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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 2000
Commission file number 0-14299
SECOM GENERAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 87-0410875
(State or other jurisdiction (IRS Employer I.D. Number)
of incorporation or organization)
46035 GRAND RIVER AVENUE 48374
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 248-305-9410
Indicate by check mark whether the registrant (1) has filed all reports 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 requirement for
the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Title of Class Number of Shares Outstanding
Common Stock 1,029,124
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SECOM GENERAL CORPORATION
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statement of Net Assets (Liquidation Basis)......................1
Consolidated Balance Sheet....................................................2
Consolidated Statement of Changes in Net
Assets (Liquidation Basis)................................................4
Consolidated Statements of Operations.........................................5
Consolidated Statements of Cash Flows.........................................6
Notes to Interim Consolidated Financial Statements............................7
Item 2. Management's Discussion & Analysis of Financial Condition,
Results of Operations and Changes in Net Assets (Liquidation Basis)...........10
PART II OTHER INFORMATION
Item 1. Legal Proceedings..................................................................15
Item 2. Changes in Securities..............................................................15
Item 3. Defaults in Securities.............................................................15
Item 4. Submission of Matters to a Vote of Security Holders................................15
Item 5. Other Information..................................................................15
Item 6. Exhibits and Reports on Form 8-K...................................................15
</TABLE>
<PAGE> 3
SECOM GENERAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF NET
ASSETS IN LIQUIDATION AS OF JUNE 30, 2000
<TABLE>
<S> <C>
ASSETS:
Cash and cash equivalents $ 11,589,400
Accounts receivable 2,220,200
Real estate and buildings of discontinued Tooling Segment 1,575,000
Other assets 75,900
Real estate and buildings held for sale Novi, Michigan 2,488,900
Notes receivable 1,589,400
---------------
Total assets $ 19,538,800
===============
LIABILITIES:
Accounts payable $ 654,800
Federal income and Michigan Single Business tax 1,558,400
Accrued wages and benefits 638,800
Accrued other 531,800
Debt secured by computer equipment 141,200
Debt secured by buildings and real estate
held for sale 1,652,300
---------------
Total liabilities 5,177,300
---------------
NET ASSETS IN LIQUIDATION 14,361,500
===============
Number of Common shares outstanding 1,029,124
===============
NET ASSETS IN LIQUIDATION PER COMMON SHARE $ 13.96
===============
</TABLE>
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SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (GOING CONCERN BASIS)
ASSETS
<TABLE>
<CAPTION>
Sept. 30, 1999
------------------
<S> <C>
Current assets
Cash and cash equivalents $ 497,200
Accounts receivable
Trade 3,272,000
Other, principally notes 525,300
Inventories 2,896,500
Prepaid expenses 93,100
Deferred tax assets 105,900
Real estate and buildings held for sale 834,600
Property, plant, equipment and inventory of
discontinued subsidary -
Machinery and equipment held for sale 1,203,900
------------------
Total current assets 9,428,500
Notes receivable, net of current portion 975,400
Property, plant and equipment, net 6,930,000
Other assets 285,500
------------------
Total assets $ 17,619,400
==================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
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SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (GOING CONCERN BASIS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Sept. 30, 1999
-------------------
<S> <C>
Current liabilities
Current maturities of secured debt $ 1,073,300
Accounts payable 1,314,400
Accrued wages and benefits 749,400
Other accrued expenses 830,600
Debt secured by buildings and real estate held for sale -
Debt secured by property, plant and equipment
of discontinued subsidiary -
---------------
Total current liabilities 3,967,700
Long-term debt obligations 3,527,900
Deferred tax liabilities 401,300
---------------
Total liabilities 7,896,900
---------------
Stockholders' equity
Common stock, $.10 par value,
authorized 10,000,000 shares;
outstanding 1,038,200 shares 104,400
Additional paid-in capital 18,757,700
Accumulated deficit (9,139,600)
---------------
Total stockholders' equity 9,722,500
---------------
Total liabilities and stockholders' equity $ 17,619,400
