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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934
COMMISSION FILE NUMBER 1-9307
GUNDLE/SLT ENVIRONMENTAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 22-2731074
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
19103 GUNDLE ROAD 77073
HOUSTON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 443-8564
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK, $.01 PAR VALUE AMERICAN STOCK EXCHANGE
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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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $44,700,000 as of February 22, 1996. All share
amounts included herein have been restated to reflect all previous stock splits.
The number of shares outstanding of the issuer's common stock, $.01 par
value, as of February 22, 1996 was 17,699,999 shares.
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1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business...................................................................... 1
Item 2. Properties.................................................................... 8
Item 3. Legal Proceedings............................................................. 8
Item 4. Submission of Matters to a Vote of Security Holders........................... 8
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters..... 9
Item 6. Selected Financial Data....................................................... 9
Item 7. Management's Discussion and Analysis of Results of Operations and Financial
Condition................................................................... 10
Item 8. Consolidated Financial Statements and Supplementary Data...................... 13
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure........................................................ 33
PART III
Item 10. Directors and Executive Officers of the Registrant............................ 33
Item 11. Executive Compensation........................................................ 33
Item 12. Security Ownership of Certain Beneficial Owners and Management................ 33
Item 13. Certain Relationships and Related Transactions................................ 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............... 33
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PART I
ITEM 1. BUSINESS.
Introduction
Gundle/SLT Environmental, Inc. (the "Company") is a leading supplier of
innovative, quality barrier products and systems used in managing and protecting
water and other resources.
The Company is a Delaware corporation formed in 1986. The Company's
principal executive offices are located at 19103 Gundle Road, Houston, Texas
77073. The Company's telephone number is (713) 443-8564.
Recent Developments
On July 27, 1995, the Company merged with SLT Environmental, Inc. ("SLT").
SLT manufactured and installed engineered synthetic lining systems and operated
manufacturing facilities located in Rechlin, Germany and Houston, Texas.
The sole stockholder of SLT, Wembley, Ltd., a British Virgin Islands
company ("Wembley") received in exchange for its SLT Common Stock, 7,000,000
shares of the Company's Common Stock, or approximately 41% of the issued and
outstanding Common Stock of the Company after the merger.
For more information concerning the merger, see Note 17 of the Notes to
Consolidated Financial Statements included herein under Item 8.
General
The Company manufactures, sells and installs synthetic lining systems and
products principally for the prevention of groundwater contamination from
municipal and industrial sources, and for the containment of water and
industrial liquids and solids. The Company markets its lining systems primarily
to waste management, industrial and mining companies, municipalities and other
governmental agencies that own or operate waste, material processing, water
treatment or containment facilities, as well as to engineering firms and
construction contractors that serve these industries. During the three year
period ended December 31, 1995, the Company sold over 1.5 billion square feet of
polyethylene membrane to customers in the United States and more than 70 other
countries.
The Company generates revenue from the direct sale of its products to
customers, as well as from the installation of liner systems which incorporate
the liners and other products manufactured by or distributed through the
Company. Other products include drainage nets, geotextile, composites,
geosynthetic clay products, vertical barrier walls, geogrids, and specialty
concrete attachment products.
The Company sells and installs its products through its worldwide
distribution system consisting of its own sales and marketing personnel,
domestic installation companies and foreign agents and distributors.
Lining systems installed by the Company are designed by its customers to
meet their particular containment requirements, ranging from a single lining to
more complex systems consisting of several liners interlayered with drainage
materials, geotextiles and geogrids. The principal components of the Company's
lining systems are geomembranes manufactured by the Company primarily from high
density polyethylene ("HDPE") resin and certain chemical additives using a
formula and production process developed by the Company. The Company's sheets
are generally welded together on the customer's job site using the hot wedge or
extrusion welding methods. The welded seams on lining systems installed by the
Company are tested as part of its quality assurance program.
The Company believes that its manufacturing capabilities, quality control
procedures, welding processes and use of high quality resins enable it to
produce and install lining systems of the highest quality. The Company provides
its customers with a single source for the manufacture, installation and testing
of complete lining systems.
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Economies of scale in purchasing raw materials, and the efficiencies of its
manufacturing process enable the Company to undertake construction projects
requiring the installation of lining systems on a price competitive basis.
Synthetic Liner Industry
The Company manufactures flexible geomembrane liners ("FMLs") that compete
directly in some cases with coated textiles and soils as well as FMLs made from
other resins. The principal types of FMLs presently available are HDPE and other
variations of polyethylene, such as very flexible polyethylene ("VFPE"),
polyvinyl chloride ("PVC"), ethylene propylene diene terpolymer ("EPDM"),
scrim-reinforced chlorosulphonated polyethylene ("Hypalon"), polypropylene or
combinations or variations of these synthetics. Polyethylene membranes have
several physical advantages over PVC and other FMLs that include chemical
resistance characteristics (e.g., their resistance to various acids, alkalis,
aromatic solvents and oils) as well as certain strength characteristics (e.g.,
their relative impermeability, puncture resistance and tendency to stretch
rather than tear in response to certain types of pressure). HDPE sheeting
represents a major portion of the synthetic liner market, particularly for
municipal solid waste and other environmentally critical applications. The
Company believes the market for synthetic liners in general and polyethylene
liners in particular continues to expand as engineers become more familiar with
the quality, utility and breadth of product options involving liners
manufactured from HDPE, VFPE and combinations thereof.
The Company believes that significant factors in the growth of the market
for FMLs include: regulatory requirements at the federal and state level
relating to the storage of hazardous and non-hazardous substances (see
"Regulatory Background"); increasing public concern for the environment and for
protecting ground water; cost benefits of synthetic liners when compared to more
traditional containments such as soil, concrete and steel; and the inert,
sanitary characteristic of polyethylene liners that makes them usable for
potable water containment or conveyance and aquaculture ponds.
Regulatory Background
In the past two decades, substantial regulations have been enacted
worldwide relating to the management, treatment, storage and disposal of waste
materials. The Company believes that these regulations have enhanced the market
for the Company's lining systems and helped establish the quality, utility and
breadth of product options of HDPE and VFPE lining systems in general.
The principal U.S. federal statute which has influenced the market for the
Company's products is the Resource Conservation and Recovery Act of 1976
("RCRA"). RCRA provides a comprehensive scheme for the regulation of waste
facilities and the storage, treatment and disposal of wastes. The Environmental
Protection Agency (the "EPA"), which is charged with implementing, administering
and enforcing RCRA, has adopted regulations under RCRA governing the management
and disposal of wastes, including standards for storage areas, incinerators and
landfills.
RCRA legislation is divided into a number of subtitles, including "Subtitle
C -- Hazardous Waste Management" and "Subtitle D -- State or Regional Solid
Waste Plans." Regarding synthetic liners, Subtitle D impacts the disposal of all
municipal solid waste ("MSW") at roughly 2,700 MSW active landfill sites in the
country by providing minimum national standards for the protection of human
health and the environment. Regulations adopted under Subtitle D govern the
methods by which MSW landfills are sited, designed, built, operated and closed,
and impose strict compliance standards with regard to groundwater protection.
The EPA published the Subtitle D regulations as a federal rule on October
9, 1991 with an effective date of October 9, 1993 for most of the provisions.
The EPA intended for the Subtitle D regulations to be enforced at the state
level and has encouraged states to create their own guidelines which meet or
exceed the federal guidelines and to apply for "approved status" as a regulatory
agency to oversee permitting and compliance. "Approved" state programs can
permit facilities using alternatives to the federally specified criteria.
Alternative liner designs must be proven to be as effective as the minimum
design standard. The Subtitle D regulations specify use of a composite liner
system consisting of highly impermeable clay plus a geomembrane.
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The geomembrane must be at least 30 mils (one mil equals 1/1000 of an inch)
thick. HDPE liners have been installed in landfills in every state. The Company
believes that a broad range of factors favor use of HDPE geomembranes in
landfills, including material properties, extensive experience and history.
The Hazardous and Solid Waste Amendments of 1984 (the "1984 Amendments")
expanded the scope of RCRA's Subtitle C by among other things, prescribing more
stringent standards for hazardous waste landfills. The 1984 Amendments require
that all new hazardous waste landfills use lining systems composed of two or
more liners with leachate collection and drainage systems above and between each
liner (a "Double Liner System"). These lining systems are required to be
constructed of materials resistant to the hazardous materials to be contained in
the landfill. Each new lining system installed to contain hazardous waste in
accordance with RCRA must be approved. The 1984 Amendments also require the use
of a Double Liner System for all surface impoundments or ponds used in the
containment of certain hazardous liquids. The welds joining individual sections
of synthetic lining systems must also be tested in compliance with EPA
procedures. The Company believes that, of the lining systems for hazardous waste
landfill sites that have received EPA approval under RCRA since 1984, HDPE
lining systems have been the most widely used.
In addition to regulation directly mandating the use of synthetic liners,
other federal and state regulations requiring the cleanup of waste disposal
sites (and imposing substantial liability for the failure to do so) have led to
an increasing use of synthetic lining systems by both private and public owners
and operators of waste sites. The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (commonly known as "CERCLA" or the
"Superfund" legislation), was enacted in response to the dangers of uncontrolled
hazardous waste sites. In relevant part, CERCLA subjects owners and operators of
hazardous waste sites to joint and several liability for costs of cleanup and
damages to natural resources resulting from the release of hazardous substances
into the environment. The Superfund legislation further authorizes the EPA to
compel these owners and operators to clean up hazardous waste sites and, if they
fail to do so, authorizes the EPA to perform the cleanup work, using funds
appropriated for that purpose by Congress, and thereafter to pursue owners or
operators for reimbursement.
In light of the slow pace and high cost of Superfund cleanup, the U.S.
Congress and the EPA have sought to accelerate cleanup and reduce costs by
prescribing "presumptive remedies" for preventing groundwater and soil
contamination and human exposure to hazardous wastes. In 1994, the EPA published
its presumptive remedy for use at MSW landfills, which accounted for 230
identified Superfund sites. The presumptive remedy includes use of a liner cap
over the area and containment of subterranean hazardous waste plumes. The
Company believes its products directly address this application.
Other federal statutes believed to have led to the increased use of
synthetic liners include the Federal Water Pollution Control Act (Clean Water
Act), the Toxic Substances Control Act and the Clean Air Act. EPA regulations
and some state regulations also require that gypsum waste, a by-product of
phosphate mining, be stored in lined facilities. In addition, all states have
enacted statutes regulating the handling and storage of hazardous substances,
specifically petroleum products and other chemicals contained in tanks or
lagoons.
Similar regulatory requirements exist in other countries throughout the
world, particularly in major industrialized nations such as Germany, United
Kingdom, France and Japan.
Also, other activities around the world which involve intensive water use
or which can have impacts on groundwater quality have been regulated or targeted
for regulation. These activities include agricultural irrigation, livestock
feedlots, dairy facilities, aquaculture facilities, and industrial and public
stormwater runoff containment areas.
Products and Services
The Company produces a variety of products that are used in lining systems.
The Company's principal product is a smooth finished HDPE sheet. The sale and
installation of HDPE smooth sheeting accounted for approximately 55%, 52% and
54% of the Company's sales in 1995, 1994 and 1993, respectively. The Company
manufactures HDPE sheet in thicknesses from 20 to 240 mil (one mil equals 1/1000
of an inch) in varying
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seamless widths up to 34.5 feet. The Company believes that no other company
produces HDPE liner suitable for waste containment in this variety of
thicknesses and in such great widths. Sheet width and consequently the number of
seams required for installation is critical. Seaming represents the major
technical difficulty for liner installation. A greater number of seams requires
more technical labor and more testing. The Company also manufactures and sells
textured HDPE sheet for use on sloping terrain, or where a high friction
interface is required.
The Company also manufactures sheeting using VFPE resins. The Company
markets VFPE sheet as a very flexible membrane with chemical compatibility and
temperature tolerance characteristics superior to PVC and other FML products.
Applications include landfill caps, mining heap leach pads, and floating covers.
New product developments utilize the Company's co-extrusion capability to
produce sheets with layers consisting of different materials. When co-extruded,
these layers become molecularly integrated such that they cannot delaminate.
Many combinations and variations are possible. The Company has been awarded a
patent for its white-surfaced sheet. By reflecting radiant heat, the white
surfaced sheet reduces the expansion/contraction (wrinkling/bridging) of the
liner during installation and protects subgrade soils from desiccation. Under
identical exposure conditions, white-surfaced sheets have recorded temperatures
as much as 50% lower than standard black geomembranes. In addition,
white-surfaced sheets greatly improve installation damage detection and quality
by revealing scoring and abrasion as black marks exposed against the white
surface. The Company also manufactures this product with a textured surface.
A patent has also been awarded for the Company's electrically conductive
sheet product which incorporates a proprietary conductive layer and allows for
100% electric spark testing of the installed liner. Unlike traditional electric
leak detection surveys, the Company's conductive sheet spark testing does not
require flooding of the containment system with water, which can be expensive
and time consuming. The Company believes this product allows for more reliable
testing.
The Company manufactures a high density polyethylene net, consisting of two
sets of HDPE strands intertwined to form a net along which fluid may be conveyed
for drainage. The Company bonds geotextiles to one or both sides of the drainage
net which allows one-step installation of drainage media for primary leachate
collection where soil is placed directly on top of the drainage layer.
The Company, under non-exclusive agreements, markets and installs other
third party products such as high-flow net, geogrids, piping and geotextiles.
The Company operates three primary manufacturing facilities: two in
Houston, Texas, and one in Rechlin, Germany. The Company utilizes two different
extrusion manufacturing technologies for its primary sheeting products: flat
cast and blown film. The Company operates a total of eleven continuous flow
extrusion lines, 9 for sheeting products and two for its net products. Raw
materials are delivered to the plants by railcar, then pneumatically transported
into storage silos or directly to a production line where it is extruded into
sheet or net. Material handling equipment then moves the rolls of finished
product to a storage yard for shipment to the customer. The Company's production
facilities normally operate on a 24 hour per day basis, seven days a week,
throughout the year.
The Company often provides its customers with completely installed and
tested lining systems. The Company employs trained technicians and supervisors
who travel to customer job sites and install the lining materials. The sheets
are joined in the field using the hot wedge or extrusion welders. The hot wedge
welder operates by propelling itself along the sheets that are to be joined and
draws a hot metal wedge between them. The heated sheets are then fed between
pressure rollers, creating a dual track seam. The extrusion welder operates by
extruding heated resin through the dual head of the welder, and integrating such
material with the resin of the sheets that are to be joined. Both the hot wedge
and extrusion weld result in a homogeneous bond between the sheets, thereby
offering the same chemical resistance as the sheet. Because of the homogeneous
bond created with the sheet, the Company believes its welding methods are
superior to other methods.
The Company also manufactures and sells a geosynthetic clay liner (GCL),
that combines the Company's various sheet products with highly expansive sodium
bentonite clay. The benefit of the clay layer is that its high swelling capacity
seals punctures in an overlaying FML.
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The Company conducts its own laboratory and onsite testing of its
installations. The laboratory tests measure the resistance of FMLs to materials
and conditions that are expected to be found in particular environments. Among
other things, the Company tests the strength and adequacy of the welds on the
liners it installs by some combination of the following methods: cutting samples
from the liners and destructively testing the weld seam; pressure testing an air
channel created in the length of the weld during hot wedge welding; performing
vacuum testing for the airtightness of the extrusion weld seam, and electric
spark testing of its conductive sheet product. The Company considers the testing
of its products and the maintenance of high quality standards essential to the
successful operation of its business.
The Company's research and development efforts focus on the development of
new products, new quality control procedures, and new or more efficient
manufacturing and installation techniques. Concepts are generated by the
Company's internal research efforts, as well as through contacts with potential
customers and professionals in the field. The Company's research and development
and quality control expenditures during 1995, 1994 and 1993 were $1,705,000,
$2,191,000 and $2,373,000, respectively.
Raw Materials
The principal raw material used by the Company is a high grade polyethylene
resin. The Company conducts initial screening tests of the resins upon delivery
as part of its quality control program. The Company currently purchases
polyethylene resins from three primary suppliers, and other sources are
available. The Company uses different types of resins (e.g., HDPE and VFPE),
pigments and other proprietary formulations to manufacture various products. The
Company also purchases certain anti-oxidants and stabilizers, available from
many sources, that are mixed with the resin to increase performance and product
life.
Polyethylene resins are occasionally in short supply and are subject to
substantial price fluctuation in response to market demand. The Company has not
encountered any significant difficulty to date in obtaining raw materials in
sufficient quantities to support its operations at current or expected near-term
future levels. However, any significant interruption in raw material supplies or
abrupt increases in raw material prices could have an adverse effect upon the
Company's operations.
Applications
The following table sets forth the principal applications of the Company's
lining systems, and the dollar amounts (in thousands) and percentages of net
sales for each application for the past three years.
