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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9603
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STEVENS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 75-2159407
(STATE OF OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5500 AIRPORT FREEWAY
FORT WORTH, TEXAS 76117
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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Registrant's telephone number, including area code: (817) 831-3911
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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<S> <C>
Series A Stock, $0.10 Par Value American Stock Exchange
Series B Stock, $0.10 Par Value American Stock Exchange
</TABLE>
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
be 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. Yes [X] No [_]
As of March 11, 1996, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $19,213,000 based upon the
closing price of the registrant's Common Stock on such date, $2 15/16 and $4
per share for Series A and Series B stock, respectively, as reported by the
American Stock Exchange. As of March 11, 1996, there were outstanding
7,313,268 shares of Series A stock and 2,136,834 shares of Series B stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statements for the annual meeting of stockholders of
the Company to be held during 1996 are incorporated by reference in Part III.
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STEVENS INTERNATIONAL, INC.
TABLE OF CONTENTS
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FORM 10-K ITEM PAGE
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PART I
Item 1. Business................................................... 3
Item 2. Properties................................................. 11
Item 3. Legal Proceedings.......................................... 11
Item 4. Submission of Matters to Vote of Security Holders.......... 11
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters....................................... 12
Item 6. Selected Financial Data.................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14
Item 8. Financial Statements and Supplementary Data................ 19
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 40
PART III
Item 10. Directors and Executive Officers of the Registrants........ 40
Item 11. Executive Compensation..................................... 40
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 40
Item 13. Certain Relationships and Related Transactions............. 40
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 40
</TABLE>
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PART I
ITEM 1. BUSINESS.
Stevens International, Inc. (formerly Stevens Graphics Corporation) was
incorporated in Delaware in November 1986. (All references to the "Company" or
"Stevens" include Stevens International, Inc. and its subsidiaries and
predecessors, unless the context otherwise requires.)
GENERAL
Stevens is a leading manufacturer of web-fed packaging and printing systems.
Stevens designs, manufactures, markets and services packaging and printing
systems and related equipment for its customers in the packaging industry and
in the specialty/commercial and security and banknote segments of the printing
industry. The Company believes that its technological and engineering
capabilities, including its ability to utilize and combine the four major
printing technologies in its systems, provide it with a competitive advantage
over other packaging and printing equipment manufacturers. Stevens is also a
leading manufacturer of rotary and platen die cutting and creasing equipment.
The Company combines its various types of equipment, including printing
presses, die cutting equipment and delivery systems, into complete integrated
systems capable of providing finished product in a single press pass. The
Company's systems sell for prices ranging from $1 million to in excess of $10
million. The Company also manufactures auxiliary and replacement parts and
provides service for its equipment which represented 30% and 27% of the
Company's net sales for 1995 and 1994, respectively. The Company has an
installed base of more than 5,000 machines in over 50 countries.
Stevens' equipment is used by its customers to produce thousands of end-
products, including food and beverage containers, banknotes, postage stamps,
lottery tickets, direct mail inserts, personal checks and business forms. A
growing use of the Company's die cutting equipment is in non-printing
applications to produce consumer items such as potato chips, cookies, battery
grids, disposable diapers, adhesive bandages and other end products.
All of the Company's presses are "web-fed" presses, which print on paper or
other substrate that is fed continuously from a roll or "web," as distinct
from "sheet-fed" presses, which print on pre-cut sheets of paper or other
substrate. Although sheet-fed equipment is dominant in the segments of the
packaging industry and the security and banknote segment of the printing
industry that are served by the Company, the Company believes that significant
opportunities exist to convert users of sheet-fed equipment to its web-fed
packaging and printing systems because of the greater efficiencies inherent in
the web-fed process.
INDUSTRY OVERVIEW
Stevens markets its systems to its customers in two distinct worldwide
industries--the packaging industry and the printing industry. Although both
the packaging and printing industries utilize printing in the manufacturing
process, the printed products have significantly different applications. In
the packaging industry, the printed product functions as the container for the
end product, such as food and beverage containers. In the printing industry,
the printed product is the end product, such as lottery tickets, postage
stamps and personal checks.
The packaging industry consists of several large segments, some of which the
Company does not serve. The Company's products are designed to serve the
folding carton, liquid packaging and flexible packaging segments of the
packaging industry. The printing industry also consists of several large
segments in which the Company does not participate (newspapers, periodicals
and book publishing). The Company's products are designed to serve the
specialty/commercial and security and banknote segments of the printing
industry.
BUSINESS STRATEGY
The Company's objective is to strengthen its position as a leading
manufacturer of web-fed packaging and printing systems through its strategy of
providing complete systems solutions to its customers. The principal elements
of this strategy include the following:
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Technological Leadership. The Company believes that it is a technological
leader in the development of packaging and printing equipment systems. The
Company demonstrates its technological leadership through its research and
development efforts and new product introductions. The Company works closely
with manufacturers of related consumables, i.e., printing plates, anilox
rolls, inks, paper and similar products, to create new product enhancements.
In the last three fiscal years, the Company's gross expenditures for research
and development (including customer funded projects) have exceeded 5% of net
sales. The Company has recently introduced, among others, the System 2000 and
5000 series flexographic and offset lithographic ("offset") printing press
systems. The Company has also developed improved high speed rotary and platen
die cutting equipment to complement its new packaging and printing equipment
systems. In the security and banknote industry, the Company, in 1995,
installed the first production model single note on web ("SNOW") banknote
printing system at Banque de France.
Integrated Systems. The Company provides fully integrated web-fed packaging
and printing systems which are capable of producing a finished product by
taking paper or other substrate through one continuous, uninterrupted process.
The Company works closely with its customers in the design and development of
its integrated systems to meet their specific manufacturing needs. For many of
its customers, the Company is a single-source supplier of their packaging and
printing systems. The Company has the technological and engineering expertise
to combine any of the four major printing methods (offset, flexography,
rotogravure and intaglio) together with die cutters and creasers and product
delivery systems into a single system. The Company believes that its ability
to provide customized systems solutions provides it with a competitive
advantage over other packaging and printing equipment manufacturers.
Conversion to Web-Fed Systems. The Company believes that, because of the
increased productivity inherent in the web-fed process, significant
opportunities exist to convert users of sheet-fed equipment over to web-fed
systems in the segments of the packaging and printing industries that it
serves. While web-fed equipment has been successfully utilized for many years
in some segments of the printing industry which the Company does not serve
(including newspapers and periodicals), sheet-fed equipment is predominant in
the folding carton segment of the packaging industry and the security and
banknote segment of the printing industry. The Company also believes that its
web-fed systems can significantly enhance productivity over sheet-fed
applications in all segments of the packaging and printing industries
including those segments into which the Company markets its products.
Increased Penetration of International Markets. The Company plans to
accelerate its penetration of international markets in order to capitalize on
growth opportunities developing in Asia and in Eastern Europe for packaging
and printing systems and to further geographically diversify its sales base.
The Company has taken a number of initiatives to strengthen its international
marketing efforts. In 1991, the Company established an European sales
subsidiary and in 1995 acquired a French repair and service company (see
"Marketing") to fill an important need and to better service products
installed in Europe. In addition, the Company has continued to add to its
existing base of sales agents in order to market its products internationally.
The Company received five 1994-1995 orders from China, four of which have been
delivered, for its new System 9000, narrow web rotogravure printing and
packaging press.
PRODUCTS
The Company markets a broad range of packaging and printing equipment
systems to the packaging industry and the specialty/commercial and security
and banknote segments of the printing industry. The Company's complete systems
integrate a variety of its equipment, including printing presses, die cutters
and creasers and product delivery systems. The Company also sells system
components independently of complete systems. The components of these systems
are as follows:
Printing Presses. The Company offers all four major printing processes on a
worldwide basis for its web-fed packaging and printing systems. The Company's
printing presses are capable of flexographic, offset lithographic, rotogravure
and intaglio printing processes and combinations thereof. Flexography, which
is well
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suited for printing large areas of solid color, is typically the least
expensive printing process. Offset lithography, which is the most widely used
printing process, is a process that historically has yielded a higher quality
printed product than flexography. Rotogravure, which uses etched cylinders in
the printing process, is a higher quality, more expensive process than either
flexography or offset lithography. Intaglio printing, which is the most
technologically complex and expensive printing process, utilizes engraved
plates and applies ink under extreme pressure.
Die Cutters and Creasers. The Company manufactures and markets both rotary
and platen die cutters and creasers. The Company believes that it offers the
broadest array of rotary cutting products and technology in the packaging and
printing industries. The Company's proprietary rotary die system equipment is
now the preferred cutting and creasing system for several of the largest
liquid packaging producers. A growing use of the Company's rotary die cutting
equipment is in non-printing applications to produce consumer items such as
potato chips, cookies, battery grids, disposable diapers, adhesive bandages
and other end products. The Company believes its platen die cutters perform
faster and more reliably than other similar systems.
Product Delivery Systems. The Company manufactures a number of product
delivery systems such as stackers, collators, strippers, belt askews and
delivery tables. These product delivery systems perform a number of automated
tasks as the final product exits the printing press. In some instances, the
speed of the product delivery system can limit throughput and productivity of
packaging and printing equipment systems.
Auxiliary Equipment, Parts and Customer Service. The Company manufactures
auxiliary equipment and replacement parts and provides service for its
presses, collators and die cutters. During 1995 and 1994, 30% and 27%,
respectively, of the Company's net sales, were attributable to auxiliary
equipment, parts and service. Generally, auxiliary equipment allows the
customer to expand the capabilities of its existing equipment by increasing
production capacity or by providing such additional features as forward
numbering, batch delivery and special types of finishing, such as punching,
perforating and folding. Auxiliary equipment also includes print towers to add
additional colors and additional collating stations.
In line with its program of strong customer service, the Company provides
customers with product services and support through trained Company and dealer
service representatives. Product services include installation, field repairs,
routine maintenance, replacement and repair parts, operator training and
technical consulting services. Product services and support programs also are
designed to promote the sale of auxiliary equipment.
MARKETING
The Company primarily markets its products domestically through direct sales
engineers and managers. The Company primarily markets its products
internationally through agents. In 1990, the Company opened a sales and
service office in France to better serve its European customers and, in 1995,
formed Societe Specialisee dans le Materiel d'Imprimerie ("SSMI"), to acquire
a French printing press repair and service company, which permits the Company
to better service its European customers. The Company's traditional marketing
efforts include advertising, participating in major domestic and international
trade shows and customer symposiums, and conducting periodic product
maintenance seminars. The Company conducts market research and analysis to
study trends and actively participates in various trade associations.
CUSTOMERS
The Company's customers include packaging companies, printing companies,
paper companies, consumer product companies, check printers, business forms
companies and security and banknote printers.
COMPETITION
The Company encounters substantial competition in marketing its products
from manufacturers of both sheet-fed and web-fed presses and related
equipment. The Company believes that in its selected segments of the packaging
and printing industries its competitors are primarily manufacturers of web-fed
equipment. The Company's principal web-fed competitors are Bobst, S.A., M.A.N.
Roland, Komori-Chambon, Goebel and
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Cerutti. The Company believes that the packaging industry is also served by
manufacturers of offset sheet-fed equipment such as Heidelberg, M.A.N. Roland
and Komori-Chambon. The security and banknote markets are predominately served
by sheet-fed equipment made by De La Rue Giori-Koenig and Bauer-Albert
Frankenthal (KBA). The Company believes that competition for its products is
based primarily on product performance, web-fed versus sheet-fed technology,
reliability, customer service, price and delivery. See "Factors That Could
Affect Future Performance -- Competition."
RESEARCH AND DEVELOPMENT
In addition to Company sponsored development programs, projects are funded
in varying amounts by customers who are in need of specialized equipment or
processes. Research and development costs are charged to operations as
incurred and the total of gross expenditures (including customer funded
projects) has exceeded 5% of net sales in recent years.
EMPLOYEES
As of March 11, 1996, the Company had approximately 716 employees.
Approximately 26% of the Company's employees are covered by a separate
collective bargaining agreement that expires in December 1997. The Company
believes that its employee relations are good and has not experienced any
strike or material work stoppage since a seven-week strike at its Hamilton,
Ohio facilities in the fourth quarter of 1990.
BACKLOG AND ORDERS
The backlog of the Company consists of orders that have met strict criteria,
including having a signed contract with appropriate down payments received.
Further, to be included in backlog, these orders must also have a reasonable
expectation of being manufactured, shipped and paid for within contract terms.
Additionally, the backlog does not generally include service and parts orders,
which have historically been in excess of 20% of the Company's sales volume.
The Company's backlog of unfilled orders as of December 31, 1995 was
approximately $40.4 million compared to $68.6 million at December 31, 1994, a
decrease of 41%. The backlog included a decrease of $20.2 million in
packaging, a decrease of $3.2 million in banknote and security related
equipment and $4.8 million in specialty/commercial orders. The current decline
in backlog is the result of a general slowness in orders. While the slowness
may be attributable to general economic conditions, the Company believes it is
also attributable to difficulties in resolving certain product performance
issues. Although the Company believes that it is making progress in resolving
these performance issues, they have not all been resolved and there can be no
assurance that they will be.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
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NAME AGE PRINCIPAL POSITION WITH THE COMPANY
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Paul I. Stevens............. 81 Chairman of the Board, Chief Executive Officer
and Director
Richard I. Stevens.......... 57 President, Chief Operating Officer and Director
Allen J. Prochnow........... 45 Sr. Vice President and General Manager-Zerand
Division
Kenneth W. Reynolds......... 57 Sr. Vice President--Finance and Administration
and Chief Financial Officer*
</TABLE>
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* Mr. Reynolds retired from his position as Senior Vice President--Finance and
Administration and Chief Financial Officer effective March 31, 1996.
Paul I. Stevens founded the Company in 1965. He has served the Company as
Chairman of the Board and Chief Executive Officer since its inception. In
1974, Mr. Stevens founded Stevens Industries, Inc., a family-
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owned holding company that is an affiliate of the Company and of which he is
the controlling stockholder. Mr. Stevens is the father of Richard I. Stevens.
Richard I. Stevens is President, Chief Operating Officer and a director of
the Company and has served in each of these capacities for at least five
years. From May 1992 to December 1993, Mr. Stevens served as President and
General Manager of the Company's Hamilton Division. He joined the Company in
1965 and became President in 1969. In 1973 he was elected to the Board of
Directors. Mr. Stevens is active in industry professional associations. He has
been a director of The Association for Suppliers of Printing and Publishing
Technologies (NPES) since 1982. In October 1995, Mr. Stevens was elected
Chairman of the Board of NPES for a two-year term.
Allen J. Prochnow has served as Senior Vice President and General Manager-
Zerand Division since November 1993 and Vice President of the Company from
August 1991 to November 1993. Mr. Prochnow joined Zerand as Treasurer and
Controller in the fall of 1979. In 1981, he was promoted to fill the new
Zerand position of Vice President, Finance, and in early 1988, he was
appointed to Vice President, Operations.
Kenneth W. Reynolds has served the Company as Senior Vice President--Finance
and Administration and Chief Financial Officer since July 1993. From 1989 to
June 1993, Mr. Reynolds served Baldwin Technology Company, Inc. as Vice
President--Finance and Administration and Chief Financial Officer. From 1987
to 1989, Mr. Reynolds served as Vice President--Finance and Administration for
Modicon Inc., an AEG Company (Germany). From 1974 to 1987, he held various
positions with Harris Graphics Corporation and from 1965 to 1974, he held
various positions with Moore Business Forms, Inc.
Except as otherwise noted, no family relationships exist among the executive
officers of the Company.
FACTORS THAT COULD AFFECT FUTURE PERFORMANCE
This report contains certain forward looking statements about the business
and financial condition of the Company, including various statements contained
in "Management's Discussions and Analysis of Financial Condition and Results
of Operations." The actual results of the Company could differ materially from
those forward looking statements. The following information sets forth certain
factors that could cause the actual results to differ materially from those
contained in the forward looking statements.
Competition. The packaging and printing equipment industry is highly
competitive, and many of the industry participants possess greater management,
financial and other resources than those possessed by the Company. The Company
encounters substantial competition in marketing its products from
manufacturers of both sheet-fed and web-fed presses and related equipment. The
Company believes that in selected segments of the packaging and printing
industries its competitors are primarily manufacturers of web-fed equipment.
The Company's principal web-fed competitors are Bobst S.A., M.A.N. Roland,
Komori-Chambon, Goebel and Cerutti. The Company believes that the packaging
industry is also served by manufacturers of offset sheet-fed equipment, such
as Heidelberg, M.A.N. Roland and Komori-Chambon. The security and banknote
markets are predominately served by sheet-fed equipment made by De La Rue
Giori. The Company believes that competition for its products is based
primarily on product performance, web-fed versus sheet-fed technology,
reliability, customer service, price and delivery. The Company has recently
experienced difficulties in meeting customers expectations in manufacturing
certain new products, including certain System 2000 presses. The Company
believes these difficulties have hampered its marketing and accounts
receivable collection efforts and has made it a high priority to satisfy these
expectations as soon as practicable.
Economic Downturn. Sales of the Company's packaging and printing products
may be adversely affected by general economic and industry conditions and
downturns. The Company's business and results of operations may be adversely
affected by inflation, interest rates, unemployment and other general economic
conditions reflecting a downturn in the economy, which may cause customers to
defer or delay capital expenditure decisions. The Company incurred significant
losses in 1990 and 1991 of $7.8 and $13.5 million, respectively; these losses
were caused by changing printing technology that affected demand for the
Company's business
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forms printing systems, which at the time represented a substantial portion of
the Company's revenues and by a general economic downturn which impacted or
delayed capital expenditure decisions by its customers. As a result, the
Company restructured its operations, which involved a plan that included the
closure of some facilities, the combination of operating units, personnel
reassignments, headcount reductions and asset sales. This restructuring
necessitated recording pre-tax restructuring charges in 1990 and 1991 of $5.0
and $4.0 million, respectively. The plan was designed to bring the Company's
operating costs in line with anticipated order rates and to reposition the
Company in growing markets such as packaging systems and to de-emphasize
declining markets such as business forms. Sales of business forms and
specialty web printing press systems have historically been subject to
cyclical variation based upon specific and general economic conditions, and
there can be no assurance that the Company will maintain profitability during
downturns.
Technological Advances in the Packaging and Printing Industry. The packaging
and printing industry has experienced many technological advances over the
last decade, and the Company expects such advances to continue. Packaging and
printing companies generally want more efficient packaging and printing press
systems in order to reduce inventories, "in process" production time, waste
and labor costs. These technological advancements could result in the
development of additional competition for all or a portion of the Company's
products and could adversely affect the competitive position of the Company's
products. Although the Company has rights in a significant number of issued
patents in the United States and elsewhere, management believes that patent
protection is less significant to the Company's competitive position than
certain other factors. These factors include the Company's knowledge of the
industry and the skills, know-how and technological expertise of the Company's
personnel.
Dependence Upon New Technologies and Product Development. Technological
leadership, enhanced by the introduction and development of new products, is
an important objective of the Company's business strategy. In accordance with
this business strategy, the Company's newly developed products have been a
significant factor in the Company's growth in 1994 and 1995. In the last three
fiscal years, the Company's gross expenditures for research and development
exceeded 5% of net sales. The Company believes that its continued success will
be dependent, in part, upon its ability to develop, introduce and market new
products and enhancements. Many difficulties and delays are encountered in
connection with the development of new technologies and related products. The
Company experienced some product performance issues related to new products in
1995 which contributed to the slowness in orders experienced in the fourth
quarter of 1995. There can be no assurance, therefore, that the Company will
be able to continue to design, develop and introduce new products that will
meet with market acceptance.