===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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SECOM GENERAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CHANGES
IN NET ASSETS (LIQUIDATION BASIS) FOR THE PERIOD
MARCH 31, 2000 TO JUNE 30, 2000
<TABLE>
<S> <C>
Stockholders equity at March 31, 2000 (going concern, historical cost basis) $10,118,300
Increase in net assets from revaluing assets to liquidation basis from going
concern historical cost basis as of March 31, 2000. 903,800
Gain from the sale of the Tooling Segment's assets, net of applicable
income taxes of $1,424,000. 2,951,200
Gain from activities during the wind down period April 1, 2000 through
June 30, 2000 282,400
Gain from the sale of a manufacturing facility, net of applicable income
taxes of $54,500. 105,800
------------
Net Assets in Liquidation as of June 30, 2000 $14,361,500
============
</TABLE>
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SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(GOING CONCERN BASIS)
<TABLE>
<CAPTION>
Three Months Six Months Nine Months
Ended Jun. 30 Ended Mar. 31 Ended Jun. 30
1999 2000 1999
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Revenues $ 350,100 $ 668,200 $ 1,048,100
Costs and expenses:
Depreciation and interest 196,900 308,800 608,500
Salaries and benefits 102,600 186,800 332,600
Professional services 55,200 59,200 193,700
Other 66,000 90,300 170,900
-------------------- -------------------- --------------------
Total costs and expenses 420,700 645,100 1,305,700
Loss from continuing operations before
income taxes (70,600) 23,100 (257,600)
Income tax benefit 25,500 (16,800) 49,000
-------------------- -------------------- --------------------
Loss from continuing operations (45,100) 6,300 (208,600)
Discontinued operations:
Income from operations of
discontinued subsidiaries 181,900 597,700 228,800
Loss on disposal of subsidiary, net of
applicable income tax benefit of $93,200 - (186,600) -
-------------------- -------------------- --------------------
Net income $ 136,800 $ 417,400 $ 20,200
==================== ==================== ====================
Income (loss) per common share
(basic and diluted):
Continuing operations $ (0.04) $ 0.01 $ (0.20)
Discontinued operations 0.17 0.39 0.21
-------------------- -------------------- --------------------
Net Income per common share $ 0.13 $ 0.40 $ 0.01
==================== ==================== ====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(GOING CONCERN BASIS)
<TABLE>
<CAPTION>
Six Months Nine Months
Ended Mar. 30 Ended Jun. 30
2000 1999
---------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 417,400 $ 20,200
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 200,200 432,900
Deferred income tax benefit 16,800 49,000
Gain on sale of assets - (1,000)
Changes in operating assets and liabilities
which provided (used) cash:
Prepaid expenses and other (138,200) (56,500)
Trade accounts payable (6,300) (203,300)
Accrued liabilities (183,400) 32,300
Net cash provided by discontinued operations (40,400) 1,441,000
---------------------- ----------------------
Net cash provided by operating activities 266,100 1,714,600
---------------------- ----------------------
Cash flows from investing activities:
Proceeds from disposal of property, plant
and equipment - 2,000
Net cash provided by discontinued operations 3,609,400 3,636,700
---------------------- ----------------------
Net cash provided by investing activities 3,609,400 3,638,700
---------------------- ----------------------
Cash flows from financing activities:
Net change in bank line of credit - (1,745,000)
Payments on long-term obligations (203,200) (280,100)
Retirements of common stock (21,600) (18,200)
Net cash used in discontinued operations (1,700,100) (3,341,800)
---------------------- ----------------------
Net cash used in financing activities (1,924,900) (5,385,100)
---------------------- ----------------------
Net increase (decrease) in cash and cash equivalents 1,950,600 (31,800)
Cash and cash equivalents, beginning of period 497,200 104,600
---------------------- ----------------------
Cash and cash equivalents, end of period $ 2,447,800 $ 72,800
====================== ======================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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SECOM GENERAL CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION
General
The consolidated financial statements included herein have been
prepared by Secom General Corporation (the "Company") without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in the consolidated financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
we believe that the disclosures are adequate to make the information
presented not misleading. On April 1, 2000 we changed our basis of
accounting from the going concern historical cost basis to the
liquidation basis of accounting. The primary differences between these
methods of accounting are discussed below in Note 2.
