<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 10-K
----------------
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required)
For the fiscal year ended March 31, 1997.
Commission File Number: 0-016072
DECORA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 68-0003300
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 MILL STREET
FORT EDWARD, NEW YORK 12828
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (518) 747-6255
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
------------------- -------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $ .01 PAR VALUE
<PAGE> 2
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 (229.405 of this chapter) is not contained
herein, and will not be contained to the best of registrant's
knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Yes [X] No [ ]
As of June 13, 1997, the Registrant had 35,719,390 shares of Common
Stock outstanding. The aggregate market value of the Common Stock held
by nonaffiliates as of June 13, 1997, was approximately $31,477,482
based on the average of the closing bid and asked prices on that date.
<PAGE> 3
DOCUMENTS INCORPORATED BY REFERENCE
Certain exhibits filed to the following are incorporated by reference in Part IV
- - Exhibits, Financial Statement Schedules and Reports on Form 8-K hereof (See
Exhibit list on Page 27):
<TABLE>
<S> <C>
(1) Report on Form 10-K for the fiscal year ended March 31, 1988.
(2) Report on Form 8-K dated April 18, 1990.
(3) Report on Form 8-K dated April 6, 1992.
(4) Report on Form 10-K for the fiscal year ended March 31, 1992.
(5) Report on Form 8-K dated November 5, 1992.
(6) Report on Form 10-K for the fiscal year ended March 31, 1993.
(7) Report on Form 10-K for the fiscal year ended March 31, 1994.
(8) Report on Form 10-Q for the fiscal quarter ended December 31, 1994.
(9) Report on Form 8-K dated March 2, 1995.
(10) Report on Form 10-K for the fiscal year ended March 31, 1995.
(11) Report on Form 10-Q for the fiscal quarter ended December 31, 1995.
(12) Report on Form 10-K for the fiscal year ended March 31, 1996.
(13) Report on Form 10-Q for the fiscal quarter ended June 30, 1996.
(14) Report on Form 10-Q for the fiscal quarter ended September 30, 1996.
(15) Report on Form 10-Q for the fiscal quarter ended December 31, 1996.
</TABLE>
<PAGE> 4
PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Decora Industries, Inc. (the "Company"), a holding company, is a Delaware
corporation operating through its sole operating subsidiary, Decora,
Incorporated ("Decora"). The main emphasis of Decora is the development,
manufacture and sale of self-adhesive consumer decorative products and of
specialty industrial and commercial products, utilizing its proprietary
pressure-sensitive adhesive and release systems and its Wearlon(R) coating
technologies.
HISTORY OF THE COMPANY
The Company, as presently structured, stems from a 1988 change in control
effected by a group of investors who completed a management change and new
strategic plan. In March 1992, the Company, formerly named Utilitech,
Incorporated, changed its name to reflect the strategic decision of management
to place future emphasis on decorative products as well as specialized
industrial and commercial products derived from its proprietary coating,
laminating, adhesive and release technologies. In 1988, the Company was a
diversified holding company with a number of subsidiaries operating various
businesses, including industrial lighting, utility repair, utility software,
telecommunications, metal fabrication and pipe manufacture. Management evaluated
these businesses and determined that the majority of these businesses either did
not possess sufficient growth potential or did not fit with the Company's
strategic direction. From late 1989 to 1990, the Company engaged in the
divestiture of these entities and meanwhile sought other opportunities.
On April 18, 1990, Decora acquired the assets of the Decora Division of United
Merchants and Manufacturers, Inc. (a NYSE company). The Decora Division had been
in business since 1945 and was the originator of the pressure-sensitive,
stylized, decorative covering material bearing the brand name Con-Tact(R).
Concurrent with the acquisition, Decora entered into an exclusive five-year
manufacturing and distribution agreement (the "Manufacturing Agreement") with
Rubbermaid Incorporated ("Rubbermaid"), which has since been extended to 1999,
whereby decorative self-adhesive vinyl and related products are exclusively
manufactured for and distributed by Rubbermaid under their Con-Tact(R) brand
name. The Con-Tact(R) manufacturing and adhesive technology is owned by Decora
and, along with the trademark, which is now owned by Rubbermaid but was
originally established by the Decora Division, enabled the Company in the 1950's
to establish its continued market leadership position in the industry. Decora
has continued to invest in and improve the coating and adhesive technology
involved in the manufacture of these products and, in conjunction with the
development of its Wearlon(R) technology, has recently developed a new group of
proprietary products that are now being distributed by Rubbermaid and other new
strategic partners.
In May 1988, right before the change in control, the Company acquired ComTel
Industries (then known as Utility Marketing and Development Corporation), a
privately held, fully integrated telecommunications enterprise which engaged in
installing, refurbishing and servicing new and used telecommunications equipment
1
<PAGE> 5
and systems. In July 1990 and September 1991, respectively, ComTel's 80%-owned
subsidiary, ComTel Metals, Inc., acquired the Siemens-Stromberg Carlson metal
manufacturing divisions in El Paso, Texas and Sanford, Florida. In April 1994,
as a result of its desire to focus resources on its core Decora subsidiary, the
Company made the decision to sell the operations of ComTel, which was completed
in June 1995.
NARRATIVE DESCRIPTION OF THE BUSINESS
GENERAL
Decora Industries, Inc. is a holding company operating through its subsidiary,
Decora, Incorporated. The "Company" as used herein shall refer to the holding
company and "Decora" shall refer to its subsidiary unless the context indicates
otherwise.
Decora is in the business of developing, manufacturing and selling self-adhesive
consumer decorative products and specialty commercial and industrial products.
It develops and manufactures these products utilizing its proprietary
pressure-sensitive adhesive and release systems technologies, including its
technology known as Wearlon(R). At the time of the acquisition of the Decora
Division from United Merchants and Manufacturers, Inc. in 1990, the majority of
the Decora Division's revenues were from sales of its core Con-Tact(R) and
related products under a single exclusive manufacturing agreement with
Rubbermaid. In order to complement Decora's mature core business, following the
acquisition, management began to seek growth and diversification opportunities
both within its distribution relationship with Rubbermaid and through other
strategic relationships and products which would not compete with products sold
to Rubbermaid. During fiscal 1997, 1996 and 1995, revenues under the Rubbermaid
contract have been 89%, 90% and 93%, respectively, of total revenues (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"). Management's main focus in the development of long-term growth
strategies has been:
- To maximize its strategic alliance with Rubbermaid and its consumer
products distribution network;
- To utilize its modular product components and technologies to create
self-adhesive products for new applications and market segments;
- To establish additional strategic relationships for distribution of
new products in segments, channels and geographic areas not served by
Rubbermaid; and
- To complement its consumer products with other applications and
products for the industrial coatings and substrates markets.
Significant resources have been invested in research and initiating new product
programs arising from Decora's base self-adhesive technology. As a result,
several new consumer products have been introduced during the past three fiscal
years and sold through its distribution partnership with Rubbermaid, as well as
to other new markets and strategic distributors. The Company also acquired and
developed a new release coating technology marketed under the brand name
Wearlon(R) which has begun to be used for speciality architectural and
2
<PAGE> 6
industrial process coating applications. Decora continues to invest in research
efforts; however, primary emphasis is now placed on the commercialization and
refinement of new products and the expansion of marketing relationships and
distribution channels.
PRODUCTS AND SERVICES - CONSUMER DECORATIVE PRODUCTS GROUP
Decora manufactures proprietary decorative self-adhesive products for sale into
an increasing number of market segments including housewares, arts and crafts,
wall covering and hardware. Such products are produced with a modular system of
varying substrates, coatings, finishes and packaging depending on the
requirements of the application, distribution channel and end user. Decora's
goal is to maximize this modular system through the development and sale of
self-adhesive products for as many household applications and through as many
market segments as possible.
Within its decorative and surface covering products, Decora's primary consumer
product is Con-Tact(R), a repositionable, self-adhesive, vinyl decorative
covering material which is used for do-it-yourself shelf decorations, surface
protection, arts and crafts and other applications. Con-Tact(R) is manufactured
by Decora utilizing its proprietary and patented repositionable adhesive
technology and is sold in roll form with a wide range of finishes including
printed patterns, solid colors and clear vinyl. All of Decora's Con-Tact(R)
production is purchased by Rubbermaid under a manufacturing agreement (the
"Manufacturing Agreement") which has been extended to March 31,1999. Decora
provides Rubbermaid with 100% of its worldwide product needs according to
periodically negotiated pricing levels which are adjusted primarily based on
changes in raw material costs and volume. Rubbermaid markets and sells
Con-Tact(R) and other specialty products which Decora has developed for
Rubbermaid primarily in the housewares departments of mass merchandisers in the
U.S., including WalMart, K-Mart, Target and others.
In July 1994, Decora expanded its market presence into Europe by establishing a
second distribution relationship for a new range of its decorative products for
the European market standard with the signing of a License Agreement with
Friedola Gebr. Holzapfel GmbH & Co. KG ("Friedola"). Under the agreement,
Friedola purchases from Decora self-adhesive decorative products for exclusive
distribution throughout western Europe under the Friedola(R) and easyTAC(TM)
brand names. In conjunction with Friedola, Decora expanded its product offerings
with a broader range of decorative designs, substrates and finishes. In addition
to its North American and European activities, Decora sells decorative products
internationally to customers in South America, the Middle East and the Far East
through its own direct efforts and through manufacturer's representative and
agency relationships it has developed.
In addition to its self-adhesive vinyl products, Decora has developed and
introduced self-adhesive thin film products for the home decorating market based
on its proprietary thin film technology (patent pending). These products are
very thin, yet durable and removable, and they blend almost seamlessly onto most
smooth or textured surfaces. They are printed in a variety of accents, borders
and stencil-like decorative designs including a line specifically targeted for
decorative use on kitchen and bathroom tiles. Utilizing its core product
3
<PAGE> 7
technology, Decora has also developed new product programs for the stationery
and arts and crafts markets which are targeted for introduction to the market
during fiscal 1998. Through these efforts, the Company's strategy is to
recapture product volume through targeting and re-merchandising existing
products and technology for sale in other growing market segments.
Management believes these new products and marketing efforts broaden Decora's
potential consumer products revenue base beyond housewares and across new market
segments such as hardware, paint and sundries, arts and crafts and wall
covering, both in the U.S. and internationally. Decora plans to continually
introduce new consumer products through its principal distributors and to pursue
its growth plan both domestically and internationally.
PRODUCTS AND SERVICES - INDUSTRIAL PRODUCTS GROUP
Decora has developed an industrial coatings business which markets a full range
of proprietary coatings under the Wearlon(R) brand name to users of specialty
industrial coatings. These unique non-stick, yet abrasion-resistant, coatings
are water-based and cure at room temperature, providing the industrial market
with an environmentally friendly coating system for a wide range of specialized
applications. These include manufacturing process applications such as mold
release and industrial maintenance applications such as machinery valves, paint
booths and clean rooms, marine foul release and other specialized OEM product
and process applications. Decora initially established a sales network in North
America consisting of manufacturer's representatives and qualified professional
applicators through which the product has been marketed and applied for a
variety of such applications. The coatings have been sold through this network
on a limited basis for use in the automotive, marine, paper, petroleum, aircraft
and food processing industries both for repeat users as well as for ongoing
pilot programs in a variety of applications. Through this network, the Company
has established several applications for which it believes the coating may have
significant competitive advantage. The Company is now focused on increasing its
penetration of these few applications and on seeking long term licensees for the
technology.
The necessity of long-term evaluation and testing programs required for various
technically oriented industrial applications require a long selling cycle and
result in slower growth for revenue opportunities compared with certain of
Decora's consumer products. The high performance nature of the coating, the
costs associated with installing such coatings in large projects and testing for
specific applications may take months, and in some cases years, and requires
application refinements in response to testing results. Management continues to
experience some breakthroughs in these applications and believes that liquid
coating products hold significant opportunity for Decora. Revenues from all
coating products have not yet been material to Decora's overall business to
date; however, such products have started to be recognized by industry
participants as a coating with unique properties.
In addition to the products summarized above, Decora's Industrial Products Group
also markets various other products, including commercial laminating, coating
and printing services and a line of high quality hazardous marking tapes and
electrical tapes sold under Decora's Cobra(R) tradename.
4
<PAGE> 8
For fiscal 1997, industrial products represented 1% of Decora's revenues.
Ongoing technology development and commercialization efforts are anticipated to
generate additional revenues in the future both through Decora's own direct
development and selling efforts and through strategic relationships.
MANUFACTURING
The majority of the products sold by Decora are produced at its facility in Fort
Edward, New York. Management believes that the plant currently has available
capacity which will be utilized in connection with the proposed expansion of
existing and new decorative self-adhesive products and commercial and industrial
products. Decora also utilizes outside suppliers when required for certain
specific printing, coating and finishing purposes for which it does not
currently have sufficient industrial capabilities as well as for temporary
warehousing requirements. Management anticipates making additional capital
expenditures in the future in order to increase operating efficiencies and add
additional capacity as warranted by product demand and mix.
The primary raw materials used in Decora's products are paper, vinyl, adhesives,
inks, silicone and other chemicals. Decora uses two primary suppliers for its
vinyl and relations with such suppliers are good. Decora believes that it has
alternative sources of its significant and primary raw materials.
MARKETING, RESEARCH AND DEVELOPMENT
Decora's strategy for its consumer products is to develop and sell products and
marketing programs through strategic partners with existing distribution
capabilities. Accordingly, for the majority of sales of product covered by the
Manufacturing Agreement and other supply agreements, Decora does not incur what
might otherwise be typical distribution and selling expenses relating to
consumer decorative products and has relied on the services of third party sales
and marketing consultants when deemed necessary. Decora has taken a similar
strategy for international sales of its Consumer Decorative Products as
reflected by its distributor agreement with Friedola and by relationships it has
developed with other international manufacturer's representatives.
For its Industrial Products Group, Decora utilizes varying strategies for
different markets. Decora has established a combination of a manufacturer's
representative network and professional applicators across the country to market
and apply its Wearlon(R) coatings in industrial maintenance, OEM and marine
applications. Decora is also actively pursuing opportunities for strategic
relationships in other specific niche markets where Wearlon(R) coatings are
believed to have the most potential, such as in the architectural, aviation,
paper and automotive industries for such applications as mold release, foul
release/easy-to-clean and friction reduction. As described above, due to the
nature of these products, the development cycle is a long term process.
With regard to research and development, Decora has reduced its pure research
and development function and currently maintains a small internal research group
led by the inventor of the Company's adhesive and Wearlon(R) technology which
has made significant progress in producing various new products based on
Wearlon(R) and the rest of its proprietary adhesive and coating technologies.
The majority of recent efforts have
5
<PAGE> 9
been placed on the refinement and enhancement of products already developed;
however, that group also continues to focus its efforts on the pursuit of new
consumer and industrial products and applications. As a result of these efforts,
the Company has refined a high-end product for certain industrial applications.
The Boeing Company and Ford Motor Company have recently started to use
Wearlon(R) industrial maintenance coating systems within their production lines
for mold release and non-stick applications. The rate at which these two
customers will continue to repurchase Wearlon(R) will be the first indication of
future growth potential for Wearlon(R) for these applications.
Given its desire to grow beyond one market and one customer, from fiscal 1992
through fiscal 1995, Decora invested capital into research and product
development as it expanded its product lines through the development and
commercialization of new products and technology for the consumer and industrial
markets. Following this period, management has de-emphasized pure research and
development while continuing to invest in the establishment of distribution
relationships for its broader range of products. As a result, total marketing
and research and development expenditures have declined. Total expenditures on
marketing, research and product and process development amounted to
approximately $1.9 million, $2.3 million and $4.0 million in fiscal 1997, 1996
and 1995, respectively. Management anticipates continued expenditures at similar
levels per dollar of revenue as it did in fiscal 1997 on products, program and
process development while continuing to de-emphasize pure research as new
distribution relationships are developed, new applications and programs for
existing products are developed and international marketing channels are opened
(see "Management's Discussion and Analysis of Financial Condition and Results of
Operations").
PROPRIETARY RIGHTS
Decora owns the rights to the pressure sensitive adhesive technology used in the
manufacturing of its self-adhesive Con-Tact(R) products, although the tradename
is now owned by Rubbermaid. In addition, it owns the Cobra(R), Wearlon(R) and
Decora(R) trade names. Decora has also applied for trade name and patent
protection for certain of its other new products including the protective and
decorative thin film products and certain of its Wearlon(R) liquid coatings and
coating additives.
Several of Decora's new products utilize variations of Wearlon(R) technology as
a component of their construction. Decora's rights to Wearlon(R) were formalized
in fiscal 1992 and the technology is the result of more than a decade of
research and development in adhesive and coating systems. Wearlon(R) includes a
water-based polymer which management believes is a breakthrough in coatings
requiring extraordinary non-stick and slip-lubricity properties combined with
high levels of resistance to corrosion, abrasion, chemicals and solvents. It
also provides the ability to control surface release characteristics across a
broad spectrum for a variety of applications and cures at room temperature.
Decora believes that its commercial position is enhanced by the patents it owns
as well as the know-how and trade secrets it has developed and maintains. Decora
has also applied for foreign protection for certain of its established and new
technologies and trademarks. In the interests of product development and
establishment of a distribution network, certain of its technologies have
6
<PAGE> 10
been licensed to third parties. Decora has executed trade secret and
confidentiality agreements with its licensees and others to protect its
proprietary rights as part of its overall secrecy protection program.
CUSTOMERS
During fiscal 1997, sales to Rubbermaid represented 89% of Decora's revenues.
Con-Tact(R) and other related products are distributed through Rubbermaid on a
nationwide basis to consumers in conjunction with the extensive product lines of
Rubbermaid pursuant to a Manufacturing Agreement which has most recently been
extended to March 31, 1999. Decora also has a supply agreement with Friedola and
international manufacturer's representative relationships which have become more
significant contributors to Decora's business. Decora has approximately 50
customers in addition to Rubbermaid and Friedola.
COMPETITION
Although Con-Tact(R) and associated products are not sold by Decora to the
ultimate consumer, competition experienced by Rubbermaid affects the purchase
requirements under the Manufacturing Agreement and Decora's ultimate revenues.
Management believes that the Con-Tact(R) product dominates the U.S. market for
its class of decorative material as well as miscellaneous end-use surface
protection applications. There are several similar products, including a low
cost shelf liner produced and sold by Rubbermaid, which, in management's
opinion, have not significantly penetrated the market; however, availability of
retail shelf space (and thus potential product sales) in an extremely
competitive retail environment can be impacted by products serving different
utilities than Decora's products. Management believes that Decora (and
ultimately Rubbermaid) compete effectively on the basis of price, service and
the quality of its products.
Domestic and international markets for self-adhesive decorative products and
industrial coating products are very competitive with competitors who are larger
and have more financial resources than Decora. Management believes that the
formulation and performance characteristics of Wearlon(R)-based products are
unique and that the proprietary technology utilized in several new products may
provide a competitive advantage in certain applications. Management intends to
focus on such specific applications. Other than Con-Tact(R) sold in the U.S.,
Decora does not yet have any significant market share in its various other
consumer decorative or industrial coating products.
SEASONALITY
Decora generally experiences higher earnings in its first two fiscal quarters
due to the purchase requirements of Rubbermaid to meet larger consumption of
Con-Tact(R) during the late spring and summer months. Order rates may also be
impacted by significant changes in inventory levels at Rubbermaid. Decora's
international business has been developed partially to help off-set the
seasonality of the domestic core business and management anticipates less
overall seasonality in the future as a result of global expansion. During fiscal
1996, Decora experienced an abnormal decline in volume relative to historical
trends as a result of Rubbermaid's absorption of excess inventory which was
created as a result of the consolidation of finished
7
<PAGE> 11
packaging operations in Decora's facility. Sales to Rubbermaid followed a more
typical seasonal pattern during fiscal 1997. There is no identified seasonality
for Decora's other products.
