FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File No: 0-7475
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PHOTO CONTROL CORPORATION
(Exact name of Registrant as specified in its charter)
Minnesota
(State or other jurisdiction of 41-0831186
incorporation or organization) (I.R.S. Employer
Identification No.)
4800 Quebec Avenue North
Minneapolis, Minnesota 55428
(Address of principal executive offices)
Registrant's telephone number, including area code:
(612) 537-3601
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.08
----------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_. No __
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.(X)
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of March 4, 1996 was approximately $4,245,000 (based on the
closing sale price of the Registrant's Common Stock on such date).
- -------------------------------------------------------------------------------
Number of shares of $0.08 par value Common Stock outstanding at March 4, 1996:
1,608,163
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Registrant's Report to Shareholders for the year ended
December 31, 1995 are incorporated by reference into Part II.
2. Portions of the Registrant's definitive Proxy Statement to be dated April 1,
1996 for its Annual Meeting of Shareholders are incorporated by reference into
Part III.
PART I
ITEM 1. BUSINESS
(a) General Development of Business.
Photo Control Corporation (the "Registrant" or the "Company") was
organized as a Minnesota corporation in 1959. The Registrant acquired all of the
outstanding stock of Norman Enterprises, Inc. ("Norman"), a California
corporation, in 1973. In June, 1983 the Registrant acquired all of the
outstanding stock of Nord Photo Engineering, Inc. ("Nord"), a Minnesota
corporation. In October, 1986 the Registrant acquired all of the outstanding
stock of Bardwell & McAlister, Inc. ("Bardwell"), a California corporation. As
of December 31, 1987, Bardwell was liquidated and its assets and liabilities
were transferred to Norman. Norman discontinued the manufacture and sale of the
Bardwell product line during 1994.
The Registrant designs, manufactures, and markets professional cameras,
long-roll film magazines, photographic accessories, Norman electronic flash
equipment, and Nord photographic package printers. All references to the
"Registrant" or the "Company" also include "Norman" and "Nord" unless indicated
otherwise.
(b) Financial Information About Industry Segments.
During the years ended December 31, 1995, 1994, and 1993, the
Registrant was engaged in one industry which consisted of designing,
manufacturing, and marketing professional photographic equipment.
(c) Narrative Description of Business.
(c) (l)(i) Principal Products, Services and Markets. The Registrant
designs, manufactures and markets professional cameras, long-roll film
magazines, photographic accessories, Norman electronic flash, cine and video
lighting equipment, and Nord photographic package printers.
The principal market for the Registrant's long-roll camera equipment is
the sub-segment of the professional photography market requiring high-volume
equipment, such as elementary and secondary school photographers. The market
with respect to the Norman electronic flash equipment is broader, extending to
all professional photographers and to experienced amateur photographers. The
market for Nord photographic package printers is photographic processing labs
which specialize in producing photographic color print packages such as those
often produced for weddings and school photography. The geographic market in
which the Registrant competes with respect to long-roll camera equipment, flash
equipment, printers, and cine and video lights consists of the entire United
States and, to a lesser extent, some foreign countries.
The Registrant markets most of its cameras, film magazines, and
photographic accessories through its two employee salesmen and one independent
sales representative and part-time use of a service employee. Such equipment is
marketed primarily under the tradename, "Camerz". Norman markets its electronic
flash and lighting equipment through three full-time employee salesmen, and ten
independent sales representatives. Nord markets its printers through five
employee salesmen, one independent sales representative, and by part-time use of
three service employees. The Camerz division and Nord utilize the same
independent sales representative to sell both product lines. It is expected that
the sales force will remain at the current level during 1996.
(c)(1)(ii) New Products and Services. The Camerz division introduced
two tripods, the Auto-Mate which features a gas charged, counter-balanced center
column cylinder for holding cameras from twelve to thirty-five pounds and the
Adjusto-Mate which has a gear driven column with precision rack and pinion
movement to hold up to fifty pounds. Also the Camerz ZII Digital Preview System
was placed in four beta sites. The system main components are a ZII Camera with
EIS (electronic identification system) an Electronic Camera mounted on the ZII
with synchronized zooming, a customized PC with a camera synchronizing board,
and a Camerz frame-grabber board, a camera monitor and an optional point-of-sale
computer system and monitor. The Camerz software allows up to sixteen frames to
be viewed on the screen at one time, and selection can be made by process of
elimination with each frame identified on the screen by a Camerz EIS sequential
frame number which matches a number exposed on the film. Delivery of the system
started in January 1996.
Nord acquired the Bespro product line which features a low cost multi-lens
printer. The daylight printer handles all professional color and black and white
film sizes, and prints on either eleven, ten or eight inch paper. Nord enhanced
its additive lamphouse by making it compatible with Accudata(TM), a printer
controller used on a wide variety of photographic printers.
Norman improved its line of battery-portable flash units by introducing the new
"Super Battery" and "Delta V Charger." This nickel-cadmium battery provides 25%
more flashes per charge with no memory effect and the charger utilizes a micro
processor control circuit that substantially increases battery life. These
improvements have dramatically revitalized sales of Norman's portables. Also,
Norman introduced the new high-power 40/40 power supply. Sales in 1995 were to a
single high-volume user, with introduction to the dealers in January 1996.
(c)(1)(iii) Sources and Availability of Raw Materials. Materials
required for the Registrant's photographic equipment consist primarily of
fabricated parts, lenses, electronic components, and lights, most of which are
readily available from numerous sources.
(c)(1)(iv) Patents, Trademarks, Licenses, Franchises and Concessions.
The Registrant, on February 16, 1982, obtained United States patent number
4,319,819 for a reflex shutter, which is used in conjunction with a zoom lens.
The Registrant has incorporated the shutter into a zoom lens camera which was
first introduced in fiscal 1980.
The Registrant on June 7, 1988, obtained a United States Patent number
4,750,012 for a reflex shutter for SLR cameras. The shutter is incorporated into
the "Z35" camera which was first introduced in 1987.
In 1991, the Registrant was granted United States Patent number
5,055,863 for a multiple image transfer camera system for the simultaneous
transfer of light rays from an object to a pair of separate, discrete mediums to
provide for substantially exact image reproduction and capture thereof at either
or both of two media.
The Registrant received U.S. Patent No. 5,294,950 on March 15, 1994 for
an identification system for automated film and order processing including
machine and human readable code.
On July 12, 1994, the U.S. Patent and Trademark Office granted the
Registrant patent number 5,329,325 for the Registrant's synchronized zoom
electronic camera system.
Nord holds two patents. Patent number 4,213,689 granted July 22, 1980
relates to a camera shutter which is electromagnetically activated and is not
currently in production. The Additive Color Lamphouse patent, granted in 1991,
United States Patent number 5,032,866, covers a closed loop light intensity
feedback control system for regulating the light sources within the lamphouse.
The Registrant believes that it is the owner of two unregistered
trademarks, "Camerz" and the logo-type used in connection with the sale of
photographic equipment under the name Camerz. Also, the Registrant owns one
registered trademark called "Smart System".
Nord is the owner of four registered trademarks; "Portrait Express,"
"Nord", "ESP", and a logo-type design referred to as the "Micrometer."
Although the Registrant's patents and trademarks are valuable, they are
not considered to be essential to the Company's success. Innovative application
of existing technology along with providing efficient and quality products are
of primary importance.
The Registrant has entered into agreements with employees which
agreements grant the Registrant a exclusive right to use, make and sell
inventions conceived by employees during their employment with the Registrant.
The Registrant believes that the right to use, make and sell such inventions
adequately protects the Registrant against any employee who might claim an
exclusive proprietary right in an invention developed while the employee was
employed by the Registrant.
(c)(1)(v) Seasonal Fluctuations. The photographic equipment business,
including that of Norman and Nord, is somewhat seasonal. There is a larger
volume of sales from March through October.
(c)(1)(vi) Working Capital Practices. The Registrant believes that its
working capital needs are typical to the industry. The nature of the
Registrant's business does not require that it maintain a high volume of
finished goods inventory or provide extended payment terms to customers. The
Registrant maintains an inventory of raw material and finished products and
permits customers to return only defective merchandise.
(c)(1)(vii) Single Customer. During the years ended December 31, 1995,
1994 and 1993, the company derived 20.2%, 24.2% and 17.4%, respectively, of its
sales from one unaffiliated customer, Lifetouch Inc. and its affiliates.