SALES BY MARKET APPLICATION
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YEAR ENDED DECEMBER 31,
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1995 % 1994 % 1993 %
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Solid Waste Containment............... $148,738 60% $133,290 60% $106,536 57%
Mining................................ 40,680 16 16,884 8 12,789 7
Hazardous Waste Containment........... 4,282 2 10,138 4 10,311 6
Liquid Containment.................... 22,067 9 34,115 15 24,025 13
Other Applications.................... 32,296 13 28,901 13 32,144 17
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Total Net Sales....................... $248,063 100% $223,328 100% $185,805 100%
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Solid Waste Containment. Solid waste containment applications for synthetic
liners include the lining of new landfill sites, or new cells within existing
landfill sites, to be used for the disposal or storage of non-hazardous waste.
Subtitle D of RCRA requires the use of FMLs in all new or expanded Municipal
Solid Waste landfill cells. (See "Regulatory Background.").
Synthetic liners are used to cover or "cap" unlined landfill sites to
prevent rainwater from creating excessive leachate that may seep into the
underlying groundwater, and to cap lined landfill cells to meet
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federal and state Subtitle D guidelines. Synthetic liner covers also are used to
collect methane gas that is naturally produced as waste decays for use as fuel
or to meet Clean Air Act regulations.
Mining. Synthetic liners are employed for various purposes in the mining
industry. Liners are used for the containment of chemicals used in the mining of
gold, silver and copper. These minerals are dissolved or "leached" from the ore
by chemical solutions that are circulated through ore-bearing crushed rock
deposited on top of a liner pad. The synthetic liner acts as a collection and
drainage system for the mineral-bearing solution. Demand for synthetic liners
for the mining industry is a direct result of the introduction of leaching
processes in gold, silver and copper mines. Leaching is a lower cost recovery
technique, as compared with traditional, labor-intensive mining techniques for
the separation of minerals from ore, and also permits the extraction of minerals
from low-grade ore that previously was not processed. Synthetic liners are also
used in various mining applications to contain the spent ore, or tailings, and
for containment of the various chemical solutions after the leaching process.
Gypsum, a byproduct of the phosphate mining industry, is regulated to require
containment systems, as it becomes acidic during the mining process. The Company
believes the gypsum market represents an important segment of the overall mining
application market.
Hazardous Waste Containment. Synthetic liners are used for containment of
both solid and liquid hazardous waste. RCRA mandates the use of synthetic lining
systems at all new hazardous waste landfill sites and at all new ponds
containing certain hazardous liquids.
Liquid Containment. Applications such as aquaculture ponds, wastewater
ponds for municipal sewage treatment, industrial process liquid containment,
stormwater runoff containment, potable water reservoirs, irrigation canals,
erosion control along banks, and decorative ponds often require the use of
liners to contain water.
Other Applications. Synthetic liners are used in various other industrial
and non-industrial applications, including tank lining, secondary containment,
tunnel waterproofing and prefabricated products. Synthetic liners also are used
as floating covers on liquid or semi-solid surfaces to protect the covered
elements from water and other elements in the environment, control odor, promote
anaerobic digestion of organic wastes and capture the resultant methane gas
produced. The Company is continually evaluating other industries in which its
lining systems might have commercially viable applications.
Marketing and Sales
The Company conducts a direct sales effort focused on engineers, general
contractors, facility owners and government officials who are responsible for
designing projects and awarding construction contracts involving the
installation of synthetic lining systems. It has sales personnel located in the
U.S., France, Germany, the United Kingdom, Spain, the Netherlands, Singapore and
Australia. The Company also sells material to a select group of domestic
installation companies and through a network of independent agents and
distributors throughout the world.
The Company advertises in specialized trade publications and by direct mail
to its customers and potential customers, and participates in trade conventions
and conducts industry seminars domestically and abroad. The Company also gives
presentations to state and local administrators regarding the available
technology for the containment of waste materials and the advantages offered by
the Company's products.
The Company sells liners generally through construction contracts awarded
on the basis of a competitive bidding process or directly to independent
installers. When the Company makes sales pursuant to construction contracts, the
customer's bid proposal specifies the design and performance criteria for the
lining system to be constructed. If the Company is awarded the contract, the
remainder of the contractual terms are negotiated with the customer, or with the
customer's general contractor. The contract price covers the cost of
manufacturing the lining material, other third party products and the labor and
other costs involved in installation, welding and testing. The Company also may
indemnify the site owner or general contractor for certain damages resulting
from the negligence of the Company's employees. The Company often is required to
post bid and performance bonds covering the full amount of an installation
contract. In most contracts, the Company provides the customer with specified
warranties as to material quality and workmanship. These
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warranties may last for up to 20 years, but are generally limited to repair or
replacement by the Company of the defective liner or installation up to the
dollar amount of the contract involved, on a prorated basis.
In 1995, 1994 and 1993, 51%, 61% and 66% of the Company's net sales were to
customers in the United States.
Due to the large size of some of the Company's lining projects, certain
customers may account for 10% or more of the Company's net sales for any year.
During fiscal 1995, 1994 and 1993, no single customer accounted for 10% or more
of the Company's net sales. The Company believes that the loss of any one
customer would not have a material adverse effect on the Company's financial
position or results of operations.
Product Liability and Insurance
Although the Company is not exposed to the type of potential liability that
might arise from being in the business of handling, transporting or storing
hazardous wastes or materials, the Company could be susceptible to liability for
environmental damage or personal injury resulting from defects in the Company's
products or negligence by Company employees in the installation of its lining
systems. Such liability could be substantial because of the potential that
hazardous or other waste materials might leak out of their containment system
into the environment. The Company maintains product liability insurance, which
includes pollution coverage in the U.S. and Germany, in amounts which it
believes to be prudent. However, there is no assurance that this coverage will
remain available to the Company. The Company has experienced no material losses
from defects in products and installations. However, the Company's claims
experience to date may not be a meaningful measure of its potential exposure for
product liability.
Backlog
The backlog of unfilled orders at December 31, 1995, was $51.7 million
compared with $65.1 million at December 31, 1994. Although backlog declined
$13.4 million for the year, incoming orders for the year were equal to 1994. It
is anticipated that, subject to weather and other construction-related delays,
the majority of the value of construction contracts and customer purchase orders
included in backlog at December 31, 1995, will be completed or filled prior to
December 31, 1996. Contracts and commitments for products and services are
occasionally varied, modified or canceled by mutual consent.
Seasonality and Other Business Conditions
The Company's operations are subject to seasonal fluctuation, with the
greatest volume of product deliveries and installations typically occurring
during the summer and fall. In addition, scheduled deliveries are often subject
to delay at the customers' request to correspond with customers' annual
budgetary and permitting cycles. See Supplementary Data.
Competition
The Company believes that there are approximately 30 companies engaged in
the production of various synthetic liners worldwide. At least twelve of these
companies compete directly with the Company throughout the world. The principal
competitive factors within the synthetic liner market are performance of the
lining system, installation capability and price. The Company believes that it
has been able to maintain its position within the synthetic lining market
because of the performance advantages of the Company's lining systems over other
types of liners available, the convenience to the customer of having the Company
take sole responsibility for the manufacture, installation and testing of its
lining systems and by being price competitive. Although the Company is a leading
supplier of synthetic lining systems, certain of the Company's existing
competitors are subsidiaries of larger companies that have greater financial
resources than the Company. Furthermore, the possibility exists that companies
with more significant resources than the Company could enter the synthetic
lining market.
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Employees
As of December 31, 1995, the Company had 833 employees, of whom 639 were
employed in the United States and 194 in foreign locations. During peak
construction periods in the summer and fall months, the Company's workforce
increases. During the winter months, the Company's workforce is maintained at
levels somewhat below the peak staffing levels experienced during the summer and
fall months. Some of the Company's full-time employees in foreign locations are
unionized however, the Company has never experienced a strike or walkout. The
Company believes its employee relations are satisfactory.
Patents and Proprietary Information
The Company has been awarded patents for the "GSE White(TM)", "GSE
Conductive(TM)" and "GSE CurtainWall(R)" products as well as the
"FrictionFlex(R)" texturing process. The Company has other patents and pending
applications. The Company's manufacturing, welding and testing processes also
involve proprietary information and know-how. See "Products and Services."
ITEM 2. PROPERTIES.
United States
The Company's corporate headquarters and one of its manufacturing
facilities are situated on a 21.5-acre tract of Company-owned land located in an
industrial park in north Houston. This location has 31,400 square feet of office
space in two buildings, housing executive, administrative, marketing and
accounting personnel. The manufacturing plant is a 67,000 square foot building
of metal skin over steel frame construction that contains seven continuous flow
liner extrusion lines. This manufacturing facility also houses one continuous
flow drainage net extruder. In addition, fabrication services and equipment are
housed in a 12,000 square foot facility located on the premises.
A second manufacturing facility in Houston occupies 16.9 acres with 3,300
square feet of office space and 83,000 square feet of manufacturing facilities.
This location operates a continuous flow polyethylene membrane extrusion line on
this site, as well as geonet, geocomposite and texturing lines.
The Company also has a manufacturing facility located in Spearfish, South
Dakota, that manufactures the Company's GCL. This 16,000 square foot facility
contains one production line.
Germany
The administrative offices of GSE Lining Technology GmbH, the Company's
German subsidiary, are located in Hamburg, Germany. The manufacturing facility,
located in Rechlin, Germany, on 8.2 acres, supplies polyethylene sheet to
customers in Europe. The Company operates a continuous flow polyethylene
membrane extrusion line and two texturing lines on this site.
Other
The Company also maintains installation and sales offices in leased
premises located in the United Kingdom, Singapore and Australia.
ITEM 3. LEGAL PROCEEDINGS.
For information concerning various legal proceedings involving the Company,
see Note 16 of the Notes to the Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
8
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The common stock of the Company trades on the American Stock Exchange under
the symbol GUN. The following table shows the range of high and low prices for
the common stock for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
------------- -------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter......................................... $6 $4 15/16 $8 1/2 $6 1/4
Second Quarter........................................ 7 9/16 5 1/8 6 7/8 5 5/8
Third Quarter......................................... 8 5/8 6 5/8 6 7/8 4 1/2
Fourth Quarter........................................ 7 9/16 5 1/4 6 1/4 4 7/8
</TABLE>
The approximate number of record holders of the Company's common stock at
February 22, 1996, was 524. Management estimates that the aggregate number of
beneficial holders exceeds 7,000.
ITEM 6. SELECTED FINANCIAL DATA.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- ------------- ------------- ------------- -------------
(AS RESTATED) (AS RESTATED) (AS RESTATED) (AS RESTATED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................... $248,063 $ 223,328 $ 185,805 $ 193,212 $ 195,673
Gross profit................ 49,313 46,572 34,120 41,932 48,797
Nonrecurring charges........ 15,270 -- -- -- --
Operating income............ 3,727 14,805 5,349 12,772 23,140
Interest expense, net....... 5,350 4,521 4,710 4,384 5,286
Income (loss) before income
taxes.................... (1,296) 10,775 425 8,091 17,019
Net income (loss)........... (2,231) 7,545 1,874 5,097 10,908
Earnings (loss) per common
share.................... (.13) .44 .11 .29 .63
BALANCE SHEET DATA:
Working capital............. $ 79,546 $ 61,680 $ 43,384 $ 50,351 $ 43,539
Total assets................ 196,021 211,182 177,753 174,041 172,435
Total debt.................. 55,573 60,834 57,981 54,721 56,801
Stockholders' equity........ 97,550 98,478 81,925 81,349 78,715
</TABLE>
The Company's historical financial data for each of the four years ended
December 31, 1994 has been restated to include the results of SLT for all
periods presented and to reflect a change in the Company's method of determining
percentage of completion for installation contracts from the units-installed
method to the cost-to-cost method. See Notes 1 and 2 of the Notes to the
Consolidated Financial Statements.
9
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
RESULTS OF OPERATIONS
The following table sets forth certain items included in Selected Financial
Data, as a percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales..................................................... 100% 100% 100%
Gross profit.................................................. 20 21 18
Nonrecurring charges.......................................... 6 -- --
Operating income.............................................. 1 7 3
Interest expense, net......................................... 2 2 3
Income (loss) before income taxes............................. (1) 5 --
Net income (loss)............................................. (1) 3 1
</TABLE>
General
On July 27, 1995, the Company merged with SLT. The stockholder of SLT
received 7,000,000 shares of the Company's common stock for all issued and
outstanding shares of SLT common stock. The merger was accounted for as a
pooling of interests. Accordingly, the Company's financial statements have been
restated to include the results of SLT for all periods presented.
Year Ended December 31, 1995 Versus Year Ended December 31, 1994
The Company's net sales increased $24,735,000 or 11% in 1995 compared with
1994. Of this increase, $18,829,000 related to increased sales from the
Company's European operations where in February, the Company purchased a product
line in Germany that generated over $7,000,000 in sales. The remaining increase
was primarily from U.S. operations. The Company's increased sales were generated
from increased pricing, as unit sales volume fell slightly less than 6% from
year to year. Overall pricing for the Company's products and services increased
approximately 18% and was principally the result of the pass through of
increased raw material costs in 1995.
Gross profit for the year increased $2,741,000 or 6% from 1994 to 1995.
This increase is the result of increased sales for the year. The increase in
gross profit was generated primarily from the Company's European operations. As
a percentage of sales, gross profit decreased from 21% to 20%. The gross profit
percentage from U. S. operations was down slightly from year to year, but fell
nearly 3% in Europe as a result of the Company aggressively pricing its products
and services to increase its market share.
Selling, general and administrative expenses were reduced $1,498,000 to
$29,408,000 during 1995. Expense in the U.S. fell $3,536,000, as a result of
efficiencies gained from the merger. Internationally, SG&A expenses were up
$2,038,000, primarily in Europe. Approximately $1,500,000 of this increase
relates to the purchase of a product line in February, with the balance of the
increase being the effect of the strengthening of the German mark relative to
the U.S. dollar during 1995.
As a result of the merger and the planned disposal of SLT's old office and
manufacturing facility, the Company recorded nonrecurring charges of
$15,270,000. Of this amount, $10,070,000 related to a plan to reduce the overall
cost structure of the Company's products and manufacturing operations. To
accomplish the reduction in cost, the Company is standardizing its products, as
well as streamlining its manufacturing processes. An analysis was completed
during the year and the Company concluded that certain products, processes and
manufacturing assets must be upgraded or eliminated. The resulting charge of
$10,070,000 represents the Company's best estimate of the cost to standardize
products and streamline the manufacturing process, including the writedown of
certain assets. The Company has discontinued operating its compounding facility
and plans to upgrade its geonet production lines. The capital cost associated
with upgrading its geonet
10
<PAGE> 13
production capability is estimated to be $1,500,000. In addition, costs of
$400,000 related to the consolidation of SLT's manufacturing facilities and
closing its Conroe facility were recorded. Costs related to the merger with SLT
were $4,800,000. These expenses represent the cost of combining the two
companies, including severance expense, standardization of employee benefit
plans, professional fees, office and equipment relocation and other related
costs incurred in connection with the merger.
Net interest expense of $5,350,000 increased $829,000 from the prior year
due to an increase in the average level of debt outstanding during the year and
lower average investible cash balances.
Other income fell from $679,000 in 1994 to $447,000 in 1995 due to gains
recorded in 1994 on the sale of fully depreciated assets from the Company's
abandoned manufacturing facility in Germany. In 1995, other income includes the
receipt of a development grant of approximately $500,000 in connection with the
Company's investment in its German manufacturing facility.
The Company's provision for income taxes decreased to $935,000 in 1995 from
$3,230,000 in 1994. The tax provision in both years was provided at the
statutory rate adjusted for permanent differences. In 1995, the Company recorded
a tax provision of $935,000 on a pretax loss of $1,296,000 due to the
nondeductibility of certain expenses, particularly merger, meals and
entertainment expenses and goodwill amortization. The 1994 tax provision was
reduced by $1,574,000 due to the utilization of a previously unrecognized net
operating loss carryforward.
Year Ended December 31, 1994 Versus Year Ended December 31, 1993
The Company's net sales increased $37,523,000 or 20% in 1994 as compared
with 1993 due to increased unit sales volume partially offset by decreased
selling prices. Sales from the U.S. increased $19,387,000 or 13% while sales in
Europe increased $13,849,000 or 52%. The increased sales in the U.S. were driven
by enforcement of RCRA combined with increased demand in the mining sector. The
increase in European sales was driven by the Company's increased manufacturing
capacity in Germany along with the acquisition of Taggart Contracts, a United
Kingdom installation company in early 1994. Sales in Australia were also up
$3,813,000 due to increased demand in the Australian mining sector.
Gross profit increased $12,452,000 or 36% from year to year as a result of
increased sales volume and improved margins. Gross profit as a percentage of
sales increased to 21% from 18% last year primarily due to significant
productivity improvements in manufacturing and installation and increased plant
capacity utilization, particularly in the Company's German operations.
Selling, general and administrative expenses increased $2,946,000 or 11%
from 1993. This increase was primarily due to increased expenses in the
Company's German operations combined with the SG&A expenses associated with
Taggart Contracts in the United Kingdom.
Net interest expense of $4,521,000 in 1994 represents a reduction of
$189,000 or 4% from the prior year. The reduction was due to a decreased level
of debt outstanding for the year.
