SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 26, 1993 Commission file number 1-6345
THE INTERLAKE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3428543
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
550 Warrenville Road, Lisle, Illinois 60532-4387
(Address of Principal Executive Offices) (Zip Code)
(708) 852-8800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
___Title_of_each_class__ ___on_which_registered___
Common stock, par value New York Stock Exchange
$1.00 per share Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of the
Form 10-K or any amendment to the Form 10-K. [ ]
Aggregate market value of common stock, $1 par value, held by non-affiliates as
of February 15, 1994: $68,129,997
As of February 15, 1994, 22,026,695 shares of the Registrant's common stock
were outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 26, 1993 are incorporated by reference into Part II. Portions
of the Registrant's Proxy Statement for the 1994 Annual Meeting of Shareholders
(to be filed) are incorporated by reference into Parts III and IV.
PAGE
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THE INTERLAKE CORPORATION
Form 10-K Annual Report - 1993
Table of Contents
PART I Page
Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for the Registrant's Common Equity and Related 13
Stockholder Matters
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Results of 15
Operations and Financial Condition
Item 8. Financial Statements and Supplementary Data 15
Item 9. Disagreements on Accounting and Financial Disclosure 15
PART III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and Management 18
Item 13. Certain Relationships and Related Transactions 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on 19
Form 8-K
Signatures 30
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PART I
As used herein, the term "Company" means The Interlake Corporation and its
subsidiaries. The terms "Interlake" and "Registrant" mean The Interlake
Corporation, the parent company.
ITEM 1 - BUSINESS
General
The Company is a multinational corporation engaged in the design, manufacture
and sale or distribution of value-added metal and related products for the
automotive, aerospace, materials handling and packaging industries. The
Company's operations are divided into two segments: Engineered Materials and
Handling/Packaging Systems. (See Note 8 of Notes to Consolidated Financial
Statements.)
Engineered_Materials
The Engineered Materials segment includes Special Materials, which produces
ferrous metal powder used to manufacture precision parts, and Aerospace
Components, which manufactures precision jet engine components and repairs jet
engine fan blades. The two units which comprise Engineered Materials generally
use proprietary and patented processes to produce precise, high value-added
metal powders or components.
Special_Materials
General - The Company conducts its Special Materials business through Hoeganaes
Corporation, which is the North American market leader in the production of
ferrous metal powder. Ferrous metal powder is used by customers primarily to
manufacture precision parts for automobiles, light trucks, farm and garden
equipment and appliances. Precision parts produced using powdered metal
technology have certain cost and design advantages over parts produced using
conventional techniques such as forging, casting or machining, as they may be
manufactured with less wasted raw material, lower labor costs and little or no
additional machining.
Hoeganaes' business strategy centers on research and development of new powder
metal products, manufacturing processes and applications while maintaining a
broad product line and cost-efficient, strategically located production
facilities. This strategy allows Hoeganaes to meet its customers' quality
control standards and "just in time" inventory requirements.
Production - Hoeganaes has two basic production processes. The first process
is atomizing which converts selected scrap steel into powders through the use
of an electric furnace steel making and spraying system. Hoeganaes has the two
largest atomizing plants in North America. The second process is direct
reduction which converts high purity iron ore into a unique, highly porous
metal powder. Hoeganaes has the only direct reduction process facility in
North America. Hoeganaes also formulates these powders into press-ready mixes
for its customers. In addition, Hoeganaes produces proprietary products such
as patented bonded materials.
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Market Share - The Company believes that Hoeganaes has been the largest North
American producer of ferrous metal powders for the last 25 years. Hoeganaes'
size provides it with economies of scale in production, marketing and research
and development.
Markets - The North American market for ferrous metal powders can be divided
into two segments: structural parts (metal powder to be compressed into solid
parts) and powders principally used in welding, chemicals and photocopying.
Uses for structural parts comprise an estimated 80% of the North American
market for ferrous metal powders. Approximately 60% of Hoeganaes' sales are
for automotive applications, which include components for transmissions,
engines and suspension systems. For automobile applications, Hoeganaes
generally supplies metal powder to component manufacturers as opposed to
directly supplying vehicle manufacturers.
The non-structural market for ferrous metal powders generally consists of
applications in welding and chemicals and for use as a carrier agent for
photocopier toner. Ferrous metal powders are also used by pharmaceutical
companies as catalysts in blood thinning agents and for use in nutritional iron
supplements.
Minority Interest - The Company owns 80% of the capital stock of Hoeganaes.
The remaining 20% is owned by Hoganas AB, a Swedish corporation. Agreements
between the owners of Hoeganaes define the structure of the Hoeganaes board of
directors, grant to each party a right of first refusal with respect to a
proposed sale of Hoeganaes stock and provide for technology exchanges and tax
sharing arrangements.
Aerospace_Components
General - The Company conducts its Aerospace Components business through
Chem-tronics, Inc., which manufactures precision jet engine ducts, rings and
casings and other large aerospace components ("Fabrication"). Chem-tronics is
also a leader in jet engine fan blade repair ("Repair"). Chem-tronics'
business strategy focuses on developing and implementing advanced manufacturing
technologies in order to maintain high quality standards and to satisfy
customer needs on a timely basis.
Fabrication
General - Chem-tronics' Fabrication business is engaged in the production of
precision jet engine ducts, rings and casings and other large aerospace
components used in military and commercial aircraft engines and launch vehicles
in the space program. Chem-tronics offers its customers a vertically
integrated facility, thereby eliminating the need for numerous subcontractors
for a single component. The principal products are sold to prime contractors
under arrangements which generally establish Chem-tronics as the sole source.
The strategy of the Fabrication business is to diversify and realign the
aerospace component business by: reducing the dependence on military business
by expanding the commercial and space segments, lowering costs to improve its
competitive posture and improving its core technologies.
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Production Processes - The primary processes used in the Fabrication business
are chemical milling, welding, forming, machining, non-destructive testing and
inspection. The "Unistructure" chemical milling process has been used to
manufacture both military and commercial jet engine ducts and is used for
structures where strength and weight are critical. This "Unistructure" chemical
milling process etches away unneeded metal, leaving a stiffening rib structure
on the surface of the product. This patented rib structure is integral, or
part of the surface metal itself, rather than being attached to the surface.
Products manufactured using the "Unistructure" process are light, strong, easy
to inspect and generally cost less to produce than products made solely by
conventional processes.
Products and Customers - The Fabrication business produces titanium ducts which
are used as part of the structural framework for jet engines and for containing
the air flows used for thrust. Other products include jet engine fan
containment cases, rings, complete fan case assembly modules and complex
fabrications for large commercial turbofan engines. The primary customers of
the Fabrication business are the original equipment manufacturers of jet
engines ("OEMs"). In addition to its normal contracts for commercial and
military engine components, this business also is involved in various ongoing
space programs and has entered into a long-term contract for compressor cases
for commuter aircraft jet engines.
Repair
General - Chem-tronics' Repair business operates Federal Aviation
Administration ("FAA") approved repair facilities that serve over 100 airlines,
engine overhaul centers, and OEMs with repair capabilities for fan and
compressor blades for commercial and military jet aircraft. The cost of
repairing a jet engine fan blade generally averages 10-20% of its replacement
cost. Growth in this business through 1992 had been based on increases in
market share and size but depressed market conditions in 1993 have led to
revenue declines. The Company believes that Repair has a leading market share
in commercial jet engine fan blade repair performed by independent blade repair
facilities.
Repair Capabilities - Repair, by virtue of its FAA certification, is considered
certified by the Civil Aviation Aeronautics Board and the British Civil
Aviation Authority and is certified by all major OEMs (e.g., General Electric,
Pratt & Whitney and Rolls-Royce) to repair substantially all commercial jet
engine fan blades manufactured in the western world. Frequently, when OEMs
develop a new engine, Chem-tronics assists in modification and improvements
during the development stage. As a result, Chem-tronics is often the first FAA-
certified repair center for such engines. The Company believes this gives Chem-
tronics certain competitive advantages and also believes that Chem-tronics has
a competitive advantage in terms of quality.
Customers - The Repair business services OEMs, major airlines and engine
overhaul centers.
Handling/Packaging_Systems
The Handling/Packaging Systems segment is comprised of the Company's domestic
and international Handling and Packaging units. Handling designs, manufactures
and sells storage rack, shelving, and related equipment primarily for use in
warehouses, distribution centers and for other storage applications. The
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Company believes that Handling is the world's largest manufacturer of storage
rack. Packaging designs and sells machinery for applying strapping and
stitching wire, and also supplies strapping and stitching wire for use in these
machines.
Handling
General - The Company's Handling operations are conducted through Interlake
Material Handling ("Material Handling") in the U.S., Canada, and Australia and
through Dexion Group in Europe. The Dexion name is well recognized in Europe
and provides Handling with certain marketing advantages. The Handling
operations design, manufacture, and sell storage rack, angle, conveyors, and
conveyor systems both in the U.S. and in Europe, and shelving and office
partitioning in Europe. Handling's entire product line (other than office
partitioning) is also manufactured and sold in Australia. Certain products are
also sold in Asia Pacific, South America, Africa and the Middle East.
Handling's distribution network allows it to satisfy the needs of large
customers and projects, as well as smaller, geographically distant customers.
Handling's design capabilities and large manufacturing capacity enable it to
undertake large scale projects where these capabilities may be most
advantageously utilized. Handling's large size allows it to realize
significant economies of scale in product development, design and
manufacturing.
Products - Handling's primary product is storage rack which is used for storing
unit loads in distribution centers, warehouse facilities and factory shipping
and receiving departments. Storage rack consists of two primary pieces, a
vertical steel frame and a horizontal steel beam that links the frames
together. Storage rack can be assembled in a variety of configurations
depending on individual customer needs. Handling offers a broad range of
products, including products that allow for FIFO and LIFO storage and
retrieval, for the storage of bulky, awkwardly shaped items (lumber, carpet
rolls, furniture, etc.) and for the storage and retrieval of very heavy items.
Handling also sells conveyors and conveyor systems which range from simple
gravity conveyors to complex belt and chain powered conveyors. In Europe,
Handling manufactures and sells partitioning for offices, office storage
equipment, and angle and shelving.
Market Share - The Company believes Handling is the world's largest
manufacturer of storage rack, with the largest market share in the U.S., the
U.K., Belgium and Australia, and the second largest market share in Germany.
Product Development, Design and Manufacturing - In addition to competing on the
basis of cost, Handling utilizes proprietary software, computer aided design
applications and its in-house structural engineering staff to design the
optimal solution for each customer's storage requirements. Furthermore,
extensive technical training for its sales staff and for third-party
distributors allows for a better assessment of customer needs. Handling's
design software is also used to generate detailed bills of material which
automatically specify the size, type and quantity of all components to be used
in the project. This allows for better coordination between the sales, design
and manufacturing functions.
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<PAGE>
Handling's facilities generally purchase steel coils and then form, finish and
paint the steel for various storage applications. Steel comprises
approximately 60-70% of production cost. While Handling believes it is a low
cost producer, continuing emphasis is placed on overhead and manufacturing cost
control and the efficient utilization of raw materials.
Sales and Distribution - The Company believes that Handling's domestic and
international direct sales force and extensive distributor network give it a
significant competitive advantage. Domestically, Handling is represented by a
network of over 180 distributors. In the U.K., Handling utilizes an
independent distributor network, wholly-owned distribution centers and a direct
sales force, while in Germany, Handling conducts its sales efforts exclusively
through a direct sales force and wholly-owned distribution centers. Handling
believes that its direct sales force allows it to satisfy the complex needs of
large customers and applications, while its extensive distributor network
allows it to reach smaller, geographically distant customers.
Customers - Handling's customers are primarily engaged in the retailing and
wholesaling of food and consumer durables and non-durables.
Packaging
General - Packaging designs and sells machinery for applying steel and
non-metallic strap in the U.S., Canada and the U.K. Packaging also sells
non-metallic strap in the U.S., and both steel and non-metallic strap in the
U.K. and Canada, for use in such machines. Packaging designs, manufactures and
distributes wire stitching equipment. Many of the industries served by
Packaging are highly cyclical. As a result, Packaging has focused on lowering
or eliminating certain fixed costs and improving production efficiencies in an
effort to maintain profitability even during severe cyclical downturns.
Products and Customers - Strapping markets are segmented by strapping strength
requirements. Non-metallic products have cost, safety and other advantages,
but are currently limited by the strength of the joint. As technology has
improved, applications for non-metallic products have expanded. Due to the
safety advantages and improving strength characteristics of non-metallic
strapping, Packaging has focused its engineering and development efforts on the
non-metallic strap market. Steel strapping is used predominantly by heavy
goods manufacturers to bundle products or reinforce existing packaging. The
principal end-users of steel strapping are the steel, lumber, brick, and
concrete industries. Non-metallic strapping is marketed to a broad customer
base, with primary emphasis on the corrugated, newspaper, graphics, can,
bottle, textile and distribution industries. Wire stitching machines serve a
wide customer base including the corrugated box, graphic arts, automotive,
agricultural and food industries.
Packaging currently designs strapping machines which are manufactured to its
specifications by third parties. Strap produced by a given manufacturer can
generally be used with machines produced by another manufacturer; however, most
users purchase strap and machines from the same supplier.
Production - For steel strapping, Packaging purchases raw materials in the form
of steel coils which are then slit into bands. The bands are further slit into
straps of various widths. The strap is then either zinc coated or painted in
order to prevent rusting. Rust resistant strap is important for the lumber and
brick industries where product is exposed to the elements and strap is subject
to rusting.
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For non-metallic strapping, Packaging purchases raw materials in the form of
pelletized or flake polyester and polypropylene which is often blended with
recycled materials. Non-metallic strapping is manufactured through a
continuous extrusion process. This material is then shaped and chilled, then
reheated and stretched to the appropriate width and thickness and, finally,
annealed, relaxed and either slit or embossed, cooled to minimize shrinkage and
wound into coils.
Market Share - The Company believes that the Canadian steel strapping unit
generally has the largest market share in its market. The Company also
believes that the U.K. steel strapping unit has the second largest market share
in its market and that the U.K. non-metallic strapping and non-metallic
machines units have leading market shares in certain areas. In the U.S.,
Packaging is a leading supplier of plastic strapping and stitching products.
Sales, Distribution and Servicing - Packaging's direct sales force services
clients in the U.S., the U.K. and Canada. In the U.S., Packaging also utilizes
a network of over 350 distributors to service smaller customers. Within each
sales force, product specialists are trained to service the needs of specific
industries such as publishing or lumber. Due to the fact that most of
Packaging's customers utilize its products for high volume applications,
Packaging has an extensive field service organization to allow it to respond
rapidly to customer service needs. The Company believes that its
sales/distributor network and its field service capabilities give it
significant advantages over smaller competitors.
Customers; Order Backlogs
Engineered Materials - Sales to General Electric and United Technologies
accounted for approximately 50% of Aerospace Components' sales, equivalent to
16% of Engineered Materials' sales and 5% of total Company sales in 1993. The
Company is a supplier to these companies and has no other significant
relationship with them. Sales to these companies are made pursuant to purchase
orders.
At December 26, 1993 and December 27, 1992, the backlog of orders for
Engineered Materials was $73.6 million and $82.9 million, respectively.
Special Materials' backlog, which is generally short-term in nature, was up
11%. Aerospace Components' backlog was down 19% due mainly to reductions in
military business. All orders for Engineered Materials at December 26, 1993
were believed to be firm, but approximately 42% of these orders are subject to
renegotiation. Approximately 83% of these orders are expected to be delivered
during 1994.
Handling/Packaging Systems - Handling/Packaging Systems' products are sold to a
substantial number of industrial customers, none of which individually
purchased a significant portion of the segment's output in 1993. The backlog
of orders for this segment at December 26, 1993 was $71.6 million compared to
$81.0 million at December 27, 1992 (in each case applying foreign exchange
rates at December 26, 1993), due to lower orders in the European Handling
business. All orders at December 26, 1993 were believed to be firm and are
expected to be filled during 1994.
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Competition
Competition is vigorous in both of the Company's business segments. Factors
normally affecting competitive conditions are product quality, technological
development, price and service. The Company competes with a variety of other
entities in each of its businesses.
Research and Development
Research activities are directed towards developing primary products and
processes. Expenditures on research activities by business segment were as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
(in millions)
<S> <C> <C> <C>
Engineered Materials $2.1 $2.2 $2.5
Handling/Packaging Systems _1.1 __.6 _1.3
Total $3.2 $2.8 $3.8
</TABLE>
The Company believes that these amounts are adequate to maintain its
competitive positions in the businesses in which it operates.
Patents
The Company holds domestic and foreign patents covering certain products and
processes in both business segments. While these patents are considered
important to the ability of the segments to compete, unpatented manufacturing
expertise is considered equally important. Future profitability of these
segments is therefore not considered dependent upon any one patent or group of
related patents.
Environmental Matters
The Company's operations are subject to extensive and changing federal, state,
local and foreign environmental laws and regulations, including those relating
to the use, handling, storage, discharge and disposal of hazardous substances,
and as a result the Company is from time to time involved in administrative and
judicial proceedings and inquiries relating to environmental matters. In
addition, the Company's future capital and operating expenditures will continue
to be influenced by environmental laws and regulations; however, the Company
does not believe these expenditures are likely to have a material adverse
effect on its earnings or its ability to compete with other companies. In 1993,
capital expenditures for environmental compliance were $2.9 million and the
Company estimates that environmental capital spending for 1994 will be $1.5
million. In 1993 and 1991, the Company incurred special nonoperating charges
of $4.8 million and $6.0 million, respectively, to provide for estimated
environmental liabilities in connection with certain sites not related to its
ongoing operations. (See Management's Discussion and Analysis - Nonoperating
Items, and Note 17 of Notes to Consolidated Financial Statements.)
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Employees
At December 26, 1993 the Company employed a total of 4,619 persons, consisting
of 2,059 salaried and 2,560 hourly employees. Of the hourly employees, 57% are
represented by unions, with no single union representing a significant number
of the hourly employees.
Raw Materials
The Company's principal raw materials are steel and steel scrap which are
purchased in the open market where no shortages are anticipated. The Company
also purchases large extruded metal shapes and milled products that are
available from a limited number of suppliers and high quality iron ore imported
from a limited foreign source. The Company believes these sources are adequate
to provide for the current and future needs of each of the Company's segments
and believes that, if necessary, adequate substitute supplies and suppliers
could be obtained without any material adverse effect on the Company's
operations or operating results. The Company's conclusions as to availability
and impact are based upon the Company's general knowledge of the markets for
its raw materials, and its use of alternative sources from time to time.
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ITEM 2 - PROPERTIES
<TABLE>
<CAPTION>
The following are the principal properties of the Company, listed by business unit:
Usable Space
___Business_Unit___ _______________Function_______________ _Owned/Leased_ (Square_Feet)
<C> <C> <C> <C>
HOEGANAES
Riverton, NJ Manufacture iron and steel metal powder Owned 496,000
Gallatin, TN Manufacture steel metal powder Owned 168,000
Milton, PA Bonding and blending metal powder, Owned 102,000
warehouse
CHEM-TRONICS
El Cajon, CA Manufacture aerospace components and Owned 230,000 *
repair of jet engine fan blades
Building owned 39,000
on leased land
Tulsa, OK Repair of jet engine fan blades Leased 42,000
HANDLING
Interlake Material Handling
Pontiac, IL Manufacture storage rack and slotted angle Owned 400,000 *
Sumter, SC Manufacture storage rack Owned 250,000 *
Blacktown, Australia Manufacture storage rack, slotted angle, Owned 135,000 *
shelving, and conveyors
Lodi, CA Manufacture storage rack Owned 125,000 *
Shepherdsville, KY Manufacture conveyors Owned 106,000 *
Wacol, Australia Manufacture shelving and wire products Owned 30,000 *
Dexion Group
Hemel Hempstead, U.K. Manufacture storage rack, slotted angle, Building owned 353,000
shelving and partitioning on leased land
Laubach, Germany Manufacture storage rack, slotted angle, Owned 335,000
shelving, partitioning and conveyors
Gainsborough, U.K. Manufacture conveyors Building owned 103,000
on leased land
Nivelles, Belgium Manufacture storage rack and slotted angle Owned 101,000
Halle, Germany Manufacture steelwork and conveyors Owned 90,000
Kilnhurst, U.K. Manufacture storage rack Owned 89,000 *
PACKAGING
Scarborough, Canada Manufacture steel strap, edgeboard, Owned 135,000 *
collated nails and strapping equipment
Kilnhurst, U.K. Manufacture steel strap, seals, tools Owned 97,000
and machines
Racine, WI Manufacture stitching machines Leased 70,000
Fountain Inn, SC Manufacture non-metallic strap Owned 61,000 *
Hodgkins, IL Machine preparation, warehouse Leased 32,000
Maidenhead, U.K. Machine preparation, warehouse Owned 22,000
Strood, U.K. Manufacture over/under-wrappers Leased 6,000
and conveyors
The properties marked with an asterisk (*) are subject to mortgages pursuant
to the Registrant's bank credit agreement and will be subject to mortgages
pursuant to the Amended Credit Agreement. In addition to the facilities
described above, the Company owns two other warehouses and leases various
warehouses and sales and administrative facilities. The Company believes
that its manufacturing facilities are properly maintained and that productive
capacity is adequate to meet the requirements of the Company.
</TABLE>
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ITEM 3 - LEGAL PROCEEDINGS
The nature of the Company's business is such that it is regularly involved in
legal proceedings incidental to its business. Neither the Registrant nor any
of its subsidiaries is a party to any legal proceedings which are `material'
within the meaning of regulations of the Securities and Exchange Commission
presently in effect. Additional information is contained in Notes 17 and 18 of
Notes to Consolidated Financial Statements.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE>
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The principal market for Interlake's common stock is the New York Stock
Exchange (ticker symbol IK). The common stock is also listed on the Chicago
Stock Exchange and is admitted to unlisted trading on the Pacific Coast
Exchange and the Boston Exchange.
Interlake has not paid a dividend or made a distribution with respect to its
common stock since the third quarter of 1989. Restrictions under Interlake's
bank credit agreement (see Note 15 of Notes to Consolidated Financial
Statements) will prevent it from paying any cash dividends in 1994 or in the
foreseeable future.
On December 26, 1993 there were approximately 7,884 holders of record of
Interlake's common stock.
High and low prices of Interlake's common stock during each of the eight
calendar quarters ending on December 31, 1993 were:
<TABLE>
<CAPTION>
________1993________ _______1992________
_______Price_________ ______Price________
__High________Low_________High________Low__
<S> <C> <C> <C> <C>
Calendar Quarter Ended
March 31 $4 3/4 3 5/8 $9 3/8 $5 3/8
June 30 4 3/8 3 1/8 6 3/8 3 7/8
September 30 4 5/8 3 3/8 4 1/2 3 1/2
December 31 4 1/8 2 1/2 4 1/4 3 1/4
</TABLE>
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ITEM 6 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
(in thousands except per share data)
For_the_Year
<S> <C> <C> <C> <C> <C>
Net sales of continuing
operations $681,330 $708,199 $714,742 $786,279 $827,739
Income(loss) from continuing
operations before extraordinary
loss and accounting change $(25,962)<F1><F3> $(13,990)<F2> $(13,744)<F2><F3> $(12,843)<F2> $ 2,397<F2>
Income(loss) from continuing
operations before extraordinary
loss and accounting change per
common share $ (1.18)<F1><F3> $ (.84)<F2> $ (1.31)<F2><F3> $ (1.22)<F2> $ .23<F2>
Cash dividends per
common share - - - - 45.75<F4>
Average number of shares
outstanding 22,027 16,574 10,484 10,516 10,291
At_Year_End
Working capital
- cash and cash equivalents $ 31,934 $ 38,640 $ 10,541 $ 18,473 $ 16,181
- other working capital __41,935 __54,149 __50,806 __51,547 _100,495
- total working capital 73,869 92,789 61,347 70,020 116,676
- current ratio 1.5 to 1 1.6 to 1 1.4 to 1 1.4 to 1 1.6 to 1
Total assets $477,035 $511,292 $478,067 $518,997 $594,509
Long-term debt, including
current maturities 443,135 450,801 471,441 494,615 555,193
Convertible Exchangeable
Preferred Stock 39,155 39,155 - - -
Common shareholders' equity (259,767) (232,718) (239,465) (226,808) (202,971)
<FN>
<F1> includes a restructuring charge of $5,611 (see Note 2 of Notes to Consolidated Financial Statements)
<F2> includes unusual items of expense of $2,523, $3,344, $13,482 and $26,146 in 1992, 1991, 1990 and 1989,
respectively, due to the 1989 restructuring program (see Note 6 of Notes to Consolidated Financial
Statements)
<F3> includes nonoperating charges for environmental matters of $4,750 and $6,000 in 1993 and 1991,
respectively (see Note 17 of Notes to Consolidated Financial Statements)
<F4> includes a special cash dividend of $45 per share paid in connection with the 1989 restructuring
program
1989 was a 53-week year while all other periods were 52-week years.
</TABLE>
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
See Pages 12 through 18 of the 1993 Annual Report to Shareholders.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Pages 20 through 44 of the 1993 Annual Report to Shareholders.
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Information about directors and nominees required by this item is incorpor-
ated by reference to the Registrant's definitive proxy statement to be
filed in connection with its 1994 Annual Meeting of Shareholders.
(b) The executive officers listed below are elected annually by the Board of
Directors of the Registrant, to serve for a term of office of one year and
until their successors are elected. Years prior to 1986 include service
with Interlake, Inc.
