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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/x/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee required) for the fiscal year ended
December 31, 1995 or
/ / 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 No. 0-13805
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-0983610
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
171 Monroe Ave. N.W., Suite 600, Grand Rapids, MI, 49503
(Address of principal executive offices, zip code)
(616)336-9400 (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: (none)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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 to the best of registrant's
knowledge, will not be contained in any amendment to this Form 10-K. / /
As of March 15, 1996, the aggregate market value of the registrant's Common
Stock, $1 par value, held by persons other than (a) directors and executive
officers of the registrant and (b) the Ameriwood Industries Affiliated
Employee Stock Ownership and Savings Plan, none of which persons is hereby
acknowledged to be an "affiliate" of the registrant, was $17,510,639 based on
the last sale price on that date as reported on The Nasdaq Stock Market.
As of March 15, 1996, 4,188,406 shares of the registrant's Common Stock, $1
par value, were outstanding.
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PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Ameriwood Industries International Corporation ("Ameriwood" or the "Company")
is a Michigan corporation. It is the successor to a company originally
incorporated in Michigan in 1915 under the name "Rose Patch and Label Company,"
which reflected Ameriwood's original business--the production of fabric patches
and labels. That name was changed to "Rospatch Corporation" in 1968, at which
time the manufacture of labels was still the principal line of business.
In December 1991, by a majority vote of Ameriwood's shareholders, the name
was changed to "Ameriwood Industries International Corporation," which more
closely identifies the Company with its current core business, wood products.
Ameriwood's corporate offices are located at 171 Monroe Avenue, N.W., Suite
600, Grand Rapids, MI, 49503, and its telephone number is (616) 336-9400.
Further discussion of the general development of the Company's business is
set forth in response to Part I, Item 1--Narrative Description of Business
below.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
All of Ameriwood's operations, for purposes of the consolidated financial
statements included as part of this report, have been in the Wood Products
industry segment. (See the consolidated balance sheets of Ameriwood
Industries International Corporation as of December 31, 1995 and 1994, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995,
and the notes thereto, and the report of independent accountants thereon
("the accompanying financial statements"), which are included in Part II,
Item 8--Financial Statements and Supplementary Data.)
NARRATIVE DESCRIPTION OF BUSINESS
Principal Products
Ameriwood manufactures unassembled furniture, stereo speaker cabinets, fully
assembled speaker units, and is an original equipment manufacturer of various
laminated products used by other manufacturers for incorporation into their
own products. All Company-made products are manufactured at two subsidiary
facilities, both of which are located in the United States. The Company sells
its products through its own sales personnel and through independent sales
representatives who are assigned specific territories.
Ameriwood considers its principal products to be those that, as a group,
contribute ten percent or more to consolidated revenues. The Company
categorizes its furniture products as those of "Ameriwood Furniture" and
its stereo speaker cabinets and other products as those of "Ameriwood OEM."
Ameriwood Furniture currently sells its unassembled furniture to office
superstores, mass merchant discount stores, home improvement centers, national
chains, catalog showrooms, home furnishings retailers, and warehouse clubs.
Furniture products include, among other items, home office furniture,
computer furniture, wall units/organizers, storage units, wardrobes,
bookcases, utility carts, television and VCR stands, entertainment centers,
home theater units, bedroom furniture, and upholstered chairs and sofas.
Ameriwood OEM stereo speaker cabinets and components are primarily sold to
consumer electronics manufacturers, including certain major audio component
companies. In addition, Ameriwood OEM sells Company-fabricated wood grain and
opaque laminated particle board to a variety of manufacturers for use in
furniture, kitchen and bathroom cabinets, office partitions, and other furniture
and building products.
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Raw Materials
Ameriwood purchases raw materials from various domestic and foreign suppliers
Particle board is the principal raw material used; other raw materials
include furniture hardware, vinyl, lamination paper, packaging, glass and
various electronic components. Most of the raw materials, components, and other
supplies needed in the Company's manufacturing processes are available from
numerous sources; to date, no significant difficulty has been experienced in
obtaining these items.
Particle board used in Ameriwood's operations is obtained from mills located
on the West coast, the Midwest and the Southeast regions of the United States,
and is laminated by the Company at its plants in Dowagiac, Michigan, and
Tiffin, Ohio. A large percentage of the laminated board is used in Ameriwood's
furniture products and stereo speaker cabinets. Most of the remainder is
either cut to customer specifications in the Company's facilities or shipped
in large sheets and cut and milled in the customer's own plants. Although
Ameriwood's results of operations were negatively affected by significant
increases in particle board prices in 1993 and 1994, prices began to stabilize
in 1995. To date, no significant difficulty has been experienced in
obtaining particle board; however, Ameriwood's future growth could be
restricted if available supplies of particle board become inadequate to
meet the Company's requirements.
Patents and Trademarks
No significant portion of Ameriwood's business is dependent upon a single
patent or series of patents. Certain individual Company trademarks,
particularly Affordable Furniture, are believed to be significant to the
Company's operations.
Seasonality
The Company believes there is some seasonal variation in the demand for its
products, with increases in third and fourth quarter consolidated sales
(see table below).
Percent of Consolidated Sales By Quarter
----------------------------------------
Year 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total
---- -------- -------- -------- -------- -----
1995 25.6% 23.4% 26.0% 25.0% 100%
1994 25.1% 22.5% 25.8% 26.6% 100%
1993 23.0% 22.0% 27.3% 27.7% 100%
Certain Working Capital Items
The Company (in particular Ameriwood Furniture) must maintain a significant
amount of inventory to satisfy its major customers. As a result of
competitive pressures, the Company (mainly Ameriwood Furniture) has been
required to provide to its customers certain rights to return merchandise
and has offered certain customers extended payment terms. Ameriwood
believes these practices are common in this industry.
Significant Customers
In 1995 and 1994 no single customer accounted for 10% or more of
consolidated net sales. In 1993, sales to Venture Stores were
approximately 10% of consolidated net sales. Ameriwood has no relationship
with Venture Stores or any other significant customer, other than a
supplier-customer relationship.
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Backlog
The approximate Company backlogs at February 29, 1996 and February 28, 1995
were $13,329,100 and $18,147,400, respectively. Although Ameriwood
believes the backlog is firm, certain orders may be subject to cancellation
prior to shipment. Therefore, the backlog may not represent actual future
sales. The February 29, 1996 backlog is expected to be filled during the
current fiscal year.
Competition
Ameriwood Furniture competes with a large number of unassembled, as well as
assembled furniture manufacturers. Based on industry publications and
other sources, Ameriwood believes it is the fourth largest U.S. manufacturer
of unassembled furniture. The principal methods of competition are price,
design, quality and service.
The unassembled furniture market has become very competitive, with the
addition of certain new industry entrants. One of these new competitors
entered the industry in 1994 with a very aggressive pricing policy in the
promotionally- priced segment of the market, which currently represents the
Company's largest market segment. At the same time, Ameriwood and its
other competitors have made substantial capital investments which, the
Company believes, has resulted in a surplus of manufacturing capacity in
the industry. This surplus of capacity, combined with the pressure from
new industry entrants, has resulted in a shift to more aggressive product
pricing as competitors either try to "buy" or preserve market share and
maximize manufacturing capacity utilization. Ameriwood anticipates this
aggressive pricing will continue, as new competitors attempt to grow and
existing competitors attempt to protect their market share, which could
affect the Company's future profitability.
Ameriwood OEM speaker products compete with similar products manufactured
by approximately ten other companies, including companies which are owned
by various speaker marketers. Principal customers include national brand
name electronics manufacturers and marketers. Principal methods of
competition are quality, design, service and price. The Company's other
OEM products compete with numerous other manufacturers. Management
believes Ameriwood has sufficient resources, material and manpower to
compete effectively in its present OEM business.
Research and Development
Company research and product development costs are expensed as incurred and
were $546,700 in 1995, $636,000 in 1994 and $490,100 in 1993. Customer-
sponsored research and development activities are not significant to
Ameriwood's operations.
Environmental Matters
As indicated elsewhere in this report (see Item 7--Environmental Matters
and Note 6--Contingencies in the accompanying financial statements), the
Company has accrued certain environmental investigation and remediation
costs in its financial statements. Compliance with present laws concerning
protection of the environment is not currently expected by management to
have any material effect upon the Company's capital expenditures, earnings
or competitive position
Human Resources
At December 31, 1995, Ameriwood employed approximately 732 associates on a
full- time basis. With limited exceptions, the Company does not regularly
employ part-time persons, but does utilize a temporary work force as
necessary to meet peak demand.
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FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
All of Ameriwood's operations are located in the United States. The
Company's wood products are sold throughout the United States, Canada and
Mexico, but principally in the United States. Export sales were
$3,385,000 in 1995, $4,110,700 in 1994 and $2,441,800 in 1993.
ITEM 2. PROPERTIES.
Listed below are the principal properties owned or leased by Ameriwood as
of February 29, 1996.
Location Principal Use Owned or Leased
---------------- ------------------------------------ ---------------
Dowagiac, MI Manufacturing, warehouse, and office Owned
Grand Rapids, MI Corporate office Leased
High Point, NC Furniture showroom Leased
Tiffin, OH Manufacturing, warehouse, and office Owned
Stow, OH Office and warehouse Leased
In the aggregate, Ameriwood and its subsidiaries own approximately
1,025,000 square feet of space and currently lease approximately 17,000
square feet. Management considers all of the Company's material properties
and equipment to be well-maintained, in good operating condition, and
suitable and adequate for their purposes.
Management estimates the Company's present manufacturing capacity (in
annual sales dollars), based on current product mix and pricing levels, to
be $140,000,000 without incurring further significant capital expenditures.
The Dowagiac, Michigan facility secures the Company's indebtedness pursuant
to $5,000,000 of Michigan Strategic Fund Industrial Development Revenue
Bonds and its reimbursement obligations to the issuer of a letter of credit
collateralizing these bonds, as described in Note 3--Borrowing Arrangements
in the accompanying financial statements.
ITEM 3. LEGAL PROCEEDINGS.
ARTHUR ANDERSEN LITIGATION
On December 4, 1992, Ameriwood filed a lawsuit in the Michigan Circuit
Court for the County of Wayne against its former auditing firm, Arthur
Andersen & Co. ("Andersen"), claiming that its exposure to liability in the
Atlantis Group, Inc. ("Atlantis") and class action litigation against
Ameriwood, settled early in 1992, as well as related derivative litigation
dismissed in early 1991, was the result of malpractice committed by
Andersen while performing audit and accounting work for the Company for the
years 1986 through 1990. Andersen has denied liability in this matter and,
on January 29, 1993, filed a counterclaim against Ameriwood.
In February 1995, Ameriwood filed suit against Andersen in the United
States District Court for the Western District of Michigan asserting a
contribution claim under Section 10(b) of the Securities Exchange Act of
1934, breach of contract, and malpractice. The action in Wayne County,
including Andersen's counterclaim in that suit, was dismissed in favor of
the Federal suit. Andersen moved to dismiss the Federal contribution
claim. On March 19, 1996, the court granted this motion and ruled that
contribution is not recoverable unless the settling parties discharged the
liability of all defendants in the underlying action. The Court ruled that
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Ameriwood could seek to recover its payments for attorneys' fees and costs
in the underlying actions from Andersen on its malpractice and breach of
contract theories. In August 1995, Ameriwood amended its complaint in the
District Court action to assert an additional damage theory based on the
claim that certain substantial expenditures were made which would not have
been made had the audits been conducted properly. The Court's March 1996
opinion left these claims intact.
In this proceeding against Andersen, Ameriwood is seeking to recover the
amount of its settlements related to the Atlantis and class litigation, as
well as fees and other defense costs incurred by the Company prior to
settlement. For further information concerning these settlements and
related expenses, see Note 12--Shareholder Litigation and Settlements in
the accompanying financial statements.
Andersen filed its counterclaim in this Federal suit in March of 1995. In
its counterclaim, Andersen alleged that any problems with Company financial
statements audited by Andersen arose from failures by persons then employed
by the Company to provide Andersen with accurate, complete and/or timely
information, which injured Andersen by embroiling it in the Atlantis and
related litigation. On its counterclaim, Andersen is seeking to recover
from Ameriwood an amount equal to Andersen's costs of defending the
Atlantis and class actions and its own ultimate settlements, which were
separate from those of Ameriwood. Andersen is also seeking to recover its
costs of defending this Federal suit and the now dismissed Wayne County
suit on the asserted ground that Ameriwood's right to bring these suits was
foreclosed by virtue of certain earlier proceedings relating to the
settlement of the Atlantis and class litigation. The total amount sought
by Andersen is not known at present but may be substantial. The Company
believes that Andersen's claims are barred by the Bar Order enacted by the
Court when it approved the underlying settlements.
The Company intends to vigorously pursue its claims against Andersen and to
vigorously defend against Andersen's counterclaim in this proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
INFORMATION ON EXECUTIVE OFFICERS OF THE REGISTRANT
In January 1996, the Company announced a plan to reorganize its management
structure for the purpose of eliminating layers of management and reducing
redundant staffing in order to lower fixed costs (see Note 7--Management
Reorganization in the accompanying financial statements). In connection
therewith, it was announced that the Company's former President and Chief
Executive Officer would be leaving the employ of the Company on January 29,
1996. He was replaced immediately by Charles R. Foley, the Company's Vice
President of Finance and Chief Financial Officer, on an interim basis while
the Board of Directors conducts a search for a permanent replacement. Mr.
Foley continues as a candidate for the position on a permanent basis.
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Charles R. Foley (age 49) was named Secretary, Interim President and Chief
Executive Officer of Ameriwood on January 29, 1996. Mr. Foley has been the
Vice President of Finance and Chief Financial Officer since August 1995,
and prior to that was Corporate Vice President of Planning and Control from
June 1993 until August 1995. Before joining Ameriwood, he was a consultant
with Arthur Andersen & Co. L.L.P., a public accounting firm, from June 1990
to June 1993.