(c)(1)(viii) Backlog. The dollar amount of backlog believed by the
Registrant to be firm as of December 31, is as follows:
1995 1994 1993
Company $1,397,000 $4,994,000 $7,967,000
Nord 426,000 1,109,000 486,000
Norman 1,035,000 83,000 6,000
---------- ---------- ----------
Total $2,858,000 $6,186,000 $8,459,000
========== ========== ==========
The Registrant anticipates that it and its subsidiaries will be able to fill all
current backlog orders during the fiscal year ending December 31, 1996.
(c)(1)(ix) Government Contracts. No material portion of the
Registrant's or its subsidiaries' business is subject to renegotiation of
profits or termination of any contract or subcontract at the election of the
Government.
(c)(1)(x) Competition. Primary methods of competition for the Company's
products are product performance, reliability, service, and delivery. The
Registrant's two primary competitors with respect to such equipment are Lucht
Engineering, Inc., which sells photographic printers, and Beattie Systems, Inc.,
which sells long-roll cameras. Because of varying product lines, the Registrant
is unable to state accurately its competitive position in relation to such
competitors. In the somewhat broader market in which Norman competes in the sale
of professional studio electronic flash equipment, there are approximately
fourteen significant competitors, several of which are well established. The
Registrant is unable to state accurately Norman's overall competitive position
in relation to such competitors. Norman's dominant competitors are Broncolor,
Dynalite, White Lighting, Photogenic, and Speed-O-Tron.
(c)(1)(xi) Research and Development. The Registrant spent the following
amounts on research activities relating to the development of new products,
services, and production engineering:
YEAR ENDED
DECEMBER 31
----------------------------------------
1995 1994 1993
---- ---- ----
Camerz Division $ 408,000 407,000 396,000
Nord 520,000 730,000 561,000
Norman 382,000 403,000 329,000
---------- ---------- ----------
Total $1,310,000 $1,540,000 $1,286,000
========== ========== ==========
The Company intends to maintain its level of spending on research and
development.
(c)(1)(xii) Environmental Regulation. Federal, state and local laws and
regulations with respect to the environment have had no material effect on the
Registrant's or its subsidiaries' capital expenditures, earnings, or respective
competitive positions.
(c)(1)(xiii) Employees. As of December 31, 1995, the Registrant had the
following employees:
FULL-TIME PART TIME
--------- ---------
Camerz Division 44 1
Nord 33 1
Norman 62 3
--- ---
Total 139 5
=== ===
The Registrant utilizes subcontract personnel on a temporary basis to supplement
its regular work force which totaled 46 people as of December 31, 1995.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales. The Registrant has no operations based outside of the United
States. During each of the last three years ended December 31, 1995, slightly
more than 5% of the Registrant's consolidated sales were derived from export
sales.
ITEM 2. PROPERTIES
The Registrant's principal property is located at 4800 Quebec Avenue
North, Minneapolis, Minnesota. The building at that location consists of 60,000
square feet and is located on 3 1/2 acres of land. The building was constructed
in 1971 and was purchased in 1980. Extensive remodeling has been done to meet
the specific needs of the Company. The Registrant first occupied the building
during the fall of 1980, and uses the building for camera production, Nord
printer manufacturing, and as corporate offices.
Nord owns a 5,000 square foot building in Hinckley, Minnesota, on one
acre of land, which houses optical production and was built in 1981. In February
1996, the production was moved to Minneapolis and the building listed for sale.
Norman occupies a 32,000 square foot building in Burbank, California
which was constructed in 1977 and expanded in 1984. The facility is located on
50,000 square feet of land and houses all of Norman's operations. The land and
building are financed through the issuance of an industrial development bond by
the Industrial Development Authority of the County of Los Angeles and are owned
by Norman subject to a mortgage in favor of the note holder.
The Registrant believes its present facilities are adequate for its
current level of operation and provide for a reasonable increase in production
activities.
ITEM 3. LEGAL PROCEEDINGS
Neither the Registrant nor any of its subsidiaries is a party to, and
none of their property is the subject of, any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Registrant's shareholders
during the Registrant's quarter ending December 31, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name, Age and
Present Position of Officer Business Experience
- --------------------------- -------------------
<S> <C>
Leslie A. Willig, 70 Mr. Willig, who received a Ph.D in Industrial Management from the School of
Business of the University of Iowa in 1956, has been a member and Chairman of
Chairman of the Board of Directors, the Board of Directors of Registrant since June, 1974, has been its Chief
Chief Executive Officer, and Executive Officer since August, 1974, and has been its President since May,
President of the Registrant 1975. Mr. Willig has been a director and Secretary of North Snow Bay Inc.,
Freemont, Indiana, a real estate development company, since1965. Mr. Willig has
acted as a self-employed business and real estate broker in Indiana, since
March, 1970
William L. Norman, 55 Since it was acquired in 1973, Mr. Norman has served as President of the
Registrant's wholly-owned subsidiary Norman Enterprises, Inc., located
Director of the Registrant and in Burbank, California. He was Secretary of the Registrant from May, 1987
President of Norman to May, 1993.
Curtis R. Jackels, 49 Mr. Jackels has been Vice President-Treasurer of the Registrant since
August, 1985 and Treasurer since November, 1980. Mr. Jackels was controller
Vice President - from June, 1978 to November, 1980. Prior to June, 1978, Mr. Jackels
Treasurer of the was employed by two public accounting firms. Mr. Jackels is a certified
Registrant public accountant and has a Master of Business Administration degree from the
University of Wisconsin.
Mark J. Simonett, 39 Mr. Simonett has served as the Registrant's General Counsel and Personnel
Director since September, 1992 and as Secretary since May, 1993. He has served
Secretary of the part-time since April 1995. He was associated with the Mninneapolis law firm of
Registrant Gray, Plant, Mooty, Mooty and Bennet P.A. from 1991 to 1992, and with the
consulting firm Delta Environmental Consultants, Inc. From 1990 to 1992.
Roger M. Johnson, 62 Mr. Johnson has been President, Camerz Photo Products Division since
November, 1989 and was in charge of that Division from December, 1982
Executive Vice President to November, 1989. Since November, 1985 he has been Executive Vice
of the Registrant, President of the Registrant and from November, 1985 to November, 1989
President of Camerz was President of the Company's subsidiary Nord. From December, 1956
Photo Products Division to November, 1982 he was employed by Pako, Minneapolis, Minnesota, a
manufacturer of film processing equipment and film processors. The
last position held at Pako was Group Product Manager photo products.
Patrick J. Gilligan, 55 Mr. Gilligan has been President of the Company's wholly-owned subsidiary,
Nord Photo Engineering, Inc., since November, 1990. Since May, 1993,
Executive Vice President he has been Executive Vice President of the Registrant. From August 1988
of the Registrant to October, 1990, he was employed by Pakor, Inc. of Minneapolis, Minnesota,
President of Nord a manufacturer of Pako service parts, and a distributor of photographic
processing equipment. The last position held at Pakor was President. From
1986 to 1988 he was employed by PhotoTek, a Division of Pako, the predecessor
to Pakor, Inc. and a subsidiary of Pako. His position with PhotoTek was Vice
President and General Manager. From 1968 to 1985 he was employed by Pako with
his last position being Director of Photo Engineering.
</TABLE>
The term of office for each executive officer is from one annual meeting of
directors until the next annual meeting or until a successor is elected. There
are no arrangements or understandings between any of the executive officers and
any other person (other than arrangements or understandings with directors or
officers acting as such) pursuant to which any of the executive officers were
selected as an officer of the Registrant.
There are no family relationships between any of the Registrant's directors or
executive officers.
PART II
The information required by Items 5, 6, 7 and 8 of Part II is incorporated
herein by reference to the sections labeled "Stock Market Information,"
"Selected Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements and
Notes and the Independent Auditor's Report which appear in the Registrant's
Annual Report to Shareholders for the year ended December 31, 1995. With respect
to Item 9, no change of accountants or disagreements on any matter of accounting
principles or practices or financial statement disclosure has occurred.
PART III
Items 10, 11, 12 and 13 of Part III, except for certain information relating to
Executive Officers included in Part I, are omitted inasmuch as the Company
intends to file with the Securities and Exchange Commission within 120 days of
the close of the year ended December 31, 1995, a definitive proxy statement
containing information pursuant to Regulation l4A of the Securities Exchange Act
of 1934 and such information shall be deemed to be incorporated herein by
reference from the date of filing such document.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as Part of this Report.
(a)(l) Consolidated Financial Statements.