<TABLE>
<CAPTION>
Executive
_________Name__________ _Age_ Officer_Since _________Positions_During_Last_5_Years__________
<S> <C> <C> <S> <C> <S>
W. Robert Reum 51 1982 Chairman of the Board since April 1991 and
President and Chief Executive Officer since
January, 1991; President and Chief Operating
Officer from August 1989 to December 1990;
Executive Vice President from May 1988 to
August 1989
Craig A. Grant 46 1991 Vice President - Human Resources since
May 1991; human resources executive at The Ceco
Corporation for more than five years of which
two were as Vice President - Human Resources
John J. Greisch 38 1991 Vice President - Finance, Treasurer and Chief
Financial Officer since February 1993; Vice
President from January through February 1993;
Managing Director of Dexion Group plc from May
1991 through December 1992; Group Finance
Director of Dexion Group plc from October 1989
to September 1990; Managing Director of
Dexion Limited from February 1990 to November 1992;
Vice President - Finance of the Material Handling
Division of The Interlake Companies, Inc.
from May 1988 to October 1989
John P. Miller 36 1993 Controller since April 1993; Vice President -
Finance of the Material Handling Division
of The Interlake Companies, Inc. from October
1989 to April 1993; Manager, Division Accounting
for the Material Handling Division from May 1988
to October 1989; Manager, Financial & Systems
Analysis for the Material Handling Division from
May 1987 through April 1988
</TABLE>
16
PAGE
<PAGE>
<TABLE>
<CAPTION>
Executive
_________Name__________ _Age_ Officer_Since _________Positions_During_Last_5_Years__________
<S> <C> <C> <S>
Stephen R. Smith 37 1991 Vice President, Secretary and General Counsel
since January 1993; Vice President and General
Counsel from January through December 1992;
Vice President - Law from September to
December 1991; Partner in the Chicago law
firm of Hopkins & Sutter from 1987 to
September 1991
</TABLE>
The Registrant has determined that the operating executives named below are
"executive officers" as defined by the Securities and Exchange Commission.
Mr. Gregory was appointed president of the Material Handling Division of The
Interlake Companies, Inc. by that subsidiary's management. The remaining
operating executives were elected by boards of directors of the subsidiaries
named below. None of such operating executives is an executive of the
Registrant.
<TABLE>
<CAPTION>
Executive
_________Name__________ _Age_ Officer_Since _________Positions_During_Last_5_Years__________
<S> <C> <C> <S> <C>
Stephen Gregory 44 1989 President of the Material Handling Division,
which manufactures and distributes storage
rack, conveyors, and conveyor systems,
since June 1989; Finance Director of Dexion
Group plc from 1983 to June 1989
James Legler 45 1988 President, Chem-tronics, Inc., the subsidiary
which manufactures precision engine components
and provides jet engine component
repairs, since December 1988
Robert A. Pedersen 48 1986 President, Interlake Packaging Corporation,
the subsidiary which produces and distributes
strapping, and strapping products and equipment
Bernd Stiller 53 1993 Managing Director of Dexion Group plc, the
subsidiary which produces material handling
and storage products in Europe, since
January 1993; Managing Director of
Dexion GmbH since 1986
Ian A. White 62 1982 President, Hoeganaes Corporation, the
subsidiary which produces powdered metals
</TABLE>
17
PAGE
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is incorporated into this report by
reference to the information under the caption "Executive Compensation" in
the Registrant's definitive proxy statement to be filed in connection with its
1994 Annual Meeting of Shareholders. Notwithstanding the foregoing sentence,
the information set forth under "Executive Compensation - Report of the
Compensation Committee on Executive Compensation" and "Executive Compensation -
Performance Graph" in the Registrant's definitive proxy statement to be filed
in connection with its 1994 Annual Meeting of Shareholders is not incorporated
herein.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated into this report by
reference to information under the caption "Voting Securities and Security
Ownership By Certain Persons and Management" in the Registrant's definitive
proxy statement to be filed in connection with its 1994 Annual Meeting of
Shareholders.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
18
PAGE
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
Page in
Annual
1. Financial Statements Report*
Report of Independent Accountants 19
Consolidated Statement of Operations for the Years Ended
December 26, 1993, December 27, 1992 and December 29, 1991 20
Consolidated Balance Sheet at December 26, 1993 and
December 27, 1992 21
Consolidated Statement of Cash Flows for the Years Ended
December 26, 1993, December 27, 1992 and December 29, 1991 22
Consolidated Statement of Shareholders' Equity for the
Years Ended December 26, 1993, December 27, 1992 and
December 29, 1991 23
Notes to Consolidated Financial Statements 24
* Incorporated by reference from the indicated pages of the 1993 Annual
Report to Shareholders
Page in
2. Financial Statement Schedules Form 10-K
Report of Independent Accountants on Financial Statement
Schedules 25
Schedule V--Property, Plant and Equipment 26
Schedule VI--Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment 27
Schedule VIII--Valuation and Qualifying Accounts 28
Schedule X--Supplementary Income Statement Information 29
All other schedules are omitted because of the absence of conditions under
which they would have been required or because the required information is
disclosed in the financial statements or notes thereto.
3. Exhibits
Sequential
Numbering
Exhibit System
Number Item Page No.
3. Articles of Incorporation and Bylaws
3.1 Composite of the Registrant's Restated Certificate of None
Incorporation as amended, incorporated by reference to
Exhibit 3.1 of the Registrant's Annual Report on Form 10-K
for the year ended December 27, 1992 (the "1992 10-K"),
Commission File 1-6345
19
PAGE
<PAGE>
3.2 Bylaws of registrant as amended and restated dated None
August 23, 1990, incorporated by reference to Exhibit 3(b)
of the Registrant's Annual Report on Form 10-K for the year
ended December 30, 1990 (the "1990 10-K"), Commission
File 1-6345
4. Instruments Defining the Rights of Security Holders including Indentures
4.1 Form of Indenture (including form of Senior Subordinated None
Debenture), incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement on Form S-2,
File No. 33-46247, as amended (the "Debt S-2")
4.2 Rights Agreement dated as of January 26, 1989 between the None
Registrant and the First National Bank of Chicago, as Rights
Agent, (the "Rights Agreement") incorporated by reference to
Exhibit 2 of the Registrant's Registration Statement on
Form 8-A dated as of January 27, 1989
4.3 Amendment to Rights Agreement dated as of August 15, 1989, None
incorporated by reference to Exhibit (a) of the Company's
Form 8 dated May 22, 1990
4.4 Amendment to Rights Agreement dated as of May 7, 1990, None
incorporated by reference to Exhibit (b) of the Company's
Form 8 dated May 22, 1990
4.5 Form of Amendment to Rights Agreement, incorporated by None
reference to Exhibit 4.5 of the Registrant's Registration
Statement on Form S-2, File No. 33-46248, as amended
(the "Common Stock S-2")
4.6 Preferred Stock Purchase Agreement dated as of March 6, 1992 None
among the Registrant and the persons listed on the Schedule of
Purchasers attached thereto, incorporated by reference to
Exhibit 4.6 of the Common Stock S-2
4.7 Revised Form of Registration Rights Agreement among the None
Registrant and the parties listed on the signature pages
thereof, incorporated by reference to Exhibit 4.4 of the
Registrant's Post-Effective Amendment No. 4 to the Registration
Statement on Form S-2, File No. 33-37041 (the "IRN Post-
Effective Amendment No. 4")
4.8 Revised Form of Certificate of Designation of Series A-1 None
Convertible Exchangeable Preferred Stock, Series A-2
Convertible Exchangeable Preferred Stock and Series A-3
Convertible Exchangeable Preferred Stock, incorporated by
reference to Exhibit 4.5 of the IRN Post-Effective Amendment No. 4
4.9 Revised Form of Certificate of Designation of Series B-1 None
Convertible Exchangeable Preferred Stock, Series B-2
Convertible Exchangeable Preferred Stock and Series B-3
Convertible Exchangeable Preferred Stock, incorporated by
reference to Exhibit 4.5 of the IRN Post-Effective Amendment No. 4
20
PAGE
<PAGE>
4.10 Form of Certificate of Amendment to the Registrant's Restated None
Certificate of Incorporation relating to Common Stock and
Non-Voting Common Stock, incorporated by reference to
Exhibit 4.10 of the Common Stock S-2
4.11 Form of Series 1 Junior Convertible Subordinated Debenture, None
incorporated by reference to Exhibit 4.11 of the
Common Stock S-2
4.12 Form of Series 2 Junior Convertible Subordinated Debenture, None
incorporated by reference to Exhibit 4.12 of the
Common Stock S-2
4.13 Series A-3 Preferred Stock Purchase Agreement dated as of None
May 7, 1992 by and between the Registrant and the persons
listed on the signature pages thereto, incorporated by
reference to Exhibit 4.9 of the IRN Post-Effective
Amendment No. 4
4.14 Form of Series 3 Junior Convertible Subordinated Debenture None
(Exchange Debentures relating to the Series A-3 Preferred
Stock), incorporated by reference to Exhibit 4.10 of the IRN
Post-Effective Amendment No. 4
4.15 Stock Purchase Agreement dated November 2, 1989 between the None
Registrant and LaSalle National Bank, trustee for The Interlake
Corporation Employee Stock Ownership Plan, incorporated by
reference to Exhibit 10(v) of the Registrant's Annual Report on
form 10-K for the year ended December 29, 1991 (the "1991 10-K"),
Commission File 1-6345
4.16 Form of Amended and Restated Credit Agreement, incorporated by None
reference to Exhibit 10.15 of the IRN Post-Effective
Amendment No. 4
4.17 First Amendment to the Amended and Restated Credit Agreement None
dated as of August 17, 1992, incorporated by reference to
Exhibit 4.18 of the 1992 10-K
4.18 Second Amendment to the Amended and Restated Credit Agreement None
dated as of October 30, 1992, incorporated by reference to
Exhibit 4.19 of the 1992 10-K
4.19 The Registrant Term Notes dated June 18, 1992, incorporated by None
reference to Exhibit 4.20 of the 1992 10-K
4.20 The Registrant Revolving Notes dated June 18, 1992, None
incorporated by reference to Exhibit 4.21 of the 1992 10-K
4.21 Subsidiary Term Notes dated June 18, 1992, incorporated by None
reference to Exhibit 4.22 of the 1992 10-K
4.22 Subsidiary Revolving Notes dated June 18, 1992, incorporated None
by reference to Exhibit 4.23 of the 1992 10-K
21
PAGE
<PAGE>
4.23 The Registrant Delayed Draw Notes dated June 18, 1992, None
incorporated by reference to Exhibit 4.24 of the 1992 10-K
4.24 The Registrant Deferred Term Notes dated June 18, 1992, None
incorporated by reference to Exhibit 4.25 of the 1992 10-K
4.25 The Registrant Pledge Agreement dated September 27, 1989, None
made by the Registrant and accepted by Chemical Bank, along
with stock certificates of the two subsidiaries, incorporated
by reference to Exhibit 10(t) of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1989
(the "1989 10-K") Commission File 1-6345
4.26 Amended and Restated Security Agreement dated September 27, None
1989 and amended and restated as of August 17, 1992 between
the Registrant and Chemical Bank, incorporated by reference
to Exhibit 4.27 of the 1992 10-K
4.27 Amended and Restated Security Agreement among Certain None
Subsidiaries of the Registrant and Chemical Bank dated as of
September 27, 1989 and amended and restated as of August 17,
1992, incorporated by reference to Exhibit 4.28 of the 1992 10-K
4.28 Third Amendment, dated August 20, 1993, to the Amended and None
Restated Credit Agreement, incorporated by reference to the
Registrant's quarterly report on Form 10-Q for the quarter
ending September 26, 1993
4.29 Fourth Amendment, dated December 22, 1993, to the Amended and ---
Restated Credit Agreement
4.30 Fifth Amendment, dated February 23, 1994, to the Amended and ---
Restated Credit Agreement
10. Material Contracts
10.1 1994 Executive Incentive Compensation Plan ---
10.2 Form of Agreement dated August 27, 1992 for the Cancellation None
and Re-Granting of Non-Qualified Stock Options between the
Registrant and U.S. executive officers and employees,
incorporated by reference to Exhibit 10.7 of the 1992 10-K
10.3 Form of Agreement dated August 27, 1992 for the Cancellation None
and Re-Granting of Non-Qualified Stock Options between the
Registrant and one foreign executive officer and foreign
employees, incorporated by reference to Exhibit 10.8 of the
1992 10-K
10.4 Form of Grant of Stock Award as of May 23, 1991 - Outside None
Director, incorporated by reference to Exhibit 10(a) of the
1991 10-K
22
PAGE
<PAGE>
10.5 Letter Agreement dated May 3, 1991 between the Registrant None
and one U.S. executive officer, incorporated by reference to
Exhibit 10(g) of the 1991 10-K
10.6 Form of Grant of Stock Award as of April 26, 1990 - Outside None
Directors, incorporated by reference to Exhibit 10(a) of
the 1990 10-K
10.7 Amendment to Non-Qualified Stock Option Agreement and to Stock None
Appreciation Rights granted July 23, 1987 by the Registrant
to one U.S. executive officer, incorporated by reference to
Exhibit 10(i) of the 1990 10-K
10.8 Amendment to Non-Qualified Stock Option Agreement and to None
Stock Appreciation Rights granted July 28, 1988 by the
Registrant to one U.S. executive officer, incorporated by
reference to Exhibit 10(j) of the 1990 10-K
10.9 1989 Stock Incentive Program, incorporated by reference to None
the proxy statement filed in connection with the
Registrant's 1990 annual meeting of shareholders
10.10 Amendment No. 1 to the Key Executive Severance Pay Plan None
effective as of August 5, 1988, incorporated by reference to
Exhibit 10(m) of the Registrant's Annual Report on Form 10-K
for the year ended December 25, 1988 (the "1988 10-K")
Commission File 1-6345
10.11 Trust Agreement between the Registrant and Continental None
Illinois National Bank and Trust Company of Chicago with
respect to the Key Executive Severance Pay Plan dated
September 30, 1988, incorporated by reference to Exhibit 10(o)
of the 1988 10-K
10.12 Trust Agreement between the Registrant and Continental None
Illinois National Bank and Trust Company of Chicago with
respect to The Interlake Corporation Restated Directors'
Post-Retirement Income Plan dated September 30, 1988,
incorporated by reference to Exhibit 10(p) of the 1988 10-K
10.13 Trust Agreement between the Registrant and Continental None
Illinois National Bank and Trust Company of Chicago with
respect to the Deferred Compensation Agreement dated
May 29, 1986 (as amended August 5, 1988) between the Registrant
and Frederick C. Langenberg dated September 30, 1988,
incorporated by reference to Exhibit 10(q) of the 1988 10-K
10.14 Trust Agreement between the Registrant and Continental None
Illinois National Bank and Trust Company of Chicago with
respect to the Deferred Compensation Agreement dated
May 29, 1986 (as amended August 5, 1988) between the Registrant
and Grant L. Johnson dated September 30, 1988, incorporated by
reference to Exhibit 10(r) of the 1988 10-K
23
PAGE
<PAGE>
10.15 Form of Indemnification Agreement between the Registrant and None
Outside Directors, incorporated by reference to Exhibit 10(a)
of the Registrant's Annual Report on Form 10-K for the year
ending December 27, 1987 (the 1987 10-K), Commission File 1-6345
10.16 Form of Indemnification Agreement between the Registrant and None
executive officers, including inside directors, incorporated
by reference to Exhibit 10(b) of the 1987 10-K
10.17 Cross Indemnification Agreement dated as of May 29, 1986, None
between the Registrant and Acme Steel Company, incorporated
by reference to Exhibit 10(b) of the Registrant's Annual
Report on Form 10-K for the year ended December 28, 1986
(the "1986 10-K"), Commission File 1-6345
10.18 Parallel Loan Agreement dated as of May 29, 1986, between None
Acme Steel Company and The Interlake Companies, Inc., as
amended by letter agreement dated June 27, 1986, incorporated
by reference to Exhibit 10(c) of the 1986 10-K
10.19 Tax Indemnification Agreement dated as of May 29, 1986, None
between the Registrant and Acme Steel Company, incorporated
by reference to Exhibit 10(i) of the 1986 10-K
10.20 Deferred Compensation Agreement dated May 29, 1986, between None
the Registrant and Frederick C. Langenberg, incorporated
by reference to Exhibit 10(j) of the 1986 10-K
10.21 Deferred Compensation Agreement dated May 29, 1986, between None
the Registrant and Grant L. Johnson, incorporated by reference
to Exhibit 10(k) of the 1986 10-K
10.22 Instrument of Assumption and Release dated May 29, 1986, None
between the Registrant, W. R. Reum and Acme Steel Company,
concerning an April 12, 1982 Agreement between W. R. Reum and
Interlake, Inc. (n.k.a. Acme Metals, Inc.), incorporated by
reference to Exhibit (l) of the 1986 10-K
10.23 Key Executive Severance Pay Plan established by the None
Registrant on May 29, 1986, incorporated by reference
to Exhibit 10(n) of the 1986 10-K
13.1 Portions of the Annual Report to Shareholders for fiscal year ---
ended December 26, 1993 (With the exception of the data
described in Part II, Items 7 and 8, no other data appearing
in the Annual Report to Shareholders for the fiscal year ended
December 26, 1993, is to be deemed filed as part of this Form
10-K.)
22. Subsidiaries of the Registrant ---
23. Consent of Experts and Counsel None
23.1 Consent of Price Waterhouse ---
28. Description of Capital Stock of the Registrant, incorporated by None
reference to Exhibit 28 of the 1992 10-K
24
PAGE
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders of The Interlake Corporation
Our audits of the consolidated financial statements referred to in our report
dated January 27, 1994 appearing on page 19 of the 1993 Annual Report to
Shareholders of The Interlake Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedules listed
in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
As discussed in the Notes to Consolidated Financial Statements appearing on
pages 24 to 42 of the 1993 Annual Report to Shareholders of The Interlake
Corporation, the Company changed its method of accounting for postretirement
benefits other than pensions and its method of accounting for income taxes in
1992.
PRICE WATERHOUSE
Chicago, Illinois
January 27, 1994
25
PAGE
<PAGE>
<TABLE>
<CAPTION>
THE INTERLAKE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Construction
__Land__ Buildings Equipment _in_Progress _Total_
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 30, 1990 $ 7,244 $ 75,124 $260,583 $ 6,257 $349,208
Additions at cost 258 999 10,191 2,024 13,472
Retirements or sales (29) (200) (5,022) (37) (5,288)
Changes in exchange rates (82) (543) (1,520) 48 (2,097)
Other changes - add(deduct) _______- _____415 _____736 ____(279) _____872
Balance at December 29, 1991 7,391 75,795 264,968 8,013 356,167
Additions at cost - 1,298 15,772 7,518 24,588
Retirements or sales (14) (5) (4,161) - (4,180)
Changes in exchange rates (386) (3,235) (10,495) (338) (14,454)
Other changes - add(deduct) ____(128) ____(224) __(1,059) _____126 __(1,285)
Balance at December 27, 1992 6,863 73,629 265,025 15,319 360,836
Additions at cost - 984 24,634 (11,078) 14,540
Retirements or sales - (108) (2,682) - (2,790)
Changes in exchange rates (136) (1,142) (2,058) (17) (3,353)
Other changes - add(deduct) _______2 _____812 ____(859) ______(2) _____(47)
Balance at December 26, 1993 $ 6,729 $ 74,175 $284,060 $ 4,222 $369,186
</TABLE>
26
PAGE
<PAGE>
<TABLE>
<CAPTION>
THE INTERLAKE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
_Land_ Buildings Equipment _Total_
(in thousands)
<S> <C> <C> <C> <C>
Balance at December 30, 1990 $ - $ 25,759 $156,836 $182,595
Additions charged to costs
and expenses - 2,399 18,404 20,803
Retirements - (49) (3,815) (3,864)
Changes in exchange rates - (232) (900) (1,132)
Other changes - add(deduct) ______- ___1,843 __(2,034) ____(191)
Balance at December 29, 1991 - 29,720 168,491 198,211
Additions charged to costs
and expenses - 2,176 18,282 20,458
Retirements - (5) (3,523) (3,528)
Changes in exchange rates - (1,379) (8,265) (9,644)
Other changes - add(deduct) ______- ____(215) ____(665) ____(880)
Balance at December 27, 1992 - 30,297 174,320 204,617
Additions charged to costs
and expenses - 2,127 17,640 19,767
Retirements - (86) (2,244) (2,330)
Changes in exchange rates - (589) (1,535) (2,124)
Other changes - add(deduct) ______- _____(74) ____(361) ____(435)
Balance at December 26, 1993 $ - $ 31,675 $187,820 $219,495
Note: The estimated lives used in determining annual rates of depreciation
to be applied to the cost for principal classes of assets are:
Years
Buildings 30 to 50
Machinery and Equipment 8 to 18
</TABLE>
27
PAGE
<PAGE>
<TABLE>
<CAPTION>
THE INTERLAKE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
_______Additions________
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
______Description______ _of_Year_ __Expenses__ Accounts<F1> Deductions<F2>__Year___
(in thousands)
Valuation accounts deducted from assets to which they apply:
Allowance for doubtful accounts receivable -
Year ended -
<S> <C> <C> <C> <C> <C>
December 26, 1993 $ 3,989 $ 179 $ 163 $(1,556) $ 2,775
December 27, 1992 $ 5,014 $ 1,283 $ 201 $(2,509) $ 3,989
December 29, 1991 $ 5,513 $ 2,021 $ 209 $(2,729) $ 5,014
<FN>
<F1>consists principally of recoveries of accounts charged off in prior years
<F2>consists principally of uncollectible accounts charged off and foreign
exchange rate fluctuations
Amortization of goodwill -
Year ended -
December 26, 1993 $18,646 $ 1,495 $ - $ - $20,141
December 27, 1992 $14,077 $ 4,569 $ - $ - $18,646
December 29, 1991 $11,272 $ 2,805 $ - $ - $14,077
</TABLE>
28
PAGE
<PAGE>
<TABLE>
<CAPTION>
THE INTERLAKE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
____________For_The_Years_Ended_____________
December 26, December 27, December 29,
____1993____ ____1992____ ____1991____
(in thousands)
<S> <C> <C> <C>
Maintenance and repairs $ 17,196 $ 18,451 $ 16,244
Depreciation and amortization of intangible
assets, preoperating costs and
similar deferrals * * *
Taxes, other than payroll and income
taxes (principally real estate and
personal property taxes) * * *
Royalties * * *
Advertising costs * * *
*less than 1% of total sales and revenues
</TABLE>
29
PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE INTERLAKE CORPORATION
By_________________________________
W. Robert Reum
Chairman, President and
Chief Executive Officer
February 24, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated.
________Signature_________ _______________Title_______________
__________________________ Director, Chairman, President and )
W. Robert Reum Chief Executive Officer )
)
__________________________ Vice President - Finance, )
John J. Greisch Treasurer and )
Chief Financial Officer )
)
__________________________ Controller and Chief )
John P. Miller Accounting Officer )
)
__________________________ Director )
John A. Canning, Jr. )
)
__________________________ Director )
James C. Cotting )
)
__________________________ Director ) February 24, 1994
Arthur G. Hansen )
)
__________________________ Director )
John E. Jones )
)
__________________________ Director )
Frederick C. Langenberg )
)
__________________________ Director )
Quentin C. McKenna )
)
__________________________ Director )
William G. Mitchell )
)
__________________________ Director )
Erwin E. Schulze )
)
30
PAGE
<PAGE>
CONSENT_OF_INDEPENDENT_ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-4266 and 33-11428) of The Interlake Corporation
of our report dated January 27, 1994 appearing on page 19 of the 1993 Annual
Report to Shareholders of The Interlake Corporation which is incorporated by
reference in this Annual Report on Form 10-K.
PRICE WATERHOUSE
Chicago, Illinois
January 27, 1994
31
PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE INTERLAKE CORPORATION
By_/s/_W._ROBERT_REUM________
W. Robert Reum
Chairman, President and
Chief Executive Officer
February 24, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and
on the dates indicated.
