FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
Commission file number 0-14299
SECOM GENERAL CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 87-0410875
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
46035 GRAND RIVER AVENUE, NOVI, MICHIGAN 48374
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 305-9410
Securities registered pursuant to Section 12(b) of the
Securities Exchange Act of 1934:
None
(Title of class and name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934:
Common Stock, par value $.10 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to
such filing requirements for the past 90 days. Yes__X__ No_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in a definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ ]
As of December 27, 1995, 4,776,200 shares of the Registrant's Common Stock
were outstanding and the aggregate market value of such Common Stock held by
non-affiliates (based on the closing price on that date as reported on the
NASDAQ National Market System) was approximately $8,229,000.
DOCUMENTS INCORPORATED BY REFERENCE
Items 11 and 13 - incorporated by reference from the Registrant's Proxy
Statement for its Annual Meeting to be held in March 1996.
<PAGE>
TABLE OF CONTENTS
PART I
Page
----
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 13
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management 16
Item 13. Certain Relationships and Related Transactions 17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 18
<PAGE>
PART I
Item 1. Business
General
Secom General Corporation, a Delaware corporation (the "Company"), is a
holding company with the following wholly-owned operating subsidiaries:
Metal Parts Forming Segment:
* Uniflow Corporation ("Uniflow") acquired in 1991
Tooling Segment:
* Form Flow, Inc. ("Form Flow") acquired in 1987
* L & H Die, Inc. ("L & H") acquired in 1987
* Micanol, Inc. ("Micanol") acquired in 1990
* Triple Technologies, Inc. ("Triple" ), formerly known as
Triple Tool, acquired in 1991
In May 1995, Triple's operations were downsized and relocated to a Form Flow
facility. Triple's continuing business activity was absorbed into Form Flow.
Prior to November 1993, the Company operated in another segment, Plastic
Molded Products, through its subsidiary, Tri-Tec Plastics Corporation
("Tri-Tec"). Tri-Tec had been acquired in 1991 and its assets were sold in
November 1993. For financial information regarding Tri-Tec, reference is made
to the section entitled "Discontinued Operations" in Management's Discussion
and Analysis set forth in Item 7 as well as Note 2 to the financial statements
set forth in Item 8.
The Company's corporate address is 46035 Grand River Avenue, Novi, Michigan
48374; its telephone number is (810) 305-9410 and its facsimile number is
(810) 305-9599.
Except as otherwise indicated by the context, any reference to "the Company"
shall mean the Company and its subsidiaries.
Principal Customers, Backlog and Seasonality
None of the Company's customer accounts exceed 10% of consolidated revenues.
Sales of the Company's parts, tooling and services are not considered
seasonal. The Company believes that its backlog, due to the nature of its
respective businesses, is not necessarily indicative of the level of its
present or future sales.
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<PAGE>
SEGMENT REVIEW
Metal Parts Forming Segment
General
The Metal Parts Forming Segment is comprised of the Company's Uniflow unit,
which primarily manufactures automotive and truck parts from steel bar, coil
and tubing using cold forging and forming machines and various types of
secondary machining, threadrolling and piercing equipment.
Sales and Competition
Uniflow's fiscal 1995 sales was comprised as follows: 36% wheel studs for
heavy and light duty trucks (original equipment manufacturers or "OEM" and
aftermarket); 26% automobile ball joint suspension housings (OEM and
aftermarket); 21% transmission gear housings (OEM); and 17% miscellaneous cold
headed and cold forged parts (OEM). While Uniflow operates in competitive
markets, management believes that Uniflow's extensive tooling inventory gives
it a competitive advantage in retaining certain yearly reorders from the same
customers. Although Uniflow is aggressively seeking sales of new parts, most
of its business base remains reorders of the same customer specific parts.
Uniflow's sales backlog usually covers a period of approximately three months
of work. As such, the backlog is not necessarily indicative of Uniflow's sales
performance beyond that time period.
Uniflow's sales are concentrated with a few customers, as five customers
comprised 56% of revenue for the fiscal year ended September 30, 1995. If
Uniflow were to lose a significant customer, management believes that it could
replace that business within an estimated timeframe of 6 to 18 months.
Manufacturing and Engineering
Uniflow manufactures parts from steel bar, coil and tubing using cut-off
machines, cold forging hydraulic presses, cold heading machines, CNC turning
centers, threadrollers, broaching and piercing machines. Although part
production can involve up to 14 different production steps, primary equipment
consists of the cold forging presses and cold forming (header) machines, which
form the parts into their general size and shape. The forging presses complete
one operation at a time, while the header machines complete up to five
operations in succession. After parts are forged or formed, they are routed to
various secondary machining operations for finishing, such as CNC turning,
threadrolling, piercing and drilling. External steps completed by outside
processors typically include specialized machining, heat-treating, annealing
and plating. Production order turnaround time can vary from 4 to 12 weeks,
depending on engineering requirements, lead times from outside vendors and the
production backlog. Uniflow's tooling department makes and repairs some of the
perishable tooling used in production, while the Company's Tooling Segment
also supplies Uniflow with some of its production tooling. The engineering
staff offers tool design and production development services to customers for
new or modified parts.
Employees
As of September 30, 1995, Uniflow employed a total of 153 full-time employees
compared to 151 in the prior year, as follows: 132 direct and indirect labor
(including factory floor supervision), 6 engineering, 2 sales, 8 office and 5
management.
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<PAGE>
Tooling Segment
General
The Company's Tooling Segment ("Tooling Segment", "Tooling Operations" or
"Tooling Units") is comprised of three wholly-owned operating subsidiaries,
which are Form Flow, L & H and Micanol. In May 1995, the Company significantly
reduced the size of its Triple operation by selling off certain equipment.
Triple's remaining operations were transferred to the Company's Form Flow
unit, although certain equipment was moved to the other subsidiaries. The
continuing Triple business activity has been absorbed into Form Flow. For
further discussion about Triple, reference is made to the Management's
Discussion and Analysis set forth in Item 7 and Note 2 to the financial
statements set forth in Item 8.
The Tooling Segment manufactures close tolerance tooling for the hot and cold
metal forming industry. Hot and cold metal forming companies typically make
metal parts from steel coil that is automatically fed through various stations
on a "header forming" machine. A header machine cuts off a piece of steel
from automatically fed coil and then moves it through each die station
progressively, using tool inserts to form the part. The number of stations,
the grade of steel and whether the steel is hot or cold as it goes through
the header machine is determined by the attributes of each customer part. As
part of its sales and service, the Tooling Unit's design and development
staff will advise customers on these and other engineering matters related
to the production of hot and cold formed parts. Tool orders typically take
4 to 10 weeks to complete, while design and development orders can span
over a period of months.
Sales and Competition
The Tooling Segment's customers manufacture items such as industrial
fasteners, hand tools, electronic components, automotive parts, tubing,
aircraft parts, consumer items and munitions as well as a wide array of OEM
assembly parts. Tooling Segment customers include OEM and aftermarket
suppliers. Continuing customer relations are very important in the tooling
business, as a significant amount of revenue is derived from the reorder
of tooling.
The Tooling Segment operates in fragmented markets with numerous competitors.
Management believes that the Company's success is based on its customers
ability to differentiate between tooling suppliers on the basis of (1) the
quality and durability of the tooling, (2) the ability to fulfill delivery
commitments, and (3) price competitiveness. The Tooling Unit's design and
engineering services allow it to compete for tool development work; management
believes these services provide the Company a significant advantage in
attracting new customer business. The Tooling Segment sells principally to
customers in the United States.
Manufacturing and Engineering
All tooling orders are manufactured to customer specifications as indicated on
a tool drawing. Tools are made from bar stock steel or carbide blanks and
generally are routed through a production sequence that includes cutting,
turning (CNC/lathe work), heat treating, grinding, polishing and coating.
Form Flow, L & H and Micanol have separate plant facilities. Design and
engineering services are located at a Form Flow facility, and are offered by
all three of the Tooling Units.
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<PAGE>
Employees
As of September 30, 1995, the Tooling Segment employed a total of 158
full-time employees compared to 175 in the prior year, as follows: 133 direct
and indirect labor (including factory floor supervision), 4 engineering, 4
sales, 11 office and 6 management.
Item 2. Properties
The Company's corporate offices were relocated from leased space to its
present offices that it owns at 46035 Grand River Avenue. Novi, Michigan. The
subsidiaries operate in separate facilities, as follows:
1) Form Flow is located in two 12,600 square foot adjacent buildings at
6901 and 6999 Cogswell in Romulus, Michigan 48174. The 6999 Cogswell
facility was acquired by the Company in December 1995. Its telephone
number is 313-729-3100. The buildings are situated on about three acres
of land and are owned by the Company.
2) L & H is located in a 12,600 square foot building at 38200 Ecorse Road,
Romulus, Michigan 48174 and its telephone number is 313-722-8011. The
building is situated on about two acres of land and is owned by the
Company.
3) Micanol is located in a 12,400 square foot building at 46001 Grand River
Avenue, Novi, Michigan 48374 and its telephone number is 810-347-1230. The
building is owned by the Company.
4) Uniflow is located in three buildings in Novi, Michigan 48374, all owned
by the Company: (1) 30,300 square feet at 26600 Heyn Drive, (2) 16,700
square feet at 46035 Grand River Avenue and (3) 32,000 square feet at 46009
Grand River Avenue. Its telephone number is 810-348-9370.
Item 3. Legal Proceedings.
The Company is involved in various legal proceedings arising in the normal
course of business. In the opinion of management (based on the opinion of
counsel) the outcome of such litigation will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders.
No items were submitted to a vote of the Company's stockholders during its
fourth fiscal quarter.
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<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock (trading symbol "SECM") has traded on NASDAQ since
June 1987 and the NASDAQ National Market System (NMS) since January 1992. The
following table sets forth (for the respective period indicated) the high and
low trade for the common stock as reported by NASDAQ. Trade prices do not
include retail markups, markdowns or commissions.
<TABLE>
<CAPTION>
High Low
Quarter Ended Trade Trade
------------- ----- -----
<S> <C> <C>
12/31/92 $5.25 $3.00
3/31/93 4.50 2.50
6/30/93 3.25 2.00
9/30/93 5.25 2.25
12/31/93 3.75 2.25
3/31/94 3.50 2.44
6/30/94 3.38 2.38
9/30/94 3.25 2.50
12/30/94 3.00 2.00
3/31/95 2.62 1.62
6/30/95 2.50 1.62
9/30/95 4.09 2.25
</TABLE>
On September 30, 1995 there were approximately 1,000 nominees/persons of
record that held the Company's common stock. Of those listed of record,
approximately 1.3 million shares were held by brokers and nominees
representing an undetermined number of beneficial stockholders.
Owners of common stock are entitled to receive dividends declared by the Board
of Directors out of funds legally available therefor. The Company has never
paid a cash dividend and does not anticipate paying cash dividends in the
foreseeable future. Its policy is to retain earnings so it can provide funds
for operations and expansion of its business. In addition, the Company's bank
loan agreement prohibits the payment of cash dividends without written consent
from the lender.
In June 1991 and in May 1992, the Company issued 10% common stock dividends to
stockholders of record as of May 14, 1991 and May 1, 1992, respectively.
Item 6. Selected Financial Data
See page 36 for selected financial data as of September 30, 1995, 1994, 1993,
1992 and 1991 and for the years then ended as required by this Item. This
information should be read in conjunction with the financial statements and
the footnotes thereto referred to in Item 14(a)(1) of this Form 10-K.
- 7 -
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following should be read in conjunction with the consolidated financial
statements and notes thereto contained elsewhere in this Form 10-K.
Overview
The Company posted net income of $1,204,300 (28 cents per share) on sales of
$36,276,200 in 1995 compared to a net income of $1,093,500 (29 cents per
share) on sales of $32,570,900 in 1994. In May 1995, the Company downsized the
Triple operation and absorbed its continuing business activity into the Form
Flow unit. The Company now operates four subsidiaries in two business
segments: the Metal Parts Forming Segment (Uniflow) and the Tooling Segment
(Form Flow, L & H and Micanol).
During the 1995 fiscal year, the Uniflow unit showed marked improvement in
augmenting productivity. With this positive trend in place, Uniflow's primary
goal is to significantly increase its continuing sales base of cold formed and
cold forged metal parts. To meet that objective, Uniflow is pursuing a number
of prospects that could add significant sales, including a family of aluminum
airbag housings and various OEM cold formed small motor shaft parts.
The Tooling Segment recorded another consistent year of profitability. Form
Flow completed a significant expansion during 1995 to increase its die repair
capacity, as demand for those services remains strong. Micanol, on the other
hand, lost sales volume from two key customers and is seeking to replace that
business.
Results of Operations
Metal Parts Forming Segment*
Chart of three year comparative operation results (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net sales................. $17,600 100.0 $16,052 100.0 $13,723 100.0
Gross profit.............. 2,226 12.6 1,533 9.6 1,154 8.4
Operating expense......... 1,951 11.1 1,356 8.4 1,356 9.9
Operating profit (loss)... 275 1.6 177 1.1 (202) (1.5)
</TABLE>
*Note: The Metal Parts Forming Segment is comprised of the Uniflow unit.
Uniflow manufactures metal parts from two types of primary machinery: (1)
single operation hydraulic presses, which generally specialize in short run
production orders and (2) multiple operation cold forming machines, which
specialize in longer production orders. In 1993, Uniflow completed a
significant expansion of its multiple operation capability with the addition
of three cold forming machines.