EMPLOYEES
At March 31, 1997, the Company employed 173 people of which 170 were in Decora
and three were employed in the Company's corporate office. As of the same date,
121 of Decora's employees were represented by a labor union. The contract with
such union was renegotiated and renewed in April 1996 and expires in March 1999.
There have been no major work stoppages in recent years and the Company believes
that its relations with its labor force are good.
ITEM 2. PROPERTIES
Decora owns its 220,000 square foot facility located on approximately 12 acres
in Fort Edward, New York. The Company's corporate headquarters are located
within this facility.
Management of the Company believes that the facilities of the Company and its
subsidiary are adequate for present and foreseeable future needs.
ITEM 3. LEGAL PROCEEDINGS
In July 1993, the Company's Decora, Incorporated subsidiary was notified by the
Environmental Protection Agency ("EPA") that a site in which it disposed of
hazardous waste has been named a Superfund site and that it is a potentially
responsible party. Decora, Incorporated will be required to contribute to the
cost of the cleanup of the site based on its share of waste contributed to the
site. Decora, Incorporated's allocated share of the total costs was finalized
through an arbitration process during fiscal 1997 and, as a result, based on the
current estimates of the total costs required to clean up the site, Decora,
Incorporated's share of the total future costs is estimated to be less than
$50,000 and the Company has reserved an amount based upon currently available
information.
In July 1995, a complaint was filed in the Supreme Court of the State of New
York against the Company and its Decora, Incorporated subsidiary by a former
consultant of such subsidiary. The complaint alleged various breaches of a
consulting agreement, including failure to pay sums due for services,
misrepresentations, deceptive trade practices and wrongful termination of
services. The matter has been dismissed without prejudice due to plaintiff's
failure to obtain counsel to replace counsel which withdrew from representation.
The Company and its subsidiaries are defendants in other pending actions, which,
in the opinion of management of the Company, are not material to the Company's
financial condition or results of operations. Although no assurances can be
given regarding the ultimate outcome of such matters, the Company has accrued
amounts for defense and settlement costs which the Company considers adequate.
8
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
9
<PAGE> 13
PART II
ITEM-5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
a. Market Information
The Company's Common Stock trades over the counter and is quoted on
NASDAQ ("Small Cap").
b. Stock Price Information
The following table reflects actual transactions, without retail
markup, markdown or commissions for Fiscal 1997 and 1996 and
inter-dealer quotations, without retail markup, markdown or commissions
for Fiscal 1995. Inter-dealer quotations may not necessarily represent
actual transactions. The high and low sales and bid prices of the
Common Stock for the dates indicated have been provided by the National
Quotation Bureau, Inc.
Common Stock
------------
Sales Prices
------------
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal 1997:
First Quarter $1 1/2 $ 1
Second Quarter 1 3/8 27/32
Third Quarter 1 1/4 7/8
Fourth Quarter 1 1/4 11/16
High Low
---- ---
Fiscal 1996:
First Quarter 1 3/8 1 5/16
Second Quarter 1 7/16 1
Third Quarter 1 3/16 1 1/16
Fourth Quarter 1 3/8 29/32
Bid Prices
----------
Fiscal 1995:
First Quarter 1 5/16 15/16
Second Quarter 2 3/32 1 1/8
Third Quarter 1 13/32 1 7/16
Fourth Quarter 1 1/4 15/16
</TABLE>
10
<PAGE> 14
On June 13, 1997, the closing sales price for the shares in the over-the-counter
market was $0.91, as reported by the National Quotation Bureau, Inc. The Company
has also authorized a class of preferred stock, although no shares of preferred
stock have been issued.
c. Approximate Number of Holders of Common Stock.
There were 804 holders of record of Common Stock as of June 13, 1997.
d. Dividends
The Company has never paid a cash dividend and intends to retain earnings,
if any, for use in its business. The Company's agreements with its lenders
restrict the ability of the Company to pay cash dividends and the Company
does not presently intend to pay any cash dividends on its Common Stock for
the foreseeable future.
ITEM 6. SELECTED FINANCIAL INFORMATION.
The following selected financial data of the Company as to the five fiscal years
ended March 31, 1997 are derived from the consolidated financial statements that
have been audited by Price Waterhouse LLP as to all years.
The following table should be read in conjunction with the Company's financial
statements and the notes thereto. Unless otherwise indicated, none of the
information in the table includes discontinued operations of the Company. See
Note 2 of the financial statements. See also Item 7, "Management's Discussion
and Analysis of Financial Condition".
11
<PAGE> 15
DECORA INDUSTRIES, INC.
SELECTED FINANCIAL DATA
For the five years ended March 31, 1997
(In thousands except per share data)
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $41,082 $38,828 $40,414 $39,955 $38,543
Operating Income 4,726 4,108 3,895 4,192 3,107
Income (Loss) from Continuing Operations 3,566 2,919 2,408 1,629 623
Income (Loss) from Discontinued Operations - - (1,297) (1,481) 68
------- ------- ------- ------- -------
Net Income (Loss) $ 3,566 $ 2,919 $ 1,111 $ 148 $ 691
======= ======= ======= ======= =======
INCOME (LOSS) PER SHARE(1):
Continuing Operations $ 0.10 $ 0.09 $ 0.08 $ 0.06 $ 0.02
Discontinued Operations - - (0.04) (0.05) 0.01
------- ------- ------- ------- =======
Income (Loss) Per Share1 $ 0.10 $ 0.09 $ 0.04 $ 0.01 $ 0.03
======= ======= ======= ======= =======
BALANCE SHEET DATA:(3)
Total Assets $37,454 $36,157 $31,021 $30,023 $34,952
Working capital (deficit) $ 6,253 $ 1,460 $ 238 $ 515 $(1,904)
Long-term Obligations $18,817 $20,299 $18,163 $18,473 $18,883
Stockholders Equity: $14,503 $10,139 $ 4,396 $ 2,577 $ 1,666
Cash Dividends per common share(2) - - - - -
</TABLE>
- ----------
(1) Includes shares issuable upon exercise of outstanding warrants and
options to purchase Common Stock if their inclusion is dilutive.
(2) The Company has not paid dividends during the five years ended March
31, 1997 and does not anticipate paying cash dividends in the
foreseeable future.
(3) Historical balance sheet data has not been restated for discontinued
operations in years prior to the year in which the relevant measurement
date occurred.
12
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This annual report on Form 10-K (the "10-K") includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.
All statements other than statements of historical facts, including, without
limitation, the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" and located
elsewhere herein regarding industry prospects and the Company's financial
position are forward-looking statements. Although the Company believes that the
expectations reflected in such forward looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Company's expectations are disclosed in the 10-K, including, without limitation,
in conjunction with the forward-looking statements included in this 10-K.
GENERAL
During the fiscal year ended March 31, 1997, Decora Industries, Inc. (the
"Company") and it's sole operating subsidiary, Decora, Incorporated ("Decora"),
began to realize the impact of previous investment in product and market
expansion, achieving record revenues and increased customer base and market
diversification. While revenues from the Company's largest customer, Rubbermaid
Incorporated ("Rubbermaid") recovered from the depressed levels in the prior
year, volume continues to trend below historical averages. Nevertheless,
Decora's expansion efforts, particularly internationally, have enabled the
Company to more than overcome this trend and to generate record sales levels.
Additionally, Decora continues to redefine its product offering to Rubbermaid
and has initiated new programs with Rubbermaid in market segments outside of
traditional housewares in order to recapture sales from consumer buying habits
which are changing with the evolution of retailing (i.e. the expansion of
"category killers", etc.). Management continues to emphasize growth in its mix
of products and penetration of new markets beyond its mature core product line.
From a financial point of view, the Company completed several financing
transactions during fiscal 1997. In June 1996 it completed the restructuring of
the warrants which the Company's subordinated lender, CIGNA Investments
("CIGNA"), held for 20% of the stock of the Company's Decora subsidiary. Such
warrants were exchanged for a note and common stock of the Company and thereby
removed the "put" obligation which the lender had for such warrants beginning in
April 1997. Subsequent to the exchange, two long term, senior debt borrowings
were completed which enabled the Company to retire $5,100,000 of the
subordinated debt owed to CIGNA, including the note issued in the warrant
exchange. The Company also extended its revolving line of credit facility and
added an additional facility specifically structured to support the Company's
growing international sales activities (see "Liquidity and Capital Resources"
below).
13
<PAGE> 17
RESULTS OF OPERATIONS
FISCAL 1997 VS. FISCAL 1996
Revenue of the Company was $41,082,000 for the year ended March 31, 1997
compared to $38,828,000 for the year ended March 31, 1996, an increase of 6%.
This increase resulted from significant growth in sales of decorative products
to international customers, as well as increased sales to the Company's
principal customer, Rubbermaid. In the prior year, sales to Rubbermaid had been
negatively impacted by inventory consolidation and shipment delays related to
the acquisition and installation of finish packaging operations in the Company's
Fort Edward facility. The prior year also reflected lower per unit revenue
during the first quarter, prior to the start-up of such new operations, in
comparison to the full year of such operations during the current period. While
sales to Rubbermaid increased $1,407,000, or 4%, over the prior year amount,
unit shipment volumes during the year decreased by 1% and remained below
historical averages. The Company believes that this decline is partially a
result of additional inventory reductions at Rubbermaid. In order to meet
current retail market demands for minimal inventory levels and just-in-time
demand scheduling, Decora and Rubbermaid are working together to implement a
pull-system ordering methodology for the Company's products. As a result
additional inventory is anticipated to be removed throughout the entire
manufacturer-to-retailer supply chain during the first half of fiscal 1998. Such
inventory reductions may impact the Company's shipment volumes during this
period. Other factors may include competition from alternative non-adhesive
shelf lining products in this segment which Management is working to counteract
with Rubbermaid with the introduction of re-merchandised products targeted for
specific consumer needs in new market segments such as stationery, office supply
and crafts.
Revenue from international sales of self-adhesive decorative products was
$4,465,000, an increase of $2,204,000 over the prior year. The majority of this
increase was derived from the export of products for sale in the European market
in addition to increased volume of products sold to other international markets.
Revenue from proprietary non-core decorative products such as thin film and
industrial products for the year ended March 31, 1997 was $1,166,000 lower than
in the same period last year as certain redesigned decorative products were not
introduced into the market until January 1997, when the Company introduced its
Decora Tile Art(TM), Decora Wall Art(TM) and Decora Glass Art(TM) programs at
the International Housewares Show in Chicago. The Company also continues to
focus on negotiating long term license agreements with potential third party
licensees for its Wearlon(R) liquid coatings, rather than on direct distribution
of such coatings into the industrial specialty coatings market.
Gross profit for the year ended March 31, 1997 was $10,579,000, or $5,000 lower
than the prior year's gross profit of $10,584,000. The Company's gross profit
margin was 25.8% during fiscal 1997, or 1.5% lower than the prior year's margin
of 27.3% reflecting the full year's impact of increased depreciation and
amortization expenses in cost of goods sold related to the manufacturing
expansion completed in September 1995 of the prior year as well as changes in
product mix. The gross profit margin was also impacted by the ramp-up of the new
international program whereby shorter production runs and related inefficiencies
were required to support product shipments. Other contributing factors to the
change in gross margin were changes in production volume and product mix.
Management anticipates that average gross profit margins will be at
14
<PAGE> 18
similar levels over the near term while there are likely to be quarterly
fluctuations based on changes in production and sales volume.
Marketing, general and administrative expenses were $5,853,000 during fiscal
1997, or $623,000 lower than the prior year's expenses of $6,476,000. This
reduction reflects the impact of cost saving measures which were implemented
during the last four months of fiscal 1996, including the early retirement
program which resulted in a one-time charge of $282,000 to the prior year's
expense. Lower expenditures also resulted from reduced research and development
expense as the Company continues to shift its emphasis from pure development to
the sale of commercialized products. As a result of the above changes, operating
income for the year ended March 31, 1997 increased to $4,726,000 from $4,108,000
during the prior year.
Net income for the fiscal year ended March 31, 1997 was $3,566,000, or $0.10 per
share, an increase of $647,000 over the prior year's net income of $2,919,000,
or $0.09 per share. Interest expense was $2,319,000 for the year ended March 31,
1997 versus $2,675,000 in the prior year, a decrease of $356,000. Such decrease
resulted from reduced borrowings and reduced interest rates on new borrowings
which were used to refinance pre-existing, higher cost obligations. Income from
continuing operations was also impacted favorably by a tax benefit of $1,159,000
resulting from net operating loss carry forwards which had previously been
partially reserved for (see Note 8 to the financial statements). The continued
profitability of the Company has resulted in the recognition of the remaining
benefit under accounting principles applicable to the Company's net operating
loss carry forwards. As a result, while cash taxes paid are anticipated to
remain below normal corporate rates as the net operating loss carryforwards are
utilized, current income tax expense to be recognized for financial reporting
purposes is anticipated to increase to approximately 25%-35% of pretax income
with a corresponding reduction in net income as a percent of revenue.
For the fourth quarter of fiscal 1997, revenues were $8,507,000 versus revenues
of $9,379,000 in the prior year's fourth quarter. This decline of 9% primarily
is the result of an 12% reduction in revenues from its most significant
customer, Rubbermaid. Management believes that such decline was partially due to
inventory reductions at Rubbermaid's main distribution facility reflecting an
on-going program to implement pull-system inventory management. Such inventory
reductions are scheduled to continue through the second quarter of fiscal 1998
and are likely to negatively impact the Company's revenues through that period.
Reduced sales to Rubbermaid were partially offset by a 74% increase in
international sales of decorative products which increased from $639,000 during
the fourth quarter of fiscal 1996 to $1,112,000 during the fourth quarter of
fiscal 1997. Gross profit during the fourth quarter of fiscal 1997 was
$2,534,000 versus gross profit of $2,636,000 reflecting the impact of lower
sales volume which was partially offset by changes in product mix for the same
quarter in fiscal 1996. Reduced marketing, general and administrative expenses
and reduced interest expense offset lower gross profit resulting in an increase
of pre-tax income from $243,000 for the fourth quarter of fiscal 1996 to
$403,000 for the fourth quarter of fiscal 1997. A lower tax benefit resulted in
net income for the last quarter of fiscal 1997 of $1,562,000 versus net income
for the fourth quarter of fiscal 1996 of $1,773,000.
The Company's near term growth is anticipated by Management to come primarily
from increased product sales to international markets, the sale of proprietary
self-adhesive decorative thin film products and the introduction
15
<PAGE> 19
and sale of new self-adhesive products to the stationery and arts & crafts
markets. In the near term, such growth may be partially offset by continued
price pressure and inventory reductions at Rubbermaid which are anticipated to
continue through September 1997. Longer term growth is also anticipated to be
derived from these products as well as from sales of Wearlon(R) liquid coatings
both in the industrial maintenance and other niche markets and from sales of new
products being developed for Rubbermaid and the do-it-yourself marketplace. The
Company is also actively pursuing strategic acquisitions that may further
contribute to growth and enhance its market position.
FISCAL 1996 VS. FISCAL 1995
Revenue of the Company was $38,828,000 for the year ended March 31, 1996
compared with $40,414,000 in the prior year. Several factors contributed to the
reduction in revenue which were related solely to Decora's core business
customer, Rubbermaid, while the decline was partially offset by advances in new
business areas. Most significant was the decline in orders from Rubbermaid as a
result of its absorption of buffer inventories of products purchased from Decora
which were no longer required as a result of the integration of product
finishing operations at Decora's Fort Edward facility. In addition to inventory
reductions at Rubbermaid associated with the operational consolidation,
continuing efforts by Rubbermaid to reduce overall inventory levels negatively
impacted Decora's order levels during the recent year. The reduced volume of
products sold to Rubbermaid also resulted from Rubbermaid's move to focus on
Con-Tact(R) shelving and decorative products for the housewares market and to
discontinue non-housewares specialty products, including Decora's Cushion(TM)
products, FabriArt(TM) self-adhesive textile products and KidScape(TM) juvenile
border and mural products. While Decora now has the ability to take these
products to new distribution channels, in the short term, reduced sales of such
products to Rubbermaid during fiscal 1996 resulted in $1.6 million lower sales
from the levels experienced in the prior year's period. All of these factors
contributed to an 18% reduction in unit volume of products sold to Rubbermaid
during fiscal 1996 versus the prior year. Such decline was partially offset by
the additional value added to the products by the operational consolidation
since June 1995 and volume related price adjustments pursuant to the
Manufacturing Agreement with Rubbermaid, resulting in a net revenue decline of
7% with Rubbermaid.
Revenue from international sales of self adhesive decorative products for the
year ended March 31, 1996 increased by $1,131,000, or 100%, over the same period
in the prior year primarily as a result of significantly increased sales of
Decora's new European line to its distribution partner, Friedola, primarily
during the third and fourth quarters of the year. Such products were
successfully reintroduced at the Heimtextil trade fair in January 1996 and
Decora received additional reorders for such products during the first quarter
of fiscal 1997.
Sales of self-adhesive wall covering and thin film products were $1,154,000
during the year ended March 31, 1996, a 30% increase over $887,000 of sales for
such products in the prior year. This resulted primarily from increased sales of
Decora's Wearlon(R)-based decorative products, including Decora's proprietary
thin film. Such increases more than offset lower revenues from certain
self-adhesive wall covering products which were discontinued for profitability
reasons during the year.
16
<PAGE> 20
Revenues from industrial products for fiscal 1996 were $563,000, or $374,000
lower than for the same period in the prior year, primarily the result of a
$570,000 reduction in revenue from the discontinuance of a release liner product
line in September 1994. This decline, in addition to a decline in revenues of
Decora's Cobra(R) tape line, was partially offset by an increase in sale of
Wearlon(R) liquid coating sales and sales of other industrial products.
Gross profit for year ended March 31, 1996 was $10,584,000, or $1,032,000 lower
than the prior year's gross profit of $11,616,000. The Company's gross margin
percentage declined from 28.7% in the prior year to 27.3% in fiscal 1996 as a
result of installation costs and start-up inefficiencies of the new
manufacturing operations, reduced overall manufacturing volumes relative to
fixed costs and the inclusion of certain expenses in costs of goods sold which
had been classified as developmental expenses in the prior year. The impact of
reduced volumes was partially offset by volume price adjustments pursuant to the
Manufacturing Agreement. Gross margins were impacted by many factors including
production volume, product mix, changes in raw material prices and product
pricing.
Marketing, general and administrative expenses were $6,476,000 during fiscal
1996, or $1,245,000 lower than the prior year's expenses of $7,721,000,
primarily as a result of lower research and product development expenditures,
the transition of certain new product processes from the developmental stage in
the prior year to ordinary costs of goods sold in the current year and workforce
reduction. Marketing, general and administrative expenses during the fiscal year
ended March 31, 1996 also include a one-time charge of $282,000 related to an
early retirement program which was accepted by twelve of the Company's
employees. The charge represents the present value of future benefits and
payments to be made to the retired employees over a 70-month time period and
management anticipates that Decora will achieve approximately $1,000,000 in net
savings over the same period as a result of the program. To further reduce costs
in the face of lower business volume during the fourth quarter of fiscal 1996,
management implemented a workforce reduction. Research and development
activities were at lower levels than in previous years as management has now
placed more focus on the sale and marketing of products derived from Decora's
established technologies. As a result of the above changes, operating income for
the fiscal year ended March 31, 1996 increased to $4,108,000 from $3,895,000
during the prior year.
Income from continuing operations for the fiscal year ended March 31, 1996 was
$2,919,000 versus $2,408,000 for the same period in the prior year. Interest
expense increased $17,000 over the prior year primarily as a result of a
$217,000 increase in the accrual for the warrants in subsidiary which was
credited to interest expense. Such increase was partially offset by favorable
borrowing rates. Income from continuing operations was impacted favorably by a
tax benefit of $1,500,000 resulting from net operating loss carry forwards which
had not previously been given value on the Company's financial statements (see
Note 8 to the financial statements). The final disposition of non-core
subsidiaries and the historical profitability of continuing operations resulted
in the recognition of this benefit under accounting principles applicable to a
portion of the Company's net operating loss carry forwards. No loss from
discontinued operations was recorded during the year ended March 31, 1996
resulting in net income for the year ended March 31, 1996 of $2,919,000, or
$0.09 per share, versus $1,111,000, or $0.04 per share, for the year ended March
31, 1995.
