SEALRIGHT CO., INC.
7101 College Boulevard
Suite 1400
Overland Park, Kansas 66210
Notice of Annual Meeting of Stockholders
To Be Held May 9, 1995
TO ALL STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of
Stockholders (the "Annual Meeting") of Sealright Co., Inc., a
Delaware corporation, will be held the 9th day of May, 1995,
9:00 a.m., at the Atlanta Room, Ballroom level, Hyatt Regency
Crown Center Hotel, 2435 McGee, Kansas City, Missouri, for the
following purposes:
(1) To elect the members of the Board of Directors for
the ensuing year or until their successors are duly
elected and qualified;
(2) To approve the appointment of independent public
accountants;
(3) To approve the Sealright Co., Inc. 1995 Stock Option
Plan; and
(4) To transact such other business as may properly come
before the Annual Meeting or any adjournments or
postponements thereof.
The Board of Directors has fixed the close of business on
March 21,1995 as the record date for the determination of the
stockholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournments or postponements thereof.
BY ORDER OF THE BOARD OF
DIRECTORS
Marvin W. Ozley
Chairman of the Board
Date: March 31, 1995
Important - Your Proxy is Enclosed
You are urged to sign, date and mail your Proxy even
though you may plan to attend the Annual Meeting. No postage is
required if mailed in the United States. If you attend the
Annual Meeting, you may vote by Proxy or you may withdraw your
Proxy and vote in person. By returning your Proxy promptly, a
quorum will be assured at the Annual Meeting, which will prevent
costly follow-up and delays.<PAGE>
SEALRIGHT CO., INC.
7101 College Boulevard
Suite 1400
Overland Park, Kansas 66210
Annual Meeting of Stockholders
To Be Held May 9, 1995
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of
Directors of Sealright Co., Inc., a Delaware corporation (the
"Company"), for use at its Annual Meeting of Stockholders (the
"Annual Meeting") to be held on Tuesday, May 9, 1995, 9:00 a.m.,
at the Atlanta Room, Ballroom level, Hyatt Regency Crown Center
Hotel, 2435 McGee, Kansas City, Missouri, and any adjournments or
postponements thereof. Shares represented by duly executed
Proxies received prior to the Annual Meeting will be voted at the
Annual Meeting. If a stockholder specifies a choice on the form
of Proxy with respect to any proposal set forth therein, the
shares will be voted in accordance with such directions made
therein with respect to the proposals described in this Proxy
Statement. Any person giving a Proxy has the power to revoke it
at any time before it is exercised by giving written notice to
the Secretary of the Company at any time prior to its use.
The Company will bear all the costs of solicitation of
Proxies. In addition to the use of the mails, Proxies may be
solicited by personal contact or telephone by officers or
representatives of the Company, and the Company may reimburse
brokers or other persons holding stock in their names or in the
names of nominees for their expenses in sending proxy soliciting
material to beneficial owners. This Proxy Statement and the
accompanying form of Proxy are first being mailed or given to
stockholders on or about March 31, 1995.
Only stockholders of record at the close of business on
March 21, 1995 will be entitled to notice of, and to vote at, the
Annual Meeting. On the record date, the Company had 11,069,991
shares of common stock issued and outstanding and entitled to
vote. Each outstanding share of common stock is entitled to one
vote on each matter brought to a vote. The affirmative vote of a
plurality of the shares of common stock voting is required for
the election of each nominee for director. The affirmative vote
of a majority of the issued and outstanding shares of common
stock is required for approval of the appointment of the
independent public accountants and the Sealright Co., Inc. 1995
Stock Option Plan.
Management does not know of any matters, other than those
referred to in the accompanying Notice of Annual Meeting of
Stockholders, which are to come before the Annual Meeting. If
any other matters are properly presented to the Annual Meeting
for action, it is intended that the persons named in the
accompanying form of Proxy, or their substitutes, will vote in
accordance with their judgment of the best interests of the
Company on such matters.<PAGE>
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth with respect to the Company's
common stock as of March 1, 1995: (i) the only persons known to
be beneficial owners of more than 5% of the Company's common
stock; (ii) shares beneficially owned by all directors and
nominees; (iii) each of the executive officers named in the
Summary Compensation Table set forth herein; and (iv) shares
beneficially owned by all directors, and executive officers as a
group.
<TABLE>
<CAPTION>
Number of Shares and
Name and Address Nature of of Beneficial Percent
of Beneficial Owner Ownership(1) Of Class
<S> <C> <C>
G. Kenneth Baum 4,155,115(2)(3) 37.53%
120 West 12th Street
Kansas City, Missouri 64105
William D. Thomas 3,812,700(3)(4) 34.44%
120 West 12th Street
Kansas City, Missouri 64105
George K. Baum Group, Inc. 3,412,500(5) 30.83%
120 West 12th Street
Kansas City, Missouri 64105
Ariel Capital
Management, Inc. 2,182.709(6) 19.72%
307 North Michigan Avenue
Chicago, Illinois 60601
Marvin W. Ozley 192,251(7)(8) 1.74%
Donald C. Wooton 70,000(9) *
D. Patrick Curran 1,000 *
Frederick O. DeSieghardt 125,200(10) 1.13%
Robert F. Hagans 5,400(11) *
Arthur Schulze 1,000 *
Charles A. Sullivan 3,000 *
Richard F. Anderson 13,500(12) *
Lawrence D. Boyle 15,000(13) *
Howard E. Smith 15,950(14) *
Directors and Executive 5,020,681(15) 45.08%
Officers as a Group
(19 persons)
* Percentages do not exceed 1% of the issued and outstanding
shares of common stock.
</TABLE>
(1) Calculated in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934. Nature of beneficial
ownership of securities is direct unless indicated
otherwise by footnote. Beneficial ownership as shown in
the table arises from sole voting power and sole
investment power unless otherwise indicated by footnote.
(2) Includes 742,615 shares held indirectly by Mr. Baum as
trustee of a revocable trust established by him.
(3) Also includes 3,412,500 shares owned by George K. Baum
Group, Inc. (Group) Mr. Baum and Mr. Thomas are each a
director, officer and stockholder of Group and have
shared voting and investment power over these shares.
(4) Includes 300,000 shares held directly and 100,000 shares
held by his spouse and 200 shares held by his spouse as
custodian for children, in which he disclaims beneficial
ownership.
(5) Excludes shares owned by officers and employees of Group
and its subsidiaries.
(6) This information is based on an Amendment No. 9 to
Schedule 13G dated February 9, 1995.
(7) Includes 104,500 shares held indirectly by Mr. Ozley as
trustee of a revocable trust established by himself,
41,750 shares held by his spouse as trustee of a
revocable trust established by her; 39,000 shares held in
trust for the benefit of Mr. Ozley's children, of which
his spouse is trustee; and 4,001 shares issuable pursuant
to options which are currently exercisable.
(8) Includes 3,000 shares held by the Sealright Foundation,
Inc., a charitable foundation organized pursuant to
Section 501(c)(3) of the Internal Revenue Code by the
Company, of which Mr. Ozley is a trustee.
(9) Includes 42,750 shares held indirectly by Mr. Wooton as
trustee of a revocable trust established by him; 23,250
shares held in a revocable trust established by his
spouse of which he is a co-trustee; and 2,704 shares
issuable pursuant to options which are currently
exercisable.
(10) Such shares held indirectly by Mr. DeSieghardt as trustee
of a revocable trust established by him.
(11) Such shares held indirectly by Mr. Hagans as trustee of
a revocable trust established by him and 1,200 shares
held by his spouse.
(12) Includes 1,500 shares held jointly with his spouse and
10,062 shares issuable pursuant to options which are
currently exercisable.
(13) Includes 13,705 shares issuable pursuant to options which
are currently exercisable.
(14) Includes 450 shares held jointly with his spouse and
15,500 shares issuable pursuant to options which are
currently exercisable.
(15) Includes 66,337 shares issuable pursuant to options which
are currently exercisable.
Directors
The shares represented by the enclosed Proxy will be voted,
unless otherwise indicated, for the election of the eight
nominees for director named below. The directors elected at the
Annual Meeting will serve for one year or until their successors
are duly elected and qualified. In the unanticipated event that
any nominee for director should become unavailable, the Board of
Directors, at its discretion, may designate a substitute nominee,
in which event such shares will be voted for such substitute
nominee.
Management recommends a vote for the election of the
eight nominees for director named below.
<TABLE>
<CAPTION>
Name of Nominee Director Principal Occupation for Last
for Director Since Age Five Years and Directorships
<S> <C> <C> <C>
Marvin W. Ozley(1) 1986 61 Chairman of the Board and Chief
Executive Officer of the Company
since April 1989 and President
of the Company since January
1988. Since January 1991 he has
been Chairman of the Board and
President of Sealright Packaging
Company and Jaite Packaging, Inc.
(Jaite), subsidiaries of the
Company. He has also been
Chairman of the Board of Venture
Packaging, Inc. (Venture) and
Packaging Industries, Inc.
(Packaging Industries), other
subsidiaries of the Company,
since January 1993 and 1988,
respectively.
G. Kenneth Baum(1) 1983 64 Mr. Baum has been Chairman of the
Board of George K. Baum Group,
Inc., an investment company in
Kansas City, Missouri, since May
1994 and Chairman of the Board of
George K. Baum & Company, an
investment banking firm in Kansas
City, Missouri, from April 1982
until May 1994. Mr. Baum is also
a director of four other publicly
held companies: H & R Block,
Inc., Unitog Company (Unitog),
Interstate Bakeries Corporation
(Interstate Bakeries), and
American City Business Journals,
Inc.
D. Patrick
Curran(2) 1992 50 Chairman of the Board and
President of Curran Companies, a
manufacturer and supplier of
specialty chemicals, with which
he has been associated since
1968. He is also a director of
three other publicly-held
companies: Unitog, Applebee's
International, Inc. and American
Safety Razor Co.
Frederick O.
DeSieghardt 1983 70 Retired; Vice Chairman of the
Board of the Company from
February 1988 until 1993. Mr.
DeSieghardt has been associated
with the Company since September
1964.
<CAPTION>
Name of Nominee Director Principal Occupation for Last
for Director Since Age Five Years and Directorships
<S> <C> <C> <C>
Robert F.
Hagans(1)(2) 1983 68 Mr. Hagans was the Chairman of
the Board of Unitog, a publicly-
held company which is engaged in
the design, manufacture and
rental of business and work
garments, prior to his retirement
in September 1991. Mr. Hagans is
currently a director of Unitog.
Arthur R. Schulze 1993 64 Mr. Schulze was the Vice Chairman
of the Board of General Mills,
Inc. from October 1989 until his
retirement in April 1993 and
Executive Vice President -
Grocery Products from
December 1985 until October 1989.
Mr. Schulze is also a director of
Tennant & Co. and Inter-Regional
Financial Group, Inc.
Charles A.
Sullivan 1992 59 Mr. Sullivan has been the
President and Chief Executive
Officer of Interstate Bakeries
since March 1989 and Chairman of
its Board of Directors since May
1991. From January 1988 to March
1989 he was the Executive Vice
President of Merita/Cotton's
Division of Interstate Brands.
Mr. Sullivan is also a director
of UMB Bank, n.a.
William D.
Thomas(2) 1983 51 Mr. Thomas has been the President
of George K. Baum Group, Inc.
since May 1994 and the Vice
Chairman of George K. Baum &
Company from June 1991 until May
1994. From July 1985 to June
1991 he served as the Executive
Vice President of George K. Baum
& Company. Mr. Thomas is
currently a director of Unitog.
</TABLE>
_________________________
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
The Board of Directors of the Company held five meetings and
acted by unanimous written consent on one occasion during 1994.
No director standing for election at the Annual Meeting attended
fewer than 75% of the total number of meetings of the Board of
Directors and the committees of the Board on which he served
during 1994.
The Compensation Committee held two meetings during 1994.
The functions performed by the Compensation Committee are the
review of salaries of certain officers and bonuses of executive
officers, the administration of the Incentive Compensation Plan,
the Long-Term Incentive Plan and the Stock Option Plans and the
overall administration of the Company's compensation program.
The Audit Committee held two meetings during 1994. The
functions performed by the Audit Committee are review of
significant financial information of the Company, ascertainment
of the existence of an effective accounting and internal control
system, oversight of the audit function and recommendation of the
appointment of the independent public accountants of the Company.
The Company does not have a standing nominating committee.
Executive Officers
The Company's executive officers, in addition to those
executive officers listed in the foregoing table of director
nominees, and its other key employees are as follows:
<TABLE>
<CAPTION>
Name of Non-Director Principal Occupation for
Executive Officers Age Last Five Years
<S> <C> <C>
Howard E. Smith 60 Mr. Smith has been a Senior Vice
President of the Company since
October 1990. From January 1988 to
October 1990 he was Vice President
and General Manager - Central
Division. Mr. Smith is currently
taking a leave of absence due to
health.
Richard F.
Anderson 51 Mr. Anderson has been Senior Vice
President of the Company since
October 1992. From August 1986
through September 1992 he was the
Executive Vice President and General
Manager of Jaite.
Lawrence D. Boyle 52 Mr. Boyle has been Senior Vice
President - Rigid Packaging of the
Company since November 1993. From
May 1989 to November 1993 he was
Vice President and General
Manager - Western Division.
John T. Carper 43 Mr. Carper has been Vice President
of Finance and Chief Financial
Officer of the Company since May
1994. From July 1989 to May 1994,
he was a partner with KPMG Peat
Marwick, LLP, independent public
accountants.