Page
Independent Auditor's Report......................................... *
Consolidated Statements of Opera-
tions for the years ended
December 31, 1995, 1994 and 1993..................................... *
Consolidated Statements of Changes
in Stockholders' Equity for the
years ended December 31, 1995, 1994
and 1993, ........................................................... *
Consolidated Balance Sheets at December
31, 1995 and 1994.................................................... *
Consolidated Statements of Cash Flows
for the years ended December 31,
1995, 1994 and 1993.................................................. *
Notes to Consolidated Financial
Statements .......................................................... *
- -------------------------------
*Incorporated by reference to the Registrant's Annual Report to Shareholders for
the year ended December 31, 1995 a copy of which is included in this Form 10-K
as Exhibit 13
Page
(a)(2) Consolidated Financial Statement Schedules.
Auditor's Consent and Report on Schedules............................ 10
Schedule VIII - Valuation and Qualifying Accounts
for the years ended December 31, 1995, 1994
and 1993............................................ 11
All other schedules have been omitted because they are not applicable or are not
required, or because the required information has been given in the Consolidated
Financial Statements or notes thereto.
(a)(3) Exhibits. See "Exhibit Index" on page following signatures.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the last fiscal quarter of the Registrant's 1995 fiscal year.
(c) Exhibits. Reference made to item 14 (A)(3)
(d) Schedules. Reference made to item 14 (A)(2)
- --------------------------------
*Incorporated by reference to the Registrant's Annual Report to Shareholders for
the year ended December 31, 1995, a copy of which is included in this Form 10-K
as Exhibit 13
AUDITOR'S CONSENT AND REPORT ON SCHEDULES
Board of Directors and
Stockholders
Photo Control Corporation
We hereby consent to the incorporation by reference in this Annual Report on
Form 10-K of Photo Control Corporation for the year ended December 31, 1995 of
our report, dated January 30, 1996, appearing in the Company's 1995 Annual
Report to Shareholders. We also consent to the incorporation by reference of
such report in the registration statements on Form S-8 for the Photo Control
Stock Option Plan.
In the course of our audit of the financial statements referred to in our
report, dated January 30, 1996, included in the Company's 1994 Annual Report to
Shareholders, we also audited the supporting schedule listed in Item 14(a)(2) of
this Annual Report on Form 10-K. In our opinion, the schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
VIRCHOW KRAUSE, & COMPANY, LLP
January 30, 1996
Minneapolis, Minnesota
PHOTO CONTROL CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- -------- -------- --------
ADDITIONS
CHARGED ADDITIONS
BALANCE (CREDITED) CHARGED
AT TO COSTS TO OTHER BALANCE
BEGINNING AND ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF YEAR EXPENSES DESCRIBE DESCRIBE OF YEAR
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Allowance for Doubtful
Accounts $ 142,000 $ 61,325 $ 710(a) $ (51,035)(b) $ 153,000
========= ========= ====== ========== =========
YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful
Accounts $ 97,000 $ 39,231 $ 9,367(a) $ (3,598)(b) $ 142,000
======== ========= ======= ========== =========
YEAR ENDED DECEMBER 31, 1993
Allowance for Doubtful
Accounts $ 97,000 $ 23,303 $ 2,920(a) $ (26,223)(b) $ 97,000
======== ========= ======= ========== =========
</TABLE>
(a) Recoveries of amounts written off in prior years.
(b) Uncollectible accounts written off.
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.
PHOTO CONTROL CORPORATION
Date: March 15, 1996 By /s/ Leslie A. Willig
Leslie A. Willig, Chairman
of the Board of Directors,
Chief Executive Officer and
President
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.
Date: March 15, 1996 /s/ Leslie A. Willig
Leslie A. Willig, Chief
Executive Officer, President
and Director (principal
executive officer)
Date: March 15, 1996 /s/ Curtis R. Jackels
Curtis R. Jackels, Vice
President and Treasurer
(principal financial and
principal accounting officer)
Date: March 15, 1996 /s/ George A. Kiproff
George A. Kiproff, Director
Date: March 15, 1996 /s/ James R. Loomis
James R. Loomis, Director
Date: March 15, 1996 /s/ William L. Norman
William L. Norman, Director
Date: March 17, 1996 /s/ Thomas J. Cassady
Thomas J. Cassady, Director
Date: March 17, 1996 /s/ Joe M. Kilgore
Joe M. Kilgore, director
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------------------------------------
PHOTO CONTROL CORPORATION
COMMISSION FILE NO.: 0-7475
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EXHIBIT INDEX
FOR
FORM 10-K FOR YEAR ENDED DECEMBER 31, 1995
Page Number
in Sequential
Numbering
of all Form
10-K and
Exhibit Pages
EXHIBIT
3.1 Registrant's Restated Articles of Incorporation, as
amended-incorporated by reference to Exhibit 3.1 to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1988 *
3.2 Registrant's bylaws as amended-incorporated by
reference to Exhibit 3.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended June 30, 1989 *
4.1 Loan Agreement between City of New Hope, Minnesota,
and the Registrant, dated May 16, 1980-incorporated by
reference to Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended June 30, 1989 *
4.2 Mortgage and Security Agreement between the Registrant,
Mortgagor, and Washington National Insurance Company,
Mortgagee, dated May 16, 1980-incorporated by
reference to Exhibit 4.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended June 30, 1989 *
4.3 Loan Agreement between Industrial Development Authority
of the County of Los Angeles and Norman Enterprises, Inc.,
dated as of December 1, 1983-incorporated by
reference to Exhibit 4.3 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended June 30, 1989 *
4.4 Trust Deed among Industrial Development Authority of the
County of Los Angeles, Norman Enterprises, Inc. and First
National Bank of Minneapolis, dated as of December 1,
1983-incorporated by reference to Exhibit 4.4 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1989 *
4.5 Guaranty Agreement from Photo Control Corporation
as Guarantor to First National Bank of Minneapolis,
dated December 1, 1983-incorporated by
reference to Exhibit 4.5 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended June 30, 1989 *
4.6 Supplemental Agreement between Photo Control
Corporation and First National Bank of Minneapolis,
dated as of December 29, 1983-incorporated by
reference to Exhibit 4.6 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended June 30, 1989 *
10.1 Executive Salary Continuation Plan adopted August 9, 1985
together with Exhibits - incorporated by reference to
Exhibit 10.4 to the Registrant's Annual Report on Form 10-K *
for the year ended June 30, 1986 **
10.2 The Registrant's 1983 Stock Option Plan - incorporated by
reference to Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year *
ended June 30, 1989 **
10.3 Form of Stock Option Agreement under the Registrant's
1983 Stock Option Plan - incorporated by reference to
Exhibit 5 to the Registrant's Registration Statement on *
Form S-8, Reg. No. 2-85849 **
10.4 Cash bonus plan for officers - incorporated by reference
to the description of such plan contained in the Registrant's
definitive Proxy Statement for its 1995 Annual Meeting of *
Shareholders **
10.5 Amendment to Stock Option Plan August 29, 1994 - incorporated
by reference to Exhibit 10.5 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994 *
10.6 Amendment to Stock Option Plan, February 23, 1996 **
11 Statement re computation of per share earnings
13 Report to Shareholders for the year
ended December 31, 1995
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
25 Power of Attorney from Messrs. Willig, Jackels, Kiproff,
Loomis, Norman and Cassady
- ----------------------------
*Incorporated by reference
** Indicates management contracts or compensation plans or arrangements required
to be filed as exhibs.
EXHIBIT 10.6
PHOTO CONTROL CORPORATION
1983 STOCK OPTION PLAN
AMENDMENT
FEBRUARY 23, 1996
The Photo Control Corporation 1983 Stock Option Plan (the "Plan") is amended by
addition of the following sections entitled "Change in Control," "Retirement"
and "Forfeiture":
Change in Control
Notwithstanding any other provision of the Plan, in the event of a
Change in Control all outstanding options shall become fully exercisable and
vested, unless otherwise determined by the Board of Directors.
