<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------------------
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, 1994
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
-------------------------------------------------------
Commission File Number 1-9634
LARIZZA INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
--------------------------------------------------------------------------------
OHIO 34-1376202
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
SUITE 1040 (810) 689-5800
201 WEST BIG BEAVER ROAD (Registrant's telephone number,
TROY, MICHIGAN including area code)
(Address of principal executive offices) 48084
(Zip Code)
--------------------------------------------------------------------------------
Securities Registered Pursuant to Section 12(b) of the Act:
COMMON STOCK, NO PAR VALUE AMERICAN STOCK EXCHANGE
(Title of each class) (Name of exchange on which registered)
Securities Registered Pursuant to Section 12(g) of the Act: None
--------------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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. [ ]
The total market value of Registrant's common stock, no par value, held
by persons who are not affiliates of the Registrant was $44,621,000 on February
21, 1995.
The Registrant had 22,088,107 shares of common stock issued and
outstanding on February 21, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
---------------------------------- ---------------------------------
Proxy Statement for the 1995 Annual Meeting Part III, Items 10-13
of Shareholders if filed no later than
April 30, 1995
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Larizza Industries, Inc., an Ohio Corporation, was incorporated in
November 1982. Unless the context otherwise requires, all references to the
"Company" in this Form 10-K refer to Larizza Industries, Inc. and its
consolidated subsidiaries. The Company's principal executive offices are
located at 201 West Big Beaver Road, Columbia Center, Suite 1040, Troy,
Michigan 48084, and its telephone number is (810) 689-5800.
The Company designs and manufactures high-quality, plastic-based
components and systems utilized in the interiors of automobiles, light trucks,
sport utility vehicles and mini-vans. The Company's product line ranges from
injection molded plastic components, such as sidewall trim, air outlet
assemblies and cupholders, to highly complex systems, such as complete
instrument panels and door panels.
The Company has eight automotive parts manufacturing facilities, of
which five are in Michigan and three are in Ontario, Canada. The Company
believes these facilities provide significant capacity for expansion of its
core automotive interior plastics business without a proportional increase in
investments in fixed assets.
On March 11, 1994, the Company's lenders converted $47,000,000 of
principal and $9,254,000 of accrued interest into 8,283,040 shares of common
stock. The conversion reduced long-term debt, accrued interest and deferred
gain on debt restructure on the Company's balance sheet as of March 11, 1994 by
$47,000,000, $9,254,000, and $3,324,000, respectively, and increased
shareholders' equity by $59,578,000.
On May 6, 1994, the Company signed a $50,000,000 credit facility
agented by Bank of America Illinois (formerly Continental Bank, N.A.). The
initial borrowing of $36,000,000 consisted of $35,600,000 used to repay
existing indebtedness and $400,000 used to pay various loan fees and expenses.
This debt refinancing resulted in the recognition of the remaining deferred
gain on debt restructure which was recorded as an extraordinary gain. See Note
6 of the Notes to Consolidated Financial Statements listed in Item 14 of this
Report.
On October 20, 1994, the Company acquired Hughes Plastics, Inc., a
designer and manufacturer of air outlets and instrument panel components for
the automotive industry. Hughes Plastics, Inc. is located in St. Joseph,
Michigan. See Note 2 of the Notes to Consolidated Financial Statements listed
in Item 14 of this Report.
During the fourth quarter of 1994, the Company was awarded contracts by
Ford to manufacture instrument panel components for the Ford Taurus, Mercury
Sable and Ford Econoline. The Ford Econoline business started in the fourth
quarter of 1994 and the Ford Taurus and Mercury Sable start in production in
1995. The Company anticipates further opportunities to quote on instrument
panel components for Ford.
INDUSTRY OVERVIEW
The Company markets its products primarily to automotive original
equipment manufacturers ("automotive OEMs") and automotive OEM suppliers in the
North American automotive industry. The North American market for new
automobiles, light trucks, sport utility vehicles and mini-vans is cyclical
with demand strongly influenced by the overall strength of the North American
economies. Sales volumes have fluctuated due to such factors as the general
condition of the economy, inflationary expectations and interest rates on
consumer credit. Within the automotive industry, certain trends have developed
which will affect the future growth opportunities for automotive OEM suppliers
such as the Company.
-1-
<PAGE> 3
Increased outsourcing by automotive OEMs. Increasingly, automotive
OEMs have shifted the procurement of components from internal divisions to
external suppliers. This trend in outsourcing has developed because external
suppliers generally have lower cost structures and shorter development lead
times than captive suppliers. The Company believes outsourcing will benefit
external suppliers by providing a major source of potential growth.
Consolidation of the automotive OEM supplier base. Because of ever
increasing competition among the automotive OEMs, supplier standards are
frequently upgraded. The automotive OEMs are requiring their suppliers to meet
increasingly stringent standards for quality, cost and full-service
capabilities, including design, engineering and product management support. The
continuation of this trend has resulted in reducing the number of suppliers and
has created opportunities for suppliers which can meet these increasingly
stringent standards. The Company expects to take advantage of this trend.
Increasing consumer attention to interior styling. Consumers have
become increasingly sensitive to automobile passenger compartment styling.
This styling includes the texture and esthetic appeal of an automobile's
interior components, including door handles and dashboards, as well as
functional performance of elements such as cupholders and air outlets.
Heightened attention to the design of these components has increased the need
for automotive OEM suppliers to produce higher quality components with enhanced
features and has created opportunities for suppliers, such as the Company,
capable of providing components which appeal to consumers. In addition, as the
exterior styling of automobiles is increasingly driven by the need to meet
demanding engineering specifications for aerodynamic performance, product
differentiation can be most easily achieved by enhancing interior comfort and
styling.
Increased North American production by transplant automotive OEMs. The
share of North American automotive production provided by foreign automotive
manufacturers has increased from 1990 to 1994. Increasingly, these transplants
are under political and economic pressure to purchase a greater percentage of
their components from domestic suppliers. The Company currently supplies
Honda with door panels used in the Honda Civic and Nissan with various
components used in the Nissan Quest.
PRODUCTS
The Company's products are used in the interior of vehicles and range
from injection molded plastic components to highly complex systems. The
Company's products include injection molded plastic components, such as
sidewall trim, air outlet assemblies, cupholders, substrates and door panels,
and compression molded plastic components, such as window trim and van engine
covers which provide a structural protective cover for engines. The Company
also manufactures padded products such as armrests and headrests. The Company
intends to expand its product line and increase sales of systems which, because
of their greater complexity and higher labor content, produce higher profit
margins.
The Company manufactures products using a variety of processes,
including injection molding, compression molding, rotocast molding, vacuum
forming and polyurethane foaming. The Company also performs secondary
operations such as hot stamping, heat staking and the application of paint,
vinyl, carpet and other decorative components.
The extensive manufacturing capabilities of the Company enable it to
produce highly complex systems, such as instrument panels and door panels. For
door panels, the Company injection molds the plastic substrate, which serves as
the foundation, manufactures and attaches the armrest and upper door panel,
attaches vinyl, carpet, speaker grilles and electrical switches and applies
paint or other decorative finishes where needed.
The Company has engineering and design capabilities which permit the
Company to work closely with its customers in the development of new components
and systems and the redesign of existing components and systems. The Company
has a number of patents and patents pending covering products developed and
designed internally.
-2-
<PAGE> 4
CUSTOMERS
The Company sells its products primarily to automotive OEMs. The
Company's principal customers are various divisions of General Motors,
Chrysler, Ford and Honda. The following table reflects the Company's net sales
to each of its principal customers for the year ended December 31, 1994. The
loss or significant reduction of business with any of these customers could
have a material adverse impact on the Company.
<TABLE>
<CAPTION>
Customer Net Sales Percent
-------- --------- -------
(In millions)
<S> <C> <C>
General Motors $ 59.0 34.8%
Chrysler 48.7 28.8
Ford 32.5 19.2
Honda 16.7 9.9
Other 12.4 7.3
------- -----
Total $ 169.3 100.0%
======= =====
</TABLE>
The Company is a supplier on a variety of automobile, light truck, sport
utility vehicle and mini-van models. The following table lists the major models
for which the Company currently produces components or systems:
<TABLE>
<CAPTION>
CUSTOMER MODELS
-------- ------
<S> <C>
General Motors Buick:
LeSabre, Regal, Silhouette, Skylark, Park Avenue
Cadillac:
DeVille/Concours, Eldorado, Seville
Chevrolet:
Beretta, Camaro, Caprice, Cavalier, Corsica, Corvette, Lumina/Monte
Carlo, Lumina APV
Oldsmobile:
Achieva, Bravada, Eighty-eight, Ninety-eight
Pontiac:
Bonneville, Grand Am, Sunbird, Trans Sport
GMC Truck:
Blazer, "CK" Truck, Rally, Sport Van, Suburban, Vandura, Yukon
Chrysler Dodge:
Dakota
Jeep:
Grand Cherokee
Ford Ford:
Crown Victoria, Taurus, "F" Truck, Econoline
Lincoln:
Mark VIII
Mercury:
Grand Marquis, Villager, Sable
Nissan Nissan:
Quest
Honda Honda:
Civic.
</TABLE>
-3-
<PAGE> 5
The Company has been selected as the sole-source supplier for certain
components and systems on the 1996 Chevrolet Corsica, Beretta and Cavalier,
Pontiac Grand Am, General Motors "M" vans (Astro and Safari) and full-size vans,
Ford "F" Truck, and Honda Civic, the 1997 Chevrolet Lumina APV, Corsica and
Beretta, Pontiac Trans Sport and Grand Prix, Buick Regal and Park Avenue, and
Cadillac DeVille and Concours, and the 1998 Chrysler "LH" cars (the Chrysler New
Yorker, LHS and Concorde, the Dodge Intrepid and the Eagle Vision).
Each of the Company's principal customers has chosen the Company to be
the exclusive supplier of various components and systems for certain models of
automobiles, light trucks, sport utility vehicles or mini-vans. For example,
the Company is the exclusive supplier of interior sidewall trim for the
Chevrolet Lumina, instrument panels for the General Motors Rally/Vandura,
sidewall trim for the Ford Crown Victoria, door panels for the Jeep Grand
Cherokee and door panels for the Honda Civic manufactured in North America.
The Company's business tends to reflect the seasonal business cycle of
the domestic automotive industry. Normally, production declines during the
model changeover period in the third quarter of each year. Production generally
increases in the fourth quarter, with maximum production experienced during the
first and second quarters.
The Company believes that Ford and Chrysler are reducing the number of
their direct suppliers, and that Ford has selected several suppliers to act as
integrators of complete automobile interiors. The Company believes that it is
in Chrysler's and Ford's reduced supplier base for instrument panel components,
but it is not part of Ford's group of integrators. The Company is, however,
supplying one of the Ford integrators, and it is attempting to obtain
subcontracting work from other integrators, but there can be no assurance that
the Company will be successful in its efforts.
BUSINESS STRATEGY
The Company's goal is to increase its sales of highly complex systems
supplied to the automotive OEMs as well as to other major automotive suppliers.
To accomplish this goal, the Company follows a business strategy based upon the
following elements:
Maintain High Quality Reputation
The Company believes the numerous quality awards it has received from
its principal customers evidence the Company's historical success in
implementing its business strategy by delivering the quality, service and price
required by its customers. To date, certain of the Company's plants have
received top quality awards from its customers, including the Chrysler "QE",
Ford "Q1" and the General Motors "TFE" awards. In addition, the Company
received General Motors' "Worldwide Supplier of the Year" award for 1994, 1993
and 1992. This award was given to one of General Motors' decorative injection
molded parts suppliers in each of the last three years in recognition of
excellence in quality, service and price. The Company believes that there are
over 100 General Motors decorative injection molded parts suppliers in North
America.
