<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 {FEE REQUIRED}
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 {NO FEE REQUIRED}
For the Transition Period From ___ to___
Commission File Number 1-9929
INSTEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0674867
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1373 BOGGS DRIVE, MOUNT AIRY, NORTH CAROLINA 27030
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (910) 786-2141
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
COMMON STOCK (NO PAR VALUE) NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes {X} No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [X]
The aggregate market value of the common stock held by non-affiliates
of the registrant as of December 15, 1995 was $41,150,855.
The number of shares outstanding of the registrant's common stock as
of December 15, 1995 was 8,393,270.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement to be delivered to
stockholders in connection with the 1996 Annual Meeting of Stockholders are
incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS.
GENERAL
Insteel Industries, Inc. (the "Company" or "Insteel") manufactures and
markets a wide range of wire products. The Company's wholly-owned subsidiary,
Insteel Wire Products Company, is comprised of two divisions, Insteel Wire
Products ("IWP") and Insteel Construction Systems ("ICS"). IWP produces
concrete reinforcing products, industrial wire, agricultural fencing and nails
for the construction, home furnishings, appliance and agricultural industries.
ICS manufactures the Insteel 3-D(R) building panel for commercial and
residential construction. The most significant market for both divisions is the
construction industry, which represented over half of Insteel's sales in 1995.
Insteel's business strategy is to attain leadership positions in the
markets that it serves and continue expanding into higher value-added products
that offer superior returns relative to the Company's traditional businesses.
Future growth will leverage off of the Company's core competencies in the
manufacture and sales of wire products. Insteel's strategic focus is on new
product additions or product line extensions that offer the potential for (1)
substantial barriers to entry, (2) clear differentiation from competitors and
(3) significantly more attractive profit margins than the Company's
commodity-type businesses.
From its founding in 1953 up until its entry into the wire business in
1974, Insteel manufactured concrete building products for the construction
industry. Sales of wire products expanded substantially during 1975 - 1988, as
the Company attained leadership positions in a number of its product lines and
markets. In 1988, the Company elected to focus its resources on the wire
industry and sold its concrete products division.
ICS was formed in 1989 as a joint venture with an Austrian firm, EVG.
In 1992, ICS entered into a joint venture agreement that created an affiliate,
Insteel Panel/MEX, to manufacture and distribute 3-D panel in Mexico. During
the second quarter of 1995, the Company purchased EVG's 30% minority interest,
and following the completion of the stock purchase, merged ICS into Insteel's
wholly-owned subsidiary, Insteel Wire Products Company.
During 1992 and 1993, the Company completed a strategic realignment
program which included the redeployment of production capacity and the
consolidation of the management and administrative responsibilities for its
previously stand-alone wire products subsidiaries. Three manufacturing
facilities were closed while three other facilities were significantly
expanded. In 1993, the Company merged its Expo Wire Company, Rappahannock Wire
Company, Forbes Steel & Wire Corporation and Intersteel Corporation
subsidiaries into one wholly-owned subsidiary, Insteel Wire Products Company.
Also during 1993, the scrap brokerage business that bought and sold steel scrap
on a commissioned basis was terminated. Wire products and scrap brokerage sales
for the last three years are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------
1995 1994 1993
-------------------- ------------------- --------------------
($ in thousands) Amount % Amount % Amount %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Wire Products $260,344 100.0 $247,045 100.0 $211,509 86.3
Scrap Brokerage - - - - 33,507 13.7
-------- ----- -------- ----- -------- -----
Total $260,344 100.0 $247,045 100.0 $245,016 100.0
======== ===== ======== ===== ======== =====
</TABLE>
In January 1994, Insteel entered the prestressed concrete strand ("PC
strand") business with the start-up of a new manufacturing facility. The
Company has made purchase commitments for an expansion to the PC strand plant
that will double its production capacity. Start-up is currently scheduled for
the second half of fiscal 1996.
A second major new product introduction will be collated nails. In May
1995, construction was started on a new manufacturing facility with production
scheduled to commence in February 1996.
2
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PRODUCTS
Concrete reinforcing products include welded wire fabric and PC
strand. Welded wire fabric is produced as both a commodity and specially
engineered reinforcing product for concrete pipe, commercial construction and
infrastructure construction. The product is manufactured in both rolls and mats
in widths of up to 13.5 feet. PC strand is a sophisticated concrete reinforcing
product used in both pretensioned and posttensioned prestressed concrete
construction for structural members, bridges, buildings, parking decks,
pilings, railroad ties and utility poles.
Industrial wire products are primarily sold to manufacturers of
springs for the bedding and furniture industries, appliances such as
refrigerators, ovens and dishwashers, strapping ties, display racks, grocery
carts and chain link fences. Product attributes vary with the end use and can
include galvanizing for corrosion resistance and intermediate heat-treating, in
addition to stringent tolerance requirements and mechanical properties.
Nails include a wide variety of products such as common nails,
finishing nails, box nails, sinkers, duplex nails and galvanized nails where
corrosion resistance is required. The Company's collated nail product line will
include standard sizes that fit all of the major pneumatic automatic power
nailers currently manufactured.
Agricultural products are primarily galvanized wire that is woven,
welded or formed into fencing or barbed wire used on farms as well as in
commercial and residential applications.
Insteel 3-D(R) building panel is a steel-reinforced polysterene
sandwich panel to which concrete is applied, creating an insulated
continuously-reinforced concrete structure. The product is used in the
construction of commercial buildings, prisons, apartments and homes. The 3-D
panel is far superior to conventional building methods in terms of strength,
durability, structural performance, insulation qualities, design flexibility,
ease of installation and speed of construction. The most critical factor
impacting customer acceptance has been, and continues to be, the cost effective
application of concrete.
MARKETING AND DISTRIBUTION
Insteel markets its products through sales representatives who are
employees of the Company. Insteel aligns its sales and marketing staff with the
markets that it is servicing. IWP's sales function is organized into three
customer-based units: (1) concrete reinforcing, including welded wire fabric
and PC strand, (2) industrial wire and (3) nails and agricultural. ICS has its
own sales and marketing organization which is focused on the promotion of the
Insteel 3-D(R) building panel. The Company's products are sold directly to
users and through numerous wholesalers, distributors and retailers located
primarily in the eastern part of the U.S. as well as a portion of the
Southwest.
Insteel delivers its products using either its own trucking fleet, or
via common or contract carriers, depending upon comparative costs and
scheduling requirements. In order to minimize freight costs, the Company
backhauls raw materials on its fleet whenever customer locations are in close
proximity to its suppliers.
RAW MATERIALS
The primary raw material required in the production of Insteel's wire
products is hot rolled carbon steel wire rod. The Company purchases wire rod
from both domestic and foreign suppliers. Under the terms of a rod supply
agreement, Insteel is committed to purchase from GS Industries, Inc. a portion
of its raw material requirements. During the past three years, domestic wire
rod markets have remained tight and prices have escalated as U.S. manufacturers
operated near full capacity. Announced increases in domestic wire rod capacity
scheduled over the next few years should have a favorable impact on the quality
and availability of the Company's most significant raw material. The Company
believes that raw materials and supplies are available in quantities adequate
to meet the Company's current and future needs.
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COMPETITION
The markets in which the Company's business is conducted are highly
competitive. Insteel faces formidable competition in most areas of its business
activity, including competition from companies whose revenues and financial
resources are much larger than the Company's. Some of its competitors are
integrated steelmakers that produce both wire rod and wire products and offer
multiple product lines over broad geographical areas. Other competitors are
smaller independent wire mills that offer limited competition in certain
markets. Market participants compete on the basis of price, quality and
service. Selling prices tend to ultimately move with changes in raw material
costs, although spreads can widen or narrow depending upon market conditions.
Technology has become a critical factor in maintaining competitive levels of
conversion costs and quality. The Company believes that it is the leading low
cost producer of wire products operating the most technologically-advanced
manufacturing facilities. In addition, the Company offers a broader range of
products through more diverse distribution channels than any of its
competitors. The Company believes that it is well-positioned to compete
favorably based on the industry's critical success factors.
EMPLOYEES
As of September 30, 1995, the Company employed 1,023 people. The
Company has a collective bargaining agreement with a labor union at its
Delaware plant covering its hourly employees. The Company believes that
relations with the labor union and employees are satisfactory.
ENVIRONMENTAL MATTERS
The Company believes that it is in compliance in all material respects
with applicable environmental laws and regulations. The Company has experienced
no material difficulties in complying with legislative or regulatory standards
and believes that these standards have not materially impacted Insteel's
financial position or results of operations. Compliance with future additional
environmental requirements could necessitate capital outlays. However, the
Company does not believe that these expenditures should ultimately result in a
material adverse effect on Insteel's financial position or results of
operations.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
--------------------------- --- -------------------------------------------------
<S> <C> <C>
Howard O. Woltz, Jr. 70 Chairman of the Board and a Director
H.O. Woltz III 39 President, Chief Executive Officer and a Director
Gary D. Kniskern 50 Vice President - Administration and Secretary
Michael C. Gazmarian 36 Chief Financial Officer and Treasurer
</TABLE>
Howard O. Woltz, Jr., has been Chairman of the Board since 1958 and
has served in various capacities for more than 37 years. He had been President
of the Company from 1958 to 1968 and from 1974 to 1989. He previously served as
Vice President, General Counsel and a director of Quality Mills, Inc. (a
publicly-held manufacturer of knit apparel and fabrics), for more than 35 years
prior to its acquisition in December 1988 by Russell Corporation.
H. O. Woltz III, a son of Howard O. Woltz, Jr., was elected Chief
Executive Officer in February 1991 and has served in various capacities for
more than 17 years. He was named President and Chief Operating Officer in
August 1989. He had been Vice President of the Company since September 1988
and, previously, President of Rappahannock Wire Company, a subsidiary of the
Company, since 1981. Mr. Woltz has been a director of the Company since 1986
and also serves as President of Insteel Wire Products Company.
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<PAGE> 5
Gary D. Kniskern was elected Vice President - Administration in August
1994 and has served in various capacities for more than 16 years. He had been
Secretary and Treasurer since December 1984 and, previously, internal auditor
since 1979.
Michael C. Gazmarian was elected Treasurer in August 1994. He had
joined Insteel as Chief Financial Officer in July 1994. He had been with
Guardian Industries Corp. since 1986, serving in various financial capacities.
Most recently, he was Vice President - Finance and Administration for
Consolidated Glass & Mirror Corp., a Guardian subsidiary.
The executive officers listed above were elected by the Board of
Directors at its annual meeting held February 7, 1995. All officers serve until
the next annual meeting of the Board of Directors or until their successors are
elected and qualify. The next meeting at which officers will be elected is
scheduled for February 13, 1996.
ITEM 2. PROPERTIES.
Insteel's corporate headquarters and IWP's divisional office are
located in Mount Airy, North Carolina. ICS' divisional office is located in
Brunswick, Georgia. IWP has seven manufacturing facilities located in Andrews,
South Carolina; Dayton, Texas; Fredericksburg, Virginia; Gallatin, Tennessee (2
plants); Mount Airy, North Carolina; and Wilmington, Delaware. Construction is
underway on a collated nail plant located in Andrews, South Carolina, scheduled
to begin production in February 1996. ICS operates a manufacturing facility
located in Brunswick, Georgia and a joint venture operation located in
Mexicali, B.C., Mexico.
The Company owns all of its properties with the exception of the
Mexican joint venture facility, which is leased. The Dayton, Fredericksburg,
Gallatin, and Brunswick plants are all pledged as security under long-term
financing agreements. The Company owns and leases a fleet of trucks and
trailers for the delivery of its products.
The Company considers that its properties are in good operating
condition and that its machinery and equipment have been well-maintained.
Manufacturing facilities are suitable for their intended purposes and have
capacities adequate for current and projected needs for existing products.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company
or any of its subsidiaries is a party or which any of their property is a
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is listed on the New York Stock Exchange
under the symbol III. At December 11, 1995, there were 785 stockholders of
record.
Certain of the Company's borrowing agreements contain restrictions on
the payment of dividends. As of September 30, 1995, $13,953,000 of retained
earnings are available for dividend payments.
5
<PAGE> 6
FINANCIAL INFORMATION BY QUARTER (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND PRICE DATA)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
1995
----
<S> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $58,619 $66,003 $69,360 $66,362
Gross profit 4,674 6,943 6,698 3,592
Net earnings 684 4,026 1,596 30
PER SHARE DATA (IN DOLLARS)
Net earnings .08 .48 .19 .01
Dividends declared .06 .06 .06 .06
Stock prices
High 8.88 8.25 8.13 8.88
Low 6.88 7.00 7.00 7.00
1994
----
OPERATING RESULTS
Net sales $50,356 $56,128 $71,360 $69,201
Gross profit 2,842 4,668 6,611 5,633
Earnings before cumulative effect of change
in accounting principle 17 706 1,580 1,469
Cumulative effect of change in accounting
principle 1,325 - - -
Net earnings 1,342 706 1,580 1,469
PER SHARE DATA (IN DOLLARS)
Earnings before cumulative effect of change
in accounting principle - .09 .19 .18
Cumulative effect of change in accounting
principle .16 - - -
Net earnings .16 .09 .19 .18
Dividends declared .06 .06 .06 .06
Stock prices
High 11.50 12.13 10.38 9.75
Low 8.63 8.50 8.25 8.13
</TABLE>
6
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA.
FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $260,344 $247,045 $245,016 $239,559 $240,220
Earnings before extraordinary item and
cumulative effect of change in
accounting principle* 6,336 3,772 6,292 4,345 1,660
Net earnings 6,336 5,097 6,292 4,345 1,769
Earnings per share before extraordinary
item and cumulative effect of change
in accounting principle (primary)* .76 .45 .80 .68 .26
Net earnings per share (primary) .76 .61 .80 .68 .28
Dividends per share .24 .24 .23 .21 .19
Total assets 146,135 138,879 133,042 112,766 108,909
Long-term debt 22,089 26,797 29,188 30,433 32,130
Stockholders' equity 71,212 66,461 62,930 44,944 41,684
</TABLE>
* See Item 7, below, and Note 1 of Notes to Consolidated Financial Statements
for information regarding the change in accounting principle.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
1995 Compared With 1994
Insteel's net sales reached a new high in 1995, rising 5% to $260.3
million compared with $247.0 million in 1994. The current year was marked by
dramatically different business conditions in the first and second halves of
the year relative to 1994. Sales for the first half of the year were up 17%
over the same period in 1994 due to strong market demand and the additional
volume generated by the PC strand product line. During the second half of the
year, a softening business environment and related build-up in customer
inventories led to a 3% decline in sales compared to the same period in 1994.
For the year, average wire selling prices per ton were up 3% over 1994 due to
improved product mix and higher price levels. Wire product shipments increased
2%.
Cost of sales during 1995 were 91.6% of sales, down from 92.0% in
1994. Gross profit increased 11% to $21.9 million or 8.4% of sales in 1995
compared with $19.8 million or 8.0% of sales in 1994. The PC strand plant,
which incurred start-up losses during the first half of 1994, was the driving
factor behind the year-to-year improvement. Strong customer demand in the
first half of the year widened spreads between selling prices and raw material
costs and favorably impacted gross margins. Weakening market conditions in the
second half of the year led to narrower spreads and excess inventories. In
response, production rates at most facilities were sharply reduced in order to
realign inventories with customer demand. The resulting increase in per-unit
production costs negatively impacted gross margins, particularly in the fourth
quarter.
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Selling, general and administrative expenses were $13.2 million or
5.1% of sales in 1995 compared with $12.5 million or 5.0% of sales in 1994. The
Company's focus on cost-reduction efforts continued to minimize SG & A
expenditures.
Interest expense increased 9% to $2.3 million compared to $2.2 million
in 1994. The increase in 1995 was due to higher interest rates and the
capitalization of interest related to the construction of the PC strand plant
in the first quarter of 1994.
The statement of earnings for 1994 and 1993 reflected the funding of
30% of ICS losses by its former joint venture partner. As a result of the
purchase of the remaining interest in ICS in the second quarter of 1995,
minority interest was not applicable to the 1995 results. ICS continued to
incur substantial losses in 1995 due to insufficient sales volume.
The provision for income taxes included a $2.4 million deferred tax
benefit recorded in the second quarter of 1995 as a result of the purchase of
the 30% minority interest in ICS and subsequent merger into IWP. The Company
established a deferred tax asset and reduced its income tax provision to
reflect the expected usage of existing ICS net operating loss carryforwards in
the future. In the first quarter of 1994, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," and recognized a $1.3 million benefit for
previously unrecorded deferred tax assets related to other net operating loss
carryforwards. Excluding the tax-related adjustments in both years, the
effective income tax rate remained constant at 36.6%.