A "Change in Control" shall be deemed to occur in the event:
(a) that during any 24 consecutive months the individuals who, at the
beginning of such period, constitute the entire Board of Directors of the
Company ("Incumbent Directors") cease for any reason other than death to
constitute at least a majority of the Board; provided, however, that any
individual who was not a director at the beginning of such 24-month period whose
election, or nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the then Incumbent Directors also shall be
an Incumbent Director;
(b) the Board of Directors or the stockholders of the Company shall
approve any merger, consolidation or recapitalization of the Company or of all
or substantially all of the assets of the Company (each of the foregoing being
an "Acquisition Transaction") where:
(i) the stockholders of the Company immediately prior to such
Acquisition Transaction would not immediately after such Acquisition
Transaction beneficially own, directly or indirectly, shares
representing in the aggregate more than 50% of (A) the then outstanding
common stock of the corporation surviving or resulting from such
merger, consolidation or recapitalization or acquiring such assets of
the Company, as the case may be, or of its ultimate parent corporation,
if any (the "Surviving Corporation") and (B) the Combined Voting Power
(as defined below) of the then outstanding Voting Securities (as
defined below) of the Surviving Corporation, or
(ii) the Incumbent Directors at the time of the initial approval of
such Acquisition Transaction would not immediately after such
Acquisition Transaction constitute a majority of the Board of Directors
of the Surviving Corporation;
(c) the Board of Directors or the stockholders of the Company shall
approve any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company or any plan or proposal for the liquidation or dissolution of the
Company; or,
(d) any Person (as defined below) shall become the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of securities of the Company representing in the aggregate 30% or
more of either (i) the then outstanding shares of the Company's Common Stock or
(ii) the Combined Voting Power of all then outstanding Voting Securities of the
Company; provided that, notwithstanding the foregoing, a Change in Control shall
not be deemed to have occurred solely as the result of an acquisition of
securities directly from the Company (not including any conversion of a security
that was not acquired directly from the Company).
For purposes of this section:
(a) "Person" shall mean any individual, entity (including, without
limitation, any corporation, partnership, trust, joint venture, association or
governmental body) or group (as defined in Sections 13(d)(3) or 14(d)(2) of the
Exchange Act and the rules and regulations thereunder); provided that Person
shall not include the Company or any employee benefit plan of the Company;
(b) "Voting Securities" shall mean all securities of a corporation
having the right under ordinary circumstances to vote in an election of the
Board of Directors of such corporation; and
(c) "Combined Voting Power" shall mean the aggregate votes entitled to
be cast generally in the election of directors of a corporation by holders of
then outstanding Voting Securities of such corporation.
The provisions of this section shall supersede any other provisions of
the Plan which may conflict with this section including, but not limited to the
provisions of the section entitled , "Company Recapitalization, Liquidation,
Reorganization, Etc."
Retirement
Notwithstanding any prior Plan provision regarding termination of
options, this provision shall govern an optionee's rights in the event of
retirement from employment or directorship with the Company.
In the event of an optionee's retirement from employment or
directorship with the Company, unless otherwise indicated in an optionee's Stock
Option Agreement, options held by the optionee may be exercised, to the extent
exercisable on the date of retirement, until the earlier of the twelve-month
anniversary of the optionee's retirement or the expiration of the option.
Forfeiture
The purpose of the Company's Stock Option Plan is to attract, retain,
and reward employees, to increase stock ownership and identification with the
Company's interests, and to provide incentive for remaining with the Company
over the long term. To further theses objectives, options granted under the Plan
shall be subject to the following forfeiture provisions unless otherwise
indicated in an optionee's Stock Option Agreement.
1. Forfeiture of option gain if optionee leaves the Company within one
year of exercise. If an optionee exercises any portion of an option and leaves
the employment of the Company within one year after such exercise for any reason
except death, disability or normal retirement, then the optionee shall pay the
Company the Option Gain defined as both (a) the cash bonus received from the
Company, if any, and (b) the gain represented by the market price on the date of
exercise less the exercise price, multiplied by the number of shares purchased
without regard to any subsequent market price decrease or increase.
2. Forfeiture of option gain and unexercised options if optionee
engages in certain activities. If at any time within
(a) the original term of an option,
(b) three years after termination of employment, or
(c) three years after exercise of any portion of an option, whichever
is latest, the optionee engages in any activity in competition with any activity
of the Company, or adverse or harmful to the interests of the Company, including
but not limited to
(a) conduct related to the optionee's employment for which either
criminal or civil penalties against the optionee may be sought,
(b) violation of Company policies, including, without limitation, the
Company's insider trading policy,
(c) accepting employment with or serving as a consultant, advisor or in
any other capacity to an employer that is in competition with or acting
against the interests of the Company, including employing or recruiting
any present, former or future employee of the Company,
(d) disclosing or misusing any confidential information or material
concerning the Company, or
(e) participating in a hostile takeover attempt, then all unexpired
options held by the optionee shall terminate effective upon the date on
which the optionee engages in such activity, unless terminated earlier
by operation of another term or condition of the Plan or the Stock
Option Agreement, and the optionee shall pay the Company any Option
Gain as defined in paragraph 1 of this section.
3. Right of Setoff. The Company shall have a right of setoff against
any amounts the Company may owe the optionee from time to time (including wages,
vacation pay, other compensation, fringe benefits or any other amounts owed), to
the extent of the amounts owed by the optionee to the Company under paragraphs 1
and 2 of this section.
4. Board Discretion. The optionee may be released from the obligations
under this forfeiture section only if the Board of Directors, or its duly
appointed agent, determines in its sole discretion that such action is in the
best interests of the Company.
EXHIBIT 11
COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(A) Net Income (Loss) $ (581,864) $ 459,290 $ 843,479 $ 834,705 $ 200,652
=========== =========== =========== =========== ===========
Weighted Average of
Common Shares Out-
standing 1,550,685 1,541,670 1,590,653 1,308,037 1,351,864
Potential Shares
Attributable to
Options Outstanding 38,676 107,976 121,808 57,413 6,722
----------- ----------- ----------- ----------- -----------
(B) Weighted Average of Common
and Common Equivalent
Shares Outstanding 1,589,361 1,649,646 1,712,461 1,365,450 1,358,586
=========== =========== =========== =========== ===========
Primary Net Income (Loss) Per Common
Share (A/B) $ (.37) $ .28 $ .49 $ .49* $ .12*
=========== =========== =========== =========== ===========
</TABLE>
* Restated to reflect a five-for-four stock split, effected in the form of a 25%
stock dividend to Shareholders of record on March 19, 1993.
EXHIBIT 13
PHOTO CONTROL
CORPORATION
1995
ANNUAL REPORT
BUSINESS DESCRIPTION
Photo Control Corporation designs, manufactures, and markets
professional cameras, long-roll film magazines, package printers, electronic
flash equipment and photographic accessories. The principal market for the
camera and magazine equipment is the sub-segment of the professional photography
market which requires high-volume equipment, such as school photographers. The
market for photographic package printers is photographic processing labs which
specialize in producing photographic color print packages such as wedding and
school photography. The market for the electronic flash equipment extends to all
professional and to more experienced amateur photographers. The geographic area
in which the equipment is marketed consists of the entire United States and to
some foreign countries. Most marketing personnel are full-time employees of the
Company.
ANNUAL MEETING
The annual meeting of shareholders will be held on May 9, 1996, at 3:30 p.m., at
the First Bank, Marquette Office Sixth and Marquette, Minneapolis, MN.
All shareholders are invited to attend.
CORPORATE COMMUNICATIONS
Requests for annual, and Form 10-K reports or other Company financial
communications should be directed to:
Vice-President-Treasurer
Photo Control Corporation
4800 Quebec Ave. N.
Minneapolis, MN 55428
The above reports will be mailed without charge.
CORPORATE OFFICES
Photo Control Corporation
4800 Quebec Ave. N.
Minneapolis, MN 55428
(612) 537-3601
PAGE INSIDE FRONT COVER
To Our Shareholders:
[PHOTO] PICTURE OF L.A. WILLIG, CHAIRMAN
The markets in which we sell our products were soft in 1995. Not only
were our sales down but our bottom line results showed a loss of $581,864 or
$.37 per share. In spite of the weak markets and this poor performance, Photo
Control made some significant accomplishments during 1995 and they are
highlighted below.
As electronic imaging continues to make inroads into our market
segments, we have developed some products and systems and need to design others
that are compatible with and will flourish in this changing technology. Three
such product categories in which we manufacture equipment are optics, lighting,
and portrait cameras. All are needed in electronic (or computerized) imaging.
Camerz Long-Roll Portrait Cameras are presently being used with our new
electronic instant preview system to provide instant proofs. We also have
patents on optical technology which can be used in the future to produce a
filmless camera system for our market segments.