International Business Risks. In 1995, international sales represented 26.2%
of net sales, and the Company expects that international sales will continue
to represent a significant portion of its total sales. Sales to customers
outside the United States are subject to risks, including the imposition of
governmental controls, the need to comply with a wide variety of foreign and
United States export laws, political and economic instability, trade
restrictions, changes in tariffs and taxes, longer payment cycles typically
associated with international sales, and the greater difficulty of
administering business overseas as well as general economic conditions.
Although substantially all of the Company's international orders are
denominated in United States dollars, some orders are denominated in foreign
currencies and, accordingly, the Company's business and results of operations
may be affected by fluctuations in interest and currency exchange rates.
Fluctuations in foreign currencies may also affect the Company's foreign
sales, and, since many of the Company's competitors are foreign, fluctuations
in foreign currencies may also affect the Company's competitive position in
the United States markets. The Company periodically enters into foreign
exchange contracts to hedge the risk that eventual net cash flows will be
adversely affected by changes in exchange rates. In addition, the laws of
certain foreign countries may not protect the Company's intellectual property
to the same extent as do the laws of the United States.
Acquisitions. The Company may from time to time acquire or enter into
strategic alliances concerning technologies, product lines or businesses that
are complementary to those of the Company. Although the Company believes that
integration of acquired technologies, product lines and businesses should
result in long-term growth and profitability, there can be no assurance that
the Company will be able to successfully identify, finance or integrate such
technologies, product lines or businesses. Furthermore, the integration of an
acquired
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company product line or business may cause a diversion of management time and
resources. The Company also may need to obtain additional equity or debt
financing to complete an acquisition and in some instances must obtain the
approval of its existing lenders in order to either incur additional debt or
complete the acquisition. There can be no assurance that the Company will be
able to conclude any acquisitions in the future on terms favorable to it or
that, once consummated, such acquisitions will be advantageous to the Company.
Manufacturing Risks. Disruption of operations at any of the Company's
primary manufacturing facilities or any of its subcontractors for any reason,
including work stoppages, fire, earthquake or other natural disasters, would
cause delays in shipments of the Company's products. There can be no assurance
that alternate manufacturing capacity would be available, or if available,
that it could be obtained on favorable terms or on a timely basis.
Impact of Accounting Methods and Estimates Upon Quarterly Earnings. The
Company derives the majority of its revenues from the sale of packaging and
printing press systems, with prices for each system and most orders ranging
from $1 million to in excess of $10 million. The Company's policy is to record
revenues and earnings for orders in excess of $1 million on the percentage of
completion basis of accounting, while revenues for orders of less than $1
million are recognized upon shipment or when completed units are accepted by
the customer. The percentage of completion method of accounting recognizes
revenues and earnings over the build cycle of the press system as work is
being performed based upon the cost incurred to date versus total estimated
contract cost and management's estimate of the overall profit in each order.
In the event that the Company determines it will experience a loss on an
order, the entire amount of the loss is charged to operations in the period
that the loss is identified. The Company believes that the percentage of
completion method of accounting properly reflects the earnings process for
major orders. The informed management judgments inherent in this accounting
method may cause fluctuations within a given accounting period, which could be
significant. During each accounting period, other management assessments
include estimates of warranty expense, allowances for losses on trade
receivables and many other similar informed judgments.
Litigation. The Company and certain officers and directors are defendants in
a class action lawsuit filed in 1990. Prior to commencement of trial, the
parties agreed in principle to a settlement of the dispute. In the event the
settlement is not approved by the Court, the Company will continue to
vigorously pursue all available defenses. Without regard to the outcome, a
trial would result in a significant diversion of management time and
attention. A negative outcome in excess of insurance coverage could have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, the Company is subject to various claims,
including product liability claims, which arise in the ordinary course of
business, and is a party to various legal proceedings that constitute ordinary
routine litigation incidental to the Company's business. A successful product
liability claim brought against the Company in excess of its product liability
coverage could have a material adverse effect upon the Company's business,
operating results and financial condition. See "Legal Proceedings."
Environmental Costs, Liabilities and Related Matters. The Company's
production facilities and operations are subject to a variety of federal,
state, local and foreign environmental, health and job safety laws and
regulations. The Company is not aware of any conditions or circumstances that,
under applicable environmental, health or safety regulations or requirements,
will require expenditures by the Company that management believes would have a
material adverse effect on its businesses. However, environmental liabilities
(especially those relating to discontinued production or waste disposal
practices) are very difficult to quantify, and it is possible that
environmental litigation or regulatory action may require significant
unanticipated expenditures or otherwise adversely affect the Company. See
"Legal Proceedings."
Control by Principal Stockholders. Paul I. Stevens, Stevens Industries, Inc.
and members of the immediate family of Paul I. Stevens beneficially own
approximately 31.5% of the combined outstanding Series A and Series B Common
Stock of the Company, representing 70.3% of the voting power. As a result, the
Stevens family alone is able to elect a majority of the Board of Directors and
otherwise continue to influence the direction and policies of the Company and
the outcome of any other matter requiring shareholder approval, including
mergers,
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consolidations and the sale of all or substantially all of the assets of the
Company, and, together with others, to prevent or cause a change in control of
the Company.
Volatility of Stock Price. The Company's Series A Common Stock market price
has ranged from a high of $19 5/8 per share in the first quarter of 1990 to a
low of $2 3/4 per share in the first quarter of 1996. The market price of the
Company's Series A Common Stock may be subject to substantial fluctuations
related to the announcement of financial results, new product introductions,
new orders or order cancellations by the Company or by its competitors or by
announcements of other matters related to the Company's business. In addition,
there can be no assurance that the price of the Series A Common Stock will not
fluctuate in the future due to a multiplicity of factors outside of the
Company's control. These factors include general economic and stock market
conditions, investor perceptions and mood swings, levels of interest rates and
the value of the dollar.
Dependence On Key Personnel. The Company's success depends, to a significant
extent, on the Company's Chairman of the Board and Chief Executive Officer,
Paul I. Stevens, on its President and Chief Operating Officer, Richard I.
Stevens and on other members of its senior management. The loss of the
services of Paul or Richard Stevens, or any of its other key employees, could
have a material adverse effect on the Company. The Company maintains a key man
life insurance policy on Paul I. Stevens in the amount of $2,000,000. The
Company's future success will also depend in part upon its continuing ability
to attract and retain highly qualified personnel. There can be no assurance
that the Company will be successful in attracting and retaining such
personnel.
Rapid Growth. The Company's annual revenue growth rate which was 19.5% in
fiscal 1994 (exclusive of the discontinued Post operations), accelerated to
30.4% in fiscal 1995. This growth was largely attributable to the development
and sale of new products. In light of this growth, the Company increased the
amount of expenditures on its research and development programs, particularly
in conjunction with the development of these new products. The Company
recently curtailed many expenditures in light of the slowness of new orders
which has been due, in part, to certain product performance issues related to
the new products. In addition, the Company has reduced capital expenditures
and implemented certain other cost reduction measures. As a result, sales and
operating results for 1996 are not anticipated to equal 1995 results.
ITEM 2. PROPERTIES.
The following are the locations of the Company's executive and principal
manufacturing and research facilities. In addition, the Company leases a small
sales office in Europe on a month-to-month basis. The Company believes its
facilities are adequate for its present needs.
<TABLE>
<CAPTION>
APPROX. OWNED
LOCATION USE SQ. FT. OR LEASED
-------- --- ------- ---------
<S> <C> <C> <C>
Fort Worth, Texas....... Executive Offices 12,400 Leased
Hamilton, Ohio.......... Research facilities and manufacturing of 252,000 Owned
printing presses, and collators,
administration offices and sales
facilities
New Berlin, Wisconsin... Research facilities and manufacturing of 67,000 Owned
printing presses and reciprocating
cutter-creasers, and administration
offices and sales facilities
New Berlin, Wisconsin... Warehouse and manufacturing facilities 43,200 Leased
Rochester Hills, Manufacturing of rotary pressure dies, 42,000 Leased
Michigan............... cutter-creasers, and related equipment,
research facilities, administration
offices and sales facilities
Fort Worth, Texas....... Manufacturing facility and 74,000 Owned
administration offices
Villers sous St. Leu, Repair and service facility and 13,000 Owned
France................. administrative offices
</TABLE>
10
<PAGE>
See notes F, K and M of the notes to consolidated financial statements of
the Company for information relating to property, plant and equipment and
leases. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
ITEM 3. LEGAL PROCEEDINGS.
On December 5, 1990, Howard Lasker, as the representative of an alleged
class consisting of purchasers of the Company's common stock between October
18, 1989 and October 31, 1990, filed a lawsuit against the Company and certain
officers and directors of the Company. The suit was certified as a class
action in March 1992. On February 26, 1993, notice of the pendency of the
class action was mailed to stockholders of record of the Company and was
published in the national edition of the Wall Street Journal. The action,
which was filed in the United States District Court for the Northern District
of Texas (Dallas Division), alleges that the defendants, during the class
period, engaged in a course of action that deceived the investing public
regarding the financial condition and prospects of the Company, that as a
consequence, the market value of the Company's common stock was artificially
inflated, and that the plaintiff and other members of the class purchased
Company common stock during the class period at inflated prices.
After extensive discovery and trial preparation, the case was scheduled to
go to trial in January 1996. Prior to commencement of trial, the parties
agreed in principle to a settlement of the dispute. The Company, its officers'
and directors' liability insurance carrier, and the Plaintiff are in the
process of negotiating a written settlement of the dispute that, if approved
by the court, would result in the dismissal of the litigation. As part of the
settlement, the Company has agreed to issue to the class warrants to purchase
Series A Common Stock with an aggregate value of $700,000. When issued, the
value of the warrants will be charged to the Company's earnings. The court
took the January 1996 trial setting off of its docket. In the event the
settlement agreement is not approved by the court, the Company will continue
to vigorously pursue all available defenses.
In February 1990, the Environmental Protection Agency ("EPA") issued a
Notice of Potential Liability and Request for Participation in Cleanup
Activities to approximately 60 parties, including Post Machinery Company,
Inc., a subsidiary of the Company, in relation to the disposition of certain
substances that could be characterized as "hazardous wastes" which purportedly
were taken to the Coakley Landfill Site ("Coakley Site") in North Hampton, New
Hampshire prior to 1982. A committee representing the potentially responsible
parties ("PRPs") negotiated a settlement in the form of consent decrees (the
"Consent Decrees") with EPA and the State of New Hampshire covering the
closure and capping of the Coakley Site. The PRPs also agreed that certain of
the PRPs, including Post, would no longer be obligated to participate in the
cleanup at the Coakley Site in return for a contribution of a fixed amount
into escrow, and such PRPs would be indemnified by certain of the remaining
PRPs from further liability under the EPA's current action. Post contributed
$86,719 under this agreement. EPA is currently conducting an investigation of
ground water conditions under a wetlands area adjacent to the site. EPA has
not given notice to any parties of potential liability for ground water under
the wetlands. There can be no assurances that no further claims will be
brought related to the Coakley Site, or sites affected by contamination from
the Coakley Site, or that any claims which might be brought would be covered
by the Consent Decrees or the agreement described above. In connection with
the aforementioned environmental claim, the Company was indemnified and
reimbursed by Post's predecessor, PXL Holdings Corporation, its costs in
connection with the Coakley matter.
No assurance can be given regarding the outcome of any pending case;
however, in management's opinion, the Company has adequate legal defense
and/or insurance coverage regarding each of these actions and does not believe
that such actions, either individually or in the aggregate, will materially
affect the Company's financial condition or its results of operation; however,
a negative outcome in excess of insurance coverage could have a material
adverse effect on the Company's business, operating results and financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders during
the last quarter of its fiscal year ended December 31, 1995.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The Company's Series A Common Stock and Series B Common Stock are traded on
the American Stock Exchange under the symbols SVGA and SVGB, respectively. The
following table sets forth for the periods indicated the range of the high and
the low closing sale prices per share for the Series A Common Stock and the
Series B Common Stock, all as reported on the Composite Tape of the American
Stock Exchange Listed Issues.
<TABLE>
<CAPTION>
SERIES A SERIES B
COMMON STOCK COMMON STOCK
--------------- ------------
HIGH LOW HIGH LOW
------- ------- ------ -----
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
First Quarter................................... 7 1/2 5 1/2 8 5/8 7 3/8
Second Quarter.................................. 6 5/8 5 1/4 7 1/2 7
Third Quarter................................... 6 1/8 5 7 1/8 7 1/8
Fourth Quarter.................................. 8 3/8 5 3/4 9 7
Year Ending December 31, 1995:
First Quarter................................... 8 1/8 6 3/4 8 3/8 7 1/2
Second Quarter.................................. 7 13/16 6 8 6 5/8
Third Quarter................................... 8 1/8 6 8 1/16 7
Fourth Quarter.................................. 8 3 15/16 7 7/8 4 1/8
First Quarter 1996 (through March 11, 1996)....... 4 3/8 2 7/8 4 1/4 3 1/4
</TABLE>
As of March 11, 1996, approximately 7,313,000 shares of the Series A Common
Stock were outstanding and held by approximately 214 holders of record, and
2,136,800 shares of the Series B Common Stock were outstanding and held by
approximately 77 holders of record.
The Company has not paid cash dividends on its capital stock. The current
policy of the Company's Board of Directors is to retain any future earnings to
provide funds for the operation and expansion of the Company's business.
Consequently, the Company does not anticipate that cash dividends will be paid
on the Company's capital stock in the foreseeable future. If, however, cash
dividends are paid, such dividends will be paid equally to holders of the
Series A Common Stock and the Series B Common Stock on a share-for-share
basis. See "Description of Capital Stock." In addition, the Company's current
credit facility restricts the Company's ability to pay dividends. For a
discussion of restrictions of the Company's ability to pay dividends, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
ITEM 6. SELECTED FINANCIAL DATA.
The following tables set forth selected historical financial information for
the indicated periods for the Company. The historical information is derived
from the Consolidated Financial Statements of the Company.
The Company's acquisition of Post Machinery Company, Inc. ("Post") effective
as of June 1, 1990, was accounted for as a purchase. As a result, the
operations and financial position of Post are included in the financial
statements of the Company from June 1990 through 1993. Substantially all
assets, operations and product technology of Post were sold to Bobst Group,
Inc. in 1993 (see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note B of Notes to Consolidated Financial
Statements of the Company).
12
<PAGE>
SELECTED FINANCIAL INFORMATION
INCOME STATEMENT
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales.................... $139,181 $106,694 $103,762 $ 84,160 $ 78,938
Cost of sales................ 108,307 81,009 79,476 67,131 61,937
-------- -------- -------- -------- --------
Gross Profit................. 30,874 25,685 24,286 17,029 17,001
Selling, general and
administrative expense...... 21,437 17,211 17,477 16,089 21,619
Restructuring Charge(3)...... -- -- -- -- 4,000
-------- -------- -------- -------- --------
Operating income (loss)...... 9,437 8,474 6,809 940 (8,618)
Other income (expense)....... (3,478) (4,139) (3,940) (5,647) (7,742)
-------- -------- -------- -------- --------
Income (loss) before income
taxes, extraordinary items
and cumulative effect of
accounting change......... 5,959 4,335 2,869 (4,707) (16,360)
Income tax (expense)
benefit..................... (1,660) (1,908) (2,098) 1,525 2,825
-------- -------- -------- -------- --------
Income (loss) before
extraordinary items and
cumulative effect of
accounting change......... 4,299 2,427 771 (3,182) (13,535)
Extraordinary items(2)....... -- (85) -- 4,033 --
Cumulative effect of change
in method of accounting for
income taxes(1)............. -- -- 412 -- --
-------- -------- -------- -------- --------
Net income (loss)........ $ 4,299 $ 2,342 $ 1,183 $ 851 $(13,535)
======== ======== ======== ======== ========
Income (loss) per common
share before extraordinary
items and cumulative effect
of accounting change........ $ 0.45 $ 0.26 $ 0.08 $ (0.36) $ (1.50)
Extraordinary items per
common share(2)............. -- (0.01) -- 0.45 --
Cumulative effect of
accounting change per common
share(1).................... -- -- 0.05 -- --
-------- -------- -------- -------- --------
Net income (loss) per
common share............ $ 0.45 $ 0.25 $ 0.13 $ 0.09 $ (1.50)
======== ======== ======== ======== ========
Weighted average shares
outstanding................. 9,553 9,256 9,129 9,017 9,014
======== ======== ======== ======== ========
BALANCE SHEET DATA
(IN THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash and temporary
investments................. $ 814 $ 1,473 $ 3,768 $ 10,507 $ 30,488
Working capital.............. 38,127 16,692 16,737 25,546 33,268
Total assets................. 117,647 94,041 106,147 108,548 132,756
Long-term debt............... 33,470 15,308 21,567 41,759 47,548
Total stockholders' equity... 45,372 40,965 36,520 35,782 35,184
</TABLE>
- --------
(1) Beginning January 1, 1993, income taxes were determined in accordance with
SFAS No. 109. Accordingly, the cumulative effect of this accounting change
in 1993 was a benefit of $412,000.
(2) Gain on involuntary conversion of assets in the 1992 Bernal fire and
resulting benefit of utilization of a net operating loss for income taxes.
Debt extinguishment costs incurred in 1994 related to the refinancing of
long-term debt. See Note I of Notes to the Consolidated Financial
Statements of the Company.
(3) The restructuring charge reflected the estimated costs of a restructuring
plan which included closing some facilities, combinations of operating
units, major personnel reassignments, reductions in number of employees,
severance compensation, and some asset sales. The plan was designed to
bring the Company's operating costs in line with the current order rates
and the recession in the capital goods industry. The cash outlay in 1992
and 1993 for this restructuring was approximately equal to the
restructuring charge. In 1992 and 1993, as expected, the Company realized
lower ongoing operating costs and substantial cash from the sales of idle
facilities and other assets.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
Stevens derives its revenues from the sale of packaging and printing
equipment systems and related equipment to customers in the packaging industry
and the specialty/commercial and security and banknote segments of the
printing industry. The Company's net sales have fluctuated from a high of
$139.2 million in 1995 to a low of $78.9 million in 1991. Revenues for the
fourth quarter of 1995, however, declined approximately 2.0% from the fourth
quarter of 1994. In the early 1990's, several significant events adversely
affected the Company's net sales and profitability. First, technological
changes, which permitted a rapid increase in automated or electronic
transactions and manipulation of information, resulted in a significant
decline in the need and demand for business forms equipment, the sales of
which represented a substantial portion of the net sales of the Company at
that time. At approximately the same time, the general downturn in the economy
from 1990-1992, which impacted or delayed capital expenditure decisions by its
customers, was more pronounced in the Company's non-packaging markets than in
the economy generally.
As a result of certain of these events, the Company restructured its
operations, which involved a plan that included the closure of some
facilities, the combination of operating units, personnel reassignments,
headcount reductions and asset sales (including the sale of the Post division
assets in 1993). Since the implementation of the Company's restructuring plan,
the Company has repositioned itself as an enterprise with multiple product
lines serving the packaging industry and the specialty/commercial and security
and banknote segments of the printing industry.
In August 1993, the Company sold a part of its packaging products business.
Specific assets of Post, including the product technology and related
intangibles were sold to Bobst Group, Inc., the U.S. operating unit of Bobst,
S.A. of Switzerland. The agreement provided for the transfer of manufacturing
operations over a four month transition period. Post retained its accounts
receivable (approximately $1.2 million), its work-in-process and finished
goods inventories (approximately $1.1 million) and its existing backlog of
orders (approximately $5.9 million). Post also retained substantially all of
its liabilities (approximately $2.5 million). The cash proceeds were
approximately $7.3 million, of which $6 million was used to permanently reduce
senior debt. Post contributed sales of approximately $13.5 million and income
before interest, corporate charges and taxes of approximately $4.6 million for
1993, including a gain of $1.3 million on the sale of assets to Bobst Group,
Inc.
