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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, 1999
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.)
5700 E. Belknap St. 76117
Fort Worth, Texas (Zip Code)
(Address of Principal Executive Offices)
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Registrant's telephone number, including area code: (817) 831-3911
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class which registered *(1)
Series A Stock, $0.10 Par Value Over The Counter Bulletin Board (OTCBB)
Series B Stock, $0.10 Par Value Over The Counter Bulletin Board (OTCBB)
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 [ ]
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $7,105,000 based upon the last trade of
the registrant's Series B Common Stock on February 22, 2000 at $2 per
share and the closing price of the Series A Common Stock on March 23, 2000
at $1c per share as reported by the OTCBB. As of March 23, 2000, there
were outstanding 7,466,347 shares of Series A stock and 2,035,786 shares
of Series B stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual meeting of stockholders of
the Company to be held during 2000 are incorporated by reference in Part III.
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*1 Effective August 2, 1999
<PAGE>
STEVENS INTERNATIONAL, INC.
TABLE OF CONTENTS
Form 10-K Item Page
PART I ----
Item 1. Business 3
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to Vote of Security Holders 13
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholders Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 8. Financial Statements and Supplementary Data 23
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 43
PART III
Item 10. Directors and Executive Officers of the Registrants 43
Item 11. Executive Compensation 43
Item 12. Security Ownership of Certain Beneficial Owners
and Management 43
Item 13. Certain Relationships and Related Transactions 43
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. 43
<PAGE>
PART I
Item 1. Business.
Stevens International, Inc. 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.)
The statements in this report that are forward looking are based upon
current expectations and actual results may vary. See "Cautionary
Statements" under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this report.
The Company's business has changed significantly in the last several
years due to fundamental changes in web-fed printing press markets, the
large operating losses that the Company sustained in 1996 and 1997 and the
Company's need to have reduced indebtedness. Sales of the Post Machinery
Co. division (1993), the Bernal division (1997), the Zerand division (1998),
the Hamilton Machining Center (1998) and the Hamilton, Ohio production and
storage facility (1999) have enabled the Company to substantially reduce
indebtedness.
General
Stevens designs, manufactures, markets and services web-fed packaging
and printing systems and related equipment for its customers in the
packaging industry and in the specialty/commercial and banknote and
securities segments of the printing industry. The Company's technological
and engineering capabilities allow it to combine the four major printing
technologies in its systems. The Company combines various types of
equipment, including printing presses, die cutting equipment and delivery
systems, into complete integrated systems, which are capable of providing
finished products in a single press pass. These systems sell for prices
ranging from $1 million to over $10 million. The Company also manufactures
auxiliary and replacement parts and provides service for its equipment which
represented 76% of the Company's net sales for 1999, 60% of net sales for
1998, and 45% of net sales for 1997. Stevens' equipment is used by its
customers to produce hundreds of end-products, including food and beverage
containers, banknotes, postage stamps, lottery tickets, direct mail inserts,
personal checks and business forms. The Company has an installed base of
more than 3,000 machines in over 50 countries. The Company also markets
and manufactures high-speed image processing systems primarily for use in
the banknote and securities printing industry.
All of the Company's presses are "web-fed" presses, which print on
paper or other substrate that is fed continuously from a roll (the "web"),
as distinct from traditional "sheet-fed" presses, which print on pre-cut
sheets of paper or other substrate. Although sheet-fed equipment is still
dominant in the segments of the packaging industry and the banknote and
securities segment of the printing industry that are served by the Company,
the Company believes that numerous opportunities exist to convert certain
users of sheet-fed equipment to its web-fed packaging and printing systems
because of certain efficiencies inherent in the web-fed process.
<PAGE>
Private Placement of $1 Million 10% Convertible Subordinated Notes Payable
Due March 31, 2003
In April 2000, the Company completed a private placement of $1 million
of 10% convertible subordinated notes ("the Notes"). Net proceeds of the
Notes will be used for working capital. The Notes were issued in increments
of $50,000 and are convertible into 2,000,000 shares of Series A Common
Stock ("SVEIA") of the Company at $0.50 per share, subject to adjustment.
The conversion of the Notes is at the holder's option anytime on or after
the fifteenth day following the original issue date of the Notes and prior
to the close of business on their maturity date. Issue costs for the Notes
aggregated approximately $151,000.
The Company has committed to register the shares that would be issuable
upon conversion of the Notes. Dilution to existing shareholders would occur
as a result of the conversion of the Notes to 2 million shares of Series A
common stock. Should all the notes be converted, these shareholders would
own approximately 17% of the outstanding stock of the Company. The first
quarter of 2000 will include a charge for interest expense of $1 million
with a corresponding $1 million increase in "Paid in Capital in Excess of
Par Value."
Liens on Company Assets
Substantially all assets of the Company continue to be pledged as
collateral on the Company's credit facilities. Throughout the recent
history of the Company the Senior Bank lenders have had first liens on
accounts receivable, inventory, the real and personal property in Tarrant
County, Texas, and all intangibles of the Company. Beginning June 30, 1998,
Paul I. Stevens, the Company's Chairman and CEO and principal lender, was
granted first liens on the "holdback" from the sale of Zerand in 1998,
certain international contracts, and various real and personal property in
Butler County, Ohio, as well as second lien positions on accounts
receivable, inventory, the real and personal property in Tarrant County,
Texas, and all intangibles of the Company.
The Company was unable to pay certain pension plan minimum payments due
on September 15, 1999. Accordingly, the Company filed the necessary forms
with the Pension Benefit Guaranty Corporation ("PBGC") to initiate distress
terminations of the Company's two defined benefit pension plans. The PBGC
is a federal agency that insures and protects pension benefits in certain
pension plans when the sponsoring company cannot make the required
contributions to fund projected benefit obligations of the plans.
As a result of the "distress termination" filing in September 1999, the
PBGC in November 1999 and February 2000 filed $1.6 million in federal liens
against all property and rights to property of the Company on behalf of the
Company's Pension Plan for Bargaining Unit Employees.
In December 1999, the PBGC granted a subordination of their lien
interests to the extent of $4 million in favor of the Company's Senior
lender, Wells Fargo Credit, Inc., in order to induce the Senior lender to
facilitate further loans or extend financial accommodations to the Company.
<PAGE>
In February 2000, the PBGC granted a subordination of their lien
interests to Paul I. Stevens on advances of no more than $550,000 by Mr.
Stevens subsequent to February 7, 2000. The PBGC reserved certain rights
and remedies with respect to prior advances to the Company by Mr. Stevens.
Overview of 1999 and 1998
The Company continued to experience a decrease in sales during 1999 and
1998, which primarily reflected the sale of various divisions and a
continuation of the reduced order flow that the Company has experienced for
the last several years. Orders for 1999 ($11.1 million) increased 8.8% over
the previous year. The increase occurred in packaging and specialty web
products. In response to the low volume of orders, the Company continued
its work force and cost reductions and the consolidation of certain
facilities and operating functions. In an effort to cut costs and improve
cash flow, the Company has eliminated certain product lines and consolidated
manufacturing and assembly at its Fort Worth, Texas, location. The Company
believes these actions have helped and will continue to help in its efforts
to return to profitability.
Results of Operations
A description of the Company's recent divestitures follow.
Sale of SSMI
In January 2000, the Company sold its French repair and service
company, SSMI, for a net aggregate consideration of $198,000. The
transaction resulted in an aggregate loss of $1.65 million, including a loss
on sale of $0.05 million and a related non-cash foreign currency adjustment
of $1.6 million which had been previously reported as a charge against
stockholder equity in accumulated other comprehensive loss. SSMI had 1999
revenues of $3 million and an operating loss of $0.13 million. Net proceeds
of this transaction were used to repay a portion of the loans from P. I.
Stevens, which were partially collateralized by a lien on this subsidiary.
Sale of Hamilton Production and Storage Facilities
In the second quarter of 1999, the Company concluded the sale of the
real property at its Hamilton, Ohio production facility for an aggregate
consideration of $725,000. The transaction resulted in a small loss due to
certain unanticipated costs of vacating the facility. An inventory storage
facility at Hamilton, Ohio was sold in August 1999 for an aggregate
consideration of $70,000. With the conclusion of this transaction, all real
property in Ohio has now been sold. Proceeds of these transactions were
used to repay certain expenses of the sale, certain property taxes and repay
a portion of the $2.5 million loan from Paul I. Stevens, which was
partially collateralized by a lien on these production and storage
facilities.
<PAGE>
Sale of Hamilton Machining Center in July 1998
In July, 1998 the Company sold the real and personal property at its
Hamilton, Ohio machining center ("HMC") and the major portion of its
machinery and equipment at its assembly facility in Hamilton, Ohio for an
aggregate consideration of approximately $4.33 million. This transaction
resulted in the recording of a second quarter 1998 loss on sale of assets of
approximately $0.8 million and an additional loss of $0.5 million in the
third quarter of 1998 as a result of HMC inventory and other inventory that
was abandoned by the Company and included in the sale. Proceeds of the
transaction were used to repay the $4 million secured bridge term loan from
the Company's new bank lender (the "Bridge Loan") which was loaned to the
Company on June 30, 1998, transaction fees and certain real and personal
property taxes. HMC had outside sales of $1.2 million and operating losses
of $0.35 million in 1997. The Company has replaced certain of the
capabilities of its machining center with a group of new and traditional
suppliers.
Sale of Assets of Zerand Division in April 1998
In April, 1998, the Company sold substantially all the assets of its
Zerand division to Valumaco Incorporated, a new company formed for the asset
purchase. In addition, Valumaco Incorporated assumed certain liabilities of
the Zerand division. The assets sold included the real property, platen die
cutter systems, and other original Zerand products such as delivery
equipment, wide-web rotogravure printing systems, stack flexographic
printing systems, unwind and butt splicer systems, and related spare parts,
accounts payable, and other assumed liabilities. Excluded from the
transaction were the System 2000 flexographic printing systems and the
System 9000 narrow-web rotogravure printing systems produced at the Zerand
division and related accounts receivable, inventory and engineering
drawings. The sale price was approximately $13.7 million, which consisted
of cash proceeds of $10.1 million, a one-year $1 million escrow "hold back",
and the purchaser's assumption of approximately $2.6 million of certain
liabilities of Zerand, including the accounts payable.
This transaction resulted in an approximate $10 million reduction of
the Company's senior secured bank debt. In 1997, Zerand contributed sales
of approximately $11.6 million and approximately $1.8 million of income
before interest, corporate charges and taxes. The Company realized an
approximate $3.6 million gain on the sale of Zerand assets.
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 direct mail
inserts, postage stamps and personal checks.
<PAGE>
The Company's products are designed to serve the (1) commercial and
specialty printing industry, (2) banknote and securities segments of the
printing industry, (3) the paperboard packaging industry, and (4) the
flexible packaging industry. 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 carton, and the
flexible packaging segments of the packaging industry. The printing
industry also consists of several large segments in which the Company does
not participate - including newspapers, periodicals and book publishing.
Economic Forecasts
The Company believes that, in the industry segments which it serves,
several major market trends exist that are influencing the development and
enhancement of packaging and printing equipment systems. These trends
include an increasing emphasis on productivity, changing retailing
practices-including greater market segmentation-and increasing environmental
regulation. In addition the industry is experiencing a considerable
consolidation process with numerous customer consolidations taking place in
each of the last several years.
Productivity. Productivity in the printing industry (as measured by
output per employee) is one of the lowest among major industries in the
United States. The purchasers of packaging and printing equipment continue
to seek methods of reducing per unit costs in response to increased labor
and raw materials costs, such as paper and paperboard. As a result,
purchasers of packaging and printing equipment want to improve efficiency by
reducing inventories, "in process" production time, waste and labor costs.
Purchasers, therefore, are demanding more productive equipment including
integrated systems capable of running at high speeds and producing finished
product in a single press pass. The Company believes its web systems
technology meets these demands for higher productivity.
Retailing Practices. Retail shelf space is becoming increasingly
expensive and scarce. In order to more effectively utilize shelf space,
consumer product manufacturers are placing greater emphasis on the
appearance of the package as a selling tool for the product. As a result,
purchasers of packaging and printing equipment are being required by their
customers to produce packaging with improved graphics through an increased
number of colors, improved color quality and application of color enhancing
coatings. These requirements have increased the complexity of the packaging
and printing processes. The Company believes its products provide a
production solution to these requirements.
Market Segmentation. Market segmentation, or target marketing, where
products are marketed to specific geographic areas or demographic groups,
has resulted in increased product and packaging variety and an increased
demand for distinct packaging and more specialized printing. In response to
this trend, which has resulted in shorter press runs, purchasers of
packaging and printing equipment systems are demanding greater system
flexibility and automation to permit quick and less expensive change-over
from one product run to another. The Company believes its technology has
distinct advantages in meeting these demands.
<PAGE>
Environmental Regulation. Increasingly stringent environmental laws,
rules and regulations, both domestically and internationally, have caused
purchasers of packaging and printing equipment to focus on volatile organic
compounds, printing inks, coatings and chemicals used for platemaking and
equipment maintenance which are environmentally safer. As a result,
purchasers of packaging and printing equipment are increasingly seeking
ecologically-friendly processes such as the use of flexographic printing
with water based inks.
Business Strategy
The Company's objective is to rebuild the Company into a strong
international business as a manufacturer of packaging and printing systems
through its strategy of providing complete systems solutions to its
customers. The principal elements of this strategy include the following:
Technological Advancements. The Company demonstrates its technological
advancements through its research and development efforts and new product
introductions. This included the introduction of the currency examination
equipment, the System 2000 flexographic and System 9000 rotogravure printing
press systems. 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. Historically, the Company's
gross expenditures for research and development (including customer funded
projects) have exceeded 5% of net sales.
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 (lithography, flexography, rotogravure and intaglio)
together with die cutters and creasers and product delivery systems
purchased from other suppliers 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 in
the banknote and securities segment of the printing industry.
<PAGE>
Products
The Company markets a broad range of packaging and printing equipment
systems to the packaging industry and the specialty/commercial and banknote
and securities segments of the printing industry. The Company's complete
systems integrate a variety of equipment, including printing presses, die
cutters and creasers and product delivery systems. Such systems generally
include equipment manufactured by the Company and also that produced by
other manufacturers with the Company acting as a "systems integrator". The
Company also sells the following system components independently of complete
systems.