Lean Manufacturing Improvements
The Company applies a "lean manufacturing" philosophy designed to reduce
manufacturing costs by eliminating waste in its operations through active
employee participation. By empowering employees and giving them more autonomy
and responsibility for decisions affecting day-to-day operations, the Company
believes that it has improved product quality while reducing operating costs.
As a result of implementing a strategy that incorporates this
philosophy, the Company believes that it has positioned itself as a low cost
producer of the products that it manufactures.
-4-
<PAGE> 6
Provide Increased Engineering and Design
Over the past several years, the automotive OEMs have increasingly
relied upon their suppliers to provide engineering and design support early in
the development cycle of a new vehicle. As a result, the Company has developed
engineering and design capabilities which permit the Company to work closely
with its customers in the development of new components and systems and the
redesign of existing components and systems. The Company has a number of
patents and patents pending relating to products developed and designed
internally.
Just-In-Time Delivery/Line Sequencing Advantage
The Company works closely with its customers to reduce their inventory
costs. For example, it has developed a "line sequencing" system in which
engine covers, instrument panels and door panels are produced and sequenced for
shipment in the same color sequence as the interiors of the customers' vehicles
in which the engine covers, instrument panels and door panels will be
installed. This reduces the customers' overhead costs by eliminating the need
to store large quantities of components with various options and colors. The
"line sequencing" system is a further development of the "just-in-time" system
in which the Company integrates its delivery schedules with its customers so
that components are delivered "just in time" for installation into the
customers' products.
As an example, the Company has manufactured and sequenced over 2.0
million door panels under one contract for a customer without any quality or
sequencing rejections, even though there are approximately 75 variations in the
color and options relating to that program. The Company believes that its
ability to produce and sequence products for its customers provides it with a
cost advantage in bidding on certain contracts.
Strategic Acquisitions in Core Business
The Company may consider the acquisition of successful companies engaged
in the Company's core plastics business if the Company believes the acquisition
will further its goal of increasing its market penetration through expanding its
product line, manufacturing capabilities or customer base. While the Company
believes the opportunities may become available as a result of the automotive
OEMs reducing their supplier bases, there are no negotiations for such
acquisitions at present and there can be no assurance that any acquisitions will
be completed.
MARKETING
The Company sells its products directly to its customers under sales
contracts which are obtained primarily through competitive bidding. The
Company's marketing personnel maintain regular contact with its various
customers' engineers and purchasing agents. The Company coordinates its
marketing efforts through a sales office in Troy, Michigan, which employs
full-time marketing representatives and also uses independent manufacturers'
representatives.
Suppliers are generally selected to produce components and systems two
to four years in advance of commencement of production of a new or redesigned
model. The Company typically receives a purchase order to supply the customer's
entire requirement for a given product. The actual number of products sold by
the Company under a purchase order is dependent upon the number of vehicles
produced by the customer in which the product is incorporated. Accordingly, the
Company is unable to state a firm order backlog.
Historically, most customer purchase orders have provided for supplying
the customer's requirements for a model year and may be canceled by the
customer at any time, although, it has been the Company's experience that such
purchase orders are typically renewed until the product is redesigned or
eliminated in a model change. In certain cases, customers will issue long-term
purchase orders which provide for supplying the customer's requirements for the
life of a component or system. Such purchase orders typically require annual
price reductions which reflect expected efficiency gains in the manufacturing
process.
-5-
<PAGE> 7
COMPETITION
Automotive components and systems such as those produced by the Company
are supplied by a large number of manufacturers. As a result, manufacturers
tend to have relatively small market shares, and the Company believes that no
supplier or group of suppliers has a dominant position in the market for any of
the Company's products. The Company's competitors include manufacturers having
both greater and lesser size and financial resources than the Company. Certain
manufacturing operations of automotive OEMs directly compete with the Company.
In general, the Company competes in its markets on the basis of quality,
price, customer service, design and engineering capability and reputation with
the customer.
RAW MATERIALS
The principal raw material used by the Company is plastic resins. The
Company's principal suppliers of resins include The Dow Chemical Co., A.
Schulman, Inc. and General Electric Corporation. The Company believes that it
has adequate supplies of raw material available from reliable sources for the
level of production presently anticipated.
PATENTS, TRADEMARKS AND LICENSES
The Company has a number of patents and patents pending, trademarks and
a license. The Company believes that although its patents and patents pending,
trademarks and license have some value in the manufacturing and marketing of
certain products, their loss would not have a material adverse effect on the
Company's business.
EMPLOYEES
The Company's continuing operations had 1,894 full-time employees as of
January 31, 1995. These consisted of 143 salaried and 763 hourly personnel in
the United States and 163 salaried and 825 hourly personnel in Canada. As of
January 31, 1995, 1,486 of the Company's employees were represented by various
labor unions under collective bargaining agreements expiring on various dates
through August 1998. Certain of such agreements, covering an aggregate of 1,048
employees, expire prior to the end of 1995. There can be no assurance that such
agreements will be successfully negotiated and renewed before they expire. The
Company has never experienced a work stoppage and considers its employee
relations to be good.
ENVIRONMENTAL
Compliance with federal, state and local laws and regulations governing
the discharge of material into the environment and noise levels is not expected
to have a material effect upon the Company.
GENERAL NUCLEAR
General Nuclear Corporation, a subsidiary of the Company located in
Hempfield, Pennsylvania, manufactures high-precision valves, valve components
and specialized fasteners for the cooling systems of nuclear reactors used in
United States Navy nuclear submarines and aircraft carriers. These products are
machined and fabricated from stainless steel, iconel, monel, stellite, aluminum
and other metals and metal alloys.
General Nuclear Corporation has been accounted for as a discontinued
operation since December 31, 1990, when the Company adopted a plan to dispose of
General Nuclear Corporation. General Nuclear Corporation's revenues in 1994
were approximately $3.8 million, but such revenues are not included in the
Company's net sales in its financial statements. General Nuclear is being held
for sale by the Company.
-6-
<PAGE> 8
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Information regarding the Company's operations by geographic area is set
forth in Note 12 of the Notes to Consolidated Financial Statements listed in
Item 14 of this Report.
ITEM 2. PROPERTIES
The manufacturing operations of the Company are conducted in the
following facilities:
<TABLE>
<CAPTION>
Building Size
(Approximate Owned or
Location Square Feet) Leased
-------- ------------ ------
Continuing Operations
---------------------
<S> <C> <C>
Manchester, Michigan 158,000 Owned
Homer, Michigan 71,000 Owned
St. Joseph, Michigan (1) 75,000 Leased
Ann Arbor, Michigan (2) 29,000 Owned
Williamston, Michigan 16,900 Owned
Williamston, Michigan (3) 30,400 Leased
Gananoque, Ontario, Canada 200,000 Owned
Stratford, Ontario, Canada 73,000 Owned
Scarborough, Ontario, Canada (4) 140,000 Leased
Discontinued Operations
-----------------------
Hempfield, Pennsylvania (5) 14,000 Leased
</TABLE>
------------------------
(1) Lease expires in October 2001, and may be renewed for seven
years at the Company's option. Company has an option to purchase at
any time during the initial term of the lease.
(2) Facility is no longer in operation and is held for sale.
(3) Lease expires in March 2000.
(4) Lease expires in April 2003.
(5) Lease expires in January 1997.
Owned properties are subject to mortgages under Credit Agreements with
lenders (see Note 6 of the Notes to Consolidated Financial Statements listed in
Item 14 of this Report).
The Company believes that all of its properties, machinery and equipment
are well maintained and suitable and adequate for the business of the Company as
presently conducted. The Company believes that it has a significant amount of
open capacity due, in part, to the elimination of waste resulting from its "lean
manufacturing" strategy.
-7-
<PAGE> 9
ITEM 3. LEGAL PROCEEDINGS
In the opinion of management, the Company is not a party to any material
pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The Company's common stock is traded on the American Stock Exchange
under the symbol LII. Information regarding the last sale prices per share of
the Company's common stock on the American Stock Exchange for each quarterly
period of 1994 and 1993 is set forth below.
PRICE OF COMMON STOCK
<TABLE>
<CAPTION>
1994 1993
----------------- ----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $ 9-5/8 6-5/8 3-5/8 2-1/4
Second Quarter 7-3/4 4-5/8 9-5/8 3-1/4
Third Quarter 6-1/8 4-5/8 11-3/8 8-3/8
Fourth Quarter 5-5/8 3-3/4 11-3/4 7-1/8
</TABLE>
SHAREHOLDERS
As of February 15, 1995, there were approximately 212 record holders of
the Company's common stock.
DIVIDENDS
It is the policy of the Company's Board of Directors to retain all
earnings for the operation and expansion of the Company's business for the
foreseeable future, and the Company does not currently intend to pay cash
dividends on its common stock. The Company has not paid any dividends in the
last three years. The Company is restricted from paying dividends under Credit
Agreements with its lenders (see Note 6 of the Notes to Consolidated Financial
Statements listed in Item 14 of this Report).
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company for
the years ended December 31, 1994, 1993, 1992, 1991 and 1990 should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto, listed in Item 14 of this Report, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," set forth in Item 7
of this Report.
-8-
<PAGE> 10
Notes to selected financial data:
(1) On March 11, 1994, the Company's lenders converted $47,000,000 of
principal and $9,254,000 of accrued interest into 8,283,040 shares of
common stock (the "Conversion"). The Conversion reduced long-term debt,
accrued interest and deferred gain on debt restructure on the Company's
balance sheet as of the date of the Conversion by $47,000,000, $9,254,000
and $3,324,000, respectively, and increased shareholders' equity by
$59,578,000. On October 20, 1994, the Company acquired Hughes Plastics,
Inc.
(2) The Company sold the majority of its Defense Group and its Automotive
Electrical Division in 1991. These businesses have been accounted for as
discontinued operations.
(3) The Company sold its Plating operations and closed its automotive harness
assembly operations and its Ann Arbor plant in 1990. The plating and
automotive harness assembly operations accounted for $9.9 million of the
Company's sales in 1990.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------
1994(1) 1993 1992 1991(2) 1990(3)
------- ---- ---- ------- -------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales $ 169,336 148,257 111,307 85,951 96,739
Cost of goods sold 133,870 115,660 92,036 73,955 86,254
--------- --------- --------- --------- ---------
Gross profit 35,466 32,597 19,271 11,996 10,485
Selling, general and administrative
expenses 13,434 11,500 10,935 8,261 10,506
Nonrecurring operating expenses - - - 4,033 12,522
--------- --------- --------- --------- ---------
Operating income (loss) 22,032 21,097 8,336 (298) (12,543)
Other expense, net (2,948) (6,640) (6,855) (11,023) (12,682)
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations, before income taxes
and extraordinary gain 19,084 14,457 1,481 (11,321) (25,225)
Income tax provision 5,100 2,070 - 1,594 50
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations before extraordinary
gain 13,984 12,387 1,481 (12,915) (25,275)
Loss related to discontinued operations - - - (3,900) (19,455)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary
gain 13,984 12,387 1,481 (16,815) (44,730)
Extraordinary gain on extinguish-
ment of debt - - 711 - -
Extraordinary gain on refinancing
of debt 2,405 - - - -
--------- --------- --------- --------- ---------
Net income (loss) $ 16,389 12,387 2,192 (16,815) (44,730)
========= ========= ========= ========= =========
</TABLE>
-9-
<PAGE> 11
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1994(1) 1993 1992 1991(2) 1990(3)
------- ---- ---- ------- -------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
SHARE AND PER SHARE DATA:
Income (loss) per common share:
Primary:
Income (loss) from continuing
operations before extraordinary
gain $ .68 .90 .11 (.94) (1.83)
=== === === ==== ====
Net income (loss) $ .80 .90 .16 (1.22) (3.24)
=== === === ==== ====
Fully diluted:
Income from continuing
operations before extra-
ordinary gain $ .66 .72
=== ===
Net income $ .77 .72
=== ===
Weighted average number of
shares of common stock
outstanding:
Primary 20,522 13,805 13,805 13,805 13,805
Fully diluted 22,088 22,088
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------
1994(1) 1993 1992 1991(2) 1990(3)
------- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
(Amounts in thousands)
BALANCE SHEET DATA:
Working capital (deficiency) $ 3,648 4,279 5,964 1,943 (95,884)
Total assets 83,454 63,854 62,657 60,150 82,149
Long-term obligations, excluding
current installments 32,756 93,426 106,987 102,464 2,432
Shareholders' equity (deficit) 10,181 (64,073) (75,182) (74,616) (57,835)
</TABLE>
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<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and notes thereto of the Company listed in
Item 14 of this Report.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, items in the
consolidated statements of operations expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 20.9 22.0 17.3
Selling, general and administrative
expenses 7.9 7.8 9.8
Operating income 13.0 14.2 7.5
</TABLE>
Year Ended December 31, 1994 vs. Year Ended December 31, 1993
The Company's net sales for 1994 were $169.3 million compared to $148.3
million for 1993, representing an increase of 14.2 percent. This increase in
net sales resulted from increased production levels of vehicles in which the
Company's products are used, new programs launched during the third quarter of
1994 and the acquisition of Hughes Plastics, Inc. on October 20, 1994, which
resulted in $2.7 million of additional sales in 1994. The Chrysler Jeep Grand
Cherokee door program is scheduled to end in the third quarter of 1995. However,
sales are expected to increase in 1995 as a result of the full year impact of
new programs started in 1994, the acquisition of Hughes Plastics, Inc. and new
instrument panel component business for the Ford Taurus and Mercury Sable
expected to begin production in the third quarter of 1995.