- 8 -
<PAGE>
Net sales increased 9.8% in 1995 from 1994, and 17.0% in 1994 from 1993. The
sales improvement in 1995 over 1994 was primarily due to increased sales of
truck wheel fasteners and various cold formed parts, while the increase in
1994 compared to 1993 was primarily due to higher sales of tubular
transmission shaft housings and various cold formed parts. As noted above,
Uniflow expanded its cold forming capacity significantly in 1993 with new
machinery capable of generating over $8 million of revenue annually. Although
sales in this area remain weak with utilized capacity at about 25%, management
is optimistic about a few sales prospects that could add substantially to the
revenues and profits of the Company. In addition, in June 1995, Uniflow
acquired a specialized hydraulic press for the manufacture of aluminum airbag
housings. Management anticipates production of airbag housing to begin in
June 1996 for delivery to a dedicated customer. For fiscal 1996, Uniflow
management projects steady sales, increasing later in the year as the airbag
housing and other parts begin production.
Gross profit on sales was 12.6% in 1995, 9.6% in 1994 and 8.4% in 1993. The
increases in gross profit percentages were primarily the result of lower
material and factory overhead costs along with higher sales prices on various
parts. Management believes that Uniflow's gross profit percentage will
improve significantly as excess machine capacity is utilized through
additional sales.
Operating expense as a percentage of sales was 11.1%, 8.4% and 9.9% in 1995,
1994 and 1993, respectively. The percentage increase in operating expense in
1995 compared to 1994 reflects increased staffing in management, engineering
and quality control areas and the direct allocation of certain personnel
expense that were previously classified as corporate expenses. Management
believes that the overhead structure in place will handle significant sales
increases with minimal additions to overhead. The operating expense percentage
decrease in 1994 compared to 1993 was primarily due the elimination of certain
sales related expenses, combined with the increase in sales for the segment.
Uniflow's profit (loss) from operations was $275,000, $177,000 and ($202,000)
in 1995, 1994 and 1993, respectively. The profit increase for 1995 compared to
1994 reflects the improved gross profit, offset by higher selling, general and
administrative expense. The increase in operating income in 1994 compared to
1993 was primarily due to the slightly higher gross profit and lower operating
costs.
Tooling Segment**
Chart of three year comparable operating results (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net sales(1) ........ $20,659 100.0 $19,143 100.0 $18,360 100.0
Gross profit ........ 4,902 23.7 4,841 25.2 4,370 23.8
Operating expense ... 2,445 11.8 1,833 9.6 1,868 10.2
Operating profit .... 2,457 11.9 3,008 15.7 2,502 13.6
<FN>
(1) Before elimination of intercompany sales.
</TABLE>
**Note: The Tooling Segment is comprised of the Form Flow, L&H, Micanol and
Triple units. (Triple was downsized and its operations were relocated to
Form Flow in May 1995.)
- 9 -
<PAGE>
The Tooling Segment sells tools and dies for use in the production of hot and
cold formed metal parts.
Tooling net sales increased 7.9% in 1995 compared to 1994 and 4.3% in 1994
from 1993. The sales increase in 1995 was the result of the Form Flow, L&H and
Micanol units increasing their sales, partially offset by a significant sales
decrease at Triple. Form Flow's sales in 1995 increased due to the continuing
success of its die repair program for two customers and various one time
tooling development projects for an automotive company. L&H and Micanol
experienced only minor increases in sales volume, due to lower volumes from
certain key accounts. Management's goal is to increase sales in areas that it
specializes in, such as carbide tooling, design and development, die repair,
punch tooling and tube rolls. Net sales for 1994 increased only 4.3% from
1993, as the Tooling Units approached their productive capacity. Looking
forward, Tooling management believes that order volume will remain steady for
the next year.
Gross profit on sales was 23.7% in 1995, 25.2% in 1994 and 23.8% in 1992. The
decrease in gross profit was primarily attributable to lower margins at
Triple, L&H and Micanol, offset by a higher gross profit at Form Flow.
Triple's margins were negatively impacted by cost overruns on various jobs,
while L&H and Micanol margins were affected by lower sales volumes from
certain higher margin customer accounts. The slight increase in gross profit
in 1994 from 1993 was primarily the result of improved asset utilization due
to strong customer demand.
Operating expense as a percentage of sales was 11.8% in 1995, 9.6% in 1994 and
10.2% in 1993. The 1995 increase in operating expense as a percentage of sales
compared to 1994 is primarily the result of increased personnel costs, which
includes higher discretionary incentive compensation, increased health
insurance costs and the direct allocation of certain personnel expenses that
were previously classified as corporate expense. The 1994 decline from 1993
was due to lower sales-related expenses and an increased sales volume.
The Tooling Segment's operating profit was $2,457,000 (11.9% of sales),
$3,008,000 (15.7% of sales) and $2,502,000 (13.6% of sales) in 1995, 1994 and
1993, respectively. The decline in 1995 from 1994 is primarily the result of
lower operating profits at L&H, Micanol and Triple, partially offset by higher
operating profits at Form Flow. L&H and Micanol recorded lower sales volumes
from various higher margin accounts in 1995, largely accounting for their
decline in profit margin. Triple's operating profit continued to deteriorate
due to lower sales volume and cost overruns. Form Flow, on the other hand,
continued to improve its margins through a series of successful design and
development jobs and an expansion of its die repair program. The improvement
of operating profit to 15.7% of sales in 1994 compared to 13.6% of sales in
1993 primarily reflected increased sales at Form Flow, L&H and Micanol of
higher margin tooling and services, such as design and development, die repair
and tube rolls, among others.
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<PAGE>
Corporate Expenses
Unallocated corporate overhead was $858,000, $1,620,000 and $1,884,000 for the
years ended September 30, 1995, 1994 and 1993, respectively. The decrease in
corporate expense in 1995 compared to 1994 reflects (1) the direct allocation
of certain expenses attributable to the subsidiaries that were included in
corporate expense in 1994, including approximately $450,000 in personnel costs
and (2) a reduction in various corporate overhead costs, including the
elimination of corporate office lease expense and lower business insurance
expenses. The decrease in corporate expense for 1994 compared to 1993 was
primarily the result of lower outside professional expenses, primarily
consulting expenses.
Interest Expense, Miscellaneous Income and Income Tax Benefit
Interest expense was $1,138,000, $953,000 and $895,000 for 1995, 1994 and
1993, respectively. Interest expense was higher on a year to year comparative
basis due to higher borrowings, primarily to support capital expenditures, and
rising interest rates.
Miscellaneous income (expense) was ($8,000), $386,000 and $310,000 for 1995,
1994 and 1993, respectively. The 1994 miscellaneous income primarily reflects
Tri-Tec debt settlements at less than recorded values, while the 1993 amount
reflects the Company's corporate allocation to that discontinued operation.
The income tax benefit of $372,700 for the year ended September 30, 1995 is
the result of the utilization of net operating loss carryforwards against
taxable income and the reversal of portions of the valuation allowance in
anticipation of future use of net operating loss carryforwards.
Discontinued Operation
The Company decided to dispose of Tri-Tec in September 1993 and its assets
were sold in November 1993. Accordingly, the Company recorded a loss of $2.44
million as of September 30, 1993, to reduce Tri-Tec's assets to net realizable
value and to provide for estimated operating losses until completion of the
asset sales. In addition to the loss on the sale of assets, Tri-Tec recorded
an operating loss of $1.2 million in 1993. Tri-Tec's losses in 1993 were
largely the result of inefficient production and intensified competition in
its respective bottle and cap markets.
Financial Condition
The Company's working capital position continued its improvement during 1995,
ending at $1,129,000 as of September 30, 1995 compared to $266,000 at
September 30, 1994 and a negative $2,335,000 at September 30, 1993. The
successive year-to-year working capital improvements primarily reflect
improvements in operating results and the 1994 infusion of $1 million from a
subordinated loan, which was converted to 500,000 shares of common stock
through the exercise of a stock warrant in November 1994.
Subsequent to September 30, 1995, the Company completed the following
financing transactions with its primary lender: (1) the $4.5 million working
capital line of credit was extended through December 1996, on terms
substantially the same as those that were previously in place, (2) a
$1 million equipment line of credit was established for the acquisition of
machinery, (3) the $320,000 acquisition of land and building that is adjacent
to Form Flow and L&H, which was financed by an $800,000 mortgage that covers
the newly acquired building and the two adjacent buildings already owned by
the Company and (4) the Company extended the due date of Uniflow's real estate
loan through December 1996. In addition, the interest rate on the line of
credit and all other debt with the primary lender has been reduced to 1/4% and
3/4% over the prime rate, respectively.
- 11 -
<PAGE>
Also subsequent to fiscal year end, the Company received $1 million in
exchange for 500,000 shares of common stock from Manubusiness Opportunities,
Inc. ("MOI"), a related party, pursuant to stock purchase warrants held by
MOI.
Scheduled term debt payments are approximately $1.86 million for the
forthcoming fiscal year. Management believes that internal operations,
bank financing and the $1 million received from the stock warrant exercise
will generate sufficient cash flow to cover the scheduled debt payments and
fund continuing working capital requirements.
Cash flow for 1995, 1994 and 1993 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities...... $ 1,772,000 $ 356,000 $ 3,649,000
Cash flows from investing activities...... (494,000) (589,000) (3,520,000)
Cash flows from financing activities...... (1,274,000) 93,000 18,000
</TABLE>
Cash flows from operating activities
Cash flow provided by operating activities before changes in working capital
items was $2,697,000 in 1995 compared to $3,030,000 in 1994 and $2,297,000 in
1993. In 1995, working capital items used $925,000, primarily the result of
higher accounts receivables and prepaids and lower accounts payables. Working
capital items used $2,674,000 in 1994, which was primarily the result of
increased finished tooling inventories required by certain customers and
reduced trade payables. Trade payables were reduced to normal operating levels
from the prior year, when they were stretched due to the Company's cash flow
constraints. In 1993, working capital items provided cash flow of $1,352,000,
principally due to increases in accounts payable that were associated with the
Company's cash flow problems. Net cash provided (used) by the discontinued
operation was ($42,000), $309,000 and ($561,000) in 1995, 1994 and 1993,
respectively.
Cash flows from investing activities
Capital expenditures were $1,359,000 in 1995, $908,000 in 1994 and $3.74
million in 1993. The 1995 total primarily reflects Uniflow's acquisition of a
hydraulic press for the production of airbag housings and Form Flow's
acquisition of various ID/OD grinders and building improvements for its space
expansion. Uniflow's production target date for airbag housings is June 1996.
In 1994, capital expenditures were primarily for production tooling at
Uniflow, while in 1993, $3.35 million was expended at the Uniflow unit for
cold forming machinery and special production tooling. The Company received
$863,000, $149,000 and $201,000 in 1995, 1994 and 1993, respectively, from
disposals of machinery, principally from the Triple unit. Net cash provided
(used) by discontinued operations in investing activities was $149,000 and
($13,000) in 1994 and 1993, respectively.
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<PAGE>
Cash flows from financing activities
Cash flow provided by (used in) financing activities was ($1,274,000) in 1995,
$93,000 in 1994 and $18,000 in 1993. In 1995, cash flow used in financing
activities included scheduled payments on long term debt of $1.63 million,
partially offset by proceeds from the bank line of credit and other
obligations of $484,000. Overall, the Company reduced its long term
obligations to $4.6 million in 1995 from $7.1 million in 1994, through
scheduled debt payments and repayment of the MOI note by its exercise of a
stock warrant. In 1994, cash flow provided by financing activities included
long-term debt proceeds of $2.47 million, of which $1 million originated from
a subordinated debt placement and $1.14 million was derived from Uniflow's
bond fund, offset by scheduled debt payments made during 1994 of $1.07
million. The subordinated debt was converted to common stock in November 1994
through the exercise of a stock purchase warrant. The Company also refunded
$700,000 of restricted cash to bondholders during 1994. In 1993, long-term
debt proceeds were $2.67 million, of which $1 million was used to refinance
Triple's debt and $1.55 million was used from unexpended bond funds to finance
a portion of Uniflow's capital expenditures. The 1993 increases in cash flows
from financing activities was partially offset by payments on long-term
obligations of $2.3 million. Net cash used by the discontinued operation was
$483,000 in 1994 and $344,000 in 1993.
Item 8. Financial Statements and Supplementary Data.
See Item 14(a)(1) for a list of the financial statements included in this
Form 10-K.
Refer to page 37 of this Form 10-K for the supplementary quarterly financial
data required by this Item.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
- 13 -
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The following are the current executive officers and directors of the Company:
Name and Age Position
- ------------ --------
Robert A. Clemente (42) Chairman, President and Director
David J. Marczak (35) Chief Financial Officer, Secretary, Director
Gregory Adamczyk (39) Director
Rocco Pollifrone (37) Director
Orville K. Thompson (46) Director
Richard Thompson (27) Director
Martin J. Eidemiller (39) Vice President - Tooling Subsidiaries
The following is a summary of the business experience of the directors and
executive officers of the Company.
