SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended September 30, 1995
Commission File No. 33-1475C
LAMCOR INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-1478017
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
Highway 169 North, P.O. Box 70, Le Sueur, MN 56058
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (612) 332-1997
Securities registered pursuant to Section 12(b) of the Act:
275,000 Shares Of Common Stock
Securities registered pursuant to Section 12(g) of the Act:
None
Common Stock, (no par value)
(Title of Class)
Indicate by check mark whether the Registrant (1) as 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___
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on September 30, 1995, based on the average bid and asked prices of
Common Stock in the over-the-counter market on that date was $2,937,501.
1,341,542 shares of Registrant's Common Stock, no par value were outstanding on
September 30, 1995, prior to the effectiveness of the latest practicable date.
DOCUMENTS INCORPORATED BY REFERENCE
None.
CONTENTS
Page
PART I
Item 1. BUSINESS 4
Item 2. PROPERTY 5
Item 3. LEGAL PROCEEDINGS 6
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 6
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS 6
Item 6. SELECTED FINANCIAL DATA 7
Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA 8
Item 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 8
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT 9
Item 11. EXECUTIVE COMPENSATION 10
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 10
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 11
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K 11
PART I
Item 1. - BUSINESS
General
Lamcor Incorporated, formerly Laminations Incorporated was formed in
July, 1983 as the successor company to Film Converting Services, Inc. The name
was changed in September, 1986 to Lamcor Incorporated.
There are two basic processes that take place in the plant of the
company. First the roll of plastic film is laminated with another roll of film
to give it strength. The other is to apply a heat seal coating to the basic
material to act as a sealant, and is called a coated roll. This resulting roll
is either used in the next process, or sold to others as is. The laminated rolls
are sold to the meat industry, to other food packagers, and as a generic
product. The coated rolls are sold to snack food makers, to specialty food
manufacturers, and as a generic product. The product sales mix is about 10%
laminated rolls, 20% coated rolls, and 70% pouches, and are sold to wide variety
of customers. The company has been able in the past to keep the employees
employed full time as a result, since it can sell this basic laminated roll to
any number of customers.
The other process takes the laminated roll of plastic film, folds it
over, and makes a pouch. This machine seals the pouch on three sides, cuts it to
the desired length, and is able to make the folded over roll wide enough to make
two pouches at the same time. These are sold in standard sizes, and some to
customers specifications.
The pouch that comes from this process is then used for packaging
products. The customer takes the pouch, inserts the product, removes the air
from the pouch, and seals the fourth side. This removal of air causes the
plastic pouch to collapse around the product and the result is the package found
in most stores. Some processors do this by machine, but most pack the product in
the pouch by hand. The FDA has set standards for this type of plastic film pouch
for food products. The company meets these standards. The FDA standards are met
by the suppliers of the basic material; the company relies on these written
representations and its own testing to ensure that the FDA standards are met.
The company has machinery that will enable it to custom make pouches
for various customers in different thicknesses and sizes.
The advent of microwave cooking has brought new demands to the
requirements for plastic packaging of food. Microwave cooking requires that the
food be packaged in plastic that will also be used in cooking not just in the
storage of the food. The cooking of the food has brought more stringent
requirements from the FDA for plastic packaging. The company complies with the
FDA requirements, and so far has been able to fully comply. Along with the more
stringent requirements has come a vastly expanded market.
The convenience of microwave cooking is a market that has barely been
tapped at this time. The company feels that the market for microwave cooking
will greatly expand in the next few years, and the company wants to be in
position to exploit its portion of that market; the plastic packaging of the
convenience foods. The pouch that the company makes is in many ways the ideal
vehicle to package the microwave foods, and, in fact, the company has several
customers that use its pouch at this time in microwave foods, such as entrees
and snack foods. About 30% of the production of the products of the company at
this time is used for microwave foods.
Major Customers
Reference is made to Note 9 to the financial statements with regard to
customers from which the company derived more than 10% of its sales.
Patents and Trademarks
The Company has no patents on any of its products, however there is a
patent pending on a vacuum seal for its plastic bags.
Employees
As of September 30, 1995, the Company had 38 full time employees, of
which nine are in management and twenty nine are in production.
Item 2. - PROPERTY
Facilities
The Company purchased its manufacturing and office facilities for
$340,000 in March, 1991. The Company expanded the plant in 1994, adding an
additional 9,500 square feet to bring the size of the plant to 23,000 square
feet, at a cost of $210,000. The sales offices were moved from leased space in
Edina, Minnesota to expanded space at the plant. The Company added an additional
1,200 square feet at a cost of $100,000 for the new offices.