1994 Compared With 1993
Sales increased 1% for the year, rising to $247.0 million in 1994 from
$245.0 million in 1993. Sales for 1993 included $33.5 million of scrap
brokerage revenue, a business that was terminated in August 1993. Excluding the
scrap brokerage business, sales were up 17% over 1993. Average wire selling
prices per ton were up 6% over 1993 due to improved product mix and higher
price levels. Wire product shipments increased 11%.
Cost of sales increased to 92.0% of sales in 1994 from 91.5% in 1993.
As a result, gross profit dropped 5% to $19.8 million or 8.0% of sales in 1994
compared with $20.9 million or 8.5% of sales in 1993. Operating costs for 1994
were negatively impacted by the start-ups of an automated wire rod cleaning
facility, a new welding line and the PC strand operation. ICS continued to
operate below breakeven volume despite the profitable performance of the
Panel/MEX joint venture in the second half of the year.
Selling, general and administrative expenses decreased to $12.5
million or 5.0% of sales in 1994 compared with $12.8 million or 5.2% of sales
in 1993. Interest expense increased to $2.2 million from $1.1 million in 1993.
Interest expense for 1993 was below recent historical levels due to: (1) the
conversion of $14.0 million of subordinated debentures into equity in December
1992 and (2) partial year interest expense on the $15.0 million private
placement of senior notes that were funded half in April and half in September.
Higher short-term debt balances relative to recent historical levels were also
responsible for the increase in interest expense for 1994.
In the first quarter of 1994, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," and recognized a $1.3 million benefit for
previously unrecorded deferred tax assets related to net operating loss
carryforwards. Prior to adoption of this new accounting standard, benefits from
the Company's net operating loss carryforwards were recognized for financial
reporting purposes only in the year that they were used for income tax
purposes. As a result of this new accounting treatment, the Company's
effective tax rate increased to 36.6% in 1994 from 17.5% in 1993.
FINANCIAL CONDITION
Operating activities generated $4.6 million of cash during 1995
compared to $1.6 million in 1994 and $17.3 million in 1993. Increases in cash
provided by receivables and improved operating performance were offset by
higher inventory levels. Earnings before interest, taxes and depreciation were
$16.5 million or $1.96 per share
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<PAGE> 9
in 1995 compared to $15.2 million or $1.83 per share in 1994 and $15.1 million
or $1.92 per share in 1993. Days sales outstanding of receivables were 43.5 in
1995 compared to 45.1 in 1994 and 43.5 in 1993. The sharp increase in raw
material inventories relative to shipment volumes resulted in a decrease in
inventory turns to 6.3 in 1995 compared to 7.1 in 1994 and 9.1 in 1993. In
1995, the soft market conditions in the second half of the year were
responsible for the inventory build-up. Management is taking action to reduce
raw material inventories down to desired levels by the end of the first fiscal
quarter of 1996. Inventory levels in 1994 were driven upwards by: (1) tight
wire rod market conditions and longer lead times from suppliers, (2) a higher
proportion of imported rod purchases with larger order sizes and (3) additional
inventories required to support start-up operations with low initial sales
volumes.
Investing activities consumed $5.4 million of cash in 1995 compared to
$11.1 million in 1994 and $20.0 million in 1993 as a result of lower capital
expenditures. From 1992 - 1994, capital expenditures amounted to $40.1 million
or $4.78 per share as the Company completed an extensive manufacturing
realignment program. In May 1995, construction started on a new collated nail
facility in Andrews, South Carolina with start-up scheduled for the second
fiscal quarter of 1996. The Company has also made purchase commitments for the
expansion of its PC strand plant with start-up scheduled for the second half of
fiscal 1996. Total expenditures for these projects will be approximately $9.0
million.
Financing activities used $200,000 of cash in 1995 compared to
providing $1.5 million in 1994 and $11.6 million in 1993. Short-term debt
increased in 1995 and 1994 primarily due to higher inventory levels.
During 1995, the Company utilized short-term borrowings on unsecured
lines of credit to fund its seasonal working capital requirements. At September
30, 1995, there was $8.3 million outstanding on lines of credit which provide
total availability of $20.0 million. The Company is negotiating with a
commercial bank for a five-year $35.0 million unsecured revolving credit
facility that will replace the existing lines of credit. The proposed revolving
credit facility would be utilized to refinance a portion of existing debt and
fund working capital requirements, capital expenditures and general corporate
purposes.
Insteel's financial position remained strong in 1995. The Company's
long-term debt to total capital ratio decreased to 24% at September 30, 1995
compared to 29% in 1994 and 32% in 1993. The Company believes that funds
provided by operations and external sources of financing are sufficient to
support business requirements for the foreseeable future.
OUTLOOK
Future trends for revenue and profitability continue to be difficult
to predict. Insteel faces a number of risks and uncertainties, including
business conditions and growth in the general economy, competitive pressures
and wire rod market conditions. Announced increases in domestic wire rod
capacity should improve the quality and availability of the Company's primary
raw material. The recently completed realignment and capital investment
programs have strengthened Insteel's position as the leading low cost producer
of wire products operating in the most updated, technologically advanced
manufacturing facilities. The Company currently offers a wider range of product
lines through more diverse distribution channels than any of its competitors.
Management believes that Insteel is well-positioned to benefit from future
improvements in market conditions.
Although ICS has failed to build sales volumes up to breakeven levels,
recent developments are promising. Order levels have improved and substantial
interest has been generated by the performance of the 3-D product during the
recent hurricanes in the Caribbean. Management is prepared to implement
alternative operating strategies should the increased interest fail to
translate into substantial improvements in ICS' operating results.
9
<PAGE> 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
(A) FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets as of September 30, 1995 and 1994 11
Consolidated Statements of Earnings for the three years ended September 30, 1995 12
Consolidated Statements of Stockholders' Equity for the three years ended September 30, 1995 13
Consolidated Statements of Cash Flows for the three years ended September 30, 1995 14
Notes to Consolidated Financial Statements 16
Schedule II - Valuation and Qualifying Accounts 25
Independent Auditors' Report - KPMG Peat Marwick LLP 26
Independent Auditors' Report - Deloitte & Touche LLP 27
</TABLE>
(B) SUPPLEMENTARY DATA
Selected quarterly financial data appears under the caption "Financial
Information by Quarter (Unaudited)" in Item 5 of this report.
10
<PAGE> 11
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 263 $ 1,234
Accounts receivable, net 31,516 33,399
Inventories 40,566 28,750
Prepaid expenses and other 1,509 1,119
-------- --------
Total current assets 73,854 64,502
Property, plant and equipment, net 65,100 66,540
Other assets 7,181 7,837
-------- --------
Total assets $146,135 $138,879
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,471 $ 25,196
Accrued expenses 6,897 6,776
Short-term debt 8,260 4,940
Current portion of long-term debt 5,196 2,407
-------- --------
Total current liabilities 47,824 39,319
Deferred income taxes 5,010 6,302
Long-term debt 22,089 26,797
Commitments
Stockholders' equity:
Preferred stock, no par value
Authorized shares: 1,000 (none issued) - -
Common stock, $2 stated value
Authorized shares: 20,000
Issued and outstanding shares: 1995, 8,393; 1994, 8,333 16,787 16,667
Additional paid-in capital 38,033 37,730
Retained earnings 16,392 12,064
-------- --------
Total stockholders' equity 71,212 66,461
-------- --------
Total liabilities and stockholders' equity $146,135 $138,879
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE> 12
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales $260,344 $247,045 $245,016
Cost of sales 238,437 227,291 224,155
-------- -------- --------
Gross profit 21,907 19,754 20,861
Selling, general and administrative expense 13,164 12,455 12,789
-------- -------- --------
Operating income 8,743 7,299 8,072
Interest expense 2,344 2,160 1,121
Minority interest in loss of subsidiary - (625) (549)
Equity in loss of affiliate 88 116 290
Other expense (income) 52 (301) (417)
-------- -------- --------
Earnings before income taxes and cumulative
effect of change in accounting principle 6,259 5,949 7,627
Provision (benefit) for income taxes (77) 2,177 1,335
-------- -------- --------
Earnings before cumulative effect of change
in accounting principle 6,336 3,772 6,292
Cumulative effect of change in accounting principle - 1,325 -
-------- -------- --------
Net earnings $ 6,336 $ 5,097 $ 6,292
======== ======== ========
Earnings per share:
Primary:
Earnings before cumulative effect of change
in accounting principle $ .76 $ .45 $ .80
Cumulative effect of change in accounting principle - .16 -
-------- -------- --------
Net earnings $ .76 $ .61 $ .80
======== ======== ========
Fully diluted:
Earnings before cumulative effect of change
in accounting principle $ .76 $ .45 $ .78
Cumulative effect of change in accounting principle - .16 -
-------- -------- --------
Net earnings $ .76 $ .61 $ .78
======== ======== ========
Cash dividends per share $ .24 $ .24 $ .23
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 13
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
COMMON STOCK:
Balance, beginning of year $16,667 $16,533 $11,618
Adjustment to reflect conversion of convertible debentures - - 3,316
Adjustment to reflect 10% stock dividend - - 1,502
Stock options exercised 120 134 97
------- ------- -------
Balance, end of year $16,787 $16,667 $16,533
======= ======= =======
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year $37,730 $37,434 $20,254
Adjustment to reflect conversion of convertible debentures - - 9,893
Adjustment to reflect 10% stock dividend - - 7,039
Stock options exercised 303 296 248
------- ------- -------
Balance, end of year $38,033 $37,730 $37,434
======= ======= =======
RETAINED EARNINGS:
Balance, beginning of year $12,064 $ 8,963 $13,072
Adjustment to reflect 10% stock dividend - - (8,540)
Cash dividends declared (2,008) (1,996) (1,861)
Net earnings 6,336 5,097 6,292
------- ------- -------
Balance, end of year $16,392 $12,064 $ 8,963
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 14
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 6,336 $ 5,097 $ 6,292
-------- -------- --------
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Cumulative effect of change in accounting principle - (1,325) -
Depreciation and amortization 7,797 7,100 6,336
Minority interest in loss of subsidiary - (625) (549)
Equity in loss of affiliate 88 116 290
Accounts receivable, net 1,819 (4,598) 167
Inventories (11,816) (5,040) 2,822
Accounts payable and accrued expenses 2,395 586 4,058
Other changes (1,976) 240 (2,157)
-------- -------- --------
Total adjustments (1,693) (3,546) 10,967
-------- -------- --------
Net cash provided by operating activities 4,643 1,551 17,259
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,554) (10,707) (19,596)
Proceeds from sale of property, plant and equipment 16 980 257
Proceeds (payments) on notes receivable 226 654 (514)
Increase in other investments (116) (2,000) (118)
-------- -------- --------
Net cash used in investing activities (5,428) (11,073) (19,971)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term debt 3,320 4,940 -
Proceeds from long-term debt 1,986 1,306 20,772
Principal payments on long-term debt (3,907) (3,838) (8,234)
Proceeds from stock options 423 430 345
Dividends paid (2,008) (1,996) (1,861)
Capital contribution to subsidiary by minority interest - 625 536
-------- -------- --------
Net cash provided by (used in) financing activities (186) 1,467 11,558
-------- -------- --------
Net increase (decrease) in cash (971) (8,055) 8,846
Cash and cash equivalents at beginning of year 1,234 9,289 443
-------- -------- --------
Cash and cash equivalents at end of year $ 263 $ 1,234 $ 9,289
======== ======== ========
</TABLE>
14
<PAGE> 15
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $2,268 $1,912 $ 1,730
Income taxes $1,569 $1,424 $ 1,940
Non-cash activities:
Purchase of minority interest through issuance of notes payable $ 832 - -
====== ====== =======
Conversion of accounts receivable to investment in affiliate $ 300 - -
====== ====== =======
Conversion of 7 3/4% convertible subordinated debentures
(including deferred debt issuance costs of $465 and accrued interest
expense of $134) to common stock - - $13,394
====== ====== =======
Note receivable obtained in connection with the sale of assets - - $ 765
====== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE> 16
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
(In thousands, except as noted)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS. Insteel Industries, Inc. ("Insteel" or the
"Company") is a wire products manufacturer whose primary market is the
construction industry. The Company produces welded wire fabric and prestressed
concrete strand for concrete reinforcement, industrial wire, fencing products,
nails and wire reinforced building panels. Insteel sells its products
nationwide from eight plants in the U.S. and a joint venture operation in
Mexico.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of the Company and its subsidiaries. During the second
quarter of 1995, the Company purchased the remaining 30% of its joint venture
subsidiary, Insteel Construction Systems, Inc. ("ICS"). Following the stock
purchase, ICS was merged into Insteel's wholly-owned subsidiary, Insteel Wire
Products Company ("IWP"). The Company accounted for this transaction under the
purchase method and allocated the entire purchase price as a reduction of the
valuation allowance for deferred tax assets. Results prior to the ICS stock
purchase reflect the 30% minority interest of Insteel's joint venture partner.
All significant intercompany balances and transactions have been eliminated.
CASH EQUIVALENTS. The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.
REVENUE RECOGNITION. Revenue is recognized when the related products
are shipped.
INVENTORIES. Inventories are valued at the lower of average cost
(which approximates computation on a first-in, first-out basis) or market (net
realizable value or replacement cost).
INVESTMENT IN AFFILIATED COMPANIES. Investment in common stock of the
Company's Mexican affiliate, Insteel Panel/MEX ("IPM") is accounted for by the
equity method.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are
stated at cost. Depreciation is calculated principally using the straight-line
method based on the estimated useful lives of the assets. No interest costs
were capitalized in 1995. Capitalized interest costs were $268 in 1994 and $414
in 1993.
OTHER ASSETS. Other assets consist principally of various intangible
assets, long-term notes receivable and the cash surrender value of life
insurance policies. Intangible assets are amortized on a straight line basis
over the expected periods to be benefited.
INCOME TAXES. Effective October 1, 1993, the Company adopted Statement
of Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for
Income Taxes." The cumulative effect on prior years of this change in
accounting principle increased net earnings by $1,325 or $.16 per share and is
reported separately in the consolidated statement of earnings for 1994. Under
the asset and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the differences between the tax basis of assets
or liabilities and their reported financial statement amounts. Financial
statements for 1993 have not been restated to apply the provisions of SFAS No.
109 and are accounted for under SFAS No. 96.
RECLASSIFICATIONS. Certain reclassifications have been made in prior
years' financial statements to conform to the 1995 presentation.
16
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except as noted)
(2) DEBT AND CREDIT FACILITIES
SHORT-TERM DEBT. The Company has agreements with two banks whereby one
bank will advance up to $15,000 and the other bank up to $5,000 under unsecured
lines of credit. These lines bear interest at a variable rate based on LIBOR
and are renewable annually on December 31. There was $8,260 outstanding on the
$15,000 line of credit at September 30, 1995 and $4,940 outstanding at
September 30, 1994. Principal on any amounts advanced under the lines is
payable in full on demand.
LONG-TERM DEBT. Long-term debt consists of:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------
1995 1994
------- -------
<S> <C> <C>
8.25% senior secured notes payable in semi-annual installments of
$1,000, plus interest, beginning October 1995. $15,000 $15,000
Industrial revenue refunding bonds-interest rates range from 6.50%
to 7.75%; serial bonds totaling $1,400 payable in varying annual
amounts through 2000; term bonds payable in $840 installments in
2002 and 2005 3,080 3,360
Industrial development revenue refunding bonds - payable in semi-
annual installments of $170 from January 1995 through January
1999, plus interest at a variable rate (4.60% at September 30,
1995) 2,720 3,060
Industrial revenue bonds - payable in quarterly installments of
$115 through March 2000, plus interest at a variable rate (4.70%
at September 30, 1995) 2,003 2,463
Unsecured note payable in monthly installments of $18 through
February 2000, plus interest at a variable rate (6.88% at
September 30, 1995) 936 1,140
7.30% secured note payable in monthly installments of $50 through
March 1997, plus interest 900 1,450
7.25% secured note payable in monthly installments of $47 through
August 1997, including interest 886 1,363
Unsecured note payable in quarterly installments of $109 through
November 1996, imputed interest at 6.50% 522 -
Mortgage notes and other 600 786
Supplemental retirement accrual 638 582
------- -------
Total long-term debt 27,285 29,204
Less current maturities 5,196 2,407
------- -------
Long-term debt, excluding current maturities $22,089 $26,797
======= =======
</TABLE>
Certain debt agreements contain restrictions on working capital,
tangible net worth, debt relative to total capitalization, dividend payments
and capital expenditures. Under the most restrictive of these covenants, the
17
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except as noted)
Company must maintain tangible net worth of $52,000 plus 50% of cumulative net
earnings since October 1, 1992, a liabilities to tangible net worth ratio of
less than 2.0 to 1, a debt to total capitalization ratio of less than 50% and a
current ratio of 1.5 to 1. Some of the agreements restrict liens on assets and
certain mergers, consolidations or sales of assets. Dividend payments are
restricted to a total of $3,000 plus cumulative earnings since October 1, 1992,
and no dividends can be paid when a loss has been incurred in the four
preceding quarters. At September 30, 1995, $13,953 of retained earnings are
available for dividend payments. Property, plant and equipment with an
aggregate carrying value of $46,325 is pledged as collateral under the
Company's debt agreements.