________Signature_________ _______________Title_______________
/s/_W._ROBERT_REUM_________ Director, Chairman, President )
W. Robert Reum and Chief Executive Officer )
)
/s/_JOHN_J._GREISCH________ Vice President - Finance, )
John J. Greisch Treasurer and Chief Financial )
Officer )
)
/s/_JOHN_P._MILLER_________ Controller and Chief )
John P. Miller Accounting Officer )
)
/s/_JOHN_A._CANNING,_JR.___ Director )
John A. Canning, Jr. )
)
/s/_JAMES_C._COTTING_______ Director )
James C. Cotting )
)
/s/_ARTHUR_G._HANSEN_______ Director )February 24, 1994
Arthur G. Hansen )
)
/s/_JOHN_E._JONES__________ Director )
John E. Jones )
)
/s/_FREDERICK_C._LANGENBERG Director )
Frederick C. Langenberg )
)
/s/_QUENTIN_C._MCKENNA_____ Director )
Quentin C. McKenna )
)
/s/_WILLIAM_G._MITCHELL____ Director )
William G. Mitchell )
)
/s/_ERWIN_E._SCHULZE_______ Director )
Erwin E. Schulze )
)
30
Exhibit 4.29
FOURTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
FOURTH AMENDMENT (the "Amendment"), dated as of December 22,
1993, among THE INTERLAKE CORPORATION, a Delaware corporation
(the "Company"), each Subsidiary Borrower party to the Credit
Agreement referred to below, The Interlake Corporation Employee
Stock Ownership Trust (the "ESOP Borrower"), acting by and
through the LaSalle National Trust, N.A. (successor to LaSalle
National Bank), not in its individual or corporate capacity, but
solely in its capacity as trustee of the ESOP Trust (the "ESOP
Trustee" and together with the Company and the Subsidiary
Borrowers, the "Credit Parties"), CHEMICAL BANK, individually and
as Administrative Agent (the "Administrative Agent"), THE FIRST
NATIONAL BANK OF CHICAGO, individually and as Co-Agent (the
"Co-Agent"), and the financial institutions party to the Credit
Agreement referred to below and listed on the signature pages
hereto (the "Banks"). All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings
provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, each of the Credit Parties, the Banks, the
Administrative Agent and the Co-Agent are parties to that certain
Amended and Restated Credit Agreement dated as of September 27,
1989 and amended and restated as of May 28, 1992 and as further
amended by the First Amendment dated as of August 14, 1992, the
Second Amendment and Waiver dated as of October 30, 1992 and the
Third Amendment and Waiver dated as of August 20, 1993 (as so
amended and restated and further amended and as the same may
hereafter be amended, modified or supplemented from time to time,
the "Credit Agreement"); and
WHEREAS, the Company, the Subsidiary Borrowers and the
Banks wish to amend the Credit Agreement as herein provided;
NOW THEREFORE, it is agreed:
1. On the Fourth Amendment Effective Date (as defined
below), Section 1.01(c) of the Credit Agreement is hereby amended
by inserting a new sentence at the end thereof which shall read
as follows:
"Furthermore, on the last day of each fiscal quarter during
the periods shown below, outstanding Revolving A Loans, when
added to all Letter of Credit Outstandings at such time and the
aggregate principal amount of all Permitted Other Indebtedness
then outstanding, shall not exceed in aggregate principal amount
for all Revolving A Banks the amounts set forth below opposite
such period, provided, that, during all other days of any such
fiscal quarter the Company will be permitted to have outstanding
up to $20,000,000 of Revolving A Loans in addition to the amounts
set forth below to support fluctuating cash needs, provided
further, that, at any time that it is necessary for the Company
to post performance bonds or financial guarantees in connection
with its ordinary course of business and as otherwise permitted
by Section 8.05(h), the Company will be permitted to have
outstanding up to $5,000,000 of (x) Standby Letters of Credit in
support of, plus (y) Permitted Other Indebtedness consisting of,
performance bonds or financial guarantees in addition to the
amounts set forth below:
<TABLE>
<S> <C>
From the Fourth Amendment Effective
Date to and including the fiscal
year ending December, 1993 $ 35,000,000
For the First Quarter, 1994 46,800,000
For the Second Quarter, 1994 39,800,000
For the Third Quarter, 1994 46,800,000
For the Fourth Quarter, 1994 39,800,000
For the First Quarter, 1995 52,800,000
For the Second Quarter, 1995 50,800,000
For the Third Quarter, 1995 62,800,000
For the Fourth Quarter, 1995 60,800,000
For the First Quarter, 1996 70,900,000
For the Second Quarter, 1996 70,900,000
For the Third Quarter, 1996 85,000,000
For the Fourth Quarter, 1996 85,000,000
For all fiscal years thereafter 85,000,000"
</TABLE>
Notwithstanding anything to the contrary contained above, at
no time will the Company be permitted to have outstanding
Revolving A Loans, which when added to all Letter of Credit
Outstandings at such time and the aggregate principal amount of
all Permitted Other Indebtedness then outstanding, exceed
$85,000,000 in aggregate principal amount.
2. On the Fourth Amendment Effective Date, Section
2.01(a) of the Credit Agreement is hereby amended and restated in
its entirety as follows:
"2.01 Letters of Credit. (a) Subject to and upon the
terms and conditions herein set forth, the Company may request
(x) any Issuing Bank at any time and from time to time on or
after the Restatement Effective Date and prior to the Revolving
Loan Maturity Date, to issue, and subject to the terms and
conditions contained herein such Issuing Bank shall issue, for
the account of the Company, an irrevocable standby letter of
credit denominated in Dollars and otherwise in such form as has
been approved by such Issuing Bank and the Administrative Agent
(each a "Standby Letter of Credit") in support of such
obligations of the Company and its Subsidiaries as are acceptable
to such Issuing Bank and the Administrative Agent and (y) any
Issuing Bank at any time and from time to time on or after the
Restatement Effective Date and prior to the Revolving Loan
Maturity Date, to issue, and subject to the terms and conditions
contained herein such Issuing Bank shall issue, for the account
of the Company an irrevocable trade letter of credit denominated
in Dollars and otherwise in such form as has been approved by
such Issuing Bank and the Administrative Agent, in support of
such obligations of the Company and its Subsidiaries as are
acceptable to such Issuing Bank and the Administrative Agent
(each a "Trade Letter of Credit", and, together with each
"Standby Letter of Credit", individually, a "Letter of Credit";
and the "Trade Letters of Credit" and the "Standby Letters of
Credit", collectively, the "Letters of Credit"). It is hereby
acknowledged and agreed that each of the Letters of Credit
described on Schedule II, which were issued by the Issuing Bank
under the Original Credit Agreement and remain outstanding on the
Restatement Effective Date, shall constitute a "Letter of Credit"
for all purposes of this Agreement."
3. On the Fourth Amendment Effective Date, Section
2.01(b) of the Credit Agreement is hereby amended by (a)
substituting a comma for the word "or" in the tenth line thereof,
and (b) inserting the phrase "or (3) the limitations set forth in
the last sentence of Section 1.01(c)" after the phrase "Borrowing
Base" in the eleventh line thereof.
4. On the Fourth Amendment Effective Date, Section
6.10(c) of the Credit Agreement is hereby amended by adding the
following proviso at the end thereof which shall read as follows:
", provided further that, after November 29, 1993 Delayed
Draw Loans may be incurred solely for the purposes described in
clause (x)."
5. On the Fourth Amendment Effective Date, Section
7.01(a) of the Credit Agreement is hereby amended by adding at
the end thereof the following:
", and a schedule of all intercompany Indebtedness
specifically setting forth the details of the obligor, the payee,
and other relevant terms of repayment and whether such
Indebtedness is evidenced by a promissory note or an instrument."
6. On the Fourth Amendment Effective Date, Section
7.01(c) of the Credit Agreement is hereby amended by substituting
the number "75" for the number "90" in the first line thereof.
7. On the Fourth Amendment Effective Date, Section
7.02 of the Credit Agreement is hereby amended by inserting the
phrase "and to conduct audits of the Company's books and records
and each of its Subsidiaries' books and records in connection
with the determination of the Borrowing Base," before the word
"all" in the fifteenth line thereof.
8. On the Fourth Amendment Effective Date, Section 7
of the Credit Agreement is hereby amended by inserting new
Sections 7.15 and 7.16, and a new summary paragraph at the end
thereof which shall read as follows:
"7.15 German Security Restructuring. The Company
will, and will to the extent so required, cause each of its
Subsidiaries to, complete and satisfy the requirements set forth
below (such requirements, collectively the "German Security
Restructuring") to the satisfaction of the Administrative Agent
no later than January 15, 1994 (or such later date thereafter as
the Administrative Agent may agree):
(a) Dexion Group PLC shall have duly authorized,
executed and delivered that certain Second Amended and Restated
Subsidiary Germany Security Transfer Agreement between Dexion
Group PLC, the Administrative Agent and the Banks;
(b) Each of Dexion Group PLC and a Subsidiary to
be designated by the Company shall have duly authorized, executed
and delivered that certain Second Security Re-Transfer Agreement
between Dexion Group PLC, the Administrative Agent and such
designated Subsidiary; and
(c) Each of Dexion Group PLC, Dexion Holding
GmbH, Dexion GmbH, such designated Subsidiary and any other
Subsidiary which may be necessary to complete the German Security
Restructuring shall each have duly authorized, executed and
delivered such certificates, shareholder resolutions, powers of
attorney, notarial confirmations or any other documents necessary
in connection with the completion of the German Security
Restructuring.
7.16 Letter Agreement. The Company will comply fully
with the requirements set forth in the Letter Agreement.
No waiver, modification, alteration or amendment of this
Section 7 or any definition used in this Section 7 or any
component definition used therein shall be permitted without the
prior written consent of the Required Banks in accordance with
the proviso contained in the definition of Required Banks."
9. On the Fourth Amendment Effective Date, Section
8.02 of the Credit Agreement is hereby amended by deleting the
last sentence of such Section and inserting two new sentences in
lieu thereof which shall read as follows:
"No waiver, modification, alteration or amendment of this
Section 8.02 or of any definition used in this Section 8.02 or of
any component definition used therein shall be permitted without
the prior written consent of the Required Banks in accordance
with the proviso contained in the definition of Required Banks.
To the extent the Required Banks, in accordance with the proviso
contained in the definition of Required Banks, waive any
provision of this Section 8.02 with respect to the sale of any
Collateral, or any Collateral is sold as permitted by this
Section 8.02, such Collateral shall be sold free and clear of the
Liens created by the Security Documents, and the Collateral Agent
shall be authorized to take such actions as it deems appropriate
in connection therewith."
10. On the Fourth Amendment Effective Date, Section
8.05(g) of the Credit Agreement is hereby amended and restated in
its entirety as follows:
"(g) Indebtedness (i) of the Company or The Interlake
Companies, Inc. to any Subsidiary including but not limited to
any Subsidiary which is a Subsidiary Assignor, a Subsidiary
Guarantor or a Subsidiary Borrower (for purposes of this clause
(g) only, each Subsidiary Assignor, Subsidiary Guarantor or
Subsidiary Borrower, a "Subsidiary Credit Party"), (ii) of a
Subsidiary Credit Party to either (a) the Company, (b) The
Interlake Companies, Inc. or (c) any other Subsidiary Credit
Party; provided, however, if the Indebtedness permitted under
this clause (ii) is of a Subsidiary Credit Party which is not a
Foreign Subsidiary, then only Indebtedness to the extent
permitted under subparagraph (g)(ii)(a) or (b) hereof, (iii) of
any Subsidiary which is not a Subsidiary Credit Party to any
other Subsidiary (other than Hoeganaes) which is not a Subsidiary
Credit Party, (iv) of Interlake Packaging Corporation and/or
Interlake DRC Limited to any Subsidiary Credit Party which is a
direct or indirect Subsidiary of such Person, (v) notwithstanding
the foregoing, Indebtedness of any Subsidiary which is not a
Subsidiary Credit Party to a Subsidiary Credit Party shall be
permitted if (x) the aggregate principal amount thereof does not
exceed $5,000,000 at any time outstanding or (y) the proceeds of
any Indebtedness incurred in excess of the amount permitted under
clause (x) are returned (by way of dividend or otherwise) to a
Borrower within 5 Business Days of the incurrence thereof and the
Administrative Agent shall have received 5 Business Days prior
written notice of the incurrence of such Indebtedness and
subsequent notice that the dividend or other returning payment
has been made, (vi) Interlake DRC Limited or any Subsidiary
Credit Party which is a Foreign Subsidiary to any Foreign
Subsidiary which is not a Subsidiary Credit Party and (vii) among
the Company and its Subsidiaries outstanding as of November 30,
1993 provided that such Indebtedness shall only be permitted (A)
after January 31, 1994 if described in writing to the
Administrative Agent on or before such date and (B) after
February 28, 1994 if either (1) such Indebtedness is otherwise
permitted under clauses (i) through (vi) of this clause (g) or
(2) the repayment of such Indebtedness shall, based on a
certificate of the chief financial officer of the Company, create
costs, adverse tax or legal consequences which the Administrative
Agent determines (in its sole discretion) are material."
11. On the Fourth Amendment Effective Date, Section
8.06 of the Credit Agreement is hereby amended by (a) deleting
the word "and" at the end of clause (xv) thereof, (b)
substituting "; and" for the period at the end of clause (xvi)
thereof and (c) adding the new clause (xvii) which shall read as
follows:
"(xvii) the Company or any Subsidiary may make an
acquisition for a purchase price not to exceed $1,000,000 of the
business, stock and/or assets of a Hong Kong distributor."
12. On the Fourth Amendment Effective Date, Sections
8.08, 8.09, 8.10, 8.11 and 8.12 of the Credit Agreement are
hereby amended and restated in their entirety as follows:
"8.08 Capital Expenditures. The Company will not, nor
will it permit any of its Subsidiaries to, make or incur Capital
Expenditures (a) in any fiscal year after 1994, in an amount
that, together with any amounts expended pursuant to Section
8.06(xvii) in such fiscal year, is less than $15,000,000, and (b)
in any period set out below, in excess of the amount that,
together with any amounts expended pursuant to Section 8.06(xvii)
in such period, is set forth below opposite such period, provided
that, if the actual Capital Expenditures of the Company and its
Subsidiaries in any period are less than the amount so set forth,
then the lesser of (i) such difference and (ii) $5,000,000 (the
"Carry-Over Amount") may be added to the amount of Capital
Expenditures otherwise permitted hereunder for the immediately
succeeding period and the portion of the Carry-Over Amount not
expended in such immediately succeeding period shall be added to
the amount of Capital Expenditures otherwise permitted hereunder
for the second succeeding period:
<TABLE>
<CAPTION>
Period Amount
<S> <C>
Fiscal Year Ending December, 1993 $25,000,000
Fiscal Year Ending December, 1994 20,000,000
Fiscal Year Ending December, 1995
and each fiscal year thereafter 16,000,000
</TABLE>
8.09 [Intentionally Omitted].
8.10 [Intentionally Omitted].
8.11 Minimum Consolidated Net Worth. At the end of
each quarter shown below, Consolidated Net Worth shall be greater
than the amount set forth opposite such quarter, provided, that
for purposes of this Section 8.11, Consolidated Net Worth shall
be determined exclusive of an amount not to exceed $4,000,000 on
a cumulative basis which reflects certain charges to be taken by
the Company in connection with the St. Louis River Site:
<TABLE>
<CAPTION>
Fiscal Quarter Amount
<S> <C>
Fourth Quarter, 1993 $(200,200,000)
First Quarter, 1994 (205,700,000)
Second Quarter, 1994 (209,300,000)
Third Quarter, 1994 (211,900,000)
Fourth Quarter, 1994 (212,400,000)
First Quarter, 1995 (212,400,000)
Second Quarter, 1995 (210,300,000)
Third Quarter, 1995 (207,300,000)
Fourth Quarter, 1995 (211,000,000)
First Quarter, 1996 (207,400,000)
Second Quarter, 1996 (203,800,000)
Third Quarter, 1996 (200,200,000)
Fourth Quarter, 1996 (196,500,000)
First Quarter, 1997 (191,500,000)
Second Quarter, 1997 (186,500,000)
Third Quarter, 1997 (181,500,000)
Fourth Quarter, 1997 (176,500,000)
First Quarter, 1998 (171,500,000)
Second Quarter, 1998 (166,500,000)
Third Quarter, 1998 (161,500,000)
Fourth Quarter, 1998 (156,500,000)
First Quarter, 1999 (151,500,000)
Second Quarter, 1999 (146,500,000)
Third Quarter, 1999 (141,500,000)
</TABLE>
8.12 Minimum Consolidated EBITDA. At the end of each
period shown below (taken as one accounting period), Consolidated
EBITDA shall be greater than the amount set forth opposite such
period, provided, that for purposes of this Section 8.12,
Consolidated EBITDA shall be determined exclusive of an amount
not to exceed $4,000,000 on a cumulative basis which reflects
certain charges to be taken by the Company in connection with the
St. Louis River Site:
<TABLE>
<CAPTION>
Fiscal Period Amount
<S> <C>
For the four quarters of 1993 $65,000,000
For the first quarter of 1994 11,300,000
For the first two quarters of 1994 29,600,000
For the first three quarters of 1994 48,800,000
For the four quarters of 1994 70,100,000
For the first quarter of 1995 22,200,000
For the first two quarters of 1995 46,400,000
For the first three quarters of 1995 71,600,000
For the four quarters of 1995 90,000,000
For the first quarter of 1996 26,200,000
For the first two quarters of 1996 52,500,000
For the first three quarters of 1996 78,700,000
For the four quarters of 1996 104,900,000
For the first quarter of 1997 28,000,000
For the first two quarters of 1997 56,000,000
For the first three quarters of 1997 84,000,000
For the four quarters of 1997 112,000,000
For the first quarter of 1998 28,000,000
For the first two quarters of 1998 56,000,000
For the first three quarters of 1998 84,000,000
For the four quarters of 1998 112,000,000
For the first quarter of 1999 28,000,000
For the first two quarters of 1999 56,000,000
For the first three quarters of 1999 84,000,000"
</TABLE>
13. On the Fourth Amendment Effective Date, Section 8
of the Credit Agreement is hereby amended by inserting a new
sentence at the end thereof which shall read as follows:
"No waiver, modification, alteration or amendment of this
Section 8 or any definition used in this Section 8 or any
component definition used therein shall be permitted without the
prior written consent of the Required Banks in accordance with
the proviso contained in the definition of Required Banks."
14. On the Fourth Amendment Effective Date, Section
9.03 of the Credit Agreement is hereby amended by (a)
substituting the phrase ", 7.15, 7.16 and/or 8" for the phrase
"and/or 8" in the fourth line thereof, and (b) adding a new
sentence at the end of such Section which shall read as follows:
"No waiver, modification, alteration or amendment of this
Section 9.03 or of any definition used in this Section 9.03 or of
any component definition used therein shall be permitted without
the prior written consent of the Required Banks in accordance
with the proviso contained in the definition of Required Banks."
15. On the Fourth Amendment Effective Date, Section 10
of the Credit Agreement is hereby amended by (i) deleting in
their entirety the definitions of "Cash Flow Coverage Ratio,"
"Current Ratio," "Maximum Leverage Ratio" and "Unused Amount"
from such Section, (ii) amending and restating in their entirety
each of the following definitions:
"Applicable Margin" shall mean a percentage per annum
equal to (i) in the case of Base Rate Loans and all other
interest rates determined by reference to the Alternate Base
Rate, 1-3/4% and (ii) in the case of Fixed Rate Loans, 2-3/4%.
"Consolidated EBITDA" shall mean, for any period, the
sum of (i) Consolidated EBIT for such period, plus (ii)
depreciation and amortization expenses deducted in determining
Consolidated EBIT for such period, provided, that for the Fourth
Quarter, 1993, non-cash asset write-offs up to an amount not to
exceed $4,000,000 may be added back in determining Consolidated
EBITDA, however, reversal of any reserves established in the
Fourth Quarter, 1993, may not be included in determining
Consolidated EBITDA in any subsequent period.
"Consolidated Net Worth" shall mean on any date of
determination thereof, shareholders' equity (including preferred
stock) of the Company and its Subsidiaries on a consolidated
basis, (a) without giving effect to the negative adjustment to
the value of the assets of the Company and its Subsidiaries
located outside of the United States due solely to currency
fluctuations, provided that, to the extent that such negative
adjustments exceed $30,000,000, such excess shall be included in
determining Consolidated Net Worth and (b) without giving effect
to write-offs in the Fourth Quarter of 1993 in respect of
intangible assets up to an amount not to exceed $42,800,000.
"Required Banks" at any time shall mean Banks (which
may include the Administrative Agent) whose outstanding Loans
(other than Revolving A Loans), Revolving A Commitments and
Delayed Draw Commitments exceed 66-2/3% of the total outstanding
Loans (other than Revolving A Loans), Total Revolving A
Commitment and Total Delayed Draw Commitment, provided, that (a)
for the purpose of Sections 3.02(b), 4.02(b), 4.02(g) and 8.02
the "Required Banks" shall mean Banks (which may include the
Administrative Agent) whose outstanding Loans (other than
Revolving A Loans), Revolving A Commitments and Delayed Draw
Commitments exceed 75% of the total outstanding Loans (other than
Revolving A Loans), Total Revolving A Commitment and Total
Delayed Draw Commitment, (b) for the purpose of Sections 9.03, 7
or 8 during the fiscal year ending December 31, 1994, the
"Required Banks" shall mean (i) Banks (which may include the
Administrative Agent) whose outstanding Loans (other than
Revolving A Loans), Revolving A Commitments and Delayed Draw
Commitments exceed 66-2/3% of the total outstanding Loans (other
than Revolving A Loans), Total Revolving A Commitment and Total
Delayed Draw Commitment and (ii) Banks (which may include the
Administrative Agent) whose Revolving A Commitments exceed 66-2/3%
of the Total Revolving A Commitments, and (c) for the purpose of
Sections 9.03, 7 or 8 during the fiscal year ending December 31,
1995 and thereafter, the "Required Banks" shall mean (i) Banks
(which may include the Administrative Agent) whose outstanding
Loans (other than Revolving A Loans), Revolving A Commitments and
Delayed Draw Commitments exceed 70% of the total outstanding
Loans (other than Revolving A Loans), Total Revolving A
Commitment and Total Delayed Draw Commitment, and (ii) Banks
(which may include the Administrative Agent) whose Revolving A
Commitments exceed 70% of the Total Revolving A Commitments.
and (iii) adding the following new definitions to such Section
in the appropriate alphabetical order:
"Carry-Over Amount" shall have the meaning provided in
Section 8.08.
"Dexion GmbH" shall mean Dexion GmbH, a German company.
"Dexion Group PLC" shall mean Dexion Group PLC, an
English company.
"Dexion Holding GmbH" shall mean Dexion Holding GmbH, a
German company.
"German Security Restructuring" shall have the meaning
provided in Section 7.15.
"Letter Agreement" shall mean that certain Letter
Agreement, dated as of December 22, 1993 between the Company and
the Administrative Agent, on behalf of the Banks.
"Standby Letter of Credit" shall have the meaning
provided in Section 2.01(a).
"Trade Letter of Credit" shall have the meaning
provided in Section 2.01(a).
16. On the Fourth Amendment Effective Date, Section
13.02 of the Credit Agreement is hereby amended by deleting the
phrase "to such Bank" from the fourteenth line thereof.
17. On the Fourth Amendment Effective Date, Schedule I
to the Credit Agreement is hereby amended to reduce the Total
Delayed Draw Commitment to $17,500,000 by deleting page 7 thereto
in its entirety and by inserting in lieu thereof a new page 7 in
the form of Annex 1 attached hereto.
18. On the Fourth Amendment Effective Date, Exhibit C
of the Credit Agreement is hereby amended by deleting the phrase
"Standby Letter of Credit" in the twelfth line of the first
paragraph thereof and inserting the phrase "[Standby Letter of
Credit/Trade Letter of Credit]" in lieu thereof.
19. In order to induce the Banks to enter into this
Amendment, each of the Credit Parties (other than the ESOP
Trustee) hereby (a) certifies that no Default or Event of Default
exists and that each of the representations, warranties and
agreements contained in Section 6 of the Credit Agreement on the
Fourth Amendment Effective Date, both before and after giving
effect to this Amendment, is true and correct in all material
respects and (b) confirms that it has and will continue to comply
with all of its obligations contained in the Credit Agreement and
the other Credit Documents including with respect to each of the
Borrowers, but not limited to, all of its obligations contained
in Section 7.10(b) of the Credit Agreement.
20. This Amendment is limited as specified and shall
not constitute a modification, acceptance or waiver of any other
provision of the Credit Agreement or any other Credit Document.
21. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and
delivered shall be an original, but all of which shall together
constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Company and the
Administrative Agent.
22. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
23. This Amendment shall become effective on the date
(the "Fourth Amendment Effective Date") when (i) the Company, the
Subsidiary Borrowers, the ESOP Trustee, the Administrative Agent,
the Co-Agent and the Required Banks shall have signed a copy
hereof (whether the same or different copies) and shall have
delivered (including by way of telecopier) such copies to the
Administrative Agent, (ii) the Company shall have paid to the
Administrative Agent for the account of each Bank which has
executed this Amendment the amendment fee consisting of an amount
equal to 3/8th of 1% of each Bank's pro rata share of the total
principal amount of outstanding Loans plus any unutilized amount
of the Total Commitment and (iii) the Company shall have executed
and delivered to the Administrative Agent a copy of the Letter
Agreement.
24. From and after the Fourth Amendment Effective
Date, all references in the Credit Agreement and each of the
Credit Documents or any other agreement to the Credit Agreement
shall be deemed to be references to such Credit Agreement as
amended hereby.
IN WITNESS WHEREOF, each of the parties hereto has
caused a counterpart of this Amendment to be duly executed and
delivered as of the date first above written.
THE INTERLAKE CORPORATION
By ______________________
Title:
SUBSIDIARY BORROWERS
ACME STRAPPING INC.
By ______________________
Title:
DEXION (AUSTRALIA) PTY. LTD.
A.C.N. 000 083 956
By ______________________
Title:
S.A. DEXION-REDIRACK N.V.
By ______________________
Title:
DEXION INTERNATIONAL LIMITED
By ______________________
Title:
PRECIS (935) LTD.
By ______________________
Title:
DEXION GmbH
By ______________________
Title:
TWICEBONUS LIMITED
By ______________________
Title:
THE INTERLAKE CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST, acting
by and through the LASALLE NATIONAL TRUST, N.A. (successor to
LaSalle National Bank), not in its individual or corporate
capacity (except for the representations and warranties contained
in Section 6.01(b)(y) of the Credit Agreement) but solely in its
capacity as ESOP Trustee
By _______________________
Title:
BANKS
CHEMICAL BANK
Individually, and as
Administrative Agent
By________________________
Title:
THE FIRST NATIONAL BANK
OF CHICAGO
Individually, and as Co-Agent
By_________________________
Title:
MITSUI TRUST & BANKING CO.,
LTD.
By_________________________
Title:
NATIONAL BANK OF CANADA
By_________________________
Title:
By_________________________
Title:
NATIONAL WESTMINSTER BANK PLC
By_________________________
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, successor
by merger to Security Pacific National Bank
By________________________
Title:
CONTINENTAL BANK N.A.
By________________________
Title:
THE FUJI BANK LIMITED
By_______________________
Title:
MELLON BANK N.A.
By_______________________
Title:
THE NIPPON CREDIT BANK, LTD.
By_______________________
Title:
THE BANK OF NOVA SCOTIA
By_______________________
Title:
AMERICAN SAVINGS OF FLORIDA, F.S.B.