The Company reported a net loss for the fourth quarter of 1995 of ($482,000)
which resulted from a general slowness in orders and greater than expected
manufacturing costs, including unexpected warranty costs associated with some
of the Company's new products.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain income
statement data as percentages of net sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994 1993 1992
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales...................................... 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales.................................. 77.8 % 75.9 % 76.6 % 79.8 %
----- ----- ----- -----
Gross profit................................... 22.2 % 24.1 % 23.4 % 20.2 %
Selling, general and administrative expenses... 15.4 % 16.1 % 16.8 % 19.1 %
----- ----- ----- -----
Operating income............................... 6.8 % 8.0 % 6.6 % 1.1 %
Other income (expense):
Interest, net................................ (2.3)% (3.0)% (4.2)% (6.0)%
Other, net................................... (0.2)% (0.9)% 0.4 % (0.7)%
----- ----- ----- -----
Income (loss) before income taxes,
extraordinary items and cumulative effect of
accounting change............................. 4.3 % 4.1 % 2.8 % (5.6)%
</TABLE>
14
<PAGE>
Comparison of Years Ended December 31, 1995 and 1994
Net Sales. The Company's net sales for the year ended December 31, 1995
increased by $32.5 million, or 30.4%, compared to net sales in the same period
in 1994, due to increased sales of packaging products. Packaging product sales
increased $27.7 million, or 48%, primarily due to increased sales of the
System 2000 flexographic printing system, sales of the new System 9000
rotogravure printing system into China and sales of both platen and rotary die
cutters. Specialty/commercial product sales increased by $1.9 million, due to
increased sales of specialty printing offset systems and business forms
equipment. Security and banknote product sales decreased by $0.3 million,
reflecting reduced revenues under the contract with Banque de France for the
single note on web ("SNOW") currency printing system as the project neared
completion. This decrease was offset to some degree by increased revenues
under the contract with The Bank of England for development of the Automated
Currency Examination ("ACE") system. In January 1995, the Company formed SSMI
and acquired a full service repair and maintenance facility in France, which
provides service and support for the Company's European customer base. SSMI
contributed $3.2 million in sales for 1995. On a geographic basis, net sales
to international customers for the year ended December 31, 1995, were $36.5
million and comprised 26.2% of net sales as compared to $15.0 million, or 14%,
of net sales for 1994, due primarily to the System 9000 shipments to China.
Gross Profit. The Company's gross profit for the year ended December 31,
1995 increased by $5.2 million, or 20.2%, compared to gross profit for the
same period in 1994, primarily due to increased sales volume for packaging
systems products. Gross profit margin for 1995 decreased to 22.2% of net sales
as compared to 24.1% of net sales for the same period in 1994. The decrease in
gross profit margin was primarily due to higher costs associated with the
installation component of sales and lower than average margins on the new
System 9000 introduced into China during 1995, and unexpected start-up costs
on the System 2000 and certain specialty printing systems.
Selling, General and Administrative Expenses. The Company's selling, general
and administrative expenses increased by $4.2 million, or 24.6%, for the year
ended December 31, 1995 compared to the same period in 1994. This was due to
increased advertising, personnel and related costs at operating divisions, and
certain corporate administrative and legal costs. Selling, general and
administrative expenses for 1995 were 15.4% of net sales compared to 16.1% for
1994, due to the $32.5 million increase in sales without corresponding expense
level increases.
Other Income (Expense). The Company's gross interest expense decreased by
$0.4 million, or 10.1%, for 1995 compared to 1994. This was due to reduced
borrowings by the Company as a result of debt reductions in 1994, accomplished
in part through a private placement of stock in September 1994 and the
refinancing of existing debt at a lower interest rate. Interest income
decreased by $0.4 million for 1995 compared to 1994, due to the use of cash to
minimize the amount borrowed under the Company's credit facility.
Comparison of Years Ended December 31, 1994 and 1993
Net Sales. The Company's net sales for 1994 increased by $2.9 million, or
2.8%, compared to net sales in 1993. This was due to increased sales of
specialty/commercial printing systems and packaging systems. Packaging product
sales increased $11.3 million, or 21.2%, primarily due to increased sales of
the System 2000 flexographic printing system and platen cutters.
Specialty/commercial product sales increased $14.8 million, or 64.2%, due to
increased sales, which included a lottery ticket press and several check
printing systems. These increases were offset by a decrease in security and
banknote printing systems of $8.7 million, as the two SNOW banknote printing
systems for Banque de France were in the final completion and customer
acceptance process, as well as the sale of the Post division assets (in August
1993), which generated sales from the sale of folder gluer systems of $14.5
million in 1993. On a geographic basis, net sales to international customers
were $15.0 million, or 14.0%, for 1994 compared with $30.4 million, or 29.3%,
for 1993, due to a decrease in revenues from the SNOW project with Banque de
France.
15
<PAGE>
Gross Profit. The Company's gross profit for 1994 increased by $1.4 million,
or 5.8%, compared to gross profit in 1993, primarily due to the increase in
volume for packaging systems. Gross profit margin for 1994 increased to 24.1%
of net sales as compared to 23.4% of net sales for 1993. This increase in
gross profit margin in 1994 was primarily due to changes in product mix.
Selling, General and Administrative Expenses. The Company's selling, general
and administrative expenses decreased by $0.3 million, or 1.5%, for 1994,
compared to selling, general and administrative expenses in 1993, due to small
decreases in personnel and related expenses in banknote printing systems
operations. Selling, general and administrative expenses for 1994 were 16.1%
of net sales compared to 16.8% for 1993, due to increased sales without
corresponding expense level increases.
Operating Income. Operating income increased $1.7 million, or 24.5% for the
year ended December 31, 1994 as compared to operating income in 1993. As a
percentage of net sales, operating income was 7.9% for 1994 compared with 6.6%
for 1993.
Other Income (Expense). The Company's gross interest expense decreased by
$1.6 million, or 29.0%, for 1994 compared to interest expense in 1993, due to
reduced borrowings as well as a slight decrease in interest rates. The reduced
borrowings were the result of debt reductions in August 1993, February 1994,
May 1994 and September 1994, through the application of proceeds from the sale
of the Post division assets and a manufacturing facility in Grapevine, Texas,
the refinancing of existing debt and a private placement of Series A Common
Stock in September 1994. Interest income decreased by $0.3 million in 1994 as
compared to interest income in 1993, due to the use of cash to reduce
borrowings. Other net expense increased in 1994 by $1.4 million as compared to
1993, primarily because a $1.3 million gain on the sale of certain assets of
Post was included in other income in 1993, with no such corresponding event in
1994.
TAX MATTERS
The Company's effective state and federal income tax rate ("effective tax
rate") was 27.9% and 45% for the year ended December 31, 1995 and 1994,
respectively. This decrease in the effective tax rate was due to certain
research and experimental expenditure tax credits of $0.8 million that were
recorded in 1995.
The Company's effective tax rate for the year ended December 31, 1993 was
73.1%. The unusually high 1993 effective tax rate was primarily due to certain
non-deductible charges, including goodwill amortization and non-deductible
goodwill expenses upon the sale of Post.
The Company's effective tax rate during fiscal 1992 was 0% due to net
operating loss and tax credit carryforwards for income tax purposes.
The Company adopted the provisions of SFAS 109, "Accounting for Income
Taxes", retroactive to January 1, 1993. SFAS 109 requires income taxes to be
accounted for under the liability method rather than in accordance with the
deferred method as previously required by Accounting Principles Board Opinion
No. 11, "Accounting for Income Taxes" (APB No. 11). SFAS 109 requires a
company to recognize deferred tax liabilities and assets for the expected
future tax consequences of events that have been recognized in a company's
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based upon the difference between the
financial statement carrying amounts and tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse. The cumulative effect of the adoption of SFAS 109
increased the Company's net income by approximately $412,000 ($0.05 per share)
in 1993. As a result of applying SFAS 109, $4.8 million of previously
unrecorded deferred tax benefits from net operating loss and tax credit
carryforwards incurred by the Company were recognized at January 1, 1993.
Under prior accounting, a part of these benefits would have been recognized as
a reduction of income tax expense from continuing operations for 1993.
Accordingly, the adoption of SFAS 109 at the beginning of 1993 had the effect
of increasing the federal tax rate applied to operations for 1993 from 0% to
35%.
16
<PAGE>
QUARTERLY RESULTS (UNAUDITED)
The following table summarizes results for each of the four quarters for the
years ended December 31, 1995, 1994 and 1993. Income per share for each year
does not necessarily equal the sum of the four quarters due to the impact of
common stock equivalents (stock options).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DECEMBER 31,
--------- -------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1995:
Net sales.......................... $33,042 $37,474 $33,962 $34,703
Operating income (loss)............ $ 3,294 $ 3,648 $ 3,778 ($1,283)
Net income (loss).................. $ 1,448 $ 1,552 $ 1,781 ($482)
Net income (loss) per common
share............................. $ 0.15 $ 0.16 $ 0.19 ($0.05)
1994:
Net sales.......................... $20,930 $21,281 $29,085 $35,398
Operating income................... $ 1,362 $ 1,303 $ 2,621 $ 3,188
Income before extraordinary item... $ 72 $ 163 $ 954 $ 1,238
Income per common share before
extraordinary item per share...... $ 0.01 $ 0.02 $ 0.10 $ 0.13
1993:
Net sales.......................... $25,295 $27,138 $29,033 $22,296
Operating income................... $ 1,289 $ 2,039 $ 1,964 $ 1,517
Income before cumulative effect of
accounting change................. $ 18 $ 345 $ 190 $ 218
Income per common share before
accounting change................. $ 0.00 $ 0.04 $ 0.02 $ 0.02
</TABLE>
The Company attributes the operating and net loss for the fourth quarter of
1995 to (1) a decrease in orders ($45.5 million versus $65.4 million for the
last six months of 1995 and 1994 respectively) and (2) greater than expected
manufacturing costs, including unexpected warranty costs associated with some
of the Company's new products.
The Company has taken certain actions to adjust its expected 1996 production
to the reduced order flow in 1995. These actions include adjustments to
operations and overhead expenses in the short term. Accordingly, sales and
operating results for 1996 are not anticipated to equal 1995 results. The
Company is implementing cost reduction measures to minimize the impact of the
slowness of orders on future earnings. The expected benefits of such cost
reduction measures may not be fully realized, however, until the second half
of fiscal year 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital primarily to fund working capital for ongoing
operations, to provide for the expansion of manufacturing capacity, to service
its existing debt and to pursue its strategic objectives, including the
development of new products and the penetration of international markets.
Historically, the Company has funded its capital requirements with cash
provided by operating activities, borrowings under credit facilities,
issuances of long-term debt and the sale and private placement of common
stock. Net cash provided by (used in) operating activities was $(3.3) million
in 1993, $17.4 million in 1994 and $(16.7) million for 1995.
Net cash provided by (used in) operating activities (before working capital
requirements) has improved from $7.6 million in 1993 to $9.4 million and $9.3
million in 1994 and 1995, respectively. Working capital provided (used) cash
of $(10.9) million in 1993, $7.9 million in 1994 and $(26.0) million during
1995. The Company's working capital needs increase during periods of sales
growth because of a number of factors, including the duration of the
manufacturing process and the relatively large size of most orders. The large
increase in working capital requirements during 1995 reflected increasing
sales, particularly a growing proportion of international
17
<PAGE>
orders, which typically have less favorable cash flow terms, and the
introduction of new products. The Company believes that continued sales
growth, particularly growth of international orders and the introduction of
new products, may further increase the Company's requirements for working
capital. Working capital usage also increased during 1995 as a result of more
competitive new domestic order terms made necessary by foreign competition,
slowing orders and related lower customer deposits during the latter part of
the year, and receivables collection delays resulting from new product
warranty issues.
Capital expenditures for additions to property, plant and equipment for
1992, 1993, 1994 and 1995 totaled $22.2 million. These expenditures were used
to rebuild the Company's rotary die manufacturing facility that was destroyed
by a fire in 1992, to modernize equipment at all locations and to expand
capacity, including the reopening of the Fort Worth, Texas facility which
occurred during 1995. Approximately $7.3 million of the capital expenditures
were funded by insurance proceeds. In addition, the Company received $6.0
million from the sale of the Post division assets in 1993 and $4.6 million in
1994 from the sale of an idle facility located in Grapevine, Texas. The
Company anticipates that its capital expenditures for 1996 will be
significantly less than 1995. These capital expenditures are anticipated to be
used primarily for continued equipment modernization and for capacity
expansion.
Positive cash flow from operations, as well as asset sales in 1993 and 1994
and a private placement of Series A Common Stock in 1994, enabled the Company
to reduce its long-term debt by $54.8 million during the period from 1992 to
1994. Increases in the Company's net sales necessitated $21.0 million in
working capital borrowings during 1995.
At December 31, 1995, the Company's indebtedness was comprised primarily of
a credit facility and the Company's Subordinated Notes due June 30, 2000. As
of December 31, 1995, there was outstanding $15.3 million in Subordinated
Notes, with principal payments of $3.6 million being due on June 30, 1996 and
each June 30 thereafter, and a final payment of $0.9 million at maturity.
Under its credit facility, the Company may borrow up to $27.0 million in the
form of direct borrowings and letters of credit. As of December 31, 1995,
there was $23.0 million in direct borrowings and $3.3 million in standby
letters of credit outstanding under the credit facility. As a result of the
increased borrowings under the credit facility, the Company's debt to total
capital ratio increased to 45% compared to 27% at the beginning of the year.
The interest rate on direct borrowings under the credit facility is at the
lender's prime rate, or at the Company's option, an offshore rate (generally
equivalent to LIBOR) plus 1.5%. At December 31, 1995, $11.0 million of the
Company's borrowings were at the lender's prime rate of interest (8.75%) and
$12.0 million of the borrowings were at an offshore rate plus 1.5% (7.44%).
The amounts borrowed under the credit facility have been used for working
capital.
Both the agreement concerning the credit facility and the agreement with the
holders of the Subordinated Notes provide for joint and several guaranties by
the domestic operating subsidiaries of the Company. To secure the indebtedness
and the guaranties, a first lien was granted to the lender, and a second lien
was granted to the holders of the Subordinated Notes, on substantially all the
assets of the Company and its domestic subsidiaries. The Company's domestic
operating subsidiaries were merged into the Company effective January 1, 1996.
The borrowings under the credit facility and Subordinated Notes agreement
are subject to various restrictive covenants related to financial ratios as
well as limitations on capital expenditures and additional indebtedness. The
credit facility permits the Company to borrow up to $5 million for domestic
acquisitions without lender consent. The Company is not allowed to pay
dividends.
In March of 1996, the Company and its lender reached an agreement for a
modification of the credit facility. The modification will provide for a
reduction in the minimum required debt service coverage ratio during 1996
consistent with the Company's current expectations. The Company anticipates
final documentation of the modification to be completed in April 1996.
Management believes that cash flow from operations together with existing
borrowing capacity under the Company's credit facility will be adequate to
fund its existing operations, repay indebtedness, and allow it to
18
<PAGE>
pursue its strategic objectives over the next 12 months. In addition, the
Company may incur, from time to time, additional short- and long-term bank
indebtedness (under its existing credit facility or otherwise) and may issue,
in public or private transactions, its equity and debt securities to provide
additional funds necessary for the continued pursuit of the Company's growth
strategies, including the financing of possible future acquisitions. The
availability and terms of any such sources of financing will depend on market
and other conditions. There can be no assurance that such additional financing
will be available or, if available, will be on terms and conditions acceptable
to the Company. In addition to the availability of external financing,
management believes that the Company's liquidity will be impacted by its
ability to achieve a satisfactory resolution of product performance issues,
timely deliveries, acceptance of the ACE system by the Bank of England and
final acceptance of the SNOW press by Banque de France, the degree of
international orders (which generally have less favorable cash flow terms and
require letters of credit that reduce credit availability), terms of domestic
orders, and timely implementation of cost reduction measures. There can be no
assurance that the Company will be successful in any or all of these areas.
ACCOUNTING POLICIES
The Financial Accounting Standards Board ("FASB") has issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which establishes methods for determining and
measuring asset impairment and the required timing of asset impairment
evaluations. In addition, the FASB has issued Statement No. 123, "Accounting
for Stock-Based Compensation", which establishes accounting and disclosure
guidelines for stock-based compensation. Management has evaluated these
statements and believes that they will not have a significant effect on the
financial results of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Management................................................... 19
Independent Auditors' Report........................................... 21
Consolidated Balance Sheets--December 31, 1995 and 1994................ 22
Consolidated Statements of Income--Years Ended December 31, 1995, 1994
and 1993.............................................................. 23
Consolidated Statements of Stockholders' Equity--Years Ended December
31, 1995, 1994 and 1993............................................... 24
Consolidated Statements of Cash Flows--Years Ended December 31, 1995,
1994 and 1993......................................................... 25
Notes to Consolidated Financial Statements............................. 26
Schedule II--Valuation and Qualifying Accounts--Years Ended December
31, 1995, 1994 and 1993............................................... 44
</TABLE>
All other schedules are not submitted because they are not applicable or not
required or because the information is included in the consolidated financial
statements or notes thereto.
REPORT OF MANAGEMENT
The consolidated financial statements of Stevens International, Inc. have
been prepared by management and have been audited by Deloitte & Touche LLP,
the Company's independent auditors, whose report follows. The management of
the Company is responsible for the financial information and representations
contained in the financial statements and other sections of the annual report.
Management believes that the consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
appropriate under the circumstances to reflect, in all material respects, the
substance of events and transactions that should be included. In preparing the
financial statements, it is necessary that management make informed estimates
and judgments based upon currently available information of the effects of
certain events and transactions.
19
<PAGE>
In meeting its responsibility for the reliability of the financial
statements, management depends on the Company's system of internal accounting
control. This system is designed to provide reasonable assurance that assets
are safeguarded and transactions are executed in accordance with management's
authorization and are properly recorded. In designing control procedures,
management recognizes that errors or irregularities may nevertheless occur.
Also, estimates and judgments are required to assess and balance the relative
cost and expected benefits of the controls. Management believes that the
Company's accounting controls provide reasonable assurance that errors or
irregularities that could be material to the financial statements are
prevented or would be detected within a timely period by employees in the
normal course of performing their assigned functions.
The Board of Directors pursues its oversight role for the accompanying
financial statements through its Audit Committee, which is composed soley of
directors who are not officers or employees of the Company. The Committee also
meets with the independent auditors, without management present, to discuss
internal accounting control, auditing, and financial reporting matters.
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Stevens International, Inc.
We have audited the accompanying consolidated balance sheets of Stevens
International, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 8. These financial statements and the financial statement schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Stevens
International, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995 in conformity with generally accepted
accounting principles. Also, in our opinion, the financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information
set forth therein.
As discussed in Note J to the Consolidated Financial Statements, in 1993 the
Company changed its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109.