Robert A. Clemente - President, CEO, Chairman and Director. Bob became a
Director and President of the Company in December 1993 and its Chairman in
December 1994. Bob is an attorney and of counsel to Hardy, Lewis and Page, PC,
which is located in Birmingham, Michigan. Prior to joining the Company, Bob
practiced law at Hardy Lewis for 14 years, specializing in corporate,
commercial and tax law. He holds a BBA degree from the University of
Michigan - Dearborn, a JD from Wayne State University and an LLM in taxation
from New York University. Bob is also a certified public accountant and
certified management accountant.
David J. Marczak - Secretary, Treasurer, Chief Financial Officer and Director.
Dave started with the Company in 1986 as Corporate Controller, in 1987 added
the duties of Corporate Secretary and in 1990 became Treasurer. He has been a
Director since April 1994 and was also a Director from 1991 to 1993. Dave is a
certified public accountant, previously worked for Touche Ross & Co and has a
BBA degree from the University of Michigan.
Gregory Adamczyk - Director. Greg became a Director in December 1993. Greg is
a majority owner and director of Forward Planning Corp. (Livonia, Michigan),
an engineering firm that specializes in manufacturing plant layout, design and
related systems. He has over twenty years experience in manufacturing and
engineering and holds a Bachelor of Science degree from the University of
Michigan - Dearborn.
Rocco Pollifrone - Director. Rocco became a Director in December 1993. Rocco
is President and Chief Executive Officer of Forward Planning Corp. and has
been employed by Forward Planning or affiliated companies for over ten years.
He holds a Bachelor of Science degree from the Detroit Engineering Institute.
Orville K. (Ken) Thompson - Director. Ken became a Director in February 1994.
Ken is the owner and President of MST Steel Corp., a steel service center
located in Warren, Michigan. He has been employed there for over 10 years.
- 14 -
<PAGE>
Richard Thompson - Director. Rich became a Director in December 1993. Since
1993, Rich has been President of Star Supply Company of Detroit, Michigan, a
company that distributes heating and cooling units and related products. Rich
is also a Vice President of MST Steel Corp. and has been employed there since
1991. He received a Bachelor of Arts degree from the University of Michigan.
Martin J. Eidemiller. Vice President - Tooling Group. Marty has been employed
by the Company and its subsidiaries for over 20 years. He has been Vice
President of the Tooling Group since 1994 and President of Form Flow since
1991.
Each Director of the Company holds that position until the next annual
stockholder's meeting or their death, resignation or removal. Officers hold
their respective positions until their successors are appointed or they die,
resign or are removed by the Board of Directors.
Except for Ken Thompson, who is the father of Richard Thompson, there are no
family relationships among the directors and officers listed above. Except as
set forth below, there are no arrangements by which any of the directors
listed above were or are to be elected as officers or directors. Pursuant to
the terms and conditions of the agreements entered into between the Company
and Manubusiness Opportunities, Inc. ("MOI") that became effective on December
15, 1993, MOI was given the right to designate four persons to be appointed to
the Company's then seven person Board of Directors. On December 15, 1993, the
following persons designated by MOI were appointed to the Company's Board:
Robert Clemente; Greg Adamczyk; Rocco Pollifrone and Richard Thompson.
- 15 -
<PAGE>
Item 11. Executive Compensation.
The information called for by this Item is incorporated by reference from the
Registrant's proxy statement for its Annual Meeting to be held in March 1996.
The Company's proxy statement will be filed with the Securities and Exchange
Commission in January 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of December 28, 1995, the Company had 4,776,200 shares of Common Stock
outstanding. The following table sets forth at that date the Common Stock
beneficially owned: (i) by each Director; (ii) by all Officers and Directors
of the Company as a group; and (iii) by each person known by the Company to
beneficially own 5% or more of the outstanding shares of the Common Stock of
the Company:
<TABLE>
<CAPTION>
Number of shares Percent
Name and address (2) Beneficially Owned (1) Owned (1)
- -------------------- ---------------------- ---------
<S> <C> <C>
Robert A. Clemente 20,194 (2) 0.42%
Gregory Adamczyk 458,818 (2)(3) 9.35%
Rocco Pollifrone 169,038 (2)(4) 3.50%
Orville K. Thompson 1,482,706 (2)(5) 28.48%
Richard Thompson 19,000 (2) 0.40%
David J. Marczak 21,164 (2)(6) 0.44%
Martin Eidemiller 27,798 (11) 0.58%
All Directors and Officers
as a Group (totaling 9) 1,783,988 (9) 45.55%
Manubusiness Opportunities, Inc.
401 S. Woodward
Birmingham, Michigan 48009 2,414,831 (7) 44.10%
John Cocke
46035 Grand River Avenue
Novi, Michigan 48374 514,132 (8) 10.77%
Secom General Corporation 401(k) Plan
46035 Grand River Avenue
Novi, Michigan 48374 292,084 (10) 6.12%
<FN>
(1) For the purposes of this table, shares indicated as being beneficially
owned include shares for which the person has directly or indirectly, the
power to vote or to direct the voting of, and/or investment power (being,
among other things, the power to dispose or to direct the disposition of)
the shares of Common Stock indicated. Unless otherwise indicated, the
beneficial owner has sole investment and voting power. Shares indicated
as being beneficially owned also include shares which are subject to
exercise within 60 days through options, warrants, rights or conversion
privileges. For the purpose of computing the percentage of the
outstanding shares owned by a stockholder, the shares subject to such
exercise by a stockholder are deemed to be outstanding securities of the
class owned by the stockholder but are not deemed to be outstanding for
the purpose of computing the percentage owned by any other person.
- 16 -
<PAGE>
(2) A director of the Company. The address for all directors is 46035 Grand
River Avenue, Novi, Michigan 48374.
(3) Represents 19% of the 2,414,831 shares that are beneficially owned by
MOI, as Mr. Adamczyk owns 19% of the common stock of MOI. See footnote
(7) below.
(4) Represents 7% of the 2,414,831 shares that are beneficially owned by MOI,
as Mr. Pollifrone owns 7% of the common stock of MOI. See footnote (7)
below.
(5) Represents 61% of the 2,414,831 shares that are beneficially owned by
MOI, as Mr. Thompson owns 61% of the common stock of MOI. See footnote
(7) below.
(6) Includes 9,000 shares that may be acquired by the exercise of employee
stock options at a price of $2.625 per share through January 1998.
(7) MOI was formed to make an investment in the Company and three of its
principal owners, Greg Adamczyk, Rocco Pollifrone and Ken Thompson,
became directors of the Company in conjunction with MOI's investment.
MOI's shares include (i) 1,130,428 shares owned directly; (ii) 500,000
shares that may be purchased on or before November 23, 1996 upon the
exercise of warrants with an exercise price of $3.00 per share, (iii)
200,000 shares that may be purchased on or before November 23, 1998 upon
the exercise of stock options with an exercise price of $2.63 per share
and, (iv) 608,339 shares owned by John Cocke and Larry McKnight, as they
have each given MOI a proxy to vote their shares for the election of
directors that are nominated by the Board for a three year period ending
November 23, 1996. Refer to footnotes (3), (4) and (5) above.
(8) John Cocke is a Vice President of the Company. The shares that he owns
are the subject of a proxy given to MOI and therefore are also deemed to
be beneficially owned by MOI and its stockholders. See footnotes (3) -
(5) and (7) above.
(9) Includes all of the shares for the persons referenced with footnotes (2),
(8) and (11).
(10) Participant's of the Company's 401(k) Plan can vote their pro rata
shares. Shares not voted by participants may be voted by the Plan's
trustee, David Marczak, who is also a Director of the Company. Shares
owned by the 401(k) Plan for the account of persons who are not officers
or directors of the Company are not included in the shares shown as owned
by David Marczak or by all directors and officers as a group, because to
do so would be misleading. Of the shares owned by the Company's 401(k)
Plan, 16,875 are owned for the account of officers and directors and are
treated as owned directly by them for purposes of this table.
(11) Includes 10,000 shares that may be acquired by the exercise of employees
stock options at a price of $2.625 per share through January 1998.
</TABLE>
Item 13. Certain Relationships and Related Transactions
The information called for by this Item is incorporated by reference from the
Registrant's proxy statement for its Annual Meeting to be held in March 1996.
The Company's proxy statement will be filed with the Securities and Exchange
Commission in January 1996.
- 17 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements and Financial Statement Schedule.
Page
----
Independent Auditors' Report............................... 23
Consolidated Balance Sheets as of September 30, 1995
and 1994................................................ 24
Consolidated Statements of Operations for the Years Ended
September 30, 1995, 1994 and 1993....................... 25
Consolidated Statements of Stockholders' Equity for the
Years Ended September 30, 1995, 1994 and 1993........... 26
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1995, 1994 and 1993....................... 27
Notes to Consolidated Financial Statements................. 28-35
Schedule II - Valuation and Qualifying Accounts............ 38
Schedules other than those listed above are omitted because of the absence of
the conditions under which they are required or because the information called
for is included in the consolidated financial statements or the notes thereto.
(b) Reports filed on Form 8-K.
The Company filed a report on Form 8-K dated November 23, 1995 to report the
exercise of a stock purchase warrant by Manubusiness Opportunities, Inc.
("MOI") to acquire 500,000 shares of common stock for $1 million.
(c) Exhibits. See the Exhibit Index on the following page.
- 18 -
<PAGE>
Exhibit Description Page*
- ------- ----------- -----
3.1 Certificate of Incorporation of the Company filed with
the Secretary of State of Delaware on August 25, 1987. 3.1*<F1>
3.2 Amendment to Articles of Incorporation filed on
August 31, 1990. 3.2*<F2>
3.3 Certificate of Merger between the Company and Secom
General Corporation, a Utah corporation filed with the
Secretary of State of Delaware in December 1987. 3.2*<F1>
3.4 Certificate of Designation of Rights of the Class A
Preferred Stock filed with the Secretary of State of
Delaware in December 1987. 3.3*<F1>
3.5 Amendment to Articles of Incorporation filed on
December 17, 1991. 3.5*<F5>
3.6 Bylaws of the Company. 3.4*<F1>
4.1 List of instruments defining the right of security
holders. 4.1*<F8>
4.2 Common Stock Purchase Warrant granted to Manubusiness
Opportunities, Inc. and exercisable for 500,000 shares
of common stock at $2.00 per share on or before November
23, 1994 (this same form was used for an additional 500,000
warrants exercisable at $2.00 per share on or before
November 23, 1995 and an additional 500,000 warrants
exercisable at $3.00 per share on or before November
23, 1996). 4.1*<F8>
4.3 Nonqualified Stock Option Agreement dated November
23, 1993 between Secom General Corporation as grantor
and Manubusiness Opportunities, Inc. as grantee. 4.2*<F8>
4.4 Proxy Agreement dated November 23, 1993 between Roy A.
McKnight, Larry McKnight, John Cocke and Manubusiness
Opportunities, Inc. 4.3*<F8>
10.1 Installment Business Loan Note dated September 13, 1991
in the principal amount of $1,920,000 from the Company
and Uniflow to NBD Bank. 10.3*<F3>
10.2 Master Demand Business Loan Note dated September 13, 1991
in the principal amount of $1,500,000 from Uniflow to
NBD Bank. 10.4*<F3>
10.3 Mortgage dated September 13, 1991 from the Company to
NBD Bank. 10.5*<F3>
10.4 Installment Business Loan Note dated October 15, 1991
in the principal amount of $300,000 from Uniflow
Corporation to NBD Bank, N.A. 10.14*<F6>
10.5 1991 Nonqualified Stock Option Plan 10.27*<F4>
10.6 Form of Stock Option Agreement for Options granted
under the 1991 Non-qualified Stock Option Plan 10.28*<F4>
10.7 Option Cancellation Agreement dated November 23, 1993
between the Company, Roy McKnight, Larry McKnight and
John Cocke. E-4*<F8>
10.8 Loan Agreement, dated as of June 1, 1992, between
the Michigan Strategic Fund as lender and Uniflow
Corporation as borrower. 10.28*<F6>
10.9 Promissory Note dated June 1, 1992 in the principal
amount of $4,000,000 from Uniflow Corporation to the
Michigan Strategic Fund. 10.29*<F6>
- 19 -
<PAGE>
10.10 Reimbursement Agreement, dated as of June 1, 1992,
between Uniflow Corporation and NBD Bank, N.A. 10.30*<F6>
10.11 Pledge and Security Agreement, dated as of June 1, 1992,
among Uniflow Corporation, NBD Bank, N.A. and
Manufacturers National Bank, N.A. 10.31*<F6>
10.12 Mortgage, Security Agreement and Assignment of Rents,
dated as of June 1, 1992, from Uniflow Corporation to
NBD Bank, N.A. 10.32*<F6>
10.13 Security Agreement, dated as of June 1, 1992, from
Uniflow Corporation to NBD Bank, N.A. 10.33*<F7>
10.14 Irrevocable Guaranty, dated as of June 1, 1992, from
Secom General Corporation, Tri-Tec Plastics Corporation,
Form Flow, Inc., L & H Die, Inc., Micanol Incorporated
and Triple Tool, Inc. to NBD Bank, N.A. 10.34*<F7>
10.15 Amended and Restated Security Agreement dated
December 15, 1993 between The Company as debtor and
NBD Bank, N.A. as Secured Party.
