<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1997 COMMISSION FILE NUMBER 1-10307
IMPERIAL HOLLY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 74-0704500
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE IMPERIAL SQUARE, SUITE 200
P.O. BOX 9
SUGAR LAND, TEXAS 77487
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 491-9181
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
Common Stock, without par value REGISTERED
Rights to Purchase Preferred Stock American Stock Exchange
American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to the
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K .
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $95.8 million, based upon the last reported sales
price of the registrant's Common Stock on the American Stock Exchange on June
2, 1997 and (solely for this purpose) treating all directors, executive
officers and 10% shareholders of the registrant (other than those holding
shares in a fiduciary capacity) as affiliates.
The number of shares outstanding of the registrant's Common Stock, as of
June 2, 1997, was 14,250,293.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive Proxy Statement relating to
the registrant's 1997 Annual Meeting of Shareholders are incorporated by
reference in Part III hereof.
<PAGE>
TABLE OF CONTENTS
PART I
<TABLE>
<C> <S> <C>
Item 1. Business......................................................... 1
Item 2. Properties....................................................... 8
Item 3. Legal Proceedings................................................ 9
Item 4. Submission of Matters to a Vote of Security Holders.............. 10
Executive Officers of the Registrant............................. 10
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters........................................................ 12
Item 6. Selected Financial Data ......................................... 12
Management's Discussion and Analysis of Financial Condition and
Item 7. Results of Operations............................................ 13
Item 8. Financial Statements and Supplementary Data ..................... 16
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure .......................................... 16
PART III
Item 10. Directors and Executive Officers of the Registrant ............. 16
Item 11. Executive Compensation ......................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and Management . 16
Item 13. Certain Relationships and Related Transactions ................. 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 17
</TABLE>
----------------
The statements regarding future market prices and operating results and
other statements that are not historical facts contained in this report on
Form 10-K are forward-looking statements. The words "expect", "project",
"estimate", "believe", "anticipate", "plan", "intend", "could", "may",
"predict" and similar expressions are also intended to identify forward-
looking statements. Such statements involve risks, uncertainties and
assumptions, including, without limitation, market factors, the effect of
weather and economic conditions, farm and trade policy, the available supply
of sugar, available quantity and quality of sugar beets and other factors
detailed elsewhere in this and other Company filings with the Securities and
Exchange Commission. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary materially from those indicated.
<PAGE>
PART I
ITEM 1. BUSINESS.
Imperial Holly Corporation is one of the nation's largest producers and
marketers of refined sugar, producing both cane and beet sugar. As used
herein, the "Company" refers to Imperial Holly Corporation and its
subsidiaries; "Imperial" refers to the Company's cane sugar refinery
operations, which are conducted directly by the Company under the name
Imperial Sugar Company--a division of Imperial Holly Corporation; and "Holly"
refers to the Company's wholly-owned subsidiary, Holly Sugar Corporation, and
its subsidiaries, including Spreckels Sugar Company, Inc. ("Spreckels").
The Company refines raw cane sugar primarily at its Imperial Sugar Company
refinery in Sugar Land, Texas. Through Holly, the Company extracts refined
beet sugar by processing sugarbeets purchased from independent growers at
processing plants in California, Wyoming, Montana and Texas. The Company sells
its refined sugar directly and through brokers to wholesalers, retail grocers
and food manufacturers. The Company sells by-products (primarily beet pulp and
molasses) from the extraction and refining processes for use as livestock feed
and markets commercial beet seed.
The Company was incorporated in 1924 as Imperial Sugar Company and is the
successor to a cane sugar plantation and milling operation begun in Sugar Land
in the early 1800's that began producing granulated sugar in 1843. In 1988,
the Company purchased Holly and the Company's name was changed to Imperial
Holly Corporation. Holly was founded in 1905 and incorporated in 1916.
On April 19, 1996, Holly acquired all of the outstanding capital stock of
Spreckels and Limestone Products Company, Inc. Effective March 31, 1997,
Spreckels was merged into Holly Sugar Corporation and continues as a division
of Holly. See Note 2 to the Consolidated Financial Statements for further
discussion of the Spreckels acquisition. Spreckels operates beet sugar
processing plants in Woodland and Mendota, California. Holly did not acquire
Spreckels' Manteca, California factory, which was retained by the seller and
has been closed. Spreckels has been in continuous operation since 1898. The
Company ceased sugarbeet processing at Holly's Hamilton City, California
factory in June 1996.
A wholly-owned subsidiary of Holly has entered into a limited partnership
agreement with a sugarbeet growers' cooperative in Washington state to build
and operate a sugarbeet factory at Moses Lake, Washington. This facility is
under construction with a current total budget of approximately $140 million
and is expected to process sugarbeets for the first time in the 1998 fall
campaign.
PRODUCTS AND SALES
Sugar. The Company's principal product line is refined sugar, which
accounted for approximately 90% of consolidated net sales in the Company's
fiscal year ended March 31, 1997. Cane sugar and beet sugar account for
approximately 45% and 55%, respectively, of the Company's fiscal 1997 sugar
production. The Company produces and sells granulated white, brown and
powdered sugar to wholesalers, retail grocers and food manufacturers. Sugar is
sold in consumer packages and industrial packages and in bulk and liquid form
(including invert sugar and blended products).
Sales to wholesalers and grocers consist primarily of consumer packages of
granulated, brown and powdered sugar. These consumer packages, which range
from one pound boxes to 25-pound bags and constitute approximately one-third
of the sugar sold, are marketed under the Imperial(R) and Holly(R) brand names
and under various private labels. Spreckels sells sugar under its Spreckels(R)
and U&I(R) brands and under various private labels. Private label packaged
sugar, which represents a significant percentage of the Company's sales, is
generally sold at prices lower than that received for branded sugar. The
Company continues to focus efforts on increasing sales of branded products as
a percentage of total consumer sales.
1
<PAGE>
Food manufacturers principally purchase sugar in industrial size packages
and in bulk or liquid form for use in the preparation of confections, baked
products, frozen desserts, canned goods and various other food products. The
majority of the Company's industrial sales are made to customers under fixed
price contracts with terms of one year or less.
The Company's products are sold directly by the Company's sales force and
through independent brokers. The Company maintains sales offices at its
corporate headquarters in Sugar Land as well as in Chicago, Illinois and
Tracy, California. The Company considers its marketing and promotional
activities important to its overall sales effort. The Company advertises its
brand names in both print and broadcast media and distributes various
promotional materials, including discount coupons and compilations of recipes.
The Company's sales are concentrated in the western and mid-western portions
of the United States. No customer accounted for more than 10% of the Company's
sales during fiscal 1997.
Sales of refined sugar are moderately seasonal, normally increasing during
the summer months because of increased demand of various food manufacturers,
including fruit and vegetable packers; shipments of specialty products (brown
and powdered sugar) increase in the fourth calendar quarter due to holiday
baking needs. Although the refining of cane sugar is not seasonal, the
production of beet sugar is a seasonal activity. Each of the Company's beet
sugar factories operates during sugar-making campaigns, which generally total
120 days to 180 days in length each year, depending upon the supply of
sugarbeets available to the factory. Because of the geographical diversity of
its manufacturing facilities, the Company is generally able to produce beet
sugar year-round. While the seasonal production of sugarbeets requires the
Company to store significant refined sugar inventory at each factory, the
geographical diversity and staggered periods of production enable the
Company's total investment in inventories to be reduced. Additionally, these
factors reduce the likelihood that adverse weather conditions will affect all
the Company's productive areas simultaneously and aid in distribution. Refined
sugar is shipped by rail and truck, including Company-owned vehicles.
By-Products. By-products from beet sugar processing (beet pulp and molasses)
are sold primarily as livestock feeds to dairymen, livestock feeders,
livestock feed processors and industrial customers. By-product sales accounted
for approximately 7% of consolidated net sales during fiscal 1997. The major
portion of the beet pulp and molasses produced from sugarbeet operations is
sold during and shortly after the sugar-making campaigns.
Marketing of by-products from beet sugar processing is concentrated in the
western half of the United States and Japan. In fiscal 1997, export sales
accounted for approximately 25% of by-product sales.
Both the domestic and export markets are highly competitive because of the
availability and pricing of by-products of other sugarbeet processors and corn
wet millers, as well as other livestock feeds and grains. The market price of
the Company's by-products relative to the price of competitive feeds and
grains is the principal competitive determinant. Among other factors, the
weather and seasonal abundance of such feeds and grains may affect the market
price of by-products.
Beet Seed. Holly Hybrids, a division of Holly, produces and markets
commercial seed to beet growers under contract to Holly as well as growers
under contract to grow for other beet sugar processors. In addition, Spreckels
is active in the development and production of commercial seed for use by
California beet growers. Holly's beet seed sales program is conducted
primarily at Holly Hybrids' headquarters in Sheridan, Wyoming and at Holly's
Tracy, California Agriculture Station. The Company consolidated Spreckels' and
Holly's beet seed programs during the 1997 fiscal year. See "Research."
Inulin. In October 1995, the Company and Cooperatie Cosun U.A., a
Netherlands sugar processor (formerly known as Cooperatie Suiker Unie U.A.),
formed Imperial-Suiker Unie, L.L.C. ("Imperial-Suiker Unie"), a 50-50 joint
venture. In connection with the creation of Imperial-Suiker Unie, the Company
has entered into various agreements with Cosun and Sensus, a business unit of
Cosun, whereby the Company has agreed to
2
<PAGE>
provide certain marketing and administrative services to the joint venture.
Imperial-Suiker Unie has the exclusive right to market in Canada, Mexico and
the United States inulin and inulin-based products produced by Cosun. Inulin
is extracted from chicory roots by a process similar to sugar extraction from
sugarbeets and is a natural carbohydrate with multifunctional properties with
potential both as a nutritional additive and as a functional food ingredient.
RAW MATERIAL AND PROCESSING REQUIREMENTS
Raw Cane Sugar. The Company purchases raw cane sugar from both domestic and
foreign sources. Sources of supply in the recent past have been Louisiana,
Florida and countries in the Caribbean and Central America. The availability
of foreign raw cane sugar is determined by the import quota level designated
by applicable regulation. See "--Sugar Legislation and Other Market Factors".
During fiscal 1997, approximately 48% of the raw sugar purchased by Imperial
was produced domestically. The Company has not experienced difficulties in the
past in contracting sufficient quantities of raw sugar to supply the refinery.
Imperial receives raw sugar directly by rail in Sugar Land and by
intercoastal barges and ocean-going vessels at the Company's facility in
Galveston, Texas, approximately 60 miles from Sugar Land. Raw sugar received
at the Galveston facility is unloaded, weighed, sampled and stored in
Imperial's Galveston warehouse, which has a capacity of approximately 30,000
tons. Imperial is paid a stevedoring allowance by the raw sugar sellers to
unload the raw sugar and receives additional dispatch payments from the
carriers if the unloading is completed in less than the allotted time or pays
demurrage if unloading takes more than the time allotted. In Sugar Land, the
raw sugar is stored in a warehouse having a capacity of approximately 20,000
tons.
Raw sugar purchase contracts can provide for the delivery of a single cargo
or for multiple cargoes over a specified period or a specified percentage of
the seller's production over one of more crop years. Contract terms may
provide for fixed prices but generally provide for prices based on the futures
market during a specified period of time. The contracts provide for a premium
if the quality of the raw sugar is above a specified grade or a discount if
the quality is below a specified grade. Contracts generally provide that the
seller pays freight, insurance charges and other costs of shipping.
The Company contracts to purchase raw sugar substantially in advance of the
time it delivers the refined sugar produced from that purchase. The majority
of the Company's industrial sales are under fixed price contracts; in order to
minimize price risk in raw and refined sugar commitments, the Company attempts
to match refined sugar sales contracted for future delivery with the purchase
or pricing of raw sugar when feasible.
Holly supplements its beet sugar production by refining raw cane sugar at
its sugarbeet processing facilities. The cane sugar refined by Holly generally
is co-processed with its beet sugar production, but Holly has also refined raw
cane sugar during periods when it was not processing sugarbeets. Holly expects
to continue to supplement its beet sugar production by refining raw cane sugar
during fiscal 1998.
Sugarbeet Purchases. Holly purchases sugarbeets, from which it extracts
sugar and produces by-products, from independent growers under contracts
negotiated with associations representing such growers. The grower contracts
typically are for one crop; however, on occasion, contracts may cover multiple
crops. Holly contracts for acreage prior to the planting season based on
estimated demand, marketing strategy, processing capacity and historical crop
yields. The type of contract used provides for payments to the grower based on
the sugar content of the sugar beets delivered by each grower and the net
selling price of refined beet sugar during the specified contract year. Some
grower contracts provide for a premium to the growers for delivering beets of
superior quality. The net selling price is the gross sales price less certain
marketing costs, including packaging costs, brokerage, freight expense and
amortization costs for certain facilities used in connection with marketing.
Use of this type of participating contract reduces Holly's exposure to
inventory price risks on its sugarbeet purchases so long as the net selling
price does not fall below applicable regional minimum support prices, if any,
established by the United States Department of Agriculture ("USDA"). See " --
Sugar Legislation and other Market Factors".
3
<PAGE>
Acreage contracted at each factory location may vary from year to year on
the basis of prior crop quality, productivity, weather conditions,
availability of irrigation water, the prices anticipated by growers for
alternate crops, and competition with other beet sugar processors. Sugarbeet
acreage in Northern California, the North Platte Valley of Wyoming and the
Texas Panhandle has declined in recent years but appears to have stabilized,
with modest growth expected in fiscal 1998.
Harvested beets are purchased by Holly and, in some locations, stored in
piles until processed. Weather conditions during the growing, harvesting and
processing seasons, as well as diseases, insects and other parasites, may
materially affect the quality and quantity of sugarbeets available for
purchase as well as the unit costs of raw materials and processing. Weather
conditions can also adversely affect sugarbeets in storage piles awaiting
processing.
Energy. The refining of raw cane sugar and processing of sugarbeets are
energy intensive. The primary fuel used by the Company is natural gas,
although certain of the Company's factories use significant amounts of coal.
The Company generates a substantial portion of the electricity used at the
refinery and the factories. Fuel oil can be used by the Company at certain
locations both as an alternative energy source when the price is more
attractive and as a backup to natural gas in the event of curtailment of gas
deliveries. Natural gas and coal supplies are typically purchased under
contracts which do not contain minimum quantities for terms of one year or
more.
Pricing of natural gas contracts is generally fixed for the term or indexed
to a spot market index. The Company has also utilized financial tools such as
swaps and caps to stabilize the price for gas purchases under indexed
contracts. Coal is available in abundant supply domestically and the Company
is able to purchase coal competitively.
The Company owns a royalty interest in a coal seam methane gas project in
the Black Warrior Basin of Alabama as an additional indirect hedge against
future natural gas price increases.
Other Raw Materials. Foundry coke and limestone are used in the beet sugar
extraction process. The Company generally purchases coke under contracts with
one to three year terms and utilizes rail transportation to deliver the coke
to factories. Domestic coke supplies may become tighter due to environmental
restrictions; the Company has the option of converting existing coke-fired
equipment to natural gas should the availability and economics of coke so
dictate. Holly owns a 50% share of a limestone quarry in Warren, Montana which
supplies the Sidney, Montana and Worland, Wyoming factories with their annual
limestone requirements. Limestone Products Company, Inc., a subsidiary of
Holly, operates a limestone quarry in Cool, California which supplies Holly's
Northern California beet processing factories with limestone. These quarries
do not normally supply other Holly factories because of high freight costs.
Limestone required in the other factory operations is generally purchased from
independent sources under contracts with one to five-year terms.
RESEARCH
The Company has recently completed the relocation of its Research and
Development Center, consolidating research relating to manufacturing process
technology, factory operations, food science and new product development in
Sugar Land.
Holly has an agreement with D. J. van der Have B.V., a Netherlands beet seed
company, granting D. J. van der Have access to Holly's proprietary beet seed
breeding material for varietal seed development in exchange for the exclusive
marketing rights to D. J. van der Have's beet seed in certain markets in the
United States, Canada and Mexico. In addition, Holly is participating in a
joint venture with Societe Europeenne de Semences, N.V.- S.A., a Belgian beet
seed company, to develop improved beet seed varieties.
4
<PAGE>
Holly is active in sugarbeet disease control. Holly's growing areas, like
those of its competitors, have varying levels of diseases which affect
sugarbeet quality and quantity as well as the cost of processing. Holly has a
sugarbeet plant pathology disease control research laboratory in Tracy,
California which develops and implements disease control strategies for all of
the Company's sugarbeet growing areas. Holly communicates information about
agricultural practices to growers through its computerized agriculture
information systems and printed material, including Holly's magazine
"Sugarbeet Update", published semiannually.
COMPETITION
The Company competes with other cane sugar refiners and beet sugar
processors and, in certain product applications, with producers of other
nutritive and non-nutritive sweeteners. Selling price and the ability to
supply the buyer's quality and quantity requirements in a timely fashion are
important competitive factors.
Certain competing beet sugar processors have expanded their production
capacity significantly over the past five years. The additional sugar marketed
as a result of this expansion has acted to depress sugar market prices at
times during this period.
The most significant nutritive sweetener that competes with refined sugar is
high fructose corn syrup ("HFCS"), which generally sells at a discount to
refined sugar; in recent months such discount has increased. The level of per
capita sucrose consumption in the United States has increased in recent years;
the Company believes that future increases or decreases in sucrose consumption
will be dependent upon technological improvements, changes in population,
geographic shifts in population and changes in consumer sweetener preferences.
In certain applications, refined sugar also competes with non-nutritive or
low-calorie sweeteners, principally aspartame and, to lesser extents,
saccharin and acesulfam-k.
The table below is based on data published by the USDA and sets forth per
capita consumption of nutritive sweeteners in the United States for the years
indicated.
ANNUAL PER CAPITA U. S. NUTRITIVE SWEETENER CONSUMPTION
<TABLE>
<CAPTION>
1993 1994 1995 1996(1)
----------------- ----------------- ----------------- -----------------
POUNDS PERCENTAGE POUNDS PERCENTAGE POUNDS PERCENTAGE POUNDS PERCENTAGE
------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Refined sugar........... 65.5 45% 65.8 45% 66.2 44% 66.9 44%
HFCS.................... 54.4 38 56.4 38 58.4 39 59.8 39
Other corn sweeteners... 23.6 16 23.9 16 24.3 16 24.4 16
Other................... 1.4 1 1.5 1 1.5 1 1.5 1
----- --- ----- --- ----- --- ----- ---
Total................. 144.9 100% 147.6 100% 150.4 100% 152.6 100%
===== === ===== === ===== === ===== ===
</TABLE>
- --------
(1)Estimate.
SUGAR LEGISLATION AND OTHER MARKET FACTORS
The Company's business and results of operations are substantially affected
by market factors, principally the domestic prices for refined sugar and raw
cane sugar, and the quality and quantity of sugar beets available to the
Company. These market factors are influenced by a variety of forces, including
the number of domestic acres contracted to grow sugar cane and sugarbeets,
prices of competing crops, weather conditions and United States farm and trade
policies.
5
<PAGE>
Federal government programs, in the form of legislative or regulatory
action, have existed to support the price of domestic crops of sugar beets and
sugar cane almost continually since 1934. The principal legislation affecting
the domestic sugar industry is the Federal Agricultural Improvement and Reform
Act of 1996 (the "Act"), which became effective July 1, 1996 and extended the
sugar price support program for sugar cane and sugarbeets until June 30, 2003.
Pursuant to the Act, the Commodity Credit Corporation ("CCC") is obligated
annually to make loans available to domestic sugar processors on existing
sugar inventories from the current crop year production at 18.0 cents per
pound of raw cane sugar and 22.9 cents per pound of refined beet sugar
(subject to a limited right of reduction by the USDA); however, unlike the
predecessor act, the processor is generally not obligated to pay participating
growers a predetermined minimum support price for such sugar. The CCC loans
under the Act are recourse loans unless the tariff rate quota for import sugar
is set at a level in excess of 1.5 million short tons raw value ("STRV"). If
the tariff rate quota exceeds 1.5 million STRV, the CCC loans will become non-
recourse and processors will be obligated to pay participating growers a
predetermined minimum support price. As under the predecessor act, CCC loans
mature September 30 of each year and in no event more than nine months after
the month in which the loan was made. Under the Act, processors may forfeit
sugar to the USDA; if the tariff rate is below 1.5 million STRV and the
collateral for the loan is inadequate to cover the loan amount, the USDA may
proceed against the processor for the difference between the loan amount and
the proceeds from the sale of the forfeited sugar. A processor will be
penalized approximately 1 cent per pound for each pound of sugar forfeited.
Under the Act, the USDA utilizes the import quota and the forfeiture penalty
to affect sugar price supports and prevent forfeitures under the CCC loan
program. Unlike the predecessor act, marketing allotments are not authorized
by the Act. The USDA annually implements a tariff-rate quota for foreign
sugar, which has the effect of limiting the total available supply of sugar in
the United States. The tariff-rate quota controls the supply of sugar by
setting a punitive tariff on all sugar imported for domestic consumption that
exceeds the determined permitted imported quantity and is designed to make the
importation of the excess sugar uneconomical. To the extent the Company sells
refined sugar for export from the United States, it is entitled to import an
equivalent quantity of non-quota eligible foreign raw sugar. The tariff-rate
quota for sugar to be allowed entry into the United States during the year
ending September 30, 1997 is 2,339,000 STRV.
The Act imposes a marketing assessment fee, which was increased to 24.8
cents per hundred pounds of raw cane sugar and 26.5 cents per hundred pounds
of refined beet sugar, that is paid to the CCC by the processor. This fee is
applicable to all refined beet sugar produced from domestically grown
sugarbeets and all raw sugar produced from domestically grown sugar cane.
The North American Free Trade Agreement contains provisions that allow
Mexico to increase its sugar exports to the United States if Mexico is
projected to produce a net surplus of sugar. The terms of the North American
Free Trade Agreement restrict Mexico's exports to the United States to no more
than 25,000 STRV annually until the year 2000. Mexico's exports to the United
States would be further increased in the event Mexico produced a sugar surplus
for two consecutive years during the seven years prior to the year 2000 or at
anytime after the year 2000.
EMPLOYEES
As of March 31, 1997, the Company employed approximately 1,700 year-round
employees. In fiscal 1997, the Company employed an additional approximately
2,500 seasonal employees during the sugarbeet processing seasons when beet
sugar factories are operating around-the-clock.
