<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-97056
CALMAR INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3833709
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 South Turnbull Canyon Road
City of Industry, California 91745
(Address of principal executive offices)
Registrant's telephone number, including area code: (818) 330-3161
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the common stock of Calmar Inc. held by non-
affiliates of Calmar Inc. is inapplicable as the common stock of Calmar Inc. is
privately held.
The number of shares of common stock of Calmar Inc. outstanding on March
15, 1997 was 3,092,531.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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Page 1 of __ Pages
Exhibit Index Appears on Page __
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CALMAR INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 1996
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I
Item 1. Business................................................................ 3
Item 2. Properties.............................................................. 9
Item 3. Legal Proceedings....................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders..................... 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters... 12
Item 6. Selected Financial Data................................................. 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 14
Item 8. Financial Statements and Supplementary Data............................. 19
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.................................................... 19
PART III
Item 10. Directors and Executive Officers of the Registrant...................... 20
Item 11. Executive Compensation.................................................. 23
Item 12. Security Ownership of Certain Beneficial Owners and Management.......... 29
Item 13. Certain Relationships and Related Transactions.......................... 30
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........ 31
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS.
As used in this Annual Report on Form 10-K ("Form 10-K"), unless the
context indicates otherwise, the terms "Company" and "Calmar" refer to Calmar
Inc., a Delaware corporation, and its predecessor companies.
GENERAL
Calmar believes it is the leading worldwide manufacturer of non-aerosol
plastic dispensing and spraying systems. Calmar offers the broadest range of
such systems in the world, including a full line of fine mist, regular and
trigger sprayers; regular, large and high-viscosity dispensers; and other
specialty products. These products are used primarily for dispensing and
packaging personal care, household, automotive, chemical and pharmaceutical
products. Management attributes the Company's success to its global
relationships with major customers, excellent product quality and service,
advanced manufacturing capabilities and development of innovative products. The
Company's largest customers include most major consumer products companies. The
Company has been doing business with its ten largest customers, which together
accounted for approximately 29% of its net sales in 1996, for an average of 20
years.
The markets for Calmar's products are generally characterized by stable
aggregate end-user demand. These markets have grown as: (i) the demand for
consumer products has grown, particularly internationally; (ii) Calmar's
customers have increasingly used high-value-added dispensing and spraying
systems to differentiate, add convenience and improve their products; (iii) new
applications for the Company's technology have been developed, such as drug
delivery systems and certain food applications; and (iv) the cost of these
products has continued to decline as technology and manufacturing techniques
have improved.
Calmar was incorporated in 1983 to carry on the business formerly conducted
by the Calmar division of Diamond International Corporation. In 1987, Beijer
Industries AB ("Beijer"), a Swedish corporation and the 65% stockholder of the
Company, through two wholly-owned subsidiaries, acquired the remaining 35% of
the common stock of the Company. In a creditor proceeding in 1994 involving
Beijer and its parent Kongsbo Industrier AB, a Swedish corporation, the equity
interest in the Company retained by Beijer was transferred to AB Handel och
Industri, a Swedish corporation. In 1988, FS Equity Partners II, L.P., a
California limited partnership and an affiliate of Freeman Spogli & Co.
("FS&Co."), purchased a 52% interest in Calmar and has, from time to time, made
additional equity investments in the Company to support its growth.
THE REFINANCING
On August 18, 1995, the Company refinanced a substantial portion of its
long-term debt. The Company sold $120.0 million aggregate principal amount of
its 11 1/2 Senior Subordinated Notes due 2005, Series A (the "Old Notes").
Concurrently therewith, Calmar entered into a new senior secured credit
agreement (the "New Credit Facility") which provides for term loan facilities
aggregating $105.0 million and a revolving credit facility of up to $20.0
million (the "Revolver"). The Revolver expires in 1999. The New Credit
Facility is secured by, among other things, a first priority lien on all of the
Company's domestic real properties.
On September 18, 1995, net proceeds from the sale of the Old Notes
(approximately $116.0 million), together with borrowings under the term loan
portion of the New Credit Facility ($105.0 million), were used: (i) to redeem
the $90.0 million outstanding principal amount of the Company's 12% Senior
Secured Notes due 1997 (the "Senior Secured Notes"); (ii) to redeem the $104.8
million outstanding principal amount of the Company's 14% Subordinated Notes due
1999 (the "Subordinated Notes"); (iii) to pay related call premiums aggregating
$5.7 million plus associated redemption costs and accrued interest on such
securities to their date of redemption; (iv) to repay all outstanding amounts
($6.5 million) under the Company's then existing revolving credit agreement; and
(v) for working capital and general corporate purposes.
3
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As used herein, the term "Refinancing" shall refer to the transactions
which occurred on August 18, 1995 and September 18, 1995 described above.
On January 10, 1996, the Company consummated an offer to exchange (the
"Exchange Offer") $1,000 principal amount of its 11 1/2 Senior Subordinated
Notes due 2005, Series B (the "Senior Subordinated Notes") which were registered
under the Securities Act of 1933, as amended, pursuant to a Registration
Statement on Form S-4, for each $1,000 principal amount of its outstanding Old
Notes, of which $120.0 million principal amount was outstanding. As of March
15, 1997, $120.0 million principal amount of the Senior Subordinated Notes was
outstanding.
On October 4, 1996, the Company amended its New Credit Facility. The
amendment replaced its current lender under the Revolver within the New Credit
Facility, reduced the maximum borrowings permitted under the Revolver from $20.0
million to $12.0 million, revised certain financial covenants pursuant to the
New Credit Facility and provided some technical revisions to the New Credit
Facility. At December 31, 1996, the borrowing base test permitted the Company
to borrow up to $12.0 million.
The Company's executive offices are located at 333 South Turnbull Canyon
Road, City of Industry, California 91749, and its telephone number is (818) 330-
3161.
Unless otherwise indicated, as used in this Form 10-K (i) all references to
square feet are to gross square feet, rather than net selling space; and (ii)
all references to a year shall mean the fiscal year of the Company which
commences in such year (for example, the fiscal year commencing January 1, 1996
and ending December 31, 1996 is referred to herein as "1996").
PRODUCTS
Calmar believes it is the largest manufacturer of non-aerosol plastic pump
spraying and dispensing systems in the world. Calmar manufactures three types
of plastic pump sprayers (fine mist, regular and trigger sprayers), three types
of plastic pump dispensers (regular, large and high-viscosity dispensers),
child-resistant closures as well as custom-molded inhaler casings and aerosol
valves. Calmar's products are designed, developed and manufactured using the
Company's patents, proprietary processes and technology.
The following table shows the contribution to Calmar's net sales made by
plastic pump sprayers, plastic pump dispensers and other products during each of
the last three years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1994 1995 1996
------------ ------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Sprayers............... $111,513 55% $129,331 58% $128,808 59%
Dispensers............. 68,197 33 71,209 32 69,382 32
Other Products......... 23,634 12 23,925 10 21,247 9
-------- --- -------- --- -------- ---
Total.............. $203,344 100% $224,465 100% $219,437 100%
======== === ======== === ======== ===
</TABLE>
Plastic Pump Sprayers
- ---------------------
Calmar's plastic pump sprayers are used to dispense a wide variety of
liquid products for various applications. Different applications require the
sprayers to have different performance characteristics. Calmar has designed and
developed or acquired three basic types of sprayers and has several relevant
patents related to these products.
4
<PAGE>
Fine Mist Sprayers. Fine mist sprayers emit a fine spray for use with
such products as hair holding sprays, fragrances, and nasal sprays and other
pharmaceutical products. Calmar is a major supplier of fine mist sprayers to
the hair care industry in the U.S. and to the hair care, deodorant, fragrance
and pharmaceutical markets in Europe. Fine mist sprayers are required for the
application of fragrances and hair holding products in order to avoid
concentrations of the products on any one area and to promote rapid drying.
Pharmaceutical products, such as nasal sprays, require fine, micron size
particles for product efficacy. The Company's products are used for nasal
applications in both the over-the-counter and prescription pharmaceutical
markets. Recently, these sprayers have also begun to be used for food
applications.
Regular Sprayers. Regular sprayers emit a wetter, larger particle size
spray than fine mist sprayers and are used with household cleaners, including
window, tile and all-purpose cleaners, as well as throat sprays, automotive
cleaners and insecticides. In Europe, regular sprayers are typically used in
certain hair care and medical applications. The Company currently manufactures
two models of regular sprayers. Regular sprayers are typically used with
smaller-sized packages, while larger packages are increasingly switching to
trigger sprayers.
Trigger Sprayers. Trigger sprayers emit a spray similar to, but higher in
output than, that of the regular sprayers described above but are generally used
for larger size containers such as household, automotive and chemical products.
The world market for trigger sprayers has experienced significant growth over
the past five years primarily as a result of: (i) a significant decrease in
product prices and manufacturing costs; (ii) the conversion from regular
sprayers to trigger sprayers for larger applications; and (iii) the conversion
from conventional closures to trigger sprayers for added convenience. Calmar
currently manufactures three models of trigger sprayers.
Plastic Pump Dispensers
- -----------------------
The Company's plastic pump dispensers are primarily used to dispense pre-
measured amounts of liquids, lotions and high-viscosity products.
Regular Dispensers. Regular dispensers are used primarily with products
such as liquid soaps, hand, face and body lotions and other applications
requiring pre-measured amounts of products. The Company currently manufactures
five models of regular dispensers, with several designs of each. Growth in this
category has been driven by the introduction in the mid 1980s of liquid soap
products which rapidly gained market share from traditional bar soaps. Regular
dispenser sales have increased further as hand, face and body lotions were
packaged to use dispensers.
Large Dispensers. Large dispensers dispense from one-eighth of an ounce
to one ounce of product at a time, which is a greater output than that of
Calmar's regular dispensers. Large dispensers are used primarily for shampoos,
hair conditioners, syrups, food products (such as mustard and ketchup in
institutional size containers) and liquid detergents. The Company currently
manufactures three models of large dispensers, with several designs of each,
including a product line with a locking pump which does not require outer
protection for shipping.
High-Viscosity Dispensers. High-viscosity dispensers, which are sold
mainly in the U.S., are used almost exclusively with a toothpaste product. The
Company provides all of the high-viscosity dispenser requirements of one major
toothpaste manufacturer.
Other Products
- --------------
The Company is a supplier to Rhone-Poulenc Rorer of an inhaler casing used
by asthmatics and sold under the Azmacort(TM) brand name. The product was
introduced by Rhone-Poulenc Rorer in 1991 and is produced by Calmar in a clean
room environment.
Calmar is a leading manufacturer of child-resistant closures for use in the
U.S. over-the-counter pharmaceutical market. The Company manufactures a one
piece plastic child-resistant safety cap under the trademark Snap-Safe(R) which
meets the protocol standards established by the United States Consumer Products
Safety
5
<PAGE>
Commission for "child-resistant" closures. This cap is used with dry
pharmaceutical products such as analgesics, cold tablets and vitamins.
Calmar also sells aerosol valves that are manufactured under license at its
facility in Spain. These products are sold to the Spanish market only.
MARKETING STRATEGY AND DISTRIBUTION
In North America, product managers are responsible for marketing and
distribution and also act as liaisons with the Company's technology,
manufacturing and finance personnel. Sales to customers in North America are
made directly through the Company's direct sales force located throughout North
America and indirectly through packaging distributors. In Europe, country
managers have key account responsibilities for major customers, while sales and
marketing are handled by a direct sales force under the direction of the
Managing Director of European Operations. Sales to the Pacific Rim are
conducted through licensees and are coordinated by a Managing Director based in
Singapore. Latin American sales are conducted both through direct sales and
licensees and are managed by a salesperson in the U.S. Calmar also actively
markets its products worldwide in trade journals and at trade shows.
CUSTOMERS
The Company's largest customers include most major consumer products
companies. The Company has long-standing relationships with and is the sole
supplier to many of its major customers. Management believes that Calmar's
focus on product development, quality and excellent service has allowed the
Company to develop and maintain close and long-standing relationships with its
customers.
Although the Company has over 1,400 customers, approximately 29% of
Calmar's net sales in 1996 were to its ten largest customers. The personal care
and household products industry has consolidated over the past several years led
primarily by multinational companies. These companies are increasingly
demanding that their suppliers provide high quality products directly to their
operations around the world on a cost-efficient and timely basis. Furthermore,
as these companies continue to rationalize their supplier base, management
believes that Calmar's ability to provide a broad range of products will improve
the Company's competitive position.
The Company sells components and finished goods to licensees in Latin
America and the Pacific Rim. Calmar typically supplies such licensees with
molded parts and such licensees then assemble the parts into finished products
for sale in a specific market.
COMPETITION
The markets for Calmar's products are highly competitive. Calmar competes
with a number of public and privately-held companies, including divisions of
larger companies, some of which have greater financial resources than the
Company. Nonetheless, Calmar is the largest manufacturer of non-aerosol plastic
pump spraying and dispensing systems in the world, measured by the number of
units sold. In North America, Calmar believes that it has or shares a leading
position in each of the markets in which it competes. In addition, the Company
believes that no other manufacturer produces as wide a variety of non-aerosol
plastic spraying and dispensing systems as Calmar.
The European markets for Calmar's products are highly fragmented. In
addition to the presence of North American competitors in Europe, there are a
number of local competitors in most of the major product categories. Calmar
believes it has a leading market share in Europe for trigger sprayers, regular
sprayers and large dispensers and has the second largest market share in its
other product categories. Calmar's European competitors are focused largely on
one or two major product areas while Calmar offers the widest variety of options
for their customers' needs.
6
<PAGE>
In the Pacific Rim and Latin America, Calmar typically competes with other
multinational companies as well as local producers.
Calmar believes that it competes primarily on the basis of its reputation
and the quality, reliability, performance and prompt delivery of its products.
Many of the Company's major customers are multinational companies competing on a
global basis with worldwide brands and place increased emphasis on global
sourcing of input materials and components. Management believes that Calmar's
ability to serve these customers globally from its North American and European
production bases will continue to be an important competitive factor.
RESEARCH AND DEVELOPMENT
Management believes that Calmar is a leader in the technological
development and innovation of products in the industry. The focus of the
Company's research, development and engineering efforts is to: (i) develop
products that will increase the size of the available market; (ii) provide the
highest level of quality; (iii) develop unique value-added product features;
(iv) customize products for specific customer applications; and (v) continue to
simplify the design/production process to reduce costs.
The Company's technology effort is very closely associated with its
customers. Many development projects are conducted jointly with customers and,
in some instances, are partially or fully funded by these customers. These
projects may include cost sharing agreements regarding the purchase of
manufacturing equipment for new products and/or additional capacity. These
arrangements help the Company to share some of the risk in both product
development and product sales associated with introducing a new product or a
modified product into the market. Calmar is currently working on several
confidential joint development projects with major multinational companies to
develop new proprietary products.
In 1994, 1995 and 1996, Research and Development expenditures totalled $4.1
million, $4.5 million and $5.1 million, respectively.
MANUFACTURING, DESIGN AND RAW MATERIAL
The Company molds precision plastic components using tight tolerance,
multi-cavity molds in standard injection molding machines. Plastic components
are produced primarily at Calmar's manufacturing facilities, with support from
contract molders. The extent to which contract molders are used varies monthly
and depends on current product demand. In addition, Calmar operates a captive
spring-making plant which manufactures the majority of metal springs used in its
pump products; the remaining springs and certain other components are purchased
from outside suppliers. The Company also manufactures most of its own extruded
tubing for its pumps.
Pump components are assembled automatically on proprietary design assembly
machines. Each pump is inspected for product integrity and tested for
functionality throughout the assembly process, utilizing state-of-the-art
sensors and computer controls to minimize defective products. Calmar has
developed significant expertise in automated assembly equipment, having designed
and built the majority of its assembly equipment to exacting product design and
manufacturing requirements.
The principal raw materials used by Calmar are polypropylene and high-
density polyethylene resins. These raw materials are available from a number of
suppliers in the United States and in Europe. Approximately 15% of Calmar's
cost of sales in 1996 was attributable to plastic resin costs. The cost of
plastic resins purchased by Calmar are subject to commodity pricing. The prices
of polypropylene and high-density polyethylene resins were relatively stable
during the first half of 1996, but increased during the second half of 1996.
The overall average price of plastic resins purchased by Calmar decreased
slightly in 1996 as compared to 1995. To date, the Company has been able to
obtain sufficient quantities of plastic resin for its requirements. Calmar does
not have long-term supply contracts for the purchase of raw materials, although
it has long-standing relationships with its major suppliers.
7
<PAGE>
Calmar's manufacturing facilities (the majority of which are Company owned)
and equipment represent advanced technology for the industry. The Company's
Spanish and German plants have been International Standards Organization (ISO)
9001 certified. The Company is also in the process of having its fourth United
States plant similarly certified. Three of the Company's four plants in the
United States have been ISO 9001 certified. The production capacity of Calmar's
manufacturing facilities depends to a great extent on the products manufactured.
Since most of Calmar's injection molding machines are readily adapted to the
manufacture of various products or components, production capacity may be
shifted among various products by reallocating the injection molding machines or
by contracting with independent molders who are provided with the Company's
molds. Currently Calmar is at capacity with respect to the production of
certain of its products. One of the Company's European subsidiaries has
recently completed construction of a new facility which is expected to begin
production during the second quarter of 1997 and thereby reduce the Company's
reliance on independent molders.
BACKLOG
Calmar's largest customers typically provide Calmar with quarterly or
annual estimates of their product requirements and confirm specific orders on a
monthly basis. Calmar's backlog of orders believed to be firm, as of February
28, 1997 was approximately $72 million. Calmar expects that substantially all
of its present backlog will be filled within the next 12 months.
INTERNATIONAL OPERATIONS
The Company's German subsidiary, Calmar-Albert GmbH, manufactures and sells
plastic pump sprayers and dispensers, primarily in the European market. The
Company's Spanish subsidiary, Monturas, is the largest producer of non-aerosol
sprayers, dispensing pumps and aerosol valves in Spain. Calmar's French,
Belgian, English and Italian subsidiaries are trading companies selling products
produced by Calmar-Albert GmbH and Monturas, as well as products manufactured by
the Company in the U.S. The Company's Canadian subsidiary sells certain of
Calmar's products manufactured in the U.S. For a discussion of the amounts of
revenue, operating income and identifiable assets attributable to the Company's
international operations and the amount of export sales, see Note 12 to the
Company's Consolidated Financial Statements.
The Company also has licensees located in Japan, Taiwan, South Korea, Hong
Kong, South Africa, Australia, Argentina and India.
The Company is currently reviewing the feasibility of possible joint
venture arrangements or acquisitions of existing licensees of the Company in
Asia and South America during 1997.
Sales outside of North America (including export sales) accounted for
approximately 48% and 47% of the Company's total revenues in 1995 and 1996,
respectively. These sales are subject to a number of inherent risks, including
the impact of inflationary environments in economies outside the United States
and generally longer receivables collection periods, as well as tariffs and
other potential trade barriers which may reduce the profitability to the Company
of such sales.
The U.S. dollar value of revenues derived from products sold outside the
United States (excluding U.S. export sales) varies with currency exchange rate
fluctuations, and the Company's consolidated revenues may be unfavorably
impacted by significant increases in the value of the U.S. dollar relative to
certain foreign currencies. Calmar's domestic operations currently export
products with invoices denominated in U.S. dollars to eliminate any such
exchange rate risk. See Note 1 to the Consolidated Financial Statements. In
addition, with respect to product sales which are denominated in a currency
other than the functional currency of the country in which the Company
subsidiary making the sale is located, the Company may be exposed to gains or
losses based upon fluctuations in exchange rates. In practice, Calmar's
subsidiaries invoice in their own functional currency whenever possible and are
involved in some hedging arrangements with respect to foreign currencies. See
"Item 7.--Management's Discussion and Analysis of Financial Condition and
Results of Operations."