(Each Subsidiary also entered into a similar
security agreement). 10.11*<F7>
10.16 Third Amendment to Reimbursement Agreement dated
December 15, 1993 between Uniflow Corporation and
NBD Bank, N.A. 10.12*<F7>
10.17 First Amendment to Mortgage dated December 15, 1993
between The Company as mortgagor and NBD Bank, N.A.
as mortgagee. 10.13*<F7>
10.18 First Amendment to Mortgage dated December 15, 1993
between The Company and Uniflow as mortgagors and NBD
Bank, N.A. as mortgagee. 10.14*<F7>
10.19 Amended and Restated Continuing Guaranty dated
December 15, 1993 by the Subsidiaries of the Company
to NBD Bank, N.A. (the Company and all of the
Subsidiaries executed similar Amended and Restated
Guarantees with respect to the obligations of each
corporation to NBD). 10.15*<F7>
10.20 Subordination Agreement dated December 15, 1993
between Larry McKnight as junior lender and
NBD Bank, N.A. as senior lender. 10.17*<F7>
10.21 Fifth Amendment to Amended and Restated Credit
Agreement dated December 1, 1995 between the Company
and NBD Bank.
10.22 Sixth Amendment to Amended and Restated Credit
Agreement dated December 27, 1995 between the Company
and NBD Bank.
22. Subsidiaries of the Registrant 3
23. Consent of Deloitte & Touche LLP
27. Financial Data Schedule
- ------------
* See the footnotes on page 21 to locate these exhibits.
- 20 -
<PAGE>
All exhibits that have page numbers followed by an * are incorporated by
reference from the filings set forth below. The numbers set forth as page
numbers for those exhibits are the exhibit numbers those documents were given
in those other filings. All other exhibits are included in this Form 10-K at
the page numbers shown.
*<F1> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1987.
*<F2> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1990.
*<F3> Incorporated by reference from the Company's Current Report on Form
8-K dated September 13, 1991.
*<F4> Incorporated by reference from the Company's Registration Statement
on Form S-4 (File No. 33-40865) that was declared effective on
November 20, 1991.
*<F5> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1991.
*<F6> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1992.
*<F7> Incorporated by reference from the Company's Current Report on Form
8-K dated December 15, 1993.
*<F8> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1993.
- 21 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SECOM GENERAL CORPORATION
Dated: December 28, 1995 By: /s/ Robert A. Clemente
-------------------------------
Robert A. Clemente
Chairman, President and CEO
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.
Signature Title Date
--------- ----- ----
Principal Executive Officer:
/s/ Robert A. Clemente
- ------------------------------ Chairman, President December 28, 1995
Robert A. Clemente CEO and Director
Principal Financial and
Accounting Officer:
/s/ David J. Marczak
- ------------------------------ Chief Financial Officer, December 28, 1995
David J. Marczak Secretary, Treasurer
and Director
/s/ Gregory Adamczyk
- ------------------------------ Director December 28, 1995
Gregory Adamczyk
/s/ Rocco Pollifrone
- ------------------------------ Director December 28, 1995
Rocco Pollifrone
/s/ Orville K. Thompson
- ------------------------------ Director December 28, 1995
Orville K. Thompson
/s/ Richard Thompson
- ------------------------------ Director December 28, 1995
Richard Thompson
- 22 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Secom General Corporation
Novi, Michigan
We have audited the accompanying consolidated balance sheets of Secom General
Corporation and subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a)(1) of Form 10-K. These consolidated financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Secom General Corporation and
subsidiaries at September 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
/s/ Deloitte & Touche LLP
December 27, 1995
Detroit, Michigan
- 23 -
<PAGE>
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994
- ---------------------------------------------------------------------------------------
ASSETS 1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash $ 13,700 $ 9,300
Receivables:
Trade (net of allowances of $93,500 and $78,800) 4,484,800 4,277,200
Other 320,600 386,000
Inventories (Note 3) 3,935,700 4,070,000
Prepaids and other 727,800 366,200
Deferred tax assets (Note 11) 542,700 280,000
------------ ------------
Total current assets 10,025,300 9,388,700
PROPERTY, PLANT AND EQUIPMENT, NET (Note 4) 14,583,600 15,728,800
INTANGIBLE ASSETS (Note 1) 2,071,300 2,527,700
OTHER ASSETS 266,900 181,200
------------ ------------
TOTAL ASSETS $ 26,947,100 $ 27,826,400
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations (Note 5) $ 5,633,400 $ 5,256,700
Trade accounts payable 2,065,500 2,628,400
Accrued liabilities 1,197,100 1,237,200
------------ ------------
Total current liabilities 8,896,000 9,122,300
LONG-TERM OBLIGATIONS (Note 5) 4,621,700 7,089,300
DEFERRED TAX LIABILITIES (Note 11) 1,518,900 1,778,100
------------ ------------
Total liabilities 15,036,600 17,989,700
STOCKHOLDERS' EQUITY (Notes 6, 8 and 9):
Common stock, $.10 par value, 10,000,000
shares authorized; outstanding:
1995, 4,276,200 shares;
1994, 3,700,500 shares 427,600 370,100
Additional paid-in capital 16,478,900 15,666,900
Accumulated deficit (4,996,000) (6,200,300)
------------ ------------
Total stockholders' equity 11,910,500 9,836,700
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,947,100 $ 27,826,400
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
- 24 -
<PAGE>
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
- ----------------------------------------------------------------------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NET SALES $ 36,276,200 $ 32,570,900 $ 29,356,000
COST OF SALES 29,016,100 26,048,200 23,712,700
------------ ------------ ------------
GROSS PROFIT 7,260,100 6,522,700 5,643,300
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,282,300 4,801,500 5,071,500
------------ ------------ ------------
INCOME FROM OPERATIONS 1,977,800 1,721,200 571,800
OTHER INCOME (EXPENSE):
Interest (1,137,800) (952,500) (894,700)
Other, net (8,400) 385,600 310,200
------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 831,600 1,154,300 (12,700)
INCOME TAX BENEFIT (EXPENSE) (Note 11) 372,700 (60,800)
------------ ------------ --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 1,204,300 1,093,500 (12,700)
DISCONTINUED OPERATIONS (Note 2):
Loss from operations of discontinued subsidiary (1,198,800)
Loss on disposal of subsidiary, including provision of
$249,000 for operating losses during phase-out period
(less applicable income tax benefit of $125,300) (2,441,000)
------------ ------------ ------------
NET INCOME (LOSS) $ 1,204,300 $ 1,093,500 $ (3,652,500)
============ ============ ============
EARNINGS (LOSS) PER COMMON SHARE (Note 1):
Income from continuing operations $ 0.28 $ 0.29
Loss from operations of discontinued subsidiary $ (0.42)
Loss on disposal of discontinued subsidiary (0.85)
------------ ------------ ------------
NET INCOME (LOSS) PER COMMON SHARE $ 0.28 $ 0.29 $ (1.27)
============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING (Note 1) 4,284,200 3,795,200 2,863,200
============ ============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
- 25 -
<PAGE>
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional
------------------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1992 2,821,300 $ 282,100 $ 15,370,200 $ (3,641,300) $ 12,011,000
Exercise of options 1,000 100 4,900 5,000
Issuances to 401(k) plan (employer match and
employee elections) 103,600 10,400 325,400 335,800
Stock retirement (25,000) (2,500) (122,500) (125,000)
Net loss (3,652,500) (3,652,500)
--------- ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1993 2,900,900 290,100 15,578,000 (7,293,800) 8,574,300
Issuances for settlement of stock guarantees 711,900 71,200 (85,500) (14,300)
Issuances to 401(k) plan (employer match and
employee elections) 37,700 3,800 79,400 83,200
Private placements 50,000 5,000 95,000 100,000
Net income 1,093,500 1,093,500
--------- ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1994 3,700,500 370,100 15,666,900 (6,200,300) 9,836,700
Exercise of stock warrant 500,000 50,000 950,000 1,000,000
Issuances to 401(k) plan (employer match and
employee elections) 42,300 4,200 79,900 84,100
Issuances for compensation 41,800 4,100 79,500 83,600
Stock retirements, net (8,400) (800) (31,000) (31,800)
Note issued for settlement of stock guarantee (266,400) (266,400)
Net income 1,204,300 1,204,300
--------- ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1995 4,276,200 $ 427,600 $ 16,478,900 $ (4,996,000) $ 11,910,500
========= ============ ============ ============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
- 26 -
<PAGE>
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
- -----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $ 1,204,300 $ 1,093,500 $ (12,700)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by operations:
Depreciation and amortization 1,858,600 1,983,700 1,878,700
Provision for (benefit from) deferred taxes (521,900) 60,800
Increase (decrease) in allowance for doubtful accounts 17,000 (228,800) 277,000
(Gain) loss on sales of assets (319,500) 14,100 24,500
Stock issuances to 401(k) plan (employer match) 64,700 107,000 129,600
Write-off of Triple Tool goodwill 309,700
Stock issuances for compensation 83,600
Changes in assets and liabilities that provided (used) cash, net of
discontinued operations:
Trade and other receivables (298,400) (105,300) (396,200)
Inventories 134,300 (1,412,200) 314,300
Prepaids and other (193,700) 30,300 (67,400)
Other assets 78,300 (18,000) 44,800
Trade accounts payable (491,400) (984,400) 1,461,200
Accrued liabilities (111,300) (196,900) 229,300
Other liabilities (297,200) 327,000
Net cash (used in) provided by discontinued operations (42,300) 309,400 (560,800)
----------- ----------- -----------
Net cash provided by operating activities 1,772,000 356,000 3,649,300
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of property, plant and equipment 863,000 149,300 201,200
Collections on notes receivable 2,300 20,600 32,700
Capital expenditures (1,359,200) (907,900) (3,741,000)
Net cash provided by (used in) discontinued operations 149,200 (13,400)
----------- ----------- -----------
Net cash used in investing activities (493,900) (588,800) (3,520,500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank line of credit 210,600 44,900 (92,500)
Proceeds from long-term obligations and use of restricted cash 273,100 2,469,400 2,673,000
Proceeds from issuances of stock 61,700 222,300
Retirements of common stock (12,500) (125,000)
Payments on long-term obligations (1,634,000) (1,065,000) (1,989,800)
Refund of restricted cash to bondholders (700,000)
Payments on capital lease obligations (110,900) (234,400) (326,800)
Net cash used in discontinued operations (483,400) (343,600)
----------- ----------- -----------
Net cash (used in) provided by financing activities (1,273,700) 93,200 17,600
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 4,400 (139,600) 146,400
CASH, BEGINNING OF PERIOD 9,300 148,900 2,500
----------- ----------- -----------
CASH, END OF PERIOD $ 13,700 $ 9,300 $ 148,900
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 1,104,800 $ 965,200 $ 886,500
=========== =========== ===========
Cash paid during the year for income taxes $ 120,000
===========
<FN>
See notes to consolidated financial statements.
</TABLE>
- 27 -
<PAGE>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
- -----------------------------------------------------------------------------
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business - Secom General Corporation (the "Company") is a
publicly-traded holding company with four wholly-owned subsidiaries
supplying the automotive, truck, construction and consumer markets.
The Company operates in the following two business segments:
Tooling:
Form Flow, Inc. ("Form Flow")
L&H Die, Inc. ("L&H Die")
Micanol, Inc. ("Micanol")
Triple Technologies, Inc. ("Triple"), formerly known as Triple
Tool (refer to Note 2)
Metal Parts Forming -
Uniflow Corporation ("Uniflow")
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiaries. All
material intercompany accounts and transactions have been
eliminated.
Inventories are stated at the lower of cost or market, as determined
under the first-in, first-out method.
Property, Plant and Equipment are recorded at cost. The Company
capitalizes, as additions, expenditures which extend the useful life
or increase the value of related assets. Maintenance and repairs are
charged to operating expense as incurred. Expenditures for repairs
and maintenance for the three years ended September 30, 1995 were
$408,400, $535,900 and $119,000, respectively. Depreciation is
computed using the straight-line method over the estimated useful
lives of the assets.
Intangible Assets consisting of goodwill (cost in excess of net
assets acquired) are generally amortized on a straight-line
basis over 40 years. The carrying value of goodwill is evaluated
periodically in relation to the operating performance of the
underlying business and assets. Management has evaluated the
carrying value of the goodwill, has made adjustments to such
values as described in Note 2, and has determined at September 30,
1995 that remaining amounts are not impaired. Accumulated
amortization was $664,000 and $208,000 as of September 30, 1995
and 1994, respectively.
Income Taxes - Deferred income tax assets and liabilities are
computed annually for differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.
Earnings (Loss) per Common Share is computed by dividing net
income by the weighted average number of common and common
equivalent shares (warrants and options to purchase common stock
outstanding during the periods presented).
New Accounting Standards - Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was
issued in March 1995. The Statement is effective for fiscal years
beginning after December 15, 1995, and requires that long-lived
assets and certain identifiable intangibles to be held and used by
an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. The Statement is not expected to have a material
effect on the Company's consolidated financial position or results
of operations.
- 28 -
<PAGE>
SFAS No. 123, "Accounting for Stock-Based Compensation," was issued
in October 1995. This Statement, which is effective for fiscal years
beginning after December 15, 1995, establishes financial accounting
and reporting standards for stock-based employee compensation plans
and is not expected to have a material effect on the Company's
consolidated financial position or results of operations.