Automatic Currency Examination ("ACE") Equipment. The Company markets
and manufactures high-speed image processing systems primarily for use in
the banknote and security printing industry. These systems are used for the
examination of banknotes with error detection capabilities for overt and
covert anti-counterfeit components and other printing errors. The ACE
system achieves the final link in the long-sought goal of complete machine-
based production, processing, and distribution of banknotes. The ACE system
has resulted from many years of technical development of banknote inspection
by the Bank of England Printing Works, and continued development and close
cooperation with the Company over the last six years.
ACE is based on a high-speed digital image processor capable of
completely examining each note on both sides of a sheet of banknotes in a
single pass through the machine at rates up to 10,000 sheets per hour. ACE
enhances productivity by replacing the requirement for examination
personnel, reducing the number of related security personnel, and by
removing a severe bottleneck in the production flow of a banknote printing
works. ACE further provides the standard of consistency for production
quality required in the public distribution process of banknotes.
ACE electronically identifies banknotes that do not meet customer
defined quality standards. Once identified, the defective currency is
automatically removed from the manufacturing process. In addition to
currency inspection and extraction, the ACE system also accounts for the
number of sheets entering and exiting the automated examination process.
Printing Presses. The Company offers all four major printing processes
on a worldwide basis for its web-fed packaging and printing systems
including flexographic, offset lithographic, rotogravure and intaglio
printing and in combinations. Flexography, which historically was well
suited for printing large areas of solid color, is typically the least
expensive printing process. However, with the Company's technological
advances, certain System 2000 flexographic machines are capable of printing
quality that rivals offset lithography, at much lower costs. Offset
lithography, which is the most widely used printing process, is a process
that until now has typically provided 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 to print banknotes and other security documents.
Die Cutters and Creasers. The Company believes that it offers, through
preferential OEM agreements, a broad array of platen die cutters and rotary
cutting products and technology in the packaging and printing industries.
<PAGE>
Auxiliary Equipment, Parts and Customer Service. The Company
manufactures auxiliary equipment and replacement parts and provides service
for its presses and collators, which represented 76% of the Company's net
sales for 1999, 60% of net sales for 1998, and 45% of net sales for 1997.
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.
Customer Service. The Company provides a customer service program
including 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. Parts can be delivered the same
day or overnight in North America, and within 24-48 hours worldwide.
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 and internationally through its agent network.
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 also conducts limited market research and analyses to reveal and
study trends in addition to actively participating in various trade
associations.
Customers
The Company's customers include packaging companies, printing
companies, paper companies, check printers, business forms companies and
central bank and private banknote and securities 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., Komori-Chambon and Goebel. The Company believes
that the packaging industry is also served by manufacturers of offset sheet-
fed equipment such as Koenig and Bauer-Albert Frankenthal (KBA)-Planeta,
Heidelberg, M.A.N. Roland and Komori. The banknote and securities markets
are predominately served by sheet-fed equipment made by Koenig and Bauer-
Albert Frankenthal (KBA) and marketed 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.
<PAGE>
Research and Development
Company development 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 1, 2000, the Company had approximately 55 employees. With
the closing of the Hamilton plant in 1998, the Company no longer employs any
collective bargaining employees.
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 a
significant amount of service and parts orders, which have been in the 30%
to the 50% range of the Company's sales volume for the last three years.
The absolute value of the backlog varies with the amount of percentage
of completion revenue recognized in any one period. This value can fluctuate
since the Company experiences an average six to nine month period between
the booking of the order and its final shipment. The Company's backlog of
unfilled orders as of December 31, 1999 was approximately $2.5 million
compared to $2.5 million at December 31, 1998.
Executive Officers
The executive officers of the Company are as follows:
Name Age Principal Position with the Company
---------------- --- -----------------------------------
Paul I. Stevens 85 Chairman of the Board, Chief
Executive Officer and Director
Richard I. 61 President, Chief Operating Officer
Stevens and Director
Constance I. 56 Vice President - Administration,
Stevens Assistant Secretary and Director
George A. 58 Vice President, Treasurer and Chief
Wiederaenders Accounting Officer
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-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 and
Constance I. Stevens.
<PAGE>
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. Mr. Stevens is
the son of Paul I. Stevens.
Constance I. Stevens has served as a director of the Company since
April 1987. Ms. Stevens has served as Vice President - Administration and
Assistant Secretary to the Company since July 1995. From July 1989 to July
1995, Ms. Stevens served as the President of a project management consulting
firm in Carmel, California. From May 1980 until July 1989, Ms. Stevens
served as the managing partner of Merritt Associates of Carmel, California,
an architectural design and real estate development firm. Ms. Stevens is
the daughter of Paul I. Stevens.
George A. Wiederaenders has served as Vice President, Treasurer and
Chief Accounting Officer since May 1996. He has been Chief Accounting
Officer of the Company since July 1993, was Treasurer of the Company from
September 1987 to August 1993 and had served Stevens as it Vice President -
Finance from December 1985 to April 1988. From January 1981 to December
1985, Mr. Wiederaenders was Executive Vice President and Treasurer of
Manufactured Energy Products, Inc., a manufacturer of wireline trucks and
skids for oilfield exploration. Mr. Wiederaenders served in various
capacities with the public accounting firm of Coopers & Lybrand in Texas
from 1967 to 1978, including general practice audit partner from 1976 to
1978 and managing partner of the Austin, Texas office from June 1977 to
1978.
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.
The Company's Financial Condition Is Poor. The Company is currently
experiencing severe liquidity problems and has been unable to pay all of its
obligations when they have become due. The Company has had operating losses
in each of the last four years, with net sales declining substantially each
year since 1995. Since 1997, cash flow from operations has been
insufficient to meet the Company's cash requirements. Unless the Company
obtains substantial orders for printing equipment in the near future, the
Company may be forced to file for bankruptcy. The Company's liabilities may
currently exceed the value of its assets.
<PAGE>
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., Komori-Chambon, and Goebel. The Company believes
that the packaging industry is also served by manufacturers of offset sheet-
fed equipment, such as Koenig and Bauer-Albert Frankenthal (KBA)-Planeta,
Heidelberg, M.A.N. Roland and Komori. The banknote and securities markets
are predominately served by sheet-fed equipment marketed 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.
Economic Downturn. Sales of the Company's packaging and printing
products may be adversely affected by general economic and industry
conditions and downturns, and particularly by the price of paper and
paperboard. The Company's business and results of operations may be
adversely affected by inflation, interest rates, unemployment, paper prices,
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 losses of $34.2 million in 1996 and $19.2 million in
1997. These losses were caused by many factors, including a slowdown in its
customers' capital spending that surfaced in the fourth quarter of 1995;
changing printing technology that affected demand for the Company's business
forms printing systems, which prior to 1990 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. 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 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 in-depth knowledge of the industry and the skills, know-how and
technological expertise of the Company's personnel.
<PAGE>
Dependence Upon New Technologies and Product Development. The
Company's industry is highly competitive and is characterized by
technological advances and new product introductions and improvements. The
Company believes that its future success depends upon its ability to enhance
current products, to develop and introduce new and superior products on a
timely basis and at acceptable pricing, to respond to evolving customer
requirements, and to design and build products which achieve general market
acceptance. The ability of the Company to compete successfully will depend
on its ability to maintain a technically competent research and development
staff and to stay ahead of technological changes and advances in the
industry. Many difficulties and delays are encountered in connection with
the development of new technologies and related products. There can be no
assurance that new products will establish long-term life cycles or assure
long-term field use. Moreover, there can be no assurance that any refined
or improved versions of current products or any new products that may be
introduced in the future will be commercially viable. Current competitors
or new market entrants could introduce new or enhanced products with
features which render the Company's technology, or products incorporating
the Company's technology, obsolete or less marketable.
International Business Risks. International sales represented 38% of
net sales in 1999, 35% in 1998 and 25% in 1997. The Company expects that
international sales will continue to represent a significant portion of its
total sales. International operations are subject to various risks,
including exposure to currency fluctuations, political and economic
instability, differing economic conditions and trends, differing trade and
business laws, unexpected changes in applicable laws, rules, regulatory
requirements or tariffs, difficulty in staffing and managing foreign
operations, longer customer payment cycles, greater difficulty in accounts
receivable collection, potentially adverse tax consequences and varying
degrees of intellectual property protection. Fluctuations in currency
exchange rates could result in lower sales volume reported in U.S. dollars.
Fluctuations in foreign exchange rates are unpredictable and may be
substantial, and, since many of the Company's competitors are foreign,
fluctuations in foreign countries may also affect the Company's competitive
position in the United States market. Any event causing a sudden disruption
of international sales could have a material adverse effect on the Company's
operations. There can be no assurance that the Company will be successful
if it engages in such practices to a significant degree in the future.
Manufacturing Risks and Availability of Raw Materials. Disruption of
operations at the Company's primary manufacturing facility 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. The principal raw materials used in the
manufacturing of printing press systems are high grade steel and alloys used
in the making of gears, rollers and side frames. Steel is in very available
supply throughout the world.
<PAGE>
Impact of 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 over $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. As a result of the Company's continuous liquidity
problems, the Company has been the subject of lawsuits, from time to time,
with respect to the Company's inability to pay certain vendors on a timely
basis. To date, most of such actions have been settled, but there can be no
assurance that all of the actions can be settled, or if named a defendant in
such actions in the future, the Company will be able to settle such claims
in the future. 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. As of March 20, 2000, Paul I.
Stevens and persons and entities related to him beneficially own
approximately 13% of the outstanding Series A Common Stock and 93% of the
outstanding Series B Common Stock of the Company. This ownership represents
72.4% of the combined voting power. Although the impact of the Stevens'
holdings is not believed to be material to the operations of the Company,
such control may have the effect of reducing liquidity of the stock which
may affect shareholder value.
<PAGE>
Volatility of Stock Price. The Company's Series A Common Stock market
price in the last few years has ranged from a high of $4.50 per share in
the second quarter of 1998 to a low of $0.09 per share in the fourth quarter
of 1999. The trading price of the Common Stock is likely to continue to be
highly volatile and subject to wide fluctuations in response to factors
related to the announcement of financial results, new product introductions,
new orders or order cancellations by the Company or 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, including general economic and stock
market conditions, investor perceptions, levels of interest rates and the
value of the U.S. dollar.
Dependence On Key Personnel. The Company's success is largely
dependent on the personal efforts of Paul I. Stevens, its Chairman of the
Board and Chief Executive Officer, Richard I. Stevens, its President and
Chief Operating Officer, and on various other members of its senior
management. The loss or interruption of the services of such individuals
could have a material adverse effect on the Company's business or prospects.
The success of the Company may also be dependent on its ability to hire
and retain additional qualified sales, marketing and other personnel.
Competition for qualified personnel in the Company's industry is intense,
and there can be no assurance that the Company will be able to hire or
retain additional qualified personnel. In addition, past financial
performance of the Company may limit its ability to hire and retain
management professionals.
Rapid Growth and Decline of Revenues. The Company's annual revenue has
fluctuated dramatically over the years ranging from 30% growth in 1995 to a
50% decrease in 1999. The 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 new products.
In recent years, the Company curtailed many expenditures in response to the
slowness of new orders which has been due, in large part, to certain product
performance issues related to the new products. These performance issues
also severely impacted the Company's liquidity, necessitating large lay offs
of personnel, a restructuring of operations to lower operating levels, and
consolidation of functions and facilities. In addition, the Company has
reduced capital expenditures and implemented certain other cost reduction
measures.
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. 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.
<PAGE>
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.
Approx. Owned or
Location Use Sq. Ft. Leased
- ----------------- --------------------------------- ------ ------
Fort Worth, Texas Executive and engineering offices 12,400 Leased
Fort Worth, Texas Manufacturing facility and 74,000 Owned
administration offices
See notes G, J and L 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.
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. No assurance can be given regarding
the outcome of any case; 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.
On September 15, 1999 the Company filed the necessary forms with the
Pension Benefit Guaranty Corporation (PBGC) to initiate distress
terminations of the Company's two defined benefit pension plans. The PBGC
is a federal agency that insures and protects pension benefits in certain
pension plans when the sponsoring company cannot make the required
contributions to fund projected benefit obligations of the plans.
The Company's low volume of printing press sales has resulted in
extensive lay-offs, plant closings and sales of certain operating divisions
over the past three years. The reduction in employment has, in turn,
created a higher than normal demand for pension benefits necessitating the
Company's decision to file for distress termination of the plans. The
filings began a series of negotiations with the PBGC regarding funding of
the pension benefits of employees. In November 1999 and February 2000, the
PBGC filed federal liens aggregating $1.6 million against all property and
rights to property of the Company on behalf of the Company's Pension Plan
for Bargaining Unit Employees.
As a result of the Company's continuing liquidity problems, the Company
has been the subject of lawsuits, from time to time, with respect to the
Company's inability to pay certain vendors on a timely basis. To date, most
of such actions have been settled, but there can be no assurance that all of
these actions can be settled or that the Company, if named a defendant in
such actions in the future, will be able to settle such claims in the
future.
<PAGE>
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, for its costs in connection with the
Coakley matter.
No assurance can be given regarding the outcome of any pending case;
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, 1999.
<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 SVEIA and SVEIB,
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, or closing prices as
reported by the Over-the-Counter Bulletin Board daily summaries.
<TABLE>
Series A Series B
Common Stock Common Stock
----------------- ------------------
High Low High Low
------- ------ ------- -------
<S> <C> <C> <C> <C>
Year Ending December 31, 1998 .....
First Quarter ..................... $2 1/2 $1 1/2 $3 15/16 $3 3/8
Second Quarter .................... 3 13/16 1 4 3/8 3 3/8
Third Quarter ..................... 3 11/16 1 4 1/4 1 1/4
Fourth Quarter .................... 1 3/8 9/16 1 1/4 13/16
Year Ending December 31, 1999:
First Quarter ..................... $1 1/4 $ 5/16 $1 3/16 $ 11/16
Second Quarter .................... 1 1/4 5/16 13/16 1/2
Third Quarter ..................... 11/16 1/4 1/2 1/4
Fourth Quarter .................... 1/2 3/32 1/2 1/4
First Quarter 2000
(through March 23, 2000)......... $2 1/4 $ 1/4 $2 $ 1/16
</TABLE>
As of March 23, 2000, approximately 7,466,000 shares of the Series A Common
Stock were outstanding and held by approximately 200 holders of record, and
2,036,000 shares of the Series B Common Stock were outstanding and held by
approximately 65 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 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."
Recent Sales of Unregistered Securities
On March 31, 2000, the Company received the net proccees of a private
placement of $1 million 10% convertible subordinated notes payable due March
31, 2003 (see Item 1, Business and Note U of Notes to Consolidated Financial
Statements). The notes are convertible into 2,000,000 shares of Series A
Common Stock (SVEIA), subject to adjustment. The Company issued these
unregistered securities in reliance upon Rule 504 of Regulation D of the
Securities Act of 1933, as amended.