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements reflect all adjustments required to
present fairly its net assets as of June 30, 2000 (liquidation basis),
changes in net assets from March 31, 2000 to June 30, 2000 (liquidation
basis), balance sheet as of September 30, 1999 (going concern basis),
results of operations for the six months ended March 31, 2000 and the
three and nine months ended June 30, 1999 (going concern basis) and
cash flows for the six months ended March 31, 2000 and nine months
ended June 30, 1999 (going concern basis). These financial statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Form 10-K and
Annual Report for the fiscal year ended September 30, 1999.
Our Board of Directors approved a Plan of Liquidation on July 1, 2000,
subject to shareholder approval at our Annual Meeting to be held on
August 24, 2000. (For a detailed description of the Plan of
Liquidation, please see the Company's Definitive Proxy on Form 14A,
dated July 24, 2000, incorporated herein by reference and made a part
hereof).
Background and Reasons for the Plan of Liquidation
During the fall of 1998, our Board of Directors engaged the investment
banking firm of Goldsmith, Agio, Helms Securities, Inc. ("GAHS") to
assist us in developing strategic alternatives to increase stockholder
value. Our Board initially contacted GAHS because it believed that the
value of the Company was greater than the aggregate value of the then
trading price of our shares of Common Stock. Among the alternatives
discussed with GAHS was a possible merger, sale or similar transaction
of the entire Company or its subsidiaries. While other parties
expressed an interest in engaging in a transaction with the entire
Company, the price proposed by such parties was below what our Board
believed was fair market value. GAHS also advised our Board that,
because of the different industries represented by our two segments,
many potential purchasers would not be interested in purchasing both
segments. Therefore, our Board believed it was necessary to pursue
other alternatives to accomplish its goal of increasing stockholder
value, including selling our assets and properties in separate
transactions and ultimately liquidating the Company.
In August 1999, we entered into a letter of intent with a potential
purchaser for the sale of the assets of the Tooling Segment, which was
comprised of Form Flow, Inc. ("Form Flow"), L&H Die, Inc. ("L&H"), and
Micanol, Inc ("Micanol"). After signing the letter of intent, the
potential
7
<PAGE> 10
purchaser asked us for certain concessions on the terms which we were
unwilling to provide. The letter of intent also contained certain
contingencies that were not satisfied so the letter of intent
terminated.
At the same time, we were negotiating with Alken-Ziegler Livonia, LLC
("Alken-Ziegler") for the sale of the operating assets of the Metal
Parts Forming Segment, which was comprised of Uniflow Corporation. We
ultimately entered into a letter of intent for that sale in October
1999. When the letter of intent with respect to the Tooling Segment
terminated, Alken-Ziegler expressed interest in purchasing the assets
of the Tooling Segment. In November 1999, our Board authorized
execution of a non-binding letter of intent with Alken-Ziegler for the
sale of the assets of the Tooling Segment. At that time, however, we
believed that it was in the Company's best interest to focus on closing
the sale of the Metal Parts Forming Segment before entering into a
definitive agreement for the sale of the assets of the Tooling Segment.
On February 9, 2000, we sold the operating assets of our Metal Parts
Forming Segment to Alken-Ziegler for a purchase price of approximately
$2.4 million in cash. Alken-Ziegler also agreed to assume certain
liabilities of the Metal Parts Forming Segment. (For a detailed
description of that transaction, please see the Company's Form 8-K
dated February 9, 2000, incorporated herein by reference and made a
part hereof). We then began negotiating with Alken-Ziegler and GL
Ziegler Investments, LLC ("GLZ") on the terms of a definitive agreement
for the sale of the assets of the Tooling Segment.