Gerald A. Hickman (age 52) has been Corporate Vice President of Manufacturing
since December 1992, and will be retiring April 1, 1996. As a result of the
reorganization referred to above, Mr. Hickman's responsibilities will be
handled at the subsidiary level and there are no current plans to fill his
vacated position. From January to November 1992 he managed an overseas
special project for Haworth, Inc., and was Director of Facilities &
Manufacturing Services at Haworth, Inc. from September 1988 to December 1991.
James R. Meier (age 51) has been Corporate Vice President of Marketing and
Sales for Ameriwood from August 1991 until the present time. In connection
with the management reorganization, his position will be eliminated and Mr.
Meier will be leaving the Company. Sales and marketing responsibilities
will be handled by officers of the Company's subsidiaries. Previously Mr.
Meier was Vice President-Marketing and Sales at Westinghouse Electric
Company, Furniture Division, an office systems furniture manufacturer, from
August 1987 to July 1991.
Craig G. Wassenaar (age 40) joined Ameriwood in January 1996 as Corporate
Controller / Treasurer and Assistant Secretary. Mr. Wassenaar was formerly
Vice President of Finance for the Baby Care Division of Gerber Products
Company from January 1995 to October 1995 and Corporate Controller and
Chief Accounting Officer of Gerber Products Company from May 1992 until
January 1995. Prior to that, he was a Senior Manager in the accounting
firm of Ernst & Young L.L.P.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
Ameriwood's only outstanding common equity is common stock; $1 par value per
share, which is traded on The Nasdaq Stock Market under the symbol AWII.
The table below shows the range of high and low sale prices reported by The
Nasdaq Stock Market for the periods indicated.
Year Quarter High Low
---- ------- ------ ------
1995 Fourth $ 6.38 $ 3.88
Third 7.00 6.13
Second 7.75 6.00
First 9.50 6.75
1994 Fourth $11.50 $ 7.00
Third 13.25 11.13
Second 14.50 9.25
First 19.00 13.25
As of March 15, 1996, there were 1,844 shareholders of record. No dividends
were paid or declared in 1995 or 1994. Please refer to Note 10--Common Stock
Purchase Rights in the accompanying financial statements for a description of
the Company's Rights Agreement.
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ITEM 6. SELECTED FINANCIAL DATA.
(Amounts in thousands except per share data)
1995 1994 1993 1992 1991
-------- ------- -------- ------- -------
OPERATIONS
Net Sales $100,754 $105,124 $100,177 $87,692 $78,744
Operating Income (Loss) (4,236) 5,577 7,125 6,019 5,822
Net Income (Loss) (3,368) 8,625 5,099 6,958 (8,761)
Average shares outstanding 4,208 4,259 4,221 4,110 5,056
Earnings (loss) per share $(0.80) $2.02 $1.21 $1.69 $(1.73)
Dividends per share -- -- -- -- --
FINANCIAL POSITION
Total Assets $60,365 $63,385 $49,865 $44,954 $53,613
Long-term debt 5,000 5,000 5,000 5,000 5,000
Shareholders' equity 37,211 40,578 31,917 25,612 18,494
Book value per share $8.88 $9.69 $7.63 $6.27 $4.56
See Item 8 for complete consolidated balance sheets as of December 31, 1995
and 1994, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1995, and the notes thereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The summary of Selected Financial Data presented in Part II, Item 6 above
is presented for the five years ended December 31, 1995.
RESULTS OF OPERATIONS -- 1995 Compared to 1994
Consolidated net sales for 1995 were $100.8 million, compared to $105.1
million in 1994. Furniture sales accounted for 71% of total net sales, and
were down 3.9% from 1995. OEM sales accounted for 24% of total net sales,
and were down 7% from 1994. Regional discount chains, the Company's largest
distribution channel for unassembled furniture, and electronic retailers,
a large distribution channel for OEM products, were negatively affected by
the soft retail environment. This, along with competitive pricing, were
the major factors in the decline in net sales. BIC America stereo speaker
sales increased 7.7% and accounted for 5% of the total. The BIC increase
is a result of focusing on the development of new dealers during 1995.
Cost of sales for 1995 was negatively impacted by unfavorable overhead
absorption, due to higher fixed costs and reduced production schedules.
Lower than planned order volume, due to retail softness, reduced the
Company's ability to absorb fixed manufacturing costs. Higher fixed costs
resulted from the long-term capital expansion program that was completed
late in 1994. The higher cost of sales resulted in a reduction in the gross
margin from 19.8% in 1994 to 13.9% in 1995.
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Selling, general and administrative ("SG&A") as a percentage of net sales
increased from 14.3% of net sales in 1994 to 15.5% in 1995. Contributing
to this was bad debt expense increasing from $136,000 in 1994 to $1,016,000
in 1995. During 1995, several customers filed for bankruptcy protection ,
and bad debt reserves were increased to cover the potential losses. Operating
expenses in 1995 included a $1.4 million pre-tax charge for management
reorganization. The reorganization, which is expected to be completed by the
end of the second quarter of 1996, is intended to eliminate layers of
management and reduce redundant staffing in order to lower fixed costs.
Also included in operating expenses for 1995 was a $1.2 million pre-tax
charge for environmental remediation related to the clean up of environmental
contamination at the Company's Dowagiac, Michigan facility. Please see the
"Environmental Matters" section following and Note 6--Contingencies in the
accompanying financial statements for a further discussion of this matter.
Interest expense was up $168,300 in 1995, primarily due to a lower amount
of interest related to qualifying construction projects being capitalized
($72,000 capitalized in 1995 compared to $145,000 in 1994). Slightly
higher interest rates on the Company's line of credit borrowings and the
$5,000,000 Industrial Revenue Bond accounted for the remaining difference.
Other Income in 1994 included a $3.7 million shareholder litigation
settlement, net of related ESOP expense. This payment to Ameriwood settled
all claims against the Company's former insurance carrier for directors and
officers liability coverage, and was for reimbursement of covered expenses
the Company incurred related to shareholder litigation settled in 1992. In
December 1994, Ameriwood sold a junior subordinated note with interest
receivable to an unrelated third party for a net pretax gain of $3.7
million. The sale of this note eliminated quarterly interest payments,
which totaled $531,300 in 1994, and was the reason for the decrease in
interest income from 1994 to 1995. For more information, please see Note
11--Sale of Note Receivable, and Note 12--Shareholder Litigation and
Settlements in the accompanying financial statements.
For the twelve months ended December 31, 1995, Ameriwood recorded a net
loss of $3.4 million, compared to net income of $8.6 million in 1994. On a
per share basis, the net loss was $.80 for 1995, based on 4,208,500 average
shares outstanding, compared to net income of $2.02 in 1994, based on
4,259,400 average shares outstanding. The difference is due to the non-
recurring gains included in Other Income in 1994, decreased sales volume in
1995, and the non-recurring charges in 1995 for management reorganization
and environmental remediation.
RESULTS OF OPERATIONS -- 1994 Compared to 1993
Consolidated net sales increased nearly $5 million to $105.1 million in
1994 as compared to $100.2 million in 1993. Furniture sales accounted for
the increase, with a 9.9% increase over the prior year, while OEM sales
declined 5.8% and BIC America stereo speaker sales declined 4.3% from 1993.
Furniture sales gains occurred because of volume increases resulting from
increased sales to new and existing customers, augmented by price increases
implemented in 1993 and 1994 on certain products. The sales decrease in
OEM was primarily a result of an ongoing strategic plan to pursue only OEM
business with acceptable margins. BIC America stereo speaker sales
declined due mainly to a shift from consumers shopping at independent
specialty stereo stores, which are currently BIC America's primary
customers, to electronics superstores which are becoming the preferred
source for consumer electronics.
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The cost of sales represented 80.2% of net sales in 1994, compared to 78.1%
in 1993. Gross profit declined by $1.1 million from the prior year; as a
percentage of sales it decreased from 21.9% in 1993 to 19.8% in 1994. The
gross margin decrease can be attributed to several factors, the most
significant of which was a major increase in the price of particle board,
the principal raw material used in Ameriwood's products. In the twelve
month period ended December 31, 1994, particle board prices increased
approximately 15%, with an average increase during the 24 months ended
December 31, 1994 of nearly 40%. Due to the highly competitive markets in
which Ameriwood sells its products, the Company could not fully recover its
higher material costs through customer price increases. Also affecting
gross profit were start-up inefficiencies related to new machinery and
manufacturing processes resulting from the capital expansion program and
the development of new product lines.
SG&A expenses increased $230,700 in 1994. The increase was caused by
higher development costs, up approximately $146,000 in 1994, related to
broadening the Company's product line, and increases in volume-related
selling expenses such as commissions Also included in operating expenses
in 1994 was a $250,000 pre-tax charge taken to cover estimated legal fees
for the suit filed against Chrylser related to the Dowagiac environmental
matter (see Note 6--Contingencies in the accompanying financial
statements).
"Other Income" for 1994 included Shareholder litigation settlements of $3.7
million, net of related ESOP expenses, and a gain on the sale of a note
receivable of $3.7 million. No comparable transactions occurred in 1993.
Total interest costs in 1994, net of $145,000 related to qualifying
construction projects that was capitalized, was $169,500, compared to
$149,600 in 1993. The increase was due primarily to more short-term
borrowing activity in 1994 as a result of Ameriwood's capital expenditure
program to increase its manufacturing capacity.
Ameriwood recorded net income of $8.6 million for the twelve months ended
December 31, 1994 compared to net income of $5.1 million in 1993. On a per
share basis, net income was $2.02 in 1994, based on 4,259,400 average
shares outstanding, compared to $1.21 in 1993, based on 4,220,800 average
shares outstanding. The increases were due to the non-recurring income
from the litigation settlement in the third quarter and the gain on the
sale of the note in the fourth quarter as described in the preceding
section.
Environmental Matters
During 1989, the Company discovered environmental contamination at its
facility in Dowagiac, Michigan. The Company voluntarily reported the matter
to the Michigan Department of Environmental Quality ("MDEQ")and began
remediation procedures. Ameriwood identified Chrysler Corporation and the
United States Department of Defense ("DOD") as prior owners or operators of
this site. Chrysler has admitted successorship to a prior owner of the
site, but has not admitted liability. A suit has been filed against
Chrysler seeking recovery of costs for environmental investigation and
remediation at the site. Although the Company believes it has sufficient
basis to prevail, there is no assurance of recovery and no recognition has
been given in the financial statements for potential recoveries from other
parties.
<PAGE> 11
It is the Company's policy to accrue environmental cleanup costs if it is
probable that a liability has been incurred and an amount is reasonably
estimable. Costs of $1,200,000 in 1995 and $250,000 in 1994 were recognized
as pretax charges to results of operations. The 1995 charge increased the
Company's reserve at December 31, 1995 to $2,030,500 to cover costs including
ongoing monitoring for up to 30 years and future anticipated legal costs.
The current portion, $830,500, is included in other current liabilities and
the remainder is included in other long-term liabilities.
In March 1996, the Company received a Remedial Investigation and Feasibility
Study from an independent engineering firm, acceptable to Chrysler. A request
for approval of the Company's feasibility study has been filed with the MDEQ.
If the study is approved, a Remedial Action Plan will be submitted for
approval. Based on the opinion of the independent engineering firm and
legal counsel, the Company believes it will receive a favorable ruling, and
management believes any additional costs beyond the amounts recorded will not
be material to the Company's financial position or results of operations.
Liquidity and Capital Resources
During 1995, the Company generated cash from operating activities of $3.4
million, which provided the necessary funds to meet working capital needs,
as well as investing and financing activities. Short-term borrowings were
$2 million at the end of 1995, down from $2.3 million at the end of 1994.
Net accounts receivable were down $3.2 million at the end of 1995, to $17.4
million, as compared to $20.7 million at the end of 1994. This decrease is
due to lower sales volume in the fourth quarter of 1995 and increased bad
debt reserves at December 31, 1995, as compared to 1994.
Ameriwood, as authorized by the Board of Directors, repurchased 106,700
shares of common stock during 1995, at a cost of $697,400, to fund the ESOP
portion of the Company's ESOP/401k plan. For 1996, the Board has authorized
the purchase of up to $750,000 of the Company's common stock in open market
transactions, however, the Company is not obligated to purchase any shares
based on the Board's action. The Company's annual ESOP contribution is the
greater of 10% of net profits or 3% of qualified wages, as defined by the plan.
Capital expenditures of $2.4 million in 1995 consisted mainly of expenditures
for machinery and equipment related to improving manufacturing efficiency and
cost containment. Ameriwood currently anticipates capital expenditures in
1996 will be approximately $3.5 million which will include machinery and
equipment purchases at the Company's Ohio and Michigan manufacturing facilities.
Management believes the Company's present liquidity, combined with cash
flow from future operations and the Company's revolving credit agreement,
will be adequate to fund operations in 1996. In the event more funds are
required, additional long-term borrowings may be a possible alternative for
meeting some liquidity and capital resource needs. (As to Ameriwood's
outstanding credit arrangements and borrowings, see Note 3--Borrowing
Arrangements in the accompanying financial statements.)
Inflation
Inflation did not have a significant impact on the Company's results in
1995. In 1994 and 1993 results of operations were affected by significant
increases in the price of particle board, the principal raw material used
in the Company's products. Prices stabilized in 1995, and are expected to
remain flat in 1996. Ameriwood continuously attempts to minimize the
effects of inflation and cost increases of all materials through product
value engineering and improved production methods.
<PAGE> 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Immediately following are the report of independent accountants;
consolidated balance sheets of Ameriwood Industries International
Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31,
1995; the notes thereto; and Schedule II--Valuation and Qualifying
Accounts.