17
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
The Company's net working capital as reflected on its consolidated balance sheet
increased from $1,460,000 as of March 31, 1996 to $6,253,000 as of March 31,
1997. Accounts receivable increased $2,017,000 reflecting additional receivables
related to international sales, receivables associated with contractual year-end
price adjustments with Decora's largest customer and significant product
shipments during March 1997. Inventories decreased by $564,000 reflecting the
impact of the March shipments noted above and prepaid and other current assets
increased $205,000. Accounts payable increased by $140,000 reflecting purchases
of raw materials required to fulfill significant March orders while accrued
liabilities decreased $280,000. Current portion of long term debt decreased by
$3,500,000 reflecting the extension of Decora's revolving line of credit
facility until August 1998.
Consolidated cash balances as of March 31, 1997 were $243,000 which are limited
by certain security agreements and debt covenants as to use. The holding company
therefore has limited cash resources. During recent fiscal periods, the Company
and its subsidiaries generated cash from operations which was utilized primarily
to fund working capital requirements and repay debt. During fiscal 1997, Decora
generated positive operating cash flow, while the holding company was funded
through management fees and from the proceeds of notes receivable.
In connection with the acquisition of the Decora division by the Company in
April 1990, Decora issued $7,000,000 principal amount of subordinated notes, of
which $2,500,000 was due April 15, 1995 and $1,500,000 on each April 15
thereafter through 1998. The lender (CIGNA) and Decora agreed to extend the
first payment until April 15, 1997 at which time a total of $3,500,000 was due
with the remaining balance of $3,500,000 due on April 15, 1998. These notes had
been issued with warrants which included certain put features which may have
been payable in May 1997. On June 28, 1996, the Company and CIGNA exchanged such
warrants for a non-interest bearing two-year note in the amount of $1,000,000
and 1,000,000 shares of the Company's common stock. If the note had not been
repaid prior to April 15, 1997, the amount due would increase by 20% and if the
shares of common stock do not have a market value of at least $3.00 per share as
of April 15, 1998, the Company will issue additional shares to make up any
deficiency. Utilizing the proceeds from the financings described below as well
as its operating cash flow and availability under its line of credit, during the
year ended March 31, 1997, the Company repaid CIGNA a total of $5,100,000
including pre-payment of the $1,000,000 note due April 15, 1998. As such, the
Company did not have to pay the 20% premium noted above.
In August 1996, Decora renewed its $6,000,000 revolving line of credit until
August 31, 1998. As of March 31, 1997, the outstanding balance of this facility
was $2,907,000.
In November 1996, Decora borrowed $2,460,000 through the issuance of tax exempt
industrial development revenue bonds due in 2004, the net proceeds of which were
used to repay the Company's line of credit which had been used as a temporary
funding vehicle for the Company's packaging expansion project. These bonds were
credit enhanced through a letter of credit provided by the Company's primary
senior lender and bear interest at a rate which is adjusted weekly based on the
marketability of such tax-exempt, credit enhanced
18
<PAGE> 22
bonds. Initial level principal payments begin in November 1997. The line of
credit availability noted above was used to repay, in advance, $2,800,000 of the
$3,500,000 due to CIGNA in April 1997.
In March 1997, Decora completed a $4,354,000 senior debt financing comprised of
a five year, $3,354,000 term loan and an additional $1,000,000 revolving line of
credit facility. Proceeds of the term loan were used to repay CIGNA Investments
the remaining $700,000 which had been due on April 15, 1997, for early
retirement of $600,000 of the $3,500,000 due to CIGNA on April 15, 1998 and for
repayment of the $1,000,000 note noted above. In addition to repaying CIGNA,
$700,000 of the term loan provides funds to help the Company complete its fiscal
1998 capital expenditure program and the remaining $354,000 refinanced the
remaining balance of an existing term loan with the bank. The term loan matures
in May 1999 and bears interest at a floating rate. Contemporaneously with the
execution of this financing, the Company executed an interest rate swap
transaction which effectively fixed the interest rate for both of the Company's
bank term loans at 8.58% until May 1999. In addition to its existing line of
credit, the Company also established a $1,000,000 revolving line of credit
facility specifically tailored for the Company's increasing export activities
which was unused as of March 31, 1997.
Capital expenditures for the year ended March 31, 1997 were $489,000, which was
lower than historical levels. While the Company continues to make capital
improvements, several projects which had been scheduled for the year ended March
31, 1997 were postponed until fiscal 1998 as a result of additional planning and
design work required prior to executing certain projects. The Company
anticipates spending approximately $1,200,000 on capital projects during the
fiscal year ending March 31, 1998.
Future cash flow requirements of the Company will be satisfied through existing
cash balances, operations and available funds under the Company's credit
facilities. Additionally, Management believes that it will be able to raise any
additional funds which may be required in order to repay the remaining
$2,900,000 which is due CIGNA on April 15, 1998 and the convertible note in the
amount of $1,500,000 which is due in May 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is submitted in response to Part IV
hereof. See the Index to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
19
<PAGE> 23
PART III
DIRECTORS AND EXECUTIVE OFFICERS
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain biographical information, present occupation,
and business experience for the past five years of each director and executive
officer, including those persons nominated to serve on the Board of Directors:
<TABLE>
<CAPTION>
Year First
Became
Name Age Position Director
---- --- -------- --------
<S> <C> <C> <C>
Nathan Hevrony 45 Director, Chairman, 1988
Chief Executive Officer
Roger Grafftey-Smith 65 Director 1988
Gabriel Thomas 55 Director 1991
Stephen H. Verchick 56 Director 1993
Ronald A. Artzer 53 Director 1994
Timothy N. Burditt 42 Executive Vice President, -
Administration and Finance,
Secretary
Richard A. DeCoste 58 Executive Vice President, -
Decora Industries; Director of
Manufacturing, Decora, Incorporated
Frank J. Nolfi, Jr 65 Vice President-Finance, -
Decora, Incorporated
John F. Tattersall 39 Chief Operating Officer, -
Decora, Incorporated
</TABLE>
20
<PAGE> 24
DIRECTORS
NATHAN HEVRONY. Mr. Hevrony has served as a director and secretary of the
Company since August 1988. He was elected Chief Executive Officer and Chairman
of the Board during Fiscal 1990. He was a Director of two publicly traded
companies, Consolidated Packaging Corporation and Marcom Telecommunications,
Inc. until June 1988 while he was employed as a Director of Planning and
Development at Corporate Data Sciences, a publically traded company, from June
1986 to June 1988.
ROGER GRAFFTEY-SMITH. Mr. Grafftey-Smith has served as a director of the Company
since August 1988 and has been a managing partner of Grafftey-Smith &
Associates, an international financial consulting firm, since 1981. Mr.
Grafftey-Smith also serves as a director of Americanino Capital Corporation, a
publicly-traded corporation.
GABRIEL THOMAS. Mr. Thomas has served as a director of the Company since June
1991. He has served as President and Director of Unilab Corporation since
December 1989. During the period from 1986 to 1991, Mr. Thomas was a consultant
in international marketing and management. In 1985 and 1986, he was a consultant
to Frankfurt Consult, the mergers and acquisitions subsidiary of BHF Bank,
Frankfurt, Germany.
STEPHEN H. VERCHICK. Mr. Verchick was elected to the Board of Directors in
October 1993. He has been engaged in the private practice of law as President of
Stephen H. Verchick & Associates, Professional Corporation, in Beverly Hills,
California, for the past 24 years. Mr. Verchick is also President of Warner
Capital Associates, a Los Angeles based venture capital firm.
RONALD A. ARTZER. Mr. Artzer was elected to the Board of Directors in May 1994.
In March 1994, Mr. Artzer became President and Chief Executive Officer of
SoPakCo Foods, a food processing and packaging company. From 1991 to 1993, Mr.
Artzer served as President and Chief Executive Officer of Design Foods, a
Division of Sara Lee Corporation. From 1988 to 1991, he was President of STP
Consumer Services, Inc., a subsidiary of First Brands Corporation. From 1984 to
1988, he was President of Toddle House Restaurants, Inc., a subsidiary of Carson
Pirie Scott & Company. Prior thereto, he served in various Executive Officer
capacities of Sambo's Restaurants, Pepsi-Cola Company and General Foods
Corporation.
Directors of the Company hold office until the next annual meeting of
shareholders, until successors are elected and qualified or until their earlier
resignation or removal.
EXECUTIVE OFFICERS
TIMOTHY N. BURDITT. Mr. Burditt was named Executive Vice President,
Administration and Finance in April 1993 and was named Secretary in August 1993.
From 1991 until his employment with the Company, Mr. Burditt was President and
Chief Operating Officer of Monitor Television, Inc., a Boston area cable and
broadcasting television station and worldwide shortwave radio network. Prior to
his employment with Monitor, Mr. Burditt was Vice President, Investment Banking,
of Fleet Associates, Inc., an investment banking firm,
21
<PAGE> 25
from 1988 through 1991, Senior Associate for Investment Banking for the First
Boston Corporation from 1986 to 1987 and held various positions with GE Capital,
Inc. from 1983 to 1986.
JOHN F. TATTERSALL. Mr. Tattersall was named Chief Operating Officer of the
Company's Decora, Incorporated subsidiary in June 1995. From 1984 until his
employment with Decora, Incorporated, Mr. Tattersall held several key executive
positions with General Electric Company, including Business Manager from 1991 to
1995 and Product Manager from 1989 to 1991.
RICHARD A. DECOSTE. Mr. DeCoste was named Director of Manufacturing in December
1995. He had joined the Company as President of the Company's Decora,
Incorporated subsidiary in January 1993. In February 1994, Mr. DeCoste became
President of its Consumer Decorative Products Group. In November 1994, he became
Executive Vice President of the Company. From 1989 through 1991, Mr. DeCoste was
President of Plural Technologies, a manufacturer of commercial coatings. In
addition, he has owned DeCoste Remodeling/Design, a building materials company,
since 1987.
FRANK J. NOLFI, JR. Mr. Nolfi has served as Vice-President Finance of the
Company's Decora, Incorporated subsidiary since the Company's acquisition in
April 1990. He served in the same position for the Uniglass Industries division
of the prior owner, United Merchants and Manufacturers, Inc.
Officers of the Company are elected by the Board of Directors and hold office
until their successors are chosen and qualified, until their death or until they
resign or have been removed from office. All corporate officers serve at the
discretion of the Board of Directors. There are no family relationships between
any director or executive officer of the Company and any other director or
executive officer of the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors convened four formal meeting during fiscal 1997. In
addition, the Board took action numerous times during the fiscal year by
unanimous written consent. Management confers frequently with its directors on
an informal basis to discuss Company affairs.
The Board of Directors has two standing committees: an Audit Committee and a
Compensation Committee. The Board does not have a Nominating Committee.
The function of the Audit Committee is to review and approve the selection of
and all services performed by the Company's independent accountants, to meet and
consult with, and to receive reports from, the Company's independent accountants
and its financial and accounting staff and to review and act or report to the
Board of Directors with respect to the scope of audit procedures, accounting
practices, and internal accounting and financial controls of the Company. The
current members of the Audit Committee are Roger Grafftey-Smith, Gabriel Thomas,
Stephen Verchick and Ronald Artzer. The Audit Committee held one meeting during
fiscal 1997 and took action by written consent.
22
<PAGE> 26
The Compensation Committee is generally authorized to review and recommend to
the Board the compensation to be paid to the Company's principal officers and to
administer the Company's 1987 Stock Option Plan. The current members of the
Compensation Committee are Ronald Artzer (Chairman), Gabriel Thomas, Stephen
Verchick and Roger Grafftey-Smith. The Compensation Committee held two meetings
during fiscal 1997 and took action several times by written consent.
COMPENSATION OF DIRECTORS
Directors are paid $2,500 for each Board meeting and $500 for each committee
meeting which they attend. Directors may also receive stock options under the
Company's 1987 Stock Option Plan or by other grant by the Company. The Company
reimburses directors for reasonable expenses incurred in connection with their
attendance at meetings and other Company related functions.
ITEM 11. EXECUTIVE COMPENSATION
The tables and discussion below set forth information about the compensation
awarded to, earned by or paid to the Company's Chief Executive Officer and to
its most highly compensated executive officers during the fiscal years ended
March 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- ----------------------
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS STOCK OPTIONS
- --------------------------- ---- --------- ----- -------------
<S> <C> <C> <C> <C>
Nathan Hevrony 1997 $185,000(4) $40,000 -
Chief Executive Officer 1996 $185,000(4) - -
1995 $180,000 $25,000 400,000(2)
Timothy N. Burditt 1997 $120,000 $15,000 -
Executive Vice President, 1996 $120,000 $15,000 25,000
Administration & Finance 1995 $ 90,000 $27,000 -
John F. Tattersall 1997 $130,000 $20,000 -
Chief Operating Officer, 1996 $ 99,000 - 200,000(3)
Decora Incorporated 1995 - - -
Richard A. DeCoste 1997 $125,000 $ 5,000 -
Director of Manufacturing, 1996 $125,000 - -
Decora, Incorporated 1995 $128,000 - -
</TABLE>
23
<PAGE> 27
(1) Messrs. Hevrony, Tattersall, and Burditt were compensated pursuant to
employment agreements. See "Employment Agreements" below.
(2) The options vest as follows: 150,000 vest if the share price is $3.00
or more for 30 consecutive days and 250,000 shall vest if the share
price is $4.00 or more for 30 consecutive days any time until May 31,
1998. None of these options are vested at this time.
(3) Options vest as follows: 50,000 on date of grant and 50,000 on each
anniversary of date of grant over three years.
(4) The Company also paid the premium for term life insurance for the
benefit of Mr. Hevrony of $17,665.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Hevrony, its Chief
Executive Officer which has been extended until May 31, 2000. The extended
agreement provides for an annual salary of $197,500 and a cash bonus of up to
$110,600 contingent on the amount of income from operations before taxes which
is achieved by the Company. Mr. Hevrony was paid a $40,000 bonus for the fiscal
year ended March 31, 1997. In addition, during August 1994, Mr. Hevrony received
an option to purchase up to 400,000 shares at $2.00 per share. The options vest
as follows: 150,000 vest if the share price is $3.00 or more for 30 consecutive
days and 250,000 shall vest if the share price is $4.00 or more for 30
consecutive days any time until May 31, 1998. None of these options are vested
at this time. The employment agreement shall terminate upon breach of a material
term of the agreement or upon the permanent disability of Mr. Hevrony. In the
event of termination without cause (as defined in such agreement), Mr. Hevrony
is entitled to receive compensation for the remainder of the term of the
agreement (through May 31, 2000) and an additional 24 month period.
The Company entered into a three-year employment agreement with Mr. Burditt
which provides for a minimum annual compensation in the amount of $90,000 and an
annual bonus of $27,000. In 1995, such agreement was modified to provide minimum
annual compensation in the amount of $120,000 with an annual bonus subject to
performance and the discretion of the compensation committee. This agreement was
automatically renewed for a new three year term beginning June 1996. Upon
termination without cause, Mr. Burditt is entitled to receive any earned but
unpaid bonuses on a pro-rata basis, plus compensation in the amount of twelve
months during the first year of the term, nine months compensation during the
thirteenth to eighteenth months of the term and the lesser of six months or
until the end of the term if terminated after the eighteenth month. Such
agreement was extended to May 1999.
As of June 1, 1997, the Company entered into a three year employment agreement
with Richard DeCoste, Decora Manufacturing's Vice President of Operations, which
provides for annual compensation of $140,000. Upon termination without cause,
Mr. DeCoste is entitled to receive compensation for the lesser of twelve months
or the end of the term. As part of the employment agreement, Mr. DeCoste was
granted an option to purchase 100,000 shares of the Company's common stock at
$1.00 per share.
24
<PAGE> 28
In June 1995, the Company entered into a three year employment agreement with
Mr. Tattersall which initially provides for minimum annual compensation in the
amount of $130,000. In addition, such agreement provides for an annual bonus of
up to half his salary contingent upon certain performance criteria. Upon
termination without cause, Mr. Tattersall is entitled to receive compensation
for the greater of 12 months or the remainder of the term of his agreement.
AGGREGATED MARCH 31, 1997 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
---------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(3)
---- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Nathan Hevrony 750,000 400,000 $ -0- $ -0-
Timothy N. Burditt 125,000(1) -0- $ -0- $ -0-
Richard A. DeCoste 75,000(1)(2) -0- $ -0- $ -0-
John F. Tattersall 100,000 100,000 $- 0- $ -0-
</TABLE>
- ----------
(1) Options were granted at 85% of market value (closing bid price for the
Company's Common Stock as reported by NASDAQ) at date of grant.
(2) Options have a term of ten years, subject to termination upon the
termination of employment. Unvested options are subject to acceleration
upon a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of
substantially all of the Company's outstanding stock by a single person
or entity (unless the terms of such agreement specifically provide for
the assumption of such options), or in the event of the sale or
transfer of substantially all of the Company's assets.
(3) Value of unexercised in-the-money options was calculated using the
average of the bid and asked price for the Company's stock on March 31,
1997.
During fiscal 1997, none of the executive officers exercised any outstanding
stock options. The only unexercised options held by such executive officers as
of March 31, 1997, are shown in the table above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of June 13, 1997, certain information with
respect to the Common Stock of the Company which may be deemed to be
beneficially owned by each stockholder who is known by the Company to own more
than 5% of the outstanding Common Stock, by each director of the Company and by
all directors and officers as a group.
25
<PAGE> 29
<TABLE>
<CAPTION>
NAME AND PERCENT
ADDRESS OF COMMON OTHER OF
BENEFICIAL OWNER(1) STOCK SECURITIES TOTAL CLASS
------------------- ----- ---------- ----- -----
<S> <C> <C> <C> <C>
Nathan Hevrony 753,750 750,000(2) 1,503,750 4.2%
1 Mill Street
Fort Edward, NY 12828
Gabriel Thomas -0- 512,000(2) 512,000 1.4%
1 Mill Street
Fort Edward, NY 12828
Roger Grafftey-Smith 375,000 362,000(2) 737,000 2.1%
1 Mill Street
Fort Edward, NY 12828
Stephen H. Verchick -0- 175,000(2) 175,000 (4)
21550 Oxnard Street
Suite 300
Woodland Hills, CA 91367
Ronald A. Artzer -0- 150,000(2) 150,000 (4)
315 Mullins Street
Mullins, South Carolina 29574
Timothy N. Burditt -0- 125,000(2) 125,000 (4)
1 Mill Street
Fort Edward, NY 12828
John F. Tattersall -0- 100,000(2) 50,000 (4)
1 Mill Street
Fort Edward, NY 12828
Richard A. DeCoste -0- 175,000(2) 175,000 (4)
1 Mill Street
Fort Edward, NY 12828
Frank J. Nolfi, Jr. -0- -0- -0- (4)
1 Mill Street
Fort Edward, NY 12828
Robert W. Johnson, IV(6) 2,006,325(3) 1,207,353(2)(5) 3,213,678 9.0%
The Johnson Company
630 Fifth Avenue, Suite 918
New York, NY 10111
</TABLE>
26
<PAGE> 30
<TABLE>
<S> <C> <C> <C> <C>
All directors and officers as
a group including the named
persons (9 persons) 1,128,750 2,349,000 3,477,750 9.7%
</TABLE>
(1) Unless otherwise indicated, each person included in the table has sole
investment power and sole voting power with respect to the securities
beneficially owned.
(2) The amounts shown reflect shares of common stock underlying stock
options, convertible notes or warrants which are exercisable within 60
days of June 13, 1997.
(3) Mr. Johnson disclaims beneficial interest in 185,000 shares which are
held by trusts for which he is a trustee.