On March 29, 2000, our Board authorized the execution of an Asset
Purchase Agreement with Alken-Ziegler and GLZ. On May 10, 2000, the
sale of the Tooling Group was approved by the written consent of more
than fifty-one (51%) percent of the outstanding shares of our Common
Stock. Prior to the closing, Alken-Ziegler assigned its interests under
the Asset Purchase Agreement to its affiliate, Alken-Ziegler Tool
Company, LLC ("A-Z Tool Company; A-Z Tool Company and GLZ are
collectively referred to as "Purchaser"). The sale was completed on
June 30, 2000. In connection with the sale of the operating assets of
the Tooling Segment, we received a cash purchase price of approximately
$8 million on June 30, 2000. We expect to receive a cash payment of
approximately $1.6 million for the sale of the real estate on or before
August 31, 2000. The Purchaser also agreed to assume certain
liabilities of the Tooling Segment. (For a detailed description of that
transaction, please see the Company's Information Statement on Form 14C
dated May 24, 2000, incorporated herein by reference and made a part
hereof).
In a separate transaction in April 2000, we sold one of our
manufacturing facilities in Novi, Michigan for $1.2 million. Our three
remaining manufacturing facilities in Novi, Michigan are currently held
for sale at an aggregate purchase price of $2.75 million.
By completing these business sales and, if we are successful in
liquidating our remaining assets at their estimated current market
values, the Board believes that, after reserving sufficient funds to
pay our debts as they come due, the stockholders could, over time,
receive a liquidating distribution of approximately $13 per share.
Given that the market value of our Common Stock on March 29, 2000 was
$4.50 per share (as reported by the NASDAQ Smallcap Market), the Board
believes that liquidation is the best alternative in maximizing
stockholder value.
2. SIGNIFICANT LIQUIDATION BASIS OF ACCOUNTING POLICIES
General
The liquidation basis of accounting requires that assets and
liabilities be valued at their estimated liquidation value. Assets and
liabilities that have not been revalued to liquidation value are
disclosed as such on the face of the financial statements. In addition,
under the liquidation basis
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<PAGE> 11
of accounting, gains and losses from dispositions of assets are
displayed as net amounts versus gross revenue and expenses under the
going concern basis of accounting. The primary financial statements
required under the liquidation basis of accounting are a Statement of
Net Assets and a Statement of Changes in Net Assets.
Real estate and buildings of discontinued Tooling Segment
The value of the Romulus, Michigan real estate and buildings is based
on a definitive purchase agreement signed with Alken-Ziegler and GL
Ziegler Investments, LLC, for approximately $1.64 million, less
estimated costs to sell.
Real estate and buildings held for sale Novi, Michigan
The value represents an expected selling price of $2.75 million, less
estimated costs to sell.
Costs associated with carrying out the Plan of Liquidation
All costs including professional fees, interest expense and other
administrative costs associated with carrying out the Plan of
Liquidation are expensed as incurred.
