UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number
0-27262
SPRECKELS INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-3050406
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
6805 MORRISON BOULEVARD, SUITE 450, CHARLOTTE, NORTH CAROLINA 28211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704) 367-4220
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Name of each exchange
Title of each class on which registered
Class A Common Stock Nasdaq National Market
par value $.01 per share, with
common stock purchase rights
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the 6,055,438 shares of voting stock of
the Registrant held by non-affiliates of the Registrant as of October 11, 1996,
was $152,355,741.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a Court. Yes X No______
The number of shares outstanding of each of the Registrant's classes of
common stock are as follows:
SHARES OUTSTANDING AS OF
TITLE OF EACH CLASS OCTOBER 9, 1996
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Class A Common Stock 6,0487,033
par value $.01 per share,
with common stock purchase rights
DOCUMENTS INCORPORATED BY REFERENCE:
None
(ii)
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TABLE OF CONTENTS
PART I PAGE NO.
Item 1. Business 1
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote
of Security Holders 10
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 13
Item 8. Financial Statements and Supplementary
Data 20
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 51
PART III
Item 10. Directors and Executive Officers of the
Registrant 51
Item 11. Executive Compensation 54
Item 12. Security Ownership of Certain Beneficial
Owners and Management 61
Item 13. Certain Relationships and Related
Transactions 63
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 64
(iii)
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PART I
ITEM 1. BUSINESS
Spreckels Industries, Inc., now known as Yale International, Inc. (the
"Company"), through its subsidiaries produces a wide range of industrial
products, including hoists, scissor lifts, mechanical jacks, rotating joints,
actuators and circuit protection devices. (See Note 1 of the Notes to the
Consolidated Financial Statements contained in Item 8). Its principal
subsidiary, Duff-Norton Company, Inc. ("Duff-Norton"), has been in operation
since 1883.
The Company was organized in Delaware in May, 1987 by its then senior
management and Prudential-Bache Interfunding, Inc. In July, 1987 the Company
acquired a portion of its current business, certain other industrial businesses,
and the Spreckels Sugar business (composed of Spreckels Sugar Company, Inc.
("Spreckels Sugar") and Limestone Products Company, Inc. ("Limestone Products")
(together the "Sweetener Segment"), from Amstar Corporation in a leveraged
buyout. In December, 1988 the Company purchased all of the stock of Yale
Industrial Products, Inc., a manufacturer of hoists and lifting equipment.
In October, 1992, the Company commenced a case under Chapter 11 of the
Bankruptcy Code. The Company's Plan of Reorganization (the "Plan") became
effective on September 2, 1993. (See Note 3 of the Notes to the Consolidated
Financial Statements contained in Item 8). In fiscal years 1994 and 1995, the
Company sold the stock of certain of its industrial products subsidiaries,
including Carbidie Corporation ("Carbidie"), (see Note 9 of the Notes to the
Consolidated Financial Statements contained in Item 8).
On April 19, 1996, the Company sold all of the stock of Spreckels Sugar
and Limestone Products, to Holly Sugar Corporation ("Holly"), (see Note 2 of the
Notes to the Consolidated Financial Statements contained in Item 8). The sale
consisted of substantially all of the assets of the Sweetener Segment, other
than two sugar processing facilities located in Spreckels and Manteca,
California, Spreckels Water Company and certain farm properties. These remaining
properties were valued at their net realizable value and were included in the
Consolidated Financial Statements of the Company as "Net Assets of Discontinued
Operations Held for Sale". The real estate properties were transferred to
Spreckels Land Company, Inc. (the "Land Company"), and together with certain
properties held by the Land Company represent over 1,000 acres of real estate
and such real estate is currently offered for sale.
On August 24, 1996, subsequent to the fiscal year ended June 30, 1996,
the Company entered into an Agreement and Plan of Merger (the "Merger
Agreement") among the Company, Columbus McKinnon Corporation ("Columbus
McKinnon") and L. Acquisition Corporation, a wholly owned subsidiary of Columbus
McKinnon (the "Purchaser"). See the "Merger Agreement" below.
The Company produces a wide range of products and is composed of the
following companies:
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DUFF-NORTON COMPANY, INC. Duff-Norton Company, Inc. and its subsidiaries, which
include Yale Industrial Products GmbH (Germany), and Yale Industrial Products
Ltd. (U.K.), (together, "Duff-Norton") design, manufacture and market mechanical
and electro-mechanical actuators, mechanical jacks, rotating joints, electric
and manual hoists and other lifting and positioning equipment and components.
Duff-Norton's American Lifts division also manufactures hydraulic scissor-lifts
and other engineered lifting products.
The electric and manual hoists manufactured by Duff-Norton serve both
the industrial and commercial markets. The Yale(R) and Coffing(R) hoist products
are used in a number of industries, including the heavy manufacturing,
industrial construction, chemical, railroad, utility, shipping and mining
industries. In the commercial market, the Duff-Lynx(R), Little Mule(TM) and Shop
King hoists are used by the light manufacturing, commercial construction,
agriculture and automotive industries. The Little Mule(TM) hoists are also used
by the utility industry. American Lifts' hydraulic scissor-lifts are used
primarily by the automotive, general manufacturing and freight handling
industries for process automation or to improve factory ergonomics.
Mechanical and electro-mechanical actuators are linear motion devices
used to position loads in a variety of industries, principally the steel, paper
and aerospace industries. Actuators are used by steel and paper mills to
position rollers, among other applications, and by the aerospace industry in the
positioning of communications satellite antennas and the testing and
transportation of large rockets. Mechanical jacks are heavy-duty lifting
devices, whose uses include the repair and maintenance of railroad tracks,
locomotives and other industrial machinery. Rotating joints are piping devices
which introduce heating or cooling liquids into the interiors of rotating drums
in industrial processes. Major customers for this product include the paper,
textiles, rubber, plastics, printing and machine tool industries.
Duff-Norton sells its products to distributors, original equipment
manufacturers and end-users in the United States and abroad. In addition, a
European licensee manufactures, markets and distributes certain Duff-Norton
metric actuators. During the past several years, Duff-Norton has expanded its
overseas operations through the acquisition by its subsidiary, Yale Industrial
Products GmbH, of Manutention Connection, S.A.R.L. in France and the
establishment of Yale Industrial Products GmbH in Austria. These actions have
significantly increased hoist distribution operations in those countries.
Hangzhou Lila Lifting & Lashing Co. Ltd., a subsidiary of Yale Industrial
Products GmbH, was also formed to manufacture textile strapping and slings in
China for distribution in Europe and Asia. Duff-Norton has also recently entered
into joint venture agreements to provide for the manufacturing and distribution
of its products in China and Egypt. Foreign sales comprised approximately 16% of
total sales for the past year.
The raw materials used by Duff-Norton come from a number of sources.
Certain finished components, such as electric motors, bearings, graphite parts
and ball screws, as well as certain hoist and trolley components, are purchased
from single sources. However, it is believed that the loss of any single
supplier for these goods would have no material adverse effect on operations.
Competition in Duff-Norton's markets is intense and comes from a large
number of domestic and international firms. The basis of competition varies with
Duff-Norton's product lines, but is based primarily on product quality, delivery
and price.
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MECHANICAL PRODUCTS GROUP. Mechanical Products, Inc. and Minitec Corporation
(together, the "Mechanical Products Group"), design, manufacture and market
small, lightweight circuit protective devices for both the aircraft/aerospace
and commercial markets. The Mechanical Products Group primarily serves the
aircraft industry, producing circuit breakers for original equipment
manufacturers of both commercial and military aircraft. In the commercial
sector, the Mechanical Products Group sells circuit breakers to original
equipment manufacturers, electrical distributors and hardware outlets for
medical equipment, motor vehicles, plug strip and other electrical equipment
applications. Most aircraft circuit breakers are built to comply with customer
or military specifications while most commercial circuit breakers are built to
comply with the specifications of safety related agencies.
The Mechanical Products Group's products are marketed and sold by
direct salespeople and through a network of manufacturers' representatives and
distributors in the United States and abroad. The Mechanical Products Group has
two offshore licensees.
The raw materials, components and parts used for the production of the
Mechanical Products Group's circuit breakers are available through normal
industry sources. Although a number of suppliers are single source suppliers
because of the specialized tooling required for the products, the Company
believes that the loss of any single supplier would not have a material adverse
effect on the business of the Mechanical Products Group. The loss of a bimetal
supplier, however, would result in time consuming and expensive commercial
product requalifications.
The Company believes that the Mechanical Products Group's principal
competitor in the aircraft circuit breaker market is Texas Instruments
Corporation. The Company believes that the loss of a major aircraft original
equipment manufacturer as a customer would have a material adverse effect on the
business of the Mechanical Products Group. Competition in certain markets in the
commercial circuit breaker market includes several manufacturers from Hong Kong,
Taiwan and Korea.
For information on the Company's operations in different geographic
areas, see Note 19 of the Notes to Consolidated Financial Statements contained
in Item 8.
CARBIDIE CORPORATION. Carbidie Corporation ("Carbidie") a manufacturer of
custom-made tungsten carbide preforms which are used for their strength and
durability in the tool and die industry, was a wholly-owned subsidiary of the
Company until November 4, 1994 when the Company sold all of the stock of
Carbidie to Greenfield Industries, Inc. for cash consideration of $22,500,000.
DISCONTINUED OPERATIONS--As described above, the Company sold all of the issued
and outstanding capital stock of Spreckels Sugar and Limestone Products, on
April 19, 1996. In connection with the sales, the Company retained two sugar
processing facilities in Spreckels and Manteca, California, production equipment
located at Cool, California and certain farm properties. In addition, the
Company retained the financial responsibility for all costs associated with the
closure and demolition of the two retained sugar processing facilities, as well
as certain employee related liabilities including medical benefits for those
employees who had retired as of December 31, 1995.
The real estate retained has been valued at its net realizable value
and included in the Company's Consolidated Financial Statements as "Net Assets
of Discontinued Operations Held for
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Sale." The affected real estate and real estate previously held by the Land
Company represents over 1,000 acres. All real estate is currently being offered
for sale.
MERGER AGREEMENT--The Merger Agreement provided for the commencement of a tender
offer for all of the outstanding shares of the common stock of the Company and
all of the outstanding warrants to purchase the common stock of the Company (the
"Offer") as soon as reasonably practicable, but in no event later than five
business days after the public announcement by the Company of the execution of
the Merger Agreement. In the Offer, stockholders who tender their shares will
receive $24.00 per share in cash and warrant holders who tender their warrants
will receive for each warrant an amount in cash equal to the excess of the
$24.00 per share offer price over the exercise price of the warrant. The
obligation of Purchaser to accept for payment shares and warrants tendered is
subject only to (i) the Minimum Condition (as defined below under "Conditions of
the Offer") and (ii) the satisfaction or waiver of the other conditions
described below under "Conditions of the Offer." Under the Merger Agreement, the
Purchaser expressly reserves the right, in its sole discretion, to waive any
condition to the Offer (other than the Minimum Condition) and to increase the
per share amount payable pursuant to the Offer or make any other changes in the
terms and conditions of the Offer (provided that, without the written consent of
the Company, no change may be made which decreases the per share amount payable
in the Offer, changes the form of consideration payable in the Offer (other than
by adding consideration), reduces the maximum number of shares or warrants to be
purchased in the Offer or imposes conditions to the Offer in addition to those
set forth in "Conditions of the Offer" below). The Merger Agreement provides
that, subject to the terms and conditions of the Merger Agreement and the Offer,
including but not limited to the conditions to the Offer, unless the Company
otherwise consents in writing, Purchaser will accept for payment and pay for
shares and warrants validly tendered and not properly withdrawn promptly
following the expiration of the Offer, provided that Purchaser may extend the
Offer up to the tenth business day after the later of (i) the tenth business day
after the initial expiration date of the Offer and (ii) the date on which all
such conditions shall first have been satisfied or waived.
The Merger Agreement provides that upon the terms and subject to the
conditions thereof, and in accordance with the General Corporation Law of the
State of Delaware ("Delaware Law"), at the effective time of the merger (the
"Effective Time"), the Purchaser will be merged with and into the Company (the
"Merger"). As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the surviving corporation
of the Merger.
The Merger Agreement also provides that immediately prior to the
Effective Time, each employee or director stock option and any related stock
appreciation right (together, an "Employee Option"), whether or not then
exercisable, will be cancelled by the Company, and each holder of a cancelled
Employee Option will be entitled to receive at the Effective Time or as soon as
practicable thereafter (or, if later, with respect to any Employee Option, the
date six months and one day following the grant of such Employee Option) from
the Company in consideration for the cancellation of such Employee Option an
amount in cash equal to the product of (i) the number of shares previously
subject to such Employee Option and (ii) the excess, if any, of the merger
consideration over the exercise price per share previously subject to such
Employee Option.
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The Merger Agreement also provides that the directors of Purchaser
immediately prior to the Effective Time will be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time will be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified.
Pursuant to the Merger Agreement, the Company, acting through its Board
of Directors, will, if required in accordance with applicable law and the
Company's Certificate of Incorporation and ByLaws, (i) duly call, give notice
of, convene and hold a special meeting of its stockholders as soon as
practicable following consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the transactions contemplated
thereby (the "Stockholders Meeting") and (ii) subject to its fiduciary duties
under applicable law, exercised after consultation with independent legal
counsel, (A) include in the Proxy Statement the recommendation of the Board of
Directors that the stockholders of the Company vote in favor of the approval of
the Merger Agreement and the transactions contemplated thereby and the written
opinion of the financial advisor that the consideration to be received by the
stockholders of the Company pursuant to the Offer and the Merger is fair to such
stockholders from a financial point of view and (B) use its reasonable efforts
to obtain the necessary approval of the Merger Agreement and the transactions
contemplated thereby by its stockholders. At the Stockholders Meeting, the
Purchaser will cause all shares then owned by it and its subsidiaries to be
voted in favor of approval of the Merger Agreement and the transactions
contemplated thereby.
The Merger Agreement provides that in the event that Purchaser acquires
at least 90% of the outstanding shares, the Company agrees, at the request of
Purchaser, subject to the conditions to the Merger set forth below in
"Conditions to the Merger", to take all necessary and appropriate action to
cause the Merger to become effective as soon as reasonably practicable after
such acquisition, without a meeting of the Company's stockholders, in accordance
with Section 253 of Delaware Law.
CONDITIONS OF THE OFFER--Under the terms of the Merger Agreement, Purchaser will
not be required to accept for payment or pay for any shares tendered pursuant to
the Offer, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any shares tendered pursuant to the
Offer, and may amend or terminate the Offer (whether or not any shares have
theretofore been purchased or paid for) if, prior to the expiration of the
Offer, (i) a number of shares of Common Stock which, together with any shares
owned by Columbus McKinnon or Purchaser, constitutes at least 51% of the voting
power (determined on a fully-diluted basis, including the exercise in full of
all options and warrants outstanding, other than Warrants validly tendered and
accepted for payment pursuant to the Offer), on the date of purchase, of all the
securities of the Company entitled to vote generally in the election of
directors or in a merger shall not have been validly tendered and available for
acceptance pursuant to the Offer (the "Minimum Condition"), (ii) Purchaser is
not, in its reasonable discretion, satisfied that (x) the Rights will not become
exercisable upon consummation of the Offer, (y) upon consummation of the Offer,
the restrictions contained in Section 203 of Delaware Law will not apply to the
Merger or (z) no supermajority vote will be required by the Company's
Certificate of Incorporation to approve the Merger or, after consummation of the
Offer, Purchaser will otherwise possess sufficient voting power to effect the
Merger without the affirmative vote of any person other than Purchaser or (iii)
at any time on or after
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August 24, 1996 and prior to the acceptance for payment of shares, any of the
following conditions occurs or has occurred or Purchaser makes a good faith
determination, which, in the reasonable judgment of Purchaser with respect to
each and every matter referred to below, makes it inadvisable to proceed with
the Offer or with such acceptance for payment of or payment for shares or to
proceed with the Merger:
(a) there shall have been any action or proceeding brought by any
governmental authority before any federal or state court, or any order or
preliminary or permanent injunction entered in any action or proceeding before
any federal or state court or governmental, administrative or regulatory
authority or agency, located or having jurisdiction within the United States, or
any other action taken, proposed or threatened, or statute, rule, regulation,
legislation, interpretation, judgment or order proposed, sought, enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to
Purchaser, the Company or any subsidiary or affiliate of Purchaser or the
Company or the Offer or the Merger, by any legislative body, court, government
or governmental, administrative or regulatory authority or agency located or
having jurisdiction within the United States, which could reasonably be expected
to have the effect of: (i) making illegal, or otherwise directly or indirectly
restraining or prohibiting or making materially more costly, the making of the
Offer, the acceptance for payment of, payment for, or ownership, directly or
indirectly, of some of or all the Shares by Parent or Purchaser, the
consummation of any of the transactions contemplated by the Merger Agreement or
materially delaying the Merger; (ii) prohibiting or materially limiting the
ownership or operation by the Company or any of its subsidiaries, or by Parent,
Purchaser or any of Parent's subsidiaries of all or any material portion of the
business or assets of the Company or any of its material subsidiaries or Parent
or any of its subsidiaries, or compelling Purchaser, Parent or any of Parent's
subsidiaries to dispose of or hold separate all or any material portion of the
business or assets of the Company or any of its material subsidiaries or Parent
or any of its subsidiaries, as a result of the transactions contemplated by the
Offer or the Merger Agreement; (iii) imposing or confirming limitations on the
ability of Purchaser, Parent or any of Parent's subsidiaries effectively to
acquire or hold or to exercise full rights of ownership of Shares, including,
without limitation, the right to vote any Shares acquired or owned by Parent or
Purchaser or any of Parent's subsidiaries on all matters properly presented to
the stockholders of the Company, including, without limitation, the adoption and
approval of the Merger Agreement and the Merger or the right to vote any shares
of capital stock of any subsidiary (other than immaterial subsidiaries) directly
or indirectly owned by the Company; or (iv) requiring divestiture by Parent or
Purchaser, directly or indirectly, of any Shares;
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, (ii) any extraordinary or
material adverse change in the market price of the Shares or in the United
States securities or financial markets generally, including, without limitation,
a decline of at least 20% in either the Dow Jones Average of Industrial Stocks
or the Standard & Poor's 500 index from the date of the Merger Agreement, (iii)
any material adverse change or any condition, event or development involving a
prospective material adverse change in United States or other material
international currency exchange rates or a suspension of, or limitation on, the
markets therefor, (iv) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, or (v) a commencement of a
war or armed hostilities or other national or international calamity directly or
indirectly involving the United States which would have a Material Adverse
Effect or materially adversely affect (or materially delay) the consummation of
the Offer;
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(c) (i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of this
Section as set forth in Rule 13d-3 promulgated under the Exchange Act) of 15% or
more of the outstanding Shares has been acquired by any corporation (including
the Company or any of its subsidiaries or affiliates), partnership, person or
other entity or group (as defined in Section 13(d)(3) of the Exchange Act),
other than Parent or any of its affiliates and other than any Grandfathered
Person (as presently defined) so long as such person remains a Grandfathered
Person (as presently defined) or (ii) (A) the Board of Directors of the Company
or any committee thereof shall have withdrawn or modified in a manner adverse to
Parent or Purchaser the approval or recommendation of the Offer, the Merger or
the Merger Agreement, or approved or recommended any takeover proposal or any
other acquisition of Shares other than the Offer and the Merger, (B) any such
corporation, partnership, person or other entity or group shall have entered
into a definitive agreement or an agreement in principle with the Company with
respect to a tender offer or exchange offer for any Shares or a merger,
consolidation or other business combination with or involving the Company or any
of its subsidiaries or (C) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing;
(d) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be true
and correct or any such representations and warranties that are not so qualified
shall not be true and correct in any material respect, in each case as if such
representations and warranties were made at the time of such determination;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the Merger
Agreement;
(f) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been amended or terminated with the consent of
the Company;
(g) any waiting periods under the HSR Act applicable to the purchase of
Shares pursuant to the Offer shall not have expired or been terminated, or any
material approval, permit, authorization, consent or waiting period of any
domestic, foreign or supranational governmental, administrative or regulatory
agency (federal, state, local, provincial or otherwise) located or having
jurisdiction within the United States or any country or economic region in which
either the Company or Parent, directly or indirectly, has material assets or
operations, shall not have been obtained or satisfied; or
(h) the Company and Purchaser (or any affiliate of Purchaser) shall
have entered into an agreement (which by its terms supersedes the Merger
Agreement) providing for the acquisition of the Company by Purchaser or any
affiliate of Purchaser by merger or other similar business combination, or by
purchase of shares of capital stock or assets of the Company, or the Company and
Purchaser shall have entered into any other agreement pursuant to which it is
agreed that the Offer will be terminated.
CONDITIONS OF THE MERGER--Under the Merger Agreement, the respective obligations
of each party to effect the Merger are subject to the satisfaction at or prior
to the Effective Time of the following conditions: (a) if required by Delaware
Law, the Merger Agreement shall have been approved by the affirmative vote of
the stockholders of the Company by the requisite vote in accordance with the
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Company's Certificate of Incorporation and Delaware Law (which the Company has
represented shall be solely the affirmative vote of a majority of the
outstanding shares); (b) no statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any United States
or state court or governmental authority which prohibits, restrains, enjoins or
restricts the consummation of the Merger; (c) any waiting period applicable to
the Merger under the Hart-Scott-Rodino Act shall have terminated or expired; and
(d) Purchaser shall have purchased shares pursuant to the Offer in a number
sufficient to satisfy the Minimum Condition.
PATENTS AND TRADEMARKS--The Company has a number of patents and trademarks. The
Company believes that name recognition and the Company's trademarks are
important to a number of the Company's products.
EMPLOYEES--As of June 30, 1996, the Company had 1,363 employees, of which 573
were represented by unions. The following is a summary of the Company's union
contracts:
Company Description
Duff-Norton Company, Inc. United Steel Workers of America
(Forrest City, Arkansas) Local 5681
Contract expires May 6, 2001
Covers approximately 191 employees
Duff-Norton Company, Inc. United Lift Workers
American Lifts Division Contract expires May 14, 2001
(Greensburg, Indiana) Covers approximately 71 employees
Duff-Norton Company, Inc. United Steel Workers of America
(Charlotte, NC) Local 1811
Contract expires September 26, 1999
Covers approximately 155 employees
Mechanical Products, Inc. United Auto Workers of America
(Jackson, Michigan) Local 1330
Contract expires April 7, 1997
Covers approximately 125 employees
ENVIRONMENTAL MATTERS--The Company's operations are subject to regulation by
various federal, state and local environmental agencies. Statutes, regulations
and permits and other authorizations impose requirements on the Company and its
operations concerning air emissions and waste water discharges, waste management
and disposal and other environmental matters.
The Company's subsidiary, Mechanical Products, Inc. discovered in 1987
that groundwater and sediments beneath its Jackson, Michigan plant contain
certain organic chemical compounds in concentrations above those permitted by
applicable law. Mechanical Products has conducted an extensive investigation of
the site and has entered into an Administrative Order by Consent with the
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State of Michigan Department of Natural Resources which provides for further
investigation and the development and implementation of a plan for remedial
action. Since 1991, Mechanical Products has been engaged in efforts to remove
and prevent further intrusion of such compounds into the groundwater, including
removal of affected sediments. Although no assurances can be given, management
believes that the remaining cost to the Company of continuing remedial efforts
at the Jackson plant will not have a material adverse effect on the Company's
business, financial condition or results of operations.
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in leased office space
in Charlotte, North Carolina. The following is a list of the Company's other
principal properties and facilities:
NATURE OF TERMS OF
ENTITY FACILITY LOCATION OCCUPANCY
Duff-Norton Company, Office and Plant Charlotte, NC Leased
Inc. Office and Plant Wadesboro, NC Owned
Office and Plant Forrest City, AR Leased
Office and Plant Greensburg, IN Owned
Yale Industrial Products Distribution Telford, England Leased
Ltd. (UK) Facilities
Yale Industrial Products Office and Plant Velbert, Germany Leased
(GmbH)
Yale Industrial Products Distribution Vosendorf, Austria Leased
GmbH Facilities
Manutention Connection Office and Plant Vierzon, France Owned
Hangzhou Lila Lifting Office and Plant People's Republic Leased
& Lashing of China
Duff-Norton Asia Pacific Office Singapore, Republic Leased
Pte. Ltd. of Singapore
Mechanical Products, Inc. Office and Plant Jackson, MI Owned
Minitec Corporation Office and Plant Hollywood, MD Owned
DISCONTINUED OPERATIONS
Sugar Processing Manteca, CA Owned
Spreckels, CA Owned
Duff-Norton's manufacturing facilities have an aggregate of
approximately 837,000 square feet of area, including storage and office space.
The Company's other industrial manufacturing facilities have an aggregate of
approximately 100,000 square feet of area, including storage and office space.
The Company also owns certain non-operating real estate in California,
which is currently being offered for sale.
The Company believes that its facilities are adequate for its present
needs.
-9-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Certain of the Company's subsidiaries are regularly engaged in product
liability and other litigation arising in the ordinary course of their business.
Except for certain risks discussed below, the Company is not aware of any legal
proceedings which have been brought against it or any of its subsidiaries which,
if adversely determined, would be material to the business of the Company and
its subsidiaries taken as a whole.
The Company has been advised that a customer has alleged that one of
the Company's products was the cause of a fire which occurred in January, 1995
at a manufacturing facility, resulting in losses in excess of the Company's
policy limits. No litigation or other formal proceedings against the Company
have commenced and, at the present time, it is unclear what role, if any, the
Company's product played in the fire. However, it is the opinion of management
that there was no manufacturing defect and that any claim, if filed and
eventually supported, would in all likelihood be settled within the Company's
policy limits, (see also Note 18 of the Notes to the Consolidated Financial
Statements, Commitments and Contingencies).