Gross profit for 1994 was $35.5 million compared to $32.6 million for
1993, representing an increase of 8.8 percent. This increase in gross profit is
a result of higher sales. The gross profit margin decreased to 20.9 percent in
1994 compared to 22.0 percent in 1993. This decrease in gross profit margins
resulted primarily from losses incurred at Hughes Plastics, Inc. The Company
expects this operation to become profitable during 1995. During the last half
of 1994, the Company began experiencing inflationary pressures with respect to
raw material costs, particularly plastic resins. This had a minor impact on
margins in 1994; however, if the Company is not able to pass these increased
costs on to its customers, 1995 margins could be impacted negatively.
Operating income in 1994 was $22.0 million compared to $21.1 million in
1993, representing an increase of 4.4 percent. This increase in operating
income resulted from increased gross profit offset partially by increased
selling, general and administrative costs. Operating income as a percentage of
net sales was 13.0 percent in 1994 compared to 14.2 percent in 1993.
Selling, general and administrative expenses were $13.4 million in 1994
compared to $11.5 million in 1993. Selling expenses were up by $0.9 million as
a result of increased sales and general and administrative costs were up by $1.0
million as a result of costs associated with the filing of a registration
statement which was subsequently withdrawn and a refinancing of the Company's
remaining debt, as well as generally higher expenses.
Interest expense for 1994 was $3.5 million compared to $6.5 million for
1993. This reduction in interest expense resulted primarily from the conversion
of $47.0 million in principal amount of debt, plus the related accrued interest,
into common stock on March 11, 1994.
-11-
<PAGE> 13
Income tax expense for 1994 was $5.1 million compared to $2.1 million
for 1993. The effective tax rate increased to 26.7 percent in 1994 from 14.3
percent in 1993 as a result of the Canadian net operating loss carryforwards
being fully utilized during 1993.
During 1994, the Company completed a debt refinancing which resulted in
the recognition of the remaining deferred gain on debt restructure. This
resulted in an extraordinary gain of $2.4 million being recorded in 1994.
Year Ended December 31, 1993 compared with Year Ended December 31, 1992
The Company's net sales for 1993 were $148.3 million compared to $111.3
million for 1992, representing an increase of 33.2 percent. This increase in
net sales resulted largely from increased sales of door panels for the Chrysler
Jeep Grand Cherokee which was launched in the first quarter of 1992, as well as
the launching during the third quarter of 1992 of new programs to supply door
panels for the Honda Civic manufactured in Marysville, Ohio and instrument panel
components for the Mercury Villager and Nissan Quest.
Gross profit for 1993 was $32.6 million compared to $19.3 million for
1992, representing an increase of 69.2 percent. This increase in gross profit
is a result of higher sales and higher gross profit margins. The gross profit
margin increased to 22.0 percent in 1993 compared to 17.3 percent in 1992. This
increase in gross profit margins resulted from higher sales being spread over
fixed overhead costs and operating improvements at certain of the Company's
facilities.
Operating income in 1993 was $21.1 million compared to $8.3 million in
1992, representing an increase of 153.1 percent. This increase in operating
income resulted from increased gross profit offset slightly by increased
selling, general and administrative costs. Operating income as a percentage of
net sales was 14.2 percent in 1993 compared to 7.5 percent in 1992.
Selling, general and administrative expenses were $11.5 million in 1993
compared to $10.9 million in 1992. Selling, general and administrative expenses
for 1993 include professional expenses relating to a proposed acquisition by the
Company that was not consummated. The 5.2 percent increase in selling, general
and administrative expenses in 1993 was less than the 33.2 percent increase in
net sales for the same period because general and administrative expenses are
primarily fixed costs. Selling, general and administrative expenses as a
percentage of net sales were 7.8 percent in 1993 compared to 9.8 percent in
1992.
Interest expense for 1993 was $6.5 million compared to $7.1 million for
1992. This reduction in interest expense resulted primarily from lower
borrowing levels. Interest expense was reduced by $1.3 million and $1.4 million
of amortization of deferred gain on debt restructure in 1993 and 1992,
respectively.
During 1993, the Company's Canadian net operating loss carryforwards
were fully utilized resulting in an income tax provision for 1993 of $2.1
million.
During the first quarter of 1992, the Company extinguished long-term
debt in the amount of $906,000 for a cash payment of $195,000 resulting in a
gain of $711,000 which is recorded as an extraordinary gain.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash position increased by $0.2 million during 1994.
Cash provided by operating activities was $19.0 million. Cash in the amount of
$6.1 million was used for capital expenditures, primarily for machinery and
equipment purchases and upgrades. Capital expenditures in 1995 are projected to
be slightly higher than they were in 1994 as a result of new programs being
launched in 1995 and 1996.
-12-
<PAGE> 14
During 1994, the Company acquired Hughes Plastics, Inc., for a purchase
price of $5.3 million including liabilities assumed, net of cash acquired and
had net debt repayments of $7.3 million.
At December 31, 1994, the Company had $8.5 million available under its
line of credit, plus, if certain conditions are met, an additional $7.0 million
available for tooling and capital expenditure loans. For a description of the
Company's credit facilities, see Note 6 of the Notes to Consolidated Financial
Statements listed in Item 14 of this Report.
On March 11, 1994, the Company's lenders converted $47.0 million of
principal and $9.3 million of accrued interest into 8.3 million shares of common
stock, representing 37.5 percent of the Company's outstanding common stock after
such conversion. This conversion reduced long-term debt, accrued interest and
deferred gain on debt restructure on the Company's balance sheet as of the date
of the conversion by $47.0 million, $9.3 million and $3.3 million, respectively,
and increased shareholders' equity by $59.6 million.
The Company's primary needs for liquidity during 1995 will be to support
its working capital needs, debt service requirements and capital expenditure
requirements. The Company believes that cash generated by operations plus
amounts available under its credit facilities will be adequate to fund its cash
requirements for 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Supplementary Data of the
Company are described in Item 14 of this Report and follow the signature page of
this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Election of Directors" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the
Proxy Statement, if filed no later than April 30, 1995, for the 1995 Annual
Meeting of Shareholders, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in
the Proxy Statement (except for the information under the heading "Board
Compensation Committee Report on Executive Compensation" or "Performance
Graph"), if filed no later than April 30, 1995, for the 1995 Annual Meeting of
Shareholders, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement, if filed no
later than April 30, 1995, for the 1995 Annual Meeting of Shareholders, is
incorporated herein by reference.
-13-
<PAGE> 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Transactions" in
the Proxy Statement, if filed no later than April 30, 1995, for the 1995 Annual
Meeting of Shareholders, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report:
1. Financial Statements
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Operations for the years ended December
31, 1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity (Deficit) for the
years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended December
31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
None
3. Exhibits
Each management contract or compensatory plan or arrangement in the
following list is identified with an asterisk before the exhibit number.
3(i) Amended Articles of Incorporation (5)
3(ii) Amended Code of Regulations (1)
4.1 Specimen of Common Stock (1)
4.2 Loan Agreements, see Exhibits 10.10(a) through 10.11(g)
(2), 10.15(a) and 10.15(b)
9 Voting Trust Agreement among Larizza Industries, Inc.,
Ronald T. Larizza and Edward L. Sawyer, Jr., dated as
of December 20, 1991 (4)
9.1 Amended and Restated Voting Trust Agreement among
Larizza Industries, Inc., Ronald T. Larizza and the
shareholders signing the agreement, dated as of
May 4, 1994 (9)
9.1(a) Amendment to Voting Trust Agreement among Larizza
Industries, Inc., Ronald T. Larizza and Edward L.
Sawyer, Jr., dated as of March 11, 1994 (10)
-14-
<PAGE> 16
*10.1(a)(1) Promissory Note dated as of December 31, 1993, in the
amount of $1,468,827 from Ronald T. Larizza to Larizza
Industries, Inc., which replaces a note, dated December
31, 1991 (8)
*10.1(a)(2) Promissory Note dated as of December 31, 1993, in the
amount of $667,250 from Edward L. Sawyer, Jr. to
Larizza Industries, Inc., which replaces the note,
dated December 31, 1991 (8)
10.2 Asset Sale and Purchase Agreement, dated as of
May 6, 1994, between Manchester Plastics, Ltd. and
Larizza Industries, Inc. (9)
10.3(c)(4) Lease between Mortall Realty Company and Dynamic
Industries of Michigan Incorporated, dated March 1,
1983 (2)
10.4(a) Lease between ALBA, Inc. and Manchester Plastics, Inc.,
dated April 1, 1990 (3)
10.5 Lease among Louis V. Buzzitta, Catherine F. Buzzitta
and Hughes Plastics, Inc., dated October 20, 1994,
incorporated by reference to Exhibit 10.2 to the
Company's Form 10-Q for the quarter ended September 30,
1994
10.6 Lease between Ronita Properties Limited, Larizza
Industries, Inc. and Manchester Plastics, Ltd., dated
as of March 23, 1993 (7)
10.6(a) Lease Amending Agreement between Ronita Properties
Limited, Larizza Industries, Inc. and Manchester
Plastics, Ltd., dated as of June 25, 1993 (8)
10.6(b) Lease Amending Agreement between Ronita Properties
Limited, Larizza Industries, Inc. and Manchester
Plastics, Ltd., dated as of February 17, 1994 (8)
10.7(c) Lease dated December 29, 1986, between Sochacki Realty
Partners and General Nuclear Corporation (1)
10.8(a) Amended and Restated Marketing, Selling, Administrative
and Management Services Agreement, dated as of May 6,
1994, between Larizza Industries, Inc. and Manchester
Plastics, Ltd. (9)
*10.9(a)(1) Reverse Split-Dollar Agreement between Larizza
Industries, Inc. and Edward Wells dated as of April 22,
1993 (6)
*10.9(a)(2) Reverse Split-Dollar Agreement between Larizza
Industries, Inc. and Terence C. Seikel dated as of
April 22, 1993 (6)
*10.9(a)(3) Agreement between Larizza Industries, Inc. and Steven
J. Lebowski, trustee of the Larizza Family Irrevocable
Trust, dated as of April 22, 1993 (6)
*10.9(a)(4) Collateral Assignment made by Steven J. Lebowski,
trustee of the Larizza Family Irrevocable Trust to
Larizza Industries, Inc. dated as of April 22, 1993 (6)
*10.9(a)(5) Agreement between Larizza Industries, Inc. and Steven
J. Lebowski, trustee of the Larizza Family Irrevocable
Trust, dated as of April 22, 1993 (6)
-15-
<PAGE> 17
*10.9(a)(6) Collateral Assignment made by Steven J.