By_______________________
Title:
UNION BANK OF FINLAND/
CAYMAN ISLAND BRANCH
By_______________________
Title:
BANK OF YOKOHAMA
By_______________________
Title:
GIROCREDIT BANK
By_______________________
Title:
By_______________________
Title:
EATON VANCE PRIME RATE
RESERVES
By______________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By_______________________
Title:
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS, B.V.
By_______________________
Title:
Chancellor Senior Secured Management, Inc. as Portfolio Advisor
PEARL STREET L.P.
By_______________________
Title:
Stichting Restructured Obligations backed by Senior Assets II
(ROSA II)
By ______________________
Title:
Chancellor Senior Secured Management, Inc. as Portfolio Advisor
ACCEPTED AND CONSENTED TO:
INTERLAKE DRC LIMITED
By________________________
Title:
DEXION GROUP PLC
By________________________
Title:
Exhibit 4.30
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
FIFTH AMENDMENT (the "Amendment"), dated as of
February 23, 1994, among THE INTERLAKE CORPORATION, a
Delaware corporation (the "Company"), each Subsidiary
Borrower party to the Credit Agreement referred to below, The
Interlake Corporation Employee Stock Ownership Trust (the
"ESOP Borrower"), acting by and through the LaSalle National
Trust, N.A. (successor to LaSalle National Bank), not in its
individual or corporate capacity, but solely in its capacity
as trustee of the ESOP Trust (the "ESOP Trustee" and together
with the Company and the Subsidiary Borrowers, the "Credit
Parties"), CHEMICAL BANK, individually and as Administrative
Agent (the "Administrative Agent"), THE FIRST NATIONAL BANK
OF CHICAGO, individually and as Co-Agent (the "Co-Agent"),
and the financial institutions party to the Credit Agreement
referred to below and listed on the signature pages hereto
(the "Banks"). All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings
provided such terms in the Credit Agreement referred to
below.
W I T N E S S E T H :
WHEREAS, each of the Credit Parties, the Banks, the
Administrative Agent and the Co-Agent are parties to that
certain Amended and Restated Credit Agreement dated as of
September 27, 1989 and amended and restated as of May 28,
1992 and as further amended by the First Amendment dated as
of August 14, 1992, the Second Amendment and Waiver dated as
of October 30, 1992, the Third Amendment and Waiver dated as
of August 20, 1993 and the Fourth Amendment dated as of
December 22, 1993 (as so amended and restated and further
amended and as the same may hereafter be amended, modified or
supplemented from time to time, the "Credit Agreement"); and
WHEREAS, the Company, the Subsidiary Borrowers and
the Banks wish to amend the Credit Agreement as herein pro-
vided;
NOW THEREFORE, it is agreed:
1. On the Fifth Amendment Effective Date (as
defined below), Section 6.05 of the Credit Agreement is
hereby amended by deleting the phrase "Sections 8 and 11 of
the Hoeganaes Management Agreement" appearing in the tenth
and eleventh lines of such Section and inserting in lieu
thereof the phrase "Sections 6 and 8 of the Hoeganaes Stock-
holders Agreement".
2. On the Fifth Amendment Effective Date, Section
6.19 of the Credit Agreement is hereby amended by deleting
the phrase "Hoeganaes Management Agreement" appearing in the
second to last sentence of such Section and inserting in lieu
thereof the phrase "Hoeganaes Stockholders Agreement".
3. On the Fifth Amendment Effective Date, Section
8.02 of the Credit Agreement is hereby amended by deleting
(a) subsection (vii) in its entirety and (b) each of the
subsequent subsection numbers "(viii)", "(ix)", "(x)",
"(xi)", "(xii)", "(xiii)", "(xiv)" and "(xv)", and inserting
in lieu thereof the following subsection numbers "(vii)",
"(viii)", "(ix)", "(x)", "(xi)", "(xii), "(xiii)" and
"(xiv)", respectively.
4. On the Fifth Amendment Effective Date, Section
8.05(f) of the Credit Agreement is hereby amended by deleting
such Section in its entirety and inserting in lieu thereof
the following new Section:
"(f) Indebtedness of the Company under Section
6(c) of the Hoeganaes Stockholders Agreement arising in
connection with the purchase of shares permitted by
Section 8.06;"
5. On the Fifth Amendment Effective Date, Section
8.06(v) of the Credit Agreement is hereby amended by deleting
such Section in its entirety and inserting in lieu thereof
the following new Section:
"(v) The Company or any Subsidiary may purchase
shares of stock of Hoeganaes offered to it pursuant to
Section 6(c) of the Hoeganaes Stockholders Agreement,
provided that (A) after giving effect to such purchase
no Default or Event of Default would exist and (B) in
the event such purchase is not permitted by Clause (A)
the Required Banks shall consent to such purchase;"
6. On the Fifth Amendment Effective Date, Section
8.06(viii) of the Credit Agreement is hereby amended by
deleting the phrase "Section 8 of the Hoeganaes Management
Agreement", appearing in the second and third sentences
thereof and inserting in lieu thereof the phrase "Section
6(c) of the Hoeganaes Stockholders Agreement".
7. On the Fifth Amendment Effective Date, Section
8.13 of the Credit Agreement is hereby amended by deleting
(i) the phrase "or Indebtedness under Section 8 of the
Hoeganaes Management Agreement" appearing in subsection (i)
thereof and inserting in lieu thereof the phrase " or Indebt-
edness under Section 6 of the Hoeganaes Stockholders Agree-
ment", (ii) the phrase "the Hoeganaes Management Agreement"
appearing in subsection (v) thereof and inserting in lieu
thereof the phrase "the Hoeganaes Stockholders Agreement, the
Hoeganaes Research and Development Agreement" and (iii) the
phrase "Section 8(b) of the Hoeganaes Management Agreement"
appearing in subsection (vi) thereof and inserting in lieu
thereof the phrase "Section 6(c) of the Hoeganaes Stock-
holders Agreement".
8. On the Fifth Amendment Effective Date, Section
10 of the Credit Agreement is hereby amended by (i) deleting
in its entirety the definition of "Hoeganaes Management
Agreement" and (ii) adding the following new definition in
the appropriate alphabetical order:
"Hoeganaes Stockholders Agreement" shall mean the
Stockholders Agreement dated February 8, 1994 by and
between The Interlake Companies, Inc., Hoeganaes
Aktiebolag and Hoeganaes, as such Agreement was in
effect on the Fifth Amendment Effective Date without
giving effect to any amendment, modification or supple-
ment thereto without the prior written consent of the
Required Banks."
"Hoeganaes Research and Development Agreement"
shall mean the Research and Development Agreement dated
February 8, 1994 between Hoganas AB and Hoeganaes
Corporation, as such Agreement was in effect on the
Fifth Amendment Effective Date without giving effect to
any amendment, modification, or supplement thereto
without the prior written consent of the Required
Banks."
9. On the Fifth Amendment Effective Date, Section
13.01 of the Credit Agreement is hereby amended by deleting
the second parenthetical appearing in subsection (ii) thereof
in its entirety and inserting in lieu thereof the following
new parenthetical:
"(including, without limitation, the reasonable
fees and disbursements of (a) counsel for the Adminis-
trative Agent and for each of the Banks and (b) internal
and third-party consultants in connection with their
review, preparation and analysis of the Borrowing Base,
appraisals, assets and related financial materials of
the Company and its Subsidiaries)".
10. In order to induce the Banks to enter into
this Amendment, each of the Credit Parties (other than the
ESOP Trustee) hereby (a) certifies that no Default or Event
of Default exists and that each of the representations,
warranties and agreements contained in Section 6 of the
Credit Agreement on the Fifth Amendment Effective Date, both
before and after giving effect to this Amendment, is true and
correct in all material respects and (b) confirms that it has
and will continue to comply with all of its obligations con-
tained in the Credit Agreement and the other Credit Documents
including with respect to each of the Borrowers, but not
limited to, all of its obligations contained in Section
7.10(b) of the Credit Agreement.
11. This Amendment is limited as specified and
shall not constitute a modification, acceptance or waiver of
any other provision of the Credit Agreement or any other
Credit Document.
12. This Amendment may be executed in any number
of counterparts and by the different parties hereto on sepa-
rate counterparts, each of which counterparts when executed
and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A complete
set of counterparts shall be lodged with the Company and the
Administrative Agent.
13. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
14. This Amendment shall become effective on the
date (the "Fifth Amendment Effective Date") when the Company,
the Subsidiary Borrowers, the ESOP Trustee, the Administra-
tive Agent, the Co-Agent and the Required Banks shall have
signed a copy hereof (whether the same or different copies)
and shall have delivered (including by way of telecopier)
such copies to the Administrative Agent.
15. From and after the Fifth Amendment Effective
Date, all references in the Credit Agreement and each of the
Credit Documents or any other agreement to the Credit Agree-
ment shall be deemed to be references to such Credit Agree-
ment as amended hereby.
IN WITNESS WHEREOF, each of the parties hereto has
caused a counterpart of this Amendment to be duly executed
and delivered as of the date first above written.
THE INTERLAKE CORPORATION
By________________________
Title:
SUBSIDIARY BORROWERS
ACME STRAPPING INC.
By________________________
Title:
DEXION (AUSTRALIA) PTY. LTD.
A.C.N. 000 083 956
By________________________
Title:
S.A. DEXION-REDIRACK N.V.
By________________________
Title:
DEXION INTERNATIONAL LIMITED
By________________________
Title:
PRECIS (935) LTD.
By________________________
Title:
DEXION GmbH
By________________________
Title:
TWICEBONUS LIMITED
By_______________________
Title:
THE INTERLAKE CORPORATION
EMPLOYEE STOCK OWNERSHIP
TRUST, acting by and through
the LASALLE NATIONAL TRUST,
N.A. (successor to LaSalle
National Bank), not in its
individual or corporate
capacity (except for the
representations and warranties
contained in Section
6.01(b)(y) of the Credit
Agreement) but solely in its
capacity as ESOP Trustee
By_________________________
Title:
BANKS
CHEMICAL BANK
Individually, and as
Administrative Agent
By________________________
Title:
THE FIRST NATIONAL BANK
OF CHICAGO
Individually, and as Co-Agent
By_________________________
Title:
MITSUI TRUST & BANKING CO.,
LTD.
By_________________________
Title:
NATIONAL BANK OF CANADA
By_________________________
Title:
By_________________________
Title:
NATIONAL WESTMINSTER BANK PLC
By_________________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
successor by merger to
Security Pacific National Bank
By________________________
Title:
CONTINENTAL BANK N.A.
By________________________
Title:
THE FUJI BANK LIMITED
By_______________________
Title:
MELLON BANK N.A.
By_______________________
Title:
THE NIPPON CREDIT BANK, LTD.
By_______________________
Title:
THE BANK OF NOVA SCOTIA
By_______________________
Title:
AMERICAN SAVINGS OF FLORIDA,
F.S.B.
By_______________________
Title:
UNION BANK OF FINLAND/
CAYMAN ISLAND BRANCH
By_______________________
Title:
BANK OF YOKOHAMA
By_______________________
Title:
GIROCREDIT BANK
By_______________________
Title:
By_______________________
Title:
EATON VANCE PRIME RATE
RESERVES
By______________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By_______________________
Title:
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS, B.V.
By_______________________
Title:
Chancellor Senior Secured
Management, Inc. as Portfolio
Advisor
PEARL STREET L.P.
By_______________________
Title:
ACCEPTED AND CONSENTED TO:
INTERLAKE DRC LIMITED
By________________________
Title:
DEXION GROUP PLC
By________________________
Title:
Exhibit 10.1
THE INTERLAKE CORPORATION
1994 Executive Incentive Compensation Plan
Section 1. Establishment and Purpose
1.1 Purpose The purpose of this Executive Incentive
Compensation Plan ("Plan") is to provide meaningful incentives
for the achievement of annually specified Company goals.
Section 2. Definitions
2.1 Definitions The following terms shall have the
meanings set forth below, unless specifically defined otherwise.
When the defined meaning is intended, the term is capitalized.
(a)"Average Controllable Working Capital to Sales
Ratio" "ACWC/S") shall mean the ratio of the twelve-month average
of Controllable Working Capital (FIFO based) to the total annual
net sales of the Organizational Unit, except that Corporate
Average Controllable Working Capital to Sales Ratio is the ratio
of the twelve-month average Controllable Working Capital (FIFO
based) of all Organizational Units (other than Corporate) to the
total annual net sales of all such Organizational Units.
(b)"Award" shall mean the amount of incentive
compensation earned by a Participant.
(c)"Base Salary" shall mean the higher of 1) the total
of the regular monthly base salary earned for each calendar month
during the Year or 2) the annualized base salary rate prescribed
by the 25th percentile of competitive practice in the Hay Survey
of Industrial Companies.
(d)"Board" shall mean the Board of Directors or the
Executive Committee of The Interlake Corporation.
(e)"Company" shall mean The Interlake Corporation, a
Delaware corporation, and any of its Organizational Units that
are designated by the Board from time to time to participate
under this Plan. Initially, the Organizational Units are as
defined in Section 3.2.
(f)"Compensation Committee" shall mean the
Compensation Committee of the Board of Directors of The Interlake
Corporation.
PAGE
<PAGE>
(g)"Controllable Working Capital (FIFO based)" shall
be the net of each Organizational Unit's current assets and
current liabilities (other than cash, interest-bearing and
intercompany items and income tax related accounts) invested in
each such Organizational Unit, at the end of each four or
five-week period in each Year. It includes accounts receivable,
inventories (before any reserves for LIFO), prepayments and other
current assets, minus accounts payable, accrued liabilities,
accrued salaries and wages, and taxes other than income. Each of
such current assets and current liabilities is subject to
adjustment to eliminate items which, in the opinion of the Board,
are unusual in nature, amount or both. Corporate Controllable
Working Capital is the sum of the Controllable Working Capital of
all Organizational Units other than Corporate.
(h)"Earnings Before Interest and Taxes" or "EBIT"
shall mean net sales of continuing operations of each
Organizational Unit less cost of products sold, less selling and
administrative expenses (which shall not include any items of
expenses classified by the Corporation's Chief Financial Officer
as Corporate expenses, including provisions made for goodwill
associated with the acquisition of Dexion Group plc,
Chem-tronics, Inc., Power Industries, Ltd. and InterPower
Packaging Corporation, nor any revenue or expense from
intercompany transactions) adjusted so as to exclude items of
revenue and expenses which, in the opinion of the Board, are
unusual in nature, amount or both.
(i)"EBIT Minimum" shall mean the minimum level of
Earnings Before Interest and Taxes that must be achieved before
an Award for ACWC/S performance measurement can be earned.
(j)"Employee" shall mean a regular, active, full-time
salaried Employee of the Company who is in a position meeting the
defined eligibility criteria for participation in the Plan.
(k)"Incentive Group" shall mean any number of
designated Participant groupings approved by the Board, for which
a maximum incentive Award opportunity is specified.
(l)"Market Value Per Share" shall mean, the average of
the high and the low price of the Stock on the last trading date
of the calendar year (or, if there are no sales on that date, the
last preceding date on which there was a sale) on the New York
Stock Exchange Composite Transactions as reported by The Wall
Street Journal, corrected for reporting errors.
(m)"Participant" shall mean an Employee who is
approved by the Board to participate in the Plan.
(n)"Stock" shall mean common stock of The Interlake
Corporation.
PAGE
<PAGE>
(o)"Year" shall mean the 1994 fiscal year of The
Interlake Corporation.
Section 3. Eligibility and Participation
3.1 Eligibility Eligibility for participation in this
Incentive Plan shall be limited to those key Employees who, by
the nature and scope of their positions, regularly and directly
contribute to the achievement of financial objectives which
impact the overall results or success of the Company.
3.2 Participation Participation in the Plan shall be
determined based upon the recommendation of the Chief Executive
Officer, the Compensation Committee of the Board of Directors and
the approval of the Board. Participants will be assigned to one
of the following Incentive Groups within an Organizational Unit
which specifies the maximum Award (as a percent of Base Salary)
that may be earned:
<TABLE>
<CAPTION>
Incentive Maximum Award
Group As A % of Base Salary
<S> <C>
CEO 100.0%
A 70.0%
B 60.0%
C 50.0%
D 40.0%
E 30.0%
F 20.0%
</TABLE>
The Board approves the participation of a Participant in one of
the following Organizational Units:
Chem-tronics, Inc.
Dexion Group (HQ)
Hoeganaes Corporation
The Interlake Companies, Inc.
Material Handling Division (a)
Material Hdlg Division-North American Operations (b)
The Interlake Corporation (General Mgmt & Corporate) (c)
Interlake Packaging Corporation (d)
(a)Includes both the domestic operations of the Material
Handling Division of The Interlake Companies, Inc., the Redirack
Interlake Storage Products Division of Acme Strapping, Inc., and
all subsidiaries of The Interlake Corporation under the
operational control of the Material Handling Division of The
Interlake Companies, Inc.
<PAGE> <PAGE>
(b)Includes both the U.S domestic operations of the Material
Handling Division of The Interlake Companies, Inc., and the
Redirack Interlake Storage Products Division of Acme Strapping,
Inc.
(c)Includes all subsidiaries.
(d)Includes all subsidiaries of The Interlake Corporation
which are under the operational control of Interlake Packaging
Corporation.
Employees approved for participation shall be notified of their
Incentive Group and Organizational Unit designation as soon after
approval as is practicable.
3.3 New Participants The Board or the Chief Executive
Officer may designate an Employee a Participant as a result of
promotion, reassignment or contemporaneously with becoming an
Employee.
3.4 Changes In Participation During Year
Contemporaneously with the promotion, demotion or reassignment of
a Participant, the Board or the Chief Executive Officer may make
one or more of the following changes:
(a) Change the Incentive Group or Organizational Unit to
which the Participant had heretofore been assigned. A
Participant who is redesignated from one Incentive Group to
another (e.g., Group C to Group B), or from one Organizational
Unit to another, during a performance period, will receive an
Award based on the Participant's Base Salary during the periods
of participation in each applicable Incentive Group and/or
Organizational Unit during the performance periods.
(b) Terminate a Participant's participation in this
Incentive Plan for the remainder of the Year without otherwise
affecting the employment status of such Employee. The Employee
shall be notified of such termination as soon as practicable
following such action. Said Participant's Award for the Year
shall be based upon the Participant's Base Salary during that
portion of the Year during which he was a Participant, adjusted
for personal performance.
3.5 No Right to Participate No Participant or other
Employee at any time shall have a right to be selected for
participation in this Plan for this Year, despite having been
approved for participation in some other year, nor any right to
be selected for participation in any plan for any other year,
despite having been selected for participation in this Plan for
this Year.
PAGE
<PAGE>
Section 4. Award Determination
4.1 Establishing Participation Levels The initial
Participants for this Plan for this Year are set forth in
Schedule B.
4.2 Performance Criteria for Corporate and Organizational
Units Performance under the Plan shall be evaluated in terms of
Earnings Before Interest and Taxes and Average Controllable
Working Capital to Sales Ratio relative to Plan for the Year.
The performance measurements are defined in Section 2.1.
4.3 Thresholds An Award for ACWC/S performance shall not
be earned by an Organizational Unit Participant if the EBIT
Minimum (See Section 2.1[i]) for his Organizational Unit is not
achieved.
An Award for ACWC/S performance shall not be earned by a
Corporate Participant if the Corporate EBIT Minimum is not
achieved. Corporate EBIT minimum is 89.39% of the Corporate EBIT
Plan. The 1994 Corporate EBIT Plan is the sum of the Plan EBITs
for the organizational units (other than Corporate), less
Corporate expense. An Award shall not be earned by any
elected officers of The Interlake Corporation, other than
assistant officers, if The Interlake Corporation shall, during
the Year, default in the payment of principal or interest when
due under any note, debenture or other instrument evidencing
borrowed money.
4.4 Performance Measurement Objectives Provided that the
Organizational Unit to which a participant is assigned meets or
exceeds the applicable threshold described in the preceding
subparagraph as it applies to ACWC/S performance, a Participant's
Award for the Year, before adjustment for personal performance,
will have two components: one based upon EBIT performance for
his Organizational Unit and the other based upon the Average
Controllable Working Capital to Sales Ratio ("ACWC/S")
performance for his Organizational Unit, expressed as a
percentage. For each performance measurement, the Award
percentage earned for a given level of performance shall be
adjusted for the weight of the performance measurement.
4.5 Performance Measurement Weighting The EBIT weighting
percentage under the Plan shall be seventy (70) and the ACWC/S
weighting percentage shall be thirty (30).
4.6 Award Calculation An Award shall be calculated as
follows: The bonus factor (percentage of maximum Award earned)
for each performance measurement's actual achievement shall be
multiplied by that performance measurement's weighting factor.
The sum of the individual products shall be the total bonus
factor. The total bonus factor shall be multiplied by a
PAGE
<PAGE>
participant's maximum Award opportunity. That product shall be
multiplied by the participant's Base Salary to determine the
amount of the Award.
<TABLE>
<CAPTION>
EXAMPLE
EBIT ACWC/S
($ in 000s)
<S> <C> <C>
1994 Plan Objective $50,341 14.65%
Actual Performance $52,273 (103.84%) 14.50% (98.99%)
Percentage of Maximum
Award Earned 60.0 70.0
Performance Measurement
Weight .7 .3
Adjusted Percentage of
Maximum Award Earned 42.0 21.0
Total Award Earned As A
Percentage Of Maximum
Award 42.0 + 21.0 = 63.0
Participant's Award = % of Maximum Award Earned X
Participant's Maximum Award Percentage X Participant's Base
Salary.
Note: This example assumes the EBIT Minimum was achieved.
</TABLE>
4.7 Maximum Awards No Award, prior to adjustment for
personal performance, may exceed the Participant's maximum Award
opportunity. However, any Award may be adjusted based on
personal performance (See Section 4.9).
4.8 1994 Performance Objectives The Plan objectives for
each Organizational Unit, defined in Section 3.2, are contained
in Attachment I to this Plan.
4.9 Individual Performance Ratings Adjustments to the
Participant's incentive Award may be made based upon the
Participant's individual performance during the Plan Year as
follows:
PAGE
<PAGE>
(a) CEO Incentive Classification The Award of the CEO is
subject to adjustment based on the discretion of the Board of
Directors.
(b) Incentive Group A, B, C, D, E and F Participants'
performance is evaluated each year by management on a scale of 1
to 3.
- 1 Rating results in a Participant's Award being
reduced by 15%. This means that the Participant is either very
new in his position or did not meet expectations or objectives
satisfactorily.
- 2 Rating results in a Participant receiving 100%
of his/her Award. This means that a Participant has met
expectations and objectives satisfactorily.
- 3 Rating results in a Participant's Award being
increased by 25%. This means that a Participant has exceeded the
expectations and objectives for his position, or has completed a
particular assignment or objective in an unusual or exemplary
manner.
All ratings of "1" or "3" will be substantiated in writing with
an explanation by the executive recommending the determination.
Ratings will then be subject to the review and approval of the
Chief Executive Officer and approval of the Board.
4.10 Award Determinations Following the end of the Plan
Year, Awards shall be computed (See Section 4.1) for each
Participant based upon performance of his Organizational Unit
(including Corporate) and adjusted for personal performance. The
Board may adjust Awards payable to Participants in any
Organizational Unit if it determines that changes in business
conditions or other circumstances have materially and unduly
influenced such Organizational Unit's ability to meet the
performance goals. All Awards, when approved by the Board, shall
be conclusive for all purposes.
Section 5. Payment of Awards
5.1 Form and Timing of Payment Payment of Awards shall
be made in cash or cash and Stock, net of applicable withholding
taxes, as soon as practicable following the end of the Year as
the Board may determine. The maximum amount of an Award payable
in Stock shall be fifty percent (50%) of the Award.
5.2 Payment in the Event of Death In the event of
death, a Participant's designated Award shall be paid to the
Participant's estate.
PAGE
<PAGE>
Section 6. Termination of Employment
6.1 Termination of Employment Due to Death, Disability, or
Retirement In the event a Participant's employment is
terminated by reason of death, total and permanent disability (as
determined by the Board), or retirement, the Award shall be
determined by multiplying the Participant's Base Salary, prior to
termination, by the appropriate final Award percentage, adjusted
for personal performance.
6.2 Voluntary Termination or Termination for Cause In
the event a Participant voluntarily terminates employment, or is
terminated for cause (of which the Board shall be the sole
judge), all rights to an Award for the Plan Year shall be
forfeited.
6.3 Other Termination In the event a Participant's
employment is terminated for reasons other than those described
in Sections 6.1 and 6.2, an Award shall be paid. Such Award
shall be based on the Participant's Base Salary, prior to
termination, multiplied by the appropriate final Award
percentage, adjusted for personal performance.
Section 7. Rights of Participants
7.1 Employment Nothing in this Plan shall interfere
with or limit in any way the right of the Company to terminate
any Participant's employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company.
7.2 Nontransferability No right or interest of any
Participant in this Plan shall be assignable or transferable, or
subject to any lien, directly, by operation of law, or otherwise,
including execution, levy, garnishment, attachment, pledge, and
bankruptcy.
7.3 Board Member Participants No member of the Board
who also is a Participant shall vote as to any action taken by
the Board with respect to Awards to be made to him under the Plan
or with respect to his designation as a Participant.
Section 8. Administration
8.1 Administration This Plan shall be administered by
the Vice President-Human Resources of The Interlake Corporation
in accordance with its terms and such rules, if any, as may be
established from time to time by the Board for the administration
of this Plan.
PAGE
<PAGE>
8.2 Disputes The determination of the Board as to any
disputed question arising under this Plan, including questions of
construction and interpretation, shall be final, binding, and
conclusive upon all persons.