For many years, Nord's optics laboratory has been located in Hinckley,
Minnesota, a small rural town located about 90 miles north of Minneapolis. That
optics operation has been moved from Hinckley to some newly renovated spaces in
our main headquarters building in Minneapolis. Now we will be able to expand
production under better supervision and with better coordination by our
engineering personnel. It is expected that we will be able to extend our sales
into broader markets and offer improved delivery times while continuing to
maintain the high quality standards for which Nord optics are so widely known.
During 1995, Nord also has established an alliance with a highly
respected and successful electronic and data systems company, Bremson, Inc.,
which is located in Lenexa, Kansas. This alliance has resulted in a new
electronic control device for some of Nord's package printers which will open
many new sales opportunities for that subsidiary.
Our other market segment which continues to hold especial promise in
the future technology is lighting. In the past, we have concentrated on
electronic flash products which could be sold to the end user only through a
network of professional photographic equipment dealers. In 1995, while
continuing to develop such products and work with those dealers, our lighting
subsidiary, Norman Enterprises, has begun to work directly with very large users
who require specialized customization to meet their specific needs. This new
market inroad has shown early promise and has resulted in some sizable long-term
orders which should show favorable results in 1996.
On behalf of the Board,
/s/ L. A. Willig
L. A. Willig
Chairman
PAGE 1
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales........................... $14,698,526 $17,590,481 $17,809,220 $16,131,596 $11,967,288
Net Income (Loss) .................. (581,864) 459,290 843,479 834,705 200,652
Net Income (Loss) Per Share......... (.37) .28 .49 .49* .12*
Return on Sales..................... (4.0)% 2.6% 4.7% 5.2% 1.7%
Return on Beginning Net Worth....... (6.1)% 4.9% 9.6% 10.2% 2.5%
Return on Beginning Assets.......... (4.8)% 3.6% 6.7% 7.5% 1.7%
Working Capital..................... $6,133,435 $6,378,530 $6,994,937 $6,357,194 $6,175,618
Plant and Equipment................. 3,614,104 3,813,339 3,692,698 3,909,808 3,479,364
Total Assets........................ 12,595,111 12,064,139 12,661,072 12,617,495 11,065,204
Long-Term Debt...................... 600,000 670,000 1,551,590 1,667,519 1,778,994
Shareholders' Equity................ 9,172,308 9,509,595 9,318,098 8,824,026 8,158,108
Book Value Per Share................ 5.70 6.28 5.99 5.47* 4.94*
Shares Outstanding.................. 1,608,163 1,514,813 1,556,155 1,290,552 1,320,652
</TABLE>
*Restated to reflect a five-for-four stock split, effected in the form of a 25%
stock dividend to shareholders of record on March 19, 1993.
STOCK MARKET INFORMATION
The Company's Common Stock is listed on the National Association of Securities
Dealers Automated Quotation System (NASDAQ) on the National Market System under
the symbol PHOC. The Company has never paid any cash dividends. It intends to
retain earnings to finance the development of its business. On February 5, 1993,
the Board of Directors declared a five-for-four stock split in the form of a 25%
stock dividend payable on April 2, 1993 to shareholders of record on March 19,
1993. Shareholders of record on December 31, 1995 numbered 462. The Company
estimates that an additional 900 shareholders own stock held for their account
at brokerage firms and financial institutions. The following table sets forth
the high and low transactions for the eight fiscal quarters ending during the
years set forth below. The source of the quotations is the National Association
of Securities Dealers Inc. Monthly Statistical Report.
1995 1994
----------------------------------------------
QUARTER HIGH LOW HIGH LOW
------ ----- ------ -----
March 31 6 1/4 5 8 3/4 6 1/4
June 30 5 3/8 4 1/2 6 1/2 5 3/4
September 30 4 3/4 3 1/2 6 1/2 5 3/4
December 31 4 3 1/2 8 1/4 6
PAGE 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents selected items from the Company's Consolidated
Statements of Operations expressed as percentages of sales for the year
indicated.
<TABLE>
<CAPTION>
PERCENT
INCREASE (DECREASE)
(BASED ON AMOUNTS)
YEAR ENDED DECEMBER 31 1995 1994
---------------------- VS VS
1995 1994 1993 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sales..................................... 100.0% 100.0% 100.0% (16.4)% (1.2)%
Gross Margin.............................. 26.6 32.3 32.6 (31.1) (2.0)
Marketing & Administrative................ 23.0 18.7 17.4 2.5 6.8
Research, Development & Engineering....... 8.9 8.8 7.2 (15.0) 19.8
Interest.................................. .7 .5 .7 14.3 (25.0)
Income Before Taxes....................... (6.0) 4.3 7.3 (216.1) (42.1)
Net Income................................ (4.0) 2.6 4.7 (226.7) (45.6)
</TABLE>
SALES
The Company's sales are made up of three product lines; professional cameras,
photographic printers and electronic flash equipment. Consolidated sales in 1995
decreased by $2,891,955 or 16.4% from 1994. Sales to a major customer decreased
by $1,285,000 in 1995 from 1994, however, the customer still accounted for 20.2%
of sales in 1995 and 24.2% of sales in 1994. A substantial portion of the sales
to this customer consisted of a dual-ported zoom lens camera that were made
under a multi-year contract. The customer has scheduled shipments of $346,000
through April, 1996 under the multi-year contract, but has not indicated whether
any additional shipments will be required. Total sales of professional cameras
declined by $3,200,000 in 1995 from 1994 due to completion of studio expansion
by several significant customers during 1995 and the reduction in sales of
dual-ported zoom lens cameras. Sales of the printer line declined by $1,300,000
in 1995 as compared to 1994 reflecting the decease in the relatively high sales
of customized printer lens and film coaters in 1994. Sales of flash equipment
increased $1,600,000 in 1995 from 1994. OEM sales primarily account for the
flash equipment sales increase, however, the gross margin on these sales were
significantly lower than on the standard dealer flash equipment lines. With the
exception of a three percent price increase on the camera products, prices were
not increased in 1995 from 1994.
Consolidated sales in 1994 decreased by $218,739 or 1.2% from 1993. An increase
in the sales of the printer product lines of $998,000 was offset by declines in
both the camera and flash equipment products. Increased sales of film coaters
and printer customized lens account for the printer product line. Sales of flash
equipment declined $383,000 due to competitive pressures. Sales of the camera
line declined by $834,000. Demand decreased for the standard camera product
lines which was partially offset by increases in the sale of the dual-ported
lens camera.
GROSS MARGINS
The gross margins were 26.6%, 32.3% and 32.6% for the years ended December 31,
1995, 1994 and 1993, respectively. The gross margin decline in 1995 from 1994 is
attributable to all three product lines. Gross margins on camera and printer
sales declined primarily as a result of the sales volume declines. Gross margins
on flash equipment sales account for the majority of the decline due to the poor
margin on OEM sales. The Company anticipates that the gross margin in future
periods will be higher than 1995 and closer to 1994 and 1993. However, gross
margins are expected to fluctuate on a quarterly basis because of product mix
changes and the seasonality of sales.
MARKETING AND ADMINISTRATIVE
Marketing and administrative expense have remained relatively level at
$3,377,883, $3,296,119 and $3,086,242 for the years ended December 31, 1995,
1994 and 1993, respectively. As a percentage of sales, marketing and
administrative expenses have changed to 23.0% in 1995 from 18.7% in 1994 and
from 17.4% in 1993. The dollar increase in 1995 from 1994 is due to additional
compensation of $165,000 paid under the terms of the option agreements to option
holders who exercised options under the Company's non-qualified stock option
plan. The small increase in 1994 from 1993 is due to higher spending on
marketing activities such as trade shows and commissions.
PAGE 3
RESEARCH, DEVELOPMENT AND ENGINEERING
The Company believes that timely development of new products and features is
required to maintain and enhance its competitive position. Accordingly, the
Company is committed to an aggressive level of research, development and
engineering spending. Research, development and engineering expenses were
$1,309,738, $1,540,174 and $1,285,731 for the years ended December 31, 1995,
1994 and 1993, respectively. These expenses increased as a percentage of sales
to 8.9% in 1995 from 8.8% in 1994 and 7.2% in 1993 The 1995 expense decreased by
$230,436 all which is attributable to the printer product line. A number of
projects were completed and the related use of outside engineers declined. The
1994 increase primarily reflects additional personnel.
INTEREST
Interest expense increased to $103,387 for the year ended December 31, 1995 as
compared to $90,430 for the year ended December 31, 1994 and decreased from
$120,475 for the year ended December 31, 1993. The increase reflects higher
usage during 1995 of the Company's line of credit.