Item 3. - LEGAL PROCEEDINGS
None
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
PART II
Item 5. - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock has been actively traded principally in the
Minneapolis over-the-counter market since March 1, 1987. As of September 30,
1995, the following brokerage firms were making a market in the Company's common
stock: R.J. Steichen & Co. Corp., Van Clemons Co.
The following table sets forth for the periods indicated the range of
high and low closing bid quotations per share as reported by the local
over-the-counter market. These quotations represent inter-dealer prices, without
retail markups, markdowns or commissions and may not necessarily represent
actual transactions.
Price Per Share
High Low
Fiscal year 1995
First Quarter (October 1, 1994
through December 31, 1994) $ 3.50 $ 3.00
Second Quarter (January 1, 1995
through March 31, 1995) $ 2.50 $ 1.75
Third Quarter (April 1, 1995
through June 30, 1995) $ 3.37 $ 3.00
Fourth Quarter (July 1, 1995
through September 30, 1995) $ 3.75 $ 3.00
On September 30, 1995 the high closing bid and low asked prices of the
Company's common stock were $3.00 and $3.75 per share, respectively. On
September 30, 1995 there were 183 holders of record.
Item 6. - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Years Ended September 30,
--------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net Sales $7,158,636 $4,817,411 $3,682,870 $3,190,502 $2,223,107
Income (loss) before
extraordinary item $ 358,795 $ 176,918 $ 127,450 $ 192,288 $ 47,622
Net Income (loss) $ 358,795 $ 176,918 $ 127,450 $ 192,288 $ 57,622
Per Share Data
Income (loss) before
extraordinary item $ .22 $ .12 $ .09 $ .16 $ .04
Net Income (loss) $ .22 $ .12 $ .09 $ .16 $ .05
Cash dividends -- -- -- -- --
As of September 30,
-------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Balance Sheet Data
Total Assets $4,164,080 $3,527,547 $2,374,724 $1,936,955 $1,675,124
Long-term debt, net
of current portion $ 852,093 $ 837,761 $ 589,561 $ 316,042 $ 328,581
</TABLE>
Item 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Profitability was achieved for a sixth consecutive year. Net income was
double that of 1994, and was aided, in part, by stability in raw material
markets. Management feels that this will be a continuing trend with only
moderate increases in fixed costs.
Net sales for 1995 were $7,158,636, up from $4,817,411 in 1994,
$3,682,870 in 1993. This reflected an increase of 49% in one year and almost
double in the last 4 years. Net income was $358,795, compared to $176,918 in
1994, an increase of 103%. Per share income was $.22 per share, as opposed to
$.12 in 1994. All income was from operations.
Cost of goods sold for 1995 was $5,194,981, compared to $3,542,411 in
1994 and $2,762,358 in 1993. Gross profit was $1,963,655 in 1995 compared to
$1,275,000 in 1994 and $920,512 in 1993. Selling and administrative expense for
1995, 1994 and 1993 were $1,244,694, $936,587 and $693,781 respectively. During
the course of the year financing was procured to provide capital for building
expansion and for new machinery for production. Assets increased from $3,527,547
in 1994 to $4,164,080 in 1995. Long term debt increased from $837,761 in 1994 to
$1,277,799, primarily due to building expansion and capital lease obligation.
Capital expenditures this year included the delivery of a new P.D.I.
pouch machine capable of making large recloseable pouches. Full utilization was
only recent, and there are orders employing its capabilities.
Ten new offices were completed in the second quarter of 1995. For the
past several years the Company has maintained a sales office in Edina,
Minnesota, and the lease term ended in 1995. Management determined that the
sales operations would be enhanced by a move to the manufacturing headquarters
in LeSuer. This put all operations under one roof, at a lower cost, and enhanced
communications between sales and production
The company funded $15,200 in 1994 and $18,000 in 1995 to the 401(k)
plan. Nearly all of the employees contributed to the plan, and management feels
that it adds stability to the work force.
The company is planning another major expansion to the plant to double
its size for manufacturing and warehouse space and to purchase a six color
impression printing press in 1996. All printing of the plastic bags has been
done by others to this time. The increased volume of sales, and the added space
with the new addition to the plant will enable the company to do the printing in
its own facility. Management feels that the printing will enable the company to
control the timing of the printing, its quality, and enhance profits.
Inflation has not had a significant effect on the company, and the
company has budgeted 1996 based on moderate economic growth. The only
significant variable has been the volatile price of the film purchased as a raw
material.
Item 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are attached following Item 14.