The Company's cane refinery and distribution employees are represented by
the International Association of Machinists and Aerospace Workers, AFL-CIO
under a three-year contract which expires October 5, 1997. The Company's beet
sugar factory operating personnel are represented by the Distillery, Wine and
Allied Workers International Division of the United Food and Commercial
Workers International Union, AFL-CIO at
6
<PAGE>
the California factories and by the American Federation of Grain Millers
International Union, AFL-CIO at the Montana, Wyoming and Texas factories. The
Distillery, Wine and Allied Workers International Union contract expires March
1, 1998. The American Federation of Grain Millers International Union contract
expires April 30, 1999.
Certain employees of the Company's Cool, California quarry are represented
by the International Union of Operating Engineers, AFL-CIO under a three-year
contract expiring July 31, 1998.
Maintenance and repair employees at the Galveston, Texas facility are
represented by the South Atlantic and Gulf Coast District of the International
Longshoremen's Association under a three-year contract that expires September
30, 1998.
The Company believes its employee and union relationships are good.
ENVIRONMENTAL REGULATION
Company operations are governed by various federal, state and local
environmental regulations. These regulations impose effluent and emission
limitations, and requirements regarding management of water resources, air
resources, toxic substances, solid waste and emergency planning. The Company
has obtained or is making application for the required permits.
Each of the Company's manufacturing locations is permitted for the disposal
of waste materials and the monitoring of air and water quality. Additional
testing requirements and more stringent permit limitations have resulted in
increasing environmental costs, and the Company expects the cost of compliance
to continue to increase.
Imperial's Sugar Land refinery is permitted to discharge waste water for
treatment to the Sugar Land Regional Sewage System. Imperial's discharge of
this waste water to the publicly owned treatment facility has become subject
to more restrictive limitations, which will require capital expenditures of
approximately $0.5 million in fiscal 1998.
Waste water odor control is being addressed at Holly's Tracy, California and
Spreckels' facilities at Mendota, California and Woodland, California. The
soil and ground water at Spreckels' Mendota, California facility have high
concentrations of salts. Spreckels has developed a prevention plan to install
a clay cap on the areas of concern and to treat the affected ground water.
This plan will be accomplished over a 20 to 30 year period with an expected
annual cost ranging from $40,000 to $120,000. The Company has recorded a
liability for the estimated costs of this project. Holly's Torrington facility
has made significant operational modifications in order to meet more
restrictive state solid waste and groundwater regulations.
The Clean Air Act Amendment of 1990 ("CAAA") are expected to require
substantial capital expenditures, increased operational costs, and increased
emissions and permitting fees over the next ten years. Each State's
Implementation Plan will define permit parameters, monitoring requirements and
reporting criteria as directed by the CAAA Title V permitting process. To
date, application for Title V permits have been required at Holly's Wyoming
and California factories. Applications for these permits have been filed. The
Company will not be able to estimate compliance costs until the final
regulations are issued and permits are obtained.
Ongoing compliance with environmental statutes and regulations has not had,
and the Company does not anticipate that it will in the future have, a
material adverse effect on the Company's competitive position since its
competitors are subject to similar regulation. Additional capital expenditures
will be required to comply with future environmental protection standards,
although the amount of any further expenditures cannot be accurately
estimated. Management does not believe that compliance will have a materially
adverse impact on capital resources.
7
<PAGE>
ITEM 2. PROPERTIES.
Imperial's refinery in Sugar Land is located on 26 acres owned by the
Company and consists of numerous buildings with approximately 600,000 square
feet of factory space. The refinery operates 24 hours a day when sugar is
being refined. The refinery has an estimated melting capacity in excess of
4,000,000 pounds of raw sugar per day. The refinery is served by adequate
transportation and maintained in good operating condition.
The following table shows the location and capacity of Holly's beet sugar
production facilities, each of which is served by adequate transportation and
is maintained in good operating condition. Each of the facilities operates
continuously during the facility's sugar-making campaign, which generally
total 120 to 180 days each year, depending upon the supply of sugarbeets
available.
<TABLE>
<CAPTION>
APPROXIMATE DAILY
SLICING CAPACITY
BEET SUGAR FACTORIES (TONS OF SUGARBEETS)
- -------------------- --------------------
<S> <C>
Brawley, California........................................ 8,200
Mendota, California (Spreckels)............................ 4,200
Tracy, California.......................................... 5,000
Woodland, California (Spreckels)........................... 4,000
Sidney, Montana............................................ 5,400
Hereford, Texas............................................ 7,700
Torrington, Wyoming........................................ 5,600
Worland, Wyoming........................................... 3,600
------
Total...................................................... 43,700
======
</TABLE>
In June 1996, the Company ceased sugarbeet processing at Holly's Hamilton
City, California factory. Holly operates ion exclusion facilities at its
Hereford, Texas and Mendota, California factories, and a Steffens extraction
process at its Woodland, California factory. These processes increase each
factory's refined sugar production capacity without an increase in beet
slicing capacity by extracting sugar from molasses, a by-product of the beet
sugar production process.
Holly participates in a venture with the sugarbeet growers' associations
representing the sugarbeet growers supplying Holly's Rocky Mountain factories
which significantly increased the refined sugar storage capacity available at
Holly's Sidney factory by the construction of additional silos during fiscal
1996. The additional silos, built on land leased by Holly to the venture, are
owned by the venture and leased to Holly.
The Company's principal executive offices occupy approximately 64,500 square
feet of office space in an office complex owned by the Company near the Sugar
Land refinery. The office complex is located on nine acres owned by the
Company. Holly currently leases approximately 3,897 square feet of office
space for administrative offices in Colorado Springs, Colorado. As part of the
Company's strategy to consolidate corporate functions in Sugar Land, in fiscal
1997 Holly negotiated a novation agreement with the landlord and was released
from liability for the remainder of the Colorado Springs administrative office
space. Holly has subleased, until the termination of the base lease, the
Research and Development Center in Colorado Springs to a third party as part
of the Company's consolidation efforts. Each of the leases in Colorado Springs
expire in 2005.
Spreckels leases 22,000 square feet of office space in Pleasanton,
California. The Company closed the Pleasanton office and has subleased the
space through the term of the lease, which terminates in 2003. Spreckels
leases a 90,000 square foot raw sugar warehouse in Stockton, California under
a lease which terminates June 30, 1998.
Imperial's wharf and warehouse facilities in Galveston are located on
property leased from the Port of Galveston under a lease which expires in
2013. The Company owns the raw sugar discharging equipment located at this
facility.
8
<PAGE>
The Company owns approximately 250 acres of land near its refinery and
approximately 10,800 acres of land at the various beet sugar factory sites.
Most of this acreage is used for the factories, settling ponds and as buffers
from nearby communities. The remainder of the land is leased as farm and
pasture land. Holly also owns approximately 100 acres of land, an agricultural
research facility and a sugarbeet seed processing facility at Sheridan,
Wyoming. Holly owns a 50% interest in The Bighorn Limestone Company, the owner
of a limestone quarry in Warren, Montana. Limestone Products Company, Inc., a
subsidiary of Holly, is the owner of a limestone quarry at Cool, California.
Holly has a 43% limited partnership interest in a partnership which owns the
site of a former beet sugar production facility in Moses Lake, Washington. The
partnership is constructing a beet processing facility on the 1,400 acre site
which is scheduled for commissioning in 1998.
ITEM 3. LEGAL PROCEEDINGS.
Spreckels Industries, Inc. (the "Seller") sued the Company claiming the
purchase price paid for Spreckels Sugar Company and Limestone Products Company
was not properly calculated. The Company and the Seller have settled this
dispute and the litigation was dismissed in May 1997. See Note 2 to the
Consolidated Financial Statements for further discussion of the Spreckels
acquisition.
The Company is a party to litigation and claims which are normal in the
course of its operations; while the results of such litigation and claims
cannot be predicted with certainty, the Company believes the final outcome of
such matters will not have a materially adverse effect on its results of
operations or consolidated financial position.
9
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 1997
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the Company are elected annually to serve for the
ensuing year or until their successors have been elected. The following table
sets forth certain information with respect to the executive officers of the
Company:
<TABLE>
<CAPTION>
NAME AGE* POSITIONS
---- ---- ---------
<C> <C> <S>
James C. Kempner................. 57 President, Chief Executive Officer and
Chief Financial Officer
Peter C. Carrothers.............. 57 Managing Director
Douglas W. Ehrenkranz............ 39 Managing Director
Roger W. Hill.................... 57 Managing Director and President and
Chief Executive Officer of Holly
John A. Richmond................. 50 Managing Director
William F. Schwer................ 49 Managing Director, Secretary and
General Counsel
Brian T. Harrison................ 41 Vice President--Operations Development
Roy E. Henderson................. 58 Vice President--Administration
Calvin K. Jones.................. 51 Vice President--Agriculture
Raymond Knecht................... 49 Vice President--Cane Operations
H. P. Mechler.................... 43 Vice President--Accounting
Karen L. Mercer.................. 35 Vice President and Treasurer
Roy F. Silva..................... 57 Vice President--Product Development
Robert W. Strickland............. 50 Vice President--Beet Operations
Alan K. Lebsock.................. 44 Controller
</TABLE>
- --------
* As of June 2, 1997.
Except as set forth below, executive officers have held their present
offices for at least the past five years. Positions, unless specified
otherwise, are with the Company.
Mr. James C. Kempner became President and Chief Executive Officer in 1993
and has been Chief Financial Officer since 1988. In 1994, Mr. Kempner became
President and Chief Executive Officer of Imperial. Mr. Kempner served as
Executive Vice President from 1988 to 1993.
Mr. Carrothers became a Managing Director in October 1995 and had been
Senior Vice President-Operations since March 1995. Mr. Carrothers joined the
Company as Senior Vice President--Logistics in May 1994. From 1990 until
joining the Company, he was Vice President--Logistics of PepsiCo Foods
International and had served in various other capacities with Frito Lay, Inc.,
a subsidiary of PepsiCo, since 1973.
Mr. Ehrenkranz became a Managing Director in April 1997 and had been Vice
President--Sales & Marketing since September 1995. Prior thereto, Mr.
Ehrenkranz had been Director of Sales, Planning & Marketing-Development since
joining the Company in April 1995. Prior to joining the Company, Mr.
Ehrenkranz was Marketing Manager with PepsiCo's Taco Bell subsidiary from 1993
to 1994 and served in various positions at Procter & Gamble from 1979. His
last position at Procter & Gamble before joining PepsiCo was Category Sales
Manager for Folgers Coffee.
Mr. Hill was named a Managing Director in October 1995 and had been
Executive Vice President since 1988. Mr. Hill also has been President and
Chief Executive Officer of Holly since 1988. Mr. Hill joined Holly in 1963 and
served in various capacities, including Vice President--Agriculture and
Executive Vice President.
10
<PAGE>
Mr. Richmond became a Managing Director in April 1997 and was named Vice
President--Operations in October 1995. Mr. Richmond has been Senior Vice
President and General Manager, Beet Sugar Operations, of Holly since 1993. Mr.
Richmond was Senior Vice President and General Manager--Eastern Division of
Holly from June 1992 to 1993; Vice President and General Manager--Eastern
Division of Holly from December 1991 to June 1992; Vice President and
Operations Manager--Eastern Division from September 1990 to December 1991;
Vice President, Technical Services and Assistant Operations Manager--Eastern
Division from July 1989 to September 1990; and Vice President, Technical
Services from December 1982 to July 1989. Mr. Richmond joined Holly in 1973.
Mr. Schwer became a Managing Director in October 1995 and was named Senior
Vice President, Secretary and General Counsel of the Company in 1993. Mr.
Schwer had been Vice President, Secretary and General Counsel since 1989. He
joined Holly as Assistant General Counsel in 1988.
Mr. Harrison became Vice President--Operations Development in November 1996.
Previously he was Vice President--Refinery Operations from 1993 to 1996. He
was Refinery Manager of Imperial from 1991 to 1992 and has served in various
other capacities since he joined the Company in 1980.
Mr. Henderson has been Vice President--Administration since 1994. From 1981
until 1994, he was Vice President and Treasurer, and has been an employee of
the Company since 1967.
Mr. Jones was named Vice President--Agriculture in April 1997 and had been
Vice President--Commodities since 1985. Mr. Jones has served in various
positions with Holly since joining in 1969.
Mr. Raymond Knecht has been Vice President--Cane Operations since November
1996. Prior to joining the Company he was employed by Refined Sugar
Incorporated as Vice President--Operations from 1993 to 1996 and he held the
same position with C & H Sugar from 1986 to 1993.
Mr. Mechler became Vice President--Accounting in April 1997. Mr. Mechler had
been Controller since joining the Company in 1988.
Ms. Mercer became Vice President and Treasurer in April 1997. Ms. Mercer
became Treasurer in 1994 and has been an employee of the Company since 1993.
Prior to joining the Company she was employed by First City, Texas--Houston,
National Association from 1988 to February 1993 and Texas Commerce Bank,
National Association from February 1993 to September 1993. The last position
she held at Texas Commerce Bank was Vice President--Commercial Lending.
Mr. Silva has been Vice President--Product Development of the Company since
1992. Prior thereto, he served as Vice President of U. S. Food Operations for
Nattermann Phospholipid, Inc., a German subsidiary of Rhone-Poulenc Rorer,
from 1989 to 1992 and as its Director of Technical Development and Marketing
from 1988 to 1989.
Mr. Strickland was named Vice President--Beet Operations in October 1995 and
has been Vice President--Operations of Holly since 1993. Mr. Strickland was
Operations Coordinator for Holly from 1992 to 1993 and Operations Manager,
Western Division of Holly from 1988 to 1992. Mr. Strickland joined Holly in
1972.
Mr. Lebsock became Controller in April 1997 and has been Controller for
Holly since October 1990. From October 1984 to September 1990, he was
Assistant Controller for Holly. Mr. Lebsock joined Holly in 1974.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
The Company's Common Stock is traded on the American Stock Exchange. At June
2, 1997 there were 906 shareholders of record of the Common Stock. The
following table sets forth the high and low sales price per share of Common
Stock, as quoted by the American Stock Exchange, and cash dividends declared
during the last eight fiscal quarters.
<TABLE>
<CAPTION>
SALES PRICE
------------- CASH
THREE MONTHS ENDED HIGH LOW DIVIDEND
------------------ ------ ------ --------
<S> <C> <C> <C>
June 30, 1995...................................... $ 9.50 $ 8.69 $0.04
September 30, 1995................................. 9.19 7.88 --
December 31, 1995.................................. 8.38 5.25 --
March 31, 1996..................................... 9.63 5.38 --
June 30, 1996...................................... 12.50 7.50 --
September 30, 1996................................. 16.75 11.25 --
December 31, 1996.................................. 16.00 14.50 --
March 31, 1997..................................... 15.38 10.50 --
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for the last five years is as follows (in thousands
of dollars, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------
1997(3) 1996 1995 1994 1993
-------- -------- -------- -------- --------
FOR THE PERIOD:
- ---------------
<S> <C> <C> <C> <C> <C>
Net Sales............... $752,595 $616,450 $586,925 $655,498 $647,825
Operating Income (Loss). 28,423 (2,431) (2,091) (4,566) 7,139
Income (Loss) Before Ex-
traordinary Item....... 11,518 (3,218) (5,365) (7,965) 123
Extraordinary Item...... -- 604 (2) -- -- (3,509)(1)
Net Income (Loss)....... 11,518 (2,614) (5,365) (7,965) (3,386)
<CAPTION>
PER SHARE DATA:
- ---------------
<S> <C> <C> <C> <C> <C>
Income (Loss) Before Ex-
traordinary Item....... $ 0.92 $ (0.31) $ (0.52) $ 0.78 0.01
Extraordinary Item...... -- 0.06 (2) -- -- (0.34)(1)
Net Income (Loss)....... 0.92 (0.25) (0.52) (0.78) (0.33)
Cash Dividends Declared. -- .04 .16 .32 .36
<CAPTION>
AT PERIOD END:
- --------------
<S> <C> <C> <C> <C> <C>
Total Assets............ $449,933 $325,319 $374,124 $393,660 $398,202
Long-Term Debt--Net..... 90,619 89,800 100,010 100,044 108,181
Total Shareholders' Eq-
uity................... 176,956 111,043 109,977 114,737 122,462
</TABLE>
- --------
(1) In fiscal 1993 the Company paid a make-whole premium in connection with
the prepayment of a series of senior notes and recorded the charge, net of
tax, as an extraordinary item.
(2) See Note 6 to the Consolidated Financial Statements.
(3) Includes the results of Spreckels since April 19, 1996, as discussed in
Note 2 to the Consolidated Financial Statements.
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
The Company completed the Spreckels acquisition in April 1996, and funded
the $35.3 million cash purchase price from short-term borrowings under the
Company's bank credit lines. In August 1996, the Company sold 3.8 million
shares of common stock in a private placement to Greencore Group plc for $49.8
million, and the proceeds were used initially to reduce short-term debt. The
Company has announced a $35 million capital program, much of which is expected
to be completed in fiscal 1998, and expects to fund such expenditures from
cash generated from operations and existing bank borrowing agreements. Major
projects in the program include an $11 million expansion of the Sidney,
Montana factory, as well as the addition of bulk sugar storage and high speed
packaging equipment at the Sugar Land refinery with costs totaling $16
million.
The Company has an $110 million committed bank line of credit expiring in
June 1998, as well as uncommitted bank lines which aggregate $55 million as
described in Note 5 to the Consolidated Financial Statements. Loans
outstanding under these bank lines total $8.7 million at March 31, 1997.
Working capital financing is provided by a combination of trade credit and
borrowings. In addition to the bank lines of credit, short-term inventory
financing is available to the Company's beet sugar operations in the form of
secured borrowings from the CCC under the USDA price support program. CCC
loans may be recourse or non-recourse depending upon certain regulatory
matters. See "Business--Sugar Legislation and Other Market Factors."
Management believes that existing internal and external sources of liquidity
are adequate to meet financing needs.
Working capital increased $52.2 million to $133.9 million at March 31, 1997
and includes marketable securities which are recorded at a market value of
$49.0 million, $20.0 million in excess of cost. The increase in working
capital items during fiscal 1997 resulted primarily from the Spreckels
acquisition and the return of refined inventory to more normal levels, after
the reductions in fiscal 1996 resulting from the smaller than expected
sugarbeet crop that year. The Company's current ratio was 1.9:1.0 at March 31,
1997.
The Company, as a 43% limited partner, and a Washington sugarbeet growers
cooperative, as the 57% general partner, have formed a partnership which is
building a new sugarbeet factory in Moses Lake, Washington. The Company has
made capital contributions and advances in the form of subordinated loans to
the partnership of $3 million and has contributed certain surplus production
equipment. The general partner has made capital contributions to the
partnership of $6 million and has contributed certain surplus equipment from
an abandoned sugar beet processing facility. Additionally, the Company and the
cooperative may be required to make further subordinated loans of up to $1.7
million each, depending upon final construction costs. The remainder of the
$118 million projected cash construction budget is expected to be financed by
loans to the general partner who will in turn advance such funds to the
partnership.
In fiscal 1996, the Company entered into a venture with the sugarbeet
growers associations representing the growers supplying Holly's Rocky Mountain
factories which built additional bulk refined sugar storage silos at Holly's
Sidney, Montana factory. The additional silos are owned by the venture and are
financed largely by the venture's non-recourse, term bank debt.
In 1997 and 1996 the Company purchased and retired $0.3 million and $10.2
million principal amount, respectively, of its 8 3/8% senior notes due 1999.
The Company purchased and retired an additional $8.3 million principal amount
of the notes in April 1997. The remaining notes, with an aggregate principal
amount of $81.2 million, require semi-annual interest only payments prior to
maturity. Long-term debt at March 31, 1997 was approximately 34% of total
long-term debt plus shareholders' equity. Shareholders' equity was $177.0
million at March 31, 1997, approximately 40% of total assets.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
This new standard requires dual presentation of basic and diluted earnings per
share ("EPS") on the face of the earnings statement and requires a
reconciliation
13
<PAGE>
of the numerators and denominators of basic and diluted EPS calculations. This
statement will be effective for both interim and annual periods ending after
December 15, 1997. The Company's current EPS calculation conforms to basic EPS.
Diluted EPS as defined by SFAS No. 128 is not expected to be materially
different from basic EPS.
RESULTS OF OPERATIONS
Industry Environment
The Company's results of operations are substantially dependent on market
factors, including domestic prices for refined sugar and raw cane sugar. These
market factors are influenced by a variety of external forces, including the
number of domestic acres contracted to grow sugar cane and sugarbeets, prices
of competing crops, weather conditions and United States farm and trade policy,
that the Company is unable to predict. Certain segments of the beet sugar
industry in the recent past have expanded sugarbeet acreage at rates exceeding
the rate of growth in the demand for refined sugar, which along with large crop
yields, put downward pressure on refined sugar prices. Smaller sugar beet crops
in the fall of 1995 and 1996 have increased refined sugar prices. The domestic
sugar industry is subject to substantial influence by legislative and
regulatory actions. The current farm bill limits the importation of raw cane
sugar, affecting the supply and cost of raw material available to the Company's
Imperial Sugar refinery. See "Business--Sugar Legislation and Other Market
Factors" and "--Competition".
Weather conditions during the growing, harvesting and processing seasons, the
availability of acreage to contract for sugarbeets, as well as the effects of
diseases and insects, may materially affect the quality and quantity of sugar
beets available for purchase as well as the unit costs of raw materials and
processing. See "Business--Raw Materials and Processing Requirements".
Year Ended March 31, 1997 versus 1996
Net sales increased $136.1 million or 22.1% in fiscal 1997 as a result of
almost equal contributions from higher sugar sales prices and volumes, as well
as higher beet pulp sales prices. Sugar sales prices increased as a result of
smaller than usual sugar beet crops in the fall of 1995 and 1996. A significant
portion of the Company's industrial sales are made under fixed price, forward
sales contracts, most of which commence October 1 and extend for up to one
year. As a result, changes in the Company's realized sales prices tend to lag
market price changes. To mitigate its exposure to future price changes, the
Company enters into forward purchase contracts for raw cane sugar and utilizes
a participatory sugarbeet purchase contract described below. See "Business--Raw
Materials and Processing Requirements". Increases in cane sugar sales volumes
and the additional volumes attributable to the Spreckels acquisition more than
offset lower sales by Holly resulting from lower refined sugar inventories in
the first half of the fiscal year. Beet pulp prices began increasing late in
fiscal 1996 as a result of higher feed grain prices and returned to more normal
levels in the latter part of fiscal 1997.