Deloitte & Touche LLP
Fort Worth, Texas
February 21, 1996
21
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- -------
<S> <C> <C>
ASSETS
------
Current assets:
Cash...................................................... $ 712 $ 396
Temporary investments (Note C)............................ 102 1,077
Trade accounts receivable, less allowance for losses of
$655 and $450 in 1995 and 1994, respectively............. 26,079 13,050
Costs and estimated earnings in excess of billings on
long-term contracts (Note D)............................. 18,341 12,478
Inventory (Note E)........................................ 23,300 20,198
Deferred and refundable income taxes...................... 832 --
Other current assets...................................... 666 498
-------- -------
Total current assets.................................... 70,032 47,697
Property, plant and equipment, net (Notes F and M).......... 32,017 29,734
Other assets, net (Note G).................................. 15,598 16,610
-------- -------
$117,647 $94,041
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Trade accounts payable.................................... $ 15,117 $11,372
Billings in excess of costs and estimated earnings on
long-term contracts (Note D)............................. 219 3,390
Other current liabilities (Note H)........................ 9,019 8,942
Income taxes payable...................................... -- 279
Customer deposits......................................... 3,851 5,929
Advances from affiliates (Note M)......................... -- 932
Current portion of long-term debt (Note I)................ 3,699 161
-------- -------
Total current liabilities............................... 31,905 31,005
Long-term debt (Note I)..................................... 33,470 15,308
Deferred income taxes (Note J).............................. 4,536 5,428
Deferred pension costs (Note L)............................. 2,364 1,335
Commitments and contingencies (Note K)
Stockholders' equity (Note O):
Preferred stock, $0.10 par value, 2,000,000 shares
authorized, none issued and outstanding.................. -- --
Series A Common Stock, $0.10 par value, 20,000,000 shares
authorized, 7,312,000 and 7,130,000 issued and
outstanding at December 31, 1995 and 1994, respectively.. 731 713
Series B Common Stock, $0.10 par value, 6,000,000 shares
authorized, 2,139,000 and 2,236,000 shares issued and
outstanding at December 31, 1995 and 1994, respectively.. 214 224
Additional paid-in capital................................ 39,144 38,737
Foreign currency translation adjustment................... 359 68
Excess pension liability adjustment....................... (1,036) (438)
Retained earnings......................................... 5,960 1,661
-------- -------
Total stockholders' equity.............................. 45,372 40,965
-------- -------
$117,647 $94,041
======== =======
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $139,181 $106,694 $103,762
Cost of sales.................................... 108,307 81,009 79,476
-------- -------- --------
Gross profit..................................... 30,874 25,685 24,286
Selling, general and administrative expenses..... 21,437 17,211 17,477
-------- -------- --------
Operating income................................. 9,437 8,474 6,809
Other income (expense):
Interest income................................ 207 647 956
Interest expense............................... (3,421) (3,807) (5,361)
Other, net..................................... (264) (979) 465
-------- -------- --------
(3,478) (4,139) (3,940)
-------- -------- --------
Income before taxes, extraordinary item and
cumulative effect of accounting change.......... 5,959 4,335 2,869
Income tax (expense) (Note J).................... (1,660) (1,908) (2,098)
-------- -------- --------
Income before extraordinary item and cumulative
effect of accounting change..................... 4,299 2,427 771
Extraordinary item, net of tax (Note I).......... -- (85) --
Cumulative effect of change in method of
accounting for income taxes (Note J)............ -- -- 412
-------- -------- --------
Net income................................... $ 4,299 $ 2,342 $ 1,183
======== ======== ========
Income (loss) per common share:
Income (loss) before extraordinary item and
cumulative effect of accounting change........ $ 0.45 $ 0.26 $ 0.08
Extraordinary item (Note I).................... -- (0.01) --
Accounting change (Note J)..................... -- -- 0.05
-------- -------- --------
Net income................................... $ 0.45 $ 0.25 $ 0.13
======== ======== ========
Weighted average number of shares of common and
common stock equivalents outstanding during the
periods (Note O)................................ 9,553 9,256 9,129
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN EXCESS
SERIES A STOCK SERIES B STOCK ADDITIONAL CURRENCY PENSION RETAINED
---------------- ----------------- PAID-IN TRANSLATION LIABILITY EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT ADJUSTMENT (DEFICIT) TOTAL
------- ------- ------- ------- ---------- ----------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of January 1,
1993................... 6,677 $ 667 2,337 $ 234 $36,978 $(78) $ (155) $(1,864) $35,782
Foreign currency
translation
adjustment............ -- -- -- -- -- 25 -- -- 25
Excess pension
liability adjustment.. -- -- -- -- -- -- (509) -- (509)
Conversion of Series B
stock to Series A
stock................. 101 10 (101) (10) -- -- -- -- --
Exercise of stock
options............... 9 2 -- -- 37 -- -- -- 39
Net income............. -- -- -- -- -- -- -- 1,183 1,183
------- ------ ------- ------ ------- ---- ------- ------- -------
Balance, December 31,
1993................... 6,787 679 2,236 224 37,015 (53) (664) (681) 36,520
Sale of stock.......... 300 30 -- -- 1,516 -- -- -- 1,546
Foreign currency
translation
adjustment............ -- -- -- -- -- 121 -- -- 121
Excess pension
liability adjustment.. -- -- -- -- -- -- 226 -- 226
Exercise of stock
options............... 43 4 -- -- 206 -- -- -- 210
Net income............. -- -- -- -- -- -- -- 2,342 2,342
------- ------ ------- ------ ------- ---- ------- ------- -------
Balance, December 31,
1994................... 7,130 713 2,236 224 38,737 68 (438) 1,661 40,965
Foreign currency
translation
adjustment............ -- -- -- -- -- 291 -- -- 291
Excess pension
liability adjustment.. -- -- -- -- -- -- (598) -- (598)
Conversion of Series B
stock to Series A
stock................. 97 10 (97) (10) -- -- -- -- --
Exercise of stock
options............... 85 8 -- -- 407 -- -- -- 415
Net income............. -- -- -- -- -- -- -- 4,299 4,299
------- ------ ------- ------ ------- ---- ------- ------- -------
Balance, December 31
1995................... 7,312 $ 731 2,139 $ 214 $39,144 $359 $(1,036) $ 5,960 $45,372
======= ====== ======= ====== ======= ==== ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER,
---------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Cash provided by operations:
Net income....................................... $ 4,299 $ 2,342 $ 1,183
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization.................. 5,215 4,944 4,635
Deferred taxes................................. (892) 525 2,110
Deferred pension costs......................... 1,029 675 169
Other.......................................... (308) 956 (131)
Cumulative effect of change in method of
accounting for income taxes................... -- -- (412)
Changes in operating assets and liabilities net
of effects from purchase of subsidiary:
Trade accounts receivable...................... (13,029) 2,309 (726)
Contract costs in excess of billings........... (9,034) (2,466) (9,328)
Inventory...................................... (3,102) 4,105 441
Refundable income taxes........................ (832) -- --
Other assets................................... (615) (541) (1,485)
Trade accounts payable......................... 3,744 1,696 (386)
Other.......................................... (3,211) 2,844 623
-------- -------- -------
Total cash provided by (used in) operating
activities.................................. (16,736) 17,389 (3,307)
-------- -------- -------
Cash provided by (used in) investing activities:
Additions to property, plant and equipment....... (5,303) (2,356) (7,646)
Proceeds from insurance and sale of assets....... (212) 4,630 243
Deposits and other............................... 129 (284) 2,468
Disposal of the net assets of subsidiary......... -- -- 5,941
-------- -------- -------
Total cash provided by (used in) investing
activities.................................. (5,386) 1,990 1,006
-------- -------- -------
Cash provided by (used in) financing activities:
Net increase in (payments on) long-term debt..... 21,048 (23,430) (4,476)
Sale of stock and exercise of stock options...... 415 1,756 38
-------- -------- -------
Total cash provided by (used in) financing
activities.................................. 21,463 (21,674) (4,438)
-------- -------- -------
Increase (decrease) in cash and temporary
investments....................................... (659) (2,295) (6,739)
Cash and temporary investments at beginning of
year.............................................. 1,473 3,768 10,507
-------- -------- -------
Cash and temporary investments at end of year...... $ 814 $ 1,473 $ 3,768
======== ======== =======
Supplemental disclosure of cash flow information:
Interest......................................... $ 2,622 $ 3,580 $ 4,872
Income taxes..................................... 3,261 1,243 707
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Stevens
International, Inc. (formerly Stevens Graphics Corporation) and all of its
wholly owned subsidiaries (the "Company"). All significant intercompany
transactions have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenue on the sale of equipment and parts when units
are shipped or when completed units are accepted by the customer. Revenue and
cost on certain long-term contracts are recognized as work is performed, based
upon the percentage that incurred costs bear to estimated total contract costs
(percentage of completion method). In the event of an anticipated loss under
the percentage of completion method, the entire amount of the loss is charged
to operations during the accounting period in which the amount of the
anticipated loss is determined.
Inventory
Approximately 49% and 52% of inventory at December 31, 1995 and 1994,
respectively, is valued at the lower of cost, using the last-in, first-out
(LIFO) method, or market with the remainder valued using the first-in, first-
out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
on a straight-line basis over the estimated useful lives of three to forty
years for the related assets.
Other Assets
Included in other assets are a covenant not to compete, patent costs,
buildings and improvements held for sale, and goodwill. These are amortized
over the noncompete period, the remaining life of the patents, the depreciable
useful lives of the buildings, and thirty years, respectively.
Income Taxes
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109) in 1993. SFAS 109
required income taxes to be accounted for under the liability method rather
than in accordance with the deferred method as previously required by
Accounting Principles Board Opinion No. 11, "Accounting for Income Taxes" (APB
No. 11). SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based upon the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.
Income Per Common Share
Income per common share is based on the weighted average number of shares of
common and common stock equivalents (stock options, when dilutive)
outstanding.
26
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Asset Impairment of Long Lived Tangible and Intangible Assets
Potential impairment of long-lived tangible and intangible assets is
assessed annually (unless economic events warrant more frequent reviews) on an
asset-by asset-basis.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets, liabilities,
revenues and expenses as of and for the reporting period. Estimates and
assumptions are also required in the disclosure of contingent assets and
liabilities as of the date of the financial statements. Actual results may
differ from such estimates.
Stock-Based Compensation
Compensation expense is recorded with respect to stock option grants to
employees using the intrinsic value method prescribed by Accounting Principles
Board Opinion No. 25. This method calculates compensation expense on the
measurement date (usually the date of grant) as the excess of the current
market price of the underlying Company stock over the amount the employee is
required to pay for the shares, if any. The expense is recognized over the
vesting period of the grant or award. The Company does not intend to elect the
fair value method of accounting for stock-based compensation encouraged, but
not required, by Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation". See Note O.
B. FORMATION OF SSMI AND SALE OF POST
In January 1995, the Company formed Societe Specialisee dans le Materiel
d'Imprimerie ("SSMI"), a French company, and acquired the assets of its
predecessor, Societe Specialisee dans le Materiel d'Imprimerie Offset
("SSMIO") for approximately FF1.8 million ($368,000). SSMI is a company
engaged in the service and repair of printing presses. Assets acquired were
recorded at fair market values; there were no costs in excess of net assets
acquired. The acquisition did not have a material pro forma impact on
operations.
In August 1993, the Company sold specific assets of Post including the
product technology and related intangibles to Bobst Group, Inc., the U.S.
operating unit of Bobst, S.A. of Switzerland. Post contributed sales of
approximately $14 million and income before interest, corporate charges and
taxes of approximately $4.6 million for 1993, including a gain of $1.3 million
on the sale of assets to Bobst Group, Inc. The gain on assets sold is
reflected in the 1993 results of operations as "other income". This gain was
entirely offset by the Company's abnormally high tax rate for this
transaction, due in part to the non-deductible Post goodwill expensed upon the
sale of Post's technology.
C. TEMPORARY INVESTMENTS
Temporary investments (stated at cost, which approximates market) at
December 31, 1995 and 1994 consisted of short term investments in commercial
paper, with original maturities within ninety days, and money management
accounts.
27
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
D. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED LONG-TERM CONTRACTS
Unbilled costs and estimated earnings on uncompleted contracts represent
revenue earned but not billable under terms of the related contracts being
accounted for using the percentage of completion revenue recognition method. A
summary of all costs and related progress billings at December 31, 1995 and
1994 follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Cost incurred on uncompleted contracts.............. $ 28,828 $ 27,097
Estimated earnings.................................. 10,861 11,699
----------- -----------
Revenue from long-term contracts.................... 39,689 38,796
Less: Billings to date.............................. 21,567 29,708
----------- -----------
$ 18,122 $ 9,088
=========== ===========
</TABLE>
The $18,122,000 and $9,088,000 net differences are included in the
accompanying balance sheets under the following captions:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Cost and estimated earnings in excess of billings
on long-term contracts.......................... $ 18,341 $ 12,478
Billings in excess of costs and estimated
earnings on long-term contracts................. (219) (3,390)
----------- -----------
$ 18,122 $ 9,088
=========== ===========
</TABLE>
E. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Finished product..................................... $ 7,204 $ 5,332
Work in progress..................................... 9,231 6,670
Raw material......................................... 6,865 8,196
----------- -----------
$ 23,300 $ 20,198
=========== ===========
</TABLE>
As required by Accounting Principles Board Opinion No. 16, inventories of
acquired companies were recorded at their estimated fair value at the date of
acquisition less costs of disposition including a reasonable selling effort.
Accordingly, at December 31, 1995 and 1994 the financial accounting basis for
LIFO inventories exceeded the tax basis by approximately $4,479,000 and
$4,724,000, respectively. Replacement cost exceeds financial accounting LIFO
cost by approximately $3,457,000 and $3,219,000 at December 31, 1995 and 1994,
respectively.
28
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
F. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
RANGE OF DECEMBER 31,
ESTIMATED USEFUL -----------------------
LIVES 1995 1994
---------------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Land.............................. N/A $ 1,985 $ 1,508
Building and improvements......... 15-40 years 11,308 9,570
Machinery and equipment........... 5-18 years 30,105 27,393
Furniture and fixtures............ 3-10 years 10,355 9,441
Leasehold improvements............ 8-20 years 1,703 1,445
----------- -----------
55,456 49,357
Less: accumulated depreciation and
amortization..................... 23,439 19,623
----------- -----------
$ 32,017 $ 29,734
=========== ===========
</TABLE>
G. OTHER ASSETS
Other assets consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Goodwill, net of amortization of $3,513 and
$3,088, respectively............................. $ 9,493 $ 9,897
Patents, net of amortization of $2,132 and $1,904,
respectively..................................... 1,760 1,981
Buildings and improvements held for sale.......... -- 450
Performance bond deposits......................... 1,504 1,504
Intangible pension asset.......................... 941 944
Other............................................. 1,900 1,834
----------- -----------
$ 15,598 $ 16,610
=========== ===========
</TABLE>
H. OTHER CURRENT LIABILITIES
Other current liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Salaries and wages.................................. $ 1,602 $ 1,635
Taxes other than income taxes....................... 979 806
Employee benefits................................... 1,512 1,208
Accrued interest.................................... 416 464
Other accrued expenses.............................. 4,510 4,829
----------- -----------
$ 9,019 $ 8,942
=========== ===========
</TABLE>
29
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
I. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Senior subordinated notes,
interest at 10.5% (Net of
unamortized origination
fees of $780 and $798)... $ 14,481 $ 14,463
Notes payable to banks,
interest at prime rate,
or an offshore rate plus
1.5% at December 31, 1995
(Net of unamortized
origination fees of $469
and $726)................... 22,531 768
Capital lease obligations
due in varying
installments............. 108 238
Other..................... 49 --
----------- -----------
37,169 15,469
Less: current portion..... 3,699 161
----------- -----------
$ 33,470 $ 15,308
=========== ===========
</TABLE>
The interest rate on direct borrowings under the Company's Bank Credit
Facility is at the lender's prime rate, or at the Company's option, an
offshore rate (generally equivalent to LIBOR) plus 1.5%. At December 31, 1995,
$11.0 million of the Company's borrowings were at the lender's prime rate of
interest (8.5%) and $12.0 million of the borrowings were at an offshore rate
plus 1.5% (7.44%). The interest rate on the Company's Bank Credit Facility was
at prime plus 1.25% or 9.75% at December 31, 1994.
At December 31, 1995, the Company's indebtedness was comprised primarily of
a bank credit facility due April 30, 1998 and Senior Subordinated Notes due
June 30, 2000 (the "Subordinated Notes"). As of December 31, 1995, there was
outstanding $15.3 million under the Subordinated Notes, bearing interest at
the rate of 10.5% per annum, with principal payments of $3.6 million being due
on June 30, 1996 and each June 30 thereafter until a final payment of $0.86
million on June 30, 2000.
Under its credit facility, the Company may borrow up to $27.0 million in the
form of direct borrowings and letters of credit. As of December 31, 1995,
there was $23.0 million in direct borrowings and $3.3 million in standby
letters of credit outstanding under the credit facility. As of December 31,
1995 the unused line of credit was $0.7 million.
In September 1994, the Company redeemed $2.5 million of the Subordinated
Notes (without premium or penalty). Sources for this reduction were the net
proceeds from a private placement of 300,000 shares of Series A common stock
and bank borrowings. See Note O. Pursuant to the amended subordinated note
agreement, this principal payment resulted in a reduction in the interest rate
to the minimum defined interest rate of 10.5%.
The early extinguishment of debt in September 1994 resulted in an
extraordinary loss of $85,000 (or $0.01 per share), net of income tax benefit
of $67,000, as a result of the write-off of loan origination costs which were
being amortized over the life of the indebtedness.
30
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Principal maturities of the outstanding long-term debt at December 31, 1995,
are as follows (Amounts in thousands):
<TABLE>
<S> <C>
Year ending December 31, 1996....................................... $ 3,699
1997................................................................ 3,631
1998................................................................ 26,620
1999................................................................ 3,606
2000................................................................ 862
2001 and thereafter................................................. 0
-------
38,418
Less unamortized loan origination fees............................ 1,249
-------
$37,169
=======
</TABLE>
Both the agreement concerning the credit facility and the agreement with the
holders of the Subordinated Notes provide for joint and several guaranties by
the domestic operating subsidiaries of the Company. To secure the indebtedness
and the guaranties, the first lien was granted to the lender, and a second
lien was granted to the holders of the Subordinated Notes, on substantially
all the assets of the Company and its domestic subsidiaries. The Company's
domestic operating subsidiaries were merged into the Company effective January
1, 1996.
The borrowings under the credit facility and Subordinated Notes agreement
are subject to various restrictive covenants related to financial ratios as
well as limitations on capital expenditures and additional indebtedness. The
credit facility permits the Company to borrow up to $5 million for domestic
acquisitions without lender consent. The Company is not allowed to pay
dividends.
In March of 1996, the Company reached an agreement with its lender for a
modification of the credit facility. The modification will provide for a
reduction in the minimum required debt coverage ratio during 1996 consistent
with the Company's current expectations. The Company anticipates final
documentation of the modification to be completed in April 1996.
J. INCOME TAXES
The Company and its domestic subsidiaries file consolidated income tax
returns. At December 31, 1995, the Company had the following losses and
credits available for carryforward for federal income tax purposes:
<TABLE>
<S> <C>
General business credit--expiring in 2005, 2009 and 2010......... $ 897,000
Minimum tax credit--not subject to expiration.................... 1,612,000
</TABLE>
SFAS No. 109 was adopted by the Company in 1993. The cumulative effect of
the adoption of SFAS No. 109 increased the company's net income by
approximately $412,000 ($0.05 per share) in 1993.