Item 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
PART III
Item 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers and directors of the Company, with a brief
description, are as follows:
Name Age Position
Leo Lund 64 Chairman of the Board
Toby Jensen 43 President
David Stewart 55 Director
Sue Jones 41 Director
Christopher Elliott 38 Director
The directors of the company are elected annually by the shareholders
for a term of one year or until their successors are elected and qualified. The
officers serve at the pleasure of the Board of Directors.
LEO LUND, Chairman of the Board and Secretary, age 64. Mr. Lund is an
accountant, and was a partner in the firm of Lund & Associates, P.A. from 1955
to 1992, which provided accounting services. Mr. Lund sold his interest in the
accounting firm in 1992, and is now semi retired. He serves as a board member of
several corporations, which are not registered corporations. Mr. Lund devotes
less than 5% of his time to the company.
TOBY JENSEN, President, age 43. Mr. Jensen has a degree from the
University of Minnesota, and has been in management and sales with 2 flexible
packaging companies for the past 17 years. He has been the President of the
Company since 1988.
DAVID STEWART, Director, age 55. Mr. Stewart is the President of
Paragon Enterprises, Inc. a real estate development company.
SUE JONES, Director, age 41. Ms Jones was the Vice President and
General Manager of Strout Plastics, Inc., for 13 years until 1994. She is now an
independent sales representative in the flexible packaging industry.
CHRISTOPHER ELLIOTT, Director, age 38. Mr. Elliott is an attorney and
has practiced with the firm Christoffel, Elliott and Albrecht since 1989.
Item 11. - EXECUTIVE COMPENSATION.
The following table sets forth the cash compensation for services
rendered in all capacities to the company during the company's fiscal year ended
September 30, 1995, as paid by the company to each executive officer whose cash
compensation exceeded $60,000 and to all executive officers as a group:
Name Capacity Cash Compensation
Toby Jensen President $ 93,799
All executive officers
as a group $121,499
Item 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
There are presently 1,341,542 shares of the company's common shares
outstanding. The following table sets forth the information as to the ownership
of each person who, as of the date of this report, owns of record, or is known
by the company to own beneficially, more than five percent of the company's
common stock, and the officers and directors of the company.
Number Of Percent Of
Name of Beneficial Owner Shares Shares
Leo Lund 145,075 10.8%
Tanana, Inc. 122,300 9.1%
Kathy Young 103,230 7.6%
Christopher Elliott 156,000 11.6%
Toby Jensen 45,000 3.3%
Sue Jones 5,000 0.3%
David Stewart 11,300 0.8%
All executive officers and
directors as a group
(5 individuals) 362,375 27.0%
Does not take into account any unexecuted warrants or options.
Item 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See notes 6, 8, 9 & 11 to Financial Statement.
PART IV
Item 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) Attached are the Financial Statements and Independent Auditor's
Report on Examination of Financial Statements for the year ended
September 30, 1994, 1993 and 1992.
(b) Attached are the following Financial Statement Schedules and
Auditors Report on Schedules,
Independent Auditors Report on Schedules
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation, Depletion,
and Amortization of Property, Plant and
Equipment
Schedule IX - Short-term borrowings
All other schedules are omitted because they are not required or not
applicable or the information is shown in the consolidated financial
statements or notes thereto.
(c) No report was filed on Form 8-K.
(d) There are no exhibits.
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.
Dated December 22,1995
LAMCOR, INC.
by____________________________
Leo W. Lund
LAMCOR, INCORPORATED
FINANCIAL REPORT
SEPTEMBER 30, 1995, 1994 AND 1993
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Lamcor, Incorporated
LeSueur, Minnesota
We have audited the accompanying balance sheets of Lamcor, Incorporated
as of September 30, 1995 and 1994, and the related statements of income, changes
in stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Lamcor, Incorporated
as of September 30, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended September 30, 1995,
in conformity with generally accepted accounting principles.
/s/ HOUSE, NEZERKA & FROELICH, P.A.