3. NET INCOME (LOSS) PER COMMON SHARE
Earnings (Loss) Per Common Share
Earnings (loss) per common share is computed using the weighted average
number of common shares outstanding during the year. This statement
requires a dual presentation and reconciliation of "basic" and
"diluted" per share amounts. Diluted reflects the potential dilution of
all common stock equivalents. At March 31, 2000 and June 30, 1999
options to purchase 68,200 and 69,200 shares, respectively, were
excluded from the computation of earnings per share because the
options' exercise prices were greater than the average market price of
the common shares. A reconciliation of the denominators used in the
basic and diluted share calculation for continuing operations follows
for the six month period ended March 31, 2000 and the three and nine
month periods ended June 30, 1999:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS THREE MONTHS NINE MONTHS
ENDED ENDED ENDED
MAR 31, 2000 JUN 30, 1999 JUN 30, 1999
------------------ ------------------- -----------------
<S> <C> <C> <C>
Denominator:
Weighted average shares
outstanding, basic 1,043,100 1,064,900 1,066,200
Incremental shares from
assumed conversion of options - - -
------------------ ------------------- -----------------
Weighted average shares
outstanding, diluted 1,043,100 1,064,900 1,066,200
================== =================== =================
</TABLE>
4. SUPPLEMENTAL CASH FLOWS INFORMATION
Cash payments for interest for the six months ended March 31, 2000 and
the nine months ended June 30, 1999, respectively, were $151,000 and
$616,000. Cash payments for income taxes for the six months ended March
31, 2000 were $1,078,000. No cash was paid for income taxes for the
nine months ended June 30, 1999.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND CHANGES IN NET ASSETS (LIQUIDATION BASIS)
OVERVIEW
The Company and its representatives may from time to time make written
or oral statements concerning expectations for the future which are
forward-looking statements, including statements in the Company's filings with
the Securities and Exchange Commission. Whenever possible, the Company has
identified these forward-looking statements by words or phrases such as "will
likely result", "expects", "anticipates", "believes", "forecast", "estimate",
"project" or similar expressions within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company's forward-looking statements reflect
the Company's best judgment based on current information and are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those expressed in, or implied by, these statements. Readers are
cautioned that they should not place undue reliance on any forward-looking
statements because such statements speak only as of the date they are made.
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is hereby identifying
important factors that could affect any liquidating distributions to
stockholders the Company may pay. Among the factors that could impact the
Company's projections or goals with respect to any liquidating distributions
are: the methods used by the Board of Directors and management in estimating the
value of the Company's property and assets do not, with certainty, result in an
exact determination of value nor are they intended to indicate the amount, if
any, a stockholder may receive in liquidation, price at which the Company will
be able to sell its remaining assets and properties, the rate of inflation,
changes in interest rates, the condition of real estate and financial markets,
the availability of financing to prospective purchasers, the timing of the sale
of our remaining assets, the amount and nature of any unknown contingent
liabilities, and the ability to collect our receivables.
The Company cautions that the foregoing list of important factors may
not be all-inclusive, and it specifically declines to undertake any obligation
to publicly revise any forward-looking statements that have been made to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of any anticipated or unanticipated events.
During the fall of 1998, our Board of Directors engaged the investment
banking firm of Goldsmith, Agio, Helms Securities, Inc. ("GAHS") to assist us in
developing strategic alternatives to increase stockholder value. Our Board
initially contacted GAHS because it believed that the value of the Company was
greater than the aggregate value of the then trading price of our shares of
Common Stock. Among the alternatives discussed with GAHS was a possible merger,
sale or similar transaction of the entire Company or its subsidiaries. While
other parties expressed an interest in engaging in a transaction with the entire
Company, the price proposed by such parties was below what our Board believed
was fair market value. GAHS also advised our Board that, because of the
different industries represented by our two segments, many potential purchasers
would not be interested in purchasing both segments. Therefore, our Board
believed it was necessary to pursue other alternatives to accomplish its goal of
increasing stockholder value, including selling our assets and properties in
separate transactions and ultimately liquidating the Company.
On February 9, 2000, we sold the operating assets of our Metal Parts
Forming Segment to Alken-Ziegler for a purchase price of approximately $2.4
million in cash. Alken-Ziegler also agreed to assume certain liabilities of the
Metal Parts Forming Segment. (For a detailed description of that transaction
please see the Company's Form 8-K dated February 9, 2000, incorporated herein by
reference and made a part hereof). We then began negotiating with Alken-Ziegler
and GL Ziegler Investments, LLC ("GLZ") on the terms of a definitive agreement
for the sale of the assets of the Tooling Segment.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND CHANGES IN NET ASSETS (LIQUIDATION BASIS) (CONTINUED)
On March 29, 2000, our Board authorized the execution of an Asset
Purchase Agreement with Alken-Ziegler and GLZ. On May 10, 2000, the sale of the
Tooling Group was approved by the written consent of more than fifty-one (51%)
percent of the outstanding shares of our Common Stock. Prior to the closing,
Alken-Ziegler assigned its interests under the Asset Purchase Agreement to its
affiliate, Alken-Ziegler Tool Company, LLC ("A-Z Tool Company; A-Z Tool Company
and GLZ are collectively referred to as "Purchaser"). The sale was completed on
June 30, 2000. In connection with the sale of the operating assets of the
Tooling Segment, we received a cash purchase price of approximately $8 million
on June 30, 2000. We expect to receive a cash payment of approximately $1.6
million for the sale of the real estate on or before August 31, 2000. The
Purchaser also agreed to assume certain liabilities of the Tooling Segment. (For
a detailed description of that transaction, please see the Company's Information
Statement on Form 14C dated May 24, 2000, incorporated herein by reference and
made a part hereof).
