SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee required) for the fiscal year ended December
31, 1997
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required) for the transition period
Commission File No. 0-13805
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan (State of incorporation)
38-0983610 (IRS Employer Identification Number)
168 Louis Campau Promenade, Suite 400, Grand Rapids, Michigan, 49503
(616) 336-9400
(Address of principal executive offices, zip code, 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 11, 1998, 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 $22,032,700 based on the last sale price on that date as reported on
The Nasdaq Stock Market.
As of March 11, 1998, 4,349,606 shares of the registrant's Common Stock,
$1 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Certain information from the
registrant's definitive proxy statement relating to the 1998 annual
meeting of shareholders is incorporated in Part III of this report by
reference.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Ameriwood Industries International Corporation ("Ameriwood" or the
"Company") was originally incorporated in Michigan in 1915. It is the
successor to "Rose Patch and Label Company", and later "Rospatch
Corporation", which reflected the original business--the production of
fabric patches and labels. In 1991, 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 168 Louis Campau Promenade, Suite 400,
Grand Rapids, Michigan, 49503, and its telephone number is (616) 336-
9400.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
All of Ameriwood's operations, for purposes of the consolidated financial
statements included as part of this report, are in the Wood Products
industry segment (see Part II, Item 8--Financial Statements and
Supplementary Data).
NARRATIVE DESCRIPTION OF BUSINESS
Principal Products
Ameriwood manufactures unassembled furniture, stereo speaker cabinets and
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 or customers.
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
Custom Solutions" (formerly "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, military
exchanges, and warehouse clubs. Furniture products include, among other
items, office furniture, computer furniture, wall units/organizers,
storage units, wardrobes, bookcases, utility carts, television and VCR
stands, entertainment centers, home theater units and kitchen and bedroom
furniture.
Ameriwood Custom Solutions produces stereo speaker cabinets and
components. These products are sold primarily to consumer electronics
manufacturers, including certain major audio component companies. In
addition, Ameriwood Custom Solutions sells custom products for the point
of purchase and fixtures market, for interactive kiosk cabinets, and for
institutional uses. It also sells Company-fabricated wood grain and
opaque laminated particle board to a variety of manufacturers for use in
kitchen and bathroom cabinets, office partitions, and other furniture and
building products.
Raw Materials
Particle board is the principal raw material used; other raw materials
include furniture hardware, lamination paper and vinyl, corrugated
packaging, glass, and various electronic components. Ameriwood purchases
raw materials from various domestic and foreign suppliers. These items
are available from numerous sources, and, to date, no significant
difficulty has been experienced in obtaining them.
Patents and Trademarks
No significant portion of Ameriwood's business is dependent upon a single
patent, series of patents, or trademark.
Seasonality
The Company believes there is some seasonality in the demand for its
products. Historically consolidated net sales are stronger in the third
and fourth quarters of the year.
Certain Working Capital Items
The Company engages in no unusual practices with regard to inventories,
receivables, or other items of working capital.
Significant Customers
In 1997, 1996, and 1995, no single customer accounted for 10% or more of
consolidated net sales.
Backlog
The Company believes that order backlog at any particular point in time
is not predicative of future sales performance. As is standard in the
furniture industry, a customer may change or cancel an order prior to
shipment in order to react to changes in consumers' demands.
Competition
Ameriwood Furniture competes with a large number of unassembled and
assembled furniture manufacturers. Based on industry publications and
other sources, Ameriwood believes it is the sixth largest US manufacturer
of unassembled furniture. Principal methods of competition are price,
design, quality, marketing support, and service. Ameriwood Custom
Solutions 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. Management believes
the Company has sufficient resources, material and personnel to compete
effectively in its present businesses.
Research and Development
Company research and product development costs are expensed as incurred
and were $527,600 in 1997, $642,200 in 1996, and $546,700 in 1995.
Customer-sponsored research and development activities are not
significant to Ameriwood's operations.
Environmental Matters
The Company has accrued certain environmental investigation and
remediation costs in its financial statements (see Item 7--Environmental
Matters and Note 6--Contingencies in the accompanying 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, 1997, Ameriwood employed approximately 700 associates on
a full- time basis. The Company does not regularly employ part-time
persons, but does utilize a temporary work force as necessary to meet
peak demand.
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 North America, but
principally in the United States. Export sales were $2,197,200 in 1997,
$2,784,700 in 1996, and $3,385,100 in 1995.
ITEM 2. PROPERTIES
In the aggregate, Ameriwood owns approximately one million square feet of
space consisting of manufacturing, warehouse and office space located in
Dowagiac, Michigan, and Tiffin, Ohio. Management considers all of the
Company's material properties and equipment to be well-maintained, in
good operating condition, and adequate for their purposes.
The Dowagiac, Michigan facility secures the Company's indebtedness
pursuant to $5 million of Michigan Strategic Fund Industrial Development
Revenue Bonds and its reimbursement obligations to the issuer of a letter
of credit collateralizing these bonds (see Note 3--Borrowing Arrangements
in the accompanying financial statements).
ITEM 3. LEGAL PROCEEDINGS
In April 1997, Ameriwood reached a settlement related to its long-
standing litigation against its former auditors. The litigation related
to services provided to the Company from 1986 to 1990. Under the terms
of the settlement, which was reached in US District Court for the Western
District of Michigan, in Grand Rapids, Michigan, Ameriwood received $6.25
million, before related expenses. Additionally, a counterclaim against
the Company was dropped. The settlement, net of expenses, resulted in a
one-time after tax gain of $5.1 million, or $1.18 per share for the year
ended December 31, 1997. The recovery is considered a return of capital
and therefore, is not subject to income taxes.
The Company is not currently a party to any material legal proceedings.