31
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, and
(b) operating loss and tax credit carryforwards. The tax effects of
significant items comprising the Company's net deferred tax liability as of
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Difference between book and tax basis of
property........................................ $ 6,097 $ 6,224
Difference between book and tax basis of
intangibles..................................... 674 753
Excess of tax over book pension cost............. 270 536
Differences between book and tax LIFO inventory
reserves........................................ 2,723 2,723
Other............................................ 241 183
----------- -----------
10,005 10,419
----------- -----------
Deferred tax assets:
Difference between book and tax basis of pension
liability....................................... 557 --
Reserves not currently deductible................ 2,403 2,497
Net operating loss, credit and other
carryforwards................................... 2,509 2,494
----------- -----------
5,469 4,991
----------- -----------
Net deferred tax liability......................... $ 4,536 $ 5,428
=========== ===========
</TABLE>
The effective state income tax rate for 1993 and certain non-deductible
charges, including goodwill amortization, comprise the principal reasons for
the abnormally high 1993 effective federal income tax rate of 73%. As a result
of applying SFAS No. 109, $4,799,000 of previously unrecognized deferred tax
benefits from net operating loss and tax credit carryforwards were recognized
at January 1, 1993. Under prior accounting, a part of these benefits would
have been recognized as a reduction of income tax expense from continuing
operations in 1993. Accordingly, the adoption of SFAS No. 109 at the beginning
of 1993 had the effect of increasing the effective tax rate applied to
continuing operations for 1993 from 0% to 34%.
The provisions for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Current provision for income taxes................. $ 1,995 $ 1,383 $ 785
Deferred provision for income taxes................ (335) 525 1,313
------- ------- -------
$ 1,660 $ 1,908 $ 2,098
======= ======= =======
</TABLE>
32
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax expense results from differences in the basis of assets and
liabilities between income tax and financial reporting purposes. The sources
of these differences and the tax effect of each were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
------- ------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Excess of tax over book
depreciation/amortization (book over tax)...... $ (129) $ 95 $ (143)
Excess of tax over book pension cost (book over
tax)........................................... (145) (20) 77
Warranty cost and inventory reserves charged to
expense on books, but not deductible until paid
for tax purposes (tax over book)............... (229) 191 (241)
Employee benefits accrued but not paid currently
(tax over book)................................ 14 (112) (61)
Restructuring charge............................ 8 103 388
Gain on involuntary conversion.................. -- -- 196
Excess of book over tax loss on sale of
intangible and fixed assets.................... (37) (261) (961)
Utilization of tax loss carryforward and other.. 183 529 2,058
------- ------- --------
$ (335) $ 525 $ 1,313
======= ======= ========
</TABLE>
The Company's effective tax rate varies from the statutory federal income
tax rate for the following reasons:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Tax expense (benefit), at statutory rate*....... $ 2,026 $ 1,474 $ 975
Foreign sales corporation earnings.............. (384) (174) --
Goodwill expense, not deductible for tax
purposes....................................... 140 140 1,037
Other, net...................................... 189 196 (174)
State and local taxes........................... 338 257 237
Foreign taxes................................... 13 15 23
General business credit......................... (662) -- --
------- ------- -------
Actual tax expense.............................. $ 1,660 $ 1,908 $ 2,098
======= ======= =======
</TABLE>
- --------
* Calculated from income before income tax excluding extraordinary item and
cumulative effect of accounting change.
K. COMMITMENTS AND CONTINGENCIES
The Company leases equipment, office and manufacturing facilities under
operating leases. These leases in some instances include renewal provisions at
the option of the Company. Rent expense for the years ended December 31, 1995,
1994, and 1993 was approximately $703,000, $520,000, and $566,000,
respectively.
The following is a schedule by year of minimum rental payments due under
non-cancelable leases with initial or remaining minimum lease terms in excess
of one year as of December 31, 1995:
<TABLE>
<CAPTION>
OPERATING
-----------
(AMOUNTS IN
THOUSANDS)
<S> <C>
Year ending December 31, 1996.................................... $381
1997............................................................. 263
1998............................................................. 26
1999............................................................. 17
2000............................................................. 17
2001 and thereafter.............................................. 7
----
Total minimum lease payments................................... $711
====
</TABLE>
33
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1995, the Company had no major capital equipment leases and
$288,000 of outstanding capital expenditure purchase commitments.
The Company is contingently liable for approximately $0.9 million at
December 31, 1995, under terms of customer financing arrangements. These
arrangements provide for a loss sharing formula whereby the Company generally
is responsible for 15% of the ultimate net loss, if any, in the event of
default by the customers on their financing agreements. Management believes
the likelihood of materially adverse effects on the financial position or
results of operations of the Company as a result of these agreements is
remote.
The Company is a party to a number of legal actions arising in the ordinary
course of its business. In management's opinion, the Company has adequate
legal defense and/or insurance coverage regarding each of these actions and
does not believe that such actions, either individually or in the aggregate,
will materially affect the Company's operations or financial position.
Included as part of the Company's agreement in principle to a settlement of
the Lasker class action lawsuit is an offer of $700,000 of warrants to
purchase Series A stock. This possible settlement action, if approved by the
court and the shareholders in 1996, could result in a $700,000 pre-tax non-
cash charge to operations in 1996.
L. EMPLOYEE BENEFIT PLAN
Effective January 1, 1992, the Company adopted a profit sharing and 401(k)
savings retirement plan to cover all non-union employees of the Company. In
1994, union employees of the Company were covered under this plan. With the
institution of this plan, the assets of existing profit sharing plans were
vested in participant accounts and merged into the 401(k) savings retirement
plan. The 401(k) plan provides for a tax deferred employee elective
contribution up to 15% of annual compensation or the maximum amount allowed as
determined by the Internal Revenue Code ($9,240 in 1995 and 1994) and a
discretionary matching contribution by the Company for non-union employees.
For the years, 1995, 1994 and 1993, the Company agreed to match 25% of non-
union employee elective contributions up to 4% of employee 1994 and 1993
annual compensation. Company contributions to profit sharing plans were
$104,000 in 1995, $106,000 in 1994, and $44,000 in 1993.
The Company has defined benefit pension plans covering its employees at
December 31, 1995. Such plans provide for monthly benefits, normally at age
65, after completion of continuous service requirements. The Company's general
funding policy is to contribute amounts deductible for federal income tax
purposes. The assets of the pension plans are maintained in trusts and consist
primarily of equity and fixed income securities. Pension expense was $607,000
in 1995, $630,000 in 1994 and $468,000 in 1993.
Beginning January 1, 1989, the Company was required to recognize a liability
in the amount of the Company's unfunded accumulated benefit obligation, with
an equal amount to be recognized as either an intangible asset or a reduction
of equity, net of applicable deferred income taxes. Based upon actuarial and
plan asset information as of December 31, 1995, the Company has recorded a
pension liability of $2.9 million and a corresponding intangible asset of $0.9
million and reduction of equity of approximately $1.6 million before
adjustment for tax effects.
34
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the funded status of the Company's defined
benefit pension plans and the related amounts recognized in the Company's
consolidated financial statements for 1995 and 1994.
<TABLE>
<CAPTION>
1995 STATUS OF PLANS 1994 STATUS OF PLANS
-------------------- -----------------------------
PLANS WHERE PLANS WHERE PLANS WHERE
BENEFITS EXCEED ASSETS EXCEED BENEFITS EXCEED
ASSETS BENEFITS ASSETS
-------------------- ------------- ---------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value
of benefit obligations:
Vested................ $6,425 $1,543 $2,603
Non-vested............ 505 175 168
------ ------ ------
Accumulated benefit
obligation............. $6,930 $1,718 $2,771
====== ====== ======
Plan assets at fair
value.................. $4,194 $2,195 $1,863
Projected benefit
obligation............. 7,933 2,167 2,771
------ ------ ------
Projected benefit
obligation in excess of
(less than) plan
assets................. 3,739 (28) 908
Unrecognized prior
service cost........... 28 960 (944)
Unrecognized net gain
(loss)................. (2,960) (17) (438)
Unrecognized net asset
(liability) at
January 1, 1987........ (343) (387) --
Adjustment required to
recognize minimum
liability.............. 2,456 -- 1,382
------ ------ ------
Pension liability
recognized in balance
sheet.................. $2,920 $ 528 $ 908
====== ====== ======
</TABLE>
Net periodic pension cost was composed of the following elements:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Service cost....................................... $ 388 $ 490
Interest cost...................................... 496 494
Actual return on plan assets:
Loss (gain)...................................... (720) 157
Deferred (loss) gain............................. -- (611)
Net amortization and deferral...................... 443 100
----------- -----------
Net periodic pension cost........................ $ 607 $ 630
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Major assumptions used:
Discount rate.................................. 6.95% 8.60% 7.50%
Expected long-term rate of return on assets.... 8.50% 8.50% 8.50%
Rate of increase in compensation levels........ 4.00% 4.00% 4.00%
</TABLE>
The Company has executive incentive plans which provide additional
compensation for officers and key employees based upon income and attainment
of other predetermined goals and objectives. Such incentives aggregating
$497,000, $723,000 and $75,000 were paid or charged to expense pursuant to the
plans in 1995, 1994 and 1993, respectively.
35
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In addition to providing certain retirement benefits, the Company has
insurance coverage available for certain health care and life insurance
benefits for retired personnel on a fully reimbursable basis. Since the cost
of these programs is paid for by retired employees, no expenses are recorded
in accordance with guidelines in Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions."
M. RELATED PARTY TRANSACTIONS
The Company and Xytec, a subsidiary of Stevens Industries, Inc. one of the
principal shareholders of the Company, entered into an agreement during 1994
for Xytec to provide software and computer related services and equipment of
$1.2 million as a subcontractor on a major contract. During 1995 and 1994, the
Company paid approximately $784,000 and $287,000 to Xytec on this contract. In
addition, Xytec previously provided certain computer hardware and software to
the Company. The Company's payments for Xytec computer hardware and software
during 1993 of approximately $113,000 are included in net property, plant and
equipment.
Two company directors and officers are partners in a venture that leases
office facilities to the Company. Amounts paid to the partnership as rent and
maintenance were approximately $111,000 in 1995, 1994 and 1993, respectively.
In January and February 1994, Stevens Industries, Inc. advanced an aggregate
of $900,000 to Stevens Security Systems, S.A. in exchange for a Stevens
Security Systems, S.A. 6% note due February 1995. These advances were repaid
in full in February 1995.
N. RESEARCH AND DEVELOPMENT, SALES TO MAJOR CUSTOMERS AND FOREIGN SALES
For the years ended December 31, 1995, 1994 and 1993, the Company incurred
research and development expenses of approximately $1,976,000, $2,162,000 and
$1,489,000, respectively.
Net sales to customers outside of the United States in 1995, 1994 and 1993
were approximately $36,479,000, $14,957,000 and $30,414,000, respectively.
In 1995, 1994 and 1993, no single customer accounted for more than 10% of
total sales, except for a $26 million project with the Banque de France. This
contract resulted in sales of approximately $2 million in 1995, $3 million in
1994, and $13 million in 1993.
O. STOCK TRANSACTIONS AND VOTING RIGHTS
In September 1994, the Company sold 300,000 shares of Series A common stock
at $5.50 per share in a private placement. Net proceeds of $1,546,000 after
related expenses of $104,000 were used to extinguish Senior Subordinated debt.
The sale of stock and bank borrowings enabled the reduction of $2,500,000 of
Senior Subordinated debt and reduced the interest rate on this indebtedness
from 11.25% to 10.5%.
The Series A and Series B stock differ only as to voting and conversion
rights. As to matters other than the election of directors, the holders of
Series A stock and Series B stock vote together as a class, with each holder
of Series A stock having one-tenth of one vote for each share of Series A held
and each holder of Series B stock having one vote for each share of Series B
stock held. Holders of Series A stock, voting separately as a class, are
entitled to elect 25% of the total membership of the board of directors.
Holders of Series B stock, voting separately as a class, are entitled to elect
the remaining directors.
The shares of Series B stock are convertible, share-for-share, into shares
of Series A stock at the election of the holder thereof at any time. Once a
share of Series B stock is converted into a share of Series A stock, such
36
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
share of Series A stock may not be converted into any other security. The
Company's certificate of incorporation further provides that the Company may
not engage in a merger or consolidation with any other corporation unless each
holder of Series A stock and each holder of Series B stock receives identical
consideration per share in the merger or consolidation. If a dividend other
than a stock dividend is to be paid, it will be paid equally to holders of
both series of common stock, share-for-share. If a stock dividend is to be
paid to holders of common stock, it must be paid proportionately to the
holders of both series of common stock either (a) in Series A stock to holders
of both Series A and Series B stock or (b) in Series A stock to holders of
Series A stock and in Series B stock to holders of Series B stock.
In 1987, the Company adopted a stock option plan in which incentive and
nonqualified stock options may be granted to key employees to purchase shares
of common stock at a price not less than the fair market value at the date of
grant for each incentive option and at not less than 85% of the fair market
value at the date of the grant for each nonqualifed option. The aggregate
number of common shares for which options may be granted is 795,000, subject
to adjustment for stock splits and other capital adjustments. The plan permits
the grant of options for a term of up to ten years. Outstanding options are
generally exercisable either immediately or in two installments beginning one
year after the date of grant and expire five to seven years after the date of
grant.
Options to purchase shares of common stock have also been granted to
directors and others who are not eligible to participate in the 1987 employee
plan. A summary of stock option activity for the last three years follows:
<TABLE>
<CAPTION>
SERIES A OPTION PRICE
STOCK OPTION PER SHARE
------------ ------------
<S> <C> <C>
Stock Option Plan:
Balance, January 1, 1993.......................... 402,000 $ 4.56
Granted.......................................... 30,000 5.50
Exercised........................................ (8,500) 4.56
Cancelled........................................ (19,000) 4.56
------- -----------
Balance, December 31, 1993........................ 404,500 $4.56-$5.50
Granted.......................................... 256,000 3.50- 6.50
Exercised........................................ (43,000) 4.56- 5.50
Cancelled........................................ (5,000) 4.56
------- -----------
Balance, December 31, 1994........................ 612,500 $4.56-$6.50
Granted.......................................... 257,000 7.13
Exercised........................................ (65,600) 4.56
Cancelled........................................ (41,000) 4.56- 7.13
------- -----------
Balance, December 31, 1995........................ 762,900 $4.56-$7.13
======= ===========
</TABLE>
Options for 536,900 shares are exercisable at December 31, 1995.
<TABLE>
<CAPTION>
SERIES A OPTION PRICE
STOCK OPTION PER SHARE
------------ ------------
<S> <C> <C>
Directors and Others:
Balance, December 31, 1992 and December 31,
1993........................................... 39,500 $4.56-$15.00
Granted........................................ 70,000 5.65- 6.00
------- ------------
Balance, December 31, 1994...................... 109,500 $4.56-$15.00
Granted........................................ 35,000 7.19
Exercised...................................... (20,000) 5.65- 6.00
Cancelled...................................... (15,000) 5.65- 15.00
------- ------------
Balance, December 31, 1995...................... 109,500 $4.56-$ 7.19
======= ============
</TABLE>
Options for 109,500 shares are exercisable at December 31, 1995.
37
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
P. QUARTERLY RESULTS (UNAUDITED)
The following table summarizes results for each of the four quarters for the
years ended December 31, 1995 and 1994. Income per share for each year does
not necessarily equal the sum of the four quarters due to the impact of common
stock equivalents (stock options).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- -------- ------------- ------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1995:
Net sales.................. $33,042 $37,474 $33,962 $34,703
Gross profit (loss)........ 8,149 8,567 9,538 (1,283)
Net income (loss).......... 1,448 1,552 1,781 (482)
Net income (loss) per
share..................... 0.15 0.16 0.19 (0.05)
1994:
Net sales.................. $20,930 $21,281 $29,085 $35,398
Gross profit............... 5,561 5,214 6,750 8,160
Income before extraordinary
loss...................... 72 163 954 1,238
Income before extraordinary
loss per share............ 0.01 0.02 0.10 0.13
Net income................. 72 163 869 1,238
Net income per share....... 0.01 0.02 0.09 0.13
</TABLE>
Q. FINANCIAL INSTRUMENTS, MARKET AND CREDIT RISK
Financial Accounting Standards Board ("FASB") Statement No. 107, "Disclosure
about Fair Value of Financial Instruments", is a part of a continuing process
by the FASB to improve information on financial instruments. The following
methods and assumptions were used by the Company in estimating its fair value
disclosure for such financial instruments as defined by the Statement:
Cash and Temporary Investments
The carrying amount reported in the balance sheet for cash and cash
equivalents approximates its fair value.
Performance bond deposits
The fair values for performance bond deposits are estimated using discounted
cash flow analyses based upon U.S. Treasury notes due in 1997.
Long-Term Debt
The carrying amounts of the Company's borrowings under its revolving credit
agreements approximate fair value. The fair values of the Company's other
long-term debt either approximate fair value or are estimated using discounted
cash flow analyses based on the Company's current incremental borrowing rates
for similar types of borrowing arrangements.
Letters of Credit
The Company utilizes letters of credit to back certain financing instruments
and insurance policies. The letters of credit reflect fair value as a
condition of their underlying purpose and are subject to fees competitively
determined in the market place.
38
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and trade accounts
receivable.
The Company maintains cash and cash equivalents and certain other financial
instruments with various financial institutions. The Company's policy is
designed to limit exposure to any one institution. The Company's periodic
evaluations of the relative credit standing of these financial institutions
are considered in the Company's investment strategy.
Concentration of credit risk with respect to trade accounts receivable are
limited due to the number of entities comprising the Company's customer base
and their dispersion across the printing and graphic arts industries. As of
December 31, 1995, the Company had no significant concentrations of credit
risk.
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Cash and temporary investments.................... $ 814 $ 814
Performance bond deposits......................... 1,504 1,425
Long-term debt.................................... 33,470 33,500
Off-Balance Sheet Financial Instruments:
Letters of credit............................... -0- 3,322
</TABLE>
39
<PAGE>
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 concerning the directors of the Company is set forth in the
Proxy Statement to be delivered to stockholders in connection with the
Company's Annual Meeting of Stockholders to be held during 1996 (the "Proxy
Statement") under the heading "Election of Directors", which information is
incorporated herein by reference. The name, age and position of each executive
officer of the Company is set forth under "Executive Officers of the
Registrant" in Item 1 of this report, which information is incorporated herein
by reference. The information required by Item 405 of Regulation S-K is set
forth in the Proxy Statement under the heading "Section 16 Requirements",
which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information concerning management compensation and transactions with
management is set forth in the Proxy Statement under the heading "Management
Compensation and Transactions", which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading
"Principal Stockholders and Management Ownership", which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information concerning certain relationships and related transactions is
set forth in the Proxy Statement under the heading "Management Compensation
and Transactions", which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Annual Report on
Form 10-K:
(1) Financial Statements:
The financial statements filed as a part of this report are listed in
the "Index to Consolidated Financial Statements and Financial Statement
Schedules" at Item 8.
(2) Financial Statement Schedules:
The financial statement schedules filed as a part of this report are
listed in the "Index to Consolidated Financial Statements and Financial
Statement Schedules" at Item 8.
(3) Exhibits
The exhibits filed as a part of this report are listed under
"Exhibits" at subsection (c) of this Item 14.
(b) Reports on Form 8-K:
No report of Form 8-K was filed on behalf of the Registrant during the
last quarter of the Company's 1995 fiscal year.