November 20, 1995
<TABLE>
<CAPTION>
LAMCOR, INCORPORATED
BALANCE SHEETS
September 30, 1995 and 1994
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and savings account $ 62,872 $ 6,196
Trade accounts receivable, less allowance for
doubtful accounts of $10,000 (Notes 4, 5 and 9) 1,046,302 793,610
Inventories (Notes 2, 4 and 5) 986,438 1,064,687
Prepaid expenses and other 14,498 14,414
Deferred tax assets (Note 10) 12,615 --
----------- -----------
Total current assets 2,122,725 1,878,907
OTHER ASSETS (Note 3) 4,158 295,362
PROPERTY, EQUIPMENT AND IMPROVEMENTS, at cost
(Notes 4, 5 and 6):
Land 20,000 20,000
Building and improvements 753,862 602,418
Manufacturing equipment 1,981,743 1,313,585
Office equipment and other 128,165 88,133
----------- -----------
2,883,770 2,024,136
Less accumulated depreciation 846,573 670,858
----------- -----------
2,037,197 1,353,278
----------- -----------
$ 4,164,080 $ 3,527,547
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks issued in excess of bank balance $ -- $ 82,381
Bank lines of credit (Note 4) -- 90,000
Current maturities of long-term debt (Note 5) 97,000 101,500
Current maturities of capital lease obligations (Note 6) 57,103 157,030
Accounts payable 503,645 638,983
Accrued expenses (Note 11) 144,569 86,110
Income taxes payable (Note 10) 128,206 29,436
----------- -----------
Total current liabilities 930,523 1,185,440
LONG-TERM DEBT, less current maturities (Note 5) 852,093 837,761
CAPITAL LEASE OBLIGATIONS, less current maturities (Note 6) 425,706 --
DEFERRED INCOME TAXES (Note 10) 145,900 97,000
STOCKHOLDERS' EQUITY (Notes 7 and 8):
Undesignated shares; authorized 5,000,000 shares; none issued Common stock,
no par value; authorized 5,000,000 shares;
outstanding shares 1995 1,341,542; 1994 1,328,542 952,809 940,159
Notes receivable arising from the sale of common stock (66,433) (97,500)
Retained earnings 923,482 564,687
----------- -----------
1,809,858 1,407,346
----------- -----------
$ 4,164,080 $ 3,527,547
=========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
LAMCOR, INCORPORATED
STATEMENTS OF INCOME
Years Ended September 30, 1995, 1994 and 1993
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales (Note 9) $ 7,158,636 $ 4,817,411 $ 3,682,870
Cost of goods sold 5,194,981 3,542,411 2,762,358
----------- ----------- -----------
Gross profit 1,963,655 1,275,000 920,512
Selling, general and administrative expense 1,244,694 936,587 693,781
----------- ----------- -----------
Operating income 718,961 338,413 226,731
Other income (expense):
Interest income 5,181 8,996 8,054
Interest expense (139,247) (66,141) (50,135)
Other -- 150 3,500
----------- ----------- -----------
(134,066) (56,995) (38,581)
----------- ----------- -----------
Income before income taxes 584,895 281,418 188,150
Income taxes (Note 10) 226,100 104,500 60,700
----------- ----------- -----------
Net income $ 358,795 $ 176,918 $ 127,450
=========== =========== ===========
Earning per common share:
Primary $ .22 $ .12 $ .09
=========== =========== ===========
Fully diluted $ .21 $ .12 $ .09
=========== =========== ===========
Shares used in computing earnings per
common equivalent shares:
Primary 1,615,101 1,448,315 1,363,168
=========== =========== ===========
Fully diluted 1,713,000 1,451,483 1,370,214
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
LAMCOR, INCORPORATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended September 30, 1995, 1994 and 1993
Notes Receivable
Common Stock From Sale of Retained
Shares Amount Common Stock Earnings Total
------ ------ ------------ -------- -----
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1992 1,285,542 $ 894,034 $ (79,750) $ 260,319 $ 1,074,603
Stock issued for notes receivable/options 30,000 37,500 (36,250) - 1,250
Proceeds from notes receivable - - 8,500 - 8,500
Net income - - - 127,450 127,450
----------- ---------- ---------- ---------- -----------
Balance, September 30, 1993 1,315,542 931,534 (107,500) 387,769 1,211,803
Stock issued for options 13,000 8,625 - - 8,625
Proceeds from notes receivable - - 10,000 - 10,000
Net income - - - 176,918 176,918
----------- ---------- ---------- ---------- -----------
Balance, September 30, 1994 1,328,542 940,159 (97,500) 564,687 1,407,346
Stock issued for options/compensation 3,000 5,150 - - 5,150
Interest on note receivable - - (7,683) - (7,683)
Proceeds from notes receivable - - 46,250 - 46,250
Stock issued for notes receivable/options 10,000 7,500 (7,500) - -
Net income - - - 358,795 358,795
----------- ---------- ---------- ---------- -----------
Balance, September 30, 1995 1,341,542 $ 952,809 $ (66,433) $ 923,482 $ 1,809,858
=========== ========== ========== ========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
LAMCOR, INCORPORATED
STATEMENTS OF CASH FLOWS
Years Ended September 30, 1995, 1994 and 1993
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 358,795 $ 176,918 $ 127,450
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 176,179 125,120 103,556
Deferred income taxes 36,285 42,000 22,000
Stock exchanged for compensation 2,150 - -
Changes in assets and liabilities:
Trade accounts receivable (252,692) (181,959) (166,652)