<PAGE>
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.
<TABLE>
STATEMENT OF OPERATIONS
(In thousands except per share data)
Year Ended December 31,
---------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net sales $11,137 $22,207 $35,151 $65,659 $139,181
Cost of sales 7,813 17,877 34,011 74,243 108,307
------ ------ ------ ------ -------
Gross profit (loss) (1) 3,324 4,330 1,140 (8,584) 30,874
Selling, general and administrative expense 4,909 7,379 9,837 22,485 21,437
Restructuring charge (3) - - - 1,300 --
Loss on impairment of assets 200 573 6,347 -- --
Loss on sale of assets -- -- -- 3,472 --
------ ------ ------ ------ -------
Operating income (loss) (1,785) (3,622) (15,044) (35,841) 9,437
Gain (loss) on sale of assets (4) (1,682) 2,203 -- -- -
Other income (expense) (817) (1,956) (4,396) (5,379) (3,478)
------ ------ ------ ------ -------
Income (loss) before income taxes and
extraordinary item (4,284) (3,375) (19,440) (41,220) 5,959
Income tax (expense) benefit - (75) 213 7,000 (1,660)
------ ------ ------ ------ -------
Income (loss) before extraordinary item (4,284) (3,450) (19,227) (34,220) 4,299
Extraordinary item (2) -- 11,221 - - -
------ ------ ------ ------ -------
Net income (loss) $(4,284) $ 7,771 $(19,227) $(34,220) $ 4,299
====== ====== ====== ====== =======
Per Common Share - Basic:
Income (loss) before extraordinary item $ (0.45) $ (0.36) $ (2.03) $ (3.62) $0.46
Extraordinary item (2) - 1.18 - - -
------ ------ ------ ------ -------
Net income (loss) - basic $ (0.45) $0.82 $ (2.03) $ (3.62) $ 0.46
====== ====== ====== ====== =======
Per Common Share - Diluted:
Income (loss) before extraordinary item $ 0.45 $ (0.36) $ (2.03) $(3.62) $ 0.45
Extraordinary item (2) -- 1.18 - - -
------ ------ ------ ------ -------
Net income (loss) - diluted. $ 0.45 $ 0.82 $ (2.03) $ (3.62) $ 0.45
====== ====== ====== ====== =======
Weighted average shares outstanding - basic 9,502 9,492 9,457 9,451 9,408
====== ====== ====== ====== =======
Weighted average shares outstanding - diluted 9,502 9,492 9,457 9,451 9,553
====== ====== ====== ====== =======
<PAGE>
BALANCE SHEET DATA
(In thousands)
Year Ended December 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- -------- -------
Cash and temporary investments .. $ 6 $ 164 $ 211 $ 3,338 $ 814
Working capital (deficit) ....... 1,178 1,965 (10,894) (11,476) 38,127
Total assets .................... 10,262 14,651 31,890 77,417 117,647
Long-term debt .................. 6,158 5,244 55 113 33,470
Total stockholders' equity (deficit) $(5,396) $(2,955) $(9,611) $10,896 $45,372
______________________________
(1) Includes increase in gross profit in 1999 of $1.2 million and in 1998
of $1.3 million as a result of a decrement in the LIFO inventory at
December 31, 1999 and 1998, respectively.
(2) In 1998, gain on early extinguishment of debt was $11.2 million.
(3) The restructuring charge reflected certain of the estimated costs of a
restructuring plan which included closing some facilities, combinations
of operating units, major personnel reassignments, reductions in number
of employees, and severance compensation. 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 1996 and 1997 for this restructuring was approximately equal to the
restructuring charge.
(4) Includes loss on January, 2000 sale of SSMI, the Company's French
repair and service company, of $0.05 million and a related non-cash
foreign currency adjustment of $1.6 million which had been previously
reported as a charge against stockholder equity in "accumulated other
comprehensive loss".
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Cautionary Statement
The statements in this Form 10-K, including this Management's
Discussion and Analysis, that are forward looking are based upon current
expectations and actual results may differ materially. Therefore, the
inclusion of such forward looking information should not be regarded as a
representation of the Company that the objectives or plans of the Company
will be achieved. Such statements include, but are not limited to, the
Company's expectations regarding the operations and financial condition of
the Company. Forward looking statements contained in this Form 10-K and
included in this Management's Discussion and Analysis, involve numerous
risks and uncertainties that could cause actual results to differ materially
including, but not limited to, the effect of changing economic conditions,
business conditions and growth in the printing and paperboard converting
industry, the Company's ability to maintain its lending arrangements, or if
necessary, access external sources of capital, implementing current
restructuring plans and accurately forecasting capital expenditures. In
addition, the Company's future results of operations and financial condition
may be adversely impacted by various factors including, primarily, the level
of the Company's sales. Certain of these factors are described in the
description of the Company's business, operations and financial condition
contained in this Form 10-K. Assumptions relating to budgeting, marketing,
product development and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revisions
based on actual experience and business developments, the impact of which
may cause the Company to alter its marketing, capital expenditure or other
budgets, which may in turn affect the Company's financial position and
results of operations.
General
The Company 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 $11.1 million in 1999.
The Company continued to experience a decrease in sales during 1999 and
1998, which primarily reflected the sale of various divisions and a
continuation of the reduced order flow that the Company has experienced for
the last several years. Orders for 1999 of $11.1 million increased 8.8%
over the previous year. The increase occurred in packaging and specialty
web products. In response to the low volume of orders, the Company
continued its work force and cost reductions and the consolidation of
certain facilities and operating functions. In an effort to cut costs and
improve cash flow, the Company has eliminated certain product lines and
consolidated manufacturing and assembly at its Fort Worth, Texas, location.
The Company believes these actions have helped and will continue to help in
its efforts to return to profitability.
<PAGE>
Results of Operations
<TABLE>
The following table sets forth, for the periods indicated, certain
income statement data as percentages of net sales
Year Ended December 31,
-----------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Net sales ....................... 100.0% 100.0% 100.0%
Cost of sales ................... 70.2% 80.5% 96.8%
----- ----- -----
Gross profit (loss) ............. 29.8% 19.5% 3.2%
Selling, general and administrative expenses 44.1% 33.2% 28.0%
Loss on impairment of assets .... 1.8% 2.6% 18.0%
----- ----- -----
Operating income (loss) ......... (16.1%) (16.3%) (42.8%)
Other income (expense):
Gain (loss) on sale of assets (15.1%) 9.9% -
Interest, net .............. ( 6.6%) ( 7.1%) (10.2%)
Other, net ................. ( 0.7%) ( 1.7%) ( 2.3%)
----- ----- -----
Loss before income taxes and extraordinary
items ...................... (38.5%) (15.2%) (55.3%)
</TABLE>
Comparison of Years Ended December 31, 1999 and 1998
Sales. The Company's sales for the year ended December 31, 1999
decreased by $11.1 million (or 49.8%) compared to sales in the same period
in 1998 due primarily to decreases in packaging system products ($5.6
million) and French service and repair sales ($1.2 million). A total of
$4.3 million of the decrease resulted from sales of Zerand, which was sold
on April 27, 1998.
Gross Profit. The Company's gross profit for the year ended December
31, 1999 decreased by $1.0 million compared to gross profit in the same
period in 1998. The gross profit margin increased to 29.8% of sales as
compared to 19.5% in the comparable period in 1998 due (1) to product mix,
shipment of products at near normal margins, and reduced depreciation and
product development costs in 1999, and (2) the Company's evaluation of its
last-in first-out ("LIFO") inventory reserve and corresponding decrement in
the calculated LIFO reserve. The Company evaluated its LIFO inventory
reserve principally because of the sale of its machining and production
facilities in Ohio in mid-1998 and the complete 1998 changeover of
manufacturing philosophy from a "machine and make the component parts" to a
"purchase the machined part." This LIFO evaluation process reduced the
current year LIFO reserve calculation and, accordingly, increased the gross
profit by $1.2 million (or $0.13 per share) for the year ended December 31,
1999.
<PAGE>
Selling, General and Administrative Expenses. The Company's selling,
general, and administrative expenses decreased by $2.4 million (or 33.5%)
for the year ended December 31, 1999 compared to the same period in 1998 due
to cost reduction efforts at corporate headquarters and manufacturing
locations in connection with the reduced volume of sales, as well as the
impact of the sale of Zerand. Selling, general and administrative expenses
for the year ended December 31, 1999 were 44.1% of sales compared to 33.5%
of sales for the same period in 1998 due to the huge reduction in sales in
1999. The reduction in expenses was not proportionate to the reduction in
sales discussed above.
Other Income (Expense). The Company's interest expense decreased by
$0.8 million for the year ended December 31, 1999 compared to the same
period in 1998 due to the reduced borrowings in 1999 resulting from the
application of the Zerand and Hamilton sale proceeds to pay down bank
indebtedness and the early extinguishment of $17.3 million of subordinated
notes, offset by an increased cost of borrowing in 1999. Interest income
was negligible for the year ended December 31, 1999 and 1998.
Comparison of Years Ended December 31, 1998 and 1997
Net Sales. The Company's net sales for the year ended December 31,
1998 decreased by $12.9 million, or 36.8%, compared to the same period in
1997, due primarily to decreased sales of packaging systems products ($4.7
million) and to the sale of the Zerand division in April 1998, which
contributed $4.3 million in 1998 sales and $11.6 million in 1997 sales. In
addition, the Company experienced decreases in its French repair and service
sales ($0.9 million). Sales and gross profit in 1997 include $0.7 million
in proceeds from the sale of certain press system contract rights. The
Company sold these rights in lieu of a long repossession and resale process.
Gross Profit. The Company's gross profit for the year ended December
31, 1998 increased by $3.2 million compared to gross profit in the same
period in 1997 due primarily to shipment of products at near normal product
margins. In addition, the Company evaluated its last-in first-out ("LIFO")
inventory reserve following the sale of assets, including the inventory, at
HMC and other inventory usage in 1998. The financial impact of the
calculated decrement in the LIFO inventory for the year ended December 31,
1998 was $1.3 million. Accordingly, the gross profit for the year was
increased $1.3 million ($0.14 per share) and the LIFO reserve was reduced
$1.3 million. Gross profit margin for 1998 increased to 19.5% of sales as
compared to 3.2% for 1997. This increase in gross profit margin in 1998 was
due primarily to product mix, shipment of products at near normal margins,
decreased warranty expenses, and the benefit of the reduction in the LIFO
reserve. Sales and gross profit in 1997 include $0.7 million in proceeds
from the sale of certain press system contract rights. The Company sold
these rights in lieu of a long repossession and resale process.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses decreased by $2.5 million, or 25%, for
the year ended December 31, 1998 compared to the same period in 1997. The
decrease was due to cost reduction efforts at corporate headquarters and at
manufacturing locations in connection with the reduced volume of sales, as
well as the impact of the sale of the Zerand division. Selling, general and
administrative expenses for the year ended December 31, 1998 were 33.2% of
sales compared to 28% of sales for the same period of 1997 due to the very
low sales in 1998 compared to 1997. The Company's continuing cost
reductions in 1998 did not equate to the overall percentage decrease in
sales, and especially the sales decrease in the last half of 1998.
<PAGE>
Loss on Impairment of Assets. In connection with the continuing
consolidation of operating facilities, the Company decided in November 1997
to sell certain production facilities. Based upon bids received or other
pertinent valuations, the Company recorded a fourth quarter 1998 charge of
$0.57 million to reflect the estimated ultimate realizable value of one
production and one inventory storage facility in Hamilton, Ohio held for
sale (See Note D of Notes to the Financial Statements).
Gain on Sale of Assets. The gain on sale of assets of $2.2 million for
the year ended December 31, 1998 included a $3.6 million gain on the April
1998 sale of the Zerand division assets, offset by a $1.4 million loss on
the sale of the HMC in July 1998.
Other Income (Expense). The Company's interest expense decreased by
$2.0 million for the year ended December 31, 1998 compared to the same
period in 1997 due to the reduced borrowings in 1998 resulting from the
application of the Zerand and Bernal sale proceeds to pay bank indebtedness,
and the extinguishment of subordinated indebtedness at June 30, 1998, offset
by an increased cost of borrowing in 1998. Interest income was negligible
for the years ended December 31, 1998 and 1997.
Tax Matters
The Company's effective state and federal income tax rate ("effective
tax rate") was 0% for 1999, 0.3% for 1998, and 0.6% for 1997. This
decrease in the effective tax rate was due to the uncertainty of future tax
benefits from future operations.
Quarterly Results (Unaudited)
<TABLE>
The following table summarizes results for each of the four quarters
for the years ended December 31, 1999, and 1998.
Three Months Ended
------------------------------------------
March 31, June 30, Sept.30, December 31,
------ ------ ------- ------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
1999:
Net sales ................... $ 3,314 $ 2,575 $ 2,415 $ 2,833
Operating income (loss) ..... $ 270 $ 297 $ (830) $ (1,522)
Net income (loss) ........... $ 43 $ 5 $ (994) $ (3,338)
Net income (loss) per common
share - basic and diluted .. $ 0.005 $ 0.00 $ (0.10) $ (0.35)
1998:
Net sales ................... $ 9,697 $ 5,343 $ 2,737 $ 4,430
Operating income (loss) ..... $ 557 $(1,813) $ (987) $ (1,379)
Extraordinary item ..... -- $11,221 -- --
Net income (loss) ........... $ (416) $11,556 $(1,785) $ (1,584)
Net income (loss) per common
share - basic ............ $ (0.04) $ 1.22 $ (0.19) $ (0.17)
Net income (loss) per common
share - diluted ........... $ (0.04) $ 1.13 $ (0.19) $ (0.17)
</TABLE>
<PAGE>
The Company attributes the operating and net loss for the fourth
quarter of 1999 to (1) a continuing decline in sales volume, (2) accrual
for losses on certain major contracts and LIFO inventory, and (3) unabsorbed
overhead costs due to the low shipment volume in the quarter, and (4) loss
on January 2000 sale of SSMI of $0.05 million and a related non-cash foreign
currency adjustment of $1.6 million which had been previously reported as a
charge against stockholders equity in "accumulated other comprehensive
loss".
The Company attributes the operating and net loss for the fourth
quarter of 1998 to (1) a continuing decline in orders ($3.0 million versus
$20.3 million for the last six months of 1998 and 1997, respectively); (2) a
non-cash charge for loss on impairment of asset values of $0.57 million and
(3) unabsorbed overhead costs due to the low shipment volume in the quarter.