Cost of sales increased $103.0 million or 18.3% and gross margin improved to
11.7% of sales in fiscal 1997 from 8.9% in fiscal 1996. Unit sugar sales
margins improved as reductions in cane sugar unit manufacturing costs resulting
from increased volumes and reductions in raw cane sugar costs offset higher
energy costs and higher beet sugar manufacturing costs owing to reduced
throughput at three of the Company's beet sugar factories. Additionally, winter
flooding disrupted rail service in Northern California requiring the diversion
of harvested beets in Oregon and Washington to the Company's Sidney, Montana
factory. The delays in processing these, as well as the Sidney beets affected
beet quality and impacted processing, reducing sugar recovery and increasing
costs several million dollars. The Company purchases sugar beets under
participatory contracts which provide for a percentage sharing of the net
selling price realized on refined beet sugar sales between the Company and the
grower. Use of this type of contract reduces the Company's exposure to
inventory price risk. The increase in sales prices for beet sugar resulted in
an increase in cost of sugar beets under the participatory contracts.
In recent years the Company has experienced reductions in the availability of
acreage planted in sugarbeets supplying its Hereford, Texas, Torrington,
Wyoming and Northern California factories, resulting in reduced
14
<PAGE>
throughput and corresponding increases in unit manufacturing costs. Sugarbeet
acreage supplying each of these factories is expected to increase in fiscal
1998, although acreage is expected to remain below the Company's targeted
levels. The Company has processed raw cane sugar at some of these factories,
which increases throughput and lowers unit fixed manufacturing costs.
Selling, general and administrative expenses increased $4.5 million resulting
from increases in volume related selling and distribution costs and incentive
compensation as well as increases in administrative costs associated with
Spreckels' Pleasanton, California office which was closed in the Company's
second fiscal quarter.
Interest expense--net, increased primarily due to higher average short-term
borrowings. Other income--net includes losses on asset dispositions of
approximately $700,000 in 1997 and gains of $400,000 in 1996.
Realized gains on marketable securities decreased $5.0 million in fiscal
1997; net unrealized gains which have not been recognized in the Company's
results of operations increased $6.2 million and are detailed in Note 3 to the
Consolidated Financial Statements. The components of income tax expense and its
relationship to statutory rates are detailed in Note 7 to the Consolidated
Financial Statements.
Year Ended March 31, 1996 versus 1995
Net sales increased $29.5 million or 5.0% in fiscal 1996 resulting from
increases in both sugar sales volumes and average sales prices. Average sales
prices of refined sugar increased modestly during fiscal 1996. Spot prices
began strengthening in the second-half of the fiscal year as a result of the
smaller domestic sugarbeet crop. By-product sales revenues were virtually
unchanged as lower volumes offset the impact of higher prices. Prices began
rising significantly late in the fiscal year as a result of high feed grain
prices.
Cost of sales increased $29.5 million or 5.5% as a result of both higher
sales volumes and increases in unit costs. Raw cane sugar costs increased
significantly during the fiscal year, particularly during the first six months,
due to a tight raw sugar market. Average beet sugar manufacturing costs
increased slightly as the reduced throughput from the smaller fall sugarbeet
crop offset cost reductions achieved in the spring processing campaigns. As
discussed in Note 1 to the Consolidated Financial Statements, the Company
liquidated beginning LIFO inventory layers at costs below current year cost,
and charged such beginning amounts to cost of sales.
Selling, general and administrative costs declined $1.8 million or 3.2% as
increases in volume related selling and distribution costs were more than
offset by reductions in general and administrative as well as research and
development costs. During the third fiscal quarter, the Company commenced a
cost reduction program in the sales, administrative and manufacturing overhead
areas and recorded a charge to earnings of $475,000 for the cost of a work
force reduction. Additionally, the Company recorded a $1,750,000 charge in the
fourth quarter related to the closure of the Hamilton City factory.
Interest expense for fiscal 1996 was lower than fiscal 1995 as lower balances
of both short and long-term borrowings were partially offset by higher short-
term interest rates and a lower earnings credit from the interest rate swap
described in Note 6 to the Consolidated Financial Statements. The interest rate
swap, which was entered into to effectively convert a portion of the Company's
fixed rate debt to a floating rate basis and has provided positive cash flow
for each period during its term, expired in October 1996.
Realized gains on marketable securities increased $3.7 million during fiscal
1996; unrealized gains and losses, which have not been recognized in the
Company's results of operations, but are shown, net of tax, as a component of
shareholders' equity, are detailed in Note 3 to the Consolidated Financial
Statements. The components of income tax expense and its relationship to
statutory rates are detailed in Note 7 to the Consolidated Financial
Statements. The extraordinary item is discussed in Note 6 to the Consolidated
Financial Statements.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the index of financial statements and financial statement schedules
under "Exhibits, Financial Statement Schedules and Reports on Form 8-K."
Unaudited quarterly financial data for the last two fiscal years is as
follows (in thousands of dollars, except per share amounts):
<TABLE>
<CAPTION>
PER SHARE
-------------------------------
INCOME (LOSS) INCOME (LOSS)
--------------------- --------------------
BEFORE NET BEFORE NET
NET GROSS EXTRAORDINARY INCOME EXTRAORDINARY INCOME CASH
SALES MARGIN ITEM (LOSS) ITEM (LOSS) DIVIDENDS
-------- ------- ------------- ------- ------------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal 1997(1):
June 30, 1996............. $179,905 $24,268 $ 4,149 $ 4,149 $ 0.40 $ 0.40 --
September 30, 1996........ 214,050 22,121 2,928 2,928 0.25 0.25 --
December 31, 1996......... 189,935 19,334 1,496 1,496 0.11 0.11 --
March 31, 1997............ 168,705 22,026 2,945 2,945 0.21 0.21 --
Fiscal 1996:
June 30, 1995............. $148,824 $14,517 $ 766 $ 1,146 $ 0.07 $ 0.11 $0.04
September 30, 1995........ 165,786 13,958 (1,530) (1,530) (0.15) (0.15) --
December 31, 1995(2)........171,569..13,760 (419) (195) (0.04) (0.02) --
March 31, 1996(3)...........130,271..12,337 (2,035) (2,035) (0.20) (0.20) --
</TABLE>
- --------
(1) Includes the results of Spreckels Sugar Company since April 19, 1996. See
Note 2 to the Consolidated Financial Statements.
(2) Results of operations for the third quarter of fiscal 1996 include a pre-
tax charge of $475,000 related to the cost of a work force reduction as
discussed in Note 11 to the Consolidated Financial Statements.
(3) Results of operations for the fourth quarter of fiscal 1996 include a pre-
tax charge of $1,750,000 related to costs associated with the closure of
the Company's Hamilton City, California factory as discussed in Note 11 to
the Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information set forth under the captions "Election of Directors--
Nominees", "--Continuing Directors" and "--Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's definitive Proxy Statement for its 1997
Annual Meeting of Shareholders, to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Proxy Statement"), is incorporated herein by reference.
See also "Executive Officers of the Registrant" included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the captions "Election of Directors--
Director Remuneration", "--Executive Compensation" and "--Compensation
Committee Interlocks and Insider Participation" in the Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the caption "Election of Directors--Security
Ownership" in the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information set forth under the caption "Election of Directors--
Compensation Committee Interlocks and Insider Participation" and "--Other
Information" in the Proxy Statement is incorporated herein by reference.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Independent Auditors' Report.............................................. F-1
Consolidated Balance Sheets at March 31, 1997 and 1996.................... F-2
Consolidated Statements of Income for the years ended March 31, 1997, 1996
and 1995................................................................. F-3
Consolidated Statements of Changes in Shareholders' Equity for the years
ended March 31, 1997, 1996 and 1995...................................... F-4
Consolidated Statements of Cash Flows for the years ended March 31, 1997,
1996 and 1995............................................................ F-5
Notes to Consolidated Financial Statements................................ F-6
</TABLE>
(a)(2) Financial Statement Schedules.
All schedules and other statements for which provision is made in the
applicable regulations of the Commission have been omitted because they are
not required under the relevant instructions or are inapplicable.
(a)(3) Exhibits.
Asterisk indicates exhibit previously filed with the Commission and
incorporated herein by reference as indicated.
<TABLE>
<C> <S>
*3(a) --Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3(b) to the Company's Registration Statement
on Form S-4 (Registration No. 33-20959)).
*3(b) --Articles of Amendment to Restated Articles of Incorporation
(incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1990
(File No. 1-10307)).
*3(c) --Statement of Resolution establishing Series of Shares designated
Series A Junior Participating Preferred Stock (incorporated by
reference to Exhibit 3(b) to the Company's Annual Report on Form
10-K for the year ended March 31, 1990 (File No. 1-10307) (the
"1990 Form 10-K")).
*3(d) --Statement of Resolution increasing number of shares designated
Series A Junior Participating Preferred Stock (incorporated by
reference to Exhibit 3.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1990 (File No. 1-10307)).
*3(e)(1) --Rights Agreement dated as of September 14, 1989 between the
Company and The Bank of New York, as Rights Agent (incorporated by
reference to Exhibit 1 to the Company's Current Report on Form 8-K
dated September 21, 1989 (File No. 1-10307)).
*3(e)(2) --Amendment to Rights Agreement dated as of January 27, 1995
(incorporated by reference to Exhibit 1 to the Company's Current
Report on Form 8-K dated January 27, 1995 (File No. 1-10307)).
*3(f) --By-Laws of the Company (incorporated by reference to Exhibit 3(b)
to the Company's Annual Report on Form 10-K for the year ended
March 31, 1989 (File No. 0-16674) (the "1989 Form 10-K")).
*3(g)(1) --Investor Agreement dated August 29, 1996 by and among the Company,
Greencore Group plc and Earlsfort Holdings B.V. (incorporated by
reference to Exhibit 4.3 to the Company's current report on Form 8-
K dated September 5, 1996 (File No. 1-10307) (the "September 5,
1996 Form 8-K")).
</TABLE>
17
<PAGE>
<TABLE>
<C> <S>
*3(g)(2) --Registration Rights Agreement dated August 29, 1996 by and among
the Company, Greencore Group plc and Earlsfort Holdings B.V.
(incorporated by reference to Exhibit 4.2 to the September 5, 1996
Form 8-K).
*4(a)(1) --Credit Agreement dated as of June 10, 1993 among the Company, the
signatory banks thereto and Harris Trust and Savings Bank, as
Agent (incorporated by reference to Exhibit 4(b) to the Company's
Annual Report on Form 10-K for the year ended March 31, 1993 (File
No. 1-10307) (the "1993 Form 10-K")).
*4(a)(2) --First Amendment to Credit Agreement dated December 1, 1993
(incorporated by reference to Exhibit 4(a)(2) to the Company's
Annual Report on Form 10-K for the year ended March 31, 1994 (File
No. 1-10307) (the "1994 Form 10-K")).
*4(a)(3) --Second Amendment to Credit Agreement and First Amendment to Notes
dated March 4, 1994 (incorporated by reference to Exhibit 4(a)(3)
to the 1994 Form 10-K).
*4(a)(4) --Third Amendment to Credit Agreement dated July 13, 1994
(incorporated by reference to Exhibit 4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994 (File No.
1-10307)).
*4(a)(5) --Fourth Amendment to Credit Agreement dated April 28, 1995
(incorporated by reference to Exhibit 4(a)(5) to the Company's
Annual Report on Form 10-K for the year ended March 31, 1995 (File
No. 1-10307)).
*4(a)(6) --Fifth Amendment to Credit Agreement dated June 28, 1996
(incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996
(File No. 1-10307)).
*4(b) --Indenture dated as of October 15, 1992 by and between the Company
and Texas Commerce Bank National Association, as Trustee, relating
to the Company's 8-3/8% Senior Notes due 1999 (incorporated by
reference to Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1992 (File 1-10307)).
The Company is a party to several debt instruments under which the
total amount of securities authorized does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated
basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of
Regulation S-K, the Company agrees to furnish a copy of such
instruments to the Commission upon request.
Exhibits 10(a) through 10(l) relate to management contracts or
compensatory plans.
10(a) --Imperial Holly Corporation Stock Incentive Plan (as amended and
restated effective May 1, 1997).
*10(b) --Specimen of the Company's Employment Agreement for certain of its
officers (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990 (File No. 1-10307)(the "September 1990 Form 10-
Q")).
*10(b)(2) --Specimen of the Company's Amendment to Employment Agreement for
certain of its officers (incorporated by reference to Exhibit
10(c)(2) to the 1994 Form 10-K).
*10(b)(3) --Schedule of Employment Agreements (incorporated by referenced to
Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994 (File No. 1-10307) (the
September 1994 Form 10-Q")).
*10(c) --Specimen of the Company's Severance Pay Agreements for certain of
its officers (incorporated by reference to Exhibit 10.2 to the
September 1990 Form 10-Q).
*10(d)(1) --Imperial Holly Corporation Salary Continuation Plan (as amended
and restated effective August 1, 1994) (incorporated by reference
to Exhibit 10(b)(1) to the September 1994 Form 10-Q).
*10(d)(2) --Specimen of the Company's Salary Continuation Agreement (Fully
Vested) (incorporated by reference to Exhibit 10(b)(2) to the
September 1994 Form 10-Q).
</TABLE>
18
<PAGE>
<TABLE>
<C> <S>
*10(d)(3) --Specimen of the Company's Salary Continuation Agreement
(Graduated Vesting) (incorporated by reference to Exhibit 10(b)(3)
to the September 1994 Form 10-Q).
*10(d)(4) --Schedule of Salary Continuation Agreements (incorporated by
reference to Exhibit 10(d)(4) to the Company's Annual Report on
Form 10-K for the year ended March 31, 1996 (File No. 1-10307)
(the "1996 Form 10-K")).
*10(e)(1) --Imperial Holly Corporation Benefit Restoration Plan (as amended
and restated effective August 1, 1994) (incorporated by reference
to Exhibit 10(c)(1) to the September 1994 Form 10-Q).
*10(e)(2) --Specimen of the Company's Benefit Restoration Agreement (Fully
Vested) (incorporated by reference to Exhibit 10(c)(2) to the
September 1994 Form 10-Q).
*10(e)(3) --Specimen of the Company's Benefit Restoration Agreement
(Graduated Vesting) (incorporated by reference to Exhibit 10(c)(3)
to the September 1994 Form 10-Q).
10(e)(4) --Schedule of Benefit Restoration Agreements.
*10(f)(1) --Imperial Holly Corporation Executive Benefits Trust (incorporated
by reference to Exhibit 10.5 to the September 1990 Form 10-Q).
*10(f)(2) --First Amendment to the Company's Executive Benefits Trust dated
June 4, 1991 (incorporated by reference to Exhibit 10(g)(2) to the
1994 Form 10-K).
*10(g) --Imperial Holly Corporation 1989 Nonemployee Director Stock Option
Plan (incorporated by reference to Exhibit A to the Company's
Proxy Statement dated June 16, 1989 for the 1989 Annual Meeting of
Shareholders, File No. 0-16674).
*10(h) --Imperial Holly Corporation Retirement Plan For Nonemployee
Directors (incorporated by reference to Exhibit 10(j) to the 1994
Form 10-K).
*10(i)(1) --Specimen of the Company's Change of Control Agreement
(incorporated by reference to Exhibit 10(d)(1) to the September
1994 Form 10-Q).
10(i)(2) --Schedule of Change of Control Agreements.
*10(j) --Independent Consultant Agreement between I. H. Kempner III and
the Company (incorporated by reference to Exhibit 10(k) to the
1996 Form 10-K).
10(k) --Specimen of the Company's Restricted Stock Agreement with certain
of its officers.
10(l) --Schedule of Restricted Stock Agreements.
*10(m) --Agreement of Limited Partnership of ChartCo Terminal, L.P.
(incorporated by reference to Exhibit 10(j) to the 1990 Form 10-
K).
11 --Computation of Income Per Common Share.
21 --Subsidiaries of the Company.
23 --Independent Auditors' Consent
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the three months
ended March 31, 1997.
19
<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, ON JUNE 10, 1997.
Imperial Holly Corporation
/s/ James C. Kempner
By___________________________________
James C. Kempner
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON JUNE 10, 1997.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ James C. Kempner
- -------------------------------------------
James C. Kempner President, Chief Executive Officer, Chief
Financial Officer and Director (Principal
Executive Officer and Principal Financial
Officer)
/s/ H. P. Mechler
- -------------------------------------------
H. P. Mechler Controller (Principal Accounting Officer)
/s/ I. H. Kempner, III
- -------------------------------------------
I. H. Kempner, III Chairman of the Board of Directors
/s/ John D. Curtin, Jr.
- -------------------------------------------
John D. Curtin, Jr. Director
/s/ David J. Dilger
- -------------------------------------------
David J. Dilger Director
/s/ Edward O. Gaylord
- -------------------------------------------
Edward O. Gaylord Director
/s/ Gerald Grinstein
- -------------------------------------------
Gerald Grinstein Director
/s/ Ann O. Hamilton
- -------------------------------------------
Ann O. Hamilton Director
/s/ Roger W. Hill
- -------------------------------------------
Roger W. Hill Director
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ Harris L. Kempner, Jr.
- -------------------------------------------
Harris L. Kempner, Jr. Director
/s/ Henry E. Lentz
- -------------------------------------------
Henry E. Lentz Director
/s/ Robert L. K. Lynch
- -------------------------------------------
Robert L. K. Lynch Director
/s/ Kevin C. O'Sullivan
- -------------------------------------------
Kevin C. O'Sullivan Director
/s/ Fayez Sarofim
- -------------------------------------------
Fayez Sarofim Director
/s/ Daniel K. Thorne
- -------------------------------------------
Daniel K. Thorne Director
</TABLE>
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Imperial Holly Corporation:
We have audited the accompanying consolidated financial statements of
Imperial Holly Corporation and subsidiaries (the "Company"), listed in Item
14(a)(1). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Imperial Holly Corporation
and subsidiaries at March 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1997 in conformity with generally accepted accounting
principles.
Deloitte & Touche llp
Houston, Texas
May 30, 1997
F-1
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
ASSETS -------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments............................. $ 7,719 $ 1,930
Marketable securities...................................... 48,963 37,373
Accounts receivable--trade................................. 52,157 37,251
Income tax receivable...................................... 3,400 1,485
Inventories:
Finished products........................................ 119,206 61,702
Raw and in-process materials............................. 12,428 15,929
Supplies................................................. 16,392 12,124
Manufacturing costs prior to production.................... 20,888 12,476
Prepaid expenses........................................... 3,994 3,260
-------- --------
Total current assets................................... 285,147 183,530
NOTES RECEIVABLE............................................. 1,168 1,195
OTHER INVESTMENTS............................................ 11,949 6,702
PROPERTY, PLANT AND EQUIPMENT--Net........................... 146,402 124,103
OTHER ASSETS................................................. 5,267 9,789
-------- --------
TOTAL.................................................. $449,933 $325,319
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable--trade.................................... $ 42,492 $ 37,937
Short-term borrowings...................................... 62,470 31,839
Current maturities of long-term debt....................... 1,017 8
Deferred income taxes--net................................. 16,256 8,248
Other current liabilities.................................. 29,006 23,772
-------- --------
Total current liabilities.............................. 151,241 101,804
-------- --------
LONG-TERM DEBT--Net of current maturities.................... 90,619 89,800
DEFERRED INCOME TAXES--Net................................... 21,453 21,320
DEFERRED EMPLOYEE BENEFITS AND OTHER CREDITS................. 9,664 1,352
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY:
Preferred stock, without par value, issuable in series;
5,000,000 shares authorized, none issued.................. -- --
Common stock, without par value; 50,000,000 shares
authorized, 14,158,195 and 10,312,507 shares issued and
outstanding at March 31, 1997 and 1996, respectively...... 82,620 32,276
Retained earnings.......................................... 81,347 69,829
Unrealized securities gains--net of income taxes........... 12,989 8,938
-------- --------
Total shareholders' equity............................... 176,956 111,043
-------- --------
TOTAL.................................................. $449,933 $325,319
======== ========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
NET SALES.................................. $ 752,595 $ 616,450 $ 586,925
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales............................ 664,846 561,878 532,423
Selling, general and administrative...... 59,326 54,778 56,593
Restructuring charges (Note 11).......... -- 2,225 --
---------- ---------- ----------
Total.................................. 724,172 618,881 589,016
---------- ---------- ----------
OPERATING INCOME (LOSS).................... 28,423 (2,431) (2,091)
INTEREST EXPENSE--Net...................... (12,430) (11,207) (11,426)
REALIZED SECURITIES GAINS--Net............. 426 5,389 1,649
OTHER INCOME--Net.......................... 1,269 3,173 3,219
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM........................ 17,688 (5,076) (8,649)
PROVISION (CREDIT) FOR INCOME TAXES........ 6,170 (1,858) (3,284)
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM.... 11,518 (3,218) (5,365)
EXTRAORDINARY ITEM--Net of tax of $325
(Note 6).................................. -- 604 --
---------- ---------- ----------
NET INCOME (LOSS).......................... $ 11,518 $ (2,614) $ (5,365)
========== ========== ==========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
Income (loss) before extraordinary item.. $ 0.92 $ (0.31) $ (0.52)
Extraordinary item--Net.................. -- 0.06 --
---------- ---------- ----------
Net income (loss)........................ $ 0.92 $ (0.25) (0.52)
========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING........ 12,576,489 10,300,487 10,266,229
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED PENSION
------------------ RETAINED SECURITIES LIABILITY
SHARES AMOUNT EARNINGS GAINS ADJUSTMENT TOTAL
---------- ------- -------- ---------- ---------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1994.. 10,252,959 $31,780 $ 79,862 $ 3,804 $(709) $114,737
Net loss.............. -- -- (5,365) -- -- (5,365)
Cash dividend ($.16
per share)........... -- -- (1,643) -- -- (1,643)
Exercise of stock
options.............. 7,582 66 -- -- -- 66
Employee stock
purchase plan........ 22,904 200 -- -- -- 200
Change in unrealized
securities gains--
net.................. -- -- -- 1,831 -- 1,831
Pension liability
adjustment........... -- -- -- -- 151 151
---------- ------- -------- ------- ----- --------
BALANCE, MARCH 31, 1995. 10,283,445 32,046 72,854 5,635 (558) 109,977
Net loss.............. -- -- (2,614) -- -- (2,614)
Cash dividends ($.04
per share)........... -- -- (411) -- -- (411)
Exercise of stock
options.............. 11,445 85 -- -- -- 85
Employee stock
purhcase plan........ 17,617 145 -- -- -- 145
Change in unrealized
securities gains--
net.................. -- -- -- 3,303 -- 3,303
Pension liability
adjustment........... -- -- -- -- 558 558
---------- ------- -------- ------- ----- --------
BALANCE, MARCH 31, 1996. 10,312,507 32,276 69,829 8,938 0 111,043
Net income............ -- -- 11,518 -- -- 11,518
Exercise of stock
options.............. 14,411 147 -- -- -- 147
Employee stock
purchase plan........ 9,517 115 -- -- -- 115
Nonemployee director
compensation plan.... 21,760 301 -- -- -- 301
Private placement of
common stock......... 3,800,000 49,781 -- -- -- 49,781
Change in unrealized
securities gains--
net.................. -- -- -- 4,051 -- 4,051
---------- ------- -------- ------- ----- --------
BALANCE, MARCH 31, 1997. 14,158,195 $82,620 $ 81,347 $12,989 $ 0 $176,956
========== ======= ======== ======= ===== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1996 1995
-------- --------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................. $ 11,518 $ (2,614) $ (5,365)
Adjustments for noncash and nonoperating
items:
Extraordinary item--net..................... -- (604) --
Depreciation................................ 14,773 12,681 13,429
Deferred income tax provision............... 5,760 (1,737) (3,294)
Other....................................... 1,164 (5,203) (2,021)
Working capital changes (excluding working
capital acquired in the Spreckels
acquisition):
Receivables................................. (10,172) (502) 5,380
Inventory................................... (22,564) 45,408 8,914
Deferred and prepaid costs.................. (1,105) 627 1,814
Accounts payable............................ (6,997) (6,819) 989
Other liabilities........................... (1,285) (3,361) 2,358
-------- --------- --------
Operating cash flow........................... (8,908) 37,876 22,204
-------- --------- --------
INVESTING ACTIVITIES:
Acquisition of Spreckels...................... (36,287) -- --
Capital expenditures.......................... (12,322) (8,890) (7,850)
Investment in marketable securities........... (7,044) (6,537) (6,675)
Proceeds from sale of marketable securities... 2,139 14,974 4,344
Proceeds from sale of fixed assets............ 109 1,478 5,915
Other investments............................. (2,872) (741) 245
Other......................................... 4,207 864 131
-------- --------- --------
Investing cash flow........................... (52,070) 1,148 (3,890)
-------- --------- --------
FINANCING ACTIVITIES:
Private placement of common stock............. 49,781 -- --
Short-term borrowings:
Bank borrowings--net........................ 4,180 (5,431) (15,721)
CCC borrowings--advances.................... 93,014 153,143 76,307
CCC borrowings--repayments.................. (79,125) (176,965) (76,280)
Repayment of long-term debt................... (1,595) (9,324) (67)
Dividends paid................................ -- (411) (1,643)
Stock option proceeds and other............... 512 208 221
-------- --------- --------
Financing cash flow........................... 66,767 (38,780) (17,183)
-------- --------- --------
INCREASE IN CASH AND TEMPORARY INVESTMENTS...... 5,789 244 1,131
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF
YEAR........................................... 1,930 1,686 555
-------- --------- --------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR..... $ 7,719 $ 1,930 $ 1,686
======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
1. ACCOUNTING POLICIES
The Company--The consolidated financial statements include the accounts of
Imperial Holly Corporation and its majority owned subsidiaries (the
"Company"). All significant intercompany balances and transactions have been
eliminated. The Company operates in one domestic business segment--the
production and sale of refined sugar and related products. The Company is
significantly affected by market factors, including domestic prices for
refined sugar and raw cane sugar. These market factors are influenced by a
variety of external forces, including the number of domestic acres contracted
to grow sugar cane and sugarbeets, prices of competing crops, weather
conditions and United States farm and trade policy. Federal legislation and
regulations provide for mechanisms designed to support the price of domestic
sugar crops, principally the limitations on importation of raw cane sugar for
domestic consumption. In addition, agricultural conditions in the Company's
growing areas may materially affect the quality and quantity of sugar beets
available for purchase as well as the unit costs of raw materials and
processing.