Section 9. Amendments
9.1 Amendments The Board, in its absolute discretion,
without notice, at any time and from time to time, may modify or
amend, in whole or in part, any or all of the provisions of this
Plan, or suspend or terminate it entirely; provided, that no such
modification, amendment, suspension, or termination, may without
the consent of a Participant reduce the right of a Participant
(or his Beneficiary as the case may be) to a payment or
distribution hereunder to which he has otherwise become entitled
with respect to the Plan Year.
Section 10. General
10.1 Governing Law The Plan shall be construed in
accordance with and governed by the laws of the State of
Illinois.
10.2 Withholding Taxes The Company shall have the right
to deduct from all payments under this Plan any Federal, state or
local taxes required by the law to be withheld with respect to
such payments.
10.3 Supersession of Prior Plan This Plan is intended to
be operative for the 1994 Plan Year. Accordingly, this Plan
shall supersede in its entirety the 1993 Executive Incentive
Compensation Plan of The Interlake Corporation, as heretofore
restated, except as to Executive Incentive Compensation Awards
and related matters in respect of periods prior to the 1994 Plan
Year.
Exhibit 13.1
Shareholder Information
Annual Meeting
Shareholders are invited to attend Interlake's Annual Meeting at 10:00 a.m.
local time on Thursday, April 28, 1994. The location will be the Radisson
Hotel Lisle-Naperville, 3000 Warrenville Road, Lisle, IL.
Common Stock Listing and Price Information
Interlake's common stock is listed on the New York and Chicago stock exchanges.
Its ticker symbol is "IK" and it is listed as "Intlake in the New York Stock
Exchange Composite Transactions, which appear in the business pages of larger
daily newspapers.
Shareholder Services
Please address questions about your Interlake stock to: The First Chicago Trust
Company of New York, P.O. Box 2500, Jersey City, NJ 07303-2500; (800) 446-2617.
Form 10-K Available
A copy of The Interlake Corporation Annual Report on Form 10-K, filed with the
Securities and Exchange Commission, is available to shareholders upon request
to the Corporate Secretary, The Interlake Corporation, 550 Warrenville Road,
Lisle, IL 60532-4387.
1
PAGE
<PAGE>
INTERLAKE AT A GLANCE
Interlake is a multinational manufacturer with four operating groups.
MAJOR PLANT SITES PRODUCTS/USES CUSTOMERS MARKET POSITION
SPECIAL MATERIALS Ferrous metal powders Metal powder parts Leader in North
Automotive engine and suppliers America
Hoeganaes powertrain parts Automotive parts
Corporation Farm and construction manufacturers
equipment parts Heavy machinery
Gallatin, TN Appliance parts producers
Milton, PA Welding, chemical and
Riverton, NJ photocopy applications
AEROSPACE COMPONENTS Fabricated components Leading jet engine A leader in
Precision ducts, manufacturers this market
rings, casings and segment
other complex
Chem-tronics, fabrications for
Inc. military and Prime aerospace Unique in its
commercial jet contractors array of
engines and space fabrication
launch vehicles technologies
El Cajon, CA
Tulsa, OK Repair services Most major airlines Significant
Jet engine fan blades Overhaul centers share in
and other components Engine this market
manufacturers
HANDLING Storage rack Businesses in all Largest in
Distribution size ranges in U.S. and
facilities; manufact- North America, Australia
Interlake Material uring facilities; Australia, Pacific
Handling receiving, shipping, Rim and the Far
in-process storage East
Blacktown, Australia Conveyors and conveyor Growing
Lodi, CA systems supplier in
Pontiac, IL Retail display a fragmented
Shepherdsville,KY equipment, field
Sumter, SC office interiors A leader in
Australia
Dexion Group plc Storage rack Businesses in all Largest in the
Distribution size ranges in U.K. and
facilities; the U.K., Belgium; a
Gainsborough, U.K. manufacturing continental leader in
Halle, Germany facilities; receiving Europe, Africa, Germany
Hemel Hempstead,U.K. shipping, in-process Middle East
storage
Kilnhurst, U.K. Conveyors and conveyor A U.K. leader
Laubach, Germany systems for unit load
Nivelles, Belgium Shelving, office conveyors and
interiors shelving
2
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<PAGE>
PACKAGING Non-metallic strapping Steel, lumber, Largest in the
machines and non- brick, corru- U.K., a leader
metallic strapping gated, newspaper, in North
Interlake Steel strapping graphics, can, America
Packaging machines and steel bottle, textile Largest
strapping and distribution supplier in
Fountain Inn, SC Carton strapping; industries Canada; a
Hodgkins, IL securing unit loads; leader in the
Kilnhurst, U.K. i.e. pallets, textile Businesses that U.K.
Maidenhead, U.K. products, lumber, ship products in
newspapers cartons
Racine, WI Stitchers and Businesses that A leader in
stitching wire ship products in the U.S.
Scarborough, Canada Boxboard sealing cartons
Book, magazine binding Graphics arts
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<PAGE>
To Our Shareholders and Employees:
A stronger domestic economy improved the outlook for most of our North American
operations as we concluded 1993. However, with a significant deterioration in
the continental European economic climate during the year and increases in raw
material costs at Special Materials, Interlake employees' success in improving
our operations could not prevent declines in sales and earnings for 1993. The
combination of the weak European economy and stronger dollar compared with 1992
(which reduced the reported dollar earnings of our foreign operations) more
than offset the improvements we have begun to see in most of our domestic
operations. Despite lower sales and earnings, we continue to manage the cash
flows of our operations effectively and strengthen our competitiveness in the
face of mixed economic conditions.
During the fourth quarter we took a pretax restructuring charge of $5.6 million
to cover costs associated with closure of several small facilities and further
job eliminations, primarily in our European Handling operations, and also the
write-down of non-performing assets. We believe these actions will enhance the
Company's future results by improving our operating efficiencies. In addition,
during the fourth quarter we increased by $3.9 million our reserves associated
with environmental obligations at a Superfund site sold by a predecessor
company over 20 years ago. Further details of these charges are included in
Management's Discussion and Analysis of Results on page 13.
Review of 1993 Results
Net sales in 1993 were $681.3 million, down 4% compared with 1992. The decline
resulted mainly from lower sales volumes in our European Handling operations
and unfavorable foreign currency exchange rates, which were only partially
offset by increased volumes in our powder metal and domestic Handling
operations. Selling and administrative expenses were 8% lower than 1992 due to
continuing aggressive cost reduction efforts and the exchange rate effect.
Operating income, excluding the 1993 restructuring charge, declined to $43.8
million from $50.4 million in 1992. The decline from 1992 was largely due to
lower earnings at our European operations and our Aerospace Components
business. In addition, higher scrap steel costs reduced margins at our powder
metal operation in 1993, and the stronger dollar reduced reported earnings of
our foreign operations by approximately $2.4 million compared with 1992.
However, we saw stronger earnings at our domestic Handling operation in 1993.
Excluding the effects of restructuring, environmental and extraordinary charges
in 1993 and 1992, the 1993 net loss was $16.0 million, compared with $14.0
million in 1992. In 1993, restructuring and environmental charges added $9.4
million to the reported net loss, while in 1992 extraordinary charges related
to completion of our financing plan and the retroactive adoption of new
accounting standards for postretirement benefits and income taxes increased the
reported net loss by $13.7 million.
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Outlook
Improvement in Interlake's results depends in part upon the economic
environments in which our businesses operate. The improving domestic economy
is leading to increased demand in most of our North American operations, so
that we expect improved results in 1994 for our Special Materials, North
American Handling, and Packaging operations. Overseas, we're seeing stronger
demand in the U.K. and Australia, but we have yet to see improvement in our
continental European operations, where we have taken additional actions to
reduce costs.
However, Interlake is not relying solely on economic recovery for its growth.
We continue to grow our core businesses through geographic expansion, increased
market penetration and new product development.
At Special Materials, we are developing new patent-protected metal powders and
processes that will expand the applications for powder metal parts.
Furthermore, by expanding annealing capacity at our two atomizing plants we
will improve our ability to respond consistently to growing market demand and
customer delivery requirements.
At Aerospace Components, our fabrication unit continues to successfully capture
business in the commercial and space markets, but this has not offset fully the
declines in military work. Our aviation repair unit has experienced lower
sales due to the weak commercial airline industry. In response, we are
reducing costs, lowering the turnaround time for jet engine fan blade repairs,
and expanding future growth opportunities through new repairs in both
traditional and non-aerospace businesses.
At Handling, we are strengthening our global market coverage with new sales
offices in the Asia Pacific region and expanded coverage in the Middle East and
eastern Europe. We continue to broaden our product range with plans in 1994 to
introduce new conveyor and office interiors products. In addition, we are
setting up targeted marketing programs to reach new customers in retail
merchandising, automotive aftermarket, food distribution and other key growth
areas.
At Packaging, we are concentrating our development efforts on new plastic
strapping applications, where we expect demand to increase as the fiber
industry continues its conversion from steel to polyester strapping. In
addition, we are establishing a stronger sales and marketing presence in
continental Europe, where we will build upon our successful export sales into
this region. We are also expanding our marketing efforts in Australia and
South America.
Over the past several years, we have worked hard to ensure that our businesses
have a solid base upon which to grow. We have strictly controlled working
capital and overhead costs; expanded employee involvement in project-based
continuous improvement programs; invested in our facilities to increase
capacity, improve productivity and ensure environmental compliance; initiated
programs to improve customer service and support; and funded new product
development. Because of these and many other actions by our employees
worldwide, Interlake's businesses continue to hold leading shares in the
markets where we compete, with a consistent reputation for high quality
products and superior customer service.
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Having secured an amendment to our bank credit agreement during the fourth
quarter of 1993, we have provided adequate liquidity for our operating cash
requirements during 1994. We have bank debt principal payment obligations that
become due beginning in 1995. We are presently evaluating various actions to
refinance some or all of these obligations in order to improve Interlake's
financial flexibility beyond 1994. We expect these actions will address the
Company's near-term financial needs while preserving the value opportunities
for our shareholders to be realized through improved economic and market
conditions.
I firmly believe that by combining the strengths of our businesses with the
continued support of our employees and investors, we can profit from economic
recovery and grow in the years to come.
Sincerely,
/s/
W. Robert Reum
Chairman, President and Chief Executive Officer
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Business Profile - Special Materials
Interlake conducts its Special Materials business through Hoeganaes
Corporation. Hoeganaes is the North American market leader in ferrous metal
powders, which are sold to customers who primarily manufacture precision parts
for automobiles, light trucks, farm and garden equipment, appliances and other
applications requiring high volumes. About 60% of Hoeganaes' sales are for
automotive applications, including components for transmissions, engines and
suspension systems. Hoeganaes also provides powders for non-structural
applications including photocopying, welding and chemicals.
Hoeganaes uses two basic production processes: atomization, which converts
high-grade steel scrap into powder through the use of an electric furnace steel
making and atomizing system, and direct reduction, which converts high purity
iron ore into a highly porous metal powder. The resulting base powders can
then be blended with various additives and lubricants and treated with coatings
using patented technologies to produce a wide variety of powders tailored to
customer specifications.
Our largest customers for ferrous metal powders in North America are the
original equipment manufacturers of automobile components. Usage of powder
metal parts in vehicles is growing on a cyclical basis as the domestic auto
industry recovers from the recent downturn, and on a secular basis as powder
metallurgy (P/M) continues to displace forging and other more costly metal
forming techniques for component production.
Hoeganaes is driving this additional growth by advancing P/M technology to
increase part strength and density. As the industry's acknowledged technical
leader, Hoeganaes has strategic relationships with key parts producers to
cooperate with them in developing new high-tonnage applications.
These relationships are an integral part of our business strategy for
Hoeganaes, which centers on the research and development of advanced
proprietary engineered materials and processes that will expand P/M parts
applications in automotive and other markets. Broad industry acceptance of our
new ANCORBOND (registered trademark) premixes during 1993 underlines the
success of this strategy. The patented ANCORBOND blend technology, which bonds
alloy additives directly to individual iron particles, results in more
consistent metallurgical properties and improved productivity through better
flow characteristics and more efficient manufacturing performance. ANCORBOND
also results in greatly reduced dusting, which improves factory environmental
conditions. In 1994, Hoeganaes will launch the next generation of ANCORBOND
technology that will open more new applications by further increasing part
strength and density.
Beyond our commitment to research and development, we continue to fund
significant capital projects at Hoeganaes to add capacity, improve quality and
ensure compliance with environmental legislation. Expanding annealing capacity
in 1993 and 1994 at our two atomizing plants will improve our ability to
respond consistently to the growing P/M market and to satisfy customer delivery
requirements across our entire product range. Planned improvements in the
steel making and annealing areas will further improve product quality and
reinforce our position as the low-cost producer. A $5 million fugitive dust
collection system completed in 1993 at our Riverton, New Jersey, plant uses the
latest technology to control particulate emissions both inside and outside the
facility.
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A projected 8-10% growth in vehicle production in North America leads to a
positive outlook for the P/M market in 1994. Hoeganaes expects to share in
this increased tonnage, with volume opportunities not only in the automotive
market, but in the hand tool, lawn and garden and appliance markets as well.
Competitive pressure is expected to remain strong and selling price increases
will not fully compensate for the increases in raw material costs experienced
during 1993.
Despite the competitive pressures, we expect Hoeganaes will maintain its market
leadership and improve profitability through continued development of
patent-protected powders and processes, combined with further productivity
improvements and cost reduction.
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Business Profile - Aerospace Components
Interlake conducts its Aerospace Components business through Chem-tronics, Inc.
Chem-tronics marked its 40th year in the aerospace business in 1993 as a
leading producer of components for commercial and military aerospace
applications. Our primary fabricated products include jet engine ducts, rings
and containment cases; complete fan case assembly modules; and complex
fabrications for military and commercial jet engines and space launch vehicles.
We produce these components using hot and cold forming, chemical milling,
conventional machining and welding. Principal customers are the original
equipment manufacturers (OEMs) of jet aircraft engines.
Chem-tronics also is a leading supplier of jet engine fan blade repair
services. Our customers include all major jet engine manufacturers, most major
airlines and various engine overhaul centers. Our aviation repair business is
certified to repair nearly all commercial jet engine fan blades, using CNC
machining, hot creep forming, electron beam welding and other processes.
The aerospace industry continues to suffer through depressed market conditions
that have persisted for several years. Prime aerospace contractors have seen
sales fall due to declining military business, and the fact that many of the
major air carriers have postponed or canceled new aircraft purchases in the
light of their poor financial condition. The result is an extremely
competitive environment where several marginal producers have exited the
business.
Chem-tronics intends to grow during this period of industry contraction by
executing a strategy of expanding its product line using core competencies of
advanced engineering, machining and fabrication capabilities, and diversifying
its customer base. Our components manufacturing unit continues to successfully
capture business from the commercial and space markets to partially offset
declining military work.
In 1993 we successfully delivered first articles for several major new
programs, including the first major subassembly Chem-tronics has manufactured
for an OEM - the fan case module for the Rolls-Royce Trent 800 engine, which is
under development for use on the new twin engine Boeing 777 widebody aircraft.
Other new programs include a compressor case for the small Allison gas turbine
engine destined for use on small commuter and business aircraft, a columbium
nozzle that goes on the Delta II launch vehicle and components for the Titan IV
launch vehicle.
Critical to the success of all these new programs is a commitment to superior
quality and customer responsiveness, and strict control of start-up and
production costs. Chem-tronics is achieving these goals through widespread
employee involvement on problem solving and process improvement teams,
additional focused work cells, and enhanced shop floor engineering support.
The market for aviation repair services contracted during 1993, as demand from
the airlines declined and price competition intensified. Demand is expected to
remain flat in the near term, as overall airline fleet size is not expected to
grow substantially until later in the decade, except for modest near-term
growth in the Pacific Rim.
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Our strategy for repair services calls for market sensitive pricing strategies,
a continued commitment to reducing turnaround times for blade repairs, lowering
our cost structure and expanding volume by establishing new repairs in both
traditional and non-aerospace businesses.
A competitive advantage for Chem-tronics, as the industry market leader, is
that we have a reputation for high quality and customer responsiveness, and the
ability to offer a wider scope of repairs than anyone in the industry. Our
acknowledged technical competency has prompted engine manufacturers to choose
Chem-tronics as the launch source for fan blade repairs on new engine programs.
Challenging business conditions are nothing new for the aerospace industry, and
Chem-tronics is making the necessary changes to maintain its leading position
in today's competitive environment and to grow in the years to come.
Business Profile - Handling
Interlake's Handling operations are conducted through Interlake Material
Handling and Dexion Group, with production facilities located in the U.S.,
Europe and Australia. Handling designs, manufactures and sells storage rack,
shelving, conveyors and related equipment for use in warehouses, distribution
centers, factories and other storage applications. We also supply equipment
for retail display and office interiors.
With our ability to provide global market coverage, Handling is the world's
leading supplier of rack systems and offers the broadest product line of
material handling and storage products. Furthermore, Handling is the most
experienced provider of sophisticated rack configurations and integrated
storage and handling solutions. Our in-house design capabilities and large
manufacturing capacity enable us to respond rapidly to our largest customers'
complex needs and exacting delivery schedules, while our extensive distributor
network allows us to reach smaller clients on a timely basis.
Because Handling's customers are primarily engaged in retailing and wholesaling
of food and consumer durables and non-durables, our sales are in part dependent
upon prevailing economic conditions in the markets where we compete. With
recessionary conditions continuing in continental Europe and weak recoveries in
the U.K. and Australia, those markets for storage products remain highly
competitive. The domestic market has shown good signs of recovery in the
second half of 1993 and is expected to continue to improve as the domestic
economy strengthens.
Handling's business strategy centers on continuously reducing production costs,
adding value to our product offerings through superior service and support, and
expanding to selected Pacific Rim, European and North American markets. We
have directed capital spending in the last several years toward productivity
and quality improvements, including a new $2 million paint line at our Lodi,
California, plant that has improved finish quality, lowered paint cost,
increased factory throughput and ensured compliance with environmental air
quality standards. More and more Handling employees are involved in continuous
improvement programs that are contributing to additional cost reductions and
productivity improvements.
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We are improving our design, quotation and sales order processing systems to
enhance the effectiveness of our sales force, and we're implementing targeted
marketing programs to reach new customers in retail merchandising, automotive
aftermarket, food distribution and other key growth areas. We are also
developing new distribution channels, such as catalog sales.
During 1993 we expanded our presence in the rapidly growing Asia Pacific
region, opening a sales office in Singapore. Also in 1993, we expanded our
regional sales office in Dubai, United Arab Emirates, serving the growing
Middle East market, and we are strengthening our sales coverage of the emerging
eastern European markets. We intend to establish a sales and distribution
outlet during early 1994 in Hong Kong to serve that market and the rapidly
expanding market in mainland China.
Along with geographic expansion, we plan to continue to broaden our product
offerings, with planned introductions this year of a new high-speed lineshaft
conveyor and improved office interiors and office systems products for the
European and Australian markets.
While we continue to pursue new product and geographic market opportunities
aggressively, we are also responding quickly to contracting market conditions,
particularly in Europe, where we have significantly reduced our cost structure
over the past several years. All of our Handling operations have improved cost
structures and are positioned to capitalize on the market recovery. Our
outlook for 1994 calls for improved market conditions in the U.S., U.K., and
Asia Pacific markets. However, we expect that markets in continental Europe
will not improve until the second half of 1994 at the earliest. In
anticipation of this continued weakness in our European markets, we took
additional actions during 1993 to further reduce our cost structure.
While worldwide economic conditions remain challenging, we are confident
Handling's low-cost producer status, unrivalled product range and superior
customer service will enable us to leverage the benefit of economic recovery
and support our growth initiatives.
Business Profile - Packaging
Interlake's Packaging operations design and sell machinery for applying steel
and plastic strapping and stitching wire, and produce strapping and wire for
use in such machines. We are the leading supplier of steel strapping in Canada
and second in the U.K.; a market leader in plastic strapping and machines in
the U.K.; and a leading supplier of plastic strapping and stitching products in
the U.S.
Our principal plastic strapping customers are the corrugated, newspaper,
graphics, can, bottle, textile and distribution industries. Primary users of
steel strapping are heavy goods manufacturers such as the steel, lumber, brick
and concrete industries. Stitching products are sold to a broad customer base
including the corrugated box, graphic arts, automotive, agricultural and food
industries.
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Aside from modest increases in North American strapping sales, Packaging's 1993
results were unfavorably affected by weak fundamentals in the other markets
where we compete. Our 1994 economic outlook foresees modest growth in North
America and the U.K., but pricing will remain competitive. Packaging's
business strategy, therefore, hinges on continued cost reductions and improved
production efficiencies in our manufacturing operations, increased penetration
of new applications for plastic strapping, expanding plastic strapping sales to
new European markets and improved product offerings in the stitching business.
As the market for capital equipment gradually improves in the U.S., we
anticipate stronger activity in the newspaper, corrugated, and graphics
industries, where we offer the technically-advanced PowerStrap and Interlake
lines of plastic strapping machines. Our reputation for quality, breadth of
product range and excellent field support buttresses our position in this
market. We expect demand for plastic strapping to increase as the fiber
industry continues its conversion from steel to polyester strapping. In 1993,
Packaging completed installation of a new polyester strap manufacturing line at
our Fountain Inn, South Carolina, plant to support this growing market. The
new line features the latest computerized monitoring and control, and it also
improves our ability to use post-industrial and post-consumer recycled
polyester in the manufacturing process.
Packaging's Canadian and U.K. steel strapping businesses are facing strong
price competition and material cost increases in their primary markets. Our
strategy for these units centers on reducing manufacturing costs and improving
productivity, expanding export sales and increasing domestic market
penetration. In Canada, we are also increasing sales of our product
identification line, used by the lumber and other industries in inventory
control applications.
Expanding sales to new geographic regions is also a key strategic thrust of our
U.K. plastic strapping business. In late 1993 we established a sales office in
France to build upon our successful export sales into this region.
In our U.S. stitching business, 1993 saw the introduction of the Commander, a
side-feed stitching head for the graphics industry. A major improvement was
made to our widely-used Champion stitching head. Renamed the Magnatek, the
improved head incorporates an Interlake-exclusive magnetic rotator that
virtually eliminates dropped stitches and jams, improving its reliability in
high-speed bindery applications.
Our outlook for 1994 foresees better market conditions in North America and the
U.K. With plans for further market expansion, new product introductions and
cost reduction initiatives, we believe we are positioned to take advantage of
improving economic conditions in our existing markets and to pursue growth in
new areas.
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<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
(Dollars in millions)
Results of Operations
Net sales were $681.3, $708.2, and $714.7, respectively, in 1993, 1992, and
1991. In the Engineered Materials segment, strong North American auto and
light truck production in 1993 led to a $9.0 increase in sales of metal powders
which was offset by a $6.5 decline in Aerospace Component sales.
Handling/Packaging Systems sales declined as increased U.S. sales of material
handling equipment were more than offset by recessionary conditions in
continental Europe and the effects of a stronger U.S. dollar. In 1992, in the
Engineered Materials segment, increased sales of metal powders were more than
offset by a $14.2 decline in defense-related business. Lower strapping
equipment sales accounted for the 1992 sales decrease in the Handling/Packaging
Systems segment as lower selling prices for Handling products were offset by
higher Handling volume.
Operating income was $38.2, $50.4, and $61.5, respectively, in 1993, 1992, and
1991. In 1993 operating income was $12.2 lower than in 1992 reflecting the
recessionary impact on volume and pricing in the Handling/Packaging Systems
segment in continental Europe, a restructuring charge of $5.6, lower shipments
and weak conditions in the commercial aerospace industry, and higher scrap
steel costs in Engineered Materials. These declines were partially offset by
higher domestic Handling profits. The $11.1 decline in 1992 as compared with
1991 was due to lower selling prices and reduced benefits from liquidation of
LIFO inventories in the Handling/Packaging Systems segment, and to lower
defense-related sales volume and higher expenses in developing new non-defense
business in the Engineered Materials segment.
During the three year period, Engineered Materials' sales of metal powders
increased due to higher North American auto and light truck production.
Defense-related sales declined approximately $14.9 since 1991 at Aerospace
Components. In the three year period, Handling/Packaging Systems' sales have
reflected a lack of demand for capital goods in most major economies throughout
the world. This lack of demand has generally led to reduced selling prices
and lower volumes, resulting in lower segment earnings. The unfavorable trend
in the Handling/Packaging Systems segment's operating profit also reflects
declining benefits from liquidations of LIFO inventories, with LIFO benefits
being $1.2, $1.5, and $4.1, respectively, in 1993, 1992, and 1991.
Cost of sales (excluding unusual items of expense) as a percentage of sales was
76%, 75%, and 73%, respectively, in 1993, 1992, and 1991. The Company was able
to offset most of the effect of unabsorbed fixed costs due to lower sales by
reducing total manufacturing costs, but was unable to offset the entire effect
of lower selling prices in either 1993 or 1992. Selling and administrative
expenses for the core businesses were reduced each year and as a percentage of
sales were 17% in 1993 and 18% in both 1992 and 1991.
The following business segment commentary excludes unusual items and
restructuring charges. The analysis of individual business unit results is
presented here before allocation of general corporate expenses. See Note 8 of
Notes to Consolidated Financial Statements for further information on business
segments.
