and remodels residential inground swimming pools in
five regions in or near major cities in California, Texas and along the eastern
seaboard. The Company believes that Anthony is one of the two largest builders
of residential concrete pools in the United States. Anthony also distributes
swimming pool equipment, such as filters and heaters, which are installed in
pools built by Anthony or sold to independent pool builders under an authorized
dealership program in markets not served by Anthony. Replacement parts and
equipment are sold by authorized service centers. Poolsaver, acquired by the
Company in 1988, manufactures and installs motorized and hand operated swimming
pool covers for inground pools. The Company believes that it is one of the
largest manufacturers of motorized pool covers in the United States. Poolsaver
also provides service on installed pool covers through its service
organization. Sales of pool covers are made to consumers and pool builders
through Poolsaver branches in or near major cities in California and through
distributors and dealers in markets in which Poolsaver does not have offices.
23
<PAGE>
INDUSTRIAL PRODUCTS
Net sales of industrial products were $170.3 million in 1994, $146.1 million
in 1993 and $135.4 million in 1992. The Company's industrial products segment
historically has contributed to operations by providing a base of generally
consistent earnings and cash flow. Cash flow generated by the Company's
industrial products businesses has been and is expected to continue to be used
in part to fund the growth of the Company's sporting goods businesses.
The following table lists certain of the Company's principal industrial
products and the brand names under which they are sold.
<TABLE>
<CAPTION>
PRODUCT BRAND NAME
------- ----------
<S> <C>
Monofilament Line Shakespeare
Fiberglass Utility and Decorative Light Poles Shakespeare
Marine Radio Antennas Shakespeare
Coated and Laminated Paperboard Products Thermo-ply
Protective Building Wrap Barricade, R-Wrap
Synthetic Commercial Building Coatings Finestone
</TABLE>
Monofilament Line. Nylon and polyester monofilament line is domestically
manufactured by the Company in a variety of diameters, tensile strengths and
softness for use in various applications including the manufacture of woven
mats for use by paper producers in the U.S., Europe and South America and for
use as line in weed trimmers in the United States. The Company believes that it
has the #1 U.S. market share for monofilament in paperweaving and weed trimmer
applications. Fishing line is also manufactured domestically and marketed by
Shakespeare's fishing tackle division to retailers and mass merchandisers.
Monofilament produced for sale in Europe for woven mats is manufactured
primarily in the Company's U.K. facility.
Fiberglass Utility and Decorative Light Poles. The Company produces
fiberglass products including utility and decorative light poles which are
manufactured and sold under the Shakespeare name in the United States
principally to utility companies and municipalities. The Company believes that
it has the #1 market share for fiberglass light poles in the U.S., a market it
believes is growing due to the acceptance of fiberglass as a durable,
relatively light weight and easy to install alternative to aluminum and wood.
The Company believes that a large majority of major utilities in the U.S. have
approved the use of fiberglass light and utility poles.
Marine Radio Antennas. The Company manufactures in the United States
fiberglass radio antennas for marine, citizen band and military application
under the Shakespeare name. These products are sold primarily in the United
States, and the Company has the #1 market share in marine antennas in the
United States. Anthony also distributes marine radios and other marine
electronics under the Shakespeare name which are manufactured in Asia to the
Company's specifications. These antennas, radios and other marine electronics
are sold by an in-house sales department and independent sales representatives
to specialty marine dealers.
Coated and Laminated Paperboard Products. Anthony's Simplex business
manufactures a wide range of coated and laminated paperboard products, which
include insulative sheathing marketed under the trademark Thermo-ply, container
components for fiber drums and flexible packaging paperboard products. These
products are manufactured in the U.S. and are sold to a large number of
customers in the domestic residential and manufactured housing, container and
industrial packaging industries, and in the case of Thermo-ply, also to the
Japanese residential housing industry. The Company believes that it has the #1
market share in the United States for laminated and coated paperboard
insulative
24
<PAGE>
sheathing. The Company also operates a paper recycling mill which produces chip
paperboard primarily used in the manufacture of Thermo-ply and secondarily sold
to others in nonconstruction related markets.
Protective Building Wrap. The Company manufactures and sells protective
building wrap in the U.S. under the names R-Wrap and Barricade to the domestic
residential and manufactured housing industries. These products are generally
sold through distributors to home builders.
Synthetic Commercial Building Coatings. The Company manufactures and sells
synthetic commercial building coatings in the U.S. under the name Finestone to
the domestic commercial construction industry. These products are marketed
primarily to architects and builders.
COMPETITION
The Company's competition varies among its business lines. The sporting goods
and recreational products markets are generally highly competitive, with
competition mainly centering on product innovation, performance and styling,
price, marketing and delivery. Competition in these products (other than
snowboards, active apparel and swimming pools) consists of a relatively small
number of large producers, some of whom have greater financial and other
resources than the Company. A large number of companies compete in snowboards
and active apparel, and in the swimming pool market the Company has one
national competitor and many smaller competitors which are privately owned or
which consist of small franchised pool building operations. While the Company
believes that its well recognized brand names, established distribution
networks and reputation for developing and introducing innovative products have
been key factors in the successful introduction of its sporting goods products,
there are no significant technological or capital barriers to entry into the
markets for many sporting goods and recreational products. These markets face
competition from other leisure activities, and sales of leisure products are
affected by changes in consumer tastes, which are difficult to predict.
While the Company believes that in its industrial products segment it
competes based on product quality, service and delivery the Company's
industrial products are, in most instances, subject to price competition,
ranging from moderate in marine antennas and monofilament line to intense for
commodity-type products such as paperboard container components. Insulative
sheathing products compete with substitute products and fiberglass utility and
light poles compete with poles made of other materials, such as wood and
aluminum. Certain industrial competitors have greater financial and other
resources than the Company.
FOREIGN SOURCING AND RAW MATERIALS
The Company has not experienced any substantial difficulty in obtaining raw
materials, parts or finished goods inventory for its sporting goods and other
recreational products businesses. Certain components and finished products,
however, are manufactured or assembled abroad and therefore could be subject to
interruption as a result of local unrest, currency exchange fluctuations,
increased tariffs, trade difficulties and other factors. A major portion of the
Company's fishing rods, including its Ugly Stik models, and reels are currently
manufactured in the People's Republic of China which trades with the United
States under a Most Favored Nation ("MFN") trade status. While the Company
believes that alternative sources for its fishing rods and reels produced in
China could be found, maintaining its existing costs of such products will
depend on China's continuing to be treated under MFN tariff rates, which the
U.S. from time to time has threatened to rescind. Early in 1995, the United
States threatened trade sanctions against certain products made in China,
including fishing rods. Shortly before such sanctions were to have become
effective, however, they were withdrawn based on certain representations made
by China relating to its future enforcement of intellectual property laws.
The Company has not experienced any substantial difficulty in obtaining raw
materials for its industrial product segment, although recycled corrugated
scrap paper, a raw material used in the
25
<PAGE>
production of the Company's insulative sheathing, has become materially more
expensive, a trend which the Company expects could continue. This increasing
cost has had and could continue to have a significant impact on the
profitability of the insulative sheathing line. While the Company has been able
to raise its insulative sheathing prices to partially offset the increasing
cost of this raw material, no assurances can be given of the Company's
continued ability to do so.
SEASONALITY AND CYCLICALITY; BACKLOG
Sales of the Company's sporting goods and other recreational products are
generally highly seasonal and in many instances are dependent on weather
conditions. The Company's industrial products are mildly seasonal. This
seasonality causes the Company's financial results to vary from quarter to
quarter, and the Company's sales are usually weakest in the first quarter. In
addition, the nature of the Company's ski and snowboard businesses requires it
to make relatively large investments in inventory in anticipation of these
products' selling season, which runs from June through December, and relatively
large investments in receivables during and shortly after such season. The
delivery requirements of the Company's customers for their sporting goods
products and active apparel also result in investment in significant amounts of
inventory. The Company believes that another factor in its level of inventory
investment is the shift by certain of its sporting goods customers from
substantial purchases of pre-season inventories to deferral of deliveries until
the products' retail seasons.
Sales of sporting goods and other recreational products including, in
particular, swimming pools, depend to a large extent on general economic
conditions including the amount of discretionary income available for leisure
activities, consumer confidence and the availability of consumer credit at
reasonable interest rates. Sales of the Company's industrial products are
dependent to varying degrees upon favorable economic conditions in the domestic
housing, container and paper industries.
As a result of the nature of many of the Company's businesses, backlog is
generally not significant, and management believes it is not an important
indicator of future sales.
CUSTOMERS
The Company believes that its customer relationships are excellent, and no
one customer of the Company accounted for ten percent or more of its
consolidated annual net sales in 1993 or 1994. The loss, however, of one of the
Company's two largest customers of its sporting goods products could have a
significant impact on the Company's results of operations.
RESEARCH AND DEVELOPMENT
Consistent with the Company's business strategy of continuing to develop
innovative brand name products and improving the quality, cost and delivery of
products, the Company maintains decentralized research and development
departments at several of its manufacturing centers which are engaged in
product development and the search for new applications and manufacturing
processes. Expenditures for research and development activities totalled
approximately $6.3 million in 1994, $4.3 million in 1993 and $3.5 million in
1992 and were expensed as a part of general and administrative expenses in the
year incurred.
EMPLOYEES
At March 31, 1995, the Company had approximately 4,000 employees and at each
of December 31, 1994 and December 31, 1993, the Company had approximately 3,700
employees. The Company believes that its relations with employees generally
have been good.
26
<PAGE>
FACILITIES
The table below provides information with respect to the principal production
and distribution facilities utilized by the Company as of March 31, 1995.
<TABLE>
<CAPTION>
OWNED FACILITIES LEASED FACILITIES
------------------- -----------------
TYPE OF NO. OF SQUARE NO. OF SQUARE
LOCATION FACILITY LOCATIONS FOOTAGE LOCATIONS FOOTAGE
-------- -------------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
SPORTING GOODS AND
OTHER RECREATIONAL PROD-
UCTS
Alabama................. Production 2 156,000
California.............. Production 1 25,000
Illinois................ Distribution 1 76,000
Minnesota............... Distribution
and production 1 290,000
Rhode Island............ Distribution
and production 1 50,000
South Carolina.......... Distribution
and production 2 140,000
Washington.............. Distribution
and production 1 160,000 1 37,000
Foreign................. Distribution
and production 3 101,000 6 147,000
--- --------- --- -------
Subtotal.............. 9 847,000 10 335,000
--- --------- --- -------
INDUSTRIAL PRODUCTS
Florida................. Production 1 73,000
Michigan................ Production 2 278,000
South Carolina.......... Production 2 484,000
--- ---------
Subtotal.............. 5 835,000
--- ---------
Total............... 14 1,682,000 10 335,000
=== ========= === =======
</TABLE>
The corporate headquarters of the Company is located in 15,000 square feet of
leased office space in Los Angeles, California, and the Company leases several
other small spaces for sales offices throughout the United States. The terms of
the Company's leases range from one to eight years, and many are renewable for
additional periods. The termination of any lease expiring during 1995 or 1996
would not have a material adverse effect on the Company's operations.
The Company believes that, in general, its plants and equipment are
adequately maintained, in good operating condition and are adequate for the
Company's present needs. The Company regularly upgrades and modernizes its
facilities and equipment and expands its facilities to meet production and
distribution requirements.
ENVIRONMENTAL FACTORS
The Company is among several potentially responsible parties named in an EPA
matter involving discharge of hazardous materials at an old waste disposal site
in South Carolina. This action primarily seeks cleanup costs. The ultimate
outcome of this matter cannot be predicted with certainty; however, to the
extent to which not previously reserved against by the Company, management does
not believe this matter will have a material adverse effect on the Company.
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<PAGE>
PATENTS AND INTELLECTUAL PROPERTY RIGHTS
While product innovation is a highly important factor in the Company's
sporting goods and other recreational products segment and many of the
Company's innovations have been patented, the Company does not believe that the
loss of any one patent would have a material adverse effect on it. Certain of
its brand names, such as K2, K2 Exotech, Olin, Shakespeare, Ugly Stik, Anthony
Pools, Poolsaver, Girvin, ProFlex, Hilton, Dana Design and Wilderness
Experience are believed by the Company to be well recognized by consumers and
therefore important in the sales of these products. Registered and other
trademarks and tradenames of Company products are italicized in this
Prospectus.
LEGAL PROCEEDINGS
Certain of the Company's products are used in recreational settings which
carry inherent risks including the possibility of serious bodily injury. From
time to time the Company is named as a defendant in lawsuits asserting product
liability claims relating to its sporting goods and other recreational products
and, in particular, its swimming pools, diving boards and pool filters. To date
none of these lawsuits has had a material effect on the Company, and the
Company does not believe that any lawsuit now pending could reasonably be
expected to have such an effect. The Company maintains product liability,
general liability and excess liability insurance coverage. No assurances can be
given that such insurance will continue to be available at an acceptable cost
to the Company or that such coverage will be sufficient to cover one or more
large claims, or that the insurers will not successfully disclaim coverage as
to any pending or future claim.
28
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Company's
directors, executive officers and other key employees and its Chairman
Emeritus.
<TABLE>
<CAPTION>
POSITION; PRINCIPAL YEARS WITH
NAME AGE OCCUPATION COMPANY(1)
---- --- ---------------------------- ----------
<C> <C> <S> <C>
EXECUTIVE OFFICERS
Bernard I. Forester......... 67 Chairman of the Board and 29
Chief Executive Officer
Richard M. Rodstein......... 40 President and Chief 11
Operating Officer(2)
Robert E. Doyle............. 48 Senior Vice President; 15
President of Simplex
Products
John J. Rangel.............. 41 Senior Vice President-- 10
Finance
Tony H. Chow................ 47 Vice President and Director 13
of Taxes
David G. Cook............... 57 Vice President; President of 6
Stearns
Woodrow P. Greene........... 50 Vice President--Quality and 3
Process Improvement
David H. Herzberg........... 52 Vice President; President of 15
Shakespeare Monofilament
Marilyn E. Lane............. 63 Vice President and Treasurer 35
Franklin D. Leibow.......... 45 Vice President; President of 19
Hilton Active Apparel
L. Wayne Shealy............. 44 Vice President; President of 15
Shakespeare Electronics and
Fiberglass
Susan E. McConnell.......... 51 Secretary 22
OTHER KEY EMPLOYEES
J. Wayne Merck.............. 35 President of Anthony 3
Pools/Poolsaver
Augustus Pitou, III......... 55 President of Girvin 3
FOUNDER AND CHAIRMAN EMERITUS
Myron P. Anthony............ 77 Retired 49
OUTSIDE DIRECTORS
Robert T. Anthony........... 32 Director; Principal at 1
management consulting firm
of Concord Partners
Richard L. Goldberg......... 59 Director; Member of the law 19
firm of Proskauer Rose Goetz
& Mendelsohn LLP(3)
Abraham L. Gray............. 71 Director; Chairman of the 11
Board, Gray Capital
Corporation(4)
Hugh V. Hunter.............. 77 Director; President, Hugh V. 23
Hunter Accountancy
Corporation(3)(4)
John H. Offermans........... 66 Director; Real Estate Broker 8
and Consultant(4)
John B. Simon............... 70 Director; Private 9
Investor(3)
Sol S. Weiner............... 76 Director; President, Sol S. 16
Weiner Investments, Inc.(4)
</TABLE>
- --------
(1) In the case of executive officers and other key employees who became
associated with the Company as a result of its acquisition of a business,
this column sets forth the number of years since the Company made such
acquisition.