40
<PAGE>
(c) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
------- -----------------------------
<C> <S>
4.1 Second Amended and Restated Certificate of Incorporation of the
Company.(1)
4.2 Bylaws of the Company, as amended.(2)
4.3 Specimen of Series A Common Stock Certificate.(3)
4.4 Specimen of Series B Common Stock Certificate.(4)
10.1 Form of Indemnity Agreement.(2)
10.3 Second Amended and Restated Stock Option Plan of the Company.(5)
10.4 Description of Stevens Graphics Incentive Plan.(3)
10.5 Description of Hamilton Life Insurance Payroll Deduction Plan.(2)
10.6 Labor Agreement, dated July 2, 1994, between Hamilton-Stevens Group, Inc.
and the International Union United Automobile, Aerospace and
Agricultural Implement Workers of America.(9)
10.9 Chem-Dyne Site Trust Fund Agreement, dated September 23, 1985.(2)
10.10 Lease Agreement between Space Unlimited Joint Venture #3 and Stevens
Corporation ("Stevens"), dated September 11, 1981 and related lease
addendum.(2)
10.11 First Extension Agreement dated January 19, 1987 between Stevens and
Space Unlimited Joint Venture #3.(3)
10.12 First Amended Joint Venture Agreement of Space Unlimited Joint Venture
#3, dated June 26, 1980 and related Assignment of Joint Interest and
Loan Modification, Assumption Agreement and Release.(2)
10.13 Second Extension Agreement between the Company and Space Unlimited Joint
Venture #3.(6)
10.14 Stevens Graphics Corporation Pension Plan and Trust.(6)
10.15 Stevens Graphics Corporation Profit Sharing and 401(k) Savings Retirement
Plan.(6)
10.17 Lease Agreement between Rochester Hills Executive Park and Zerand-Bernal
Group, Inc.(8)
10.18 Severance Agreement among the Company, Post and Robert F. Hopkins.(6)
10.19 Restated and Amended Subordinated Debt Agreement dated March 27, 1992,
together with forms of Subordinated Notes and Subordinated
Guaranties.(6)
10.20 Amended and Restated Intercreditor and Subordination Agreement dated
April 26, 1994.(11)
10.21 Contract of Sale between the Company and Banque de France.(6)
10.23 Asset Purchase Agreement dated July 20, 1993 among Post Machinery
Company, Inc., the Company and Bobst Group, Inc. and Bobst, S.A.(10)
10.24 Letter Agreement dated August 5, 1993 amending Asset Purchase Agreement
among the Company, Post Machinery Company, Inc., Bobst Group, Inc. and
Bobst, S.A.(10)
10.25 Intellectual Property Purchase Agreement dated August 5, 1993 among the
Company, Post Machinery Company, Inc. and Bobst S.A.(10)
10.27 Fourth Amendment to Amended and Restated Senior Subordinated Note
Agreement dated April 29, 1994.(11)
10.28 Form of Stock Purchase Agreement dated as of September 16, 1994 between
the Company and certain investors.(12)
10.29 Credit Agreement, dated May 16, 1995, between the Company and Bank of
America, Texas, N.A.(13)
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
------- -----------------------------
<C> <S>
10.30 First Amendment to Amended and Restated Subordination and Intercreditor
Agreement dated August 1995.(*)
10.31 Fifth Amendment to Amended and Restated Senior Subordinated Note Agreement
dated August 1995.(*)
10.32 First Amendment to Credit Agreement effective August 15, 1995 between the
Company and Bank of America Texas, N.A.(*)
10.33 Second Amended and Restated Master Note: Reference Rate Related dated
August 15, 1995, executed by the Company and payable to the order of Bank
of America Texas, N.A. in the original principal amount of $27
million.(*)
10.34 Second Amendment to Credit Agreement effective December 1995 between the
Company and Bank of America Texas, N.A.(*)
11.1 Computation of Net Income per Common Share.(*)
23.1 Consent of Deloitte & Touche LLP.(*)
</TABLE>
- --------
* Filed herewith.
(1) Previously filed as an exhibit to the Company's Annual Report on Form 10-
K for the year ended December 31, 1990 and incorporated herein by
reference.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 33-15279) and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 33-24486) and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's report on Form 8-A filed
August 19, 1988 and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1994 and incorporated herein by
reference.
(6) Previously filed as an exhibit to the Company's Annual Report on Form 10-
K for the year ended December 31, 1991 and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 33-32089) and incorporated herein by reference.
(8) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1993 and incorporated herein by
reference.
(9) Previously filed as an exhibit to the Company's Report on Form 10-Q for
the period ended September 30, 1994 and incorporated herein by reference.
(10) Previously filed as an exhibit to the Company's Current Report on Form 8-
K filed August 12, 1993 and incorporated herein by reference.
(11) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1994 and incorporated herein by
reference.
(12) Previously filed as an exhibit to the Company's Registration Statement on
Form S-3 (No. 33-84246) and incorporated herein by reference.
(13) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1995 and incorporated herein by
reference.
42
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Stevens International, Inc.
By __________________________________
KENNETH W. REYNOLDS
CHIEF FINANCIAL OFFICER AND SR.
VICE PRESIDENT FINANCE
AND ADMINISTRATION
Date: March 20, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND 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.
SIGNATURE TITLE DATE
Chairman of the March 20, 1996
- ------------------------------------- Board and Chief
PAUL I. STEVENS Executive Officer
President, Chief March 20, 1996
- ------------------------------------- Operating Officer
RICHARD I. STEVENS and Director
Vice President, March 20, 1996
- ------------------------------------- Assistant Secretary
CONSTANCE I. STEVENS and Director
Director March 20, 1996
- -------------------------------------
ROBERT H. BROWN, JR.
Director March 20, 1996
- -------------------------------------
JAMES D. CAVANAUGH
Director March 20, 1996
- -------------------------------------
ROBERT B. HOLLAND, III
Director March 20, 1996
- -------------------------------------
EDGAR H. SCHOLLMAIER
Director March 20, 1996
- -------------------------------------
JOHN W. STODDER
43
<PAGE>
SCHEDULE II
STEVENS INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1995
Allowance for doubtful
accounts.............. $450,000 $256,000 $ 105,000(2) $156,000(1) $655,000
Year Ended December 31,
1994
Allowance for doubtful
accounts.............. $625,000 $ 11,000 $(173,000) $ 13,000(1) $450,000
Year Ended December 31,
1993
Allowance for doubtful
accounts.............. $816,000 $258,000 $(220,000) $229,000(1) $625,000
</TABLE>
- --------
(1) Write off of uncollectible accounts.
(2) Reclassification of accrued interest on customer account.
44
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT PAGES
------- ----------------------------- ------------
<C> <S> <C>
4.1 Second Amended and Restated Certificate of
Incorporation of the Company.(1)
4.2 Bylaws of the Company, as amended.(2)
4.3 Specimen of Series A Common Stock Certificate.(3)
4.4 Specimen of Series B Common Stock Certificate.(4)
10.1 Form of Indemnity Agreement.(2)
10.3 Second Amended and Restated Stock Option Plan of the
Company.(5)
10.4 Description of Stevens Graphics Incentive Plan.(3)
10.5 Description of Hamilton Life Insurance Payroll
Deduction Plan.(2)
10.6 Labor Agreement, dated July 2, 1994, between Hamilton-
Stevens Group, Inc. and the International Union United
Automobile, Aerospace and Agricultural Implement
Workers of America.(9)
10.9 Chem-Dyne Site Trust Fund Agreement, dated September
23, 1985.(2)
10.10 Lease Agreement between Space Unlimited Joint Venture
#3 and Stevens Corporation ("Stevens"), dated
September 11, 1981 and related lease addendum.(2)
10.11 First Extension Agreement dated January 19, 1987
between Stevens and Space Unlimited Joint Venture
#3.(3)
10.12 First Amended Joint Venture Agreement of Space
Unlimited Joint Venture #3, dated June 26, 1980 and
related Assignment of Joint Interest and Loan
Modification, Assumption Agreement and Release.(2)
10.13 Second Extension Agreement between the Company and
Space Unlimited Joint Venture #3.(6)
10.14 Stevens Graphics Corporation Pension Plan and Trust.(6)
10.15 Stevens Graphics Corporation Profit Sharing and 401(k)
Savings Retirement Plan.(6)
10.17 Lease Agreement between Rochester Hills Executive Park
and Zerand-Bernal Group, Inc.(8)
10.18 Severance Agreement among the Company, Post and Robert
F. Hopkins.(6)
10.19 Restated and Amended Subordinated Debt Agreement dated
March 27, 1992, together with forms of Subordinated
Notes and Subordinated Guaranties.(6)
10.20 Amended and Restated Intercreditor and Subordination
Agreement dated April 26, 1994.(11)
10.21 Contract of Sale between the Company and Banque de
France.(6)
10.23 Asset Purchase Agreement dated July 20, 1993 among Post
Machinery Company, Inc., the Company and Bobst Group,
Inc. and Bobst, S.A.(10)
10.24 Letter Agreement dated August 5, 1993 amending Asset
Purchase Agreement among the Company, Post Machinery
Company, Inc., Bobst Group, Inc. and Bobst, S.A.(10)
10.25 Intellectual Property Purchase Agreement dated August
5, 1993 among the Company, Post Machinery Company,
Inc. and Bobst S.A.(10)
10.27 Fourth Amendment to Amended and Restated Senior
Subordinated Note Agreement dated April 29, 1994.(11)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT PAGES
------- ----------------------------- ------------
<C> <S> <C>
10.28 Form of Stock Purchase Agreement dated as of September
16, 1994 between the Company and certain
investors.(12)
10.29 Credit Agreement, dated May 16, 1995, between the
Company and Bank of America, Texas, N.A.(13)
10.30 First Amendment to Amended and Restated Subordination
and Intercreditor Agreement dated August 1995.(*)
10.31 Fifth Amendment to Amended and Restated Senior
Subordinated Note Agreement dated August 1995.(*)
10.32 First Amendment to Credit Agreement effective August
15, 1995 between the Company and Bank of America
Texas, N.A.(*)
10.33 Second Amended and Restated Master Note: Reference Rate
Related dated August 15, 1995, executed by the Company
and payable to the order of Bank of America Texas,
N.A. in the original principal amount of $27
million.(*)
10.34 Second Amendment to Credit Agreement effective December
1995 between the Company and Bank of America Texas,
N.A.(*)
11.1 Computation of Net Income per Common Share.(*)
23.1 Consent of Deloitte & Touche LLP.(*)
</TABLE>
- --------
* Filed herewith.
(1) Previously filed as an exhibit to the Company's Annual Report on Form 10-
K for the year ended December 31, 1990 and incorporated herein by
reference.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 33-15279) and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 33-24486) and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's report on Form 8-A filed
August 19, 1988 and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1994 and incorporated herein by
reference.
(6) Previously filed as an exhibit to the Company's Annual Report on Form 10-
K for the year ended December 31, 1991 and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 33-32089) and incorporated herein by reference.
(8) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1993 and incorporated herein by
reference.
(9) Previously filed as an exhibit to the Company's Report on Form 10-Q for
the period ended September 30, 1994 and incorporated herein by reference.
(10) Previously filed as an exhibit to the Company's Current Report on Form 8-
K filed August 12, 1993 and incorporated herein by reference.
(11) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1994 and incorporated herein by
reference.
(12) Previously filed as an exhibit to the Company's Registration Statement on
Form S-3 (No. 33-84246) and incorporated herein by reference.
(13) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1995 and incorporated herein by
reference.
<PAGE>
EXHIBIT 10.30
FIRST AMENDMENT TO AMENDED AND RESTATED
---------------------------------------
SUBORDINATION AND INTERCREDITOR AGREEMENT
-----------------------------------------
THIS FIRST AMENDMENT TO AMENDED AND RESTATED SUBORDINATION AND
INTERCREDITOR AGREEMENT (the "Amendment"), dated as of August ___, 1995, is by
and among STEVENS INTERNATIONAL, INC. f/k/a Stevens Graphics Corporation (the
"Company"), HAMILTON-STEVENS GROUP, INC., PMC LIQUIDATION, INC. f/k/a POST
MACHINERY CO., INC., ZERAND-BERNAL GROUP, INC., PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION, STEVENS SECURITIES SYSTEMS INTERNATIONAL, INC.
(collectively, "Guarantors"), BANK OF AMERICA TEXAS, N.A. ("Bank of America"),
as assignee of Bank One, Milwaukee, National Association ("Bank One"), AETNA
LIFE INSURANCE COMPANY, THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, MONY LIFE
INSURANCE COMPANY OF AMERICA (collectively, "Purchasers") and NATIONSBANK OF
TEXAS, N.A. ("NationsBank") (in its capacity as Collateral Agent for the holders
of the Subordinated Debt).
R E C I T A L S:
A. The Company, the Purchasers, the Guarantors, NationsBank and Bank
One heretofore entered into that certain Amended and Restated Subordination and
Intercreditor Agreement (as amended, the "Intercreditor Agreement") dated as of
April 26, 1994.
B. Bank One assigned all of its, right, title
and interest in the Intercreditor Agreement to Bank of America.
C. The Company, the Guarantors, the Purchasers, NationsBank and Bank
of America now desire to amend the Intercreditor Agreement as herein set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
Definitions
-----------
Section 1.1. Definitions. Capitalized terms used in this Amendment,
-----------
to the extent not otherwise defined herein, shall have the same meanings as in
the Intercreditor Agreement, as amended hereby.
<PAGE>
ARTICLE II
----------
Amendments
----------
Section 2.1. Amendment to Definition of Bank Credit Agreement.
------------------------------------------------
Effective as of the date hereof, subsection (i) of the definition of "Bank
Credit Agreement" in Section 1 of the Intercreditor Agreement is hereby amended
to read as follows:
(i) that certain Credit Agreement dated as of May 16, 1995, among the
Company and Senior Lender (as the same may be amended and restated from
time to time, the "Bank Credit Agreement").
Section 2.2. Amendment to Definition of Permitted Refinancing. Effective
------------------------------------------------
as of the date hereof, subsection (a) of the definition of "Permitted
Refinancing" in Section 1 of the Intercreditor Agreement is hereby amended to
read as follows:
(a) the maximum credit available to the Company and the Guarantors
under any Permitted Refinancing shall not exceed $27,000,000.00,
Section 2.3. Amendment to Definition of Senior Debt. Effective as of the
--------------------------------------
date hereof, the definition of Senior Debt in Section 1 of the Intercreditor
Agreement is hereby amended to read as follows:
Senior Debt means all present and future obligations, indebtedness and
-----------
liabilities of the Company or to any Guarantor arising under or pursuant to
the Bank Credit Agreement, any Permitted Refinancing, all other agreements
or financing arrangements with Senior Lender, all interest accruing
pursuant to the aforementioned agreements and arrangements, all attorneys'
fees, costs, expenses or other fees incurred in the enforcement and
collection thereof and any and all renewals, extensions, increases, and
amendments thereto; provided that, the aggregate principal amount of such
Senior Debt (excluding attorneys' fees, costs, expenses, other fees or any
indemnified amounts) shall not exceed the sum of $27,000,000.
Section 2.4. Amendment to Definition of Senior Lender. The definition of
----------------------------------------
"Senior Lender" in Section 1 of the Intercreditor Agreement is hereby amended to
read as follows:
Senior Lender means Bank of America Texas, N.A. and any assignee or
-------------
participant, in whole or in part, of the Senior Debt.
Section 2.5. References in the other Senior Documents and Subordinated
---------------------------------------------------------
Documents. All references in the other Senior Documents and Subordinated
- ---------
Documents are hereby modified and amended wherever necessary to reflect the
modifications to the Intercreditor Agreement referenced in Sections 2.1 through
2.4 above.
-2-
<PAGE>
ARTICLE III
-----------
Conditions Precedent
--------------------
Section 3.1. Conditions. The effectiveness of this Amendment is subject
----------
to the satisfaction of the following conditions precedent:
(a) Purchasers and Bank of America shall have received all of the
following, each dated (unless otherwise indicated) the date of this Amendment,
in form and substance satisfactory to them:
(1) Resolutions. Resolutions of the Board of Directors of the
-----------
Company and each Guarantor certified by the Secretary or an Assistant
Secretary which authorize the execution, delivery and performance by such
Person of this Amendment;
(2) Incumbency. A certificate of incumbency certify by the
----------
Secretary or an Assistant Secretary of the Company and each Guarantor
certifying the names of the officers of such Person authorized to sign this
Amendment together with specimen signatures of such officers;
(3) Articles of Incorporation. The articles of incorporation for
-------------------------
the Company and each Guarantor certified by the appropriate government
official of the state of incorporation for such Person within thirty (30)
days prior to the date of this Amendment;
(4) Bylaws. The bylaws of the Company and each Guarantor
------
certified by the Secretary or an Assistant Secretary of such Person; and
(5) Government Certificates. Certificates of the appropriate
-----------------------
government officials of the state of incorporation of the Company and each
Guarantor as to the existence and good standing of such Person, each dated
within thirty (30) days prior to the date of this Amendment.
ARTICLE IV
----------
Ratification
-------------
Section 4.1. Ratification. The terms and provisions set forth in this
------------
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Intercreditor Agreement and except as expressly modified and
superseded by this Amendment, the terms and provisions of the Intercreditor
Agreement and the other Senior Documents and Subordinated Documents are ratified
and confirmed and shall continue in full force and effect. The Company, the
Guarantors, the Purchasers, NationsBank and Senior Lender agree that the
Intercreditor
-3-
<PAGE>
Agreement as amended hereby shall continue to be legal, valid, binding and
enforceable in accordance with its terms.
ARTICLE V
---------
Miscellaneous
-------------
Section 5.1. Reference to Agreement. Each of the Senior Documents and
----------------------
Subordinated Documents, including the Intercreditor Agreement and any and all
other agreements, documents, or instruments now or hereafter executed and
delivered pursuant to the terms hereof or thereof, are hereby amended so that
any reference in such Senior Documents, Subordinated Documents or Intercreditor
Agreement to the Intercreditor Agreement shall mean a reference to the
Intercreditor Agreement as amended hereby.
Section 5.2 Severability. Any provision of this Amendment held by a court
------------
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.3 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER SUBORDINATED
--------------
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN TEXAS, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS.
Section 5.6 Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of the Purchasers, the Company, the Guarantors,
NationsBank and Senior Lender and their respective successors and assigns.
Section 5.7 Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument. Telecopies of signatures shall be binding and effective as
originals.
Section 5.8 Effect of Waiver. No consent or waiver, express or implied,
----------------
by Purchasers to or for any breach of or deviation from any covenant, condition
or duty by the Company or any Guarantor shall be deemed a consent or waiver to
or of any other breach of the same or any other covenant, condition or duty.