8
<PAGE>
PATENTS AND TRADEMARKS
Many of Calmar's products are protected by patents and the Company is
continually exploring opportunities for new patentable products through research
and development. While Calmar believes that its patents are important to its
business and enhance its competitive position, Calmar does not believe that the
loss of any one particular patent would have a material adverse effect on
Calmar's business.
Most of Calmar's products are sold under registered trademarks. Although
Calmar believes that its trademarks are useful, it does not believe that their
loss would have a material adverse effect on Calmar's business.
EMPLOYEES
As of December 31, 1996, Calmar employed 1,874 persons. At such date, 522
of Calmar's U.S. employees were covered by collective bargaining agreements.
Approximately 120 employees in Germany and 198 employees in Spain were
represented by national labor unions. The collective bargaining agreement
covering employees at the Company's facility in Ohio will expire during 1997.
Calmar believes that its relationship with its employees is excellent and
is not aware of any threatened labor activity affecting its employees. Calmar
has never experienced a work stoppage due to a labor dispute.
ITEM 2. PROPERTIES.
Calmar manufactures products at six Company-owned plants located in
California, Ohio, Missouri, Germany and Spain and one leased plant located in
Germany, and manufactures springs at one Company-owned facility in Ohio. Calmar
also leases a number of sales offices throughout the world. All of the
Company's domestic real properties are subject to a first priority lien securing
the New Credit Facility. See "Item 1. Business--The Refinancing."
Calmar's manufacturing operations are conducted at the facilities described
below:
<TABLE>
<CAPTION>
SIZE
(APPROX.)
LOCATION SQ. FT.
--------------------------------------- ----------
<S> <C>
City of Industry, California........... 125,800
Washington Court House, Ohio........... 117,000
Washington Court House, Ohio........... 15,600
Lee's Summit, Missouri................. 133,100
Lee's Summit, Missouri................. 65,000
Hemer, Germany......................... 90,000
Hemer, Germany (leased)................ 43,000
Barcelona, Spain....................... 129,000
</TABLE>
The Company believes that its existing facilities are in good condition and
are suitable and adequate to meet its current needs, and such buildings will be
sufficient to handle anticipated growth for the next two years. Currently, the
Company's planned capital expenditures contemplate the acquisition of additional
molding equipment. Historically, contract molders have been readily available
to provide the Company with additional molding capacity and the Company expects
that contract molders will continue to be readily available. The leased
facility in Hemer, Germany will become operational during the second quarter of
1997 and is expected to reduce the Company's reliance on contract molders.
9
<PAGE>
ENVIRONMENTAL REGULATIONS
Management believes the Company is in substantial compliance with national,
state, and local laws and regulations governing the use, discharge and disposal
of hazardous materials, except as outlined below. In June 1987, the California
Regional Water Quality Control Board (the "Water Control Board") required the
Company to conduct an investigation of possible soil and groundwater
contamination at the Company's City of Industry facility. This investigation
indicated that site soils and groundwater under the site had been impacted by
industrial cleaning solvents. Since 1987, the Company has continued to
investigate and monitor the site. The investigations performed to date indicate
that some of the contamination on the site may result from off-site sources
unrelated to the Company. It is anticipated that the Company will be required to
perform additional investigations or remedial activities at the site. The
Company submitted a plan to the Water Control Board in August 1995 detailing
additional investigations to be made at the site regarding the extent of soil
contamination and in October 1995, the Water Control Board approved such plan.
In February 1997, the Company submitted a new plan to the Water Control Board
regarding additional investigations to be made at the site and the Company is
awaiting a response from the Water Control Board.
In June 1993, the EPA sent 64 companies and individuals, including the
Company, letters notifying the recipients that they were considered potentially
liable for groundwater contamination in the Puente Valley Operable Unit of the
San Gabriel Superfund Site. The Company's City of Industry facility is located
in the Puente Valley Operable Unit. In response to the EPA's request, the
Company and a majority of the recipients of the notice formed a steering
committee known as the Puente Valley Steering Committee ("PVSC"). In September
1993, 47 companies (including Calmar) and individuals in the Puente Valley,
entered into an Administrative Order on Consent ("AOC"), whereby such companies
and individuals, including the Company, agreed to conduct a remedial
investigation/feasibility study under the oversight of the EPA. As of December
31, 1996, the final report regarding such remedial investigation/feasibility
study had been delivered to the EPA and the PVSC is awaiting final acceptance of
such report. Final acceptance by the EPA would discharge the obligation of the
settling parties under the AOC. The total costs related to conducting this
study are estimated to be approximately $5.0 million of which $4.8 million has
been paid to date. The Company's share is expected to be approximately
$150,000 which has been provided for in the accompanying Consolidated Financial
Statements. The Company believes that it will have some insurance coverage in
this matter. The EPA deferred its claim against all potentially responsible
parties for $1.2 million previously incurred by the EPA at the Puente Valley
site. No assurances can be given that the Company will not be required to pay a
portion of EPA's past costs or to perform additional investigation or remedial
activity relating to the San Gabriel Superfund Site. The EPA has not yet
selected remedies for the site but the possibilities identified range from no
action to active groundwater pump and treat systems. The cost of such remedies
and the Company's portion of such costs are not known at this time.
The Company may be required to incur other costs and expenses from time to
time in order to generally comply with environmental laws and regulations;
however, the Company does not anticipate that such costs and expenses will have
a material adverse effect on the Company's results of operations. No assurances
can be given however, that the historical, current or future uses and conditions
of the Company's facilities or operations will not result in the imposition of
liability under environmental laws.
GOVERNMENT REGULATION
Although the Company is not generally subject to significant government
regulation of its products, several states have mandated a reduction in the
level of volatile organic compounds ("VOC") in the formulation of certain
products, such as hairspray, that may be dispensed by Calmar's fine mist
products. The current regulations require manufacturers of hairsprays to
maintain a VOC level of no more than 80%. Effective June 1, 1999, the maximum
permissible VOC level will be reduced to 55% in California. In reduced VOC
level hairspray formulations, VOC's are typically replaced by water. Currently
no hairspray formulations have been developed with the permissible 55% VOC level
which are acceptable to the consumer. Although the Company has been successful
in redesigning a fine mist sprayer to accommodate currently allowable VOC
formulations and is aggressively working to adapt a fine mist sprayer to
accommodate further reductions in the permitted VOC content of product
formulations mandated in 1999, there can be no assurance that consumers will
find reduced VOC hairspray acceptable, that such reductions would be compatible
with a fine mist sprayer or that an effective fine mist sprayer could be
developed at a reasonable cost and, in such event, there may be an adverse
impact on the Company's results of operations.
10
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings pending against the Company or any
of its properties, except as noted in "Item 2. Properties--Environmental
Regulations." In addition, please see Note 11 to the Consolidated Financial
Statements and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" for a
discussion of the pending tax audit of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no established public trading market for the common stock of the
Company. As of March 15, 1997, the number of record holders of common stock of
the Company was 37.
The Company has not declared or paid cash dividends to its stockholders.
The Company anticipates that all of its earnings in the near future will be
retained for the development and expansion of its business and, therefore, does
not anticipate paying dividends on its common stock in the foreseeable future.
Declaration of dividends on the common stock will depend, among other things,
upon levels of indebtedness, future earnings, the operating and financial
condition of the Company, its capital requirements and general business
conditions. The agreements governing the Company's indebtedness contain
provisions which restrict the ability of the Company to pay dividends on its
common stock. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial information has been derived
from the historical consolidated financial statements of the Company.
The information set forth below should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and notes thereto included
elsewhere in this Form 10-K.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1992(1) 1993 1994 1995(2) 1996
--------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................. $192,139 $175,364 $203,344 $224,465 $219,437
Gross profit.......................................... 49,075 42,812 53,284 56,021 56,450
Selling, general and administrative expenses.......... 33,893 34,437 34,641 35,559 37,097
Operating income...................................... 15,182 8,375 18,643 20,462 19,353
Income before net interest and taxes(3)............... 16,803 8,918 19,201 21,520 20,555
Interest expense...................................... (27,605) (28,277) (27,788) (27,265) (24,487)
Interest income....................................... 1,170 382 413 396 320
Loss before income taxes, extraordinary item and
cumulative effect of accounting change............... (9,632) (18,977) (8,174) (5,349) (3,612)
Loss before extraordinary item and cumulative
effect of accounting change.......................... (9,511) (17,813) (9,090) (6,432) (3,398)
Net loss.............................................. (9,511) (25,527) (9,090) (15,960) (4,016)
BALANCE SHEET DATA:
Total assets.......................................... $292,214 $280,595 $282,405 $289,785 $282,738
Long-term debt........................................ 211,308 212,859 208,705 235,785 232,867
Stockholders' equity (deficiency)..................... 16,657 (2,428) (9,632) (23,619) (29,398)
OTHER DATA:
Capital expenditures.................................. $ 11,085 $ 22,930 $ 18,707 $ 18,290 $ 16,681
Research and development costs........................ 3,247 3,262 4,065 4,546 5,139
Depreciation and amortization expense................. 23,638 23,970 24,835 25,135 24,167
EBITDA(4)............................................. 41,491 36,565 44,574 47,212 45,190
Ratio of EBITDA to total interest expense(5).......... 1.50x 1.29x 1.60x 1.73 1.85x
Deficiency of earnings available to cover fixed
charges(6)........................................... $ (9,509) $(18,997) $ (8,174) $ (5,349) $ (3,612)
Net cash provided by operating activities............. 18,119 9,233 12,976 17,274 21,233
Net cash used in investing activities................. (23,383) (20,503) (14,873) (14,361) (15,228)
Net cash provided by (used in) financing activities... 8,119 7,462 (3,298) 3,534 (5,701)
</TABLE>
Footnotes on following page
12
<PAGE>
___________________
(1) In 1992, the Company acquired the remaining 51% balance of the capital
stock of Monturas and fully consolidated its operations into the
consolidated financial results of the Company for the year then ended.
Previously, the Monturas operations were accounted for under the equity
method of accounting.
(2) The consolidated financial information includes adjustments to reflect the
issuance of the Old Notes and New Credit Facility, redemption of the Senior
Secured Notes and Subordinated Notes and recognition of an extraordinary
loss for redemption of such former indebtedness. See the
Consolidated Financial Statements.
(3) Income before net interest and taxes is before the effect of an
extraordinary charge for certain extinguishments of debt in 1995 and
1996 and a change in the method of accounting for postretirement benefits
in 1993.
(4) EBITDA represents income before interest, income taxes, depreciation and
amortization and certain other non-recurring items. EBITDA data is
included because the Company believes that such information is an indicator
of a leveraged company's ability to service debt and because such data is
used in certain financial tests in the Indenture. However, EBITDA is not
intended to be a performance measure that should be regarded as an
alternative either to net income as an indicator of operating performance
or to cash flows as a measure of liquidity, as determined in accordance
with generally accepted accounting principles. Under the Company's former
and existing credit agreements, EBITDA excludes the effects of certain non-
recurring items amounting to $1,050, $3,677, $538, $557 and $469 for the
years ended December 31, 1992 through 1996, respectively. In fiscal 1992,
non-recurring items resulted from consulting services to improve certain
processes in the research and development, customer service and
manufacturing areas. Non-recurring items in fiscal 1993 consisted of
additional consulting services, termination expenses associated with the
closure of the Mexican manufacturing facility and the relocation of such
facility to the United States, and certain operating expenses related to
the adoption of Statement of Financial Accounting Standards ("SFAS") No.
106 for postretirement benefits other than pensions. In each of the other
periods presented above, non-recurring items resulted from certain
operating expenses associated with SFAS No. 106. The adoption of the
accounting change for postretirement benefits did not require any cash
outlay.
(5) The ratio of EBITDA (as defined in footnote 4 above) to total interest
expense is calculated by dividing EBITDA by total interest expense. Total
interest expense consists of total interest paid or accrued on the
Company's debt obligations. This ratio is included because the Company
believes it is a measure of the availability of cash from operations to pay
interest and because such data is used in certain financial tests in the
Company's debt agreements. However, this ratio is not intended to be a
substitute for the ratio of earnings to fixed charges.
(6) For purposes of determining the ratio of earnings to fixed charges,
earnings consist of loss before income taxes, equity in earnings (loss) of
unconsolidated subsidiary in 1992, and fixed charges. Fixed charges
consist of interest expense, amortization of debt issuance costs and that
portion of operating lease rental expense which represents the interest
factor. As set forth in the table above, the consolidated earnings of the
Company were inadequate to cover fixed charges during the periods
indicated.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated financial condition and results of operations. The discussion
should be read in conjunction with the "Selected Consolidated Financial Data"
and the Consolidated Financial Statements and notes thereto included elsewhere
in this Form 10-K.
The following table sets forth selected results of operations as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEARS
--------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Sprayers................................ 54.9% 57.6% 58.7%
Dispensers.............................. 33.5 31.7 31.6
Other products.......................... 11.6 10.7 9.7
----- ----- -----
Net sales............................. 100.0% 100.0% 100.0%
Gross profit............................ 26.2% 25.0% 25.7%
Selling, general and administrative 17.0 15.9 16.9
expenses...............................
Operating income........................ 9.2 9.1 8.8
</TABLE>
RESULTS OF OPERATIONS
Comparison of the Year Ended December 31, 1996 to the Year Ended December
31, 1995
Net sales for the year ended December 31, 1996 totaled $219.4 million, a
decrease of $5.0 million or 2.2% from 1995. Net sales were unfavorably impacted
by $2.8 million due to foreign exchange rate changes. Sprayer sales were
generally unchanged from the prior year; although sales were up in North
America, they were offset by decreases in Europe. The increase in sales in
North America was primarily from increased demand for trigger sprayers. The
decrease in sales in Europe was primarily due to weaker demand and lower selling
prices. Total dispenser sales decreased slightly from the prior year due to the
effects of non-recurring product promotions in North America, the switch by
certain customers towards lower-priced non-pump alternatives and lower selling
prices. Lower selling prices have been influenced by the negotiations of long-
term contracts and competitive pressures. Other product sales decreased as the
result of lower sales to licensees, lower aerosol valve sales, which are
produced and sold in Spain, and a customer's major product promotion in 1995
which did not repeat in 1996.
Gross profit for the year ended December 31, 1996 was $56.4 million as
compared to $56.0 million in 1995. Gross profit as a percentage of sales
increased from 25.0% in 1995 to 25.7% in 1996. The increase in gross profit as
a percentage of sales resulted primarily from improvements in North American
operations. The increase reflects lower unit costs resulting from higher sales
volume, enhanced automation of certain assembly operations, lower resin prices
and lower purchase costs associated with new purchasing programs. The
improvements in North America were partially offset by lower gross margins in
Europe which were due to increased outsourcing of molding requirements, lower
overall prices and the effect of foreign exchange rate changes.
Selling, general and administrative expenses were $37.1 million or 16.9% of
net sales for the year ended December 31, 1996 as compared to $35.6 million or
15.8% of net sales for 1995. The increase in selling, general and
administrative expenses is due to higher compensation, legal expenses,
professional fees, research and development, and the effect of changes in
foreign exchange rates.
14
<PAGE>
Operating income for the year ended December 31, 1996 decreased to $19.4
million or 8.8% of net sales as compared to $20.5 million or 9.1% of net sales
in 1995. The decrease was primarily the result of higher selling, general and
administrative expenses as discussed above.
Interest expense decreased $2.8 million to $24.5 million from the previous
year. The decrease reflects the benefits of lower interest rates resulting from
the refinancing of the majority of the Company's long-term debt in 1995. As no
income tax benefit was recorded against the U.S. losses due to uncertainty of
its ultimate realization, the income tax provision for 1996 was primarily
related to income from the Company's European operations.
In 1996, the Company recognized an extraordinary loss on extinguishment of
debt of $0.6 million, consisting principally of prepayments, other fees and
write-offs of the unamortized portion of related deferred financing costs in
connection with the replacement of the Company's lender under the Revolver
within the New Credit Facility which was treated for accounting purposes as an
extinguishment of debt. See "Item 1. Business--The Refinancing."
Net loss for the year ended December 31, 1996 decreased to $4.0 million as
compared to $16.0 million in 1995. The decrease was principally as a result of
lower interest expense and significantly lower extraordinary items of $0.6
million in 1996 related to the amendment of the Revolver discussed above as
compared to extraordinary items of $9.5 million incurred in 1995 in
connection with the Refinancing.
Comparison of the Year Ended December 31, 1995 to the Year Ended December
31, 1994
Net sales for the year ended December 31, 1995 totaled $224.5 million, an
increase of $21.1 million or 10.4% from 1994. Sprayer sales experienced sales
growth of 16.0% in the aggregate from the prior year. Trigger sprayer sales
increased 26.7% from the prior year. The increased trigger sprayer sales in
North America and Europe were the result of increased business from a major
customer as well as significant sales to new customers. Fine mist sprayer sales
increased 7.2% reflecting continuing strong European demand in the fragrance and
hair care applications. Regular sprayer sales increased 16.2% from the prior
year which resulted from new customers in Europe and new uses for the regular
sprayer. Total dispenser sales increased 4.4% from the prior year due primarily
to increased sales of regular dispensers resulting from new customers in Europe
and increased sales of high viscosity dispensers in North America as a result of
a major customer heavily promoting its product. Aerosol valves, which are
produced and sold in Spain, experienced an increase in sales of 39.4% due to
continued strong demand and moderate price increases. Net sales were favorably
impacted by $8.4 million due to foreign exchange rate changes. In periods when
the U.S. dollar is weakening, the effect of the translation of the financial
statements of the Company's foreign consolidated subsidiaries into U.S. dollars
is that of higher sales, costs and net income.
Gross profit for the year ended December 31, 1995 increased $2.7 million or
5.1% from the comparable 1994 period. Gross profit as a percentage of sales
decreased from 26.2% in 1994 to 25.0% in 1995. The increase in gross profit
resulted primarily from increased sales volume as well as the benefit of
favorable changes in foreign exchange rates. Such increases were offset, in
part, by lower selling prices, increases in plastic resin prices and increased
costs associated with increased utilization of contract molders in Europe. The
price of two of the major plastic resin components consumed by the Company
increased significantly from June 1994 through July 1995 primarily as a result
of demand being higher than available capacity. Resin prices recently leveled
off and are starting to decline slightly. The increased costs due to increased
utilization of contract molding in Europe is due to increased demand for the
Company's products. Limitations in the Company's in-house molding capacity do
not affect the Company's sales growth because, historically, contract molders
have been readily available to provide the Company with additional capacity.
However, use of contract molders generally increases the cost of production and
as a result, the Company's margins on contract-molded products may be lower.
Selling, general and administrative expenses were $35.6 million or 15.9% of
net sales for the year ended December 31, 1995 as compared to $34.6 million or
17.0% of net sales for 1994. The increase in selling, general and
administrative expenses related primarily to increases in research and
development projects, professional fees, certain expenses associated with an
Asian sales office, increased communication expenses and the effect of changes
in foreign exchange rates.
15
<PAGE>
Operating income for the year ended December 31, 1995 increased to $20.5
million or 9.1% of net sales as compared to $18.6 million or 9.2% of net sales
in 1994. The increase was achieved principally through significant growth in
sales as discussed above.
The Company recognized an extraordinary loss of $9.5 million, as a result
of the recognition of call premiums of redeemed notes, certain fees and write-
offs of the unamortized portion of related deferred financing costs in
connection with the Refinancing.
Interest expense in 1995 remained relatively constant compared to the
previous year. As no income tax benefit was recorded against the U.S. losses
due to uncertainty of its ultimate realization, the income tax provision for
1995 was primarily related to income from the Company's European operations.