The Company is from time to time a party to certain other lawsuits and
has been threatened with litigation arising out of the normal course of
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Ameriwood's only outstanding equity is common stock; $1 par value per
share, traded on The Nasdaq Stock Market under the symbol AWII. As of
March 13, 1998, there were approximately 1,700 shareholders of record.
No dividends were paid or declared for 1997 or 1996. Please refer to
Note 11--Common Stock Purchase Rights in the accompanying financial
statements for a description of the Company's Rights Agreement. The
table below shows high and low sale prices reported by The Nasdaq Stock
Market for the periods indicated.
Year Quarter High Low
---- ------- ------ ------
1997 Fourth $ 7.75 $ 4.50
Third 7.38 5.50
Second 8.75 6.63
First 10.75 7.50
1996 Fourth $ 9.75 $ 8.13
Third 9.00 5.75
Second 6.75 5.38
First 5.75 3.88
ITEM 6. SELECTED FINANCIAL DATA
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Amounts in thousands, except per share data)
OPERATIONS
Net sales $94,553 $114,547 $105,998 $109,997 $103,934
Operating income (loss) (4,449) 1,549 (4,236) 5,577 7,125
Net income (loss) 2,524 480 (3,368) 8,625 5,099
Basic earnings (loss)
per share $0.59 $0.11 $(0.80) $2.02 $1.21
Weighted average shares
outstanding 4,303 4,255 4,209 4,259 4,221
Dividends per share -- -- -- -- --
FINANCIAL POSITION
Total assets $57,800 $66,506 $60,365 $63,385 $49,865
Long-term debt 5,000 11,600 7,000 7,300 5,000
Shareholders' equity 41,103 37,969 37,211 40,578 31,917
Book value per share $9.45 $8.94 $8.88 $9.69 $7.63
See Item 8 for complete consolidated balance sheets as of December 31,
1997 and 1996, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1997, and the notes thereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS -- 1997 Compared to 1996
Consolidated net sales of $94.6 million for the twelve months ended
December 31, 1997 were down 17.5% from 1996. Furniture sales of $69.2
million were down $18.9 million as compared to the prior year, due
primarily to the loss of a major account in the office superstore channel
and lower sales in the warehouse clubs channel. Custom Solutions had net
sales of $20.8 million for the year, compared to $22.2 million in 1996.
Although Custom Solutions' overall net sales declined, the non-audio
portion of the business increased by 14.9% from the prior year reflecting
efforts and investments to grow this segment. BIC America speaker sales
increased by 7.1%, from $4.2 million in 1996 to $4.6 million in 1997.
Gross profit as a percentage of net sales was 18.0% for 1997 as compared
to 21.0% in 1996. The decline in gross profit is due principally to
unfavorable overhead absorption variances from reduced production
schedules.
Selling, general, and administrative expenses (SG&A) for 1997 were $21.9
million, up less than 2% from $21.7 million in 1996. In the third
quarter of 1997, the Company implemented several cost control and process
improvement measures, including the centralization of many support
functions, which helped to control SG&A costs. These savings were offset
by a $0.5 million increase in bad debt.
In 1997, the accrual for environmental remediation was revised to reflect
current estimates of future costs, resulting in a credit to operating
expenses of $0.5 million. For more information, see "Environmental
Matters" below, and Note 6--Contingencies in the accompanying financial
statements.
Included in income for 1997 is a one-time after tax gain of $5.1 million,
net of related expenses, for a settlement related to litigation against
the Company's former auditors (see Note 12--Shareholder Litigation and
Settlements in the accompanying financial statements).
As a result of the operating loss and expenses incurred in connection
with the litigation settlement, Ameriwood was able to carryback these
losses along with certain other credits to realize a refundable tax
benefit. With these carrybacks and the net gain for the litigation
settlement, Ameriwood recorded net income of $2.5 million, or $0.59 per
share for the twelve months ended December 31, 1997, compared to $0.5
million, or $0.11 per share, for the twelve months ended December 31,
1996.
RESULTS OF OPERATIONS -- 1996 Compared to 1995
Consolidated net sales for 1996 were $114.5 million, compared to $106.0
million in 1995, an increase of 8.1%. Furniture sales increased 14.5% to
$88.1 million, accounting for 76.9% of total net sales in 1996.
Increases were experienced in various distribution channels, including
office superstores, catalog showrooms, home centers and warehouse clubs.
Custom Solutions net sales decreased $1.9 million to $22.2 million.
Custom Solutions, primarily an original equipment manufacturer of speaker
products, was negatively affected by weak sales in the consumer
electronics channel of distribution throughout 1996. The consumer
electronics environment also contributed to the decline in sales volume
of $0.8 million to $4.2 million in 1996 for BIC America, the Company's
own proprietary brand of stereo speakers.
Gross profit as a percent of net sales improved to 21.0%, compared with
18.1% in 1995, and was favorably impacted by productivity gains in the
Company's two manufacturing facilities, stabilizing raw material prices
and the development of products designed to sell at a higher retail price
point.
SG&A expenses as a percentage of net sales declined from 19.7% in 1995 to
18.9% in 1996, benefiting from a streamlining of the organization, offset
by increased spending on advertising. During 1995, several customers
filed for bankruptcy protection, resulting in bad debt expense of $1.0
million, compared to $0.4 million in 1996. Operating expenses in 1995
also included a $1.4 million pre-tax charge for management
reorganization. The reorganization eliminated layers of management in
order to reduce fixed costs.
In the fourth quarter of 1996, the Company recorded a pretax charge of
$1.15 million in connection with the voluntary recall of an imported
futon cushion (see Note 7--Product Recall in the accompanying financial
statements). Also included in operating expenses in the fourth quarter
of 1996 was a credit of $0.4 million for recovery of amounts previously
charged against income for environmental matters. In 1995 a $1.2 million
pre-tax charge was recorded for environmental remediation related to the
Company's Dowagiac, Michigan facility (see the "Environmental Matters"
section following and Note 6--Contingencies in the accompanying financial
statements).