A significant portion of the Company's industrial sales are made under fixed
price, forward sales contracts, most of which commence October 1 and extend
for up to one year. The Company contracts to purchase raw cane sugar
substantially in advance of the time it delivers the refined sugar produced
from that purchase. To mitigate its exposure to future price changes, the
Company attempts to match refined sugar sales contracted for future delivery
with the purchase or pricing of raw cane sugar when feasible. Additionally,
the Company utilizes a participatory sugar beet purchase contract, described
below, which relates the cost of sugar beets to the net selling price realized
on refined beet sugar sales.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires estimates and assumptions
that affect the reported amounts as well as certain disclosures. The Company's
financial statements include amounts that are based on management's best
estimates and judgments. Actual results could differ from those estimates.
Cash and Temporary Investments--Temporary investments consist of short-term,
highly liquid investments with maturities of 90 days or less at the time of
purchase.
Marketable Securities--All of the Company's marketable securities are
classified as "available for sale", and accordingly, are reflected in the
Consolidated Balance Sheet at fair market value, with the aggregate unrealized
gain, net of related deferred tax liability, included as a component of
shareholders' equity. Cost for determining gains and losses on sales of
marketable securities is determined on the FIFO method.
Inventories--Inventories are stated at the lower of cost or market. Cost of
sugar is determined under the last-in first-out ("LIFO") method. All other
costs are determined under the first-in first-out ("FIFO") method.
If only the FIFO cost method had been used, inventories would have been
$19.2 million and $12.9 million higher at March 31, 1997 and 1996,
respectively. Reductions in inventory quantities in fiscal 1996 and 1995
resulted in liquidations of LIFO inventory layers carried at costs prevailing
in prior years. The effect of these liquidations was to increase net income by
about $1,385,000 ($0.13 per share) in 1996 and decrease net income by about
$114,000 ($0.01 per share) in 1995.
Sugarbeets Purchased--Payments to growers for sugarbeets are based in part
upon the Company's average net return for sugar sold (as defined in the
participating contracts with growers) during the grower contract years, some
of which extend beyond March 31. The contracts provide for the sharing of the
net selling price (gross sales price less certain marketing costs, including
packaging costs, brokerage, freight expense and amortization of costs for
certain facilities used in connection with marketing) with growers. Cost of
sales includes an accrual
F-6
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997, 1996 AND 1995
for estimated additional amounts to be paid to growers based on the average
net return realized to date for sugar sold in each of the contract years
through March 31. The final cost of sugarbeets cannot be determined until the
end of the contract year for each growing area.
Manufacturing Costs Prior to Production--Certain manufacturing costs
incurred between processing periods which are necessary to prepare the factory
for the next processing campaign are deferred and allocated to the cost of
sugar produced in the subsequent campaign.
Property and Depreciation--Property is stated at cost and includes
expenditures for renewals and improvements and capitalized interest.
Maintenance and repairs are charged to current operations. When property is
retired or otherwise disposed of, the cost and related accumulated
depreciation are removed from the respective accounts, and any gain or loss on
disposition is included in income.
Depreciation is provided principally on the straight-line or sum-of-the-
years' digits methods over the estimated service lives of the assets.
Fair Value of Financial Instruments--The fair value of financial instruments
is estimated based upon market trading information, where available. Absent
published market values for an instrument, management estimates fair values
based upon quotations from broker/dealers or interest rate information for
similar instruments. The carrying amount of cash and temporary investments,
accounts receivable, accounts payable, short-term borrowings and other current
liabilities approximates fair value because of the short maturity and/or
frequent repricing of those instruments. The fair value of the $89.5 million
principal amount of 8 3/8% senior notes as of March 31, 1997 was approximately
par value, based on a dealer quote.
Federal Income Taxes--Federal income tax expense includes the current tax
obligation and the change in deferred income tax liability for the period.
Deferred income taxes result from temporary differences between financial and
tax bases of certain assets and liabilities.
Earnings Per Share--The computation of earnings per share is based on the
weighted average number of shares outstanding. Shares of common stock issuable
under stock options have not been included in the computation of earnings per
share as their effect would be insignificant.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
This new standard requires dual presentation of basic and diluted earnings per
share ("EPS") on the face of the earnings statement and requires a
reconciliation of the numerators and denominators of basic and diluted EPS
calculations. This statement will be effective for both interim and annual
periods ending after December 15, 1997. The Company's current EPS calculation
conforms to basic EPS. Diluted EPS as defined by SFAS No. 128 is not expected
to be materially different from basic EPS.
2. ACQUISITION OF SPRECKELS SUGAR
On April 19, 1996, the Company acquired all of the outstanding capital stock
of Spreckels Sugar Company, Inc. and Limestone Products Company, Inc.
(collectively "Spreckels"), a California based beet sugar processor. The
purchase price was the sum of i) Spreckels' net working capital as of December
31, 1995, ii) $3 million and iii) net cash advanced to Spreckels by the seller
between December 31, 1995 and the closing date. The Company funded from
current borrowings under the Company's revolving credit line $35.3 million of
the purchase price at closing. The Company notified the seller that it
calculated the total purchase price as $29.3 million. The seller filed a
lawsuit claiming that the final purchase price was $39.1 million, with $3.8
million remaining unpaid. The Company and the seller have settled their
dispute and the litigation was dismissed in May 1997. Under such settlement,
the purchase price was agreed to equal $35.3 million and the Company paid an
additional $200,000
F-7
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997, 1996 AND 1995
to acquire certain former Spreckels' assets not included in the original
purchase. These assets have an estimated value of approximately $2.5 million
based on an independent appraisal.
The acquisition was accounted for as a purchase and Spreckels' results of
operations are included in these consolidated financial statements commencing
April 19, 1996. Summarized pro forma operating results for the years ended
March 31, 1997 and 1996, as if the acquisition had occurred on the first day
of each of the respective years are as follows (in thousands of dollars,
except per share amounts):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net sales............................................. $760,432 $797,629
Income (loss) before extraordinary item............... 11,851 (11,744)
Net income (loss)..................................... 11,851 (11,140)
Earnings per share:
Income (loss) before extraordinary item............. $ 0.94 $ (1.14)
Net income (loss)................................... $ 0.94 $ (1.08)
</TABLE>
3. INVESTMENTS
Marketable securities consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
------------------------------------ -------------------------------------
GROSS UNREALIZED GROSS UNREALIZED
FAIR HOLDING FAIR HOLDING
AMORTIZED MARKET ------------------ AMORTIZED MARKET -------------------
COST VALUE GAINS LOSSES COST VALUE GAINS LOSSES
--------- ------- --------- -------- --------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US Government securities
due 1997 through 1998.. $ 9,226 $ 9,222 $ 8 $ (12) $ 4,881 $ 4,937 $ 56 $ --
Common stocks........... 19,755 39,741 20,085 (99) 18,740 32,436 13,696 --
------- ------- --------- ------- ------- ------- ---------- ------
Total................... $28,981 $48,963 $ 20,093 $ (111) $23,621 $37,373 $ 13,752 $ --
======= ======= ========= ======= ======= ======= ========== ======
</TABLE>
Realized securities gains are reported net of realized losses of $28,000 in
1997, $2,000 in 1996, and $106,000 in 1995. Marketable securities with a
market value of $14.3 million at March 31, 1997 were pledged to secure certain
insurance obligations.
Other investments include the Company's royalty interest in a coal seam
methane gas project, which is accounted for at amortized cost and its
investment in a limited partnership which is constructing a beet sugar factory
in Washington state which is accounted for on the equity method.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at March 31, 1997 and 1996 consisted of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land................................................... $ 19,949 $ 13,682
Buildings, machinery and equipment..................... 271,002 251,949
Construction in progress............................... 5,440 2,094
-------- --------
Total.............................................. 296,391 267,725
Less accumulated depreciation.......................... 149,989 143,622
-------- --------
Property, Plant and Equipment--Net..................... $146,402 $124,103
======== ========
</TABLE>
The Company sold a distribution facility during fiscal 1995 in exchange for
a three-year, fixed rate note and deferred the gain of $780,000 on the sale
until collection of the note whose final maturity is in fiscal 1998.
F-8
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997, 1996 AND 1995
5. SHORT-TERM BORROWINGS
At March 31, 1997, the Company had working capital financing available from
domestic banks under a $110,000,000 unsecured revolving credit line which
expires in June 1998. The line of credit provides for interest on advances at
floating or negotiated rates, requires commitment fees and is subject to a
credit agreement which limits, among other things, the Company's right,
without consent of the lenders, to take certain actions and requires the
Company to maintain certain financial and operating ratios. At March 31, 1997,
the Company had the ability to pay dividends of up to $75.0 million under the
most restrictive of such financial covenants. The Company also has short-term
borrowing facilities available from banks on an uncommitted basis aggregating
$55,000,000 at March 31, 1997. Interest on these borrowings is on a negotiated
rate basis.
Additionally, the Company borrows short-term from the Commodity Credit
Corporation ("CCC") under the USDA's price support loan program. CCC
borrowings are secured by refined beet sugar inventory and are nonrecourse to
the Company if the tariff rate import quota for raw sugar exceeds 1.5 million
short tons raw value ("STRV"); such quota was 2.3 million STRV at March 31,
1997.
Outstanding borrowings at March 31, 1997 and 1996 were as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Commodity Credit Corporation............................ $53,770 $27,319
Bank working capital financing.......................... 8,700 4,520
------- -------
Total............................................... $62,470 $31,839
======= =======
Weighted Average Interest Rate.......................... 6.70% 5.36%
======= =======
</TABLE>
6. LONG-TERM DEBT
Long-term debt at March 31, 1997 and 1996 was as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
8 3/8% senior notes...................................... $89,468 $89,800
Other, principally equipment capital leases.............. 2,168 8
------- -------
Total long-term debt..................................... 91,636 89,808
Less current maturities.................................. 1,017 8
------- -------
Long-term debt, net...................................... $90,619 $89,800
======= =======
</TABLE>
The Company's 8 3/8% senior notes due 1999 do not require principal payments
prior to maturity. The indenture relating to the senior notes contains
restrictions on the Company's ability to create liens on certain properties.
During fiscal 1997 and 1996, the Company purchased and retired $0.3 million
and $10.2 million principal amount, respectively, of the senior notes. The
fiscal 1996 purchases were for amounts less than book value, and the Company
reported such difference, net of tax, as an extraordinary item. In April 1997,
the Company purchased and retired an additional $8.3 million principal amount
of the senior notes at par value.
The Company had an interest rate swap agreement with Lehman Brothers Inc.
("Lehman") under which the Company received payments based on a fixed rate of
7.77% and paid Lehman amounts based on the three month LIBOR rate. Income
(loss) on the swap (which expired in October 1996) totaled ($3,000) in 1997,
$289,000 in 1996, and $643,000 in 1995 and is reported in interest expense-
net.
F-9
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997, 1996 AND 1995
Cash paid for interest on short and long-term debt was $11,949,000 in 1997,
$12,228,000 in 1996, and $11,463,000 in 1995. Interest capitalized as part of
the cost of constructing assets was not significant in 1997, 1996 or 1995.
7. INCOME TAXES
The components of the consolidated income tax provision (credit), including
amounts reported as an extraordinary item, for each of the last three fiscal
years were as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Federal:
Current...................................... $ 20 $ 109 $ (36)
Tax benefit of operating loss carryforward... (1,762) (1,452) (1,636)
Deferred..................................... 7,522 (285) (1,658)
State.......................................... 390 95 46
------- ------- -------
Total........................................ $ 6,170 $(1,533) $(3,284)
======= ======= =======
</TABLE>
The tax effects of temporary differences which give rise to the Company's
deferred tax assets and liabilities at March 31, 1997 and 1996 were as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
---------------------------- ---------------------------
ASSETS LIABILITIES TOTAL ASSETS LIABILITIES TOTAL
------- ----------- -------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Current:
Marketable securities
valuation
differences.......... -- $ (6,994) $ (6,994) -- $ (4,813) $ (4,813)
Inventory valuation
differences,
principally purchase
accounting........... -- (12,324) (12,324) -- (6,320) (6,320)
Manufacturing costs
prior to production
deducted currently... -- (7,311) (7,311) -- (4,366) (4,366)
Accruals not currently
deductible........... $ 2,446 -- 2,446 $2,081 -- 2,081
Alternate minimum tax
differences.......... 903 -- 903 903 -- 903
Operating loss
carryforward
(expiring 2010, 2011
and 2012............. 5,919 -- 5,919 3,172 -- 3,172
Other................. 1,105 -- 1,105 1,135 (40) 1,095
------- -------- -------- ------ -------- --------
Total current....... 10,373 (26,629) (16,256) 7,291 (15,539) (8,248)
------- -------- -------- ------ -------- --------
Noncurrent:
Depreciation
differences,
including purchase
accounting........... -- (22,160) (22,160) -- (18,443) (18,443)
Pension cost
differences.......... 1,153 1,153 -- (1,711) (1,711)
Accruals not currently
deductible........... 658 -- 658 154 -- 154
Other................. -- (1,104) (1,104) -- (1,320) (1,320)
------- -------- -------- ------ -------- --------
Total noncurrent.... 1,811 (23,264) (21,453) 154 (21,474) (21,320)
------- -------- -------- ------ -------- --------
Total................... $12,184 $(49,893) $(37,709) $7,445 $(37,013) $(29,568)
======= ======== ======== ====== ======== ========
</TABLE>
F-10
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997, 1996 AND 1995
The consolidated income tax provision is different from the amount which
would be provided by applying the statutory federal income tax rate of 35% to
the Company's income before taxes. The reasons for the differences from the
statutory rate are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Income taxes computed at the statutory federal
rate......................................... $6,191 $(1,451) $(3,027)
Nontaxable interest and dividends............. (217) (251) (299)
State income taxes............................ 253 62 30
Foreign sales corporation..................... (60) (59) (68)
Other......................................... 3 166 80
------ ------- -------
Total....................................... $6,170 $(1,533) $(3,284)
====== ======= =======
</TABLE>
Income taxes paid were $2,300,000 in 1997 and $213,000 in 1996; income tax
refunds received were $3,778,000 in 1995.
8. EMPLOYEE BENEFITS
Retirement Plans--Substantially all of the Company's nonseasonal employees
are covered by retirement plans. Certain unionized employees are covered by an
industry-wide plan, and other employees are covered by Company-sponsored
defined benefit plans. Under the Company-sponsored defined benefit plans,
retirement benefits are primarily a function of years of service and the
employee's compensation for a defined period of employment. The Company funds
pension costs at an actuarially determined amount based on normal cost and the
amortization of prior service costs, gains, and losses over the remaining
service periods. Additionally, the Company provides a supplemental non-
qualified, unfunded pension plan for certain officers whose benefits under the
qualified plan are limited by federal tax law. The Company provides a non-
qualified retirement plan for non-employee directors, which provides benefits
based upon years of service as a director and the retainer in effect at the
date of a director's retirement.
The aggregate net periodic pension cost for these plans for each of the past
three fiscal years included the following components (in thousands of
dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Company-sponsored plans:
Service cost for benefits earned during the
period...................................... $ 2,756 $ 2,089 $2,128
Interest cost on projected benefit
obligation.................................. 5,883 2,653 2,348
Actual return on plan assets................. (15,675) (10,141) (4,439)
Net amortization and deferral................ 10,355 8,377 3,254
------- ------- ------
Net periodic pension cost -
Company-sponsored plans.................... 3,319 2,978 3,291
Industry-wide plan for certain unionized em-
ployees....................................... 432 438 459
------- ------- ------
Total pension cost............................. $ 3,751 $ 3,416 $3,750
======= ======= ======
</TABLE>
F-11
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997, 1996 AND 1995
The funded status of the Company-sponsored plans was as follows at March 31,
1997 and 1996 (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
------------------------------- -------------------------------
PLANS FOR WHICH PLANS FOR WHICH PLANS FOR WHICH PLANS FOR WHICH
ACCUMULATED ASSETS EXCEED ACCUMULATED ASSETS EXCEED
BENEFITS ACCUMULATED BENEFITS ACCUMULATED
EXCEED ASSETS BENEFITS EXCEED ASSETS BENEFITS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Actuarial present value
of projected benefit
obligations:
Accumulated benefit
obligations:
Vested.............. $27,039 $37,458 $9,055 $17,832
Nonvested........... 1,210 1,049 668 433
------- ------- ------ -------
Total accumulated
benefit obligations.. 28,249 38,507 9,723 18,265
Effect of projected
future salary
increases............ 1,219 8,279 715 8,434
------- ------- ------ -------
Projected benefit
obligations.......... 29,468 46,786 10,438 26,699
Plan assets at fair
value (primarily listed
stocks and bonds)...... 25,649 60,850 6,889 31,888
------- ------- ------ -------
Projected benefit obli-
gations over (under)
plan assets............ 3,819 (14,064) 3,549 (5,189)
Prior service cost of
plan amendments........ (2,651) (1,628) (2,118) 22
Unrecognized net gains
(losses):
Arising at transition
date................. ( 675) 215 ( 989) 293
Arising subsequent to
transition date...... 2,793 16,902 (175) 3,108
Adjustment for addi-
tional liability....... 1,671 -- 2,567 --
------- ------- ------ -------
Accrued (prepaid) pen-
sion cost.............. $ 4,957 $ 1,425 $2,834 $(1,766)
======= ======= ====== =======
Assumptions used:
Current discount rate
for plan liabilities. 8.0% 8.0% 7.5% 7.5%
Projected annual rate
of increase in
compensation levels.. 5.0% 5.0% 5.5% 5.5%
Assumed long-term
return on plan
assets............... 8.0% 8.0% 8.0% 8.0%
</TABLE>
401(k) Plans--Substantially all of the Company's nonbargaining unit
employees may elect to defer up to 15% of their annual compensation in the
Company's 401(k) Tax Deferred Savings Plan. The Company may make discretionary
matching contributions of up to 38% of the first $2,500 contributed by an
employee. The Company also provides 401(k) plans for certain bargaining unit
groups which allow participating employees to defer up to 15% of their annual
compensation. The amount charged to expense for these plans for fiscal 1997
was $85,000; no amount was charged to expense for these plans in 1996 and
1995.
Employee Stock Purchase Plan--In July 1993, the shareholders approved an
amended and restated employee stock purchase plan and reserved 1,000,000
shares of common stock. The plan provides substantially all year-round
employees the option to purchase shares of common stock either through open
market purchases at market value or directly from the Company at 85% of market
value. The amount charged to compensation expense for the discount on shares
purchased under the latter alternative was $17,000 in 1997, $22,000 in 1996,
and $30,000 in 1995.
F-12
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997, 1996 AND 1995
9. SHAREHOLDERS' EQUITY
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") in fiscal 1997. As
permitted by SFAS No. 123, the Company elected to continue to follow
Accounting Principles Board Opinion No. 25 to measure employee stock
compensation cost, and to provide the pro forma disclosures required by SFAS
No. 123. The pro forma effect on compensation costs, net income and earnings
per share of measuring compensation cost pursuant to SFAS No. 123 in fiscal
1997 was not material.