The Company has taken certain continuing cost reduction actions to
adjust its expected 2000 production to the order flow in 1999.
Liquidity and Capital Resources
The Company requires capital primarily to fund its ongoing operations,
to service its existing debt and to pursue its strategic objectives
including new product development and penetration of international markets.
The Company's working capital needs typically increase because of a number
of factors, including the duration of the manufacturing process and the
relatively large size of most orders.
Net cash provided by (used in) operating activities was $(1.6) million
in 1999, $(5.9) million in 1998, and $(3.3) million in 1997. Net cash
provided by (used in) operating activities (before working capital
requirements) was $(1.9) million in 1999, $(4.5) million in 1998, and
$(10.4) million in 1997. Working capital provided (used) cash of $0.3
million in 1999, $(1.4) million in 1998, and $7.0 million in 1997. 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.
In April 2000, the Company completed a private placement of $1 million
of 10% convertible subordinated notes ("the Notes"). Net proceeds of the
Notes will be used for working capital. The Notes were issued in increments
of $50,000 and are convertible into 2,000,000 shares of Series A Common
Stock ("SVEIA") of the Company at $0.50 per share, subject to adjustment.
The conversion of the Notes is at the holder's option anytime on or after
the fifteenth day following the original issue date of the Notes and prior
to the close of business on their maturity date. Issue costs for the Notes
aggregated approximately $151,000.
The Company's capital expenditures were $0.1 million in 1999, $0.2
million in 1998, and $0.1 million in 1997 and were used primarily for
certain machinery and equipment modernization.
<PAGE>
On June 30, 1998 the Company refinanced a major portion of its secured
indebtedness ("the Debt Restructuring") as part of its plan to reduce its
debt. Through a combination of new secured bank borrowings of approximately
$6 million, and loans from its Chairman, CEO and principal shareholder, Paul
I. Stevens, aggregating $4.5 million, the Company paid off principal amounts
due its senior secured bank lender and its secured senior subordinated
noteholders, aggregating approximately $19.5 million. Repayment of the
secured Senior Subordinated Notes resulted in an extraordinary gain on early
extinguishment of debt of approximately $11.2 million.
The Company's bank credit facility bears interest at 13% over prime and
matures June 30, 2001. Under the bank facility, the Company's maximum
borrowings are limited to a borrowing base formula, which cannot exceed $4.0
million and may be in the form of direct borrowings and letters of credit.
As of December 31, 1999 there were $2.07 million in direct borrowings and no
standby letters of credit outstanding, with approximately $0.2 million
additional availability for such borrowings. The Company is not in
compliance with some of the covenants of its senior bank line of credit loan
agreement. The principal default involved the failure to make the required
pension plan payments in 1999 and 2000, which necessitated the filing of a
distress termination request (see below). The Company's senior lender has
declined to grant waivers of the defaults. Although the bank can declare
the full amount of the loan immediately payable at any time, it has not done
so. The senior bank debt is classified as a current obligation at December
31, 1999.
The Company's bank credit facilities have first liens on certain assets
of the Company, principally inventory, accounts receivable, and the
Company's Texas real estate. Paul I. Stevens' loans aggregating $6.1
million at December 31, 1999 have first liens on certain assets of the
Company, principally a $0.5 million platen cutter relating to the hold back
on the sale of the Zerand division, the assets of a foreign subsidiary, and
certain accounts receivable for new customer equipment. Mr. Stevens has
second liens on all other assets of the Company. The Company was paid
$500,000 of the Zerand escrow hold back funds net of amounts owed to the
purchaser on November 6, 1998. Because these hold back funds collateralized
certain Paul I. Stevens advances, the $500,000 was paid to him to reduce his
secured loans to the Company. The secured loans from Paul I. Stevens are
due June 30, 2001 and bear interest at rates that vary up to 2% over bank
prime.
The borrowings under the bank credit facility are subject to various
restrictive covenants related to financial ratios as well as limitations on
capital expenditures and additional indebtedness. The Company is not
allowed to pay dividends.
The Company was unable to pay certain pension plan minimum payments due
on September 15, 1999. Accordingly, the Company filed the necessary forms
with the Pension Benefit Guaranty Corporation ("PBGC") to initiate distress
terminations of the Company's two defined benefit pension plans. The PBGC
is a federal agency that insures and protects pension benefits in certain
pension plans when the sponsoring company cannot make the required
contributions to fund projected benefit obligations of the plans.
<PAGE>
The Company's low volume of printing press sales has resulted in
extensive lay-offs, plant closings and sales of certain operating divisions
over the past three years. The reduction in employment has, in turn,
created a higher than normal demand for pension benefits necessitating the
Company's decision to file for distress termination of the plans. The
filings have begun a series of negotiations with the PBGC regarding funding
of the pension benefits of employees. The PBGC, on behalf of the Company's
pension plan for bargaining unit employees, has filed liens in the aggregate
amount of $1.6 million.
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 operational strategies. 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.
Through December 31, 1999, the Company's Chairman and Chief Executive
Officer has loaned the Company $6.16 million for its short-term cash
requirements. As of December 31, 1999, this amount has not been repaid.
The success of the Company's plans will continue to be impacted by its
ability to achieve a satisfactory level of orders for printing systems,
timely deliveries, the degree of international orders (which generally have
less favorable cash flow terms and require letters of credit that reduce
credit availability), and improved terms of domestic orders. While the
Company believes it is making progress in these areas, there can be no
assurance that the Company will be successful in these endeavors.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk.
Not required for the company.
Item 8. Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements and Financial Statement Schedules
Page
Number
------
Report of Management......................................... 20
Report of Independent Certified Public Accountants .......... 21
Independent Auditors' Report ................................ 22
Consolidated Balance Sheets -- December 31, 1999 and 1998 ... 23
Consolidated Statements of Operations -- Years Ended December
31, 1999, 1998 and 1997 ................................... 24
Consolidated Statement of Stockholders' Equity -- Years
Ended December 31, 1999, 1998 and 1997 ................... 25
Consolidated Statements of Cash Flows -- Years Ended December
31, 1999, 1998 and 1997 ................................... 26
Notes to Consolidated Financial Statements .................. 27
Schedule II -- Valuation and Qualifying Accounts -- Years
Ended December 31, 1999, 1998 and 1997..................... 45
<PAGE>
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 certified public
accountants, whose reports follow. 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.
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 solely
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.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Stevens International, Inc. and subsidiaries as of December 31, 1999, and
1998, and the consolidated results of their operations and their
consolidated cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
We have also audited Schedule II for the years ended December 31, 1999
and 1998. In our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note B to the
financial statements, the Company has experienced a significant reduction in
its sales volume and has experienced continuing losses from operations that
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note B.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
<PAGE>
GRANT THORNTON LLP
Dallas, Texas
March 24, 2000
(except for Note U as to which
the date is March 31, 2000)
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Stevens International, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows for the year ended December 31, 1997
of Stevens International, Inc. and subsidiaries. Our audit also included
the financial statement schedule listed in the Index at Item 8 for the year
ended December 31, 1997. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provided a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements of Stevens
International, Inc. and subsidiaries referred to above present fairly, in
all material respects, the results of their operations and their cash flows
for the year ended December 31, 1997 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 for the year ended December 31, 1997.
The accompanying consolidated financial statements and financial
statement schedule have been prepared assuming that the Company will
continue as a going concern. As discussed in Note B of notes to the
consolidated financial statements in the 1997 Form 10-K, the Company has
negative working capital at December 31, 1997, negative cash flows from
operations for the year ended December 31, 1997, and anticipates that
negative cash flows from operations will continue. In addition, as
discussed in Note J of notes to the financial statements in the 1997 Form
10-K, at December 31, 1997, the Company would not have been in compliance
with certain covenants of its long-term debt agreements had the lenders not
waived the covenants and extended the debt due dates. These factors raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plan concerning these matters are also described in
Note B of notes to the 1997 Form 10-K. The consolidated financial
statements and financial statement schedule do not include any adjustments
that might result from the outcome of this uncertainty.
DELOITTE & TOUCHE LLP
Fort Worth, Texas
March 31, 1998
<PAGE>
<TABLE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
<CAPTION>
December 31,
--------------------
1999 1998
------ ------
<C> <C> <C>
ASSETS
Current assets:
Cash $ 6 $ 164
Trade accounts receivable, less allowance
for losses of $70 and $529 in 1999 and
1998, respectively 936 1,711
Costs and estimated earnings in excess of
billings on long-term contracts 109 665
Inventories 6,303 6,146
Other current assets 93 1,076
Assets held for sale 363 988
------ ------
Total current assets 7,810 10,750
Property, plant and equipment, net 1,795 2,600
Other assets, net 657 1,301
------ ------
$10,262 $14,651
====== ======
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 2,120 $ 3,035
Other current liabilities 1,691 3,705
Income taxes payable 110 75
Customer deposits 641 310
Advances from stockholder --- 1,645
Current portion of long-term debt 2,070 15
------ ------
Total current liabilities 6,632 8,785
Long-term debt --- 2,294
Note payable - stockholder 6,158 2,950
Accrued pension costs 3,110 3,577
Commitments and contingencies --- ---
Stockholders' equity:
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, 7,459,000
and 7,418,000 issued and outstanding at
December 31, 1999 and 1998, respectively 745 741
Series B Common Stock, $0.10 par value,
6,000,000 shares authorized, 2,042,000
and 2,085,000 shares issued and outstanding
at December 31, 1999 and 1999, respectively 205 209
Additional paid-in capital 39,961 39,961
Accumulated other comprehensive (loss) (2,549) (4,150)
Retained deficit (44,000) (39,716)
------ ------
Total stockholders' equity (deficit) (5,638) (2,955)
------ ------
$10,262 $14,651
====== ======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
Year Ended December 31,
-----------------------------
1999 1998 1997
------ ------ -------
<S> <C> <C> <C>
Net sales $11,137 $22,207 $ 35,151
Cost of sales 7,813 17,877 34,011
------ ------ -------
Gross profit 3,324 4,330 1,140
Selling, general and
administrative expenses 4,909 7,379 9,837
Loss on impairment of assets 200 573 6,347
------ ------ -------
Operating (loss) (1,785) (3,622) (15,044)
Other income (expense):
Gain (loss) on sale of assets (1,682) 2,203 -
Interest income 31 13 95
Interest expense (769) (1,580) (3,666)
Other, net (79) (389) (825)
------ ------ -------
(2,499) 247 (4,396)
------ ------ -------
(Loss) before taxes and
extraordinary item (4,284) (3,375) (19,440)
Income tax benefit (expense) -- (75) 213
------ ------ -------
(Loss) before extraordinary item (4,284) (3,450) (19,227)
Extraordinary gain on debt
extinguishment - 11,221 -
------ ------ -------
Net income (loss) $(4,284) $ 7,771 $(19,227)
====== ====== =======
Net income (loss) per common share
Income (loss) before
extraordinary gain $ (0.45) $ (0.36) $ (2.03)
Extraordinary gain - 1.18 -
------ ------ -------
Net income (loss) - basic and
diluted $ (0.45) $ 0.82 $ (2.03)
====== ====== =======
Weighted average number of shares
of common and common stock
equivalents outstanding during
the periods - basic and diluted 9,502 9,492 9,457
====== ====== =======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
Accumulated
Additional Other
Series A Stock Series B Stock Paid-In Retained Comprehensive
Shares Amount Shares Amount Capital (Deficit) Loss Total
----- ---- ----- ---- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 7,340 $ 734 2,111 $ 211 $39,844 $(28,260) $(1,633) $ 10,896
Net loss - - - - - (19,227) - (19,227)
Foreign currency
translation adjustment - - - - - - (602) (602)
Excess pension liability
adjustment - - - - - - (779) (779)
------
Comprehensive loss (20,608)
------
Conversion of Series B
stock to Series A stock 13 1 (13) (1) - - - -
Exercise of stock warrants 38 4 - - 97 - - 101
----- ---- ----- ---- ------- ------ ------ ------
Balance, December 31, 1997 7,391 739 2,098 210 39,941 (47,487) (3,014) (9,611)
Net income - - - - - 7,771 - 7,771
Foreign currency
translation adjustment - - - - - - (295) (295)
Excess pension liability
adjustment - - - - - - (841) (841)
-----
Comprehensive income 6,635
-----
Exercise of stock options 14 1 - - 20 - - 21
Conversion of Series B
to Series A stock 13 1 (13) (1) - - - -
----- ---- ----- ---- ------- ------ ------ ------
Balance, December 31, 1998 7,418 741 2,085 209 39,961 (39,716) (4,150) (2,955)
Net loss - - - - - (4,284) - (4,284)
Foreign currency
translation adjustment - - - - - - (1,064) (1,064)
Excess pension liability
adjustment - - - - - - 537 537
-----
Comprehensive loss (2,683)
Conversion of Series B
to Series A stock 41 4 (41) (4) - - - -
----- ---- ----- ---- ------- ------ ------ ------
Balance, December 31, 1999 7,459 $ 745 2,044 $ 205 $39,961 $(44,000) $(2,549) $(5,638)
===== ==== ===== ==== ====== ======= ====== ======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended December,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Cash provided by operations:
Net income (loss) $ (4,284) $ 7,771 $(19,227)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 906 934 3,350
Extraordinary gain on debt extinguishment - (11,221) -
Accrued pension costs 71 (134) 253
Loss on impairment of assets 200 573 6,347
(Gain) loss on sale of assets 1,682 (2,203) --
Other (521) (294) (620)
Changes in operating assets and liabilities net
of effects from purchase of subsidiary in 1995:
Trade accounts receivable 775 1,446 7,780
Contract costs in excess of billings 555 1,411 (357)
Inventories (157) 464 2,551
Refundable income taxes 48 (48) 2,464
Other assets 978 (36) 5,871
Trade accounts payable (915) 344 (5,631)
Other liabilities (913) (4,934) (6,143)
------- ------- -------
Total cash provided by (used in)
operating activities (1,575) (5,927) (3,362)
------- ------- -------
Cash provided by (used in) investing activities:
Additions to property, plant and equipment (117) (232) (93)
Proceeds from insurance and sale of assets - - -
Deposits and other - 16 397
Disposal of the net assets of divisions 945 14,733 10,384
------- ------- -------
Total cash provided by (used in)
investing activities 828 14,517 10,688
------- ------- -------
Cash provided by (used in) financing activities:
Increase (decrease) in current portion of
long-term debt (15) (13,848) (10,496)
Net increase (decrease) in long-term debt 604 5,190 (58)
Sale of stock and exercise of stock options - 21 101
------- ------- -------
Total cash provided by (used in)
financing activities 589 (8,637) (10,453)
------- ------- -------
Increase (decrease) in cash (158) (47) (3,127)
Cash at beginning of year 164 211 3,338
------- ------- -------
Cash at end of year $ 6 $ 164 $ 211
======= ======= =======
Supplemental disclosure of cash flow information:
Interest $ 258 $ 614 $ 1,252
Income taxes - -- (2,677)
See notes to consolidated financial statements.