(4) Each of these persons owns less than 1% of the outstanding common stock
of the Company.
(5) Includes 882,353 shares issuable upon the conversion of the Johnson
Note in the principal amount of $1,500,000 at the rate of $1.70 per
share. Does not include a warrant to purchase 1,700,000 shares which
can only be exercised if the Johnson Note is paid in full without
conversion.
(6) Pursuant to the terms of a Note and Warrant Agreement, dated November
3, 1992, by and between the Company and Mr. Johnson, as amended, the
Company is obligated to name Mr. Johnson as a director nominee. Mr.
Johnson has indicated to the Company that he does not intend to
exercise such right at the present time.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements. See Index to Consolidated Financial
Statements.
2. Financial Statement Schedules. See Index to Consolidated
Financial Statements.
3. Exhibits.
The following exhibits are filed or incorporated by reference as part of this
Report.
27
<PAGE> 31
(3) Articles of Incorporation and By-Laws
3.1 Certificate of Incorporation filed on March 27, 1992.(8)
3.2 By-laws.(8)
(4) Instruments Defining the Rights of Security Holders
4.1 Certificate of Incorporation (see Exhibits 3.1-3.2).
4.2 Form of Specimen Certificate.
(10) Material Contracts
10.1 Utilitech, Incorporated, 1987 Stock Option Plan.(1)
10.2 Management Agreement dated as of April 18, 1990 by and between
Utilitech and Decora, Incorporated.(2)
10.3 Loan and Security Agreement dated as of April 18, 1990 by and
between Decora, Incorporated, Utilitech and Norstar Bank of
Upstate NY ("Norstar").(2)
10.4 Secured Revolving Line of Credit Agreement dated as of April
18, 1990 by and between Decora, Incorporated and Norstar.(2)
10.5 Form of Warrant to Purchase Common Stock of Decora,
Incorporated expiring April 15, 1998 dated as of April 18,
1990 by and between Decora and CIGNA Mezzanine Partners II,
L.P., CIGNA Property and Casualty Insurance Company and Zande
and Co.(2)
10.6 Forms of 14% Senior Subordinated Notes due April 15, 1998
dated as of April 18, 1990 in the amounts of $3,206,480.21,
$1,327,732.26, $1,138,055.27 and $1,327,732.26 to CIGNA
Mezzanine Partners II, L.P., CIGNA Property and Casualty
Property and Casualty Insurance Company and Zande and Co.(2)
10.7 Securities Purchase Agreement dated as of April 15, 1990 by
and between Utilitech, Decora, Incorporated and Purchasers of
14% Senior Subordinated Notes due 1998 and Warrants to
Purchase Common Stock of Decora, Incorporated.(2)
10.8 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Nathan Hevrony.(4)
28
<PAGE> 32
10.9 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Roger Grafftey-Smith.(4)
10.10 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Gabriel Thomas.(4)
10.11 Note and Warrant Purchase Agreement by and between Decora
Industries, Inc. and Robert W. Johnson IV, dated November 3,
1992.(5)
10.12 Convertible Negotiable Promissory Note by and between Decora
Industries, Inc. and Robert W. Johnson IV, dated November 3,
1992.(5)
10.13 Series A Warrant to Purchase Common Stock of Decora
Industries, Inc., dated November 3, 1992 issued to Robert W.
Johnson IV.(5)
10.14 Series B Warrant to Purchase Common Stock of Decora
Industries, Inc., dated November 3, 1992 issued to Robert W.
Johnson IV.(5)
10.15 Form of Option Agreement dated as of January 11, 1993, by and
between Richard A. DeCoste and the Company.(6)
10.16 Employment Agreement, dated as of July 1, 1993, by and between
the Company and Timothy N. Burditt.(6)
10.17 1988 Employee Stock Purchase Plan.(6)
10.18 Second Amendment to Secured Revolving Line of Credit Agreement
dated as of July 29, 1993 by and between Decora and Fleet Bank
of New York (successor to Norstar).(7)
10.19 Labor Agreement, effective June 9, 1992, by and between
Decora, Incorporated and Local #13 United Paperworkers
International Union.(7)
10.20 Promissory Note in the amount of $8,500,000 by and between
Decora, Incorporated and Fleet Bank of New York dated July 20,
1994.(7)
10.21 Amendment No. 1 to Loan and Security Agreement between Decora,
Incorporated and Fleet Bank of New York dated July 20,
1994.(7)
10.22 Promissory Note in the amount of $1,000,000 by and between
Decora, Incorporated and Fleet Bank of New York dated July 20,
1994.(7)
29
<PAGE> 33
10.23 Loan and Security Agreement in the amount of $1,000,000 by and
between Decora, Incorporated and Fleet Bank of New York dated
July 20, 1994.(7)
10.24 Revolving Line of Credit Note in the amount of $6,000,000 by
and between Decora, Incorporated and Fleet Bank of New York
dated July 20, 1994.(7)
10.25 Third Amendment to Secured Revolving Line of Credit Agreement
by and between Decora, Incorporated and Fleet Bank of New York
dated July 20, 1994.(7)
10.26 Warrant to Confidesa AG to Purchase 100,000 Shares of Common
Stock dated June 29, 1993.(7)
10.27 Form of Warrant to Confidesa AG to Purchase 50,000 shares of
Common Stock dated June 1994.(7)
10.28 Amendment to Securities Purchase Agreement dated as of July
19, 1994 by and between Decora, Incorporated and CIGNA
Mezzanine Partners, Inc., CIGNA Property and Casualty and
Insurance Company of North America.(7)
10.29 Promissory Note in the amount of $6,000,000 dated as of July
20, 1994 by and between Decora Industries as borrower and
Decora, Incorporated as lender.(7)
10.30 Form of Option Agreement dated as of July 5, 1994 by and
between Decora Industries, Inc. and Stephen Verchick.(7)
10.31 Form of Option Agreement dated as of July 5, 1994 by and
between Decora Industries, Inc. and Ronald Artzer.(7)
10.32 Form of Option Agreement dated as of August 15, 1994 by and
between Decora Industries, Inc. and Nathan Hevrony.(8)
10.33 Secured Promissory Note I dated as of March 31, 1995 in the
amount of $850,000 by and between ComTel Systems Corporation,
as Debtor, and ComTel Industries, Inc., as Lender.(10)
10.34 Secured Promissory Note II dated as of March 31, 1995 in the
amount of $710,000 by and between ComTel Systems Corporation,
as Debtor, and ComTel Industries, Inc., as Lender.(10)
10.35 Amendment to Securities Purchase Agreement dated as of April
1, 1995, by and among Decora, Incorporated and CIGNA Mezzanine
Partners II, L.P., CIGNA Property and Casualty Insurance
Company and Insurance Company of North America.(10)
30
<PAGE> 34
10.36 Manufacturing Agreement dated April 12, 1995 by and among
Decora Industries, Inc., Decora, Incorporated and Rubbermaid
Incorporated.(10)(11)
10.37 Employment Agreement dated June 28, 1995 by and between John
Tattersall and Decora, Incorporated.(10)
10.38 Option Agreement dated June 28, 1995 by and between John
Tattersall and Decora Industries, Inc.(10)
10.39 Option Agreement dated July 6, 1995 by and between Gabriel
Thomas and Decora Industries, Inc.(10)
10.40 Amended and Restated Note and Warrant Purchase Agreement by
and between Decora and Johnson.(12)
10.41 Amended and Restated Convertible Negotiable Promissory Note in
the amount of $1,500,000 by and between Decora as payor and
Johnson as holder.(12)
10.42 Series C Warrant to Purchase Common Stock of Decora
Industries, Inc.(12)
10.43 Business Purpose Note dated January 24, 1996 in the amount of
$650,000 by and between Decora Industries, Inc. as payor and
Fleet Bank.(13)
10.44 Promissory Note dated September 20, 1995 in the amount of
$375,000 by and between Decora, Incorporated as the borrower
and the Washington County Local Development Corporation.(13)
10.45 Loan Agreement dated September 20, 1995 between Decora,
Incorporated and the Washington County Local Development
Corporation.(13)
10.46 Form of Amendment No. 3 to the Securities Purchase Agreement
dated as of March 31, 1996 by and among Decora, Incorporated,
CIGNA Mezzanine Partners, Inc., CIGNA Property and Casualty
and Insurance Company of North America.(13)
10.47 Form of Exchange Agreement dated March 31, 1996 by and among
Decora, Incorporated, CIGNA Mezzanine Partners, Inc., CIGNA
Property and Casualty and Insurance Company of North
America.(13)
10.48 Form of Loan and Security Agreement amendment no. 2, dated
August 13, 1996, by and among Decora, Incorporated, as
Borrower, the Company, as Corporate Guarantor and Fleet Bank
as Lender.(14)
31
<PAGE> 35
10.49 Form of Restated Promissory Note dated August 13, 1996 by and
between Decora, Incorporated and Fleet Bank.(14)
10.50 Form of Official Statement of Counties of Warren and
Washington, New York, Industrial Development Agency $2,460,000
Tax-exempt Industrial Development Revenue Bonds (Decora,
Incorporated Project), Series 1996.(15)
10.51 Form of Line of Credit Note dated March 27, 1997 by and
between Decora, Incorporated and Fleet Bank.
10.52 Form of Consolidated and Restated Promissory Note dated March
27, 1997 by and between Decora, Incorporated and Fleet Bank.
10.53 Form of Amended and Restated Term Note dated March 27, 1997 by
and between Decora, Incorporated and Fleet Bank.
10.54 Form of Employment Agreement dated as of June 1, 1997 by and
between Decora Industries, Inc. and Nathan Hevrony.
(22) Subsidiaries of the Registrant(7)
(24) Consents of Experts and Counsel
24.1 Consent of Price Waterhouse LLP.
Notes
(1) Previously filed as Exhibits to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1988.
(2) Previously filed as Exhibits to the Company's Report on Form
8-K dated April 18, 1990.
(3) Previously filed as Exhibit to the Company's Report on Form
8-K dated April 6, 1992.
32
<PAGE> 36
(4) Previously filed as Exhibits to the Company's Report on Form
10-K for the fiscal year ended March 31, 1992.
(5) Previously filed as Exhibits to the Company's Report on Form
8-K dated November 5, 1992.
(6) Previously filed as Exhibit to the Company's Report on Form
10-K for the fiscal year ended March 31, 1993.
(7) Previously filed as Exhibit to the Company's Report on Form
10-K for the fiscal year ended March 31, 1994.
(8) Previously filed as Exhibit to the Company's Report on Form
10-Q for the fiscal quarter ended December 31, 1994.
(9) Previously filed as Exhibit to the Company's Report on Form
8-K dated March 2, 1995.
(10) Previously filed as Exhibit to the Company's Report on Form
10-K for the fiscal year ended March 31, 1995.
(11) Confidential treatment requested.
(12) Previously filed as Exhibit to the Company's Report on Form
10-Q for the fiscal quarter ended December 31, 1995.
(13) Previously filed as Exhibit to the Company's Report on Form
10-K for the fiscal year ended March 31, 1996.
(14) Previously filed as Exhibit to the Company's Report on Form
10-Q for the fiscal quarter ended September 30, 1996
(15) Previously filed as Exhibit to the Company's Report on Form
10-Q for the fiscal quarter ended December 31, 1996.
(b) REPORTS ON FORM 8-K
None
33
<PAGE> 37
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
DECORA INDUSTRIES, INC.
By: /s/ Nathan Hevrony
--------------------------------
Nathan Hevrony
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) THE SECURITIES 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/ /Roger Grafftey-Smith Director June 25, 1997
- ----------------------------
Roger Grafftey-Smith
/s/ Gabriel Thomas Director June 25, 1997
- ----------------------------
Gabriel Thomas
/s/ Nathan Hevrony Chief Executive Officer June 25, 1997
- ---------------------------- and Director (Principal
Nathan Hevrony Executive Officer)
/s/ Stephen H. Verchick Director June 25, 1997
- ----------------------------
Stephen H. Verchick
/s/ Ronald A. Artzer Director June 25, 1997
- ----------------------------
Ronald A. Artzer
/s/ Timothy N.Burditt Executive Vice President, June 25, 1997
- ---------------------------- Administration and Finance
Timothy N. Burditt (Principal Financial and
Accounting Officer)
</TABLE>
34
<PAGE> 38
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Financial Statements Page
- -------------------- ----
<S> <C>
The following Consolidated Financial Statements
of Decora Industries, Inc. and Report of Independent
Accountants are filed as part of this report:
Report of Independent Accountants F-2
Consolidated Balance Sheet as of March 31, 1997 and 1996 F-3
Consolidated Statement of Income for the Years
Ended March 31, 1997, 1996 and 1995 F-5
Consolidated Statement of Cash Flows for the Years
Ended March 31, 1997, 1996 and 1995 F-6
Consolidated Statement of Changes in Shareholders' Equity
for the Years Ended March 31, 1997, 1996 and 1995 F-7
Notes to Consolidated Financial Statements F-8
Financial Statement Schedule for the three years ended March 31, 1997
Schedule II - Valuation and Qualifying Accounts F-22
</TABLE>
F-1
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Decora Industries, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Decora
Industries, Inc. and its subsidiaries at March 31, 1997 and 1996 and the results
of their operations and their cash flows for each of the three years in the
period ended March 31, 1997 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform an 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, assessing the accounting principles used and significant estimates
made by management and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
June 9, 1997
F-2
<PAGE> 40
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's (except per share data)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1997 1996
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 243 $ 188
Accounts receivable, less allowance for
doubtful accounts of $499 and $202 at
March 31, 1997 and 1996, respectively 6,168 4,151
Inventories 5,439 6,003
Prepaid expenses and other current assets 847 642
----------- ----------
Total current assets 12,697 10,984
Property and equipment, net 7,781 8,944
Notes receivable 1,468 1,758
Intangibles, net 10,924 11,342
Other non-current assets, net 357 229
Deferred income taxes 4,227 2,900
----------- -----------
Total assets $ 37,454 $ 36,157
=========== ===========
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 41
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's (except per share data)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1997 1996
---- ----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,267 $ 2,127
Accrued liabilities 1,867 1,587
Current portion of long-term debt 2,310 5,810
----------- -----------
Total current liabilities 6,444 9,524
Long-term debt 16,507 14,489
Other non-current liabilities - 363
----------- -----------
Total liabilities 22,951 24,376
----------- -----------
Warrants in subsidiary - 1,642
----------- -----------
Shareholders' equity:
Preferred stock, $.01 par value; 5,000 shares
authorized at March 31, 1997 and 1996 - -
Common stock, $.01 par value; 45,000 shares authorized;
35,469 and 34,429 shares issued and outstanding at
March 31, 1997 and 1996, respectively 355 344
Additional paid-in capital 31,862 31,075
Accumulated deficit (17,714) (21,280)
----------- -----------
Total shareholders' equity 14,503 10,139
----------- -----------
Commitments and contingencies
----------- -----------
Total liabilities and shareholders' equity $ 37,454 $ 36,157
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 42
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's (except per share data)
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales $ 41,082 $ 38,828 $ 40,414
Cost of goods sold 30,503 28,244 28,798
-------- -------- --------
Gross profit 10,579 10,584 11,616
Marketing, general and administrative
expense 5,853 6,476 7,721
-------- -------- --------
Operating income 4,726 4,108 3,895
Interest expense 2,319 2,675 2,658
-------- -------- --------
Income from continuing
operations before income taxes 2,407 1,433 1,237
Benefit from income taxes (1,159) (1,486) (1,171)
-------- -------- --------
Income from continuing operations 3,566 2,919 2,408
-------- -------- --------
Discontinued operations:
Loss from operations -- -- (875)
Provision for discontinued operations -- -- (422)
-------- -------- --------
Loss from discontinued operations -- -- (1,297)
-------- -------- --------
Net income $ 3,566 $ 2,919 $ 1,111
======== ======== ========
Income (loss) per common share:
Continuing operations $ 0.10 $ 0.09 $ 0.08
Discontinued operations -- -- (0.04)
-------- -------- --------
Net income per common share $ 0.10 $ 0.09 $ 0.04
======== ======== ========
Average shares of common stock used in
computation of income per share 35,219 32,280 30,357
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 43
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's (except per share data)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended March 31,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,566 $ 2,919 $ 1,111
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,249 1,222 1,623
Amortization of debt discount 195 83 489
Loss on disposal of fixed assets -- 98 75
Stock issued for interest and services -- 47 358
Deferred income tax benefit (1,327) (1,500) (1,400)
Accretion of put warrants -- 217 --
Net changes in current assets and liabilities (1,601) (3,316) (1,724)
Increase (decrease) in net assets and liabilities
of discontinued operations -- (601) 1,476
--------- --------- ---------
Net cash provided by (used in)
operating activities 3,082 (831) 2,008
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of discontinued operations -- -- 1,090
Reductions in (additions to) notes receivable 290 (198) (1,560)
Cash of discontinued operations -- -- (180)
Purchase of fixed assets (489) (2,699) (920)
Retirement of fixed assets -- 154 --
--------- --------- ---------
Net cash used in investing activities (199) (2,743) (1,570)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from additional borrowings 5,814 3,823 226
Repayment of debt (8,362) (1,420) (875)
Proceeds from exercise of stock options 30 -- 50
Proceeds from issuance of common stock -- 550 --
Stock issued in connection with
debt restructuring -- 500 150
Payment of deferred financing costs (310) -- --
--------- --------- ---------
Net cash provided by (used in)
financing activities (2,828) 3,453 (449)
--------- --------- ---------
Net increase (decrease) in cash 55 (121) (11)
Cash at beginning of year 188 309 320
--------- --------- ---------
Cash at end of year $ 243 $ 188 $ 309
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 44
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's (except per share data)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
ADDITIONAL
PAR PAID-IN ACCUMULATED
SHARES VALUE CAPITAL DEFICIT
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Balance at March 31, 1994 29,859 $ 299 $ 27,588 $(25,310)
Interest paid in common shares 258 2 180 --
Conversion of debentures 131 1 149 --
Common shares issued in debt restructuring 125 1 149 --
Stock options exercised 50 1 49 --
Common shares issued to
settle outstanding obligations 295 3 173 --
Net income -- -- -- 1,111
--------- --------- --------- ---------
Balance at March 31, 1995 30,718 307 28,288 (24,199)
Conversion of note payable 574 6 344 --
Common shares issued for
interest and debt restructuring 900 9 538 --
Common shares issued to
settle outstanding obligations 1,336 13 1,364 --
Common shares issued in
private placement 901 9 541 --
Net income -- -- -- 2,919
--------- --------- --------- ---------
Balance at March 31, 1996 34,429 344 31,075 (21,280)
Warrants exercised 40 1 29 --
Common shares issued in warrant
exchange 1,000 10 758 --
Net income -- -- -- 3,566
--------- --------- --------- ---------
Balance at March 31, 1997 35,469 $ 355 $ 31,862 $(17,714)
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 45
Decora Industries, Inc.
Notes to Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Decora Industries, Inc. (the "Company") is a holding company primarily
engaged in the development, manufacture and sale of consumer decorative
products and of specialty industrial products, utilizing its proprietary
pressure-sensitive, self-adhesive, release and protective technologies.
The Company operates through its wholly-owned subsidiary, Decora,
Incorporated. In April 1994, management decided to discontinue the
operations of a second wholly-owned subsidiary, ComTel Industries, Inc.
("ComTel"), which manufactured, installed and serviced
telecommunications equipment and systems (see Note 2). Accordingly, the
continuing operations of the Company now comprise the various divisions
of Decora, Incorporated, which constitutes a single business segment.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The consolidated
financial statements include the accounts of Decora Industries, Inc.,
its operating subsidiary and its inactive subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of some investments are estimated based on quoted market
prices for those or similar investments. For other investments for which
there are no quoted market prices, a reasonable estimate of fair value
could not be made without incurring excessive costs. For fiscal years
ending 1997 and 1996, there were no quoted market prices for the notes
receivable. All financial instruments are held for purposes other than
trading.