Aggregate maturities of long-term debt during the next five years are
as follows: 1996, $5,196; 1997, $3,704; 1998, $3,296; 1999, $3,296; 2000,
$3,875.
The Company is negotiating with a commercial bank for a five-year
$35.0 million unsecured revolving credit facility and a $17.5 million unsecured
letter of credit facility. Under the proposed revolving credit agreement,
interest would be paid at a variable rate based upon LIBOR and the Company
would pay a commitment fee based upon the unused portion of the facility. The
interest spread over LIBOR and unused commitment fee would be adjusted
quarterly based upon the Company's ratio of funded debt to earnings before
interest, taxes, depreciation and amortization. The proposed revolving credit
facility would be utilized to refinance a portion of existing debt and fund
working capital requirements, capital expenditures and general corporate
purposes.
(3) STOCKHOLDERS' EQUITY
Shares of common stock outstanding are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Balance, beginning of year 8,333 8,267 5,809
Conversion of convertible debentures - - 1,658
10% stock dividend - - 751
Stock options exercised 60 66 49
----- ----- -----
Balance, end of year 8,393 8,333 8,267
===== ===== =====
Weighted average 8,363 8,311 7,863
===== ===== =====
</TABLE>
On February 2, 1993, the Board of Directors approved a 10% stock
dividend that was distributed on April 12, 1993 to shareholders of record as of
March 19, 1993.
Primary earnings per share are computed by dividing net earnings by
the weighted average number of common shares outstanding for each period. The
calculation excludes the effect of common equivalent shares resulting from
stock options using the treasury stock method as the effect does not exceed 3%
of the shares outstanding and would not be material for 1995, 1994 or 1993.
Fully diluted earnings per share in 1993 excludes interest expense
(net of tax effect) on the 7 3/4% convertible subordinated debentures issued in
1986. In November 1992, the Company called the debentures for
18
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except as noted)
redemption. The call was underwritten, with the result that 100% of the
debentures were converted by December 31, 1992, thereby increasing shares
outstanding by approximately 1,658 shares. Stockholders' equity was increased
by the amount of debentures converted, less underwriting and original debenture
issuance costs.
On August 15, 1995, the Board of Directors authorized the repurchase of up to
one million shares of the Company's common stock. The Board action did not
specify either a time period or the price at which shares may be repurchased.
(4) STOCK OPTION PLANS
Under the Company's stock option plans, shares of common stock have
been made available for grant to employees and directors. The exercise price of
each option is 100% of market value on the date of the grant. Options granted
under the 1985 employee and 1990 director stock option plans vest over five
years and expire five years from the date of the grant. By action of the Board
of Directors on September 24, 1994, no further options may be granted under
these plans. Options granted under the 1994 employee and director stock option
plans vest over five years and expire ten years from the date of the grant.
Stock options outstanding are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
1995 1994 1993
---------------------- ---------------------- ---------------------
PRICE PRICE PRICE
SHARES RANGE SHARES RANGE SHARES RANGE
------ ----------- ------ ------------ ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year 464 $5.21-12.25 337 $5.21l-12.25 294 $5.21-8.57
Additional options granted 95 7.50-7.88 195 8.50-10.44 96 9.60-12.25
Options exercised (100) 5.78-6.96 (67) 5.78-7.84 (53) 5.77-7.84
Options cancelled (50) 6.01-10.44 (1) 5.78-7.84 - -
----- ----------- ----- ------------ ----- -----------
Balance, end of year 409 $5.21-12.25 464 $5.21-12.25 337 $5.21-12.25
Shares reserved for future option grants 855 950 1,163
----- ----- -----
Total shares reserved 1,264 1,414 1,500
===== ===== =====
Total shares exercisable 204 231 202
===== ===== =====
</TABLE>
(5) INCOME TAXES
Effective October 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." The cumulative effect on prior years of this
change in accounting principle increased net earnings by $1,325 or $.16 per
share and is reported separately in the consolidated statement of earnings for
1994.
19
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except as noted)
The provision (benefit) for income taxes consists of:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
CURRENT:
Federal $ 1,219 $1,318 $1,471
State 100 222 269
------- ------- ------
1,319 1,540 1,740
DEFERRED:
Federal (1,385) 568 (334)
State (11) 69 (71)
------- ------- ------
(1,396) 637 (405)
------- ------- ------
Provision (benefit) for income taxes $ (77) $2,177 $1,335
======= ====== ======
</TABLE>
The provision (benefit) for income taxes differs from the amount of
the income tax determined by applying the applicable federal statutory income
tax rate of 34% to pretax earnings as a result of the following differences:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1995 1994 1993
------- ------ -------
<S> <C> <C> <C>
Provision for income taxes at statutory rate $ 2,128 $2,023 $ 2,593
Change in the beginning-of-the-year balance of the
valuation allowance for deferred tax assets
allocated to the provision for income taxes (2,368) - -
Utilization of federal tax loss carryforwards - - (1,584)
State income taxes, net of federal income tax benefit 66 155 178
Equity in losses of subsidiary not included in
consolidated return - 534 435
Adjustments to deferred income taxes previously
established - (520) (217)
Other, net 97 (15) (70)
------- ------ -------
Provision (benefit) for income taxes $ (77) $2,177 $ 1,335
======= ====== =======
</TABLE>
20
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except as noted)
The tax effect of temporary differences and tax credit carryforwards that give
rise to significant portions of deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------
1995 1994
------- -------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ 2,242 $ 2,924
Accrued expenses or asset reserves for financial statements not
yet deductible for tax purposes 1,814 1,573
Alternative minimum tax credit carryforwards 525 415
------- -------
Total gross deferred tax assets 4,581 4,912
Less valuation allowance - (2,924)
------- -------
Net deferred tax assets 4,581 1,988
------- -------
DEFERRED TAX LIABILITIES:
Plant and equipment principally due to differences in depreciation
and capitalized interest (8,112) (7,134)
Other reserves (621) (747)
Prepaid expenses for financial statements that were deducted for
tax purposes (346) (409)
------- -------
Total gross deferred liabilities (9,079) (8,290)
------- -------
Net deferred tax liability $(4,498) $(6,302)
======= =======
</TABLE>
During the second quarter of 1995, the Company purchased the remaining
30% of its joint venture subsidiary, ICS. Following the completion of the stock
purchase, ICS was merged into Insteel's wholly-owned subsidiary, IWP.
Management expects that through the future combined operations of IWP and ICS,
the Company will be able to utilize the net operating loss carryforwards
generated by ICS prior to the merger. Accordingly, during the second quarter,
the valuation allowance was reduced $2,368 with a corresponding reduction in
the deferred provision for income taxes. The balance of the valuation allowance
was reduced by the amount of the purchase price for the remaining 30% interest
in ICS. Following adoption of SFAS No. 109, the balance of the valuation
allowance at October 1, 1993 for net operating loss carryforwards that were not
included in the Company's consolidated return was $1,970. Therefore, the
valuation allowance increased $954 in 1994.
The Company's IWP subsidiary has approximately $6,595 of operating
loss carryforwards for tax return purposes expiring in 2004 to 2010.
(6) EMPLOYEE BENEFIT PLANS
RETIREMENT PLANS. Insteel has various defined benefit pension plans
covering substantially all of its employees. Pension benefits are based
principally on an employee's years of service and compensation level near
21
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except as noted)
retirement. The Company's funding policy is to deposit with an independent
trustee amounts at least equal to those required by law. The funded status of
these plans and amounts recognized in the Company's consolidated balance sheet
are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1995 1994
------- -------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 8,631 $ 8,939
Nonvested benefit obligation 521 767
------- -------
Accumulated benefit obligation 9,152 9,706
======= =======
Projected benefit obligation 11,588 12,311
Plan assets at fair market value 10,262 10,171
------- -------
Projected benefit obligations in excess of plan assets (1,326) (2,140)
Unrecognized net (asset) obligation (333) (401)
Unrecognized prior service cost (490) (492)
Unrecognized net gain 437 1,310
------- -------
Accrued pension expense included in accrued expenses $(1,712) $(1,723)
======= =======
</TABLE>
The weighted average discount rates and long-term rates for
compensation increases used for estimating the benefit obligations and the
expected return on plan assets are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Assumptions at year-end:
Discount rate 7.5% 7.0% 7.0%
Rate of increase in compensation levels 6.0% 6.0% 6.0%
Expected long-term rate of return on assets 8.0% 8.0% 8.0%
</TABLE>
Pension expense included the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1995 1994 1993
----- ----- -------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 639 $ 698 $ 520
Interest cost of projected benefit obligation 793 772 686
Expected investment return on plan assets (662) (757) (1,206)
Net amortization and deferral (60) (81) 417
----- ----- -------
Net pension expense $ 710 $ 632 $ 417
===== ===== =======
</TABLE>
22
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except as noted)
Plan assets are primarily invested in publicly traded stocks and
bonds, pooled equity funds, fixed income investment funds and insurance company
guaranteed investment accounts The plans hold 27 shares of Insteel common
stock with a market value of $193 at September 30, 1995.
Insteel has a management security program for key employees. Under
the plan, participants are entitled to cash benefits upon retirement at age 65,
payable annually for 15 years. The plan is funded by life insurance policies
on the participants purchased by the Company. Management security program
expense was $74 in 1995 compared with $49 in 1994 and $11 in 1993.
PROFIT-SHARING PLANS. Insteel has a profit-sharing plan covering
substantially all of its employees. Under the plan, a profit pool of 10% of
earnings before income tax is paid to the employees of the Company's
subsidiaries each year. The Company's corporate office employees receive a
percentage of their compensation as determined by a portion of each
subsidiary's overall profit-sharing percentage. Corporate officers participate
in the bonus plan only after return on equity reaches a minimum of 10%. Profit
sharing expense was $958 in 1995 compared with $792 in 1994 and $1,194 in 1993.
ESOP. Insteel has an Employee Stock Ownership Plan (ESOP) covering
substantially all of its employees. Under the plan the Company can make
voluntary cash contributions which are used to purchase shares of the Company's
common stock on the open market. These shares are then allocated to eligible
employees once a year. During 1995, the Company contributed $85 to the ESOP. No
contributions were made in 1994 or 1993.
VEBA. Insteel has a Voluntary Employee Beneficiary Association (VEBA).
Under the plan both employees and the Company may make contributions to pay for
medical benefits. During 1995, the Company contributed $685 compared with $710
in 1994 and $840 in 1993.
(7) COMMITMENTS
The Company leases a portion of its machinery and equipment under
principally noncancellable operating leases which expire at various dates
through 2006. Under most lease agreements, the Company pays insurance, taxes
and maintenance. Rental expense for operating leases for 1995 was $1,266
compared with $1,081 in 1994 and $812 in 1993. Future lease obligations for
the next five years and beyond are as follows: 1996, $867; 1997, $858; 1998,
$857; 1999, $348; 2000, $371; beyond, $1,645.
Commitments for construction or purchase of property, plant and
equipment approximate $3,765 at September 30, 1995.
Under the terms of a rod supply agreement, Insteel has committed to
purchase from GS Industries, Inc. a portion of the Company's raw material
requirements. The supply agreement remains in effect until cancellation by
either party. Should either party elect to cancel the agreement, cancellation
becomes effective one year after the receipt of written notification.
(8) MAJOR CUSTOMER
During 1993, sales of the Company's scrap brokerage operation were
entirely to one customer and amounted to $33,507. In August 1993, the Company
ceased its scrap brokerage operation.
23
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except as noted)
(9) JOINT VENTURE
In May 1992, the Company's ICS subsidiary entered into a joint venture
agreement for the purpose of manufacturing and distributing wire reinforced
building panels in Mexico. The Company accounts for the investment in its
Mexican affiliate, IPM, using the equity method of accounting.
Notes receivable from the joint venture were $300 at September 30,
1995 and September 30, 1994. Notes receivable from the joint venture partner
were $238 at September 30, 1995 and $244 at September 30, 1994. Trade accounts
receivable from the joint venture were $382 at September 30, 1995 and $500 at
September 30, 1994.
(10) RELATED PARTY TRANSACTIONS
Construction services amounting to $582 in 1995 and $3,806 in 1994
were provided by a company whose chairman is a Company director.
(11) OTHER FINANCIAL DATA
Balance sheet information:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------
1995 1994
-------- --------
<S> <C> <C>
Accounts receivable:
Accounts receivable $ 31,910 $ 33,655
Less allowance for doubtful accounts 394 256
-------- --------
Accounts receivable, net $ 31,516 $ 33,399
======== ========
Inventories:
Finished goods $ 13,042 $ 10,900
Work in progress 1,372 1,274
Raw materials 24,025 14,067
Supplies 2,127 2,509
-------- --------
Total inventories $ 40,566 $ 28,750
======== ========
Property, plant and equipment:
Land and land improvements $ 4,758 $ 4,681
Buildings 28,414 27,236
Machinery and equipment 74 051 71,872
Construction in progress 1,979 708
-------- --------
Total property, plant and equipment, at cost 109,202 104,497
Less accumulated depreciation (44,102) (37,957)
-------- --------
Total property, plant and equipment, net $ 65,100 $ 66,540
======== ========
</TABLE>
24
<PAGE> 25
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
1995 1994 1993
---- ----- -------
<S> <C> <C> <C>
Balance, beginning of year $256 $ 366 $ 1,207
Additions charged to earnings 148 308 206
Accounts written off (10) (418) (1,047)
---- ----- -------
Balance, end of year $394 $ 256 $ 366
==== ===== =======
</TABLE>
25
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Insteel Industries, Inc.
We have audited the accompanying consolidated balance sheet of Insteel
Industries, Inc. and subsidiaries as of September 30, 1995, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
the year then ended. In connection with our audit of the consolidated financial
statements, we also have audited the financial statement Schedule II -
Valuation and Qualifying Accounts. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of Insteel Industries, Inc.
and subsidiaries as of September 30, 1995, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
October 24, 1995
26
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Insteel Industries, Inc.
Mount Airy, North Carolina
We have audited the accompanying consolidated balance sheet of Insteel
Industries, Inc. and subsidiaries as of September 30, 1994, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the two years in the period ended September 30, 1994, and the
additional financial statement schedule listed at Item 14 (a)(2). These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Insteel Industries, Inc. and subsidiaries as of September 30, 1994, and the
results of their operations and their cash flows for each of the two years in
the period ended September 30, 1994 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in Note 5 to the financial statements, the Company
changed its method of accounting for income taxes effective October 1, 1993 to
conform with Statement of Financial Accounting Standards No. 109.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
October 28, 1994
27
<PAGE> 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required for this item has been reported by means of a
Current Report on Form 8-K, dated August 15, 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to directors and nominees appears under the
caption "Election of Directors" in the Company's Proxy Statement for the 1996
Annual Meeting of Stockholders and is incorporated by reference.
Information on executive officers appears under the caption "Executive
Officers of the Company" in Item 1 of this report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required for this item appears under the captions
"Executive Compensation" and "Performance Graph" in the Company's Proxy
Statement for the 1996 Annual Meeting of Stockholders and is incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required for this item appears under the captions
"Principal Shareholders" and "Security Ownership of Management" in the
Company's Proxy Statement for the 1996 Annual Meeting of Stockholders and is
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required for this item appears under the captions
"Executive Compensation - Compensation Committee Interlocks and Insider
Participation" and "Transactions With Management and Others" in the Company's
Proxy Statement for the 1996 Annual Meeting of Stockholders and is incorporated
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A)(1) FINANCIAL STATEMENTS
The financial statements as set forth under Item 8 are filed as part
of this report.
(A)(2) FINANCIAL STATEMENT SCHEDULES
Supplemental Schedule II - Valuation and Qualifying Accounts appears
on page 25 of this report.
All other schedules have been omitted because they are either not
required or not applicable.
(B) REPORTS ON FORM 8-K
During the quarter ended September 30, 1995, the Company filed one
Current Report on Form 8-K, dated August 15, 1995, reporting under Item 4
thereof a change in the Company's principal accountants.