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Ameriwood Industries International Corporation
We have audited the consolidated financial statements and the financial
statement schedule of Ameriwood Industries International Corporation and
subsidiaries listed in Item 14(a) of this Form 10-K. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ameriwood
Industries International Corporation and subsidiaries at December 31, 1995
and 1994, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles. In addition, in
our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
- ------------------------------
Coopers & Lybrand L.L.P.
Grand Rapids, Michigan
March 25, 1996
<PAGE> 14
CONSOLIDATED BALANCE SHEETS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
December 31
1995 1994
------------- -----------
ASSETS
CURRENT ASSETS:
Accounts receivable, less allowances
(1995-$1,055,500; 1994-$614,300) $17,446,300 $20,667,000
Inventories:
Raw material 5,849,900 7,758,300
Work in process 3,629,100 3,940,900
Finished goods 7,944,200 5,776,700
------------ ------------
17,423,200 17,475,900
Prepaid expenses and other current assets 2,149,500 956,600
----------- ------------
Total current assets 37,019,000 39,099,500
PROPERTY AND EQUIPMENT:
Land 231,900 231,900
Buildings and improvements 13,691,200 13,439,400
Machinery and equipment 29,172,000 25,078,500
Construction in progress 305,300 2,490,300
----------- -------------
43,400,400 41,240,100
Less accumulated depreciation (20,233,000) (17,175,600)
----------- ------------
23,167,400 24,064,500
OTHER ASSETS 178,700 220,600
------------ ------------
$60,365,100 $63,384,600
============ ============
<PAGE> 15
December 31
1995 1994
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank $ 2,000,000 $ 2,300,000
Accounts payable 4,527,700 5,014,300
Accrued liabilities-
Payroll and related benefits 3,262,800 1,741,500
Accrued advertising 2,621,700 2,531,100
Other current liabilities 3,260,100 5,152,600
----------- -----------
Total current liabilities 15,672,300 16,739,500
LONG-TERM DEBT 5,000,000 5,000,000
OTHER LONG-TERM LIABILITIES 2,482,200 1,066,800
COMMITMENTS AND CONTINGENCIES (Notes 3,5,6)
SHAREHOLDERS' EQUITY:
Preferred stock, without par value; authorized
5,000,000 shares; none issued
Common stock, par value $1; authorized
20,000,000 shares; 4,188,406 shares issued
and outstanding at December 31, 1995 and 1994 4,188,400 4,188,400
Additional paid-in capital 20,622,300 20,622,300
Retained earnings 12,399,900 15,767,600
----------- -----------
37,210,600 40,578,300
----------- -----------
$60,365,100 $63,384,600
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE> 16
CONSOLIDATED STATEMENTS OF OPERATIONS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
Year ended December 31
1995 1994 1993
------------ ------------- -------------
Net sales $100,754,400 $105,124,300 $100,176,600
Cost of sales 86,762,400 84,301,000 78,286,300
------------- ------------- -------------
Gross profit 13,992,000 20,823,300 21,890,300
Selling, general and
administrative expenses 15,652,800 14,996,000 14,765,300
Management reorganization 1,375,000
Environmental remediation 1,200,000 250,000
------------- ------------- -------------
18,227,800 15,246,000 14,765,300
------------- ------------- -------------
Operating income (loss) (4,235,800) 5,577,300 7,125,000
Other expense (income):
Shareholder litigation and
settlements, net (3,707,500)
Gain on sale of note, net (3,671,000)
Interest expense 337,800 169,500 149,600
Interest income (12,700) (553,600) (680,500)
Other, net 250,200 72,100 (41,300)
------------- ------------- -------------
575,300 (7,690,500) (572,200)
------------- ------------- -------------
Income (loss) before income taxes (4,811,100) 13,267,800 7,697,200
Income taxes (benefit) (1,443,400) 4,642,800 2,598,500
------------- ------------- -------------
NET INCOME (LOSS) $(3,367,700) $8,625,000 $5,098,700
============= ============= =============
Earnings (loss) per common share $(0.80) $2.02 $1.21
======= ===== =====
The accompanying notes are an integral part of these statements.
<PAGE> 17
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
Total
Additional Share-
Common Paid-in Retained holders'
Stock Capital Earnings Equity
----------- ------------ ------------ ------------
BALANCES JANUARY 1, 1993 $2,042,600 $21,525,600 $ 2,043,900 $25,612,100
Issued 37,061 shares
for ESOP contribution 37,100 806,100 843,200
Issued 4,700 shares
under stock option plans 4,700 53,900 58,600
Issued 2,081,739 shares
in connection with a
two-for-one stock split 2,081,700 (2,081,700)
Issued 19,030 shares
in connection with
payment of class action
settlement 19,000 285,400 304,400
Net income 5,098,700 5,098,700
----------- ------------ ------------ ------------
BALANCES DECEMBER 31, 1993 4,185,100 20,589,300 7,142,600 31,917,000
Purchased 82,000 shares
for ESOP contribution (82,000) (787,400) (869,400)
Issued 82,000 shares
for ESOP contribution 82,000 787,400 869,400
Issued 2,600 shares
under stock option plans 2,600 22,500 25,100
Issued 698 shares
in connection with
payment of class action
settlement 700 10,500 11,200
Net income 8,625,000 8,625,000
----------- ------------ ------------ ------------
BALANCES DECEMBER 31, 1994 4,188,400 20,622,300 15,767,600 40,578,300
Purchased 106,740 shares
for ESOP contribution (106,700) (590,700) (697,400)
Issued 106,740 shares
for ESOP contribution 106,700 590,700 697,400
Net loss (3,367,700) (3,367,700)
----------- ------------ ------------ ------------
BALANCES DECEMBER 31, 1995 $4,188,400 $20,622,300 $12,399,900 $37,210,600
=========== ============ ============ ============
The accompanying notes are an integral part of these statements.
<PAGE> 18
CONSOLIDATED STATEMENTS OF CASH FLOWS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C> <C> <C>
Year ended December 31
1995 1994 1993
------------ ------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(3,367,700) $ 8,625,000 $ 5,098,700
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,337,200 2,778,800 2,156,400
Provision for doubtful accounts 1,016,000 135,800 386,200
Provision for environmental remediation 1,200,000 250,000
Provision for management reorganization 1,375,000
Deferred income taxes (973,400) 119,000 1,483,900
Gain on sale of note receivable (3,671,000)
Shareholder settlement (2,962,400)
Changes in operating assets and liabilities:
Accounts receivable 2,204,700 (4,878,600) (1,806,100)
Inventories 52,700 (3,070,800) (4,047,300)
Accounts payable (486,600) 1,082,400 516,100
Other current assets and
and liabilities, excluding debt (916,500) 2,224,300 841,200
------------ ---------- --------------
Net cash provided by operating activities 3,441,400 3,594,900 1,666,700
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of note receivable 3,750,000
Purchases of property and equipment (2,432,700) (8,929,000) (5,059,400)
Other (11,300) 117,200 132,200
------------ ----------- -------------
Net cash used in investing activities (2,444,000) (5,061,800) (4,927,200)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to bank 2,150,000 14,900,000 1,250,000
Payments on notes payable to bank (2,450,000) (12,600,000) (1,250,000)
Repurchase of common stock (697,400) (869,400)
Issuance of common stock 36,300 58,600
------------ ----------- --------------
Net cash provided by (used in)
financing activities (997,400) 1,466,900 58,600
------------ ----------- --------------
NET DECREASE IN CASH AND EQUIVALENTS 0 0 (3,201,900)
CASH AND EQUIVALENTS BEGINNING OF YEAR 0 0 3,201,900
------------ ------------ - -----------
CASH AND EQUIVALENTS END OF YEAR $ 0 $ 0 $ 0
============ ============ ===========
NONCASH FINANCING ACTIVITIES
Common stock issued for ESOP contribution $697,400 $869,400 $843,200
Common stock issued for class action settlement $304,400
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTE 1--THE COMPANY AND OTHER INFORMATION
Ameriwood Industries International Corporation (individually "Ameriwood"
and with its subsidiaries the "Company") is a manufacturer operating in the
wood products industry. The Company manufactures unassembled furniture which is
sold to retailers for resale to consumers, stereo speaker cabinets and
fully assembled speaker units for wholesale and consumer markets, and
various laminated products which it supplies to other manufacturers. In
view of the nature of its products and the production process, management
believes the Company's business constitutes a single industry segment.
In 1995 and 1994 no single customer accounted for 10% or more of
consolidated net sales. In 1993 one customer accounted for approximately
10% of consolidated net sales. As of December 31, 1995 and 1994,
approximately 86% and 84% of the company's accounts receivable were from
customers in the retail industry, which includes mass merchandisers,
discount retail chains and home centers. Product design and development
costs are expensed as incurred and were $546,700 in 1995, $636,000 in 1994
and $490,100 in 1993.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of Ameriwood and its wholly-owned subsidiaries. All
intercompany accounts, transactions, and profits are eliminated in
consolidation.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Cash Equivalents: The Company considers all highly liquid investments with
maturities of three months or less when purchased to be cash equivalents.
Inventories: Inventories are stated at the lower of cost, determined on
the first-in, first-out (FIFO) method, or market.
Property and Equipment: Property and equipment are recorded at cost and
include expenditures for major renewals and betterments. Maintenance and
repairs that do not extend the lives of the respective assets are expensed
as incurred. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. Estimated depreciable lives are:
buildings and improvements, 5 to 30 years; machinery and equipment, 4 to 10
years.
Revenue Recognition: Revenue is recognized when products are shipped and
invoiced to customers. Provisions are made for doubtful receivables,
discounts, returns and allowances.
<PAGE> 20
Income Taxes: The provision for income taxes is based on income reported
in the financial statements. Deferred income taxes are recognized for all
temporary differences between the tax and financial reporting bases of
assets and liabilities.
Per Share Data: Earnings per share are computed based on the weighted
average shares of common stock and common stock equivalents (stock options)
outstanding during each year. The weighted average shares of common stock
and common stock equivalents outstanding were 4,208,500 in 1995, 4,259,400
in 1994 and 4,220,800 in 1993.
Reclassifications: Certain reclassifications have been made to the prior
years' consolidated financial statements to conform with the 1995
presentation.
NOTE 3--BORROWING ARRANGEMENTS
At December 31, 1995, the Company's short-term borrowings under a
$15,000,000 unsecured bank revolving credit agreement totaled $2,000,000,
bearing interest at 6.43%. At December 31, 1995, the Company was in
compliance with restrictive covenants contained in the credit agreement,
except for a covenant requiring cash flow from operations to represent a
certain percentage of outstanding indebtedness. The Company obtained a
waiver of this covenant violation.
The credit agreement expires on January 13, 1998; however, the Company, on
an annual basis, may request up to two extensions of the expiration date
for an additional twelve months, subject to approval by the banks. The
credit agreement requires the Company to comply with certain restrictive
covenants which, among other things, include maintaining certain financial
ratios and a minimum level of tangible net worth. Borrowings under the
credit agreement bear interest, at the Company's option, at LIBOR plus 50
to 100 basis points, or the greater of (a) the agent bank's prime rate or
(b) an average of the rates at which selected federal funds brokers offer
to sell federal funds to the bank plus 50 basis points. The Company is
required to pay a commitment fee of 1/4% per annum on the unused portion of
the credit agreement.
Long-term debt at December 31, 1995 and 1994 consisted of $5,000,000 in
Michigan Strategic Fund Industrial Development Revenue Bonds, with a
variable interest rate based on the market rate for similar bonds (5.25% at
December 31, 1995). The bonds are due in November 2006 and require annual
principal payments of $500,000 beginning November 1997. The Company's
Michigan facility and related equipment are pledged as collateral for the
bonds. A letter of credit for approximately $5,178,000, with a 1% fee
charged annually on the face amount, is also collateralizing the bonds.
The letter of credit expires on January 13, 1998. Covenants under the
letter of credit are the same as those relating to the revolving credit
facility. A wavier of the violation mentioned above was also obtained.
The letter of credit is secured by the Company's Michigan facility,
including certain related equipment.
The carrying value of the Company's long-term debt at December 31, 1995 and
1994 approximated its fair value. The Company made cash payments for
interest on all borrowing arrangements in the amounts of $350,100 in 1995
(net of capitalized interest of $72,000), $137,900 in 1994 (net of
capitalized interest of $145,000)and $140,100 in 1993.
<PAGE> 21
NOTE 4--INCOME TAXES
Income (loss) before the provision for income taxes is derived entirely
from domestic operations. The following is a summary of the components of
the provision for income taxes:
1995 1994 1993
------------ ---------- ----------
Current-Federal $ (505,100) $4,025,900 $1,042,200
State and local 35,100 497,900 72,400
Deferred (973,400) 119,000 1,483,900
------------ ---------- ----------
$(1,443,400) $4,642,800 $2,598,500
============ ========== ==========
A reconciliation of total income tax expense (benefit) and the amount
computed by applying statutory federal income tax rates to income (loss)
before income taxes follows:
1995 1994 1993
------------ ----------- -----------
Income tax expense (benefit) at
statutory rates $(1,635,800) $4,543,700 $2,617,100
State and local income taxes net of
federal tax reduction 23,200 323,600 47,800
Decrease in deferred tax asset
valuation allowance (272,100) (158,600)
Other 169,200 47,600 92,200
------------ ----------- -----------
$(1,443,400) $4,642,800 $2,598,500
============ =========== ===========
Major components of the Company's deferred tax assets and liabilities at
December 31 are as follows:
1995 1994
---------- ----------
Assets:
Environmental accruals $ 850,400 $ 426,700
Inventory reserves and tax valuation 574,900 440,500
Employee benefits 909,300 353,400
Accounts receivable reserves 614,800 445,600
Other accrued liabilities 220,500 352,700
------------ ------------
3,169,900 2,018,900
Liabilities:
Depreciation (1,329,400) (1,150,900)
Prepaid expenses & other (2,144,300) (2,145,200)
------------ ------------
(3,473,700) (3,296,100)
------------ ------------
Net Deferred Tax Liability $ (303,800) $(1,277,200)
============ ============
Reported in balance sheet:
Other current assets (liabilities) $ 978,400 $ (210,400)
Other long-term liabilities (1,282,200) (1,066,800)
------------ ------------
Net Deferred Tax Liability $ (303,800) $(1,277,200)
============ ============
Cash expended for income taxes, net of refunds, totaled $1,231,500 in 1995,
$3,513,700 in 1994 and $1,026,400 in 1993.