On September 17, 1996, the Company filed a legal action (the "Action")
against Holly in the U.S. District Court for the Northern District of California
based on a dispute with Holly arising out of the agreement (the "Stock Purchase
Agreement") by which the Company sold to Holly the stock of Spreckels Sugar and
Limestone Products. The complaint alleges claims for breach of contract, money
had and received, and declaratory relief and seeks to recover damages in excess
of $3.7 million against Holly based on the subsequent adjustment provisions of
the Stock Purchase Agreement. Prior to the filing of the Action, Holly has
asserted claims against the Company of approximately $6 million, alleging that a
refund of a portion of the purchase consideration that it had paid to the
Company should be refunded under such adjustment provisions of the Stock
Purchase Agreement. The Company is not in a position to predict the outcome of
the Action at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
-10-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION. The Company's Class A Common Stock is traded on the Nasdaq
National Market under the symbol YALE. (Until April 24, 1996, the Company's
stock traded under the symbol SPKL). See Note 1 of the Notes to Consolidated
Financial Statements.
The following table sets forth the range of high and low closing prices
on the Nasdaq National Market for the Class A Common Stock for the periods
indicated. Prices represent the closing sale prices as reported by the Nasdaq
Stock Market.
FISCAL YEARS ENDED JUNE 30
PRICE
HIGH LOW
1996
First Quarter............ $ 9.75 $7.75
Second Quarter........... $ 14.25 $9.00
Third Quarter............ $ 15.50 $13.50
Fourth Quarter........... $ 17.00 $14.75
1995
First Quarter............ $ 8.75 $7.125
Second Quarter........... $ 10.00 $7.875
Third Quarter............ $ 10.25 $8.375
Fourth Quarter........... $ 10.50 $8.125
HOLDERS. The Company had approximately 301 stockholders of record on August 24,
1996.
DIVIDENDS. The Company has not paid any dividends on its common stock and is
subject to certain restrictions on the payment of such dividends under the terms
of the indenture relating to the Company's 11.5% Senior Secured Notes Due 2000
and under the terms of its revolving credit agreement unless certain financial
requirements are met (See Note 4 of the Notes to the Consolidated Financial
Statements).
ITEM 6. SELECTED FINANCIAL DATA
The following data is qualified in its entirety by the financial
statements of the Company and other information contained elsewhere in this
document. The financial data as of June 30, 1996 and for the three years ended
June 30, 1996, has been derived from the audited financial statements of the
Company contained elsewhere in this document. The financial data as of and for
the years ended June 30, 1993 and 1992 are unaudited. The following financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and notes thereto contained in Item No. 8.
-11-
<PAGE>
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SUCCESSOR COMPANY* PREDECESSOR COMPANY
ELEVEN ONE
MONTHS MONTH
ENDED ENDED UNAUDITED
YEAR ENDED JUNE 30, JUNE 30, JULY 31, YEAR ENDED JUNE 30,
1996 1995 1994 1993 1993 1992
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net Sales $ 186,967 $ 180,580 $ 161,004 $ 13,466 $ 162,709 $ 158,606
Gross profit 55,111 51,238 45,886 4,443 44,961 40,216
Operating income from continuing operations 19,128 15,383 14,255 1,245 13,773 6,994
Income (loss) before discontinued
operations, fresh-start adjustments,
cumulative effect of changes in
accounting principle and extraordinary item 6,868 4,339 3,266 (1,136) (22,121) (5,443)
Loss from discontinued operations (58,922) (6,479) (796) (138) (5,504) (13,784)
Fresh-start reporting 16,046
Cumulative effect of changes in
accounting principle (6,710)
Extraordinary item, debt forgiveness 26,388
Net (loss) income $ (52,054) $ (2,140) $ 2,470 $ 34,450 $(27,625) $ (19,227)
FINANCIAL DATA:
Total assets $ 160,539 $222,403 $249,574 $223,338 $ 190,626 $ 200,995
Long-term obligations $ 70,000 $ 80,616 $ 79,589 $ 81,486 $ 656 $ 88,767
Stockholders' equity (deficit) $ 19,958 72,509 $ 72,951 $ 71,000 $ (28,539) $ (281)
EARNINGS PER SHARE:
Income (loss) before discontinued
operations, fresh-start adjustments,
cumulative effect of changes in accounting
principle and extraordinary item:
Primary $ 1.06 $ 0.72 $ 0.54 $ (0.22) $ (4.38) $ (1.09)
Fully Diluted $ 1.02 $ 0.72 $ 0.54 $ (0.22) $ (4.38) $ (1.09)
Discontinued operations:
Primary $ (7.47) $ (1.08) $ (0.13) $ (0.03) $ (1.09) $ (2.75)
Fully Diluted $ (7.47) $ (1.08) $ (0.13) $ (0.03) $ (1.09) $ (2.75)
Fresh-start reporting $ 3.18
Cumulative effect of changes in
accounting principle $ (1.33)
Extraordinary item, debt forgiveness $ 5.23
Net (loss) income per share:
Primary $ (6.41) $ (0.36) $ 0.41 $ 6.83 $ (5.47) $ (3.84)
Fully Diluted $ (6.45) $ (0.36) $ 0.41 $ 6.83 $ (5.47) $ (3.84)
</TABLE>
- -----------
* On August 1, 1993, the Company implemented the accounting for entities
emerging from Chapter 11 reorganization including the application of
fresh-start reporting set forth by the American Institute of Certified
Public Accountants, Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code." Since
fresh-start reporting has been included in the financial statements for
the eleven months ended June 30, 1994, the financial statements are not
comparable between periods (see Note 3, Notes to the Consolidated
Financial Statements).
-12-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In October 1992, the Company filed a voluntary petition for
reorganization under Chapter 11 of Title 11 of the United States Code. The
Company's subsidiaries did not file similar petitions and were not debtors in
any insolvency proceedings. On August 4, 1993 (the "Confirmation Date"), the
Bankruptcy Court entered an order confirming a plan of reorganization (the
"Plan"), which became effective September 2, 1993. The effects of the Plan were
recorded as of July 31, 1993, the fiscal month end closest to the Confirmation
Date.
The following discussion includes comments and data relating to the
Company's results of operations and financial condition for the fiscal years
ended June 30, 1996 and 1995, the eleven-month period ended June 30, 1994, and
the one-month period ended July 31, 1993. The accompanying financial statements
reflect the application, as of July 31, 1993, of fresh-start reporting as set
forth by the American Institute of Certified Public Accountants, Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code." Also, effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits other than Pensions: ("SFAS No. 106"), and Statement of
Financial Standards No. 109, "Accounting for Income Taxes: ("SFAS No. 109").
Accordingly, in some instances, the results of operations and financial
condition of the Company are not comparable between periods due to the effects
of the Plan, fresh-start reporting and adoption of the new accounting
principles.
RESULTS OF OPERATIONS--The Company is a manufacturer of mechanical and
electro-mechanical actuators, mechanical jacks, rotating joints, electric and
manual hoists and other lifting and positioning equipment and components. The
Company has nine manufacturing facilities located in five countries producing
products under the brand names of Yale(TM), Duff-Norton(TM), Coffing(TM), and
Little Mule(TM).
DISCONTINUED OPERATIONS--As described in Item 1 above, on November 13, 1995, the
Company announced its intention to sell the Sweetener Segment and sold such
Segment to Holly on April 19, 1996 (see Note 2 of the Notes to the Consolidated
Financial Statements). Prior to the sale of the Sweetener Segment, the Company
operated in two distinct business segments, 1) its current business operations
as described above which was previously referred to as the Company's "Industrial
Products Segment," and 2) the Sweetener Segment, which principal business was
the refining and distribution of sugar.
During the second quarter ended December 31, 1995, the Company
reclassified its Sweetener Segment as discontinued operations and recognized a
loss on disposal of discontinued operations of $56.7 million, which included an
income tax benefit of $30.6 million, pursuant to standards set forth by the
Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Results of
Operations and Reporting the Effects of Disposal of a Segment of a Business".
Included in the $56.7 million loss on the disposal of discontinued
operations were expenses of $11.8 million in estimated costs for shut down and
disposal costs, which included $2.6 million in costs to operate the Sweetener
Segment until sale, $1.6 million in factory demolition costs, $2.6
-13-
<PAGE>
million for environmental costs and $5.0 million in costs for commissions,
professional fees and certain severance benefits related to sweetener personnel.
Net sales, operating costs, expenses, interest and income taxes for the
years ended June 30, 1996 and 1995, the eleven-month period ended June 30, 1994
and the one-month period ended July 31, 1993, have been reclassified and
disclosed as "loss from the operation of discontinued sugar operations, net of
income taxes." As a result, this discussion is not comparable to previous
discussions of the Company's operations (see Notes 2 and 3 to the Notes to the
Consolidated Financial Statements for further discussion).
The Company recognized losses from the operation of discontinued
sweetener operations of $2.3 million for the year ended June 30, 1996, $6.5
million for the year ended June 30, 1995, $0.8 million for the eleven-month
period ended June 30, 1994 and $2.9 million for the one-month period ended July
31, 1993, which included income tax benefits of $1.2 million, $5.7 million, $0.4
million and $0.0 million, respectively.
SALE OF DISCONTINUED OPERATIONS--The sale of the Sweetener Segment to Holly
consisted of substantially all of the assets of the Sweetener Segment, other
than two sugar processing facilities located in Spreckels and Manteca,
California, and associated production equipment which was previously used at
these production facilities, Spreckels Water Company, and certain farm
properties. These remaining properties were valued at their net realizable value
and were included in the Consolidated Financial Statements of the Company as
"Net assets of Discontinued Operations Held for Sale" on the Company's balance
sheet.
The sale was effected pursuant to a Stock Purchase Agreement between
the Company and Holly and provided for the transfer of the remaining assets and
substantially all liabilities, in consideration of payment of approximately
$28.0 million plus the assumption of $16.0 million of debt. The sales price was
based upon the net working capital of the Sweetener Segment at December 31,
1995, plus $3.0 million, and is subject to certain adjustments. In addition, the
Agreement required Holly to reimburse the Company for the net cash outflow of
the Sweetener Segment incurred from January 1, 1996 through the date of close,
which was $16.7 million. The Company and Holly have been unable to reach
agreement on a final settlement and as a result the Company filed legal action
against Holly. (See Item No. 3, "Legal Proceedings" for further discussion). The
Company also retained $5.6 million in medical benefits for those employees who
had retired from the Sweetener Segment as of December 31, 1995, and was included
in the $15.6 million post-retirement benefit obligation disclosed in the
Company's balance sheet at June 30, 1996.
CONTINUING OPERATIONS--The Company sold all of the outstanding stock of Carbidie
Corporation on November 4, 1994 and of National Carbide Die on June 30, 1994
(together, "Divested Companies"). See Note 9 of the Notes to the Consolidated
Financial Statements for additional discussion. The following table removes the
results of operations for Divested Companies for the periods described and is
presented to accompany management's discussion of ongoing operations:
-14-
<PAGE>
RESULTS OF OPERATIONS FOR ONGOING OPERATIONS:
(dollars in thousands)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED JUNE 30 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES:
Reported amount $186,967 $180,580 $174,470
Less divested Companies 0 7,244 25,707
------------- -------------- --------------
Ongoing operations $186,967 $173,336 $148,763
============= ============== ==============
COST OF PRODUCTS SOLD:
Reported amount $131,856 $129,342 $124,141
Less divested Companies 0 4,956 18,054
------------- -------------- --------------
Ongoing operations $131,856 $124,386 $106,087
============= ============== ==============
SELLING, GENERAL AND ADMINISTRATIVE:
Reported amount $35,983 $35,855 $34,829
Less divested Companies 0 859 3,302
------------- -------------- --------------
Ongoing operations $35,983 $34,996 $31,527
============= ============== ==============
OPERATING INCOME FROM CONTINUING
OPERATIONS:
Reported amount $19,128 $15,383 $15,500
Less divested Companies 0 1,429 4,351
------------- -------------- --------------
Ongoing operations $19,128 $13,954 $11,149
============= ============== ==============
</TABLE>
RESULTS OF OPERATIONS FOR ONGOING OPERATIONS:
(Dollars in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
NET SALES:
Domestic $ 155,857 $ 146,432$ 128,177
International 31,110 26,904 20,586
---------- --------- ----------
Ongoing operations $ 186,967 $ 173,336$ 148,763
======= ======= ========
COST OF PRODUCTS SOLD:
Domestic $ 113,832 $ 108,675$ 93,968
International 18,024 15,711 12,119
---------- --------- ----------
Ongoing operations $ 131,856 $ 124,386$ 106,087
======== ======= ========
SELLING, GENERAL AND ADMINISTRATIVE:
Domestic $ 27,908 $ 27,893 $ 26,396
International 8,075 7,103 5,131
----------- ---------- -----------
Ongoing operations $ 35,983 $ 34,996 $ 31,527
========== ======== ==========
OPERATING INCOME FROM CONTINUING
OPERATIONS:
Domestic $ 14,117 $ 9,864 $ 7,813
International 5,011 4,090 3,336
----------- ----------- ----------
Ongoing operations $ 19,128 $ 13,954 $ 11,149
========= ======= =========
-15-
<PAGE>
NET SALES --The Company's worldwide sales from ongoing operations for the year
ended June 30, 1996 totaled $187 million, an increase of $13.6 million, or 7.9%
from the year ended June 30, 1995. This increase was a result of increased
market demand for hoists and actuators coupled with selected price increases.
Overall, the Company's rate of growth in fiscal 1996 was significantly lower
than its rate of growth achieved at the end of its fiscal year ended June 30,
1995. In fiscal year 1995, sales from ongoing operations increased by $24.6
million, or 16.5% from the twelve months ended June 30, 1994. The Company
believes that the slowdown in its rate of growth experienced this year compared
to its prior year, was a reflection of the overall sluggishness of the worldwide
economy. However, the Company has experienced a $38.2 million, or 25.7% increase
in sales over the two-year period ended June 30, 1996. This increase was caused
by a number of factors, including program changes introduced in early 1995,
which included "Selective Distribution" and "Target Marketing" programs, and an
overall shift in strategy to a product management focus.
Net sales from the Company's domestic owned subsidiary companies
amounted to $155.9 million, or 83.4% of total sales during the year ended June
30, 1996. Domestic net sales increased $9.4 million, or 6.4% from the year ended
June 30, 1995. The increase in domestic sales during fiscal year 1996 was at a
much slower rate than the growth performance achieved during the prior year. In
fiscal year 1995, sales from ongoing domestic operations increased by $18.3
million, or 14.2%, from the twelve months ended June 30, 1994.
Sales from the Company's foreign operations represented 16.6%, 15.5%
and 13.8% of total net sales in Fiscal Years 1996, 1995 and 1994, respectively.
Sales from the Company's foreign subsidiaries increased $4.2 million to $31.1
million during fiscal year 1996, which represented a 15.6% increase over year
ended June 30, 1995, and 30.9% of the Company's total increase in sales. These
results were related to significant market share gains in Europe, especially in
France and Germany.
COST OF PRODUCTS SOLD--Total cost of products sold from ongoing operations was
$131.9 million for the year ended June 30, 1996, an increase of $7.5 million, or
6.0% from the year ended June 30, 1995. The increase in cost of sales was less
than the increase of $18.3 million experienced for the year ended June 30, 1995.
The increase in costs in both years was primarily related to the total increase
in sales.
Cost of products sold as a percent of net sales declined from 71.8% in
1995 to 70.5% in fiscal year 1996. This decline has resulted in an overall
improvement in gross margins from 28.2% in fiscal 1995 to 29.5% in fiscal year
1996 and was primarily related to favorable foreign currency costs related to
the acquisition of certain purchased products as well as favorable results
achieved from the Company's productivity programs such as its focused factory
and work cells. In the year ended June 30, 1995, cost of products sold as a
percent of sales from ongoing operations increased by 0.5% from the twelve
months ended June 30, 1994, which was primarily related to increases in
materials costs from certain foreign suppliers.
-16-
<PAGE>
Cost of products sold as a percent of domestic sales for the Company's
domestic ongoing operations represented 73.0%, 74.2% and 73.3% in fiscal years
1996, 1995 and for the twelve months ended June 30, 1994, respectively. Cost of
products sold as a percent of foreign sales for the Company's foreign operations
represented 57.9%, 58.4% and 58.9% in fiscal years 1996, 1995 and from the
twelve months ended June 30, 1994, respectively.
SELLING, GENERAL AND ADMINISTRATIVE--Selling, general and administrative
expenses ("SG&A") from continuing operations increased $1.0 million, or 2.8% to
$36.0 million for the year ended June 30, 1996, from the $35.0 million reported
during the year ended June 30, 1995. However, when adjusted for $1.1 million of
restructuring costs (see Note 20 of the Notes to the Consolidated Financial
Statements) incurred during fiscal 1995, SG&A expenses increased by $2.1
million, or 6.2% from fiscal 1995 to fiscal 1996. This increase was incurred at
both the Company's domestic ($1.1 million) and international ($1.0 million)
operations. Fiscal 1995 SG&A expenses of continuing operations increased by $3.5
million, or 11.1% over 1994. However, when adjusted for the restructuring costs
noted above, SG&A increased by $2.3 million, or 7.4% from the $31.5 million
reported for the twelve-month period ended June 30, 1994. The overall increase
in SG&A expenses in both years was also related to increases in marketing
expenses in order to meet increased sales levels as well as expanding the
Company's international presence.
OPERATING INCOME FROM CONTINUING OPERATIONS--The Company had operating income
from continuing operations of $19.1 million, or 10.2% of net sales in fiscal
1996, an increase of $5.2 million, or 37.1% from the year ended June 30, 1995.
Operating earnings from ongoing operations from the Company's domestic
operations increased $4.3 million, or 43.1% for the year ended June 30, 1996
compared to fiscal 1995. Operating earnings from ongoing operations from the
Company's international operations increased $0.9 million, or 22.5% for the year
ended June 30, 1996 compared to fiscal year 1995.
OTHER ITEMS--Interest expense, net, decreased by $0.1 from the $8.1 million from
year ended June 30, 1995 to $8.0 million for the year ended June 30, 1996. This
decrease was a result of interest income received from the Company's short term
investments.
EARNINGS PER SHARE--The Company uses the Modified Treasury Stock Method of
computing earnings per share in accordance with Accounting Principles Board
Opinion No. 15, ""Earnings per Share" (see Note 17 of the Notes to the
Consolidated Financial Statements).
At June 30, 1995 and at June 30, 1994, the market price per share was
such that warrants and stock options did not have a dilutive effect resulting in
an earnings per share computation based upon the actual shares outstanding of
6,000,000 shares. However, the market price of the Company's stock significantly
increased during the period ended June 30, 1996 and consequently, the number of
shares from the assumed exercise of outstanding warrants has increased resulting
in a significant dilutive impact on the per share computation.
-17-
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
GENERAL--The Company's principal ongoing sources of liquidity are cash from
operations, cash on hand and its revolving credit facility (see Note 8 of the
Notes to the Consolidated Financial Statements). On April 19, 1996, the Company
received approximately $35.0 million in cash ($28.0 million in proceeds and $7.0
million in reimbursement of net cash outflow) from the sale of its Sweetener
Segment (see discussion on the sale of discontinued operations above), and such
proceeds were used to discharge the Company's outstanding borrowings on its
revolving line of credit. At June 30, 1996, the Company had no outstanding
borrowings against its revolving line of credit, except for letters of credit
outstanding of $2.5 million, resulting in an available amount of $22.5 million
(see Note 8 of the Notes to the Consolidated Financial Statements). The Company
had cash at June 30, 1996 of $10.2 million which represents an increase of $7.8
million over the year ended June 30, 1995.
Cash provided from operating activities are, at any time, affected by a
number of factors and amounted to $15.7 million for the fiscal year ended June
30, 1996, which represents an increase of $13.3 million over the $2.4 million
provided by continuing operations for the year ended June 30, 1995. The increase
in cash provided from operating activities from continuing operations in fiscal
year 1996 resulted primarily from improved profit performance of $2.6 million to
$6.9 million from the $4.3 million in income from continuing operations reported
in fiscal 1995. Working capital (adjusted for "Net Assets of Discontinued
Operations Held for Sale") increased by $3.8 million. This increase was
primarily related to a decrease of $3.7 million in inventory and a $2.1 million
increase in other current liabilities which was partially offset by $1.7 million
increase in accounts receivable. The decrease in inventory was related to
certain inventory management programs implemented by the Company during fiscal
year 1996 and the increase in accounts receivable was related to the increase in
sales of $6.4 million achieved this year compared to the fiscal year ended June
30, 1995.
Increases and decreases in cash flows from investing activities for the
year ended June 30, 1996 related primarily to cash receipts from the net
proceeds from the sale of discontinued operations ($28.0 million of Sweetener
Segment sale and $1.3 million of real estate sales), and the purchase of $4.9
million in capital equipment. Cash flows from financing activities were
primarily related to the paydown of the Company's revolving line of credit.
CAPITAL EXPENDITURES--Total capital expenditures for the years ended June 30,
1996 and 1995 and the twelve-month period ended June 30, 1994 amounted to $4.9
million, $5.3 million and $3.5 million, respectively. These expenditures were
primarily used for equipment replacements.
CHANGE IN ACCOUNTING PRINCIPLES--The Company adopted Statement of Financial
Accounting Standards No. 106, ("SFAS 106"), "Employers' Accounting for
Postretirement Benefits Other than Pensions," on July 1, 1993. SFAS 106 requires
the Company to recognize the cost of providing health care and other benefits to
retirees over the term of employee service, which represented a change from the
Company's previous method of recognizing these costs when paid. The Company
elected to recognize the cumulative effect of the change in accounting for
postretirement benefits in the amount of $8.6 million on July 31, 1993. The
effect of this change was an increase in recorded annual expense of $1.9 million
over cash payments of $1.1 million.
-18-
<PAGE>
The Company adopted Statement of Financial Accounting Standards No.
109, ("SFAS 109"), "Accounting for Income Taxes" on July 1, 1993. This statement
requires that deferred tax liabilities and assets be recognized based on the
difference between the tax basis of assets and liabilities and their financial
reporting amounts measured by using presently enacted current and/or future tax
laws and rates. Deferred taxes increased by approximately $19.7 million due to
the reversal of recording of the Company's leveraged buyout in 1987 and the
reversal of the purchase of Yale Industrial Products, Inc. in 1988.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, ("SFAS 121"), "Accounting
for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This statement requires that long-lived assets be reported at the lower of
carrying amount or fair value. The Company plans to adopt SFAS 121 in fiscal
1997 and believes that such adoption will not have a significant impact on its
financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, ("SFAS 123"), "Accounting
for Stock-Based Compensation." SFAS 123 defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all employee
stock compensation plans. However, SFAS 123 also allows an entity to continue to
measure compensation cost using the intrinsic value based method of accounting
prescribed by APB No 25, "Accounting for Stock Issued to Employees", provided it
makes pro forma disclosures of net income and earnings per share as if SFAS 123
had been applied. The Company plans to continue to account for employee stock
options under the provisions of APB 25 and will include appropriate disclosures.
AGREEMENT OF MERGER--On August 24, 1996, subsequent to the fiscal year ended
June 30, 1996, the Company entered into the Merger Agreement. Shortly
thereafter, Columbus McKinnon commenced a tender offer for all of the
outstanding shares of the common stock of the Company. In the tender offer,
stockholders who tender their shares will receive $24.00 per share in cash and
warrant holders who tender their warrants will receive for each warrant an
amount in cash equal to the excess of the $24.00 per share tender offer price
over the exercise price of the warrant.
The Board of Directors of the Company has approved the merger and
recommended to each stockholder and warrant holder to tender their shares and
warrants. Consummation of the merger is subject to regulatory approval. The
Company and Columbus McKinnon have filed for approval of the merger with the
Federal Trade Commission ("FTC") and the FTC has requested additional
information relating to such merger. See Note 21 of the Notes to the
Consolidated Financial Statements and Item No. 1, "Business" for additional
information on the Merger.
-19-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS
SPRECKELS INDUSTRIES, INC.
PAGE
Report of Independent Public Accountants 21, 22
Consolidated Balance Sheets as of June 30, 1996 and 1995 23
Consolidated Statements of Operations for the years 24, 25
ended June 30, 1996 and 1995, the eleven-month period
ended June 30, 1994, and the one-month period ended
July 31, 1993.
Consolidated Statements of Stockholders' Equity 26
for the years ended June 30, 1996 and 1995, the eleven-
month period ended June 30, 1994, and the one-month
period ended July 31, 1993.
Consolidated Statements of Cash Flows for the years 27, 28
ended June 30, 1996 and 1995, the eleven-month period
ended June 30, 1994, and the one-month period ended
July 31, 1993.
Notes to Consolidated Financial Statements 29
Financial Statement Schedules 77
-20-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
SUCCESSOR COMPANY
To the Board of Directors of Spreckels Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Spreckels
Industries, Inc., (a Delaware corporation) and subsidiaries (the "Company") as
of June 30, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended June 30,
1996 and 1995, and for the eleven-month period ended June 30, 1994. These
financial statements and the schedules referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
June 30, 1996 and 1995, and the results of its operations and its cash flows for
the years ended June 30, 1996 and 1995, and for the eleven-month period ended
June 30, 1994, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a) 2 are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not a required part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
Charlotte, North Carolina,
August 24, 1996.
-21-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
PREDECESSOR COMPANY
To the Board of Directors of Spreckels Industries, Inc.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit) and cash flows of Spreckels Industries, Inc. (a
Delaware corporaton) and subsidiaries (the "Company') for the one-month period
ended July 31, 1993. These financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules 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 provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
farly, in all material respects, the results of the Company's operations and its
cash flows for the one-month period ended July 31, 1993, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in Item 14(a) 2 are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not a required part of the basic financial statements. These schedules
have been subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
As discussed in Notes 11 and 13, the Company adopted Statements of Financial
Accounting Standards Nos. 106 and 109 effective July 1, 1993.
Charlotte, North Carolina
August 24, 1996.