Net loss for the year ended December 31, 1995 increased to $16.0 million as
compared to $9.1 million in 1994. The increase was primarily the result of $9.5
million of extraordinary items related to the extinguishment of debt in
connection with the Refinancing, offset partially by increased operating income
of $1.8 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its cash needs through cash flow from operations,
existing cash balances, equipment financing and the Revolver under the New
Credit Facility. See "Item 1. Business--The Refinancing."
The Company's primary source of cash continues to be its cash flow from
operations. In addition, the Revolver is available to support the Company's
working capital requirements. The net cash provided by operating activities
increased by $4.0 million for the year ended December 31, 1996 over the
comparable 1995 period. The cash provided by the changes in accounts payable
and accrued liabilities was partially offset by the change in cash used for
accounts receivable and inventories. Working capital at December 31, 1996 was
$20.5 million compared to $18.9 million at December 31, 1995. The increase in
working capital is primarily attributable to an increase in inventories
partially offset by increased short-term borrowings. The Company has entered
into certain interest rate cap agreements to reduce the risk of significant
fluctuations in interest rates on interest payments for the term loan portion of
the New Credit Facility.
The net cash used in investing activities for the year ended December 31,
1996 increased by $0.9 million due primarily to increased purchases of property
and equipment. For the year ended December 31, 1996, capital expenditures were
$16.7 million which were funded primarily by available cash. Capital
expenditures, primarily for the purchase of new manufacturing equipment, for
fiscal 1997 and for fiscal 1998 are expected to exceed $20.0 million for each
year. These amounts represent both expected cash outlays and equipment
financings. Currently Calmar is at capacity with respect to the in-house
molding of certain of its products and the Company's planned capital
expenditures contemplate expanding its in-house molding capacity. The
production capacity of Calmar's manufacturing facilities depends to a great
extent on the products manufactured. Since most of Calmar's injection molding
machines are readily adapted to the manufacture of various products or
components, production capacity may be shifted among various products by
reallocating molding machines or by contracting with independent molders who are
provided with the Company's molds. The Company's capital expenditure program is
designed, in part, to reduce the Company's use of contract molders, and thereby
increase the Company's margins. The Company plans to fund new equipment
purchases through equipment financing and leasing, existing cash balances (which
were $9.2 million as of December 31, 1996) and cash flow from operations. As of
December 31, 1996, a European subsidiary has entered into several non-cancelable
commitments which currently total $1.9 million for capital expenditures to
increase its manufacturing capacity. The related construction and cash outlays
commenced during September 1996. In addition, this European subsidiary has
entered into a sale and leaseback agreement for the construction of an adjacent
manufacturing facility which, upon completion, is expected to result in
operating lease commitments totaling approximately $4.9 million extended over a
term of fourteen years. The Company did not have any other material commitments
for capital expenditures as of the end of fiscal 1996.
16
<PAGE>
The net cash provided by financing activities decreased by $9.2 million for
the year ended December 31, 1996 from the comparable period of 1995 due to the
occurrence of the Refinancing in 1995 and the prepayment of certain equipment
debt and certain Monturas acquisition obligations which totalled approximately
$3.5 million in 1996.
The Refinancing eliminated mandatory redemptions of $45.0 million due each
December 15, 1996 and December 15, 1997 under the Senior Secured Notes and $50.0
million due each February 15, 1998 and February 15, 1999 under the Subordinated
Notes. In 1996, the Company made scheduled principal payments of $1.1 million
and $8.6 million with respect to the New Credit Facility and other long-term
debt, respectively. The scheduled principal payments over the next five years
pursuant to the New Credit Facility are $1.1 million per year in 1997 and 1998;
$10.0 million in 1999; $12.0 million in 2000; and $15.0 million in 2001. In
addition, other long-term debt requires scheduled principal payments of
approximately $4.8 million, $3.1 million, $2.3 million, $2.2 million and $1.7
million in 1997 through 2001, respectively. There is no principal amortization
of the Senior Subordinated Notes during these periods. It is expected that
these payments will be funded through cash flow from operations.
In 1996, cash interest expense for existing borrowings was $24.4 million.
The Company estimates that cash interest expense for existing borrowings for the
fiscal years 1997 through 2001 will be approximately $23.4 million, $23.1
million, $22.6 million, $21.5 million and $20.3 million, respectively (assuming
(i) the interest rate for borrowings under the Senior Subordinated Notes, the
Series A term loan under the New Credit Facility, the Series B term loan under
the New Credit Facility and other long-term debt is 11.5%, 8.4%, 8.8% and
various rates ranging from 5.5% to 10.5%, respectively; and (ii) only scheduled
amortization payments on the term loans and other long-term debt are made during
this period).
In October 1996, the Company amended its New Credit Facility. The
amendment replaced the Company's current lender under the Revolver within the
New Credit Facility through assignment of the Revolver to a new lender which was
deemed to be a repayment of the Revolver, reduced the maximum borrowings
permitted under the Revolver from $20.0 million to $12.0 million, revised
certain financial covenants pursuant to the New Credit Facility and provided
some technical revisions to the New Credit Facility. As amended, the Revolver
under the New Credit Facility has a remaining term of three years and permits
borrowing of up to the lesser of $12.0 million or the maximum amount permitted
under an eligible borrowing base test and contains a $5.0 million sublimit for
letters of credit. At December 31, 1996, the borrowing base test permitted the
Company to borrow up to $12.0 million. At such date, the Company had no
borrowings outstanding and letters of credit of $1.0 million, leaving $11.0
million available for borrowing.
In connection with obtaining the amendment and significantly modifying the
New Credit Facility, the Company incurred fees (to lenders and advisors) of $0.7
million. These amounts have been recorded as debt issue costs and will be
amortized over the remaining terms of the respective components of the New
Credit Facility. In addition, as discussed above, the Company recognized an
extraordinary loss on the extinguishment of the Revolver under the New
Credit Facility in the amount of $0.6 million.
The indenture which governs the terms of the Senior Subordinated Notes (the
"Indenture") and the New Credit Facility contain significant financial and
operating covenants. The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur debt,
issue certain preferred stock, create liens securing subordinated debt, sell or
transfer assets, make restricted payments (dividends, redemptions, investments,
and unscheduled payments on subordinated debt) and engage in certain
transactions with affiliates and certain mergers. The New Credit Facility
contains certain financial covenants, including, but not limited to, covenants
related to a minimum interest coverage ratio, a minimum consolidated EBITDA, a
maximum leverage ratio and a minimum current asset ratio. In addition, the New
Credit Facility contains other affirmative and negative covenants relating to
(among other things) limitations on capital expenditures, other indebtedness,
liens, investments, guarantees, restricted junior payments (dividends,
redemptions, and payments on subordinated debt), mergers and acquisitions, sales
of assets, leases and transactions with affiliates. The New Credit Facility
also contains customary events of default, including certain changes of control
of the Company. As of December 31, 1996, the Company was in compliance with all
covenants contained in such debt instruments.
17
<PAGE>
The terms of the Indenture allow for the incurrence of additional
indebtedness, including Senior Debt (as defined in the Indenture) and secured
indebtedness. The incurrence of additional indebtedness is limited by certain
conditions, including compliance with a Consolidated Cash Flow Ratio (as defined
in the Indenture), calculated on a pro forma basis to reflect such additional
indebtedness, of 2.0 to 1.0. At December 31, 1996, the Consolidated Cash Flow
Ratio was 1.8 to 1.0. In addition and notwithstanding the foregoing, the
Indenture permits the Company, and in certain cases its subsidiaries, to incur
certain specified additional indebtedness without regard to the compliance with
the Consolidated Cash Flow Ratio referred to above. The terms of the New Credit
Facility permit the Company, and in certain cases its subsidiaries, to incur
additional indebtedness only under certain circumstances.
The Company has a substantial amount of indebtedness. The degree to which
the Company is leveraged could have important consequences to investors,
including the following: (i) the Company's ability to obtain additional
financing in the future for refinancing indebtedness, working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired, (ii) a
substantial portion of the Company's consolidated cash flow from operations must
be used for the payment of interest and principal on its indebtedness, (iii) the
Company may be more highly leveraged than its competitors, which may place it at
a competitive disadvantage, (iv) the Indenture and the New Credit Facility
contain restrictive financial and operating covenants, (v) the borrowings under
the New Credit Facility have floating rates of interest, which cause the Company
to be vulnerable to increases in interest rates, and (vi) the Company's
substantial degree of leverage could make it more vulnerable to a downturn in
general economic conditions.
Cumulative dividends aggregating $60.3 million have accumulated on the
Company's outstanding Series A and Series B Preferred Stock through December 31,
1996. Such dividends, payable in shares of Series A and Series B Preferred
Stock, respectively, had not been declared as of December 31, 1996.
The Company had unused credit facilities available to its European
subsidiaries of $4.7 million at December 31, 1996.
The Company believes that cash flow from operations, existing cash balances
and the financial resources available to it, including the Revolver under the
New Credit Facility and equipment financing and leasing, will be sufficient to
meet its debt service, working capital and capital investment needs through the
term of the Revolver.
For a discussion of the Company's adoption of SFAS No. 123, please see Note
1 to the Company's Consolidated Financial Statements.
The Company's Federal income tax returns for calendar years 1986 through
1991 are currently under examination by the Internal Revenue Service ("IRS"). On
March 10, 1997, the Company received notice from the IRS of proposed adjustments
for such calendar years which would result in additional federal taxes of up to
$5.5 million, plus interest from the date when such additional taxes would have
been due, and in the reduction of the Company's net operating loss carryovers
from $45.6 million to $36.5 million. Most of the proposed adjustments relate to
the Company's amortization deductions with respect to a covenant not to compete
purchased from the Company's former parent corporation when that corporation
sold a controlling
18
<PAGE>
interest in the Company in 1988.
The Company, after consultation with tax counsel, continues to believe in
the propriety of its positions set forth in its tax returns and will vigorously
contest the adjustments being proposed by the IRS.
EFFECT OF INFLATION
The effect of inflation on the Company's results of operations has not been
material in the periods discussed.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Index to Consolidated Financial Statements and the Index to
Financial Statement Schedules included at "Item 14. Exhibits, Financial
Statement Schedules, and Reports on Form 8-K."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The current executive officers and directors of the Company are listed
below, together with their ages and all Company positions and offices held by
them.
NAME AGE POSITION
- ---------------------------- ---- --------------------------------------
Richard J. Hartl............. 59 President, Chief Executive Officer,
Chairman of the Board and Director
C. Richard Huebner........... 50 Executive Vice President, Chief
Financial Officer, Secretary and
Director
Jacques J. Barriac........... 56 Vice President, Technology
David C. Guinta.............. 48 Vice President, North American Sales
Christopher M. Harrison...... 49 Managing Director and Vice President,
European Operations and Director
Aldie E. Johnson, III........ 45 Vice President and General Manager,
Personal Care Products Division
John P. McKernan............. 37 Vice President and General Manager,
Chemical and Cleaning Products
Division
Donald K. Miller............. 59 Vice President, Engineering
Thomas F. Perong............. 57 Vice President, Human Resources
Gunnar Backman............... 59 Director
Matt L. Figel................ 37 Director
Donald E. Knox............... 77 Director
Harry T.J. Roberts........... 62 Director
John M. Roth................. 38 Director
Ronald P. Spogli............. 49 Director
William M. Wardlaw........... 50 Director
Mr. Hartl has served as President since September 1991 and as Chairman of
the Board of Directors of Calmar Inc. (the "Board") since September 1995. Prior
to joining Calmar, Mr. Hartl had been employed for 16 years by Avery-Dennison
where he held various positions, including Group Vice President for the
Specialty Tapes and Adhesives Group and Group Vice President for Technology and
Ventures. Mr. Hartl's previous employment
19
<PAGE>
included senior management positions with General Electric in its Engineering
Plastics operation and with the Plastics Division of Monsanto. Mr. Hartl has
been a director of the Company since September 1991.
Mr. Huebner has served as Executive Vice President since August 1988 and
Chief Financial Officer and Secretary since December 1988. From March 1988 to
August 1988, Mr. Huebner served as Senior Vice President of Finance, and from
April 1983 to March 1988 he served as Vice President-Finance, Treasurer and
Secretary. Mr. Huebner has been a director of the Company since April 1983.
Mr. Barriac has served as Vice President of Technology of the Company since
July 1992. Prior to joining Calmar, Mr. Barriac was Vice President of
Technology for West Company where he had been employed since 1987. Mr. Barriac
also was employed by Owens Illinois as Manager of Technology for Plastic
Closures. Mr. Barriac holds a Ph.D. in Polymer Chemistry from the Sorbonne
University.
Mr. Guinta joined Calmar in September 1991 and became Vice President of
North American Sales in January 1997. From 1991 to January 1997, Mr. Guinta
held various positions in sales, including Sales Representative, East Coast
Regional Manager and Director North American Sales. Prior to joining Calmar, Mr.
Guinta was employed for five years with Amoco Container Company Division of
Amoco Oil Company as Sales Representative and for eight years with VCA Molded
Products Division of Ethyl Corporation as Sales Representative.
Mr. Harrison has served as Managing Director of European Operations of the
Company since February 1992 and Vice President, European Operations since April
1992. Prior to joining Calmar, Mr. Harrison had been employed by CMB Packaging,
S.A. since 1989 where he held various positions, including Group Director of CMB
Bottles and Closures PLC. From 1987 until 1989, he was employed by MB Group
P.L.C. where he was Managing Director of UCP-Metalbox. Mr. Harrison became a
director of the Company in March 1996. Mr. Harrison resigned from the Company
and as a director effective March 31, 1997.
Mr. Johnson has served as Vice President and General Manager of the
Personal Care Products Division of the Company since February 1996. From July
1990 to February 1996, Mr. Johnson served as Vice President of Manufacturing.
Prior to joining Calmar, Mr. Johnson served as Vice President and General
Manager of the Specialty Plastics Product Division of Kerr from March 1983 until
July 1990.
Mr. McKernan joined Calmar in February 1996 as Vice President and General
Manager of the Chemical and Cleaning Products Division of Calmar. Prior to
joining Calmar, Mr. McKernan was employed for 10 years by Setco, a division of
McCormick and Company, where he held various positions, including Vice President
of Sales and Marketing.
Mr. Miller has served as Vice President of Engineering since January 1988.
From March 1978 to December 1987, he served as Engineering Director and from
March 1976 to February 1978, he served as Chief Engineer of the Company.
Mr. Perong joined Calmar in August 1991 and become Vice President of Human
Resources in January 1996. From August 1991 to January 1996, Mr. Perong served
as Director of Human Resources. Prior to joining Calmar, Mr. Perong was
employed for 15 years by Bourns, Inc. as Division Vice President of Human
Resources.
Mr. Backman has been with Svenska Handelsbanken, a major Swedish bank,
since 1970 serving in various capacities before becoming General Manager and
Senior Vice President of Svenska Handelsbanken New York in 1983. In 1986, Mr.
Backman was appointed Deputy of the Central Credit Department in Sweden and
became an Executive Vice President of Svenska Handelsbanken Sweden in 1989.
Since 1994, Mr. Backman has also served on the boards of directors of several
subsidiaries of the bank. AB Handel och Industri, which owns 36.4% of the
outstanding common stock of Calmar, is a wholly-owned subsidiary of Svenska
Handelsbanken Sweden. Mr. Backman became a director of the Company in December
1995.
Mr. Figel founded Doramar Capital, a private investment firm, in January
1997. From October 1986 to December 1996, Mr. Figel was employed by FS&Co. (or
its affiliates). FS&Co. is a private investment company
20
<PAGE>
that was founded in 1983. Mr. Figel became a Director of the Company in January
1995. Mr. Figel is also a member of the Board of Directors of Buttrey Food and
Drug Stores Company.
Mr. Knox continues to be a director of the Company. He served as Chairman
of the Board from September 1987 until October 1991. From April 1983 to August
1988, he served as President and Chief Executive Officer of the Company.
Mr. Roberts became a director of the Company in December 1995. Since 1985
Mr. Roberts has been Senior Vice President and in general management of Svenska
Handelsbanken New York, a branch of Svenska Handelsbanken Sweden. Mr. Roberts
holds a fellowship in the Chartered Institute of Bankers. Mr. Roberts is also a
member of the Board of Directors of D.V.I. Inc.
Mr. Roth joined FS&Co. in March 1988 and became a general partner in March
1993. From 1984 to 1988 Mr. Roth was employed by Kidder, Peabody & Co.
Incorporated, his most recent position being Vice President in the Merger and
Acquisition Group. Mr. Roth became a director of the Company in 1988. Mr. Roth
is also a member of the Boards of Directors of EnviroSource, Inc. and Brylane
Inc.
Mr. Spogli is a founding partner of FS&Co. Mr. Spogli became a director of
the Company in 1988. Mr. Spogli is the Chairman of the Board and a director of
EnviroSource, Inc. Mr. Spogli also serves on the Boards of Directors of Buttrey
Food and Drug Stores Company and Brylane Inc.
Mr. Wardlaw joined FS&Co. in March 1988 and became a general partner in
January 1991. From 1984 to 1988, Mr. Wardlaw was a principal of the law firm of
Riordan & McKinzie. Mr. Wardlaw became a director of the Company in 1988. Mr.
Wardlaw is also a member of the Board of Directors of Buttrey Food and Drug
Stores Company.
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers serve at the
discretion of the Board. The Board has a Compensation Committee, consisting of
all of the members of the Board except Messrs. Hartl and Huebner, which
administers both the Company's stock option plan and the Company's bonus plan.
The members of the Board do not receive compensation for services on the Board
or for services on the Compensation Committee but are reimbursed for their out-
of-pocket expenses in serving on the Board and any committee thereof. There are
no family relationships between any member of the Board and any executive
officer of the Company.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and the other four most highly compensated
executive officers (the "Named Executive Officers") for their services to the
Company for (i) the year ended December 31, 1994, (ii) the year ended December
31, 1995, and (iii) the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) COMPENSATION(4)
- ---------------------------- ---- --------- -------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Richard J. Hartl.............................. 1996 $301,000 $ 145,000 -- $ 22,609
President and Chief Executive Officer........ 1995 301,000 150,000 -- 22,270
1994 301,000 200,000 -- 24,020
C. Richard Huebner............................ 1996 192,000 60,202 -- 47,577
Executive Vice President and Chief........... 1995 188,000 64,814 -- 45,390
Financial Officer............................ 1994 184,000 67,839 -- 47,264
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Aldie E. Johnson, III......................... 1996 153,558 52,963 -- 3,341
Vice President and General Manager-......... 1995 134,000 43,557 -- 7,533
Personal Care Products Division.............. 1994 131,000 40,249 -- 7,041
Christopher M. Harrison....................... 1996 136,355 23,510 -- 22,909
Managing Director and Vice President-........ 1995 132,000 26,437 -- 23,018
European Operations.......................... 1994 121,000 36,261 -- 18,884
John McKernan(5).............................. 1996 126,000 43,458 64,183(6) 1,325
Vice President and General Manager,
Chemical and Cleaning Products Division
</TABLE>
____________________
(1) Amounts include $41,000 of supplemental deferred compensation earned by Mr.
Hartl in 1994, 1995 and 1996.
(2) Represents payments made to executive officers pursuant to the Calmar Inc.
Executive Incentive Plan in 1994, 1995 and 1996 with the exception of
$200,000, $150,000 and 145,000 bonuses earned but deferred by Mr. Hartl in
1994, 1995 and 1996 respectively.
(3) While certain officers received certain perquisites, such perquisites do
not exceed the lesser of $50,000 or 10% of such officers' respective
salaries and bonuses.