(2) Mr. Rodstein has been nominated for election to the Company's Board of
Directors at the Company's Annual Meeting of Shareholders to be held on May
4, 1995.
(3) Member of Compensation Committee.
(4) Member of Audit Committee.
29
<PAGE>
CERTAIN SHAREHOLDERS
The table below sets forth the ownership of the Company's Common Stock as of
March 31, 1995 by (i) Bernard I. Forester, the Company's Chairman of the Board
and Chief Executive Officer; (ii) each person known to the Company to own five
percent or more of the Common Stock outstanding prior to this offering; and
(iii) all directors and executive officers as a group. Except as otherwise
indicated, the shareholders listed have sole voting and investment power over
the shares held by them.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
BENEFICIALLY OWNED(1)
SHARES OF COMMON STOCK --------------------------
BENEFICIALLY OWNED AS PRIOR TO AFTER
NAME OF MARCH 31, 1995 OFFERING OFFERING(2)
---- ---------------------- -------- ------------
<S> <C> <C> <C>
Bernard I. Forester......... 548,827(3) 4.6% 3.5%
Abraham L. Gray............. 619,743(4) 5.2 3.9
David L. Babson & Company,
Inc. ...................... 755,613(5) 6.4 4.8
Myron P. Anthony............ 1,034,196(6) 8.7 6.5
Trust under Employee Stock
Ownership Plan............. 2,370,322 20.0 14.9
All directors and executive
officers as a group
(19 persons)............... 1,973,814(7) 16.3 12.4
</TABLE>
- --------
(1) The shares subject to options described in notes (3) and (4) for each
individual were deemed to be outstanding for purposes of calculating the
percentage owned by such individual.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Includes 11,576 shares of Common Stock which Mr. Forester has the right to
acquire through the exercise of currently exercisable options and 49,764
shares allocated to his account under the Company's ESOP. Does not include
stock options for an additional 103,998 shares of Common Stock which become
exercisable over a period of three years, or earlier in certain events.
(4) Includes 210 shares of Common Stock which Mr. Gray has the right to acquire
through the exercise of currently exercisable options.
(5) Based on the shareholder's Schedule 13G, dated February 10, 1995.
(6) Includes 947 shares allocated to Mr. Anthony's account under the Company's
ESOP and 1,033,249 shares as to which he has sole voting and investment
power. An additional 375,316 shares (3.2% prior to this offering and 2.4%
after the offering) are owned by Mr. Anthony's wife. Mr. Anthony and his
wife are the parents of Robert T. Anthony, a director of the Company.
(7) Includes 137,108 shares subject to currently exercisable options and
150,079 shares allocated to accounts under the Company's ESOP. Does not
include shares owned by Myron P. Anthony or those of his wife.
30
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the more complete descriptions thereof set forth in the documents incorporated
by reference in this Prospectus and to the Restated Certificate of
Incorporation, the By-Laws of the Company and the Rights Agreement, dated
August 10, 1989, between the Company and The Harris Trust Company of New York
(the "Rights Agreement"), which either are exhibits to documents incorporated
by reference into this Prospectus or have been incorporated by reference as
exhibits to the Registration Statement of which this Prospectus is a part.
GENERAL
The authorized capital stock of the Company consists of 40,000,000 shares of
Common Stock, par value $1.00 per share, and 12,500,000 shares of preferred
stock, par value $1.00 per share ("Preferred Stock"). At March 31, 1995,
11,874,128 shares of Common Stock were issued and outstanding on an undiluted
basis, and no shares of Preferred Stock were issued and outstanding.
COMMON STOCK
The Common Stock has no preemptive rights and no redemption, sinking fund or
conversion provisions. All shares of Common Stock are fully paid and non-
assessable, are noncumulative and have one vote on any matter submitted to the
vote of shareholders. The Common Stock does not have cumulative voting rights.
Upon any liquidation of the Company, the holders of Common Stock are entitled
to receive, on a pro rata basis, all assets then legally available for
distribution after payment of debts and liabilities and preferences on
Preferred Stock, if any. Holders of Common Stock are entitled to receive
dividends when and as declared by the Board of Directors out of funds legally
available therefor (subject to the prior rights of Preferred Stock, if any).
The Company's Credit Line, Short-Term Facility and certain of its other debt
agreements contain restrictions on its payment of cash dividends. See "Price
Range of Common Stock and Dividends." As of March 31, 1995, there were
approximately 1,893 holders of record of the Company's Common Stock. The Harris
Trust Company of California is Transfer Agent, Registrar and Dividend
Disbursing Agent for the Common Stock.
PREFERRED STOCK
The Board of Directors, without further action by the shareholders, is
authorized to issue the Preferred Stock in one or more series and to designate
as to any such series the dividend rate, redemption prices, liquidation
preferences, sinking fund terms, conversion rights, voting rights and any other
preferences or special rights and qualifications, including preferences,
special rights and qualifications that could adversely affect the voting power
and liquidation rights of the holders of Common Stock. As of the date of this
Prospectus, the Board of Directors has not authorized the issuance of any
Preferred Stock other than the Preferred Shares issuable upon exercise of the
Rights, as described below.
PREFERRED STOCK PURCHASE RIGHTS
Holders of outstanding shares of Common Stock and each share issued prior to
the occurrence of certain specified events which could cause a person or group
to own 20% or more of the outstanding shares of Common Stock (the date of such
occurrence, the "Distribution Date," and such person or group, the "Acquiring
Person") are entitled to receive one Preferred Stock Purchase Right ("Right")
for each share of Common Stock held. Each Right entitles the registered holder
to purchase one one-hundredth of a share of Series A Preferred Stock, par value
$1.00 per share, of the Company (the "Preferred Shares"), subject to
adjustment, at a current exercise price of $51.71 per Preferred Share, subject
to adjustment. Until the Distribution Date, the Rights will not be exercisable
and will attach to,
31
<PAGE>
and be transferred with and only with certificates for Common Stock. After the
Distribution Date, separate certificates evidencing the Rights will be issued.
Should a person or group (other than certain exempted groups, such as the ESOP)
become an Acquiring Person, each holder of a Right shall thereafter have the
right to receive, upon exercise, shares of Common Stock (or certain Common
Stock equivalents) having a value equal to two times the exercise price of the
Rights, and any Rights beneficially owned by the Acquiring Person, its
associates, affiliates and transferees, shall become null and void. If the
Company subsequently engages in certain mergers, business combinations or asset
sales with the Acquiring Person, each holder of a Right other than the
Acquiring Person and its affiliates is thereafter entitled, upon payment of the
exercise price, to receive stock of the Acquiring Person having a market value
of twice the exercise price.
At any time prior to the date of announcement of the existence of an
Acquiring Person (the "Share Acquisition Date"), the Board of Directors may
redeem the Rights in whole, but not in part, at a price of $.01 per Right. At
any time after a person or group becomes an Acquiring Person, the Board of
Directors may exchange the Rights in whole, but not in part, at an exchange
ratio of one share of Common Stock (or one Common Stock equivalent) per Right.
The Purchase Price payable, and the number of Preferred Shares and other
securities issuable upon exercise of the Rights, are subject to adjustment from
time to time to prevent dilution in the event of certain transactions by the
Company. Until a Right is exercised, the holder thereof will have no right as a
shareholder of the Company. The terms of the Rights may be amended by the
Company, provided that following the earlier of the Share Acquisition Date and
the Distribution Date the amendment does not adversely affect the interests of
holders of Rights (other than an Acquiring Person) and provided that no
amendment shall be made which decreases the Rights' redemption price.
Each share of Series A Preferred Stock issuable upon exercise of the Rights
entitles its holder to receive, if declared by the Board of Directors,
cumulative dividends at the quarterly rate of the greater of (i) $1.00 or (ii)
100 times the aggregate per share amount of certain dividends declared on
Common Stock, subject to adjustment, payable before the Company may declare or
pay dividends on, or purchase shares of, Common Stock. Upon any voluntary
liquidation, dissolution or winding up of the Company, before any distribution
is made to holders of shares of Common Stock, the holders of Series A Preferred
Stock will be entitled to receive the greater of (i) $100.00 per share plus all
dividends accrued and unpaid to the date of payment or (ii) 100 times the
aggregate amount to be distributed per share to holders of Common Stock,
subject to adjustment. Series A Preferred Stock will not be redeemable. If the
Company enters into a merger or certain other transactions, holders of the
Series A Preferred Stock will be entitled to receive 100 times the aggregate
amount of consideration for which the Common Stock is exchanged in the
transaction, subject to adjustment. Each share of Series A Preferred Stock will
entitle its holder to 100 votes on all matters submitted to a vote of the
shareholders and such holder shall vote with the holders of Common Stock as one
class on such matters, except where otherwise provided by law or in the
Company's Certificate of Incorporation. In addition, if dividends on the Series
A Preferred Stock become in arrears in an aggregate amount equal to the full
semiannual dividends thereon, the holders of Series A Preferred Stock (together
with all holders of other series of Preferred Stock upon which such voting
rights have been conferred) will be entitled to elect two directors until all
accrued and unpaid dividends have been declared and paid or set apart for
payment.
DELAWARE ANTI-TAKEOVER LAW
Section 203 of the Delaware General Corporation Law ("Section 203") provides
in general that a shareholder acquiring more than 15% of the outstanding voting
shares of a corporation subject to the statute (an "Interested Stockholder")
but less than 85% of such shares may not engage in certain "Business
Combinations" with the corporation for a period of three years subsequent to
the date on which the shareholder became an Interested Stockholder unless (i)
prior to such date the corporation's
32
<PAGE>
board of directors approved either the Business Combination or the transaction
in which the shareholder became an Interested Stockholder or (ii) the Business
Combination is approved by the corporation's board of directors and authorized
by a vote of at least two-thirds of the outstanding voting stock of the
corporation not owned by the Interested Stockholder. Section 203 defines the
term "Business Combination" to encompass a wide variety of transactions with or
committed by an Interested Stockholder in which the Interested Stockholder
receives or could receive a benefit on other than a pro rata basis with other
stockholders. The Company's shareholders, by adopting an amendment to the
Certificate of Incorporation or By-Laws of the Company, may elect not to be
governed by Section 203, effective 12 months after adoption, and no such
election has been made.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation provides for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. The Company's Certificate of Incorporation also requires that
mergers, certain other business combinations and similar transactions involving
the Company and the beneficial owner of more than 10% of the Company's voting
shares (an "Interested Shareholder") be approved by at least an 80% vote of the
outstanding voting shares (including a two-thirds vote of shares not held by
the Interested Shareholder) unless the transaction is either approved by two-
thirds of the members of the Board of Directors who are both unaffiliated with
the Interested Shareholder and were Directors before the Interested Shareholder
became such or unless certain minimum consideration and procedural requirements
are met. The Company's Certificate of Incorporation requires a vote of at least
66% of the outstanding shares to approve any merger, consolidation of the
Company, or the sale of all or substantially all of its assets.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company established its Employee Stock Ownership Plan or "ESOP" in 1979.
As of March 31, 1995, First Interstate Bank, as trustee for the ESOP, owned
approximately 20% of the outstanding Common Stock. The trustee votes allocated
shares held by it in accordance with the instructions of the persons to whose
account the shares are allocated and votes unallocated shares (and allocated
shares as to which no instructions are received) in the same proportions as
those instructions.
33
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to the underwriters named below (the
"Underwriters"), for whom Salomon Brothers Inc, A.G. Edwards & Sons, Inc. and
Smith Barney Inc. are acting as representatives (the "Representatives"), and
each such Underwriter has severally agreed to purchase, the respective number
of shares of Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Salomon Brothers Inc...........................................
A.G. Edwards & Sons, Inc.......................................
Smith Barney Inc...............................................
---------
Total...................................................... 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the shares of Common Stock offered hereby (other
than the shares covered by the Underwriters' over-allotment option described
below) if any such shares are purchased.
The Company has been advised by the Representatives that the Underwriters
propose initially to offer the shares of Common Stock to the public at the
public offering price set forth on the cover page of this Prospectus, and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow and such dealers may reallow a discount not
in excess of $ per share to certain other dealers. After this offering, the
public offering price and other selling terms may be changed.
The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 600,000 additional shares
of Common Stock at the public offering price less the underwriting discount set
forth on the cover page of this Prospectus. The Underwriters may exercise such
option only for purposes of covering over-allotments, if any, incurred in the
sale of the shares of Common Stock offered hereby. To the extent that the
Underwriters exercise such option, each of the Underwriters will be obligated,
subject to certain conditions, to purchase such additional shares in
approximately the same proportion as the number of shares of Common Stock to be
purchased by such Underwriter shown in the preceding table bears to the
4,000,000 shares of Common Stock offered hereby.
Subject to certain exceptions, the Company and its executive officers and
directors have agreed that they will not, without the prior written consent of
the Representatives, sell, offer or contract to sell or otherwise dispose of,
directly or indirectly, any shares of Common Stock or options or other rights
to acquire, or securities convertible into or exchangeable for, Common Stock,
for a period of 90 days following the closing of the sale of the shares of
Common Stock offered hereby.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or contribute to payments the Underwriters may be required
to make in respect thereof.
34
<PAGE>
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Proskauer Rose Goetz & Mendelsohn LLP, New York, New York.
Richard L. Goldberg, a member of Proskauer Rose Goetz & Mendelsohn LLP, is a
director of the Company. Munger, Tolles & Olson, Los Angeles, California, will
pass on certain legal matters for the Underwriters.