<PAGE> 22
NOTE 5--LEASES
The Company and its subsidiaries have entered into various operating leases
for facilities and equipment. Future minimum rental payments required
under lease obligations that have initial or remaining noncancelable lease
terms in excess of one year are $615,200 in 1996, $553,600 in 1997,
$534,600 in 1998, $166,200 in 1999, $169,200 in 2000, and $93,500
thereafter.
Total rent expense charged against income was $987,600 in 1995, $940,000 in
1994, $791,700 in 1993.
NOTE 6--CONTINGENCIES
During 1989, the Company discovered environmental contamination at its
facility in Dowagiac, Michigan. The Company voluntarily reported the matter
to the Michigan Department of Environmental Quality ("MDEQ")and began
remediation procedures. Ameriwood identified Chrysler Corporation and the
United States Department of Defense ("DOD") as prior owners or operators of
this site. Chrysler has admitted successorship to a prior owner of the
site, but has not admitted liability. A suit has been filed against
Chrysler seeking recovery of costs for environmental investigation and
remediation at the site. Although the Company believes it has sufficient
basis to prevail, there is no assurance of recovery and no recognition has
been given in the financial statements for potential recoveries from other
parties.
In March 1996, the Company received a Remedial Investigation and
Feasibility Study from an independent engineering firm, acceptable to
Chrysler. A request for approval of the Company's feasibility study has
been filed with the MDEQ. If the study is approved, a Remedial Action Plan
will be submitted for approval. It is the Company's policy to accrue
environmental cleanup costs if it is probable that a liability has been
incurred and an amount is reasonably estimable.
Costs of $1,200,000 in 1995 and $250,000 in 1994 were recognized as pretax
charges to results of operations. The 1995 charge increased the Company's
reserve at December 31, 1995 to $2,030,500 to cover costs including ongoing
monitoring for up to 30 years and future anticipated legal costs. The
current portion, $830,500, is included in other current liabilities and the
remainder is included in other long-term liabilities. Based on the opinion
of the independent engineering firm and legal counsel, the Company believes
it will receive a favorable ruling, and management believes any additional
costs beyond the amounts recorded will not be material to the Company's
financial position or results of operations.
The Company is also a party to certain other lawsuits and has been
threatened with litigation arising out of the normal course of its
business. While the ultimate results of these matters cannot be predicted
with certainty, the Company believes any resulting liability will not
materially affect the financial position or the results of operations of
the Company.
<PAGE> 23
NOTE 7--MANAGEMENT REORGANIZATION
In December 1995, the Company initiated a management reorganization plan
for the purpose of eliminating layers of management and reducing redundant
staffing in order to lower fixed costs. The plan includes termination of
certain management employees. Accordingly, the Company has accrued
$1,375,000 at December 31, 1995 to provide for negotiated severance and
other termination benefits for these employees. The plan is expected to be
completed by June 30, 1996.
NOTE 8--STOCK OPTIONS
The Company has stock options outstanding, mostly under employee stock
option plans and a non-employee directors' plan. Options are granted at or
above the market price of the Company's common stock on the date of grant.
Options become exercisable at various times up to three years following the
date of grant and expire from six to ten years after the date of grant. No
charges to operations are recorded with respect to authorization, grant, or
exercise of options. Proceeds received upon exercise are credited to
shareholders' equity.
A summary of shares subject to options follows:
Outstanding at January 1, 1993 267,834 $ 3.63 - $11.38
Granted 28,946 7.69 - 10.25
Exercised (6,800) 5.75 - 10.25
Canceled (32,146) 7.69 - 11.38
---------
Outstanding at December 31, 1993 257,834 3.63 - 11.38
Granted 52,950 18.13
Exercised (2,600) 7.75 - 11.38
Canceled (3,650) 8.81 - 18.13
---------
Outstanding at December 31, 1994 304,534 3.63 - 18.13
Granted 87,000 6.56 - 8.88
Canceled (24,984) 7.75 - 18.13
---------
Outstanding at December 31, 1995 366,550 3.63 - 18.13
=========
Exercisable at December 31, 1995 326,550 3.63 - 18.13
=========
Available for future granting:
At December 31, 1994 243,564
At December 31, 1995 253,104
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
which is effective for fiscal years beginning after December 15, 1995. The
standard prescribes an optional method of accounting for stock-based
compensation that determines compensation expense based on fair value
measured at the grant date of options. The Company anticipates adopting
the disclosure-only requirements of this standard in 1996, therefore there
will be no impact on the Company's results of operations upon adoption in
1996.
<PAGE> 24
NOTE 9--EMPLOYEE BENEFIT PLANS
The Company maintains an employee stock ownership (ESOP) and savings plan
which covers substantially all employees. The ESOP component of the plan
is entirely funded by Company contributions. The Company's annual ESOP
contribution is the greater of 10% of net profits or 3% of qualified wages,
as defined by the plan. Employees vest in the Company ESOP contributions over
a five-year period. At December 31, 1995, the ESOP held 627,905 shares of
Ameriwood common stock. Of those shares held, 624,257 shares were allocated to
the accounts of plan participants. All shares held by the ESOP are issued and
outstanding shares of the Company and have been included in calculating
earnings per share. The amount of ESOP compensation expense recognized was
$521,000 in 1995, $1,084,400 in 1994 and $867,200 in 1993.
The savings component of the plan allows participants to make voluntary
contributions by salary reduction pursuant to section 401(k) of the
Internal Revenue Code. The Company matches such contributions up to a
maximum of 4% of employee compensation. Employees vest immediately in
their own contribution and vest in Company contributions over a five-year
period. The expense for Ameriwood's 401(k) match totaled $523,400 in 1995,
$525,700 in 1994 and $496,200 in 1993.
NOTE 10--COMMON STOCK PURCHASE RIGHTS
Under the terms of the Amended and Restated Rights Agreement, dated as of
April 28, 1986, as amended and restated as of March 15, 1995, between the
Company and Harris Trust and Savings Bank, as Rights Agent, each
outstanding share of Ameriwood common stock currently carries with it one
Right to purchase one additional share of common stock at an exercise price
of $50, subject to adjustment. The Rights are not currently exercisable,
but would become exercisable if a person or group acquired 15% or more (or
commenced a tender offer to acquire 15% or more) of the shares of common
stock then outstanding. In the event a person or group acquires 15% or
more of the shares of the Company's common stock then outstanding, each
Right (except for Rights owned by a person or group or certain successors
in interest, which would have become null and void) would entitle the
holder to purchase, for the exercise price then in effect, shares of the
Company's common stock (or, in some cases, of the other party to a relevant
acquisition transaction) having a market value equal to twice the exercise
price.
The Rights may be redeemed by Ameriwood in whole, but not in part, at a
price of $0.025 per Right. The Rights have no voting or dividend
privileges and, until such time, if ever, as the Rights first become
exercisable and separate Rights certificates are distributed (the
"Distribution Date"), will be attached to and trade with and only with the
common stock. Unless earlier exercised or redeemed, the Rights will expire
on May 20, 1996. Prior to redemption, expiration or, in certain
circumstances, occurrence of the Distribution Date, any additional shares
of common stock issued by Ameriwood will also carry Rights.
<PAGE> 25
NOTE 11--SALE OF NOTE RECEIVABLE
In a 1989 transaction involving the sale of two former subsidiaries, the
Company received $3,750,000 face value of the buyer's cumulative convertible
preferred stock. No value was assigned to the preferred stock due to the
uncertainty of its realization. In December of 1991, the Company, at its
option, converted the preferred stock to an unsecured junior subordinated
promissory note of $4,500,000, which included a 20% conversion premium. The
junior subordinated note was due December 15, 1994, with interest payable
quarterly at 12.5%. Consistent with the valuation of the preferred stock,
no value was assigned to the unsecured junior subordinated note, and income
derived from the note was recognized as cash was received. Interest income
recognized from this note was $531,300 in 1994 and $562,500 in 1993.
In September of 1994, Ameriwood did not receive a required quarterly interest
payment. As a result of this event of default, the note became due and payable
in full in accordance with provisions contained in the note. In order to
reach a suitable settlement arrangement, Ameriwood sold the junior
subordinated note and interest receivable to an unrelated third party for
$4,000,000 on December 2, 1994. After deducting interest receivable and
pertinent legal and professional costs from the sale proceeds, the Company
recognized a net pretax gain of $3,671,000 on the sale of the note.
NOTE 12--SHAREHOLDER LITIGATION AND SETTLEMENTS
During 1992, the Company settled legal actions brought against it and certain
co-defendants by Atlantis Group, Inc. ("Atlantis"), formerly a substantial
Ameriwood shareholder, and by shareholders included in a class action.
Expenses associated with that litigation totaled $15.6 million in 1991 and
$2 million in 1990. In addition, the Company repurchased all 996,200 shares
of Ameriwood stock held by Atlantis for $7,471,500, based on a fair market
value of $7.50 per share.
During the third quarter of 1994, Ameriwood received a $4,675,000 payment
which settled all claims against its former insurance carrier for directors
and officers liability coverage. The settlement was for reimbursement of
covered expenses the Company incurred related to the shareholder lawsuits
and the class action suit. As a result of the litigation settlement income
recognized, Ameriwood increased contributions to its ESOP plan by $467,500
in 1994 in compliance with the Plan's funding provisions. Income from
litigation settlements is reported in the statements of operations net of
these additional ESOP contributions.
Ameriwood is also seeking certain further reimbursements for shareholder
litigation defense and settlement costs and has filed a malpractice, breach
of contract, and contribution lawsuit against its former auditing firm. In
1995, the Company amended its claim to seek recovery of certain substantial
expenditures which would not have been made had the audits been completed
properly. That firm, which also was a defendant in the principal
shareholder lawsuit and the class action suit until reaching a settlement
after, and separate from, that of the Company, has filed a counterclaim against
the Company seeking reimbursement of its defense and settlement costs. The
amount of those costs has not been specified and may be substantial.
Ameriwood has directed its counsel to vigorously pursue the claims in this
proceeding and vigorously defend against the counterclaim. The Company
recognized a pretax charge to results of operations of $500,000 in 1994 for
estimated legal fees related to this matter.
<PAGE> 26
NOTE 12--SHAREHOLDER LITIGATION AND SETTLEMENTS (continued)
While the ultimate results of these matters cannot be predicted with
certainty, management believes the Company has complete defense to these
claims and that any resulting liability from the counterclaim will not
materially affect the financial position of the Company. The matter could,
however, have a material effect on quarterly or annual operating results
when resolved in a future period.
NOTE 13--QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data are summarized as follows:
Earnings
Net Income (Loss)
Net Sales Gross Profit (Loss) Per Share
------------ ------------ ------------ ---------
1995
First quarter $ 25,763,800 $ 3,982,000 $ 44,000 $ .01
Second quarter 23,524,700 3,207,000 (227,600) $ (.05)
Third quarter 26,236,100 3,609,100 (689,700) $ (.16)
Fourth quarter 25,229,800 3,193,900 (2,494,400) $ (.60)
------------ ----------- ------------ -------
$100,754,400 $13,992,000 $(3,367,700) $ (.80)
============ =========== ============ =======
1994
First quarter $ 26,334,600 $ 4,928,500 $ 700,300 $ .16
Second quarter 23,664,300 4,814,100 667,800 $ .16
Third quarter 27,161,900 5,654,800 4,047,800 $ .95
Fourth quarter 27,963,500 5,425,900 3,209,100 $ .76
------------ ----------- ----------- -------
$105,124,300 $20,823,300 $ 8,625,000 $ 2.02
============ =========== =========== =======
In the fourth quarter of 1995 a charge for management reorganization
increased the net loss by approximately $962,500, or $.23 per share, and
estimated costs to complete environmental remediation increased the net
loss by approximately $840,000, or $.20 per share.
During the third quarter of 1995, charges for bad debts related to
bankruptcy filings of certain customers amounted to $541,800, or $.13 per
share.
An insurance settlement, net of related ESOP expense, recognized in the
third quarter of 1994 increased net income by approximately $2,734,900, or
$.64 per share.
In the fourth quarter of 1994, a gain on the sale of a note receivable
increased net income by approximately $2,386,100, or $.56 per share and
legal fees accrued decreased net income by approximately $487,500, or $.11
per share.
<PAGE> 27
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
ADDITIONS
BEGINNING CHARGED TO END OF
OF YEAR COSTS AND YEAR
CLASSIFICATION BALANCE EXPENSES DEDUCTIONS BALANCE
- ------------------------------------------------------------------------------
Year ended December 31, 1995
Deducted from asset accounts:
Allowance for doubtful accounts $496,300 $1,016,000 $759,800(a) $ 752,500
Allowance for returns 118,000 185,000 303,000
-------- ---------- -------- ----------
$614,300 $1,201,000 $759,800 $1,055,500
======== ========== ======== ==========
Year ended December 31, 1994
Deducted from asset accounts:
Allowance for doubtful accounts $316,100 $ 135,800 $(44,400)(a) $496,300
Allowance for returns 220,000 102,000 118,000
-------- ---------- --------- ---------
$536,100 $ 135,800 $ 57,600 $614,300
======== ========== ========= =========
Year ended December 31, 1993
Deducted from asset accounts:
Allowance for doubtful accounts $291,200 $ 386,200 $361,300(a) $316,100
Allowance for returned 144,800 75,200 220,000
-------- ---------- --------- ---------
$436,000 $ 461,400 $361,300 $536,100
======== ========== ========= =========
(a) Uncollectible accounts written off, net of recoveries.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information with respect to each director and executive
officer of the Company is based upon the most recent information provided
to the Company by such person.