(4) Amounts shown include compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers which specifically include the following for Messrs. Hartl,
Huebner, Johnson, Harrison and McKernan, respectively: (i) Company
contributions to the 401(k) Plan of: Hartl: $4,750 in 1996, $4,620 in 1995
and 1994; Huebner: $4,750 in 1996, $4,620 in 1995 and 1994; Johnson: $0 in
1996, 1995 and 1994; Harrison: $0 in 1996, 1995 and 1994; and McKernan:
$1,131 in 1996; (ii) Company payments to the Deferred Compensation Plan of:
Hartl: $14,709 in 1996, $14,500 in 1995 and $16,250 in 1994; Huebner:
$12,792 in 1996, $9,950 in 1995 and $10,415 in 1994; Johnson: $2,712 in
1996, $7,225 in 1995 and $6,742 in 1994; Harrison: $0 in 1996, 1995 and
1994; and McKernan: $0 in 1996; (iii) Company payments of term life
insurance premiums of: Hartl: $3,150 in 1996, 1995 and 1994; Huebner:
$1,371 in 1996, $807 in 1995 and $786 in 1994; Johnson: $629 in 1996, $308
in 1995 and $299 in 1994; Harrison (whole life insurance premiums): $13,364
in 1996, $13,778 in 1995 and $10,414 in 1994; and McKernan: $194 in 1996;
(iv) Company contributions to the defined contribution portion of the
Pension Arrangement (as defined below) for Mr. Harrison of: $9,545 in 1996,
$9,240 in 1995 and $8,470 in 1994. In addition, amounts shown include
imputed interest on certain employee loans for Mr. Huebner of $28,664 in
1996, $30,013 in 1995 and $31,443 in 1994.
(5) Mr. McKernan joined the Company in February 1996.
(6) Consists of a moving allowance of $39,183 and a signing bonus of $25,000
paid to Mr. McKernan in 1996.
EXECUTIVE INCENTIVE PLAN
In January 1993, the Company adopted the Calmar Inc. Executive Incentive
Compensation Plan (the "Executive Incentive Plan") which provides for the
payment of bonuses to (i) persons who hold a Vice Presidential title, (ii)
Directors, and (iii) Key Managers approved by the President/CEO. The
President/CEO's incentive compensation is determined separately by the Board of
Directors. Each eligible participant may be paid a bonus according to a formula
which takes into account the participant's level of responsibility and quality
of performance, and the Company's performance as a whole. If the Company's
performance-to-budget is below 85%, bonuses are given only at the discretion of
the President/CEO and Board of Directors. No bonuses are given if performance
is less than 50% of budget.
Bonuses paid or to be paid to the Named Executive Officers under the
Executive Incentive Plan in 1994, 1995 and 1996 have been included in the
Summary Compensation Table set forth above.
22
<PAGE>
401(k) PLAN
The Company maintains a 401(k) plan (the "401(k) Plan") pursuant to which
all domestic salaried and clerical employees (except employees covered by a
union retirement plan), after completing six months of service with the Company,
can elect to defer Federal income taxation on up to 15% of their total annual
compensation, including salaries and bonuses, by having such amount contributed
by Calmar to the trust established under the plan rather than paid to the
employee. All salary deferral and voluntary contributions made for or by the
employee participant are immediately fully vested. Calmar will make a
contribution each year in an amount equal to 50% of the employee's salary
deferral contributions for management employees, up to a maximum of 3% of the
employee's total compensation (not to exceed $4,750). Calmar will make a
contribution each year in an amount equal to 75% of the employee's salary
deferral contributions for qualified hourly employees, up to a maximum of 4.5%
of the employee's total compensation (not to exceed $7,125). Company matching
contributions vest at the rate of 20% thereof for each full year of service.
Although generally amounts held for the account of the employee under the 401(k)
Plan cannot be distributed until the employee reaches the age of 65, or 55 and
has 10 full years of service, or has 30 full years of service, early
distribution of (or borrowing from) voluntary contributions is permitted, and
early distribution of salary deferred contributions is permitted, in certain
circumstances of hardship.
Salary deferral and Company matching contributions to the 401(k) Plan made
or to be made for or by the Named Executive Officers of the Company have been
included in the notes to the Summary Compensation Table set forth above.
DEFERRED COMPENSATION PLAN
Calmar maintains a deferred compensation plan (the "Deferred Compensation
Plan") which provides certain executives with retirement income and permits such
executives to determine the manner in which they will receive such income.
Under such plan, for the calendar years 1987 through 1994, the Company credited
to an account established for each eligible participant 5% of such participant's
base salary and bonus. For calendar years after 1994, the Company shall
determine, in its sole discretion, the deferral percentage or amount that shall
be credited to the participant's deferred compensation account (the "Deferred
Compensation Account"). The amount contributed is typically used to purchase an
insurance policy on the life of the participant. A participant who, after five
years of consecutive employment with the Company, is terminated for cause or
resigns prior to the established retirement date, is entitled to receive a
benefit equal to 100% of the amount in the participant's Deferred Compensation
Account. This amount will be distributed in 15 annual installments beginning
one year after termination. A participant who is terminated without cause, is
entitled to a benefit equal to 120% of the amount in the participant's Deferred
Compensation Account. If a participant's employment is terminated for any
reason other than death before five consecutive years of employment, such
participant's Deferred Compensation Account is forfeited to the Company. If the
participant dies before completing five years of consecutive employment, the
designated beneficiary is entitled to 50% of the net proceeds of the
participant's policy, while the beneficiary of a participant dying after five
years of consecutive employment is entitled to 100% of the net proceeds of the
participant's policy. Benefits for death and termination without cause may be
disbursed in a lump sum or in 20 equal quarterly installments. As of December
31, 1996, approximately $663,341 has been provided for in the Deferred
Compensation Accounts established under the Deferred Compensation Plan.
Company payments to the Deferred Compensation Accounts of the Named
Executive Officers have been included in the notes to the Summary Compensation
Table set forth above.
NONQUALIFIED STOCK OPTION PLAN
Officers, key employees and consultants, including directors who are
officers, key employees or consultants of the Company or its direct or indirect
subsidiaries (the "Subsidiaries") who are chosen by the Compensation Committee
of the Company are eligible to participate in the Company's 1988 Employee Stock
Option Plan (the "Option Plan") of the Company. Under the Option Plan, the
participants may be granted nonqualified options to purchase shares of common
stock of the Company (the "Options") at an option price (the "Option Price")
23
<PAGE>
determined by the Board of Directors of the Company. The Options are not
intended to qualify for treatment as incentive stock options under Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code").
Up to 216,360 shares of Calmar's common stock may be issued under the
Option Plan upon the exercise of Options granted thereunder. On September 3,
1991, in connection with its offer of employment, the Company granted a
nonqualified stock option under the Option Plan to Mr. Hartl for 50,000 shares
of common stock at an exercise price of $10.00 per share. As of March 15, 1997,
Options covering an aggregate of 154,177 shares (including Mr. Hartl's option)
of the Company's common stock were outstanding under the Option Plan.
The Options terminate at the earlier of (i) three months after termination
of employment other than by resignation or for cause, (ii) on the effective date
of the participant's voluntary resignation or termination for cause, (iii) one
year after death or permanent disability, or (iv) ten years and one month from
the date of grant. Options vest in annual installments of 20% per year over
five years. The exercisability of Options may be accelerated, at the discretion
of the Compensation Committee, upon the occurrence of certain events
constituting an Extraordinary Corporate Event (as defined in the Option Plan).
However, no Option granted to an officer or director of Calmar will be
exercisable within six months from the date of its grant as a result of
acceleration. Under the Option Plan, any time prior to four years after the
date of grant of an Option, the Company has the option to repurchase all or any
portion of the shares of its common stock acquired by the participant by the
exercise of the Options for a period of six months after the date of termination
of the participant for any reason except death or disability. The purchase
price for such repurchased shares shall equal the price set forth in the
individual nonqualified stock option agreements. The Company has a right of
first refusal in the event a participant proposes to sell after the fourth
anniversary of the date of grant any shares purchased upon exercise of such
participant's Options.
The Option Plan also provides for the grant of "Limited Rights" to any
holders of Options granted thereunder. A Limited Right may be granted at any
time during the term of a related Option. The purpose of the Limited Rights
feature is to allow participants who are subject to the short-term trading
provisions of the federal securities laws to obtain the full economic benefit of
their related Options in the event an Extraordinary Corporate Event occurs. A
Limited Right permits the holder to receive upon exercise cash equal to the
number of shares as to which the Limited Right is being exercised multiplied by
the difference between the Option Price per share and the price per share of
common stock paid or to be paid to the holder of the Limited Right in any
Extraordinary Corporate Event in effect at the time such Limited Right is
exercised.
The following table sets forth information concerning the number and value
of securities underlying unexercised Options held by each of the Named Executive
Officers at December 31, 1996. No Options were granted to the Named Executive
Officers or exercised by the Named Executive Officers in 1996.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
--------------------------------- ---------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Richard J. Hartl............. 50,000/0 N/A
C. Richard Huebner........... 61,331/0 N/A
Aldie E. Johnson, III........ 0/0 N/A
Christopher M. Harrison...... 1,200/800 N/A
John McKernan................ 0/0 N/A
</TABLE>
_______________
(1) Because there is no established public trading market for the common stock
of the Company, the Board of Directors of the Company determines the fair
market value of the Company's common stock from time to time. The Company
believes that the fair market value of the Company's common stock was
$10.00 per share as of December 31, 1996. The exercise price of each of
the Options listed above is $10.00 per share. On this basis, none of the
Options held by the Named Executive Officers were "in-the-money" as of
December 31, 1996.
24
<PAGE>
1995 STOCK OPTION PLAN
In December 1995, the Board of Directors of the Company approved and
adopted the Calmar Inc. 1995 Employee Stock Option Plan (the "New Plan"). The
New Plan is a successor to the Calmar Inc. 1988 Employee Stock Option Plan (the
"Old Plan") and was established to replace the Old Plan and to grant additional
options to officers, certain directors, key employees and consultants of the
Company. Under the New Plan, persons holding unexercised stock options (the
"Old Options") under the Old Plan will be allowed to exchange such Old Options
for similar options (the "New Options") under the New Plan. The New Options
will cover the same number of shares and be exercisable at the same option price
as the Old Options. In addition, optionees will be vested in the New Options to
the same extent as they are vested in their Old Options. The expiration dates
of the New Options will extend for two years beyond the respective expiration
dates of the Old Options.
The New Plan authorizes granting of options to purchase up to 910,000
shares of the Company's common stock. The New Options will be designated as
either Incentive Stock Options or Nonqualified Stock Options. Incentive Stock
Options may not be granted to directors who are not otherwise employees of the
Company; while Nonqualified Stock Options may be granted to directors only if
they are outside directors (i.e., non-employees). The exercise price of the
Incentive Stock Options will be not less than the fair market value of the
shares underlying such option on the date of the grant. The exercise price of
the Nonqualified Stock Options shall be not less than 85 percent of the fair
market value of the shares underlying such option on the date of the grant.
Vesting of all options may be based on the Company's attaining of performance
criteria as specified at the time of the granting and/or may also be based on
the passage of time. The Options terminate at the earliest of (i) ninety (90)
days after termination of employment other than (a) by death or disability, (b)
for cause, or (c) if the participant dies within ninety (90) days of termination
(other than for cause), (ii) thirty (30) days after the participant's
termination for cause, (iii) one year after death, permanent disability or
termination if the participant dies within ninety (90) days of termination
(other than for cause), or (iv) ten years from the date of grant. The New
Options also provide for certain "tag along" rights whereby, in the event that
FS Equity Partners II, L.P., the majority stockholder of Calmar ("FSEP II"),
finds a third party buyer for all or part of its shares of common stock,
participants will have the right to sell an equivalent percentage of their
shares of common stock on the same terms. Similarly, the New Options also
provide for certain "drag along" rights whereby, in the event that FSEP II finds
a third party buyer for all of its shares of common stock, participants will be
obligated to sell all of their New Options and/or common stock on the same
terms. To date, no New Options have been granted and no Old Options have been
exchanged for New Options under the New Plan.
EMPLOYMENT AGREEMENTS
Mr. Hartl is party to an employment agreement with the Company which
contains customary employment terms and provides for a current annual base
salary of $301,000, an annual incentive bonus under the Executive Incentive
Plan, fringe benefits, participation in benefit plans, and such other
compensation as approved by the Board of Directors. The term of the employment
agreement is three years and four months, terminating at the close of business
on December 31, 1997, unless earlier terminated as provided therein. The
Company may terminate Mr. Hartl's employment during the 40-month term for cause,
upon Mr. Hartl's disability or without cause. If Mr. Hartl is terminated
without cause, he would be entitled to, among other things, 125% of his base
annual salary payable for the remainder of the 40-month term as if he had not
been terminated and the bonus payable to him under the Incentive Plan for the
most recently completed fiscal year prior to termination (if not previously paid
by the Company). In addition, the Company would continue to pay all benefits,
including his premiums for health care continuation coverage under the Calmar
Inc. Retiree Health Benefit Plan. If, after a Change of Control (as defined
below) of the Company, (i) the duties of Mr. Hartl are significantly reduced or
adversely altered, (ii) Mr. Hartl is removed as President and Chief Executive
Officer, (iii) Mr. Hartl's base annual salary or bonus is reduced, or (iv) the
successor to the Company fails to assume the obligations of the Company under
the employment agreement, then Mr. Hartl may terminate his employment and would
be entitled to receive, among other things, a lump sum payment equal to three
times his base annual salary (including any amounts deferred under the Deferred
Compensation Plan) his Incentive Plan bonus and payment of his health care
continuation coverage premiums as described above. The employment agreement
also contains noncompetition and confidentiality provisions. Pursuant
25
<PAGE>
to the Deferred Compensation Arrangement effective as of January 1, 1995, by and
between Mr. Hartl and the Company, Mr. Hartl may defer until a subsequent year
up to 100% of his compensation. The Company maintains a Supplemental Executive
Retirement Plan for the benefit of Mr. Hartl. Under this Plan, Mr. Hartl will,
upon retirement, receive an annual benefit in an amount determined by Mr.
Hartl's age at retirement.
Mr. Huebner is a party to an employment agreement with the Company which
contains customary employment terms and provides for a base annual salary of
$192,000 and for an annual incentive bonus under the Executive Incentive Plan.
If the successor to all or substantially all of the business and/or assets of
the Company does not assume the Company's obligations under Mr. Huebner's
employment agreement, then Mr. Huebner would be entitled to a payment equal to
two times the sum of his base salary and all incentive compensation awarded
pursuant to the Incentive Plan during the 12 months preceding such termination
of his employment agreement. In addition, upon termination of his employment
agreement under certain circumstances (including the failure of a successor
entity to assume the obligations of his employment contract), Mr. Huebner would
be entitled to the continuation of all employee benefit plans for two years
following such termination and payment of any legal fees incurred by Mr. Huebner
as a result of such termination of employment. The employment agreement also
includes confidentiality provisions.
Certain employees, including Messrs. Johnson and Harrison are parties to
agreements affording them certain rights upon a Change of Control (as defined
below) of the Company. If any such employee is terminated without cause within
one year of a Change in Control, he will be entitled to (i) a lump sum amount
equal to his base annual salary prior to the Change in Control; (ii) any bonus
earned, but as yet unpaid, under the Company's Incentive Plan, for the most
recently completed fiscal year of the Company prior to the effective date of
termination; and (iii) the reimbursement of reasonable expenses accrued through
the effective date of such termination. For purposes of such agreements and Mr.
Hartl's employment agreement discussed above, the term "Change of Control" is
defined as: (i) the acquisition in one or more transactions of beneficial
ownership (within the meaning of Rule 13d(3) under the Exchange Act) by (y) any
person or entity (other than FS&Co. and its affiliates) or (z) any group (as
defined in Section 13(d) under the Exchange Act) other than FS&Co. and its
affiliates of any voting stock of the Company such that, as a result of such
acquisition, such person, entity or group has the ability to elect, directly or
indirectly, a majority of the members of the Board, or (ii) the sale of all or
substantially all of the assets of the Company (including within such assets the
capital stock of any subsidiary) and its subsidiaries, in a single transaction
or a series of transactions, to any person or persons.
PENSION PLAN
Each of Calmar's domestic employees (except employees covered by a union
retirement plan) including executive officers, participate in Calmar's Salaried
Retirement Plan, a defined benefit plan (the "Pension Plan"). The Pension Plan
is funded entirely through cash contributions made by the Company. Because
contributions are calculated on an actuarial basis for all participants, it is
not practicable to determine actuarial amounts set aside or accrued for an
individual or group of individuals. An employee's years of service and average
annual compensation during the highest consecutive five years over the last ten
years of employment before retirement are the major factors affecting the amount
of their pension. Credit for this purpose is given for service under a plan
sponsored by Realex Corporation, a company purchased by Calmar in 1985, which
plan was merged into the Pension Plan. The normal retirement age under the
Pension Plan is 65.
The following table sets forth estimated annual benefits payable upon
retirement to persons in specified remuneration and years of service
classifications under the Pension Plan (without regard to the maximum annual
accrued benefit permitted by the Code, which, except for certain grandfather
rights or in the event of early or late retirement, was $120,000 for 1996,
subject to cost of living adjustments). Remuneration covered by the Pension
Plan consists of total cash compensation including any bonuses. The benefits
shown in the table below are not subject to deduction for Social Security
benefits or other offset amounts. As of December 31, 1996, the credited years
of service under the Pension Plan of Messrs. Hartl, Huebner, Johnson and
McKernan were approximately 5, 23, 6 and 0, respectively.
26
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION
FOR REPRESENTATIVE YEARS
OF CREDITED SERVICES OVER
AVERAGE ANNUAL COMPENSATION THE FOLLOWING YEARS
DURING THE HIGHEST ---------------------------------
CONSECUTIVE FIVE YEARS 10 20 30 OR MORE
- --------------------------- ------- -------- ----------
<S> <C> <C> <C>
$ 40,000 $ 4,828 $ 9,656 $14,483
60,000 7,828 15,656 23,484
80,000 10,824 21,648 32,471
100,000 13,828 27,656 41,483
150,000 21,327 42,656 63,983
</TABLE>
Because Mr. Harrison is located in England, he is not eligible to
participate in the Pension Plan discussed above. However, Mr. Harrison has a
pension arrangement, dated September 1992 (the "Pension Arrangement") with the
Company. The Pension Arrangement has a defined contribution component whereby
the Company contributes 7.0% of Mr. Harrison's salary annually provided that Mr.
Harrison also contributes 3.0% of his salary annually. The Pension Arrangement
also has a defined benefit component which will provide at age 55, the lesser
of: (i) 66.7% of Mr. Harrison's final salary, less the pension equivalent of
his defined contribution benefits; or (ii) in addition to his defined
contribution benefits, a certain percentage of his final salary depending on Mr.
Harrison's age at retirement and ranging from 29.0% if Mr. Harrison retires at
age 55 to 66.7% if he retires at age 65. With respect to the defined benefit
component, Mr. Harrison contributes 6.17% of his annual salary and the Company
pays the balance of the contribution needed to fund such benefit. As of
December 31, 1996, Mr. Harrison had been credited with approximately 4 years of
service under the Pension Arrangement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No officer or employee of the Company or its subsidiaries participated in
the deliberations of the Board of Directors concerning executive officer
compensation during fiscal 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock, Series A Preferred Stock and Series B
Preferred Stock, as of March 15, 1997, by each person who is known by the
Company to own beneficially more than 5% of the capital stock, by each director
of the Company, each of the Named Executive Officers and by all directors and
officers of the Company as a group.