EXPERTS
The Consolidated Financial Statements of Anthony Industries, Inc. at December
31, 1994 and 1993 and for each of the three years in the period ended December
31, 1994 included herein have been audited by Ernst & Young LLP, independent
auditors, and the information under the caption "Selected Consolidated
Financial Data" for each of the five years in the period ended December 31,
1994 included herein have been derived from the consolidated financial
statements audited by Ernst & Young LLP as set forth in their reports thereon
included herein. Such Consolidated Financial Statements and Selected
Consolidated Financial Data are included herein in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
35
<PAGE>
ANTHONY INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................... F-2
Statements of Consolidated Income for the years ended December 31, 1992,
1993 and 1994 and for the three months ended March 31, 1994 and 1995
(unaudited)............................................................. F-3
Consolidated Balance Sheets as of December 31, 1993 and 1994 and March
31, 1995 (unaudited).................................................... F-4
Statements of Consolidated Cash Flows for the years ended December 31,
1992, 1993 and 1994 and for the three months ended March 31, 1994 and
1995 (unaudited) ....................................................... F-5
Statements of Consolidated Shareholders' Equity for the three years ended
December 31, 1994, and for the three months ended March 31, 1995 (unau-
dited).................................................................. F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
ANTHONY INDUSTRIES, INC.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Anthony Industries, Inc.
We have audited the accompanying consolidated balance sheets of Anthony
Industries, Inc. and subsidiaries as of December 31, 1993 and 1994, and the
related statements of consolidated income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Anthony
Industries, Inc. and subsidiaries at December 31, 1993 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1990,
1991 and 1992 and the related consolidated statements of income, shareholders'
equity, and cash flows for the years ended December 31, 1990 and 1991 (none of
which are presented separately herein); and we expressed unqualified opinions
on those consolidated financial statements. In our opinion, the information set
forth in "Selected Consolidated Financial Data" for each of the five years in
the period ended December 31, 1994, appearing in this Prospectus, is fairly
stated in all material respects in relation to the consolidated financial
statements from which it has been derived.
Ernst & Young LLP
Los Angeles, California
February 14, 1995,
except for Note 12, as to which
the date is April 25, 1995
F-2
<PAGE>
ANTHONY INDUSTRIES, INC.
STATEMENTS OF CONSOLIDATED INCOME
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE FIGURES)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- -----------------
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales..................... $402,047 $431,640 $502,444 $109,735 $145,018
Other Income.................. 1,159 1,305 1,578 368 318
-------- -------- -------- -------- --------
403,206 432,945 504,022 110,103 145,336
Costs and expenses
Cost of products sold....... 296,006 321,366 370,902 83,053 109,712
Selling expenses............ 52,199 52,254 61,023 14,157 17,477
General and administrative
expenses................... 35,313 36,605 44,283 10,609 12,588
Interest expense............ 6,777 5,759 7,481 1,574 2,832
-------- -------- -------- -------- --------
390,295 415,984 483,689 109,393 142,609
-------- -------- -------- -------- --------
Income before provision for
income taxes................. 12,911 16,961 20,333 710 2,727
Provision for income taxes.... 4,390 5,840 7,300 250 640
-------- -------- -------- -------- --------
Net Income.................... $ 8,521 $ 11,121 $ 13,033 $ 460 $ 2,087
======== ======== ======== ======== ========
Per Share..................... $ .73 $ .94 $ 1.09 $ .04 $ .17
======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
ANTHONY INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE FIGURES)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ ---------
1993 1994 1995
-------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................ $ 5,860 $ 7,700 $ 5,813
Accounts receivable less allowances of
$7,262 in 1993, $8,425 in 1994 and
$7,091 at March 31, 1995................ 90,056 111,154 125,640
Inventories, net......................... 82,375 101,742 107,281
Deferred taxes........................... 6,392 7,928 7,465
Prepaid expenses and other current as-
sets.................................... 3,073 4,324 5,807
-------- -------- --------
Total current assets................... 187,756 232,848 252,006
Property, Plant and Equipment
Land and land improvements............... 1,617 1,665 1,665
Buildings and leasehold improvements..... 25,367 26,797 28,232
Machinery and equipment.................. 92,356 99,138 101,897
Construction in progress................. 2,745 3,859 5,064
-------- -------- --------
122,085 131,459 136,858
Less allowance for depreciation.......... 71,991 79,095 81,986
-------- -------- --------
50,094 52,364 54,872
Other Assets
Intangibles, principally goodwill, net... 15,829 15,825 17,405
Other.................................... 3,600 3,377 3,710
-------- -------- --------
Total Assets........................... $257,279 $304,414 $327,993
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank loans............................... $ 6,288 $ 18,341 $ 35,432
Accounts payable......................... 25,144 26,858 29,016
Accrued payroll and related.............. 17,442 18,697 15,959
Other accruals........................... 14,378 15,788 19,042
Current portion of long-term debt........ 6,724 2,918 2,902
-------- -------- --------
Total current liabilities.............. 69,976 82,602 102,351
Long-Term Debt............................. 87,271 109,921 110,822
Deferred Taxes............................. 11,376 12,895 12,925
Commitments and Contingencies
Shareholders' Equity
Preferred Stock, $1 par value, authorized
12,500,000 shares, none issued.......... -- -- --
Common Stock, $1 par value, authorized
40,000,000 shares, issued shares--
11,681,393 in 1993, 12,322,851 in 1994
and 12,355,187 at March 31, 1995 ....... 11,681 12,323 12,355
Additional paid-in-capital............... 56,863 66,973 67,229
Retained earnings........................ 30,895 28,994 29,775
Employee Stock Ownership Plan and stock
option loans............................ (3,361) (3,937) (3,908)
Treasury shares at cost, 469,681 shares
in 1993 and 481,059 shares in 1994 and
at March 31, 1995 ...................... (3,993) (4,189) (4,189)
Cumulative translation adjustments....... (3,429) (1,168) 633
-------- -------- --------
Total Shareholders' Equity............. 88,656 98,996 101,895
-------- -------- --------
Total Liabilities and Shareholders'
Equity................................ $257,279 $304,414 $327,993
======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
ANTHONY INDUSTRIES, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER THREE MONTHS
31, ENDED MARCH 31,
------------------------- ----------------
1992 1993 1994 1994 1995
------- ------- ------- ------ --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................... $ 8,521 $11,121 $13,033 $ 460 $ 2,087
Adjustments to reconcile net in-
come to net cash provided by
(used in) operating
activities:
Depreciation.................. 8,687 8,190 7,705 2,059 2,157
Amortization.................. 966 893 929 237 211
Deferred taxes................ 2,179 515 (17) (576) 466
Changes in operating assets
and liabilities:
Accounts receivable......... (11,087) (10,858) (21,098) (5,449) (13,948)
Inventories................. (6,838) (4,092) (19,367) (2,156) (4,143)
Prepaid expenses and other
current
assets..................... (1,034) 884 (1,251) (804) (1,388)
Accounts payable............ (800) 2,584 1,714 1,851 1,478
Payrolls and other accruals. (923) 1,093 2,666 2,083 155
------- ------- ------- ------ --------
Net cash provided by (used in)
operating
activities..................... (329) 10,330 (15,686) (2,295) (12,925)
------- ------- ------- ------ --------
INVESTING ACTIVITIES
Property, plant and equipment
expenditures................... (7,131) (8,715) (11,620) (1,880) (4,468)
Disposals of property, plant and
equipment...................... 310 304 1,924 37 495
Purchase of businesses, net of
cash acquired.................. -- (932) -- -- (2,159)
Other items, net................ (2,260) (3,108) 1,068 959 1,034
------- ------- ------- ------ --------
Net cash used in investing ac-
tivities....................... (9,081) (12,451) (8,628) (884) (5,098)
------- ------- ------- ------ --------
FINANCING ACTIVITIES
Borrowings under long-term debt. 40,000 21,500 22,582 5,328 1,000
Payments of long-term debt...... (10,078) (6,534) (3,738) (3,646) (771)
Net increase (decrease) in
short-term bank loans.......... (17,216) (5,004) 12,053 399 17,095
Exercise of stock options....... 222 629 267 165 118
Dividends paid.................. (4,464) (4,733) (5,010) (1,235) (1,306)
------- ------- ------- ------ --------
Net cash provided by financing
activities..................... 8,464 5,858 26,154 1,011 16,136
------- ------- ------- ------ --------
Net increase (decrease) in cash
and cash
equivalents...................... (946) 3,737 1,840 (2,168) (1,887)
Cash and cash equivalents at be-
ginning of period................ 3,069 2,123 5,860 5,860 7,700
------- ------- ------- ------ --------
Cash and cash equivalents at end
of period........................ $ 2,123 $ 5,860 $ 7,700 $3,692 $ 5,813
======= ======= ======= ====== ========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
ANTHONY INDUSTRIES, INC.
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE FIGURES)
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED DECEMBER 31, 1994 AND THE THREE MONTHS ENDED
MARCH 31, 1995
--------------------------------------------------------------------------
EMPLOYEE STOCK
ADDITIONAL OWNERSHIP PLAN TREASURY CUMULATIVE
COMMON PAID-IN RETAINED AND STOCK SHARES TRANSLATION
STOCK CAPITAL EARNINGS OPTION LOANS AT COST ADJUSTMENTS TOTAL
------- ---------- -------- -------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1,
1992................... $10,466 $41,727 $35,117 $(2,919) $(3,993) $ 265 $80,663
Net income for the year
1992................... 8,521 8,521
Exercise of stock op-
tions.................. 86 696 (560) 222
Cash dividends, $.385
per share.............. (4,464) (4,464)
Stock dividends, 5%,
plus cash in lieu of
fractional shares...... 499 5,554 (6,062) (9)
Translation adjustments. (1,662) (1,662)
Employee Stock Ownership
Plan, amortization and
partial loan repayment. 327 327
------- ------- ------- ------- ------- ------ --------
BALANCE AT DECEMBER 31,
1992................... 11,051 47,977 33,112 (3,152) (3,993) (1,397) 83,598
Net income for the year
1993................... 11,121 11,121
Exercise of stock op-
tions.................. 97 828 (296) 629
Cash dividends, $.405
per share.............. (4,733) (4,733)
Stock dividends, 5% plus
cash in lieu of frac-
tional shares.......... 533 8,058 (8,605) (14)
Translation adjustments. (2,032) (2,032)
Employee Stock Ownership
Plan, amortization and
partial loan
repayment.............. 87 87
------- ------- ------- ------- ------- ------ --------
BALANCE AT DECEMBER 31,
1993................... 11,681 56,863 30,895 (3,361) (3,993) (3,429) 88,656
Net income for the year
1994................... 13,033 13,033
Exercise of stock op-
tions.................. 78 764 (575) 267
Cash dividends, $.425
per share.............. (5,010) (5,010)
Stock dividend, 5%, plus
cash in lieu of frac-
tional shares.......... 562 9,348 (9,924) (14)
Translation adjustments. 2,261 2,261
Repurchase of shares and
stock option loan re-
payments............... 2 (2) 303 (196) 107
Employee Stock Ownership
Plan, amortization and
partial loan
repayment.............. (304) (304)
------- ------- ------- ------- ------- ------ --------
BALANCE AT DECEMBER 31,
1994................... 12,323 66,973 28,994 (3,937) (4,189) (1,168) 98,996
______________________ (UNAUDITED) ______________________
Net income for the three
months ended March 31,
1995................... 2,087 2,087
Exercise of stock op-
tions.................. 32 256 (170) 118
Cash dividends, $.11 per
share.................. (1,306) (1,306)
Translation adjustments. 1,801 1,801
Stock option loan repay-
ments.................. 195 195
Employee Stock Ownership
Plan, amortization and
partial loan repayment. 4 4
------- ------- ------- ------- ------- ------ --------
BALANCE AT MARCH 31,
1995................... $12,355 $67,229 $29,775 $(3,908) $(4,189) $ 633 $101,895
======= ======= ======= ======= ======= ====== ========
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, Shakespeare Company, K2 Corporation, Stearns
Manufacturing Company and Girvin Inc., and Dana Design Ltd. for the period from
February 4, 1995, the date of acquisition.
Fiscal Periods
The Company maintains its books using a 52/53 week year ending on the last
Sunday of December. For purposes of the consolidated financial statements, the
year-end is stated as December 31. Each of the years ended in 1992, 1993 and
1994 consisted of 52 weeks and each of the quarters in 1993 and 1994 consisted
of 13 weeks. The year ending December 31, 1995 will consist of 53 weeks with
the additional week included in the first quarter ended March 31, 1995.
Interim Financial Information
The unaudited financial statements for the three months ended March 31, 1994
and 1995 have been prepared on the same basis as the audited financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included in the unaudited financial statements. The results for the three
months ended March 31, 1995 are not necessarily indicative of the results to be
expected for the full year and for any other interim period.
Income taxes for the three months ended March 31, 1994 and 1995 are based on
the estimated effective annual rate applicable for the full year. The income
tax provision for the three months ended March 31, 1995 included a $259,000
foreign tax settlement.
Cash Equivalents
Short-term investments (including any debt securities) that are part of the
Company's cash management portfolio are classified as cash equivalents and are
carried at amortized costs. These investments are highly liquid, are of limited
credit risk and have original maturities of three months or less. The carrying
amount of cash equivalents approximates market.
Accounts Receivable and Allowances
Accounts receivable are the result of the Company's worldwide sales
activities. Although the Company's credit risk is spread across a large number
of customers within a wide geographic area, periodic concentrations within a
specific industry occur due to the seasonality of its businesses. As of
December 31, 1994, the Company's receivables from the ski and snowboard
industry amounted to 46% of total receivables. The Company performs periodic
credit evaluations to manage its credit risk. Allowances include reserves for
volume-related discounts of $2,712,000, $3,018,000, and $1,486,000 as of
December 31, 1993 and 1994 and March 31, 1995, respectively.
F-7
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on
the LIFO method with respect to approximately 49% and 46% of total inventories
at December 31, 1993 and 1994, respectively. Cost was determined on the FIFO
method for all other inventories.
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." As permitted by
Statement No. 109, the Company has elected not to restate the financial
statements of any prior years. The cumulative effect of the change on the
Company's financial statements was not material. Income taxes have been
provided using the liability method. For years prior to 1993, the Company
accounted for income taxes in accordance with Accounting Principles Board
Opinion No. 11, "Accounting for Income Taxes," which provided for income taxes
using the income statement approach.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation is provided
on the straight-line method based upon the estimated useful lives of the
assets.
Intangibles
Goodwill arising from acquisitions is amortized on a straight-line basis over
a period up to 40 years. Other intangibles are amortized on a straight-line
basis over 3 to 15 years. Accumulated amortization of intangibles as of
December 31, 1993 and 1994 amounted to $5,143,000 and $6,004,000, respectively.
The Company periodically reviews intangibles for impairment of value.
Foreign Currency Translation
The functional currency for most foreign operations is the local currency.