Director with Term Expiring in 1998
Edwin Wachtel (age 64) has been an Ameriwood director since May 1990. From
February 1992 until September 1995, he was Chairman and Chief Executive
Officer of Europe Craft Imports, Inc., an apparel marketer. From October
1987 to January 1992, he was Chairman of GW Investors Corporation, a
private investment firm. Mr. Wachtel is also a director of Hubco, Inc. and
its banking subsidiaries.
<PAGE> 28
Directors with Terms Expiring in 1997
Richard J. Pigott (age 55), an Ameriwood director since February 1995, is a
merger and acquisition advisor, private investor, and attorney. He also
serves as a director of Rodman & Renshaw Capital Group, Inc.
Joseph J. Miglore (age 50) was President, Chief Executive Officer, and
Secretary of Ameriwood Industries International Corporation from April 1990
until his resignation on January 29,1996. He was a director of the Company
from December 1991 until his resignation on March 8, 1996.
Directors With Terms Expiring in 1996
Kevin K. Coyne (age 46) has been an Ameriwood director since September 1990.
He was President of CMB Industries Corp., a manufacturer of water valves,
from February 1992 to December 1995.
Neil L. Diver (age 58) has been an Ameriwood director and its Chairman of
the Board since September 1990. He is an administrator of private investments.
For information on Non-Director Executive Officers, please see the section
immediately following Item 4 in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The following table provides, for each of the last three completed fiscal
years, information about the compensation of the CEO and the other
individuals who were serving as executive officers at the end of fiscal
1995 whose total salary and incentive bonus for that year exceeded $100,000
(the named executives").
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------
Long Term
Annual Compensation(1) Compensation
-------------------------------------------- ------------
(2) Other (3)Options All Other
Name and Annual /SARS Compen-
Principal Position Year Salary Bonus Compensation (#shares) sation(4)
- -------------------------------------------------------------------------------------------------
Joseph J. Miglore 1995 $227,000 $ 0 $24,737 20,000 $31,783
President, Chief Executive 1994 227,000 0 26,030 20,000 36,384
Officer, and Secretary 1993 215,000 102,601 * 0 18,487
James R. Meier 1995 $129,000 $ 0 $15,639 7,000 $13,635
Corporate Vice President 1994 129,000 0 19,288 7,000 20,449
of Marketing and Sales 1993 122,400 45,452 * 0 14,693
Gerald A. Hickman 1995 $124,000 $ 0 $ * 7,000 $14,674
Corporate Vice President 1994 124,000 0 * 7,000 21,611
of Manufacturing 1993 117,500 44,561 * 0 10,331
Charles R. Foley 1995 $122,800 $ 0 $16,414 7,000 $11,785
Corporate Vice President 1994 122,800 0 14,848 7,000 18,096
of Finance and Chief 1993 65,540(5) 26,696 * 0 2,057
Financial Officer
- -----------------------------------------------------------------------------------------------
<TABLE\>
<PAGE> 29
(1) Includes amounts deferred under the 401(k) portion of the ESOP/401(k) Plan.
(2) A "*" in this column indicates that the dollar value of perquisites
and other personal benefits provided to the named executive did not exceed
10% of such executive's aggregate salary and bonus. In each case where
the amount did exceed 10%, the cost to lease a company automobile for the
named executive represented more than 25% of his total perquisites and other
personal benefits. Also, for Mr. Miglore, a monthly auto allowance
represented more than 25% of his other annual compensation for 1995.
(3) In accordance with special provisions in the Ameriwood Industries 1993
Stock Incentive Plan, as approved by the shareholders at the 1993
annual meeting, a portion of Mr. Miglore's options granted in 1992 were
automatically canceled and replaced by options granted on June 16,
1993, the date of shareholder approval. The purpose of this special
provision was to allow the portion of Mr. Miglore's 1992-granted incentive
stock options not then exercisable to become fully exercisable as non-
qualified stock options. The replacement options cover the same number of
shares as were covered by the canceled options, and the per share exercise
price and expiration date also remained unchanged, as did any effect of
employment termination while the replacement options are outstanding. In
all other respects, the replacement options are governed by the terms of the
1993 Stock Incentive Plan.
(4) Includes Company matching contributions under the 401(k) portion of
the ESOP/401(k) Plan, Company contributions under the ESOP portion of the
ESOP/401(k) Plan, and, beginning in January 1994, annual premiums
under the Supplemental Executive Retirement Program (SERP) as described
later in this section.
Year Description Miglore Meier Hickman Foley
------------------------------------------------------------------
1995 401(k) match $ 6,468 $4,519 $4,339 $4,298
ESOP contribution 4,500 3,874 3,719 3,684
SERP premium 20,815 5,242 6,616 3,803
1994 401(k) match 6,468 6,106 5,894 5,229
ESOP contribution 9,101 9,101 9,101 9,064
SERP premium 20,815 5,242 6,616 3,803
1993 401(k) match 6,855 6,099 4,288 2,057
ESOP contribution 11,632 8,594 6,043 0
(5) Represents salary for partial years, as Mr. Foley was hired as
Corporate Vice President of Planning and Control in June 1993.
CERTAIN AGREEMENTS WITH NAMED EXECUTIVES
Miglore Employment Agreement
Joseph J. Miglore had an employment agreement with Ameriwood from the time
he joined the Company in April 1990, as amended by an addendum in November
1992, until he left the Company in January 1996. The agreement provided
for salary at a rate subject to annual review by the Ameriwood Board (which
has been delegated to the Compensation and Benefits Committee), a potential
annual cash incentive bonus, the amount of which was tied to achievement of
objectives established by the Compensation and Benefits Committee under
Ameriwood's Annual Incentive Plan, and for certain fringe benefits. The
agreement was of indefinite duration and provided for termination by either
party at any time.
<PAGE> 30
Under this agreement, if Ameriwood terminated Mr. Miglore for any reason
other than cause, he was entitled to receive severance of one year's
salary, the full amount of his target cash incentive bonus for the calendar
year of termination, and continuation of fringe benefits for twelve months.
In addition, for a 30-day period following such termination, Mr. Miglore
would have had the right to require the Company to purchase all shares of
Ameriwood stock then owned by him and all of his then-outstanding options
on Ameriwood stock to the extent they were exercisable on the termination
date. The purchase price for such shares and options would have been based
on the average high bid and low asked prices for the common stock on or
nearest the date he demanded such purchase--reduced, in the case of
options, by the option exercise prices. Ameriwood was not obligated to
provide any post-employment payments or benefits to Mr. Miglore if he
voluntarily terminated employment, or if his employment terminated by
death.
On January 29, 1996, Mr. Miglore's employment arrangement with the Company
was terminated and the parties entered into a "Mutual Termination and
Benefits Agreement" (filed herein as Exhibit 10(n)). Under the terms of
this agreement, Mr. Miglore received a lump sum settlement of $402,000 and
certain health and life insurance benefits for one year. In addition, he
received stock appreciation rights on 20,000 shares of the Company's common
stock, which expire on April 29, 1996, and will be settled at the spread
between (i) the average of the closing bid and asked price on the date
settled and (ii) $4.50. Also, should a "change in control" (see below)
occur during the nine months following termination of employment, Mr.
Miglore, under the terms of his Management Retention Agreement, is entitled
to the benefits described in the section below, except that the lump sum
severance payment would be multiplied by three, and the fringe benefits
would continue for three years. Mr. Miglore also resigned from the
Company's Board of Directors in March 8, 1996.
Management Retention Agreements
Ameriwood has entered into Management Retention Agreements with all of its
executive officers and certain other key employees. These agreements were
authorized by the Board of Directors, and were initially generated in
connection with a proposal to acquire the Company made in late 1992. The
purpose of the agreements is to reinforce and encourage such employees'
continued attention and dedication to their duties when faced with
potentially disturbing circumstances which might arise from the possibility
of a change in control of the Company. Each agreement remains in force for
the entire term of the pertinent person's employment. However, no benefits
could become payable under any agreement unless a "change in control"
should occur (as therein defined).
Under each executive's agreement, if such a change in control occurred, and
within 24 months thereafter the executive terminates his employment for
"good reason," or his employment is otherwise terminated for reasons other
than death, disability," voluntary" retirement or "cause" (terms defined in
the agreements), he would become entitled to (1) continuation of fringe
benefits for one year and (2) lump-sum cash severance payments in the
following amounts: (a) the total of annual salary, target annual incentive
bonus, and 9.5% of salary and target incentive; (b) the full amount of any
unvested employer contributions allocated to his account under the
ESOP/401(k) Plan; (c) for each share covered by an outstanding option on
Ameriwood stock then owned, the excess of market price (or if higher, the
highest price paid in connection with any change in control) over the
pertinent option exercise price, whereupon such options would be canceled;
and (d) reasonable legal fees and expenses incurred by him as a result of
<PAGE> 31
the termination. These fringe benefit and severance payment entitlements
are subject to the signing and delivery of a release, and to certain
potential payment reductions related to provisions of the Internal Revenue
Code. Each agreement further provides that if the Company terminates the
executive other than for cause or he terminates employment for good reason
prior to a change in control, should a change in control occur within nine
months thereafter, he would be entitled to the benefits and payments described
above as if his termination had occurred on the first business day following
the change in control.
Supplemental Executive Retirement Program
The Company believes that competitive retirement benefits are an integral
part of attracting and retaining key executives. Based on an independent
benefits consulting firm study, Ameriwood executive officers were up to 22%
below the average retirement "target replacement rate" (the desired
percentage of salary that would be available at retirement, through
retirement savings plans or other retirement vehicles) of ending salary of
the 300+ companies in its study. Ameriwood executive officers were below
the average rate primarily because of government regulations that currently
limit Company and executive contributions to Ameriwood's ESOP/401(k) Plan.
Therefore, on January 21, 1994, Ameriwood instituted a Supplemental
Executive Retirement Program (SERP) for all of its executive officers.
Under the SERP, Ameriwood has purchased variable life insurance policies
for each executive officer. Each policy is subject to a Split-Dollar Life
Insurance Agreement ("Split-Dollar Agreement") and a Severance Compensation
Agreement, under which ownership of the insurance policy lies with each
respective executive officer. Since Ameriwood is obligated to pay the
policy premiums, in consideration of such payments each executive officer
has assigned to Ameriwood a collateral security interest in his policy,
which is evidenced by a Collateral Assignment Agreement. Under the Split-
Dollar Agreement, executive officers may also make, at their option, after-
tax deposits to investment accounts established under the policies.
If an executive officer remains continuously employed full-time with
Ameriwood until he attains age 55, and employment is subsequently
terminated for any reason other than "cause" (as defined in the executive
officer's management retention agreement described in the preceding
section), the Company will release to the executive officer its collateral
security interest in the policy, which is equal to the total amount of
premiums paid to-date on that policy. The executive officer would receive
the cash surrender value of the policy, which would be taxable to the
executive officer and tax deductible to the Company. Should the executive
officer's employment with Ameriwood be terminated for any reason prior to
attaining age 55, the Company would receive the lesser of the cash
surrender value of the policy or the amount of its collateral security
interest on that executive officer's policy; the executive officer would
not be eligible for any benefit in these circumstances. If the Company
terminates the executive officer for cause, no benefit will be payable
under this program.
In the event of disability, an executive officer will be deemed to have met
the age requirement and will be entitled to the benefits described above.
Should an executive officer die while employed by Ameriwood, the Company
would be reimbursed for its security interest from the death benefit paid
out on the policy. The remainder of the death benefit would be issued to
the executive officer's named beneficiary; no other benefit would be
payable under the program.
<PAGE> 32
Ameriwood agrees that it will not merge or consolidate with any other
corporation or organization, or permit its business activities to be taken
over by any other organization, unless the other organization agrees to
assume the obligations under this program. Total premiums paid in
connection with the life insurance policies under this program were
approximately $34,000 in 1995. Each policy's annual premium remains
constant for as long as the policy remains in effect.
Additional Information
As applied to Joseph J. Miglore, the foregoing agreements and provisions
have been amended and/or supplemented by the "Mutual Termination and
Benefits Agreement" arising out of the termination of his employment, a
copy of which is filed herein as exhibit 10(n). As applied to Charles R.
Foley, the foregoing agreements and provisions have been amended and/or
supplemented by the "Letter Agreement" relating to his appointment as
Interim President and Chief Executive Officer, a copy of which is filed
herein as exhibit 10(q).
For more information on transactions between the Company and members of the
Board of Directors, refer to Item 13-Certain Relationships and Related
Transactions.
Stock Options
The following tables provides information concerning options to purchase
Ameriwood common stock granted to the named executives in 1995 and
unexercised
options held by the named executives at year-end. There were no options
exercised by the named executives during 1995.
- -------------------------------------------------------------------------------
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------
Individual Grants
------------------------------------------- Potential Realizable
% of Total Value at Assumed
Options/SARs Annual Rates of Stock
# Options Granted to Price Appreciation
/SARs Employees Exercise Expir- for Option Term (2)
Granted in Fiscal Price ation -----------------------
Name (1) Year ($/Share) Date 0% 5% 10%
- -------------------------------------------------------------------------------
Miglore 20,000 42.6% $8.875 02/07/05 $0 $111,629 $282,889
Meier 7,000 14.9% $8.875 02/07/05 $0 39,070 99,011
Hickman 7,000 14.9% $8.875 02/07/05 $0 39,070 99,011
Foley 7,000 14.9% $8.875 02/07/05 $0 39,070 99,011
- -------------------------------------------------------------------------------
(1) Options were granted under Ameriwood's 1993 Stock Incentive Plan, and
allow the exercise price to be paid in cash, shares of common stock, or any
combination thereof. All options were granted for maximum ten-year
terms and were immediately exercisable.