QUARTERLY RESULTS
Historically, second and third quarter sales are relatively high which reflects
the Company's seasonal nature. 1995 and 1994 reflected the typical seasonality.
In addition to the normal poor fourth quarter results, the fourth quarter
results for 1995 and 1994 reflect the discontinuance of flash equipment product
lines. In the fourth quarter of 1995 the Venca power pack was discontinued and
in the fourth quarter of 1994 the Bardwell cine lights were discontinued with
inventory disposed of or an allowance established to cover subsequent disposal.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased to $145,899 at December 31, 1995 from $307,227 at December 31,
1994. Working capital decreased to $6,133,435 at December 31, 1995 from
$6,378,530 at December 31, 1994.
Capital expenditures were $231,817 in 1995, $535,337 in 1994 and $178,294 in
1993. The Company estimates that additional capital investments for property and
equipment will be approximately $350,000 in 1996.
The Company has an unsecured line of credit for $1,500,000 at the prime rate of
interest and at December 31, 1995, there was $450,000 of borrowings under the
line.
The Company has repurchased its common stock in the amounts of $285,320,
$292,126 and $370,304 for the years ended December 31, 1995, 1994 and 1993,
respectively. The Board of Directors had authorized the purchase of common stock
of up to a total of $1,500,000 which has been completely expended as of December
31, 1995.
The ratio of long-term debt to stockholder's equity at December 31, 1995, 1994
and 1993 was .07, .07 and .17, respectively. In February 1994, the Company used
its excess cash to retire the 9% Industrial Development Revenue Note which had a
balance of $857,249 at December 31, 1993.
During 1995, 148,752 shares of common stock at a total price of $416,505 were
acquired by the holders of the non-qualified stock options. In addition, the
Company received a $80,000 tax benefit for a tax reduction measured by the
amount that the fair market value of the stock exceeded the option price at the
date of exercise.
The Company has not paid any cash dividends on its common stock and currently
expects that any future earnings will be retained for use in its business.
The Company believes that its current cash position, its cash flow from
operations and amounts available from bank borrowing should be adequate to meet
its anticipated cash needs for working capital and capital expenditures during
1996. However, the current line of credit may need to be increased during 1996
to accommodate the seasonal nature of its cash flow.
PAGE 4
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Sales ..................................... $ 14,698,526 $ 17,590,481 $ 17,809,220
------------ ------------ ------------
Cost and Expenses
Cost of Goods Sold .................. 10,783,382 11,909,468 12,013,293
Marketing and Administrative ........ 3,377,883 3,296,119 3,086,242
Research, Development and Engineering 1,309,738 1,540,174 1,285,731
Interest ............................ 103,387 90,430 120,475
------------ ------------ ------------
15,574,390 16,836,191 16,505,741
------------ ------------ ------------
Income (Loss) Before Income Taxes ......... (875,864) 754,290 1,303,479
Income Tax Provision (Benefit) (Note 5) .. (294,000) 295,000 460,000
------------ ------------ ------------
Net Income (Loss) ......................... $ (581,864) $ 459,290 $ 843,479
============ ============ ============
Net Income (Loss) Per Common Share (Note 2) $ (.37) $ .28 $ .49
============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------
NUMBER ADDITIONAL
OF PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 ........ 1,290,552 $ 103,244 $ 993,023 $ 7,727,759
Five-For-Four Stock Split ......... 323,221 25,858 (25,858) --
Repurchase of Stock ............... (60,784) (4,863) (48,177) (317,264)
Stock Options Excercised (Note 7) . 3,166 253 20,644 --
Net Income ........................ -- -- -- 843,479
----------- ----------- ----------- -----------
Balance at December 31, 1993 ........ 1,556,155 $ 124,492 $ 939,632 $ 8,253,974
Repurchase of Stock ............... (47,175) (3,774) (35,853) (252,499)
Stock Options Excercised (Note 7) . 5,833 467 23,866 --
Net Income ........................ -- -- -- 459,290
----------- ----------- ----------- -----------
Balance at December 31, 1994 ........ 1,514,813 121,185 927,645 8,460,765
Repurchase of Stock ............... (63,750) (5,100) (48,450) (231,770)
Stock Options Exercised (Note 7) .. 148,752 11,900 484,605 --
Contribution to Profit Sharing Plan 8,348 668 32,724 --
Net Income (Loss) ................. -- -- -- (581,864)
----------- ----------- ----------- -----------
Balance at December 31, 1995 ........ 1,608,163 $ 128,653 $ 1,396,524 $ 7,647,131
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
PAGE 5
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
ASSETS 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents .................................. $ 145,899 $ 307,227
Accounts Receivable, Less Allowance of $153,000 and $142,000 1,262,540 1,506,202
Other Receivables .......................................... 15,706 21,100
Inventories (Notes 2 and 3) ................................ 6,658,336 5,727,360
Prepaid Expenses ........................................... 351,263 180,524
------------ ------------
Total Current Assets .................................... 8,433,744 7,742,413
------------ ------------
Investments and Other Assets
Cash Value of Life Insurance ............................... 215,263 194,035
Excess of Cost Over Net Assets Acquired .................... 19,352
Deferred Income Taxes (Note 5) ............................. 332,000 295,000
------------ ------------
Total Investments and Other Assets ...................... 547,263 508,387
------------ ------------
Plant and Equipment (Notes 2 and 4)
Land and Building .......................................... 4,197,081 4,185,355
Machinery and Equipment .................................... 3,551,997 3,393,608
Accumulated Depreciation ................................... (4,134,974) (3,765,624)
------------ ------------
Total Plant and Equipment ............................... 3,614,104 3,813,339
------------ ------------
$ 12,595,111 $ 12,064,139
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note Payable to Bank (Note 4) .............................. $ 450,000 $
Current Maturities of Long-Term Debt (Note 4) .............. 130,616 117,612
Accounts Payable ........................................... 1,384,830 782,450
Accrued Payroll and Employee Benefits ...................... 213,872 382,760
Accrued Expenses ........................................... 120,991 81,061
------------ ------------
Total Current Liabilities ............................... 2,300,309 1,363,883
------------ ------------
Long-Term Debt (Note 4) ....................................... 600,000 670,000
------------ ------------
Deferred Compensation ......................................... 522,494 520,661
------------ ------------
Stockholders' Equity (Note 7)
Common Stock
Par Value $.08 Authorized 5,000,000
Shares Issued 1,608,163 and 1,514,813 ................... 128,653 121,185
Additional Paid-In Capital ................................. 1,396,524 927,645
Retained Earnings .......................................... 7,647,131 8,460,765
------------ ------------
Total Stockholders' Equity .............................. 9,172,308 9,509,595
------------ ------------
$ 12,595,111 $ 12,064,139
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
PAGE 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (Loss) from operations ............ $ (581,864) $ 459,290 $ 843,479
Items not affecting cash-
Depreciation .............................. 401,444 414,694 395,404
Amortization .............................. 19,352 25,836 29,641
Deferred compensation ..................... 26,453 23,109 55,122
(Gain) Loss on sale of equipment .......... 8,774 (2,500) (17,200)
Deferred income taxes ..................... (37,000) (15,000) (30,000)
Proceeds from life insurance .................... -- 202,128 --
Payment of deferred compensation ............. (24,620) (20,516) --
Change in operating assets and liabilities:
Receivables ............................ 249,056 415,415 (404,734)
Inventories ............................ (930,976) (287,006) 385,786
Prepaid expenses ....................... (170,739) 8,824 (63,503)
Accounts payable ....................... 602,380 96,152 (201,661)
Accrued expenses ....................... (95,566) (98,312) 7,761
----------- ----------- -----------
Net cash provided (used) by
operating activities .............. (533,306) 1,222,114 1,000,095
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of equipment .............. 20,834 2,500 17,200
Additions to plant and equipment ............. (231,817) (535,337) (178,294)
Additions to cash value of life insurance .... (21,228) (21,228) (26,511)
Collections on notes receivable .............. -- 12,645 34,942
----------- ----------- -----------
Net cash used in investing activities (232,211) (541,420) (152,663)
----------- ----------- -----------
Cash flows from financing activities:
Repayment of long-term debt .................. (56,996) (948,489) (111,717)
Borrowing (repayment) on line of credit-net .. 450,000 -- (200,000)
Proceeds from stock options exercised ........ 496,505 24,333 20,897
Repurchase of Company's common stock ......... (285,320) (292,126) (370,304)
----------- ----------- -----------
Net cash provided (used) by
financing activities ............. 604,189 (1,216,282) (661,124)
----------- ----------- -----------
Change in cash and cash equivalents ............. (161,328) (535,588) 186,308
Cash and cash equivalents at beginning of year .. 307,227 842,815 656,507
----------- ----------- -----------
Cash and cash equivalents at end of year ........ $ 145,899 $ 307,227 $ 842,815
=========== =========== ===========
Supplemental disclosure information:
Income tax payments .......................... $ 20,900 $ 388,642 $ 715,893
=========== =========== ===========
Income tax refunds ........................... $ 170,562 $ 121,744 $ 131,207
=========== =========== ===========
Interest paid ................................ $ 103,387 $ 90,430 $ 120,475
=========== =========== ===========
Non-Cash Transaction:
The Company contributed 8,343 shares of common stock to its profit sharing
plan at a value of $33,392 during the year ended December 31, 1995.