Foreign currency financial statements are converted into United States dollars
by translating balance sheet accounts at the current exchange rate at yearend
and income statement items at the average exchange rate for the year, with the
resulting translation adjustment made to a separate component of shareholders'
equity. Transaction gains or losses, other than those related to items deemed
to be of a long-term nature, are included in net income in the period in which
they occur.
Advertising Costs
Advertising costs are generally expensed as incurred. Advertising costs for
the years ended December 31, 1992, 1993 and 1994 amounted to $11,263,000,
$11,050,000 and $12,943,000, respectively.
Research and Development
Research and development costs are charged to expense as incurred. Research
and development costs for the years ended December 31, 1992, 1993 and 1994
amounted to $3,538,000, $4,290,000 and $6,298,000, respectively.
F-8
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Per Share Data
Earnings and cash dividends per share data have been retroactively adjusted
for stock dividends. Earnings per share were determined by dividing net income
by the average outstanding shares, including common stock equivalents and ESOP
shares, using the treasury stock method. Common stock equivalents include stock
options. Primary earnings per share approximate earnings per share on a fully
diluted basis.
NOTE 2--ACQUISITION OF BUSINESSES
On October 14, 1993, the Company purchased certain assets of Ocean State
International, Inc. ("Girvin"). Girvin is a distributor and manufacturer of
ProFlex full-suspension mountain bikes and Girvin accessories for sale in the
U.S. and Europe. Subsequent to the year end, the Company purchased Dana Design
Ltd., a small manufacturer and distributor of backpacks primarily in the U.S.
and the assets of two additional small businesses.
NOTE 3--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH
DECEMBER 31, 31,
---------------- --------
1993 1994 1995
------- -------- --------
(THOUSANDS)
<S> <C> <C> <C>
Finished goods....................................... $55,322 $ 66,900 $ 70,261
Work in process...................................... 8,985 8,788 11,827
Raw materials........................................ 24,164 32,216 31,488
------- -------- --------
Total at lower of FIFO cost or market (approximates
current cost)....................................... 88,471 107,904 113,576
Less LIFO valuation reserve.......................... 6,096 6,162 6,295
------- -------- --------
$82,375 $101,742 $107,281
======= ======== ========
</TABLE>
NOTE 4--INCOME TAXES
Pretax income for the years ended December 31 was taxed under the following
jurisdictions:
<TABLE>
<CAPTION>
1992 1993 1994
------- ------- -------
(THOUSANDS)
<S> <C> <C> <C>
Domestic................................................ $11,519 $13,631 $15,242
Foreign................................................. 1,392 3,330 5,091
------- ------- -------
$12,911 $16,961 $20,333
======= ======= =======
</TABLE>
F-9
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 4--INCOME TAXES--(CONTINUED)
Components of the income tax provision for the three years ended December 31
are:
<TABLE>
<CAPTION>
1992 1993 1994
---------------- ----------------- ----------------
CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
------- -------- ------- -------- ------- --------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Federal...................... $3,375 $ 95 $5,575 $(1,095) $5,610 $(760)
State........................ 720 25 1,020 (85) 1,755 (85)
Foreign...................... 195 (20) (5) 430 505 275
------ ---- ------ ------- ------ -----
$4,290 $100 $6,590 $ (750) $7,870 $(570)
====== ==== ====== ======= ====== =====
</TABLE>
The principal elements accounting for the difference between the statutory
federal income tax rate and the effective tax rates for the three years ended
December 31 are:
<TABLE>
<CAPTION>
1992 1993 1994
---- ---- ----
(PERCENT)
<S> <C> <C> <C>
Statutory federal income tax rate............................. 34.0 35.0 35.0
State income tax effect....................................... 3.8 3.6 5.3
U.S. tax effects of foreign earnings.......................... (2.8) (4.5) (5.0)
Other......................................................... (1.0) .3 .6
---- ---- ----
34.0 34.4 35.9
==== ==== ====
</TABLE>
Deferred tax assets and liabilities are comprised of the following at
December 31:
<TABLE>
<CAPTION>
1993 1994
------- -------
(THOUSANDS)
<S> <C> <C>
Depreciation................................................... $ 7,010 $ 7,031
Trademark amortization......................................... 167 207
Other.......................................................... 4,199 5,657
------- -------
Long-term deferred tax liabilities, net...................... $11,376 $12,895
======= =======
Insurance accruals............................................. $ 2,093 $ 1,967
Bad debt reserve............................................... 922 1,021
Other.......................................................... 3,377 4,940
------- -------
Current deferred tax assets, net............................. $ 6,392 $ 7,928
======= =======
</TABLE>
Income taxes paid, net of refunds, in the years ended December 31, 1992, 1993
and 1994 were $2.2 million, $5.3 million and $6.7 million, respectively.
The income tax provision for the year ended December 31, 1994 includes
$600,000 relating to a reclassification of the provision for certain state
taxes which have historically been included in selling and general and
administrative expense. The Company has elected not to restate the financial
statements of any prior years, as such amounts were not material.
F-10
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 4--INCOME TAXES--(CONTINUED)
No provision for United States income taxes has been made on undistributed
earnings of foreign subsidiaries, since a substantial portion of these earnings
has been permanently reinvested. At December 31, 1994, the foreign subsidiaries
had unused operating loss carryforwards of approximately $7.5 million, of which
approximately $1.8 million expires in 2001 and the remainder carries forward
indefinitely. Since the use of these operating loss carryforwards is limited to
future taxable earnings of the related foreign subsidiaries, a valuation
allowance has been recognized to offset the deferred tax asset arising from
such carryforwards.
NOTE 5--BORROWINGS AND OTHER FINANCIAL INSTRUMENTS
At December 31, 1994, the Company had several foreign and domestic short-term
lines of credit totaling up to $40.7 million. The foreign subsidiaries' lines
of credit generally have no termination date but are reviewed annually for
renewal and are denominated in the subsidiaries' local currencies. At December
31, 1994, amounts outstanding under such short-term lines of credit (bank
loans) were $18.3 million at interest rates ranging from 5.75% to 11.2%. The
weighted average interest rates on short-term lines of credit as of December
31, 1994 and 1993 were 6.5% and 7.1%, respectively.
The principal components of long-term debt at December 31 are:
<TABLE>
<CAPTION>
1993 1994
------- --------
(THOUSANDS)
<S> <C> <C>
Notes payable due in nine equal annual principal instalments
beginning in 1996 through 2004 with semi-annual interest
payable at 8.39%............................................ $40,000 $ 40,000
$70 million three-year bank revolving credit line due June
28, 1997, quarterly interest payments due at LIBOR plus 3/4%
and a commitment fee of 3/8% on the unused portion of the
line through June 1997...................................... 50,500 68,000
Note payable due in monthly instalments through February 2001
with interest payable monthly at LIBOR plus 1 1/2% (7 1/2%
at December 31)............................................. 4,703
Secured note payable to bank in semi-annual instalments of
$211,300 including interest at 10% to January 2009--paid in
full in 1994................................................ 3,094
Other debt................................................... 401 136
------- --------
93,995 112,839
Less--amounts due within one year............................ 6,724 2,918
------- --------
$87,271 $109,921
======= ========
</TABLE>
The principal amount of long-term debt maturing in each of the four years
following 1995 is:
<TABLE>
<CAPTION>
(THOUSANDS)
-----------
<S> <C>
1996....................................... $ 4,853
1997....................................... 70,383
1998....................................... 4,916
1999....................................... 4,950
</TABLE>
Interest paid on short- and long-term debt for the years ended December 31,
1992, 1993 and 1994 was $6.8 million, $5.8 million and $7.5 million,
respectively.
F-11
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 5--BORROWINGS AND OTHER FINANCIAL INSTRUMENTS--(CONTINUED)
The $70 million revolving credit line is a component of an $85 million credit
facility which provides for a $15 million sub-limit that may only be used for
standby letters of credit. This facility is subject to an agreement which,
among other things, restricts amounts available for payment of cash dividends
by the Company. As of December 31, 1994, retained earnings of $7.9 million were
free of such restrictions. Interest rates on the revolving line at December 31,
1994 ranged from 6.375% to 7.125%.
The Company had $14.5 million of letters of credit outstanding as of December
31, 1994.
On April 21, 1995, the Company amended its $85 million credit facility such
that the $15 million available for standby letters of credit can also be used
for operating purposes. Additionally, on April 27, 1995, the Company signed an
agreement for an additional $40 million 364-day unsecured revolving short-term
facility with the same lenders, and providing for substantially the same
covenants, interest rate options and commitment fees as under the Company's $85
million credit facility discussed above.
The Company has entered into interest rate swap agreements to manage its
interest rate exposure on the $40 million 8.39% notes payable. During 1993, the
Company converted the fixed rate to a variable rate by entering into an
interest rate swap with a maturity in 1996. The Company subsequently entered
into an offsetting swap effectively returning the debt to a fixed rate which
also matures in 1996. The remaining gain of $66,000 is being recognized over
the remaining life of the interest rate swap agreements. In 1994, the Company
also entered into an interest rate swap agreement effectively converting the
interest rate exposure on the $4.7 million bank loan described above to a fixed
rate of 6.97%. The interest rate swap agreement matures at the time the related
loan matures. The Company is exposed to credit loss in the event of
nonperformance by the banks, who are parties to these agreements. However, in
view of the substantial size and financial strength of these banks, the Company
believes that non-performance is remote.
The Company enters into forward exchange contracts to hedge certain
anticipated and firm sales and purchases commitments which are denominated in
foreign currencies. The purpose of the Company's foreign currency hedging
activities is to reduce the Company's risk to fluctuating exchange rates. At
December 31, 1994, the Company had foreign exchange contracts with maturities
of generally less than one year in the aggregate amount of $5.0 million, and
with unrealized losses of $205,000. The unrealized losses will be recognized in
earnings when realized and when the underlying transaction occurs. At December
31, 1994, the Company had no deferred realized gains or losses from forward
exchange contracts.
The carrying amounts for the short-term lines of credit and the long-term
bank revolving credit line approximate their fair value since floating interest
rates are charged which approximate market rates. The fair value of the $40
million 8.39% notes payable, based on quoted market prices, is $37.7 million as
compared to a carrying amount of $40.0 million, and the fair value of the $4.7
million note payable is $4.2 million as compared to a carrying amount of $4.7
million.
F-12
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 6--COMMITMENTS AND CONTINGENCIES
Future minimum payments under noncancelable operating leases as of December
31, 1994, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (THOUSANDS)
----------- -----------
<S> <C>
1995.......................................................... $2,441
1996.......................................................... 2,058
1997.......................................................... 1,628
1998.......................................................... 1,493
1999.......................................................... 821
2000-2008..................................................... 651
------
$9,092
======
</TABLE>
Leases are primarily for rental of facilities, and about one-half of these
contain renewal rights to extend the terms from one to ten years.
Net rental expense, including those rents payable under noncancelable leases
and month-to-month tenancies, amounted to $3,770,000, $3,609,000 and
$3,837,000,for the years ended December 31, 1992, 1993 and 1994, respectively.
The Company is subject to various legal actions and proceedings in the normal
course of business. While the ultimate outcome of these matters cannot be
predicted with certainty, and to the extent not previously provided, management
does not believe these matters will have a material adverse effect on the
Company's financial statements.
The Company is among several potentially responsible parties named in a
cleanup of a chemical waste disposal site in South Carolina under the
Comprehensive Environmental Response, Compensation and Liability Act. The
ultimate outcome of this matter cannot be predicted with certainty, however, to
the extent to which not previously provided, management does not believe this
matter will have a material adverse effect on the Company's financial
statements.
NOTE 7--PENSION PLANS AND OTHER BENEFIT PLANS
The Company sponsors several trusteed noncontributory defined benefit pension
plans covering most of its employees. Benefits are generally based on years of
service and the employee's highest compensation for five consecutive years
during the years of credited service. Contributions are intended to provide for
benefits attributable to service to date and service expected to be provided in
the future. The Company funds these plans in accordance with the Employee
Retirement Income Security Act of 1974 (ERISA).
The Company also sponsors defined contribution pension plans covering certain
domestic employees who are not covered by a defined benefit pension plan and
substantially all Stearns employees. Contributions by the Company are
determined as a percent of the amounts contributed by the respective employees.
F-13
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 7--PENSION PLANS AND OTHER BENEFIT PLANS--(CONTINUED)
The following table sets forth the defined benefit plans' funded status and
amounts recognized in the Company's consolidated balance sheet at December 31:
<TABLE>
<CAPTION>
1993 1994
--------------------------- ---------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value
of benefit
obligations:
Accumulated benefit
obligation, including
vested benefits of
$28,994 in 1993 and
$26,202 in 1994...... $(28,469) $(2,216) $(26,510) $(2,347)
======== ======= ======== =======
Projected benefit
obligation for service
rendered to date....... $(36,200) $(2,216) $(32,631) $(2,347)
Plan assets at fair
value, primarily
publicly traded stocks,
bonds, and other fixed
income securities...... 37,278 35,018
-------- ------- -------- -------
Plan assets in excess of
(or less than) the
projected benefit
obligation............. 1,078 (2,216) 2,387 (2,347)
Unrecognized net loss... 3,167 292 1,145 93
Unrecognized prior serv-
ice cost............... 55 312 (73) 385
Unrecognized net
transition (asset)
obligation at January
1, 1987, net of
amortization........... (1,981) 654 (1,706) 589
Adjustment required to
recognize minimum
liability.............. (1,258) (1,067)
-------- ------- -------- -------
Prepaid pension cost
(pension liability)
recognized in the con-
solidated balance
sheet.................. $ 2,319 $(2,216) $ 1,753 $(2,347)
======== ======= ======== =======
</TABLE>
Net pension cost consisted of the following at December 31:
<TABLE>
<CAPTION>
1992 1993 1994
------ ------ ------
(THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the period......... $1,038 $1,108 $1,495
Interest cost on the projected benefit obligation...... 2,326 2,607 2,829
Actual (gains) loss on plan assets..................... (2,028) (2,798) 360
Net amortization and deferral.......................... (1,419) (525) (3,802)
------ ------ ------
Total net periodic pension cost (benefit) of funded de-
fined benefit plans................................... (83) 392 882
Defined contribution plans............................. 505 517 435
------ ------ ------
Total pension plan cost................................ $ 422 $ 909 $1,317
====== ====== ======
</TABLE>
F-14
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 7--PENSION PLANS AND OTHER BENEFIT PLANS--(CONTINUED)
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pension." The adoption of Statement No. 106 had an immaterial effect on
the Company's financial statements.