Inventories 78,249 (628,786) 63,084
Prepaid expenses and other (7,767) (1,317) (4,967)
Refundable income taxes - 37,124 (37,124)
Accounts payable (135,338) 269,482 51,388
Accrued expenses 58,459 22,275 3,638
Income taxes payable 98,770 29,436 (75,000)
-------------- -------------- --------------
Net cash provided by (used in) operating activities 413,090 (109,707) 87,373
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (214,923) (294,491) (431,814)
Other deposits (1,777) (134,493) (3,309)
-------------- -------------- --------------
Net cash used in investing activities (216,700) (428,984) (435,123)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 1,000,000 545,000 85,000
Principal payments on short-term borrowings (1,090,000) (455,000) (85,000)
Principal payments on long-term debt and capital lease (136,583) (85,766) (99,478)
Proceeds from long-term debt 120,000 350,442 398,020
Collections on note receivable from common stock 46,250 10,000 8,500
Proceeds from exercise of stock options 3,000 8,625 1,250
Checks issued in excess of bank balance - 82,381 -
Payments on checks issued in excess of bank balance (82,381) - -
-------------- -------------- --------------
Net cash provided by (used in) financing activities (139,714) 455,682 308,292
-------------- -------------- --------------
Net increase (decrease) in cash and savings account 56,676 (83,009) (39,458)
Cash and savings account:
Beginning 6,196 89,205 128,663
-------------- -------------- --------------
Ending $ 62,872 $ 6,196 $ 89,205
============== ============== ==============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligation for equipment/deposit $ 353,040 $ 157,030 $ -
============== ============== ==============
Equipment deposit used for purchase of equipment $ 291,673 $ - $ 60,000
============== ============== ==============
Stock issued for notes receivable $ 7,500 $ - $ 36,250
============== ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 140,019 $ 61,346 $ 50,540
============== ============== ==============
Cash paid for income taxes $ 91,045 $ 15,621 $ 150,824
============== ============== ==============
Cash refunded for income taxes $ - $ 19,681 $ -
============== ============== ==============
</TABLE>
See Notes to Financial Statements.
LAMCOR, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
Years Ended September 30, 1995, 1994 and 1993
Note 1. Nature of Business and Significant Accounting Policies:
Nature of business:
The Company is engaged in the business of laminating plastic and
manufacturing of plastic pouches used in the food and medical
industries with sales throughout the United States.
A summary of the Company's significant accounting policies
follows:
Inventories:
Inventories are stated at the lower of cost (using standard costs
for work in progress and finished goods) or market, computed on a
basis which approximates the first-in, first-out (FIFO) method.
Property, equipment and improvements:
Property, equipment and improvements are stated at cost. For
financial reporting purposes, depreciation is computed using the
straight-line method over the following estimated useful lives:
Years
Building and improvements 3-40
Manufacturing equipment 5-15
Office equipment and other 3-5
Depreciation on property, equipment and improvements was $175,715,
$124,805 and $103,556 for the years ended September 30, 1995, 1994
and 1993, respectively.
For income tax reporting purposes, other lives and methods are
used; deferred income taxes are provided for these differences.
Income taxes:
Effective October 1, 1993, the Company began accounting for income
taxes in accordance with SFAS No. 109, "Accounting for Income
Taxes" (see Note 10). Deferred tax assets and liabilities are
recognized for the future consequences attributable to temporary
differences between the financial statement carrying amounts of
assets and liabilities and their respective tax bases.
Earnings per share:
Earnings per share has been determined by dividing net income by
the weighted average common shares outstanding during each period
plus the effect of common shares contingently issuable, primarily
from stock options as computed using the modified treasury stock
method.
Estimates and assumptions:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Note 2. Inventories:
The components of inventory are as follows:
1995 1994
-------- --------
Raw materials $246,576 $ 480,394
Work in progress 416,504 355,094
Finished goods 323,358 229,199
-------- --------
$986,438 $1,064,687
======== ========
Note 3. Other Assets:
1995 1994
-------- --------
Building lease deposit $ -- $ 844
Equipment deposits 277 291,673
Refinancing costs, less accumulated
amortization 1995 $928; 1994 $464 2,381 2,845
Land deposit 1,500 --
-------- --------
$ 4,158 $295,362
======== ========
Note 4. Bank Line of Credit:
The Company has two revolving lines of credit with a bank in the
maximum amount of $300,000 and $90,000 which expire September 26,
1998 and October 10, 1995, respectively. Interest is payable at
1.5% over the bank's reference rate which was 8.75% at September
30, 1995. The notes are payable on demand and are collateralized
by receivables, inventory and equipment.