27
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE NUMBER OF NUMBER OF
OF COMMON SHARES OF PERCENTAGE SHARES OF
PERCENTAGE STOCK ON A SERIES A OF SERIES A SERIES B
NUMBER OF SHARES OF OF COMMON FULLY DILUTED PREFERRED PREFERRED PREFERRED
NAME COMMON STOCK(1) STOCK(1) BASIS STOCK(1) STOCK(1) STOCK(1)
- ----------------------------- ------------------- ----------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Freeman Spogli & Co. (2).......... 5,332,922(3) 78.3% 59.2% 254,197 57.4% 1,000,000(4)
John M. Roth
Ronald P. Spogli
William M. Wardlaw
AB Handel och Industri............ 3,033,046(5) 60.7% 33.7% 177,938 40.2% --
Humlegardsgatan 6
S-114 46 Stockholm,
Sweden
Richard J. Hartl.................. 100,000(6) 3.2% 1.1% -- -- --
C. Richard Huebner................ 137,414(7) 4.4% 1.5% 250 * --
Christopher M. Harrison........... 7,600(8) * * -- -- --
Aldie E. Johnson, III............. 5,000(9) * * 375 * --
Donald E. Knox.................... 54,553(10) 1.8% * 500 * --
Directors and officers as a
group (16 persons)............... 5,656,274(11) 81.2% 62.8% 255,522 57.7% --
</TABLE>
- -------------------
* Less than 1%.
(1) The persons named in this table have sole voting power and investment power
with respect to all shares of capital stock shown as beneficially owned by
them, subject to community property laws where applicable and the
information contained in this table and these notes.
(2) All shares are held of record by FSEP II of which FS&Co. is the general
partner. As general partner of FSEP II, FS&Co. has the sole power to vote
and dispose of such shares. Messrs. Spogli, Wardlaw and Roth (each of whom
are directors of the Company) and Messrs. Bradford M. Freeman and J.
Frederick Simmons are general partners of FS&Co., and as such may be deemed
to be the beneficial owners of the Company's capital stock indicated as
beneficially owned by FS&Co. The business address of FS&Co. and its general
partners is 11100 Santa Monica Boulevard, Suite 1900, Los Angeles,
California 90025.
(3) Includes 3,722,627 shares issuable upon exercise of warrants.
(4) Constitutes 100% of the outstanding shares of Series B Preferred Stock.
(5) Includes 1,905,840 shares issuable upon exercise of warrants.
(6) Includes 50,000 shares issuable with respect to options exercisable within
60 days of March 15, 1997.
(7) Includes 72,750 shares of common stock held by C. Richard Huebner and Debra
Ann Huebner, as Co-Trustees of the C. Richard Huebner and Debra Ann Huebner
Family Trust dated August 5, 1988. Includes 3,333 shares issuable upon
exercise of warrants and 61,331 shares issuable with respect to options
exercisable within 60 days of March 15, 1997.
(8) Includes 1,600 shares issuable with respect to options exercisable within
60 days of March 15, 1997.
(9) Consists of 5,000 shares issuable upon exercise of warrants.
(10) Includes 6,667 shares issuable upon exercise of warrants and 17,886 shares
issuable with respect to options exercisable within 60 days of March 15,
1997.
(11) Includes 3,739,960 shares issuable upon exercise of warrants and 137,269
shares issuable with respect to options exercisable within 60 days of March
15, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On August 5, 1988, the Company loaned C. Richard Huebner, Executive Vice
President, Chief Financial Officer and a director of the Company, and his wife
$398,000. The loan is evidenced by a promissory note secured by a deed of
trust. Principal is payable in equal monthly payments based on a 30-year
amortization. As of February 24, 1997, the outstanding principal amount was
$277,690. The note does not bear interest unless Mr. Huebner is terminated by
the Company for other than reasonable cause, at which time the note shall bear
interest at the rate of 10% per annum. Upon termination for cause, the entire
amount of the loan may become due and payable at the option of the Company. In
addition, on December 8, 1988, in connection with his acquisition of 72,750
shares of Calmar's common stock at a price of $10.00 per share, Mr. Huebner paid
$466,000 in cash
28
<PAGE>
and gave his promissory note for $261,500 which note, together with all accrued
and unpaid interest thereon, is payable in full on December 31, 1997. As of
February 24, 1997, the outstanding principal amount of the note was $367,718.
On September 3, 1991, Richard J. Hartl, President and Chief Executive
Officer and a director of the Company, purchased 50,000 shares of common stock
of Calmar at a price of $7.50 a share, for an aggregate purchase price of
$375,000. Of such price, $374,500 was represented by a promissory note which
bears interest at a defined prime rate which as of February 24, 1997 was 8.25%.
The principal balance of and all accrued and unpaid interest on the note are
payable in full on September 30, 1997. As of February 24, 1997, the outstanding
principal amount was $189,072. The note is secured by a pledge of the 50,000
shares of common stock purchased by Mr. Hartl.
29
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
(a)(1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
CALMAR INC. AND SUBSIDIARIES
Independent Auditors' Report........................................................ F-1
Consolidated Balance Sheets as of December 31, 1996 and 1995........................ F-2
Consolidated Statements of Operations for the years ended December 31, 1996,
1995 and 1994..................................................................... F-3
Consolidated Statements of Stockholders' Deficiency for the years
ended December 31, 1996, 1995 and 1994............................................ F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994..................................................................... F-5
Notes to Consolidated Financial Statements.......................................... F-7
(a)(2) INDEX TO FINANCIAL STATEMENT SCHEDULES:
Schedule II -- Valuation and Qualifying Accounts.................................... S-1
</TABLE>
All other schedules are omitted as the required information is inapplicable
or not present in amounts sufficient to require submission of the schedule, or
because the information is presented in the consolidated financial statements or
related notes.
(a)(3) EXHIBITS:
The exhibits listed on the accompanying Exhibit Index are filed as
part of this Form 10-K. In addition, following is a list of each executive
compensation plan and arrangement required to be filed as an exhibit.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Calmar Inc. Salaried Retirement Plan dated as of June 22, 1983, as
amended--Exhibit 10.46 to 1992 Form 10-K (No. 0-12054).
Calmar Inc. Incentive Plan dated December 1983, as amended--Exhibit
10.43 to 1992 Form 10-K (No. 0-12054).
Stock Subscription Agreement dated as of December 8, 1988 among CSS
Holding Corporation, FS Equity Partners II, L.P. (formerly RFS Equity
Partners II, L.P.) (hereinafter, "FSEP II") and C. Richard Huebner,
with form of note and pledge agreement attached thereto as Exhibits A
and B, respectively--Exhibit 10.4 to Registration Statement on Form S-
1 (No. 33-26281).
Form of Stock Subscription Agreement dated as of December 1, 1988 by
and between CSS Holding Corporation and certain members of management
who purchased shares of common stock of CSS Holding Corporation for
cash--Exhibit 10.1 to Registration Statement on Form S-1 (No. 33-
26281).
Form of Stock Subscription Agreement dated as of December 1, 1988 by
and between CSS Holding Corporation and certain members of management
who purchased shares of common stock of CSS Holding Corporation for
promissory notes, with form of note attached thereto as Exhibit A--
Exhibit 10.2 to Registration Statement on Form S-1 (No. 33-26281).
30
<PAGE>
Form of Stock Subscription Agreement dated as of December 1, 1988 by
and between CSS Holding Corporation and certain members of management
who purchased shares of common stock of CSS Holding Corporation for
cash and promissory notes, with form of note attached thereto as
Exhibit A--Exhibit 10.3 to Registration Statement on Form S-1 (No. 33-
26281).
Stock Subscription Agreement dated as of December 8, 1988 by and among
CSS Holding Corporation, FSEP II (formerly RFS Equity Partners II,
L.P.) and Donald E. Knox--Exhibit 10.5 to Registration Statement on
Form S-1 (No. 33-26281).
CSS Holding Corporation 1988 Employee Stock Option Plan dated December
1, 1988, as amended--Exhibit 10.3 to Registration Statement on Form S-
4 (No. 33-47304).
Form of Nonqualified Stock Option Agreement by and between CSS Holding
Corporation and certain members of management--Exhibit 10.9 to
Registration Statement on Form S-1 (No. 33-26281).
Form of Nonqualified Stock Option Agreement dated as of December 8,
1988 between CSS Holding Corporation and C. Richard Huebner--Exhibit
10.10 to Registration Statement on Form S-1 (No. 33-26281).
Form of Nonqualified Stock Option Agreement by and between CSS Holding
Corporation and Donald E. Knox--Exhibit 10.11 to Registration
Statement on Form S-1 (No. 33-26281).
Employment Agreement dated January 13, 1988 between Calmar Inc. and C.
Richard Huebner--Exhibit 10.23 to Registration Statement on Form S-1
(No. 33-26281).
Calmar Inc. 401(k) Plan dated as of January 1, 1989, as amended--
Exhibit 10.45 to 1992 Form 10-K (No. 0-12054).
Securities Subscription Agreement dated as of September 28, 1990 by
and among CSS Holding Corporation, FSEP II and C. Richard Huebner--
Exhibit 10.22 to Registration Statement on Form S-4 (No. 33-97056).
Form of Securities Subscription Agreement dated as of September 28,
1990 by and between CSS Holding Corporation and certain members of
management--Exhibit 10.23 to Registration Statement on Form S-4 (No.
33-97056).
Securities Subscription Agreement dated as of September 28, 1990 by
and among CSS Holding Corporation, FSEP II and Donald E. Knox--Exhibit
10.24 to Registration Statement on Form S-4 (No. 33-97056).
Form of Warrant dated as of October 5, 1990 issued to certain members
of management--Exhibit 10.9 to Registration Statement on Form S-4 (No.
33-47304).
Stock Subscription Agreement dated as of September 3, 1991 between CSS
Holding Corporation and Richard J. Hartl, with form of note and pledge
agreement attached thereto as Exhibits A and B, respectively--Exhibit
10.29 to Registration Statement on Form S-4 (No. 33-47304).
Nonqualified Stock Option Agreement dated as of September 3, 1991
between CSS Holding Corporation and Richard J. Hartl--Exhibit 10.32 to
Registration Statement on Form S-4 (No. 33-47304).
Calmar Inc. Supplemental Executive Retirement Plan dated as of
September 3, 1991--Exhibit 10.31 to Registration Statement on Form S-4
(No. 33-97056).
31
<PAGE>
Form of Securities Subscription Agreement dated as of October 31, 1991
by and between CSS Holding Corporation and certain members of
management--Exhibit 10.35 to Registration Statement on Form S-4 (No.
33-97056).
Form of Warrant dated as of October 31, 1991 issued to certain members
of management--Exhibit 10.38 to Registration Statement on Form S-4
(No. 33-47304).
Calmar Inc. Deferred Compensation Plan 1993 Restatement effective as
of January 1, 1993--Exhibit 10.41 to Registration Statement on Form S-
4 (No. 33-97056).
Form of Stock Subscription Agreement dated as of April 1, 1993 by and
between Calmar, Inc. and certain members of management who purchased
shares of common stock of Calmar Inc. for cash--Exhibit 10.42 to
Registration Statement on Form S-4 (No. 33-97056).
Stock Subscription Agreement dated as of April 1, 1993 by and between
Calmar Inc. and Jacques Barriac, with form of note and pledge
agreement attached thereto as Exhibits A and B, respectively--Exhibit
10.43 to Registration Statement on Form S-4 (No. 33-97056).
Form of Change in Control Benefit Agreement dated as of September 1,
1994 between Calmar Inc. and certain members of management--Exhibit
10.46 to Registration Statement on Form S-4 (No. 33-97056).
Employment Agreement dated as of September 1, 1994 by and between
Calmar Inc. and Richard J. Hartl--Exhibit 10.47 to Registration
Statement on Form S-4 (No. 33-97056).
Calmar Inc. Deferred Compensation Arrangement effective as of January
1, 1995 between Calmar Inc. and Richard J. Hartl--Exhibit 10.48 to
Registration Statement on Form S-4 (No. 33-97056).
Calmar Inc. Executive Incentive Compensation Plan dated January,
1993--Exhibit 10.49 to Registration Statement on Form S-4
(No. 33-97056).
Pension Arrangement dated September 1992, between Calmar Inc. and
Christopher M. Harrison--Exhibit 10.57 hereto.
(b) REPORTS ON FORM 8-K:
None.
(c) EXHIBITS:
The exhibits listed on the accompanying Exhibit Index are filed as
part of this Form 10-K.
32
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Calmar Inc.:
We have audited the consolidated balance sheets of Calmar Inc. and subsidiaries
as of December 31, 1996 and 1995 and the related consolidated statements of
operations, stockholders' deficiency and cash flows for each of the years in the
three-year period ended December 31, 1996. In connection with our audits of the
consolidated financial statements, we have also audited the financial statement
schedule as listed in the accompanying index. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Calmar Inc. and
subsidiaries as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Orange County, California
March 14, 1997
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS 1996 1995
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,198 $ 9,037
Accounts receivable, less allowance
for doubtful accounts of $1,563 in
1996 and $1,401 in 1995 35,153 34,694
Inventories 20,679 17,421
Income taxes receivable 444 486
Prepaid expenses 1,710 2,460
----------- ----------
Total current assets 67,184 64,098
Property and equipment, net 106,619 111,076
Cost in excess of net assets acquired,
less accumulated amortization of
$26,360 in 1996 and $23,007 in 1995 93,649 97,002
Other intangible assets, less
accumulated amortization of $12,758 in 6,275 7,752
1996 and $13,231 in 1995
Other assets, net 9,011 9,857
----------- ----------
$ 282,738 $ 289,785
=========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
(DEFICIENCY)
Current liabilities:
Short-term borrowings $ 2,640 $ 390
Current installments of long-term debt 5,857 7,278
Accounts payable 18,941 17,887
Accrued liabilities 19,246 19,675
----------- ----------
Total current liabilities 46,684 45,230
Long-term debt 232,867 235,785
Deferred income taxes 12,380 13,430
Other liabilities 20,205 18,959
----------- ----------
Total liabilities 312,136 313,404
----------- ----------
Stockholders deficiency:
Preferred stock, par value $.01 per
share; liquidation preference
aggregating $54,250 for all
outstanding preferred stock:
Series A Preferred Stock,
liquidation preference $100 per 4 4
share; authorized 450,000 shares;
issued and outstanding 442,500
shares in 1996 and 1995
Series B Preferred Stock,
liquidation preference $10 per 10 10
share. Authorized 1,000,000
shares; issued and outstanding
1,000,000 shares
Common stock, par value $.01 per
share. Authorized 8,500,000 shares; 31 31
issued and outstanding 3,097,031
shares in 1996 and 1995
Additional paid-in capital 77,986 77,986
Accumulated deficit (103,402) (99,386)
Accumulated translation adjustment (3,473) (1,725)
Notes receivable from officers for
purchase of common stock (554) (539)
----------- ----------
Total Stockholders deficiency (29,398) (23,619)
----------- ----------
$ 282,738 $ 289,785
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 219,437 $ 224,465 $ 203,344
Cost of sales 162,987 168,444 150,060
---------- ---------- ----------
Gross profit 56,450 56,021 53,284
Selling, general and administrative
expenses 37,097 35,559 34,641
---------- ---------- ----------
Operating income 19,353 20,462 18,643
Other income 1,522 1,454 971
Interest expense (24,487) (27,265) (27,788)
---------- ---------- ----------
Loss before income taxes and
extraordinary item (3,612) (5,349) (8,174)
Income tax provision (benefit) (214) 1,083 916
---------- ---------- ----------
Loss before extraordinary item (3,398) (6,432) (9,090)
Extraordinary item loss on
extinguishment of debt (618) (9,528) -
---------- ---------- ----------
Net loss $ (4,016) $ (15,960) $ (9,090)
========== ========== ==========
Loss per share of common stock:
Loss before extraordinary item $ (6.16) $ (6.45) $ (6.70)
Extraordinary item (.20) (3.07) -
---------- ---------- ----------
Net loss per share $ (6.36) $ (9.52) $ (6.70)
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Deficiency
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Preferred stock
-------------------------------------------------------
Series A Series B Common stock Additional
------------------------------------------------------- -------------------------- Paid-in
Shares Amount Shares Amount Shares Amount Capital
---------- ----------- ------------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 442,550 $ 4 1,000,000 $ 10 3,097,031 $ 31 78,004
Additions to notes receivable
from officers -- -- -- -- -- -- --
Collection on notes
receivable from officers -- -- -- -- -- -- --
Issuance of common stock -- -- -- -- 1,500 -- 15
Foreign currency translation
adjustment -- -- -- -- -- -- --
Net loss ----------- ----------- ------------ ---------- ------------ ----------- -----------
Balance, December 31, 1994 442,550 4 1,000,000 10 3,098,531 31 78,019
Additions to notes
receivable from officers -- -- -- -- -- -- --
Repurchase of preferred stock (50) -- -- -- -- -- (5)
Issuance of common stock -- -- -- -- 1,000 -- 1
Repurchase of common stock -- -- -- -- (2,500) -- (29)
Foreign currency translation
adjustment -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- --
----------- ----------- ------------ ---------- ------------ ----------- -----------
Balance, December 31, 1995 442,500 4 1,000,000 10 3,097,031 31 77,986
Additions to notes
receivable from officers -- -- -- -- -- -- --
Foreign currency translation
adjustment -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- --
----------- ----------- ------------ ----------- ------------ ----------- -----------
Balance, December 31, 1996 442,500 $ 4 $ 1,000,000 $ 10 3,097,031 31 77,986
=========== =========== ============ =========== ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Notes
receivable Total
Accumulated from officers stockholders'
Accumulated translation for purchase of equity
deficit adjustment common stock (deficiency)
--------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $ (74,336) $ (5,603) $ (538) $ (2,428)
Additions to notes receivable
from officers -- -- (11) (11)
Collection on notes
receivable from officers -- -- 25 25
Issuance of common stock -- -- -- 15
Foreign currency translation
adjustment -- 1,857 -- 1,857
Net loss (9,090) -- -- (9,090)
---------------- -------------- --------------- ----------------
Balance, December 31, 1994 (83,426) (3,746) (524) (9,632)
Additions to notes
receivable from officers -- -- (15) (15)
Repurchase of preferred stock -- -- -- (5)
Issuance of common stock -- -- -- 1
Repurchase of common stock -- (29)
Foreign currency translation
adjustment -- 2,021 -- 2,021
Net loss (15,960) -- -- (15,960)
---------------- -------------- --------------- ----------------
Balance, December 31, 1995 (99,386) (1,725) (539) (23,619)
Additions to notes
receivable from officers -- -- (15) (15)
Foreign currency translation
adjustment -- (1,748) -- (1,748)
Net loss (4,016) -- -- (4,016)
---------------- -------------- ---------------- ----------------
Balance, December 31, 1996 $ (103,402) $ (3,473) $ (554) $ (29,398)
================ ============== ================ ================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
(CALMAR INC.)