28
<PAGE> 29
(C) EXHIBITS
See exhibit index on page 31.
(D) FINANCIAL STATEMENT SCHEDULES
See Item 14 (a)(2) above.
29
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
INSTEEL INDUSTRIES, INC.
Dated: December 18, 1995 By: H. O. WOLTZ III
---------------
H. O. WOLTZ III
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on December 18, 1995 below by the following persons
on behalf of the registrant and in the capacities indicated:
<TABLE>
<CAPTION>
Name and Signature Position(s)
-------------------- -------------------------------------------------
<S> <C>
HOWARD O. WOLTZ, JR. Chairman of the Board
--------------------
HOWARD O. WOLTZ, JR.
H. O. WOLTZ III President, Chief Executive Officer and a Director
---------------
H. O. WOLTZ III
JOSEPH D. NOELL, III Director
--------------------
JOSEPH D. NOELL, III
MICHAEL C. GAZMARIAN Chief Financial Officer and Treasurer (Principal
-------------------- Financial and Accounting Officer)
MICHAEL C. GAZMARIAN
THOMAS J. CUMBY Director
---------------
THOMAS J. CUMBY
LOUIS E. HANNEN Director
---------------
LOUIS E. HANNEN
FRANCES H. JOHNSON Director
------------------
FRANCES H. JOHNSON
CHARLES B. NEWSOME Director
------------------
CHARLES B. NEWSOME
W. ALLEN ROGERS, II Director
-------------------
W. ALLEN ROGERS, II
C. RICHARD VAUGHN Director
-----------------
C. RICHARD VAUGHN
JOHN E. WOLTZ Director
-------------
JOHN E. WOLTZ
</TABLE>
30
<PAGE> 31
EXHIBIT INDEX
TO
ANNUAL REPORT ON FORM 10-K OF INSTEEL INDUSTRIES, INC.,
FOR YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
3- ARTICLES OF INCORPORATION AND BYLAWS
------------------------------------
3.1 Restated articles of incorporation of the registrant, as amended (Incorporated by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K, dated May 3, 1988.)
3.2 Bylaws of the registrant (as last amended February 5, 1991) incorporated by reference to the
exhibit of the same number contained in the Company's Annual Report on Form 10-K for the year
ended September 30, 1991.
4- INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
-------------------------------------------------------------------------
4.2 Articles IV and VI of the registrant's restated articles of incorporation, which are
incorporated herein by reference to Exhibit 3.1.
4.3 Article 2, Section 8, of the registrant's bylaws, which is incorporated herein by reference to
Exhibit 3.2.
*4.13 Loan Agreement dated as of September 1, 1988, between Liberty County Industrial Development
Corporation ("Issuer") and Insteel Industries, Inc. ("Company") pursuant to which the Issuer
agreed to loan the proceeds from its $3,400,000 Industrial Development Revenue Refunding Bonds,
Series 1988 (Insteel Industries, Inc. Project) (the "Bonds") to the Company and the Company
agreed to repay such loan to the Issuer.
*4.14 Promissory Note dated October 26, 1988 and issued by the Company to the Issuer in the principal
amount of $3,400,000, which note evidences the loan from the Issuer to the Company under the
Loan Agreement (Exhibit 4.13).
*4.15 Purchase Contract dated October 26, 1988, among the Issuer, the Company, Texas Department of
Commerce and Federated Tax-Free Trust ("Purchaser") pursuant to which the Purchaser agreed to
purchase the Bonds issued by the Issuer.
*4.16 Letter of Credit and Reimbursement Agreement dated as of September 1, 1988, by and between the
Company and First Union National Bank of North Carolina ("Bank") pursuant to which the Bank
agreed to issue its Letter of Credit to secure payment of the Bonds and the Company agreed to
reimburse the Bank for any and all drawings made under the Letter of Credit.
+4.17 Loan Agreement dated as of May 1, 1989, between Brunswick and Glynn County Development
Authority ("Issuer") and Insteel Industries, Inc. ("Company"), pursuant to which the Issuer
agreed to loan the proceeds from its $4,500,000 Industrial Development Revenue Bonds, Series
1989 (Insteel Industries, Inc. Project) (the "Bonds") to the Company and the Company agreed to
repay such loan to the Issuer.
+4.18 Promissory Note dated June 27, 1989, and issued by the Company to the Issuer in the principal
amount of $4,500,000 which note evidences the loan from the Issuer to the Company under the
Loan Agreement (Exhibit 4.17).
+4.19 Purchase Contract dated June 27, 1989, among the Issuer, the Company, and Seaboard Corporation
("Purchaser") pursuant to which the Purchaser agrees to purchase the Bonds issued by the
Issuer.
+4.20 Letter of Credit and Reimbursement Agreement dated as of May 1, 1989, by and between the
Company and First Union National Bank of North Carolina ("Bank") pursuant to which the Bank
agreed to issue its Letter of Credit to secure payment of the Bonds and the Company agreed to
reimburse the Bank for any and all drawings made under the Letter of Credit.
#4.24 Indenture of Trust between Industrial Development Authority of the City of Fredericksburg,
Virginia and Crestar Bank as Trustee, dated as of September 1, 1990, relating to $4,205,000
Industrial Development Authority of the City of Fredericksburg, Virginia Industrial Development
First Mortgage Revenue Refunding Bonds (Insteel Industries, Inc./Rappahannock Wire Company
Project) Series of 1990.
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
#4.25 Refunding Agreement between Industrial Development Authority of the City of Fredericksburg,
Virginia ("Issuer") and Insteel Industries, Inc., and Rappahannock Wire Company (since renamed
Insteel Wire Products Company) (together, the "Companies"), dated as of September 1, 1990
pursuant to which the Issuer agreed to loan the proceeds from its $4,205,000 Industrial
Development First Mortgage Revenue Refunding Bonds (Insteel Industries, Inc./Rappahannock Wire
Company Project), Series of 1990 to the Companies and the Companies agreed to repay such loan
to the Issuer.
4.31 Promissory Note and Security Agreement between Insteel Industries, Inc. and First Union
National Bank of North Carolina, dated August 27, 1992, providing for $2.25 million to finance
expansion of the Andrews, South Carolina plant. (Incorporated by reference to the exhibit of
the same number contained in the Company's Annual Report on Form 10-K for the year ended
September 30, 1992).
**4.33 Promissory Note and Security Agreement between Insteel Industries, Inc. and First Union
National Bank of North Carolina, dated February 23, 1993, providing for $2.4 million to
refinance welding and auxilliary equipment.
**4.35 Note Agreement (including formal Note, appendices and exhibits) between Insteel Industries,
Inc. and Jefferson-Pilot Life Insurance Company, dated as of April 15, 1993, relating to
$15,000,000 principal amount of 8.25% Senior Secured Notes due October 15, 2002.
**4.36 Deed of Trust, Security Agreement, Assignment of Rents and Financing Statement, dated as of
April 15, 1993, relating to the 8.25% Senior Secured Notes issued pursuant to Exhibit 4.35.
**4.37 Guaranty Agreement, dated as of April 15, 1993, relating to the 8.25% Senior Secured Notes
issued pursuant to Exhibit 4.35.
4.41 Loan Agreement between Insteel Industries, Inc. and Wachovia Bank of North Carolina, N.A. dated 34
February 3, 1995, providing for a $1,080,000 loan to finance an office building.
4.42 Promissory Note dated February 3, 1995 and issued by the Company to the Issuer in the principal 39
amount of $1,080,000, which note evidences the loan from the Issuer to the Company under the
Loan Agreement (Exhibit 4.41).
4.43 Promissory Note between Insteel Industries, Inc. and Wachovia Bank of North Carolina, N.A. 41
dated February 3, 1995, providing for a $5,000,000 line of credit.
4.44 Promissory Note and Security Agreement between Insteel Industries, Inc. and First Union 43
National Bank of North Carolina, dated December 21, 1994, providing for a $15,000,000
revolving line of credit.
UNDERTAKING: The Company agrees to file upon request of the Commission any instrument with
-----------
respect to long-term debt not registered for which the total amount authorized does not exceed
10% of the total assets of the Company and its subsidiaries on a consolidated basis.
10- MATERIAL CONTRACTS
------------------
#10.4 1985 Insteel Industries, Inc. Employee Incentive Stock Option Plan (amended February 6, 1990).
+10.5 Employee Stock Ownership Plan of Insteel Industries, Inc., including Employee Stock Ownership
Plan Trust Agreement.
10.6 1990 Director Stock Option Plan of Insteel Industries, Inc. incorporated by reference to the
exhibit of the same number contained in the Company's Annual Report on Form 10-K for the year
ended September 30, 1991.
**10.7 Profit Sharing Plan of Insteel Wire Products Company.
**10.8 Profit Sharing Plan of Insteel Industries, Inc.
++10.9 1994 Employee Stock Option Plan of Insteel Industries, Inc.
++10.10 1994 Director Stock Option Plan of Insteel Industries, Inc.
10.11 Nonqualified Stock Option Plan 46
11- Computation of Earnings Per Share 50
21- List of Subsidiaries of Insteel Industries, Inc., at September 30, 1995. 51
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------- -----
<S> <C> <C>
23- Consents of Experts and Counsel: Independent Auditors' Consent.
23.1 Consent of KPMG Peat Marwick LLP 52
23.2 Consent of Deloitte & Touche LLP 53
27- Financial Data Schedule (for SEC use only) 54
* Incorporated by reference to the exhibit of the same number contained in the Company's Annual
Report on Form 10-K for the year ended September 30, 1988.
+ Incorporated by reference to the exhibit of the same number contained in the Company's Annual
Report on Form 10-K for the year ended September 30, 1989.
# Incorporated by reference to the exhibit of the same number contained in the Company's Annual
Report on Form 10-K for the year ended September 30, 1990.
** Incorporated by reference to the exhibit of the same number contained in the Company's Annual
Report on Form 10-K for the year ended September 30, 1993.
++ Incorporated by reference to the exhibit of the same number contained in the Company's Annual
Report on Form 10-K for the year ended September 30, 1994
</TABLE>
33
<PAGE> 1
Exhibit 4.41
TERM LOAN AGREEMENT
THIS AGREEMENT, made this 3rd day of February, 1995, by and between
INSTEEL INDUSTRIES, INC., a North Carolina corporation (hereinafter called the
Borrower); and WACHOVIA BANK OF NORTH CAROLINA, N.A. (hereinafter called the
Bank);
WITNESSETH:
1. In borrowing hereunder, the Borrower represents and warrants
to the Bank which representations and warranties will survive the delivery of
the Note and the making of the loan that:
(a) The Borrower and each Subsidiary (corporations of which the
Borrower owns, directly or indirectly, more than 50% of the voting stock) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it was incorporated, and has the corporate
power and legal authority to own its property and to carry on its business as
now being conducted and is duly qualified to do business in every jurisdiction
where such qualification is necessary. The Borrower has the corporate power to
execute and perform this Agreement, to borrow hereunder and to execute and
deliver the Note herein referred to and that to do so will not violate any law,
its charter or by-laws or any other agreement or instrument to which it is a
party.
(b) There is no litigation or proceeding pending against the
Borrower or any Subsidiary of the Borrower nor to the knowledge of the officers
of the Borrower threatened, which, if decided adversely to the Borrower or any
such Subsidiary would have a material effect upon its financial condition or
business.
(c) The audit report of the Borrower for the fiscal year ended
September 30, 1994, certified by Deloitte & Touche, LLP, independent certified
public accountants, and the interim financial statements for the three-month
period ended December 31, 1994 fairly reflect the financial condition of the
Borrower and each Subsidiary and the results of their operations as of the
dates and for the periods stated, and no material adverse changes in the
financial condition, the business or operations of the Borrower or any
Subsidiary have occurred. Such financial statements are consolidated and have
been prepared in accordance with generally accepted accounting principles.
(d) The real estate and other fixed assets of the Borrower and
consolidated Subsidiaries are subject to no mortgage or lien except as shown in
the audit report and interim statements referred to in paragraph 1 (c) above.
(e) The Borrower and consolidated Subsidiaries have no
liabilities, direct or contingent, except those disclosed in the audit report
and interim statements referred to in paragraph 1 (c) above, and except those
arising in the ordinary course of business since the date of such audit report
and interim statements, having in the aggregate no materially adverse effect on
the financial condition of the Borrower.
34
<PAGE> 2
(f) The Borrower and consolidated Subsidiaries have made no
investments in, advances to or guaranties of the obligations of any
corporation, individual or other entity except those disclosed in the audit
report and interim statements referred to in paragraph 1 (c) above.
(g) The proceeds of all borrowings hereunder will be used for the
refinance of existing obligations.
2. Relying upon the foregoing representations and warranties and
the agreements and covenants hereinafter contained, the Bank agrees to lend to
the Borrower, at the Borrower's option, at any time prior to February 28, 1995,
the sum of One Million Eighty Thousand Dollars ($1,080,000.00). The loan shall
be evidenced by a Note in the form of Exhibit "A" attached hereto and shall be
payable in installments and bear interest as set out in the Note. The terms and
conditions of this Agreement are incorporated in the Note by reference as
though the same were written therein.
3. The Bank may, upon at least sixty (60) calendar days written
notice, declare the principal and accrued interest to be due and payable in
full as of August 3, 1997.
4. The obligation of the Bank to lend hereunder is subject to the
following conditions precedent:
(a) The Bank shall have received, on or before the date of the
first borrowing hereunder, (i) a copy of the resolutions of the Board of
Directors of the Borrower, certified on such date authorizing the execution and
delivery of this Agreement, the borrowing hereunder and the execution and
delivery of the Note and the collateral described in paragraph 7, below, and
(ii) such additional documents as the Bank or counsel for the Bank may
reasonably request.
5. The Borrower covenants and agrees that from the date hereof
and until payment in full of the principal and interest on the Note, unless the
Bank shall otherwise consent in writing, the Borrower will and will cause the
Guarantor to:
(a) Furnish the Bank consolidated financial statements for each
fiscal year, audited by an independent certified public accountant satisfactory
to the Bank, and a balance sheet and related statements of income and surplus
of the Borrower for each quarter, certified by an officer of the Borrower. All
financial statements will be prepared in conformity with generally accepted
accounting principles and will be in a form satisfactory to the Bank. In
connection with the examination, the independent certified public accountant
will issue a letter stating any and all of the terms of this Agreement that are
being violated or that there are no violations. Such annual audits and
quarterly statements shall be delivered to the Bank within 90 days and 60 days,
respectively, after the close of the fiscal period. The Borrower will furnish
the Bank, within a reasonable period of time, such additional information and
financial statements as the Bank may from time to time request.
(b) Maintain at all times consolidated net working capital (i.e.,
current assets in excess of current liabilities) of not less than Six Million
Dollars ($6,000,000.00), and consolidated tangible net worth (i.e., the sum of
shareholders' equity plus all indebtedness subordinated to the
35
<PAGE> 3
indebtedness owed the Bank hereunder by subordination agreements in form and
substance satisfactory to the Bank, less all intangibles appearing on the
balance sheet ) of not less than Fifty-Two Million Dollars ($52,000,000.00) plus
50% of cumulative net earnings since October 1, 1992 (additions to net worth
arising from revaluation of assets not to be allowed), all as determined by
generally accepted accounting principles.
(c) Maintain consolidated current assets of not less than 1.5
times consolidated current liabilities, all as determined by generally accepted
accounting principles.
(d) Comply with all statutes and government regulations and pay
promptly when due all taxes, assessments, governmental charges, claims for
labor, supplies, rent and other obligations, which, if unpaid, might become a
lien against the property of any Borrower or any Subsidiary, except liabilities
being contested in good faith and against which, if requested by the Bank, the
Borrowers will set up reserves satisfactory to the Bank.
(e) Maintain insurance, in such amounts and against such risks,
including business interruption insurance, as is satisfactory to the Bank.
(f) Maintain its corporate existence and comply with all valid and
applicable statutes, rules and regulations, and maintain its properties in good
operating condition.
(g) Comply with the requirements of the Employee Retirement Income
Security Act of 1974 as amended from time to time (ERISA) with respect to each
employee benefit plan and promptly notify the Bank (i) of the occurrence of any
event which could cause the termination, in whole or in part, of any defined
benefit plan; (ii) of any violation of ERISA with respect to any employee
benefit plan; and (iii) of the occurrence of any reportable event as defined in
ERISA.
6. Until payment in full of the Note and interest thereon, the
Borrower covenants that it will not, nor will it permit a Subsidiary to,
without the prior written consent of the Bank:
(a) Permit total consolidated liabilities to exceed two times
consolidated tangible net worth plus indebtedness subordinated to the
indebtedness owed the Bank pursuant to this Agreement by subordination
agreements satisfactory to the Bank.