Lebowski, trustee of the Larizza Family Irrevocable
Trust to Larizza Industries, Inc. dated as of April 22,
1993 (6)
*10.9(b) Stock Incentive Plan for Key Employees (1)
*10.9(c) Consulting Agreement, dated as of June 15, 1994
between Larizza Industries, Inc. and The Edgewater
Group, Inc. (12)
*10.9(d) Finders Agreement, dated as of June 15, 1994, between
Larizza Industries, Inc. and The Edgewater Group, Inc.
(12)
*10.9(e) Employment Agreement, dated as of April 21, 1994,
between Larizza Industries, Inc. and Ronald T. Larizza
(11)
10.10(a) Credit Agreement, dated as of May 6, 1994, among
Larizza Industries, Inc., various financial
institutions and Continental Bank N.A. (9)
10.10(a)(1) First Amendment to Credit Agreement, dated as of
June 2, 1994, among Larizza Industries, Inc., various
financial institutions and Continental Bank N.A. (12)
10.10(a)(2) Second Amendment to Credit Agreement, dated as of
October 19, 1994, among Larizza Industries, Inc.,
various financial institutions and Bank of America
Illinois (13)
10.10(a)(3) Third Amendment to Credit Agreement, dated as of
November 4, 1994, among Larizza Industries, Inc.,
various financial institutions and Bank of America
Illinois
10.10(b) Note, dated as of May 6, 1994, in the principal
amount of $35,000,000 from Larizza Industries, Inc. to
Continental Bank N.A. (9)
10.10(b)(1) Note, dated as of June 15, 1994, in the
principal amount of $24,500,000 from Larizza
Industries, Inc. to Continental Bank N.A. (12)
10.10(b)(2) Note, dated as of June 15, 1994, in the
principal amount of $10,500,000 from Larizza
Industries, Inc. to The First National Bank of Boston
(12)
10.10(b)(3) Note, dated as of August 31, 1994, in the
principal amount of $17,375,000 from Larizza
Industries, Inc. to Continental Bank N.A. (13)
10.10(b)(4) Note, dated as of August 31, 1994, in the
principal amount of $6,950,000 from Larizza Industries,
Inc. to Sanwa Business Credit Corporation (13)
10.10(c) Security Agreement, dated as of May 6, 1994,
between Larizza Industries, Inc. and Continental Bank
N.A. (9)
10.10(d) Company Pledge Agreement, dated as of May 6,
1994, between Larizza Industries, Inc. and Continental
Bank N.A. (9)
10.10(e) Form of Mortgage, Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Financing
Statement, dated as of May 6, 1994, between Larizza
Industries, Inc., and Continental Bank N.A. covering
properties located in Manchester, Ann Arbor, Homer and
Willamston, Michigan (9)
-16-
<PAGE> 18
10.11(a) Credit Agreement, dated as of May 6, 1994,
among Manchester Plastics, Ltd., various financial
institutions and Continental Bank N.A (9)
10.11(a)(1) First Amendment to Credit Agreement, dated as
of June 2, 1994, among Manchester Plastics, Ltd.,
various financial institutions and Continental Bank
N.A. (12)
10.11(b) Note, dated as of May 6, 1994, in the principal
amount of $15,000,000 from Manchester Plastics, Ltd. to
Continental Bank N.A. (9)
10.11(b)(1) Note, dated as of June 15, 1994, in the
principal amount of $10,500,000 from Manchester
Plastics, Ltd. to Continental Bank N.A. (12)
10.11(b)(2) Note, dated as of June 15, 1994, in the
principal amount of $4,500,000 from Manchester
Plastics, Ltd. to The First National Bank of Boston
(12)
10.11(b)(3) Note, dated as of August 31, 1994, in the
principal amount of $7,031,250 from Manchester
Plastics, Ltd. to Continental Bank N.A. (13)
10.11(b)(4) Note, dated as of August 31, 1994, in the
principal amount of $2,812,500 from Manchester
Plastics, Ltd. to Sanwa Business Credit Corporation
(13)
10.11(c) General Security Agreement, dated as of May 6,
1994, between Manchester Plastics, Ltd. and Continental
Bank N.A. (9)
10.11(d) Demand Debenture, dated as of May 6, 1994, from
Manchester Plastics, Ltd. to Continental Bank N.A. (9)
10.11(e) Debenture Pledge Agreement, dated as of May 6,
1994, between Manchester Plastics, Ltd. and Continental
Bank N.A. (9)
10.11(f) Patent Security Agreement, dated as of May 6,
1994, between Manchester Plastics, Ltd. and Continental
Bank N.A. (9)
10.11(g)(1) Charge/Mortgage of Land, dated as of May 6,
1994, from Manchester Plastics, Ltd. to Continental
Bank N.A. concerning Gananoque and Stratford, Ontario
properties (9)
10.11(g)(2) Charge/Mortgage of Land, dated as of May 6,
1994, from Manchester Plastics, Ltd. to Continental
Bank N.A. concerning Scarborough, Ontario lease (9)
10.14 Agreement, dated as of March 4, 1994, among
Larizza Industries, Inc., Internationale Nederlanden
(U.S.) Capital Corporation and Oppenheimer & Co.,
Inc., concerning expenses of the public offering (8)
10.15 Stock Purchase Agreement, dated October 13,
1994, among Larizza Industries,Inc., and Diane M.
Buzzitta Trust, Phillip F. Wood, Trustee, Diane M.
Buzzitta, Louis V. Buzzitta, Joseph T. Buzzitta and
James V. Buzzitta, LVB Industries, Inc. and Hughes
Plastics, Inc. (13)
10.15(a) Guarantee, dated as of October 21, 1994, by
Hughes Plastics, Inc., in favor of Bank of America
Illinois and other Banks (13)
10.15(b) Security Agreement, dated as of October 21,
1994, between Hughes Plastics, Inc. and Bank of America
Illinois (13)
-17-
<PAGE> 19
10.15(c) Subordinated Note, dated as of October 20,
1994, in the amount of $1,200,000 from Larizza
Industries, Inc. to Louis V. Buzzitta (13)
10.15(d) Subordinated Note, dated as of October 20,
1994, in the amount of $500,000 from Larizza
Industries, Inc. to Louis V. Buzzitta (13)
21 Subsidiaries of the Registrant
23 Consent of KPMG Peat Marwick
24 Powers of Attorney
27 Financial Data Schedule
(b) Reports on Form 8-K filed during Fourth Quarter:
None.
(c) Exhibits:
The response to this portion of Item 14 is submitted as a separate section
of this Report.
(d) Financial Statement Schedules:
Not applicable
___________________________
Key to Footnotes:
(1) Incorporated by reference from the same exhibit number to Amendment
No. 1 to the Company's Registration Statement on Form S-1 (file no.
33-15198), filed with the Securities and Exchange Commission on July
28, 1987.
(2) Incorporated by reference from the same exhibit number to the
Company's Form 10-K Annual Report for the fiscal year ended December
31, 1987.
(3) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended March 31, 1991.
(4) Incorporated by reference from the same exhibit number to the
Company's Form 10-K Annual Report for the fiscal year ended December
31, 1991.
(5) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended June 30, 1992.
(6) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended March 31, 1993.
(7) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended June 30, 1993.
(8) Incorporated by reference from the same exhibit number to the
Company's Form 10-K Annual Report for the fiscal year ended December
31, 1993.
(9) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended March 31, 1994.
-18-
<PAGE> 20
(10) Incorporated by reference from the same exhibit number to the
Company's Registration Statement on Form S-1 (file no. 33-52641),
filed with the Securities and Exchange Commission on March 11, 1994.
(11) Incorporated by reference from exhibit number 10.9(c) to Amendment No.
3 to the Company's Registration Statement on Form S-1 (file no.
33-52641), filed with the Securities and Exchange Commission on May 2,
1994.
(12) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended June 30, 1994.
(13) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended September 30, 1994.
-19-
<PAGE> 21
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.
LARIZZA INDUSTRIES, INC.
By: /s/ Terence C. Seikel
------------------------------
March 13, 1995 Terence C. Seikel
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Ronald T. Larizza * President and Director
--------------------------- (Principal Executive Officer) March 13, 1995
Ronald T. Larizza
/s/ Edward L. Sawyer, Jr. * Chairman of the Board March 13, 1995
--------------------------- of Directors
Edward L. Sawyer, Jr.
/s/ Edward W. Wells * Chief Operating March 13, 1995
--------------------------- Officer and Director
Edward W. Wells
/s/ Terence C. Seikel Chief Financial Officer March 13, 1995
---------------------------- (Principal Financial Officer)
Terence C. Seikel
/s/ Mary Jane Vicary * Controller March 13, 1995
---------------------------
Mary Jane Vicary
/s/ Frank E. Blazey, Jr. * Director March 13, 1995
---------------------------
Frank E. Blazey, Jr.
/s/ Arthur L. Wiseley * Director March 13, 1995
---------------------------
Arthur L. Wiseley
/s/ Terence C. Seikel March 13, 1995
---------------------------
*Terence C. Seikel
As attorney-in-fact pursuant
to Powers of Attorney
</TABLE>
-20-
<PAGE> 22
Independent Auditors' Report
The Shareholders and Board of Directors
Larizza Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Larizza
Industries, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for each of the years in the three-year period ended December
31, 1994. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated 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 misstatements. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Larizza Industries,
Inc. and subsidiaries at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in notes 1 and 8 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
KPMG Peat Marwick LLP
Detroit, Michigan
February 9, 1995
-21-
<PAGE> 23
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(In thousands, except share data)
<TABLE>
<CAPTION>
Assets 1994 1993
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 794 559
Accounts receivable, less allowance of $393 in 1994 and
$394 in 1993 26,363 20,426
Inventories 8,601 7,268
Reimbursable tooling costs 4,810 2,178
Net current assets of discontinued operations 1,624 1,627
Deferred income taxes 734 -
Other current assets 1,239 625
--------- -------
Total current assets 44,165 32,683
Net property, plant and equipment 29,487 26,116
Notes receivable from principal shareholders 2,264 2,136
Goodwill and other intangibles, net 7,416 2,782
Net noncurrent assets of discontinued operations 122 137
--------- -------
$ 83,454 63,854
========= =======
Liabilities and Shareholders' Equity (Deficit)
----------------------------------------------
Current liabilities:
Current installments of long-term debt and capitalized lease
obligation $ 2,101 4,679
Accounts payable, trade 20,064 14,267
Income taxes payable 6,954 1,008
Accrued salaries and wages 2,047 1,469
Accrual for loss on sale of discontinued operations 2,331 2,118
Other accrued expenses 7,020 4,863
--------- -------
Total current liabilities 40,517 28,404
========= =======
Long-term debt, excluding current installments 30,000 81,460
Capitalized lease obligation, excluding current installments 510 780
Deferred gain on debt restructure - 6,097
Deferred income taxes 315 1,400
Accrued interest - 8,463
Accrued pension liability and other long-term liabilities 1,931 1,323
Shareholders' equity (deficit):
Preferred stock, no par value; authorized 10,000,000 shares,
no shares issued - -
Common stock, no par value; authorized 50,000,000 shares,
issued and outstanding 22,088,107 shares in 1994 and
13,805,067 shares in 1993 76,780 17,202
Additional paid-in capital 5,551 5,551
Accumulated deficit (67,484) (83,873)
Foreign currency translation adjustment (4,666) (2,953)
--------- -------
Total shareholders' equity (deficit) 10,181 (64,073)
--------- -------
Commitments and contingencies
$ 83,454 63,854
========= =======
</TABLE>
See accompanying notes to consolidated financial statments.