The Company recorded litigation related costs of $0.4 million in the
fourth quarter of 1996 in a matter in which it was the plaintiff in a
suit against its former auditors (see Note 13--Shareholder Litigation and
Settlements in the accompanying financial statements). Interest expense
increased $0.2 million to $0.5 million in 1996 as a result of increased
borrowing caused by working capital needs and the investment of $3.8
million in capital equipment.
For the twelve months ended December 31, 1996, Ameriwood recorded net
earnings of $0.5 million, or $0.11 per share, compared to a net loss of
$3.4 million, or $0.80 per share, in 1995.
ENVIRONMENTAL MATTERS
During 1989, the Company discovered environmental contamination at its
facility in Dowagiac, Michigan, which was reported to the appropriate
state environmental agency. A remedial investigation and feasibility
study (RI/FS), including final estimates of costs necessary to remediate
the site, was completed in 1996 by an independent consulting engineering
firm. The RI/FS is undergoing review by the State of Michigan. Based on
the opinion of the independent engineering firm and legal counsel, the
Company believes it will receive a favorable ruling.
Costs of $1.2 million in 1995 and $0.3 million in 1994 were recognized as
pretax charges to results of operations to cover costs related to the
Dowagiac site, including ongoing monitoring for up to 30 years. Based on
revised remediation estimates provided by the independent consulting
engineering firm, the Company reversed $0.5 million of the amount
previously charged to income at December 31, 1997. Ameriwood filed suit
against certain parties who might be required to contribute toward
cleanup of this site. Settlement agreements were reached with the
involved parties and $50,000 and $0.4 million was included in income in
1997 and 1996 respectively. As of December 31, 1997, the Company has
reserves recorded of $1.1 million. The current portion, $0.4 million, is
included in other current liabilities and the remainder, $0.8 million, is
included in other long-term liabilities.
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. The Company believes any additional costs beyond the amounts
recorded will not be material to its financial position or results of
operations.
CAPITAL RESOURCES AND LIQUIDITY
Ameriwood has continued to maintain a strong financial position and
liquidity. At December 31, 1997, working capital was $24.5 million and
the ratio of current assets to current liabilities was 3.7 to 1. Net
accounts receivable were down $7.6 million and net inventories were down
$4.2 million from December 31, 1996 levels. These declines were
primarily the result of lower sales volume. Cash provided by operating
activities of $9.7 million was used primarily to fund capital
expenditures of $3.8 million and pay off outstanding borrowings on the
Company's revolving credit agreement. There were no outstanding
borrowings on the credit agreement at December 31, 1997.
During 1997, $3.8 million was spent on capital expenditures, and an
additional $4.7 million was committed for projects expected to be
completed in 1998. Ameriwood currently anticipates that an aggregate of
$14.7 million will be spent or committed for capital expenditures in
1998. The capital spending for 1997 and 1998 is primarily for machinery
and equipment, for the Ohio and Michigan manufacturing facilities, to
provide improved capabilities and efficiencies.
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 1998. In the event more funds are
required, additional long-term borrowings may be a possible alternative
for meeting liquidity and capital resource needs (see Note 3--Borrowing
Arrangements in the accompanying financial statements).
YEAR 2000 CONVERSION
Ameriwood completed its Year 2000 conversion program during 1997. The
Company feels that with this conversion it is well equipped to
efficiently handle customer orders, production and shipping scheduling,
and invoicing into the year 2000 and beyond.
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, 1997 and 1996; the
related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31,
1997; the notes thereto; and Schedule II--Valuation and Qualifying
Accounts.
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, 1997 and 1996, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997 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
February 6, 1998
CONSOLIDATED BALANCE SHEETS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
December 31
1997 1996
------------ ------------
ASSETS
CURRENT ASSETS
Accounts receivable, less
allowances $ 13,149,500 $ 20,721,800
(1997-$1,454,200, 1996-$882,100)
Inventories:
Raw materials 4,999,000 6,841,400
Work in process 3,062,500 3,380,900
Finished goods 8,309,100 10,389,900
------------ ------------
16,370,600 20,612,200
Refundable income taxes 3,240,500 18,800
Other current assets 754,300 1,440,600
------------ ------------
Total current assets 33,514,900 42,793,400
PROPERTY AND EQUIPMENT:
Land 265,400 265,400
Buildings and improvements 14,189,900 13,715,200
Machinery and equipment 33,846,300 32,375,700
Construction in progress 2,086,900 760,200
------------ ------------
50,388,500 47,116,500
Accumulated depreciation (26,788,500) (23,558,900)
------------ ------------
23,600,000 23,557,600
OTHER ASSETS 684,700 154,500
------------ ------------
$ 57,799,600 $ 66,505,500
============ ============
CONSOLIDATED BALANCE SHEETS
(continued)
December 31
1997 1996
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,892,800 $ 6,144,500
Accrued liabilities:
Payroll and related benefits 1,730,900 2,203,500
Accrued advertising and allowances 2,157,600 2,733,100
Other current liabilities 2,276,100 3,271,900
------------ ------------
Total current liabilities 9,057,400 14,353,000
LONG-TERM DEBT 5,000,000 11,600,000
OTHER LONG-TERM LIABILITIES 2,639,000 2,584,000
COMMITMENTS AND CONTINGENCIES (Notes 3,5,6)
SHAREHOLDERS' EQUITY:
Preferred stock, without par value;
5,000,000 authorized, none issued
Common stock, par value $1, 20,000
authorized, 4,349,606 and 4,246,406
shares issued and outstanding at
December 31, 1997 and 1996 4,349,600 4,246,400
Additional paid-in-capital 21,349,900 20,842,300
Retained earnings 15,403,700 12,879,800
------------ ------------
41,103,200 37,968,500
------------ ------------
$ 57,799,600 $ 66,505,500