Shareholder Rights Plan--In 1989, the Board of Directors declared a dividend
of one Right for each outstanding share of the Company's common stock. Certain
terms of the rights were amended in January 1995. Each of the Rights, which
are currently attached to the common stock, entitle the holder to purchase two
three-hundredths of a share of a new series of Junior Participating Preferred
Stock (94,388 in total as of March 31, 1997) at a price of $60 (subject to
adjustment). The Rights are not exercisable until the earlier of ten days
after the public announcement that a person or group has acquired 15% or more
(25% or more for persons who were 10% shareholders on January 27, 1995) of the
Company's outstanding common stock (an "Acquiring Person") or ten business
days after the commencement of a tender offer to acquire such an interest.
Under certain circumstances, the Rights, other than the Rights held by the
Acquiring Person, will become exercisable for common stock of the Company (or
an acquirer) with a market value equal to two times the exercise price of the
Right. The Rights are redeemable, at 2/3 cents per Right, at any time prior to
a person becoming an Acquiring Person. The Rights will expire on September 25,
1999.
Stock Sale--On August 29, 1996, the Company completed the private placement
of 3,800,000 shares of the Company's common stock to Greencore Group plc
("Greencore"), an Irish sugar and agricultural products company, for net
proceeds of $49.8 million. In July, the Board of Directors took action under
the Shareholder Rights Plan to increase the ownership percentage that would
trigger the Plan with respect to Greencore to 30% during the term of the
Investor Agreement between Greencore and the Company (not more than 5 years).
Thereafter, the trigger level would be increased to 35%, until such time as
Greencore's investment falls below 15%, at which time the trigger level
becomes 15%. During the term of the Investor Agreement, Greencore will have
the right to designate two nominees for election as directors of the Company,
and will be required to vote for the director nominees recommended by the
Board of Directors. During the term of the Investor Agreement, Greencore is
also subject to restrictions relative to certain actions regarding the
Company.
Stock Incentive Plan--The shareholders have approved the Imperial Holly
Corporation Stock Incentive Plan, and have reserved for issuance 1,062,500
shares of common stock. The plan provides for the granting of incentive awards
in the form of stock options, stock appreciation rights (SARs), restricted
stock, performance units and performance shares at the discretion of the
Executive Compensation Committee of the Board of Directors. Stock options have
an exercise price equal to the fair market value of the shares of common stock
at date of grant, become exercisable in annual increments for up to five years
commencing one year after date of grant, and expire not more than ten years
from date of grant.
F-13
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997, 1996 AND 1995
Stock option activity in the plan during the last three fiscal years was as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ----------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE PRICE EXERCISE PRICE EXERCISE PRICE
OPTIONS PER SHARE OPTIONS PER SHARE OPTIONS PER SHARE
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance....... 528,589 $10.03 510,733 $10.67 494,815 $10.68
Granted................. 141,700 12.90 94,000 7.84 24,500 9.18
Expired................. (41,551) 15.22 (66,199) 12.33 (1,000) 8.69
Exercised............... (14,411) 7.97 (9,945) 6.67 (7,582) 6.74
------- ------- -------
Balance, March 31....... 614,327 10.39 528,589 10.03 510,733 10.67
======= ======= =======
Exercisable as of March
31..................... 324,252 10.23 330,964 11.05 331,609 11.58
======= ======= =======
</TABLE>
Options outstanding at March 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
EXERCISABLE OPTIONS
RANGE OF -------------------------
EXERCISE WEIGHTED- WEIGHTED-
PRICES AVERAGE WEIGHTED-AVERAGE AVERAGE
PER NUMBER EXERCISE PRICE REMAINING NUMBER EXERCISE PRICE
SHARE OF OPTIONS PER SHARE CONTRACTUAL LIFE OF OPTIONS PER SHARE
- -------- ---------- -------------- ---------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
$ 6.44-
$ 8.81 370,677 $ 7.85 5.8 years 217,052 $ 7.55
$ 9.75-
$12.25 12,000 10.38 8.9 years 4,250 9.75
$13.19-
$16.83 231,650 14.46 6.9 years 102,950 15.91
</TABLE>
Certain stock options listed above were granted with SARs. The SARs provide
that, in lieu of the exercise of options, the optionee may receive cash or
shares of stock with a fair market value equal to the amount by which the fair
market value on exercise date of the stock subject to the option exceeds the
option price. No SARs have been exercised and, at March 31, 1997, options
outstanding with SARs attached totaled 49,795 shares, all of which were
exercisable.
Nonemployee Director Stock Option Plan--The shareholders have approved the
Nonemployee Director Stock Option Plan and have reserved 30,000 shares of
common stock for issuance. The plan provides for the automatic granting to
each nonemployee director of options to purchase 1,500 shares of common stock
at a price equal to 50% of the fair market value at date of grant. The options
become exercisable upon the completion of three years of service as a
director, and expire over a two year period from the date first exercisable.
Stock option activity in the plan during the last three fiscal years was as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ----------------------- ----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE PRICE EXERCISE PRICE EXERCISE PRICE
OPTIONS PER SHARE OPTIONS PER SHARE OPTIONS PER SHARE
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance....... 3,000 $5.88 5,250 $6.93 6,000 $7.17
Granted................. 1,500 7.84 -- --
Expired................. -- (750) 8.84 (750) 8.84
Exercised............... -- (1,500) 8.09 --
----- ------ -----
Balance, March 31....... 4,500 6.53 3,000 5.88 5,250 6.93
===== ====== =====
Exercisable as of March
31..................... 3,000 5.88 -- -- 2,250 8.34
===== ====== =====
</TABLE>
Options outstanding at March 31, 1997 have a range of exercise prices of
$4.75 to $7.84, and a weighted-average remaining contractual life of 2.0
years.
F-14
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997, 1996 AND 1995
Nonemployee Director Compensation Plan--In fiscal 1997, the shareholders
approved the Nonemployee Director Compensation Plan which provides for the
annual award of common stock to directors in lieu of their cash retainer. In
fiscal 1997, 21,760 shares of common stock were awarded pursuant to this plan.
10. COMMITMENTS AND CONTINGENCIES
The Company is party to litigation and claims which are normal in the course
of its operations; while the results of such litigation and claims cannot be
predicted with certainty, the Company believes the final outcome of such
matters will not have a materially adverse effect on its results of operations
or consolidated financial position.
The Company has had $3.9 million of standby letters of credit issued by
banks to secure certain insurance obligations.
The Company has a contingent commitment to advance additional amounts to a
limited partnership which is constructing a beet sugar factory in Washington
state of up to $1.7 million, depending upon final construction costs.
The Company leases certain facilities and equipment under cancelable and
noncancelable operating leases. Total rental expenses for all operating leases
amounted to $5,788,000, $4,343,000, and $3,519,000 in fiscal 1997, 1996 and
1995, respectively.
The aggregate future minimum lease commitments under noncancelable operating
leases at March 31, 1997 are summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
OPERATING
FISCAL YEAR LEASES
----------- ---------
<S> <C>
1998........................................................... $2,697
1999........................................................... 2,279
2000........................................................... 1,713
2001........................................................... 1,458
2002........................................................... 936
After 2002...................................................... 646
</TABLE>
The aggregate future minimum amount to be received under sub-leases was
$2,978,000 at March 31, 1997.
11. SUPPLEMENTARY INCOME STATEMENT INFORMATION
In fiscal 1996 the Company recorded a charge of $1,750,000 related to the
announced closure of its Hamilton City California beet processing facility in
early fiscal 1997, including $650,000 related to the layoff of approximately
68 employees. Through March 31, 1997, approximately $475,000 of such amount
had been incurred. Additionally, in fiscal 1996, the Company recorded a charge
of $475,000 related to costs in connection with a work force reduction. As of
March 31, 1997 substantially all of that amount had been incurred in
connection with the termination of 47 individuals.
Other income--net includes interest and dividends totaling $1,792,000 in
1997, $1,820,000 in 1996, and $1,456,000 in 1995. Amounts charged to expense
for research and development were $1,445,000 in 1997, $1,670,000 in 1996, and
$2,084,000 in 1995.
F-15
<PAGE>
EXHIBIT 10(a)
IMPERIAL HOLLY CORPORATION
STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
SECTION 1. - GENERAL PROVISIONS RELATING TO PLAN
GOVERNANCE, COVERAGE AND BENEFITS......................................... 1
1.1 Purpose............................................................ 1
1.2 Definitions........................................................ 1
(a) Appreciation................................................ 1
(b) Board....................................................... 1
(c) Change in Control........................................... 1
(d) Code........................................................ 2
(e) Committee................................................... 2
(f) Common Stock................................................ 2
(g) Company..................................................... 2
(h) Covered Employee............................................ 2
(i) Deferred Stock.............................................. 2
(j) Disability.................................................. 2
(k) Employee.................................................... 3
(l) Employment.................................................. 3
(m) Exchange Act................................................ 3
(n) Fair Market Value........................................... 3
(o) Grantee..................................................... 3
(p) Incentive Award............................................. 4
(q) Incentive Plan Agreement.................................... 4
(r) Incentive Stock Option...................................... 4
(s) Independent SAR............................................. 4
(t) Nonstatutory Stock Option................................... 4
(u) Other Stock-Based Award..................................... 4
(v) Outside Director............................................ 4
(w) Parent...................................................... 4
(x) Performance Period.......................................... 4
(y) Performance Share or Performance Unit....................... 4
(z) Plan........................................................ 5
(aa) Restricted Stock............................................ 5
(bb) Restricted Stock Award...................................... 5
(cc) Restriction Period.......................................... 5
(dd) Retirement.................................................. 5
(ee) Spread...................................................... 5
(ff) Stock Appreciation Right or SAR............................. 5
(gg) Stock Option................................................ 5
(hh) Subsidiary.................................................. 5
(ii) Supplemental Payment........................................ 5
i
<PAGE>
(jj) Tandem SAR................................................... 5
1.3 Administration...................................................... 5
(a) Committee Powers............................................. 5
(b) No Liability................................................. 6
(c) Meetings..................................................... 6
1.4 Shares of Common Stock Subject to the Plan.......................... 7
(a) Common Stock Authorized...................................... 7
(b) Common Stock Available....................................... 7
(c) Incentive Award Adjustments.................................. 7
(d) Special Limitation........................................... 8
1.5 Participation....................................................... 8
(a) Eligibility.................................................. 8
(b) Incentive Stock Option Eligibility........................... 8
1.6 Incentive Awards.................................................... 9
SECTION 2. - STOCK OPTIONS AND STOCK APPRECIATION RIGHTS...................... 9
2.1 Grant of Stock Options.............................................. 9
2.2 Stock Option Terms.................................................. 9
(a) Written Agreement............................................ 9
(b) Number of Shares............................................. 9
(c) Exercise Price............................................... 9
(d) Term......................................................... 9
(e) Exercise..................................................... 9
(f) Incentive Stock Options......................................10
2.3 Stock Option Exercises..............................................10
(a) Method of Exercise...........................................10
(b) Notification with respect to Incentive Stock Options.........11
(c) Proceeds.....................................................11
2.4 Stock Appreciation Rights in Tandem with Nonstatutory Stock Option..11
(a) Grant........................................................11
(b) General Provisions...........................................11
(c) Exercise.....................................................11
(d) Settlement...................................................12
2.5 Stock Appreciation Rights Independent of Nonstatutory Stock Options.12
(a) Grant........................................................12
(b) General Provisions...........................................12
(c) Exercise.....................................................12
(d) Settlement...................................................12
2.6 Supplemental Payment on Exercise of Nonstatutory Stock Options or
Stock Appreciation Rights...........................................13
SECTION 3. - RESTRICTED STOCK.................................................13
3.1 Award of Restricted Stock...........................................13
ii
<PAGE>
(a) Grant........................................................13
(b) Immediate Transfer Without Immediate Delivery of Restricted
Stock........................................................13
3.2 Restrictions........................................................14
(a) Restrictive Conditions.......................................14
(b) Forfeiture of Restricted Stock...............................14
(c) Removal of Restrictions......................................14
3.3 Restriction Period..................................................15
3.4 Delivery of Shares of Common Stock..................................15
3.5 Supplemental Payment on Vesting of Restricted Stock.................15
SECTION 4. - PERFORMANCE UNITS AND PERFORMANCE SHARES.........................15
4.1 Performance Based Awards............................................15
(a) Grant........................................................15
(b) Performance Criteria.........................................15
(c) Modification.................................................16
(d) Payment......................................................16
(e) Special Rule for Covered Employees...........................16
4.2 Supplemental Payment on Vesting of Performance Units or Performance
Shares..............................................................17
SECTION 5. - OTHER STOCK-BASED AWARDS.........................................17
5.1 Grant of Other Stock-Based Awards...................................17
5.2 Other Stock-Based Award Terms.......................................18
(a) Written Agreement............................................18
(b) Purchase Price...............................................18
(c) Performance Criteria and Other Terms.........................18
(d) Payment......................................................18
(e) Dividends....................................................18
SECTION 6. - PROVISIONS RELATING TO PLAN PARTICIPATION........................18
6.1 Plan Conditions.....................................................18
(a) Incentive Plan Agreement.....................................18
(b) No Right to Employment or Service............................19
(c) Securities Requirements......................................19
6.2 Transferability.....................................................19
(a) Non-Transferable Awards and Options..........................19
(b) Ability to Exercise Rights...................................19
6.3 Rights as a Stockholder.............................................20
(a) No Stockholder Rights........................................20
(b) Holder of Restricted Stock...................................20
6.4 Listing and Registration of Shares of Common Stock..................20
6.5 Change in Stock and Adjustments.....................................20
iii
<PAGE>
(a) Changes in Law or Circumstances..............................20
(b) Exercise of Corporate Powers.................................20
(c) Recapitalization of the Company..............................21
(d) Reorganization of the Company................................21
(e) Issue of Common Stock by the Company.........................22
6.6 Termination of Employment, Death, Disability and Retirement.........22
(a) Termination of Employment or Service.........................22
(b) Retirement...................................................22
(c) Disability or Death..........................................22
(d) Continuation.................................................23
6.7 Changes in Control..................................................23
(a) Changes in Control...........................................23
(b) Right of Cash-Out............................................24
6.8 Amendments to Incentive Awards......................................24
6.9 Exchange of Incentive Awards........................................25
6.10 Financing...........................................................25
SECTION 7. - MISCELLANEOUS....................................................25
7.1 Effective Date and Grant Period.....................................25
7.2 No Funding..........................................................25
7.3 Withholding Taxes...................................................26
(a) Mandatory Withholding........................................26
(b) Incentive Stock Options......................................26
7.4 Designation of Beneficiary by Participant...........................26
7.5 Conflicts with Plan.................................................26
7.6 No Guarantee of Tax Consequences....................................26
7.7 Miscellaneous Provisions............................................27
7.9 Gender, Tense and Headings..........................................27
7.10 Amendment and Termination...........................................28
7.11 Governing Law.......................................................28
7.12 Section 16 Compliance...............................................28
iv
<PAGE>
IMPERIAL HOLLY CORPORATION
STOCK INCENTIVE PLAN
SECTION 1.
----------
GENERAL PROVISIONS RELATING TO
PLAN GOVERNANCE, COVERAGE AND BENEFITS
1.1 PURPOSE
The purpose of the Imperial Holly Corporation Stock Incentive Plan (the
"Plan") is to foster and promote the long-term financial success of Imperial
Holly Corporation (the "Company") and to materially increase stockholder value
by: (a) encouraging the long-term commitment of selected key Employees, (b)
motivating superior performance of key Employees by means of long-term
performance related incentives, (c) encouraging and providing key Employees and
Outside Directors with a formal program for obtaining an ownership interest in
the Company, (d) attracting and retaining key Employees by providing incentive
compensation opportunities that are competitive with similar companies, and (e)
enabling participation by key Employees and Outside Directors in the long-term
growth and financial success of the Company. The Plan provides for payment of
various forms of incentive compensation and, therefore, is not intended to be a
plan that is subject to the Employee Retirement Income Security Act of 1974, as
amended (ERISA). The Plan shall be interpreted, construed and administered
consistent with its status as a plan that is not subject to ERISA.
The Plan was previously last amended and restated effective April 29, 1993
and was approved by the Company's shareholders on July 29, 1993. The Plan
originally became effective as of February 26, 1988 and was approved by the
shareholders of the Company.
1.2 DEFINITIONS
The following terms shall have the meanings set forth below:
(a) Appreciation. The difference between the option exercise price
per share of the Nonstatutory Stock Option to which a Tandem SAR relates
and the Fair Market Value of a share of Common Stock on the date of
exercise of the Tandem SAR.
(b) Board. The Board of Directors of the Company.
(c) Change in Control. Any of the events described in and subject to
Section 6.7.
<PAGE>
(d) Code. The Internal Revenue Code of 1986, as amended. References
herein to any provision of the Code shall refer to any successor provision
thereto.
(e) Committee. The Executive Compensation Committee of the Board,
which shall be comprised of not less than two members of the Board,
appointed by the Board to administer the Plan. The Board shall have the
power to fill vacancies on the Committee arising by resignation, death,
removal or otherwise. The Board may, in its sole discretion, bifurcate the
powers and duties of the Committee among one or more separate Committees,
or retain all powers and duties of the Committee in a single Committee;
provided, however, to the extent that by reason of the position or
relationship of any Employee to the Company, Section 16(b) of the Exchange
Act applies to the Employee, the Committee with the power or authority with
respect to such Employee shall be exclusively comprised of members of the
Board who are "non-employee directors" (as defined under rules and
regulations promulgated under Section 16(b) of the Exchange Act) and there
shall not be less than two such non-employee directors serving as members
of the Committee. In addition, if Section 162(m) of the Code applies to
the Company (upon the expiration of any applicable transition period
provided in the regulations promulgated under Section 162(m) of the Code,
including Section 1.162-27(f) of the Treasury Regulations), at least two
such Committee members shall also be "outside directors" as defined in
Section 162(m) of the Code and the regulations promulgated thereunder. No
member of the Committee shall be a Grantee hereunder.
(f) Common Stock. The common stock of the Company, no par value, per
share and any class of common stock into which such common shares may
hereafter be converted, reclassified or recapitalized.
(g) Company. Imperial Holly Corporation, a corporation organized
under the laws of the State of Texas, and any successor thereto.
(h) Covered Employee. Any Covered Employee as defined in Section
162(m) of the Code and the regulations promulgated thereunder.
(i) Deferred Stock. Shares of Common Stock to be issued or
transferred to a Grantee under an Other Stock-Based Award granted pursuant
to Section 5 at the end of a specified deferral period, as set forth in the
Incentive Plan Agreement pertaining thereto.
(j) Disability. As determined by the Committee, a physical or mental
condition of the Employee that (1) would entitle him to payment of
disability income payments under the Company's Long Term Disability Plan or
any successor long term disability insurance or other program maintained by
the Company; or (2) in the event that the Employee is not covered, for
whatever reason, under said Disability Plan or any other long term
disability insurance or other program maintained by the Company,
"Disability" means a permanent and total disability as defined in Section
22(e)(3) of the Code.
2
<PAGE>
(k) Employee. Any common-law employee of the Company or any Parent or
Subsidiary who, in the opinion of the Committee, is one of a select group
of executive officers, other officers, or other key management personnel of
the Company or any Parent or Subsidiary, who is in a position to contribute
materially to the growth and development and to the financial success of
the Company or any Parent or Subsidiary, including officers who are members
of the Board.
(l) Employment. Employment by the Company or any Parent or
Subsidiary, or by any corporation issuing or assuming an incentive award in
any transaction described in Section 424(a) of the Code, or by a parent
corporation or a subsidiary corporation of such corporation issuing such
incentive award, and the parent-subsidiary relationship shall be determined
at the time of the corporate action described in Section 424(a) of the
Code. In this regard, neither the transfer of a Grantee from Employment by
the Company to Employment by any Parent or Subsidiary, nor the transfer of
a Grantee from Employment by any Parent or Subsidiary to Employment by the
Company, shall be deemed to be a termination of Employment of the Grantee.
Moreover, the Employment of a Grantee shall not be deemed to have been
terminated because of absence from active Employment on account of
temporary illness or during authorized vacation or during temporary leaves
of absence from active Employment granted for reasons of professional
advancement, education, health, or government service, or during military
leave for any period (if the Grantee returns to active Employment within 90
days after the termination of military leave), or during any period
required to be treated by the Company as a leave of absence by virtue of
any valid law or agreement.
(m) Exchange Act. The Securities Exchange Act of 1934, as amended.
(n) Fair Market Value. The fair market value of one share of Common
Stock on the date in question, which is deemed to be the mean between the
highest and lowest sales price per share of Common Stock on the American
Stock Exchange (or any other national stock exchange or transaction
reporting system on which the Common Stock is then listed or quoted); or if
Common Stock is not listed or quoted on any national stock exchange or
transaction reporting system, the mean between the highest closing bid and
lowest closing asked price for Common Stock as reported by the National
Association of Securities Dealers NASDAQ System; or if not reported by such
system, the mean between the closing bid and asked price as quoted by such
quotation source as shall be designated by the Committee on that date. If
there was no public trade of Common Stock on the date in question, Fair
Market Value shall be determined by reference to the last preceding date on
which such a trade was so reported.
(o) Grantee. Any Employee or Outside Director who, in the opinion of
the Committee, performs significant services for the benefit of the Company
and who is granted an Incentive Award under the Plan.
3
<PAGE>
(p) Incentive Award. Any incentive award, individually or
collectively, as the case may be, including any Nonstatutory Stock Option,
Incentive Stock Option, Stock Appreciation Right, Restricted Stock Award,
Performance Unit, Performance Share, or Other Stock-Based Award as well as
any Supplemental Payment, granted under the Plan to a Grantee.
(q) Incentive Plan Agreement. The written agreement (including any
written notification signed only by an officer of the Company) entered into
between the Company and the Grantee pursuant to which an Incentive Award
shall be made under the Plan, as such agreement is further defined in
Section 6.1(a).
(r) Incentive Stock Option. A Stock Option granted by the Committee
to an Employee under Section 2 of the Plan which is designated by the
Committee as an Incentive Stock Option and intended to qualify as an
Incentive Stock Option under Section 422 of the Code.
(s) Independent SAR. A Stock Appreciation Right described in Section
2.5.
(t) Nonstatutory Stock Option. A Stock Option granted by the
Committee to a Grantee under Section 2, which is not designated by the
Committee as an Incentive Stock Option.
(u) Other Stock-Based Award. An award granted by the Committee to a
Grantee under Section 5 that is valued in whole or in part by reference to,
or is otherwise based upon, Common Stock.
(v) Outside Director. A member of the Board who is not at the time
of grant of an Incentive Award an employee of the Company or any Parent or
Subsidiary.
(w) Parent. Any corporation (whether now or hereafter existing)
which constitutes a "parent" of the Company, as defined in Section 424(e)
of the Code.
(x) Performance Period. A period of time determined by the Committee
over which performance is measured for the purpose of determining a
Grantee's right to and the payment value of any Performance Units,
Performance Shares or Other Stock-Based Awards.