</TABLE>
See accompanying Notes to Consolidated Financial Statements
PAGE 7
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS DESCRIPTION
Photo Control Corporation (the Company) designs, manufactures and markets
professional cameras, photographic package printers, electronic flash equipment,
and related photographic accessories.
The principal market for the Company's long-roll camera equipment is the
sub-segment of the professional photography market requiring high-volume
equipment, such as elementary and secondary school photographers. The market
with respect to electronic flash equipment is broader, extending to all
professional and commercial photographers and to experienced amateur
photographers. The market for photographic package printers is photographic
processing labs which specialize in producing photographic color print packages
such as those often produced for weddings and school photography. The geographic
market in which the Company competes with respect to long-roll camera equipment,
flash equipment, and printers consists of the entire United States and, to a
lesser extent, some foreign countries.
Historically, camera equipment provides the largest amount of sales, followed by
electronic flash equipment and package printers. Earnings have generally
followed sales except in 1995 and 1994 the flash equipment operation resulted in
the highest losses with package printers showing a loss in 1995 and a small
profit in 1994.
To some extent there has been a consolidation of school photography and studio
portrait photography in recent years which has concentrated the company sales to
fewer customers. It is expected that this trend will continue. In 1995, one
customer accounted for 20.2% of the Company's sales and although it is expected
that this particular customer will account for less sales in the future, other
customers could become significant.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Norman Enterprises,
Inc. and Nord Photo Engineering, Inc. All material inter-company transactions
and account balances have been eliminated.
USE OF ESTIMATES - Management uses estimates and assumptions in preparing
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from the estimates
that were assumed in preparing the financial statements.
REVENUE RECOGNITION - Sales are recorded when the product is shipped.
INVENTORIES - Inventories of raw materials, work in process and finished goods
are valued at the lower of cost (first-in, first-out) or market. Market
represents estimated realizable value in the case of finished goods and
replacement or reproduction cost in the case of other inventories. Because of
changing technology and market demand, inventory is subject to obsolescence. An
annual review is made of all inventory to determine if any obsolete,
discontinued or slow moving items are in inventory. Based on this review,
inventory is disposed of or an allowance for obsolescence established to cover
any future disposals.
PLANT AND EQUIPMENT - Plant and equipment are stated at cost. Depreciation is
computed primarily on the straight-line method over the estimated useful lives
of 15 to 40 years for the buildings and 3 to 8 years for machinery and
equipment.
Ordinary maintenance and repairs are charged to operations, and expenditures
which extend the physical or economic life of property and equipment are
capitalized. Gains and losses on disposition of property and equipment are
recognized in operations and the related asset and accumulated depreciation
accounts are adjusted accordingly.
PAGE 8
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts for cash,
receivables, accounts payable and accrued liabilities approximate fair value
because of the short maturity of these instruments. The carrying value of notes
payable to bank under the Company's line of credit agreement also approximates
fair value because of periodic repricing based on prime rate changes. The fair
value of long-term debt is estimated based on current rates for tax-exempt debt
of similar maturities and is not materially different than its carrying value.
RESEARCH AND DEVELOPMENT - Expenditures for research and development are charged
against operations as incurred.
INCOME TAXES - Deferred income taxes are provided for expenses recognized in
different time periods for financial reporting and income tax purposes. These
differences consist primarily of depreciation, which is accelerated for tax
purposes, deferred compensation that is not deductible for taxes and inventory
which has a higher tax basis than for financial reporting purposes.
CASH EQUIVALENTS - The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be a cash equivalent. Cash
and cash equivalents consist of money market mutual funds and bank balances. The
Company at December 31, 1995 and periodically throughout the year has maintained
balances in various operating and money market accounts in excess of federally
insured limits.
NET INCOME PER SHARE - Net income per common share was based on the weighted
average number of common shares and common stock equivalents outstanding during
the period. When dilutive, stock options are included as common stock
equivalents using the treasury stock method.
NOTE 3. INVENTORIES
The following inventories were on hand at December 31:
1995 1994 1993
---- ---- ----
Raw Materials.......................... $4,272,903 $3,606,564 $3,336,948
Work in Process........................ 819,686 942,939 892,807
Finished Goods......................... 1,565,747 1,177,857 1,210,599
---------- ---------- ----------
$6,658,336 $5,727,360 $5,440,354
========== ========== ==========
NOTE 4. LONG-TERM DEBT AND SHORT-TERM LINE OF CREDIT
Long-term debt at each year ended December 31, consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
65% of Prime Rate Industrial Development Revenue Bond.......... $ 670,000 $ 740,000
Other Notes Payable............................................ 60,616 47,612
--------- ---------
730,616 787,612
Less Amount Due Within One Year................................ 130,616 117,612
--------- ---------
Amount Due After One Year...................................... $ 600,000 $ 670,000
========= =========
</TABLE>
The Industrial Revenue Bond is secured by land and building and is due in
varying semi-annual principal amounts of $35,000 to $85,000 at the due date of
December 2003.
Maturities of long-term debt for the next five years ending December 31 are
$130,616 in 1996 and $70,000 in each of the four years thereafter.
PAGE 9
The Company has a $1,500,000 unsecured line of credit agreement at the prime
rate of interest. The following summarizes the borrowings under the line of
credit during each year ended December 31:
1995 1994
---- ----
Outstanding balance at year end.............. $ 450,000 $ --
Maximum balance at any month end............. 1,000,000 500,000
Average month end balance.................... 683,340 172,000
Average interest rate........................ 8.9% 7.5%
NOTE 5. INCOME TAXES
The income tax provision shown in the statement of operations is detailed below
for each year ended December 31:
Current 1995 1994 1993
---- ---- ----
Federal............... $ (260,000) $ 225,000 $ 412,000
State................. 3,000 85,000 78,000
Deferred ...................... (37,000) (15,000) (30,000)
---------- ---------- ----------
$ (294,000) $ 295,000 $ 460,000
=========== ========== ==========
In 1993, the Company adopted the method of accounting and reporting for income
taxes under the Financial Accounting Standards Board (FASB) issued Statement No.
109 "Accounting for Income Taxes". The implementation of Statement No. 109 did
not have a significant effect on the financial statements. The income tax
provision for continuing operations varied from the federal statutory tax rate
as follows for each year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. Statutory Rate....................................... (34.0)% 34.0% 34.0%
State Income Taxes, Net of Federal Income Tax Benefit..... .2 7.4 3.8
Amortization of Goodwill.................................. .7 1.1 .7
Miscellaneous Items....................................... (.3) (2.1) (1.5)
Minimum Tax and R & D Tax Credits......................... (.6) (1.3) (1.7)
------- ------- ------
(33.6)% 39.1% 35.3%
======= ======= ======
</TABLE>
The Company does not file on a unitary tax basis in all states. As a result
certain losses which are offset against income on a federal tax basis cannot be
used in computing taxes in some states, which caused a higher than expected
state income tax provision in the year ended December 31, 1994 and a lower than
expected tax benefit for the year ended December 31, 1995. The company has a
state tax loss carryforward of approximately $875,000 which expires in 1998,
1999 and 2000.