In a separate transaction in April 2000, we sold one of our
manufacturing facilities in Novi, Michigan for $1.2 million. Our three remaining
manufacturing facilities in Novi, Michigan are currently held for sale at an
aggregate purchase price of $2.75 million.
By completing these business sales and, if we are successful in
liquidating our remaining assets at their estimated current market value, the
Board believes that, after reserving sufficient funds to pay our debts as they
come due, the stockholders could, over time, receive a liquidating distribution
of approximately $13 per share. Given that the market value of our Common Stock
on March 29, 2000 was $ 4.50 per share (as reported by the NASDAQ Smallcap
Market), the Board believes that liquidation is the best alternative in
maximizing stockholder value. Therefore our Board of Directors adopted a plan of
liquidation on July 1, 2000, subject to shareholder approval.
SUMMARY OF THE PLAN OF LIQUIDATION
CESSATION OF BUSINESS ACTIVITIES
Pursuant to the Plan, after the filing of the certificate of
dissolution (the "Effective Date"), we will not engage in any business
activities except for the purpose of preserving the value of our assets,
prosecuting and defending suits by or against us, adjusting and winding up our
business and affairs, selling and liquidating our properties and assets and
making distributions to stockholders in accordance with the Plan.
LIQUIDATION OF ASSETS
After the Effective Date, as provided for in the Plan, we will sell,
transfer, or otherwise dispose of all of our property and assets, including our
intellectual property and other intangible assets, to the extent, for such
consideration and upon such terms and conditions as our Board of Directors deems
expedient and in the best interests of the Company, its creditors and
stockholders, without the requirement of further vote or action by you. Our
remaining assets and properties may be sold in bulk to one buyer or a small
number of buyers or on a piecemeal basis to numerous buyers. We will not be
required to obtain appraisals or other third party opinions as to the value of
our properties and assets in connection with the liquidation. As part of the
liquidation of our property and assets, we will collect, or make provision for
the collection of, all accounts receivable, debts and claims owing to the
Company.
11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND CHANGES IN NET ASSETS (LIQUIDATION BASIS) (CONTINUED)
CERTIFICATE OF DISSOLUTION
Once the liquidation of our property and assets is substantially
completed (as determined by our Board of Directors) or such earlier time as the
Board of Directors determines, in its discretion, to be appropriate, the
officers of the Company will execute and file with the Secretary of State of the
State of Delaware, a certificate of dissolution.
PAYMENT OF DEBTS
Prior to making any distributions to our stockholders, we will pay, or
as determined by the Board of Directors, make reasonable provision to pay, all
our claims and obligations, including all contingent, conditional or unmatured
claims known to us. Following the Effective Date, the Board of Directors may
establish a contingency reserve (the "Contingency Reserve") and set aside into
the Contingency Reserve such amounts of our cash or property as our Board of
Directors, in its discretion, determines is sufficient to account for unknown
events, claims, contingencies and expenses incurred in connection with the
collection and defense of our property and assets and the liquidation and
dissolution provided for in the Plan. Following the payment, satisfaction or
other resolution of all such events, claims, contingencies and expenses, any
amounts remaining in the Contingency Reserve shall be distributed in accordance
with the Plan.