(b) Become a party to a merger, consolidation or other
reorganization with any other corporation or entity (including a de facto
merger by which all or substantially all of the property or assets of another
company are acquired), except (i) a merger with a domestic Subsidiary in which
the Borrower is the surviving or continuing corporation and (ii) a merger,
consolidation or other reorganization through which the Borrower acquires a
business which becomes a Subsidiary of the Borrower, provided that after giving
pro forma effect to such merger, consolidation or other reorganization, the
Borrower will be in full compliance with all of the provisions of this
Agreement.
(c) Declare or pay cash dividends in any fiscal year in an
aggregate amount in excess of Three Million Dollars ($3,000,000.00) plus
cumulative net earnings since October 1, 1992, except
36
<PAGE> 4
that a wholly-owned Subsidiary may pay dividends to the Borrower; provided that
after giving pro forma effect to the payment of any such dividends, the
Borrower will be in full compliance with all of the provisions of this
Agreement.
(d) Declare or pay cash dividends when there has been an operating
loss in the preceding four quarters.
(e) Except with the prior written consent of the Bank, incur or
permit to exist any encumbrances, security interest, pledge or lien against the
property and improvements located at 1345 Boggs Drive, Mount Airy, North
Carolina.
7. Payment of the Note and performance of this Agreement shall be
collateralized and supported by a guaranty in the form of Exhibit "B" attached,
executed by Insteel Wire Products Company.
8. The Borrower shall furnish at the reasonable request of the
Bank opinions of legal counsel and certificates of its officers, satisfactory
to the Bank regarding matters incident to this agreement. In addition, the
Borrower shall give the Bank prompt written notice of the occurrence of any
Event of Default under the terms of this Agreement and of a default or failure
of performance under any other agreement or contract to which it is a party or
by which it is bound.
9. The occurrence of any one or more of the following Events of
Default will constitute a default by the Borrower under this Agreement,
whereupon the Note and all indebtedness of the Borrower to the Bank will, at
the option of the Bank, immediately become due and payable without
presentation, demand, protest, or notice of any kind, all of which are hereby
expressly waived, and the Borrower will pay the reasonable attorney's fee
incurred by the Bank in connection with such default or recourse against any
collateral held by the Bank as security for the indebtedness owed by the
Borrower:
(a) Non-payment when due, whether by acceleration or otherwise, of
any principal payment on the Note;
(b) Non-payment within ten days after due date of interest on the
Note, or of any premium, fee or other charge under this Agreement;
(c) A breach or failure of performance by the Borrower (or
Subsidiary) of any provision of this Agreement which is not remedied within 30
days after written notice from the Bank;
(d) A representation or warranty by the Borrower is false or
erroneous;
(e) The Borrower (or a Subsidiary): (i) files a petition or has a
petition filed against it under the Bankruptcy Code or any proceeding for the
relief of insolvent debtors; (ii) generally fails to pay its debts as such
debts become due; (iii) has a custodian appointed for the Borrower or its
assets; (iv) benefits from or is subject to the entry of an order for relief by
any court of insolvency; (v) makes an admission of insolvency seeking the
relief provided in the Bankruptcy Code or any
37
<PAGE> 5
other insolvency law; (vi) makes an assignment for the benefit of creditors;
(vii) has a receiver appointed, voluntarily or otherwise, for its property;
(viii) suspends business; (ix) permits a judgment in the amount of $5,000 or
more to be obtained against it which is not promptly paid or promptly appealed
and secured pending appeal; (x) becomes insolvent, however otherwise evidenced;
or (xi) defaults in payment of any other indebtedness, or permits the time of
payment of any other indebtedness to be accelerated.
10. No failure or delay by the Bank to exercise any right, power
or privilege hereunder shall operate as a waiver of any such right, power or
privilege, nor shall any single or partial exercise of any right, power or
privilege preclude any other or future exercise thereof. The right and remedies
herein provided are cumulative and not exclusive of any rights or remedies
provided by law.
11. The provisions of this Agreement shall extend to and be
available to any subsequent holder of the Note, as well as to the Bank.
12. In the event that, at any time while this Agreement is in
effect, the Company shall issue any indebtedness for borrowed money which is
not by its terms subordinate and junior to other indebtedness of the Company
("Senior Debt") and such Senior Debt shall include, or be issued pursuant to a
trust indenture or other agreement which includes, financial covenants not
substantially provided for in this Agreement, the Company shall so advise the
Bank. Thereupon, if the Bank shall so request by written notice to the
Company, the Company and the Bank shall enter into an amendment to this
Agreement providing for substantially the same financial covenants as those
contained in such Senior Debt, trust indenture or other agreement.
13. The Agreement and the Note shall be deemed to be contracts
made under, and for all purposes shall be construed in accordance with, the
laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the year and day first above written.
INSTEEL INDUSTRIES, INC.
By: /s/ Michael C. Gazmarian
----------------------------------------
Title: Chief Financial Officer and Treasurer
-------------------------------------
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: /s/ R. Alan Proctor
----------------------------------------
R. Alan Proctor
Assistant Vice President
38
<PAGE> 1
Exhibit 4.42
<TABLE>
WACHOVIA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NOTE
Date February 3, 1995 $1,080,000.00
------------------- -----------------------------
FOR VALUE RECEIVED, the undersigned (hereinafter called the "Borrower") hereby promises to pay to the order of WACHOVIA BANK OF
NORTH CAROLINA, N.A. (hereinafter called the "Lender") at its office where borrowed, in immediately available funds, the sum of
One Million eighty thousand and no/100 ---------------------------------------------------------------- dollars
- ------------------------------------------------------------------------------------------------------------------------------------
together with any unpaid interest hereon from date of advance, in accordance with the terms contained in this Note. The optional
provisions applicable to this Note are checked below.
REPAYMENT:
[ ] One payment in full of principal and unpaid interest due
----------------------------------------------------------------------
[ ] On Demand
----------------------------
[X] 60 Payments of $18,000.00 beginning March 1, 1995 and thereafter
--- --------------- ----------------- --------------------------------------------------
on the first of each month.
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
until February 3, 2000.
---------------------------------------------------------------------------------------------- ----------- -----
when the entire principal amount then outstanding and all accrued but unpaid interest shall be paid in full.
[ ] On Demand the principal amount set forth above or the unpaid principal amount of all advances which the Lender actually makes
hereunder to the Borrower, whichever amount is less. Each advance and each payment made on account of the principal thereof,
shall be evidenced on an attachment hereto; provided, however, any such notation or the failure of the Lender or other holder to
make any such notation shall not limit or otherwise affect the obligation of the Borrower with respect to repayment of all
advances actually made hereunder. This Note and any attachment hereto shall be used to record the outstanding principal balance
advanced hereunder until it is surrendered to the Borrower by the Lender, and it shall continue to be used even though there may
be periods prior to such surrender when no amount of principal or interest is owing hereunder. If advances of the principal
amount hereof are to be made by Lender to the Borrower after the date of this Note, Lender, at its sole discretion, is hereby
authorized to make such advances under this Note upon telephonic or written communication of a borrowing request from any person
representing himself or herself to be the Borrower or, in the event the Borrower is a partnership or corporation, a duly
authorized officer or representative of Borrower.
INTEREST:
Payable: [X] in arrears: [ ] in advance.
[X] in addition to the payments described above; [ ] included in the payments described above.
Payable at the rate per annum of: [ ] Prime Rate plus %; [ ] % of Prime Rate; [ ] % Fixed:
------------- ------------ ----------------
[ ] Those rates which may be offered from time to time by the Lender and agreed to by the Borrower and so noted by the Lender on
an attachment hereto. In the event of a good faith dispute among the parties to this Note as to rate under this rate
option, the rate shall be the Prime Rate, adjusted for any changes in the Prime Rate as of the day such Prime Rate changes;
[ ] The rate(s) set forth in Schedule 1 attached to this Note and incorporated herein by reference;
[X] Those rates which have been offered by the Lender to the Borrower in the Loan Agreement or Commitment Letter checked below,
the provisions of which shall determine such rates, the procedure for the selection of such rates and the time periods for
which such rates shall apply.
In no case shall interest exceed the maximum rate permitted by applicable law.
To the extent not prohibited by law, a late charge not to exceed 4% of the payment amount shall be assessed on any payment remaining
unpaid on the fifteenth day after the payment due date or 30 days in the case interest is payable in advance.
If the interest is based upon the Prime Rate, such interest rate will be adjusted on: [ ] The day the Prime Rate changes;
[ ] Other .
-------------------
Due: [X] On principal payment dates; [ ] Other .
-------------------------------
Interest will be calculated on the basis of [X] A year of 360 days and paid for the actual number of days elapsed;
[ ] Other .
----------------------
After demand or maturity (whether by acceleration or otherwise), as applicable, interest on any unpaid balance hereof shall be
payable on demand at a rate per annum equal to 150% of the Prime Rate, or if greater, 2% above the rate applicable prior to demand
or maturity, adjusted for any changes in the Prime Rate as of the day such Prime Rate changes, not to exceed the maximum rate
permitted by applicable law.
As used herein, "Prime Rate" refers to that interest rate so denominated and set by the Lender from time to time as an interest rate
basis for borrowings. The Prime Rate is one of several interest rate bases used by the Lender. The Lender lends at interest rates
above and below the Prime Rate.
All payments on this Note shall be applied first to accrued interest, then to principal, and then to late charges.
[X] The terms and conditions in a Loan Agreement date February 3, 1995 between the parties hereto, as the same may be amended from
time to time, shall be considered a part hereof to the same extent as if written herein.
[X] The terms and conditions in a Commitment Letter dated February 3, 1995 from the Lender to the Borrower, as the same may be
amended, extended or replaced from time to time, shall be considered a part hereof to the same extent as if written herein.
No waiver by the Lender of any default shall be effective unless in writing nor operate as a waiver of any other default on a past
or future occasion. To the extent not prohibited by law, the Borrower hereby grants to the Lender and to such Lender's Affiliates
(as the case may be) a security interest in and security title to and does hereby assign, pledge, transfer and convey to Lender and
such Lender's Affiliates (as the case may be) (i) all property of the Borrower of every kind or description now or hereafter in the
possession or control of the Lender or of any of Lender's Affiliates, exclusive of any such property in the possession or control of
the Lender or any of Lender's Affiliates as a fiduciary other than as agent, for any reason including, without limitation, all cash,
stock or other dividends and all proceeds thereof, and all rights to subscribe for securities incident thereto and any substitutions
or replacements for, or other rights in connection with, any of such collateral and (ii) any balance or deposit accounts of the
Borrower, whether such accounts be general or special, or individual or multiple party, and upon all drafts, notes, or other cash
deposited for collection or presented for payment by the Borrower with the Lender or the Lender's Affiliates (as the case may be),
exclusive of any such property
Wachovia Bank of North Carolina, N.A.
</TABLE>
39
<PAGE> 2
<TABLE>
<S> <C> <C>
in the possession or control of the Lender or any of Lender's Affiliates as fiduciary other than as agent, and the Lender and the
Lender's Affiliates (as the case may be) may at any time, without demand or notice, appropriate and apply any of such to the payment
of any indebtedness, obligations and liabilities of the Borrower to the Lender or to any of Lender's Affiliates (as the case may
be), now existing or hereafter incurred or arising (hereinafter sometimes referred to collectively as the "Obligations"), whether or
not due, with the exception of indebtedness obligations and liabilities owing to Lender or Lender's Affiliates that constitute
open-end credit under, or are subject to, the disclosure requirements of the Truth-In-Lending Act and Federal Reserve Board
Regulation Z or any applicable state consumer protection laws. As used herein, "Lender's Affiliates" means any entity or entities
now or hereafter directly or indirectly controlled by Wachovia Corporation or any successor thereto. All parties to this Note,
including the makers, endorsers, sureties and guarantors, whether bound by this or by separate instrument or agreement, shall be
jointly and severally liable for the indebtedness evidenced by this Note and hereby (1) waive presentment for payment, demand,
protest, notice of nonpayment or dishonor and of protest and any and all other notices and demands whatsoever; (2) consent that at
any time, or from time to time, payment of any sum payable under this Note may be extended without notice, whether for a definite or
indefinite time; and (3) agree to remain liable until the indebtedness evidenced hereby is paid in full irrespective of any
extension, modification or renewal. No conduct of the holder shall be deemed a waiver or release of such liability, unless the
holder expressly releases such party in writing. Upon (i) any failure of any Obligor (which term shall include the Borrower and
each endorser, surety or guarantor of this Note) to pay any of the Obligations when due or to observe or perform any agreement,
covenant or promise hereunder or in any other agreement, note, instrument or certificate of any Obligor to the Lender, or to any of
Lender's Affiliates, now existing or hereafter executed in connection with any of the Obligations, including, but not limited to, a
loan agreement, if applicable, and any agreement guaranteeing payment of any of the Obligations; (ii) any default of any Obligor
in the payment or performance of any other liabilities, indebtedness or obligations to any other creditor or to allow or permit any
other liabilities, indebtedness, or obligations to any other creditor to be accelerated; (iii) any failure of any Obligor to
furnish Lender current financial information upon request; (iv) any failure of any person to observe or perform any agreement,
covenant or promise contained in any agreement, instrument or certificate executed in connection with the granting of a security
interest in property to secure the Obligations; (v) any warranty, representation or statement made or furnished to the Lender by or
on behalf of any Obligor in connection with the extension of credit evidenced by this Note proving to have been false in any
material respect when made or furnished; (vi) the death, dissolution, change in control, termination of existence, insolvency,
business failure or appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding under any bankruptcy or insolvency laws, state or federal, by or against, the Borrower or any other
Obligor; (vii) any discontinuance or termination or any guaranty of any of the Obligations by a guarantor; or (viii) the Lender
deeming itself insecure, thereupon, or at any time thereafter, the Lender at its option may terminate any obligation to extend any
additional credit or make any other financial accommodation to the Borrower and/or may declare all of the Obligations to be
immediately due and payable. If any Obligation (including but not limited to the Note) is a demand instrument, the statement of a
maturity date, the requirement for the payment of periodic interest or the recitation of defaults and the right of Lender to declare
any Obligation due and payable shall not constitute an election by Lender to waive its right to demand payment under a demand at any
time and in any event as Lender in its sole discretion may deem appropriate. In the event the indebtedness evidenced hereby is
collected by or through an attorney, the holder shall be entitled to recover reasonable attorney's fees (15% of the then outstanding
principal and interest of the indebtedness, to the extent not prohibited by law) and all other costs and expenses of collection.
Time is of the essence.
This Note, and the rights and obligations of the parties hereunder, shall be governed and construed in accordance with the laws of
the State of North Carolina.
IN WITNESS WHEREOF, the Borrower has executed this Note under seal and year set forth above.
Witness: --------------------------------------------------------------------(Seal)
(Individual Borrower)
- ------------------------------------------- --------------------------------------------------------------------(Seal)
(Individual Borrower)
Borrower:
- ------------------------------------------- Insteel Industries, Inc.
--------------------------------------------------------------------
Attest: (Name of Corporation or Partnership)
Gary D. Kniskern By /s/ Michael C. Gazmarian
- ------------------------------------------- -----------------------------------------------------------------(Seal)
Title Secretary Title Chief Financial Officer and Treasurer
-------------------------------------- --------------------------------------------------------------
[Corporate Seal
INSTEEL INDUSTRIES, INC.]
ACCOUNT NUMBER NOTE LENDING FRB SECUR NOTE REPAY NOTE TRANSACTION PRIME RATE CLASS BRAN
NUMBER OFFICER CODE CODE TYPE CODE QUAL DATE CODE-FACTOR
INTEREST PAID TO INT INTEREST DISCOUNT FEES COLLECTED COMMITMENT COMMIT C TAX BILLING
DATE BASE COLLECTED ACCOUNT NUMBER NUMBER BAL CODE CODE
</TABLE>
40
<PAGE> 1
<TABLE>
<S> <C> <C>
Exhibit 4.43
WACHOVIA
- ------------------------------------------------------------------------------------------------------------------------------------
MASTER NOTE
Date February 3, 1995 $5,000,000.00
---------------- -------------
Value Received, the undersigned (hereinafter called the "Borrower"), hereby promises to pay on demand but not later than the
maturity date or dates determined herein set forth to the order of WACHOVIA BANK OF NORTH CAROLINA, N.A. (hereinafter called the
"Lender"), at its office where borrowed, the principal of Five Million and no/100 ----------------------------------------- Dollars
-----------------------------------------------------------------
the aggregate unpaid principal sum of all advances which the Lender actually makes hereunder to the Borrower, whichever amount is
less, together with interest arrears payable on each Interest Due Date (as hereinafter defined) at a rate computed on the basis of a
360-day year for the actual number of days in each interest period, determined as herein set forth.