-22-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
CURRENT ASSETS: 1996 1995
-------------- --------
<S> <C> <C>
Cash and cash equivalents $ 10,222 $ 2,439
Accounts receivable, net of allowance for
doubtful accounts of $1,011 and $1,160
respectively 30,654 28,949
Inventories 38,746 42,525
Net assets of discontinued operations
held for sale 11,224 78,382
Other current assets 9,720 10,100
------------ ----------
Total current assets 100,566 162,395
Property, plant and equipment, net 25,480 23,133
Excess reorganization value, net 28,382 30,098
Other assets 6,111 6,777
------------- ------------
Total assets $ 160,539 $ 222,403
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 15,305 $ 16,236
Accrued payroll costs 4,203 3,633
Accrued interest 1,364 1,827
Other current liabilities 16,295 13,941
----------- -----------
Total current liabilities 37,167 35,637
Long-term debt 70,000 80,616
Post-retirement benefit obligation 15,573 16,103
Other noncurrent liabilities 17,841 17,538
----------- -----------
Total liabilities 140,581 149,894
COMMITMENTS AND CONTINGENCIES (Notes 10 and 18)
STOCKHOLDERS' EQUITY:
Common stock $0.01 par value authorized 15,000,000
Class A shares; 6,055,438
and 5,999,900 shares issued
and outstanding 61 60
Common stock $0.01 par value authorized 15,000,000
Class B shares; 0 and 100 shares issued and outstanding --- ---
Additional paid-in capital 71,510 70,940
(Accumulated deficit) retained earnings (51,724) 330
Treasury stock (2) (1)
Accumulated benefit obligation in
excess of plan assets (244) (154)
Foreign currency translation adjustment 357 1,334
------------- ------------
Total stockholders' equity 19,958 72,509
----------- -----------
Total liabilities and stockholders' equity $ 160,539 $ 222,403
========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an
integral part of these balance sheets.
-23-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
11-MONTHS ONE MONTH
ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, JUY 31,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Net sales $ 186,967 $ 180,580 $ 161,004 $ 13,466
Cost of products sold 131,856 129,342 115,118 9,023
---------- ---------- ----------- ------------
Gross profit 55,111 51,238 45,886 4,443
Operating expenses:
Selling, general and administrative expenses 34,267 32,931 29,304 3,198
Restructuring costs --- 1,122 --- ---
Amortization of excess reorganization value 1,716 1,802 2,327 ---
------------ ------------ ------------- -----------------
Operating income from continuing operations 19,128 15,383 14,255 1,245
Interest expense, net 8,011 8,146 7,379 1,826
Reorganization items --- --- --- 555
------------ ----------- --------------- -----------------
Income (loss) from continuing operations
before provision for income taxes 11,117 7,237 6,876 (1,136)
Provision (benefit) for income taxes 4,249 2,898 3,610 ---
------------ ------------ ------------- ----------------
Income (loss) from continuing operations before
discontinued operations, fresh-start
adjustments, cumulative effect of changes
in accounting principle and extraordinary item 6,868 4,339 3,266 (1,136)
Discontinued operations:
Loss from the operation of discontinued
sugar operations, net of income tax benefit of
$1,246, $5,637, $414 and $0.0, respectively (2,263) (6,479) (796) (138)
Loss on disposal of sugar business including
provision for $11,840 for operating losses
during phaseout period (net of income tax
benefit of $30,642) (56,659) --- --- ---
------------ ------------ ------------- --------------
Loss from discontinued operations (58,922) (6,479) (796) (138)
Fresh-start reporting adjustments, net of tax --- --- --- 16,046
Cumulative effect of changes in accounting
principle, net of tax --- --- --- (6,710)
Extraordinary item, debt forgiveness , net of tax --- --- --- 26,388
----------- ------------ ------------- --------------
Net (loss) income $ (52,054) $ (2,140)$ 2,470 $ 34,450
=========== ============ ============= ===========
Earnings (loss) per share:
Primary earnings (loss) per share:
Income (loss) from continuing operations
before discontinued operations, fresh-
start adjustments, cumulative effect
of changes in accounting principle
and extraordinary item $ 1.06 $ 0.72 $ 0.54 $ (0.22)
Discontinued operations (7.47) (1.08) (0.13) (0.03)
Fresh-start reporting --- --- --- 3.18
Cumulative effect of charges in
accounting principle --- --- --- (1.33)
Extraordinary item --- --- --- 5.23
----------- ------------ ------------ -------------
Net (loss) income $ (6.41) $ (0.36) $ 0.41 $ 6.83
=========== ============ ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
-24-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - (CONTINUED)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
11-MONTHS ONE MONTH
ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, JULY 31,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Fully diluted earnings (loss) per share:
Income (loss) from continuing operations before
discontinued operations, fresh-start adjustments,
cumulative effect of changes in accounting
principle and extraordinary item $ 1.02 $ .72 $ .54 $ (0.22)
Discontinued operations (7.47) (1.08) (.13) (0.03)
Fresh-start reporting -- -- -- 3.18
Cumulative effect of charges in
accounting principle -- -- -- (1.33)
Extraordinary item -- -- -- 5.23
------------- ----------- ------------- -----------
Net (loss) income $ (6.45) $ (.36) .41 $ 6.83
------------- =========== ============= ===========
Weighted average shares outstanding 7,893,000 6,000,000 6,000,000 5,045,951
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
-25-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars and shares in thousands)
<TABLE>
<CAPTION>
Accumulated
Benefit
Class A Class B Foreign Obligation (Accumulated
Common Stock Common Shares Additional Currency In Excess Deficit) Total
--------------- --------------- Paid-in Translation of Plan Retained Treasury Stockholders'
Shares Amount Shares Amount Capital Adjustment Assets Earnings Stock Equity
------ ------ ------ ------ ------- ---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Predecessor Company:
Balances at June 30, 1993 3,568 $ 35 1,478 $ 15 $ 12,281 $ (132) $ --- $(38,334) $ (2,404)$ (28,539)
Income (loss) before fresh-
start adjustment and cumulative
effect of changes in
accounting principle --- --- --- --- --- --- --- (1,136) --- (1,136)
Cumulative effect of changes
in accounting principle --- --- --- --- --- --- --- (6,710) --- (6,710)
Loss from discontinued operations --- --- --- --- --- --- --- (138) --- (138)
Translation loss --- --- --- --- --- (213) --- --- --- (213)
------ ------- ------- ------- ---------- -------- -------- ----------- --------- ---------
Balances at July 31, 1993 3,568 35 1,478 15 12,281 (345) --- (46,318) (2,404) (36,736)
------ ------- ------- ------- ------- ------- -------- --------- --------- ---------
Debt conversion 5,520 55 --- --- 65,247 --- --- 26,388 --- 91,690
Exchange of old equity for
new equity (3,088) (30) (1,478) (15) 45 --- --- --- --- ---
Fresh-start reporting
adjustments --- --- --- --- (6,633) 345 --- 19,930 2,404 16.046
------ ------- -------- ------- -------- -------- -------- ---------- --------- ---------
Successor Company:
Balances at August 1, 1993 6,000 60 --- --- 70,940 --- --- --- --- 71,000
------- ------- -------- ------- ------- -------- ------ ---------- ---------- ---------
Net income --- --- --- --- --- --- --- 2,470 --- 2,470
Repurchase of common stock --- --- --- --- --- --- --- --- (1) (1)
Accumulated benefit obligation
in excess of plan assets --- --- --- --- --- --- (904) --- --- (904)
Translation gain --- --- --- --- --- 386 --- --- --- 386
------- ------- -------- ------- ------- --------- ------- ---------- ---------- ---------
Balances at June 30, 1994 6,000 60 --- --- 70,940 386 (904) 2,470 (1) 72,951
------- ------- -------- ------- ------- -------- ------- ---------- ---------- ---------
Net loss --- --- --- --- --- --- --- (2,140) --- (2,140)
Accumulated benefit obligation
in excess of plan assets --- --- --- --- --- --- 750 --- --- 750
Translation gain --- --- --- --- --- 948 --- --- --- 948
------- ------- -------- ------- ------- -------- ------- --------- ---------- ---------
Balances at June 30, 1995 6,000 60 --- --- 70,940 1,334 (154) 330 (1) 72,509
------- ------- -------- ------- ------- ------- ------ --------- ---------- ---------
Net loss --- --- --- --- --- --- --- (52,054) --- (52,054)
Repurchase of common stock --- --- --- --- --- --- --- --- (1) (1)
Exercise of warrants 29 1 --- --- 320 --- --- --- --- 321
Exercise of stock options 26 --- --- --- 250 --- --- --- --- 250
Accumulated benefit obligation
in excess of plan assets --- --- --- --- --- --- (90) --- --- (90)
Translation loss --- --- --- --- --- (977) --- --- --- (977)
------- ------- -------- -------- ------- -------- ------- ----------- --------- -------
Balances at June 30, 1996 6,055 $ 61 $ --- $ --- 71,510 $ 357 $ (244) $(51,724) $ (2) 19,958
------- ------- -------- -------- ------- ------- ------- ----------- --------- -------
</TABLE>
-26-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
11-MONTHS ONE MONTH
ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, JULY 31,
1996 1995 1994 1993
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(52,054) $ (2,140) $ 2,470 $ 34,450
Adjustments to reconcile net (loss) income
to net cash provided by (used in)
continuing operating activities:
Reorganization items -- -- -- 555
Depreciation and amortization 4,630 4,589 5,955 458
Deferred income tax 1,112 (1,316) 90 --
Loss from discontinued operations 58,922 6,479 796 138
Loss on the sale of fixed assets 76 19 -- --
Fresh-start adjustments -- -- -- (16,046)
Gain on debt forgiveness -- -- -- (26,388)
Cumulative effect of changes in accounting
principle -- -- -- 6,710
Net changes in operating assets and liabilities:
Increase in receivables (1,705) (1,452) (2,323) (540)
Decrease (increase) in inventories 3,779 (6,974) (4,716) (2,214)
(Increase) decrease in other current assets (220) 269 730 --
(Increase) decrease in other noncurrent assets (127) 1,959 -- --
(Decrease) increase in accounts payable and
accrued expenses (824) 2,495 (10,336) (3,590)
Increase (decrease) in other current liabilities 2,144 3,321 (2,871) (3,557)
Decrease in postretirement benefit obligation (530) (1,113) -- --
Increase (decrease) in other noncurrent obligations 496 (3,720) 19,764 --
-------- -------- -------- --------
Net cash provided by (used in)
continuing operating activities 15,699 2,416 9,559 (10,024)
Discontinued operations --Net cash (used in)
provided by discontinued operations (22,144) (19,465) (10,531) 56,865
-------- -------- -------- --------
Net cash (used in) provided by
operating activities (6,445) (17,049) (972) 46,841
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of discontinued operations 29,312 -- -- --
Net proceeds from divestiture -- 21,800 --
Capital expenditures (4,930) (5,314) (2,940) (537)
Proceeds from sale of fixed assets 10 39 -- 29
Investment in joint ventures (136) (370) -- --
Other -- -- -- 1,074
-------- --------
Net cash provided by (used in)
investing activities 24,256 16,155 (2,940) 566
-------- -------- -------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
-27-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
11-MONTHS ONE MONTH
ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, JULY 31,
1996 1995 1994 1993
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under capital
lease obligations $ (193) $ 193 $ -- $ --
Increase (decrease) in short-term debt 210 (30) -- --
Decrease in liabilities subject to compromise -- -- -- (92,503)
Repayments of revolver borrowings (33,162) (8,511) -- (30,009)
Repayment of long-term debt -- -- -- (40,006)
Issuance of senior notes -- -- -- 70,000
Net revolver borrowings (payments) 22,546 10,616 (2,520) 11,036
Proceeds from the exercise of stock options
and warrants 571 -- -- --
-------- -------- --------
Net cash (used in) provided by financing
activities (10,028) 2,268 (2,520) (81,482)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 7,783 1,374 (6,432) (34,075)
Cash and cash equivalents, beginning of period 2,439 1,065 7,497 41,572
-------- -------- -------- --------
Cash and cash equivalents, end of period $ 10,222 $ 2,439 $ 1,065 $ 7,497
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE AND CASH FLOW
INFORMATION: - Cash paid during the year for:
Interest $ 8,050 $ 8,050 $ 7,487 $ 8,853
Taxes $ 1,460 $ 945 $ 749 $ --
======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
-28-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS
Yale International, Inc. (the "Company") is a manufacturer and
distributor of material handling and industrial component products. The Company
has 9 manufacturing facilities located in five countries, producing products
under the brand names of Yale(TM), Duff-Norton(TM), Coffing(TM) and Little
Mule(TM). The Company sells its products to original equipment manufacturers,
distributors and end-users in the United States and abroad.
On April 22, 1996, the Board of Directors announced the change of the
Company's name from Spreckels Industries, Inc. to Yale International, Inc. and
on April 24, 1996, the Company's stock began trading on the Nasdaq National
Market under the symbol "YALE". The Company's stock formerly traded under the
symbol "SPKL". The Board of Directors of the Company will seek stockholders'
ratification for its name change at its next annual meeting. Prior to that time,
the legal name of the Company will continue to be Spreckels Industries, Inc.,
although the Company will operate as Yale International, Inc.
2. DISCONTINUED OPERATIONS
On November 13, 1995 (the "Measurement Date"), the Company announced
its intention to sell the operations of its Spreckels Sugar Company, Inc. and
Limestone Products, Inc., subsidiaries (collectively, the "Sweetener Segment").
The Sweetener Segment produced refined beet sugar and certain sweetener products
and sold its products to retail and industrial end-users. This business segment
has been accounted for as discontinued operations in accordance with Accounting
Principles Board Opinion No. 30, "Reporting the Results of Operations and
Reporting the Effects of Disposal of a Segment of a Business." Accordingly, the
assets and liabilities of the discontinued Sweetener Segment have been
classified in the accompanying consolidated balance sheets as "net assets of
discontinued operations held for sale." In addition, the results of operations
of the Sweetener Segment for the periods ended June 30, 1996, June 30, 1995, the
eleven-month period ended June 30, 1994, and the one-month period ended July 31,
1993, have been segregated in the accompanying consolidated statements of
operations.
The Company recorded a $56.7 million loss on the disposal of the
Sweetener Segment in the second quarter of fiscal 1996, which included $11.8
million for estimated operating and shut-down costs to be incurred between the
Measurement Date and the estimated disposal date.
On April 19, 1996, the Company completed the sale of all of the issued
and outstanding capital stock of Spreckels Sugar Company, Inc. and Limestone
Products Company, Inc. In connection with the sale, the Company retained two
sugar processing facilities located in Spreckels and Manteca, California,
production equipment located at Cool, California, and certain farm properties,
which are being held for sale. In addition, the Company retained the financial
responsibility for all costs associated with the closure and demolition of the
two retained sugar processing facilities, as well as certain employee-related
liabilities, including medical benefits for those employees who had retired as
of December 31, 1995.
-29-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. DISCONTINUED OPERATIONS - CONTINUED
The terms of the sale provided for the payment of approximately $28.0
million in cash plus the assumption of $16 million of debt, and was based upon
the net working capital of the Sweetener Segment at December 31, 1995, plus $3.0
million, subject to certain adjustments which were still under negotiation as of
August 24, 1996.
Sales from discontinued operations were $109.1 million, $175.8 million,
$188.6 million and $16.0 million, for the period from July 1, 1995, to November
13, 1995, the year ended June 30, 1995, the 11-month period ended June 30, 1994,
and the one-month period ended July 31, 1993, respectively.
The components of net assets of discontinued operations held for sale
on the consolidated balance sheets at June 30, 1996 and 1995, are as follows (in
thousands):
1996 1995
Accounts Receivable $ -- $ 11,452
Inventory -- 59,032
Property, plant and equipment, net 14,918 95,565
Other assets 3,500 11,837
-------- ----------
Total assets 18,418 177,886
-------- ----------
Accounts payable and accrued expenses -- 14,325
CCC loans payable -- 35,265
Deferred taxes -- 28,413
Accrued plant shut-down costs 6,255 --
Other liabilities 939 21,501
-------- ----------
Total liabilities 7,194 99,504
-------- ----------
Net assets of discontinued operations
held for sale $ 11,224 $ 78,382
======== ==========
Interest expense charged to discontinued operations amounted to $1.6
million, $2.3 million $2.6 million and $0.0 million, for the years ended June
30, 1996 and 1995, the 11-month period ended June 30 1994, and the one-month
period ended July 31, 1993, respectively. Interest has been charged to
discontinued operations based on indebtedness from borrowings directly related
to the Sweetener Segment, which primarily consisted of Commodity Credit
Corporation (CCC) borrowings.
As a result of the Company's decision to discontinue the operations of
its Sweetener Segment, a pension curtailment gain of $1.0 million was
recognized, resulting in a net periodic pension benefit of $0.7 million credited
to discontinued operations for the year ended June 30, 1996. Net periodic
pension cost charged to discontinued operations amounted to $0.9 million, $1.2
million and $0.1 million for the fiscal year ended June 30, 1995, the 11-month
period ended June 30, 1994, and the one-month period ended July 31, 1993,
respectively.
-30-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. DISCONTINUED OPERATIONS - CONTINUED
Accrued pension cost for discontinued operations at June 30, 1995, was
$2.4 million, and is included in "Net Assets of Discontinued Operations Held for
Sale" in the accompanying consolidated balance sheets.
Accrued postretirement benefit cost for discontinued operations at June
30, 1995, was $5.6 million, and is included in net assets of discontinued
operations held for sale in the accompanying consolidated balance sheet.
Postretirement benefit expense charged to discontinued operations amounted to
$203,000 and $288,000 for the fiscal years ended June 30, 1996 and 1995,
respectively, and $894,000, and $82,000 for the 11-month period ended June 30,
1994, and the one-month period ended July 31, 1993, respectively..
Discontinued operations include management's estimates of the amounts
expected to be realized on the sale of the Sweetener Segment. The amounts the
Company will ultimately realize could differ materially in the near term from
the amounts assumed in arriving at the loss on disposal of the discontinued
operations.
3. REORGANIZATION PROCEEDINGS
In October 1992, the Company filed a voluntary petition for
reorganization under Chapter 11 of Title 11 of the United States Bankruptcy
Code. The Company's subsidiaries did not file similar petitions and were not
debtors in any insolvency proceeding. On August 4, 1993 (the "Confirmation
Date"), the Bankruptcy Court entered an order confirming the Plan of
Reorganization (the "Plan"), which became effective on September 2, 1993 (the
"Effective Date"). The effects of the Plan have been recorded as of July 31,
1993, the fiscal month-end closest to the Confirmation Date.
The Company has implemented the accounting for entities emerging from
Chapter 11 reorganization, including the application of "fresh-start" reporting,
set forth by the American Institute of Certified Public Accountants' Statement
of Position 90-7 ("SOP 90-7"), "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code". The ongoing impact of the adoption of
fresh-start reporting is reflected in the accompanying consolidated financial
statements.
The following occurred under the Plan as of the Effective Date:
- The Company restructured certain senior indebtedness in the aggregate
principal amount of approximately $103.4 million. Such indebtedness was
satisfied by issuance of the Company's 11.5% Senior Secured Notes due 2000 in
the aggregate principal amount of $70.0 million (the "Senior Secured Notes") and
by the establishment of and drawing under a revolving credit facility extended
by the senior secured creditors.
- All of the indebtedness owed to the holders of the Company's 14.25%
Senior Subordinated Notes due 1998 (the "Old Senior Subordinated Notes"),
totaling $55.0 million in principal amount
-31-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. REORGANIZATION PROCEEDINGS - CONTINUED
and all of the indebtedness owed to the holder of two junior subordinated notes
due July 31, 1995 (the "Old Junior Subordinated Notes"), totaling approximately
$16.9 million in principal amount was converted to equity by the issuance of
4,500,000 shares of the Company's Class A Common Stock to the holders of the Old
Senior Subordinated Notes and issuance of 1,020,000 shares of the Company's
Class A Common Stock, plus warrants to purchase up to 900,000 shares of the
Company's Class A Common Stock at a price equal to $9.17 per share to the holder
of the Old Junior Subordinated Notes (see Note 16).
- All of the equity interests (capital stock, warrants and options) in
the Company prior to the effectiveness of the Plan were canceled and 479,900
shares of Class A Common Stock, plus 100 shares of Class B Common Stock, plus
warrants to purchase up to 1,950,000 shares of the Company's Class A Common
Stock at various prices, were issued to the holders of such equity interests
(see Notes 15 and 16). In addition, the Company adopted a new management stock
option plan covering 564,894 shares of the Company's Class A Common Stock (see
Notes 15 and 16).
Under fresh-start reporting, reorganization value of the entity was
allocated to the reorganized Company's assets on the basis of the fair market
values as of July 31, 1993. The portion of reorganization value not attributable
to specific tangible or identifiable intangible assets of the reorganized entity
was reflected as excess reorganization value. Revaluation of assets and
liabilities pursuant to the adoption of fresh-start reporting included (in
thousands):
Eliminate inventory LIFO layers $ (6,576)
Write-up assets to appraised values 43,693
Write-up of other assets 1,368
Adjust liabilities to net fair value (13,070)
Tax impact of fresh-start accounting (9,369)
------------
Total fresh-start adjustments $ 16,046
===========
Under fresh-start reporting, the final consolidated balance sheet as of
July 31, 1993 (Predecessor Company), after adjustment resulting from the
effectiveness of the Plan, became the opening balance sheet on August 1, 1993,
of the reorganized successor company. Since fresh-start reporting was included
in the financial statements for the years ended June 30, 1996 and 1995 and for
the eleven-month period ended June 30, 1994, the consolidated financial
statements as of and for the period subsequent to that date are not comparable
to any such statements as of any prior date or for any prior period.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The financial statements include the consolidated
accounts of the Company. All significant intercompany transactions and accounts
have been eliminated in consolidation.
-32-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
CASH AND CASH EQUIVALENTS--Cash and cash equivalents consist of cash on hand and
in banks and highly liquid investments with original maturities of three months
or less.
REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK--Revenue is recognized as
products are shipped or when risk of loss has passed. The Company performs
ongoing credit evaluations of its customers' financial condition, but generally
does not require collateral to support customer receivables. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other factors.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The book value of cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities and
outstanding borrowings under the Company's revolving line of credit approximates
the fair value due to the short-term nature of these instruments.
Based on borrowing rates currently available to the Company for debt
with similar terms and average maturities, the fair value of the Senior Secured
Notes (see Note 8) was $72.7 million at June 30, 1996, and $73.9 million at June
30, 1995. Fair value was determined by reference to quotations available in
markets where the issue is traded. The Senior Secured Notes are redeemable by
the Company, at prices explained in Note 8, which are less than the quoted
market prices used in determining the fair value.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are depreciated
using the straight-line method over their estimated useful lives, ranging from
15 to 30 years for building and structures and from 7 to 18 years for machinery
and equipment. Expenditures for repairs and maintenance are charged against
income as incurred.
EXCESS REORGANIZATION VALUE--Excess reorganization value represents the
unamortized excess of the Company's value for reorganization purposes over the
fair value of its tangible and identifiable intangible net assets as of the date
of reorganization (see Note 3). The Company amortizes its excess reorganization
value over a 20-year period and expensed $1.7 million and $1.8 million for the
years ended June 30, 1996 and 1995, respectively, and $2.3 million for the
11-month period ended June 30, 1994. Accumulated amortization at June 30, 1996
and 1995, amounted to $5.3 million and $3.6 million, respectively.
RESEARCH AND DEVELOPMENT--Research and development costs are charged to expense
as incurred and amounted to $2.3 million and $1.3 million for the years ended
June 30, 1996 and 1995, respectively, $0.7 million for the eleven-month period
ended June 30, 1994 and $0.1 million for the one-month period ended July 31,
1993. These amounts are included in selling, general and administrative expenses
in the accompanying consolidated statements of operations.
-33-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES--Deferred income taxes are determined in accordance with Statement
of Financial Accounting Standards, No. 109 "Accounting for Income Taxes," ("SFAS
109"), whereby deferred tax assets are recognized for deductible temporary
differences and operating loss carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
Deferred tax assets and liabilities on the accompanying consolidated
balance sheets are classified in accordance with SFAS 109, which generally
requires classification be based on the related asset or liability. Deferred
taxes not related to a specific asset or liability are classified based on the
estimated period of reversal.
EARNINGS PER SHARE--Weighted average shares for earnings (loss) per share
purposes include common stock equivalents, as calculated under the modified
treasury stock method (see Note 17).
FOREIGN CURRENCY TRANSLATION--Assets and liabilities of subsidiaries outside the
United States are translated into U.S. dollars at the exchange rates in effect
at the end of the period. Revenue and expense accounts are translated at a
weighted average of exchange rates which were in effect during the year.
Translation adjustments that arise from translating a foreign subsidiary's
financial statements from local currency to U.S. dollars are accumulated in a
separate component of stockholders' equity. Transaction gains and losses that
arise from exchange rate changes on transactions denominated in a foreign
currency are included in results of operations as incurred.
FOREIGN EXCHANGE CONTRACTS--The Company operates internationally, giving rise to
exposure to market risks from changes in foreign exchange rates. The Company
does not hold or issue financial instruments for speculative trading purposes.
Forward exchange contracts are utilized by the Company to hedge firm
and anticipated purchases denominated in foreign currencies (principally in
Japanese yen). The terms of the foreign exchange contracts do not exceed six
months. The purpose of the Company's foreign currency hedging activity is to
protect the Company from the risk that the future cash outflows resulting from
purchases from foreign suppliers will be adversely affected by changes in
exchange rates. Gains and losses from these transactions are recognized when the
obligation to pay foreign suppliers is incurred.
At June 30, 1996, the Company had forward purchase commitments of 177
million Japanese yen at contract rates ranging between 102 and 104 yen to the
U.S. dollar.
PERVASIVENESS OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make certain estimates and assumptions.
-34-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
These estimates and assumptions affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
NEW ACCOUNTING PRONOUNCEMENT--In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121, ("SFAS 121"),
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." This statement requires that long-lived assets be reported at the
lower of carrying amount or fair value. The Company plans to adopt SFAS 121 in
1997 and believes that the adoption of this new accounting standard will not
have a significant impact on its financial position or results of operations.
DIVIDENDS--The Company has not paid any dividends on its common stock. The
Company is subject to certain restrictions on the payment of dividends under the
terms of its Senior Secured Notes and its revolving credit agreement (see Note
8).
RECLASSIFICATIONS--Certain prior year amounts have been reclassified to conform
to the current year presentation.