Douglas R. Stay 51 Mr. Stay has been Vice President and
General Manager - Eastern Division
of the Company since October 1990.
From February 1990 to October 1990
he was Assistant General Manager -
Eastern Division. From June 1981 to
February 1990 he was Sales Manager -
Eastern Division.
<CAPTION>
<PAGE>
Name of Non-Director Principal Occupation for
Executive Officersq Age Last Five Years
<S> <C> <C>
David M. Lindley 45 Mr. Lindley has been Vice President
and General Manager - Western
Division of the Company since
January 1994. From November 1991 to
December 1993 he was Manager of
Business Development. He was the
Manufacturing Manager - Central
Division from July 1983 to October
1991.
Thomas L. James 52 Mr. James has been the Vice
President and General Manager of
Jaite since October 1992. From
January 1990 to October 1992 he was
Director of Marketing of the
Company.
William M. Kelly 56 Mr. Kelly has been the Vice
President and General Manager of
Packaging Industries since July
1992. From June 1991 to July 1992
he was Vice President - Technical
Service of Jaite. From
December 1989 to July 1991 he was
Vice President - Manufacturing of
Jaite.
Michael J. Hayes 42 Mr. Hayes has been the Vice
President and General Manager of
Venture since March 1993. From
November 1990 to March 1993 he was
Vice President - Sales of Jaite.
From January 1988 to January 1990 he
was a Regional Sales Manager of
Jaite.
Lou F. Williams 48 Ms. Williams has been Director of
Human Resources of the Company since
October 1991. From April 1986 to
October 1991 she was Manager of
Benefits and Insurance.<PAGE>
Executive Compensation And Other Information
Summary
The following table provides certain summary information
concerning compensation paid or accrued by the Company to or on
behalf of the Company's Chief Executive Officer and each of the
four other most highly compensated executive officers of the
Company whose salary and bonus exceeded $100,000 (determined as
of the end of the last year) for the years ended December 31,
1994, 1993 and 1992:
</TABLE>
<TABLE>
Summary Compensation Table (Part 1 of 2)
Annual Compensation
<CAPTION>
Name and Other Annual
Principal Salary Bonus Compensation
Position Year ($) ($) ($)
<S> <C> <C> <C> <C>
Marvin W.
Ozley, 1994 303,868 132,732 -
Chairman of the 1993 290,820 -0- -
Board, Chief 1992 276,705 95,708 -
Executive Officer
and President(3)
Richard F. 1994 197,240 60,326 -
Anderson, 1993 188,760 -0- -
Senior Vice 1992 175,291 63,714 -
President
Lawrence D. 1994 181,400 66,974 -
Boyle, 1993 143,800 -0- -
Senior Vice 1992 130,380 33,746 -
President
Howard E. Smith, 1994 180,466 61,401 -
Senior Vice 1993 178,345 -0- -
President 1992 163,090 48,448 -
Donald C. 1994 144,830 45,103 -
Wooton, 1993 139,000 -0- -
Vice Pres.- 1992 132,670 34,366 -
Central Div.
Summary Compensation Table (Part 2 of 2)
<CAPTION>
_ Long-Term Compensation
Awards(1) Payouts(2)
Restricted Securities
Stock Underlying LTIP All Other
Awards Options Payouts Compensation
Year ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C>
Marvin W.
Ozley, 1994 -0- -0- -0- 9,147(4)
Chairman of the 1993 -0- -0- -0- 7,432(5)
Board, Chief 1992 -0- -0- -0- 4,033(6)
Executive
Officer
and
President(3)
Richard F. 1994 -0- 5,000 -0- 5,077(7)
Anderson, 1993 -0- 2,000 -0- 17,520(8)
Senior Vice 1992 -0- 6,000 -0- 45,694(9)
President
Lawrence D. 1994 -0- 10,000 -0- 4,817(10)
Boyle, 1993 -0- -0- -0- 6,561(11)
Senior Vice 1992 -0- 2,000 -0- 3,538(12)
President
Howard E. Smith, 1994 -0- 5,000 -0- 5,967(13)
Senior Vice 1993 -0- -0- -0- 5,032(14)
President 1992 -0- 5,000 -0- 5,197(15)
Donald C. 1994 -0- 5,000 -0- 4,401(16)
Wooton, 1993 -0- -0- -0- 4,255(17)
Vice Pres.- 1992 -0- 2,000 -0- 3,894(18)
Central Div.
</TABLE>
____________________
(1) Does not include the earned awards under the Long-Term
Incentive Plan of the Company. See "Long-Term
Incentive Plan."
(2) Does not include the payout (vesting) of the earned
awards under the Long-Term Incentive Plan which
occurred on February 8, 1995. See "Long-Term Incentive
Plan."
(3) On January 31, 1995, the Board of Directors appointed a
Search Committee consisting of certain members of the
Board of Directors to select a new Chief Executive
Officer of the Company.
(4) Company's payments for Long-Term Savings Plan
(successor of the Thrift Plan) ($3,764), Deferred
Compensation (under the Company's Deferred Compensation
Plan) ($3,847) and term life insurance premiums
($1,536).
(5) Company's payments for Thrift Plan ($5,896) and term
life insurance premiums ($1,536).
(6) Company's payments for Thrift Plan ($3,253) and term
life insurance premiums ($780).
(7) Company's payments for Long-Term Savings Plan ($2,910),
Deferred Compensation ($1,873) and term life insurance
premiums ($294).
(8) Company's payments for Thrift Plan ($4,719), term life
insurance premiums ($294) and reimbursement of moving
expenses ($4,802), as well as a benefit plan adjustment
($7,705).
(9) Company's payments for Thrift Plan ($2,274) and
reimbursement of moving expenses ($34,692), as well as
a benefit plan adjustment ($3,450) and a contribution
by Jaite to its 401K plan ($5,278).
(10) Company's payments for Long-Term Savings Plan ($3,750),
Deferred Compensation ($785) and term life insurance
premiums ($282).
(11) Company's payments for Thrift Plan ($3,595), term life
insurance premiums ($294) and reimbursement of moving
expenses ($2,672).
(12) Company's payments for Thrift Plan ($3,538).
(13) Company's payments for Long-Term Savings Plan ($3,502),
Deferred Compensation ($929) and term life insurance
premiums ($1,536).
(14) Company's payments for Thrift Plan ($4,252) and term
life insurance premiums ($780).
(15) Company's payments for Thrift Plan ($4,417) and term
life insurance premiums ($780).
(16) Company's payments for Deferred Compensation ($3,621)
and term life insurance premiums ($780).
(17) Company's payments for Thrift Plan ($3,475) and term
life insurance premiums ($780)
(18) Company's payments for Thrift Plan ($3,600) and term
life insurance premiums ($294).
<TABLE>
<PAGE>
Option Grants, Exercises and Holdings
The following table provides further information concerning
grants of stock options pursuant to the 1987 Stock Option Plan
during 1994 to the named executive officers:
Option Grants In Last Fiscal Year (Part 1 of 2)
<CAPTION>
Individual Grants (1)
Number of
Securities Percent of Total
Underlying Options Granted Exercise or
Options to Employees Base Price Expiration
Name Granted(#) in Fiscal Year ($/Sh) Date
<S> <C> <C> <C> <C>
Marvin W. Ozley, CEO -0- N/A N/A N/A
Richard F. Anderson 5,000(2) 10% 12.75 04/21/04
Howard E. Smith 5,000(2) 10% 12.75 04/21/04
Lawrence D. Boyle 5,000(2) 10% 12.75 04/21/04
5,000(3) 10% 12.75 04/21/04
Donald C. Wooton -0- N/A N/A N/A
Option Grants In Last Fiscal Year (Part 2 of 2)
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term
0% 5%($) 10%($)
<S> <C> <C> <C>
Marvin W. Ozley, CEO N/A N/A N/A
Richard F. Anderson -0- 40,092 101,601
Howard E. Smith -0- 40,092 101,601
Lawrence D. Boyle -0- 40,092 101,601
-0- 40,092 101,601
Donald C. Wooton N/A N/A N/A
</TABLE>
(1) All options were granted on April 21, 1994 with an
exercise price equal to the closing sale price for the
Company's common stock on that date, as reported on the
NASDAQ National Market System. Except in the event of
death or retirement, if any of the named executive
officers ceases to be employed by the Company, his
options shall terminate immediately. Upon a merger or
consolidation in which the Company is not the surviving
corporation, all options outstanding shall be exercisable
immediately prior to such merger or consolidation.
(2) The option to purchase 1,000 shares becomes exercisable
each anniversary date of the date of grant, until fully
vested on April 21, 1999.
(3) The option to purchase 2,500 shares becomes exercisable
each anniversary date of the date of grant, until fully
vested on April 21, 1996.
No options were exercised by any of the named executive
officers during 1994. The following table provides information
with respect to the named executive officers concerning
unexercised options held as of the end of 1994:
<TABLE>
Fiscal Year End Option Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at Fiscal Year-End (#) at Fiscal Year-End ($) (1)
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Marvin W.
Ozley, CEO -0- -0- N/A N/A
Richard F.
Anderson 4,000 9,000 -0- 27,500
Howard E.
Smith 12,500 5,000 -0- 27,500
Lawrence D.
Boyle 9,500 10,000 -0- 55,000
Donald C.
Wooton 2,000 -0- -0- N/A
</TABLE>
(1) Represents the difference between the closing price of
the Company's common stock on December 31, 1994 and the
exercise price of the options.<PAGE>
Long-Term Incentive Plan
In 1992, the Company instituted a Long-Term Incentive Plan
(the "Long-Term Incentive Plan") which provides for the granting
of cash bonuses ("Cash Units") and options ("Options") to acquire
shares of common stock ("Shares") and restricted shares of common
stock ("Restricted Shares") to selected members of Management.
The awards under the Long-Term Incentive Plan were eligible to be
earned at the end of each year in the three-year measurement
period (1992, 1993 and 1994), based upon the degree of attainment
of the Company's target annual earnings per share growth during
each respective year. Following the final year in the
measurement period, the earned awards were distributed (paid out)
to the plan participants pursuant to the terms of the Long-Term
Incentive Plan. On February 8, 1995, the "payout" was effected
in that the Options were granted to the Plan participants. The
Options are exercisable for three years from the date of grant,
at an exercise price of $21.75 per each unit of one Share and
one-half Restricted Share. At the time of the exercise of
Options, Cash Units will be distributed to the participant. The
Restricted Shares are subject to forfeiture upon the occurrence
of certain events for three years from the date of their issuance
and their sale, transfer, pledge, or other disposition is also
prohibited during such three year period. A maximum of 75,000
Shares and 37,500 Restricted Shares are authorized for issuance
under the Options.
On January 24, 1995, the Compensation Committee confirmed
the achievement of the awards under the Long-Term Incentive Plan
and approved their payout on February 8, 1995, since the Company
achieved in 1994 a twenty percent (20%) growth in earnings per
share over 1993. The following table provides information with
respect to the named executive officers concerning their awards
under the Company's Long-Term Incentive Plan for the Company's
performance in 1994:
<TABLE>
Long-Term Incentive Plan - Awards For Last Fiscal Year
<CAPTION>
Number of Shares,
Units or Other Rights
Performance or
Other Period
Until Maturation
Options or Payout(1)
Cash
Units(2) Shares Restricted
Shares
<S> <C> <C> <C> <C>
Marvin W.
Ozley, CEO 3,334 2,667 1,334 1995
Richard F.
Anderson 2,500 2,000 1,000 1995
Howard E.
Smith 1,667 1,333 667 1995
Lawrence D.
Boyle 1,667 1,333 667 1995
Donald C.
Wooton 1,667 1,333 667 1995
</TABLE>
(1) On February 8, 1995, the Options awarded under the Plan
became immediately exercisable. At the time of the
exercise of Options, Cash Units will be issued to the
participant.
(2) Dollar value of Cash Units is determined on the basis of
the Company's stock price.<PAGE>
Retirement Income Plan
The retirement benefits pursuant to the Company's pension
plan are generally based on the average annual compensation of
the highest five consecutive years of annual compensation (salary
and bonus, as identified in the Summary Compensation Table,
above) during the previous ten years of credited service. The
following table sets forth the estimated annual retirement
benefits payable (on a straight-life annuity basis) upon normal
retirement to participating employees in the specified
remuneration and years-of-service classifications. Such
retirement benefits are not subject to reduction for Social
Security benefits. The estimated credited years of service for
the named executive officers based on continued service to normal
retirement age would be: Mr. Ozley, 35 years; Mr. Anderson, 22
years; Mr. Smith, 14 years; Mr. Boyle, 18 years; Mr. Wooton, 35
years.
<TABLE>
Pension Plan Table
<CAPTION>
Remuneration
Years of Service
15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 $18,750 $25,000 $31,250 $37,500 $43,750
$150,000 $22,500 $30,000 $37,500 $45,000 $52,500
$175,000 $26,250 $35,000 $43,750 $52,500 $61,250
$200,000 $30,000 $40,000 $50,000 $60,000 $70,000
$225,000 $33,750 $45,000 $56,250 $67,500 $78,750
$250,000 $37,500 $50,000 $62,500 $75,000 $87,500
$300,000 $45,000 $60,000 $75,000 $90,000 $105,000
$400,000 $60,000 $80,000 $100,000 $120,000 $140,000
$450,000 $67,500 $90,000 $112,500 $135,000 $157,500
$500,000 $75,000 $100,000 $125,000 $150,000 $175,000
</TABLE>
Payment of the specified retirement benefits is contingent
upon continuation of the plans in their present form until the
employee retires and, in the case of those subject to reduction
of benefits under the Internal Revenue Code, selection by the
administrative committee of the Deferred Compensation Plan to
participate in the Company's supplemental executive retirement
provisions under such Deferred Compensation Plan.<PAGE>
Compensation of Directors
During fiscal year 1994, each non-officer director was paid
an annual director's fee of $12,000 and fees of $500 for each
meeting of the Board of Directors or its committees which he
attended. The Company paid a total of $103,750 in directors'
fees in 1994. Officer-directors do not receive annual fees or
fees for attendance at meetings.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of G. Kenneth Baum,
Robert F. Hagans and Marvin W. Ozley. Mr. Ozley, an officer of
the Company in the capacities of Chairman of the Board, Chief
Executive Officer and President, served on the Compensation
Committee for fiscal year 1994 and directly participated in
decisions affecting compensation of other executives. Decisions
affecting Mr. Ozley's compensation were made separately and
exclusively by the other members of the Compensation Committee,
who are outside directors.