</TABLE>
<PAGE>
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1999, 1998 and 1997
A. Summary of Significant Accounting Policies
Nature of Operations
Stevens International, Inc. (the "Company") designs, manufactures,
markets, and services web-fed packaging and printing systems and related
equipment for its customers in the packaging industry, and in the
specialty/commercial and banknote and securities segments of the printing
industry.
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. 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 53 % of inventory at December 31, 1999 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. The
LIFO method was used for 31% of the inventory at December 31, 1998.
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 patent costs, and goodwill. Patent
costs are amortized over the remaining life of the patents, and goodwill is
amortized over thirty years.
<PAGE>
Income Taxes
The Company accounts for income taxes under the liability method
and recognizes 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.
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.
Translation of Foreign Currency
The financial position and results of operations of the Company's
foreign subsidiaries are measured using local currency as the functional
currency. Revenues and expenses of such subsidiaries have been translated
into U.S. dollars at average exchange rates prevailing during the period.
Assets and liabilities have been translated at the rates of exchange at the
balance sheet date. Translation gains and losses are deferred as a separate
component of shareholders' equity, unless there is a sale or complete
liquidation of the underlying foreign investments. Aggregate foreign
currency transaction gains and losses are included in determining net
earnings.
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 P.
<PAGE>
Earnings Per Share
Basic earnings per share ("EPS") excludes dilution and is computed
by dividing income available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. Potential
common shares relating to the exercise of stock options have been excluded
from the computation as the effect of such conversion would be anti-
dilutive.
B. Liquidity Concerns
The Company continues to experience a decrease in sales due to a
declining market for the Company's products and competitive pressures. The
Company has continued to implement a significant restructuring plan, which
included large work force and cost reductions and the sale and consolidation
of certain facilities and operating functions.
The Company requires capital to fund its ongoing operations, to service
its existing debt and to pursue its strategic objectives including new
product development. Further, the Company has been dependent on the ability
of its Chairman and Chief Executive Officer, Paul I. Stevens, to provide
certain amounts of working capital over and above that provided by the
Company's bank credit facility. The Company also must continue to meet
certain financial covenants imposed by its bank credit facility. The
Company's viability is dependent upon its ability to meet its obligations to
its bank lender and to Mr. Stevens, and ultimately, a return to
profitability.
C. Divestiture of Division Assets
Sale of SSMI
In January 2000, the Company sold its French repair and service
company, SSMI, for a net aggregate consideration of $198,000. The
transaction resulted in an aggregate loss of $1.65 million, including a loss
on sale of $0.05 million and a related non-cash foreign currency adjustment
of $1.6 million which had been previously reported as a charge against
stockholder equity in accumulated other comprehensive loss. SSMI had 1999
revenues of $3 million and an operating loss of $0.13 million. Net proceeds
of this transaction were used to repay a portion of the loans from Paul I.
Stevens, which were partially collateralized by a lien on this subsidiary.
Sale of Hamilton Production and Storage Facilities in 1999
In the second quarter of 1999, the Company concluded the sale of the
real property at its Hamilton, Ohio production facility for an aggregate
consideration of $725,000. The transaction resulted in a small loss due to
certain unanticipated costs of vacating the facility. An inventory storage
facility at Hamilton, Ohio was sold in August 1999 for an aggregate
consideration of $70,000. With the conclusion of this transaction, all real
property in Ohio has now been sold. Proceeds of these transactions were
used to repay certain expenses of the sale, certain property taxes and repay
a portion of the $2.5 million loan from Paul I. Stevens, the Company's
chairman and chief executive officer, which was partially collateralized by
a lien on these production and storage facilities.
<PAGE>
Sale of Hamilton Machining Center in July 1998
On July 28, 1998 the Company sold the real and personal property at its
Hamilton, Ohio machining center ("HMC") and the major portion of its
machinery and equipment at its assembly facility in Hamilton, Ohio for an
aggregate consideration of approximately $4.33 million. This transaction
resulted in a second quarter 1998 loss on sale of assets of approximately
$0.8 million and an additional loss of $0.5 million in the third quarter of
1998 as a result of HMC inventory and other inventory that was abandoned by
the Company and included in the sale. Proceeds of the transaction were used
to repay the $4 million secured bridge term loan from the Company's new bank
lender (the "Bridge Loan") which was loaned to the Company on June 30, 1998.
HMC had outside sales of $1.2 million and operating losses of $0.35 million
in 1997. The Company has replaced certain of the capabilities of its
machining center with a group of new and traditional suppliers.
Sale of Assets of Zerand Division in April 1998
On April 27, 1998, the Company sold substantially all the assets of its
Zerand division to Valumaco Incorporated, a new company formed for the asset
purchase. In addition, Valumaco Incorporated assumed certain liabilities of
the Zerand division. The assets sold included the real property, platen die
cutter systems, and other original Zerand products such as delivery
equipment, wide-web rotogravure printing systems, stack flexographic
printing systems, unwind and butt splicer systems, and related spare parts,
accounts payable, and other assumed liabilities. Excluded from the proposed
transaction were the System 2000 flexographic printing systems and the
System 9000 narrow-web rotogravure printing systems produced at the Zerand
division and related accounts receivable, inventory and engineering
drawings. The sale price was approximately $13.7 million, which consisted
of cash proceeds of $10.1 million, a one-year $1 million escrow "hold back",
and the purchaser's assumption of approximately $2.6 million of certain
liabilities of Zerand, including the accounts payable. The Company was
obligated in 1999 to repurchase a platen cutter at a purchase price of $0.9
million. The remaining balance in the escrow holdback was used to partially
offset the price of the platen cutter.
This 1998 transaction resulted in an approximate $10 million reduction
of the Company's senior secured bank debt. In 1997, Zerand contributed
sales of approximately $11.6 million and approximately $1.8 million of
income before interest, corporate charges and taxes. The Company realized
an approximate $3.6 million gain on the sale of Zerand assets.
D. 1999 and 1998 Loss on Impairment of Assets
In September 1999 certain inventory assets were determined to be
worthless. A third quarter 1999 non-cash charge of $0.2 million was
recorded to reflect this impairment of value.
In connection with the continuing consolidation of operating
facilities, the Company decided in November 1997 to sell certain production
facilities. Based upon bids received or other pertinent valuations, the
Company recorded a 1998 fourth quarter non-cash charge of $0.57 million to
reflect the estimated ultimate realizable value of one production and one
inventory storage facility in Hamilton, Ohio which were sold. The production
facility was sold in 1999. The aggregate carrying value of these assets in
1998, prior to the impairment adjustment was $1.4 million.
<PAGE>
E. 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.
<TABLE>
A summary of all costs and related progress billings at December 31,
1999 and 1998 follows:
December 31,
-----------------
1999 1998
----- -----
(Amounts in thousands)
<S> <C> <C>
Cost incurred on uncompleted contracts $ 205 $5,155
Estimated earnings 106 --
----- -----
Revenue from long-term contracts 311 5,155
Less: Billings to date 202 4,490
----- -----
$ 109 $ 665
===== =====
</TABLE>
The $109,000 and $665,000 net differences are included in the
accompanying balance sheets under the caption "Cost and estimated earnings
in excess of billings on long-term contracts."
F. Inventories
<TABLE>
Inventories consist of the following:
December 31,
------------------
1999 1998
----- -----
(Amounts in thousands)
<S> <C> <C>
Finished product $1,396 $ 630
Work in progress 349 1,458
Raw material and purchased parts 4,558 4,058
----- -----
$6,303 $6,146
===== =====
</TABLE>
Replacement cost exceeds financial accounting LIFO cost by
approximately $696,000 at December 31, 1999 and $1,938,000 at December 31,
1998.
<PAGE>
G. Property, Plant and Equipment
<TABLE>
Property, plant and equipment consists of:
December 31,
Range of -------------------
Estimated Useful 1999 1998
Lives (Amounts in thousands)
----------- ------ ------
<S> <C> <C> <C>
Land ........................ N/A $ 416 $ 477
Building and improvements ... 15-40 years 1,436 1,867
Machinery and equipment ..... 5-18 years 1,515 1,001
Furniture and fixtures ...... 3-10 years 5,968 3,227
Leasehold improvements ...... 8-20 years - 295
------ ------
9,335 6,867
Less: accumulated depreciation and amortization 7,540 4,267
------ ------
$ 1,795 $ 2,600
====== ======
</TABLE>
H. Other Assets
<TABLE>
Other assets consist of:
December 31,
--------------
1999 1998
----- -----
(Amounts in thousands)
<S> <C> <C>
Goodwill, net of amortization of $147 and $133 $ 235 $ 251
Patents, net of amortization of $286 and $282 58 62
Intangible pension asset ..................... - 166
Banknote and securities technology intangible 287 752
asset ......................................
Other ........................................ 77 70
----- -----
$ 657 $1,301
===== =====
</TABLE>
<PAGE>
I. Other Current Liabilities
<TABLE>
Other current liabilities consist of:
December 31,
-------------------
1999 1998
----- -----
(Amounts in thousands)
<S> <C> <C>
Salaries and wages ....................... $ 205 $ 190
Taxes other than income taxes ............ 119 760
Employee benefits ........................ 289 827
Accrued interest ......................... 24 406
Contract reserves ........................ 674 533
Warranty reserve ......................... 150 544
Other accrued expenses ................... 230 445
----- -----
$1,691 $3,705
</TABLE>
J. Long-Term Debt
<TABLE>
Long-term debt consists of the following:
December 31,
1999 1998
----- -----
(Amounts in thousands)
<S> <C> <C>
Paul I. Stevens, interest at prime rate plus 2% $6,158 $2,950
Notes payable to banks, interest at prime rate
plus 13% at December 31, 1999 (Net of unamortized
origination fees of $52 and $88) ........... 2,070 2,291
Other ...................................... -- 18
----- -----
8,228 5,259
Less: current portion ...................... 2,070 15
----- -----
$6,158 $5,244
===== =====
</TABLE>
The interest rate on direct borrowings under the Company's Bank Credit
Facility at December 31, 1999 is at the lender's prime rate (8.5%) plus 13%
(or 9.75%). Under its credit facility, the Company may borrow up to $4.0
million in the form of direct borrowings and letters of credit. As of
December 31, 1999 there was $2.07 million in direct borrowings and $0 in
standby letters of credit outstanding, with approximately $0.2 million
additional availability for such borrowings. At December 31, 1998, $2.38
million of the Company's borrowings were at the lender's prime rate of
interest (8.0%) plus 13%.
<PAGE>
The Company is not in compliance with some of the covenants of its
senior bank line of credit loan agreement under which the Company has
outstanding debt of approximately $2 million. The principal default
involved the failure to make the required pension plan payments in 1999 and
2000, which necessitated the filing of a distress termination request with
the PBGC (see Note M). The Company's senior lender has declined to grant
waivers of the defaults. Although the bank can declare the full amount of
the loan immediately payable at any time, it has not done so. The senior
bank debt is classified as a current obligation at December 31, 1999.
On June 30, 1998 the Company refinanced a major portion of its secured
indebtedness ("the Debt Restructuring") as part of its plan to reduce its
debt. Through a combination of new secured bank borrowings of approximately
$6 million, and loans from its Chairman, CEO and principal shareholder, Paul
I. Stevens, aggregating $4.5 million, the Company paid off principal amounts
due its senior secured bank lender and its secured senior subordinated
noteholders, aggregating approximately $19.5 million. Repayment of the
secured senior subordinated notes resulted in an extraordinary gain on early
extinguishment of debt of approximately $11.2 million. The Company paid in
full a $4.0 million bank Bridge Loan on July 28, 1998 from the sale of HMC
and the major portion of its machinery and equipment at its assembly
facility in Hamilton, Ohio.
The Company's Bank Credit Facility has first liens on certain assets of
the Company, principally inventory, accounts receivable, and the Company's
Texas real estate. Paul I. Stevens' loans aggregating $6.1 million at
December 31, 1999 have first liens on certain assets of the Company,
principally a $0.5 million platen cutter relating to the holdback on the
sale of Zerand, the assets of a foreign subsidiary, and certain accounts
receivable for new customer equipment. Mr. Stevens has second liens on all
other assets of the Company. The Company was paid $500,000 of the Zerand
escrow holdback funds net of amounts owed to the purchaser on November 6,
1998. Because these holdback funds collateralized certain P. I. Stevens
advances, the $500,000 was paid to him to reduce his secured loans to the
Company. The secured loans from Paul I. Stevens are due June 30, 2001 and
bear interest at rates that vary up to 2% over bank prime.
The borrowings under the bank credit facility are subject to various
restrictive covenants related to financial ratios as well as limitations on
capital expenditures and additional indebtedness. The Company is not
allowed to pay dividends.
Principal maturities of the outstanding long-term debt at December 31,
1999, are as follows (Amounts in thousands):
Year ending December 31, 2001. . . . . . . . . . $ 6,210
Less unamortized loan origination fees . . . . . 52
------
$ 6,158
======
<PAGE>
K. Income Taxes
The Company and its domestic subsidiaries file consolidated income tax
returns. At December 31, 1999, the Company had the following losses and
credits available for carryforward for federal income tax purposes:
Net operating loss - $11,451,000
expiring in 2011 and 2012 and $4,283,000
expiring in 2019 $15,734,000
General business credit -- expiring
in 2005, 2009 and 2010 $ 1,552,000
Minimum tax credit -- not subject
to expiration $ 832,000
During 1998, the Company recognized income from cancellation of
indebtedness of $11,221,000. Pursuant to Internal Revenue Code Section 108,
this amount was not includible in taxable income; however, it reduced the
Company's net operating loss carryforward as of January 1, 1999. The net
operating loss carryforward described above has been reduced for the impact
of the 1998 cancellation of indebtedness transaction.
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.
<TABLE>
The tax effects of significant items comprising the Company's net
deferred tax assets as of December 31, 1999 and 1998 are as follows:
December 31,
1999 1998
------ ------
(Amounts in thousands)
<S> <C> <C>
Deferred tax assets:
Difference between book and tax basis of property $ 345 $ 1,055
Difference between book and tax basis of intangibles 1 1
Difference between book and tax basis of pension
liability ................................ 557 557
Reserves not currently deductible ........ 2,924 3,626
Net operating loss, credit and other carryforwards 7,745 5,993
Other .................................... 60 91
------ ------
11,632 11,323
------ ------
Deferred tax liabilities:
Excess of tax over book pension cost ..... 124 380
Differences between book and tax LIFO inventory 1,839 1,916
reserves .................................