In November 1992, the FASB issued Statement No. 112, "Employers' Accounting
for Postemployment Benefits," that requires accrual accounting for
postemployment benefits instead of recognizing an expense for those benefits
when paid. The Company has complied with the new rules beginning in 1994. The
adoption of the new standard has not had a material effect on the Company's
financial statements.
NOTE 8--QUARTERLY OPERATING DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET GROSS NET NET INCOME
SALES PROFIT INCOME PER SHARE
------ ------ ------ ----------
(IN MILLIONS EXCEPT FOR PER
SHARE FIGURES)
<S> <C> <C> <C> <C>
1993
First quarter................................... $ 98.0 $ 24.7 $ .9 $ .08
Second quarter.................................. 112.9 30.0 4.0 .34
Third quarter................................... 113.9 30.4 3.8 .32
Fourth quarter.................................. 106.8 25.2 2.4 .20
------ ------ ----- -----
$431.6 $110.3 $11.1 $ .94
====== ====== ===== =====
1994
First quarter................................... $109.7 $ 26.7 $ .5 $ .04
Second quarter.................................. 131.8 36.4 5.0 .42
Third quarter................................... 127.9 34.5 4.5 .38
Fourth quarter.................................. 133.0 33.9 3.0 .25
------ ------ ----- -----
$502.4 $131.5 $13.0 $1.09
====== ====== ===== =====
</TABLE>
NOTE 9--STOCK OPTIONS
Under the Company's 1994 Incentive Stock Option Plan ("1994 Plan"), options
may be granted to eligible directors and key employees of the Company and its
subsidiaries at not less than 100% of the market value of the shares on the
dates of grant. No further options may be granted under the Company's 1988
Incentive Stock Option Plan ("1988 Plan").
The 1994 Plan permits the granting of options for terms not to exceed ten
years from date of grant. The options are exercisable on such terms as may be
established by the Compensation Committee of the Board of Directors at the
dates of grant.
The Company is authorized, at the discretion of the Compensation Committee,
to provide loans to key employees in connection with the exercise of stock
options under both the 1994 Plan and the 1988 Plan. The loans are
collateralized by the underlying shares of stock issued and bear interest at
the applicable rates published by the IRS. At December 31, 1993 and 1994, there
was a total of $2,167,000
F-15
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 9--STOCK OPTIONS--(CONTINUED)
and $2,440,000, respectively, of loans and accrued interest outstanding which
are due on various dates through December 1999. The loan amounts have been
deducted from shareholders' equity.
Further information regarding the Plans is shown below. The data has been
adjusted to reflect the 5% stock dividend in December 1994.
<TABLE>
<CAPTION>
1994 PLAN 1988 PLAN
---------------- ---------------
<S> <C> <C>
Status at December 31, 1993
Number of shares subject to options.......... 504,995
Exercise price per share..................... $5.66 to $14.52
Number of shares exercisable................. 168,111
Available for grant.......................... 69,663
---------------
Status at December 31, 1994
Number of shares subject to options.......... 182,800 399,935
Exercise price per share..................... $15.00 to $17.25 $5.66 to $14.52
Number of shares exercisable................. 184,071
Available for grant.......................... 867,200
---------------- ---------------
Information regarding the number of shares subject to options which were
exercised during the three years ended December 31, 1994 is shown below.
<CAPTION>
YEAR SHARES PRICE PER SHARE
---- ---------------- ---------------
<S> <C> <C>
1992......................................... 95,368 $5.66 to $ 8.86
1993......................................... 107,240 $5.66 to $ 8.77
1994......................................... 83,774 $5.66 to $14.52
---------------- ---------------
</TABLE>
During 1994, options for 182,800 shares were granted at $15.00 to $17.25 per
share, and options for 21,286 shares at $8.85 to $14.52 per share were
cancelled or expired. At December 31, 1994, 1,449,935 shares of common stock
were reserved for issuance under the Plans.
NOTE 10--SHAREHOLDERS' EQUITY
Preferred Stock
Shares are issuable in one or more series, and the Board of Directors has
authority to fix the terms and conditions of each series.
Employee Stock Ownership Plan
The Company has an Employee Stock Ownership Plan (ESOP) which covers
substantially all of its domestic non-union employees with at least one year of
service. As of December 31, 1994, the trust was indebted to the Company in the
aggregate amount of $944,000 in connection with stock purchases
F-16
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 10--SHAREHOLDERS' EQUITY--(CONTINUED)
made from 1982 through 1984 of which 260,415 shares with an aggregate market
value of $4,167,000 as of December 31, 1994 remained unallocated to
participants. These loans are repayable over the next eight to ten years with
interest at prime plus 1/2 %, not to exceed 18% and the unallocated shares will
be released to participants proportionately as these loans are repaid. Of the
total dividends received by the ESOP on its investment in the Company's common
stock, dividends on unallocated shares in the amount of $147,000 and $157,000
in 1993 and 1994, respectively, were used to service these loans. Additionally,
the trust was indebted to the Company in the amount of $400,000 in connection
with distributions made to terminees. The loan carries no interest and is due
June 30, 1995. It is anticipated the loan will be repaid through the sale of
unallocated shares.
Shareholders' equity has been reduced by the amount of the loans and any
payments made by the Company on behalf of the trust. The payments, which at
December 31, 1994 totaled $153,000, are being amortized to expense over the
lives of the loans.
The amount of the Company's annual contribution to the ESOP is at the
discretion of the Company's Board of Directors. For the three years 1992, 1993
and 1994 contributions were limited to amounts in excess of annual dividends,
net of debt service, of the ESOP necessary to fund obligations arising in each
of those years to retired and terminated employees. These amounts were
$1,150,000, $1,260,000 and $1,016,000, respectively. ESOP expense, including
amortization of the foregoing payments, was $1,321,000, $1,012,000 and
$1,014,000 in 1992, 1993 and 1994, respectively. Allocated shares as of
December 31, 1994 totaled 2,109,907 shares.
Preferred Stock Rights
Rights are outstanding which entitle the holder of each share of Common Stock
of the Company to buy one one-hundredth of a share of Series A preferred stock
at an exercise price of $51.712 per one one-hundredth of a share, subject to
adjustment. The rights are not separately tradable or exercisable until a party
either acquires, or makes a tender offer that would result in ownership of, at
least 20% of the Company's common shares. If a person becomes the owner of at
least 20% of the Company's outstanding common shares (an "Acquiring Person"),
each holder of a right other than such Acquiring Person and its affiliates is
entitled, upon payment of the then current exercise price per right (the
"Exercise Price"), to receive shares of Common Stock (or Common Stock
equivalents) having a market value of twice the Exercise Price. If the Company
subsequently engages in certain mergers, business combinations or asset sales
with the Acquiring Person, each holder of a right other than the Acquiring
Person and its affiliates is thereafter entitled, upon payment of the Exercise
Price, to receive stock of the Acquiring Person having a market value of twice
the Exercise Price. At any time after any party becomes an Acquiring Person,
the Board of Directors may exchange the rights (except those held by the
Acquiring Person) at an exchange ratio of one common share per right. Prior to
a person becoming an Acquiring Person, the rights may be redeemed at a
redemption price of one cent per right, subject to adjustment. The rights are
subject to amendment by the Board.
F-17
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 11--SEGMENT DATA
The Company and its subsidiaries are organized into the sporting goods and
other recreational products and industrial products segments. The sporting
goods and other recreational products segment is composed of the following
lines of business: manufacture and sale of skis and snowboards; sale of in-
line skates; manufacture and sale of athletic jackets, imprintable shirts and
bowling shirts; manufacture and sale of personal flotation devices;
construction of residential concrete swimming pools; manufacture and
installation of swimming pool covers; manufacture and sale of full-suspension
mountain bikes and accessories; and manufacture and sale of rods, reels and
other fishing tackle items. The industrial products segment consists of the
manufacture and sale of extruded monofilament used by the paperweaving
industry and for cutting line, fishing line and sewing thread; fiberglass
marine antennas, communication and navigation equipment and light poles; and
laminated and coated paperboard products.
The following segment data is presented for the three years ended December
31, 1994. "Identifiable Assets" are as of December 31.
<TABLE>
<CAPTION>
NET SALES TO
UNAFFILIATED CUSTOMERS PRETAX INCOME
----------------------- --------------
1992 1993 1994 1992 1993 1994
------- ------- ------- ----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Sporting goods and other recre-
ational products................ 266.6 285.5 332.1 11.6 12.2 16.0
Industrial products.............. 135.4 146.1 170.3 11.0 14.0 16.7
------- ------- ------- ----- ----- -----
Net sales and operating profits.. 402.0 431.6 502.4 22.6 26.2 32.7
------- ------- ------- ----- ----- -----
Corporate
Interest and other income.............................. 1.0 .9 .4
Interest expense....................................... (6.8) (5.8) (7.5)
General expense........................................ (3.9) (4.3) (5.3)
----- ----- -----
Pretax income............................................ 12.9 17.0 20.3
----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE
ASSETS CAPITAL EXPENDITURES DEPRECIATION AMORTIZATION
----------------- -------------------- ------------------- -----------------
1992 1993 1994 1992 1993 1994 1992 1993 1994 1992 1993 1994
----- ----- ----- ------ ------ ------ ----- ----- ----- ----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sporting goods and other
recreational products.. 162.3 177.0 216.6 3.7 6.0 7.0 4.3 3.7 3.4 .8 .8 .8
Industrial products..... 64.5 66.3 74.8 3.4 2.7 4.6 4.3 4.4 4.2 .1
----- ----- ----- ------ ------ ------ ----- ----- ----- ----- ----- -----
Total segment data.... 226.8 243.3 291.4 7.1 8.7 11.6 8.6 8.1 7.6 .9 .8 .8
Corporate............... 9.4 14.0 13.0 .1 .1 .1 .1 .1 .1
----- ----- ----- ------ ------ ------ ----- ----- ----- ----- ----- -----
Total Company........... 236.2 257.3 304.4 7.1 8.7 11.6 8.7 8.2 7.7 1.0 .9 .9
===== ===== ===== ====== ====== ====== ===== ===== ===== ===== ===== =====
<CAPTION>
TOTAL SEGMENT
UNITED STATES FOREIGN ELIMINATIONS DATA
----------------- -------------------- ------------------- -----------------
1992 1993 1994 1992 1993 1994 1992 1993 1994 1992 1993 1994
----- ----- ----- ------ ------ ------ ----- ----- ----- ----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... 336.8 363.1 421.4 86.0 87.1 99.8 (20.8) (18.6) (18.8) 402.0 431.6 502.4
Less--intergeographic
sales.................. 5.8 7.3 8.5 15.0 11.3 10.3 (20.8) (18.6) (18.8)
----- ----- ----- ------ ------ ------ ----- ----- ----- ----- ----- -----
Net sales to unaffili-
ated customers......... 331.0 355.8 412.9 71.0 75.8 89.5 402.0 431.6 502.4
----- ----- ----- ------ ------ ------ ----- ----- -----
Operating profit........ 18.7 21.7 25.9 3.9 4.5 6.8 22.6 26.2 32.7
----- ----- ----- ------ ------ ------ ----- ----- -----
Identifiable assets..... 189.8 208.9 241.4 37.0 34.4 50.0 226.8 243.3 291.4
----- ----- ----- ------ ------ ------ ----- ----- -----
Capital expenditures.... 5.3 7.3 9.7 1.8 1.4 1.9 7.1 8.7 11.6
----- ----- ----- ------ ------ ------ ----- ----- -----
Depreciation............ 7.3 6.9 6.4 1.3 1.2 1.2 8.6 8.1 7.6
----- ----- ----- ------ ------ ------ ----- ----- -----
Amortization............ .9 .8 .8 .9 .8 .8
===== ===== ===== ===== ===== =====
</TABLE>
F-18
<PAGE>
ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
NOTE 12--SUBSEQUENT EVENTS
The Company plans to file on or about April 27, 1995, a registration
statement and prospectus in connection with an underwritten public offering of
4 million primary shares of its common stock. Management expects that the
proceeds of the proposed offering will be used to reduce borrowings under the
Company's $85 million three-year revolving credit line.
F-19
<PAGE>
[GRAPHIC MATERIAL]
<PAGE>
GRAPHIC MATERIAL SCHEDULE
PAGE 2 CONTAINS TWO PICTURES OF K2 SKIS IN USE.
THE INSIDE GATEFOLD CONTAINS (i) PICTURES OF A K2 SNOWBOARD, PROFLEX
MOUNTAIN BIKES, A SHAKESPEARE FLY FISHING ROD AND REEL, K2 EXOTECH IN-LINE
SKATES AND A DANA DESIGN BACKPACK IN USE; (ii) A PICTURE OF STEARNS RAINGEAR
BEING WORN AND (iii) AN ANTHONY POOL.
THE INSIDE BACK COVER CONTAINS A PICTURE OF SHAKEPEARE MARINE ANTENNAS ON
A BOAT, INSTALLED SHAKESPEARE STREET LAMPS, SHAKEPEARE MONOFILAMENT AND SIMPLEX
THERMO-PLY.
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 4
Certain Investment Considerations......................................... 6
Use of Proceeds........................................................... 8
Price Range of Common Stock and
Dividends................................................................ 8
Capitalization............................................................ 9
Selected Consolidated Financial Data...................................... 10
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 11
Business.................................................................. 17
Directors and Executive Officers.......................................... 29
Certain Shareholders...................................................... 30
Description of Capital Stock.............................................. 31
Underwriting.............................................................. 34
Legal Opinions............................................................ 35
Experts................................................................... 35
Index to Consolidated Financial
Statements............................................................... F-1
</TABLE>
4,000,000 SHARES
ANTHONY INDUSTRIES, INC.
COMMON STOCK
($1 PAR VALUE)
[LOGO OF ANTHONY INDUSTRIES, INC.]
SALOMON BROTHERS INC
A.G. EDWARDS & SONS, INC.
SMITH BARNEY INC.
PROSPECTUS
DATED , 1995
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemized statement of all expenses in
connection with the issuance and distribution of the securities being
registered hereby other than the Underwriters' discounts.