Note 5. Long-Term Debt:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Mortgage payable - bank, due in monthly installments of $3,285
including interest at 1.75% over the bank's reference rate
which was 8.75% at September 30, 1995, balance due December 6,
2000, collateralized
by building and land $ 384,772 $ 392,360
Notes payable, due in monthly installments including interest from
either 8.5% to 9.6% or 1% to 1.75% over the bank's reference
rate which was 8.75% at September 30, 1995, balances are due
from October 5, 1995 to September 15, 2001, collateralized
by accounts receivable, inventory and equipment 564,321 546,901
-------------- --------------
949,093 939,261
Less current maturities 97,000 101,500
-------------- --------------
$ 852,093 $ 837,761
============== ==============
</TABLE>
Maturities for the next five years on long-term debt outstanding
at September 30, 1995 are as follows:
Year Ending September 30
1996 $ 97,000
1997 94,883
1998 102,389
1999 103,781
2000 169,057
After 381,983
--------
$949,093
Note 6. Leases:
On August 11, 1994, the Company entered into a capital lease
agreement with a financing company to acquire $489,920 of
equipment. The financing company advanced the manufacturer
$157,030 for which the Company was directly obligated as of
September 30, 1994. Payments totaling $332,890 were made by the
financing company during the 1995 year. The lease began on May 1,
1995 and calls for 84 monthly payments of $8,147 including
interest at 10.33%.
On January 17, 1995, the Company entered into a capital lease
agreement to purchase a truck for $18,884. The lease requires 48
monthly payments of $400 including interest at 9.75%.
The Company also entered into a capital lease agreement to
purchase a computer for $4,304 which began on April 30, 1995 and
requires 36 monthly payments of $130.
The following is a schedule by year of the future minimum lease
payments due under capital leases together with the present value
of the net minimum lease payments:
Year Ended September 30:
1996 $104,125
1997 104,125
1998 103,345
1999 99,360
2000 97,763
After 2000 154,791
--------
Total minimum lease payments 663,509
Less amount representing interest 180,700
--------
Present value of minimum lease payments 482,809
Less current obligation under capital lease 57,103
--------
Non-current obligation under capital lease $425,706
========
Cost and accumulated amortization of leased assets are as follows:
1995 1994
-------------- ----------
Cost $ 513,108 $ -
Accumulated amortization 23,290 -
-------------- ----------
$ 489,818 $ -
============== ==========
Amortization of assets under capital leases is included in
depreciation expense and was $23,290 for the year ended September
30, 1995.
The Company rented space for a Minneapolis sales office under an
operating lease which commenced June 1, 1990 and expired May 31,
1995. Rent expense under all operating leases was $16,488, $14,810
and $12,962 for the years ended September 30, 1995, 1994 and 1993,
respectively.
Note 7. Stock Options:
The Company has reserved shares of common stock for issuance to
key employees and stockholders under incentive stock option and
purchase plans. Options are exercisable on a graduated scale
and/or expire based on the individual terms of the option
agreements. The options are exercisable at prices ranging from $
.50 to $2.00 per share. Other pertinent information related to the
plan is as follows:
<TABLE>
<CAPTION>
September 30
--------------------------------------------------------
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Under option, beginning of year 598,000 576,000 455,000
Granted 5,000 45,000 156,000
Terminated and cancelled - (10,000) (5,000)
Exercised (13,000) (13,000) (30,000)
-------------- -------------- --------------
Under option, end of year 590,000 598,000 576,000
============== ============== ==============
Options exercisible, end of year 505,000 484,000 496,000
============== ============== ==============
</TABLE>
The options exercised during the years ended September 30, 1995,
1994 and 1993 were at an average price of $.81, $.66 and $1.25 per
share, respectively.
Note 8. Notes Receivable Arising From the Sale of Common Stock:
<TABLE>
<CAPTION>
1995 1994
-------------- ---------
<S> <C> <C>
Notes receivable from exercise of options for
the Company's common stock -
Due December 1, 1994, including interest at 2% over prime $ - $ 5,000
Due April 1, 1996, including interest at 6% 58,933 51,250
Due August 2, 1996, including interest at 6% 7,500 -
Due in quarterly installments of $1,250 through
April 1995, balance due July 1, 1995 - 41,250
-------------- --------------
$ 66,433 $ 97,500
============== ==============
</TABLE>
Issued shares are being held by the Company as collateral for the
above notes pending payment of the amounts due.