(2) Potential realizable values are based on arbitrarily assumed rates of
appreciation in the market value of Ameriwood common stock above the
exercise price and over the entire option term without any discount to
present value. As illustrated by the first column, without an
increase in the stock price above the market price at grant, there would be
no value realized. Ameriwood's closing stock price as of March 15, 1996
would have to increase by over 60% to equal the market price at grant for
these options.
<PAGE> 33
- -----------------------------------------------------------------------
FISCAL YEAR-END OPTION/SAR VALUES
- -----------------------------------------------------------------------
Value of Unexercised
Number of Unexercised In-the-Money Options / SARs
Options / SARS at Year-End at Year-End (1)
--------------------------- ---------------------------
Name Exercisable / Unexercisable Exercisable / Unexercisable
- -----------------------------------------------------------------------
Miglore 124,000 / 0 $ 0 / $ 0
Meier 28,000 / 0 0 / 0
Hickman 21,000 / 0 0 / 0
Foley 14,000 / 0 0 / 0
- -----------------------------------------------------------------------
(1) In-the-Money options are those for which, at year-end, the fair market
value of the underlying security exceeded the exercise price.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- --------------------------------------------------------------------------------
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
- ------------------------------- ------------------------------------------------
Sole Shared % of Class
Voting and Voting or Stock Issued and
Investment Investment Options Outstanding
Name Power Power(1) (2) Total (3)
- --------------------------------------------------------------------------------
Kevin K. Coyne 36,981 31,038(4) 20,000 88,019 2.09%
Neil L. Diver 152,500 36,000 40,000 228,500 5.40%
Joseph J. Miglore 10,000 5,867 124,000 139,867 3.24%
Richard J. Pigott 0 0 0 0 *
Edwin Wachtel 55,436 0 20,000 75,436 1.79%
Charles R. Foley 1,160 3,461 14,000 18,621 *
Gerald A. Hickman 0 1,712 21,000 22,712 *
James R. Meier 0 4,770 28,000 32,770 *
All directors and executive
officers as a group 265,077 88,482 284,400 637,959 14.26%
- -------------------------------------------------------------------------------
(1) Includes shares with respect to which the indicated person has shared
voting or investment power by reason of joint ownership, trust or
other contract or property right, and shares held by spouses and children
asto which the indicated person may have substantial influence by reason of
relationship. This total also includes, with respect to executive
officers of the Company, shares held by the ESOP/401(k) Plan allocated to
the accounts of such officers as of December 31, 1995.
(2) Shares which may be acquired via options exercisable within 60 days.
(3) In computing the percentage of beneficial ownership by an individual
(or by the group), shares shown under "Stock Options" for that individual
(or for the group,) are treated as issued and outstanding. Ownership of
less than 1% is indicated by "*".
(4) Of these shares listed for Mr. Coyne, 16,702 are owned of record by
his minor children and 14,336 are held in a trust for his brother's
children, to which Coyne is the trustee, but to which he has no monetary
interest. Mr. Coyne disclaims beneficial ownership of all of these
shares.
<PAGE> 34
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Europe Craft License Agreement
As previously noted, Edwin Wachtel, who is currently a member of the
Compensation Committee and served on that committee throughout 1995, was
President and Chief Executive Officer of Europe Craft Imports, Inc.
("Europe Craft") until September 1995. From March 1, 1992 until June 30,
1995, Ameriwood had an agreement with Europe Craft, which owns the Members
Only trademark, under which Ameriwood was granted an exclusive license to
use the trademark in the United States and its territories and possessions,
Canada, and Mexico. The trademark was used in connection with the
manufacture, distribution and sale of unassembled furniture produced from
designs approved by Europe Craft ("covered products").
Royalties payable under this agreement were based on a percentage of the
Company's Net Sales (as defined in the agreement) of covered products
manufactured and sold during a contract period, subject to minimum required
royalties of $100,000 for the 12-month period ended June 30, 1994, and
$130,000 for each succeeding twelve month period. The agreement also
required Ameriwood to comply with specified standards and practices
relating to use of the trademark, and contained cross-indemnifications
between Ameriwood and Europe Craft. During 1995, payments to Europe Craft
pursuant to this agreement were $65,000, the minimum amount due for the
first six months of 1995.
Other Matters
As previously noted, Neil L. Diver, who is currently a member of the
Compensation Committee and served on that committee throughout 1995, is the
Chairman of the Board of Ameriwood. However, neither Mr. Diver, nor any
other director serving on the Compensation Committee during 1995 is, or has
ever been, an employee or officer of Ameriwood or any of its subsidiaries.
Non-employee directors of Ameriwood may be compensated for consulting
services they may provide to the Company from time to time, as well as for
reimbursement of documented expenses incurred in rendering such services.
Payment consists of consulting fees at the rate of $125 per hour, subject
to a maximum of $1,000 per day, with all payments subject to approval by
the chairman of the Compensation Committee. With respect to this
arrangement, Mr. Diver received approximately $120,000 for actual time and
expenses incurred during 1995 in connection with litigation support,
environmental matters, investor relations, and strategic planning issues.
<PAGE> 35
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements. The following financial statements, all
of which are set forth in Item 8, are filed as a part of this
report:
- Report of Independent Accountants
- Consolidated Balance Sheets as of December 31, 1995 and 1994
- Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993
- Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1995, 1994 and 1993
- Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
- Notes to Consolidated Financial Statements
2. Financial Statement Schedule. The following financial statement
schedule is set forth in Item 8 and is filed as a part of this
report:
Schedule II--Valuation and Qualifying Accounts for the years
ended December 31, 1995, 1994 and 1993
3. Exhibits. Reference is made to the Exhibit Index on pages 37
through 40 of this Form 10-K report.
(b) 1. Reports on Form 8-K. No reports on Form 8-K were filed by the
registrant during the quarter ended December 31, 1995.
<PAGE> 36
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.
Ameriwood Industries
International Corporation
March 28, 1996 By /s/ Craig G. Wassenaar
------------------------------------
As Corporate Controller / Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. Each director
of the registrant whose signature appears below hereby appoints Craig G.
Wassenaar as his attorney-in-fact to sign in his name and on his behalf,
and to file with the Commission, any and all amendments to this report to
the same extent and with the same effect as if done personally.
March 28, 1996 /s/ Charles R. Foley
-------------------------------------
Charles R. Foley
Interim President and Chief
Executive Officer, Vice President of
Finance Chief Financial Officer
(Principal Executive and Financial Officer)
March 28, 1996 /s/ Craig G. Wassenaar
-------------------------------------
Craig G. Wassenaar
Corporate Controller / Treasurer
(Principal Accounting Officer)
March 28, 1996 /s/ Neil L. Diver
-------------------------------------
Neil L. Diver
Board Chairman
March 28, 1996 /s/ Kevin K. Coyne
-------------------------------------
Kevin K. Coyne
Director
March 28, 1996 /s/ Richard J. Pigott
-------------------------------------
Richard J. Pigott
Director
March 28, 1996 /s/ Edwin Wachtel
-------------------------------------
Edwin Wachtel
Director
<PAGE> 37
EXHIBIT INDEX
- --------------------------------------------------------------------------------
3(a) Restated Articles of Incorporation, as amended June 24,1993 (filed
as exhibit to Form 10-K for the year ended December 31, 1993
(Commission File No. 0-13805) and incorporated herein by reference)
3(b) Bylaws, as amended through January 28, 1996
4(a) Indenture of Trust relating to $5,000,000 Michigan Strategic Fund
Industrial Development Revenue Bonds due in 2006, and related Loan
Agreement, Letter of Credit Agreement, Mortgage and Security
Agreement and Irrevocable Transferable Letter of Credit (filed as
exhibits to Form 10-K for the year ended December 31, 1989 (Commission
File No. 0-13805) and incorporated herein by reference)
4(b) Second Amendment, dated June 19, 1992, to Letter of Credit with
Harris Trust and Savings Bank, dated November 1, 1986, relating to
Letter of Credit identified in Exhibit 4(a) (filed as exhibit to Form
10-Q for the quarter ended June 30, 1992 (Commission File No. 0-13805)
and incorporated herein by reference)
4(c) Third Amendment, dated January 13, 1995, to Letter of Credit with
Harris Trust and Savings Bank, dated November 1, 1986, relating to
Letter of Credit identified in Exhibit 4(a)(filed as exhibit to Form
10-K for the year ended December 31, 1994 (Commission File No.
0-13805) and incorporated herein by reference)
4(d) Letter of Credit Agreement Waiver with Harris Trust and Savings
Bank, dated February 27, 1996, relating to the Letter of Credit and
applicable amendments in Exhibits 4(a), 4(b), and 4(c)
4(e) Credit Agreement with Harris Trust and Savings Bank, dated June 19,
1992 (filed as exhibit to Form 10-Q for the quarter ended June 30, 1992
(Commission File No. 0-13805) and incorporated herein by reference)
4(f) Waiver to Credit Agreement with Harris Trust and Savings Bank,
dated December 30, 1994, relating to Credit Agreement identified in
Exhibit 4(e) and Letter of Credit identified in Exhibit 4(a) (filed as
exhibit to Form 10-K for the year ended December 31, 1994 (Commission
File No. 0-13805) and incorporated herein by reference)
4(g) Credit Agreement with Harris Trust and Savings Bank and The First
National Bank of Chicago, dated January 13, 1995 (filed as exhibit
to Form 10-K for the year ended December 31, 1994 (Commission File No.
0-13805) and incorporated herein by reference)
4(h) First Amendment to Credit Agreement and Waiver with Harris Trust
and Savings Bank, dated February 27, 1996, relating to Credit Agreement
identified in Exhibit 4(g)
4(i) Ameriwood Industries International Corporation common stock
certificate specimen (filed as exhibit to Form 10-Q for the quarter
ended March 31, 1993 (Commission File No. 0-13805) and incorporated
herein reference)
<PAGE> 38
EXHIBIT INDEX
- --------------------------------------------------------------------------------
4(j) Rights Agreement, as amended and restated as of March 15, 1996,
between Ameriwood Industries International Corporation and Harris Trust
and Savings Bank, as Rights Agent (filed as exhibit to Form 10-K for
the year ended December 31, 1994 (Commission File No. 0-13805) and
incorporated herein by reference)
The following material contracts identified with "*" preceding the exhibit
number are agreements or compensation plans with or relating to executive
officers, directors or related parties.
*10(a) 1984 Incentive Stock Option Plan, as amended (filed as exhibit to
Form 10-K for the year ended December 31, 1990 (Commission File No.
0-13805) and incorporated herein by reference)
*10(b) Ameriwood Industries 1992 Non-Employee Directors' Stock Option
Plan (filed as Exhibit A to the definitive proxy statement dated
June 26, 1992 relating to the Company's 1992 annual meeting
(Commission File No. 0-13805) and incorporated herein by reference)
*10(c) Ameriwood Industries 1995 Non-Employee Directors' Stock Option Plan
(filed as Exhibit A to the definitive proxy statement dated April
12, 1995 relating to the Company's 1995 annual meeting (Commission File
No.0-13805) and incorporated herein by reference)
*10(d) Ameriwood Industries 1993 Stock Incentive Plan (filed as Exhibit A
to the definitive proxy statement dated May 10, 1993 relating to the
Company's 1993 annual meeting (Commission File No. 0-13805)
incorporated herein by reference)
*10(e) Form of Stock Option Agreement dated February 14, 1991 with Neil L.
Diver (filed as exhibit to Form 10-K for the year ended December
31, 1990 (Commission File No. 0-13805) and incorporated herein by
reference)
*10(f) Rospatch Corporation Annual Incentive Plan (filed as exhibit to
Form 10-K for the year ended December 31, 1990 (Commission File No .0-
13805) and incorporated herein by reference)
*10(g) Description of non-employee directors consultation fee arrangements
(filed as exhibit to Form 10-K for the year ended December 31, 1992
(Commission File No. 0-13805) and incorporated herein by reference)
*10(h) Rospatch Corporation Irrevocable Indemnity Trust Agreement dated
August 13, 1990 (filed as exhibit to Form 10-Q for the quarter ended
June 30, 1990 (Commission File No. 0-13805) and incorporated herein by
reference)
*10(i) First Amendment to Rospatch Corporation Irrevocable Indemnity Trust
Agreement (filed as exhibit to Form 10-K for the year ended
December 31, 1991 (Commission File No. 0-13805) and incorporated herein
by reference)
<PAGE> 39
EXHIBIT INDEX
- --------------------------------------------------------------------------------
*10(j) Form of Indemnity Agreement entered into between the registrant and
certain persons, together with a list of such persons (filed as
exhibit to Form 10-K for the year ended December 31, 1994 (Commission
File No.0-13805) and incorporated herein by reference)
*10(k) Employment Agreement dated April 20, 1990 with Joseph J. Miglore
(filed as exhibit to Form 10-K for the year ended December 31, 1990
(Commission File No. 0-13805) and incorporated herein by reference)
*10(l) Addendum To Employment Agreement between registrant and Joseph J.