-22-
<PAGE> 24
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1994, 1993 and 1992
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales $169,336 148,257 111,307
Cost of goods sold 133,870 115,660 92,036
-------- ------- -------
Gross profit 35,466 32,597 19,271
-------- ------- -------
Expenses:
Selling expenses 4,446 3,543 2,757
General and administrative expenses 8,988 7,957 8,178
-------- ------- -------
13,434 11,500 10,935
-------- ------- -------
Operating income 22,032 21,097 8,336
-------- ------- -------
Other income (expense):
Interest income 574 219 165
Interest expense (3,467) (6,520) (7,128)
Other, net (55) (339) 108
-------- ------- -------
(2,948) (6,640) (6,855)
-------- ------- -------
Income before income tax provision and extraordinary gain 19,084 14,457 1,481
Income tax provision 5,100 2,070 -
-------- ------- -------
Income before extraordinary gain 13,984 12,387 1,481
Extraordinary gain on extinguishment of debt - - 711
Extraordinary gain on refinancing of debt 2,405 - -
-------- ------- -------
Net income $ 16,389 12,387 2,192
======== ======= ========
Income per common share:
Primary:
Income before extraordinary gain $.68 .90 .11
Extraordinary gain .12 - .05
---- -- ---
Net income $.80 .90 .16
==== === ===
Fully diluted:
Income before extraordinary gain $.66 .72
Extraordinary gain .11 -
---- --
Net income $.77 .72
==== ===
Weighted average number of shares of common stock outstanding:
Primary 20,522 13,805 13,805
Fully diluted 22,088 22,088
</TABLE>
See accompanying notes to consolidated financial statements.
- 23 -
<PAGE> 25
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficit)
Years ended December 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Foreign Total
Additional Currency Shareholders'
Common Paid-in Accumulated Translation Equity
Stock Capital Deficit Adjustment (Deficit)
----- ------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $17,202 5,551 (98,452) 1,083 (74,616)
Net income - - 2,192 - 2,192
Foreign currency translation adjustment - - - (2,758) (2,758)
------- ----- ------ ------ -------
Balance at December 31, 1992 17,202 5,551 (96,260) (1,675) (75,182)
Net income - - 12,387 - 12,387
Foreign currency translation adjustment - - - (1,278) (1,278)
------- ----- ------- ------ -------
Balance at December 31, 1993 17,202 5,551 (83,873) (2,953) (64,073)
Net income - - 16,389 - 16,389
Conversion of debt to equity 59,578 - - - 59,578
Foreign currency
translation adjustment - - (1,713) (1,713)
------- ----- ------- ------ -------
Balance at December 31, 1994 $76,780 5,551 (67,484) (4,666) 10,181
======= ===== ======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
- 24 -
<PAGE> 26
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $16,389 12,387 2,192
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 4,268 4,117 4,175
Deferred income taxes (909) 1,400 -
(Gain) loss on disposal of property, plant and equipment (246) 368 44
Foreign exchange (gain) loss 108 (32) (303)
Amortization of deferred gain (368) (1,342) (1,382)
Extraordinary gain on extinguishment of debt - - (711)
Extraordinary gain on refinancing of debt (2,405) - -
Increase in accrued interest 791 4,174 4,186
Changes in assets and liabilities, net of purchase of business:
Accounts receivable (3,430) (1,414) (8,769)
Inventories (308) (1,288) (17)
Other current assets (4,516) (1,183) 305
Accounts payable and accrued liabilities 9,670 854 433
------- ------- ------
Cash provided by operating activities 19,044 18,041 153
------- ------- ------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 490 - 53
Cost of acquisition, net of cash acquired (5,284) - -
Capital expenditures (6,094) (2,999) (3,163)
Other, net (128) (177) (172)
------- ------- ------
Cash used for investing activities (11,016) (3,176) (3,282)
------- ------- ------
Cash flows from financing activities:
Proceeds from issuance of debt 36,000 - 1,075
Repayments of debt (43,257) (13,489) (660)
Other, net - (743) (490)
------- ------- ------
Cash used for financing activities (7,257) (14,232) (75)
------- ------- ------
Effect of exchange rates on cash (536) (563) (406)
------- ------- ------
Net increase (decrease) in cash and cash equivalents 235 70 (3,610)
Cash and cash equivalents at beginning of year 559 489 4,099
------- ------- ------
Cash and cash equivalents at end of year $ 794 559 489
======= ======= ======
Supplemental cash flow disclosures:
Interest paid $ 1,998 3,501 4,071
Income taxes paid 902 1,112 570
Supplemental schedule of noncash investing and
financing activities:
Asset acquired and obligation incurred under
capital lease $ - - 1,426
Conversion of debt to equity 59,578 - -
</TABLE>
See accompanying notes to consolidated financial statements.
- 25 -
<PAGE> 27
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of
Larizza Industries, Inc. and its wholly owned subsidiaries
("Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
(b) Foreign Currency Translation
The Company translates the foreign currency financial
statements of its Canadian operations by translating balance
sheet accounts at the exchange rate prevailing at year-end and
income statement accounts at the average exchange rate for the
year. Gains or losses resulting from translating foreign
currency financial statements are recorded in a separate
component of shareholders' equity (deficit). Gains or losses
resulting from foreign currency transactions are included in
net earnings.
(c) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
(d) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
is calculated on the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are
amortized on the straight-line method over the shorter of the
remaining lease terms or estimated useful lives of the
improvements. Amortization of capitalized leases is included
with depreciation expense. Property, plant and equipment held
for sale are stated at their estimated net realizable value,
and accordingly, are no longer depreciated.
(e) Goodwill and Other Intangibles
Goodwill represents the excess of purchase price over the fair
value of net assets of acquired companies at the dates of
acquisition. Goodwill is amortized on a straight-line basis
over 30 years. Net goodwill was $5,763,000 and $1,486,000 at
December 31, 1994 and 1993, respectively, and accumulated
amortization was $496,000 and $408,000 at December 31, 1994 and
1993, respectively.
Other intangibles represents an intangible asset recorded in
conjunction with SFAS No. 87, Employers' Accounting for
Pensions, as discussed in Note 9.
- 26 -
<PAGE> 28
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
(f) Income Taxes
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standard (SFAS) No. 109, Accounting for
Income Taxes, which requires the use of the asset and liability
method of accounting for deferred income taxes.
The provision for income taxes includes federal and foreign
income taxes currently payable and those deferred because of
temporary differences between the financial statement and tax
bases of assets and liabilities. The Company has not provided
for federal income taxes on the undistributed earnings of its
Canadian subsidiary because they are reinvested and not
expected to be remitted to the parent company.
(g) Income Per Share of Common Stock
Primary income per common share is calculated by dividing net
income by the weighted average number of common shares
outstanding during the period.
On a fully diluted basis, both net income and shares
outstanding are adjusted to assume the conversion of the
convertible term loan of $47,000,000 plus accrued interest into
8,283,040 shares of common stock at the beginning of the
period. To adjust net income for 1994 and 1993, interest
expense of $791,000 and $4,174,000, respectively, related to
the convertible term loan, less $144,000 and $694,000,
respectively, of amortization of deferred gain on debt
restructure, was added back into income. Such conversion was
not dilutive during the year ended December 31, 1992.
(h) Cash and Cash Equivalents/Consolidated Statements of Cash Flows
The Company considers highly liquid investments with a maturity
at the time of purchase of three months or less to be cash
equivalents.
(i) Pensions and Post Retirement Benefit Plans
The Company has three defined benefit pension plans covering
certain of its salaried and hourly employees. Pension expense
is determined pursuant to the provisions of SFAS No. 87,
Employers' Accounting for Pensions. Benefits are based upon
either employee years of service and compensation or stated
dollar amounts per years of service. Contributions to the
plans are based upon the recommendation of the Company's
actuaries, and past service costs are funded over 15 years.
Contributions are intended to provide not only for benefits
for service to date, but also for those expected to be earned
in the future.
The Company does not currently provide medical benefits to
retirees.
- 27 -
<PAGE> 29
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Acquisition
On October 20, 1994, the Company purchased all of the outstanding
stock of LVB Industries, Inc., and then merged LVB Industries, Inc.,
into its wholly-owned subsidiary Hughes Plastics, Inc. The
approximate purchase price of $5,289,000, including liabilities
assumed and net of cash acquired, is subject to adjustment and
exceeded the fair value of the net assets acquired by $4,450,000.
The acquisition has been accounted for by the purchase method of
accounting, and accordingly, the results of Hughes Plastics, Inc.,
have been included in the consolidated operating results since the date
of acquisition.
The following unaudited pro forma consolidated results of operations
gives effect to the acquisition of LVB Industries, Inc., as though it
happened January 1, 1993. This pro forma information is not
necessarily indicative of what would have occurred had the acquisition
taken place at the beginning of 1993.
<TABLE>
<CAPTION>
(In thousands,
except per share data)
1994 1993
---- ----
<S> <C> <C>
Net sales $181,992 163,264
Income before extraordinary gain 12,099 11,338
Net income 14,504 11,338
Per share:
Primary:
Income before extraordinary gain $ .59 .82
Net income $ .71 .82
Fully diluted:
Income before extraordinary gain $ .58 .67
Net income $ .69 .67
</TABLE>
(3) Discontinued Operations
Effective on December 31, 1990, the Company adopted a plan to divest
General Nuclear Corporation, a wholly-owned subsidiary, operating in
the defense industry. General Nuclear, which is being held for sale,
has been accounted for as a discontinued operation in the accompanying
consolidated financial statements and its net assets have been written
down to their estimated net realizable value. The sales of General
Nuclear were $3,831,000, $3,323,000, and $3,860,000 in 1994, 1993 and
1992, respectively.
- 28 -
<PAGE> 30
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Discontinued Operations, Continued
At December 31, 1994 and 1993, the composition of the net
current and net noncurrent assets of the discontinued
operations is as follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1993
---- ----
<S> <C> <C>
Net current assets of discontinued operations:
Current assets $ 1,842 1,893
Current liabilities (218) (266)
--------- -------
$ 1,624 1,627
========= =======
Net noncurrent assets of discontinued operations:
Property and equipment, net $ 617 821
Noncurrent liabilities (495) (684)
--------- -------
$ 122 137
========= =======
</TABLE>
(4) Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1993
---- ----
<S> <C> <C>
Raw materials $4,302 4,428
Work in process 1,992 1,032
Finished goods 2,307 1,808
------ -----
$8,601 7,268
====== =====
</TABLE>
(5) Property, Plant and Equipment
Property, plant and equipment is comprised of:
<TABLE>
<CAPTION>
(In thousands)
1994 1993
---- ----
<S> <C> <C>
Land $ 337 332
Buildings 9,832 9,724
Machinery and equipment 37,594 33,962
Furniture and fixtures 2,457 1,838
Transportation equipment 1,191 741
Leasehold improvements 836 142
Construction in progress 719 239
-------- -------
52,966 46,978
Less accumulated depreciation and amortization 23,479 20,862
-------- ------
$ 29,487 26,116
======== ======
</TABLE>
- 29 -
<PAGE> 31
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Property, Plant and Equipment, Continued
Included in property, plant and equipment in 1994 and 1993 is a
building held for sale with a net book value of $400,000.