============ ============
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
Year ended December 31
1997 1996 1995
------------ ------------ ------------
Net sales $ 94,553,400 $114,546,600 $105,997,600
Cost of sales 77,583,800 90,539,100 86,762,400
------------ ------------ ------------
Gross profit 16,969,600 24,007,500 19,235,200
Selling, general, and
administrative 21,918,800 21,658,600 20,896,000
Product recall 1,150,000
Management reorganization 1,375,000
Environmental remediation (500,000) (350,000) 1,200,000
------------ ------------ ------------
21,418,800 22,458,600 23,471,000
------------ ------------ ------------
Operating income (loss) (4,449,200) 1,548,900 (4,235,800)
Other expense (income):
Shareholder litigation and
settlements, net (4,460,800) 362,000
Interest expense 324,800 503,700 337,800
Interest income (23,900) (2,900) (12,700)
Other, net 161,000 500 250,200
------------ ------------ ------------
(3,998,900) 863,300 575,300
------------ ------------ ------------
Income (loss) before income taxes (450,300) 685,600 (4,811,100)
Income taxes (benefit) (2,974,200) 205,700 (1,443,400)
------------ ------------ ------------
NET INCOME (LOSS) $ 2,523,900 $ 479,900 $ (3,367,700)
============ ============ ============
Basic earnings (loss) per
common share $0.59 $0.11 $(0.80)
Diluted earnings (loss) per
common share $0.59 $0.11 $(0.80)
Common stock outstanding 4,349,600 4,246,400 4,188,400
Weighted average shares
outstanding 4,302,700 4,255,300 4,208,500
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
Additional
Common Paid-In Retained Total
Stock Capital Earnings Equity
---------- ------------ ------------ ------------
BALANCE JANUARY 1, 1995 $4,188,400 $20,622,300 $15,767,600 $40,578,300
Net loss (3,367,700) (3,367,700)
---------- ------------ ------------ ------------
BALANCE DECEMBER 31,1995 4,188,400 20,622,300 12,399,900 37,210,600
Issued 58,000 shares
under stock option
plans 58,000 220,000 278,000
Net income 479,900 479,900
---------- ------------ ------------ ------------
BALANCE DECEMBER 31,1995 4,246,400 20,842,300 12,879,800 37,968,500
Issued 26,000 shares
under stock option
plans 26,000 90,300 116,300
Issued 77,200 shares
for ESOP contribution 77,200 417,300 494,500
Net income 2,523,900 2,523,900
---------- ------------ ------------ ------------
BALANCE DECEMBER 31,1997 $4,349,600 $21,349,900 $15,403,700 $41,103,200
========== ============ ============ ============
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOW
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
Year ended December 31
1997 1996 1995
------------ ----------- ------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,523,900 $ 479,900 $(3,367,700)
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 3,673,900 3,483,600 3,337,200
Provision for:
Doubtful accounts 880,600 454,000 1,016,000
Environmental remediation (500,000) (350,000) 1,200,000
Management reorganization 1,375,000
Deferred income taxes 509,800 544,900 (973,400)
Changes in operating assets and
liabilities:
Accounts receivable 6,691,700 (3,729,500) 2,204,700
Inventories 4,241,600 (3,189,000) 52,700
Accounts payable (3,251,700) 1,616,700 (486,600)
Other current assets and
liabilities, excluding debt (5,034,300) (361,500) (1,613,900)
------------ ----------- ------------
Net cash provided by (used in)
operating activities 9,735,500 (1,050,900) 2,744,000
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property
and equipment (3,752,900) (3,840,400) (2,432,700)
Other 6,600 13,300 (11,300)
------------ ----------- ------------
Net cash used in
investing activities (3,746,300) (3,827,100) (2,444,000)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds revolving credit
agreement 5,000,000 8,700,000 2,150,000
Payments revolving credit
agreement (11,600,000) (4,100,000) (2,450,000)
Issuance of common stock 610,800 278,000
------------ ----------- ------------
Net cash provided by (used in)
financing activities (5,989,200) 4,878,000 (300,000)
------------ ----------- ------------
NET CHANGE IN CASH AND 0 0 0
EQUIVALENTS
CASH AND EQUIVALENTS BEGINNING OF 0 0 0
YEAR
------------ ----------- ------------
CASH AND EQUIVALENTS END OF YEAR $ 0 $ 0 $ 0
============ =========== ============
The accompanying notes are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTE 1--THE COMPANY AND OTHER INFORMATION
Ameriwood Industries International Corporation ("Ameriwood" or the
"Company") operates in the wood products industry. The Company
manufactures unassembled furniture, which is sold to retailers for resale
to consumers, stereo speaker cabinets, 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 1997 and 1996 no single customer accounted for 10% or more of
consolidated net sales. As of December 31, 1997 and 1996, approximately
86% and 95% of the company's accounts receivable were from customers in
the retail industry, which includes office superstores, mass
merchandisers, discount retail chains, and home centers. Product design
and development costs are expensed as incurred and were $527,600 in 1997,
$642,200 in 1996, and $546,700 in 1995.
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 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, and returns and allowances.
Advertising Costs: Cooperative advertising costs associated with
customer support programs are accrued when the related revenues are
recognized. Advertising costs expensed were $3.0 million in 1997, $4.1
million in 1996, and $3.2 million in 1995.
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 have been computed according to
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share". SFAS 128 replaced the previously reported "primary earnings per
share" with "basic earnings per share" and replaced "fully diluted
earnings per share" with "diluted earnings per share". This statement
had no effect on the resulting earnings per share as the Company's basic
and diluted earnings per share are identical. Basic earnings per share
have been computed based on the actual shares of common stock outstanding
at the end of each year. Diluted earnings per share have been computed
based on the weighted average shares of common stock and equivalents
(stock options) outstanding during each year. The weighted average
shares of common stock and common stock equivalents outstanding were
4,302,700 in 1997, 4,255,300 in 1996, and 4,208,500 in 1995.