DISTRIBUTIONS TO STOCKHOLDERS
Following the payment or the provision for the payment of our claims
and obligations, we will distribute pro rata to the holders of the Common Stock
all of our remaining property and assets, in one or a series of distributions.
RECORD DATE AND RESTRICTIONS ON TRANSFER OF SHARES
The Company will close its stock transfer books and discontinue
recording transfers of Common Stock at the close of business on the record date
fixed by the Board for the Dissolution Distribution (the "Dissolution Record
Date"). Thereafter, certificates representing the Common Stock shall not be
assignable or transferable on the books of the Company except by will, intestate
succession or operation of law. The proportionate interests of all of the
stockholders of the Company shall be fixed on the basis of their respective
stock holdings at the close of business on the Record Date, and, after the
Record Date, any distributions made by the Company shall be made solely to the
stockholders of record at the close of business on the Record Date, except as
may be necessary to reflect subsequent transfers recorded on the books of the
Company as a result of any assignments by will, intestate succession or
operation of law.
For a detailed description of the Plan of Liquidation, please see the
Company's Definitive Proxy on Form 14A, dated July 24, 2000, incorporated herein
by reference and made a part hereof.
LIQUIDATION BASIS OF ACCOUNTING
The Company adopted the liquidation basis of accounting on April 1,
2000. The liquidation basis of accounting requires that assets and liabilities
be valued at their estimated liquidation value. Assets and liabilities that have
not been revalued to liquidation value are disclosed as such on the face of the
financial statements. In addition, under the liquidation basis of accounting,
gains and losses from dispositions of assets are displayed as net amounts versus
gross revenue and expenses under the going concern basis of accounting. The
primary financial statements required under the liquidation basis of accounting
are a Statement of Net Assets and a Statement of Changes in Net Assets.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND CHANGES IN NET ASSETS (LIQUIDATION BASIS) (CONTINUED)
The Company believes that the going concern historical cost basis
undervalued the proceeds the Company would receive from the sale of its
remaining real estate and buildings. As a result, the Company increased the
value of the real estate and buildings by $904,000. The Company expects that
accounts receivable, other assets, notes receivable, accounts payable, accrued
wages and benefits and accrued other will be settled at their going concern
basis carrying values and accordingly they have not been adjusted based upon the
change to the liquidation basis of accounting. Secured debt is recorded in
accordance with its contractual terms and no adjustments have been made as a
result of the change to liquidation basis of accounting.
CHANGES IN NET ASSETS FOR THE PERIOD MARCH 31, 2000 TO JUNE 30, 2000
The increase in net assets in liquidation of approximately $4.2 million
was due primarily to gains, net of income taxes, on asset sales of approximately
$3.1 million and increases in net asset values, as a result of the Company
adopting liquidation basis of accounting, of $904,000. The Company recorded a
gain of approximately $2.9 million, net of applicable income taxes of
approximately $1.4 million, from the sale of the operating assets of the Tooling
Segment. A gain of $106,000, net of applicable income taxes of $55,000, was
recognized from the sale of a building and its related real estate located in
Novi, Michigan. The Company recognized an increase of $904,000 in net assets as
it revalued its remaining real estate and buildings located in Romulus, Michigan
and Novi, Michigan. The $904,000 increase was based on anticipated selling
prices less estimated costs to sell.
The Company expects that accounts receivable, other assets, notes
receivable, accounts payable, accrued wages and benefits and accrued other will
be settled at their going concern basis carrying values and accordingly they
have not been adjusted based upon the change to the liquidation basis of
accounting. All costs including professional fees, interest expense and other
administrative costs associated with carrying out the Plan of Liquidation are
expensed as incurred.
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
As discussed above the Company adopted the liquidation basis of
accounting effective April 1, 2000. Under the liquidation basis of accounting no
income statement is presented and therefore there is no comparison of the
results of operations with the three months ended June 30, 1999. Discussed below
are some of the significant events that transpired during the three months June
30, 2000.