There are no Compensation Committee interlocks with other
companies.
Employment Contracts
In May, 1994, the Company entered into a five-year
employment agreement with John T. Carper, the Company's Vice
President - Finance and Chief Financial Officer. Under the
agreement, Mr. Carper's beginning base salary is $160,000. Mr.
Carper also has the right to participate in all benefit programs
and incentive compensation plans that the Company generally makes
available to its executive officers. In addition, Mr. Carper was
granted a ten-year option to purchase 20,000 shares of common
stock at $13.75 per share, the fair market value of the Company's
common stock on the date of grant. The option vests in five
equal annual installments, commencing May 16, 1995, subject to
accelerated vesting in the event of a change of control of the
Company during the term of the employment agreement.
Compensation Committee Report on Executive Compensation
On an annual basis, the Compensation Committee reviews the
salaries and bonuses of the executive officers and other
employees, administers the 1987 Stock Option Plan (the "1987
Plan") and the Long-Term Incentive Plan and oversees the
administration of the Company's compensation program. The
Company has available to it an independent compensation
consultant to aid in focusing and implementing the Company's
compensation policies and objectives.
In accordance with the Securities and Exchange Commission's
rules designed to enhance disclosure of companies' policies
toward executive compensation, the following report is submitted
by the above-listed committee members in their capacity as the
Board's Compensation Committee. The report addresses the
Company's compensation policy as it related to the executive
officers for fiscal 1994.
General Compensation Policy. The Compensation Committee of
the Board of Directors was, and continues to be, guided by a
belief that executive compensation should reflect the Company's
performance (as evidenced by the earnings before interest and
taxes ("EBIT"), earnings per share ("EPS") and market value of
the Company's common stock), while at the same time considering
surrounding competitive pressures, individual performance (as
evidenced by evaluations) and retention of key executive
officers. The Compensation Committee has not yet adopted a
policy with respect to the $1,000,000 limitation on deductibility
of executive compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended, since current compensation
levels fall significantly below that amount.
Fiscal 1994 Compensation. To accomplish this compensation
policy in 1994, the Company's executive compensation integrated
(i) annual base salary, (ii) bonuses under an Incentive
Compensation Plan ("ICP") based on a targeted EBIT or EBIT and
operating income of the respective operating groups, (iii) awards
under a Long-Term Incentive Plan based on a targeted EPS growth
rate, and (iv) stock option grants under the Company's 1987 Plan.
The compensation policies, as implemented, endeavor to enhance
the profitability of the Company (and, thus, stockholder value)
by tying the financial interests of the management with those of
the Company.
Base Salary. As a general matter, an executive officer's
base salary is subjectively positioned so as to reflect the
experience and performance of such executive officer and the
performance of the Company. The Compensation Committee initially
determines the amount of base salary based on factors such as
prior level of pay, quality of resume, responsibilities of
position and salary levels of similarly positioned executives in
other companies. As many of the companies in the Company's peer
group (for purposes of the performance graph, below) are much
larger than the Company, the Compensation Committee does not
compare the salaries of the Company's executives exclusively with
those of its peer group. The Committee believes that such a
comparison would result in overstating the appropriate level of
executive compensation.
The Compensation Committee subjectively grants raises to
each executive's base salary based on, in the order of priority:
(i) published surveys of other executive officer median base
salary increases of manufacturing companies (not just the
companies listed in the peer group for purposes of the
performance graph, below), (ii) overall Company performance
(based on EBIT, or EBIT and operating income, and EPS), and (iii)
in some instances, the executive officer's individual performance
(as evidenced by informal evaluations by other executives and/or
the Board). The surveys referred to in (i) above are produced by
a leading executive compensation publication and reflect the
percentage increases to annual base salary of other manufacturing
companies' executive officers. For 1994, those surveys indicated
a median increase in the annual base salary of approximately
4.5%.
Based on the foregoing, in fiscal 1994, the Compensation
Committee approved base salary increases to executive officers
averaging approximately 4.5%, effective twelve months following
their previous increases.
Incentive Compensation Plan. For its executive officers,
the Company's ICP couples executive cash compensation to the
Company's EBIT or EBIT and operating income of the respective
operating groups. Under the ICP, each participating officer is
assigned a payout percentage ("Payout Percentage") which, when
multiplied by his/her base salary, establishes the amount of
his/her annual bonus, assuming 100% of the target level is
reached. Subject to a threshold and a ceiling, attainment of
greater than (or less than) such target level results in an
increase (or decrease), in each executive's bonus.
For 1994, the executive officers achieved between 62.5%
and 100% of their respective target levels. Each such target
award level was multiplied by their individual Payout Percentages
times their annual base salary to arrive at their 1994 ICP bonus.
Long-Term Incentive Plan. Effective in January 1992, the
Company adopted the nonqualified Long-Term Incentive Plan to
establish a relationship among the Company's performance (as
evidenced by a targeted EPS growth rate), long-term executive
retention and executive compensation. Prior to the effective
date, the Compensation Committee identified certain key
executives for participation in the Long-Term Incentive Plan and
set an annual EPS target for each year of a three-year
measurement period. Following such measurement period the
participants received a payout of cash performance incentives,
nonqualified stock options and restricted shares, based upon the
Company's actual EPS growth during each year of the three-year
measurement period. For further information regarding the awards
and payout under the Long-Term Incentive Plan, see "Long-Term
Incentive Plan," at page 11.
Stock Option Awards. The Compensation Committee also
awards stock options to executive officers under the 1987 Plan or
otherwise. The Committee believes that stock options are an
effective incentive for executives to create value for
stockholders since the value of an option bears a direct
relationship to appreciation in the Company's stock price.
The Compensation Committee subjectively and informally
determines the granting of stock options. In making the
determination, the Committee examines (i) the Company's
performance, as determined by EBIT, EPS and the market price of
its common stock, (ii) the number and exercise price of options
then held by each executive, (iii) the total stock holdings of
the executive officer, (iv) the individual performance of the
executive (as informally evaluated by other executives and/or the
Board), (v) the executive's potential contribution to the
Company, and (vi) the executive's position with the Company. The
Compensation Committee does not separately weigh such criteria,
but rather views the mix of information with respect to each
executive officer.
During 1994, the Compensation Committee granted options
to purchase 42,000 shares of common stock to 5 executive
officers, at an exercise price equal to the fair market value of
the stock on the date of grant.
Chairman and CEO Compensation. Marvin W. Ozley, Chairman
and CEO of the Company, is subject to the same general
compensation package as the other executives.
For fiscal 1994, the Compensation Committee decided to
increase Mr. Ozley's base annual salary effective May 1, 1994 by
4.5%, the average increase granted other executive officers.
Based upon a Payout Percentage of 50%, a bonus of $132,732 was
paid to Mr. Ozley pursuant to the ICP.
During 1994, based upon the total mix of information
available to the Compensation Committee, as noted under "Stock
Option Awards" above, the Committee did not grant any options to
Mr. Ozley.
Summary. The Compensation Committee believes that the
executive officers of the Company are dedicated to achieving
significant improvements in long-term financial performance and
that the compensation policies and programs contribute to
achieving this senior management focus. The Compensation
Committee believes that the compensation levels during fiscal
1994 adequately reflected the Company's compensation goals and
policies.
The Compensation Committee report is submitted by:
G. Kenneth Baum
Robert F. Hagans
Marvin W. Ozley
<PAGE>
Company Performance
The following graph shows a five-year comparison of
cumulative total returns for the Company, the NASDAQ Composite
and an index of peer companies selected by the Company ("new peer
group") and, for comparison purposes, the peer group of the
Company selected for last year's proxy statement ("old peer
group").
<TABLE>
Comparison Of Five-Year Cumulative Total Return
(Sealright Co., Inc., NASDAQ Composite,
new peer group, and old peer group)
Dollars
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Sealright 100 79.61 85.06 92.92 66.07 81.47
NASDAQ 100 81.12 104.14 105.16 126.14 132.44
New Peer
Group 100 89.37 92.31 110.46 111.86 119.4
Old Peer
Group 100 92.52 92.68 111.17 111.34 115.6
</TABLE>
The total cumulative return on investment (change in the
year-end stock price plus dividends reinvested at the ex-dividend
date) for each of the periods for the Company, the new and old
peer groups and the NASDAQ Composite is based on the stock prices
at the end of fiscal year 1989, assuming a $100 investment. The
graph compares the performance of the Company with that of the
NASDAQ Composite and peer companies selected by the Company with
the investment weighted at the beginning of the period based on
market capitalization. The Company added three companies to the
new peer group since publication of the old peer group in last
year's proxy statement. The three companies were added in an
effort to make the peer group more reflective of the Company,
both in relative size and market presence. The performance of
the old peer group is reflected in the graph for comparison
purposes.
The old peer group consists of the following companies:
Bemis Company, Inc., James River Corporation of Virginia,
Liqui-Box, Inc. and Sonoco Products Company. The New Peer Group
consists of the following companies: Bemis Company, Inc., James
River Corporation of Virginia, Kerr Group, Inc., Liqui-Box, Inc.,
Ropak Corporation, Shorewood Packaging Corporation and Sonoco
Products Company. Both the old and new peer groups were
approved by the Compensation Committee.<PAGE>
Relationship With Independent Public Accountants
For 1994, Arthur Andersen LLP audited the consolidated
financial statements of the Company and its subsidiaries.
Representatives of Arthur Andersen LLP will attend the Annual
Meeting, will have an opportunity to make a statement if they
desire, and will be available to respond to questions by
stockholders.
The Board of Directors has selected Arthur Andersen LLP
as independent public accountants of the Company for 1995 and is
therefore asking the stockholders to approve the appointment.
Approval of the 1995 Stock Option Plan
The board of directors is asking the stockholders to
approve the Sealright Co., Inc. 1995 Stock Option Plan (the
"Plan"). The Plan is described briefly below.
Description of the Plan
The Board of Directors believes that the Company's long-
term success is dependent upon its ability to attract and retain
outstanding individuals and to motivate them to exert their best
efforts on behalf of the Company's stockholders. The Board
believes that the Plan will be instrumental in fulfilling these
goals.
The Plan authorizes the grant of incentive stock options
("ISOs") and non-qualified stock options ("NQSOs"). ISOs are
"incentive stock options" as defined by federal tax law
(described below). An NQSO is any option to purchase Company
stock which is not an ISO. ISOs and NQSOs are called "Options."
No options may be granted under the Plan after March 13, 2005.
The Plan is administered by the Compensation Committee
consisting of at least two non-employee directors. Officers and
management employees of the Company and its subsidiaries are
eligible to receive awards. Approximately 50 employees are
eligible to participate in the Plan. Non-employee directors,
including all Compensation Committee members, are ineligible.
The Compensation Committee determines, within the limits of the
Plan, the selection of the participants, allotment of shares,
exercise price (which may not be less than the fair market value
on the date of grant), the vesting schedule and other matters
relating to awards.
There is a $100,000 limit on the value of stock (determined
at the time of grant) covered by ISOs that first become
exercisable by an option holder in any calendar year. An option
which first becomes exercisable in any year and which is in
excess of this limitation, will be an NQSO. Stock options
granted under the Plan are exercisable for a period of up to ten
years from the date of grant and at an exercise price which is
not less than 100% of the fair market value of the common stock
on the date of the grant, except that the term of an ISO granted
under the Plan to any stockholder beneficiary owning more than
10% of the outstanding common stock may not exceed five years and
the exercise price of an ISO granted to such stockholder may not
be less than 110% of the fair market value of the common stock on
the date of the grant. The purchase price must be paid in full
at the time of exercise either in cash or, in the discretion of
the Compensation Committee, in the Company's common stock with an
equivalent market value or in a combination of cash and common
stock.
Options granted under the Plan may contain such provisions
as the Compensation Committee determines regarding the extent, if
any, to which Options may be exercised after termination of
employment, provided that ISOs may not be exercised after three
months after termination of employment or, in case of termination
by reason of death or disability, after twelve months after
termination. Options may not be assigned or transferred other
than by will or by the laws of descent and distribution and,
during the option holder's lifetime, may be exercised only by the
option holder.
In the event the employment of an option holder is
terminated within one year from the date of a "change of control"
of the Company, any unvested Options then outstanding which have
been held by such option holder for at least six months shall
vest immediately and shall be settled by the payment to the
option holder of an amount equal to the excess, if any, of the
fair market value of the shares subject to such Options over the
original exercise price of the Options. Under the Plan, a
"change of control" is deemed to have occurred in the event: (i)
any person, other than the Company, shall acquire more than 25%
of the common stock through a tender offer, exchange offer or
otherwise; (ii) the Company shall be liquidated or dissolved
following a sale of all or substantially all of its assets; or
(iii) the Company shall not be the surviving parent corporation
resulting from any merger or consolidation to which it is a
party.