Note 9. Major Customers:
The Company derived more than 10% of its net sales from the
following unaffiliated customers and had receivable balances from
those customers in the amounts of:
<TABLE>
<CAPTION>
Year Ended September 30
-----------------------
1995 1994 1993
--------------------------- -------------------------- --------------------------
Customer Sales Receivable Sales Receivable Sales Receivable
-------- ----------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C>
A $ * $ * $ 528,983 $ 68,804 $ 475,858 $ 75,660
B 942,035 87,299 * * * *
</TABLE>
* The net sales to customers A and B were less than 10% of the
total net sales for the period indicated.
Note 10. Income Taxes:
Effective October 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." The adoption of Statement 109
changes the Company's method of accounting for income taxes from
the deferred method to a liability method. Under the deferred
method, the Company recorded the tax effects of timing differences
between financial reporting and taxable income. As explained in
Note 1, the liability method requires the recognition of deferred
tax assets and liabilities for the expected future tax
consequences of temporary differences between the reported amounts
of assets and liabilities and their tax bases. The cumulative
effect relating to the adoption of Statement No. 109 was not
significant.
The income tax components are as follows:
<TABLE>
<CAPTION>
Year Ended September 30
-----------------------
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Currently payable:
Federal $ 165,815 $ 51,700 $ 31,000
State 24,000 10,800 7,700
-------------- -------------- --------------
189,815 62,500 38,700
Deferred income taxes 36,285 42,000 22,000
-------------- -------------- --------------
$ 226,100 $ 104,500 $ 60,700
============== ============== ==============
</TABLE>
Net deferred tax liabilities consist of the following:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation $ 145,900 $ 97,000
Deferred tax assets:
Allowance for doubtful accounts 3,400 -
Vacation accrual 4,018 -
Inventory capitalization 5,197 -
-------------- ----------
12,615 -
-------------- ----------
$ 133,285 $ 97,000
============== ==============
</TABLE>
Differences between income tax expense and the amount computed by
applying the statutory federal income tax rates to earnings before
income taxes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Statutory rate applied to income at 34% $198,900 $ 95,700 $ 64,000
Incremental tax brackets -- 13,000 (7,300)
State taxes, net of federal tax benefit 18,100 10,500 7,000
Other 9,100 (14,700) (3,000)
-------- --------- --------
$226,100 $ 104,500 $ 60,700
======== ========= ========
</TABLE>
Note 11. Other Accrued Expenses:
Other accrued expenses consist of the following:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Accrued wages and related expenses $ 42,820 $ 29,037
Accrued commissions 46,189 27,166
Accrued profit sharing 18,000 -
Payable to chairman 29,680 22,240
Other 7,880 7,667
-------------- --------------
$ 144,569 $ 86,110
============== ==============
</TABLE>
Note 12. Profit Sharing Plan:
During the year ended September 30, 1993, the Company implemented
a profit sharing plan under Section 401(k) of the Internal Revenue
Code for all eligible employees. The Plan provides that Company
contributions are at the discretion of the Board of Directors. In
addition, participants may elect to enter into salary reduction
agreements with the Company for a portion of their compensation.
Company contributions for the years ended September 30, 1995, 1994
and 1993 were $18,000, $15,300 and $0, respectively.
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES
Board of Directors and Shareholders
Lamcor, Incorporated
LeSueur, Minnesota
Our audits of the financial statements of Lamcor, Incorporated included
schedules V, VI and IX contained herein, for the years ended September 30, 1995,
1994 and 1993.
In our opinion, such schedules present fairly the information required
to be set forth therein in conformity with generally accepted accounting
principles.
HOUSE, NEZERKA & FROELICH, P.A.