A substantial majority of the Company' debt, in combination with
interest rate swap agreements, bears current market rates of interest or
is payable on demand. Accordingly, the carrying amount is considered a
reasonable approximation of fair value.
CASH AND CASH EQUIVALENTS
The Company invests surplus cash in highly liquid debt instruments which
have original maturities of less than three months and are considered to
be cash equivalents.
NET SALES
Sales of products and services are recognized when products are shipped
and services are performed. Returns are minimal and are recorded when
received.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method)
or market.
F-8
<PAGE> 46
Decora Industries, Inc.
Notes to Consolidated Financial Statements
PROPERTY AND EQUIPMENT
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, generally five to thirty years.
INTANGIBLES
The excess of the aggregate purchase price over the fair value of the
net assets of businesses acquired has been recorded as goodwill and is
being amortized on the straight-line method over forty years. The
trademark is being amortized over twenty years. At each balance sheet
date, the Company evaluates the recoverability of its intangible assets
based on estimated future cash flows.
Intangibles consist of the following ($000's): MARCH 31,
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Goodwill $ 9,857 $ 9,857
Trademark 2,000 2,000
Organization fees 1,299 1,299
Other 280 280
--------- ---------
13,436 13,436
Less: accumulated amortization (2,512) (2,094)
--------- ---------
$ 10,924 $ 11,342
========= =========
</TABLE>
Amortization expense was $418,000, $385,000 and $369,000 for fiscal
1997, 1996 and 1995, respectively.
INCOME PER SHARE
Income per share of common stock is based on the average number of
shares and equivalents of common stock outstanding during each year.
Fully diluted income per share is not presented for each of the periods
since the reduction from primary income per share is less than 3% or
anti-dilutive.
INCOME TAXES
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards ("SFAS") No.
109, Accounting for Income Taxes. Deferred income taxes are recorded to
reflect expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and tax
bases of assets and liabilities using enacted tax rates in the years in
which the differences are expected to reverse.
F-9
<PAGE> 47
Decora Industries, Inc.
Notes to Consolidated Financial Statements
RESEARCH AND DEVELOPMENT
Research and development costs related to both present and future
products are expensed as incurred. Research and development expenses
amounted to $216,000, $302,000 and $1,067,000 in fiscal 1997, 1996 and
1995, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and revenues and expenses during the reporting period.
Actual results may differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to prior period amounts in
order to conform with the current year presentation.
2. DISCONTINUED OPERATIONS
ComTel Industries, Inc. - In April 1994, management of the Company
decided to divest its telecommunications services and manufacturing
operations ("ComTel"). In its fiscal 1994 consolidated financial
statements, the Company included a provision for discontinued operations
of $212,000, which reflected the then expected loss on disposal of the
related assets of ComTel.
On June 28, 1994, the Company sold the El Paso division of its
telecommunications business for $840,000 cash and assumption by the
buyer of the long-term lease on a facility. The transaction resulted in
a loss approximating $212,000 with respect to the book value of the
related assets at that date.
On March 31, 1995, the Company sold the telecommunications assets of
ComTel for $1,810,000 (consisting of cash of $250,000 and notes
receivable of $1,560,000) plus the assumption of $1,700,000 of
liabilities. The notes receivable are secured by the assets of the
purchaser, are guaranteed by the purchaser's parent company and bear
interest at 7%, with principal payments beginning September 30, 1997 and
continuing monthly until maturity on February 28, 2002. On June 14,
1995, the Company completed the sale of the fixed assets and inventory
related to the manufacturing division of ComTel's business. The selling
price was $1,370,000 (consisting of $1,100,000 cash and a note for
$270,000) plus the assumption of $75,000 of liabilities. The
transactions resulted in a loss approximating $540,000 with respect to
the book value of the related assets at that date which was accrued for
as of March 31, 1995.
The results of operations of ComTel have been reported as discontinued
operations in the accompanying financial statements and consist of
($000's):
F-10
<PAGE> 48
Decora Industries, Inc.
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
1995
----
<S> <C>
Revenues $ 9,221
Operating Loss $ (875)
Net Loss $ (1,297)
</TABLE>
Yorkville Industries, Inc. - In July 1994, the Company settled
litigation with the former owners of Yorkville Industries, Inc.
requiring cash payments which were made during fiscal 1995 and the
registration and issuance of 1,336,000 shares of common stock of the
Company on August 2, 1995.
3. INVENTORIES
<TABLE>
<CAPTION>
MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Inventories consist of ($000's):
Raw materials $ 3,194 $ 3,838
Work-in-process 1,035 687
Finished goods 1,210 1,478
--------- ---------
$ 5,439 $ 6,003
========= =========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consist of ($000's):
<TABLE>
<CAPTION>
MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Land and buildings $ 4,881 $ 4,701
Vehicles and related equipment 38 38
Machinery and equipment 9,542 9,362
Furniture and fixtures 393 353
Leasehold improvements 617 617
Construction in progress 89 -
--------- ---------
15,560 15,071
Less accumulated depreciation (7,779) (6,127)
--------- ---------
$ 7,781 $ 8,944
========= =========
</TABLE>
F-11
<PAGE> 49
Decora Industries, Inc.
Notes to Consolidated Financial Statements
Depreciation expense was $1,652,000, $1,234,000 and $1,098,000 for
fiscal 1997, 1996 and 1995, respectively.
5. DEBT
Debt consists of ($000's): MARCH 31,
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Decora Industries, Inc. Note (a) $ 321 $ 650
Decora, Incorporated Term Loans (b) 8,795 7,280
Decora, Incorporated Lines of Credit (c) 2,907 4,002
Decora, Incorporated Industrial
Development Revenue Bonds (d) 2,460 --
Decora, Incorporated Senior Subordinated Note (e) 2,900 7,000
Decora Industries, Inc. Convertible Notes (f) 1,500 1,500
--------- ---------
18,883 20,432
Less: Amounts due within one year (2,310) (5,810)
Unamortized debt discount (66) (133)
--------- ---------
$ 16,507 $ 14,489
========= =========
</TABLE>
Amounts maturing within the next five years are: $2,310,000, $9,446,000,
$3,316,000, $771,000 and $730,000.
(a) In January 1996, the Company borrowed $650,000 from its primary bank
lender in the form of a three year business purpose note. The note bears
interest at prime plus 1 1/2% (10.0% at March 31, 1997) and is payable
in quarterly installments beginning in September 1996. The note is
secured by all the assets of the parent company.
(b) Decora, Incorporated has a term loan of $5,169,000 at March 31, 1997
with its primary lender which matures in May 1999, bears interest at
30-day LIBOR plus 2.00% (7.56% at March 31, 1997) and is secured by
certain accounts receivable, inventory and property and equipment. On
March 27, 1997, Decora, Incorporated borrowed $3,354,167 under a second
term loan which matures in April 2002 and is also secured by certain
accounts receivable, inventory and property and equipment. This second
term loan also bears interest at 30-day LIBOR plus 2.00% (7.56% at March
31, 1997).
F-12
<PAGE> 50
Decora Industries, Inc.
Notes to Consolidated Financial Statements
As of March 27, 1997, Decora, Incorporated entered into an interest rate
swap agreement with its primary bank lender which expires May 31, 1999.
The agreement effectively converts $8,523,000 of its variable rate
borrowings into fixed rate obligations. Under the terms of the
agreement, Decora, Incorporated makes payments at a fixed rate of 8.58%,
and receives variable rate payments at LIBOR plus 200 basis points,
repriced at the beginning of each month. The net amount which will be
paid or received will be included in interest expense.
The agreement became effective as of April 1, 1997.
On September 20, 1995, Decora, Incorporated borrowed $375,000 from the
Washington County Local Development Corporation. The five-year note
bears interest at 5.00% and is payable in monthly installments ending
September 1, 2000. It is secured by certain of Decora, Incorporated's
property and equipment. As of March 31, 1997, the outstanding balance of
this note was $272,000.
(c) Decora, Incorporated has a revolving line of credit of up to $6,000,000
which matures in August 1998 and is secured by various accounts
receivable, inventory and equipment. The amount outstanding under the
facility bears interest at prime plus 1 1/4% (9.75% at March 31, 1997).
Availability under this credit facility is limited by specified
percentages of current trade receivables and on-hand inventories. On
March 27, 1997, Decora, Incorporated established a second line of credit
of up to $1,000,000 which also matures in August 1998, bears interest at
prime plus 1.0% (9.50% at March 31, 1997) and is secured by certain
accounts receivable. Availability under this credit facility is limited
by specified percentages of certain international trade accounts
receivable. As of March 31, 1997, the availability under these lines of
credit was $1,709,000.
(d) On November 13, 1996, Decora, Incorporated borrowed $2,460,000 through
the issuance of Tax-Exempt Industrial Development Revenue Bonds (Decora,
Incorporated Project), Series 1996 by the Counties of Warren and
Washington, New York Industrial Development Agency. These bonds mature
on November 1, 2004 and require sinking fund payments by Decora,
Incorporated of $20,833 per month beginning November 1997. The bonds
bear interest at a floating rate which is adjusted weekly based on the
remarketing agent's ability to re-market the bonds at par. As of March
31, 1997, the interest rate on the bonds was 3.50%. The bonds are credit
enhanced through a letter of credit issued by the Company's primary
lender and, in addition to interest on the bonds, Decora, Incorporated
pays its primary lender an annual letter of credit fee equal to 1.50% of
the outstanding balance of the letter of credit.
(e) In April 1990, Decora, Incorporated issued $7,000,000 of 14% senior
subordinated notes, interest payable semi-annually. On June 28, 1996,
Decora, Incorporated and the lender agreed to extend the repayment terms
of the notes to include payments of $3,500,000 on each of April 15, 1997
and April 15, 1998. The amount due on April 15, 1997 was prepaid by
F-13
<PAGE> 51
Decora Industries, Inc.
Notes to Consolidated Financial Statements
Decora, Incorporated in two installments of $2,800,000 and $700,000 on
November 13, 1996 and March 27, 1997, respectively. On March 27, 1997,
Decora, Incorporated also prepaid $600,000 of the amount due on April
15, 1998.
On June 28, 1996, the Company and the lender also exchanged warrants
held by the lender to purchase 20% of Decora, Incorporated's common
stock for (i) a two-year, non-interest bearing, promissory note for
$1,000,000 (the "new note") due April 15, 1998 and (ii) 1,000,000 shares
of the Company's common stock (the "new common stock"). The new note was
repaid in full on March 27, 1997. The new common stock contains a
guaranty which requires the issuance of additional shares to the lender
if the market price of the Company's common stock does not exceed $3.00
per share by April 1998. As of March 31, 1997, the market price of the
Company's common stock was $0.91.
At March 31, 1996, prior to closing of the exchange agreement, the
warrants held by the lender were valued at $1,642,000. Prior to the
exchange, changes in the value of the warrants based upon results of
operations and financial position of Decora, Incorporated were charged
or credited to interest expense. During fiscal 1996 and 1995, $217,000
and $0 were charged, respectively. The note is recorded net of
unamortized discount of $66,000 and $133,000 at March 31, 1997 and 1996,
respectively.
(f) In November 1992, the Company borrowed $1,500,000 from a private lender
and issued a convertible note. As part of the transaction, the Company
also issued 89,000 shares of its common stock, warrants to purchase
225,000 shares of common stock at $1.40 per share and warrants for an
additional 100,000 shares of common stock at prices contingent upon the
future market price of the Company's common stock. The convertible note
was due in November 1995 and bears interest at 12% per annum, payable in
the form of the Company's common stock. The fair value of the shares and
warrants issued were reflected as debt issuance costs and amortized to
interest expense over the term of the debt agreement.
In November 1995, the Company and the lender agreed to extend the note
until May 1998. Interest for the extension period ($303,000) and a
closing fee ($197,000) were paid at the date of the extension through
the issuance of 782,000 shares of the Company's common stock and
warrants to purchase an additional 818,000 common shares at $0.78 per
share exercisable only in the event that the note is paid in full
without conversion. The prepaid interest expense and the closing fee are
being amortized over the term of the extended debt agreement.
F-14
<PAGE> 52
Decora Industries, Inc.
Notes to Consolidated Financial Statements
6. RETIREMENT ALLOWANCE
During fiscal 1996, the Company offered an early retirement program to
all of its employees age 59 and over. Such program, which was accepted
by twelve employees, provides them with monthly cash payments and
medical coverage through age 65. In the fourth quarter of fiscal 1996,
the Company took a one-time charge through marketing, general and
administrative expense of $282,000 equal to the present value of such
future payments and established an accrued liability equal to the same
amount to be applied against such payments as they are incurred over a 6
year period. As of March 31, 1997, the remaining balance of such
liability was $67,000.
7. LONG-TERM INCENTIVE PLANS AND STOCK OPTIONS
The Company has several long-term incentive plans under which shares of
the Company's common stock may be sold to directors, officers and key
employees. Certain other parties have been offered stock options by the
Company in connection with various transactions.
The Company adopted a Stock Option Plan in 1987 (the "1987 Plan")
pursuant to which 1,700,000 shares of common stock are available for
grant. The 1987 Plan is administered by a committee of Directors of the
Company who are not covered by the 1987 Plan. All options granted under
the 1987 Plan terminate either five or ten years after the date of grant
and vest quarterly over a three-year period subsequent to the date of
the grant, unless modified by the Company. To date, options for 730,000
shares of common stock have been exercised.
In 1988, the shareholders of the Company approved the Decora Industries,
Inc. 1988 Employee Stock Purchase Plan (the "1988 Plan") pursuant to
which a total of 500,000 shares of the Company's Common Stock may be
issued to participants during the term of the 1988 Plan at an issue
price of 85% of the fair market value at the date of the purchase. The
1988 Plan is administered by the Board of Directors provided that a
majority are not covered by the 1988 Plan, or by a committee appointed
by the Board of Directors. The 1988 Plan terminates on December 31, 1988
and no shares have been purchased pursuant to the 1988 Plan. A summary
of stock option activity issued under all plans for the three years
ended March 31, 1997 follows (000's except average price data):
F-15
<PAGE> 53
Decora Industries, Inc.
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
AVERAGE
SHARES PRICE
------ -----
<S> <C> <C>
Outstanding at:
March 31, 1994 3,999 $1.28
Granted 1,175 $1.46
Exercised (50) $1.00
Expired (1,111) $1.16
------- -----
March 31, 1995 4,013 $1.38
Granted 225 $1.04
Exercised - $ -
Expired (214) $1.30
------- -----
March 31, 1996 4,024 $1.36
Granted 820 $1.14
Exercised (40) $0.75
Expired (135) $1.70
------- -----
March 31, 1997 4,669 $1.29
======= =====
</TABLE>
The Company applies Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations in
accounting for stock options. Accordingly, no compensation cost has been
recognized for its fixed stock option plan.
The following table summarizes information about stock options
outstanding at March 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ---------------------
EXERCISE AVERAGE TERM AVERAGE
PRICE SHARES PRICE (MONTHS) SHARES PRICE
------------------ --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
$1.00 - $1.10 710,000 $ 1.02 19.9 580,000 $1.02
$1.11 - $1.12 1,274,000 1.12 33.0 1,274,000 1.12
$1.13 - $1.25 975,000 1.20 33.7 875,000 1.20
$1.26 - $1.49 750,000 1.44 10.4 750,000 1.44
$1.50 - $1.86 960,000 1.59 20.5 510,000 1.67
</TABLE>
Had compensation cost for the Company's stock-based compensation plans
and other transactions been determined based on the fair values of the
fiscal year 1997 and 1996 grant dates for those awards, consistent with
the requirements of SFAS No. 123, Accounting for Stock-Based
Compensation, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated below ($000's except per
share data):
F-16
<PAGE> 54
Decora Industries, Inc.
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Net Income - As Reported $ 3,566 $ 2,919
- Pro Forma 3,171 2,831
Earnings Per Share - As Reported $0.10 $0.09
- Pro Forma 0.09 0.09
</TABLE>
The fair value of each stock option grant has been estimated on the date
of each grant using the Black-Scholes option pricing model with the
following weighted-average assumptions:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Risk-free interest rate 6.22% 6.23%
Expected life (months) 45.6 62.4
Expected volatility 0.594 0.594
Expected dividend yield 0 0
</TABLE>
The weighted-average grant date fair values of options granted during
fiscal 1997 and 1996 were $0.16 and $0.25, respectively.
The Company has reserved 925,000 shares of common stock for the future
possible exercise of warrants; 450,000 of these warrants can be
exercised at a price of $.25 per share and expire on July 14, 1997 and
the remaining 475,000 warrants can be exercised at prices ranging from
$.50 to $1.40 and expire on November 3, 2000.
8. INCOME TAXES
The benefit from income taxes for fiscal 1997, 1996 and 1995 was as
follows ($000's):
<TABLE>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current tax expense (benefit):
Federal $ 68 $ 45 $ (3)
State 100 (31) 232
------- ------- -------
Total current 168 14 229
Deferred tax benefit (1,327) (1,500) (1,400)
------- ------- -------
Benefit from income taxes $(1,159) $(1,486) $(1,171)
======= ======= =======
</TABLE>
F-17
<PAGE> 55
Decora Industries, Inc.
Notes to Consolidated Financial Statements
Deferred tax (liabilities) assets are comprised of the following at
March 31, 1997 and 1996 ($000's):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Depreciation $ (296) $ (572)
Discontinued operations (357) (368)
Deferred expenses (331) (324)
---------- ----------
(984) (1,264)
---------- ----------
Net operating loss carryforwards 4,503 5,500
Tax credits 313 -
Inventory valuation allowance 45 15
Valuation reserves 175 105
Other 175 239
---------- ----------
5,211 5,859
---------- ----------
Deferred tax asset valuation allowance - (1,695)
---------- ----------
Deferred income tax asset, net $ 4,227 $ 2,900
========== ==========
</TABLE>
The benefit from income taxes for the three years ended March 31, 1997
differs from the amount of income tax determined by applying the
applicable U.S. statutory federal income tax rate to pretax income from
continuing operations as a result of the following ($000's):
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Provision at statutory rate $ 840 $ 502 $ 433
State tax expense (benefit) 65 (20) 151
Effect of permanent items 182 261 132
Effect of tax credits (313) - -
Other (238) (729) (487)
Change in valuation allowance (1,695) (1,500) (1,400)
---------- ---------- ----------
Benefit from income taxes $ (1,159) $ (1,486) $ (1,171)
========== ========== ==========
</TABLE>
F-18
<PAGE> 56
Decora Industries, Inc.
Notes to Consolidated Financial Statements
Approximately $12.9 million of the Company's loss carryforwards remain
available at March 31, 1997. Their use is limited to future taxable
earnings of the Company. The carryforwards expire over the period 1999
through 2007.
Management believes that it is more likely than not that the Company
will generate taxable income sufficient to realize the tax benefit
associated with future deductible temporary differences and the net
operating loss carryforwards prior to their expiration. This belief is
based upon, among other factors, recent changes in operations.
Specifically, cost savings associated with capital investments in and
strategic realignment of Decora, Incorporated have improved operating
results as well as the discontinuance of less profitable non-core
businesses. As described in Note 2, the Company divested itself of its
ComTel subsidiary, which had generated significant operating losses
through 1995.
Management believes that the reversal of the valuation allowance at
March 31, 1997 is appropriate given the current estimates of future
taxable income. If the Company is unable to generate sufficient taxable
income in the future through operating results, increases in the
valuation allowance will be required through a charge to deferred tax
expense.
9. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, the ultimate
resolution of which, in the opinion of management, will not have a
materially adverse impact on the financial condition, results of
operations or cash flows of the Company.
10. BUSINESS AND CREDIT CONCENTRATIONS
Decora, Incorporated's primary customer is Rubbermaid Inc., which
accounted for $36,390,000 (89%), $34,983,000 (90%) and $37,764,000 (93%)
of net sales in fiscal 1997, 1996 and 1995, respectively. Accounts
receivable from Rubbermaid at March 31, 1997 and 1996 were $3,115,000
(51%) and $2,482,000 (57%), respectively. The Company believes there are
no significant credit risks with respect to these accounts receivable.