Other income increased $740,000 from 1993 primarily due to gains from the
sale of assets from the Company's abandoned manufacturing plant in Hamburg,
Germany.
In 1994, the Company's provision for income taxes was $3,230,000. In 1993,
the Company recorded an income tax benefit of $1,449,000. The 1993 benefit was
created by the recognition of a $4.1 million net operating loss carryforward in
Germany. The tax provisions in both years were provided at the statutory rates
adjusted for certain permanent differences.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had working capital of $79,546,000, of
which $16,057,000 was cash and cash equivalents. The Company's cash, inventory
and receivable balances fluctuate from quarter to quarter due to the seasonality
of sales. The Company's capital structure consisted of $55,573,000 in total
long-term debt and $97,550,000 in stockholders' equity at December 31, 1995.
11
<PAGE> 14
The Company has a $35,000,000 multi-currency revolving credit facility (the
"Revolver") with NationsBank of Texas. The Revolver, which matures on September
30, 2000, bears interest at the Company's option, at the bank's prime rate or
the reserve adjusted LIBOR plus an applicable margin based on the ratio of
funded debt to total capitalization. An annual commitment fee of up to 3/8% is
payable on any unused portion of the facility. Under the terms of the revolving
line of credit agreement, the Company is required to maintain certain financial
ratios and a specific level of consolidated tangible net worth. At December 31,
1995 and February 22, 1996, there was no balance outstanding on the Revolver.
However, letters of credit issued under this facility totaled $3,008,000,
thereby reducing the balance available to $31,992,000 (see Note 8 of the Notes
to Consolidated Financial Statements). The letters of credit issued under this
facility secure performance of installation projects and self-insurance
programs.
During 1995, the Company entered into note agreements (the "7.34% Notes")
with two lenders, in the aggregate amount of $25,000,000 which mature on August
1, 2005. The 7.34% Notes, which are unsecured, require semiannual interest
payments at a rate of 7.34% and annual principal payments of $5,000,000
beginning August 1, 2001. The terms of the 7.34% Notes place various
restrictions on the Company's ability to pay dividends or make certain other
payments, incur additional debt, consolidate or merge into another corporation
or sell assets unless certain other criteria are met. The 7.34% Notes also
require the Company to maintain certain financial ratios and a specified level
of consolidated net worth. The proceeds from the 7.34% Notes were used to retire
outstanding indebtedness of SLT.
Subsequent to year end, the Company announced that it had signed letters of
intent to acquire SGS Geosystems, Ltd. (SGS), a UK geomembrane manufacturer and
to sell its interest in GSE Clay Lining Technology Co. (Clay Lining). The net
cash requirement for these two transactions is expected to be minimal.
On June 15, 1996 the Company is required to make a $5,000,000 principal
payment on its 11.17% Notes. In addition, the Company has committed to spend
approximately $1,500,000 to upgrade its geonet production capability. The
Company believes that its cash balance, cash generated by operations and the
balance available under the Revolver are adequate to meet these and any other
foreseeable cash requirements during 1996.
The Company's operations are subject to seasonal fluctuation with the
greatest volume of product deliveries and installations typically occurring in
the summer and fall months. In particular, the Company's operating results are
most impacted in the first quarter as both product deliveries and installations
are at their lowest levels due to the inclement weather experienced in the
Northern Hemisphere.
In connection with contracts performed outside of the United States, the
Company routinely bids contracts that are denominated in currencies different
than the functional currency of the applicable subsidiary performing the work.
The Company recognizes that such bidding practices, in the context of
international operations, are subject to the risk of foreign currency
fluctuations not present in domestic operations. Currency losses to date have
not been material to the Company's operations as a whole.
Pricing for the Company's products and services are principally driven by
worldwide manufacturing capacity in the industry and raw material pricing. The
Company's primary raw material occasionally is in short supply and is subject to
substantial price fluctuation in response to market demand. Any increase in
worldwide manufacturing capacity, interruption in raw material supply or abrupt
raw material price increase could have an adverse effect upon the Company's
operations. Inflation has not had a significant impact on the Company's
operations.
12
<PAGE> 15
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Gundle/SLT Environmental, Inc.:
We have audited the accompanying consolidated balance sheets of Gundle/SLT
Environmental, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Gundle/SLT
Environmental, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Houston, Texas
February 2, 1996
13
<PAGE> 16
GUNDLE/SLT ENVIRONMENTAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
-------- -------------
(AS RESTATED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 16,057 $ 9,488
Accounts receivable:
Trade........................................................... 66,061 77,283
Other........................................................... 1,953 1,533
Contracts in progress.............................................. 10,601 9,401
Inventory.......................................................... 19,850 22,072
Deferred income taxes.............................................. 5,361 2,516
Prepaid expenses and other......................................... 2,045 954
-------- ---------
Total current assets....................................... 121,928 123,247
Property, plant and equipment, net................................... 43,940 57,172
Excess of purchase price over fair value of net assets acquired,
net................................................................ 27,916 28,715
Deferred income taxes................................................ 681 912
Other assets......................................................... 1,556 1,136
-------- ---------
$196,021 $ 211,182
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable...................................................... $ -- $ 12,467
Accounts payable and accrued liabilities........................... 34,254 42,789
Advance billings on contracts in progress.......................... 634 499
Current portion of long-term debt.................................. 5,426 2,165
Income taxes payable............................................... 206 2,120
Deferred income taxes.............................................. 1,862 1,527
-------- ---------
Total current liabilities.................................. 42,382 61,567
Deferred income taxes................................................ 4,598 3,893
Long-term debt....................................................... 50,147 46,202
Other liabilities.................................................... 1,344 1,042
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized, no
shares issued or outstanding.................................... -- --
Common stock, $.01 par value, 30,000,000 shares authorized,
17,695,677 and 17,685,506 shares issued and outstanding......... 177 177
Additional paid-in capital......................................... 68,270 68,216
Retained earnings.................................................. 30,154 32,385
Cumulative translation adjustment.................................. 3,216 1,967
-------- ---------
101,817 102,745
Treasury stock at cost, 500,000 shares............................. (4,267) (4,267)
-------- ---------
Total stockholders' equity................................. 97,550 98,478
-------- ---------
$196,021 $ 211,182
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
14
<PAGE> 17
GUNDLE/SLT ENVIRONMENTAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
-------- ------------- -------------
(AS RESTATED) (AS RESTATED)
<S> <C> <C> <C>
Net sales............................................... $248,063 $ 223,328 $ 185,805
Cost of sales........................................... 198,750 176,756 151,685
-------- --------- ---------
Gross profit............................................ 49,313 46,572 34,120
Selling, general and administrative expenses............ 29,408 30,906 27,960
Amortization of goodwill................................ 908 861 811
Nonrecurring charges.................................... 15,270 -- --
-------- --------- ---------
Operating income........................................ 3,727 14,805 5,349
Other expenses:
Interest expense, net................................. 5,350 4,521 4,710
Foreign exchange loss................................. 120 188 153
Other, net............................................ (447) (679) 61
-------- --------- ---------
Income (loss) before income taxes....................... (1,296) 10,775 425
Provision (benefit) for income taxes.................... 935 3,230 (1,449)
-------- --------- ---------
Net income (loss)....................................... $ (2,231) $ 7,545 $ 1,874
======== ========= =========
Earnings(loss) per common share......................... $ (.13) $ .44 $ .11
======== ========= =========
Weighted average common shares outstanding.............. 17,193 17,182 17,296
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
15
<PAGE> 18
GUNDLE/SLT ENVIRONMENTAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE TREASURY STOCK
----------------- ----------------- PAID-IN RETAINED TRANSLATION -----------------
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT SHARES AMOUNT TOTAL
------ ------- ------- ------- ----------- --------- ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1992 (as
restated)...... -- -- 17,641 $ 176 $60,254 $22,966 $ 611 280 $(2,658) $81,349
Exercise of
stock
options...... -- -- 2 -- 82 -- -- -- -- 82
Purchases under
the Employee
Stock
Purchase
Plan......... -- -- 6 1 44 -- -- -- -- 45
Purchases of
Treasury
Stock........ -- -- -- -- -- -- -- 177 (1,303) (1,303)
Cumulative
translation
adjustment... -- -- -- -- -- -- (122) -- -- (122)
Net income..... -- -- -- -- -- 1,874 -- -- -- 1,874
------ ----- ------- ---- ------- ------- ------ --- ------- -------
Balance at
December 31,
1993 (as
restated)...... -- -- 17,649 177 60,380 24,840 489 457 (3,961) 81,925
Exercise of
stock
options...... -- -- 28 -- 48 -- -- -- -- 48
Purchases under
the Employee
Stock
Purchase
Plan......... -- -- 8 -- 57 -- -- -- -- 57
Capital
contributions -- -- -- -- 7,731 -- -- -- -- 7,731
Purchases of
Treasury
Stock........ -- -- -- -- -- -- -- 43 (306) (306)
Cumulative
translation
adjustment... -- -- -- -- -- -- 1,478 -- -- 1,478
Net income..... -- -- -- -- -- 7,545 -- -- -- 7,545
------ ----- ------- ---- ------- ------- ------ --- ------- -------
Balance at
December 31,
1994 (as
restated)...... -- -- 17,685 177 68,216 32,385 1,967 500 (4,267) 98,478
Exercise of
stock
options...... -- -- 4 -- 16 -- -- -- -- 16
Purchases under
the Employee
Stock
Purchase
Plan......... -- -- 7 -- 38 -- -- -- -- 38
Cumulative
translation
adjustment... -- -- -- -- -- -- 1,249 -- -- 1,249
Net income
(loss)....... -- -- -- -- -- (2,231) -- -- -- (2,231)
------ ----- ------- ---- ------- ------- ------ --- ------- -------
Balance at
December 31,
1995........... -- -- 17,696 $ 177 $68,270 $30,154 $3,216 500 $(4,267) $97,550
====== ===== ======= ==== ======= ======= ====== === ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
16
<PAGE> 19
GUNDLE/SLT ENVIRONMENTAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
-------- ------------- -------------
(AS RESTATED) (AS RESTATED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................ $ (2,231) $ 7,545 $ 1,874
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Depreciation.......................................... 8,123 8,262 7,799
Amortization of goodwill.............................. 908 861 811
Amortization of debt issuance costs................... 40 32 31
Deferred income taxes................................. (1,573) (457) (3,209)
Gain on sale of assets................................ (86) (592) (149)
Write down of assets.................................. 8,470 -- --
Increase (decrease) in cash due to changes in assets
and liabilities:
Accounts receivable................................. 10,802 (25,131) (1,724)
Contracts in progress............................... (1,200) (4,068) 889
Inventory........................................... 2,222 (4,260) 1,914
Prepaid expenses and other, net..................... (965) (1,313) (240)
Accounts payable and accrued liabilities............ (8,535) 8,852 2,216
Advance billings on contracts in progress........... 135 (160) (1,018)
Income taxes payable................................ (1,914) 2,246 (424)
-------- --------- ---------
Net cash provided by (used in) operating
activities..................................... 14,196 (8,183) 8,770
-------- --------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment, net.......... (4,135) (9,759) (13,179)
Proceeds from the sale of equipment...................... 860 670 167
Payments for acquisition of a business, net of cash
acquired.............................................. -- (880) --
Advances to affiliates and other, net.................... (387) 821 (84)
-------- --------- ---------
Net cash used in investing activities............ (3,662) (9,148) (13,096)
-------- --------- ---------
Cash flows from financing activities:
Payments on short-term debt, net......................... (12,467) (7,675) --
Proceeds from long-term debt............................. 25,000 7,712 14,816
Repayments of long-term debt............................. (17,692) -- (10,875)
Subsidies received from governmental agencies............ -- -- 1,085
Proceeds from the exercise of stock options and purchases
under the employee stock purchase plan................ 54 105 126
Capital contributions.................................... -- 7,761 225
Repurchase of common stock............................... -- (306) (1,303)
-------- --------- ---------
Net cash provided by (used in) financing
activities..................................... (5,105) 7,597 4,074
Effect of exchange rate changes on cash.................... 1,140 (368) (150)
-------- --------- ---------
Net increase (decrease) in cash and cash equivalents....... 6,569 (10,102) (402)
Cash and cash equivalents at beginning of year............. 9,488 19,590 19,992
-------- --------- ---------
Cash and cash equivalents at end of year................... $ 16,057 $ 9,488 $ 19,950
======== ========= =========
Cash paid for interest..................................... $ 4,856 $ 5,188 $ 5,578
======== ========= =========
Cash paid for income taxes................................. $ 5,184 $ 1,334 $ 2,197
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE> 20
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION --
Organization --
Gundle/SLT Environmental, Inc. (the "Company"), a Delaware corporation, was
incorporated in August 1986, and through its wholly owned subsidiaries is
primarily engaged in the manufacture, sale and installation of polyethylene
lining systems.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
Fiscal year --
On April 17, 1995, the Company elected to change its year end to December
31, effective December 31, 1995. The Company's historical financial statements
have been restated to conform with this change in year end.
Consolidation --
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. Investments in partially owned
entities in which ownership ranges from 20 to 50 percent are accounted for using
the equity method. All material intercompany balances and transactions have been
eliminated.
Cash Equivalents --
The Company considers all highly liquid short-term investments with an
original maturity of three months or less to be cash equivalents.
Inventory --
Inventory is stated at the lower of cost or market. Cost, which includes
material, labor and overhead, is determined by the weighted average cost method.
Property, plant and equipment --
Costs of additions and major improvements are capitalized, whereas
maintenance and repairs which do not improve or extend the life of the asset are
charged to expense as incurred. When items are retired or otherwise disposed of,
income is charged or credited for the difference between net book value and
proceeds realized thereon. Interest costs incurred in construction of assets are
capitalized and depreciated over the useful life of the asset. Depreciation is
computed using the straight-line method, based on the estimated useful lives of
the assets. Total repairs and maintenance expense during 1995, 1994 and 1993 was
$2,650,000, $2,632,000 and $1,792,000, respectively.
Excess of purchase price over fair value of net assets acquired --
The excess of the aggregate price paid by the Company in the acquisition of
businesses, accounted for as a purchase, over the fair market value of the net
assets acquired is amortized on a straight-line basis over periods not exceeding
40 years. The carrying value of the excess of purchase price over fair value of
net assets acquired is reviewed if the facts and circumstances suggest that it
may be impaired. If this review indicates that the carrying value will not be
recoverable, as determined based on the undiscounted cash flows of the entity
required over the remaining amortization period, it is reduced by the estimated
shortfall of cash flows. As of December 31, 1995 and 1994, accumulated
amortization was $8,895,000 and $7,954,000, respectively.
18
<PAGE> 21
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accounting for long-lived assets --
In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement 121
in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
Revenue and cost recognition --
The Company recognizes revenue upon shipment of product to the customer
except when work is being performed under an installation contract. Revenues
from installation contracts are recognized on the percentage-of-completion
method measured by the percentage of costs incurred to total estimated costs for
each contract.
Cost of sales includes all direct material and labor costs, and indirect
costs such as indirect labor, depreciation, insurance, supplies, tools and
repairs.
Selling, general and administrative costs are charged to expense as
incurred.
Provisions for the total estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Changes in job performance,
job conditions, estimated profitability and final contract settlements may
result in revisions to costs and income and are recognized in the period in
which the revisions are determined.
Deferred costs --
Debt issuance costs are capitalized and amortized using the effective
interest rate method over the period the related debt is anticipated to be
outstanding.
Warranty Costs --
The Company's products are sold and installed with specified warranties as
to material quality and workmanship and may extend up to 20 years. Provision for
warranty costs are made based on the Company's claims experience. The reserve
for these costs is included in the self-insurance reserve (see Note 7).
Income taxes --
The Company follows the liability method of accounting for income taxes.
Under this method, deferred income tax assets and liabilities are determined
based on differences between the financial statements and income tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.
Foreign currency translation --
Results of operations for foreign subsidiaries with functional currencies
other than the U.S. dollar are translated using average exchange rates during
the year. Assets and liabilities of these foreign subsidiaries are translated
using the exchange rates in effect at the balance sheet date and the resulting
translation adjustments are recognized as a separate component of stockholders'
equity. Gains and losses arising from foreign currency transactions are
recognized in income as incurred.
19
<PAGE> 22
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with contracts performed outside of the United States, the
Company routinely bids fixed-price contracts which are denominated in currencies
different than the functional currency of the applicable subsidiary performing
the work. The Company recognizes that such bidding practices, in the context of
international operations, are subject to the risk of foreign currency
fluctuations not present in domestic operations. Losses related to these
contracts are included in cost of sales and have not been significant.
Foreign exchange contracts --
The Company periodically enters into forward exchange contracts primarily
as hedges relating to identifiable currency positions. These financial
instruments are designed to minimize exposure and reduce risk from exchange rate
fluctuations on certain transactions. At December 31, 1995, the Company had a
forward exchange contract to sell 18,000,000 Deutsche Marks for $12,846,000 that
were purchased on November 20, 1995 for $12,761,000. This contract matures in
1996.
Earnings per common share --
Earnings per common share is based on the weighted average number of common
shares and common share equivalents outstanding. Common share equivalents
(outstanding options to purchase shares of common stock) are computed using the
treasury stock method and were excluded from the earnings per share calculations
as dilution was less than 3%.