Miglore (filed as exhibit to Form 10-K for the year ended December
31, 1992 (Commission File No. 0-13805) and incorporated herein by
reference)
*10(m) Management Retention Agreement dated as of November 20, 1992
between the registrant and Joseph J. Miglore (filed as exhibit to Form
10-K for the year ended December 31, 1992 (Commission File No. 0-13805)
and incorporated herein by reference)
*10(n) Mutual Termination and Benefits Agreement dated as of January 18,
1996 between the registrant and Joseph J. Miglore
*10(o) Form of Management Retention Agreement dated November 20, 1992
between the registrant and certain persons, together with a list of such
persons (filed as exhibit to Form 10-K for the year ended December 31,
1992 (Commission File No. 0-13805) and incorporated herein by reference)
*10(p) Management Retention Agreement dated June 7, 1993 between the
registrant and Charles R. Foley (filed as exhibit to Form 10-K for the
year ended December 31, 1993 (Commission File No. 0-13805) and
incorporated herein by reference)
*10(q) Letter agreement regarding duties as Interim President and CEO
dated February 22, 1996 between the registrant and Charles R. Foley
*10(r) Variable Life Policies (Sections 1 - 3) for Joseph J. Miglore,
James Meier, Gerald A. Hickman, Charles R. Foley, and David N. Kraker,
dated January 21, 1994 (filed as exhibits to Form 10-K for the year
ended December 31, 1993 (Commission File No. 0-13805) and incorporated
herein by reference)
*10(s) Form of Variable Life Policy (Sections 4 - 19, Rider and
Endorsement) for executive officers of the registrant, together with a
list of such officers (filed as exhibit to Form 10-K for the year ended
December 31 ,1993 (Commission File No. 0-13805) and incorporated herein
by reference)
*10(t) Form of Split-Dollar Life Insurance Agreement dated January 21,
1994 between the registrant and certain persons, together with a list of
such persons (filed as exhibit to Form 10-K for the year ended December
31, 1993 (Commission File No. 0-13805) and incorporated herein by
reference)
<PAGE> 40
EXHIBIT INDEX
- --------------------------------------------------------------------------------
*10(u) Form of Collateral Assignment Agreement dated January 21, 1994
between the registrant and certain persons, together with a list of such
persons (filed as exhibit to Form 10-K for the year ended December 31,
1993 (Commission File No. 0-13805) and incorporated herein by reference)
*10(v) Form of Severance Compensation Agreement dated January 21, 1994
between the registrant and certain persons, together with a list of such
persons (filed as exhibit to Form 10-K for the year ended December 31,
1993 (Commission File No. 0-13805) and incorporated herein by reference)
*10(w) Form of License Agreement between registrant and Europe Craft
Imports, Inc. (filed as exhibit to Form 10-K for the year ended December
31, 1991 (Commission File No. 0-13805) and incorporated herein by
reference)
10(x) $4,500,000 Flightline Electronics, Inc. Junior Subordinated Note,
dated December 5, 1991; Endorsement of Note; Agreement between
Ameriwood Industries International Corp. and Flightline Electronics,
Inc.; and Assignment of Junior Subordinated Note (filed as exhibit to
Form 10-K for the year ended December 31, 1994 (Commission File No. 0-
13805) and incorporated herein by reference)
21 Subsidiaries of the Registrant
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
</TABLE>
FIRST AMENDMENT TO BYLAWS, AS AMENDED THROUGH JUNE 16,1994
The undersigned, Secretary of Ameriwood Industries Intentional
Corporation,certifies that the following is a true and correct copy of Article
II, Section 2 of the corporation Bylaws as amended by the Board of
Directors on January 28, 1996:
Section 2. Annual Meetings.
Annual meetings of the shareholders shall be held on such day as may
be determined by the Board of Directors from time to time, but not later
than a date which is fifteen (15) months following the previous annual
meeting of the shareholders, at such hour as shall be stated in the notice of
the meeting, at which the shareholders shall elect by a plurality vote
the successors of the class of directors whose term expires at the
meeting, together with directors to fill vacancies or newly created
directorships, and transact such other business as may properly be brought
before the meeting.
IN WITNESS WHEREOF, I have signed my name as Assistant Secretary of
the Corporation on this 25th day of March, 1996.
/s/ Charles R. Foley
- ----------------------------------
Charles R. Foley
Secretary, Interim Chief Executive
Officer and President, Chief
Financial Officer
February 27, 1996
Ameriwood Industries
International Corporation
171 Monroe NW, Suite 600
Grand Rapids, Michigan 49503
Gentlemen:
We refer to the Letter of Credit Agreement dated as of November 1,
1986 as amended by that certain First Amendment to Letter of Credit
Agreement dated as of April 25, 1988, as amended by that certain
Second Amendment to Letter of Credit Agreement dated as June 19, 1992,
and as amended by that certain Third Amendment to Letter of Credit
Agreement dated as of January 13, 1995 (the "Credit Agreement") and
currently in effect between the Company and us (the "Bank").
You have indicated that for the period ending December 31, 1995, the
Company will not be in compliance with a certain financial covenant of
the Letter of Credit Agreement. Accordingly, the Bank hereby agrees
to the following:
1. The Bank hereby waives any potential default or event of default
which may arise from the Company's failure at the end of any calendar
quarter ending prior to June 30, 1996 to comply with Section 8.8 of the
Credit Agreement. The foregoing is not, and shall not be deemed to be,
a waiver of the Company's obligation to maintain as of the last day
of the calendar quarter ending on June 30, 1996 a ratio for the
period of four calendar quarters then ending of Funds from Operations to
Indebtedness for Borrowed Money of not less than .40 to 1.O.
This shall not constitute a waiver of said Section as it may relate to
any other period nor shall it constitute a waiver of any other
covenant, provision or requirement of the Letter of Credit Agreement.
Harris Trust and Savings Bank
By /s/ Peter Krawchuk
- ----------------------------------
Vice President
Accepted and agreed to as of the date last above written.
Ameriwood Industries International Corporation
/s/ Craig G. Wassenaar
- --------------------------------
Its Corporate Controller / Treasurer
FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER
This first amendment to credit agreement and waiver, dated as of
February 27, 1996, by and among Ameriwood Industries International
Corporation, a Michigan corporation (the "Company"), Harris Trust and
Savings Bank in its capacity as agent for the Banks (the "Agent") and
the Banks. Terms which are defined in the Credit Agreement (as
hereinafter defined) shall have the same meaning herein as defined in
the Credit Agreement except to the extent that such definitions are
amended by this Amendment.
WITNESSETH THAT:
Whereas, the Company, the Banks and the Agent are party to that
certain Credit Agreement dated as of January 13, 1995 (together with
all exhibits, schedules, attachments and appendices thereto, the
"Credit Agreement");
Whereas, the Company has requested that the Credit Agreement be
amended to, among other things, modify certain covenants and other
provisions of the Credit Agreement and the Banks and the Agent are
agreeable to such request;
Whereas, the Company has requested that the Banks provide the waiver
set forth herein and the Banks are agreeable to granting such a waiver
on the terms and conditions set forth herein;
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Banks and the
Company hereby agree as follows:
1. AMENDMENTS
(i) The definition of "LIBOR Margin" appearing in Section 2.1(c) of
the Credit Agreement is hereby amended in its entirety to be and to
read as follows:
"LIBOR Margin" shall mean 1%, provided that upon the Company's
achieving at the end of any calendar quarter occurring on or after
December 31,1995, a ratio for any period of four calendar quarters then
ending of Funds from Operations to Indebtedness for Borrowed Money in
excess of.40 to 1.0, then the LIBOR Margin shall thereafter be subject to
adjustment as provided in Section 2.10 hereof.
(ii) The definition of "Required Banks" appearing in Section 5 of
the Credit Agreement is hereby amended in its entirety to be and to
read as follows:
"Required Banks" shall mean the Banks holding 100% of the outstanding,
principal amount of the Notes.
2. WAIVER
The Banks hereby waive any Potential Default or Event of Default
which may arise from the Company's failure at the end of any calendar
quarter ending prior to June 30, 1996 to comply with Section 8.8 of
the Credit Agreement. The foregoing is not, and shall not be deemed
to be, a waiver of the Company's obligation to maintain as of the last
day of the calendar quarter-ending on June 30, 1996 a ratio for the
period of four calendar quarters then ending, of Funds from Operations
to Indebtedness for Borrowed Money of not less than 40 to 1.O.
The waiver granted above is limited strictly to its terms, shall apply
only to the covenant and for the period described therein, shall not
extend or affect any of the Company's other obligations contained in
the Credit Agreement or the Notes and shall not impair any rights
consequent thereon. The Banks shall not have any obligation to issue
any further waiver with respect to the subject matter or the waiver of
any other matter. Except as expressly set forth herein, nothing
contained herein shall be deemed to be a waiver of, or shall in any
way impair or prejudice, any rights of the Agent or the Banks under
the Credit Agreement or the Notes.
3. MISCELLANEOUS
Except as expressly amended hereby, the Credit Agreement and all other
documents executed in connection therewith shall remain in full force
and effect in accordance with their respective terms. The Credit
Agreement, as amended hereby, and all rights and powers created
thereby and thereunder or under such other documents are in all
respects ratified and confirmed. From and after the date hereof, the
Credit Agreement shall be deemed to be amended and modified as herein
provided, but, except as so amended and modified, the Credit Agreement
shall continue in full force and effect in accordance with its terms
and the Credit Agreement and this Amendment shall be read, taken and
construed as one and the same instrument. On and after the date
hereof the term "Agreement" as used in the Credit Agreement and all
other references to the Credit Agreement in the Credit Agreement, the
other documents executed in connection therewith and/or herewith or
any other instrument, document or writing executed by the Company or
any other person or furnished to the Agent or the Banks by the
Company, or any other person in connection herewith or therewith shall
mean the Credit Agreement as hereby amended.
On and as of the date hereof, the Company represents and warrants
to the Banks that:
(a) its representations and warranties contained in this
Amendment and the Credit Agreement are true and correct in all
material respects, in each case as though made on and as of such
date, except to the extent such representations and warranties
relate solely to an earlier date (and then as of such earlier
date); and
(b) both before and after giving effect to this Amendment and
after giving effect to the waiver contained herein, no Potential
Default or Event of Default has occurred and is continuing
or would result from the execution and delivery of this
Amendment or any other document arising in connection with or
pursuant to this Amendment; and
(c) the Company is, and will be, in full compliance with all of the
material terms, conditions and all other provisions of this
Amendment and the Credit Agreement; and
(d) this Amendment has been duly authorized, executed and delivered on
its behalf, and both the Credit Agreement, both before being
amended and supplemented hereby and as amended and supplemented
hereby, and this Amendment constitutes its legal, valid and
binding obligation enforceable against it in accordance with its
terms, except to the extent that a remedy or default may be
determined by a court of competent jurisdiction to constitute a
penalty and except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights or by general
principles of equity.
The Company agrees promptly to pay or reimburse all out-of-pocket
costs and expenses of the Agent, including the expenses and reasonable
fees of Chapman and Cutler, legal counsel for the Agent, relating to
the preparation, execution and delivery of this Amendment and any
other documents referred to in this Amendment.
This Amendment may be signed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Except as otherwise specified herein, this Amendment embodies the entire
agreement and understanding between the Company, the Agent and the
Banks with respect to the subject matter hereof and supersedes all
prior agreements, consents and understandings relating, to such
subject matter.
This Amendment shall be binding upon and inure to the benefit of the
Agent and the Banks and their successors and assigns and the Company
and its permitted successors and assigns.
IN WITNESS WHEREOF, the Company, the Agent and the Banks have caused this
Amendment to be duly executed as of the date first hereinabove written.
AMERIWOOD INDUSTRIES INTERNATIONAL CORP.
Attest:
/s/ Charles R. Foley By /s/ Craig G. Wassenaar
- ---------------------- -----------------------------------
Its Secretary Its Corporate Controller / Treasurer
HARRIS TRUST AND SAVINGS BANK,
individually and as Agent
By /s/ Jeffrey C. Nicolson
-----------------------------------
Its Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Nathan L. Bloch
-----------------------------
Its Vice President
MUTUAL TERMINATION AND BENEFITS AGREEMENT
THIS AGREEMENT, dated as of the 18th day of January 1996, by and among
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION, a Michigan corporation
(the "Company") , and JOSEPH J. MIGLORE ("Employee").
WITNESSETH:
WHEREAS, the Company and Employee are parties to (i) a certain Employment
Agreement dated April 20, 1990, as amended by an Addendum to Employment
Agreement dated November 25, 1992 (the "Employment Agreement") pursuant to
which Employee has been employed as the President and Chief Executive Officer
of the Company,(ii) a certain Management Retention Agreement dated
November 20, 1992 (the "Retention Agreement"), and (iii) a certain Split-Dollar
Life Insurance Agreement dated January 21, 1994 ("Split-Dollar Agreement")
and related Severance Compensation Agreement dated January 21, 1994 ("Related
Agreement"); and
WHEREAS, the Company and Employee have carried on discussions and
reached certain understandings concerning Employee's resignation as an
employee and officer of the Company; and
WHEREAS, the Employment Agreement, the Retention Agreement, the Split-Dollar
Agreement and the Related Agreement contain provisions concerning termination
benefits in the event the Employee's employment is terminated under certain
circumstances; and
WHEREAS, the Company and Employee desire to terminate and supersede
the Employment Agreement, the Split-Dollar Agreement and the Related Agreement.
NOW, THEREFORE, in consideration of the premises, the agreements and
understandings contained herein, and the payments to be made by the Company
pursuant hereto, the Company and Employee mutually agree as follows:
1. Resignation. Employee shall resign as an employee and officer of the
Company, effective 11:59 a.m., January 28, 1996 (the "Effective Date"). The
Employment Agreement, the Split-Dollar Agreement and the Related Agreement
shall remain in full force and effect until the Effective Date. The Employment
Agreement, the Split-Dollar Agreement and the Related Agreement, and all other
agreements, commitments and understandings between the Company and Employee,
whether oral or written, shall terminate and end as of the Effective Date;
provided, however, that the Retention Agreement shall continue and be
operative in accordance with Section 4 (vii) thereof with respect to any change
of control (as defined in the Retention Agreement) as may occur during
the nine-month period referred to therein. Employee shall simultaneously
resign as trustee or committee member of any Company-sponsored benefit plan,
effective as of the Effective Date.