Financial Instruments: The carrying values of financial instruments
classified in the balance sheet as current assets and liabilities
approximate fair values. The carrying amount of long-term debt
approximates fair value as the floating rates applicable to these
borrowings reflect changes in overall market interest rates.
NOTE 3--BORROWING ARRANGEMENTS
At December 31, 1997, the Company had no outstanding borrowings under a
$15 million unsecured bank revolving credit agreement. The agreement
expires on July 15, 1999; 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 bank. 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. At December 31, 1997, the Company
was in compliance with restrictive covenants contained in the credit
agreement. 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 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, 1997 and 1996 included $5 million in
Michigan Strategic Fund Industrial Development Revenue Bonds, with a
variable interest rate based on the market rate for similar bonds (4.45%
at December 31, 1997). The bonds are due in November 2006. The
Company's Michigan facility and related equipment are pledged as
collateral for the bonds. A letter of credit for approximately $5.2
million, with a 1% fee charged annually on the face amount, is also
collateralizing the bonds. The letter of credit expires on May 30, 1999
and is also secured by the Company's Michigan facility, including certain
related equipment. Covenants under the letter of credit are the same as
those relating to the revolving credit facility.
The Company made cash payments for interest on all borrowing arrangements
in the amounts of $348,000 in 1997 (net of capitalized interest of
$38,000), $482,000 in 1996 (net of capitalized interest of $29,000), and
$356,200 in 1995 (net of capitalized interest of $72,000).
NOTE 4--INCOME TAXES
The provision for income tax expense (benefit) consisted of the following:
1997 1996 1995
------------ ------------- ------------
Current - Federal $(3,319,700) $ (322,300) $ (505,100)
State and local (164,300) (16,900) 35,100
Deferred 509,800 544,900 (973,400)
------------ ------------- -------------
$(2,974,200) $ 205,700 $(1,443,400)
============ ============= =============
A reconciliation of total income tax expense (benefit) and the amounts
computed by applying statutory federal income tax rates to pretax income
(loss) follows:
1997 1996 1995
------------ ------------- -------------
Income tax expense benefit
at statutory rates $ (153,100) $ 233,100 $(1,635,800)
State and local income
taxes net of federal tax
reduction (108,400) 11,200 23,200
Research & development
credits (484,000)
Litigation settlement
treated as return
of capital (2,125,000)
Change in valuation
allowance (100,000)
Other (3,700) (38,600) 169,200
------------ ------------- -------------
$(2,974,200) $ 205,700 $(1,443,400)
============ ============= =============
Major components of deferred tax assets and liabilities at December 31:
1997 1996
----------- -------------
Assets:
Environmental accruals $ 468,200 $ 611,100
Inventory reserves 428,000 781,600
Employee benefits 447,000 342,100
Accounts receivable 627,000 455,800
Other accrued 95,300 369,000
----------- -------------
2,065,500 2,559,600
Liabilities:
Depreciation (1,389,900) (1,402,100)
Other (2,034,200) (2,006,200)
----------- -------------
(3,424,100) (3,408,300)
----------- -------------
$(1,358,600) $ (848,700)
=========== =============
Reported in balance sheet:
Other current assets $ (29,100) $ 535,300
Other long-term liabilities (1,329,500) (1,384,000)
----------- -------------
$(1,358,600) $ (848,700)
=========== =============
Income taxes paid, net of refunds, were $14,500 in 1997. Income taxes of
$1,000,900 were refunded to the Company in 1996.
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 $572,700 in 1998,
$531,300 in 1999, $253,100 in 2000, $118,900 in 2001, $59,200 in 2002,
and $50,900 thereafter.
Total rent expense charged against income was $1,026,200 in 1997,
$907,100 in 1996, and $987,600 in 1995.
NOTE 6--CONTINGENCIES
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. During 1989, the Company discovered environmental
contamination at its facility in Dowagiac, Michigan, which was reported
to the appropriate state environmental agency. A remedial investigation
and feasibility study (RI/FS), including final estimates of costs
necessary to remediate the site, was completed in 1996 by an independent
consulting engineering firm The RI/FS is undergoing review by the State
of Michigan. Based on the opinion of the independent engineering firm
and legal counsel, the Company believes it will receive a favorable
ruling.
Costs of $1.2 million in 1995 and $0.3 million in 1994 were recognized on
an undiscounted basis as pretax charges to results of operations to cover
future costs related to the Dowagiac site, including ongoing monitoring
for up to 30 years. Based on revised remediation estimates provided by
the independent consulting engineering firm, the Company reversed $0.5
million of the amount previously charged to income at December 31, 1997.
Ameriwood filed suit against certain parties who might be required to
contribute toward cleanup of this site. Settlement agreements were
reached with the involved parties and $50,000 and $0.4 million was
included in income in 1997 and 1996 respectively.
As of December 31, 1997, the Company has reserves recorded of $1.1
million. The current portion, $0.4 million, is included in other current
liabilities and the remainder, $0.8 million, is included in other long-
term liabilities. The Company believes any additional costs beyond the
amounts recorded will not be material to the its financial position or
results of operations.
The Company is from time to time 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.
NOTE 7--PRODUCT RECALL
In October 1996, management discovered that an imported futon cushion may
not have met applicable US standards. The distribution of this product
was limited to a small number of customers and confined primarily to two
discount retailers with stores in the northeastern United States. The
Company immediately took steps to notify its customers and suspend
distribution of this product. The involved futon cushions were replaced
with cushions meeting the Company's high quality standards. In the fourth
quarter of 1996, the Company recorded a nonrecurring pretax charge of
$1.15 million, or $0.19 per share, for costs associated with this matter.