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (4,016) $ (15,960) $ (9,090)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Extraordinary item 618 9,528 -
Depreciation and amortization 24,167 25,135 24,835
Amortization of discount on notes payable 103 201 569
Deferred income tax benefit (888) (1,104) (561)
Additions to notes receivable from officers for
purchase of common stock (15) (15) (11)
(Gain) loss on sale of property and equipment (81) (104) 55
Changes in assets and liabilities:
Accounts receivable (1,341) 915 (6,888)
Inventories (3,814) 635 (3,390)
Income taxes receivable 11 (45) 382
Prepaid expenses 659 148 (437)
Accounts payable 4,399 (14) 1,884
Accrued liabilities (237) (3,292) 4,774
Other long-term liabilities 1,668 1,246 854
------------ ------------- --------------
Net cash provided by operating activities 21,233 17,274 12,976
------------ ------------- --------------
Cash flows from investing activities:
Purchases of property and equipment (15,940) (14,208) (16,874)
Proceeds from sales of equipment 626 180 72
Increase in other intangibles (66) - -
Decrease (increase) in other assets 152 (333) 1,929
------------ ------------- --------------
Net cash used in investing activities (15,228) (14,361) (14,873)
------------ ------------- --------------
Cash flows from financing activities:
Proceeds (repayments) of short-term borrowings, net 2,343 (909) (4,468)
Increase (decrease) in cash overdraft (2,578) (844) 3,422
Proceeds from issuance of senior and subordinated
debt - 225,000 -
Redemption of senior and subordinated debt - (194,847) -
Payment of deferred financing fees (704) (7,928) -
Payment of call premiums for debt redemption (81) (5,697) -
Proceeds from issuance of long-term debt 5,002 3,224 4,722
Principal payments on long-term debt (9,683) (14,432) (7,014)
Repurchase of preferred stock - (5) -
Proceeds from issuance of common stock - 1 15
Repurchase of common stock - (29) -
Collections of notes receivable from officers for
purchase of common stock - - 25
----------- ------------- -------------
Net cash provided by (used in) financing
activities (5,701) 3,534 (3,298)
----------- ------------- -------------
</TABLE>
(Continued)
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows,
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Effect of exchange rate changes on cash
and cash equivalents $ (143) $ (49) $ (39)
---------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents 161 6,398 (5,234)
Cash and cash equivalents, beginning of
year 9,037 2,639 7,873
---------- ---------- ----------
Cash and cash equivalents, end of year $ 9,198 $ 9,037 $ 2,639
========== ========== ==========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Income taxes $ 2,168 $ 3,259 $ 1,011
========== ========== ==========
Interest $ 24,306 $ 28,559 $ 27,826
========== ========== ==========
Supplemental schedule of noncash
investing and financing
activities--equipment acquired in
exchange for long-term debt $ 741 $ 4,082 $ 1,833
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Calmar Inc. is a multinational manufacturer of nonaerosol plastic dispensing
and spraying systems. The primary products manufactured and sold by Calmar
Inc. include a full line of fine mist, regular and trigger sprayers;
regular, large and high-viscosity dispensers; and other specialty products.
Manufacturing is performed in the United States, Spain and Germany. The
Company sells through direct sales forces in the United States, Canada and
Western Europe, distributors in the United States and Western Europe, and
licensees in South America and Asia. The principal markets for Calmar Inc.'s
products are North American, Western European, South American and Asian
dispensing and packaging personal care, household, automotive, chemical and
pharmaceutical businesses.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Calmar Inc. include the accounts of
its wholly-owned subsidiaries: Calmar International, Inc., Calmar - Albert
GmbH, Monturas, S.A., Calmar - Spanish Branch, Calmar - Albert S.A.R.L.,
Calmar - Albert Limited, Calmar Plastics Limited, Calmar - Albert Belgium
S.A. and Calmar - Albert Italia (collectively, the Company). All significant
intercompany balances and transactions have been eliminated in
consolidation.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1994 balances to
conform to the 1996 presentation.
FOREIGN CURRENCY TRANSLATION
The Company uses the local currency as the functional currency for most
foreign operations. Assets and liabilities are translated at year-end
exchange rates, and income and expense items are translated at average
exchange rates prevailing during the year. Translation adjustments are
recorded as a separate component of stockholders' deficiency. The net gain
(loss) from foreign exchange transactions was insignificant in 1996, 1995
and 1994.
REVENUE RECOGNITION
Revenue is recognized upon shipment of products to customers.
CASH AND CASH EQUIVALENTS
Cash equivalents consist principally of interest bearing foreign currency
accounts. For purposes of the consolidated statements of cash flows, the
Company considers all short-term investments with original maturities of 90
days or less to be cash equivalents. The carrying amount approximates fair
value because of the short maturity of the financial instruments.
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets up
to 40 years for buildings and land improvements, 3 to 10 years for machinery
and equipment, and the respective lease term for assets under capital leases.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired (goodwill) is amortized over 4 to 40
years using the straight-line method. Such amortization expense amounted to
$3,353,000, $3,543,000 and $3,665,000 in 1996, 1995 and 1994, respectively,
and is included in selling, general and administrative expenses in the
accompanying consolidated statements of operations.
OTHER INTANGIBLE ASSETS
The costs of patents, trademarks, licenses and other intangible assets are
amortized over the estimated lives of the related assets ranging from 5 to 17
years using the straight-line method. Such aggregate amortization expense
amounted to $1,539,000, $1,542,000 and $1,916,000 in 1996, 1995 and 1994,
respectively, and is included in selling, general and administrative expenses
and cost of sales in the accompanying consolidated statements of operations.
IMPAIRMENT OF ASSETS
The Company accounts for long-lived assets under the Statement of Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets."
Effective January 1, 1994, the Company adopted the provisions of this
Statement, under which impairment of goodwill and other long-lived assets
would be recognized if the expected future net cash flows (undiscounted and
without interest charges) of the related businesses are less than the
carrying amounts of the assets. No impairment existed in 1996, 1995 or 1994.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the lives of the respective debt
agreements using the interest method and are included in other assets in the
accompanying consolidated balance sheets.
OTHER POSTRETIREMENT BENEFITS
The Company accounts for other postretirement benefits under Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Postretirement benefit expense
was $415,000, $509,000 and $538,000 in 1996, 1995 and 1994, respectively.
Cash paid for actual claims in 1996, 1995 and 1994 was $161,000, $51,000 and
$61,000, respectively.
OTHER POSTEMPLOYMENT BENEFITS
The Company accounts for other postemployment benefits under Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits". The Company currently provides for certain
postemployment benefits, primarily in the form of
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
limited continuation of healthcare insurance, to nearly all domestic
employees. The premiums for these benefits are paid for by the employees and
any additional costs are paid by the Company, which were immaterial in 1996,
1995 and 1994.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Long-Term Debt
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
Interest Rate Cap and Foreign Currency Agreement
An interest rate cap used to establish an effective maximum rate for certain
long-term debt and a foreign currency agreement used for hedging purposes are
carried at amortized costs which approximate market. The agreements are in
effect for three years and expire in 1998. The Company is exposed to credit
losses in the event of nonperformance by the counterparties to its agreements
but has no off-balance-sheet credit risk of accounting loss. The Company
anticipates, however, that the counterparties will be able to fully satisfy
their obligations under the agreements.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases.
United States income taxes are not provided, with certain exceptions, on the
undistributed earnings of the foreign subsidiaries as such earnings are
intended to be indefinitely reinvested in those operations.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred. Such
costs amounted to $5,139,000, $4,546,000 and $4,065,000 in 1996, 1995 and
1994, respectively, and are included in selling, general and administrative
expenses in the accompanying consolidated statements of operations.
LOSS PER SHARE OF COMMON STOCK
Loss per share of common stock is computed using the weighted average number
of common shares of stock outstanding during the years presented and does not
include the effect of common share equivalents (stock options and warrants)
because their effect would be antidilutive. The weighted average number of
common shares used in the computation were 3,097,000 in 1996 and 3,098,000 in
1995 and 1994. In 1996, 1995 and 1994, the loss before extraordinary item
for purposes of the loss per share calculation has been increased by
$15,686,000, $13,540,000 and $11,682,000, respectively, for dividends on the
Company's preferred stock to arrive at the loss per share of common stock.
Accordingly, the net loss applicable to common shareholders was $19,702,000,
$29,500,000 and $20,772,000 in 1996, 1995 and 1994, respectively.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
STOCK OPTION PLANS
Prior to January 1, 1996, the Company accounted for its stock option plans
in accordance with the provisions of Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123 (SFAS No. 123),
"Accounting for Stock-Based Compensation," which permits entities to
recognize as expense over the vesting period the fair value of all stock-
based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share disclosures
for employee stock option grants made in 1995 and future years as if the
fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No.
25 and provide the pro forma disclosure provisions of SFAS No. 123. No
stock options were granted in 1995 or 1996, thus there are no further
disclosures required under SFAS No. 123.
(2) INVENTORIES
Inventories consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Raw materials $ 4,713 $ 4,817
Work in process 10,063 8,843
Finished goods 5,903 3,761
--------- ---------
$ 20,679 $ 17,421
========= =========
</TABLE>
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1996 1995
----------- ------------
<S> <C> <C>
Land and land improvements $ 12,097 $ 13,119
Buildings 36,941 37,503
Machinery and equipment 170,077 173,050
Assets under capital leases 4,011 4,807
Construction in progress 12,629 9,155
----------- -----------
235,755 237,634
Accumulated depreciation and
amortization (129,136) (126,558)
----------- -----------
$ 106,619 $ 111,076
=========== ===========
</TABLE>
(4) SHORT-TERM BORROWINGS
Short-term borrowings consist principally of European bank overdrafts and
other facilities, which are used principally for working capital purposes
and are secured by accounts receivables and inventories of certain European
subsidiaries. Borrowings aggregating $2,640,000 and $390,000 were
outstanding as of December 31, 1996 and 1995, respectively, at weighted
average interest rates of 8.6% and 8.7%, respectively.
The Company has unused credit facilities available to its European
subsidiaries of $4,725,000 at December 31, 1996.
(5) LONG-TERM DEBT
Long-term debt consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Senior Subordinated Notes $ 120,000 $ 120,000
New Credit Facility 103,688 104,738
Monturas Acquisition Obligations, net
of discount of $132 in 1995 -- 1,088
Other 15,036 17,237
---------- ----------
238,724 243,063
Less current installments 5,857 7,278
---------- ----------
$ 232,867 $ 235,785
========== ==========
</TABLE>
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
SENIOR SUBORDINATED NOTES
On August 18, 1995, the Company sold $120,000,000 principal amount of Senior
Subordinated Notes due 2005 (Senior Subordinated Notes) to consummate the
refinancing of a substantial portion of the Company's long-term debt. In
connection with the refinancing transactions, the Company recognized an
extraordinary loss of $9,528,000, which includes call premiums of redeemed
notes, certain fees and the write-off of the related deferred financing costs
Interest on the Senior Subordinated Notes accrues at a rate of 11.5% per
annum and is payable semiannually, commencing February 15, 1996. The notes
are redeemable at the option of the Company, in whole or in part, at any time
on or after August 15, 2000, at a redemption price of 105.75% of the
principal amount, decreasing to 102.875% in 2001 and to 100% by 2002. No
principal payments are due until August 15, 2005.
NEW CREDIT FACILITY
On August 18, 1995, the Company entered into a senior secured credit
agreement (New Credit Facility) pursuant to which $105,000,000 was made
available on September 18, 1995, to consummate the refinancing of a
substantial portion of the Company's long-term debt. In addition, the New
Credit Facility included a $20,000,000 revolving line of credit (Revolver) to
support the Company's working capital requirements.
The term loan component of the New Credit Facility includes two portions:
Series A with a face value of $60,000,000 due 2003 and Series B with a face
value of $45,000,000 due 2004. The Series A bears interest at either
London Interbank Offered Rate (LIBOR) plus 3% per annum or a Base Rate, as
defined, plus 2% per annum. The Series B bears interest at either a LIBOR
rate plus 3.25% per annum or a Base Rate, as defined, plus 2.25% per annum.
In connection with LIBOR interest rate options, interest is payable at the
Company's election, for either a one-, two-, three- or six-month period.
The New Credit Facility is secured by a first priority interest in nearly all
domestic assets, including both tangible and intangible assets, of the
Company and a pledge of a portion of the capital shares of the Company's
subsidiaries.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
REVOLVING CREDIT AGREEMENTS
On September 18, 1995, the Revolver of the New Credit Facility became
available to the Company. The Revolver provided for borrowings of up to
$20,000,000 based on 75% of eligible domestic accounts receivable and 40% of
eligible domestic inventory. The Revolver, which was to terminate in 1999,
bore interest at either LIBOR plus 2.5% or a Base Rate, as defined, plus
1.5%.
In October 1996, the Company amended its New Credit Facility. The amendment
replaced its current lender under the Revolver within the New Credit Facility
through assignment and repayment, reduced the maximum borrowings permitted
under the Revolver from $20,000,000 to $12,000,000, revised certain financial
covenants pursuant to the New Credit Facility and provided some technical
revisions to the New Credit Facility. Commitment fees relating to the
Revolver increased from $75,000 to $125,000 for an annual administration fee
and continue to include a 0.5% non-use fee based on a daily average of the
unused credit facility balances. At December 31, 1996, the borrowing base
test permitted the Company to borrow up to $12,000,000. At such date, the
Company had no borrowings outstanding and letters of credit of $1,000,000,
leaving $11,000,000 available for borrowing.
In connection with obtaining the amendment and significantly modifying the
New Credit Facility, the Company incurred fees (to lenders and advisors) of
$704,000. These amounts have been recorded as debt issue costs and will be
amortized over the remaining terms of the respective components of the New
Credit Facility. In addition, the Company recognized an extraordinary loss on
the extinguishment of the Revolver under the New Credit Facility in the
amount of $618,000.
COVENANTS
In connection with the New Credit Facility and other debt agreements, the
Company has agreed to comply with a number of restrictive and financial
covenants that require, among other things, limiting the ability of the
Company and its subsidiaries to incur debt, issue certain preferred stock,
create liens securing subordinated debt, sell or transfers assets, make
restricted payments (dividends, redemptions, investments, and unscheduled
payments on subordinated debt) and engage in certain transactions with
affiliates and certain mergers. The New Credit Facility also
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
contains certain financial covenants, including, but not limited to,
covenants related to a minimum interest coverage ratio, a minimum
consolidated EBITDA, a maximum leverage ratio, and a minimum current asset
ratio. In addition, the New Credit Facility contains other affirmative and
negative covenants relating to (among other things) limitations on capital
expenditures, other indebtedness, liens, investments, guarantees, restricted
junior payments (dividends, redemptions, and payments on subordinated debt),
mergers and acquisitions, sales of assets, leases and transactions with
affiliates. The New Credit Facility also contains customary events of
default, including certain changes of control of the Company. As of December
31, 1996, the Company was in compliance with all covenants contained in such
debt instruments.
MONTURAS ACQUISITION OBLIGATIONS
In connection with the acquisition of the remaining 51% interest in Monturas
in December 1992, the Company agreed to pay certain amounts aggregating
$7,949,000 through February 1, 1998 (Monturas Acquisition Obligations). Such
payments were discounted to a present value of $6,553,000 at the date of
acquisition using an estimated market rate of interest of 8% and have been
included as part of the cost of the acquisition. The fixed portion of the
Monturas acquisition obligation was fully paid during 1996. Additional
payments beyond the above amounts may be payable to the seller through 1998
based on a fixed formula of worldwide sales of specific products. Such
additional amounts will be expensed if and when they are earned. No such
amounts were earned through December 31, 1996.
OTHER
Other long-term debt consists of (1) domestic equipment notes payable
aggregating $7,999,000 and $6,948,000 as of December 31, 1996 and 1995,
respectively, bearing interest at rates ranging from 7.6% to 10.2% and due in
various monthly installments through 2001; (2) notes payable aggregating
$5,465,000 and $7,505,000 as of December 31, 1996 and 1995, respectively, to
four German commercial banks, bearing interest at rates ranging from 5.5% to
8.3%, due in scheduled maturities of various amounts through 2005,
collateralized by land, building and equipment; (3) various capital lease
obligations aggregating $1,572,000 and $2,784,000 as of December 31, 1996 and
1995, respectively, due in scheduled maturities of various amounts through
2000.
Principal amounts due under all long-term debt agreements are presented below
(dollars in thousands):
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1997 $ 5,857
1998 4,138
1999 12,288
2000 14,153
2001 16,691
Thereafter 185,597
----------
Total $ 238,724
==========
</TABLE>
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------
CARRYING FAIR
AMOUNT VALUE
------------- --------------
<S> <C> <C>
(UNAUDITED)
Cash and cash equivalents $ 9,198 $ 9,198
============= ==============
Long-term debt:
Senior Subordinated Notes $ 120,000 $ 124,800
New Credit Facility 102,638 101,612
Long-term debt -- other 10,229 10,229
------------- --------------
Total long-term debt $ 232,867 $ 236,641
============= ==============
Interest rate cap $ 128 $ 128
============= ==============
Foreign currency agreement $ 62 $ 62
============= ==============
</TABLE>
(7) ACCRUED LIABILITIES
Accrued liabilities consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------
1996 1995
------------- --------------
<S> <C> <C>
Compensation and benefits $ 6,646 $ 6,487
Interest payable 5,625 5,558
Other 6,975 7,630
------------- --------------
$19,246 $19,675
============= ==============
</TABLE>
(8) STOCKHOLDERS' DEFICIENCY
PREFERRED STOCK
The Company has issued two series of preferred stock, Series A Preferred
Stock (Series A) and Series B Preferred Stock (Series B). The Senior
Subordinated Notes and the New Credit Facility limit the ability
of the Company to pay dividends on or redeem the Series A and Series B.
Dividends on the Series A and Series B accrue and compound quarterly at the
rate of 15% per annum and are each payable in shares of the Company's Series
A and Series B. Subject to
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
certain limitations, the Series A and Series B may each be redeemed, at the
option of the Board, in cash for $100 and $10, respectively, per share, plus
accrued and unpaid dividends. Subject to certain limitations, the Series A
and Series B are exchangeable at any time at the option of the Company for
ten year 15% junior subordinated notes. Holders of outstanding shares of the
Series A and Series B shall each vote as a single class with the common stock
and are entitled to two votes per share of Series A and Series B.
Cumulative dividends aggregating $60,289,000 had accrued on the Series A and
Series B through December 31, 1996. Such dividends, payable in shares of
Series A and Series B, were not declared as of the balance sheet date and
therefore are not reflected as issued. Such dividends per weighted average
share of preferred stock were $32.66, $28.19 and $24.32 in 1996, 1995 and
1994, respectively.
WARRANTS
In conjunction with certain equity issuances, including the issuance of
preferred stock, the Company has issued warrants to purchase shares of common
stock. The warrants are immediately exercisable in exchange for one share of
common stock and expire eight years from the date of issuance. The warrants
begin to expire 1996 through 2001. A summary of warrant activity is as
follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE PER
WARRANTS SHARES
------------ ---------------
<S> <C> <C>
Outstanding, December 31, 1993 5,837,333 $ 7.50-10.00
Warrants canceled (4,600) 7.50
------------ ---------------
Outstanding, December 31, 1994 5,832,733 7.50-10.00
Warrants canceled (500) 7.50
------------ ---------------
Outstanding, December 31, 1995 5,832,233 7.50-10.00
Warrants expired (75,000) 10.00
------------ ---------------
Outstanding, December 31, 1996 5,757,233 $ 7.50-10.00
============ ===============
</TABLE>
(9) STOCK OPTIONS
The Company has a Nonqualified Stock Option Plan which authorizes the
granting of options to directors, officers and key employees of the Company
or its subsidiaries to purchase, within a period of 10 years and 1 month
from date of grant, up to 216,360 shares of the Company's common stock at a
price per share determined by the Board of Directors. All options granted
have an exercise price of $10 per share which was estimated to be no less
than the fair market value on the date of grant. As of December 31, 1996,
there were 62,183 shares available for grant under the plan.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Options granted under the Nonqualified Stock Option Plan generally vest
over a five-year period. The exercisability of the options may be
accelerated at the option of the Compensation Committee of the Board of
Directors. At December 31, 1996, 154,177 options were outstanding.
As of December 31, 1996, options for 152,777 shares were exercisable. The
remaining options (1,400), excluding 50,000 shares granted to an executive
officer outside of the Nonqualified Stock Option Plan, become exercisable
in 1997.