2. Payments and Benefits. In consideration of the agreements and
undertakings of Employee contained herein, and in full accord,
satisfaction and discharge of any and all obligations, agreements
(including the Employment Agreement), commitments and understandings, the
Company shall:
a. On the later of (i) January 29, 1996; or (ii) the day following the
expiration of the seven-day period referred to in Paragraph 11
hereof (the "Payment Date"), pay Employee the sum of $402,000, less
any taxes and other deductions required to be withheld by law.
b. For the period commencing on the Effective Date and ending January
28, 1997 (the "Payment Period") , provide Employee and his family
with the full health, dental and group life and accident (but
excluding the existing split-dollar life policy) insurance benefits
presently made available by the Company to the Employee in
accordance with the Employment Agreement; provided, however, the
amount of such payments shall be reduced to reflect any duplicative
benefits provided by a successor employer of Employee.
3. Options; SARS. The following agreements are made with respect
to options theretofore or hereby issued to Employee:
a. Any options issued to Employee under the Company's 1984 or 1993
Stock Incentive Plan (the "Plan") which are vested and outstanding
on the Effective Date shall be exercisable for the period following
the Effective Date equal to the period provided in the respective
Stock Option Agreements by which such options were issued to
Employee for exercise of vested options following termination of
employment.
b. Effective as of the Payment Date, the Company shall grant Employee
stock appreciation rights on 20,000 shares of the Company' s Common
Stock, which rights shall expire on April 29, 1996 and be settled at
the spread between (i) the average of the closing bid and asked
price of the Company's Common Stock on the date settled and (ii)
$4.50.
4. Split-Dollar Arrangements. As provided in Article XII of the
Split-Dollar Agreement, on the Payment Date Employee shall pay to the
Company the Corporation's Interest in the Policy (as defined in the
Split-Dollar Agreement and determined as of the close of business on
January 26 to take into account the payment and posting of all
premiums paid by the Company prior to the Payment Date) and receive
from the Company a release of its interest in the Policy. From and
after the Payment Date, Employee shall be the owner of the Policy,
free and clear of any claims and interests of the Company, whether
under the Split-Dollar Agreement, the Related Agreement or otherwise.
Employee and the Company shall execute and deliver such documents as
the issuer of the Policy shall require to effect the relinquishment of
rights as aforesaid.
5. Release by Employee. In consideration of the payments and
reimbursements to be made hereunder by the Company (which Employee
acknowledges as good and valuable consideration and which constitute,
in whole or in part, monies or benefits to which Employee is not
otherwise entitled under the Employment Agreement or otherwise),
Employee, on behalf of himself and his heirs, legal representatives
and assigns, hereby releases and forever discharges the Company, and
its subsidiaries, divisions, units, successors, affiliates,
shareholders, directors, officers, agents, employees and former
employees (hereinafter the "Released Parties") of and from all
actions, causes of action, claims, demands, compensatory. exemplary,
statutory and punitive damages, costs, suits, debts, dues, sums of
money, accounts, reckonings, bills, covenants, contracts, liens,
controversies, agreements, promises, variances, trespasses,
executions, liability and any all consequential damages whatsoever, in
law or in equity, which Employee, individually, or in any
representative capacity, had, now has or may have or shall have
against the Released Parties by reason of any matter, fact,
representation, cause or thing of any conceivable kind and character
whatsoever, and which occurred up to the Effective Date, including
specifically, but not by way of limitation, any and all claims of
discrimination, wrongful discharge, breach of contract, fraud,
promissory estoppel, misrepresentation, retaliation, all claims under
or in connection with the Age Discrimination in Employment Act, the
Older Workers Benefit Protection Act, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Employee Retirement
Income Security Act of 1974, the Michigan Elliott-Larsen Civil Rights
Act, the Michigan Handicappers, Civil Rights Act, the Michigan Workers
Disability Compensation Act, The Americans with Disabilities Act, and
any other Michigan and federal statutes and the common law of the
State of Michigan and the United States, actions based on torts,
public policy, defamation or injuries incurred on the job or incurred
as a result of loss of employment, and any and all claims and demands
of every conceivable kind based upon or in connection with or
involving Employee's employment and the termination of such
employment.
6. Waiver. In further consideration, Employee, on behalf of himself, his
heirs, legal representatives and assigns, hereby covenants with the Released
Parties that he will not sue or proceed in any manner, whether at law or in
equity, against any of them, for and account of any claim of any nature
whatsoever, including but not limited to any claim for injuries or
compensatory, exemplary, statutory or punitive damages as the result of the
events arising out of or relating in any way to Employee's employment or the
termination of such employment with the Company.
7. Release by Company. For good and valuable consideration, the
Company, and its subsidiaries, divisions, units, successors,
affiliates, shareholders, directors, officers, agents, employees and
former employees (hereinafter the "Releasees") hereby release and
forever discharge Employee, his heirs and personal representatives
(the "Released Parties") of and from all actions, causes of action,
claims, demands, compensatory, exemplary, statutory and punitive
damages, costs, suits, debts, dues, sums of money, accounts,
reckonings, bills, covenants, contracts, liens, controversies,
agreements, promises, variances, trespasses, executions, liability and
any all consequential damages whatsoever, in law or in equity, which
the Releasees, individually, or in any representative capacity, had,
now have or may have or shall have against the Released Parties by
reason of any matter, fact, representation, cause or thing of any
conceivable kind and character whatsoever, and which occurred up to
the Effective Date.
8. Waiver. In further consideration, the Releasees covenant with
the Released Parties that they will not sue or proceed in any manner,
whether at law or in equity, against any of them, for and account of
any claim of any nature whatsoever, including but not limited to any
claim for injuries or compensatory, exemplary, statutory or punitive
damages as the result of the events arising out of or relating in any
way to Employee's employment or the termination of such employment
with the Company.
9. Indemnification. Nothing contained herein shall alter, amend or
limit in any way Employee's right and entitlement as an officer,
director and employee of the Company to be indemnified by the Company
in accordance with, and subject to, the Certificate of Incorporation
and Bylaws of the Company and the most recently dated Indemnification
Agreement between Employee and the Company.
10. Additional Agreements. Employee and the Company hereby make the
following additional agreements:
a. Throughout the Payment Period and continuing thereafter, Employee
agrees to keep confidential all trade secrets, customer lists,
business strategies, financial and marketing information, and other
data concerning the private affairs of the Company or any of its
affiliates made known to or developed by Employee during the course
of his employment by the Company, or during the Payment Period (the
"Confidential Information"), not to use any Confidential Information
or supply Confidential Information to others other than in
furtherance of the Company's business, and to return to the Company
all copies, in whatever form, of all Confidential Information and
other documents relating to the business of the Company or of any of
its affiliates which may be in the possession or under the control
of Employee. Further, Employee acknowledges and agrees that any
intellectual property of any sort developed or invented by Employee
while employed by the Company (or any at time during the Payment
Period) whether or not during work hours, shall be and remain the
sole and exclusive property of the Company, and Employee shall have
no interest therein.
b. Employee agrees that, during the Payment Period and for one (1) year
thereafter, he will make no attempt whatsoever to induce or
encourage any employee of the Company or any of its affiliates to
leave such employment for employment with any other entity with
which Employee is associated and which is engaged in any line of
business which is competitive with the Company or any of its
affiliates.
c. From and after the Effective Date, neither Employee nor the Company
shall make any public statements concerning the other, without the
prior written consent of the other, and will make no statements
which disparage or discredit the other, except as the Company shall
be required to do to fulfill its disclosure obligations under
applicable law. Employee shall have the right to review and comment
on the draft press release announcing his resignation from the
Company.
d. Employee will make himself available, on reasonable advance notice
and at reasonable times, to be interviewed by counsel to the Company
and as a witness (by deposition or at trial) in connection with any
suits or proceedings in which the Company is involved as of the
Effective Date.
11. Waiting and Revocation Periods. Employee expressly acknowledges that
he has consulted an attorney of his choice and reviewed the terms of this
Agreement with such counsel. Employee further acknowledges that he has had
twenty-one (21) days with which to consider the terms of this Agreement and
to review its terms and conditions with his attorney. Employee understands
and agrees that this Agreement is revocable by either party for seven (7) days
after its execution by both parties, and that this Agreement shall not
become effective or enforceable until such period has expired. This
Agreement automatically becomes enforceable and effective on the 8th day
after the date this Agreement is signed by the parties. This Agreement may
be revoked by a writing sent certified mail by either party post-marked no
later than the 7th day after the Agreement is signed by both parties (unless
that day is a Sunday or a holiday, in which event the period is extended to a
day there is mail service).
12. Entire Agreement. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof and supersedes all other
agreements or understandings, including, but not limited to the Employment
Agreement and the Retention Agreement. This Agreement cannot be altered or
amended except in writing, which writing must be signed by Employee and the
Chairman of the Company. In no event shall this Agreement be modified by any
oral statements, agreements, commitments or understandings.
13. Free Act and Deed. The Company and Employee acknowledge that they
have reviewed this Agreement, understand its terms and execute this Agreement
as their free act and deed. Employee further acknowledges that he has been
afforded the opportunity to review this Agreement with counsel of his own
choice and that he knowingly and voluntarily approves this Agreement.
14. Choice of Law and Severability. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of
Michigan applicable to contracts made and to be performed within such State.
If any provision of this Agreement shall for any reason be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof, but this Agreement shall, in such event, be construed as if
such invalid and/or unenforceable provision had never been contained herein.
15. Arbitration. Any controversy, dispute, or claim arising out of or
relating to this Agreement or any claimed breach thereof shall be settled by
arbitration in accordance with the commercial rules of the American
Arbitration Association at its Southfield, Michigan offices. Judgment
upon any award may be entered in any circuit court or other court having
jurisdiction thereof, without notice to the opposite party or parties.
Anything contained herein to the contrary notwithstanding, this agreement to
arbitrate shall not be deemed to be a waiver of the Company' s right to
secure equitable relief including injunction (whether as part of or separate
from the arbitration proceeding) if and when otherwise appropriate.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THIS IS A RELEASE. READ BEFORE SIGNING.
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION
By /s/ Neil Diver
- ------------------------------------
Neil Diver
Its Chairman, on behalf of the Board
/s/ Joseph J. Miglore
- ------------------------------------
Joseph J. Miglore
February 19, 1996
Mr. Neil L. Diver
1988 Jackson Street
San Francisco, CA 94109
Dear Neil:
This letter outlines changes based on our discussion of the February 15
Compensation Committee meeting regarding a compensation package for my
new and additional responsibilities as Interim Chief Executive Officer.
I sincerely believe this package is balanced in the sense that is reasonable,
fair to the company and me, and allows flexibility.
Base salary of $150,000, retroactive to January 1, 1996. This would
continue, except for normal base salary adjustment (and "normal" bonus
opportunities), after the "new" CEO commences employment.
An initial "interim" bonus opportunity of up to $50,000 for
accomplishment of what I perceive to be the most significant objectives
of my "interim" responsibilities (see attachment). This bonus would be
payable July 15, 1996. The Board will give due consideration for
substantial accomplishment for the majority of objectives listed.
Please note that I believe at least a couple of the objectives have
already been accomplished, as indicated.
An additional bonus opportunity of up to $25,000 for meeting the Third
Quarter AOP pre-tax earnings, adjusted for "one-time" expense adjustments
(such as severance, bankruptcies, or other "non-operating" expenses).
Additionally, consideration will be given for identification
or implementation of additional savings or "incremental business" margin
opportunities that occur in Q3 but may not be realized until subsequent
periods. This bonus amount is payable October 15, 1996.
20,000 Ameriwood Stock Appreciation Rights (SAR's) at the closing price
on February 15, 1996 ($4.00), with ability to exercise commencing at any
point beginning 90 days from the employment of a Chief Executive Officer
and upon notification to the company, except in the event of
termination, in which case I can exercise the rights immediately up
until 90 days following termination.
It is unlikely that I will be able to use all of this year's vacation
before my anniversary date of June 7, 1996, after which it can't be
"rolled over" into future anniversary years under our normal policy. I
understand this year's unused vacation is approved for continuance or
"rollover" into future anniversary years.
Severance, while Interim CEO, if terminated, of a lump sum equal to six
months base salary, payable on my last day of employment; coverage for
six months of group health, medical, disability, and term life insurance
for self and two children; $6,500 payment for outplacement assistance;
the allowable 401-k and ESOP contributions under our plan document;
payment for accrued (including the "rolled over" as noted above)
vacat ion; and the ability to purchase my SERP at the then cash surrender
value. However, the base salary (and group health, medical, disability,
and term life insurance for self and two children noted above) portion
will increase to twelve months, after ninety days of employment of a new
CEO. This severance amount will remain at this level for one year,
after which it will return to the six month amount.
My existing agreements (such as the "Management Retention Agreement,"
Incentive Plans, Indemnification Agreements and others) will not be
affected or superseded by any of the above.
I want you to know that I am genuinely excited and confident regarding
the challenging months ahead as interim CEO. I assure you that I am
positive and that you can count on my total effort and commitment
during this important period. I also sincerely appreciate both your
and the Board's confidence in me and the opportunities provided to me.
Respectfully,
/s/ Charles R. Foley
- -------------------------------
Charles R. Foley
Interim Chief Executive Officer
/s/ Neil L. Diver February 22, 1996
- ------------------------------- -----------------
Neil L. Diver, Chairman Date
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Rospatch Jessco Corporation Michigan
Tiffin Enterprise, Inc. Ohio
(A) B.I.C. America, Inc. Ohio
Rospatch Orlando, Inc. Delaware
(B) Rospatch Carpinteria, Inc. California
(A) A wholly-owned subsidiary of Tiffin Enterprise, Inc.
(B) A wholly-owned subsidiary of Rospatch Orlando, Inc.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Ameriwood Industries International Corporation on Forms
S-8 (File Nos. 2-72163, 2-99965,33-46777 and 33-67494) of our report,
dated March 25, 1996, on our audits of the consolidated financial
statements and financial statement schedule of Ameriwood Industries
International Corporation as of December 31, 1995 and 1994, and for
each of the three years in the period ended December 31, 1995, which
report is included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
- -------------------------------
Coopers & Lybrand L.L.P.
Grand Rapids, Michigan
March 25, 1996
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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