NOTE 8--MANAGEMENT REORGANIZATION
In December 1995, the Company initiated a management reorganization plan
for the purpose of eliminating layers of management and redundant
staffing in order to lower fixed costs. The plan included termination of
certain management employees. Accordingly, the Company accrued $1.4
million at December 31, 1995 to provide for negotiated severance and
other termination benefits for these employees. The plan was
substantially completed by June 30, 1996.
NOTE 9--STOCK OPTIONS
The Company has one active employee stock option plan, the 1993 Stock
Incentive Plan. This Plan permits the issuance of options, stock
appreciation rights (SARs), limited SARs, restricted stock, and other
stock-based awards to selected executives and key employees of the
Company. The plan reserved 300,000 shares of common stock for grant and
provides that the term of each award be determined by a committee of the
Board of Directors (the "Committee") charged with administering the plan.
Under the terms of the plan, options granted may be either nonqualified
or incentive stock options. SARs and limited SARs granted in tandem with
an option shall be exercisable only to the extent the underlying option
is exercisable and the grant price shall be equal to the exercise price
of the underlying option. Options granted in 1997 become exercisable
over a two year period; fifty percent of the options an employee was
granted become exercisable one year from the date of grant, and the
remaining fifty percent become exercisable on the second anniversary of
the grant date. Options granted prior to 1997 became exercisable
immediately. All options granted under the plan expire ten years from
the date of grant. At December 31, 1997, 163,600 shares were available
for granting under the plan, 109,500 shares were outstanding, and 44,700
shares were exercisable.
Upon the exercise of SARs, the employee renders the unexercised related
option and receives a cash payment equal to the excess of the fair market
value at the time of exercise over the price of the related option.
During 1996, stock appreciation rights on 40,000 shares were granted and
20,000 shares were exercised. The remaining 20,000 SARs are outstanding
at December 31, 1997. The compensation cost associated with these stock
appreciation rights that was charged against income was a credit of
$90,000 in 1997; and $117,500 in 1996. There were no stock appreciation
rights granted in 1997 or 1995.
Also active is the 1995 Non-Employee Director Stock Option Plan. The
number of options granted annually is fixed by the plan. Options become
fully exercisable on the third anniversary of their respective grant date
and expire six years after the date of grant. The total number of shares
to be issued under this plan may not exceed 100,000 shares. At December
31, 1997, 40,000 shares were available for grant under the plan and a
total of 60,000 options were outstanding, but, due to vesting
requirements were not exercisable.
Although no longer active, the Company has two additional employee stock
option plans, the 1983 Plan and the 1984 Plan, which still have 28,300
options outstanding and exercisable as of December 31, 1997. Also no
longer active, the 1992 Non-Employee Directors' Stock Option Plan
provided one-time grants of 20,000 shares of common stock to directors at
the time they were elected. At December 31, 1997, 80,000 shares were
outstanding under the 1992 Plan, but due to vesting requirements, only
60,000 shares were exercisable. Also, At December 31, 1997, options to
purchase 20,000 shares of the Company's common stock remain outstanding
and exercisable due to a 1991 grant to a Director.
The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. Accordingly, since all options are granted at
a fixed price not less than the fair market value of the Company's common
stock on the date of grant, no compensation cost has been recognized for
its stock option plans. Had compensation cost for the Company's stock
based plans been determined based on the fair value at the 1997 and 1996
grant dates for awards under those plans consistent with the method of
FASB Statement of Accounting Standards No. 123, Accounting for Stock
Based Compensation, the Company's net income (loss) (in thousands) and
basic earnings (loss) per share would have been reduced to the pro forma
amounts indicated below:
1997 1996 1995
---------- -------- ----------
Net Income As Reported $2,523,900 $479,900 $(3,367,700)
Pro Forma $2,324,400 340,700 (3,588,300)
Basic Earnings
Per Share As Reported $0.59 $0.11 $(0.80)
Pro Forma $0.54 0.08 $(0.85)
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following
assumptions for 1997, 1996, and 1995, respectively: risk free interest
rates of 6.2%, 5.2%, and 7.0%; no dividend yield; expected lives of 5
years; and volatility of 38%, 35% and 35%. Option valuation models, like
the Black-Scholes model, require the input of highly subjective
assumptions including the expected stock price volatility. Because
changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
stock options.
Summary of the status of the Company's stock option plans as of December 31:
1997 1996 1995
--------------- ---------------- ------------
Outstanding January 1 265,250 $ 7.83 366,550 $ 9.12 304,534 $9.33
Granted 103,250 8.82 70,000 4.63 87,000 8.34
Exercised (26,000) 4.47 (58,000) 4.79
Forfeited (44,750) 11.18 (113,300) 11.58 (24,984) 8.97
------- ------- -------
Outstanding December 31 297,750 265,250 366,550
======= ======= =======
Exercisable December 31 153,000 205,250 326,550
======= ======= =======
Weighted average fair
value of options
granted during year $3.85 $1.84 $3.86
===== ===== =====
Following is a summary of outstanding stock options as of December 31, 1997:
Options Outstanding Options Exercisable
--------------------------------- --------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Average
Exercise Out- Contractual Exercise Number Exercise
Prices Standing Life Price Exercisable Price
- ------------- -------- ----------- -------- ----------- -------
$3.75 -$ 5.88 45,500 6.0 $ 3.99 43,000 $ 3.88
6.19 - 8.88 177,500 4.3 7.69 90,000 8.14
9.50 - 11.38 63,050 8.2 9.70 8,300 10.98
18.13 11,700 6.7 18.13 11,700 18.13
------- -------
297,750 5.5 7.96 153,000 7.86
======= =======
NOTE 10--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, 1997, the plan
held 831,600 shares of Ameriwood common stock. Of those shares held,
820,300 shares were allocated to the accounts of plan participants. All
shares held by the plan 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 $543,400 in 1997, $569,300 in
1996, and $520,900 in 1995.