5. INVENTORIES
Substantially all inventories are valued at the lower of cost or market
using the last-in, first-out ("LIFO") method. Inventories consist of the
following at June 30, 1996 and 1995 (in thousands):
1996 1995
----------- --------
Raw materials $ 4,480 $ 4,750
Work in progress 11,955 14,626
Finished goods 23,312 23,380
---------- ----------
39,747 42,756
Less-LIFO reserve 1,001 231
----------- ----------
$ 38,746 $ 42,525
= ========= ===========
-35-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at June 30,
1996 and 1995 (in thousands):
1996 1995
------------- --------
Land $ 835 $ 835
Buildings and structures 4,982 4,144
Machinery and equipment 24,718 20,916
Leasehold improvements 1,563 1,418
------------ -----------
32,098 27,313
Less-Accumulated depreciation 6,618 4,180
------------ ------------
$ 25,480 $ 23,133
= ========== = ==========
7. OTHER CURRENT LIABILITIES
Other current liabilities consists of the following at June 30, 1996
and 1995 (in thousands):
1996 1995
----------- --------
Accrued taxes $ 6,189 $ 5,442
Product liability 3,984 2,816
Workers' compensation liability 1,547 2,326
Other 4,575 3,357
---------- -----------
Total $ 16,295 $ 13,941
=========== = =========
8. DEBT
Long-term debt consists of the following at June 30, 1996 and 1995 (in
thousands):
1996 1995
---------- --------
Senior Secured Notes $ 70,000 $ 70,000
Credit Agreement - Revolving
loan due June 30, 1997,
at prime plus 0.75% --- 10,616
----------- ----------
Total $ 70,000 $ 80,616
=========== ==========
The Senior Secured Notes bear interest at 11.5%, payable semi-annually,
are due September 1, 2000, and are guaranteed by each of the Company's directly
held subsidiaries. Upon the change of control of the Company, each holder of
Senior Secured Notes may require the Company to repurchase such holder's notes
at 101% or, if on or after September 1, 1998, 100% of the principal amount
thereof, plus accrued interest to the date of repurchase.
-36-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. DEBT - CONTINUED
On July 22, 1994, the Company entered into a secured revolving credit
agreement (the "Credit Agreement") with Harris Trust and Savings Bank. The
Credit Agreement, as amended, provides for maximum borrowings of $25.0 million,
including a $6.0 million sublimit for letters of credit, through June 30, 1997.
The Credit Agreement is secured by accounts receivable, inventories and bank
deposits of Duff-Norton Company, Inc., the Company's principal operating
subsidiary. Interest rates under the Credit Agreement are at prime plus 0.75%
for domestic loans and LIBOR plus 2.25% for Eurodollar loans. The prime rate
under the Credit Agreement was 8.25% and 9.0% at June 30, 1996 and 1995,
respectively.
The terms and conditions of the Credit Agreement and the Senior Secured
Notes impose restrictions that affect, among other things, the ability of the
Company to (i) incur additional indebtedness (including indebtedness incurred by
means of guarantees); (ii) create liens on assets, (iii) sell assets; (iv)
engage in mergers or consolidations; (v) make investments and capital
expenditures; (vi) pay dividends; and (vii) engage in certain transactions with
affiliates and subsidiaries. The Company is also required to comply with certain
specified financial ratios and tests, including the maintenance of certain
interest coverage ratios and minimum net worth levels.
As of June 30, 1996, as a result of the sale of Spreckels Sugar
Company, Inc., the Company was in violation of certain covenants related to the
Credit Agreement; however, the Company received a waiver subsequent to year end.
There were no outstanding borrowings under the Credit Agreement as of June 30,
1996.
As of June 30, 1996 and 1995, the Company had letters of credit
outstanding of $2.5 million and $1.7 million, respectively.
9. DIVESTITURES
On November 4, 1994, the Company sold all of the stock of its wholly
owned subsidiary, Carbidie Corporation ("Carbidie"). Carbidie manufactured
custom-made tungsten carbide preforms, which are used for their strength and
durability in the tool and die industry. Carbidie was sold for $22.5 million and
net proceeds amounted to $21.8 million. The sale of Carbidie resulted in no gain
or loss.
On June 30, 1994, the Company sold all of the stock of its wholly owned
subsidiary, National Carbide Die ("NCD"). NCD manufactured precision quality
tools, dies and component parts, primarily from die steel and carbide tungsten.
NCD was sold for $2.1 million, its book value. Accordingly, no gain or loss was
recorded on the transaction. The Company received a cash payment of $1.8 million
in July 1994 plus a promissory note maturing in 2001 for the remainder of the
purchase price.
-37-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. LEASE COMMITMENTS
The Company leases office space, production facilities, warehouses,
transportation and other equipment under operating leases extending for varying
periods of time. Rental expense amounted to $2.9 million and $2.7 million for
the years ended June 30, 1996 and 1995, respectively, $2.1 million for the
eleven-month period ended June 30, 1994, and $0.2 million for the one-month
period ended July 31, 1993.
At June 30, 1996, remaining lease commitments are as follows (in
thousands):
OPERATING CAPITAL
1997 $ 2,592 $ 52
1998 1,951 52
1999 1,501 52
2000 1,362 52
2001 1,311 52
Thereafter 12,753 381
---------- --------
Total minimum lease payments $ 21,470 641
==========
Less-interest portion 295
--------
Present value of net minimum
capital lease payments $ 346
=========
11. INCOME TAXES
The Company adopted SFAS No. 109 on July 1, 1993. The cumulative effect
on prior years of this change in accounting principle increased net income by
$1.9 million, or $0.38 per share, and is included in cumulative effect of
changes in accounting principles in the Consolidated Statements of Operations
for the period ended July 31, 1993.
Domestic and foreign components of income from continuing operations,
before income taxes, are summarized as follows (in thousands):
PREDECESSOR
SUCCESSOR COMPANY COMPANY
11-MONTH ONE-MONTH
PERIOD PERIOD
ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, JULY 31,
1996 1995 1994 1993
Income (loss) before income taxes:
Domestic $ 6,153 $ 3,221 $ 3,867 $ (1,350)
Foreign 4,964 4,016 3,009 214
--------- --------- ---------- ---------
Total $ 11,117 $ 7,237 $ 6,876 $ (1,136)
========= ========= ========== =========
-38-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES - CONTINUED
The provision for income taxes applicable to continuing operations are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
11-MONTH ONE-MONTH
PERIOD PERIOD
ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, JULY 31,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Income before income taxes:
Current:
Federal $ 555 $ 2,087 $ 2,248 $ (70)
State 615 314 338 (35)
Foreign 1,967 1,813 934 105
---------- --------- ---------- ----------
Total current 3,137 4,214 3,520 ---
Deferred provision (benefit) 1,112 (1,316) 90 ---
----------- -------- ---------- ----------
Total tax provision $ 4,249 $ 2,898 $ 3,610 $ ---
=========== ========= ========== ===========
</TABLE>
The reconciliation between the statutory federal tax expense and
recorded tax expense is as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
11-MONTH ONE-MONTH
PERIOD PERIOD
ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, JULY 31,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Statutory federal income tax expense $ 3,891 $ 2,533 $ 2,407 $ (386)
State income taxes, net of federal benefit 400 204 220 56
Excess reorganization value amortization 601 631 815 ---
Tax on foreign income distributed 512 577 246 ---
Foreign income taxed at different rates 230 407 (119) 32
Operating loss carryforward utilized (1,484) --- --- ---
Reduction of taxes provided in prior years --- (1,505) --- ---
Reorganization items --- --- --- 420
Other items 99 51 41 (122)
---------- --------- --------- --------
Total tax expense $ 4,249 $ 2,898 $ 3,610 $ ---
======== ======= ========= ============
</TABLE>
-39-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES - CONTINUED
The Company had previously provided for taxes related to a dispute with
taxing authorities which was favorably resolved in 1995.
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities included in the accompanying consolidated balance sheets
at June 30, 1996 and 1995, are as follows (in thousands):
1996 1995
----------- --------
Deferred tax assets
Postretirement health benefit accrual $ 5,957 $ 6,159
Insurance reserves 3,245 3,303
Real property lease valuation reserves 1,836 2,099
Vacation accrual 619 579
Other 1,326 1,603
---------- ---------
Total deferred tax assets 12,983 13,743
--------- ---------
Deferred tax liabilities
Inventory 3,242 3,052
Property, plant and equipment 4,579 4,634
Other 2,468 2,251
---------- --------
Total deferred tax liabilities 10,289 9,937
--------- --------
Net deferred tax asset $ 2,694 $ 3,806
========== ========
At June 30, 1996, the Company had net operating loss carryforwards of
$1.2 million which expire between 2008 and 2010, and alternative minimum tax
credits of $1.5 million which do not expire.
12. RETIREMENT PLANS
The Company has a number of noncontributory defined benefit pension
plans. These plans provide pension benefits based on years of service, with some
plans providing benefits based on compensation at the date benefits are earned
and others based on compensation for a period immediately prior to retirement.
Plan assets include U.S. government securities, federal agency obligations,
corporate debt instruments, common stock, other fixed income securities and cash
equivalents. The Company's funding policy is to contribute annually the minimum
amount required by the Employee Retirement Income Security Act.
Net periodic pension cost components charged to continuing operations
and related assumptions are as follows (in thousands):
-40-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. RETIREMENT PLANS - CONTINUED
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
11-MONTH ONE-MONTH
PERIOD PERIOD
ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, JULY 31,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Service cost - Benefits earned during
the period $ 1,606 $ 1,559 $ 1,532 $ 125
Interest cost on projected benefit
obligation 3,105 3,056 2,762 255
Actual return on assets (5,153) (4,919) (2,819) (256)
Curtailment --- (1,129) --- ---
Settlement (263) 300 --- ---
Net amortization and deferral 2,050 2,007 --- ---
-------- ------- ---------- --------
$ 1,345 $ 874 $ 1,475 $ 124
======== ======== ======= ========
Discount rates 8% 8% 8% 8%
Rates of increase in compensation levels 4-5% 4-5% 4-5% 4-5%
Expected long-term rates of return on
assets 9% 9% 9% 9%
</TABLE>
The following table sets forth the plans' funded status and amounts
recorded in the accompanying consolidated balance sheets at June 30, 1996 and
1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------ -----------------------
PLAN ASSETS PROJECTED PLAN ASSETS PROJECTED
EXCEEDS BENEFITS EXCEED BENEFITS
PROJECTED EXCEED PLAN PROJECTED EXCEED PLAN
BENEFITS ASSETS BENEFITS ASSETS
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations
Vested benefit obligation $ (6,290) $ (26,757) $ (10,092) $ (22,250)
========= ========= ========== ==========
Accumulated benefit
obligation $ (6,826) $(28,320) $ (10,763) $ (23,357)
========= ========= ========== ==========
Projected benefit
obligation $ (6,826) $(35,473) $ (11,588) $ (29,566)
Plan assets at fair value 9,468 29,252 13,620 23,253
--------- ---------- ----------- -----------
Plan assets in excess of (less
than) projected benefit
obligation 2,642 (6,221) 2,032 (6,313)
</TABLE>
-41-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. RETIREMENT PLANS - CONTINUED
<TABLE>
<CAPTION>
1996 1995
----------------------- ----------------------
PLAN ASSETS PROJECTED PLAN ASSETS PROJECTED
EXCEEDS BENEFITS EXCEED BENEFITS
PROJECTED EXCEED PLAN PROJECTED EXCEED PLAN
BENEFITS ASSETS BENEFITS ASSETS
<S> <C> <C> <C> <C>
Unrecognized net gain (609) (1,187) (203) (220)
Prior service cost --- 669 --- 78
Accumulated benefit
obligation in excess of
plan assets --- (244) --- (154)
----------- ----------- ----------- -----------
Prepaid (accrued) pension
cost $ 2,033 $ (6,983) $ 1,829 $(6,609)
========== ========== ========== ============
</TABLE>
As of June 30, 1996 and 1995, the benefit plans' accumulated benefit
obligation exceeded plan assets by $244,000 and $154,000, respectively. As
required by SFAS No. 87, "Employers' Accounting for Pensions," the Company has
adjusted its pension liability by this amount and reflected the corresponding
offset as a reduction of stockholders' equity.
13. POSTRETIREMENT BENEFIT OBLIGATION
The Company sponsors defined benefit postretirement health care plans
that provide medical and life insurance coverage to retirees and their
dependents. The Company pays the majority of the medical costs for retirees and
their spouses who are under age 65. For retirees and dependents of retirees who
retired prior to January 1, 1989, and are age 65 and over, the Company
contributes 100% toward the American Association of Retired Persons ("AARP")
premium frozen at the 1992 level. For retirees and dependents of retirees who
retired after January 1, 1989, the Company contributes $35 per month toward the
AARP premium. The life insurance plan is noncontributory.
On July 1, 1993, the Company adopted SFAS NO. 106. SFAS 106 requires
the Company to recognize the cost of providing health care and other benefits to
retirees over the term of employee service, which was a change from the
Company's previous method of recognizing these costs when paid. The adoption of
this pronouncement resulted in a charge to net income of $8.6 million, which is
included in the amount shown as cumulative effect of changes in accounting
principles, net of tax, in the Consolidated Statement of Operations for the
period ended July 31, 1993.
The following table sets forth the plans' combined accumulated
postretirement health benefit obligation shown on the accompanying consolidated
balance sheets at June 30, 1996 and 1995 (in thousands):
-42-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. POSTRETIREMENT BENEFIT OBLIGATIONS - CONTINUED
1996 1995
---------- --------
Actives not fully eligible $ 4,341 $ 3,598
Actives fully eligible 2,083 2,289
Retirees and dependents 10,552 10,688
--------- ---------
Accumulated postretirement
benefit obligation 16,976 16,575
Less - Unrecognized net loss (1,403) (472)
---------- ---------
Accrued postretirement benefit cost $ 15,573 $ 16,103
========= =========
The Company's postretirement health benefit plans are not funded. Net
periodic postretirement benefit cost includes the following components (in
thousands):
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
11-MONTH ONE-MONTH
PERIOD PERIOD
ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, JULY 31,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Service cost - Benefits attributed to
service during the period $ 374 $ 360 $ 442 $ 40
Interest cost on accumulated post-
retirement obligation 1,229 1,305 1,375 125
------- ------ ----- ---------
Postretirement benefit expense $ 1,603 $ 1,665 $ 1,817 $ 165
======= ====== ====== =========
</TABLE>
For measurement purposes, an 8% and 12% annual rate of increase in the
per capita cost of postretirement medical benefits was assumed in 1996 and 1995,
respectively, for retirees who are younger than age 65; the rate was assumed to
decrease gradually to 5.5% and 6.5% by 2000 for 1996 and 1995, respectively, and
remain at that level thereafter. The discount rate used in determining the
accumulated postretirement benefit obligation was 8.0% for 1996 and 1995.
14. EMPLOYEE BENEFIT AND INCENTIVE PLANS
The Company sponsors two 401(k) defined contribution plans in which
U.S. employees are eligible to participate. The Company's contributions under
the plans are funded with a trustee and are determined based upon the amount of
employee contributions and are contingent on each of the Company's business
segments achieving certain profitability and cash flow targets. The total amount
-43-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. EMPLOYEE BENEFIT AND INCENTIVE PLANS - CONTINUED
contributed by the Company for the years ended June 30, 1996 and 1995, the
11-month period ended June 30, 1994 amounted to $0.7 million, $0.7 million, $1.3
million, respectively. The Company did not make any contributions during the
one-month ended July 31, 1993.
At June 30, 1996, the Company's 401(k) plans and its Employee Stock
Ownership Plan ("ESOP") held 421,742 shares of the Company's Class A Common
Stock.
15. CAPITAL STOCK
STOCKHOLDER RIGHTS AGREEMENT--On November 11, 1995, the Board of Directors
adopted a Stockholder Rights Agreement under which a dividend distribution was
declared of one-half right for each outstanding share of the Company's Class A
Common Stock. Except as set forth below, each right entitles the holder to
purchase from the Company one share of Common Stock at a price of $45 per share,
subject to adjustment.
The rights are not currently exercisable, but would become exercisable
if certain events occurred related to a person or group ("Acquiring Person")
acquiring or attempting to acquire 15% or more of the Company's common stock.
Once a person or group has acquired 15% or more of such stock, except for
certain permitted offers, each holder of a right (other than the Acquiring
Person) would be entitled to purchase one share of Class A Common Stock at $1.00
per share.
The Board of Directors, at its option, may at any time after a person
becomes an Acquiring Person (but not after the acquisition by such person of 50%
or more of the outstanding common stock) exchange all or part of the then
outstanding and exercisable rights for shares of common stock at an exchange
ratio of one share of common stock for each right.
The Company may redeem the rights in whole, but not in part, at a price
of $0.001 per right at any time prior to the earlier of (i) a person or group
becoming an Acquiring Person or (ii) the expiration of the rights (which will
occur no later than November 23, 2005).
STOCKHOLDERS OF RECORD--As of August 24, 1996, there were 301 stockholders of
record of the Company's Class A Common Stock.
CLASS B COMMON STOCK--All of the Company's Class B Common Stock was converted to
Class A Common Stock in fiscal 1996 upon sale of the shares by the original
holder.
-44-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. STOCK OPTIONS AND WARRANTS - CONTINUED
OPTIONS--The Company has a New Management Stock Option Plan ("the Option Plan")
covering a maximum of 564,894 shares of the Company's Class A Common Stock for
issuance to key employees and directors of the Company. Options granted under
the Option Plan vest over periods of three to four years and are exercisable at
prices and other terms as determined by the Board of Directors.
Under the option agreements, all options granted become exercisable as
of the date of a change in control, as defined.
The Company's New Management Stock Option Plan (the "Management Plan")
provided for the issuance of nonqualified stock options to key employees and
directors of the Company. Under the terms of the Management Plan, options to
purchase up to 376,596 shares of Class A Common Stock were issued at an exercise
price of $.01 per share and were exercisable in increments of one-third on June
30, 1994, 1995 and 1996, provided that the Company's EBITDA (earnings before
interest, taxes, depreciation and amortization) exceeded certain targets. In any
year where EBITDA targets were not met, the right to exercise such options was
forfeited and the forfeited shares were then made available for future stock
option grants under the Option Plan. The Company did not meet the EBITDA target
in 1996, 1995 or 1994 and, as a result, all option shares granted under the
Management Plan have been forfeited as of June 30, 1996.
Stock option activity under the Option Plan at share prices ranging
from $8.125 to $15.25 for the year ended June 30, 1996, and at share prices
ranging from $8.25 to $8.88 for the year ended June 30, 1995, was as follows:
1996 1995
-------- ---------
Authorized
Beginning balance 66,208 340,163
Canceled 36,533 53,663
Forfeited from Management Plan 125,532 125,532
Granted (179,065) (453,150)
--------- ---------
Shares available for grant 49,208 66,208
========= =========
1996 1995
-------- --------
Outstanding
Beginning balance 399,487 ---
Granted 179,065 453,150
Canceled/Forfeited (36,533) (53,663)
Exercised (26,333) ---
--------- ----------
Ending balance 515,686 399,487
======== ========
-45-
<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. STOCK OPTIONS AND WARRANTS - CONTINUED
The Company also has a Directors' Stock Option Plan (the "Directors'
Plan") dated September 2, 1993, which covers nonemployee directors of the
Company. Certain directors of the Company were granted stock options under the
Directors' Plan except the director formerly designated by the holder of the
Company's Class B Common Stock which was converted to Class A in 1996 and those
directors appointed subsequent to November 1, 1995. Under the terms of the
Directors' Plan, options to purchase up to 50,000 shares of Class A Common Stock
have been issued at exercise prices of $10.00 and $11.67. The options have
varying vesting dates over a three-year period following their date of grant. As
of June 30, 1996, none of the options issued under the Directors' Plan have been
exercised.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 defines a fair
value based method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
all employee stock compensation plans. However, SFAS No. 123 also allows an
entity to continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with the
accounting as prescribed by APB Opinion No. 25 must make pro forma disclosures
of net income and, if presented, earnings per share, as if the fair value based
method of accounting defined in SFAS No. 123 had been applied.
The Company plans to continue accounting for employee stock options
under the provisions of APB Opinion No. 25. Appropriate pro forma information
will be disclosed in future periods in accordance with SFAS No. 123.
WARRANTS--As of June 30, 1996 and 1995, warrants to purchase 2,520,895 shares
and 2,550,000 shares, respectively, of the Company's stock had been issued with
exercise prices ranging from $9.17 to $15.00 per share. These warrants are
noncontingent and do not expire. Warrants to purchase an additional 300,000
shares of the Company's stock had also been issued at June 30, 1996 and 1995,
with an exercise price of $1.00 per share. The exercisability of these warrants
is contingent on the market price of the Company's stock reaching or exceeding
$17.50 per share for 20 consecutive trading days. As of June 30, 1996 and 1995,
the contingency had not been met. Subsequent to June 30, 1996, however, the
contingency was satisfied and the warrants became fully exercisable.
17. EARNINGS PER SHARE
Primary and fully diluted earnings per share are based on the weighted
average number of shares outstanding during each period and the assumed exercise
of stock options and warrants, as calculated under the modified treasury stock
method. Under the modified treasury stock method, cash proceeds from the assumed
exercise of outstanding stock options and warrants are used to repurchase the
Company's stock, subject to a 20% limitation. Cash proceeds remaining after the
20%
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<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. EARNINGS PER SHARE - CONTINUED
limit has been reached are used to reduce indebtedness of the Company.
Accordingly, net income (loss) is adjusted for the resulting reduction of
interest expense to compute net income (loss) applicable to common stock.
All stock options and warrants have been excluded from the calculation
of earnings (loss) per share for the year ended June 30, 1995, and the 11-month
period ended June 30, 1994, because their inclusion, in the aggregate, is
antidilutive.
18. COMMITMENTS AND CONTINGENCIES
The Company has certain contingent liabilities with respect to material
existing or potential claims, lawsuits and other proceedings, including those
involving environmental, product liability and other matters, certain of which
are discussed more specifically below. The Company accrues liabilities when it
is probable that future costs will be incurred and such costs can be reasonably
estimated. Such accruals are based on developments to date, the Company's
estimates of the outcomes of these matters and its experience in contesting,
litigating and settling other matters. As the scope of the liabilities becomes
better defined, there will be changes in the estimates of future costs, which
could have a material effect on the Company's future results of operations and
financial condition or liquidity. In the opinion of management, the results of
any pending legal proceedings or claims will not have a material adverse effect
on the Company's financial position or results of its operations.
ENVIRONMENTAL--The Company discovered in 1987 that groundwater and sediments
beneath the Jackson, Michigan, plant of the Company's subsidiary, Mechanical
Products, Inc., contain certain organic chemical compounds in concentrations
above those permitted by applicable law. The Company conducted an extensive
investigation of the site and has entered into an Administrative Order by
Consent with the State of Michigan Department of Natural Resources which
provides for further investigation, the development of a remedial plan and
subsequent remedial action. In 1991, the Company began removal of such compounds
from the groundwater and affected sediments. These efforts will continue during
fiscal 1997 and possibly beyond. Although no assurances can be given, management
believes that the remaining cost to the Company of remedial efforts at the
Jackson plant will not have a material adverse effect on the Company's business,
financial condition or results of operations.
PRODUCT LIABILITY--The Company is periodically subject to personal injury and
property damage claims arising out of incidents involving the use of its
products. The Company is self-insured for product liability claims up to a
maximum of $500,000 per occurrence and maintains product liability insurance
with a $100 million cap per occurrence. The Company has been advised that a
customer has alleged that one of the Company's products was the cause of a fire
which occurred in January 1995 at a manufacturing facility, resulting in losses
in excess of the Company's policy limits. No litigation or other formal
proceedings against the Company have commenced and, at the present time,
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<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. COMMITMENTS AND CONTINGENCIES - CONTINUED
it is unclear what role, if any, the Company's product played in the fire.
However, it is the opinion of management that there was no manufacturing defect
and that any claim, if filed and eventually supported, would in all likelihood
be settled within the Company's policy limits.
EMPLOYMENT AGREEMENTS--The Company has employment agreements with certain
executive officers which provide that in the event of their termination or
resignation following a change in control, as defined, the Company may be
required to make certain salary payments and provide medical benefits for a
period ranging from one to two years. The employee agreements also provide for
the employee to become fully vested in all awards granted under all incentive
compensation, deferred compensation and stock option plans maintained by the
Company.
19. GEOGRAPHIC SEGMENT DATA
Information about the Company's operations in different geographic
areas is as follows (in thousands):
<TABLE>
<CAPTION>
(A)
OPERATING
INCOME
FROM DEPRECIATION
NET CONTINUING AND
SALES OPERATIONS ASSETS AMORTIZATION
<S> <C> <C> <C> <C>
SUCCESSOR COMPANY:
For the year ended June 30, 1996:
United States $155,857 $ 14,117 $145,107 $ 4,436
Europe 31,110 5,011 15,432 194
-------- -------- -------- --------
$186,967 $ 19,128 $160,539 $ 4,630
======== ======== ======== ========
For the year ended June 30, 1995:
United States $153,676 $ 11,293 $207,912 $ 4,388
Europe 26,904 4,090 14,491 201
-------- -------- -------- --------
$180,580 $ 15,383 $222,403 $ 4,589
======== ======== ======== ========
For the 11-month ended June 30, 1994:
United States $141,949 $ 11,148 $240,925 $ 5,839
Europe 19,055 3,107 8,649 116
-------- -------- -------- --------
$161,004 $ 14,255 $249,574 $ 5,955
======== ======== ======== ========
</TABLE>
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<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. GEOGRAPHIC SEGMENT DATA - CONTINUED
(A)
OPERATING
INCOME
FROM DEPRECIATION
NET CONTINUING AND
SALES OPERATIONS ASSETS AMORTIZATION
PREDECESSOR COMPANY
For the one-month ended July 31, 1993:
United States $ 11,935 $ 1,016 $212,935 $ 445
Europe 1,531 229 10,403 13
-------- -------- ------- --------
$ 13,466 $ 1,245 $223,338 $ 458
======== ======== ======== ========
(a) Operating income (loss) is determined by deducting all operating
expenses, including amortization of excess reorganization value and other costs,
from revenues. Operating expenses do not include interest expense.
Intersegment sales between geographic areas are not significant. For
the years ended June 30, 1996 and 1995, the eleven-month period ended June 30,
1994 and the one-month period ended July 31, 1993, export sales from the United
States to foreign countries were $8.2 million, $9.5 million, $10.8 million and
$0.6 million, respectively.