Lender, at its sole discretion, is hereby authorized to make advances under this Note upon telephonic or written communication of a
borrowing request from any person representing himself or herself to be the Borrower or, in the event Borrower is a partnership or
corporation, a duly authorized officer or representative of Borrower. At the time of each advance hereunder, the Borrower and the
Lender shall agree on the maturity date for the payment of the principal amount of such advance (in the absence of earlier demand),
the interest rate for such advance and the dates interest on such advance shall be payable (the "Interest Due Dates"). Lender or
other holder shall be and is hereby authorized by the Borrower to set forth on the reverse side of this Note, or on an attachment
hereto: (1) the amount to date of each advance made hereunder; (2) the maturity date of each such advance (absent earlier demand);
(3) the interest rate for each such advance; (4) the Interest Due Dates for each such advance; and (5) each payment of principal
received thereon and the date of such payment; provided, however, any such notation or the failure to make any such notation shall
not limit or otherwise affect the obligation of the Borrower with respect to the repayment of all advances actually made hereunder.
In the event of a good faith dispute among the parties to this Note as to rate, the rate shall be the Prime Rate.
Under this Note or any advance of this Note shall become due, whether on demand or otherwise, the unpaid principal of this Note
shall bear interest at a rate per annum equal to 150% of the Prime Rate, or if greater, 2% above the rate applicable prior to the
due date, not to exceed the maximum rate permitted by applicable law. As used herein, "Prime Rate" refers to that interest rate so
denominated and set by the Lender from time to time as an interest rate basis for borrowings. The Prime Rate is one of several
interest rate bases used by the Lender. The Lender lends at rates above and below the Prime Rate. Changes in the Prime Rate shall
be effective as of the day of each such change.
Advances made hereunder shall not be used to purchase or carry margin stock, such terms having the same meanings used in Regulation
U of the Federal Reserve Board.
Any payments of any advance hereunder shall be applied first to accrued interest and then to principal.
The Borrower may prepay any advance hereunder prior to the maturity date specified for such advance only with the consent or upon
the demand of the Lender.
Any waiver by the Lender of any provision of this Note shall be effective unless in writing. To the extent not prohibited by law
the Borrower hereby grants to the Lender and to such Lender's Affiliates (as the case may be) a security interest in and security
title to and does hereby assign, pledge, transfer and convey to Lender and such Lender's Affiliates (as the case may be) (i) all
property of the Borrower of every kind or description now or hereafter in the possession or control of the Lender of any of Lender's
Affiliates, exclusive of any such property in the possession or control of the Lender or Lender's Affiliates as a fiduciary other
than as agent, any reason including, without limitation, all cash, stock or other dividends and all proceeds thereof, and all rights
to subscribe for securities incident thereto and any substitutions or replacements for, or other rights in connection with, any of
such collateral and (ii) any balance or deposit accounts of the Borrower, whether such accounts be general or special, or individual
or multiple party, and upon all drafts, notes, or other items deposited for collection or presented for payment by Borrower with the
Lender or the Lender's Affiliates (as the case may be), exclusive of any such property in the possession or control of the Lender or
Lender's Affiliates as a fiduciary other than as agent, and the Lender and the Lender's Affiliates (as the case may be) may at any
time, without demand or notice, appropriate to apply any of such to the payment of any indebtedness, obligations and liabilities of
the Borrower to the Lender or to any of Lender's Affiliates (as the case may be), now existing or hereafter incurred or arising,
whether or not due, with the exception of indebtedness, obligations and liabilities owing to Lender or Lender's Affiliates that
constitute open-end credit under, or are subject to, the disclosure requirements of the Truth-In-Lending Act and Federal Reserve
Board Regulation or any applicable state consumer protection laws. As used herein, "Lender's Affiliates" means any entity or
entities now or hereafter directly or indirectly controlled by Wachovia Corporation or any successor thereto. All parties to this
Note, including makers, endorsers, sureties and guarantors, whether bound by this or by separate instrument or agreement, shall be
jointly and severally liable for the indebtedness evidenced by this Note and hereby (1) waive presentment for payment, demand,
protest, notice of nonpayment or dishonor and of protest and any and all other notices and demands whatsoever; (2) consent that at
any time, or from time to time, payment of any sum payable under this Note may be extended without notice, whether for a definite or
indefinite time; and (3) agree to remain liable until indebtedness evidenced hereby is paid in full irrespective of any extension,
modification or renewal. No conduct of the holder shall be deemed a waiver or release of such liability, unless the holder
expressly releases such party in writing. In the event the indebtedness evidenced hereby is collected by or through an attorney,
the holder shall be entitled to recover reasonable attorneys' fees and all other costs and expenses of collection. Time is of the
essence. Notwithstanding the statement of any specific maturity date for any specific advance and the requirement for the payment
of interest from time to time, this Note is a demand instrument and due and payable at any time without cause or reason and is not
subject to the terms of Sections 1-203 or 1-208 of the Uniform Commercial Code of North Carolina, as the same may be amended from
time to time.
This Note shall evidence all advances and payments of principal made hereunder until it is surrendered to the Borrower by the
Lender, and it shall continue to be ? even though there may be periods prior to such surrender when no amount of principal
interest is owing hereunder.
This Note, and the rights and obligations of the parties hereunder, shall be governed by and construed in accordance with the laws
of the State of North Carolina.
IN WITNESS WHEREOF, the Borrower has executed this Note under seal the day and year set forth above.
Witness: ------------------------------------------------------- (Seal)
(Individual Borrower)
- ----------------------------------------- ------------------------------------------------------- (Seal)
(Individual Borrower)
- ----------------------------------------- Borrower:
Insteel Industries, Inc.
Attest: --------------------------------------------------------
(Name of Corporation or Partnership)
Gary D. Kniskern By Michael C. Gazmarian
- ----------------------------------------- -----------------------------------------------------
[Corporate Seal]
Title Secretary Title Chief Financial Officer and Treasurer
----------------------------------- --------------------------------------------------
Wachovia Bank of North Carolina, N.A.
</TABLE>
41
<PAGE> 2
<TABLE>
<CAPTION>
SCHEDULE FOR MASTER NOTE
<S> <C> <C> <C> <C> <C>
Date of Maturity Interest Interest Principal
Advance Amount of Advance Date Rate Due Date Payment
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT NUMBER NOTE LENDING FRB SECUR NOTE REPAY NOTE TRANSACTION PRIME RATE CLASS BRAN
NUMBER OFFICER CODE CODE TYPE CODE QUAL DATE CODE-FACTOR
- --- --- --- -- ---- ---- --- ---- ---- ----- ---- ---- --- -- -- --- ---- ---- ----
INTEREST PAID TO INT. INTEREST/DISCOUNT FEES COLLECTED COMMITMENT COMMIT. C TAX BILLING
DATE BASE COLLECTED ACCOUNT NUMBER NUMBER BAL CODE CODE
- --- --- --- ---- --- ----- --- -- --- ---- --- --- --- --- ------ --- ---- ---- ---
Wachovia Bank of North Carolina, N.A.
</TABLE>
42
<PAGE> 1
<TABLE>
<S> <C>
Exhibit 4.44
Amended and Restated
PROMISSORY NOTE AND SECURITY AGREEMENT
(LOGO, FIRST UNION) $15,000,000 December 21, 1994
----------- -----------------
(Date of Execution and Delivery)
LENDER: FIRST UNION NATIONAL BANK OF NORTH CAROLINA (hereinafter termed "LENDER"), Mount Airy, North Carolina
-----------
BORROWER(S): Insteel Industries, Inc., a North Carolina corporation, with its principal place of business at 1373 Boggs Drive,
----------------------------------------------------------------------------------------------------------------------
Mount Airy, North Carolina
----------------------------------------------------------------------------------------------------------------------
FOR VALUE RECEIVED: to wit, money loaned undersigned BORROWER(S) (hereinafter collectively termed "BORROWER"), jointly and severally
(if more than one BORROWER), promise(s) to pay to the order of LENDER at its office in the above city, or wherever else LENDER may
specify, the sum of
Fifteen Million ($15,000,000 )DOLLARS*
- ------------------------------------------------------------------------------------------------------------- --------------
with interest until paid
* minus one hundred percent (100%) of the face amount of all import letters of credit issued by Lender for the account of Borrower
other than letter of credit number L046772 in the current face amount of $9,327,890 naming International Chartering, Inc. as
beneficiary.
CONTRACT [ ] at the rate of percent ( %);
----------------------- ------
RATE OF [x] at the rate of LENDER'S PRIME RATE minus one quarter of one percent (0.25%) as that rate may change from time to
time with changes to occur on the date the LENDER'S PRIME RATE changes or as set forth on the attached Schedule "B"
which is incorporated herein by reference
INTEREST
[ ] at the rate of
----------------------------------------------------------------------------------------------------
to be adjusted beginning
------------------------------------------------------------------------ -------------------
TERMS [x] payable in full on January 31, 1996;
OF [x] with interest payable daily commencing on December 21, 1994 and each day thereafter;
PAYMENT [ ] payable in consecutive payments of principal commencing on
-----------------------
, in equal payments of $
---------------------------------- ------------ -----------------------------------------
plus an irregular payment of $ due on
------------------- -----------------------------
with interest payable commencing on and each thereafter;
------------------- --------------------- --------------------
[ ] payable in consecutive payments of principal and interest commencing on
--------------------------
, in equal payments of $
------------------------------------ ----------------------- ----------------------------
plus an irregular payment of all remaining principal and interest due on
------------------------------------------;
[ ] see attached Schedule "B," terms of which are incorporated herein by reference;
(TERMS ABOVE NOT COMPLETED ARE DELETED)
together with a late charge of four percent (4%) of each payment past due for fifteen (15) or more days. If BORROWER fails to make
a payment when due, subsequent payments shall be first applied to the past due payment. If BORROWER resumes making payments but has
not paid all past due payments, then LENDER will impose a separate late payment charge for each payment that becomes due until the
default is cured.
Further, upon BORROWER'S Default (as hereinafter defined) and where LENDER deems it necessary or proper to employ an Attorney
to enforce collection of any unpaid balance hereunder; then BORROWER agrees to pay LENDER'S reasonable Attorney's fees and
collection costs. Liability for reasonable Attorney's fees and costs shall exist whether or not any suit or proceeding is
commenced; BORROWER agrees and stipulates that reasonable Attorney's fees shall be deemed to be fifteen percent (15%) of the sum of
all unpaid principal and interest due as permitted under the laws of the state of North Carolina.
In addition to all other rights contained herein, if the original principal amount of the loan is more than Three Hundred
Thousand and no/100 Dollars ($300,000.00) the contract rate of interest during any period while the loan is in Default shall be the
interest rate set out above plus three percent (3%) commencing with and continuing for as long as the loan or any portion thereof is
in Default. The contract rate of interest shall apply until the Note or any judgement thereon shall be paid in full.
INTEREST is computed on the basis of a 360 day year for the actual number of days in the interest period (Actual/360
Computation) unless indicated below.
- -----------------------------------------------------------------------------------------------------------------------------------
LENDER'S Actual/360 or 365/360 computation determines the annual effective interest yield by taking the stated (nominal)
interest rate for a year's period and then dividing said rate by 360 to determine the daily periodic rate to be applied for each day
in the interest period. Application of such computation produces an annualized effective interest rate exceeding that of the
nominal rate.
If the interest provision contained herein refers to "LENDER'S PRIME RATE", BORROWER acknowledges/that LENDER'S PRIME RATE is
not represented or intended to be the lowest or most favorable rate of interest offered by LENDER.
All payments received during normal banking hours after 2:00 P.M. shall be deemed received at the opening of the next banking
day. At LENDER'S option, any repayments of this Note, other than by U.S. currency, will not be credited to the outstanding loan
balance until LENDER receives collected funds.
BORROWER'S payment will increase if the scheduled payment amount is insufficient to pay accrued interest. If the scheduled payment
amount is insufficient to pay accrued interest, the scheduled payment amount shall be immediately increased as is necessary to pay
all accruals of unpaid interest from previous periods. Such adjustments to the scheduled payment amount shall remain in effect for
as long as the interest accruals shall exceed the original scheduled payment amount and shall be further adjusted upward or downward
to reflect changes in the variable interest rate. In no event shall the scheduled payment amount be reduced below the original
scheduled payment specified herein.
Each of the undersigned, whether BORROWER, sureties or endorsers, and all others who may become liable for all or any part of
the obligations evidenced and secured hereby, do hereby, jointly and severally; waive presentment, demand, protest, notice of
protest and/or of dishonor, notice of acceleration of maturity on Default or otherwise. Further, they agree that LENDER may, from
time to time, extend, modify, amend or renew this Note for any period (whether or not longer than the original period of the Note)
and grant any release, compromises or indulgences with respect to the Note or any extensions, modifications, amendments or renewals
thereof or any security therefor, or to any party liable thereunder or hereunder, all without notice to or consent of any of the
undersigned and without affecting the liability of the undersigned hereunder.
If this Note is subject to the terms of a Commitment letter and/or Loan Agreement, LENDER may advance and readvance under this
Note pursuant to its terms and/or the terms of such other contractual obligations between the parties, and at the request of
BORROWER, LENDER in its sole discretion may make other advances and readvances under this Note pursuant thereto.
If more than one person has signed this instrument, such parties are jointly and severally obligated hereunder. Further, use
of the masculine pronoun herein shall include the feminine and neuter and also the plural. If any provision of this instrument
shall be prohibited of invalid under applicable law, such provision shall be ineffective but only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.
Time is of the essence hereof. Any notices to Borrower shall be sufficiently given, if mailed or delivered to the Principal
Place of Business.
TO SECURE PAYMENT of this Note, all obligations of undersigned BORROWER hereunder, and all other obligations of BORROWER to
LENDER, its successors and assigns, howsoever created, arising or evidenced; whether direct or indirect, absolute or contingent, or
now or hereafter existing, or due to become due (the loan and debt evidenced by this Note and secured by this Security Agreement and
all other present and future obligations of BORROWER owed to LENDER are hereinafter collectively termed the "OBLIGATIONS"); the
undersigned BORROWER hereby mortgages, conveys, and grants to LENDER, as permitted by law, a security interest in, and herewith
pledges and deposits as collateral the following described and identified personal and/or real property, and any and all additions,
accessions and substitutions thereto or therefor, (including all cash, stock or other dividends and all proceeds thereof, and all
rights to subscribe for securities incident thereto) are hereinafter termed the "COLLATERAL"; and a Security interest in PROCEEDS
AND PRODUCTS of the COLLATERAL is granted to LENDER:
[ ] If checked here, COLLATERAL is listed and described on attached SCHEDULE "A" (incorporated herein by reference).
[ ] This Note is secured by a deed of Trust, Mortgage or Deed to Secure Debt (hereinafter Security Instrument) to dated
------------
43
--------------------
BORROWER hereby warrants, covenants and agrees that:
(1) Borrower's principal place of business is that shown above. If Borrower has no principal place of business in said State, the
Borrower's residence in said State is shown above.
(2) BORROWER's other places of business in said State or State of LENDER's office not previously stated are as follows:
(3) Personal property COLLATERAL is used or being purchased for [ ] Farming Operations [X] Business Use and [ ] if checked here,
COLLATERAL IS BEING ACQUIRED WITH THE PROCEEDS OF AN ADVANCE EVIDENCED BY THIS Agreement, which LENDER may disburse directly to the
seller of said personal property.
(4) The personal property COLLATERAL will be kept at the Principal Place of Business; otherwise [ ] if checked here at:
(5) If any personal property COLLATERAL will be used in more than one State whether or not actually so used, and BORROWER has a
place(s) of business in more than one State, the Principal Place of Business is that shown above unless otherwise as follows:
(No. and Street)
(City) (County) (State) (Zip Code)
(6) [ ] If checked here personal property COLLATERAL is to be affixed to real property, a description of the real estate is as
follows:
full name(s) of the record owner(s) is (are):;
(7) Said COLLATERAL is free and clear of all liens, security interests, claims and/or encumbrances other than any to LENDER except
the following:
(8)[X] If checked, this Note is subject to the terms and conditions of a commitment letter and/or loan agreement between BORROWER
and LENDER dated December 28, 1993 and December 22, 1992 respectively which is incorporated herein by reference.
THIS PROMISSORY NOTE AND SECURITY AGREEMENT IS SUBJECT TO THE ADDITIONAL PROVISIONS, TERMS, UNDERTAKINGS AND RIGHTS SET FORTH
ON THE REVERSE SIDE HEREOF, THE SAME BEING INCORPORATED HEREIN BY REFERENCE.