Noncash Transactions - The Company entered into the following
noncash investing and financing transactions for the following years
ended September 30 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Cancellation of note in exchange for exercise of stock warrant $1,000
Notes receivable issued for sale of Triple equipment 249
Note payable issued for settlement of stock guarantee 266
Common stock issued for services or for reduction
of other obligations 148 $ 107 $ 130
Note receivable and assumption of obligations from
sale of Tri-Tec subsidiary 1,191
Capital lease obligations incurred 98
Note payable issued for repurchase of common stock and
noncompete agreement 175
</TABLE>
Reclassifications - Certain amounts in the 1994 consolidated
financial statements have been reclassified to conform with the
presentation for 1995.
2. DISCONTINUED AND DOWNSIZED OPERATIONS
In the quarter ended September 30, 1993, the Company adopted a
formal plan to discontinue operations of its Plastic Molded
Products Segment, Tri-Tec. In the first quarter of 1994,
Tri-Tec's inventories and machinery and equipment were sold for
cash and notes receivable of $1,200,000 and the assumption of
$838,000 of capital lease obligations. A loss of $2.4 million
was recorded to writedown Tri-Tec's assets to net realizable
value at September 30, 1993, which included a provision for
losses during the period prior to sale. Tri-Tec's sales for the
year ended September 30, 1993 was $6,686,000. At September 30,
1995 the Company was no longer an obligor or guarantor on leases
assumed by the buyer of Tri-Tec.
In the quarter ended June 30, 1995, the Company completed its
downsizing of Triple by the sale of $725,800 (net book value) of
equipment and the leasing of $342,000 (net book value) of
equipment. The Company recorded a net gain of $2,500 on this
transaction after writing down goodwill in the amount of
$310,000 in connection with the downsizing. In June 1995,
Triple's remaining operations, primarily electro-diode machining
(EDM), contracts and the related equipment (net book value
$341,000) were transferred to Form Flow. For the three years
ended September 30, 1995, sales from Triple were $1,559,000,
$2,500,000 and $2,323,000, respectively, and operating losses
were $399,000, $50,200 and $626,000, respectively.
- 29 -
<PAGE>
3. INVENTORIES
Inventories at September 30 consist of (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials $ 372 $ 639
Work-in-process 1,797 2,203
Finished goods 1,767 1,228
------ ------
Total $3,936 $4,070
====== ======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment at September 30 consist of (in
thousands):
<TABLE>
<CAPTION>
1995 1994 Life
---- ---- ----
<S> <C> <C> <C>
Machinery and equipment $ 14,581 $ 15,393 2 to 20 years
Building and improvements 4,714 4,459 3 to 30 years
Land and improvements 540 540 N/A
Furniture and fixtures 478 475 5 to 7 years
Vehicles 263 185 3 to 10 years
Construction-in-progress 236 41 N/A
-------- --------
Total 20,812 21,093
Less accumulated depreciation (6,228) (5,364)
-------- --------
Total $ 14,584 $ 15,729
======== ========
</TABLE>
5. LONG-TERM OBLIGATIONS
Long-term obligations at September 30 consist of (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Bank line of credit (a) $ 3,776 $ 3,566
Real estate mortgage notes with bank (b) 1,888 2,056
Michigan Strategic Fund Limited Obligation Revenue Bonds (c) 2,500 2,900
Equipment term notes with bank (d) 1,176 1,767
Equipment capital leases (e) 104 215
Other notes payable (f) 811 1,842
-------- --------
Total 10,255 12,346
Less current obligations (5,633) (5,257)
-------- --------
Long-term obligations $ 4,622 $ 7,089
======== ========
<FN>
(a) The bank line of credit, due on demand, permits
borrowings of $4.5 million at September 30, 1995. The
line of credit is collateralized by accounts receivable
and inventory and borrowings are limited to stated
percentages of accounts receivable and inventory.
Interest rate is prime rate plus 1.5%. The line of
credit agreement prohibits the payment of cash dividends
and requires the Company to maintain specific financial
covenants including minimum tangible equity, working
capital, and cash flow. The Company was in compliance
with all financial covenants at September 30, 1995.
- 30 -
<PAGE>
(b) Real estate mortgage notes with bank are collateralized by
land and buildings with a net book value of $2,771,600.
Interest is prime rate plus 2%. Notes mature in 1997 and
2001. Payments due are as follows: 1996, $175,000; 1997,
$1,373,000; 1998, $29,000; 1999, $29,000; 2000, $29,000;
thereafter, $253,000.
(c) In June 1992, the Michigan Strategic Fund sold $4,000,000
of its Limited Obligation Revenue Bonds and loaned the
proceeds to Uniflow for the purchase of equipment and the
construction of a manufacturing facility. The bonds require
monthly interest payments and annual principal installments
through June 1, 2002. Under the terms of the Company's bank
credit agreement, $700,000 of unexpended bond proceeds
was returned to the bondholders in 1994. The bonds bear
interest at the rate of approximately 2% below the prime
rate and are collateralized by buildings and equipment with
a net book value of $3,962,300. Payments due are as
follows: 1996, $400,000; 1997, $400,000; 1998, $400,000;
1999, $500,000; 2000, $500,000; thereafter, $300,000.
(d) Equipment term notes with bank are collateralized by
equipment with a net book value of $6,768,100. Interest
is prime rate plus 2%. Maturity dates range from 1996
to 1998. Payments due are as follows: 1996, $759,000;
1997, $396,000; 1998, $21,000.
(e) Interest rates on equipment capital leases range from 6.6%
to 10.6%. The leases expire in 1996 and 1997. Payments due
are as follows: 1996, $72,000; 1997, $32,000.
(f) Interest rates on other notes payable range from 4.9% to
12%. At September 30, 1995, amount includes $336,200 in
trade installment notes collateralized by specific
equipment and at September 30, 1994 amount includes a
related party note payable of $1,000,000 (refer to Note 6).
Maturity dates range from 1996 to 2000. Payments due are
as follows: 1996, $451,000; 1997, $248,000; 1998, $33,000;
1999, $18,000; 2000, $61,000.
</TABLE>
The prime rate at September 30, 1995 and 1994 was 8.75% and 7.75%,
respectively. The weighted average interest rate on short-term
obligations at September 30, 1995 was approximately 10.3%
Payments on long-term obligations for the next five years are as
follows (in thousands):
<TABLE>
<S> <C>
1996 $5,633
1997 2,449
1998 483
1999 547
2000 590
Thereafter 553
</TABLE>
Subsequent to September 30, 1995, the Company and its primary
lender (1) extended its $4.5 million bank line of credit
agreement through December 1996, with terms substantially the
same as the previous terms, (2) established a $1 million
equipment line of credit, (3) extended Uniflow's $1.4 million
real estate note through December 1996 and (4) financed a land
and building purchase for $320,000 by establishing an $800,000
mortgage note covering the new property and two adjacent
buildings already owned by the Company. In addition, the
interest rate on the line of credit and other debt with the
primary lender was reduced to 1/4% and 3/4% over the prime rate,
respectively.
- 31 -
<PAGE>
6. RELATED PARTY TRANSACTIONS
In December 1993, the Company issued a $1,000,000 subordinated
note payable, maturing December 1, 1995 and requiring payment of
interest only, at the prime rate plus 3%, to Manubusiness
Opportunities, Inc. ("MOI"), an entity controlled by three
directors of the Company. MOI also received warrants and options
to purchase 1.7 million shares of common stock, as follows:
500,000 shares that expire in one year with an exercise price of
$2 per share, 500,000 shares that expire in two years with an
exercise price of $2 per share, and 500,000 shares that expire
in three years with an exercise price of $3 per share and
200,000 options that expire in five years with an exercise price
of $2.63 per share. In November 1994, MOI exercised its first
warrant to acquire 500,000 shares of common stock in exchange
for the cancellation of the $1,000,000 note. In November 1995,
MOI exercised its second warrant to acquire 500,000 shares of
common stock in exchange for a payment of $1,000,000. Included
in accrued liabilities at September 30, 1995 and 1994, is
$125,000 and $95,000, respectively, of interest on the above
note payable.
In connection with the 1991 acquisition of Uniflow, an officer of
the Company received 135,600 shares of common stock for his 15.8%
Uniflow ownership. His consideration was determined on the same
basis as that paid to all other Uniflow stockholders. The shares he
received were subject to a certain guarantee provision. This
guarantee right to realize $7.17 per share on his 135,600 shares was
exchanged for 168,000 additional shares of common stock in 1993. The
shares of common stock received for extinguishment of his guarantee
right were calculated on the same basis as offered to all other
stockholders who had guarantee rights.
In October 1993, a former director loaned $100,000 to the Company
due on demand. The loan, subject to a bank subordination agreement,
bears interest at the prime rate plus 2%.
7. LEASES
The Company leased certain manufacturing facilities under
noncancelable operating leases. Rental expense for continuing
operations was $36,000, $106,000 and $104,000 for the years ended
September 30, 1995, 1994 and 1993, respectively. As of September 30,
1995, the Company was not obligated under any material noncancelable
operating leases.
Machinery and equipment includes assets under capital leases having
a total cost of $438,700 and $635,500 and accumulated amortization
of $156,700 and $150,300, respectively, at September 30, 1995 and
1994.
Annual payments due on the capital leases are as follows (in
thousands):
<TABLE>
<S> <C>
1996 $ 79
1997 32
-----
Total 111
Less imputed interest (7)
-----
Total $ 104
=====
</TABLE>
- 32 -
<PAGE>
8. STOCK OPTIONS
In 1991, the Board of Directors (the "Board") adopted a nonqualified
stock option plan (the "1991 Plan"). The 1991 Plan authorizes the
Board to grant options to purchase a maximum of 400,000 shares of
common stock to employees. Transactions under the 1991 Plan are
summarized as follows:
<TABLE>
<CAPTION>
Shares Price
------ -----
<S> <C> <C>
Options outstanding September 30, 1993 32,000 3.00 - 5.00
Options granted 182,500 2.62 - 2.75
Options terminated (35,750) 2.62 - 5.00
Options outstanding September 30, 1994 178,750 2.62 - 3.00
Options terminated (16,250) 2.62
Options outstanding September 30, 1995 162,500 2.62 - 3.00
</TABLE>
During the year ended September 30, 1995, 5,500 options that had
been issued in 1992, outside of the 1991 Plan, were terminated and
none of those options remain outstanding.
9. COMMON STOCK PRICE GUARANTEES
The Company is contingently liable under stock price guarantees
issued in connection with 1991 private stock placements. Under the
agreements, the holder is entitled to the shortfall between the
amount realized from sale of the shares during the guarantee period
and the guaranteed price of the share. The Company agreed to payment
terms with a holder of a stock price guarantee in the first quarter
of 1995 with the issuance of a note payable of $266,000 to be paid
over 30 months. At September 30, 1995, the Company has approximately
30,000 shares remaining that are subject to guarantees with a
maximum guarantee amount of approximately $216,000.
10. EMPLOYEE BENEFIT PLAN
The Company maintains a defined contribution 401(k) plan to which it
contributes stock on a discretionary basis. The cost of the stock
contributed to the Plan resulted in a charge to expense of $116,000,
$107,000, and $129,000 for the years ended September 30, 1995, 1994
and 1993, respectively.
11. INCOME TAXES
The provision for income taxes consists of the following for the
years ended September 30:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current (expense) $(149,200)
Deferred benefit (expense) 521,900 $ (60,800) $ 125,000
--------- --------- ---------
Income tax benefit (expense) $ 372,700 $ (60,800) $ 125,000
========= ========= =========
</TABLE>
- 33 -
<PAGE>
Temporary differences and carryforwards which give rise to deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
September 30
---------------------------
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax carryforwards $ 137,200 $ 43,300
Tax credit carryforwards 108,400 108,400
Secom net operating loss carryforward 45,200 532,100
Net operating loss carryforwards of acquired companies 544,500 717,300
Reserves 159,100 41,600
Other 17,000 72,300
----------- -----------
Total deferred tax assets 1,011,400 1,515,000
Less valuation allowance (468,700) (1,235,000)
----------- -----------
Net deferred tax assets 542,700 280,000
Current portion 542,700 280,000
----------- -----------
Long-term portion None None
=========== ===========
Deferred tax liabilities:
Depreciation $ 488,100 $ 373,400
Book and tax basis differences from business combinations 988,200 1,404,700
Other 42,600
----------- -----------
Total deferred tax liabilities 1,518,900 1,778,100
Current portion None None
----------- -----------
Long-term portion $ 1,518,900 $ 1,778,100
=========== ===========
</TABLE>
During 1995 and 1994, certain tax benefits from net operating losses
and temporary differences creating deferred tax assets have been
reserved with a valuation allowance due to their uncertainty of
realization.
Remaining net operating loss carryforwards as of September 30, 1995
are available for offset against future taxable earnings through the
year 2007, subject to annual limitations as set forth in the
Internal Revenue Code.
A reconciliation of the Company's statutory income tax liability
computed on pre-tax income to the recorded income tax provision for
the year ended September 30 is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Statutory income tax liability $(283,300) $(430,000)
Change in valuation allowance 766,000 30,000
Nondeductible goodwill amortization (128,000) (23,000)
Book and tax basis differences from business combinations 40,000 383,000
Nondeductible other expenses (22,000) (20,800)
--------- ---------
Income tax benefit (expense) $ 372,700 $ (60,800)
========= =========
</TABLE>
- 34 -
<PAGE>
12. CONTINGENCIES
The Company is involved in certain legal proceedings arising in the
normal course of business. In the opinion of management, based on
the opinion of counsel, the outcome of such litigation will not have
a material adverse effect on the Company's consolidated financial
position or results of operations.