<TABLE>
<S> <C>
SEC registration fee.................................................. $ 25,776
Exchange listing fees................................................. 23,670
NASD filing fee....................................................... 7,975
Accounting fees and expenses.......................................... 100,000
Legal fees and expenses............................................... 250,000
Blue sky expenses and counsel fees.................................... 7,500
Cost of printing...................................................... 60,000
Transfer agent's fees................................................. 10,000
Miscellaneous......................................................... 65,079
--------
Total............................................................... $550,000*
========
</TABLE>
- --------
* All amounts except the registration fee, exchange listing fees and NASD fee
are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") empowers a
Delaware corporation to indemnify any person against expenses, judgments, fines
and settlements actually and reasonably incurred by any person in connection
with a threatened, pending or completed action, suit or proceeding in which the
person is involved by reason of the fact that he or she is or was a director,
officer, employee or agent of such 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, provided
that (i) the person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation and
(ii) with respect to any criminal action or proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful. If the action or
suit is by or in the name of the corporation, the corporation may indemnify any
such person against expenses actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner he or she reasonably believed to be in and
not opposed to the best interests of the corporation except that no
indemnification may be made in respect to 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 Delaware Court of Chancery or the court
in which the action or suit is brought determines on application that, despite
the adjudication of liability but in view of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
Article Eighteenth of the Company's Certificate of Incorporation, as amended,
provides that each person who is made or threatened to be made a party to or
involved in any action by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Company to the fullest extent permitted by
the DGCL, as such law is now in effect or may be amended hereafter to authorize
broader indemnification, against all expense, liability and loss (including
attorneys' fees, judgments, fines, excise taxes or penalties under ERISA and
amounts paid or to be paid in settlement) actually and reasonably incurred or
suffered by such person in connection therewith. The payment of expenses
incurred in defending such action prior to the final disposition thereof is to
be made by the Company, subject to any requirement under the DGCL that the
indemnified person undertake to pay back the amounts so advanced if it shall be
ultimately determined that such person is not entitled to
II-1
<PAGE>
indemnification under Article Eighteenth. The rights to indemnification and the
payment of expenses provided by Article Eighteenth are contract rights, and
individuals entitled to indemnification or compensation thereunder are
expressly authorized by such Article to bring suit against the Company to
enforce such rights. The provisions of Article Eighteenth are not exclusive and
are in addition to any other rights which any person may at any time have under
any statute, provision of the Company's Certificate of Incorporation, By-Law,
agreement, vote of shareholders or disinterested directors or otherwise. The
Board of Directors is authorized under Article Eighteenth to establish, in its
discretion, from time to time, arrangements for funding the Company's
obligations under Article Eighteenth.
The Company maintains directors' and officers' liability insurance. In
addition to covering directors and officers of the Company, such insurance also
insures the Company against amounts paid by it to indemnify directors and
officers.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
1 Form of Underwriting Agreement between the Company and Salomon
Brothers Inc, A.G. Edwards & Sons, Inc. and Smith Barney Inc., as
Representatives of the Underwriters
4 Rights Agreement dated August 10, 1989 between the Company and
The Harris Trust Company of New York, as Rights Agent ("Rights
Agreement''), incorporated by reference to Exhibit I to the Company's
Registration Statement on Form 8-A dated August 21, 1989
5 Opinion of Proskauer Rose Goetz & Mendelsohn LLP
23.1 Consent of Ernst & Young LLP
23.2* Consent of Proskauer Rose Goetz & Mendelsohn LLP
23.3 Consent of Richard M. Rodstein
24 Power of Attorney (included on the signature page of the Registration
Statement)
</TABLE>
- --------
* Included in Exhibit 5.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(i) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on the 27th day of
April, 1995.
ANTHONY INDUSTRIES, INC.
By: /s/ B.I. Forester
--------------------------------
B.I. Forester
Chairman of the Board
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bernard I. Forester, Richard M. Rodstein and
John J. Rangel, and any of them, his attorney-in-fact, with full power of
substitution, for him in all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or any of them, or their
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ B.I. Forester Director, Chairman of the April 27, 1995
- ------------------------------------ Board and Chief Executive
B.I. Forester Officer (Principal Executive
Officer)
/s/ John J. Rangel Senior Vice President-- April 27, 1995
- ------------------------------------ Finance (Principal Accounting
John J. Rangel Officer)
/s/ Robert T. Anthony Director April 24, 1995
- ------------------------------------
Robert T. Anthony
/s/ Richard L. Goldberg Director April 27, 1995
- ------------------------------------
Richard L. Goldberg
/s/ Abraham L. Gray Director April 27, 1995
- ------------------------------------
Abraham L. Gray
/s/ Hugh V. Hunter Director April 27, 1995
- ------------------------------------
Hugh V. Hunter
/s/ John H. Offermans Director April 27, 1995
- ------------------------------------
John H. Offermans
/s/ John B. Simon Director April 27, 1995
- ------------------------------------
John B. Simon
/s/ Sol S. Weiner Director April 27, 1995
- ------------------------------------
Sol S. Weiner
</TABLE>
II-4
<PAGE>
EXHIBIT 1
ANTHONY INDUSTRIES, INC.
4,000,000 SHARES/1/
COMMON STOCK
($1.00 PAR VALUE)
UNDERWRITING AGREEMENT
New York, New York
______________, 1995
Salomon Brothers Inc
A. G. Edwards & Sons, Inc.
Smith Barney Inc.
As Representatives of the several Underwriters,
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Anthony Industries, Inc., a Delaware corporation (the "Company"),
proposes to sell to the underwriters named in Schedule I hereto (each an
"Underwriter" and together, the "Underwriters"), for whom you (the
"Representatives") are acting as representatives, 4,000,000 shares of the
Company's common stock, par value $1.00 per share ("Common Stock") (said shares
to be sold by the Company being hereinafter called the "Underwritten
Securities"). The Company also proposes to grant to the Underwriters an option
to purchase up to 600,000 additional shares of Common Stock (the "Option
Securities"; the Option Securities, together with the Underwritten Securities,
being hereinafter called the "Securities").
1. Representations and Warranties. The Company represents and
-------------------------------
warrants to, and agrees with, each Underwriter as set forth below in this
Section 1. Certain terms used in this Section 1 are defined in paragraph (t)
hereof.
- ------------
/1/ Plus an option to purchase from Anthony Industries, Inc. up to 600,000
additional shares to cover over-allotments.
-1-
<PAGE>
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act") and has filed with the Securities and
Exchange Commission (the "Commission") a registration statement (file
number 33-________) on such Form, including a related preliminary
prospectus, for the registration under the Act of the offering and sale of
the Securities. The Company may have filed one or more amendments thereto,
including the related preliminary prospectus, each of which has previously
been furnished to you. The Company will next file with the Commission
either (A) prior to effectiveness of such registration statement, a further
amendment to such registration statement, including the form of final
prospectus or (B) after effectiveness of such registration statement, a
final prospectus in accordance with Rules 430A and 424(b)(1) or (4). In
the case of clause (B), the Company has included in such registration
statement, as amended at the Effective Date, all information (other than
Rule 430A Information) required by the Act and the rules thereunder to be
included in the Prospectus with respect to the Securities and the offering
thereof. As filed, such amendment and form of final prospectus, or such
final prospectus, shall include all Rule 430A Information, together with
all other such required information, with respect to the Securities and the
offering thereof and, except to the extent the Representatives shall agree
in writing to a modification, shall be in all substantive respects in the
form furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you, prior to the
Execution Time, will be included or made therein.
(b) On the Effective Date, the Registration Statement did or will, and
when the Prospectus is first filed (if required) in accordance with Rule
424(b) and on the Closing Date, the Prospectus (and any supplements
thereto) will, comply in all material respects with the applicable
requirements of the Act and the Securities Exchange Act of 1934 (the
"Exchange Act") and the respective rules thereunder; on the Effective Date,
the Registration Statement did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and on the date of any filing
pursuant to Rule 424(b) and on the Closing Date, the Prospectus (together
with any supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
(c) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or organized,
with full corporate power and authority to own its properties and conduct
its business as described in the Prospectus, and is duly
-2-
<PAGE>
qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction which requires such qualification
wherein it owns or leases properties or conducts business, and in which the
failure to be so qualified would, in the aggregate in all such cases, have
a material adverse impact on the Company on a consolidated basis.
(d) The Company's authorized equity capitalization is as set forth in
the Prospectus; the capital stock of the Company conforms to the
description thereof contained in the Prospectus; the outstanding shares of
Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable; the Securities have been duly and validly
authorized, and, when issued and delivered to and paid for by the
Underwriters pursuant to this Agreement, will be fully paid and
nonassessable; the Securities will be duly authorized for listing, subject
to official notice of issuance, on the New York Stock Exchange ("NYSE") and
Pacific Stock Exchange ("PSE"); the certificates for the Securities are in
valid and sufficient form; the holders of outstanding shares of capital
stock of the Company are not entitled to preemptive or other rights to
subscribe for the Securities; and upon delivery of the Securities issued
and sold by the Company pursuant to this Agreement and payment therefor as
contemplated herein, the Underwriters will acquire good and marketable
title to the Securities, free and clear of any lien, claim, security
interest or other encumbrance, restriction on transfer or other defect in
title.
(e) All the outstanding shares of capital stock of each subsidiary
have been duly authorized and validly issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Prospectus, all
outstanding shares of capital stock of the subsidiaries are owned by the
Company either directly or through wholly owned subsidiaries free and clear
of any security interests, claims, liens or encumbrances. There are no
outstanding rights, warrants or options to acquire or instruments
convertible into or exchangeable for, any shares of capital stock or equity
interest in any subsidiary. The Company's only subsidiaries are those
listed on Exhibit 22 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994, and (other than the Subsidiaries)
individually or in the aggregate do not constitute a "Significant
Subsidiary" as defined in Regulation S-X under the Act. The term
"Subsidiary" shall include Shakespeare Corporation, a Delaware corporation,
Sitca Corporation, a Washington corporation, SMCA, Inc., a Minnesota
corporation and Cirvin, Inc., a Delaware corporation, Dana Design Ltd., a
Montana corporation, and Shakespeare International Ltd., a British
corporation.
(f) Each of the Company and its subsidiaries have good and marketable
title to, or leasehold estates in full force and effect with respect to,
all items of real and personal property referred to in the Prospectus, in
each case free and clear of all material liens, encumbrances, claims,
security interests and defects, other than those
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<PAGE>
referred to in the Prospectus. The properties of the Company and the
subsidiaries necessary to the conduct of their businesses (as presently
conducted and as described in the Prospectuses) are in good repair
(reasonable wear and tear excepted), insured in accordance with industry
practice and suitable for their uses. The real properties referred to in
the Prospectuses as held under lease by the Company or its subsidiaries are
held by it under valid, subsisting and enforceable leases with such
exceptions as are not, separately or in the aggregate, material and do not
interfere with the conduct of the business of the Company and its
subsidiaries, and no defaults are existing by the Company, or to its
knowledge by any other party thereto, under any such leases that,
separately or in the aggregate, would have a material adverse effect on the
business or financial condition of the Company and its subsidiaries.
(g) There is no pending or threatened action, suit or proceeding
before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries of a character
required to be disclosed in the Prospectus which is not adequately
disclosed in the Prospectus, and there is no franchise, contract, agreement
or other document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit, which
is not described or filed as required. The descriptions in the
Registration Statement and the Prospectus of statutes, regulations,
contracts, franchises, other documents, pending or threatened actions,
suits or proceedings before any court or arbitrator, or brought by any
governmental agency, authority or body are accurate in all material
respects and fairly summarize the matters therein described.
(h) The consolidated financial statements of the Company and its
consolidated subsidiaries, together with related schedules and notes,
included and incorporated by reference in the Registration Statement and
the Prospectus present fairly the consolidated financial position and the
consolidated results of operations and cash flows of the Company and its
consolidated subsidiaries for the periods or at the dates therein
specified; such consolidated financial statements and related schedules and
notes have been prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods involved; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are accurately presented and prepared on a basis consistent with
such financial statements and the books and records of the Company. Ernst
& Young LLP, whose report is filed with the Commission as a part of the
Registration Statement and the Prospectus, are independent public
accountants as required by the Act and the Regulations.
(i) Neither the Company nor any subsidiary is in violation of its
certificate of incorporation or bylaws, or other organizational documents,
or in violation in any material respect of any law, ordinance,
administrative or governmental rule or regulation
-4-
<PAGE>
applicable to the Company or its subsidiaries, or in violation of any
decree of any court or governmental agency or body having jurisdiction over
the Company or its subsidiaries, or in default in any material respect in
the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which the
Company or its subsidiaries are a party or by which it or any of their
properties may be bound.
(j) The Company and each subsidiary has such permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("permits") as are necessary to own their properties and to conduct their
business in the manner described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus; the Company and each
subsidiary has fulfilled and performed all of their material obligations
with respect to such permits and no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the
holder of any such permit, subject in each case to such qualification as
may be set forth in the Prospectus; and, except as described in the
Prospectus, none of such permits contains any restriction that is
materially burdensome to the Company or its subsidiaries.
(k) Subsequent to the respective dates as of which such information is
given in the Registration Statement and the Prospectus (or any amendment or
supplement thereto), neither the Company nor any subsidiary has incurred
any liability or obligation, direct or contingent, or entered into any
transaction, not in the ordinary course of business, that is material to
the Company and its subsidiaries, and there has not been any change in the
capital stock, or material increase in the short-term debt or long-term
debt, of the Company and its subsidiaries, or any material adverse change,
or any development involving or which may reasonably be expected to involve
a prospective material adverse change, in the condition (financial or
other), business, net worth, results of operations or prospects of the
Company.
(l) The Company and its subsidiaries have filed all federal, state,
local, and foreign tax returns required to be filed, which returns are true
and correct in all material respects, and the Company and its subsidiaries
are not in default in the payment of any taxes which were payable pursuant
to said returns or any assessments with respect thereto, except where
either (i) the amount of such unpaid taxes is not in excess of the amount
reserved therefor, or (ii) the Company is contesting such default in good
faith through appropriate proceedings.
(m) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are
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<PAGE>
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (ii) access to assets is permitted only in
accordance with management's general or specific authorizations; and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(n) The Company and its subsidiaries own or possess adequate licenses
or other rights to use all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets, and know-how described in the
Prospectus as being owned or possessed by them, or necessary for the
conduct of its business as described in the Prospectus, and, except as
described in the Prospectus, neither the Company nor its subsidiaries has
received any notice of infringement of or conflict with (and knows of no
such infringement of or conflict with) asserted rights of others with
respect to any patents, trademarks, service marks, trade names, copyrights,
licenses, inventions, trade secrets, or know-how which could result in any
material adverse effect upon the Company and its subsidiaries, and none of
the Company's products and processes referred to in the Prospectus
infringes or conflicts with any right or patent, or any discovery,
invention, product or process which is the subject of a patent application,
known to the Company in a manner which would materially and adversely
affect the Company and its subsidiaries.
(o) Neither the Company nor any of its subsidiaries is involved in any
labor dispute with any union or group of employees nor, to the knowledge of
the Company, is any dispute threatened.