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 contributions and vest in Company contributions over a five-
year period. The expense for Ameriwood's 401(k) match totaled $608,700
in 1997, $565,300 in 1996, and $523,400 in 1995.
NOTE 11--COMMON STOCK PURCHASE RIGHTS
Under the terms of the Rights Agreement, dated April 4, 1996, 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 $80, subject to adjustment as provided in the agreement. The
Rights are not currently exercisable, but would become exercisable if a
person or group acquired 20% or more (or commenced a tender offer to
acquire 20% or more) of the shares of common stock then outstanding. In
the event a person or group acquires 20% 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 Company may redeem the Rights at a price of $0.005 per Right. The
Rights have no voting or dividend privileges and, until such time, if
ever, as they first become exercisable and separate Rights certificates
are distributed (the "Distribution Date"), will be attached to and trade
only with the common stock. Unless earlier exercised or redeemed, the
Rights will expire on May 20, 2006. Prior to redemption, expiration, or
occurrence of the Distribution Date, any additional shares of common
stock issued by Ameriwood will also carry Rights.
NOTE 12--SHAREHOLDER LITIGATION AND SETTLEMENTS
In April 1997, the Company reached a settlement related to its long-
standing litigation against its former auditors. The litigation related
to services provided to the Company from 1986 to 1990. Under the terms
of the settlement, which was reached in US District Court for the Western
District of Michigan, in Grand Rapids, Michigan., Ameriwood received
$6.25 million, before related expenses, in April 1997. Additionally, a
counterclaim against the Company was dropped. The settlement, net of
related expenses, resulted in a one-time after-tax gain of $5.1 million,
or $1.18 per share for the year ended December 31, 1997. The recovery is
considered a return of capital and therefore, is not subject to income
taxes.
NOTE 13--QUARTERLY FINANCIAL DATA (UNAUDITED)
Basic
Earnings
Gross Net Income (Loss)
Net Sales Profit (Loss) Per Share
------------ ----------- ---------- -------
1997 First quarter $ 24,980,700 $ 4,792,200 $4,365,000 $1.02
Second quarter 25,222,800 4,213,400 (1,207,600) (0.28)
Third quarter 22,816,800 3,913,800 (759,500) (0.18)
Fourth quarter 21,532,900 4,050,200 126,000 0.03
------------ ----------- ---------- -----
$ 94,553,400 $16,969,600 $2,523,900 $0.59
============ =========== ========== =====
1996 First quarter $ 27,913,000 $ 5,403,200 $ 66,400 $0.02
Second quarter 23,652,900 4,758,400 41,300 0.01
Third quarter 31,661,100 6,586,300 524,800 0.12
Fourth quarter 31,319,600 7,259,600 (152,600) (0.04)
------------ ----------- ---------- -----
$114,546,600 $24,007,500 $ 479,900 $0.11
============ =========== ========== =====
During the fourth quarter of 1997, pretax income for (1) a change in
estimate for expenses associated with the litigation settlement increased
net income by $530,000, or $0.12 per share, and (2) a change in estimate
for environmental remediation increased net income by $450,000 or $0.11
per share. Net income also includes a tax benefit of $484,000, or $0.11
per share, related to research and development tax credits on Federal tax
returns filed during the fourth quarter of 1997.
In the fourth quarter of 1996, pretax charges for (1) product recall
costs decreased net income by $1.15 million, or $0.19 per share, and (2)
for legal fees related to the litigation against the Company's former
auditors of $362,000, or $0.06 per share. The Company also recorded a
recovery related to an environmental remediation matter during the
quarter which increased pretax income by $350,000, or $0.06 per share.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
Additions
Beginning Charged To End of
Of Year Costs and Deductions Year
Classification Balance Expenses (a) Balance
- -------------------------------------------------------------------------
Year ended December 31, 1997
Deducted from asset accounts:
Allowance for
doubtful accounts $ 622,300 $ 880,600 $ (48,700) $1,454,200
Allowance for returns 259,800 (259,800) 0
---------- ---------- --------- ----------
$ 882,100 $ 880,600 $(308,500) $1,454,200
========== ========== ========= ==========
Year ended December 31, 1996
Deducted from asset accounts:
Allowance for
doubtful accounts $ 752,500 $ 418,000 $(548,200) $ 622,300
Allowance for returns 303,000 36,000 (79,200) 259,800
---------- ---------- --------- ----------
$1,055,500 $ 454,000 $(627,400) $ 882,100
========== ========== ========== =========
Year ended December 31, 1995
Deducted from asset accounts:
Allowance for
doubtful accounts $ 496,300 $1,016,000 $(759,800) $ 752,500
Allowance for returns 118,000 185,000 303,000
---------- ---------- ---------- ----------
$ 614,300 $1,201,000 $(759,800) $1,055,500
========== ========= ========== ==========
(a) Uncollectible accounts written off, net of recoveries.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required to be furnished by Items 401 and 405 of Regulation S-
K is included in the Company's definitive Proxy Statement for its 1998
annual meeting of shareholders filed with the Securities and Exchange
Commission (the "1998 Proxy Statement") and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be furnished by paragraphs of Item 402 of
Regulation S-K is included in the 1998 Proxy Statement and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required to be furnished by Item 403 of Regulation S-K is
included in the 1998 Proxy Statement and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be furnished by Item 404 of Regulation S-K is
included in the 1998 Proxy Statement and is incorporated herein by
reference.