The Plan authorizes the issuance of up to 700,000 shares
of the Company's common stock. Shares are charged against the
limit only to the extent shares are issued under the Plan; shares
covered by forfeited awards may be re-granted. Appropriate
adjustments to the limit are required for stock splits and
similar events.
The Board of Directors may amend or terminate the Plan
at any time; provided, however, that it may not, without
stockholder approval (i) increase the maximum number of shares
for which Options may be granted under the Plan, (ii) materially
increase the benefits accruing to participating employees under
the Plan, (iii) withdraw the authority to administer the Plan
from a committee whose members meet the requirements of Rule
16b-3 under the Securities Exchange Act of 1934, or (iv) change
the class of employees to whom Options may be granted.
It is the intention that the Compensation Committee grant
options having performance based vesting provisions. The dollar
value and allocations of option awards under the Plan are not
currently determinable as they are dependent upon future
decisions to be made by the Compensation Committee in its sole
discretion, subject to applicable provisions of the Plan. To
date, the Compensation Committee has not granted any options
under the Plan. The last sale price of the Company's common
stock on March 1, 1995, was $17.50 per share.
Federal Income Tax Consequences
ISOs
Under current law an employee generally will not realize
any income upon the grant or exercise of an ISO. An employee's
tax basis in the shares of common stock received upon exercise of
the ISO ("ISO Shares") will be equal to the amount paid for the
shares. If the employee disposes of the ISO Shares in a taxable
transaction at least two years after the date the option is
granted and at least one year after the common stock is
transferred to him or her, the employee will recognize long-term
capital gain in an amount equal to the excess, if any, of the
amount realized in the transaction over the employee's tax basis
in such shares. Under current law, long-term capital gain
generally is taxed at a rate of 28%. The Company will not be
entitled to any tax deduction resulting from the issuance or
exercise of the option.
If the employee disposes of the ISO Shares prior to the
expiration of two years from the date the option is granted, or
one year from the date the common stock is transferred to him or
her (a "disqualifying disposition"), generally any gain realized
in the transaction will be recognized at such time as ordinary
income from compensation to the extent (i) the lesser of (A) the
fair market value of the shares on the date the option was
exercised or (B) the amount realized from such disposition
exceeds (ii) the exercise price of the option. The remaining
gain realized in the disposition, if any, will be recognized as
either short-term or long-term capital gain, depending on the
employee's holding period for the ISO Shares. In this case, the
Company generally may claim an income tax deduction (as
compensation) equal to the amount that is taxable to the employee
as ordinary income under the rules described above with respect
to Non-Qualified Options.
Although not subject to regular income tax upon the
exercise of an incentive stock option, in general, the excess of
the fair market value of the ISO Shares at the time the option is
exercised over the option exercise price will be included as part
of the employee's alternative minimum taxable income. Thus, it
is possible that the exercise of an option may result in an
alternative minimum tax liability to an employee in the year in
which the option is exercised.
If the Compensation Committee approves of an employee's
election to pay all or a portion of the exercise price of an
option with shares of the Company's common stock owned by the
employee, generally the exchange of shares will be nontaxable to
the employee (except for the alternative minimum tax consequences
previously discussed). The employee will take a carry over tax
basis in an identical number of ISO Shares received in the
exchange as he or she tendered, and any remaining consideration
paid upon exercise of the option, will be allocated among the
remaining ISO Shares received by the employee upon the exercise
of the option. However, if the employee used shares received
pursuant to the exercise of an incentive stock option as to which
the employee had not satisfied the applicable two year and one
year holding periods previously described, the exchange would be
treated as a taxable "disqualifying disposition" of the exchanged
shares.
NQSOs
In general, an employee will not recognize income on
account of the grant of a NQSO. Except with respect to employees
who are subject to suit under Section 16(b) of the Securities
Exchange Act of 1934 with respect to purchases and sales of
shares of the Company during any six-month period (the "16(b)
Restriction"), employees will recognize as compensation income
upon the exercise of a NQSO an amount equal to the difference
between the fair market value of shares of common stock received
over the exercise price of the option.
Employees subject to the 16(b) Restriction will recognize,
as compensation income upon the lapse of the 16(b) Restriction,
an amount equal to the difference between the fair market value
of the shares received as of the date the restriction lapses over
the employee's basis in the shares (generally the option exercise
price). However, pursuant to Section 83(b) of the Code a
employee can elect to recognize compensation income immediately
upon exercise of the NQSO, notwithstanding the 16(b) Restriction.
If the Compensation Committee approves of an employee's
election to pay all or a portion of the exercise price of a NQSO
with shares of the Company's common stock owned by the employee,
the exchange of shares will be taxable to the employee under the
rules discussed above as compensation income to the extent the
fair market value of the shares received exceeds the fair market
value of the tendered shares and any additional cash paid in
connection with the exercise of the NQSO. The employee will take
a carry over tax basis in an identical number of shares received
in the exchange as he or she tendered, and any remaining
consideration paid upon exercise of the NQSO, will be allocated
among the remaining shares received by the employee. However, if
the employee used shares received pursuant to the exercise of an
ISO as to which the employee had not satisfied the applicable two
year and one year holding periods described above, the exchange
will be treated as a taxable "disqualifying disposition" of the
exchanged shares.
In general, the Company will be permitted to deduct as
compensation paid, the amount includable in the employee's income
as described above. However, in the event that the NQSO become
exercisable on account of a change in control of the Company, a
portion of the Company's deduction upon the exercise of such
options may be disallowed pursuant to the "golden parachute"
provisions of the Code. If such provisions are applicable, the
employee would pay an excise tax equal to 20% of the amount
disallowed the Company as a deduction.
Vote Required for this Proposal
The affirmative vote of a majority of the shares of common
stock represented and entitled to vote at the annual meeting
is required for approval of the Plan. Therefore, an abstention
with respect to the Plan is in effect a vote against the
proposal.
The Board of Directors recommends that you vote FOR
approval of the Sealright Co., Inc. 1995 Stock Option Plan.
Stockholder Proposals
In the event any stockholder intends to present a proposal
at the Annual Meeting of Stockholders to be held in 1996, such
proposal must be received by the Company, in writing, on or
before December 14, 1995, to be considered for inclusion in the
Company's next Proxy Statement.
Voting Proxies and Other Matters
Proxies will be voted in accordance with the choices
specified on the form of proxy. If no choice is specified,
shares will be voted: (i) "FOR" the nominees listed on the Proxy
and in this Proxy Statement, (ii) "FOR" approval of the
appointment of Arthur Andersen LLP as independent public
accountants for the Company for 1995, and (iii) "FOR" approval of
the Company's 1995 Stock Option Plan.
Management of the Company does not intend to present any
business to the Annual Meeting except as indicated herein and
presently knows of no other business to be presented at the
Annual Meeting. Should any other business come before the Annual
Meeting, the persons named in the accompanying form of Proxy will
vote the Proxy in accordance with their judgment of the best
interests of the Company on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
Marvin W. Ozley,
Chairman of the Board
March 31, 1995.
SEALRIGHT CO., INC. 1995 STOCK OPTION PLAN
_______________
Section I. Purpose
The purpose of this Plan is to provide an incentive and to
encourage ownership of the Company's stock by the grant of stock
options to certain "Key Employees" of the Company or its
subsidiaries. It is intended that some options granted pursuant
to the Plan may qualify as Incentive Stock Options ("ISO's"), as
defined in Section 422(b) of the Internal Revenue Code of 1986,
as amended ("Code"), and some options granted pursuant to the
Plan may not qualify as ISO's and will be non-qualified stock
options ("NQSO's").
Section II. Definitions
A. "Board of Directors" means the board of directors of the
Company.
B. "Common Stock" means shares of the common stock
(including treasury stock), par value $.01 per share, of the
Company.
C. "Company" means Sealright Co., Inc. or any successor
thereto.
D. "Committee" means the compensation committee established
by the Board of Directors of the Company.
E. "Disability" means inability of a Participant to engage
in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last
for a continuous period of not less than 12 months. A
Participant shall not be considered to be disabled unless the
Participant furnishes the Company proof of the existence thereof
in such form and manner, and at such times, as the Committee may
require.
F. "Fair Market Value", as of a given date, means the fair
market value of one share of Common Stock as determined by the
Committee in accordance with procedures established by the
Committee and in accordance with the provisions of the Code and
the regulations thereunder.
G. "Key Employee" means a person who is employed in a
position of managerial responsibility by the Company or a
Subsidiary. A non-employee member of the Board of Directors of a
Subsidiary can not be a Key Employee.
H. "Parent" means any corporation (other than the Company
or a Subsidiary) in an unbroken chain of corporations ending with
the Company if at the time of the grant of an option each of the
corporations, other than the Company or a Subsidiary, owns stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
I. "Participant" means a Key Employee who is granted a
stock option hereunder.
J. "Plan" means the Sealright Co., Inc. 1995 Stock Option
Plan.
K. "Subsidiary" means any corporation, other than the
Company, in an unbroken chain of corporations beginning with the
Company if, at the time of grant of an option hereunder, each of
the corporations, other than the last corporation in the unbroken
chain, owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the
other corporations in such chain.
L. "Ten Percent Shareholder" means a person who owns, on the
date of grant of an ISO, more than 10% of the total combined
voting power of all classes of stock of the Company, or its
Parent or Subsidiary
Section III. Stock
The stock which may be granted under the Plan shall not
exceed, in the aggregate, 700,000 shares of the Company's Common
Stock; provided, however, the maximum number of shares with
respect to which options may be granted under the Plan during any
calendar year to any eligible employee shall not exceed 10% of
such amount. Such shares may be, in whole or in part, as the
Board of Directors shall from time to time determine, authorized
but unissued shares, or issued shares which shall have been
reacquired by the Company. If an option expires or is terminated
or surrendered without having been fully exercised, the
unpurchased shares of Common Stock subject to the option shall
again be available for grant under this Plan.
Section IV. Eligibility
A stock option may be granted under the Plan only to a Key
employee.
Section V. Stock Options
A. Option Price. Except as provided below, the purchase
price of Common Stock under each ISO and NQSO granted hereunder
shall not be less than one hundred percent (100%) of the Fair
Market Value of the Common Stock at the close of market on the
day of grant of the option. The purchase price of Common Stock
under each ISO granted to a Ten Percent Shareholder shall not be
less than 110% of the Fair Market Value of the Common Stock at
the close of market on the day prior to the grant of the option.
B. Term and Exercise of Options. Except as provided below,
the term of each option shall not be more than ten (10) years
from the date of granting thereof. The term of each ISO granted
to a Ten Percent Shareholder shall not be more than five (5)
years from the date of granting thereof. In no case may an
option be exercised within six months of the date of the granting
thereof. Within such limits, options will be exercisable at such
time or times, and subject to such restrictions and conditions,
as the Committee shall, in each instance, approve, which need not
be uniform for all Participants; provided, however, that except
as provided in Subsection D of this Section and Section X, no
option may be exercised at any time unless the Participant is
then an employee of the Company or a Subsidiary and has been so
employed continuously since the granting of the option or was an
employee of the Parent of the Company at the time of grant and
has been continuously employed since that time by either such
Parent or by the Company or by a Subsidiary.
C. Non-Transferability of Options. Each option granted
under the Plan shall by its terms be non-transferable otherwise
than by will or by the laws of descent and distribution, and an
option may be exercised, during the lifetime of the Participant,
only by the Participant.
D. Termination of Employment. Subject to the restrictions
on the Optionee's exercise of an option described in Subsection B
of this Section and the provisions of Subsection G of this
Section, options may contain such provisions as the Committee
shall determine regarding the extent (if any) to which options
may be exercised after termination of employment; provided,
however, that ISO's shall be subject to the following
restrictions:
(a) If a Participant terminates employment for any
reason other than death or Disability, the Participant may not in
any event exercise any ISO held by such Participant after the
date which is three (3) months after the date of the
Participant's employment termination.
(b) If a Participant's employment is terminated by
reason of death or Disability, the Participant or the personal
representative of the Participant may not in any event exercise
an ISO after the date which is twelve (12) months after the date
of such termination._
E. Leaves of Absence. The option agreements issued
pursuant to this Plan may contain such provisions as the
Committee shall determine with respect to approved leaves of
absence.
F. Payment of Option Price. The purchase price is to be
paid in full upon the exercise of an option, either (i) in cash;
or (ii) in the discretion of the Committee by the tender to the
Company of shares of the Common Stock owned by the Participant
and registered in the Participant's name having a Fair Market
Value equal to the cash exercise price of the option being
exercised; or (iii) in the discretion of the Committee, by any
combination of the payment methods specified in clauses (i) and
(ii) hereof. The proceeds of sale of stock subject to option are
to be added to the general funds of the Company, if cash, or to
the shares of the Common Stock held in treasury, if shares of
Common Stock, and used for the corporate purposes of the Company
as the Committee shall determine.
G. Limitation on Exercise of Options. The maximum
aggregate Fair Market Value (determined at the time an option is
granted) of the Common Stock with respect to which ISO's are
exercisable for the first time by any Participant during any
calendar year (under all plans of the Company and its Parent and
Subsidiaries) shall not exceed $100,000. If the provisions of
this Section limit the exercisability of certain ISO's which
would otherwise become exercisable on account of an event
described in Subsection D of this Section or Section X, the
Committee, in its sole discretion, shall determine the times at
which such ISO's become exercisable so that the provisions of
this Subsection G are not violated; provided that in no event
shall any ISO be exercisable more than ten (10) years from the
date of granting thereof (five (5) years in the case of ISO's
granted to Ten Percent Shareholders).