(y) Performance Share or Performance Unit. An Incentive Award
representing a contingent right to receive cash or shares of Common Stock
(which may be Restricted Stock) at the end of a Performance Period and
which, in the case of Performance Shares, is denominated in Common Stock,
and, in the case of Performance Units, is denominated in cash values.
4
<PAGE>
(z) Plan. The Imperial Holly Corporation Stock Incentive Plan as set
forth herein and as it may be amended from time to time.
(aa) Restricted Stock. Shares of Common Stock issued or transferred
to a Grantee subject to Section 3.
(bb) Restricted Stock Award. An authorization by the Committee to
issue or transfer Restricted Stock to a Grantee.
(cc) Restriction Period. The period of time determined by the
Committee during which Restricted Stock is subject to the restrictions
under the Plan.
(dd) Retirement. The termination of Employment from the Company or
any Parent or Subsidiary constituting retirement as determined by the
Committee or as specified in the Incentive Plan Agreement.
(ee) Spread. The difference between the exercise price per share
specified in any Independent SAR grant and the Fair Market Value of a share
of Common Stock on the date of exercise of the Independent SAR.
(ff) Stock Appreciation Right or SAR. A Tandem SAR described in
Section 2.4 or an Independent SAR described in Section 2.5.
(gg) Stock Option. Pursuant to Section 2, an Incentive Stock Option
or Nonstatutory Stock Option granted to an Employee, or a Nonstatutory
Stock Option granted to an Outside Director, whereunder the Grantee has the
right to purchase shares of Common Stock. In accordance with Section 422
of the Code, no Outside Director shall be granted an Incentive Stock
Option.
(hh) Subsidiary. Any corporation (whether now or hereafter existing)
which constitutes a "subsidiary" of the Company, as defined in Section
424(f) of the Code.
(ii) Supplemental Payment. Any amounts described in Sections 2.6, 3.5
and/or 4.2 dedicated to payment of any federal income taxes that are or
will be due and payable on an Incentive Award as determined by the
Committee.
(jj) Tandem SAR. A Stock Appreciation Right described in Section 2.4.
1.3 ADMINISTRATION
(a) Committee Powers. The Plan shall be administered by the
Committee which shall have full power and authority to: (i) designate
Grantees; (ii) determine the Incentive Awards to be granted to Grantees;
(iii) subject to Section 1.4, determine the
5
<PAGE>
Common Stock to be covered by Incentive Awards and, in connection
therewith, to reserve shares of Common Stock as needed in order to cover
grants of Incentive Awards; (iv) determine the terms and conditions of any
Incentive Award; (v) determine whether, to what extent, and under what
circumstances Incentive Awards may be settled or exercised in cash, Common
Stock, or other securities or property; or canceled, substituted, forfeited
or suspended, and the method or methods by which Incentive Awards may be
settled, exercised, canceled, substituted, forfeited or suspended; (vi)
interpret, construe and administer the Plan and any instrument or agreement
relating to, or Incentive Award made under, the Plan; (vii) establish,
amend, suspend or waive rules and guidelines relating to the Plan and the
Incentive Awards hereunder; (viii) appoint such agents as it deems
appropriate for the administration of the Plan; provided, however that the
Committee with the power and authority over Employees who are subject to
Section 16(b) of the Exchange Act or who cause Section 162(m) of the Code
to apply to the Company pursuant to Section 1.162-27(f) of the Treasury
Regulations, shall not delegate any of the power or authority set forth in
(i) through (vii) above in respect of such Employees; and (ix) make any
other determination and take any other action that it deems necessary or
desirable for such administration. All designations, determinations,
interpretations and other decisions with respect to the Plan or any
Incentive Award shall be within the sole discretion of the Committee, and
shall be final, conclusive and binding upon all persons, including the
Company or any Parent or Subsidiary, any Grantee, any holder or beneficiary
of any Incentive Award, and any stockholder.
The Committee may act only by a majority of its members then in
office, except that said members may authorize any one or more of their
number or any officer of the Company to execute and deliver documents on
behalf of the Committee. No member of the Committee shall be liable for
anything done or omitted by him or by any other member of the Committee in
connection with the Plan, except for his own willful misconduct or as
expressly provided by statute which cannot be waived.
(b) No Liability. No member of the Committee shall be liable for any
action or determination made in good faith by the Committee with respect
to this Plan or any Incentive Award hereunder, and to the full extent
permitted by the Company's Bylaws, the Company shall indemnify each member
of the Committee.
(c) Meetings. The Committee shall designate a chairman from among
its members, who shall preside at all of its meetings, and shall designate
a secretary, without regard to whether that person is a member of the
Committee, who shall keep the minutes of the proceedings and all records,
documents, and data pertaining to its administration of the Plan. Meetings
shall be held at such times and places as shall be determined by the
Committee. The Committee may take any action otherwise proper under the
Plan by the affirmative vote, taken with or without a meeting, of a
majority of its members.
6
<PAGE>
1.4 SHARES OF COMMON STOCK SUBJECT TO THE PLAN
(a) Common Stock Authorized. Subject to adjustment under Section 6.5,
the aggregate number of shares of Common Stock available for granting
Incentive Awards (including, without limitation, Stock Appreciation Rights)
under the Plan shall be One Million, Sixty-two Thousand and Five Hundred
(1,062,500) shares of Common Stock. If any Incentive Award shall (i) expire
or terminate for any reason, without being exercised or purchased, or (ii)
be forfeited or reacquired by the Company or Plan pursuant to rights
reserved upon issuance of the Incentive Award, shares of Common Stock
subject to the unexercised, forfeited or reacquired portion of such
Incentive Award shall again be available for grant in connection with
grants of subsequent Incentive Awards. With respect to any Stock Option or
Stock Appreciation Right granted to a Grantee who is a Covered Employee
that is canceled or repriced, the number of shares subject to such Stock
Option or Stock Appreciation Right shall continue against the maximum
number of shares that may be the subject of Stock Options or Stock
Appreciation Rights granted to such Covered Employee and such maximum
number shall be determined in accordance with Section 162(m) of the Code
and the regulations promulgated thereunder.
In addition to Common Stock actually issued, there shall be deemed to
have been issued pursuant to the Plan (and therefore no longer available in
connection with Incentive Awards) a number of shares equal to the aggregate
number of shares of Common Stock under option in respect of which Stock
Appreciation Rights have been exercised. If any Common Stock issued as
Restricted Stock shall be repurchased by the Company or Plan pursuant to a
repurchase option in the Grantee's Incentive Plan Agreement, or if any
Common Stock issued under the Plan shall be reacquired pursuant to
restrictions imposed at the time of issuance under the Plan or Incentive
Plan Agreement, such shares may again be issued under the Plan.
(b) Common Stock Available. The Common Stock available for issuance
or transfer under the Plan shall be made available from shares now or
hereafter (i) held in the treasury of the Company, (ii) authorized but
unissued shares or (iii) shares to be purchased or acquired by the
Company. No fractional shares shall be issued under the Plan; payment for
fractional shares shall be made in cash.
(c) Incentive Award Adjustments. Subject to the limitations set
forth in Sections 6.8 and 7.10, the Committee, with the consent of the
Grantee, may make any adjustment in the exercise price or the number of
shares subject to, or the terms of, any Incentive Award other than an
Incentive Stock Option. Such adjustment shall be made by amending,
substituting or canceling and regranting such Incentive Award with the
inclusion of terms and conditions that may differ from the terms and
conditions of the original Incentive Award. If such action is effected by
amendment, the effective date of such amendment shall be determined by the
Committee (including an effective date that may be the same date as the
original grant of the Incentive Award); provided, however,
7
<PAGE>
such effective date shall not affect or contravene any treatment required
by applicable securities law or otherwise with respect to the effective
date of the grant or such amendment. In addition, any such action shall be
effective only to the extent that such action would not cause (i) the
Grantee of the Incentive Award to lose an exemption from liability under
Section 16(b) of the Exchange Act, or (ii) an Incentive Award to fail to
qualify as performance based compensation as defined in Section 162(m) of
the Code, unless otherwise agreed to by the Grantee.
(d) Special Limitation. In no event shall the number of shares of Common
Stock subject to Stock Options or Stock Appreciation Rights awarded to any
one Grantee who is a Covered Employee in any calendar year exceed Five
Hundred Thousand (500,000) shares of the Common Stock. In all events,
determinations under the preceding sentence shall be made in a manner that
is consistent with Section 162(m) of the Code and regulations promulgated
thereunder (including Treas. Reg. Section 1.162-27(f)).
1.5 PARTICIPATION
(a) Eligibility. The Committee shall from time to time designate
those selected Employees and Outside Directors, if any, to be granted
Incentive Awards under the Plan, the type of Awards granted, the number of
shares, options, rights or units, as the case may be, which shall be
granted to each such person, and any other terms or conditions relating to
the Awards as it may deem appropriate, to the extent not inconsistent with
the provisions of the Plan. Any Grantee may, if otherwise eligible, be
granted additional Incentive Awards at any time.
(b) Incentive Stock Option Eligibility. No Employee shall be
eligible for the grant of any Incentive Stock Option who owns or would own
immediately before the grant of such Incentive Stock Option, directly or
indirectly, stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company, or any Parent
or Subsidiary. This restriction does not apply if, at the time such
Incentive Stock Option is granted, the Incentive Stock Option exercise
price is at least one hundred and ten percent (110%) of the Fair Market
Value on the date of grant and the Incentive Stock Option by its terms is
not exercisable after the expiration of five (5) years from the date of
grant. For the purpose of the immediately preceding sentence, the
attribution rules of Section 424(d) of the Code shall apply for the purpose
of determining an Employee's percentage ownership in the Company or any
Parent or Subsidiary. No Outside Director shall be eligible for the grant
of any Incentive Stock Option. This paragraph shall be construed
consistent with the requirements of Section 422 of the Code and the
regulations issued thereunder.
8
<PAGE>
1.6 INCENTIVE AWARDS
The forms of Incentive Awards under this Plan are Stock Options, Stock
Appreciation Rights and Supplemental Payments as described in Section 2,
Restricted Stock and Supplemental Payments as described in Section 3,
Performance Units or Performance Shares and Supplemental Payments as described
in Section 4, and Other Stock-Based Awards and Supplemental Payments as
described in Section 5, or any combination of the foregoing.
SECTION 2.
---------
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 GRANT OF STOCK OPTIONS
The Committee is authorized to grant Stock Options to selected
Employees and Outside Directors in accordance with the terms and conditions of
the Plan, and with such additional terms and conditions not inconsistent with
the Plan as the Committee shall determine. Successive grants may be made to the
same Grantee whether or not any Stock Option previously granted to such person
remains unexercised.
2.2 STOCK OPTION TERMS
(a) Written Agreement. Each grant of a Stock Option shall be
evidenced by an Incentive Plan Agreement.
(b) Number of Shares. Each Stock Option shall specify the number of
shares of Common Stock to which it pertains.
(c) Exercise Price. The exercise price per share of Common Stock
under each Stock Option shall be determined by the Committee; provided,
however, that in the case of Incentive Stock Options such purchase price
shall not be less than one hundred percent (100%) of the Fair Market Value
per share of such stock on the date the Incentive Stock Option is granted,
as determined by the Committee. Each Stock Option shall specify the method
of exercise which shall be consistent with the requirements of Section
2.3(a).
(d) Term. The Committee shall fix the term of each Stock Option
which shall be not more than ten (10) years from the date of grant. In the
event no term is fixed, such term shall be ten (10) years from the date of
grant.
(e) Exercise. The Committee shall determine the time or times at
which a Stock Option may be exercised in whole or in part. Each Stock
Option may specify the required period of continuous Employment (or
service) and/or the performance objectives
9
<PAGE>
to be achieved before the Stock Option or portion thereof will become
exercisable. Each Stock Option, the exercise of which, or the timing of the
exercise of which, is dependent, in whole or in part, on the achievement of
designated performance objectives, may specify a minimum level of
achievement in respect of the specified performance objectives below which
no Stock Options will be exercisable, and may set forth a method for
determining the number of Stock Options that will be exercisable if
performance is at or above such minimum but short of full achievement of
the performance objectives. All such terms shall be set forth in the
Incentive Plan Agreement.
(f) Incentive Stock Options. Anything in the Plan notwithstanding,
to the extent that the aggregate Fair Market Value (determined as of the
time the Incentive Stock Option is granted) of the shares of Common Stock
with respect to which Incentive Stock Options are exercisable for the first
time by any Grantee during any single calendar year (under the Plan and any
other stock option plans of the Company and its Subsidiaries or any Parent)
exceeds the sum of $100,000, such Incentive Stock Options shall be treated
as Stock Options which are not Incentive Stock Options. This paragraph
shall be applied by taking Incentive Stock Options into account in the
order in which they are granted.
2.3 STOCK OPTION EXERCISES
(a) Method of Exercise. To purchase shares under any Stock Option
granted under the Plan, a Grantee must give notice in writing to the
Company of his intention to purchase and specify the number of shares as to
which he intends to exercise his Stock Option. Upon the date or dates
specified for the completion of the purchase of the shares, the purchase
price shall be payable in full. The purchase price may be paid in cash or
an equivalent acceptable to the Committee. At the discretion of the
Committee, and provided that such payment can be effected without causing
the Grantee to incur liability under Section 16(b) of the Exchange Act, the
exercise price may be paid by the assignment and delivery to the Company of
shares of Common Stock owned by the Grantee or a combination of cash and
such shares equal in value to the exercise price. Any shares so assigned
and delivered to the Company in payment or partial payment of the purchase
price shall be valued at their Fair Market Value on the exercise date. In
addition, at the request of the Grantee and to the extent permitted by
applicable law, the Company in its discretion may selectively approve
"cashless exercise" arrangements with a brokerage firm under which such
brokerage firm, on behalf of the Grantee, shall pay to the Company the
exercise price of the Stock Options being exercised, and the Company,
pursuant to an irrevocable notice from the Grantee, shall promptly deliver
the shares being purchased to such firm.
The Committee, in its discretion and to the extent permitted by
applicable law, may determine to permit the holder of an Option to satisfy
the purchase price of the shares as to which an Option is exercised by
delivery of the Option holder's promissory note, such note to be subject to
such terms and conditions as the Committee may determine. The
10
<PAGE>
Committee may, in its discretion and to the extent permitted by applicable
law, direct the Company to lend to the Option holder such funds, on such
terms and conditions as the Committee determines to be appropriate,
sufficient for the holder to pay the purchase price of the shares as to
which an Option is exercisable.
(b) Notification with respect to Incentive Stock Options.
Notwithstanding any other provision of the Plan, a Grantee who disposes of
shares of Common Stock acquired upon the exercise of an Incentive Stock
Option by a sale or exchange either (i) within two (2) years after the date
of the grant of the Incentive Stock Option under which the stock was
acquired or (ii) within one (1) year after the transfer of such shares to
him pursuant to exercise, shall notify the Company of such disposition, the
amount realized and his adjusted basis in such shares.
(c) Proceeds. The proceeds received by the Company from the sale of
shares of Common Stock pursuant to Stock Options exercised under the Plan
shall be used for general corporate purposes.
2.4 STOCK APPRECIATION RIGHTS IN TANDEM WITH NONSTATUTORY STOCK OPTIONS
(a) Grant. The Committee may, at the time of grant of a Nonstatutory
Stock Option, or at any time thereafter during the term of the Nonstatutory
Stock Option, grant Stock Appreciation Rights with respect to all or any
portion of the shares of Common Stock covered by such Nonstatutory Stock
Option. A Stock Appreciation Right in tandem with a Nonstatutory Stock
Option is referred to herein as a "Tandem SAR."
(b) General Provisions. Each Tandem SAR shall be evidenced by, and
subject to, the terms of the Grantee's Incentive Plan Agreement. The
exercise price per share of Common Stock of a Tandem SAR shall be fixed in
the Incentive Plan Agreement and shall not be less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock on the date of
the grant of the Nonstatutory Stock Option to which it relates.
(c) Exercise. The Committee may impose conditions on the exercise of
a Tandem SAR as may be required to satisfy the requirements of applicable
securities laws. A Tandem SAR may be exercised at any time the
Nonstatutory Stock Option to which it relates is then exercisable, but only
to the extent such Nonstatutory Stock Option is exercisable, and shall
otherwise be subject to the conditions applicable to such Nonstatutory
Stock Option. When a Tandem SAR is exercised, the Nonstatutory Stock
Option to which it relates shall terminate to the extent of the number of
shares with respect to which the Tandem SAR is exercised. Similarly, when
a Nonstatutory Stock Option is exercised, the Tandem SAR relating to the
shares covered by such Nonstatutory Stock Option exercise shall terminate.
Any Tandem SAR which is outstanding on the last day of the term of the
related Nonstatutory Stock Option shall be automatically exercised on
11
<PAGE>
such date for cash, without the need for any action by the Grantee, to the
extent of any Appreciation.
(d) Settlement. Upon exercise of a Tandem SAR, the holder shall
receive, for each share with respect to which the Tandem SAR is exercised,
an amount equal to the Appreciation. The Appreciation shall be payable in
cash, Common Stock, or a combination of both, at the option of the
Committee, and shall be paid within 30 calendar days of the exercise of the
Tandem SAR. The number of shares of Common Stock which shall be issuable
upon exercise of a Tandem SAR shall be determined by dividing (1) by (2)
where (1) is the number of shares of Common Stock as to which the Tandem
SAR is exercised multiplied by the Appreciation in such shares and (2) is
the Fair Market Value of a share of Common Stock on the exercise date.
2.5 STOCK APPRECIATION RIGHTS INDEPENDENT OF NONSTATUTORY STOCK OPTIONS
(a) Grant. The Committee may grant Stock Appreciation Rights
independent of Nonstatutory Stock Options ("Independent SARs") to selected
Employees and Outside Directors.
(b) General Provisions. Each Independent SAR shall be evidenced by
an Incentive Plan Agreement. The exercise price per share of Common Stock
shall be not less than one hundred percent (100%) of the Fair Market Value
of a share of Common Stock on the date of the grant of the Independent SAR.
The term of an Independent SAR shall be determined by the Committee and no
Independent SAR shall be exercised after the expiration of its term.
(c) Exercise. Independent SARs shall be exercisable at such time or
times and subject to such terms and conditions as the Committee shall
specify in the Incentive Plan Agreement for the Independent SAR grant
including, without limitation, conditions on the exercise of an Independent
SAR as may be required to satisfy the requirements of applicable securities
laws. Unless the Incentive Plan Agreement expressly specifies otherwise,
the Committee shall have discretion at any time to accelerate such time or
times and otherwise waive or amend any conditions in respect of all or any
portion of the Independent SARs held by any Grantee.
(d) Settlement. Upon exercise of an Independent SAR, the holder
shall receive, for each share specified in the Independent SAR grant, an
amount equal to the Spread. The Spread shall be payable in cash, Common
Stock, or a combination of both, at the option of the Committee, and shall
be paid within 30 calendar days of the exercise of the Independent SAR.
The number of shares of Common Stock which shall be issuable upon exercise
of an Independent SAR shall be determined by dividing (1) by (2) where (1)
is the number of shares of Common Stock as to which the Independent SAR is
exercised
12
<PAGE>
multiplied by the Spread in such shares and (2) is the Fair Market Value of
a share of Common Stock on the exercise date.
2.6 SUPPLEMENTAL PAYMENT ON EXERCISE OF NONSTATUTORY STOCK OPTIONS OR STOCK
APPRECIATION RIGHTS
The Committee, either at the time of grant or as of the time of exercise of
any Nonstatutory Stock Option or Stock Appreciation Right, may provide in the
Incentive Plan Agreement for a supplemental payment (the "Supplemental Payment")
by the Company to the Grantee with respect to the exercise of any Nonstatutory
Stock Option or Stock Appreciation Right. The Supplemental Payment shall be in
the amount specified by the Committee, which amount shall not exceed the amount
necessary to pay the federal income tax payable with respect to both the
exercise of the Nonstatutory Stock Option and/or Stock Appreciation Right and
the receipt of the Supplemental Payment, assuming the holder is taxed at the
maximum effective federal income tax rate applicable thereto. The Committee
shall have the discretion to grant Supplemental Payments that are payable solely
in cash or Supplemental Payments that are payable in cash, Common Stock, or a
combination of both, as determined by the Committee at the time of payment.
Unless otherwise agreed to by the Grantee, the Supplemental Payment shall be
paid within 30 calendar days of the date of exercise of a Nonstatutory Stock
Option or Stock Appreciation Right (or, if later, within 30 calendar days of the
date on which income is recognized for federal income tax purposes with respect
to such exercise).
SECTION 3.
---------
RESTRICTED STOCK
3.1 AWARD OF RESTRICTED STOCK
(a) Grant. In consideration of the performance of Employment or
other services by any selected Employee or Outside Director, shares of
Restricted Stock may be awarded under the Plan by the Committee on such
terms and conditions and with such restrictions as the Committee may
designate, all of which may differ with respect to each Grantee.
Restricted Stock shall be awarded for no additional consideration or such
additional consideration as the Committee may determine, which
consideration may be less than, equal to or more than the Fair Market Value
of the shares of Restricted Stock on the grant date. Each grant or sale of
Restricted Stock shall be evidenced by an Incentive Plan Agreement.
(b) Immediate Transfer Without Immediate Delivery of Restricted
Stock. Subject to the terms of the Incentive Plan Agreement, each
Restricted Stock Award shall constitute an immediate transfer of the record
and beneficial ownership of the shares of Restricted Stock to the Grantee
in consideration of the performance of services as an
13
<PAGE>
Employee or Outside Director, as applicable, entitling such Grantee to all
voting and other ownership rights, but subject to the restrictions
hereinafter specified. Each Restricted Stock Award may limit the Grantee's
dividend rights during the Restriction Period in which the shares of
Restricted Stock are subject to a "substantial risk of forfeiture" within
the meaning given to such term under Section 83 of the Code and
restrictions on transfer. Shares of Common Stock awarded pursuant to a
grant of Restricted Stock may be issued in the name of the Grantee and
held, together with a stock power endorsed in blank, by the Committee or
Company or in trust or in escrow pursuant to an agreement satisfactory to
the Committee, as determined by the Committee, until such time as the
restrictions on transfer have expired. All such terms shall be set forth in
the Grantee's Incentive Plan Agreement.