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<TABLE>
<CAPTION>
Net Sales and Operating Profit by Business Segment
(in millions)
________Net_Sales______ _____Operating_Profit_____
1993______1992_____1991_____1993______1992______1991__
Engineered Materials
<S> <C> <C> <C> <C> <C> <C>
Special Materials $131.5 $122.5 $114.5
Aerospace Components __61.0 __67.5 __77.9
Core Businesses 192.5 190.0 192.4 $ 26.3 $ 29.6 $ 32.4
Restructuring Charges _____- _____- _____- __(1.8) _____- _____-
_192.5 _190.0 _192.4 __24.5 __29.6 __32.4
Handling/Packaging Systems
Handling 366.7 395.3 392.0
Packaging _122.1 _122.9 _130.3
Core Businesses 488.8 518.2 522.3 19.1 24.0 33.7
Restructuring Charges - - - (3.8) - -
Unusual Items _____- _____- _____- _____- __(2.5) __(3.3)
_488.8 _518.2 _522.3 __15.3 __21.5 __30.4
Corporate Items/
Eliminations _____- _____- _____- _(56.0)* _(52.6) _(62.4)*
Consolidated Totals $681.3 $708.2 $714.7 $(16.2) $ (1.5) $ 0.4
* Includes provisions of $4.8 in 1993 and $6.0 in 1991 for environmental matters.
See Note 17 of Notes to Consolidated Financial Statements.
</TABLE>
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Engineered Materials
Engineered Materials includes Special Materials (metal powders for
manufacturing precision parts) and Aerospace Components (precision machined
structures, complex fabrications, and jet engine component repairs).
Sales increased 1% in 1993 over 1992 in the Engineered Materials segment.
Metal powder shipments were up 8% in 1993 following a 9% increase in 1992
reflecting increased North American automobile and light truck production.
Aerospace Components' sales declined 10% in 1993. Fabrication shipments
declined due to the continued slowdown in military procurement and weak
conditions in the commercial aerospace industry. Weak demand from the airline
industry has had a negative impact on repair volumes and has led to increased
price competition.
Aerospace Components' defense-related business represented approximately 39%,
36%, and 50% of this business' sales in 1993, 1992, and 1991, respectively.
(Defense-related sales as a percent of the Company's consolidated sales were
approximately 3%, 3%,and 5% in the last three years.) Aerospace Components has
emphasized a strategy of developing fabrication business in the commercial and
space sectors to replace declining defense-related business and has experienced
an 11% increase in this area from 1990 to 1993 despite weak conditions in the
industry.
Operating profit for the segment fell 11% in 1993. Special Materials'
operating profit fell 3% despite the higher metal powder volume as higher scrap
steel costs and other manufacturing costs more than offset the benefits of
higher volume. The average cost of scrap steel in 1993 was 20% higher than in
1992. The Company expects to partially recover increases in scrap costs during
1994 through higher selling prices. Aerospace Components' operating profit was
37% lower in 1993. In addition to the volume shortfall noted above, depressed
conditions in the commercial aerospace and airline industries have resulted in
excess capacity leading to increased price competition. Results in 1993 were
also unfavorably affected by high initial costs related to the early production
stages of new non-defense business.
Engineered Materials' sales declined 1% in 1992 as compared with 1991. Special
Materials' shipments increased 9% and Aerospace Components' sales declined 13%.
Efforts to grow non-defense business at Aerospace Components were successful
and led to a 10% sales increase in this area, but were not sufficient to offset
the effects of defense-related sales declines of 37% in 1992.
Segment operating profit declined 9% in 1992 as compared with 1991. Special
Materials' operating profit advanced in line with sales, although revenue per
ton declined 1%. Aerospace Components' operating profit was reduced by roughly
50% due to a decline in defense-related business and expenses associated with
developing new non-defense business, such as start-up expenses at a new blade
repair facility in Tulsa.
The Engineered Materials segment ended 1993 with an order backlog of $73.6,
down from $82.9 at the end of 1992. Special Materials' backlog, which is
generally short-term in nature, was up 11%. Aerospace Components' backlog was
down 19% due mainly to reductions in multi-year military order backlog.
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Handling/Packaging Systems
Handling/Packaging Systems' sales in 1993 were down 6% from 1992. Domestic
Handling sales were up 17% as demand for material handling equipment in the
United States showed substantial improvement during the year. However, this
increase was more than offset by a decline in continental Europe and the
unfavorable effects of the stronger dollar. Recessionary conditions in
continental Europe, especially Germany, resulted in lower volume and pricing
levels, leading to a sales decline of 21% for the European Handling unit
overall. Packaging sales fell by 1% during the year. Higher volume in North
American strapping and machines was more than offset by the impact of a
stronger dollar on European sales, and lower sales of stitching products.
Segment operating profit in 1993 was 20% below 1992. Handling profit fell 20%,
as improved domestic volume and cost reduction efforts throughout the group
were not enough to offset the recessionary impact of lower volume and pricing
on the European operations and the effect of a stronger dollar. Packaging
operating profit was 10% lower than the prior year as improved strapping and
machine volume in North America was more than offset by lower stitching product
volume and the effect of a stronger dollar.
Sales for the segment fell by less than 1% in 1992 as compared with 1991.
Recessionary conditions in capital goods markets led to intensified price
competition which caused the segment's sales reduction. Handling's sales in
1992 were largely unchanged from 1991 due to the offsetting effects of lower
selling prices, primarily in North America, and higher unit sales in Germany,
which were up 9%. Packaging's sales fell by 6% with most of the decline in
machine sales. Operating profit for the segment declined 29% in 1992, due to
lower North American selling prices and reduced benefits from liquidations of
LIFO inventories.
Handling/Packaging Systems ended 1993 with an order backlog of $71.6, down from
$81.0 at the end of 1992 (at the same exchange rates) because of lower orders
in the European Handling business.
Restructuring Charge
The $5.6 restructuring charge in 1993 consisted of costs associated with the
closure of several small facilities, personnel reductions and write-offs of
non-performing equipment and inventory. The personnel reductions relate
primarily to the European Handling operations. These reductions, together with
others that have occurred in 1993 and 1992, will result in a total reduction of
8% in the Company's work force.
Unusual Items
Unusual items in 1992 and 1991 were $2.5 and $3.3, respectively, and reflected
unfavorable adjustments with respect to non-core businesses which were divested
in 1992 and 1993.
16
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<PAGE>
Interest Expense
The Company has a highly leveraged capital structure with substantial net
interest expense. Net interest expense was $49.1, $51.4, and $56.1 in 1993,
1992, and 1991, respectively. The declines in 1993 and 1992 were largely the
result of lower average outstanding borrowings. In 1992, the Company
substantially fixed its future interest rates. Completion of a debt
refinancing in 1992 included the placement of $220.0 of fixed rate (12 1/8%)
Senior Subordinated Debentures and retirement of Subordinated Increasing Rate
Notes. In addition, the Company has long-term interest rate agreements as
required under its bank credit agreement, which effectively provide fixed rates
of interest on 67% of its bank obligations at the end of 1993.
Nonoperating Items
The Company incurs certain expenses which are not related to its ongoing
operations. These include costs for environmental matters arising from sites
related to former operations of a predecessor of the Company, and
postretirement expenses attributable to disposed of or discontinued operations.
The Company has been identified as one of four potentially responsible parties
at a Superfund site in Duluth, Minnesota. In 1991, based on a review of its
environmental matters involving nonoperating locations, the Company took a
special charge of $6.0, of which $4.5 was attributable to its estimate of its
share of the potential costs related to the Duluth site. Based on its
experience at the Duluth site since 1991, and further studies conducted by the
Company in response to a request issued by the Minnesota Pollution Control
Agency in 1993, the Company took an additional special charge of $3.9 for
environmental matters in the fourth quarter of 1993. The charge was based on
the Company's estimate of its share of the likely costs to complete remediation
of the soils at the site to standards consistent with industrial use and to
further investigate the underwater sediments. It does not attempt to account
for potential costs of remediation consistent with an alternative use, or to
account for remediation of the underwater sediments, which the Company believes
are not reasonably determinable absent further investigation and indication by
governmental agencies as to what level of remediation, if any, will be required.
The Company believes that further remediation at the Duluth site should and will
be consistent with its long-time industrial use. Were the governmental agencies
to insist upon clean-up to residential use standards, or require remediation of
the underwater sediments, it is likely that the costs of remediation would be
significantly higher. (See Note 17 of Notes to Consolidated Financial
Statements.)
Provision for Income Taxes
The high level of net interest expense and continued sluggish levels of
economic activity caused domestic losses in 1993, 1992, and 1991. These losses
can be carried forward and tax benefits realized in future years, but did not
result in federal tax benefits in the calculation of the provision for income
taxes for the 1991-1993 period. Consequently, the taxes due to foreign and
state authorities were not offset by any U.S. federal income tax benefits in
this period. As a result, the Company recorded a tax expense compared to
pretax losses in 1993 and 1992 and a tax expense in excess of pretax income in
1991. The decline in taxes in 1993, from 1992, was due to lower foreign
income.
17
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<PAGE>
At the end of 1993, the Company's U.S. federal income tax returns for the years
1988 through 1990 were in the process of examination. Resolution of the years
1982-87 is pending with the Appeals Division of the Internal Revenue Service.
The Company believes that adequate provision has been made for the possible
assessments of additional taxes. However, there can be no assurance that
federal income tax issues for the years 1982-1990 will be resolved in
accordance with the Company's expectations.
In 1992, the Company adopted a new method of accounting for income taxes (see
Cumulative Effect of Accounting Changes and Note 3 of Notes to Consolidated
Financial Statements). The effect of this change on taxes provided against
results of operations in 1993 and 1992 was immaterial.
Extraordinary Loss
In 1992, as part of its debt refinancing, the Company redeemed its Increasing
Rate Notes and negotiated an amended bank credit agreement. These actions
necessitated the write-off of related deferred debt issuance costs amounting to
$7.6 without any net tax benefit in 1992.
Cumulative Effect of Accounting Changes
In 1992, the Company adopted the Financial Accounting Standards Board's
Statements of Financial Accounting Standards (FAS) No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and No. 109
"Accounting for Income Taxes". The cumulative effects of these adoptions were
recognized in 1992, as of the beginning of the year. The adoption of FAS No.
106 resulted in a charge of $9.2 (net of taxes), while the adoption of FAS No.
109 resulted in a credit of $3.1. (See Note 3 of Notes to Consolidated
Financial Statements.)
Intangible Assets
The Company regularly reviews the carrying values of long-lived assets for
potential impairment based on earnings history and market conditions.
Impairment is determined by comparing the sum of the undiscounted future cash
flows attributable to the businesses to which the intangible assets relate to
the carrying value of all the assets attributable to such businesses. Under
this analysis, the Company has determined that its intangible assets at present
are not impaired. However, in the light of changing conditions in the markets
of the businesses to which the intangible assets relate, including changes
taking place in the aerospace and newspaper industries, the Company will
continue to periodically assess the carrying values of its intangible assets
using the analysis described above and other analyses as deemed appropriate,
and may conclude at some point in the future that their value has been impaired.
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<PAGE>
Liquidity and Capital Resources
Capital Resources
At December 26, 1993, cash totaled $31.9 compared with $38.6 at the end of
1992. During the fourth quarter of 1993 the Company reached an accord with its
bank group to amend its credit agreement, enabling it to maintain compliance
with the terms of its existing credit agreement. Under the amended credit
agreement, during 1994 the Company will be able to borrow for general corporate
purposes up to an additional $36.7. However, outstanding bank borrowings at
the end of each fiscal quarter will be limited to between $9.7 and $16.7 above
its year end 1993 bank borrowings of $200.1. In addition, $5.8 will be
available for use in connection with the Duluth Superfund site. The Company
believes that the revised credit agreement provides for adequate liquidity in
1994.
Based on the level of operating profit achieved in 1993, the Company believes
that it will be unlikely that operating cash flow combined with the additional
borrowing capacity available under the amended credit agreement will be
sufficient to meet the Company's projected cash requirements in 1995 and 1996,
which include long-term debt amortization of $24.7 in 1995 and $88.2 in 1996.
The Company is evaluating alternative actions to refinance some or all of its
long-term bank obligations in order to improve its financial flexibility beyond
1994.
Cash Flow (see Consolidated Statement of Cash Flows)
Cash inflows provided by operating activities were $8.0 and $23.4 in 1993 and
1991, respectively, while operating activities used cash of $7.2 in 1992.
Excluding debt issuance costs related to the 1992 financing plan, cash inflows
provided by operating activities were $4.8 in 1992. Cash inflows in 1992,
excluding debt issuance costs, were down mainly due to lower operating earnings
and increased working capital requirements.
Cash outflows used by investing activities were $13.1, $26.3 and $9.4,
respectively, in 1993, 1992 and 1991. Included in 1993 and 1992 capital
expenditures were expansion projects of $6.1 and $8.8, respectively. Expansion
spending in 1993 included an additional annealing furnace to expand capacity at
the Special Materials operation and a new production line for polyester
strapping at Packaging. Expansion spending in 1992 included the implementation
of advanced manufacturing techniques to further enhance the quality of Special
Materials' atomized metal powders and the establishment of Aerospace
Components' new Tulsa facility for repair of jet engine fan blades. Expansion
spending in 1991 totaled $4.5 and included the purchase of a German production
facility near Leipzig which, along with the establishment of new distribution
centers, enhanced the Company's business in eastern Germany. Management
believes that capital expenditures have been adequate to properly maintain the
Company's businesses and provide for anticipated growth opportunities. At the
end of 1993, the unexpended balance on approved capital expenditure projects
was $6.0. The Company anticipates that 1994 capital spending will be
approximately $20.0 which is expected to be funded by operations.
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<PAGE>
Cash outflows used for financing activities were $1.3 and $21.8 in 1993 and
1991, respectively, while in 1992, a net cash inflow of $67.5 resulted from
implementation of the 1992 debt refinancing. Outflows in 1991 represented
scheduled amortization of long-term debt, but included the use of $7.5 of
deferred term loan facilities.
Foreign Operations
The Company does business in a number of foreign countries, mainly through its
Handling/Packaging Systems segment. The results of these operations are
initially measured in local currencies, principally in British pounds, German
marks, Canadian dollars, or Australian dollars and then translated into U.S.
dollars at applicable exchange rates. The reported results of these operations
are sensitive to changes in applicable foreign exchange rates and could have a
material effect on the Company's results of operations. In 1993, the dollar
was generally stronger against most European currencies than in 1992, resulting
in a negative impact on sales of $35.7 and on operating income of $2.4.
Fluctuations in foreign currency exchange rates in 1992 had very little effect
on sales and operating income. (For additional information about the Company's
operations by geographic area, see Note 8 of Notes to Consolidated Financial
Statements.)
Effects of Inflation
The impact of inflation on the Company in recent years has not been material,
and it is not expected to have a significant effect in the foreseeable future.
20
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<PAGE>
The Interlake Corporation - Report of Management
The consolidated financial statements of The Interlake Corporation, presented
on pages 23 through 26 of this annual report, have been prepared by management,
which is responsible for their accuracy and integrity. They have been prepared
in conformity with generally accepted accounting principles, consistently
applied, and include informed judgments and estimates, as required. Other
financial information in this annual report is consistent with the financial
statements.
Interlake's system of internal controls is designed to provide reasonable
assurance, at a justifiable cost, as to the reliability of financial records
and reporting and the protection of assets. This system includes
organizational arrangements with clearly defined lines of responsibility.
Internal controls are monitored through recurring internal audit programs.
Price Waterhouse, independent accountants, have examined Interlake's financial
statements and their opinion appears below.
The Audit Review Committee of the Board of Directors, composed solely of
outside directors, determines that management is fulfilling its financial
responsibilities by meeting periodically with Price Waterhouse, the internal
auditors and management to review accounting, auditing and financial reporting
matters. The internal auditors and independent accountants have free and
complete access to the Audit Review Committee.
Interlake has adopted formal corporate policies demanding high standards of
ethical and financial integrity and has disseminated these policies to
appropriate employees. Internal audit procedures have been developed to
provide reasonable assurance that violations of these policies, if any, are
detected.
/s/ John J. Greisch
Vice President - Finance, Treasurer and Chief Financial Officer
/s/ W. Robert Reum
Chairman, President and Chief Executive Officer
Report of Independent Accountants
To the Board of Directors and Shareholders of The Interlake Corporation:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of shareholders' equity
present fairly, in all material respects, the financial position of The
Interlake Corporation and its subsidiaries at December 26, 1993 and December
27, 1992, and the results of their operations and their cash flows for each of
the three years in the period ended December 26, 1993, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of The Interlake Corporation's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
21
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<PAGE>
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 3 to the consolidated financial statements, the Company
changed its method of accounting for postretirement benefits other than
pensions and its method of accounting for income taxes in 1992.
/s/ PRICE WATERHOUSE
Chicago, Illinois
January 27, 1994
22
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<PAGE>
<TABLE>
<CAPTION>
The Interlake Corporation
Consolidated Statement of Operations
For the Years Ended December 26, 1993, December 27, 1992 and December 29, 1991
(in thousands except per share data)
__1993___ __1992___ __1991___
<S> <C> <C> <C>
Net Sales $ 681,330 $ 708,199 $ 714,742
Cost of Products Sold 520,508 527,857 521,803
Selling and Administrative Expense 117,025 127,436 128,056
Unusual Items - 2,523 3,344
Restructuring Charge ____5,611 ________- ________-
Operating Income 38,186 50,383 61,539
Interest Expense 50,906 54,284 58,654
Interest Income (1,855) (2,859) (2,508)
Dividend Income - - (220)
Nonoperating Expense (see Note 17) ____5,359 ______484 ____5,186
Income (Loss) Before Taxes on Income,
Minority Interest, Extraordinary Loss
and Accounting Changes (16,224) (1,526) 427
Provision for Income Taxes ____6,542 ____9,040 ___10,530
Income (Loss) Before Minority Interest,
Extraordinary Loss and Accounting
Changes (22,766) (10,566) (10,103)
Minority Interest in Net Income
of Subsidiaries ____3,196 ____3,424 ____3,641
Income (Loss) Before Extraordinary Loss
and Accounting Changes (25,962) (13,990) (13,744)
Extraordinary Loss on Early
Extinguishment of Debt, Net of
Applicable Income Taxes - (7,567) -
Cumulative Effect of Change
in Accounting Principles ________- ___(6,141) ________-
Net Income (Loss) $ (25,962) $ (27,698) $ (13,744)
Income (Loss) Per Share of Common Stock:
Income (Loss) Before Extraordinary
Loss and Accounting Changes $ (1.18) $ (0.84) $ (1.31)
Extraordinary Loss - (0.46) -
Accounting Changes ________- ____(0.37) ________-
Net Income (Loss) $ (1.18) $ (1.67) $ (1.31)
Average Shares Outstanding 22,027 16,754 10,484
(See notes to consolidated financial statements)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
The Interlake Corporation
Consolidated Balance Sheet - December 26, 1993 and December 27, 1992
(Dollars in thousands)
__1993___ ___1992__
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 31,934 $ 38,640
Receivables, less allowances of $2,775
in 1993 and $3,989 in 1992 107,861 129,370
Inventories 77,025 74,121
Other current assets ____9,720 ____9,454
Total Current Assets __226,540 __251,585
Goodwill and Other Assets:
Goodwill, less accumulated amortization
of $20,141 in 1993 and $18,646 in 1992 38,916 42,905
Other assets ___61,888 ___60,583
Total Goodwill and Other Assets __100,804 __103,488
Property, Plant and Equipment:
Land 6,729 6,863
Buildings 74,175 73,629
Equipment 284,060 265,025
Construction in progress 4,222 15,319
Less - depreciation and amortization _(219,495) _(204,617)
Property, Plant and Equipment, net __149,691 __156,219
Total Assets $ 477,035 $ 511,292
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 60,382 $ 60,702
Accrued liabilities 43,272 42,474
Interest payable 13,913 13,341
Accrued salaries and wages 14,713 13,759
Income taxes payable 17,866 21,793
Debt due within one year ____2,525 ____6,727
Total Current Liabilities __152,671 __158,796
Long-Term Debt __440,610 __444,074
Other Long-Term Liabilities ___65,765 ___63,794
Deferred Tax Liabilities ___19,771 ___20,233
Commitments and Contingencies ________- ________-
Minority Interest ___18,830 ___17,958
Preferred Stock - 2,000,000 shares authorized
Convertible Exchangeable Preferred Stock - Redeemable,
par value $1 per share, issued 40,000 shares 39,155 39,155
Shareholders' Equity:
Common stock, par value $1 per share, authorized
100,000,000 shares, issued 23,228,695 in 1993 and 1992 23,229 23,229
Additional paid-in capital 30,248 30,271
Cost of common stock held in treasury (1,202,000 shares
in 1993 and 1,201,956 shares in 1992) (28,047) (28,060)
Retained earnings (Accumulated deficit) (253,215) (227,252)
Unearned compensation (11,279) (12,934)
Accumulated foreign currency
translation adjustments __(20,703) __(17,972)
Total Shareholders' Equity _(259,767) _(232,718)
Total Liabilities and Shareholders' Equity $ 477,035 $ 511,292
(See notes to consolidated financial statements)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
The Interlake Corporation
Consolidated Statement of Cash Flows
For the Years Ended December 26, 1993, December 27, 1992 and December 29, 1991
(in thousands)
___1993___ ___1992___ ___1991___
<S> <C> <C> <C>
Cash Flows from (for) Operating Activities:
Net income (loss) $ (25,962) $ (27,698) $ (13,744)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Restructuring charge 5,611 - -
Depreciation and amortization 25,040 27,535 25,324
Extraordinary item - 7,488 -
Debt issuance costs - (11,952) -
Accounting changes - 6,141 -
Nonoperating environmental matters 4,750 - 6,000
Other operating adjustments (7,231) (4,412) 1,963
(Increase) Decrease working capital:
Accounts receivable 16,233 (6,469) (754)
Inventories (4,190) (3,616) 8,548
Other current assets (1,642) 190 5,518
Accounts payable 519 2,724 2,033
Other accrued liabilities (2,708) 10,779 (11,773)
Income taxes payable ___(2,432) ___(7,866) ______260
Total Working Capital Change ____5,780 ___(4,258) ____3,832
Net Cash Provided (Used) by Operating Activities ____7,988 ___(7,156) ___23,375
Cash Flows from (for) Investing Activities:
Capital expenditures (14,540) (24,588) (13,472)
Proceeds from disposal of PP&E 284 636 2,344
Acquisitions - (2,319) (5,472)
Redemption of preferred stock received from
1984 business disposition - - 6,000
Divestitures - - 2,160
Other investment flows ____1,122 ________- ___(1,007)
Net Cash Provided (Used) by Investing Activities __(13,134) __(26,271) ___(9,447)
Cash Flows from (for) Financing Activities:
Proceeds from issuance of long-term debt 104 267,832 111,344
Retirements of long-term debt (7,582) (282,430) (133,179)
Proceeds from issuance of common stock - 41,759 -
Proceeds from issuance of preferred stock - 39,155 -
Other financing flows ____6,158 ____1,217 _______36
Net Cash Provided (Used) by Financing Activities ___(1,320) ___67,533 __(21,799)
Effect of Exchange Rate Changes _____(240) ___(6,007) ______(61)
Increase (Decrease) in Cash and Cash Equivalents (6,706) 28,099 (7,932)
Cash and Cash Equivalents, Beginning of Year ___38,640 ___10,541 ___18,473
Cash and Cash Equivalents, End of Year $ 31,934 $ 38,640 $ 10,541
(See notes to consolidated financial statements)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
The Interlake Corporation
Consolidated Statement of Shareholders' Equity
For the Years Ended December 26, 1993,December 27, 1992 and December 29, 1991
(in thousands)
Common Stock Common Stock Retained Unearned Foreign
and_Paid-In_Capital Held_in_Treasury Earnings Compen- Currency
Shares Amount Shares Amount (Deficit) sation Translation Total
____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 30, 1990 11,741 $ 11,741 (1,351) $ (30,685) $(182,654) $ (16,064) $ (9,146) $(226,808)
Net income (loss) (13,744) (13,744)
Stock incentive plans 94 1,976 (2,010) 745 711
ESOP transactions 1,207 1,207
Translation loss ______ ________ ______ _________ _________ _________ ____(831) _____(831)
Balance December 29, 1991 11,741 11,741 (1,257) (28,709) (198,408) (14,112) (9,977) (239,465)
Net income (loss) (27,698) (27,698)
Sale of stock 11,488 41,759 41,759
Stock incentive plans 55 649 (1,146) 273 (224)
ESOP transactions 905 905
Translation loss ______ ________ ______ _________ _________ _________ __(7,995) ___(7,995)
Balance December 27, 1992 23,229 53,500 (1,202) (28,060) (227,252) (12,934) (17,972) (232,718)
Net income (loss) (25,962) (25,962)
Stock incentive plans (23) 13 (1) 46 35
ESOP transactions 1,609 1,609
Translation loss ______ ________ _______ _________ _________ _________ ___(2,731) ___(2,731)
Balance December 26, 1993 23,229 $ 53,477 (1,202) $ (28,047) $(253,215) $ (11,279) $ (20,703) $(259,767)
(See notes to consolidated financial statements)
</TABLE>
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<PAGE>
The Interlake Corporation
Notes to Consolidated Financial Statements
For the Years Ended December 26, 1993, December 27, 1992 and December 29, 1991
(All dollar amounts in thousands except where indicated)
NOTE_1_-_Summary_of_Significant_Accounting_Policies
Principles of Consolidation - The consolidated financial statements include the
accounts of all majority-owned domestic and foreign subsidiaries.
Cash Equivalents - The Company considers all highly liquid financial
instruments with original maturities of three months or less to be cash
equivalents and reports the earnings from these instruments as interest income.
Revenue Recognition - Revenue from sales is generally recognized when product
is shipped, except on long-term contracts in the Handling/Packaging Systems
segment, where revenue is accounted for principally by the
percentage-of-completion method.
Deferred Charges - The Company periodically enters into long-term agreements
with customers where tooling and other development costs are capitalized as
Other Assets. These assets are then amortized during the production stage by
the units of production method.