Section VI. Administration
This Plan shall be administered by the Committee. Subject
to the express provisions of this Plan, the Committee shall have
complete authority to:
A. determine the individuals to whom and the time or
times when options shall be granted.
B. determine the number of shares to be subject to each
option and the terms and provisions including the qualified
status of each option.
C. interpret the Plan.
D. prescribe, amend and rescind rules and regulations
relating to the Plan.
E. cancel, with the consent of a Participant, any
option previously granted to such Participant and to grant a new
option in place thereof; and
F. make all determinations not specifically set forth
in (A) through (E) above which it considers necessary or
advisable for the administration of this Plan.
All determinations by the Committee with respect to (A)
through (F) above shall be final. In the event the Company or
any Subsidiary enters into a transaction described in Section
424(a) of the Code with any other corporation, the Committee may
grant options to employees or former employees of such
corporation in substitution of options previously granted to them
upon such terms and conditions as shall be necessary to qualify
such grant as a substitution described in Section 424(a) of the
Code.
Section VII. Committee
The Committee shall at all times be constituted to comply
with the requirements of Rule 16 b-3 under the Securities
Exchange Act of 1934, as the same may from time to time be
amended. As of the date of adoption of this Plan by the Board of
Directors of the Company, Rule 16 b-3 requires that the Committee
shall consist of two (2) or more members of the Board of
Directors who were not at anytime within one year prior to their
appointment as Committee members and are not during such service
granted or awarded equity securities pursuant to this Plan or any
other plan of the Company or any affiliate of the Company (as
defined in the Securities Exchange Act of 1934) except as
permitted by Rule 16 b-3. The members of the Committee shall be
appointed by and shall serve at the pleasure of the Board of
Directors, which may from time to time appoint members in
substitution for members previously appointed and fill vacancies,
however caused, in the Committee. Each member shall also be an
"outside director" within the meaning of Section 162(m) of the
Code. The Committee may select one of its members as its
Chairman and shall hold its meetings at such times and places as
it may determine. A majority of its members shall constitute a
quorum. All recommendations by the Committee shall be made by a
majority of its members.
Section VIII. Effect of Change in Stock
Notwithstanding any other provision in the Plan, if there is
any change in the Common Stock of the Company by reason of stock
dividends, spinoffs, split ups, recapitalizations, mergers,
consolidations, reorganizations, combinations or exchanges of
shares and the like, the number and class of shares available for
grants of options, the number of shares subject to any
outstanding options and the price thereof, as applicable, shall
be adjusted to the same proportionate number and class of shares
an price as in effect before such change.
Section IX. Amendment or Termination
Unless this Plan shall theretofore have been terminated as
hereinafter provided, this Plan shall terminate, and no stock
option shall be granted hereunder, after ten (10) years from the
date of its adoption by the Board of Directors. Any stock
options outstanding at the termination of this plan shall
continue in full force and effect and shall not be affected by
such termination of this Plan. The Board of Directors of the
Company may, at any time prior to that date, terminate this Plan
or make such modifications of the Plan as it may deem advisable;
provided, however, that the Board of Directors may not, without
further approval by the holders of the Common Stock of the
Company, (a) increase the maximum number of shares for which
options may be granted (except under the anti-dilution provisions
in Section VIII), (b) change the class of employees to whom
options may be granted, (c) withdraw the authority to administer
the Plan from a committee whose members meet the requirements of
Section VII or (d) materially increase the benefits accruing to
Participants.
Section X. Change of Control
In the event that:
A. any person, other than the Company, shall acquire
more than 25% of the Common Stock through a tender offer,
exchange offer or otherwise; or
B. the Company shall be liquidated or dissolved
following a sale of all or substantially all of its assets;
or
C. the Company shall not be the surviving parent
corporation resulting from any merger or consolidation to
which it is a party,
then, if a Participant's employment with the Company or a Parent
or Subsidiary is voluntarily or involuntarily terminated within
one year after any such event, any then outstanding stock option
held by such Participant for a period of not less than six months
shall immediately mature and vest in full and any such stock
option shall be settled by the payment to such Participant of an
amount equal to the excess, if any, of the aggregate Fair Market
Value of the shares subject thereto on the Special Maturity Date,
as hereinafter defined, over the aggregate exercise price of such
option; provided, however, that the Board of Directors may, by
unanimous resolution adopted prior to an event described in
clause (C) above, provide that such maturity shall not result
from an event in clause (C) above. For purposes of an event
specified in clause (A) above, the Special Maturity Date for
purposes hereof shall be the date on which the Common Stock had
the highest Fair Market Value during the period in which the
tender or exchange offer was outstanding, or, in the event no
tender or exchange offer was outstanding, the date the person has
first acquired, in the aggregate, 25% of the Common Stock. For
purposes of an event specified in clause (B) or (C), the Special
Maturity Date shall be the effective date of the liquidation,
dissolution, merger or consolidation. Settlement shall be made
in cash within not less than five (5) days following the
Participant's termination of employment.
Section XI. Withholding
The Company, at the time any distribution is made under this
Plan, whether in cash or in shares of stock, may withhold from
such payment any amount necessary to satisfy Federal and state
income tax withholding requirements with respect to such
distribution. Such withholding may be in cash or in shares of
stock.
Section XII. Miscellaneous
A. Rights to Continued Employment. Nothing in this Plan or
in any option granted pursuant to this Plan shall confer on any
individual any right to continue in the employ of the Company or
a Subsidiary or interfere with the right of the Company or a
Subsidiary to terminate the individual's employment at any time.
B. Retirement Plan Rights. Benefits received under this
Plan by a Participant shall not affect or be used in the
calculation of the Participant's pension or other retirement
benefits under any other plan maintained by the Company.
C. Investment Undertakings. Until and unless the issuance
of shares of Common Stock pursuant to this Plan shall have been
registered pursuant to the Securities Act of 1933 and applicable
state securities laws, each Participant acquiring shares of
Common Stock under this Plan may be required, as a condition
precedent to such issuance, to execute and deliver to the Company
a letter or certificate containing such investment
representations, agreements restricting sale (including, without
limitation, provision for stop transfer orders and restrictive
legend on stock certificates) and confirmation of other relevant
facts to support any exemption from the registration requirements
under the Securities Act of 1933 and such state securities laws
on which the Company intends to rely, all as shall be deemed
reasonably necessary by counsel for the Company and in such form
as such counsel shall determine.
Section XIII. Effectiveness of the Plan
This Plan will be effective upon adoption by the Board of
Directors of the Company, subject, however, to its approval by
the stockholders of the Company given within 12 months after the
date the Plan is adopted by the Board of Directors, at a regular
meeting of the stockholders or at a special meeting of the
stockholders duly called and held for such purpose. Grants of
options made prior to stockholder approval shall be subject to
the obtaining of such approval, and if such approval is not
obtained as aforesaid, such grants shall not be effective for any
purpose.
The foregoing Plan was adopted by the Board of Directors of
the Company on March 13, 1995 and approved by the stockholders of
the Company on ______________________.
Sealright Co., Inc.
By___________________________
__________________________________
Attest
SEALRIGHT CO., INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 1995
THIS PROXY AND EACH OF THE PROPOSALS ARE SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Marvin W. Ozley and John T.
Carper, jointly and individually, as Proxies, each with full
power of substitution, and hereby authorizes them to represent
and to vote, as designated below, all the shares of common stock
of Sealright Co., Inc. which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders
to be held on May 9, 1995, or any adjournments or postponements
thereof.
1. Election of Directors
( ) FOR ALL NOMINEES LISTED BELOW ( ) WITHHOLD AUTHORITY
(except as marked to the to vote for all
contrary below). nominees listed
below.
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee strike a line through the nominee's name)
MARVIN W. OZLEY, G. KENNETH BAUM, D. PATRICK CURRAN,
FREDERICK O. DESIEGHARDT, ROBERT F. HAGANS,
ARTHUR R. SCHULZE, CHARLES A. SULLIVAN, and WILLIAM D. THOMAS.
2. APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR 1995.
( )FOR ( )AGAINST ( )ABSTAIN
3. APPROVAL OF THE SEALRIGHT CO., INC. 1995 STOCK OPTION PLAN.
( )FOR ( )AGAINST ( )ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the Annual
Meeting.
(Please see reverse side)
<PAGE>
SEE REVERSE SIDE FOR MATTERS TO BE VOTED ON.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. NONE OF
THE PROPOSALS ARE RELATED TO OR CONDITIONED ON THE APPROVAL, OF
ANY OTHER PROPOSAL. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR ALL NOMINESS FOR DIRECTOR AND FOR PROPOSAL 2 AND 3.
Please mark, date, sign and return this proxy card by mail in the
enclosed, postage prepaid envelope.
Dated:_______________________, 1995
___________________________________
Signature
___________________________________
Signature
(Please sign exactly as name appears on
stock certificate. Where stock is
registered jointly, all owners must sign.
Corporate owners should sign full
corporate name by an authorized person.
Executors, administrators, trustees or
guardians should indicate their status
when signing.)
[TEXT]
_________________________________________________________________
(Dollar amounts in millions except per share data)
<TABLE>
<CAPTION>
As of and For the Years Ended December 31, 1994 1993 %Change
<S> <C> <C> <C>
Net Sales $295.1 $275.7 + 7%
Operating Income 27.2 24.6 +11
Net Income 13.3 11.1 +20
Earnings Per Share $1.20 $1.00 +20%
Total Assets $241.4 $214.3 +13%
Working Capital 39.9 44.3 -10
Stockholders' Equity 112.9 104.6 + 8
Capital Expenditures 44.4 26.3 +69
</TABLE>
=================================================================
FINANCIAL INFORMATION
(In thousands, except per share data)
For the Years
Ended December 31, 1994 1993 1992 1991 1990
FIVE-YEAR SUMMARY
INCOME STATEMENT DATA
Net sales $295,069 $275,665 $263,778 $258,349 $205,861
Operating income 27,240 24,621 31,372 32,578 28,258
Income before
cumulative effect
of accounting
changes 13,335 11,085 16,143 15,921 15,697
Cumulative effect of
accounting changes -- -- 2,416 -- --
Net income 13,335 11,085 13,727 15,921 15,697
Earnings per share 1.20 1.00 1.24 1.44 1.42
Cash dividends declared
per share .46 .445 .41 .37 .30
Average Number of shares
outstanding 11,075 11,075 11,090 11,058 11,045
BALANCE SHEET DATA
Total assets $241,374 $214,266 $191,218 $159,555 $151,689
Long-term debt 74,135 62,271 50,833 39,801 43,851
Working capital 39,902 44,335 38,831 34,812 30,640
Stockholders' equity 112,892 104,647 98,429 89,217 77,213
The Company acquired Jaite Packaging, Inc. on December 28, 1990.
The 1990 income statement data does not include the effects of the
acquisition. The Company acquired Venture Packaging, Inc. on
December 31, 1992. The 1992 income statement data does not
include the effects of the acquisition (Note 9).
MANAGEMENT'S DISCUSSION AND ANALYSIS
(The following table presents the statement of income expressed
in terms of percent.)
RESULTS OF OPERATIONS
Percentage of Net Sales
Year Ended December 31 1994 1993 1992
Net sales 100.0% 100.0% 100.0%
Cost of sales 78.1 78.5 75.2
Gross profit 21.9 21.5 24.8
Selling, general and
administrative expenses 12.7 12.6 12.3
Write down of plant facilities
to net realizable value -- -- .6
Operating income 9.2 8.9 11.9
Interest expense 1.1 1.3 1.1
Other expense .5 .6 .6
Income before income taxes and
cumulative effect of
accounting changes 7.6 7.0 10.2
Cumulative effect of accounting
for income taxes and
postretirement benefits -- -- .9
Provision for income taxes 3.1 2.9 4.1
Net income 4.5% 4.1% 5.2%
=================================================================
=======
1994 Compared with 1993
Net sales for 1994 totaled $295.1 million, representing an
increase of $19.4 million, or 7%, over net sales of $275.7
million in 1993. The increase consists of a 7% increase in both
the Rigid Packaging Group and the Flexible Packaging Group.
Gross profit for 1994 increased by $5.4 million, or 9.1%, to
$64.8 million, or 21.9% of net sales, compared with $59.4
million, or 21.5% of net sales in 1995. The modest increase in
gross profit percentage was primarily due to the increase in
volume, which resulted in greater absorption of fixed cost as
well as continuous improvement and other productivity efforts
throughout the year.
Selling, general and administrative expenses for 1994 were $37.5
million, or 12.7% of net sales, compared with $34.8 million, or
12.6% of net sales, in 1993. Overall selling, general and
administrative expenses were controlled, with the net increase of
$2.7 million primarily attributable to the following
non-recurring NLEA related expenses of $1.1 million; increased
costs of employee retirement benefits of $.6 million; and
officers' and key employee bonuses under the incentive
compensation plan and long term incentive plan of $1.4
million. The effect of these increases was reduced by a decrease
in other selling, general and administrative expenses.
Interest expense for 1994 compared with 1993 decreased $430,000,
or 11.8%. While total borrowings have increased, the average
interest rate has decreased slightly. However, capitalized
interest has significantly increased due primarily to the
construction of the new Central Division manufacturing plant.
Total interest expense for 1994 was $3.2 million, net of
capitalized interest of $2.0 million.
Income tax expense for 1994 has been provided at a 40.3%
effective tax rate, based upon the taxable income of the Company,
compared with 42.1% in 1993.