20. SUPPLEMENTARY INCOME STATEMENT INFORMATION
The Company recorded a $1.1 million charge to continuing operations in
1995 for certain costs associated with the reorganization of the corporate
office. The Company also recorded a $1.0 million charge to its discontinued
operations in 1995 for certain costs associated with a reduction in force at
Spreckels Sugar Company, Inc.
21. SUBSEQUENT EVENT - AGREEMENT OF MERGER
On August 24, 1996, the Company entered into an Agreement and Plan of
Merger (the "Agreement") whereby the Company will be merged with and into
Columbus McKinnon Corporation ("Columbus McKinnon"), a U.S.-based industrial
manufacturer. Under the terms of the Agreement, Columbus McKinnon will commence
a tender offer to purchase all of the outstanding shares of the Company at a
price of $24 per share and all of the outstanding warrants of the Company at a
price equal to the difference between $24 and the exercise price of the
warrants. As part of this Agreement, all outstanding stock options will be
canceled and each holder of such options will be entitled to receive cash
consideration from the Company equal to the excess of the $24 purchase price
over the exercise price of the respective options. The execution of the merger
is not intended to trigger any of the stockholder rights as described in Note 15
to become exercisable, but may require the Company to repurchase its Senior
Secured Notes. Consummation of the merger is subject to,
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<PAGE>
SPRECKELS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. SUBSEQUENT EVENT - AGREEMENT OF MERGER - CONTINUED
among other things, shareholder and regulatory approval. Under certain
conditions, if the Agreement is terminated by the Company or otherwise not
consummated, the Company may be required to pay Columbus McKinnon a fee of $10
million plus expenses.
22. GUARANTOR SUBSIDIARIES
The Company's obligations under the 11-1/2% Senior Secured Notes are
guaranteed by each of the Company's directly held subsidiaries (the
"Guarantees"). Each Guarantee is a senior unsecured obligation of the subsidiary
providing such Guarantee and ranks pari passu with all other senior unsecured
indebtedness of such subsidiary. Duff-Norton, the Company's principal
subsidiary, is directly obligated for money borrowed under the Credit Agreement.
The total funding extended to the Company cannot at any time exceed the maximum
amount of the Credit Agreement, which is $25.0 million. In addition, the Company
and the Company's domestic subsidiaries have guaranteed the indebtedness
outstanding under the Credit Agreement ("with respect to such subsidiaries, the
"Subsidiary Bank Guarantees"). The obligations of Duff-Norton under the Credit
Agreement and the Subsidiary Bank Guarantees are secured in general, by the
cash, cash equivalents, accounts receivable and inventory of Duff-Norton and
other domestic subsidiaries of the Company and therefore effectively rank senior
to the Guarantees.
23. QUARTERLY RESULTS OF OPERATIONS
(Unaudited and in thousands except per share amounts):
FIRST SECOND THIRD FOURTH
FISCAL 1996 QUARTER QUARTER QUARTER QUARTER
- ----------- ------- ------- ------- -------
Revenues (a) $ 45,259 $ 44,493 $ 49,209 $ 48,006
Net income (loss) 102 (56,652) (b) 1,770 2,726
Earnings per share $ 0.02 $ (9.45) $ 0.26 $ 0.38
Stock price $ 9.75 $ 13.69 $ 14.78 $ 15.75
FISCAL 1995
Revenues (a) $ 40,203 $ 40,445 $ 46,648 $ 46,040
Carbidie 5,312 1,932 --- ---
---------- ---------- ----------- ----------
Total $ 45,515 $ 42,377 $ 46,648 $ 46,040
= ========= = ========= = ======== = ========
Net income (loss) 118 488 619 (3,365)
Earnings per share $ 0.02 $ 0.08 $ 0.13 $ (0.55)
Stock price $ 8.375 $ 8.375 $ 9.375 $ 8.125
(a) Includes only revenues from continuing operations.
(b) Includes loss from disposal of discontinued sugar operations.
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<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are:
Name Age Position
Bart A. Brown, Jr. 64 Chairman of the Board of
Directors
Gary L. Tessitore 51 Chief Executive Officer,
President and Director
Donald C. Roof 44 Senior Vice President and Chief
Financial Officer
Michael L. Sarina 46 Corporate Controller, Chief Accounting
Officer and Secretary
Joshua S. Friedman 40 Director
Stewart M. Kasen 57 Director
F. Kenneth Iverson 70 Director
William J. Nightingale 67 Director
George A. Poole, Jr. 65 Director
S. Donley Ritchey 63 Director
Steven Van Dyke 37 Director
The term of each of the directors listed above will expire immediately
prior to the election of directors at the Company's Annual Meeting of
Stockholders.
BART A. BROWN, JR., has served as Chairman of the Board of Directors of
the Company since July 14, 1994, its Chief Executive Officer from July 14, 1994
to May 15, 1995 and as a Director since September, 1993. Since April, 1996 he
has served as a consultant to Investcorp International, Inc. He also served as
Chairman and Chief Executive Officer of Color Tile, Inc. from August, 1995 to
March, 1996. From June, 1990 to August 1995, he was Chairman of Circle K
Corporation, which
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<PAGE>
owns and operates convenience stores, and served as its Chief Executive Officer
from June, 1991 through July, 1993. Prior to joining Circle K, he was an
attorney practicing in the Cincinnati, Ohio area for over 30 years. Mr. Brown
serves on the Board of Directors of Barry's Jewelers, Inc. and Firstcity
Financial Corporation. He received his B.S. in Accounting and Bachelor of Law
degrees from the University of Louisville along with a Masters of Law from
Georgetown University. Mr. Brown is admitted to practice law in both Kentucky
and Ohio.
GARY L. TESSITORE became the President, Chief Executive Officer and a
Director of the Company on May 15, 1995. Prior to joining the Company, Mr.
Tessitore was the President and Chief Operating Officer of Breed Technologies,
Inc., a manufacturer of automotive safety equipment, from 1993 to 1995, an
Executive Vice President and General Manager of the agricultural equipment and
components group of J. I. Case Company from 1990 to 1993, and its Senior Vice
President and Chief Financial Officer from 1988 to 1990. From 1968 to 1988, he
held various positions with Ford Motor Company, including Vice President and
Controller of its Ford New Holland Division. Mr. Tessitore received his B.S.
degree from Villanova University in 1966 and his M.B.A. degree from the
University of Maryland in 1968.
DONALD C. ROOF became Chief Financial Officer of the Company in 1990
and its Senior Vice President in 1994. Mr. Roof joined Mechanical Products, Inc.
in March, 1985 as Controller and became Corporate Controller of the Company in
June, 1987. He is a certified public accountant in Michigan and has a B.A.
degree in Accounting from Eastern Michigan University.
MICHAEL L. SARINA joined the Company in June, 1994 and became its Chief
Accounting Officer on August 29, 1994 and Secretary on September 11, 1995. Mr.
Sarina is a certified public accountant in California and has a B.S. degree in
accounting from Golden Gate University. Prior to joining the Company, Mr. Sarina
has held positions as Controller and Chief Division Financial Officer for
various corporations, including Verbatim Corporation (floppy disk manufacturer)
from 1982 to 1985, California Microwave, Inc. (telecommunications equipment
manufacturer) from 1985 to 1987 and 1990 to 1993, and Sequel Corporation (rigid
disk drive manufacturer) from 1988 to 1990.
JOSHUA S. FRIEDMAN became a director of the Company on November 2,
1995. He is founding director and officer of Canyon Partners Incorporated
("CPI"), a California corporation, positions he has held since 1990, and holds
similar positions or limited partnership interests in its subsidiaries and
affiliates. Mr. Friedman is in charge of CPI's merchant banking and direct
investment activities. Prior to the formation of CPI, Mr. Friedman was an
Executive Vice President and Co-Director of the Capital Markets Services Group
of Drexel Burnham Lambert. Prior to 1984, he worked in the Mergers &
Acquisitions Department of Goldman, Sachs & Company in New York. Mr. Friedman is
a graduate of Harvard College (B.A.), Oxford University (M.A.), Harvard Law
School (J.D.) and Harvard Business School (M.B.A.). Mr. Friedman currently holds
no position as an officer of the Company. In 1995, Mr. Friedman was elected to
the board of directors of Showbiz Pizza Time, Inc.
STEWART M. KASEN became a director of the Company in September, 1993.
He served as President and Chief Executive Officer of Best Products, Inc.
(discount retail stores) until earlier this year. Mr. Kasen joined Best in
October, 1989 as President and Chief Operating Officer. He previously served as
President of Emporium Capwell (retail stores) and President of Thalhimers
(retail stores). He also serves on the Board of Directors of Markel Corporation.
Mr. Kasen received his B.S. degree from Seton Hall University.
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<PAGE>
F. KENNETH IVERSON became a director of the Company on February 14,
1996. He has served as Chief Executive Officer of Nucor Corporation, a
Charlotte-based steel manufacturer company, since 1965 and as its Chairman since
1984. Mr. Iverson serves on the Board of Directors of Wikoff Color Corporation,
Citizens for a Sound Economy and Tultex Corporation and is a former director of
Wachovia Corporation and Wal-Mart Stores. He received his Bachelor's degree in
Aeronautical Engineering from Cornell University and a Master's Degree from
Purdue University. He also holds honorary doctorates from the University of
Nebraska and Purdue University.
WILLIAM J. NIGHTINGALE became a director of the Company in September
1993. He has been a Senior Advisor of Nightingale & Associates, Inc., a general
management consulting firm, since July 1995, after serving as the firm's
Chairman and President since July 1975. In this previous capacity, he has
provided executive management services for a number of companies. Prior to
founding Nightingale & Associates, he was President and Chief Executive Officer
of the Bali Company, Inc. Mr. Nightingale also serves as a director of
Glasstech, Inc. and Rings End Inc., as well as a trustee of the Narragansett Tax
Free Bond Fund (Rhode Island), Churchill Money Market Fund and Churchill Tax
Free Bond Fund (Kentucky). He received his B.A. degree in Economics from Bowdoin
College and an M.B.A. from Harvard Business School.
GEORGE A. POOLE, JR. became a director of the Company in September
1993, and has been a private investor for more than the past five years. He
currently serves as a director of U.S. Home Corporation, Bucyrus-Erie Company
and Rock Island Foods, Inc. Mr. Poole received his B.A. degree from Yale
University and his J.D. from Stanford University.
S. DONLEY RITCHEY became a director of the Company in September 1993,
and currently serves on the Board of Directors of Pacific Telesis Group,
McClatchy Newspapers, Inc., De La Salle Institute and Hughes Markets, Inc. Since
May 1981, he has been the managing partner of Alpine Partners, an investment
partnership. Mr. Ritchey is the former President, Chief Executive Officer and
Chairman of the Board of Lucky Stores, Inc. where he worked for over 30 years
prior to his retirement. He has previously served as a director of Lucky Stores,
Inc., York International Corp., Levolor Corporation and Crocker National Bank.
Mr. Ritchey also served as Council Member/Mayor of the Town of Danville,
California from December, 1987 until December, 1995. He received both his B.S.
and M.S. degrees from San Diego State University and was a Sloan Ph.D. Fellow at
Stanford University..
STEVEN VAN DYKE became a director of the Company on February 14, 1996. He has
served as President of Tower Investment Group in Tampa, Florida since 1989. He
received his B.A. degree in Finance from the University of Kentucky.
SECTION 16(A) REPORTING--Pursuant to the Securities and Exchange Commission
regulations, the Company is required to identify the names of persons who failed
to file or filed late a report required under Section 16(a) of the Securities
Exchange Act of 1934. Generally, the reporting regulations under Section 16(a)
require directors, executive officers and greater than 10% stockholders to
report changes in ownership of Company securities. To the Company's knowledge,
based solely on review of the copies of such reports furnished to the Company
and written representations that no other reports were required, for the fiscal
year ended June 30, 1996, the Company believes that all of its directors,
officers and greater than 10% beneficial owners complied with all filing
requirements applicable to them.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of annual and long-term
compensation for the fiscal years ended June 30, 1996, 1995 and 1994 awarded to,
earned by or paid to the Chief Executive Officer of the Company during the
fiscal year ended June 30, 1996 and each of the four most highly compensated
executive officers of the Company (other than the Chief Executive Officer) whose
total annual salary and bonus for the fiscal year ended June 30, 1996 were in
excess of $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Securities
Underlying
Salary Bonuses Other Annual Options All Other
Year ($)(1) ($)(2) Compensation($) SARs(# ) Compensation($)(3)
----- ------- ---------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Bart A. Brown, Jr. 1996 48,000 50,000 0 0 0
Chairman of the Board 1995 0 0 327,202(4) 60,000(5) 27,500(5)
1994 0 0 0 10,000 0
Gary L. Tessitore 1996 350,000 358,112 188,862(6) 30,000 3,000
President and Chief 1995 47,115 0 0 60,000 0
Executive Officer 1994 0 0 0 0 0
Donald C. Roof 1996 182,000 167,787 117,336(6) 20,000 3,000
Senior Vice President 1995 164,323 25,000 0 22,000 0
and Chief Financial 1994 156,655 24,000 0 16,500(7) 1,615
Officer
James E. Boyd(8) 1996 175,000 113,257 0 0 310,575(8)
President 1995 166,440 79,342 0 21,500 3,000
Duff-Norton Company 1994 146,630 25,820 0 19,500(7) 3,000
Michael L. Sarina 1996 114,000 71,112 114,755(6) 3,800 3,000
Controller, Chief 1995 110,000 0 0 9,000 0
Accounting Officer 1994 8,462 0 0 0 0
and Secretary
</TABLE>
- ----------
(1) Amounts shown include the dollar value of base salary (cash and
noncash) earned by the executive officers named above, and any salary
deferred under a Company-sponsored 401(k) or other deferred
compensation plan.
(2) Amounts shown include the dollar value of bonuses (cash and noncash)
earned by the executive officers named above, as well as accrued
interest on certain bonuses not yet paid, and any bonus deferred under
a Company-sponsored 401(k) or other deferred compensation plan.
(3) Except as otherwise indicated, the amounts shown consist of
contributions made by the Company to the Company-sponsored 401(k).
(4) Consists of consulting payments of $267,500, office reimbursements in
the amount of $52,500 and payments made by the Company amounting to
$7,202 for an automobile.
(5) Mr. Brown was granted options to purchase 60,000 shares of Class A
Common Stock during fiscal year 1995; options covering 35,000 of such
shares were canceled on June 30, 1995 in exchange for a payment of
$17,500, which amount is included under "All Other Compensation." The
remaining $10,000 of such compensation consists of director's fees.
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<PAGE>
(6) Represents reimbursement of moving expenses.
(7) Of the options granted during the fiscal year ended June 30, 1994,
one-third were forfeited as of each June 30, 1994, June 30, 1995 and
June 30, 1996. See "Option Grants and Exercises" below.
(8) Mr. Boyd resigned from the Company effective June 30, 1996 and received
severance in the amount of $290,750, $115,750 in cash and the balance
in monthly installments of $14,583 per month for twelve months
beginning July 1, 1996 and vacation payments of $16,825. The Company
will provide Mr. Boyd with medical benefits for a period of one year
subsequent to June 30, 1996.
OPTION GRANTS AND EXERCISES--The following tables summarize option grants to
each of the Company's officers named in the Summary Compensation Table during
the last fiscal year.
OPTION GRANTS IN FISCAL YEAR 1996(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION OPTION TERMS (2)
GRANTED(#) FISCAL YEAR (3) PRICE(S/SH) DATE 5% 10%($)
------------ --------------- ----------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gary L. Tessitore 30,000(3) 19.6 15.625 6/30/2006 294,794 747,067
Donald C. Roof 20,000(3) 13.1 15.625 6/30/2006 196,530 498,045
Michael L. Sarina 3,800(3) 2.5 15.625 6/30/2006 37,341 94,629
- ---------
</TABLE>
(1) There were no SAR grants during the fiscal year ended June 30, 1996.
(2) The five percent (5%) and ten percent (10%) assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
the future Class A Common Stock price.
(3) Such options vest in one-third increments on June 30, 1997, 1998 and 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND 1996 FISCAL
YEAR-END OPTION VALUES(1)
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT FISCAL OPTIONS AT FISCAL
YEAR END(#) YEAR END($)(2)
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
BART A. BROWN, JR.. 0 0 25,000/0 196,875/0
GARY L. TESSITORE.. 0 0 30,000/60,000 228,750/232,500
DONALD C. ROOF..... 0 0 9,667/32,333 70,211/94,789
JAMES E. BOYD...... 0 0 9,333/0 67,914/0
MICHAEL L. SARINA.. 1,500 8,813 3,000/8,300 21,750/33,663
(1) THERE WERE NO SAR EXERCISES DURING THE FISCAL YEAR ENDED JUNE 30, 1996.
(2) CALCULATED ON THE BASIS OF THE FAIR MARKET VALUE OF THE UNDERLYING
SECURITIES AT JUNE 30, 1996 ($15.75 PER SHARE) MINUS THE EXERCISE
PRICE.
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<PAGE>
THE COMPANY ADOPTED THE NEW MANAGEMENT STOCK OPTION PLAN (THE "OPTION
PLAN") WHICH AUTHORIZES THE GRANTING OF OPTIONS COVERING UP TO 564,894 SHARES OF
CLASS A COMMON STOCK OF THE COMPANY TO KEY EMPLOYEES AND DIRECTORS. IN AUGUST
1993, OPTIONS TO PURCHASE 376,494 SHARES WERE ISSUED AT AN EXERCISE PRICE OF
$0.01 PER SHARE. SUCH OPTIONS WERE TO VEST IN ONE-THIRD INCREMENTS AT THE CLOSE
OF THE FISCAL YEARS ENDING JUNE 30, 1994, 1995 AND 1996 IF THE COMPANY'S EBITDA
(EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION) FOR THE
RELEVANT YEAR IS AT LEAST EQUAL TO THE TARGETS SET FORTH IN THE OPTION PLAN. THE
COMPANY DID NOT MEET THE RESPECTIVE EBITDA TARGETS, SO OPTIONS REPRESENTING
376,494 SHARES OF CLASS A COMMON STOCK HAVE BEEN FORFEITED.
OPTIONS TO PURCHASE 188,298 SHARES ALONG WITH ANY FORFEITED SHARES MAY
BE GRANTED UNDER THE OPTION PLAN AT EXERCISE PRICES AND UPON SUCH OTHER TERMS AS
DETERMINED BY THE COMPANY'S BOARD OF DIRECTORS. OPTIONS TO PURCHASE 60,000
SHARES OF CLASS A COMMON STOCK AT AN EXERCISE PRICE OF $7.875 WERE GRANTED TO
BART A. BROWN, JR., UPON BECOMING CHAIRMAN AND CHIEF EXECUTIVE OFFICER ON JULY
14, 1994. ALL OF THESE OPTIONS WERE VESTED AT THE TIME OF GRANT. OPTIONS
COVERING 35,000 OF SUCH SHARES WERE CANCELED ON JUNE 30, 1995. ON AUGUST 29,
1994, OPTIONS TO PURCHASE AN ADDITIONAL 200,000 SHARES OF CLASS A COMMON STOCK
AT AN EXERCISE PRICE OF $8.875 PER SHARE WERE GRANTED TO CERTAIN OFFICERS AND
DIRECTORS OF THE COMPANY, INCLUDING MESSRS. ROOF, BOYD, SARINA, KASEN,
NIGHTINGALE, POOLE AND RITCHEY. THESE OPTIONS VEST IN ONE-THIRD INCREMENTS ON
JUNE 30, 1995, 1996 AND 1997. ON JUNE 30, 1995, OPTIONS TO PURCHASE AN
ADDITIONAL 193,150 SHARES OF CLASS A COMMON STOCK AT AN EXERCISE PRICE OF $8.125
PER SHARE WERE GRANTED TO CERTAIN OFFICERS OF THE CORPORATION, INCLUDING MESSRS.
TESSITORE, BOYD, ROOF AND SARINA. THESE OPTIONS VEST IN ONE-THIRD INCREMENTS ON
JUNE 30, 1996, 1997 AND 1998, EXCEPT FOR 60,000 SHARES ISSUED TO MR. TESSITORE
WHICH VEST IN ONE-FOURTH INCREMENTS ON JUNE 30, 1995, 1996, 1997 AND 1998.
ON JUNE 13, 1996, OPTIONS TO PURCHASE 152,815 SHARES OF CLASS A COMMON
STOCK AT AN EXERCISE PRICE OF $15.625 WERE GRANTED TO CERTAIN OFFICERS AND
DIRECTORS OF THE COMPANY, INCLUDING MESSRS. TESSITORE, ROOF, SARINA, IVERSON,
FRIEDMAN AND VAN DYKE. THESE OPTIONS VEST IN ONE-THIRD INCREMENTS ON JUNE 30,
1997, 1998 AND 1999.
OTHER COMPENSATION
PENSION PLANS--The following two tables show estimated pension benefits for
certain employees of the Company. The first table shows the estimated annual
pension payable under the Spreckels Sugar Company, Inc. Salaried Pension Plan
provisions of the Retirement Plan for Salaried Employees of Duff-Norton
Companies (the "Sugar Plan") in conjunction with any benefit that is payable
under the Company's Excess Benefit Plan (the "Excess Plan"). The second table
shows the estimated annual pension payable under the main provisions of the
Retirement Plan for Salaried Employees of the Duff-Norton Companies (the
"Duff-Norton Plan") in conjunction with any benefit payable under the Excess
Plan. The calculations under each table relate to employees at various earnings
classifications retiring on June 30, 1996 at age 65, with representative years
of service, assuming that the employees had elected a single life annuity form
of payment. Prior to June 30, 1979, employees were required to contribute to the
Plan in order to accrue any benefit, and the calculations assume that the
employees made contributions to that plan prior to June 30, 1979 and had begun
participation at the earliest possible date.
While the Sugar Plan and the Duff-Norton Plan are funded, qualified
pension plans, the Excess Plan is an unfunded, nonqualified plan. The Excess
Plan pays those benefits that exceed the limitations of the Internal Revenue
Service Code of 1986 (the "Code") applicable to qualified pension
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<PAGE>
plans such as the Sugar Plan and the Duff-Norton Plan. For example, for the 1996
fiscal year, neither qualified Plan may base a benefit on compensation in excess
of $150,000, and since 1994 the annual compensation that may be taken into
account under the plans has been subject to a $150,000 indexed limit. In
addition, no qualified plan may pay out an annual age 65 benefit in excess of
$120,000 in 1996. Thus, any benefit accrued in excess of these limits would be
payable from the Excess Plan.
PENSION PLAN TABLES
SUGAR PLAN AND EXCESS PLAN
Years of Service
REMUNERATION 15 20 25 30 35
- ------------ -- -- -- -- --
$ 125,00 $ 27,000 $ 36,000 $ 45,000 $ 54,000 $ 62,000
150,00 32,000 43,000 54,000 65,000 76,000
175,000 38,000 51,000 63,000 76,000 89,000
200,000 44,000 58,000 73,000 87,000 102,000
225,000 49,000 66,000 82,000 99,000 115,000
250,000 55,000 73,000 91,000 110,000 128,000
300,000 66,000 88,000 110,000 132,000 154,000
400,000 89,000 118,000 148,000 177,000 207,000
450,000 100,000 133,000 166,000 200,000 233,000
500,000 111,000 148,000 185,000 222,000 259,000
DUFF-NORTON PLAN AND EXCESS PLAN
Years of Service
REMUNERATION 15 20 25 30 35
- ------------ -- -- -- -- --
$ 125,000 $ 27,800 $ 37,000 $ 46,000 $ 55,500 $ 64,800
150,000 33,400 44,500 55,600 66,800 77,900
175,000 39,000 52,000 65,000 78,000 91,000
200,000 48,600 59,500 74,400 88,300 104,000
225,000 50,300 67,000 83,800 100,500 117,300
250,000 55,900 78,500 93,100 111,800 130,400
300,000 67,100 89,500 111,900 134,300 156,600
400,000 89,600 119,500 149,400 179,300 209,100
450,000 100,900 134,500 168,100 201,800 235,400
500,000 112,100 149,500 186,900 224,300 261,600
Pension benefits of executives for the Company are based on the greater
of the determination in (a) or (b) as follows: (a) all years of the executive's
service with the Company are taken into account under the Duff-Norton Plan and
the Duff-Norton Plan's provisions of the Excess Plan, or (b) the Sugar Plan and
the Sugar Plan provisions of the Excess Plan apply to service prior to April 19,
1996, and the Duff-Norton Plan and the Duff-Norton Plan provisions of the Excess
Plan apply to service after April 18, 1996. Under either of the Sugar Plan or
the Duff-Norton Plan, the remuneration on which benefits are based is the
employee's "average annual compensation." In each case, average annual
compensation is the average of the employee's total annual compensation paid
during a three-year computation period in which compensation is the highest out
of the final ten years of employment. Total annual compensation is the amount of
salary and any regular bonus from the Sumary Compensation Table. Pension
benefits under each plan are determined under an integrated
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formula. However, benefits accrued in the aggregate under the qualified plans
and the Excess Plan are not subject to offset by Social Security old-age
payments.
At the close of fiscal year 1996, for purposes of the Sugar Plan,
Messrs. Tessitore, Roof and Sarina were credited with 0, 11.25 and 2.08 of
pensionable service with the Company. For purposes of the Duff-Norton Plan, when
counting all years of service, Messrs. Tessitore, Roof and Sarina would have 1,
11 and 2 years of pensionable service, and when counting service on or after
April 19, 1996, Messrs. Tessitore, Roof and Sarina do not yet have any
pensionable service under the Duff-Norton Plan. At the close of fiscal year
1996, for purposes of the Duff-Norton Plan, Mr. Boyd was credited with 21.6
years of service.
SEVERANCE AGREEMENTS--In connection with his resignation from the Company
effective June 10, 1996 and in accordance with the terms of his Severance
Agreement , Mr. Boyd received a cash payment of $115,750, plus accrued vacation
of $16,825. In addition, Mr. Boyd will receive an additional $175,000 in equal
monthly installments of $14,583 beginning July 1, 1996, and will receive medical
benefits for up to one year following his resignation.