------ ------
1,963 2,296
------ ------
Net deferred tax assets ................. 9,669 9,027
Less valuation allowance ................. (9,669) (9,027)
------ ------
Net deferred tax assets .................. $ -0- $ -0-
====== ======
</TABLE>
<PAGE>
<TABLE>
The provisions for income taxes consists of the following:
Year Ended December 31,
-------------------------
1999 1998 1997
---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C>
Current provision (benefit) for
income taxes ....................... $ -- $ 75 $(213)
Deferred provision (benefit) for
income taxes ....................... -- -- --
---- ---- ----
$ -- $ 75 $(213)
==== ==== ====
The Company's effective tax rate varies from the statutory federal
income tax rate for the following reasons:
December 31,
-------------------------------
1999 1998 1997
------- ------ -------
(Amounts in thousands)
<S> <C> <C> <C>
Tax expense (benefit), at
statutory rate ................ $ (1,456) $ 2,642 $ (6,732)
Goodwill expense ............... 5 1,483 73
Other, net ..................... 206 (5) (258)
State and local taxes .......... 65 -- (213)
Valuation allowance ............ 1,180 (4,045) 6,917
------- ------ -------
Actual tax expense (benefit) ... $ --- $ 75 $ (213)
======= ====== =======
</TABLE>
L. Commitments and Contingencies
The Company leases equipment and office facilities under operating
leases. These leases in some instances include renewal provisions at the
option of the Company. Rent expense was $223,000 for the year ended
December 31, 1999, $246,000 in 1998, and $293,000 in 1997.
<PAGE>
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, 1999:
Operating
(Amounts in
thousands)
----
Year ending December 31, 2000 ... $ 66
2001 7
2002 7
2003 7
2004 and thereafter ........ -
----
Total minimum lease payments... $ 87
====
At December 31, 1999, the Company had no capital equipment leases and
no outstanding capital expenditure purchase commitments.
The Company is contingently liable for approximately $0.2 million at
December 31, 1999, 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, cash flows or results of operations of the Company as a result of
these agreements is remote.
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. 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, if they occur either
individually or in the aggregate, will materially affect the Company's
operations or financial position.
M. 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. 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 ($10,000 in 1999 and $10,000 in
1998) and a discretionary matching contribution by the Company for non-union
employees. Company matching contributions were $-0- in 1999, 1998, and
1997.
<PAGE>
The Company has sponsored defined benefit pension plans covering its
employees. The two plans provided for monthly benefits, normally at age 65,
after completion of continuous service requirements. The Company was unable
to pay certain pension plan minimum payments due on September 15, 1999.
Accordingly, the Company filed the necessary forms with the Pension Benefit
Guaranty Corporation ("PBGC") to initiate distress terminations of the
Company's two defined benefit pension plans. The PBGC is a federal agency
that insures and protects pension benefits in certain pension plans when the
sponsoring company cannot make the required contributions to fund projected
benefit obligations of the plans.
The Company's low volume of printing press sales has resulted in
extensive lay-offs, plant closings and sales of certain operating divisions
over the past three years. The reduction in employment has, in turn,
created a higher than normal demand for pension benefits necessitating the
Company's decision to file for distress termination of the plans. The
filings have begun a series of negotiations with the PBGC regarding funding
of the pension benefits of employees. The PBGC, on behalf of the Company's
pension plan for bargaining unit employees, has filed liens against all
property and rights to property of the Company in the aggregate amount of
$1.6 million. The assets of the pension plans are maintained in trusts and
consist primarily of equity and fixed income securities. Pension expense
was $259,000 in 1999, $395,000 in 1998, and $145,000 in 1997.
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, 1998, the
Company has recorded a pension liability of $4.0 million and a corresponding
intangible asset of $0.16 million, and a reduction of equity of $3.1
million. Benefits under the salaried retirement plan were frozen as of
April 30, 1997, which eliminated future benefit accruals for participants in
the salaried retirement plan. The impact of this plan amendment was to
reduce pension expense by $360,000 in 1997.
<PAGE>
<TABLE>
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 1999 and 1998.
Status of Plans
1999 1998
----- -----
(Amounts in thousands)
<C> <C> <C>
Actuarial present value of benefit
obligations:
Vested ....................... $5,219 $6,662
Non-vested ................... -- --
----- -----
Accumulated benefit obligation . $5,219 $6,662
===== =====
Plan assets at fair value ...... $2,080 $2,637
Projected benefit obligation ... 5,219 6,662
----- -----
Projected benefit obligation in
excess of plan assets .......... 3,139 4,025
Unrecognized prior service cost -- (358)
Unrecognized net gain (loss) ... (2,549) (3,279)
Adjustment required to recognize
minimum liability. ............. 2,549 3,637
----- -----
Pension liability recognized in
balance sheet .................. $3,139 $4,025
===== =====
</TABLE>
<PAGE>
<TABLE>
Net periodic pension cost was composed of the following elements:
December 31,
---------------------------
1999 1998 1997
------ ------ ------
(Amounts in thousands)
<S> <C> <C> <C>
Service cost ................... $ -- $ 37 $ 268
Interest cost .................. 388 408 420
Prior service cost adjustment .. -- -- --
Curtailment gain .............. -- -- (360)
Actual return on plan assets:
Loss (gain) ................. (217) (239) (175)
Net amortization and deferral .. 88 144 (8)
------ ------ ------
Net periodic pension cost ... $ 259 $ 395 $ 145
====== ====== ======
December 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Major assumptions used:
Discount rate ................ 6.5% 6.5% 6.5%
Expected long-term rate of return on
assets ....................... 8.5% 8.5% 8.5%
Rate of increase in compensation levels 0.0% 0.0% 0.0%
</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 aggregated
$-0- in 1999, 1998 and 1997.
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."
N. Related Party Transactions
The Company and Xytec, a subsidiary of Stevens Industries, Inc. one of
the principal shareholders of the Company, entered into various agreements
for Xytec to provide software and computer related services and equipment as
a subcontractor on certain major contracts. Xytec was paid $328,000 on
these agreements in 1999, $856,000 in 1998, and $594,000 in 1997.
Two company directors and officers were partners in a venture that
leased office facilities to the Company through September 30, 1998. Amounts
paid to the partnership as rent and maintenance were approximately $84,000
in 1998, and $111,000 in 1997.
<PAGE>
Through December 31, 1999, Paul I. Stevens, the Company's Chairman and
Chief Executive Officer has loaned the Company $6.16 million on a long-term
arrangement. (See Note J of Notes to Financial Statement.) As of December
31, 1999, this amount has not been repaid.
O. Research and Development, Sales to Major Customers and Foreign Sales
The Company incurred gross company funded research and development
expenses of approximately $125,000, for the year ended December 31, 1999,
$172,000 in 1998, and $44,000 in 1997.
Net sales to customers outside of the United States were approximately
$3,940,000 in 1999 , $7,851,000 in 1998, and $8,796,000 in 1997.
Shipments to one customer in 1999, Bell Paper Box, exceeded 10% of the
sales. Shipments to one customer in 1998, Field Packaging Co. LLP and one
customer in 1997, Universal Packaging Company, exceeded 10% of total sales.
The Company has no foreign exchange contracts.
P. Stock Transactions and Voting Rights
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 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 nonqualified 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.
<PAGE>
<TABLE>
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:
Series A Weighted Average
Stock Option Exercise Price
------- ----
<C> <C> <C>
Stock Option Plan:
Balance at January 1, 1997 ........ 552,900 $5.63
Granted ........................... 345,000 1.50
Cancelled ........................ (502,900) 5.33
------- ----
Balance at December 31, 1997 ...... 395,000 $2.18
Granted ........................... 285,000 1.50
Exercised ......................... (14,100) 1.50
Cancelled ......................... (70,900) 5.27
------- ----
Balance at December 31, 1998 ..... 595,000 $1.50
Cancelled ......................... (105,000) 1.50
------- ----
Balance at December 31, 1999 ..... 490,000 $1.50
======= ====
Series A Weighted Average
Stock Option Exercise Price
------- ----
Directors and Others:
Balance at December 31, 1996 ..... 114,500 $5.15
Granted .......................... 35,000 1.50
Cancelled ........................ (39,500) 5.22
------- ----
Balance at December 31, 1997 ..... 110,000 $3.97
Granted .......................... 25,000 2.25
------- ----
Balance at December 31, 1998 and 1999 135,000 $3.65
Stock Options outstanding as of December 31, 1999 are as follows:
Options Outstanding Options Exercisable
----------------- ------------------------------
Range of Exercise Number Weighted Weighted Number Weighted
Prices Average Average Average
Years to Exercise Exercise
Expiration Price Price
------------- ------- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C>
$1.50 ...... 490,000 2.35 $1.50 490,000 $1.50
$5.50 - $7.19 50,000 5.30 $3.65 135,000 $3.65
$1.50 - $3.00 85,000 5.30
------- -------
$1.50 - $7.19 625,000 625,000
</TABLE>
<PAGE>
The Company applies the intrinsic value method in accounting for its
stock option plans. Accordingly, no compensation cost has been recognized
for its stock option plans. Had compensation cost for the Company's stock
option plan been determined based on the fair value at the grant dates for
awards under the plan, as described above, the Company's net income would
have been reduced by $0 million in 1999, $0.3 million in 1998, and $0.03
million in 1997. Earnings (loss) per share would have been reduced by $0
per share in 1999, $0.03 per share in 1998, and $0.03 per share in 1997.
Weighted average grant-date fair value of options in 1999 $(0), 1998
$(1.05), and 1997 $(0.83) were calculated in accordance with the Black-
Scholes option pricing model, using the following assumptions:
1999 1998 1997
---- ---- ----
Expected volatility ........ 60% 60% 60%
Expected dividend yield .... 0 0 0
Expected option term ....... 5 years 5 years 5 years
Risk-free rate of return ... 5.5% 5.5% 7.5%
Q. Quarterly Results (Unaudited)
<TABLE>
The following table summarizes results for each of the four quarters
for the years ended December 31, 1999 and 1998. 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).
Three Months Ended
-------------------------------------------------------
March 31, June 30, September 30, December 31,
------- ------- ------- -------
(Amounts in thousands except per share data)
<S> <C> <C> <C> <C>
1999:
Net sales .................. $ 3,314 $ 2,575 $ 2,415 $ 2,833
Operating income (loss) .... $ 270 $ 297 $ (830) $ (1,522)
Net income (loss) .......... $ 43 $ 5 $ (994) $( 3,338)
Net income (loss) per common
share - basic and diluted .. $ 0.005 $ 0.00 $ (0.10) $ (0.35)
1998:
Net sales .................. $ 9,697 $ 5,343 $ 2,737 $ 4,430
Operating income (loss) .... $ 557 $ (1,813) $ (987) $ (1,379)
Extraordinary item.......... -- $ 11,221 -- --
Net income (loss) .......... $ ( 416) $ 11,556 $ (1,785) $ (1,584)
Net (loss) per common share - basic $ (0.04) $ 1.22 $ (0.19) $ (0.17)
Net (loss) per common share - dluted $ (0.04) $ 1.13 $ (0.19) $ (0.17)
</TABLE>
The Company attributes the operating and net loss for the fourth
quarter of 1999 to (1) continuing decline in sales volume, (2) accrual for
losses on certain major contracts and LIFO inventory, and (3) unabsorbed
overhead costs due to the low shipment volume in the quarters, and (4) loss
on January 2000 sale of SSMI of $0.05 million and a related non-cash foreign
currency adjustment of $1.6 million previously reported as a charge against
stockholders equity in "accumulated other comprehensive loss."
<PAGE>
The Company attributes the operating and net loss for the fourth
quarter of 1998 to (1) a continuing decline in orders ($3.0 million versus
$20.3 million for the last six months of 1998 and 1997, respectively); (2) a
non-cash charge for loss on impairment of asset values of $0.57 million and
(3) unabsorbed overhead costs due to the low shipment volume in the quarter.
R. Business Segment Data (Amounts in 000's)
The Company has three business segments: Banknote Inspection,
Printing & Packaging Equipment (web-fed printing presses and related parts
and service), French Repair & Service Company (repair, moving and servicing
presses in Europe), and Zerand Platen Cutter Equipment (cutter-creaser
equipment for packaging-sold in 1998).
<TABLE>
Total Revenue Deprec. Income(loss) Unusual
Assets & Amort From Oper. Items
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Segments in 1999
----------------
Banknote Inspection, Printing
& Packaging Equipment $ 8,958 $ 8,123 $ 860 $ (4,153) $ (1,600) (1)
French Repair & Service
Company - Sold in 2000 ... 1,304 3,014 46 (131) -
------ ------- ------- ------- -------
Totals ................... $ 10,262 $ 11,137 $ 906 $ (4,284) $ (1,600)
Segments in 1998
----------------
Banknote Inspection, Printing
& Packaging Equipment $ 12,920 $ 13,590 $ 807 $ (4,453) $ (1,973) (2)
French Repair & Service
Company .................. 1,731 4,312 33 133 -
Zerand Platen Cutter
Equipment - Sold in 1998 . - 4,305 94 698 3,600 (3)
------ ------- ------- ------- -------
Totals ................... $ 14,651 $ 22,207 $ 934 $ (3,622) $ 1,627
Segments in 1997
----------------
Banknote Inspection, 15,153 18,965 2,775 (17,220) (6,347) (4)
Printing & Packaging
Equipment
French Repair & Service
Company .................. 1,928 4,592 38 371 -
Zerand Platen Cutter
Equipment ................ 14,809 11,594 537 1,805 -
------ ------- ------- ------- -------
Totals ................... $ 31,890 $ 35,151 $ 3,350 $(15,044) $(6,347)
Notes: (1) Represents loss on January 2000 sale of SSMI of $0.05 million
and a related non-cash foreign currency adjustment of $1.6
million which had been previously reported as a charge against
stockholders equity in "accumulated other comprehensive loss".
(2) Represents Loss on Impairment of Asset Values - (-$573) and Loss
on Sale of Hamilton Machining Center (-$1,400).
(3) Represents Gain on Sale of Zerand Division Assets ($3,600).
(4) Represents Loss on Impairment of Asset Values at Hamilton, Ohio
Facilities (-$6,347).