Stock options --
The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting for
stock options.
Use of estimates --
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Supplier/sources of supply --
The Company currently purchases its raw material (polyethylene resins) from
three primary suppliers. Polyethylene resins are occasionally in short supply
and are subject to substantial price fluctuation in response to market demand.
The Company has not encountered any significant difficulty to date in obtaining
raw materials in sufficient quantities to support its operations at current or
expected near-term future levels. However, any disruption in raw material supply
or abrupt increases in raw material prices could have an adverse effect upon the
Company's operations.
Reclassifications --
The accompanying consolidated financial statements for 1994 and 1993
contain certain reclassifications to conform with the presentation used in 1995.
20
<PAGE> 23
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) TRADE RECEIVABLES --
Trade receivables consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
(IN THOUSANDS)
Direct sales............................................. $30,100 $35,599
Contracts:
Completed.............................................. 22,129 25,744
In progress............................................ 15,247 15,775
Retainage.............................................. 3,320 2,865
------- -------
70,796 79,983
Allowance for doubtful accounts.......................... (4,735) (2,700)
------- -------
$66,061 $77,283
======= =======
</TABLE>
(4) ACCOUNTING FOR INSTALLATION CONTRACTS --
The following summarizes installation contracts in progress at December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
(IN THOUSANDS)
Costs incurred on contracts in progress.................. $45,326 $55,975
Estimated earnings, net of losses........................ 7,611 10,226
------- -------
52,937 66,201
Less -- billings to date............................... 42,970 57,299
------- -------
$ 9,967 $ 8,902
======= =======
Included in the accompanying balance sheet under the
following captions:
Contracts in progress.................................. $10,601 $ 9,401
Advance billings....................................... (634) (499)
------- -------
$ 9,967 $ 8,902
======= =======
</TABLE>
(5) INVENTORY --
Inventory consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies................................ $ 3,893 $ 9,892
Finished goods............................................ 15,957 12,180
------- -------
$19,850 $22,072
======= =======
</TABLE>
21
<PAGE> 24
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) PROPERTY, PLANT AND EQUIPMENT --
Property, plant and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................... $ 2,708 $ 2,860
Buildings and improvements.............................. 14,027 12,660
Machinery and equipment................................. 66,980 78,689
Furniture and fixtures.................................. 1,706 1,592
-------- --------
85,421 95,801
Less -- accumulated depreciation........................ (41,481) (38,629)
-------- --------
$ 43,940 $ 57,172
======== ========
</TABLE>
(7) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
Accounts payable and accrued liabilities consisted of the following at
December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Trade accounts payable.................................... $16,425 $23,438
Self-insurance reserves................................... 3,097 4,701
Compensation and benefits................................. 3,219 2,561
Taxes, other than income.................................. 1,585 3,388
Other accrued liabilities................................. 9,928 8,701
------- -------
$34,254 $42,789
======= =======
</TABLE>
22
<PAGE> 25
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) LONG-TERM DEBT --
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revolving line of credit payable to NationsBank of Texas,
interest due quarterly.................................. $ -- $ --
11.17% Notes due June 15, 2000, with required annual
principal payments of $5,000,000 beginning June 15,
1996, interest payable quarterly at 11.17%.............. 25,000 25,000
7.34% Notes due August 1, 2005, with required annual
principal payments of $5,000,000 beginning August 1,
2001, interest payable semi-annually at 7.34%........... 25,000 --
8% Promissory Note due December 31, 2004, with required
annual principal and interest payments of $206,000...... 1,287 1,383
REDI Funds................................................ -- 25
Revenue bonds due April 15, 2000, with required annual
principal payments of $90,000 through April 15, 1996 and
$100,000 thereafter, interest payable semi-annually at
7.75%, secured by property and plant.................... 490 580
Installment loans, denominated in German Marks, due
September, 1998, with required semi-annual principal and
interest payments, interest rates ranging from 7.5% to
8.0%, secured by property and plant..................... 3,796 4,054
Note payable due August, 1996, interest payable monthly at
LIBOR plus 0.875%....................................... -- 12,000
Note payable due June, 1998, with required monthly
principal payments of $10,208, interest payable monthly
at prime
plus 1%................................................. -- 1,225
Note payable due December, 1988, with required monthly
principal payments of $35,417, interest payable monthly
at prime plus 0.5%...................................... -- 1,700
Note payable due August, 1997, with required monthly
principal payments of $75,000, interest payable monthly
at LIBOR plus 3%........................................ -- 2,400
------- -------
55,573 48,367
Less -- current maturities................................ (5,426) (2,165)
------- -------
$50,147 $46,202
======= =======
</TABLE>
The Company entered into a new $35,000,000 multi-currency revolving credit
facility (the "Revolver") with NationsBank of Texas, on July 27, 1995. The
Revolver, which matures on September 30, 2000, bears interest at the Company's
option, at the bank's prime rate or the reserve adjusted LIBOR plus an
applicable margin based on the ratio of funded debt to total capitalization. An
annual commitment fee of up to 3/8% is payable on any unused portion of the
facility. Under the terms of the revolving line of credit agreement, the Company
is required to maintain certain financial ratios and a specific level of
consolidated tangible net worth. As of December 31, 1995, there was no balance
outstanding under the Revolver. However, letters of credit issued under this
facility totaled $3,008,000 reducing the balance available to $31,992,000. The
letters of credit primarily secure performance of installation contracts and
self-insurance programs.
23
<PAGE> 26
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 27, 1995, the Company entered into note agreements (the "7.34%
Notes") with two lenders, in the aggregate amount of $25,000,000 which mature on
August 1, 2005. The 7.34% Notes, which are unsecured, require semiannual
interest payments at a rate of 7.34% beginning February 1, 1996 and annual
principal payments of $5,000,000 beginning August 1, 2001. The terms of the
7.34% Notes place various restrictions on the Company's ability to pay dividends
or make certain other payments, incur additional debt, consolidate or merge into
another corporation or sell assets unless certain other criteria are met. The
7.34% Notes also require the Company to maintain certain financial ratios and a
specified level of consolidated net worth. The proceeds from the 7.34% Notes
were used to retire outstanding indebtedness of SLT.
The 11.17% Notes, which are unsecured, require quarterly interest payments
at a rate of 11.17%, which began September 15, 1990, and annual principal
payments of $5,000,000 beginning June 15, 1996. The terms of the 11.17% Notes
are consistent with the terms of the 7.34% Notes.
The 8% Promissory Note, which is unsecured, requires annual principal and
interest payments of $206,000 ending December 31, 2004.
Summarized below are the maturities of long-term debt of the Company during
the next five years and thereafter (in thousands).
<TABLE>
<CAPTION>
YEAR
ENDING
DECEMBER 31,
- ------------
<S> <C>
1996........................................................ $ 5,426
1997........................................................ 5,759
1998........................................................ 5,769
1999........................................................ 5,778
2000........................................................ 5,788
Thereafter.................................................. 27,053
-------
$55,573
=======
</TABLE>
(9) STOCKHOLDERS' EQUITY --
On June 1, 1992, the Company's board of directors adopted a stock
repurchase plan under which the company was authorized to repurchase up to
500,000 shares of its outstanding common stock in open market transactions
depending on market conditions. As of December 31, 1995 and 1994, stockholders'
equity included 500,000 shares repurchased under the plan at an aggregate cost
of $4,267,000.
The Company's board of directors adopted a qualified employee stock
purchase plan on October 16, 1991, effective January 1, 1992. The plan
authorizes the issuance of up to 100,000 shares of common stock for purchase by
participating employees at a 15% discount from the market price. As of December
31, 1995 and 1994, 20,217 and 13,797 shares, respectively, had been issued under
this plan.
In 1986, the Company's board of directors adopted an employee stock option
plan (the "1986 Plan"), which permitted the grant of up to 850,000 stock
options. The plan permitted the grant of both "incentive" and "non-qualified"
stock options to employees of the Company. Each option is exercisable for a
period of up to ten years after it is granted. Unless the terms of the option
specify otherwise, options may be exercised in respect of 33 1/3%, 66 2/3% and
100% of the shares covered, upon the third, fourth and fifth anniversaries of
the date of grant. The option price cannot be less than the fair market value of
the shares on the date the option is granted. Any options that were available
for grant under this plan are now a part of the 1995 Incentive Stock Plan (the
"1995 Plan").
24
<PAGE> 27
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1988, the Company's board of directors adopted a stock option plan
(the "1988 Plan"), which permits the grant of up to 75,000 "non-qualified" stock
options to non-employee directors. The terms of this plan are substantially the
same as those of the employee stock option plan.
During 1995, the Company's board of directors adopted the 1995 Plan. The
1995 Plan as subsequently amended and restated, permits the grant of up to
1,750,000 stock options less any options exercised or outstanding under the 1986
Plan. The 1995 Plan provides for the grant of (i) non-qualified stock options,
(ii) incentive stock options, (iii) shares of restricted stock, (iv) shares of
phantom stock, and (v) stock bonuses (collectively, "Incentive Awards"). In
addition, the 1995 Plan permits the grant of cash bonuses payable when a
participant is required to recognize income for federal income tax purposes in
connection with the vesting of shares of restricted stock or the grant of a
stock bonus. Key employees, including officers (whether or not they are
directors), of the Company and its subsidiaries will be eligible to participate
in the 1995 Plan. Each non-qualified stock option issued under the 1995 Plan is
exercisable for a period up to seven years after it is granted and may be
exercised in respect of 50% and 100% of the shares covered upon the first and
second anniversaries of the date of grant. The option price cannot be less than
the fair market value of the shares on the date the option is granted.
The stock option activity under each plan is set forth below:
<TABLE>
<CAPTION>
1986 PLAN 1988 PLAN 1995 PLAN
------------------------------ ------------------------------ -----------------------------
SHARES OPTION PRICE SHARES OPTION PRICE SHARES OPTION PRICE
UNDER OPTION PER SHARE UNDER OPTION PER SHARE UNDER OPTION PER SHARE
------------ --------------- ------------ --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
December 31,
1992.............. 626,682 $4.27 to $18.00 40,000 $8.25 to $16.17 -- --
Granted........... 63,000 $7.63 to $11.13 5,000 $9.13 -- --
Exercised......... (20,157) $4.27 to $ 8.25 -- -- -- --
Cancelled......... (226,170) $7.63 to $18.00 -- -- -- --
-------- --------------- ------- --------------- -------- ---------------
Outstanding at
December 31,
1993.............. 443,355 $4.27 to $16.92 45,000 $8.25 to $16.17 -- --
Granted........... 105,500 $5.25 to $ 7.38 5,000 $6.25 -- --
Exercised......... (10,313) $4.27 -- -- -- --
Cancelled......... (88,159) $7.63 to $15.63 -- -- -- --
-------- --------------- ------- --------------- -------- ---------------
Outstanding at
December 31,
1994.............. 450,383 $4.27 to $16.92 50,000 $6.25 to $16.17 -- --
Granted........... -- -- 10,000 $7.00 289,700 $5.38 to $5.50
Exercised......... (3,751) $4.27 -- -- -- --
Cancelled......... (75,085) $7.63 to $15.63 -- -- -- --
-------- --------------- ------- --------------- -------- ---------------
Outstanding at
December 31,
1995.............. 371,547 $4.27 to $16.92 60,000 $6.25 to $16.17 289,700 $5.38 to $5.50
======== =============== ======= =============== ======== ===============
Options
exercisable....... 231,377 $4.27 to $16.92 40,000 $8.25 to $16.17 -- --
======== =============== ======= =============== ======== ===============
Options available
for future
grants............ -- 15,000 975,689
======== ======= ========
</TABLE>
In 1993, pursuant to an employment agreement with an officer, the Company's
board of directors granted the officer a non-qualified stock option to purchase
100,000 shares of the Company's common stock. The option price is equal to the
fair market value of the shares on the date of the grant. This option is
exercisable through April 1997. At December 31, 1995, 66,667 shares were
exercisable under this agreement.
25
<PAGE> 28
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) INCOME TAXES --
A significant amount of earnings (losses) from consolidated operations
before income taxes is from foreign sources as reflected as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic......................................... $(2,124) $13,910 $1,189
Foreign.......................................... 828 (3,135) (764)
------- ------- ------
Total.................................. $(1,296) $10,775 $ 425
======= ======= ======
</TABLE>
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current expense:
Federal........................................ $ 2,109 $2,929 $ 1,162
Foreign........................................ 13 363 57
State.......................................... 386 395 541
------- ------ -------
Total current.......................... 2,508 3,687 1,760
Deferred expense (benefit):
Federal........................................ (1,572) (973) (137)
Foreign........................................ 529 513 (3,028)
State.......................................... (530) 3 (44)
------- ------ -------
Total deferred......................... (1,573) (457) (3,209)
------- ------ -------
$ 935 $3,230 $(1,449)
======= ====== =======
</TABLE>
A reconciliation between the provision for income taxes and income taxes
computed by applying the statutory rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax provision (benefit) at statutory rate....... $ (441) $ 3,664 $ 145
Add (deduct):
Merger costs.................................. 553 -- --
Decrease in valuation allowance............... -- (1,654) (309)
Amortization of goodwill...................... 377 362 312
Meals and entertainment disallowance.......... 440 413 164
Foreign Sales Corporation benefit............. (200) (157) (326)
Taxable differential for foreign operations... 144 141 (1,431)
State income taxes............................ (95) 222 253
Other, net.................................... 157 239 (257)
----- ------ ------
$ 935 $ 3,230 $(1,449)
===== ====== ======
</TABLE>
26
<PAGE> 29
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that gave rise to the deferred tax
assets and liabilities were as follows at December 31:
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accrued expenses......................................... $5,353 $3,205
Net operating loss and other carryforwards............... 681 1,786
Other.................................................... 58 417
------ ------
6,092 5,408
------ ------
Deferred tax liabilities:
Excess of tax depreciation over book depreciation........ 3,884 5,421
Long term contracts...................................... 1,658 1,446
Intangible assets........................................ 115 117
Other.................................................... 853 415
------ ------
6,510 7,399
------ ------
Total deferred tax liabilities........................ $ 418 $1,991
====== ======
</TABLE>
In 1995 and 1994 the U.S. current tax provisions for income taxes were net
of approximately $601,000 and $1,574,000, respectively, of tax benefit due to
the utilization of net operating loss carryforwards. In Germany the 1995 and
1994 current tax provisions for income taxes were net of approximately $324,000
and $726,000, respectively, of tax benefit due to utilization of net operating
loss carryforwards.
At December 31, 1995 the Company has $1,219,000 of net operating loss
carryforwards, for German tax purposes, which do not expire. In the opinion of
management, no valuation allowance on the deferred tax assets is necessary at
December 31, 1995 and 1994.
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $700,000 at December 31, 1995. Those earnings are considered to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided thereon. Upon distribution of those
earnings in the form of dividends or otherwise, the Company would be subject to
both U.S. income taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable to the various foreign countries. Determination of the
amount of unrecognized deferred U.S. income tax liability is not practicable
because of the complexities associated with its hypothetical calculation.
(11) RELATED-PARTY TRANSACTIONS --
During the years ended December 31, 1995 and 1994 the Company paid $250,000
and $400,000, respectively, in selling, general and administrative expenses to
Wembly, Ltd., formerly the sole stockholder of SLT, for reimbursement of such on
its behalf. See Note 18 also.
(12) EMPLOYEE BENEFIT PLANS --
The Company has a defined contribution employee benefit plan under which
substantially all employees are eligible to participate. The Company contributed
$264,000, $315,000 and $296,000 to the plan during the years ended December 31,
1995, 1994 and 1993, respectively. Under the terms of the plan, contributions to
the plan may be discontinued at any time.
The Company has a non-qualified bonus arrangement whereby a portion of
annual net income may be contributed to a bonus pool for allocation to all
eligible employees. Contributions under this plan are at the discretion of the
board of directors.
27
<PAGE> 30
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) PENSION PLAN --
The Company's German subsidiary has an unfunded pension plan providing
benefits to three present employees and three former employees. The plan
provides fixed minimum pension payments at retirement age. There are no assets
held in outside funds.
The Company has adopted FAS 87, "Employers' Accounting for Pensions";
however, to the extent pension costs under German law exceed amounts computed
under FAS 87, those additional amounts are recorded by the Company. Pension
expense for the years ended December 31, 1995, 1994, and 1993 was $94,000,
$70,000, and $199,000, respectively. The actuarial present value of accumulated
benefits was $1,219,000 at December 31, 1995 and $1,041,000 at December 31,
1994. The projected benefit obligation for service rendered to date, net of
unrecognized prior service cost, was $1,281,000 and $1,093,000 as of December
31, 1995 and 1994, respectively.
The computation assumed a discount rate on benefit obligations of 7.5%,
annual salary increase of 5% and annual benefit increase of 3%.
(14) SALES TO SIGNIFICANT CUSTOMERS --
During 1995, 1994 and 1993, no single customer accounted for 10% or greater
of total net sales.