1993 Compared with 1992
Net sales for 1993 totaled $275.7 million, an increase of $11.9
million (4.5%) over 1992. The December, 1992 acquisition of
Venture Packaging, Inc. (Venture) made a significant contribution
to the increase which was partially offset by volume decreases
and competitive pricing pressures throughout the year. Within
the Rigid Packaging Group, overall sales were down 6.5%. In the
paper-related side of the business, volume was down approximately
12%, while plastic products enjoyed a growth of approximately
16%.
The gross profit percentage decrease was a reflection of the
competitive pricing pressures as well as results from a larger
portion of the business in areas with a lower return.
Selling, general and administrative expenses increased
approximately $2.4 million as a result of the addition of
Venture, offset by a decrease in selling, general and
administrative expenses throughout the remaining divisions of the
Company. Most notably, these reductions occurred in workers'
compensation expense due to 1992 having been burdened with a
catch-up expense of $830,000, a reduction in professional fees
incurred and a curtailment of traveling expenses. Also, due to
the 1993 performance, management bonuses were not paid.
Interest expense for 1993 compared with 1992 increased by
$804,000, or 28.3%, due to additional borrowings to finance the
acquisition of Venture. Total interest expense for 1993 was $3.7
million, net of capitalized interest of $774,000.
The Company adopted Statement of Financial Accounting Standards
(SFAS) 109, "Accounting for Income Taxes", effective January 1,
1992. For further discussion of SFAS 109, refer to Footnote 2
to the Consolidated Financial Statements. The combined
effective tax rate for 1993 was 42.1% compared with 40.7% in
1992.
The Company also adopted Statement of Financial Accounting
Standards (SFAS) 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", effective January 1, 1992.
Further discussion of this adoption is included in Footnote 7 to
the Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed operations with internally
generated funds and available borrowings under its bank credit
agreement. Cash provided by operating activities during 1994 was
$25.7 million, a decrease of $2.8 million from 1993. This
decrease was primarily attributable to increased working capital
requirements resulting from increased sales and production volume
levels. Working capital was $39.9 million at December 31, 1994,
compared with $44.3 million at December 31, 1993. The decrease
primarily resulted from increases in accounts receivable and raw
and finished goods inventory levels.
During 1994, the Company made capital expenditures of $44.4
million, compared with $26.3 million in 1993. In 1994, the
Company made capital expenditures of $20.0 million in connection
with the new Central Division manufacturing plant in DeSoto,
Kansas. The balance of capital expenditures during 1994 was used
for equipment, process improvements and modernization projects.
The Company expects to make approximately $25.0 million of
capital expenditures in 1995.
During 1993, long term debt was issued through a private
placement of $35.0 million at a fixed rate of 6.75% over 15
years. Part of the funds was used to replace the then-existing
bank borrowings for the 1992 purchase of Venture. The remaining
amounts were utilized in 1994 to fund the construction of the new
Central Division manufacturing plant.
During 1994, the Company entered into a new credit agreement with
its bank which allows the Company to borrow up to $40.0 million
due October 31, 1996. Borrowings under the bank credit agreement
bear interest rates at the bank's prime interest rate less .5%,
or LIBOR plus .5%, at the option of the Company. The agreements
governing the Company's new credit agreement and $59.8 million in
senior notes contain a number of covenants.
At December 31, 1994, the Company had borrowed $18.5 million
under the bank credit agreement, with available credit under the
agreement of $21.5 million. Total indebtedness at December 31,
1994 was $80.9 million, 76.2% fixed average interest rate of 7.3%
and the remaining 23.8% has a variable average interest rate of
7.1%. The Company anticipates that its operating cash flow and
amounts available under the bank credit agreement will be
adequate to fund capital expenditures and working capital
requirements during 1995.
CONSOLIDATED BALANCE SHEETS (In thousands)
As of December 31 1994 1993
ASSETS
CURRENT ASSETS
Cash $ 1,057 $ 2,289
Short-term investments -- 10,500
Accounts receivable, less allowance
for doubtful accounts of $300
in 1994 and 1993 25,281 18,394
Inventories (Note 1) 46,969 39,974
Other current assets 2,003 2,130
Total current assets 75,310 73,287
PROPERTY, PLANT AND EQUIPMENT (Notes 1 & 3)
Land 8,027 7,977
Buildings and improvements 51,105 30,477
Machinery and equipment 124,925 109,454
Furniture and fixtures 11,492 9,356
195,549 157,264
Less--Accumulated depreciation 64,031 53,046
Property, plant and equipment, net 131,518 104,218
EQUIPMENT LEASED TO CUSTOMERS (Note 1) 36,684 33,375
Less--Accumulated depreciation 19,654 17,296
Equipment leased to customers, net 17,030 16,079
OTHER ASSETS
Excess of purchase price over fair value
of net assets acquired (Notes 1 & 9) 6,541 6,986
Intangibles (Notes 1 & 9) 8,367 10,179
Prepaid Pension (Note 6) 2,608 3,517
Total other assets 17,516 20,682
Total assets $241,374 $214,266
=================================================================
As of December 31 1994 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt (Note 3) $ 6,733 $ 6,812
Note payable 58 158
Accounts payable 15,929 12,245
Accrued vacation 3,306 3,291
Accrued workers' compensation reserve 2,473 2,055
Deferred Income Taxes (Note 2) 1,684 1,644
Other accrued liabilities 5,225 2,747
Total current liabilities 35,408 28,952
LONG-TERM DEBT (Note 3) 74,135 62,271
DEFERRED INCOME TAXES (Note 2) 16,212 15,048
POSTRETIREMENT BENEFITS (Note 7) 2,215 2,315
PENSION LIABILITY (Note 6) 512 1,033
COMMITMENTS (Note 4) -- --
STOCKHOLDERS' EQUITY (Notes 1, 3 and 8)
Common stock, par value $.10
Shares authorized: 20,000,000;
Shares issued and outstanding:
11,063,127 at December 31, 1994
and 1993, respectively 1,106 1,106
Additional paid-in capital 14,747 14,747
Retained earnings 97,039 88,794
Total stockholders' equity 112,892 104,647
Total liabilities and stockholders' equity $241,374 $214,266
=================================================================
The accompanying notes are an integral part of these balance
sheets.
CONSOLIDATED STATEMENTS OF INCOME (In thousands)
For the Years Ended December 31 1994 1993 1992
NET SALES (Note 1) $295,069 $275,665 $263,778
COST OF SALES 230,306 216,294 198,476
Gross Profit 64,763 59,371 65,302
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 37,523 34,750 32,344
WRITE-DOWN OF PLANT FACILITIES TO
NET REALIZABLE VALUE -- -- 1,586
Operating Income 27,240 24,621 31,372
OTHER EXPENSES:
Interest (Notes 1, 3 and 5) 3,218 3,648 2,844
Other 1,671 1,830 1,650
Total Other Expenses 4,889 5,478 4,494
Income before cumulative effect
of accounting changes and
provision for income taxes 22,351 19,143 26,878
PROVISION FOR INCOME TAXES (Note 2) 9,016 8,058 10,735
Income before cumulative effect
of accounting changes 13,335 11,085 16,143
Cumulative effect of accounting
for income taxes (Note 2) -- -- 1,143
Cumulative effect of accounting
for postretirement benefits,
net of income taxes (Note 7) -- -- 1,273
NET INCOME $ 13,335 $ 11,085 $13,727
=================================================================
EARNINGS PER SHARE (Note 1)
Income before cumulative
effect of accounting changes $1.20 $1.00 $1.45
Cumulative effect of accounting
changes -- -- .21
NET INCOME PER SHARE $1.20 $1.00 $1.24
=================================================================
The accompanying notes are an integral part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands)
Additional
Common No. of Paid-In Retained
Stock Shares Capital Earnings
Total
For the Years Ended December 31
BALANCE, December 31, 1991 $1,106 11,057 $14,673 $73,438 $89,217
Net income -- -- -- 13,727 13,727
Exercise of stock options
(Note 8) * 2 19 -- 19
Dividends declared ($0.41
per share) -- -- -- (4,534) (4,534)
BALANCE, December 31, 1992 $1,106 11,059 $14,692 $82,631 $98,429
Net income -- -- -- 11,085 11,085
Exercise of stock options
(Note 8) * 4 55 -- 55
Dividends declared ($0.445
per share) -- -- -- (4,922) (4,922)
BALANCE, December 31, 1993 $1,106 11,063 $14,747 $88,794 $104,647
Net income -- -- -- 13,335 13,335
Dividends declared ($0.46
per share) -- -- -- (5,090) (5,090)
BALANCE, December 31, 1994 $1,106 11,063 $14,747 $97,039 $112,892
========================================================================
The accompanying notes are an integral part of these statements.
*Par value of common stock issued rounds to less than $1,000.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOW (NOTE 1) (In thousands)
For the Years Ended December 31 1994 1993 1992
CASH FLOW FROM OPERATING ACTIVITIES
Net income $13,335 $11,085 $13,727
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 17,561 15,653 13,386
Deferred tax provision 1,245 2,699 175
LIFO provision (benefit) (243) 710 (1,821)
Loss (gain) from disposal of equipment (12) 77 562
Accounting change-postretirement
benefits (Note 7) -- -- 1,273
Accounting change-income taxes (Note 2) -- -- 1,143
Write down of plant facilities to
net realizable value -- -- 1,586
Changes in assets and liabilities, net
of effect from purchase of
Venture (Note 9):
Accounts receivable, net (6,887) 1,396 (653)
Inventories (6,752) (1,315) 189
Accounts payable 3,684 2,230 543
Other 3,783 (3,987) (1,035)
Total adjustments 12,379 17,463 15,348
NET CASH PROVIDED BY OPERATING ACTIVITIES 25,714 28,548 29,075
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for purchase of Venture (Note 9) -- -- (21,143)
Capital expenditures (44,378) (26,288)(16,521)
Proceeds from disposal of equipment 237 38 22
Short-term investments 10,500 (10,500) --
NET CASH USED IN INVESTING ACTIVITIES (33,641) (36,750)(37,642)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing under credit
agreement (Note 5) 18,500 3,000 17,000
Private placement refinancing, net (Note 1) -- 14,772 --
Proceeds from exercise of stock
options (Note 8) -- 55 19
Principal payments of long-term debt
(Note 3) (6,715) (5,719) (5,129)
Dividends paid (5,090) (4,922) (4,534)
NET CASH PROVIDED BY FINANCING
ACTIVITIES 6,695 7,186 7,356
Net decrease in cash (1,232) (1,016) (1,211)
CASH, Beginning of Year 2,289 3,305 4,516
CASH, End of Year $ 1,057 $ 2,289$ 3,305
==========================================================================
The accompanying notes are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business Activities--Sealright Co., Inc. (the Company)
serves the food industry by providing container components and
production systems for packaging food, primarily in round paperboard
containers and,to a lesser extent, in round plastic containers. Approximately
47% of the Company's 1994 sales were accounted for by paperboard container
sales to frozen dessert producers. In addition to sales in the dairy
industry, the Company manufactures packaging films, supplies flexible
packaging, labeling and label-application equipment.
b. Principles of Consolidation--The consolidated financial
statements include the accounts of the Company's wholly owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
c. Inventories--Inventories are stated at the lower of cost or
market. Finished products, work in process and raw material inventories
are carried at last-in, first-out (LIFO) cost. Certain machine parts
and supplies inventories are carried at average cost, while others
are carried at first-in, first-out (FIFO) cost. Inventories include the cost
of material, labor and factory overhead required in the production
of the Company's products. Inventories at December 31 of each year were:
(In thousands) 1994 1993
Inventories carried on LIFO basis
Raw materials $15,139 $12,778
Work in process 7,986 6,150
Finished goods 17,139 14,944
Total FIFO basis 40,264 33,872
FIFO basis in excess of
LIFO basis (355) (598)
Total LIFO basis 39,909 33,274
Inventories carried on average cost
or FIFO basis 7,060 6,700
Total $46,969 $39,974
==========================================================================
During 1993 and 1992, the Company liquidated certain LIFO inventories that
were carried at lower costs prevailing in prior years. The effect
on net income of this liquidation was insignificant.
d. Property, Plant and Equipment--Property, plant and equipment
has been recorded at cost and such assets are being depreciated
over their estimated useful lives using the straight-line method. The
estimated useful lives are as follows:
Buildings and improvements 5 to 45 years
Machinery and equipment 3 to 15 years
Furniture and fixtures 3 to 8 years
Interest capitalized on construction of buildings, machinery and
equipment was $2,041,000, $774,000 and $565,000 in 1994, 1993 and 1992,
respectively. Building and equipment under construction at
December 31, 1994, 1993 and 1992 was $30,069,000, $14,892,000 and $8,233,000,
respectively.