Changes in the number of shares represented by all outstanding options are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1996 1995 1994
----------- --------- ----------
<S> <C> <C> <C>
Outstanding at beginning of year ($10
per share) 158,217 295,023 294,023
Options granted ($10 per share) -- -- 1,000
Options canceled ($10 per share) (4,040) (136,806) --
---------- ---------- --------
Outstanding at end of year ($10 per
share) 154,177 158,217 295,023
========== ========== ========
</TABLE>
In December 1995, the Board approved and adopted the Calmar Inc. 1995
Employee Stock Option Plan (the New Plan). The New Plan is a successor to
the Calmar Inc. 1988 Employee Stock Option Plan (the Old Plan) and has been
established to replace the Old Plan and grant additional options to officers,
outside directors, key employees and consultants of the Company. Under the
New Plan, the employees owning options under the Old Plan will be allowed to
exchange their old options for new options. The new option will cover the
same number of shares and be exercisable at the same option price as the old
option. The employees will be vested in the new option to the same extent as
they are vested in the old option. The expiration dates on the new options
will extend for two years beyond the expiration date of the old options.
The New Plan authorizes granting of up to 910,000 options to purchase shares
of common stock. The options under the New Plan will be designated as either
Incentive Stock Options or Nonqualified Stock Options. The options will
expire no more than ten years from the date of grant. The exercise price of
the Incentive Stock Options shall be no less than the fair market value at
the date of the grant. The exercise price of the Nonqualified Stock Options
shall be not less than 85% of the fair market value on the date of the grant.
Vesting of all options may be based on the Company's attaining of performance
criteria as specified at the time of the granting and on the passage of time.
As of December 31, 1996 no options had been granted under the Plan.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) EMPLOYEE BENEFITS
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
At December 31, 1996 and 1995, the actuarial and recorded liabilities for
post-retirement benefits other than pensions for eligible domestic
employees, none of which have been funded, were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $ 3,744 $ 3,428
Active employees fully eligible 977 1,414
Other active employees 1,742 2,061
--------- --------
Total 6,463 6,903
Plan assets at fair value -- --
--------- --------
Excess of accumulated postretirement
benefit obligation over plan assets 6,463 6,903
Unrecognized net gain (loss) 3,841 3,231
Unrecognized prior service cost (636) (720)
-------- --------
Accrued postretirement benefit cost $ 9,668 $ 9,414
========= ========
</TABLE>
The components of periodic expense for these postretirement benefits for
1996, 1995 and 1994 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost $ 164 $ 177 $ 167
Interest cost 416 499 450
Net amortization (165) (167) (79)
------- ------- -------
Net periodic postretirement benefit
cost $ 415 $ 509 $ 538
======= ======= =======
</TABLE>
The weighted-average discount rates used in determining the accumulated
postretirement benefit obligation and net periodic postretirement benefit
cost were 7.75% and 7.25% in 1996, 7.25% and 9% in 1995, and 9% and 7.3% in
1994, respectively.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The healthcare cost trend rates for both the indemnity and HMO Plans for 1994
through 2007 and thereafter are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Indemnity plan 10% 10% 12%
HMO plan 7% 7% 8%
Ultimate indemnity plan 5% 5% 6%
Ultimate HMO plan 4% 4% 4%
</TABLE>
The healthcare trend rate has a significant effect on the amounts reported.
To illustrate, increasing the health care trend rates by one percentage point
each year would increase the accumulated postretirement benefit obligation as
of December 31, 1996 by $682,000 and the net periodic postretirement benefit
cost for 1996 by $71,000.
PENSION PLANS
The Company has domestic and foreign noncontributory defined benefit plans
covering substantially all employees except certain domestic hourly factory
employees who are covered by union retirement plans and all employees at the
Company's subsidiary in Spain. Employees with more than one year of service
are eligible to participate in the plans. The benefits payable under the
plans are generally determined on the basis of the employee's length of
service and earnings.
The Company's funding policy for the U.S. plan is to contribute annually the
minimum recommended contribution, while no funding is made for the foreign
plan. The following table sets forth the funded status and amounts
recognized in the Company's consolidated balance sheets as of December 31,
1996 and 1995 for the U.S. and foreign plans (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 U.S. PLAN FOREIGN PLAN
- -------------------------------------------------------------------------------- -------------- -------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 13,785 $ 2,783
============== ============
Accumulated benefit obligation $ 14,801 $ 3,881
============== ============
Projected benefit obligation for service rendered to date $ 18,062 4,917
Plan assets at fair value on December 31, 1996 15,897 $ --
-------------- ------------
Projected benefit obligation in excess of plan assets 2,165 $ 4,917
Unrecognized net gain (loss) from past experience different from that assumed and
effects of changes in assumptions 204 1,177
Prior service cost not yet recognized in net periodic
pension cost (83) --
------------- ------------
Accrued pension cost $ 2,286 $ 6,094
============= ============
</TABLE>
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
DECEMBER 31, 1995 U.S. PLAN FOREIGN PLAN
- --------------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 13,572 $ 2,366
============= ===============
Accumulated benefit obligation $ 14,679 $ 3,744
============= ===============
Projected benefit obligation for service rendered to date $ 18,268 $ 4,956
Plan assets at fair value on December 31, 1995 13,540 --
------------- ---------------
Projected benefit obligation in excess of plan assets 4,728 4,956
Unrecognized net gain (loss) from past experience different
from that assumed and effects of changes in assumptions (2,614) 1,131
Prior service cost not yet recognized in net periodic
pension cost (125) --
------------- ---------------
Accrued pension cost $ 1,989 $ 6,087
============= ===============
</TABLE>
Plan assets consist of equity securities, U.S. Government obligations and cash
equivalents.
Net periodic pension costs for 1996, 1995 and 1994 consist of the following
(dollars in thousands):
<TABLE>
<CAPTION>
U.S. PLAN FOREIGN PLAN
------------------------------------ -----------------------------------------
1996 1995 1994 1996 1995 1994
---------- --------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 879 $ 611 $ 769 $ 249 $ 251 $ 214
Interest cost 1,305 1,146 1,081 316 332 315
Actual return on assets (2,137) (3,202) 207 -- -- --
Net amortization and deferral 1,192 2,268 (993) (53) (48) (27)
--------- --------- -------- -------- ------- -----
Net periodic pension cost $ 1,239 $ 823 $ 1,064 $ 512 $ 535 $ 502
========= ========= ======== ======== ======= ======
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation for the U.S. plan were 7.75% and 5% in 1996,
7.25% and 5% in 1995 and 9% and 5% in 1994. The average expected long-term
rate of return on assets was 9% in 1996 and 8.5% in 1995 and 1994,
respectively.
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation for the foreign plan were 7.0% and 4.0%, in
1996, 7.5% and 4.5%, in 1995 and 8% and 5.5%, in 1994.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
MULTIEMPLOYER PENSION PLAN
Certain of the Company's domestic hourly employees are covered by union-
sponsored, collectively-bargained multiemployer pension plans. Contributions
into multiemployer pension plans are based upon collectively-bargained
agreements and were $486,000, $479,000 and $436,000 in 1996, 1995 and 1994,
respectively.
SAVINGS PLAN (401(K) PLAN)
In general, all domestic employees other than those covered under union
agreements are eligible to participate in a defined contribution plan
sponsored by the Company, which is qualified under section 401(k) of the
Internal Revenue Code. The Company contributes to the plan an amount equal
to a portion of each participant's contribution. Expense for the Company's
401(k) Plan was $627,000, $624,000 and $600,000 in 1996, 1995 and 1994,
respectively.
INCENTIVE PLANS
The Company has incentive plans covering certain domestic personnel of the
Company. Incentive bonuses of $1,250,000, $971,000 and $1,380,000 were
provided for under these plans in 1996, 1995 and 1994, respectively.
EMPLOYMENT CONTRACTS
Certain executive officers are employed under employment contracts containing
customary employment terms and providing for base annual salaries and for
annual incentive bonuses as the Board of Directors may, in its discretion,
determine pursuant to its incentive plan in accordance with past practices or
otherwise. Upon termination, they are entitled to certain severance
benefits, unless termination is for cause, at which point the Company will
have no further obligation. These benefits have not been accrued since it is
not probable the liability will be incurred.
(11) INCOME TAXES
The components of the loss before income tax provision (benefit) and
extraordinary item are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Domestic loss $ (4,455) $ (8,467) $ (9,533)
Foreign earnings 843 3,118 1,359
--------- --------- ---------
Loss before income tax provision
(benefit) and extraordinary item $ (3,612) $ (5,349) $ (8,174)
========= ========= =========
</TABLE>
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
There was no tax benefit recorded in connection with the extraordinary items.
The income tax provision (benefit) associated with the loss before
extraordinary item is comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Current:
Domestic $ 22 $ (79) $ 181
Foreign 815 2,093 1,125
Deferred-foreign (1,051) (931) (390)
--------- -------- --------
Total $ (214) $ 1,083 $ 916
========= ======== ========
</TABLE>
Provision has not been made, with certain exceptions, for U.S. or additional
foreign taxes on approximately $13,500,000 of undistributed earnings of
foreign subsidiaries, as those earnings are intended to be indefinitely
reinvested. If, not withstanding management's intent in this regard, such
undistributed earnings become taxable in the U.S. by repatriation or other
means, net operating loss carryforwards and foreign tax credits would be
available to mitigate substantially all of the U.S. tax liability
attributable to such earnings.
The income tax provision (benefit) related to the loss before extraordinary
item differs from the amounts computed by applying the United States
statutory income tax rate as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Income tax benefit at statutory tax rate $ (1,264) $ (1,872) $ (2,861)
Extraordinary item (216) (3,293) --
Effect of foreign operations (301) (23) 1,030
Effect of domestic net operating loss (688) 5,931 1,433
Amortization of goodwill 1,005 1,005 1,005
Accrued bonuses 438 -- --
Other 812 (665) 309
--------- --------- ---------
Income tax provision (benefit) $ (214) $ 1,083 $ 916
========= ========= =========
</TABLE>
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1996, 1995 and 1994 are presented below (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Deferred tax assets:
Self insurance reserves $ 469 $ 679 $ 886
Inventories, principally due to
additional costs for tax purposes 293 236 490
Deferred bonus payments 520 -- --
Accrued vacation 1,038 1,064 1,001
Accrued postretirement benefit
obligation 4,067 3,865 3,675
Accrued pension 1,415 1,023 952
Net operating loss carryforward 18,826 19,030 11,192
Other 1,378 1,402 976
---------- ---------- ----------
Total gross deferred tax assets 28,006 27,299 19,172
Less valuation allowance (19,079) (18,011) (10,640)
---------- ---------- ----------
Net deferred tax assets 8,927 9,288 8,532
---------- ---------- ----------
Deferred tax liabilities:
Plant and equipment, principally due
to differences in depreciation (10,212) (10,933) (9,837)
Intangibles, principally due to
differences in amortization (639) (798) (973)
Difference in basis of noncurrent
assets related to Monturas acquisition (7,086) (8,135) (9,390)
Other (3,370) (2,852) (2,693)
---------- ---------- ----------
Total gross deferred tax liabilities (21,307) (22,718) (22,893)
---------- ---------- ----------
Net deferred tax liabilities $ (12,380) $ (13,430) $ (14,361)
========== ========== ==========
</TABLE>
The increase in the valuation allowance in 1996, 1995 and 1994 was
$1,068,000, $7,371,000 and $5,651,000 respectively.
As of December 31, 1996, the Company had Federal net operating loss
carryforwards for tax purposes of approximately $45,600,000, which, if not
utilized, will expire in 2003 through 2010.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company's Federal income tax returns for calendar years 1986 through
1991 are currently under examination by the Internal Revenue Service
("IRS"). On March 10, 1997, the Company received notice from the IRS of
proposed adjustments for such calendar years which would result in
additional federal taxes of up to $5.5 million, plus interest from the date
when such additional taxes would have been due, and in the reduction of the
Company's net operating loss carryovers from $45,600,000 to $36,500,000.
Most of the proposed adjustments relate to the Company's amortization
deductions with respect to a covenant not to compete purchased from the
Company's former parent corporation when that corporation sold a
controlling interest in the Company in 1988.
The Company, after consultation with tax counsel, continues to believe in
the propriety of its positions set forth in its tax returns and will
vigorously contest the adjustments being proposed by the IRS.
At December 31, 1996, the Company has recorded a significant valuation
allowance against its net deferred tax assets, which includes net operating
loss carryovers. No additional amounts have been accrued for any alleged
deficiency resulting from the proposed adjustments as the Company does not
presently believe that any payment amount is probable.
(12) SEGMENT AND FOREIGN OPERATIONS
The Company operates in one industry segment: the design, manufacture and
sale of plastic pump sprayers, dispensers, valves and closures as well as
various custom-molded products.
The foreign subsidiaries operate in two geographical areas: Western Europe
and Canada. Information relating to the Company's foreign and domestic
operations are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Sales:
United States $ 144,094 $ 143,428 $ 138,377
Western Europe 81,122 85,991 68,632
Canada 6,045 6,489 6,061
Eliminations (11,824) (11,443) (9,726)
---------- ---------- ----------
$ 219,437 $ 224,465 $ 203,344
========== ========== ==========
YEAR ENDED DECEMBER 31
----------------------------------------
1996 1995 1994
---------- ---------- ----------
Operating income (loss):
United States $ 18,918 $ 17,669 $ 17,453
Western Europe (120) 2,149 730
Canada 426 471 282
Eliminations 129 173 178
---------- ---------- ----------
$ 19,353 $ 20,462 $ 18,643
========== ========== ==========
</TABLE>
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Identifiable assets:
United States $ 176,431 $ 181,014 $ 177,929
Western Europe 104,551 106,977 103,319
Canada 2,415 2,474 1,910
Eliminations (659) (680) (753)
---------- ---------- ----------
$ 282,738 $ 289,785 $ 282,405
========== ========== ==========
</TABLE>
Export sales from the United States aggregated $21,668,000, $20,887,000
and $19,024,000 in 1996, 1995 and 1994, respectively.
(13) RELATED PARTY TRANSACTIONS
The Company has made loans to certain executive officers which are
evidenced by promissory notes and secured by deeds of trust. The loans
have maturities up to 30 years. As of December 31, 1996 and 1995,
outstanding principal amounts of $619,000 and $654,000, respectively, are
included in other assets in the accompanying consolidated balance sheets.
Included in the above amounts are loans in the amount of $339,000 and
$361,000 at December 31, 1996 and 1995, respectively, which carry interest
at a rate of 0.25% per annum and are payable in the year 2006. The
remaining note does not bear interest unless the officer is terminated for
other than reasonable cause, at which time the note will bear interest at
the rate of 10% per annum. Upon termination for cause, the entire amount
of the loan may become due and payable. The terms of the loan may be more
favorable than terms which would be obtained from an unrelated third
party.
The Company holds promissory notes from certain executive officers for the
purchase of common stock. These notes aggregated $554,000 and $539,000 at
December 31, 1996 and 1995, respectively, and mature in 1997. Interest on
these stock subscription notes accrue at defined interest rates which
approximated 8.25% at December 31, 1996 and 1995.
As of December 31, 1996, a certain executive officer had deferred $674,000
of compensation. The Company is paying interest on this deferred amount.
(14) COMMITMENTS AND CONTINGENCIES
ROYALTIES
Under the terms of various exclusive and nonexclusive licensing
agreements, the Company is obligated to pay royalties based on percentages
of the net sales (as defined) of products subject to such agreements. The
agreements, which generally extend for the life of the respective patents,
are cancelable by the Company at any time. The licensor has the right to
cancel the agreements under certain conditions, primarily default on
royalty payments. Royalty expense related to the agreements was $137,000,
$160,000 and $227,000 in 1996, 1995 and 1994, respectively.
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
LEASES
The Company leases certain warehouse and office facilities and equipment
under noncancelable operating leases. The aggregate minimum future lease
commitments under operating leases with noncancelable terms of one year or
more are as follows (dollars in thousands):
<TABLE>
<S> <C>
Year ending December 31:
1997 $ 829
1998 767
1999 682
2000 527
2001 430
Thereafter 3,991
------
$7,226
======
</TABLE>
A European subsidiary has entered into a sale-leaseback agreement for the
construction of an adjacent manufacturing facility which upon completion is
expected to result in an operating lease commitment totaling $4,900,000
extended over a term of 14 years.
Rental expense was $1,103,000, $992,000 and $662,000 in 1996, 1995 and 1994,
respectively.
ENVIRONMENTAL
Management believes the Company is in substantial compliance with national,
state, and local laws and regulations governing the use, discharge and
disposal of hazardous materials, except as outlined below. In June 1987, the
California Regional Water Quality Control Board (Water Control Board)
required the company to conduct an investigation of possible soil and
groundwater contamination of the Company's City of Industry facility. This
investigation indicated that soils and groundwater under the site had been
impacted by industrial cleaning solvents. Since 1987, the Company has
continued to investigate and monitor the site. The investigations performed
to date indicate that some of the contamination on the site may result from
off-site sources unrelated to the Company. It is anticipated that the Company
will be required to perform additional investigations or remedial activities
at the site. The Company submitted a plan to the Water Control Board in
August 1995 detailing additional investigations to be made at the site
regarding the extent of soil contamination and in October 1995, the Water
Control Board approved such plan. In February 1997, the Company submitted a
new plan to the Water Control Board regarding additional investigations to be
made at the site. At this time, the Company is awaiting response from the
Water Control Board.
In June 1993, the EPA sent 64 companies and individuals, including the
Company, letters notifying the recipients that they were considered
potentially liable for groundwater contamination in the Puente Valley
Operable Unit of the San Gabriel Superfund Site. The Company's City of
Industry facility is located in the Puente Valley Operable Unit. In response
to the EPA's request, the Company and a majority of the recipients of the
notice formed a steering committee known as the Puente Valley Steering
Committee (PVSC). In September 1993, 47 companies (including Calmar) and
individuals in the Puente Valley, entered into a Administrative Order on
Consent (AOC) whereby such companies and individuals, including the Company,
agreed to conduct a remedial investigation/feasibility study under the
oversight of the EPA. As of December 31, 1996, the
<PAGE>
CALMAR INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
final reports regarding such remedial investigation/feasibility study had
been delivered to the EPA and the PVSC is awaiting final acceptance. Final
acceptance by the EPA would discharge the obligation of the settling parties
under the AOC. The total costs related to conducting this study are estimated
to be approximately $5,000,000 of which $4,800,000 has been paid to date. The
Company's share is expected to be approximately $150,000 for which has been
provided in the accompanying consolidated financial statements. The Company
believes that it will have some insurance coverage in this matter. The EPA
deferred its claim against all potentially responsible parties for $1,200,000
previously incurred by the EPA at the Puente Valley site. No assurances can
be given that the Company will not be required to pay a portion of EPA's past
costs or to perform additional investigation or remedial activity relating to
the San Gabriel Superfund Site. The EPA has not yet selected remedies for the
site but the possibilities identified range from no action to active
groundwater pump and treat systems. The costs of such remedies and the
Company's portion of such costs are not known at this time.
The Company may be required to incur other costs and expenses from time to
time in order to generally comply with environmental laws and regulations;
however, the Company does not anticipate that such costs and expenses will
have a material adverse effect on the Company's results of operations. No
assurances can be given however, that the historical, current or future uses
and conditions of the Company's facilities or operations will not result in
the imposition of liability under environmental laws.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Industry, State of California, on March 28, 1997.
Calmar Inc.