Sales to international customers represented 10% of total sales during
fiscal 1997.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in current assets and liabilities, exclusive of acquisitions and
dispositions of subsidiaries, were as follows ($000's):
F-19
<PAGE> 57
Decora Industries, Inc.
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
(Increase) decrease in
accounts receivable $ (2,017) $ (1,210) $ 966
(Increase) decrease in inventory 564 (1,074) (1,866)
Increase in other assets (205) (193) (42)
Increase (decrease) in
accounts payable 140 (713) (909)
Increase (decrease) in accrued liabilities (83) (126) 127
---------- ---------- ----------
$ (1,601) $ (3,316) $ (1,724)
========== ========== ==========
Supplemental cash flow information is as follows ($000's):
Cash paid during the year for interest $ 1,871 $ 2,218 $ 1,731
========== ========== ==========
Cash paid during the year for
income taxes $ 194 $ 45 $ 235
========== ========== ==========
</TABLE>
During fiscal 1997, 1,000,000 shares of common stock and notes payable
in the amount of $874,000 were issued upon the conversion of $1,642,000
of warrants in subsidiary. During fiscal 1996, 1,336,000 shares of
common stock were issued to satisfy the terms of an agreement with the
former owners of an inactive subsidiary of the Company.
F-20
<PAGE> 58
Decora Industries, Inc.
Notes to Consolidated Financial Statements
12. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1997
1ST 2ND 3RD 4TH
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(dollars in thousands, except per share data)
Net sales $ 10,138 $ 12,904 $ 9,533 $ 8,507
Gross profit $ 2,444 $ 3,222 $ 2,379 $ 2,534
Net income $ 520 $ 1,078 $ 406 $ 1,562
Net income per share $ .02 $ .03 $ .01 $ .04
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1996
1ST 2ND 3RD 4TH
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(dollars in thousands, except per share data)
Net sales $ 9,702 $ 9,500 $ 10,247 $ 9,379
Gross profit $ 2,648 $ 2,240 $ 3,060 $ 2,636
Net income $ 401 $ 165 $ 580 $ 1,773
Net income per share $ .01 $ .01 $ .02 $ .05
</TABLE>
F-21
<PAGE> 59
DECORA INDUSTRIES, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
Balance charged Deductions Balance
at beginning to costs from at end
Description of period and expenses accounts of period
<S> <C> <C> <C> <C>
Reserve deducted from asset
to which it applied:
For the year ended
March 31, 1997
Accounts Receivable
Reserves $ 202 $ 554 $ 257(a) $ 499
===== ===== ===== =====
For the year ended
March 31, 1996
Accounts Receivable
Reserves $ 175 $ 157 $ 130(a) $ 202
===== ===== ===== =====
For the year ended
March 31, 1995
Accounts Receivable
Reserves $ 70 $ 112 $ 7(a) $ 175
====== ===== ====== =====
(a) Uncollectible receivables written off net of recoveries.
For the year ended
March 31, 1997
Inventory reserves $ 0 $ 130 $ 0 $ 130
=== ===== === =====
For the year ended
March 31, 1996
Inventory reserves $ 51 $ 0 $ 51 $ 0
==== === ==== ===
For the year ended
March 31, 1995
Inventory reserves $ 364 $ 0 $ 313 $ 51
===== === ===== ====
</TABLE>
F-22
<PAGE> 1
EXHIBIT 10.51
LINE OF CREDIT NOTE
$1,000,000.00 March 27, 1997
Albany, New York
ON DEMAND, FOR VALUE RECEIVED, the undersigned, DECORA, INCORPORATED, a
Delaware corporation authorized to do business in the State of New York as
DECORA MANUFACTURING, with an office and principal place of business at One Mill
Street, Fort Edward, New York 12828 (the "Borrower") promises to pay to the
order of FLEET BANK, a bank organized and existing under the laws of the State
of New York (herein called the "Bank"), at the office of the Bank, 69 State
Street, Albany, New York 12201, or at such other place as may be designated from
time to time by the Bank, the unpaid amount of all sums that have been advanced
to or for the benefit of the Borrower in accordance with the terms hereof, not
to exceed the lesser of (i) ninety (90.0%) of the value of the Borrower's
foreign accounts receivable that are either (a) fully insured through Ex-Im
Bank, or (b) guaranteed by a standby letter of credit, issued in favor of the
Bank, and satisfactory to the Bank in all respects, or (ii) the aggregate sum of
ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), lawful money of the United
States of America, plus interest on the unpaid principal balance computed from
the date hereof, at a per annum rate equal to the "Fleet Bank Prime Rate", based
on a year of 360 days but chargeable on actual days.
As used herein, the following terms shall have the following meanings:
Default Rate - The Fleet Bank Prime Rate, plus two (2.00%) percent.
Event of Default - Any of those events defined as an Event of Default under this
Note or in any other instruments or documents executed in connection with the
Loan.
Fleet Bank Prime Rate - That rate announced from time to time by the Bank as a
reference point for determining interest rates charged on certain loans and is
not necessarily the lowest rate at which the Bank lends. Any change in this
interest rate shall be effective on the date the change in such rate occurs,
whether or not notice has been given to the Borrower.
Loan - The loan of up to $1,000,000.00 by the Bank to the Borrower.
Loan Formula Certificate - that certain loan formula certificate to be delivered
by the Borrower to the Bank at the time of delivery of each Request for Advance,
and in any event, no less frequently than weekly. A form of the Loan Formula
Certificate is attached hereto as Exhibit B.
-1-
<PAGE> 2
Request for Loan Advance - The Notice to be delivered by the Borrower to the
Bank from time to time in the form of Exhibit A attached hereto, in which the
Borrower shall indicate a desire to receive an advance of Loan proceeds.
Security Agreement - that certain Export-Import Bank of the United States
Notification by Insured of Amounts Payable under Multi-Buyer Export Credit
Insurance Policy assignment, pledge and security agreement executed by the
Borrower in favor of the Bank on even date herewith.
When requesting each advance of Loan proceeds from the Bank, the
Borrower shall deliver to the Bank a Request for Loan Advance a Loan Formula
Certificate, and either (i) proof that the intended foreign account buyer has
been added to the Export-Import Bank of the United States policy via an
endorsement acceptable to the Bank, or (ii) a standby letter of credit, issued
in favor of the Bank in the amount of the requested advance, and satisfactory to
the Bank in all respects.
The Borrower agrees to pay principal and interest to the Bank on demand.
In the absence of prior demand, interest shall be payable monthly in arrears
commencing April 1, 1997, and continuing on the first day of each and every
month thereafter. On demand, the entire unpaid balance of principal, plus
accrued interest, on all Loan advances shall be due and payable in any event.
Advances under this Note shall be reflected on the records of the Bank.
Notwithstanding anything to the contrary contained herein, the Bank shall not be
obligated to make any advances under this Note if, in the Bank's sole judgment,
a material adverse change in the Borrower's financial condition has occurred, or
if an Event of Default has occurred hereunder.
Unless cancelled in writing by the Borrower, the Borrower authorizes the
Bank to debit its account at the Bank to make the payments due hereunder, but
such authority shall not relieve the Borrower of its obligation to assure that
payments are made when due. All payments made hereunder shall be applied first
to accrued interest, next to the payments of any fees and expenses of the Bank,
then to principal and finally to any unpaid "Late Charge" as hereinafter
defined.
In the event that any payment shall become overdue for a period in
excess of ten (10) days, a "Late Charge" of five cents ($0.05) for each dollar
($1.00) so overdue will be charged by the Bank for the purpose of defraying the
expense incident to handling such delinquent payment.
Upon the occurrence of one or more events of default as provided below,
the entire disbursed and unpaid principal, and the interest on this Note shall,
upon written demand of the Bank,
-2-
<PAGE> 3
become immediately due and payable without presentment or protest or other
notice or demand, all of which are expressly waived by the Borrower. Any one or
more of the following shall constitute an event of default ("Event of Default"):
(a) Upon the failure of the Borrower to pay any part of the interest or
principal on this Note when due and payable and continuance of such failure for
ten (10) days;
(b) Any event of default pursuant to the terms and conditions
of the Security Agreement;
(c) Any default pursuant to the terms and conditions of any
other loan or credit accommodation by the Bank to the Borrower or
by the Bank to Decora Industries, Inc. after notice and the
expiration of any grace period, if applicable;
(d) Dissolution, cessation of business and/or transfer of a
material part of the assets of the Borrower;
(e) Institution of Bankruptcy proceedings or other proceedings of any
kind for the relief of or collection of debts by the Borrower, including,
without limitation, assignments for the benefit of creditors, appointment of
trustees, receivers or custodians for a material part of the Borrower's assets,
levies upon or attachment of assets, or filing of judgments not fully insured,
bonded or removed within thirty days or a filing of tax liens;
(f) Institution of Bankruptcy proceedings or other proceedings of any
kind for the relief of or collection of debts against the Borrower, including,
without limitation, assignments for the benefit of creditors, appointment of
trustees, receivers or custodians for a material part of the Borrower's assets,
levies upon or attachment of assets, or filing of tax liens; which proceedings,
assignments, appointments, levies or tax liens are not fully bonded or
discharged within ten days of the date of their imposition;
(g) Failure by the Borrower to at all times keep proper books and
records and accounts in accordance with generally accepted accounting principals
consistently applied ("GAAP"), and provide the following financial reporting to
the Bank;
(i) within one hundred fifty (150) days of the end of its
fiscal year, annual certified public accountant audited,
consolidated statements for the Borrower and Decora
Industries, Inc. (which must include a consolidating
statement schedule), all prepared in accordance with
generally accepted accounting
-3-
<PAGE> 4
principles ("GAAP") consistently applied, as well
as copies of the Borrower's 10-k reports;
(ii) within thirty (30) days of each calendar month end,
internally prepared financial statements for the Borrower
for the preceding month, in form acceptable to the Bank,
all prepared in accordance with GAAP;
(iii) within sixty (60) days of the end of each fiscal
quarter, 10Q reports for Decora Industries, Inc.;
(iv) within thirty (30) days of the end of each month, separate
domestic and international account receivable aging
reports concerning the Borrower in form acceptable to the
Bank;
(v) within sixty (60) days after the end of each fiscal
quarter, a compliance letter acknowledged by the Chief
Financial Officers of both the Borrower and Decora
Industries, Inc. concerning those financial covenants
referenced below in subparagraph (h); and
(vi) At the time of submittal of each Request for Advance, but
in no event less frequently than monthly, a Loan Formula
Certificate.
(h) Failure by the Borrower to maintain compliance with the following
financial covenants, as would be shown on the quarterly and fiscal year end
financial statements of the Borrower prepared in accordance with GAAP:
(i) a minimum current ratio of 1.20 to 1.00 during fiscal year
1997; 1.30 to 1.00 during fiscal year 1998; 2.00 to 1.00 during
fiscal year 1999 and thereafter. For the purposes of this Note,
current ratio shall be defined as the ratio of the Borrower's
current assets (including the unused formula loan availability
under that certain $6,000,000.00 revolving line of credit loan
extended by the Bank to the Borrower and that certain
$1,000,000.00 revolving line of credit loan to be extended by the
Bank to the Borrower on even date herewith [collectively the
"Revolver Loans"]) to the Borrower's current liabilities
(excluding the aforementioned Revolver Loans) as would be shown
on each fiscal quarter end and fiscal year end balance sheets of
the Borrower prepared in accordance with GAAP;
(ii) a minimum working capital of Four Million and no/100 Dollars
($4,000,000.00) as at March 31, 1997 through December 31, 1997
and Five Million Five Hundred Thousand and no/100 Dollars
($5,500,000.00) as at March 31, 1998.
-4-
<PAGE> 5
During fiscal year 1999 and thereafter, the Borrower must
maintain a minimum working capital of Seven Million and no/100
Dollars ($7,000,000.00), all as would be shown on the fiscal
quarter end and fiscal year end balance sheets of the Borrower
prepared in accordance with GAAP. For the purposes of determining
working capital, the Borrower's liability to the Bank pursuant to
the Revolver Loans will be excluded, and the Borrower's current
assets shall be increased by the Borrower's unused formula loan
availability under the Revolver Loans.
(iii) a total debt to tangible net worth ratio at fiscal year end
March 31, 1997 of 3.75 to 1.0; at fiscal year end March 31, 1998
of 4.50 to 1.00 and at fiscal year end March 31, 1999 and
thereafter at each March 31 fiscal year end of 3.00 to 1.0. For
the purposes of this Note, debt to tangible net worth ratio shall
be defined, for the purposes of the fiscal year end March 31,
1997 calculation, as the ratio of the Borrower's total funded
debt (all currently outstanding senior and subordinated debt)
divided by the Borrower's earnings before interest, taxes,
depreciation and amortization. For the purposes of this Note,
debt to tangible net worth ratio shall be defined, for the
purposes of all other fiscal year end calculation periods, as the
ratio of the Borrower's total liabilities (less subordinated
debt) divided by the sum of the Borrower's tangible net worth
plus subordinated debt less the amount of the outstanding
principal balance of the notes receivable from Decora Industries,
Inc., as would be shown on the fiscal quarter end and fiscal year
end balance sheets of the Borrower prepared in accordance with
GAAP.
(iv) a minimum debt service coverage ratio during fiscal year
1997 of 1.20 to 1.00, during fiscal year 1998 of 1.15 to 1.0 and
during fiscal year 1999 and thereafter of 1.20 to 1.0. For the
purposes of this Note, debt service coverage ratio will be
calculated using the trailing four quarters of the Borrower's
earnings before interest, taxes, depreciation and amortization
minus the Borrower's cash capital expenditures (net of financed
capital expenditures) divided by the sum of Borrower's trailing
four quarters debt service payments (principal and interest) less
funds raised to finance the Borrower's repayment of indebtedness
owed to CIGNA (whether in the form of debt or equity), as would
be shown on the fiscal quarter end and fiscal year end balance
sheets of the Borrower prepared in accordance with GAAP;
(v) the Borrower shall be limited to making annual capital
expenditures in the maximum amount of One Million Five Hundred
Thousand and no/100 Dollars during the term
-5-
<PAGE> 6
of this Note. If required by the terms of the manufacturing
agreement between the Borrower and Rubbermaid, for each year
during the term of this Note, the Borrower must provide evidence,
satisfactory to the Bank, that the Borrower has received the
consent of Rubbermaid to make capital expenditures exceeding One
Million and no/100 Dollars ($1,000,000.00) in said year; and
(vi) the Borrower's expenditures for management fees shall not
exceed Eight Hundred Thousand and no/100 Dollars ($800,000.00)
per annum.
If an Event of Default has occurred and is continuing, the Borrower
shall not be permitted to make any Requests for Loan Advances unless and until
the Event of Default is cured, and interest shall accrue at the Default Rate
until the earlier of (i) the Event of Default is cured, or (ii) this Note is
paid in full.
The powers and remedies given hereby and by the Security Agreement shall
not be exclusive of any other powers and remedies available to the Bank. No
course of dealings between the Borrower and the Bank and no delay on the part of
the Bank in exercising any rights with respect to any default shall operate as a
waiver of any rights of the Bank. Failure on the part of the Bank to exercise
any rights with respect to any default shall not operate as a waiver of any
rights with respect to any other default. The Borrower agrees to pay all costs
and expenses incurred by the Bank in enforcing this Note, including, without
limitation, reasonable attorneys' fees and legal expenses.
Interest after maturity (whether by acceleration or otherwise) shall be
payable at the Default Rate until this Note is paid in full. If any provisions
of this Note or the application of it to any person or circumstance, shall be
invalid or unenforceable, the remainder of this Note or the application of those
provisions to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected and every other provision of
this Note shall be valid and fully enforceable.
This Note may not be waived, changed, modified or discharged orally, but
only by agreement in writing signed by the party against whom any enforcement of
any waiver, change, modification or discharge is sought.
This Note and all rights of the Bank hereunder, may be assigned by the
Bank, but this Note may not be assigned by the Borrower, without the prior
written consent of the Bank.
The purchaser, assignee, transferee, or pledgee of this Note shall be
entitled to all rights of the Bank hereunder as if said
-6-
<PAGE> 7
purchaser, assignee, transferee, or pledgee were originally named
in this Note.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR ARISING
OUT OF OR IN CONNECTION WITH THIS NOTE, THE SECURITY AGREEMENT OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH.
IN WITNESS WHEREOF, the Borrower has duly executed this Note the day and
year first above written.
DECORA, INCORPORATED d/b/a DECORA MANUFACTURING
By: _________________________
Timothy J. Burditt, Vice
President Finance
-7-
<PAGE> 1
EXHIBIT 10.52
CONSOLIDATED AND RESTATED PROMISSORY NOTE
$3,354,166.69 March 27, 1997
Albany, New York
This CONSOLIDATED AND RESTATED PROMISSORY NOTE is made and executed this
27th day of March, 1997 by DECORA, INCORPORATED, a Delaware corporation
authorized to do business in the State of New York as DECORA MANUFACTURING and
having an office at 1 Mill Street, Fort Edward, New York 12828 (the "Borrower")
to and in favor of FLEET BANK, a bank organized under the laws of the State of
New York and having a principal place of business at 69 State Street, Albany,
New York 12201 (the "Bank").
WHEREAS, the Bank is the holder of a $3,000,000.00 Demand Note (the
"Demand Note") executed by the Borrower in favor of the Bank on even date
herewith; and
WHEREAS, the Bank is also the holder of a $1,000,000.00 Promissory Note
executed by the Borrower in favor of the Bank on July 19, 1994 (the "Prior
Note"); and
WHEREAS, the Borrower agrees and confirms that the aggregate principal
amount outstanding pursuant to the terms of the Prior Note is $354,166.69, all
interest having been paid to date, and that there are no offsets, claims,
setoffs, defenses or counterclaims against payment of said amounts; and
WHEREAS, the Borrower and the Bank desire to consolidate the outstanding
balances of the Demand Note and the Prior Note to form a single note evidencing
a principal indebtedness in the amount of $3,354,166.69, and, as consolidated,
to modify and restate in full the terms of the Demand Note and the Prior Note as
hereinafter set forth; and
NOW, THEREFORE, the Borrower and the Bank agree that the Demand Note and
the Prior Note are hereby merged into this "Note" (as defined below) and are
hereby modified, consolidated and restated in full to form one single note and
one single indebtedness in the principal amount of $3,354,166.69, with interest
payable as hereinafter set forth. Said consolidated, modified and restated note
is hereinafter called the "Note" and provides as follows:
FOR VALUE RECEIVED, the undersigned, Decora, Incorporated, a Delaware
corporation duly authorized to do business in the State of New York as Decora
Manufacturing, with its principal place of business at 1 Mill Street, Fort
Edward, New York 12828 (herein called the "Borrower"), hereby promises to pay to
the order of Fleet Bank (herein called the "Payee" or the "Bank"), at such
-1-
<PAGE> 2
Payee's main office at 69 State Street, Albany, New York 12207, or such other
location as the Payee shall designate in writing from time to time, the
principal sum of Three Million Three Hundred Fifty Four Thousand One Hundred
Sixty Six and 69/100 Dollars ($3,354,166.69), lawful money of the United States
of America, plus interest on the unpaid principal balance computed from the date
hereof, at the per annum rates set forth below, based on a year of 360 days but
chargeable on actual days.
As used herein, the following terms shall have the following meanings:
Banking Day - any day on which the Bank is open for business.
Cost of Funds Fixed Rate - A per annum fixed interest rate equal to the Fleet
Bank Cost of Funds Rate, plus two and one-quarter of one percent (2.25%).
Default Rate - The Fleet Bank Prime Rate, plus two (2.00%) percent.
Election Notice - The Interest Rate Election Notice to be delivered by the
Borrower to the Bank from time to time in the form of Exhibit A attached hereto,
in which the Borrower shall indicate an Interest Rate Election and an Interest
Rate Election Period. Any Election Notice specifying a LIBOR Fixed Rate Election
must be submitted to the Bank at least three (3) days prior to the effective
date of said LIBOR Fixed Rate Interest Rate Election.