Section 5.9 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
----------------
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR
-4-
<PAGE>
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
STEVENS INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Paul I. Stevens
------------------------------------
Name: Paul I. Stevens
----------------------------------
Title:
---------------------------------
HAMILTON-STEVENS GROUP, INC.,
a Delaware corporation
By: /s/ Richard I. Stevens
------------------------------------
Name: Richard I. Stevens
----------------------------------
Title:
---------------------------------
PMC LIQUIDATION, INC.,
a Delaware corporation
By: /s/ Richard I. Stevens
------------------------------------
Name: Richard I. Stevens
----------------------------------
Title:
---------------------------------
ZERAND-BERNAL GROUP, INC.,
a Delaware corporation
By: /s/ Richard I. Stevens
------------------------------------
Name: Richard I. Stevens
----------------------------------
Title:
---------------------------------
-5-
<PAGE>
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION, a Texas corporation
By: /s/ W. Scott Mclain
----------------------------------------
Name: W. SCOTT MCLAIN
--------------------------------------
Title: Treasurer
-------------------------------------
STEVENS SECURITIES SYSTEMS
INTERNATIONAL, INC., a Delaware corporation
By: /s/ Richard I. Stevens
------------------------------------
Name: Richard I. Stevens
----------------------------------
Title:
---------------------------------
AETNA LIFE INSURANCE COMPANY
By: /s/ Teresa H. Lawton
-----------------------------------------
Title: Investment Manager
---------------------------------
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Frank G. Simunek
-----------------------------------------
Title: FRANK G. SIMUNEK
--------------------------------------
Managing Director
MONY LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ Frank G. Simunek
-----------------------------------------
Title: FRANK G. SIMUNEK
--------------------------------------
Authorized Agent
-6-
<PAGE>
BANK OF AMERICA TEXAS, N.A.,
a national banking association
By: /s/ Donald P. Hellman
---------------------------------------
Title: Vice President
------------------------------------
NATIONSBANK OF TEXAS, N.A.,
as Collateral Agent
By: ^[SIGNATURE APPEARS HERE]^
---------------------------------------
Title: Vice President
------------------------------------
-7-
<PAGE>
<PAGE>
EXHIBIT 10.31
FIFTH AMENDMENT TO
------------------
AMENDED AND RESTATED SENIOR SUBORDINATED NOTE AGREEMENT
-------------------------------------------------------
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED SENIOR SUBORDINATED NOTE
AGREEMENT (the "Amendment"), dated as of August ___, 1995, is by and among
STEVENS INTERNATIONAL, INC., a Delaware corporation f/k/a Stevens Graphics
Corporation ("Company"), and AETNA LIFE INSURANCE COMPANY ("Aetna"), THE MUTUAL
LIFE INSURANCE COMPANY OF NEW YORK, AND MONY LIFE INSURANCE COMPANY OF AMERICA
("MONY") (each such insurance company, together with its successors and assigns,
being hereinafter referred to individually as a "Purchaser," and collectively as
the "Purchasers"), and each corporation listed on the signature pages hereof
under the heading "Guarantors" (each such corporation, together with any other
person or entity that guarantees payment of the hereinafter defined Notes being
hereinafter referred to individually as a "Guarantor," and collectively as the
"Guarantors").
R E C I T A L S:
A. The Company, the Purchasers and the Guarantors heretofore entered
into that certain Amended and Restated Senior Subordinated Note Agreement (as
amended, the "Note Agreement") dated as of March 27, 1993, as amended by that
certain First Amendment and Waiver dated as of July 8, 1992, Second Amendment
and Waiver dated as of June 30, 1993, Third Amendment and Waiver dated as of
August 5, 1993 and Fourth Amendment to Amended and Restated Senior Subordinated
Note Agreement dated as of April 26, 1994, pursuant to which the Purchasers
purchased from the Company 12% Senior Subordinated Notes of the Company in an
aggregate principal amount of $26,000,000.00 due December 31, 2000 (such notes,
together with all extensions, renewals and modifications thereof, and all
replacements and substitutions therefor, being hereinafter referred to as the
"Notes").
B. Pursuant to the Note Agreement, the Guarantors guaranteed to the
Purchasers the payment and performance of the Notes and all other amounts
payable by the Company under the Note Agreement.
C. The Company, the Guarantors and the Purchasers now desire to amend
the Note Agreement as herein set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
ARTICLE I
---------
Definitions
-----------
Section 1.1. Definitions. Capitalized terms used in this Amendment,
-----------
to the extent not otherwise defined herein, shall have the same meanings as in
the Note Agreement, as amended hereby.
ARTICLE II
----------
Amendments
----------
Section 2.1. Amendment to Funded Debt Covenant. Effective as of the
---------------------------------
date hereof, Section 4.2(d) of the Note Agreement is hereby amended to delete
from the end thereof the following paragraph:
On and after April 26, 1996, if the Purchasers have released their
Liens on the Collateral pursuant to Section 9.3 hereof, then the Company
will not, and will not permit any Operating Subsidiary to, incur, assume or
otherwise become or remain liable with respect to any unsecured Funded Debt
in an amount greater than the remainder of $25,000,000.00, minus the
-----
principal balance of the Notes outstanding from time to time.
Section 2.2. Amendment to Security Covenant. Effective as of the date
------------------------------
hereof, Section 9.3 of the Note Agreement is hereby deleted.
Section 2.3. References in Subordinated Documents. All references in the
------------------------------------
other Subordinated Documents are hereby modified and amended wherever necessary
to reflect the purpose and intent of the modifications to the Note Agreement
referenced in Sections 2.1 and 2.2 above.
ARTICLE III
-----------
Conditions Precedent
--------------------
Section 3.1. Conditions. The effectiveness of this Amendment is subject
----------
to the satisfaction of the following conditions precedent:
(a) Purchasers shall have received all of the following, each dated (unless
otherwise indicated) the date of this Amendment, in form and substance
satisfactory to Purchasers:
(1) Resolutions. Resolutions of the Board of Directors of the
-----------
Company and each Guarantor certified by the Secretary or an Assistant
Secretary of the Company
- 2 -
<PAGE>
and each Guarantor which authorize the execution, delivery and performance
by such Person of this Amendment;
(2) Incumbency. A certificate of incumbency certified by the
----------
Secretary or an Assistant Secretary of the Company and each Guarantor
certifying the names of the officers of such Person authorized to sign this
Amendment together with specimen signatures of such officers;
(3) Articles of Incorporation. The articles of incorporation for
-------------------------
the Company and each Guarantor certified by the appropriate government
official of the state of incorporation for such Person within thirty (30)
days prior to the date of this Amendment;
(4) Bylaws. The bylaws of the Company and each Guarantor
------
certified by the Secretary or an Assistant Secretary of such Person;
(5) Government Certificates. Certificates of the appropriate
-----------------------
government officials of the state of incorporation of the Company and each
Guarantor as to the existence and good standing of such Person, each dated
within thirty (30) days prior to the date of this Amendment.
(b) The Company, the Senior Agent, the Purchasers and others shall have
entered into a First Amendment to the Amended and Restated Subordination and
Intercreditor Agreement.
(c) The representations and warranties contained herein and in all other
Subordinated Documents, as amended, shall be true and correct as of the date
hereof as if made on the date hereof.
(d) No Event of Default shall have occurred and be continuing and no event
or condition shall have occurred that with the giving of notice or lapse of time
or both would be an Event of Default.
(e) As compensation for the agreements contained herein, Aetna shall have
received the sum of $25,000.00 and MONY shall have received the sum of
$25,000.00.
(f) The Purchasers shall have received copies of the documents evidencing
the Senior Debt.
ARTICLE IV
----------
Ratifications, Representations and Warranties
---------------------------------------------
Section 4.1. Ratification. The terms and provisions set forth in this
------------
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Note Agreement and
- 3 -
<PAGE>
except as expressly modified and superseded by this Amendment, the terms and
provisions of the Note Agreement and the other Subordinated Documents are
ratified and confirmed and shall continue in full force and effect. The Company,
the Guarantors and the Purchasers agree that the Note Agreement as amended
hereby and the other Subordinated Documents shall continue to be legal, valid,
binding and enforceable in accordance with their respective terms.
Section 4.2. Representations and Warranties. The Company hereby
------------------------------
represents and warrants to the Purchasers that (i) the execution, delivery and
performance of this Amendment and any and all other Subordinated Documents
executed and/or delivered in connection herewith have been authorized by all
requisite corporate action on the part of the Company and will not violate the
articles of incorporation or bylaws of the Company, (ii) the representations and
warranties contained in the Note Agreement, as amended hereby, and any other
Subordinated Document are true and correct on and as of the date hereof as
though made on and as of the date hereof, (iii) no Event of Default has occurred
and is continuing and no event or condition has occurred that with the giving of
notice or lapse of time or both would be an Event of Default, and (iv) the
Company is in compliance with all covenants and agreements contained in the Note
Agreement as amended hereby.
ARTICLE V
---------
Miscellaneous
-------------
Section 5.1. Reference to Agreement. Each of the Subordinated Documents,
----------------------
including the Note Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Note Agreement as amended hereby, are hereby
amended so that any reference in such Subordinated Documents to the Note
Agreement shall mean a reference to the Note Agreement as amended hereby.
Section 5.2 Severability. Any provision of this Amendment held by a court
------------
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.3 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER SUBORDINATED
--------------
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 5.6 Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of the Purchasers, the Company, and the Guarantors
and their respective successors and assigns, except neither the Company nor any
Guarantor may assign or transfer
- 4 -
<PAGE>
any of their respective rights or obligations hereunder without the prior
written consent of the Purchasers.
Section 5.7 Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument. Telecopies of signatures shall be binding and effective as
originals.
Section 5.8 Effect of Waiver. No consent or waiver, express or implied,
----------------
by the Purchasers to or for any breach of or deviation from any covenant,
condition or duty by Company or any Guarantor shall be deemed a consent or
waiver to or of any other breach of the same or any other covenant, condition or
duty.
Section 5.9 Non-Application of Chapter 15 of Texas Credit Code. The
--------------------------------------------------
provisions of Chapter 15 of the Texas Credit Code (Vernon's Annotated Texas
Statutes, Article 5069-15) are specifically declared by the parties not to be
applicable to this Amendment or any of the Subordinated Documents or the
transactions contemplated hereby.
Section 5.10 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
----------------
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
STEVENS INTERNATIONAL, INC.:
---------------------------
By: /s/ Paul I. Stevens
---------------------------------------
Name: Paul I. Stevens
-------------------------------------
Title:
------------------------------------
GUARANTORS:
----------
HAMILTON-STEVENS GROUP, INC.
By: /s/ Richard I. Stevens
---------------------------------------
Name: Richard I. Stevens
-------------------------------------
Title:
------------------------------------
ZERAND-BERNAL GROUP, INC.
By: /s/ Richard I. Stevens
---------------------------------------
Name: Richard I. Stevens
-------------------------------------
Title:
------------------------------------
- 5 -
<PAGE>
PMC LIQUIDATION, INC.
By: /s/ Richard I. Stevens
---------------------------------------
Name: Richard I. Stevens
-------------------------------------
Title:
------------------------------------
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By: /s/ W. Scott McLain
---------------------------------------
Name: W. Scott McLain
-------------------------------------
Title: Treasurer
------------------------------------
STEVENS SECURITIES SYSTEMS
INTERNATIONAL, INC.
By: /s/ Richard I. Stevens
---------------------------------------
Name: Richard I. Stevens
-------------------------------------
Title:
------------------------------------
PURCHASERS:
----------
AETNA LIFE INSURANCE COMPANY
By: /s/ Teresa H. Lawton
---------------------------------------
Name: Teresa H. Lawton
-------------------------------------
Title: Investment Manager
------------------------------------
- 6 -
<PAGE>
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Frank G. Simunek
---------------------------------------
Name: Frank G. Simunek
-------------------------------------
Title: Managing Director
------------------------------------
MONY LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ Frank G. Simunek
---------------------------------------
Name: Frank G. Simunek
-------------------------------------
Title: Authorized Agent
------------------------------------
-7-
<PAGE>
EXHIBIT 10.32
FIRST AMENDMENT
---------------
TO
--
CREDIT AGREEMENT
----------------
This First Amendment to Credit Agreement (this "Amendment") is entered into
---------
effective as of the 15th of August, 1995, by and between Bank of America Texas,
N.A. (the "Bank") and Stevens International, Inc., formerly known as to Stevens
Graphics Corporation, a Delaware corporation (the "Borrower").
--------
REFERENCE:
----------
Reference is made to the Credit Agreement (the "Credit Agreement") dated as
----------------
of May 16, 1995 by and between Bank and Borrower.
RECITAL:
--------
Bank and Borrower desire to increase the Commitment (as such term is defined
in the Credit Agreement) from $22,000,000.00 to $27,000,000.00.
AGREEMENTS:
-----------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used in this Amendment and not otherwise
-----------
defined in this Amendment shall have the meanings given them in the Credit
Agreement.
2. Amendment. The Credit Agreement is hereby amended to the extent
---------
specified below:
Section 2.1(a) of the Credit Agreement is hereby amended by deleting the
--------------
reference to "Twenty-Two Million Dollars ($22,000,000.00)" and substituting
therefor "Twenty-Seven Million Dollars ($27,000,000.00)."
3. Representations. Borrower represents and warrants that the execution,
---------------
delivery and performance by Borrower of this Amendment and the Credit Agreement
as amended hereby have been duly authorized by all necessary corporate action
and that this Amendment and the Credit Agreement as amended hereby are legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally, or by general principles of equity limiting the
availability of certain remedies.
FIRST AMENDMENT - Page 1
<PAGE>
4. Conditions Precedent.
--------------------
A. Borrower will pay Bank $25,000.00 as a fee for Bank's
agreement to increase the Commitment under the Credit Agreement from
$22,000,000.00 to $27,000,000.00;
B. Bank shall have received a First Amendment to Amended and
Restated Subordination and Intercreditor Agreement, in form and substance
reasonably satisfactory to the Bank, duly executed by Borrower, Hamilton-Stevens
Group, Inc., PMC Liquidation, Inc., Zerand-Bernal Group, Inc., Printing &
Packaging Equipment Finance Corporation, Stevens Securities Systems
International, Inc., Aetna Life Insurance Company, The Mutual Life Insurance
Company of New York, Mony Life Insurance Company of America and NationsBank of
Texas, N.A.;
C. Bank shall have received a Consent and Ratification, duly
executed by Hamilton-Stevens Group, Inc., PMC Liquidation, Inc., Zerand-Bernal
Group, Inc., Stevens Securities Systems International, Inc. and Printing &
Packaging Equipment Finance Corporation; and
D. Bank shall have received such other documents, certificates
and other materials as the Bank reasonably may require in connection with this
Amendment.
5. Miscellaneous.
-------------
A. Ratifications. The terms and provisions set forth in this
-------------
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Credit Agreement, and, except as expressly modified and superseded
by this Amendment, the terms and provisions of the Credit Agreement are ratified
and confirmed and shall continue in full force and effect. Borrower and Bank
agree that the Credit Agreement as amended hereby shall continue to be legal,
valid, binding and enforceable in accordance with its terms.
B. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of Texas.
C. Counterparts. This Amendment may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
FIRST AMENDMENT -- Page 2
- ---------------
<PAGE>
IN WITNESS WHEREOF, Borrower and Bank have caused this Amendment to be
duly executed as of the day and year first above written.
Bank of America Texas, N.A. Stevens International, Inc.,
formerly known as Stevens Graphics
Corporation
By: /s/ Donald P. Hellman By: /s/ Kenneth W. Reynolds
----------------------- -----------------------------
Donald P. Hellman Name: Kenneth W. Reynolds
Vice President -----------------------------
Title: Senior Vice President
Finance and Administration
-----------------------------
FIRST AMENDMENT - Page 3
- ---------------
<PAGE>
EXHIBIT 10.33
SECOND AMENDED AND RESTATED
MASTER NOTE: REFERENCE RATE RELATED
[N-312(TX)]
CHECK APPROPRIATE BLOCK ________________________________________________________
ACCOUNT (5) CLASS (3) LOAN(5)
____________________________________________________
- --------------------------------------------------------------------------------
$27,000,000.00 August 15, 1995
FOR VALUE RECEIVED STEVENS INTERNATIONAL, INC., formerly known as Stevens
Graphics Corporation, a Delaware corporation (hereafter referred to as
"Borrower"), promises to pay to the order of BANK OF AMERICA TEXAS, N.A.
("Bank") on April 30, 1998, at Bank's office at 1925 W. John Carpenter Freeway,
Irving, Texas 75063-3224, the total unpaid principal amount advanced by Bank
from time to time to or for the benefit of or at the request of Borrower from
and after the date of this Note through April 30, 1998, together with interest
thereon at the times and at the rates specified in this Note.
This Note evidences Borrower's obligation to the Bank under the line of
credit and letter of credit facility provided to Borrower by Bank pursuant to
that certain Credit Agreement, dated May 16, 1995, as amended by that certain
First Amendment to Credit Agreement, dated August 15, 1995 (collectively along
with any and all other amendments, modifications and restatements thereof, the
"Credit Agreement"), executed by and between Borrower and Bank, and is entitled
to all the benefits as set forth therein. Capitalized terms used in this Note
and not otherwise defined in this Note shall have the meanings given them in
the Credit Agreement.
No advance shall be made under this Note if, as a result of such advance, the
total principal amount outstanding under this Note, together with the undrawn
face amount of all letters of credit issued and outstanding under the Credit
Agreement would exceed TWENTY-SEVEN MILLION AND NO/100 DOLLARS
($27,000,000.00). All advances and all payments made on account of principal
shall be recorded from time to time by the holder of this Note on the reverse
side of this Note or on an attachment hereto. Each such record of any advance
hereunder shall be conclusive evidence that the advance was made by Bank to
Borrower, unless Borrower objects to such record or accounting within thirty
(30) days after receipt of the same from Bank.
Each advance under this Note shall bear interest from the date of such
advance until payment in full at a rate per year equal to the lesser of (a)
either (i) the Basic Rate, which is equal to
MASTER NOTE--PAGE 1
- -----------
<PAGE>
the sum of the Bank's Reference Rate plus zero percentage points, or (ii) the
Offshore Rate plus one and one-half (1.5) percentage points, or (b) the Maximum
Rate, all as more fully provided in, and in accordance with the terms of, the
Credit Agreement.
Notwithstanding the foregoing, if at any time the Basic Rate or the Offshore
Rate plus one and one-half (1.5) percentage points, as applicable in accordance
with the terms of the Credit Agreement (each, as applicable, being referred to
as the "Contract Rate") shall exceed the Maximum Rate and thereafter the
Contract Rate shall become less than the Maximum Rate, the rate of interest
payable under this Note shall be the Maximum Rate until the Bank shall have
received the amount of interest it otherwise would have received if the
interest payable hereunder had not been limited by the Maximum Rate during the
period of time the Contract Rate exceeded the Maximum Rate.
The Basic Rate of interest shall be computed on the basis of a three hundred
sixty (360) day year and actual days elapsed, which results in more interest
than if a three hundred sixty-five (365) day year were used.
Accrued interest for borrowings subject to the Basic Rate shall be payable
quarterly, on each June 30, September 30, December 31, and March 31 during the
term hereof, beginning September 30, 1995, and upon payment in full of
principal of this Note.
Accrued interest for borrowings subject to the Offshore Rate shall be
payable, to the extent applicable, on the 90th, 180th, and 270th day of every
interest period and on the last day of each interest period.
Each advance under this Note shall be made in such manner as Bank and
Borrower may agree in writing.
The occurrence of any "Event of Default", as such term is defined in the
Credit Agreement shall, at the option of the holder of this Note, make all sums
of accrued unpaid interest and principal of this Note immediately due and
payable without notice of default, presentment or demand for payment, protest
or notice of nonpayment or dishonor, or other notices or demands of any kind or
character.
If suit is commenced to enforce payment of this Note, Borrower agrees to pay
to Bank such additional sums as attorneys' fees as the court may adjudge
reasonable, unless Borrower is the prevailing party, in which event Bank will
be required to pay the Borrower's attorneys' fees.
This Note is a master revolving credit note; it being expressly contemplated
that, by reason of prepayments hereon, there may be times when no indebtedness
is owing hereunder, but, notwithstanding such occurrences, this Note shall
remain valid and shall be in full force and effect as to loans or advances made
subsequent to such occurrences.
MASTER NOTE--PAGE 2
- -----------
<PAGE>
Borrower and any and all sureties, guarantors and endorsers of this Note and
all other parties now or hereafter liable hereon, severally waive grace,
demand, presentment for payment, protest, notice of any kind (including, but
not limited to, notice of dishonor, notice of protest, notice of intention to
accelerate and notice of acceleration) and diligence in collecting and bringing
suit against any party hereto, and agree (i) to all extensions and partial
payments, with or without notice, before or after maturity, (ii) to any
substitution, exchange or release of any security now or hereafter given for
this Note, (iii) to the release of any party primarily or secondarily liable
hereon, and (iv) that it will not be necessary for Bank, in order to enforce
payment of this Note, to first institute or exhaust Banks's remedies against
Borrower or any other party liable therefor or against any security for this
Note.