By: /s/ Richard J. Hartl
------------------------------------
Richard J. Hartl
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Richard J. Hartl President, Chief Executive March 28, 1997
- ----------------------------- Officer,
Richard J. Hartl Chairman of the Board and
Director
(Principal Executive Officer)
/s/ C. Richard Huebner Executive Vice President, March 28, 1997
- ----------------------------- Chief Financial Officer,
C. Richard Huebner Secretary and Director
(Principal Financial and
Accounting Officer)
Managing Director and Vice March 28, 1997
/s/ Christopher M. Harrison President,
- ----------------------------- European Operations and
Christopher M. Harrison Director
/s/ Gunnar Backman Director March __, 1997
- -----------------------------
Gunnar Backman
/s/ Matt L. Figel Director March 28, 1997
- -----------------------------
Matt L. Figel
/s/ Donald E. Knox Director March 28, 1997
- -----------------------------
Donald E. Knox
/s/ Harry T.J. Roberts Director March 28, 1997
- -----------------------------
Harry T.J. Roberts
/s/ John M. Roth Director March 28, 1997
- -----------------------------
John M. Roth
/s/ Ronald P. Spogli Director March __, 1997
- -----------------------------
Ronald P. Spogli
/s/ William M. Wardlaw Director March 28, 1997
- -----------------------------
William M. Wardlaw
</TABLE>
33
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
Years ended December 31, 1994, 1995 and 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance Charges to Charges to Balance
at Beginning Costs and Other Deductions/ at End
Description of the Period Expenses Accounts Write-offs (1) of the Period
- ----------- ------------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994:
Allowance for doubtful accounts $ 830 $ 654 -- ($ 179) $ 1,305
Reserve for obsolete inventories 858 905 -- (376) 1,387
Self- insurance reserves (2) 1,796 3,957 $ 178 (3,776) 2,155
Environmental reserve 200 363 -- (63) 500
Defective product liability 44 111 -- (82) 73
------- ------- ------- ------- -------
Total $ 3,728 $ 5,990 $ 178 ($4,476) $ 5,420
======= ======= ======= ======= =======
December 31, 1995:
Allowance for doubtful accounts $ 1,305 $ 209 -- ($ 113) $ 1,401
Reserve for obsolete inventories 1,387 381 $ 70 (755) 1,083
Self- insurance reserves (2) 2,155 4,558 36 (5,087) 1,662
Environmental reserve 500 - -- (103) 397
Defective product liability (3) 73 137 474 (356) 328
------- ------- ------- ------- -------
Total $ 5,420 $ 5,285 $ 580 ($6,414) $ 4,871
======= ======= ======= ======= =======
December 31, 1996:
Allowance for doubtful accounts $ 1,401 $ 501 $ 13 ($ 352) $ 1,563
Reserve for obsolete inventories (4) 1,083 320 (270) (706) 427
Self- insurance reserves 1,662 4,031 -- (4,569) 1,124
Environmental reserve 397 159 -- (156) 400
Defective product liability (4) 328 130 232 (149) 541
------- ------- ------- ------- -------
Total $ 4,871 $ 5,141 ($ 25) ($5,932) $ 4,055
======= ======= ======= ======= =======
</TABLE>
- --------------------------------------------------------------------------
(1) Deductions/ Write-offs include the effects of foreign currency
translation totalling $97,000, $116,000 and ($20,000) in 1994, 1995 and
1996, respectively.
(2) Charges to other accounts includes excess liability insurance refunds
on certain workman's compensation claims totalling $178,000 and $36,000
in 1994 and 1995, respectively.
(3) Charges to other accounts represents a reclassification of
Calmar-Albert GmbH reserves to defective product liability in 1995.
(4) Charges to other accounts primarily represents a reclassification of
domestic reserves for obsolete inventories to domestic defective
product liability in 1996.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- -------------
<S> <C> <C>
3.1 ++ Certificate of Incorporation of Calmar Inc., as amended to
date (with Certificate of Correction attached thereto).
3.2 *** Bylaws of Calmar Inc., as amended to date.
4.1 ++ Indenture dated as of August 18, 1995 between Calmar Inc.
and United States Trust Company of New York, as Trustee,
with respect to the 11 1/2% Senior Subordinated Notes
due 2005.
4.2 ++ Purchase Agreement, dated August 3, 1995, by and among
Calmar Inc., Goldman, Sachs & Co. and Merrill Lynch & Co.
4.3 ++ Registration Rights Agreement, dated as of August 18, 1995,
by and among Calmar Inc., Goldman, Sachs & Co. and Merrill
Lynch & Co.
4.4 ++ Credit Agreement dated as of August 18, 1995 between
Calmar Inc. and Pearl Street L.P., Bankers Trust Company and the
financial institutions listed therein (collectively,
including Pearl Street L.P. and Bankers Trust Company, "Lenders"),
Goldman, Sachs & Co., as syndication agent, Bankers Trust
Company, as administrative agent for Lenders, and Mellon Bank, N.A.,
as documentation agent and collateral agent for Lenders.
4.5 +++ Security Agreement, dated as of September 18, 1995, by and between
Calmar Inc. and Mellon Bank, N.A., as Collateral Agent.
4.6 +++ Pledge Agreement, dated as of September 18, 1995, by and between
Calmar Inc. and Mellon Bank, N.A., as Collateral Agent.
4.7 +++ Trademark Collateral Security Agreement, dated as of September 18,
1995, by and between Calmar Inc. and Mellon Bank, N.A., as Collateral
Agent.
4.8 +++ Patent Collateral and Security Agreement, dated as of September 18,
1995, by and between Calmar Inc. and Mellon Bank, N.A., as Collateral
Agent.
4.9 +++ Collateral Account Agreement, dated as of September 18, 1995, by and
between Calmar Inc. and Mellon Bank, N.A., as Collateral Agent.
4.10 ++ Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing (California), dated August 16, 1995, executed by Calmar
Inc., as Trustor, in favor of Mellon Bank, N.A., as Collateral Agent,
as Beneficiary, covering property located at 333 South Turnbull Canyon
Road, City of Industry, California 91749.
4.11 ++ Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing (Missouri), dated August 16, 1995, executed by Calmar Inc., as
Trustor, in favor of Mellon Bank, N.A., as Collateral Agent, as
Beneficiary, covering property located at 1001 S.E. 291 Highway, Lee's
Summit, Missouri 64081.
4.12 ++ Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing (Missouri), dated August 16, 1995, executed by Calmar Inc., as
Trustor, in favor of Mellon Bank, N.A., as Collateral Agent, as
Beneficiary, covering property located at 1204 Southwest Jefferson
Road, Lee's Summit, Missouri 64081.
4.13 ++ Mortgage, Assignment of Rents, Security Agreement and Fixture Filing
(Ohio), dated August 16, 1995, executed by Calmar Inc., as Trustor,
in favor of Mellon Bank, N.A., as Collateral Agent, as Beneficiary,
covering properties located at 2550 Kenskill Avenue, Washington Court
House, Ohio 43160, and 238 South Main Street, Washington Court House,
Ohio 43160.
10.1 ++++ Calmar Inc. Salaried Retirement Plan dated as of June 22, 1983, as
amended.
10.2 ++++ Calmar Inc. Incentive Plan dated December 1983, as amended.
10.3 * Stock Subscription Agreement dated as of December 8, 1988 among CSS
Holding Corporation, FS Equity Partners II, L.P. (formerly RFS
Equity Partners II, L.P.) (hereinafter, "FSEP II") and C. Richard
Huebner, with form of note and pledge agreement attached thereto as
Exhibits A and B, respectively.
10.4 * Form of Stock Subscription Agreement dated as of December 1, 1988
by and between CSS Holding Corporation and certain members of
management who purchased shares of common stock of CSS Holding
Corporation for cash.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- -------------
<S> <C> <C>
10.5 * Form of Stock Subscription Agreement dated as of December 1, 1988 by
and between CSS Holding Corporation and certain members of management
who purchased shares of common stock of CSS Holding Corporation for
promissory notes, with form of note attached thereto as Exhibit A.
10.6 * Form of Stock Subscription Agreement dated as of December 1, 1988
by and between CSS Holding Corporation and certain members of
management who purchased shares of common stock of CSS Holding
Corporation for cash and promissory notes, with form of note
attached thereto as Exhibit A.
10.7 * Stock Subscription Agreement dated as of December 8, 1988 by and
among CSS Holding Corporation, FSEP II (formerly RFS Equity Partners
II, L.P.) and Donald E. Knox.
10.8 *** CSS Holding Corporation 1988 Employee Stock Option Plan dated December
1, 1988, as amended.
10.9 * Form of Nonqualified Stock Option Agreement by and between CSS Holding
Corporation and certain members of management.
10.10 * Form of Nonqualified Stock Option Agreement dated as of December 8, 1988
between CSS Holding Corporation and C. Richard Huebner.
10.11 * Form of Nonqualified Stock Option Agreement by and between CSS Holding
Corporation and Donald E. Knox.
10.12 * Registration Rights Agreement dated December 9, 1988 by and among CSS
Holding Corporation, Beijer Industries AB and FSEP II.
10.13 * Stockholders' Agreement dated December 9, 1988 among FSEP II (formerly
RFS Equity Partners II, L.P.), Beijer Industries AB, Calmar Inc., CSS
Holding Corporation and Calmar Spraying Systems, Inc.
10.14 * Registration Rights Agreement dated as of December 8, 1988 by and among
CSS Holding Corporation and the investors who are signatories thereto.
10.15 * Purchase and Warrant Agreement dated as of December 8, 1988 by and
among CSS Holding Corporation and the investors who are signatories
thereto.
10.16 * Promissory Note secured by Deed of Trust dated August 5, 1988 of C.
Richard Huebner and Debra A. Huebner in favor of Calmar Inc., its
successors and assigns.
10.17 * Employment Agreement dated January 13, 1988 between Calmar Inc. and C.
Richard Huebner.
10.18 ++++ Calmar Inc. 401(k) Plan dated as of January 1, 1989, as amended.
10.19 *** Shareholders Agreement dated July 26, 1990 between Antonio Puig,
S.A. and Others, J.M. Puig Planas and Others and Monturas S.A., on the
one hand, and Calmar Spraying Systems, Inc., on the other hand.
10.20 *** License Agreement dated as of July 27, 1990 between Monturas S.A. and
Calmar Inc.
10.21 *** Distributorship Agreement dated as of July 27, 1990 between Monturas
S.A. and Calmar Inc.
10.22 *** Agency Agreement dated as of July 27, 1990 between Monturas S.A. and
Calmar Inc.
10.23 *** Sale and Purchase Agreement dated as of July 30, 1990 among Aerosol
Research (Participations) S.A., Calmar Spraying Systems, Inc. and Cope
Allman Packaging PLC.
10.24 *** Subscription Agreement dated as of September 28, 1990 among CSS Holding
Corporation, FSEP II and Beijer Industries AB.
10.25 ++ Securities Subscription Agreement dated as of September 28, 1990 by and
among CSS Holding Corporation, FSEP II and C. Richard Huebner.
10.26 ++ Form of Securities Subscription Agreement dated as of September 28,
1990 by and between CSS Holding Corporation and certain members of
management.
10.27 ++ Securities Subscription Agreement dated as of September 28, 1990 by
and among CSS Holding Corporation, FSEP II and Donald E. Knox.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- -------------
<S> <C> <C>
10.28 *** Warrant to purchase 722,627 shares of common stock dated as of
October 5, 1990 issued to FSEP II.
10.29 *** Subscription Agreement dated as of October 4, 1990 by and among CSS
Holding Corporation, FSEP II and Chesterfield Investments.
10.30 *** Warrant to purchase 66,667 shares of common stock dated as of October
5, 1990 issued to Atwell & Co.
10.31 *** Form of Warrant dated as of October 5, 1990 issued to certain members of
management.
10.32 *** Stock Subscription Agreement dated as of September 3, 1991 between CSS
Holding Corporation and Richard J. Hartl, with form of note and pledge
agreement attached thereto as Exhibits A and B, respectively.
10.33 *** Nonqualified Stock Option Agreement dated as of September 3, 1991
between CSS Holding Corporation and Richard J. Hartl.
10.34 ++ Calmar Inc. Supplemental Executive Retirement Plan dated as of
September 3, 1991.
10.35 *** Subscription Agreement dated as of October 31, 1991 among CSS Holding
Corporation, FSEP II and Beijer Industries AB.
10.36 *** Warrant to purchase 2,000,000 shares of common stock dated as of
October 31, 1991 issued to FSEP II.
10.37 *** Subscription Agreement dated as of November 1, 1991 among Calmar
Spraying Systems, Inc. (formerly CSS Holding Corporation), FSEP II
and Beijer Industries AB.
10.38 ++ Form of Securities Subscription Agreement dated as of October 31, 1991
by and between CSS Holding Corporation and certain members of
management.
10.39 *** Form of Warrant dated as of October 31, 1991 issued to certain members
of management.
10.40 ++ Amendment Agreement dated as of February 15, 1992 among FSEP II, Beijer
Industries AB, Kongsbo Industrier AB and Calmar Inc.
10.41 + Subscription Agreement dated as of May 7, 1992 among Calmar Inc.,
Calspray Investors, L.P., FSEP II and Kongsbo Industrier AB.
10.42 + Warrant to purchase 25,000 shares of common stock dated as of May 7,
1992 issued to Jefco.
10.43 ++ Promissory Note secured by Deed of Trust dated September 10, 1992 of
Jacques J. Barriac and Jessica M. Barriac in favor of Calmar Inc., its
successors and assigns.
10.44 ++ Calmar Inc. Deferred Compensation Plan 1993 Restatement effective as of
January 1, 1993.
10.45 ++ Form of Stock Subscription Agreement dated as of April 1, 1993 by and
between Calmar, Inc. and certain members of management who purchased
shares of common stock of Calmar Inc. for cash.
10.46 ++ Stock Subscription Agreement dated as of April 1, 1993 by and between
Calmar Inc. and Jacques Barriac, with form of note and pledge agreement
attached thereto as Exhibits A and B, respectively.
10.47 ++ Warrant to purchase 500,000 shares of common stock dated as of
September 10, 1993 issued to FSEP II.
10.48 ++ Warrant to purchase 500,000 shares of common stock dated as of
October 11, 1993 issued to FSEP II.
10.49 ++ Form of Change in Control Benefit Agreement dated as of September 1,
1994 between Calmar Inc. and certain members of management.
10.50 ++ Employment Agreement dated as of September 1, 1994 by and between
Calmar Inc. and Richard J. Hartl.
10.51 ++ Calmar Inc. Deferred Compensation Arrangement effective as of January 1,
1995 between Calmar Inc. and Richard J. Hartl.
10.52 ++ Calmar Inc. Executive Incentive Compensation Plan dated January, 1993.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- -------------
<S> <C> <C>
10.53 ++ Warrant to purchase 1,400,000 shares of common stock dated as of May
25, 1995 issued to AB Handel och Industri.
10.54 ++ Warrant to purchase 505,840 shares of common stock dated as of May 25,
1995 issued to AB Handel och Industri.
10.55 ## Waiver and Agreement dated as of January 15, 1993 among Calmar Inc.,
FSEP II, Kongsbo Industrier AB In Bankruptcy and Svenska Handelsbanken.
10.56 ## Waiver and Agreement dated as of October 27, 1993 among Calmar Inc.,
FSEP II, Kongsbo Industrier AB In Bankruptcy, Svenska Handelsbanken and
AB Handel och Industri.
10.57 +++ Pension Arrangement dated September 1992, between Calmar Inc. and
+++ Christopher M. Harrison.
10.58 * Amendment No. 1 to Senior Secured Credit Facility dated as of October
4, 1996.
12.1 ** Computation of ratio of earnings to fixed charges.
12.2 ** Computation of ratio of consolidated long-term debt to consolidated
stockholders' deficiency.
21.1 ++ Subsidiaries of Calmar Inc.
27.1 ** Financial Data Schedule.
</TABLE>
__________
* Filed as an exhibit to Registration Statement on Form S-1 (No. 33-
26281) filed on December 23, 1988.
** Filed as an exhibit to Amendment No. 2 to Registration Statement on
Form S-1 (No. 33-26281) filed on February 14, 1989.
*** Filed as an exhibit to Registration Statement on Form S-4 (No. 33-
47304) filed on April 21, 1992.
+ Filed as an exhibit to Amendment No. 1 to Registration Statement on
Form S-4 (No. 33-47304) filed on June 2, 1992.
++ Filed as an exhibit to Registration Statement on Form S-4 (No. 33-
97056) filed on September 18, 1995.
+++ Filed as an exhibit to Amendment No. 1 to Registration Statement on
Form S-4 (No. 33-97056) filed on October 11, 1995.
## Filed as an exhibit to Amendment No. 3 to Registration Statement on
Form S-4 (No. 33-97056) filed on November 30, 1995.
++++ Filed as an exhibit to Annual Report on Form 10-K (No. 0-12054) for
the fiscal year ended December 31, 1992, filed on March 31, 1993.
++++++ Filed as an exhibit to Annual Report on Form 10-K (No. 33-97056) for
the fiscal year ended December 31, 1995, filed on March 30, 1996.
* Filed as an exhibit to Quarterly Report on Form 10-Q (No. 33-97056)
for the quarterly period ended September 28, 1996, filed on November
12, 1996.
** Filed herewith.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material has been sent to security holders during
the fiscal year ended December 31, 1996.
4
<PAGE>
CALMAR INC. AND SUBSIDIARIES
EXHIBIT 12.1
Computation of Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loss before income taxes, extraordinary item,
and cumulative effect of accounting change (1) ($ 9,509) ($18,977) ($ 8,174) ($ 5,349) ($ 3,612)
-------- -------- -------- -------- --------
Interest expense 27,605 28,277 27,788 27,265 24,487
Amortization of debt expense 1,015 1,170 1,274 1,146 955
Portion of rental expense representing interest 196 169 146 114 118
-------- -------- -------- -------- --------
Total fixed charges 28,816 29,616 29,208 28,525 25,560
-------- -------- -------- -------- --------
Total earnings before fixed charges $ 19,307 $ 10,639 $ 21,034 $ 23,176 $ 21,948
======== ======== ======== ======== ========
Ratio of earnings to fixed charges -- -- -- -- --
======== ======== ======== ======== ========
Deficiency of earnings to cover fixed charges ($ 9,509) ($18,977) ($ 8,174) ($ 5,349) ($ 3,612)
======== ======== ======== ======== ========
</TABLE>
(1) Excludes equity in loss of unconsolidated subsidiary of $123,000 for
the year ended December 31, 1992.
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Exhibit 12.2
Computation of Ratio of Consolidated Long-Term Debt
to Consolidated Stockholders' Deficiency
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
12/31/96
--------
<S> <C>
Consolidated long-term debt $232,867
========
Consolidated stockholders' deficiency ($29,398)
========
Ratio of long-term debt to stockholders deficiency (7.92):1
========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,198
<SECURITIES> 0
<RECEIVABLES> 36,716
<ALLOWANCES> 1,563
<INVENTORY> 20,679
<CURRENT-ASSETS> 67,184
<PP&E> 235,755
<DEPRECIATION> 129,136
<TOTAL-ASSETS> 282,738
<CURRENT-LIABILITIES> 46,684
<BONDS> 120,000
0
14
<COMMON> 31
<OTHER-SE> (29,443)
<TOTAL-LIABILITY-AND-EQUITY> 282,738
<SALES> 219,437
<TOTAL-REVENUES> 219,437
<CGS> 162,987
<TOTAL-COSTS> 200,084
<OTHER-EXPENSES> (1,522)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,487
<INCOME-PRETAX> (3,612)
<INCOME-TAX> (214)
<INCOME-CONTINUING> (3,398)
<DISCONTINUED> 0
<EXTRAORDINARY> (618)
<CHANGES> 0
<NET-INCOME> (4,016)
<EPS-PRIMARY> (6.36)
<EPS-DILUTED> (6.36)
</TABLE>