At a meeting of the Board of Directors of the Company (the "Board of
Directors") held on July 17, l996, in order to ensure the continued dedication
and objectivity of certain key executives and managers of the Company, the Board
authorized the Company to enter into amended severance compensation agreements
("Amended Severance Agreements") with certain executives and managers (such
executives and managers, the "Executives"). The Amended Severance Agreements
modified the previously effective severance agreement forms to (i) provide that
an Executive will be entitled to Severance (as defined below) based on the
Annual Target Bonus (as defined below) rather than the Executive's accrued bonus
to the date of Termination (as defined below), (ii) provide that an Executive
will be entitled to Severance in the event of an Executive's termination of
employment by the Company (or its successor) within two years following a Change
in Control (as defined below), rather than one-year for constructive termination
or six months from resignation; and (iii) modify the definitions of
"Termination" and "Change in Control".
Under the new severance structure adopted by the Board, Mr. Tessitore,
Chief Executive Officer of the Company and Mr. Roof, Chief Financial Officer of
the Company, are entitled to an amount equal to (a) two times the Executive's
annual rate of Base Compensation, plus (b) two times the Executive's annual
target bonus as in effect for the year in which termination occurs (or, if
higher, the target bonus for the year in which the Change in Control occurs (the
"Annual Target Bonus").
Mr. Sarina, Controller, Chief Accounting Officer and Secretary of the
Company, is entitled to an amount equal to (a) one and one-half times the
Executive's annual rate of Base Compensation, plus (b) one and one-half times
the Executive's annual target bonus as in effect for the year in which
termination occurs (or, if higher, the target bonus for the year in which the
Change in Control occurs (the "Annual Target Bonus").
The Amended Severance Agreement also provide for the Executive to
become fully vested in all awards granted to such Executive under all incentive
compensation, deferred compensation, stock option, stock appreciation rights,
restricted stock, phantom stock, or similar plans maintained by the Company, any
contrary provisions of such plans notwithstanding.
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<PAGE>
A "Change in Control" for the purposes of the Amended Severance
Agreements is deemed to have occurred if: (i) the six persons who were directors
of the Company on September 1, 1995 (the "Incumbent Directors") cease (for any
reason other than death) to constitute a majority of the Board of Directors. For
this purpose, any director who was not a director on September 1, 1995 shall be
deemed to be an Incumbent Director if such director was elected or appointed to
the Board after July 24, 1996 in substitution of an Incumbent Director by, or on
the recommendation of, or with the approval of, at least a majority of the
directors who then qualified as Incumbent Directors (so long as such director
was not nominated by a person who has threatened to, or has entered into an
agreement to, effect a Change in Control); (ii) any person (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (excluding the Company or any Company benefit plans) is or
becomes the beneficial owner directly or indirectly of securities of the Company
representing more than 30% of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors; (iii) the
stockholders of the Company approve (A) a merger or consolidation of the
Company, with any other corporation or (B) an agreement for the sale of 50% or
more of the assets of the Company; or (iv) any other event determined to be a
Change in Control by a majority of the Board.
Under the Amended Severance Agreements, "Cause" is defined as (i) a
willful failure by the Employee to substantially perform his duties, other than
a failure resulting from the Employee's complete or partial incapacity due to
physical or mental illness or impairment, (ii) a willful act by the Employee
which constitutes gross misconduct or fraud and which is materially injurious to
the Company, or (iii) a conviction of, or a plea of "guilty" or "no contest" to,
a felony, provided that no act or failure to act by the Employee shall be
considered "willful" unless committed without good faith and without a
reasonable belief that the act or omission was in the Company's best interest.
Under the Amended Severance Agreements, "Termination" or "Terminated"
is defined as any of the following: (i) the Employee has been terminated by the
Company for any reason other than Cause; (ii) elimination of the Employee's
position or job; (iii) a significant diminution of the Employee's duties,
responsibilities or authority without the Employee's consent; (iv) a reduction
in the Employee's Base Compensation after the Change in Control; (v) the failure
by the Company to provide substantially similar benefits as in effect on the
date thereof, including, without limitation, equity, incentive, bonus,
retirement, health, life insurance, vacation, change in control protection and
other fringe benefit arrangements; (vi) any breach of the Amended Severance
Agreement by the Company; or (vii) a requirement that the Employee relocate his
principal place of work by a distance of 50 miles or more.
On August 23, 1996, in connection with the Board's approval of the
Merger Agreement and its recommendation of the transactions contemplated
thereby, including the Offer and the Merger, and in recognition and
consideration of the services provided and to be provided prior to the Merger,
the Board approved Amendatory Agreements with two Executives, Messrs. Tessitore
and Roof, to remove the parachute limit imposed by Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and to provide that amounts
received by such Executives upon a Change in Control (whether or not received
pursuant to the Tier 1 Amended Severance Agreements) will be increased by any
amounts incurred by them as a result of the imposition of the excise taxes
imposed on any payments deemed made to them under such agreements or otherwise
under other agreements, plans or programs pursuant to Section 4999 of the Code.
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<PAGE>
On August 23, 1996, in consideration and recognition of their
dedication to the Company and services rendered for the Company in the past and
to be rendered to the Company until a Change in Control occurs and in connection
with its approval of the Merger Agreement, the Board also approved bonus
payments, payable upon a Change in Control, to Mr. Tessitore of $500,000, Mr.
Roof of $350,000, Mr. Sarina of $65,000, Mr. Brown of $150,000 and remaining
members of the Board in an aggregate amount equal to $275,000.
The Company also has indemnification agreements (the "Indemnification
Agreements") with each member of the Board and certain executive officers. The
Indemnification Agreements supplement the protections afforded to the Company's
directors and executive officers under the Company's Bylaws. In general, the
Indemnification Agreements provide that upon the occurrence of a Change in
Control, the Company will obtain an irrevocable standby letter of credit in an
amount not less than $1,000,000 per individual naming such director or officer
as the sole beneficiary (each, a "Letter of Credit"). Such director or officer
can draw amounts under a Letter of Credit upon the certification by such
indemnified person that (i) such indemnified person has made a written request
to the Company for such amount and the Company has failed or refused to provide
him with such amount in full for 30 days and (ii) the indemnified party believes
that he is entitled under the terms of the Indemnification Agreement to the
amount he is drawing down. The Indemnification Agreements are binding on the
Company and any successor to the Company. Pursuant to the Merger Agreement, the
Company has agreed to deliver to Parent, on or prior to the initial expiration
date of the Offer, a copy of an amendment to each director's Indemnification
Agreement, executed by the Company and such director, pursuant to which the
requirement of the Company to obtain a Letter of Credit will cease to be
effective upon consummation of a change in control upon the consummation of the
transactions contemplated by the Merger Agreement.
DIRECTORS' COMPENSATION--Each director of the Company who is not also an
employee of the Company, receives an annual fee of $10,000, plus $2,000 for each
Board meeting attended, $500 for each committee meeting attended that is held on
the day immediately preceding or following a Board meeting, $750 for each
committee meeting attended that is not held on the same day or day immediately
preceding or following a Board meeting and $500 for participation in each
telephonic meeting. During the 1995 fiscal year, an aggregate amount of $187,750
in fees was paid to directors. Directors are also reimbursed for reasonable
out-of-pocket expenses incurred in attending Board of Directors and committee
meetings.
The Board of Directors held 12 meetings during the fiscal year ended
June 30, 1996. Each of the directors attended seventy-five percent (75%) or more
of the aggregate number of meetings of the Board of Directors and of the
committees on which such director served during the fiscal year ended June 30,
1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION--The Company
established a Compensation Commitee in September, 1993, the current members of
which are Messrs. Stewart M. Kasen, William J. Nightingale and S. Donley
Ritchey, none of whom are or have been officers or employees of the Company or
any of its subsidiaries.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of August 29,
1996 as to shares of the Common Stock beneficially owned by: (i) each person who
is known by the Company to own beneficially more than 5% of the Common Stock,
(ii) each of the Company's directors, (iii) each of the Company's officers named
in the Summary Compensation Table and (iv) all directors and executive officers
of the Company as a group:
<TABLE>
<CAPTION>
Percentage
Shares Beneficially
NAME OF BENEFICIAL OWNER Beneficially Owned(1)
Owned(1)
<S> <C> <C>
American Enterprises, L.L.C.(2) ........................................ 1,201,260 19.7%
Metropolitan Capital Advisors, Inc. (3) ................................ 455,636 7.2%
Scoggin Capital Management, L.P. (4) ................................... 386,333 6.2%
Joshua S. Friedman(5)................................................... 256,500 4.3%
James E. Boyd(6)(7)(8)(9)............................................... 74,270 1.2%
Donald C. Roof(6)(7)(8)(9).............................................. 40,822 *
Gary L. Tessitore(6).................................................... 30,000 *
Bart A. Brown, Jr.(6)................................................... 26,500 *
George A. Poole, Jr.(6)................................................. 10,833 *
Stewart M. Kasen(6)..................................................... 9,333 *
William J. Nightingale(6)............................................... 9,333 *
S. Donley Ritchey(6).................................................... 9,333 *
Steven Van Dyke......................................................... 5,000 *
Michael L. Sarina(6).................................................... 3,001 *
All directors and executive officers as a group (12 persons)(6)(7)(8)... 471,925 7.8%
*Less than 1%.
</TABLE>
(1) The number of shares beneficially owned includes shares which could be
acquired upon exercise of warrants or options to acquire Common Stock
if such warrants or options are exercisable within 60 days thereof.
Except as set forth below, to the Company's knowledge, the person
listed has sole voting power and sole investment power with respect to
the shares beneficially owned.
(2) As of July 19, 1996, as reported in a Joint Schedule 14D-1 and
Amendment No. 2 to a Schedule 13D filed with the Commission on July 19,
1996. American Enterprises, L.L.C. holds the sole power to vote or
direct the vote and to dispose or direct the disposition of 1,201,260
shares of Common Stock of the Company. By virtue of their limited
liability interest in American Enterprises, L.L.C., Mitchell P. Rales
and Steven M. Rales may be deemed to share the power to vote or direct
the vote and the power to dispose or direct the disposition of, all the
shares of Common Stock of the Company owned by American Enterprises,
L.L.C.
(3) As of August 26, 1996, as reported in Amendment No. 3 to a Schedule 13D
filed with the Commission on August 29, 1996. Such Amendment reported
that (i) Bedford Falls Investors, L.P. had the sole power to vote or
dispose of or direct the voting or disposition of 455,636 shares of
Common Stock of the Company, of which 296,236 are represented by
currently exercisable warrants, and (ii) such voting and dispositive
power may be exercised on behalf of Bedford Falls Investors, L.P. by
its General Partner, Metropolitan Capital Advisors, L.P., which acts
through its corporate General Partner, Metropolitan Capital Advisors,
Inc. By virtue of its position as General Partner of Metropolitan
Capital Advisors, L.P., the General Partner of Bedford Falls Investors,
L.P., Metropolitan Capital Advisors, Inc. may be deemed
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to have shared voting and dispositive power over the 455,636 shares of
Common Stock of the Company beneficially owned by Bedford Falls
Investors, L.P. In addition, by virtue of its discretionary trading
authority over 42,297 shares of the Company's Common Stock, 31,097 of
which may be acquired upon exercise of currently exercisable warrants,
held in a managed account, Metropolitan Capital Advisors may be deemed
to be the beneficial owner of an aggregate amount of 497,933 shares of
Common Stock of the Company. Such Amendment also reported that (i)
Jeffrey E. Schwarz did not own any shares of Common Stock directly but
may be deemed to be the beneficial owner of 497,933 shares (7.9%) of
the Common Stock of the Company, of which 327,333 are represented by
currently exercisable warrants, as a result of his being a director,
executive officer and controlling stockholder of Metropolitan Capital
Advisors, Inc. and (ii) Karen Finerman did not own any shares of Common
Stock directly but may be deemed to be the beneficial owner of the
aforementioned 497,933 shares of Common Stock of the Company by virtue
of her being a director and executive officer of Metropolitan Capital
Advisors, Inc.
(4) As of December 1, 1996, as reported in a Schedule 13D filed with the
Commission on December 11, 1996. The Schedule 13D reported that Scoggin
Capital Management, L.P. beneficially owns 386,333 shares of Common
Stock of the Company. Such shares consist of 155,500 shares of Common
Stock owned by Scoggin Capital Management, L.P., 163,683 shares
issuable upon exercise of currently exercisable warrants to purchase
Common Stock owned by Scoggin Capital Management, L.P., 37,000 shares
of Common Stock held in managed customer accounts, and 29,650 shares
issuable upon the exercise of currently exercisable warrants to
purchase Common Stock in such managed customer accounts.
(5) Of such shares, 205,875 represent shares beneficially owned by entities
advised by Capital Management, which exercises both voting and
dispositive power with respect to such shares and 50,625 represent
shares owned by CPI Securities, L.P. ("CPIS") which exercises both
voting and dispositive power with respect to such shares. Since Capital
Management and CPIS are each indirectly equally controlled by Mr.
Friedman and two other individuals, Mr. Friedman and such other persons
exercise both voting and dispositive power with respect to such shares.
Mr. Friedman disclaims beneficial ownership of such shares.
(6) Includes 53,069: 24,590; and 77,659 shares subject to warrants to
purchase Common Stock held by Messrs Boyd and Roof, and all directors
and executive officers as a group, respectively.
(7) Includes 9,333; 9,667; 30,000; 25,000; 8,333; 8,333; 8,333; 8,333;
3,000; and 110,333 shares subject to options to purchase Common Stock
held by Messrs. Boyd, Roof, Tessitore, Brown, Poole, Kasen,
Nightingale, Ritchey and Sarina, and all directors as a group,
respectively.
(8) Includes 5,381 and 3,575 shares of Common Stock held by the Company's
Incentive Savings Plan allocated to Messrs. Boyd and Roof,
respectively.
(9) Includes 1,175, 1,001 and 1 shares of Common Stock held by the
Company's Employee Stock Ownership Plan allocated to Messrs. Boyd, Roof
and Sarina, respectively.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the indenture governing the Company's 11-1/2% Senior Secured
Notes and under its secured revolving credit facility, the Company is generally
precluded from entering into any transaction with any affiliate of the Company
(including officers and directors) or any five percent (5%) stockholder unless
the Board of Directors determines in good faith that the transaction is as
favorable to the Company as terms that could be obtained at the time for
comparable transactions in arm's-length dealings with unaffiliated parties.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents are filed as a part of this report:
1. FINANCIAL STATEMENTS
The Consolidated Financial Statements, Notes thereto
and Accountants' Report thereon are included in Part
II, Item 8 of this report.
2. FINANCIAL STATEMENT SCHEDULES
- Condensed Consolidating Balance Sheets as of
June 30, 1996 and June 30, 1995.
- Condensed Consolidating Statements of
Operations for the years ended June 30, 1996
and June 30, 1995, the eleven month period
ended June 30, 1994 and the one- month
period ended July 31, 1993.
- Condensed Consolidating Statements of Cash
Flows for the years ended June 30, 1996 and
June 30, 1995, the eleven-month period ended
June 30, 1994 and the one-month period ended
July 31, 1994.
- Valuation and Qualifying Accounts for the
years ended June 30, 1996 and June 30, 1995,
the 11-month period ended June 30, 1994 and
the one-month period ended July 31, 1993.
All other schedules have been omitted since the required information is
either not present in amounts sufficient to require submission of the schedule
or is included in the consolidated financial statements or notes thereto.
3. EXHIBITS
See (c) below.
(b) Reports on Form 8-K filed during fourth quarter:
Form 8-K filed on April 19, 1996 and Form 8-K filed on May 3,
1996.
(c) Exhibits
The exhibits filed with this Form 10-K are listed in the
Exhibit Index commencing on page 78.
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<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.
SPRECKELS INDUSTRIES, INC.
By: /s/ Michael L. Sarina
Michael L. Sarina
Controller, Chief Accounting Officer
and Secretary
Date: October 16, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
*Bart A. Brown, Jr. Director and Chairman of October 16, 1996
the Board
/s/ Gary L. Tessitore Chief Executive Officer and October 16, 1996
Gary L. Tessitore President (principal executive
officer)
/s/ Donald C. Roof Senior Vice President and October 16, 1996
Donald C. Roof Chief Financial Officer
(principal financial officer)
/s/ Michael L. Sarina Controller, Chief Accounting October 16, 1996
Michael L. Sarina Officer and Secretary (principal
accounting officer)
*Joshua S. Friedman Director October 16, 1996
*F. Kenneth Iverson Director October 16, 1996
*Stewart M. Kasen Director October 16, 1996
*William J. Nightingale Director October 16, 1996
*George A. Poole, Jr. Director October 16, 1996
*S. Donley Ritchey Director October 16, 1996
*Steven A. Van Dyke Director October 16, 1996
* By /s/ Michael L. Sarina
Michael L. Sarina, Attorney-in-Fact
</TABLE>
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<PAGE>
SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
JUNE 30, 1996
<TABLE>
<CAPTION>
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
(dollars in thousands)
ASSETS:
Cash and cash equivalents $ 8,653 $ 1,569 $ -- $ 10,222
Accounts receivable, net 24,911 5,743 -- 30,654
Inventories 30,929 7,817 -- 38,746
Net assets of discontinued operations 11,224 -- -- 11,224
Other current assets 6,325 3,395 -- 9,720
--------- --------- --------- ---------
Total current assets 82,042 18,524 -- 100,566
Property, plant and equipment, net 22,075 3,405 -- 25,480
Excess reorganization value, net 28,382 -- -- 28,382
Investment in subsidiary 6,396 -- (6,396) --
Other assets 6,212 (101) -- 6,111
--------- --------- --------- ---------
Total assets $ 145,107 $ 21,828 $ (6,396) $ 160,539
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable $ 12,674 $ 2,631 $ -- $ 15,305
Accrued payroll costs 3,913 290 -- 4,203
Accrued interest 1,364 -- -- 1,364
Other current liabilities 11,843 4,452 -- 16,295
--------- --------- --------- ---------
Total current liabilities 29,794 7,373 -- 37,167
Long-term debt 70,000 -- -- 70,000
Intercompany debt -- 6,396 (6,396) --
Post-retirement benefit obligation 15,573 -- -- 15,573
Other non-current liabilities 14,286 3,555 -- 17,841
--------- --------- --------- ---------
Total liabilities 129,653 17,324 (6,396) 140,581
STOCKHOLDERS' EQUITY:
Common stock and additional paid-in capital 71,571 -- -- 71,571
(Accumulated deficit) retained earnings (55,876) 4,152 -- (51,724)
Treasury stock (2) -- -- (2)
Accumulated benefit obligation in excess
of plan assets (244) -- -- (244)
Accumulated foreign currency translation
adjustment 5 352 -- 357
--------- --------- --------- ---------
Total stockholders' equity 15,454 4,504 -- 19,958
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 145,107 $ 21,828 $ (6,396) $ 160,539
========= ========= ========= =========
</TABLE>
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SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
JUNE 30, 1995
<TABLE>
<CAPTION>
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
(dollars in thousands)
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 294 $ 2,145 $ -- $ 2,439
Accounts receivable, net 23,912 5,037 -- 28,949
Inventories 35,112 7,413 -- 42,525
Net assets of discontinued operations 78,382 -- -- 78,382
Other current assets 7,199 2,901 -- 10,100
--------- --------- --------- ---------
Total current assets 144,899 17,496 -- 162,395
Property, plant and equipment, net 20,962 2,171 -- 23,133
Excess reorganization value, net 30,487 (389) -- 30,098
Investment in subsidiary 4,932 -- (4,932) --
Other assets 6,632 145 -- 6,777
--------- --------- --------- ---------
Total assets $ 207,912 $ 19,423 $ (4,932) $ 222,403
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable $ 13,290 $ 2,946 $ -- $ 16,236
Accrued payroll costs 3,633 -- -- 3,633
Accrued interest 1,827 -- -- 1,827
Other current liabilities 9,647 4,294 -- 13,941
--------- --------- --------- ---------
Total current liabilities 28,397 7,240 -- 35,637
Long-term debt 80,616 -- -- 80,616
Intercompany debt -- 4,932 (4,932) --
Post-retirement benefit obligation 16,103 -- -- 16,103
Other non-current liabilities 14,149 3,389 -- 17,538
--------- --------- --------- ---------
Total liabilities 139,265 15,561 (4,932) 149,894
STOCKHOLDERS' EQUITY:
Common stock and additional paid-in capital 71,000 -- -- 71,000
(Accumulated deficit) retained earnings (2,289) 2,619 -- 330
Treasury stock (1) -- -- (1)
Accumulated benefit obligation in
excess of plan assets (154) -- -- (154)
Accumulated foreign currency translation
adjustment 91 1,243 -- 1,334
--------- --------- --------- ---------
Total stockholders' equity 68,647 3,862 -- 72,509
--------- --------- --------- ---------
Total liabilities and stockholders' equity$ 207,912 $ 19,423 $ (4,932) $ 222,403
========= ========= ========= =========
</TABLE>
-67-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales $ 155,857 $ 31,110 $ -- $ 186,967
Cost of product sold 113,832 18,024 -- 131,856
--------- --------- --------- ---------
Gross profit 42,025 13,086 -- 55,111
OPERATING EXPENSES:
Selling, general and administrative
expenses 26,169 8,098 -- 34,267
Amortization of excess reorganization
value 1,739 (23) -- 1,716
Equity (in earnings) loss of subsidiaries (2,997) -- 2,997 --
--------- --------- --------- ---------
Operating income (loss) from continuing
operations 17,114 5,011 (2,997) 19,128
Interest expense, net 7,964 47 -- 8,011
--------- --------- --------- ---------
Income (loss) from continuing operations
before provision for income taxes 9,150 4,964 (2,997) 11,117
Provision for income taxes 2,282 1,967 -- 4,249
--------- --------- --------- ---------
Net income (loss) from continuing operations 6,868 2,997 (2,997) 6,868
DISCONTINUED OPERATIONS:
Loss from the operation of
discontinued sweetener operations (2,263) -- -- (2,263)
Loss on disposal of sweetener business,
net of income taxes (56,659) -- -- (56,659)
--------- --------- --------- ----------
Loss from discontinued operations,
net of tax (58,922) -- -- (58,922)
--------- --------- --------- ----------
Net (loss) income $ (52,054) $ 2,997 $ (2,997) $ (52,054)
========= ========= ========= =========
</TABLE>
-68-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales $ 153,676 $ 26,904 $ -- $ 180,580
Cost of product sold 113,631 15,711 -- 129,342
--------- --------- --------- ---------
Gross profit 40,045 11,193 -- 51,238
OPERATING EXPENSES:
Selling, general and administrative
expenses 25,805 7,126 -- 32,931
Restructuring costs 1,122 -- -- 1,122
Amortization of excess reorganization
value 1,825 (23) -- 1,802
Equity (in earnings) loss of subsidiaries (2,203) -- 2,203 --
--------- --------- --------- ---------
Operating income (loss) from continuing
operations 13,496 4,090 (2,203) 15,383
Interest expense, net 8,072 74 -- 8,146
--------- --------- --------- ---------
Income (loss) from continuing operations
before provision for income taxes 5,424 4,016 (2,203) 7,237
Provision for income taxes 1,085 1,813 -- 2,898
--------- --------- --------- ---------
Net income (loss) from continuing operations 4,339 2,203 (2,203) 4,339
DISCONTINUED OPERATIONS:
Loss from the operation of
discontinued sweetener operations (6,479) -- -- (6,479)
Loss on disposal of sweetener business,
net of income taxes -- -- -- --
--------- --------- --------- ---------
Loss from discontinued operations,
net of tax (6,479) -- -- (6,479)
--------- --------- --------- ---------
Net (loss) income $ (2,140) $ 2,203 $ (2,203) $ (2,140)
========= ========= ========= =========
</TABLE>
-69-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED JUNE 30, 1994
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales $ 141,949 $ 19,055 $ -- $ 161,004
Cost of product sold 103,907 11,211 -- 115,118
--------- --------- --------- ---------
Gross profit 38,042 7,844 -- 45,886
OPERATING EXPENSES:
Selling, general and administrative
expenses 24,547 4,757 -- 29,304
Restructuring costs -- -- -- --
Amortization of excess reorganization
value 2,347 (20) -- 2,327
Equity (in earnings) loss of subsidiaries (2,075) -- 2,075 --
--------- --------- --------- ---------
Operating income from continuing
operations 13,223 3,107 (2,075) 14,255
Interest expense, net 7,281 98 -- 7,379
--------- --------- --------- ---------
Income (loss) from continuing operations
before provision for income taxes 5,942 3,009 (2,075) 6,876
Provision for income taxes 2,676 934 -- 3,610
--------- --------- --------- ---------
Net income (loss) from continuing
operations 3,266 2,075 (2,075) 3,266
DISCONTINUED OPERATIONS:
Loss from the operations of discontinued
sweetener operations (796) -- -- (796)
Loss on disposal of sweetener business,
net of income taxes -- -- -- --
--------- --------- --------- ---------
Loss from discontinued operations,
net of tax (796) -- -- (796)
--------- --------- --------- ---------
Net income (loss) $ 2,470 $ 2,075 $ (2,075) $ 2,470
========= ========= ========= =========
</TABLE>
-70-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
ONE MONTH ENDED JULY 31, 1993
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales $ 11,935 $ 1,531 $ -- $ 13,466