Maintenance and repairs are charged to expense as incurred. The
cost and accumulated depreciation of assets retired are removed from the
acounts, and any resulting gains or losses are reflected in income
currently.
e. Equipment Leased to Customers--The Company manufactures and
leases equipment to its customers under operating leases which
may be cancelled by either the Company or customer after giving a 30-day
notice. This equipment has been recorded at cost, and such assets are
being depreciated using the straight-line method over their estimated
useful lives ranging from three to eight years.
f. Excess of Purchase Price Over Fair Value of Net Assets
Acquired--Excess of purchase price over fair value of net assets
acquired was recorded in connection with the acquisition of Indopak in
1986, Jaite Packaging, Inc. in 1990, and Venture Packaging, Inc. (Venture) in
1992, and is being amortized ratably over 20, 30 and 20 years,
respectively. Accumulated amortization is $2,788,000 and $2,333,000, as of
December 31, 1994 and 1993, respectively (Note 9). The related amortization
expense charged to operations during the years ended December 31, 1994,
1993 and 1992 was $455,000, $386,000 and $386,000, respectively.
g. At December 31, 1994, intangible assets consisted primarily
of covenants not to compete, customer lists and work forces
associated with the Company's acquisitions. These assets are being amortized
over the respective remaining lives of the assets, ranging from 3 to 20
years. Accumulated amortization on these assets totaled $4,501,000 and
$3,353,000 at December 31, 1994 and 1993, respectively. The related
amortization expense charged to operations during the years ended December 31,
1994, 1993 and 1992 was $1,148,000, $1,394,000 and $1,255,000,
respectively.
h. Research and Development--Research and development costs are
charged to expense as incurred and amounted to $5,644,000,
$5,702,000 and $5,300,000, in 1994, 1993 and 1992, respectively.
i. Income Taxes--Effective January 1, 1992, the Company
implemented the provisions of Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 utilizes the
liability method and deferred taxes are determined based on estimated
future tax effects of differences between financial statement and tax bases
of assets and liabilities given the provisions of the enacted tax
laws (Note 2).
j. Earnings Per Share--Earnings per share has been calculated
based on the weighted average number of common and common stock equivalent
shares outstanding, 11,075,000, 11,075,000 and 11,090,000 in 1994, 1993
and 1992, respectively.
k. Revenue Recognition--Revenue from sales of packages and
containers is recognized at the time ownership of the product is transferred
to the customer. Revenue from operating leases of packaging equipment
is recognized monthly in accordance with the terms of the leases.
Revenues pertaining to operating leases are included in net sales
and amounted to $4,670,000, $4,206,000 and $4,592,000 for the years
ended December 31, 1994, 1993 and 1992, respectively.
l. The Company is a party to various legal and environmental
matters incidental to its business. In the opinion of management, these
matters will not have a material impact on the Company's consolidated
financial position.
m. Statement of Cash Flows--Supplemental cash flow information
is (in thousands):
Cash paid during the year for-- 1994 1993 1992
Interest (net of amount capitalized) $3,303 $3,730 $ 2,930
Income Taxes 7,013 5,903 11,079
Debt was refinanced in 1993 as follows (Note 3):
Gross proceeds from private placement of
senior notes $35,000
Repayment of borrowings under bank credit
agreement (20,000)
Debt issuance costs (228)
Net cash received in private placement refinancing $14,772
======
The Company purchased substantially all of the assets of Venture
in December 1992 (Note 9). In conjunction with the acquisition,
liabilities were assumed as follows:
Fair value of assets acquired $24,130
Liabilities assumed (2,891)
Cash paid 21,239
Less: cash acquired (96)
Net cash paid for assets $21,143
=======
n. Financial Instruments--The carrying amount of the Company's
financial instruments approximate fair value.
o. Certain reclassifications have been made to the 1993
Consolidated Financial Statements to conform to the 1994 presentation.
2 INCOME TAXES
The Company adopted the provisions of SFAS No. 109 effective
January 1, 1992, and recorded a charge of $1,143,000 and decreased earnings
per share by $0.10 for the effect of this change in accounting principle.
Under the provisions of SFAS 109, the Company was required in
1993 to record $365,000 deferred income tax for the effect of the 1993
Tax Act increasing the statutory federal income tax rate from 34% to 35%
on the prior year's deferred tax liability.
The provision for income taxes includes the following (in
thousands):
For the Years ended December 31 1994 1993 1992
Currently payable
Federal $6,584 $4,340 $ 9,005
State and local 1,187 1,019 1,555
Total currently payable 7,771 5,359 10,560
Deferred
Federal 1,025 2,465 139
State and local 220 234 36
Total deferred 1,245 2,699 175
Total $9,016 $8,058 $10,735
A reconciliation of the provision for income taxes to the
statutory federal rate is as follows (in thousands):
1994 1993 1992
Statutory federal income tax rate 35.0% 35.0% 34.0%
Depreciation and amortization
not deductible for tax purposes
resulting from purchase transactions .8 .7 1.4
State income taxes, net of
federal tax benefit 3.8 4.3 3.2
Other, net .7 2.1 2.1
40.3% 42.1% 40.7%
==========================================================================
Deferred taxes are determined based on the estimated future tax
effects of differences between the financial statement and tax bases of
assets and liabilities given the provisions of the enacted tax laws. The
principal temporary differences relate to depreciation and amortization,
LIFO, capitalized interest, pension income and certain financial
reserves not deductible for tax purposes until paid, such as postretirement
benefits reserve, vacation and workers' compensation reserve. The net
deferred tax liability is comprised of the following (in thousands):
As of December 31 1994 1993
Current deferred taxes
Gross assets $ 2,107 $1,875
Gross liabilities (3,791) (3,519)
Total current deferred taxes (1,684) (1,644)
Noncurrent deferred taxes
Gross assets 3,475 2,582
Gross liabilities (19,687) (17,630)
Total noncurrent deferred taxes (16,212) (15,048)
Total deferred taxes $(17,896) $(16,692)
=========================================================================
The Company did not record any valuation allowances at December
31, 1994 and 1993. The tax effect of significant temporary differences
representing deferred tax assets and liabilities are as follows
(in thousands):
As of December 31 1994 1993
Depreciation $(15,264) $(13,574)
Amortization (405) (665)
LIFO (3,830) (3,578)
Capitalized Interest (2,024) (1,596)
Pension (1,007) (1,378)
Postretirement 857 909
Vacation 1,136 1,123
Workers' Compensation 968 850
Other 1,673 1,217
Net deferred tax liabilities $(17,896) $(16,692)
3 LONG-TERM DEBT:
Long-term debt consists of (in thousands):
As of December 31 1994 1993
Senior notes, interest at 6.75%, issued
September 9, 1993. Maturity
September 9, 2008. (Interest
payments only for first five years) $35,000 $35,000
Senior notes, interest at 8.15%, issued
October 22, 1991. Maturity
October 22, 1998. (Principal and
interest payments are made quarterly) 24,800 $31,000
Industrial Revenue Bonds, interest due
June 1 and December 1 at 7.95%,
principal due June 1, 2009, collater-
alized by engineering/machine building
facilities purchased with bond proceeds. 1,850 1,850
Industrial Revenue Notes and Industrial
Development Mortgage Revenue Notes
with dates ranging from May 1, 1973,
through July 7, 1986. Future maturity
dates range from July 1995 to July
1996. Interest rates vary from 75%
of prime to 8.25%, and principal and
interest payment ranges are monthly,
quarterly, semi annually and annually.
These notes are collateralized by
certain property, plant and equipment
purchased and constructed with bond
proceeds. 576 1,045
Bank Credit Agreement due October 31, 1996
(Note 5) 18,500 --
Other 142 188
Total debt 80,868 69,083
Less Current portion (6,733) (6,812)
Total long-term debt $74,135 $62,271
==========================================================================
The Company must comply with various convenants under these debt
agreements. Insofar as they pertain to accounting matters, under
the most
restrictive covenants (Senior Notes), the Company is required to:
a. Maintain a tangible net worth, as defined, of at least
$53,000,000, plus 50% of cumulative consolidated net income earned after June
30, 1991.
b. Maintain a ratio of indebtedness to tangible net worth, as defined,
of not more than 2.0 to 1.
c. Maintain a ratio of consolidated funded indebtedness, as
defined, to consolidated total capitalization, as defined, of less than 60%.
d. Maintain current ratio of not less than 1.5 to 1.
e. Maintain daily average outstanding principal balance under
short-term indebtedness, as defined, of less than $5 million for a period of
45 days each year.
f. Maintain a consolidated net income available for fixed
charges of not less than 200% of the aggregate amount of fixed charges.
The Company was in compliance with all convenants through
December 31, 1994.
The total principal payments on long-term debt are $6,733,000,
$24,885,000, $6,200,000, $6,200,000 and $3,500,000 in 1995, 1996,
1997, 1998 and 1999, respectively. Additionally, $3,500,000 is due
each year 2000 through 2008, and $1,850,000 is due in 2009.
4 LEASE COMMITMENTS:
Future minimum rental payments required under the terms of
operating leases that have initial or remaining noncancelable lease terms
in excess of one year from December 31, 1994, are as follows (in
thousands):
December 31 Amount
1995 $1,088
1996 868
1997 750
1998 549
1999 and thereafter 187
Total $3,442
=====================================================
Principal operating leases are for office space, warehouse
facilities and equipment. Rent expense for all operating leases
was $1,872,000, $2,009,000 and $2,032,000 in 1994, 1993 and 1992,
respectively. Rent is expensed ratably over the life of each
lease, although the timing of rental payments may be scheduled
differently.
5 NOTE PAYABLE TO BANK:
The Company may borrow up to $40,000,000 under the terms of a
credit agreement which expires October 31, 1996. Borrowings under the
agreement bear interest at either LIBOR plus .5% or prime rate less .5%, at
the option of the Company. The Company must pay a facility fee of
.125% of the unused portion of the commitment. The agreement contains
covenants which are essentially the same as those of the senior notes (Note
3).
(In thousands) 1994 1993 1992
Maximum borrowings outstanding $18,500 $22,500 $21,000
Average borrowings outstanding 7,377 $13,900 233
Weighted average interest rate 6.02% 5.58% 5.84%
Weighted average interest rate
at December 31 7.10% 5.50% 5.50%
Unused credit at December 31 $21,500 $25,000 $8,000
========================================================================
6 EMPLOYEE BENEFIT PLANS:
The Company and its subsidiaries have defined benefit pension plans covering
substantially all employees. Benefits for the salaried retirement income
plans are based on employee compensation during the five highest consecutive
years in the final 10 years prior to retirement. All hourly and union
employee benefits are based on a flat rate per year of service. Total pension
expense was $794,000, $278,000 and $317,000 in 1994, 1993and 1992,
respectively, including amortization of prior service costs over 25 years.
The funded status of the plans was as follows (in thousands):
As of December 31 1994 1993
Plan Assets Accumulated Plan Assets Accumulated
In Excess Of Benefits in In Excess Of Benefits in
Accumulated Excess of Accumulated Excess of
Benefits Plan Assets Benefits Plan Assets
Actuarial present value of:
Accumulated benefit obligation
including vested benefits of
$46,173 in 1994 and $48,136
in 1993 $27,417 $19,641 $28,005 $20,915
Additional obligation for projected
compensation increases 3,432 -- 3,046 --
Projected benefit obligation 30,849 19,641 31,051 20,915
Plan assets at fair value 36,525 18,769 38,489 20,431
Amount (used) provided over amount funded (2,907) 811 (2,968) 404
Amount provided for future benefits 33,618 19,580 35,521 20,915
Amount provided for future benefits
in excess of projected benefit
obligation $ 2,769 $ 61 $ 4,470 $ --
==========================================================================
Amount provided for future benefits in excess of projected
benefit obligation consists of the
following (in thousands):
As of December 31 1994 1993
Items not yet recognizable--
Remaining net obligation from January 1, 1987 $1,492 $ 908 $ 2,066 $1,105
Net actuarial gain (loss) represented by actual
results versus estimated, and effects of
changes in assumptions 1,722 55 2,905 (774)
Adjustment for minimum liability -- 512 -- 1,033
Prior service cost (445) (1,414) (501) (1,364)
$ 2,769 $ 61 $4,470 $ --
==================================================================
===================================================================
Pension expense consisted of the following (in thousands):
For the Years Ended 1994 1993 1992
Benefits earned during the year $ 1,682 $ 941 $ 974
Interest cost on projected
benefit obligation 3,744 3,673 3,510
5,426 4,614 4,484
Less--
Actual return on assets (538) (7,191) (4,734)
Net amortization (4,094) 2,855 567
Net pension expense $ 794 $ 278 $ 317
======================================================================
Plan assets are invested in interest-bearing securities (bonds, fixed income
and money market funds), equity securities and income producing real estate.
In determining the actuarial present value of the projected benefit
obligation, the assumed discount rate was 8.25% and 7.25% in 1994 and
1993, respectively; the assumed rate of increase in future compensation levels
was 5.5%, and the expected long-term rate of return on assets was 9%.
The Company makes contributions to a defined benefit multi-employer pension
plan for certain union employees of Indopak, a wholly owned subsidiary.
Amounts charged and contributed to the plan totaled $172,000, $186,000 and
$133,000 in 1994, 1993 and 1992, respectively. The Company has a long term
savings plan available to substantially all non-union employees. The total
expense to the Company for the plans was $636,000, $509,000 and $442,000 in
1994, 1993 and 1992, respectively. The Company reserves the right to amend or
terminate the plans, but cannot recover contributions already paid. In 1994,
the Company established an unfunded supplemental executive retirement plan for
certain officers and key employees whose benefits are reduced because of
compensation deferral elections or limitations under federal tax laws. The
Company's 1994 plan expense was $140,000. The Company has an incentive
compensation plan which provides for payment of cash bonus awards to officers
and key employees based upon achievement of specific financial goals. During
1994 $624,000 and $551,000 was earned by officers and key employees,
respectively. The Company's total plan expense was $1,175,000 in 1994. No
awards were made under the plan in 1993 and awards of $825,000 were made in
1992.
7 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
Employees hired prior to January 1, 1992 who retire from the Company on or
after attaining age 55 and have rendered service to the Company ranging from
10 to 15 years are entitled to postretirement life insurance and healthcare
coverage. These benefits are subject to retirees' contributions,
deductibles, copayment provisions and other limitations. The Company may
amend, change or terminate the plan. The Company adopted Statement of
Financial Accounting Standards No. (SFAS) 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" as of January 1, 1992. This new
standard requires that the expected cost of these postretirement benefits
must be charged to expense during the years that the employees render service.