Inventories - Inventories are stated at the lower of cost or market value.
Gross inventories valued on the LIFO method represent approximately 44% and 43%
of gross inventories and 55% and 50% of domestic gross inventories at December
26, 1993 and December 27, 1992, respectively. The current cost of these
inventories exceeds their valuation determined on a LIFO basis by $16,628 at
December 26, 1993 and by $17,689 at December 27, 1992.
During 1993, 1992, and 1991, inventory quantities valued on the LIFO
method were reduced, resulting in the liquidation of LIFO inventory quantities
carried at lower costs that prevailed in prior years as compared with the costs
of production for 1993, 1992, and 1991. As a result, pretax income from core
operations in 1993, 1992, and 1991 was increased by $1,201, $1,948, and $4,643,
respectively. Pretax income from non-core operations in 1991 was increased by
$277.
<TABLE>
<CAPTION>
Inventories by category at December 26, 1993 and December 27, 1992 were:
__1993__ __1992__
<S> <C> <C>
Raw materials $ 13,443 $ 12,291
Semi-finished and finished products 54,795 53,082
Supplies ___8,787 ___8,748
$ 77,025 $ 74,121
Property, Plant and Equipment and Depreciation - For financial reporting
purposes, plant and equipment are depreciated principally on a straight-line
method over the estimated useful lives of the assets. Depreciation claimed for
income tax purposes is computed by use of accelerated methods.
</TABLE>
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<PAGE>
Upon sale or disposal of property, plant and equipment, the asset cost
and related accumulated depreciation are removed from the accounts, and any
gain or loss on the disposal is generally credited or charged to nonoperating
income. (In 1992 and 1991, gains and losses on disposals related to the 1989
restructuring program [see Note 6] were included in operating
income as unusual items.)
Expenditures for renewals and betterments which extend the originally
estimated useful life of an asset or materially increase its productivity are
capitalized. Expenditures for maintenance and repairs are charged to expense
as incurred.
Property, plant and equipment by category at December 26, 1993 and
December 27, 1992 were:
<TABLE>
<CAPTION>
__1993__ __1992__
<S> <C> <C>
At cost:
Land $ 6,729 $ 6,863
Buildings 74,175 73,629
Equipment 284,060 265,025
Construction in progress ____4,222 ___15,319
369,186 360,836
Less-Depreciation and amortization _(219,495) _(204,617)
$ 149,691 $ 156,219
</TABLE>
Goodwill - Goodwill represents the excess of the purchase price over the fair
value of the net assets of acquired companies and is amortized on a
straight-line method over periods not exceeding thirty years. The Company
carries its intangible assets at their purchase prices, less amortized amounts,
but subject to regular review for impairment.
Foreign Currency Translation - The financial position and results of operations
of the Company's foreign subsidiaries are measured using local currency as the
functional currency. Assets and liabilities of these subsidiaries are
translated at the exchange rate in effect at each year end. Income statement
accounts are translated at the average rate of exchange prevailing during the
year. Translation adjustments arising from differences in exchange rates from
period to period are included in the accumulated foreign currency translation
adjustments account in shareholders' equity.
Foreign Exchange Contracts - The Company periodically enters into foreign
exchange contracts to hedge inventory purchases and other transactions
denominated in foreign currencies. Premiums received and fees paid on foreign
exchange contracts are deferred and amortized over the period of the contracts.
At December 26, 1993, the Company had outstanding currency contracts to
exchange $2,995 for foreign currency (may include Canadian dollars, Australian
dollars, deutsche marks, pounds sterling, Japanese yen and Belgian francs).
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial guarantee is represented by the currency
fluctuations related to the amounts to be exchanged; however, the Company does
not anticipate nonperformance by the counterparties.
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<PAGE>
Interest Rate Hedges - The Company utilizes various financial instruments to
hedge its interest rate exposures (see Note 16). Interest expense increases or
decreases are accrued as they occur and are settled on a quarterly basis. At
current interest rates the Company has no exposure to credit loss.
Research and Development Expenses - Research and development expenditures for
Company sponsored projects are generally expensed as incurred. Research and
development expenses included in selling and administrative expenses were
$2,153, $2,209, and $2,510 for the Engineered Materials segment in 1993, 1992,
and 1991, respectively, and $1,092, $607, and $1,272 for the Handling/Packaging
Systems segment in 1993, 1992, and 1991, respectively.
NOTE_2_-_Restructuring_Charge
During 1993, the Company identified restructuring charges totaling $5,611
associated with the closure of several small facilities, personnel reductions
which relate primarily to the European Handling operations, and the write-off
of non-performing equipment and inventory.
NOTE_3_-_Cumulative_Effect_of_Changes_in_Accounting_Principles
In the fourth quarter of 1992, the Company changed its method of accounting for
postretirement benefits and income taxes by adopting pronouncements of the
Financial Accounting Standards Board which are mandatory for fiscal years
beginning after December 15, 1992. The one-time cumulative effect of these new
accounting standards on income was a net charge of $6,141 which was reported
retroactively to the beginning of fiscal 1992. Such accounting changes did not
affect cash flows in 1992 and will not affect future cash flows.
The Company provides certain medical and life insurance benefits to
qualifying domestic retirees. In 1992, the Company changed its method of
accounting for these postretirement benefits by adopting the Financial
Accounting Standards Board's Statement of Financial Accounting Standards (FAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions". This change recognized the difference between the estimated
accumulated postretirement benefit obligation under FAS No. 106 ($34,477) and
the obligation accrued under the Company's previous accrual method ($20,439) by
making a charge against income of $14,038 ($9,265 after taxes, equivalent to
$.56 per share) retroactively to the beginning of the fiscal year.
In 1992, the Company changed its method of accounting for income taxes
by adopting the Financial Accounting Standards Board's FAS No. 109, "Accounting
for Income Taxes". In making this change, the Company recognized the
cumulative effect of the difference in accounting methods as a $3,124 credit to
earnings (equivalent to $.19 per share) retroactive to the beginning of the
fiscal year.
NOTE_4_-_Financing_Plan
During 1992, the Company consummated a comprehensive Financing Plan. The plan
was designed to increase the Company's ability to meet working capital
requirements, to make capital expenditures, and to take advantage of improved
economic conditions and future business opportunities.
29
PAGE
<PAGE>
To implement the Financing Plan, the Company:
a) sold $40,000 of convertible exchangeable preferred stock
receiving net proceeds of $39,155 (see Note 12);
b) sold 11,488,000 shares of common stock (including the
underwriters' over-allotment option) receiving net proceeds of
$41,759 (see Note 13);
c) sold $220,000 of 12 1/8% Senior Subordinated Debentures due in
2002 receiving net proceeds of $212,463 (see Note 15);
d) entered into an agreement with its bank group which amended and
restated the Company's bank credit agreement to modify payment
and other terms; and
e) redeemed $200,000 of Subordinated Increasing Rate Notes for
$200,708 (including accrued interest) and repaid $51,074 of
long-term bank debt (see Note 15).
The 1992 Financing Plan was designed to increase the Company's equity
base, fix the rate of interest and extend the maturity of its subordinated
debt. The bank credit agreement was also amended to defer scheduled repayments
and adjust the terms of covenants.
NOTE_5_-_Extraordinary_Loss
The 1992 Financing Plan included an early extinguishment of debt, reflecting
the redemption of the Company's Increasing Rate Notes and the comprehensive
amendment and restatement of its original 1989 Credit Agreement. This
necessitated the write-off of issuance costs related to this previously
outstanding indebtedness which were originally deferred so that they could be
expensed over the original lives of such indebtedness. This resulted in an
extraordinary loss of $7,567 without any currently usable tax benefit in 1992
(equivalent to $.46 per share).
The cash flow impact of the early extinguishment of debt was
immaterial. However, new debt issuance costs related to the amendment and
restatement of the bank credit agreement and the issuance of the 12 1/8% Senior
Subordinated Debentures had a negative cash flow consequence of $11,952 which
was deducted in determining net cash provided (used) by operating activities in
the Consolidated Statement of Cash Flows.
NOTE_6_-_Unusual_Items
During 1989, the Company adopted a restructuring program which modified its
strategic operating plan. The modified strategic operating plan identified
certain businesses and Corporate assets to be disposed of (the Designated Asset
Sale Program) and implemented major Corporate cost reductions. Most of the
designated businesses were sold or shut down in 1990. Additional costs of
$2,523 and $3,344 were provided for in 1992 and 1991, respectively, reflecting
unfavorable adjustments with respect to non-core businesses designated to be
divested including losses on disposition of assets. These divestitures were
completed in 1993.
30
PAGE
<PAGE>
NOTE_7_-_Acquisitions
In 1989, the Company and certain of its subsidiaries acquired 80% interests in
Power Industries, Ltd. of Maidenhead, England and Power Strap, Inc. of
Cleveland, Ohio, along with its wholly owned subsidiary Power Polystrap of
Jacksonville, Florida, which was sold in 1990. The Company accounted for this
acquisition using the purchase method. Earn-out payments (based on
performance) were made in 1992, 1991, and 1990 for $275, $28, and $3,961,
respectively, and are being amortized on a straight-line basis over seven,
eight, and nine year periods, respectively. In 1990, Power Strap, Inc. changed
its name to InterPower Packaging Corporation ("InterPower"). The remaining 20%
interests in InterPower and Power Industries, Ltd. were acquired in July, 1992
and November, 1991, respectively, for $2,045 and $5,472, respectively, with
related increases in goodwill of $1,752 and $4,387, respectively. InterPower
has since been merged into the Interlake Packaging Corporation.
NOTE_8_-_Business_Segment_Information
The Company operates in two segments, each of which is composed of products
which have a similar strategic emphasis. The two business segments are:
Engineered Materials - includes Special Materials, which produces ferrous metal
powder used to manufacture precision parts, and Aerospace Components, which
manufactures precision jet engine components and repairs jet engine fan blades.
Handling/Packaging Systems - comprised of the Company's Handling operations,
which design, manufacture and sell storage rack, shelving and related equipment
primarily for use in warehouses, distribution centers and for other storage
applications; and the Company's Packaging operations, which design and sell
machinery for applying strapping and stitching wire, and also supply strapping
and stitching wire for use in such machines.
The accompanying tables present financial information by business segment
for the years 1993, 1992, and 1991. Operating profit consists of net sales of
the segment less all costs and expenses related to the segment. "Corporate
Items" includes net interest expense and other items which are not related to
either of the two business segments. "Corporate Items" includes special
nonoperating charges of $4,750 and $6,000 for environmental matters in 1993 and
1991, respectively (see Note 17). Total assets by business segment consist of
those assets used directly in the operations of each segment. Corporate net
assets consist principally of cash, nonoperating investments, prepaid pension
cost and liabilities related to closed plants and discontinued operations.
31
PAGE
<PAGE>
<TABLE>
<CAPTION>
Information_About_the_Company's_Business_Segments
The operating profits of specific segments were increased (decreased) by the
following significant items:
Handling/
Engineered Packaging
_Materials_ _Systems_
(in millions)
<S> <C> <C>
1993
Restructuring charge $ (1.8) $ (3.8)
Liquidation of LIFO inventory quantities - 1.2
1992
Businesses to be divested* $ - $ (2.5)**
Liquidation of LIFO inventory quantities .4 1.5
1991
Businesses to be divested* $ - $ (3.3)**
Liquidation of LIFO inventory quantities .5 4.1
* Businesses to be divested under the Designated Asset Sale Program
(see Note 6).
** Included in unusual items.
</TABLE>
<TABLE>
<CAPTION>
Assets Depreciation
Operating at Year and Capital
Year Net_Sales(a) _Profit __End Amortization Expenditures
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Engineered Materials 1993 $192.5 $ 24.5 $178.3 $ 12.2 $ 9.0
1992 190.0 29.6 173.5 11.8 15.5
1991 192.4 32.4 162.6 11.8 6.5
Handling/Packaging Systems 1993 488.8 15.3 265.6 12.6 5.5
1992 518.2 21.5 279.4 15.5 9.1
1991 522.3 30.4 296.6 13.3 7.0
Corporate Items/Eliminations 1993 - (56.0) 33.1 .2 -
1992 - (52.6) 58.4 .2 -
1991 - (62.4) 18.9 .2 -
Consolidated 1993 681.3 (16.2) 477.0 25.0 14.5
1992 708.2 (1.5) 511.3 27.5 24.6
1991 714.7 .4 478.1 25.3 13.5
(a) includes sales in _1993_ _1992_ _1991_
- Engineered Materials: Special Materials $131.5 $122.5 $114.5
Aerospace Components 61.0 67.5 77.9
- Handling/Packaging Systems: Handling 366.7 395.3 392.0
Packaging 122.1 122.9 130.3
</TABLE>
32
PAGE
<PAGE>
The following table presents information about the Company's operations by
geographic area. Transfers between geographic areas, which are all in the
Handling/Packaging Systems segment, are made at prices which approximate the
prices of similar items sold to distributors. Operating profit by geographic
area is the difference between net sales attributable to the area and all costs
and expenses related to the geographic area. Total assets consist of those
assets used directly in the operations in the geographic areas shown. Export
sales to unaffiliated customers included in the United States' sales are not
material. Sales to domestic and foreign government agencies are not material.
<TABLE>
<CAPTION>
Information_About_the_Company's_Operations_by_Geographic_Region
The operating profits by geographic area were increased (decreased) by the
following significant items:
Canada &
United_States Europe Australia
(in millions)
<S> <C> <C> <C>
Restructuring charge
1993 $(3.8) $(1.1) $ (.7)
Businesses to be divested*
1992** - (1.6) (.9)
1991** .9 - (4.2)
Liquidation of LIFO inventory
quantities
1993 - 1.1 .1
1992 1.1 .7 .1
1991 3.1 1.3 .2
* Businesses to be divested under the Designated Asset Sale Program
(see Note 6).
** Included in unusual items.
</TABLE>
<TABLE>
<CAPTION>
______Net_Sales______
Inter- Operating Assets at
Year Customers geographic __Profit_ Year-End_
(in millions)
<S> <C> <C> <C> <C> <C>
United States 1993 $390.0 $ 2.6 $ 28.3 $275.1
1992 363.5 3.6 32.7 274.4
1991 364.0 5.8 44.2 255.7
Europe 1993 206.5 1.4 8.5 94.7
1992 256.5 1.2 15.7 106.3
1991 254.9 2.4 19.0 125.0
Canada and Australia 1993 84.8 1.2 3.0 74.1
1992 88.2 2.2 2.7 72.2
1991 95.8 1.1 (.4) 78.5
Corporate Items/
Eliminations 1993 - (5.2) (56.0) 33.1
1992 - (7.0) (52.6) 58.4
1991 - (9.3) (62.4) 18.9
Consolidated 1993 681.3 - (16.2) 477.0
1992 708.2 - (1.5) 511.3
1991 714.7 - .4 478.1
</TABLE>
33
PAGE
<PAGE>
NOTE_9_-_Income_Taxes
Provisions for income taxes were calculated according to the precepts of FAS
No. 109 in 1993 and 1992 and according to Accounting Principles Board Opinion
No. 11 "Accounting for Income Taxes" in 1991. The balance sheet effects
related to the retroactive adoption of FAS No. 109 as of the beginning of 1992
were decreased short-term assets of $8,260, increased short-term liabilities of
$7,314, increased long-term assets of $22,323, and decreased long-term
liabilities of $1,148.
<TABLE>
<CAPTION>
Pretax income (loss) consisted of:
__1993__ __1992__ __1991__
<S> <C> <C> <C>
Domestic $(25,482) $(16,854) $(14,363)
Foreign ___9,258 __15,328 __14,790
$(16,224) $ (1,526) $ 427
The provisions for taxes on income consisted of:
__1993__ __1992__ __1991__
Current:
U.S. Federal $ 602 $ 1,080 $ 2,041
State 2,343 689 1,674
Foreign ___3,697 __8,614 __6,856
Total ___6,642 _10,383 _10,571
Deferred:
U.S. Federal - - -
State - - -
Foreign (31) 121 (41)
Translation adjustment _____(69) _(1,464) ______-
Total ____(100) _(1,343) ____(41)
Tax Provision $ 6,542 $ 9,040 $10,530
</TABLE>
In 1993, 1992, and 1991, high levels of net interest expense caused
domestic losses which were not currently eligible for federal tax benefits. As
a result, U.S. federal taxes in 1993, 1992, and 1991 were essentially the
result of tax adjustments related to earlier years. The benefit of the federal
tax net operating loss carryforwards and alternative minimum tax carryforwards
were $10,450 and $2,078, respectively, and will not begin to expire until 2005.
(Existing losses can be carried forward and tax benefits realized in future
years to the extent that domestic income is earned.)
State and foreign taxes were essentially the result of income earned
in those jurisdictions. Actual cash disbursements for income taxes and other
tax assessments were $8,586, $16,151, and $13,369 in 1993, 1992, and 1991,
respectively. Because of the Company's tax situation in 1993, 1992, and 1991,
effective tax rate analysis would not be meaningful.
34
PAGE
<PAGE>
Deferred tax liabilities and assets are comprised of the following:
<TABLE>
<CAPTION>
__1993__ __1992__
<S> <C> <C>
Deferred tax liabilities
Depreciation $ 19,771 $ 20,233
Other ___3,156 ___4,068
$ 22,927 $ 24,301
Deferred tax assets
Deferred employee benefits $ 16,400 $ 16,266
Net operating loss carryforward 12,681 9,386
AMT carryforwards 2,078 2,303
Inventory 4,188 4,510
Recapitalization costs 2,419 2,709
Environmental reserves 2,884 2,230
Other ___5,681 ___3,959
46,331 41,363
Valuation allowances _(23,489) _(17,178)
$ 22,842 $ 24,185
</TABLE>
As of December 26, 1993, U.S. federal income tax returns for the years
1988 through 1990 were in the process of examination. Resolution of years
1982-1987 is pending with the Appeals Division of the Internal Revenue Service.
The Company believes that adequate provision has been made for possible
assessments of additional taxes.
No provision has been made for U.S. income taxes on approximately
$25,648 of undistributed earnings of foreign subsidiaries. Due to federal tax
loss carryforwards and foreign tax credits, the Company anticipates that no
material tax cost will be incurred upon distribution of these earnings.
NOTE_10_-_Pensions
The Company has various defined benefit and defined contribution pension plans
which between them cover substantially all employees.
The provision for defined benefit pension costs includes current
costs, interest costs, actual return on plan assets, amortization of the
unrecognized net asset existing at the date of transition and net unrealized
gains and losses. Benefits are computed based mainly on years of service and
compensation during the latter years of employment. Company contributions are
determined according to the funding requirements set forth by ERISA.
Approximately two-thirds of the Company's defined benefit plans relate
to foreign locations which are denominated in currencies other than U.S.
dollars. The following table sets forth the funded status of the ongoing,
domestic and foreign defined benefit plans and the amounts included in the
year-end balance sheet. The Company's plans were generally overfunded and the
underfunded plans which existed were not significant.
35
PAGE
<PAGE>
<TABLE>
<CAPTION>
__1993__ __1992__
<S> <C> <C>
Plan assets at fair value $142,009 $122,190
Actuarial present value of accumulated benefit obligation:
Vested benefits 110,693 98,369
Non-vested benefits _____907 _____757
111,600 99,126
Effect of assumed future compensation increases __10,010 ___9,780
Projected benefit obligation for service to date _121,610 _108,906
Plan assets in excess of projected benefit obligation __20,399 __13,284
Items not yet recognized in earnings:
Unrecognized net asset at December 28, 1986
(being recognized over 15 years) 15,704 17,853
Unrecognized net actuarial gain (loss) 3,834 (4,785)
Unrecognized prior service cost __(5,033) __(4,539)
__14,505 ___8,529
Prepaid (Accrued) pension liability $ 5,894 $ 4,755
</TABLE>
<TABLE>
Net pension cost (income) included in operating income for these plans
consists of the following components:
<CAPTION>
__1993__ __1992__ __1991__
<S> <C> <C> <C>
Service cost 3,068 3,232 3,357
Interest cost 9,298 9,596 8,961
Actual return on plan assets [(income) loss] (12,107) (9,923) (14,134)
Net amortization and deferred items _____(434) ___(3,177) ____1,545
Net pension cost (income) $ (175) $ (272) $ (271)
Assumptions used in the computations:
Assumed discount rate 7-9% 7-9% 7-9%
Expected long-term rate of return on plan assets 7-9% 7-9% 7-9%
Rate of increase in future compensation levels 4-6% 5-7% 5-7%
</TABLE>
36
PAGE
<PAGE>
Pension plan assets are primarily invested in common and preferred stock,
short and intermediate term cash investments, and corporate bonds.
The expense for the Company's defined contribution pension plans was
$2,267, $2,307, and $2,332 in 1993, 1992, and 1991, respectively. Annual
contributions to defined contribution plans are equal to the amounts accrued
during the year.
In 1989, the Company established a non-contributory, defined
contribution employee stock ownership plan (ESOP) covering all domestic
employees not covered by collective bargaining agreements. Company
contributions are allocated to participants based on the ratio each
participant's compensation bears to the total compensation of all eligible
participants. The Company makes contributions to the plan in the amount
necessary to enable the plan to make its regularly scheduled payments of
principal and interest on its term loan under the bank credit agreement (see
Note 15). Amounts charged to employee benefits and interest during the year
totalled $1,508 and $703, respectively, in 1993, $1,307 and $846, respectively,
in 1992, and $1,207 and $1,254, respectively, in 1991.
NOTE_11_-_Postretirement_Benefits_Other_Than_Pensions
The Company has unfunded postretirement health care and death benefit plans
covering certain domestic employees. Effective as of the beginning of 1992,
the Company adopted FAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", for these domestic retiree benefit plans. Under
FAS No. 106, the Company is required to accrue the estimated cost of retiree
benefit payments, other than pensions, during the employee's active service
period. The cost of postretirement benefits historically has been actuarially
determined and accrued over the working lives of employees expected to receive
benefits with prior service costs being accrued over periods not exceeding
twenty-five years.
The Company elected to recognize this change in accounting on the
immediate recognition basis. The difference between the estimated accumulated
postretirement benefit obligation under FAS No. 106 ($34,477) and the unfunded
obligation accrued under the Company's previous accounting method ($20,439) was
charged against earnings as of the beginning of fiscal 1992 ($14,038). The
related balance sheet effect was an increase to long-term liabilities of
$14,038.
The following table sets forth the status of the plans, reconciled to
the accrued postretirement benefit cost recognized in the Company's balance
sheet.
<TABLE>
<CAPTION>
__1993__ __1992__
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 26,171 $ 26,178
Fully eligible active plan participants 2,436 3,419
Other active plan participants ___2,245 ___5,870
Total accumulated postretirement benefit obligation 30,852 35,467
Unrecognized prior service cost 2,341 -
Unrecognized gain (loss) ___1,511 _____(25)
Accrued postretirement benefit cost $ 34,704 $ 35,442
</TABLE>
37
PAGE
<PAGE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
_1993_ _1992_
<S> <C> <C>
Service cost on benefits earned $ 242 $ 464
Interest cost on accumulated postretirement
benefit obligation 2,389 2,808
Unrecognized prior service cost (123) -
Unrecognized (gain) loss ____(57) ______-
Net periodic postretirement benefit cost
charged to results from operations $ 2,451 $ 3,272
</TABLE>
For measuring the expected postretirement benefit obligation, a 15%
annual rate of increase in the per capita claims cost was assumed for 1993.
This rate was assumed to decrease 1% per year to 6% in 2002 and remain at that
level thereafter. The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% at December 31, 1993 and
8.5% at December 31, 1992.
If the health care cost trend rate were increased 1%, the accumulated
postretirement benefit obligation as of December 31, 1993 would have increased
by 7%. The effect of this change on the aggregate of service and interest cost
for 1993 would be an increase of 6%.
The provision for postretirement benefits other than pensions included
in operating income was $167, $1,958, and $1,505 in 1993, 1992, and 1991,
respectively. In 1993, costs were down from 1992 because of benefit changes
made by the Company in the second quarter which resulted in a curtailment gain
of $1,141. The provision for such costs included in nonoperating income was
$1,143, $1,314, and $225 in 1993, 1992, and 1991, respectively. The increase
in costs between 1992 and 1991 was largely the result of increased per capita
claims cost (caused by an increase in actual claims experience) and
nonrecurrence of favorable nonoperating accrual adjustments.
NOTE_12_-_Convertible_Exchangeable_Preferred_Stock
In connection with the 1992 Financing Plan, the Company issued 40,000 shares of
Series A Preferred Stock. The preferred stock is convertible into common stock
at an initial conversion price of $6.50 per share and bears a 9% per annum
dividend payable semi-annually beginning December 31, 1992. To the extent
dividends are not paid in cash on a semi-annual dividend payment date, an
adjustment will be made which reduces the per share conversion price. Upon
such an adjustment, all accrued and unpaid dividends on the shares of preferred
stock through the date of adjustment will cease to be accrued and unpaid. Due
to restrictions in the bank credit agreement and the indenture under which the
Senior Subordinated Debentures were issued, it is not expected that cash
dividends will be paid on the preferred stock for the foreseeable future.
Accordingly, it is expected that the conversion price of the preferred stock
will decline approximately 4.5% on each semi-annual dividend payment date,
resulting in an increase in the aggregate number of shares of common stock
issuable upon conversion of the preferred stock. As a result of the operation
of these dividend adjustment provisions of the preferred stock, the conversion
price of the preferred stock was reduced to $5.67 per share as of December 31,
1993. In addition, to the extent dividends are not paid on the preferred stock
in cash, the liquidation preference on the preferred stock will increase at a
rate of 9% per year, compounded semi-annually.