Bloomington, Minnesota
November 20, 1995
<TABLE>
<CAPTION>
LAMCOR, INCORPORATED
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Other Balance
Beginning Additions Changes - at End
Classifications of Period at Cost Retirements Add (Deduct) of Period
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1995
Land $ 20,000 $ - $ - $ - $ 20,000
Building and improvements 602,418 151,444 - - 753,862
Manufacturing equipment 1,313,585 668,158 - - 1,981,743
Office equipment and other 88,133 40,032 - - 128,165
----------- ---------- ---------- ---------- -----------
$ 2,024,136 $ 859,634 $ - $ - $ 2,883,770
=========== ========== ========== ========== ===========
Year ended September 30, 1994
Land $ 20,000 $ - $ - $ - $ 20,000
Building and improvements 390,638 211,780 - - 602,418
Manufacturing equipment 1,246,594 66,991 - - 1,313,585
Office equipment 72,969 15,720 556 - 88,133
----------- ---------- ---------- ---------- -----------
$ 1,730,201 $ 294,491 $ 556 $ - $ 2,024,136
=========== ========== ========== ========== ===========
Year ended September 30, 1993
Land $ 20,000 $ - $ - $ - $ 20,000
Building and improvements 363,135 27,503 - - 390,638
Manufacturing equipment 824,467 422,127 - - 1,246,594
Office equipment 30,785 42,184 - - 72,969
----------- ---------- ---------- ---------- -----------
$ 1,238,387 $ 491,814 $ - $ - $ 1,730,201
=========== ========== ========== ========== ===========
</TABLE>
Depreciation and amortization of building, equipment and improvements are
provided on the straight-line method over the following estimated useful lives
of the assets:
Years
Building and improvements 3-40
Manufacturing equipment 5-15
Office equipment and other 3-5
LAMCOR, INCORPORATED
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes - at End
Description of Period Expense Retirement Add (Deduct) of Period
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1995
Land $ - $ - $ - $ - $ -
Building and improvements 60,036 21,960 - - 81,996
Manufacturing equipment 574,165 136,013 - - 710,178
Office equipment and other 36,657 17,742 - - 54,399
----------- ---------- ---------- ---------- -----------
$ 670,858 $ 175,715 $ - $ - $ 846,573
=========== ========== ========== ========== ===========
Year ended September 30, 1994
Land $ - $ - $ - $ - $ -
Building and improvements 40,522 19,514 - - 60,036
Manufacturing equipment 480,938 93,227 - - 574,165
Office equipment 25,149 12,064 556 - 36,657
----------- ---------- ---------- ---------- -----------
$ 546,609 $ 124,805 $ 556 $ - $ 670,858
=========== ========== ========== ========== ===========
Year ended September 30, 1993
Land $ - $ - $ - $ - $ -
Building and improvements 27,306 13,216 - - 40,522
Manufacturing equipment 397,532 83,406 - - 480,938
Office equipment 18,215 6,934 - - 25,149
----------- ---------- ---------- ---------- -----------
$ 443,053 $ 103,556 $ - $ - $ 546,609
=========== ========== ========== ========== ===========
</TABLE>
LAMCOR, INCORPORATED
SCHEDULE IX - SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
Period and Category of at End Interest During During the During the
Short-Term Borrowings of Period Rate the Period Period (5) Period (6)
- --------------------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1995
Bank line of credit (1) $ - 10.5% $ 300,000 $ 130,534 10.3%
Bank line of credit (2) - - - - -
Year ended September 30, 1994
Bank line of credit (1) $ 90,000 9.25% $ 185,000 $ 47,530 5.5%
Year ended September 30, 1993
Bank line of credit (3) $ - 7.0% $ 35,000 $ 7,000 7.0%
Bank line of credit (4) - - - - -
</TABLE>
(1) Note payable to bank under a revolving line of credit borrowing arrangement
which expires September 26, 1998. Collateralized by receivables, inventory
and equipment.
(2) Note payable to bank under a revolving line of credit borrowing arrangement
which expires October 10, 1995. Collateralized by receivables, inventory
and equipment.
(3) Note payable to bank under a revolving line of credit borrowing arrangement
which expires November 3, 1994. Collateralized by receivables, inventory
and equipment.
(4) Note payable to bank dated September 28, 1993 under a revolving line of
credit borrowing arrangement which expires December 28, 1998.
Collateralized by receivables, inventory and equipment.
(5) Total of daily outstanding principal balances divided by days in the year.
(6) Actual interest divided by the average amount outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 62,872
<SECURITIES> 0
<RECEIVABLES> 1,056,302
<ALLOWANCES> 10,000
<INVENTORY> 986,438
<CURRENT-ASSETS> 2,122,725
<PP&E> 2,883,770
<DEPRECIATION> 846,573
<TOTAL-ASSETS> 4,164,080
<CURRENT-LIABILITIES> 930,523
<BONDS> 1,277,799
0
0
<COMMON> 952,809
<OTHER-SE> (66,433)
<TOTAL-LIABILITY-AND-EQUITY> 4,164,080
<SALES> 7,158,636
<TOTAL-REVENUES> 7,158,636
<CGS> 5,194,981
<TOTAL-COSTS> 5,194,981
<OTHER-EXPENSES> (5,181)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,247
<INCOME-PRETAX> 584,895
<INCOME-TAX> 226,100
<INCOME-CONTINUING> 358,795
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 358,795
<EPS-PRIMARY> .22
<EPS-DILUTED> .21
</TABLE>