Event of Default - Any of those events defined as an Event of Default under this
Note, the Loan Agreement, any of the Instruments of Collateral Security, or any
other instruments or documents executed in connection with the Loan.
Fleet Bank Cost of Funds Rate - A rate per annum equal to the rate of interest
the Bank is required to pay (or is offering to pay) for a Liability in an amount
equal to the unpaid balance of the Loan having a maturity equal to two (2) years
(the "Cost of Funds Interest Period"), as adjusted for reserve requirements and
such other requirements as may be imposed by federal, state and/or local
government and regulatory agencies, which shall include the fees assessed by the
Bank's so-called "Treasury Division."
Fleet Bank Prime Rate - That rate announced from time to time by the Bank as a
reference point for determining interest rates charged on certain loans and is
not necessarily the lowest rate at which the Bank lends. Any change in this
interest rate shall be effective on the date the change in such rate occurs,
whether or not notice has been given to the Borrower.
-2-
<PAGE> 3
Floating Rate - the Fleet Bank Prime Rate, plus one and one quarter of one
percent (1.25%).
Instruments of Collateral Security - Those loan documents already executed or to
be executed by the Borrower and the Borrower's Corporate Guarantor - Decora
Industries, Inc. identified in paragraph 1 (d) of the Loan Agreement.
Interest Rate Election - An election on the part of the Borrower to choose the
Cost of Funds Fixed Rate, the LIBOR Fixed Rate or the Floating Rate to be
charged on the Loan. If prior to May 31, 1999, the Borrower should select the
Floating Rate or the LIBOR Fixed Rate to be charged on the Loan, the Borrower
will be required to purchase an interest rate cap, in the case of a Floating
Rate Inerest Rate Election and/or an interest rate swap, in the case of a LIBOR
Fixed Rate Interest Rate Election.
Interest Rate Election Period - The time period selected by the Borrower during
which interest is to accrue on the Loan at Cost of Funds Fixed Rate or the LIBOR
Fixed Rate as elected by the Borrower. Any Interest Rate Election Period must
terminate on August 31, November 30, February 28 or February 29 as the case may
be, or May 31. An Interest Rate Election Period during which interest is to
accrue at the Cost of Funds Fixed Rate shall be for a term of two (2) years. An
Interest Period during which interest is to accrue at the LIBOR Fixed Rate shall
be for a term of thirty (30) days. In no event shall any Interest Rate Election
Period extend beyond the Maturity Date of this Loan.
Liability - Any liability which the Bank could incur for an obligation (or
obligations) in an amount equal to the unpaid principal amount of the Loan and
upon which the Fleet Bank Cost of Funds Rate can be based. It is understood that
the choice of which liabilities to use in determining the Fleet Bank Cost of
Funds Rate shall be made by the Bank in its sole discretion and that the Bank is
not obligated to incur any particular liability on which the Fleet Bank Cost of
Funds Rate is based, but may do so in its sole discretion.
LIBOR Rate - A rate per annum as determined on the basis of the offered rates
for deposits in U.S. dollars for a period of time closest to thirty (30) days
(the "LIBOR Interest Period") which appears on the Telerate page 3750 as of
11:00 a.m. London time on the day that is three Banking Days preceding the first
day of any Interest Rate Election Period during which interest is to accrue at
the LIBOR Fixed Rate. If such rate does not appear on the Telerate page 3750,
the rate for that date will be determined on the basis of the offered rates for
deposits in U. S. dollars closest to the maturity of the LIBOR Interest Period
which are offered by four major banks in the London Interbank Market at
approximately 11:00 a.m. London time on the day that is three
-3-
<PAGE> 4
Banking Days prior to the first day of the LIBOR Interest Period in question.
The principal London office of each of the four major London banks will be
requested to provide a quotation of its U.S. dollar deposit offered rate. If at
least two such quotations are provided, the rate for that date will be the
arithmetic mean of the quotations. If fewer than two quotations are provided as
requested, the rate for that date will be determined on the basis of the rates
quoted for loans in U.S. dollars to leading European banks for a period of time
closest to the maturity of the LIBOR Interest Period offered by major banks in
New York City at approximately 11:00 a.m. New York City time, on the day that is
three Banking Days preceding the first day of the LIBOR Interest Period in
question. In the event the Bank is unable to obtain any such quotation as
provided above, it will be deemed that a LIBOR Rate cannot be determined. In the
event the Board of Governors of the Federal Reserve System shall impose a
reserve percentage with respect to Eurodollar deposits of the Bank, then for any
period during which such reserve percentage shall apply, the LIBOR Rate shall be
equal to the amount determined above divided by an amount up to one (1) minus
such reserve percentage.
LIBOR Fixed Rate - A per annum rate fixed at the LIBOR Rate, plus 200 basis
points.
Loan - The loan of $3,354,166.69 by the Bank to the Borrower.
Loan Agreement - that certain Loan and Security Agreement by, between and among
the Borrower and the Bank dated July 19, 1994, as modified by that certain Loan
and Security Agreement Modification Agreement No. 1 dated of even date herewith.
Maturity Date - April 1, 2002.
Immediately upon execution of this Note, the Borrower shall deliver to
the Bank an Election Notice indicating an Interest Rate Election and an Interest
Rate Election Period for the Loan. The Interest Rate Election shall remain in
effect until expiration of the Interest Rate Election Period chosen by the
Borrower for the Loan. Prior to the end of a selected Interest Rate Election
Period, the Borrower shall deliver to the Bank a new Election Notice designating
the new Interest Rate Election Period and the Interest Rate Election to apply to
the Loan during such Interest Rate Election Period. In the event the Borrower
fails to deliver an Election Notice to the Bank prior to the expiration of any
Interest Rate Election Period, interest shall accrue on the Loan at the Floating
Rate until the Borrower again makes an Interest Rate Election. Once chosen, the
Interest Rate Election shall remain in effect until the expiration of the
Interest Rate Election Period.
-4-
<PAGE> 5
The Borrower agrees to pay principal and interest as follows:
Interest shall be payable monthly in arrears commencing March 31, 1997
and continuing on the last day of each month thereafter during the term of the
Loan. In addition, quarterly principal payments shall be made commencing May 31,
1997, and continuing on each August 31st, November 30th, February 28th or
February 29th as the case may be, and May 31st thereafter in the amount of
$120,000.00 each. The entire unpaid balance of principal, plus accrued interest,
shall be due and payable in any event on the Maturity Date.
In the absence of an Event of Default, all payments made hereunder shall
be applied first to accrued interest, next to the payments of any fees and
expenses of the Bank, then to principal and finally to any unpaid "late charges"
as hereinafter defined. If an Event of Default occurs hereunder, the Bank my
apply any payments received to any sums due hereunder in such manner as it deems
appropriate.
In the event the Borrower prepays the Loan prior to the end of any
applicable LIBOR Interest Period or Cost of Funds Interest Period, as the case
may be, the Borrower may be assessed a prepayment premium computed as follows:
During any period in which the Cost of Funds Fixed Rate or the LIBOR
Fixed Rate is being charged, the principal balance of the Loan
outstanding may be repaid in full or in part at any time subject to
current market conditions as the Bank may determine, and to the extent
such prepayment is possible, the Borrower shall pay to the Bank a
prepayment penalty in an amount computed as follows:
The current published rate as of the date of prepayment for United
States Treasury Notes or Bills (Bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the last
day of the LIBOR Interest Period or Cost of Funds Interest Period, as
the case may be, shall be subtracted from the LIBOR Rate or the Fleet
Bank Cost of Funds Rate, as the case may be, in effect at the time of
prepayment. If the result is zero or a negative number, there shall be
no prepayment penalty. If the result is a positive number, then the
resulting percentage shall be multiplied by the amount of the principal
balance being prepaid. The resulting amount will be divided by 360 and
multiplied by the number of days remaining in the LIBOR Interest Period
or the Cost of Funds Interest Period, as the case may be. Said amount
shall be reduced to present value calculated by
-5-
<PAGE> 6
using the number of days remaining in the designated Interest Period and
using the above referenced United States Treasury Note or Bill rate and
the number of days remaining in said designated Interest Period as of
the date of the prepayment. The resulting amount shall be the prepayment
premium due to the Bank upon the prepayment of the Loan. If by reason of
an Event of Default (as hereinafter defined) hereunder, the Bank elects
to declare this Note to be immediately due and payable, then any
prepayment premium with respect to this Note shall become due and
payable in the same manner as if the Borrower had voluntarily exercised
such right of prepayment.
The Borrower acknowledges that this Note is subject to the provisions of
the Loan Agreement and the Instruments of Collateral Security.
In the event that any payment shall become overdue for a period in
excess of ten (10) days, a "Late Charge" of five cents ($0.05) for each dollar
($1.00) so overdue will be charged by the Bank for the purpose of defraying the
expense incident to handling such delinquent payment.
Upon the occurrence of one or more Events of Default as provided below,
the entire disbursed and unpaid principal, and the interest on this Note shall,
upon written demand of the Bank, become immediately due and payable without
presentment or protest or other notice or demand, all of which are expressly
waived by the Borrower. Any one or more of the following shall constitute an
Event of Default:
(a) Upon the failure of the Borrower to pay any part of the interest or
principal on this Note when due and payable and continuance of such failure for
ten (10) days;
(b) Any event of default pursuant to the terms and conditions of the
Loan Agreement or any of the Instruments of Collateral Security;
(c) Any default pursuant to the terms and conditions of any other loan
or credit accommodation by the Bank to the Borrower or by the Bank to Decora
Industries, Inc. after notice and the expiration of any grace period, if
applicable.
If an Event of Default has occurred and is continuing, interest shall
accrue at the Default Rate until the earlier of (i) the Event of Default is
cured, or (ii) this Note is paid in full.
-6-
<PAGE> 7
The powers and remedies given hereby and by the Loan Agreement and the
Instruments of Collateral Security shall not be exclusive of any other powers
and remedies available to the Bank. No course of dealings between the Borrower
and the Bank and no delay on the part of the Bank in exercising any rights with
respect to any default shall operate as a waiver of any rights of the Bank.
Failure on the part of the Bank to exercise any rights with respect to any
default shall not operate as a waiver of any rights with respect to any other
default. The Borrower agrees to pay all costs and expenses incurred by the Bank
in enforcing this Note, including, without limitation, reasonable attorneys'
fees and legal expenses.
Interest after maturity (whether by acceleration or otherwise) shall be
payable at the Default Rate until this Note is paid in full. If any provisions
of this Note or the application of it to any person or circumstance, shall be
invalid or unenforceable, the remainder of this Note or the application of those
provisions to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected and every other provision of
this Note shall be valid and fully enforceable.
This Note may not be waived, changed, modified or discharged orally, but
only by agreement in writing signed by the party against whom any enforcement of
any waiver, change, modification or discharge is sought.
This Note and all rights of the Bank hereunder, may be assigned by the
Bank, but this Note may not be assigned by the Borrower.
The purchaser, assignee, transferee, or pledgee of this Note shall be
entitled to all rights of the Bank hereunder as if said purchaser, assignee,
transferee, or pledgee were originally named in this Note.
The Borrower hereby irrevocably submits to the jurisdiction of any New
York or Federal court sitting in Albany County, New York in any action or
proceeding arising out of or relating to this Note and the Borrower hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such New York State court or in such Federal court.
The Borrower hereby irrevocably waives, to the fullest extent it may effectively
do so, the defense of an inconvenient forum to the maintenance of such action or
proceeding. Nothing in this paragraph shall affect the right of the Lender to
bring any action or proceeding against the Borrower or its property in the
courts of other jurisdictions.
-7-
<PAGE> 8
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR ARISING
OUT OF OR IN CONNECTION WITH THIS NOTE, THE LOAN AGREEMENT OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH.
IN WITNESS WHEREOF, the Borrower has duly executed this Consolidate and
Restated Promissory Note the day and year first above written.
DECORA, INCORPORATED d/b/a DECORA
MANUFACTURING
By: _________________________
Timothy N. Burditt
Vice President Finance
-8-
<PAGE> 1
EXHIBIT 10.53
AMENDED AND RESTATED TERM NOTE
$5,169,000.00 March 27, 1997
Albany, New York
FOR VALUE RECEIVED, the undersigned, DECORA, INCORPORATED, a Delaware
corporation authorized to do business in the State of New York as Decora
Manufacturing, with an office and principal place of business at 1 Mill Street,
Ft. Edward, New York 12828 (the "Borrower") promises to pay to the order of
FLEET BANK, a bank organized and existing under the laws of the State of New
York (herein called the "Bank"), at the office of the Bank, 69 State Street,
Albany, New York 12201, or at such other place as may be designated from time to
time by the Bank, FIVE MILLION ONE HUNDRED SIXTY NINE THOUSAND AND NO/100
DOLLARS ($5,169,000.00), lawful money of the United States of America, plus
interest on the unpaid principal balance computed from the date hereof, at the
per annum rates set forth below, based on a year of 360 days but chargeable on
actual days.
As used herein, the following terms shall have the following meanings:
Banking Day - any day on which the Bank is open for business.
Cost of Funds Fixed Rate - A per annum fixed interest rate equal to the Fleet
Bank Cost of Funds Rate, plus two and one-quarter of one percent (2.25%).
Default Rate - The Fleet Bank Prime Rate, plus two (2.00%) percent.
Election Notice - The Interest Rate Election Notice to be delivered by the
Borrower to the Bank from time to time in the form of Exhibit A attached hereto,
in which the Borrower shall indicate an Interest Rate Election and an Interest
Rate Election Period. Any Election Notice specifying a LIBOR Fixed Rate Interest
Rate Election must be submitted to the Bank at least three (3) days prior to the
effective date of said LIBOR Fixed Rate Interest Rate Election.
Event of Default - Any of those events defined as an Event of Default under this
Note, the Loan Agreement, andy of the Instruments of Collateral Security, or any
other instruments or documents executed in connection with the Loan.
Fleet Bank Cost of Funds Rate - A rate per annum equal to the rate of interest
the Bank is required to pay (or is offering to pay) for a Liability in an amount
equal to the unpaid balance of the Loan having a maturity equal to two (2) years
(the "Cost of Funds
-1-
<PAGE> 2
Interest Period"), as adjusted for reserve requirements and such other
requirements as may be imposed by federal, state and/or local government and
regulatory agencies, which shall include the fees assessed by the Bank's
so-called "Treasury Division."
Fleet Bank Prime Rate - That rate announced from time to time by the Bank as a
reference point for determining interest rates charged on certain loans and is
not necessarily the lowest rate at which the Bank lends. Any change in this
interest rate shall be effective on the date the change in such rate occurs,
whether or not notice has been given to the Borrower.
Floating Rate - the Fleet Bank Prime Rate, plus one and one quarter of one
percent (1.25%).
Instruments of Collateral Security - Those loan documents already executed or to
be executed by the Borrower and the Borrower's Corporate Guarantor - Decora
Industries, Inc. identified in paragraph 3 (k) of the Loan Agreement.
Interest Rate Election - An election on the part of the Borrower to choose the
Cost of Funds Fixed Rate, the LIBOR Fixed Rate or the Floating Rate to be
charged on the Loan. If prior to May 31, 1999, the Borrower should select the
Floating Rate or the LIBOR Fixed Rate to be charged on the Loan, the Borrower
will be required to purchase an interest rate cap, in the case of a Floating
Rate Interest Rate Election, and/or an interest rate swap, in the case of a
LIBOR Fixed Rate Interest Rate Election.
Interest Rate Election Period - The time period selected by the Borrower during
which interest is to accrue on the Loan at Cost of Funds Fixed Rate or the LIBOR
Fixed Rate as elected by the Borrower. Any Interest Rate Election Period must
terminate on August 31, November 30, February 28 or February 29 as the case may
be, or May 31. An Interest Rate Election Period during which interest is to
accrue at the Cost of Funds Fixed Rate shall be for a term of two (2) years. An
Interest Period during which interest is to accrue at the LIBOR Fixed Rate shall
be for a term of thirty (30) days. In no event shall any Interest Rate Election
Period extend beyond the Maturity Date of this Loan.
Liability - Any liability which the Bank could incur for an obligation (or
obligations) in an amount equal to the unpaid principal amount of the Loan and
upon which the Fleet Bank Cost of Funds Rate can be based. It is understood that
the choice of which liabilities to use in determining the Fleet Bank Cost of
Funds Rate shall be made by the Bank in its sole discretion and that the Bank is
not obligated to incur any particular liability on which the Fleet Bank Cost of
Funds Rate is based, but may do so in its sole discretion.
-2-
<PAGE> 3
LIBOR Rate - A rate per annum as determined on the basis of the offered rates
for deposits in U.S. dollars for a period of time closest to thirty (30) days
(the "LIBOR Interest Period") which appears on the Telerate page 3750 as of
11:00 a.m. London time on the day that is three Banking Days preceding the first
day of any Interest Rate Election Period during which interest is to accrue at
the LIBOR Fixed Rate. If such rate does not appear on the Telerate page 3750,
the rate for that date will be determined on the basis of the offered rates for
deposits in U. S. dollars closest to the maturity of the LIBOR Interest Period
which are offered by four major banks in the London Interbank Market at
approximately 11:00 a.m. London time on the day that is three Banking Days prior
to the first day of the LIBOR Interest Period in question. The principal London
office of each of the four major London banks will be requested to provide a
quotation of its U.S. dollar deposit offered rate. If at least two such
quotations are provided, the rate for that date will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as requested, the rate
for that date will be determined on the basis of the rates quoted for loans in
U.S. dollars to leading European banks for a period of time closest to the
maturity of the LIBOR Interest Period offered by major banks in New York City at
approximately 11:00 a.m. New York City time, on the day that is three Banking
Days preceding the first day of the LIBOR Interest Period in question. In the
event the Bank is unable to obtain any such quotation as provided above, it will
be deemed that a LIBOR Rate cannot be determined. In the event the Board of
Governors of the Federal Reserve System shall impose a reserve percentage with
respect to Eurodollar deposits of the Bank, then for any period during which
such reserve percentage shall apply, the LIBOR Rate shall be equal to the amount
determined above divided by an amount up to one (1) minus such reserve
percentage.
LIBOR Fixed Rate - A per annum rate fixed at the LIBOR Rate, plus 200 basis
points.
Loan - The loan of $5,169,000.00 by the Bank to the Borrower.
Loan Agreement - that certain Loan and Security Agreement by, between and among
the Borrower, Norstar Bank of Upstate NY n/k/a the Bank and Decora Industries,
Inc. (successor by merger to Utilitech, Incorporated) dated April 18, 1990, as
modified by that certain Loan and Security Agreement Modification Agreement No.
1 dated July 19, 1994, that certain Loan and Security Agreement Modification
Agreement No. 2 dated August 13, 1996 and that certain Note and Loan and
Security Agreement Modification Agreement No. 3 dated of even date herewith.
Maturity Date - May 31, 1999.
-3-
<PAGE> 4
Immediately upon execution of this Note, the Borrower shall deliver to
the Bank an Election Notice indicating an Interest Rate Election and an Interest
Rate Election Period for the Loan. The Interest Rate Election shall remain in
effect until expiration of the Interest Rate Election Period chosen by the
Borrower for the Loan. Prior to the end of a selected Interest Rate Election
Period, the Borrower shall deliver to the Bank a new Election Notice designating
the new Interest Rate Election Period and the Interest Rate Election to apply to
the Loan during such Interest Rate Election Period. In the event the Borrower
fails to deliver an Election Notice to the Bank prior to the expiration of any
Interest Rate Election Period, interest shall accrue on the Loan at the Floating
Rate until the Borrower again makes an Interest Rate Election. Once chosen, the
Interest Rate Election shall remain in effect until the expiration of the
Interest Rate Election Period.