</TABLE>
<PAGE>
<TABLE>
(b) Sales by geographic area were as follows:
Year ended December 31,
--------------------------------
1999 1998 1997
------- -------- -------
<S> <C> <C> <C>
United States $ 7,064 $ 14,355 $ 24,132
Europe 3,839 6,178 6,714
Asia 21 898 3,200
Other 213 776 1,105
------- -------- -------
Total revenues $ 11,137 $ 22,207 $ 35,151
======= ======== =======
</TABLE>
S. 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.
Long-Term Debt
The carrying amounts of the Company's borrowings under its
revolving credit agreements approximate fair value.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
significant concentrations of credit risk consist primarily of 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, 1999, the Company had no significant concentrations of
credit risk.
<PAGE>
The carrying amounts and fair values of the Company's financial
instruments at December 31, 1999 are as follows:
Carrying Amount Fair Value
--------------- ----------
(Amounts in thousands)
Cash and temporary investments .. $ 6 $ 6
Long-term debt .................. $6,158 $6,158
Off-Balance Sheet Financial
Instruments: Letters of credit .. $ -0- $ -0-
<TABLE>
T. Accumulated Other Comprehensive Income
Minimum Accumulated
Foreign Pension Other
Currency Liability Comprehensive
(Amounts in 000's) Items Adjustment Income
------------------------- ------- -------- --------
<S> <C> <C> <C>
Balance January 1, 1997 $ (167) $ (1,466) $ (1,633)
Current period change (602) (779) (1,381)
------- -------- --------
Balance December 31, 1997 (769) (2,245) (3,014)
Current period change (295) (841) (1,136)
------- -------- --------
Balance December 31, 1998 $ (1,064) $ (3,086) $ (4,150)
Current period change 1,064 537 1,601
------- -------- --------
Balance December 31, 1999 $ 0 $ (2,549) $ (2,549)
======= ======== ========
</TABLE>
U. Subsequent Event - Private Placement of $1 Million 10% Convertible
Subordinated Notes Payable Due March 31, 2003
In April 2000, the Company completed a private placement of $1 million of
10% convertible subordinated notes ("the Notes"). Net proceeds of the Notes
will be used for working capital. The Notes were issued in increments of
$50,000 and are convertible into 2,000,000 shares of Series A Common Stock
("SVEIA") of the Company at $0.50 per share, subject to adjustment. The
conversion of the Notes is at the holder's option anytime on or after the
fifteenth day following the original issue date of the Notes and prior to
the close of business on their maturity date. Issue costs for the Notes
aggregated approximately $151,000.
<PAGE>
The Company has committed to register the shares that would be issuable
upon conversion of the Notes. Dilution to existing shareholders would occur
as a result of the conversion of the Notes to 2 million shares of Series A
common stock. Should all the notes be converted, these shareholders would
own approximately 17% of the outstanding stock of the Company. The first
quarter of 2000 will include a charge for interest expense of $1 million
with a corresponding $1 million increase in "Paid in Capital in Excess of
Par Value."
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
(a) On May 21, 1998, Stevens International, Inc. (the "Company")
dismissed Deloitte & Touche LLP ("Deloitte & Touche") as its principal
independent accountants. The decision to dismiss Deloitte & Touche was
approved by the Company's Board of Directors as well as the Audit Committee
of the Board of Directors. Deloitte & Touche's report on the Company's
financial statements for each of the fiscal years ended December 31, 1997
and 1996 did not contain an adverse opinion or disclaimer of opinion.
However, such reports were qualified or modified as to uncertainties
involving factors raising substantial doubt about the Company's ability to
continue as a going concern. There were no adjustments in the consolidated
financial statements that might result from the outcome of this uncertainty.
During the Company's 1996 and 1997 fiscal years and for the
period through May 21, 1998, there were no disagreements between the
Company and Deloitte & Touche on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure
which if not resolved to the satisfaction of Deloitte & Touche would have
caused it to make reference to the subject matter(s) of the disagreement(s)
in connection with its reports.
A letter from Deloitte & Touche confirming the statements contained
in this Item 9(a) was filed as an exhibit to Form 8-K filed on May 29, 1998.
(b) On May 21, 1998, the Company retained Grant Thornton LLP to serve
as the Company's principal independent accountants. During the Company's
past two fiscal years and the periods following December 31, 1997, the
Company did not consult Grant Thornton LLP regarding the application of
accounting principles to a specified transaction or the type of audit
opinion that might be rendered on the Company's financial statements.
<PAGE>
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 2000 (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
<PAGE>
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 1999 fiscal year.
(c) Exhibits:
Exhibit
Number Description of Exhibit
------ ----------------------
3.1 Second Amended and Restated Certificate of Incorporation of the
Company.(1)
3.2 Bylaws of the Company, as amended. (2)
4.1 Specimen of Series A Common Stock Certificate. (3)
4.2 Specimen of Series B Common Stock Certificate. (4)
4.3 Specimen of 10% Convertible Subordinated Note due March 31, 2003.(*)
10.11 Asset Contract to Purchase Real Estate dated February 8, 1999 by
and between the Company and Production Manufacturing, Inc. (5)
21 Subsidiaries of the Company.(*)
23.1 Consent of Grant Thornton LLP.(*)
23.2 Consent of Deloitte & Touche LLP. (*)
27.1 Financial Data Schedule. (*)
________
* 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 Annual Report on Form
10-K for the year ended December 31, 1998 and incorporated herein by
reference.
<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: /s/ PAUL I. STEVENS
-------------------
Paul I. Stevens
Chairman of the Board,
Chief Executive Officer, and
Acting Chief Financial Officer
Date: April 6, 2000
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
-------------------- -------------------------- -------------
/s/ PAUL I. STEVENS Chairman of the Board and April 6, 2000
Paul I. Stevens Chief Executive Officer
/s/ RICHARD I. STEVENS President, Chief Operating April 6, 2000
Richard I. Stevens Officer and Director
/s/ CONSTANCE I. STEVENS Vice President, Secretary April 6, 2000
Constance I. Stevens and Director
/s/ JAMES D. CAVANAUGH Director April 6, 2000
James D. Cavanaugh
/s MICHEL A. DESTRESSE Director April 6, 2000
Michel A. Destresse
/s/ EDGAR H. SCHOLLMAIER Director April 6, 2000
Edgar H. Schollmaier
<PAGE>
SCHEDULE II
<TABLE>
STEVENS INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
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, 1999
Allowance for doubtful accounts $ 529,000 $ (69,000) $ ( 89,000) (2) $ (301,000) (1) $ 70,000
Year Ended December 31, 1998
Allowance for doubtful accounts $ 374,000 $ 194,000 $ 23,000 $ (62,000) (1) $ 529,000
Year Ended December 31, 1997
Allowance for doubtful accounts $ 4,225,000 $ (305,000) $(2,849,000) (2) $ (697,000) (1) $ 374,000
____________
(1) Write off of uncollectible accounts.
(2) Reclassification of allowance for doubtful accounts to "assets held for sale".
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit Sequentially
Numbered
Pages
3.1 Second Amended and Restated Certificate of
Incorporation of the Company.(1)
3.2 Bylaws of the Company, as amended.(2)
4.1 Specimen of Series A Common Stock
Certificate.(3)
4.2 Specimen of Series B Common Stock
Certificate.(4)
4.3 Specimen of 10% Convertible Subordinated
Note due March 31, 2003. (*)
10.11 Asset Contract to Purchase Real Estate
dated February 8, 1999 by and between the
Company and Production Manufacturing, Inc. (5)
21. Subsidiaries of the Company. (*) 48
23.1 Consent of Grant Thornton LLP. (*) 49
23.2 Consent of Deloitte & Touche LLP. (*) 50
27.1 Financial Data Schedule. (*) 51
*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 Annual Report on Form
10-K for the year ended December 31, 1998 and incorporated herein by
reference.
Exhibit 4.3
[Form of Note]
This security and the shares of common stock issuable upon conversion
of this security have not been registered under the Securities Act of 1933,
as amended or any state securities laws. Neither this security, the shares
of common stock issuable upon conversion of this security, nor any interest
or participation herein or therein may be offered, sold, assigned,
transferred, pledged, encumbered or otherwise disposed of in the absence of
such registration or unless such transaction is exempt from, or not subject
to, registration.
STEVENS INTERNATIONAL, INC.
10% CONVERTIBLE SUBORDINATED NOTE
DUE MARCH 31, 2003
U.S. $_______________ Fort Worth, Texas
March 31, 2000
FOR VALUE RECEIVED, Stevens International, Inc., a Delaware corporation
(hereinafter referred to as "Obligor"), promises to pay to _____________
(hereinafter referred to as "Holder"), the principal sum of ___________
Dollars (U.S. $__________), together with interest thereon at a rate of ten
percent (10%) per annum (calculated on the basis of a 360 day year comprised
of twelve 30-day months). Interest shall be paid on the then outstanding
principal balance on March 31 and September 30 of each year (each, an
"Interest Payment Date") until maturity, commencing on September 30, 2000
and ending on March 31, 2003 (the "Maturity Date").
This Note is one of a duly authorized issue of promissory notes of
Obligor in the aggregate principal amount of $1,000,000 designated as its
10% Convertible Subordinated Notes Due March 31, 2003 (the "Notes").
Obligor may elect to pay all or a portion of interest due and payable
on September 30, 2000 or March 31, 2001 in cash (as described below) or by
the issuance of additional notes in the principal amount of the accrued and
unpaid interest at such Interest Payment Date and dated the date of such
Interest Payment Date. Any such additional notes shall have the same terms
and conditions as this Note. Interest payments on this Note will be paid to
the person who is the Holder of record of this Note as shown on the register
maintained by Obligor to record the registration and transfer of the Notes
at the close of business on the March 15 or September 15 next preceding each
Interest Payment Date. Interest shall accrue from the next preceding
Interest Payment Date to which interest has been paid on this Note or if no
interest has been paid from the date hereof. Cash payments of principal and
interest will be made in the money of the United States that at the time of
payment is legal tender for payment of public and private debts. Subject to
the first sentence of this paragraph, all payments of principal of and
interest on this Note may be made by check or wire payable in such money.
Cash interest payments may be made by check and mailed to the Holder's
registered address or at such other place as Holder shall notify Obligor in
writing.
<PAGE>
1. Subordination. Except as hereinafter provided, Obligor and Holder
agree that the payment of the principal amount of this Note and interest
thereon is subordinated to the prior payment in full of all Senior
Indebtedness (as hereinafter defined) of Obligor, together with all interest
and fees thereon. "Senior Indebtedness" as used in this Note means (i) the
principal amount of, premium (if any) and all interest, fees and expenses
(including attorneys' fees and costs of court) on all indebtedness, whether
outstanding on the date of this Note or hereafter created, incurred or
assumed, and however evidenced (whether by a letter of credit, loan
agreement, promissory note indenture or similar instrument), for money
borrowed from any and all banks and savings and loans and other depository
institutions, finance companies, insurance companies, trust companies,
leasing companies, government agencies and other persons or entities which
regularly engage in commercial or asset-based lending and Paul I. Stevens as
a lender (collectively "Senior Creditors"), for the payment of which the
Obligor is or becomes directly or indirectly liable; (ii) guarantees by
Obligor of indebtedness due to Senior Creditors for borrowed money incurred
by subsidiaries of Obligor or subsidiaries of such subsidiaries; and
(iii) the principal amount of and all interest and fees on any renewal,
extension, refunding, amendment or modifications of any such Senior
Indebtedness, including without limitation of the foregoing, purchase money
mortgages, mortgages made, given or guaranteed by Obligor as mortgagor or
guarantor, and assumed or guaranteed mortgages, upon property, but excluding
any indebtedness to trade creditors or suppliers on open account for work,
labor, services and materials and excluding any indebtedness which by the
terms of the instrument creating or evidencing the same is stated to be not
superior in right of payment to the Notes.
Subject to the following paragraph, Obligor shall pay and holder shall
have the right to receive and retain from Obligor principal and accrued
interest owing hereon so long as Obligor is not in default in respect of any
of its Senior Indebtedness.
Upon the happening of an event of default which would permit Senior
Creditors to declare Senior Indebtedness due and payable and upon written
notice thereof given to Obligor by any one or more Senior Creditors (a
"Default Notice"), then, unless and until such event of default shall have
been cured or waived or shall have ceased to exist, Obligor shall not,
directly or indirectly, pay any principal or interest on, redeem or
repurchase any of, the Notes; provided, however, that the foregoing
provisions of this sentence shall not prevent the making of any such payment
for more than 120 days after the Default Notice shall have been given unless
the Senior Indebtedness in respect of which such event of default exists has
been declared due and payable in its entirety, in which case no such payment
may be made until the earliest to occur of (i) such declaration has been
waived, rescinded or annulled, (ii) such Senior Indebtedness shall have been
paid in full or (iii) payment thereof shall be duly provided for in cash or
in any other manner satisfactory to such Senior Creditors. Any number of
Default Notices may be given; provided, however, that not more than one
Default Notice shall be given with respect to the same issue of Senior
Indebtedness within a period of 360 consecutive days, and no specific event
of default which existed or was continuing on the date of any Default Notice
and was known to the Senior Creditors shall be made the basis for the giving
of a subsequent Default Notice by the Senior Creditors.
<PAGE>
No rights of any Senior Creditor established in this Section 1 shall at
any time or in any way be prejudiced or impaired by any act or failure to
act on the part of Obligor or by any act or failure to act in good faith by
any Senior Creditor or by any failure by Obligor to comply with the terms of
this Note.
This Note shall not be secured by any interest in any properties of
Obligor.