(15) RESEARCH AND DEVELOPMENT COSTS --
Research and development costs are charged to expense as incurred. The
amounts of research and development and quality control expenditures during the
years ended December 31, 1995, 1994 and 1993 were $1,705,000, $2,191,000, and
$2,373,000, respectively.
(16) COMMITMENTS AND CONTINGENCIES --
Product warranties and insurance coverage --
The Company's products are sold and installed with specified warranties as
to material quality and workmanship. These warranties may last for up to 20
years, but are generally limited to repair or replacement by the Company of the
defective liner or the dollar amount of the contract involved, amortized over a
period of years. The Company may also indemnify the site owner or general
contractor for other damages resulting from negligence of the Company's
employees. The Company is often required to post bid and performance bonds
covering the full amount of an installation contract.
Although the Company is not exposed to the type of potential liability that
might arise from being in the business of handling, transporting or storing
hazardous waste or materials, the Company could be susceptible to liability for
environmental damage or personal injury resulting from defects in the Company's
products or negligence by Company employees in the installation of its lining
systems. Such liability could be substantial because of the potential that
hazardous or other waste materials might leak out of their containment system
into the environment. The Company maintains product liability insurance, which
includes pollution coverage in the U.S. and Germany, in amounts which it
believes to be prudent. However, there is no assurance that this coverage will
remain available to the Company. While the Company's claims experience to date
may not be a meaningful measure of its potential exposure for product liability,
the Company has experienced no material losses from defects in products and
installations.
Litigation and claims --
The Company is involved in litigation arising in the ordinary course of
business, which, in the opinion of management, will not have a material adverse
effect on the Company's financial position or results of operations.
28
<PAGE> 31
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Operating Leases --
The Company leases certain equipment through operating lease arrangements
of varying terms. Annual rental expense under the terms of non-cancellable
operating leases is less than 1% of consolidated revenues.
(17) MERGER WITH SLT ENVIRONMENTAL, INC. --
On July 27, 1995, the Company merged with SLT Environmental, Inc. (SLT).
The stockholder of SLT received 7,000,000 shares of the Company's common stock
for all issued and outstanding shares of SLT common stock. The merger was
accounted for as a pooling of interests. Accordingly, the Company's financial
statements have been restated to include the results of SLT for all periods
presented.
Combined and separate results of Gundle and SLT during the period preceding
the merger were as follows (unaudited and in thousands):
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED JULY 27, 1995 YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1993
---------------------------------- --------------------------------- ---------------------------------
GUNDLE SLT COMBINED GUNDLE SLT COMBINED GUNDLE SLT COMBINED
------- ------- -------- -------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales.......... $70,390 $67,715 $138,105 $132,515 $90,813 $223,328 $113,800 $72,005 $185,805
======= ======= ======== ======== ======= ======== ======== ======== ========
Net income..... $ (267) $ 1,308 $ 1,041 $ 2,943 $ 4,602 $ 7,545 $ 1,911 $ (37) $ 1,874
======= ======= ======== ======== ======= ======== ======== ======== ========
</TABLE>
As a result of the merger and the planned disposal of SLT's old office and
manufacturing facility, the Company recorded nonrecurring charges of
$15,270,000. Of this amount, $10,070,000 related to a plan to reduce the overall
cost structure of the Company's products and manufacturing operations. To
accomplish the reduction in cost, the Company is standardizing its products, as
well as streamlining its manufacturing processes. An analysis was completed
during the year and the Company concluded that certain products, processes and
manufacturing assets must be upgraded or eliminated. The resulting charge of
$10,070,000 represents the Company's best estimate of the net cost to
standardize products and streamline the manufacturing process, including the
writedown of certain assets. The Company has discontinued operating its
compounding facility and plans to upgrade its geonet production lines. The
capital cost associated with upgrading its geonet production capability is
estimated to be $1,500,000. In addition, costs of $400,000 related to the
consolidation of SLT's manufacturing facilities and closing its Conroe facility
were recorded. Costs related to the merger with SLT were $4,800,000. These
expenses represent the cost of combining the two companies, including severance
expense, standardization of employee benefit plans, professional fees, office
and equipment relocation and other related costs incurred in connection with the
merger.
(18) GSE CLAY LINING TECHNOLOGY CO. --
On December 16, 1994, the Company purchased 99.999% of its partner's 50%
interest in PG Technology Co, subsequently renamed GSE Clay Lining Technology
Co. ("Clay Lining") for cash, notes and the assumption of debt. The Company paid
$500,000 in cash and issued a note payable of $1,383,000. The note is payable
over ten years and bears interest at 8%. The acquisition was recorded using the
purchase method of accounting.
Clay Lining manufactures and sells a composite liner product combining
polyethylene liner and bentonite clay. The manufacturing facility is located in
Spearfish, South Dakota.
(19) SUBSEQUENT EVENTS --
In January 1996, the Company signed letters of intent to acquire SGS
Geosystems, Inc. (SGS), a U.K. geomembrane manufacturer and to sell its interest
in Clay Lining. The net cash requirement for these two transactions is expected
to be minimum.
29
<PAGE> 32
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(20) GEOGRAPHIC INFORMATION --
Summary geographic financial information is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales to unaffiliated customers:
United States.................................... $178,181 $172,059 $152,672
Far East......................................... 4,707 4,530 4,056
Australia........................................ 5,982 6,375 2,562
Europe........................................... 59,193 40,364 26,515
Intercompany sales between geographic areas
(eliminated in consolidation):
United States.................................... -- -- --
Far East......................................... 2,133 2,141 673
Australia........................................ 2,946 3,995 1,361
Europe........................................... 4,169 6,043 3,187
Operating profit (loss):
United States.................................... 1,933 12,661 7,038
Far East......................................... (249) 104 169
Australia........................................ 187 852 141
Europe........................................... 1,856 1,188 (1,999)
Identifiable assets:
United States.................................... 138,551 167,024 144,371
Far East......................................... 2,761 2,984 1,820
Australia........................................ 4,389 4,376 1,638
Europe........................................... 50,320 36,798 29,924
</TABLE>
Included in the United States sales to unaffiliated customers are export
sales to countries principally located in North, Central and South America
comprising less than 10% of consolidated sales.
30
<PAGE> 33
GUNDLE/SLT ENVIRONMENTAL, INC.
SUPPLEMENTARY DATA
Consolidated quarterly financial data (Unaudited) --
Unaudited quarterly information for fiscal 1995 and 1994 is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1995 1994
------------------------------------- -------------------------------------
QUARTER QUARTER
------------------------------------- -------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $42,535 $68,106 $79,166 $58,256 $30,277 $48,723 $76,342 $67,986
Gross profit............ 6,938 14,361 17,529 10,485 5,984 10,627 16,444 13,517
Income (loss) before
income taxes.......... (4,064) 2,819 (2,854) 2,803 (2,717) 2,068 7,405 4,019
Net income (loss)....... (2,801) 2,263 (3,254) 1,561 (2,040) 1,545 5,003 3,037
Earnings (loss) per
common share.......... (.16) .13 (.19) .09 (.12) .09 .29 .18
</TABLE>
The above data should be read in conjunction with the consolidated
financial statements and notes thereto.
31
<PAGE> 34
SCHEDULE II
GUNDLE/SLT ENVIRONMENTAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED AT END
DESCRIPTION OF YEAR TO EXPENSE WRITEOFFS OF YEAR
- --------------------------------------------------- ---------- ---------- --------- -------
<S> <C> <C> <C> <C>
December 31, 1993:
Allowance for doubtful accounts.................. $1,518 $ 585 $ 181 $ 1,922
====== ====== ======= =======
December 31, 1994:
Allowance for doubtful accounts.................. $1,922 $1,447 $ 669 $ 2,700
====== ====== ======= =======
December 31, 1995:
Allowance for doubtful accounts.................. $2,700 $4,133 $ 2,098 $ 4,735
====== ====== ======= =======
</TABLE>
32
<PAGE> 35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
Part III (Items 10 through 13) is omitted since the Company expects to file
with the Securities and Exchange Commission within 120 days following December
31, 1995, definitive proxy materials pursuant to Regulation 14A under the
Securities Exchange Act of 1934 involving the annual election of directors and
certain other matters. If for any reason such a statement is not so filed, this
Report will be appropriately amended.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial statements (see financial statements at pages 13-30)
(a)(2) Supplementary data (see page 31)
(a)(3) Financial schedule (see page 32)
Schedule II -- Valuation and Qualifying Accounts
Schedules not listed above are omitted since the information required to be
submitted has been included in the financial statements or the notes thereto, or
the schedules are not required.
(a)(3) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------------------
<S> <C>
2-A -- Plan Agreement of Merger dated March 28, 1995 between the Company
and SLT Environmental, Inc. (Exhibit A to Registrant's Preliminary
Proxy Statement filed on May 4, 1995 is incorporated herein by
reference).
3-A -- Articles of Incorporation as amended (Exhibits 3.1, 3.2 and 3.3 to
Registrant's Registration Statement No. 33-9809 are incorporated
herein by reference).
3-B -- Bylaws (Exhibit 3.4 to Registrant's Registration Statement No.
33-9809 is incorporated herein by reference).
4-E -- Credit Agreement dated as of July 27, 1995, between the Company, the
financial institutions named therein and NationsBank of Texas, N.A.,
as agent (incorporated by reference to Exhibit 1.6 to Registrant's
Current Report on Form 8-K filed on August 9, 1995).
4-F -- Note Agreements dated as of June 15, 1995, between Gundle
Environmental Systems, Inc. and certain institutions covering the
Senior Notes due June 15, 2000 (incorporated by reference to
Exhibits 1.3, 1.4 and 1.5 to Registrant's Current Report on Form 8-K
filed August 9, 1995).
10-A -- Employment Agreement dated as of June 1, 1993 between Thomas L.
Caltrider and the Registrant.
10-B -- Registrant's stock option plan (Exhibit 10.11 to Registrant's
Registration Statement No. 33-9809 is incorporated herein by
reference).
10-E -- Registrant's 1988 Non-Qualified Stock Option Plan for Non-Employee
Directors, as amended to date.
10-F -- Employment Agreement dated October 13, 1989 as amended March 28,
1995 between William P. Reid and the Company.
10-G -- Registrant's 1995 Amended and Restated Incentive Stock Plan.
11 -- Computation of per share earnings (see financial statements at page
20).
18-A -- Independent public accounts preferability letter regarding changes
in accounting method.
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------------------
<S> <C>
21 -- Subsidiaries.
23 -- Consent of Independent Auditors.
27 -- Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K.
(c) Exhibits (see Item (a)(3), above).
(d) Additional financial statements (see Items (a)(1) and (a)(2) above).
34
<PAGE> 37
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, ON THE 22ND DAY OF
FEBRUARY, 1996.
GUNDLE/SLT ENVIRONMENTAL, INC.
By
------------------------------------
William P. Reid, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES INDICATED ON THE 22ND DAY OF FEBRUARY, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<C> <S>
Director and Principal
- --------------------------------------------- Executive Officer
WILLIAM P. REID
Principal Financial and
- --------------------------------------------- Accounting Officer
ROGER J. KLATT
Director and Chairman of the
- --------------------------------------------- Board
SAMIR T. BADAWI
Director
- ---------------------------------------------
AHMED Y. KHALAWI
Director
- ---------------------------------------------
T. WILLIAM PORTER
Director
- ---------------------------------------------
HUGH L. RICE
Director
- ---------------------------------------------
BRIAN D. YOUNG
</TABLE>
35
<PAGE> 38
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------------------
<S> <C>
2-A -- Plan Agreement of Merger dated March 28, 1995 between the Company
and SLT Environmental, Inc. (Exhibit A to Registrant's Preliminary
Proxy Statement filed on May 4, 1995 is incorporated herein by
reference).
3-A -- Articles of Incorporation as amended (Exhibits 3.1, 3.2 and 3.3 to
Registrant's Registration Statement No. 33-9809 are incorporated
herein by reference).
3-B -- Bylaws (Exhibit 3.4 to Registrant's Registration Statement No.
33-9809 is incorporated herein by reference).
4-E -- Credit Agreement dated as of July 27, 1995, between the Company, the
financial institutions named therein and NationsBank of Texas, N.A.,
as agent (incorporated by reference to Exhibit 1.6 to Registrant's
Current Report on Form 8-K filed on August 9, 1995).
4-F -- Note Agreements dated as of June 15, 1995, between Gundle
Environmental Systems, Inc. and certain institutions covering the
Senior Notes due June 15, 2000 (incorporated by reference to
Exhibits 1.3, 1.4 and 1.5 to Registrant's Current Report on Form 8-K
filed August 9, 1995).
10-A -- Employment Agreement dated as of June 1, 1993 between Thomas L.
Caltrider and the Registrant.
10-B -- Registrant's stock option plan (Exhibit 10.11 to Registrant's
Registration Statement No. 33-9809 is incorporated herein by
reference).
10-E -- Registrant's 1988 Non-Qualified Stock Option Plan for Non-Employee
Directors, as amended to date.
10-F -- Employment Agreement dated October 13, 1989 as amended March 28,
1995 between William P. Reid and the Company.
10-G -- Registrant's 1995 Amended and Restated Incentive Stock Plan.
11 -- Computation of per share earnings (see financial statements at page
20).
18-A -- Independent public accounts preferability letter regarding changes
in accounting method.
21 -- Subsidiaries.
23 -- Consent of Independent Auditors.
27 -- Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K.
(c) Exhibits (see Item (a)(3), above).
(d) Additional financial statements (see Items (a)(1) and (a)(2) above).
<PAGE> 1
March 28, 1995
Mr. William P. Reid
President and CEO
SLT Environmental, Inc.
200 S. Trade Center Pkwy.
Conroe, Texas 77385
Dear Mr. Reid:
This letter will serve to amend your employment agreement (the "Agreement")
dated October 13, 1989 with SLT Environmental, Inc. ("SLT") in respect of the
matters set forth below in the event and upon the date (the "Effective Date")
that the proposed merger referred to in the Plan and Agreement of Merger as of
the date hereof of SLT and Gundle Environmental Systems, Inc. ("Gundle") becomes
effective.
1. Employment - You will be employed as the President and Chief Executive
Officer of Gundle, which will be the surviving corporation in the merger.
2. Term - The term of your Agreement shall be for a period of three years
beginning on the Effective Date.
3. Compensation and Benefits - Your annual base salary will be $275,000,
payable in accordance with the practices of Gundle. You will continue to be
entitled to incentive compensation of a maximum of fifty percent (50%) of annual
base salary based upon mutually agreed upon goals and objectives, and to the
other benefits referred to in the Agreement (insurance, pension or retirement,
company car, vacation, reimbursement of expenses). The bonus, if any, shall be
payable within 30 days after the release of Gundle's audited financial
statements for the relevant fiscal year. If the mutually agreed upon goals and
objectives for a fiscal year are exceeded, the Board of Directors, in its sole
discretion, will consider awarding you a bonus in excess of the aforesaid 50% of
annual base salary in respect of that fiscal year.
4. Termination - The provisions of Paragraph 5 of the Agreement will
continue in effect, except that if your employment is terminated without cause
(subparagraph (f)), prior to expiration of the term, you shall have the option
exercisable by notice to Gundle within 30 days following such termination to be
paid your base salary in a lump sum for one year, in which event you shall not
have the obligation to seek other employment in mitigation of damages. Should
you determine not to exercise this option, you shall be paid your base
<PAGE> 2
Mr. William P. Reid
March 28, 1995
Page 2
salary for the remainder of your term or one year, whichever is greater,
subject to your obligation to mitigate damages as set forth in subparagraph
(f) of paragraph 5 and conditioned in all circumstances upon your
continued adherence to the non-competition covenant set forth in
paragraph 8 of the Agreement.
5. Upon the Effective Date, you shall be granted a non-qualified option to
purchase 200,000 shares of the common stock of Gundle at an option price equal
to the fair market value of the shares as of the close of business on the date
hereof. The option will be exercisable for a period of up to 10 years after the
Effective Date (unless your employment with Gundle is sooner terminated, in
which event it shall be exercisable until 90 days following such termination) in
respect of 33 1/3%, 66 2/3% and 100% upon the first, second and third
anniversaries of the date of the grant.
6. All other terms and conditions of the Agreement not specifically
referred to herein shall remain in full force and effect. It is anticipated that
a restated agreement embodying this amendment will be entered into following the
Effective Date.
If the foregoing comports with your understanding, kindly sign and return
to SLT a copy of this letter, whereupon it will become a binding agreement of
Gundle as the surviving corporation to the merger upon the Effective Date.
Very truly yours,
SLT ENVIRONMENTAL, INC.
By: [ILLEGIBLE]
------------------------------------
Chairman of the Board
Agreed:
By: /s/ WILLIAM P. REID
------------------------------
William P. Reid
<PAGE> 3
SLT ENVIRONMENTAL, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated on or as of the 13th day
of October, 1989, between SLT ENVIRONMENTAL, INC., a Delaware Corporation
("Company") and William P. Reid, an individual residing in Houston,
Texas ("Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs Executive as President and Chief Executive
Officer of the Company. The Company agrees that the Executive accepts such
employment and agrees to devote his full time and best efforts to the Company,
subject to the direction of the Company's Board of Directors. As Chief
Executive Officer, Executive will have full responsibility for and authority
over all divisions of the Company.