The Borrower agrees to pay principal and interest as follows:
Interest shall be payable monthly in arrears commencing March 31, 1997
and continuing on the last day of each month thereafter during the term of the
Loan. In addition, quarterly principal payments shall be made commencing May 31,
1997, and continuing on each August 31st, November 30th, February 28th or
February 29th as the case may be, and May 31st thereafter in the amount of
$333,000.00 each. The entire unpaid balance of principal, plus accrued interest,
shall be due and payable in any event on the Maturity Date.
In the absence of an Event of Default, all payments made hereunder shall
be applied first to accrued interest, next to the payments of any fees and
expenses of the Bank, then to principal and finally to any unpaid "late charges"
as hereinafter defined. If an Event of Default occurs hereunder, the Bank my
apply any payments received to any sums due hereunder in such manner as it deems
appropriate.
In the event the Borrower prepays the Loan prior to the end of any
applicable LIBOR Interest Period or Cost of Funds Interest Period, as the case
may be, the Borrower may be assessed a prepayment premium computed as follows:
During any period in which the Cost of Funds Fixed Rate or the LIBOR
Fixed Rate is being charged, the principal balance of the Loan
outstanding may be repaid in full or in part at any time subject to
current market conditions as the Bank may determine, and to the extent
such prepayment is possible, the Borrower shall pay to the Bank a
prepayment penalty in an amount computed as follows: The current
published rate as of the date of prepayment for United States Treasury
Notes or Bills (Bills on a discounted basis shall be converted to a bond
-4-
<PAGE> 5
equivalent) with a maturity date closest to the last day of the LIBOR
Interest Period or Cost of Funds Interest Period, as the case may be,
shall be subtracted from the LIBOR Rate or the Fleet Bank Cost of Funds
Rate, as the case may be, in effect at the time of prepayment. If the
result is zero or a negative number, there shall be no prepayment
penalty. If the result is a positive number, then the resulting
percentage shall be multiplied by the amount of the principal balance
being prepaid. The resulting amount will be divided by 360 and
multiplied by the number of days remaining in the LIBOR Interest Period
or the Cost of Funds Interest Period, as the case may be. Said amount
shall be reduced to present value calculated by using the number of days
remaining in the designated Interest Period and using the above
referenced United States Treasury Note or Bill rate and the number of
days remaining in said designated Interest Period as of the date of the
prepayment. The resulting amount shall be the prepayment premium due to
the Bank upon the prepayment of the Loan. If by reason of an Event of
Default (as hereinafter defined) hereunder, the Bank elects to declare
this Note to be immediately due and payable, then any prepayment premium
with respect to this Note shall become due and payable in the same
manner as if the Borrower had voluntarily exercised such right of
prepayment.
The Borrower acknowledges that this Note is subject to the provisions of
the Loan Agreement and the Instruments of Collateral Security.
In the event that any payment shall become overdue for a period in
excess of ten (10) days, a "Late Charge" of five cents ($0.05) for each dollar
($1.00) so overdue will be charged by the Bank for the purpose of defraying the
expense incident to handling such delinquent payment.
Upon the occurrence of one or more Events of Default as provided below,
the entire disbursed and unpaid principal, and the interest on this Note shall,
upon written demand of the Bank, become immediately due and payable without
presentment or protest or other notice or demand, all of which are expressly
waived by the Borrower. Any one or more of the following shall constitute an
Event of Default:
(a) Upon the failure of the Borrower to pay any part of the interest or
principal on this Note when due and payable and continuance of such failure for
ten (10) days;
-5-
<PAGE> 6
(b) Any event of default pursuant to the terms and conditions
of the Loan Agreement or any of the Instruments of Collateral
Security;
(c) Any default pursuant to the terms and conditions of any other loan
or credit accommodation by the Bank to the Borrower or by the Bank to Decora
Industries, Inc. after notice and the expiration of any grace period, if
applicable.
If an Event of Default has occurred and is continuing, interest shall
accrue at the Default Rate until the earlier of (i) the Event of Default is
cured, or (ii) this Note is paid in full.
The powers and remedies given hereby and by the Loan Agreement and the
Instruments of Collateral Security shall not be exclusive of any other powers
and remedies available to the Bank. No course of dealings between the Borrower
and the Bank and no delay on the part of the Bank in exercising any rights with
respect to any default shall operate as a waiver of any rights of the Bank.
Failure on the part of the Bank to exercise any rights with respect to any
default shall not operate as a waiver of any rights with respect to any other
default. The Borrower agrees to pay all costs and expenses incurred by the Bank
in enforcing this Note, including, without limitation, reasonable attorneys'
fees and legal expenses.
Interest after maturity (whether by acceleration or otherwise) shall be
payable at the Default Rate until this Note is paid in full. If any provisions
of this Note or the application of it to any person or circumstance, shall be
invalid or unenforceable, the remainder of this Note or the application of those
provisions to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected and every other provision of
this Note shall be valid and fully enforceable.
This Note may not be waived, changed, modified or discharged orally, but
only by agreement in writing signed by the party against whom any enforcement of
any waiver, change, modification or discharge is sought.
This Note and all rights of the Bank hereunder, may be assigned by the
Bank, but this Note may not be assigned by the Borrower.
The purchaser, assignee, transferee, or pledgee of this Note shall be
entitled to all rights of the Bank hereunder as if said purchaser, assignee,
transferee, or pledgee were originally named in this Note.
The Borrower hereby irrevocably submits to the jurisdiction of any New
York or Federal court sitting in Albany County, New York in
-6-
<PAGE> 7
any action or proceeding arising out of or relating to this Note and the
Borrower hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State court or in such
Federal court. The Borrower hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding. Nothing in this paragraph shall affect the right
of the Lender to bring any action or proceeding against the Borrower or its
property in the courts of other jurisdictions.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR ARISING
OUT OF OR IN CONNECTION WITH THIS NOTE, THE LOAN AGREEMENT OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH.
This Note modifies, amends and restates in its entirety a promissory
note from the undersigned to the Bank in the face amount of Eight Million and
no/100 Dollars ($8,000,000.00) dated July 19, 1994.
IN WITNESS WHEREOF, the Borrower has duly executed this Note the day and
year first above written.
DECORA, INCORPORATED d/b/a DECORA
MANUFACTURING
By: _________________________
Timothy N. Burditt
Vice President Finance
-7-
<PAGE> 1
EXHIBIT 10.54
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of June 1,
1997 by and between Nathan Hevrony, an individual ("Executive"), and Decora
Industries, Inc., a Delaware corporation (the "Company").
WHEREAS, the Company wishes to employ Executive and Executive wishes to
accept such employment on the terms and conditions set forth herein;
NOW, THEREFORE, the parties agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby employs Executive and
Executive accepts such employment for a term of three (3) years commencing
June 1, 1997, subject to the provisions of Section 5 below.
2. DUTIES. Executive shall be employed as the Chairman and Chief Executive
Officer of the Company, with the duties and powers customarily associated with
such position, and shall perform such other duties pertaining to the Company's
business as the Board of Directors of the Company (the "Board") may from time to
time direct. Executive hereby consents to serve as an officer and/or director of
the Company or any subsidiary or affiliate without any additional salary or
compensation. The base of operations of Executive shall be his present base of
operations. However, Executive shall also render services at such other place or
places within or without the United States as the Company may designate from
time to time, but not, without Executive's consent, for more than 90 days during
any consecutive 12 month period. When and if Executive is required to render
such services away from home, the Company agrees to either furnish such
transportation and living expenses as may be reasonably required for Executive
during and on account of the rendition of such services, or pay Executive a
fixed weekly sum as reimbursement for such expenses incurred by Executive. In
the latter regard, Executive agrees to keep records of such expenses and furnish
the Company reasonably detailed reports of actual expenses incurred by Executive
as aforesaid.
3. NECESSARY SERVICES.
(a) Performance of Duties. Executive agrees that he will at all times
faithfully, industriously and to the best of his ability, experience and
talents, perform to the reasonable satisfaction of the Company all of the duties
that may be assigned to him hereunder and shall devote such time to the
performance of these duties as may be necessary therefor.
(b) Full-Time Service. During the term of the Agreement, Executive
shall be available on a full-time basis to perform the duties assigned him in
accordance with paragraph 2 hereof.
-1-
<PAGE> 2
(c) Exclusive Services. Executive agrees that during the period of
his employment, Executive shall provide services exclusively pursuant to this
Agreement, and Executive will not, without the prior written consent of the
Company (which consent may be granted or withheld in the sole and absolute
discretion of the Company), directly or indirectly:
i) plan or organize any business activity competitive with the
business or planned business of the Company or its affiliates, or combine,
participate, or conspire with other employees of the Company or its affiliates
or other persons or entities for the purpose of organizing any such competitive
business activity; or
ii) divert or take away, or attempt to divert or take away, any
of the customers or potential customers of the Company or its affiliates, either
for himself or for any other person, firm, partnership, corporation or other
business entity.
4. COMPENSATION.
(a) Salary. Subject to such deductions as the Company may from time
to time be required to make pursuant to law, governmental regulation or order,
the Company agrees to pay to Executive during the term hereof, and Executive
agrees to accept as payment in full for all services rendered by him to or for
the benefit of the Company, compensation in an amount equal to a yearly rate of
$197,500, for the first year, but shall be subject to periodic adjustment
upwards, in accordance with the discretion of the Compensation Committee of the
Board of Directors of the Company. Salary and performance compensation payments,
once determined, shall be made to Executive at such times and in such increments
as are in accordance with the prevailing policies of the Company.
(b) Performance Compensation. The Executive shall be entitled to
performance compensation based upon the Company's Income from Operations before
taxes which shall be established by the Company's Board of Directors for each
fiscal year ("Target Profit") at the following level:
<TABLE>
<CAPTION>
Performance Compensation
Profit Before Tax % of Annual Base Salary
----------------- ------------------------
<S> <C>
Target Profit less 20% 24%
Target Profit less 10% 32%
Target Profit 40%
Target Profit plus 10% 48%
Target Profit plus 20% 56%
</TABLE>
-2-
<PAGE> 3
(c) Acquisition Compenation. For the fiscal year March 31, 1997 to
April 1, 1998, the Executive shall be entitled to acquisition compensation in
accordance with the provisions of the Acquisition Incentive Plan to be adopted
by the Compensation Committee of the Board of Directors of the Company, subject
to the reservation by the Company contained in such Plan of the right to amend
or terminate such Plan at any time.
(d) Fringe Benefits. In addition to the compensation set forth
above, Executive shall be entitled to the following benefits:
i) Annual accrued vacation in accordance with the prevailing
policies of the Company, but not less than three (3) weeks per year;
ii) Sick leave and personal leave with pay in accordance with
the prevailing policies of the Company;
iii) Health and medical benefit insurance for Executive as granted
by the Company to employees performing similar services, but in no event
coverage less extensive than that afforded to Executive by the Company
immediately prior to the date of this Agreement;
iv) Life insurance policy on life of Executive with a death
benefit of $1,000,000 for which Executive shall designate;
v) At all times during the term hereof, the Company, at its
expense, shall furnish to Executive a fully equipped automobile of the Company's
choice, for Executive's use in the performance of his duties hereunder. The
Company shall pay the cost of maintenance, operation, upkeep and repair of said
automobile including license fees and insurance premiums;
vi) The benefits provided by any employee stock option plan,
profit sharing plan or pension plan maintained by the Company, subject to the
reservation by the Company contained in any such plan of the right to amend any
such plan from time to time without prejudice to any vested benefits; and
vii) Any other benefits not specifically set forth herein as may be
granted by the Company, in its sole and absolute discretion, to employees
performing similar services.
5. TERMINATION.
(a) This Agreement shall terminate:
i) At the option of the Company, upon the death or permanent
disability of Executive, "permanent disability" being defined as the inability
of Executive to
-3-
<PAGE> 4
perform his duties as required hereunder as a result of physical or mental
illness for a continuous period in excess of ninety (90) days.
ii) At the election of the Company, immediately upon the material
breach by Executive of any term or condition of this Agreement or upon the
dismissal of Executive by the Company for cause. For purposes of this Agreement,
the Company shall have "cause" to terminate Executive's employment if he (1)
engages in one or more acts constituting a felony; (2) engages in one or more
acts involving fraud or serious moral turpitude; (3) misappropriates Company
assets or (4) materially breaches the Trade Secrets and Confidentiality
Agreement by and between the Executive and the Company dated October 22, 1991.
iii) Upon 90 days written notice by the Company to Executive, for
any other reason whatsoever, whether arbitrary or not.
(b) Return of Company's Property. If this Agreement is terminated for
any of the foregoing reasons, the Company may, at its option, require Executive
to vacate his offices prior to the effective date of a termination and to cease
all activities on the Company's behalf. Executive agrees that on the termination
of his employment in any manner, he will immediately deliver to the Company all
notebooks, brochures, documents, memoranda, reports, price lists, files,
invoices, purchase orders, books, correspondence, customer lists, or other
written or graphical records, and the like, relating to the business or work of
the Company, which are or have been in his possession or under his control and
which have not been returned to the Company, except those owned by Executive
prior to and as of the date of his actual commencement of employment with the
Company. Executive hereby expressly acknowledges that all such materials
referenced above are the property of the Company.
(c) Public Identification. If this Agreement is terminated pursuant
to any provision of this Section 5, Executive shall immediately and forever
thereafter cease to hold himself out to any person, firm, partnership,
corporation or other entity as an employee, agent, independent contractor or
representative of the Company or of any entity owned by, or affiliated with, the
Company.
(d) Payment of Accrued Compensation.
i) If this Agreement is terminated pursuant to this Section
5(a)(i) or 5(a)(ii), any accrued but unpaid compensation due under Section 4
hereof as of the effective date of termination shall be prorated, if necessary,
through the effective date of termination and the amount so determined to be due
and payable hereunder shall be paid within thirty (30) days after said date of
termination to Executive or his estate, as applicable. The Company shall have no
further obligation under this Agreement to make any payments to, or bestow any
benefits upon,
-4-
<PAGE> 5
Executive after the effective date of termination (i.e. immediately upon notice
of termination following the occurrence of any events described in Sections
5(a)(i) and 5(a)(ii)).
ii) If this Agreement is terminated pursuant to Section
5(a)(iii), the Company shall continue to pay Executive compensation pursuant to
Section 4 for the remainder of the Initial Term, plus an additional 24 month
period. The Company may, at its option, discharge such obligation through a cash
severance payment of the total obligation due.
6. EXPENSES. The Company shall reimburse Executive for all out-of-pocket
expenses incurred by Executive in the performance of his duties hereunder,
including, but not limited to, telephone, travel, secretarial, office and
entertainment expenses, subject to such written guidelines and/or requirements
for verification as the Company may, in its sole and absolute discretion,
establish. Such expenses shall be accounted for by Executive and reimbursed by
the Company on a monthly basis. The Company shall provide Executive with such
office and secretarial facilities at the Company's principal place of business
as Executive may reasonably request.
7. LITIGATION AND ATTORNEYS FEES. In the event of any litigation between
the parties hereto in connection with this Agreement or to enforce any provision
or right hereunder, the unsuccessful party to such litigation shall pay to the
successful party therein all costs and expenses, including but not limited to
reasonable attorneys' fees incurred therein by such successful party, which
costs, expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
8. INDEMNIFICATION. The Company agrees to indemnify Executive, to the
fullest extent permissible under the Company's charter documents and/or
applicable law, against any expenses or charges incurred by Executive as a
result of any legal proceedings to which Executive is or is threatened to be
made a party in his capacity as an agent of the Company.
9. LEGAL REPRESENTATION. The Executive confirms that he is not
represented by Miller & Holguin and that he has been advised to seek the advice
of independent counsel.
10. GENERAL PROVISIONS.
(a) The failure of the Company at any time to enforce performance by
Executive of any provisions of this Agreement shall in no way affect the
Company's rights thereafter to enforce the same, nor shall the waiver by the
Company of any breach of any provision hereof be held to be a waiver of any
other breach of the same or any other provision.
-5-
<PAGE> 6
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and the successors and assigns of the Company; provided,
however, it is understood and agreed that the services to be rendered and the
duties to be performed by Executive hereunder are of a special, unique and
personal nature and that it would be difficult or impossible to replace such
services; by reason thereof, Executive may not assign either the benefits or the
obligations of this Agreement; and provided, further, that any assignment by the
Company shall not release the Company from its obligations hereunder without the
consent of Executive.
(c) Executive shall be considered an employee of the Company within
the meaning of all federal, state and local laws and regulations governing
unemployment insurance, workers' compensation, industrial accident, labor and
taxes.
(d) Any continuance of Executive's employment by the Company after
the Term of this Agreement shall be subject to termination with or without cause
by either the Company or Executive upon delivery of six (6) months written
notice thereof to the other party. Except with respect to the foregoing
termination provisions, any such continuance of employment shall be upon the
same terms and conditions as are set forth herein.
(e) This Agreement is the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior oral and
written agreements and negotiations between the parties.
(f) The headings of the several paragraphs in this Agreement are
inserted solely for the convenience of the parties and are not a part of and are
not intended to govern, limit or aid in the construction of any term or
provision hereof.
(g) This Agreement may not be modified except by a written
instrument signed by all parties hereto.
(h) All clauses and covenants contained in this Agreement are
severable, and in the event any of them shall be held to be invalid by any
court, such clauses or covenants shall be limited as permitted under applicable
law, or, if the same are not susceptible to such limitation, this Agreement
shall be interpreted as if such invalid clauses or covenants were not contained
herein. Without limitation of the foregoing, if, in any judicial proceedings, a
court shall refuse to enforce the geographic and/or time restrictions imposed in
any covenant herein to their fullest extent, then the geographic and/or time
restrictions set forth herein shall be reduced to the extent necessary to permit
enforcement of the foregoing covenant to the fullest extent possible.
(i) This Agreement is made with reference to the laws of the State
of New York and shall be governed by and construed in accordance
therewith. Any litigation concerning
-6-
<PAGE> 7
or to enforce the provisions of this Agreement shall be brought in the courts of
the State of New York.
(j) All notices or demands of any kind which either party hereto may
be required or may desire to serve upon the other party under the terms of this
Agreement, shall be in writing and shall be served upon such other party by
personal service upon such other party or by leaving a copy of said notice or
demand, addressed to such other party at the address hereafter set forth,
whereupon such service shall be deemed complete, or by mailing a copy thereof by
registered or express mail, postage prepaid with return receipt requested,
addressed as follows:
If to the Company: Decora Industries, Inc.
1 Mill Street
Fort Edward, New York 12828
With a copy to: Dale S. Miller, Esq.
Miller & Holguin
1801 Century Park East
7th Floor
Los Angeles, CA 90067
If to Executive: Mr. Nathan Hevrony
200 E 61st Street
Apartment 40G
New York, NY 10021
In case of service by mail, service shall be deemed completed at the
expiration of the third day after the date of mailing. The addresses to which
notices and demands shall be delivered or sent may be changed from time to time
by written notice served as hereinabove provided by either party upon the other
party hereto.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
EXECUTIVE:
--------------------------
NATHAN HEVRONY
THE COMPANY:
DECORA INDUSTRIES, INC.
By:
-----------------------
Its:
----------------------
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED
CASH FLOWS FOR THE FISCAL YEAR ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 243
<SECURITIES> 0
<RECEIVABLES> 6,657
<ALLOWANCES> 499
<INVENTORY> 5,439
<CURRENT-ASSETS> 12,697
<PP&E> 15,560
<DEPRECIATION> 7,779
<TOTAL-ASSETS> 37,454
<CURRENT-LIABILITIES> 6,444
<BONDS> 16,507
0
0
<COMMON> 355
<OTHER-SE> 14,148
<TOTAL-LIABILITY-AND-EQUITY> 37,454
<SALES> 41,082
<TOTAL-REVENUES> 41,082
<CGS> 30,503
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,319
<INCOME-PRETAX> 2,407
<INCOME-TAX> (1,159)
<INCOME-CONTINUING> 3,566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,566
<EPS-PRIMARY> $0.10
<EPS-DILUTED> $0.10
</TABLE>