BORROWER agrees that LENDER shall after the occurrence of any event of default, be entitled to immediate possession of the
COLLATERAL. BORROWER agrees that LENDER's interest in the COLLATERAL arose out of a Commercial Transaction.
To secure payment of the Note, BORROWER grants a security interest in any collateral (other than household goods or a principal
dwelling, but this exception does not apply to the collateral described in this Note) which secures any other loans of BORROWER with
LENDER, now or hereafter. LENDER expressly waives as collateral for this loan any security interest in collateral BORROWER uses as
a principal dwelling and household goods for any other existing or future transactions between BORROWER and LENDER, except that this
waiver does not apply to the collateral described in this Note.
IN WITNESS WHEREOF, the Borrower, on the day and year first written above, has caused this Note to be executed under seal by,
(i) if by individuals, by hereunto setting their funds and seals or (ii) if a corporation, that adopts the facsimile seal printed
hereon for such special occasion and purpose (or if an impression seal appears hereon by affixing such impression seal) by its duly
authorized officer(s).
CORPORATE BORROWER ATTEST INSTEEL INDUSTRIES, INC.
---------------------------------------------------------------------------
Name of Corporation
By: Gary D. Kniskern By: Michael C. Gazmarian
------------------------------------ ------------------------------------------------------------------------
Title: Treasurer
---------------- (Secretary)
INDIVIDUAL BORROWER(S), PROPRIETORSHIPS, PARTNERSHIPS ------------------------------------------------------------------------
- ----------------------------------------------------- -------------------------------------------------------------------(Seal)
- ----------------------------------------------------- -------------------------------------------------------------------(Seal)
This Note amends and restates in its entirety that
certain Promissory Note, dated December 31, 1993, [SEAL]
as amended by First Modification thereto, dated
September 26, 1994, issued by Borrower to Lender. Taxpayer Identification Number(s) 56-0674867
Ref. 301117 (3/89)
</TABLE>
43(a)
<PAGE> 2
<TABLE>
<S> <C>
ADDITIONAL PROVISIONS
BORROWER hereby further warrants, covenants, and agrees as follows (continued from front side hereof):
Anything contained herein to the contrary notwithstanding, if for any reason the effective rate of interest on this Note should
exceed the maximum lawful rate, the effective rate shall be deemed reduced to and shall be such maximum lawful rate, and any sums
of interest which have been collected in excess of such maximum lawful rate shall be applied as a credit against the unpaid balance
due hereunder.
No waivers, amendments or modifications shall be valid unless in writing. No waiver by LENDER of any default(s) shall operate as
a waiver of any other default or the same default on a future occasion. All rights of LENDER hereunder shall inure to the benefit
of its successors and assigns, and all OBLIGATIONS of BORROWER shall bind his heirs, executors, administrators, successors and/or
assigns.
This Note shall be governed by and construed under the laws of the State of North Carolina. BORROWER irrevocably agrees to submit
to personal jurisdiction in the State of North Carolina. Service of process on BORROWER arising out of or relating to this Note
shall be effective if mailed to BORROWER at the address first
above given or, if applicable at the address provided to LENDER pursuant to the terms hereof.
WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER FURTHER KNOWINGLY AND VOLUNTARILY WAIVES THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS NOTE OR THE LOAN AGREEMENT AND AGREES THAT ALL SUCH ACTIONS OR
PROCEEDINGS AT THE OPTION OF LENDER SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE STATE OF NORTH CAROLINA.
In the case of conflict between the terms of this Note and any Commitment Letter and/or Loan Agreement issued in connection
herewith, the priority of controlling terms shall be first this Note, then the Loan Agreement, then the Commitment Letter.
BORROWER WILL IMMEDIATELY NOTIFY LENDER in writing of any (1) change in: BORROWER's Principal Place of Business and/or Residence;
(2) change in the BORROWER's name or identity; (3) change in BORROWER's Corporate Structure.
BORROWER warrants that BORROWER does not have either a record or reputation for violating Laws of the United States or of any
State relating to liquor (as referred to in 18 U.S.C.A. 3617, et. seq.) or narcotics (as referred to in 21 U.S.C.A. 801, et. seq.)
and/or any commercial crimes.
BORROWER warrants to LENDER that all balance sheets, financial statements, profit and loss statements and all other information
now or hereafter furnished to LENDER are and will be true and correct and fairly reflect the financial condition of BORROWER as of
the dates thereof, and that the most recently provided financial information fairly reflects the current financial condition of
BORROWER.
Each BORROWER waives all claims, direct or indirect, absolute or contingent, against any other BORROWER, guarantor, endorser or
surety arising from or relating to this Note or such BORROWER's performance hereunder. Without limiting the foregoing, each
BORROWER waives all rights of reimbursement, exoneration, indemnification and/or contribution from any other BORROWER, guarantor,
endorser or surety under or relating to this NOTE and waives all rights of subrogation to the claims of Bank which may otherwise
arise from such payment.
Upon the occurrence of any of the "EVENTS OF DEFAULT," as hereinafter defined, LENDER is herewith expressly authorized to exercise
its right of Set-Off or Bank Lien as to any monies deposited in demand, checking, time, savings or other accounts of any nature
maintained in and with if by any of the undersigned, without advance notice. Said right of Set-Off shall also be exercised and
applicable where LENDER is indebted to any signer hereof by reason of any Certificate of Deposit, Note or otherwise.
Upon the occurrence of any "Event of Default," all of the OBLIGATIONS evidenced herein and secured hereby shall at the option of
LENDER immediately be due and payable, without notice.
The parties agree that LENDER may exercise its power of sale for real property and personal property together or separately.
EVENTS OF DEFAULT
BORROWER shall be in default under this Note, upon the happening of any of the following events, circumstances or conditions;
namely:
(1) Default in the payment or performance of any of the OBLIGATIONS provided hereunder or in connection herewith or any other
OBLIGATIONS of BORROWER or any affiliate (as defined in 11 U.S.C. 101(2), except that the term "debtor" therein shall be substituted
by the term "BORROWER" herein, hereinafter "affiliate") or any general partner of BORROWER or any endorser, guarantor or surety
for BORROWER to LENDER or any affiliate of LENDER, howsoever created, primary or secondary, whether direct or indirect absolute or
contingent, now or hereafter existing, due or to become due, or of any other covenant, warranty or undertaking expressed herein,
therein, or in any other document establishing said endorsement, guaranty, or surety; or
(2) Any warranty, representation or statement made or furnished to LENDER by or on behalf of BORROWER, or any guarantor, in
connection with this Note or to induce LENDER to make a loan to BORROWER which was false in any material respect when made or
furnished or has become materially false, if such warranty of BORROWER was ongoing in nature; or
(3) Death, dissolution, termination of existence, insolvency, business failure, appointment of a receiver, custodian, or trustee
for any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against BORROWER or any endorser, guarantor, or surety for or any general partner or majority
shareholder of BORROWER; or
(4) The acquisition of substantially all of BORROWER's endorser's, guarantor's or surety's business or assets, or a material
portion of such business or assets if such a sale is outside BORROWER's, or guarantor's, endorser's or surety's ordinary course of
business, or more than 50% of its outstanding stock or voting power in a single transaction or a series of transactions, or any
acquisition of substantially all of the business or assets or more than 50% of the outstanding stock or voting power of any other
entity, or should any BORROWER, endorser, guarantor, or surety enter into any transaction or merger or consolidation without prior
written consent of LENDER;
or
(5) Failure of a corporate BORROWER or endorser, guarantor, or surety for said BORROWER to maintain its corporate existence in
good standing; or
(6) Upon the entry of any monetary judgment or the assessment and/or filing of any tax lien against BORROWER or any endorser,
surety, or guarantor; or upon the issuance of any writ of garnishment, judicial seizure of, or attachment against any property of,
debts due or rights of BORROWER or any endorser, surety or guarantor, to specifically include commencement of any action or
proceeding to seize monies of BORROWER or any endorser, surety or guarantor on deposit in any bank account with LENDER or
(7) Any BORROWER, endorser, guarantor, or surety shall be a debtor, either voluntarily or involuntarily, under (and as the term
debtor is defined in) the Bankruptcy Code or should any BORROWER, endorser, guarantor, or surety be generally not paying their
respective debts as such debts become due; or
(8) Failure of said BORROWER, endorser, guarantors or sureties to furnish financial statements or other financial information
reasonably requested by LENDER; or
(9) The assertion or making of any seizure, vesting, or intervention by or under authority of any government by which the
management of BORROWER, or any endorser, guarantor or surety is displaced of its authority in the conduct of its business(es) or
its business(es) is curtailed.
(10) Loss, theft, substantial damage, destruction, sale or encumbrance to or of any COLLATERAL, or the assertion or making of any
levy, seizure, mechanics' or materialmen's lien or attachment thereof or thereon; or
(11) If LENDER should otherwise deem itself or the debt created hereunder unsafe or insecure; or should LENDER, in good faith,
believe that the prospect of payment or other performance is impaired.
ADDITIONAL PROVISIONS FOR PERSONAL PROPERTY COLLATERAL
BORROWER hereby further warrants, covenants, and agrees, as follows:
THE COLLATERAL SHALL, AT ALL TIMES, BE AT BORROWER's risk. The loss, injury to or destruction of COLLATERAL shall release
BORROWER from payment or other performance hereof. BORROWER agrees to obtain and keep in force Physical Damage and/or Property
Damage Insurance on said COLLATERAL and any other insurance required by LENDER. Such insurance is to be in form and amounts
satisfactory to LENDER, with the same payable to LENDER.
All such policies shall provide for ten days written minimum cancellation notice to LENDER. BORROWER shall furnish to LENDER the
original policies or certificates or other evidence satisfactory to LENDER of compliance with the foregoing provisions. LENDER is
authorized, but not obligated, to purchase any or all of said insurance or "single interest insurance," protecting only its security
interests, all at BORROWER's expense. In such event, BORROWER agrees to reimburse LENDER for the cost of such insurance to the
extent that the same is not included in the principal amount of this Note.
BORROWER hereby assigns to LENDER the proceeds of all such insurance to the extent of the unpaid balance hereunder, and directs
any insurer to make payments directly to LENDER, BORROWER further hereby grants to LENDER his Power of Attorney, which shall be
irrevocable for so long as any amount is unpaid hereunder. Said Power of Attorney gives LENDER the sole right to file Proof of Loss
and/or any other forms required to collect from any insurer any amount due from any loss, damage or destruction of the COLLATERAL;
to agree to and bind BORROWER as to the amount of said recovery; to designate Payee(s) of such recovery; to grant releases to
payor-insurers for their liability; to grant subrogation rights to any such payor-insurer, to indorse any settlement check or
draft. BORROWER further agrees not to exercise any of the foregoing Powers granted to LENDER, without the latter's written consent.
In the event of any default hereunder, LENDER is authorized in its sole discretion to cancel any insurance and credit any premium
refund against the unpaid balance due on BORROWER OBLIGATIONS.
If, with respect to any security pledged hereunder, a stock dividend is declared or any stock split-up made or right to
subscribe is issued, all the certificates for the shares representing such stock dividend or stock split-up right to subscribe will
be immediately delivered, duly indorsed, to the LENDER as additional COLLATERAL security.
If, at any time, the COLLATERAL shall be deemed unsatisfactory to and by LENDER or in the event LENDER shall otherwise deem
itself, its security, its COLLATERAL or said debt unsafe or insecure, then and on demand of LENDER, BORROWER shall immediately
furnish such further COLLATERAL or make such payment on said account as will be satisfactory to LENDER to be held by said LENDER as
it originally pledged hereunder.
At its option, LENDER may discharge taxes, liens security interest or other encumbrances at any time levied or placed on said
COLLATERAL, may pay for insurance and for the maintenance and preservation of same. BORROWER agrees to reimburse LENDER, on
demand, for any such payment made, or any such expense incurred by LENDER pursuant to the foregoing authorization, any amounts so
advanced, paid or expanded shall be deemed principal advances under this Note (even though when added to other advances the sum
thereof may exceed the face amount of the Note), shall bear interest from time advanced, paid or expanded at the rate prescribed in
this Note and be secured by the personal property Collateral and its payment endorced as if it were part of the original debt.
Any sum expended, paid or advanced under this paragraph shall be at LENDER's sole option and not constitute a waiver of any default
or right arising from the breach by BORROWER of any covenant or agreement contained in this Note. Until default, as hereinafter
defined, BORROWER shall have the right to retain possession of the COLLATERAL, unless otherwise agreed by the parties hereto, and to
use it in any lawful manner not inconsistent with this Note.
LENDER may, with or without notice, before or after maturity of this Note, transfer or register in the name of its nominee(s) all
or any part of the COLLATERAL and also exercise any or all rights of collection, conversion, or exchange and other similar rights,
priviliges and options pertaining to the COLLATERAL; but shall have no duty to exercise any such rights, privileges or options or to
sell or otherwise realize upon any of the COLLATERAL as herein authorized or to preserve the same and shall not be responsible for
any failure to do so or delay in so doing. As to any COLLATERAL consisting of instruments or chattel paper, it is agreed that
LENDER shall not be required to take any steps whatever to preserve any rights against prior Parties.
LENDER shall have no custodial or ministerial duties to perform with regard to COLLATERAL pledged except for its safekeeping; and
by way of explanation and not by way of limitation thereof. LENDER shall incur no liability for any of the following: either loss
or depreciation of the COLLATERAL unless caused by its willful misconduct; its failure to present any paper for payment or protest
or to protest or to give notice of non-payment or any other notice with respect to any paper or COLLATERAL; or failure to present
or surrender for redemption, conversion or exchange any bond, stock, paper, or other Security whether in connection with any
merger, consolidation, recapitalization, reorganization or arising out of the intendment or refunding of the original Security; or
its failure to notify any party hereto that the COLLATERAL should be so presented or surrendered.
Upon any transfer of this Note, the LENDER may deliver the property held as security or any part thereof, to the transferee, as
well as any subsequent holder hereof, who shall there upon become vested with all the powers and rights herein given to the LENDER
in respect to the property so transferred and delivered; and the LENDER shall thereafter be forever relieved and fully discharged
from any liability or responsibilty with respect to such property so transferred but with respect to any property not so
transferred, the LENDER shall retain all rights and powers hereby given.
With prior written assent of the LENDER, other COLLATERAL may be substituted for the original COLLATERAL herein, in which event
all rights, duties, obligations, remedies and security interests provided for, created or granted shall apply fully to such
substitute COLLATERAL.
If the COLLATERAL is attached to real estate prior to the perfection of the security interest granted herein and hereby.
BORROWER will, on demand of LENDER, furnish the latter with a disclaimer(s) duly executed by all persons having any interest in the
real estate, or any interest in or claim against the COLLATERAL which is prior to LENDER's interests.
Borrower will not use any COLLATERAL in any jurisdiction other than a State in which BORROWER shall have previously advised
LENDER to be properly protected and perfected. Absent advance written consent of LENDER, the COLLATERAL therein described will not
be used outside the territorial limits of the U.S.A.
BORROWER (or one or more of undersigned) has, or forthwith will acquire, full title to COLLATERAL, and will at all times keep
same free of all liens, security interests, attachments, and/or claims whatsoever, other than the security interests hereunder.
BORROWER has good indefeasible marketable title hereto and will warrant and defend same against all claims. BORROWER is not to and
will not attempt to transfer, sell or encumber the COLLATERAL or use it for hire or in violation of any statute or ordinance.
BORROWER further agrees to pay promptly all taxes and assessments upon the COLLATERAL and/or for its use or operation, and/or on the
Agreement to keep use and maintain said COLLATERAL in a reasonably careful manner so as not to unreasonably or unnecessarily expose
the same to waste, damage, wear or depreciation, and to keep the same in good order and repair. LENDER may examine and inspect
COLLATERAL or any part thereof, wherever located at any reasonable time(s). All equipment, accessories and parts shall become part
of said COLLATERAL by accession.
Borrower will at all times keep LENDER's security interest properly protected and hereby designates LENDER as its attorney in
fact to do any acts or deeds or execute such documents reasonably appropriate to accomplish said perfection. Said designation shall
be irrevocable as long as any obligation of Borrower is outstanding.
REMEDIES ON DEFAULT (Including Powers of Sale) FOR PERSONAL PROPERTY COLLATERAL)
Lender shall have all rights and remedies of a SECURED PARTY under the Uniform Commercial Code, as adopted by the State of
LENDER's office as set forth herein.