38
PAGE
<PAGE>
NOTE_13_-_Shareholders'_Equity
In connection with the 1992 Financing Plan, the Company sold 11,488,000 shares
(including the underwriters' over-allotment option) of common stock, par value
$1 per share, in an underwritten public offering at an initial public offering
price of $4.00 per share. The net proceeds of this sale of $41,759 were added
to common stock and additional paid-in capital in the amounts of $11,488 and
$30,271, respectively. Each share of common stock has the right to one vote
per share on all matters submitted to a vote of the shareholders of the
Company.
A new class of Non-Voting Common Stock with a par value of $1 per
share was created, of which 15,000,000 shares were authorized and none have
been issued. Shares of Non-Voting Common Stock would not entitle the holder
thereof to any votes except as otherwise provided or as required by law.
No dividend payments were made in 1993, 1992, and 1991 and, due to
restrictions in the bank credit agreement and the indenture for the Senior
Subordinated Debentures, it is not expected that cash dividends will be paid in
the foreseeable future.
The Company established an ESOP in 1989 with an initial contribution
of 10,000 shares, followed by the sale of 1,100,000 shares to the ESOP. Under
a related stock purchase program, Interlake undertook to purchase the lesser of
1,100,000 shares or the number of shares purchasable for $16,088 in the open
market or in privately negotiated transactions. As of December 26, 1993 a
total of 893,739 shares had been acquired at a cost of $11,083, unchanged from
the prior year end.
Unearned compensation represents estimated future charges to income by
reason of the ESOP and stock awards previously granted. Principal and interest
payments on the ESOP borrowings are charged against earnings as employee
compensation and interest expenses, respectively. Payments are made to the
ESOP trustee which pays the principal and interest to the banks and uses the
amount of such payments to determine the allocation of Interlake common shares
to the employee participants' accounts.
In 1989, the Board of Directors declared a stock right dividend
distribution. The purpose of these rights is to protect the Company against
certain unfair and abusive takeover tactics. In certain circumstances,
shareholders, other than the holder of 15% or more of Interlake's stock, have
the right to purchase Interlake stock from Interlake for less than its market
price. In certain circumstances, Interlake shareholders can purchase, for less
than market value, shares of a company which acquires The Interlake
Corporation.
NOTE_14_-_Stock_Incentive_Plans
The Company has in place two stock incentive programs adopted by its Board of
Directors and approved by the shareholders - the 1986 Stock Incentive Program
(the "1986 Program") and the 1989 Stock Incentive Program (the "1989 Program"
and, together with the 1986 Program, the "Stock Incentive Programs"). The
Stock Incentive Programs provide for the grant of awards of and options for
shares of the Company's common stock to officers, key employees and outside
directors of the Company and its subsidiaries. The 1989 Program also provides
for the grant of shares of common stock in lieu of cash bonuses and the 1986
Program also provides for the grant of stock appreciation rights.
39
PAGE
<PAGE>
A summary of stock option activity under the Stock Incentive Programs
follows:
<TABLE>
<CAPTION>
________1993_______ _______1992________
Average Average
_Shares_ _Price_ _Shares_ _Price_
<S> <C> <C> <C> <C>
Stock Options:
Outstanding-beginning of year 1,331,955 $6.81 1,419,221 $13.47
Granted 106,000 4.09 857,250 4.25
Exercised - - - -
Canceled or expired _(249,793) 8.77 _(944,516) 14.49
Outstanding-end of year 1,188,162 6.15 1,331,955 6.81
Exercisable-end of year 427,937 9.95 494,705 11.56
Available shares 796,655 652,818
</TABLE>
NOTE_15_-_Long-Term_Debt_and_Credit_Arrangements
Long-term debt of the Company consists of the following:
<TABLE>
<CAPTION>
December 26, December 27,
____1993____ ____1992____
<S> <C> <C>
Senior Subordinated Debentures $ 220,000 $ 220,000
Term Loans 94,136 94,258
Delayed Draw Term Loan 11,125 11,716
Deferred Term Loans 7,500 7,500
Revolving Loans 76,031 76,171
ESOP Note 11,261 12,870
Obligations under long-term
lease agreements 10,230 11,155
Pollution control and industrial
development loan agreements 12,150 15,650
Other ______702 ____1,481
443,135 450,801
Less-current maturities ____2,525 ____6,727
$ 440,610 $ 444,074
</TABLE>
40
PAGE
<PAGE>
During 1992, the Company implemented a comprehensive Financing Plan
which included sale of $220,000 of 12 1/8% Senior Subordinated Debentures due
in 2002, redemption of $200,000 of subordinated increasing rate notes,
repayment of $51,074 of long-term bank debt, and entering into an agreement
with its bank group which amended and restated the Company's bank credit
agreement to modify payment and other terms. Certain terms of the agreement
were further modified in 1993.
At the end of 1993, the bank credit agreement provided facilities for
term loans of $118,545, revolving loans of up to $97,031, and ESOP loans of
$11,261. Principal repayments for term and revolving loans are due in varying
annual amounts from 1995 through 1998. Principal amounts for ESOP loans are
due in varying amounts through 1999.
Under the terms of the bank credit agreement, the Company pays a
commitment fee of 1/2 percent on unused credit facilities and, in 1994, has the
option to borrow funds under the revolving and term facilities at the prime
rate plus 1 3/4 percent, or various London Interbank Offered Rates (LIBOR) plus
2 3/4 percent, with such rates adjusted periodically. The bank credit
agreement borrowing rates at December 26, 1993 ranged from 5.6875% to 8.4375%.
The bank credit agreement also required the Company to enter into long-term
interest rate swap agreements to reduce the impact of changes in interest rates
on its floating rate long-term debt. At the end of 1993, the Company had
interest rate hedging arrangements limiting interest rates on $134,000 of debt
under the bank credit agreement to 8.55% plus the applicable spread. The
expiration dates of the various interest rate hedging arrangements correlate to
the original schedule of principal term loan repayment dates and extend, on a
declining basis, through the final maturity of the term loans.
The long-term lease obligations relate principally to capitalized
pollution control facilities. The interest rates on these obligations vary
from 6.125% to 7.875%. Principal repayments are due in varying amounts through
2002.
The Company has borrowed funds under several loan agreements with
state and county pollution control and industrial development authorities to
finance certain environmental and facility expansion and improvement projects.
Interest rates on these obligations vary from 6.25% to 7.125%. Principal
repayments are to be made in various amounts from 1998 to 2009. At the time of
the spin-off of Acme Metals, Inc. from the Company in 1986, Acme assumed an
obligation to pay the Company for pollution control bonds related to its
facilities, which are currently outstanding for $6,000.
The schedule of debt repayment requirements for the five years
following 1993 are as follows:
<TABLE>
<C> <C>
1994 $ 2,525
1995 24,709
1996 88,178
1997 79,848
1998 11,412
</TABLE>
41
PAGE
<PAGE>
Under the bank credit agreement the Company is limited in its ability
to pay cash dividends and repurchase its common stock. There are no plans to
pay dividends in the immediate future and stock repurchases will be limited to
those related to the ESOP. In addition to scheduled repayments of debt, the
bank credit agreement requires certain mandatory prepayments in connection with
asset dispositions, issuances of stock, incurrence of indebtedness and
generation of annual excess cash flows. The bank credit agreement contains
covenants relating to earnings before interest, taxes and depreciation and
amortization, capital expenditures and net worth, and limits the amount of
revolving loan balance outstanding. Substantially all of the Company's assets
are pledged under the bank credit agreement.
Actual cash disbursements for interest were $48,326, $41,179, and
$59,551 in 1993, 1992, and 1991, respectively.
At December 26, 1993 the Company had unamortized deferred debt
issuance costs of $9,978 which are being amortized as part of interest expense
over the lives of the related debt issues.
Under the amended credit agreement, during 1994 the Company will be
able to borrow for general corporate purposes up to an additional $36,700.
However, outstanding bank borrowings at the end of each fiscal quarter will be
limited to between $9,700 and $16,700 above its year end 1993 bank borrowings
of $200,100. In addition, $5,784 will be available for use in connection with
the Duluth Superfund site.
NOTE_16_-_Fair_Value_of_Financial_Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents - The carrying amount approximates fair
value because of the short maturities of such instruments.
Other assets - The fair values for financial instruments included in
other assets were estimated based on quoted market prices for the same or
similar issues.
Long-term debt (See Note 15) - The interest rate on the Company's bank
debt is reset every quarter to reflect current market rates. Consequently, the
carrying value of the bank debt approximates fair value. The fair values of
the long-term debt, other than bank debt, were estimated based on quoted market
prices for the same or similar issues.
Convertible exchangeable preferred stock (See Note 12) - The fair
value of the preferred stock, which was issued in a private placement, is
estimated at carrying value as such stock is not traded in the open market and
a market price is not readily available.
Foreign exchange contracts (See Note 1) - The fair value associated
with the foreign currency contracts has been estimated by valuing the net
position of the contracts using spot rates as of the end of the fiscal year.
42
PAGE
<PAGE>
Interest rate swap agreements (See Note 15) - The fair value of
interest rate swaps (used for hedging purposes) is the estimated amount that
the Company would pay to terminate the swap agreements at the reporting date,
taking into account current interest rates and the present creditworthiness of
the swap counterparties. Under the restrictions of the bank credit agreement,
the Company does not expect to cancel these agreements, and expects them to
expire as originally contracted.
The estimated fair values of the Company's financial instruments are
as follows:
<TABLE>
<CAPTION>
December 26,
_______1993__________
Carrying Fair
_Amount_ _Value_
<S> <C> <C>
Cash and cash equivalents $ 31,934 $ 31,934
Other assets* 6,942 6,996
Long-term debt** 432,905 435,754
Convertible exchangeable preferred stock 39,155 39,155
Foreign currency contract assets - (75)
Interest rate swap liabilities 1,824 12,226
* Includes current maturities
** Includes current maturities and excludes capitalized long-term leases
</TABLE>
NOTE_17_-_Environmental_Matters
The Company has been identified by the United States Environmental Protection
Agency and the Minnesota Pollution Control Agency ("MPCA") as a potentially
responsible party in connection with the investigation and remediation of a
site on the St. Louis River in Duluth, Minnesota. The Site has been listed on
the National Priorities List (also known as the "Superfund" list) pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA). The iron and steel division of a predecessor of the Company operated
a facility on a portion of the Site before shutting it down in 1961.
In the fall of 1993, the Company completed the excavation and removal
of certain tar seeps located on the portion of the Site owned by the Company's
predecessors, thereby complying with the terms of a Request for Response Action
(RFRA) issued by the MPCA in March 1991 with respect to the tar seeps operable
unit, one of three operable units identified by the MPCA at the Site.
In May, 1993, the MPCA issued a Request for Response Action (RFRA) to
the Company requesting it to undertake, for the portion of the Site owned and
operated by its predecessors, studies and remedial actions for the second
operable unit being addressed, the soils operable unit. The Company has
commenced these studies, including a study outlining a broad range of remedial
alternatives and associated costs. The alternatives favored by the Company
assume that the Site will be used for industrial purposes, and the costs of
those alternatives range from approximately $1,500 to $4,000. Other possible
alternatives assume that the Site will be used for residential purposes, and
the costs of those alternatives may be significantly higher than the industrial
use alternatives. The Company expects to oppose the selection of any remedy
that assumes future residential use of the Site.
43
PAGE
<PAGE>
In December 1993, the Company and other potentially responsible
parties received a letter from the MPCA informing them that it intends to issue
another Request for Response Action requesting that they undertake studies and
remedial action for the third and final operable unit, the underwater sediments
operable unit. The scope of these studies and remedial action have yet to be
defined.
During 1991, the Company reviewed all of its environmental matters
involving nonoperating locations and took a special charge of $6,000, $4,500 of
which was attributable to its estimate at that time of its share of the
potential costs related to the Site. This estimate was partially based on the
Company's expectation that it would not be identified as a responsible party for
underwater sediments in Stryker Bay, an embayment which is a portion of the
Site. Based on its experience at the Site since that time, including the
completion of the tar seeps remediation, substantial investigation of the soils,
and the indication of the MPCA that it intends to issue a RFRA identifying the
Company as a responsible party for the underwater sediments, including those in
Stryker Bay, the Company has taken an additional special charge of $3,850 for
environmental matters in the fourth quarter of fiscal year 1993. This charge is
based on the Company's estimate of the likely costs to complete remediation of
the soils at the Site consistent with industrial use alternatives, and the
likely costs of further investigation of the underwater sediments. The charge
does not attempt to account for potential costs of remediation of the underwater
sediments, which the Company believes are not reasonably determinable absent
further investigation and indication by governmental agencies as to what level
of remediation, if any, will be required.
Based on information available as of December 26, 1993, including an
evaluation of all locations where the Company may have environmental liability,
including the Site, the Company believes that, except as indicated above with
respect to the underwater sediments at the Site, the costs of known
environmental matters either have been fully provided for or are unlikely to
have a material adverse effect on the Company's business or consolidated
financial condition.
NOTE_18_-_Commitments_and_Contingencies
The Company is engaged in certain routine litigation arising in the ordinary
course of business. Based upon its evaluation of available information,
management does not believe that any such matters are likely, individually or
in the aggregate, to have a material adverse effect upon the Company's business
or consolidated financial condition.
44
PAGE
<PAGE>
NOTE_19_-_Quarterly_Results_(Unaudited)
<TABLE>
<CAPTION>
Quarterly results of operations for 1993 and 1992 were as follows:
(in millions except per share data)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1993
Net sales
Engineered Materials $ 51.5 $ 48.7 $ 46.9 $ 45.4
Handling/Packaging Systems _117.0 _124.4 _122.1 _125.3
_168.5 _173.1 _169.0 _170.7
Gross profit 41.7 41.4 37.8 39.9
Operating profit
Engineered Materials 7.7 7.3 6.2 3.3
Handling/Packaging Systems 4.3 5.6 3.7 1.7
Corporate Items _(12.8) _(13.5) _(12.4) _(17.3)
___(.8) ___(.6) __(2.5) _(12.3)
Interest expense 13.0 12.7 12.6 12.6
Provision for income taxes 1.9 1.6 1.4 1.6
Net income (loss) (3.6) (3.1) (4.7) (14.6)
Net income (loss) per common share (.16) (.14) (.22) (.66)
Average number of shares outstanding 22.0 22.0 22.0 22.0
1992
Net sales
Engineered Materials $ 46.9 $ 47.4 $ 47.0 $ 48.7
Handling/Packaging Systems _125.0 _124.2 _137.0 _132.0
_171.9 _171.6 _184.0 _180.7
Gross profit 44.9 45.1 44.1 46.2
Operating profit
Engineered Materials 7.8 7.2 7.2 7.4
Handling/Packaging Systems 6.3 6.1 5.0 4.1
Corporate Items _(13.6) _(13.0) _(12.5) _(13.5)
___0.5 ___0.3 __(0.3) __(2.0)
Interest expense 13.1 13.5 12.3 12.5
Provision for income taxes 1.5 2.3 1.9 3.3
Income (loss) before extraordinary loss
and accounting changes (1.9) (2.9) (3.1) (6.1)
Extraordinary loss - (7.6) - -
Accounting changes (6.1) - - -
Net income (loss) (8.0) (10.5) (3.1) (6.1)
Income (loss) before extraordinary loss
and accounting changes
per common share (.18) (.25) (.14) (.28)
Extraordinary loss per common share - (.64) - -
Accounting changes per common share (.58) - - -
Net income (loss) per common share (.76) (.89) (.14) (.28)
Average number of shares outstanding 10.5 11.7 22.0 22.0
</TABLE>
45
PAGE
<PAGE>
In the fourth quarter of 1993, the Company took a restructuring charge of
$5,611 to provide for costs associated with closure of several small
facilities, personnel reductions and write-offs of certain obsolete equipment
and inventory (see Note 2).
Nonoperating expenses consist of items which are not related to
activities that constitute the Company's ongoing major operations. In 1993,
nonoperating expenses included a special charge of $3,850 in the fourth quarter
and $900 in the second quarter for environmental matters involving nonoperating
locations (see Note 17).
In 1993, benefits to pretax income due to reductions in LIFO
inventories were $1,000 in the first quarter and $200 in the fourth quarter.
In the first and fourth quarters of 1992, the liquidation of LIFO inventories
benefited pretax income from core businesses by $400 and $1,500, respectively.
Effective as of the beginning of fiscal 1992, the Company changed its
method of accounting for both income taxes and postretirement benefits by
adopting the Financial Accounting Standards Board's FAS No. 109, "Accounting
for Income Taxes" and No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". These changes in accounting principles required
restatement of previously reported first quarter 1992 results by a charge of
$6,141 or $.58 per share. The ongoing effects of these changes in 1992 were
not material and did not require restatement of quarterly results (see Note 3).
Unusual items of expense, reflecting unfavorable adjustments with
respect to non-core businesses designated to be divested within the
Handling/Packaging Systems segment, were $2,523 in the fourth quarter of 1992.
46
PAGE
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(in thousands except per share data)
__1993__ __1992__ __1991__ __1990__ ___1989___
<S> <C> <C> <C> <C> <C>
For_the_Year
Net sales of continuing
operations $681,330 $708,199 $714,742 $786,279 $827,739
Income(loss) from continuing
operations before extraordinary
loss and accounting change $(25,962)<F1><F3> $(13,990)<F2> $(13,744)<F2><F3> $(12,843)<F2> $ 2,397<F2>
Income(loss) from continuing
operations before extraordinary
loss and accounting change per
common share $ (1.18)<F1><F3> $ (.84)<F2> $ (1.31)<F2><F3> $ (1.22)<F2> $ .23<F2>
Cash dividends per common share - - - - 45.75<F4>
Average number of shares
outstanding 22,027 16,574 10,484 10,516 10,291
At_Year_End
Working capital
- cash and cash equivalents $ 31,934 $ 38,640 $ 10,541 $ 18,473 $ 16,181
- other working capital __41,935 __54,149 __50,806 __51,547 _100,495
- total working capital 73,869 92,789 61,347 70,020 116,676
- current ratio 1.5 to 1 1.6 to 1 1.4 to 1 1.4 to 1 1.6 to 1
Total assets $477,035 $511,292 $478,067 $518,997 $594,509
Long-term debt, including current
maturities 443,135 450,801 471,441 494,615 555,193
Convertible Exchangeable
Preferred Stock 39,155 39,155 - - -
Common shareholders' equity (259,767) (232,718) (239,465) (226,808) (202,971)
<FN>
<F1> includes a restructuring charge of $5,611 (see Note 2 of Notes to
Consolidated Financial Statements)
<F2> includes unusual items of expense of $2,523, $3,344, $13,482 and
$26,146 in 1992, 1991, 1990 and 1989, respectively, due to the 1989
restructuring program (see Note 6 of Notes to Consolidated Financial
Statements)
<F3> includes nonoperating charges for environmental matters of $4,750 and
$6,000 in 1993 and 1991, respectively (see Note 17 of Notes to
Consolidated Financial Statements)
<F4> includes a special cash dividend of $45 per share paid in connection
with the 1989 restructuring program
1989 was a 53-week year while all other periods were 52-week years.
</TABLE>
47
PAGE
<PAGE>
MARKET FOR INTERLAKE'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market for Interlake's common stock is the New York Stock
Exchange (ticker symbol IK). The common stock is also listed on the Chicago
Stock Exchange and is admitted to unlisted trading on the Pacific Coast
Exchange and the Boston Exchange.
Interlake has not paid a dividend or made a distribution with respect to its
common stock since the third quarter of 1989. Restrictions under Interlake's
bank credit agreement (see Note 15 of Notes to Consolidated Financial
Statements) will prevent it from paying any cash dividends in 1994 or in the
foreseeable future.
On December 26, 1993 there were approximately 7,884 holders of record of
Interlake's common stock.
High and low prices of Interlake's common stock during each of the eight
calendar quarters ending on December 31, 1993 were:
<TABLE>
<CAPTION>
_______1993_________ ________1992________
_______Price________ _______Price________
__High________Low___ __High________Low___
<S> <C> <C> <C> <C>
Calendar Quarter Ended
March 31 $4 3/4 3 5/8 $9 3/8 $5 3/8
June 30 4 3/8 3 1/8 6 3/8 3 7/8
September 30 4 5/8 3 3/8 4 1/2 3 1/2
December 31 4 1/8 2 1/2 4 1/4 3 1/4
</TABLE>
48
PAGE
<PAGE>
The Interlake Corporation
Directors
John A. Canning, Jr.
President, Madison Dearborn Partners, Inc. [1993]
James C. Cotting
Chairman and Chief Executive Officer, Navistar International Corporation
(manufacturer of medium and heavy duty trucks) [1989]
Arthur G. Hansen
Higher Education Consultant [1984]
John E. Jones
Chairman of the Board, President and Chief Executive Officer, CBI Industries,
Inc. (industrial gases, construction services and investments) [1988]
Frederick C. Langenberg
Retired Chairman of the Board, The Interlake Corporation [1979]
Quentin C. McKenna
Chairman of the Board, Kennametal, Inc. (manufacturer of metal cutting tools
made from cemented carbides and ceramics, machining systems and materials for
applications requiring wear resistance) [1986]
William G. Mitchell
Retired Vice Chairman, Centel Corporation (communications and electric
services) [1984]
W. Robert Reum
Chairman of the Board, President and Chief Executive Officer, The Interlake
Corporation [1987]
Erwin E. Schulze
Retired Chairman of the Board, President and Chief Executive Officer, The Ceco
Corporation (manufacturer of building products and provider of concrete forming
services for the construction industry) [1981]
[ ] Brackets indicate the year when an individual became a director of The
Interlake Corporation or a predecessor company. Directors serve on one or more
of the following committees: Audit Review, Compensation, Executive, Finance and
Nominating.
49
PAGE
<PAGE>
Officers
W. Robert Reum
Chairman of the Board, President and Chief Executive Officer
Craig A. Grant
Vice President - Human Resources
John J. Greisch
Vice President - Finance, Treasurer and Chief Financial Officer
John P. Miller
Controller
Stephen R. Smith
Vice President, Secretary and General Counsel
Operating_Executives
Stephen Gregory
President, Interlake Material Handling Division
James Legler
President, Chem-tronics, Inc.
Robert A. Pedersen
President, Interlake Packaging Corporation
Bernd Stiller
Managing Director, Dexion Group plc
Ian A. White
President, Hoeganaes Corporation
50
Exhibit 22
THE INTERLAKE CORPORATION
LIST OF SUBSIDIARIES
State or Country
Corporate Name Parent Company of Incorporation
Acme Gerrard Limited Precis (935) Limited England
Acme Strapping Inc. Interlake Packaging
Corporation Canada
The Interlake Companies,
Inc.
Apton GmbH Dexion GmbH Germany
Arwood International, Interlake ARD
Inc. Corporation New Jersey
Chem-tronics, Inc. The Interlake Companies,
Inc. California
Ciceri & Company Limited Dexion Group plc England
Conco-Tellus Inc. The Interlake Companies,
Inc. Delaware
Construction & Indus- Dexion International
trial Supplies Limited Limited England
Dexion-Aura GmbH Dexion GmbH Germany
Dexion (Australia) Pty. Interlake DRC Limited New South
Ltd. Wales,
Australia
Dexion Control Systems Dexion International
Limited Limited England
Dexion GmbH Dexion Holding GmbH Germany
Dexion Group plc Interlake DRC Limited England
Dexion Holding GmbH Dexion Group plc Germany
Dexion Holdings Limited Dexion Group plc England
Dexion Incorporated The Interlake Companies,
Inc. Delaware
Dexion International Dexion Group plc England
Limited
Dexion Limited Dexion International
Limited England
Dexion Produktions GmbH Dexion Holding GmbH Germany
Dexion S.A. Dexion International
Limited France
Gary Steel Supply The Interlake Companies,
Company Inc. Illinois
<PAGE>
Hoeganaes Corporation The Interlake Companies,
Inc.** Delaware
Hoeganaes Development, Hoeganaes Corporation Delaware
Inc.
Index Industries, The Interlake Companies,
Incorporated Inc. Delaware
Interlake ARD The Interlake Companies,
Corporation Inc. Delaware
Interlake Australian The Interlake Companies,
Mining Ventures, Inc. Inc. Ohio
Interlake Conveyors, The Interlake Companies,
Inc. Inc. California
Interlake DRC Limited The Interlake Companies,
Inc. Delaware
Interlake Foreign Sales The Interlake Companies,
Corporation Inc.(70%)
Hoeganaes Corporation
(30%) Barbados, W.I.
Interlake Newco The Interlake Corpor- Delaware
Corporation ation
Interlake Packaging The Interlake Companies,
Corporation Inc. Delaware
Interlake Steel The Interlake Companies,
Corporation Inc. Arizona
Lodi Fab Industries, The Interlake Companies,
Inc. Inc. Delaware
Pakseal Power Industries Limited England
Pakseal Industries
Limited Power Industries Limited England
Pakseal S.A.R.L. Power Industries Limited France
Pakseal S.R.L. Power Industries Limited Italy
Power Industries Limited Twicebonus Limited England
Power Strap Limited Pakseal Industries
Limited (50%) England
Power Industries Limited (50%)
Precis (935) Limited Interlake DRC Limited England
<PAGE>
Redirack GmbH Dexion GmbH Germany
Redirack Limited Dexion International
Limited England
S.A. Dexion-Redirack Dexion Group plc Belgium
N.V.
Seal-less Strapping
Industries Limited Acme Strapping Inc. Canada
The Interlake Companies, The Interlake Corpor-
Inc. ation Delaware
TIC Assurance Ltd. The Interlake Companies,
Inc. Cayman Islands
Twicebonus Limited Interlake DRC Limited England
Westore Limited Dexion Group plc England
Witty & Wyatt Equipment Dexion International
Limited Limited England
**20% of capital stock, all of which is voting common stock, is
owned by Hoganas Aktiebolag