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, 1997, 1996
Consolidated Statements of Operations years ended December 31, 1997,
1996, 1995
Consolidated Statements of Shareholders' Equity years ended December
31,
1997,1996,1995,
Consolidated Statements of Cash Flows years ended December 31, 1997,
1996, 1995,
Notes to Consolidated Financial Statements
(a) 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,
1997, 1996, and 1995
(a) 3. Exhibits. Reference is made to the Exhibit Index starting on
page 26 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, 1997.
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 19, 1998 By /s/ Marlan R. Smith
-------------------------
Marlan R. Smith
Vice President, Chief Financial Officer, and Secretary
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
Marlan R, Smith 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 19, 1998 /s/ Charles R. Foley
-------------------------------------
Charles R. Foley
President and Chief Executive Officer
(Principal Executive Officer)
March 19, 1998 /s/ Marlan R. Smith
-------------------------------------
Marlan R. Smith
Vice President, Chief Financial Officer,
and Secretary
(Principal Financial and Accounting Officer)
March 19, 1998 /s/ Neil L. Diver
-------------------------------------
Neil L. Diver
Board Chairman
March 19, 1998 /s/ Kevin K. Coyne
-------------------------------------
Kevin K. Coyne
Director
March 19, 1998 /s/ Richard J. Pigott
-------------------------------------
Richard J. Pigott
Director
March 19, 1998 /s/ Edwin Wachtel
-------------------------------------
Edwin Wachtel
Director
EXHIBIT INDEX
- -------------------------------------------------------------------------
3(a) Restated Articles of Incorporation, amended June 24, 1993 (filed as
exhibit to Form 10-K for the year ended December 31, 1993 and
incorporated by reference)
3(b) Bylaws, as amended through January 28, 1996 (filed as exhibit to
Form 10-K for the year ended December 31, 1995 and incorporated by
reference)
4(a) Indenture of Trust for $5,000,000 Michigan Strategic Fund
Industrial Development Revenue Bonds due in 2006, 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 and incorporated by reference)
4(b) Second Amendment, dated June 19, 1992, to Letter of Credit with
Harris Trust and Savings Bank, dated November 1, 1986 (filed as exhibit
to Form 10-Q for the quarter ended June 30, 1992 and incorporated by
reference)
4(c) Third Amendment, dated January 13, 1995, to Letter of Credit with
Harris Trust and Savings Bank, dated November 1, 1986 (filed as exhibit
to Form 10-K for the year ended December 31, 1994 and incorporated by
reference)
4(d) Letter of Credit Agreement Waiver with Harris Trust and Savings
Bank, dated February 27, 1996 (filed as exhibit to Form 10-K for the year
ended December 31, 1995 and incorporated by reference)
4(e) Fourth Amendment, dated August 2, 1996, to Letter of Credit with
Harris Trust and Savings Bank, dated November 1, 1986 (filed as exhibit
to Form 10-Q for the quarter ended June 30, 1996 and incorporated by
reference)
4(f) 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 and incorporated by
reference)
4(g) First Amendment to Credit Agreement and Waiver with Harris Trust
and Savings Bank, dated February 27, 1996 (filed as exhibit to Form 10-K
for the year ended December 31, 1995 and incorporated by reference)
4(h) Second Amendment to Credit Agreement with Harris Trust and Savings
Bank, dated August 2, 1996 (filed as exhibit to Form 10-Q for the quarter
ended June 30, 1996 and incorporated by reference)
4(i) Ameriwood Industries International Corporation common stock
certificate specimen (filed as exhibit to Form 10-Q for the quarter ended
March 31, 1993 and incorporated by reference)
4(j) Rights Agreement, dated April 4, 1996, between Ameriwood Industries
International Corporation and Harris Trust and Savings Bank, as Rights
Agent (filed as exhibit to Form 10-Q for the quarter ended June 30, 1996
and incorporated by reference)
The following material contracts identified with "*" 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 and incorporated by
reference)
*10(b) 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 incorporated by reference)
*10(c) 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 and incorporated by
reference)
*10(d) 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 and incorporated
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 and incorporated by reference)
*10(f) Rospatch Corporation Annual Incentive Plan (filed as exhibit to
Form 10-K for the year ended December 31, 1990 and incorporated 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 and incorporated by reference)
*10(h) Form of Indemnity Agreement entered into between the registrant
and certain executive officers and directors (filed as exhibit to Form 10-
K for the year ended December 31, 1994 and incorporated by reference)
*10(i) Form of Management Retention Agreement entered into between the
registrant and certain executive officers (filed as exhibit to Form 10-Q
for the quarter ended September 30, 1997 and incorporated by reference)
*10(j) Letter agreement regarding duties as Interim President and CEO
dated February 22, 1996 between the registrant and Charles R. Foley
(filed as exhibit to Form 10-K for the year ended December 31, 1995 and
incorporated by reference)
*10(k) Severance Compensation Agreement entered into between the
registrant and Charles R. Foley, dated April 8, 1997 (filed as exhibit to
Form 10-Q for the quarter ended June 30, 1997 and incorporated by
reference)
*10(l) Contingent Supplemental Executive Retirement Plan entered into
between the registrant and certain executive officers dated July 15, 1997
(filed as exhibit to Form 10-Q for the quarter ended September 30, 1997,
1992 and incorporated by reference)
21 Subsidiaries of the Registrant
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
[DESCRIPTION] SUBSIDIARIES OF THE REGISTRANT
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
(A) A wholly-owned subsidiary of Tiffin Enterprise, Inc.
[DESCRIPTION] CONSENT OF INDEPENDENT ACCOUNTANTS
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. 2-99965, 33-46777, 33-67494, 333-43667, and
333-43699) of our report, dated February 6, 1998, on our audits
of the consolidated financial statements and financial statement
schedule of Ameriwood Industries International Corporation as of
December 31, 1997 and 1996, and for each of the three years in
the period ended December 31, 1997, 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
February 6, 1998
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