It is the intention of the parties hereto to comply strictly with applicable
usury laws; accordingly, notwithstanding any provision to the contrary in this
Note or in any of the documents securing the payment hereof or otherwise
relating hereto, in no event shall this Note or such documents require or
permit the payment, charging, taking, reserving, or receiving of any sums
constituting interest under applicable laws which exceed the maximum amount
permitted by such laws. If any such excess interest is contracted for, charged,
taken, reserved, or received in connection with the loan evidenced by this Note
or in any of the documents securing the payment hereof or otherwise relating
hereto, or in any communication by Bank or any other person to Borrower or any
other party liable for payment of this Note, or in the event all or part of the
principal or interest hereof shall be prepaid or accelerated, so that under any
of such circumstances or under any other circumstance whatsoever the amount of
interest contracted for, charged, taken, reserved, or received on the amount of
principal actually outstanding from time to time under this Note shall exceed
the maximum amount of interest permitted by applicable usury laws, then in any
such event it is agreed as follows: (i) the provisions of this paragraph shall
govern and control, (ii) any such excess shall be cancelled automatically to
the extent of such excess, and shall not be collected or collectible, (iii) any
such excess which is or has been received shall be credited against the then
unpaid principal balance hereof or refunded to Borrower, at Bank's option, and
(iv) the effective rate of interest shall be automatically reduced to the
maximum lawful rate allowed under applicable laws as construed by courts having
jurisdiction hereof or thereof. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved,
or received in connection herewith which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate shall be made to
the extent permitted by applicable laws by amortizing, prorating, allocating
and spreading during the period of the full term of the loan, including all
prior and subsequent renewals and extensions, all interest at any time
contracted for, charged, taken, reserved, or received. The terms of this
paragraph shall be deemed to be incorporated in every loan document, security
instrument, and communication relating to this note and loan. The term
"applicable usury laws" shall mean such laws of the State of Texas or the laws
of the United States, whichever laws allow the higher rate of interest, as such
laws now exist; provided, however, that if such laws shall hereafter allow
higher rates of interest, then the applicable usury laws shall be the laws
allowing the higher rates, to be effective as of the effective date of such
laws.
MASTER NOTE--PAGE 3
- -----------
<PAGE>
Borrower and Bank agree that Tex. Rev. Civ. Stat. Ann. art. 5069 Ch. 15
(which regulates certain revolving loan accounts and revolving tri-party
accounts) shall not apply to any revolving loan accounts created under this
Note or maintained in connection therewith.
To the extent that this Note is deemed an open end account as such term is
defined in Article 5069-1.01(f) of the Texas Revised Civil Statutes, as
amended, the Bank retains the right to modify the interest rate in accordance
with applicable law.
Borrower represents and warrants to Bank and to all other owners and holders
of any indebtedness evidenced hereby that all loans evidenced by this Note are
for business, commercial or other similar purpose and not primarily for
personal, family, household or agricultural use, as such terms are used or
defined in Texas Revised Civil Statutes, Article 5069-1.04, Texas Credit Code
and Regulation Z promulgated by the Board of Governors of the Federal Reserve
System and under Titles I and V of the Consumer Credit Protection Act. In no
event shall the provisions of Tex. Rev. Civ. Stat. Ann. arts. 5069-2.01 through
5069-8.06, or 5069-15.01 through 5069-15.11, be applicable to the loan
evidenced hereby. To the extent that Texas law determines the maximum lawful
rate of interest, such rate shall be determined by utilizing the indicated rate
(weekly) ceiling from time to time in effect pursuant to Tex. Rev. Civ. Stat.
Ann. art. 5069-1.04, as amended.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Note is a renewal, amendment, modification, and restatement of that
certain Amended and Restated Master Note, dated May 16, 1995, executed by
Borrower and payable to the order of Bank, in the amount of $22,000,000.00,
which was a renewal, amendment, modification and restatement of that certain
Revolving Credit Note dated April 26, 1994 executed by Borrower payable to the
order of Bank One, Milwaukee, National Association ("Bank One"), in the
original principal amount of $20,000,000.00, which was assigned to Bank
pursuant to that certain Master Assignment of Note and Security Documents
executed by Bank One in favor of Bank, dated May 22, 1995.
MASTER NOTE--PAGE 4
- -----------
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by
its officers thereunder duly authorized and directed by a resolution of its
Board of Directors duly passed and adopted by a majority of said Board at a
meeting thereof duly called, noticed, and held.
STEVENS INTERNATIONAL, INC., Telephone No.: 817-838-4332
formerly known as Stevens Graphics
Corporation Present Mail Address:
--------------------
5500 Airport Freeway
Fort Worth, Texas 76117
Attn: W. Scott McLain
By: /s/ Ken Reynolds
-------------------------------------
Name: Kenneth W. Reynolds
-----------------------------------
Senior Vice President
--Finance & Admin.
Title:
-----------------------------------
MASTER NOTE--PAGE 5
- -----------
<PAGE>
EXHIBIT 10.34
SECOND AMENDMENT
TO
CREDIT AGREEMENT
----------------
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made
effective for all purposes as of the __th day of December, 1995, by and between
Bank of America Texas, N.A. (the "Bank") and Stevens International, Inc.,
formerly known as Stevens Graphics Corporation, a Delaware corporation (the
"Borrower").
REFERENCES:
----------
Reference is made to the Credit Agreement (as amended, the "Credit
Agreement") dated as of May 16, 1995 by and between Bank and Borrower, as by
amended First Amendment to Credit Agreement dated as of August 15, 1995 by and
between Bank and Borrower.
RECITALS:
--------
Borrower has requested that the Bank amend certain of the covenants of the
Credit Agreement; specifically,
(1) to increase the limitation on Borrower's dispositions of assets
during Borrower's 1995 fiscal year from $500,000 to $585,000; and
(2) to increase the limitation on Borrower's capital expenditures
during Borrower's 1995 fiscal year from $5,000,000 to $5,500,000
Subject to the terms and conditions set forth below, Bank has agreed to
amend the Credit Agreement.
AGREEMENTS:
----------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECOND AMENDMENT-Page 1
- ----------------
<PAGE>
ARTICLE I
Definitions
-----------
1.1 Capitalized terms used in this Amendment are defined in the Credit
Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
Amendments
----------
2.1 Asset Dispositions. Section 8.18(d) of the Credit Agreement is hereby
------------------
amended and restated to read as follows:
"(d) lease or dispose of all or a substantial part of the Borrower's
business or assets, except for leases or dispositions of assets having a
fair market value in an aggregate amount not exceeding:
(1) Five Hundred Eighty-Five Thousand Dollars ($585,000) in
Borrower's 1995 fiscal year, and
(2) Five Hundred Thousand Dollars ($500,000) in any fiscal year
thereafter,
(in which events the Bank will agree to release its lien on such assets,
and the Borrower may retain the proceeds of such lease or disposition, so
long as no Event of Default has occurred and is continuing);"
2.2 Capital Expenditures. Section 9.4, Capital Expenditures, of the Credit
-------------------- --------------------
Agreement is hereby amended and restated to read as follows:
9.4 Capital Expenditures. Not to spend or incur obligations
--------------------
(including the total amount of any capital leases) to acquire fixed or
capital assets for more than:
(1) Five Million Five Hundred Thousand Dollars ($5,500,000) in
Borrower's 1995 fiscal year, and
(2) Five Million Dollars ($5,000,000) in any fiscal year
thereafter.
For purposes of this Section 9.4, capital expenditures shall not include
amounts spent or obligations incurred in connection with the purchase of
certain assets of Societe Specialisee dans le Materiel d'Imprimerie
Offset.
SECOND AMENDMENT--Page 2
- ----------------
<PAGE>
ARTICLE III
Conditions
----------
3.1 Conditions to Amendment. The effectiveness of his Amendment is
-----------------------
conditioned upon and subject to the satisfaction of the following requirements:
(a) The Guarantors shall have consented to this Amendment and
ratified their Guaranties; and
(b) The Borrower shall have paid an amendment fee in the amount of
Two Thousand Five Hundred Dollars ($2,500.00) on or before January 5, 1996.
ARTICLE IV
No Waiver
---------
4.1 Except as otherwise specifically provided for in this Amendment,
nothing contained herein shall be construed as a waiver by the Bank of any
covenant or provision of this Amendment, or of any other contract or instrument
between Borrower and the Bank; and the Bank's failure at any time or times
hereafter to require strict performance by Borrower of any provision thereof
shall not waive, affect or diminish any right of the Bank to thereafter demand
strict compliance therewith. The Bank hereby reserves all rights granted under
the Credit Agreement, as amended, and any other contract or instrument between
Borrower and the Bank.
ARTICLE V
Ratifications, Representations and Warranties
------------- --------------- ----------
5.1 Ratifications. The terms and provisions set forth in this Amendment
-------------
shall modify and supersede all inconsistent terms and provisions set forth in
the Credit Agreement, and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Credit Agreement are ratified and
confirmed and shall continue in full force and effect. Borrower and the Bank
agree that the Credit Agreement, as amended hereby, shall continue to be legal,
valid, binding and enforceable in accordance with its terms.
5.2 Representations and Warranties of Borrower. Borrower hereby
------------------------------------------
represents and warrants to the Bank that (a) the execution, delivery and
performance of this Amendment have been authorized by all requisite corporate
action on the part of Borrower and will not violate the certificate of
incorporation or bylaws of Borrower; and (b) Borrower is in full compliance with
all covenants and agreements contained in the Credit Agreement, as amended
hereby.
SECOND AMENDMENT-Page 3
- ----------------
<PAGE>
ARTICLE VI
Miscellaneous Provisions
------------------------
6.1 Amendment Fee. Subject to the provisions of Section 12.14 of the
-------------
Credit Agreement, in consideration of the Bank agreeing to amend the terms of
the Credit Agreement, as set forth above, the Borrower will pay the Bank a Two
Thousand Five Hundred Dollar ($2,500) fee for such amendment, as provided by
Section 3.1(d) of the Credit Agreement and by Section 3.1(b) of this Amendment.
6.2 Severability. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.3 Binding Effect. This Amendment shall be binding upon Borrower and
--------------
the Bank and their respective successors and assigns.
6.4 Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
6.5 Effect of Waiver. No consent or waiver, express or implied, by the
----------------
Bank to or for any breach of or deviation from any covenant or condition by
Borrower shall be deemed a consent to or waiver of any other breach of the same
or any other covenant, condition or duty.
6.6 Headings. The headings, captions, and arrangements used in this
--------
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
6.7 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS EXECUTED
--------------
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
6.8 Final Agreement. THE CREDIT AGREEMENT, AS AMENDED HEREBY, REPRESENTS
---------------
THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF
ON THE DATE THIS AMENDMENT IS EXECUTED. THE CREDIT AGREEMENT, AS AMENDED HEREBY,
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
SECOND AMENDMENT-Page 4
- ----------------
<PAGE>
PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY
PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED
BY BORROWER AND THE BANK.
This Amendment is executed as of the date stated at the top of the first
page.
Bank of America Texas,N.A. Stevens International, Inc.
formerly known as
Stevens Graphics Corporation
By By /s/ W. Scott Mclain
------------------------- --------------------
Donald P. Hellman Name W. Scott Mclain
Vice President ------------------
Title Treasurer
------------------
SECOND AMENDMENT-Page 5
- ----------------
<PAGE>
CONSENT AND RATIFICATION
------------------------
The undersigned, Hamilton-Stevens Group, Inc., PMC Liquidation, Inc.,
Zerand-Bernal Group, Inc., Printing & Packaging Equipment Finance Corporation
and Stevens Securities Systems International, Inc. (together and individually,
the "Guarantors") have executed a Business Loan Continuing Guaranty, dated May
16, 1995 ("Guaranty"), in favor of Bank of America Texas, N.A., a national
--------
banking association ("Bank"), covering obligations of Stevens Graphics
----
Corporation (presently known as Stevens International, Inc.).
The Guarantors hereby consent and agree to the terms of the Second
Amendment to Credit Agreement dated to be effective as of December __, 1995 (the
"Amendment") executed by Stevens International, Inc., formerly known as Stevens
---------
Graphics Corporation, a Delaware corporation (the "Borrower"), and Bank. The
--------
Guarantors agree that the Guaranty shall remain in full force and effect and
shall continue to be the legal, valid and binding obligation of the Guarantors
enforceable against Guarantors in accordance with its terms.
Furthermore, the Guarantors hereby agree and acknowledge that (a) the
obligations, indebtedness and liabilities arising in connection with the
Amendment constitute "Debt," as such term is defined in the Guaranty, (b) as of
the date hereof, the Guaranty is not subject to any claims, defenses or offsets,
(c) nothing contained in the Amendment shall adversely affect any right or
remedy of Bank under the Guaranty, and (d) the execution and delivery of the
Amendment shall in no way reduce, impair or discharge any obligations of the
Guarantors pursuant to the Guaranty.
GUARANTORS.
HAMILTON-STEVENS GROUP, INC.
By: /s/ George A. Wiederaenders
-----------------------------
Name: George A. Wiederaenders
---------------------------
Title: Treasurer
--------------------------
PMC LIQUIDATION, INC.
By: /s/ George A. Wiederaenders
-----------------------------
Name: George A. Wiederaenders
---------------------------
Title: Treasurer
--------------------------
CONSENT AND RATIFICATION-Page 1
- ------------------------
<PAGE>
ZERAND-BERNAL GROUP, INC.
By: /s/ George A. Wiederaenders
---------------------------------
Name: GEORGE A. WIEDERAENDERS
-------------------------------
Title: TREASURER
------------------------------
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By: /s/ W. Scott McLain
---------------------------------
Name: W. SCOTT MCLAIN
-------------------------------
Title: VICE-PRESIDENT
------------------------------
STEVENS SECURITIES SYSTEMS
INTERNATIONAL, INC.
By: /s/ W. Scott McLain
---------------------------------
Name: W. SCOTT MCLAIN
-------------------------------
Title: VICE-PRESIDENT
------------------------------
CONSENT AND RATIFICATION-Page 2
- -------------------------------
<PAGE>
December 1995
------------------
Date of Notice
NOTICE OF FINAL AGREEMENT
To: Borrower and All Other Obligors with Respect to the Loan Which is
Identified below:
1. THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
---------------------------------------------------------------------
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
-------------------------------------------------------------------------
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
--------------------------------------------
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
----------------------------------------------------------
2. As used in this Notice:
"Borrower" means the Borrower identified in the signature blocks below in
this Notice.
"Lender" means Bank of America Texas, N.A.
"Loan" means the loan by Lender which is evidenced by the Second Amended
and Restated Master Note: Reference Rate Related or other evidence of
indebtedness dated August 15, 1995 (the "Note") executed by Borrower,
payable to the order of Lender, in the principal face amount of
$27,000,000.00.
"Loan Agreement" means one or more promises, promissory notes, agreements,
undertakings, security agreements, deeds of trust or other documents, or
commitments, or any combination of those actions or documents, relating to
the Loan, including, without limitation, the Credit Agreement dated May 16,
1995, as amended by the First Amendment to Credit Agreement dated August
15, 1995, as further amended by the Second Amendment to Credit Agreement
dated December __, 1995.
3. This Notice is given by Lender with respect to the Loan, pursuant to
Section 26.02 of the Texas Business and Commerce Code. Borrower and each
other obligor with respect to the Loan who signs below acknowledges,
represents and warrants to Lender that Lender has given and such party has
received and retained a copy of this Notice on the Date of this Notice
stated above.
NOTICE OF FINAL AGREEMENT--Page 1
- -------------------------
<PAGE>
EXECUTED as of the date first above stated.
LENDER
Bank of America Texas, N.A.
By:
-------------------------------------
Donald P. Hellman
Vice President
BORROWER
Stevens International, Inc.
formerly known as Stevens
Graphics Corporation
By: /s/ W. Scott McLain
-------------------------------------
Name: W. SCOTT MCLAIN
-----------------------------------
Title: TREASURER
----------------------------------
GUARANTORS
Hamilton-Stevens Group, Inc.
By: /s/ George A. Wiederaenders
-------------------------------------
Name: GEORGE A. WIEDERAENDERS
-----------------------------------
Title: TREASURER
----------------------------------
NOTICE OF FINAL AGREEMENT-Page 2
- -------------------------
<PAGE>
PMC Liquidation, Inc.
By: /s/ George A. Wiederaenders
------------------------------------
Name: GEORGE A. WIEDERAENDERS
----------------------------------
Title: TREASURER
---------------------------------
Zerand-Bernal Group, Inc.
By: /s/ George A. Wiederaenders
------------------------------------
Name: GEORGE A. WIEDERAENDERS
----------------------------------
Title: TREASURER
---------------------------------
Printing & Packaging Equipment
Finance Corporation
By: /s/ W. Scott McLain
------------------------------------
Name: W. SCOTT MCLAIN
----------------------------------
Title: VICE PRESIDENT
---------------------------------
Stevens Securities Systems
International, Inc.
By: /s/ W. Scott McLain
------------------------------------
Name: W. SCOTT MCLAIN
----------------------------------
Title: VICE PRESIDENT
---------------------------------
NOTICE OF FINAL AGREEMENT-PAGE 3
- -------------------------
<PAGE>
EXHIBIT 11.1
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATIONS OF NET INCOME PER COMMON SHARE
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Primary and fully diluted:
Weighted average shares outstanding................ 9,408 9,122 9,015
Assumed exercise of Series A and B stock options
(treasury stock method)........................... 145 134 114
------- ------- -------
Total common share equivalents....................... 9,553 9,256 9,129
======= ======= =======
Income before extraordinary item and cumulative
effect on accounting change......................... $ 4,299 $ 2,427 $ 771
Extraordinary item................................... -- (85) --
Cumulative effect of accounting change for income
tax................................................. -- -- 412
------- ------- -------
Net Income........................................... $ 4,299 $ 2,342 $ 1,183
======= ======= =======
Per share amounts--
Primary and fully diluted:
Income before extraordinary item................... $ 0.45 $ 0.26 $ 0.08
Extraordinary item................................. -- (0.01) --
Cumulative effect of accounting change............. -- -- 0.05
------- ------- -------
Net Income......................................... $ 0.45 $ 0.25 $ 0.13
======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-25949 and 33-36852 on Form S-8, and Registration Statement No. 33-84246 on
Form S-3 of Stevens International, Inc. and subsidiaries, of our report dated
February 21, 1996, appearing in this Annual Report on Form 10-K of Stevens
International, Inc. and subsidiaries for the year ended December 31, 1995.
Deloitte & Touche LLP
Fort Worth, Texas
March 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF STEVENS INTERNATIONAL, INC. AND
SUBSIDIARIES AS OF DECEMBER 31, 1995 AND FOR THE YEAR THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 814
<SECURITIES> 0
<RECEIVABLES> 26,734
<ALLOWANCES> 655
<INVENTORY> 23,300
<CURRENT-ASSETS> 70,032
<PP&E> 55,456
<DEPRECIATION> 23,439
<TOTAL-ASSETS> 117,647
<CURRENT-LIABILITIES> 31,905
<BONDS> 33,470
0
0
<COMMON> 945
<OTHER-SE> 44,427
<TOTAL-LIABILITY-AND-EQUITY> 117,647
<SALES> 139,181
<TOTAL-REVENUES> 139,181
<CGS> 108,307
<TOTAL-COSTS> 108,307
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 256
<INTEREST-EXPENSE> 3,421
<INCOME-PRETAX> 5,959
<INCOME-TAX> 1,660
<INCOME-CONTINUING> 4,299
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,299
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