13. SEGMENT INFORMATION
The following business segment information is applicable to
continuing operations (in thousands):
<TABLE>
<CAPTION>
Metal Eliminations
Parts and
Forming Tooling Corporate Consolidated
------- ------- ------------ ------------
<S> <C> <C> <C> <C>
September 30, 1995:
Net sales $ 17,630 $ 20,659 $ (2,013) $ 36,276
Income from operations 275 2,457 (754) 1,978
Identifiable assets 14,444 8,852 3,651 26,947
Depreciation and amortization 1,151 671 37 1,859
Capital expenditures 592 751 16 1,359
September 30, 1994:
Net sales $ 16,052 $ 19,143 $ (2,624) $ 32,571
Income from operations 177 3,008 (1,464) 1,721
Identifiable assets 15,856 8,119 3,851 27,826
Depreciation and amortization 1,273 598 113 1,984
Capital expenditures 570 330 8 908
September 30, 1993:
Net sales $ 13,723 $ 18,360 $ (2,727) $ 29,356
Income from operations (202) 2,502 (1,728) 572
Identifiable assets 16,937 7,656 6,698 31,291
Depreciation and amortization 1,121 592 166 1,879
Capital expenditures 3,348 368 25 3,741
</TABLE>
- 35 -
<PAGE>
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
Year Ended September 30
--------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In thousands; except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
NET SALES $ 36,276 $ 32,571 $ 29,356 $ 27,574 $ 14,359
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 831 1,154 (13) 295 1,095
INCOME TAX BENEFIT (EXPENSE) 373 (61) (80) (375)
-------- -------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS 1,204 1,093 (13) 215 720
INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAXES (1) (3,640) 38 8
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,204 1,093 (3,653) 253 728
EXTRAORDINARY ITEM, UTILIZATION OF NET
OPERATING LOSS CARRYFORWARD 375
CUMULATIVE EFFECT OF CHANGE IN METHOD OF
ACCOUNTING FOR INCOME TAXES (2) 379
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ 1,204 $ 1,093 $ (3,653) $ 632 $ 1,103
======== ======== ======== ======== ========
BALANCE SHEET DATA
TOTAL ASSETS $ 26,947 $ 27,826 $ 31,291 $ 33,924 $ 24,435
LONG-TERM OBLIGATIONS 4,622 7,089 7,123 10,519 7,117
STOCKHOLDERS' EQUITY 11,910 9,837 8,574 12,011 9,626
COMMON STOCK SHARES OUTSTANDING (3) 4,276 3,701 2,901 2,821 2,192
EARNINGS (LOSS) PER COMMON SHARE (3):
Continuing operations $ 0.28 $ 0.29 $ 0.08 $ 0.43
Discontinued operations $ (1.27) 0.01 0.01
Extraordinary item 0.23
Change in method of accounting for income taxes 0.14
-------- -------- -------- -------- --------
NET INCOME (LOSS) PER COMMON SHARE $ 0.28 $ 0.29 $ (1.27) $ 0.23 $ 0.67
======== ======== ======== ======== ========
EQUITY PER COMMON SHARE 2.79 2.66 2.96 4.26 4.39
CURRENT RATIO 1.13 1.03 0.82 0.96 1.26
LONG-TERM OBLIGATIONS TO STOCKHOLDERS' EQUITY 0.39 0.72 0.83 0.88 0.74
RETURN ON ASSETS 4 % 4 % 2 % 5 %
RETURN ON STOCKHOLDERS' EQUITY 10 % 11 % 5 % 11 %
<FN>
(1) See note 2 to the consolidated financial statements regarding discontinued
operations.
(2) Adopted Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," effective October 1, 1991.
(3) Restated for the 10% stock dividends distributed in 1991 and 1992.
</TABLE>
- 36 -
<PAGE>
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
Quarter Ended
---------------------------------------------------------------------------------
1995 1994
--------------------------------------- ---------------------------------------
September June March December September June March December
1995 1995 1995 1994 1994 1994 1994 1993
--------- ---- ----- -------- --------- ---- ----- --------
(In thousands; except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES $ 8,200 $ 9,915 $ 9,863 $ 8,298 $ 8,515 $ 8,245 $ 8,242 $ 7,569
GROSS PROFIT 1,566 2,338 2,193 1,163 1,374 1,754 1,771 1,624
INCOME (LOSS)
BEFORE INCOME
TAXES 171 545 424 (308) 105 351 437 261
INCOME TAX
BENEFIT (EXPENSE) 255 80 (48) 85 161 42 (160) (104)
------- ------- ------- ------- ------- ------- ------- -------
NET INCOME (LOSS) $ 426 $ 625 $ 376 $ (223) $ 266 $ 393 $ 277 $ 157
======= ======= ======= ======= ======= ======= ======= =======
EARNINGS (LOSS) PER
COMMON SHARE -
Net income (loss) $ 0.10 $ 0.14 $ 0.09 $ (0.05) $ 0.07 $ 0.10 $ 0.07 $ 0.05
======= ======= ======= ======= ======= ======= ======= =======
PRICE RANGE OF
COMMON STOCK:
High bid $ 4.09 $ 2.50 $ 2.62 $ 3.00 $ 3.25 $ 3.38 $ 3.50 $ 3.75
Low bid 2.25 1.62 1.62 2.00 2.50 2.38 2.44 2.25
</TABLE>
- 37 -
<PAGE>
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- -----------------------------------------------------------------------------------------------------------------------
Column A Column B Column C - Additions Column D Column E
Balance at Charged to Charged to Balance at
Beginning Cost and Other Deductions - End of
Description of Year Expenses Accounts Write Offs Year
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended September 30, 1993 $ 30,600 $ 297,100 $ 20,100 $ 307,600
Year ended September 30, 1994 307,600 9,400 238,200 78,800
Year ended September 30, 1995 78,800 127,500 112,800 93,500
Inventory reserve:
Year ended September 30, 1993 59,000 120,500 179,500
Year ended September 30, 1994 179,500 7,500 126,000 61,000
Year ended September 30, 1995 61,000 15,000 76,000
Deferred tax asset valuation allowance:
Year ended September 30, 1993 227,000 1,038,000 1,265,000
Year ended September 30, 1994 1,265,000 30,000 1,235,000
Year ended September 30, 1995 1,235,000 766,300 468,700
</TABLE>
- 38 -
EXHIBIT 10.21
FIFTH AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
This Fifth Amendment to Amended and Restated Credit Agreement ("Fifth
Amendment") is dated effective December 1, 1995 among NBD BANK, formerly NBD
Bank N.A., successor by merger to National Bank of Detroit ("NBD" or "Bank"),
as lender, with its main offices at 611 Woodward Avenue, Detroit, Michigan
48226, and Secom General Corporation, a Delaware corporation ("Secom"), whose
address is 46035 Grand River Ave., Novi, Michigan 48374; Uniflow Corporation,
a Michigan corporation ("Uniflow"), whose address is 26600 Heyn Drive, Novi,
Michigan 48450; Triple Tool, Inc., a Michigan corporation ("Triple Tool")
whose address is 1445 Allen Drive, Troy, Michigan 48083; Micanol, Inc., a
Michigan corporation ("Micanol") whose address is P.O. Box 881, 46001 Grand
River, Novi, Michigan 48376; L&H Die, Inc., a Michigan corporation ("L&H"),
whose address is 38200 Ecorse Road, Romulus, Michigan 48174; Form Flow, Inc.,
a Michigan corporation ("Form Flow"), whose address is 6901 Cogswell, Romulus,
Michigan 48174; and Tri-Tec Plastics Corporation, a Michigan corporation
("Tri-Tec"), whose address is 46035 Grand River Ave., Novi, Michigan 48374
(such corporations being sometimes collectively referred to as the "Borrowers"
and individually as a "Borrower"), as borrowers.
This Fifth Amendment amends the Amended and Restated Credit Agreement
dated December 15, 1993, among NBD and the Borrowers, as amended by (i) the
First Amendment to Amended and Restated Credit Agreement dated July 19, 1994,
(ii) the letter dated August 19, 1994 from NBD to Secom, (iii) the Third
Amendment to Amended and Restated Loan Agreement dated December 28, 1994 and
(iv) the Fourth Amendment to Amended and Restated Loan Agreement dated
February 17, 1995 (as so amended, the "Credit Agreement" or "Agreement").
Capitalized terms not otherwise defined herein shall have the meanings given
to them in the Credit Agreement.
Recitals
A. NBD has made available to the Borrowers revolving credit loans and
term loans as more fully described in the Credit Agreement.
B. The Borrowers have requested that NBD provide a new term loan to
Secom in the original principal amount of $800,000, a portion of which will be
used to fund the purchase price of certain real estate currently being leased
by Secom and a portion of which will be used to refinance the obligations of
Secom to NBD under the $500,582.78 Secom Note and the $109,322.08 Triple Tool
Note.
<PAGE>
C. The Borrowers have also requested that NBD provide them with up to
$1,000,000 in term loans to allow the various Borrowers to purchase equipment.
D. NBD is willing to provide such financing on the terms and conditions
set forth in this Fifth Amendment.
E. The Borrowers have determined that it is in their best interest to
guaranty the new term loan to Secom and Uniflow and the loans under the
proposed equipment line in order to induce NBD to provide such financing,
since Secom provides many services to the other Borrowers, the current
obligations will be extended, a portion of the financing will reduce the
outstandings under the Line of Credit and the equipment to be purchased will
help increase the revenues and profitability of the respective Borrowers.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Amended Term Loans. A new Section 1.2C is hereby added to the Credit
Agreement to read as follows:
1.2C Amended Term Loans.
Prior to December 31, 1995 and subject to meeting all conditions for
funding, NBD will provide a term loan to Secom in the original principal
amount of $800,000, a portion of which will refinance (but not repay) the
$500,582.78 Secom Note and the $109,322.08 Triple Tool Note and also to
purchase the real property commonly known as 6999 Cogswell, Romulus, Michigan,
and more fully described on Exhibit 1.2C(i) ("Purchased Property"). Such loan
will be evidenced by an Installment Business Loan Note substantially in the
form of Exhibit 1.2C(ii) attached to the Fifth Amendment (together with any
amendments, extensions, renewals or restatements, the "$800,000 Secom Note").
In addition to the existing Secom Mortgages and the other collateral granted
to NBD to secure the Obligations, Secom will deliver a mortgage on the
Purchased Property to secure the $800,000 Secom Note and the other
Obligations.
2. New Equipment Line. A new Section 1.2D is hereby added to the Credit
Agreement to read as follows:
1.2D $1,000,000 Equipment Line. NBD agrees to consider from time to
time prior to December 31, 1995 ("Equipment Line Expiration Date"),
granting term loans to any Borrower (jointly and severally with Secom)
not to exceed $1,000,000 in the aggregate original principal amounts
(the "Equipment Line"), the proceeds of which must be used by the
requesting Borrower to finance no more than 80% of the purchase price
of the equipment being acquired for use in such Borrower's business.
Each loan will be made at NBD's discretion and will be subject to the
conditions set forth in Section 9 of the Fifth Amendment. Such loans
shall be evidenced by Installment Business Loan Notes in the forms
provided
2
<PAGE>
by NBD (all such notes, together with any amendments, extensions,
renewals or restatements, are referred to as the "1995 Equipment Line
Notes").
3. Revised Covenants. Sections 5.1B and 5.1C of the Credit Agreement are
hereby amended in their entirety to read as follows:
B. Tangible Capital Funds. Maintain Tangible Capital Funds as follows:
from June 30, 1995 and thereafter of at least $9,000,000.
C. Total Liabilities to Tangible Capital Funds. Maintain the following
ratios of total liabilities minus deferred tax liabilities as shown on
the consolidated balance sheet of Borrowers as determined and prepared
in accordance with generally accepted accounting principles
consistently applied ("Total Liabilities") to Tangible Capital Funds
of no more than 2.2 to 1.0 from June 30, 1995 and thereafter.
4. Definitions. All references in the Credit Agreement to the "Notes"
and the "Term Notes" shall hereafter include the $800,000 Secom Note and the
1995 Equipment Line Notes. All references to the "Obligations" in the Credit
Agreement shall hereafter include the liabilities and obligations under the
$800,000 Secom Note and the 1995 Equipment Line Notes. All references to the
$500,582.78 Secom Note and the $109,322.08 Triple Tool Note shall hereafter
refer to the $800,000 Secom Note. All references in the Credit Agreement to
the "Loan Documents" shall include the documents and instruments executed
pursuant to this Fifth Amendment.
5. Interest Rate on Line of Credit Note and Term Notes. Borrowers and
the Bank agree that notwithstanding anything to the contrary contained in the
Credit Agreement, the Line of Credit Note or any of the Term Notes, beginning
on and after December 1, 1995, interest shall accrue and be payable on the
Line of Credit Note and each of the Term Notes (except any 1995 Equipment Line
Note which specifically references a fixed interest rate, if any) at a per
annum rate equal to the Applicable Margin (defined below) for the type of note
plus the rate announced from time to time by the Bank as its "prime rate" (the
"Note Rate"), which prime rate may not be the lowest rate charged by the Bank
to any of its customers. Each change in the prime rate will immediately result
in a change of the Note Rate. After maturity, or from and after an Event of
Default as defined in the Credit Agreement, the outstanding principal balance
under the Line of Credit Note and the Term Notes shall bear additional
interest from and after such maturity date or the occurrence of the Event of
Default, at a rate of three (3%) percentage points per annum above the
applicable Note Rate until such note is fully paid or the Event of Default is
fully cured (the "Default Rate"). Interest shall be computed on the basis of
actual days elapsed over a period of a 360-day year.