(p) There has not been any generation, use, handling, transportation,
treatment, storage, release or disposal of any Hazardous Substance (as
defined herein) in connection with the conduct of the business of the
Company or any subsidiary or the use of any property or facility of the
Company or any subsidiary which has created any liability under any
Environmental Laws that is or could reasonably be expected to be material
to the business or financial condition of the Company or such subsidiary.
Except as described in the Prospectus, (i) neither the Company nor any
subsidiary has received (1) any notice or claim to the effect that it is or
may be liable to any person as a result of the release or threatened
release of any Hazardous Substance or (2) any letter or request for
information under Section 104 of the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (S) 9604) or comparable state
laws, and (ii) to the best of the Company's knowledge, none of the
operations of the Company or any subsidiary is the subject of any federal
or state investigation evaluating whether any remedial action is needed to
respond to a release or a threatened release of any Hazardous Substance at
any facility of the Company or any subsidiary or at any other location.
-6-
<PAGE>
"Hazardous Substance" shall mean any (1) substance that is defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as a "hazardous substance," "hazardous material," "hazardous
waste," "toxic substance," or any other formulation intended to define,
list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity, "TCLP toxicity," or "EP toxicity," (2) oil, petroleum or
petroleum-derived substance and drilling fluid, produced water, and other
waste associated with the exploration, development, or production or crude
oil, natural gas, or geothermal resources, or (3) any flammable substance
or explosive, any radioactive material, any hazardous waste or substance,
any toxic waste or substance or any other material or pollutant which poses
a hazard to any property of the Company or to persons on or about such
property.
(q) This Agreement has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement enforceable against the
Company in accordance with its terms, except to the extent that rights to
indemnity and contribution hereunder may be limited by federal securities
law or the public policy of a state with respect to such matters.
(r) Neither the issuance and sale of the Securities, the execution,
delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby (i)
requires any consent, approval, authorization or other order of or
registration or filing with any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as may
have been obtained or such as may be required for the registration of the
Securities under the Act and the Exchange Act and compliance with the
securities or Blue Sky laws of various jurisdictions) or conflict or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificates of incorporation or bylaws, or other organizational
documents, of the Company or (ii) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, any
agreement, indenture, lease or other instrument to which the Company is a
party or by which it or any of its properties may be bound, or violates or
will violate any statute, law, regulation or filing or judgment,
injunction, order or decree applicable to the Company or any of its
properties, or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant
to the terms of any agreement or instrument to which it is a party or by
which it may be bound or to which any of its property or assets is subject.
(s) Except as described in the Prospectus, there are no outstanding
options, warrants or other rights calling for the issuance of, and no
commitments, plans or arrangements to issue, any shares of capital stock of
the Company or any security convertible into or exchangeable or exercisable
for capital stock of the Company; and
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<PAGE>
except as described in the Prospectus, there is no holder of any securities
of the Company or any other person who has the right, contractual or
otherwise, to cause the Company to sell or otherwise issue to them, or to
permit them to underwrite the sale of, any of the Securities or the right
to have any Common Stock or other securities of the Company included in the
Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares
of Common Stock or other securities of the Company, except for such holders
of shares of Common Stock who have elected not to exercise their rights to
require registration under the Act of such shares of Common Stock.
(t) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean
the date and time that this Agreement is executed and delivered by the
parties hereto. "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in paragraph (i) above and any preliminary
prospectus included in the Registration Statement at the Effective Date
that omits Rule 430A Information. "Prospectus" shall mean the prospectus
relating to the Securities that is first filed pursuant to Rule 424(b)
after the Execution Time or, if no filing pursuant to Rule 424(b) is
required, shall mean the form of final prospectus relating to the
Securities included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to
in paragraph (i) above, including incorporated documents, exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended. Such term shall include
any Rule 430A Information deemed to be included therein at the Effective
Date as provided by Rule 430A. "Rule 424" and "Rule 430A" refer to such
rules under the Act. "Rule 430A Information" means information with
respect to the Securities and the offering thereof permitted to be omitted
from the Registration Statement when it becomes effective pursuant to Rule
430A. Any reference herein to the Registration Statement, a Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Exchange Act.
2. Purchase and Sale.
------------------
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees, to
sell to each Underwriter, and each Underwriter agrees, severally and not
jointly, to purchase from
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<PAGE>
the Company, at a purchase price of $______ per share, the amount of the
Underwritten Securities set forth opposite such Underwriter's name in
Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants
an option to the several Underwriters to purchase, severally and not
jointly, up to 600,0000 shares of the Option Securities at the same
purchase price per share as the Underwriters shall pay for the Underwritten
Securities. Said option may be exercised only to cover over-allotments in
the sale of the Underwritten Securities by the Underwriters. Said option
may be exercised in whole or in part at any time (but not more than once)
on or before the 30th day after the date of the Prospectus upon written
notice by the Representatives to the Company setting forth the number of
shares of the Option Securities as to which the several Underwriters are
exercising the option and the settlement date. Delivery of certificates
for the shares of Option Securities by the Company and payment therefor to
the Company shall be made as provided in Section 3 hereof. The number of
shares of the Option Securities to be purchased by each Underwriter shall
be the same percentage of the total number of shares of the Option
Securities to be purchased by the several Underwriters as such Underwriter
is purchasing of the Underwritten Securities, subject to such adjustments
as you in your absolute discretion shall make to eliminate any fractional
shares.
3. Delivery and Payment. Delivery of and payment for the
---------------------
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third business
day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
______________, 1995, or such later date (not later than ______________, 1995)
as the Representatives shall designate, which date and time may be postponed by
agreement between the Representatives and the Company or as provided in Section
9 hereof (such date and time of delivery and payment for the Securities being
herein called the "Closing Date"). Delivery of the Securities shall be made to
the Representatives for the respective accounts of the several Underwriters
against payment by the several Underwriters through the Representatives of the
respective aggregate purchase prices of the Securities being sold by the Company
to or upon the order of the Company by certified or official bank check or
checks drawn on or by a New York Clearing House bank and payable in next day
funds. Delivery of the Securities shall be made at such location as the
Representatives shall reasonably designate at least one business day in advance
of the Closing Date and payment for the Securities shall be made at the offices
of Munger, Tolles & Olson, 355 S. Grand Avenue, Los Angeles, California.
Certificates for the Securities shall be registered in such names and in such
denominations as the Representatives may request not less than three full
business days in advance of the Closing Date.
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<PAGE>
The Company agrees to have the Securities available for inspection,
checking and packaging by the Representatives in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
If the option provided for in Section 2(b) hereof is exercised after
the third business day prior to the Closing Date, the Company will deliver (at
the expense of the Company) to the Representatives, at such location as the
Representatives shall reasonably designate at least one business day in advance
of the settlement date, on the date specified by the Representatives (which
shall be within three business days after exercise of said option), certificates
for the Option Securities in such names and denominations as the Representatives
shall have requested against payment at the offices of Munger, Tolles & Olson of
the purchase price thereof to or upon the order of the Company by certified or
official bank check or checks drawn on or by a New York Clearing House bank and
payable in next day funds. If settlement for the Option Securities occurs after
the Closing Date, the Company will deliver to the Representatives on the
settlement date for the Option Securities, and the obligation of the
Underwriters to purchase the Option Securities shall be conditioned upon receipt
of, supplemental opinions, certificates and letters confirming as of such date
the opinions, certificates and letters delivered on the Closing Date pursuant to
Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
-------------------------
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters
----------
that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Securities, the Company will not file any amendment of the Registration
Statement or supplement to the Prospectus unless the Company has furnished
you a copy for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably object. Subject
to the foregoing sentence, if the Registration Statement has become or
becomes effective pursuant to Rule 430A, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will cause the
Prospectus, properly completed, and any supplement thereto to be filed with
the Commission pursuant to the applicable paragraph of Rule 424(b) within
the time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company will promptly advise
the Representatives (A) when the Registration Statement, if not effective
at the Execution Time, and any amendment thereto, shall have become
effective, (B) when the Prospectus, and any supplement thereto, shall have
been filed (if required) with the Commission pursuant to Rule 424(b), (C)
when, prior to termination of the offering of the Securities, any amendment
to the Registration Statement shall have been filed or become effective,
(D) of any request by the Commission for any amendment of the
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<PAGE>
Registration Statement or supplement to the Prospectus or for any
additional information, (E) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (F) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of
any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act or the Exchange Act or the respective rules thereunder, the Company
promptly will prepare and file with the Commission, subject to the second
sentence of paragraph (a) of this Section 5, an amendment or supplement
which will correct such statement or omission or effect such compliance.
(c) As soon as practicable, the Company will make generally available
to its security holders and to the Representatives an earnings statement or
statements of the Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the Registration
Statement (including exhibits thereto) and to each other Underwriter a copy
of the Registration Statement (without exhibits thereto) and, so long as
delivery of a prospectus by an Underwriter or dealer may be required by the
Act, as many copies of each Preliminary Prospectus and the Prospectus and
any supplement thereto as the Representatives may reasonably request. The
Company will pay the expenses of printing or other production of all
documents relating to the offering.
(e) The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as the Representatives may
designate, will maintain such qualifications in effect so long as required
for the distribution of the Securities and will pay the fee of the National
Association of Securities Dealers, Inc., in connection with its review of
the offering.
(f) The Company will not, for a period of 90 days following the
Execution Time, without the prior written consent of the Representatives,
offer, sell or contract to
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<PAGE>
sell, or otherwise dispose of, directly or indirectly, or announce the
offering of, any other shares of Common Stock or any securities convertible
into, or exchangeable for, shares of Common Stock; provided, however, that
-------- -------
the Company may grant options or issue and sell Common Stock pursuant to
any employee stock option plan of the Company in effect at the Execution
Time and the Company may issue Common Stock issuable upon the conversion of
securities or the exercise of warrants outstanding at the Execution Time.
(i) The Company will apply the net proceeds from the sale of its
Securities substantially in accordance with the description set forth in
the Prospectus and any Preliminary Prospectus under the heading "Use of
Proceeds."
(g) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, An Act Relating to Disclosure of Doing Business with Cuba, and the
---------------------------------------------------------
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Securities and Exchange Commission or with the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if the
information reported in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changes
in any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
6. Conditions to the Obligations of the Underwriters. The
--------------------------------------------------
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time and the Closing Date and any settlement date pursuant to
Section 3 hereof, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of their respective obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later
time, the Registration Statement will become effective not later than (i)
6:00 PM New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 PM New
York City time on such date or (ii) 12:00 Noon on the business day
following the day on which the public offering price was determined, if
such determination occurred after 3:00 PM New York City time on such date;
if filing of the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b), the Prospectus, and any such supplement, will be
filed in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness
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<PAGE>
of the Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or threatened.
(b) The Company shall have furnished to the Representatives the
opinions of Proskauer Rose Goetz & Mendelsohn LLP, counsel for the Company,
dated the Closing Date, to the effect that:
(i) each of the Company and the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or
organized, with full corporate power and authority to own and lease
its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction which requires such qualification wherein the Prospectus
states it owns or leases properties or conducts business;
(ii) the Company's authorized equity capitalization is as set
forth in the Prospectus; the authorized and outstanding capital stock
of the Company is as set forth under the caption "Capitalization" in
the Prospectus; the capital stock of the Company conforms to the
description thereof contained in the Prospectus in all material
respects; the outstanding shares of Common Stock have been duly and
validly authorized and issued and are fully paid and nonassessable;
the Securities have been duly and validly authorized, and, when issued
and delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and nonassessable; the
Securities will be duly authorized for listing, subject to official
notice and issuance, on NYSE and PSE; the certificates for the
Securities are in valid and sufficient form and conform to the
requirements of the Delaware General Corporation Law and NYSE; the
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or, to the best knowledge of such counsel,
other rights to subscribe for the Securities; and upon delivery of the
Securities pursuant to this Agreement and payment therefor as
contemplated herein and assuming the purchase of the Securities by the
Underwriter in good faith and without notice of any adverse claim as
defined in the New York Uniform Commercial Code, the Underwriters will
acquire good and marketable title to the Securities, free and clear of
any lien, claim, security interest or other encumbrance, restriction
on transfer or other defect in title;
[(iii) all the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully
paid and nonassessable, and all outstanding shares of capital stock of
the Subsidiaries are owned by the Company either directly or through
wholly owned subsidiaries
-13-
<PAGE>
free and clear of any perfected security interest and, to the
knowledge of such counsel, after due inquiry, any other security
interests, claims, liens or encumbrances;]
(iv) to the best knowledge of such counsel, there are no
outstanding rights, warrants, or options to acquire, or instruments
convertible into or exchangeable for any shares of capital stock or
equity interest in the Subsidiaries;
(v) to the best knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Company or
any of its subsidiaries of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in the
Prospectus, and there is no statute or regulation or, to the best
knowledge of such counsel, no franchise, contract or other document of
a character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit, or required to be filed
under the Exchange Act if upon such filing they would be incorporated
by reference therein, which is not described or filed as required; the
descriptions in the Registration Statement and the Prospectus of
statutes, regulations, contracts, franchises, other documents, pending
or threatened actions, suits or proceedings before any court of
arbitrator, or brought by any governmental agency, authority or body
do not contain an untrue statement of fact or omit to state a material
fact and fairly summarize the matters therein described;
(vi) the Registration Statement has become effective under the
Act; any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the best knowledge
of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened and the Registration
Statement and the Prospectus (other than the financial statements and
other financial and statistical information contained therein as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Exchange Act and the respective rules thereunder;
(vii) the Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Securities to
be sold by it to the Underwriters as provided herein; this Agreement
has been duly authorized, executed and delivered by the Company;
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<PAGE>
(viii) no consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of the
transactions contemplated herein, except such as have been obtained
under the Act and such as may be required under the blue sky laws of
any jurisdiction in connection with the purchase and distribution of
the Securities by the Underwriters;
(ix) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof will conflict with, result in a
breach or violation of, or constitute a default under any law or the
charter or bylaws of the Company or the terms of any indenture or
other agreement or instrument known to such counsel and to which the
Company or any of its subsidiaries is a party or bound or any
judgement, order or decree known to such counsel to be applicable to
the Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of its subsidiaries; and
(x) to the best of such counsel's knowledge, no holders of
securities of the Company have rights to the registration of such
securities under the Registration Statement.