Cost of product sold 8,115 908 -- 9,023
-------- -------- -------- --------
Gross profit 3,820 623 -- 4,443
OPERATING EXPENSES:
Selling, general and administrative
expenses 2,806 392 -- 3,198
Restructuring costs -- -- -- --
Amortization of excess reorganization
value (2) 2 -- --
Equity (in earnings) loss of subsidiaries 39 -- (39) --
-------- -------- -------- --------
Operating income from continuing
operations 977 229 39 1,245
Interest expense, net 1,811 15 -- 1,826
Reorganization items 555 -- -- 555
-------- -------- -------- --------
(Loss) income from continuing operations
before provision for income taxes (1,389) 214 39 (1,136)
(Benefit) provision for income taxes (105) 105 -- --
-------- -------- -------- --------
(Loss) income from continuing operations
before discontinued operations,
fresh-start adjustments, cumulative
effect of changes in accounting principle,
and
extraordinary item (1,284) 109 39 (1,136)
DISCONTINUED OPERATIONS:
Loss from the operation of
discontinued sweetener operations (2,910) -- -- (2,910)
Loss on disposal of sweetener business,
net of income taxes -- -- -- --
-------- -------- -------- -------
Loss from discontinued operations,
net of tax (2,910) -- -- (2,910)
Fresh-start reporting adjustments, net of tax 16,194 (148) -- 16,046
Cumulative effect of changes in accounting
principle, net of tax (3,938) -- -- (3,938)
Extraordinary item, debt forgiveness, net of tax 26,388 -- -- 26,388
-------- -------- -------- --------
Net income (loss) $ 34,450 $ (39) $ 39 $ 34,450
======== ======== ======== ========
</TABLE>
-71-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
(dollars in thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(55,051) $ 2,997 $ -- $(52,054)
Equity in earnings of subsidiaries 2,997 -- (2,997) --
Loss from discontinued operations 58,922 -- -- 58,922
Depreciation and amortization 4,436 194 -- 4,630
Deferred income tax 1,112 -- -- 1,112
Gain on the sale of fixed assets 76 -- -- 76
Net changes in operating assets and liabilities:
(Increase) decrease in receivables,
prepaid expenses and other assets (2,197) 145 -- (2,052)
Decrease (increase) in inventories 4,183 (404) -- 3,779
Increase (decrease) in trade payables,
accrued expenses and other
current liabilities 1,450 (130) -- 1,320
(Decrease) increase in postretirement
benefit obligation (696) 166 -- (530)
Increase (decrease) in other noncurrent
obligations 1,456 (960) -- 496
-------- -------- -------- --------
Net cash provided by (used in)
continuing operations 16,688 2,008 (2,997) 15,699
Discontinued operations-Net cash used
in discontinued operations (22,144) -- -- (22,144)
-------- -------- -------- --------
Net cash (used in) provided by
operating activities (5,456) 2,008 (2,997) (6,445)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,520) (1,410) -- (4,930)
Proceeds from the sale of discontinued
operations 29,312 -- -- 29,312
Proceeds from the sale of fixed assets (18) 28 -- 10
Investment in joint ventures (136) -- -- (136)
-------- -------- -------- --------
Net cash provided by (used in)
investing activities 25,638 (1,382) -- 24,256
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under capital leases obligations (193) -- -- (193)
(Decrease) increase in short-term debt (52) 262 -- 210
Repayment of revolving loan (33,162) -- -- (33,162)
Net borrowings - revolver 22,546 -- -- 22,546
Intercompany transfers 1,464 (1,464) -- --
Proceeds from the exercise of stock
options and warrants 571 -- -- 571
-------- -------- --------
Net cash used in financing activities (8,826) (1,202) -- (10,028)
-------- -------- -------- --------
Net increase (decrease) in cash
and cash equivalents 11,356 (576) (2,997) 7,783
Cash and cash equivalents at
beginning of period 294 2,145 -- 2,439
-------- -------- -------- --------
Cash and cash equivalents at
end of period $ 11,650 $ 1,569 $ (2,997) $ 10,222
======== ======== ======== ========
</TABLE>
-72-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
(dollars in thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (4,343) $ 2,203 $ -- $ (2,140)
Equity in earnings of subsidiaries 2,203 -- (2,203) --
Loss from discontinued operations 6,479 -- -- 6,479
Depreciation and amortization 4,388 201 -- 4,589
Deferred income tax (1,316) -- -- (1,316)
Gain on the sale of fixed assets 19 -- -- 19
Net changes in operating assets and liabilities:
Decrease (increase) in receivables,
prepaid expenses and other
current assets 1,436 (2,619) -- (1,183)
Increase in inventories (4,222) (2,752) -- (6,974)
Increase in trade payables, accrued
expenses and other current liabilities 2,553 3,263 -- 5,816
(Decrease) increase in other
non-current liabilities (6,009) 1,176 -- (4,833)
Decrease in deferred carges and
other assets 1,059 900 -- 1,959
-------- -------- -------- --------
Net cash provided by continuing
operations 2,247 2,372 (2,203) 2,416
Discontinued operations-Net cash used
in discontinued operations (19,465) -- -- (19,465)
-------- -------- --------
Net cash (used in) provided by
operating activities (17,218) 2,372 (2,203) (17,049)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,279) (1,035) -- (5,314)
Proceeds from the sale of subsidiary
company 21,800 -- -- 21,800
Proceeds from the sale of fixed assets 39 -- -- 39
Investment in joint ventures (370) -- -- (370)
-------- -------- -------- --------
Net cash provided by (used in)
investing activities 17,190 (1,035) -- 16,155
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under
capital lease obligations 275 (82) -- 193
Decrease in short-term debt (30) -- -- (30)
Repayment of revolving loan (8,511) -- -- (8,511)
Net borrowings - revolver 10,616 -- -- 10,616
-------- -------- -------- -------
Net cash provided by (used in)
financing activities 2,350 (82) -- 2,268
-------- -------- -------- --------
Net increase (decrease) in cash
and cash equivalents 2,322 1,255 (2,203) 1,374
Cash and cash equivalents at
beginning of period 175 890 -- 1,065
-------- -------- -------- --------
Cash and cash equivalents at
end of period $ 2,497 $ 2,145 $ (2,203) $ 2,439
======== ======== ======== ========
</TABLE>
-73-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
ELEVEN MONTHS ENDED JUNE 30, 1994
<TABLE>
<CAPTION>
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
(dollars in thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 395 $ 2,075 $ -- $ 2,470
Equity in earnings of subsidiaries 2,075 -- (2,075) --
Loss from discontinued operations 796 -- -- 796
Depreciation and amortization 5,839 116 -- 5,955
Deferred income tax 90 -- -- 90
Net changes in operating assets and liabilities:
(Increase) decrease in receivables, prepaid
expenses and other current assets (3,636) 2,043 -- (1,593)
(Increase) decrease in inventories (4,833) 117 -- (4,716)
Decrease in trade payables, accrued
expenses and other current liabilities (11,055) (2,152) -- (13,207)
Increase in other noncurrent obligations 18,828 936 -- 19,764
-------- -------- -------- --------
Net cash provided by continuing operations 8,499 3,135 (2,075) 9,559
Net cash used in discontinued operations (10,531) -- -- (10,531)
-------- -------- -------- --------
Net cash (used in) provided by
operating activities (2,032) 3,135 (2,075) (972)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,885) (55) -- (2,940)
Proceeds from the sale of discontinued
operations -- -- -- --
-------- -------- -------- -------
Net cash used in investing activities (2,885) (55) -- (2,940)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt 647 (647) -- --
Net borrowings - revolver (2,520) -- -- (2,520)
Intercompany transfers 1,910 (1,910) -- --
-------- -------- -------- --------
Net cash provided by (used in)
financing activities 37 (2,557) -- (2,520)
-------- -------- -------- --------
Net (decrease) increase in cash
and cash equivalents (4,880) 523 (2,075) (6,432)
Cash and cash equivalents at
beginning of period 7,130 367 -- 7,497
-------- -------- -------- --------
Cash and cash equivalents at
end of period $ 2,250 $ 890 $ (2,075) $ 1,065
======== ======== ======== ========
</TABLE>
-74-
<PAGE>
SPRECKELS INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
ONE MONTH ENDED JULY 31, 1993
<TABLE>
<CAPTION>
COMBINED
COMBINED NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
(dollars in thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 34,489 $ (39) $ -- $ 34,450
Equity in earnings of subsidiaries (39) -- 39 --
Reorganization items 555 -- -- 555
Loss from discontinued operations 2,910 -- -- 2,910
Depreciation and amortization 445 13 -- 458
Deferred income tax -- -- -- --
Fresh-start adjustments (16,194) 148 -- (16,046)
Gain on debt forgiveness (26,388) -- -- (26,388)
Cumulative effect of changes in
accounting principle 3,938 -- -- 3,938
Net changes in operating assets and liabilities:
(Increase) decrease in receivables, prepaid
expenses and other assets (884) 344 -- (540)
(Increase) decrease in inventories (2,664) 450 -- (2,214)
(Decrease) increase in trade payables,
accrued expenses and other current
liabilities (4,399) 809 -- (3,590)
Increase (decrease) in other
non-current liabilities (3,330) (227) -- (3,557)
-------- -------- -------- --------
Net cash (used in) provided by
continuing operations (11,561) 1,498 39 (10,024)
Discontinued operations-Net cash
provided by discontinued operations 56,865 -- -- 56,865
-------- -------- -------- --------
Net cash provided by operating activities 45,304 1,498 39 (46,841)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (536) (1) -- (537)
Proceeds from the sale of discontinued
operations (30) 30 -- --
Proceeds from sale of fixed assets 29 -- -- 29
Other 1,074 -- -- 1,074
-------- -------- -------- --------
Net cash provided by investing activities 537 29 -- 566
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt 273 (273) -- --
Repayment of revolving loan (30,009) -- -- (30,009)
Decrease in liabilities subject
to compromise (92,503) -- -- (92,503)
Net borrowings - revolver 11,036 -- -- 11,036
Repayment of long-term debt (40,006) -- -- (40,006)
Issuance of senior notes 70,000 -- -- 70,000
Intercompany transfers 1,365 (1,365) -- --
-------- -------- -------- --------
Net cash used in financing activities (79,844) (1,638) -- (81,482)
-------- -------- -------- --------
Net decrease in cash and cash equivalents (34,003) (111) 39 (34,075)
Cash and cash equivalents at
beginning of period 41,094 478 -- 41,572
-------- -------- -------- --------
Cash and cash equivalents at
end of period $ 7,091 $ 367 $ 39 $ 7,497
======== ======== ======== ========
</TABLE>
-75-
<PAGE>
SCHEDULE II
SPRECKELS INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS(1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- --------------------------- -------- --------- ----------- ------ --------
Balance at Charged to Fresh-Start Balance at
Beginning Costs and Accounting End
Classification of Period Expenses Deductions Adjustments of Period
<S> <C> <C> <C> <C> <C>
June 30, 1996:
Reserve for doubtful accounts $1,160 $ 174 $ (323) $ -- $1,011
Accumulated amortization of
excess reorganization value 3,570 1,716 -- -- 5,286
Accumulated amortization of
bond issue costs 360 212 -- -- 572
------ ------ ------ --------------- ------
Total $5,090 $2,102 $ (323) $ -- $6,869
====== ====== ====== =============== ======
June 30, 1995:
Reserve for doubtful accounts $ 576 $ 744 $ (160) $ -- $1,160
Accumulated amortization of
excess reorganization value 2,327 1,802 (559) -- 3,570
Accumulated amortization of
bond issue costs 148 212 -- -- 360
------ ------ ------ --------------- ------
Total $3,051 $2,758 $ (719) $ -- $5,090
====== ====== ====== =============== ======
June 30, 1994:
Reserve for doubtful accounts $ 824 $ 202 $ (450) $ -- $ 576
Accumulated amortization of
excess reorganization value -- 2,327 -- -- 2,327
Accumulated amortization of
bond issue costs -- 148 -- -- 148
------ ------ ------ --------------- ------
Total $ 824 $2,677 $ (450) $ -- $3,051
====== ====== ====== =============== ======
August 1, 1993:
Reserve for doubtful accounts $ 573 251 $ -- $ -- $ 824
Accumulated amortization of
goodwill 8,293 119 -- (8,412) 0
------ ------ ------ --------------- ------
Total $8,866 $ 370 $ -- $ (8,412) $ 824
====== ====== ====== =============== ======
June 30, 1993:
Reserve for doubtful accounts $ 599 $ 179 $ (205) $ -- $ 573
Accumulated amortization of
goodwill 6,869 1,424 -- -- 8,293
------ ------ ------ --------------- ------
Total $7,468 $1,603 $ (205) $ -- $8,866
====== ====== ====== =============== ======
</TABLE>
-76-
<PAGE>
EXHIBIT INDEX
Asterisk indicates exhibit previously filed with the Commission and
incorporated herein by reference as indicated.
<TABLE>
<CAPTION>
<S> <C>
Exhibits
3.1* Restated Certificate of Incorporation of the Registrant. (1994 Form 10-K, File No.
0-23050, Exhibit 3.1).
3.2* By-laws of the Registrant, as amended on November 11, 1995 (1995 Form 10-K, File
No. 0-23050, Exhibit 3.2).
4.1* Indenture entered into by the Registrant and Chemical Trust Company of California,
as Trustee (including form of Note). (1994 Form 10-K, File No. 0-23050, File No.
00-23050, Exhibit 4.1).
4.2* Supplemental Indenture entered into by the Registrant and Chemical Trust Company
of California, as Trustee. (1994 Form 10-K, File No. 0-23050, Exhibit 4.2).
4.3* Form of Warrants of the Registrant. (1994 Form 10-K, File No. 0-23050, Exhibit
4.3).
10.1* Senior Notes Agreement dated as of September 2, 1993, by and among the
Registrant, Citibank, N.A., Union Bank, Pacific Corinthian Life Insurance and The
Resolution Trust Corporation as Conservator for HomeFed Bank, F.A. (1994 Form
10-K, File No. 0-23050, Exhibit 10.1).
10.2* Registration Rights Agreement dated September 2, 1993, by and among the
Registrant and the persons identified therein. (1994 Form 10-K, File No. 0-23050,
Exhibit 10.2).
10.4* Form of Indemnification Agreement entered into by and between the Registrant and
each of George A. Lamberth, Donald C. Roof, Robert L. Schmalz, David E.
Dennehy, James E. Boyd, Lynn R. Matzen and Richard A. Harmon. (S-1 Registration
Statement No. 33-67740).
10.5* Employee Stock Ownership Plan, effective July 1, 1987. (S-1 Registration Statement
No. 33-67740).
10.6* 1993 Nonstatutory Stock Option Plan (Form 8-K dated April 18, 1994, File
No. 0-23050, Exhibit 10.18, File No. 0-23050, Exhibit 10.18).
10.7* Form of Nonstatutory Option Agreement (Form 8-K dated April 18, 1994, File No.
0-23050, Exhibit 10.19).
-77-
<PAGE>
10.8* Severance Agreement dated December 21, 1993, between Spreckels Industries, Inc.
and George A. Lamberth (Form 8-K dated April 18, 1994, File No. 0-23050, Exhibit
10.20).
10.9* 1993 Directors' Stock Option Plan (Form 8-K dated April 18, 1994, File
No. 0-23050, Exhibit 10.26).
10.10* Form of 1993 Directors' Stock Option Plan; Nonstatutory Stock Option Agreement
(Form 8-K dated April 18, 1994, File No. 0-23050).
10.11* Form of Officers' and Directors' Indemnity Agreement. (S-1 Registration Statement
No. 33-67740).
10.12* Secured Revolving Credit Agreement between the Registrant, Spreckels Sugar
Company, Inc., Duff-Norton Company, Inc. and Harris Trust and Savings Bank dated
as of July 22, 1994. (1994 Form 10-K, File No. 0-23050, Exhibit 10.29).
10.13* Stock Purchase Agreement as of June 30, 1994 by and between NCD Acquisition
Company and the Registrant. (1994 Form 10-K, File No. 0-2350, Exhibit 10.30).
10.14* Excess Benefit Plan of the Registrant. (1994 Form 10-K, File No. 0-23050, Exhibit
10.32).
10.15 Amended and Restated Registrant's Employees' Incentive Savings Plan.
10.16* Retirement Plan for Salaried Employees of Duff-Norton Company, Inc. (1994 Form
10-K, File No. 0-23050, Exhibit 10.35).
10.17* Disclosure Statement for Registrant's Third Amended Plan of Reorganization. (1994
Form 10-K, File No. 0-23050, Exhibit 10.37).
10.18* Bart A. Brown, Jr. Consulting Agreement dated July 14, 1994 (1995 Form 10-K, file
No. 0-23050, Exhibit 10.38).
10.19* Robert J. McLaughlin Consulting Agreement dated February 28, 1995 (1995 Form
10-K, file No. 0-23050, Exhibit 10.39).
10.20* Stock Purchase Agreement of Carbidie Corporation dated November 4, 1994 (1995
Form 10-K, file No. 0-23050, Exhibit 10.40).
10.21* Stock Purchase Agreement dated January 8, 1996, between Registrant and Holly
Sugar Corporation for the sale of Spreckels Sugar Company, Inc. , dated January 8,
1996 (Form 8-K, file No. 0-23050, Exhibit 99.1).
-78-
<PAGE>
10.22* Agreement and Plan of Merger among Spreckels Industries, Inc., Columbus
McKinnon Corporation and L. Acquisition Corp., dated August 24, 1996(Exhibit 1
to Registrant's Schedule 14D-9 filed on September 3, 1996).
10.23* Severance Compensation Agreement (incorporated as Exhibit 2 to Registrant's
Schedule 14D-9 filed on August 1, 1996).
10.24* Amended Severance Compensation Agreement between the Company and Gary L.
Tessitore, (Exhibit 11(a) to Amendment No. 1 to Registrant's 14D-9 filed on August
1, 1996).
10.25* Amended Severance Compensation Agreement between the Company and Donald C.
Roof, (Exhibit 11(b) to Amendment No. 1 to Registrant's 14D-9 filed on August 1,
1996).
10.26* Severance Compensation Agreement (Exhibit 3 to Registrant's Schedule 14D-9 filed
on August 1, 1996).
10.27* Form of Corporate Office Employee Bonus Plan (Exhibit 11(c) to Amendment No.
1 to Registrant's 14D-9 filed on August 1, 1996).
10.28* Form of Amendment to Indemnification Agreement (Exhibit 6(b) to to Registrant's
14D-9 filed on September 3, 1996).
10.29* Rights Agreements dated November 11, 1995 (Form 8-K dated November 17, 1997,
File No. 0-23050, Exhibit 1).
10.30* Amendment to Rights Agreement dated January 8, 1996 (Form 8-K dated February
5, 1996, File No. 0-23050, Exhibit 1).
10.31* Amendment to Rights Agreement dated July 23, 1996 (Registrant's 14D-9 dated
August 1, 1996, File No. 0-23050, Exhibit 8(c)).
10.32* Amendment to Rights Agreement dated August 23, 1996 (Registrant's Amended
14D-9 dated August 1, 1996, File No. 0-23050, Exhibit 14).
10.33 Severance Agreement dated June 5, 1996 between Spreckels Industries, Inc. and
James E. Boyd.
10.34 First Amendment to Secured Revolving Credit Agreement and Secured Revolving
Credit Note between Registrant, Duff-Norton Company, Inc. and Harris Trust and
Savings Bank dated April 19, 1996.
21 List of subsidiaries of the Registrant.
22 Powers of Attorney.
</TABLE>
-79-
EXHIBIT 10.33
June 5, 1996
Mr. James E. Boyd
14401 Soldier Road
Charlotte, NC 28278
Dear Jim:
This letter memorializes our agreement with respect to your termination
of employment from Yale International, Inc./Spreckels Industries, Inc. (together
"Yale"). As used in this letter agreement ("Agreement"), "you" means you, all of
your heirs, successors, representatives and assigns and "Yale" means Yale
International, Inc./Spreckels Industries, Inc., its successors, assignees, and
its past, present and future managers, agents, affiliates, trustees,
shareholders, directors, representatives, indemnitors, attorneys and employee
benefit plans and its affiliated companies and their past, present and future
managers, agents, affiliates, trustees, shareholders, directors,
representatives, indemnitors, attorneys and employee benefit plans. Employee
benefit plans for purposes of this Agreement, does not and shall not include the
Spreckels Industries, Inc. New Management Stock Option Plan (effective September
2, 1993) or any other stock option plan of Yale, under which you hold shares of
the capital stock of Yale, or the right to acquire shares of the capital stock
of Yale.
AGREEMENT AND RELEASE OF CLAIMS
1. Yale agrees to pay you a severance payment in the amount of
$175,000, less statutory deductions (the "severance payment"). The severance
payment will be paid in twelve (12) monthly installments beginning July 1, 1996.
In addition, any payments due you under the Fiscal 1996 Management Incentive
Plan will be paid within 15 days after approval of Fiscal 1996 Plan awards by
the Board of Directors. Such payment will be computed based on actual Fiscal
1996 Industrial results and your earnings for 12 months. You will be maintained
as an active employee with full pay and benefits through June 30, 1996. The
severance payment represents all payments due you by Yale under any severance,
executive severance, retention, or any other such policy or practice. It does
not restrict your rights to additional benefits under the Executive Severance
Policy. It also does not restrict your rights to medical, dental and life
insurance coverages for 12 months from June 30, 1996, provided you continue to
make any required contributions. Yale's policy provides that to be eligible for
payment under the policy, "you must in writing, release the
<PAGE>
Mr. James E. Boyd
June 5, 1996
Page 2
Company, its subsidiaries and its employees from all claims, including those
regarding discrimination because of age, sex, race, national origin or physical
or mental impairment." This Agreement is the release that you must sign in order
to receive a severance payment under the policy. You will not receive any
benefits or payments under this Agreement if you do not sign the Agreement or if
you exercise your right to revoke this Agreement, as set forth in paragraph 10.
2. If you sign this Agreement, you agree to the terms below, and the
waivers and releases set forth in the paragraphs below will be effective.
3. You release Yale from any and all claims, demands, actions and
causes of action, of any and every sort, whether known or unknown, arising out
of any source from the beginning of time up to and including the date of this
Agreement.
4. You understand that this Agreement shall not be considered as an
admission by Yale of (a) any liability whatsoever, (b) your rights or the rights
of any other person under any order, law or statute, (c) a breach of any
contract and (d) any act of discrimination against you or any other person. Yale
specifically disclaims (a) any liability to you or discrimination against you or
any other person, (b) any alleged violation of your rights or the rights of any
person under any order, law or statute and (c) any breach or violation of any
contract, wage order or law. Except in an action for breach of this Agreement or
to enforce its provisions, this Agreement may not be presented or used as
evidence against Yale in any action, proceeding or claim against Yale.
5. You agree and represent that you have not and will not, file any
claim or action against Yale with any administrative agency, arbitrator, board
or court. You further agree that if any agency, arbitrator, board or court
assumes jurisdiction of any claim or action against Yale that relates to your
employment in any way, you will join with Yale to request in writing that the
matter be dismissed with prejudice. You agree that you will not cooperate or
participate in the investigation or prosecution of any such claim or action
unless compelled to do so by legal process and then only to such extent.
6. Notwithstanding anything to the contrary, you irrevocably and
unconditionally release and forever discharge Yale from any and all actions or
liabilities of any kind (including attorneys' fees, interest, expenses, and
costs actually incurred) of any nature whatsoever, known or unknown, suspected
or unsuspected, arising out of your hiring, employment with Yale or termination
from Yale.
7. You understand that various statutes provide you with the right to
bring actions against Yale if you believe that you have been discriminated
against on the basis of race, ancestry, color, religion, sex, marital status,
sexual orientation, status as a veteran of the Vietnam Era, national origin,
disability or medical condition or if you believe that you have been retaliated
against
<PAGE>
Mr. James E. Boyd
June 5, 1996
Page 3
for filing such a claim. Such statutes include, but are not limited to, Title
VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991,
the Vietnam Era Veterans' Readjustment Assistance Act of 1974, the Uniformed
Services Employment and Reemployment Act of 1994, the Employee Retirement Income
Security Act of 1984, as amended ("ERISA"), the Family and Medical Leave Act,
the Rehabilitation Act of 1973, the Equal Pay Act, ss.1981 of Title 42 of the
United States Code and the Americans with Disabilities Act, (collectively, the
"Acts"). ERISA also provides you with the right to bring actions against Yale if
you believe that Yale violated ERISA's provisions. You understand the rights
afforded under the Acts and agree that you will not file any action against Yale
based upon any alleged violations of the Acts. You waive any rights to assert a
claim for relief available under the Acts against Yale including, but not
limited to, back pay, attorneys' fees, damages, reinstatement or injunctive
relief. You waive and agree that you have no right to be recalled, or to
reemployment or reinstatement.
8. You represent and agree that you have not relied upon any
representations made by Yale with regard to the subject matter of this Agreement
other than what is contained in this Agreement itself. You agree that this
Agreement reflects the full understanding of the parties and supersedes,
replaces and renders void and unenforceable all prior oral and written
agreements relating to your hiring or termination of employment with Yale in any
way.
9. You specifically understand and acknowledge that the Age
Discrimination in Employment Act of 1967, as amended ("ADEA"), provides you with
the right to bring a claim against Yale, if you believe that you have been
discriminated against on the basis of age. You understand the rights afforded
under ADEA and agree that you will not file any claim or action against Yale
based on any alleged violation or violations of ADEA arising prior to the date
you execute this Agreement. You hereby waive any right to assert a claim for
relief under ADEA, including but not limited to, back pay, attorneys' fees,
damages, reinstatement or injunctive relief.
10. A copy of this Agreement was delivered to you on June 4, 1996. You
understand and agree that you:
a. have carefully read and fully understand all of the
provisions of this Agreement;
b. waive and release Yale from any and all claims or
rights that you may have against Yale, including
without limitation, claims arising under the Age
Discrimination in Employment Act of 1967 (29 U.S.C.
ss.621, et seq.);
c. are not waving any ADEA rights or claims that may
arise after the date of this Agreement is executed;
<PAGE>
Mr. James E. Boyd
June 5, 1996
Page 4
d. are waiving any rights and claims in exchange for
consideration in addition to anything of value to
which you are already entitled;
e. were advised, are hereby advised in writing, and have
had the opportunity to consider the terms of this
Agreement and consult with an attorney of your choice
prior to executing this Agreement;
f. have twenty-one (21) calendar days to review this
Agreement before signing it; and
g. understand that for a period of seven (7) days
following the execution of this Agreement, you may
revoke this Agreement, and this Agreement shall not
become effective or enforceable until the revocation
period has expired.
11. In addition to the payments and benefits outlined in paragraphs 1
and 2 above, and pursuant to the Executive Severance Policy attached, Yale
agrees to provide you with the following additional benefits:
(a) Vacation pay of $16,825 equal to twenty-five (25)
days pay.
(b) A one time payment of $115,750, which include
$100,000 of additional severance payment, $15,000 in
lieu of outplacement services and $750 to cover the
total cost of your legal fees in connection with the
review of this document by your lawyer.
(c) Both the vacation pay ("a" above) and the one time
payment ("b" above) will be paid in a lump sum ten
(10) days after receipt of a signed copy of this
agreement.
(d) A one-time payment of the vested portion of your
Supplemental Employee Retirement Plan will be paid to
you within 15 days' after calculation of the amount
you are owed by William Mercer, Inc. This calculation
will determine the present value payment utilizing
long-term treasury rates for the discount factor.