3.2 RESTRICTIONS
(a) Restrictive Conditions. Restricted Stock awarded to a Grantee
shall be subject to the following restrictions until the expiration of the
Restriction Period: (i) the shares of Common Stock included in the
Restricted Stock Award shall be subject to one or more restrictions
including, without limitation, a restriction that constitutes a
"substantial risk of forfeiture" (as defined in Section 3.1(b) above), and
to the restrictions on transferability set forth in Section 6.2; (ii)
unless otherwise specified by the Committee in the Incentive Plan
Agreement, the shares of Common Stock included in the Restricted Stock
Award that are subject to restrictions which are not satisfied at the time
the Grantee ceases Employment shall be forfeited and all rights of the
Grantee to such shares shall terminate without further obligation on the
part of the Company at such time; and (iii) any other restrictions that the
Committee determines in advance are necessary or appropriate, including,
without limitation, rights of repurchase or first refusal in the Company or
provisions subjecting the Restricted Stock to a continuing substantial risk
of forfeiture in the hands of any transferee. Any such restrictions shall
be set forth in the Grantee's Incentive Plan Agreement.
(b) Forfeiture of Restricted Stock. If for any reason, the
restrictions imposed by the Committee upon Restricted Stock are not
satisfied at the end of the Restriction Period, any Restricted Stock
remaining subject to such restrictions shall thereupon be forfeited by the
Grantee and reacquired by the Company.
(c) Removal of Restrictions. The Committee, in its discretion, shall
have the authority to remove any or all of the restrictions on the
Restricted Stock if it determines that by reason of a change in applicable
law or another change in circumstance arising after the grant date of the
Restricted Stock Award that such action is appropriate.
14
<PAGE>
3.3 RESTRICTION PERIOD
The Restriction Period of Restricted Stock shall commence on the date of
grant and shall be established by the Committee in the Incentive Plan Agreement
setting forth the terms of the Restricted Stock award.
3.4 DELIVERY OF SHARES OF COMMON STOCK
Subject to withholding taxes under Section 7.3 and to the terms of the
Incentive Plan Agreement, at the expiration of the Restriction Period, a stock
certificate evidencing the Restricted Stock (to the nearest full share) with
respect to which the Restriction Period has expired shall be delivered to the
Grantee free of all restrictions.
3.5 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK
The Committee, either at the time of grant or vesting of Restricted Stock,
may provide for a Supplemental Payment by the Company to the holder in an amount
specified by the Committee which shall not exceed the amount necessary to pay
the federal income tax payable with respect to both the vesting of the
Restricted Stock and receipt of the Supplemental Payment, assuming the Grantee
is taxed at the maximum effective federal income tax rate applicable thereto.
The Committee shall have the discretion to grant Supplemental Payments that are
payable solely in cash or Supplemental Payments that are payable in cash, Common
Stock, or a combination of both, as determined by the Committee at the time of
payment.
SECTION 4.
---------
PERFORMANCE UNITS AND PERFORMANCE SHARES
4.1 PERFORMANCE BASED AWARDS
(a) Grant. The Committee is authorized to grant Performance Units
and Performance Shares to selected Employees and Outside Directors. Each
grant of Performance Units and/or Performance Shares shall be evidenced by
an Incentive Plan Agreement. The Committee may make grants of Performance
Units or Performance Shares in such a manner that more than one Performance
Period is in progress concurrently. For each Performance Period, the
Committee shall establish the number of Performance Units or Performance
Shares and the contingent value of any Performance Units or Performance
Shares, which may vary depending on the degree to which performance
criteria established by the Committee are met.
(b) Performance Criteria. At the beginning of each Performance
Period, the Committee shall (i) establish for such Performance Period
specific financial or non-
15
<PAGE>
financial performance objectives as the Committee believes are relevant to
the Company's business objectives; (ii) determine the value of a
Performance Unit or the number of shares under a Performance Share grant
relative to performance objectives; and (iii) notify each Grantee in
writing of the established performance objectives and, if applicable, the
minimum, target, and maximum Performance Unit or Share value for such
Performance Period.
(c) Modification. If the Committee determines, in its discretion
exercised in good faith, that the established performance measures or
objectives are no longer suitable to the Company's objectives because of a
change in the Company's business, operations, corporate structure, capital
structure, or other conditions the Committee deems to be appropriate, the
Committee may modify the performance measures and objectives as it
considers to be appropriate, unless such modification would cause the
Performance Unit or Share to fail to qualify as "performance-based
compensation" under Section 162(m) of the Code and the regulations
promulgated thereunder to the extent applicable to the Covered Employee,
unless otherwise agreed to by the Covered Employee.
(d) Payment. The basis for payment of Performance Units or
Performance Shares for a given Performance Period shall be the achievement
of those financial and non-financial performance objectives determined by
the Committee at the beginning of the Performance Period. If minimum
performance is not achieved for a Performance Period, no payment shall be
made and all contingent rights shall cease. If minimum performance is
achieved or exceeded, the value of a Performance Unit or Performance Share
shall be based on the degree to which actual performance exceeded the
preestablished minimum performance standards, as determined by the
Committee. The amount of payment shall be determined by multiplying the
number of Performance Units or Performance Shares granted at the beginning
of the Performance Period times the final Performance Unit or Performance
Share value. Payments shall be made, in the discretion of the Committee,
solely in cash or Common Stock, or a combination of cash and Common Stock,
following the close of the applicable Performance Period, in such manner as
may be permissible without causing the Grantee to incur liability under
Section 16(b) of the Exchange Act.
(e) Special Rule for Covered Employees. Without limiting the
generality of the foregoing, it is intended that the Committee shall
establish performance goals applicable to Performance Units or Performance
Shares awarded to Grantees who, in the judgment of the Committee, may be
Covered Employees in such a manner as shall permit payments with respect
thereto to qualify as "performance-based compensation" as described in
Section 162(m)(4)(C) of the Code and in accordance with the regulations
promulgated thereunder (including Treas. Reg. Section 1.162-27(f)). It is
specifically provided that the material terms of such performance goals for
Grantees who, in the judgment of the Committee, may be Covered Employees,
shall, until changed by the Committee with the approval of the
stockholders, be as follows: (i) the business criteria on which the
performance goals shall be based shall be the attainment of such target
levels
16
<PAGE>
of earnings per share from continuing operations, total stockholder
return, Common Stock price per share, sales or market share as may be
specified by the Committee; and (ii) the maximum amount of compensation
that may be paid under Performance Units and Performance Shares to any one
Grantee with respect to any one year shall be Five Million Dollars
($5,000,000).
4.2 SUPPLEMENTAL PAYMENT ON VESTING OF PERFORMANCE UNITS OR PERFORMANCE SHARES
The Committee, either at the time of grant or at the time of vesting of
Performance Units or Performance Shares (other than Restricted Stock), may
provide in the Incentive Plan Agreement for a Supplemental Payment by the
Company to the Grantee in an amount specified by the Committee which shall not
exceed the amount necessary to pay the federal income tax payable with respect
to both the vesting of such Performance Units or Performance Shares and receipt
of the Supplemental Payment, assuming the Grantee is taxed at the maximum
effective federal income tax rate applicable thereto. The Supplemental Payment
shall be paid within 30 days of each date that such Performance Units or
Performance Shares vest unless otherwise agreed to by the Grantee. The Committee
shall have the discretion to grant Supplemental Payments that are payable in
cash, Common Stock, or a combination of both, as determined by the Committee at
the time of payment.
SECTION 5.
---------
OTHER STOCK-BASED AWARDS
5.1 GRANT OF OTHER STOCK-BASED AWARDS
Other Stock-Based Awards may be awarded by the Committee to selected
Employees and Outside Directors, that are denominated or payable in, valued in
whole or in part by reference to, or otherwise related to, shares of Common
Stock, as deemed by the Committee, in its discretion, to be consistent with the
purposes of the Plan. Other types of Stock-Based Awards include, without
limitation, Deferred Stock, purchase rights, shares of Common Stock awarded
which are not subject to any restrictions or conditions, convertible or
exchangeable debentures, other rights convertible into shares of Common Stock,
Incentive Awards valued by reference to the value of securities of or the
performance of a specified Subsidiary, division or department, and settlement in
cancellation of rights of any person with a vested interest in any other plan,
fund, program or arrangement that is or was sponsored, maintained or
participated in by the Company or any Parent or Subsidiary. As is the case with
other Incentive Awards, Other Stock-Based Awards may be awarded either alone or
in addition to or in tandem with any other Incentive Awards or any other plan of
the Company or any Parent or Subsidiary.
17
<PAGE>
5.2 OTHER STOCK-BASED AWARD TERMS
(a) Written Agreement. Each grant of an Other Stock-Based Award
shall be evidenced by an Incentive Plan Agreement.
(b) Purchase Price. Except to the extent that an Other Stock-Based
Award is granted in substitution for an outstanding Incentive Award or is
delivered upon exercise of a Stock Option, the amount of consideration
required to be received by the Company shall be either (i) no consideration
other than services actually rendered (in the case of authorized and
unissued shares) or to be rendered, or (ii) in the case of an Other Stock-
Based Award in the nature of a purchase right, consideration (other than
services rendered or to be rendered) at least equal to 50% of the Fair
Market Value of the Common Stock covered by such grant on the date of
grant.
(c) Performance Criteria and Other Terms. The Committee may specify
such criteria, periods or goals for vesting in Other Stock-Based Awards and
payment thereof to the Grantee as it shall determine; and the extent to
which such criteria, periods or goals have been met shall be conclusively
determined by the Committee. Any other terms and conditions of Other
Stock-Based Awards shall be determined by the Committee and set forth
in the Incentive Plan Agreement. The Committee may also provide for a
Supplemental Payment as described in Section 4.2.
(d) Payment. Other Stock-Based Awards may be paid in shares of
Common Stock or other consideration related to such shares, in a single
payment or in installments, and shall be payable on such dates as
determined by the Committee, all as specified in the Incentive Plan
Agreement.
(e) Dividends. The Grantee of an Other Stock-Based Award shall be
entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the number of shares covered by the
Other Stock-Based Award, as determined by the Committee and set forth in
the Incentive Plan Agreement. The Committee may provide in the Incentive
Plan Agreement that such amounts (if any) shall be deemed to have been
reinvested in additional Common Stock.
SECTION 6.
---------
PROVISIONS RELATING TO PLAN PARTICIPATION
6.1 PLAN CONDITIONS
(a) Incentive Plan Agreement. Each Grantee to whom an Incentive
Award is granted shall be required to enter into an Incentive Plan
Agreement with the Company, in
18
<PAGE>
such form as is provided by the Committee. The Incentive Plan Agreement
shall contain specific terms as determined by the Committee with respect to
the Grantee's particular Incentive Award. The Incentive Plan Agreement may
include, for example, vesting and other provisions particular to the
Incentive Award, as well as provisions that the Grantee (i) shall not
disclose any confidential information of the Company acquired during
Employment or other service with the Company and (ii) shall abide by all
the terms and conditions of the Plan and such other terms and conditions as
may be imposed by the Committee.
(b) No Right to Employment or Service. Nothing in the Plan or any
instrument executed pursuant to the Plan shall create any Employment or
service rights (including without limitation, rights to continued
Employment or directorship) in any Grantee, or otherwise affect the right
of the Company to terminate the Employment or service of any Grantee
without regard to the Plan.
(c) Securities Requirements. No shares of Common Stock shall be
issued or transferred pursuant to an Incentive Award unless and until all
then applicable requirements imposed by federal and state securities and
other laws, rules and regulations, by any regulatory agencies having
jurisdiction, and by any stock market or exchange upon which the Common
Stock may be listed, have been fully met. As a condition precedent to the
issuance of shares pursuant to the grant or exercise of an Incentive Award,
the Company may require the Grantee to take any reasonable action to meet
such requirements. The Company shall not be obligated to take any
affirmative action in order to cause the issuance or transfer of shares
pursuant to an Incentive Award to comply with any such law, rule or
regulation.
6.2 TRANSFERABILITY
(a) Non-Transferable Awards and Options. No Incentive Award and no
right under the Plan, contingent or otherwise, other than Restricted Stock
as to which restrictions have lapsed, will be (i) assignable, saleable, or
otherwise transferable by a Grantee except by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations
order, or (ii) subject to any encumbrance, pledge or charge of any nature.
No transfer by will or by the laws of descent and distribution shall be
effective to bind the Company unless the Committee has been furnished with
a copy of the deceased Grantee's enforceable will or such other evidence as
the Committee may deem necessary to establish the validity of the transfer.
Any attempted transfer in violation of this subsection shall be void and
ineffective for all purposes.
(b) Ability to Exercise Rights. Subject to a beneficiary designation
pursuant to Section 7.4, only the Grantee or his guardian (if the Grantee
becomes Disabled), or in the event of his death, his legal representative
or beneficiary, may exercise Stock Options, receive cash payments and
deliveries of shares, or otherwise exercise rights under the
19
<PAGE>
Plan. The executor or administrator of the Grantee's estate, or the person
or persons to whom the Grantee's rights under any Incentive Award should
pass by will or by the laws of descent and distribution, shall be deemed to
be the Grantee's beneficiary or beneficiaries of the rights of the Grantee
hereunder and shall thus be entitled to exercise such rights to the same
extent as they would have been exercisable by Grantee.
6.3 RIGHTS AS A STOCKHOLDER
(a) No Stockholder Rights. Except as otherwise provided in Section
6.3(b), a Grantee of an Incentive Award (or a permitted transferee of such
Grantee) shall have no rights as a stockholder with respect to the shares
of Common Stock covered by such Incentive Award until the issuance of a
stock certificate for such shares.
(b) Holder of Restricted Stock. Unless otherwise provided by the
Committee in the Incentive Plan Agreement for the grant of a Restricted
Stock Award, a Grantee of Restricted Stock, or a permitted transferee of
such Grantee, shall have voting and dividend rights as a stockholder before
a stock certificate has been issued to him with respect to the shares
covered by such Restricted Stock Award.
6.4 LISTING AND REGISTRATION OF SHARES OF COMMON STOCK
The Company, in its discretion, may postpone the issuance and/or delivery
of shares of Common Stock pursuant to an Incentive Award until completion of
such stock exchange listing, registration, or other qualification of such shares
under any state and/or federal law, rule or regulation as the Company deems
appropriate, and may require any Grantee to make such representations and
furnish such information as it considers appropriate in connection with the
issuance or delivery of the shares in compliance with such laws, rules and
regulations.
6.5 CHANGE IN STOCK AND ADJUSTMENTS
(a) Changes in Law or Circumstances. Subject to Section 6.7 which
applies in the event of a Change in Control, in the event of any change in
applicable laws or any change in circumstances which results in or would
result in any dilution of the rights granted under the Plan, or which
otherwise warrants equitable adjustment because it interferes with the
intended operation of the Plan, then, if the Committee should determine, in
its discretion, that such change equitably requires an adjustment in the
number or kind of shares of stock or other securities or property
theretofore subject, or which may become subject, to issuance or transfer
under the Plan or in the terms and conditions of outstanding Incentive
Awards, such adjustment shall be made in accordance with such
determination. Such adjustments may include changes with respect to (i)
the aggregate number of shares that may be issued under the Plan, (ii) the
number of shares subject to Incentive Awards, and (iii) the price per share
for outstanding Incentive Awards. Any adjustment of an Incentive Stock
Option under this paragraph shall be made only to
20
<PAGE>
the extent not constituting a "modification" within the meaning of Section
424(h)(3) of the Code unless otherwise agreed to by the Grantee. The
Committee shall give notice to each applicable Grantee of such adjustment
which shall be effective and binding.
(b) Exercise of Corporate Powers. The existence of the Plan or
outstanding Incentive Awards hereunder shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalization, reorganization or other changes in
the Company's capital structure or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred
or prior preference stocks ahead of or affecting the Common Stock or the
rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding whether of a similar character or otherwise.
(c) Recapitalization of the Company. Subject to Section 6.7 which
applies in the event of a Change in Control, if while there are Incentive
Awards outstanding, the Company shall effect any subdivision or
consolidation of shares of Common Stock or other capital readjustment, the
payment of a stock dividend, stock split, combination of shares,
recapitalization or other increase or reduction in the number of shares of
Common Stock outstanding, without receiving compensation therefor in money,
services or property, then the number of shares of Common Stock available
under the Plan and the number of Incentive Awards which may thereafter be
exercised shall (i) in the event of an increase in the number of shares
outstanding, be proportionately increased and the Fair Market Value of the
Incentive Awards awarded shall be proportionately reduced; and (ii) in the
event of a reduction in the number of shares outstanding, be
proportionately reduced, and the Fair Market Value of the Incentive Awards
awarded shall be proportionately increased.
(d) Reorganization of the Company. Subject to Section 6.7 which
applies in the event of a Change in Control, if the Company is reorganized,
merged or consolidated, or is a party to a plan of exchange with another
corporation, pursuant to which reorganization, merger, consolidation or
plan of exchange stockholders of the Company receive any shares of Common
Stock or other securities or property, or if the Company should distribute
securities of another corporation to its stockholders, each Grantee shall
be entitled to receive, in lieu of the number of unexercised Incentive
Awards previously awarded, the number of Stock Options, Stock Appreciation
Rights, Performance Shares, Restricted Stock shares, or other Stock-Based
Awards, with a corresponding adjustment to the Fair Market Value of said
Incentive Awards, to which such holder would have been entitled pursuant to
the terms of the corporate agreement, if immediately prior to such
corporate action, such Grantee had been the holder of record of a number of
shares of Common Stock equal to the number of the unexercised Incentive
Awards previously awarded to him. For this purpose, Restricted Stock shall
be treated the same as unrestricted outstanding shares of Common Stock.
21
<PAGE>
(e) Issue of Common Stock by the Company. Except as hereinabove
expressly provided and subject to Section 6.7 which applies in the event of
a Change in Control, the issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, for
cash or property, or for labor or services, either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, or upon any
conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of, or Fair Market Value
of, any Incentive Awards then outstanding under previous awards; provided,
however, in such event, Grantees of Restricted Stock shall be treated the
same as the holders of outstanding unrestricted shares of Common Stock.
6.6 TERMINATION OF EMPLOYMENT, DEATH, DISABILITY AND RETIREMENT
(a) Termination of Employment or Service. Subject to Section 3.2 for
Restricted Stock awards, and unless otherwise specifically provided in the
Grantee's Incentive Plan Agreement, if the Grantee's Employment or service
on the Board, as applicable, is terminated for any reason other than due to
his death, Disability or Retirement, any outstanding Incentive Award at the
time of such termination shall automatically expire and terminate and no
further vesting shall occur. In such event, the Grantee shall be entitled
to exercise his rights only with respect to the portion of the Incentive
Award that was vested as of the termination date for a period that shall
end on the earlier of (i) the expiration date set forth in the Incentive
Plan Agreement with respect to the vested portion of such Incentive Award
or (ii) the date that occurs sixty (60) calendar days after his termination
date.
(b) Retirement. Subject to Section 3.2 for Restricted Stock awards,
and unless otherwise specifically provided in the Grantee's Incentive Plan
Agreement, upon the Retirement of any Employee who is a Grantee:
(i) any nonvested portion of any outstanding Incentive Award of
the Grantee shall immediately terminate and no further vesting shall
occur; and
(ii) any vested Incentive Award shall expire on the earlier of
(A) the expiration date set forth in the Incentive Plan Agreement with
respect to such Incentive Award; or (B) the expiration of (1) six (6)
months after the date of Retirement in the case of any Incentive Award
other than an Incentive Stock Option, or (2) three (3) months after
the date of Retirement in the case of an Incentive Stock Option.
(c) Disability or Death. Subject to Section 3.2 for Restricted Stock
Awards, and unless otherwise specifically provided in the Grantee's
Incentive Plan Agreement, upon termination of Employment or service on the
Board, as applicable, as a result of the Grantee's Disability or death:
22
<PAGE>
(i) any nonvested portion of any outstanding Incentive Award of
the Grantee shall immediately terminate upon termination of Employment
or directorship service, as applicable, and no further vesting shall
occur; and
(ii) any vested Incentive Award shall expire upon the earlier of
either (A) the expiration date set forth in the Incentive Plan
Agreement or (B) the first anniversary of the Grantee's termination of
Employment or directorship service, as applicable, as a result of his
Disability or death.
(d) Continuation. Subject to the conditions and limitations of the
Plan and applicable law and regulation, the Committee and Grantee may
provide for the continuation of any Incentive Award for such mutually
period and upon such agreed terms and conditions in the event that a
Grantee ceases to be an Employee or Outside Director. In the event of any
such continuation, a written amendment to the Grantee's Incentive Plan
Agreement shall be required.
6.7 CHANGES IN CONTROL
(a) Changes in Control. Notwithstanding any contrary provision in
the Plan, in the event of a Change in Control (as defined below), the
following actions shall automatically occur unless otherwise specifically
provided in the Grantee's Incentive Plan Agreement:
(i) all of the Stock Options and Stock Appreciation Rights then
outstanding shall become 100% vested and immediately and fully
exercisable;
(ii) all of the restrictions and conditions of any Restricted
Stock and any Other Stock-Based Awards then outstanding shall be deemed
satisfied, and the Restriction Period with respect thereto shall be
deemed to have expired, as of the date of the Change in Control; and
(iii) all of the Performance Shares, Performance Units and any
Other Stock-Based Awards shall become fully vested, deemed earned in
full and promptly paid within thirty (30) days to the Grantees without
regard to payment schedules and notwithstanding that the applicable
performance cycle, retention cycle or other restrictions and
conditions have not been completed or satisfied.
For purposes of this Section 6.7, a "Change in Control" means a change in
control of the Company of such a nature that would be required to be reported in
response to either (i) Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act or (ii) Item 1 of Form 8-K promulgated under the Exchange
Act, assuming at all times that the Exchange Act applies to the Company;
provided further that such a Change in Control shall also be deemed to have
occurred at such time as:
23
<PAGE>
(i) any "person" (as that term is used in Section 13(d) and
14(d)(2) of the Exchange Act) is or becomes, directly or indirectly,
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of securities representing more than forty percent (40%) of any
class of stock of the Company entitled to elect a majority of the
Board of the Company or any successor of the Company; or
(ii) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of the
Company cease, for any reason, to constitute at least a majority of
the Board, unless the election or nomination for election of each new
director was approved by a vote of more than one-half (50%) of the
directors then in office who were directors at the beginning of the
two-year period.
(b) Right of Cash-Out. If approved by the Board prior to or within
thirty (30) days after such time as a Change in Control has occurred, the
Board shall have the right for a forty-five (45) day period immediately
following the date that the Change in Control is deemed to have occurred to
require all, but not less than all, Grantees to transfer and deliver to the
Company all Incentive Awards previously granted to Grantees in exchange for
an amount equal to the "cash value" (defined below) of the Incentive
Awards. Such right shall be exercised by written notice to all Grantees.