Without limitation thereto, LENDER shall have the following specific rights and remedies:
(1) To take immediate possession of the COLLATERAL without notice or resort to legal process; and for such prupose, to enter upon
any premises on which the COLLATERAL or any part thereof may be situated and remove the same therefrom; or, at its option, to render
the COLLATERAL unusable. Furhter, also at its option, to dispose of said COLLATERAL on BORROWER's premises.
(2) To require BORROWER to assemble the COLLATERAL and make it available to LENDER, which is reasonably convenient to both
parties.
(3) To exercise its rights of Set-Off by applying any monies of BORROWER on deposit with LENDER toward payment of the OBLIGATIONS
evidenced or referred to herein or secured hereby, without notice. If any process is issued or ordered to be served on LENDER,
seeking to seize BORROWER rights and/or interest in any bank account maintained with LENDER; the balance in any said account shall
immediately be deemed to have been and shall be set-off against any and all OBLIGATIONS of BORROWER to LENDER, as of the time of
issuance of any such writ or process; whether or not BORROWER and/or LENDER shall then have been served therewith.
(4) To dispose of COLLATERAL as allowed by the Uniform Commercial Code, as adopted by the State of LENDER's office as set forth
herein to any County or place selected by LENDER
(5) To make or have made any repairs deemed necessary or desirable at time or repossession , possession or sale, the cost of
which is to be charged against BORROWER.
(6) To apply the proceeds realized from disposition of the COLLATERAL to satisfy the following items in the order here listed:
(a) The cost of reimbursing any person whose interest in the premises is physically damaged by the entry and removal of the
COLLATERAL, upon BORROWER's failure to do so; next to
(b) The expenses of taking, removing, holding for sale, repairing or otherwise preparing for sale and selling of said
COLLATERAL, specifically including the LENDER reasonable Attorney's fees and both legal and collection expenses. BORROWER
herewith stipulates and agrees that 15% of the sum of the unpaid principal and all interest due thereon as permitted under
state law shall be deemed reasonable Attorney's fees of said LENDER, next to
(c) The expense of liquidating any liens, security interest, attachments or encumbrances superior to the security interest
herein created; and, finally to
(d) The unpaid principal and all accumulated interest hereunder and to any other debt owed to LENDER by any signer hereof.
Any surplus, after the satisfaction of the foregoing items (a) through (d) shall be paid to BORROWER or to any other PARTY
lawfully entitled thereto and know to this LENDER. Further, if proceeds realized from disposition of the COLLATERAL shall fail to
satisfy any of the foregoing items (a) through (d), BORROWER shall forthwith pay deficiency balance to LENDER.
All items and expressions contained herein which are defined in Article 1, 3, or 9, of the Uniform Commercial Code of the State of
North Carolina shall have the same meaning herein as in said Articles of said Code.
ADDITIONAL PROVISIONS AS TO REAL PROPERTY COLLATERAL
BORROWER hereby further warrants, covenants and agrees, as follows:
This note is secured by a Security Instrument and such instrument is incorporated herein by reference.
BORROWER will discharge all of BORROWER's duties and obligations as stated in any Security Instrument to LENDER for any debt of
BORROWER to Lender and any other Instrument, including a Commitment Letter and/or Loan Agreement, if any, evidencing and securing
the obligations in this Note.
REMEDIES ON DEFAULT FOR REAL PROPERTY COLLATERAL
All remedies upon default for real property Collateral encumbered to Lender by the Security Instrument will be determined
according to the terms of such Security Instrument.
(SEE OTHER SIDE FOR SIGNATURES AND SEALS)
</TABLE>
44(a)
<PAGE> 3
SCHEDULE B TO PROMISSORY NOTE AND SECURITY AGREEMENT
DATED DECEMBER 21st, 1994.
IN THE AMOUNT OF $15,000,000
BETWEEN FIRST UNION NATIONAL BANK OF NORTH CAROLINA AND INSTEEL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
Borrower may elect from time to time to select the rate of interest
under this Note which shall be either the LIBOR Rate (as hereinafter defined)
or Lender's Prime Rate (as defined in this Note). As used herein, "LIBOR Rate"
shall mean the rate per annum (adjusted for the costs of maintaining reserves,
insurance, and any other costs as may become applicable) at which deposits in
the United States dollars would be offered to Lender at approximately 10:00
a.m., London time for an amount equal to the principal balance outstanding
under this Note for any thirty (30) day period for which the LIBOR Rate is
chosen for settlement in immediately available funds by major banks in London
Interbank Market plus three quarters percent (0.75%) per annum.
Executed this 21st day of December, 1994.
ATTEST: INSTEEL INDUSTRIES, INC.
/s/ Gary D. Kniskern By: /s/ Michael C. Gazmarian
- --------------------------- --------------------------
Secretary Title: Treasurer
--------------- -------------------
[CORPORATE SEAL]
45
<PAGE> 1
Exhibit 10.11
INSTEEL INDUSTRIES, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made the 7th day of February, 1995, between
Insteel Industries, Inc., a North Carolina corporation, with its principal
office in Mount Airy, North Carolina (hereinafter called the "Company"), and
Louis E. Hannen (hereinafter called the "Optionee");
As authorized by the Company's Board of Directors, the Company
and the Optionee hereby agree as follows:
1. Grant of Option.
(a) The Company grants to the Optionee as a matter of
separate inducement and agreement in connection with his agreeing to
serve as a member of the Company's Board of Directors, which service
will help enhance the efficiency, soundness, profitability, growth and
shareholder value of the Company, and not in lieu of any salary or
other compensation for his services, the right and option to purchase
all or any part of an aggregate of NINETEEN THOUSAND NINE HUNDRED
SIXTY-FIVE (19,965) shares of the Common Stock of the Company, no par
value, at the purchase price of 7 7/8 Dollars ($7.875) per share.
(b) Except as otherwise expressly provided herein
regarding exercise of the option in the event of Optionee's death
while serving as a director (Paragraphs 2(d) and 3) and discretionary
acceleration of exercise rights in the event of termination of
Optionee's status as a nonemployee director (Paragraph 2(d)), all
rights of the Optionee with respect to the unexercised portion of the
option shall terminate upon termination of the Optionee's status as a
director of the Company.
2. Period of Option and Certain Limitations on Right to
Exercise.
(a) The period during which the option may be exercised
(the "option period") shall be ten years from the date hereof. The
option shall become exercisable in installments as follows: 20 percent
of the number of shares covered hereby at any time prior to the first
anniversary of the date hereof, and an additional 20 percent of such
number of shares annually following the first, second, third and
fourth anniversaries of the date hereof, with each such installment to
be cumulative. Any portion of the option not exercised before the
expiration of the option period shall terminate.
(b) The option may be exercised by giving written notice
of at least ten days to the Company at such place as the Board shall
direct. Such notice shall specify the number of shares to be purchased
pursuant to the option and the aggregate purchase price to be paid
therefor, and shall be accompanied by the payment of such purchase
46
<PAGE> 2
price. Such payment shall be in the form of cash or shares owned by
the Optionee at the time of exercise, or in any combination of cash
and shares.
(c) Shares tendered in payment of the exercise of the
option shall be valued at their fair market value on the date of
exercise, which shall be determined in good faith by the Board and
shall be (i) the price per share of the last sale of such shares on
the New York Stock Exchange as reported in The Wall Street Journal for
the last trading day nearest preceding the date on which the option is
exercised; or (ii) if the Common Stock is not listed and traded on the
New York Stock Exchange or another recognized securities exchange but
is traded in the over the counter market, then the fair market value
shall be the closing sales price of such Common Stock as reported in
the NASDAQ National Market System on the last trading day nearest
preceding the date of exercise; or (iii) if the shares of the Company
cease to be traded on the open market, then in accordance with the
applicable provisions of Section 20.2031-2 of the Federal Estate Tax
Regulations, or in any other manner consistent with the Internal
Revenue Code of 1986, as amended, and accompanying regulations.
(d) The option shall not be exercised unless the Optionee
is, at the time of exercise, a nonemployee member of the Board of
Directors and has been a nonemployee member of the Board of Directors
continuously since the date hereof; provided, however, that the option
shall be exercisable following the death of the Optionee in accordance
with Paragraph 3. If the status of the Optionee as a nonemployee
director is terminated, the option may be exercised only to the extent
exercisable on the date of such termination, except that the Board may
in its discretion accelerate the date for exercising all or any part
of the option that was not otherwise exercisable on the date of such
termination.
(e) The Optionee or his legal representative, legatees or
distributees shall not be deemed to be the holder of any shares
subject to the option unless and until certificates for such shares
are issued to him or them under the plan.
3. Nontransferability of Option. During the Optionee's
lifetime, the option shall be exercisable only by him and shall not be
transferable (including by pledge or hypothecation); provided, however that the
option may be transferred upon the death of the Optionee in accordance with the
Optionee's will or the laws of descent and distribution.
4. Dilution or Other Adjustments. If there is any change
in the outstanding shares of Common Stock of the Company as a result of a
merger, consolidation, reorganization, stock dividend, stock split to holders
of shares that is distributable in shares, or other change in the capital stock
structure of the Company, the Board shall make such adjustments to the option
as the Board in its sole discretion deems equitable to prevent dilution or
enlargement of the option or otherwise advisable to reflect such change.
5. Surrender of Options. The Board may, in its sole
discretion and subject to such terms and conditions as it deems appropriate,
accept the surrender by the Optionee of all or a part of the option and
authorize payment in consideration therefor of an amount equal
47
<PAGE> 3
to the difference between the option price and the fair market value of the
shares remaining subject to the option (determined pursuant to Paragraph 2(c)
hereof) on the date of such surrender. Such payment shall be made in shares
valued at such fair market value on the date of such surrender, or in cash, or
partly in such shares and partly in cash as the Board shall determine; provided,
that the Board determines that such settlement is consistent with the purpose
set forth in Paragraph 1 hereof. The surrender of the option under this
Paragraph 5 shall be permitted only to the extent that the option is
exercisable under Paragraph 2(a) on the date of surrender. The right to
surrender the option under this Paragraph 5 shall not be transferable
(including by pledge or hypothecation) and such right of surrender shall be
exercisable during the Optionee's lifetime only by him. In no event shall the
Optionee surrender this option under this Paragraph 5 if the fair market value
of the shares at the time of such surrender is less than the option price.
6. Investment Purpose.
(a) This option is granted on the condition that all
purchases of stock hereunder shall be for investment purposes and not
with a view to resale or distribution.
(b) Unless the option granted pursuant to this Agreement
and shares of stock underlying such option shall have been registered
with the Securities and Exchange Commission under a then effective
registration statement on an appropriate form, each certificate for
shares issued under exercise of the option granted hereunder shall
bear a legend in substantially the following form:
"The shares represented by this certificate
have not been registered with the Securities and
Exchange Commission and may not be transferred in the
absence of an effective registration statement with
respect thereto or an opinion of counsel satisfactory
to the Company that such registration is not
required."
7. Termination. This Agreement and the option granted
under it shall terminate upon the first of the following events to occur:
exercise in full of the option granted hereunder; termination of Optionee's
status as a director of the Company; or the close of business on February 6,
2005.
8. Binding Agreement. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
executors, administrators, next-of-kin, successor and assigns.
9. Governing Law. This Agreement shall be interpreted,
construed and enforced in accordance with the laws of the State of North
Carolina.
IN WITNESS WHEREOF, this Agreement has been executed in behalf
of the Company by its officers thereunto duly authorized, and the Optionee, in
acceptance of the
48
<PAGE> 4
above-mentioned option, subject to the terms of this Agreement, has set forth
his hand and seal all on the day and year first above written.
INSTEEL INDUSTRIES, INC.
By: /s/ H. O. Woltz III
-------------------------------
President
ATTEST:
/s/ Gary D. Kniskern
- --------------------------
Secretary
[Corporate Seal]
OPTIONEE
/s/ Louis E. Hannen
-----------------------------------
Name: Louis E. Hannen
49
<PAGE> 1
EXHIBIT 11
INSTEEL INDUSTRIES, INC.
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Earnings Before Cumulative Effect of Change
in Accounting Principle $6,336 $3,772 $6,292
Cumulative Effect of Change in Accounting Principle - 1,325 -
------ ------ ------
Net Earnings $6,336 $5,097 $6,292
====== ====== ======
Earnings Per Common Share:
Weighted Average Shares Outstanding 8,363 8,311 7,863
====== ====== ======
Earnings Before Cumulative Effect of Change
in Accounting Principle $ .76 $ .45 $ .80
Cumulative Effect of Change in Accounting Principle - .16 -
------ ------ ------
Net Earnings Per Share $ .76 $ .61 $ .80
====== ====== ======
</TABLE>
INSTEEL INDUSTRIES, INC.
COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Earnings from Operations $6,336 $3,772 $6,292
Interest on Convertible Debentures (Net of Tax) - - 137
------ ------ ------
Earnings Before Cumulative Effect of Change
in Accounting Principle $6,336 $3,772 $6,429
Cumulative Effect of Change in Accounting Principle - 1,325 -
------ ------ ------
Net Earnings $6,336 $5,097 $6,429
====== ====== ======
Earnings Per Common Share:
Weighted Average Shares Outstanding 8,363 8,311 7,863
Shares Issuable Upon Conversion of Debentures - - 387
------ ------ ------
Total Weighted Average Common Shares 8,363 8,311 8,250
====== ====== ======
Earnings Before Cumulative Effect of Change in
Accounting Principle $ .76 $ .45 $ .78
Cumulative Effect of Change in Accounting Principle - .16 -
------ ------ ------
Net Earnings Per Share $ .76 $ .61 $ .78
====== ====== ======
</TABLE>
All share and per-share data reflect the 10% stock dividend that was
distributed on April 12, 1993.
Primary earnings per share is computed by dividing net earnings by the weighted
average number of common shares outstanding for each period. The calculation
excludes the effect of common equivalent shares resulting from stock options
using the treasury stock method as the effect would not be material.
Fully diluted earnings per share are computed based on the weighted average
number of common shares and common equivalent shares outstanding for each
period.
50
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF INSTEEL INDUSTRIES, INC.
The following is a list of subsidiaries of the Company as of September 30,
1995, each of which is wholly owned by the Company:
<TABLE>
<CAPTION>
STATE OR OTHER JURISDICTION OF
NAME INCORPORATION
-------------------------------------------------------- ----------------------------------
<S> <C>
Insteel Wire Products Company North Carolina
Intercontinental Metals Corporation North Carolina
</TABLE>
51
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors and Stockholders
Insteel Industries, Inc.
We consent to incorporation by reference in the registration statements on
Forms S-8 (Nos. 33-01032, 33-40410, 33-35316, 33-61887, and 33-61889) of
Insteel Industries, Inc. of our report dated October 24, 1995, relating to the
consolidated balance sheet of Insteel Industries, Inc. and subsidiaries as of
September 30, 1995, and the related consolidated statements of earnings,
stockholders' equity and cash flows and related schedule for the year then
ended which report appears in the September 30, 1995 annual report on Form 10-K
of Insteel Industries, Inc.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
December 21, 1995
52
<PAGE> 1
EXHIBIT 23.2
CONSENT OF DELOITTE & TOUCHE LLP
The Board of Directors and Stockholders
Insteel Industries, Inc.
We consent to incorporation by reference in the registration statements on
Form S-8 (Nos. 33-01032, 33-40410, 33-35316, 33-61887, and 33-61889) of
Insteel Industries, Inc. of our report dated October 28, 1994, relating to the
consolidated balance sheet of Insteel Industries, Inc. and subsidiaries as of
September 30, 1994, and the related consolidated statements of earnings,
stockholders' equity and cash flows and related schedule for each of the two
years in the period then ended which report appears in the annual report on
Form 10-K of Insteel Industries, Inc. for the year ended September 30, 1995.
DELOITTE & TOUCHE LLP
Charlotte North Carolina
December 21, 1995
53
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K OF
INSTEEL INDUSTRIES, INC. FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 263
<SECURITIES> 0
<RECEIVABLES> 31,910
<ALLOWANCES> 394
<INVENTORY> 40,566
<CURRENT-ASSETS> 73,854
<PP&E> 109,202
<DEPRECIATION> 44,102
<TOTAL-ASSETS> 146,135
<CURRENT-LIABILITIES> 47,824
<BONDS> 0
0
0
<COMMON> 16,787
<OTHER-SE> 54,425
<TOTAL-LIABILITY-AND-EQUITY> 146,135
<SALES> 260,344
<TOTAL-REVENUES> 260,344
<CGS> 238,437
<TOTAL-COSTS> 238,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,344
<INCOME-PRETAX> 6,259
<INCOME-TAX> (77)
<INCOME-CONTINUING> 6,336
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,336
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
</TABLE>