Included in property, plant and equipment in 1994 are assets
under a capitalized lease obligation with a cost of $1,395,000
and accumulated amortization of $315,000.
(6) Long-term Debt and Conversion
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1993
---- ----
<S> <C> <C>
Term loans $13,125 35,625
Convertible term loan - 47,000
Revolving credit facilities 18,750 3,300
------- -------
31,875 85,925
Less current installments 1,875 4,465
------- -------
$30,000 81,460
======= =======
</TABLE>
On March 11, 1994, the holders of the convertible term loan
converted $47,000,000 in principal and $9,254,000 of accrued
interest related to the convertible term loan into 8,283,040
shares of common stock. The conversion reduced long-term
debt, accrued interest and deferred gain on debt restructure
on the Company's balance sheet as of March 11, 1994 by
$47,000,000, $9,254,000 and $3,324,000, respectively, and
increased common stock by $59,578,000.
On May 6, 1994, the Company signed a $50,000,000 credit
facility agented by Bank of America Illinois (formerly
Continental Bank N.A.). The initial borrowing of $36,000,000
consisted of $35,600,000 used to repay existing indebtedness
and $400,000 used to pay various loan fees and expenses.
- 30 -
<PAGE> 32
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Long-term Debt and Conversion, Continued
The new facility includes a $27,000,000 revolving line of
credit for the Company, of which $17,750,000 was outstanding
on December 31, 1994, and an $8,000,000 revolving line of
credit for tooling and capital equipment for the Company, of
which $1,000,000 was outstanding at December 31, 1994. The
amount available under the $27,000,000 line of credit is
reduced by $250,000 at the end of each quarter in 1994
(beginning June 30, 1994) and $1,250,000 at the end of each
subsequent quarter during the term of the loan. Both lines of
credit expire May 6, 1997. Interest on the loans is based on
Eurodollar rates or the bank's reference rate, plus a margin
which can vary each quarter based on specified financial
covenants. The margins at December 31, 1994 were 1.75 percent
for Eurodollar loans and 0 percent for reference rate loans.
The weighted average interest rate at December 31, 1994 was
7.66 percent. The line of credit also requires the Company to
pay a commitment fee of .375 percent a year on the average
unused amount of the facility. Interest and the commitment
fee are payable quarterly, or in the case of Eurodollar loans
on their due date, but not less often than quarterly. The
revolving line of credit is also available for letters of
credit in amounts not to exceed $2,000,000. The Bank issued a
$500,000 (Canadian) letter of credit securing checking account
overdrafts. Both lines of credit are secured by all of the
assets of the Company including the stock of its subsidiaries
and the assets of Hughes Plastics, Inc.
In addition, the new facility includes a $15,000,000 term loan
to Manchester Plastics, Ltd., the Company's Canadian
subsidiary, secured by all of its assets, of which $13,125,000
was outstanding on December 31, 1994. The loan is payable in
four quarterly installments of $937,500 from June 30, 1994,
through March 31, 1995, with the balance due May 7, 1999.
Interest on the loan is based on Eurodollar rates or the
bank's reference rate, plus a margin which varies each quarter
based on Manchester Plastics' net worth. The margins at
December 31, 1994 were 3.50 percent for Eurodollar loans and
1.75 percent for reference rate loans. The weighted average
interest rate at December 31, 1994 was 9.26 percent. Interest
is payable quarterly, or in the case of Eurodollar loans on
their due date, but not less often than quarterly.
The loans to the Company and to Manchester Plastics, Ltd.,
contain various covenants, the most restrictive of which
include limits on the disposition of properties, limits on
capital expenditures, maintenance of certain financial levels
and ratios and restrictions on additional indebtedness and on
the payment of dividends. The Company was in compliance with
all such covenants at December 3l, 1994, and expects to be in
compliance throughout 1995.
Accrued interest of $8,821,000 which was owed to the banks on
December 23, 1991 was unconditionally forgiven by the banks.
This amount was recorded as a deferred gain on debt
restructure. During 1994, 1993 and 1992 $368,000, $1,342,000
and $1,382,000, respectively, of deferred gain on debt
restructure was amortized and netted against interest expense.
On May 6, 1994, when the Company refinanced its debt, the
remaining deferred gain on debt restructure of $2,405,000 was
recorded as an extraordinary gain.
During 1992, the Company extinguished long-term debt in the
amount of $906,000 for a cash payment of $195,000 resulting in
a gain of $711,000 which is recorded as an extraordinary gain.
- 31 -
<PAGE> 33
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Long-term Debt and Conversion, Continued
Aggregate principal payments due on long-term debt for the
next five years are as follows: 1995 - $1,875,000; 1996 -
$1,500,000; 1997 - $17,250,000; 1998 - $0; 1999 - $11,250,000.
(7) Leases
The Company leases a portion of its operating facilities and
equipment. Aggregate future minimum lease payments under all
noncancelable leases at December 31, 1994, are as follows:
<TABLE>
<CAPTION>
(In thousands)
Capital Operating
Year Leases Leases
---- ------ ------
<S> <C> <C>
1995 $297 1,569
1996 297 1,490
1997 269 1,330
1998 - 1,185
1999 - 1,087
---- -----
863 6,661
=====
Less amounts representing interest 127
----
Present value of minimum lease payments 736
Less current installments 226
----
Long-term obligation $510
====
</TABLE>
Rent expense for operating leases amounted to $1,344,000, $1,305,000
and $1,209,000 in 1994, 1993 and 1992, respectively.
(8) Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. The
statement requires the use of the asset and liability approach for
financial accounting and reporting for income taxes. Financial
statements for prior years have not been restated as the cumulative
effect of the accounting change had no impact.
Income (loss) before income tax provision and extraordinary gain is as
follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
United States $ 3,008 (2,250) (2,037)
Canada 16,076 16,707 3,518
------- ------ -----
$19,084 14,457 1,481
======= ====== =====
</TABLE>
- 32 -
<PAGE> 34
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Income Taxes, Continued
The income tax provision (benefit) before extraordinary gain is
summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current:
United States $ 273 184 -
Canada 5,736 450 -
State - 36 -
------ ----- -----
6,009 670 -
------ ----- -----
Deferred:
United States (984) - -
Canada 75 1,400 -
State - - -
------ ----- -----
(909) 1,400 -
------ ----- -----
Total $5,100 2,070 -
====== ===== =====
</TABLE>
A reconciliation between the provision for income taxes before
extraordinary gain and income taxes on such income calculated at the
United States statutory rate of 35 percent for 1994 and 1993, and 34
percent for 1992 is as follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income tax at statutory rate $6,679 5,060 504
Amortization of intangibles (712) (712) 24
Difference in tax rates of consolidated foreign
subsidiaries 160 334 141
Canadian and United States net operating loss
carryforwards (864) (6,387) (663)
Deemed dividend from Canadian subsidiary - 3,510 -
Other (163) 265 (6)
------ ----- ----
Income tax at effective rate $5,100 2,070 -
====== ===== ====
</TABLE>
- 33 -
<PAGE> 35
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Income Taxes, Continued
The tax effected temporary differences and United States net operating
and capital loss carryforwards which give rise to deferred tax assets
and liabilities at December 31, 1994 and 1993 are summarized as
follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1993
---- ----
<S> <C> <C>
Deferred tax assets:
United States capital loss carryforwards $5,236 5,322
United States net operating loss carryforwards 3,359 2,550
Interest forgiveness income - 2,073
Accruals for discontinued operations 1,000 1,012
Miscellaneous accrued liabilities 585 435
Other 450 391
------ ------
10,630 11,783
Less valuation allowance 8,546 11,348
------ ------
2,084 435
Deferred tax liability:
Depreciation and amortization (1,665) (1,835)
------ ------
Net deferred tax asset (liability) $ 419 (1,400)
====== =======
</TABLE>
A valuation allowance has been recognized to offset the deferred tax
assets related to operations in the United States due to the
uncertainty of realizing the benefit of the United States net
operating loss and capital loss carryforwards and deductible temporary
differences in the future. The net change in the valuation allowance
from $11,348,000 at December 31, 1993 to $8,546,000 at December 31,
1994 was a decrease of $2,802,000 which related primarily to the
reversal of the temporary difference provided for interest forgiveness
income in 1993.
At December 31, 1994, the Company has net operating loss carryforwards
of $7,500,000 for United States income tax purposes, which expire from
2005 to 2009. Net operating loss carryforwards for Canadian tax
purposes of $9,400,000 at December 31, 1992, were fully utilized in
1993 to reduce Canadian taxable income. As a result of the Hughes
Plastics, Inc. acquisition, there is an estimated $2,400,000 of net
operating loss carryforwards subject to the separate return limitation
year provisions. In addition, the Company has capital loss
carryforwards for United States tax purposes of $15,400,000 which
expire in 1996.
- 34 -
<PAGE> 36
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Employee Pension Plans
The Company has three defined benefit pension plans covering certain
of its salaried and hourly employees. In accordance with SFAS No.
87, Employers' Accounting for Pensions, the Company recorded a minimum
pension liability of $1,653,000 and $1,296,000 at December 31, 1994
and 1993, respectively. This liability represents the excess of
unfunded accumulated benefit obligations over accrued pension cost.
The minimum liability was offset by an intangible asset which is
amortized on a straight line basis over 16 years. There was no effect
on net income.
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheet at December 31,
1994 and 1993:
<TABLE>
<CAPTION>
(In thousands)
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, fully vested $5,071 4,520
====== =====
Projected benefit obligation (5,659) (5,125)
Fair value of plan assets 4,262 4,023
------ -----
Excess of projected benefit obligation over plan assets (1,397) (1,102)
Unamortized initial net liability 1,528 1,235
Other 117 35
------ ------
Prepaid pension costs $ 248 168
====== ======
</TABLE>
Net periodic pension costs for the years ended December 31, 1994 and
1993, are:
<TABLE>
<CAPTION>
(In thousands)
1994 1993
---- ----
<S> <C> <C>
Service cost $289 277
Interest cost 396 370
Actual return on plan assets (339) (291)
Net amortization and deferral 133 120
---- ---
$479 476
==== ===
Assumptions:
Discount rate 7.5% 7.5%
Average wage increase 6.5% 6.5%
Long-term rate of return on plan assets 8.5% 8.5%
</TABLE>
- 35 -
<PAGE> 37
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Related Party Transactions
Notes receivable from principal shareholders include $2,264,000 and
$2,136,000 of interest-bearing notes due from principal shareholders
at December 31, 1994 and 1993, respectively. During 1993, notes
receivable from principal shareholders were replaced with new notes.
These new notes bear interest at 5.97% and are payable in annual
installments beginning in 1996. Interest charged by the Company to
principal shareholders was $128,000, $155,000 and $141,000 in 1994,
1993 and 1992, respectively.
Amounts charged to the Company by a prior director of the Company for
sales commissions were $2,420,000, $2,173,000 and $1,380,000 during
1994, 1993 and 1992, respectively. Amounts paid by the Company to a
certain director for consulting services were $340,000, $50,000 and
$50,000 during 1994, 1993 and 1992, respectively.
(11) Litigation
The Company and its consolidated subsidiaries have various pending
lawsuits and claims. In the opinion of management, the ultimate
liabilities resulting from such lawsuits and claims will not
materially affect the consolidated financial position of the Company.
(12) Segment and Geographic Information
The Company operates in the automotive industry, where it designs and
manufactures plastic-based components and systems used in the
interiors of automobiles, light trucks, sport utility vehicles and
mini-vans.