2. TERM
The term of this Agreement shall be for a period of two (2) years,
beginning on November 1, 1989 and ending on November 1, 1991. This Agreement
shall be deemed automatically renewed and extended for successive one (1)
year terms upon the same terms and conditions unless ninety (90) days prior to
the expiration of the initial term or each succeeding one (1) year term
thereafter, either the Company or the Executive notifies the other in writing
of his or its desire to terminate Executive's employment hereunder.
3. COMPENSATION AND BENEFITS
(a) Base Salary
In consideration for services rendered hereunder, the Company will
pay the Executive a minimum annual base salary of $175,000, payable in
26 equal bi-weekly installments. Beginning on November 1, 1990, and
annually thereafter, the Company's Board of Directors, in their sole
discretion, will determine an appropriate percentage increase in base
salary based on the performance of the Company, Executive's
performance and general economic conditions.
<PAGE> 4
(b) Incentive Compensation
Executive shall be entitled to participate in the short and long-term
incentive compensation programs of the Company as determined by, and in the
sole discretion of, the Board of Directors of the Company. The Executive
will be entitled to participation in the Company's Management Incentive
Compensation Plan at a maximum of fifty percent (50%) of annual base salary
based upon mutually agreed upon goals and objectives during the first year.
(c) Insurance
The Company will provide Executive and his eligible dependents with group
life, accidental death and dismemberment, dental, hospitalization, major
medical and disability income insurance coverages and other welfare benefit
coverages now or hereafter afforded by the Company to any other executive.
(d) Other Benefit Plans
The Company will also provide Executive with pension or other retirement
income afforded by the Company to any other executive, in the Company's sole
discretion.
(e) Company Car
Executive shall be entitled to the use of a Company car. A new Company car
will be provided for Executive's use every three (3) years or 50,000 miles,
whichever occurs first. The Company shall provide all maintenance, repair
and insurance on the Company car during the term hereof.
(f) Vacation
Executive will be entitled to a vacation of twenty-one (21) days per
calendar year. The Executive may accumulate unused vacation days up to a
maximum of twenty-eight (28) days. If the Executive terminates his
employment with the Company pursuant to Paragraphs 5 (b), (c) or (d), unused
vacation days may be tendered back to the Company and the Executive may
receive the dollar value of the unused vacation days based on his then
current prorated daily salary.
4. REIMBURSEMENT OF EXPENSES
Company will reimburse Executive for all reasonable and necessary expenses
incurred by Executive for travel, entertainment and miscellaneous business
expenses in connection with his duties for the Company.
<PAGE> 5
5. TERMINATION
(a) Death
If the Executive dies during the term of this Agreement, then this
Agreement shall terminate and the Company shall have no further obligation
to the Executive or his estate except the obligation to pay his then
current salary to his estate for six (6) months.
(b) Disability
If Executive becomes disabled during the term of this Agreement, his then
current base salary will continue to be paid by the Company for six (6)
months after the determination of disability. After this six (6) month
period, the Executive is entitled to receive disability pay in accordance
with the provisions of the Company's long-term disability plan. Disability
shall mean that Executive has become totally and permanently disabled as
determined by the disability insurer insuring Executive under the Company's
long-term disability plan. If there is no such disability insurance,
Executive shall be deemed to have become totally and permanently disabled
when the Board of Directors of the Company, upon the advice of three (3)
duly licensed and qualified physicians, shall have determined that
Executive has become physically or mentally incapable (excluding infrequent
and temporary absences due to ordinary illness) or performing the duties of
an officer and employee of the Company.
(c) Voluntary Termination
If Executive voluntarily terminates his employment with the Company, he
will continue to receive his then current base salary up to the effective
date of termination. Payments under programs described in Paragraph 3
hereof will be determined in accordance with the provisions of the
applicable plans. Executive agrees to give the Company ninety (90) days
written notice of such voluntary termination of employment.
(d) Termination for Cause by the Company
The Company may terminate Executive's employment hereunder for "Cause", if
Executive discloses the Company's confidential information to any third
party, commits a felony or other crime involving moral turpitude,
habitually neglects his duties, fails or refuses to follow the reasonable
directives of the Board of Directors of the Company, or otherwise breaches
the terms and conditions hereof.
<PAGE> 6
Such termination for Cause, as set forth above, of Executive's employment
shall not be construed to be a breach of this Agreement by the Company,
and, except as hereinafter set forth, shall terminate all benefits to which
Executive is entitled hereunder. If Executive breaches any of the terms and
provisions of this Agreement, the Company shall give Executive thirty (30)
days written notice of such breach. If Executive fails in good faith to
remedy such alleged breach within thirty (30) days after receipt of written
notification from the Company, then the Company may terminate Executive's
employment hereunder, and the Company's only obligations to Executive shall
be to pay to Executive that portion of his base salary to be paid to him
which has accrued to the date of such termination.
(e) Termination Due to Change of Ownership
If Executive's employment is terminated due to the change of Ownership of
the Company, Executive shall be entitled to receive one-hundred percent
(100%) of his full base salary for one year beginning the date of
termination. Executive will also be entitled to full hospitalization and
medical expense coverage during this period or until such coverage is
included by another entity (whichever comes first).
(f) Termination Without Cause
Company may terminate without cause Executive's employment at any time by
majority vote of Company's Board of Directors at any special or regular
meeting of the Board. If Executive is terminated without cause, Executive
shall be paid his base salary then in effect for one year following his
termination. Executive shall have the obligation to seek other employment
in mitigation of damages and Executive compensation shall be diminished by
his earning compensation from other persons after his termination.
Executive shall receive all other benefits of employment which may have
vested prior to the date of his termination.
6. NO MITIGATION
If, during the term of this Agreement, the employment of Executive by
the Company is terminated by the company pursuant to Paragraph 5 (e) then
Executive shall have the right to be otherwise employed, and except as
set forth in the immediately succeeding sentence, any compensation of any
type whatsoever received by Executive in connection with such other
employment shall not be offset by the Company against any of the obligations
imposed upon the Company under this Agreement. Notwithstanding the
foregoing, in the event that after such termination of employment,
Executive breaches the non-competition covenant set forth in Paragraph 8
hereof, the Company shall have no further obligation to pay to Executive any
further compensation.
<PAGE> 7
7. NON-ASSIGNABILITY
The obligations of the Executive and the Company are not assignable
by either party. This agreement shall survive any change of ownership of
the Company.
8. COVENANT AGAINST COMPETITION
During the initial term or any extension of this Agreement, and for a period
of one (1) year thereafter, Executive will not, directly or indirectly,
without the express written consent of the Company, own or operate, or be
employed by or have any interest whatsoever in (other than by reason
of purchasing securities on a national securities exchange) any person, firm
or corporation or other entity engaged in the business of
developing, manufacturing, selling, and/or installing polyethylene
geomembranes in the United States of America (but not to exceed the
maximum area permitted by law). Executive acknowledges that the foregoing
time and area restrictions are reasonable in scope and necessary for the
protection of the business and goodwill of the Company and that a breach of
this covenant would cause the Company substantial damage impossible in precise
determination. Executive further agrees that should any portion of the
foregoing covenant be unenforceable because of the scope thereof or the
period covered thereby or otherwise, the covenant shall be deemed to be
reduced and limited to enable it to be enforced to the extent permissible
under the laws and public polices applied in the jurisdiction in which
enforcement is sought.
9. AMENDMENT
The provisions of this Agreement may be amended only with the written
authorization of both the Executive and the Company.
10. NOTICES
All notices made in connection with this Agreement will be put in writing and
sent by certified or registered mail to the following addresses:
If to the Company:
Chairman of the Board
SLT ENVIRONMENTAL, INC.
16945 Northchase, Suite 1750
Houston, TX 77060
If to the Executive:
Mr. William P. Reid
10223 Meadow Lake Lane
Houston, TX 77042
<PAGE> 8
11. GOVERNING LAW
The provisions of this Agreement will be subject to the laws of the State of
Texas.
12. ARBITRATION
Any controversy or claim arising out of this Agreement or breach hereof shall
be settled by arbitration in accordance with the Rules of the American
Arbitration Association. Any such arbitration shall be held in Harris
County, Texas at a site chosen by the American Arbitration Association.
Judgement upon the award rendered by the arbitrator(s) may be entered in
any court of competent jurisdiction.
13. SEVERABILITY
In case any term, phrase, clause, paragraph, restriction or covenant
herein contained shall be held to be invalid or unenforceable, the same
shall be deemed and it is hereby agreed that the same are meant to be
severable, and shall not defeat or impair the remaining provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
or as of the day and year first above written.
SLT ENVIRONMENTAL, INC.
By: /s/ DAVID L. BURNEY
-----------------------------------
Name: David L. Burney
Title: Chairman
AGREED TO AND ACCEPTED:
/s/ WILLIAM P. REID
- -------------------------------
Name: William P. Reid
<PAGE> 1
Exhibit 10-G
GUNDLE/SLT ENVIRONMENTAL, INC.
AMENDED AND RESTATED
1995 INCENTIVE STOCK PLAN
1. PURPOSE OF THE PLAN
This Gundle/SLT Environmental, Inc. Amended and Restated 1995
Incentive Stock Plan is intended to promote the interests of the Company by
providing the employees and consultants of the Company, who are largely
responsible for the management, growth and protection of the business of the
Company, with a proprietary interest in the Company.
The Plan supersedes and replaces the Company's 1995 Incentive Stock
Option Plan (the "Former Plan"). Upon the effectiveness of the Plan, no
further options shall be granted under the Former Plan, but all options
previously granted under the Former Plan shall remain outstanding pursuant to
the terms and provisions of the option agreements relating to their grant.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Board of Directors" or "Board" shall mean the Board of
Directors of Gundle/SLT Environmental, Inc.
(b) "Cause," when used in connection with the termination of a
Participant's employment with the Company, shall mean the termination of the
Participant's employment by the Company by reason of (i) the conviction of the
Participant by a court of competent jurisdiction as to which no further appeal
can be taken of a crime involving moral turpitude; (ii) the proven commission
by the Participant of an act of fraud upon the Company; (iii) the willful and
proven misappropriation of any funds or property of the Company by the
Participant; (iv) the willful, continued and unreasonable failure by the
Participant to perform duties assigned to him and agreed to by him; (v) the
knowing engagement by the Participant in any direct, material conflict of
interest with the Company without compliance with the Company's conflict of
interest policy, if any, then in effect; (vi) the knowing engagement by the
Participant, without the written approval of the Board of Directors of the
Company, in any activity which competes with the business of the Company or
which would result in a material injury to the Company; or (vii) the knowing
engagement in any activity which would constitute a material violation of the
provisions of the Company's Policies and Procedures Manual, if any, then in
effect.
(c) "Cash Bonus" shall mean an award of a bonus payable in cash
pursuant to Section 10 hereof.
(d) "Change in Control" shall mean:
(i) a "change in control" of the Company, as that term is
contemplated in the federal securities laws; or
(ii) the occurrence of any of the following events:
(1) any Person becomes, after the effective date
of this Plan, the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly,
of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities, unless the Board (as constituted immediately prior
to such Change in Control) determines in its sole and absolute
discretion that no Change in Control occurred; provided, that
the acquisition of additional voting securities, after the
effective date of this Plan, by any Person who is,
<PAGE> 2
as of the effective date of this Plan, the beneficial owner,
directly or indirectly, of 20% or more of the combined voting
power of the Company's then outstanding securities, shall not
constitute a "Change in Control" of the Company for purposes
of this Section 2(d);
(2) a majority of individuals who are nominated
by the Board of Directors (as constituted immediately prior to
such Change in Control) for election to the Board of Directors
on any date, fail to be elected to the Board of Directors as a
direct or indirect result of any proxy fight or contested
election for positions on the Board of Directors; or
(3) the Board of Directors determines in its sole
and absolute discretion that there has been a change in
control of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(f) "Committee" shall mean the Compensation Committee of the Board
of Directors or such other committee as the Board of Directors shall appoint
from time to time to administer the Plan.
(g) "Common Stock" shall mean the Company's common stock, par
value $.01 per share.
(h) "Company" shall mean Gundle/SLT Environmental, Inc., a
Delaware corporation, and each of its Subsidiaries, and its successors.
(i) "Consultant" shall mean any person who is engaged by the
Company to render consulting services and is compensated for such consulting
services.
(j) "EBITDA to Sales Ratio" shall mean, with respect to any given
Company fiscal year within a Performance Period, the quotient of (i) the
Company's income from operations before interest, taxes, depreciation and
amortization for such fiscal year, divided by (ii) the Company's gross sales
for such fiscal year, as reported on the Company's audited financial
statements.
(k) "Employee" shall mean any person who is an employee of the
Company within the meaning of Section 3401(c) of the Code and the Regulations
promulgated thereunder.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(m) the "Fair Market Value" of a share of Common Stock on any date
shall be (i) the closing sales price on the immediately preceding business day
of a share of Common Stock as reported on the principal securities exchange on
which shares of Common Stock are then listed or admitted to trading or (ii) if
not so reported, the average of the closing bid and asked prices for a share of
Common Stock on the immediately preceding business day as quoted on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") or (iii) if not quoted on NASDAQ, the average of the closing bid and
asked prices for a share of Common Stock as quoted by the National Quotation
Bureau's "Pink Sheets" or the National Association of Securities Dealers' OTC
Bulletin Board System. If the price of a share of Common Stock shall not be so
reported, the Fair Market Value of a share of Common Stock shall be determined
by the Committee in its absolute discretion.
(n) "Incentive Award" shall mean an Option, a share of Restricted
Stock, a share of Phantom Stock, a Stock Bonus or Cash Bonus granted pursuant
to the terms of the Plan.
(o) "Incentive Stock Option" shall mean an Option which is an
"incentive stock option" within the meaning of Section 422 of the Code and
which is identified as an Incentive Stock Option in the agreement by which it
is evidenced.
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<PAGE> 3
(p) "Issue Date" shall mean the date established by the Committee
on which certificates representing shares of Restricted Stock shall be issued
by the Company pursuant to the terms of Section 7(d) hereof.
(q) "Non-Qualified Stock Option" shall mean an Option which is not
an Incentive Stock Option and which is identified as a Non-Qualified Stock
Option in the agreement by which it is evidenced.
(r) "Option" shall mean an option to purchase shares of Common
Stock of the Company granted pursuant to Section 6 hereof. Each Option shall
be identified as either an Incentive Stock Option or a Non-Qualified Stock
Option in the agreement by which it is evidenced.
(s) "Participant" shall mean an Employee or Consultant who is
eligible to participate in the Plan and to whom an Incentive Award is granted
pursuant to the Plan, and, upon his death, his successors, heirs, executors and
administrators, as the case may be, to the extent permitted hereby.
(t) "Performance Period" shall mean that period covering three
consecutive fiscal years of the Company designated by the Committee for
purposes of measuring the performance criteria for the vesting of the shares of
Restricted Stock pursuant to Section 7(b) hereof.
(u) "Person" shall mean a "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act, and the rules and Regulations in
effect from time to time thereunder.
(v) a share of "Phantom Stock" shall represent the right to
receive in cash the Fair Market Value of a share of Common Stock of the
Company, which right is granted pursuant to Section 8 hereof and subject to the
terms and conditions contained therein.
(w) "Plan" shall mean the Gundle/SLT Environmental, Inc. Amended
and Restated 1995 Incentive Stock Plan, as it may be amended from time to time.
(x) a share of "Restricted Stock" shall mean a share of Common
Stock which is granted pursuant to the terms of Section 7 hereof and which is
subject to the restrictions set forth in Section 7(c) hereof for so long as
such restrictions continue to apply to such share.
(y) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
(z) "Stock Bonus" shall mean a grant of a bonus payable in shares
of Common Stock pursuant to Section 9 hereof.
(aa) "Subsidiary" or "Subsidiaries" shall mean any and all
corporations in which at the pertinent time the Company owns, directly or
indirectly, stock vested with more than 50% of the total combined voting power
of all classes of stock of such corporations within the meaning of Section
424(f) of the Code.
(bb) "Vesting Date" shall mean the date established by the
Committee on which a share of Restricted Stock or Phantom Stock may vest
pursuant to the terms of Sections 7(a) and 8(a) hereof, respectively.
(cc) "Working Capital to Sales Ratio" shall mean, with respect to
any given Company fiscal year within a Performance Period, the quotient of (i)
the monthly average of the Company's current assets (excluding cash) less its
current liabilities (excluding indebtedness for borrowed money) for such fiscal
year, divided by (ii) the Company's gross sales for such fiscal year, as
reported on the Company's audited financial statements. For purposes of the
"Working Capital to Sales Ratio", the monthly average described in item (i)
above shall be equal to the quotient of (x) the aggregate sum of the Company's
current assets (excluding cash) less its current liabilities (excluding
indebtedness for
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<PAGE> 4
borrowed money) for each month during the relevant fiscal year as reported on
the last day of each of such months, divided by (y) 12.