For purposes of this Section 6.7(b), the cash value of an Incentive Award
shall equal the sum of (i) for cash-denominated Incentive Awards, all cash
to which the Grantee would be entitled upon settlement or exercise of such
Incentive Award, and/or (ii) for stock options and other stock-denominated
Incentive Awards, the excess of the "market value" (defined below) per
share over the option exercise price, multiplied by the number of shares
subject to such Incentive Award. For purposes of the preceding sentence,
"market value" per share shall mean the higher of (i) the average of
the Fair Market Value per share on each of the five trading days
immediately following the date a Change in Control is deemed to have
occurred or (ii) the highest price, if any, offered in connection with the
Change in Control. For purposes of this Section 6.7(b), any vesting and
other restrictions on the outstanding Incentive Awards shall be deemed to
have lapsed and be of no further force or effect as of the Change in
Control date unless otherwise specifically provided in the particular
Grantee's Incentive Plan Agreement or as agreed to by the Grantee. The
amount payable to each Grantee by the Company pursuant to this Section
6.7(b) shall be paid in a cash lump sum, unless the Grantee agrees in
writing to another form of distribution, and shall be subject to Section
7.3 for tax withholding.
6.8 AMENDMENTS TO INCENTIVE AWARDS
The Committee may waive any conditions or rights with respect to, or amend,
alter, suspend, discontinue, or terminate, any unexercised Incentive Award
theretofore granted, prospectively or retroactively, with the written consent of
the relevant Grantee; provided, however, with respect to a Grantee who is a
Covered Employee, the Committee shall have no
24
<PAGE>
authority to take any such action to the extent that such action would likely
result in the failure of payments under an Incentive Award to qualify as
"performance-based compensation" (as described in Section 162(m)(4)(C) of the
Code and the regulations promulgated thereunder (including Treas. Reg. Section
1.162-27(f)) where such payments otherwise would have qualified as "performance-
based compensation" with respect to the Covered Employee, unless otherwise
agreed to by the Covered Employee.
6.9 EXCHANGE OF INCENTIVE AWARDS
The Committee may, in its discretion, permit any Grantee to surrender
outstanding Incentive Awards in order to exercise or realize his rights under
other Incentive Awards or in exchange for the grant of new Incentive Awards, or
require holders of Incentive Awards to surrender outstanding Incentive Awards
(or comparable rights under other plans or arrangements) as a condition
precedent to the grant of new Incentive Awards.
6.10 FINANCING
The Company may extend and maintain, or arrange for and guarantee, the
extension and maintenance of financing to any Grantee to purchase shares
pursuant to exercise of an Incentive Award upon such terms as are approved by
the Committee in its discretion.
SECTION 7.
---------
MISCELLANEOUS
7.1 EFFECTIVE DATE AND GRANT PERIOD
This Plan is amended and restated effective May 1, 1997. Unless sooner
terminated by the Board, no Incentive Award shall be granted under the Plan
after April 29, 2003.
7.2 NO FUNDING
Except as provided under Section 3 for Restricted Stock, no provision of
the Plan shall require the Company, for the purpose of satisfying any
obligations under the Plan, to purchase assets or place any assets in a trust or
other entity to which contributions are made or otherwise to segregate any
assets, nor shall the Company be required to maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes. Grantees shall have no
rights under the Plan other than as unsecured general creditors of the Company
except that, insofar as they may have become entitled to payment of compensation
through performance of services, they shall have the same rights as other
Employees or Outside Directors under general law.
25
<PAGE>
7.3 WITHHOLDING TAXES
(a) Mandatory Withholding. The Company shall have the right to (i)
make deductions from any settlement of an Incentive Award made under the
Plan, including the delivery of shares, or require shares or cash or both
be withheld from any Incentive Award, in each case in an amount sufficient
to satisfy withholding of any federal, state or local taxes required by
law, or (ii) take such other action as may be necessary or appropriate to
satisfy any such withholding obligations. The Committee may determine the
manner in which such tax withholding may be satisfied, and may permit whole
shares of Common Stock to be used to satisfy required tax withholding based
on their Fair Market Value as of the delivery date of such shares in
exercise or other satisfaction of the applicable Incentive Award.
(b) Incentive Stock Options. With respect to shares received by a
Grantee pursuant to the exercise of an Incentive Stock Option, if such
Grantee disposes of any such shares within (i) two years from the date of
grant of such Option or (ii) one year after the transfer of such shares to
the Grantee, the Company shall have the right to withhold from any salary,
wages or other compensation payable by the Company to the Grantee an amount
sufficient to satisfy federal, state and local tax withholding requirements
attributable to such disqualifying disposition.
7.4 DESIGNATION OF BENEFICIARY BY PARTICIPANT
A Grantee may name a beneficiary(ies) to receive any payment to which he
may be entitled in respect of Incentive Awards in the event of his death, on a
beneficiary designation form as is provided by the Committee. A Grantee may
change his beneficiary designation from time to time in the same manner. If no
designated beneficiary is living on the date on which any amount becomes payable
to the beneficiary, such payment will be made to the Grantee's surviving spouse,
if applicable, otherwise to the executor or administrator of the Grantee's
estate. As used herein, the term "beneficiary" shall then include such person.
7.5 CONFLICTS WITH PLAN
In the event of any inconsistency or conflict between the terms of the Plan
and an Incentive Plan Agreement, the terms of the Plan shall govern.
7.6 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Company nor the Committee makes any commitment or guarantee
that any federal, state or local tax treatment will apply or be available to any
person participating or eligible to participate hereunder.
26
<PAGE>
7.7 MISCELLANEOUS PROVISIONS
(a) No Employee, Outside Director, or other person shall have any
claim or right to be granted an Incentive Award under the Plan. Neither
the Plan nor any action taken hereunder shall be construed as giving any
Employee or Outside Director any right to be retained in the employ or
other service of the Company or any Parent or Subsidiary.
(b) A Grantee's rights and interest under the Plan and any Incentive
Award may not be assigned or transferred in whole or in part either
directly or by operation of law or otherwise (except in the event of the
Grantee's death), including, without limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner; and no
such right or interest of the Grantee shall be subject to any obligation or
liability of such Grantee until paid.
(c) No shares of Common Stock shall be issued hereunder unless
counsel for the Company is then satisfied that such issuance will be in
compliance with applicable federal and state securities laws.
(d) The expenses of the Plan shall be borne by the Company.
(e) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund, nor to make any other segregation
of assets, to assure the payment of any Incentive Award under the Plan.
(f) By accepting any Incentive Award granted under the Plan, each
Grantee and each person claiming through him shall be deemed to have
indicated his acceptance of the Plan.
7.8 SEVERABILITY
In the event that any provision of this Plan shall be held illegal, invalid
or unenforceable for any reason, such provision shall be fully severable, but
shall not affect the remaining provisions of the Plan, and the Plan shall be
construed and enforced as if the illegal, invalid, or unenforceable provision
was not included herein.
7.9 GENDER, TENSE AND HEADINGS
Whenever the context so requires, words of the masculine gender used herein
shall include the feminine and neuter, and words used in the singular shall
include the plural. Section headings as used herein are inserted solely for
convenience and reference and constitute no part of the interpretation or
construction of the Plan.
27
<PAGE>
7.10 AMENDMENT AND TERMINATION
The Plan may be amended or terminated at any time and from time to time by
the Board; provided, however, (1) no amendment that increases the aggregate
number of shares of Common Stock which may be issued pursuant to the Plan shall
be effective unless and until the same is approved by the stockholders of the
Company and (2) no amendment or termination of the Plan shall adversely affect
any right of any Grantee with respect to any Incentive Award therefore granted
without such Grantee's written consent. Unless earlier terminated, the Plan
shall terminate as of midnight on April 29, 2003 and no Incentive Awards shall
be issued hereunder after such date.
In addition, to the extent that the Committee determines that the listing
for qualification requirements of any national securities exchange or quotation
system on which the Company's Common Stock is then listed or quoted, or the Code
or Treasury regulations issued thereunder, require stockholder approval in order
to maintain compliance with such listing or qualification requirements or to
maintain any favorable tax advantages or qualifications, then the Plan shall not
be amended in such respect without prior approval of the Company's stockholders.
7.11 GOVERNING LAW
The Plan shall be interpreted, construed and constructed (a) in accordance
with the laws of the State of Texas without regard to its conflicts of law
provisions, except as superseded by applicable federal law, and (b) in
accordance with applicable provisions of the Code and regulations or other
authority issued thereunder by the appropriate governmental authority.
7.12 SECTION 16 COMPLIANCE
The Plan, and transactions hereunder by persons subject to Section 16 of
the Exchange Act, are intended to comply with all applicable conditions of Rule
16b-3 or any successor exemption provision promulgated under the Exchange Act.
To the extent that any provision of the Plan or any action by the Committee or
the Board fails, or is deemed to fail, to so comply, such provision or action
shall be null and void but only to the extent permitted by law and deemed
advisable by the Committee in its discretion.
28
<PAGE>
IN WITNESS WHEREOF, Imperial Holly Corporation has caused this amended and
restated Plan to be duly executed in its name and on its behalf by its duly
authorized officer, to be effective as of May 1, 1997.
ATTEST: IMPERIAL HOLLY CORPORATION
By: By:
------------------------- --------------------------
Name: Name:
----------------------- ------------------------
Title: Title:
---------------------- -----------------------
29
<PAGE>
Exhibit 10(e)(4)
IMPERIAL HOLLY CORPORATION
SCHEDULE OF BENEFIT RESTORATION AGREEMENTS
Name Title
- ---- -----
AGREEMENTS WITH FULL VESTING:
J. C. Kempner President, Chief Executive Officer and
Chief Financial Officer
R. W. Hill Managing Director
W. F. Schwer Managing Director, Secretary
and General Counsel
R. E. Henderson Vice President, Administration
AGREEMENTS WITH GRADUATED VESTING:
P. C. Carrothers Managing Director
J. A. Richmond Managing Director
<PAGE>
Exhibit 10(i)(2)
IMPERIAL HOLLY CORPORATION
SCHEDULE OF CHANGE OF CONTROL AGREEMENTS
Name Title
- ---- -----
P. C. Carrothers Managing Director
D. W. Ehrenkranz Managing Director
B. T. Harrison Vice President, Operations Development
R. E. Henderson Vice President, Administration
R. F. Silva Vice President, Product Development
H. P. Mechler Vice President, Accounting
K. L. Mercer Vice President and Treasurer
C. K. Jones Vice President, Agriculture
R. L. Knecht Vice President, Cane Operations
R. W. Strickland Vice President, Beet Operations
<PAGE>
EXHIBIT 10(k)
RESTRICTED STOCK AGREEMENT
PURSUANT TO THE TERMS OF THE
IMPERIAL HOLLY CORPORATION
STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE MAY 1, 1997)
GRANT DATE: MAY 1, 1997
1. GRANT OF RESTRICTED STOCK. On May 1, 1997 (the "Grant Date"),
Imperial Holly Corporation, a Texas corporation ("Company"), hereby grants to
_______________ ("Grantee") all rights, title and interest in the record and
beneficial ownership of _________________ (_______) shares of the common stock,
no par value per share, of the Company (the "Restricted Shares"). The Restricted
Shares are granted pursuant to the Imperial Holly Corporation Stock Incentive
Plan, as amended and restated effective May 1, 1997 (the "Plan"), and are
subject to this Agreement and the Plan. By execution of this Agreement, Grantee
agrees to be bound by the terms and provisions of this Agreement and the Plan.
All capitalized terms have the meanings set forth in the Plan unless
otherwise specifically defined herein. All section references herein pertain to
sections of this Agreement unless otherwise specifically provided.
2. CUSTODY OF RESTRICTED SHARES. The Restricted Shares shall be issued
and registered in the name of the Grantee and held, together with a stock power
endorsed in blank, by the Chairman of the Executive Compensation Committee (the
"Committee") of the Board of Directors (the "Board") of the Company or his
designee. The grant of Restricted Shares shall constitute an immediate transfer
of the record and beneficial ownership of such shares to the Grantee; however,
the Restricted Shares shall not be transferable by the Grantee until such time
as the restrictions on their transfer imposed by the terms hereof have expired
and such shares are delivered to or on behalf of the Grantee pursuant to Section
7. No interest, right or benefit in any Restricted Shares shall in any manner be
liable for or subject to any debts, obligations, contracts, liabilities or torts
of the Grantee until such time as the shares have been delivered pursuant to
Section 7. Until such time as the Restricted Shares have been delivered pursuant
to Section 7, the shares may not be transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and distribution,
by the Grantee.
3. RISK OF FORFEITURE; STOCK POWER. Grantee shall forfeit the right to
receive the Restricted Shares in accordance with Section 5 and, in the event of
any such forfeiture, and without any action on the part of Grantee, such
forfeited shares shall be transferred to the Company or to any person designated
by the Company. Grantee hereby appoints the Chairman of the Committee and any
designee of said Chairman, and each of them, as Grantee's attorney-in-fact to
transfer such shares in the event of any such forfeiture. Grantee cannot revoke
this appointment prior to the delivery of such shares to or on his behalf
pursuant to Section 7.
4. THREE-YEAR CLIFF VESTING. Subject to possible accelerated vesting
pursuant to Sections 5(a), (b), (c) or (d), the total number of Restricted
Shares subject to this Agreement shall become one hundred percent (100%) vested
on the third annual anniversary of the Grant Date and shall not be vested in any
percent before such vesting date.
_________
Grantee's
Initials
<PAGE>
5. TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL. In the event of
termination of employment of the Grantee, or the occurrence of a Change in
Control (as defined in the Plan), Grantee's rights under this Agreement shall be
affected as follows:
(a) DEATH OR DISABILITY. If Grantee's employment with the Company is
terminated due to his death or Disability (as defined in the Plan), then
all his Restricted Shares hereunder shall automatically become 100%
vested on such termination date.
(b) RETIREMENT. If Grantee's employment with the Company is
terminated due to his retirement at or after attaining age 62, as
determined by the Committee in good faith, then all of his Restricted
Shares hereunder shall automatically become 100% vested on such
termination date.
(c) TERMINATION FOR GOOD REASON. If Grantee is a party to an
employment agreement between Grantee and the Company and if Grantee
terminates his employment with the Company for Good Reason (as defined
in such employment agreement), then all Grantee's Restricted Shares
hereunder shall automatically become 100% vested on such termination
date.
(d) CHANGE IN CONTROL. If a Change in Control (as defined in the
Plan) should occur before the Grantee's employment with the Company has
been terminated for any reason, then all his nonvested Restricted Shares
hereunder shall automatically become 100% vested as of the occurrence
date of the Change in Control. Effective as of such Change in Control
date, the Restricted Shares shall be fully vested and nonforfeitable
regardless of whether Grantee's employment is thereafter terminated.
(e) TERMINATION OF EMPLOYMENT. If there is a voluntary or
involuntary termination of Grantee's employment with the Company for any
reason other than due to one of the reasons specified above in parts
(a), (b), (c) or (d) of this Section 5, as determined by the Committee
in good faith, then Grantee shall forfeit the right to receive any
Restricted Shares hereunder that have not vested pursuant to Section 4
before such termination date.
6. FORFEITURES. Any Restricted Shares forfeited by the Grantee pursuant
to Section 5(e) shall be reacquired by the Company without charge or payment
pursuant to Section 3.
7. TRANSFER AND DELIVERY OF RESTRICTED SHARES TO GRANTEE. The Committee
shall cause to be issued and delivered to Grantee a certificate or certificates
for all vested Restricted Shares, free of restrictions hereunder, to or on
behalf of Grantee within 30 days from the date that he becomes 100% vested in
such Restricted Shares pursuant to Sections 4 or 5 hereof, as applicable;
provided, however, in the event of a Change in Control pursuant to Section 5(d),
such non-restricted and fully vested shares shall be delivered to Grantee within
five days from the Change in Control date.
8. VOTING AND DIVIDEND RIGHTS. The Grantee is entitled to exercise
voting rights applicable to the Restricted Shares unless and until forfeited
pursuant to Section 6. Dividends declared on the Restricted Shares shall be
distributed to the Grantee, and included in his income, unless and until such
shares are forfeited pursuant to Section 6.
_________
Grantee's
Initials
2
<PAGE>
9. AMENDMENT AND TERMINATION. This Agreement may be amended or
terminated at any time and from time to time. Any amendment or termination must
be set forth in a written instrument that is approved by the Committee and
executed by both the Grantee and by an appropriate officer on behalf of the
Company.
10. NO GUARANTEE OF EMPLOYMENT. The Plan and this Restricted Stock
Agreement shall not confer upon the Grantee any right with respect to
continuance of employment or other service with the Company, nor shall it
interfere in any way with any right that the Company would otherwise have to
terminate such employment or service at any time.
11. WITHHOLDING OF TAXES. The Company shall have the right to (a) make
deductions from the number of vested Restricted Shares otherwise deliverable to
or on behalf of Grantee upon satisfaction of the conditions precedent of this
Agreement in such amount as is sufficient to satisfy withholding of any federal,
state or local taxes required by applicable law, and (b) take such other action
as it deems to be necessary or appropriate to satisfy any tax withholding
obligations.
12. NO GUARANTEE OF TAX CONSEQUENCES. The Company and the Committee do
not make any commitment or guarantee that any tax treatment will apply or be
available to the Grantee or any other person.
13 SEVERABILITY. In the event that any provision of this Agreement shall
be held illegal, invalid, or unenforceable for any reason, such provision shall
be fully severable and shall not affect the remaining provisions of this
Agreement. In such event, the Agreement shall be construed and enforced as if
the illegal, invalid, or unenforceable provision had not been included herein.
14. GOVERNING LAW. The Plan and this Agreement shall be construed in
accordance with the laws of the State of Texas without regard to its conflicts
of law provisions.
15. EFFECTIVE DATE OF GRANT. This Agreement is effective on the Grant
Date.
ATTEST: IMPERIAL HOLLY CORPORATION
By:___________________________ By:__________________________
Name:_________________________ Name:________________________
Title:________________________ Title:_______________________
Date:_________________________ Date:________________________
_________
Grantee's
Initials
3
<PAGE>
ACCEPTED AND AGREED:
ATTEST: GRANTEE
By:___________________________ Signature:__________________________
Name:_________________________ Name:_______________________________
Date:_________________________ Date:_______________________________
SPOUSAL CONSENT
I, the undersigned spouse, am married (or am deemed under applicable law to be
married) to ____________ (the "Grantee). I hereby consent to the terms and
provisions of this Restricted Stock Agreement.
____________________________________
Spouse's Signature
____________________________________
Printed Name
____________________________________
Date
_________
Grantee's
Initials
4
<PAGE>
EXHIBIT 10(l)
IMPERIAL HOLLY CORPORATION
SCHEDULE OF RESTRICTED STOCK AGREEMENTS
Name Title
- ---- -----
J. C. Kempner President, Chief Executive Officer
and Chief Financial Officer
P. C. Carrothers Managing Director
D. W. Ehrenkranz Managing Director
R. W. Hill Managing Director
J. A. Richmond Managing Director
W. F. Schwer Managing Director, Secretary
and General Counsel
<PAGE>
EXHIBIT 11
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
(In Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------
1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
NET INCOME (LOSS) FOR PRIMARY AND FULLY
DILUTED COMPUTATION:
Income (Loss) Before Extraordinary Item:
As reported $ 11,518 $ (3,218) $ (5,365)
Adjustments - none
----------- ----------- -----------
As adjusted $ 11,518 $ (3,218) $ (5,365)
=========== =========== ===========
Extraordinary Item:
As reported $ 604
Adjustments - none
-----------
As adjusted $ 604
===========
Net Income (Loss):
As reported $ 11,518 $ (2,614) $ (5,365)
Adjustments - none
----------- ----------- -----------
As adjusted $ 11,518 $ (2,614) $ (5,365)
=========== =========== ===========
PRIMARY EARNINGS (LOSS) PER SHARE:
Weighted average shares of common
stock outstanding 12,576,489 10,300,487 10,266,299
Incremental shares issuable from
assumed exercise of stock options
under the treasury stock method 151,013 26,138 34,142
----------- ----------- -----------
Weighted average shares of common
stock outstanding, as adjusted 12,727,502 10,326,625 10,300,441
=========== =========== ===========
Primary earnings (loss) per share:
Income (loss) before extra-ordinary item $ 0.90 $ (0.31) $ (0.52)
=========== =========== ===========
Extraordinary item $ 0.06
===========
Net income (loss) $ 0.90 $ (0.25) $ (0.52)
=========== =========== ===========
FULLY DILUTED EARNINGS (LOSS) PER SHARE:
Weighted average shares of common
stock outstanding 12,576,489 10,300,487 10,266,299
Incremental shares issuable from
assumed exercise of stock options
under the treasury stock method 151,013 55,169 53,504
----------- ----------- -----------
Weighted average shares of common
stock outstanding, as adjusted 12,727,502 10,355,656 10,319,803
=========== =========== ===========
Fully diluted earnings (loss) per share:
Income (loss) before extra-ordinary item $ 0.90 $ (0.31) $ (0.52)
=========== =========== ===========
Extraordinary item $ 0.06
===========
Net income (loss) $ 0.90 $ 0.25 $ (0.52)
=========== =========== ===========
- --------------
</TABLE>
This calculation is submitted in accordance with Item 601(b)(11) of Regulation
S-K; the amount of dilution illustrated in this calculation is not required to
be disclosed pursuant to paragraph 14 of Accounting Principles Board Opinion
No. 15.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
JURISDICTION OF
SUBSIDIARY INCORPORATION
---------- -------------
Holly Sugar Corporation.............................. New York
Spreckels Sugar Company, Inc. (1).................... Delaware
(1) Merged into Holly Sugar Corporation effective March 31, 1997.
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-30328, Registration Statement No. 33-41769 and in Registration Statement
No. 33-68896 of Imperial Holly Corporation, each on Form S-8, of our report
dated May 30, 1997 appearing in this Annual Report on Form 10-K of Imperial
Holly Corporation for the year ended March 31, 1997.
DELOITTE & TOUCHE LLP
Houston, Texas
June 10, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Financial Statements for the year ended March 31, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 7,719
<SECURITIES> 48,963
<RECEIVABLES> 52,157
<ALLOWANCES> 0
<INVENTORY> 148,026
<CURRENT-ASSETS> 285,147
<PP&E> 296,391
<DEPRECIATION> 149,989
<TOTAL-ASSETS> 449,933
<CURRENT-LIABILITIES> 151,241
<BONDS> 90,619
82,620
0
<COMMON> 0
<OTHER-SE> 94,336
<TOTAL-LIABILITY-AND-EQUITY> 449,933
<SALES> 752,595
<TOTAL-REVENUES> 752,595
<CGS> 664,846
<TOTAL-COSTS> 664,846
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,430
<INCOME-PRETAX> 17,688
<INCOME-TAX> 6,170
<INCOME-CONTINUING> 11,518
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,518
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
</TABLE>