Net sales to major customers are as follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
General Motors Corporation $ 59,000 51,300 45,200
Chrysler Corporation 48,700 41,100 20,800
Ford Motor Company 32,500 32,400 26,500
Honda Motor Company 16,700 14,400 8,400
</TABLE>
- 36 -
<PAGE> 38
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Segment and Geographic Information, Continued
Information about the Company's operations by geographic area is as
follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C> <C>
Net sales:
United States $ 66,800 53,672 34,978
Canada 102,536 94,585 76,329
------- ------- -------
Consolidated $ 169,336 148,257 111,307
======= ======= =======
Operating income:
United States $ 7,324 8,106 1,473
Canada 20,697 18,746 11,814
General corporate expenses (5,989) (5,755) (4,951)
-------- ------- -------
Consolidated $ 22,032 21,097 8,336
========= ======= ======
Identifiable assets:
United States $ 37,557 28,557 26,210
Canada 41,180 36,441 32,992
Corporate assets 4,967 (1,144) 3,455
--------- ------- ------
Consolidated $ 83,704 63,854 62,657
============ ======= =======
</TABLE>
The Company holds some degree of credit risk due to the concentration
of trade accounts receivable due from major customers. Receivables
from these customers at December 31, 1994 and 1993 approximate the
same percent of total receivables as aggregate sales to these
customers bear to total sales. Transfers between geographic areas and
export sales are immaterial. Identifiable assets are those used in
the operation of each geographic area. Corporate assets consist
primarily of cash, prepaid expenses, transportation equipment and
notes receivable from officers.
(13) Stock Incentive Plan
The 1987 Stock Incentive Plan authorizes the granting of incentive and
nonqualified stock options, stock appreciation rights and restricted
shares of common stock. Participation in the Plan is limited to
employees, including officers and directors of the Company. Under the
Plan, a maximum of 200,000 shares of common stock may be made the
subject of options, stock appreciation rights or restricted stock
grants.
The per share purchase price of the common stock under options is
determined by the Compensation Committee and, in the case of incentive
stock options, must be at least 100 percent (110 percent in the case
of 10 percent shareholders) of the fair market value of one share of
common stock on the date of grant of such option. Stock appreciation
rights may either be granted independently or in conjunction with the
grant of a stock option. Each stock option or appreciation right
shall be exercisable at any such time as may be determined by the
Compensation Committee at the time of grant. Each option and
appreciation right shall expire not more than ten years from the date
of grant.
- 37 -
<PAGE> 39
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) Stock Incentive Plan, Continued
Under the Plan, the Compensation Committee may also grant shares of
restricted stock to participants. The Compensation Committee shall
establish the restricted period at the time the shares are awarded.
The shares of restricted stock may not be sold, assigned, transferred,
pledged, hypothecated or otherwise encumbered during the restricted
period.
On December 31, 1994, no options were outstanding and 200,000 shares
were available for grant.
(14) Quarterly Data (Unaudited)
Summarized quarterly financial data for 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands, except per-share data)
Quarter
--------------------------------------------------
1994 First Second Third Fourth Year
---- ----- ------ ----- ------ ----
<S> <C> <C> <C> <C>
Net sales $41,061 42,779 37,673 47,823 169,336
Gross profit 8,887 9,931 7,339 9,309 35,466
Income before
extraordinary gain 3,399 4,370 2,748 3,467 13,984
Extraordinary gain - 2,405 - - 2,405
------- -------- -------- ------- --------
Net income $ 3,399 6,775 2,748 3,467 16,389
======= ======== ======== ======= ======
Income per common share:
Primary:
Income before
extraordinary gain .22 .20 .12 .16 .68
Extraordinary gain - .11 - - .12
-- --- -- -- ---
Net income .22 .31 .12 .16 .80
=== === === === ===
Fully diluted:
Income before
extraordinary gain .19 n/a n/a n/a .66
Extraordinary gain - .11
-- ---
Net income .19 .77
=== ===
</TABLE>
- 38 -
<PAGE> 40
LARIZZA INDUSTRIES, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) Quarterly Data (Unaudited), Continued
<TABLE>
<CAPTION>
1993 First Second Third Fourth Year
---- ----- ------ ----- ------ ----
<S> <C> <C> <C> <C> <C>
Net sales $ 39,615 39,390 31,144 38,108 148,257
Gross profit 8,942 9,183 5,767 8,705 32,597
Net income 4,174 4,749 1,561 1,903 12,387
Income per common share:
Primary .30 .34 .11 .14 .90
Fully diluted .23 .25 n/a .13 .72
</TABLE>
- 39 -
<PAGE> 41
EXHIBITS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
3(i) Amended Articles of Incorporation (5) N/A
3(ii) Amended Code of Regulations (1) N/A
4.1 Specimen of Common Stock (1) N/A
4.2 Loan Agreements, see Exhibits 10.10(a) through 10.11(g)(2), 10.15(a) and N/A
10.15(b)
9 Voting Trust Agreement among Larizza Industries, Inc., Ronald T. Larizza N/A
and Edward L. Sawyer, Jr., dated as of December 20, 1991 (4)
9.1 Amended and Restated Voting Trust Agreement among Larizza Industries, N/A
Inc., Ronald T. Larizza and the shareholders signing the agreement, dated
as of May 4, 1994 (9)
9.1(a) Amendment to Voting Trust Agreement among Larizza Industries, Inc., Ronald N/A
T. Larizza and Edward L. Sawyer, Jr., dated as of March 11, 1994 (10)
*10.1(a)(1) Promissory Note dated as of December 31, 1993, in the amount of $1,468,827 N/A
from Ronald T. Larizza to Larizza Industries, Inc., which replaces a note,
dated December 31, 1991 (8)
*10.1(a)(2) Promissory Note dated as of December 31, 1993, in the amount of $667,250 N/A
from Edward L. Sawyer, Jr. to Larizza Industries, Inc., which replaces the
note, dated December 31, 1991 (8)
10.2 Asset Sale and Purchase Agreement, dated as of May 6, 1994, between N/A
Manchester Plastics, Ltd. and Larizza Industries, Inc. (9)
10.3(c)(4) Lease between Mortall Realty Company and Dynamic Industries of Michigan N/A
Incorporated, dated March 1, 1983 (2)
10.4(a) Lease between ALBA, Inc. and Manchester Plastics, Inc., dated April 1, N/A
1990 (3)
10.5 Lease among Louis V. Buzzitta, Catherine F. Buzzitta and Hughes Plastics, N/A
Inc., dated October 20, 1994, incorporated by reference to Exhibit 10.2 to
the Company's Form 10-Q for the quarter ended September 30, 1994
10.6 Lease between Ronita Properties Limited, Larizza Industries, Inc. and N/A
Manchester Plastics, Ltd., dated as of March 23, 1993 (7)
10.6(a) Lease Amending Agreement between Ronita Properties Limited, Larizza N/A
Industries, Inc. and Manchester Plastics, Ltd., dated as of June 25, 1993
(8)
10.6(b) Lease Amending Agreement between Ronita Properties Limited, Larizza N/A
Industries, Inc. and Manchester Plastics, Ltd., dated as of February 17,
1994 (8)
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
Page
Number
EXHIBITS, CONTINUED ------
<S> <C> <C>
10.7(c) Lease dated December 29, 1986, between Sochacki Realty Partners and N/A
General Nuclear Corporation (1)
10.8(a) Amended and Restated Marketing, Selling, Administrative and Management N/A
Services Agreement, dated as of May 6, 1994, between Larizza Industries,
Inc. and Manchester Plastics, Ltd. (9)
*10.9(a)(1) Reverse Split-Dollar Agreement between Larizza Industries, Inc. and Edward N/A
Wells dated as of April 22, 1993 (6)
*10.9(a)(2) Reverse Split-Dollar Agreement between Larizza Industries, Inc. and N/A
Terence C. Seikel dated as of April 22, 1993 (6)
*10.9(a)(3) Agreement between Larizza Industries, Inc. and Steven J. Lebowski, trustee N/A
of the Larizza Family Irrevocable Trust, dated as of April 22, 1993 (6)
*10.9(a)(4) Collateral Assignment made by Steven J. Lebowski, trustee of the Larizza N/A
Family Irrevocable Trust to Larizza Industries, Inc. dated as of April 22,
1993 (6)
*10.9(a)(5) Agreement between Larizza Industries, Inc. and Steven J. Lebowski, trustee N/A
of the Larizza Family Irrevocable Trust, dated as of April 22, 1993 (6)
*10.9(a)(6) Collateral Assignment made by Steven J. Lebowski, trustee of the Larizza N/A
Family Irrevocable Trust to Larizza Industries, Inc. dated as of April 22,
1993 (6)
*10.9(b) Stock Incentive Plan for Key Employees (1) N/A
*10.9(c) Consulting Agreement, dated as of June 15, 1994 between Larizza N/A
Industries, Inc. and The Edgewater Group, Inc. (12)
*10.9(d) Finders Agreement, dated as of June 15, 1994, between Larizza Industries, N/A
Inc. and The Edgewater Group, Inc. (12)
*10.9(e) Employment Agreement, dated as of April 21, 1994, between Larizza N/A
Industries, Inc. and Ronald T. Larizza (11)
10.10(a) Credit Agreement, dated as of May 6, 1994, among Larizza Industries, Inc., N/A
various financial institutions and Continental Bank N.A. (9)
10.10(a)(1) First Amendment to Credit Agreement, dated as of June 2, 1994, among N/A
Larizza Industries, Inc., various financial institutions and Continental
Bank N.A. (12)
10.10(a)(2) Second Amendment to Credit Agreement, dated as of October 19, 1994, among N/A
Larizza Industries, Inc., various financial institutions and Bank of
America Illinois (13)
10.10(a)(3) Third Amendment to Credit Agreement, dated as of November 4, 1994, among
Larizza Industries, Inc., various financial institutions and Bank of
America Illinois
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
Page
Number
EXHIBITS, CONTINUED ------
<S> <C> <C>
10.10(b) Note, dated as of May 6, 1994, in the principal amount of $35,000,000 from N/A
Larizza Industries, Inc. to Continental Bank N.A. (9)
10.10(b)(1) Note, dated as of June 15, 1994, in the principal amount of $24,500,000 N/A
from Larizza Industries, Inc. to Continental Bank N.A. (12)
10.10(b)(2) Note, dated as of June 15, 1994, in the principal amount of $10,500,000 N/A
from Larizza Industries, Inc. to The First National Bank of Boston (12)
10.10(b)(3) Note, dated as of August 31, 1994, in the principal amount of $17,375,000 N/A
from Larizza Industries, Inc. to Continental Bank N.A. (13)
10.10(b)(4) Note, dated as of August 31, 1994, in the principal amount of $6,950,000 N/A
from Larizza Industries, Inc. to Sanwa Business Credit Corporation (13)
10.10(c) Security Agreement, dated as of May 6, 1994, between Larizza Industries, N/A
Inc. and Continental Bank N.A. (9)
10.10(d) Company Pledge Agreement, dated as of May 6, 1994, between Larizza N/A
Industries, Inc. and Continental Bank N.A. (9)
10.10(e) Form of Mortgage, Deed of Trust, Assignment of Leases and Rents, Security N/A
Agreement and Financing Statement, dated as of May 6, 1994, between
Larizza Industries, Inc., and Continental Bank N.A. covering properties
located in Manchester, Ann Arbor, Homer and Willamston, Michigan (9)
10.11(a) Credit Agreement, dated as of May 6, 1994, among Manchester Plastics, N/A
Ltd., various financial institutions and Continental Bank N.A (9)
10.11(a)(1) First Amendment to Credit Agreement, dated as of June 2, 1994, among N/A
Manchester Plastics, Ltd., various financial institutions and Continental
Bank N.A. (12)
10.11(b) Note, dated as of May 6, 1994, in the principal amount of $15,000,000 from N/A
Manchester Plastics, Ltd. to Continental Bank N.A. (9)
10.11(b)(1) Note, dated as of June 15, 1994, in the principal amount of $10,500,000 N/A
from Manchester Plastics, Ltd. to Continental Bank N.A. (12)
10.11(b)(2) Note, dated as of June 15, 1994, in the principal amount of $4,500,000 N/A
from Manchester Plastics, Ltd. to The First National Bank of Boston (12)
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
Page
Number
EXHIBITS, CONTINUED ------
<S> <C> <C>
10.11(b)(3) Note, dated as of August 31, 1994, in the principal amount of $7,031,250 N/A
from Manchester Plastics, Ltd. to Continental Bank N.A. (13)
10.11(b)(4) Note, dated as of August 31, 1994, in the principal amount of $2,812,500 N/A
from Manchester Plastics, Ltd. to Sanwa Business Credit Corporation (13)
10.11(c) General Security Agreement, dated as of May 6, 1994, between Manchester N/A
Plastics, Ltd. and Continental Bank N.A. (9)
10.11(d) Demand Debenture, dated as of May 6, 1994, from Manchester Plastics, Ltd. N/A
to Continental Bank N.A. (9)
10.11(e) Debenture Pledge Agreement, dated as of May 6, 1994, between Manchester N/A
Plastics, Ltd. and Continental Bank N.A. (9)
10.11(f) Patent Security Agreement, dated as of May 6, 1994, between Manchester N/A
Plastics, Ltd. and Continental Bank N.A. (9)
10.11(g)(1) Charge/Mortgage of Land, dated as of May 6, 1994, from Manchester N/A
Plastics, Ltd. to Continental Bank N.A. concerning Gananoque and
Stratford, Ontario properties (9)
10.11(g)(2) Charge/Mortgage of Land, dated as of May 6, 1994, from Manchester N/A
Plastics, Ltd. to Continental Bank N.A. concerning Scarborough, Ontario
lease (9)
10.14 Agreement, dated as of March 4, 1994, among Larizza Industries, Inc., N/A
Internationale Nederlanden (U.S.) Capital Corporation and Oppenheimer &
Co., Inc., concerning expenses of the public offering (8)
10.15 Stock Purchase Agreement, dated October 13, 1994, among Larizza N/A
Industries, Inc., and Diane M. Buzzitta Trust, Phillip F. Wood, Trustee,
Diane M. Buzzitta, Louis V. Buzzitta, Joseph T. Buzzitta and James V.