2. Events of Default. Upon the occurrence and during the continuance
of an Event of Default (as hereinafter defined), other than as described in
Subsections (d) and (e) below, but subject to any restrictions and
limitations by the Holder relating to Senior Indebtedness, the Holder of
this Note shall be entitled, by written notice to Obligor, to declare this
Note to be, and upon such declaration this Note shall be and become,
immediately due and payable, in addition to any other rights or remedies
Holder may have under the laws of the State of Texas. Upon the occurrence
of an Event of Default as described in Subsections (d) and (e) below, this
Note shall be and become immediately due and payable without notice or
declaration by the Holder. The occurrence of any of the following events
shall constitute an "Event of Default":
(a) Failure to Make Payments When Due. Failure of Obligor to pay
any principal, interest or other amount due under this Note when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, and the failure of Obligor to cure such
default within five (5) days after the due date of any such payment; or
(b) Breach of Covenants. Failure of Obligor to perform or
observe any other material term, covenant or agreement on Obligor's part to
be performed or observed pursuant to this Note, and the failure of Obligor
to cure such default within thirty (30) days after written notice of such
default by Holders owning not less than twenty-five percent (25%) of the
aggregate principal amount of all Notes then outstanding; or
(c) Suspension of Business; Liquidation. Suspension of the usual
business activities of Obligor or the complete or partial liquidation of
Obligor's business; or
(d) Involuntary Bankruptcy, Etc. (i) A court having jurisdiction
in the premises shall enter a decree or order for relief in respect of
Obligor in an involuntary case under Title 11 of the United States Code (as
now and hereinafter in effect, or any successor thereto, the "Bankruptcy
Code") or any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, which decree or order is not stayed; or any other
similar relief shall be granted under any applicable federal or state law;
or (ii) an involuntary case shall be commenced against Obligor under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Obligor or over all or
a substantial part of its property shall have been entered; or the
involuntary appointment of an interim receiver, trustee or other custodian
of Obligor for all or a substantial part of its property shall have
occurred; or a warrant of attachment, execution or similar process shall
have been issued against any substantial part of the property of Obligor,
and, in the case of any event described in this clause (d), such event shall
have continued for sixty (60) days unless dismissed, bonded or discharged;
or
<PAGE>
(e) Voluntary Bankruptcy, Etc. An order for relief shall be
entered with respect to Obligor or Obligor shall commence a voluntary case
under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property, or Obligor shall
make an assignment for the benefit of creditors; or Obligor shall admit in
writing its inability to pay its debts as such debts become due; or the
Board of Directors of Obligor shall adopt any resolution or otherwise
authorize action to approve any of the foregoing.
Notwithstanding the provisions of this Section 2, if this Note is not
paid on the Maturity Date or in the event that this Note becomes due and
payable before the Maturity Date, the Holder shall not be entitled to seek
any judgement, order, decree or other action from any court or governmental
or administrative authority, including any insolvency, bankruptcy,
receivership, reorganization or related case or proceeding, until the
earlier of (i) 90 days after such declaration or (ii) the payment in full of
all Senior Indebtedness.
3. Conversion Rights. A Holder of a Note may convert the principal
amount of such Note (or any portion thereof equal to $50,000 or amounts
equal to the sum of $50,000 and any integral multiple of $1,000) into shares
of Series A Common Stock, par value $.10 per share, of Obligor (the
"Conversion Shares") at any time after April 14, 2000 and prior to the close
of business on March 28, 2003; provided, however, that if the Note is called
for redemption pursuant to Section 4 hereof, the conversion right will
terminate at the close of business on the business day immediately preceding
the redemption date for such Note or such earlier date as the Holder
presents such Note for redemption (unless Obligor shall default in making
the redemption payment when due, in which case the conversion right shall
terminate at the close of business on the date such default is cured and
such Note is redeemed). The Holder, at Holder's option and subject to and
in compliance with the provisions of this Section 3, may convert any or all
of the outstanding principal on this Note at the time of such conversion
(the "Conversion Rights") into a number of Conversion Shares equal to the
result obtained by dividing the amount then being converted by $0.50 per
share, as adjusted pursuant to this Section 3 (the "Conversion Price"). No
payment or adjustment shall be made on account of accrued but unpaid
interest upon conversion of this Note.
(a) Registration; Conversion Price Adjustment. Pursuant to a
Registration Rights Agreement of even date with this Note (the "Registration
Rights Agreement"), Obligor will use its reasonable best efforts to file
with the Securities and Exchange Commission a registration statement under
the Securities Act of 1933 covering the resale of the Conversion Shares. If
such registration statement shall not have been declared effective within
120 days after the date hereof, the Conversion Price will be reduced to
$0.40 per share. If such registration statement shall not have been
declared effective within 180 days after the date hereof, the Conversion
Price will be further reduced to $0.25 per share and shall remain at such
amount until the Maturity Date. Notwithstanding the preceding provisions of
this Subsection 3(a), any Conversion Price adjustment under this Subsection
3(a) shall be subject to the Holder's having executed and delivered to
Obligor the Registration Rights Agreement and performed all of the
obligations thereunder required to be performed by a Noteholder. The
Conversion Price as reduced by any adjustment under this Subsection 3(a)
shall be subject to further adjustment under Subsection 3(e) hereof.
<PAGE>
(b) Manner of Exercising Conversion Rights. In order to exercise
the Conversion Rights, the Holder shall deliver to Obligor during normal
business hours at the Obligor's address as set forth in Section 8 below, (i)
the original of this Note and (ii) a completed and executed conversion
notice in the form attached. As soon as practicable after the date (the
"Conversion Date") on which the Obligor receives the required documents in
proper form but in any event no later than fifteen (15) business days
thereafter, Obligor shall issue and deliver to Holder a certificate for the
number of whole Conversion Shares and cash as provided in Subsection 3(c)
below, in respect of any fraction of a Conversion Share. Such conversion
shall be deemed to have been effected on the Conversion Date, and the Holder
shall be deemed to have become the holder of record of the shares
represented thereby on such date. Obligor shall not be obligated, upon
exercise of the Conversion Rights by Holder, to effect the transfer of any
Conversion Shares, or cause any Conversion Shares to be registered, to any
persons or in any name or names other than the Holder.
(c) Fraction of a Share. Obligor shall not be required to issue
a fraction of a share or scrip representing fractional shares of Conversion
Shares. If any fraction of a Conversion Share would, except for the
provisions of this Subsection (c), be issuable on the conversion of this
Note, Obligor shall pay to the Holder a cash payment equal to the equivalent
fraction of the closing price on the Conversion Date.
(d) Obligor to Reserve Stock. As long as the Holder's Conversion
Rights are in effect, Obligor shall at all times reserve and keep available
out of its authorized but unissued Series A Common Stock, for the purpose of
effecting the conversion of this Note, such number of its duly authorized
shares of Series A Common Stock as shall from time to time be sufficient to
effect the conversion of this Note. Obligor covenants that all shares of
Series A Common Stock which may be issued upon conversion of this Note will
upon issue be fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof.
(e) Additional Conversion Price Adjustments. If Obligor shall
(i) pay a dividend or make a distribution in shares of capital stock
(whether shares of Series A Common Stock or capital stock of any other
class), (ii) effect a stock split or subdivide the outstanding Series A
Common Stock, (iii) effect a reverse stock split or combine the outstanding
Series A Common Stock into a smaller number of shares or (iv) effect any
other reclassification or recapitalization, then the number and types of
shares of capital stock into which this Note is convertible and the
Conversion Price in effect immediately prior thereto shall be adjusted so
that upon the subsequent conversion of this Note the Holder hereof shall be
entitled to receive the number and type of shares of capital stock of
Obligor that the Holder would have owned or have been entitled to receive
after the happening of any of the events described above had this Note been
converted immediately prior to the happening of such event. An adjustment
made pursuant to this paragraph shall become effective immediately after the
record date for any event requiring such adjustment or shall become
effective immediately after the effective date of such event if no record
date is set.
<PAGE>
4. Redemption.
(a) Optional Redemption. This Note is subject to redemption, at
any time after (i) either (A) the registration statement covering the resale
of the Conversion Shares shall be effective from the date of notice of
redemption to the redemption date or (B) two years (or such other period as
may hereafter be provided in Rule 144(k) under the Securities Act of 1933,
or any successor rule) shall have elapsed since the original date of this
Note and (ii) the closing market price of the Series A Common Stock shall
not have been less than $3.00 per share for a period of 20 consecutive
trading days prior to the date of notice of redemption. The redemption
price of this Note shall be equal to 100% of the principal amount redeemed,
plus interest accrued and unpaid on the amount redeemed through the date
fixed for redemption (the "Redemption Date"). The redemption price, upon
surrender of this Note or portion thereof, as the case may be, to Obligor at
its principal office, will be paid by check or wire transfer.
(b) Notice of Redemption. Notice of redemption will be mailed by
first-class mail at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at its registered
address. Notes in denominations larger than $50,000 may be redeemed in
part, but only in amounts equal to the sum of $50,000 and any integral
multiple of $1,000. On and after the Redemption Date interest will cease to
accrue on Notes or any portion of the Notes called for redemption.
5. Costs and Expenses of Collection. If this Note is collected by or
through an attorney at law as a result of a failure of Obligor to pay, when
due hereunder, any payment of principal of and interest on this Note,
Obligor shall pay all of Holder's reasonably incurred costs of collection
including, but not limited to, Holder's reasonable attorneys' fees.
6. Waivers by Obligor. The Obligor waives presentment for payment,
protest, notice of dishonor and protest and consents to any extensions of
time with respect to any payment due under this Note, and to the addition or
release of any party or of any collateral securing this Note. No waiver of
any payment under this Note shall operate as a waiver of any other payment.
7. Effect of Delay or Waiver by Holder. No delay or failure of the
Holder of this Note in the exercise of any rights or remedy provided for
hereunder shall be deemed a waiver of any other right or remedy which the
Holder may have.
8. Notices to Obligor. Any notice or demand to Obligor shall be at
the address as set forth on the signature page of this Note and to the
Holder as provided to Obligor in the manner set forth herein, or to either
Obligor or the Holder at any address previously furnished in writing by
Obligor or Holder. Such notice shall be deemed to have been received 72
hours after its deposit, postage prepaid, with the United States Postal
Service, or upon receipt in the case of personal delivery by courier or
otherwise, or upon confirmation of receipt if delivered by facsimile
transmission, provided that the original thereof is sent by mail, in the
manner set forth above, within the next business day after the facsimile
transmission is sent.
9. Governing Law; Headings. This Note is made in and shall be
governed by and construed according to the laws of the State of Texas. The
Section headings in this Note are for convenience of reference only and
shall not be considered in, nor shall they affect, the interpretation or
application of any of the provisions of this Note.
<PAGE>
10. Transfer, Exchange. The Notes are in registered form without
coupons. A Holder may register the transfer of or exchange Notes only on
the books of the Obligor maintained for that purpose. The Obligor may
require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes or other governmental charges
that may be imposed in relation thereto by law and proof of compliance with
all applicable securities laws.
11. Persons Deemed Owners. The Holder of a Note may be treated as the
owner of the Note for all purposes.
12. Recourse Against Others. A director, officer, employee or
shareholder, as such, of Obligor shall not have any liability for any
obligations of Obligor under the Notes nor for any claim based on, in
respect of or by reason of such obligations or their creation. The Holder of
this Note by accepting this Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of this
Note.
STEVENS INTERNATIONAL, INC.
By:
--------------------
George Wiederaenders
Treasurer
Address:
5700 East Belknap Street
Fort Worth, Texas 76117
<PAGE>
CONVERSION NOTICE
To convert this Note into Series A Common Stock, check the box:
To convert only part of this Note, state the principal amount to be
converted (must be $50,000 or an amount equal to the sum of $50,000 and any
integral multiple of $1,000): $____________.
Your Signature:
Date:
------------------ ------------------------------------------------
(Sign exactly as your name appears on this Note)
Name:
-----------------------------------------
Address:
-----------------------------------------
<PAGE>
CERTIFICATE TO BE DELIVERED UPON REGISTRATION OF TRANSFER
10% Convertible Subordinated Notes Due March 31, 2003 (the "Notes")
of Stevens International, Inc. (the "Company")
This certificate relates to $________________ principal amount of Notes
owned by _______________________ (the "Transferor") to be transferred to
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________.
(Insert Transferee's name, address and social security or tax I.D. number)
The Transferor has requested the Company to register the transfer of
such Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with transfer
restrictions relating to the Notes and the transfer of such Note is being
made pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Securities Act") (check applicable box) or the
transfer or exchange, as the case may be, of such Note does not require
registration under the Securities Act because (check applicable box):
Such Note is being transferred pursuant to an effective
registration statement under the Securities Act.
Such Note is being transferred pursuant to and in compliance
with an exemption from the registration requirements under the Securities
Act in accordance with Rule 144 (or any successor thereto) ("Rule 144")
under the Securities Act.
Such Note is being transferred pursuant to and in compliance
with an exemption from the registration requirements of the Securities Act
(other than pursuant to Rule 144), and if Obligor so requests, an opinion of
counsel satisfactory to Obligor to the effect that the transfer is in
compliance with the Securities Act.
Date:
---------------------------- ------------------------------------
(Signature of Transferor)
Exhibit 21
Material Subsidiaries of the Company
Country or State Name(s) Under Which
Name of Subsidiary of Incorporation Subsidiary Does Business
-------------------------- ---------------- ------------------------
1. Stevens International, S.A. France
Exhibit 23.1
Consent of Grant Thornton LLP
Consent of Independent Certified Public Accountants
We have issued our report dated March 20, 2000 accompanying the
consolidated financial statements and schedules incorporated by reference
in the Annual Report of Stevens International, Inc. on Form 10-K for the
year ended December 31, 1999. We hereby consent to the incorporation by
reference of said report in the Registration Statements of Stevens
International, Inc. on Form S-3 (File No. 33-84246) and on Form S-8 (File
No. 33-25949, File No. 33-36852, and File No. 333-00319).
/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Dallas, Texas
April 12, 2000
Exhibit 23.2
Consent of Deloitte & Touche LLP
Independent Auditors' Consent
We consent to the incorporation by reference in Registration Statements No.
33-25949, No. 33-36853 and No. 333-00319 of Stevens International, Inc. on
Form S-8 and Registration Statement No. 33-84246 of Stevens International,
Inc. on Form S-3 of our report dated March 31, 1998 appearing in this Annual
Report on Form 10-K of Stevens International, Inc. for the year ended
December 31, 1999.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Fort Worth, Texas
April 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF STEVENS INTERNATIONAL, INC.
AND SUBSIDIARIES AS OF DECEMBER 31, 1999 AND FOR THE YEAR THEN ENDED AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 1,006
<ALLOWANCES> 70
<INVENTORY> 6,303
<CURRENT-ASSETS> 7,810
<PP&E> 9,335
<DEPRECIATION> 7,540
<TOTAL-ASSETS> 10,262
<CURRENT-LIABILITIES> 6,632
<BONDS> 6,158
0
0
<COMMON> 950
<OTHER-SE> (6,588)
<TOTAL-LIABILITY-AND-EQUITY> 10,262
<SALES> 11,137
<TOTAL-REVENUES> 11,137
<CGS> 7,813
<TOTAL-COSTS> 5,109
<OTHER-EXPENSES> 79
<LOSS-PROVISION> 1,682
<INTEREST-EXPENSE> 738
<INCOME-PRETAX> (4,284)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,284)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,284)
<EPS-BASIC> (0.45)
<EPS-DILUTED> (0.45)
</TABLE>