3
<PAGE>
The "Applicable Margin" will be determined according to the following
table:
<TABLE>
<CAPTION>
Total Liabilities to
Tangible Capital Funds
(determined under Applicable Margin Applicable Margin
Section 5.1C) is: for Term Notes for Line of Credit Note
- ----------------- -------------- -----------------------
<S> <C> <C>
Greater than or equal to 1.75% 1.25%
2.0 to 1.0
from 1.75 to 1.0 up to and 1.50% 1.00%
including 1.99 to 1.0
from 1.50 to 1.0 up to and 1.25% .75%
including 1.74 to 1.0
from 1.25 to 1.0 up to and 1.00% .50%
including 1.49 to 1.0
less than 1.25 to 1.0 .75% .25%
</TABLE>
The Applicable Margin will be adjusted effective on the first day of the next
fiscal quarter after receipt of the quarterly financial statements delivered
to the Bank pursuant to Section 5.4. If such quarterly financial statements
are not delivered by the end of the quarter in which they are due, the ratio
of Total Liabilities to Tangible Capital Funds will be deemed to be greater
than 2.0 to 1.0 until quarterly financial statements are delivered to the
Bank. Any appropriate adjustments to the Applicable Margin will be effective
upon the date of receipt by the Bank of the overdue financial statements.
6. SWAP Transactions. NBD may from time to time enter into interest rate
or currency swap agreements or future rate agreements or forward exchange
contracts or interest rate protection or cap agreements with one or more of
the Borrowers ("Swap Transactions"). Any telex, telecopy or other document
evidencing any Swap Transaction and any agreement entered into by any Borrower
and NBD pursuant to or in connection with a Swap Transaction will be
considered part of the "Loan Documents" under the Credit Agreement. Any
obligations of any Borrower to NBD under or in connection with a Swap
Transaction will be considered part of the "Obligations" under the Credit
Agreement.
7. Conditions Precedent. NBD shall not be required to make the loan
described in Sections 1.2C and 1.2D of the Credit Agreement unless and until
all of the terms and conditions of Article II of the Credit Agreement have
been and continue to be met, and, in addition:
(a) NBD shall have received this Fifth Amendment, executed and
delivered by each of the Borrowers;
4
<PAGE>
(b) NBD shall have received a commitment for title insurance in
the amount of $800,000, covering the 1995 Mortgage of the Purchased
Property and the property commonly known as 6901 Cogswell and 38200
Ecorse, Romulus, Michigan, and subject only to encumbrances and
exceptions consented to by NBD;
(c) NBD shall have received an officers certificate from each
Borrower in form and substance satisfactory to NBD; and
(d) NBD shall have received simultaneously with the execution of
this Fifth Amendment a closing fee of 1% of the principal amount of the
loans extended under Section 1.2C from the Borrowers.
8. Additional Conditions For Mortgage Loan. NBD shall not be required to
make the loan described in Section 1.2C of the Credit Agreement unless and
until all of the terms and conditions of Section 7 of this Fifth Amendment and
in Article II of the Credit Agreement have been and continue to be met, and,
in addition:
(a) NBD shall have received the $800,000 Secom Note, and an
environmental certification in the form provided by NBD, executed and
delivered by Secom;
(b) NBD shall have received frown Secom executed copies of the
Amended and Restated Mortgage ("1995 Mortgage") in the form of Exhibit 7
attached to this Fifth Amendment, which amends and restates the existing
Mortgage dated June 1, 1990 covering the real property commonly known as
6901 Cogswell and 38200 Ecorse, Romulus, Michigan, and grants a mortgage
on the Purchased Property;
(c) On or before December 31, 1995, Secom shall deliver to NBD a
mortgage survey of the Purchased Property and the property commonly
known as 6901 Cogswell and 38200 Ecorse, Romulus, Michigan, certified to
NBD; and
(d) The Borrowers will take all reasonable steps necessary to
insure that the title policy issued from the commitment required above
is issued without standard exceptions, at the Borrower's expense.
9. Conditions to Equipment Line. NBD shall not consider making any loan
described in Section 1.2D of the Credit Agreement unless and until all of the
conditions in Section 7 of this Fifth Amendment and in Article II of the
Credit Agreement have been and continue to be met, and, in addition, NBD shall
have received:
(a) A 1995 Equipment Line Note, appropriately completed to
represent the advance and the agreed upon repayment terms;
5
<PAGE>
(b) Appropriate evidence of the purchase and delivery of the
equipment which is being financed (or binding contracts for such
purchase and delivery);
(c) UCC financing statements executed by the requesting Borrower
and filed in the appropriate jurisdictions and evidencing NBD's purchase
money security interest in such equipment;
(d) A fee of 1% of the requested advance under the Equipment Line;
and
(e) Such other information or documents as NBD shall request in
connection with such loan.
10. Additional Defaults. NBD may fund any loan without waiving any of
the conditions set forth in Sections 7, 8 or 9 of this Fifth Amendment. Unless
otherwise agreed to in writing by NBD, if the Borrowers fail to comply with
any condition in this Fifth Amendment within 15 days after a written request
for compliance is sent by NBD to Secom, NBD may consider such failure an Event
of Default under the Credit Agreement.
11. Expenses. Borrowers acknowledge and agree that the Borrowers will
pay reasonable attorneys' fees and out of pocket costs of NBD in connection
with or with respect to this Fifth Amendment and the loans funded pursuant
hereto.
12. Ratification. The parties hereto acknowledge and agree that the
terms and provisions of this Fifth Amendment amend, add to and constitute a
part of the Credit Agreement. Except as expressly modified and amended by the
terms of this Fifth Amendment, all of the other terms and conditions of the
Credit Agreement and all of the documents executed in connection therewith or
referred to or incorporated therein (including, without limitation, the
Restated Guaranties), remain in full force and effect and are hereby ratified,
confirmed and approved.
13. Express Conflicts. If there is an express conflict between the terms
of this Fifth Amendment and the terms of the Credit Agreement, or any of the
other agreements or documents executed in connection therewith or referred to
or incorporated therein, the terms of this Fifth Amendment shall govern and
control.
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment to
Amended and Restated Credit Agreement effective as of the date noted above.
SECOM GENERAL CORPORATION
By: /s/ Dave Marczak
--------------------------------
Its: Chief Financial Officer
--------------------------------
(Signatures continue on next page)
6
<PAGE>
UNIFLOW CORPORATION
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
TRI-TEC PLASTICS CORPORATION
By: /s/ Dave Marczak
--------------------------------
Its: President
--------------------------------
TRIPLE TOOL, INC.
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
MICANOL, INC.
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
L&H DIE, INC.
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
FORM FLOW, INC.
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
(Signatures continue on next page)
7
<PAGE>
NBD BANK
By: /s/ Timothy O'Rourke
--------------------------------
Its: Vice President
--------------------------------
EXHIBITS
Exhibit 1.2C(i) Legal Description
Exhibit 1.2C(ii) $800,000 Secom Note
Exhibit 7 Amendment and Restated Mortgage
8
EXHIBIT 10.22
SIXTH AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
This Sixth Amendment to Amended and Restated Credit Agreement ("Sixth
Amendment") is dated effective December 27, 1995 among NBD BANK, formerly NBD
Bank N.A., successor by merger to National Bank of Detroit ("NBD" or "Bank"),
as lender, with its main offices at 611 Woodward Avenue, Detroit, Michigan
48226, and Secom General Corporation, a Delaware corporation ("Secom"), whose
address is 46035 Grand River Ave., Novi, Michigan 48374; Uniflow Corporation,
a Michigan corporation ("Uniflow"), whose address is 26600 Heyn Drive, Novi,
Michigan 48450; Triple Technologies, Inc. (formerly known as Triple Tool,
Inc.), a Michigan corporation ("Triple Tech.") whose address is 46035 Grand
River Ave., Novi, Michigan 48374; Micanol, Inc., a Michigan corporation
("Micanol") whose address is P.O. Box 881, 46001 Grand River, Novi, Michigan
48376; L&H Die, Inc., a Michigan corporation ("L&H"), whose address is 38200
Ecorse Road, Romulus, Michigan 48174; Form Flow, Inc., a Michigan corporation
("Form Flow"), whose address is 6901 Cogswell, Romulus, Michigan 48174; and
Tri-Tec Plastics Corporation, a Michigan corporation ("Tri-Tec"), whose
address is 46035 Grand River Ave., Novi, Michigan 48374 (such corporations
being sometimes collectively referred to as the "Borrowers" and individually
as a "Borrower"), as borrowers.
This Sixth Amendment amends the Amended and Restated Credit Agreement
dated December 15, 1993, among NBD and the Borrowers, as amended by (i) the
First Amendment to Amended and Restated Credit Agreement dated July 19, 1994,
(ii) the letter dated August 19, 1994 from NBD to Secom, (iii) the Third
Amendment to Amended and Restated Loan Agreement dated December 28, 1994, (iv)
the Fourth Amendment to Amended and Restated Loan Agreement dated February 17,
1995 and (v) the Fifth Amendment to Amended and Restated Loan Agreement dated
December 1, 1995 (as so amended, the "Credit Agreement" or "Agreement").
Capitalized terms not otherwise defined herein shall have the meanings given
to them in the Credit Agreement.
Recitals
A. NBD has made available to the Borrowers revolving credit loans and
term loans as more fully described in the Credit Agreement.
B. The Borrowers have requested, among other things, that NBD extend
the maturity of certain loans, including the Line of Credit, Equipment Line of
Credit and the $1,738,649.61 Joint Note.
C. NBD is willing to provide such financing on the terms and conditions
set forth in this Sixth Amendment.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Line of Credit. The first three paragraphs of Section 1.1 of the
Credit Agreement are hereby amended in its entirety to read as follows:
1.1 Line of Credit. From time to time prior to December 31, 1996 (the
"Expiration Date"), NBD agrees to consider, subject to the terms and
conditions set forth in this Agreement and in the sole discretion of
NBD, lending and relending to Borrowers at any time and from time to
time from the date of this Sixth Amendment such amounts as Borrowers
(or Secom on behalf of Borrowers) may request (the "Line of Credit" or
the "Credit"), provided that the outstanding aggregate credit shall not
exceed an amount equal to the lesser of (a) the principal amount of
$4,500,000 or (b) the sum of (i) 80% of Net Qualified Accounts, (ii)
50% of Qualified Inventory consisting of raw materials, and (ii) 25% of
Qualified Inventory consisting of work in process and finished goods;
provided, however, that in no event shall the amount advanced against
all Qualified Inventory, at any one time outstanding, exceed the
principal sum of $500,000. This Line of Credit is in replacement, but
not repayment of the Joint Line of Credit described in Recital B.
NOTWITHSTANDING ANYTHING SET FORTH IN THIS AGREEMENT OR ANY OF THE LOAN
DOCUMENTS ON THE CONTRARY, NBD SHALL NOT BE OBLIGATED TO LEND OR RELEND
TO BORROWERS AT ANY TIME; EACH BORROWING OR REBORROWING WHICH IS MADE
UNDER THIS AGREEMENT WILL BE MADE AT THE OPTION, AND IN THE SOLE
DISCRETION, OF NBD. All such loans will be evidenced by a single Fourth
Amended and Restated Master Demand Business Loan Note of the Borrowers
(together with any modifications, replacements or renewals thereof, the
"Line of Credit Note"), payable to the order of NBD and dated as of the
date of the Sixth Amendment, in substantially the form of Exhibit 1.1
(1995) attached to the Sixth Amendment. Interest on the outstanding
loans under the Line of Credit shall accrue at the rate and be payable
at the time set forth in the Line of Credit Note. The Line of Credit
Note shall be executed by Borrowers and delivered to NBD prior to or
simultaneously with the execution of the Sixth Amendment.
In addition to any other payments of principal or interest due
NBD under the Line of Credit Note and this Agreement, at any time the
Line of Credit Note bears interest at the prime rate, then Borrowers
shall pay to NBD an inventory reliance fee of one quarter percent
(1/4%) per annum, charged monthly in arrears, based on the monthly
average outstanding balance under the Line of Credit supported by
Qualified Inventory. For purposes of computing such inventory reliance
fee, the principal outstanding under the Line of Credit Note shall
first be attributed to Qualified Receivables.
2
<PAGE>
2. Extended Equipment Line. Section 1.2D of the Credit Agreement is
hereby amended by deleting the date "December 31, 1995" and inserting in lieu
thereof the date "December 31, 1996".
3. Amended Term Loan. A new Section 1.2E is hereby added to the Credit
Agreement to read as follows:
1.2E Simultaneously with the Sixth Amendment to Amended and Restated
Credit Agreement, NBD will extend a term loan to Secom and Uniflow in
the original principal amount of $1,400,000.00 to mature on December 31,
1996, all of which will be used to refinance (but not repay) the
$1,738,649.61 Joint Note. Such loan will be evidenced by an Amended and
Restated Installment Business Loan Note substantially in the form of
Exhibit 1.2E attached to the Sixth Amendment (together with any
amendments, extensions, renewals or restatements, the "Joint Novi
Mortgage Note").