With the payment of this amount, you will not be
eligible for any additional payments under the
Company's Supplemental Employee Retirement Plan.
(e) Vesting in the 1994 Stock Option grant, providing you
with vesting of one-third of the options, which
vesting would have otherwise occurred on June 30,
1996, covering options of 2,167.
<PAGE>
Mr. James E. Boyd
June 5, 1996
Page 5
(f) Vesting in the 1995 Stock Option grant, providing you
with vesting of 5,000 options which vesting would
have otherwise occurred on June 30, 1996.
(g) You will have one (1) full year from signing this
Agreement to exercise these options.
12. In addition, you agree to enter into a Non-Competition Agreement,
as follows:
(a) Covenant Not to Compete. During a period of two years
following the execution of this Agreement, you shall
not, directly or indirectly, engage in any business
or activity in which Yale or any subsidiary of Yale
is engaged ("Competitive Business") nor be employed
by, render services of any kind to, advise or receive
compensation in any form from, nor invest or
participate in any manner or capacity in, any entity
or person which directly or indirectly engages in a
Competitive Business.
(b) Purpose of Covenant. It is agreed by both parties
hereto that the covenants contained in Subsection (a)
of Paragraph 12 above, are reasonable and necessary
to protect the confidentiality of the customer lists
and trade secrets, and other confidential information
concerning Yale, acquired by you.
(c) Specific Performance. You and Yale recognize and
agree that (i) because of the nature of the
businesses in which Yale and its subsidiaries are
engaged and because of the nature of the confidential
information which you have acquired or will acquire
with respect to the businesses of Yale and its
subsidiaries, it would be impracticable and
excessively difficult to determine the actual damages
of Yale or its subsidiaries in the event that you
breach any of such covenants. Accordingly, if you
commit any breach of such covenants or threaten to
commit any such breach, then Yale shall have the
right to have the covenants contained in Subsection
(a) of paragraph 12 above, specifically enforced by
any court having equity jurisdiction, without posting
bond or other security, it being acknowledged and
agreed by both parties hereto that any such breach or
threatened breach would cause irreparable injury to
Yale and its subsidiaries and that an injunction may
be issued against you. The rights described in this
Subsection (c) shall be in addition to, and not in
lieu of, any other rights or remedies available to
Yale under law or in equity.
<PAGE>
Mr. James E. Boyd
June 5, 1996
Page 6
13. No Solicitation or Hiring. During the two-year period following the
execution of this Agreement, you shall not, directly or indirectly:
(a) Contact any employee or consultant of Yale or any of
its subsidiaries to solicit such employee or
consultant (or any entity in which such employee or
consultant has a significant equity interest) to
become an employee, partner or independent contractor
of you or any other person; or
(b) Employ or retain any present or former employee or
consultant of Yale or any of its subsidiaries (or any
entity in which such employee or consultant has a
significant equity interest) as an employee, partner
or independent contractor of you or any other person.
14. You acknowledge that in the course of your employment with Yale,
you had access and became acquainted with information concerning the business
operations of Yale. Such information would include, without limitation,
financial information, personnel information, sales data, client lists,
technical data and other information that is owned by Yale and regularly used in
Yale's business operations (collectively referred to as "confidential
information"). You agree that you will not disclose (except in the course of
your ongoing employment at Yale or as may be required by process of law or as
required by legal regulation) any confidential information, directly or
indirectly, or use it in any way. You also agree that you will not disclose
(except as may required by process of law or legal regulation), the existence or
terms of this Agreement except that you may disclose it to your spouse or
attorney or financial professional on an as needed basis and only after
obtaining that individual's agreement not to disclose the contents of this
Agreement.
15. You understand and agree that if at any time a violation of any
term of this Agreement is asserted by any party to this Agreement, that party
shall have the right to seek specific performance of that term and/or necessary
and proper relief, including but not limited to, damages from any court of
competent jurisdiction, and the prevailing party shall be entitled to recover
reasonable costs and attorneys' fees.
16. Modification by Court. If any of the covenants contained in this
Agreement is determined to be unenforceable because of the duration of such
covenants or the area covered thereby, then the court making the determination
shall have the power to reduce the duration of such covenants and/or the area
covered thereby, and such covenants, in their reduced form, shall be
enforceable.
17. Different Jurisdictions. If any of the covenants contained in this
Agreement is determined to be wholly unenforceable by the courts of any domestic
or foreign jurisdiction, then the determination shall not bar or in any way
affect Yale's right to relief in the courts of any other
<PAGE>
Mr. James E. Boyd
June 5, 1996
Page 7
jurisdiction with respect to any breach of such covenants in such other
jurisdiction. Such covenants, as they relate to each jurisdiction, shall be
severable into independent covenants and shall be governed by the laws of the
jurisdiction where a breach occurs.
18. This Agreement shall be binding upon the parties to this Agreement
and upon their spouses, heirs, administrators, representatives, executors,
successors and assigns. You expressly warrant that you have not transferred and
will not transfer to any person or entity any rights, causes of action or claims
released in this Agreement. No promise or agreement made after the execution of
this Agreement shall be binding unless it is in writing and signed by the
authorized representatives of the parties.
19. This Agreement shall be construed and governed under the laws of
the State of North Carolina.
Date: _____________________, 1996 /s/ JAMES E. BOYD
---------------------------
JAMES E. BOYD
YALE INTERNATIONAL, INC./
SPRECKELS INDUSTRIES, INC.
Date: _____________________, 1996 By: /s/ GARY L. TESSITORE
-------------------------
Gary L. Tessitore
Its: President and Chief Executive
Officer
<PAGE>
EXHIBIT 10.34
SPRECKELS INDUSTRIES, INC.
SPRECKELS SUGAR COMPANY, INC.
DUFF-NORTON COMPANY, INC.
FIRST AMENDMENT TO SECURED REVOLVING CREDIT AGREEMENT
AND SECURED REVOLVING CREDIT NOTE
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Ladies and Gentlemen:
The undersigned, Spreckels Industries, Inc., a Delaware corporation
("Industries"), Spreckels Sugar Company, Inc., a Delaware corporation
("Spreckels"), and Duff-Norton Company, Inc., a Delaware corporation
("Duff-Norton") and you (the "Bank") have entered into a Secured Revolving
Credit Agreement dated as of July 22, 1994 (the "Credit Agreement") pursuant to
which the Bank makes a Revolving Credit (as defined in the Credit Agreement)
available to Spreckels and Duff-Norton (collectively the "Borrowers" and
individually a "Borrower"). All defined terms used in this Amendment shall have
the same meanings as in the Credit Agreement unless defined differently herein.
Substantially concurrently herewith Holly Sugar Corporation (the
"Purchaser") will acquire all of the capital stock of Spreckels and Limestone
Products Company, Inc., a Delaware corporation ("Limestone"). In connection with
that acquisition the Borrowers have requested the Bank to amend the Credit
Agreement and the other Loan Documents to remove Spreckels as a Borrower
thereunder, to reduce the Bank's Commitment thereunder to $25,000,000, to amend
certain covenants contained therein and to release Limestone from its
obligations under the Subsidiary Guaranty, and the Bank is willing to do so on
the terms and conditions of this Amendment.
1. AMENDMENTS.
The Borrowers and the Bank hereby agree that upon the satisfaction of all
of the conditions precedent contained in Section 2 hereof, the Credit Agreement
and the other Loan Documents shall be amended as follows:
1.1. The Bank consents to the sale of all of the capital stock of
Spreckels and Limestone to the Purchaser.
1.2. All indebtedness, obligations and liabilities of Spreckels and
Limestone to the Bank under the Loan Documents shall be fully paid and
satisfied, and all liens on and security interests in the assets and properties
of Spreckels and Limestone under any of the Loan Documents shall be terminated
and released; excluding, however, such indebtedness,
<PAGE>
obligations and liabilities of Spreckels and Limestone relating to the L/Cs
described on Exhibit A attached hereto (the "Retained L/Cs") arising under any
application and agreement for letter of credit previously or hereafter executed
and delivered by Spreckels and/or Limestone to the Bank (the "Retained L/C
Obligations"), which shall continue in full force and effect in accordance with
their terms.
1.3. Industries, Duff-Norton and Mechanical Products, Inc. shall have no
indebtedness, obligations or liability to the Bank with respect to any
indebtedness, obligations and liabilities of Spreckels and Limestone to the
Bank.
1.4. The term "L/C" shall not include the Retained L/Cs.
1.5. The term "L/C Agreement" shall not include any application and
agreement for letter of credit at any time executed and delivered by Spreckels
or Limestone with respect to any of the Retained L/Cs.
1.6. The term "Reimbursement Obligation" shall not include any of the
Retained L/C Obligations.
1.7. The terms "Borrowers" and "Borrower" shall mean Duff-Norton.
1.8. The term "Obligation" shall mean all indebtedness, obligations and
liabilities of Duff-Norton to the Bank under the Loan Documents.
1.9. Section 1.1 of the Credit Agreement shall be amended by replacing the
figure "$40,000,000" with the figure "$25,000,000".
1.10. The definition of the term "Borrowing Base" contained in Section 4.1
of the Credit Agreement shall be amended to read as follows:
"Borrowing Base", as determined on the basis of the information
contained in the most recent Borrowing Base Certificate, shall mean, with
respect to Duff-Norton, an amount equal to:
(a) 85% of the amount of Eligible Receivables of Duff-Norton; plus
(b) 50% of the Value of Eligible Inventory of Duff-Norton consisting
of finished goods and raw materials; plus
(c) 40% of the Value of Eligible Inventory owned by Duff-Norton
consisting of finished parts and assembly."
1.11 Section 7.8(f) and (g) of the Credit Agreement shall be amended to
read as follows:
"(f) Intentionally Omitted;
-2-
<PAGE>
(g) Intentionally Omitted;".
1.12. Section 7.14 of the Credit Agreement shall be amended by replacing
the figure "$7,000,000" appearing therein with the figure "$5,000,000".
1.13. Sections 7.17 and 7.18 of the Credit Agreement shall be amended to
read as follows:
"7.17 . Intentionally Omitted.
7.18 . Intentionally Omitted."
1.14. Section 7.24 of the Credit Agreement shall be amended to read as
follows:
"7.24. Intentionally Omitted."
1.15. Each and every reference in any of the Loan Documents to Spreckels
or Limestone shall be of no force or effect.
1.16. Exhibit A to the Credit Agreement and the Note shall each be amended
by replacing the figure "$40,000,000" appearing in the upper left-hand corner
thereof with the figure "$25,000,000", by replacing the phrase "Forty Million
Dollars ($40,000,000)" appearing in the first paragraph thereof with the phrase
"Twenty-Five Million Dollars ($25,000,000)".
1.17. The Bank shall type the following legend on the Note:
"This Note has been amended pursuant to a First Amendment to Secured
Revolving Credit Agreement and Secured Revolving Credit Note dated as
of April 19, 1996 among the Borrowers and Harris, including a reduction
in the principal amount hereof, to which amendment reference is hereby
made for a statement of the terms thereof."
1.18. Exhibit E to the Credit Agreement shall be replaced by Exhibit E
attached hereto.
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
2.1. The Borrowers and the Bank shall have executed this Amendment.
2.2. Each Guarantor Subsidiary and Industries shall have executed and
delivered to the Bank the Guarantors' Acknowledgment attached hereto.
-3-
<PAGE>
2.3. Each of the representations and warranties set forth in Section 5 of
the Credit Agreement shall be true and correct, except that the representations
and warranties made under Section 5.4 of the Credit Agreement shall be deemed to
refer to the most recent financial statements furnished to the Bank pursuant to
Section 7.4 of the Credit Agreement.
2.4. The Borrowers shall be in full compliance with all of the terms and
conditions of the Credit Agreement and no Event of Default or Potential Default
shall have occurred and be continuing thereunder or shall result after giving
effect to this Amendment which has not been waived by the Bank.
2.5. The aggregate principal amount of all loans and unpaid Reimbursement
Obligations and the maximum amount available to be drawn under all L/Cs
outstanding under the Credit Agreement (exclusive of the Retained L/Cs) shall
not exceed the lesser of $25,000,000 or Duff-Norton's Borrowing Base.
2.6. The Bank shall have received an application and agreement for letter
of credit executed and delivered by Imperial Holly Corporation and either
Spreckels or Limestone, as the case may be, with respect to each of the Retained
L/Cs.
2.7. Evidence satisfactory to the Bank that Industries' guaranty of
Spreckels' obligations to General Electric Capital Corporation and Heller
Financial Corporation have been terminated without any liability to Industries.
2.8. The Bank shall have received the amount specified in the pay-off
letter dated even date herewith from the Bank, Industries, Spreckels and
Duff-Norton to Imperial Holly Corporation.
3. REPRESENTATIONS.
In order to induce the Bank to execute and deliver this Amendment, the
Borrowers hereby represents to the Bank that as of the date hereof, the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 5.4 shall be deemed to refer to the most recent financial
statements of the Borrowers delivered to the Bank) and the Borrowers are in full
compliance with all of the terms and conditions of the Credit Agreement and no
Potential Default or Event of Default has occurred and is continuing under the
Credit Agreement or shall result after giving effect to this Amendment.
4. MISCELLANEOUS.
4.1. Duff-Norton hereby agrees that notwithstanding the execution and
delivery hereof, the Security Agreement shall be and remain in full force and
effect and that any rights and remedies of the Bank thereunder, obligations of
Duff-Norton thereunder and any liens or security interests created or provided
for thereunder shall be and remain in full force and effect and shall not be
affected, impaired or discharged hereby. Nothing herein
-4-
<PAGE>
contained shall in any manner affect or impair the priority of the liens and
security interest created and provided for by the Security Agreement as to the
indebtedness which would be secured thereby prior to giving effect hereto.
4.2. Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to the specific Amendment need not be made in any note, document,
letter, certificate, the Credit Agreement itself, or any communication issued or
made pursuant to or with respect to the Credit Agreement, any reference to the
Credit Agreement being sufficient to refer to the Credit Agreement as amended
hereby.
4.3. This Amendment may be executed in any number of counterparts, and by
the different parties on different counterparts, all of which taken together
shall constitute one and the same instrument. Any of the parties hereto may
execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original. This Amendment
shall be governed by the internal laws of the State of Illinois.
-5-
<PAGE>
Dated as of April 19, 1996.
SPRECKELS SUGAR COMPANY, INC.
By (Signature of Donald C. Roof appears here)
Its Treasurer
DUFF-NOTON COMPANY, INC.
By (Signature of Donald C. Roof appears here)
Its Treasurer
Accepted as of the date last written above.
HARRIS TRUST AND SAVINGS BANK
By
Its Vice President
-6-
<PAGE>
Dated as of April 19, 1996.
SPRECKELS SUGAR COMPANY, INC.
By
Its
DUFF-NORTON COMPANY, INC.
By
Its
Accepted as of the date last written above.
HARRIS TRUST AND SAVINGS BANK
By (Signature of Alvin T. Kuhler appears here)
Its Vice President
-6-
<PAGE>
GUARANTORS' ACKNOWLEDGMENT
The undersigned, Spreckels Industries, Inc., a Delaware corporation, has
executed and delivered the Credit Agreement (as defined in the above and
foregoing Amendment) as a guarantor thereunder, and the undersigned, Mechanical
Products, Inc., a Delaware corporation, has signed a Guaranty Agreement dated as
of July 22, 1994, to the Bank. Each of the undersigned hereby acknowledges the
amendment of the Credit Agreement as set forth above and confirms that its
guaranty and all of its respective obligations thereunder remain in full force
and effect and, without limiting the foregoing, acknowledges and agrees that all
of Duff-Norton's indebtedness, obligations and liabilities to the Bank under the
Credit Agreement as amended by the above and foregoing Amendment constitutes
indebtedness which is guarantied by the undersigned under its respective
guaranty. Each of the undersigned further agrees that its acknowledgment to any
further amendments to the Credit Agreement shall not be required as a result of
this acknowledgment having been obtained, except to the extent if any, required
by the terms of its guaranty.
Dated as of the date last written above.
SPRECKELS INDUSTRIES, INC.
By (Signature of Donald C. Roof appears here)
Its Treasurer
MECHANICAL PRODUCTS, INC.
By (Signature of Donald C. Roof appears here)
Its Treasurer
<PAGE>
EXHIBIT E
SPRECKELS INDUSTRIES, INC.
DUFF-NORTON COMPANY, INC.
BORROWING BASE CERTIFICATE
As of _________________, 19__
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60609
Pursuant to the terms of that certain Secured Revolving Credit Agreement
dated as of July 22, 1994, as amended, originally among SPRECKELS INDUSTRIES,
INC., SPRECKELS SUGAR COMPANY, INC. AND DUFF-NORTON COMPANY, INC. (the
"Borrower") and you (the "Agreement"), the Borrower delivers to you the
following computation of the Borrowing Base, as defined in Section 4.1 of the
Agreement, as of the computation date of ________________, 19__. The Borrower
certifies that the following computation of the Borrowing Base was made in
accordance with Section 4.1 of the Agreement and that as of the last day of the
preceding weekly period the Borrower has re-examined the terms and provisions of
the Agreement and that no Potential Default or Event of Default has occurred or,
if any such Potential Default or Event of Default has occurred, a description of
such Potential Default or Event of Default and the action, if any, taken by the
Borrower to remedy the same are specified hereinbelow.
RECEIVABLES DUFF-NORTON
Aging: Current - 30 days $__________
31-60 days
61-90 days
Over 90 days ___________
Total Receivables
Less: Ineligible Receivables ___________
Eligible Receivables $__________ $___________
85% of Eligible Receivables
<PAGE>
DUFF-NORTON FINISHED GOODS INVENTORY
Finished Goods Inventory Value $__________
Less: Ineligible Finished Goods
Inventory Value ___________
Total Value $__________
50% Finished Parts Inventory Value $___________
DUFF-NORTON RAW MATERIALS INVENTORY
Raw Material Inventory Value $__________
Less: Ineligible Raw Material
Inventory Value $__________
Total Value $__________
50% Raw Materials Inventory Value $___________
DUFF-NORTON FINISHED PARTS INVENTORY
Finished Parts Inventory Value $__________
Less: Ineligible Finished Parts
Inventory Value ----------
Total Value $__________
40% Finished Parts Inventory Value $___________
BORROWING BASE $___________
Loans and L/C's Outstanding $__________
Excess (Deficit) $___________
-2-
<PAGE>
The Information contained in this certificate is true and correct on the
date hereof.
SPRECKELS INDUSTRIES, INC.
By
Its
-3-
<PAGE>
EXHIBIT A
THE RETAINED LETTERS OF CREDIT
SPRECKELS
Number Amount Beneficiary
SPL 34110 $34,000 Hacienda Venture
SPL 34745 $486,540 West Coast Beet Seed
LIMESTONE
SPL 34114 $239,000 Eldorado County
<PAGE>
EXHiBIT 21
SPRECKELS INDUSTRIES, INC
Direct Subsidiaries:
Duff-Norton Company, Inc.
Mechanical Products Company, Inc.
Minitec Corporation
Spreckels Land Company, Inc.
Spreckels Water Company, Inc.
Spreckels Development Company, Inc.
Spreckels Industries International Ltd.
<PAGE>
EXHIBIT 22
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned Steven A. Van Dyke, a
Director of Spreckels Industries, Inc., a Delaware corporation (the "Company"),
hereby authorizes and designates Donald C. Roof, Senior Vice President and Chief
Financial Officer of the Company and Michael L. Sarina, Controller, Chief
Accounting Officer and Secretary of the Company, to execute, acknowledge and
file in his name, and as his attorneys-in-fact, individually, the Company's Form
10-K for fiscal year ended June 30, 1996, with the United States Securities and
Exchange Commission (the "SEC") for the purpose of complying with Section 13 or
15(b) of the Securities Exchange Act of 1934 and the rules, regulations and SEC
interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
------------------------
Steven A. Van Dyke
<PAGE>
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned Bart A. Brown, Jr., a
Director of Spreckels Industries, Inc., a Delaware corporation (the "Company"),
hereby authorizes and designates Donald C. Roof, Senior Vice President and Chief
Financial Officer of the Company and Michael L. Sarina, Controller, Chief
Accounting Officer and Secretary of the Company, to execute, acknowledge and
file in his name, and as his attorneys-in-fact, individually, the Company's Form
10-K for fiscal year ended June 30, 1996, with the United States Securities and
Exchange Commission (the "SEC") for the purpose of complying with Section 13 or
15(b) of the Securities Exchange Act of 1934 and the rules, regulations and SEC
interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
------------------------
Bart A. Brown, Jr.
<PAGE>
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned Joshua S. Friedman, a
Director of Spreckels Industries, Inc., a Delaware corporation (the "Company"),
hereby authorizes and designates Donald C. Roof, Senior Vice President and Chief
Financial Officer of the Company and Michael L. Sarina, Controller, Chief
Accounting Officer and Secretary of the Company, to execute, acknowledge and
file in his name, and as his attorneys-in-fact, individually, the Company's Form
10-K for fiscal year ended June 30, 1996, with the United States Securities and
Exchange Commission (the "SEC") for the purpose of complying with Section 13 or
15(b) of the Securities Exchange Act of 1934 and the rules, regulations and SEC
interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
------------------------
Joshua S. Friedman
<PAGE>
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned F. Kenneth Iverson, a
Director of Spreckels Industries, Inc., a Delaware corporation (the "Company"),
hereby authorizes and designates Donald C. Roof, Senior Vice President and Chief
Financial Officer of the Company and Michael L. Sarina, Controller, Chief
Accounting Officer and Secretary of the Company, to execute, acknowledge and
file in his name, and as his attorneys-in-fact, individually, the Company's Form
10-K for fiscal year ended June 30, 1996, with the United States Securities and
Exchange Commission (the "SEC") for the purpose of complying with Section 13 or
15(b) of the Securities Exchange Act of 1934 and the rules, regulations and SEC
interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
------------------------
F. Kenneth Iverson
<PAGE>
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned Stewart M. Kasen, a Director
of Spreckels Industries, Inc., a Delaware corporation (the "Company"), hereby
authorizes and designates Donald C. Roof, Senior Vice President and Chief
Financial Officer of the Company and Michael L. Sarina, Controller, Chief
Accounting Officer and Secretary of the Company, to execute, acknowledge and
file in his name, and as his attorneys-in-fact, individually, the Company's Form
10-K for fiscal year ended June 30, 1996, with the United States Securities and
Exchange Commission (the "SEC") for the purpose of complying with Section 13 or
15(b) of the Securities Exchange Act of 1934 and the rules, regulations and SEC
interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
------------------------
Stewart M. Kasen
<PAGE>
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned William J. Nightingale, a
Director of Spreckels Industries, Inc., a Delaware corporation (the "Company"),
hereby authorizes and designates Donald C. Roof, Senior Vice President and Chief
Financial Officer of the Company and Michael L. Sarina, Controller, Chief
Accounting Officer and Secretary of the Company, to execute, acknowledge and
file in his name, and as his attorneys-in-fact, individually, the Company's Form
10-K for fiscal year ended June 30, 1996, with the United States Securities and
Exchange Commission (the "SEC") for the purpose of complying with Section 13 or
15(b) of the Securities Exchange Act of 1934 and the rules, regulations and SEC
interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
-------------------------
William J. Nightingale
<PAGE>
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned George A. Poole, Jr., a
Director of Spreckels Industries, Inc., a Delaware corporation (the "Company"),
hereby authorizes and designates Donald C. Roof, Senior Vice President and Chief
Financial Officer of the Company and Michael L. Sarina, Controller, Chief
Accounting Officer and Secretary of the Company, to execute, acknowledge and
file in his name, and as his attorneys-in-fact, individually, the Company's Form
10-K for fiscal year ended June 30, 1996, with the United States Securities and
Exchange Commission (the "SEC") for the purpose of complying with Section 13 or
15(b) of the Securities Exchange Act of 1934 and the rules, regulations and SEC
interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
------------------------
George A. Poole, Jr.
<PAGE>
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned S. Donley Ritchey, a
Director of Spreckels Industries, Inc., a Delaware corporation (the "Company"),
hereby authorizes and designates Donald C. Roof, Senior Vice President and Chief
Financial Officer of the Company and Michael L. Sarina, Controller, Chief
Accounting Officer and Secretary of the Company, to execute, acknowledge and
file in his name, and as his attorneys-in-fact, individually, the Company's Form
10-K for fiscal year ended June 30, 1996, with the United States Securities and
Exchange Commission (the "SEC") for the purpose of complying with Section 13 or
15(b) of the Securities Exchange Act of 1934 and the rules, regulations and SEC
interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
------------------------
S. Donley Ritchey
<PAGE>
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned Gary L. Tessitore, Director,
President and Chief Executive Officer, of Spreckels Industries, Inc., a Delaware
corporation (the "Company"), hereby authorizes and designates Donald C. Roof,
Senior Vice President and Chief Financial Officer of the Company and Michael L.
Sarina, Controller, Chief Accounting Officer and Secretary of the Company, to
execute, acknowledge and file in his name, and as his attorneys-in-fact,
individually, the Company's Form 10-K for fiscal year ended June 30, 1996, with
the United States Securities and Exchange Commission (the "SEC") for the purpose
of complying with Section 13 or 15(b) of the Securities Exchange Act of 1934 and
the rules, regulations and SEC interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
------------------------
Gary L. Tessitore
<PAGE>
POWER OF ATTORNEY
Effective October 8, 1996, the undersigned Donald C. Roof, Senior Vice
President and Chief Financial Officer, of Spreckels Industries, Inc., a Delaware
corporation (the "Company"), hereby authorizes and designates Michael L. Sarina,
Controller, Chief Accounting Officer and Secretary of the Company, to execute,
acknowledge and file in his name, and as his attorney-in-fact, individually, the
Company's Form 10-K for fiscal year ended June 30, 1996, with the United States
Securities and Exchange Commission (the "SEC") for the purpose of complying with
Section 13 or 15(b) of the Securities Exchange Act of 1934 and the rules,
regulations and SEC interpretations thereunder.
The undersigned has executed this Power of Attorney this _____ day of
October, 1996.
------------------------
Donald C. Roof
<PAGE>