3. STOCK SUBJECT TO THE PLAN
Subject to the terms of the Plan, the Committee may grant to
Participants (i) Options, (ii) shares of Restricted Stock, (iii) shares of
Phantom Stock, (iv) Stock Bonuses and (v) Cash Bonuses.
The Committee may grant Options, shares of Restricted Stock, shares of
Phantom Stock and Stock Bonuses under the Plan with respect to a number of
shares of Common Stock that in the aggregate at any time does not exceed
1,750,000 shares of Common Stock. The grant of a Cash Bonus shall not reduce
the number of shares of Common Stock with respect to which Options, shares of
Restricted Stock, shares of Phantom Stock or Stock Bonuses may be granted
pursuant to the Plan. The Company will, during the term of this Plan, reserve
and keep available for issuance a sufficient number of shares of Common Stock
to satisfy the requirements of the Plan.
If any outstanding Option expires, terminates or is canceled for any
reason, the shares of Common Stock attributable to the unexercised portion of
such Option shall again be available for grant under the Plan. If any shares
of Restricted Stock or Phantom Stock, or any shares of Common Stock granted in
a Stock Bonus are forfeited or canceled for any reason, such shares shall again
be available for grant under the Plan.
Shares of Common Stock issued under the Plan may be either newly
issued or treasury shares, at the discretion of the Committee.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Committee of the Board of
Directors consisting of two or more persons, each of whom shall be both (i) a
"disinterested person" within the meaning of Rule 16b-3(c)(2)(i) promulgated
under Section 16 of the Exchange Act and (ii) an "outside director" within the
meaning of Section 162(m)(4)(C) of the Code and any current or future treasury
regulation promulgated thereunder. The Committee shall from time to time
designate the Participants of the Company who shall be granted Incentive Awards
and the amount and type of such Incentive Awards.
The Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and the
terms of any Incentive Award issued under it and to adopt such rules and
regulations for administering the Plan as it may deem necessary. Decisions of
the Committee shall be final and binding on all parties.
The Committee may, in its absolute discretion (i) accelerate the date
on which any Option granted under the Plan becomes exercisable, (ii) extend the
date on which any Option granted under the Plan ceases to be exercisable, and
(iii) accelerate the Vesting Date or waive any condition imposed pursuant to
Section 8 hereof, with respect to any share of Phantom Stock granted under the
Plan.
In addition, the Committee may, in its absolute discretion, grant
Incentive Awards to Participants on the condition that such Participants
surrender to the Committee for cancellation such other Incentive Awards
(including, without limitation, Incentive Awards with higher exercise prices)
as the Committee specifies. Notwithstanding Section 3 hereof, Incentive Awards
granted on the condition of surrender of outstanding Incentive Awards shall not
count against the limits set forth in such Section 3 until such time as such
Incentive Awards are surrendered.
Except as provided in Section 6(f)(4) hereof, whether an authorized
leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Committee in
its absolute discretion.
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No member of the Committee shall be liable for any action, omission,
or determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of
the Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated from and against any cost or
expense (including attorneys' fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, unless, in either case,
such action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it was in
the best interests of the Company.
5. ELIGIBILITY
The persons who shall be eligible to receive Incentive Awards pursuant
to the Plan shall be the Employees or Consultants who are largely responsible
for the management, growth and protection of the business of the Company
(including officers of the Company, whether or not they are directors of the
Company) as the Committee, in its absolute discretion, shall select from time
to time; provided, however, Incentive Stock Options may only be granted to
Employees.
6. OPTIONS
The Committee may grant Options pursuant to the Plan, which Options
shall be evidenced by agreements in such form as the Committee shall from time
to time approve. Options shall comply with and be subject to the following
terms and conditions:
(a) Identification of Options
All Options granted under the Plan shall be clearly identified in the
agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options.
(b) Exercise Price
Except as provided in Section 6(e) hereof, the exercise price of any
Option granted under the Plan shall be not less than 100% of the Fair Market
Value of a share of Common Stock on the date on which such Option is granted.
(c) Term and Exercise of Options
(1) Each Option shall be exercisable on such date or dates,
during such period and for such number of shares of Common Stock as
shall be determined by the Committee on the day on which such Option
is granted and set forth in the agreement evidencing the Option;
provided, however, that (A) no Incentive Stock Option shall be
exercisable after the expiration of five years from the date such
Incentive Stock Option was granted, and (B) no Non Qualified Stock
Option shall be exercisable after the expiration of ten years from the
date such Non Qualified Stock Option was granted and (C) no Option
shall be exercisable until six months after the date of grant; and,
provided, further, that each Option shall be subject to earlier
termination, expiration or cancellation as provided in the Plan.
(2) Each Option shall be exercisable in whole or in part with
respect to whole shares of Common Stock. The partial exercise of an
Option shall not cause the expiration, termination or cancellation of
the remaining portion thereof. Upon the partial exercise of an
Option, the agreement evidencing such Option shall be returned to the
Participant exercising such Option together with the delivery of the
certificates described in Section 6(c)(5) hereof.
(3) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no
fewer than five business days in advance of the effective date of the
proposed
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<PAGE> 6
exercise. Such notice shall be accompanied by the agreement
evidencing the Option, shall specify the number of shares of Common
Stock with respect to which the Option is being exercised and the
effective date of the proposed exercise, and shall be signed by the
Participant. The Participant may withdraw such notice at any time
prior to the close of business on the business day immediately
preceding the effective date of the proposed exercise, in which case
such agreement shall be returned to the Participant. Payment for
shares of Common Stock purchased upon the exercise of an Option shall
be made on the effective date of such exercise either (i) in cash, by
certified check, bank cashier's check or wire transfer or (ii) subject
to the approval of the Committee, in shares of Common Stock owned by
the Participant and valued at their Fair Market Value on the effective
date of such exercise, or partly in shares of Common Stock with the
balance in cash, by certified check, bank cashier's check or wire
transfer. Any payment in shares of Common Stock shall be effected by
the delivery of such shares to the Secretary of the Company, duly
endorsed in blank or accompanied by stock powers duly executed in
blank, together with any other documents and evidences as the
Secretary of the Company shall require from time to time.
(4) Any Option granted under the Plan may be exercised by a
broker-dealer acting on behalf of a Participant if (i) the
broker-dealer has received from the Participant or the Company a duly
endorsed agreement evidencing such Option and instructions signed by
the Participant requesting the Company to deliver the shares of Common
Stock subject to such Option to the broker-dealer on behalf of the
Participant and specifying the account into which such shares should
be deposited, (ii) adequate provision has been made with respect to
the payment of any withholding taxes due upon such exercise and (iii)
the broker-dealer and the Participant have otherwise complied with
Section 220.3(e)(4) of Regulation T, 12 CFR Part 220.
(5) Certificates for shares of Common Stock purchased upon
the exercise of an Option shall be issued in the name of the
Participant and delivered to the Participant as soon as practicable
following the effective date on which the Option is exercised;
provided, however, that such delivery shall be effected for all
purposes when a stock transfer agent of the Company shall have
deposited such certificates in the United States mail, addressed to
the Participant.
(6) During the lifetime of a Participant each Option granted
to him shall be exercisable only by him or a broker-dealer acting on
behalf of such Participant pursuant to Section 6(c)(4) hereof. No
Option shall be assignable or transferable otherwise than by will or
by the laws of descent and distribution.
(d) Limitations on Grant of Options
(1) No Participant may be granted Options for more than
50,000 shares of Common Stock during any Company fiscal year, such
maximum number of shares subject to Options being referred to in this
Plan as the "Annual Option Limitation".
(2) Solely for purposes of the Annual Option Limitation,
shares of Common Stock subject to Options granted to a Participant
hereunder which are (i) subsequently cancelled shall continue to be
counted against the 50,000 share Annual Option Limitation with respect
to such Participant, and/or (ii) subsequently amended to reduce the
exercise price of such Options shall be deemed a cancellation of such
original Options and the grant of a deemed new Option with respect to
such Participant, resulting in both the deemed cancelled Options and
the new Options counting against the 50,000 share Annual Option
Limitation with respect to such Participant.
(e) Limitations on Grant of Incentive Stock Options
(1) The aggregate Fair Market Value of shares of Common Stock
with respect to which "incentive stock options" (within the meaning of
Section 422, without regard to Section 422(d) of the Code) are
exercisable for the first time by a Participant during any calendar
year under the Plan (and any other stock
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<PAGE> 7
option plan of the Company, or any Parent or Subsidiary) shall not
exceed $100,000. Such Fair Market Value shall be determined as of the
date on which each such Incentive Stock Option is granted. If such
aggregate Fair Market Value of shares of Common Stock underlying such
Incentive Stock Options exceeds $100,000, then Incentive Stock Options
granted hereunder to such Participant shall, to the extent and in the
order required by Regulations promulgated under the Code (or any other
authority having the force of Regulations), automatically be deemed to
be Non-Qualified Stock Options, but all other terms and provisions of
such Incentive Stock Options shall remain unchanged. In the absence
of such Regulations (and authority), or if such Regulations (or
authority) require or permit a designation of the options which shall
cease to constitute Incentive Stock Options, Incentive Stock Options
shall, to the extent of such excess and in the order in which they
were granted, automatically be deemed to be Non-Qualified Stock
Options, but all other terms and provisions of such Incentive Stock
Options shall remain unchanged.
(2) No Incentive Stock Option may be granted to an individual
if, at the time of the proposed grant, such individual owns stock
possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or any of its Subsidiaries, unless
(i) the exercise price of such Incentive Stock Option is at least 110%
of the Fair Market Value of a share of Common Stock at the time such
Incentive Stock Option is granted and (ii) such Incentive Stock Option
is not exercisable after the expiration of five years from the date
such Incentive Stock Option is granted.
(f) Effect of Termination of Employment
(1) If the employment of a Participant with the Company shall
terminate for any reason other than Cause, "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code) or
the death of the Participant, (i) Options granted to such Participant,
to the extent that they were exercisable at the time of such
termination, shall remain exercisable until the expiration of ninety
days after such termination, on which date they shall expire, and (ii)
Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close
of business on the date of such termination; provided, however, that
no Option shall be exercisable after the expiration of its term.
(2) If the employment of a Participant with the Company shall
terminate as a result of the "permanent and total disability" (within
the meaning of Section 22(e)(3) of the Code) or the death of the
Participant, Options granted to such Participant and outstanding at
the time of such termination, whether or not exercisable, shall become
immediately exercisable and remain exercisable until the expiration of
one year after such termination, on which date they shall expire;
provided, however, that no Option shall be exercisable prior to 6
months from the date of grant or after the expiration of its term.
(3) In the event of the termination of a Participant's
employment for Cause, all outstanding Options granted to such
Participant shall expire at the commencement of business on the date
of such termination.
(4) A Participant's employment with the Company shall be
deemed terminated if the Participant's leave of absence (including
military or such leave or other bona fide leave of absence) extends
for more than 90 days and the Participant's continued employment with
the Company is not guaranteed by contract or statute.
(g) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, the Committee (as
constituted immediately prior to the Change in Control) shall determine, in its
absolute discretion, whether each Option granted under the Plan and outstanding
at such time shall become fully and immediately exercisable and remain
exercisable until its expiration, termination or cancellation pursuant to the
terms of the Plan or whether each such Option shall continue to vest according
to its terms.
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7. RESTRICTED STOCK
The Committee may grant shares of Restricted Stock pursuant to the
Plan. Each grant of shares of Restricted Stock shall be evidenced by an
agreement in such form as the Committee shall from time to time approve. Each
grant of shares of Restricted Stock shall comply with and be subject to the
following terms and conditions:
(a) Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the Committee
shall establish an Issue Date or Issue Dates and a Vesting Date or Vesting
Dates with respect to such shares. Except as provided in Sections 7(c) and
7(g) hereof, upon the occurrence of the Issue Date with respect to a share of
Restricted Stock, a share of Restricted Stock shall be issued in accordance
with the provisions of Section 7(d) hereof. Provided that all conditions to
the vesting of a share of Restricted Stock imposed pursuant to Section 7(b)
hereof are satisfied, and except as provided in Sections 7(c) and 7(g) hereof,
upon the occurrence of the Vesting Date with respect to a share of Restricted
Stock, such share shall vest and the restrictions of Section 7(c) hereof shall
cease to apply to such share.
(b) Conditions to Vesting
(1) At the time of grant of any shares of Restricted Stock to
a Participant, the Committee shall adopt, in writing within 90 days
after the commencement of the Performance Period pertaining to such
shares, a vesting schedule pursuant to which up to 1/3 of such shares
shall vest upon the expiration of each year during the Performance
Period based on the Company's achievement of certain performance
criteria attributable to the following three measures of operational
efficiency: (i) the EBITDA to Sales Ratio, (ii) the Working Capital
to Sales Ratio, and (iii) the profitability of the Company; provided,
however, that no such shares shall vest unless such Participant
remains continuously employed by the Company throughout the entire
Performance Period with respect to such shares, except as otherwise
provided in Paragraph 7(g)(1) hereof.
(2) Prior to the vesting of any shares of Restricted Stock
granted to a Participant, the Committee shall certify in writing that
such all conditions of vesting have been satisfied with respect to
such Participant, including the Company's achievement of the
performance criteria described in Paragraph 7(b)(1) hereof and the
Participant's compliance with the continuous employment requirement
(except as otherwise provided under Paragraph 7(g)(1) hereof).
(c) Restrictions on Transfer Prior to Vesting and Expiration of
the Performance Period
Except as provided in Paragraph 7(g)(1) hereof, prior to the vesting
of a share of Restricted Stock and the expiration of the Performance Period
pertaining to such Restricted Stock, no transfer of a Participant's rights with
respect to such share, whether voluntary or involuntary, by operation of law or
otherwise, shall vest the transferee with any interest or right in or with
respect to such share, but immediately upon any attempt to transfer such
rights, such share, and all of the rights related thereto, shall be forfeited
by the Participant and the transfer shall be of no force or effect.
(d) Issuance of Certificates
(1) Except as provided in Sections 7(c) or 7(f) hereof,
reasonably promptly after the Issue Date with respect to shares of
Restricted Stock, the Company shall cause to be issued a stock
certificate, registered in the name of the Participant to whom such
shares were granted, evidencing such shares; provided, that the
Company shall not cause to be issued such a stock certificates unless
it has received a stock power duly endorsed in blank with respect to
such shares. Each such stock certificate shall bear the following
legend:
The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture and
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<PAGE> 9
restrictions against transfer) contained in the Gundle/SLT
Environmental, Inc. Amended and Restated 1995 Incentive Stock
Plan and an Agreement entered into between the registered
owner of such shares and Gundle/SLT Environmental, Inc. A
copy of the Plan and Agreement is on file in the office of the
Secretary of Gundle/SLT Environmental, Inc., 19103 Gundle
Road, Houston, Texas 77073.
Except as provided in Paragraph 7(g)(1) hereof, such legend shall not
be removed from the certificate evidencing such shares until after (i)
the vesting of such shares pursuant to the terms hereof, (ii) the
Committee's written certification of such vesting pursuant to
Paragraph 7(b)(2) hereof and (iii) the expiration of the Performance
Period pertaining to such shares.
(2) Each certificate issued pursuant to Paragraph 7(d)(1)
hereof, together with the stock powers relating to the shares of
Restricted Stock evidenced by such certificate, shall be held by the
Company. The Company shall issue to the Participant a receipt
evidencing the certificates held by it which are registered in the
name of the Participant.
(e) Limitation on Grant of Restricted Stock
No Participant may be granted more than 100,000 shares of Restricted
Stock during any three-year Performance Period.
(f) Consequences Upon Vesting and Expiration of Performance Period
Upon (i) the vesting of a share of Restricted Stock pursuant to the
terms hereof, (ii) the Committee's written certification of such vesting
pursuant to Paragraph 7(b)(2) hereof, and (iii) the expiration of the
Performance Period pertaining to such share, the restrictions of Section 7(c)
hereof shall cease to apply to such share. Reasonably promptly thereafter, the
Company shall cause to be issued and delivered to the Participant to whom such
share was granted, a certificate evidencing such share, free of the legend set
forth in Paragraph 7(d)(1) hereof, together with any other property of the
Participant held by Company pursuant to Sections 7(d) and 11(a) hereof;
provided, however, that such delivery shall be effected for all purposes when
the Company shall have deposited such certificate and other property in the
United States mail, addressed to the Participant. Any shares of Restricted
Stock granted to a Participant which have not vested upon expiration of the
Performance Period pertaining to such shares shall immediately be forfeited.
(g) Effect of Termination of Employment
(1) If the employment of a Participant with the Company shall
terminate for any reason other than for Cause or voluntary resignation
prior to the expiration of the Performance Period pertaining to the
shares of Restricted Stock granted to such Participant, then,
notwithstanding such Participant's failure to maintain continuous
employment with the Company throughout such Performance Period, the
portion of such shares, to the extent otherwise vested pursuant to the
vesting schedule described in Section 7(b) hereof and for which the
Committee has certified in writing as to the Company's achievement of
the performance criteria set forth in such schedule, shall vest as of
the date of such termination and the restrictions of Section 7(c)
hereof shall cease to apply to such shares, provided, that such
Participant remained an Employee from commencement of such Performance
Period until the date of termination and that such shares were not
forfeited or cancelled prior to such termination pursuant to any other
provision hereof. The Company shall cause to be issued and delivered
to such terminated Participant, within 30 days after the date of such
termination, a certificate evidencing that portion of the shares of
Restricted Stock described in the immediately preceding sentence, free
of the legend set forth in Paragraph 7(d)(1) hereof; provided,
however, that such delivery shall be effected for all purposes when
the Company shall have deposited such certificate in the United States
mail, addressed to the Participant.