4. Definitions. All references in the Credit Agreement to the "Notes"
and the "Term Notes" shall hereafter include the Joint Novi Mortgage Note. All
references to the "Obligations" in the Credit Agreement shall hereafter
include the liabilities and obligations under the Joint Novi Mortgage Note.
All references to the $1,738,649.61 Joint Note shall hereafter refer to the
Joint Novi Mortgage Note. All references in the Credit Agreement to the "Loan
Documents" shall include the documents and instruments executed pursuant to
this Sixth Amendment.
5. Interest Rate on Line of Credit Note and Term Note. The table for
the Applicable Margin as set forth by the Fifth Amendment to Amended and
Restated Loan Agreement is hereby amended in its entirety to read as follows:
<TABLE>
<CAPTION>
Total Liabilities to
Tangible Capital Funds
(determined under Applicable Margin Applicable Margin
Section 5.1C) is: for Term Notes for Line of Credit Note
- ----------------- -------------- -----------------------
<S> <C> <C>
Greater than or equal to 1.75% 1.25%
2.0 to 1.0
from 1.75 to 1.0 up to and 1.50% 1.00%
including 1.99 to 1.0
from 1.50 to 1.0 up to and 1.25% .75%
including 1.74 to 1.0
from 1.25 to 1.0 up to and 1.00% .50%
including 1.49 to 1.0
from 1.01 to 1.0 up to and .75% .25%
including 1.24 to 1.0
less than 1.0 to 1.0 .50% .00%
</TABLE>
3
<PAGE>
6. Conditions Precedent. NBD shall not be required to extend the Line
of Credit described in Section 1.1 of the Credit Agreement, extend the
Equipment Line as described in Section 1.2D of the Credit Agreement or make
the loan described in Section 1.2E of the Credit Agreement unless and until
all of the terms and conditions of Article II of the Credit Agreement have
been and continue to be met, and, in addition:
(a) NBD shall have received the Line of Credit Note, executed
and delivered on each of the Borrowers,
(b) NBD shall have received the Joint Novi Mortgage Note,
executed and delivered on Secom and Uniflow;
(c) NBD shall have received this Sixth Amendment, executed and
delivered by each of the Borrowers;
(d) NBD shall have received an officers certificate from each
Borrower in form and substance satisfactory to NBD; and
(e) NBD shall have received simultaneously with the execution of
this Sixth Amendment a closing fee of $750 from the Borrowers.
7. Additional Defaults. NBD may fund any loan without waiving any of
the conditions set forth in Section 6 of this Sixth Amendment. Unless
otherwise agreed to in writing by NBD, if the Borrowers fail to comply with
any condition in this Sixth Amendment within 15 days after a written request
for compliance is sent by NBD to Secom, NBD may consider such failure an Event
of Default under the Credit Agreement.
8. Expenses. Borrowers acknowledge and agree that the Borrowers will
pay reasonable attorneys' fees and out of pocket costs of NBD in connection
with or with respect to this Sixth Amendment and the loans funded pursuant
hereto.
9. Ratification. The parties hereto acknowledge and agree that the
terms and provisions of this Sixth Amendment amend, add to and constitute a
part of the Credit Agreement. Except as expressly modified and amended by the
terms of this Sixth Amendment, all of the other terms and conditions of the
Credit Agreement and all of the documents executed in connection therewith or
referred to or incorporated therein (including, without limitation, the
Restated Guaranties), remain in full force and effect and are hereby ratified,
confirmed and approved.
4
<PAGE>
10. Express Conflicts. If there is an express conflict between the
terms of this Sixth Amendment and the terms of the Credit Agreement, or any of
the other agreements or documents executed in connection therewith or referred
to or incorporated therein, the terms of this Sixth Amendment shall govern and
control.
IN WITNESS WHEREOF, the parties have executed this Sixth Amendment to
Amended and Restated Credit Agreement effective as of the date noted above.
SECOM GENERAL CORPORATION
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
UNIFLOW CORPORATION
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
TRI-TEC PLASTICS CORPORATION
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
TRIPLE TECHNOLOGIES, INC.
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
MICANOL, INC.
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
(Signatures continue on next page)
5
<PAGE>
L&H DIE, INC.
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
FORM FLOW, INC.
By: /s/ Dave Marczak
--------------------------------
Its: Vice President
--------------------------------
NBD BANK
By: /s/ Timothy O'Rourke
--------------------------------
Its: Vice President
--------------------------------
EXHIBITS
Exhibit 1.1 Line of Credit Note
Exhibit 1.2E Joint Novi Mortgage Note
6
<PAGE>
EXHIBIT 1.1(1995)
FOURTH AMENDED AND RESTATED
MASTER DEMAND BUSINESS LOAN NOTE
Amount: $4,500,000.00 Dated: as of December 1, 1995
Made at Detroit, Michigan.
FOR VALUE RECEIVED, the undersigned, jointly and severally, promise to
pay a the earlier of (i) December 31, 1996, or (ii) ON DEMAND to the order of
NBD BANK ("Bank"), at its offices in Detroit, Michigan or at such other place
as the holder of this note may from time to time designate in writing, the
principal sum of Four Million Five Hundred Thousand and 00/100 Dollars
($4,500,000.00), plus interest, payable as follows: monthly interest payments
in the amount set forth below commencing on January 1, 1996, and continuing on
the 1st day of each consecutive month thereafter, and a final payment, of the
outstanding principal balance plus all accrued but unpaid interest on December
31, 1996.
The indebtedness under this Note outstanding from time to time prior to
maturity (whether by acceleration or otherwise) or the occurrence of an Event
of Default shall bear interest on the basis of a year of 360 days for the
actual number of days elapsed in each month, at a per annum rate equal to the
Applicable Margin (defined below) plus the rate announced from time to time by
the Bank as its "prime rate" (the "Note Rate"), which prime rate may not be
the lowest rate charged by the Bank to any of its customers. Each change in
the prime rate will immediately result in a change of the Note Rate. After
maturity, or from and after an Event of Default as defined in the Credit
Agreement, described below the outstanding principal balance under this Note
shall bear additional interest from and after such maturity date or the
occurrence of the Event of Default, at a rate of three (3%) percentage points
per annum above the Note Rate until the Note is fully paid or the Event of
Default is fully cured (the "Default Rate").
The "Applicable Margin" will be determined according to the following
table:
<TABLE>
<CAPTION>
Total Liabilities to Tangible
Tangible Capital Funds
(determined under Section 5.1C Applicable Margin
of the Credit Agreement) is: for the Note
---------------------------- ------------
<S> <C>
Greater than or equal to 2.0 to 1.0 1.25%
from 1.75 to 1.0 up to and including 1.99 to 1.0 1.00%
from 1.50 to 1.0 up to and including 1.74 to 1.0 .75%
from 1.25 to 1.0 up to and including 1.49 to 1.0 .50%
from 1.01 to 1.0 up to and including 1.24 to 1.0 .25%
less than 1.0 to 1.0 .00%
</TABLE>
<PAGE>
The Applicable Margin will be adjusted effective on the first day of the next
fiscal quarter after receipt of the quarterly financial statements delivered
to the Bank pursuant to Section 5.4 of the Credit Agreement. If such quarterly
financial statements are not delivered by the end of the quarter in which they
are due, the ratio of Total Liabilities to Tangible Capital Funds will be
deemed to be greater than 2.0 to 1.0 until quarterly financial statements are
delivered to the Bank. Any appropriate adjustments to the Applicable Margin
will be effective upon the date of receipt by the Bank of the overdue
financial statements.
Principal of and interest on this Note shall be payable in lawful money
of the United States of America. The undersigned agrees to pay all costs of
collection and enforcement of this Note, including reasonable attorneys' fees
and court costs.
The indebtedness under this Note may be prepaid in whole or in part at
any time. In addition to the principal payments described above, additional
payments on this Note may be due and payable pursuant to the terms of the
Amended and Restated Credit Agreement dated as of December 15, 1993, as
amended by (i) the First Amendment to Amended and Restated Credit Agreement
dated July 19, 1994, (ii) the letter dated August 19, 1994 from NBD to Secom,
(iii) the Third Amendment to Amended and Restated Loan Agreement dated
December 28, 1994, (iv) the Fourth Amendment to Amended and Restated Loan
Agreement dated February 17, 1995 and (v) the Fifth Amendment to Amended and
Restated Loan Agreement dated December 1, 1995 (as so amended, the "Credit
Agreement" or "Agreement"). Capitalized terms not otherwise defined herein
shall have the meanings given them in the Credit Agreement.
This Fourth Amended and Restated Master Demand Business Loan Note,
among other things, amends, restates and consolidates (but does not discharge)
the indebtedness outstanding under that certain Third Amended and Restated
Master Demand Business Loan Note dated December 28, 1994, in the original
amount of $4,500,000, that certain Second Amended and Restated Master Demand
Business Loan Note dated December 13, 1994, in the original principal amount
of $4,200,000, that certain Amended and Restated Master Demand Business Loan
Note dated September 1, 1993, in the original principal amount of $4,200,000,
that certain Master Demand Business Loan Note dated April 29, 1993, in the
original principal amount of $4,200,000, that certain Master Demand Business
Loan Note, dated March 23, 1993, in the original principal amount of
$4,000,000, and that certain Master Demand Business Loan Note dated as of
December 19, 1991, in the original principal amount of $4,000,000. Any
reference in any other document or instrument to the foregoing notes shall
constitute a reference to this Fourth Amended and Restated Master Demand Note.
This Note is given pursuant to the terms and conditions of the Credit
Agreement. This Note is secured by, among other collateral, the collateral
granted to Lender under the terms of the Credit Agreement and the Loan
Documents. The occurrence of any default under the Credit Agreement or any of
the Loan Documents (as such documents may have been amended by the Credit
Agreement), or any document or instrument referred to or incorporated into any
of the foregoing shall be deemed a default under this Note and shall entitle
the holder of this Note to accelerate the maturity of the debt evidenced by
this Note and to have all rights and remedies afforded by law or available
under the Credit Agreement, the Loan Documents and under all other agreements
referred to or executed in connection with any of the foregoing.
2
<PAGE>
The undersigned, and all endorsers and guarantors, hereby severally
waive valuation and appraisement, presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Note, and expressly agree
that the maturity of this Note, or any payment due under this Note, may be
extended from time to time without in any way affecting the liability of the
undersigned or such endorsers or guarantors.
This Note, made and executed in the State of Michigan, shall be
governed and construed according to the internal laws of the State of
Michigan.
SECOM GENERAL CORPORATION,
a Delaware corporation
By: /s/ Dave Marczak
-------------------------------------
Name: Dave Marczak
-------------------------------
Title: Vice President
--------------------------
46035 Grand River Ave.
Novi, Michigan 48374
UNIFLOW CORPORATION
By: /s/ Dave Marczak
-------------------------------------
Its: Vice President
--------------------------------
26600 Heyn Drive
Novi, Michigan 48450
(Signatures continue)
3
<PAGE>
MICANOL, INC.
By: /s/ Dave Marczak
-------------------------------------
Its: Vice President
--------------------------------
P.O. Box 881
46001 Grand River
Novi, Michigan 48376
TRIPLE TECHNOLOGIES, INC.
By: /s/ Dave Marczak
-------------------------------------
Its: Vice President
--------------------------------
1445 Allen Drive
Troy, Michigan 48083
L&H DIE, INC.
By: /s/ Dave Marczak
-------------------------------------
Its: Vice President
--------------------------------
38200 Ecorse Road
Romulus, Michigan 48174
FORM FLOW, INC.
By: /s/ Dave Marczak
-------------------------------------
Its: Vice President
--------------------------------
6901 Cogswell
Romulus, Michigan 48174
TRI-TEC PLASTICS CORPORATION
By: /s/ Dave Marczak
-------------------------------------
Its: Vice President
--------------------------------
46035 Grand River Ave.
Novi, Michigan 48374
4
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
Secom General Corporation:
We consent to the incorporation by reference in Registration Statements
No. 33-45177 and 33-43557 of Secom General Corporation on Form S-8 of our
report dated December 27, 1995, appearing in this Annual Report on Form 10-K
of Secom General Corporation for the year ended September 30, 1995.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Detroit, Michigan
December 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> $ 13,700
<SECURITIES> 0
<RECEIVABLES> 4,578,300
<ALLOWANCES> (93,500)
<INVENTORY> 3,935,700
<CURRENT-ASSETS> 10,025,300
<PP&E> 20,811,500
<DEPRECIATION> (6,227,900)
<TOTAL-ASSETS> 26,942,100
<CURRENT-LIABILITIES> 8,896,000
<BONDS> 0
<COMMON> 427,600
0
0
<OTHER-SE> 11,482,900
<TOTAL-LIABILITY-AND-EQUITY> 26,947,100
<SALES> 36,276,200
<TOTAL-REVENUES> 36,276,200
<CGS> 29,016,100
<TOTAL-COSTS> 34,298,400
<OTHER-EXPENSES> 8,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,137,800
<INCOME-PRETAX> 831,600
<INCOME-TAX> (372,700)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,204,300
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.28
</TABLE>