The following summarizes the tax effects of the significant temporary
differences which comprise the deferred tax asset for each year ended December
31:
1995 1994
---- ----
Inventory Costs $ 306,000 $ 269,000
Deferred Compensation 118,000 117,000
Bad Debt Reserves 50,000 46,000
Net Operating Loss Carry Forward 7,400
Accrued Benefits 41,000 32,600
----------- -----------
515,000 472,000
Less Accelerated Depreciation (183,000) (177,000)
----------- -----------
Net Deferred Tax $ 332,000 $ 295,000
=========== ===========
PAGE 10
NOTE 6. PROFIT SHARING PLAN
The contribution to the Company's profit sharing plan, which covers qualified
full-time employees was $135,000 and $180,000 for the years ended December 31,
1994 and 1993, respectively. The Company did not make a contribution to the plan
for the year ended December 31, 1995. The 1994 contribution paid in 1995
consisted of $33,392 of the Company's common stock and $101,608 of cash.
NOTE 7. STOCK OPTIONS
Non-qualified stock options to purchase shares of the Company's common stock
have been granted to certain officers, directors, and key employees. Option
prices of all the grants were not less than the fair market value of the
Company's common stock at dates of grants. At December 31, 1995, 31,583 stock
options were exercisable. Unless exercised, stock options will expire as
follows: 1997 - 9,375; 1998 - 76,000; 1999 - 26,000, 2000 - 26,000. Option
excercise prices on outstanding options at December 31, 1995, ranged from $4.00
to $6.25.
<TABLE>
<CAPTION>
1995 1994 1993
------------------------ ----------------------- ---------------------
NUMBER NUMBER NUMBER
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of Year........ 260,127 255,377 138,500
Granted............................. 29,000 $4.00 to $6.00 29,000 $5.75 to $6.25 86,000 $5.00
Exercised........................... (148,752) $2.80 (5,833) $2.80 (3,166) $2.80
Expired............................. (3,000) $6.00 (18,417) $2.80 to $5.75
Five-For-Four Stock Split........... ______ ______ 34,043
------
Balance at End of Year.............. 137,375 260,127 255,377
======= ======= =======
</TABLE>
NOTE 8. MAJOR CUSTOMER
During the years ended December 31, 1995, 1994, and 1993, the Company derived
20.2%, 24.2%, and 17.4%, respectively, of its sales from one unaffiliated
customer.
NOTE 9. QUARTERLY INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information for
the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
-------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Sales.............................. $3,044,080 $3,496,583 $4,858,565 $3,299,298 $14,698,526
Gross Operating Earnings........... 770,677 1,014,055 1,417,375 713,037 3,915,144
Net Income (Loss).................. (396,237) (45,355) 167,427 (307,699) (581,864)
Net Income (Loss) Per Share........ (.25) (.03) .11 (.20) (.37)
YEAR ENDED DECEMBER 31, 1994 1ST QTR. 2ND QTR . 3RD QTR. 4TH QTR. TOTAL
-------- -------- -------- -------- ------
Sales.............................. $3,714,502 $4,491,738 $5,993,414 $3,390,827 $17,590,481
Gross Operating Earnings........... 1,282,199 1,595,803 2,067,339 735,672 5,681,013
Net Income (Loss).................. 1,132 303,482 372,586 (217,910) 459,290
Net Income (Loss) Per Share - .18 .23 (.13) .28
YEAR ENDED DECEMBER 31, 1993 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
-------- -------- -------- -------- ------
Sales.............................. $4,640,988 $4,326,813 $5,021,840 $3,819,579 $17,809,220
Gross Operating Earnings........... 1,411,247 1,514,137 1,678,295 1,192,248 5,795,927
Net Income......................... 145,763 211,327 294,653 191,736 843,479
Net Income Per Share............... .08 .13 .17 .11 .49
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 11
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Photo Control Corporation
We have audited the accompanying consolidated balance sheets of Photo
Control Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of changes in stockholders' equity, operations
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits 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 Photo
Control Corporation and subsidiaries as of December 31, 1995 and 1994 and the
consolidated results of operations and cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
VIRCHOW, KRAUSE & COMPANY, LLP
Minneapolis, Minnesota
January 30, 1996
CORPORATE DIRECTORY
DIRECTORS
LESLIE A. WILLIG
Chairman
THOMAS J. CASSADY
Retired President of
Merrill Lynch Pierce Fenner & Smith
Division
GEORGE A. KIPROFF
Retired President of
DEK Identification Systems
Fort Wayne, Indiana
JAMES R. LOOMIS
Retired President of
Magnavox Electronic System Co.
WILLIAM L. NORMAN
President
Norman Enterprises, Inc.
Burbank, California
JOE M. KILGORE
Partner in Law Firm of
McGinnis, Lochridge and
Kilgore
Austin, Texas
BOARD OF DIRECTORS
[PHOTO]
Photograph of the following:
Standing: James R. Loomis, Thomas J. Cassady, William L. Norman
Seated: Joe A. Kilgore, Leslie A. Willig, George A. Kiproff
CORPORATE OFFICERS
[PHOTO]
PATRICK J. GILLIGAN
President, Nord
Engineering, Inc.
[PHOTO]
CURTIS R. JACKELS
Vice President-Treasurer
[PHOTO]
ROGER M. JOHNSON
President, Camerz
Products Division
[PHOTO]
WILLIAM L. NORMAN
President, Norman
Enterprises, Inc.
[PHOTO]
MARK J. SIMONETT
Secretary
LEGAL COUNSEL
Gray, Plant, Mooty, Mooty &
Bennett, P.A.
Minneapolis, Minnesota
INDEPENDENT PUBLIC ACCOUNTANTS
Virchow, Krause & Company, LLP
Minneapolis, Minnesota
STOCK TRANSFER AGENT
Norwest Bank Minnesota, N.A.
South St. Paul, Minnesota
STOCK LISTED
NASDAQ
Stock symbol: PHOC
PAGE INSIDE BACK COVER
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
NAME OF SUBSIDIARY STATE OF INCORPORATION PERCENT OWNED
Norman Enterprises, Inc. California 100%
Nord Photo Engineering, Inc. Minnesota 100%
EXHIBIT 23
AUDITOR'S CONSENT AND REPORT ON SCHEDULES
Board of Directors and
Stockholders
Photo Control Corporation
We hereby consent to the incorporation by reference in this Annual Report on
Form 10-K of Photo Control Corporation for the year ended December 31, 1995, of
our report, dated January 30, 1996, appearing in the Company's 1995 Annual
Report to Shareholders. We also consent to the incorporation by reference of
such report in the registration statements on Form S-8 for the Photo Control
Stock Option Plan.
In the course of our audit of the financial statements referred to in our
report, dated January 30, 1996, included in the Company's 1995 Annual Report to
Shareholders, we also audited the supporting schedule listed in Item 14(a)(2) of
this Annual Report on Form 10-K. In our opinion, the schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
Virchow, Krause & Company, LLP
January 30, 1996
Minneapolis, Minnesota
EXHIBIT 25
POWER OF ATTORNEY
CONCERNING
FORM 10-K FISCAL 1995
Each person whose signature appears below constitutes and appoints
LESLIE A. WILLIG his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities to sign the Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, and any or all amendments to such Annual Report on
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.
Signature Date
/s/Leslie A. Willig March 15, 1996
Leslie A. Willig, Chief Executive Officer
President and Director (principal executive
officer)
/s/Curtis R. Jackels March 15, 1996
Curtis R. Jackels, Vice President
and Treasurer (principal financial and principal
accounting officer)
/s/George A. Kiproff March 15, 1996
George A. Kiproff, Director
/s/James R. Loomis March 15, 1996
James R. Loomis, Director
/s/William L. Norman March 15, 1996
William L. Norman, Director
/s/Thomas J. Cassady March 15, 1996
Thomas J. Cassady, Director
/s/Joe M. Kilgore March 15, 1996
Joe M. Kilgore, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 145,899
<SECURITIES> 0
<RECEIVABLES> 1,262,540
<ALLOWANCES> 0
<INVENTORY> 6,658,336
<CURRENT-ASSETS> 8,433,744
<PP&E> 7,749,078
<DEPRECIATION> 4,134,974
<TOTAL-ASSETS> 12,595,111
<CURRENT-LIABILITIES> 2,300,309
<BONDS> 600,000
0
0
<COMMON> 128,653
<OTHER-SE> 9,043,655
<TOTAL-LIABILITY-AND-EQUITY> 12,595,111
<SALES> 14,698,526
<TOTAL-REVENUES> 14,698,526
<CGS> 10,783,382
<TOTAL-COSTS> 10,783,382
<OTHER-EXPENSES> 4,867,621
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103,387
<INCOME-PRETAX> (875,864)
<INCOME-TAX> (294,000)
<INCOME-CONTINUING> (581,864)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (581,864)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> 0
</TABLE>