The Company recognized an approximately $2.9 million gain, net of
approximately $1.4 million of applicable income taxes, on the sale of the
operating assets of the Tooling Segment. Additionally, the Company recorded a
gain of $106,000, net of $55,000 of applicable income taxes, on the sale of a
building and its related real estate located in Novi, Michigan. During the
period form April 1, 2000 until June 30, 2000 the Company recorded a gain of
approximately $282,000, primarily from the winding down of the Tooling Segments
operations before their sale on June 30, 2000.
SIX MONTHS ENDED MARCH 31, 2000 AND NINE MONTHS ENDED JUNE 30, 1999.
Revenues for the six months ended March 31, 2000 (the "operating
period") of $668,000 were 36% lower than $1.05 million for the nine months ended
June 30, 1999. Expenses were $645,000 for the six months ended March 31, 2000,
51% lower than the $1.31 million recorded during the nine months ended June 30,
2000. The decrease in revenues and expenses is primarily due to the Company's
adoption of liquidation basis accounting as of April 1, 2000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND CHANGES IN NET ASSETS (LIQUIDATION BASIS) (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
On July 1, 2000 our Board of Directors approved, subject to shareholder
approval, a Plan of Liquidation. As part of the Plan of Liquidation, the Company
will liquidate our remaining property and assets, we will collect, or make
provision for the collection of, all accounts receivable, debts and claims owing
to the Company. Prior to making any distributions to our stockholders, we will
pay, or as determined by the Board of Directors, make reasonable provision to
pay, all our claims, expenses, and obligations, including all contingent,
conditional or unmatured claims and known to us. Following the Effective Date,
the Board of Directors may establish a contingency reserve (the "Contingency
Reserve") and set aside into the Contingency Reserve such amounts of our cash or
property as our Board of Directors, in its discretion, determines is sufficient
to account for unknown events, claims, contingencies and expenses incurred in
connection with the collection and defense of our property and assets and the
liquidation and dissolution provided for in the Plan. Following the payment,
satisfaction or other resolution of all such events, claims, contingencies and
expenses, any amounts remaining in the Contingency Reserve shall be distributed
in accordance with the Plan.
Our Board of Directors will determine, in its sole discretion and in
accordance with applicable law, the timing of, the amount, the kind of and the
record dates for all distributions made to stockholders. Although our Board of
Directors has not established a firm timetable for distributions to
stockholders, after the Plan of Liquidation has been approved, our Board will,
subject to exigencies inherent in winding up our business, make such
distributions as promptly as practicable.
Because of the uncertainties as to the precise net realizable value of
our assets and the ultimate amount of our liabilities, it is not possible to
predict with certainty the aggregate net values that will ultimately be
distributed to our stockholders or the timing of such distributions. Based upon
information presently available to us, we believe our stockholders could, over
time, receive proceeds from a liquidation of approximately $13 per common share
with the initial distribution approximating $10 per common share. We currently
anticipate that our Board will set a record date for the first distribution of
liquidation proceeds in or around October 2000 with the majority of the
remaining liquidation proceeds distributed over a period of three and one-half
(3 1/2) years.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults in Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders
As of May 10, 2000, in accordance with Delaware law, the holders of a
majority of the issued and outstanding common stock of Secom executed a
Written Consent in Lieu of a Special Meeting approving the sale of
substantially all of the operating assets and real estate of the
Tooling Segment, pursuant to an Asset Purchase Agreement dated March
29, 2000. Please see Secom's Form 14C Information Statement dated May
10, 2000, which is incorporated herein by reference.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
Form 8-K dated July 14, 2000, regarding the sale the Company's Tooling
Segment.
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SIGNATURES
Pursuant to the requirements of Section 13 or 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
(Registrant)
By: /s/ Paul D. Clemente August 11, 2000
--------------------------------
Paul D. Clemente
Vice President
By: /s/ Scott J. Konieczny August 11, 2000
--------------------------------
Scott J. Konieczny
Chief Financial Officer
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