Buzzitta, LVB Industries, Inc. and Hughes Plastics, Inc. (13)
10.15(a) Guarantee, dated as of October 21, 1994, by Hughes Plastics, Inc., in N/A
favor of Bank of America Illinois and other Banks (13)
10.15(b) Security Agreement, dated as of October 21, 1994, between Hughes Plastics, N/A
Inc. and Bank of America Illinois (13)
10.15(c) Subordinated Note, dated as of October 20, 1994, in the amount of N/A
$1,200,000 from Larizza Industries, Inc. to Louis V. Buzzitta (13)
10.15(d) Subordinated Note, dated as of October 20, 1994, in the amount of $500,000 N/A
from Larizza Industries, Inc. to Louis V. Buzzitta (13)
21 Subsidiaries of the Registrant
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
Page
Number
EXHIBITS, CONTINUED ------
<S> <C>
23 Consent of KPMG Peat Marwick
24 Powers of Attorney
27 Financial Data Schedule
</TABLE>
________________
Key to Footnotes
(1) Incorporated by reference from the same exhibit number to Amendment
No. 1 to the Company's Registration Statement on Form S-1 (file no.
33-15198), filed with the Securities and Exchange Commission on July
28, 1987.
(2) Incorporated by reference from the same exhibit number to the
Company's Form 10-K Annual Report for the fiscal year ended December
31, 1987.
(3) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended March 31, 1991.
(4) Incorporated by reference from the same exhibit number to the
Company's Form 10-K Annual Report for the fiscal year ended December
31, 1991.
(5) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended June 30, 1992.
(6) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended March 31, 1993.
(7) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended June 30, 1993.
(8) Incorporated by reference from the same exhibit number to the
Company's Form 10-K Annual Report for the fiscal year ended December
31, 1993.
(9) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended March 31, 1994.
(10) Incorporated by reference from the same exhibit number to the
Company's Registration Statement on Form S-1 (file no. 33-52641),
filed with the Securities and Exchange Commission on March 11, 1994.
(11) Incorporated by reference from exhibit number 10.9(c) to Amendment No.
3 to the Company's Registration Statement on Form S-1 (file no.
33-52641), filed with the Securities and Exchange Commission on May 2,
1994.
(12) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended June 30, 1994.
(13) Incorporated by reference from the same exhibit number to the
Company's Form 10-Q for the quarter ended September 30, 1994.
<PAGE> 1
EXHIBIT 10.10(a)(3)
November 4, 1994
Larizza Industries, Inc.
201 West Big Beaver Road
Suite 1040
Troy, MI 48084
Attn: President
Re: Amendments to Credit Agreement
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of May 6,
1994 (as previously amended, the "Credit Agreement") among
Larizza Industries, Inc. (the "Company"), various financial
institutions (the "Banks") and Bank of America Illinois (formerly
known as Continental Bank N.A.), as agent for the Banks (the
"Agent"). Capitalized terms used herein without definition which
are defined in the Credit Agreement shall have the meanings
assigned to them in the Credit Agreement.
The Company and the Banks hereby agree that the Credit
Agreement is hereby amended by amending Section 10.11 of the
Credit Agreement as follows:
1. Clause (i) thereof is amended by deleting the word
"and" at the end thereof.
2. Clause (j) thereof is amended by substituting "; and"
for the period at the end thereof; and
3. The following clause (k) is inserted at the end
thereof:
"(k) other Investments by the Company or any of its
Subsidiaries not at any time to exceed $700,000 in the
aggregate."
The Company has advised the Banks that it intends to sell
the stock of General Nuclear. Accordingly, the Company and the
<PAGE> 2
Banks further agree that, effective with the consummation of such
sale, the Credit Agreement and the other Loan Documents shall be
deemed amended mutatis mutandis to account for such sale (e.g.
references to General Nuclear shall be deleted from the list of
Subsidiaries on Schedule 9.8 to the Credit Agreement, from
Schedule I to the Pledge Agreement and from the form of
Compliance Certificate).
Except as modified by this Letter Agreement, the Credit
Agreement is ratified and confirmed in all respects. This Letter
Agreement shall be deemed to be a contract made under and
governed by the laws of the State of Illinois, without giving
effect to conflicts of laws principles.
Please indicate your agreement to the foregoing by executing
and delivering to the Agent a counterpart of this Letter
Agreement. This Letter Agreement may be executed by the parties
hereto in any number of counterparts and by different parties on
separate counterparts and each such counterpart shall be deemed
to be an original, but all such counterparts shall together
constitute but one and the same agreement. This Letter Agreement
shall be effective when executed by the Company and the Required
Banks.
Very truly yours,
BANK OF AMERICA ILLINOIS,
individually and as Agent
By: /s/ Steven K. Ahrenholz
------------------------
Title: Vice President
----------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Larry Favre
--------------------------
Title: Vice President
-----------------------
-2-
<PAGE> 3
SANWA BUSINESS CREDIT CORPORATION
By: /s/
-------------------------------
Title: V.P.
----------------------------
Agreed to as of the day
and year first above written
LARIZZA INDUSTRIES, INC.
By: /s/ Terence C. Seikel
-----------------------------
Title: CFO
--------------------------
-3-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF LARIZZA INDUSTRIES, INC.
State or Other Jurisdiction
Name of Incorporation
------ ---------------------------
General Nuclear Corp. Pennsylvania
Hughes Plastics, Inc. Michigan
Manchester Plastics, Ltd. Ontario, Canada
<PAGE> 1
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
Larizza Industries, Inc.:
We consent to incorporation by reference in the registration statement (No.
33-23911) on Form S-8 of Larizza Industries, Inc., of our report dated February
9, 1995, relating to the consolidated balance sheets of Larizza Industries,
Inc., and subsidiaries as of December 31, 1994, and 1993, and the related
consolidated statements of operations, shareholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 1994,
which report appears in the December 31, 1994 annual report on Form 10-K of
Larizza Industries, Inc.
KPMG Peat Marwick LLP
Detroit, Michigan
March 9, 1995
<PAGE> 1
EXHIBIT 24
LARIZZA INDUSTRIES, INC.
Power of Attorney
KNOW ALL PEOPLE BY THESE PRESENTS, that Larizza Industries, Inc., an
Ohio corporation (the "Company"), expects to file with the Securities and
Exchange Commission, Washington, D.C. (the "SEC"), under the Securities
Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K
with respect to the year ended December 31, 1994, and the Company and each of
the undersigned directors and officers of the Company hereby constitute and
appoint Ronald T. Larizza, Edward L. Sawyer, Jr., Edward W. Wells and Terence
C. Seikel, and each of them (with full power of substitution and
re-substitution), its, his or her true and lawful attorney-in-fact and agent for
each of such persons and on its, his or her behalf and in its, his or her
name, place and stead, in any and all capacities, to sign, execute and file
with the SEC and any state securities regulatory board or commission such
aforesaid Annual Report under the Act, including any amendment or amendments,
supplement or supplements relating thereto and all exhibits thereto, and any and
all documents required to be filed with the American Stock Exchange, Inc., the
National Association of Securities Dealers, Inc. and any federal or state
regulatory authority pertaining to such Annual Report, granting unto said
attorneys, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in order to
effectuate the same as fully to all intents and purposes as each of them might
or could do if personally present, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or any of their substitutes,
may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the dates set forth below.
LARIZZA INDUSTRIES, INC.
January 16, 1995 By: /s/ Ronald T. Larizza
---------------- --------------------------------
Date Ronald T. Larizza
President
January 16, 1995 /s/ Ronald T. Larizza
---------------- --------------------------------
Date Ronald T. Larizza
January 16, 1995 /s/ Edward L. Sawyer, Jr.
---------------- --------------------------------
Date Edward L. Sawyer, Jr.
January 12, 1995 /s/ Edward Wells
---------------- --------------------------------
Date Edward W. Wells
January 12, 1995 /s/ Terence Seikel
---------------- --------------------------------
Date Terence C. Seikel
January 12, 1995 /s/ Mary Jane Vicary
---------------- --------------------------------
Date Mary Jane Vicary
January 15, 1995 /s/ Frank E. Blazey Jr.
---------------- --------------------------------
Date Frank E. Blazey, Jr.
January 25, 1995 /s/ Arthur L. Wiseley
---------------- --------------------------------
Date Arthur L. Wiseley
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE LARIZZA
INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1994, AND
CONSOLIDATED STATEMENT OF OPERATIONS - TWELVE MONTHS ENDED DECEMBER 31, 1994 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 794
<SECURITIES> 0
<RECEIVABLES> 26,756
<ALLOWANCES> 393
<INVENTORY> 8,601
<CURRENT-ASSETS> 44,165
<PP&E> 52,966
<DEPRECIATION> 23,479
<TOTAL-ASSETS> 83,454
<CURRENT-LIABILITIES> 40,517
<BONDS> 30,510
<COMMON> 76,780
0
0
<OTHER-SE> (66,599)
<TOTAL-LIABILITY-AND-EQUITY> 83,454
<SALES> 169,336
<TOTAL-REVENUES> 169,336
<CGS> 133,870
<TOTAL-COSTS> 133,870
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,467
<INCOME-PRETAX> 19,084
<INCOME-TAX> 5,100
<INCOME-CONTINUING> 13,984
<DISCONTINUED> 0
<EXTRAORDINARY> 2,405
<CHANGES> 0
<NET-INCOME> 16,389
<EPS-PRIMARY> .80
<EPS-DILUTED> .77
</TABLE>