The Company has recorded retirement benefits liability relating to life
insurance coverages provided. No liability has been recorded for the
healthcare coverage, as retirees pay substantially all of the health care
costs through premiums. Any shortfalls of premiums in relationship to
actual costs are charged to expense with the intent of recovering these
costs in future periods.
The following table reconciles the plan's funded status to the accrued
postretirement life insurance cost liability as reflected on the consolidated
balance sheet as of December 31, 1994 and 1993 (in thousands):
1994 1993
Accumulated Postretirement Benefit Obligation:
Retirees $(1,620) $ (1,682)
Other fully eligible participants (342) (353)
Other active participants (253) (280)
Accrued postretirement liability $(2,215) $ (2,315)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8.25% and 7.25% in 1994 and 1993,
respectively.
Postretirement expense consisted of the following (in thousands):
1994 1993
Service cost $ 26 $ 19
Interest cost 160 174
Total postretirement cost $186 $193
In November 1992, the Financial Accounting Standards Board issued a new
standard on accounting for postemployment benefits. This standard
requires the expected cost of these benefits be charged to expense during
the years the employees render service. As the Company does not provide
significant postemployment benefits, the obligation associated with these
benefits is not material to the consolidated financial statments.
8 STOCK OPTION PLANS
The Company has a stock option plan and a stock incentive plan with
150,000 shares of the Company's common stock reserved for each plan. In
1994, options to purchase 30,000 shares of common stock under the stock
option plan were granted. No grants have ever been made under the stock
incentive plan.
On May 16, 1994, the Company granted a nonqualified stock option for
20,000 shares of common stock to an officer. The option expires in 2004,
and the option price was the market value of $13.75 per share at the date
of grant. None of the shares were exercisable at December 31, 1994.
Information regarding the Company's stock options is summarized
below:
1994 1993 1992
Shares available for granting
at beginning of year 181,200 183,200 198,200
Granted 50,000 2,000 17,000
Forfeitures Due to employee terminations -- -- (2,000)
Cumulative shares exercisable at year-end* 95,400 96,900 81,400
Option price range per $12.67 to $12.67 to $12.67to
share at December 31 $20.75 $20.75 $20.75
Exercised -- 4,000 1,500
Price range of options excercised $12.67 to $12.67 to
$14.50 $14.50
Shares available
for future granting 151,200 181,200 183,200
*Options for such shares expire from 1997 to 2003.
The Company also has a long-term incentive plan (the Plan) which provides for
the granting of performance bonuses, stock options and restricted shares to
executives. The awards are payable in cash and/or shares of common stock at
the end of the three year measurement period, based upon the degree of
attainment of the Company's targeted annual earnings per share growth over
each of the three years in the measurement period. The annual earnings per
share, for purposes of this Plan, may be adjusted at the discretion of the
Board of Directors. Once the options are granted, they are exercisable for
three years at the option price of $21.75. As executives exercise the
options, a proportionate number of restricted shares are issued at no cost to
the executive. The restrictions prohibit the executive from selling,
transferring, pledging or otherwise disposing of the shares. The restrictions
lapse three years following exercise of the options. A maximum of 75,000
shares are authorized for issuance of options and a maximum of 37,500 shares
are authorized for issuance of restricted shares under the Plan. Performance
bonuses amounting to $244,000 were granted and charged to income in 1994. No
awards were made in 1993 and 1992. Stock options for 16,801 shares related to
the 1994 plan performance were granted as of February 8, 1995.
9 ACQUISITION:
On December 31, 1992, the Company acquired substantially all the assets of
Venture Packaging, Inc. The purchase price for Venture and related
manufacturing facilities was $24,320,000, including liabilities assumed and
transaction costs. For financial accounting purposes, the transaction was
accounted for as a purchase. The excess of purchase price over the fair value
of net assets acquired of $685,000 is being amortized over 20 years and the
acquired intangible assets are being amortized over various lives ranging from
3 to 20 years. The amounts utilized for the allocation of the purchase price
has been adjusted based on final values for assets and liabilities purchased
by the Company. The unaudited pro forma 1992 net sales, net income and net
income per share were $290,936,000, $13,653,000 and $1.23, respectively,
assuming the acquisition of Venture had been made as of January 1, 1992. The
pro forma results include adjustments for the additional depreciation and
amortization, interest, income taxes and other incidental costs which would
have been incurred, and excludes Venture expenses related to selling the
Company and management fees from the seller, had the transaction taken place
at the beginning of 1992.
10 QUARTERLY INFORMATION (Unaudited)
The following presents selected quarterly data for the three most recent
fiscal years (in thousands, except per share data):
Net Income
Net Sales Gross Profit Net Income PerShare*
1994
Fourth quarter $66,372 $11,783 $1,030 $.09
Third quarter 79,724 18,174 4,492 .41
Second quarter 80,421 20,350 5,665 .51
First quarter 68,552 14,456 2,148 .19
1993
Fourth quarter $58,053 $10,684 $ 696 $.06
Third quarter 73,539 16,285 3,106 .28
Second quarter 75,835 17,571 4,630 .42
First quarter 68,238 14,814 2,653 .24
1992
Fourth quarter $56,410 $11,753* $ 779* $ .07*
Third quarter 69,282 18,196* 5,578* .50*
Second quarter 72,224 20,252* 6,880* .62*
First quarter 65,862 15,101* 490* .05*
=======================================================================
*Gross profit, net income and net income per share have been retroactively
adjusted to reflect the cumulative effect of accounting changes.
The following table sets forth the range of sales prices, as quoted by NASDAQ
National Market System, and dividends paid for the indicated periods.
MARKET AND DIVIDEND DATA (Unaudited):
1994 1993
Dividend Dividend
Quarter High Low per Share High Low per Share
Fourth 20 3/4 15 3/4 $.115 17 1/2 12 3/4 $.115
Third 16 3/4 13 3/8 $.115 17 1/4 11 3/4 $.11
Second 16 1/4 12 $.115 21 15 3/4 $.11
First 16 1/2 13 3/4 $.115 23 3/4 19 1/2 $.11
At February 28, 1995, there were 463 stockholders of record. Since many
stockholders hold their certificates in "street name", management estimates
the number of individual stockholders is approximately 1,500.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Sealright Co., Inc., and
Subsidiaries:
We have audited the accompanying consolidated balance sheets of SEALRIGHT CO.,
INC. (a Delaware corporation), AND SUBSIDIARIES as of December 31, 1994 and
1993, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year 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 financial position of Sealright Co., Inc., and
Subsidiaries as of December 31, 1994 and 1993, and the 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.
Kansas City, Missouri
ARTHUR ANDERSEN LLP February 3, 1995
_________________________________________________________________
_________
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The financial statements appearing in this annual report have been prepared by
the Company in conformity with generally accepted accounting principles and
necessarily include amounts based on estimates and informed judgments with due
consideration given to materiality.
The Company relies on a system of internal accounting controls that is
designed to provide reasonable assurance that assets are safeguarded, that
transactions are executed in accordance with company policy and are properly
recorded, and that accounting records are adequate for preparation of
financial statements and other financial information. The concept of
reasonable assurance is based on recognition that the cost of a control system
should not exceed the benefits expected to be derived and that such
evaluations require estimates and judgments.
The board of directors pursues its review of auditing, internal controls and
financial statements through its audit committee including directors who are
not associates of the Company. In the exercise of its responsibilities the
audit committee meets periodically with management and the independent
accountants to review the scope and results of audits. The independent
accountants have free access to the committee with or without the presence of
management.
John T. Carper Vice President, Finance
and Chief Financial Officer
February 3, 1995
BOARD OF DIRECTORS
Marvin W. Ozley
Chairman of the Board and
Chief Executive Officer
Sealright Co., Inc.
G. Kenneth Baum
Chairman of the Board
George K. Baum Group, Inc.
D. Patrick Curran
Chairman of the Board and
President
Curran Companies
Frederick O. DeSieghardt
Vice Chairman
Sealright Co., Inc. (Retired)
Robert F. Hagans
Retired Chairman of the Board
Unitog Company
Arthur R. Schulze
Retired Vice Chairman of the Board
General Mills, Inc.
Charles A. Sullivan
Chairman of the Board and
Chief Executive Officer
Interstate Bakeries Corporation
William D. Thomas
President
George K. Baum Group, Inc.
Donald C. Wooton
Vice President, Central Division
Sealright Packaging Company
SEALRIGHT CO., INC. OFFICERS
Marvin W. Ozley
Chairman of the Board and
Chief Executive Officer
Richard F. Anderson
Senior Vice President
Lawrence D. Boyle
Senior Vice President
John T. Carper
Vice President, Finance
Chief Financial Officer
David M. Lindley
Vice President
Douglas R. Stay
Vice President
Donald C. Wooton
Vice President
Thomas W. Van Dyke
Secretary
Glenn M. Harding
Assistant Treasurer
Anne Dunn
Assistant Secretary
SEALRIGHT RIGID PACKAGING GROUP
Lawrence D. Boyle
Senior Vice President
David M. Lindley
Vice President and General Manager
Western Division
Douglas R. Stay
Vice President and General Manager
Eastern Division
Donald C. Wooton
Vice President and General Manager
Central Division
SEALRIGHT FLEXIBLE PACKAGING GROUP
Richard F. Anderson
Senior Vice President
William M. Kelly
Vice President and General Manager
Packaging Industries, Inc.
Thomas L. James
Vice President and General Manager
Jaite Packaging, Inc.
Michael J. Hayes
Vice President and General Manager
Venture Packaging, Inc.
Edward A. Davies
Vice President and General Manager
Sealright Films
Michael T. Ligett
Vice President and General Manager
Styrotech
CORPORATE AND STOCKHOLDER INFORMATION
Annual Meeting
The annual meeting of stockholders will be 9 a.m.
Tuesday, May 9, 1995, in the Atlanta room, Hyatt Regency
Crown Center, 2345 McGee Street, Kansas City, Missouri.
Common Stock
Sealright Co., Inc. common stock is traded in the over-
the-counter market (NASDAQ symbol: SRCO).
Form 10-K
A copy of Sealright's Form 10-K report filed with the
Securities and Exchange Commission may be obtained
without charge by writing:
Vice President, Finance
Sealright Co., Inc.
7101 College Blvd.
Suite 1400
Overland Park, Kansas 66210-1891
(913) 344-9000
Transfer Agent and Registrar
UMB Bank, n.a.
Securities Transfer Division
P.O. Box 410064
Kansas City, Missouri 64141-0064
Independent Public Accountants
Arthur Anderson LLP
Kansas City, Missouri
<PAGE>
Sealright Locations
Sealright Co., Inc.
7101 College Blvd.
Suite 1400
Overland Park, KS 66210
Central Division
9201 Packaging Drive
DeSoto, KS 66018
Eastern Division
100 State Street
Fulton, NY 13069
Western Division
6443 East Slauson Ave.
Los Angeles, CA 90040
Western Division
4209 East Noakes Street
Los Angeles, CA 90023
Sealright Packaging Technology Center
7707 Northwest 97th Terrace
Kansas City, MO 64153
Sealright Engineering Services Center
7805 Northwest 97th Terrace
Kansas City, MO 64153
Packaging Industries, Inc.
2450 Alvarado Street
San Leandro, CA 94577
Sealright Films
785 Montague Street
San Leandro, CA 94577
Styrotech Machines
831 Purser Drive
Raleigh, NC 27603<PAGE>
Venture Packaging, Inc.
1600 Westinghouse Blvd.
Charlotte, NC 28273
Jaite Packaging, Inc.
1972 Akron-Peninsula Road
Akron, OH 44313
Sealright Packaging Company of Austriala, PTY., Ltd.
Virginia, Queensland, Australia
<PAGE>
Sealright
Sealright designs and manufactures packaging and
packaging systems for food and dairy products, beverages,
and household, and medical supplies. A leader in round
paperboard container systems, Sealright is the largest
supplier of frozen dairy dessert packaging in North
America. The company's Flexible Packaging Group,
including Sealright Films, Packaging Industries, Jaite
Packaging, Venture Packaging, and Styrotech, manufactures
packaging films and supplies flexible packaging,
labeling, and label-application equipment.
<PAGE>
Net sales (in millions)
90 $205.9
91 $258.3
92 $263.8
93 $275.7
94 $295.1
Operating Income (in millions)
90 $28.3
91 $32.6
92 $31.4
93 $24.6
94 $27.2
Total Assets (in millions)
90 $151.7
91 $159.5
92 $191.2
93 $214.3
94 $241.4
Net Income (in millions)
90 $15.7
91 $15.9
92 $13.7
93 $11.1
94 $13.3
Research and Development (in millions)
90 $4.7
91 $5.4
92 $5.3
93 $5.7
94 $5.6<PAGE>
Capital Expenditures
90 $13.7
91 $18.4
92 $16.5
93 $26.3
94 $44.4
Financial Highlights
Dollar amounts in millions except per-share data
As of and for the years ended
December 31 1994 1993 % Change
Net Sales $295.1 $275.7 +7%
Operating Income 27.2 24.6 +11
Net Income 13.3 11.1 +20
Earnings Per Share $1.20 $1.00 +20%
Total Assets $241.4 $214.3 +13%
Working Capital 39.9 44.3 -10
Stockholders'
Equity 112.9 104.6 +8
Capital
Expenditures 44.4 26.3 +69