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(2) In the event of the termination of a Participant's
employment with the Company for Cause or voluntary resignation prior
to the expiration of the Performance Period pertaining to shares of
Restricted Stock granted to such Participant, all such shares,
notwithstanding the vesting of all or any portion of such shares
pursuant to the vesting schedule described in Section 7(b) hereof,
shall be forfeited as of the commencement of business on the date of
such termination.
(h) Effect of Change in Control
Upon the occurrence of a Change in Control, the Committee (as
constituted immediately prior to such Change in Control) shall determine, in
its absolute discretion, whether all shares of Restricted Stock which have not
theretofore vested (including those with respect to which the Issue Date has
not yet occurred) shall immediately vest or whether such shares shall continue
to vest according to their respective terms.
8. PHANTOM STOCK
The Committee may grant shares of Phantom Stock pursuant to the Plan.
Each grant of shares of Phantom Stock shall be evidenced by an agreement in
such form as the Committee shall from time to time approve. Each grant of
shares of Phantom Stock shall comply with and be subject to the following terms
and conditions:
(a) Vesting Date
At the time of the grant of shares of Phantom Stock, the Committee
shall establish a Vesting Date or Vesting Dates with respect to such shares.
The Committee may divide such shares into classes and assign a different
Vesting Date for each class. Provided that all conditions to the vesting of a
share of Phantom Stock imposed pursuant to Section 8(c) hereof are satisfied,
and except as provided in Section 8(d) hereof, upon the occurrence of the
Vesting Date with respect to a share of Phantom Stock, such share shall vest.
(b) Benefit Upon Vesting
Upon the vesting of a share of Phantom Stock, a Participant shall be
entitled to receive in cash, within 90 days of the date on which such share
vests, an amount in cash in a lump sum equal to the sum of (i) the Fair Market
Value of a share of Common Stock of the Company on the date on which such share
of Phantom Stock vests and (ii) the aggregate amount of cash dividends paid
with respect to a share of Common Stock of the Company during the period
commencing on the date on which the share of Phantom Stock was granted and
terminating on the date on which such share vests.
(c) Conditions to Vesting
At the time of the grant of shares of Phantom Stock, the Committee may
impose such restrictions or conditions, not inconsistent with the provisions
hereof, to the vesting of such shares as it, in its absolute discretion, deems
appropriate. By way of example and not by way of limitation, the Committee may
require, as a condition to the vesting of any class or classes of shares of
Phantom Stock, that the Participant or the Company achieve certain performance
criteria, such criteria to be specified by the Committee at the time of the
grant of such shares.
(d) Effect of Termination of Employment
(1) If the employment of a Participant with the Company shall
terminate for any reason other than Cause prior to the vesting of
shares of Phantom Stock granted to such Participant a portion of such
shares, to the extent not forfeited or canceled on or prior to such
termination pursuant to any provision hereof, shall vest on the date
of such termination. The portion referred to in the preceding
sentence shall be determined by the Committee at the time of the grant
of such shares of Phantom Stock and may be based on the achievement of
-10-
<PAGE> 11
any conditions imposed by the Committee with respect to such shares
pursuant to Section 8(c) hereof. Such portion may equal zero.
(2) In the event of the termination of a Participant's
employment for Cause, all shares of Phantom Stock granted to such
Participant which have not vested as of the date of such termination
shall immediately be forfeited.
(e) Effect of Change in Control
Upon the occurrence of a Change in Control the Committee (as
constituted immediately prior to such Change in Control) shall determine, in
its absolute discretion, whether all shares of Phantom Stock which have not
theretofore vested shall immediately vest or whether such shares shall continue
to vest according to their respective terms.
9. STOCK BONUSES
The Committee may, in its absolute discretion, grant Stock Bonuses in
such amounts as it shall determine from time to time. A Stock Bonus shall be
paid at such time and subject to such conditions as the Committee shall
determine at the time of the grant of such Stock Bonus. Certificates for
shares of Common Stock granted as a Stock Bonus shall be issued in the name of
the Participant to whom such grant was made and delivered to such Participant
as soon as practicable after the date on which such Stock Bonus is required to
be paid.
10. CASH BONUSES
(a) Mandatory Cash Bonuses
The Committee shall grant, in connection with each grant of Restricted
Stock to a Participant, a Cash Bonus to such Participant, payable promptly
after the date on which the Participant is required to recognize ordinary
compensation income for federal income tax purposes in connection with such
grant of Restricted Stock (without regard to any election under Section 83(b)
of the Code). The Cash Bonus shall be in an amount equal to the product of (i)
the total ordinary compensation income to be recognized for federal income tax
purposes by such Participant in connection with such grant of Restricted Stock,
multiplied by (ii) the highest federal income tax rate applicable to
individuals under Section 1 of the Code (or any successor provision thereto);
provided, however, that no such Cash Bonus shall be paid until the Committee
has provided the written notification pursuant to Section 7(b)(2) hereof.
(b) Other Cash Bonuses
The Committee may, in its absolute discretion, grant in connection
with any grant of Stock Bonus or at any time thereafter, a Cash Bonus, payable
promptly after the date on which the Participant is required to recognize
income for federal income tax purposes in connection with such Stock Bonus, in
such amounts as the Committee shall determine from time to time; provided,
however, that in no event shall the amount of a Cash Bonus exceed the Fair
Market Value on such date of the shares related to the Stock Bonus. A Cash
Bonus shall be subject to such conditions as the Committee shall determine at
the time of the grant of such Cash Bonus.
11. ADJUSTMENT UPON CHANGES IN COMMON STOCK
(a) Outstanding Restricted Stock and Phantom Stock
Unless the Committee in its absolute discretion otherwise determines,
if a Participant receives any securities or other property (including dividends
paid in cash) with respect to a share of Restricted Stock, the Issue Date with
respect to which occurs prior to such event, but which has not vested as of the
date of such event, as a result of any dividend, stock split recapitalization,
merger, consolidation, combination, exchange of shares or otherwise, such
-11-
<PAGE> 12
securities or other property will not vest until such share of Restricted Stock
vests, and shall be held by the Company pursuant to Paragraph 7(d)(2) hereof as
if such securities or other property were unvested shares of Restricted Stock.
The Committee may, in its absolute discretion, adjust any grant of
shares of Restricted Stock, the Issue Date with respect to which has not
occurred as of the date of the occurrence of any of the following events, or
any grant of shares of Phantom Stock, to reflect any dividend, stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
similar corporate change as the Committee may deem appropriate to prevent the
enlargement or dilution of rights of Participants under the grant.
(b) Outstanding Options, Increase or Decrease in Issued Shares
Without Consideration
Subject to any required action by the stockholders of the Company, in
the event of any increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or consolidation of shares of Common Stock
or the payment of a stock dividend (but only on the shares of Common Stock), or
any other increase or decrease in the number of such shares effected without
receipt of consideration by the Company, the Committee shall proportionally
adjust the number of shares and the exercise price per share of Common Stock
subject to each outstanding Option. Conversion of any of the Company's
convertible securities shall not be deemed to have been "effected without
receipt of consideration by the Company."
(c) Outstanding Options, Certain Mergers
Subject to any required action by the stockholders of the Company, if
the Company shall be the surviving corporation in any merger or consolidation
(except a merger or consolidation as a result of which the holders of shares of
Common Stock receive securities of another corporation), each Option
outstanding on the date of such merger or consolidation shall entitle the
Participant to acquire upon exercise the securities which a holder of the
number of shares of Common Stock subject to such Option would have received in
such merger or consolidation.
(d) Outstanding Options, Certain Other Transactions
In the event of a dissolution or liquidation of the Company, a sale of
all or substantially all of the Company's assets, a merger or consolidation
involving the Company in which the Company is not the surviving corporation or
a merger or consolidation involving the Company in which the Company is the
surviving corporation but the holders of shares of Common Stock receive
securities of another corporation and/or other property, including cash, the
Committee shall, in its absolute discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence of
such event, each Option outstanding immediately prior to such event
(whether or not then exercisable), and, in full consideration of such
cancellation, pay to the Participant to whom such Option was granted
an amount in cash, for each share of Common Stock subject to such
Option equal to the excess of (A) the value, as determined by the
Committee in its absolute discretion, of the property (including cash)
received by the holder of a share of Common Stock as a result of such
event over (B) the exercise price of such Option; or
(ii) provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then exercisable) for
an option on some or all of the property for which such Option is
exchanged and, incident thereto, make an equitable adjustment as
determined by the Committee in its absolute discretion in the exercise
price of the option, or the number of shares or amount of property
subject to the option or, if appropriate, provide for a cash payment
to the Participant to whom such Option was granted in partial
consideration for the exchange of the Option.
-12-
<PAGE> 13
(e) Outstanding Options, Other Changes
In the event of any change in the capitalization of the Company or
corporate change other than those specifically referred to in Sections 11(b),
(c) or (d) hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject to Options outstanding on
the date on which such change occurs and in the per share exercise price of
each such Option as the Committee may consider appropriate to prevent dilution
or enlargement of rights.
(f) No Other Rights
Except as expressly provided in the Plan, no Participant shall have
any rights by reason of any subdivision or consolidation of shares of stock of
any class, the payment of any dividend, any increase or decrease in the number
of shares of stock of any class or any dissolution, liquidation, merger or
consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Common Stock subject to an Incentive Award or the exercise
price of any Option.
12. RIGHTS AS A STOCKHOLDER
No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any Incentive Award granted
pursuant to this Plan until the date of the issuance of a stock certificate
with respect to such shares. Except as otherwise expressly provided in Section
11 hereof, no adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date such stock
certificate is issued.
13. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD
Nothing contained in the Plan or any Incentive Award shall confer upon
any Participant any right with respect to the continuation of his employment by
the Company or interfere in any way with the right of the Company, subject to
the terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Incentive
Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to
such Participant or any other Participant or other person at any time nor
preclude the Committee from making subsequent grants to such Participant or any
other Participant or other person.
14. SECURITIES MATTERS
(a) The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of any shares of Common Stock to be
issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the Plan unless and until the Company is advised by
its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange on which shares of Common Stock are
traded. The Committee may require, as a condition of the issuance and delivery
of certificates evidencing shares of Common Stock pursuant to the terms hereof,
that the recipient of such shares make such covenants, agreements and
representations, and that such certificates bear such legends, as the
Committee, in its sole discretion, deems necessary or desirable.
-13-
<PAGE> 14
(b) The exercise of any Option granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authorities
and the requirements of any securities exchange on which shares of Common Stock
are traded. The Company may, in its sole discretion, defer the effectiveness
of any exercise of an Option granted hereunder in order to allow the issuance
of shares of Common Stock pursuant thereto to be made pursuant to registration
or an exemption from registration or other methods for compliance available
under federal or state securities laws. The Company shall inform the
Participant in writing of its decision to defer the effectiveness of the
exercise of an Option granted hereunder. During the period that the
effectiveness of the exercise of an Option has been deferred, the Participant
may, by written notice, withdraw such exercise and obtain the refund of any
amount paid with respect thereto.
15. WITHHOLDING TAXES
Whenever shares of Common Stock are to be issued upon the exercise of
an Option, the occurrence of the Issue Date or Vesting Date with respect to a
share of Restricted Stock or the payment of a Stock Bonus, the Company shall
have the right to require the Participant to remit to the Company in cash an
amount sufficient to satisfy federal, state and local withholding tax
requirements, if any, attributable to such exercise, occurrence or payment
prior to the delivery of any certificate or certificates for such shares. In
addition, upon the grant of a Cash Bonus or the making of a payment with
respect to a share of Phantom Stock, the Company shall have the right to
withhold from any cash payment required to be made pursuant thereto an amount
sufficient to satisfy the federal, state and local withholding tax
requirements, if any, attributable to such exercise or grant.
16. AMENDMENT OF THE PLAN
The Board of Directors may at any time suspend or discontinue the Plan
or revise or amend it in any respect whatsoever, provided, however, that
without approval of the stockholders no revision or amendment shall (i) except
as provided in Section 11 hereof, increase the number of shares of Common Stock
that may be issued under the Plan; (ii) increase the Annual Option Limitation
and/or the maximum number of shares of Restricted Stock which may be granted
during the relevant Performance Period, as set forth in Sections 6(d) and 7(e)
hereof, respectively; (iii) materially increase the benefits accruing to
individuals holding Incentive Awards granted pursuant to the Plan; or (iv)
materially modify the requirements as to eligibility for participation in the
Plan.
17. NO OBLIGATION TO EXERCISE
The grant to a Participant of an Option shall impose no obligation
upon such Participant to exercise such Option.
18. TRANSFERS UPON DEATH
Upon the death of a Participant, outstanding Incentive Awards granted
to such Participant may be exercised only by the executors or administrators of
the Participant's estate or by any person or persons who shall have acquired
such right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive
Award, or the right to exercise any Incentive Award, shall be effective to bind
the Company unless the Committee shall have been furnished with (a) written
notice thereof and with a copy of the will and/or such evidence as the
Committee may deem necessary to establish the validity of the transfer and (b)
an agreement by the transferee to comply with all the terms and conditions of
the Incentive Award that are or would have been applicable to the Participant
and to be bound by the acknowledgments made by the Participant in connection
with the grant of the Incentive Award.
-14-
<PAGE> 15
19. EXPENSES AND RECEIPTS
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.
20. FAILURE TO COMPLY
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant to comply with any of the terms and conditions
of the Plan or the agreement executed by such Participant evidencing an
Incentive Award, unless such failure is remedied by such Participant within ten
days after having been notified of such failure by the Committee, shall be
grounds for the cancellation and forfeiture of such Incentive Award, in whole
or in part as the Committee, in its absolute discretion, may determine.
21. EFFECTIVE DATE AND TERM OF PLAN
The Plan was adopted by the Board of Directors on March 26, 1996, and
approved by the stockholders of the Company at its annual meeting on May 2,
1996 (the "Effective Date"), in accordance with applicable law, the
requirements of Sections 422 and 162(m) of the Code and the requirements of
Rule 16b-3 under Section 16(b) of the Exchange Act. No Incentive Award may be
granted under the Plan after March 25, 2001.
-15-
<PAGE> 1
EXHIBIT 21
GUNDLE/SLT ENVIRONMENTAL, INC.
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF EFFECTIVE
ENTITY NAME INCORPORATION OWNERSHIP
- -------------------------------------------------------------- --------------- ---------
<S> <C> <C>
GSE Lining Technology, Inc.................................... Delaware 100%
GSE Lining Technology GmbH.................................... Germany 100%
Gundle GmbH................................................... Germany 100%
GSE Lining Technology Pty. Ltd................................ Australia 100%
GSE Lining Technology Pte. Ltd................................ Singapore 100%
GSE Lining Technology Ltd..................................... United Kingdom 100%
GSE U.K. Ltd.................................................. United Kingdom 100%
Gundle Environmental Ltd...................................... United Kingdom 100%
GSE Clay Lining Technology Co................................. South Dakota 100%
GSE International, Inc........................................ Delaware 100%
GSE Foreign Sales, Ltd........................................ Barbados 100%
GSE Ventures, Inc............................................. South Dakota 100%
Gundwater, Inc................................................ Nevada 100%
</TABLE>
36
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 33-62947) of Gundle/SLT Environmental, Inc. and in the related
Prospectus, the Registration Statements (Form S-8 No. 33-44306) pertaining to
the 1986 Stock Option Plan and (Form S-8 No. 33-44531) pertaining to the 1991
Employee Stock Purchase Plan and the 1988 Nonqualified Stock Option Plan For
Non-Employee Directors of Gundle/SLT Environmental, Inc. of Gundle/SLT
Environmental, Inc. of our report dated February 2, 1996, with respect to the
consolidated financial statements and schedule of Gundle/SLT Environmental, Inc.
included in the Annual Report (Form 10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
Houston, Texas
February 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 16,057
<SECURITIES> 0
<RECEIVABLES> 72,749
<ALLOWANCES> 4,735
<INVENTORY> 19,850
<CURRENT-ASSETS> 121,928
<PP&E> 85,421
<DEPRECIATION> 41,481
<TOTAL-ASSETS> 196,021
<CURRENT-LIABILITIES> 42,382
<BONDS> 50,147
<COMMON> 177
0
0
<OTHER-SE> 97,373
<TOTAL-LIABILITY-AND-EQUITY> 196,021
<SALES> 248,063
<TOTAL-REVENUES> 248,063
<CGS> 198,750
<TOTAL-COSTS> 198,750
<OTHER-EXPENSES> 45,586
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,350
<INCOME-PRETAX> (1,296)
<INCOME-TAX> 935
<INCOME-CONTINUING> (2,231)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,231)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