In addition, such counsel shall state that in the course of the
preparation of the Registration Statement and the Prospectus, such counsel
has participated in conferences with officers and representatives of the
Company and with the Company's independent public accountants, at which
conferences such counsel made inquiries of such officers, representatives
and accountants and discussed the contents of the Registration Statement
and the Prospectus and (without taking any further action to verify
independently the statements made in the Registration Statement and the
Prospectus and, except as stated in the foregoing opinion, without assuming
-----------------------------------------
responsibility for the accuracy, completeness or fairness of such
statements) nothing has come to such counsel's attention that causes such
counsel to believe that (i) the Registration Statement as of the effective
date and as of the Closing Date or the Prospectus as of the date thereof
and as of the Closing Date contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need not express any opinion with respect to
the financial statements, schedules and other financial and statistical
data included in the Registration Statement or the Prospectus); or (ii) the
conduct of the businesses of the Company and its subsidiaries is in
violation of any federal, state or local statute, administrative regulation
or other law, which violation is likely to have a material adverse effect
on the Company and its subsidiaries taken as a whole; or (iii)
-15-
<PAGE>
that any of the Company or its subsidiaries has not obtained all licenses,
permits, franchises, certificates and other authorizations from federal,
state, local, foreign and other regulatory authorities (including, but not
limited to, the Specified Agencies) as are necessary or required for the
ownership, leasing and operation of its properties and the conduct of its
business as presently conducted as contemplated in the Prospectus.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
General Corporations Law of the State of Delaware, the states of New York
or California or the federal law of the United States, to the extent they
deem proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Underwriters and (B) as to matters of fact,
to the extent they deem proper, on certificates of responsible officers of
the Company and public officials. References to the Prospectus in this
paragraph (b) include any supplements thereto at the Closing Date.
(c) The Representatives shall have received from Munger, Tolles &
Olson, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Securities, the
Registration Statement, the Prospectus (together with any supplement
thereto) and other related matters as the Representatives may reasonably
require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(d) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
Chief Executive officer and the principal financial or accounting officer
of the Company, dated the Closing Date, to the effect that the signers of
such certificate have carefully examined the Registration Statement, the
Prospectus, any supplement to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
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<PAGE>
(iii) since the date of the most recent financial statements
included or incorporated in the Prospectus (exclusive of any
supplement thereto), there has been no material adverse change in the
condition (financial or other), earnings, business or properties of
the Company and its subsidiaries, whether or not arising from
transactions in the ordinary course of business, except as set forth
in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(e) At the Execution Time and at the Closing Date, Ernst & Young
L.L.P. shall have furnished to the Representatives a letter or letters,
dated respectively as of the Execution Time and as of the Closing Date, in
form and substance satisfactory to the Representatives, confirming that
they are independent accountants within the meaning of the Act and the
Exchange Act and the respective applicable published rules and regulations
thereunder and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated in the
Registration Statement and the Prospectus and reported on by them
comply in form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published
rules and regulations;
(ii) on the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of
the following:
(1) a reading of the minutes of the meetings of the
stockholders, directors and the Audit and Compensation Committees
of the Company and, where applicable, the Subsidiaries;
(2) performing the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in SAS No. 71, Interim
Financial Information, on the unaudited interim financial
statements of the Company and its consolidated Subsidiaries
included in the Registration Statement and reading the unaudited
interim financial data for the period from the date of the latest
balance sheet included in the Registration Statement to the date
of the latest available interim financial data; and
(3) inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the
Company regarding its subsidiaries as to transactions and events
subsequent to the December 31, 1994 audited financial statements
incorporated in the Prospectus,
-17-
<PAGE>
nothing came to their attention which caused them to believe that:
(1) the unaudited financial statements included or
incorporated in the Registration Statement and the Prospectus do
not comply in form in all material respects with applicable
accounting requirements and with the published rules and
regulations of the Commission with respect to financial
statements included or incorporated in quarterly reports on Form
10-Q under the Exchange Act;
(2) any material modifications should be made to the
unaudited financial statements for them to be in conformity with
generally accepted accounting principles; or
(3) with respect to the period subsequent to March 31,
1995, there were any changes, at a specified date not more than
five business days prior to the date of the letter, in the Long-
Term Debt or Capital Stock of the Company and its consolidated
subsidiaries or decreases in the Shareholders' Equity of the
Company as compared with the amounts shown on the March 31, 1995
consolidated balance sheet included or incorporated in the
Registration Statement and the Prospectus, or for the period from
April 1, 1995 to such specified date there were any decreases, as
compared with the corresponding period in the preceding year, in
Net Sales, Income Before Provision for Income Taxes or in total
or per share amounts of Net Income of the Company and its
consolidated subsidiaries, except in all instances for changes or
decreases set forth in such letter, in which case the letter
shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed
necessary by the Representatives; and
(iii) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Registration Statement and the Prospectus, including the
information set forth under the captions "Selected Consolidated
Financial Information," "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operation" and
"Business" in the Prospectus, the information included or incorporated
in Items 1, 2, 6, 7 and 11 of the Company's Annual Report on Form 10-
K, incorporated in the Registration Statement and the Prospectus, and
the information included in the "Management's Discussion and Analysis
of Financial Condition and
-18-
<PAGE>
Results of Operations" included or incorporated in the Company's
Quarterly Reports on Form 10-Q, incorporated in the Registration
Statement and the Prospectus, agrees with the accounting records of
the Company and its subsidiaries, excluding any questions of legal
interpretation.
References to the Prospectus in this paragraph (g) include any
supplement thereto at the date of the letter.
(f) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in
the letter or letters referred to in paragraph (g) of this Section 6 or
(ii) any change, or any development involving a prospective change, in or
affecting the business or properties of the Company and its subsidiaries
the effect of which, in any case referred to in clause (i) or (ii) above,
is, in the judgment of the Representatives, so material and adverse as to
make it impractical or inadvisable to proceed with the offering or delivery
of the Securities as contemplated by the Registration Statement (exclusive
of any amendment thereof) and the Prospectus (exclusive of any supplement
thereto).
(g) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto from
each executive officer and director of the Company addressed to the
Representatives, in which each such person agrees not to offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or
announce an offering of, any shares of Common Stock beneficially owned by
such person or any securities convertible into, or exchangeable for, shares
of Common Stock for a period of 90 days following the Execution Time
without the prior written consent of the Representatives.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of
such cancellation shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.
7. Reimbursement of Underwriters' Expenses. If the sale of the
----------------------------------------
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company
-19-
<PAGE>
to perform any agreement herein or comply with any provision hereof other than
by reason of a default by the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
fees and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Securities.
8. Indemnification and Contribution.
---------------------------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each
Underwriter and each person who controls any Underwriter within the meaning
of either the Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for
the registration of the Securities as originally filed or in any amendment
thereof, or in any Preliminary Prospectus or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable
-------- -------
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein under
the heading "Underwriting" in any Preliminary Prospectus and the
Prospectus; and provided further, that the indemnification contained
-------- -------
in this paragraph 8(a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter (or any person controlling such
Underwriter) on account of any such loss, claim, damage or liability
arising from the sale of the Securities by such Underwriter to any person
if a copy of the Prospectus contained in the Registration Statement as of
the Effective Date was not delivered or sent to such person within the time
required by the Act and the regulations thereunder, and it has been finally
decided by a court of law that such Prospectus was not so delivered or
sent, and if the Prospectus contained in the Registration Statement as of
the Effective Date would have cured the defect giving rise to such loss,
claim, damage or liability, provided that the Company has delivered such
Prospectus in requisite quantity on a timely basis to permit such delivery
or sending. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
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<PAGE>
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only with
reference to written information relating to such Underwriter furnished to
the Company by or on behalf of such Underwriter through the Representatives
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability
which any Underwriter may otherwise have. The Company acknowledges that
the statements set forth under the heading "Underwriting" in any
Preliminary Prospectus and the Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for
inclusion in any Preliminary Prospectus or the Prospectus, and you, as the
Representatives, confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in
which case the indemnifying party shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
-------- -------
counsel shall be satisfactory to the indemnified party. Notwithstanding
the indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the right
to employ separate counsel (including local counsel), and the indemnifying
party shall bear the reasonable fees, costs and expenses of such separate
counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict
of interest, (ii) the actual or potential defendants in, or targets of, any
such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party,
(iii) the indemnifying party shall not have employed counsel satisfactory
to the indemnified party to represent the indemnified party within a
reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified
-21-
<PAGE>
party to employ separate counsel at the expense of the indemnifying party.
An indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the
Company and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by
the Company and by the Underwriters from the offering of the Securities;
provided, however, that in no case shall any Underwriter (except as may be
-------- -------
provided in any agreement among underwriters relating to the offering of
the Securities) be responsible for any amount in excess of the underwriting
discount or commission applicable to the Securities purchased by such
Underwriter hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the
Underwriters shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and of the Underwriters in connection with the statements or
omissions which resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Company shall be deemed
to be equal to its net proceeds from the offering (before deducting
expenses), and benefits received by the Underwriters shall be deemed to be
equal to the total underwriting discounts and commissions, in each case as
set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Underwriters. The
Company and the Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method
of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d),
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Underwriter within the meaning
of either the Act or the Exchange Act and each director, officer, employee
and agent of an Underwriter shall have the same rights to contribution as
such Underwriter, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, each officer of the Company
who shall have signed the Registration
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<PAGE>
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms
and conditions of this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters shall
--------------------------
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
-------- -------
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representatives shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. Effective Date of Agreement; Termination. This Agreement shall
-----------------------------------------
become effective at such time (after notification of the effectiveness of the
Registration Statement has been released by the Commission) as the Underwriters
and the Company shall agree on the initial public offering price and
underwriting discount per share, unless prior to such time such of the
Underwriters as have agreed to purchase in the aggregate 50% or more of the
Securities shall have given notice to the Company that such Underwriters elect
that this Agreement shall not become effective; provided, however, that the
-------- -------
provisions of this Section 10 and of Section 8 hereof shall at all times be
effective. If this Agreement shall not have become effective prior to 5:00 PM
New York City time, on the seventh full business day after the Effective Date,
this Agreement shall not thereafter become effective unless such period is
extended by agreement among the Underwriters and the Company.
This Agreement shall be subject to termination in the absolute
discretion of the Representatives, by notice given to the Company prior to
delivery of and payment for the Securities, if prior to such time (i) trading in
the Company's Common Stock shall have been suspended by the Commission or NYSE
or PSE or trading in securities generally on the NYSE or the NASDAQ National
Market System shall have been suspended or limited or minimum
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<PAGE>
prices shall have been established on such Exchange or Market System, (ii) a
banking moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the judgment of the Representatives, impracticable or inadvisable to
proceed with the offering or delivery of the Securities as contemplated by the
Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
-------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Notices. All communications hereunder will be in writing and
--------
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telegraphed and confirmed to them, care of Salomon Brothers Inc, at
Seven World Trade Center, New York, New York 10048; or, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at 4900 South
Eastern Avenue, Los Angeles, CA 90040, Attention: John Rangel.
13. Successors. This Agreement will inure to the benefit of and be
-----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
---------------
in accordance with the laws of the State of New York.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.
Very truly yours,
ANTHONY INDUSTRIES, INC.
By:
----------------------------------------
Chairman and Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON BROTHERS INC
A. G. EDWARDS & SONS
SMITH BARNEY INC.
By: Salomon Brothers Inc
By:
----------------------------
Vice President
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<PAGE>
EXHIBIT A
[Letterhead of executive officer or director of Anthony Industries, Inc.]
Anthony Industries, Inc.
Public Offering of Common Stock
-------------------------------
, 19__
Salomon Brothers Inc
A. G. Edwards & Sons
Smith Barney Inc.
As Representatives of the several Underwriters,
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between Anthony
Industries, Inc., a Delaware corporation (the "Company"), and each of you as
representatives of a group of Underwriters named therein, relating to an
underwritten public offering of Common Stock, $_____ par value (the "Common
Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned agrees not to offer, sell or contract to
sell, or otherwise dispose of, directly or indirectly, or announce an offering
of, any shares of Common Stock beneficially owned by the undersigned or any
securities convertible into, or exchangeable for, shares of Common Stock for a
period of [___] days following the day on which the Underwriting Agreement is
executed without your prior written consent.
If for any reason the Underwriting Agreement shall be terminated prior to
the Closing Date (as defined in the Underwriting Agreement), the agreement set
forth above shall likewise be terminated.
Yours very truly,
[Signature of executive officer
or director]
[Name and address of executive
officer or director]
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<PAGE>
[Letterhead Proskauer Rose Goetz & Mendelsohn LLP]
Exhibit 5
April 27, 1995
Anthony Industries, Inc.
4900 South Eastern Avenue
Los Angeles, California 90040
Anthony Industries, Inc.
Registration Statement on Form S-3
(filed April 27, 1995)
-----------------------------
Ladies and Gentlemen:
We have acted as counsel to Anthony Industries, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), of the above-captioned Registration
Statement and the prospectus included therein (the "Prospectus"), relating to
the proposed issuance of up to 4,600,000 shares of the Company's Common Stock,
par value $1.00 per share (the "Shares").
In so acting, we have examined and relied upon the originals, or copies
certified or otherwise identified to your satisfaction, of such records,
documents and other instruments as in our judgment are necessary or appropriate
to enable us to render the opinion expressed below.
Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized and, when issued in accordance with the underwriting agreement
as described in the Registration Statement, will be validly issued, fully paid
and non-assessable.
<PAGE>
Anthony Industries, Inc.
April 27, 1995
Page 2
Our opinion expressed above is limited to the federal law of the United
States of America, the law of the State of New York and the General Corporation
Law of the State of Delaware.
Richard L. Goldberg, Esq., a partner of our firm, is a director of the
Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Opinions" in the Prospectus. In giving such consent, we do not thereby concede
that we are within the category of persons whose consent is required under
Section 7 of the Act or the Rules and Regulations of the Commission thereunder.
Very truly yours,
PROSKAUER ROSE GOETZ & MENDELSOHN LLP
By: /s/ Robert A. Cantone
-----------------------------------
Robert A. Cantone,
a member of the firm
<PAGE>
EXHIBIT 23.1
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated
February 14, 1995 and April 25, 1995, in the Registration Statement of Anthony
Industries, Inc. on Form S-3 and related Prospectus for the registration of
4,600,000 shares of its Common Stock.
We also consent to the incorporation by reference therein of our report dated
March 24, 1995 with respect to the consolidated financial schedules of Anthony
Industries, Inc. for the years ended December 31, 1992, 1993 and 1994 included
in the Annual Report (Form 10-K, Exhibit (23)) for 1994 filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Los Angeles, California
April 25, 1995
<PAGE>
Exhibit 23.3
CONSENT OF PERSON CHOSEN TO BECOME A DIRECTOR
April 27, 1995
Reference is made to the Registration Statement on Form S-3 being filed by
Anthony Industries, Inc., a Delaware corporation (the "Company"), on the date
hereof (the "Registration Statement"). The undersigned consents to be named in
the Registration Statement as a person who will become a director of the
Company.
/s/ Richard M. Rodstein
-----------------------
Richard M. Rodstein
